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Author: 
 
 Vance, William Reynolds 
 
 Title: 
 
 Handbook of the law of 
 insurance 
 
 St. Paul, Minn. 
 
 Date: 
 
 1904 
 
Q5 -^zAn-s 
 
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 Vance, WiUiam Reynolds, 1870- 
 
 Handbook of the law of insurance, by William Eeynolds 
 Vance ... St. Paul, Minn., West publishing co., 1904. 
 
 xiv, 683 p. 23^'^'". iThe hornbook series. 28i 
 
 1. Insurance law — ^U. S. 
 
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 Colutntria ?Hnttiers(itp 
 
 in ttie Citp of ^tn |Borfc 
 
 LIBRARY 
 
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 School of Business 
 
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Of elementary treatises on all the principal subjects of the law. 
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 In preparation: Handbooks of the law on other subjects to be an- 
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 011617— b 
 
 HANDBOOK 
 
 OP fSE 
 
 'LAW OF INSURANCE 
 
 By WILLIAM REYNOLDS VANCE 
 
 PROFESSOR OF LAW IN THE GEORGE WASHINGTON UNIVERSITY 
 
 WASHINGTON, D. C 
 
 St. Paul, Minn. 
 
 WEST PUBLISHING CO. 
 1904 
 
I 
 
 3 
 
 
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 """■■ I""**,^^ 
 
 r . > 
 
 V 
 
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 ^^'^cH 
 
 COFYBIGHT. 1904. 
 
 WBOT PUBUSHING COMPAITT. 
 
 To A. H. y^ 
 
 WHO EBI^nBX 
 
I 
 
 PREFACE. 
 
 This work, elaborated from the author's lecture notes as they were 
 experimentally developed through several years spent in teaching the 
 law of insurance in Washington and Lee University, is designed pri- 
 marily for the student, although it is hoped that it may be found useful 
 to the practitioner as well, and possibly contribute something, however 
 little, toward the needed crystallization of this branch of the law from 
 its present amorphous condition. The principal object of the treatise 
 is to give a consistent statement of logically developed principles that 
 underlie all contracts of insurance — erratic doctrines and eccentric 
 decisions beiiig relegated to the foot-notes so far as fairness would 
 permit. Subsidiary chapters are added, treating of the rules peculiar 
 to the several different kinds of insurance, special attention being given 
 to the construction of the standard fire policy. 
 
 Since there are more than thirty thousand cases involving questions 
 of insurance to be found in English-printed reports, the citation of 
 cases, upon which much care has been expended, is selective rather 
 than exhaustive. That is, the cases found in the foot-notes are cited 
 for the purpose of supporting, illustrating, or supplementing the state- 
 ments of the text, and not with any ambition to supplant the digests. 
 For the convenience of both students and teachers, those leading cases 
 which have been selected by the compilers of the various case-books 
 on insurance law as well adapted for illustrative purposes, are printed 
 in capitals. Finally, without invidious mention of names, the author 
 desires to extend in this manner his thanks to the many friends to 
 whose counsel and aid any merit that may be possessed by this book 
 is largely due y/ j^ y 
 
 Wasbington, D. GL, September 10, 1904. 
 
 (vU)^ 
 
\ 
 
 
 TABLE OF CONTENTS. 
 
 GHAPTEB L 
 
 HISTORICAL AND INTRODUCTORY. 
 
 ■eetl«B Page 
 
 1-2. The Insurance Contract and Its Purpose • 1-2 
 
 3-a The Historical Origin of Insurance 2-9 
 
 7-10. The Development of Insurance in England 9-13 
 
 11-12. The Development of Insurance in the United States 13-23 
 
 13. The Extension of the Principles of Insurance in Modem 
 
 Times 24-28 
 
 14-15. The Forms and Kinds of Policies 28-33 
 
 16-21. Premiums and Reserve Fund 83-41 
 
 CHAPTER IL 
 
 THE NATURE AND REQUISITES OF THE CONTRACT. 
 
 22-28. The Nature of the Insurance Contract — In General 42-46 
 
 24. An Aleatory but Not a Wagering Contract. 46-47 
 
 25. An Executory and Conditional Contract. 47-48 
 
 26-27. A Personal Contract Uberrimae Fidei 48-52 
 
 28. A Contract Essentially of Indemnity 52-55 
 
 29. The Nature of the Contract of Life Insurance 56-58 
 
 80. The Nature of Mutual Benefit Insurance 58-61 
 
 81. The Contract of Reinsurance 61-68 
 
 82. When the Contract is Divisible 69-72 
 
 83 Requisites for the Validity of the Contract 72-73 
 
 CHAPTER in 
 
 PARTIES. 
 
 84. In Cteneral 74-78 
 
 85. Who May be Insurers 78-79 
 
 36. The Several Kinds of Corporate Insurers 79-81 
 
 87-38. The Rights of Foreign Insurers 81-85 
 
 89. Contracts Made by Insurers not Complying with Statutory 
 
 Requirements 8&-88 
 
 40. Who May be Insured 88-89 
 
 41. Infants as Parties Insured , 89-92 
 
 42-4a Aliens as Parties Insured 92-96 
 
 Insane Persona aa Parties Insured 86-97 
 
 Tahgi IHI. (iz) 
 
46. 
 47. 
 48. 
 49-52. 
 53. 
 54. 
 
 sa 
 
 57-59. 
 60. 
 61. 
 
 62-63. 
 64. 
 6& 
 6o> 
 67. 
 
 TABLE OF CONTENTS, 
 
 CHAPTER IV. 
 
 INSURABLE INTEREST. ^ 
 
 rage 
 
 The General Theory of Insurable Interest in^i^ 
 
 Insurable Interest in Property— What Constitutes i9ili24 
 
 Duration of Interest lO'v-l^ 
 
 Inaurable Interest in LiTes itTV^ 
 
 Interest of Creditor in Life of Debtor iSli^ 
 
 Interest of the Assignee of a Life Policy ^arIa^ 
 
 Consent of the Life Insured 14&-1«J 
 
 CHAPTER V. 
 
 THE MAKING OF THE CONTRACT. 
 
 In General— Offer and Acceptance JHzJ^S 
 
 The Form Required— Oral Contracts ^tT^na 
 
 When an Oral Contract Becomes Complete irq 
 
 Contracts in Writing. i«A_ifto 
 
 Informal Written Contracts l^t^ 
 
 Formal Written Contracts— The Policy :^]TL 
 
 When the Policy Becomes Binding i «q"i^ 
 
 Delivery 169-175 
 
 Payment of First Premium JI^'iS 
 
 What Papers Form the Written Contract I^qa 
 
 Same— Mutual Benefit Insurance iw-i»4 
 
 CHAPTER VI. 
 
 THE CONSIDERATION— PREMIUMS AND ASSESSMENTS. 
 
 70-71. In General— The Nature of the Obligation i ^J^ 
 
 72-73. When the Premium is a Debt 201I21I 
 
 74^-75. Payment of Premiums oh.oiq 
 
 7a Consequences of Nonpayment of Premiums 213-218 
 
 77. Forfeiture 218-222 
 
 7& Excuses for Nonpayment ••• to;^^^ 
 
 79-«0. Notice of Premiums Due ooT.ooa 
 
 81. Paid-up Policies and Extended Insurance ooi.^ 
 
 82. Effect of Nonpayment of Premium Notes •.....• ^Zk 
 
 8^-84. Dues and Assessments in Mutual Benefit Societies olil^ 
 
 85-8& When Premiums may be Recoyered 441 ^« 
 
 CHAPTER VH. 
 
 THE CONSENT OF THE PARTIES— CONCEALMENT. 
 
 i 
 
 Sectloa 
 93-94. 
 95. 
 96. 
 
 97. 
 
 TABLB OP CONTENTS. ^ 
 
 Page 
 
 When Facts Concealed are to be Deemed Material 257-258 
 
 When Duty to Disclose Terminates 259-261 
 
 Disclosure Rendered Unnecessary by Special Circum- 
 
 stances 261-263 
 
 Facts Unknown to Insured, but Known to his Agent 263-266 
 
 CHAPTER Vin. 
 
 THE CONSENT OF THE PARTIES— REPRESENTATIONS AND 
 
 WARRANTIES. 
 
 98-99. The Nature and Effect of Representations • • 267-272 
 
 100. Representations as to Opinion and Belief 272-274 
 
 101. Promissory Representations o^^oH 
 
 102-103. Construction of Representations oIq 
 
 104. Warranties— In General SS~oaX 
 
 105. Aflirmative and Promissory Warranties 289-290 
 
 106-107. Warranties Distinguished from Representations 291-297 
 
 CHAPTER 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 The Doctrine of Agency In Insurance Law 298-305 
 
 Classes of Agents and Their Powers 306-316 
 
 Subagents — ^Their Appointment and Powers 317-322 
 
 Limitations upon the Powers of Agents 322-342 
 
 108. 
 109-110. 
 111-113. 
 114-117. 
 
 11&-120. 
 
 121. 
 
 122. 
 
 123. 
 
 124. 
 125-126. 
 127-128. 
 
 CHAPTER X. 
 
 WAIVER AND ESTOPPEL. 
 
 General Principles 843-346 
 
 Parol Waivers 346-348 
 
 Prior Parol Waivers 348-351 
 
 Subsequent Parol Waivers 351-354 
 
 Contemporaneous Parol Waivers 355-370 
 
 What Constitutes a Waiver 371-380 
 
 What may be Waived 881-385 
 
 87-89. General Principles 
 
 90-92. What must be Disclosed. 
 
 250-251 
 251-267 
 
 CHAPTER XL 
 
 RIGHTS UNDER THE POLICY. 
 
 129. In General 886-S87 
 
 130-131. The Beneficiary 387-389 
 
 132-134. Vested Rights of the Beneficiary • 890-398 
 
 
Zll 
 
 136. 
 
 laai 
 
 137-138. 
 139. 
 140. 
 141. 
 
 142. 
 143-145. 
 146-147. 
 
 148. 
 149-15a 
 
 TABLiB OF CONTENTS. 
 
 Page 
 
 C3witliig«it Interest Of the Beneflciarj ^^ 
 
 Mere Expectancy of Benefit. . . ..... •;••"••• 400-404 
 
 Beneficiaries in Mutual Benefit Afo^i,^«^^« ' ' * ' * ^^ 
 
 The Rights of Creditors of the Insured-Fire Policies 404^ 
 
 Life Policy Payable to Insured InCio 
 
 Policy Payable to a Third Person ^UT-^iu 
 
 When the Creditor Is the Assured 412I417 
 
 The Rights of the Assignee 417-420 
 
 Rights of the Mortgagor and Mortgagee ^1 
 
 Rights of Life Tenant and Remainderman 422-428 
 
 Subrogation • • 
 
 151-152. 
 
 153. 
 
 154. 
 165-156. 
 
 157. 
 158-160. 
 
 161. 
 
 I6I:. 
 
 163. 
 
 164. 
 
 165. 
 
 16t. 
 
 THE STANDARD FIRE POLICY. 
 
 429-432 
 The General Rule of Construction aoo^^u 
 
 The Efllect of Temporary Breach of Condition l^Jm 
 
 The Term of Insurance aoraoq 
 
 The Subject of Insurance-Description 439^ 
 
 The Subject of Insurance— Location 442-448 
 
 The Interest of the Insured 44q_^».4 
 
 Change of Interest, Title, or Possession 454I456 
 
 Fraud and False Swearing ••• ^^^^^q 
 
 Other Insurance 460-461 
 
 Operation of Factories 462-464 
 
 Increase of Risk 4e4.-i65 
 
 Making Repairs »«r-xuu 
 
 167. 
 
 168. 
 
 169. 
 
 170. 
 
 171. 
 
 172. 
 173-175. 
 176-177. 
 
 178. 
 
 179. 
 
 180. 
 
 181. 
 
 182. 
 
 183. 
 184r-189. 
 
 19a 
 
 1»L 
 
 THE STANDARD FIRE POLICY (Continued). 
 
 466-467 
 Foreclosure Proceedings [',,[[[ 468 
 
 Assignments || ^qq 
 
 Generation of Gas 4rq_471 
 
 Explosive and Inflammable Substances ^il474 
 
 Vacant or Unoccupied Buildings , ^^^ 
 
 Collapse of Building 475-483 
 
 Liability of the Insurer 4R3-486 
 
 Measure of Insurer's Liability IsfillaT 
 
 Appraisal and Arbitration • l^_^ 
 
 Option to Rebuild 4ftQ_4Q9 
 
 As Affected by Valued Policy Laws. IqolQo 
 
 Documents Made Part of Contract by Reference 49j^»^ 
 
 Authority of Agents— Waivers 494.495 
 
 Cancellation of Policy 496-505 
 
 Notice and Proofs of Loss 505-507 
 
 Magistrate's Certificate 507-510 
 
 Limitation upon Actions 
 
 |H| 
 
 ■MtiM 
 
 192. 
 
 193. 
 
 194. 
 195-196. 
 197-199. 
 200-201. 
 202-204. 
 
 20s. 
 
 206. 
 
 207-208. 
 209. 
 210. 
 21L 
 
 212-213. 
 
 214-217. 
 21a 
 219. 
 22a 
 22L 
 222. 
 
 223-224. 
 
 225-227. 
 22a 
 228. 
 
 TABLB OF C0NTBNT8. 
 
 TERMS OF THE LIFE POLICY. 
 
 T« n^«n«.i 811-512 
 
 In General _^„ --« 
 
 Designation of Beneficiary 516 
 
 Statement of Age kiokoa 
 
 Suicide— When not Excepted in the Policy ll^to 
 
 Suicide— When Excepted in the Policy tZ^t^ 
 
 Death in Violation of Law 527l5'>9 
 
 Assignment Kon-SM 
 
 Incontestable Clause • '• o**^'~*'*>*> 
 
 CHAPTER XV. 
 
 MARINE INSURANCE. 
 
 K9A. 
 
 Scope Of This Chapter koa_^ 
 
 Marine Policies and Their Construction ^oTto? 
 
 Insurable Interest— Lost or not Lost IIT^ 
 
 Property Covered by the Insurance Sr^tlo 
 
 Commencement and Duration of Risk STlTtTl 
 
 What Risks are Assumed— Proximate Causes of Loss ^^t! 
 
 Implied Exceptions ^to^^i 
 
 Perils of the Sea ooO-odi 
 
 Barratry ^^~Sa 
 
 Thefts Kr;Q_^ 
 
 Captures, Arrests, Restraints 553-555 
 
 Jettison •• 
 
 Particular and General Average Losses ^'^'SI 
 
 The Insurer's Liability— Total Loss 557-560 
 
 Abandonment 5^1 
 
 Sue and Labor Clause 5b J-ow 
 
 CHAPTER XVL 
 
 ACCIDENT INSURANCE. 
 
 230. In General 564-565 
 
 231. Accident Policies and Their Construction 565-566 
 
 232. Accidental Injuries— External, Violent, and Accidental 
 
 Causes 566-569 
 
 283. Disease Induced by Accident— Proximate Cause 570-571 
 
 234. External and Visible Signs of Injury Vn^^t 
 
 235. Risks of Travel kIkIkta 
 
 236. Excepted Risk&— In General ?Ic^Iq 
 
 237. Poison, or Contact with Poisonous Substances 576-578 
 
 238. Inhaling Gas 578-580 
 
 239. Bodily Infirmities or Disease 5f?lSi 
 
 240. Voluntary and Unnecessary Exposure to Injury ^09"^ 
 
 24L Intentional Injury by Another 582-683 
 
XIV 
 
 TABLE OF CONTENTS. 
 
 242. Occupation and Employinent ^^f"^ 
 
 243. Injuries Received Wliile Intoxicated ^^ 
 
 244. Liability of the Insurer— Total Disability roT^ 
 
 24& Rifilit to an Autopsy 688-o»» 
 
 GUARANTY. CREDIT, AND LIABILITY INSURANCE 
 
 24«. In General ^90-594 
 
 247-248. Fidelity and Guaranty Insurance ^^ 
 
 249-250. Liability of the Guaranty Insurer ^ilSu 
 
 251. Credit Insurance 22l«n« 
 
 252-253. Employers' Liability Insurance -... SvTSaq 
 
 2M. BlghtB of the Injured Person in the Insurance Fund. .•••••• OU»-ow 
 
 (Page 6114 
 
 I 
 
 i 
 
 ^ 
 
 HANDBOOK 
 
 OF THE 
 
 LAW OF INSURANCE. 
 
 1-2. 
 
 3-6. 
 
 7-10. 
 
 11-12. 
 
 13. 
 
 14-15. 
 
 16-21. 
 
 CHAPTER I. 
 
 HISTORICAL AND INTRODUCTORY. 
 
 The Insurance Contract and Its Purpose. 
 
 The Historical Origin of Insurance. 
 
 The Development of Insurance In England. 
 
 The Development of Insurance in the United States. 
 
 The Extension of the Principles of Insurance in Modern Timea 
 
 The Forms and Kinds of Policies. 
 
 Premiums and Reserve Fund. 
 
 THE INSURANCE CONTRACT AND ITS PURPOSE. , 
 
 1. Insurance is a conditional contract, whereby on« party xmdertakes 
 
 to indemnify another against loss, damage, or liability arising 
 from some specified bnt contingent event. 
 
 2. The purpose of the contract of insurance is to distribute among aU 
 
 exposed to a common peril loss that, by reason of misfortune, 
 falls upon som.e of them* * 
 
 The contract of insurance * is to be governed by the same rules 
 that apply to ordinary contracts. While there are many peculiar 
 features that characterize the contract of insurance, it is yet incor- 
 rect to regard it as a contract sui generis, as seems to be the tend- 
 ency of some of the courts.* The law of insurance, considered as a 
 
 iThe following definition of "Insurance," as given in Bouv. Law Diet 
 (Rawle's Revision), is adopted in State v. Pittsburg, O., C. & St. L. R. Co . 68 
 Ohio St. 9, 67 N. E. 93, 96 Am. St. Rep. 635: "A contract whereby, for an 
 agreed premium, one party undertakes to compensate the other for loss on 
 a specified subject by specified perils." 
 
 « A distinguished specialist in insurance law recently said, in an address 
 before the American Bar Association: *The contract of insurance is the 
 Yahob Ins.— 1 
 
HISTORICAL AND INTRODUCTORY. 
 
 (Ch.l 
 
 separate branch of jurispnidence, is largely made up of the rules 
 determining the proper application of the principles of general con- 
 tract law to the peculiar conditions under which insurance contracts 
 are usually executed. A thorough understanding of these pecuhar 
 conditions is therefore indispensable to the student of msurance law, 
 and that can be obtained only by a consideration of their historical 
 
 development. 
 
 It is to be observed in the outstart that the primary purpose of 
 everv contract of insurance is indemnity against some specified loss 
 that 'is uncertain, either in the happening or in the time when it may 
 occur. The peril insured against must naturally be one to which a 
 considerable number are equally exposed, and yet one which will not 
 be of such frequent occurrence as to make exposure to it wholly 
 fatal to the business to which it is incident. The contract contem- 
 plates distributing the loss which, falling upon one, would result in 
 his entire ruin, among all those who are exposed, equally with the 
 unfortunate one, to the same perils. Such an arrangement for the 
 distribution of loss enables a person to calculate with safety the de- 
 gree of the risk incurred, and make adequate provision for the pos- 
 sible loss, and thus carry on successfully and safely kinds of business, 
 or do acts, that might otherwise bring misfortune upon his affairs 
 and distress to those dependent upon him.* 
 
 THE HISTORICAI. ORIGIN OP INSURANCE. 
 
 3. The origin of tlie practice of insurance is to be f onnd in tlie mntnal 
 
 agreements made between merchants, engaged in common ship- 
 ping adventnres, for distributing among the mntnal contractors 
 the loss falling npon any one by reason of perils of navigation. 
 It is thus apparent that in its early forms insnrance was de- 
 rived from the maritime law, and as snob was a part of the 
 'general law merchant, and international in its character. 
 
 4. The principle of insnrance was probably nnknown to the ancient 
 
 commercial nations, and no reference to the insnrance contract 
 is to be f onnd in the books of the civil law. 
 
 5. The invention of the practice of insnrance is to be attribnted to the 
 
 merchants of the ItaUan cities in the early Middle Ages. From 
 Italy the practice of insuring commercial ventures against dis- 
 aster rapidly extended to the other maritime states of Europe. 
 
 6. The I«ombard merchants who came to London in the thirteenth 
 
 century brought with them the custom of insuring against 
 hasards of trade. All questions of insurance, however, were 
 
 plaything of the legislatures and the football of the courts.'* See Reports 
 Am. Bar Ass'n, vol. 20, p. 496; 4 Va. Law Reg. 499. « * 
 
 8 For an excellent statement of the benefits flowing from the practice of 
 Insurance, and its influence in advancing commerce, see 1 Duer, Ins. p. 54. 
 
 r 
 
 '! 
 
 I. 
 
 §§ 3-6) 
 
 THE HISTORICAL ORIGIN OF INSURANCE. 
 
 8 
 
 determiac'J !n accordance xrith the cnstoms of merelir.iits, and 
 by merehaat courts. It was not until the middle of the eigh- 
 teenth century that the common-law courts began to take ade- 
 quate cognizance of insurance causes. 
 
 Insurance among the Ancients. 
 
 It seems remarkable that the merchants who were engaged in the 
 extensive commerce that in ancient times was carried on upon the Med- 
 iterranean Sea between the Phoenician and the Levantine cities, and 
 between the several ports of the Roman Empire, should not have 
 invented so simple a method of providing against the hazards that 
 must have attended commercial enterprise at that time as the con- 
 tract of insurance. Indeed, some means of mutual assistance against 
 the misfortunes to which every merchant engaged in commerce by sea 
 is exposed would seem to have been imperatively necessary for the con- 
 duct of such extended commerce as is known to have existed dur- 
 ing the period of the Roman emperors. But, with the exception of 
 references to bottomry and respondentia bonds, there are to be 
 found in the Roman treatises no traces * of the contract of insurance. 
 If the practice of insurance was known to the ancient Romans and 
 Phoenicians, the extensive use to which it would probably have been 
 put should have induced some treatment of the rules of law respect- 
 ing it in the civil-law treatises, but none are found. It is reasonable 
 to presume, therefore, that insurance was unknown either to the 
 Romans or the Phoenicians. 
 
 The Barliest Traces of Insurance. 
 
 The earliest indications we find of any transactions between mer- 
 chants similar to insurance are to be found in the laws of the ancient 
 Rhodians.* In this collection of maritime regulations there are pro- 
 visions for contribution and general average in case of loss by a 
 shipowner, requiring that all of those having an interest in a common 
 venture, and subject to a common peril, shall make contribution to 
 that one whose interest had been sacrificed to protect or save from 
 loss the whole venture. Out of this practice, apparently inaugurated 
 by these Rhodian merchants, there was gradually developed the 
 
 ♦ Occasional doubtful referenceg found in the writings of Cicero livy 
 Suetonius, and other Latin authors have led some authorities to conclude 
 that Insurance was known and practiced among the Romans. See Emerigon 
 c. 1, § 1; 1 Duer, Ins. pp. 7, & But the better opinion gives other meanings 
 to these passages. 
 
 » These laws consisted of a compilation of maritime rules and orders pro- 
 mulgated by Rhodes when that island was the foremost commercial state 
 of the world. They were said to be wise and Just, and were adopted by 
 Augustus and subsequent Roman emperors as a part of the Roman law bo 
 far as not repugnant to any of iti positive ruleg. Cicero, Pro Lege Manilla. 
 See 1 Duer, Ins. 24. -• » "**«. 
 
 ^JM;- 
 
HISTORICAL AND INTRODUCTORY. 
 
 (Ch.l 
 
 w 
 
 law of marine insurance, which is thus seen to be the earlies^^^^^^^^ 
 
 as for a long time it was the most important, branch of msurance 
 
 business* 
 
 Insurance as Practiced by the Italian Cities during the Middle Ages 
 
 The first satisfactory evidence that we have of any extensive use 
 of the contract of insurance is to be found in the history and reoD ds 
 of the medieval maritime states of Italy. From the twelfth to the 
 sbcieenth centuries the Italian republics of Venice. Flo^enc^. and 
 Genoa flourished greatly by reason of their extensive niantinie com- 
 merce, and it was among these Italian merchants *!«**«; f°«tj^^ 
 of insurance first received that attention which the mamfest benefi s 
 to be derived from its use would justify.* Insurances were certainly 
 effected as early as the begimiing of the thirteenth cenUiry, and 
 probably in the tenth century. From Italy the custoni of making 
 mutual contracts of insurance spread rapidly over the whole of com- 
 mercial Europe, and early came to be P-'^.'^'^^extensive^ by the 
 merchants in the towns forming the Hanseatic ^^^S?*;. ^".f '^^ ^^ 
 1310 there was a chamber of assurance m Bruges, and there is record 
 of a statutory form of policy in Florence as early as 1520 In fact, 
 the word "policy" is a monument to the Italian ongm of msurance. 
 it being derived from the ItaUan word "polizia.' • 
 
 Part of the General Law Merchant. » • , 
 
 It h thus seen that during the fourteenth and fifteenth centuries 
 the practice among merchants of making insurance contracts had 
 become general throughout all the maritime states of Europe. The 
 contracts seem to have been confined to those merchants engaged 
 in the riore extensive international commerce, and this fact rendered 
 necessary uniformity in the regulations of insurance as Practiced in 
 "hese different countries. Thus there was impressed upon hese n- 
 surance regulations, just as well as upon other commercial rules 
 SowTng ouf of the custom of merchants, a certain international char- 
 fZL the whole body of rules intended to govern Jhf V°™; 
 mere al transactions became known as the "law merchant These 
 rules bore a peculiar relation to the respective systems of law ex- 
 Uting Tthe several countries in which the law merchant, by vir- 
 
 .so stated ^>r Pardes- See apjnio. of Bra«e, J ^/Xln"S 
 
 ■^TseTL^baid: "nTp. t wh^JeT.s'^.^^erestin, document i. set forth .. 
 t„U^^ w"l'.I^ conteilns an excellent outline of the early history and 
 
 "'iTr^pletsThrvt been derived from the Low Latin "P^oUtlcn- •• . 
 coJi^pffom ^"polyptlcum," derived from a Greek word m.anin« . folded 
 wrltlog. Skeaf • Etymological Diet 
 
 1' 
 
 S-6) 
 
 THE mSTOEIOAL OEIGIN OF INSUKANOB. 
 
 tue of the customs of merchants, prevailed. Durmg the Middle 
 Ages these merchants engaged in international commerce being 
 much more enlightened than most of their countrymen, and better 
 capable of governing their own trade, were naturally unwilling to 
 leave the determining of their rights with respect to such trade to 
 the crude forms of law and the rude courts that administered the 
 local laws of Continental Europe. From this fact arose the custom 
 among these merchants of leaving all questions ansing under the 
 law merchant to be settled by conventional courts established by 
 themselves, and having only such powers as were derived fro™ *« 
 consent of the parties appearing before them. Nevertheless, these 
 infonnal tribunals of merchants, who were, in effect, but committees 
 of arbitration, and who had no means of enforcmg any order that 
 might be entered, were by the mere force of custom enabled to set- 
 tle satisfactorily all causes arising out of the law merchant durmg 
 those centuries. And it was not until the increasing refinement and 
 better education of the people generally had brought the law courts 
 to a higher state of efficiency that these informal mercantile courts 
 
 were superseded. . .j . t 
 
 The law merchant, of which insurance law is a part, is said to be a 
 part of international law, but it is international only in the sense that 
 the principles applicable are those that are recognized m all civilized 
 nations. The positive niles of law themselves are but part of the 
 municipal law in the several countries in which they are enforced, 
 and do not in any wise affect international relations; tiiat is, the law 
 merchant is a portion of the jus gentium, but not of the jus inter 
 rentes. On account of its international character as thus under- 
 stood, the sources from which the rules and customs are to be de- 
 rived are found in the various compilations of commercial rules and 
 regulations promulgated by the several maritime nations of Europe, 
 and in the treatises by lawyers and merchants in the nature of 
 commentaries on these customs and regulations. While any one body 
 of commercial laws was, of course, binding only upon the courts sit- 
 ting in the country by which these laws were enacted, yet the sim- 
 ilarity of such regulations throughout Europe caused all of these 
 various compilations to be treated as persuasive authority m deter 
 mining the rule of decision to be applied to any cause that might 
 arise, in whatever jurisdiction. . . » » 
 
 It will be well to mention a few of the most famous and unportant 
 of these compilations of commercial laws and usages. The Con- 
 solato del Mare is the Italian name for a Spanish compilation first 
 published at Barcelona about the middle of the thirteenth century. 
 This body of rules had great vogue in all of the commercial countries 
 of Europe, and has powerfully influenced the subsequent develop- 
 ment of maritime and general commercial law in aU of the Conti- 
 
 I 
 
KSTOBICAL AND INTBODUCTOBT. 
 
 (Ch.l 
 
 §§3-6) 
 
 THE HISTOBICAL ORIGIN OF INSUBANCB. 
 
 (I 
 
 II 
 
 nental countries. It contains, however, no distinct reference to in- 
 surance law. The Laws of Oleron, a small island off the northwest- 
 em coast of France, were first pubHshed about the year 1266, and 
 although rather crude, and sometimes harsh, they yet achieved great 
 reputation among merchants, and were regarded as of great weight 
 throughout Europe on all questions involving the law merchant. 
 The Laws of Wisbuy, a flourishing commercial town of Southern 
 Sweden, were published at the end of the thirteenth century, and, 
 on account of the extensive commerce carried on by merchants of 
 Wisbuy, were frequently relied upon for determining maritime 
 rights. In addition to these older sets of laws, all of the Hanse 
 Towns established mercantile codes, governing mercantile transac- 
 tions in their respective jurisdictions, which were often cited in 
 courts in other parts of Europe. Probably the most skillfully com- 
 piled and adequate collection of mercantile regulations was the 
 famous Marine Ordinances of Louis XIV, published in 1681. The 
 excellence of these laws is probably due not only to the sagacity of 
 the great French monarch, Louis XIV, but also to a clear insight 
 into the commercial needs of the day possessed by his illustrious 
 minister, Colbert The influence of these Ordinances of Louis XIV 
 extended throughout Europe, and even to the British Islands, and 
 afforded the principal source from which Napoleon compiled the 
 famous "Code de Commerce" of a later date, which is now the most 
 important and extensive repository of modern commercial law on 
 the Continent of Europe. In addition to these collections of laws, 
 several earlier treatises obtained great authority in commercial coun- 
 tries, and greatly aided in the proper development of the law mer- 
 chant. Among these, probably the earliest of importance is the 
 Guidon de la Mer, pubHshed by Cleirac, a distinguished lawyer of 
 Rouen, in 1671. In later times, a distinguished trio of French 
 writers, Emerigon, Valin, and Pothier, contributed valuable works 
 upon the various subjects of mercantile law. These writers are re- 
 garded as of great authority on all questions treated in their works, 
 not only on the Continent, but in England and the United States as 
 well.* 
 
 The Introduction of Insurance into England, 
 
 Although it is now seen that the law of insurance is but a part of 
 the general law merchant, it has yet become a part of the common 
 law. As said by Bradley, J., in New England Marine Ins. Company 
 
 • For an appreciatiye account of these works and writers, see 3 Kent, 
 Comm. 348. That they are still regarded as authorities in general maritime 
 law, see "The Osceola," 189 U. S. 158, 23 Sup. Ct 433, 47 L. Ed. 760, where 
 the Supreme Court cites the Marine Ordinances of Louis XIV, the Laws of 
 Oleron, of Wisbuy, and of the Hanse Towns. See Appendix to 30 Fed. Gas., 
 where these ancient laws are reprinted in part. 
 
 V. Dunham,* • "the contract of insurance is an exotic in the common 
 law." It will therefore be of interest to trace briefly the early de- 
 velopment of insurance law in England, and to note the causes re- 
 sulting in its adoption into the common law. It seems well estab- 
 lished that the Italian merchants coming from the flourishing com- 
 mercial centers in Northern Italy, and generally known as Lom- 
 bards, founded trading houses in London in the twelfth century; 
 and it is manifest that they introduced into their English trade the 
 custom of insuring their adventures, which had proved so beneficial 
 to the growth of commerce in their native Italian citfes. Lombard 
 street in London is now a monument to these earlier Italian mer- 
 cantile adventurers, and marks the locality in which their trading 
 houses were located. These Lombards brought with them to Lon- 
 don not only their Italian custom of insuring against hazards of 
 trade, but they also brought with them their merchant courts, or, 
 rather, the custom of submitting all contests involving mercantile 
 rights to courts of merchants, established by themselves, and having 
 no relation to or sanction under the common law of England. These 
 merchant courts, which had their analogues in the well-known pie- 
 powder courts of the early English fair towns, seem to have been amply 
 adequate to dispose of any Htigation that arose among merchants 
 during several centuries, and the preamble to 43 Eliz. c 12, the first 
 statute passed by the English Parliament that recognizes the prac- 
 tice of insurance, contains a striking tribute to the honesty and fair- 
 ness which had characterized the dealings of merchants with refer- 
 ence to all contracts of assurance. This fact explains the absence 
 of insurance cases in the earHest English reports, but there is abun- 
 dant evidence that the business of insurance among English mer- 
 chants was well established long before the date of this statute, and had 
 attained considerable volume.** Thus, at the opening of Elizabeth's 
 first Parliament, in 1558, her Chancellor, Lord Bacon, said, "Doth not 
 the wise merchant in every adventure of danger give part to have the 
 rest assured ?" 
 
 The first reported appearance of any question involving insurance in 
 the common law of England occurred in the thirty-eighth year of the 
 reign of Henry VIII (1546), in the case of Crane v. Bell,*' in which 
 a common-law court issued a writ of prohibition, forbidding a court 
 
 10 11 Wall. (U. S.) 1, 20 L. Ed. 90. 
 
 "In the preamble to the Statute of 43 Ellz. c. 12, it Is said: "And, where- 
 as, it hathe bene, tyme out of mynde, an usage among the merchants, both 
 of this realme and of forraine nacyons, when they make any great adven- 
 tiu*e (especiallie in remote parts) to give some Consideracion of money to 
 ocher persons (which commonlie are in no small number), to have from them 
 assurance," etc. 
 
 12 4 Coke's Inst 138. 
 
8 
 
 HISTORICAL AND INTRODUCTORY. 
 
 {Ch.l 
 
 of admiralty to take jurisdiction of an insuiance case. The juris- 
 diction of causes involving the law of insurance would more prop- 
 erly have fallen to the courts of admiralty, which had cognizance of 
 such causes throughout Europe," and which have always been more 
 international in their character than any other courts of England. 
 The jurisdiction of admiralty courts in such matters is recognized 
 in the United States," but the jealousy which characterized the com- 
 mon-law courts in maintaining and extending their jurisdiction re- 
 sulted in the early withdrawal of such causes from the English courts 
 of admiralty, and their transfer to the common-law courts, as was 
 indicated in the case of Crane v. Bell, mentioned above. The pro- 
 cedure in the common-law courts, however, and the rigid principles 
 of common-law jurisprudence, were alike ill suited for settling the 
 disputes of merchants in regard to insurance in either an expeditious 
 or a satisfactory way, and the result of prohibition of jurisdiction to 
 the admiralty courts was to continue the practice of submitting such 
 mercantile questions to the arbitration of merchant courts. With 
 the growth, however, of the volume and importance of insurance 
 business, it began to be recognized that some more formal court, 
 with power to enforce its judgments, was necessary for the proper 
 administration of the law merchant. With this in view, there was 
 created by the statute of 43 Eliz. (1601) a special court for the trial 
 of marine insurance cases. This court was composed of the judge 
 of the admiralty, the recorder of London, two doctors of the civil 
 law, two lawyers, and eight grave and discreet merchants. This 
 special court, however, must not have proved itself very efficient, 
 for it seems to have passed out of existence within less than 100 
 years. It is possible, however, that the passing away of this court 
 was due as much to the increased efficiency of the common-law 
 courts as to the insufficiency of this special mercantile court. 
 
 The first reported insurance case heard before a common-law 
 court is Dowdale's Case," which was decided in 1589. But so un- 
 willing were the merchants to bring their causes before the common- 
 law courts, that it is said that less than 60 insurance cases are to 
 be found in all of the English reports prior to the time of Lord 
 Mansfield's accession to the bench, in 1756." With the appointment 
 of Lord Mansfield as Chief Justice of the Court of King's Bench 
 there came a new era in the common law with reference to questions 
 involving the law merchant. This great judge, appreciating the 
 peculiar circumstances that attended the making of mercantile con- 
 
 x» See New England Marine Ins. Co. v. Dunham, 11 Wall CU. S.) 1. 20 
 L. Ed. 90. 
 1* New England Marine Ins. Co. v. Dunham, supra. 
 !• Coke's Reports, pt. 6, p. 47b. See Parke, Ins. 43 et seq. 
 i« See Parke, Ins. ubi supra. 
 
 §§ 7-10) THE DEVELOPMENT OF INSURANCE IN ENGLAND. 9 
 
 tracts, and the importance of considering the usages and customs 
 of merchants as determining their rights under such contracts, began 
 a consistent effort to import into the common law such of the prin- 
 ciples of the law merchant as would render the common law suitable for 
 the administration of justice in regard to commercial rights. In order 
 to determine what rules should be applied in deciding these causes, he 
 looked to the various authorities that were in vogue on the Continent,*^ 
 such as have been mentioned above, and also had special juries impan- 
 eled to detennine the customs of English merchants. Thus, in the skill- 
 ful hands of Lord Mansfield, who is properly called the "Father of Eng- 
 lish Commercial Law," the essential principles of the law merchant 
 were incorporated into the common-law system of England, and the 
 common-law courts thereby rendered competent to take adequate 
 cognizance of all questions involving insurance. When Mansfield 
 retired from the bench in 1788, not only had the jurisdiction of the 
 common-law courts over questions regarding the law merchant be- 
 come fixed, but also the volume of litigation in such causes had in- 
 creased to such an extent as to show that the merchants now re- 
 garded those courts as adequate for the administration of justice in 
 connection with their commercial dealings. 
 
 THE DEVEI.OPMENT OF INSUBANCE IN ENGLAND. 
 
 7. MARINE INSURANCE— For several centnries after its introduction 
 
 into England, insurance was confined to marine risks, and oonse* 
 quently the law of marine insurance was first developed in the 
 English courts, and until recent times remained the pre-emi- 
 nently important branch of insurance law^. 
 
 8. FIRE INSURANCE— Insurance against loss by fire is of compara* 
 
 tively recent orignbi, the first reg^nlar ofiice being opened in 
 1681, and assumed little importance before the beginning of 
 the nineteenth century. During the century just closed the 
 growth of the business of fire insurance companies was very 
 rapid, and the law of insurance against fire now rivals that of 
 marine insurance in importance. 
 
 9. LIFE INSURANCE— Insurance against loss by death is of still later 
 
 origin, and is of a soniewhat different nature from insurance 
 against marine and fire risks. The volume of life insurance 
 business has grown greatly in recent years. 
 
 10. ACCIDENT INSURANCE— Insurance against accidental injury, 
 
 including death by accident, is derived from, and im principle 
 is but a form of, life insurance* 
 
 *' As evidence of the international character of maritime law, see the cita- 
 tions in The Osceola, 189 U. S. 158, 23 Sup. a. 433, 47 L. Ed. 760. A case 
 involving fire insurance has recently been decided in a trial court in Louis- 
 ville, Ky., on the authority of a French work on Insurance, by Alauzet nub- 
 lifihed in 1843. ^ 
 
 m 
 
10 
 
 HISTORICAL AND INTRODUCTORY. 
 
 (Ch.l 
 
 Marine Insurance as Developed from the Usages at Lloyd's. 
 
 While the practice among merchants of insuring their marine ad- 
 ventures doubtless had its origin as early as the thirteenth century, 
 yet we have no evidence of any definitely settled regulations or meth- 
 ods of carrying on insurance business in London before the latter 
 part of the seventeenth century. It is known that Lloyd's Coffee 
 House, an inn kept by one Edward Lloyd on Tower street in Lon- 
 don, was, as early as 1688, a popular resort for seafaring men and 
 merchants engaged in foreign trade. It became the custom among 
 those who gathered at Lloyd's to make their gathering an occasion 
 for arrang-ing their mutual contracts of insurance against the sea 
 perils to which their ventures were exposed. The method employed 
 in making such insurance contracts was for the person desiring the 
 insurance to pass around among the company assembled a slip upon 
 which was written a description of the vessel and its cargo, with the 
 name of the master and the character of his crew, and the voyage con- 
 templated. Those desiring to become insurers of the ventures so 
 described would write beneath the description on this slip their 
 names or initials, and opposite thereto the amount which each was 
 willing to be liable for as insurer. When the total amount of insur- 
 ance desired by the owner of the vessel was thus underwritten, the 
 contract was complete. From this practice, among those congre- 
 gating at Lloyd's, is derived the term "underwriters," as now applied 
 to insurers. The business of insurance carried on in this informal 
 way at Lloyd's seems to have increased rapidly, and the commercial 
 importance of the house required that it should be removed to a 
 more commodious and convenient site, which was found on Lom- 
 bard street, whither Lloyd removed his house in 1692. Both the 
 importance of this coffee house in commercial circles, and the enter- 
 prise of its proprietor, were shown by the estabHshment in 1696 of 
 a newspaper, giving information of commercial transactions and of the 
 movement of shipping throughout the world. While this newspaper 
 was shortly afterwards suppressed by reason of some indiscretion on 
 the part of its publisher, it was yet the progenitor of "Lloyd's Lists," 
 the publication of which was begun in 1726, and which continues up 
 to this day as the most important publication in the shipping and 
 commercial world. After various removals, Lloyd's finally found 
 permanent quarters in the Royal Exchange, where it is now located, 
 and remains, probably the greatest and most important single com- 
 mercial factor in the mercantile world. 
 
 The conduct of the business of marine insurance continued to be 
 largely informal, governed by no fixed rules or regulations, either 
 as to the membership in the company of attending brokers, or as 
 to the terms and incidents of the contracts made, until 1769, when 
 the underwriters accustomed to writing insurance there were formed 
 
 §§ 7-10) THE DEVELOPMENT OF INSURANCE IN ENGLAND. 11 
 
 into a society governed by rules established in accordance with the 
 customs that had been developed. It soon became evident that 
 many advantages would flow from the establishing of a fixed form 
 (»f policy v/hich should be used by the contractors at Lloyd's, and, 
 as a consequence, in 1779 the famous "Lloyd's Policy" was adopted 
 as the standard form for marine insurance. The terms of this policy 
 liave been subjected to much criticism, and even vituperation, at the 
 hands of writers and courts, Mr. Justice Buller declaring that it was 
 "absurd and incoherent." " Yet the uniformity introduced into the 
 business of insurance by its use, and the fact that many of its terms 
 have been construed by the courts, render the venerable document 
 valuable for practical purposes, and justify its retention, with a few 
 needful changes that have since been made, in the modern business 
 of marine insurance. In 1871 the Society of Lloyd's was incorpo- 
 rated, one of the purposes of incorporation being "the collection, 
 publication, and diffusion of intelligence and information with respect 
 to shipping." In carrying out this purpose, Lloyd's and its agencies 
 throughout the civilized world have attained a high degree of effi- 
 ciency, so that no movement of any considerable vessel, in any part 
 of the world, is made without being promptly reported and published 
 at Lloyd's. In addition to "Lloyd's Lists," before mentioned, the 
 society publishes "Lloyd's Captains' Register," containing informa- 
 tion with reference to the character and experience of all the certi- 
 fied masters engaged in British commerce, and "Lloyd's Register 
 of British and Foreign Shipping," published annually, which gives 
 full descriptions of British and foreign vessels engaged in com- 
 merce. The symbol used in rating the highest class of wooden ves- 
 sels in this publication, "A 1," has passed into popular usage as in- 
 dicating the highest degree of excellence. A record of all casualties 
 occurring during any year is kept in what is known as the "Black 
 Book," and the posting of any vessel at Lloyd's as "missing" is re- 
 garded as sufficient evidence of the loss of such vessel to entitle the 
 owner thereof to demand the payment of the insurance.** 
 
 The immense volume and great relative importance of the foreign 
 commerce of England make marine insurance in that country by far 
 the most important branch of the law of insurance, as it was for cen- 
 turies the only branch. 
 
 The Establishment and Development of Fire Insurance. 
 
 There is some evidence that even in Saxon times agreements were 
 ir^ade in small communities for mutual aid in case of loss by fire, 
 
 !• Brough V. Whitmore, 4 T. R. 206. 
 
 19 See Richards, Ins. p. 11. The brokers at Lloyd's still continue their 
 unique methods of underwriting individually risks proposed, and issuing 
 binding slips, which are followed by formally drawn policies. See Garrett's 
 Insurance Reference Book (1901) p. 283, 
 
'Il 
 
 12 
 
 HISTORICAL AND INTRODUCTORY. 
 
 (Ch.l 
 
 I!! 
 
 but such practice evidently assumed no considerable proportions or 
 importance, and it was not until after the great London Fire of 1666 
 that fire insurance can be said to have become of any importance 
 as a business. Indeed, no regular office was open for the purpose 
 of insuring against loss by fire until 1681, when certain brokers seem 
 to have formed a loose organization for this purpose in the rear of 
 the Royal Exchange. The year 1710 saw the establishment of the 
 oldest of all fire insurance companies, the Sun Fire Office, which 
 was a mutual and stock company." Various other companies were 
 established at later periods, but the business of fire insurance did not 
 attain to any very considerable proportions before the beginning of the 
 nineteenth century. The application of the principles of insurance to 
 losses by fire on land, however much their beneficence might be recog- 
 nized in the case of marine insurance, did not meet with early favor in 
 England, it being supposed that the tendency of such insurance was to 
 increase the number of cases of arson, and thus make the practice in- 
 jurious to the best interests of the public. That this belief was not with- 
 out foundation can be seen from the statistics, which show that, dunng 
 the years of 1852-66, which period exhibited a marked increase in the 
 volume of fire insurance business, the increase of fires of suspicious 
 origin in England was from 34>^ per cent, to 52>4 per cent. The 
 business of fire insurance companies, being thus subjected to popu- 
 lar disfavor and suspicion, was deemed a proper subject for taxa- 
 tion and accordingly the British government imposed taxes, vary- 
 incr'in amount from time to time, upon all companies msuring 
 ag'Linst fire risks down to as late a time as 1869, when it began to be 
 recognized that the business of fire insurance was not only proper, 
 but highly beneficial to the property interests of the country, and 
 the burden of taxation was removed." During the last quarter of 
 the nineteenth century the business of fire insurance in England 
 increased with great rapidity. Probably the largest fire insurance 
 companies in the worid are two great English companies, which have 
 established branches in all civiUzed countries. 
 
 The Origin and Rise of Life Insurance. 
 
 The first attempt made to apply the principles of insurance to in- 
 demnifying those who suffer on account of the death of others was 
 in 1706, when the "Amicable Society for a Perpetual Assurance 
 Office" was founded. The plan of operation in this society was 
 merely to require from each member, irrespective of age or condi- 
 
 20 This venerable company still carries on a large and prosperous bnsinesa^ 
 
 21 See article "Insurance." 13 Ena Brit. It is estimated that in the United 
 States over 30 per cent of the fire insurance losses are to be attributed to fires 
 of intentional origin. See Fire Insurance and Causes of Fires, by F. C Moore, 
 at page 17. 
 
 §§ 11-12) DEVELOPMENT OP INSITBANCE IN UNITED STATES. IB 
 
 tion, a fixed annual contribution, and, from the sum so raised, to 
 pay to the representatives of each member dying a proportionate 
 part of such sum. In 1734 the society made a guaranty that the 
 amount paid to the representative of each member deceased should 
 not be less than £100. But, even with this latter guaranty, the con- 
 stitution of this society was not such as to make its operation suc- 
 cessful The first society formed for insuring against loss of Ute, 
 upon the principles underlying modern life insurance was the Eq- 
 uitable Assurance Society of London, which was established in 17b^. 
 This company first recognized the necessity for varying the amount 
 of premiums paid in accordance with the age and condition of the 
 insurer Since the establishment of the Equitable, life insurance has 
 been steadily developed along modern lines, and numerous other 
 influential companies have been estabUshed in England that carry 
 on an extensive business both at home and abroad. 
 
 Accident Insurance. . . j ^ 
 
 The first company formed for the purpose of granting indemnity 
 against accidental injury was the Railway Passengers' Assurance 
 Company, established in London in 1849. As its name imphes, its 
 business was confined to insurance against railway accidents. But 
 in 1856 it extended the scope of its business so as to include insur- 
 ance against accidents of all kinds. The contracts of the company, 
 insuring against accidental injury, provided for paymg certain sums 
 during disability of the insured on account of accident, or to indem- 
 nify him for the accidental loss of any limb or member, or to pay a 
 certain sum to a beneficiary named in case of death by accident 
 This species of insurance is directly derived from life insurance, and 
 the principles that apply to contracts of the latter kind of msurance 
 in most cases govern the rights of parties under contracts of acci- 
 dent insurance. 
 
 THE DEVEIiOPMENT OP INSURANCE IN THE UNITED STATES. 
 
 11. In general, tlie development of the »everal kind, of inanrance ka« 
 
 followed the same lines In tlie United States as In England, save 
 tliat marine Insurance does not occnpy a position of such great 
 importance as compared with fire and Uf e insurance. 
 
 12. The pecnUar circumstances entering into the making of contract. 
 
 of insurance, and the early tendency on the part of insurers to 
 make use of the common-law rules governing insurance con- 
 tracts, in order to take an unfair advantage of the insured, 
 have caused the legislatures of the several states of the Union 
 to enact numerous statutes for the regulation of insurance. 
 These statutory restrictions have greatly complicated the legal 
 principles that are now to he appUed to the determinins ©f iMr 
 ■urance oauses. 
 
 i\ 
 
\ 
 
 14 
 
 HISTORICAL AND INTRODUCTORY. 
 
 (Ch.l 
 
 Marine Insurance in the United States. 
 
 On account of the fact that the foreign commerce of the United 
 States has always been of less importance than its domestic trade, 
 and its shipping relatively insignificant in volume, marine insurance 
 has never attained the great importance in this country that it has 
 always occupied in England. While this is true, yet the volume of 
 business done by marine insurance companies in the United States 
 is by no means inconsiderable. One company, the Atlantic Mutual 
 of New York, carries, perhaps, as great an amount of insurance upon 
 shipping as even the British Lloyd's.** There is every reason to 
 believe that under the present commercial policy of the United 
 States government, and the rapid growth of American foreign com- 
 merce during the last decade, the marine insurance business may in 
 time assume the position of relative importance that it occupies in 
 Great Britain. 
 
 Fire Insurance in the United States. 
 
 The first fire insurance company to be established in the United 
 States was in Philadelphia, in 1752. This company, known as the 
 "Philadelphia Contributionship for Insuring Houses from Loss by 
 Fire," was incorporated on the mutual plan, Benjamin Franklin be- 
 ing one of its directors. The business of fire insurance has always 
 been favored in the United States, and it has experienced a steady 
 growth, until at the^present time it is regarded as thoroughly unwise 
 for any property owner to allow his property to be uninsured. The 
 volume of fire insurance business in this country has become im- 
 mense, the total amount of risks written by the several joint-stock 
 companies doing business in this country being, during the year 
 1901, $20,629,226,087, and the premiums paid, $157,599,206, whilf, 
 losses were paid amounting to $93,139,517.*' 
 
 The methods of carrying on the business of insurance against 
 fire have been reduced to the greatest precision and nicety. Boards 
 of underwriters are established in the great cities, whose functions 
 are to obtain and classify all items of information, with reference to 
 risks to be assumed, that may be of value to the various constituent 
 
 «2 This great company during 1891 wrote insurance to the amount of 
 $718,746,817. During its life of sixty years it has paid losses amounting to 
 $211,954,046. 
 
 28 Statistics of the business of mutual fire companies are not very re- 
 liable. Reports of 179 companies give the premiums received as aggregat- 
 ing $20,742,603; the losses paid, $7,324,779. 
 
 The average dividend earned by the American joint-stock companies dur- 
 ing the period 1860-1901, inclusive, was 11.12 per cent. 
 
 The total amount of fire and marine insurance transactions in the United 
 States for the year 1901 is imposing. The total capital invested was $69,- 
 930,423; the total assets of all companies, $450,566,078; the premiums re- 
 ceived were $199,800,505; and the losses paid, $112,007,219. 
 
 :|^ 
 
 HI 
 
 5 11-12) DEVELOPMENT OP INSUKANCE IN UNITED STATES. 15 
 
 companies. Charts are made of all the buildings in every consider- 
 able city, and the underwriter may now, by a mere reference to the 
 chart to be found in his office, determine the quality and character of 
 any risk that may be brought before him. The insurance companies 
 doing business in the cities also maintain salvage corps, who possess 
 every appliance for promptly and efficiently protecting the property 
 of the insured against injury by fire or water, and act on behalf of 
 the insurance companies in conjunction with the fire department of 
 the city in which they are found. 
 
 Life Insurance in the United States. 
 
 The first effort made to establish life insurance in the United 
 States was a mutual benefit association of Presbyterian ministers 
 which was chartered in 1769 in the colony of Pennsylvania. There 
 seem to have risen numerous small mutual companies of a similar 
 kind during the latter part of the eighteenth and the first part of the 
 nineteenth centuries, but that life insurance was of little importance, 
 and the business of small volume, is evidenced by the fact that the 
 earliest case ** on the subject in a court of last resort was decided in 
 1809 in the state of Massachusetts. At as late a date as this the 
 court went gravely into the question of whether a contract of life 
 insurance was valid under the law of Massachusetts, it being con- 
 tended that the common law of England was not in this respect in 
 force in that state, because such a contract was repugnant to sound 
 morals and contrary to public policy. In referring to the holding 
 of the French courts, deciding that such contracts were illegal be- 
 cause they "set a price upon the life of a freeman, which is above 
 all price," Chief Justice Parker naively observed that such reasoning 
 was hardly sufficient, coming from France, where freedom had never 
 been known. Notwithstanding Chief Justice Parker's decided opin- 
 ion on the subject, the contract of life insurance was long regarded 
 with suspicion, many moralists holding that it was in fact speculat- 
 ing in life, and therefore immoral. In consequence, the growth of 
 the business of life insurance was not rapid until about 1850, when 
 the increasing prosperity of the people of the United States enabled 
 them to give effect to their desire to make a suitable provision after 
 death for the support of those depending upon them. This, with the 
 prevalence of sounder views with regard to the ethics of life insur- 
 ance, resulted in a very considerable increase in the volume of life 
 insurance prior to the Civil War. After the close of the Civil War, 
 in 1865, life insurance began to grow with marvelous rapidity. Nu- 
 merous companies were established in all sections of the United 
 States, many of them on very insufficient capital, and their adminis- 
 tration was conducted upon very reckless and unsound methods. 
 
 «* LORD Y. DALL, 12 Mass. 115, 7 Am. Dec. 38. 
 
T 
 
 h \ 
 
 li 
 
 I 
 
 16 
 
 HISTORICAL AND INTBODUCTOEY. 
 
 (Ch.l 
 
 Many different kinds of policies that were expected to prove at- 
 tractive to the people were offered, and by the end of the third quar- 
 ter of the century life insurance had suddenly become one of the 
 most important financial institutions of the country. During the last 
 25 years the growth of life insurance, while not so marvelous, rela- 
 tively, as that of the period immediately preceding, has yet been 
 most wonderful, and the volume of business done by life insurance 
 companies at the present time is so great as almost to stagger the 
 intelligence. 
 
 The total amount of outstanding insurance of all life companies 
 doing business in the United States was on the 1st day of January, 
 1902, $15,574,514,784, and the premiums paid by the people for this 
 insurance $453,682,070, while the losses paid to policy holders dur- 
 ing the year 1901 reached the enormous sum of $265,231,939." 
 
 In considering the causes of this phenomenal growth of life in- 
 surance, it is well to observe that this business is not now confined 
 to mere insurance against the risks and accidents of life, but also 
 includes, as perhaps its most important element, the feature of in- 
 vestment. All life insurance companies now issue policies embody- 
 ing this feature of investment of money by the insured, with the 
 double purpose of securing protection for those dependent upon him 
 in case of death, and of obtaining a safe investment for his surplus 
 earnings that will yield him a reasonable interest return. These in- 
 vestment policies are of almost infinite variety, and are known vari- 
 ously as "endowment policies" or "endowment bonds." So popular 
 is this investment feature of insurance, that it is now added to the 
 ordinary life policy in nearly all modern companies. Thus the enor- 
 mous sum total of invested assets of the insurance companies in 
 the United States represents not only the reserve value of the 
 
 *» These fignres Include the business done by assessment associations and 
 fraternal orders, the statistics of which are probably incomplete. It is stated 
 that the total receipts of all the various fraternal orders in the United States 
 during 1901 were $81,628,597, and the losses paid $68,412,804, with outstand- 
 ing insurance of $5,656,453,465. 
 
 From these figures it is apparent that the insurance given by the fraternal 
 orders is much less costly than that of the old-line companies; in the former 
 the losses paid being more than 80 per cent, of premiums received, and in 
 the latter less than 60 per cent 
 
 The volume of life insurance business In the United States may be well 
 illustrated by figures showing the condition of the three greatest life com- 
 panies on January 1, 1902: 
 
 New York Life: Total income, $71,274,150; total assets, $290,743,386; out- 
 standing insurance, $1,365,369,299. 
 
 Mutual of New York: Total income, $65,624,306; total assets, $352,838,972; 
 outstanding insurance, $1,241,688,430. 
 
 Equitable Life: Total income, $64,374,606; total assets, $330,473,309; out- 
 standing insurance, $1,179,276,725. 
 
 §§ 11-12) DEVELOPMENT OP INSURANCE IN UNITED STATES. 17 
 
 outstanding policies accumulated to enable the company to \neet 
 losses v^hen occurring, but also represents the savings of great 
 numbers of people who have adopted this form of investment. The 
 favor with which this kind of investment has been met in the United 
 States is probably due to the large proportion of salaried workers 
 in this country, which in turn is due to the fact that nearly all of the 
 industrial enterprises are in the hands of corporations, which neces- 
 sarily employ agents and servants and pay salaries. These employes, 
 having no business of their own in which their savings can be in- 
 vested, and, on account of the nature of their business, being usually 
 not in a position to secure for themselves safe and satisfactory 
 modes of investment, are almost perforce led to look to the insur- 
 ance companies to invest their money for them. 
 
 In the subsequent examination that is to be made of the principles 
 which determine the rights of the several parties to such contracts, 
 the student should bear in mind this double nature of the modern 
 life insurance contract : That it is a contract (1) of indemnity to de- 
 pendents in case of loss of life, and (2) of investment of savings. 
 
 Another important factor that has aided in the great increase and 
 popularity of life insurance is to be found in the establishment and 
 growth of the various mutual aid and benefit associations among 
 the laboriiig classes, these organizations being partly social in their 
 character, and beneficial in purpose 
 
 Accident Insurance. 
 
 As was seen above, accident insurance is but a modified form of 
 life insurance, and it might be expected that its importance would 
 increase in much the same proportion as that of life insurance. 
 There are numerous companies insuring against the consequences 
 of accident in all its forms and phases, and the amount of business 
 done by these companies is such as to justify, in a later chapter, a care- 
 ful examination of any peculiar rules of law that apply in the construc- 
 tion of their contracts. 
 
 Statutory Regulations of Insurance Business. 
 
 On account of the peculiar characteristics of the insurance con- 
 tract, and of the extensive use into which it has come, it has afforded 
 a favorite subject for legislation in all of the states of the Union 
 Notwithstanding the frequency with which such contracts are made 
 by nearly all the members of society, it is safe to say that the prin- 
 ciples of no other contract are so little known to even the more in- 
 telligent members of the business community as are those of in- 
 surance. ^ This unfortunate ignorance of the fundamental principles 
 upon which the conduct of insurance is based has manifested itself 
 m a great mass of legislation, much of which is undiscriminating. 
 Certain hardships bearing upon the insured in the enforcement of 
 Vance Ins.— 2 
 
 i 
 
18 
 
 HISTORICAL AND INTRODUCTOBT. 
 
 (Ch.l 
 
 
 the common-law principles of insurance have been apparent to the 
 unlearned legislator, and have been sufficient to induce him to apply, 
 without regard to the serious consequences that may ensue, such 
 superficial remedies, by sweeping enactments, as may have suggest- 
 ed themselves either to him or to his even less knowing constitu- 
 ents. It is admitted by all persons having any adequate knowledge 
 of the nature of insurance that it is one of the most beneficial in- 
 ventions of society, and it is peculiarly unfortunate that it should 
 have excited such pernicious activity, on the part of legislative 
 bodies, in the effort to regulate the administration and conduct of 
 companies engaging in insurance. In many cases, however, these 
 legislative regulations have been wisely conceived, and do really rem- 
 edy deficiencies of the common law, tending to promote justice and 
 prevent the perpetration of fraud upon the public. These statutes^ 
 are always aimed at the insurer, and intended for the benefit of the 
 insured. In accomplishing this desired end, the statutes may be said 
 to have four general purposes: (1) To insure the solvency of the 
 companies granting insurance ; (2) to prevent the insured from being 
 trapped by conditions of forfeiture set forth in the contract that 
 might escape his attention ; ^^ (3) the control of litigation against 
 the insurer, in order to make the remedy of the insured under his 
 contract speedy and efficient ; and (4) a general control of the busi- 
 ness of the insurers, in order to prevent any unfairness in the ad- 
 ministration of their affairs, either to the public or to the policy 
 holders, and for their proper and speedy winding up in case of in- 
 solvency (ilA fifth general aim to be easily observed is found in the 
 regulations intended for revenue only. The insurance company, with 
 its extensive business and large invested assets, offers a tempting 
 subject for taxation, and this temptation legislatures are by no 
 means inclined to resist. It is probable that the insurance business 
 is taxed more grievously, and bears a larger proportionate share 
 of the burden of maintaining the government, than any other kind 
 of legitimate business.'^ 
 
 The unhealthy influence exerted by the rapid growth of insurance 
 business shortly after the close of the Civil War resulted in the es- 
 tablishing of a large number of unsafe companies, which, after more 
 or less extended struggles for existence, suffered the collapse that 
 might have been expected from their reckless methods. The occur- 
 rence of such frequent failures on the part of insurance companies 
 had the double result of entailing very considerable loss upon nu- 
 merous innocent policy holders, and also of exciting a deep public 
 
 >• See the lerere arraignment of insurance companies on this account bj 
 Doe, J., in De Lancey v. Insurance Co., 52 N. H. 581. 
 >7 See Elements of Life Insurance, by M. M. Dawson. 
 
 11-12) DEVELOPMENT OP INSURANCE IN UNITED STATES. 
 
 19 
 
 distrust in the integrity of the management of all insurance com- 
 panies. From this condition the step to government inspection and 
 supervision was a short one. Practically all the states of the Union 
 have passed laws empowering an officer of the state, either specially 
 created for the purpose, and called "Insurance Commissioner," or 
 one of the already existing state officers, to require all insurance 
 companies doing business in their respective states to make annual 
 sworn reports as to the condition of their business, and allowing such 
 officers the privilege of examining the books of the companies at 
 pleasure, and also authorizing them to proceed to wind up any in- 
 surance companies which upon inspection are found to be insolvent. 
 Statutes are also to be found in all of the states requiring that each 
 foreign company doing business in the state shall deposit in the state 
 treasury a sufficient sum to secure to the policy holders in that state 
 the performance of all contracts made with them. The funds so 
 deposited in the treasury of the state are required to be a certain 
 per cent, of the capital and assets of the company, and are held sub- 
 ject to a lien in favor of the resident policy holders. In some states 
 companies are not allowed to carry on the business of insurance 
 unless they possess a certain amount of capital specified in the statute, 
 and are prohibited from accepting a single risk exceeding a specified 
 percentage of that capital." These regulations, being intended to 
 make certain the solvency of all insurers, and to prevent the reckless 
 and unsound conduct of insurance, commend themselves more high- 
 ly to reason than any other statutes affecting this subject. And yet 
 statistics show that there are more numerous failures among the 
 extensively regulated companies in the United States than among 
 the British companies, which are almost unmolested. 
 
 In the early stages of the business, the conduct of insurance com- 
 panies towards their policy holders was so illiberal and unwise, and 
 so many real hardships were imposed upon unwary policy holders, 
 that it is not surprising that we find upon the statute books of the 
 various states many laws intended to shield those buying insurance 
 from the supposed wrong intentions and harsh practices of the in- 
 surer. However well justified and even beneficial these regulations 
 were at the time they were passed, many of them now operate 
 merely to vex and harass the insurance companies in carrying out 
 the more liberal policies which experience and reflection have shown 
 to be wisest and best. The provisions intended to protect the in- 
 sured against the consequences of carelessness or ignorance in mak- 
 ing the contract of insurance are very great in number and of almost 
 
 ^ 
 \ 
 
 »« For an example, see Acts Va. 189&-96. p. 462, c. 421. Any attempt to cite 
 awurately the statutes of all the states on these subjects would be useless, and 
 might prove misleading, since they shift like the sands of tbt 
 
20 
 
 HISTORICAL AND INTRODUCTORY. 
 
 (Ch.l 
 
 I* 
 
 endless variety, and only those most general and important can 
 be noticed. It is a well-recognized rule of law that any contractor 
 accepting an instrument known to contain the terms of his contract 
 is conclusively bound by all of the terms written therein ; yet such 
 was the character of the poHcies formerly issued by insurance com- 
 panies that, on account of their great length, fine type, long lines, 
 and involved statement, the ordinary contractor found it not only 
 exceedingly inconvenient and burdensome to read over the verbose 
 stipulations, but also, when read, they were practically meaningless 
 to him, unless he chanced to be a man of unusual intellectual powers 
 and legal attainments. The result was that upon the happening of 
 the contingency insured against the policy holder frequently learned 
 for the first time that all rights under the policy had been forfeited 
 by reason of "some condition crouched unseen in the jungle of print- 
 ed matter with which a modern policy is overgrown." " In order 
 to prevent such forfeitures, which were regarded with the utmost 
 disfavor by the public, statutes have been passed providing that no 
 condition in the application or other paper referred to in the policy 
 shall be valid unless set forth in the poHcy itself ;»• that no condi- 
 tion or term in a policy shall be enforceable unless printed in type 
 as large as long primer '* or other specified size. In some states it 
 is enacted that the insurer may avail himself of no charter or statute 
 stipulation unless it be printed on the policy, although, of course, the 
 failure so to print such a provision on the policy will not prevent 
 the insured from claiming any right given thereby.** In many states 
 it is enacted that no policy shall be forfeited by reason of a failure 
 to pay any premium or other dues, unless the insurer shall give rea- 
 sonable notice of the fact that such payment is due. New York, fol- 
 lowed by some other states, has even gone so far as to enact that 
 after the third year a life poHcy may not be forfeited by failure to 
 pay any premium or dues, but that the reserved value of the policy 
 at the time of such failure shall be used in extending the insurance." 
 The rule of law absolutely avoiding insurance policies in the event 
 of a breach of warranty, however immaterial such warranty might 
 be, has often worked great hardship upon careless policy holders, 
 and as a result of this fact a large number of the states have enacted 
 
 «» VAN SCHOICK T. INSURANCE CO., 68 N. T. 434; Richards* Casea, 
 
 362. 
 
 80 See the Pennsylvania Statute (Laws 1881, p. 20), set out In RITTER ▼. 
 INSURANCE CO., 169 U. S. 139, 18 Sup. Ct. 300, 42 L. Ed. 693. 
 
 81 See Code Va. 1887, § 3252. There exists a legal presumption that the 
 policy conforms to the requirements of the statute. Sulphur Mines Co. T. 
 Phenix Ins. Co., 94 Va. 355, 26 S. E. 856. 
 
 «« See Cllne v. Assurance Co., 101 Va. 496, 44 S. B. 700. 
 tt See 3 Bey. St (8th Ed.) p. 1GS8. 
 
 it 
 
 
 §§ 11-12) DEVELOPMENT OV INSURANCE IN UNITED STATES. 21 
 
 statutes declaring that no policy shall be forfeited by reason of a 
 breach of warranty, unless the fact warranted was material or the 
 statement fraudulent.^* In Missouri it has been enacted that a 
 breach of warranty shall not avoid a policy, unless the subject of the 
 warranty contributed to the happening of the event upon which the 
 poHcy became payable. ^ . 
 
 The same general purpose of guarding the insured agamst unfair 
 advantages that may be taken by the insurer under the terms of 
 the policy that he himself has written is subserved by a statute, to 
 be found in many states, declaring that the agent who soHcits the 
 insurance and takes the application shall be deemed the agent of the 
 insurer, and not of the insured, in spite of what the poHcy may pro- 
 vide;" that the insurer shall be estopped to claim a forfeiture by 
 reason of a false statement made by the insured, when such falsity 
 was known to the agent of the insurer ; prohibiting the insurer from 
 setting up the suicide of the insured in defense of a claim under the 
 policy,»« or from showing, in the case of a fire policy, that the real 
 value of the property destroyed was less than the amount set forth 
 on the face of the policy. Statutes containing this last provision, 
 known as "the valued policy" acts, are the most vicious and short- 
 sighted of all the unwise legislation devised for the regulation of 
 insurance business. They are not only based upon a total miscon- 
 ception and perversion of the true principles of insurance, but are 
 also contrary to public poHcy, inasmuch as they tend to encourage 
 arson and other fraudulent practices, and, moreover, are opposed to 
 the real interest of those who desire to insure their property. The 
 purpose of insurance is indemnity, and indemnity only, and, when- 
 ever it is applied to any other purpose, such use is a perversion of 
 the true principle, and introduces a wrongful and immoral element 
 of speculation that promotes fraud and crime. If a person, by fraud- 
 ulent collusion with an agent of the insurer, or by deceiving such 
 agent, procures insurance upon his property greater than its value, 
 he is under constant temptation to destroy his own property, and this 
 temptation, which is all too frequently yielded to, not only is injuri- 
 ous to public morals, but greatly increases the average per cent, of 
 loss in property insured, and necessarily results in the increasing of 
 rates of insurance. Thus the inevitable result of such laws, where- 
 under a fire may cause not a loss, but operate as a means of a most 
 
 84 See Union Cent. Life Ins. Co. v. Pollard, 94 Va. 146, 26 S. E. 421, 36 h. 
 R. A. 271, 64 Am. St. Rep. 715. 
 
 «5 See Continental Life Ins. Co. v. Chamberlain, 132 U. S. 304, 10 Sup. Ct 
 87, 33 L. Ed. 341; Bankers' Life Ins. Co. v. Robbins, 55 Neb. 117, 75 N. W. 
 585. See, also. Acts Va. 1887, p. 349, c. 271, § 5. 
 
 3 6 See the Missouri Statute set out in Knights Templars* & Masons' Life 
 Indemnity Co. v. Jarman, 187 U. S. 197, 23 Sup. Ct. 108, 47 L. Ed. 139. 
 
I 
 
 
 HISTORICAL AND INTRODUCTORY. 
 
 (Ch.l 
 
 satisfactory cash sale of the property destroyed, is to shift upon the 
 honest policy holders the burden of paying to the dishonest destroyer 
 of his overinsured property the dishonest gains obtained by such 
 overinsurance. It is thus seen that every consideration of public policy 
 and the best interests of the insuring public should prevent the enact- 
 ment of these valued policy statutes, yet so great is the prejudice in the 
 mind of the ordinary legislator against any defense that may be made 
 by an insurance company against payment und%r its policy that prob- 
 ably one-half of the states of the Union have passed such injurious 
 acts.'^ 
 
 In addition to these general acts looking to governmental super- 
 vision and control, referred to above, there are many others of a 
 more desultory character that are found in the various states, limit- 
 ing the powers of insurers or imposing conditions upon their busi- 
 ness. Thus, there are found acts regulating the right retained by 
 all companies of canceling fire policies, and still others that establish 
 certain rules with regard to notice and proof of loss in case of fire 
 policies, with which the terms of the policies themselves are required 
 to comply. In New York, and many other states where the valued 
 policy acts are not in force, the insurance company is required by 
 statute, in case the value of the property in the event of loss is 
 found to be less than the face of the policy, to return such propor- 
 tion of the premium received as was in excess of the real risk borne. 
 In an effort to prevent unfair discriminations among those taking 
 policies, some of the states have enacted arbitrary prohibitions 
 against any discriminations in favor of any individuals of the same 
 class, either in regard to premiums charged, dividends paid, or re- 
 bates given; others forbid discriminations between white persons 
 and colored persons. The anti-trust crusades of recent years have 
 also had their effect upon insurance regulations, and we find statutes 
 in a large number of the states prohibiting insurance companies or 
 their agents from combining together to fix the rates of insurance, 
 or making any other agreements that would tend to restrain compe- 
 tition among companies bidding for insurance. These laws have 
 often worked great injustice and hardship upon insurance companies, 
 and have in some cases resulted in causing some of the best com- 
 panies to withdraw entirely from the state attempting to enforce 
 such vexatious regulations. This withdrawal from the state, of 
 course, removes the better class of insurance companies, thus leav- 
 ing the business to inferior companies, and making it easy for them 
 to raise the rates. Thus, it is probable that these anti-compact laws 
 
 »T The (Supreme Court appears to consider such statutes not to be opposed 
 to a sound public policy. See Orient Ins. Co. ?. Daggs, 172 U. S. 557, 19 
 Sup. Ct 281, 43 L. Bd. 552. 
 
 §§ 11-12) DEVELOPMENT OP INSURANCE IN UNITED STATES. 23 
 
 tend rather to increase the evil against which they are aimed — that 
 is, higher insurance rates — than to diminish them. 
 
 Many states have also manifested a strong desire to retain control 
 of all litigation in connection with insurance contracts, and, as a con- 
 sequence, we find that one of the conditions upon which foreign com- 
 panies are allowed to do business in such states is that they shall agree 
 not to remove any causes in which they may be parties defendant 
 into the federal courts. Such agreements, of course, are unenforce- 
 able, and cannot operate to oust the jurisdiction of the federal courts, 
 or to deprive the insurance companies of the right to remove their 
 causes if they so desire ; " but it has also been held that the failure 
 of any insurance company to abide by its agreement to allow all 
 litigation to remain in the state courts is sufficient ground for a revo- 
 cation of the license granted to the foreign insurance company to 
 do business in the state." So, as a result of this provision, foreign 
 insurance companies are obUged either to forego their constitutional 
 right to have suits against them tried in the federal courts, or to be 
 deprived of the privilege of doing business in the state. 
 
 In the further attempt to control insurance litigation, many states 
 have declared that any term in the insurance contract which limits 
 the time within which suit may be brought upon the poHcy to a pe- 
 riod less than the statutory limitations shall be void. The unfortu- 
 nate insurance companies arfe further harassed by additional restric- 
 tions and limitations that grow out of various retaliatory acts. Thus, 
 some states have enacted that any foreign corporation carrying on 
 the business of insurance within their limits shall be subject, in addi- 
 tion to the specific requirements of their own statutes, to such addi- 
 tional limitations as may be imposed by the state of the domicile of 
 the corporation upon foreign companies doing business there. We 
 may further mention statutes that require the use of the standard 
 fire policy, which are eminently wise, and can hardly be objected to 
 by any straightforward insurer. 
 
 Just in the proportion that regular insurance companies are unpop- 
 ular and considered proper subjects for all sorts of vexatious regu- 
 lations that certainly tend to discourage the business, so the various 
 mutual co-operative and benevolent societies that are organized for 
 the double purpose of social satisfaction and financial insurance are 
 regarded with peculiar favor, and every effort is made to encourage 
 them and foster their growth. It will be found that in most states 
 such benefit societies, even though doing insurance business, are ex- 
 empted from the operation of the regulations imposed upon the gen- 
 eral companies as set forth above. 
 
 w Home Ins. Co. of New Yorls v. Morse. 20 Wall. (U. S.) 450, 22 L. Ed. 367. 
 »• Doyle T. Insurance Co., 94 JJ- S. 535, 24 L, Ed. 148. 
 
I 
 
 24 
 
 HISTORICAL AND INTRODUCTORY. 
 
 (Ch.l 
 
 THE EXTENSION OF THE PRINCIPLES OP INSUBANCE IN 
 
 MODERN TIMES. 
 
 13. The rapid g^rowtli and snccessfnl condnot of the regrnlar forms of 
 marine, fire, life, and accident insurance have in recent years 
 stimulated the attempts to apply the principles of insurance to 
 contracts of indemnity for numerous other kinds of loss hap- 
 pening under conditions making: insurance practicable. These 
 attempts have resulted in a more or less successful extension 
 of insurance to almost innumerable conditions, among which 
 may be noted as the most important: 
 
 (a) Workingmen*s or industrial insurance against the peculiar and 
 
 extrahazardous risks assumed by employes in the various kinds 
 of industries. 
 
 (b) Guaranty insurance, by which the insurer agrees to indemnify 
 
 the insured against loss or liability by reason of the lack of 
 fidelity on the part of officials, or liability incurred by reason 
 of default of any other person. 
 
 (c) Indemnity to employers against liability that may be incurred 
 
 by reason of personal injury suffered by employes. 
 
 (d) Insurance against losses suffered on account of violence of nat- 
 
 ural agencies, such as wind, hail, flood, lightning, etc. 
 
 (e) Contracts made by benevolent and fraternal organizations for the 
 
 purpose of g^ranting indemnity to their members in case of loss 
 by reason of sickness, accident, or death. 
 
 (f) Some unsuccessful attempts made by European governments to 
 
 establish insurance under governmental control. 
 
 In General. 
 
 The beneficial results of properly managed insurance have become 
 so well recognized by all classes of society in recent years that there 
 is manifested a strong tendency to apply these benevolent principles 
 to all conditions that give rise to risk of loss or injury. The forms 
 which the application of insurance principles to these varying condi- 
 tions takes are almost innumerable, and the nature and character of 
 the risks insured against are even more numerous, yet the principles 
 applying to these manifold contracts of indemnity are in all cases 
 practically the same. There are, however, some features of these 
 differing contracts, which have received the consideration of the courts 
 in many cases that are to be noted hereafter. 
 
 The student must observe that there is no reason why a contract 
 of insurance shall not be made in any case where an actual loss may 
 be suffered, and that whatever the contract may be called, or through 
 whatever agencies it may be made, or whatever other incidents it 
 may have associated with it, the agreement is still one of insurance, 
 and subject to the rules of insurance law, if the requisite elements are 
 present 
 
 M 
 
 §13) 
 
 EXTENSION OF PRINCIPLES IN MODERN TIMES. 
 
 25 
 
 Workingmen's or Industrial Insurance. 
 
 It is manifest that no insurance company could safely grant insur- 
 ance to those who are engaged in hazardous employments, upon the 
 same rates as are paid by policy holders whose lives are subject to 
 slighter risks. There have therefore sprung up numerous compa- 
 nies who issue special poHcies upon special premium rates to work- 
 ingmen whose employment subjects them to these peculiar risks. 
 Many of the great railroads of the country have established and are 
 now conducting an extensive system of insurance to their employes 
 against the risk incident to their employment. The railway compa- 
 nies build and equip hospitals, and agree to care for and furnish 
 medical attendance to any employe injured in their service, and to 
 pay certain specified sums to him during the time when he is incapa- 
 ble of working on account of his injury, or to his family in case of 
 his death by accident.*** In return, the employe is under obligation 
 to allow the employer to reserve a certain amount from his monthly 
 wages, and he also agrees that the employer shall be released from 
 any common-law liability that may exist by reason of the injury suf- 
 fered.*^ A most interesting and important phase of workingmen's 
 insurance is to be found in the recent efforts made by the German 
 government to establish a compulsory system among the working 
 classes, having as its object relief to any workingman that may be 
 disabled from earning a livelihood by reason of either accident, in- 
 jury, sickness, or old age. The first introduction of the interesting 
 experiment of government insurance was made under the act of 1884. 
 Since this initial attempt, many experimental acts have been passed 
 by the German government, extending and elaborating the system, 
 which is now said to be highly efficient, and thoroughly satisfactory 
 to the classes concerned.* These experiments in Europe are being tried 
 
 *oit is generally held that such relief associations do not carry on "in- 
 surance" within the meaning of the term as used in statutes regulating the 
 conduct of insuiance business, and that the railways that establish such as- 
 sociations are not acting ultra vires. See State v. Pittsburg, C, 0. & St. L. 
 R. Co., 68 Ohio St. 9, 67 N. E. 93, 96 Am. St. Rep. 635; Ringle v. Railroad 
 Co., 164 Pa. 529, 30 Atl. 492, 44 Am. St. Rep. 628. 
 
 *i By the weight of authority such releases are valid. See Beck v. Rail- 
 road Co., 63 N. J. Law, 232, 43 Atl. 908, 76 Am. St. Rep. 211; Chicago, B. & 
 Q. R. Ci). V. Curtis, 51 Neb. 442, 71 N. W. 42, 66 Am. St. Rep. 456; Olementa 
 V. Railway Co. (1894; App. Cas. 482. Contra, Miller v. Railroad Co. (C. C.) 
 65 Fed. 306. Pittsburgh, C, C. & St. L. R. Co. v. Montgomery, 152 Ind. 1, 
 49 N E. 582, 71 Am. St. Rep. 301, was decided under a local statute prohib- 
 iting such releases. 
 
 ♦ The following interesting statement is taken from the Outlook for August 
 13, 1904 (volume 77, p. 870) : "The way in which the German government regu- 
 lates insurance partly accounts for the ability of the working people to bear 
 the burden of military and other taxation which weighs on them so heavily, 
 and in some measure removes the fear of poverty from many thousands for 
 whom no other means of financial assistance would be available, and who 
 
26 
 
 HISTORICAL AND INTRODUCTORY. 
 
 (Ch. 1 
 
 «13) 
 
 EXTENSION OF PRINCIPLES IN MODERN TIMES. 
 
 27 
 
 1 
 
 ii't 
 
 jMii 
 
 t 
 
 along the same lines as those pursued by the larger corporations spoken 
 of above in this country, and may well be watched by us with great 
 interest, with a view to their extension by corporate employers, and 
 possibly to the ultimate adoption of such insurance as a governmental 
 function. 
 
 Guaranty Insurance, 
 
 The necessity for insuring the fidelity and integrity of persons 
 placed in positions of trust has long been recognized and accomplish- 
 ed by taking bonds for the faithful performance of duty by such per- 
 sons, with private sureties thereon. There are now, however, nu- 
 merous and important companies that have been formed for the' pur- 
 pose of granting insurance against official infidelity. These compa- 
 nies not only furnish bonds for all persons in positions of trust, but 
 also agree to indemnify against loss by reason of the dishonesty of 
 employes, or the insolvency of debtors, or against loss in trade, or 
 from nonpayment of obligations, and against other breaches of con- 
 tract. Under this general class of contracts fall also those that guar^ 
 anty title to real estate, which are now frequently made, and have 
 given rise to numerous large and influential title guaranty compa- 
 nies. Other insurances of this same general sort are such as are 
 granted against loss by burglary. 
 
 Employers' Insurance against Injury to Employes. 
 
 No inconsiderable item of expense connected with the conduct of 
 a large industrial enterprise, having in its employ large numbers of 
 laborers, is made up of the sums that must be paid out to those em- 
 ployes who have suffered injury in the course of their employment, 
 and in some cases such employers deem it advisable to secure insur- 
 ance against loss by such accidents to their employes, and the companies 
 granting such indemnity carry on a business of very considerable 
 volume. 
 
 Insurance against Loss by Reason of Violence of Natural Agencies, 
 
 While loss by reason of the violence of the elements is not so fre- 
 quent as that by fire, yet it is extensive enough to justify the forma- 
 
 would otherwise be thrown on charity. The Insurance Is chiefly against acci- 
 dent, sickness, and infirmity due to old age. The number of working people, 
 of whom over 2,000,000 were women, thus protected in 1902 was 17,582,000, and 
 is now, judging by the present rate of Increase, probably in excess of 20,000 000 
 In 1902 there were 711,330 cases of accident Indemnified, and in the present 
 year 663,140 pensions for disability are in force, besides 14,186 pensions fop 
 Illness and 156,618 pensions for old age. The total income of workingmen's 
 insurance funds in 1901 was $131,648,430, and the total expenses were $106,- 
 043,003 in that year. To the total income the employers contributed 45 20 
 per cent, the employees 37.64 per cent, and the government 6.43 per cent, while 
 the balance of 10.73 per cent was derived from interest and earnings. More 
 than $250,000 per day was paid ont that year in benefits to working people^'* 
 
 tion of companies for the purpose of insuring against such loss. The 
 most frequent risks of this character insured against are those from 
 wind, hail, and lightning. It has been decided that destruction by 
 lightning, in the absence of conflagration, is not covered by a policy 
 insuring against loss by fire, but in modern times most fire policies 
 include a clause insuring against destruction by lightning. Con- 
 tracts somewhat similar to these are granted against the explosion 
 of steam boilers. This last kind of insurance has become of great 
 importance, and the business of a company granting such insurance 
 also usually includes the inspection of the boilers insured at certain 
 specified periods. Contracts granting indemnity against loss by rea- 
 son of the breaking of plate glass have also become of frequent oc- 
 currence. 
 
 Insurance by Benevolent and Fraternal Organizations. 
 
 Associations of men living in the same community, and under sim- 
 ilar conditions, for mutual aid against disaster, as well as for social 
 pleasure, have been known from the earliest times. The guilds in 
 the Middle Ages were well organized, and were administered under 
 carefully drawn regulations. It is probable that even at that early 
 time these voluntary associations may have possessed some of the 
 features resembling mutual insurance, but it is only within the last 
 two decades that these voluntary associations of laboring men have 
 engaged in the practice of insuring their members against sickness, 
 injury, and death, to any considerable extent The natural gregari- 
 ousness of laboring men, and the rapid growth in popularity of the 
 trades union, have resulted in the establishing of great numbers of 
 benevolent associations, organized for the double purpose of social 
 pleasure and mutual aid in time of distress. In carrying out this lat- 
 ter purpose a most extensive form of life and accident insurance on 
 the co-operative and mutual assessment plan has grown up. This 
 ,Vind of insurance will be further considered in a later chapter.** 
 
 Attempts to Establish Government Insurance against Fire. 
 
 As early as the sixteenth century the government of Portugal at- 
 tempted to promote its commerce by providing certain regulations for 
 insuring all maritime ventures by the government The premiums, 
 however, that the government required to be paid exceeded those that 
 were demanded by private insurers in other countries at the same time, 
 and this effort on the part of the Portuguese government to carry on 
 governmental insurance seems to have been early abandoned. 
 
 Within comparatively recent times the city of Zurich, in Switzerland, 
 attempted to institute a system of municipal insurance on the property 
 
 *2 See post p. 58. Guaranty, liability, and other special kinds of insurance 
 are discussed in chapter 17, post, p. 590. 
 
 I 
 
28 
 
 HISTORICAL AND INTRODUCTOEY, 
 
 (Ch.l 
 
 ll 
 
 * 
 
 of its citizens upon the payment of a specified tax premium. It soon 
 became manifest, however, that so many delicate conditions entered into 
 the fixing of the amount of insurance, and the premiums to be paid for 
 such insurance, that the attempt to carry on successfully the business 
 of fire insurance by employes of the government would necessarily fail. 
 Peculation, favoritism, and incompetency, that might have been expect- 
 ed to characterize the administration of such a complicated govern- 
 mental business, soon resulted in running the premium rates up far 
 higher than they had been when insurance was in the hands of private 
 individuals. The result was that the city soon gave up this attempt, and 
 no considerable effort has since been made to repeat such an unpromis- 
 ing experiment.*' The insurance of workingmen under government 
 regulation that is now being carried on in Germany may, if contin- 
 uously successful, perhaps revive these attempts to conduct other 
 branches of insurance bv eovernmental ag:encies. 
 
 THE FORMS AND KINDS OF POLICIES. 
 
 I' 
 
 I 
 
 14. Policies of insurance are as diverse in form as are the contracts 
 
 whicli they embody. In 1779 IJoyd's adopted a standard form 
 of marine policy which, -with few changes, remains in prac- 
 tically universal use in the British w^orld. A standard form 
 of fire policy has been adopted by many of the American states, 
 w^hich is in general use throughout the United States. 
 
 15. Policies difPer according to the character of the contract made* 
 
 The most important kinds may be classified as folloxirs: 
 As to the aniount payable, policies are ''valued** or ''open." 
 
 (a) 
 (b) 
 <c) 
 
 (d) 
 
 As to duration they are "time** or "voyage** policies. 
 
 As to the subject-miatter of insurance, policies are termed "float- 
 ing,** "running,** or "blanket** policies. 
 
 Life policies are known as "regular life," "tontine,** "endow- 
 ment,** and "joint life** policies, and by many other descriptive 
 names* 
 
 From what has before been said it is seen that the contracts of mod- 
 em insurance are so very diverse, both as regards the subject-matter of 
 insurance and the terms of the contracts themselves, that the policies 
 in which these contracts are embodied are of almost infinite variety; 
 yet it early began to be manifest that much needless difficulty and con- 
 fusion had come into insurance law, especially with regard to the adjust- 
 ment of losses suffered upon property insured under several policies. 
 Because of this troublesome diversity in the terms of similar policies, an 
 effort was early made to reduce the various contracts of insurance 
 against certain frequently occurring perils, such as loss by marine dis- 
 aster, to a uniformity in terms. As a result, the insurance brokers of 
 
 4t See article "Insurance,** in 13 Enc Brit 
 
 i 
 
 i 
 
 
 29 
 
 §§ 14r-16) - THE FORMS AND KIKDS OF POUCIB8. 
 
 Lloyd's Society in 1779 adopted the curious form of P^l'^^f''* ^^ 
 ever since been known as "Lloyd's Standard Policy, f "^ wh ch desp.te 
 its incoherence and uncertainty, has been so frequently -^^f ™/^ "> ^J 
 of its important terms by the courts as to remam ^J"^ ^o the pre^^^J 
 time the most satisfactory and generally used form of marine msurance 
 pTcy" This policy was intended at first to be used only by the 
 rnderwriters dofng business at Lloyd's, and the -ntra^f ^ u^^^^^^^^^ 
 form were held in special favor for many years ''y «7" ^^^'^/^/^ff ^ 
 they were made under the guaranty of accredited members of the 
 sodety at Lloyd's. But the form came into general use among all ma- 
 Sd rtriLs in England, and by the Marine I"-;-- ^m of 1899 
 this venerable document was recognized as the standard form of ma 
 rine do&v for the British Islands." In the United States no standard 
 form ?f Irine po^^^^ has ever been adopted by legislative enactment. 
 
 The Standard Fire Policy. 
 
 With the remarkable growth of the business of fire msurance in the 
 latter half of the nineteenth century, the evils consequent upon the grea 
 variety of policies issued by different companies covering the same 
 kfnd of risks became so evident and annoying that an effort was made 
 to secure, by legislative interference, uniformity in the terms of s.m.la 
 Contracts of insurance, by whatever insurer made. I« ^^f tl'^»>'"f/"^'^ 
 a standard form of fire policy Massachusetts took the lead, under an 
 
 act first passed in 1873. This act was ^"''^f^l^^^J^ „^%t„^^,;"^*. 
 prese:it standard form exists under an act of 1886 Shortly there 
 after New York took steps toward framing a standard form of policy 
 for all contracts of fire insurance made in that state. Under the pro- 
 visions of the, New York statute, the act was to be drafted by a commit- 
 tee from the New York Board of Fire Underwriters, but the work was 
 actually done by that committee collaborating with a committee of the 
 National Board of Fire Underwriters, with the assistance and lega 
 counsel of some of the most distinguished specialists in msurance law at 
 the New York bar. In the construction of this important document, 
 herefore. it is seen that use was made of the best talent and the most 
 extensive experience possessed by those engaged in insurance business, 
 under the guidance of those skilled as counselors in the P^acface of in- 
 surance law. The attempt made by those having charge of .*•« work 
 was not only to give as clear and precise expression as possible to the 
 usual terms of a contract of fire insurance, but also to adapt the terms 
 
 «4 Lord Mansfield in 1812 said of this policy: "This PoW^y »' ';»'"'""~ 
 is a ^^ sttange instrument, as we all know and feel." See Le Chemmant 
 
 " JiriVJ^InsNTth B«.) P. 12 et seq.. where this I«cu-lar docnm^jt ta 
 printed in full. There ta also given an account of recent statutor, dumge* 
 of Uoyd'B policy. 
 
30 
 
 f 
 
 HISTORICAL AND INTRODUCTORY. 
 
 (Ch.l 
 
 §§ 14-16) 
 
 THE FORMS AND KINDS OP POIilCTBS. 
 
 31 
 
 used to the judicial precedents in existence at that time. The New 
 York standard policy, as finally reported by this committee of experts, 
 and adopted by the Legislature in 1886, differs in some respects from 
 the Massachusetts form, but has generally been recognized as an instru- 
 ment of great merit and value, and has been adopted with various minor 
 changes, by the legislatures of several other states. It has recently 
 b.een decided in Missouri *« that the promulgation of such a standard 
 form by the properly authorized state officers, and the requirement that 
 all policies subsequently written shall be in such form, is not such a vio- 
 lation of the civil rights of citizens, guarantied under the fourteenth 
 amendment of the Constitution of the United States, as will justify 
 a court in enjoining such promulgation at the suit of protesting prop- 
 erty owners. & *- *- 
 
 This standard form of fire policy is now in general use throughout 
 the United States, and has resulted in greatly simplifying the always 
 vexatious and difficult problem of adjusting losses, and has also done 
 much toward rendering more harmonious the legal precedents fixing 
 the rights of parties under the contract. No effort has yet been made 
 to reduce either life or accident policies to any sort of uniformity, and, 
 on account of the numerous variations of which these contracts are capa- 
 ble. It is hardly probable that any such effort could be made with any 
 considerable success. 
 
 The Different Kinds of Policies. 
 
 Certain ones of the most frequently occurring contracts of insurance 
 have received names that should become familiar to the reader, in order 
 that subsequent reference to them may be more easily understood 
 Generally, policies are spoken of as being either "interest" policies or 
 
 wager policies. The first is merely the ordinary valid policy of in- 
 surance, based upon a substantial interest in the insurer, while the 
 second IS a gambling contract, based upon an event in which the parties 
 have no interest other than the payment of some wager. Such wager 
 pohaes were probably valid at common law, but now in England, under 
 the act of 19 George II, they are prohibited, and they have in most cases 
 been held wholly invalid in the United States, apart from the statutes 
 prohibiting wagering contracts.*^ 
 
 A "valued" policy is one in which a definite valuation is, by the 
 agreement of both parties, put upon the subject-matter of insurance and 
 wntten in the face of the policy, as, for example, a policy insuring "The 
 Ship Empress, valued at thirty thousand pounds." Such a valuation 
 m the absence of fraud or mistake, is conclusive upon the parties,' 
 
 *• Business Men's League v. Waddlll, 143 Mo. 495, 45 S. W. 262, 40 U R 
 A. 501. 
 
 4T CONxXECTICUT MUT. MFB INS. CO. y. SOHAEFER, 94 U. S. 457. 460, 
 
 and in case of total loss it always furnishes the basis of settlement. An 
 "open" policy is one in which a certain agreed sum is written in the 
 face of the policy, not as the value of the property insured, but as the 
 maximum limit of recovery in case of destruction by the peril insured 
 against, as, for instance, a house insured for $10,000. In case property 
 insured under such open policy is totally destroyed, the insurer may in- 
 troduce evidence to show that the property was not really worth $10,000, 
 but some other less sum. Of course, however, the amount written in 
 the policy is always the limit of recovery, beyond which there is 
 no liability upon the insurer, even for damage actually suffered. As 
 has been heretofore noted, many of the American states have by statute 
 prohibited the insurer from showing, in the absence of fraud, that the 
 value of property destroyed is any less than the amount written in the 
 face of the policy, thus converting all open policies arbitrarily into 
 valued policies. 
 
 A "time" policy is one granting insurance from one specified date 
 until another, as, for instance, upon a ship from the 1st day of January, 
 1901, to the 1st day of January, 1902, or upon a house for a period of 
 five years from July 1, 1900. A "voyage" policy is one that insures a 
 vessel or its cargo during a certain voyage between specified termini, 
 as "At and from London to Melbourne and return." Sometimes a 
 policy is written as both a time and voyage policy, as "At and from 
 Liverpool to Canton, for six months from January 1, 1902." Policies 
 upon goods shipped in a certain named vessel are sometimes calle-:' 
 "named" policies. 
 
 Blanket Policies. 
 
 Ordinarily the subject-matter of insurance must be designated with 
 such particularity as will make its identification certain, yet in some 
 cases the nature of the property insured, or the circumstances of the 
 granting of the insurance, are such as to make it impossible to have such 
 certainty in the subject-matter. Thus, insurance may be carried on a 
 constantly changing stock of goods, or on grain that is being carried to 
 and fro in the harbor on lighters, and under such circumstances these 
 policies are usually known as "floating." Other names, having the 
 same significance and given to the same kind of policies, are "running," 
 "open," and "blanket." *• 
 
 Kinds of Life Policies. 
 
 The kinds of life policies are limited in number only by the ingenuity 
 of the actuaries and managers of the numerous competing companies, 
 insuring against loss of life, and only the more important and usual 
 kinds may be mentioned. The oldest and most frequent form, even at 
 
 48 For an Interesting case involving a blanket policy, and the apportion- 
 ment of loss between blanket and specific policies, see Schmaelzle v. Insur- 
 ance Co., 75 Conn. 397, 53 Atl. 863, 60 L. R. A. 536, 96 Am. St Kep. 233. 
 
32 
 
 HISTORICAL AND INTRODUCTORY. 
 
 (Ch.l 
 
 PREMIUMS AND RESERVE FUND. 
 
 33 
 
 the present time, is known as the "regular life," under the terms of 
 which the insured is required to pay a certain fixed premium annually 
 throughout life, and the beneficiary is entitled to receive payment un- 
 der the policy only upon the death of the insured. 
 
 Another kind of policy which, from the time of its invention by Lo- 
 renzo Tonti, an Italian, in 1650, has always proved exceedingly at- 
 tractive, is the "tontine." The original tontine contract was for the 
 purpose of securing government loans on advantageous terms from the 
 people, and was based upon a division of the lenders into classes, only 
 the survivors of which were at any given period to participate in the 
 payment of the dividends or principal. This, in its simple form, is 
 seen to be the reverse in many respects of the ordinary contract of life 
 insurance, under which it is to the interest of the insurer that the insured 
 should survive the making of the contract long enough to pay in 
 premiums an amount equal to, or in excess of, the sum received by 
 the beneficiaries under the policy. Under the tontine contract, however, 
 death before the dividend period entirely deprived the decedent, or his 
 nominee, of any benefits from the contract whatever, but the interest 
 of all dying would pass to the survivors, so that the last survivor of 
 any class would receive the dividends that originally accrued to the 
 whole class, and, if the terms of the contract so provided, might also 
 receive the entire principal sum of the loan. A great many of the mod- 
 ern life insurance policies contain tontine features, more or less modi- 
 fied to suit the desires of the insured. Thus, in many endowment poli- 
 cies, it is provided that dividends shall be apportioned to all policies sub- 
 sisting after a certain period, whether five, ten, or twenty years. Under 
 such contracts, those policies maturing or lapsing prior to the expiration 
 of the dividend period receive no dividends, but those still in force at 
 the end of the tontine period receive the benefit, by way of increased 
 dividends, of the maturing or the cancellation of other policies. 
 
 As has been stated heretofore, the modem life insurance contract is 
 as much a contract of investment as of insurance. In the regular life 
 policies defined above, the insurance feature is g^ven prominence, but 
 there are written many and various kinds of life policies in which the 
 investment feature is paramount. Such policies are generally called 
 "endowment policies," and usually provide that the insured shall pay 
 a certain premium annually for a stated period of years. If the insured 
 dies before the end of the endowment period, the beneficiary receives 
 the amount which is agreed to be paid in the policy ; but if the insured 
 survives the endowment period, he is entitled at its end to receive the 
 amount written in the face of the policy, with any dividends that may 
 be awarded under the authority of the directors of the company from 
 the surplus receipts of the company. Instead of such cash payment, 
 the insured is given the privilege of receiving a paid-up policy for some 
 specified sum, or of taking the benefit accruing under the matured policy 
 
 t 
 
 §§ 16-21) 
 
 in various other alternative forms. A "joint life" policy is one under 
 which there is an agreement that the premium shall be paid during the 
 joint lives of the persons insured, the policy maturing and becoming 
 payable upon the death of any one of those jointly insured. A ''sur- 
 vivorship" policy is one that is payable upon the death of the survivor 
 of several joint lives. 
 
 A policy of "reinsurance" is merely a contract made by one insurer 
 with another, whereby the first reinsures with the second some portion 
 of the risks originally taken by himself. Such contracts of reinsurance 
 are made for the purpose of distributing a risk that is deemed so large 
 that a payment in case of loss would seriously cripple and endanger the 
 prosperity of the original insurer. With the exception of some peculiar 
 incidents to be discussed hereafter, the same rules apply to the making 
 of contracts of reinsurance as to those of original insurance. 
 
 PREMIUMS AND RESERVE FUND. 
 
 < 
 
 16. In fixing the amount of preniium in any given ease of marine, fire, 
 
 or accident insurance, the insurer strikes an equation between 
 the sum to be paid by all of the insured and the amount neces- 
 sary for the payment of probable losses and probable expenses 
 during a specified term. To do this it is necessary to require 
 that each insured shall pay such a percentage of the amount of 
 his insurance as experience has shoivn that the probable losses 
 suffered, plus expenses to be incurred, will bear to the total of 
 the outstanding insurance. 
 
 17. In cases of *'level premium" life insurance, the insurer must 
 
 equate the present worth of the sum payable under the terms 
 of the policy with the present worth of all the premiums that 
 may be received from the insured during the probable duration 
 of his life, plus the proportionate part of the expense of man- 
 agement. 
 
 18. In "assessment" iusurance, the premium exacted of the insured 
 
 is determined by apportioning the actual losses suffered and the 
 expenses incurred in any given term among the surviving in- 
 sured, due regard being had to the expectancy of life possessed 
 by each one insured. Expectancy of life in any case is deter- 
 niined by reference to accepted mortuary tables. 
 
 i^, THE RESERVE FUND for any given policy is a sum aoonmulated 
 from the premiums paid for the purpose of discharging the 
 payment due under the policy upon its uiaturity. Such reserve 
 is made up of that portion of the annual premiums payable 
 v^hich, with compound interest at a fixed rate per cent., will, 
 at the time the policy is calculated to niature, amount to the 
 sum payable under the policy. 
 
 20« THE RESERVE VALUE of the policy at any given time is the 
 sum of all such reserved portions of the premiunis paid during 
 its currency, and the aggregate reserve values of all policies 
 outstanding determine the liability of the insurer im reference 
 
 Vance Ins. — 3 
 
34 
 
 HISTORICAL AND INTRODUCTORY. 
 
 (Ch.l 
 
 to outstanding insurance. Tlius, tlie reserve value of subsist- 
 ing policies, and not the amount of insurance outstanding, is 
 to be looked to in determining the solvency of tbe insurer, and 
 the rights of policy holders in cases of insolvency. 
 21. The "surrender value" of a policy is based upon its reserve value, 
 but is usually fixed at a somewhat lower figure. 
 
 The fixing of premiums for the various kinds of insurance is done by 
 the actuaries, and involves the application of difficult and abstruse 
 mathematical principles, as well as the calculation of tabulated proba- 
 bilities from the most extensive data obtainable. In every case of 
 fixing insurance rates, the real problem is to determine what proportion 
 of the losses that are actually suffered from the perils insured against 
 shall be borne by each of those participating in the benefits of the in- 
 surance. The machinery for making this distribution of losses and 
 apportioning the burden is usually supplied by a corporation, whose 
 officers make the proper calculations and attend to the details necessary 
 to render effective the agreement for distribution. In each case it is 
 necessary merely to require from all of those in the class insured against 
 certain perils the payment of such sums as will realize an amount suf- 
 ficient to pay the losses when they shall happen, and also defray the 
 cost of administration. In marine, fire, and accident insurance, where 
 the contract of insurance appears in its simplest and purest form, the 
 sum to be exacted as premium for insurance during any given term 
 can be easily fixed if it is known what percentage of the total amount of 
 insurance that is granted will be required to be paid in losses. In ma- 
 rine and fire insurance long experience, and careful recordation of prop- 
 erty insured and of losses under such insurances, have resulted in the 
 formation of tables which give with considerable accuracy the prob- 
 able percentage which the losses by any specified peril will bear to the 
 total amount of property insured during any given term. With these 
 tables at hand the insurer has but to fix his premium at the same rate 
 per cent, of the amount of the insurance granted as the probable loss 
 during the period will bear to the total property insured. To this net 
 premium so obtained is added a certain amount of "loading," intended 
 to cover the cost of administration, and to give a surplus from which 
 any losses in excess of those anticipated may be paid. In order to pro- 
 vide against emergencies, such as may arise on account of a great storm 
 at sea, or a great conflagration on land, such as that at Chicago in 1871, 
 marine and fire companies are always careful to provide a safe margin 
 between the amount which experience tables show will probably be 
 needed to meet the losses, and the sum actually realized from premium 
 payments. It should be noted here that in the various kinds of mixed 
 insurance contracts, such as that of insuring boilers against explosion, 
 there are many other considerations that enter into the calculation of the 
 amount of the premium besides the probable amount of loss that would 
 
 §§ 16-21) 
 
 PREMIUMS AND RESERVE FUND. 
 
 35 
 
 be suffered. Thus, in the case of boiler insurance, the contract re- 
 quires that there shall be inspection of the boilers insured at stated 
 periods, and a portion of the premium that is paid is in effect the fee 
 charged for the inspection, and has therefore no proper relation to in- 
 surance. 
 
 Fixing Premiums in Life Insurance, 
 
 The problem of determining what charge shall be made to the in- 
 sured under the contract of life insurance involves many elements that 
 are not found in the case of fire insurance contracts, and presents many 
 difficulties that do not obtain in the calculation of premiums for pure 
 insurance. It is first to be noted that while the loss msured against in 
 a marine or fire contract or an accident policy may never take place, and 
 in the great majority of instances does not take place, yet the loss that 
 the life insurance contract agrees to indemnify is certain to occur, the 
 only element of contingency being the time at which the loss — ^that is, 
 the death of the insured — will occur. It is plain that if the contract of 
 life insurance is performed by both parties the sum will certainly be- 
 come payable at some future time, and it becomes necessary for the 
 insurer to provide from the premiums received a sure means of ac- 
 cumulating a sufficient fund to enable him to make the payment prom- 
 ised under the policy when it shall mature. In order to do this, it 
 is needful for him to be able to calculate with a reasonable degree of 
 certainty upon the number of annual premiums he may expect to re- 
 ceive from a healthy person of a given age who may be insured. Such 
 knowledge is now obtained by the insurer from certain tables, ordi- 
 narily known as "mortuary tables." 
 
 The Several Mortuary Tables and Their Origin. 
 
 The first attempt made to construct a table showing what proportion 
 of a class of men, taken at a given age, will die in successive years 
 thereafter, was made by John Graunt in 1662, being made up from 
 baptismal and death records kept during a number of years in London. 
 This table was very crude, and was much improved by a similar effort 
 made by Halley in 1693, from data obtained from the death records of 
 the city of Breslau, in Germany.** The first table, however, to present 
 even an approximately accurate result, obtained from a more compre- 
 hensive compilation of vital statistics, was that given forth by Johann 
 Siissmilch in 1742. It was on this table that the rates of the venerable 
 Equitable Life Insurance Institution, founded in 1765, were based. In 
 1815, the more accurate Carlisle Tables were compiled, and, being 
 framed from very much more carefully collected and assimilated sta- 
 tistics, very soon became popular with the insurance companies. In 
 
 I 
 
 ^* For an interesting account of the yarions mortuary tablet in use, see 
 Elements of Life Insurance, by M. M. Dawson. 
 
f 
 
 36 
 
 HISTOEICAIi AND INTRODUCTORY. 
 
 (Ch.l 
 
 §§ 16-21) 
 
 PREMIUMS AND RESERVE FUND. 
 
 37 
 
 later times many other mortuary tables have been constructed, but the 
 Actuaries' Experience Tables, made up from the data obtamed from the 
 records of seventeen of the largest English companies, and the American 
 Experience Tables, compiled by Shephard Romans, the famous actuary 
 of the Mutual Life Insurance Company of New York, are generally re- 
 o-arded as being the most accurate in the results tabulated, and now fur- 
 nish a basis for the calculation of all insurance values m the various 
 states of the Union. New York, Virginia, and many other states use 
 the American Experience Tables, while Massachusetts and other states 
 use the Actuaries' Table. All of these mortuary tables, however, as 
 experience has abundantly shown, are too unfavorable to the insured, 
 and the expectancy of Hfe as shown by them is unquestionably less 
 than the experience of insurance companies has demonstrated to be the 
 actual average duration of lives at the given ages. The three most 
 popular tables do not differ widely in the results obtained, but it is 
 to be observed that in the American Tables the ultimate limit of life is 
 placed at 95 years, while in the Cariisle and Actuaries' Tables the ulti- 
 mate limit is placed at 100. Actual experience has shown that the ulti- 
 mate limit of life is greater even than 100, and it necessarily follows that 
 the American Tables, especially, placing the ultimate limit at 95, give 
 too unfavorable results for the more advanced ages. It is admitted 
 by all that these mortuary tables are far from being as accurate as 
 might be obtained, and records are now being made from which it is 
 probable that there will be ultimately compiled some vital statistics 
 that will show with reasonable accuracy what is the expectancy of life 
 at any given age. It is manifest that such a table, if accurate and re- 
 liable results are to be reached, must take account of locality, heredity, 
 and of sex, none of which were regarded in the construction of exist- 
 ing tables. 
 
 Natural Premiums, Level Premiums, and Assessments. 
 
 Whatever may be the form of life insurance, the ultimate problem 
 before the actuaries in determining the premium charge to be made is 
 always the same. The insurer must require of the insured, during his 
 expectancy of life as determined by the experience tables, premiums to 
 such an amount that the present value of the aggregate sum of all the 
 premiums that may be paid from year to year shall equal the present 
 worth of the sum payable under the policy at the time of its calculated 
 maturity. It is plain that as life advances the risk of loss increases, 
 and with the increasing loss would come increasing cost of insuring 
 against the happening of such loss. If life insurance contracts were 
 made from year to year, the insurer agreeing merely to grant insurance 
 against loss in any given year, the insured would be required to pay for 
 such term of insurance only in accordance with the actual risk of loss 
 at his age, such amount, of course, increasing from year to year as 
 
 the probability of death during each successive year increased, until 
 finally, when the ultimate limit of life was reached, the cost of insur- 
 ance against death would approach the amount to be paid at death. 
 The premium that would thus be paid for insurance during any given 
 year, or indeed for a term of years specified, would be in many respects 
 similar to that required for insurance for loss by fire or peril by sea, and 
 is known as a "natural" premium. Natural premium insurance is un- 
 questionably the cheapest method of obtaining pure insurance against 
 loss of life, and many efforts have been made to popularize this form of 
 life insurance. But, as is seen, it contains nothing of the investment 
 feature, and, furthermore, imposes ever increasing burdens upon the 
 insured that fall upon him during the later years of his life, when he 
 is least able to bear them. It is probably this characteristic that has pre- 
 vented natural premium insurance from attaining any considerable 
 vogue, notwithstanding the ardent efforts made in its behalf by Mr. 
 Romans, the actuary mentioned above. 
 
 The demand for insurance at a fixed annual rate, which shall continue 
 the same throughout the currency of the policy, has given rise to the 
 prevailing form of level premium insurance, which is by all means the 
 most popular form that modern contracts of life insurance assume. 
 It will be readily seen that in fixing a level rate for life poHcies the 
 actuary is confronted with many difficulties that do not exist in the 
 case of natural premium insurance. The actual risk insured against 
 increases rapidly with the increasing age of the insured, and it becomes 
 necessary for the actuary to strike such an average rate as will, after 
 due regard has been paid to the interest earning power of accumulated 
 premiums, yield a sufficient sum to ensure the ability of the insurer to 
 make the payment promised under the policy when death occurs, which, 
 of course, is calculated to take place at the end of the period specified 
 in the experience tables as the expectancy of life possessed by the in- 
 sured. The premium charge, which will be merely sufficient to dis- 
 charge at maturity the obligation assumed to the insured under the 
 policy, is termed the "net" premium ; but, as has been said, the actuary 
 must add to the net premium so fixed a sufficient amount, denominated 
 "loading," to defray the expenses connected with the administration 
 of the business of the company. The charge thus made, including this 
 loading, is termed the "office" premium. Of course, the method of 
 calculation of both net and office premiums will vary considerably with 
 the terms of each particular contract. Thus, in the case of a twenty- 
 payment life policy, the actuary must take into account the fact that 
 the insurer cannot possibly receive more than twenty payments, and 
 may receive fewer in case of the death of the insured before the lapse 
 of the specified period. In the case of a ten-year endowment policy, 
 the insurer must base his calculation upon the certain maturity of the 
 policy after ten years, and its possible maturity by the death of tlie 
 
38 
 
 HISTORICAL AND INTRODUCTORY. 
 
 (Ch. 1 
 
 §§ 16-21) 
 
 PREMIUMS AND RESERVE FUND. 
 
 39 
 
 S 
 
 insured before the expiration of that time. In all cases, however, the 
 essential principle upon which the calculation of the premium is based 
 remains the same. 
 
 Assessment Insurance.^^ 
 
 Theoretically, assessment insurance should be the cheapest and most 
 satisfactory form for determining the charge which should fall upon 
 every member of a class of persons insured in return for the indemnity 
 guarantied. Pure assessment insurance requires that the loss that may 
 be suffered in the case of the death of any person in the class insured 
 shall be met by levying a proportionate assessment upon all of the 
 surviving members of that class, with such additional amount as may 
 be necessary to defray the expenses of administration. It is plain 
 that the charges made for insurance under the assessment plan would 
 thus closely approach the actual cost of the insurance, the method of 
 levying insurance after the loss has accrued eliminating any neces- 
 sity for calculating probabilities. But in the practical conduct of as- 
 sessment companies it is found that it is impossible to apply successfully 
 the pure theory, described above, inasmuch as there is no means 
 of insuring the faithful performance by all of the insured of their agree- 
 ment to pay all assessments levied. Experience shows that the mem- 
 bers of such companies will pay the assessment when they deem it to 
 be to their advantage to do so, but otherwise they will not. Conse- 
 quently it is impossible, in cases where pure assessment insurance is 
 put into practice, to determine beforehand what is going to be the 
 amount realized by any assessment that may be levied. As a result, 
 promises to pay losses are rendered uncertain, and the company is apt 
 to be abandoned by those who do not feel inclined to pay assessments, 
 when uncertain whether the obligation of the company to themselves 
 will be*met when it matures. In order to do away with this element of 
 weakness in the conduct of assessment insurance, it is found necessary 
 to secure to the insurer some means of penalizing the members for a 
 failure to pay assessments. This is ordinarily accomplished by requir- 
 ing that certain dues and fees, somewhat in the nature of the premiums 
 of level premium companies, shall be paid in at stated intervals by the 
 members of the assessment company. The funds so received are used 
 to defray expenses, and also to accumulate a sort of reserve, known as 
 the "emergency fund." In case of the failure on the part of any mem- 
 ber to pay any assessment when properly levied, his interest in the re- 
 <;erve fund to which his previous payments have contributed, will be 
 forfeited. In this way assessment insurance associations, which are 
 usually in the form of some fraternal organization, that may include in- 
 surance as only one of its purposes, have become very numerous, and 
 
 80 As to the extent of assessment life insurance in the United States, see 
 North American Review, vol. 151, p. 507. 
 
 carry on life insurance extensively, and with considerable success, al- 
 though, on account of insufficient rates and unbusinesslike management, 
 failures among them have been numerous. 
 
 The Meaning and Function of the Reserve Fund. 
 
 Under the ordinary level rate life policy, if it is not allowed to lapse 
 by the insured, the sum promised to be paid by the insurer will certamly 
 become due at a future time, which, though uncertain in every mdividual 
 case, yet in the average may be ascertained with reasonable accuracy 
 from the experience tables. The insurer is obliged to make provision 
 for such payment, and must from the premium received each year set 
 aside or reserve a sufficient amount to enable him to discharge his obli- 
 gation when it matures. This accumulated fund, which is seen to 
 measure the ability of the insurer to keep his promise for payment, is 
 known as the "reserve fund." •* 
 
 Bi The method of determining the amount that must necessarily be re- 
 served in this fund, and its meaning in the contract of insurance as affect- 
 ing the rights of all the parties thereto, may be best explained by reference 
 to the following table: 
 
 Tear. 
 
 Number 
 of Pol- 
 icies in 
 Force. 
 
 
 Insurance 
 Outstand- 
 ing. 
 
 Premium 
 Receipts. 
 
 Total 
 Assets. 
 
 Losses 
 Paid. 
 
 Reserve 
 Fund. 
 
 Reserve 
 Value of 
 Each Pol- 
 icy. 
 
 i 
 s 
 s 
 
 4 
 
 5 
 f 
 
 7 
 
 8 
 
 9 
 
 10 
 
 10 
 9 
 8 
 7 
 6 
 5 
 4 
 3 
 2 
 1 
 
 $110,000 
 99.000 
 88,000 
 77,000 
 66,000 
 55,000 
 44.000 
 33.000 
 22,000 
 U.OOO 
 
 $20,000 
 
 18,000 
 
 16,000 
 
 14,000 
 
 12.000 
 
 10.000 
 
 8,000 
 
 6,000 
 
 4,000 
 
 2,000 
 
 $20,000 
 
 $11,000 
 
 27,000 
 
 n.ooo 
 
 32,000 
 
 u.ooo 
 
 35.000 
 
 u.ooo 
 
 36,000 
 
 11,000 
 
 35,000 
 
 11,000 
 
 32.000 
 
 U,000 
 
 27.000 
 
 11,000 
 
 20,000 
 
 U.OOO 
 
 11,000 
 
 11,000 
 
 $ 9.000 
 16,000 
 21,000 
 24,000 
 25,000 
 24,000 
 21,000 
 16,000 
 9,000 
 
 $1,000 
 2,000 
 3,000 
 4,000 
 6,000 
 6,000 
 7,000 
 8,000 
 9.000 
 
 In order to show the method of calculation of the reserve fund and its 
 function most clearly, we will take an example which, though impossible in 
 practice yet fully exhibits principles which in a more complex form apply 
 to the actual contracts as made. Thus, suppose that ten men of uniform age 
 form a class of persons insured. We will suppose that each one carries an 
 insurance of $11,000, and that all are of such an age that, in accordance 
 with the mortuary tables, one may be expected to die each year. It is evi- 
 dent that all will be dead after the tenth year, and that the insurer may 
 expect to receive the first year ten premiums, the next year nine premiums, 
 and so on. From the whole class of ten he will receive fifty-five premiums. 
 To all ten it will be necessary to pay the aggregate sum of $110,000. Now, 
 disregarding all questions of interest and expense, in order to simplify the il- 
 lustration it is apparent that the insurer must raise the sum of $110,000 
 from fifty-five premiums. It will therefore be necessary to require that each 
 annual premium paid shall be $2,000. 
 
 By reference to the table, it is seen that at the end of the first year, when 
 
iil 
 
 40 
 
 HISTORICAL AND INTBODUCTOBT, 
 
 (Ch.l 
 
 §§ 16-21) 
 
 PREMIUMS AND RESERVE FUND. 
 
 41 
 
 I 
 
 Itlii 
 
 Surrender Values. 
 
 Most life policies, especially in later years, stipulate that, if the policy 
 shall be in force for a given number of years, there shall be paid to the 
 insured a certain amount upon his surrendering his policy for cancella- 
 tion.*^* The amount of this surrender value offered is based upon the 
 reserve value of the policy at the time of surrender, and it is plain that 
 the insurer can well afford to pay to the insured the entire reserve value 
 of his policy in consideration of his surrendering it for cancellation; 
 but, inasmuch as insurance companies desire to discourage the surren- 
 der of policies so far as they can equitably do so, the surrender value 
 fixed upon a policy is usually set at a considerably lower figure than 
 that which would be established by its reserve value. It seems that, 
 in the absence of a specified promise so to do, the insurer is under no 
 obligation to pay any portion of the reserve value of a policy upon its 
 surrender.** 
 
 the first payment of $11,000 must be made, there !s outstanding Insurance 
 to the amount of $110,000, and during that year premiums have been paid 
 in to the amount of $20,000. After the loss of $11,000 has been paid out of 
 the income for that year, there remains a balance of $9,000 unexpended. 
 This $9,000 must be reserved by the insurer to meet losses that will subse- 
 quently occur, and constitutes the reserve fund necessary for the outstand- 
 ing insurance of $99,000, with which the second year begins. The reserve 
 value of each policy is manifestly found by dividing the total amount of re- 
 serve by the number of policies outstanding. Thus, in the example taken, at 
 the beginning of the second year there are nine policies outstanding, with a 
 reserve fund in the hands of the insurer of $9,000; therefore the reserve 
 value of each policy is $1,000. In order further to explain the relation of 
 these values, let us note the condition of our supposed company at the end 
 of the sixth year. It is seen that during the sixth year there is outstanding 
 insurance to the amount of $55,000, but the amount of premiums received 
 is now only $10,000, whereas the loss occurring that year requires the pay- 
 ment of $11,000, the loss thus exceeding the premium income. This excess, 
 however, is more than made good by the reserve fund of $25,000, which 
 has been accumulated, and which, added to the premium received that year, 
 gives $35,000, from which the $11,000 of loss for that year must be paid, 
 leaving the reserve fund at $24,000 at the end of the sixth year. At the be- 
 ginning of the seventh year there are four policies outstanding, and a re- 
 serve fund of $24,000 has been accumulated. Thus, the reserve value of 
 each policy, at the beginning of the seventh year, is $6,000. At the begin- 
 ning of the tenth year there is but one policy outstanding, and a reserve 
 fund of $9,000 on hand. There is due under this one policy a premium 
 of $2,000, which, added to the reserve fund of $9,000, enables the insurer 
 to pay the sum due under the last policy at its maturity at the end of that 
 year. (Illustration adapted from that in Dawson's Moments of Life In- 
 surance.) 
 
 52 In many states statutes require that the reserve value of a lapsed policy 
 shall be applied as a single premium payment in the purchase of paid-up in- 
 surance. See the New York statute, set out in full in Nielsen v. Society, 139 
 Cbl. 332, 73 Pac. 168, 96 Am. St. Rep. 146. 
 
 63 Haskell v. Society, 181 Mass. 341, 63 N. K 899. 
 
 Surplus, 
 
 As has been explained above, the income received by msurance com- 
 panies that conduct their business upon a conservative basis, as ex- 
 perience has shown, considerably exceeds the liabilities that become, 
 fixed under the policies at their maturity. The liability of the insurer 
 under the policies outstanding is at any time not the face value of those 
 policies, for the liability under them is contingent ; but is always de- 
 termined by reference to such reserve fund as calculated by the ex- 
 perience tables, and at some fixed rate " of compound interest will 
 enable the insurer to discharge all obligations under the policies when 
 those obligations become due. Therefore, the reserve value of all of 
 the outstanding policies is the criterion of the solvency of the insurer. 
 If its assets fall below the amount that should be reserved in order to 
 maintain the reserve fund intact, under the laws of most of the states 
 the insurance commissioner is authorized to take possession of the as- 
 sets and to take steps to wind up the company for the benefit of its cred- 
 itors. In winding up such insolvent company each policy holder is 
 deemed to have a fixed claim against the company to the amount of the 
 reserve value of his individual poHcy. In order to prevent the danger 
 of their assets falling below the amount necessary to maintain their 
 reserve, and thus to insure their solvency, most insurance companies set 
 aside a certain portion of the surplus income above that needed for the 
 payment of losses and the maintenance of the reserve, and place it in a 
 surplus fund, upon which, in case of epidemics or other unusual or un- 
 expected losses, they can draw in order to preserve their reserve 
 funds and avoid insolvency. The residue of the income received is 
 apportioned by the directors under the charter and by-laws as dividends 
 to the several policy holders as their contracts mature. It has recently 
 beei. decided in New York that policy holders, upon maturity of their 
 contracts, have no rights in the surplus funds set aside for the purpose 
 described above but can claim to participate in the surplus income of the 
 company only to such an extent as dividends may be apportioned to 
 them by the o/der of the directors of the company." 
 
 8* See, for example, Codp Va. 1887, § 1278. 
 
 " GreeCf v. Society, 160 N. Y. 19, 54 N. E. 712, 46 U R. A. 288, TO Am. St 
 Rep. 659. 
 
42 
 
 THE NATUBB AND REQUISITES OF THE CONTRACT. 
 
 (Ch.2 
 
 §§ 22-23) 
 
 NATURE or CONTRACT — IN GENERAL. 
 
 48 
 
 I 
 
 CHAPTER n. 
 
 THE NATURE AND REQUISITES OF THE CONTRACT. 
 
 22-23. The Nature of the Insurance Contract— In General 
 
 24. An Aleatory but Not a Wagering Contract 
 
 25. An Executory and Conditional Contract. 
 26-27. A Personal Contract Uberrimse Fidel. 
 
 28. A Contract Essentially of Indemnity. 
 
 29. The Nature of the Contract of Life Insurance^ 
 
 80. The Nature of Mutual Benefit Insurance. 
 
 81. The Contract of Reinsurance. 
 
 82. When the Contract is Divisible. 
 
 33. Requisites for the Validity of the Contract 
 
 THE NATURE OF THE INSURANCE CONTRACT— IN GENERAXi. 
 
 22. Any contract wIlIcIl proTides indemnity for contingent loss or 
 
 damage is a contract of insurance, ivliateTer be its form. Its 
 essential requisite is a risk to be assun&ed; and, wherever a risk 
 not involving any illegal acts exists, a contraot of insurance 
 may be made for the assuniption of that risk. 
 
 23. The contract, which is ordinarily entire, the whole premium being 
 
 earned upon the attachment of the risk, covers t 
 
 (a) A loss due to the negligence of the insured. 
 
 (b) But not a loss intentionally caused by the insured. 
 
 As has before been indicated, the insurance contract is character- 
 ized by the features possessed by other contracts, and is, under or- 
 dinary circumstances, to be construed in accordance with the rules 
 that apply to contracts in general; but there are some additional 
 characteristics possessed by the contract of insurance, that require 
 special rules to be applied by the courts of law in properly determin- 
 ing the rights of parties to them. The primary requisite essential to 
 the existence and validity of every contract of insurance is the pres- 
 ence of a risk of actual loss. The insurer in all cases agrees to as- 
 sume this risk, in return for a valuable consideration paid to him by 
 the insured. Wherever such an actual risk exists, and that risk is 
 assumed by one of the parties to the contract, whatever be the form 
 which the contract may wear, or the name which it may bear, it is in 
 fact a contract of insurance. The question as to whether any given 
 contract is one of insurance really, or one merely wearing the guise 
 of insurance, becomes important, not only for the purpose of decid- 
 ing whether the peculiar principles of insurance law are applicable, 
 but also, and most frequently, in order to determine whether the con- 
 
 <^ tract is subject to statutory provisions governing insurance business. 
 It has been held repeatedly that the contracts made between the vari- 
 ous correlated lodges and chapters of benefit associations with the 
 members of such associations, if they provide for a real indemnity 
 against loss of life, or the consequences of sickness or accident, are 
 contracts of insurance, and are subject to the insurance laws, unless 
 excepted from their operation.^ So a contract whereby one of the 
 parties agrees to indemnify the other against the losses that may be 
 sustained on account of the insolvency of debtors, inasmuch as it 
 provides for the shifting of an actual risk from one party to another, 
 is a contract of insurance, whatever be its form and name.* Where 
 a newspaper company offers, in each paper issued, to pay a certain 
 amount to the heirs of any person who suffers death by accident 
 within a specified time after its issuance, provided he is found with 
 a copy of that paper upon his person, with the printed offer signed 
 by him, is liable as under a contract of insurance, in case the pur- 
 chase of the paper was induced by the offer.* So contracts to pay 
 for the loss of a bicycle,* for damages sustained by an employer by 
 reason of injuries inflicted by his employes in driving his vehicles,* 
 for losses that may be suffered by reason of accident in connection 
 with the running of an elevator, or for injuries that may be suffered 
 by a workman in the employ of a contractor, are contracts of insurance 
 as truly as are those which are written in the regular course of busi- 
 ness and in the standard form of policy.* 
 
 But it is not every contract that wears the appearance of insurance 
 that is really a policy of insurance. Thus, where a corporation provides 
 means of making investments of small sums paid in monthly install- 
 ments by certain holders of certificates, with the agreement that the cer- 
 tificates shall be redeemed in accordance with certain agreed stipu- 
 lations, this contract is not one of insurance, even though it may be 
 based upon the ordinary tables used in insurance, and may include 
 some other characteristics of the insurance contract.^ When a light- 
 ning rod dealer, upon the sale of a lightning rod, agreed to pay all 
 damages resulting to the building from lightning, to which the rod 
 
 1 As to the nature of these organizations, see further, p. 68. 
 
 « Claflin V. Credit Svstem Co., 165 Mass. 504, 43 N. E. 293, 52 Am. St. Rep. 
 628; Tebbets v. Guarantee Co., 73 Fed. ©6, 19 G. C A. 281; Shakman v. 
 Credit System Co., 92 Wis. 366, 66 N. W. 528. 32 L. R. A. 383, 53 Am. St 
 
 Rep. 920. „ ^^„ 
 
 8 Commonwealth v. Philadelphia Inquirer (Com. PI.) 15 Pa. Co. Ct. R. 463. 
 * In re Solebury Mut. Protective Soc, 3 Del. Co. R. 139. 
 B EMPLOYERS' LIABILITY ASSUR. CORP. v. MERRILL, 155 Mass. 404, 
 
 29 N E 529 
 
 « EMPLOYERS' LIABILITY ASSUR. CORP. v. MERRILL, 155 Mass. 404, 
 
 20 N. E. 529. 
 
 t State V. Federal Inv. Co., 48 Minn. 110, 50 N. W. 1028. 
 
oNb 
 
 THE NATURE AND REQUISITES OF THE CONTRACT. 
 
 (Ch.2 
 
 §§ 22-23) 
 
 NATURE OF CONTRAC5T — IN GENERAL. 
 
 45 
 
 I 
 
 ii 
 
 was attached, within a specified term, the contract made was held to 
 be one of guaranty, and not of insurance.® But where a corporation, 
 even though it was called a surety company, agreed for a valuable 
 consideration to indemnify the other party against loss by reason of 
 uncollectible debts, this was a contract of insurance, and not a con- 
 tract of guaranty." Where a number of young men made a mutual 
 agreement whereby each member, upon the payment of a certain ini- 
 tiation fee and annual dues and assessments, and upon giving a guar- 
 anty that he would not be married within two years from the date of 
 his initiation, was to receive one thousand dollars at the time of his 
 marriage, this was held to be a mere gambling contract in restraint 
 of marriage, and not a contract of insurance.^® It is to be noticed 
 that in all those cases which were held not to be contracts of insur- 
 ance there was an element of chance, but no assumption of a risk 
 of actual loss.*^ 
 
 It is manifest that the risk of loss must not be so great as to be 
 prohibitory of the enterprise in which it is encountered, and that 
 there must be, in order to the successful practice of insurance, a 
 sufficiently large number exposed to the same risk to make it prac- 
 ticable and advantageous to distribute the loss falling upon a few. 
 This is well expressed in the quaint language of an old writer, who 
 speaks of "this most laudable custom of assurances, whereby the 
 danger and adventure of goods is divided, repaired, or borne by 
 many persons consenting and agreed upon between them what part 
 everie man will be contented to assure, make goode, and pay if any 
 loss or casualtie should happen to the goods adventured, or to be 
 adventured, at the seas as also by land, to the end that merchants 
 might enlarge and augment their trafficke and commerce, and not 
 adventure on in Bottome to their loss and over-throw, but that the 
 same might be repaired and answered for by many." *' 
 
 « Cole v. Haven (Iowa) 7 N. W. 383. While the reanlt of this decision is 
 correct, inasmuch as the lightning rod dealer should have been estopped 
 to set up his own violation of the insurance laws, there can be little doubt 
 that the contract in question was really one of insurance. 
 
 » Tebbets v. Guarantee Co*, 73 Fed. 95, 19 C. C. A. 281, 38 U. S. App. 4S1. 
 
 10 State V. Towle, 80 Me. 287, 14 Atl. 195. 
 
 11 Evidence of the rapid extension of the principle of Insurance to all the 
 perils of commerce and life is found in the recent press reports of the es- 
 tablishment of corporations insuring against loss by strikes, and of other 
 corporations guarantying to their members the payment of their burial ex- 
 penses up to the amount of $100. Corporations engaged in carrying on such 
 "burial insurance** in New York have recently been enjoined from continu- 
 ing in business without first complying with the requirements made by the 
 laws of that state for the regulation of insurance businesa. 
 
 1 a May hies. Lex Mercatoria, Ed. 1622, 146. 
 
 Contract an Entirety, . j • *i,* «Ke.«..- r»f a 
 
 The contract of insurance is an entirety," and m the absence of a 
 stipulation to the contrary, if the risk is once attached, no portion 
 of the premium is returnable, even though the subject msured may 
 be lost by reason of an excepted peril before the expiration of the 
 term for which the insurance is granted.- But unless the risk does 
 attach, the contract fails of its purpose, and the insured may recover 
 the premium paid, upon the ground that the consideration therefor 
 has failed." 
 
 No Indemnity for Intentional Damage. . . ^ ., . i^,. 
 
 The contract does not contemplate grantmg indemnity for a loss 
 which is due to the intentional act of the insured, for one of the req- 
 uisites of insurance is that the risk shall not be subject m any wise 
 to the control of the parties. Upon this principle, as well as upon 
 deeper grounds of public policy, the insurer is not required to indem- 
 nify the insured for a loss that has been caused by his owri crimina 
 act " The insured may not recover for the loss of a building that 
 has been burned by himself,- and, in the recent case o R^tt^r^ v. 
 Mutual Life Ins. Co. of New York," the Supreme Court of the Unit- 
 ed States has held that not only is suicide of the insured, while sane 
 a good defense under the ordinary policy, but also that a contract 
 stipulating for payment in case of suicide would be contrary to pubhc 
 policy and void. 
 
 'Thl%tSedfsToMndemnified under the contract for the 
 consequences of his criminal wrong, the same principle is not ex- 
 tended so far as to preclude his right to mdemnity when the loss is 
 
 1. For some purposes It Is sometimes held separable See Infni, P- ra- 
 il Tvrle T Fletcher, Cowp. 666, Richards, Cas. 265. See, also, Hendricks 
 V. insurance CO ,8 Johns. (N. Y.) 1; J-'^- ^endy Ma^h, Work. v. Amert- 
 ain Steam Boiler Insurance Co., 86 Cal. 248, 24 Pac. 1018, 21 Am. St Rep. W. 
 °. Forces T Church, 3 Johns. Cas. (N. Y.) 159; Insurance Co. y. Pyle, 44 
 nhift St 1<) 4 N E 465. 58 Am. Rep. 781. _ _ ^^ 
 
 "" » miiEE V INSURANCE CO., 169 U. S. 139, 18 Sup. Ct 300, 42 U Bi 
 693 • Names t. Insurance Co., 95 Iowa, 642, 64 N. W. 628 ; Western HorsB & Cat. 
 Tins. CO. V O'Neill, 21 Neb. 548, 32 N. W. 581. But see Westchest« Fl^e Ina 
 On V Foster 90 III. 121, and Morris v. Assurance Co., 183 Pa. 5M, i» Ati. 
 m" Th?po^lcy IS not avoided If the Insured was Insane at the time he d^ 
 Buoyed thV insured property, or. In the case of a life policy when ^J0^^»^, 
 suidde Karow v. Insurance Co., 57 Wis. 56, 15 N. W. 27, 46 Am. Rep. 17, 
 Van zindtv Insurance Co.. 55 N. Y. 169, 14 Am. Rep. 215; Grand Lodge T. 
 WletlnK 168 111. 408, 48 N. E. 59, 61 Am. St Rep. 123. See post P- 61ft 
 
 mk the defen;e may be sustained upon a P^PO"?^""^^ «"f ^^^ 
 Blaeser T. Insurance Co., 37 Wis. 31, 19 Am Rep. 747; GreenU Ey. (16th Ed.) 
 S 81d See Commonwealth t. Andrews, 155 Mass. 68, 28 N. ^-J^- 
 
 1. RITTER Y. MUTUAL LIFE INS. CO. OF NEW YORK. 168 U. S. ISft, M 
 Sup. Ct 300, 42 L. Ed. 693. 
 
 II 
 
16 
 
 THB NATURB AND REQUISITES OF THE CONTRACT. (Ch. 2 
 
 25) 
 
 AN EXECUTORY AND CONDITIONAL CONTRACT. 
 
 47 
 
 m 
 
 occasioned by his own negligence, provided there is no fraud.^' It 
 has frequently been held that the doctrine of contributory negligence 
 does not in any way apply to rights under a contract of insurance.^** 
 
 AN AI.EATORT BUT NOT A IVAGERINQ CONTRACT. 
 
 24. Insnrance i« an aleatory but not a wasering contract. It is not a 
 contract of chance, bnt a contract ^vherennder sonie of the 
 rights of the parties are contingent upon chance events. 
 
 It is erroneous to regard the contract of insurance as a "contract 
 of chance," in the ordinary meaning of the phrase. In a wagering . 
 contract the parties contemplate gain through chance ; in a contract 
 of insurance the parties seek to avoid loss by reason of chance. The 
 gambler courts fortune ; the insured seeks to avoid misfortune. The 
 contract of gambling tends to increase the inequality of fortune, 
 while the contract of insurance tends to equalize fortune. It is for 
 this reason that insurance is termed an "aleatory" contract, in con- 
 tradistinction to a "commutative" contract, under the terms of which 
 each of the parties is supposed to give an exact equivalent, either 
 in obligation or performance, to the other; whereas, in insurance 
 each party must take a risk; the insurer that of being compelled, 
 upon the happening of the contingency, to pay the entire sum agreed 
 upon, and the insured that of parting with the amount required as 
 premium, without receiving anything therefor in case the contingency 
 does not happen. It is, however, inaccurate to say that, in case the 
 peril insured against does not arise, the insured receives nothing in 
 return for the payment made. In consideration of his payment of 
 the stipulated premium, he receives what is ordinarily termed "pro- 
 tection," which means nothing more than that he is free to take part 
 in enterprises which would expose him to the given peril, with the 
 assurance that in case loss is suffered he will not be ruined by the 
 event, but that the loss will be shifted by the terms of the contract 
 upon the insurer. That this protection is regarded as a valuable 
 consideration in itself is shown in the decision of that class of cases 
 which hold that premiums paid by infants under contracts of life in- 
 
 !• Gove v. Insnrance Co., 48 N. H. 41, 97 Am. Dec. 572, 2 Am. Rep. 168; 
 Travelers' Ins. Co. v. Randolph, 78 Fed. 754, 24 C. a A. 305 (accident policy); 
 Hutchins v. Ford, 82 Me. 363, 19 Atl. 832 (marine policy); Cowan v. Rob- 
 berds, 6 Adol. & E. 75 ; Sadler y. Dixon, 8 Mees. & W. 895. 
 
 20 Travelers' Ins. Co. v. Randolph, 78 Fed. 754, 24 C. C. A. 305; SCHNEI- 
 DER v. INSURANCE CO., 24 Wis. 28, 1 Am. Rep. 157; Providence Life Ins. 
 & Inv. Co. of Chicago v. Martin, 32 Md. 310. Contra, Morel v. Insnrance 
 Co., 4 Bush (Ky.) 535; Scottish Union & Nat Ins. Co. Y. Strain (Ky.) 70 S. 
 W. 274. 
 
 surance cannot be recovered by them upon disaffirmance of the con- 
 tract, such contract being regarded as executed to the extent to 
 which protection has been given.*^ 
 
 AN EXECUTORY AND CONDITIONAL CONTRACT. 
 
 25. The oontraot of insnraaoe i» often executed on one side by the 
 payment of the premium for the entire term of the insurance, 
 remaining executory as to the insurer; or the contract may he 
 executory on both sides. The contract in its very nature is not 
 only executory, but subject to conditions, the principal one of 
 which is the happening of the event insured against. In addi- 
 tion to this main condition, the contract usually includes many 
 other conditions which must be compUed with as precedent to 
 the right of the insured to claim benefit under it. 
 
 Even in cases of fire insurance contracts for a given term, when 
 the premium has been prepaid for the entire term the contract is to 
 a certain extent executory with reference to both parties. Manifest- 
 ly the insurer's promise is executory, inasmuch as it is not to be per- 
 formed except upon condition ; and certain duties under the contract 
 remain yet to be performed by the insured, such as giving notice of 
 an increase of risk, or making repairs, or of travel or change of res- 
 idence or occupation in case of life insurance. 
 
 The contract of insurance is one peculiarly subject to conditions, 
 some of which are precedent and others subsequent. The main con- 
 dition upon which the insurer becomes liable to pay the sum named 
 in the policy is a suspensory condition, but ordinarily termed a "con- 
 dition precedent." The latter term, however, is scarcely accurate, in- 
 asmuch as the obligation of the insurer attaches immediately upon 
 the completion of the contract, and his liability to pay is rather sus- 
 pended until the happening of the specified contingency. This is 
 certainly the case in life insurance. Perhaps it may be more prop- 
 erly said that the happening of the peril insured against in the case 
 of marine and fire insurance is a condition precedent to the liability 
 of the insurer. There are, however, numerous conditions purely pre- 
 cedent to be found in every contract of insurance ; as, for instance, 
 the provision that the policy shall not go into effect until delivery 
 and the payment of the first premium, or that no waiver shall be 
 valid unless indorsed on the policy by certain specified officers. 
 Rights once acquired under the policy may be defeated by conditions 
 subsequent set forth therein ; thus, the introduction into a house in- 
 sured of inflammable substances forbidden by the policy, or making 
 
 «i JOHNSON y. INSURANCE CO., 56 Minn. 365, 67 N. W. 034, 58 N. W. 
 892, 26 L. B. A. 187, 45 Am. St Rep. 473. 
 
 II 
 
48 
 
 THE NATURE AND REQUISITES OF THE CONTRACT. (Ch. 2 
 
 
 I i 
 
 II 
 
 I 
 
 repairs upon the building, or its being vacated without the consent 
 of the insurer, or, in the case of Hfe poHcies, engaging in prohibited 
 hazardous employments, or changing the place of residence, or trav- 
 eling in prohibited regions, without the consent of the insurer, may 
 entirely defeat the rights of the insured under the policy. 
 
 A PEBSONAIi CONTRACT UBERRIMA: FIDEI. 
 
 26. A contract of insurance is essentially personal, eaoli party having 
 in vieiv the character, credit, and condnct of the other. The 
 contract conteniplates the payment of money by one to the 
 other, in order to make good a loss that niay be suffered u^ith 
 reference to the interest that may be insured. The subject- 
 matter of the contziact is the payment of money, although the 
 subject of the insurance may be property; hence 
 
 (a) The contract of insurance is not attached to nor does it acconi* 
 
 pany the property urhich is the subject of the insurance. 
 
 (b) As a general rule, the rights under a contract of insurance 
 
 against fire, so long as it remains executory, cannot be assigned 
 by one party without the consent of the other. 
 
 27* In making the contract of insurance, good faith requires that each 
 party shall disclose to the other all material facts in his knowl- 
 edge that niay affect the making of the contract, and that in 
 all matters concerning the insurance each shall exercise a high 
 degree of good faith in his dealings with the other. 
 
 In ordinary parlance it is said that certain property is insured, or 
 that a life is insured, but this is inaccurate. As a matter of fact, every 
 contract of insurance is between two persons, and contemplates in- 
 suring one of them against loss that may be suffered with reference 
 to a certain designated property or life. As was pointed out by 
 Brett, L. J., in the leading English case of Rayner v. Preston," there 
 is a distinction to be made between the subject-matter of the contract 
 of insurance and the subject-matter of the insurance; the subject- 
 matter of the contract is the payment of money, the subject-matter 
 of the insurance may be property or some other valuable interest. 
 Therefore, when the property which is the subject-matter of insur- 
 ance is destroyed, there arises simply an obligation on the part of 
 the insurer under the contract to pay money over to the other party 
 to the contract. Hence it follows that there is no necessary legal re- 
 lation existing between property that may have been lost, and the in- 
 surance money received by the owner of that property to indemnify 
 him against that loss. Thus insurance money paid to a mortgagor 
 under a policy taken out by him is not affected by the lien of the 
 
 tt BAYNER V. PRESTON, L. R. 18 Ch. Div. 1, Richards* Cases, 276L 
 
 g§ 26-27) A PERSONAL CONTRACT UBERRIMA FIDEI. *9 
 
 mortgage, nor is the mortgage debt to be reduced by the amount of 
 
 ^^^ insurance money paid to the mortgagee under a contract of in- 
 
 ; anc" th^^^^^^^^ -ay have taken out upon the mortg^^^^^^^ 
 
 • oo cTfated broadlv the rule is that the insurance contract 
 
 <C::t^"rufw th Si" oAther property insured.' This is well 
 
 Uustrrted in the case of Rayner v. Preston, referred to above In 
 
 Us case the plaintiff had made a binding contract for the purchase 
 
 of certain r^a' estate owned by the <^^'^-^-\fZ:^'^''Z 
 Ld been completed, but before a conveyance had been made the 
 Sdtags uponV property were destroyed by fire, and the vendor 
 3 to possession, collected the amount due under the contract o^ 
 Surance which he had taken out upon the proper^. The vend^ 
 cktaed that the money received under the policy of msurance nght- 
 Kelonged to him, inasmuch as the equitable interest m the prop- 
 SiZr!^ was already in him before the conveyance of the legal 
 Se, and that, inasmuch as the real loss suffered was Jis ow". th« 
 money paid on account of that loss should be awarded to him. But 
 Ae court held that the contract of insurance was purely personal be- 
 weentfe vendor and the insurer; that it did not run wrth the land 
 EUs sold; and that the vendee^ as a stranger to the contra^ 
 could take no rights under it.»« The same rule^apphes with refer 
 ence to the insurance of personal property." In the language of 
 Chancellor King, in Lynch v. Dalzell." "These Pol'"«* "^ .^J^ 
 .urances on the specific things mentioned to be insured, «o>- do such 
 insurances attach on the realty, or in any manner go/'«h \he same 
 
 as incident thereto by any conveyance o'-.'^*^?"™^"*'.'";* ^loss 
 onlv specific agreements with the person msunng agamst such loss 
 or damage as they may sustain." This view of the contract is sus- 
 °ained by abundant American authority." Thus, where real prop- 
 
 ..Dlsbrow y. Jones. Harr. Ch. (Mich.) 48 : Flanagaa y. »»J^°<*j^;^ 
 N T Taw BOB- Lett y. Insurance Co., 125 N. Y. 82, 2.5 N. a 108», "a"" ;• 
 N. J. I^'^'f^' ^"/- '"_, «-. QTJARLBS y. OLATTON, 87 Tenn. 308, 
 Insurance Co.. 4 Hill (N. x.) id<, wy^'^^'^ '• ^ m t t«t» 'U S2 All 
 10 S. W. tS05. 3 L. B. A. 170; Kase v. Insurance C^ 58 N. J. Law. M 32 At 
 1057. See. also. Wright y. Insurance Co.. 117 Ga. 4f ■ «S. B. 700. For a^ful 
 discussion of the respectlye rights of mortgagor and mortgagee with reler 
 enoo in in<inrance on the mortgaged property, see post, p. 4l(. ^. ^ . 
 
 '-"^eXcWne M rIyNEK y. PRESTON ^S^^TtlT'^ AmTt^ep 
 in this country. Skinner y. Houghton, 92 Md 68 ^8 ^tl f , 84 Am. St^Rep. 
 485 See also State Mut Fire Ins. Co. y. UpdegrafT, 21 Pa. 513; Reed y. 
 iri4 Pa'm 84Tn. Dec. 425. « has no application where «ie yen- 
 dee pa^ the premiums. Williams y. Lllley, 67 Conn. 50, 84 Atl. 765. 37 L. 
 
 ''■» ilc^nald y. Black's Adm'r, 20 Ohio. 185. 65 Am. Dea 448; Kortlander T. 
 Elston. 6 V. S. App. 283, 62 Fed. 180. 2 C. C. A- 657. 
 
 " LYNCH y. DALZELL. 4 Bro. Pari. Cas. ^2. ^ _. ,-^. 
 
 "See Carpenter v. Insurance Co.. 16 Pf OJ. W «6. » f- ™: ^ 
 QBARLES V. CLAYTON. 87 Tenn. 308. 10 S. W. 606, 8 L. E. A. 170. Klnf 
 
 Vance Ins.— 4 
 
 Hi 
 
50 
 
 THE NATURE AND REQUISITES OF THE CONTRACT. 
 
 CCh.2 
 
 erty was insured by the owner, the insurance payable to himself, his 
 executors, administrators, and assigns, it was held that upon the 
 death of the insured the interest in the policy passed to his executor 
 rather than to his heirs.^* 
 
 It is possible, however, for the parties to frame the contract so as 
 to attach it to the property and give successive owners of the prop- 
 erty rights under the contract. Thus, where the insurance is "on 
 account of the owners," or for "whom it may concern," or where the 
 loss is made payable to bearer, the subsequent transferees become, 
 by the terms of the contract, the real parties to the contract of insur- 
 ance.** Such contracts, by which the insurance policy is made to 
 pass from owner to owner, are of the nature of successive novations. 
 
 Contracts of Fire Insurance not Ordinarily Assignable. 
 
 From the fact that the contract of fire insurance is peculiarly per- 
 sonal, the result follows that rights under it, so long as it remains 
 executory, cannot be assigned by one party without the consent of 
 the other.** The insurer, in estimating the character of the risk that 
 he is to assume under the contract, always takes into consideration 
 the character of the party insured, and also his previous conduct. An 
 insurer is very unwilling to grant insurance to a person who has been 
 a too frequent sufferer from loss by fire, or to one of whose good 
 faith, for any other reason, he may have grounds of suspicion. The 
 insurer may be quite willing to take the risk upon property while in 
 the possession of and owned by a person who will use every effort 
 that diligence and good faith may suggest to preserve the property 
 from loss, when quite unwilling to accept the same risk, on the same 
 terms, in case the possession or ownership should be changed. It 
 follows, therefore, that a person whose property is insured, when sell- 
 ing his property to another person, cannot thrust upon the insurer, 
 as his successor in the contract of insurance, a stranger to the con- 
 tract in the person of his vendee.*^ The insurer may consent to the 
 substitution of the vendee for the vendor, in which case there is, of 
 course, a new contract created.** Nearly all of the contracts of in- 
 surance upon property provide for the transfer of such contracts to 
 
 V. Preston, 11 La. Ann. 95; Clinton ▼. Insurance Co., 45 N. T. 454; Plimpton 
 V. Insurance Co., 43 Vt 497, 5 Am. Rep. 297. But see note 24, supra. 
 
 28 Wyman v. Prosser, 36 Barb. (N. Y.) 368. 
 
 a» See Rogers v. Insurance Co., 6 Paige (N. Y.) 583, 588. 
 
 soKase v. Insurance Co., 58 N. J. Law, 34, 32 Atl. 1057; New England 
 Loan & Trust Co. v. Kenneally, 38 Neb. 895, 57 N. W. 759; Wbite v. Rob- 
 bins, 21 Minn. 370. 
 
 «i Nor can the Insurer, without the consent of the insured, substitute an- 
 other in his place. Basher v. Insurance Co., 69 N. Y. 101. 
 
 »J Ellis V. Insurance Co. (C. C.) 32 Fed. 646; CONTINENTAL INS. CO. v. 
 MUNNS, 120 Ind. 30, 22 N. E. 78, 5 L. R. A. 430. 
 
 A PERSONAL CONTKACT UBEFwRlMiE FIDEL 
 
 51 
 
 §§ 20-27) 
 
 vendees under certain conditions, or, in the absence of such transfer, 
 for a repayment of a proportionate amount of the insurance premi- 
 um received from the vendor. Of course, this applies only to exec- 
 utory contracts of insurance. After the loss has been suffered, and 
 a right to demand money of the insurer has accrued, the insured may 
 assign such claim as freely as any other money demand. 
 The Highest Degree of Good Faith Required of the Parties to the 
 
 Contract. . . ..i.:«„ 
 
 In the earliest forms of the insurance contract— for the assumption 
 
 of marine risks— the subject of the insurance, whether ship or cargo, 
 was seldom present for inspection, but the contract was necessarily 
 made in a place remote from the property insured. Therefore the in- 
 surer in determining the quality of the risk he was asked to assume, 
 was compelled to rely entirely upon the statements made by the ap- 
 plicant for insurance. This necessarily created a fiduciary relation 
 between the parties, and imposed upon the applicant the duty ot 
 making full and free disclosures of all the facts that would in any 
 wise affect the making of the contract. Not only was the apphcant 
 required to make full disclosures, but it was also necessary that any 
 statements made by him, and upon which the insurer would rely, 
 should be absolutely true. From such circumstances as these, at- 
 tending the making of the contract, arose the peculiar rules respect- 
 ing the making of contracts of insurance, and fixing the doctrines 
 with reference to concealments, representations, and warranties, that 
 are hereafter to be discussed. The rule thus derived, requiring that 
 all material facts should be made known to the insurer, is not based 
 upon the principle of fraud, as it might be easily possible for the in- 
 sured to fail in his duty of disclosure, with no fraudulent purpose 
 whatever. Thus, in the case of Proudfoot v. Montefiore/* the agent 
 of the insured shipped a cargo of madder from Smyrna for Liver- 
 pool, having notified the principal of the shipment, but failed to tel- 
 egraph to him the fact that the vessel was subsequently wrecked at 
 the mouth of the harbor, and the cargo lost. The principal, after the 
 destruction of the cargo, and after he might have received the tele- 
 graphic information of that fact if the agent had properly performed 
 his duty, secured insurance "lost or not lost" on the venture, but did 
 not, of course, disclose the fact of loss that was not known to him. 
 It was held that the policy was avoided by the failure to disclose the 
 fact that should have been known to the insured, even though in re- 
 ality he was as ignorant of the fact as was the insurer. 
 While questions involving the exercise of good faith and the duty 
 
 " Nease t. Insurance Co., 32 W. Va. 288, 9 S. B. 283. And see post. "As- 
 fiignments," p. 468, 
 
 ^* PIIOUDFOOT V. MONTEFIORB, L. B. 2 Q. B. 51L 
 
52 
 
 THE NATURE AND IIEQUISITES OF THE CONTRACT. (Ch. 2 
 
 of disclosure usually arise with reference to the insured, yet the in- 
 surer is also required to act in perfect good faith towards the insur- 
 ed, and cannot, in making the contract, take any unfair advantage of 
 him. This accounts for the readiness with which the courts apply the 
 doctrine of estoppel as against the insurer when he seeks to take ad- 
 vantage of some condition of forfeiture in order to escape payment 
 under the policy. As said by Christian, J., in Manhattan Fire Ins. 
 Co. V. Weill,* » "Where good faith and fair dealing are of the very 
 essence of the contract of insurance, insurance companies will be es- 
 topped from asserting a defense which not only tends to a breach of 
 good faith, but to actual and positive fraud." 
 
 A GOIfTRACT ESSENTIAIXY OF INDEMNITY. 
 
 28. The basis of the eontract of insurance is indemnity. Indemnity 
 is its sole leg^tiniate pnrpose, and any contract of insurance 
 that contemplates a possible gain to the insured by the happen- 
 ing of the event upon which the liability of the insurer becomes 
 fixed is contrary to the proper nature of insurance, and, in the 
 absence of statute, will not be allowed. Hence: 
 
 (a) No person may secure insurance upon property or Utcs in urhich 
 
 he has no interest. 
 
 (b) The value of the interest destroyed or damaged is, in every case, 
 
 the limit of reoovery under a contract of insurance upon such 
 
 interest, 
 (e) In marine insurance, the owner of property partially insured is 
 
 deemed co-insurer to the extent of the value uncovered by the 
 
 policy, 
 (d) The insurer is entitled to be subrogated to any claim whereby the 
 
 insured, who is indeninified under the terms of the policy, might 
 
 have had his loss reduced or made good by some third party. 
 
 The Principle of Indemnity Requires the Presence of cm Insurable 
 Interest, 
 As has been shown before, any contract of insurance that does not 
 contemplate indemnifying the insured against an actual loss that 
 may be suflFered by reason of the designated perils is a wagering 
 policy, contrary to public policy and void. The interest subject to ' 
 the perils insured against, and for the loss of which the contract pro- 
 vides an indemnity, is termed "insurable interest," and, inasmuch as 
 a person having no insurable interest in the subject of insurance can- 
 not suffer loss on account of stipulated perils, it is manifest that the 
 presence of such insurable interest is necessarily required by the 
 principle of indemnity. While it is therefore true that indemnity is 
 
 »» 28 Grat. (Va.) 389, 396, 26 Am. Rep. 364. See, also, Germania Ins. Ck). 
 T. Rudwig, 80 Ky. 223. 
 
 §28) 
 
 CONTRACT ESSENTIALLY OF INDEMNITY. 
 
 53 
 
 the sole legitimate purpose of the ordinary contract of insurance, ye 
 here are certain apparent limitations upon this general principle that 
 deserve to be noticed. The contract provides for indemnity only for 
 proximate damages resulting from the designated penis,- and does 
 not ordinarily indemnify the insured for the loss of expected profits 
 or other speculative benefits." Neither does the contract provide 
 to damages sustained by reason of the peculiar ^''^^^'}^^^^\''^'''^ 
 nected with the subject of insurance; that is, it can take into account 
 no pretTum affectionis, in the absence of specific valuation that may 
 be based upon such peculiar value. 
 
 Rule as to Recovery under Valued Policies. 
 
 Under the strict principle of indemnity, the actual value of the sub- 
 ject of insurance is always the limit of recovery." So, under the or- 
 dinary open policy, the amount written therem is mtended to desig- 
 nate merely the maximum amount which may be recovered," pro- 
 vided the amount of the loss may be proved to be so much; that is 
 to say, that if under the ordinary policy a house is msured for $10,- 
 000, and burns, the insured can in no event recover more than $10 - 
 000, however much greater the real value of the house «n»y ^"^ = ^ut 
 if it can be proved that the house was m fact worth on^y $8,000, its 
 actual value thus ascertained is the limit of recovery This principle 
 of strict indemnity is, however, subject to some modifications m cas- 
 es of valued policies. It is perfectly competent for the parties to a 
 contract of insurance to determine by prior agreement what shall 
 be regarded as the value of the property insured, m case of its de- 
 struction; and, in the absence of fraud, accident, or mistake, such 
 valuation is the measure of recovery, even though it might be proved 
 that the actual value of the property lost is more or less. The mere 
 fact of overvaluation is not a good defense to an action for the 
 
 .. HUUer y. Insurance Co., 8 Pa. 470, « Am Dec. 656; LTON GAS * 
 ELECTRIC CO. V. MEKIDEN FIBE INS. CO.. 158 Mass 870, 33 NR 67^ 
 20 L. R. A. 297, 36 Am. St Rep. 540. See FREEMAN '• f SSOCIATION, loO 
 Mass. 351, 30 N. B. 1013, 17 L. R. A. 753; WHITE ^- Il^"'?A'^S'|=„°°o' 1 
 Me. 91, 2 Am. Rep. 22; Travelers' Ins. Co. v. MeUck, 65 Fed. 178, 12 0. 0. A. 
 
 1i in tte\ttt^of Wright and Pole. 1 Adol. & B. 621. "Inf """Ity d^s 
 not contemplate unrealized profits." Ostrander, Fire Ins. (2d Ed.) i 180. 
 quoted in Niaraga Fire Ins. Co. v. Heflln (Ky.) 60 S. W. 393. „. . „ -, 
 
 »« STATE INS. CO. T. TAYLOR, 14 Colo. 499, 24 Pac. 333. 20 Am. St. 
 Rep. 281; Fisher v. Insurance Co. (C. 0.) 33 Fed. 544. 
 
 «»Dacey v. Insurance C!o.. 21 Hun (N. T.) 83. 
 
 " The insured may not prove that the value is more. Holmes v. Insurance 
 Co, 10 Meto. (Mass.) 211. 43 Am. Dec. 428. The Insurer may not show tMt 
 the value Is less. Borden v. Insurance Co.. 18 Pick (Mass.) 523. 29 Am- Det 
 614: Patapsco Ins. Co. v. Biscoe (Md.) 7 Gill & J. 293, 28 Am. Dec 319 (Insui- 
 •nee on freight); HARRIS v. INSURANCE CO.. 6 Johns. (N. T.) 868. 
 
54 
 
 THE NATURE AND REQUISITES OF THE CONTRACT. 
 
 (Ch.2 
 
 ^ 
 
 
 '•*t 
 
 amount set forth in a valued policy,** though such overvaluation 
 may be regarded as evidence of fraud ; and, in case the overvaluation 
 is great, its weight as evidence will be great.** Such contracts of 
 agreed valuation are analogous to agreements for liquidated dam- 
 ages in ordinary contracts.*" While they may possibly result in the 
 payment by the insurer of a sum that will more than indemnify the 
 insured for the loss sustained in case of an overvaluation, not fraud- 
 ulent, yet this is only an apparent exception to the rule that only in- 
 demnity can be provided by the contract of insurance. As has been 
 intimated, it is always possible to show fraud in the valuation, and, 
 in the absence of fraud, it is plain that at the time of the making of 
 the contract the parties regarded the sum specified as the value of 
 the property as merely the amount necessary to indemnify the own- 
 er for its loss. 
 
 Double Insurance — Contribution, 
 
 That nothing more than indemnity can be secured under the con- 
 tract of insurance is illustrated in cases where the same property is 
 covered by policies written by two or more insurers, and a partial 
 loss occurs. Each of the insurers is Hable for the whole amount of 
 the loss up to the sum specified in his policy,** but the insured can 
 recover his loss only once, and, if he has been fully indemnified in an 
 action against one insurer, such recovery bars a subsequent action 
 against a co-insurer.*' The co-insurers stand to one another in the 
 mutual relation of principal and surety, and that insurer who has 
 been called upon to make good the loss to the insured has, of course, 
 his right to recover proportionately from his co-insurers.*' Such 
 circuity of procedure, however, is now generally avoided by the pro 
 rata clause included in modern policies, whereby each one of several 
 insurers is liable only for his ratable proportion of any partial loss 
 that may be suffered.*' 
 
 41 Sturm v. Insurance Co., 63 N. T. 77; FRANKLIN FIRE INS. CO. v. 
 VAUGHAN, 92 U. S. 516, 23 L. Ed. 740; Borden v. Insurance Co., 18 Pick. 
 (Mass.) 523, 29 Am. Dec. 614. 
 
 ** See post, "Fraud and False Swearing," p. 454. 
 
 4» See HARRIS v. INSURANCE CO., supra; Sturm v. Insurance Oo., supra. 
 
 4* NBWBY v. REED, 1 W. Bl. 416; Godln v. Assurance Co., 1 Burr. 489; 
 Thurston v. Koch (0. C, Fa. Dist.) 4 Dall. 348, Fed. Cas. No. 14,016, 1 L. Ed. 
 862. See, also, Wiggin y. Insurance Co., 18 Pick. (Mass.) 145, 29 Am. Dec. 576. 
 
 *» Williamsburg City Fire Ins. Co. v. Gwinn, 88 Ga. 65, 13 S. E. 837. 
 
 4« LUCAS v. INSURANCE CO., 6 Cow. (N. Y.) 635; Millandon v. Insur- 
 ance Co., 9 La. 27, 29 Am. Dec. 433. 
 
 47 In the New York standard fire policy this clause reads as follows: 
 "This company shall not be liable under this policy for a greater proportion 
 of any loss on the described property, or for loss by any expense of removal 
 from premises endangered by fire, than the amount hereby insured shall 
 bear to the whole in^rance, whether yalid or not, or by solyent or insolvent 
 
 §28) 
 
 A CONXBACT ESSENTIALLY OF ISDEMKITT. 
 
 66 
 
 The Insured a Co-Insurer under Marine Policies. • „... _« 
 
 Under the usual contract of fire insurance the msurer, in case of 
 a partial loss of the subject of the contract is required to give full 
 indemnity for such loss up to the amount written m his policy, even 
 though the property be very inadequately insured Thus if proper- 
 ty valued at $10,000 is insured for $5,000, and is damaged by fire to 
 the extent of one-half of its value, the insurer will be compelled to 
 oav the entire $5,000 that is necessary to repair the loss. Ihis, how- 
 ever, is not the rule in marine insurance, in which the insured is 
 considered the co-insurer for an amount determined by the difference 
 between the insurance taken out and the value of the Property in- 
 sured " Thus, if a vessel worth $100,000 is msured for only $80,000 
 and is damaged to the extent of $50,000, the insurer wiU be reqmred 
 to ply only 80 per cent, of the loss suffered, or $40000; the other 
 20 per cent., or $10,000, being borne by the msured himself. It is 
 sonietimes stipulated in contracts of fire insurance that the msured 
 shall be co-insurer to the extent that the property is not covered by 
 the policy, and it is said that the rule applying m tiiis respect to ma- 
 rine insurance governs in fire insurance also in France and other 
 Continental countries. 
 
 The Insurer Entitled to Subrogation. 
 
 Inasmuch as the insured is under no circumstances entitled to re- 
 ceive any profit by reason of the contract of insurance he is required, 
 after being indemnified by the insurer for the loss suffered, to subro- 
 gate the insurer to any claims or right that he might have enforced 
 against third parties, with respect to that loss whereby it might have 
 been either reduced or made good." This right of subrogation, to 
 which the insurer is thus entitled, will be discussed at length m a later 
 chapter in this work. 
 
 insurers, covering such property." See C«««'ty/- I°«"J»°^ vV^ttf^f 
 49, 8 South. 138; German Ins. Co. T. Heiduk, 30 Neb. 288 ^ N. W. 481, ^ 
 Am. St. Rep. 402: LUCAS v. INSUKANCE CO., 6 Cow ^- 
 «. Hughes on Admiralty. 33, citing Western Assnr. Co. v. Transp. Co.. 16 
 
 '•^B^'rigSho'^eTy. '^: V. Rogers, 76 Va- f 3; Springa^d Fire & Martne 
 Ins. Co. V. Allen, 43 N. T. 889. 8 Am. Rep. 711; OASTBLUAIN v. PRESTON. 
 U Q. B. DlT. 380. 
 
 i« 
 
 P 
 
THS NATURE AND REQUISITES OF THE CONTRACT. 
 
 (Ch.2 
 
 THE NATURE OF THE CONTRACT OF LIFE INSURANCE. 
 
 29. Tl&e ordinary contract of life insurance is based upon tlie principle 
 of indemnity, but is not itself a contract of indemnity. It 
 is ratber a contract wbereby one party, called tbe "insurer,** 
 purchases an annuity to be paid to bim during tbe life of an- 
 otber, denon&inated tbe "insured," in consideration for wbich 
 tbe insurer agrees to pay a specified sum upon tbe deatb of tbe 
 insured. Public policy requires tbat tbe principle of indemnity 
 sball be so far regarded as to bold tbat any contract for tbe in- 
 surance of a life, in tbe continuance of wbiob tbe insured bas 
 no real interest, sball be Toid. 
 
 I« \ 
 
 The life insurance contract differs materially from the other kinds 
 of insurance. It may be, like them, purely a contract of indemnity, 
 if the insurance is merely for a specified term, as, for instance, where 
 insurance is granted upon the life of a person for the space of one 
 year, or five years, as is the case in "natural premium" insurance. 
 Such contracts, however, as has already been stated, are relatively 
 infrequent. The ordinary contract of life insurance contemplates the 
 certain payment of a specified sum at an uncertain time, and the pre- 
 miums are so calculated that, in accordance with the insured's ex- 
 pectancy of life, there will be paid to the insurer as great, or a great- 
 er, sum in premiums and interest thereon than will become due at 
 the death of the insured. In the case of fire or marine insurance, the 
 insurer takes merely a risk that a loss may take place, it being known 
 by experience that such losses do not occur in the great majority of 
 cases ; whereas, in Hfe insurance, the event upon which the payment 
 is to be made is absolutely certain to happen at some future time. 
 The fact that the insurer thus accumulates from the premiums a sum 
 which he holds to be paid out upon the death of the insured, intro- 
 duces into this so-called "contract of insurance" a predominant ele- 
 ment of speculative investment.'® The presence of this element nec- 
 essarily precludes the application of the principle of strict indemnity, 
 since, as is easily seen, in the average case the insurer only pays back 
 the money that has been given to him to hold in quasi trust for the 
 insured. 
 
 Another serious obstacle in the way of regarding life insurance as 
 a contract of indemnity exists in the difficulty to be encountered in 
 fixing any sort of pecuniary value upon life. It is a well-recognized 
 principle that, granting the existence of an actual interest, the law 
 fixes no limit to the amount of insurance which may legally be placed 
 
 •0 Phcenix Life Ins. Co. v. Bailey, 13 Wall. 616, 20 L. Ed. 501 ; CJrosswel v. In- 
 demnity Ass'n, 61 S. C. 103, 28 S. E. 200. See, also. 6 Va. Law Reg. 775. 
 
 v' \ 
 
 §29) 
 
 THE NATURE OF THE CONTRACT OF LIFE INSURANCE. 
 
 m 
 
 uoon the life of any person, even though that person might be a 
 helpless invalid whose life was rather a burden upon the party m m- 
 terest than a benefit possessing a pecuniary value. ^ 
 
 While life insurance thus cannot be regarded as a contract ot in- 
 demnity to the same extent as fire or marine insurance, yet it is man- 
 ifest that no practice cguld be more vicious than that of speculating 
 in human life. Therefore a contract in which the assured has no in- 
 surable interest in the life of the insured is, on the broadest and 
 soundest principles of public policy, absolutely void in this country 
 and also under the statute in England.^^ As will be seen later, the 
 criterion for determining the presence of an insurable interest is loss 
 or detriment to be suffered by the insured upon the happening of the 
 peril insured against; so it is clear that the basis of an insurable in- 
 terest is indemnity. Therefore the contract of life insurance is based 
 upon the principle of indemnity, in so far as it cannot exist unless 
 there is an insurable interest in the party insured at the time of the 
 making of the contract. But beyond this the principle of indemnity 
 does not apply to life insurance. As was said by Parke B., in the 
 leading English case of Dalby v. The India & London Life Assur. 
 Co • " "The contract commonly called 'life assurance,' when prop- 
 erly* considered, is a mere contract to pay a certain sum of money on 
 the death of a person, in consideration of the due payment of a cer- 
 tain annuity for his life; the amount of the annuity bemg calculated 
 in the first instance according to the probable duration of hfe, and, 
 when once fixed, is constant and invariable. This species of insur- 
 ance in no way resembles a contract of indemnity." While the doc- 
 trine thus enunciated has been contested by some American author- 
 ities," yet it may now be regarded as thoroughly well established by 
 the overwhelming weight of authority in the United States." The 
 
 «i Trinity College v. Insurance Co., 113 N. C. 244. 18 S. »• 175 22 L- «• A. 
 291: SINGLETON v. INSURANCE CO., 66 Mo. 63, 27 Am. Rep. 321. In the 
 latter case the court says that "the question may be considered an open one 
 m this state," and, after citing numerous cases, concludes that a 2®"cy of 
 Insurance procured by one upon the life of another, for the benefit of the 
 former, who has no pecuniary interest in the continuance of the life insured, 
 is against public policy, and therefore void." See, also.^ra, P. 125. 
 
 "^ Under 14 Geo. Ill, c. 48. See HALFORD ▼. KYMER. 10 Barn. & Cress. 
 724 
 
 ei DALBY v. THE INDIA & LONDON LIFE ASSUR. CO.. 15 C. B. 36o. 
 
 Richards* Cases, 271. 
 •* See May on Ins. (3d B3d.) §§ 7, 8, 115, 116. ^ phoenix 
 
 •» Trinto/Mut Life & Fire Ins. Co. v. Johnso^ 24 N. J. ^^«^'^f » !^2."1^^^ 
 
 Lifelns. Co. y. Bailey, 13 WalL 618, JW U IM, Wl ; BAWLS J- ^NSUR^J^E CO, 
 
 era?- (^af L^lm IV, ^; Nyr^.^^ran^^^^^^^^^^^ ^^ind. l^^^ ^ 
 
 r^.7^ rJitrLerCas.;287j ^I™/ J'^^^^^^^^.^ s^^^^^ 
 Atl. 890, 2 L. R. A. 844; Bacon^s Ben. Soc & L. Ins. § 163 But see Ex 
 change Bank of Macon v. Loh, 104 Ga. 446, 31 S. B. 459, 44 L. R. A. 372. 
 
58 
 
 THE NATURE AND REQUISITKS OF THE CONTRACT. 
 
 (Ch.2 
 
 §30) 
 
 THE NATURE OF MUTUAL BENEFIT INSURANCE. 
 
 69 
 
 question usually arises when the interest, which the assured had in 
 the life insured at the inception of the policy, has ceased before its 
 maturity. In such case it is plain that the death of the person whose 
 life is insured causes no loss to the assured which could be the sub- 
 ject of indemnity, and, if the principle of indemnity were to be strict- 
 ly applied, there could certainly be no recovery by the insured under 
 such circumstances ; and such was the holding in the case of Godsall 
 V. Boldero,*' in which it was decided that a tradesman who had in- 
 sured the life of William Pitt, to secure a debt owed to him by that 
 statesman, could not recover under the policy after all Mr. Pitt's 
 debts had been paid in accordance with an act of Parliament. But 
 this case was overruled, and its doctrine distinctly repudiated, by the 
 case of Dalby v. The India & London Life Assur. Co.,'^ which arose 
 upon very similar facts. The doctrine of this last case has been 
 adopted by the Supreme Court of the United States, which, in the 
 case of Connecticut Mut. Life Ins. Co. v. Schaefer," in which a di- 
 vorced wife sought to recover under a policy upon the life of her 
 former husband, held that the termination of the wife's interest in 
 the life of her husband did not in any wise affect her right of recov- 
 ery under the policy. Justice Bradley stated the law in these broad 
 terms : "We do not hesitate to say, however, that a policy taken out 
 in good faith, and valid at its inception, is not avoided by the cessa- 
 tion of the insurable interest, unless such be the necessary effect of 
 the provisions of the policy itself." And this statement of the law 
 seems to have been fully concurred in by other American courts. '^* 
 
 THE KATUBE OF MUTTTAI. BENEFIT IirSURANCE. 
 
 30. Life insurance by mntnal benefit associationa and fraternal orders 
 does not contraotnally differ in any niaterial respect from regu- 
 lar life insurance. Since tbe purposes of sucb organizations, 
 however, are benevolent, and not commercial, tbey are usually 
 differentiated in tbe statutory regulation of insurance. 
 
 Life Insurance by Mutual Benefit and Assessment Associations. 
 
 The fact that the various benefit associations include insurance up- 
 on the lives of their members as only one of the many functions un- 
 dertaken by them, has induced many authorities to make statements 
 
 •• GODSALL v. BOLDERO, 9 Bast, 72. 
 
 •7 DALBY V. THE INDIA & LONDON LIFE ASSUR. CO., Biipra. 
 
 •8 CONNECTICUT MUT. LIFE INS. CO. v. SCHAEFER, 94 U. S. 457, 24 
 L. Ed. 251. 
 
 B» Overhlser's Adm'x t. Overhlser, 63 Ohio St 77, 67 N. B. 965, 50 L. R. 
 A. 552, 81 Am. St. Rep. 612; Appeal of Corson, 113 Pa. 438, 6 Atl. 213, 57 
 Am. Rep. 479; RAWLS v. INSURANCE CO., 27 N. Y. 282, 84 Am. Dec. 28o. 
 
 implying that insurance by such associations is peculiar, and not sub- 
 let to the rules of law applying to the ordinary contract of life insur- 
 ance •« This, however, is not correct. For whatever may be the ul- 
 timate motive of the members of such benefit associations, and how- 
 ever true that their membership may be based upon the fraterna 
 desire of mutual aid, and for the promotion of social pleasure, yet 
 the rights of members to demand the benefits due in case of sickness 
 or death, in accordance with the terms of the membership certificate 
 Ts purli; a contract right, and none the less subject to the rules of 
 law applying to contracts of life insurance because of its intimate con- 
 nection with the other benevolent purposes of the association. It 
 may therefore be properly said that, so far as the contract of mem- 
 bership in such benefit associations provides for the contingent pay- 
 ment of.money in case of sickness or death, the agreenient is one 
 purely of life insurance, and in no wise different from the contrac 
 Tsimilar effect made by the so-called "oM^ine" companies." Yet 
 there is this distinction between the contract ordinarily set forth in 
 a membership certificate in a benefit association and the contract of 
 the old-line companies. As has been shown above, the ^^ore popu- 
 lar forms of level premium insurance contam an important feature 
 of investment, and, in so far, are not contracts of msurance at all 
 but in the pure form of benefit or mutual assessment insurance, 
 there is no feature of investment whatever. The contract contem- 
 plates merely the indemnifying of the insured against ^^^^^'^^^^^ 
 death, and is therefore in its nature more strictly a contract of msur- 
 
 •0 Commonwealth v. Equitable Ben. Ass'n, 137 Pa. 412, 18 Atl. 1112; State 
 V low^ mT A d Ass'n, 59 Iowa, 125. 12 N. W. 782; Commonwealth y. 
 Na^olal Mut AM Ass'n,' 94 Pa. 481; Chosen F^end. v Fa^^ ^ How. 
 Prac (N Y) 886; Commercial League Ass'n t. People, 90 111. 166, biate t. 
 Mutual Protectiok Ass'u, 26 Ohio St 19; Northwestern Masonic ^^^ 
 rj^nes 154 Pa 99 26 Ati. 263. 35 Am. St Kep. 810; Martin v. Stubblngs. 
 m ni 387 18 N m ^7, 9 Am. St. Rep. 620. These decisions will be found 
 ^oVever"" ; L^u^rJtatutes specially providing f- tnUnfsu'S'^^e.i: 
 "societies (or beneficial or protective purposes," »' ««f P*^"*,^""^.^!^^ „? 
 from the regulations imposed upon »°»°«"<=^'°'°P'^^^^,J^" J?V^S^ney 
 statutory provisions, it Is clear that any association «^«° J*°"8^ "J^ben^Tl- 
 olent or charitable, and provide benefits for Its ««°L^™ ~ *^^_ ''""'f^t 
 arles only, IncldentaUy, yet « U contracts to pay » '^f^ata sum to .uch ben^^^ 
 flclarles upon the decease of such -members in consideration of wnWbuHons 
 made by them, it is doing an insurance business. COMMONWEALTH v. 
 WETHBRBEE, 105 Mass. 149; Endowment & Benev. Ass n '• S*^^^>*°; 
 253, 10 Pac. 872; Chartbrand v. Brace, 16 Colo. 19. 26Pa<^ 152. 12 L. K. A^ 
 209 25 Am. St Rep. 235; Bolton v. Bolton, 73 Me. 299; ftatej. Farmers 
 Ben. Ass'n, 18 Neb 281. 25 N. W. 81; Rensenhouse v Sf •ey.,/^ Mich. ««, 
 40 N. W. 765; State ex rel. Atty. Gen. v. Merchants' Excb. Mut Benev. Soc. 
 72 Mo. 146; Bacon, Ben. Soc. & Life Ins. § 52. 
 
 .1 See, further, Danlher v. Grand Lodge, 10 Utah. 110, 37 Pac 245; Su- 
 preme Coun>.:U v. Larmour. 81 Tex. 71. IB S. W. 633. 
 
Il 
 
 THE NATURE AND REQUISITES OF THE CONTRACT. ^Ch. 2 
 
 ance. It has also been shown heretofore, however, that in practice 
 the mutual benej&t associations are gradually approaching the meth- 
 ods of business used by the old-line companies, and that in nearly all 
 cases there is provided some sort of reserve fund, whether called a 
 "contingent fund," "emergency fund," or "surplus." The provision of 
 such a fund is manifestly necessary to do away with the evil consequen- 
 ces that would ensue from fluctuations in the death rates or in the pay- 
 ment of assessments, or from other emergencies requiring an unusual 
 and unexpected expenditure. But the accumulation of this fund is in so 
 far a departure from the principles of purely mutual assessment in- 
 surance. 
 
 While the provision made by these benefit associations for pay- 
 ing sick and death benefits is thus nothing less than a contract of life 
 insurance, and therefore subject to the same rules of law as apply in 
 other similar contracts, yet such associations are frequently given a 
 different standing from the old-line companies by special statutes 
 that are enacted in their favor. In most of the states are found stat- 
 utory provisions for the organization and conduct of these mutxial 
 benefit associations, and in such cases it has been held that the gen- 
 eral law governing the conduct of life insurance business does not 
 apply to benevolent associations established under the special law.'* 
 Furthermore, it has been frequently held that the benevolent char- 
 acter of these associations will be recognized under the statute ex- 
 empting charitable and benevolent associations from taxation, and it 
 is not essential to the charitable nature of these associations that 
 their benefits shall be bestowed upon all alike, without restriction to 
 any designated classes. As said by Lewis, P., in City of Petersburg 
 V. Mechanics* Association : •• "The objects of the association, which 
 was incorporated by the Legislature in 1826, are set forth in the con- 
 stitution and by-laws, and in the preamble thereto, which declare 
 that, in instituting a society of mechanics, charity should be the prin- 
 cipal, but not the only object. Its revenues, as testimony shows, are 
 wholly applied to the payment of its current expenses, the assistance 
 of its indigent members, and the families of such of them as may 
 have died in needy circumstances. These are charitable purposes, 
 and the relief afforded is none the less charity because confined to 
 the members of the association and the families of deceased mem- 
 bers. It is not essential to charity that it shall be universal." In the 
 language of the Tennessee court in a recent case : •* "The order of 
 
 •s See Commonwealfh r. Bqultable Ben. Ass'n, 137 Pa. 487, 18 Atl. 1112; 
 State V. Whitmore, 75 Wis. 332, 43 N. W. 1133; Donald v. Railway Cb., 93 
 Iowa, 284, 61 N. W. 971, 33 L. R. A. 492. 
 
 «3 78 Va. 431, 436. 
 
 •« Supreme Lodge K. P. v. La Malta, 95 Tenn. 157, 31 S. W. 493, 30 L. B. 
 A. 8o5. 
 
 THE CONTRACT OF KEINSURANCB. 
 
 61 
 
 the Knights of Pythias is not a regular life insurance company but 
 t is a benefit association with Ufe insurance as one feature, to be en- 
 joyed or not by each particular member at his own election, and up- 
 on certain terms and conditions." 
 
 THE CONTRACT OP REINSURANCE. 
 
 ^^act 1. personal between the ln.nrer ««l the r.ln.nr.,. «wl 
 <., Xhrco-S'r .r.rnfan7e'u"^ lli^ --rtahi... ^ »- 
 
 Ch, r:lT.^.TZ t^^ nnae, the -o-^*, -^^^ 
 bT the liabiUty of the original iiuinrer, not by hi. abiUty to pay. 
 
 i:t""T.: r« h.tly'S::::^^ »<»ey paid l., the r.lnsn,ex 
 (d^ B^ wh»r. reln.nrer>. promi.. 1. t. pay l...e. ^•-"«/^^ ^^ 
 poUcy holder., the original in«nred th« take, a ^Bht of .idt 
 Snder the eontxact thn. n-d. for hi. benefit, even though he 
 
 (., A^y °:t«e»rn?^X the ln.nrer, without the eon.ent of^e 
 * ' ^ri^nrer, whieh i«p..e. addition^ Wen. upon the rein- 
 .nrer, will relea«» the latter from hi. UabiUtr. 
 
 Reinsurance is merely a further extension of *« *«"^^^!!'^;,«*^ °^ 
 insurance, that is, a distribution among many of the "f >^«?^»g '^^ 
 one When an insurer finds that he has undertaken a single nsk so 
 great th^Ae happening of the peril insured against would r«,der h.m 
 fnsolvent, or seriously cripple his efficiency, it is <="^tornary for him to 
 reinsure such risk, or a portion thereof, with one ^^ «<^^^ °*^ "f 5^ 
 ers. It sometimes happens, also, that an insurer desires entirely to 
 relieve himself of liability under contracts made, and remsures all his 
 
 sks Such contracts are plainly beneficial to the P"W.c, inasmuch as 
 they promote both efficiency and stability m tiie conduct of Jje uisur^ 
 ance business. Yet they have at times been in great disfavor as pro- 
 moting speculation in the rise and fall of premiums, and were f onner- 
 ly prohibited in England by statute." No such discnminahon how- 
 ever, has ever been made against contracts of reinsurance » *« ~"n- 
 try," and it has become a common practice among msurers. Of course, 
 
 .. Defined In Commercial Mut. Ins. (3o. v. Detroit Fire & Marine Ina. Co„ 
 38 Ohio St. 16, 43 Am. Rep. 413. 
 
 «e 19 Geo. II, c. 37. Repealed 30-31 Vict c. 23. toaNSP OO 
 
 •' 3 Kent, Oomm. 276; PHCENIX INS. CO. T. BRIB * W. TEANSP. CO., 
 
 Hji^ m mi»m ■ 
 
i 
 
 It 
 
 ^ 
 
 THB NATURE AND REQUISITES OF THE CONTRACT. 
 
 (Ch.2 
 
 it stands to reason that a contract of reinsurance, like any other contract 
 of insurance, must be supported by an insurable interest; therefore 
 the reinsurance may not be for a greater amount than the original in- 
 surance, although it may be easily for a less amount. •• Likewise, the 
 amount payable under the contract of reinsurance cannot be more than 
 an indemnity to the insurer, and, if the insurer becomes liable to pay 
 any sum less than the amount of reinsurance, the sum so payable will 
 fix the liability of the reinsurer.* • 
 
 Contracts Improperly Termed Reinsurance, 
 
 It is well to call to the reader's attention the distinction which exists 
 between a contract of reinsurance and other somewhat similar contracts 
 that frequently pass under the same name. When a person who has 
 already insured his property secures a second insurance upon the same 
 property, the second contract is frequently called "reinsurance," but 
 this is merely a case of double insurance, and not at all "reinsurance" 
 in the technical sense of the word. Another instance of the untech- 
 nical use of the word occurs when two insurance companies are con- 
 solidated, or when one buys out another, assuming all of its policies and 
 obligations, in order that that other may discontinue its business. In 
 such cases the consolidated company, or the purchasing company, is 
 said to "reinsure" the risks of the company that ceases to exist; but 
 this is a case of substitution, in which the so-called "reinsurers" engage 
 to take the place of the original insurer, and themselves directly to make 
 good losses to the holders of the original policies. It must be borne in 
 mind that such cases of consolidation, or of successive insurance, are 
 not technically cases of reinsurance, and what is said of the rules of law 
 determining the peculiar rights of the parties to the contract of rein- 
 surance does not apply to the cases mentioned. It is also to be noted 
 that the contract of reinsurance does not amount to a novation, even 
 when the contract provides for a payment by the reinsurer directly to 
 the original insured, in case of the happening of the event insured 
 against. This is so although the original insured may accept the obli- 
 
 117 U. S. 312, 323, 6 Sup. Ct 750, 29 I.. Ed. 873; Sun Mut Ins. Co. t. Ocean 
 Ins. Co., 107 U. S. 485, 1 Sup. Ot 582, 27 L. Ed, 337; MERRY v. PRINCE, 
 2 Mass. 176. 'There can be no doubt that the original insurer may protect 
 himself to the whole extent of his liability." Insurance Co. of North Amer- 
 ica V. Hibemia Ins. Co., 140 U. S. 565, 11 Sup. Ct 909, 35 L». Ed. 517. See, 
 also, Acts Va. 1895-96, p. 452, c. 421. 
 
 ••Berry v. Insurance Co., 132 N. Y. 49, 30 N. B. 254, 28 Am. St. Rep. 
 548; Manufacturers* Fire & Marine Ins. Co. v. Western Assur. Co., 145 Mass. 
 419, 14 N. E. 632; Insurance Co. of North America v. Hibemia Ins. Co., 140 
 U. S. 565, 11 Sup. Ct 909, 35 L. Ed. 517; Commonwealth Ins. Co. v. Globe 
 Insurance Co., 35 Pa. 475. 
 
 69 ILLINOIS MUT. FIRE INS. 00. T. ANDES INS. CO., 67 UL 362, 16 
 Am. Rep. 620. 
 
 S31) 
 
 THE CONTRACT OF REINSUBANOB. 
 
 63 
 
 nation assumed by the reinsurer, and bring suit against hun to enforce 
 the payment undertaken under the contract^^ 
 
 Statute of Frauds, 
 
 There is some conflict of authority as to whether an agreement to 
 make a contract of reinsurance is enforceable if made by parol. 1 here 
 is authority for holding that the agreement of the reinsurer is to answer 
 for the debt of another, and therefore must be in wntmgm order to be 
 hindinff " But this view arises from a misconception of the nature ot 
 the coniract It is an agreement made with the debtor to indemnify 
 him against any debt that may be incurred under the original contract 
 of insurance, and is not a promise made to the creditor, and therefore 
 does not fall within that class of cases required to be m wnting by the 
 fourth section of the statute of frauds." Furthermore, the contract 
 would be taken out of the statute by reason of its being an original 
 undertaking to indemnify the insurer against liability, and not a col- 
 lateral contract of guaranty. 
 The Rights of the Insurer and the Reinsurer, 
 
 The subject of the contract of reinsurance is the insurer's risk, and 
 not the property insured under the original policy." The Policy />* 
 reinsurance is necessarily based upon the original policy, and the nghts 
 of the parties, while of course fixed by the terms of the policy of rein- 
 surance, are yet greatly affected by the terms and condition^ of the 
 oricrinal policy upon which the reinsurance contract is based, ihe rein- 
 surl'r's agreement thus rests upon the original policy as its basis, though 
 the terms of the original policy are not necessarily on that account in- 
 corporated within the policy of reinsurance. Therefore the reinsurer 
 will not be liable to the insurer in case the latter might have avoided 
 payment of the loss under any of the terms of the original policy, 
 though a bona fide payment of a doubtful claim by the insurer, after 
 notice to the reinsurer, fixes the liability of the latter. But the condi- 
 tions, representations, and warranties of the original policy arc to be 
 construed, in determining the rights of the reinsurer and insurer, as 
 of the time of the execution of the policy. Thus the fact that repre- 
 sentations made by the insured were untrue at the time of the execu- 
 tion of the policy of reinsurance will not affect the liability of the rein- 
 to See Barnes v. Insurance Co., 56 Minn. 38, 57 N. W. 314. 45 Am. St. 
 Rep. 438. Contra, Wood v. Moriarty, 15 R. I. 522, 9 Atl. 427. 
 71 Egan V. Insurance Co.. 27 La. Ann. 368. /n o x o-ia i^ 
 
 T2 Commercial Mut Ins. Co. v. Union Mut Ins. Co., 19 How (U. S.) 318, 15 
 L. Ed. 636; Bartlett v. Insurance Co., 77 Iowa, 158, 41 N. W. 601; Ciarit. 
 
 Cent p. 98. , „ ,^ 
 
 7 a Jackson v. Insurance Co., 99 N. Y. 124, 130, 1 N. E. p. 
 7* Eagle Ins. Co. v. Lafayette Insurance Co., 9 Ind. 443, 447; Mwchantir 
 
 Mut Ins. Co. V. New Orleans Mut Insurance Co., 24 La. Ann. 305. 
 
 :i1 
 
li 
 
 64 
 
 THE NATURE AND REQUISITES OF THE CONTRACT. (Ch. 2 
 
 §31) 
 
 THE CONTRACT OP REINSURANCE. 
 
 65 
 
 surer, provided such representations were true at the time of the mak- 
 ing of the original contract^' 
 
 As r^rards the obligation to the insured, the relation between the 
 reinsurer and the insurer is that of principal and surety. It is the duty 
 of the insurer, whenever a question of doubtful liability arises under any 
 of his policies, to give notice to the reinsurer, who should then deter- 
 mine whether the claim will be resisted or paid. In case, however, the 
 reinsurer takes no action, it is proper for the insurer to make defense if 
 he thinks the claim can be successfully resisted, and the expenses 
 attendant upon such litigation can be charged against the reinsurer in 
 case the judgment of the court is adverse to the insurer.''* But it 
 seems that if the insurer is successful in the prosecution of his suit he 
 has no claim for costs against the reinsurer, inasmuch as, by theory at 
 least, he is indemnified against his costs by having them taxed against 
 the defeated plaintiflF in the suit." This rule, however, seems to be 
 of doubtful correctness. If the unsuccessful insurer may demand re- 
 imbursement from the reinsurer for all proper expenses incurred in his 
 effort to avoid payment, including attorney's fees, there would seem 
 to be no sound reason why such expenses incurred, above the taxable 
 costs in the suit, for attorney's fees, and other proper causes of expendi- 
 ture, should not also be charged to the reinsurer in case the insurer is 
 successful in the litigation. 
 
 The reinsurer agrees to indenmify the insurer, not against actual pay- 
 ments made, but against liabilities incurred ; therefore it is by no means 
 necessary that the insurer shall first have paid a loss accruing, as a 
 condition precedent to his demanding payment of the reinsurer. In 
 fact, the insolvency of the insurer, which precludes his ever meeting 
 in full the obligation incurred to the insured under the original policy, 
 does not in any wise affect the right of the insurer to demand payment 
 in full under the policy of reinsurance." A difficult question arises, 
 however, when there has been an actual settlement made by the insur- 
 er with the original insured for a less sum than that set forth on the 
 face of the policy. While it is true that it is the liability only of the 
 insurer that measures the liability of the reinsurer, it is also to be kept 
 in mind that the contract of reinsurance is, like any other proper con- 
 
 T» Cohen v. Insurance Co., 50 N. Y. 610; Jackson v. Insurance Co.. 99 N. 
 Y. 124, 1 N. E. 539. 
 
 T« New York State Marine Ins. Co. v. Protection Insurance Co., 1 Story, 
 458, Fed. Gas. No. 10,216. And a judgment against the insurer In a pro- 
 ceeding of which the reinsurer had notice is conclusive upon the reinsurer. 
 Commercial Union Assur. Co. v. American Cent Ins. Co., 68 Cal. 430, 9 Pac! 
 712; Strong v. Insurance Co., 62 Mo. 289, 21 Am. Rep. 417. 
 
 " Faneuil Hall Ins. Co. v. Liverpool & L. & G. Ins. Co., 153 Mass. 63 29 
 N. B. 244. 10 L. R. A. 423. 
 
 »« Elackstone v. Insurance Co., 06 N. Y. 104; Joyce on Ins., § 133. 
 
 tract of insurance, a contract merely of indemnity. Therefore the 
 proper ruling in all cases should be that, where the insurer has made an 
 actual settlement for a less amount than that stipulated in the policy, 
 when such settlement has already discharged the liability of the msurer 
 to the original insured, the reinsurer should never be liable for a greater 
 amount than the sum actually paid under the settlement.^ » But the cases 
 involving a final settlement between the insurer and the insured, where- 
 bv the former is discharged from the obligation of his contract, are to be 
 carefully distinguished from those cases in which the receiver of an in^ 
 solvent company pays out to the creditors of the company only a certam 
 percentage of their total claims against the company. Thus, if an in- 
 solvent company setties with its creditors at 50 per cent, of their claims, 
 the reinsurer cannot claim to have his liability to the insolvent msurer 
 scaled down 50 per cent., inasmuch as the right of the msolvent com- 
 pany to enforce its entire claim against the reinsurer is a part of the 
 assets of the insolvent's estate, and the reinsurer is not m a position to 
 claim the benefits of a settlement that may have been made solely for 
 the creditors.^** If, however, there had been a composition between the 
 insolvent insurer and those having claims under the policies, whereby 
 the insurer is discharged, and a matured obligation by the reinsurer has 
 not been reckoned among the assets of the insolvent, it would seem, on 
 principle that the reinsurer should not be liable under his policy for 
 a sum greater than that which was paid out by the insurer under the 
 policy which served as the basis for the contract of reinsurance.* 
 
 The Rights of the Original Insured, 
 
 (1) The original insured may stand in any one of three relations 
 towards the reinsurer, in accordance with the terms of the particular 
 contract of reinsurance: In case the contract is solely between the 
 insurer and the reinsurer, contemplating only an indemnity to the in- 
 surer against losses suffered by reason of the policies carried by him, 
 the original insured has absolutely no interest in the contract, and is a 
 total stranger to it.«* He has no claim upon the reinsurer, nor can he 
 demand that a preference shall be given to him in case of the insolvency 
 of the insurer in the distribution of a fund received by the insurer 
 from the reinsurer on account of a loss suffered under the original 
 policy. Money so paid by the reinsurer becomes but a part of the 
 general assets of the insurer, and all of his creditors have an equal 
 
 T» ILLINOIS MUT. FIRE INS. CO. v. ANDES INS. CO., 67 111. 362, 16 
 
 Am. Rep. 620. ^ , « ^ ^ ^ ry « 
 
 80 Elackstone v. Insurance Co., 56 N. Y. 104; Mutual Safety Ins. Co. ▼. 
 
 Hone, 2 N. Y. 235. ^ ^^ 
 
 81 See Consolidated Fire Ins. Co. v. Cashow, 41 Md. 69. 
 
 82 Barnes v. Insurance Co., 56 Minn. 38. 57 N. W. 314, 46 Am. St. Rep. 
 438 ; GOODRICH'S APPEAL, 109 Pa. 523, 2 Atl. 209 ; WoodruTs Gases on In- 
 surance, 71. 
 
 Yanob Ins. — 6 
 
THB NATURE AND REQUISITES OP THE CONTRACT. (Ch. 2 
 
 right with the original insured to demand payment out of such 
 
 fund." 
 
 (2) The contract of reinsurance may contain a term whereby the 
 reinsurer binds himself to pay any loss that may fall upon the insurer 
 to the policy holders concerned. Under the common-law rule as es- 
 tablished in most of the United States, though not in England, and 
 confirmed in many states by statutory provisions, a third party for 
 whose benefit a contract is made is allowed to enforce such con- 
 tract by suit against the promisor." Therefore the remsurer who 
 has promised to pay the losses accruing under the original pohcies 
 directly to the holders of such policies will be liable to a suit by the 
 original insured under the contract of reinsurance. But the right 
 thus given to the insured to enforce the contract of payment against 
 the reinsurer does not at all release the insurer from the liability 
 assumed under the original policy. The remedy of the insured is 
 double, and, while he may not have a double satisfaction of his claim, 
 he is not required to elect between his remedies against the reinsurer 
 and the insurer, but may prosecute his suit against both until he 
 secures a complete satisfaction of his claim. Thus, in the case of 
 Barnes v. Hekla Fire Ins. Co.," the defendant company had rein- 
 sured its risk under a policy granted to the plaintiff in the St. Paul 
 German Insurance Company. The reinsuring company had agreed 
 to assume and pay all losses to policy holders. After a loss had 
 occurred under the policy, the German Insurance Company became 
 insolvent, and the plaintiff filed his claim under the contract of re- 
 insurance in the insolvency proceedings. While such proceedings 
 were still pending, the plaintiff sued the defendant, the original in- 
 surer, for the whole amount due under the policy. The defendant 
 sought to set up the claim made by the plaintiff against the Ger- 
 man Insurance Company in bar of the suit, but the court held that 
 such a claim did not affect the plaintiff's right of action against the 
 defendant, stating the law as follows : "A creditor is put to an elec- 
 tion only where his remedies are inconsistent, and not when they 
 are consistent and concurrent. In the latter case a party may prose- 
 cute as many as he has, as in the case of several debtors ; and so, 
 if in this instance the remedy against the insolvent company, as 
 respects the plaintiff, was merely cumulative, there is no reason why 
 
 8s GOODRICH'S APPEAL, 109 Pa. 523, 2 Atl. 209 ; Glen v. Insurance Co 56 
 N Y 379: Barnes v. Insurance Co., supra; Arnould, Marine Ins. S 3^4. 
 Conti^a. Shoaf v. Insurance Co., 127 N. C. 308, 37 S. B. 451. 80 Am. St Rep. 
 
 604 
 
 8*4 Lawrence v. Pox, 20 N. Y. 268; Clark, Oont. 513. Otherwise in Massa- 
 chusetts: Exchange Bank of St Louis v. Rice, 107 Mass. 37, d Am. Rep. L 
 Cf. Code Va. 1S87, § 2415. 
 
 •• 56 Minn. 38, 57 N. W. 314. 45 Am, St Bep. 438, 
 
 ^31) 
 
 THE CONTRACT OF REINSURANCE. 
 
 67 
 
 she may not pursue either or both. As between the two companies, 
 the defendant occupies no better position than a surety." 
 
 Where the contract of reinsurance contains an agreement to make 
 payment directly to the policy holder, the liability of the reinsurer 
 at the suit of the insured will not be affected by the fact that the 
 reinsurer would have a good defense against a demand of payment 
 by the insurer. Thus, where the Craftsman's Life Assurance Com- 
 pany had issued three policies of five thousand dollars each upon 
 the life of one Hall, payable to the plaintiffs, and the defendant 
 company had agreed to reinsure the Craftsman's Company on all 
 its outstanding risks, and to pay the holders of its policies such sums 
 as the insurer might become liable to pay, it was held that the de- 
 fendant reinsurer was liable at the suit of the plaintiffs, the original 
 insured, to pay the policies in full upon the death of Hall, although the 
 Craftsman's Company had effected with two other companies poli- 
 cies of reinsurance upon the life of Hall for five thousand dollars 
 each.** As between the Craftsman's Company, which had received 
 ten thousand dollars from its contracts of reinsurance upon the poli- 
 cies in suit, and the defendant reinsurer, the reinsurer would un- 
 questionably have been liable only for the residue of the sum due 
 from the insurer upon the three original policies — that is, five thou- 
 sand dollars — but this could not relieve the defendant company from 
 its obligation to make good its agreement to pay the fifteen thou- 
 sand dollars to the plaintiffs. 
 
 While, under such contracts of reinsurance as we are now treat- 
 ing, the original insured has, by virtue of the term in the policy of 
 reinsurance, a right to enforce payment directly from the reinsurer, 
 it is yet to be remarked that the attempt to enforce this right by the 
 insured does not create a novation which discharges the original 
 policy. Instead, the original contract remains in full force, and the 
 original insured may rightfully demand that all of its terms and 
 conditions shall be complied with in accordance with its tenor. 
 Therefore, if the insurer grants any permissions or privileges, or 
 gives consent to any change of conditions in accordance with his 
 powers under the contract, such action on his part will be binding 
 upon the reinsurer, even though the policy of reinsurance may pro- 
 vide that such acts as would affect or change the rights of the in- 
 sured under the original policy should be done by the reinsurer. 
 Thus a clause in a policy of reinsurance making the reinsurer the 
 agent of the original insurer for the purpose of doing, in regard to 
 all outstanding policies covered by the contract of reinsurance, all 
 acts necessary to transfer such policies in accordance with their 
 conditions, does not prevent the original insurer from lawfully con- 
 
 «« Glen V. Insurance Co., 56 N. Y. 379. 
 
C8 THE NATURli AND REQUISITES OF THE CONTRACT. (Ch. 2 
 
 senting to the transfer of a policy, since the reinsurer by the clause 
 n not made the sole agent for such transfer." So where a rein- 
 surer had agreed to indemnify the insurer against all loss and dam- 
 aJes sustained by reason of certain designated outstandmg pohc.es, 
 it was held that the original insured might recover from the rein- 
 surer the damages sustained by reason of the failure of the "surer 
 to accept premiums due and to continue its pohcies m force The 
 insured was not obliged to accept the reinsurer m Pf^°;the orig- 
 inal insurer, and, upon the failure of the insurer to continue per 
 formance under his contract, the insured was of course en mkd to 
 damages for breach of agreement, and, under the terms of he con- 
 tract of reinsurance, such damages could be recovered directly from 
 
 the reinsurer. . .... ■ ._j ^i,. 
 
 (3) A third kind of relation between the original insured and the 
 reinsurer may arise in those cases in which the circumstances attend- 
 ine the making of the contract of reinsurance amount to a novation 
 of the original contract, and hence operate to discharge that con- 
 tract and The original insurer from all obligation thereunder. Such 
 a result can arisf, however, only when the insured agrees with the 
 insurer and reinsurer that he will accept the obligation of the rein- 
 surer in consideration of the discharge of that of the insurer. Such 
 an agreement is ordinarily carried into effect by a surrender of the 
 oriSfpolicy, and the issue of another poUcy under the same terms 
 ^Jconditiol; by the so-called "reinsurer." As is shown above 
 however, such a transaction is not one of technical reinsurance for 
 here the so-called "reinsurer" is but substituted for the origina in- 
 surer and hence becomes the immediate insurer of the subject of the 
 orSal policy, instead of being the insurer of the origmal insurer s 
 risfby reason of such policy, as would be the case if the transaction 
 were one of proper reinsurance. In such cases of novation the 
 TriSnal insure? is" of course, wholly discharged from any obhgation 
 °h"?may have existed under the former policy a«d Je insure^^^ 
 turn secures the same rights against the so-called remsurer as if 
 the policy had been originally issued by him. 
 
 •T Fanetill Hall Ins. Co. v. Uverpool & L. & G. Ins. Co., 153 Mass. 63, 26 
 
 N. E. 244, 10 L. R. A. 423. 
 
 as Fifjhpr V Insurance Co., 69 N. T. 161. 
 
 ..li rohannr^ Insurance Co.. 66 Wla. 80. 27 N. W. 414. 57 Am. Hep. 
 
 249; Glen v. Insurance Co., 66 N. Y. 379. 
 
 §32) 
 
 WHEN THE CONTRACT IS DIVISIBLE. 
 
 WHEN THE CONTRACT IS DIVISIBLE. 
 
 69 
 
 32 Tlie pecnUar character of tlie insurance contract raises a strong 
 presumption in all cases tliat its terms are to be construed as 
 parts of an indivisible whole. But this general rule may be 
 ■well supplemented as follows: 
 
 (a) Whether the contract is divisible or indivisible is a question 
 
 purely of intention, rightly expressed, and the effort of the 
 courts should be to give effect to the fair intent of the contract 
 
 taken as a whole. * i. 
 
 (b) When the contract grants insurance upon several separate sub- 
 
 jects in consideration of separate premium charges, the contract 
 is divisible, and the invalidity of one part will not affect an- 
 other. , . ^ - , 
 
 (c) When the contract covers several different subjects of insurance 
 
 which are separately valued, but the consideration is a single 
 gross premium, there is great conflict among the decisions as 
 to the character of the contract, whether divisible or indivis- 
 ible. On principle, however, the rulea of construction obtaining 
 may be stated as follows: 
 
 (1) If the terms of the contract distinctly state that any misrep- 
 
 resentation or breach of condition with reference to any 
 of the several subjects of insurance under the poUcy wiU 
 defeat all rights of the holder under the poUcy, the con- 
 tract is then to be regarded as indivisible. 
 
 (2) If the misrepresentation or breach of condition with regard 
 
 to one of the several subjects is of such a character as ma- 
 terially to increase the risk in regard to the other subjects 
 covered by the policy, then as to such condition the contract 
 is indivisible. 
 
 (3) But if the misrepresentation or breach of condition is such 
 
 as to affect only one of the subjects, then the contract is 
 deemed divisible, and the rights of the insured with refer- 
 ence to the other subjects covered by the poUcy are not 
 affected. 
 
 One of the most difficult questions in insurance law coming before 
 the courts for decision arises when there are embraced under a sin- 
 gle contract of insurance several different and distinct subjects, and 
 the defense of the insurer consists in some misrepresentation or the 
 breach of some condition with regard to only one of the subjects. It 
 is manifest that if the contract is indivisible, and there has been a 
 breach of a single condition, or any misrepresentation whatsoever, 
 the policy holder acquires no rights whatever under it; but, if the 
 contract can be held divisible, it may be invalid as to one subject and 
 valid as to others. The terms of the policy themselves very often 
 distinctly indicate what is the intention of the parties with reference 
 to its construction in this respect ; and since the question of divisi- 
 bility, like every other one of construction, depends altogether upon 
 
70 
 
 THE NATURE AND REQUISITES OP THE CONTRACT. 
 
 (Ch.2 
 
 §32) 
 
 WHEN THE CONTRACT IS DIVISIBLE. 
 
 71 
 
 i I: 
 
 the properly expressed intention of the parties, in such cases the 
 courts find little difficulty in determining the rights of the parties 
 under a policy embracing several different kinds of property. But 
 in the absence of such clear expression of intention great difficulty 
 is experienced in the construction of those policies which cover sev- 
 eral different kinds of property, each having a distinct valuation, but 
 the premium for the insurance of all being one gross sum. The 
 typical case is where a single policy is issued upon a house and its 
 contents, each being separately valued, but the consideration being 
 a gross premium. Mr. Parsons states the rule in these concise 
 terms : "If the consideration to be paid is single and entire, the con- 
 tract must be held to be entire, although the subject of the contract 
 may consist of several distinct and wholly independent items." ®® 
 Or, as it is expressed in the case of McClurg v. Price : »^ "If the con- 
 sideration is single, the contract is entire, whatever the number or 
 variety of the items embraced in the subject." The rule as thus 
 stated has received the approval of, and been enforced by, many of 
 the courts in the various states ; ^^^ but it is submitted that it is too 
 arbitrary in form, and is not based upon the true principles involved 
 in the determination of all such cases. As was stated above, the ques- 
 tion of the divisibility of the contract of insurance is purely one of 
 intention, and any arbitrary rule of construction is apt to work con- 
 fusion in the law and hardship upon litigants. It is true that the 
 presumption is in favor of the indivisibility of the contract on account 
 of the singleness of the consideration, but other circumstances at- 
 tending the making of the contract may show that the single pre- 
 mium received, in the case of insurance upon separately valued sub- 
 jects, is but for the mutual convenience of the parties, and that it 
 does not really mean that the parties intend that the contract shall 
 be regarded as inseparable. 
 
 The reasonable view to be taken of the apparently conflicting cases 
 involving this question would seem to be this: If the several sep- 
 arately valued subjects of insurance under the policy in question are 
 so closely connected that any representation or condition that will 
 affect the character of the risk upon one subject will extend also 
 to the others, then the policy should be regarded as indivisible, 
 and the breach of any condition, or any misrepresentation with 
 reference to one, should avoid the insurance on all.** Or, if any 
 
 ••2 Pars. Cont 519. 
 
 ti 59 Pa. 420, 98 Am. Dec. 356. 
 
 •« iEtna Ins. Co. v. Resb, 44 Mich. 55, 6 N. W. 114, 38 Am. Rep. 228; Hln- 
 man v Insurance Oo., 36 W!s. 159; Bowman v. Insm-ance Co., 40 Md. 620; 
 Gould V. Insurance Co., 47 Me. 403, 74 Am. Dec. 494. 
 
 »» Agricultural Ins. Co. of Watertown v. Hamilton, 82 Md. 88, 33 Atl. 429, 
 
 circumstances of fraud, whether of misrepresentation or concc^l- 
 nuMit, have attended the making of the contract, such fraud should 
 be held to avoid the whole contract, even though it may have di- 
 rect reference only to one of the several subjects insured, when 
 such fraudulent misrepresentation or concealment has clearly at- 
 fected the making of the contract; •* that is to say, fraud that has 
 procured the making of the contract will avoid the whole contract, 
 even though such fraud may be limited to only a part of the contract 
 But, on the other hand, where the different kinds of property insured 
 under the one policy for a single premium are so entirely dissociated 
 as that the risks attaching to each are distinctly separable, there is 
 no sufficient reason for holding that a misrepresentation o^^ breach 
 of condition with reference to one kind of property should have any 
 . effect whatever upon the validity of insurance upon the other kinds 
 in the absence of express provisions to that effect, and pro>nded there 
 has been no fraudulent procurement of the contract." This prin- 
 ciple is well illustrated in the well-reasoned case of Loomisv Rock- 
 ford Insurance Co.»« In this case the plaintiff had msured three 
 houses, situated on separate farms, under a single policy, and for a 
 single premium. Subsequently to the issuing of the policy the farm 
 upon which one of the insured houses stood was sold by the plaintiff 
 without the consent of the insurer. Under a provision of the policy 
 any change in the title to the property insured without the consent 
 of the insurer, avoided the policy. After this alienation without con- 
 sent, one of the houses that remained under the ownership of the 
 plaintiff was destroyed by fire. In an action brought by the plaintiff 
 under the policy, the insurer set up the breach of the alienatio^^ 
 clause in defense. But the court very properly held that the con- 
 tract was divisible, and that the breach of the condition as to one 
 of the houses did not affect the contract as to the other two, and 
 thus stated the law applying: "The general rule, ^ in part void 
 in toto,' should apply to all cases where the contract is affected by 
 some all-pervading vice, such as fraud, or some unlawful act con- 
 demned by pubUc poUcy or the common law; cases where the con- 
 tract is entire, and not divisible ; and all those cases where the mat- 
 ter that renders the policy void in part, and the result of its bemg so 
 
 qn T T? A fta^ Rl Am St Rep. 457, in which a policy on a house and per- 
 
 '^.X^trT'^L'^m^ ^avoided as to ^ \rwTsT5%l rw IK' 
 To the same effect, see Stevens v. Insurance Co., 81 Wis. 335. 51 N. W. 555, 
 
 29 Am. St. Rep. 905. ^ „ „« * t> oto 
 
 94 Moore v. Insurance Co., 28 Grat (Va.) 508, 26 Am. Rep. 373. 
 
 «« Havens ;. Insurance Co., Ill Ind. 90, 12 N. ^^^'^J^^^^^' ^^'^^ 
 Manchester Fire Assur. Co. v. Glenn, 13 Ind. App. 365, 40 N. B. 926, 41 N. 
 E. 847, 55 Am. St. Rep. 225. 
 
 •• 77 Wis. 87, 45 N. W. 813, 8 L. R. A. 834. 20 Am. St Rep. 9«, 
 
P 11 il 
 
 72 
 
 THE NATURE AND REQUISITES OF THE CONTRACT. 
 
 (Ch.2 
 
 
 rendered void, affects the risk of insurance upon the other items in 
 the contract. Keeping these rules in mind, the leading cases upon 
 this subject can all be reconciled. A recovery should be had in all 
 those cases where the contract is divisible, the different properties 
 insured for separate sums, and the risk upon the property, which is 
 claimed to be valid, unaffected by the cause that renders the policy 
 void in part." 
 
 Another phase of the same principle is illustrated in Connecticut 
 Fire Insurance Co. v. Tilley,®^ in which the contract was held sep- 
 arable for the benefit of the insurer. The plaintiff had taken out a 
 single policy on sixteen tenement houses, paying therefor a single 
 premium. The policy contained the usual provision that if the prem- 
 ises remained vacant for ten days without the company's assent the 
 policy should be void. Several of the houses covered by the policy 
 remained vacant for a longer period than ten days, and without the 
 company's assent, and were vacant at the time of the fire, which 
 destroyed all of them. The plaintiff contended that the contract was 
 entire, and that the premises were therefore not vacant so long as 
 any one of the houses was occupied. The court, however, declined 
 to hold the contract indivisible, notwithstanding the payment of a 
 single premium, and allowed the plaintiff to recover only for such of 
 the houses as had not become vacant 
 
 § 33) REQUISITES FOR THE VALIDITY OF THE CONTRACT. 73 
 
 in general, that the contract of insurance must possess the same req- 
 uisites of validity that must characterize any other contract. But 
 there are some special rules growing out of the peculiar nature of 
 the contract itself, and the peculiar relation of the parties thereto 
 will require us to examine in detail the application of principles that 
 are already familiar to the student of contract law. The considera- 
 tions that primarily require this special treatment in the case of in- 
 surance contracts are: (1) The quasi public character of insurance 
 business, which has induced a large measure of statutory restraint 
 and control of insurance companies and regulation of insurance con- 
 tracts ; and (2) because the relation of the parties to the contract of 
 insurance is in a measure fiduciary, and therefore, in the making of 
 all insurance contracts, each party is under obligation to exercise the 
 highest degree of good faith towards the other. The consequent 
 special rules of law affecting the formation of the contract of in- 
 surance will therefore be now taken up and examined in detail. 
 
 REQUISITES FOB THE VAIJDITY OF THE OONTBACT. 
 
 33. In order that the oontraot of insuranoe shall be valid, it miut pos- 
 ■ess all the essential elements that are requisite to the Talidity 
 of any other oontraot; that is: 
 
 (a) There mnst be an asveen&ent resulting from an offer and acceiit- 
 anoe. 
 
 <b> In order to be binding, this agreement^ 
 
 (1) Must be in the form required by law. 
 
 (2) There niust be two parties legidly capable of contracting. 
 
 (3) It ninst be supported by a valuable consideration, unless such 
 
 consideration be dispensed with by reason of a seal. 
 
 (4) The purpose of the contract must be legal, and not in contra* 
 
 Tcntion of publie policy, 
 (c) In addition, the insurance contract n&ust be made fairly, the con- 
 sent of each of the parties being given upon a full hnowledge of 
 all n&aterial and relevant facts known to the other* 
 
 u 
 
 The peculiar nature of the contract of insurance having now been 
 set forth, it becomes necessary to examine the rules by which it may 
 be determined when the contract is validly executed. It may be said, 
 
 •7 88 Va. 1024, 14 S. E. 851, 29 Am. St Rep. 770. 
 
 1 
 
1 
 
 1 
 
 
 
 
 
 : 
 
 H ' 
 
 1 
 
 
 
 u 
 
 PARTIES. 
 
 (Ch.3 
 
 CHAPTER nL 
 
 PARTIES. 
 
 34. In General. 
 
 35. Who ^lay be Insurers. 
 
 36. The Several Kinds of Corporate Imrarers. 
 37-38. The Rights of Foreign Insurers. 
 
 89. Contracts Made by Insurers not Complying with Statn- 
 tory Requirements. 
 
 40. Who May be Insured. 
 
 41. Infants as I*;irties Insured. 
 42-43. Aliens as Parties Insured. 
 
 41 1 5. Insane Persons as Parties Insured. 
 
 IN GEKERAI*. 
 
 34. There mnst be at least two parties to every oontraot of insurance, 
 the insurer and the insured, and there may be a third, the as- 
 sured or beneficiary. At common law any person capable of 
 making a valid contract may become a party to a contract of 
 insurance, but the contract is one affected by a public interest, 
 and is, therefore, a proper subject for governmental regulation. 
 Such regrulation niay impose special qualifications as necessary 
 for those who would become parties to the contract. The rela- 
 tion between insurer and insured is that of debtor and creditor, 
 subject to the conditions of the policy, and not that of trustee 
 and cestui que trust. 
 
 As in the case of any other contract, there must be at least two parties 
 to a valid contract of insurance. A person cannot contract for insur- 
 ance with himself, even though, in so doing, he may suppose that he is 
 acting for the insurance company. It has therefore been held that 
 where an agent or other representative of the insurance company, hav- 
 ing power to contract on its behalf, insures his own property, or issues 
 a life policy to himself, such insurance is invalid.* The authority of 
 the agent does not extend to any transaction in which his personal inter- 
 est is opposed to that of his principal. 
 
 While there must always be two parties, there may be three, or even 
 four, parties to a contract of insurance. Thus, when one person takes 
 out insurance upon the life of another, the consent of both the assured 
 
 1 Pratt V. Insurance Co., 130 N. T. 206, 29 N. B. 117. See, also, Nenendorff 
 v. Insurance Co., G9 N. Y. 389; Wildberger v. Insurance Co., 72 Miss. 338, 17 
 South. 282, 28 L. R. A. 220, 48 Am. St Rep. 558; Greenwood Ice & Coal Oo. 
 ▼. Georgia Home Ins. Co., 72 Miss. 46, 17 South. 83. 
 
 ^34) 
 
 IN OENERAU 
 
 75 
 
 and the insured, and of the insurer, is necessary to the validity of the 
 contract. In case the assured assigns such a policy to a fourth party 
 with the consent of the insurer, the assignee then becomes properly a 
 party to the contract.' So there may be a third party to a contract of 
 fire insurance, as where the standard mortgagee clause is attached to a 
 policy of insurance upon the mortgaged property. The mortgagee in 
 such case becomes a proper party to the contract, who may enforce 
 it by an action in his own name, and whose rights under the contract 
 will not be defeated by the default of the party insured." 
 
 The person who grants the insurance is termed the "insurer," and 
 the second party to the contract is called, indifferently, the "insured" 
 or "assured." * There has been some effort made by text-writers and 
 in some of the decisions to make a distinction in the use of the terms 
 "insured" and "assured." * The latter has been said to designate the 
 person for whose benefit the insurance is granted, while the word "in- 
 sured" indicates the person whose life is the subject of the contract. 
 While such a distinction has the sanction of very respectable authority, 
 it cannot be said to be maintained with such consistency as to entitle it 
 to the dignity of a rule of law. 
 
 It is customary that the second party to the contract shall be express- 
 ly designated, but this is by no means necessary. The name of the 
 insured may be left blank, and parol testimony is admissible to show 
 who is intended as the insured.* It is not unusual that policies shall 
 be issued "for the benefit of whom it concerns." This phrase, however, 
 is not so broad in its legal effect as its apparent meaning would seem 
 
 I 
 
 
 « Kingsley v. Insurance Co., 8 Cush. (Mass.) 400; Biddeford Sav. Bank v. 
 Dwelling-House Ins. Co., 81 Me. 571, 18 Atl. 299; Tremblay v. Insurance 
 Co., 97 Me. &i7, 55 Atl. 509, 94 Am. St. Rep. 521. 
 
 8 See Capital City Ins. Co. v. Jones, 128 Ala. 361, 30 South. 674, 86 Am. St 
 Rep. 152; Hastings v. Insurance Co., 73 N. Y. 141. 
 
 *See Equitable Life Assur. Soc. v. Commonwealth (Ky.) 67 S. W. 388, 
 where this second party is termed the "insurant" 
 
 B Ferdon v. Canfield, 104 N. Y. 143, 10 N. E. 146; Smith v. Insurance Co., 
 5 Lans. (N. Y.) 545. "There are undoubtedly instances where this distinction 
 between the terms 'assured' and 'insured' is observed, though we do not find 
 any Judicial consideration of it The application of either term to the party 
 for whose benefit the insurance is effected, or to the party whose life is 
 insured, has generally depended upon its collocation and context in the pol- 
 icy." Per Mr. Justice Field in Connecticut Mut Life Ins. Co. v. Luchs, lOS 
 U. S. 498, 2 Sup. Ct 949, 27 L. Ed. 800. 
 
 « Burrows v. Turner, 24 Wend. (N. Y.) 276, 35 Am. Dec. 622, and note. 
 "The policy is valid, although no particular person was named therein as the 
 assured.'* Weed v. Insurance Co., 133 N. Y. 401, 31 N. El 231, and cases 
 cited. So, where the insurance was effected by certain brokers named there- 
 in, "for the owners, payable" to such brokers, the owners were permitted to 
 sue on the policy in their own names. Farrow v. Insurance Co., 18 Pick. 
 (Mass.) 53, 29 Am. Dec. 564. But see dictum in Newson's Adm'r y. Douglass, 
 7 Har. & J. (Md.) 417, 16 Am. Dec 317, 
 
 i' 
 
V 
 
 1» 1 
 
 76 
 
 PARTIES. 
 
 (Ch.3 
 
 to imply. It is merely equivalent to saying that the policy is taken out 
 on behalf of some person not designated ; and, while the person con- 
 templated as beneficiary under such policy by the person taking it out 
 may take the benefit of it by ratifying the act of his agent, even when it 
 had been without authority,^ it has been held that the interest of a 
 stranger not in the contemplation of either of the original parties to 
 the contract cannot be protected thereunder.* 
 
 Statutory Regulations. 
 
 In the absence of statutory provision there is no reason whatever why 
 any person sui juris may not make a contract of insurance, whether as 
 insurer or insured. But since the business has assumed such great pro- 
 portions, and its proper conduct has become of such vital importance 
 to the welfare of the public, the contract of insurance is now regarded as 
 a proper subject for legislative control. 
 
 In the language of the Pennsylvania court in a recent case,* "The 
 business of insurance against loss by fire is, by reason of its magnitude, 
 its importance as to property owners, and the nature of the business, a 
 proper subject for the exercise of the police power of the state." As 
 to how far the police power, properly invoked for the regulation of 
 so important a business, shall extend in fixing the qualification of those 
 who are going to take part in it, is a matter of much difficulty and 
 doubt.^*^ It seems to be well settled that the state may impose such 
 regulations as it may see fit, so far as they do not violate the constitu- 
 tions of the United States or of the state, upon the conduct of in- 
 surance within its boundaries, and may prohibit the making of contracts 
 by either natural persons or corporations who have not complied with 
 
 T Newson's Adm*r t. Douglass, snpra; Fire Ins. Ass'n ▼. Merchants* & 
 Miners' Transp. Co., 66 Md. 339, 7 Atl. 905, 59 Am. Rep. 162; Ballard v. In- 
 surance Co., 9 La. 258, 29 Am. Dec. 444, Where there has been no previous 
 authority the contract can only be ratified by the person who was in the 
 contemplation of the party effecting the insurance. Buck v. Insurance Co., 
 1 Pet (U. S.) 151, 7 L. Ed. 90. The policy may be ratified after loss. Hooper 
 V. Robinson, 98 U. S. 528, 25 L. Ed. 219. And it has been held that the gov- 
 ernment may adopt insurance taken out by captors having no insurable in- 
 terest, and thereby take the benefit of the insurance, although it had not 
 been originally effected for the benefit of the government. Routh v. Thomp- 
 son, 13 Bast, 274, 284, 285; 1 Am. Ins. (7th Ed.) 370; McLaughlin v. Insur- 
 ance Co. (Com. PI.) 20 N. Y. Supp. 536. 
 
 8 FARMERS* MUT. INS. CO. v. NEW HOLLAND TURNPIKE CO., 122 
 Pa. 37, 15 Atl. 563; Mosser v. Donaldson (Pa.) 10 Atl. 766. 
 
 » Commonwealth v. Vrooman, 164 Pa. 306, 80 Atl. 217, 25 L. R. A. 260, 44 
 Am. St Rep. 603. 
 
 10 «*When and how far such power may be legitimately exercised with 
 regard to these subjects must be left for determination to each case as it 
 arises.'* Mr. Justice Peckham In Allgeyer T. Louisiana, 166 U. a 678» 17 
 Sup. Ct 427, 41 L. Ed. 832. 
 
 IN GENERAL. 
 
 77 
 
 §34) 
 
 the requirements that have been imposed.^^ But may this power to 
 regulate be extended to prohibit contracts by natural persons, and con- 
 fine the business of insurance wholly to corporations? Freedom of 
 contract is a constitutional right that should not be lightly interfered 
 with, and it would seem that any statute which takes from an individual 
 his common law right to enter into a contract of insurance would be an 
 unconstitutional interference with the freedom of contract.^* Yet 
 in some of the states statutes are found prohibiting, and even penaliz- 
 ing, the granting of insurance by any others than corporate insurers ; 
 and in a recent case in Pennsylvania the constitutionality of such stat- 
 utes has been upheld, though in the face of a vigorous dissent." The 
 ground upon which these statutes are held valid is that the regulation 
 of insurance business is a proper exercise of police power, and that 
 effective control of the business is not possible excepting when it is 
 carried on by corporations whose compliance with the requirements of 
 law can be easily compelled.^* ^ 
 
 Strangers Acquire no Rights Under Contract. 
 
 Only those between whom the agreement was made are entitled to 
 the rights of parties," excepting, of course, that the beneficiary of the 
 contract may be the real party in interest, and may, as such, enforce the 
 contract." But a stranger cannot thrust himself into the contract, and 
 
 11 Hoadley v. Purifoy. 107 Ala. 276, 18 South. 220, 30 L. R. A. 351 , State 
 V. Eagle Ins. Co.. 50 Ohio St 252, 33 N. R 1056. 
 
 12 For a discussion of the right of citizens to follow the common occupa- 
 tions of life, see Butchers' Union Slaughter-House, etc., Co. v. Crescent City 
 Live Stock Landing, etc., Co., Ill U. S. 746, 4 Sup. Ct 652, 28 L. Ed. 585. 
 
 18 Commonwealth v. Vrooman, supra, Sterrett, C. J., and Dean and Green, 
 
 JJ., dissenting. . - ». ^ 
 
 14 A similar question is raised by statutes restricting the business of bank- 
 ing to corporations. In State v. Scougal, 3 S. D. 55, 51 N. W. 858, 15 L. R. 
 A. 477, 44 Am. St. Rep. 756, such a statute was declared unconstitutional. 
 The contrary was held in State v. Woodmansee, 1 N. D. 246, 46 N. W. 970, 
 
 11 L. R. A. 420. _ ^^^ ^ 
 
 18 Lockwood V. Bishop, 51 How. Prac. (N. Y.) 221; North America Life Ins. 
 Co. V. Wilson, 111 Mass. 542; Burns v. Grand Lodge, 153 Mass. 173, 26 N. 
 E. 443, where the policy was sealed; Stamps v. Insurance Co., 77 N. C. 209, 
 24 Am. Rep. 443; Martin v. Insurance Co., 38 N. J. Law, 140, 20 Am. Rep. 
 372. But a lessor may sue on a fire policy taken out in her name by the 
 lessee's agent on personal property belonging to her and situated on the 
 leased premises. Watson v. Insurance Co. (Miss.) 31 South. 904. 
 
 16 Munroe v. Association, 19 R. I. 363, 34 Ati. 149; Mutual Ben. Life Ins. 
 Co. V. Hillyard, 37 N. J. Law, 444, 18 Am. Rep. 741. Under the Codes of 
 Procedure the beneficiary may sue as the real party in interest Code Civ. 
 Proc. N. Y. § 111. See Price v. Insurance Co., 17 Minn. 497 (Gil. 473), 10 Am. 
 Rep. 166; Capital City Ins. Co. v. Jones, 128 Ala. 361, 30 South. 674, 86 Am. St. 
 Rep. 152 ; Lowry v. Insurance Co., 75 Miss. 43, 21 South. 664, 37 Ll R. A. 779. 65 
 Am. St Rep. 587. This is also the rule in Virginia. Code Va. 1887, % 2415, 
 construed in Tilley t. Insurance Co., 86 Va. 811, 11 S. E. 120. 
 
 -'■1 
 
78 
 
 PARTIES. 
 
 (Ch.a 
 
 make himself a party thereto, by paying premiums or doing other acts 
 as volunteer under the terms of the policy. ^^ Neither is the person 
 whose life is insured by another a party to the contract, nor can he, by 
 his own fraud or wrong, affect the rights of the real parties thereun- 
 der,^' nor can he recover monevs that he has improperly paid as 
 premiums on the policy. 
 
 The Relation between the Insurer and the Insured. 
 
 It has been contended that in the case of mutual companies, and espe- 
 cially with regard to tontine and life endowment policies, the relation 
 of the insurer to the insured is that of trustee. In accordance with 
 this view, efforts have been made by the holders of tontine and endow- 
 ment policies to require the insurance company to act as a trustee 
 for all sums paid to it as premiums, and to distribute all profits ac- 
 cruing from premium payments and investments ratably among policy 
 holders.^* This view, however, has received no countenance in the 
 courts, and it can now be regarded as well settled that the true relation 
 existing between the parties to the insurance contract is that of condi- 
 tional creditor and debtor, being more nearly analogous to that of bank- 
 er and depositor than to any other that can be instanced.** 
 
 \ 
 
 i 
 
 WHO MAY BE INSURERS. 
 
 35. In the absence of statntory reg^nlation, any individnal, association, 
 or corporation with adequate powers may become an insurer. 
 It is competent, however, for the state to impose npon all per- 
 sons granting insurance such conditions as may be deenied 
 necessary for the proper and safe regulation of the business. 
 
 As has already been stated, the legislature has power to fix the com- 
 petency of the insurer, and to forbid absolutely the making of contracts 
 by any insurer who does not comply with all the regulations imposed, 
 even when such regulations may have the effect of prohibiting the 
 granting of insurance by natural persons. 
 
 Statutory Qualifications. 
 
 The statutory qualifications required of those engaged in the insur- 
 ance business are too numerous and varied to be set forth, but it is 
 
 iTLockwood v. Bishop, supra; Leftwich v. Wells, 101 Va. 255, 43 S. E. 
 3&4. 
 
 » 8 North America Life Ins. Oo. v. WilsoD, supra. 
 
 !» Pierce v. Assurance Soc., 145 Mass. 56, 12 N. E. 858, 1 Am. St Rep. 
 433 ; Uhlman v. Insurance CJo., 109 N. T. 421, 17 N. E. 363, 4 Am. St Rep. 
 482; Hunton v. Society (C. C.) 45 Fed. 661; Greeff v. Society, 160 N. Y. 19, 
 64 N. E. 712, 46 L. R. A. 288, 73 Am. St. Rep. 659. 
 
 «o Uhlman v. Insurance Co., supra. See People v. Security lilfe Ins. & 
 Annuity Co., 78 N. Y. 114, 34 Am. Rep. 522. 
 
 §36) 
 
 THE SEVERAL KINDS OP CORPORATE INSURERS. 
 
 79 
 
 well to call attention to the fact that all such conditions imposed upon 
 the business of insurance are intended for the protection of the public, 
 and that it is perfectly competent for the state to refuse license to do 
 business to any insurer that may fail to comply with such conditions, or 
 to revoke a license already granted, in case of the violation of any such 
 regulation. 
 
 Insurers Usually Incorporated, 
 
 Even when the statutes do not forbid the making of insurance by 
 natural persons, the conditions of the business itself, requiring per- 
 manent existence and certainty of succession in the insurer, have prac- 
 tically taken the business of insurance out of the hands of natural per- 
 sons and given it over almost exclusively to corporations. Yet certain 
 associations of underwriters, known as "Lloyd's Associations," organ- 
 ized and doing business upon very much the same general principle 
 as the venerable English Lloyd's, are acquiring considerable popularity 
 in fire insurance, and now underwrite a large amount of business. 
 
 !?f 
 
 THE SEVEKAI* KINDS OF CORPORATE INSURERS. 
 
 36. Insnraaoe oorporations are known as either stock, mixed, or mu- 
 tual companies, in accordance witk the character of the organ- 
 ization of the company. 
 
 The various corporations, in whose hands most of the insurance busi- 
 ness of this country now lies, differ very greatly in the nature of their 
 organization and in their charter powers. The different kinds of insur- 
 ance — fire, life, marine, accident, and guaranty — are usually carried on 
 separately, the charter of insurance corporations generally limiting 
 their powers to granting insurance of one of these several kinds. It is 
 not unusual, however, for a company to be empowered to grant insur- 
 ance of more than one kind. Thus the same company may issue both 
 fire and marine policies, or another may grant both life and accident in- 
 surance. Fire insurance is usually carried on by stock companies, as 
 being best suited for the character of the risk assumed. 
 
 * 
 
 Stock Companies, 
 
 A stock company is one which possesses some fixed amount oi 
 capital stock, owned by shareholders, who constitute the corporation 
 and act through officers selected by them. In the contracts made by 
 stock companies the insured sustains no relation whatever to the in- 
 surer, excepting that of contract. 
 
 Mutual Companies. 
 
 Mutual companies possess ordinarily no capital stock, and are made 
 up of all the policy holders of the corporation, who take the place of 
 stockholders in the ordinary corporation, and act through agencies se- 
 
80 
 
 PARTIES. 
 
 (Ch.3 
 
 lected by themselves.*^ The members of such mutual companies sus- 
 tain the peculiar double relation of being thus insurers and parties in- 
 sured ; for it is the whole membership of the mutual company which 
 contracts to indemnify each of the members with respect to the loss 
 insured against. No contractual difficulty arises out of this double 
 relation, however, as of course the corporation is essentially a distinct 
 entity from the members of the corporation. The simplest form of 
 mutual company is the assessment company, in which losses suffered 
 by any member are paid by assessments levied upon the whole member- 
 ship ; but, as has heretofore been explained, few mutual companies rely 
 wholly upon assessments, but require fixed premiums to be paid for 
 the purpose of accumulating a fund to assure the performance of their 
 contracts. Stock companies are more apt to be stable, but mutual com- 
 panies are better adapted for procuring cheap insurance, inasmuch as 
 there is no stock upon which dividends are to be paid. It is to be here 
 noted, however, that while each policy holder in a mutual company is a 
 part of the company and has an interest in its assets, yet he has no right 
 to demand that any ratable proportion of an accumulated surplus shall 
 be paid to him unless such dividend has been declared payable by the 
 directorate or other agency empowered under the charter.** 
 
 Mixed Companies, 
 
 Mixed companies are intended to embody the advantages of safety 
 possessed by stock companies and of cheapness that characterizes mu- 
 tual companies. A small amount of capital stock is furnished by cer- 
 tain shareholders, who, of course, are entitled to have dividends out 
 of the profits, but all policy holders also become members of the corpora- 
 tion, and are entitled to a share in the profits of the company in accord- 
 ance with the terms of their policies. The best example of a mixed 
 insurance company is the Equitable Life of New York, which possesses 
 a capital stock of $100,000, but has assets that amount to considerably 
 more than a quarter of a billion. 
 
 Mutual Benefit Associations. 
 
 The various mutual benefit and benevolent organizations are usually 
 incorporated, and are merely varying forms of the mutual company de- 
 scribed above. It should be observed that while the policy holders, or 
 the members holding certificates, are parts of the insuring organization, 
 yet until the contract is completed the applicant is as truly a stranger to 
 
 «i A mutual insurance corporation is not a partnership to be dissolved 
 when its policy holders reside in different states that become Involved in 
 war. Cohen v. Insurance Co., 50 N. Y. 610, 10 Am. Rep. 522; Mutual Ben. 
 Life Ins. Co. v. Hillyard, 37 N. J. Law, 444, 18 Am. Rep. 741. But see Kruh 
 V. Insurance Co., 77 Pa. 15. 
 
 22 Greeff v. Society, 160 N. Y. 19, 54 N. E. 712, 46 U B. A. 288, 73 Am, St 
 Rep. 659. 
 
 1 
 
 
 L 
 
 §§ 37-38) 
 
 THE RIGHTS OF FOREIGN INSURERS. 
 
 81 
 
 the mutual organization as he would be if application were made to 
 any other kind of corporate insurer." He is, therefore, not charged 
 with assent to, or acquiescence in, any hidden rules or regulations for 
 the conduct of the business, which are presumptively known to all those 
 who are actually members.'* 
 
 Corporate Insurers Act through Agents, 
 
 The principles governing the rights of the parties to the insurance 
 contract are much complicated by reason of the necessity that exists for 
 all corporate insurers to carry on their business by means of agents. 
 This brings into the law of insurance, as a complicating factor, the 
 whole law of agency. Furthermore, the questions of agency that arise 
 are of especial difficulty, by reason of the peculiar character of the 
 insurance contract, and the efforts made by insurance companies to se- 
 cure by means of terms written in their policies all the benefits that may 
 be derived from carrying on business by representatives without any 
 of the usually accompanying burdens of so doing. This general sub- 
 ject of insurance agents and their powers will, therefore, require a full 
 and careful treatment, which will be reserved for a subsequent chap- 
 ter." 
 
 THE BIGHTS OF FOREIGN INSURERS. 
 
 37. Under the Constitution of the United States any citizen or asso- 
 
 ciation of citizens of one state lias the same right to make con- 
 tracts of insurance in another state as have the citizens of that 
 state. 
 
 38. But corporate insurers are not citizens Di^ithin the meaning of this 
 
 clause, and may therefore exercise their corporate powers out- 
 side of the states by which they are chartered only by license 
 from the foreign state. States may therefore totally exclude 
 foreign insurance corporations, or may admit them on such con- 
 
 H 
 
 •• Bilenberger v. Insurance Co., 89 Pa. 464; Supreme Lodge A. O. U. W. 
 T. Hutchinson, 6 Ind. App. 399, 33 N. K 816; See Susquehanna Ins. Co. v. 
 Perrine, 7 Watts & S. (Pa.) 348. And see dictum in KANSAL. v. ASSOCIA- 
 TION, 31 Minn. 17, 16 N. W. 430, 47 Am. Rep. 776, 778. 
 
 S4 Thus, a provision of the constitution that the statements in the appli- 
 cation shall be deemed warranties will not be effective, since the applicant 
 is not yet a member. Supreme Lodge A. O. U. W. v. Hutchinson, supra; 
 and a mle limiting the agent's authority does not affect an applicant without 
 notice. Lycoming Fire Ins. Co. v. Woodworth, 83 Pa. 223. In Massachusetts 
 the rule is otherwise, and it Is held that officers and agents have no power 
 to waive by-laws that relate to the substance of the contract. A by-law re- 
 quiring prepayment of premium, or one providing that only persons between 
 certain ages may become members, cannot be waived. Baxter v. Insurance 
 Co., 1 Allen, 294, 79 Am. Dec. 730. See, also, Muhrey v. Insurance Co., 4 
 Allen, 116, 81 Am. Dec. 689; McCoy v. Insurance Co., 152 Mass. 272, 25 N. 
 BL 289. 
 
 SB See post chap. IX. 
 
 Vance Ins. — 6 
 
 I 
 
f 
 
 I 
 
 It 
 
 82 
 
 PARTIES. 
 
 (Ch.S 
 
 §g 37-38) 
 
 THE RIGHTS OF FOREIGN INSURERS. 
 
 83 
 
 ditions as tkey may see fit to impose, whether such eonditions ■ 
 bo reasonable or unreasonable. A license to do business once 
 granted may be revoked with or without cause. And the reason 
 for such revocation of license is not a proper subject for judi- 
 cial inquiry. 
 
 In order to promote commercial relations between the several states 
 and the citizens thereof, the constitution of the United States makes 
 provision that "the citizens of each state shall be entitled to all privileg- 
 es and immunities of citizens in the several states." *« Under this pro- 
 vision no state may impose upon the citizens of another state engaged 
 in insurance any conditions or restrictions to which its own citizens are 
 not subject. Of course, however, the citizens of each state are re- 
 quired to comply as fully with all the statutory requirements of other 
 states in which they desire to do business as insurers as are the citizens 
 of those states. 
 
 Lloyd's Associations, 
 
 Under the general doctrine just stated, much difficulty has been 
 experienced in determining what is the status of the unincorporated 
 associations known as "Lloyd's Associations," which appear to be grow- 
 ing in popular favor, and write a very considerable amount of insurance 
 throughout the Union. These are associations of a large number of 
 insurance brokers, who enter into a joint agreement for the more ef- 
 ficient and extensive conduct of insurance business. There is a com- 
 mon guarantee -fund to which each member contributes, a single form of 
 policy running in the name of the association, and a central managing 
 body to which all premiums are paid, and by whom losses are settled. 
 The members, however, have none of the restricted liability of stock- 
 holders of a corporation, but are individually liable for the debts of the 
 association. These associations have a central office in some large 
 city, and send their agents into many different states to solicit business. 
 The effort has been made in some states to subject the business of these 
 associations to the same conditions and restrictions that are imposed 
 upon the business of foreign insurance corporations. The statute of 
 Ohio particularly specifies that any partnership or association "acting 
 as a corporation" shall be required to comply with all the requirements 
 that are made for insurance corporations. This statute has been 
 declared constitutional by the Court of Appeals of Ohio in the recent 
 case of State v. Ackerman.*^ In other states, however, it has been 
 lately decided that such associations cannot be required to comply with 
 any other conditions than such as are imposed upon domestic insurers.** 
 
 «• Article IV, S 2, c. 1. 
 
 «T STATE T. ACKERMAN. 81 Ohio St. 163, 37 N. B. 828, 24 L. R. A. 298. 
 See. also, Greene v. People (111. Sup.) 21 N. E. 605. 
 >• State T. Board of Insurance Com'rt, 37 Fla. 564, 20 South. 772, 33 Lb 
 
 This latter view would seem to be manifestly correct. While it is 
 true that such an association does, in a sense, act as a corporation, yet 
 it is plain that it is not a corporation, but merely a number of citizens 
 of another state associated for the purpose of conducting a certain joint 
 enterprise. Although associated, they do not, in any sense, lose their 
 characters as citizens by reason of being engaged in a joint enterprise ; 
 and it would seem, therefore, a denial to them of the privileges and 
 immunities of citizenship to place upon them the same restrictions as 
 are imposed upon corporations. 
 
 Foreign Insurance Corporations. 
 
 It is now settled beyond controversy that a corporation is not a citi- 
 zen of the state by the laws of which it is chartered, within the meaning 
 of that clause of the Constitution of the United States which has been 
 quoted above,^^ although it is recognized as a citizen for jurisdictional 
 purposes.'® Therefore, not being a citizen entitled to all the privileges 
 and immunities of a citizen in the several states, the corporation has no 
 right whatsoever to do business in a foreign state, except by the per- 
 mission of that state.** It has been laid down in the leading case of 
 Paul V. Virginia," and repeatedly reaffirmed, that insurance is not com- 
 merce, within the meaning of that clause of the Constitution of the 
 United States which protects interstate commerce from state interven- 
 tion." It therefore follows that any state may, at its option, totally 
 
 R. A, 288; Barnes v. People, 168 111. 425, 48 N. E. 91. The Missouri statute 
 makes no discriminations against foreign insurers, and was held valid in 
 State v. Stone, 118 Mo. 388, 24 S. W. 164, 25 L. R. A. 243, 40 Am. St. Rep. 
 388. In Noble v. Mitchell, 164 U. S. 367, 17 Sup. Ct. 110, 41 L. Ed. 472, 
 affirming same case. 100 Ala. 519, 14 South. 581, 25 L. R. A. 238, it was stated 
 obiter that such a statutory prohibition applying to "every company, cor- 
 poration, association, or partnership organized for the purpose of transact- 
 ing the business of insurance" was void. 
 
 2» Paul V. Virginia, 8 Wall. (U. S.) 168, 19 L. Ed. 357; Hooper v. California, 
 155 U. S. 648, 15 Sup. Ct. 207, 39 L. Ed. 297. 
 
 80 Shaw V. Mining Co., 145 U. S. 444, 12 Sup. Ct 935, 36 L. Ed. 768; Bal- 
 timore & O. R. Co. V. Harris, 12 Wall. (U. S.) 65, 20 L. Ed. 354; Clark, 
 Corp. 75. 
 
 81 Bank of Augusta v. Earle, 13 Pet (U. S.) 519, 10 L. Ed. 274; 16 Am. & 
 Bug. Enc. Law, 897; Daggs v. Insurance Co., 136 Mo. 382, 38 S. W. 85, 35 
 L. R. A. 227, 58 Am. St Rep. 638, affirmed Orient Ins. Co. v. Daggs, 172 U. S 
 557, 19 Sup. Ct 281, 43 L. Ed. 552; Clark, Corp. 615. A state may prohibit 
 and punish the soliciting, within the state, of contracts of insurance in un- 
 Ucensed foreign companies. Nutting v. Massachusetts, 183 U. S. 553, 22 Sup. 
 Ct 238, 46 L. Ed. 324, affirming Commonwealth v. Nutting, 175 Mass. 154, 55 
 N. E. 895, 78 Am. St Rep. 483; Hooper v. California, 155 U. S. 648, 15 Sup.' Ct. 
 207, 39 L. Ed. 297. But a state cannot punish its citizens for making a con- 
 tract outside the state. Allgeyer v. Louisiana, 165 U. S. 578. 17 Sud Ct 427 
 41 L. Ed. 832. . h- . •, 
 
 82 8 Wall (U. S.) 168, 19 L. Ed. 357. 
 
 88 Hooper v. California, 155 U. S. 648, 16 Sup. Ct 207, 39 L. Bd. 297, In 
 which the previous cases are cited. This was a case of marine insurance. 
 
I r 
 
 OS 
 
 PARTIES. 
 
 (Ch.3 
 
 g3ii) 
 
 CONTRACTS NOT COMPLYING WITH STATUTES. 
 
 85 
 
 fc 
 
 ! 
 
 T 
 
 11 
 
 exclude any or aU foreign insurance corporations from doing business 
 within its borders, or it may admit them upon such conditions as it sees 
 fit to impose. These conditions may be reasonable or unreasonable, 
 just or unjust; all are equally conclusive upon a foreign corporation. 
 It is in its option either to decline to enter the state, or, upon entering, 
 to comply with all the conditions imposed upon its admission. Accord- 
 ingly the character of these conditions is not a subject of legal con- 
 cern to such foreign corporations, or of judicial investigation by the 
 
 courts. t «_ • u 
 
 It follows, therefore, from what has been said above, that, inasmuch 
 as the granting of license to do business to foreign corporations is plain- 
 ly at the option of the state, the license once granted may be revoked 
 at the- pleasure of the state, with or without cause." This right of the 
 state to revoke a license once granted extends so far that, although a 
 condition imposed upon foreign insurers as precedent to their admission 
 into the state is unconstitutional, yet upon the breach of such a condi- 
 tion by the foreign insurer the state is at perfect liberty to revoke the 
 license granted.*' 
 Removal of Causes by Foreign Insurance Corporations. 
 
 The most striking illustration of this last principle is found in the 
 condition imposed by many of the states in the American Umon uporv 
 foreign corporate insurers, that before engaging in business in such 
 states the insurer shall enter into an agreement that it will not remove 
 causes to which it may be a party to the federal courts.^* Such an 
 agreement is manifestly unconstitutional and void, inasmuch as it de- 
 prives the insurer of a right guarantied to it under the Constitution of 
 the United States." The insurer, therefore, is in no respect bound by 
 his agreement to refrain from resorting to a federal court whenever that 
 court has jurisdiction; but in case this illegal agreement is broken by 
 the insurer the state cannot be prevented from promptly revoking the 
 license, which was conditioned upon the faithful performance of that 
 agreement. This conclusion follows necessarily from the revocable 
 character of the license, and has been laid down in unmistakable terms 
 
 •4 Clark, Corp. 618, citing Doyle ▼. Insurance Co., 94 U. S. 535, 24 L. Ed. 
 
 85 Doyle v. Insurance Co., 94 U. S. 535, 24 L. Ed. 148. 
 
 88 Home Ins. Co. v. Davis, 29 Mich. 238; Morse v. Insurance Co., 30 Wis, 
 496, 11 Am. Rep. 580, reversed Home Ins. Co. of New York v. Morse, 20 
 Wall. (U. S.) 445, 22 L. Ed. 365. ^ ^ _ , 
 
 ST Home Ins. Co. of New York v. Morse. 20 Wall. (U. S.) 445, 22 L. Ed. 
 865 wherein it was held that the corporation could, notwithstanding the 
 statute remove a suit to the federal courts. Barron v. Burnside, 121 U. S. 
 186, 7 Sup. Ct. 931, 30 L. Ed. 915, which holds that the agent of the cor- 
 poration cannot be punished for violating such statute. 
 
 by the Supreme Court of the United States in the case of Doyle v. Con- 
 tinental Ins. Co. of New York.^® 
 
 A closely related doctrine, which is apparently repugnant to that 
 which has just been stated, should here be noted. When a statute re- 
 quires foreign corporations to relinquish their constitutional right to re- 
 sort to the federal courts as a condition to obtaining a license to do 
 business, such statute is unconstitutional, and it therefore follows that 
 a penalty imposed in that state upon persons doing business on behalf 
 of such foreign corporations without license is void and unenforceable. 
 This principle, however, is declared by the Supreme Court of the Unit- 
 ed States in Barron v. Burnside ^® not to be in conflict with the previous 
 holding of that court in Doyle v. Continental Ins. Co. of New York.*** 
 The latter case involved merely the right of the state to revoke a license 
 by reason of the breach of an agreement which was illegal, while the 
 former involved a prosecution under the statute imposing such illegal 
 condition. 
 
 CONTRACTS MADE BY INSURERS NOT COMPLTING "WITH 
 
 STATUTORY REQUIREMENTS. 
 
 Wliether oontraots of unlicensed foreign insnranoe oorporations, 
 which by statute are prohibited or declared unlawful, are valid, 
 void, or voidable, depends upon the intention of the legislature 
 as expressed in each particular statute. The following rules, 
 however, are useful in determining the proper construction of 
 any statute in question: 
 <a> When the contract is expressly declared void, neither party can 
 take any rights thereunder. 
 
 (b) When the statute expressly validates the contract despite the 
 
 noncompliance of the insurer, it is enforceable as to both par- 
 ties. 
 
 (c) Wken the contract is merely prohibited by the statute, such con- 
 
 tract is void, but may nevertheless be enforced against the de- 
 linquent insurer, who is estopped to plead in defense his oivn 
 infraction of law^. 
 <d) When a penalty is imposed upon the insurer for doing business 
 in violation of the statute, such penalty should be deemed ex- 
 clusive, and the contracts held valid. But by many authorities 
 such policies are held unenforceable against the insured. 
 
 Much confusion exists in the authorities, both text-books and judi- 
 cial decisions, as to the validity of contracts made by a foreign insurer 
 who has not complied with the statutory requirements of the state in 
 which the contract is made. Much of the conflict is only apparent, on 
 
 «« 94 U. S. 535, 24 L. Bd. 148. 
 
 «» 121 U. S. 186, 7 Sup. Ct 931, 30 L. Ed. 915. 
 
 40 Supra. 
 
 t t j 
 
 I 
 
 I 
 
86 
 
 PARTIES. 
 
 (Ch. 3 
 
 I 
 
 
 B 
 
 account of the great variation that exists between the statutes of the 
 several states under which the cases have arisen. Whether a contract 
 made in violation of any of these statutes is valid, void, or voidable, 
 will, of course, depend altogether upon the intention of the legislature 
 in enacting the statute. This intention must be discovered from the act 
 itself, construed with reference to the circumstance of its enactment. 
 Where the expression makes the intention doubtful, the court may look 
 to the purposes of the enactment and to other circumstances connected 
 with it that will tend to show what is the real intent of the legislature. 
 But if the statute is clear in its expressed meaning, the intent must be 
 conclusively deemed that which is expressed by the words of the act, 
 and no other intent repugnant to the one set forth in the words of the 
 statute can be shown. Therefore, the determination of the question 
 whether the contract is valid or not is merely a matter of construction. 
 In determining, however, the proper construction to be given to these 
 statutes, certain general rules may be laid down to serve as guiding prin- 
 ciples. 
 
 In many states ** it is expressly enacted that contracts made with- 
 out compliance with the statutory requirements by the insurer shall 
 nevertheless be valid and enforceable. Under such statutes there can, 
 of course, be no question as to the right of either of the parties to en- 
 force the contract against the other. In still other states *^ it is ex- 
 pressly declared that the contracts made in violation of the statutes shall 
 be void. These statutes are equally clear in meaning, and neither party 
 can take any rights under the contract. 
 
 When, however, the statutes imposing conditions upon doing busi- 
 ness by the foreign insurer merely prohibit the making of the contract 
 without compliance with their terms, the question as to the rights of the 
 parties becomes of much greater difficulty. In accordance with the 
 general rule ** that a contract that is prohibited is illegal, and therefore 
 void, it would follow that neither one of the parties would take any 
 rights under the contract, or could enforce the agreement against the 
 other. Yet to apply this general doctrine to a contract made under such 
 circumstances as usually attend the making of a contract of insurance 
 would work great hardship, and be manifestly unjust. The party 
 insured cannot without great difficulty discover whether the insurer has 
 complied with all the statutory requirements or not; and while it is 
 true that the statutes imposing these conditions upon the insurer are 
 
 *i Where a statute declares policy valid notwithstanding noncompliance 
 with law, premium notes and assessments thereon are collectible. Common- 
 wealth Mut. Fire Ins. Co. v. Place, 21 R. I. 248, 43 Atl. 68. See Code Va. 
 1887, § 1269. 
 
 4 a Where a statute declares policy void It Is unenforceable by either party. 
 Wood V. Insurance Co., 8 Wash. 427, 36 Pac. 267, 40 Am. St. Rep. 917. 
 
 «s See Clark, Cont. (2d Ekl.) p. 255 et seq. 
 
 .^ 39) 
 
 CONTRACTS NOT COMPLYING WITH STATUTES. 
 
 87 
 
 public acts, and therefore presumed to be known to all, yet it would be 
 unreasonable to require that every person to whom a corporate insurer 
 offers a contract of insurance should make an exhaustive investigation 
 in order to discover whether his co-contractor has been fully qualified 
 to make the agreement that is proposed, which is a question of fact. It 
 would seem that the insured has a right to presume that the insurer has 
 complied with all the requirements of law. Accordingly, it is held by 
 the great weight of authority that when the insured attempts to en- 
 force such a contract, made in good faith, against the unlicensed in- 
 surer, the latter will be estopped to escape liability under the contract 
 by pleading his own infraction of law.** 
 
 The same principle of estoppel, however, does not apply when the in- 
 surer is endeavoring to enforce some right under the contract against 
 the insured.*'^ The plaintiff, not having legally qualified himself to 
 make the contract under which he sues, has no standing in law or equity 
 when he attem.pts to enforce it. 
 
 A fourth class of cases is found to arise when the act setting forth the 
 requirements of foreign corporations for doing business within a state 
 
 *4 Clark, Corp. 628. See opinion of Caldwell, J., in Berry v. Indemnity 
 Co. (C. C.) 46 Fed. 439; Watertown Fire Ins. Co. v. Rust, 141 111. 85, 30 N. E. 
 772 ; State Mut Fire Ins. Ass'n v. Brinkley Stave & Heading Co., 61 Ark. 1, 31 
 S. W. 157, 29 L. R. A. 712, 54 Am. St Rep. 191; Swan v. Insurance Co., 96 
 Pa. 37; Hartford Live Stock Ins. Co. v. Matthews, 102 Mass. 221. 
 
 45 Where a statute prohibits the transaction of business by foreign insur- 
 ance companies in a state unless certain prescribed conditions have been 
 complied with, contracts made in violation of such statute are unenforce- 
 able by the insurer. Cincinnati Mut. Health Assur. Co. v. Rosenthal, 55 111. 
 85, 8 Am. Rep. 626; Seamans v. Temple Co., 105 Mich. 400, 63 N. W. 408, 
 28 li. R. A. 430, 55 Am. St Rep. 457; Cowan v. Assurance Corp., 73 Miss. 
 321, 19 South. 298, 55 Am. St. Rep. 535; Rose v. Clark Co., 89 Wis. 545, 62 
 N W. 526, 27 L. R. A. 556, 46 Am. St Rep. 855 (to recover an assessment); 
 Haverhill Ins. Co. v. Prescott 42 N. H. 547, 80 Am. Dec. 123 (on the ground 
 that the policy was invalid, and hence no consideration for the premium 
 note. The next year (1862) a statute was passed making policies issued by 
 foreign companies that had not complied with the statutes valid against the 
 insurer, and in Union Ins. Co. v. Smart, 60 N. H. 460, it was held that the 
 premium note was also valid, for the reason that "otherwise there would be 
 no consideration for the policy"). Williams v. Cheney, 8 Gray (Mass.) 20(i: 
 Phoenix Ins. Co. v. Pennsylvania R. Co. (Ind.) 33 N. E. 970, 20 L. R. A. 405 
 (dictum to the effect that the right of the insurer to enforce the contract is 
 suspended until compliance with the statute, and citing the conflicting In- 
 diana cases. This dictum is supported by Walter A. Wood Mowing & Reap- 
 ing Mach. Co. V. Caldwell, 54 Ind. 270, 23 Am. Rep. 641; Singer Mfg. Co. 
 V. Brown, 64 Ind. 548); Stewart v. Insurance Co., 38 N. J. Law, 436; JEtna 
 Ins. Co. V. Harvey, 11 Wis. 394; Buell v. Grain Co., 65 111. App. 271; Beeber 
 V. Walton (Del. Super.) 32 Atl. 777; Commonwealth Mut Fire Ins. Co. v. 
 Hayden, 60 Neb. 636, 83 N. W. 922, 83 Am. St Rep. 545; People's Mut Ben. 
 Soc. V. Lester, 105 Mich. n6, 63 N. W. 977; Swing v. Munson, 191 Pa. 582, 
 43 All. 342, £8 L. B. A. 223, 71 Am. St. Rep. 772. 
 
88 
 
 PARTIES. 
 
 (Ch.3 
 
 •■ ! 
 
 merely imposes a penalty upon the insurer, or upon his agent acting in 
 his behalf, in case he carries on insurance business in violation of 
 the terms of the statute. Many of the authorities *• hold that the 
 same rule of law applies in this case as in the preceding; that is, that 
 such a contract cannot be enforced against the insured, but is binding 
 upon the insurer. But on principle and the better reasoned authority, 
 it would seem that the imposing of a penalty without direct prohibition 
 would show an intent on the part of the legislature to enforce the law 
 by means of the penalty designated. The court ordinarily holds void 
 a prohibited contract, because otherwise the law that forbids such con- 
 tracts could not be enforced. But where a provision is made for en- 
 forcing the law by a distinct penalty imposed, such penalty would seem 
 to be exclusive, and to rebut the presumption that the additional penalty 
 of declaring the contract void was intended to be laid. Therefore it 
 has been held, and properly so, that such contracts of insurance as are 
 merely penalized, and not prohibited, are valid and enforceable by both 
 parties.*^ 
 
 WHO MAY BE INSURED. 
 
 'i 
 
 40. In order tl&at a person ntay be tl&e party insured in an Insnraneo 
 contract, t-wo essential requisites ninst exist: 
 
 (a) Tlie person mnst be competent to make a contract; 
 
 (b) He mnst possess an insurable interest in tbe subject of the in* 
 
 ■urance. 
 
 Ordinarily no restrictions are placed upon the right of any natural 
 person sui juris, or any corporation possessing adequate powers, to 
 protect any valuable interest he may have from loss or injury by reason 
 of any peril to which it may be exposed. Indeed it may be safely said 
 that the right of a citizen thus to protect himself against loss falls with- 
 in that class of inherent and inalienable rights which are guarantied 
 under the federal Constitution.** Accordingly, any statute unreason- 
 
 «• Where the statute prohibits and penalizes, the policy is void as against 
 the insured. Thome v. Insurance Co., 80 Pa. 15, 21 Am. Rep. 89 ; Cincinnati 
 Mut. Health Assnr. Co. v. Rosenthal, supra; Seamans v. Temple Co., supra. 
 
 *7 The mere imposition of a penalty for the transaction of business with- 
 out compliance with the statutory requirements will not render the con- 
 tract of insurance invalid. Pennypacker v. Insurance Co., 80 Iowa, 56, 45 
 N. W. 408, 8 L. R. A. 236, 20 Am. St Rep. 395; Toledo Tie & Lumber Co. 
 V. Thomas, 38 W. Va. 566, 11 S. E. 37, 25 Am. St. Rep. 925 (on the ground 
 that the penalty imposed included all others); Union Mut. Life Ins. Co. v. 
 McMillen, 24 Ohio St 67; State Mut. Fire Ins. Ass'n v. Brinkly Stave & 
 Heading Co., 61 Ark. 1, 31 S. W. 157, 29 L. R. A. 712, 54 Am. St Rep. 191. 
 See Fritts v. Pahner, 132 U. S. 282, 10 Sup. Ct 93, 33 L. Ed. 317; Clark, Corp. 
 627. 
 
 *8 Butchers* Union Slaughter-House, etc., Co. v. Orescent City Live Stock 
 Landing, etc., Co., Ill U. S. 746, 4 Sup. Ct 652, 28 L. Ed. 585. 
 
 J 
 
 Ml) 
 
 INFANTS AS PARTIES INSURED 
 
 Si> 
 
 ably restricting this right, or interfering with its enjoyment, is uncon- 
 stitutional and void.*® 
 
 It is necessarily true that a person whom the law deems incapable 
 of binding himself by the contractual bond cannot become a party to a 
 contract of insurance. Therefore a married woman at common law, 
 an alien enemy, and an adjudged lunatic, are wholly incapable of be- 
 coming parties insured.''^ But other incompetent persons, such as in- 
 fants, persons non compotes mentis, but not judicially declared insane, 
 and drunken persons, are not prohibited by the law from entering into 
 contracts, but merely protected from the evil consequences of any un- 
 wise agreements they may have made, and left free to enjoy any benefit 
 that may be derived from the enforcement of the contract against the 
 adult party. The rights arising under a contract to which the party in- 
 sured is incompetent at the time of making the contract, or becomes so 
 thereafter, require, therefore, especial examination. 
 
 Insured Must Possess an Insurable Interest 
 
 As has been shown heretofore, the presence of an insurable interest 
 in the party insured changes the spirit of the contract from one that 
 courts chance to one that defies chance ; it transforms a gambling con- 
 tract peculiarly injurious to the public morals and safety into a ben- 
 eficent arrangement for sharing misfortune, and a common bearing of 
 burdens that averts individual disaster and encourages industry and 
 enterprise. The doctrine of insurable interest is seen, therefore, to lie 
 deep at the basis of public policy, and is maintained by the courts with 
 that jealous care which its importance justifies. The subject is treated 
 fully in the next succeeding chapter. 
 
 INFANTS AS PARTIES INSURED. 
 
 41* While not a contract for necessaries, the insurance contract is one 
 that may properly be made by an infant, and, wben made, is 
 Talid nntil disaffirmed by the infant. By the weight of au- 
 thority and the better reason the infant, npon disaffirmance, 
 cannot recover the premiums paid, provided the contract has 
 been fairly made. 
 
 There are many conditions under which it is provident and wise for 
 an infant to insure his property or his life, and any rule of law which 
 would prevent his doing so would be hurtful in its effect and a grave 
 discouragement to the enterprise of infants. Accordingly, it is uni- 
 formly held that an infant's contract of insurance is perfectly valid until 
 disaffirmed by the infant or his representative.*^ This right of disaf- 
 
 49 Allgeyer v. Louisiana, 165 U. S. 578, 17 Sup. Ot. 427, 41 L. Ed. 832. 
 
 80 Clark, Cont. 212 et seq. 
 
 »i Monaghan v. Insurance Co., 53 Mich. 238, 18 N. W. 797; JOHNSON 
 
 ^ 
 
90 
 
 PARTIES. 
 
 (Ch.3 
 
 8 41) 
 
 INFANTS AS FAUTIES INSURED. 
 
 91 
 
 n 
 I 
 
 ii I 
 
 \ i 
 
 i t 
 
 firmance, however, is personal to the infant, and cannot be exerdsed by 
 the adult insurer. The latter cannot escape liability under the policy 
 by pleading the infancy of the insured, on the ground that the contract 
 lacks mutuality."* 
 
 An interesting phase of this same doctrine arises in connection with 
 contracts made between an infant member of a mutual benefit associa- 
 tion and the association. The purposes for which these associations 
 are chartered require entire mutuality in the relations between the 
 members, both as to benefits and to burdens, and in a case recently de- 
 cided in New York it was held that inasmuch as the infant could not 
 make a contract that was mutually binding, since it could be avoided by 
 the infant at will, such a contract was not within the contemplation 
 of the charter of the association, and was, therefore, void." This 
 holding, however, cannot be regarded as correct, since an infant's con- 
 tract is binding until disaffirmed. And in any event the contract of the 
 mutual benefit association with its member is to a certain extent un- 
 ilateral, since the agreement of the member to pay assessments levied 
 can usually be enforced only by his expulsion from the association and 
 his forfeiture of any rights that may have attached to his membership. 
 Therefore the association has exactly the same remedy against the in- 
 fant member as against the adult, and it has accordingly been properly 
 held by other courts that such a contract with an infant is merely void- 
 able, as other infants' contracts, and may properly be made by such an 
 association.'* 
 
 It would seem to be a principle too manifestly true to need the sup- 
 port of authority or argument, that an infant party insured must either 
 affirm or disaffirm his contract in toto. Every consideration of reason 
 and justice would be disregarded if he were allowed to affirm such terms 
 of the policy as are beneficial and disaffirm those that are found burden- 
 some. Yet it has been held in O'Rourke v. John Hancock Mut. Life 
 Ins. Co.," recently decided by the Supreme Court of Rhode Island, 
 that breach of warranty affords no defense in a suit brought upon a 
 policy of insurance granted to an infant, on the ground that to allow 
 such defense would, in effect, be permitting the insurer by a sort of 
 cross-action to enforce the warranty against the infant, which, as the 
 
 V INSURANCE CO., 56 Minn. 365, 57 N. W. 934, 26 L. R. A. 187, 45 Am. St. 
 Rep. 473; Union Cent. L. Ins. Co. v. Hilliard, 63 Ohio St. 478, 59 N. E. 230, 
 53 L. R. A. 402, 81 AnL St. Rep. 644. This case also holds that the infant's 
 assignment of the policy is only voidable. 
 
 5 2 Monaghan v. Insurance Co., supra. 
 
 83 In re GLOBE MUT. BEN. ASS'N, 135 N. T. 280, 32 N. E. 122, 17 L. 
 R. A. 547, reported below in 63 Hun, 263, 17 N. Y. Supp. 852. See, also, 
 Commonwealth v. People's Mut Life & Relief Ass'n, 6 Pa. Dist. R. 561. 
 
 64 Chicago Mut Life Indemnity Ass'n v. Hunt, 127 111. 257. 20 N. B. 55, 
 2 L. R. A. 549. See Nibl. Ben. Soc. & Ace. Ins. pp. 74, 228, 290. 
 
 »5 23 R. I. 457, 50 Atl. 834. 57 L. R. A. 496, 91 Am. St. Rep. 643. 
 
 court shows, cannot be done. The fallacy in the reasoning of the court 
 consists in confusing the cases in which the adult is attempting affirm- 
 atively to enforce the contract against the infant defendant, and those in 
 which the adult defendant sets up in defense a condition that forms 
 an integral part of the contract which the infant, or his representative, 
 is endeavoring to enforce. Stiness, C. J., in the course of his opinion 
 in the case, says: "The question, therefore, is whether an infant is 
 bound by his warranties in a contract of insurance. In considering it 
 we have not the advantage of weighing the reasons given in previous 
 decisions, for we have been unable to find a case like this reported." 
 It is to be regretted that a case of first impression involving a matter 
 so important in the commercial world should have been so decided, and 
 it is to be hoped that it will not be followed. If it is the law that an 
 infant or his representative may repudiate such of the conditions of a 
 policy as the insurer inserts for his protection, and enforce only those 
 that are beneficial to him, the effect will be to preclude insurers from 
 contracting with infants, and thus work a great hardship upon the lat- 
 ter in depriving them of the protection of insurance. 
 
 However beneficial insurance may be to the infant's estate, or how- 
 ever needful it may be to the successful conduct of his business, the con- 
 tract of insurance is not a contract for necessaries " in the technical 
 sense in which the term is used in the law of infants* contracts. The 
 infant may accordingly, upon repudiating the contract, recover the con- 
 sideration given, in accordance with the general rule of law applying 
 in such cases. 
 
 There is one phase, however, of the general doctrine touching the 
 infant's rights upon disaffirmance which is of peculiar interest and im- 
 portance in the case of insurance contracts. Has the infant insured the 
 right, after enjoying for several years the protection afforded under his 
 policy, upon attaining his majority, to repudiate his contract and re- 
 cover from the insurer the premiums he has paid? Here the infant 
 
 has received for the premiums a valuable consideration— protection 
 
 which, in the nature of things, he cannot restore. The question thus 
 reduces itself to the more general inquiry whether an infant, upon dis- 
 affirming an executed contract, can recover the cash consideration giv- 
 en when restitution of that received has become impossible. The 
 English cases hold that he cannot," but it seems that the weight of 
 American authority is opposed to the English view." It has recently 
 been held in Minnesota " that when a life insurance contract had been 
 fairly made by a solvent insurer with an infant, the latter could not 
 
 8« New Hampshire Mut. Fire Ins. Co. v. Noyes, 32 N. H. 345. 
 »7 Holmes v. Blogg, 8 Taunt. 508. See 1 Pars. Oont 322. 
 •8 Clark, Cont. (2d Ed.) 171 et seq. 
 
 »» JOHNSON V. INSURANCE CO., 56 Minn. 365, 59 N. W. 992 '>G L R 
 A. 187, 45 Am. St. Rep. 473. 
 
92 
 
 PARTIES. 
 
 (Ch.3 
 
 §§ 42-43) 
 
 ALIENS AS PARTIES INSURED. 
 
 93 
 
 upon disaffirmance recover the premiums paid. It was further held 
 that the burden of proving the fairness of the contract lay upon the 
 insurer. This decision seems eminently sound, though it is doubtful 
 if it is in accord with the weight of authority, to be derived from analo- 
 gous cases in the United States. 
 
 It is clear, however, that the premiums required in ordinary level 
 premium life insurance more than pay for the current protection af- 
 forded.*® They go to swell the reserve fund that must be accumulat- 
 ed for each policy. Therefore so much of the infant's premiums as 
 have been carried to the reserve fund, or, in other words, the reserve 
 value of the infant's policy, should be returned to him upon disaffirm- 
 ance. In Johnson v. Insurance Co.,'^ referred to above, this principle 
 was recognized, although the decision is erroneous in allowing the re- 
 recovery of the "surrender" value only. The surrender value, which is 
 always fixed at a smaller sum than the true or reserve value, can be re- 
 covered by an adult, in accordance with the terms of the contract The 
 infant should have the higher privilege of recovering the real, rather 
 than the contract, value of his policy, 
 
 ALIENS AS PARTIES INSURED. 
 
 42. In all ciTilized conii.«,rie8 the right of alien friends to oontraot for 
 
 insurance is unrestricted. The contract niade with an alien 
 enemy is Toid. 
 
 43. WAR INTERVENING — ^There is much conflict of authority as to 
 
 the effect of the intervention of x^ar, causing the parties to a 
 valid insurance contract to become alien enemies; but, by the 
 better rule, the policy is avoided, and not merely suspended. 
 
 The liberal rules of law now prevailing in all civilized countries 
 with regard to the rights and privileges accorded alien friends have 
 resulted in the frequent making of contracts of insurance between 
 citizens of different countries. One of the large American life com- 
 panies advertises that it docs business in some eighty-four different 
 countries. These international contracts are vaHd and enforceable.®* 
 The existence of war between two countries, however, necessarily in- 
 terdicts all commercial intercourse between the citizens of the bel- 
 ligerent states, and renders void any contracts of insurance, as well 
 as other contracts, that may be made between subjects of the war- 
 ring governments. 
 
 •0 NEW YORK LIFE INS. CO. v. STATHAM, 93 U. S. 24, 23 L. Ed. 789; 
 Cohen v. Insurance Co., 50 N. Y. 610, 10 Am. Rep. 522. 
 
 81 56 Minn. 365, 59 N. W. 992, 26 L. R. A. 189, 45 Am. St. Rep. 473. See 
 original opinion, 56 Minn. 365, 57 N. W. 934, 26 L. R. A. 187. 
 
 •a Clark, Cont (2d Ed.) 146. 
 
 A difficult question arises, however, when it becomes necessary to 
 determine the rights of parties under a policy issued in time of peace 
 by a citizen of one state to a citizen of another when a war inter- 
 venes. All intercourse between the parties necessarily ceases, and 
 the payment of premiums and the performance of other conditions 
 of the policy become impossible.®* In the case of an ordinary fire 
 policy, which grants insurance only from year to year, or for some 
 other specified term, it is plain that when the parties become alien 
 enemies the contractual tie is broken, and the contractual rights of 
 the parties, so far as not vested, lost But the contract of life insur- 
 ance is peculiar, and involves other than the simple principles just 
 stated as governing in fire insurance. Annual premiums paid in Ufe 
 insurance represent something more than the consideration for the 
 insurance for each successive year. They are partly set aside to form 
 a fund, known as the policy reserve, which is held in quasi trust by 
 the insurer until such time as the policy matures, and the sum speci- 
 fied therein becomes payable. This reserve value fixes the liability 
 of the insolvent insurer upon an outstanding policy at any given 
 time,®* and is in the nature of a vested right, which may be defeated 
 by nonperformance of a condition subsequent, such as the nonpayment 
 of premiums when due.®*^ 
 
 In determining the effect of war upon the rights of parties to exist- 
 ing contracts, the courts have fallen into great confusion and con- 
 flict. The cases, however, fall into three groups, according as they 
 support what, for the sake of convenience, will be called the Connect- 
 icut, the New York, and the United States Rules. 
 
 The Connecticut Rule, 
 
 In Connecticut and a few other states it has been held that the 
 intervention of war absolutely terminates all rights under the con- 
 tract.®' These courts base their decisions upon the view that there 
 are two elements in the consideration for which the annual premium 
 is paid — First, the mere protection for the year, and, second, the 
 privilege of renewing the contract for each succeeding year by pay- 
 ing the premium for that year at the time agreed upon. According 
 to this view of the contract, the payment of premiums is a condition 
 precedent, the nonperformance of which, even when performance 
 would be illegal, necessarily defeats the right to renew the contract. 
 
 «s Kershaw v. Kelsey, 100 Mass. 561, 97 Am. Dec. 124, 1 Am. Rep. 142; 
 Wheat. Int. Law (Lawr. Ed.) 551. 
 
 «* Universal Life Ins. Co. v. Binford, 76 Va. 103. 
 
 •» Sands v. Insurance Co., 50 N. Y. 626, JO Am. Rep. 535. 
 
 •• Worthington v. Insurance Co., 41 Conn. 372, 19 Am. Rep. 496 ; Dlllard 
 T. Insurance Co., 44 6a. 119, 9 Am. Rep. 167; Tait v. Insurance Go. (U. S. 
 dr. Ot) 4 Bigelow, Gas. 479, note. Fed. Cas. No. 13,728. 
 
 II 
 
94 
 
 PARTIES. 
 
 (Ch.3 
 
 The New York Rule. 
 
 By far the greater number of decisions hold that war between 
 states in which the parties reside merely suspends the contract cf 
 life insurance, and that, upon tender of all premiums due by the in- 
 sured or his representative after the war has terminated, the con- 
 tract revives and becomes fully operative.'^ Thus, one Atwood, at 
 the time of the outbreak of the Civil War a resident of Virginia, had 
 paid all premiums due on a policy issued by a New Jersey insur- 
 ance company down to December, 1861, when a premium falling due 
 could not be paid on account of the war. Atwood died in 1862. The 
 policy contained the usual conditions of forfeiture upon nonpayment 
 of any premium when due. Upon the restoration of peace, Atwood^s 
 administratrix tendered the unpaid premium, and demanded pay- 
 ment under the policy. The Virginia court held that the policy had 
 been revived, and compelled the insurer to make payment in accord- 
 ance with its terms. •• 
 
 The reasons given for this doctrine of resuscitation are divers, but 
 the general theory of the holding is that life insurance is not such 
 a continuous contract as is terminated ipso facto by war,«» but is an 
 entire contract, in which the insured has certain vested rights ; that 
 the condition avoiding the contract upon nonpayment of premiums 
 is not a condition precedent, but a condition subsequent, defeating 
 rights already vested ; and when such condition becomes impossible 
 of performance, nonperformance will be excused, since the law does 
 not favor forfeiture. 
 
 The United States Rule. 
 
 The question came before the Supreme Court of the United 
 States in 18?6, in New York Life Ins. Co. v. StathamJ*^ and several 
 companion cases, and was decided by a divided court. The rather un- 
 satisfactory opinion by Mr. Justice Bradley accords with the New 
 York doctrine in holding that the contract is entire, and not from 
 year to year, and that the condition as to payment of premiums is 
 subsequent, and not precedent. It denies, however, that the contract 
 
 « 
 
 6T Cohen v. Insurance Co., 50 N. T. 610, 10 Am. Rep. 522 ; Sands v. Insur 
 ance Co., 50 N. Y. 626, 10 Am. Rep. 535; Manhattan Life Ins. Co. v. War- 
 wick. 20 Grat (Va.) 614, 3 Am. Rep. 218; Mutual Ben. Life Ins. Co. v. At- 
 wood's Adm'x, 24 Grat. (Va.) 497, 18 Am. Rep. 652; New York Life Ins. Oo. 
 V Hendren, 24 Grat. (Va.) 536; Clemmitt v. Insurance Co., 76 Va. 355; Mu- 
 tual Ben. Life Ins. Co. v. Hillyard, 37 N. J. Law, 444, 18 Am. Rep. 741; Ne\9 
 York Life Ins. Co. v. Clopton, 7 Bush (Ky.) 179, 3 Am. Rep. 290; Statham 
 V. Insurance Co., 45 Miss. 581, 7 Am. Rep. 737. 
 
 «« Mutual Ben. Life Ins. Co. v. J^twood's Adm'x, 24 Grat 497, 18 Am. Rep. 
 652. 
 
 «• See Sands v. In^^urance Co., supra. 
 
 T« NEW YORK LIFE INS. CO. v. STATHAM. 98 U. S. 24, 23 L. Ed. 789. 
 
 g^ :t2-43> 
 
 ALIENS AS PARTIES INSURED. 
 
 95 
 
 is merely suspended, and declares it abrogated by reason of the non- 
 payment of premiums, since the time of the payments is peculiarly 
 of the essence of the contract. Nor will equity relieve from the for- 
 feiture due to the nonperformance of the impossible condition subse- 
 quent, since to do so would work injustice to the insurer, inasmuch 
 as the insurer and insured are not on an equal footing in the prem- 
 ises. The payment of the past due premiums and the revival of the 
 policy is wholly at the option of the insured. The insurer has abso- 
 lutely no means of compelling the revival of all suspended policies, 
 and it is reasonable to suppose that the option to revive, by pay- 
 ment of the premiums due, will be exercised only in those cases 
 where the insured is already dead, or in such bad health as will pre- 
 clude his securing a new policy. 
 
 Accordingly it was held that the policy was extinguished by the 
 nonpayment of the premiums, and that no action would lie for the 
 amount of insurance specified therein. But it was further decided 
 that it would be also unjust to allow the insurer to retain the re- 
 serve value of the policy, which is the excess of the premiums paid 
 over the actual risk carried during the years when the policy had 
 been in force. "To forfeit this excess, which fairly belongs to the as- 
 sured, and is fairly due from the company, and which the latter actu- 
 ally has in its coffers, and to do this for a cause beyond individual 
 control, would be rank injustice. It would be taking away from the 
 assured that which had already become substantially his property." 
 Therefore the insured was held entitled to recover the "equitable 
 value" of his policy at the time of the forfeiture. This equitable 
 value is defined as the difference between the cost of a new policy 
 and the present value of the premiums yet to be paid on the forfeited 
 policy at the time when the forfeiture occurred. This is approximately 
 the reserve value of the policy.''^ 
 
 The holding of the federal Supreme Court in the Statham Case 
 would seem to be correct. So far as the contract is executory it is 
 thoroughly inequitable, and opposed to right reason, to hold that it 
 is not discharged in accordance with its terms by reason of the non- 
 performance of the insured, even though performance would be il- 
 legal because of the existence of war. But in so far as it is executed 
 and the insured has acquired vested rights in the reserve fund of the 
 insurer, subject to be defeated by nonperformance of a condition 
 subsequent, the relation between insurer and insured is practically 
 
 Ti The West Virginia role Is stated somewhat differently, but is similar In 
 effect It is there held that the insured may recover the difference between 
 what he paid in premiums and the actual cost of sustaining the risk, inter- 
 est being allowed on each balance from the time of payment. See Abell y. 
 Insurance Co., 18 W. Va. 400. 
 
 
 
I 
 
 I 
 
 ' 
 
 96 
 
 PARTIB8, 
 
 (Ch.3 
 
 that of debtor and creditor, and the same rule should be apphed as 
 in the case of debts due at the outbreak of war, in which the rights 
 of the creditor are universally held to be merely suspended. 
 
 INSANE PERSONS AS PABTIES INSURED. 
 
 44. In accordance with tlie general law of contracts, insurance con- 
 
 tracts made with Insane person, are void when such Persons 
 have been judicially declared Insane; otherwise merely voidable 
 at the option of the Insane party, unless such Insanity was un- 
 known to the other party. In which caso * contract fairly made 
 is enforceable. 
 
 45. The intervening insanity of the insured, whereby it becomes im- 
 
 possible for him to perform the conditions of the poUcy, does 
 not prevent such nonperformance from discharging the insurer 
 in accordance with the terms of the contract, where such condi- 
 tions are precedent to the continuance of the contract. But 
 where the conditions not performed are subsequent in their 
 nature, and operate to defeat the right to demand payment for 
 m, loss already suffered, insanity will excuse nonperformance 
 and avoid a forfeiture. 
 
 A contract of insurance made with an insane person is subject to 
 the same rules as to validity as apply to ordinary contracts, which 
 have been stated above, and which are too well settled to require 
 discussion '^ But the peculiar nature of the insurance contract gives 
 rise to an interesting and difficult question as to the effect upon an 
 existing contract of the supervening insanity of the insured, when 
 such affliction renders him incapable of complying with the condi- 
 tions of the policy. 
 
 Intervening Insanity or Mental Incapacity. 
 
 While it is scarcely accurate to say that the conditions of a policy 
 are strictly either precedent or subsequent, yet they can be readily 
 distinguished as falling into two classes. First are those whose per- 
 formance at the time agreed upon is necessary to the continued lia- 
 bility of the insurer to perform in case of loss, such as payment of 
 premiums, and notice of change of interest or of other msurance. 
 Such conditions are so essentially parts of the contract that noncom- 
 pliance by the insurer amounts to a breach of the agreement, which 
 discharges the insurer from further liability. Thus, while not strict y 
 conditions precedent, they are yet of that nature. It is consequently 
 immaterial what may be the cause of the breach of such conditions 
 
 T2 Lawr. Wheat 541 et seq. ; Sands v. Insurance Co., 50 N. Y. 626^ 10 Am. 
 
 Rep. 535. 
 Ti Clark, Cont (2d Ed.) 178, 
 
 §.4 44-45) 
 
 INSANE PERSONS AS PARTIES INSURED. 
 
 97 
 
 by the insured. ^ The insurer is discharged, even though the insanity 
 or other disability of the insured made performance wholly impossi- 
 ble.^* Therefore if the insured fails to pay a premium when due be- 
 cause of insanity or other disabling disease, all his rights under the 
 policy are, nevertheless, forfeited, in accordance with the terms of 
 the contract* 
 
 But a second class of conditions are those that stipulate for the 
 doing of some act by the insured after the loss insured against has 
 taken place, such as giving notice and proofs of loss. Such terms 
 are in the nature of conditions subsequent, and the forfeiture of a 
 right that became vested upon the occurrence of the loss by reason 
 of nonperformance of such conditions is in the nature of a penalty. 
 An estate so granted that it can vest only upon the fulfillment of a 
 condition precedent will wholly fail if the condition becomes impos- 
 sible, but a vested estate is never defeated because of an impossible 
 condition subsequent. ^« By a reasonable analogy, if, on account of 
 insanity or other disabling disease, it becomes impossible for the in- 
 sured under all the circumstances to give notice of a loss suffered, or 
 proofs of such loss, or to perform any other such condition subse- 
 quent, the right to demand indemnity that became fixed upon the 
 happening of the loss ought not to be defeated." 
 
 T* Worthington v. Insurance Co.. 41 Conn. 372, 19 Am. Rep. 495; Dillard 
 V. Insurance Co., 44 Ga. 119, 9 Am. Rep. 167 (wherein the distinction be- 
 tween conditions precedent and conditions subsequent is stated). See also 
 EVANS V. INSURANCE CO., 64 N. Y. 304. ' 
 
 7 6 KLEIN V. INSURANCE CO., 104 U. S. 88, 26 L. Ed. 662; WHEELER 
 V. INSURANCE CO., 82 N. Y. 543, 37 Am. Rep. 594; Carpenter v. Associa- 
 tion, 68 Iowa, 453, 27 N. W. 456, 56 Am. Rep. 855; Smith v. Insurance Co 11 
 Wkly. Notes Cas. (Pa.) 295; Thompson v. Insurance Co., 104 U. S. 252* 26 
 L. Ed. 765. * 
 
 7« 2 Washb. Real Prop. § 2 et seq. 
 
 77 stout V. Insurance Co., 12 Iowa, 371, 79 Am. Dec. 539; Woodmen Ace 
 Ass n V. Byers (Neb.) 87 N. W. 546, 55 L. R. A. 291, 89 Am. St. Rep 777* 
 TYippe V. Society, 140 N. Y. 23, 35 N. B. 316, 22 L. R. A. 432, 37 Am. St.' Rep' 
 ^lr^\Y^^^ ^' S^^ciety* 147 Ind. 543, 44 N. E. 661; Mandell v. Casualty Co* 
 ooVf^^ty^^' ^^ ^- ^' ^^^' ^ ^™- S^ ^^P- 291; McBlroy v. Insurance Co.,' 
 ^ ^?«^I^ *^.^?- ^^^' "^^ ^™- ®*- ^^P- ^' See further statements as to 
 the distinction between conditions operating on the contract prior to the loss 
 XT^ X. ™ ^®^**^°S to matters after the loss. McNally v. Insurance Co.. 137 
 
 f;, M^^^f o^-xfi"^^' "^"^ *^ ^^^^ P^*°* *^ Paltrovitch V. Insurance Co., 
 143 N Y. 73. 37 N. B. 639. 25 L. R. A. 198; Trippe v. Society, supra; Wood- 
 men Ace. Ass'n V. Byers, gupra; McFarland v. Association. 124 Mo 204 ^7 
 S. W. 436. Cf. NEW YORK LIFE INS. CO. r. STATHAM, 98 U. S. 24 23 L. 
 Ed. 789. * * 
 
 Vanck Ins.— 7 
 
u» 
 
 INSUBABLB INTEREST. 
 
 (Ch.4 
 
 lis 
 
 I 
 
 11 
 ! 
 
 CHAPTER IV. 
 
 INSURABLE INTEREST. 
 
 46. The General Theory of Insurable Interest 
 
 47. Insurable Interest in Property— What Constitute* 
 
 48. Duration of Interest. 
 49-52. Insurable Interest in Lives. 
 
 53. Interest of Creditor in Life of Debtor. 
 
 64. Interest of the Assignee of a Life Policy. 
 
 65. Consent of the Life Insured. 
 
 THE GENERAI. THEORY OF INSURABLE INTEREST. 
 
 46. The term insurable interest is nsed to denote that interest apper- 
 taining to the insured which is exposed to injury or destruction 
 by reason of the peril insured against. Such interest need not 
 rise to the level of a legal right, and in general it may be said 
 to exist whenever the insurer stands in such a relation to prop- 
 erty or a person as to justify a reasonable expectation of finan- 
 cial benefit to be derived from the continued existence of such 
 property or person. 
 
 The requirement of an insurable interest to support a contract of 
 insurance is based upon considerations of public policy, which con- 
 demn as wagers all agreements for insurance of any subject in 
 which the contracting parties have no such interest. The general 
 theory of what constitutes an insurable interest rests upon the broad 
 principle of indemnity, that lies at the very foundation of insurance 
 law. Thus, in broad terms, one may insure property or life, when 
 he stands in such relation to it that he will be benefited by its con- 
 tinued existence and damnified by its destruction.^ But what must 
 be the character of the expected benefit, or of the loss that is feared? 
 Must the expected benefit have such a legal basis that its conferring 
 could be compelled by law, or the loss be such as would entitle the 
 insured to damages against a tort feasor causing it? 
 
 An examination of the authorities shows conclusively that in an- 
 swering this question a sharp distinction must be made between cases 
 of property insurance and those of life insurance.* While it is not 
 necessary that the person insured shall have any title to the property 
 insured, either legal or equitable, yet an expectation of benefit, to be 
 
 1 CONNECTICUT MUT. LIFE INS. CO. v. SCHAEFER, 94 U. S. 457, 24 
 
 r cvi 251 
 
 » See Crosswel v. Association, 51 S. C. 103, 28 S. E. 200, 203. 
 
 Ht>) 
 
 THE GENERAL THEORY OF INSURABLE INTEREST. 
 
 99 
 
 derived from its continued existence, however lively and morally 
 certain of realization it may be, will not afiford a sufficient insurable 
 interest unless that expectation has a basis of legal right.' If such 
 legal basis exists, an expected benefit, however remote, constitutes 
 an insurable interest. This is well illustrated by Lord Eldon in his 
 opinion in the great leading case of Lucena v. Craufurd : * "Suppose 
 A. to be possessed of a ship limited to B. in case A. dies without is- 
 sue ; that A. has 20 children, the eldest of whom is 20 years of age ; 
 and B. 90 years of age; it is a moral certainty that B. will never 
 come into possession, yet this is a clear interest. On the other hand, 
 suppose the case of the heir at law of a man who has an estate 
 worth i20,000 a year, who is 90 years of age, upon his death-bed, 
 intestate, and incapable from incurable lunacy of making a will; 
 there is no man who will deny that such an heir at law has a moral 
 certainty of succeeding to the estate ; yet the law will not allow that 
 he has any interest, or anything more than a mere expectation." 
 
 The facts in Lucena v. Craufurd well illustrate what is meant by 
 an expectation supported by a legal basis. In that case certain com- 
 missioners were appointed under act of Parliament, with power to 
 take possession and dispose of such vessels of the United Provinces 
 as might be brought into English ports. These commissioners in- 
 sured certain captured Dutch vessels then at St. Helena, which were 
 to be brought into English ports. Before reaching England the 
 insured vessels encountered a storm, and were all lost or seriously 
 damaged. The underwriters sought to escape liability on the ground 
 that the insuring commissioners had no right or interest in the ves- 
 sels until brought to an English port, and that the insurances were 
 therefore void. But the Court of Exchequer Chamber » held that 
 the commissioners had an insurable interest at the time the policies 
 were taken out; that while they had no present legal right in the 
 vessels themselves, yet they might expect to acquire such right in 
 case the vessels made the voyage in safety. And this expectation 
 was based upon an act of Parliament, which must operate if the ves- 
 sels came to port. Hence, by the destruction of the vessels at sea, 
 they were prevented from acquiring a legal right in them, and were[ 
 therefore, damnified.* 
 
 « Baldwin v. Insurance Co., 60 Iowa, 497, 15 N. W. 300. "A man has no 
 right to an indemnity because he has lost the chance to receive a gift" Lord 
 Ellenborough, in Routh v. Thompson, 11 East, 42a 
 
 * 2 Bos. & P. N. S. 269, at page 324. 
 » 3 Bos. & P. 99. 
 
 • From the Judgment of the Exchequer Chamber an appeal was taken to 
 the House of Lords, which, however, did not finally pass upon the question 
 of whether an insurable interest was present, but awarded a venire de novo 
 on collateral grounds. 2 Bos. & P. N. R. 269. Lord Eldon. Lord BUenbor- 
 
 
100 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 
 So it has been held that a stockholder may insure the property of 
 the corporation, although he has no legal interest whatsoever in such 
 property.^ His expectation of benefit to be derived from the con- 
 tinued existence of such property, however, is based upon his legal 
 right as stockholder to demand participation in the profits of the 
 corporation, or in its assets upon dissolution. But the employe of a 
 railway corporation could not insure the engine he drove on the 
 ground that its destruction would prevent the expected continuation 
 of his employment ; nor could a surety insure the property of his 
 principal merely because he would look to such property for indem- 
 nification in case he should be obliged to pay his principal's debt. 
 But it would be otherwise if the surety were secured against loss 
 by a mortgage upon the principal's property, or if the creditor held 
 a mortgage upon such property to which the surety, upon payment 
 of the debt, might be subrogated.* . 
 
 Turning to the cases on life insurance we find that no such limita- 
 tion upoil the character of the expectation exists. While the doc- 
 trine of insurable interest jn lives, like that in property, seems from 
 the authorities to be based on the theory of indemnity for actual 
 loss yet the expectation of benefit to be derived from the continued 
 existence of a life need have no legal basis whatever.^<> A reasonable 
 probability is sufficient, without more. Thus a brother is under no 
 leeal obHgation to support his sister, and the mere relationship does 
 not give her an insurable interest in his life. Yet if he has been 
 accustomed to contribute to her support, she may insure his life, on 
 the theory that by his death she will lose expected future contribu- 
 tions although such contributions would be essentially voluntary.^^ 
 Again a ^marked distinction between the rules affecting insurable 
 interest in property and life, respectively, is seen in the relation re- 
 
 ouffh and Lord Erskine. however, opposed the decision of the Exchequer 
 Chamber, and the weighty influence of their opinions is apparent in subse- 
 quenVEAglish cases, which seem to have settled tJ^e law contrary ^ot^e 
 decision of this celebrated case. See Routh v. Thompson, 11 East 426, 
 l3SWorth y. Insurance Co., L. R. 8 C. P. 596. See, also, opinion of Story, 
 J .in The Joseph, 1 Gall. 558. Fed. Cas. No. 7,533; 1 Arnould, Mar. Ins. §§ 
 
 ^^RIGGS y. INSURANCE CO., 125 N. Y. 7. 25 N. B. 1058, 10 U R. A. 684. 
 21 Am. St Rep. 716; WARREN y. INSURANCE CO., 31 Iowa, 464, 7 Am. 
 
 ^^8^'se^e Grevemeyer v. Insurance Co., 62 Pa. 340, 1 Am. Rep. 420 
 
 • Hanovr Fire Ins. Co. v. Bohn. 48 Neb. 743, 67 N. W. 774. 58 Am. St 
 
 ^?o WARNOCK y. DAVIS. 104 U. S. 775, 26 L. Ed. 924; LOOMIS v. IN- 
 SURANCE CO.. 6 Gray (Mass.) 399; Equitable Life Ins. Co y. Hazelwood. 
 ^ Tex 338 12 S. W. 621. 7 L. R. A. 217. 16 Am. St. Rep. 893; Carpenter v. 
 L^ancVco^^^iei Pa. 9, 28 Atl. 943. 23 L. R. A. 571. 41 Am. St Rep. 880. 
 11 LORD T. DALL, 12 Mass. 115, 7 Am. Dec. 38. 
 
 46) 
 
 THE GENERAL THEORY OF INSURABLE INTEREST. 
 
 101 
 
 quired between the extent of the interest insured and the amount 
 of the insurance granted thereon. In property insurance the actual 
 value of the interest exposed to loss is the limit of the insurance that 
 can validly be placed thereon. That is to say, the actual pecuniary 
 loss that will be suffered through the destruction of the property 
 insured is the limit of valid insurance on such property. But this 
 rule has no place in life insurance. Granted that an insurable inter- 
 est exists, there is no limit to the amount of insurance that may be 
 validly contracted for, save such as may be imposed by the discretion 
 of the parties, unless that interest has its origin in commercial rela- 
 tion. The insurable interest possessed by a father in the life of his 
 minor child is said to rest upon the father's right to the child's serv- 
 ices.^' The pecuniary advantage to be derived by the father from 
 the continued existence of the child until majority could not, under 
 the most favorable circumstances, amount to more than a few thou- 
 sand dollars. Indeed, it is a matter of experience that ordinarily 
 the continued existence of the child is pecuniarily a detriment, on 
 account of the expense of support and education. Yet there is no 
 rule of law that would prevent the father from insuring the life of his 
 child in the sum of one million dollars, or any other large sum which 
 might be agreed upon. A wife has a legal right to support from her 
 husband, and may therefore insure his life.^* But in an action upon 
 such a policy, evidence of the husband's incapacity to support his 
 wife, either at the time of the issuance of the policy or at the time 
 of his death, would be wholly irrelevant* 
 
 Still another striking difference is seen to exist, in regard to in- 
 surable interest, between property and life insurance. In order that 
 a contract of insurance on property shall be enforceable, an insurable 
 interest must exist in the insured at the time of loss, but not, it 
 scems,^* at the time of issue. But in life insurance the rule is re- 
 versed. A policy of Hfe insurance is wholly invalid unless the as- 
 sured possesses an insurable interest at the time when the contract 
 is made, while the presence of such an interest at the time of loss is 
 immaterial.^* 
 
 These radical differences in regard to the doctrine of insurable 
 interest found to exist between life and property insurance point to 
 
 1* Mitchell y. Insurance Co., 45 Me. 104, 71 Am. Dec. 529. 
 
 i» CONNECTICUT MUT. LIFE INS. 00. v. SCHAEFER, 94 U. S. 457, 24 
 L. Ed. 251. 
 
 ♦ But see CURRIER y. INSURANCE CO., 57 Vt 496, 52 Am. Rep. 134, in 
 wlii<± a contrary rule is suggested. 
 
 1* Sun Fire Ins. Co. v. Merz, 64 N. J. Law, 301, 45 Atl. 785, 52 L. R. A. 
 830; Dayis v. Insurance Co., 70 Vt. 217, 39 Atl. 1095. 
 
 15 CONNECTICUT MUT. LIFE INS. CO. v. SCHAEB'Eai, 94 U. & 457, 2-J 
 L. Ed. 261; DALBY y. ASSURANCE CO., 15 a B. 365. 
 
 P 
 
 71__ 
 ' 1) 
 
102 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 46) 
 
 THE GENERAL THEORY OF INSURABLE INTEREST. 
 
 103 
 
 .' 
 
 \ 
 
 some fundamental distinction between the principles applicable. It 
 is to be regretted that the courts have not worked out this distinc- 
 tion ^* and based their decisions consistently upon the differing prin- 
 ciples obtaining in the determination of what is just between the par- 
 ties and consonant with the public welfare. Not being guided by 
 any such clearly defined principles, and assuming that the same 
 theory of insurable interest is applicable in both property and life 
 insurance, they have heaped up a body of case law on insurable 
 interest, in regard to life insurance particularly, that is singularly 
 confusing and unsatisfactory, and conducive to uncertainty in the 
 law. It is believed that the true theory upon which this unfortunate 
 conflict of authority could be done away with, and the law on this 
 particular topic reduced to harmony and unity, can be discovered by 
 recognizing the essential difference between property insurance and 
 life insurance, and the consequent difference in the character of the 
 insurable interest required in each. 
 
 Property insurance is essentially and entirely a contract of indem- 
 nity. Hence an interest for the loss of which the contract provides 
 indemnity is an absolute essential to the valid existence of the con- 
 tract. Nor is it difficult to determine when such an interest is pres- 
 ent, the authorities being well agreed as to what constitutes an in- 
 surable interest in property. But life insurance is not essentially or 
 principally a contract of indemnity. While possessing an element 
 of pure insurance based upon indemnity, it is yet principally a con- 
 tract of imestment. It has been more aptly likened to a contract 
 for an annuity, whereby the insured agrees to pay a fixed annuity 
 during his life, in consideration of which the insurer agrees to pay a 
 certain sum upon the death of the insured.^^ But this contract is 
 speculative by reason of the uncertainty of life ; and the subject of 
 the contract is human life, which the law has always protected with 
 most jealous care. Therefore the law will not tolerate such con- 
 tracts made for the mere purpose of speculation, since to do so would 
 be to encourage the perpetration of murder and such other horrid 
 crimes as tend to destroy the very foundations of society. But when 
 made in good faith, for the purpose of accumulating a fund for the 
 support, after the death of the insured, of those dependent upon him, 
 the contract is one that encourages industry and thrift, and tends 
 to relieve society of the burden of caring for its helpless members. 
 
 i«See remarks of Hoar, J., In Forbes ▼. Insurance Co., 15 Gray (Mass.) 
 
 249, 77 Am. Dec. 360. „ ..no tt o 
 
 iTDALBY V. ASSURANCE CO., snpra; Central Bank v. Hume. 128 U. S. 
 195 205 9 Sup. Ct. 41, 32 L. Ed. 370, per Fuller, C. J.; NEW YOKK LIFE 
 INS. CO. ▼. STATHAM. 93 U. S. 24, 23 L. Ed. 789. 
 
 The Theoretical Basis of Valid Life Insurance. 
 
 The policy of the law, therefore, requires that iniquitous specula 
 tion in human life should be prohibited, while bona fide efforts t<^. v 
 provide for the support of dependents after death should be encour- ^ 
 aged. Thus it is clear that bona fides is the logical test of the pro- 
 priety, and hence of the validity, of the contract.^® Accordingly it 
 would seem that whenever the circumstances of the case are such as 
 to afford satisfactory evidence that a policy has been taken out in 
 good faith, and for the legitimate purpose of life insurance, it should 
 be held valid, irrespective of the question of pecuniary loss to be suf- 
 fered by the beneficiaries by reason of the death of the insured. This 
 theory of insurable interest would justify the statement that a person 
 has a sufficient interest in a life when his relation to that life is such 
 by reason of blood, marriage, or commerce, that he may reasonably 
 be supposed to be desirous of protecting and prolonging it, rather 
 than of destroying it. A more accurate statement of the principle, 
 though one further removed from the language of the adjudged 
 cases, is as follows : A contract of life insurance will be presumed to 
 be made in good faith, and therefore to be valid, when the assured 
 bears such a relation to the insured that it is reasonable to suppose 
 that the assured desires the continued existence of the insured ; but 
 this presumption is in every case rebuttable by evidence of actual 
 bad faith.^* 
 
 Under this rule those closely related by blood or marriage, as 
 parent and child, brother and sister, and husband and wife, could 
 be consistently allowed to insure each other*s lives without reference 
 to the probability of pecuniary benefit to be derived. It would be 
 sufficient that the relation was so intimate that the ties of affection 
 would induce the assured to protect and prolong the life of the in- 
 sured rather than to endeavor wrongfully to shorten it. On the oth- 
 er hand, more remote relationship, such as that of uncle and nephew, 
 would not be sufficient, without more, to raise a presumption of such 
 
 18 See Appeal of Corson, 113 Fa. 438, 6 Atl. 213, 218, 57 Am. Rep. 479; 
 Crosswel v. Association, 51 S. C. 103, 28 S. E. 200. It may be objected that 
 the difficulty of determining the existence of good faith in any given case is a 
 serious practical obstacle in the way of the adoption of the suggested rule. 
 Yet the existence of good faith is a necessary element in many well-settled 
 rules of law; for example, the rules determining priority of liens, and the 
 rights of holders of negotiable paper. So, in insurance law, as stated later 
 in the text, the good faith of a creditor in taking out insurance on the life 
 of his debtor in excess of the amount of the debt is the generally accepted 
 test of the validity of such insurance. See Cammack v. Lewis, 15 Wall. (U. 
 S.) 643, 21 L. Ed. 244. It is certainly no more difficult to determine whether 
 a contract of insurance has been made in good faith than whether land has 
 been so purchased. 
 
 19 See Appeal of Corson. 113 Pa. 438, 6 Atl. 213, 57 Am. Rep. 479. 
 
104 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 good faith as would validate the policy taken out by one on the life 
 of another. 2** But if it is shown that in any particular case there is 
 some special reason why one should desire the long life of the other, 
 as where the uncle provides for the support and education of the 
 nephew, or is indebted to him,*^ it might be properly held that the 
 circumstances were sufficient to establish the good faith necessary to 
 validate a contract of life insurance made by one upon the life of an- 
 other. 
 
 No decided case has gone so far as to lay down in terms the rule 
 stated above, but it is submitted that the theory of the best consid- 
 ered decisions, as well as sound reason, would justify its enuncia- 
 tion.*' Indeed, the requirement that the relation between assured 
 and insured shall be such as to show the good faith and lawful pur- 
 pose of the contract is but a general statement of a principle of which 
 the rule as ordinarily laid down by the courts, viz., that the relation 
 between the parties shall be such as to justify a reasonable expecta- 
 tion of benefit from the continuance of the life insured, is but a 
 phase; for expectation of pecuniary benefit to be received from the 
 insured affords the best evidence that the assured desires the con- 
 tinuance of his life. But such expectation ought not to be the sole 
 evidence of that desire." And that the tendency of the courts is 
 to adopt the broader rule may be seen from statements made by 
 judges of the highest authority, even though such statements are 
 usually obiter dicta. Thus in Warnock v. Davis " the court said : 
 "It is not necessary that the expectation of advantage or benefit 
 should be always capable of pecuniary estimation, for a parent has 
 an insurable interest in the life of his child, and a child in the life of 
 his parent, a husband in the life of his wife, and a wife in the life of 
 her husband. The natural affection in cases of this kind is consid- 
 ered as more powerful, as operating more efficaciously, to protect 
 the life of the insured, than any other consideration. But in all cases 
 there must be a reasonable ground, founded upon the relation of the 
 parties to each other, either pecuniary or of blood or affinity, to ex- 
 pect some benefit or advantage from the continuance of the life." 
 In Loomis v. Eagle Life & Health Ins. Co.," Chief Justice Shaw 
 
 «o SINGLETON v. INSURANCE CO., 66 Mo. 63. 27 Am. Rep. 321; Appeal 
 of Corson, snpra. 
 
 «i Union Mut Life Ins. Co. ▼. Mowry, 96 U. S 544, 24 L. Ed. 674. 
 
 t«Cro8Swel v. Association, 51 S. C. 103, 28 S. B. 200; WARNOOK ▼. 
 DAVIS, 104 U. S. 775. 26 L. Ed. 924 ; CONNECTICUT MUT. LIFE INS. CO. v. 
 SCHAEFER, 94 U. S. 457. 24 L. Ed. 251; ^TNA LIFE INS. CO. v. FRANCE, 
 94 U. S. 561, 24 L. Ed. 287. And see EVjuitable Life Ins. Co. V, Hazelwood, 
 75 Tex. 338, 12 S. W. 621. 
 
 «» WARNOCK v. DAVIS, 104 U. S. 775, 26 L. Ed. 024. 
 
 «*Id. 
 
 a» LOOMIS v. BEAGLE LIFE & HEALTH INS. CO., 6 Gray (Mass.) 399. 
 
 §46) 
 
 THE GENERAL THEORY OF INSURABLE INTEREST. 
 
 105 
 
 said : "We cannot doubt that a parent has an interest in the life of 
 a child, and, vice versa, a child in the life of a parent; not merely 
 on the ground of a provision of law that parents and grandparents 
 are bound to support their lineal kindred when they may stand in 
 need of relief, but upon considerations of strong morals, and the 
 force of natural affection between near kindred, operating often 
 more efficaciously than those of positive law." In Crosswel v. Con- 
 necticut Indemnity Ass'n,** a soundly decided and well-reasoned 
 case, it is said: "But with respect to life insurance, except when 
 purposely based on some contractual relation as to which death 
 might entail loss of a pecuniary nature, the matter of 'insurable in- 
 terest* is important only in ascertaining whether the contract is ob- 
 noxious to the public policy which condemns gambling on the con- 
 tinuance of human life, because such speculative contracts are sup- 
 posed to tend to bring about the death of the insured by creating an 
 interest in his death. *The essential thing (in life insurance) is that 
 the policy shall be obtained in good faith, and not for the purpose 
 of speculating upon the hazard of a life in which the insured has no 
 interest.* Connecticut Mut. Life Ins. Co. v. Schaefer, supra.*^ 
 
 "To meet the charge that the contract is a mere wager, it becomes 
 important to show that the person procuring the insurance has an 
 interest also to preserve the life of the insured. This prevents the 
 contract from being a mere wager, although all contracts based on 
 the happening of an uncertain event, or on the uncertain time when 
 a sure event will happen, are in their nature speculative. All agree 
 that 2 pecuniary interest will save the policy, at least to the extent of 
 the mterest; but does a mere pecuniary interest afford the best or 
 strongest guaranty to society that the insured's life will not be de- 
 stroyed by the holder of the policy ? What, then, is to protect soci- 
 ety against the danger that, from that standpoint, lurks in a con- 
 tract of insurance by a creditor on the life of a hopelessly bankrupt 
 debtor? In that case, how does the hopeless prospect of payment 
 by the debtor protect society against the keen interest which the 
 creditor would have in the death of the debtor ? Yet we find no case 
 holding such a policy void. So, what pecuniary interest has the wife 
 in the life of a husband incapable of supporting her, or the husband 
 in the life of a wife incapable of rendering service? Yet we find no 
 case holding such a policy void. Indeed, there is much fiction in ref- 
 erence to the supposed necessity of a pecuniary insurable interest to 
 support a life insurance policy, when a near relative insures for the 
 benefit of another. Close ties of blood or affinity, as parent, child, 
 
 «• 61 S. C. 103, 28 S. E. 200. 
 
 «7 CONNECTICUT MUT. LIFE INS. CO. v. SCHAEFER, 94 U. S. 457, 24 
 L. EO. 251. 
 
 <il 
 
 m 
 
 ™ 
 
 1 
 
 
 iiill 
 
 li 
 
 lil 
 
106 
 
 INSURABLB INTEREST. 
 
 (Ch.4 
 
 brother, sister, husband, wife, with the natural affection and moral 
 forces which generally prompt one such to serve and protect the 
 other, rendering it highly improbable that for money one would take 
 the life of the other, afford a surer guaranty to society against the 
 dangers of betting on the duration of human life than any mere pe- 
 cuniary interest in the life insured, often more imaginary than real." 
 
 Summary. 
 
 The results of the above discussion of the general theory of insur- 
 able interest may be summarized thus: 
 
 (1) The requirement of insurable interest is based on public pol- 
 icy, which prohibits wagers. 
 
 (2) The doctrine of insurable interest in property insurance is es- 
 sentially different from that in Hfe insurance, the two kinds of in- 
 surance contracts being themselves essentially different. 
 
 (3) Property insurance, being solely for indemnity, is valid only 
 when the insured sustains such a legal relation to the property in- 
 sured as that its destruction will entail upon him a pecuniary loss or 
 liability. 
 
 (4) Life insurance, not being for indemnity, is valid only when 
 contracted for in good faith. As evidence of such good faith the 
 law requires the presence of an insurable interest, which exists when 
 the assured is so related to the insured that he may reasonably be 
 supposed to desire the continuance of the life. It is not necessary 
 that the death of the insured shall cause a pecuniary loss to the as- 
 sured. 
 
 (5) It is necessary, therefore, to discuss separately the doctrines 
 of insurable interest in property and life. 
 
 INSURABLE INTEBEST IN PBOFERTY— WHAT CONSTITUTES. 
 
 47* A person lias an insurable interest in property wHen he is so situ- 
 ated with reference to it that by its destruction lie will suffer 
 an actual loss of n&oney or legal right, or incur a liability. 
 More specifically, an insurable interest exists in the following 
 cases: 
 
 (a) When the insurer possesses a legal title in the property insured, 
 
 whether Tested or contingent, defeasible or indefeasible. 
 
 (b) When he has an equitable title, of whatexer character, and in 
 
 urhatever manner acquired. 
 
 (o) Where he possesses a qualified property in the subject of the in- 
 surance. 
 
 <d) Where he has merely possession or right of possession without 
 title or claim of title. 
 
 <•> Where he has neither title nor right in the property, but stands 
 in such relation to it that he has legal ground for expecting 
 benefit from its continued existence, or loss from its destruc- 
 tion* 
 
 §47) 
 
 INSUBABLE INTEREST — WHAT CONSTITUTES. 
 
 107 
 
 I i 
 
 It is difficult to give a definition of insurable interest in property 
 that is at once broad enough to embrace accurately all of the almost 
 innumerable cases that should properly be included, and precise 
 enough to be of value. Probably the definition laid down in the 
 California Civil Code" is in as satisfactory a form as can be de- 
 vised : "Every interest in property, or any relation thereto, or lia- 
 bility in respect thereof, of such a nature that a contemplated peril 
 might directly damnify the insurer, is an insurable interest." Of 
 course, as is the case with all definitions, the uncertainty as to the 
 precise meaning of some of the words and phrases used, such as "in- 
 terest in property," "relation," and "directly damnify," prevents this 
 definition from being of any considerable value in determining diffi- 
 cult cases. The real nature of insurable interest in property is well 
 set forth in the admirable opinion of Lawrence, J., in the leading 
 case of Lucena v. Craufurd,^* which not only is characterized by emi- 
 nent good sense, but also has the sanction both of antiquity and of 
 the enthusiastic approval of subsequent judges and text writers.*® 
 "A man is interested in a thing," says that great judge, "to whom 
 advantage may arise or prejudice happen from the circumstances 
 which may attend it, and whom it importeth that its condition as 
 to safety or other quality should continue. Interest does not neces- 
 sarily imply a right to a whole or part of the thing, nor necessarily 
 and exclusively that which may be the subject of privation, but the 
 having some relation to, or concern in, the subject of the insurance ; 
 which relation or concern, by the happening of the perils insured 
 against, may be so affected as to produce a damage, detriment, or 
 prejudice to the party insuring. And where a man is so circum- 
 stanced with respect to matters exposed to certain risks and dangers 
 as to have a moral certainty of advantage or benefit but for those 
 risks and dangers, he may be said to be interested in the safety of the 
 thing. To be interested in the preservation of a thing is to be so cir- 
 cumstanced in respect to it as to have benefit from its existence 
 prejudice from its destruction. The property of a thing, and the in- 
 terest derivable from it, may be different. Of the first, the price is 
 generally the measure ; but by interest in a thing, every benefit and 
 advantage arising out of or depending on such thing may be consid- 
 ered as being comprehended." 
 
 Justice Lawrence's statement, however, is too broad. It is neces- 
 sary that the benefit expected, or detriment that is feared, shall have 
 a legal basis, as is made clear in the opinion of Andrews, J., in Riggs 
 
 «8 See Civ. Code. § 2546. 
 
 «» 2 Bos. & P. N. R. 2C9, at page 302. 
 
 «o 1 Arnould, Mar. Ins. (7th Ed.) § 254. 
 
 I 
 
 ill 
 
 I 
 
 II 
 
 i 
 
108 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 r.t 
 
 I 
 
 ▼. Commercial Mut. Ins. Co.," where the following language is 
 used : "It would seem, therefore, that whenever there is a real in- 
 terest to protect and a person is so situated with respect to the sub- 
 ject of insurance that its destruction would or might reasonably be 
 expected to impair the value of that interest, an insurance on such 
 interest would not be a wager within the statute, whether the inter- 
 est was an ownership in, or a right to the possession of, the prop- 
 erty, or simply an advantage of a pecuniary character having a legal 
 basis, but dependent upon the continued existence of the subject. It 
 I is well settled that a mere hope or expectation, which may be frus- 
 \trated by the happening of some event, is not an insurable inter- 
 est." " It is certain that a mere naked expectation of benefit, un- 
 coupled with any present legal right, will not support a contract of 
 insurance. An expectant heir cannot insure ; ** nor can a general 
 creditor •* insure the property of his debtor, even though destruction 
 of such property would render worthless any judgment he might 
 obtain. In Pennsylvania it has been held that even a judgment cred- 
 itor, having thereby a general lien on the property, cannot legally 
 insure it until his lien becomes specific.*^ But this is contrary to the 
 weight of authority.** In case the debtor is dead, and without sulR- 
 
 ■1 RIGGS v. COMMERCIAL MUT. INS. CO., 125 N. Y. 7, 25 N. E. 1058, 10 
 L. R. A. 684, 21 Am. St. Rep. 716. 
 
 82 "An interest, to be insurable, does not depend necessarily upon the 
 ownership of the property. It may be a special or limited interest, discon- 
 nected from any title, lien, or possession. If the holder of an interest in 
 property will suffer loss by its destruction, he may indemnify himself there- 
 from by a contract of insurance. If, by the loss, the holder of the interest 
 is deprived of the possession, enjoyment, or profit of the property, or a secur- 
 ity or lien arising thereon, or other certain benefits growing out of or de- 
 pending upon it, he has an insurable interest" Post, J., in German Ins. Co. 
 v. Hyman, 34 Neb. 704, 52 N. W. 401. 
 
 •8 Baldwin v. Insurance Co., 60 Iowa, 497, 15 N. W. 300. And see the 
 dictum of Lord Eldon in Lucena v. Craufurd, 2 Bos. & P. N. R. 269, at page 
 324. It has been held that an heir expectant. In possession of property, had 
 an insurable Interest therein, but the decision is of doubtful authority. Home 
 Ins. Co. V. Mendenhall, 164 111. 458, 45 N. E. 1078, 36 L. R A. 374. It seems 
 that the heirs of a decedent have an insurable interest in the property of 
 the estate. Herkimer v. Rice, 27 N. Y. 163. 
 
 34 Foster v. Van Reed, 5 Hun (N. Y.) 321 ; Phillips, Ins. 8 201 ; 1 Amould, 
 Mar. Ins. (7th Ed.) § 310. 
 
 88 Grevemeyer v. Insurance Co., 62 Pa. 340, 1 Am. Rep. 420; Light v. In- 
 surance Co.. 169 Pa. 310, 32 Atl. 439, 47 Am. St Rep. 904. 
 
 8« Spare v. Insurance Co., 15 Fed. 707. And see ROHRBACH v. INSUR- 
 ANCE CO., 62 N. Y. 47, 20 Am. Rep. 451. In the first case it was also held 
 that the creditor could not recover without showing that the judgment debtor 
 had not suflacient property left out of which the judgment could be satis- 
 fied. The statute required the creditor to proceed against the debtor's per- 
 sonalty first But it was clearly incorrect to base the insured's right of re- 
 covery upon the insufficiency of the remaining realty of the debtor to sat- 
 
 §47) 
 
 INSURABLE INTEREST — WHAT CONSTITUTES. 
 
 109 
 
 cient personalty to pay his debts, it is held that a general creditor 
 may insure his real estate, on the ground that the right of such cred- 
 itor to subject the realty to the payment of his debt is in the nature 
 of a proceeding in rem, since all personal liability ceased with the 
 death of the debtor,**^ and no personal judgment may be had against 
 his personal representative. 
 
 The nature of insurable interest, which has been seen to be so diffi- 
 cult of precise definition or adequate description, can best be shown 
 by setting forth some of the numerous relations to property which 
 have been held by the courts to afford interest sufficient to validate 
 insurance on such property; and these will best serve our purpose 
 as illustrations if roughly classified. 
 
 Where the Insured Has Legal Title, 
 
 Any legal title in property, of whatever character, constitutes an 
 insurable interest therein. The interest may be contingent and re- 
 mote, but is yet insurable. Thus a contingent remainderman ** may 
 protect his interest, but the expectant heir cannot. He has merely 
 an expectation, but no estate or interest. Likewise, dower inchoate, 
 not being an estate in land, cannot be insured.^® But curtesy ini- 
 tiate *° affords sufficient interest, as do curtesy and dower consum- 
 mate, and any other life estate.*^ So any chattel real is insurable, 
 however brief the term,*^ and not only the lessee, but the sublessee,** 
 
 isfy the debt. He insured, not his debt, but his Interest in the property, 
 and his ability to satisfy his claim by the sale of other realty of the debtor 
 should not have released the iusurer. See notes 56, 57, infra. 
 
 37 CREED V. FIRE OFFICE, 101 Ala. 522, 14 South. 323, 23 L. R. A. 1T7, 
 46 Am. St Rep. 134; ROHRBACH v. INSURANCE CO., 62 N. Y. 47, 20 Am. 
 Rep. 451; Sheppard v. Insurance Co., 21 W. Va. 368. 
 
 8 8 See the dictum of Lord Eldon In Lucena v. Craufurd, supra. 
 
 89 See the argument of Berkshire, J., In Traders' Ins. Co. v. Newman, 120 
 Ind. 554, 22 N. E. 428; and see Flynn v. Flynn, 171 Mass. 312, 50 N. E. 650, 
 42 L. R. A. 98, 68 Am. St Rep. 427. 
 
 *o Franklin Marine & Fire Ins. Co. v. Drake, 2 B. Mon. (Ky.) 47; KYTB 
 v. ASSURANCE CO., 144 Mass. 43, 10 N. E. 518. A husband, being entitled 
 to curtesy in the equitable estates of his wife, has, after the birth of issue, 
 an insurable Interest in such property. Harris v. Insurance Co., 50 Pa. 341. 
 
 41 Hartford Fire Ins. Co. v. Haas, 87 Ky. 531, 9 S. W. 720, 2 L. R. A. 64; 
 Home Ins. Co. v. Field, 42 111. App. 392; Redfield v. Insurance Co., 56 N. 
 Y. 354, 15 Am. Rep. 424. See, also, Curry v. Insurance Co., 10 Pick. (Mass.) 
 535, 20 Am. Dec. 547. 
 
 42 Philadelphia Tool Co. v. British-American Assur. Co., 132 Pa. 236, 19 
 Atl. 77, 19 Am. St. Rep. 596; Home Ins. Co. of New York v. Gibson, 72 Miss. 
 58, 17 South. 13; Mitchell v. Insurance Co., 32 Iowa, 422. If the lessee has 
 erected buildings upon the leased land, and has the right to remove them, 
 he has an insurable interest in them to their full value, although they would 
 be worth only one-fourth as much if removed. LAURENT v. INSURANCE 
 
 «• Fowle V. Insurance Co., 122 Mass. 191, 23 Am. Rep. 308; May, Ins. | 84. 
 
 'i 
 
 )i 
 
 
 Ml 
 
110 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 may insure. The lessor also might insure the same property.** The 
 title of the insured may be defeasible upon condition subsequent,** 
 or voidable, or even void, if claimed in good faith.** And in the ab- 
 sence of a misrepresentation as to title or ownership, the insurer 
 may not question such bona fide claim of title. *^ So it was held 
 that a grantor, after the delivery of a deed in escrow, had an insur- 
 able interest in the property conveyed until the conditions were per- 
 formed.*® 
 
 Even when the owner has parted with the beneficial title, and re- 
 
 • tains only a legal title as trustee, he may insure; as in the case of 
 
 the seller of property not yet conveyed,** or of a mortgagor.*^® So 
 
 00., 1 Hall (N. Y.) 45. So, where the lessee has agreed to redeliver the 
 property in good condition, this liability gives him an insurable interest in 
 it to its full value. Imperial Fire Ins. Co. v. Murray, 73 Pa. 13. A tenant 
 at will, being entitled under statute to 30 days' notice before he can be dis- 
 possessed, has an insurable interest in the premises. Schaefifer v. Insurance 
 Co., 113 Iowa, 652, 85 N. W. 985. A tenant at sufferance has no insurable 
 interest in the property so held. Birmingham v. Insurance Co., 42 Barb. (N. 
 Y.) 457. 
 
 4* Lycoming Fire Ins. Co. v. Haven, 95 U. S. 242, 24 L. Ed. 473; Columbia 
 Ins. Co. v. Cooper, 50 Pa. 331. 
 
 48 McCutcheon v. Ingraham, 32 W. Va. 378, 9 S. E. 260; Biddeford Sav. 
 Bank v. Dwelling-House Ins. Co., 81 Me. 566, 18 Atl. 298. 
 
 4« The insured, being in possession of property under a reasonable and 
 honest belief that he is the owner, is not deprived of his insurable interest 
 by the fact that his title is in dispute. Monroe County Mut. Ins. Co. v. Rob- 
 inson, 5 Wkly. Notes Cas. 389. Possession under an unauthorized convey- 
 ance from an executor constitutes an insurable interest. Home Ins. Co. v. 
 Oilman, 112 Ind. 7, 13 N. E. 118. It is immaterial, as between the insured 
 and the insurer, that the former bought the insured property at a judicial 
 sale fraudulently brought about by him. Frierson v. Brenham, 5 La. Ann. 
 540, 52 Am. Dec. 603. It Is of no consequence to the Insurer that the in- 
 sured's deed Is Improperly acknowledged. Sanford v. Insurance Co., 174 
 Mass. 416, 54 N. E. 883, 75 Am. St Rep. 358. The grantee in a fraudulent 
 conveyance has an insurable interest in the property conveyed. Phoenix 
 Ins. Co. V. Mitchell, 67 111. 43; Home Ins. Co. v. Allen, 93 Ky. 270, 19 S. W. 
 743. Possession under claim of ownership is prima facie evidence of title 
 and of an insurable interest. Franklin Fire Ins. Co. v. Chicago Ice Co., 36 
 Md. 102, 11 Am. Rep. 469; Kansas Ins. Co. v. Berry, 8 Kan. 159. See, fur- 
 ther, Helvetia Swiss Fire Ins. Co. v. Allis Co., 11 Colo. App. 264, 53 Pac. 
 242; City of New York v. Brooklyn Fire Ins. Co., 41 Barb. (N. Y.) 231; David 
 T. Insurance Co., 83 N. Y. 265, 38 Am. Rep. 418. 
 
 4T Home Ins. Co. v. Gihnan, 112 Ind. 7, 13 N. B. 118. 
 
 48 Merchants' Ins. Co. v. Nowlin (Tex. Civ. App.) 66 S. W. 198. 
 
 4» Boston & S. Ice Co. v. Royal Ins. Co., 12 Allen (Mass.) 381, 90 Am. Dec. 
 151; Hill V. Insurance Co., 59 Pa. 474; Wheeling Ins. Co. v. Morrison, 11 
 Leigh (Va.) 354, 36 Am. Dec. 385. A conditional contract of sale does not 
 divest the vendor of his Insurable interest Wood v. Insurance Co., 46 N. 
 Y. 421. A vendor of goods, who holds them to secure the payment of the 
 
 60^ See note 50 on following page. 
 
 §47) 
 
 INSURABLE INTEREST — WHAT CONSTITUTES. 
 
 Ill 
 
 an assignee for the benefit of creditors may insure the assigned prop- 
 erty, '^^ or an executor the property devised to him for trust pur- 
 poses designated in the will.'* Even a naked trustee may procure 
 in his own name insurance on the trust property. •** Of course, how- 
 ever, he would take the proceeds of such insurance impressed with 
 the conditions of the original trust. 
 
 The mere fact that the owner of property may possess other means 
 of protecting himself against the loss covered by the insurance does 
 not deprive him of his insurable interest in such property. Thus a 
 manufacturer of tobacco has an insurable interest in uncanceled 
 revenue stamps, although by statute he is entitled to be reimbursed 
 for such stamps as may have been destroyed or become useless.** 
 So the owner of land upon which buildings are in course of construc- 
 tion has an insurable interest in them even though he is under no 
 obligation to pay the contractor, who has furnished all material and 
 labor used, until the completion of the structures.''* Neither will the 
 right of the insurer to resort to the contract liability of a third per- 
 son in order to make good his loss in any wise affect his insurable 
 interest ; as where the vendor may enforce full payment of purchase 
 
 V! 
 
 ,i: 
 
 $ 
 
 r 
 
 purchase money, retains an insurable Interest. Norcross v. Ins. Cos., 17 Pa. 
 429, 55 Am. Dec. 571. See, further, Clinton v. Insurance Co., 45 N. Y. 454; 
 ^tna Ins. Co. v. Jackson, 16 B. Mon. (Ky.) 242. 
 
 50 Carpenter v. Insurance Co., 16 Pet (U. S.) 495, 10 L. Bd. 1044; Mc- 
 Donald V. Black's Adm'r, 20 Ohio, 185, 55 Am. Dec. 448; Lycoming Fire Ins. 
 Co. V. Jackson, 83 111. 302, 25 Am. Rep. 386; Guest v. Insurance Co., 66 Mich. 
 98, 33 N. W. 31; Jackson v. Insurance Co., 23 Pick. (Mass.) 418, 34 Am. 
 Dec. 69; Washington Fire Ins. Co. v. Kelly, 32 Md. 421, 3 Am. Rep. 149. 
 Mortgagors and pledgors of chattels have an insurable Interest in them. 
 Manson v. Insurance Co., 64 Wis. 26, 24 N. W. 407, 54 Am. Rep. 573; Nuss- 
 baum r. Insurance Co. (0. C.) 37 Fed. 524, 1 L. R. A. 704; Kronk v. Insur- 
 ance Co., 91 Pa. 300; Jones, Chat. Mortg. § 100. The mortgagor has an in- 
 surable Interest equal to the value of the mortgaged property: Carpenter 
 V. Insurance Co., supra; Jones, Mortg. § 397. "The owner of an equity of 
 redemption has an Insurable interest equal to the value of the insurable 
 property embraced therein, whether he is personally liable for the mort- 
 gage debt or not." Mr. Justice Bradley, in ROYAL INS. CO. v. STINSON, 
 103 U. S. 25, 26 L. Ed. 473. 
 
 81 Even though he has not filed his bond (Sibley v. Insurance Co., 57 Mich. 
 14, 23 N. W. 473), and though the deed of assignment has not been approved 
 by the creditors (Phcenix Ins. Co. v. Adams' Trustee, 8 Ky. Law Rep. 532). 
 
 B2 Savage v. Insurance Co., 52 N. Y. 502, 11 Am. Rep. 741. 
 
 »» Howard Fire Ins. Co. v. Chase, 5 Wall. (U. S.) 509, 18 L. Ed. 524; 
 Young V. Insurance Oo. (D. a) 24 Fed. 279; Dick v. Instance Co., 81 Mo. 
 103. 
 
 8* United States r. American Tobacco Co., 166 U. S. 468, 17 Sup. Ct. 619 
 41 L. Ed. 1081. 
 
 88 FOLEY v. INSURANCE CO., 152 N. Y. 131, 46 N. B. 318, 43 L. R. A, 
 664; Santa Clara Female Academy v. Northwestern Nat Ins. Co., 98 Wis 
 257, 73 N. W. 767, 67 Am. St Rep. 805. 
 
112 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 §47) 
 
 INSURABLE INTEREST — WHAT CONSTITUTES. 
 
 113 
 
 
 price under an executory contract of sale, despite destruction of 
 buildings before conveyance/® or where an insured mortgagee's se- 
 curity is ample despite the loss of the insured property.*' 
 
 When Insured Has an Equitable Title, 
 
 It is well settled that possession of an equitable title, however ob- 
 tained, gives an insurable interest in the property in which such title 
 inheres.**® Thus a vendee before conveyance, '^^ a mortgagee,*® a mort- 
 gagoi after foreclosure and before the expiration of the period within 
 
 56 KAYNER V. PRESTON, 18 Ch. Div. 1. See, also, FOLEY y. INSUR- 
 ANCE CO., supra. 
 
 67 Stetson V. Insurance Co., 4 Mass. 330, 3 Am. Dec. 217. And see Wheel- 
 ing Ins. Co. V. Morrison, 11 Leigh (Va.) 367, 36 Am. Dec. 385; EXCELSIOR 
 FIRE INS. CO. V. ROYAL INS. CO., 55 N. Y. 343, 14 Am. Rep. 271. 
 
 88 Oilman v. Insurance Co., 81 Me. 488, 17 Atl. 544; STRONG v. INSUR- 
 ANCE CO., 10 Pick. (Mass.) 40, 20 Am. Dec. 507; Redfield v. Insurance Co., 
 56 N. Y. 354, 15 Am. Rep. 424. 
 
 B» FRANKLIN FIRE INS. CO. v. MARTIN, 40 N. J. Law, 568, 29 Am. 
 Rep. 271; Hough v. Insurance Co., 29 Conn. 10, 76 Am. Dec. 581; ^TNA 
 FIRE INS. CO. V. TYLER, 16 Wend. (N. Y.) 385, 30 Am. Dec. 90; Carpenter 
 v. Insurance Co., 135 N. Y. 298, 31 N. E. 1015; IMPERIAL FIRE INS. CO. 
 r. DUNHAM, 117 Pa. 460, 12 Atl. 668, 2 Am. St. Rep. 686. Even though 
 the agreement is by parol and unenforceable under the statute of frauds, 
 yet, if it is saved in equity by the doctrine of part performance, it consti- 
 tutes an insurable interest. Redfield v. Insurance Co., 56 N. Y. 354, 15 Am. 
 Rep. 424. 
 
 •0 KING T. INSURANCE CO., 7 Cush. (Mass.) 54 Am. Dec. 683; Foster v. 
 Van Reed, 70 N. Y. 19, 26 Am. Rep. 544. Successive mortgagees may each 
 insure. Fox v. Insurance Co., 52 Me. 333. The insurance by a mortgagee 
 is not an insurance of the mortgage debt, as was said by Mr. Justice Story 
 in Carpenter v. Insurance Co., 16 Pet. (U. S.) 495, 501, 10 L. Ed. 1044; nor is 
 it an insurance of the capacity of the insured property to pay the debt 
 which was the view taken by Gibson, J., in Smith v. Insurance Co., 17 Pa. 
 253, 55 Am. Dec. 546. Against these dicta is the decision of Folger, J., in 
 EXCELSIOR FIRE INS. CO. v. ROYAL INS. CO., 55 N. Y. 343, 14 Am. Rep. 
 271. After reviewing the cases, Mr. Justice Folger says: **To say that it is 
 the debt which is insured against loss is to give to most, if not all, fire in- 
 surance companies a power to do a kind of business which the law and their 
 charter do not confer. They are privileged to insure property against loss or 
 damage by fire. They are not privileged to guaranty the collection of debts. 
 If they are, they may insure against the solvency of the debtor. No one 
 will contend this, and it will be said it is not by a guaranty of the debt, 
 but an indemnity is given against the loss of the debt by an insurance against 
 the perils to the property by fire. This is but coming to our position: that 
 it is the property which is insured against the loss by fire, and the protec- 
 tion to the debt is the sequence thereof. As the property it is which is in- 
 sured against loss, it is the loss which occurs to it which the insurer con- 
 tracts to pay, and for such loss he is to pay within the limit of his liability, 
 irrespective of the value of the property undestroyed." See, also, Jones, 
 Morts. I 41A. 
 
 which redemption is allowed," the beneficiary under a deed of trust," 
 the creditors under a deed of assignment,^^ and even the vendee of 
 goods when title is to remain in the vendor until delivery,^* have all an 
 interest that may be validly protected by insurance. So in Columbian 
 Ins. Co. V. Lawrence «« it was held, in an opinion by Chief Justice 
 Marshall, that an interest taken under a voidable executory contract 
 of sale was insurable. One in possession of land with bond for title 
 unquestionably has an insurable interest in the buildings on the land.«« 
 When the Insured Possesses a Qualified Property. 
 
 A person having a qualified property in chattels, entitling him to 
 possession and the right of using or dealing with them in accordance 
 with the terms of the bailment, has such an interest in the chattels as 
 may be the subject of a valid contract of insurance. Such bailee may 
 insure merely his interest in the chattel, to protect himself against loss 
 of the benefits to which he is entitled,«^ or he may, and does more fre- 
 quently, insure himself against the liability which he may incur upon 
 the destruction of the chattels."' In case of loss, the bailee, who has 
 insured in his own name, may recover the full value of the property, 
 
 •1 Mechler v. Insurance Co., 38 Wis. 665; STRONG v. INSURANCE CO 
 10 Pick. (Mass.) 40, 20 Am. Dec. 507. But after the time allowed for re^ 
 demption has elapsed, the mortgagor's interest ceases, notwithstanding a 
 promise, without consideration, to extend such time. Essex Sav Bank v 
 Meriden Fire Ins. Co., 57 Conn. 335, 17 Atl. 930, 4 L. R. A 759 
 
 62 HILL V. SECRETAN, 1 Bos. & P. 315; Gordon v. Insurance Co. 2 
 Kck (Mass.) 249; Harvey v. Cherry, 76 N. Y. 436; Tilley v. Insurance Co., 
 86 Va. 811, 11 S. Ei. 120. 
 
 «8 See Columbian Ins. Co. v. Lawrence, 2 Pet. (U. S.) 25, 7 L. Ed 335 
 •* Bohn Mfg. Co. v. Sawyer, 169 Mass. 477, 48 N. E. 620 
 
 Me'lsS^ n Atl ^'^ ^^' "^ ^' ^^' ^^' ^^^' ^^^''' ^'^'°^'' ""• ^^^"^^ce ^^ 81 
 66 ciapp V. Insurance Ass'n, 126 N. O. 388, 35 S. B. 617. So an assignee 
 of a title bond has an insurable interest In the property. Ayres v. Insurance 
 Co., 17 Iowa, 176, 85 Am. Dec. 553. 
 
 •7 "A distinction is to be kept in mind between the agent's insurable inter- 
 est and his authority to insure for his consignor or other principal." 1 Phill 
 Ins. § 309. A commission merchant to whom goods are consigned has an in- 
 surable interest in them to the extent of the commissions he would receive 
 on the sales. PUTNAM v. INSURANCE CO., 5 Mete. (Mass.) 386. So 
 where a general agent has a lien on a cargo for advancements, this gives him 
 an Insurable interest therein. Wolff v. Homcastle, 1 Bos. & P 316 See 
 also, Russel v. Insurance Co., 1 Wash. C. 0. 409, Fed. Cas. No 12 146* 
 
 «• Crowley v. Cohen, 8 Bam. & Adol. 478. A common carrier which has 
 insured goods for which it is liable may recover on the policy, notwithstand- 
 ing other carriers are bound by contract to indemnify it Commonwealth 
 V. Hide & Leather Ins. Co., 112 Mass. 136, 17 Am. Rep. 72. See also 
 PHCENIX INS. CO. V. ERIE & W. TRANSP. CO., 117 U. S. 312, 6 Sup Ct' 
 750, 29 L. Ed. 873; Pelzer Mfg. Co. v. Sun Fire Office, 36 S. C 213 15 a n* 
 662; SHAW v. INSURANCE CO., 49 Mo. 578, 8 Am. Rep. 150.* 
 Vance Ins. — 8 
 
 ■» 
 
 In 
 
 ' ♦! 
 
114 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 holding the excess above his interest in trust for the owners.* • Thus 
 where the plaintiffs had taken in their own names insurance on cer- 
 tain specified articles constituting the stock of their pork-packing 
 house, the larger part of which stock belonged to other persons as bail- 
 ors, it was held that the plaintiffs might recover the whole amount of 
 loss, in their own right for their property destroyed, and as trustees 
 of that belonging to others, whether the policies read "for the benefit 
 of whom it may concern" or not.^® So in California Ins. Co. v. Un- 
 ion Compress Co.,^^ a cotton compress company had procured insur- . 
 ance upon cotton situated in specified places, and held by it "in trust 
 or on commission." The receipts of the compress company to de- 
 positors stipulated that it should not be responsible for loss by fire. 
 These receipts were exchanged for railway bills of lading, which also 
 exempted the railway companies from liability for loss by fire. Cot- 
 ton embraced under the terms of the policy was burned through the 
 negligence of the railway companies. Under these facts the Supreme 
 Court of the United States held that it was competent for the insured 
 compress company to show that the insurance was taken out for the 
 benefit of the railway companies, and that "it was lawful for the plain- 
 tiff to insure in its own name goods held in trust by it, and it can re- 
 cover for their entire value, holding the excess over its own interest 
 in them for the benefit of those who have intrusted the goods to it," 
 in this case the railway companies.''* 
 
 It was also held that the railway companies would be liable to the 
 owners of the cotton for the loss due to their negligence, despite the 
 stipulations for exemption in the bills of lading, and therefore had 
 such an insurable interest in the cotton as would enable them to claim 
 the benefit of the insurance taken out in their behalf ; and, further, the 
 court reaffirmed the doctrine laid down in Phoenix Ins. Co. v. Erie & 
 W. Transp. Co.," that "no rule of law or public policy is violated by 
 allowing a common carrier, like any other person having either the 
 
 •• WATERS V. ASSURANCE CO., 5 El. & Bl. 870; Waring v. Insurance 
 Co., 45 N. Y. 606, 6 Am. Rep. 146; Home Ins. Co. v. Baltimore Warehouse 
 Co., 93 U. S. 527, 23 L. Bd. 868; Murdock v. Insurance Co., 33 W. Va. 407, 
 10 S. E. 777, 7 L. R. A. 572. Where insurance is effected by a bailee or 
 agent upon his own authority, he may abandon or cancel it before his prin- 
 cipal has in any manner ratified it Still well v. Staples, 19 N. Y. 401. 
 
 TO MtnR Ins. Co. v. Jackson, 16 B. Mon. (Ky.) 242. 
 
 Ti 133 U. S. 387, 10 Sup. Ct 365, 33 L. Ed. 730. See, also, Roberts ▼. In- 
 surance Co., 165 Pa. 55, 30 Ati. 450, 44 Am. St. Rep. 642. 
 
 7 a See, also, Roberts v. Insurance Co., 165 Pa. 56, 30 Atl. 450, 44 Am. St 
 
 Rep. 642. 
 
 T» PHCENIX INS. CO. V. ERIE & W. TRANSP. CO., 117 U. S. 312, 6 Sup. 
 Ct 750, 29 L. Ed. 873. Approved also in Orient Ins. Co. v. Adams, 123 U. S. 
 67, 8 Sup. Ct. 68, 31 L. Bd. 63; Liverpool & G. W. Steam Co. v. Phoenix Ins. 
 Co., 129 U. S. 438, 9 Sup. Ct 469, 32 Li. Ed. 788. 
 
 §47) 
 
 INSURABLE INTEREST — WHAT CONSTITUTES. 
 
 115 
 
 general property or a peculiar interest in the goods, to have them in- 
 sured against the usual perils, and to recover for any loss from such 
 penis, though occasioned by the negligence of his own servants." 
 
 The same rules as to possession of insurable interest and the meas- 
 ure of recovery in case of loss applies to all other classes of bailees, 
 such as innkeepers, warehousemen,^* commission merchants or fac- 
 tors," and hirers of chattels,*^® as well as to receivers." In case a 
 receiver improperly applies funds in his hands to the payment of pre- 
 mmms on insurances effected on property intrusted to him, the in- 
 surer may not set up such fact in defense as making the insurance 
 void. Such transgression by the receiver is a matter between him and 
 the appointing court with which the insurer has no concern.^* 
 Insurable Interest in Liens. 
 
 Any person having a specific Hen upon property has an insurable in- 
 terest in such property to the extent of his lien.^» Thus an agent may 
 msure goods of his principal to protect his lien for commissions, «» or 
 the carrier the goods of the shipper to protect his lien for freight.*^ 
 So the judgment creditor may insure goods seized under execution," 
 
 T4 WATERS V. ASSURANCE CO., 5 Bl. & Bl. 870; Home Ins. Co. v. Bal- 
 timore Warehouse Co., 93 U. S. 527, 23 L. Ed. 868; Fire Ins. Ass'n v. Mer- 
 chants' & Miners' Transp. Co., 66 Md. 339, 7 Atl. 905, 59 Am. Rep. 162 The 
 language used in describing the property covered Is important Thus in 
 Lockhart v. Cooper, 87 N. O. 149, 42 Am. Rep. 514, the phrases used were 
 owned, or "held in trust or on commission," or "sold and not delivered " 
 and it was held that the policy did not cover goods which had been sold, 
 and of which a technical delivery had been made, though not removed from 
 the warehouse. But in Waring v. Insurance Co., 45 N. Y. 606, 6 Am Rep 
 146, the phrase "sold but not removed" was employed, and it was held that 
 the policy covered goods sold, and to which the legal title had passed, but 
 which had been left in the warehouse. 
 
 "Phoenix Ins. Co. v. Hamilton, 14 Wall. (U. S.) 504, 20 L. Ed. 729- De 
 Forest v. Insurance Co., 1 Hall (N. Y.) 84; Siter v. Morrs, 13 Pa 218 
 
 T« Where the hirer covenants to pay the value in case of loss, this* Uabilitv 
 gives him an insurable interest. Oliver v. Greene, 3 Mass. 133 3 Am Dec 
 96. So a charterer who has agreed to insure may insure the vessel. Bartlet 
 V Walter, 13 Mass. 267, 7 Am. Dec. 143. And the charterer may insure for 
 the owners. Murdock v. Insurance Co., 33 W. Va. 407, 10 S. B. 777, 7 L. R. 
 A. o72. 
 
 7T Thompson v Insurance Co., 136 U. S. 287. 10 Sup. Ct 1019, 34 L. Ed 
 408; In re Hamilton (D. C.) 102 Fed. 683. ^ ^ ^ r^a. 
 
 78 Thompson v. Insurance Co., supra. 
 
 T» Sun Mut. Ins. Co. v. Tufts, 20 Tex. Civ. App. 147, 50 S. W. 180. The 
 holder of a lien on a homestead, voidable under the statute, has an insurable 
 interest. Parks v. Insurance Co., 100 Mo. 373, 12 S. W 1058 
 
 «o See SHAW v. INSURANCE 00., 49 Mo. 578, 8 Am. Rep 150 
 
 N 'y^655^°''^^ ^' ^''^"'^''''® ^''•' ^^ ^^' 3^' Sa^a«® V- Insurance Co., 86 
 «« Hancox v. Insurance Co.. 8 Sum^. 132, Fed. Cas. No. 6,018. And see 
 
 
 1 
 
 il 
 
 i 
 
 .'I 
 
116 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 §47) 
 
 INSURABLE INTEREST — WHAT CONSTITUTES. 
 
 117 
 
 I 
 
 and the mechanic or material man the building upon which he holds 
 a statutory lien.®' It has even been held that a mechanic, who has an 
 inchoate lien which binds a mere equity of redemption in the buildings 
 erected, may insure such buildings.®* So the holder of a mere equita- 
 ble lien on a vessel may insure her.*' In like manner one who sailed 
 a vessel for commissions to be received, with authority to hold her as 
 security for his claims, was held to have an insurable interest in her.®' 
 In Mutual Fire Ins. Co. v. Ward '^ a landlord procured insurance upon 
 the furniture of his tenant while situated on the leased premises. It 
 was held that the right to levy distress upon the furniture for the rent 
 that was due and unpaid constituted a sufficient insurable interest 
 
 Mere Right of Possession in Insured. 
 
 A person having the mere right of possession of property may in- 
 sure it to its full value and in his own name, even when he is not re- 
 sponsible for its safe-keeping.®* Thus a bailee may recover under a 
 policy insuring goods gratuitously kept in store for another. Of 
 course, the proceeds of such insurance are held in trust for the owner of 
 the goods ; and the recovery is on the ground that the policy is procured 
 on behalf of an undisclosed principal, especially when it is taken out 
 *'for the benefit of whom it may concern." ®» So a sheriff having in his 
 custody goods seized under execution may validly secure insurance 
 upon them.'* 
 
 When Insured Has no Title or Interest in the Property. 
 
 As has been stated heretofore, a person may possess no title or legal 
 interest in property, and yet be so circumstanced with respect to it that 
 he will be directly damnified by its destruction. But the damnifica- 
 tion must have a legal basis ; the loss must be of a legal right The 
 shattering of expectations, however bright, or the disappointing of 
 hopes however strong, does not constitute such a loss as may be in- 
 demnified by insurance. Thus a general creditor, as has been before 
 
 Donoell v. Donnell, 86 Me. 518, 30 Atl. 67; International Trust Co. v. Board- 
 man, 149 Mass. 158, 21 N. E. 239. 
 
 88 stout V. Insurance Co., 12 Iowa, 371, 79 Am. Dec. 539; Protection Ins. 
 Co. V. Hall, 15 B. Mon. (Ky.) 411. See Harvey v. Cherry, 76 N. Y. 436. 
 
 84 ROYAL INS. CO. V. STINSON, 103 U. S. 25, 26 L. Ed. 473. 
 
 8 6 Bowring v. Insurance Co. (D. C.) 46 Fed. 119. 
 
 8« The Gulnare (C. C.) 42 Fed. 861. 
 
 «T 95 Va. 231, 28 S. E. 209. See, also, Columbia Ins. Co. v. Cooper, 50 Pa, 
 
 331. 
 
 88 Fire Ina. Ass'n v. Merchants* & Miners* Transp. Co., 66 Md. 339, 7 Atl. 
 905, 59 Am. Rep. 162; PHCENIX INS. CO. v. ERIE & W. TRANSP. CO., 117 
 U. S. 312, 6 Sup. Ct 750, 29 L. Bd. 873. 
 
 8» Hooper v. Robinson, 98 U. S. 528, 25 L. Ed. 219; Snow v. Carr, 61 Ala. 
 363, 32 Am. Rep. 3. 
 
 •0 White T. Madison, 26 N. Y. 117; Smith v. Huddleston, 103 Ala. 223, 15 
 South. 521. 
 
 shown, cannot insure the property of his debtor by means of which he 
 hopes to receive payment of his claim. Nor could one named as devi- 
 see in a will insure the property designated before the testator's death, 
 however reasonable his expectation of benefit to be derived from the 
 continued existence of the property. His expectation has no legal 
 basis, since a will has no legal eflfect before the death of the testator. 
 But when the expectation of benefit or advantage is founded upon a 
 legal right, an insurable interest exists, even though the probability 
 of injury to the insurer by the happening of the peril insured against 
 is very remote. Thus stockholders of a corporation have an insurable 
 interest in the property of the corporation;*^ for though they have 
 no title whatever to such property, they have a right to share in the 
 profits of the corporation, and this right, in a proper case, will be pro- 
 tected by a court of equity. Likewise it has been held that where a 
 mortgagor had sold the mortgaged premises to a vendee who assumed 
 the payment of the mortgage debt, and had thus parted with all his 
 interest in the property, the mortgagor yet had an insurable interest 
 in the property because of his personal liability for the debt and his 
 right to be subrogated to the mortgage security in case he should be 
 compelled to make payment.** Likewise where certain mortgagees, aft- 
 er they had indorsed notes and assigned the mortgage that secured 
 them, procured insurance on the mortgaged property, payable to the 
 assignee, it was held that the mortgagees had an interest, since in case 
 they were held on their indorsement they would be entitled to a reas- 
 signment of the mortgage.** 
 
 It is generally held that the husband has no insurable interest in the 
 separate property of his wife when the statutes deny him the right of 
 possession, or the enjoyment of rents and profits, even though he may 
 be in actual possession.** This is equally true where the wife is not 
 
 •1 WARREN V. INSURANCE CO., 31 Iowa, 464, 7 Am. Rep. 160; RIGGS 
 V. INSURANCE CO., 125 N. Y. 7, 25 N. E. 1058, 10 L. R. A. 684, 21 Am. St 
 Rep. 716; Seamen v. Insurance Co. (C. C.) 18 Fed. 250. And see Wilson v. 
 Jones, 2 Exch. 139; Glover v. Wells, 40 111. App. 350. There is a dictum to 
 the contrary in Philips v. Insurance Co., 20 Ohio, 174. 
 
 »2 Hanover Fire Ins. Co. v. Bohn, 48 Neb. 743, 67 N. W. 774, 58 Am. St. 
 Rep. 719; Waring v. Loder, 53 N. Y. 581. 
 
 »3 WILLIAMS V. INSURANCE CO., 107 Mass. 377, 9 Am. Rep. 41. 
 
 »* AGRICULTURAL INS. CO. v. MONTAGUE, 38 Mich. 548, 31 Am. Rep. 
 326; Clark v. Insurance Co., 81 Me. 373, 17 Atl. 303; Trott v. Insurance Co.. 
 83 Me. 362, 22 Atl. 245; Traders' Ins. Co. v. Newman, 120 Ind. 554, 22 N. E. 
 428. But a husband in the possession and enjoyment of the realty of his 
 wife, with an inchoate right of curtesy, has an insurable interest therein. 
 TRADE INS. CO. v. BARRAOLIFF, 45 N. J. Law, 543, 46 Am. Rep. 792. In 
 the case last cited it was also held that a husband had an insurable interest 
 in his wife's personalty which he had in his possession, and the benefits of 
 which he enjoyed. But such a holding seems opposed to sound principle, 
 and a contrary doctrine was laid down in AGRICUI/TUBAL INS. CO. y. 
 
v 
 
 II < 
 
 118 INSURABLE INTEREST. (Ch. 4 
 
 allowed to sell or incumber her property except with the consent of 
 her husband and his uniting with her in the conveyance, and when he, 
 under the law, might inherit her property.* •* But an insurable interest 
 exists where the wife holds such separate estate under a parol trust in 
 favor of the husband. Thus in Horsch v. Dwelling House Ins. Co.,®' 
 a man had bought with his own money land that was conveyed to his 
 wife, with the parol understanding that he was to have possession and 
 the beneficial use of the property for the purpose of supporting the 
 family, and that the wife was to make conveyance to him upon his re- 
 quest. The husband erected buildings on the land, and insured them 
 in his own behalf. The insurer sought to escape liability under the 
 policy by pleading that the husband had no insurable interest, but the 
 court gave judgment for the plaintiff on the ground that "the posses- 
 sion and use of the house and bams was of the utmost importance to 
 him in providing a support for himself and family, and their destruc- 
 tion was substantially as disastrous to him in his endeavor to support 
 himself and family as though he had the actual title." But a mere in- 
 truder, who has no color of title to the land upon which he erects 
 buildings, cannot insure such buildings, even though the actual ex- 
 pense incurred in erecting them far exceeds the amount of the insur- 
 ance.*^ So where a turnpike company voluntarily contributed to the 
 cost of erecting a bridge, in which it had no property interest, but 
 which was used by travelers over the company's road, thus adding to 
 the profits of the company, it was held that the company was without 
 an insurable interest in the bridge. It is true that the destruction of 
 the bridge damnified the turnpike company to the extent of the dimi- 
 nution of profits pending the rebuilding of the bridge ; but such profits 
 constituted but a mere expectation, lacking the legal basis necessary 
 to support an insurable interest. •• 
 
 Insurable Interest Arising out of Contract Rights, 
 
 Any binding contract giving rights which will be injuriously affect- 
 ed by the destruction of any designated property will afford an insur- 
 
 MONTAGUE, supra. Under the Maryland statute enacted in 1842, the hus- 
 band retains marital rights in his wife's realty, and has an insurable inter- 
 est therein. Mutual Fire Ins. Co. v. Deale, 18 Md. 26, 79 Am. Dec. 673. See, 
 also, Harris v. Insurance Co., 50 Pa. 341, wherein it was said that the policy 
 on the wife's property, taken out by the husband, might be also sustained on 
 the ground of implied agency for the wife. See, further, Clarke v. Insurance 
 Co., 18 La. 431; MERRBTTT v. INSURANCE CO., 42 Iowa, 11. 
 
 •6 Clarke v. Insurance Co., supra; Traders' Ins. Co. v. Newman, supra. 
 
 »• 77 Wis. 4, 45 N. W. 946, 8 L. R. A. 806. See, also, MERRETT v. INSUR- 
 ANCE CO., Bupra. 
 
 »T Sweeny t. Insurance Co., 20 Pa. 337. But see City of New York t. 
 Brooklyn Fire Ins. Co., 41 Barb. (N. Y.) 231. 
 
 98 FARMERS' MUT. INS. CO. v. NEW HOLLAND TURNPIKE CO., 122 
 Pa. 37, 15 Atl. 563. 
 
 47) 
 
 INSURABLE INTEREST — WHAT CONSTITUTES. 
 
 119 
 
 able interest in such property, even though the insurer may have nei- 
 ther interest in the property nor any specific lien upon it. A work- 
 man has an insurable interest in any building he may have contracted 
 to repair, or an artist might insure the structure for the interior deco- 
 ration of which he had been employed. In either case the accidental 
 destrucfion of the building would discharge the contract, and thus 
 damnify the workman to the extent of the value of his contract rights. 
 So it has been held that a person who had been engaged as superin- 
 tendent of a factory for a long term had an insurable interest in the 
 factory." Likewise a contractor, who had insured a house which he 
 was engaged in moving, was held entitled to recover when the house 
 was burned, before the completion of the work, to the extent of the 
 compensation he was to have received under the contract. ^•^ 
 
 Insurance of Property not in Existence. Profits. 
 
 It must be true that one cannot have insurable interest in property 
 which does not exist. Nor is it correct to say that the possibility that 
 property may come into existence in the future gives a present insur- 
 able interest therein. But the mere fact that property has no present 
 existence affords no reason why a bona fide contract should not be 
 made for its protection when it shall be subsequently acquired or come 
 into being. Such expectant insurance may be said to be subject to a 
 suspensory condition, and attaches to any specific property only upon 
 its emerging into the realm of existent things. According to this view 
 such insurance is in no wise opposed to public policy, but rather stands 
 approved by it, since the principle of insurance is thereby adapted to 
 the needs of modern business. Hence it may be broadly stated that a 
 valid contract of insurance may be made for the future protection of 
 property in which the insurer has no present right or interest what- 
 ever, and which may not even be in esse. Amould "^ states the rule 
 to be that "an expectancy, coupled with a present existing title to that 
 out of which the expectancy arises, is an insurable interest." Such a 
 potential interest is necessary to the transfer of a legal title by sale or 
 gift, but by no means necessary to the validity of a policy of insurance. 
 It is well settled that a farmer may insure crops to be grown on land 
 owned by him at the time of the issue of the policy, but such a limita- 
 tion is without reason. He may just as properly insure the crops to 
 be raised by him as "cropper" on the land of another, provided the 
 crops will belong to him when produced. In Sawyer v. Dodge Coun- 
 
 i ') 
 
 f H 
 
 I 
 
 ;. \ 
 
 •» Graham v. Insurance Co., 48 S. 0. 195, 26 S. B. 323, 59 Am. St. Rep. 707. 
 
 100 Planters* & Merchants' Ins. Co. v. Thurston, 93 Ala. 255, 9 South. 268. 
 An insurance agent who receives, as compensation, a certain percentage of 
 the net profits of the company, has an insurable interest in the property in- 
 sured by that company. Hayes v. Insurance Co., 170 Mass. 492, 49 N. E 754 
 
 101 1 Arnould, Mar. Ins. § 256. 
 
120 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 ty Mut. Ins. Co./®' insurance upon crops to be grown during a period 
 of five years was held to cover grain that was properly within the de- 
 scription of the policy, but which had been raised on land not owned 
 by the insurer at the time of the execution of the policy. And the de- 
 cision is eminently sound, although the court was at much needless 
 pains to reconcile its holding with accepted rules as to what consti- 
 tutes insurable interest. 
 
 Open policies of marine insurance covering cargoes not yet shipped, 
 or even contracted for, are frequent, and uniformly enforced ; ^°^ and 
 similar policies upon changing stocks of goods on land are equally 
 unquestioned.^ °* Such policies are in no sense wagers. The insur- 
 ance, by the very terms of the contract, cannot attach to the property 
 until it is acquired by the insurer, when a manifest insurable interest 
 arises. 
 
 Expected profits of a venture undertaken may be properly insured.*®' 
 But there can be no recovery for loss of profits unless such profits are 
 specifically covered by the policy. Expected profits cannot be proved 
 as an element of loss suffered under a general policy upon the subject 
 out of which the profits were expected to arise.*®' Under the Ameri- 
 can cases, it is not necessary for the insurer to show that profits spe- 
 cifically insured would probably have been made but for the loss of 
 the venture ; *®^ but in England it is held that recover}' may be had 
 only to the extent of probable profits proved.*®' 
 
 loa 37 wis. 503; 5 Bennett, Fire Ins. Cas. 659. 
 
 108 1 Amould, Mar. Ins. § 258. "It is everyday practice to Insure goods on 
 a retnm voyage, long before the goods are bouglit." Rhind v. Wilkinson, 2 
 Taunt. 237. See, further, Whitney v. Insurance Co., 3 Oow. (N. Y.) 210; 
 Haven v. Gray, 12 Mass. 71. In Dow v. Insurance Co., 1 Hall (N. Y.) 366, the 
 insurance was upon goods out, and "upon the proceeds thereof home," and 
 it was held that the policy did not cover the same goods on their return 
 voyage, but no question was made of the validity of the insurance. 
 
 104 Hooper v. Insurance Co., 17 N. Y. 424; HOFFMAN v. INSURANCE 
 CO., 32 N. Y. 405, 88 Am. Dec. 337; LANE v. INSURANCE CO., 12 Me. 44, 
 28 Am. Dec. 150; Lee v. Insurance Co., 11 Cush. (Mass.) 324. An insurance 
 on "fixtures" placed or to be placed in certain buildings covers fixtures 
 erected in the buildings subsequently to the issuance of the policy. New 
 YoTk Gas Light Co. v. Mechanics' Fire Ins. Co., 2 Hall (N. Y.) 125. In the 
 case of reinsurance, whether marine (Boston Ins. Co. v. Globe Fire Ins. Co., 
 174 Mass. 229, 54 N. B. 543, 75 Am. St Rep. 303) or fire (Sun Ins. Ofiice v. 
 Merz, 64 N. J. Law, 301, 45 Atl. 785, 52 L. R. A. 330), it is not essential to 
 the validity of the policy that the insurable interest should exist at the time 
 of effecting the reinsurance. 
 
 106 BARCLAY v. COUSINS, 2 East, 544; Patapsco Ins. Co. v. Coulter, 3 
 Pet (U. S.) 222, 7 L. Ed. 659. 
 
 100 Niblo T. Insurance Co., 1 Sandf. (N. T.) 551 (profits of theater) ; Matter of 
 WRIGHT & POLE, 1 Adol. & E. 621. See Niagara Fire Ins. Co. v. Heflin 
 (Ky.) 60 S. W. 393; Stock v. Inglis, L. R. 9 Q. B. Div. 708. 
 
 107 Patapsco Ins. Co. v. Coulter, 3 Pet. (U. S.) 222, 7 L. Ed. 659; Loomis 
 T. Shaw, 2 Johns. Cas. (N. Y.) 36; 1 Phillips, Ins. § 318. 
 
 108 Hodgson V. Glover, 6 East, 316 ; Arnould Mar. Ins. (7th Ed.) 8 287. 
 
 8*S) 
 
 DURATION OF INTEREST. 
 
 DURATION OF INTEREST. 
 
 121 
 
 48. In order that insurance on property shall be valid, an interest 
 must exist in the insurer at the time of the loss. It is not 
 necessary that an interest shall exist at the time of the issue of 
 the policy; nor does the suspension of the insured's ^^terest 
 during the currency of the policy defeat a recovery if an inter- 
 est has been reacquired before the loss occurs. 
 
 The books, both texts and reports, are full of statements to the ef- 
 fect that the insurer must possess an interest at the time insurance is 
 procured on property, as well as at the time the loss occurs, in order 
 to free the contract from the fatal fault of being a wager.^®* That 
 such is generally considered to be the law is further evidenced by the 
 provision of the California Civil Code "<> which declares that "an in- 
 terest insured must exist when the insurance takes effect and when 
 the loss occurs, but need not exist in the meantime." But notwith- 
 standing the great volume of authority to this effect, it seems that the 
 existence of an insurable interest at the inception of the contract is 
 not at all necessary to its validity, unless made so by such code provi- 
 sion as was referred to above. The generally prevailing opinion that 
 a policy is void as a wager unless the insurer had an interest at the 
 time of its issue seems to have had its origin in a dictum of Lord Hard- 
 wicke's in the ancient case of Sadlers' Co. v. Babcock,"^ in which that 
 great judge said : "I am of opinion it is necessary the party insured 
 should have an interest in property at the time of the insuring, and at 
 the time the fire happens." The question before the court in this case 
 was whether an insured should be allowed to recover when he had no 
 interest in the property covered by the policy at the time of the fire, 
 and the assertion that an interest at the time of insuring was necessary 
 was as ill considered as it was uncalled for. But the doctrine so enun- 
 ciated has been borne upon a full current of dictum down to modern 
 times,"2 and has only recently come to be questioned. Yet from its 
 
 109 The following are some of the cases in which this dictum has been 
 reiterated. Ohrisman v. Insurance Co., 16 Or. 283, 18 Pac. 466; Sheppard v. 
 Insurance Co., 21 W. Va. 368; Carpenter v. Insurance Co., 16 Pet (U. S.) 
 495, 10 L. Ed. 1044; Commercial Fire Ins. Co. v. Capital City Ins. Co., 81 Ala. 
 320, 8 South. 222, 60 Am. Rep. 162; Howard v. Insurance Co., 3 Denio (N. Y ) 
 301; Fowler v. Insurance Co., 26 N. Y. 422; Lockhart v. Cooper, 87 N. C. 149, 
 42 Am. Rep. 514; Clinton v. Insurance Co., 176 Mass. 486, 57 N. E. 998 50 
 L. R. A. 833, 79 Am. St. Rep. 325. 
 
 110 Civ. Code, § 2552. 
 
 111 SADLERS' CO. v. BABCOCK, 2 Atk. 554; Id., 1 Wils. 10, decided in 
 1743. 
 
 112 See note 109, supra, and the very recent case, Ohio Farmers' Ins Go 
 T. Vogel (Ind. Sup.) 65 N. B. 1056 [1903]. 
 
122 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 ^ 
 
 very origin this rule of law has had strange and illogical fellows 
 Thus it has never been questioned that an open marine policy may 
 properly cover a return cargo to be purchased months after the time^^ 
 of the making of the policy.^^' And later it became equally well es- 
 tablished that a floating policy on a fluctuating stock of goods was en- 
 forceable so as to aflFord indemnity for the loss of after-acquired prop- 
 erty.^** It is also well settled that, in the absence of special provision 
 in the policy to the contrary, the alienation of insured property will not 
 defeat a recovery under the policy if the insured has subsequently re- 
 acquired the property and possesses an insurable interest at the time 
 of loss.^** These floating policies have been usually regarded as form- 
 ing an exception to the general rule, and as being successors to the old 
 marine "interest or no interest" policies *** of which Lord Hardwicke 
 says:**^ "The common law leant strongly against these policies for 
 some time ; but, being found beneficial to merchants, they winked at it." 
 But there is no real necessity for the courts of law to wink at these 
 exceptional policies in the interest of business, as the exception gives 
 the true rule. The sole purpose of the rule as generally stated is to 
 prevent the issue of wager policies, and beyond this it should have no 
 application. The policy of the law will not allow A. to insure the 
 house of B., when he has no interest therein, for not only would such 
 insurance be mere gambling in the probability of B.'s house being de- 
 stroyed, but would also afford a strong temptation to A. feloniously to 
 procure its destruction. Neither would the subsequent acquisition of 
 B.'s house by A. validate a contract so thoroughly vicious in its incep- 
 tion.*** But there is no reason whatever why A., contemplating the 
 purchase of B.'s house, should not take out a policy of insurance, un- 
 der which the risk is to attach upon A.'s purchasing and thereby ac- 
 quiring an interest in that house. The requirement of good faith and 
 a real interest at the time of the loss is amply sufficient to satisfy the 
 demands of public policy. Indeed public policy, which would ever en- 
 courage and protect industry and business of any legitimate kind, and 
 frequently has forced the lagging rules of law to move forward to the 
 support of advancing business usages, requires that such anticipatory 
 insurances shall be favored and enforced. If a person were not al- 
 lowed to insure property until after its acquisition, valuable business 
 
 118 See note 103, supra. 
 
 11* See note 104, supra. 
 
 11 » Rex V. Insurance Cos., 2 Phila. 357; Id., 14 Leg. Int. 332. See the 
 argument of Bigelow, C. J., In WORTHINGTON v. BEARSE, 12 Allen 
 (Mass.) 382, 90 Am. Dec. 152. Contra, Cockerlll y. Insurance Co., 16 Ohio, 
 148. 
 
 ii« Such insurances are prohibited by St 19 Geo. II, c. 37, 
 
 117 See SADLERS' CO. v. BABCOCK, 2 Atk. 554^ 550. 
 
 lit See note in 2 Am. Ltead. Gas. 847. 
 
 ^■^S) 
 
 DURATION OF INTEREST. 
 
 tl 
 
 123 
 
 interests must needs often go unprotected, since it is not always con- 
 venient or practicable to procure insurance at the time the interest is 
 actually acquired, or within a reasonable time thereafter; as when a 
 return cargo is shipped from a distant port, or when a merchant or 
 warehouseman has goods that are gradually disposed of and as gradual- 
 ly replaced with others. So, to enforce strictly a rule requiring the 
 interest protected to exist at the time the policy issues, would often de- 
 feat the very purpose for which insurance was designed. Thus if a 
 builder s risk" policy covered only the interest possessed by the in- 
 sured at the time of issue, it would impose upon the careful builder the 
 mtolerable burden of taking out daily insurance. Consequently it is 
 very properly held that the risk attaches under a builder's policy in 
 proportion as the construction progresses, and the interest of the in- 
 sured increases.^** 
 
 The strong tendency of the courts to disregard the dicta, however 
 positive laying down the generally accepted rule, and to hold valid 
 bona fide anticipatory insurance, is well indicated by the words of the 
 bupreme Court of Vermont in the case of Davis v. New England Fire 
 Ins. Co. : "0 -It is jj^sj^^^^ ^^ ^^^ defendant," says Taft, T., "that 
 the declaration is defective, for that there is no allegation that the 
 property insured was the property of the plaintiff at the time the policy 
 was issued, citing Dickerman v. Vermont Mut. Fire Ins Co ^^i jn 
 which it is said : 'It is essential to the sufficiency of the counts that 
 they should allege an insurable interest in the plaintiffs at the time the 
 policies were issued and also at the time of loss.' This is a general 
 rule according to the current of decisions, and is applicable in all cases 
 when It does not appear that there was any interest in nor ownership 
 of the property from the time the policy was issued to the time of the 
 loss. But a policy may be valid and attach to and cover property ac- 
 quired subsequent to its delivery, and in such cases the rule above stated 
 IS modified, and an allegation that subsequent to the delivery of the 
 policy the insured acquired an interest in the property which is the 
 subject of the contract is sufficient. In Hooper v. Robinson,"^ Mr 
 Justice Swayne cites 1 Arn. Ins. 238, viz. : 'It is now cleariy estab- 
 lished tiiat an insurable interest, subsisting during the risk and at the 
 time of loss, is sufficient, and that the insured need not allege nor 
 prove that he was interested at the time of effecting the policy In- 
 deed, it is every day's practice to effect insurance in which the alleo-a- 
 tion could not be made with any degree of truth.' " It is true that the 
 
 119 Commercial Fire Ins. Co. v. Capital City Ins. Co 81 Ala ^20 s 
 South 222, 60 Am. Rep. 162; Ulmer v. Insurance Co., 61 s! C. 459, Vt'^ 
 712; Sullivan v. Insurance Co., 34 App. Div. 164. 54 N. Y. Supa 629 
 
 120 70 Vt. 217, 39 Atl. 1095. • « ^4^ «^». 
 
 121 67 Vt 99, 30 Atl. 808. 
 
 "2 98 U. S. 528. 25 L. Ed. 219. 
 
 I 
 
I 
 
 II 
 
 124 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 quotation from Amould approved by Mr. Justice Swayne referre(| 
 solely to marine insurance, which only was considered in Hooper v. 
 Robinson, but the breadth of the statement certainly suggests a broader 
 application of the principle stated. The most recent case in which the 
 question has been carefully considered is Sun Fire Ins. Co. v. Merz,^** 
 in which the New Jersey Court of Errors and Appeals reversed the 
 decision of the Supreme Court, which had held that a policy of rein- 
 surance was void because it provided indemnity for losses under poli- 
 cies thereafter to be written by the reinsured company. The conclu- 
 sion of the court is thus stated by Gummere, J. : "Up to the present 
 time the question has not received consideration at the hands of this 
 court. An examination of the reasons upon which the earlier rule 
 rests has led us to the conclusion that they are not well founded, and 
 that a contract by which the parties provide for -indemnity against loss 
 by fire upon property to be subsequently acquired by the party indem- 
 nified is not in any sense a gaming contract, and void on that account ; 
 in other words, that an insurable interest, subsisting during the risk 
 and at the time of the loss, is sufficient to support a policy insuring 
 against loss by fire." *** 
 
 Unfortunately for the conclusiveness of this decision the policy in 
 question was not an ordinary fire policy, but one of reinsurance, which 
 is in its nature essentially a floating policy, and as such falls properly 
 within the recognized exception to the rule as generally stated. 
 
 Finally, it may be safely stated as a conclusion from an examination 
 of the authorities that only a very few cases have held policies other- 
 wise valid void because of the absence of an insurable interest at the 
 time of the issue; ^^' and that the rule requiring the existence of such 
 interest at the inception of the policy has no further meaning than, in 
 the words of the learned editors of the American Leading Cases,^^' 
 "that a policy intended as a wager will not be rendered valid by the 
 subsequent acquisition of an interest in the property at risk." 
 
 "8 64 N. J. Law, 301, 45 Atl. 785, 52 L. R A. 330. 
 
 12* See dictum to the contrary in Ohio Farmers' Ins. Co. ▼. Vogel (Ind. 
 App.) 65 N. E. 1056. 
 
 12B See HOWARD y. INSURANCE CO., 11 Can. Sup. Ct 92, criUcised in 
 May, Ins. § 101a. 
 
 i2« Volume 2, p. 847, note 
 
 5§ 49-52) 
 
 INSURABLE INTEREST IN LIVES. 
 
 125 
 
 INSURABLE INTEREST IN LIVES. 
 
 49. A contract of life insurance not supported by an insurable in- 
 
 terest is contrary to public policy, and void. 
 
 50. Tbe existence of an insurable interest at the time when the policy 
 
 is issued is sufficient. The subsequent termination of such in- 
 terest before the maturity of the policy in no wise affects its 
 ▼aUdity. 
 
 SI* Every person has an insurable interest in his own life, and may 
 lawfully insure it for the benefit of his own estate, or in behalf 
 of any other person. It is not necessary that such beneficiary 
 shall possess an interest in the life insured. 
 
 52. A person may procure insurance on the life of another when he is 
 so related to that other by reason of blood, niarriage, or com- 
 merce that he has well-grounded expectations of deriring ben- 
 efit from the continuation of that other's life, or of suffering 
 detriment or incurring liability through its termination. 
 
 5 
 
 » I 
 
 iVager Policies on Life. 
 
 As before stated, there seems little room to doubt that wager poli- 
 cies of life insurance, based on no interest in the assured, were enforce- 
 able in England prior to the enactment of the statutes of 19 Geo. II., c 
 :>7, and 14 Geo. III., c. 48, by which such policies were prohibited.^*^ 
 The courts of the American states, however, have generally held, irre- 
 spective of statutes, that wager policies are contrary to public policy, 
 and void.^2* In some cases it has been declared that the English stat- 
 
 
 127 By chapter 48 of the latter statute It was enacted: 'That from and 
 after the passing of this act no insurance shall be made by any person or 
 persons, bodies politic or corporate, on the life or lives of any person or per- 
 sons, or on any other event or events whatsoever, wherein the person or per- 
 sons for whose use, benefit, or on whose account such policy or policies shall 
 be made, shall have no interest, or by way of gaming or wagering; and that 
 every assurance made contrary to the true intent and meaning hereof shall 
 be null and void to all intents and purposes whatsoever." 
 
 128 Trinity College v. Travelers' Ins. Co., 113 N. C. 248, 18 8. B. 175, 22 
 L. R. A. 291; Helmetag's Adm'r v. Miller, 76 Ala. 183, 52 Am. Rep. 316; 
 SINGLETON v. INSURANCE CO., 66 Mo. 63, 27 Am. Rep. 321, disapproving 
 & dictum to the contrary in OHISHOLM v. INSURANCE CO., 52 Mo. 213, 14 
 Am. Rep. 414; Whitmore v. Supreme Lodge, 100 Mo. 36, 13 S. W. 495; Guard- 
 ian Mut. Life Ins. Co. v. Hogan, 80 111. 35, 22 Am. Rep. 180; Continental 
 Life Ins. Co. v. Volger, 89 Ind. 572, 46 Am. Rep. 185; Burton v. Insurance 
 Co., 119 Ind. 207, 21 N. E. 746, 12 Am. St. Rep. 405; United Brethren Mut 
 Aid Soc. V. McDonald, 122 Pa. 324, 15 Atl. 439, 1 L. R. A. 238, 9 Am. St Rep 
 111; ROMBACH v. INSURANCE CO., 35 La. Ann. 233, 48 Am. Rep. 239; 
 Ruse V. Insurance Co., 23 N. Y. 516; Wamock v. Davis, 104 U. S. 775, 26 L. 
 Ed. 924. See the strong language in Brockway v. Insurance Co. (C. Q) 9 
 Fed. 249. Elarly New York cases on marine insurance sustained the com- 
 mon-law rule upholding wager policies. See Juhel v. Church, 2 Johns. Cas. 
 833; Buchanan v. Insurance Co., 6 Oow. 318; Clendining v. Church, S Cainesi 
 
126 
 
 INSURABLE INTEREST. 
 
 (Ch. 4 
 
 utes were but declaratory of the common law,*** but this can scarcely 
 be true; and certainly not of the common law as determined on this 
 point by the decisions of the English courts."® Indeed, it seems that 
 in New Jersey policies without interest are still enforceable, on the the- 
 ory that the common-law rule of decision to that effect remains un- 
 changed by statute.*'* 
 
 When Such Interest Must Exist. 
 
 But it has been held that the requirements of 14 Geo. III. are satis- 
 fied by the presence of an interest in the assured at the inception of 
 the policy, and that a decrease, suspension, or entire termination of 
 that interest before the policy matures in no wise affects the assured's 
 right of recovery under a policy valid at its inception.*'* And the 
 decisions of the American courts as to the continuance of interests, 
 
 141; 1 Phillips, Ins. 3, 4. But these cases must be regarded as substantially 
 overruled by RUSE v. INSURANCE CO., 23 N. Y. 516. 
 
 129 RUSE V. INSURANCE CO., 23 N. Y. 516; Whltmore v. Supreme Lodge, 
 100 Mo. 3G, 13 S. W. 495. "It is generally agreed that mere wager policies 
 — that is, policies in which the insured party has no interest whatever in 
 the matter insured, but only an interest in its loss or destruction— are void 
 as against public policy. This was the law of England prior to the Revolu- 
 tion of 1688. But after that period a course of decisions grew up sustaining 
 wager policies. The Legislature finally interposed, and prohibited such in- 
 surance: First, with regard to marine risks, by St 19 Geo. II, c. 37; and 
 next, with regard to lives, by St 14 Geo. Ill, c. 48" — Mr. Justice Bradley, in 
 CONNECTICUT MUT. LIFE INS. CO. v. SCHAEFHR, 94 U. S. 457, 460, 24 
 L. Ed. 251. 
 
 180 That a wager, unaffected with any special cause of invalidity, is en- 
 forceable at common law, is shown by decisions since the enactment of this 
 statute. In Good v. EJlliot, 3 Term R. 693, a wager was sustained at com- 
 mon law, it being held that the case did not come within the purview of the 
 statute. See Andrews v. Heme, 1 Lev. 33; Walcott v. Tappin, 1 Keb. 56, 65, 
 cited by the court In British Ins. Co. v. Magie, Cooke & Alcock, 182, a 
 wager policy was sustained at common law, it being held that the statute 
 was inapplicable to Ireland. The statute applies not only to policies on lives, 
 but also to policies "on any other event or events whatsoever." And so. In 
 Roebuck v. Hammerton, Cowp. 737, a wager upon the sex of a person 
 was declared within the statute, the court taking care to show that the 
 form of the wager was a policy. To the same effect is Patterson v. Powell, 
 9 Bing. 320. See, further, Craufurd v. Hunter, 8 Term R. 14, 23, per Grose, 
 J.; Cousins v. Nantes, 3 Taunt. 513; Abbott v. Sebor, 3 Johns. Cas. (N. Y.) 
 39, 2 Am. Dec. 139, per Kent J. 
 
 i»i Trenton Mut Life & Fire Ins. Co. v. Johnson, 24 N. J. Law, 576; Mar- 
 tin V. Insurance Co., 38 N. J. Law, 140, 20 Am. Rep. 372; VIVAR v. 
 KNIGHTS OF PYTHIAS, 52 N. J. Law, 455, 20 Atl. 36, 41. It would seem 
 chat the statute prohibiting wagers is not applied to Insurance. See Flagg 
 V. Baldwin, 38 N. J. Eq. 219, 48 Am. Rep. 308. 
 
 i»« DALBY V. ASSURANCE CO., 15 C. B. 365, Richards' Cases, 271, Wood- 
 ruff's Cases, 7, overruling GK)DSALL v. BOLDERO, 9 East 72, In which it 
 was held that an insured creditor could not recover on the policy when the 
 debt had been paid before suit brought, but after the death of the debtor. 
 
 §§ 49-52) 
 
 INSURABLE INTEREST IN LIVES. 
 
 127 
 
 Thus' in nfr'"'' T*'^..'^', ^t"^^^'^ ^*"*"*^^' ^'^ '^ t^^ «^^ effects- 
 avowed t?r^ ""' ^""^'^ ^ ^^"^^" ^'^' ^^^"^- C^-'"* ^n insurer was 
 allowed to recover on a contract of reinsurance when the loss did not 
 
 Mut I ifl T * V^^'^cT''. ^"^ ^''" ^^"^^^^^- So in Connecticut 
 Mut. Life Ins Co. v. Schaefer "» the Supreme Court of the United 
 States declared although the point was not really in judinent thTa 
 Tand wf ?'T r^"'"' ""'^^ ^ P^^^^^ "P-" the^ife'^ L his- 
 another. We do not hesitate to say, however," to quote from the 
 
 inteist ZZTl\ '\r' '""^^'^ ^' '^' '"''^"^^^ ^' the insurable 
 
 eS^ ^l?"' T'''"^ '^'^' ^^ '^^ P^^^^^i^'^ of the pol- 
 
 icy Itself Some doubt has been cast upon the generality of this prin- 
 
 Sover'l'rl^^^^'"' ^""^T ^'^ ^^^* ^^ - ---^ -elltor to 
 recover more than the amount of his debt and charges."' But this 
 
 note of uncertainty in the appHcation of the general doctrine is £ 
 lieved to be due to misunderstood precedents and ill-considered dicta 
 and not to any direct decision repudiating the doctrine."' ' 
 
 Insurance on OwnUfe-Bene/iciary Need Have no Interest, 
 
 taken out b?th?^^^ ''''^'^' ^'u''^^ '^'''''' ^" ^"^ ^^^^^ ^^^ those 
 
 himself or nf h^ TT^ "P""" •^'' ^^" ^'^'' "^'^'^ ^^r the benefit of 
 himse f or of his estate, in case it matures only at his death, or for the 
 
 othefare ri: '7'" "'" "'^ ^^ ^^^^^^^^^ ^^ beneficiary Tn the 
 other are such pohcies as are taken out upon the life of another In 
 
 he first class of policies the question of insurable interest is of so It" 
 
 tie importance as to merit scant consideration. It is ordinarily said 
 
 "8 Appeal of Corson, 113 Pa. 438. 6 Atl. 213, 57 Am Reo 479- Mnwr^ ^ 
 Insurance Co., 9 R. I. 346; RAWLS y. INSURANC^CO 27 N y7h7r1 
 t^i l^-.'^L^Jr^'"'''' ^^^'^ ^- ^^^^^i«-^' 63 Ohio St 77 57 N R 965 
 
 of 30 ;^ '"", ^^^ "^". ^ ''''''' eoitlngL'uiSn the ln's\^^^,^^^^^^^^ 
 of 30 years, and insured the son's life for 2 vPArs who« +i!L ^J-^^^s uie age 
 
 father had received the legacy ^ ^ ^ ""• """^ *^* *"« 
 
 ^^.^CONNECTICUT MDT. LIFE INS. CO. v. SCHAEFBE, 94 U. S. 457. 24 
 
 i»« Exchange Bank v. Loh. 104 Ga 44fi «m s m ak<\ aa t t^ » „ 
 metag y. Miller, 76 Ala. 18^.^ A^.Tep 316- sSst Nat R,' t ^^ °*'- 
 Adm-r. 99 Va. 194, 87 S. E. 843, 86 Am St Rw Ss ^jlJ-J-"^' 
 
 
128 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 
 that every man has an insurable interest in his own life.^*' It were 
 more accurate to say that the question of insurable interest is immate- 
 rial when the policy is upon the insured's own life. The presence of 
 an insurable interest is really required only as evidence of the good 
 faith of the parties, and it is contrary to human experience that a man 
 should insure his own life for the purpose of speculation, or be tempted 
 to take his own life in order to secure payment of money to some 
 other, although instances of such gruesome fraud upon insurers are 
 not wanting.^^* Consequently it is uniformly held that the mere fact 
 of a man's insuring his own Ufe for the benefit either of himself or of 
 another is sufficient evidence of good faith to validate the contract. It 
 is not at all necessary that the person designated as beneficiary in such 
 policies should have any interest in the life insured.^*** It is true that 
 such a beneficiary without interest will be subject to the same tempta- 
 tion to terminate unlawfully the life insured as if he himself had taken 
 out the policy, and there are cases on record where such temptation 
 has been yielded to;"^ but the law considers this danger too slight 
 for notice, since the selection of the beneficiary by the insured is, in 
 ordinary cases, sufficient guaranty of the existence of such good faith 
 and confidence between them as will sufficiently protect the insured. 
 
 In fact, in this class of policies, the indemnity feature of life insur- 
 ance is so faint as to be scarcely traceable, and especially so where the 
 policy is on the endowment plan, payable, after a certain period, to the 
 insured. Such policies are little more than contracts of investment; 
 and even where the proceeds of the policy are to be paid to another 
 than the insured or his representative, the purpose of the agreement 
 is chiefly for the investment and accumulation of the sums annually 
 paid as premiums for the use of the designated beneficiary. Where- 
 fore, in such cases, considerations touching indemnity and insurable 
 interest may be disregarded.^ 
 
 142 
 
 !«• Union Fraternal League ▼. Walton, 109 Ga. 1, 34 S. E. 317, 46 L. R. A. 
 424 77 Am. St Rep. 850; Provident Life Ins. & Inv. Co. v. Baum, 29 Ind. 
 236- Prudential Ins. Co. v. Hunn, 21 Ind. App. 525, 52 N. E. 772, 69 Am. St 
 Rep. 380; Northwestern Masonic Aid Ass'n v. Jones, 154 Pa. 99, 26 Atl. 
 253, 35 Am. St. Rep. 810; Albert v. Insurance Co., 122 N. C. 92, 30 S. E. 327, 
 65 Am. St Rep. 693; CAMPBELL v. INSURANCE CO., 98 Mass. 381; 
 Bloomington Mut Ben. Ass'n v. Blue, 120 111. 121, 11 N. B. 331, 60 Am. Rep. 
 
 558. 
 
 18© See RITTER r. INSURANCE CO., 169 U. S. 139, 18 Sup. Ot 300, 42 
 
 L. Ed. 693. 
 
 140 Sabin ▼. Phlnney, 134 N. Y. 423, 31 N. B. 1087, 30 Am. St Rep. 681; 
 Elkhart Mot Aid B. & R. Ass'n v. Houghton, 103 Ind. 286, 2 N. E. 763, 53 
 Am. Rep. 514; eases cited in note 138. 
 
 141 See Schmidt v. Association, 112 Iowa, 41, 83 N. W. 800, 51 L. R. A. 141, 
 S4 Am. St. Rep. 323. 
 
 142 Where the policy is Issued to the insured, the beneficiary need neither 
 Allege nor prove an insurable interest Northwestern Masonic Aid Ass'n t. 
 
 §§ 49-52) 
 
 INSURABLE INTEREST IN LIVES. 
 
 129 
 
 Insurance on the Life of Another— What Interest Sumdent 
 
 But where one man assumes to insure the life of another the ques- 
 tions involved are strikingly different To allow such insurances to 
 be made by persons having no other interest in the continuance of the 
 lives insured than springs from the prospect of making gain through 
 their early termination, would be intolerable. The circumstances at- 
 tending the makmg of the contract must be such as to prove the ex- 
 istence of a bona fide desire and interest on the part of the insurer 
 that the life insured shall continue during its natural term The cir- 
 cumstances that give evidence of such a desire are said to constitute 
 an insurable interest Therefore, by transposing terms, we have the 
 statement made in accordance with the decisions, that an insurable 
 interest exists whenever the relation between the assured and insured 
 whether by blood, marriage, or commercial intercourse, is such that 
 the assured has a reasonable expectation of deriving benefit from the 
 continuation of the life insured, or of sufl^ering detriment or incurring 
 liability through its termination. "« Or, put more briefly, the policy 
 of the law requires that the assured shall have an interest to preserve 
 the life insured in spite of the insurance, rather than to destroy it be- 
 cause of the msurance. As has been shown heretofore, i** the authori- 
 ties do not require that the expectation of the benefit to be derived 
 shall have a legal basis, nor that the benefit shall be susceptible of pe- 
 cuniary estimation The benefit must, however, be valuable and not 
 merely sentimental.^*^ Neither is the amount or character of the ad- 
 vantage hoped for any measure of the amount for which insurance 
 may be procured, excepting the case of insurance by a creditor "« 
 To quote agam from the leading case of Connecticut Mut. Life Ins 
 Co. V Schaefer: "^ "But precisely what interest is necessary, in or- 
 der to take a policy out of the category of mere wager, has been the 
 subject of much discussion. In marine and fire insurance the diffi- 
 culty is not so great, because there insurance is considered as strictly 
 
 Jones, 154 Pa. 99 26 Atl. 253, 35 Am. St Rep. 810. But where the beneflclanr 
 takes out the policy directly from the insurer, such allegation and proof ^ 
 necessary. Continental Life Ins. Co. y. Volger, 89 Ind. 572, 46 Am Ren 18.^ 
 
 iirk''tSTfti%?3^V7\' V- W.'^ '' ^- ^^- ^^'- ApptaTofcU'^; 
 
 lid Pa. 438, 6 A«. 213, 57 Am. Rep. 479; United Brethren Mut Aid Soc v 
 McDonald, 122 Pa. 324, 15 Atl. 439, 1 L. E. A. 238, 9 Am. St. Hep 111- RoJ' 
 BACH v. INSURANCE CO., 35 La. Ann. 233, 48 Am. Rep 2^ 
 1** See p. 100, supra. 
 
 "» Guardian Mut Life Ins. Co. v. Hogan, 80 111. 35 22 Am Ran i«a. 
 Yancs Ins.~8 
 
 
 
 *' 
 
 i. 
 
130 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 I 
 
 I 
 
 an indemnity. But in life insurance the loss can seldom be measured 
 by pecuniary standards. Still, an interest of some sort in the insured 
 life must exist. A man cannot take out insurance on the life of a 
 total stranger, nor on that of one who is not so connected with him 
 as to make the continuance of the life a matter of some real interest 
 to him. The essential thing is, that the policy shall be obtained in good 
 faith, and not for the purpose of speculating upon the hazard of a 
 life in which the insured has no interest." It may thus be seen that 
 while a policy on the life of another is not a contract of indemnity, 
 and that the real requirement for its validity is the good faith of the 
 parties, yet it is based on the theory of indemnity in its inception."* 
 
 Examples of Insurable Interest in Life — Relationship. 
 
 While there is some obiter authority to the contrary,"* it seems now 
 well settled that mere relationship, however close, is not sufficient 
 
 i*« "It [a contract of life insurance] is not a contract of indemnity for actual 
 loss, but a promise to pay a certain sum on the happening of a future event 
 from which loss or detriment may ensue, and if made in good faith for the 
 purpose of providing against a possible loss, and not as a cloak for a wager, 
 is sustained by any interest existing at the time the contract is made." W. 
 Allen, J., in MUTUAL LIFE INS. CO. v. ALLEN, 138 Mass. 24, 52 Am. Rep. 
 
 245. 
 
 " 149 Thus, in Valley Mut. Life Ass'n v. Teewalt, 79 Va. 421, 422, it was said 
 by Hinton,' J., that "it is now well settled that a father has an insurable in- 
 terest in the life of his child, whether a minor or of full age, and the child 
 in the life of his father." In this case the policy had been taken out by the 
 father on his own life, and was made payable to his son. The policy being 
 based on the father's insurable interest in his own life, the question whether 
 the son had an interest in his father's life was not before the court. For the 
 same reason the statement in Crosswel v. Association, 51 S. C. 103, 28 S. E. 
 200, that "a son has an insurable interest in the life of his mother, on account 
 of relationship alone," was a mere dictum. The decision i^ Equitable Life 
 • Ids. Ck). v. Hazelwood, 75 Ter. 338, 12 S. W. G21, 7 L. R. A. 217, 16 Am. 
 St. Rep. 893, was based, not on the blood relationship (brothers) between the 
 Insured and assured, but on the relation of debtor and creditor. The case of 
 iETNA LIFE INS. CO. v. FRANCE, 94 U. S. 561, 24 L. Ed. 287, has some- 
 times been cited (see two cases next above) for the statement that close ties 
 of blood may give an insurable interest. But in this case the question was 
 expressly waived. Chew had taken out the policy on his own life for the 
 benefit of his sister, to whom he was indebted. She advanced the money 
 to pay the premiums. The relationship was considered only as showing the 
 bona fides of the parties. In RESERVE MUT. INS. 00. v. KANE, 81 Pa. 
 154, 22 Am. Rep. 741, the insurable interest of a son in his father's life was 
 based upon the provision of the poor law making children liable for the sup- 
 port of their Indigent parents. See a criticism of this case in Life Ins. 
 Clearing Co. v. O'Neill, 106 Fed. 800, 45 C. C. A. 641, 54 L. R. A. 225. The 
 decision in LOOMIS v. INSURANCE CO., 6 Gray (Mass.) 396, was rested 
 on the father's right to the earnings of his minor son, which is, of course, 
 A valuable pecuniary interest 
 
 §§ 49-52) 
 
 INSURABLE INTEREST IN LIVES. 
 
 131 
 
 alone to constitute an insurable interest."® But a legal right to re- 
 quire services or to receive benefit of whatever kind is sufficient to 
 vahdate insurance upon the life of a near relative, even though such 
 
 150 A demurrer to a complaint, based upon a policy of Insurance, alleging 
 that the assured is the daughter of the insured, should have been sustained 
 for ^ant of an allegation of insurable interest. Continental Life Ins. Co. v. 
 
 I^f ;. J"'^-^^' ^^ ^'^' ^"P- ^^' '^^^ ^^^^t^«° o^ father and son, coupled 
 v.ith affectionate regard for each other, and the moral obligation of the father 
 to compensate the son for his labor, are only facts tending to show an insur- 
 able interest of the son in his father's life. An instruction that these facts 
 did give the son an insurable interest was held error. Guardian Mut Life Ins 
 O). V Hogan, 80 111. 35, 22 Am. Rep. 180. In Prudential Ins. Co v Himn 
 21 ind. App 522, 52 N. E. 772, 69 Am. St. Rep. 380. the question ar^seu^on 
 t««T"wK .^ complaint. The only allegation touching insurable interest 
 was that the insured was plaintiflf's son, and it was held that the demurrer 
 should have been sustained. In Life Ins. Clearing Co. v. O'Neill, 106 Fed. 
 
 H I • ^;/l^^' ^ ^' ^' ^' 22^' " ^*« beld that under the facts in evi- 
 
 dence plaintiff had not from the bare fact of relationship an insurable Inter- 
 
 ™ m «nnr. ^H^'^K^'; ^/^' Manning, J., in ROMBACH v. INSUR- 
 nT^f o WK^ i T^^ ^''''^^ formulate the general principle somewhat in 
 IttZ^ ^r^l^^ insurable interest arises or is Implied from relationship, 
 a W«i^i«i!! .f '.* "^^^^ *^^ relationship is such that the insurer has 
 
 a lega claim upon the insured for services or support. Even though such 
 legal claim does not exist, yet where, from the personal relations o? the two 
 
 thf ,*^' ^'f^^'^ ''''^ ^^°^ ^"^"°S displayed by the Insured to the Insur^e 
 the latter has a reasonable right to expect some pecuniary advantage from 
 the continuance of the life of the former, or to fear loss from his death an 
 
 DAVIS, 104 U. S. 775, 26 L. Ed. »24, accords with this view. In that oft 
 quoted passage Mr. Justice Field says: "It is not easy to define with pr" 
 cision what will in all cases constitute an insurable interest, s^ arto teS 
 the contract out of the class of wager policies. It may be stat^ generX 
 ^ZZ"V'. "^^ '"'"^ an interest arising from the relation^ of tS party ot 
 tammg the Insurance, either as creditor of or surety for the assurec^ or from 
 the ties of blood or marriage to him, as will justify a reasonable expectatio^ 
 of advantage or benefit from the continuance of his life. It L nornressarv 
 that the expectation of advantage or benefit should be always c^p^We of 
 
 his child and a child In the life of his parent, a husband in the Ufe of his 
 
 Sis'^nd TsTo ' I." '^' "'' '' ^^^ '"^'^"^ ^^^ --'^^' affection lI^^Lli 
 this kind Is considered as more powerful— as operating more efflcacionsiv 
 
 to protect the life of the Insured than any other consWrratLn. Tut if ^i^ 
 cases there must be a reasonable ground, founded upon the relations of the 
 parties to each other, either pecuniary or of blood or affinity, to expect somi 
 benefit or advantage from the continuance of the life of the insuref OthTr! 
 wise the contract is a mere wager, by which the party takinHhe nolicv i« 
 directly Interested in the early death of the assured. SucrpoHc^^^^^^^^ a 
 tendency to create a desire for the event They are therefore, Cependently 
 Th J ^^^^ '''' ^^^ '"^J""*' condemned as being against publifS^ 
 The doctrine as thus announced seems clearly t« amount t^merel^ 
 An Insurable nterest In the life of another need not rest upon anTpecun^rv 
 or contractual relations to that other, but whatever the relation whether 
 pecuniary or of blood or affinity, it must furnish reasonabir^ound^'to^^ 
 
 'j'm< 
 
 f' 
 
 il} 
 
 f 
 
 It 
 
132 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 services may not be actually rendered; "' or any loss or liability that 
 will be incurred by reason of the death of such relative."* So a mere 
 expectation of benefit to be received from the insured relative is suffi- 
 cient, even where such expectation has no basis of legal right."' Thus 
 a parent may insure the life of his minor child, to whose services he 
 is entitled,"* but not that of an adult child, unless, perchance, he has 
 under some statute a right to look to such child for support, or ac- 
 
 pect some benefit or advantage from the continuance of the life of the as- 
 sured" Certainly by "benefit or advantage" was meant some substantial, 
 material— some pecuniary— advantage or benefit, and not any sentimental 
 benefit arising from the gratification of the feelings of love and afifection 
 for the insured by the continuance of his life. See Life Ins. Clearing Co. v. 
 O'Neill, 106 Fed. 800, 45 C. C. A. 641, 54 L. R. A. 225. "The relationship, 
 therefore, seems to be of little importance, except as tending to give rise to 
 the circumstances which justify the expectation." 
 
 151 In a case where the plaintiff had made advances to the insured to 
 enable him to prospect for gold in California, Woodrufl'. J., said: "It is urged 
 that it In no wise appears that the efforts of R. H. Miller would have pro- 
 duced any pecuniary benefit to tiie plaintiff. So It may be said to the wife, 
 non constat that your husband will support you if he lives; or to the creditor, 
 non constat that your debtor would have been either able or willing to pay 
 you had he lived; or to a master, non constat but tiaat the labor of your 
 apprentice would have been unproductive, or but that infirmity or vice in 
 him would have made a continuance of the relation a burden to you instead 
 of a profit The law does not proceed upon any such speculation as to pos- 
 sible results. There is a legal presumption of benefit In all these cases, be^ 
 cause there is a claim to what is in its nature beneficial." Miller v Insur- 
 ance Co 2 E. D. Smith (N. Y.) 268. In New York the mother, equally with 
 the father, is entitled to the expected services of her infant child, and this 
 is an insurable interest. O'Rourke v. Insurance Co., 10 Misc. Rep. 405, 31 
 N Y Supp 130. But where it is affirmatively shown that the services could 
 never have been rendered, as where the wife was a hopeless maniac or in- 
 valid at tiie time tiie policy was issued, it has been questioned whether an 
 msurable l^te^st would be held to exist. CURRIER v. INSURANCE CO 
 57 Vt 496 52 Am. Rep. 134. Cf. People's Mut Ben. See. v. Templeton, 16 
 Ind. App. 126, 44 N. B. 809. See, also, Mitchell v. Insurance Co., 45 Me. 104, 
 
 ^\fffi^v.Tollcy CO., 3 Bq. 388, 1 Kay & J. 223; Scott y. Dickson, 108 Pa 
 6 56 Am Rep. 192. In this case it was held that a surety on an official 
 bond had an insurable interest in the life of his principal. 
 
 188 CRONIN V. INSURANCE CO., 20 R. I. 670, 40 Ati. 497. In this case it 
 aDoeared that an annt and her niece lived togetiier in amicable and affection- 
 ate relations. Each had reason to rely on the other in case of need, and upon 
 this eround the aunt was held to have an insurable interest in the life of 
 her iSTce see Ca?^nter v. Insurance Co., 161 Pa. 9, 28 Ati. 943, 23 L. R. A. 
 .571, 41 Am. St Rep. 880; LORD v. DALL, 12 Mass. 115 7 ^^ I)ec. 38. 
 
 164 Mitchell v. Insurance Co.. 45 Me. 104, 71 Am. Dec. 529; IXDOMIS v. 
 INSURANCE CO., 6 Gray (Mass.) 396. The rule seems to be otherwise in 
 England. It is there held that tiie word "interest" as used in St 14 Geo. 
 Ill c 48, means pecuniary interest See HALFORD v. KYMER, 10 Barn & . 
 a 724. Cf. Law T. Policy Co.. 1 Kay & J. 223, 2 Bigelow L. & Ace Rep. 404. 
 
 §§ 49-52) INSURABLE INTEREST IN LIVES. 133 
 
 tually receives support from him. So a minor child has an insurable 
 interest in the life of a parent to whom he may look for education and 
 support, but an adult son, Uving apart from and independently of his 
 father, has no insurable interest in the latter's life, in the absence of 
 special circumstances justifying an expectation of future benefit,"*^ 
 and the same is true of insurance procured by a daughter on the life 
 of her mother."* 
 
 That provision of the poor laws of some of the states by which per- 
 sons having sufficient ability are required to maintain their lineal 
 kindred materially affects the question of insurable interest between 
 persons so related. Plainly one may insure the life of a kinsman to 
 whom he may look for support under such laws, provided it appears 
 that the person whose life is insured has the ability to render the sup- 
 port."^ And it seems to be the generally accepted rule that a policy 
 may be validly taken out on the life of a kinsman to cover expenditures 
 actually made in the support of the insured, or those necessarily to be 
 made in the future."® But the Pennsylvania court has gone still fur- 
 ther, and held that the mere possibility of having to incur such ex- 
 penditures under the statute constitutes a sufficient insurable interest. 
 "Maintenance of a father or mother unable to work is, therefore, a 
 legal liability. When we add to this the feelings of natural affection 
 and the desire produced by these feelings to provide for the comforts 
 of parents, the right to effect an insurance on the life of the parent, 
 to carry out these purposes, ought not to be denied. It would be 
 technical in the extreme to say that a son has no insurable interest in 
 his father's life. Poverty may overtake the father in his lifetime, 
 and thus both father and mother be cast upon the son; or, if the 
 father die before her, the necessity may fall at once upon the son. 
 Why, then, should he not be permitted to make a provision, by insur- 
 ance, to reimburse himself for his outlays, past or future? What in- 
 jury is done to the insurance company? They receive the full pre- 
 mium, and they know in such case, from the very relationship of the 
 parties, that the contract is not a mere gambling adventure, but is 
 founded in the best feelings of our nature, and on a legal duty which 
 
 185 Guardian Mut Life Ins. Co. v. Hogan. 80 111. 35, 22 Am. Rep. 180; 
 Life Ins. Clearing Co. v. O'Neill, 106 Fed. 800, 45 C. C. A. 641, 54 L. R. A. 225. 
 
 i8« Continental Life Ins. Co. v. Volger, 89 Ind. 572, 46 Am. Rep. 185; Pru- 
 dential Ins. Co. V. Hunn, 21 Ind. App. 525, 52 N. E. 772, 69 Am. St. Rep. 380. 
 
 i«7 Life Ins. Clearing Co. v. O'Neill, 106 Fed. 800, 45 C. C. A. 641, 54 L. R. 
 A. 225. In this case, however, there was no proof of the father's probable 
 ability to support his son, and a judgment sustaining the policy was re- 
 versed. To same effect, see People's Mut Ben. Soc. v. Templeton, 16 Ind. 
 App. 126, 44 N. K 809. See Hurd v. Doty, 86 Wis. 1, 56 N. W. 371, 21 L. R. 
 A. 746. 
 
 !•• Life Ins. Clearing Co. v. O'Neill, supra. 
 
ii 
 
 134 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 may arise at any time. We are of the opinion that the policy is not 
 void." ^»» 
 
 On principle it is difficult to see how even the actual expenditure 
 of money, or the immediate liability to pay, can give any insurable 
 interest in the life of the indigent and dependent relative. The death 
 of the insured will but relieve the assured of his burden, and from a 
 merely pecuniary point of view will unquestionably be a benefit to 
 the assured, and not a source of detriment, excepting so far as it may 
 impose liability for funeral expenses. Manifestly the theory of the 
 Pennsylvania court, as expressed in Mutual Reserve Ins. Co. v. Kane, 
 just cited, that the assured should be allowed by insurance to reim- 
 burse himself for outlays, past or future, is unsound. Life insurance 
 is not a profit-making transaction to the assured. The premiums pay- 
 able in each case are so calculated that if the life insured continues as 
 long as the average expectancy of one of similar age and health, the 
 amount paid in premiums, with interest, will exceed the amount ulti- 
 mately realized from the policy. Hence, unless the assured had fraud- 
 ulent secret knowledge of conditions that would probably terminate 
 the life insured at an earlier period than that fixed by the mortuary 
 tables, it would be thoroughly unwise for him to hope to regain his 
 expenditures on behalf of the dependent relative by insuring his life. 
 
 A sister may insure the life of a brother from whom she receives, 
 or expects to receive, support,^ •• but not otherwise.*** The mere re- 
 lation of brothers,^ •* or of uncle and nephew, or aunt and nephew,**' 
 
 W 
 
 iB» RESERVE MUT. INS. CO. v. KANE, 81 Pa. 154, 22 Am. Rep. 742. 
 
 i«o LORD V. DALLs 12 Mass. 115, 7 Am. Dec. 38. See the rather unsatis- 
 factory opinion on this question in Goodwin v. Insurance Co., 73 N. Y. 480, 
 493. 
 
 i«i The unqualified statement in Hosmer v. Welch, 107 Mich. 470, 67 N. 
 W. 504, that "at the common law the defendant had an insurable interest In 
 her brother's life," is an obiter dictum. The policy was issued to the brother. 
 
 i«» Lewis V. Insurance Co., 39 Conn. 104, 3 Bigelow L. & Ace. Ins. Rep. 
 527. In this case Carpenter, J., said: **We think it Is a correct legal propo- 
 sition that the mere relationship of a brother is not such an interest as will 
 support a policy of life insurance. The interest required to make such a con- 
 tract valid must be of a pecuniary nature. A few cases will be cited by way 
 of illustration. A father, being entitled to the wages of his minor son, has 
 an insurable interest in his life. LOOMIS v. INSURANCE CO., 6 Gray 
 (Mass.) 396. A sister, dependent upon a brother for her education and sup- 
 port, has an insurable interest in the brother's life. LORD v. DALL, 12 
 
 i«3 SINGLETON v. INSURANCE CO., 66 Mo. 63, 27 Am. Rep. 321. An 
 uncle living on his sister's place, and keeping his nephew, the child of his 
 sister, has no insurable interest in such child. Prudential Ins. Co. v. Jenkins, 
 15 Ind. App. 297, 43 N. E. 1056, 57 Am. St Rep. 228. A nephew has no in- 
 surable interest In the life of his aunt by force of the mere relationship. 
 Appeal of Corson, 113 Pa. 438, 6 Atl. 213, 57 Am. Rep. 479. See, also, Mowry 
 V. Insurance Co., 9 R. I. 353, 1 Bigelow L. & Ace. Ins. Rep. 698. 
 
 §§ 49-52) 
 
 INSURABLE INTEREST IN LIVES. 
 
 135 
 
 Ii 
 
 or grandfather and grandson,^®* will not constitute an insurable inter- 
 est. There must be some further reason for expecting pecuniary ad- 
 vantage from the continued life of the insured than the mere kindly 
 or affectionate feeling naturally existent between such near relatives. 
 It has further been held that a mere moral obligation to support or 
 render other service is not sufficient of itself. There must be either a 
 legal right or a well-grounded expectation of benefit to be conferred. 
 Thus in Guardian Mut. Life Ins. Co. v. Hogan "» it was held that the 
 moral obligation resting upon the father to reimburse the son for labor 
 and money expended in improvements on the father 's land did not give 
 the son such an interest as would validate a policy on the father's life. 
 But the existence of such moral obligation may, in connection with near 
 relationship and kindly feeling, be evidence of a well-grounded expec- 
 tation of advantage to be derived from the continuation of the life of 
 the person upon whom such obligation rests, which will constitute a 
 sufficient interest. Thus where an aunt and niece had lived tc^ether 
 like mother and daughter for many years, the aunt supporting and 
 caring for the niece, it was held that the aunt had an insurable inter- 
 est in the life of the niece, since she had reason to expect, from the 
 kindly feelings that subsisted between them, that the niece would per- 
 form the moral obligation imposed upon her by those circumstances 
 to care for and support the aunt in case of need.^®* 
 
 The conclusion to be reached from an examination of the cases is 
 that, despite the positive tone of the persistent dicta to the contrary, 
 the fact of near relationship does not of itself constitute an insurable 
 interest, and is of importance only as affording evidence of the exist- 
 ence of a legal right to demand maintenance, or of a reasonable hope 
 
 Mass. 115, 7 Am. Dec. 38. A person advancing money to another, in con- 
 sideration of which he acquires an interest by contract in his future serv- 
 ices, may protect that interest by an insurance on his life. BEVIN v. IN- 
 SURANCE CO., 23 Conn. 244. From these and many other cases that might 
 be cited, it is apparent that the plaintiff might have had an insurable interest 
 in the life of his brother. He might have been dependent upon him for his 
 support. He might have had a fixed pecuniary interest in his future services. 
 He -might have been a creditor. The defendants could not know from the 
 application that the plaintiff did not have a pecuniary interest in the continu- 
 ance of his brother's life. The policy, therefore, on its face, is not void, but 
 prima facie valid, and could only be avoided upon proving, by parol evi- 
 dence, a want of interest" But, so it has been held, a brother has an in- 
 surable interest in the life of a sister whom he supports and maintains in his 
 family. Keystone Mut Ass'n v. Beaverson, 16 Wkly. Notes Cas. (Pa.) 188. 
 
 i«* Burton v. Insurance Co., 119 Ind. 207, 21 N. E. 746, 12 Am. St. Rep. 
 405. A mother-in-law has no insurable interest in the life of her son-in-law. 
 Adams v. Reed (Ky.) 36 S. W. 568. 
 
 i«8 80 111. 35, 22 Am. Rep. 180. 
 
 ie« CRONIN V. INSURANCE CO., 20 R. I. 570. 40 Ati. 497. 
 
i: 
 
 136 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 of future benefit arising out of the kindly feeling and benevolent dis- 
 position usually incident to such relationship. 
 
 The Relation of Husband and Wife. 
 
 There would seem to be no proper question as to the right of either 
 spouse to insure the life of the other. The wife has a legal right to sup- 
 port from the husband/*^ and, under the common law, the husband has 
 a right to the services of his wife.^*® Even under the modern mar- 
 ried women's laws, by which the wife is entitled to retain her own earn- 
 ings, it is clear that the husband's expectation of services to be rendered 
 by the wife in and about the common household would give him an in- 
 surable interest in her life. And it would seem that the mere right to 
 the wife's services will support a policy on her life taken out by the hus- 
 band, without actual proof that the right was of value. In a Vermont 
 case, however, it was intimated that proof of the inability of the wife 
 to render such services, as when she is hopelessly insane or an invalid, 
 might require^the application of a different rule.*** 
 
 Commercial Relations. 
 
 Any person is permitted to protect by insurance any commercial in- 
 terest he may possess in the life of another. A creditor may insure 
 
 i«T Reed V. Assurance Co., Peake, Add. Cas. 70; MUTUAL LIFE INS. CO. 
 T. ALLEN, 138 Mass. 24, 52 Am. Rep. 245. In the latter case it appeared that a 
 wife had taken out a policy on the life of her husband, and had assigned it 
 to plaintiff. The policy was enforced, the court assuming, without discus- 
 sion, that the wife had an insurable interest in her husband's life. In ROM- 
 BACH V. INSURANCE 00., 35 La. Ann. 233, 48 Am. Rep. 239, Manning, J., 
 said: "It is thoroughly settled, because universally held, that a wife has an 
 insurable interest in the life of her husband, and although, in that case es- 
 pecially. It might be assumed that love and affection fmmished a sufficient 
 basis for it, the decisions do not place it on that ground, but rather on the 
 support she is entitled to from him." Dicta to the same effect are numer- 
 ous. See Crotty v. Insurance Co., 144 U. S. 621, 12 Sup. Ct. 749, 36 L. Ed. 566. 
 Statutes, permitting the wife to take out insurance on her husband's life, 
 and exempting the proceeds thereof from the payment of his debts, have 
 been enacted in nearly all of the states. See 4 Rev. St N. Y. (8th Ed.) p. 2602; 
 Code Ala. 1896, § 2356. A wife under a common-law marriage has an in- 
 surable interest in the life of her husband. Watson v. Insurance Co. (C. C.) 
 21 Fed. 698. In this case the husband had taken out the policy, but the 
 court did not consider this fact See, also, E3quitable Life Assur. Soc. v. 
 Paterson, 41 Ga. 338, 5 Am. Rep. 535. A woman has an insurable interest in 
 the life of her fianc6. CHISHOLM v. INSURANCE CO., 52 Mo. 213, 14 Am. 
 Rep. 414; Taylor v. Insurance Co., 15 Tex. Civ. App. 254, 39 S. W. 185. And 
 it has been held that a mistress had an insurable interest in the life of her 
 paramour. Lampkin v. Insurance Co., 11 Colo. App. 249, 52 Pac. 1040. 
 
 i«8 This constitutes an insurable interest CURRIER t. INSURANCE CO., 
 57 Yt. 496, 52 Am. Rep. 134. 
 
 i«»Id. 
 
 §§ 49-52) 
 
 INSURABLE INTEREST IN LIVES. 
 
 137 
 
 the life of his debtor/^® a partner that of his copartner/^ ^ or a serv- 
 ant the life of his master.* ^^ And a master may insure his servant 
 against such injuries in the course of his employment as will impose 
 liability on the master.*^* The life of a contractor under obligation to 
 construct any work may be insured by his employer, and persons pe- 
 cuniarily interested in any financial enterprise may insure the life of 
 the financier who has charge of it.^^* The life of one only indirectly 
 connected with a commercial enterprise may be insured by those in- 
 volved in it if the death of such person would injuriously affect the 
 enterprise, as in the recent instances of insurance on the life of the 
 King of England procured by those who had invested money in 
 preparations for the King's coronation. So a tenant pur autre vie 
 might well insure the life of his cestui que vie; ^"^^ and one who owns 
 a property interest contingent upon another's attaining some specified 
 age may through insurance secure indemnity for the loss he would suf- 
 fer by the death of that other before arriving at that age.*^^ 
 A surety may insure the life of his principal, for the latter is but a 
 
 i7« BBVIN V. INSURANCE CO., 23 Conn. 244; RAWLS y. INSURANCE 
 CO., 27 N. Y. 282, 84 Aul Dec. 280; MOliRELL v. INSURANCE CO., 10 
 Ousb. (Mass.) 282, 57 Am. Dec. 92; Shafifer v. Spangler, 144 Pa. 223, 22 Atl. 
 865; Walker v. Larkin, 127 Ind. 100, 26 N. E. 684; Mace v. Association, 101 
 N. 0. 132, 7 S. E. 674; Equitable Life Ins. Co. v. Hazelwood, 75 Tex. 338, 12 
 S. W. 621, 7 L. R. A. 217, 16 Am. St. Rep. 893. And the creditor retains an 
 insurable interest in the life of his debtor after the debt is barred by the 
 statute of limitations. RAWLS v. INSURANCE CO., supra. A creditor 
 may insure the life of his infant debtor, even though the infant may avoid 
 the obligation. Porter on Ins. 69, citing Dwyer v. Bdie, 2 Park, Ins. 914. 
 
 iTi "Certainly Luchs had a pecuniary interest in the life of Dillenberg on 
 two grounds: Because he was his creditor, and because he was his partner. 
 The continuance of the partnership, and, of course, a continuance of Dillen- 
 berg's life, furnished a reasonable expectation of advantage to himself. It 
 waa in the expectation of such advantage that the partnership was formed, 
 and, of course, for the like expectation, was continued." Mr. Justice Field 
 in CONNECTICUT MUT. LIFE INS. CO v. LUCHS, 108 U. S. 498, 2 Sup. Ot 
 949, 27 L. Ed. 800. 
 
 172 Hebdon v. West, 3 Best & S. 579. 
 
 173 EMPLOYERS' LIABILITY ASSUR CORP. v. MERRILL, 155 Mass. 
 404, 29 N. B. 529. An employer's insurance against his liability for the neg- 
 ligent killing of his employs is essentially different from an insurance of the 
 life of an employ^. See American Employers' Liability Ins. Co. v. Fordyce, 
 62 Ark. 562, 36 S. W. 1051, 54 Am. St. Rep. 305. 
 
 174 It is currently reported in the newspapers that insurance to a large 
 amount is carried upon the life of Mr. J. P. Morgan by stockholders of enter- 
 prises of which that financier has charge. See Mechanics' Nat Bank v. 
 Comins (N. H.) 55 Atl. 191. 
 
 17 5 A tenant of a landlord having only a life estate in the leased premises 
 has an insurable interest in such landlord's life. Sides v. Insurance Co. (a 
 a) 16 Fed. 650. 
 
 176 Law T. PoUcy Co., 3 Eq. 388, 1 Kay & J. 223, 2 Bigelow U & Ace. Ins. 
 Rep. 404. 
 
 t i 
 
 
 i( 
 
 1 
 
 ) 
 
 n 
 
 ill 
 
138 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 §53) 
 
 INTEREST OP CREDITOR IN LIFE OP DEBTOR. 
 
 139 
 
 conditional debtor,*'' but the principal has no such interest in the life 
 of his surety."* Likewise it has been held that a building association 
 has no insurable interest in the life of a member who is in no wise in- 
 debted to it."» 
 
 INTEREST OF CREDITOR IN LIFE OF DEBTOR. 
 
 53. Tlie interest of the creditor in the life of the debtor is measured 
 by the amonnt of the debt. The insurance effected by the cred- 
 itor upon such an interest, -while not limited to the amount of 
 the debt, ncill not be allowed so to exceed that sum as to justify 
 an inference that it was taken out as a wager. Therefore cred- 
 itor's insurance to an amonnt unreasonably greater than the 
 debt is illegal and void. 
 
 Debtor and Creditor — Amount of Insurance. 
 
 It is well settled that a creditor has an insurable interest in the life 
 of his debtor,*'® but it is difficult to ascertain from the authorities just 
 what is the nature of that interest, and what is the principle on which 
 is to be determined the proportion which the amount of insurance pro- 
 cured shall bear to the amount of the debt. It is clear that insurance 
 limited to the exact amount of the debt will fail to indemnify the cred- 
 itor, in case the debtor dies before the debt is paid, by an amount equal 
 to the sum of all premiums paid, with interest thereon.*** On the 
 other hand, it is equally clear that to allow the creditor to procure in- 
 surance greatly exceeding the amount of the debt would be to tempt 
 him to bring the debtor's life to an unnatural end, and thus contravene 
 the principle of public policy which has been seen to lie at the very* 
 basis of the doctrine of insurable interest. And that this fear of in- 
 ducing crime is not an idle one is apparent from the experience of in- 
 surance companies, as sometimes reflected in the reported cases.*** 
 
 ITT Scott T. Dickson, 108 Pa. 6, 66 Am. Rep. 192; Embry's Adm'r v. Harris, 
 104 Ky. 61, 52 S. W. 958. 
 
 178 Tate V. Association, 97 Va. 74, 33 S. B. 382, 45 L». R. A. 243, 75 Am. St 
 
 Rep. 770. 
 
 iT» Id. A religious society, supported largely by voluntary contributions 
 from its members, has no insurable interest in the life of such a member. 
 Trinity College v. Insurance Co., 113 N. C. 244, 18 S. B. 175, 22 L. R. A. 291. 
 
 i«o See note 170, supra. 
 
 i»i "He [the creditor] must be allowed to provide for a sum sufficient, 
 when collected, to cover his demand, and such disbursements as may be re- 
 quired to keep the policy in force, with accrued interest." fienry, J., in 
 Equitable Life Ins. Co. v. Hazelwood, 75 Tex. 338, 12 S. W. 621, 7 U R. A. 
 217, 16 Am. St. Rep. 893. 
 
 182 See Reg. v. Flanagan, 15 Cox, Cr. Cas. 411. In this case it appeared 
 that a woman, having lent divers sums to several persons, secured the loan 
 
 The courts have generally not attempted to lay down any precise or 
 arbitrary rule fixing the proportion of valid insurance to the debt in- 
 tended to be secured, but have contented themselves with stating broad- 
 ly that when the disproportion between the insurance and the debt is so 
 great as to show the transaction to be really a wager, and not a bona 
 fide eflFort to secure a debt, the policy shall be void."' In eflFect each 
 case has been decided on its own facts, and the proportionate amounts 
 of debt and insurance are merely evidential of the good or bad faith 
 of the creditor procuring the insurance. Thus a policy of $3,000 to 
 secure a debt of $70 was held manifestly dishonest and void;"* 
 while, under the peculiar circumstances of another case, insurance to 
 the amount of $6,500 was held not to be so disproportionate to a debt 
 of $1,000 as to avoid the contract."'' 
 
 The Pennsylvania decisions, however, attempt to formulate a rule to 
 govern the proportion between the insurance and the debt as follows : 
 The creditor may insure the life of his debtor in an amount equal to 
 the sum of the debt, plus all the premiums payable during the debtor's 
 life expectancy according to the Carlisle tables, with interest on the 
 debt and premiums during that time."' This rule, however, though ap- 
 proved in several successive decisions,"^ is wholly impracticable and 
 valueless. The premiums payable upon any policy, with annual in- 
 terest thereon, during the insured's life expectancy, will alone always 
 amount to a sum equal to or greater than the proceeds of the policy, 
 
 by insurance on their lives, and then poisoned them to secure the insurance 
 money. 
 
 188 See the opinion of Miller, J., in Cammack v. Lewis, 15 Wall. (U. S.) 643. 
 21 L. Ed. 244. . 
 
 184 Cammack v. Lewis, 15 Wall. 043, 21 L. Ed. 244. In this case it appeared 
 that the debtor procured the policy, and. in pursuance of a previous agree- 
 ment with his creditor, assigned it to him to secure the debt of $70. The 
 assignee creditor agreed to pay to the insured's wife $1,000 out of the pro- 
 ceeds of the policy. The court declared the assignment invalid because of 
 the great disproportion between the debt and the insurance. See CON- 
 NECTICUT MUT. LIFE INS. CO. v. LUCHS, 108 U. S. 498, 2 Sup. Ct. 949, 
 27 L. Ed. 800. In Corson's Appeal, 113 Pa. 438, 6 Atl. 213, 57 Am. Rep. 479] 
 a policy for $2,000, to cover a debt of $743, was sustained. In Grant's Adm'rs 
 V. Kline, 115 Pa. 618, 9 Atl. 150, the policy was for $3,000, the debt $743, 
 and the transaction was declared valid. There were cu-cumstances, how- 
 ever, evidencing the good faith of the creditor. In Cooper v. Weaver's 
 Adm'r (Pa.) li Atl. 780, a policy for $3,000, to secure a debt of $100, was 
 declared void as a wager. To same effect, see Cooper v. Shaeflfer (Pa) 11 
 Atl. 548. ' 
 
 18B RIT^TLER V. SMITH, 70 Md. 261, 16 Atl. 890, 2 L. R. A. 844 
 
 186 uirich V. Reinoehl, 143 Pa. 238, 22 Atl. 862, 13 L. R. A. 433, 24 Am. St 
 Rep. 534. 
 
 187 This rule was proposed In Grant's Adm'p t. Kline, supra, was spoken of 
 approvingly in Cooper v. Shaeflfer, supra, was adopted in Ulrlch y. Reinoehl. 
 and reaffirmed In Shaffer t. Spangler, 144 Pa. 223, 22 Atl. 865. 
 
 
 :a 
 
 t 
 
 i 
 
 11 
 
1 
 
 140 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 leaving no margin for the debt. If it were otherwise, insurance com- 
 panies could not possibly meet their obligations.^®® 
 
 Hence the only working rule would seem to be that when the dis- 
 proportion between the insurance and the debt is so great, taken with^ 
 the other circumstances of the case, as to show a want of good faith 
 in the creditor, the policy will be deemed a wager contract, and void.^**^ 
 
 XNTEBEST OF THE ASSIGNEE OF A LIFE POLICY. 
 
 54. On principle, and according to the dear weight of authority, an 
 assignn&ent of a life policy to one having no insurable interest 
 therein is perfectly valid if made in good faith, and not as a 
 •over for fraudulent speculation in life. 
 
 The validity of the assignment of a life policy to one having an in- 
 surable interest in the life insured is unquestionable, but there is much 
 conflict of authority and consequent confusion in the law as to whether 
 a valid assignment of a life policy can be made to one having no in- 
 surable interest. This confusion is due partly to the difficult nature 
 of the principles involved, and partly to the misleading opinion de- 
 livered by Mr. Justice Field, of the Supreme Court of the United 
 States, in the correctly decided case of Warnock v. Davis,^'® follow- 
 ing the preceding case of Cammack v. Lewis, ^'^ decided by the same 
 court. These confusing influences have further been aided and abet- 
 ted by a catch phrase, which, however, does not state the issue fairly, 
 to the effect that the law will not allow a person to procure by as- 
 signment insurance that he could not procure directly.^** A fair state- 
 ment of the issue is found in the postulate that the law will allow the 
 
 188 See the exposition of tJie fallacy of this rule by Lumpkin, P. J., in 
 Exchange Bank v. Loh, 104 Ga. 446, 31 S. E. 459, 44 L. R. A. 372. 
 
 i8j> A third view of this question is expressed in Equitable Life Ins. Go. 
 V. Hazelwood, 75 Tex. 338, 12 S. W. 621, 7 L. R. A. 217, 16 Am. St. Rep. 
 893. In this case Henry, J., iaid: "When the insurance is obtained by a 
 person on his own life, and made payable originally, or by assignment, to 
 another, having none, or only a limited insurable interest in his life, as the 
 surplus after the payment of the charges will go to the party whose life is 
 assured, we see no reason for limiting the amount for which the insurance 
 may be taken out When the insurance is not contracted for by the person 
 whose life is insured, but by a creditor, in his own name, so that there is no 
 party to the contract except himself and the insurer, it becomes Immaterial 
 what amount may be contracted for, as no more will be collected than wiP 
 be ultimately sufficient to discharge his debt and disbursements on the pol 
 ley, including interest upon both.'* 
 
 i»o WARNOCK V. DAVIS, 104 U. S. 775, 782. 26 L. Ed. 924, Elliott, Cas. 71. 
 
 !•! 15 Wall. (U. S.) 643, 21 L. Ed. 244. 
 
 i»a WARNOCK t. DAVIS, supra. 
 
 §54) 
 
 INTEREST OF THE ASSIGNEE OF A LIFE POLICY. 
 
 141 
 
 insured to designate a beneficiary under the policy as well by assign- 
 ment as by original nomination. 
 
 The true principle governing the question may be derived from the 
 statement of some generally accepted rules of law : 
 
 (1) A person insuring his own life may designate any person what- 
 ever as beneficiary, irrespective of insurable interest in that bene- 
 ficiary. 
 
 (2) The law requires an insurable interest only at the inception of 
 the policy, as evidence of good faith. The presence of such interest 
 at any subsequent period is wholly immaterial. 
 
 (3) Life insurance, though based on the theory of indemnity at its 
 inception, is not a contract of indemnity, but chiefly of investment As 
 a chose in action it has at any time after its issue a recognized value, 
 termed the "reserve value." 
 
 Hence wc conclude that a policy of life insurance, validly issued to 
 one having an insurable interest, becomes in his hands a valuable 
 chose in action, which should be assignable as any other property 
 right, unless such assignment be opposed to some clear rule of public 
 policy; that this right remains unimpaired in the hands of the original 
 assured, even after the termination of the interest upon which its pro- 
 curement was based, and there can be no sufficient reason for requir- 
 ing an interest in the assignee which is not possessed by the assignor; 
 and, finally, that there is no sufficient reason why the beneficiary des- 
 ignated by assignment of the policy after its valid issue should be 
 subject to a different rule as to interest required from that applying 
 to the beneficiary designated at the time of the issue of the policy. 
 Since an insurable interest is not necessary in the latter, neither should 
 it be required of the former. 
 
 But in considering the doctrine that an assignment to one having no 
 insurable interest is valid, it is important to note two qualifying phases 
 that materially affect the rights of the assignee. An assignment in 
 form will not be allowed to operate as a mere cloak to conceal a wager 
 in reality. Again, assignments may be absolute or conditional. A 
 conditional assignment made to secure a debt cannot possibly give to 
 the assignee any rights in the proceeds of the policy in excess of his 
 interest, measured by the debt secured, with interest and the charges 
 incurred on account of the policy. Upon these two propositions all 
 authorities are agreed. Yet critical examination of the numerous 
 cases that lay down the rule that an assignment to one having no in- 
 terest is invalid, and that the assignee can retain the proceeds of the 
 assigned policy only to the extent of his interest, discloses the fact that 
 in nearly all of them the assignment in question was either a cloak 
 for gambling insurance, or a conditional assignment to secure a debt. 
 This appears strikingly in the misleading leading case of Warnock y. 
 
 [I 
 
142 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 §54) 
 
 INTEREST OF THE ASSIGNEE OF A LIFE POLICY. 
 
 1421 
 
 Davis. *•• Here one Grosser applied for insurance, being moved 
 thereto by an agreement, made on the same day with the application, 
 by the Scioto Trust Association, to maintain the policy, and to pay 
 all charges connected with it, in consideration of receiving an assign- 
 ment entitling them to collect the sum due under the policy upon the 
 death of Grosser, and, after paying 10 per cent, of such sum to Gros- 
 ser's widow, to retain absolutely the balance. In accordance with this 
 agreement, the policy was assigned the day succeeding its issue, and 
 upon Crosser's death, some 18 months later, the assignees collected the 
 amount payable under the policy, and retained nine-tenths of the sum 
 collected. Upon suit by Grosser's administrator it was very properly 
 held that the assignees could retain only so much of the proceeds of 
 the policy as was necessary to reimburse them for their outlay in re- 
 spect to it ; that the assignment operated merely to secure the payment 
 of money loaned for the payment of premiums. 
 
 It would be difficult to imagine a* case showing more clearly than 
 this a purpose to evade the rule of law forbidding wager policies, and 
 to obtain indirectly insurance that the law would not allow directly. 
 The real effect of the transaction was precisely the same as if the as- 
 sociation had directly procured insurance upon the life of Grosser, in 
 which they had absolutely no interest. The decision of the court, 
 therefore, in refusing to uphold such a masquerading assignment, was 
 eminently just and proper. But the court unfortunately went far be- 
 yond the case decided, and made various general observations, which 
 apply equally well to cases entirely different from the one giving oc- 
 casion to them, and have on that account been productive of much 
 loose thinking and confusing adjudication. "The assignment of a pol- 
 icy," says Field, J., "to a party not having an insurable interest, is as 
 objectionable as the taking out of a policy in his name. Nor is its 
 character changed because it is for a portion merely of the insurance 
 money. To the extent in which the assignee stipulates for the pro' 
 ceeds of the policy beyond the sums advanced by him, he stands in 
 the position of one holding a wager policy. The law might be read- 
 ily evaded, if the policy, or an interest in it, could, in consideration of 
 paying the premiums and assessments upon it, and the promise to pay 
 upon the death of the assured a portion of its proceeds to his repre- 
 sentatives, be transferred so as to entitle the assignee to retain the 
 whole insurance money." 
 
 The case of Roller v. Moore's Adm'r,"* decided by the Virginia Court 
 of Appeals in 1889, and often cited as authority for the doctrine that an 
 assignment of a life policy to one having no insurable interest is in- 
 valid, is typical of that class of cases which make an unnecessary ex- 
 
 i»» WARNOCK V. DAVIS, 104 U. S. 775, 26 L. Ed. 924, Elliott, Cas. 71, 
 i»4 86 Ya. 512, 10 S. B. 241, 6 L. R. A. 136. 
 
 tension to absolute assignments of the principle properly applicable to 
 conditional assignments. In that case Roller had obtained from the 
 insured an assignment of a policy on his life, which, though absolute on 
 its face, was yet proved to have been given merely as security for money 
 advanced by Roller to pay the premiums on the policy. Under these 
 facts the court properly decided that the assignment was really con- 
 ditional, and that the assignee could retain only so much of the pro- 
 ceeds of the policy as would reimburse him for all sums he had paid 
 on account of the policy, with interest thereon. Under the facts of 
 this case any other decision would have been impossible. It must 
 have been the same if the assignment had been of any other chose in 
 action. But the court, not content with correctly deciding the case 
 before it, proceeded to lay down obiter a rule for absolute assignments, 
 which is declared to be the same, in effect, as that for conditional as- 
 signments. Echoing the dictum in Warnock v. Davis, the court says : 
 "The assignment of a policy, however, to a party not having an in- 
 surable interest, is as objectionable as the taking out of a policy in 
 his name." The Virginia court has lost no opportunity in subsequent 
 decisions to re-echo this dictum in Roller v. Moore's Adm'r, although 
 in every case the assignment was shown to be conditional.^'* 
 
 In like manner it will be found that in nearly all the cases that lay 
 down the rule that an assignment to one without interest is invalid, 
 the real question before the court for decision involved a conditional 
 assignment. On the other hand, there are numerous cases fairly pre- 
 senting for decision the rights of parties under an absolute assign- 
 ment, in which the courts of many different states have held, after 
 careful consideration, that no interest in the assignee is necessary to 
 support the validity of an assignment of a life policy that has been val- 
 idly taken out by one having such interest. Among the states that have 
 adopted this view are the great commercial states. New York,^®' Penn- 
 sylvania,"^ Massachusetts,"* Gonnecticut,"* Illinois,"® Indiana,"* 
 Ohio,"* New Jersey,"* and Maryland,"* as well as Iowa,"* Louisi- 
 
 i»6 See Tate v. Association, 97 Va. 74, 33 S. E. 382, 45 L. R. A. 243, 75 Am. 
 St. Rep. 770, and cases therein cited. 
 
 196 STEINBACK v. DIEPENBROCK, 158 N. Y. 24, 52 N. E. 662. 44 L. R. A. 
 417, 70 Am. St Rep. 424. 
 
 i»7 Cunningham v. Smith's Adm'r, 70 Pa. 450. 
 
 i»8 Shea V. Association, 160 Mass. 289, 35 N. B. 855, 39 Am. St. Rep. 475; 
 King V. Cram (Mass.) 69 N. E. 1049. 
 
 i»» Fitzgerald v. Insurance Co., 56 Conn. 116, 13 Atl. 673, 17 Atl. 411. 7 Am. 
 St. Rep. 288. 
 
 soo Martin v. Stnbbings, 126 111. 387, 18 N. E. 657, 9 Am. St. Rep. 625. 
 
 «oi Metropolitan Life Ins. Co. v. Brown (Ind. Sup.) 65 N. E. 908. 
 
 ao2 Eckel v. Renner, 41 Ohio St. 232. 
 
 «08 VIVAR V. KNIGHTS OF PYTHIAS, 52 N. J. Law, 455, 20 Atl. 36. 
 
 S04 RITTLER V. SMITH, 70 Md. 261, 16 Atl. 890, 2 L. R. A. 844. 
 
 106 Farmerg* & Traders* Bank v. Johnson (Iowa) 91 N. W. 1074. 
 
 1 
 
 ; > 
 
 ' i 
 
 f. 
 
 
144 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 §55) 
 
 CONSENT OF THE LIFE INSURED. 
 
 145 
 
 ana,*** Mississippi,'** New Hampshire,**'* Tennessee,*** Rhode Isl- 
 and,*" South Carolina,*" Vermont,*^* ^nd Wisconsin.*" The Eng- 
 lish *** and Canadian *^* courts have also adopted the same rule. 
 
 In Mutual Life Ins. Co. v. Allen,* ^* which repudiated the appar- 
 ently contrary holding of the same court in Stevens v. Warren,*^* 
 Allen, J., so well expresses the reasons why the assignee need have no 
 insurable interest that his words may well be quoted here: "The 
 other objection urged is that such transactions may lead to gaming 
 contracts. This does not meet the question, which is whether such 
 an assignment is in itself illegal as a wagering contract. Most con- 
 tracts have an element of gambling in them. There is uncertainty 
 in the value of any contract to deliver property at a future day, and 
 great uncertainty in the present value of an annuity for a particular 
 life, or of a sum payable in the event of a particular death, and such 
 contracts and rights are often used for gambling purposes. The 
 question is whether the right to a sum of money, payable on the death 
 of a person under a contract in the form of an insurance policy, has 
 any special character or quality which renders it less assignable than 
 the right to a sum payable at the death of the same person under any 
 other contract or assurance, or than a remainder in real estate ex- 
 pectant on such death. We see nothing in the contract of life insur- 
 ance which will prevent the assured from selling his right under the 
 contract for his own advantage, and we are of the opinion that an 
 assignment of a policy made by the assured in good faith for the pur- 
 pose of obtaining its present value, and not as a gaming risk between 
 him and the assignee, or a cover for a contract of insurance between 
 the insurer and assignee, will pass the equitable interest of the assignor ; 
 and that the fact that the assignee has no insurable interest in the life 
 insured is neither conclusive nor prima facie evidence that the trans- 
 action is illegal." 
 
 >•• Hearing's Succession, 26 La. Ann. 326. 
 
 «07 Murphy v. Red, 64 Miss. 614, 1 South. 761, 60 Am. Rep. 68w 
 
 «o« Mechanics* Nat Bank v. Comins (N. H.) 55 Atl. 191. 
 
 «o» Mutual Protection Ins. Oo. v. Hamilton, 5 Sneed (Tenn.) 269. 
 
 «io Clark v. Allen, 11 R. I. 439, 23 Am. Rep. 496. 
 
 >ii Cross wel t. Association, 51 S. C. 103, 28 S. E. 200. 
 
 «" Fairchlld t. Association, 51 Vt. 613. 
 
 «i« Bursinger T. Bank, 67 Wis. 75, 30 N. W. 290, 58 Am. Rep. 84a 
 
 >i* ASHLEY T. ASHLEY, 3 Sim. 149. 
 
 «i» Vezina v. Insurance Oo., 6 Can. Sup. Ct, 30. 
 
 >i< MUTUAL LIFE INS. CO. Y. ALLEN, 138 Mass. 24, 52 Am. Rep. 245. 
 
 aiT 101 Mass. 564. 
 
 CONSENT OF THE LIFE INSUHED. 
 
 65* While tlie practice of insurers makes the qnestion someDrliat un- 
 certain, it seems that both by reason and authority insurance 
 written upon the life of one urho has not consented thereto is 
 contrary to public policy, and void. 
 
 The Consent of the Insured. 
 
 It seems not to be yet clearly settled whether the consent of the in- 
 sured is necessary to the validity of a policy procured by another, 
 especially in view of the undoubtedly extensive practice of insurers 
 now to grant insurances to large amounts on the lives of persons 
 who have no knowledge of the contract and have given no consent to 
 it. Policies upon the lives of infants are not of infrequent occurrence. 
 Such policies are necessarily issued without examination of the life 
 insured, or other means of ascertaining the character of the risk. 
 Hence the element of pure chance, suggestive of speculation and 
 gambling, is large in these contracts. It is generally reported that 
 large amounts of insurance were taken by tradesmen and others in- 
 terested, on the life of Queen Victoria prior to her jubilee celebration, 
 and on the life of the present king of England before his recent coro- 
 nation. It is likewise said that large insurances were procured on 
 the life of a prominent New York financier during the pending of cer- 
 tain large financial operations of which he had charge. In none of 
 tliese cases is it probable that the person whose life was the subject of 
 insurance was consulted or examined with a view to determining the 
 state of his health. 
 
 On clear principle, and by the weight of authority, it is believed 
 that all such contracts are contrary to public policy, and void.^^® AS 
 has been shown heretofore, the amount of insurance that may be val- 
 
 218 In Metropolitan Life Ins. Co. v. Smith, 59 S. W. 24, 22 Ky. Law Rep. 
 8G8, 53 L. R. A. 817, it was held that where a wife insures her husband's 
 life without his knowledge or consent, and pays the premiums out of money 
 given her by him for household expenses, such premiums are recoverable by 
 him. The doctrine of the previous case of Metropolitan Life Ins. Co. v. 
 Monohan, 102 Ky. 13, 42 S. W. 924, that it is contrary to public policy for one 
 to procure an insurance on the life of another without such other's consent 
 was reaffirmed. To similar effect, see Metropolitan Ins. Co. v. Trende, 53 
 S. W. 412, 21 Ky. Law Rep. 909; Metropolitan Life Ins. Co. v. Sehlhorst, 
 53 S. W. 524, 21 Ky. Law Rep. 912. In Metropolitan Life Ins. Co. v. Blesch 
 (Ky.) 58 S. W. 436, it appeared that a daughter had insured her father's 
 life without his knowledge or consent, not knowing that such insurance is 
 void as contrary to public policy. She was allowed to recover the premiums 
 as paid under a mistake of law. In Chicago Guaranty Fund Life Soc. v. 
 Dyon, 79 111. App. 100, it was declared that a policy of insurance on the life 
 of a father, issued, without his knowledge or consent, to his son, was void 
 as contrary to public policy, 
 
 Vance Ins. — 10 
 
 a 
 
 I d 
 
 i 
 
 ' I 
 
146 
 
 INSURABLE INTEREST. 
 
 (Ch.4 
 
 idly procured is not limited strictly to the amount of the pecuniary 
 interest to be protected. A margin must be allowed to cover premiums 
 and other charges. But this excess of insurance offers a strong temp- 
 tation to hasten the death of the insured by criminal means. The 
 danger to the public from such insurances is largely obviated when the 
 insured, with knowledge of all the circumstances, has given his con- 
 sent to the contract His very consent is strong evidence of the good 
 faith of the person procuring the insurance, and thus affords a needed 
 guaranty to society. Remove this consent, and there is no guaranty 
 of the good faith of the assured, or of the safety of the life insured. 
 The especial necessity of guarding the lives of rulers and other promi- 
 nent persons whose lives are usually the subjects of this illicit insurance 
 emphasizes the value of a rule of law that would prohibit such doubt- 
 ful and corrupting contracts, and remove a very real public danger.*^^ 
 
 «!• Cases bave arisen in which persons whose lives were insured without 
 their consent have demanded the cancellation of the policies because of their 
 distrust of the assured. See ROMBACH v. INSURANCE CO., 35 La. Ann. 
 233, 48 Am. Rep. 239. 
 
 §56) 
 
 THE MAKING OP THE CONTRACT, 
 
 147 
 
 .1 
 
 56. 
 57-59. 
 
 GO. 
 
 61. 
 62-63. 
 
 64. 
 
 65. 
 
 66. 
 
 67. 
 
 68. 
 
 G9. 
 
 CHAPTER V. 
 
 THE MAKING OF THE CONTRACT. 
 
 In General — Offer and Acceptance. 
 The Form Required— Oral Contracts. 
 
 When an Oral Contract Becomes CompIetVi 
 Contracts in Writing. 
 
 Informal Written Contracts. 
 Formal Written Contracts— The Policy. 
 When the Policy Becomes Binding. 
 Delivery. 
 
 Payment of First Premium. 
 What Papers Form the Written Contract 
 Same — Mutual Benefit Insurance. 
 
 TN GENERAL—OFFER AND ACCEPTANCE. 
 
 56. The contract of insnranoe, like any other contract, is complete and 
 bindine only when an offer made by one party is accepted by the 
 other in the terms in which it is made. Neither the offer nor 
 the acceptance, however, need be in any particular form. Any 
 acts or words showing an intention to make an offer and to give 
 an acceptance are sufficient to establish a binding contract. 
 
 The contract of insurance, like any other contract, becomes com- 
 plete only when the minds of the parties have met in a common in- 
 tention to be bound in accordance with certain terms. An oflFer com- 
 municated with contracting intent must within a reasonable time be 
 accepted in the terms in which it is made, and that acceptance prop- 
 erly communicated. The familiar rules of general contract law de- 
 termmmg what constitutes a contractual offer or a valid acceptance 
 apply fully to the special contract of insurance. For a discussion of 
 such rules or their general applications, the reader is referred to 
 treatises on contracts. They will here be noticed only with reference 
 to the phases peculiar to the insurance contract. 
 
 In the conduct of the insurance business there has been developed 
 a customary method of making insurance contracts. The offer is 
 made by the person desiring the insurance, who signs a written ap- 
 plication containing such information concerning the subject of the 
 proposed insurance as may be desired by the insurer. This applica- 
 tion IS delivered to a soliciting agent of the insurer, whose powers are 
 usually limited to receiving such application and forwarding it to the 
 general offices of the insurer, where it is either rejected or accepted. 
 i^y the terms of the offer, the acceptance, however, is not ordinarily 
 
 
 •■.I 
 
 !i 
 
 it: 
 
 ( 1 
 

 li 
 
 148 
 
 THE MAKING OP THB CONTRACT. 
 
 (Ch.5 
 
 §§ 57-59) THE FORM REQUIRED — ORAL CONTRACTS. 
 
 149 
 
 complete until the issue and delivery of a policy and payment of the 
 first premium. When the preliminary negotiations take such form, 
 there is seldom any difficulty in determining when the contract is com- 
 plete. The policy contains the contract, which, by its terms, goes into 
 effect only when delivered without condition. And all preliminary ne- 
 gotiations and agreements are merged in the written policy. 
 
 But this usual course of procedure may be departed from. It may 
 be that the insurer offers a contract which is accepted by the insured 
 with or without writing, or the agent to whom the application for in- 
 surance is made may have authority to accept the offer without refer- 
 ence, and this acceptance may be written or oral. Even though re- 
 strictions have been put upon the agent's power, they may be invalid 
 because of repugnancy, or because waived by the conduct of the in- 
 surer. In these and numerous other irregular cases it often becomes 
 a difficult task to determine at what time an insurance contract becomes 
 complete. In this determination two considerations are of paramount 
 importance : First, the intention of the parties, and, second, the au- 
 thority of the parties, as agents, to carry out that intention. Of 
 course, expression must be given to this intention ; and we shall now 
 consider the form which this expression must assume, reserving the 
 discussion of the powers of agents for a later chapter. 
 
 THE FORM REQUIRED— ORAL CONTRACTS. 
 
 57. It la well settled that, in the absence of statutes to the contrary, 
 
 an oral contract of insurance is ▼alid, with the possible ex- 
 ception of guaranty insurance. 
 
 58. Oral contracts concerning insurance nuty be of two kinds, which 
 
 must be carefully distinguished. 
 
 (a) A contract of present insurance made without writing confers 
 
 the same rights and imposes the same obligations as does a writ- 
 ten contract. 
 
 (b) An oral contract thereafter to make a contract of insurance gives 
 
 to one of the parties a right to demand of the other the execu- 
 tion of an insurance contract in accordance with the usual 
 terms, and the delivery of a policy as written evidence thereof. 
 
 59. By implication, the oral contract of present insurance includes all 
 
 the terms of the policy expected subsequently to issue, or, in 
 some states, prescribed by statute. But an executory agree- 
 ment to make a contract is not subject to the conditions of the 
 contemplated policy. In the one case the insurer incurs liabil- 
 ity upon the happening of the loss insured against; in the other, 
 vpon his failure to deliver a policy as agreed. 
 
 The numerous and complex provisions of the usual contract of in- 
 surance, and the long terms for which insurance is sometimes granted., 
 make it eminently desirable that the terms of this important contract 
 
 should be fixed in writing. Hence arose a general commercial usage 
 that required the insurance contract to assume the form of a written 
 policy. The formal dignity of the policy was sometimes enhanced by 
 placing it under seal. The existence of this custom, and the fact 
 that the contract was one properly belonging to the law merchant, 
 led the learned author of an early work on marine insurance ^ to ex- 
 press the opinion that an action on an oral contract of insurance 
 would not now be sustained. This view was adopted in full by the 
 Ohio Court of Appeals, which declared in an early case that "such a 
 thing as a verbal policy is unknown to the law of insurance, and the 
 books upon the subject and the decisions unite in declaring that a policy 
 must be in writing." * But it is now settled beyond question that, in 
 the absence of statutory requirements to the contrary, an oral con- 
 tract of insurance is valid and enforceable.' The argument from 
 commercial usage was thus met by the court in the leading case of 
 Sanborn y. Fireman's Ins. Co. : * "It is not easy to see the force of 
 the reasoning which would infer that, because parties usually make 
 their contract in one way, it would be void when they choose to make 
 it in another, equally good at common law, and not prohibited by 
 statute." Indeed, a usage that an oral contract should be invalid 
 unless in writing would be contrary to law, as adding terms to the 
 statute of frauds, and evidence tending to prove such usage would be 
 inadmissible.* But the fact that such contracts are customarily in 
 writing will raise a strong presumption that no contract exists when 
 there has been no policy delivered or premium paid.* 
 
 Not within the Statute of Frauds. 
 
 The contract of insurance, even though by its terms extending over 
 many years, does not come within that provision of the statute of 
 
 1 Duer, Ins. p. 60; Miller, Ins. p. 30. 
 
 2 Cockerill v. Insurance Co. (1847) 16 Ohio, 148. This declaration, however, 
 was obiter, as tlie insurer's charter required its contracts to be in writing. 
 And it seems to have been repudiated in later Ohio cases. See Dayton Ins. 
 Co. V. Kelly (1873) 24 Ohio St. 345, 15 Am. Rep. 61; Newark Mach. Co. v. Ken- 
 ton Ins. Co., 50 Ohio St. 549, 35 N. E. 1060, 22 D. K. A. 768. In Bell v. Insur- 
 ance Co. (1843) 5 Rob. (La.) 423, 39 Am. Dec. 542, it is also stated that an in 
 surance contract must be in writing. But this is pure dictum. So in Platho 
 V. Insurance Co., 38 Mo. 254. 
 
 • Newark Mach. Co. v. Kenton Ins. Co. (1893) 50 Ohio St 549, 35 N. R 
 1060, 22 L. R. A. 768, and note, Woodruff, Ins. Cas. 93 ; Haskin v. Insurance 
 Co., 78 Va. 700; Pacific Mut Ins. Co. v. Shaffer, 30 Tex. av. App. 313, 70 
 S. W. 566; Commercial Union Assur. Co. v. Urbansky (Ky.) 68 S. W. 653; 
 Wooddy V. Insurance Co., 31 Grat. (Va.) 362, 31 Am. Rep. 739. 
 
 • 16 Gray (Mass.) 448, 77 Am. Dec. 419. 
 
 • See Emery v. Insurance Co. (1885) 138 Mass. 398. 
 
 • See Equitable Life Assur. Soc. v. McElroy (1897) 83 Fed. 631, 28 C. C. A. 
 365. But see dissenting opinion of Caldwell, J. 
 
 ■(• 
 
 : f' 
 
 I 
 
 U v!| i» 
 
 l! 
 
150 
 
 THE MAKING OF THE CONTRACT, 
 
 (Ch.5 
 
 ', 
 
 frauds requiring contracts not to be performed within one year from 
 the making thereof to be in writing. The insurer becomes Hable to 
 perform his contract immediately upon the happening of the loss to be 
 indemnified, which may easily be within a year.^ It has been held 
 that a contract of reinsurance is a promise to answer for the debt of 
 another,® but this is contrary to both reason and authority.® Contracts 
 of giiaranty insurance, however, would seem possibly within the stat- 
 ute, so as to require writing. 
 
 Statutory and Charter Provisions. 
 
 We have thus seen that at common law an oral contract of insur- 
 ance is valid and binding. We have next to consider the effect of 
 legislative enactments upon this doctrine. Such enactments modify- 
 ing the common-law rule may assume two forms. They may be con- 
 tained in general statutes governing all insurance contracts, by whom- 
 soever made, or they may be found in the charters of corporate in- 
 surers, thus affecting only the contracts of those corporations.' 
 
 It is competent for the legislature to require all insurance contracts 
 to be in writing, and in some states statutes to this effect have been 
 passed.** But statutes regulating the form of such contracts are in 
 derogation of common right, and must be strictly construed. There- 
 fore, it is held that a statute prescribing a standard form of policy 
 does not invalidate oral contracts, but merely subjects such oral in- 
 surances to the conditions of the standard policy.** 
 
 Revenue Laws Requiring Policies to he Stamped. 
 
 Revenue laws are usually held not to affect the validity of instru- 
 ments required to be stamped, but merely the admissibility of such 
 
 I 
 
 I Sanborn v. Insurance Co., 16 Gray (Mass.) 448, 77 Am. Dec. 419; Sanford 
 v. Insurance Co. (1899) 174 Mass. 416, 54 N. E. 884, 75 Am. St Rep. 358; 
 Franklin Fire Ins. Co. v. Colt, 20 Wall. (U. S.) 560, 22 L. Ed. 423; Croft v. 
 Insurance Co., 40 W. Va. 508, 21 S. E. 855, 52 Am. St Rep. 902; Phoenix Ins. 
 Co. V. Spiers, 87 Ky. 286, 8 S. W. 453; Wiebeler v. Insurance Co. (1883) 30 
 Minn. 464, 16 N. W. 363; Woodruff, Ing. Cas. 79. 
 
 But where an agent agrees to issue policies on certain goods each year 
 during a number of years in the future, the agreement is within the stat- 
 ute of frauds. Klein v. Insurance Co. (Ky.) 67 S. W. 250. 
 
 » Egan V. Insurance Co., 27 La. Ann. 368. 
 
 • See Commercial Mut Ins. Co. v. Union Mut Ins. Co., 19 How. (U. S.) 
 318, 16 L. Ed. 636. 
 
 10 See section 2794, Code Ga. 1882; Simonton v. Insurance Co. (1874) 51 
 Ga. 76. 
 
 II HICKS V. ASSURANCE CO. (1900) 162 N. Y. 284, 56 N. E. 743, 48 L. R. 
 A. 424. So a statute invalidating any terms of a policy printed in type 
 smaller than a designated size would not affect the validity of an oral con- 
 tract See Code Va. 1887, § 3252; Burruss v. Association, 96 Va. 543, 32 S. 
 E. 49. So of a statute requiring the application to be attached to the policy. 
 RITTER T. INSURANCE CO., 169 U. S. 139, 18 Sup. Ct 300, 42 L. Ed, 693. 
 
 §§ 67-59) THE FORM REQUIRED — ORAL CONTRACTS. 
 
 151 
 
 instruments as evidence. Manifestly, oral contracts are not thereby 
 prohibited. ^^ The federal revenue law of 189S provided that if any 
 of the instruments required by that law to be stamped, among which 
 were insurance policies, should be issued without a stamp with intent 
 to evade the law, such instrument should not only be inadmissible as 
 evidence in any court, but should also "be deemed invalid and of no 
 effect." The previous federal revenue acts, passed during and im- 
 mediately after the Civil War, contained similar provisions. By the 
 great weight of authority it has been held that the rule of evidence 
 laid down by these acts has no application to the state courts, being 
 confined to the federal courts.^* Nor, it seems, does the omission of 
 a required stamp, even with intent to evade the law, render such un- 
 stamped instrument void, as it is not within the powers of Congress 
 to enforce its revenue laws by declaring void contracts recognized as 
 valid by the laws of the state.^* 
 
 Restrictions upon Contract by Charter Provisions. 
 
 The charter of a corporate insurer is the law of its existence and 
 the measure of its powers.^* It is manifestly within the power of the 
 creating state to impose upon its corporate creature such limitations 
 as to the mode of contracting as may seem to it proper. Therefore, 
 if a provision in its charter prohibits it from making a contract other- 
 wise than in writing, its oral contracts will be ultra vires and invalid.^® 
 But such oral contracts are deemed to be prohibited only when the 
 
 1* Fish V. Cottenet, 44 N. Y. 538, 4 Am. Rep. 715. In an ill considered 
 Kansas case it was held that the revenue law required writing and a stamp 
 to validate the contract Western Massachusetts Ins. Oo. v. Duffey, 2 Kan. 
 347. 
 
 18 Knox V. Rossi (Nev. 1900) 57 Pac. 179, 48 L.. R. A. 305, 83 Am. St. Rep. 
 5G6, and note collating cases. See especially luminous opinion in Carpenter 
 V. Snelling (1867) 97 Mass. 452; Talley v. Robinson's Assignee, 22 Grat. (Va.) 
 888; Wingert v. Zeigler, 91 Md. 318, 46 Atl. 1074, 51 L. R. A. 316, 80 Am. 
 St. Rep. 453; Garland v. Gaines (1901) 73 Conn. 662, 49 Atl. 19, 84 Am. St. 
 Rep. 182, and note. In Pennsylvania a different view is taken, and un- 
 stamped Instruments are held inadmissible. Chartlers & R. Turnpike Co. v. 
 McNamara (1872) 72 Pa. 278, 13 Am. Rep. 673. 
 
 1* Moore v. Moore, 47 N. Y. 467, 7 Am. Rep. 466; Southern Ins. Co. v. 
 Estes, 106 Tenn. 472, 62 S. W. 149, 52 L. R. A. 915, 82 Am. St Rep. 892; 
 Latham v. Smith, 45 111. 31; Hunter v. Cobb, 1 Bush (Ky.) 239. 
 
 As to effect of English revenue laws, see Morgan v. Mather, 2 Ves. Jr. 
 18; 1 Joyce, Ins. § 33. 
 
 18 By the earlier common-law rule, corporations could contract only under 
 corporate seal. 1 Bl. Comm. 475. But it is now well settled that they may 
 contract freely by parol, unless prohibited from so doing. Bank of Colum- 
 bia v. Patterson, 7 Cranch (U. S.) 299, 3 L. Ed. 351; Clark, Corp. 157. 
 
 i« Head v. Insurance Co., 2 Cranch (U. S.) 150, 2 L. Ed. 229. A considera- 
 tion of the rights of the insurer under such agreements raises the diflScult 
 question of the effect of ultra vires contracts of corporations, which cannot 
 here be discussed. See Clark, Corp. 157, 170, et seq. 
 
 
 ! 
 
152 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 I 
 
 i; 
 
 
 ii 
 
 legislature clearly so intended. And even when oral contracts of 
 insurance are clearly prohibited, it is held that the insurer may still 
 make valid oral preliminary contracts to insure.*^ 
 
 Such are the holdings when the charter expressly or by necessary 
 implication prohibits contracts by parol. A very different rule ap- 
 plies when the charter authorizes contracts in writing, and their ex- 
 ecution by certain designated officers. Such provisions are held to be 
 enabling, and directory in their purpose of regulating the internal 
 management of the corporation and the conduct of its business, rather 
 than as mandatory, and limiting usual powers of contracting. 
 
 Thus in a leading case in the Supreme Court of the United States, 
 in which an article of the insurer's charter authorized the president 
 or other officer appointed by the board of directors to make contracts 
 of insurance "in and by policy of insurance in writing, to be signed 
 by the president or other officer and secretary of the company," Jus- 
 tice Bradley used the following language : *• "The substantial power 
 given by law to an association organized under it is to make insur- 
 ance against loss and damage by fire. The mode and form in which 
 it shall make its contracts is not prescribed as an essential part of its 
 being or mode of action. The expressions referred to are not of that 
 character. They indicate, in language chosen by the company itself, 
 and not by the legislature, the ordinary mode of conducting its busi- 
 ness. After having, by its officers and agents, made a parol contract 
 of insurance, and induced the insured party, acting in good faith, to 
 rely on its engagements, it cannot be permitted to shelter itself behind 
 any such ambiguous expressions in its charter, and claim to have a 
 special statute of frauds for its own benefit." 
 
 There are numerous other cases involving charters that contain 
 similar provisions, and holding that they do not invalidate oral in- 
 
 surances. 
 
 i» 
 
 Several Kinds of Oral Insurance Contracts, 
 
 Having now established the validity in modem law of oral con- 
 tracts of insurance,*® it is fitting that we next determine the kinds 
 of such contracts, and the character of the rights secured under them. 
 These oral contracts concerning insurance will be found to fall into 
 
 IT Constant v. Insurance Co. (1861) 3 Wall. Jr. 316, Fed. Cas. No. 3,136; 
 FrankUn Fire Ins. Co. v. Colt, 20 Wall. (U. S.) 560, 22 L. Ed. 423. 
 
 " Relief Fire Ins. Co. v. Shaw, 94 U. S. 574, 577, 24 L. Ed. 291. 
 
 !• Sanborn v. Insurance Co., 16 Gray (Mass.) 448, 77 Am. Dec. 419; Trus- 
 tees of First Baptist Church t. Brooklyn Fire Ins. O)., 19 N. Y. 305; Secur- 
 ity Fire In«. Co. v. Kentucky Marine & Fire Ins. Co., 7 Bush (Ky.) 81, 3 Am, 
 Rep. 301. 
 
 In Henning v. Insurance Co., 47 Mo. 425, 4 Am. Rep. 332, such a provision 
 was held to be restrictive, and an oral policy therefore to be void. 
 
 10 There seems to be no suificient reason why these rules of law should 
 
 §§ 57-59) THE FORM REQUIRED — ORAL CONTRACTS. 
 
 153 
 
 three classes. The first and least important of these embraces those 
 cases in which the expectant insured contracts with an insurance broker 
 for insurance in whatsoever company the broker may elect, and for 
 the continuance of such insurance, or that the broker shall keep cer- 
 tain property insured! Here the broker is purely the agent of the in- 
 sured, and the contract between them is simply one of agency, to be 
 governed by the rules of law ordinarily applying to such contracts. 
 If the broker fails to perform his agreement and secure valid insur- 
 ance, he is liable for his breach of contract, the measure of damages 
 being the sum for which the broker was instructed to procure insur- 
 ance, provided the insurance in such sum could have been secured by 
 the exercise of reasonable diligence on the part of the broker.*^ Such 
 contracts, however, cannot be properly called insurance contracts. 
 
 Preliminary Oral Contracts, 
 
 The most frequently occurring and most important kinds of oral 
 insurance contracts are those preliminary to the execution of formal 
 policies. As has been seen, there is no reason in the law why final 
 contracts of present insurance should not be made by parol, but such 
 unwritten contracts would be so inexpedient that they are seldom 
 encountered. But the exigencies of business render preliminary oral 
 contracts highly expedient. It is frequently of the highest impor- 
 tance that persons engaged in commercial ventures shall be able to 
 secure immediate protection against possible loss ; and, to use the lan- 
 guage of Justice Bradley in Eames v. Home Ins. Co. : ** "If parties 
 could not be made secure until all the formal documents were exe- 
 cuted and delivered, especially where the insuring company is sit- 
 uated in a different state, the beneficial effect of this benign contract 
 of insurance would often be defeated and rendered unavailable. As 
 said by Mr. Justice Field in the case of Franklin Fire Ins. Co v. 
 Colt,^* *It would be impracticable [for a company] to carry on its 
 business in other cities and states, or at least the business would be 
 attended with great embarrassment and inconvenience, if such pre- 
 liminary arrangements required for their validity and efficacy the for- 
 
 not be equally applicable to mutual benefit insurance organizations. It 1» 
 true that such organizations are usually more narrowly restricted in the ex- 
 ercise of their powers, but this rule of construction should not be pushed to 
 such an extreme as partially to defeat the object of the organization by de- 
 claring its preliminary oral contracts void. See Bac. Ben. Soc. § 172. 
 
 21 Mallery v. Frye, 31 Wash. Law Rep. (D. C.) 63; Lindsay v. Pettigrew, 
 5 S. D. 500, 59 N. W. 726; Morton v. Hart, 88 Tenn. 427, 12 S. W. 1026. 
 
 If the broker was acting under specific instructions, of course the meas- 
 ure of damages for his failure to perform is merely the sum which would 
 have been received under the policy he had been instructed to procure. See 
 Sawyer v. Mayhew, 51 Me. 398; Alsop v. Coit, 12 Mass. 40. 
 
 22 94 U. S. 621, 627, 24 L. Ed. 298. 
 «• 20 Wall. (U. S.) 567, 22 L. Ed. 423. 
 
 Vt\ 
 
 i 
 
 * 
 
 i ■ 
 
154 
 
 TTTi: MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 I 
 
 '! 
 
 I' 
 
 nialities essential to the executed contract. The law/ he continues, 
 'distinguishes between the preliminary contract to make insurance or 
 issue a policy, and the executed contract or policy. And we are not 
 aware that in any case, either by usage or the by-law of any com- 
 pany, or by any judicial decision, it has ever been held essential to 
 the validity of these initial contracts that they should be attested by 
 the officers and by the seal of the company. Any usage or decision to 
 that effect would break up or greatly impair the business of insurance 
 as transacted by agents of insurance companies.' " 
 
 Again, these preliminary contracts are of two kinds, which, while 
 distinct in purpose and in rights acquired by the parties, are yet so 
 similar in ultimate effect as to be often confused and seldom clearly 
 distinguished. First, the insurer, by this preliminary contract, may 
 either presently insure the subject-matter by parol or binding slip, the 
 contract to be effective until the formal policy is issued or the risk re- 
 jected; or, secondly, he may make a contract to insure the subject- 
 matter at some subsequent time, which may be definite or indefinite. 
 Under such contract the insurer becomes obligated to execute a con- 
 tract of actual insurance, in accordance with the terms agreed upon. 
 
 Preliminary Contracts of Present Insurance, 
 
 Preliminary informal contracts of present insurance are intended 
 to afford protection to the insured pending the execution and delivery 
 of a formal policy, and are completed either by mere word of mouth 
 or by binding slip. The binding slip is merely a written memoran- 
 dum in aid of the oral contract, containing a statement of the important 
 terms of the agreement, but not intended as a formal repository of 
 all the terms of the contract. The oral agreement, therefore, whether 
 aided by the binding slip or not, contemplates the issue of a formal 
 policy, and by implication includes all the terms of that policy. There- 
 fore, the rights and liabilities of the parties to these informal prelimi- 
 nary contracts are to be determined by the conditions of the policy 
 expected, even though that policy may never issue. 
 
 Thus, in the leading case of Lipman v. Niagara Fire Ins. Co.,"* a 
 preliminary contract of insurance, evidenced by a binding slip, was 
 made upon certain property which was described in the slip. Upon 
 examination, the officers of the company determined to reject the risk, 
 and two and a half hours before the property was burned gave notice 
 to the agents of the insured that the insurance was terminated. A 
 
 «4 LIPMAN y. NIAGARA FIRE INS. CO., 121 N. T. 454, 24 N. E. 699, 8 
 L. R. A. 719, Richards, Ins. Cas. 301, Woodruff, Ins. Cas. 100. See, to the 
 same effect. Underwood v. Insurance Co., 161 N. Y. 413, 55 N. B. 936 ; HICKS 
 V. ASSURANCE CO., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424 ; Eames v. 
 Insurance Co., 94 U. S. 621, 629, 24 L. Ed. 298 ; Newark Mach. Co. t. Kenton 
 Ins. Co. (1893) 50 Ohio St 549, 35 N. E. 1060. 22 L. R. A. 768. 
 
 
 §§ 57-59) THE FOKM REQUIRED — ORAL CONTRACTS. 
 
 155 
 
 term of the policy expected to issue gave to the insurer a right to ter- 
 minate the contract upon notice given. The insured contended that 
 the contract was final, and could not be so discharged, but the court 
 said: "We think there can be no doubt that the true construction of 
 the binding slip only obligated the defendant according to the terms of 
 the policy in ordinary use by the company. There is no other rea- 
 sonable interpretation of the transaction. The binding slip was a 
 short method of issuing a temporary policy for the convenience of all 
 parties, to continue until the execution of the formal one. It would 
 be unreasonable to suppose either that the broker expected an insur- 
 ance except upon the usual terms imposed by the company, or that 
 the secretary of the company intended to insure upon any other terms. 
 The right of an insurance company to terminate a risk is an important 
 one. It is not reserved in terms in the binding slip, and could not be 
 exercised at all so long as no policy should be issued, unless the con- 
 dition in the policy is deemed to be incorporated therein. Upon the 
 plaintiff's contention the company could not cancel the risk so long 
 as the binding slip was in force, and the only remedy of the company 
 to get rid of the risk would be to issue the policy and then immediately 
 cancel it. The binding slip was a mere memorandum to identify the 
 parties to the contract, the subject-matter, and the principal terms. 
 It refers to the policy to be issued. The construction is, we think, 
 the same as though it had expressed that the present insurance was 
 under the terms of the usual policy of the company to be thereafter 
 delivered." 
 
 Where a standard policy has been prescribed by law, an oral con- 
 tract is valid, but is conclusively subject to all the terms of the stand- 
 ard policy. Accordingly it has been held in a recent important deci- 
 sion by the Court of Appeals of New York that the rights of the in- 
 sured under a preliminary oral contract were defeated by his failure 
 to furnish proofs of loss as required by the standard policy, which had 
 never been issued, and which the insurer, denying the existence of the 
 oral contract, had declined to issue. ^' 
 
 Preliminary Executory Contracts of Insurance, 
 
 Instead of making a contract of present insurance, the parties may 
 make an agreement by which the insurer binds himself, subject to speci- 
 fied conditions, to issue a policy of insurance to the insured. A cer- 
 
 25 HICKS V. ASSURANCE CO., 162 N. Y. 284, 56 N. B. 743, 48 L. R. A. 424. 
 
 It is difiBcult to accept the reasoning of the majority of the court in this 
 case. As is clearly shown in the dissenting opinion of Werner, J., the com- 
 pany, through its agent, repudiated the contract, and declined to furnish 
 forms for proof of loss. It is a well-settled rule of contract law that one 
 party mav not himself repudiate the obligation of a contract and still hold the 
 other to performance. Upon such repudiation the aggrieved party should be 
 allowed to consider the contract discharged, and sue for the breach. Clark, 
 
 1 .>i 
 
 1 ■; 
 
 ^1 
 
 J 
 
156 
 
 THE MAKING OP THE CONTRACT. 
 
 (Ch.5 
 
 tain time for its issue may be designated, but, if there is no such time 
 agreed upon, the policy is to be delivered within a reasonable time. 
 Under such an executory contract the right acquired by the insured 
 is merely to demand the delivery of a policy in accordance with the 
 terms agreed upon, and the obligation assumed by the insurer is to 
 deliver such policy. The policy to be delivered is, of course, that in 
 the contemplation of the parties at the time of making the preliminary 
 contract — ^that is, the usual policy issued by that insurer, or the stand- 
 ard policy in case such a form has been prescribed by law. A failure 
 on the part of the insurer to deliver the policy in accordance with the 
 agreement at the time stipulated, or within a reasonable time, will 
 render him liable in an action for breach of contract,^® or to a suit 
 in equity for specific performance. In case the property to be insured 
 is destroyed before the issue of the policy, the measure of damages 
 in an action for breach of contract to insure will be the same as if 
 it had been brought upon the contract of insurance that should have 
 issued.*^ Nor can the defendant in such case require of the plaintid 
 a performance of all the conditions of the policy contemplated. Hav- 
 ing himself wrongfully failed to make the written contract, he cannot 
 now claim that the plaintiff is bound by its terms. Hence the plain- 
 tiff may recover without having furnished proofs of loss or having com- 
 plied with other requirements of the contemplated policy.^* So, when 
 suit is brought in equity for specific performance, if the loss to be 
 insured against has already occurred, the court will do complete jus- 
 tice between the parties by rendering a decree for the amount recover- 
 able under the policy when issued. *• 
 
 Another important consequence of the distinction between contracts of 
 present insurance and executory contracts for future insurance is found 
 in the application of the statute of frauds. As has been before stated, 
 
 Contr. 645; Knickerbocker Life Ins. Co. v. Pendleton, 112 U. S. 696, 5 Sup. 
 Ct 314, 28 L. Ed. 866; Stokes v. Mackay, 147 N. Y. 223, 41 N. B. 496. 
 
 ^« Sanford v. Insurance Co., 174 Mass. 416, 54 N. E. 884, 75 Am. St. Rep. 
 358; CAMPBELL v. INSURANCE CO., 73 Wis. 100, 40 N. W. 661, Wood- 
 rufif, Ins. Cas. p. 76; Klein v. Insurance Co. (Ky.) 57 S. W. 250; Preferred 
 Ace. Ins. Co. V. Stone, 61 Kan. 48, 58 Pac. 988. 
 
 aT Klein v. Insurance Co. (Ky.) 57 S. W. 250; HICKS v. ASSURANCE 
 CO., 162 N. Y. 284, 56 N. E. 743, 48 L. R. A. 424; CAMPBELL v. INSUR- 
 ANCE CO., 73 Wis. 100, 40 N. W. 661, Woodruff, Ins. Cas. 76. 
 
 28 See cases cited in note 25, especially dissenting opinion of Landon, J., 
 In HICKS V. ASSURANCE CO., supra; Tayloe v. Insurance Co., 9 How. (U. 
 S.) 390, 13 L. Ed. 187; Post v. Insurance Co., 43 Barb. (N. Y.) 351; New Eng- 
 land Fire & Marine Ins. Co. v. Robinson, 25 Ind. 536; Western Assur. Co. 
 T. McAlpin, 23 Ind. App. 220, 55 N. E. 119, 77 Am. St. Rep. 423. 
 
 2» Wooddy T. Insurance Co., 31 Grat. (Va.) 362, 31 Am. Rep. 733; Phoenix 
 Ins. Co. V. Ryland, 69 Md. 437, 16 Atl. 109, 1 L. R. A. 548; Commercial Mut. 
 Ins. Co. V. Union Mut. Ins. Co., 19 How. (U. S.) 318, 15 L. Ed 636; Western 
 Assur. Co. V. McAlpin, 23 Ind. App. 220, 55 N. E. 119, 77 Am, St Rep. 423. 
 
 It 
 
 §60) 
 
 WHEN AN ORAL CX)NTRA.OT BECOMES COMPLBTB. 
 
 157 
 
 a contract of present insurance is valid without writing, though for 
 a period exceeding one year, but a parol agreement to make a contract 
 of insurance at a future date more than a year distant is unenforce- 
 able. Thus, in a recent case in Kentucky, it was held that an oral 
 agreement on the part of an insurer to issue a policy on certain prop- 
 erty on a specified date each year until further directed was not en- 
 forceable because it could not be performed within a year.'* 
 
 WHEN AN ORAL CONTRACT BECOMES GOMPI«ETE. 
 
 60. The eadstence of a binding oral contract, being a question of fact, 
 
 is for the determination of a jnry; bnt these requisites must 
 
 be presents 
 <a) The agent of the insurer, if a corporation, must have authority 
 
 to contract orally. 
 (b> A^^ the essential terms of the contract must either expressly or 
 
 impliedly be determined by the parties, or the means of fixing 
 
 such terms agreed upon. 
 
 Having thus found that a contract of insurance is valid though 
 merely oral, it next becomes necessary to determine when such oral 
 contract will be deemed to be complete. In order to the creation of 
 such a contract, a meeting of the minds of the parties is necessary; 
 but whether such a meeting has taken place is a question of fact neces- 
 sarily left to a jury under proper instructions from the court. But 
 in making proper application of the findings of fact certain requisites 
 for the existence of a binding contract must be considered. In the 
 first place, it must be noted that the insurer cannot be bound upon an 
 oral contract unless the agent through whom it is made is authorized 
 to contract by parol. *^ As a general rule, an agent who has authority 
 to fix terms of insurance and to issue policies on behalf of his company 
 has also authority to make preliminary oral contracts,** even though 
 the charter of the insurer, or a public statute, may direct that its con- 
 tracts shall be made in writing, and signed by certain designated 
 officers.** 
 
 «o Klein v. Insurance Co., 57 S. W. 250. The correctness of this decision 
 is doubtful. The agreement for the issue of yearly policies was terminable 
 by the insured upon notice. It might, therefore, easily have been wholly 
 performed within the year. 
 
 81 A bill for specific performance of a parol contract to Insure must show 
 on its face that the person making the contract on behalf of an insurer had 
 authority so to bind it Haskin v. Insurance Co., 78 Va. 700; Haden v. Am- 
 soclation, 80 Va. 683. 
 
 8 2 Baker v. Assurance Co., 162 Mass. 358, 38 N. B. 1124. 
 
 88 Baker v. Assurance Co., 162 Mass. 858, 38 N. E. 1124; Sanborn t. In- 
 surance Co., 16 Gray (Mass.) 448, 77 Am. Dec. 419; Security Fire Ins. Co. v. 
 Kentucky Marine & Fire Ins. Co., 7 Bush (Ky.) 81, 3 Am. Eep. 301; Belief 
 
 li! 
 
158 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 I 
 
 Again, no insurance agreement can be held a complete contract 
 unless the parties have reached an agreement upon all the essential 
 terms of the contract, such as the exact subject of the insurance, the 
 rate of premium, the extent of the insurance, both as to time and as 
 to risks assumed, and as to the amount of insurance underwritten, and 
 any other terms that may in any given case be essential. There must 
 remain nothing to be done by the insurer save the formal execution 
 and delivery of the policy, and nothing by the insured save the ac- 
 ceptance of the policy and the payment of the premium stipulated." 
 Where some essential term of the contract remains unsettled at the 
 time of the loss, the insurer cannot be considered as bound ; *' as when 
 the length of the term, or the rate of premium," has not been agreed 
 upon, or where the property to be covered by the insurance has not 
 been clearly designated.'^ So, if any condition precedent to the mak- 
 ing of the contract remains unfulfilled, it cannot be deemed binding; 
 as where an agent agrees with the insured upon certain terms, subject 
 to the approval of a superior agent.»« But the mere fact that a parol 
 contract is made subject to the revision and possible rejection of higher 
 officers of the insurer does not prevent it from being binding until 
 rejected.'* The right of rejection is rather a condition subsequent, 
 that may operate to determine the rights of the insured under the con- 
 tract, than a condition precedent to the binding effect of the contract. 
 Nor, it seems, does a failure to specify a date at which the insurance 
 is to take effect prevent the contract from being operative, as the risk 
 will be considered to commence immediately.*® 
 
 It is not necessary that these essential terms of the contract shall 
 be definitely determined ; it is sufficient if they are made determinable.** 
 
 Fire Ins. Co. ▼. Shaw, 94 U. S. 574, 24 L.. Ed. 291. As to power of subagent 
 see Insurance Co. of North America v. Thornton, 130 Ala. 222, 30 South. 
 614, 55 L. R. A. 547, 89 Am. St. Rep. 30. 
 
 »* See Trustees of First Baptist Church v. Brooklyn Fire Ins. Co., 28 N. 
 Y. 153; Home Ins. Co. v. Adler, 77 Ala. 242; Western Assur. Co. v. McAlpin, 
 23 Ind. App. 220, 55 N. B. 119, 77 Am. St Rep. 423; Johnson v. Insurance Co., 
 84 Ky. 470, 2 S. W. 151. 
 
 «« Scammell v. Insurance Co., 164 Mass. 341, 41 N. E. 649, 49 Am. St. Rep. 
 462; J. C. Smith & Wallace Co. v. Prussian Nat. Ins. Co., 68 N. J. Law, 674, 
 54 Atl. 458; Piedmont & A. Ins. Co. v. Ewing, 92 U. S. 377, 23 L. Ed. 610; 
 Hamilton v. Insurance Co., 5 Pa. 339. 
 
 8« Strohn v. Insurance Co., 37 Wis. 625, 19 Am. Rep. 777. 
 
 •7 Kimball v. Insurance Co. (C. C.) 17 Fed. 625. 
 
 »8 See Haden v. Association, 80 Va. 683; Atkinson v. Insurance Co., 71 
 Iowa, 340, 32 N. W. 371. 
 
 »» Fidelity & Casualty Go. v. Ballard, 105 Ky. 253, 48 S. W. 1(^74; Putnam 
 v. Insurance Co., 123 Mass. 324, 25 Am. Rep. 93. And see Oliver v. Insurance 
 Co., 97 Va. 134, 33 S. B. 536. 
 
 *o Potter V. Insurance Co. (C. C.) 63 Fed. 382. 
 
 «i See Orient Mut Ins. Co. v. Wright, 28 How. (U. S.) 401, 16 L. Bd. 524; 
 
 §61) 
 
 CONTRACTS IN WRITING. 
 
 159 
 
 The parties may agree upon a method of fixing terms yet unsettled, 
 and become at once bound by the contract. Thus, where all the terms 
 of contract for insurance of a certain building were agreed upon save 
 the premium rate, which was left to the determination of the agent 
 after inspection, it was held that the insurer was bound and liable for 
 the loss occurring before the rate of premium fixed by the agent had 
 been communicated to the insured.*^ So, some of the essential terms 
 of the contract may, without express stipulation, be well understood 
 by reason of a local usage or a previous course of dealing between th^ 
 parties, and an apparently incomplete agreement thus become binding.*' 
 
 CONTRACTS IN WRITING. 
 
 61. The contract of insurance is nsually evidenced by writing. Tliia 
 writing may be informal, as a binding slip, or a written appli- 
 cation informally accepted; or it may be formal, being the 
 carefully dravirn written policy in customary use, or, more 
 rarely, the policy under seal. 
 
 The completed contract of insurance is usually evidenced by a for- 
 mal written instrument known as a "policy," which ordinarily is in- 
 tended to contain and merge all previous negotiations, and serve as 
 the only and final repository of the agreement of the parties. This 
 policy was formerly frequently executed under corporate seal, but in 
 modern times a policy under seal is of rare occurrence. 
 
 There are, however, informal writings made in evidence of the con- 
 tract entered into, which fall halfway between the formal written policy 
 and the oral contract 
 
 1- 
 
 ..■,:> 
 
 
 Scammell v. Insurance Co., supra; J. C. Smith & Wallace Co. v. Prussian 
 Nat. Ins. Co., supra. 
 
 *2 Cooke V. Insurance Co., 7 Daly (N. Y.) 555; Audubon v. Insurance Co., 
 27 N. Y. 216. 
 
 *« J. C. Smith & Wallace Co. v. Prussian Nat. Ins. Co., 68 N. J. Law, 674, 
 54 Atl. 458. In this case the court well sums up the law as follows: **To 
 constitute a valid contract there should be parties thereto, a premium, a 
 subject-matter, an insurable interest, certain risks or perils, duration of the 
 risk, and the amount insured; but in the temporary oral contracts, or in 
 those evidenced by binders, some of these terms are often omitted, and need 
 not be expressly negotiated upon, since they may be understood — ^as where 
 the terms of the usual policy are presumed to be Intended, or where the 
 usual rate of premium is presumed to be meant, or, in case of duration of the 
 risk, is understood to be the same as in a former policy, or where by custom 
 or usage a certain course of dealing hag been established." 
 
I 
 
 I! 
 
 160 THB MAKING OF THB CONTRACT. (Ch. 5 
 
 HfFORMAIi WBITTEN CONTRACTS. 
 
 62. THE BINDING SLIP— Tlie binding slip is merely a written mem- 
 
 oranduni of the most important terms of a preliminary con- 
 tract of insnranoe, intended to give temporary protection 
 pending the investigation of the risk by the insurer, or un- 
 til the issue of a formal policy. By intendment it is sub- 
 ject to all the conditions in the policy to be issued. 
 
 63. A iimdtten application for insurance, urhen finally and absolutely 
 
 accepted by the insurer, becomes thereby the memorandum of 
 a completed contract, which is binding until the issue of a 
 policy. So, any written oSer properly accepted by the insurer 
 becomes a binding contract -without the execution of a policy. 
 
 These informal writings are but incomplete and temporary contracts 
 —memoranda given in aid of parol agreements. Such memoranda 
 usually fix all the essential provisions that are variable, but they are 
 not ordinarily intended to include all the terms of agreements, and 
 always look to the formal policy that is expected subsequently to 
 issue for a complete statement of the contract made. Hence, as here- 
 tofore stated, the contract evidenced by the binding slip is subject to 
 all the conditions of the contemplated policy, even though it may never 
 issue ; ** and the same is true of other informal written contracts. 
 The memorandum may evidence a binding contract even where some 
 essential term remains undetermined, provided the parties have agreed 
 upon some method of thereafter fixing such term. This is well illus- 
 trated in a case *' recently decided by the Supreme Court of Massa- 
 chusetts, in which the memorandum relied upon as evidence of a con- 
 tract was as follows: "About $3,000 insurance is wanted by Scam- 
 mell Bros., for account of whom, etc., loss, if any, payable to them 
 
 or order for $ of chartered freight per Brigt. 'Peeress' valued 
 
 at $ amount of charter at and from Santa Fc to a port in the 
 
 U. K. or on the Continent. Priv. of port of call for others. Premium, 
 open for particulars. Binding." It was contended by the defendant 
 insurer that the memorandum fell short of a complete contract, since 
 the premium rate, one of the most essential terms of such agreements, 
 had never been fixed. The court held, however, that the parties had 
 made a binding agreement for temporary insurance, subject to the 
 condition that the insured should, within a reasonable time, furnish 
 the insurer particular information concerning the risk which would 
 enable the insurer to fix a reasonable rate to be paid for the protection 
 
 «« See MPMAN v. INSURANCE CO., 121 N. Y. 454, 24 N. B. 699, 8 L. R. A. 
 719, Richards, Ins. Cas. 301, Woodruff, Ins. Cas. 100. 
 
 49 Scammell y. Insurance Co., 164 Mass. 341, 41 N. E. 649, 49 Am. St Rep. 
 462. 
 
 §§ 62-63) 
 
 INFORMAL WRITTEN CONTRACTS. 
 
 161 
 
 given. If the insured had given the particulars within a reasonable 
 time, and paid the premium as then fixed by the insurer, the latter 
 would have been bound. But since the insured failed, during some 
 five months that intervened between the dates of the making of the 
 memorandum and the loss of the vessel, to give the information he had 
 by implication agreed to furnish, he was precluded, by his own default, 
 from requiring performance on the part of the insurer. 
 
 Acceptance of Application. 
 
 Under the usual conditions attending the making of an insurance 
 contract, a binding acceptance of the offer contained in the applica- 
 tion is given only upon the delivery of a policy. But this is not neces- 
 sarily the case. If the application is accepted, and the fact of accept- 
 ance made known to the insured, and no condition remains to be per- 
 formed in order to entitle the insured to the policy to be executed, or 
 to the benefit of the insurance, the contract is complete, and the in- 
 sured ma) compel the insurer, even after loss, to issue a policy in ac- 
 cordance with the terms of the application.** Of course, however, an 
 acceptance of the application does not complete the contract when 
 such acceptance has not been comm.unicated to the applicant,*^ nor 
 when the application contains the condition that the contract shall 
 not become operativj until the delivery of the policy ** or the payment 
 of the first premium, or the performance of some other condition. 
 Neither, in such cases, does the acceptance of the application and the 
 tender of a policy to the applicant complete the contract when the ap- 
 plicant refuses to receive the policy." In order that the insurer shall 
 be bound, the application must be actually accepted. Mere delay in 
 acting upon the application is not sufficient. ''<> Neither will the pay- 
 ment of the first premium to the agent, pending the action of the in- 
 surer upon the application, complete the contract." Even though 
 
 *• Commercial Ins. Co. v. Hallock, 27 N. J. Law, 645, 72 Am. Dec. 379; 
 MoCulIoch V. Insurance Co., 1 Pick. (Mass.) 278; Lightbody v. Insurance Co., 
 23 Wend. (N. Y.) 18; Walker v. Insurance Co., 56 Me. 371; New York Life 
 Ins. Co. V. Babcock, 104 Ga. 67, 30 S. E. 273, 42 L. R. A. 88, 69 Am. St. Rep. 
 134. 
 
 *T Equitable Life Assur. Soc. v. McEIroy, 83 Fed. 631, 28 C. C. A. 365 
 *8 McCully's Adm'r v. Insurance Co., 18 W. Va. 782. And see Jacobs v. 
 Insurance Co., 71 Miss. 658, 15 South. 639; Langstaflf v. Insurance Co. (1903) 
 69 N. J. Law, 54, 54 Atl. 518; McClare v. Association, 55 N. J. Law, 187. 26 
 Atl. 78. 
 
 *» Hogben v. Insurance Co., 69 Conn. 503, 38 Ati. 214, 61 Am. St Rep. 53; 
 Schwartz v. Insurance Co., 18 Minn. 448 (Gil. 404). 
 
 80 Home Forum Ben. Order v. Jones, 5 Okl. 598, 50 Pac. 165; Walker v 
 Insurance Co., 61 Iowa, 679, 2 N. W. 583; Winnesheik Ins. Co. v. Holzgrafe 
 53 111. 516, 5 Am. Rep. 64. ^ 
 
 »i Pickett v. Insurance Co., 39 Kan. 697, 18 Pac. 903; Armstrong v. Insur- 
 ance Co., 61 Iowa, 212, 16 N. W. 94; Coker v. Insurance Co. (Tex. Civ. Add ) 
 81 S. W. 708. ^^'^ 
 
 Vance Ins. — 11 
 
 ■: 
 
 ^ 
 
 \\l\ 
 
 m 
 
162 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 * 
 
 rtic jM emium paid may still be in the hands of the agent of the insure: 
 at the time the loss against which the insurance is proposed occurs, 
 the insurer is not liable unless he has actually accepted the applica- 
 tion.** The principles applying to such cases have been well stated 
 by the Georgia Court of Appeals in an excellent opinion by Lewis, J., 
 from which the following paragraph may well be quoted:" "The 
 fundamental question to be determined in the leg^al construction of all 
 contracts is, what was the real intention of the parties? Where one 
 party makes a proposition to purchase a thing which is unconditionally 
 accepted by the other, the contract of purchase becomes complete. 
 There is no reason why the same rule should not be applied when a 
 written application is made for an insurance policy. So long as the 
 application is not acted upon by the insurance company, of course no 
 contract has been consummated, and, if the applicant should die before 
 the acceptance of his application, the company has incurred no lia- 
 bility. But when the application is accepted, and nothing remains for 
 the applicant to do, the contract becomes complete. Actual delivery 
 of the policy to the insured is not essential to the validity of such a 
 contract, unless expressly made so by its terms. It is true that whether 
 or not a policy has been delivered often becomes a material question, 
 for this is usually the most effective way of proving the acceptance of 
 the application made by the insured. But the contract may be other- 
 wise proved, and when it is shown to be in writing it is ordinarily 
 binding upon the company, though there should be no delivery what- 
 ever, either actual or constructive, of the policy, and though it should 
 remain in the hands of the company. This principle is settled by the 
 provisions of our statute, which declares: 'Such contract [fire insur- 
 ance], to be binding, must be in writing; but delivery is not necessary 
 if, in other respects, the contract is consummated/ Civ. Code, § 2089." 
 
 Insurance by Correspondence. 
 
 Just as a valid contract of insurance may be made by parol, so it 
 may be entered into by informal correspondence. The communica- 
 tions contain the offer and acceptance, thus making up the written 
 contract. The same general rules apply to the consummation of such 
 an informal written contract as have been previously discussed " with 
 regard to oral contracts ; that is, the contract will be deemed complete 
 and binding when the offer made has been accepted in terms, and this 
 
 82 See cases dted In the two preceding notes ; also, Chamberlain v. Insurance 
 Co., 109 Wis. 4, 85 N. W. 128, 83 Am. St. Rep. 851, modifying Mathers v. As- 
 sociation, 78 Wis. 588, 47 N. W. 1130, 11 L. R. A. 83. 
 
 88 New York Life Ins. Go. T. Babcock, 104 Qa. 67, 30 S. B. 273, 42 L. R. A, 
 88, 69 Am. St. Rep. 134. 
 
 »* Supra, S 60. 
 
 
 6i) 
 
 rOEMAIi WEITTEN CONTRACTS — THE POUCT. 
 
 163 
 
 acceptance properly communicated, even though both parUes contem- 
 plate the subsequent issue of a formal policy. 
 
 The rules governing acceptance by letter in general contract law 
 apply fully to similar conditions in the law of insurance." The con- 
 tract IS consummated by acceptance upon the mailing of the letter of 
 acceptance properly stamped and addressed, and the insurer will be 
 bound, even though the letter may never be received, or may be re- 
 ceived only after the property insured has been destroyed." But in 
 an early Massachusetts case " it was held that the insurer was not 
 ,nTr^/ tJ \''"'P* °^.*' '"""'■ <=0"t^inin? the acceptance of the 
 luthoriiy. ' ^^^''^'' **' '^ ^°''^''"^ ^ *^ ^^^ '^^'ght of 
 
 thll ,'r.'T^*!rf ' '^'?!;* '"^y ^ *^ *°™ "^^'^^ *e communications 
 that are alleged to evidence the contract of insurance may assume, or 
 
 how informal they may be. It is sufficient if these co^municati^^s 
 
 clearly show that the parties have come to an agreement upon fte 
 
 V. Home Ins. Co. " a letter in which the plaintiff wrote. "6y,% is 
 pret y heavy, but I guess we will have to stand it. as I d; notknow 
 where we can do better at present," was held to be a sufficient accept- 
 ance of the offer made by the defendant in a letter to which the one 
 quoted from was the reply. 
 
 FORUAI, WBITTEK 0ONT]SACTS-TBE POUOT. 
 
 64. Wlen the coatract of la.n»nce 1. toaUy oomnUt. It i. «,^ 
 tomarlly embodied ia a formal written b^t^r^^L* * ^ 
 • "policy." Thi. in.tm«ent mevg,,^,!^^^^: *""•* 
 neon, parol agreement, tonelS^g tL^r^tJLf r*""" 
 
 ::::?"rfranrt 'r-^t*- -''"^'e^^^J^"^ ^rz 
 
 •eace of frand, to hare given U. a..ent to aU of li, term.. 
 
 As heretofore stated, a contract of insurance may validly be mad- 
 
 nuJ'h 'f''"' *^ ''"'^'■"*^ '''^'^''''- °f *« contract and Ae ^eat 
 number of conditions ordinarily contained in it render it exce^dCw 
 
 unwise for the parties to allow the important property righte^^ 
 
 ments. Hence has ansen a custom, as old as the practice of msuT- 
 " Clark, Contr. (2d Bfl.) pp. 25, 26. 
 
 S. 621 24 T. TM 9QC. Q^ 72 T ^' ' ^^™®« ▼• Insurance Co., 94 U 
 
 V. Insurant Z 6 Pa 3^ t!.- Jf""?' ^ °°- ^°- ^'^ " ^<^ ^^S; HamUton 
 L. mm • ^^'°* ''• I°«°™"«* C«^ » How. (U. S.) 380. 18 
 
 " McCulIoch V. Insurance Co., 1 Hck. 278. 
 " 84 U. S. 621, 24 L. Ed. 288. 
 
 i 
 
 f. 
 
 <<1 
 
 f 
 
THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 ^1 
 
 164 
 
 ance, and departed from only in cases of emergency, to commit the 
 contract to writing. This formal writing is termed a "pohcy. 
 
 The history of the development of the insurance pohcy, undoubt- 
 edly one of the most important of commercial instruments, is full ot 
 interest. Probably no other instrument in frequent use has been drawn 
 with so little skill and with such consistent disregard of settled rules 
 of law. The courts have complained in vain,*^' and even grown caustic 
 to no effect "Courts of law," said a famous English judge,«« have 
 always considered a policy of insurance as an absurd and incoherent 
 instrument" But the merchant was wedded to his idol, and the ma- 
 rine policy remained for centuries unalterably incoherent, and only 
 ^adually was beaten into an intelligible shape, from a legal point of 
 view by the heavy blows dealt it in the course of the incessant litiga- 
 tion provoked by its cumbrous and uncertain terms. Even to this 
 day marine insurers on both sides of the Atlantic make use of, as the 
 repository of their insurances, the form of policy so severely censured 
 by Justice Buller, only a few changes having been made by reason of 
 English statutes or of changed conditions. Of course, however, the 
 numerous decisions construing its terms have rendered practically 
 certain the meaning of this remarkable instrument, and probably jus- 
 tify insurers in enduring the ills they have in its cumbrous form rather 
 than in flying to those they know not of in some newly adopted form. 
 Neither are the modem fire and life policies free from the objec- 
 tions thus made to the ancient marine policy. Drawn up vnih the 
 double purpose of attracting parties to be insured and of limiting the 
 liability of the insurer as narrowly as possible, these instruments 
 are full of crudities, inconsistencies, and ambiguities, which have been 
 slowly pared away by the courts in the course of litigation which would 
 have been greatly reduced in volume if the policies had been f airiy and 
 
 skillfully drawn. , . _ 
 
 These same evU characteristics of which the courts complain— com- 
 plexity and unintelligibleness— have also wrought some cunous re- 
 sults in regard to the practice of persons insured. It seldom happens 
 that an ordinarily prudent man enters into a written contract without 
 first assuring himself as to its terms by a careful perusal. Yet such 
 is not the case with insurance policies. It is the exceptional man who 
 reads the policy delivered to him, although the legal consequence of his 
 acceptance of the instrument is to raise a conclusive presumption that 
 he knows and consents to all of its terms, and to preclude him from 
 
 •• See Yeaton v. Fry. 5 Cranch (U. S.) 342, 8 L. Bd. 117. per Marshall. C 
 J. M^iand InJ.^a^^^ Woods, 6 Cranch (U. S.) 29 (at page 45 et seq.), 3 
 K Ed. 143 ; American Ins. Co. v. Stoy, 41 Mich. 385. 1 N. W 877. 
 
 •VBnller J., in Brongh v. Whitmore. 4 Term R. 206. In the same case Lord 
 Kenyon said ih^t only the uniform practice of merchants and underwriters 
 had rendered policies of insurance intelligible. 
 
 §64) 
 
 FORMAL WRITTEN CONTRACTS — THE POLICY. 
 
 165 
 
 showing by parol any terms of the agreement not set forth in the policy, 
 or in any wise contradicting or varying the writing which he, by his 
 act of acceptance, makes the sole repository of his contract. Such 
 carelessness on the part of persons insured is explained, and to some 
 extent excused, by the fact that on account of the complex character 
 of the instrument the untrained layman was little wiser after reading 
 than before. From the bad forms of insurance policies and the con- 
 sequent failure of parties insured to understand their rights and lia- 
 bilities under them, flow most of the difficulties, and the larger part of 
 the litigation in this branch of the law. 
 
 Standard Forms. 
 
 An early writer on insurance says: "The common course appears 
 to be the better one, namely, to leave parties to make such stipulations 
 and in such terms as they may choose." «^ The principle so stated is 
 correct when applied to strictly private contracts. But the contract of 
 insurance contains a quasi public element. The public interest in 
 having responsible insurers and certain and fair contracts imposes 
 some limitation upon the individual's right to contract as he may 
 choose.** Further, insurance is primarily a contract of the law mer- 
 chant, and therefore powerfully affected by the custom of merchants. 
 Custom tends necessarily to uniformity; and just as the custom of 
 merchants prescribed certain terms for all instruments that were to 
 possess the quality of negotiability, so the custom of underwriters 
 gradually fixed the terms of insurance contracts, and wrought power- 
 fully to establish a standard form for the expression of these terms. 
 The ultimate result of the operation of these influences has been the 
 adoption by legislative enactment, as heretofore explained,® • of stand- 
 ard forms for fire policies in many of the states of the American Union, 
 and of a standard marine policy in England. In the other branches 
 of insurance there is still no limit to the number of forms in which 
 policies may be written save th^ desires of the insured and the in- 
 genuity of the insurers. 
 
 Execution of the Policy. 
 
 A policy of insurance may be validly executed with or without a 
 i^eal. Policies under seal, however, are few, and executed only by such 
 ancient corporations as began to insure during the time when it was 
 assumed that corporations could contract only by seal.** In the case 
 
 «i 1 Marsh. Ins. (Ed. 1810). 
 
 62 Daggs V. Insurance Co., 136 Mo. 382, 38 S. W. 85, 35 L. R. A. 227, 58 
 Am. St. Rep. 638; Orient Ins. Co. v. Daggs, 172 TJ. S. 557, 19 Sup. Ct. 28 1. 
 43 L. Ed. 552. See supra, p. 76. 
 
 «8 See ante, p. 29. The construction of the Standard fire policy is fully 
 considered in chapters 12 and 13. 
 
 8* Clark, Corp. 156 et seq.; Bank of Columbia v. Patterson, 7 Cranch (U. S.) 
 
 I 
 
166 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 of corponte insurers, policies are necessarily executed by agents. In 
 the absence of limitation brought to the notice of third parties, any 
 officer or agent of a corporate insurer who is authorized to contract 
 on its behalf is capable of executing its written policies. In practice, 
 however, it is usual that these instruments shall bear the signatures of 
 high executive officers, as of the president or secretary. 
 
 But such a mode of execution may be prescribed as will constitute 
 a limitation upon the apparent powers of the agent. There may be 
 a requirement that the policy shall be signed by one agent and counter- 
 signed by another as a condition precedent to its validity. The effect 
 of executing a policy without complying with such requirement? de- 
 pends largely upon the source of the requirements. (1) If found in 
 the charter of the corporation, the limitation is presumed to be known 
 to the public ; and while an oral contract may be valid, yet a written 
 policy will be invalid unless executed in the mode prescribed.*' (2) 
 If found in the by-laws of the corporation, with knowledge of which 
 the public is not charged,'* the limitation restricts the apparent powers 
 of agents only when actually known to the iijsured.'^ (3) When the 
 policy itself prescribes a mode of execution, the insured has notice of 
 the limitation thereby imposed upon the powers of the insurer's agents, 
 and, in the absence of circumstances estopping the insurer, cannot 
 claim that a policy not executed in. the manner prescribed is valid '• 
 unless an agent, authorized under the policy to make the policy effect- 
 ive in one way, adopts another with clear contractual intent ; for such 
 
 299, 8 L. Ed. 351; Mitchell v. Insurance Ck)., 45 Me. 104, 71 Am. Dec. 529. 
 In many states there are statutes providing that insurance contracts need 
 not be under seal. These are merely declaratory of the law as it now ex- 
 ists. In Lindauer v. Insurance Co., 13 Ark. 461, it seems that It is held that 
 where the charter provides that policies issued by the company shall be un- 
 der seal the company cannot, in a suit to recover the premium, introduce in 
 evidence an unsealed policy. 
 
 •» Dayton Ins. Ck). v. Kelly, 24 Ohio St. 345, 15 Am. Rep. 612; Head v. In- 
 surance Co., 2 Cranch (U. S.) 127-169, 2 L. Ed. 229, holding that a contract 
 to cancel a policy is as much an instrument as the policy itself, and can 
 only be executed in the manner prescribed by the charter of the company. 
 See, also, Couch v. Insurance Co., 38 Conn. 181, 9 Am. Rep. 375, holding that 
 a waiver of a provision in a policy executed in any manner save that re- 
 quired by its charter is invalid. 
 
 •e Clark, Corp. 460. 
 
 •T See infra, chapter 9. That members of mutual associations are bound 
 by the by-laws and regulations, see Mutual Assur. Soc. v. Korn, 7 Cranch 
 (U. S.) 396 (at page 399), 3 L. Ed. 383 ; Clark v. Association, 14 App. D. 0. 
 154, 43 L. R. A. 390; Sulz v. Association, 145 N. Y. 563, 40 N. E. 242, 28 L. 
 R. A. 379; Nickels v. Association, 93 Va. 380, 25 S. B. 8; Supreme Command- 
 ery K. G. R. v. Ainsworth, 71 Ala. 436, 46 Am. Rep. 332. 
 
 es Globe Ace. Ins. Co. v. Reid, 19 Ind. App. 203, 47 N. E. 947; Lynn v. Bur 
 goyne, 13 B. Mon. (Ky.) 400; Badger v. Insurance Co., 103 Mass. 244, 4 Am. 
 Rep. 547. 
 
 §65) 
 
 WHEN THE POLICY BECOMES BINDING. 
 
 1G7 
 
 agent, being authorized to make the contract, may waive that provi- 
 sion of the policy requiring a particular mode of executing it." So, 
 where a policy which provides that it shall not become operative until 
 countersigned by a designated agent is delivered as a contract by that 
 agent without being countersigned, the insurer will be estopped to 
 claim that the contract is not binding.''® It seems, however, that when 
 the insured is the agent whose countersignature is required for the 
 completion of the contract, an uncountersigned policy in the posses- 
 sion of the agent is not enforceable against the insurer.''^ 
 
 The mode of execution of the Lloyd's marine policy in England is 
 peculiar. Instead of being subscribed by the society which is incorpo- 
 rated, or by any agent in its behalf, it is underwritten by individual 
 insurers, members of the society. Each underwriter concerned sub- 
 scribes his initials, with the amount of the risk assumed by him set 
 opposite, and is individually liable to the amount of his subscription. 
 
 The insurance policy does not ordinarily receive the signature of 
 the party insured, who, however, is fully bound by all the terms of 
 the contract upon his acceptance of the policy, whether he actually 
 knows what they are or not." In some instances, however, mutual 
 benefit societies require their benefit certificates to be signed by the in- 
 sured before giving them legal effect.^* 
 
 1^, 
 
 WHEN THE POLICY BECOMES BINDIHG. 
 
 65. The polley becomes binding as a contract only when delivered 
 and all conditions precedent have been satisfied. 
 
 The reader must keep in mind that the question as to the validity 
 of a policy of insurance upon which an action is brought is very dif- 
 ferent from the question whether a binding contract of insurance has 
 been made in any given case. As has been heretofore shown, a bind- 
 ing contract of insurance or to insure can be, and often is, made whol- 
 ly by parol, and without delivery of any policy whatsoever, even 
 though the parties may have contemplated the execution and de- 
 livery of a policy. But in such cases the action is upon the parol 
 agreement, and not on the policy which the insurer had failed to de- 
 liver.''* 
 
 ir 
 
 «» Myers v. Insurance Co., 27 Pa. 268, 67 Am. Dec. 462. 
 
 TO Myers v. Insurance Co., 27 Pa. 268, 67 Am. Dec. 462; HIbemla Ins. Co. 
 ▼. O'Connor, 29 Mich. 241. 
 
 Ti Badger v. Insurance Co., 103 Mass. 244, 4 Am. Rep. 547. But see Nor- 
 ton V. Insurance Co., 36 Conn. 503, 4 Am. Rep. 98, contra, by a divided court 
 
 " NEW YORK LIFE INS. CO. v. FLETCHER, 117 U. S. 519, 6 Sup. Ct 
 837, 29 L. Ed. 934; Richardson v. Insurance Co., 46 Me. 394, 74 Am. Dec. 459. 
 
 T8 Somers v. Protective Union, 42 Kan. 619, 22 Pac. 702 
 
 T* HICKS V. ASSURANCE CO., 162 N. Y. 2Si, 56 N. E. 743, 48 L. R. A. 
 
168 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 ■4 
 
 When the validity of a policy is put in issue, the question is not 
 whether some contract has been made, but whether the parties have 
 agreed upon this particular writing as the repository of the terms of 
 their contract. No written instrument is binding upon the parties un- 
 til it is either signed by both of the parties, or, if signed by one, de- 
 livered by him and accepted by the other ; or it may be accepted by both 
 parties without signing. Or, as the rule is ordinarily stated, delivery 
 is necessary to the validity of a written instrument. It is plain, how- 
 ever, that the real meaning of the rule is that parties cannot be bound 
 upon a contract, whether written or unwritten, unless they have 
 both consented to be bound ; and that any satisfactory evidence of this 
 consent in the case of contracts in writing will constitute a "delivery."'' 
 
 With reference to what constitutes such a delivery as will put into 
 effect a written agreement, we must note a distinction that exists be- 
 tween sealed and unsealed instruments. A specialty is a solemnly ex- 
 ecuted agreement into which parties are not supposed lightly to enter. 
 Hence the law requires more formal evidence of the intention to be 
 bound under a specialty than in the case of a simple writing; and a 
 delivery of a specialty, being recognized as the last solemn act requisite 
 to its becoming effective, will not be so readily inferred from equivocal 
 conduct.''* Therefore, as we shall presently see, the cases do not re- 
 quire such clear proof of delivery of an insurance policy as of a deed. 
 
 Having thus determined that delivery is a prerequisite to the validity 
 of every policy, we have next to note that the parties may further im- 
 pose such additional conditions precedent to its validity as a contract 
 as they see fit; such as, for example, that the first premium shall be 
 paid." These conditions may be set forth (1) in the instrument itself, 
 
 424; Ruggles v. Insurance Co., 114 N. Y. 415. 21 N. E. 1000, 11 Am. St Rep. 
 674; Van Loan v. Association, 90 N. Y. 281; Angell v. Insurance Co., 59 N. 
 Y. 171, 17 Am. Rep. 322; Commercial Mut. Marine Ins. Co. v. Union Mut 
 Ins. Co., 19 How. (U. S.) 321, 15 L. Ed. 636; Franklin Fire Ins. Co. v. Colt, 
 20 Wall. (U. S.) 567, 22 L. Ed. 423; Security Fire Ins. Co. of New York v. 
 Kentucky Marine & Fire Ins. Co., 7 Busli (Ky.) 81, 3 Am. Rep. 301; Western 
 Assur. Co. V. McAlpin, 23 Ind. App. 220, 55 N. E. 119, 77 Am. St. Rep. 423. 
 
 T6 New York Life Ins. Co. v. Babcock, 104 Ga. 67, 30 S. B. 273, 42 L. R. 
 A. 88, 69 Am. St. Rep. 134, and note, 143-153; Xenos v. Wickham, L. R. 2 
 Eng. & Irish App. Cas. 296; Newark Mach. Co. y. Kenton Ins. Co., 50 Ohio 
 St. 549, 35 N. E. 1060, 22 L. R. A. 768. 
 
 If an oflScer of the company Indorses an acceptance upon the application 
 of the insured, and fills out the policy with intent to have it take immediate 
 effect, and causes it to be mailed to the applicant as of force and effect at 
 that time, the company cannot successfully claim that there was no deliv- 
 ery, although the policy did not reach its destination until after the death of 
 the applicant Dailey v. Association, 102 Mich. 289, 57 N. W. 184, 26 L. R. 
 A. 171; same case on rehearing, 102 Mich. 299, 60 N. W. 694, 26 L. E. A 
 
 171. 
 T« See Xenos v. Wickham, L. R. 2 Eng. & Irish App. Cas. 296. 
 
 T7 Infra, § 67. 
 
 ^6Q) 
 
 DELIVERY. 
 
 169 
 
 when they may be inoperative because waived by a competent agent, 
 or because a binding preliminary contract may have been made by 
 parol, irrespective of such conditions ; or (2) such conditions may have 
 been agreed upon outside of the policy, as in the application, in which 
 case they preclude the existence of any valid contract whatever, wheth- 
 er oral or written, until such conditions have been performed or au- 
 thoritatively waived.*" 
 
 The usual conditions to be found in the applications for insurance 
 are that the contract shall not become binding until the policy is de- 
 livered and the first premium paid. These conditions are valid and 
 enforceable/' and are of such importance as to require discussion in 
 detaiL 
 
 DEIiIVERT, 
 
 66. Any aet« or words elearly sliowingr an intention on tlie part of 
 the insurer to be bound by a fully executed policy will con- 
 stitute a sufBlcient delivery of tbe policy. Actual possession of 
 tbe policy is evidential only, not essential. 
 
 A policy may be delivered subject to conditions, whioli may be sbown 
 by parol. 
 
 i 
 
 In General. 
 
 Delivery is largely a question of intention, as evidenced by words or 
 acts. The requisites of a valid delivery may be said to be three : (1) 
 There must be an intention on the part of the person executing the 
 liolicy to give it legal effect as a completed instrument ; (2) this inten- 
 tion must be evidenced by some word or act indicating that the in- 
 surer has put the instrument beyond his legal control, though not nec- 
 essarily beyond his physical control; and (3) the insured must acqui- 
 esce in this intention.*® 
 
 li 
 
 I 
 
 T8 Since the law does not favor forfeitures, stipulations with reference to 
 an insurance contract will not be considered conditions precedent unless it be 
 clear that they were so intended by the parties. See Hartford Steam Boiler 
 Inspection & Ins. Co. v. Lasher Stocking Co., 66 Vt 439, 29 Ati. 629, 44 Am. 
 St Rep. 859; ^tna Ins. Co. v. Webster, 6 Wall. (U. S.) 129, 18 L. Ed. 888. 
 
 7 9 Oliver v. Insurance Co., 97 Va. 134, 33 S. B. 536; Misselhom v. Associa- 
 tion (0. C.) 30 Fed. 545; Union Cent. Life Ins. Co. v. Pauly, 8 Ind. App. 85, 
 35 N. E. 190; McCully's Adm'r v. Insurance Co., 18 W. Va. 782. 
 
 80 New York Life Ins. Co. v. Babcock, 104 Ga. 67, 30 S. E. 273, 42 L. R. A. 
 88, 69 Am. St Rep. 134, and note; Xenos v. Wickham, L. R. 2 Eng. & Irish 
 App. Cas. 296; Newark Mach. Co. v. Kenton Ins. Co., 50 Ohio St 549, 35 
 N. E. 1060, 22 L. R. A. 768; St. Louis Mut Life Ins. Co. v. Kennedy, 6 Bush 
 (Ky.) 450; McCully's Adm'r v. Insurance Co., XS W. Va. 782; Heiman v. 
 Insurance Co., 17 Minn. 153 (Gil. 127), 10 Am. Rep. 154; Folb v. Insurance 
 Co., 109 N. C. 568, 13 S. B. 798. Actual manual delivery is not essential. 
 Home Ins. Co. v. Curtis, 32 Mich. 402. For example, where it is expressly 
 
 i' 
 
I 
 
 u , 
 1: 
 
 
 170 
 
 THE MAKING OP THE CONTRACT. 
 
 (Ch.5 
 
 Intention — Fraudulently Procured Delivery, 
 
 A delivery procured by the fraud of the insured is of no effect in 
 validating the policy.®^ Thus, in New York Life Ins. Co. v. Bab- 
 cock,** where a third party induced the agent of the insurer to sur- 
 render a policy by concealing the death of the insured, the court con- 
 sidered the case as if the policy had never left the hands of the in- 
 surer's agent. But the delivery of a policy procured by the insured 
 without disclosing the fact that a loss has already occurred is not 
 fraudulent if the contract was complete, and the insured entitled to a 
 policy, before loss.*' 
 
 Same^-Conditional Delivery. 
 
 A policy may be delivered upon condition. In such cases the policy 
 is of no binding effect until the condition is fulfilled.** Such condi- 
 tions may be shown by parol without violating the well-known rule 
 prohibiting the varying of written agreements by parol testimony. 
 The condition so shown goes to the existence of the policy, and not to 
 its terms. An interesting case illustrating this principle has recently 
 
 stipulated that the policy, when filled up, shall be held by the agent in his 
 safe for the assured, no actual transfer to the assured is necessary. Frank- 
 lin Fire Ins. Co. v. Colt, 87 U. S. 560, 22 L. Ed. 423. See infra, p. 172, note 
 90. Proof of intent to cause the policy to become effective must be strong. 
 Union Cent. Life Ins. Co. v. Pauly, 8 Ind. App. 85, 35 N. B. 190; Cronkhite 
 V. Insurance Co. (C. C.) 35 Fed. 26. 
 
 81 Merchants' Mut Ins. Co. v. Lyman, 15 WalL (U. S.) 664, 21 L. Ed. 
 246. In this case it was shown that the party procuring the insurance knew 
 when the policy was issued that the vessel was lost, and it was held there 
 could be no recovery. In Piedmont & A. Ins. Co. v. Ewing, 92 U. S. 377, 23 
 L, Ed. 610, while negotiations were still pending between agent and appli- 
 cant, a friend paid the premium and secured the policy, concealing from the 
 agent the fact that the insured was in extremis, and it waa held that the de- 
 livery thus obtained by fraud was inoperative. 
 
 8« 104 Ga. 67, 30 S. E. 273, 42 L. R. A. 88, 69 Am. St. Rep. 134. 
 
 As to delivery by mistake, see Hartford Fire Ins. Co. v. Wilson, 187 U. S. 
 467, 23 Sup. Ct 189, 47 L. Ed. 261. 
 
 8» Cory V. Patton, L. R. 9 Q. B. 577; Michigan Pipe Co. v. Michigan Fire & 
 Marine Ins. Co., 92 Mich. 482, 52 N. W. 1070, 20 L. R. A. 277; Mutual Life 
 Ins. Co. V. Thomson, 94 Ky. 253, 22 S. W. 87; Commercial Ins. Co. v. Hal- 
 lock, 27 N. J. Law (3 Dutch.) 645, 72 Am. Dec. 379; Keim v. Insurance Co., 
 42 Mo. 38, 97 Am. Dec. 291; Baldwin v. Insurance Co., 56 Mo. 151, 17 
 Am. Rep. 671. But see Merchants* Mut Ins. Co. v. Lyman, 15 Wall. (U. S.) 
 604, 21 L. Ed. 246. 
 
 8* Hartford Fire Ins. Co. v. Wilson, 187 U. S. 467, 23 Sup. Ct. 189, 47 L. 
 Ed. 261; Brown v. Insurance Co., 70 Iowa, 390, 30 N. W. 647; Millville Mut 
 Marine & Fire Ins. Co. v. Collerd, 38 N. J. Law, 480; Hamickell v. Insurance 
 Co., Ill N. Y. 390, 18 N. E. 632, 2 L. R. A. 150. 
 
 When prepayment is a condition precedent to the operation of the policy, 
 the policy may be delivered to the agent of the applicant subject to such 
 condition. Heiman v. Insurance Co., 17 Minn. 153 (Gil. 127), 10 Am. Rep. 154. 
 
 ^66) 
 
 DELIVERY. 
 
 171 
 
 been decided in the Supreme Court of the United States." The in- 
 surance company delivered certain policies to a broker on condition 
 that they should not be considered binding, or surrendered to the in- 
 sured, until the company might inspect the risk, and that, in case the 
 risk should be rejected, the policies should be at once canceled. No 
 premium was paid. The insurer inspected the risk, and notified the 
 broker of its rejection. The broker, neglecting to return the policies 
 to the insurer, inadvertently delivered them to the insured, v^rho, upon 
 destruction of the building insured, brought suit upon the policies. 
 The lower court held that the insurer could not be allowed to show by 
 parol such condition in order to escape liability, since each policy re- 
 quired all agreements and conditions upon which it was "made and 
 accepted" to be indorsed on the policy. But the Supreme Court held 
 that this reasoning applied only to the policies themselves after they 
 should become legally executed instruments by virtue of an absolute de- 
 livery, and did not prevent the insurer from showing "that at the time 
 of the fire there was no subsisting contract of indemnity between the 
 company and the insured." The principle may be stated in brief thus : 
 While a parol condition cannot be shown so as to affect the meaning 
 of an existing written contract, yet a parol condition may always be 
 shown to affect the existence of an alleged contract.'* 
 
 Harnickell v. New York Life Ins. Co.," the authority chiefly relied 
 upon in the Wilson Case, just discussed, presented precisely the same 
 question with the parties reversed. In the New York case the insurer 
 sought to recover on premium notes given for policies delivered sub- 
 ject to parol conditions, which failed. It was held, and with undoubt- 
 ed correctness, that these conditions could be shown by parol in order 
 to establish the invalidity of the insurance and the consequent failure 
 of consideration for the defendant's notes. 
 
 It is sometimes the case that a condition which by its terms appears 
 to be a condition precedent imposed upon the delivery of the policy 
 will be found, in view of all the facts of the case, to be a condition 
 subsequent, rendering the contract defeasible in accordance with the 
 terms of the condition. Thus, in ^tna Ins. Co. v. Webster," the 
 plaintiff received a duly executed policy of insurance, and shortly aft- 
 erwards signed an application for the insurance just granted. In this 
 application was a provision that the insurance granted upon this appli- 
 cation was to take effect when approved by the general agent of the 
 
 86 Hartford Fire Ins. Co. v. Wilson, 187 U. S. 467, 23 Sup. Ct 189. 47 U 
 Ed. 261. 
 
 8« Burke v. Dul&ney, 153 U. S. 228, 14 Sup. Ct. 816, 38 L. Ed. 698; Catt v. 
 Olivier, 98 Va. 580, 36 S. E. 980; Donaldson v. Uhlfelder (D. C.) 31 Wash. 
 Law Rep. 428. 
 
 87 111 N. Y. 390, 18 N. E. 632, 2 L. R. A. 150. 
 «8 6 WaU. (U. S.) 129, 18 L. Ed. 888. 
 
 I 
 
 1 1 
 
 I 
 
 I 
 
 ;! t 
 
7 
 
 
 J! 
 
 172 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 defendant. The plaintiff heard nothing further of this condition un- 
 til after the property insured was lost, when he was told that the in- 
 surance had not been approved by the general agent, and an offer was 
 made to return to him his premium note. The court, considering the 
 application as a part of the same transaction with the policy, held that 
 the condition did not go to the delivery, but merely gave the insurer a 
 right to terminate the contract upon the disapproval of the general 
 agent, and notice before loss to the insured.** 
 
 Evidence of Intention to Deliver, 
 
 Not only must there be an intention to deliver, but also there must 
 be acts or words showing this intention. It is plain that manual tra- 
 dition of the policy is not required for this purpose, for there may be 
 a valid delivery without physical transfer,'® and also there may be a 
 
 
 H 
 
 •• See, on this general subject, Perkins ▼. Insurance Co., 4 Cow. (N. Y.) 
 645; Westchester Fire Ins. Co. v. Earle, 33 Mich. 152. 
 
 •0 Unless agreed upon by the parties as a condition precedent, actual deliv- 
 ery of policy is not necessary to its binding effect. Xenos v. Wickham, L. R. 
 2 H. L. Cas. 296; Blanchard v. Waite, 28 Me. (15 Shep.) 51, 48 Am. Dec. 474; 
 Bragdon ▼. Insurance Co., 42 Me. 259; Michigan Pipe Co. v. Michigan Fire 
 & Marine Ins. Co., 92 Mich. 482, 52 N. W. 1070, 20 L. R. A. 277; City of 
 Davenport v. Peoria Marine & Fire Ins. Co., 17 Iowa, 276; Franklin Fire 
 Ins. Co. v. Colt, 20 Wall. (XJ. S.) 560, 22 L. Eld. 423. Thompson v. Adams, 
 L. R. 23 Q. B. Dlv. 361, Richards, Ins. Cas. 295 ; Newark Mach. Co. v. Kenton 
 Ins. Co., 50 Ohio St 549, 35 N. E. 1060, 22 L. R. A. 768; New York Life Ins. 
 Co. V. Babcock, 104 Ga. 67, 30 S. E. 273, 42 L. R. A. 88, 69 Am. St. Rep. 134. 
 
 Where agents of the company, under an agreement with the assured, hold the 
 policy subject to the order and control of a third person, whose mortgage 
 
 interest is covered by it, this is a sufficient delivery to give validity to the 
 policy, though such third person does not call for or receive it Home Ins. 
 Co. V. Curtis, 32 Mich. 402. The courts of Massachusetts show a great re- 
 luctance to recognize the contract as complete until there has been actual 
 manual transfer of the poUcy. In MARKEY v. INSURANCE CO., 118 Mass. 
 178, a life policy was handed by the agent to the insured, who, after read- 
 ing it, handed it over to the beneficiary with the remark, **There is your pol- 
 icy;" the beneficiary afterwards returning the policy to the agent, to en- 
 able him to present It to and get the premium from a third person. The 
 agent retained the policy and a demand for the policy and a tender of the 
 money the next day was refused, and it was held that there was no such de- 
 livery as would constitute a contract binding on the company. See, also, 
 Wainer v. Insurance Co., 153 Mass. 335, 26 N. E. 877, 11 L. R. A. 598, and 
 cases cited therein. In the Wainer Case, plaintiff filed an application for in- 
 surance with defendant's agent, and, some time after receiving notice that his 
 policy was ready, called for it, and paid the premium. There was no agree- 
 ment that the policy should take effect before payment of the premium, and 
 it was held that the time between the application and payment of the pre- 
 mium could not be considered in determining whether the premises were va- 
 cant for thirty days, contrary to a provision of the policy. But see Wheeler 
 V. Insurance Co., 131 Mass. 1. 
 When the application contains a provision that the policy shall not become 
 
 DELIVERY. 
 
 173 
 
 §66) 
 
 physical transfer without a delivery.** Possession of the policy is 
 evidential, but not conclusive. Possession by the insured raises a pre- 
 sumption of delivery,®* while possession by the insurer is prima fade 
 evidence of no delivery.*' 
 
 A delivery is clearly intended when the policy is, without condition, 
 put into the possession of the insured or his agent, or even of a third 
 party for the benefit of the insured.** So, when the insurer properly 
 mails a fully executed policy, addressed to the insured, the delivery is 
 sufficient and the policy binding, even though it may be received by the 
 insured after loss, or may never be received at all.** 
 
 Same — Delivery to Agent of Insurer. 
 
 Whether a policy completely executed and put in the possession of 
 the agent of the insurer to be delivered to the insured shall be deemed 
 binding upon the insurer while still in the possession of the agent de- 
 pends upon the nature of the agent's duty with reference to the policy. 
 If the insured has done everything necessary to entitle him to posses- 
 sion of the policy, and there rests upon the agent the simple ministe- 
 rial duty of transferring the policy to the insured, then the agent of 
 the insurer in effect holds the policy for the insured, and it is binding 
 on the parties without physical transfer.** If, however, the agent is 
 
 binding until it Is actually delivered, it seems that a physical transfer is 
 necessary. See Misselhorn v. Association, 30 Mo. App. 589. 
 
 »i For example, delivery procured by fraud or mistake is not such a deliv- 
 ery as will make the policy operative. Supra, p. 170. So, the policy may be 
 delivered on condition. Supra, p. 170, and cases cited. 
 
 »2 Massachusetts Ben. Life Ass'n v. Sibley, 158 111. 411, 42 N. E. 137. But 
 such possession is only prima facie evidence of delivery— not conclusive. 
 Hartford Fire Ins. Co. v. Wilson, 187 U. S. 467 (at page 478), 23 Sup. Ot 189, 
 193, 47 L. Ed. 261. 
 
 Mere possession by the assured of a life policy which recites on its face 
 that it Is to take effect only when countersigned by A., and which is not so 
 ^countersigned, is no evidence that the policy was ever delivered to the as- 
 sured. Prall V. Society, 5 Daly (N. Y.) 298, affirmed 63 N. Y. 608. 
 
 88 Union Cent. Life Ins. Co. v. Pauly, 8 Ind. App. 85, 35 N. B. 190; Cronk- 
 hite V. Insurance Co. (C. O.) 35 Fed. 26. 
 
 »*Home Ins. Co. of Columbus v. Curtis, 32 Mich. 402; Clark, Cont. (2d 
 
 Ed.) 53. 
 
 •B Mailing policy is sufficient delivery. Hartford Steam-Boiler Inspection 
 ^ Ins. Co. V. Lasher Stocking Cto., 66 Vt. 439, 29 Atl. 629, 44 Am. St. Rep. 859; 
 Dailey v. Association, 102 Mich. 289, 57 N. W. 184, 26 L. R. A. 171, Elliott 
 Cas. Ins. 23. 
 
 In Yonge v. Society (C. O.) 30 Fed. 902, the policy was mailed from the 
 home office July 28th, and received by the local agent August 5th, but was 
 never actually delivered into the possession of the applicant, who was taken 
 ill August 6th, and died September 9th. Held that, as between the applicant 
 and the company, the policy became effective and binding when placed in 
 the mail July 28th, and, if not then, certainly when it reached the hands of 
 the agent on August 5th. 
 
 •e Delivery is complete when the agent of the insurer holds the policy 
 
 •^ 
 '» 
 
 if 
 
174 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch. 5 
 
 §67) 
 
 PAYMENT OF FIRST PJIEMIUINI. 
 
 175 
 
 M 
 
 t 
 
 vested with some discretionary power in regard to the delivery, as 
 where he is instructed not to deliver unless the insured is in good 
 health,*^ or if the insured is not entitled to claim possession of the pol- 
 icy until some condition has been fulfilled, as the payment of the first 
 premium,"® in such cases the possession of the agent does not inure 
 to the benefit of the insured, and there has been no sufficient delivery.®" 
 From the necessity of mutuality in all contracts it follows that the pol- 
 icy in the hands of the agent cannot be binding on the insurer unless 
 it is also binding on the insured. If the insurer is liable in case of 
 loss, the insured is liable to pay the stipulated premium.^**" Hence, 
 when the insured has the right of rejecting the policy upon delivery, 
 he cannot hold the insurer liable until actual delivery and acceptance 
 of the policy.*®^ 
 
 subject to the Insured's unconditional right to demand surrender. Franklin 
 Fire Ins. Co. v. Colt, 20 Wall. (U. S.) 560, 22 li. Ed. 423; New York Life Ins. 
 Co. V. Babcock, 104 Ga. 67, 30 S. E. 273, 42 L. R, A. 88, 69 Am. St Rep. 134; 
 Equitable Fire Ins. Co. v. Alexander (Miss.) 12 South. 25; Phoenix Ins. Co. 
 V. Meier, 28 Neb. 124, 44 N. W. 97; Morrison v. Insurance Co., 64 N. H. 137, 
 7 Atl. 378; Newark Mach. Co. v. Kenton Ins. Co., 50 Ohio St. 549, 35 N. E. 
 1060, 22 L. R. A. 768 ; Sheldon v. Insurance Co., 25 Conn. 207, 65 Am. Dec. 565 ; 
 Mutual Life Ins. Co. of New York v. Thomson, 94 Ky. 253, 22 S. W. 87 ; Home 
 Ins. Co. of Columbus v. Curtis, 32 Mich. 402. See, also, Wheeler v. Insurance 
 Co., 131 Mass. 1. Dibble v. Assurance Co.. 70 Mich. 1, 37 N. W. 704, 14 Am. St. 
 Rep. 470, is an interesting case on this point. There an insurance agent, 
 with general authority from the owner of property to keep it insured, can- 
 celed one policy on order of the company issuing it, and immediately re- 
 insured it in another company, paid the premium, notified the assured of the 
 transaction, and deposited the policy in his safe for the assured. This was 
 held to be a sufficient delivery of the policy to bind the company. 
 
 •7 McClave v. Association, 55 N. J. Law, 187, 26 Atl. 78. But see Fried v. 
 Insurance Co., 50 N. Y. 243. In this case, however, delivery of the policy 
 was not by its terms necessary to its validity. 
 
 »8 Giddings v. Insurance Co., 102 U. S. 108, 26 L. Ed. 92; Ormond v. Asso- 
 ciation, 96 N. C. 158, 1 S. E. 796; Heiman v. Insurance Co., 17 Minn. 153 (Gil. 
 127), 10 Am. Rep. 154; Wainer v. Insurance Co., 153 Mass. 335, 26 N. B. 877, 
 11 L. R. A. 598. 
 
 •» When the agent holds the policy for delivery upon payment of first pre- 
 mium, but there is no delivery by reason of default of the agent, the insured 
 standing ready to pay, it seems that the policy is valid. New York Life 
 Ins. Co. V. Babcock, 104 Ga. 67, 30 S. E. 273, 42 L. R. A. 88, 69 Am. St Rep. 
 134. 
 
 Where there was no payment of the premium due upon a life policy, and 
 payment of only one-half of the premium due had been waived, it was held 
 that a letter by the agent to the applicant stating that "your policy has ar- 
 rived" did not show such a state of facts as amounted to a constructive 
 delivery. Union Cent Life Ins. Co. v. Pauly, 8 Ind. App. 85, 35 N. B. 190. 
 
 100 Taylor v. Lowell, 3 Mass. 331, 3 Am. Dec. 141; Hendricks v. Insurance 
 Co., 8 Johns. (N. Y.) 1; Lindauer v. Insurance Co., 13 Ark. (8 Eng.) 461. 
 
 101 Blue Grass Ins. Co. v. Cobb (Ky.) 72 S. W. 1099; Myers v. Insurance 
 Co., 27 Pa. 268, 67 Am. Dec. 462; Millville Mut Marine & Fire Ins. Co. t» 
 CoUerd, 38 N. J. Law Yroom) 480. 
 
 Same — Where Insurer Holds Policy for Insured. 
 
 By extending the principle just considered, it becomes apparent that 
 the policy may become effective -even though it never leaves the pos- 
 session of the insurer. If the instrument is completely executed, and 
 held by the insurer either subject to the order of the insured or ready 
 for transmission to him, it is sufficiently delivered and binding upon 
 the parties, the assent of the insured having: already been given in 
 the application submitted.^®* This principle is well illustrated by the 
 leading case of Xenos v. Wickham,^®^ in which a policy of insurance 
 was completely executed, purporting on its face to have been signed, 
 sealed, and delivered by the proper officers of the insuring company, 
 the premium due was debited to the broker, in accordance with whose 
 instructions the policy had been executed, but the instrument itself 
 remained in possession of the company at the time of the loss. To 
 quote the language of the Lord Chancellor (Chelmsford) : "Now, al- 
 though the policy was thus retained by the officers of the company 
 when formal execution of it had taken place, they held it for the plain- 
 tiffs, whose property it became from that moment. It is a mistake to 
 suppose, as some of the learned judges have done, that the policy 
 wanted its complete binding effect till it was delivered to and accepted 
 by Lascaridi. The usage of insurance companies to keep the policy 
 until sent for by the assured or his broker is not for the purpose of 
 completing the instrument by a delivery personally to the party or his 
 agent, but merely as a matter of convenience." ^®* 
 
 PAYMENT OF FIRST PREMIUM. 
 
 67. Tlie parties may make such asreement concexmins the payment 
 of the first premium as they may desire, and snoh agreement, 
 i^hether express or implied, mnst be perfom&ed or x^aived. 
 In the absence of express agreement it is generally understood 
 that prepayment of the first premiun& is not necessary to the 
 validity of an oral preliminary contract, but that payment 
 must be made upon delivery of the policy. When, hourever, 
 it is expressly agreed that the contract shall not become bind* 
 ing until the first premium has been paid, no contract, oral 
 or written, can be validly n&ade unless such prepayment has 
 been n&ade or waived. 
 
 The great number of cases involving questions relating to the pay- 
 ment of the first premium arise rather out of the difficulty of making 
 
 10* See Xenos v. Wickham, 2 H. L. Cas. 296; Baldwin v. Insurance Co., 
 56 Mo. 151, 17 Am. Rep. 671; Keim v. Insurance Co., 42 Mo. 38, 97 Am. 
 Dec. 291; Commercial Mut Marine Ins. Co. v. Union Mut Ins. Co., 19 How 
 (U. S.) 318, 16 li. Ed. 636. 
 
 108 L. R. 2 Eng. & Irish App. Cas. 296. 
 
 104 L. R. 2 Eng. & Irish App. Cas. 296 (at page 320). 
 
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 176 
 
 THE MAKING OP THE CONTRACT. 
 
 (Ch.5 
 
 ^ ' 
 
 
 proper inferences of fact than of determining the principles of law 
 applicable. It is clear that, as a matter of law, any agreement made 
 by the parties with reference to the premium will be enforced, and 
 that, if the insured has failed to perform his promise of payment, he 
 is in no position to demand performance of the insurer in case of loss. 
 As a practical matter, however, in deciding questions as to the payment 
 of the first premium, three serious difficulties present themselves : (1) 
 In any given case, what was the agreement of the parties, as a matter 
 of fact; (2) what constitutes payment; and (3) what amounts to a 
 valid waiver. 
 
 The Agreement to Pay Premiums. 
 
 The express agreement presents little difficulty. If the payment of 
 the first premium is made a condition precedent to the liability of the 
 insurer, the party insured cannot recover either on a preliminary oral 
 contract or on the written policy unless such condition has been ful- 
 filled or waived.^®* So, if the premium is agreed to be paid at some 
 time subsequent to the making of the contract, the insurer's liability 
 attaches at once.^°* A promise to pay a premium will support a prom- 
 ise to indemnify as well as a cash payment. "Insurance can be sold on 
 credit as well as anything else." ^®^ 
 
 When, however, no express stipulation is made as to the time or 
 manner of payment, and the intention of the parties must be inferred 
 
 lOB Oliver v. Insurance Oo., 97 Va. 134, 33 S. K 536; St Louis Mut Life 
 Ins. Co. V. Kennedy, 69 Ky. (6 Bush) 450; Ormond v. Association, 96 N. O. 
 158, 1 S. E. 796; Heiman v. Insurance Co., 17 Minn. 153 (Gil. 127), 10 Am. 
 Rep. 154. Payment by a third party with the money of the insured, but 
 without his knowledge, is of no effect. "Whiting v. Insurance Co., 129 Mass. 
 240, 37 Am. Rep. 317. See Giddings v. Insurance Co., 102 U. S. 108, 26 U 
 Ed. 92. 
 
 . In Meyer v. Insurance Co., 73 N. Y. 516, 29 Am. Rep. 200, plalntiflT held a 
 participating policy on the life of her husband. The custom of the parties 
 had been to apply the dividends on the premiums, and, their amount being 
 thus uncertain, the defendant had been in the habit of furnishing the plain- 
 tiff with an annual statement of the amount required to renew the policy. 
 Receiving no statement for 1874, the plaintiff wrote for it, Inclosing a money 
 order for the amount she supposed would be requisite. If the defendant had 
 answered her letter promptly, the plaintiff would have had time enough to 
 make the payment, but she received no answer until three months later, when 
 the order was returned with the statement that the policy was canceled for 
 nonpayment of premium. The plaintiff tendered the proper amount, which 
 was refused. Held, that the plaintiff was entitled to have the policy de- 
 clared in force, and that formal annual tender of premium was not neces- 
 sary, but the Judgment should provide for the payment of premiums due, 
 v^ith interest. 
 
 io« Franklin Fire Ins. Co. v. Colt, 20 Wall. (U. S.) 560, 22 L. Ed. 423; First 
 Baptist Church Trustees v. Brooklyn Fire Ins. Co., 28 N. Y. 153. 
 
 107 Croft V. Insurance Co., 40 W. Va. 508, 21 S. B. 854, 52 Am. St Rep. 902; 
 Jones V. Insurance Co., 168 Mass. 245, 47 N. B. 92. 
 
 PAYMENT OF FIRST PREMIUM. 
 
 177 
 
 ^67) 
 
 from all the circumstances of the transaction, great difficulty is ex- 
 perienced and much confusion has arisen. On principle and authority 
 it would seem that the true rule should be derived from that applying 
 in the somewhat analogous case of a sale of a chattel, when, in the ab- 
 sence of agreement to the contrary, cash is to be paid upon the deliv- 
 ery of the article sold. So a preliminary contract of insurance will 
 become binding without payment of the premium,^®* but the premium 
 is payable in cash upon delivery of the policy.^®* In other words, the 
 payment of the premium and the delivery of the policy are mutually 
 dependent upon each other.^^° Of course, credit may be given at the 
 time of delivering the policy, provided the agent has authority so to do. 
 
 What Constitutes Payment. 
 
 Any transaction that will constitute payment of any premium will 
 be sufficient to satisfy the condition of prepayment of the first pre- 
 mium, so as to make the contract operative. This point will therefore 
 be treated under the general topic of payment of premiums.^** It 
 may be here remarked, however, that a partial payment of a required 
 premium will not validate a policy ^** unless the acceptance of such 
 sum by the insurer is under such circumstances as to show a waiver 
 of the requirement of full payment. ^^* 
 
 108 Franklin Fire Ins. Co. v. Colt, 20 Wall. (U. S.) 560, 22 L. Ed. 423, 
 Eames v. Insurance Co., 94 U. S. 621, 627, 24 L. Ed. 298; Firemen's Ins. Co. 
 V. Kuessner, 164 111. 275, 45 N. K 540. 
 
 109 But if the policy is delivered to the assured, nothing being said about 
 payment, a presumption is raised that a short credit was intended. Boeben 
 V. Insurance Co., 35 N. Y. 131, 90 Am. Dec. 787; Miller v. Insurance Co., 12 
 Wall. (U. S.) 285, 20 L. Ed. 398. 
 
 In Fidelity & Casualty Co. v. Chambers, 93 Va. 138, 24 S. E. 896, 40 L. R. 
 A. 432, it was held that possession of the policy by the assured is such evi- 
 dence of the payment of the premium as, upon a demurrer to the evidence, 
 is conclusive upon the court 
 
 110 Audubon v. Insurance Co., 27 N. T. 216 (at page 223), Denlo, C. J. If 
 a binding preliminary contract has been made, the right of the insured to 
 tender the premium and receive the policy agreed upon is in no wise affected 
 by the previous destruction of the property insured. Commercial Mut. Ma- 
 rine Ins. Co. V. Union Mut. Ins. Co., 19 How. (U. S.) 318, 15 L. Ed. 636. 
 
 Nor is the insured under any obligation to disclose the loss occurring after 
 the contract has been completed by parol. Baldwin v. Insurance Co., 56 Mo. 
 151, 17 Am. Rep. 671;«Keim v. Insurance Co., 42 Mo. 38, 97 Am. Dec. 291. 
 Merchants' Miit. Ins. Co. v. Lyman, 15 Wall. (U. S.) 664, 21 L. Ed. 246, seems 
 to lay down a different rule. In that case, however, the remarks of Miller. 
 J., should be regarded as obiter dictum, inasmuch as no oral contract was 
 proved. 
 
 111 See post, p. 201. 
 
 ii« Barnes v. Insurance Co., 74 N. C. 22, 5 Bigelow, Ins. Gas. 420; Carlock 
 V. Insurance Co., 138 111. 210, 28 N. E. 53; Brown v. Insurance Co., 59 N. H. 
 298, 47 Am. Rep. 205. 
 
 118 Nebraska & I. Ins. Co. v. Christiensen, 29 Neb. 572, 45 N. W. 924, 26 
 
 Tanck Ins. — 12 
 
 (i:|{ 
 
 I 
 
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 178 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 Waiver of Agreement for Prepayment. 
 
 Even though the parties may have expressly agreed that the con- 
 tract shall not be deemed complete until payment of the premium in 
 cash and in full, this stipulation may be waived by the insurer or any 
 of his agents having competent authority.^" As a general rule, any 
 agent having power to execute and issue contracts on behalf of the 
 insurer has power to waive a condition of prepayment.^ ^'^ And an 
 absolute delivery of the policy by such an agent, without payment of 
 the premium, under such circumstances as will justify an inference 
 that credit is to be given, will constitute a waiver of a condition of 
 prepayment."* It seems that an intention to give credit may be in- 
 ferred from the mere fact of unconditional delivery without requiring 
 present payment.^*^ Nor do the courts show great readiness to find 
 that a delivery was made subject to a condition of immediate payment. 
 
 I, 
 
 l;l 
 
 Am. St. Rep. 407; Cole v. Insurance Co., 22 Wash. 26, 60 Pac. 68, 47 L. R. A. 
 
 201. 
 
 114 Farnum v. Insurance Co., 83 Cal. 246, 23 Pac. 869, 17 Am. St. Rep. 233; 
 Eagan v. Insurance Co., 10 W. Va. 583; O'Brien v. Insurance Co. (C. C.) 22 
 Fed. 586. A custom of collecting premiums on the first of each month for 
 insurance efiCected during the previous month operates as a waiver of im- 
 mediate payment when no special demand is made. Potter v. Insurance Co. 
 (C. C.) 63 Fed. 382. See, also, as to waiver by custom, Peoria Sugar Refin- 
 ery V. Susquehanna Mut. Fire Ins. Co. (C. C.) 20 Fed. 480; Long v. Insurance 
 Co., 137 Pa. 335, 20 Atl. 1014, 21 Am. St Rep. 879. Failure of the agent to urge 
 applicant to pay does not constitute waiver. Union Cent Life Ins. Co. v. 
 Pauly, 8 Ind. App. 85, 35 N. E. 190. Waiver may be shown by direct proof 
 that credit was given, or may be inferred from the circumstances. Bodine 
 v. Insurance Co., 51 N. Y. 117, 10 Am. Rep. 566. 
 
 Delivery of the policy may constitute waiver. Wood y. Insurance Co., 32 
 N. Y. 619, and cases cited in note 117, infra. 
 
 11* See cases cited in note U4, supra; also, see: Elkins v. Insurance Co., 
 113 Pa. 386, 6 Atl. 224 ; Newark Mach. Co. v. Kenton Ins. Co., 50 Ohio St 549, 
 35 N. B. 1060, 22 L. R. A. 768; Mississippi Valley Life Ins. Co. v. Neyland, 
 9 Bush (Ky.) 430. In Bowman v. Insurance Co., 59 N. Y. 521, it was held that 
 the condition requiring prepayment could be waived by agent, even though 
 the policy in terms provided otherwise. A mutual company is not bound by 
 waiver of its officer contrary to its by-laws and regulations. Baxter v. 
 Insurance Co., 1 Allen (Mass.) 297, 79 Am. Dec. 730; Mulrey v. Insurance 
 Co., 4 Allen (Mass.) 116, 81 Am. Dec. 689. As to waiver by mutual compa- 
 nies, see, also, Susquehanna Mut. Fire Ins. Co. v. Elkins, 124 Pa. 484, 17 Atl. 
 24, 10 Am. St. Rep. 608. See note 24, p. 81, supra. 
 
 116 Miller v. Insurance Co., 12 Wall. (U. S.) 285, 20 L. Ed. 398; Boehen 
 T. Insurance Co., 35 N. Y. 131, 90 Am. Dec. 787; Wytheville Insurance & 
 Banking Co. v. Telger, 90 Va. 277, 18 S. E. 195; Southern Life Ins. Co. v. 
 Booker, 9 Heisk. (Tenn.) 606, 24 Am. Rep. 344; Wood v. Insurance Co., 32 
 N. Y. 619; McAllister ▼. Insurance Co., 101 Mass. 558, 3 Am. Rep 404, 
 Woodruff, Ins. Gas. 140. 
 
 iiT Boehen v. Insurance Co., 35 N. Y. 131, 90 Am. Dec. 787; Miller v. 
 Insurance Co., 12 Wall. (17. S.) 285, 20 L. Ed. 398. and note; Sheldon v. In- 
 •urance Co., 26 N. Y. 460, 84 Am. Dec 231, 
 
 §67) 
 
 PAYMENT OF FIRST PREMIUM. 
 
 no 
 
 Thus, in Sheldon v. Atlantic Fire & Marine Ins. Co.,"» the agent of 
 the insurer mailed to the plaintiff a policy containing the usual condi- 
 tion that it should not be considered binding until the premium was 
 actually paid. With the policy was sent a letter in which the agent 
 wrote: "Should you decline the policy, please return it by return 
 mail ; if you retain it, please send me the amount, $29.50." The plain- 
 tiff neither returned the policy nor paid the premium, but upon de- 
 struction of the property covered by the policy he sought to enforce 
 payment by the insurer. The court held that the delivery was uncon- 
 ditional, thus waiving the condition of prepayment, and that the ac- 
 ceptance of the plaintiff, by retaining the policy, completed the con- 
 tract. It would seem that the opinion of the dissenting judges, that 
 the delivery was conditioned upon payment of the premium specified, 
 was the more correct. Indeed, in a later case "» very similar in its 
 facts, but seemingly presenting clearer proof of an intention to waive 
 prepayment, it was held that the delivery was upon condition of im- 
 mediate payment."<> It would seem, on principle, that in all cases 
 where policies are put into the hands of applicants for the purpose of 
 examination, or subject to rejection, such delivery should be consid- 
 ered conditional, and not as constituting a waiver of conditions of pre- 
 payment.*** 
 
 Delivery of Policy Containing Receipt for Premium, 
 
 An interesting question, closely related to the one just discussed, is as 
 to the effect of an acknowledgment on the face of a policy that the first 
 
 118 26 N. Y. 460, 84 Am. Dec. 231. 
 
 1" Wood v. Insurance Co., 32 N. Y. 619. In this case the agent of the In- 
 surance company filled up two policies and left them with the plaintiff's 
 clerk, m the plaintiff's absence, with the understanding that when the plain- 
 tiff returned he should pay the premium if he accepted, and return the poli- 
 cies If he declined them. It was proved that the agent sent a messenger 
 three tames to the plaintiff, with instructions to ask for the premiums or 
 the policies. The first time the plaintiff was out. The next time the mes- 
 senger asked him for the premium, and he told him to call again. The last 
 time he at first directed his clerk to draw a check for the premium, but 
 afterwards countermanded his direction, and said he would call on the 
 agent and see him about another loss, as to which he expressed some dissaUs- 
 tactaon. The next day the fire occurred. The plaintiff claimed that by his 
 not returning the policies he accepted them, but the court, by a majority of 
 nve to three, refused to sustain such contention. 
 
 "0 But see Boehen v. Insurance Co., 35 N. Y. 131, 90 Am. Dec. 787: Miller 
 T. Insurance Co., 12 Wall. (U. S.) 285, 20 L. Ed. 398. 
 
 121 A waiver may be shown by any other facts clearly indicating an in- 
 ^ntion on the part of the insurer not to insist upon the condition. Thus 
 wbere the insured paid the first premium to an agent who had no authority 
 w receive it, and who never accounted for it to the insurer, it was held that 
 a subsequent recognition of the policy as valid by the insurer amounted to 
 
 Si,I!l'7^1 ?f, *^.o ^°^^^^°^ ^^ prepayment Mauck v. Insurance Co (Del. 
 ouper.) 04 AtL 952. 
 
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 w 
 
Ida 
 
 THE MAKING OF THB CONTRACT. 
 
 (Ch.5 
 
 premium has been paid, when in fact the policy has been dehvered 
 without such payment. Although there is some conflict of opmion 
 among the authorities,^" the prevailing opinion seems to be that sucn 
 a receipt concludes the insurer as far as the validity of the policy is 
 concerned, but is only prima facie evidence of payment m so far as 
 the premium itself is concerned;^" that is, the insurer cannot deny 
 the truth of the receipt in an action against him on the policy, but may 
 do so in an action against the insured for the purpose of recovering- 
 the premium due.^^* In most of the cases, however, in which this 
 
 III 
 
 ! 
 
 I 
 
 < 
 
 122 See 1 Joyce, Ins. § 86. «, v ««» oj »«, t>«t> 
 
 123 Southern Life Ins. Co. v. Booker, 9 Helsk. (Tenn.) 606, 24 Am. Rep. 
 344; Phil. Ins. § 512 et seq.; 3 Kent, Comm. 260. In Ormond v. Association, 
 96 N. C. 158, 1 S. E. 796, the policy provided that it should not be in force 
 until actual payment of the annual dues. The policy was delivered with a 
 receipt attached acknowledging the payment of the dues, signed by the pres- 
 ident but the receipt stated that it must be countersigned by the agent. The 
 dues were not in fact paid until after loss, and the receipt was not counter- 
 siffned by the agent The insured had notice of this stipulation by the appli- 
 cation, and it was held that payment of the dues was a condition precedent 
 to make the policy effectual, and the company could set up the ^onpayment 
 to ^eat policy. In Kline v. Association, 111 Ind. 462, 11 N. E. 620, 60 Am. 
 Rep. 703, the policy was by its terms incontestable except for fraud, and con- 
 tained a receipt for the premium. The premium was not paid, but the in- 
 sured gave an order for same on his employer, who, at his request, refused 
 to pay it This order expressly stipulated that, if it was not Paid, the in- 
 sured's rights should be forfeited, but nevertheless it was held that, as 
 against the beneficiary, the company was estopped to deny the payment of 
 the premium and forfeit the policy. See, also. Brooklyn Life InsL Co. v^ 
 Miller 12 Wall (U. S.) 285, 20 L. Ed. 398; Union Life Ins. Co. v. Winn, 8< 
 iT Ipp 25V; Uhen v^ Insurance Co., 35 N. Y. 131, 90 Am. Dec. 787; Far- 
 num V Insurance Co., 83 Cal. 246, 23 Pac. 869, 17 Am. St Rep. 233; Sheldon 
 V. Insurance Co., 26 N. Y. 460. 84 Am. Dec. 231; Basch v. Insurance Co. 35 
 N J Law 429. 5 Benn. Fire Ins. Cas. 421; Dobyns v. Association, 144 Mo. 
 95 45 S W HOT. In Brown v. Insurance Co., 59 N. H. 298, 47 Am. Rep. 
 205, it was held that there was no estoppel. The receipt was separate from 
 
 *^!,r^^f Basch v. Insurance Co.. 35 N. J. Law. 429. 5 Benru Fire Ins. Cas. 
 421 where it is said in an able opinion by Beasley. C. J.: "This policy, exe- 
 cuted by the president and secretary of the company, contains a formal ac- 
 knowledgment of the payment of the premium in question, and, in my opin- 
 ion this should prevent the defendants from averring or showing nonpay- 
 ment for the purpose of denying that the contract ever had any legal exist- 
 ence What does this receipt, in its connection with the delivery of the in- 
 strument, import, if it does not mean that the payment of the premium is 
 conclusively admitted to the extent that such payment is necessary to give 
 validity to the contract? Unless this be its meaning, it serves no legal office, 
 for it does not mean that the money has been actually received. It is true 
 that there is an express declaration that the policy is to have no effect until 
 the premium shall have been paid; but in this same instrument is an equally 
 express statement that the act on which the contract is to become efficacious 
 has been done. • • • The usual legal rule is that a receipt is only prima 
 
 §68) 
 
 WHAT PAPERS FORM THE WRITTEN CONTRACT. 
 
 181 
 
 statement is made, the facts show a waiver of the condition of pre- 
 payment, upon which the judgment is based, rather than on any estop- 
 pel arising out of the acknowledgment of payment made in the policy. 
 In fact, some of the most extreme cases allowing the insured to re- 
 cover without complying with the condition of prepayment of the pre- 
 mium are to be found in New York, where the doctrine is not ac- 
 cepted/^* 
 
 WHAT PAPERS FORM THE WRITTEN CONTRACT. 
 
 68. IN GENERAL— The contract of insurance, as nsnally made, con- 
 tains the following elements t 
 (a) All terms legally set forth on the face of the policy, or on the 
 back thereof, if properly referred to. 
 All separate papers expressly designated and made part of the 
 contract by the terms of the policy, such as applications and 
 surveys. 
 All riders attached to the policy with the consent of both parties. 
 In case of corporate insurers, all provisions of the insurer's char- 
 ter, 
 (e) All statutes applicable, as well as the fixed rules of the common 
 Imw, 
 
 (b) 
 
 (c) 
 (d) 
 
 Any discussion of the component elements of the insurance contract 
 is but the application to the peculiar phases of this subject of two 
 well-known rules of law: (1) All prior negotiations or agreements 
 are merged in any written memorial to which the parties may have 
 reduced their agreement; and (2) all persons are presumed to know 
 the law of their jurisdiction, and to contract with reference to it. 
 
 The first problem that confronts us, then, is to determine what pa- 
 pers go to make up this written memorial, behind which the parties are 
 estopped to go. The basis of this "integration," to use Prof. Wig- 
 more's word,^'* is the policy. Every contractual term on the face of 
 tliis instrument at the time of its deliver\', or written in thereafter with 
 the consent of both parties, is a part of the written agreement It is 
 
 r,:T 
 
 fncie evidence of payment, and may be explained; but this rule does not 
 apply when the question involved is not only as to the fact of payment, but 
 as to the existence of rights springing out of the contract. With a view of 
 defeating such rights the party giving the receipt cannot contradict it. An 
 acknowledgment of an act done, contained in a written contract, and which 
 act is requisite to put it in force, is as conclusive against the party making it 
 as is any other part of the contract. It cannot be contradicted or varied by 
 parol." 
 
 125 Sheldon v. Insurance Co., 26 N. Y. 460, 84 Am. Dec. 231; Baker v. In- 
 surance Co., 43 N. Y. 283, 287; How v. Insurance Co., 80 N. Y. 32. 
 
 !>• 1 GreenL Ev. (16th Ed.) S 305b. 
 
182 
 
 THE MAKING OF THB CONTRACT. 
 
 (Ch.5 
 
 !i 
 
 I 
 
 I 
 
 II 
 
 IJ 
 
 immaterial whether such terms are written or printed; ^*^ whether they 
 appear in the body of the policy or on the margin thereof; *** they are 
 equally binding if consented to. 
 
 But this is not true of conditions or other indorsements appearing 
 on the back of the policy unless reference is made to them on its 
 face.**' And it has been held recently by the Supreme Court of the 
 United States "° that the words, "See back," printed on the face of a 
 contract, are not such a reference as will make conditions printed on 
 the back binding terms of the agreement. When, however, additional 
 terms are written on the other half of the sheet containing the policy 
 
 i«T Where there are both printed and written terms, they should, if pos- 
 sible, be so construed as to stand together, but where there is repugnance 
 the written provisions prevail over those printed. Minnock v. Insurance Co., 
 90 Mich. 236, 51 N. W. 367; Reynolds v. Insurance Co., 47 N. Y. 597; Nelson 
 V. Insurance Co., 71 N. Y. 453; NICOLBT v. INSURANCE CO., 3 La. 366, 23 
 Am. Dec. 458; Kratzenstein v. Assurance Co., 116 N. Y. 54, 22 N. B. 221, 5 
 L. R. A. 799; Fire Ins. Ass'n v. Merchants' & Miners* Transp. Co., 66 Md. 
 339, 7 Atl. 905, 59 Am. Rep. 162; Plinsky v. Insurance Co. (C. C.) 32 Fed. 
 47; FAUST v. INSURANCE CO., 91 Wis. 158, 64 N. W. 883, 30 L. R. A. 783, 
 51 Am. St Rep. 876. An indorsement exempting the company from liability, 
 except in case of total loss, conti-ols. Chadsey v. Guion, 97 N. Y. 333; 
 Burt V. Insurance Co., 78 N. Y. 400. Where, on issuing the policy, the insur- 
 ers write across the policy "Privilege for $4,500 additional insurance," 
 such indorsement is a waiver of notice of additional insurance within the 
 amount specified, although the printed part of the policy requires notice to 
 be given of any additional insurance. Benedict v. Insurance Co., 31 N. Y. 
 389. Where a printed condition released the company from liability for loss by 
 lightning, written indorsement, "Covering loss by lightning," will prevail over 
 printed clause. Haws v. Insurance Co., 130 Pa. 113, 15 Atl. 915, 2 L. R. A. 
 52. In many states It is provided that no condition in a policy shall operate 
 to defeat it unless printed in type of certain size or written in pen and ink; 
 e. g.. Code V'a. 1887, § 3252. 
 
 128 Guerlain v. Insurance Co., 7 Johns. (N. Y.) 527; Burt v. Insurance Co., 
 78 N. Y. 400; WRIGHT v. ASSOCIATION, 118 N. Y. 237, 23 N. E. 186, 6 L. 
 R. A. 731, 16 Am. St. Rep. 749. 
 
 The clause in a marine policy relating to the perils of the seas, men of 
 war, enemies, etc., is controlled by the marginal statement in the policy, 
 "Warranted free from loss or expense arising from capture, seizure, or de- 
 tention, etc.," which constitutes a warranty on the part of the assured. 
 Swinnerton v. Insurance Co., 37 N. Y. 174, 93 Am. Dec. 560. For illustra- 
 tion of the varying force given to marginal "catchwords" in different jurisdic- 
 tions, see McQuitty v. Insurance Co., 15 R. I. 573, 10 Atl. 635, and Bruce v. 
 Insurance Co., 58 Vt. 253, 2 Atl. 710. 
 
 i2» Planters* Mut Ins. Co. v. Rowland, 66 Md. 236, 7 Atl. 257; Ford v. 
 Relief Co., 148 Mass. 153, 19 N. E. 169, 1 L. R. A. 700; Blackerby v. Insur- 
 ance Co., 83 Ky. 574. 
 
 In the following cases the Indorsements on the back were referred to on 
 the face of the policy, and were held binding: Kensington Nat. Bank v. 
 Yerkes, 86 Pa. 227; Porter v. Insurance Co., 160 Mass. 183, 35 N. K 678; 
 HARRIS V. INSURANCE CO., 5 Johns. (N. Y.) 368. 
 
 ISO The Majestic, 166 U. S. 375, 17 Sup. Ct 597, 41 U Ed. 1039. 
 
 §68) 
 
 WHAT PAPEKS FORM THE WRITTEN CONTRACT. 
 
 18a 
 
 pnj, er, or on a sheet of paper attached thereto, they are presumed to 
 form part of the contract, even in the absence of reference.**^ 
 
 Separate Papers — Application and Survey. 
 
 It is not necessary that a writing of any kind shall be fully set forth 
 in the body of any given contract in order to become a part of it. By 
 proper reference indicating clearly that the parties intend to be bound 
 by the terms of a separate paper, it can be made a part of the written 
 contract just as completely as if copied in full on its face.^'* It is not 
 easy to state just what reference to such separate papers is sufficient 
 to incorporate them in the policy,^*® and there seems to be no little con- 
 fusion in the cases on this point, resulting, usually, from the efforts 
 
 i«i Roberts v. Insurance Co., 3 Hill (N. Y.) 501; Murdock v. Insurance Co., 
 2 N. Y. 210; Duncan v. Insurance Co., 6 Wend. (N. Y.) 488, 22 Am. Dec. 539; 
 Goldman v. Insurance Co., 48 La. Ann. 223, 19 South. 132. 
 
 132 CLARK V. INSURANCE CO., 8 How. (U. S.) 235, 12 L. Ed. 1061; Stand- 
 ard Life & Accident Ins. Co. v. Martin, 133 Ind. 376, 33 N. E. 105; Jennings 
 V. Insurance Co., 2 Denio (N. Y.) 75; BURRITT v. INSURANCE CO., 5 Hill 
 (N. Y.) 188, 40 Am. Dec. 345; KENTUCKY & L. MUT. INS. CO. v. SOUTH- 
 ARD, 8 B. Mon. (Ky.) 634; Daniels v. Insurance Co., 12 Cush. (Mass.) 423, 
 59 Am. Dec. 192; Holmes v. Insurance Co., 10 Mete. (Mass.) 211, 43 Am. 
 Dec. 428; Day v. Insurance Co., 1 McArthur (D. C.) 41, 29 Am. Rep. 5Go; 
 Bobbitt V. Insurance Co., 66 N. C. 70, 8 Am. Rep. 494; Weinberger v. Insur- 
 ance Co., 41 La. Ann. 31, 5 South. 728; Sun Fire Office v. Wich, 6 Colo. App. 
 103, 39 Pac. 587. 
 
 133 See cases cited supra, note 131. In Vilas v. Insurance Co., 72 N. Y. 
 500, 28 Am. Rep. 186, "As per application No. 1234" was held insufficient. 
 In BURRITT v. INSURANCE CO., 5 Hill (N. Y.) 188, 40 Am. Dec. ^45, the 
 application was referred to "as forming a part of this policy," and this was 
 held sufficient. In Throop v. Insurance Co., 19 Mich. 423, the policy provided 
 "that if this policy be made and issued upon, or refer to, an application, such 
 application shall be considered a part of the contract and a warranty by 
 the insured," and it was held that this did not make the application a part 
 of the contract, so as to render it necessary that it should be set forth in 
 stating the contract, unless its terms were such as to be capable of being 
 impressed with the character of warranties by force of the stipulations it 
 contained. There was a strong dissenting opinion. In ACCIDENT INS. 
 CO. V. CRANDAL, 120 U. S. 527, 7 Sup. Ct. 685, 30 L. Ed. 740, the only men- 
 tion of the application in the policy was, "In consideration of the warranties 
 made in the application for this insurance," and it was said that the appli- 
 cation was not a part of the policy, but only those statements in the appli- 
 cation which were warranties; but in Standard Life & Accident Ins. Co. 
 V. Martin, 133 Ind. 376, 33 N. K 105, where there was the statement in the 
 policy, "In consideration of the statement of facts warranted to be true 
 in the application for this policy, and of the payment," etc., it was held that 
 the application so referred to in the policy was a part of the contract 
 
 In a recent important case in the Supreme Court of the United States, it 
 was held that, where the application states that it is subject to the charter 
 of the company and laws of the state of New York, but the policy is executed 
 and delivered in the state of Washington, referring to the application as the 
 consideration for the policy, the application is no part of the policy, and the 
 
 '^Tl 
 
 ; / 
 
 
 '♦ 
 
 
184 
 
 THE MAKING OF THE CONTRACT, 
 
 (Ch. 5 
 
 made by the courts to avoid the forfeitures that are often worked by 
 making the application part of the policy, and the statements therein 
 warranties.^'* Thus, in a Michigan case ^*' the broad statement is 
 made that: "The written application for insurance, the policy issued 
 thereon, and the note g^ven by the assured, being all but parts of one 
 and the same transaction, must be resorted to and treated as but one in- 
 strument for the purpose of ascertaining and determining the rights 
 of the parties." In Phoenix Mut. Life Ins. Co. v. Raddin,**® the ap- 
 plication was held to be no part of the policy, which contained the fol- 
 lowing term : "This policy is issued and accepted by the assured upon 
 the following express conditions: * * * jf any of the declara- 
 tions or statements made in the application for this policy, upon the 
 faith of which this policy is issued, shall be found in any respect un- 
 true, this policy shall be null and void." 
 
 The separate papers thus incorporated in the policy are most fre- 
 quently the application and the survey *'^ that sometimes accompanies 
 the application for property insurance. Premium notes given upon 
 delivery of the policy or thereafter are also often thus made parts of 
 the contract.^'* But it has been held that a receipt given for the first 
 
 I 
 
 II 
 
 laws of Washington must govern the rights of the parties. Mutual Life 
 Ins. Co. V. Cohen, 179 U. S. 262, 21 Sup. Ct. 106, 45 L. Ed. 181. 
 
 See dictum In Lycoming Fire Ins. Co. v. Jackson, 83 111. 302, 25 Am. Rep. 
 386, to effect that insured is not bound by unauthorized application, though 
 made a part of the contract by the policy which is received by him. 
 
 184 In AMERICAN POPULAR LIFE INS. CO. v. DAY, 39 N. J. Law (10 
 Vroom) 89» 23 Am. Rep. 198, the application contained an agreement that the 
 answers and statements should "be the basis and form part of the contract 
 or policy, and, if the same be not in all respects true and correctly stated, 
 the said policy shall be void, aecprding to the terms thereof." The policy 
 declared that the insurance was **ln consideration of the representations," 
 etc. The court said the application was not a part of the contract, and the 
 policy would be void only in case of fraud or intentional misrepresentation. 
 
 To do away with the uncertainty on this point, and to prevent the hard- 
 ships that have often resulted from forfeitures due to working warranties 
 into the policy by reference to an unseen application or to unknown by-laws, 
 statutes have been passed in many states declaring that the application or 
 by-laws shall not be considered a part of the contract between the parties 
 unless copies of these papers shall be attached to the policy. See Laws Pa. 
 1881, p. 20; RITTER v. INSURANCE 00., 169 U. S. 139, 18 Sup. Ct. 300, 42 
 L. Ed. 693: Manhattan Life Ins. Co. v. Myers, 109 Ky. 372, 59 S. W. 30. 
 
 185 American Ins. Co. v. Stoy, 41 Mich. 385, 1 N. W. 877. 
 
 i«« PHCENIX MUT. LIFE INS. CO. v. RADDIN, 120 U. S. 183, 7 Sup. Ct 
 500, 30 L. Ed. 644. 
 
 187 Sheldon v. Insurance Co., 22 Conn. 235, 58 Am. Dec. 424; Farmers' Ins. 
 & Loan Co. v. Snyder, 16 Wend. (N. Y.) 481, 30 Am. Dec. 118. 
 
 188 American Ins. Co. v. Story, 41 Mich. 385, 1 N. W. 877; Continental Ins. 
 Co. V. Dorman, 125 Ind. 189, 25 N. E. 213; Laughlln v. Association, 8 Tex. 
 av. App. 448, 28 S. W. 411. 
 
 §GS) 
 
 WHAT PAPERS FOKM THE WllITTEN CONTRACT. 
 
 185 
 
 premium before the issue of the policy was no part of the policy, which 
 did not refer to it.^^" 
 
 Advertising Circulars and Prospectuses, 
 
 It would seem clear on principle that prospectuses and circulars is- 
 sued by insurers for the purpose of securing business cannot be parts 
 of written contracts subsequently executed unless expressly made so 
 by reference, as in the case of other papers. They may contain repre- 
 sentations which, if false, might be ground for an action in deceit or 
 for a suit for rescission or reformation of a policy executed, but it is 
 difficult to see how such loose papers could be admitted as evidence to 
 vary the terms of policies which make no reference to them. Yet in 
 a Kentucky case "® a party to a policy, which by its terms was de- 
 clared forfeited upon failure to pay any premium at maturity, was 
 given paid-up insurance because a circular shown to him in order to 
 induce him to insure had stated that paid-up insurance would be given 
 under certain conditions. Other authorities, notably the English 
 cases,*** can be found supporting this view, but the weight of authori- 
 ty is plainly against it.*** 
 
 Riders Binding without Reference, 
 
 In the conduct of insurance business it often becomes necessary to 
 add a new term to a policy, or to modify or waive an existing term. 
 For this purpose insurers are accustomed to use little printed slips con- 
 taining the desired writing, which are attached to the policy with muci- 
 lage, and termed "riders." By reason of being annexed to the policy, 
 these riders are equally binding on the parties as if written on the 
 face of the policy, and hence require no reference to be made a part of 
 the contract.*** 
 
 188 New York Life Ins. Co. v. Babcock, 104 Ga. 67, 30 S. E. 273, 42 L. R. 
 A. 88, 69 Am. St. Rep. 134. 
 
 1*0 Southern Mut. Life Ins. Co. v. Montague, 84 Ky. 653, 2 S. W. 443, 4 
 Am. St. Rep. 218. 
 
 141 Wood V. Dwarris, 11 Bxch. (Hurl. & G.) 493; Collett v. Morrison, 9 
 Hare, 162; Salvin v. James, 6 East, 571. But see the later case of Wheelton 
 V. Hardisty, 8 El. & B. 285, 92 Eng. C. L. 231. 
 
 142 RUSE V. INSURANCE CO., 23 N. Y. 516, 24 N. Y. 653; Clemmitt v. In- 
 surance Co., 76 Va. 355; Fowler v. Insurance Co., 116 N. Y. 389, 22 N. E. 576, 
 5 L. R. A. 805; Mutual Ben. Life Ins. Co. v. Ruse, 8 Ga. 534; Maclntyre v. 
 Insurance Co., 82 Ga. 478, 9 S. E. 1124. 
 
 i*« Mascott V. Insurance Co., 68 Vt. 253, 35 Atl. 75; Haws v. Association, 
 U4 Pa. 431, 7 Atl. 159; Jackson v. Assurance Co., 106 Mich. 47, 63 N. W. 899, 
 30 L. R. A. 636, and note; Hardy v. Insurance Co., 166 Mass. 210, 44 N. E. 
 209. 33 L. R. A. 241, 55 Am. St. Rep. 395; Gunther v. Insurance Co. (C. C.) 
 VA Fed. 501; Phenix Ins. Co. v. Wilcox & Gibbs Guano Co., 65 Fed. 724, 13 
 C. C. A. 88, 25 U. S. App. 201; St. Paul Fire & Marine Ins. Co. v. Kidd, 55 
 Fed. 238, 5 C. C. A. 88, 14 U. S. App. 201; Mark v. Insurance Co. (D. C.) 
 
I 
 
 1 . 
 
 II 
 
 I 
 
 111 
 
 186 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 Charter Provisions. 
 
 All persons are charged with knowledge of public acts.*** There- 
 fore, when the insurer is a corporation created by public act, all par- 
 ties are conclusively presumed to contract with reference to the pro- 
 visions of its charter, which thereby become terms of any contract 
 made by it, and prevail over any other terms that may be repugnant.^*' 
 The by-laws of a corporation, however, are not presumed to be known 
 to the public, and do not form any part of the ordinary contract of in- 
 surance,^ *• except by proper reference. 
 
 Public Statutes as Parts of Contract, 
 
 The law with reference to which a policy is executed governs abso- 
 lutely the rights of the parties thereto. Neither can the parties by 
 their stipulations either change or subvert the purpose of the law.^*^ 
 Therefore it is properly said that the law writes into every contract 
 
 52 Fed. 170; Pool v. Insurance Co., 91 Wis. 530, 65 N. W. 54, 51 Am. St. Rep. 
 919. 
 
 An early Texas case (GODDARD v. INSURANCE CO., 67 Tex. 69, 1 S. W. 
 906, 60 Am. Rep. 1) merely said that the provisions in the rider were not war- 
 ranties. See Kelley-Goodfellow Shoe Co. v. Liberty Ins. Co., 8 Tex. Civ. 
 App. 227, 28 S. W. 1027; American Fire Ins. Co. v. First Nat Bank (Tex. 
 Civ. App.) 30 S. W. 3S4; Home Ins. Co. v. Cary, 10 Tex. Civ. App. 300, 31 
 S. W. 321; American Fire Ins. Co. v. Center (Tex. Civ. App.) 33 S. W. 551. 
 
 14* Clark, Corp. 174; McCormick v. Bank, 165 U. S. 550, 17 L. Ed. 433, 41 
 L. Ed. 821; De La Vergne Refrigerating Mach. Co. v. German Sav. Inst., 175 
 U. S. 59, 20 Sup. Ct. 20, 44 L. Ed. 62. 
 
 This rule does not apply to foreign corporations. The terms of their char- 
 ters do not bind insured unless brought to his notice. City Fire Ins. Co. v. 
 Carrugi, 41 Ga. 660. 
 
 The discussion of this question necessarily involves a consideration of the 
 difficult subject of ultra vires contracts of corporations. See Clark, Corp. 
 pp. 170-187. 
 
 148 But see Denver Fire Ins. Co. v. McClelland, 9 Cblo. 11, 9 Pac. 771, 59 
 Am. Rep. 134, holding that, the insured having performed his part of the 
 contract, the company was estopped to set up its want of power to issue 
 the policy. See. also, to same effect: Bloomington Mut. Ben, Ass'n v. Blue, 
 120 111. 121, 11 N. E. 331, 60 Am. Rep. 558. 
 
 i4« But members of a mutual company are bound by the by-laws of such 
 company. Infra, p. 191. 
 
 147 Pietri V. Seguenot, 96 Mo. App. 258, 69 S. W. 1055; Union Cent. Life 
 Ins. Co. V. Pollard, 94 Va. 146, 26 S. E. 421, 36 L. R. A. 271, 64 Am. St. Rep. 
 715; Hermany v. Association, 151 Pa. 17, 24 Atl. 1064; Queen Ins. Co. v. 
 Leslie, 47 Ohio St. 409, 24 N. B. 1072, 9 L. R. A. 45; White v. Society, 163 
 Mass. 108, 39 N. E. 771, 27 L. R. A. 398; Knights Templar & Masons' Life 
 Indemnity Co. v. Jarman, 187 U. S. 197, 23 Sup. Ct 108, 47 L. Ed. 139; Wall 
 V. Society (C. C.) 32 Fed. 273; Fletcher v. Insurance Co. (C. 0.) 13 Fed. 528: 
 (NEW YORK LIFE INS. CO. v. FLETCHER, 117 U. S. 519, 6 Sup. Ct. 837, 
 29 L. Ed. 934, on another point); Washington Cent Bank v. Hume, 128 U. S. 
 195, 9 Sup. Ct 41, 32 L. Ed. 370; Manhattan Life Ins. Co. v. Warwick, 20 
 Grat (Va.) 614, 3 Am. Rep. 218; Germania Ins. Co. v. Rudwig, 80 Ky. 223: 
 BRADY Y. INSURANCE CO., 11 Mich. 425 (ordinance of town council); 
 
 §QS) 
 
 WHAT PAPERS FORM THE WKITTEN CONTRACT. 
 
 187 
 
 all existing statutes that are applicable to the transaction, and they 
 become parts of the contract as completely as if the parties had copied 
 them in full on its face. And further, these terms render null and 
 void any other provisions agreed upon by the parties which may be 
 in conflict with these terms written by the hand of the law.^*« Thus, 
 in a striking case decided by the Virginia Court of Appeals,^*^ the 
 policy in suit made all the statements of the application warranties, 
 breach of which, whether material or immaterial, would avoid the poli- 
 cy. But the policy also provided that it should be construed as hav- 
 ing been made in the city of Cincinnati, Ohio. The law of Ohio there- 
 fore governed the contract, and among the Ohio statutes was an act 
 declaring that no misstatement in an application for insurance should 
 bar the right of the insured to recover on a policy issued upon such 
 application unless proved to be fraudulent or material. The court held 
 the Ohio statute a part of this Ohio contract, and the insurer therefore 
 liable despite the untruth of an immaterial statement in the applica- 
 tion, which under the terms of the policy would have avoided the con- 
 
 OSHKOSH GASLIGHT CO. v. GERMANIA FIRE INS. CO., 71 Wis. 454 37 
 N. W. 819, 5 Am. St. Rep. 233. 
 
 1*8 This raises the question as to wliat law governs the construction of the 
 contract. Any extended discussion of such question would be out of place 
 in an elementary work, but the following principles may be taken as estab 
 lished: 
 
 (1) In absence of express stipulation the law of the place where the con- 
 tract is consummated applies. The contract is usually completed by the 
 delivery of the policy. Daniels v. Insurance Co., 12 Cush. (Mass.) 416, 59 
 Am. Dec, 192; Manhattan Life Ins. Co. v. Warwick, 20 Grat (Va.) 614, 3 Am. 
 Rep. 318; Knights Templar & Masons' Life Indemnity Co. v. Berry, 50 Fed. 
 
 ^n^*r}^ ^' ^' ^' ^^^' ** ^' ^' ^^^' ^^^' Mutual Ben. Ufe Ins. Co. v.' Robison 
 (C. C.) 54 Fed. 580; Heebuer v. Insurance Co., 10 Gray (Mass.) 131, 69 Am. 
 Dec. 308; King Brick Mfg. Co. v. Phoenix Ins. Co., 164 Mass. 291. 41 N. E. 
 2/7; Seamans v. Knapp-Stout & Co. Company, 89 Wis. 171, 61 N. W. 757, 27 
 L R. A. 362, 46 Am. St. Rep. 825; Marden v. Insurance Co., 85 Iowa, 584, 
 52 N. W. 509, 39 Am. St. Rep. 316; note to McGarry v. Nicklin, 55 Am. St 
 Rep. 40, pp. 51-53; Mutual Life Ins. Co. v* Cohen, 179 U. S. 262. 21 Sup. Ct. 
 106, 45 L. Ed, 181. 
 
 (2) But, where there Is no principle of public policy involved, the parties 
 nmy make an agreement that their contract shall be construed by the laws 
 of another jurisdiction. Union Ont. Life Ins. Co. v. Pollard, 94 Va 140 26 
 S. E. 421, 36 L. R. A. 271, 64 Am. St. Rep. 715; Washington Cent. Bank v 
 Hume, 128 U. S. 195, 9 Sup. Ct. 41, 32 L. Ed. 370; PENNSYLVANIA MUT 
 LIFE INS. CO. V. MECHANICS' SAV. BANK & TRUST CO.. 72 Fed 413* 
 19 C. C. A. 286, 37 U. S. App. 692. 38 L. R. A. 33. 
 
 (3) Where a principle of public policy has been declared by statute, the 
 law of the forum will prevail over conflicting provisions in the policy Pietri 
 y. Seguenot, 96 Mo. App. 258, 69 S. W. 1055; Cravens v. Insurance Co US 
 Mo. 583, 50 S. W. 519, 53 L. R. A. 305, 71 Am. St. Rep. 628. 
 
 i*» Union Cent. Life Ins. Co. v. Pollard, 94 Va. 146, 26 S. E. 421 36 L R 
 -A.. 271, 64 Am. St Rep. 715. 
 
188 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 } 
 
 tract."" So in Hartford Fire Ins. Co. v. Bourbon County Court,"^ 
 very recently decided in Kentucky, it was held that, under a statute 
 fixing the liability of the insurer, in case of total loss, at the estimated 
 value of the property insured as written in the policy, the insurers 
 were liable for $50,000, the entire sum written in policies upon a court 
 house that had been totally destroyed by fire, notwithstanding stipu- 
 lations in the policies that the insurers should be liable only for the 
 actual cash value of the property at the time of loss, which the insurers 
 offered to prove was only some $34,000. 
 
 A three-fourths value clause in a policy is inoperative when opposed 
 by a statute making the insurer liable for the full amount of the insur- 
 ance; ^"^^ and, where a statute requires notice before forfeiture of in- 
 surance for nonpayment of premiums, an agreement in the policy that 
 it shall be forfeited without notice upon failure to pay any premium 
 is of no effect.^'*' Nor is an express waiver of the benefit of the stat- 
 ute binding, since a public interest is involved. *•* 
 
 The same principle makes all marine policies subject not only to the 
 
 180 For a somewhat similar case, see Nielsen v. Society, 139 Oal. 332, 73 
 Pac. 168, 96 Am. St. Rep. 146, in wliich a policy delivered in California was 
 held subject to a statute of New York, in which state the insuring corpora- 
 tion had its domicile. 
 
 i»i 72 S. W. 739. 
 
 i»2 Germania Ins. CJo. v. Ashby, 112 Ky. 303, 65 S. W. 611, 23 Ky. Law 
 Rep. 1564; Home Fire Ins. Co. v. Bean, 42 Neb. 537, 60 N. W. 907, 47 Am. St. 
 Rep. 711; Hickerson v. Insurance Co., 96 Tenn. 193, 33 S. W. 1041, 32 L. R. 
 A. 172; Queen Ins. Co. v. Leslie, 47 Ohio St 409, 24 N. E. 1072, 9 L. R. A. 
 45; Reilly v. Insurance Co., 43 Wis. 449, 28 Am. Rep. 552. 
 
 158 Warner v. Association, 100 Mich. 157, 58 N. W. 667; Wall ▼. Society 
 (C. C.) 32 Fed. 273; Griffith v. Insurance Co., 101 Cal. 627, 36 Pac. 113, 40 
 Am. St Rep. 96; Equitable Life Assur. Soc. v. Nixon, 81 Fed. 796, 26 C. a 
 A. 620; Same v. Trimble, 83 Fed. 85, 27 C. C. A. 404. In CaflPery v. Insur- 
 ance Co. (C. C.) 27 Fed. 25, it was held that an act of the Legislature pro- 
 viding that upon the payment of the first premium the policy should remair 
 in force for a certain time for the full amount thereof, "anything in the pol 
 icy to the contrary notwithstanding," might be waived by the express agree- 
 ment of the parties for the substitution of a nonforfeitable policy of a dif- 
 ferent character. 
 
 154 "The statute in question is regarded as Indicative of the legislative 
 will that, as a matter of public policy, life insurance companies should be 
 deprived of the power to declare policies forfeited for nonpayment of pre- 
 miums, except in the prescribed mode, and that, being deprived of the power 
 so to do, a waiver on the part of the insured cannot be construed to confer 
 such power in the face of the law which has taken it away.'* Per Searles, 
 C, in Griffith v. Insurance Co., 101 Cal. 627, 36 Pac. 113, 40 Am. St Rep. 96. 
 
 As to the right of the insured to waive a statute intended for his sole benefit, 
 the authorities are by no means harmonious. It would seem that the in- 
 sured should be allowed to waive the provisions of a statute, where such 
 waiver is not prohibited, and there is no principle of public policy or morals 
 concerned. 
 
 The provisions of an act against avoidance of the policy on account of iii- 
 
 §68) 
 
 WHAy PAPERS FORM THE WRITTEN CONTRACT. 
 
 189 
 
 public acts of the sovereignty under which they are written, but also 
 to all treaty regulations to which that sovereignty is a party. As said 
 by Lord Stowell :^^^ "Every treaty is part of the private law of each 
 of the countries which are parties to it, and is as binding on the sub- 
 jects of each as any part of their own municipal laws." Consequently, 
 any term in a marine policy contrary to a provision of any such treaty 
 is necessarily void.^**® 
 
 Common-Law Rule^. 
 
 The rules of the common law, when fixed by proper authority, are 
 not less to be read into a contract of insurance than are the provisions 
 of statutes, though such rules, perhaps, are more apt to yield to the 
 expressed contrary intention of the parties, and, in the nature of things, 
 are somewhat less certain in their application. Thus the policy of the 
 law will not allow a recovery that otherwise might be had under the 
 terms of a contract of insurance, when the insured intentionally burns 
 the property insured, ^*^^ or, according to some authorities, when the 
 insured takes his own life,^*^® or commits a crime that is the occasion 
 of his coming to an unexpected death by the hand of the law,***» or 
 when the beneficiary feloniously causes the death of the insured.^'*^ 
 
 correct statements in application, unless fraudulently made or material to 
 the risk, cannot be waived. Hermany v. Association, 151 Pa. 17, 24 Atl. 1064. 
 158 The Eenrom, 2 C. Rob. 1, 6. 
 
 156 Bird V. Appleton, 8 T. R. 562, 2 Am. Ins. (Ed. 1901) { 746; Hughes, 
 Admiralty, 63. 
 
 157 Citizens' Ins. Co. v. Marsh, 41 Pa. 386. 
 
 Where the property is burned by the agent of the insured, the company 
 will not be released from liability, unless it is shown that the insured was 
 particeps criminis. Henderson v. Insurance Co., 10 Rob. (La.) 164, 43 Am. 
 Dec. 176; Feibelman v. Assurance Co., 108 Ala. 180, 19 South. 540; Perry v. 
 Insurance Co. (C. C.) 11 Fed. 485; Plinksky v. Insurance Co. (C. C.) 32 Fed. 
 47. See, also, Hartford Fire Ins. CJo. v. WilUams, 63 Fed. 925, 11 C. C. A. 
 503, 27 U. S. App. 493. 
 
 Burning by assured while insane will not relieve company from liability. 
 Karow v. Insurance Co., 57 Wis. 56, 15 N. W. 27, 46 Am. Rep. 17. 
 
 In an action on a policy of insurance on a mare, where it appeared that 
 plaintifC beat her violently with an iron rod, and that she died from the 
 effects of such beating, it was held he could not recover. Western Horse & 
 Cattle Ins. Co. v. O'Neill, 21 Neb. 548, 32 N. W. 581. 
 
 158RITTER V. INSURANCE CO., 169 U. S. 139, 18 Sup. Ct. 300, 42 L. 
 ^id. 693. But there Is a conflict of authority on this point, for which see 
 infra, p. 516. 
 
 169 Burt V. Insurance Co., 187 U. S. 362, 23 Sup. Ct 139, 47 L. Ed. 216; 
 AMICABLE SOC. v. BOLLAND, 4 Bligh (N. S.) 194, 2 Bigelow, Ins. Cas. 240. 
 
 160 New York Mut Life Ins. Co. v. Armstrong, 117 U. S. 591, 6 Sup. Ct. 
 877, 29 L. Ed. 997; Schmidt v. Association, 112 Iowa, 41, 83 N. W. 800, 51 L. 
 R. A. 141, 84 Ahl St Rep. 323. For a full discussion of these questions, see 
 post, chapter 14^ 
 
190 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 §6y) 
 
 MUTUAL BENEFIT INSURANCE. 
 
 191 
 
 iif 
 
 I 
 
 ^Ji 
 
 Usage as Part of the Contract, 
 
 It is sometimes said by the authorities that a well-established usai^e 
 may become a part of a contract of insurance.^*^ However true this 
 may be of parol contracts, it can be true only in a limited sense of writ- 
 ten policies. A formal written contract merges all previous parol agree- 
 ments or understandings of any kind whatsoever, and there is no rea- 
 son whatever for allowing the terms of a written contract to be altered 
 or enlarged by parol proof of a usage.''^ It is therefore well settled 
 that a usage cannot be proved that is in contravention of any term in a 
 policy, or that adds to it any term.^«« Thus, a custom among insurers 
 to give notice of the maturity of premiums cannot give to the insured 
 any right to such notice not conferred by the policy.^" But a usage 
 may always be shown in order to make clear the intention of the par- 
 ties, and the sense in which ambiguous terms have been used.^'* 
 
 SAME— MUTUAIi BENEFIT INSURANCE. 
 
 69. The constituent elements of the contract made by a member of 
 a mntnal benefit society are: 
 
 (a) The charter and constitution, or articles of association, in ac- 
 
 cordance xrith which the society has its being. 
 
 (b) The certificate of membership, so far as consistent with the 
 
 charter and constitution, and the application if expressly so 
 made* 
 
 (c) The by-laws of the society, provided they have been properly 
 
 adopted and do not conflict with the terms of the certificate. 
 
 161 Connelly r. Association, 58 Conn. 552, 20 Atl. 671, 9 L. R. A. 428, 18 
 Am. St. Rep. 296. 
 
 i«2 Harris v. Carson, 7 Leigh (Va.) 632, 30 Am. Dec. 510. 
 
 i«8 Richardson v. Insurance Co. (Ky.) 18 S. W. 165; Grace v. Insurance 
 Co., 109 U. S. 283, 3 Sup. Gt. 207, 27 L. Ed. 932; Hearne v. Insurance Co., 20 
 Wall. (U. S.) 488, 22 L. Ed. 395; Ripley v. Insurance Co., 30 N. Y. 136, 86 
 Am. Dec. 362. 
 
 i«4 Thompson v. Insurance Co., 104 U. S. 252, 26 L. Ed. 765. 
 
 A mere usage of the company to accept past due premiums is not binding 
 on the company. Easley v. Insurance Co., 91 Va. 161, 21 S. B. 235. 
 
 But a usage may be shown to prove a subsequent parol modification of the 
 terms of the policy, and, In view of the tendency of the courts to construe 
 a contract so as to avoid forfeitures, it seems but very little evidence is 
 needed. See Sweetser v. Association, 117 Ind. 97, 17 N. E. 722; MAYER v. 
 INSURANCE CO., 38 Iowa, 304, 18 Am. Rep. 34. See, also. Union Cent. Life 
 Ins. Co. V. Pottker, 33 Ohio St. 459, 31 Am. Rep. 555; Meyer v. Insurance 
 Co., 73 N. Y. 516, 29 Am. Rep. 200; Hartford Ufe & Annuity Ins. Co. v. Un- 
 sell, 144 U. S. 439, 12 Sup. Ct. 671, 36 L. Ed. 496; New York Life Ins. Co. v. 
 Eggleston, 96 U. S. 572, 24 L. Bd. 841. 
 
 i«6Renner v. Bank, 9 Wheat. (U. S.) 581, 6 L. Ed. 166; Allegre v. Insur- 
 ance Co., 6 Har. & J. (Md.) 408, 14 Am. Dec. 289; Whitmarsh v. Insurance 
 Co., 16 Gray (Mass.) 359, 77 Am. Dec. 414; Mooney v. Insurance Co., 138 
 
 In General. 
 
 While the contracts made by benevolent and fraternal organizations 
 with their members, so far as they grant indemnity for loss by reason 
 of death, sickness, or other misfortune, are clearly contracts of insur- 
 ance, yet in their form and effect they differ largely from the contracts 
 of regular old-line insurers. Organized for the purpose of relieving 
 distress among its members, the benefit society owes a duty to each 
 member, the measure of which is ordinarily to be found primarily in 
 its constitution or articles of association. The provisions of the con- 
 stitution, or the articles of association, must be consistent with the 
 law of the land, and also with the law of the society's being— its char- 
 ter.^«« These may be said to be a part of the constitution in the same 
 sense in which the act of incorporation and public statutes are said 
 to be a part of the policy issued by regular insurance corporations. 
 Nothing further is required in order to complete a contract between 
 the society and its members upon the basis of its constitution than the 
 mere admission to membership. ^«^ But in the administration of the 
 affairs of such societies, many of which are large and extend ovei 
 wide areas, it is found necessary for the governing body to adopt, 
 from time to time, rules of administration, called "by-laws." Since 
 these by-laws are adopted by the agents of the members of the society, 
 they are binding upon all such members unless they are contrary to 
 its constitution or are unreasonable. Accordingly, in such cases the 
 contract of the member with his society is to be found in the properly 
 adopted by-laws, and in the society's charter and constitution.^ «» 
 Many of these organizations conduct their business on this plan, no 
 personal or individual contract being executed. 
 
 The Certificate as a Contract. 
 
 With the higher organization of these societies, however, as well as 
 for convenience in the conduct of business, it was found advantageous 
 to issue to members certificates of membership. These certificates, 
 tirst intended, doubtless, to be used as vouchers, soon began to be used 
 
 Mass. 375, 52 Am. Rep. 277; Fabbrl v. Insurance Co., 55 N. Y. 129. But see 
 Orient Mut. Ins. Co. v. Wright 1 Wall. (U. S.) 456, 17 L. Ed. 505. 
 
 i«e Railway Passenger & Freight Conductors' Mut. Aid & Ben. Ass'n v. 
 Robinson, 147 111. 138, 35 N. E. 168; Metropolitan Safety Fund Ace. Ass'n v. 
 Windover, 137 111. 417, 27 N. E. 538; Supreme Lodge K. P. v. La Malta, 95 
 Tenn. 157, 31 S. W. 493, 30 L. R. A. 838; Rosenberger v. Insurance Co., 87 
 Pa. 207; Golden Rule v. People, 118 111. 492, 9 N. E. 342; Chicago Mut. Life 
 Indemnity Ass'n v. Hunt, 127 111. 257, 20 N. E. 55, 2 L. R. A. 549. 
 
 167 Bishop V. Grand Lodge, 112 N. Y. 627, 20 N. E. 562. 
 
 The society may require initiation to make the membership complete. 
 Matkin v. Supreme Lodge, 82 Tex. 301, 18 S. W. 306, 27 Am. St. Rep. 886. 
 
 i«8 Dolan V. Court of Good Samaritan, 128 Mass. 437; Baldwin v. Fra- 
 ternity, 47 N. J. Law. Ill; Nibl. Ben. Soc. & Ace. Ins. § 136, Bac. Ben. Soc. 
 § 161. 
 
192 
 
 THE MAKING OF THE CONTRACT. 
 
 (Ch.5 
 
 §69) 
 
 MUTUAL BENEFIT INSURANCE. 
 
 193 
 
 il 
 
 as vehicles of contract, showing the particular benefits which the hold- 
 ers were entitled to receive at the hands of the society. Manifestly, 
 such certificates are very different instruments from insurance poli- 
 cies. They are but imperfect expressions of the contract, which is to 
 be found in its complete form only by reading the certificate in con- 
 nection with the charter, constitution, and by-laws of the society.^** 
 So these certificates are not ordinarily assignable,^ ^° nor can a benefi- 
 ciary take any vested right in them.^^* The terms of benefit certificates, 
 however, are binding on the society in so far as they are authorized. 
 Necessarily any agreement in the certificate inconsistent with the char- 
 ter or constitution is absolutely void.^'* 
 
 Conflict between Certificate and By-Law, 
 
 The law applicable when a certificate is issued containing terms in- 
 consistent with the by-laws is well stated by Marshall, J., in McCoy v. 
 Northwestern Mut. Relief Ass'n : *" "While the decisions are not 
 numerous on this subject, there is no substantial conflict, and we un- 
 derstand the general principle to be firmly established that though, 
 
 i«» Hellenberg v. I. O. B. B., 94 N. Y. 580; Supreme Commandery Knights 
 of Golden Rule v. Ainsworth, 71 Ala. 436, 46 Aul Rep. 332; Masonic Mut 
 Ben. Soc. v. Burkhart, 110 Ind. 192, 10 N. E. 79, 11 N. E. 449; American 
 Legion v. Smith, 45 N. J. Bq. 466, 17 Atl. 770; Railway Passenger & Freight 
 Conductors' Mut. Aid & Ben. Ass'n v. Robinson, 147 111. 138, 35 N. E. 168; 
 Holland v. Taylor, 111 Ind. 121, 12 N. E. 116; Gray v. Supreme Lodge, 118 
 Ind. 293, 20 N. E. 833; Sabin v. National Union, 90 Mich. 177, 51 N. W. 202; 
 Laker v. Fraternal Union, 95 Mo. App. 353, 75 S. W. 705. 
 
 170 Briggs V. Earl. 139 Mass. 473, 1 N. E. 847; Basye v. Adams, 81 Ky. 368. 
 
 But where the charter provided for its organization for the benefit of wid- 
 ows, etc., or legatees of deceased members, it was held that, as a creditor 
 was capable of becoming a beneficiary as legatee, an assignment of the cer- 
 tificate by the member in his lifetime to the creditor, as security for the debt, 
 was but an irregularity in the mode of designation, which could not be ques- 
 tioned by the widow, the society having recognized it as valid. Martin v. 
 Stubbings, 126 111. 387, 18 N. E. 657, 9 Am. St Rep. 620. 
 
 171 "Most of the decisions seem to concur in holding that in case of mutual 
 benefit societies the beneficiary named in the certificate of membership ac- 
 (luires no vested right to the benefit to accrue upon the death of the member 
 until the death occurs." Martin v. Stubbings, 126 111. 387, 18 N. B. 657, 9 Am. 
 St. Rep. 020. See Nibl. Ben. Soc. & Ace. Ins. § 201 et seq. And see post, 
 j). 400, chapter 11. 
 
 A certificate in a fraternal beneficiary society is a mere expectancy and 
 the beneficiary has no vested right therein. Fisher v. Donovan, 57 Neb. 361, 
 77 N. W. 778, 44 L. R. A. 383; Schmidt v. Association, 112 Iowa, 41, 83 N. 
 W. 800, 51 L. R. A. 141, 84 Am. St. Rep. 323, and note, page 331. Holland 
 V. Taylor, 111 Ind. 125, 12 N. E. 116. But see, contra, Pittinger v. Pittinger, 
 28 Colo. 308, 64 Pac. 195, 89 Am. St Rep. 193. 
 
 172 Golden Rule v. People, 118 111, 492, 9 N. E. 342; Bockhold T. Society, 
 129 111. 440, 21 N. E. 794, 2 L. R. A. 420. 
 
 i7» 92 Wis. 577, 66 N. W. 697, 47 L. R. A. 681. 
 
 generally speaking, a member of a mutual benefit association or in- 
 surance company is bound to take notice of its by-laws, even if not re- 
 cited or referred to in the certificate of membership or poHcy, yet, 
 when such certificate or policy and the by-laws conflict, so long as the 
 contract as written is within the power of the association under *its 
 charter or articles of organization, it will prevail over the by-laws, and 
 by it the rights and liabilities of the parties must be determined." ^^* 
 
 Indeed, in the light of recent decisions this statement of the law 
 can be still further extended. If the parties so desire, they may agree 
 that the by-laws shall be no part of their contract, confining it to the 
 certificate and the application."*^ The same result may be accom- 
 plished by the failure to attach a copy of the by-laws to the certificate 
 when required by statute.^^* 
 
 By-Laws Subsequently Adopted or Changed. 
 
 Incident to the right to make by-laws for the conduct of its business 
 is the right to change or repeal those by-laws and to adopt others."^ 
 Such amendments and changes will, in general, be binding upon all 
 members of the association, provided they are reasonable, if made after 
 notice to all members."^ This is especially true if the society's consti- 
 tution or by-laws existing at the time of the member's admission pro- 
 vided a method of amendment which had been followed; ^^* or if, as 
 is usually the case, the member had agreed to be bound by all existing 
 by-laws and those thereafter to be adopted. But, even when the mem- 
 ber has so bound himself, the presumption is strong that new by-laws 
 are intended to be only prospective, and only a clearly manifested in- 
 tent will extend them to previously issued certificates.*®* 
 
 174 See, to the same eflfect, Laker v. Fraternal Union, 95 Mo. App. 353, 75 
 S. W. 705; Davidson v. Society, 39 Minn. 303, 39 N. W. 803, 1 L. R. A. 482; 
 Failey v. Fee, 83 Md. 83, 34 Atl. 839, 32 L. R. A. 311, 55 Am. St. Rep. 326; 
 Morrison v. Insurance Co., 59 Wis. 162, 18 N. W. 13; Nibl. Ben. Soc. & Ace. 
 Ins. § 147. 
 
 17 5 Purdy v. Association, 101 Mo. App. 91, 74 S. W. 486. 
 
 176 Mooney v. Grand Lodge (Ky.) 72 S. W. 288. But see, contra, Dickinson 
 V. A. O. U. W., 159 Pa. 258, 28 Atl. 293; Lithgaw v. Supreme Tent 165 Pa 
 292, 30 Atl. 830. 
 
 177 Supreme Lodge K. P. v. Knight, 117 Ind. 489, 20 N. B. 479, 3 L. R. A. 
 409; Nibl. Ben. Soc. & Ace. Ins. § 28; Bac. Ben. Soc. § 91a. 
 
 178 Nibl. Ben. Soc & Ace. Ins. § 24; Supreme Lodge K. P. v. Knight, 117 
 Ind. 489, 20 N. E. 479, 3 L. B. A. 409. 
 
 i7» Metropolitan Safety Fund Ace. Ass'n v. Windover, 137 111. 417 27 N 
 B. 538; Bac. Ben. Soc. § 185. 
 
 180 Benton v. Brotherhood, 146 111. 570, 34 N. E. 939; Strauss v. Association 
 126 N. C. 971, 36 S. B. 352, 128 N. C. 465, 39 S. B. 55, 54 L. R. A. 605, 83 Am. 
 St. Rep. 699. Appended to this case (83 Am. St Rep., at page 706), is an ex- 
 tensive note on "The eflfect of changes of by-lawa of beneficial associatioa* 
 as against pre-existing members." 
 
 Vancs Ins. — 13 
 
jl 
 
 194 
 
 THE MAKING OP THE CONTRACT. 
 
 (Ch.5 
 
 m 
 
 Moreover, such changes or new by-laws must be reasonable; and 
 they will be held unreasonable if they take away a property right,^" 
 or if, without knowledge or consent of the member, the right of notice 
 before forfeiture for nonpayment of assessments was taken away,* 
 or if the member is deprived of the right to engage in certain occu- 
 pations not prohibited at the time of his admission."* By-laws 
 that are reasonable as to members admitted after their adoption may 
 be held unreasonable as to those whose rights as members have become 
 fixed under prior regulations.*®* 
 
 181 Weber v. Supreme Tent, 1T2 N. Y. 490, 65 N. B. 258, 92 Am. St Rep. 
 753; Wist V. Grand Lodge, 22 Or. 271, 29 Pac. 610, 29 Am. St. Rep. 603. 
 
 Even when the insured has expressly agreed to be governed by all the by- 
 laws of the society then existing or thereafter to be adopted, a subsequently 
 adopted by-law reducing the amount to be paid to the insured is unreasonable 
 as to him, and void. Russ v. Sup. Ck)uncil, 110 La. 588, 34 South. 697 ; New- 
 hall V. Supreme Council, 181 Mass. Ill, 63 N. E. 1; Knights Templar & 
 Masons* Life Indemnity Co. v. Jarman. 104 Fed. 638, 44 0. C. A. 93. See, 
 also. Miller v. Tuttle (Kan.) 73 Pac. 88. ^ „„^ ^^ t « * loe 
 
 182 Thibert v. Supreme Lodge, 78 Minn. 448, 81 N. W. 220, 47 L. R. A. 136, 
 
 iss^Tebo V. Supreme Council, 89 Minn. 3, 93 N. W. 513; Hobbs v. Associa- 
 tion 82 Iowa, 107, 47 N. W. 983, 11 L. R. A. 299, 31 Am. St. Rep. 466. 
 
 184 «it is possible that, as an original by-law, a provision of this charac- 
 ter would be held reasonable and operative on the ground that, if persons 
 chose to become members of an association with such drastic rules, theirs 
 was the right to do so." Thibert v. Supreme Lodge, 78 Minn. 448, 81 N. W. 
 220, 47 L. R. A. 136, 79 Am. St. Rep. 412. 
 
 58 70-71) THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. 195 
 
 CHAPTER VI. 
 
 THE CONSIDBRATION— PREMIUMS AND ASSESSMENTS, 
 
 70-71. In General— The Nature of the Obligation. 
 
 72-73. When the Premium is a Debt 
 
 74^75. Payment of Premiums. 
 
 .76. Consequences of Nonpayment of Premiums, 
 
 77. Forfeiture. 
 
 78. Excuses for Nonpayment. 
 79-80. Notice of Premiums Due. 
 
 81. Paid-up Policies and Extended Insurance. 
 
 82. Effect of Nonpayment of Premium Notes. 
 
 83-84. Dues and Assessments in Mutual Benefit SodetleOi 
 
 85-86. When Premiums may be Recovered. 
 
 IN GENERAL— THE NATURE OF THE OBLIGATION. 
 
 70. The consideration for the insurer's promise to indenudfy is the 
 
 insured's payn&ent of a premium, or his promise to pay a pre- 
 mium or assessment. The insurer's liability attaches only 
 when the insured has paid, or is liable to pay, a premium or 
 assessnient. 
 
 71. IN LIFE INSURANCE there is usually no liability assumed by the 
 
 insured for the payment of premiums subsequent to the first. 
 The contract ordinarily provides that nonpayment of premiums 
 • shall be a condition that will tenninate or diminish the liabil- 
 
 ity of the insurer. Unless otherwise agreed, ho^rever, assess- 
 ments properly levied are legally enforceable obligatioiui upon 
 the insured. 
 
 No authority need be cited for the proposition that the insurance 
 contract requires the support of a valuable consideration. The con- 
 tract cannot stand unless each party has given value or become liable 
 to the other. The value given by the insured is usually in the form 
 of the payment of a stun of money, called a "premium," * when the 
 
 1 The premium rate must be fixed expressly or by implication in order that 
 the contract shair be valid (Western Assur. Go. v. McAlpin, 23 Ind. App. 
 220, 55 N. B. 119, 77 Am. St Rep. 423); and this rate should be set forth in 
 the policy. In many states statutes have been enacted prohibiting discrim- 
 ination in rates charged to **insurants" of the same class, negroes being es- 
 pecially mentioned in some states as persons not to be discriminated against. 
 See How. Ann. St Mich. Supp. 1883-90, p. 3420, § 4244. 
 
 To prevent discriminations in rates it is frequently provided that no re- 
 bates upon premiums shall be given, and some of the statutes make it a 
 misdemeanor tn an insurance agent to give such rebates. See, for examples, 
 1 Mills' Ann. St Colo. 1891, p. 1341, § 2232; Laws Md. 1890, p. 275, c. 254. 
 
 Such statutes are constitutional, and do not improperly restrict the right 
 
 1^1 
 
 It '< 
 
I 
 
 
 M 
 
 I 
 
 [ 
 
 196 THE CONSIDERATION— PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 consideration is executed ; and the liability assumed is to pay a post- 
 poned premium, or an assessment, when the consideration is executory. 
 
 In insurance policies it is usually stated that the insurance is made 
 "in consideration of the representations made in the application tor 
 this poUcy," and of certain sums paid and payable as premiums. 1 his 
 does not mean, however, that the statements in the application are 
 any part of the consideration in the technical sense, such as requires to 
 be pleaded in an action on the policy.^ ^ 
 
 In the discussion of the nature of the contract in a previous chapter, 
 it was explained that in theory all payments of premiums and assess- 
 ments were but contributions from all members of the insuring organi- 
 zation to make good the losses of individual members, and that the 
 chief distinction between "premiums" and "assessments lay in the 
 fact that the former were levied and paid to meet anticipated osses, 
 while the latter were collected in order to make good actual losses. 
 Out of this distinction grow important differences as to the liabihty 
 of the insured, especially in life insurance, which must now be exam- 
 ined. 
 
 Liability for Life Insurance Premiums. 
 
 The life insurance contract does not become binding upon the in- 
 surer until the insured has either paid or promised to pay the first pre- 
 mium.* But when the contract has thus gone into effect, some pecul- 
 iarities about it become noticeable, and these have given nse to some 
 difference of opinion as to its nature. In so far as it is executory, the 
 ordinary life policy is purely unilateral. The insured is not positively 
 bound to do anything whatsoever ; he nowhere promises to pay *iy 
 premium that may fall due; * he merely agrees that, if he fails to pay, 
 his rights under the policy shall be forfeited or otherwise affected. 
 Even though the policy may state that the premium is payable annual- 
 ly no promise to pay will be implied, such an implication being incon- 
 sistent with the penaUzing spirit of the whole contract But what 
 
 of contracting freely or prevent competition. Equitable Life ^s^^- Soc. v. 
 Sr^y.) 67 S. W. 389; Ck)m. v. Equitable Life Assur. Soc, 100 Ky. 341, 
 
 ^. P^N?k MUT. LIFE INS. CO. v. RADDIN, 120 U. S. 183. 7 Sup. Ct 
 'jfto ^0 L. E3d 644. Woodruff, Ins. Cas. 92. 
 
 "^ Helman^: L^^nce Co., 17 Minn. 153 (Gill27) 10 Am. Rep. 154; Wai 
 ner v. Insurance Co., 153 Mass. 335, 26 N. E. 877. 11 L. R. A. 598. Bradley 
 V. Insurance Co., 32 Md. 108, 3 Am. Rep. 121. 
 
 /oLwln V. insurance Co.. 73 N. Y. 480; Worthington v. Insurance Co., 
 41 Conn. 372, 19 Am. Rep. 495. 510. 
 
 .In Goodwin v. Insurance Co.. 73 N. Y. 480. an unpaid Premium upon a 
 Dolicy of life insurance was held not to be an "indebtedness," withm the 
 meaning of the statute of Massachusetts, providing for the continuance and 
 validity of such a policy for a limited period after failure to pay the pre- 
 mium, and for ascertaining the period in each case. Therefore the unpaid pre- 
 
 70-71) IN GENERAL — THE NATURE OF THE OBLIGATION. 197 
 
 is the promise made by the insurer? Is it a contract of insurance for 
 one year, coupled with an agreement to renew from year to year upon 
 the payment of the stipulated premium as a condition precedent? Or 
 is it a single contract for insurance during the lifetime of the insured, 
 subject, however, to defeasance by nonpayment of any premium, when 
 due, as a condition subsequent? The former view, upheld by a few 
 courts,® is thus clearly stated by Carpenter, J., in Worthington v. Char- 
 ter Oak Life Ins. Co. : ^ "A contract of life insurance is a peculiar 
 contract. It has no parallel, and few analogies, in all the business 
 transactions of life. An ordinary life policy, like the one in suit, re- 
 quiring the payment of annual premiums, consists of two parts, and 
 is divisible. The applicant, upon the payment of the first premium, 
 effects an insurance upon his life for one year, and purchases a right 
 to continue that insurance from year to year, during life, at the same 
 rate. Whether he will continue it or not is optional with him. The 
 premium for the first year pays for the risk during that year, and for 
 the right to subsequent insurance. The rate of insurance for a single 
 year is less than the annual premiums on a life policy. The difference, 
 continued, as it is supposed it will be, from year to year through life, 
 may be regarded as the consideration for the right to continue the in- 
 surance.'' The other view, which is supported by the clear weight of 
 authority,® and seemingly by clear reason, may be best presented in 
 the words of Mr. Justice Bradley, in New York Life Ins. Co. v. Stat- 
 ham : ® "We agree with the court below that the contract is not an 
 assurance for a single year, with a privilege of renewal from year to 
 year by paying the annual premium, but that it is an entire contract 
 of assurance for life, subject to discontinuance and forfeiture for non- 
 pa}Tnent of any of the stipulated premiums. Such is the form of the 
 contract, and such is its character. It has been contended that the 
 payment of each premium is the consideration for insurance during 
 
 mium could not be deducted from the net value of the policy, in determining the 
 amount of pr'^mium for temporary insurance. In this case the court said: 
 "According to the terms of the policy, there is no promise to pay, and it 
 rests with the insured to say how long he will continue it. He can stop it at 
 the end of the year, and determine when the policy shall cease. When he 
 refuses to pay, the policy lapses, and the insured has no further claim, ex- 
 cept what is conferred by the nonforfeiture clause." 
 
 •Worthington v. Insurance Co., 41 Conn. 372, 19 Am. Rep. 495; Dillard 
 v. Insurance Co., 44 Ga. 119, 9 Am. Rep. 167; Want v. Blunt, 12 East, 183. 
 
 T 41 Conn. 372, 379, 19 Am. Rep. 495-497. 
 
 • NEW YORK LIFE INS. CO. v. STATHAM, 93 U. S. 24, 23 L. Ed. 789; 
 KLEIN V. INSURANCE CO., 104 U. S. 90, 26 L. Ed. 663; People v. Insurance 
 Co., 78 N. Y. 114, 34 Am. Rep. 528, holding an insolvent company liable in 
 damages to holders of current policies; Abell v. Insurance Co., 18 W. Va 
 400, at page 426; Mutual Benefit Life Ins. Co. v. Robertson, 59 111. 123, 14 
 Am. Rep. 8; Pritchard v. Society, 3 C. B. (N. S.) 622. 
 
 • NEW YORK LIFE INS. CO. v. STATHAM, 93 U. S. 24. 80, 23 L. Ed. 789. 
 
 fi 
 
 *7: 
 
I 
 
 ■ I ■■ 
 
 
 198 THE CONSIDERATION — ^PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 the next following year, as in fire policies. But the position is unten- 
 able. It often happens that the assured pays the entire premium in 
 advance, or in five, ten, or twenty, annual installments. Such install- 
 ments are clearly not intended as the consideration for the respective 
 years in which they are paid, for, after they are all paid, the policy 
 stands good for the balance of the life insured, without any further 
 payment. Each installment is, in fact, part consideration of the entire 
 insurance for life. It is the same thing where the annual premiums 
 are spread over the whole life. The value of assurance for one year 
 of a man's life when he is young, strong, and healthy is manifestly not 
 the same when he is old and decrepit. There is no proper relation be- 
 tween the annual premium and the risk of assurance for the year in 
 which it is paid. This idea of assurance from year to year is the sug- 
 gestion of ingenious counsel. The annual premiums are an annuity, 
 the present value of which is calculated to correspond with the present 
 value of the amount assured, a reasonable percentage being added to 
 the premiums to cover expenses and contingencies. The whole pre- 
 miums are balanced against the whole insurance." 
 
 It may be further said in elaboration of what is intimated by the 
 words of Mr. Justice Bradley, just quoted, that the theory of the Con- 
 necticut case wholly ignores the fact that the ordinary life insurance 
 contract possesses certain investment features, which render it radical- 
 ly different from the fire policy, which is a contract of pure insurance 
 from year to year. 
 
 Liability for Assessments, 
 
 But the member of the mutual assessment organization makes a very 
 different contract. The consideration for the organization's promise 
 to indemnify the member is the member's promise to pay all assess- 
 ments that are legally made during the term of his membership, and the 
 fact that his contract provides for a forfeiture of all his rights as a 
 member of the society as a penalty for failure to pay any assessment 
 does not prevent the member from being liable for the amount of such 
 assessment in an action maintained by the society.*** The payment of 
 the assessment may be enforced even though the defendant's certificate 
 is already forfeited and the society is insolvent** Of course, it is com- 
 
 10 Ellerbe v. Bamey, 119 Mo. 632, 25 S. W. 384, 23 L. R. A. 435; New Era 
 Ute Ass'n V. Rossiter, 132 Pa. 314, 19 Atl. 140; Akers v. Hite, 94 Pa. 394, 39 
 Am. Rep. 792. See, also, McDonald v. Ross-Lewin, 29 Hun (N. Y.) 87. 
 
 On principle these cases are clearly correct. The member, having received 
 protection during his membership, cannot escape liability on assessments 
 levied during such membership. 
 
 n Such assessments may be levied by the receiver of an insolvent associa- 
 tion under the instructions of the court. Bacon v. Clyne, 70 Mich. 188, 38 N. 
 W. 207. But, of course, a member who has secured the cancellation of his 
 certificate, paying all existing liabilities to the association, is not liable to 
 
 §§ 72-73) 
 
 WHEN THE PREMIUM IS A DEBT. 
 
 199 
 
 petent, however, for the parties to agree that forfeiture of rights under 
 the membership certificate shall be the only consequence of nonpay- 
 ment," and in practice the penalty of forfeiture is, in effect, the sole 
 means rehed on by the society to enforce payment of assessments. 
 
 WHEN THE PREMIUM IS A DEBT. 
 
 72* In fire and marine insurance the prenLinm payable becomes a debt 
 as soon as the risk attaches, and niay, by provision of the policy 
 or by statute, be made a lien upon the property insured. 
 
 73. In life insurance the premium becomes a debt only -when, in the 
 case of the first premium, the contract has beconie binding, and, 
 in the case of subsequent premiums, when the insurer has 
 continued the insurance, after niaturity of the premium, in 
 consideration of the insured's express or implied promise to 
 pay. An assessment properly levied, unless otherwise expressly 
 agreed, is a debt* 
 
 Fire Insurance Premiums, 
 
 In marine and fire insurance, prepayment of the premium is not so 
 strictly required as a condition to the validity of the contract. Conse- 
 quently, the contract being usually deemed entire for the whole term 
 agreed upon, the whole premium becomes an obligation as soon as the 
 risk attaches. And this is held to be the rule even when installment 
 notes are given for insurance extending over a number of years, when 
 it is stipulated that nonpayment of any installment shall avoid the 
 policy.^' Hence the whole premium is due and payable even though 
 
 pay assessments subsequently made by a receiver. Tolford v. Church, 66 
 Mich. 431, 33 N. W. 913. 
 
 12 See Tolford v. Church, 66 Mich. 431, 33 N. W. 913. 
 
 18 Where a policy is issued for a term of years, and premium notes, pay- 
 able in annual installments, are taken, there seems to be some confusion as 
 to whether, in case the policy is avoided before the expiration of the term, 
 the whole amount can be collected by the insurance company. The cases 
 seem to lay down the following rules: 
 
 (1) Where there is a distinct provision that upon failure to pay any in- 
 stallment the policy shall become void, but the whole amount shall be con- 
 sidered as earned, such provision will be given full force, and the contract 
 will be construed, as entire. Cauffield v. Insurance Co., 47 Mich. 447, 11 
 N. W. 264; St Paul Fire & Marine Ins. Co. v. Coleman, 6 Dak. 458, 43 N. W. 
 693, 6 L. R. A. 87; Continental Ins. Co. v. Boykin, 25 S. 0. 323. See, also, 
 American Ins. Go. v. Klink, 65 Mo. 78; American. Ins. Co. v. Henley, 60 
 Ind. 515 (provision in company's charter held part of the contract). 
 
 (2) But where there is no such provision in the contract, it seems that the 
 contract will be construed as severable, and the company cannot sue on the 
 notes for the entire amount American Ins. Co. v. Stoy, 41 Mich. 385, 1 N. 
 W. 877. 
 
 Where a policy insured defendant's property for a period of five years. In 
 consideration of $41.50 cash, and a note for an additional sum, of even date 
 
 
 
 
 
 
 fi«ri 
 
 A^ 
 
M 
 
 200 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 
 
 the insurance may terminate before the expiration of the whole period 
 agreed upon/* provided such termination be not brought about in ac- 
 cordance with the terms of the policy or by the wrong of the insurer.^' 
 Of course, however, it is competent for the parties to make a contract 
 of fire insurance from year to year during an agreed term of years, 
 in which case the whole premium will not be considered as due upon 
 the commencement of the risk, but from year to year, in annual in- 
 stallments, as earned by the insurer.^' 
 
 Statutes sometimes give to mutual fire insurance companies a lien 
 upon the property insured, to secure the payment of premium debts, 
 and not infrequently the policies of such companies charge the insured 
 property with a lien for premiums due.^^ 
 
 Life Insurance Premiums. 
 
 As explained above, a life insurance premium due is not ordinarily 
 a debt, nonpayment being made merely a condition of forfeiture. But 
 in case the insurer has incurred liability, without requiring prepay- 
 ment of the first premium, in consideration of the insured's promise to 
 pay, the premium due becomes a debt. So the promise of the insured 
 to pay any subsequent premium may be implied from the mere exten- 
 sion of the time of payment, or made express by his giving a premium 
 note.** 
 
 As shown above, an assessment, when once legally levied, and notice 
 thereof given, is a binding obligation upon the insured, unless some 
 term of the contract expressly stipulates that forfeiture of existing 
 rights shall be the only consequence of nonpayment** 
 
 ' 
 
 with the policy, and dne 10 months after date, the note providing that If It 
 was not paid at maturity the policy should be null and void, "and so remain 
 until the same shall be fully paid," in an action on the note it was held that, 
 the contract being an entirety, the note was as much the consideration there- 
 for as the cash payment, and, having had the benefit of the contract for 10 
 months, the defendant could not avoid paying the entire consideration. Rob- 
 inson V. Insurance Co., 51 Ark. 441, 11 S. W. 686, 4 L. R. A. 251. 
 
 1* Tyrie v. Fletcher, Cowp. 666; Richards, Ins. Cas. 265; Plymton v. Dunn, 
 148 Mass. 523, 20 N. K 180; Schimp v. Insurance Co., 124 IlL 354, 16 N. E. 
 229. 
 
 15 Supreme Council Catholic Knights of America v. Gambati, 29 Tex. Civ. 
 App. 80, 69 S. W. 114. 
 
 le American Ins. Co. v. Stoy, 41 Mich. 385, 1 N. W. 877. 
 
 IT People's Fire Ins. Co. v. Hartshorne, 84 Pa. 453 ; Bangs v. Skidmore, 
 21 N. Y. 136. 
 
 As to rights of bona fide purchasers of property burdened with such lien, 
 see Mutual Assur. Soc. v. Watts, 1 Wheat. (IJ. S.) 279, 4 L. Ed. 91; Mut 
 Assur. Soc. V. Faxon, 6 Wheat. (U. S.) 606, 5 L. Ed. 342; Mut Assur. Soc. 
 V. Stone, 3 Leigh (Va.) 218; Kentucky Farmers* Mut Ins. Oo. v. Mathers, 
 7 Bush (Ky.) 23, 3 Am. Rep. 286. 
 
 i« See Sebring v. Hazard, 128 Mich. 330, 87 N. W. 257. 
 
 i» See supra, p. 196. 
 
 i 
 
 6§ 74-75) 
 
 PAYMENT OF PREMIUMS. 
 
 201 
 
 PAYMENT OF PREMIUMS. 
 
 74. TIME AND PLACE— The preminm must be paid by tbe inrared 
 or otber person interested in tbe insurance, or by some one oa 
 bis bebalf, to tbe insurer or bis agent authorized to accept 
 payment, at the place and on the day specified in the contract, 
 unless a further day be agreed upon. In the absence of stipu* 
 lation for payment before a certain hour, the payment may be 
 made at any time before midnight of the day on which it is due. 
 If the premiuni is due on Sunday, payment on the following 
 secular day is sufficient. 
 
 76. MODE— The insurer is entitled to paynient in money, but may 
 consent to payment by check, draft, or note, or by the transfer 
 of other valuable property, or even by services rendered. An 
 agent authorized to collect premiums has, however, ordinarily^ 
 no authority to accept in pasrment anything but cash. 
 
 Time is usually of the essence of the promise to pay premiums, and 
 failure to pay on the day specified in the policy constitutes such a breach 
 of the contract as to discharge the insurer, unless the latter has ex- 
 pressly or impliedly agreed to an extension of time. For the purpose 
 of sustaining the policy, payment by any person, even a stranger,*® is 
 sufficient; but only persons having an interest in the insurance, as a 
 mortgagee, assignee, or beneficiary, or those paying at the request of 
 any such interested persons, have a lien upon the policy for premiums 
 paid.** A mere stranger by paying a premium due secures no inter- 
 est in the proceeds of the policy.** 
 
 Where Paid and to Whom 
 
 The premium must be paid at the place specified in the policy, if 
 any, and to the designated agent.*® Usually it is required to be paid 
 
 *o See the cases cited In notes 21 and 22, infra. 
 
 In the case of Whiting v. Insurance Co., 129 Mass. 240, 37 Am. Rep. 317, 
 which is sometimes cited to the contrary, payment of the first premium was 
 a condition precedent to the contract, and it was decided upon the familiar 
 principle that the insured must consent to insurance, otherwise it is void. 
 
 «i The amount of recovery is limited to the amount actually advanced. 
 Roller V. Moore's Adm'r, 86 Va. 512, 10 S. E. 241, 6 L. R. A. 136; McDonald 
 V. Humphries, 56 Ai:k. 63, 19 S. W. 234; Connecticut Mut. Life Ins. Co. v. 
 Burroughs, 34 Conn. 305, 91 Am. Dec. 725; Weisert v. Muehl, 81 Ky. 336. 
 
 22 Meier v. Meier, 88 Mo. 566; Burridge v. Row, 1 Younge & C. Ch. 183; 
 Leslie v. French, 23 Ch. Div. 552 ; Lef twich v. Wells, 101 Va. 255, 43 S. E. 
 364. 
 
 23 The mere fact that the certificate or policy may designate the person 
 appointed to receive payment of assessments or premiums as the "agent of 
 the insured" does not change the legal effect of a payment to such agent 
 when he is in fact the agent of the insurer. Thus in Supreme Lodge K. P. v. 
 Withers, 177 U. S. 260, 20 Sup. Ct. 611, 44 L. Ed. 762, the insured had paid 
 his dues to the secretary of his local section of the insuring order, to whom 
 
2U2 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 at the home office, or to the agent in possession of a properly executed 
 receipt. Such stipulations must be strictly complied with,^* but the 
 payment of a premium to an agent not authorized to receive it will be 
 sufficient if the premium money actually comes to the hands of the in- 
 surer.*" When no place of payment is designated, and no person speci- 
 fied as solely authorized to receive payments of premiums, the insured 
 may pay to any authorized agent of the insurer.* • It is the duty of the 
 insured, however, to seek the agent to whom payment is to be made, 
 and not that of the agent to seek the insured.*^ It has been held *® that, 
 when the policy is silent as to both the place where and the person to 
 whom payment is to be made, a previous parol agreement between the 
 agent of the insurer and the insured can be shown, to the effect that 
 the insured would be informed how and to whom payments were to be 
 made, and that he should not pay in any other manner. No such in- 
 formation having been given, it was held that the policy was not sus- 
 pended in accordance with its terms by reason of the fact that a pre- 
 mium was due and unpaid. This decision is based on the theory that 
 the contract of the parties was only partially reduced to writing, but it 
 can scarcely be sound, since the prior parol agreement clearly altered 
 the effect of the written policy.** 
 
 Time of Payment — Sundays and Legal Holidays, 
 
 The policy may stipulate that the premium shall be paid at a certain 
 hour of the day on which it falls due,*** as at noon, but in the absence 
 
 payments were required to be made by the general laws of the order, which, 
 however, declared that the local secretary should be regarded as agent of the 
 members, and not of the order. The money paid in due time to the secretary 
 was not transmitted by him to the general officers of the order within the 
 time specified by its general laws, and the defendant order insisted that the 
 rights of the insured were forfeited because of the default of the local secre- 
 tary. But the court held the payment sufficient, and the insurer liable. But 
 see Wilber v. Insurance Co., 122 N. Y. 439, 25 N. E. 926. 
 
 24 New York Life Ins. Co. v. Davis, 95 U. S. 425, 24 L. Ed. 453. 
 
 Such provisions may be waived, of course. McNeilly v. Insurance Co., 66 
 N. Y. 23. 
 
 25 Mauck V. Insurance Co. (Del. Super.) 54 Atl. 952 [1903]. 
 
 26 Southern Life Ins. Oo. v. McCain, 96 U. S. 84, 24 L. Ed. 653. 
 
 The payment is binding even though the company never in fact receives 
 the premiums. American Fire Ins. Co. v. Brooks, 83 Md. 22, 34 Atl. 373. 
 
 27 Mclntyre v. Insurance Co., 52 Mich. 188, 17 N. W. 781. 
 
 28 Blackerby v. Insurance Co., 83 Ky. 574. 
 
 29 See Union Mut Life Ins. Co. v. Mowry, 96 U. S. 545, 24 L. Ed. 674. 
 
 30 Penn Plate Glass Co. v. Insurance Co., 189 Pa. 255, 42 Atl. 138, 69 Am. 
 St Rep. 810. 
 
 A great many interesting questions arise as to the computation of time. 
 In the absence of clearly expressed intention to the contrary, it seems that, 
 where the insurance is to be "from" a certain day, that day is to be ex- 
 cluded in computing the time. Thus a policy insuring against fire "from 
 
 §§ 74-75) 
 
 PAYMENT OP PREMIUMS. 
 
 203 
 
 j(. «i 
 
 of such stipulation the insured has the whole day in which to make pay- 
 ment, and is not in default until midnight." 
 
 If the premium falls due on Sunday, the insured has the whole of the 
 ^ext day in which to make payment, unless, of course, it was due at 
 noon on Sunday, when payment would be made at or before noon on 
 Monday.*^ Thus, where the insured died Monday afternoon, a recov- 
 ery was allowed on a policy the premium on which had become due on 
 the Sunday preceding, and remained unpaid at the time of the insured's 
 death." 
 
 But the same rule does not apply to legal holidays, unless insurance 
 business is suspended on such days by the statute, as well as transac- 
 tions with commercial paper, which is rarely the case. Therefore it 
 has been held that, when an assessment became payable on Thanksgiv- 
 ing Day, a tender of the amount on the following day was too late to 
 avoid a forfeiture." It is probable, however, that a tender of a pre- 
 mium payable to an agent having a customary place of business would 
 be validly made at such place of business in case it were found closed 
 on a legal holiday. 
 
 When the premium is payable at a distant place, money sent by mail 
 or express must be sent so as to be received at the place of payment on 
 
 the 14th of February until the 14th of August" covers a loss on the 14th 
 of the latter month. Isaacs v. Insurance Co., L. R. 5 E^ch. 296. See, also, 
 South Staffordshire Tramways Co. v. Assur. Assoc. [1891] 1 Q. B. 402; How- 
 ard's Case, 2 Salk. 625; Supreme Council American Legion of Honor v. 
 Gootee, 89 Fed. 941, 32 O. C. A. 436, 61 U. S. App. 617; Walker v. Insurance 
 Co., 167 Mass. 188, 45 N. E. 89. 
 
 An insurance policy on goods to be shipped "between" two designated 
 days does not cover goods on either of such days. Atkins v. Insurance Co., 
 5 Mete. (Mass.) 439, 39 Am. Dec. 692. 
 
 Where a policy of insurance expired at 12 o'clock noon, and the vessel 
 was lost on the day when it expired, and, the time of the two places differ- 
 ing on account of the difference of their longitude, the loss occurred before 
 noon by the time of the place where the contract was made, and after noon 
 by the time of the place of the loss, it was held that the time must be reck- 
 oned according to the longitude of the place where the contract was made 
 and to be performed, and consequently that plaintiff was entitled to recover. 
 Walker v. Insurance Co., 29 Me. 317. 
 
 In the absence of statutory provision, the presumption is that the parties 
 contracted with reference to solar time, and, where either party claims that 
 the intention was to contract with reference to standard railroad time, the 
 burden of proof is on him to show that. Jones v. Insurance Co., 110 Iowa, 
 75, 81 N. W. 188, 46 L. R. A. 860. 
 
 81 Thomson v. Insurance Co., 4 Pa. Dist. R. 382, 52 Leg. Int. 284. 
 
 »2 HAMMOND V. INSURANCE CO., 10 Gray (Mass.) 306; Leigh v. In- 
 surance Co., 26 La. Ann. 436. See, also, Owen v. Insurance Co.. 87 Ky. 571. 
 10 S. W. 119. 
 
 88 Leigh V. Insurance Co., 26 La. Ann. 436. 
 
 »* National Mut Ben. Ass'n v. Miller, 85 Ky. 88, 2 S. W. 900. 
 
 I 
 
h 
 
 1 
 
 2(M THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 or before the day of maturity ; but if the instructions of the insurer or 
 the course of business between the parties have authorized the use of 
 the mail or express service in making payment, mailing or expressing 
 the amount of the premium on the day it falls due is a payment in time 
 to prevent a forfeiture, even though it may be received after the date on 
 which the policy requires its payment,*'' or not received at all.** 
 
 Mode of Payment 
 
 The premium is customarily payable in legal tender money,*^ and 
 the insurer can decline to accept anything else in payment. But it is 
 also competent and usual for the insurer to consent to receive in pay- 
 ment the check of the insured.^* Ukewise he may agree to receive the 
 
 •8 Kendrick v. Insurance Co., 124 N. C. 315, 32 S. B. 728, 70 Am. St. Rep. 
 592 ; Hollowell v. Insurance Ck)., 126 N. C. 398, 35 S. E. 616 ; Whitley v. In- 
 surance Co., 71 N. C. 480. 
 
 8« Kenyon v. Association, 122 N. Y. 247, 25 N. E. 299; Palmer v. Insurance 
 Co., 84 N. Y. 63; Currier v. Insurance Co., 53 N. H. 538. 
 
 Where the policy holders sent their renewal premiums by mail or express 
 direct to the home oflEice of the company, in another state, it was held that 
 the express company or postal authorities were the agents of the policy hold- 
 ers, and not of the insiu*ance company, so that the company would not have 
 to pay a tax on receipts by them. State v. Insurance Co., 106 Tenn. 282, 61 
 S. W. 75. 
 
 3 7 Quite a number of cases have arisen since the Civil War as to the effect 
 of payment in depreciated currency — e. g., notes issued by the Confederate 
 States government — and it has been held that payment in such currency w^as 
 sufficient. Robinson v. Society, 42 N. Y. 54, 1 Am. Rep. 490; Sands v. In- 
 surance Co., 50 N. Y. 626, 10 Am. Rep. 535; New York Life Ins. Co. v. 
 Clopton, 7 Bush (Ky.) 179, 3 Am. Rep. 290. In the case flist cited the court, 
 per Hunt J., said: "It is quite unreasonable to say that Cowardin [agent of 
 New York company at Richmond, Va.] had no authority to receive the pay- 
 ment in Confederate money of the premiums due to the company, and that 
 it was no better than counterfeit money. It was a currency issued by the 
 authority of an existing, de facto government, which had adopted a consti- 
 tutional form of government and was fully organized under it, which had in 
 the field large armies, had won many battles, had invaded the states of the 
 North, had besieged the national capital, was recognized as a belligerent 
 power soon after by the British government, and which had from the outset 
 been treated as a belligerent by the government of the United States, and 
 which was itself confident of maintaining Its existence. It is true that these 
 are now valuable only as relics of a past existence. It was, however, nearly 
 four years after the occurrences we are considering before this result be- 
 came certain, and we cannot transport our knowledge backwards, and by its 
 use condemn, as base and worthless, a currency which was then in general 
 use and might have become permanently valuable." 
 
 38 Long V. Insurance Co., 137 Pa. 335, 20 Atl. 1014, 21 Am. St. Rep. 879; 
 Northwestern Life Assur. Co. v. Sturdivant, 24 Tex. Civ. App. 331, 59 S. 
 W. 61. 
 
 Where the policy was to take effect only upon payment of first premium, 
 giving a worthless check was held not to be payment Brady v. Associa- 
 tion, 190 Pa. 595, 42 Atl. 862. 
 
 T; 
 
 g§ 74-75) 
 
 PAYMENT OF PEEMIUMS. 
 
 205 
 
 check of a third party,*' a draft *® or order ** drawn by the insured 
 upon another person, the note of the insured or of another,** or, in 
 fact, any valuable property.*® The insured may even be allowed to 
 pay his premium by services rendered,** or a promise of services, as by 
 advertising the business of the insurer.*** The consent of the insurer 
 to payment otherwise than in cash may be given expressly *® by a prop- 
 erly authorized agent, or be impHed from the insurer's course of busi- 
 ness.*^ Thus, if the insurer has been accustomed to accept the check 
 of the insured, or drafts upon third parties, in payment of previous 
 premiums, a tender in good faith of such a check or draft will be suffi- 
 cient to avoid a forfeiture. Likewise credit may always be given by an 
 agent having competent authority.*® Hence the note of the insured, 
 when accepted by such an agent, will satisfy the condition of the policy 
 requiring payment, even though payment in cash at the insurer's home 
 office be stipulated for.*® But the fact that the insurer has previously ac- 
 cepted the insured's note for premiums due does not give to the insured 
 any right to demand that notes shall be accepted in payment of subse- 
 quent premiums.**** The effect of nonpayment of such notes upon the 
 
 3» Union Central Life Ins. Co. v. Duvall (Ky.) 46 S. W. 518. 
 
 40 Knickerbocker Life Ins. Co. v. Pendleton, 112 U. S. 696, 5 Sup. Ot 314, 
 28 L. Ed. 866. 
 
 41 FIDELITY & CASUALTY CO. V. JOHNSON, 72 Miss. 333, 17 South. 
 2, 30 L. R. A. 206 ; Eury v. Insurance Co., 89 Tenn. 427, 14 S. W. 929. 10 L. 
 R. A. 534; Pacific Mut. Life Ins. Co. v. Williams, 79 Tex. 633, 15 S. W. 478; 
 Gotten V. Casualty Co. (C. C.) 41 Fed. 506; Travelers' Life & Accident Ins. 
 Co. V. Cash, 14 Ind. App. 3, 42 N. E. 246; Bane v. Insurance Co., 85 Ky. 677, 
 4 S. W. 787; Lyon v. Insurance Co., 55 Mich. 141, 20 N. W. 829, 54 Am. Rep. 
 354. See, also, Laudis v. Insurance Co., 6 Ind. App. 502, 33 N. B. 989. 
 
 4 2 See infra, p. 209. 
 
 43 It seems that an insurance agent may take property corresponding in 
 amount to his commissions in payment of premium. John Hancock Ins. Co. 
 v. Schlink, 175 111. 284, 51 N. E. 795. But otherwise he has ordinarily no 
 powet" to receive property as payment. See Hoffman v. Insurance Co., 92 
 U. S. 161, 23 L. Ed. 539; Equitable life Assur. Soc. y. Cole, 13 Tex. Civ. 
 App. 486, 35 S. W. 720. 
 
 44 Equitable life Assur. Soc. v. Com., 67 S. W. 388, 23 Ky. Law Rep. 2359. 
 46 Kentucky Mut Ins. Co. v. Jenks, 5 Ind. 96. 
 
 46 Tayloe v. Insurance Co., 9 How. (U. S.) 390, 13 L. Ed. 187. 
 
 47 Kenyon v. Association, 122 N. Y. 247, 25 N. E. 299. 
 
 48 Franklin Fire Ins. Co. v. Colt, 20 Wall. (U. S.) 560, 22 L. Ed. 423; Shel- 
 don V. Insurance Co., 25 Conn. 207, 65 Am. Dec. 565; Church v. Insurance 
 Co., 66 N. Y. 222; Croft v. Insurance Co., 40 W. Va. 508, 21 S. B. 854, 52 Am. 
 St. Rep. 902 ; Baker v. Assurance Co., 162 Mass. 358. 38 N. E. 1124 ; Pythian 
 Life Ass'n v. Preston, 47 Neb. 374, 66 N. W. 445. 
 
 4 9 National Life Ins. Co. v. Twiddell, 58 S. W. 699, 22 Kj. Law Rep. 881; 
 Thompson v. Insurance Co., 104 U. S. 252, 26 L. Ed. 765; Miller v. Insurance 
 Co., 12 Wall. (U. S.) 285, 20 L. Ed. 398. 
 
 ^0 See supra, page 190, and note; also, infra, chapter on "Waiver and Bs- 
 loppeL** 
 
206 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 I 
 
 I . 
 
 
 rights of the insured under the policy will be discussed in a later sec- 
 tion. 
 
 Payment by Personal Arrangement between Insured and Agent of In- 
 surer, 
 A great deal of confusion has crept into the decisions with reference 
 to the effect of a personal arrangement made between the insured and 
 the agent of the insurer for the payment of premiums due to the in- 
 surer whereby the insured pays no money which the agent may transmit 
 to his principal, but gives his note to the agent individually, or cancels a 
 debt due from the agent, or furnishes the agent goods for his personal 
 use to the amount of the premitun, while the agent assumes liability for 
 the payment of the premium to his principal. Much of this confusion 
 springs from a failure to distinguish cases that involve different prin- 
 ciples of law, though somewhat similar in fact, and a consequent mis- 
 leading use of precedents. For the purpose of simplifying the problem 
 it will be well to state succinctly some well-settled principles that are 
 applicable : 
 
 (1) An agent authorized merely to collect money due has presump- 
 tively authority to receive in payment only cash. 
 
 (2) An agent having general powers of contracting can make such 
 arrangement for the payment of premiums as he sees fit, so long as it is 
 not ultra vires of the insurer. 
 
 (3) An actual payment made to the insurer by any one on behalf of 
 the insured will be valid if accepted. 
 
 (4) The insurer may always accept in payment of the premium the 
 liability of a third party, and therefore, if the insurer debits the pre- 
 mium to the agent, and looks to him ultimately for payment, then, as 
 between the insured and insurer, the premium is paid, and, as between 
 the insured and the agent, such arrangement may be made for settling 
 accounts as is convenient. 
 
 Applying these principles to the conditions most frequently found 
 existing in the cases now under consideration, we reach the following 
 conclusions : 
 
 The agent authorized by the insurer to collect premiums cannot ac- 
 cept in payment anything but cash. He cannot, for instance, accept in 
 lieu of payment the promise of the insured to render certain services as 
 medical examiner for the insurer,** although a general agent might do 
 so.** So, plainly, an agent, even if possessed of general powers, could 
 not bind the insurer by accepting a horse in payment of a premium.** 
 
 •1 Carter v. Insurance CJo., 56 Ga. 237. 
 
 82 See Kentucky Mut Ins. Co. v. Jenks, 5 Ind. 96, where a contract of this 
 kind was entered Into by the board of directors of the company. 
 »« Hoffman ▼. Insurance Co., 92 U. S. 161, 23 L. Ed. 539; Equitable Life 
 
 
 PATMENT or PBEMinM& 
 
 207 
 
 §§ 74-76) 
 
 The acceptance of the note of a third party, or an order upon a debtor 
 of the insured, would be dearly beyond the usual powers of a collecting 
 agent, and would not bind the insurer unless consented to, when a 
 novation would arise, the liability of such third party being taken in 
 discharge of that of the insured. By parity of reasoning, the agent 
 cannot accept in discharge of the premium debt owed to his principal a 
 claim of the insured upon himself, unless the insurer accepts the liabil- 
 ity of the agent thus tendered in payment, as he may do. Therefore it 
 tollows that a premium payment made by canceling a debt owed by the 
 agent to the insured, or partly made by offsetting such a debt, is not 
 binding upon the insurer.'* As between the insured and the agent, the 
 cancellation of the latter's debt is a good consideration for his promise 
 to pay a premium due from the former, and the agent may be liable to 
 the insured for his failure to perform his promise; but, as between the 
 insured and msurer, it is difficult to see how the policy's requirement of 
 Msh payment is met by the mere promise of the insurer's agent to pay. 
 A fortiori, payment by furnishing to the agent goods for his own per- 
 sonal use will not be sufficient to answer the requirements of the pol- 
 
 Alany statements made in text-books and judicial opinions that ap- 
 pear to lay down a rule of law different from that above stated, to the 
 effect that a premium may be validly paid by offsetting a debt owed by 
 the agent, will be found upon close examination to involve some of the 
 other pnnciples stated above. Thus when the agent actually pays to 
 the insurer, either by remittance or settlement of accounts, the premium 
 due from the insured, certainly the insurer cannot, after accepting the 
 money so paid, complain because the payment was induced by the in- 
 sured s cancellation of a debt owed by the agent.** Likewise when an 
 agent took the note of the insured for the amount of the premium, and 
 out of the proceeds of the note, when discounted, paid over to the in- 
 surer that portion of the premium remaining after the reservation of 
 the agent s commission, the insurer was estopped to claim that the pre- 
 mium had not been paid in cash as required by the policy.*^ In fact, it 
 
 Assur. Soc. v. Cole. 13 Tex. Civ. App. 486, 35 S. W. 720. But see John TT«n 
 cock Ins. Co. V. Schlink, 175 111. 284; 51 N. B. 795 ^" 
 
 oJl^!^^^^^^ °^ ^^® ^°s- § ^4; Tomsecek v. Insurance Co 113 Wis 114 
 
 « Hoffman v. Insurance Co., 92 U. S. 161, 23 L. Ed. 539; Equitable Life 
 
 r "^L^W ^""^^^ ^^ ^^^- ^^' ^PP- 486, 35 S. W. 720. Se^ aC Crawfo^^ 
 County Mut Ins. Co. v. Cochran, 88 Pa. 230. v^rawrord 
 
 66 Home Ins. Co. v. Oilman, 112 Ind. 14, 13 N. B. 121 
 «.i,7 ?. '^^ ^®®® ^^^ transaction amounts to a loan made by the aeent 
 Which is the consideration for the note given by the insured. HenceS 
 is no failure of consideration that may be pleaded in defense of an action on 
 
208 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 §§ 74-75) 
 
 PAYMENT or PREMIUMS. 
 
 209 
 
 i 
 
 
 'I 
 
 seems to be held without dissent that, so far as that part of the premium 
 which the agent is entitled to retain in his settlement with the insurer 
 is concerned, the agent may make such terms with the insured as he 
 deems best for his own interest. He may accept for it goods or serv- 
 ices, or, in the absence of anti-rebate statutes, he may forego the collec- 
 tion of part or all of it, and the premium must still be regarded as paid 
 if the insurer has accepted the portion remitted.**® 
 
 So the course of business between the insurer and his agent may be 
 such that the insurer looks for payment of the first premiums of all pol- 
 icies delivered to the agent through whom they have been negotiated, 
 and not to the party insured; that is to say, the insurer charges up to 
 such agents the first premiums of all policies applied for through them, 
 and credits them with sums remitted at intervals or with policies re- 
 turned, leaving them to make with the insured such agreements as to 
 payments as may seem to them proper. '^^ This acceptance of the liability 
 of such agents, usually known as "insurance brokers," satisfies the con- 
 dition of the policy requiring actual payment in cash as far as the in- 
 surer is concerned.*® 
 
 Another difficult question involving the validity of an irregular pay- 
 ment of premiums is well illustrated by Wooddy v. Old Dominion Ins. 
 Co.,*^ in which the opinion was delivered by the able and learned Judge 
 Burks. Here the applicant's tender of the amount of the premium was 
 refused by the agent of the insurer on the ground that the agent was 
 indebted in that sum to the applicant for house rent, and that the two 
 obligations should be allowed to offset each other. The insurer was 
 also indebted to the agent for a sum equal to a part of the premium due. 
 The insurer was held liable on this contract, although the policy pro- 
 vided that it should not go into effect until the actual payment of the 
 premium. Judge Burks thus explaining the legal effect of the tender : •* 
 "If he had then paid over that amount to the appellant in discharge of 
 the rent due, and the appellant had immediately handed it back to him 
 
 the note brought by the agent, when the insurance company has become in- 
 solvent after the execution of the note. See Hudson v. Compere (Tex. Sup.) 
 01 S. W. 389. 
 
 58 John Hancock Ins. Co. v. Schlink, 175 111. 284, 51 N. B. 795. This view 
 Is seemingly held by the Supreme Court of the United States; Hoffman 
 ▼. Insurance Co., 92 U. S. 161, 23 L. Ed. 539. 
 
 B» Smith V. Society, 65 Fed. 765, 13 C. C. A. 284. 
 
 •0 Miller v. Insurance Co., 12 Wall. (U. S.) 285, 20 L. Ed. 398; Wytheville 
 Insurance & Banking Co. v. Teiger, 90 Va. 277, 18 S. B. 195; Griffith v. In- 
 surance Co., 101 Cal. 627, 36 Pac. 113, 40 Am. St Rep. 96; Western Assur. 
 Co. V. McAlpin, 23 Ind. App. 220, 55 N. E. 119, 77 Am. St Rep. 423; Train 
 V. Insurance Co., 62 N. Y. 598. 
 
 But see Brown v. Insurance Co., 59 N. H. 298, 47 Am. Rep. 205. 
 
 •1 31 Grat (Va.) 362, 31 Am. Rep. 739. 
 
 •a 31 Grat (Va.) at page 369, 31 Am. Rep. 739. 
 
 
 for the premium, nobody will doubt that the premium would have been 
 actually paid. Did not the transaction which took place amount sub- 
 stantially to the same thing? The appellant took the money from his 
 pocket and offered it to Rowzie, who declined to take it, saying in 
 terms, 'I have in my hands money belonging to you for the rent, and 
 will credit you by that amount.' It seems to me that it would be ex- 
 tremely technical to hold that this was not a payment, when, if instead 
 of retaining the money, which he says he had in his hands, belonging 
 to the appellant, he had paid it over to him with one hand and taken it 
 back from him with the other, all will admit that there would have been 
 payment In the latter case the money paid would have become at 
 once the money of the company in the hands of its agent, and so, I 
 think, the money retained by the agent, under the arrangement made, 
 became in like manner the money of the company, the greater part of 
 which, in fact ($9), was already in the hands of the company, for, ac- 
 cording to Rowzie's statement (and it is not contradicted), the company 
 owed him that amount, balance on account." 
 
 Many other cases take the same view,«« but it is very doubtful wheth- 
 er the theory of the decision is correct. It would seem better to abide 
 by the simple and righteous rule that the agent cannot be allowed to 
 use the principal's money for the payment of his own debts.'* 
 
 Effect of Payment by Check, Note, etc. 
 
 Payment of a premium by check, draft, or note may be absolute or 
 conditional. If absolute, the insurer accepts the liability of the parties 
 bound upon the instrument received in satisfaction of the premium 
 due.«« If the instrument is not paid in accordance with its tenor, the 
 insurer may enforce his rights thereunder, but cannot claim that the 
 premium remains unpaid.«« If, however, the instrument is received in 
 conditional payment, as it is presumed to be unless otherwise agreed," 
 the nonpayment of the obligation remits the insurer to his original right 
 to demand payment of the premium. He cannot, however, unless so 
 expressly stipulated,'^ claim that the policy is forfeited for nonpayment 
 of the premium. The premium has become a collectible debt, but the 
 nght of forfeiture was waived by the acceptance of the conditional oav- 
 ment«» ^ ^ 
 
 «3 Kerlin v. Association, 8 Ind. App. 636, 35 N. B. 40; Hallock v. Insurance 
 Co., 26 N. J. Law, 268. 
 
 «* Ferebee v. Insurance Co., 68 N. C. 11. 
 
 «B National Ben. Ass'n v. Jackson, 114 111. 533, 2 N. B. 414. 
 
 •« Michigan Mut Life Ins. Co. v. Bowes, 42 Mich. 19, 51 N W 962 
 
 •7 Clark, Cont 632; National Life Ins. Co. v. Goble, 51 Neb. *5 70 N W 
 603; McDonald v. Society. 108 Wis. 213, 84 N. W. 154, 81 Am. St Rep 885 ' 
 
 Qi!'oo T ^''i^^o!?'*^^®'' ^^ ^''^- ^^- ^- Pendleton, 112 U. S. 696, 5 Sup. Ct 
 wJ-4, ^o jli, htd. 866. 
 
 •• Hollowell V. Insurance Co., 126 N. G 398, 35 S. E. 610. 
 Vance Ins. — 14 
 
 I 
 
 .4 
 
r: 
 
 
 I V 
 
 210 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 There is difficulty in determining the effect of the dishonor of the 
 check of the insured given in good faith and accepted by the insurer 
 in payment of a premium due. It is clear that a receipt obtained by 
 the delivery of the insured's check, known to be worthless, could be 
 contradicted and the policy forfeited for nonpayment;^® but it seems 
 that when the insured gives his check in good faith, and it is accepted 
 by the insurer without condition other than that implied by law, in 
 payment of the premium due, the insurer cannot deny that the premium 
 is paid, in so far as the validity of the policy is concerned.''^ He may, 
 however, make such denial in an action brought to recover the amount 
 of the premium, or, in case of loss, to support his claim of set-off to 
 the extent of the premium still unpaid."'* 
 
 As stated generally above, acceptance by the insurer of an order or 
 draft drawn upon a third party by the insured is a payment of the 
 premium so far as the validity of the policy is concerned, and the fail- 
 ure of the drawee to pay does not in any wise affect the liability of the 
 insurer under the policy.'" But it is not infrequently stipulated in the 
 order or in the policy that a failure to pay the order or draft will for- 
 feit or suspend rights under the policy, this being the usual practice 
 among those engaged in industrial insurance. In the event of the non- 
 payment of such orders, the insurance is forfeited or suspended in ac- 
 cordance with the agreement of the parties, provided the insurer has 
 made due demand and given to the insured notice of nonpayment. ''* 
 But it has been held that no notice of nonpayment was necessary before 
 forfeiture when the insured had left the employ of the drawee, and 
 knew that the order would not be paid.''* When an order so given is 
 negotiable in form, the insurer occupies the position and sustains the 
 responsibilities of any other holder of negotiable paper. He must make 
 due presentment and demand, and, ordinarily, take all steps necessary 
 to fix the liability of secondary parties. It has been held, however, that 
 
 TO Brady v. Association, 190 Pa. 595, 42 Atl. 962. 
 
 Ti See Hollowell v. Insurance Co., 126 N. C. 398, 35 S. E. 616; Northwest- 
 em Life Assur. Co. v. Sturdivant, 24 Tex. Civ. App. 331, 59 S. W. 61; 
 ^tna Life Ins. Co. v. Greene, 38 U. C. Q. B. 459. But see Greenwich Ins. 
 Co. V. Oregon Imp. Co., 76 Hun (N. Y.) 194, 27 N. Y. Supp. 794; Id., 148 N. Y. 
 758, 43 N. EL 987 (memorandum decision). 
 
 72 Hollowell V. Insurance Co., 126 N. C. 398, 35 S. B. 616. See, also, dicta 
 In Tayloe v. Insurance Co., 9 How. (U. S.) 390, 13 L. Ed. 187. 
 
 78 National Ben. Ass'n v. Jackson, 114 111. 533, 2 N. E. 414. See, also, 
 FIDELITY & CASUALTY CO. v. JOHNSON, 72 Miss. 333, 17 South. 2, 30 
 L. R. A. 206; Travelers* Life & Accident Ins. Co. v. Cash, 14 Ind. App. 3, 
 42 N. E. 246; Gotten v. Casualty Co. (C. C.) 41 Fed. 506. 
 
 74 Lyon V. Insurance Co., 55 Mich. 141, 20 N. W. 829, 54 Am. Rep. 354; 
 Bury V. Insurance Co., 89 Tenn. 427, 14 S. W. 929, 10 L. R. A. 534. See, also. 
 Pacific Mut. Ins. Co. v. Williams, 79 Tex. 633, 15 S. W. 478. 
 
 7 8 Bane v. Insurance Co., 85 Ky. 677, 4 S. W. 787; Landis T. Insurance Co., 
 6 Ind. App. 502, 33 N. E. 988. 
 
 § 76) CONSEQUENCES OP NONPAYMENT OF PREMIUMS. 211 
 
 protest of a bill drawn by the insured, with a condition of forfeiture of 
 the policy upon nonpayment, was not necessary to justify the insurer 
 in declaring a forfeiture, although the court intimated that it would be 
 otherwise if the bill were drawn by a stranger. ''« In the same case it 
 was further held that dishonor of the bill by nonacceptance was not 
 sufficient to work a forfeiture; presentment for payment was still nec- 
 essary. 
 
 Application of Dividends to Premiums. 
 
 If the policy provides that dividends accruing on any policy shall be 
 applied to the reduction of the premiums that become due thereon, the 
 insured cannot be required to pay such premiums until he receives no- 
 tice of the amount due in excess of the dividend credited to his policy." 
 Even when the insurer has not agreed in the policy to apply dividends 
 to premiums due, it seems to be held that the insurer cannot declare a 
 forfeiture of a policy for nonpayment of a premium when he has in his 
 hands, as dividends on such policy, funds sufficient to pay the premium 
 due; ^« and this is especially true when the insured has customarily ap- 
 plied previous dividends to the satisfaction of premium dues.^^ But 
 the possession by the insurer of insufficient dividends will not prevent 
 a forfeiture for nonpayment of a premium,'® nor can the insured claim 
 that the earnings of the insurer, not yet declared as dividends, shall be 
 applied to a premium due.** 
 
 CONSEQUENCES OP NONPAYMENT OP PREMIUMS. 
 
 76. Nonpayment of the first preminm, unless waived, prevents the im- 
 ception of the policy. Nonpayment of subsequent premiums 
 does not affect the validity of the contract, unless, by express 
 stipulation of the policy, it is provided that the policy shall in 
 that event lapse. The rights of the insured under a lapsed 
 policy are determined by the terms of the poUcy, supplemented 
 by any statutes applicable. The usual results are— 
 (a) Porf eitnre of all rights, or 
 
 G>) Extension of insurance for a certain period, or 
 (o) Granting paid-up insurance for a certain amount. 
 
 7« Knickerbocker Life Ing. Oo. v. Pendleton, 112 U. S. 696, 5 Sup Ct 314 
 28 L. Ed. 866. 
 
 " Meyer v. Insurance Co., 73 N. Y. 516, 29 Am. Rep. 200; Eddy v. Insur- 
 ance Co., 65 N. H. 27, 18 Atl. 89, 23 Am. St Rep. 17; Nail v. Society (Tenn. 
 Ch.) 54 S. W. 109; Union Cent life Ins. Co. v. Caldwell, 68 Ark. 505 58 S 
 W. 355; Phoenix Mut Life Ins. Co. v. Doster, 106 U. S. 30, 27 L. Ed. 65. 
 
 T8 See Chicago Life Ins. Co. v. Warner, 80 111. 410. 
 
 ^» Girard Life Ins. Co. v. Mutual life Ins. Co., 97 Pa. 15; Manhattan Life 
 Ins. Co. V. Smith, 44 Ohio St 156, 5 N. E. 417, 58 Am. Rep. 806. 
 
 8<^ Bulger V. Insurance Co., 63 Ga. 328. 
 
 81 Mutual Life Ins. Co. v. Girard Life Ins., Annuity & Trust Co., 100 Pa. 
 
 I 
 
 U 
 
I 
 
 212 THE CONSIDERATION rUEMIUMS AND ASSESSMENTS. (Ch. 6 
 
 The effect of the failure of the applicant for insurance to pay the first 
 premium has already been discussed, and need not be further treated 
 here. As a general principle, the time specified for the payment of pre- 
 miums is of the essence of the contract. The ability of the insurer to 
 meet his obligations depends upon the prompt payment of all premiums 
 due him, and without requiring payment of premiums ad diem the suc- 
 cessful conduct of insurance business would be impossible. Yet so 
 great is the disfavor in which the Jaw holds forfeitures that it will not 
 readily infer that the parties intend that the nonpayment of premiums 
 shall be a condition of forfeiture; such intention must be clearly ex- 
 pressed, otherwise the unpaid premium will be regarded as a debt due 
 from the insured to the insurer, who still remains liable under the pol- 
 icy.®^ 
 
 But in response to the needs of their business, insurers are careful to 
 include in their policies terms that will insure prompt payments of pre- 
 miums and assessments due. The most potent mode of compelling pay- 
 ment in due time is to impose a penalty upon tardiness or neglect. Ac- 
 cordingly, a policy is seldom found that does not contain some penal 
 provision for the enforcement of the insurer's premium claims. 
 
 The simplest penalty to be imposed is the absolute forfeiture of all of 
 the insured's rights, and in the earlier policies we find this almost the 
 only means used for the enforcement of punctual payment of premiums. 
 But with the development of a more liberal spirit in the conduct of the 
 insurance business, due largely to the growth of competition for public 
 favor, the rigors of absolute forfeiture began to be abated. Insurers 
 found it politic, as well as just, to give the policy holders the benefit of 
 the reserve value of their policies at the time of default. Hence came 
 the provisions for extended insurance for so long a time as the reserve 
 value of the policy would suffice to pay the accruing premiums, or for 
 paid-up insurance in such an amount as could be purchased by a sum 
 ?qual to the value of the policy. 
 
 Any unreadiness that may have been shown by insurers to grant de- 
 viiiquent policy holders the equitable value of their policies in paid-up 
 insurance has, in some states, been cured by statutes requiring the in- 
 surer to give the holder of a lapsed policy such insurance." 
 
 It is, of course, competent for the parties to make any other agree- 
 
 •« See dicta In OWo Farmers' Ins. Co. v. Stowman, 16 Ind. App. 205, 44 
 K. E. 558, 940; United States Life Ins. Co. v. Ross, 159 111. 476, 42 N. R 850; 
 Woodfln V. Insurance Co., 52 N. 0. 558; American Ins. Co. v. Klink, 65 Mo. 
 78; Brady v. Insurance Co., 9 Misc. Rep. 6, 29 N. Y. Supp. 44. 
 
 83 For the Missouri statute on this subject, and its construction, see in- 
 teresting case. Cravens v. Insurance Co., 148 Mo. 583, 50 S. W. 519, 53 L. R. 
 A 305 71 Am. St Rep. 628. For the construction of the New York statute of 
 similar import, see Nielsen v. Society, 139 Cal. 332, 73 Pac. 168, 96 Am. St 
 Rep. 140. 
 
 ..ii 
 
 §T7) 
 
 FORFEITURE. 
 
 213 
 
 ment desired as to the consequence of default on the part of the insured 
 in the payment of premiums. The policy may stipulate that the rights 
 of the insured shall be suspended during his delinquency, and provide 
 for their revival, subject to certain conditions, upon the payment of the 
 overdue premiums. Of course, the insurer is not liable for any loss 
 that may be incurred during such a period of suspension. So the pol- 
 icy holder may, by the terms of his contract, be entitled to surrender 
 his policy and receive a certain amount of cash, termed the "surrender 
 value" of the policy. But, in the absence of express agreement there- 
 for, a policy has no surrender value.'* 
 
 FORFEITUBB. 
 
 77. A term, providing for forfeiture upon nonpasrment of preniinms, 
 while regarded xsith disfavor by the courts, will nevertheless 
 be enforced, nor will equity relieve against such forfeiture un- 
 less fraud or mistake be shown. 
 
 Courts must enforce contracts as the parties make them, provided 
 they are not contrary to law or public policy. Hence, when an insur- 
 ance contract provides for forfeiture of the insured's rights upon cer- 
 tain contingencies, such provisions will be given full effect,®* although 
 the courts are acute in discovering grounds upon which such forfeitures 
 may be avoided. Such forfeitures are not penalties, nor will equity 
 relieve against them.** They are rather conditions that go to the heart 
 of the contract, and their enforcement as parts of the agreement is nec- 
 essary for the safe conduct of the business of insurance. 
 
 Forfeiture of Right to Paid-up Insurance — Void as a Penalty. 
 
 But it must be borne in mind that a mere penalty for the nonpay- 
 ment of a debt will not be enforced. Hence, when the insurer makes a 
 contract which is primarily a loan, and only incidentally pertains to 
 insurance, he cannot expect to occupy a better position before the law 
 than is accorded to other lenders.*^ Therefore, when the rights and 
 liabilities of the parties to a contract of insurance have in some way 
 become fixed, as where the insured has acquired the right to paid-up or 
 extended insurance, and the insurer makes a loan to the insured secured 
 
 
 'II 
 
 «* Haskell v. Society, 181 Mass. 341, 63 N. E. 899. 
 
 8 5 Fowler v. Insurance Co., 116 N. Y. 389, 22 N. B. 576, 5 L. R. A. 805; 
 St. Louis Mut. Life Ins. Co. v. Grigsby, 10 Bush (Ky.) 310. 
 
 8« KLEIN V. INSURANCE CO., 104 U. S. 88, 26 L. Ed. 662; Thompson v. 
 Insurance Co., 104 U. S. 252, 26 L. Ed. 766; Attorney General v. Insurance 
 Co., 93 N. Y. 70; NEW YORK LIFE INS. CO. v. STATHAM, 93 U. S. 24, 
 23 L. Ed. 789. 
 
 87 Mutual Ben. Life Ins. Co. v. First Nat Bank (Ky.) 74 S. W. 1066 [June, 
 1903]. 
 
214 
 
 THE CONSIDERATION PREMIUMS AND ASSESSMENTS. 
 
 (Ch.6 
 
 I 
 
 by the policy, a stipulation in the policy forfeiting such insurance in 
 case of nonpayment of principal or interest will, in some jurisdictions, 
 not be enforced ; it is a mere penalty. In accordance with this view it 
 has been held that a stipulation in a policy that the failure to pay in 
 advance the interest on any notes or loans owing to the insurer on ac- 
 count of annual premiums should avoid the policy was, so far as it ap- 
 plied to a paid-up policy, nothing else than a penalty to compel the 
 prompt payment of debts otherwise well secured, and therefore unen- 
 forceable.®* But to the rule thus stated there is much dissent.®® 
 
 The payment of part of the premium due will not prevent a forfei- 
 ture •• unless accepted under such circumstances as will estop the in- 
 
 •• St. Louis Mnt Life Ins. Co. ▼. Grigsby, 10 Bush (Ky.) 310. 
 
 In Northwestern Mut Life Ins. Co. v. Fort's Adm'r, 82 Ky. 269, the court 
 thus explains the doctrine set forth in the text: "Here the default, if any 
 has occurred, is not of the substance of the contract, but in time of the pay- 
 ment of interest, and the company can be given all that it stipulated to re- 
 ceive. On the other hand, to forfeit the whole policy on account of default 
 in time of payment of the interest, which formed but a small part of the con- 
 sideration, and wliich the company is fully secured in the ultimate payment 
 of, if not already paid, would impose upon the insured the entire loss of the 
 premiums actually paid. A forfeiture under such circumstances would be 
 extremely oppressive, and, if provided for in a contract between individuals 
 concerning any ordinary business transaction, [would] be held as in the 
 nature of a penalty. And, as we are unable to perceive any reason for chan- 
 ging or relaxing the rule in respect to contracts about the business of life in- 
 surance, the forfeiture provided for in this case must be likewise so held." 
 See, also. New York Life Ins. Co. v. Curry (Ky.) 72 a W. 736, 61 L. R A. 
 268, holding that a provision in a contract of loan from an insurance com- 
 pany, for which its paid-up policy is pledged as collateral, that on default 
 in payment of interest for 30 days the policy shall, at the company's option, 
 be surrendered to it at the customary cash surrender value of i)olicies of 
 that class, is void. 
 
 Where there is no stipulation in the policy for forfeiture (see Cowles v. 
 Insurance Co., 63 N. H. 300; Ohde v. Insurance Co., 40 Iowa, 357, 5 Bigelow, 
 Ins. Cas. 145), or where the transaction is regarded by the parties to it as a 
 loan (see Bruce v. Insurance Cto., 58 Vt. 253, 2 Atl. 710), it seems that a for- 
 feiture for nonpayment of interest on premium notes will be held void, as a 
 penalty. See, also, Eddy v. Insurance Co., 65 N. H. 27, 18 Atl. 89, 23 Am. 
 St Rep. 17. 
 
 8» By the probable weight of authority, a provision in a paid-up policy 
 that it shall be forfeited for nonpayment in advance of interest on premium 
 notes is held valid, and will not be relieved against in equity. Holman v. 
 Insurance Co., 54 Conn. 195, 6 Atl. 405, 1 Am. St. Rep. 97; People v. Insur- 
 ance Co., 103 N. Y. 480, 9 N. a 35; Fowler v. Insurance Co., 116 N. Y. 389, 
 22 N. E. 576, 5 L. R. A. 805. See, also, Knickerbocker Life Ins. Co. v. Dietz, 
 52 Md. 16; Anderson v. Insurance Co., 1 Flip. 559, Fed. Gas. No. 362, 5 Bige- 
 low, Ins. Cas. 527. 
 
 90 Willcutts V. Insurance Co., 81 Ind. 300; Barnes v. Insurance Co., 74 N. 
 a 22, 5 Bigelow, Ins. Cas. 420. 
 
 m 
 
 ,;\ 
 
 to 
 
 §77) 
 
 FORFEITURE. 
 
 215 
 
 surer to insist upon such forfeiture. So the failure to pay one of 
 several installments of a premium note may, by the agreement of the 
 parties, avoid the whole contract. In such a case a stipulation that all 
 the installments shall be considered earned and payable, despite the for- 
 feiture of the policy, is enforceable, not being contrary to public policy 
 or unconscionable.®^ 
 
 Some question has arisen as to the effect of granting "days of grace," 
 for the payment of a premium due, upon the insurer's right to declare 
 the policy forfeited during the time of grace. Some of the English 
 cases seem to hold that during such period the rights of the insured are 
 suspended, and that, in case the sickness or death of the insured makes 
 it expedient, the insurer may refuse a tender of the premium made be- 
 fore the expiration of the days of grace, and declare the policy void. 
 Nearly all the American cases, on the other hand, hold that giving a 
 period of grace amounts to postponing, until the expiration of sucli 
 period, the insurer's right to enforce the forfeiture agreed upon. The 
 conflict is only apparent. The courts have but to determine the inten- 
 tion of the parties, and to give effect thereto. If the days of grace are 
 specified as a period within which a forfeited policy may be reinstated, 
 provided the insured himself pays the premium,'* or provided the in- 
 surer elects to receive a premium tendered,®' or upon any other condi- 
 tions,®* it is plain that the insurer could not be held liable for the death 
 of the insured within the period of grace, unless all the conditions re- 
 quired for reinstatement had been satisfied. But where the agreement 
 to give a period of grace for the payment of premiums amounts to an 
 extension of time for payment, so that the insured is not in default until 
 the expiration of that time, it is equally plain that the liability of the 
 insurer continues through the whole period of grace, and such is the 
 effect of the customary provision for grace in American policies. ''^ In- 
 deed, in many policies it is expressly stated that during the month of 
 grace the unpaid premium shall remain an indebtedness, which, with 
 interest, may be deducted from the amount to be paid under the policy 
 in case of death during that month. 
 
 •1 St Paul Fire & Marine Ins. Co. y. Coleman, 6 Dak. 458, 43 N. W. 693, 
 6 L. R. A. 87; Cauffield v. Insurance Co., 47 Mich. 447, 11 N. W. 264. 
 
 92 Simpson v. Insurance Co., 2 C. B. N. S. 257. 
 
 »3 Salvin v. James, 6 East, 571. 
 
 0* Actual payment "before loss" required. Bradley v. Insurance Co., 32 
 Md. 108, 8 Am. Rep. 121. Payment during "good health" of insured. Want 
 V. Blunt, 12 East, 183; Pritchard v. Society, 3 C. B. N. S. 622. 
 
 9 5 McMaster v. Insurance Co., 183 U. S. 25, 22 Sup. Ct. 10, 46 L. Ed. 64; 
 Howell V. Insurance Co., 44 N. Y. 276, 4 Am. Rep. 675; Homer v. Insurance 
 Co., 67 N. Y. 478; Farnum v. Insurance Co., 83 Cal. 246, 23 Pac. 869, 17 Am. 
 St Rep. 233; Spoeri v. Insurance Co. (C. C.) 39 Fed. 752. 
 
216 
 
 THB CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 r-' 
 
 M 
 
 Porfeiture when Annual Premium is Made Payable in Less than a 
 Year, 
 
 An interesting and important question concerning forfeiture of pol- 
 icies for nonpayment of premiums has arisen out of the practice of in- 
 i^urers to date policies issued as of the same date with the application, 
 which is also made the date for the payment of the recurring annual 
 premiums, while the policy does not in fact take eflFect as a contract un- 
 til delivery and payment of the first premium at a somewhat later date. 
 The result is an inconsistency between the several terms of the contract 
 Upon payment of the first premium and delivery of the policy the in- 
 sured is, under its terms, entitled to insurance for one year. Since the 
 insurance begins only with the delivery of the policy, and not from the 
 date written upon it, the year during which the insured is entitled to 
 protection should begin on the day of delivery and extend to the same 
 day in the succeeding year. Yet the policy also provides that if a pre- 
 mium falling due at a date, specified in the policy, earlier than the last 
 day of the year stipulated for, shall remain unpaid, the policy shall be 
 forfeited. Put briefly, the insurer by one term of his contract sells the 
 insured protection for one year from a certain date, and then in another 
 term declares the failure to pay a premium within that year will cut 
 short the insurance bargained and paid for. One term insures for a 
 whole year, another for part of a year. Applying the well-settled rule 
 that in cases of uncertainty and repugnancy the court will always adopt 
 that construction which will avoid a forfeiture, it seems safe to conclude 
 that the insurer will not be allowed to declare the insurance forfeited 
 before the expiration of a full year from the time when the policy be- 
 came binding, even though the express terms of the contract may ren- 
 der it forfeitable upon failure to pay an annual premium at an earlier 
 (lay.»« 
 
 
 •« It seems that, although the Insurer cannot forfeit the policy until the 
 end of the term for which premiums have been paid, nevertheless a failure 
 to pay the premium at the time specified will justify him In refusing to re- 
 new the Insurance. Thus In Tibbltts v. Insurance Co., 159 Ind. 671, 65 N. E. 
 1033, the policy, dated April 25th, was not issued until April 30th. The pol- 
 icy provided for the quarterly payment of premiums, the second of which 
 was to be paid "July 25th at or before twelve o'clock m.," and, In case of 
 failure to pay, the policy was to be forfeited. Payment was not made be- 
 fore noon on the 25th, and the insurer refused to receive It after that time. 
 The insured died August 10th. It was claimed by the plaintiff that, inas- 
 much as the policy became effective only on delivery (30th), a tender of 
 the premium at or before noon on July 30th was sufficient; but it was held 
 that the failure to pay ad diem as specified in the policy justified the insurer 
 in refusing to continue the policy. The question as to whether the risk was 
 terminated on July 25th or 30th was not raised. It would seem In accord- 
 ance with the principles stated in the text that. If the insured had died be- 
 fore July 30th, the insurer should have been held liable. 
 
 §n) 
 
 FOBFEITUBE. 
 
 217 
 
 This conclusion appears to be justified by the case of McMaster v. 
 New York Life Ins. Co.,®^ recently decided by the federal Supreme 
 Court. In this case the insured, on December 26, 1893, received, and 
 paid the first premium on, certain policies which bore date as of Decem- 
 ber 18, 1893, and which had been applied for on December 12th. The 
 insured did not read the policies delivered, being assured by the agent 
 that they conformed to his application. He did not, therefore, know 
 that the policy provided that the annual premiums should be payable 
 on December 12th of each year, and that a failure to pay any premium 
 within a month after it became due would avoid the policy, the designa- 
 tion of that date being due to the fact that the agent of the insurer, 
 without the knowledge or consent of the insured, inserted a request to 
 that effect in the application. The insured paid no other premiums, and 
 died on January 18, 1895. The insurer contended that the insured, 
 having accepted the contract offered him, was estopped to deny that he 
 had assented to all its terms ; that by its terms the policy was forfeited 
 on January 12, 1895, for nonpayment of the premium due on December 
 12, 1894 ; and this contention was supported by the judgments of both 
 the Circuit Court and of the Circuit Court of Appeals. But in the Su- 
 preme Court it was held that the acceptance of the policy by the in- 
 sured did not estop his representative to deny that he had requested the 
 policy to be dated December 12th, since he had been induced thereto 
 by the fraud of the agent of the insurer ; that he had a right to suppose 
 that he was insured for thirteen months from the time of the payment 
 of the first premium ; and that the insurance granted was not forfeitable 
 within that period. Then, apparently assuming that the provision for 
 payment on December 12th was a binding term of the contract, the 
 court says : "To hold the insurance forfeitable for nonpayment of an- 
 other premium within the year for which payment had already been 
 fully made, would be to contradict the legal effect under the applica- 
 tions and policies of the first annual payment. Clearly, such a con- 
 struction is uncalled for, if the words 'the 12th day of December in 
 every year thereafter' could be assumed to mean in every year after the 
 year for which the premiums had been paid. But, if not, taking all the 
 provisions together, and granting that the words included December 12, 
 1894, nevertheless it would not follow that forfeiture could be availed 
 of to cut short the thirteen months' immunity from December 18, 1893, 
 as the premiums had already been paid up to December 18, 1894." 
 The final conclusion of the court, that "the payment of the first year's 
 premiums made the policies nonforfeitable for the period of thirteen 
 months, and, inasmuch as the death of McMaster took place within 
 that period, the alleged forfeiture furnished no defense to the action," 
 seems to justify the inference, drawn above, that nonpayment of a pre- 
 
 •7 183 U. S. 25, 22 Sup. Ct. 10, 46 L. Ed. 64. 
 
218 
 
 THE CONSIDERATION PREMIUMS AND ASSESSMENTS. 
 
 
 (Ch.6 
 
 mium, made payable by the policy within a year from the time when 
 It became effective by the payment of the first annual premium, cannot 
 cause a forfeiture of the policy before the expiration of the full year 
 plus any period of grace allowed.®* 
 
 While conditions forfeiting the policies have repeatedly been desig- 
 nated "conditions subsequent," ®® they are yet unlike such conditions 
 of defeasance as are sometimes imposed on vested rights, such as in- 
 terests in real estate. The happening of such a condition does not of 
 itself defeat the estate upon which it is imposed ; some affirmative act 
 is necessary to enforce the forfeiture. But the condition of forfeiture 
 in the contract of insurance is self -operative ; upon breach of the condi- 
 tion the rights of the insured are terminated ipso facto.^®® No notice 
 need be given by the insurer of his intention to claim the forfeiture.^®^ 
 
 EXCUSES FOB NONPAYMENT; , 
 
 78. No ezcnses for failure to pay preminxas due oan be alleged in order 
 to prevent a forfeiture, save-* 
 
 (a) War, in some Jurisdictions. 
 
 (b) Insolvency of the insurer. 
 
 (c) Refusal of tendered premium. 
 
 (d) Any wrongful act of insurer preventing payment. 
 
 (e) Want of notice, when it is the duty of the insurer to give notice. 
 
 (f) Waiver of prompt payment. 
 
 In another respect the condition of forfeiture for nonpayment of 
 premiums is strikingly unlike the usual condition subsequent. Impos- 
 sibility of performance, not due to the default of the one under obliga- 
 tion to perform, will excuse the nonperformance of a condition subse- 
 quent; but even the act of God,^®^ rendering the payment of the pre- 
 
 •8 Of course, where policies take effect as of their date, delivery and pay- 
 ment of first premium not being required, failure to pay the annual premium 
 upon the date specified will avoid the policy. RUSE v. INSURANCE CO., 
 23 N. Y. 516. 
 
 »9 See Thompson v. Insurance Co., 104 U. S. 252, 26 L. Ed. 765; NEW 
 YORK LIFE INS. CO. v. STATHAM, 93 U. S. 24, 23 L. Ed. 789. 
 
 100 Attorney General v. Insurance Co., 93 N. Y. 70; Ashbrook v. Insurance 
 Co., 94 Mo. 72, 6 S. W. 462; United States Life Ins. Co. v. Ross, 159 111. 476, 
 42 N. E. 859; Schimp v. Insurance Co., 124 111. 357, 16 N. E. 229. 
 
 101 Attorney General v. Insurance Co., 93 N. Y. 70; Roehner v. Insurance 
 Co., 63 N. Y. 160. 
 
 102 The fact that at the time the payment was to be made the insured was 
 sick and delirious is no excuse for nonpayment of premium. Carpenter v. 
 Association, 68 Iowa, 453, 27 N. W. 456, 56 Am. Rep. 855. In this case the 
 court said: "It is true, it was impossible for the assured at the time re- 
 quired therein to perform it; but he could have provided for its performance 
 beforehand, and those of his family about him could have performed it for 
 him. The fact that the plaintiff did not know of the existence of the pol- 
 
 I! 
 
 §78) 
 
 EXCUSES FOR NONPAYMENT. 
 
 219 
 
 mium wholly impossible, will not prevent the forfeiture of a policy 
 when the premium remains unpaid. Thus the sickness or insanity of 
 the insured, rendering him wholly incapable of attending to business, 
 affords no excuse for a failure to pay premiums at the day."« Neither 
 will the fact that the policy is in possession of the insurer as pledgee,"* 
 so that the insured mistakes the date on which premiums are pay- 
 able, excuse a tardy payment."** In fact, no excuse whatever will 
 avail to prevent a forfeiture in case premiums due remain unpaid, un- 
 less such nonpayment has in some way been induced by the condition, 
 conduct, or default of the insurer. These may now be considered in 
 detail. 
 
 War. 
 
 The outbreak of war between the countries in which the insurer and 
 insured respectively reside renders it unlawful that premiums should 
 be paid or any other business transacted between them. In accordance 
 with the general principle stated above, the impossibility of lawfully 
 paying the premiums falling due during the war will not excuse their 
 nonpayment nor prevent a forfeiture. And such is the better view,"* 
 although it is properly held by the Supreme Court of the United States 
 that the insurer must pay to the insured the equitable value of his pol- 
 icy at the outbreak of the war."^ The majority of the courts passing 
 on this question have, however, in opposition to sound principle as it 
 would seem, held that the existence of war suspends the contract, and 
 thus prevents forfeiture for nonpayment of premiums that would oth- 
 
 Icy before her husband's death does not change the case. Prudence and care 
 on the part of the assured would have prompted him to prepare for the pay- 
 ment of the assessment upon the day it became due, and to inform his wife 
 of his contract, and his obligation to perform it at the time prescribed." 
 
 See, also, cases cited in following note; but see Hillyard v. Insurance Co., 
 35 N. J. Law, 415; Grand Lodge A. O. U. W. v. Brand, 29 Neb. 644, 46 N. 
 W. 95. 
 
 108 Thompson v. Insurance Co., 104 U. S. 252, 26 L. Ed. 765; KLEIN v. 
 INSURANCE CO., 104 U. S. 88, 26 L. Ed. 662; Howell v. Insurance Co. 44 
 N. Y. 277, 4 Am. Rep. 675; WHE3LER v. INSURANCE CO., 82 N. Y. 543, 37 
 Am. Rep. 594; Home Ins. Co. v. Wood, 72 S. W. 15, 24 Ky. Law Rep. 1G:JS. 
 The same rule applies to the payment of assessments in benevolent societies. 
 Hawkshaw v. Supreme Lodge (C. C.) 29 Fed. 770. 
 
 104 Howard v. Insurance Co., 6 Mo. App. 577. 
 
 lOB Nor will insured's absence from home excuse nonpayment. Webb v. In- 
 surance Co., 63 Md. 217 ; Greeley v. Insurance Co., 50 Iowa, 86. 
 
 108 NEW YORK LIFE INS. CO. v. STATHAM, 93 U. S. 24, 23 L. Ed. 789- 
 New York Life Ins. Co. v. Davis, 95 U. S. 425, 24 L. Ed. 453; Abell v. In- 
 surance Co., 18 W. Va. 400; Worthington v. Insurance Co., 41 Conn. 372 19 
 Am. Rep. 495; Dillard v. Insurance Co., 44 Ga. 119, 9 Am. Rep. 167. See, 
 also, supra, p. 94. 
 
 107 NEW YORK LIFE INS. CO. v. STATHAM. 93 U. S. 24. 23 L. Ed. 7Sy 
 See, also, Abell y. Insurance Co., 18 W. Va. 400, 
 
220 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. 
 
 (Ch.6 
 
 §T8) 
 
 EXCUSES FOR NONPAYMENT. 
 
 *>'>1 
 
 ^^1 
 
 I, 
 
 erwise have become due. According to this view, the suspended pre- 
 miums become payable upon the restoration of peace, and a tender then 
 of such premiums will revive the policy.^®* 
 
 Insolvency of the Insurer. 
 
 If the insurer has become insolvent and has suspended business, the 
 insured is not compelled to pay a premium that has fallen due, in order 
 to preserve his right to claim the value of his policy in such proceedings 
 as may be taken for winding up the business of the insolvent*®* But 
 the mere fact that the insurer is in an insolvent condition will not ex- 
 cuse failure to pay premiums due, if the insurer's business is not yet 
 suspended.**® 
 
 Refusal of Tendered Premiufiu 
 
 The act of the insurer or his agent in refusing the tender of a premi- 
 um properly made will necessarily estop the insurer from claiming a 
 forfeiture for nonpayment. The tender must be valid, and comply in all 
 respects with the requirements of the poHcy.*** So nonpayment was 
 excused where the agent of the insurer declined to accept the premium 
 tendered because the receipts needed had not been received from the 
 home office.*** A like rule applies if a tender has been decUned on 
 the groimd that the policy is already forfeited.*** Even the tender is 
 
 * 
 
 108 Cohen v. Insurance Co., 60 N. Y. 610, 10 Am. Rep. 522; Sands v. In- 
 surance Co., 50 N. Y. 626, 10 Am. Rep. 535; Robinson v. Society, 42 N. Y. 
 54, 1 Am. Rep. 490; Mutual Ben. Life Ins. Co. v. Hillyard, 37 N. J. Law, 444, 
 18 Am. Rep. 741; Clemmitt v. Insurance Co., 76 Va. 355; Mutual Benefit 
 Life Ins. Co. v. Atwood's Adm'x, 24 Grat. (Va.) 497, 18 Am. Rep. 652; New 
 York Life Ins. Co, v. Hendren, 24 Grat. (Va.) 536; Manhattan Life Ins. Co. 
 V. Warwick, 20 Grat (Va.) 614, 3 Am. Rep. 218; New York Life Ins. Co. v. 
 Clopton, 7 Bush (Ky.) 179, 3 Am. Rep. 290; Statham y. Insurance Ck)., 45 
 Miss. 581, 7 Am. Rep. 737. 
 
 In case of the death of the insured pending the war, no tender Is neces- 
 5?ary. Connecticut Mut Life Ins. Co. v. Duerson's Ex'r, 28 Grat (Va.) 630; 
 Martine v. Society, 53 N. Y. 339, 13 Am. Rep. 529. 
 
 loeBurdon v. Association, 147 Mass. 3G0, 17 N. K 874, 1 L. R. A. 146; 
 Attorney General v. Insurance Co., 82 N. Y. 336; Jones v. Life Ass'n, 83 Ky. 
 75, 7 Ky. Law Rep. 1; Jones v. Benefit Ass'n (Ky.) 2 S. W. 447; People v. 
 Insurance Co., 92 N. Y. 105. 
 
 110 Taylor v. Insurance Co., 9 Daly (N. Y.) 489; Benton y. Insurance CJo. 
 [1807] 34 Scottish L. R. 686. 
 
 111 Meyer v. Insurance Co.. 73 N. Y. 516, 29 Am. Rep. 200; Continental Ins. 
 Co. V. Miller, 4 Ind. App. 553, 30 N. E. 718. 
 
 112 Kantrener v. Insurance Co., 5 Mo. App. 581; Shear y. Insurance Co., 
 4 Hun (N. Y.) 800. 
 
 But the fact that the agent has no such receipt will not excuse payment or 
 tender. Morey y. Insurance Co., 2 Woods, 663, Fed. Cas. No. 9,795. 
 
 lis Travelers* Ins. Co. y. Pulling, 159 111. 603, 43 N. E. 762. 
 
 In Evans v. Insurance Co., 64 N. Y. 304, there was a stipulation in the 
 policy avoiding it in case the insured should reside in the South. On the 
 day the annual premium became due, an agent of the insured called at de- 
 
 excused if the insurer has clearly repudiated the contract before the 
 premium became due,*** and the refusal of one premium tendered 
 renders unnecessary further tenders of subsequently accruing pre- 
 miums.* *° 
 
 Payment Prevented by Wrongful Act of the Insurer. 
 
 It would be manifestly unjust to allow the insurer to claim a for- 
 feiture for nonpayment of a premium due when the insured's failure 
 to pay was due to the wrongful conduct of the insurer. Therefore, 
 when the insurer secures the surrender of a life policy without the 
 knowledge or consent of the beneficiary, the rights of the latter cannot 
 be forfeited on account of the nonpayment of subsequent premiums.**** 
 So the insurer is estopped in any case to claim a forfeiture when a sur- 
 render of the policy has been procured by misconduct.**^ Thus, in 
 Heinlein v. Imperial Life Ins. Co.,**® the agents of the insurer induced 
 the beneficiary under a policy to surrender it for cancellation by falsely 
 representing that the insurance was illegal and void, and returning the 
 
 fendant's office to pay it. The defendant declined to receive it, because the 
 insured was residing South, unless a percentage on the amount insured was 
 paid in addition, but agreed with the agent to continue the policy and givQ 
 credit for the amount claimed until the next day. On the next day the in- 
 sured's agent, having been authorized by his principal to pay the increased 
 rate, tendered the required amount to the insurance company, who refused 
 to receive it. It was held that as there was no agreement to pay, bind- 
 ing upon the insured, the promise of the defendant was without considera- 
 tion, and therefore not binding. 
 
 11* Manhattan Life Ins. Co. v. Smith, 44 Ohio St 156, 5 N. E. 417, 58 Am. 
 Rep. 806; Girard Life Ins. Co. v. Mutual Life Ins. Co., 86 Pa. 236; Hayner y. 
 Insurance Co., 69 N. Y. 435. See, also, Heinlein v. Insurance Co., 101 Mich. 
 250, 59 N. W. 615, 25 L. R. A. 627, 45 Am. St. Rep. 409. 
 
 11 B Meyer v. Insurance Co., 73 N. Y. 516, 29 Am. Rep. 200; Shaw y. In- 
 surance Co., 69 N. Y. 286; National Mut. Ins. Co. y. Home Benefit Society, 
 181 Pa. 443, 37 Atl. 519, 59 Am. St. Rep. 666. 
 
 ii« Whitehead v. Insurance Co., 102 N. Y. 143, 6 N. B. 267, 55 Am. Rep. 
 787; Garner v. Insurance Co., 110 N. Y. 206, 18 N. E. 130, 1 L. R. A. 256; 
 Manhattan Life Ins. Co. v. Smith, 44 Ohio, 156, 5 N. E. 417, 58 Am. Rep. 
 806; Mutual Ben. Life Ins. Co. y. Dunn, 106 Ky. 591, 51 S. W. 20. 
 
 But see Miles y. Insurance Co., 147 U. S. 177, 13 Sup. Ct. 275, 37 L. Ed. 128. 
 distinguishable on the ground of the insurer's good faith; SCHNEIDER v. 
 INSURANCE CO., 123 N. Y. 109, 25 N. E. 321, 20 Am. St. Rep. 727. 
 
 117 Where the insured surrendered his policy because of a mistake as to 
 the amount of the paid-up policy that he was to receive, and with a distinct 
 understanding between him and the agent of the company that he was to re- 
 ceive a new policy corresponding to such mistaken view, and the company 
 kept the policy for six months without giving the insured any notice of the 
 mistake, and then, by indorsement on the policy, attempted to reduce it to 
 a different amount, the insured was in no default, and did not forfeit his 
 rights under the policy. Lovell v. Insurance Co., Ill U. S. 264, 4 Sup. Ct 
 390, 28 L. Ed. 423. 
 
 !!• 101 Mich. 250, 59 N. W. 615, 25 L. R. A. 627, 45 Am. St Rep. 408l 
 
 i 
 
, « 
 
 'i 
 
 222 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. 
 
 (Ch.G 
 
 premiums paid. A premium accruing before the death of the insured 
 was not paid. But it was held that a court of equity should decree a 
 revival of the policy despite the surrender and nonpayment of the pre- 
 mium. 
 
 It is well recognized that, as between parties bearing no fiduciary 
 relation towards each other, neither a mistake nor an innocent misrep- 
 resentation as to the law governing a contract will afford any reason 
 for relieving the parties from the full legal consequences of their acts. 
 But a different rule has been applied to such misrepresentations, made 
 by an insurer, as to the legal effect of the contract made with the in- 
 sured. Thus, in a case decided by the Supreme Court of Minnesota,*^® 
 the insured was made to believe by the representations of the insurer 
 that an illegal assessment was valid, and payable on penalty of forfei- 
 ture. Rather than submit to the imposition of such assessments, the 
 insured declined to pay certain premiums legally due, and thus allowed 
 his policy to lapse. Upon the death of the insured it was held that, 
 since the misrepresentations of the insurer had caused the nonpayment 
 of the premiums and the consequent lapse of the policy, the insurer 
 could not set up a forfeiture in defense of an action by the beneficiary, 
 who was entitled to recover the amount of the policy less the premiums 
 unpaid. This holding was based on the theory that there existed a 
 quasi fiduciary relation between the parties. The correctness of the 
 decision is, to say the least, doubtful. 
 
 Want of Notice, and Waiver. 
 
 The insurer cannot claim a forfeiture for nonpayment of a premium 
 when he was under obligation to give the insured notice that such pre- 
 mium would become due, and had failed to do so. The question of 
 when the duty of giving such notice rests upon the insurer is discussed 
 in the following section. So, when the insurer has in any wise waived 
 his right to demand payment ad diem,**® he will be estopped to claim a 
 forfeiture for nonpayment. This is but a phase of the general subject 
 of waiver and estoppel, and will be reserved for treatment in the chap- 
 ter on that subject 
 
 ii» Colby V. Investment Co., 57 Minn. 510, 59 N. W. 539. 
 
 120 "Any agreement, declaration, or course of action on the part of an in- 
 surance company which leads a party insured honestly to believe that by 
 conforming thereto a forfeiture of his policy will not be incurred, followed 
 by due conformity on his part, will and ought to estop the company from 
 insisting upon the forfeiture, though it might be claimed under the express 
 letter of the contract." ^tna Life Ins. Co. v. Ragsdale's Adm'r, 95 Va. 579, 
 at page 582, 29 S. E. 328, at page 829, citing New York Life Ins. Co. v. Eg 
 gleston, 96 U. & 572, 24 L. Ed. 841. 
 
 §§ 79-80) 
 
 NOTICE OP PREMIUMS DUB. 
 
 NOTICE OF PBEMIUMS DUB. 
 
 223 
 
 79. IN OENERAIi— No oblisration rests upon tlie insurer to notify the 
 
 insured of the time 'when a premium falls due, unless such no- 
 tioe be required by statutory enactment or by agreement of the 
 parties. 
 
 80. STATUTORY PROVISIONS— In many states statutes have been 
 
 passed prohibiting forfeiture of life policies for nonpayment of 
 premiums, unless the insurer shall have g:iTen notice, a specified 
 time in advance, of the time ivhen the premiums would become 
 due, or of default in the payment of premiums already due. All 
 the requirements of such statutes niust be strictly ooniplied 
 with by the insurer before he can set up a forfeiture. 
 
 The insured, by accepting a policy containing a condition of forfei- 
 ture, agrees that his rights thereunder shall terminate if he fails to pay 
 the specified premium at the times therein designated. Under such 
 circumstances there cannot rest upon the insurer any legal obligation 
 to be the keeper of the insured's interest by giving him notice of the 
 arrival of the agreed time of payment, or by otherwise aiding him to 
 perform his part of the agreement."^ But the insurer may give no- 
 tice, and usually does so. This he may do, without the spur of legal 
 obligation, through semibenevolence and business expediency; or the 
 notice may be given under the requirements of law. Such a legal obli- 
 gation to give notice may arise from peculiar provisions in the policy, 
 or from the requirements of statutes. 
 
 Notice Required by Policy — Where Dividends are Applied to Premium. 
 It is manifest that the insured cannot be required to pay a premium 
 until he has knowledge of the amount of such premium. Therefore, 
 when the policy stipulates that all dividends apportioned to such policy 
 shall be applied in payment of premiums due thereon, the insured can- 
 not be in default for nonpayment until he has notice of the balance 
 due."« 
 
 121 Thompson v. Insurance Co., 104 U. S. 252, 26 L. Ed. 765. Punctuality 
 in the payment of premiums is of the very essence of the contract, and, 
 where payment is not made at the time, the company has the right to for- 
 feit, if such was the contract Holly v. Insurance Co., 105 N. Y. 437, 11 N. 
 E. 507; Continental Ins. Co. v. Dorman, 125 Ind. 189, 25 N. E. 213. 
 
 122 Phoenix Mut. Life Ins. Co. v. Doster, 106 U. S. 30, 27 L. Ed. 65; Meyer 
 V. Insurance Co., 73 N. Y. 516, 29 Am. Rep. 200; Nail v. Society (Tenn. Ch. 
 App.) 54 S. W. 109; Union Cent Ufe Ins. Co. v. Caldwell, 68 Ark. 505. 58 
 S. W. 355. 
 
 Where an insurance company has been accustomed to inform the insured 
 of the place where, and the agent to whom, he should make payment of each 
 premium as it fell due, the insured has a right to rely on receiving the usual 
 notice, and a nonpayment of a premium will not avoid the policy, in case 
 the agency at which payment had been previously made has been discontin- 
 
 IH 
 
 if 
 
 'II 
 
 
i 
 
 It 
 
 .1 1 
 
 224 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 Sa77ie — Stipulations in the Policy — Usage. 
 
 Likewise the insurer may agree to give notice of the maturity of 
 premiums. Such an agreement may be expressly made in the policy 
 itself, or in the insurer's charter or by-laws, or it may be made, express- 
 ly or impliedly, after the issue of the policy. Such express agreements 
 give rise to little difficulty. The bad standing of all forfeitures in 
 courts of justice throws upon the insurer the burden of proving actual 
 notice ^^^ given to the insured, and it is a question for the jury whether 
 the notice is sufficient.^^* 
 
 But much difficulty is found in determining when an agreement to 
 give notice can be implied from the conduct of the parties ; that is, when 
 the insured is entitled to rely upon the custom or usage of the insurer 
 to give notice. The usage relied on may be (1) a general usage among 
 insurers, or (2) a general course of business adopted by the particular 
 insurer towards all his policy holders, or (3) the customary course of 
 business between the insurer and the particular party insured, whose 
 rights are in question. It is manifest, and well settled, that to admit 
 evidence of usage in the first two cases would be to add, by parol, terms 
 to a written contract, which cannot be done. In the third case, how- 
 ever, the acts shown are subsequent to the written contract, and may 
 properly be shown in evidence as tending to prove a subsequent agree- 
 
 ued and the company has neglected to inform the policy holder where and 
 to whom the premium should be paid. New York Life Ins. Co. v. Eggles- 
 ton, 96 U. S. 572, 24 L. Ed. 841. 
 
 123 Columbia Ins. Co. v. Buckley, 83 Pa. 298; Supreme Lodge Knights of 
 Honor v. Dalberg, 138 111. 508, 28 N. E. 785. Where, under the terms of the 
 contract, the insurer must notify the insured of his liability for any dues, pre- 
 mium, or assessment, if such notice is sent by mail it is incumbent upon the 
 Insurer to show not only that the notice was properly addressed and mailed, 
 but also that it was actually received. Castner v. Insurance Co., 50 Mich. 
 273, 15 N. W. 452; Schmidt ▼. Insurance Co., 4 Ind. App. 340, 30 N. E. 939; 
 McCorkle v. Association, 71 Tex. 149, 8 S. W. 516. 
 
 Where a letter properly addressed is mailed, there is a prima facie pre- 
 sumption that it reached its destination. If its receipt is denied, however, it 
 is for the Jury to determine the weight of this presumption. Rosenthal v. 
 Walker, 111 U. S. 185, 4 Sup. Ct. 382, 28 L. Ed. 395; Meyer v. Krohn, 114 111. 
 574, 2 N. E. 495. It has been held that where the receipt of the letter Is denied, 
 it is reversible error to instruct the jury that there is a prima facie presump- 
 tion that it was received. Home Ins. Co. v. Marple, 1 Ind. App. 411, 27 N. B. 
 033. 
 
 The terms of the contract, Itself, or the provisions of a statute governing 
 the subject, must in all cases be looked to, to determine the sufllciency of 
 the notice given. The requirements of the contract or the statute may be 
 satisfied by the proper mailing of the notice alone. Survick v. Association 
 (Va.) 23 S. E. 223; McKenna v. Insurance Co., 73 Iowa, 453, 35 N. W. 519. 
 
 As to when notice by publication is sutficient under a clause of the char- 
 ter, see Pennsylvania Training School v. Independent Mut Fire Ins. Co., 12T 
 Pa. 559, 18 Atl. 392. 
 
 i«4 Columbia Ins. Co. v. Buckley, 83 Pa. 293, 24 Am. Rep. 172. 
 
 i\ 
 
 §§ 79-80) 
 
 NOTICE OF PREMIUMS DUE. 
 
 225 
 
 ment upon the part of the insurer to give notice. And while there is 
 weighty authority to the contrary, it seems to be generally held that 
 such a custom on the part of the insurer is alone sufficient to raise such 
 an implied agreement, and to prevent a forfeiture without notice."* 
 
 Statutory Notice. 
 
 Where the subject of notice is governed by statute, the statute forms 
 a part of every contract of insurance made within that jurisdiction or 
 with reference to its laws, and governs the rights and obligations of 
 the parties in like manner as if all of its terms and conditions had been 
 mcorporated in the written agreement. The provisions of the statute 
 must be strictly complied with, both as to the form of the notice and 
 the time and manner of giving it.^^e j^ jg ^^^^ ^j^^^ . 
 
 (1) If the statute does not prescribe what kind of notice shall be 
 given, personal notice is necessary. 
 
 (2) If notice by mail is declared sufficient, the requirements of the 
 statute are satisfied when the notice is properly addressed and mailed, 
 though it fails to reach the insured."^ 
 
 While statutory enactments requiring notice are for the benefit of 
 the insured, it is nevertheless held that it would be contrary to public 
 policy to allow him to waive the benefit of them. Any such waiver is 
 "ultra vires and void." "« The insured may, however, voluntarily 
 elect to terminate the contract, and by doing so he necessarily forfeits 
 
 "5 MAYER V. INSURANCE CO., 38 Iowa, 304, 18 Am. Rep. 34; Helme v. 
 Insurance Co., 61 Pa. 107, 100 Am. Dec. 621; Grant v. Insurance Co., 76 Ga. 
 ^; Union Cent. Life Ins. Co. v. Pottker, 33 Ohio St. 459, 31 Am. Rep 555- 
 Hartford Ins. Co. v. Hyde, 101 Tenn. 396, 48 S. W. 968. 
 
 Contra, Thompson v. Insurance Co., 104 U. S. 252, 26 L. Ed. 765; Girard 
 Life Ins., Annuity & Trust Co. v. Mutual Life Ins. Co.. 97 Pa 15 
 
 126 Carter v. Insurance Co., 110 N. Y. 15, 17 N. E. 396; Baxter v. Insur- 
 ance Co., 119 N. Y. 450, 23 N. E. 1048, 7 L. R. A. 293. The phraseology of 
 the notice given must be as clear as the statute. Phelan v. Insurance Co 
 113 N. Y. 147, 20 N. E. 827, 10 Am. St Rep. 441. See Mutual Life Ins. Co' 
 V. Phinney, 178 U. S. 327, 20 Sup. Ct 906, 44 L. Ed. 1088, for the New York 
 statute in full. 
 
 "T McConnell v. Society, 92 Fed. 769, 34 C. C. A. 663. 
 
 As to computing time under the New York statute prohibiting the for- 
 feiture of a policy unless the insured fails to make payment within 30 days 
 after the receipt of notice, see Hicks v. Insurance Co., 60 Fed. 690 9 C C A 
 aS; Rosenplanter v. Society, 96 Fed. 721, 37 O. O. A. 566, 46 L. R. A 473- 
 Wachtel V. Society, 84 N. Y. 28, 38 Am. Rep. 478; Schmidt v. Insurance Co ' 
 4 Ind. App. 340, 30 N. E. 939; McKenna v. Insurance Co.. 73 Iowa, 453, 35 
 
 W« W. 019. 
 
 128 Griffith V. Insurance Co.. 101 Cal. 627, 36 Pac. 113, 40 Am. St Rep. 96; 
 Equitable Life Assur. Soc. v. Nixon, 81 Fed. 796. 26 C. Q A. 620* Hill v 
 Insurance Co. (C. C.) 113 Fed. 44, affirmed Mutual Life Ins. Oo v HilL 118 
 Fed. 708, 55 C. C. A. 536. ^ 
 
 Vance Ins.— 15 
 
226 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 all Statutory rights to which he was entitled while the contract was in 
 force.*" 
 
 An important question has arisen as to whether a statute requiring 
 notice, enacted by the state in which an insurance corporation is char- 
 tered and has its domicile, forms a part of its contracts made with 
 parties resident in other states. Plainly the terms of the policy may 
 incorporate therein the laws of the insurer's state, or it may be made 
 subject to the laws of such state if it is to be there performed. But 
 where the contract is made and to be performed in the state where the 
 insured resides, and there is no reference in the policy to the law of any 
 state as governing the contract, it has recently been held by the Su- 
 preme Court of the United States that the law of the insurer's residence 
 and incorporation, requiring notice, does not form any part of the con- 
 tract, and that the rights of the parties are governed by the law of 
 the place where the contract was made, which is always presumed to 
 be the law of the contract"* Many state courts, however, appear to 
 have held differently.*** 
 
 To whom Notice should be Given, 
 
 Where the insurer is required, either by reason of agreement or stat- 
 ute, to give notice of the time when premiums fall due, notice should 
 be given either to the insured, or to his assignee, who has assumed all 
 obligations under the contract, with the consent of the insurer."* 
 
 Where the insured is physically or mentally incapacitated from at- 
 tending to business, notice should be given to the beneficiary before the 
 policy is claimed to be forfeited for a failure on the part of the insured 
 to pay any premium which may be due, provided that the insurer has 
 been duly notified of this disability.*** 
 
 !«• Mutual Life Ins. Co. v. Phinney, 178 U. S. 327, 20 Sup. Ct. 906, 44 L. 
 Ed. 1088; Mutual Life Ins. Co. v. Sears, 178 U. S. 345, 20 Sup. Ct 912, 44 L. 
 Ed. 1096. But see Washington life Ins. Co. v. Berwald (Tex. Civ. App.) 72 
 
 S. W. 436. 
 
 isoMutiial Life Ins. Co. v. Cohen, 179 U. S. 262, 21 Sup. Ct 106, 45 L. Ed. 
 181. See, also, Mutual Life Ins. Co. v. Hill, 193 U. S. 551, 24 Sup. Ct 538, 48 
 L. Ed. 788, in which the provisions of the New York law requiring notice, 
 which were incorporated in the policy issued to a resident of Washington, 
 were held to be validly waived by another term of the policy. 
 
 isiMcConnell v. Society, 92 Fed. 769, 34 C. C. A. 663; Nail v. Society 
 (Tenn. Ch. App.) 54 S. W. 109; Equitable Life Assur. Soc. v. Nixon, 81 Fed. 
 796, 26 C. C. A. 620; Mutual Life Ins. Co. v. Hill, 97 Fed. 263, 38 C. Q A. 159, 
 49 L. R. A. 127. See article in 52 Cent Law J. p. 4. 
 
 i«» Brannin v. Insurance Co., 28 N. J. Law, 92. A voluntary assignee is 
 a stranger to the contract and therefore not entitled to notice. Lycoming 
 Fire Ins. Co. v. Storrs, 97 Pa. 354. 
 
 133 Buchanan v. Supreme Conclave, 178 Pa. 465, 85 Atl. 873, 34 Ij. B. A. 
 4S6, 56 Am. St Bep. 774. 
 
 (o> 
 
 (d) 
 
 g 81) PAID-UP POLICIES AND EXTENDED INSURANCE. 227 
 
 PAID-UP POLICIES AmO EXTENDED INSURANOB. 
 
 81. Amons the uoit importaat provision, of the so-oaUed "nonfor^ 
 feitable*' poUcies are those Kraating the delinquent poUoy 
 holder paid-np and extended insurance. The rights of the par- 
 ttes under suoh provisions necessarily depend upon the terms of 
 the agreement as written, but these general principles may be 
 stated: 
 
 (a) Ambiguities wiU be resolved in favor of the insured. 
 
 (b) The parties will be presumed to have continued the original con. 
 tract, so far as its terms are applicable to the new agreement. 
 
 All conditions precedent to the right to demand such paid-up or 
 extended insurance must be strictly compUed with, unless con- 
 trary to law. 
 
 The time specified within which a delinquent policy shall be sur- 
 rendered for commutation is of the essence of the contract. 
 A delay beyond that time will be fatal to the rights of the in- 
 ^tioL ""*'* **' however, much authority opposed to this prop- 
 
 DeHnitions. • 
 
 By "paid-up" insurance is meant a unilateral contract, executory as 
 to the insurer, but wholly executed as to the insured. The insurer 
 promises to pay in accordance with the terms of the contract, without 
 further payments of premiums by the insured. The consideration for 
 the insurance may have been given in the form of a single premium, 
 or of a senes of premiums already paid. 
 
 Extended insurance, called also "term" and "temporary" insurance 
 is the extension of the policy in its original amount for so long a period 
 as the value of the policy at the time of default will suffice to pay the 
 ^^\\?* Z"""^^ °^ ^^ ^^ premiums that would accrue within that peri- 
 od. The amount of paid-up insurance to which the insured is en- 
 
 fn^Ti Jk! "^'V^ *^? ^^^^ ^''^'' ^^ ^^^- S*- Mo- 1879, § 5983: "Policies non- 
 forfeitable, when. No policy of insurance on life hereafter issued by any 
 life insurance company authorized to do business in this state, on and after 
 the firat day of August, A. D. 1879, shall, after payment upon it of two full 
 annual premiums, be forfeited or become void by reason of the nonpayment 
 of premiums thereon^ but it shall be subject to the following rules of" 
 mutation, to wit: The net value of the policy, when the premium becomes 
 nf"t^!f , ! °!iP5^ '^^" ^® computed upon the American experience table 
 of mortality, with four and one-half per cent, interest per annum, and after 
 n!«r. f/''''^ three-fourths of such net value any notes or othei- indebted- 
 ness to the company, given on account of past premium payments on said 
 policy issued to tiie insured, which indebtedness shall then be c^cel^ the 
 balance shall be taken as a net single premium for temporary InZanc^ for 
 the full amomit written in the policy, and the term for wWch such tem^rarv 
 insurance shall be in force shall be determined by the age of theTraon 
 Whose life is insured at the time of default of premium, anf the assuSn 
 of mortality and interest aforesaid; but. if the poUcy slmU be Z7^Z 
 
 m * 
 
 I 
 
 ii 
 
i 
 
 228 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 titled in any case is also usually deteraiined by the reserve value of the 
 policy, which is regarded as a single premium paid at the time of de- 
 fault' in consideration of the insurer's promise to pay a certain sum 
 upon the happening of the event upon which it is contingent. Some- 
 times, however, the amount of paid-up insurance given is made equal 
 to the sum of all the premiums paid, or a certain part of the sum writ- 
 ten in the original policy, proportioned to the number of premiums 
 paid. Both paid-up and extended insurance are usually conditioned 
 upon the payment of certain initial premiums, ordinarily two or three. 
 
 Sources of the Right 
 
 As shown above, the delinquent policy holder has no inherent right 
 to the reserve value of his policy. The right of the insurer to enforce 
 an agreement of forfeiture is unquestionable. Hence any claim made 
 by the insured to paid-up or extended insurance must necessarily be 
 based upon an agreement or a statute according to him such a right. 
 It follows that the defaulting policy holder's claim must be brought 
 within the terms of such agreement or statute before it can be en- 
 forced."* The nonforfeiture features of different policies are so dis- 
 similar in both effect and phraseology that few rules of construction of 
 general application can be deduced from the numerous cases that cum- 
 ber the books, the decision in each case turning upon the peculiar word- 
 ing of the policy in suit. It will be well, however, to state a few prin- 
 ciples that are of value in determining the proper construction of all 
 such nonforfeiture agreements, however dissimilar in form or wording. 
 
 ment, payable at a certain time or at death, if it should occnr previously, 
 then, if what remains, as aforesaid, shall exceed the net single premium of 
 temporary insurance for the remainder of the endowment term for the full 
 amount of the policy, such excess shall be considered as a net single premium 
 for a pure endowment of so much as such premium will purchase, deter- 
 mined by the age of the insured at date of defaulting the payment of the 
 premium on the original policy, and the table of mortality and interest as 
 aforesaid, which amount shall be paid at the end of the original term of 
 endowment, if the insured shall then be alive." For the method of determin- 
 ing the amount of paid-up policy, see Id. § 5984. These statutes are set forth 
 and construed in Cravens v. Insurance Co., 148 Mo. 583, 60 S. W. 519, 53 L. 
 R. A. 305, 71 Am. St. Rep. 628. « , „ 
 
 In Nichols V. Insurance Co. (June. 1903) 176 Mo. 355. 75 S. W. 664, 62 L. R. 
 A 657, it was held that the term "paid-up insurance," under the statute, 
 meant insurance for life, fully paid up, and not temporary paid-up insurance. 
 
 186 Universal Life Ins. Co. v. Devore, 88 Va. 778, 14 S. E. 532. But in 
 Wilcox V. Society. 173 N. Y. 50. 65 N. E. 857, 93 Am. St Rep. 579, reversing 
 same case, 55 App. Div. 529, 67 N. Y. Supp. 269, it was held that the in- 
 sured's right to a paid-up poUcy was not defeated by his failure to surrender 
 his policy in accordance with the terms of the contract, due to the fact that 
 it had been stolen from him without his fault, he having performed all 
 other conditions, and that he was entitled to a decree for a paid-up policy 
 without first executing to the insurer a separate discharge or surrender of 
 the policy. 
 
 §81) 
 
 PAID-Ur POLICIES AND EXTENDED INSUIiANCB. 
 
 229 
 
 Rules of Construction. 
 
 We must first note that the theory of all nonforfeiture policies and 
 statutes is the preservation to the insured of the equitable value of his 
 policy despite his default in the payment of premiums.^'* Such pro- 
 tection to the insured against the evil consequences of his own neglect 
 or misfortune in regard to payment of premiums is the purpose of both 
 statute and contract. Hence the terms of such statutes are manifestly 
 to be construed in favor of the insured, and likewise the provisions of 
 policies, for the double reason that words should be construed strictly 
 against the person using them, and also in order to effectuate, so far 
 as possible, the general intent of the parties. These rules are well illus- 
 trated by two cases recently decided. In Cravens v. New York Life 
 Ins. Co.^*^ the statute of Missouri governing the contract provided that 
 upon failure to pay any premium, after the second, the insured should 
 be entitled to extended insurance, or, upon demand made within sixty 
 days after default, he might receive a paid-up policy. The insured 
 failed to pay the fifth or any subsequent annual premium, and died with- 
 in the term for which his insurance was extended by the terms of the 
 statute, never having demanded a paid-up policy. The insurer claimed 
 the right to waive the demand for the paid-up policy, and to be there- 
 fore liable only for such an amount as should have been written in a 
 paid-up policy at the time of default, which was found to be $2,670. 
 The plaintiff, however, claimed the full face of the policy, $10,000, 
 less unpaid premiums, under the provision for extended insurance. 
 The court held that statute had been enacted for the benefit of the in- 
 sured, and that none of its conditions could be waived to his prejudice. 
 Drury's Adm'x v. New York Life Ins. Co.^*® involved the construc- 
 tion of a policy which provided for paid-up insurance upon surrender 
 of the policy and demand made within six months after default in pay- 
 ment of any annual premium after the third, or, in the absence of such 
 surrender and without request, it was stipulated that the insurance 
 would be extended for the face of the policy during such term as was 
 provided in a "table of loans and surrender values in paid-up or ex- 
 tended insurance." For the fourth annual premium the insured gave 
 his note, in which it was stipulated that the policy should be forfeited 
 by the nonpayment of interest and subsequent premiums, "except as to 
 a surrender value or paid-up policy." The insured died within the 
 term of extended insurance as fixed in the table, having left unpaid 
 both interest and subsequent premiums. It was held that the insurer 
 was liable for the full amount of the policy as extended insurance, that 
 being one of the "surrender values" fixed in the table, and so within 
 the exception contained in the terms of the note. 
 
 i»« Carter v. Insurance Co., 127 Mass. 153. 
 
 i»7 148 Mo. 583, 50 S. W. 519, 53 L. R. A. 305, 71 Am. St. Rep. 628. 
 
 !•• (Ky.) 74 S. W. 663, 61 L. R. A. 714. 
 

 230 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 The contract for paid-up insurance may be set forth in a separate 
 instrument, which the insurer agrees to issue, or it may be indorsed 
 upon the original policy, or merely contained in the terms of that pol- 
 icy.^" But in whatever form executed, the contract is subject to all 
 the terms of the original policy, so far as they are not inconsistent with 
 the new agreement.^** But it has been held that the indorsement of a 
 term granting paid-up insurance upon a policy amounts ta a waiver of 
 a known right to forfeit such policy.**^ Neither does the incorpora- 
 tion of a nonforfeiture statute into the policy make a new contract. 
 "When the statute provisions are adopted, in an endowment policy, for 
 the purpose of qualifying the forfeiture clause, the clause thus qualified 
 is to be so construed as to give the insured its full benefit, without alter- 
 ing any other provision of the policy." ^** Accordingly it was held 
 that extended insurance, given by the Massachusetts statute, became 
 payable, under an endowment policy, at the expiration of the endow- 
 ment period, in accordance with the terms of the policy, and not only at 
 the death of the insured.^** 
 
 Same — Conditions Precedent — Time Within Which Demand for Paid- 
 up Policy must he Made. 
 From what has been stated above, it is apparent that the insured can- 
 not make good his claim to paid-up or extended insurance without first 
 showing compliance with all conditions precedent that may have been 
 imposed upon the right to such commutation by the policy.^** Non- 
 forfeitable policies usually contain a condition requiring that the policy 
 holder shall surrender his policy and demand commuted insurance with- 
 in a specified time. If a policy, by its terms forfeitable upon nonpay- 
 ment of premiums, provides for paid-up insurance upon surrender of 
 the policy "on or before it expires by nonpayment" of some stipulated 
 premium, it seems to be generally held that the right to paid-up insur- 
 ance is lost upon the forfeiture of the policy. A demand for such in- 
 surance on any day after that on which the premium became due is too 
 late,^** and, when the policy does not limit the time within which com- 
 muted insurance shall be demanded, the time of making such demand 
 
 !•• Harlow v. Insurance Co., 54 Miss. 425, 28 Am. Rep. 358. 
 
 140 McDonnell v. Insurance Co., 85 Ala. 401, 6 South. 120; Merritt T. In- 
 surance Co., 55 Ga. 103. 
 
 1*1 Cotton States Life Ins. Co. v. Edwards, 74 Ga. 220. 
 
 i*» Carter v. Insurance Co., 127 Mass. 153. * 
 
 i*» Carter v. Insurance Co., 127 Mass. 153. For statutory provisions for 
 extended insurance under endowment policies, see Rev. St. Mo. f 5983; 3 
 Rev. St. N. Y. (8th Bd.) p. 1688. 
 
 144 Union Cent Life Ins. Co. v. Buxer, 62 Ohio St 385, 57 N. B. 66, 40 L. 
 B. A. 737; Universal life Ins. Co. v. Devore, 88 Va. 778, 14 S. B. 532. 
 
 146 Smith V. Insurance Co., 103 Pa. 177, 49 Am. Rep. 121; Meyer v. Insur- 
 ance Co.. 144 Ind. 439, 43 N. E. 448; Sheerer y. Insurance Co. (0. 0,) 20 Fed. 
 
 81) 
 
 PAID-UP POLICIES AND EXTENDED INSUKANCE. 
 
 231 
 
 is plainly at the option of the insured.^** So when the policy provides 
 for extended insurance without request or other act of the delinquent 
 policy holder, unless he shall within a specified time demand paid-up 
 insurance, there seems to be no question that such election is necessary 
 before the insured may claim paid-up insurance.^*^ 
 
 But the provision, frequently found in life policies, simply stipulat- 
 ing that failure to pay designated premiums shall not forfeit the policy, 
 provided it shall be surrendered and paid-up insurance demanded with- 
 in a term specified, is difficult of construction, and has caused much 
 confusion among the courts before which it has come. Some courts 
 have held that the effect of such a provision is to confer a right upon 
 the insured which may be demanded at any time within a reasonable 
 period, and that the time specified in the contract for the surrender of 
 the policy and making demand is not of the essence of the contract.^*® 
 The reason for this view may best be given in the words of Du Relle, 
 J., in Manhattan Life Ins. Co. v. Patterson : **• "The policy was null 
 and void, except for this remaining right. This right was absolute, 
 and, while it is provided that the company would issue a paid-up policy 
 'upon the surrender of its policy within six months after such lapse,' 
 the time was not of the essence of the contract. The whole considera- 
 tion had gone. There is no pretext appearing in the record that the 
 performance of its contract, for which it had received payment, was 
 more oppressive at the time it was demanded than if it had been de- 
 manded within the six months provided for. Some argument is made 
 that the delay in making the demand imposed upon the company the 
 burden of unnecessary bookkeeping. This we do not regard as sufficient- 
 ly burdensome to justify retaining the purchase money and refusing to 
 deliver the goods. As said in the Montgomery Case : *The premiums, 
 by express convention, paid for both current insurance and a paid-up 
 policy, and now to deny to the assured the benefit of a paid-up policy 
 because the old one was not surrendered in time is, in the strictest and 
 most obnoxious sense, a forfeiture. Such a claim is without support 
 
 886; Bussing's Ex'rs v. Insurance Co., 34 Ohio St 222; People v. Widows' 
 & Orphans' Ben. Life Ins. Co., 15 Hun (N. Y.) 8. 
 
 The violation of a condition against travel upon the seas without consent 
 of the insurer, for which a policy declares that it shall become void, defeats 
 a right to surrender that policy and obtain a paid-up policy for an amount 
 fixed by the terms of the policy with reference to the number of premiums 
 paid. Douglas v. Insurance Co., 83 N. Y. 492. 
 
 i4« Lovell v. Insurance Co., Ill U. S. 264, 4 Sup. Ct 390, 28 L. Bd. 423. 
 
 i*T Cravens v. Insurance Co., 148 Mo. 583, 50 S. W. 519, 53 L. R. A. 305, 71 
 Am. St. Rep. 628; Drury's Adm'x v. Insurance Co. (Ky.) 74 S. W. 663, 61 
 L. R. A. 714. But see Blake v. Insurance Co., 123 Oal. 470, 56 Pac. 101. 
 
 1*8 See Chase v. Insurance Co., 67 Me. 85; Dorr v. Insurance Co., 67 Me. 
 438 ; and Kentucky cases cited infra, note 150. 
 
 148 109 Ky. 624, 60 S. W. 383, 22 Ky. Law Rep. 1282, 53 L. B. A. 378, 95 
 Am. St. Rep. 393. 
 
 I 
 
 * 
 
 ;1 
 
 J 
 
 f 
 
 I 
 
 ( 
 
232 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 in reason, justice, or authority, and cannot be sanctioned in a court of 
 equity/ " »• 
 
 By the gfreat weight of authority, however, such a requirement is 
 regarded as a valid condition precedent, which must be strictly com- 
 plied with."^ Thus it has been held that an offer to surrender a 
 policy upon receipt of the paid-up term policy, although made within 
 the required time, was not a sufficient compliance with the requirement 
 that the policy "shall have been transmitted to and received by the com- 
 pany," within a time limit stated, before the insured should be entitled 
 to commuted insurance."* And this seems to be the sounder doctrine, 
 
 160 Tbe development of this doctrine In Kentucky Is quite remarkable. In 
 Montgomery v. Insurance Co., 14 Bush (Ky.) 51, the court, in a carefully con- 
 sidered opinion, decided that the time at which a paid-up policy should be 
 demanded was not of the essence of the contract, and that the right of the 
 insured to receive commuted insurance was not forfeited by his failure to 
 surrender his policy and make demand as required by the terms of the pol- 
 icy. The doctrine thus laid down was approved In Johnson v. Insurance Co., 
 79 Ky. 403; Northwestern Mut. Life Ins. Co. v. Fort's Adm'r, 82 Ky. 269; 
 Southern Mut. Life Ins. Co. v. Montague, 84 Ky. 653, 2 S. W. 443, 4 Am. St 
 Rep. 218 ; Germanla Life Ins. Co. v. Saur, 7 Ky. Law Rep. 297 ; but was, in 
 effect, overruled by the cases of Hexter v. Insurance Co., 91 Ky. 357, 15 S. 
 W. 863, and Northwestern Mut. Life Ins. Co. v. Barbour, 92 Ky. 429, 17 S. 
 W. 796, 15 L. R. A. 449, which restricted the right of the insured to demand 
 such paid-up policy to the time stipulated in the contract 
 
 In Mutual Life Ins. Co. v. Jarboe, 102 Ky. 80, 42 S. W. 1097, 39 L. R. A. 
 504, 80 Am. St Rep. 343 — ^the next case to come before the court— the two 
 preceding cases were disapproved, and the doctrine of the Montgomery Case 
 re-established. The Jarboe Case was followed and approved In Manhattan 
 Life Ing. Co. v. Patterson, 109 Ky. 624, 60 S. W. 883, 53 L. R. A. 378, 95 Am. 
 St. Rep. 393, and again In Washington Life Ins. Co. v. Miles, 112 Ky. 743, 
 06 S. W. 740. 
 
 In the case last mentioned, the court, being pressed to state a time after 
 which the right of the insured to a paid-up policy should terminate, desig- 
 nated five years — by analogy with the statute of limitations — as the extreme 
 limit of time within which such demand might be successfully made. This 
 rule was enforced so as to defeat a tardy claim in Equitable life Assur. Soc. 
 V. Warren Deposit Bank (Ky. 1903) 75 S. W. 275. 
 
 "1 KNAPP V. INSURANCE CO., 117 U. S. 411, 6 Sup. Ct 807, 29 L. Ed. 
 960; Attorney General v. Insurance Co., 93 N. Y. 70; Smith v. Insurance 
 Co., 103 Pa. 177, 49 Am. Rep. 121. 
 
 The fact that the insurer was enjoined from Issuing any policies during 
 the specified time was held to be no excuse for a failure to demand the paid- 
 up policy during such time. Universal Life Ins. Co. v. Whitehead, 58 Miss. 
 226, 38 Am. Rep. 322. 
 
 The death of the Insured does not terminate the right to a paid-np policy, 
 where within the time specified the owner of the policy surrenders it and 
 demaids the paid-up policy. WHEELER v. INSURANCE CO., 82 N. Y. 543, 
 37 Am. Rep. 594. See, also. Dorr v. Insurance Co., 67 Me. 438. 
 
 But the loss of the policy without fault of the owner excuses failure to 
 surrender within time designated. Wilcox v. Society, 173 N. Y. 50, 65 N. B. 
 857. 93 Am. St Rep. 579. 
 
 i»a Universal Life Ins. Co. v. Devore, 88 Va. 778, 14 S. E. 532. 
 
 §81) 
 
 PAID-UP POLICIES AND EXTENDED INSURANCE. 
 
 233 
 
 as well as the more reasonable practice. There seems to be no more 
 reason for saying that the forfeiture of a right to commuted insurance 
 by reason of a failure to surrender the original policy and make demand 
 within a time agreed upon is an inequitable penalty, than to say the 
 same of the forfeiture of all rights under a policy for the least default 
 in making payment of a premium due, the validity of which has never 
 been questioned. The insurer has a right to know, within a reasonable 
 time, the status of delinquent policies. Such knowledge is necessary, 
 in fact, to the safe and proper conduct of the insurer's business, espe- 
 cially in regard to the apportionment of dividends among surviving pol- 
 icy holders ; and a requirement that the delinquent policy holder shall, 
 within a reasonable time, make known his intentions with reference to 
 the continuance of his insurance, is reasonable, and should be enforced 
 as summarily as the provision for the payment of premiums. 
 
 It would seem, however, that a different rule should apply to pro- 
 visions forfeiting paid-up policies for failure to pay interest on notes 
 given to the insurer. As to such interest dues, the insurer occupies the 
 position of a money lender, who should not be allowed to enforce a 
 penalty imposed for the purpose of collecting an amply secured debt 
 As shown heretofore,"' however, there is much authority to the con- 
 trary. 
 
 Same — Required Premium Paid by Note. 
 
 The right to paid-up or term insurance is usually conditioned upon 
 the full payment in cash of a designated number of premiums, two or 
 three being ordinarily required. Without making these required pay- 
 ments in the manner stipulated, the insured can make no valid claim to 
 such a right.^»* Hence, when notes have been given for any of the re- 
 quired premiums, the intention of the parties being to extend thereby 
 the term for the payment of such premiums, no right to paid-up insur- 
 ance can exist while such notes remain unpaid. The premiums have 
 not yet been paid in the manner required by the terms of the policy. But 
 it is competent for the parties to agree that a note shall be taken as a 
 cash payment, or as part of a cash payment. Such a transaction 
 amounts to a loan made by the insurer to the insured. If such be the 
 nature of the transaction, as sufficiently proved, the insurer cannot deny 
 that the premiimi has been paid substantially in cash, nor can he refuse 
 to issue the commuted insurance if all other conditions have been satis- 
 fied. The indebtedness evidenced by the note will, however, constitute 
 a lien upon the policy in favor of the insurer.**" 
 
 IBS Supra, p. 218. 
 
 18* Equitable Life Assur. Soc. v. Spillman, 56 S. W. 710, 22 Ky. Law Rep. 
 183. 
 
 !«• Brooklyn Life Ins. Co. v. Dutcher, 95 U. S. 269, 24 L. Ed. 410. In 
 tbis case the court said: "The part of the annual premium for which a note 
 was to be given was, in substance and effect, a loan of so much money by 
 
 #1 
 
 III 
 
234 THB CONSIDBBATION — ^PBBMIUMS AND ASSBSSMBNT8. (Ch. 6 
 
 
 ^m 
 
 EFFECT OF NONPATMENT OF PREMIUM NOTES. 
 
 82. The nonpayment of a premlvni note does not affect the rights and 
 liabilities of the parties to the insurance contract, in the ab- 
 sence of eacpress provision to that effect. It is frequently 
 agreed, however, that the policy shall be forfeited by a failure 
 to pay such a note at its maturity. 
 
 Suoh an agreement may be contained— (a) In the policy, or in both the 
 policy and the note; in which cases it will be enforced in exact 
 accordance with its terms, (b) In the note alone, when, by 
 the better reason and authority, nonpayment of the note avoids 
 the policy; but in some jurisdictions it is held that upon such 
 nonpayment the insurer has merely a right to enforce a for- 
 feiture, xvhich must be done by sonie affirmative act. 
 
 Where there is no express agreement that the policy shall be avoided 
 by a failure on the part of the insured to pay, at its maturity, a note 
 given in payment of a premiimi, such a failure on his part to discharge 
 his liability on the note does not work a forfeiture of the policy, but 
 merely gives the insurer a right of action on the note.^** 
 
 the company to tbe assured. It was so described In the receipt of the com- 
 pany for the premium, and in the contract of the parties. If the money had 
 been actually paid to the company, and the next moment loaned back, and 
 the note then taken, there would not have been room even for a quibble upon 
 the subject Why go through such a ceremony? Why not go directly, as 
 was done, to the end in view? The intent which animated the conduct of 
 the parties determines its character. The receipt and contract both show 
 that the transaction was regarded by both parties as a payment of money to 
 one, and a loan back to the other, for which the note was taken. The re- 
 ceipt was for the full amount of the premium. The note and loan were men- 
 tioned by way of memorandum, as a distinct matter. The law never re- 
 quires an idle thing to be done. It would clearly have been this, and noth- 
 ing else, if the assured had actually handed over the money and note with 
 one hand, and, eo instante, with the other taken back the money. The com- 
 pany had the power to waive the actual production and payment of the 
 money, and to receive a note bearing interest, as the same thing. It has 
 exercised this power, and is estopped to deny the consequence.** See, also, 
 Bruce v. Insurance Ck)., 58 Vt. 253, 2 Atl. 710. In an action for breach of con- 
 tract to issue a paid-up policy, it seems that the amount of damages is not 
 the whole sum paid as premiums, but the equitable value of the policy; L 
 e., the amount necessary in order to purchase a paid-up policy for the stipu- 
 lated sum in a reputable company. See Phoenix Mut. Life Ins. Co. v. Baker, 
 85 111. 410; Union Cent. Life Ins. Co. v. McHugh, 7 Neb. 66; Rumbold v. 
 Insurance Co., 7 Mo. App. 71; Missouri Valley Life Ins. Co. v. Kelso, 16 
 Kan. 481. But see Watts v. Insurance Co., 16 Blatchf. 228, Fed. Cas. No. 
 17,294; Farley v. Insurance Co., 41 Hun (N. Y.) 303; Nashville Life Ins. Co. 
 V. Mathews, 8 Lea (Tenn.) 499. But where the insured elects to consider the 
 regular policy as In force, the measure of damages is the difference between 
 the value of a paid-up policy and the life policy retained by the insured. 
 American Life Ins. & Trust Co. v. Shultz, 82 Pa. 46. 
 i««Shaw T. Insurance Co^ 69 N. Y. 287; Michigan Mut life Ins. Co. t. 
 
 §82) 
 
 EFFECT OF NONPAYMENT OF PBEMIUM NOTES. 
 
 235 
 
 The right to accept a promissory note in payment of a premium is a 
 necessary incident to the right to issue a policy of insurance,"^ and a 
 legal presumption arises that, where the insurer chooses thus to accept 
 notes instead of a cash payment, he is acting in the furtherance of his 
 own interests. If no stipulation is inserted providing for the forfeiture 
 of the policy in case of nonpayment of the note at maturity, the rights 
 and obligations of the parties under the contract of insurance are the 
 same as if a cash payment had been made.^** 
 
 The parties to the contract may, however, enter into an agreement 
 that the failure to make payment of any premium note at its maturity 
 shall work a forfeiture of the policy. Such provisions are usually in- 
 serted either in the policy or in the note itself, and it becomes necessary 
 to determine what effect will be given them in each case. 
 
 Where there is a Stipulation in the Policy. 
 
 Where the policy contains a provision that a failure by the insured 
 to pay a premium note at its maturity shall avoid the policy, this stipu- 
 
 Bowes, 42 Mich. 19, 51 N. W. 962 ; Stepp v. Association, 37 S. 0. 417, 16 S. 
 B. 134; Massachusetts Ben. Life Ass'n v. Robinson, 104 Ga. 256, 30 S. E. 
 918, 42 L. R. A. 261 ; Griffith v. Insurance Co., 101 Cal. 627, 36 Pac 113. 40 
 Am. St. Rep. 96. 
 
 Where there is a provision in a policy that, in case of any loss under the 
 policy, the insurer may deduct an unpaid premium note, such a provision 
 will be enforced, despite the fact that the statute of limitations might pre- 
 vent a recovery on the note. ALEXANDER v. INSURANCE GO., 67 Wis. 
 422, 30 N. W. 727, 58 Am. Rep. 869. 
 
 Premiums are sometimes paid, in whole or In part, by assessment notes. 
 The liability on such notes is contingent upon the levying of an assessment 
 in prescribed mode, and under proper authority. They are not negotiable. 
 Savage v. Medbury, 19 N. Y. 32. Notes known as "capital stock notes" are 
 sometimes given, under statutory authorization, as a part of the capital stock 
 of a corporation. Rowland v. Edmonds, 24 N. Y. 307; White v. Haight. 16 
 N. Y. 310. 
 
 "T Farmers' Bank of Saratoga v. Maxwell, 32 N. Y. 579. A note given in 
 payment of a premium on a policy which is void is without consideration 
 and unenforceable. FROST v. INSURANCE CO., 5 Denio (N. Y.) 154, 49 
 Am. Dec. 234; Lynn v. Burgoyne, 13 B. Mon. (Ky.) 400. It was held in a 
 Massachusetts case, however, that a promissory note received in payment 
 of a premium by the officers of the company, who were ignorant of the fact 
 of its insolvency, was given for a valid consideration, and enforceable. Les- 
 ter V. Webb, 5 Allen, 569. 
 
 Where an insurance company takes the notes of some person other than 
 the Insured, it cannot, as against the insured, insist that they did not 
 amount to a payment Michigan Mut. Life Ins. Co. v. Bowes, 42 Mich. 19, 51 
 N. W. 962. So if an agent accepts in payment of a premium the note of a third 
 person, a failure to discharge the note at maturity does not forfeit the policy, 
 even though it contains a stipulation providing that the failure to pay any pre^ 
 mium note at its maturity shall avoid the policy. Galvln v. Insurance Co 
 (Ky.) 74 S. W. 275. 
 
 188 Massachusetts Ben. Life Ass'n v. Robinson, 104 Ga. 256, 30 S. E. 918, 
 42 U B. A. 261 ; Stepp v. Association, 37 S. C. 417, 16 S. E. 134. 
 
 « 
 
 M 
 
236 
 
 THB CONSIDERATION PREMIUMS AND ASSESSMENTS. 
 
 (Ch.6 
 
 lation will be enforced in exact accordance with its terms. As soon 
 as the note becomes due and unpaid, the insurer is released from all 
 liability under the contract, and this notwithstanding the fact that he 
 may have failed to make demand, or to give the insured notice of the 
 maturity of the note, unless the giving of such notice be required by 
 statute."^ 
 
 The forfeiture takes place as soon as the note is due and unpaid, and 
 no subsequent proceedings instituted by the insurer for the purpose of 
 enforcing the collection of the note will be construed as a waiver of 
 j^ i«o When, in addition to the provision in the policy, a similar stipu- 
 lation is contained in the note itself, the same results will naturally fol- 
 low a failure to make due payment of the note.^** 
 
 When the Stipulation is in the Note Alone. 
 
 In several cases it has been held that a different rule applies where 
 the condition of forfeiture upon nonpayment of a premium note at ma- 
 turity is found in the note only.^'* The failure to pay such a note, it 
 is said, does not avoid the policy ipso facto, in accordance with the 
 terms of the note, but merely gives the insurer a right to terminate a 
 policy by some affirmative act; and that, in the absence of evidence 
 showing a clear intent on the part of the insurer so to avoid a policy, 
 he will be deemed to have waived his right to do so.*'* This doctrine 
 is based on the theory that nonpayment of the note makes the contract 
 only voidable, not void ; and that therefore some act on the part of the 
 insurer is needed to make it void. "The mere nonpayment of the note 
 was not, alone," said the Ohio court in a leading case,*** "sufficient to 
 avoid the policy. Such payment was not a condition precedent to the 
 attaching or continuing of the risk. It was rather a note with a condi- 
 tion of defeasance, that might be made operative if desired." In a 
 
 159 Holly v. Insurance Co., 105 N. T. 437, 11 N. B. 507; Mclntyre ▼. Insur- 
 ance Co., 52 Mich. 188, 17 N. W. 781; Roehner v. Insurance Co., 68 N. Y. 
 160; Muhleman v. Insurance Co., 6 W. Va. 508; Imperial Life Ins. Co. v. 
 Glass, 96 Ala. 568, 11 South. 671; Blgelow v. Association, 123 Mass. 113. 
 
 Otherwise where a statute requires notice. Bradford v. Insurance Co., 112 
 Iowa, 495, 84 N. W. 693. 
 
 leo National Life Ass'n of Hartford v. Brown, 103 Ga. 882, 29 S. EV. 927. 
 
 i«i Thompson v. Insurance Co., 104 U. S. 252, 26 L. Ed. 765; Baker v. In» 
 surance Co., 43 N. Y. 283. 
 
 i«2 Mutual Life Ins. Co. t. French, 30 Ohio St 240, 27 Am. Rep. 443, ap- 
 proved in Thompson v. Insurance Co., 104 U. S. 252, 26 L. Ed. 765; Mont- 
 gomery V. Insurance Co., 14 Bush (Ky.) 51. But see Manhattan Life Ins. Co. 
 V. Pentecost, 105 Ky. 642, 49 S. W. 425; Same v. Myers, 109 Ky. 872, 59 a 
 W. 30, 53 L. R. A. 378, 95 Am. St Rep. 393; Dwelling House Ins. Co. v. Har- 
 die, 37 Kan. 674, 16 Pac. 92. See, also, MCALLISTER v. INSURANCE CO., 
 101 Mass. 558, 8 Am. Rep. 404; TRADE INS. 00. v. BARRACLIFP, 45 N. 
 J. Law, 543, 46 Am. Rep. 792; and Fithian v. Insurance Co., 4 Mo. App. 386. 
 
 !•» See cases cited in preceding note. 
 
 i«« Mutual Life Ins. Co. y. French, 30 Ohio St 240, 27 Am. Rep. 443. 
 
 §§ 83-84) 
 
 IN MUTUAL BENEFIT SOCIETIES. 
 
 237 
 
 Kentucky case ^®* it was said that to enforce such a condition would be 
 to impose a penalty upon the nonpayment of a debt. 
 
 But these views are clearly erroneous, and without any sound basis of 
 reason. It can make no possible difference in legal contemplation 
 whether the condition avoiding the policy for nonpayment of a premium 
 note is written on the face of the policy, or on the face of the note, or 
 on a premium receipt, or in any other properly executed instrument. It 
 is equally a part of the contract, and should be enforced as made. If 
 the insured has signed, and the insurer has received, a premium note 
 in which it is stipulated that if it shall not be paid at maturity the pol- 
 icy is to be null and void, a failure to pay operates of itself to avoid the 
 contract, and the mere fact that the insurer may waive the forfeiture if 
 he sees fit does not affect the case. Forfeitures for nonpayment of 
 premiums due can also be waived. To hold otherwise is to make a new 
 contract for the parties.^** The question came squarely before the fed- 
 eral Supreme Court recently in the case of Iowa Life Ins. Co. v. Lew- 
 is,**^ in which the condition of forfeiture was contained only in the 
 receipt given for a premium paid by note. It was held, reversing the 
 judgment of the Circuit Court, that upon the nonpayment of the note 
 at maturity the insurance ceased without further act by the insurer. 
 
 < 
 
 DUES AND ASSESSMENTS IN MUTUAL BENEFIT SOCIETIES. 
 
 S3, Dnes are fees payable to associations for the pnrpose of defraying 
 tlie ordinary expenses of administration. Assessments are snnis 
 payable as ratable contributions to make good a loss vrliich the 
 association bas agreed to indemnify. The nature of the liabil- 
 ity, and the consequence of nonpayment, depend in each ease 
 upon the terms of the contract. 
 
 84* No assessment is payable unless reasonable, and levied in strict ae- 
 cordance with the authority conferred by the charter, by-lairs, 
 and certificate. There is no presumption that an assessment Is 
 ▼alid. The burden of proving it so is upon the association. 
 
 xes Montgomery v. Insurance Co., 14 Bush, 51. 
 
 !•• In Holly V. Insurance Co., 105 N. Y. 437, 11 N. B. 507, Peckham. J., 
 uses the following strong language: "To that extent it was an alteration 
 of the terms of the policy, giving thirty days after a default in which to sur- 
 render and make a demand, and instead thereof it plainly provided for a total 
 and immediate forfeiture if at maturity the note were not paid. If lan- 
 guage as plain and unambiguous as this is not only to be twisted out of its 
 natural meaning, but is to be wholly ignored by courts of justice, it will be 
 useless in the future for companies to make any effort to bind policy holders 
 to perform their contracts. The use of language is to express ideas, and 
 writing is resorted to in order to furnish conclusive proof of what language 
 was used. Being certain of the language used, and the case being free from 
 fraud and mistake, if such language is plain and susceptible of but one 
 meaning, that meaning, even in cases regarding contracts of life insurance, 
 must control, though a forfeiture should be the result" 
 
 lei 18T U. S. 335, 23 Sup. Ct 126, 47 L. Ed. 204. To the same eflTect, see 
 
238 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. 
 
 (Ch.6 
 
 §§ 83-84) 
 
 IN MUTUAL BENEFIT SOCIETIES. 
 
 239 
 
 Mutual benefit associations, from their nature, can only accomplish 
 the purpose for which they are organized, and meet the losses which 
 they necessarily incur, when the individual members of the organization 
 are regular and prompt in meeting the obligations imposed upon them 
 by the terms of their contract, as set forth in the charter or by-laws of 
 the association or the certificate of membership. Chief among these 
 obligations, and the one which constitutes, to the greatest extent, the 
 consideration for the benefits which result to the members, is the prom- 
 ise to pay all properly levied dues and assessments, under penalty of 
 forfeiting membership in the organization on nonpayment.^'" 
 
 In order, however, for the member to be under an obligation to pay 
 an assessment, the assessment must be shown to have been legally lev- 
 ied under proper authority, and it must be reasonable.^ •• In de- 
 termining whether an assessment has been properly levied, the char- 
 ter and by-laws of the association must be examined. Each case is, 
 of course, to be governed by the terms of the contract, by which 
 alone the rights and obligation of the parties can be ascertained. 
 The authority to levy assessments is usually vested in the board of di- 
 rectors of the association, who, when such authority has been given 
 them, may exercise a reasonable discretion in determining the neces- 
 sity for an assessment,^ ^® and may fix or change the rate of the assess- 
 
 Holly V. Insurance Co., 105 N. T. 437, 11 N. E. 507; Ressler v. Insurance Co., 
 110 Tenn. 411, 75 S. W. 735. See, also. Kerns v. Insurapce Co., 86 Pa. 171; 
 Frank v. Assurance Co., 20 Ont. App. 564. 
 
 168 When a provision that the insured shall pay certain assessments in ad- 
 dition to cash premiums is made a part of the consideration for the policy, 
 and a condition of it, the acceptance of the policy is tantamount to an agree- 
 ment to make such payments. Whipple v. Insurance Co., 20 R. I. 260, 38 
 Atl. 498. 
 
 The member's promise to pay the assessments when duly called to meet 
 the obligations of the company accruing upon the deaths of other members 
 is the consideration for the benefit he derives from his insurance as a mem- 
 ber of the society. Ellerbe v. Barney, 119 Mo. 632, 25 S. W. 384, 23 L. R. A. 
 435. 
 
 !•• Rosenberger y. Insurance Co., 87 Pa. 207; Sands v. Graves, 58 N. Y. 
 94; American Mut Aid Soc. v. Helbum, 85 Ky. 1, 2 S. W. 495, 7 Am. St. 
 Rep. 571; Hartford Ins. Co. v. Hyde, 101 Tenn. 396, 48 S. W. 968. 
 
 170 Vandalia Mut County Fire Ins. Co. v. Peasley, 84 111. App. 138; Rosen- 
 berger V. Insurance Co., 87 Pa. 207. 
 
 Where the by-laws of a mutual benefit society provide that assessments 
 for death losses shall be levied by the board of directors, the board cannot 
 delegate such power to the president Garretson v. Association, 93 Iowa, 402, 
 61 N. W. 952. 
 
 In case of the Insolvency of a mutual benefit association, a court of equity 
 may authorize the levying of an assessment by an officer of the court Whit- 
 aker v. Meley, 61 N. J. Law, 1, 38 Atl. 840. 
 
 An order authorizing a receiver of a company to make a special assess- 
 ment on a policy, if within the jurisdiction of the court, cannot be questioned 
 
 ment, provided the apportionment is equitable.*^* If the member is 
 assessed for more than his just proportion, he is excused from pay- 
 ment; ^^* so, also, if the assessment is for losses incurred before he be- 
 came a member, or after his membership in the association has ter- 
 minated.*'* 
 
 Where a mutual benefit association relies upon the failure of any 
 member to pay an assessment as a forfeiture of his membership and all 
 benefits to which he was entitled, the association must show that the 
 assessment was legally made, in strict accordance with the charter and 
 by-laws.*'* If the defendant, however, seeks to excuse his failure to 
 
 in a collateral or ancillary proceeding. Capital City Mut Fire Ing. Go. v. 
 Boggs, 172 Pa. 91, 33 Atl. 349. 
 
 171 Ebert v. Association, 81 Minn. 116, 83 N. W. 506; Barbot y. Associa- 
 tion, 100 Ga. 681, 28 S. E. 498. 
 
 A limitation of six months in the by-laws of a mutual insurance company, 
 within which an assessment may be questioned, is valid. Survick v. Associa- 
 tion (Va.) 23 S. B. 223. 
 
 1" United States Mut Ace. Ass'n v. Mueller, 151 111. 254, 37 N. B. 882. 
 
 So, also, if other members liable to be assessed are knowingly omitted. 
 Swing V. Lumber Co., 62 Minn. 169, 64 N. W. 97. But slight errors in making 
 an assessment, which do not substantially affect the rights of the parties, do 
 not make the assessment invalid. Thropp v. Insurance Co., 125 Pa. 427, 17 
 Atl. 473, 11 Am. St Rep. 909. 
 
 The mere fact that the insured had paid mortuary assessments higher than 
 he was bound to pay under his certificate in an assessment life insurance com- 
 pany, in the absence of any showing of fraud, or that any one had been 
 misled by his conduct, did not estop him from contesting subsequent assess- 
 ments greater than he was bound to pay. Covenant Mut Life Ass'n v. Kent- 
 ner, 188 111. 431, 58 N. B. 966. 
 
 17 8 Capital City Mut Fire Ins. Co. v. Boggs, 172 Pa. 91, 33 Atl. 349; 
 Koehler v. Beeber, 122 Pa. 291, 16 Atl. 354. A failure to pay an assessment 
 levied on a member for a death which occurred prior to the date of his 
 certificate, the assessment being contrary to the plain provisions of a by-law 
 of the union, will not Invalidate the claim of his representatives to benefits. 
 Rowswell V. Union (C. C.) 13 Fed. 840. 
 
 174 As It is well expressed by Bennett, J., in a leading Kentucky case: 
 "Thus we see that In making assessments by the appellant [the society] up- 
 on its members, it does not act in a judicial, but in a ministerial, capacity. 
 Therefore no presumption can arise in favor of the regularity or legality of 
 its assessments. That the appellant's board of directors, or an executive 
 committee appointed by them, are the only persons authorized by appellant's 
 charter to make assessments against its surviving members, to pay the ben- 
 efits due the representatives of its deceased members. That a deceased mem- 
 ber of the society should have died, and that his representative was entitled 
 to a benefit arising from his death, and that an assessment upon all the sur- 
 viving members was actually made by the board of directors, or an execu- 
 tive committee appointed by them, for the purpose of i>aying said assess- 
 ments, are conditions precedent to the right of the appellant to demand pay- 
 ment of an assessment from any of its members. And they are not bound 
 to pay any assessment until these things occur. Nor do they forfeit their 
 membership by reason of their failure to pay such assessments, unless these 
 
 I 
 
 n 
 
240 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 g§ 85-86) WHEN PREMIUMS MAT BE RECOVERED. 
 
 241 
 
 •s ' 
 
 f 
 
 pay by showing fraud or misconduct on the part of the association, the 
 burden of proving this is upon him.^^* 
 
 Assessments — When Reasonable. 
 
 Even though an assessment be properly levied, and for a duly au- 
 thorized purpose, yet the members of the association will be excused 
 from payment unless it can also be shown to be reasonable. Whether 
 or not this requirement is satisfied can only be determined by a consid- 
 eration of each particular case as it arises, as, manifestly, it would be 
 impossible to lay down any general rule which could safely be followed. 
 In a leading Pennsylvania case it was held that, where an associa- 
 tion was authorized by its charter to levy assessments to pay present 
 losses, any further assessment made in anticipation of future losses 
 would be an unreasonable exercise of the discretion, as to fixing the 
 amount, given to the directors. Such an assessment, it was held, would 
 consequently be illegal and void, and the members of the association 
 excused from paying it.*^* 
 
 The body which has authority to make the by-laws of an association 
 may also, as a rule, amend or repeal them, subject to the restrictions 
 imposed by the charter or articles of the association; but any such 
 changes or amendments must be reasonable,* ^^ and, if this condition is 
 not satisfied, assessments made under authority of such amended by- 
 laws are invalid. An association may make a change in its regular 
 rate of assessment when levies made in accordance with the new rate 
 will be reasonable as to a member who has assented to the change, 
 although unreasonable as to other members who have withheld their 
 assent.*^* 
 
 things have occurred. And when the society relies upon the failure of any 
 of its members to pay his assessments, as a forfeiture of his membership 
 and benefits under its charter, it must show aflSi-matively that the assess- 
 ment was made in the manner indicated, otherwise the member cannot be 
 said to be in default." American Mut Aid Soc. v. Helbum, 86 Ky. 1, 2 S. 
 W. 495, 7 Am. St Rep. 571. The association must also show that an assess- 
 ment was necessary. Pacific Mut Ins. Co. v. Guse, 49 Mo. 329, 8 Am. Rep. 
 132; Susquehanna Mut Fire Ins. Co. v. Gackenbach, 115 Pa. 492, 9 Atl. 90. 
 
 The record of an assessment of a mutual insurance association, reciting 
 that the resolution ordering the assessment •*wa8 unanimously adopted by 
 the directors, as a body, and by the executive committee," is prima facie evi- 
 dence of its validity. Anderson v. Association, 171 111. 40, 49 N. B. 205. 
 
 17 5 Rosenberger v. Insurance Co., 87 Pa. 207; Susquehanna Mat Fire Ina 
 Co. V. Gackenbach, 115 Pa. 492, 9 Atl. 90. 
 
 176 Rosenberger v. Insurance Co., 87 Pa. 207. 
 
 ITT Thibert v. Supreme Lodge, 78 Minn. 448, 81 N. W. 220, 47 L. R. A. 136, 
 79 Am. St. Rep. 412; Mutual Reserve Fund Life Ass'n v. Taylor, 99 Va. 206, 
 37 S. E. 854. 
 
 As to what changes are deemed reasonable, see supra, p. 194. 
 
 ITS Mutual Reserve Fund Life Ass'n v. Taylor, 99 Va. 208, 37 S. B. 854. 
 
 "WHEN PREMrUMS MAY BE RECOVERED* 
 
 86. WHEN THE RISK HAS ONCE ATTACHED tlie whole premium li 
 deemed to be earned, and no portion thereof is returnable, even 
 thongh the risk may terminate before the expiration of the 
 term contracted for, unless— 
 
 (a) Such termination is due to the urrong of the insurer, or 
 
 (b) Such return is required by statute. 
 
 86. When the risk has never attached, the premium paid is always re- 
 turnable unless— 
 
 (a) The contract was rendered void ab initio by the fraud of the in- 
 
 sured, or 
 
 (b) The contract is illegal, and the parties in pari delicto. 
 
 The general rule is that the insurance granted is the entire consid- 
 eration for the premium received, and hence, if the risk has attached 
 by reason of the contract's becoming binding upon the insurer, the 
 whole premium must be considered as earned, and therefore cannot be 
 apportioned in case the risk terminates before the end of the term for 
 which the insurance was granted."' Thus, in the leading case of Ty- 
 rie V. Fletcher,"® the plaintiff had procured insurance upon a certain 
 vessel for a period of twelve months, in consideration of a certain pre- 
 mium paid. The vessel was taken by an American privateer some two 
 months after the inception of the policy. This being an excepted risk, 
 and the underwriter thus being discharged from all liability under the 
 contract for the remaining portion of the term agreed upon, the insured 
 brought suit to recover a proportionate part of the premium paid. 
 But the judgment of the court was in favor of the defendant. Lord 
 Mansfield saying, in his opinion : "that, if that risk of the contract of 
 indemnity has once commenced, there shall be no apportionment or re- 
 turn of premium afterward. For though the premium is estimated, 
 and the risk depends, upon the nature and length of the voyage, yet if 
 it has commenced, though it be for only twenty-four hours or less, the 
 risk is run. The contract is for the entire risk, and no part of the 
 consideration shall be returned." The rule thus laid down by Lord 
 Mansfield has never been questioned.^ *^ Of course, when the contract 
 
 iT»Tyrie v. Fletcher, Cowp. 666; Richards, Ins. Oas. 265; Hendricks v. 
 Insurance Co., 8 Johns. (N. Y.) 1; Waters v. Allen, 5 Hill (N. Y.) 421; Con- 
 tinental Life Ins. Co. v. Houser, 111 Ind. 266, 12 N. E. 479; Joshua Hendy 
 Mach. Works v. American Steam Boiler Ins. Co., 86 Cal. 248, 24 Pac. 1018, 
 21 Am. St Rep. 33. 
 
 See, also, Blaeser v. Insurance Co., 37 Wis. 31, 19 Am. Rep. 747; Taylor 
 v. Lowell, 8 Mass. 331, 3 Am. Dec. 141; Metropolitan Life Ins. Co. v. McCor- 
 mick, 19 Ind. App. 49, 49 N. E. 44, 65 Am. St, Rep. 392. 
 
 ISO Cowp. 666; Richards, Ins. Cas. 265. 
 
 181 See Civ. Code Cal. § 2618; Mailhoit v. Insurance Co., 87 Me. 874, 32 
 Atl. 989, 47 Am. St. Rep. 336, and cases cited supra, note ITOl 
 Yakcb Irs. — 10 
 
242 
 
 THE CONSIDERATION PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 §§ 85-86) 
 
 WHEN PREMIUMS MAT BE RECOVERED. 
 
 243 
 
 is divisible, consisting of several distinct risks, the premium paid for 
 any particular risk is not earned until that risk has attached.^ ®^ 
 
 The general rule stated above applies when valid insurance is ter- 
 minated by any cause whatsoever, excepting the act of the insurer him- 
 self."* It is frequentiy stipulated, however, in fire policies, that ei- 
 ther party to the contract may, after notice given to the other, termi- 
 nate the insurance, in which event an agreed proportion of the premium 
 is returnable."* So the law gives to an infant insured the right to 
 terminate his contract of life insurance without suffering the conse- 
 quences to which the adult is subject. He will not be allowed to re- 
 cover the premiums paid, however, but only the equitable value of his 
 insurance at the time of repudiation."* It seems, however, that an in- 
 fant would not be allowed to rescind his contract of fire insurance, if 
 the risk had attached, and recover any part of the premium paid. He 
 could not restore the consideration received, which is the incurring the 
 
 182 In Stevenson v. Snow (1761), 3 Burr. 1237, 1 W. Bl. 318, a ship was In- 
 sured, "lost or not lost, at and from London to Halifax, warranted to depart 
 with convoy from Portsmouth, for the voyage." The convoy left the ship 
 before she reached Portsmouth. The underwriters were notified, and re- 
 quested either to make long insurance, or to return part of the premium, and, 
 on their refusal, an action was brought to secure the return of a proportion- 
 ate part of the premium for the voyage from Portsmouth to Halifax. On the 
 trial it was shown that it was the custom of underwriters to treat such con- 
 tracts as divisible, and to return a proportionate part of the premium; and 
 the court, construing the contract according to the intent of the parties, 
 decreed the return. See, to same effect. Gale v. Machell (1785) 2 Marsh. Ins. 
 667; Long v. Allen (1785) 4 Doug. 276. But see Meyer v. Gregson (1784) 3 
 Doug. 402, distinguishable on the ground that no usage was found to regard 
 the contract as divisible. 
 
 Where the policy was on a voyage "at and from New York to Montevideo 
 and Buenos Ayres, and at and from thence back to New York," and the stip- 
 ulation for premium was "one and three-fourths per cent, each way," in an 
 action on premium notes by the insurer, the vessel having been burned by 
 her master soon after leaving New York (this, of course, discharging the in- 
 surer), it was held that the contract was divisible, and he could recover the 
 premium for the outward voyage only. Waters v. Allen, 5 Hill (N. Y.) 421. 
 
 188 Any breach of condition by the Insured whereby his policy is forfeited 
 will deprive him of all rights in the unearned portion of the premium paid. 
 Dickerson v. Insurance Co. (1902) 200 111. 270, 65 N. E. 694; Phoenix Ins. Co. 
 V. Stevenson, 78 Ky. 150. Where new Insurance was taken out before tht 
 presentation of the first insurance policy for cancellation, and the first pol- 
 icy contained the usual clause avoiding it in case of additional insurance, 
 the insured cannot recover the unearned portion of the premium. Farmers' 
 Mut Ins. Co. V. Phenix Ins. Co. (Neb. 1902) 90 N. W. 1000. 
 
 184 See International Life Ins. & Trust Co. v. Franklin Fire Ins. & Trust 
 Co., 66 N. Y. 119; HoUingsworth v. Insurance Co., 45 Ga. 294, 12 Am. Rep. 
 579. 
 
 185 JOHNSON V. INSURANCE CO., 56 Minn. 365, 59 N. W. 992, 26 U R. A. 
 187, 45 Am. St Rep. 473; ElUott, Ins. Cas. 5; Woodruff, Ins. Caa. 22. See 
 supra, p. 91. 
 
 risk by the insurer, and should not be allowed to recover what he has 
 paid.^®* 
 
 When Insurance Terminated by Act of Insurer, 
 
 The insurer cannot himself terminate his liability and retain the pre- 
 mium paid him. Even though he may act in perfect good faith in re- 
 pudiating the contract for a supposed breach of condition, yet, if his 
 act is in fact wrongful, he will not be allowed to retain the premium 
 paid."^ The most frequently occurring instance of the insurer's re- 
 pudiation of his contract is his wrongful declaration of a forfeiture not 
 really incurred. Any other act showing a clear intention on the part of 
 the insurer not to be bound by the policy is, however, sufficient.^®* 
 Thus the wrongful expulsion of a member of a mutual benefit associa- 
 tion, whereby he is denied any rights to benefits contracted for, will 
 afford ground for an action to recover premiums paid.^®* So an as- 
 signment made by an insolvent insurer for the benefit of his creditors 
 constitutes a breach of his contract, and the claims of the policy holders 
 for damages must be reckoned among the liabilities of the insolvent.* •• 
 
 When the contract repudiated by the insurer grants insurance for a 
 definite term, for which a definite premium has been paid, as in the cus- 
 tomary contract of fire insurance, it is clear that the insured is entitled 
 to receive again the entire premium paid, with interest. The contract 
 
 i8« See Rice v. Butler, 160 N. Y. 578, 55 N. E. 275, 47 L. R. A. 303, 73 Am. 
 St. Rep. 703. 
 
 There is a conflict of opinion as to whether an infant who has paid cash, 
 and is unable to return the consideration, may disaffirm his contract and 
 recover the cash paid. The trend of modern authority seems to favor the 
 doctrine as stated in the text 
 
 187 McCall V. Insurance Co., 9 W. Va. 237, 27 Am. Rep. 558; McKee v. 
 Insurance Co., 28 Mo. 383, 75 Am. Dec. 129. See, also, Braswell v. Insurance 
 Co., 75 N. C. 8. 
 
 188 If a mutual company, by virtue of an act of the legislature, abandons 
 its plan of insurance without the insured's knowledge or consent, and there- 
 by reduces its funds upon which the insured relies for payment of endow- 
 ments contracted for, he may rescind the contract, and is entitled to a return 
 of the premiums paid thereon. People's Mut Ins. Fund v. Bricken, 92 Ky. 
 297, 17 S. W. 625. So where a benefit society issued plaintiff a certificate 
 for $5,000, and by a subsequent by-law reduced all certificates to $2,000, It 
 was held that a tender of a certificate for $2,000 to the plaintiff amounted 
 to such a repudiation of the contract as entitled him to recover all premiums 
 paid. Supreme Council American Legion of Honor v. Jordan, 117 Ga. 808, 
 45 S. E. 33. 
 
 i8» But such a member Is not entitled to a recovery of premiums because 
 of wrongful expulsion when he has neglected to pursue within the order 
 such remedies as were open to him under the association's regulations. Su- 
 preme Council Catholic Knights of America v. Gambatl, 29 Tex. Civ. App. 
 80, 69 S. W. 114. 
 
 i»o Clark v. Insurance Co., 130 Ind. 332, 30 N. E. 212. See, also. In re Min- 
 neapolis Mut Fire Ins. Co., 49 Minn. 291, 51 N. W. 921; Smith v. Insurance 
 Co., 65 Minn. 283, 68 N. W. 28, 33 L. R. A. 511. 
 
 i^" 
 
244 
 
 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 is entire, and the considerations given by the respective parties not ap- 
 portionable. Hence a failure on the part of the insurer to give any part 
 of the insurance promised works a total failure of consideration for the 
 premium received, which may, consequently, be recovered by the in- 
 sured as money had and received. But when the contract so repudi- 
 ated is in the form of the usual life insurance contract, for the indefinite 
 term of a life's duration, and for a consideration paid in periodic pre- 
 miums, it is much more difficult to arrive at a just determination of the 
 rights of the parties. In Day v. Connecticut General Life Ins. Co.^®^ 
 it is stated that, if the insurer wrongfully declares a policy forfeited, 
 three courses are left open to the insured : (1) He may elect to con- 
 sider the poHcy at an end, and in a proper action recover its just value ; 
 or (2) he may institute proceedings to have the policy adjudged in force ; 
 or (3) he may tender the premium, and then wait till the policy became 
 payable by its terms, when it can be enforced. This statement of the 
 law has been approved by Mr. Bacon,^®'* and adopted by at least one 
 court,^*' but there is much difference of opinion as to whether the in- 
 surer, upon breach of the contract, shall be liable to pay to the insured 
 the "just value" of the policy,^®* or the sum of all the premiums re- 
 ceived,^ •• or such sum as will, under the circumstances of the particu- 
 
 i»i 45 Conn. 480, 29 Am. Rep. 693. 
 
 i»2 Bac. Ben. Soe. § 376. See, also, Joyce, Ins. 8 1659. 
 
 i»8 Mutual Reserve Fund Life Ass'n v. Taylor, 99 Va. 208, 37 S. B. 854. 
 
 i«4 Day V. Insurance Co., 45 Conn. 480, 29 Am. Rep. 693; L.ovell v. Insur- 
 ance Co., Ill U. S. 264, 4 Sup. Ct. 390, 28 L. Ed. 423. 
 
 i»8 The rule that upon the insurer's wrongful termination of the contract 
 the insured is entitled to recover all premiums paid, with interest on each 
 from the date of payment seems supported by the clear weight of authority. 
 McKee v. Insurance Co., 28 Mo. 383, 75 Am. Dec. 129; McCall v. Insurance 
 Co., 9 W. Va. 237, 27 Am. Rep. 558. In North Carolina there is a long and 
 unbroken line of authorities to the same effect Braswell v. Insurance Co., 
 75 N. C. 8; Lovick v. Association, 110 N. O. 93, 14 S. B. 506; Bumis v. In- 
 surance Co., 124 N. C. 9, 32 S. E. 323; Hollowell v. Insurance Co., 126 N. C. 
 398, 35 S. E. 616; Strauss v. Association, 126 N. C. 976, 36 S. E. 352, 54 L. 
 R. A. 605, 83 Am. St. Rep. 699; s. c. 128 N. C. 468, 39 S. B. 55, 54 L. R. A. 
 605, 83 Am. St Rep. 699; Gwaltney v. Society, 132 N. C. 925, 44 S. B. 659. 
 
 See, also, Putnam v. Insurance Co., 42 La. Ann. 739, 7 South. 602; VAN 
 WERDBN V. SOCIETY, 99 Iowa, 621, 68 N. W. 892; Supreme CouncU Amer- 
 ican Legion of Honor v. Jordan, 117 Ga. 808, 45 S. B. 33; Suess v. Insurance 
 Co., 64 Mo. App. 1 ; Union Cent Life Ins. Co. v. Pottker, 33 Ohio St 459, 31 
 Am. Rep. 555; Helme v. Insurance Co., 61 Pa. 107, 100 Am. Dec. 621; Fisher 
 v. Insurance Co., 69 N. Y. 161. 
 
 In Day v. Insurance Co., 45 Conn. 480, 29 Am. Rep. 693, an action was 
 brought upon an implied contract of the insurer to receive the premiums ten- 
 dered and keep the policy in force. The insured claimed to recover all pre- 
 miums paid, although he had not elected to rescind the principal contract 
 The court denied the existence of such an implied contract and held that no 
 action would lie unless the contract were rescinded, in which case the "eq- 
 uitable and just value" of the policy might be recovered. 
 
 §§ 85-86) WHEN PREMIUMS MAY BE RECOVERED. ^45 
 
 lar case, compensate him for the damage suffered.^®' In some respects 
 a life insurance contract extends from year to year. The premium is 
 paid, and the risk newly attaches, each succeeding year. It would 
 therefore seem scarcely fair to the insurer to apply straitly the same 
 rule as obtains in fire insurance contracts. During the years in which 
 the policy was recognized as in force, the insured received protection 
 as partial consideration for the premiums paid, and to allow him to 
 recover the whole of his premiums, after having received such benefit, 
 would be to accord him more than his due. Neither, it seems, would it 
 be just in all cases to limit his recovery to the value of the policy at 
 the time of breach. The insured is entitled to be put in as good a posi- 
 tion as he occupied before the wrongful act of the insurer.^®^ To give 
 him the value of his policy would accomplish this result only when he is 
 in good health and insurable. If he is suffering from a serious disease, 
 or if for any other reason his expectancy of Ufe is reduced below the 
 average for his age, the equitable value of his policy would in no wise 
 compensate him for its loss. For these reasons it would seem that the 
 insurer should not be held liable for all the premiums paid, nor for the 
 "just value" of the policy, but rather, as held by the Minnesota court,"* 
 for the damage actually resulting at the date of the repudiation, due 
 account being taken of the value of insurance already had."' 
 
 In case the insurer's insolvency occasions his breach of contract, the 
 authorities seem agreed that the holders of fire poHcies are entitled to 
 recover only the unearned portion of premiums paid, and not the whole 
 amount.***** In life insurance the right of the insured against the in- 
 solvent insurer is to receive the equitable value of his policy, and not 
 the premiums paid.*®^ 
 
 Statutes Requiring Return of Premiums, 
 
 Pursuant to the general legislative policy of protecting the unwary 
 public against the lurking conditions of forfeiture in which, policies are 
 apt to abound, statutes have been enacted in some states requiring a 
 return of premiums received by the insurer before he shall be allowed 
 
 !•• Ebert v. Association, 81 Minn. 116, 83 N. W. 506, 84 N. W. 457. 
 
 i»T "Where one party to an executory contract prevents performance of 
 it or puts it out of his own power to perform it, the other party may regard 
 it as terminated and demand whatever damages he has sustained thereby.'* 
 Lovell V. Insurance Co., Ill U. S. 264, 4 Sup. Ct 390, 28 L. Ed. 423. 
 
 188 Ebert v. Association, 81 Minn. 116, 83 N. W. 506, 84 N. W. 457. 
 
 !•» See this view approved In People v. Security Life Ins. & Annuity Co., 78 
 N. Y. 114, at page 126, 34 Am. Rep. 522. 
 
 200 Smith V. Insurance Co., 65 Minn. 283, 68 N. W. 28, 33 L. R. A. 511. 
 And see 1 Wood, Ins. § 147; People v. Security Life Ins. & Annuity Co., 78 
 N. T. 114, 34 Am. Rep. 522. Dewey v. Davis, 82 Wis. 500, 52 N. W. 774„ 
 seems to be contra. 
 
 201 People v. Security Life Ins. & Annuity Co., 78 N. Y. 114, 34 Am. Repw 
 522; Universal Life Ins. Co. v. Binford, 76 Va. 103. 
 
 '! 
 
246 
 
 THE CONSIDERATION PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 to set up, in defense of an action on the policy, any misrepresentation 
 alleged to have been made in securing such policy.*®' Many other pro- 
 visions varying the common-law rules may be found in the several 
 states. Thus it is provided by the Civil Code of California *** that : 
 "Where the insurance is made for a definite period of time and the in- 
 sured surrenders his policy, he is entitled to a return of such propor- 
 tion of the premium as corresponds with the unexpired time after 
 deducting from the whole premium any claim for loss or damage un- 
 der the policy which had previously accrued." So in Virginia it is 
 provided that in case of the loss of property insured under a policy, by 
 the terms of which the insurer is liable to pay less than the sum 
 written on its face, and on which premiums have been paid, the 
 insurer shall be held liable to return to the insured a part of the pre- 
 mium, proportioned to the excess of the amount of the policy over the 
 
 amount actually paid.*®* 
 
 'i 
 
 When the Risk has never Attached. 
 
 A second rule was laid down by Lord Mansfield, in Tyrie v. Fletch- 
 er,*®* as a corollary to the one first quoted above, to this effect : "Where 
 the risk has not been run, whether its not having been run was owing 
 to the fault, pleasure, or will of the insured, or to any other cause, the 
 premium shall be returned, because a policy of insurance is a contract 
 of indemnity. The underwriter receives a premium for running the 
 risk of indemnifying the insured, and whatever cause it be owing to, if 
 he does not run the risk, the consideration for which the premium or 
 money was put into his hands fails, and therefore he ought to return 
 it" 
 
 The rule so stated, notwithstanding the eminent respectability of itb 
 origin, has not been accepted without qualification. Its terms are too 
 broad. If the fault of the insured, to which the failure of the risk to 
 attach was due, was willful and fraudulent, the insurer may neverthe- 
 less retain the premiums, for the insured shall not profit by his own 
 wrong. If the policy was void from its inception by reason of the un- 
 truth of any representation or warranty, the right of the insured to 
 have again his premiums depends solely on the character of the misrep- 
 resentation **• — ^if fraudulent, he cannot recover;*®^ but if innocent, 
 
 toj See section 5977, Rev. St. Mo., as applied in NEW YORK LIFE INS. 
 00. v. FLETCHER, 117 U. S. 519, 6 Sup. Ct 837, 29 L. Ed. 934. 
 
 208 § 2617. 
 
 ao* See Acts Va. 1897-98, p. 636. For provisions of somewhat similar Im- 
 port in the French Code de Commerce, § 356, see Barb. Ins. p. 100. 
 
 soBCowp. 666; Richards, Ins. Cas. 265. 
 
 «oe Fisher v. Insurance Co., 160 Mass. 386, 35 N. E. 849, 39 Am. St. Rep. 
 495. See Civ. Code Cal. § 2619. 
 
 207 Himely v. Insurance Co., 1 Mill, Const. (S. C.) 153, 12 Am. Dec. 623; 
 Blaeser t. Insurance Oo., 37 Wis. 31, 19 Am. Rep. 747. 
 
 §g 85-86) WHEN PREMIUMS MAY BE RECOVERED. 247 
 
 he may recover."' And the fact that the insurer would be estopped, 
 by reason of his false representations in securing the policy, to deny his 
 liability on the policy, does not prevent the innocent insured from 
 avoiding the policy ab initio, and recovering all ptemiums paid, with in- 
 terest thereon. As said by the court in Hogben v. Metropolitan Life 
 Ins. Co. : *<** "Her money had been paid in reliance on a valid con- 
 tract, and not on the chance of an estoppel." But when the misrep- 
 resentations are not material to the insured, nor in any wise injure him, 
 but affect the insurer only, the insured cannot rescind the contract and 
 require the return of his premiums.*^® 
 
 Same — Overinsurance. 
 
 Another application of the rule that premiums paid for a risk that 
 never attaches are recoverable is found in the case of overinsurance 
 The law is thus stated by Mr. Arnould in his excellent work on Marine 
 Insurance: *" "With regard to return of premium for short interest, 
 overinsurance, and double insurance, the principle on which the cases 
 depend is simply this : That if the underwriter could at any time, and 
 under any conceivable circumstances, have been called on to pay the 
 whole sum on which he has received premium, in such case the whole 
 premium is earned, and there shall be no return. If, on the other hand, 
 he could never in any event have thus been called on to pay the whole, 
 but only a part of the amount of his subscription— say a half or a fourth 
 —he ought not to retain a larger proportion than one-half or one-fourth 
 of the premium, and must return the residue." 
 
 American marine policies usually contain a provision that, if the 
 insurer shall be exonerated by prior insurance from any part of the 
 sum insured, a ratable portion of the premium shall be returned."* 
 
 When Insurance is Illegal. 
 
 When the insurance is void because illegal, the general rule is that 
 the premiums cannot be recovered.*" But if, in fact, the parties are 
 not in pari delicto, the law will suffer an innocent insured to take again 
 
 208 Jones V. Insurance Co., 90 Tenn. 604, 18 S. W. 200, 25 Am. St Rep. 706; 
 Insurance Co. v. Pyle, 44 Ohio St. 19, 4 N. E. 465, 58 Am. Rep. 781; Feise v. 
 
 Parkinson, 4 Taunt. 639. 
 
 209 69 Conn. 503, 38 Atl. 214, 61 Am. St. Rep. 53. See, also, Delouche v. 
 Insurance Co., 69 N. H. 587, 45 Atl. 414, in wliich it was held that the in- 
 sured, under similar circumstances, could recover the premiums paid, less 
 the value of the insurance, and that she was not obliged to accept a paid-up 
 policy or reinstatement offered. 
 
 2ioMailhoit v. Insurance Co., 87 Me. 374, 32 Atl. 989, 47 Am. St Rep. 336. 
 
 211 Vol. 2 (7th Ed.) p. 1426, § 1259. 
 
 212 2 Phil. Ins. § 1839. And see general rule well stated In sections 2620- 
 2622, Civ. Code Cal. 
 
 213 Andree v. Fletcher, 3 T. R. 266; Howard Y. Refuge Friendly Soc, 64 
 
 L. T. 644. 
 
 I 
 
248 THE CONSIDERATION — PREMIUMS AND ASSESSMENTS. (Ch. 6 
 
 his premiums,"* as when the insured was ignorant of the facts which 
 rendered the insurance illegal."" It is also held "« that where one, 
 having no insurable interest in the life insured, paid premiums in the 
 bona fide belief, induced by the statements of the insurer, that such 
 insurance was valid, he may recover the premiums paid despite the fact 
 that the contract was illegal. But it is otherwise when the insured w::s 
 a party to the wrong.*" 
 
 As heretofore shown, a policy issued without the consent of the life 
 insured is void. Therefore, when a wife expends money intrusted to 
 her for housekeeping purposes in paying premiums upon a policy taken 
 upon the life of her husband without his knowledge or consent, the 
 husband may, upon discovering the fraud and furnishing clear proof 
 that the moneys paid were his own, recover from the insurer all pre- 
 miums so paid, with interest thereon.*^* Such cases escape the settled 
 rule that a person who takes embezzled funds in due course of business, 
 
 «i* In holding that an assignee could recover premiums paid upon an ille- 
 gally assigned policy, the Indiana court, in American Mut. Life Ins. Co. v. 
 Bertram (Ind.) 70 N. a 258, said: "The question, then, is, had the appellee, 
 as the assignee of the policy, under the circumstances hereinbefore stated, 
 the right to recover the premiums and assessments paid by her on account 
 of the supposed insurance? The general rule is that an action will not lie to 
 recover premiums paid upon an insurance which is illegal by reason of the 
 policy being illegal by statute, or by reason of the Illegality of the adventure 
 insured. 14 English Ruling Cas. 533; Lowry v. Bourdleu, 2 Dougl. 468; Van 
 Dyck V. Hewitt, 1 East, 96; Russell v. De Grand, 15 Mass. 35; Welsh v. Cut- 
 ler, 44 N. H. 561; Feise v. Parkinson, 4 Taunt. 640; Anderson v. Thornton, 
 8 Ex. 425; Waller v. Northern Assur. Co., 64 Iowa, 101, 19 N. W. 865; Rich- 
 ards V. Marine Ins. Co., 3 Johns. (N. Y.) 307; NEW YORK LIFE INS. CO. 
 V. FLETCHER, 117 U. S. 519, 6 Sup. Ct, 837, 29 L. Ed. 934. But it Is held 
 that this rule does not apply where there has been no fraud on the part of 
 the plaintiff, where the policy is void because of innocent misrepresentations, 
 where the plaintiff has been induced to take out the policy by the fraud of 
 the insurer, and is himself innocent or where it is clear that the policy was 
 not a wagering contract, but was taken out under a mistake in regard to the 
 rights of the party insured. In this case It is to be borne In mind that the 
 appellee herself did not take out the policy, but that, with the knowledge 
 and consent of the appellant, and at its solicitation, she took an assignment 
 of it.'* 
 
 218 Oom V. Bruce, 12 East, 225; Henry ▼. Stanlforth, 4 Oamp. 270, 5 M. & 
 S. 122. See 2 Am. Ins. (7th Ed.) S 1255. 
 
 ai« Hogben v. Insurance Co., 69 Conn. 503, 38 Atl. 214, 61 Am. St Rep. 53. 
 
 «i7 Fisher v. Insurance Co., 160 Mass. 386, 35 N. E. 849, 39 Am. St Rep. 
 495. Where the policy is made void by statute the parties are in pari delic- 
 to, and there can be no recovery. Wheeler v. Association, 102 III. App. 48. 
 
 «i8 Metropolitan Life Ins. Co. v. Smith, 59 S. W. 24, 22 Ky. Law Rep. 868, 
 53 U R. A. 817; Metropolitan Life Ins. Co. v. Monohan, 102 Ky. 13, 42 S. 
 W. 924; Metropolitan Life Ins. Co. v. Sehlhorst 53 S. W. 524, 21 Ky. Law 
 Rep. 912; Metropolitan Life Ins. Oo. v. Trende, 53 S. W. 412, 21 Ky. Law 
 Rep. 909. 
 
 g§ 85-86) 
 
 WHEN PREMIUMS MAY BE RECOVERED. 
 
 249 
 
 S19 
 
 for value and in good faith, can hold them against the true owner. 
 For here the insurer, though perhaps taking the premiums in due 
 course of business and in good faith, gives no value therefor, the in- 
 surance granted being void ab initio. There may be some further ques- 
 tion as to whether the insurer issuing policies upon the lives of persons 
 never examined or personally consulted can be said to receive premiums 
 paid on such policies in good faith. 
 
 If, however, the husband subsequently recognizes such a policy as 
 valid, it seems that his consent will relate back to the inception of the 
 policy, and bar any action for the recovery of premiums. 
 
 220 
 
 •iv Overseers of Poor of Norfolk v. Bank of Virginia, 2 Grat. (Va.) 544, 44 
 Ara. Dec. 399. Commercial Nat Bank v. Armstrong (C. C.) 39 Fed., at page 
 691 
 
 22C Wakeman v. Metropolitan Ins. Co., 30 Ont Rep 705 
 
250 
 
 CONCSAIiMBNT. 
 
 (Ch.7 
 
 CHAPTEB VIL 
 
 THE CONSENT OF THE PARTIES— CONCEALMENT, 
 
 87-89. General Principles. 
 
 90-92. What must be Disclosed. 
 
 83-94. When Facts Concealed are to be Deemed Materiat 
 
 95. When Duty to Disclose Terminates. 
 
 96. Disclosure Rendered Unnecessary by Special Circumstancea. 
 87. Facts Unknown to Insured, but Known to his Agent. 
 
 g§ 90-92) 
 
 WHAT MUST BE DISCLOSED. 
 
 251 
 
 Option of the other party. No question of actual fraud is involved.* 
 There may be a breach of this obligation by a party acting in perfect 
 good faith. In fact, the condition imposed by the law is rather one of 
 guaranty that all material information possessed by the one party has 
 been correctly given to the other." 
 
 There may often arise questions as to whether statements made are 
 material or not. It is competent for the parties to settle such questions 
 in advance, and to agree that certain statements shall be deemed ma- 
 terial and essential conditions of the contract. Such statements be- 
 come warranties. Thus arise the peculiar doctrines of concealment, 
 representations, and warranties, which are now to be discussed. 
 
 GENERAIi PRINCIPLES. 
 
 87. Tke eoAseni of the parties to the contract of insurance is vitiated 
 
 not only by fraud and mistake, but also by any failure on the 
 part of either to exercise that high degree of good faith which 
 the peculiar relation of the parties requires. 
 
 88. The exercise of such good faith requires 
 
 (a) That each party shall disclose to the other all material facts 
 
 known to him. 
 
 (b) That all material representations shall not only be made In good 
 
 faith, but shall also be substantially true. 
 
 89. The parties may by agreement make any representation or any 
 
 promise, however trivial, an essential part of the contract, 
 upon the truth or performance of which the existence of the 
 contract is made to depend. Such a representation or promise 
 is known as a warranty. 
 
 Contracts of insurance are affected by the presence ot iraud and 
 mistake in their making in like manner as other contracts. For dis- 
 cussions of the rights of parties to general contracts characterized by 
 fraud and mistake, the reader is referred to treatises on general con- 
 tract law.^ The scope of this work requires that only those principles 
 in regard to reality of consent which are peculiar to, or have peculiar 
 applications to, the contract of insurance, shall be discussed. The most 
 striking of these grow out of the fact that the parties to this contract 
 are not on equal footing in making it. The insurer must secure from 
 the insured much of the information upon which he bases his calcula- 
 tions as to the character of the risk proposed, while the insured is un- 
 der an equal necessity of learning from the insurer the latter's methods 
 of conducting his business. Hence arise the obligations on the part 
 of each to state to the other all facts material to the risk, and to make 
 those statements correspond with the facts — ^to tell the whole truth, and 
 nothing but the truth— on pain of making the contract voidable at tlie 
 
 1 See Clark, Cent c 7. 
 
 WHAT MUST BE DISCLOSED. , 
 
 90. In England the insured is under obligation to disclose to the in- 
 
 surer every material fact that is or ought to be known to the 
 insured. The presence of a corrupt intent on the part of the 
 insured is wholly im.material. 
 
 91. In the United States the rule as stated above applies only to n&a- 
 
 rine insurance. In making contracts of fire and life insurance, 
 the insured must disclose 
 
 (a) All facts as to n^hich inquiries are made. 
 
 (b) All other material facts, the concealment of which urould amount 
 
 to bad faith. 
 
 92. THE EFFECT of concealing a fact that should be disclosed is to 
 
 render the contract voidable at the option of the injured party. 
 
 The Duty to Disclose — English Doctrine. 
 
 The original mode of underwriting marine risks at Lloyd's, as ex- 
 plained above, was for the applicant to submit to the different under- 
 writers a slip containing a description of the proposed risk, which was 
 initialed by such as chose to insure the risk as described, in such sums 
 within a given total as each saw fit. The nature of this transaction 
 precluded inspection of the risk by the underwriter, and compelled en- 
 tire reliance upon the description as given by the insured in determin- 
 ing whether the risk would be assumed, and, if so, at what rate of pre- 
 mium. Such a course of business necessarily g^ve rise to the rule that 
 the description presented by the applicant for insurance should fully 
 and fairly set forth all the facts concerning that risk that would influ- 
 
 2 Carrollton Furniture Mfg. Co. y. American Credit Indemnity Co., 115 
 Fed. 77, 52 C. 0. A. 671. The rale as stated above is the general rale. As 
 will be seen later, the rule In this country with regard to Are and life insur- 
 ance is different. 
 
 8 For a discussion of the grounds upon which an insurance contract Is held 
 to be avoided by mere misrepresentation, see post, p. 270. 
 
252 
 
 CONCEALMENT. 
 
 (Ch.7 
 
 ence the underwriter in accepting or rejecting it. This rule, with the 
 reasons upon which it rests, has been clearly stated by Lord Mansfield 
 in the celebrated leading case of Carter v. Boehm,* as follows : "The 
 special facts upon which the contingent chance is to be computed lie 
 most commonly in the knowledge of the insured only. The underwrit- 
 er trusts to his representation, and proceeds upon confidence that he 
 does not keep back any circumstance in his knowledge to mislead the 
 underwriter into a belief that the circumstance does not exist, and to 
 induce him to estimate the risk as if it did not exist. The keeping back 
 such circumstance is a fraud, and therefore the policy is void. Al- 
 though the suppression should happen through mistake, without any 
 fraudulent intention, yet still the underwriter is deceived and the pol- 
 icy is void, because the risk run is really different from the risk under- 
 stood and intended to be run at the time of the agreement." 
 
 Although Carter v. Boehm did not involve a marine risk, but the in- 
 surance of a fort and factory in Sumatra against capture, the rule as 
 there laid down has ever since been accepted as a correct statement of 
 the law as applicable to marine insurance.* 
 
 The rule thus reasonably established in marine insurance has, in Eng- 
 land, after some faltering on the part of the courts and some confusion 
 in the decisions,* been extended to all other branches of insurance. 
 Thus, in Lindenau v. Desborough,^ a life insurance case, Bayley, J.» 
 said : "I think that in all cases of insurance, whether on ships, houses, 
 or lives, the underwriter should be informed of every material circum- 
 stance within the knowledge of the assured, and that the proper ques- 
 tion is whether any peculiar circumstance was in fact material, and not 
 whether the party believed it to be so." 
 
 ♦ GARTER V. BOEHM, 3 Burrows, 1905, at page 1909. 
 
 » lonides v. Pender, L. R. 9 Q. B. 531; Son Mut. Ins. Co. ▼. Ocean Ins. Co.» 
 107 U. S. 485, 1 Sup. Ct 582, 27 L. Ed. 337; McLanahan v. Insurance Co., 1 
 Pet. (U. S.) 170, 7 L. Ed. 98; Moses v. Insurance Co., 1 Wash. C. C. 385, Fed. 
 Cas. No. 9,872. 
 
 See, also, Oliver v. Greene, 3 Mass. 133, 3 Am. Dec. 96; Burritt v. Insur- 
 ance Co., 5 Hill (N. Y.) 189, 40 Am. Dec. 345. 
 
 « In Bufe V. Turner, 6 Taunt 338, it was held that the failure to disclose a 
 fact which the Jury found material to a fire risk avoided the policy, although 
 the nondisclosure was in entire good faith. In HUGUENIN v. RAYLEY, 
 6 Taunt. 186, and Morrison v. Muspratt, 4 Bing. 60, the same rule was ap- 
 plied in cases of life insurance. In Wheelton v. Hardisty, 8 El. & Bl. 232, 
 which apparently departs from the rule above laid down, the untrue state- 
 ment was made by the insured and without knowledge of the assured. The 
 language of Bayley, J., in LINDENAU v. DESBOROUGH, 8 Bam. & C. 58G. 
 was approved in LONDON ASSURANCE v. MAIVBEL, 11 Ch. Div. 363, de- 
 cided in 1879. Ai to this latter case, see remarks of Mr. Justice Gray in 
 PHCENIX MUT. UPE INS. CO. v. RADDIN, 120 U. S. 183. 7 Sup. Ct. 500, 
 SO L. Ed. 644. 
 
 t LINDENAU V. DESBOROUGH, 8 Bam. & C. 586. 
 
 .. 
 
 §§ 90-92) 
 
 WHAT MUST BE DISCLOSED. 
 
 253 
 
 Same — The American Doctrine. 
 
 The American rule as to concealment is the same in marine insur- 
 ance as that which obtains in England. "The duty of communication, 
 indeed, is independent of the intention, and is violated by the fact of 
 concealment, even where there is no design to deceive." ® 
 
 While a few of the early American decisions * show a tendency to 
 follow the English cases in applying to contracts of fire and life insur- 
 ance the same strict rule as to concealment, the American courts soon 
 recognized the fact that the reason did not accompany the rule when 
 imported into these other branches of insurance law. Thus, in an early 
 Ohio Case, Judge Ranney ^" said : "The reason of the rule, and the 
 policy on which it was founded, in its application to marine risks, en- 
 tirely fail when applied to fire policies. In the former the subject of 
 insurance is generally beyond the reach, and not open to the inspection, 
 of the underwriter, often in distant parts or upon the high seas, and 
 the peculiar perils to which it may be exposed, too numerous to be an- 
 ticipated or inquired about, known only to the owners and those in their 
 employ ; while in the latter it is, or may be, seen and inspected before 
 the risk is assumed, and its construction, situation, and ordinary haz- 
 ards as well appreciated by the underwriter as by the owner. In ma- 
 rine insurance the underwriter, from the very necessities of his under- 
 taking, is obliged to rely upon the assured, and has therefore the right 
 to exact a full disclosure of all the facts known to him which may in 
 any way affect the risk to be assumed. But in fire insurance no such 
 necessity for reliance exists, and, if the underwriter assumes the risk 
 without taking the trouble to either examine or inquire, he cannot very 
 well, in the absence of all fraud, complain that it turns out to be great- 
 er than he anticipated. And so are die latest and best authorities." 
 
 8 Sun Mut Ins Co. ^. Ocean Ins Co., 107 U. S. 485, 1 Sup. Ct 582, 27 L. 
 Ed. 337. In BURRITT v. INSURANCE CO., 5 Hill (N. Y.) 188, 40 Am. Dec. 
 345, Woodruff, Ins. Cas. 105, the court, per Bronson, J., said: "In marine in- 
 surance the misrepresentation or concealment by the assured of a fact ma- 
 terial to the risk will avoid the policy, although no fraud was intended. It 
 is no answer for the assured to say thrft the error or suppression was the 
 result of mistake, accident, forgetfulness, or inadvertence. It is enough that 
 the insurer has been misled, and has thus been induced to enter into a con- 
 tract which, upon correct and full information, he would either have declin- 
 ed, or would have made upon different terms. Although no fraud was in- 
 tended by the assured, it is nevertheless a fraud upon the underwriter, and 
 avoids the policy." 
 
 » WALDEN V. INSURANCE CO., 12 La. 134, 82 Am. Dec. 116, Woodruff, 
 Ins. Cas. 104, in which it was held that an innocent failure to disclose an at- 
 tempt to burn an adjacent building avoided the policy. Curry v. Insurance 
 Co., 10 Pick. (Mass.) 535, 20 Am. Dec. 547. See, also. Carpenter v. Insurance 
 Co. (per Story, J.) 1 Story, 57, Fed. Cas. No. 2,428; Vose v. Insurance Co., 6 
 Cush. (Mass.) 42; Fowler v. Insurance Co., 6 Cow. (N. Y.) 673, 16 Am. Dec. 
 
 460. 
 
 !• Hartford Protection Ins. Co. v. Harmer, 2 Ohio St 452, 68 Am. Dec. 684. 
 
 i 
 
 i'i 
 
 ■ ( 
 
254 
 
 CONCEALMENT. 
 
 (Ch.7 
 
 In addition to the considerations thus stated as conducing to the es- 
 tablishment of a less rigorous rule as to concealment in fire and life 
 j insurance, the later cases have taken into account the customary prac- 
 ^ j tice of insurance companies in making these contracts. Property up- 
 on which insurance is sought is inspected on behalf of the insurer by 
 an expert, who is capable of forming a much more accurate estimate of 
 the character of the risk than is the applicant himself ; and the person 
 of an applicant for life insurance is examined by a skilled physician 
 with such a degree of care as to make his opinion as to the health and 
 probable duration of the life of the applicant far more reliable than that 
 of the applicant himself. It is usual, then— especially in life insurance 
 — to require of the applicant written answers to questions concerning 
 the risk, the number and particularity of which are well calculated to 
 lead the ordinary man to believe that the insurer has asked for all the 
 information that he desired, and to assume that information in his pos- 
 I session not asked for by the insurer is deemed by the latter to be not 
 Imaterial.^^ But such assumption must not transcend the bounds of 
 good faith. If the applicant is aware of the existence of some circum- 
 stance which he knows would influence the insurer in acting upon his 
 application, good faith requires him to disclose that circumstance, 
 though unasked. Hence the American courts have come to recognize 
 that while, in estimating the character of the proposed risk, the insurer 
 of marine risks is under a necessity of relying absolutely upon the knowl- 
 edge and good faith of the appHcant, the insurer of property and life 
 y I relies primarily upon the information acquired by methods of his own 
 1 J selection, and looks to the applicant only for good faith. Accordingly, 
 under the American authorities, the rule may now be considered as 
 well settled that the failure on the part of the insured to disclose any 
 fact, though clearly material, will not avoid a fire or life policy, unless 
 such nondisclosure was fraudulent." As is the case with all other 
 
 (parties alleging fraud, the burden of proving a fraudulent intent in the 
 concealment rests heavily upon the insurer, and the question is neces- 
 
 11 Gates V. Insurance Oo.. 6 N. "^. 469, 55 Am. Dec. 360; Browning v. In- 
 surance Co., 71 N. Y. 508, 27 Am. Rep. 86; Short v. Insurance Co., 90 N. Y. 
 16, 43 Am. Kep. 138; RAWLS v. INSURANCE CO., 27 N. Y. 282, 84 Am. Dec. 
 280. 
 
 12PENN MUT. LIFE INS. CO. v. MECHANICS' SAVINGS BANK & 
 TRUST CO., 72 Fed. 413, 19 O. C. A. 286, 38 L. R. A. 33; Id. 73 Fed. 653, 19 
 C. O. A. 316, 38 L. R. A. 33; Wytheville Ins. Co. v. Stultz, 87 Va. 629, 13 S. 
 E. 77; Mallory v. Insurance Co., 47 N. Y. 52, 7 Am. Rep. 410; RAWLS v. 
 INSURANCE CO., 27 N. Y. 282, 84 Am. Dec. 280; Browning v. Insurance 
 Co., 71 N. Y. 508, 27 Am. Rep. 86; West Rockingham Mut. Fire Ins. Co. v. 
 Sheets, 26 Grat. (Va.) 870. See, also. National Life Ass'n v. Hopkins' Adm'r, 
 07 Va. 167, 33 S. E. 539; CLARK v. INSURANCE CO., 8 How. (U. S.) 235, 
 12 L. Ed. 1061. 
 
 Fraudulent concealment of value of property will avoid policy. Fireman's 
 Fund Ins. Co. v. McGreevy, 118 Fed. 415, 55 C. C. A. 543. 
 
 8§ yo-92) 
 
 WHAT MUST BE DISCLOSED. 
 
 255 
 
 sarily for the jur>'." But it has been said " that, when an 'undis- 
 closed fact is palpably material to the risk, the mere nondisclosure is 
 itself strong evidence of a fraudulent intent. Thus, if a man about to 
 fight a duel should obtain life insurance without disclosing his mten- 
 tion, it would seem that no argument or additional evidence would be 
 needed to show the fraudulent character of the nondisclosure." So it 
 has been declared that if any extrinsic peril existed outside of a build- 
 ing insured, so as to increase the risk, it would be the duty of the in- 
 sured to communicate such fact, though not requested.^* Failure to 
 disclose the fact that a previous attempt had been made to burn the 
 building insured has been held clearly fraudulent," though at least one 
 
 i« Daniels v. Insurance Co. (Mass.) 12 Cush. 416, 59 Am. Dec. 192; Levie 
 V. Insurance Co., 163 Mass. 117, 39 N. E. 792; Mutual Life Ins. Co. v. Baker, 
 10 Tex. Civ. App. 515, 31 S. W. 1072; Henn v. Insurance Co., 67 N. J. Law, 
 310, 51 Atl. 689. 
 
 But in a recent Georgia case (December, 1902), Northwestern Mut Lite 
 Ins. Co. V. Montgomery, 116 Ga. 799, 43 S. E. 79, where the policy was incon- 
 testable save for fraud, the court said: "Of course, intention is generally a 
 question for the determination of the jury; and the conduct of the parties, 
 as showing a fraudulent intent, is generally for their consideration. But in 
 the present case the facts were such that they could properly have made but 
 one finding. The applicant for insurance made in his application a false 
 statement with reference to a material matter of fact. The statement was 
 false, within his knowledge. It was made with a view to procuring the in- 
 surance; was made deliberately, and with an agreement that it should be re- 
 garded as a warranty, and as a part of the consideration of the contract of 
 insurance. The company had no notice of its falsity, and acted upon it to 
 its injury. Purposely misstating this material fact, in order to induce the 
 company, relying upon it, to enter into a contract which might prejudice its 
 rights, would be consistent with no other intention than one to deceive the 
 company. The intention to deceive, coupled with the other facts in the case, 
 conclusively showed fraud, in the legal acceptation of the term. What the 
 applicant thought or intended with reference to the consequences of his false- 
 hood cannot be material. He is presumed to have intended the natural con- 
 sequence of what he purposely and knowingly did. We are therefore of 
 opinion that the company completely made out its defense, and that the evi- 
 dence of the plaintiff was insufficient to overcome it We are also of opin- 
 ion that the court erred, under the evidence adduced, in leaving the jury free 
 to find that there was no bad faith or intent to deceive on the part of the 
 insured ** 
 
 i*PENN MUT. LIFE INS. CO. v. MECHANICS* SAVINGS BANK & 
 TRUST CO., 72 ^ed. 413, 435, 19 0. C. A. 286, 38 L. R. A. 33. 
 
 IB CLARK V. INSURANCE CO., 8 How. (U. S.) 235, 250, 12 L. Ed. 1061. 
 
 Where an applicant for insurance failed to disclose the fact, known to him, 
 that a fire was then raging in the vicinity of the property to be insured, such 
 concealment was in bad faith, and avoided the policy. Orient Ins. Co. v. 
 
 Peiser, 91 111. App. 278. 
 
 i«WALDEN V. INSURANCE CO., 12 La. 134, 32 Am. Dec. 116: Orient 
 Ins. Co. V. Peiser, 91 111. App. 278; Bufe v. Turner, 6 Taunt 338. See, also^ 
 Bebee v. Insurance Co., 25 Conn. 56, 65 Am. Dec. 553. 
 
 i ' 
 
 
256 
 
 CONCEALMENT. 
 
 (Ch. 7 
 
 court is of a contrary opinion.*^ So, if a building insured is used for 
 some extraordinary purpose, or if business is carried on therein in some 
 unusual manner, so that the risk is thereby enhanced, nondisclosure of 
 such fact would be evidence of bad faith on the part of the insured.^* 
 But a failure to disclose the existence of an incumbrance ^* upon prop- 
 erty insured, or the fact that the owner of the property is a married 
 woman,*® does not avoid the policy, in the absence of proof of a fraud- 
 ulent intent. 
 
 A statement made by the insured in the application to the effect that 
 he had therein communicated fully and fairly all facts material to the 
 risk, or asserting that there are no other facts that should be disclosed 
 in respect to the risk, does not enlarge the duty of the insured as to dis- 
 closures.*^ It is still for the insured to decide upon the materiality of 
 the fact in question, and a failure to disclose a fact known to be ma- 
 terial would be a breach of good faith, even in the absence of such 
 stipulation. 
 
 When no Questions are Asked, 
 
 It not infrequently happens that fire policies are issued without re- 
 quiring the usual application to be filled out, and without making any 
 inquiries of the insured as to the character of the risk. It seems to be 
 held without dissent in this country that such a course of procedure 
 does not change the rule as to the insured's duty to disclose material 
 facts.** The insured is justified in supposing that the taciturn insurer 
 has otherwise acquired all the information he desired, and need, there- 
 fore, volunteer information on the subject of the risk only when to keep 
 silence would be bad faith. On this point the Supreme Court of the 
 
 IT German-American Ins. Oo. v. Norris, 100 Ky. 29, 37 S. W. 267, 66 Am. 
 St. Rep. 324. In this ease it was left to the jury to say whether the conceal- 
 ment was with the intent to obtain insurance fraudulently or not. 
 
 18 CLARK T. INSURANCE CO., 8 How. (U. S.) 235, 12 U Ed. 1061. 
 
 i» HALL V. INSURANCE CO., 93 Mich. 184, 53 N. W. 727, 18 L. R. A. 135, 
 32 Am. St. Rep. 497; Dooly v. Insurance Co., 16 Wash. 155, 47 Pac. 507, 58 
 Am. St Rep. 26; Union Assur. Soc. v. Nails (Va.) 44 S. B. 896; Morotock Ins. 
 Co. V. Rodefer, 92 Va. 747, 24 S. E. 393, 53 Am. St Rep. 846; West Rocking- 
 ham Mut Fire Ins. Co. v. Sheets, 26 Grat (Va.) 854; Manhattan Fire Ins. 
 Co. V. Weill, 28 Grat (Va.) 389, 26 Am. Rep. 364. 
 
 20 Queen Ins. Co. t. Young, 86 Ala. 424, 5 Soutn. 116, 11 Am. St Rep. 51. 
 
 *i Louis V. Insurance Co., 58 App. Div. 137, 68 N. Y. Supp. 683, affirmed 
 [1902] 172 N. Y. 650, 65 N. B. 1119. See, also, PKNN MUT. LIFE INS. CJO. 
 V. MECHANICS* SAVINGS BANK & TRUST CO.. 72 Fed. 413, 19 C. 0. A. 
 286, 38 li. B. A. 33; Browning v. Insurance Co., 71 N. Y. 508, 27 Aul Rep. 
 86. 
 
 22 Pelzer Mfg. Co. ▼. Sun Fire Office, 36 S. O. 213, 15 S. B. 562; Johnson 
 r. Insurance Co., 93 Wis. 223, 67 N. W. 416. See, however, Smith v. Insur- 
 ance Co., 17 Pa. 253, 55 Am. Dec. 546; Dooly ▼. Insurance Co., 16 Wash. 159, 
 47 Pac 606» 58 Am. St Rep. 29. 
 
 §§ 93-94) WHEN FACTS CONCEALED DEEMED MATERIAL. 25T 
 
 United States said : " "We think the governing test on it must be 
 this: It must be presumed that the insurer has, in person or by 
 agent, in such a case, obtained all the information desired as to the 
 premises insured, or ventures to take the risk without it, and that the 
 insured, being asked nothing, has a right to presume that nothing on 
 the risk is desired from him." 
 
 WHEN FACTS CONCEALED ARE TO BE DEEMED MATERIAL. 
 
 93. THE TEST of materiality is in tlie effect wMcli the knowledge v 
 tlie fact in question would have on tlie making of tke contract. 
 To be material, a fact need not increase the risk, or contribute 
 to any loss or damage suffered. It is sufficient if the knowledge 
 of it would influence the parties in making the contract. 
 
 94 SPECIAIi INQUIRIES— Matters made the subject of special in- 
 quire are deemed conclusively material, and the failure of an 
 apparently complete answer to make full disclosure will avoid 
 the policy. But an answer incomplete on its face will not de- 
 feat thd policy in the absence of bad faith. 
 
 Facts to be Disclosed- -Materiality. 
 
 If the knowledge of a fact would cause the insurer to reject the risk, 
 or to accept it only at a higher premium rate, that fact is material, 
 though it may not even remotely contribute to the contingency upon 
 which the insurer would become liable, or in any wise affect the risk.** 
 Thus, in the early case of Lynch v. Hamilton," insurance was effected 
 upon certain goods on board ships from the Canary Islands to London, 
 without any disclosure to the underwriter of the fact that one of the 
 ships carrying the goods had been reported at Lloyd's as seen at sea 
 deep in the water and leaky. This intelligence received at Lloyd's 
 proved to be wholly erroneous, as the ship in question was at no time 
 during the voyage leaky or otherwise distressed, and was lost by cap- 
 ture. But the concealment nevertheless avoided the contract, for the 
 
 28 CLARK v. INSURANCE CO., 8 How. (U. S.), 235, at page 249, 12 L. Kd. 
 
 1061, 1066. 
 
 24 Daniels v. Insurance Co.. 12 Gush. (Mass.) 416, 59 Am. Dec. 192; Himely 
 V. Insurance Co.. 1 Mill, Const. (S. C.) 153, 12 Am. Dec. 623; Jefferson Ins. 
 Co. V. Cotheal, 7 Wend. (N. Y.) 72, 22 Am. Dec. 567; Hardman v. Firemen's 
 Ins Co (C. C.) 20 Fed. 594; Mulville v. Adams (C. Q) 19 Fed. 887; Clark v. 
 Insurance Co., 40 N. H. 333, 77 Am. Dec. 721. See, also, Columbian Ins. Co. 
 V. Lawrence, 2 Pet. (D. S.) 25, 7 L. Ed. 335. 
 
 The question of materiality is ordinarily for the jury. Daniels v. Insur- 
 ance Co. supra; Hardman v. Insurance Co., supra; Livingston v. Insurance 
 Co.. 6 Cranch (U. S.) 274, 3 L. Ed. 222; Maryland Ins. Co. v. Ruden, 6 Cranch 
 (U S) 338 3 L. Ed. 242; PENN MUT. LIFE INS. CO. v. MECHANICS' 
 SAVINGS BANK & TRUST CX)^ 72 Fed. 413, 19 a tt A. 286. 88 L. B. A. 88. 
 
 «8 3 Taunt 37. 
 
 Tarob iHg.— 17 
 
 I, I 
 
258 
 
 CONCEALMENT. 
 
 (Ch.7 
 
 underwriter would not have accepted the risk if the report at Lloyd's 
 and its connection with the property to be insured had been known to 
 him. 
 
 iVhen Specific Inquiries Made. 
 
 As a general proposition, matters made the subject of inquiry must 
 be deemed material, though otherwise they would not be so regarded,*' 
 and the insured is required to make full and free disclosure to questions 
 asked. *^ But, by the American decisions, at least, the failure to answer 
 a question, or to answer it fully, will not avoid a policy issued, unless 
 the imperfect answer is of such a character as to mislead the insurer. 
 The law on this point is clearly expressed by Mr. Justice Gray in the 
 leading case of Phoenix Mut. Life Ins. Co. v. Raddin: *• "Where an 
 answer of the applicant to a direct question of the insurers purports to 
 be a complete answer to the question, any substantial misstatement or 
 omission in the answer avoids a policy issued on the faith of the ap- 
 plication.*' But where upon the face di the application a question ap- 
 pears to be not answered at all, or to be imperfectly answered, and the 
 insurers issue a policy without further inquiry, they waive the want or 
 imperfection in the answer, and render the omission to answer more 
 fully immaterial.*® The distinction between an answer apparently 
 .complete, but in fact incomplete, and therefore untrue, and an answer 
 manifestly incomplete, and as such accepted by the insurers, may be 
 illustrated by two cases of fire insurance, which are governed by the 
 same rules in this respect as cases of life insurance. If one applying 
 for insurance upon a building against fire is asked whether the prop- 
 erty is incumbered, and for what amount, and in his answer discloses 
 one mortgage, when in fact there are two, the policy issued thereupon is 
 avoided.^ ^ But if to the same question he merely answers that the 
 property is incumbered, without stating the amount of incumbrances, 
 the issue of the policy without further inquiry is a waiver of the omis- 
 sion to state the amount." ** 
 
 «• North American Fire Ins. Oo. ▼. Throop, 22 Mich. 146, 7 Am. Rep. 638 
 
 «T Smith V. Insurance Co., 49 N. Y. 211. 
 
 «8 PHCENIX MUT. LIFE INS. CO. v. RADDIN, 120 U. S. 183, 7 Sup. Ct 
 500, 30 L. Ed. 644, Woodruff, Ins. Gas. 92, 108, Richards, Ins. Cas. 318. 
 
 »» Citing Cazenove v. Assurance Co., 29 Law J. (N. S.) 160, affirming 6 C. 
 B. (N. S.) 437. 
 
 »o Citing CONNBOTICTJT MUT. LIFE INS. CO. T. LUCHS, 108 U. S. 498, 
 2 Sup. Ct 949, 27 L. Ed. 800; Hall v. Insurance Co., 6 Gray (Mass.) 185; 
 Lorillard Fire Ins. Co. v. McCullough, 21 Ohio St. 176, 8 Am. Rep. 52 ; Amer- 
 ican Life Ins. Co. v. Mahone, 56 Miss. 180; Carson v. Insurance Co., 43 N. 
 J. Law, 300, 39 Am. Rep. 584; Jersey City Ins. Go. t. Carson, 44 N. J. Law, 
 210; Lebanon Mut Ins. Co. v. Kepler, 106 Pa. 28. 
 
 •» Citing Towne y. Insurance Co., 7 Allen (Mass.) 51. 
 
 •« CJlting Nichols v. Insurance Co., 1 Allen (Mass.) 68. Pmrther on In the 
 opinion the court said: *^he case of LONDON ASSUR. t. MANSEL, 11 Cb. 
 
 4 j!* 
 
 §95) 
 
 WHEN DUTY TO DISCLOSE TERMINATES, 
 
 WHEN DUTY TO DISCLOSE TERMINATES. 
 
 259 
 
 95. The duty of disclosure ends with the completion of the contract. 
 The insured need not disclose facts learned after the makine 
 of the contract, even though the policy issues subsequenUy. 
 
 As a corollary to the rule of materiality stated above, it follows that 
 no information possessed by one party can be material, in the sense of 
 requiring disclosure, unless it is possible that it may influence the other 
 in the making of the contract. Therefore, if the contract is already 
 complete and binding before the information in question is acquired, 
 there can be no duty resting upon the insured to disclose it, even though 
 the pohcy is yet to issue. If the insured is entitled to receive a policy, 
 he may compel its issue, even though the . loss has already occurred. 
 Therefore it is immaterial to the insurer whether such fact is disclosed 
 at the time of demanding the policy or not, for he has no option as to 
 complying with the demand. This statement of the law, which is 
 abundantly supported by authority,*' as well as in clear accord with 
 sound reason, is apparently in conflict with the carelessly written 
 
 Div. 363, on which the Insurers relied at the argument, did not arise on a 
 quesfaon including several interrogatories as to whether another application 
 had been made, and with what result, and the amount of existing Insurance, 
 and In what company. But the apphcatlon or proposal contained two sep- 
 arate questions-the first, whether a proposal had been made at any other 
 Office, and, If so, where; the second, whether it was accepted at the ordinary 
 premium, or at an increased premium, or decUned— and contained no third 
 question or interrogatory as to the amount of existing insurance and In what 
 company. The single answer to both questions was: 'Insured now In two 
 offices for £16,000 at ordinary rates. Policies effected last year.' There be- 
 ing no specific interrogatory as to the amount of existing insurance, that an- 
 swer could apply only to the question whether a proposal had been made, 
 or to the question whether it had been accepted, and at what rates, or de- 
 clmed; and, as applied to either of those questions, it was in fact, but not 
 upon Its face. Incomplete, and therefore untrue. At applied to the first ques- 
 tion, it disclosed only some, and not all, of the proposals which had in fact 
 been made; and. as applied to the second question, it disclosed only the pro- 
 f,?^^ I Yu *^^ ^^^ ^^'^ accepted, and not those which had been declined 
 though the question distinctly embraced both. That case Is thug clearly dis- 
 tinguished In its facts from the case at bar. So much of the remarks of 
 feir George Jessel. M. R., In delivering judgment, as Implies that an insurance 
 company is not bound to look with the greatest attention at the answers of 
 an applicant to the great number of questions framed by the company or its 
 agents, and that the intentional omission of the insured to answer a ques- 
 f^^,J^ 4 ?^™ *^ ^ concealment which will avoid a policy issued without 
 IcaTdecStos^' ""^ ^^""^^^ ^ reconciled with the uniform current of Amer- 
 83 Cory V. Patton, L. R. 9 Q. B. 577; Michigan Pipe Co. t. Michigan Plre 
 & Marme Ins Co., 92 Mich. 482, 52 N. W. 1070, 20 L. R. A. 277; Mutual llJ^ 
 Ins. Co. V. Thomson, 94 Ky. 253, 22 S. W. 87; Commercial Iii. Ca y Hal- 
 
260 
 
 CONCEALMENT. 
 
 (Ch.7 
 
 opinion of Mr. Justice Miller in Merchants' Mut. Ins. Co. v. Lyman.'* 
 In that case the insured claimed that a complete oral contract of insur- 
 ance had been made upon a certain vessel on December 31, 1869, to 
 extend from January 1st to April 1st, following. On January 15, 
 1870, he applied for and received a policy without disclosing the fact 
 — ^known to him — that the vessel had been lost on January 8th. The 
 evidence clearly showed that there was no binding parol contract made 
 as claimed, and that the delivery of the policy when applied for on Jan- 
 nary 15th was wholly optional with the insurer, and might have been 
 refused without liability. Consequently it is plain that the insured's 
 duty of disclosure had not terminated at the time the policy was deliv- 
 ered, and that his fraudulent concealment of his knowledge of such a 
 material fact as the vessel's loss defeated any rights he might otherwise 
 have taken under the contract; and the court so held. But the court 
 goes further, and seems to lay down the doctrine that such nondis- 
 closure would have been fraudulent, even if a previous parol contract 
 had been made, and, since the policy thus fraudulently applied for and 
 obtained had merged all prior negotiations, evidence of the previously 
 made parol contract was inadmissible. To quote the language of the 
 court: "When the company came to make this instrument, they were 
 entitled to the information which plaintiffs had of the loss of the ves- 
 sel. If, then, they had made the policy, it would have bound them, and 
 no questions would have been raised of the validity of the instrument, 
 or of fraud practiced by the insured. On the other hand, if they had 
 refused to make a policy, no injury would have been done to the plain- 
 tiffs, and they would then have stood on their parol contract, if they had 
 one, and did not need a policy procured by fraudulent concealment of a 
 material fact at the time it was executed and the premium paid. To 
 permit the plaintiffs, therefore, to prove by parol that the contract of 
 insurance was actually made before the loss occurred, though executed 
 and delivered and paid for afterward, is to contradict and vary the terms 
 of the policy in a matter material to the contract, which we understand 
 to be opposed to the rule on that subject in the law of Louisiana, as 
 well as at the common law." It can scarcely be true, assuming that 
 a binding contract was made on December 31st, that there existed any 
 further duty of disclosure on either side. The obligation of the insurer 
 to issue and of the insured to receive a policy in accordance with their 
 agreement had become fixed. Upon the loss of the vessel on January 
 8th, the liability of the insurer on the contract of insurance became 
 fixed; and it would seem passing strange if he were discharged from 
 
 lock, 27 N. J. Law, 645, 72 Am. Dec. 379; Keim y. Insurance Co., 42 Mo. 38, 
 97 Am. Dec. 291; Baldwin v. Insurance Co., 56 Mo. 151, 17 Am. Rep. 671. 
 t« 15 WalL (U. 8.) 664, 21 L. Ed. 246. 
 
 I 
 
 96) DISCLOSUBE BENDEBED UNNECESSABY. 261 
 
 such liability by issuing a policy, as he was absolutely bound to do, 
 without knowledge of the vessel's loss. 
 
 A leading English case *" goes so far as to hold that the duty of 
 the insured to communicate material facts in his knowledge terminates 
 with a preliminary contract that is binding only as a moral obligation, 
 by reason of a custom among underwriters. Accordingly, when the 
 insured failed to disclose to the insurer a loss that had occurred after 
 making such an imperfect preliminary contract, but before the execu- 
 tion of the policy, it was held that the concealment was not ground 
 for avoiding the policy when issued. 
 
 DISCLOSUBE RENDERED UNNECESSARY BY SPECIAIL 
 
 CIRCUMSTANCES. 
 
 96. The insured is under no obligation to disclose facts known to him 
 (a) When such facts are known, or are reasonably believed by the 
 
 insured to be kno-wn, to the insurer. 
 Cb) When they relate to risks expressly excepted by the policy, or 
 
 excluded by w^arranties. 
 <o) When the conununioation of such facts is waived by the insurer. 
 
 The circumstances of the parties to an insurance contract, or the 
 conditions under which it is executed, may be such as to render it un- 
 necessary, in the absence of questions requiring it, for the insured to 
 disclose to the insurer facts that would otherwise be material. The 
 common-law rule, as laid down by Lord Mansfield in Carter v. Boehm," 
 is thus analytically stated in the Civil Code of California : •* "Neither 
 party to a contract of insurance is bound to communicate information 
 of the matters following, except in answer to the inquiries of the other : 
 (1) Those which the other knows;** (2) those which, in the exercise 
 of ordinary care, the other ought to know, and of which the former 
 
 «» Cory V. Patton, L. R. 9 Q. B. 677. 
 
 »« CARTER V. BOEHM, 3 Burrows, 1905. 
 
 •T Civ. Code, S 2564. 
 
 -»• In Sun Mut Ins. Co. v. Ocean Ins. Co., 107 U. S. 485, 1 Sup. Ct 582, 27 
 L. Ed. 337, the following statement from 2 Duer, Ins. 398, is quoted and ap^ 
 proved: "The assured will not be allowed to protect himself against the 
 charge of an undue concealment by evidence that he had disclosed to the 
 underwriters, in general terms, the information that he possessed. Where 
 his own information is specific, it must be communicated in the terms in 
 which it was received. General terms may include the truth, but may fail 
 to convey it with its proper force and in all its extent. Nor will the assured 
 be permitted to urge, as an excuse for his omission to communicate material 
 facts, that they were actually known to the underwriters, unless it appears 
 that their knowledge was as particular and full as his own information. It 
 is the duty of the assured to place the underwriter in the same situation as 
 himself; to give to him the same means and opportunity of Judging of the 
 ^alue of the risks; and, when any circumstance is withheld, however slight 
 
262 
 
 CONCEALMENT. 
 
 (Ch.7 
 
 \ 
 
 has no reason to suppose him ignorant ; (3) those of which the other 
 waives communication; (4) those which prove or tend to prove the ex- 
 istence of a risk excluded by a warranty, and which are not otherwise 
 material ; and (5) those which relate to a risk excepted from the policy 
 and which are not otherwise material." 
 
 Same— Matters which the Insurer Ought to Know. 
 
 The general principle that the insured cannot be penalized for failing 
 to disclose what ought to be known to the insurer or his agent, unless 
 aware that in fact it is not so known, is clear.** To hold other- 
 wise would be to charge the insured with the default of the insurer or 
 his agent But the application of the principle is not so clear. In the 
 first place, we must note that the insured cannot expect the insurer to 
 infer from facts known to him other facts not communicated. Thus 
 the failure of an underwriter to infer that a vessel insured by him was 
 a notorious Confederate cruiser of the same name did not excuse the 
 failure of the insured to communicate to him that fact.** 
 
 The insurer must know any trade usages that may affect the risk, 
 and likewise the laws and political conditions of other countries.*^ 
 After some vacillation among the English decisions, it has become set- 
 tled that the mere fact that an item of material information has been 
 published in "Lloyd's Lists" does not excuse the insured's failure to 
 communicate it.** So it is held that an insurer is not charged with 
 jcnowledge of events or facts published in the newspapers, even though 
 it be proved that the paper containing the information in question was 
 
 and Immaterial It may have seemed to himself, that, If disclosed, would 
 probably have influenced the terms of the insurance, the concealment viti- 
 ates the policy." 
 
 »» Buck V. Insurance Co., 1 Pet. (U. S.) 160, 7 L. Ed. 90; De Longuemere 
 v. Insurance Co., 10 Johns. (N. Y.) 120; Norris v. Insurance Co., 3 Yeates 
 (Pa.) 84, 2 Am. Dec. 360. 
 
 The following statement of Lord Mansfield in CARTER ▼. BOEHM, 8 Bur- 
 rows, 1909, is often quoted: "The assured need not mention what the under- 
 writer knows, what way soever he came by that knowledge, or what he 
 ought to know or takes upon himself the knowledge of, or waives being in- 
 formed of, or what lessens the risk agreed and understood to be run, or gen- 
 eral topics of speculation, or every cause which may occasion natural perils, 
 as the difficulty of the voyage, kind of seasons, probability of hurricanes, 
 earthquakes, etc., or every cause which may occasion political perils, from 
 the rupture of states, from war, and the various operations of it, upon the 
 probability of safety from the continuance and return of peace, or from the 
 imbecility of the enemy." 
 
 *o BATES V. HEWITT, L. R. 2 Q. B. 595. 
 
 *i Buck V. Insurance Co., 1 Pet (U. S.) 160, 7 L. Ed. 90. See Am. Ina. (7th 
 Ed.) § 609 et seq., where there is a good discussion of this question. See, 
 also, CARTER v. BOEHM, 3 Burrows, 1905. 
 
 *» Morrison v. Insurance Co., Lb R. 8 Kxch. 187; BATES t. HEWITT. L. 
 R. 2 (^ B.5d& 
 
 § OTj FACTS UNKNOWN TO INSURED, BUT KNOWN TO AGENT. 
 
 263 
 
 •i^!fc 
 
 kept on file in the insurer's office. It must be proved that the insurer 
 actually read that part of the paper containing the information.** 
 
 The insured need not communicate public events, such as the status 
 of a war then flagrant, the sources of his information being equally 
 open to both parties ; nor need he make known his apprehensions for 
 the future, provided there is no concealment of facts giving rise to those 
 apprehensions.** 
 
 Excepted Risks. 
 
 That the insurer cannot complain of the insured's failure to disclose 
 facts that concern only risks excepted, either expressly or by warranty, 
 from the liability assumed under the policy, is too clear to require any 
 citation of authority in its support. Under such circumstances, the 
 facts are wholly immaterial. Likewise the insurer is estopped to set up 
 in defense concealment of material facts, when he has waived com- 
 munication of such facts.** 
 
 FACTS UNKNOWN TO INSUBED, BUT KNOWN TO HIS AGENT. 
 
 97. The insured is nnder obligation to disclose not only sneh material 
 facts as are known to Mni, bnt also those facts known to his 
 agents Provided 
 
 (a) It was the duty of the agent to acquire and oomnanaioate in- 
 
 formation of the facts in question; and 
 
 (b) It was possible for the agent, in the exercise of reasonable dili- 
 
 gence, to have made such communication before the making of 
 the insurance contract. 
 
 Facts Known to Applicanfs Agent. 
 
 In marine insurance the applicant is under obligation to communicate 
 not only all the material facts actually known to him, but also those 
 which, under all the circumstances of the case, ought to be known to 
 him. Therefore the insurer is entitled to rely upon securing all the in- 
 formation concerning the risk which has been acquired by the agent of 
 the insured, provided it was the duty of the agent to communicate 
 such information to his principal, and the means of doing so were rea- 
 sonably at hand. And a failure on the part of the insured to disclose 
 such facts known to his agent, due wholly to the default of the agent, 
 
 *» Of course, mere items of ordinary shipping Intelligence In the public 
 papers, and too general to lead to any particular application to the risk in- 
 sured, need not be communicated. In support of the statements made in the 
 text, see Greene v. Insurance Co., 10 Pick. (Mass.) 402; Dickenson v. Insur- 
 ance Co., Anth. N. P. (N. Y.) 92; 1 Am. Ins. (7th Ed.) p. 705, i 617. 
 
 ** CARTER V. BOEHM, 3 Burrows, 1909. 
 
 *6 PHOENIX MUT. LIFE INS. CO. v. RADDIN, 120 U. a 183, 7 Sup. Ct 
 500, 30 L. Ed. 644» Woodruff, Ins. Cas. 92, lOtt, Richards, Ins. Gas. SIH. 
 
264 
 
 CONCEALMENT, 
 
 (Ch.7 
 
 will avoid the policy, despite the perfect good faith of the insured.** 
 This principle is well illustrated by the leading case of Proudfoot v. 
 Montefiore.*^ An English merchant, having information from his 
 agent at Smyrna that a cargo of madder bought for him had been ship- 
 ped from that port, procured insurance upon the shipment. Shortly 
 after the dispatch of the letter containing the information upon which 
 the principal acted, the agent learned that the vessel was aground and 
 the cargo lost. The agent purposely refrained from telegraphing news 
 of the disaster to his principal, lest he should forestall the insurance. 
 In holding that the knowledge of the agent was imputable to the prin- 
 cipal, and the policy void for concealment, notwithstanding the inno- 
 cence of the latter, Cockburn, C. J., thus clearly expressed the reason 
 for his judgment : "Notwithstanding the dissent of so eminent a jurist 
 as Mr. Justice Story, we are of opinion that the cases of Fitzherbert v. 
 Mather,** and Gladstone v. King *• were well decided, and that if an 
 agent whose duty it is, in the ordinary course of business, to commu- 
 nicate information to his principal as to the state of a ship and cargo, 
 omits to discharge such duty, and the owner, in the absence of infor- 
 mation as to any fact material to be communicated to the underwriter, 
 effects an insurance, such insurance will be void on the ground of con- 
 cealment or misrepresentation. The insurer is entitled to assume, as 
 the basis of the contract between him and the assured, that the lat- 
 
 «• It must be borne In mind that the same principles apply to the Insurer, 
 though. In the nature of things, the question does not occur so frequently. 
 Thus, If an Insurer should effect insurance upon a vessel lost or not lost, 
 when his agent, under a duty of disclosing to him, knew that the vessel had 
 in fact arrived safely, the insurance would be void, and the insured would 
 be entitled to a return of his premium. See CARTER v. BOEHM, 8 Bur- 
 rows, 1900. 
 
 4T PROUDFOOT v. MONTEFIORB, L. R. 2 Q. B. 611, Rlcharda, Ins. Gas. 
 324, Woodruff, Ins. Oas. 106. 
 
 4« FITZHERBERT v. MATHER, 1 Term R, 12. In this case an agent of 
 the assured was employed to ship a cargo of oats, and to communicate the 
 shipment to another agent, who was employed to effect an assurance. An 
 omission on the part of the former, who had written to announce the sailing 
 of the ship, to communicate the fact that the ship had gone ashore, which he 
 might have done by the same post, was held fatal to the policy. 
 
 «• 1 Maule & S. 35. In this case, which was an action on a policy on a 
 ship, "lost or not lost," the master had neglected to notify his owners that 
 the ship had been driven on a rock — a fact as to which, on arriving at the 
 port of discharge, he made a protest, detailing the accident, and stating that 
 the ship's bottom must have been chafed. The owners, in ignorance of this 
 accident, had effected an insurance. It was held that inasmuch as the captain 
 was bound to communicate the fact, the antecedent damage was an Implied ex- 
 ception from the insurance, for want of such communication, and the plaintiffs 
 could not recover the loss arising from the repairs rendered necessary by the 
 accident This case has been severely criticised on the ground that the entire 
 insurance should havt been avoided: See 1 Arn. Ins. (Tth Ed.) pp. 668, 669, il 
 584, 68& 
 
 t 
 
 ' 
 
 § 97) FACTS UNKNOWN TO INSURED, BUT KNOWN TO AGENT. 26^ 
 
 ter will communicate to him every material fact of which the assured 
 has, or, in the ordinary course of business, ought to have, knowledge, 
 and that the latter will take the necessary measures, by the employment 
 of competent and honest agents, to obtain, through the ordinary chan- 
 nels of intelligence in use in the mercantile world, all due information 
 as to the subject-matter of the insurance. This condition is not com- 
 plied with where, by the fraud or negligence of the agent, the party 
 proposing the insurance is kept in ignorance of a material fact which 
 ought to have been made known to the underwriter, and through such 
 ignorance fails to disclose it." 
 
 There are several earlier English cases not to be reconciled with 
 Proudfoot v. Montefiore, and one American case,'** weighted with the 
 great name of Mr. Justice Story, and mentioned with such respect by 
 Lord Cockburn, maintains a contrary view; but the doctrine of the 
 English case seems to have received practically universal approval 
 from subsequent authorities.'* 
 
 An important qualification was put upon the rule as laid down in 
 Proudfoot V. Montefiore by another leading English case,'^ decided 
 some twenty years later, upon the following facts : The plaintiffs, desir- 
 ing reinsurance upon an overdue vessel, employed a firm of brokers 
 to procure it. One of the members of this firm learned that the ves- 
 sel had been lost, but did not communicate this fact to either the 
 plaintiffs, his principals, or to the firm's London representatives, 
 through whom a policy was procured. The following day the plain- 
 tiffs, having closed all communications with the brokers above men- 
 
 80 Buggies V. Insurance Co., opinion by Mr. Justice Story, in 4 Mason, 47, 
 Fed. Gas. No. 12,119. The result of this decision was affirmed in the Su- 
 preme Court (12 Wheat. 408, 6 L. Ed. 674) on the ground that by the loss of 
 the vessel the master had ceased to be the agent of the assured. 
 
 Bi Joyce, Ins. § 636 et seq.; 1 Am. Ins. (7th Ed.) § 582. See Phil. Ins. § 
 549, where it is said: "But it is not merely a case where one of two parties 
 must be prejudiced by the fraud of a third. The real question is whether 
 one party shall be defrauded, and the other shall be entitled to the proceeds 
 of the fraud, for the assured could not suffer by the master doing his duty in 
 communicating information of the loss. He could only, at the most, be pre- 
 vented from profiting by the master's fraud in concealing it" Prior to the 
 decision in PROUDFOOT v. MONTEFIORE, Judge Duer had said: "From 
 this review of the decisions, it certainly appears that the weight of authority 
 is greatly in favor of the doctrine that the omission of an agent, whether 
 proceeding from fraud or neglect, to give intelligence of a loss which he is 
 bound to communicate, may operate as a fatal concealment. Although our 
 first impressions may be that, where the good faith of the assured is wholly 
 unsuspected, the rule, in its application to defeat his recovery, is harsh and 
 inequitable, our subsequent refiections, it is not improbable, will lead us to 
 a different conclusion, and produce the conviction that the rule is well sus- 
 tained by the analogies of the law, and by cogent reasons of public policy. ' 
 Lect 13, p. 1, § 27, vol. 2, p. 420, Duer, Ins. 
 
 fts BLACKBURN y. VIGORS, L. R. 17 Q. B. D. 553, 12 App. Gas. 541. 
 
 I 
 
/ 
 
 il 
 
 266 
 
 CONCEALMBNT. 
 
 (Ch.7 
 
 g§ 98-99) 
 
 BEPBESfiNTATIONS AND WABBANIIBa. 
 
 267 
 
 tioned, and still having no knowledge of the vessel's loss, secured fur- 
 ther insurance through another firm of brokers, who were equally 
 ignorant of the loss. The first policy was clearly void, and the second 
 policy was likewise held in the Court of Appeal "■ — reversing the court 
 below — ^to be avoided by the nondisclosure of the knowledge that had 
 been acquired by the plaintiflFs' former agent. But in the House of 
 Lords *'* the judgment of the Court of Appeal was reversed on the 
 ground that the knowledge of an agent could be imputed to a prin- 
 cipal innocently procuring insurance only when the agent was em- 
 ployed for the purpose of procuring and communicating such infor- 
 mation as that in question,'^^ as in the case of the master of the vessel 
 in Gladstone v. King,*^ or the purchasing agent in Proudfoot v. Mon- 
 tefiore,*^ or when the insurance was procured through the agent pos- 
 sessing the information. 
 
 Insurance Procured by Agent of Insured. 
 
 Insurance procured by an agent ignorant of facts that have come 
 to the knowledge of his principal after his appointment will be valid 
 only when the insurance had been effected before the principal, by 
 m^ the exercise of due and reasonable diligence, could have communicated 
 his knowledge to his agent, or laid it before the insurer.'® The Eng- 
 lish authorities require of the principal in such cases the utmost de- 
 '0^ gree of reasonable diligence in his effort to communicate with his 
 i- agent.** 
 
 »8 L. R. 17 Q. B. Div. 553. 
 
 »* 12 App. Cas. 541. 
 
 85 See, also, Patton v. Janney, Fed. Cas. No. 10,836, 2 Oranch, C. 0. 71. 
 
 »« 1 Maule & S. 35. 
 
 »T PROUDFOOT V. MONTEFIORIi; L. R. 2 Q. B. 511. 
 
 88 McLanahan v. Insurance Co., 1 Pet (U. S.) 170, 7 L. Ed. 98; Snas^. 
 . Insurance Co., 61 N. Y. 164; Andrews v. Insurance Co., 9 Johns. (N. Y035; 
 Watson V. Delafield, 2 Johns. (N. Y.) 526. 
 
 8» See PROUDFOOT v. MONTEFIORE, L. R. 2 Q. B. 611, where it was 
 said that the telegraph should have been used. See, also. Grieve y. Young 
 <1782) MlUar, Ins. 65. 
 
 CHAPTER VnX 
 
 THE CONSENT OF THE PARTIES— REPRESENTATIONS AND 
 
 WARRANTIES. 
 
 88-99. The Nature and Effect of Representationa, 
 
 100. Representations as to Opinion and Belief. 
 
 101. Promissory Representations. 
 102-103. Construction of Representationa 
 
 104. Warranties — In General. 
 
 105. Affirmative and Promissory Warranties. 
 106-107. Warranties Distinguished from Representationa. 
 
 THE NATURE AND EFFECT OF REPRESENTATIONS. 
 
 08. Representations are statements made to give information to the 
 insurer,! and otherxeise induce hini to enter into the insurance 
 contract. They may be oral or written, and may be niade before 
 or at the time of the execution of the contract. 
 
 99. False representations, whether innocent or fraudulent, will in all 
 cases render a contract of insurance voidable, provided they are 
 material, but immaterial representations are xrholly without 
 effect, save under the provisions of statutes. 
 
 As stated in the preceding sections, it becomes the duty of the per- 
 son applying for insurance upon a risk of whatever kind to give to 
 the insurer all such information concerning that risk as will be of use 
 to him in estimating its character, and in determining whether or 
 not to assume it. This information may be given orally and volun- 
 tarily, or it may be given in writing, in response to questions asked,* 
 the course of business in this respect, as we have seen, very greatly 
 varying the extent of this duty of disclosure in some branches of in- 
 surance. But however communicated, this information forms the 
 basis of the contract as made. It describes, marks out, and defines 
 the risk assumed. If this description, as relied on by the insurer, 
 proves to be untrue in any material respect, the insurer may decline 
 to be bound by the agreement, saying, "I have made no such contract." 
 The ground of the insurer's discharge is not the fraud of the insured, 
 
 1 Representations may also be made by the insurer to induce the insured 
 to enter into the contract, and such representations are subject to all the 
 rules of law to be discussed under this heading. But as the insured seldom 
 desires to avoid the contract, the cases nearly always refer to representa- 
 tions made by the insured. 
 
 » "A representation may be oral or written." Civ. Code Cal. § 2571. 
 
 "A representation may be made at the same time with issuing the policy 
 or before iV* Ut. Code CaL i 2572. 
 
 % 
 
268 
 
 REPRESENTATIONS AND WARRANTIES. 
 
 (Ch.8 
 
 ( 
 
 but merely that the loss which he is called upon to indemnify occurred 
 under a risk different from that assumed. Clearly an underwriter who 
 has insured a steamer cannot be required to pay for the loss of a sailing 
 vessel ; nor will he, under a policy written upon a vessel represented toy 
 be safe in port, be liable for the loss of a vessel which at the time of the 
 underwriting was at sea and storm-tossed for the simple reason that he 
 had never insured that vessel. The insurer of a brick house is not liable 
 for the loss of a frame house ; nor is he who insures a man of thirty 
 liable for the death of a man who was then thirty-five, even though in 
 every other respect he may answer to the description of the person 
 insured. But the insurer could not decline to pay for the loss of a 
 white-painted house or ship because the one insured was described as 
 being painted green, though otherwise identical in description with 
 the subject of the loss. 
 
 Hence arises the reasonable and commendable rule that thefuntruth 
 of any material representation relied on by the insurer in making the 
 contract will avoid » the contract, wholly irrespective of the character 
 of the intent, whether innocent or fraudulent, with which such mis- 
 representation was made. As a complement to this rule, the authQrities 
 add that the untruth of an immaterial representation will not affect 
 the contract, unless the representation was made fraudulently.* From 
 this statement arises an implication, which is sometimes stated in 
 express terms,* fhat a fraudulent misrepresentation will avoid a con-, 
 tract of insurance, even though wholly immaterial. ^ Vlt is also some-' 
 times said that the materiality of a fraudulently made misrepresenta- 
 tion is conclusively presumed. | It is submitted that these statements 
 are misleading, and not in accord with the cases or the analogies of 
 the law. It must be borne in mind that, in order that a representa- 
 tion shall be immaterial, it must have had absolutely no weight with 
 the insurer in making the contract in question; it must not in the 
 slightest degree have induced him "to enter into a contract which he 
 would otherwise have declined, or to take a less premium than he 
 would otherwise have demanded." • If the fraudulent misrepresenta- 
 tion did, as a matter of fact, influence the insurer to assume the risk, 
 
 » The word "avoid" la used in the sense In which it is ordinarily under- 
 stood to apply in insurance law; t e., render voidable at the option of the 
 injured par^, and not absolutely void. 
 
 * Hazard v. Insurance Co., 8 Pet (U. S.) 557, 8 L. Bd. 1043; Higgle v. 
 ALmerican Lloyd's (D. C.) 14 Fed. 143; DENNISON v. INSURANCE CO., 20 
 Me. 125, 37 Am. Dec. 42; Continental Ins. Co. v. Kasey, 25 Grat (Va.) 268, 
 18 Am. Rep. 681; ARMOUR v. INSURANCE CO., 90 N. Y. 450; McVey v. 
 Grand Lodge, 53 N. J. Law, 17, 20 Atl. 873 ; Daniels v. Insurance Co., 12 Cush, 
 (Mass.) 416. 59 Am. Dec 192 ; Barteau v. Insurance Co., 67 N. T. 595. 
 
 8 See PENN MUT. LIFE INS. CO. v. MECHANICS* SAVINGS BANK & 
 TRUST CO., 72 Fed. 413, 1» a a A. 286, 88 L. B. ▲. 33. 
 
 • PLil. Ins. S 537. 
 
 A 
 
 S§ 98-99) THE NATURE AND EFFECT OF REPRESENTATIONS. 
 
 269 
 
 it is clear that the misrepresentation was material, and the courts may 
 well say that the insured will not be heard to deny its materiality. 
 But such a sound conclusion by no means justifies a general state- 
 ment that the I materiality of a fraudulent misrepresentation is con- 
 clusively presumed. \ A diligent search among the authorities fails to 
 disclose a single case in which a contract was actually avoided be- 
 ^cause of a false representation that was really immaterial. •In each 
 case in which the rule is stated, it will be found that the fraud com- 
 plained of had injuriously affected the insurer.'^ But, by way of illus- 
 tration, let us suppose it clearly proved that the owner of an ancient 
 colonial dwelling had, with conscious falsehood, assured the insurer 
 to whom application was made that the bricks of which the building 
 was constructed had been brought from England, erroneously sup- 
 posing that the insurer would more readily insure a dwelling believed 
 to possess that distinction. Let us further suppose that the insurer 
 had neither sentiment nor superstition such as would lead him to 
 think English bricks in any respect better or less inflammable than 
 American bricks, and that he gave no heed whatsoever to the colonial 
 story. Could any court be induced to hold the contract avoided by 
 the insured's harmless, though fraudulent, garrulity? Surely the gen- 
 eral rule of law applies, that one is held responsible to another for his 
 fraudulent misstatements only when that other has relied upon them 
 to his prejudice.® 
 
 In view of these considerations, the rule as to the effect of misrep- 
 resentations should be amended to read thus: A false representation 
 avoids a contract of insurance only when material, wholly without 
 reference to the intent witli which it is made,* unless it is otherwise 
 provided by statute.*" 
 
 T Examine the cases cited in note 4, supra. 
 
 8 In ANDERSON v. FITZGERALD, 4 H. L. Cas. 484, at page 504, Lord 
 Chancellor Cranworth said: "Indeed, whether made bona fide or not, if it 
 is not material, the untruth is quite unimportant. If the man on entering 
 into the policy had said that he arrived at Dublin three days previously, 
 whereas he had only arrived that morning, and such statement did not form 
 part of the contract, then, though false, it would be quite immaterial." See, 
 also, 2 Pars. Cont. 769; Clark, Cont 344, 345. 
 
 » Farmers* Ins. & Loan Co. v. Snyder, 16 Wend. (N. T.) 481, 30 Am. Dec. 118. 
 
 In VIVAR V. SUPREME LODGE, 52 N. J. Law, 455, 20 Atl. 36, the court 
 said: "If the representation made, though known by the insured to be false, 
 did not differ from the truth in any respect which was, either in fact or in 
 the view of the insurer, material to the contract, then the falsehood did not 
 mislead the insurer or induce the contract, and should not be allowed to 
 avoid it. Usually the materiality of a representation will be inferred from 
 the fact that it was made pending the negotiations, in response to a specific 
 inquiry by the insurer; but this rale is not universal, for the purpose of the 
 
 10 See note 10 on following page. 
 
 I 
 
270 
 
 BBPRBSBNTATIONS AND WARRANTIES. 
 
 (Ch.8 
 
 The rule just stated seems at first inconsistent with the cases in- 
 volving another and somewhat different class of representations; that 
 is, representations of opinion, belief, intention, and information, in 
 which intent is vital. These will be separately considered in the next 
 section. 
 
 Grounds upon Which Contract is Avoided by Misrepresentation. 
 
 There can be little doubt that the rule that insurances are avoided 
 by misrepresentations has its origin in the general doctrine of fraud, 
 and Mr. Amould thought it should still be regarded as a phase of that 
 doctrine, in order to preserve a consistent relationship with the gen- 
 eral body of the law, and that, "although no pretense existed for alleg- 
 mg actual fraud, yet the policy was to be considered void on the 
 ground of constructive or legal fraud— that is, such conduct on the part 
 of the assured as, though it does not imply any moral turpitude in 
 himself, yet, from the effect it has in fact of misleading the under- 
 writer, is, in legal language, said to be fraudulent." " 
 
 Inqnlry must be considered, to see whether the information is sought to aid 
 the insurer in fixing the terms on which he will contract, or with an en- 
 tirely different object. Thus, if a mutual insurance company should require 
 Its premiums to be paid within a definite time after the mailing of notice 
 addressed to the residence of the insured, and, with this rule in view, should 
 require every applicant for insurance to state his residence in his applica- 
 tion, and an applicant should give as his residence not the truth, but the 
 place where he ordinarily received his mail, it would seem absurd to hold 
 that such circumstance could Invalidate the contract" The view taken In 
 the text is approved by Am. Ins. § 53G (7th Ed.). 
 
 10 In framing legislation intended to mitigate the harshness of the com- 
 mon-law rule as to warranties by transforming them into represent/ dons, 
 the loose statement of the rule, as discussed in the text, has in many in- 
 stances been incorporated in the statute. Thus in the Kentucky act we read: 
 "Nor shall any misrepresentations, unless material or fraudulent, prevent a 
 recovery on the policy." Ky. St, (Barbour & (Carroll) c. 32, § 639. The Vir- 
 ginia statute is even more unsatisfactory In Its statement of the rule: "No 
 answer to any Interrogatories made by an applicant for a policy of insur- 
 ance shall bar the right to recover upon any policy issued upon said applica- 
 tion, by reason of any warranty in such application or policy contained, un- 
 less it be clearly proved that such answer was willfully false, or fraudu- 
 lently made, or that it was material." Acts 1899-1900, p. 55, c. 515. Statutes 
 of similar import exist in many other states. Under the wording of these 
 statutes, it would seem clear that a fraudulent immaterial representation 
 will avoid the contract See PENN MUT. LIFE INS. CO. v. MECHANICS* 
 SAVINGS BANK & TRUST CO., 72 Fed. 413, 19 C. C. A. 286, 38 L. R. A. 
 33; Id., 73 Fed. 653, 19 C. O. A. 316, 38 L. R. A. 33, in which the effect of 
 the Pennsylvania statute (Laws 1885, p. 134, § 1) Is discussed. 
 
 11 See Arn. Ins. (7th Ed.) § 536. It seems that this was the view taken by 
 Mr. Arnould In the first edition of his work (495-498). In the second edition 
 (vol. 1, p. 549) he took the view advanced by Judge Duer, and in the latest 
 edition (7th [19011 8 535, voL 1, p. 622) the editors adopt the view of PhilUps 
 as the correct oneit 
 
 4^ 
 
 ^S 98-99) THE NATUBE AND EFFECT OF KEFKESENTATIONS. 273 
 
 Judge Duer, in his interesting and acute lectures on Marine In- 
 surance,^* contends that a material representation is essentially a part 
 of the contract, whether written in the policy or not, and that its 
 untruth amounted to a breach of contract discharging the insurer. 
 This view, however, can scarcely be correct, and was objected to by 
 Lord Esher in Blackburn v. Vigors,^* as apt to give rise to new compli- 
 cations in the law. 
 
 It would seem from what is written above as to the nature of repre- 
 sentations, and from the clear statement of Mr. Phillips" on this 
 point, that the true theory upon which an untrue representation of a 
 material fact avoids an insurance, in the absence of any suspicion of 
 fraud, is that there is implied by the sound policy of the law from 
 the customs of underwriters a condition that the contract shall be en- 
 forceable only when all representations, on the faith of which the 
 contract was entered into, shall be substantially in accordance with 
 the facts. 
 
 How Representations Are Made — Oral and Written. 
 
 The very nature of representations requires that they precede the ex- 
 ecution of the contract which they are made to induce. They may 
 subsequently be set forth in the written contract, but, if proper rep- 
 resentations, and not the so-called promissory representations, they do 
 
 i« 2 Duer, Ins. 648-655. 
 
 i« L. R. 17 Q. B. Div. 553, 561, 12 App. Cas. 539. 
 
 1* In BLACKBURN v. VIGORS, L. R. 17 Q. B. Div. 653. at page 561, the 
 following statement of the law in Phil. Ins. § 537, is approved: "The effect 
 of a misrepresentation or concealment in discharging the underwriters does 
 not seem to be merely on the ground of fraud, as has been usually laid down 
 by writers on insurance, but also on the ground of a coE'iition implied by the 
 fact of entering Into the contract, that there is no misrepresentation or con- 
 cealment Mr. Duer criticises the phraseology of the books In putting the 
 effect of a misrepresentation or concealment upon the contract entirely upon 
 the ground of fraud. Mr. Amould adheres to this application of that term 
 for the sake of consistency with the general legal doctrine that what passes 
 between the parties preliminary to a contract is not a part of it, and should 
 not be imported into it; and since a representation through mistake or in- 
 advertence has the same effect, in reference to the underwriter, as an in- 
 tentional and literally fraudulent misrepresentation or concealment, namely, 
 it induces him to enter into a contract which he would otherwise have de- 
 clined, or to take a less premium than he would otherwise have demanded, 
 he deems it to be excusable to apply the term "fraud,'* and thus bring the 
 doctrine on this subject nominally within the acknowledged general principle 
 applicable to other contracts. But I cannot think that this anomalous use 
 of the term is justifiable on this ground, since ambiguous phraseology is not 
 to be tolerated in any science, and least of all in that of law, where it can 
 possibly be avoided, as it may easily be in this case by stating the practical 
 doctrine in direct terms, namely, that it is an implied condition of the con- 
 tract of insurance that it is free from misrepresentatioii or concealment, 
 whether fraudulent or through mistake." 
 
272 
 
 REPRESENTATIONS AND WARRANTIES. 
 
 (Ch.8 
 
 §100) 
 
 REPRESENTATIONS AS TO OPINION AND BELIEF. 
 
 273 
 
 not become any part thereof, because not contractual in nature. Being, 
 therefore, merely collateral inducements to the contract, they may be 
 communicated in any manner whatsoever that is intelligible. They 
 may be oral, or written in papers not connected with the contract, 
 such as circulars and prospectuses,** or in the application or examiner's 
 report, or they may appear in the policy itself. When statements pur- 
 porting to be representations made by the insured appear for the first 
 time in the policy as written and tendered by the insurer, it seems 
 that they become binding upon the insured only when he accepted 
 the policy with actual knowledge of their presence. By accepting the 
 policy, the insured is conclusively presumed to have assented to all of 
 its terms so far as contractual, but he will not be held to have adopted 
 at the same time all the representations that the insurer or his agents 
 may have endeavored to foist upon him.** 
 
 BEFBESENTATIONS AS TO OPINION AND BEUEF. 
 
 100. Representations as to fntnre conduct or events, or as to other 
 things not susceptible of present, actual knoxeledge, amount 
 only to statements of opinion, intention, or belief. As to suob 
 representations the good faith of the insured furnishes the 
 criterion of truth, for they can be false only urhen the opinion, 
 intention, or belief as stated is not honestly entertained. 
 
 The descriptive representations of previous and present conditions 
 and past events which have been discussed above, and which are sus- 
 ceptible of exact knowledge and correct statement, may conveniently 
 be termed "objective representations," as applicable to external realities. 
 The other class of representations as to the deponent's opinion, belief, 
 or intention, in so far as they are really representations, can, in the 
 nature of things, set forth only a mental state, and may therefore 
 conveniently be termed "subjective representations." Representations 
 of this latter class cannot be descriptive in the strict sense of the word, 
 but they may have much value to the insurer in reaching a conclusion 
 concerning the risk. Thus the insured may express an opinion that 
 his house is of a certain value, or that his body is wholly free from 
 a certain disease. The insurer cannot for a moment be justified in 
 
 18 Wood V. Dwarris, 11 Exch. (H6rl. & G.) 493; Oollett v. Morrison, 9 
 Hare, 162; Solvin v. James, 6 East, 571. But see Wheelton v. Hardisty, 
 S El. & Bl. 285, 92 B. Com. Law, 231 ; RUSE v. INSURANCE CO., 23 N. Y. 
 516; Id., 24 N. Y. 653. 
 
 i« See Dooly v. Insurance Co., 16 Wash. 155, 47 Pac. 507, 68 Am. St Rep. 
 26; O'Brien v. Insurance Co., 52 Mich. 131, 17 N. W. 726; HALL v. INSUR- 
 ANCE CO., 93 Mich. 184, 53 N. W. 727, 18 L. R. A. 135, 32 Am. St. Rep. 497; 
 Union Assur. Soc. v. Nails, 101 Va. 613, 44 S. E. 896; Morotock Ins. Co. v. 
 Rodefer. 92 Va. 747, 24 S. E. 393, 53 Am. St. Rep. 846. 
 
 thinking that the value of the house is really just what the owner esti- 
 mates it to be, for he must be deemed to know that the value of prop- 
 erty is ordinarily capable of exact ascertainment only by a sale. Nei- 
 ther can the insurer rely upon the statement of the insured that he is 
 free from some specific disease, the discovery of which might baffle 
 the skill of the most experienced physician. But he is entitled to be- 
 lieve that the insured honestly thinks his house to be of the value 
 stated, or that he is free from the disease mentioned.^ ^ The insurer 
 knows that the insured's opinion may be mistaken, but the fact that 
 such an opinion is honestly entertained by the insured may be of great 
 value to him in reaching a conclusion as to the risk. So an expression 
 of an intention as to a future course of conduct with reference to 
 property or life to be insured, if merely a representation, and not made 
 part of the contract, can be relied on only as to the bona fide existence 
 of such an intention in the mind of the insured. Likewise, when a 
 statement is made as upon information of another, as between the in- 
 surer and the insured the insurer cannot rely upon the truth of the 
 statement, but he may rely upon the fact that such information was 
 in reality received.^* 
 
 ^^ It is now apparent that all representations of this class, termed above 
 "subjective," are statements of the fact of the existence of certain 
 mental states. Hence the question of intent, which is immaterial in 
 the case of objective or descriptive representations, becomes vital 
 when the representation is subjective. Thus suppose a man who owned 
 a building of the actual value of $10,000, with an incumbrance thereon 
 to the extent of $5,000, should represent in an application for insurance, 
 subsequently issued, that the building was worth $15,000, and incum- 
 bered to the amount of only $3,000. Here the representation as to the 
 incumbrance, which is plainly material, is false, and will avoid the 
 insurance, even though due to accident or mistake, and despite the 
 
 " Kenton Ins. Co. v. Wigginton, 89 Ky. 330, 12 S. W. 668, 7 L. R. A. 81; 
 Barnes v. Association, 191 Pa. 618, 43 Atl. 341, 45 L. R. A. 264; Phenix Ins. 
 Co. V. Wilson, 132 Ind. 449, 25 N. E. 592; Supreme Ruling of the Fraternal 
 Mystic Circle v. Crawford (Tex. Civ. App. June, 1903) 75 S. W 844 • DEN- 
 NISON V. INSURANCE CO., 20 Me. 125. 37 Am. Dec. 42. Where it is stated 
 that the answers given are true to the best of the applicant's knowledge and 
 belief, good faith is all that is required of the applicant ^ETNA LIFE INS 
 
 K?^ l.l^^^^^' ^^ ^- ^- ^^^' 24 L. Ed. 287; Clapp v. Association, 146 Mass^ 
 519, 16 N. E. 433. See, also, BOWDEN v. VAUGHAN, 10 East, 415 
 
 18 Tidmarsh v. Insurance Co., Fed. Cas. No. 14,024, 4 Mason, 439. "When 
 a person insured has no personal knowledge of a fact, he may nevertheless 
 repeat information which he has upon the subject, and which he believes to 
 be true, with the explanation that he does so on the information of others, 
 or he may submit the information, in its whole extent, to the insurer; and 
 in neither case is he responsible for its truth, unless It proceeds from an 
 agent of the insured, whose duty it is to give the intelligence." Civ. Code 
 
 Vance Ins. — 18 
 
274 
 
 BEPBESENTATIONS AND WARRANTIES. 
 
 (Ch.8 
 
 total absence of any fraudulent intent. The subject of the representa- 
 tion is an external fact. The statement as to the value of the house 
 was far from being accurate, but that fact alone will not justify the 
 insurer in declaring the insurance avoided.*' He must first show 
 ihat the insured did not really think the house to be of that value; 
 that is, that he did not, in truth, entertain the opinion he professed to 
 hold. Put briefly, the subject of the opinion was the value of the prop- 
 erty, but the subject of the representation was the opinion. Therefore 
 in all of this class of representations the existence of the opinion, be- 
 lief, or intention as represented is necessary to the truth of the repre- 
 sentation. Consequently they also fall within the general rule stated 
 above — that a false material representation renders an insurance con- 
 tract voidable, whether made innocently or fraudulently. 
 
 i» In Phenix Ids. Co. v. Pickel, 119 Ind. 155, 21 N. E. 546; Id., 119 Ind. 
 291, 21 N. E. 898— both in 12 Am. St. Rep. 393, the following statement of 
 the law as laid down by Wood, Ins. pp. 568, 569, is approved: "How is value 
 determined? Is it not a matter of judgment and opinion wholly, except, it 
 may be, in special instances? How is the value of real estate to be esti- 
 mated? What is the standard by which to ascertain the value of a building? 
 Is it what this man or that says it is worth? Is it what it would cost to 
 build another of the same style and materials? The ascertainment of any of 
 these facts is a mere matter of judgment Has not the assured the same 
 right to exercise his judgment. If he exercises it honestly, that his neighbors 
 on the jury have? When the insurers propound this inquiry, upon what basis 
 and by what standard is it to be presumed they expect the insured to esti- 
 mate the value? Is it reasonable to suppose that they expect him to esti- 
 mate the value of the materials composing it, the cost of labor to build it, or, 
 rather, to give his honest judgment and opinion upon the question? Sup- 
 pose the question in the application to be, "What, in your honest judgment 
 and opinion, is the value of the property?" Would it not be held that, in 
 order to avoid the policy, the insurer must show that the value was not 
 given according to the honest judgment and opinion of the insm-ed? Most 
 certainly. And it is difficult to conceive how the introduction of the words 
 "judgment or opinion" into the question can affect the rights of the parties 
 at all, for in nearly all instances the question of value is well known to be a 
 mere matter of opinion. Particularly is this so as to buildings and real es- 
 tate generally, and all the insurer expects, or has the right to expect, in an- 
 swer to a question of the value thereof, is simply the honest judgment and 
 opinion of the assured; and it is absurd to hold the assured responsible for 
 an error of judgment honestly made, simply because his neighbors differ with 
 him in that respect A doctrine that held the insured up to a strictly exact 
 valuation would be extremely unjust, and would retult in vitiating one-half 
 the policies issued, for, under the rule, the difference of one cent is as disas- 
 trous as a difference of a large amoant." 
 
 f 
 
 § 101) 
 
 PKOMISSORY REPRESENTATIONS. 
 
 PROMISSORY REPRESENTATIONS. 
 
 275 
 
 101. The term "promissory representation" is used in two senses^ 
 
 (a) First, it is used to indicate a parol promise made in connection 
 
 with the insurance, but not incorporated in the policy. The 
 nonperformance of such a promise cannot be shown by the in- 
 surer in defense of an action on the policy, but proof that the 
 promise was made with fraudulent intent will serve to defeat 
 the insurance. 
 
 (b) Secondly, an undertaking by the insured, inserted in the poUoy, 
 
 but not specifically made a warranty, is also called a "promis- 
 sory representation.*' It is, however, in such a case, merely an 
 executory term of the contract, and not properly a representa- 
 tion at all. 
 
 "Promissory representation" is a loose term that has crept into in- 
 surance law, following in the train of the useful and correct expres- 
 sion promissory warranty," soon to be discussed. The term is used 
 in many different senses, in all of which it is misleading, while in some 
 It IS clearly a misnomer. Thus a usually careful writer says : «« "Only 
 those promissory representations are available for such a purpose [to 
 avoid a contract when bona fide] which are reduced to writing and 
 made a part of the contract, thus becoming substantially, if not for- 
 mally, warranties"— meaning thereby to state the well-known prin- 
 ciple that a written contract cannot be affected by the terms of a prior 
 parol agreement not contained therein. The most apparent significance 
 of the expression "promissory representation" is that it is a represen- 
 tation in which a promise is made to do or to refrain from doing 
 something. But in so far as the promise is concerned, it is plainly 
 no representation at all." It may be enforceable as a term of the 
 policy if properly written therein, or it may be unenforceable if not so 
 written, by the operation of the rule of evidence forbidding the ad- 
 mission of parol testimony to add prior or contemporaneous terms toi 
 a written instrument. But whether such promise is enforceable or | 
 unenforceable, no question pertaining to the doctrine of representa- / 
 tions IS involved. ' 
 
 Another meaning is given to the expression, with more accuracy in 
 the statement of the rule that promissory representations never aflFect I v 
 the contract of msurance, unless made in bad faith, however untrue I ^ 
 they may be." That is, the making of a promise may amount to a * 
 representation that a certain intention is entertained by the insured. 
 
 *o May, Ins. § 182. 
 
 «i ALSTON V. INSURANCE CO., 4 Hill (N. T.) 329. 
 Pn.dfn.^?'^^ ""• I^'SURANCB CO., 9 Allen (Mass.) 640, 85 Am. Dec. 788; 
 Prudential Assur. Co. v. ^tna Life Ins. Co. (0. C.) 23 Fed 438. See. al«o 
 KNECHT T. INSURANCE CO, 90 Pa. 118, 35 Am. Sp! ^ ^ "^^ 
 
 1 
 
 '\ 
 
276 
 
 REPRESENTATIONS AND WARRANTIES. 
 
 (Ch.8 
 
 I If the insurer relies upon the existence of that intention, and makes 
 I a contract upon the faith of it, it is clear, on principles already dis- 
 cussed, that he will not be bound by his agreement if it appears that 
 P^ the promise was made in bad faith, and that therefore the intention 
 I never existed as represented. Further, so far as the promise is merely 
 a representation, and not a contract, the failure of the insured to carry 
 out his bona fide intention will not avoid the contract.*' It is also to 
 be observed that such a prior promise may always be shown by parol, 
 in order to prove a fraudulent inducement to the contract, even when 
 it would be wholly inadmissible as a term of the contract. Thus let 
 us suppose that the owner of a factory, applying- for insurance thereon, 
 in order to secure a lower premium rate, promises, within a specified 
 time, to substitute steam heat for open fires, and electric lighting for 
 kerosene lamps. It will be further supposed that these promises in- 
 duce the insurer to issue at a lower rate a policy in which only the 
 agreement as to the steam heating is set forth, that concerning the 
 lights being omitted. The factory is destroyed by fire within the terms 
 of the policy, and the insurer sets up in defense of an action brought 
 the failure of the insured to fulfill his promises as to heating and 
 
 28 Thus, where an applicant for Insurance on a building makes an express 
 oral promise that it shall be occupied, and a policy is thereupon delivered to 
 him, such policy will not be avoided by his subsequent failure to fulfill such 
 promise, unless fraud is proved, even though the risk be increased by the 
 building being unoccupied. KIMBALL v. INSURANCE CO., 9 Allen (Mass.) 
 540, 85 Am. Dec. 786. In this case the court, per Gray, J., said: "The case 
 perhaps most often cited as showing that an oral promissory representation 
 may be set up to defeat a written policy is DENNISTOUN v. LILLIE (1821) 
 3 Bligh, 202. But an examination of the facts of the case shows that the 
 representation to the underwriters was in no sense promissory, or relating 
 to anything after the execution of the policy. The representation was con- 
 tained in a letter received and shown to the underwriters in June, which 
 stated that the ship would sail from Nassau on the 1st of May. She had 
 sailed on the 23d of April, and been lost on the 11th of May, so that the 
 representation as made to the underwriters was an untrue statement of a 
 past fact. It was so distinctly pleaded, as appears by the report of the same 
 case in 1 Shaw, App. 23. Lord Eldon so treated it after the argument, 
 stating the question to be 'whether it is a representation of an expectation, 
 or a statement as of a past fact, which is material to the risk.' DENNIS- 
 TOUN V. LILLIE, 3 Bligh, 209. In announcing his final opinion, he omitted 
 the word *past' before 'fact,' and said: 'There is a diflCerence between the 
 representation of an expectation and the representation of a fact. The for- 
 mer is immaterial, but the latter avoids the policy if the fact misrepresented 
 be material to the risk.' Yet the report clearly shows that the chancellor 
 was merely reaffirming his original opinion, and used 'fact' as past op- 
 posed to 'expectation,' which was future, and did not intend to speak of 
 anything in the future, which no human being could control, as a 'fact. 
 See. also, what is said of DENNISTOUN v. LILLIE in ALSTON v. INSUR- 
 ANCE CO., 4 Hill (N. Y.) 329. at page 33& See, also, 1 Am. Ins. (7th Ed.) 
 SS 541-544. 
 
 §101) 
 
 PROMISSORY REPRESENTATIONS. 
 
 277 
 
 t 
 
 lighting. In the first place, it is clear that the promise to install the 
 steam heat, contained in the policy, is no representation at all, but 
 a term of the contract, the performance of which may be made a 
 condition of the insurer's liability. In that case the breach of the con- 
 dition, if proved, will constitute a good defense. But suppose the 
 breach of this written condition is not proved, and the insurer is forced 
 to rely upon the nonfulfillment of the insured's oral promise to put 
 electric lights in the factory. He cannot be allowed to show this pret 
 vious parol agreement in order to prove a breach of a promissory rep4 
 resentation.^* Any such agreement formerly made was merged in' 
 the subsequently written policy, and its breach cannot be shown in 
 order to defeat the insured's rights under the terms of the policy. 
 But this oral promise may be shown for a diflFerent purpose; that is, 
 to prove a representation by the insured that he had the intention of 
 putting in electric lights. If this representation was relied on by the 
 insurer, and was false, in that the insured had not, in good faith, en- 
 tertained the intention as he had represented, the insurer would clearly 
 be discharged. But if, in fact, the promise had been made in good 
 faith, the subsequent failure of the insured to perform it would not 
 be a defense for the insurer. The oral "promissory representation"! 
 may be proved for the purpose of showing that the written contract \ 
 was fraudulently induced, but not for the purpose of adding a term ^ 
 to the contract.*' 
 
 ^ ALSTON V. INSURANCE CO., 4 Hill (N. Y.) 329. 
 
 26 This distinction seems to have been first taken by Lord Tenterden In 
 Flinn v. Tobin, 1 Moody & Malkin, 367, 22 E. Com. Law, 336. The plaintiff, 
 in obtaining the insurance, had told defendant that the vessel would carry 
 only fifty tons of salt, which would put her in light ballast trim. As a mar 
 ter of fact, she sailed with a cargo of one hundred and sixty tons, whicl? 
 was a very heavy cargo, and was lost In an action on the policy the de- 
 fense was the alleged misrepresentation. In summing up, Lord Tenterden, 
 C. J., said: "I think the defendant in this case will not be entitled to a ver- 
 dict unless he satisfy the jury that there was a fraudulent misrepresentation 
 of the cargo which the Andromache wag to carry. If he does so, the plain 
 tiff cannot recover; but the mere fact of a misrepresentation, without fraud, 
 will not be enough to prevent the plaintiff's recovering, for the contract be» 
 tween the parties is the policy, which is in writing, and cannot be varied by 
 parol. No defense, therefore, which turns on showing that the contract was 
 different from that contained in the policy, can be admitted; and this is the 
 effect of any defense turning on the mere fact of misrepresentation, without 
 fraud. If, however, fraud was practiced to induce the defendant, or the first 
 underwriter, to sign the policy, no signatures so obtained can be binding;. 
 The question, therefore, is whether you think there was any willful and 
 fraudulent misrepresentation made, for the purpose of getting the policy 
 signed. If you are of that opinion, you will find for the defendant; if not. 
 for the plaintiff." In FLINN v. HEADLAM, 9 Bam. & C. 693, Lord Ten- 
 terden instructed the jury to the same effect. In Edwards v. Footner, 1 
 Camp. 530 — ^an earlier case — a week before the policy was signed, it was rep- 
 
 i>l 
 
, t 
 
 278 
 
 BBPEESENTATIONS AND WARRANTIES. 
 
 CONSTRUCTION OF BEPRESENTATION8* 
 
 (Ch.8 
 
 102. BepresentatloBs are constmed liberally in faTor of ike imaiirecl» 
 
 and are required to be only substantially true. 
 
 103. Tbe materiality of representations is determined in accordance 
 
 witb tbe same rules previously stated as applying to conceal- 
 ments. In some states these rules have been modified by stat- 
 ute. Wbetber a given representation is material is ordinarily 
 a question for the jury. 
 
 Construction of Representations—Substantial Truth Sufficient 
 
 All the circumstances under which representations are usually made 
 to the insurer, especially in life insurance, conspire to justify the 
 strong tendency manifested by the courts to so construe the lan- 
 guage of a representation as to uphold the policy, if possible, and, by 
 holding the representation to be substantially true, preserve to an inno- 
 cent insured the benefits he expected to receive under the policy. If 
 the representation is written in the policy, the language in which it 
 is expressed was chosen by the insurer; if in answer to an inquiry, the 
 agent of the insurer usually phrases the answer to a question worded 
 by the insurer. The great number and particularity of the inquiries 
 made, and the nature of the information asked, are such that "no hu- 
 man being could with safety undertake to answer accurately and war- 
 rant the correctness of his answers." *• Consequently the courts are 
 vigorous in stretching the language of these representations, sometimes 
 beyond the limits set by the lexicographers, in order to make them fit 
 the facts to which honest but careless or ignorant applicants for insur- 
 ance had applied them. Thus, in the leading case of Union Mut. Life 
 Ins. Co. V. Wilkinson,*^ the answer, "No," was given to the question, 
 "Has the party ever had any serious illness, local disease, or personal 
 injury; if so, of what nature, and at what age?" The evidence showed 
 that the insured, when a girl of fourteen, had fallen some forty feet 
 from the top of a pecan tree, and, being taken up insensible, was con- 
 resented to the underwriters that she was to sail with two armed ships, and 
 to carry ten guns and twenty-five men. "There was no evidence of any con- 
 versation upon the subject having passed between the parties either when 
 the policy was signed, or in the intervening period." In fact, the ship sailed 
 by herself, and carried only eight guns and seventeen men. The report does 
 not show whether the ship had or had not sailed when the policy was signed. 
 The only point raised or denied was whether the court could look back to 
 the previous conversation, or must be confined to what took place at the 
 time of subscribing the policy; and upon that Lord Ellenborough ruled that 
 the previous conversation "must be referred to the policy, and treated as 
 a representation which required to be substantially complied with on the 
 part of the assured." But see the case of Bowden v. Vaughan, 10 East, 415. 
 
 «• Fitch V. Insurance Co., 59 N. Y. 557, 567, 17 Am. Rep. 372. 
 
 •r 13 Wall. 222. 20 L. Ed. 617. 
 
 §§ 102-103) OONSTBUOTION OP BBPRESBNTATION8. 
 
 279 
 
 fined to her bed for some time, but with no permanent injury to her 
 general health. In holding that it was for the jury to say whether 
 this was a "serious" injury or not, the court said: "It is insisted by 
 counsel for the defendant that, if the injury was considered serious 
 at the time, it is one which must be mentioned in reply to the interroga- 
 tory, and that whether any further inquiry is expedient on the subject 
 of its permanent influence on the health, is for the insurer to deter- 
 mine before making insurance. But there are grave and obvious dif- 
 ficulties in this construction. The accidents resulting in personal in- 
 juries, which at the moment are considered by the parties serious, 
 are so very numerous that it would be almost impossible for a per- 
 son engaged in active life to recall them at the age of forty or fifty 
 years; and, if the failure to mention all such injuries must invalidate 
 the policy, very few would be sustained where thorough inquiry is 
 made into the history of the party whose life is the subject of in- 
 surance. There is, besides, the question oi what is to be considered a 
 serious injury at the time. If the party gets over the injury completely, 
 without leaving any ill consequence, in a few days, it is clear that the 
 serious aspect of the case was a mistake. Is it necessary to state the 
 injury and explain the mistake to meet the requirement of the policy? 
 On the other hand, when the question arises, as in this case, on a 
 trial, the jury, and not the insurer, must decide whether the injury 
 was serious or not. In deciding this, are they to reject the evidence 
 of the ultimate effect of the injury on the party's health, longevity, 
 strength, and other similar considerations? This would be to leave 
 out of view the essential purpose of the inquiry, and the very matters 
 which would throw most light on the nature of the injury, with refer- 
 ence to its influence on the insurable character of the life proposed." 
 
 The propriety of a liberal construction of representations in favor 
 of the insured is well illustrated by the somewhat similar case of Fitch 
 V. American Popular Life Ins. Co.,"® in which the insured had stated 
 that he had never had "any illness, local disease, or injury in any 
 organ." In deciding that this representation was substantially true, 
 despite the fact that the insured had been discharged from the army 
 because of inflammation of the eyes, which, however, had been en- 
 tirely cured before the application for the policy in suit had been made, 
 the court said: "The president of the defendant, who appears to 
 have been a physician, enumerates about fifty parts of the human body 
 which come under the denomination of organs, including among others 
 the eye, the nerves, bones, cartilages, veins, glands of the skin, etc.; 
 and it is claimed by the defendant that an injury to or disease of any 
 of these organs at any previous period necessarily rendered the answer 
 given by the deceased a breach of warranty or a misrepresentation 
 
 «8 60 N. Y. 557, 17 Am. Rep. 372, 
 
280 
 
 BEPllESENTATIONS AND WARRANTIES. 
 
 (Ch. 8 
 
 which should avoid the policy. If a finger had been broken, the skin 
 injured, or a vein cut at any period of the applicant's life, the policy 
 would, according to this doctrine, be void." 
 
 An equally liberal construction in favor of the insured has usually 
 been given to a representation that the insured is of correct and tem- 
 perate habits. Indeed, the courts have allowed juries to render ver- 
 dicts as to the truth of such a representation so greatly at variance 
 with popular judgment in such matters as somewhat to shake the con- 
 fidence of insurers, and even of some disinterested parties, in the Eng- 
 lish language as understood in the courts of law. Thus, in Knicker- 
 bocker Life Ins. Co. v. Foley,** the court held that a man was to be 
 considered temperate if his habits were ordinarily temperate, even 
 though he may have had an occasional attack of delirium tremens from 
 exceptional overindulgence. This holding has been approved in a 
 subsequent case »® in the federal Supreme Cour^, and also in several 
 state courts," but has been 'repudiated by the House of Lords in the 
 case of Thomson v. Weems,"* in which Lord Watson, speaking of 
 the Foley Case, said : "An American jury had found that a man was 
 of temperate habits, although it had been proved at the trial that he 
 had an attack of delirium tremens, and the court refused to disturb 
 the verdict ; the main reason assigned for that decision being a state- 
 ment occurring in some treatise on medical jurisprudence to the effect 
 that, in the case of an intemperate man, delirium tremens is occa- 
 sioned by abstinence from drink, and in the case of a temperate man 
 by indulgence in liquor. Even if it had been laid down as a matter 
 of law, I should hesitate veiy much to adopt such a standard as that. 
 A man suffering from delirium tremens occasioned by recent drink- 
 ing may possibly be more temperate than another man who is simi- 
 larly afflicted in consequence of his having abstained from his usual 
 potations ; but I should not like to affirm that either of them was, in 
 the ordinary sense of the term, a man of temperate habits." 
 
 The most reasonable and satisfactory statement of the law on this 
 point is, perhaps, to be found in an Ohio case, in which the court 
 said : " "Where the general habits of a man are either abstemious or 
 
 «» 105 U. S. 350, 26 L. Ed. 1055. 
 
 so Northwestern Mut. Life Ins. Co. v. Muskegon Nat. Bank, 122 U. S. 501, 
 7 Sup. Ct. 1221, 30 L. Ed. 1100. See, also, ^tna Life Ins. Go. y. Davey, 123 
 U. S. 739, 8 Sup. Ct. 331, 31 L. Ed. 315. 
 
 ai MUTUAL LIFE INS. CO. v. SIMPSON (Tex. Civ. App.) 28 S. W. 837. 
 See, also, Van Valkenburgh v. Insurance Co., 70 N. Y. 605. 
 
 32 THOMSON V. WEEMS, 9 App. Cas. 671 (1884), Richards, Ins. Cas. 339. 
 
 His lordship, however, was mistaken in saying that the decision of Knick- 
 erbocker Life Ins. Co. v. Foley, supra, merely resulted in a refusal to set 
 aside a verdict The question before the court was the correctness of the 
 Instruction given by the lower court. 
 
 «» UNION MUT. LIFE INS. CO. v. REIF, 36 Ohio St 596, 38 Am. Rep. 613. 
 
 §§ 102-103) CONSTRUCTION OF REPRESENTATIONS. 
 
 28] 
 
 T 
 
 f^ 
 
 temperate, an occasional indulgence to excess does not make him 
 a man of intemperate habits. But if the habit is formed of drinking 
 to excess, and the appetite for liquor is indulged to intoxication, 
 either constantly or periodically, no one will claim that his habits are 
 temperate, though he may be duly sober for longer or shorter periods 
 in the intervals between the times of his debauches." 
 
 Representations Need be Only Substantially True. 
 
 These cases are also illustrations of the general rule that represen- 
 tations are not required to be literally true, as are warranties, but that 
 substantial truth only is necessary. An old English case ®* further 
 illustrates this. The armament of the vessel insured was represented 
 as consisting of twelve guns and twenty men, whereas the real arma- 
 ment was of equal strength with that represented, but not identical 
 with it. It was held that there was no misrepresentation, though it 
 would have been otherwise if the statements had been made war- 
 ranties. 
 
 Statements of Opinion, etc. 
 
 As heretofore shown,*" the statement of an erroneous opimon, be- 
 lief, or information, or of an unfulfilled intention, will not avoid the 
 contract of insurance, unless fraudulent. Hence the courts are in- 
 clined to construe a statement as being one of opinion whenever it is 
 possible to do so, in order to prevent the forfeiture of policies by rea- 
 son of innocent mistakes Thus statements of value, as already said, 
 are held but expressions of opinion; and so are representations as to 
 the health of the insured, so far as latent diseases are concerned,^® 
 
 •*PAWSON v. WATSON, Cowp. 785. Where there Is a representation 
 that the ship wil sail In ballast, such representation is sufficiently complied 
 with by her sailing with one trunk of merchandise and ten kegs of powder. 
 Suckley v. Delafield, 2 Caines (N. Y.) 222. The description in the represen- 
 tation may differ very considerably from the actual state of the property 
 insured; if such variation did not in fact aflPect the rate of insurance, or 
 change the actual risk, the policy is not avoided. Jefferson Ins. Co. v. 
 Cotheal, 7 Wend. (N. Y.) 72, 22 Am. Dec. 567. 
 
 »5 Supra, p. 272. 
 
 «« MOULOR V. INSURANCE CO., Ill U. S. 335, 4 Sup. Ct. 466, 28 L. Ed. 
 447; Goucher v. Association (C. C.) 20 Fed. 596. and note; Schwarzbach v. 
 Union, 25 W. Va. 622, 52 Am. Rep. 227; Endowment Rank Knights of 
 Pythias v. Rosenfeld, 92 Tenn. 508, 22 S. W. 204 ; Endowment Rank Knights of 
 Pythias v. Cogbill, 99 Tenn. 28, 41 S. W. 340. 
 
 See, also, as to representations and wan*anties of health of Insured when 
 he has an undiscovered disease, note to Fidelity Mut. Life Ass'n v. Jeffords, 
 53 L. R. A. 193. 
 
 In MOULOR v. INSURANCE CO., supra, the court, by Mr. Justice Harlan, 
 said: "If those who organize and control life insurance companies wish to 
 exact from the applicant, as a condition precedent to a valid contract, a 
 guaranty against the existence of diseases, of the presence of which in his 
 system he has and can have no knowledge, and which even skillful physi- 
 
282 
 
 BBPBBSENTATIONS AND WARRANTIES. 
 
 (Ch.8 
 
 although there is some authority to the contrary." But if the insured 
 represents himself to be free from a specific disease, with which he 
 knows he is really afflicted, though not in such a serious form as to 
 disable him, the untruth of the statement will avoid his policy.*' So 
 generally, a representation as to any future event or condition over 
 which the insured has no control will be deemed a mere expression of 
 opinion, which will avoid the contract only when made in bad faith.'* 
 And even a representation written in the policy in such form as to 
 admit of its being construed as an executory agreement or "promissory 
 
 clans are often unable, after the most careful examination, to detect, the 
 terms of the contract must be so clear as to exclude any other conclusion. 
 ♦ ♦ ♦ If It be said that an individual could not be afflicted with the dis- 
 eases specified In the application [scrofula, asthma, and consumption] with- 
 out being cognizant of the fact, the answer is that the Jury would in that 
 case have no serious difficulty in finding that he had failed to communicate 
 to the company what he knew or should have known was material to the 
 risk, and that consequently, for want of fair and true answers, the policy 
 was, by its terms, null and void. But whether a disease is of such a char- 
 acter that its existence must have been known to the individual afflicted 
 with It, and therefore whether an answer denying its existence was or not 
 a fair and true answer, is « matter which should have been submitted to 
 the jury." 
 
 In Endowment Rank Knights of Pythias v. Rosenfeld, supra, the court 
 said: "A man cannot, however, know with such exact certainty the condi- 
 tion of his system as he can the status and condition of his property. The 
 presence or absence of any disease, or predisposition to disease, is to some 
 extent a matter of opinion. There may be hidden or undeveloped disease, of 
 which an applicant for insurance may be wholly ignorant, and of which he 
 may or may not have the slightest suspicion, and which may or may not be 
 ascertained by an examiner upon his medical examination. This cannot be 
 said of his property. A man may always know or ascertain the condition 
 and status of his property. While the rule Is the same in both cases, the 
 application, from the very nature of the case, must be to some extent differ- 
 ent If the assured, when he makes his application, know, or have any 
 reason or ground to believe, that he has any disease, even though it may 
 be latent and undeveloped, he is in duty bound to make it known, whether 
 specially questioned or not, and, if he fail to do so, it will amount to a mis- 
 statement or concealment, as the case may be, that will avoid hlf policy; 
 but if there should be in him some latent disease, of which he knows and 
 suspects nothing, and has no means of ascertaining, he cannot be said to 
 have either misrepresented or concealed the facts in guch a sense as to avoid 
 his policy. There can be no concealment of a fact which Is not known, and 
 cannot be known by proper inquiry." See, also. Royal Neighbors of America 
 V. Wallace (Neb. 1904) 99 N. W. 256. 
 
 87 MAINE BENEFIT ASS'N v. PARKS, 81 Me. 79, 16 Atl. 339, 10 Am. St. 
 Kep. 240. See, also, CAMPBELL v. INSURANCE CO., 98 Mass. 381; Vose 
 ▼. Insurance Co., 6 Cush. (Mass.) 42. 
 
 « 8 Jeffrey v. United Order, 97 Me. 176, 53 Atl. 1102. 
 
 8» Herrick v. Insurance Co., 48 Me. 558, 77 Am. Dec. 244, where It was held 
 that the statement that a building would be occupied by a tenant was a 
 mere statement of opinion. 
 
 §§ 102-103) CONSTRUCTION OF REPRESENTATIONS. 
 
 283 
 
 representation" will rather be construed, when possible, as an affirma- 
 tive representation of a present fact, in order to save a policy from 
 forfeiture. Thus, when the insured states that the building is used 
 for a certain purpose,*® or that no smoking is allowed *^ on the prem- 
 ises, the truth of the representation at the time it is made is sufficient 
 to validate the insurance, which will not be aifected by a subsequent 
 change in the use to which the building is put, or in the practice as to 
 smoking on the premises. 
 
 But where the subject of the representation is susceptible of actuai 
 knowledge the insured cannot escape the fatal consequences of an un- 
 true statement of fact by claiming that his honestly entertained opinion 
 on the subject was mistaken.** Thus, whether a man is temperate or 
 
 *o Bryan v. Insurance Co., 8 W. Va. 605; Burlington Ins. Co. v. Brock- 
 way, 138 111. 644, 28 N. E. 799; Joyce v. Insurance Co., 45 Me. 168, 71 Am. 
 Dec. 536; Cumberland Valley Mut. Protection Co. v. Douglas, 58 Pa. 419, 98 
 Am. Dec. 298. In a policy of insurance on sundry buildings, they were de- 
 scribed as barns, to which this clause was added: "All the above-described 
 barns are used for hay, straw, grain unthreshed, stabling, and shelter"; 
 and on the trial, after proof of a loss, it appeared that on the day preceding 
 the night of the fire the insured had caused about two bushels of lime and 
 six or eight pails of water to be placed in a tub standing in a room generally 
 used for keeping therein unthreshed corn, in one of the barns, for the pur- 
 pose of preparing the lime for rolling in it some wheat which he was about 
 to sow upon his farm; that a short time previous to the fire he had com- 
 menced the painting of his house, and his painter had mixed his paints in 
 the same room, and at the time of the fire there were in it au oil barrel, 
 containing about a gallon of oil, and a pot with about a pint of mixed paint; 
 that in another building, described in the policy as used In part as a cider 
 mill, the insured, before and after the execution of the policy, had been in 
 the habit of repairing his farming utensils, and had also made in It a bee- 
 hive, and planed some boards for a room In his house, but a day or two 
 before the fire the building had been cleaned out, leaving nothing in It but 
 some apples. Held that the clause relating to the use of the buildings insured 
 was not an agreement that they should be used in that manner, and in no 
 other, but was Inserted merely for the purpose of designating the buildings 
 insured, and not to limit their use, or to deprive the insured of the enjoyment 
 of his property in the same manner as buildings of that description are gen- 
 erally used and enjoyed. Billings v. Insurance Co., 20 Conn. 139, 50 Am. 
 Dec. 277. In Catlin v. Insurance Co., Fed. Cas. No. 2,522, 1 Sumn. 434, the 
 house was described in the policy as "at present occupied as a dwelling 
 house, but to be occupied hereafter as a tavern, and privileged as such"; 
 and It was held that this was not a warranty that the house should, dur- 
 ing the continuance of the risk, be constantly occupied as a tavern, but that 
 it was, at farthest, a mere representation of the Intention to occupy it as 
 such, and a license or privilege that it might be so occupied. 
 
 *i This Is true even where the answer to the question, "Is smoking al- 
 lowed on the premises?" is made a warranty. HOSFORD v. INSURANCE 
 CO., 127 U. S. 399, 8 Sup. Ct. 1199, 32 L. Ed. 196. 
 
 *2 "When the insurer is Induced to enter into the contract through a mis- 
 apprehension as to a material matter occasioned by the conduct or declara- 
 tions of the opposite party, he is entitled to be relieved, whether the misap- 
 
284 
 
 REPRESENTATIONS AND WARRANTIES. 
 
 (Ch.8 
 
 H 
 
 intemperate is a question of fact, however difficult of legal definition 
 that fact may be. Consequently, if the insured was in fact intem- 
 perate, whether drinking to excess daily, or only at long intervals, 
 his policy cannot be saved from avoidance according to its terms by 
 showing that the insured really regarded his habits as being correct 
 and temperate.** 
 
 Tivie to Which Representations Refer. 
 
 Representations refer only to the time of making the contract. As 
 shown above,** statements promissory of conditions to exist subsequent 
 to the completion of the contract may be conditions or warranties. 
 They cannot be representations. Hence conditions represented as ex- 
 isting must be so during the making of the contract, but not after- 
 wards. And representations found, to be untrue may be withdrawn 
 prior to the completion of the contract, but not afterwards.** 
 
 Materiality — Statutes — Evidence, 
 
 The rule heretofore discussed *• as determining the materiality of 
 concealments applies equally to representations ; that is, any statement 
 is material which in any wise induced the insurer to make a contract 
 which he otherwise would not have made, or would have made only 
 on different terms.*^ In many states, however, this rule has been some- 
 what narrowed by statute. Thus in Massachusetts *® it has been en- 
 acted that "no oral or written misrepresentation made in the nego- 
 tiation of a contract or policy of insurance by the assured, or in his 
 behalf, shall be deemed material, or defeat or avoid the policy, or pre- 
 vent its attaching, unless such misrepresentation is made with actual 
 intent to deceive, or unless the matter misrepresented or made a war- 
 ranty increased the risk of loss." The Missouri statute *® goes still 
 further, and, in effect, provides that a representation shall not be 
 
 prehension be produced by fratid or Innocent mistake." Continental Ins. Co. 
 V. Kasey, 25 Grat. (Va.) 268, 18 Am. Rep. 681. 
 
 43 THOMSON V. WEEMS, 9 App. Cas. 671; Richards, Ins. Cas. 839; Stand- 
 ard Life & Accident Ins. Co. v. Lauderdale, 94 Tenn. (10 Pickle) 635, 30 S. W. 
 732. 
 
 i* Supra, p. 275. 
 
 *5 "A representation may be altered or withdrawn before the insurance la 
 effected, but not afterwards." Civ. Code Cal. § 2576. 
 
 46 Supra, p. 257. 
 
 4T "The materiality of a representation is determined by the same rule 
 as the materiality of a concealment" Civ. Code Cal. § 2581. 
 
 48 St. 1895, c. 271. For the history of this act, see White v. Society, 163 
 Mass. 108, 39 N. E. 771, 27 L. R. A. 398, and cases cited. See, also, Levle v. 
 Insurance Co., 163 Mass. 117, 39 N. E. 792. The Minnesota act is similar in 
 terms, with the omission of the words "or made a warranty" inserted by the 
 act of 1895. See Minnesota Laws 1895, p. 400, c. 175, § 20. 
 
 4»Rev. St 1879, § 5976. See Franklin Life Ins. Co. v. Galligan (March. 
 1903) 71 Ark. 295. 73 S. W. 102. 
 
 §104) 
 
 WAEEANTIES — IN GENEBAL. 
 
 285 
 
 deemed material unless it contributes to the loss or damage for which 
 indemnity is claimed. The provisions of such statutes prevail over 
 the express agreement of the parties.'** "It is as much the duty of the 
 courts to enforce such rules as it is to administer the statute of frauds 
 
 and perjuries." *^ , • t. * *i. 
 
 The materiality of any given representation is for the jury, but the 
 fact that a statement is made in response to an inquiry raises a powerful 
 presumption that it is material.^^ And the burden of proving both the 
 materiality and the falseness of a representation rests upon the in- 
 
 surer. ^^ 
 
 By the great weight of authority, both in England and this country, 
 experts in insurance will not be permitted to testify as to whether any 
 particular representation is material, but they may state to the jury 
 usages of insurers generally as to rejecting risks or accepting them only 
 at a higher* rate, when informed'of the fact in question.** 
 
 WARRANTIES— IN GENERAL. 
 
 104. A warranty is a representation or promise set forth in til* policy, 
 or by reference incorporated therein, which by the terms of the 
 policy is made an essential part of the contract, and the untruth 
 or nonfulfillment of which, it is agreed, shall render the policy 
 voidable by the insurer, wholly irrespective of the materiality 
 of such representation or promise* 
 
 It is generally agreed by the parties to the contract of insurance 
 thai certain representations or promises contained in the policy itself, 
 or incorporated in it, by an express conditio* of the policy, shall con- 
 stitute warranties, upon the truth or fulfillment of which shall depend 
 all rights of the insured in the policy. Stipulations of this character 
 art necessary for the protection of the insurer, who is thereby relieved 
 
 60 Fidelitv- Mut. Life Ass'n v. Miller, 92 Fed. 63, 34 C. C. A. 211; Fidelity 
 Mut. Life Ass'n v. Ficlilin, 74 Md. 172, 21 Atl. 680, 23 Atl. 197; Hermany v. 
 Association, 151 Pa. 17, 24 Atl. 1064; Lutz v. Insurance Co., 186 Pa. 527, 40 
 Atl. 1104. The case of Farmers' & Drovers' Ins. Co. v. Curry, 13 Bush (Ky.) 
 312, 26 Am. Rep. 194, which is opposed to the text, was apparently overruled 
 by Qermania Ins. Co. v. Rudwig, 80 Ky. 223. 
 
 Bi Hermany v. Association, 151 Pa. 17, 24 Atl. 1064, per Sterrett, J. This 
 statement does not apply, however, to statutes of a foreign state. Mutual Life 
 Ins. Co. v. Hill, 193 U. S. 551, 24 Sup. Ct. 538, 48 L. Ed. 788. 
 
 62 VIVAR V. KNIGHTS OF PYTHIAS, 52 N. J. Law, 455, 20 Atl. 36. 
 
 63 Piedmont & A. Ins. Co. v. Ewing, 92 U. S. 377, 23 L. Ed. 610; PENN 
 MUT. LIFE INS. CO. v. MECHANICS' SAV. BANK & TRUST CO., 72 Fed. 
 413, 19 C. C. A. 286, 38 L. R. A. 33; Jones v. Insurance Co., 61 N. Y. 79. 
 
 64 For a full and learned discussion of all the English and American cases 
 on this interesting question, see the able and carefully written opinion of 
 Taft, J., in PENN MUT. LIFE INS. CO. v. MECHANICS' SAV. BANK & 
 TRUST CO., 72 Fed, 413, 19 C. C. A. 28G, 38 L. R. A. 33. 
 
286 
 
 REPRESENTATIONS AND WARRANTIES. 
 
 (Ch.8 
 
 i 
 
 lit 
 
 
 from any liability which he might otherwise sustain through the as- 
 sumption of hazardous risks, which, but for the false statements or 
 promises of the applicant, would have been promptly rejected 
 
 Representations or promises which it is thus agreed shall consti^ 
 tute warranties are usually those of such a character as to be mani« 
 festly matenal to the risk assumed, but their materiality is to be de- 
 termined solely by the parties to the contract, who may, if they see 
 ^S^'"^^^ that an apparently trivial statement shall constitute a war- 
 ranty. When It can be clearly seen that such was their intention, the 
 courts ivill consider no further the question of its materiality, but 
 will hold Its untruth a good defense to an action on the policy." As 
 IS wen stated in the leading case of Jeffries v. Economical Mut. Life 
 ins. Lo.: Many cases may be found which hold that, where 
 
 false answers are made to inquiries which do not relate to the risk 
 the policy is not necessarily avoided, unless they influenced the mind 
 of the company, and that whether they are material is a question for 
 the jury ^ But we know of no respectable authority which so holds 
 where it is expressly covenanted as a condition of liability that the 
 statements and declarations made in the application are true, and when 
 the truth of such statements forms the basis of the contract " 
 
 In order to constitute a stipulation a warranty, however, it must not 
 only be clearly shown that the parties intended it as such," but it 
 
 " Ripley v. Insurance Co., 30 N. T. 136, 86 Am. Dec 362- Davev v Tn- 
 TvTim S^'^VV.'^'J'''^ Metropolitan Life^! Ca' v'^RTherford, 
 587 li ItTa '^' n ' ?^^«%^- Insurance Co., 84 Mich. 309, 47 N. W. 
 kJi'iJ ^ n, i^' ^' ?fr"^^ ^- Insurance Co., 109 La. 341, 33 South. 361; 
 Kelly TClearing Co., 113 Ala. 453, 21 South. 361. "When once it Is ascer 
 I^ptf"' the statement Is a warranty, and that it Is fale a^d the pohcy 
 
 fn «n?io ^ . * ^^°^^^n« a n^a«er of Blight importance and may not 
 
 iA V ^' A ol* ^* ^^* ^"^^^ ^- Association, 153 Mass. 176, 26 N. B 230 
 W«H m i\ ^ 'o?T^; ®i; ^®P- ^^^' JEFFRIES v. INSURANCE CO., 22 
 7m Jl' ^^^\f ^.^^- ^/ ^™^ ^^^^ INS. 00. y. FRANCE, 91 U. f 
 510, 23 L. Ed. 401; Flippen v. Insurance Co., 30 Tex. Civ. App. 362, 70 S. W. 
 
 It is held in a recent Illhiois case that, where a landlord enters Into a con- 
 tract of insurance providing that no gasoline except that contained in the 
 reservoir of a gasoline stove shall be kept within the building, it is his duty 
 to see to It that the provisions of the policy are not violated, even by the 
 
 1 * ^n K^^ °'- ^- ^- Norwaysz, 104 111. App. 390. See, further, as to 
 what will be construed as amounting to a breach of warranty, Henn v 
 Insurance Co., 67 N. J. Law, 310. 51 Atl. 689 ""^anty, uenn v. 
 
 »« JEFFRIES V. INSURANCE CO., 22 Wall. (U. S.) 47, 22 L. Ed 833 See 
 also,^TNA LIFE INS. CO. v. FRANCE, 91 U. S. 616. 23 L. Ed.^1 ' 
 
 57 Descriptive phrases will be considered warranties if used to describe 
 the risk Itself, but not if used merely for purposes of identifying t^e e^b?^ 
 
 §104) 
 
 WARRANTIES — ^IN GENERAL. 
 
 287 
 
 must also form a part of the contract, itself.'^ If the representations 
 or promises which are regarded as warranties are not contained in 
 the policy itself, but in some other instrument, such as the by-laws, 
 application, or survey, they can only be incorporated in the contract, 
 so as to be given the effect of warranties, by an express condition con- 
 tained in the policy.** Mere reference, alone, is not sufficient to give 
 them this effect.*® 
 
 Nature of a Warranty. 
 
 Warranties are in the nature of conditions precedent, in that upon a 
 strict compliance with them in every particular depend all rights of 
 
 of the insurance. Thus, where the vessel insured was described at nhe 
 good American ship called Rodman," It was held that the ship was war- 
 ranted to be American. Barker v. Insurance Co., 8 Johns. (N. Y.) 307, 5 
 Am. Dec. 339. So where the vessel was described as "the Mount Vernon, an 
 American ship." Baring v. Claggett, 3 Bos. & P. 201, 5 East, 398. See, also, 
 Lewis V. Thatcher, 15 Mass. 431. But calling a vessel by an English transla- 
 tion of her Spanish name is not a warranty that she is Eiiglish. OLAPHAM 
 V. COLOGAN, 3 Camp. 382. In Le Mesurier v. Vaughan, 6 East, 382, a state- 
 ment that the goods insured were shipped in the vessel "called the Ameri- 
 can ship President" was held not to be a warranty that the ship was 
 American, but merely a statement of her name. 
 
 In the leadhig case. BURLEIGH v. INSURANCE CO., 90 N. T. 220, Rich 
 ards, Ins. Cas. 350, a description of the building insured as "detached at least 
 one hundred feet" was held to warrant that the building was distant at least 
 one hundred feet from any other building of such character as would in- 
 crease the risk. See, also. Wall v. Insurance Co., 7 N. Y. 370. 
 
 88 Daniels v. Insurance Co., 12 Cush. (Mass.) 416, 59 Am. Dec. 192; Jeffer- 
 son Ins. Co. V. Cotheal, 7 Wend. (N. Y.) 72, 22 Am. Dec. 567; GODDARD v. 
 INSURANCE CO., 67 Tex. 69, 1 S. W. 906, 60 Am. Rep. 1. The fact that 
 representations are made a part of the contract does not, however, neces- 
 sarily make them warranties. They will only be given the effect of war- 
 ranties, when it is manifest from an examination of the entire policy that 
 such was the intention of the parties. VIVAR v. KNIGHTS OP PYTHIAS. 
 52 N. J. Law, 455, 20 Atl. 36; Supreme Council of Royal Arcanum v. Brash- 
 ears, 89 Md. 624, 43 Atl. 866, 73 Am. St Rep. 244; Hoose v. Insurance Co.. 
 84 Mich. 309, 47 N. W. 587, 11 L. R. A. 340; MOULOR v. INSURANCE 00., 
 Ill U. S. 335, 4 Sup. Ct 466, 28 L. Bd. 447; Fitch v. Insurance Co., 59 N. Y. 
 557, 17 Am. Rep. 372. 
 
 5» Printed proposals to be construed as warranties should be referred to by 
 the policy, which should in express terms declare that it had been made and 
 accepted in reference to them. Jefferson Ins. Co. r. Cotheal, 7 Wend. (N 
 Y.) 72, 22 Am. Dec. 567. 
 
 For cases hi which applications were held Incorporated In the policy, so 
 that statements contained in them constituted warranties, see Chaffee v. In- 
 surance Co., 18 N. Y. 376; Bobbitt v. Insurance Co., 66 N. C. 70, 8 Am. Rep. 
 494. See, also, Glendale Woolen Co. v. Protection Ins. Co., 21 Oonn. 19, 54 
 Am. Dec. 309, where statements contained In a lurvey were given a like con- 
 struction. 
 
 •0 SNYDER V. LOAN CO., 13 Wend. (N. Y.) 92; TAYLOR T. INSURANCE 
 CO., 120 Mass. 254; Lebanon Mut. Ins. Co. v. Losch, 109 Pa. 100; Hartford 
 Protection Ins. Co. v. Harmer, 2 Ohio St 452, 59 Am. Dec. 684. 
 
 I 
 
288 
 
 REPRESENTATIONS AND WARRANTIES. 
 
 (Ch.8 
 
 §105) 
 
 AFFIRMATIVE AND PROMISSORY WARRANTIES. 
 
 289 
 
 ■-h 
 
 
 the insured in the policy.** They differ from such conditions, how- 
 ever, in that where the insured seeks to recover on the policy he need 
 not set forth the warranties and recite his compliance with each; but 
 by the weight of authority it is held that, in order to defeat a recovery 
 on the ground of a breach of warranty, it is incumbent upon the de- 
 fendant to allege breaches, and to prove them as alleged.** 
 
 The reason for this exception to the general rule regarding the . 
 burden of proof in cases where the performance of certain stipula- 
 tions is a necessary condition precedent to the right of action may be 
 gathered from the opinion of Mr. Justice Miller in Piedmont & A. 
 Life Ins. Co. v. Ewing,*^ where it is said : "The number of the ques- 
 tions now asked of the assured in every application for a policy, and 
 the variety of subjects and length of time which they cover, are such 
 that it may be safely said that no sane man would ever take a policy 
 if proof to the satisfaction of a jury of the truth of every answer were 
 made known to him to be an indispensable prerequisite to payment of 
 the sum secured; that proof to be made only after he was dead, and 
 could render no assistance in furnishing it. On the other hand, it 
 is no hardship that, if the insurer knows or believes any of these state- 
 
 •1 FOWLER V. INSURANCE CO., 6 Cow. (N. Y.) 673, 16 Am. Dec. 460; 
 Jefferson Ins. Oo. v. Cotheal, 7 Wend. (N. Y.) 72, 22 Am. Dec. 567; Alabama 
 Gold Life Ins. Co. v. Johnston, 80 Ala. 467, 2 South. 125, 59 Am. Rep. 816; 
 Metropolitan Life Ins. Co. v. Rutherford, 98 Va. 195, 35 S. E. 361; Price ▼. 
 Insurance Co., 17 Minn. 497 (GU. 473), 10 Am. Rep. 166. 
 
 See, to the contrary, a dictimi of Judge Mitchell to the effect that a war- 
 ranty is in the nature of a defeasance, rather than a condition precedent. 
 CHAMBERS V. INSURANCE CO., 64 Minn. 495, 67 N. W. 367, 58 Am. St 
 Rep. 549. 
 
 •2 Piedmont & A. Life Ins. Co. v. Ewing, 92 U. S. 377, 23 L. Ed. 610. See, 
 also, PENN MUT. LIFE INS. OO. v. MECHANICS' SAV. BANK & TRUST 
 CO., 72 Fed. 413, 19 C. C. A. 286, 38 L. R. A. 33; Jones v. Insurance Co., 61 
 N. Y. 79; O'Connell v. Knights of Damon, 102 Ga. 143, 28 S. E. 282, 66 Am. 
 St. Rep. 159. 
 
 "If a life insurance policy provides that the application for insurance shall 
 be a part of the policy, and that if any false or fraudulent representation, 
 statement, or warranty is made in such application the policy shall be null 
 and void, the burden of proof is on the insurer to allege and show the 
 falsity of such representations or statement, and he must allege specifically 
 which of the representations he claims to be false, and he is limited in his 
 proof to those alleged." CHAMBERS v. INSURANCE CO., 64 Minn. 495, 
 67 N. W. 367, 58 Ahl St Rep. 549, Elliott, Ins. Cas. 121, Woodruff, Ins. Cas. 
 124, disapproving a dictum in Price v. Insurance Co., 17 Minn. 497 (Gil. 473), 
 10 Am. Rep. 166, to the effect that warranties are conditions precedent, the 
 truth of which must be pleaded and proved by the assured. There is au- 
 thority, however, for the view taken by the court in the earlier case. Mc- 
 Loon V. Insurance Co., 100 Mass. 472, 97 Am. Dec. 116, 1 Am. Rep. 129; 
 iSweeney v. Insurance Co., 19 R. L 171, 36 Atl. 9, 38 L. R. A. 297, 61 Am. St 
 Rep. 751. 
 
 •• 92 U. S. 377, 23 L. Ed. 610. 
 
 ments to be false, he shall furnish the evidence on which that knowl- 
 edge or belief rests. He can thus single out the answer whose truth 
 he proposes to contest, and, if he has any reasonable grounds to make 
 such an issue, he can show the facts on which it is founded." 
 
 AFFIRMATIVE AND PROMISSORY WARRANTIES. 
 
 105. Warranties are affirmative or promissory in accordance with 
 whether they represent facts as existing at the time they are 
 made, or promise that certain things shall be done or that 
 specified conditions shall exist dnring the currency of the policy. 
 
 Warranties are affirmative or promissory according as they are 
 made concerning an existing fact or state of facts, or relate to the ex- 
 istence or nonexistence of certain conditions in the future.'* The un- 
 truth of an affirmative warranty will prevent the insured from ever 
 acquiring any rights in the policy.''^ A promissory warranty, how- 
 ever, as relating solely to the future, is in the nature of a subsequent 
 condition of defeasance, the nonfulfillment of which renders the policy 
 voidable." ^ ^ 
 
 ^ The language used by the parties and the nature of the risk assumed 
 in each case will usually prevent any difficulty in determining whether 
 the insured intends a certain statement as a representation of an exist- 
 
 M 't^o.;^^^ ""' I^^SURANCE CO., 3 N. Y. 122; Smith v. Insurance Co.. 32 
 ^>- ^' 399; Gilliat v. Insurance Co., 8 R. I. 282, 91 Am. Dec. 229; Schultz v. 
 Insurance Co. (O. C.) 6 Fed. 672. 
 
 But the parties must have clearly intended to promise the existence of the 
 specified conditions. A mere expression of intention is not enough. See 
 Grant v. Insurance Co., 15 Moore, P. O. 515; Benham v. United, etc., Co., 7 
 Exch. 744; Catlin v. Insurance Co., 1 Sumn. 434, Fed. Gas. No. 2,522. But 
 on®x?"^^°"^*^ ^* Insurance Co., 5 Duer (N. Y.) 587; Ripley v. Insurance Co., 
 60 N. Y. 136, 86 Am. Dec. 362. In accordance with the general rule of con- 
 struction as to warranties, a promissory term of the policy will not be con- 
 sidered a warranty unless clearly made so. And the breach of such a prom- 
 issory term, not a warranty, will not avoid the contract, though it may give 
 rise to an action for damages. Commercial Mut. Ace. Co. v. Bates, 176 111 
 194, 52 N. E. 49. The law is thus stated in Civ. Code Gal. § 2608: "A state- 
 ment in a policy which imports that it is intended to do or not to do a thin'^ 
 which materially affects the risk is a warranty that such act or omission 
 shall take place." It is not believed that this is a correct statement of the 
 common-law rule. See Catlin v. Insurance Co., 1 Sumn. 434, Fed. Cas. No. 
 2,522; Barb. Ins. § 66. 
 
 •« See cases cited supra, note 55. 
 
 ••Schultz V. Insurance Co. (C. C.) 6 Fed. 672; Qlendale Woolen Co. t. 
 Protection Ins. Co., 21 Conn. 19, 54 Am. Dec. 309. 
 
 A mere declaration of future expectation or Intention, as distinguished 
 from an actual promise, is not a warranty. Herrick v. Insurance Co 48 
 Me. 558. 77 Am. Dec. 244; KNECHT v. INSURANCE 00.. 90 Pa. llS, 35 
 
 Vance Ins. — 19 
 
290 
 
 REPRESENTATIONS AND WARRANTIES. 
 
 rCh.8 
 
 ing- fact, or a promise for the future. Unless the latter is clearly 
 shown to have been intended, the courts will presume that the warranty 
 is merely affirmative.*^ As it is well stated in the opinion of the court 
 in Smith v. Mechanics' & Traders' Fire Ins. Co.: "If an insurance 
 company desires to protect itself by a warranty as to future or con- 
 tinued use in the same manner as when insured, it may always do so 
 by language, the object and meaning of which will be understood by 
 both parties ; and the courts should not thus construe words which are 
 fully satisfied as a description of a present use or condition into a 
 promissory warranty unless the inference is natural and irresistible 
 that such was the understanding and design of both parties." •* 
 
 In the case cited, it was held that where a policy described the prop- 
 erty insured as being "a two-story framed building, used for winding 
 and coloring- yarn, and for the storage of spun yarn," there was no 
 warranty that such building should continue to be so used. 
 
 So it was held in a leading case decided by the Supreme Court of 
 the United States that a warranty, in a contract of fire insurance, 
 that "smoking is not allowed on the premises," was not broken by the 
 fact that the assured or others afterwards smoked there, provided it 
 was forbidden at the time the contract was entered into.** In a Vir- 
 ginia case,^** in answer to the question, "Who sleeps in the store?" the 
 plaintiff had written, "Watchman on premises at night." This state- 
 ment, made a warranty by the policy, was held to refer only to the 
 time of making the contract, and not to be a warranty that a watchman 
 would be kept continuously on the premises thereafter. 
 
 •7 0*NIEL V. INSURANCE CO., 3 N. Y. 122; Smith T. Insurance Co., 82 
 N. T. 399 ; Gilliat v. Insurance Co., 8 R. I. 282, 91 Am. Dec. 229 ; HOSFORD 
 V. INSURANCE CO., 127 U. S. 399, 8 Sup. Ct. 1199, 32 L. Bd. 196. So the 
 words, "Clerk sleeps in the store," in an application, have been construed 
 as merely a description of occupancy, and not a promissory warranty. Fris- 
 bie v. Insurance Co., 27 Pa. 325. But see Glendale Woolen Co. v. Protection 
 Ins. Co., 21 Conn. 19, 54 Am. Dec. 309, where the statement, **There is a 
 watchman nights," was held to constitute a warranty for the future, as well 
 as the present. 
 
 «8 32 N. Y. 399. 
 
 «• HOSFORD V. INSURANCE CO., 127 U. S. 399, 8 Sup. CL 1199, 32 U Ed. 
 196. 
 
 TO Virginia Fire & Marine Ins. Co. v. Buck, 88 Va. 617, 13 S. B. 973. See, 
 also. United States Fire & Marine Ins. Co. v. Kimberly, 34 Md. 224, Am. 
 Rep. 325; Fiisbie t. Insurance Co.. 27 Pa. 32& 
 
 §§ 106-107) 
 
 DISTINCTION BETWEEN THEM. 
 
 291 
 
 ^ 
 
 WAKRANTIES DISTINGUISHED FROM REPRESENTATIONS. 
 
 106. Wappantie. are distingruished from representation, in tliats 
 
 W Warranties are parts of the contract, agreed to be essential; 
 n.s '^^'^■^"♦^^ioas are but coUateral inducements to it. 
 CI>) Warranties are always written on the face of the policy, actnaUy 
 or by reference. Representations may be written in the poUcy 
 x^^ * totally disconnected paper, or may be oral, 
 (c; Warranties are conclusively presumed to be material. The bup- 
 /-!'. Twr **** *^® insurer to prove representations material, 
 
 (d) Warranties must be strictly complied with, while substantial 
 truth only is required of representations. 
 
 107. STATUTORY PROVISIONS-In many states statute, ha^e been 
 
 enacted, which, in effect, abolish all distinction between repre- 
 .entations and warranties. It is generally provided by such 
 statutes that in no case will a policy be avoided by a false rep- 
 resentation or promise, unle^aLMlch representation or promise 
 be also material, or ma de with a fr au dulent in tent. 
 
 As previously shown, a representation or promise will only be Riven 
 the effect of a warranty when it forms a part of the contract of in- 
 surance. In order to become a part of the contract, it must be con- 
 tamed m the policy itself, or expressly incorporated therein by ref- 
 erence. / *V,A 
 
 A representation, on the other hand, while constituting an induce- 
 ment to the contract, is collateral to it. and not only need not be made 
 a part of the contract, either actually or by reference, but may be con- 
 tained in some paper totally disconnected with the policy, or may even 
 be oral." Manifestly, therefore, no difficulty can arise in cons^r^W 
 contracr"***'°"* statements or promises which form no part of the 
 
 A more difficult question presents itself, however, when the policy 
 expressly states that the insured warrants the truth of certain r^rZ 
 
 Do?ifv "^^ '''°'",!'''' ""•*'' ?'"^'*y "^ ^^'■^"'■"e all rights in the 
 pohcy. When such representations or promises are contained in the 
 
 thrl"'-'''/" J '* ^? "° °*^'' Provisions in it which would seem to 
 
 tiue^ t "P°." % '%^ '"''"*^°" °^ *^ P^^«^' *^y """St be con- 
 not m,v! l^"^*"^-" ?ut merely calling statements warranties does 
 not make tiiem so. If otiier provisions in the policy would seem to in- 
 
 " CLARK T. INSURANCE CO., 8 How. (tJ. S.) 235 12 L. Eii 10«1 • i^r 
 f^^ f.^- INSURANCE CO., 22 Wall. (D. S.) 47. 22 L. Bd ffiS- ^TOA mfb 
 
292 
 
 REPRESENTATIONS AND WARRANTIES. 
 
 (Ch.8 
 
 §§ 106-107) 
 
 DISTINCTION BETWEEN THEM. 
 
 293 
 
 % 
 
 dicate that the parties only intended that the stipulations in question 
 should be given the effect of representations, the courts are ever ready 
 to construe them as such.*" So, in all other doubtful cases, a state- 
 ment will be construed as a representation rather than a warranty,''* 
 and thus, whenever possible, a forfeiture will be prevented, where it 
 is sought to avoid a policy because of a false statement as to an im- 
 material matter J* 
 
 When a statement or promise is contained in an instrument other 
 than the policy, the presumption is that such a statement or promise 
 
 7» Wheaton v. Insurance Co., 76 Cal. 415, 18 Pac. 758, 9 Am. St Kep. 216; 
 Fitch V. Insurance Co., 59 N. Y. 557, 17 Am. Rep. 372; VIVAR v. KNIGHTS 
 OF PYTHIAS, 52 N. J. Law, 455, 20 Atl. 36; Continental Life Ins. Co. v. 
 Rogers, 119 111. 474, 10 N. E. 242, 59 Am. Rep. 810. 
 
 74PHCENIX MUT. LIFE INS. CO. V. RADDIN, 120 U. S. 183, 7 Sup. Ct 
 500, 30 L. Ed. 644. 
 
 For this reason, gratuitous answers written in the application — ^that is, an- 
 swers not responsive to any questions asked — are held not to be warranties, 
 even though the policy makes the statements of the application warranties. 
 Thus, when the insured had added to his correct answer to a question as to 
 other insurance, the uncalled-for statement, "Will drop Star July 15, '96," 
 it was held that his failure to perform the promise so made was not a breach 
 of warranty, and did not affect the validity of the contract. Commercial 
 Mut. Ace. Co. V. Bates, 176 111. 194, 52 N. E. 49. 
 
 76 FIRST NAT. BANK v. HARTFORD FIRE INS. CO., 95 U. S. 673, 24 L. 
 Ed. 563 ; MOULOR v. INSURANCE CO., Ill U. S. 335, 4 Sup. Ct. 466, 28 L. Ed. 
 477. In a leading Alabama case the following are mentioned as among the set- 
 tled rules for the construction of policies of insurance: (1) All the conditions 
 and obligations of the contract will be construed liberally in favor of the 
 insured, and strictly against the insurer. (2) The clearest and most unequiv- 
 ocal language is necessary to create a warranty, and all statements of doubt- 
 ful meaning will be construed as representations, merely. (3) E3ven though 
 a warranty In name or form be declared by the terms of the contract, its 
 effect may be modified by other parts of the policy or of the application, in- 
 cluding the questions and answers, so that answers to questions not material 
 to the risk will be construed as warranting only their honesty and good faith. 
 Alabama Gold Life Ins. Co. v. Johnston, SO Ala. 467, 2 South. 125, 59 Am. 
 R6p. 816; Daniels v. Insurance Co., 12 Cush. (Mass.) 416, 59 Am. Dec. 192; 
 PHCENIX MUT. LIFE INS. CO. v. RADDIN, 120 U. S. 183, 7 Sup. Ct. 500, 30 
 L. Ed. 6i4 ; Providence Life Assur. Soc ▼. Rentllnger, 58 Ark. 528, 25 S. W. 
 835. 
 
 A warranty Is never created by construction. A statement, to be given 
 the effect of a warranty, must have been expressly declared as such, or must 
 necessarily result frcnn the terms of the contract. Jefferson Ins. Co. v. 
 Cotheal, 7 Wend. (N. Y.) 72, 22 Am. Dec. 567. 
 
 Even though expressly declared a "warranty," however, a representation 
 will not in all cases be construed as such. Fitch v. Insurance Co., 59 N. Y. 
 557, 17 Am. Rep. 372; Provident Sav. Life Assur. Soc. v. Cannon, 103 111. 
 App. 534; Id., 201 111. 260, 66 N. B. 388. See, also, Missouri, K. & T. Trust 
 Co. V. German Nat. Bank, 77 Fed. 119, 23 C. C. A. 65; Rogers v. Insurance 
 Co., 121 Ind. 677, 23 N. £. 498; Garretson Y. Association, 93 Iowa, 409, 61 
 N. W. 954. 
 
 was intended as a representation ; and, in order to give it the effect of 
 a warranty, it must be clearly shown that such was the intention of the 
 parties. ''• As said by the court in a leading Massachusetts case, in 
 which it was sought to give to statements contained in the application 
 the effect of warranties: "The application is, in itself, collateral 
 merely to the contract of insurance. The statements, whether of facts 
 or agreements, belong to the class of representations. They are to be 
 so construed unless converted into warranties by force of a reference 
 in the policy, and a clear purpose, manifest in the papers thus con- 
 nected, that the whole shall form one entire contract." " 
 
 Warranty — Conclusively Presumed Material. 
 
 When it is once determined that a certain representation or promise 
 contained in the contract was intended as a warranty, it is conclusively 
 presumed that it is material to the risk assumed by the insurer, and the 
 insured can only recover on the policy in case the representation was 
 exactly true, or the promise has been literally fulfilled.'' • 
 
 A representation, on the other hand, will only avoid the policy if 
 both false and material. The insurer must show the materiality of the 
 representation in order to defeat an action on the policy.''* A sub- 
 stantial compliance with a representation, even when material, is suffi- 
 cient to prevent a forfeiture of the policy,®® while a warranty must be 
 strictly true." This rule is strikingly illustrated in the decisions of 
 
 76 Price V. Insurance Co., 17 Minn. 497 (Gil. 473), 10 Am. Rep. 166; VIVAR 
 V. KNIGHTS OF PYTHIAS, 52 N. J. Law, 455, 20 Atl. 36; Jefferson Ins. 
 Co. V. Cotheal, 7 Wend. (N. Y.) 72, 22 Am. Dec. 567. 
 
 7T CAMPBELL V. INSURANCE CO., 98 Mass. 381, cited and approved in 
 Price V. Insurance Co., 17 Minn. 497 (Gil. 473), 10 Am. Rep. 166. 
 
 78 See cases cited supra, note 55. 
 
 The doctrine is well stated in an early New York case: "A warranty 
 by the assured in relation to the existence of a particular fact must be 
 strictly true, or the policy will not take effect; and this is so whether the 
 thing warranted be material to the risk or not. It would perhaps be more 
 proper to say that the parties have agreed on the materiality of the thing 
 warranted, and that the agreement precludes all inquiry on the subject' 
 BURRITT V. INSURANCE CO., 5 Hill, 193, 40 Am. Dec. 345. 
 
 7 8 Daniels v. Insurance Co., 12 Cush. (Mass.) 416, 59 Am. Dec. 192; Jeflfer 
 son Ins. Co. v. Cotheal, 7 Wend. (N. Y.) 72, 22 Am. Dec. 567; Fidelity & 
 Casualty Co. v. Alpert, 67 Fed. 460, 14 O. C. A. 474; Mulville v. Adams (0. 
 C.) 19 Fed. 887; PHCENIX MUT. LIFE INS. CO. v. RADDIN, 120 U & 
 183, 7 Sup. Ct 500, 30 L. Ed. 644. 
 
 80 Hartford Protection Ins. Co. v. Harmer, 2 Ohio St 452, 59 Am. Dec. 684; 
 Daniels v. Insurance Co., 12 Cush. (Mass.) 416, 59 Am. Dec. 192; Higgle v! 
 American Lloyds (D. O.) 14 Fed. 143; Missouri, K. & T. Trust Co.' v. German 
 Nat Bank, 77 Fed. 117, 23 C. C. A. 65. 
 
 «i A curious departure from this rule is found in Continental Ins. Co. v. 
 Kasey, 25 Grat (Va.) 268, 18 Am. Rep. 681, in which it is held that the breach 
 of an immaterial warranty, not in fact relied on, does not avoid the contract 
 There the insured had warranted the building insured to be frame, whereas 
 
294 
 
 REPRESENTATIONS AND WARRANTIES. 
 
 (Ch.8 
 
 cases involving statements by the insured as to the condition of his 
 health. As shown above, the applicant's statement that he is not af- 
 flicted with a specified disease, or that he is in good health, if but a 
 representation, is held to be merely a statement of opinion, the incor- 
 rectness of which does not invalidate the contract unless the opinion 
 was fraudulently given. But if such a statement is warranted to be 
 
 itrue in every respect, by the weight of authority," its incorrectness 
 in fact will wholly avoid the policy, even though the insured acted in 
 perfect good faith, and had no means of knowing that he was dis- 
 eased. A few courts take the different view that the insured war- 
 rants only his good faith in making the representation as to his health,^' 
 and the latter holding is based on the sounder reasoning. The doc- 
 trine of warranties finds its sole justification in the right of the insurer 
 to stipulate beforehand that all representations made shall be material, 
 in order to escape the hazard of a verdict. But beyond the recogni- 
 tion of this right the law should not go. Warranties should be con- 
 sidered merely as representations conclusively material, and the same 
 rule as to truthfulness applied to both. It seems scarcely necessary 
 to hold that by an agreement of warranty the party insured intended to 
 assume the hazard of stating as an ascertained fact a matter which, in 
 its nature, often can be only a subject of opinion. 
 
 Effect of Statutory Enactments. 
 
 There can be no doubt but that the highly technical doctrine of war- 
 ranty often works not only hardship, but also substantial injustice, upon 
 
 it was in fact built partly of logs. The agent of the insurer inspected the 
 building and concurred with the insured in the description as made. Both 
 insured and agent acted in good faith. It was held that under the circum- 
 stances the breach of warranty did not discharge the insurer. On the facts 
 of the case, the decision was correct, as the representation was not really 
 untrue, but the theory of the opinion is scarcely sound. 
 
 82 Provident Savings Life Assur. Soc. v. Llewellyn, 58 Fed, 940, 7 C. O. A. 
 579, 16 U. S. App. 405; Day v. Insurance Co., 1 MacArthur (U. S.) 41, 29 Am. 
 Rep. 565; CAMPBELL v. INSURANCE CO., 98 Mass. 381; Mutual Ben. Life 
 Ins. Co. V. Miller, 39 Ind. 475; Powers v. Association, 50 Vt 630; Baumgart 
 V. Modern Woodmen, 85 Wis. 546, 55 N. W. 713; Metropolitan Life Ins. Co. v. 
 Howie (Ohio) 68 N. E. 4; Richards v. Association, 85 Me. 99, 20 Atl. 1050; 
 McClain v. Society (C. C.) 105 Fed. 834; Swick v. Insurance Co., 2 Dill. 160, 
 Fed. Cas. No. 13,692; Continental Life Ins. Co. v. Yung, 113 Ind. 159, 15 N. 
 E. 220, 3 Am. St Rep. 630; Woehrle v. Insurance Co., 21 Misc. Rep. 88, 46 
 N. Y. Supp. 862; Metropolitan Life Ins. Co. v. Dempsey, 72 Md. 288, 19 Atl. 
 642. But see MOULOR v. INSURANCE CO., Ill U. S. 335, 4 Sup. Ct. 466, 28 
 L. Ed. 447; Northwestern Mut. Life Ins. Co. v. Woods, 54 Kan. 663, 39 Pac. 
 189; Tucker v. Association, 133 N. Y. 548, 30 N. E. 723. 
 
 «» Grattan v. Insurance Co., 92 N. Y. 274, 44 Am. Rep. 372; Ames v. In- 
 surance Co., 40 App. Div. 465, 58 N. Y. Supp. 244; Schwarzbach v. Protec- 
 tive Union, 25 W. Va. 622, 52 Am. Rep. 227; Knights of Honor v. Dickson, 
 102 Tenn. 255, 52 S. W. 862; Endowment Rank K. P. v. Cogbill, 99 Tenn. 28, 
 41 S. W. 340. 
 
 §§ 106-107) 
 
 DISTINCTION BETWEEN THEM. 
 
 295 
 
 parties insured.** Hence in many states acts have been passed for the 
 purpose of either wholly abolishing the doctrine, or of moderating the 
 harshness of its operation. The terms of these statutes vary greatly 
 in the several states, but their general intent is to transform warranties 
 into common-law representations, thus saving policies of insurance 
 from forfeiture for false statements contained therein unless they are 
 found to be material.*' But as shown above, some of these statutes 
 accomplish very different results; some apparently laying down a rule 
 of decision less liberal to the insured than that of the common law, 
 seemingly making a fraudulent immaterial misrepresentation fatal to 
 the insured's rights,** while others make an honest misrepresentation 
 harmless unless it is material to the risk itself, or concerns a fact that 
 contributes to the loss or damage suffered.*^ In some states the stat- 
 ute does not apply to all warranties, but only to those made as an- 
 swers to interrogations in the application.** 
 
 ^> 
 
 «* See Metropolitan Life Ins. Co. v. Rutherford, 98 Va. 195, 35 S. B. 361. 
 In Continental Fire Ins. Co. v. Whitaker (Tenn. 1904) 79 S. W. 119, the court 
 quot-es as follows from the New Hampshire court: "The policy and purpose 
 of the law were to promote honest and open fair dealing, to do equal justice, 
 to protect the confidence reposed by the insured in those with whom he may 
 contract, and (especially disclaiming any reference to this defendant com- 
 pany), to spring the traps 'concealed in the mass of rubbish' before the un- 
 wary traveler shall have put his foot in them, to prevent and prohibit in 
 short, the farce and fraud by which It has too often been found that the 
 party apparently Insured by the stipulations written upon one side of a piece 
 of paper was uninsured by the conditions involved in the 'insurance typog- 
 raphy' indorsed upon the other side of the same piece of paper." 
 
 8» For examples of such statutes, see Code Ga. 1882, §§ 2803, 2804; McClain's 
 Code Iowa, § 1743 ; Laws Md. 1894, c. 662 ; Ky. St c. 32, § 639 ; Rev. St Me. 
 c. 49, § 20 ; Laws Mich. 1897, p. 214, No. 167 ; Laws Minn. 1895, c. 175, § 20 ; 
 Rev. St Mo. 1889, § 5849 ; Laws N. H. 1885, c. 73 ; Rev. St Ohio 1890, § 3625 ; 
 Laws Pa. 1885, p. 134, § 1 ; Laws Va. 1900, c. 515, p. 550. 
 
 8« See supra, p. 284. 
 
 «7 These statutes have been held constitutional. John Hancock Mut Life 
 Ins. Co. V. Warren, 181 U. S. 73, 21 Sup. Ct. 535, 45 L. Ed. 955; McGannon v. 
 Insurance Co. (Mich.) 87 N. W. 62, 54 L. R. A. 739. In this case the Michi- 
 gan statute (Comp. Laws 1897, § 5180) was held broad enough to cover all 
 policies, whether they be regarded as Michigan standard policies or not. 
 This statute reads as follows: "That no policy of fire insurance shall here- 
 after be declared void by the insurer for the breach of any condition of the 
 policy if the insurer has not been injured by such breach; or where a loss 
 has not occurred during such breach or by reason of such breach of condi- 
 tion." The court, per Moore, J., said: "The defendant corporation is a 
 creature of the statute. It could not engage in the business of insurance 
 except by virtue of the statute. It is entirely competent for the Legislature 
 to prescribe the forms of its contracts and the limitations in relation to for- 
 feitures therein." 
 
 88 See Acts Va. 1899-1900, p. 550. Also, see Union Cent Life Ins. Co. v. 
 Pollard, 94 Va. 146, 26 S. E. 421, 36 L. R. A. 271, 64 Am. St Rep. 715. 
 construing a similar Ohio statute (Rev. St Ohio 1880, § 3625). 
 
 A. 
 
 ''t 
 
 ' ) 
 
296 
 
 BEPRESBNTATIOXS AND WARRANTIES. 
 
 (Ch.8 
 
 §§ 106-107) 
 
 DISTINCTION BETWEEN THEM. 
 
 297 
 
 When the word "representation" is used in a statute in its ordinary 
 sense, it includes both representations and warranties ^» in the techni- 
 cal sense; the same rule of materiality applying to both. And the 
 question of materiality of any such statement is always for the jury,»<» 
 unless all the facts are ascertained, when it is for the court. Nor can 
 the parties, by expressly agreeing upon the materiality of a statement 
 made, withdraw the question from the jury." The provisions of the 
 statute cannot be so waived. 
 
 As has been already shown, in connection with another subject, 
 statutes, such as those under consideration, which provide that the in- 
 surer must comply with certain conditions before declaring a forfeiture, 
 have no extraterritorial effect, unless it can be plainly seen that the 
 parties intended the statute to form a part of the contract.** It would 
 seem that a different conclusion has been reached by the Maryland 
 court,*' but the view taken by it is cleariy in conflict with that of the 
 United States Supreme Court as laid down in the case of Mutual Life 
 Ins. Co. V. Cohen.** 
 
 When the validity of these statutes has been brought into question, 
 the courts have uniformly sustained them, as being cases of the valid 
 
 8» White V. Society, 163 Mass. 108, 39 N. E. 771, 27 I* R. A. 398; Germania 
 Ins. Co. V. Rudwig, 80 Ky. 223. overruling Farmers' & Drovers' Ins. Co. v. 
 Curry, 13 Bush (Ky.) 312, 26 Am. Rep. 194; PENN MUX. LIFE INS. CO v. 
 MECHANICS' SAV. BANK & TRUST CO., 72 Fed. 413, 19 C. C. A. 286, 38 
 L. R. A. 33; March v. Insurance Co., 186 Pa. 629, 40 Atl. 1100, 65 Am St 
 Rep. 887; Hermany v. Association, 151 Pa. 17, 24 Atl. 1064 
 
 »o PENN MUT. LIFE INS. CO. v. MECHANICS' SAV. BANK & TRUST 
 CO., 72 Fed. 413, 19 0. C. A. 286, 38 L. R. A. 33; Hermany v. Association. 
 151 Pa. 17, 24 Atl. 1064. 
 
 But where the matter Involved is manifestly material to the risk, the 
 court will so pronounce it. March v. Insurance Co., 186 Pa. 629, 40 Atl. 
 1100, 65 Am. St. Rep. 887; Lutz v. Insurance Co., 186 Pa. 527, 40 Atl. 1104' 
 Fidelity Mut. Life Ass'n v. Miller, 92 Fed. 63, 34 C. C. A. 211. 
 
 •1 Germania Ins. Co. v. Rudwig, 80 Ky. 223; Hermany v. Association 151 
 Pa. 17, 24 Atl. 1064. 
 
 »2 Mutual Life Ins. Co. v. Cohen, 179 U. S. 262, 21 Sup. Ct. 106, 45 L. Ed. 
 181. See supra, p. 226, where this question is discussed under the subject 
 of statutory requirements for giving notice of premiums due. 
 
 See, also, PENN MUT. LIFE INS. CO. v. MECHANICS' SAV. BANK & 
 TRUST CO., 72 Fed. 413, 19 C. C. A. 286, 38 L. R. A. 33. In this case the 
 Pennsylvania statute was made a part of the contract The insured resided 
 In New Jersey. 
 
 »« The court bases its opinion upon the fact that a corporation has only 
 such powers as are conferred upon it by the state in which it was created. 
 "Everywhere within and without the state which created it, its contracts 
 are limited, construed, and sustained according to its character and the laws 
 which affect its operation." Fidelity Mut Life Ass'n v. Ficklin. 74 M<L 172 
 21 Atl. 680. * 
 
 »* 179 U. a 262, 21 Sup. Ct 106, 45 L. Ed. 181. 
 
 exercise of the police power of the state over corporations, and not in 
 violation of the Constitution of the United States.** 
 
 •8 PENN MUT. LIFE INS. CO. v. MECHANICS' SAV. BANK & TRUST 
 CO., 72 Fed. 413, 19 0. O. A. 286. 38 L. R. A. 33. As to the validity of similar 
 statutes, see Queen Ins. Co. v. Leslie, 47 Ohio St 409, 24 N. E. 1072, 9 L. R. 
 A. 45; Equitable Life Assur. Soc. v. Pettus, 140 U. S. 226, 11 Sup. Ct 822, 
 35 L. Ed. 497; Eagle Ins. Co. v. State of Ohio, 153 U. S. 446, 14 Sup. Ct 868, 
 38 L. Ed. 778; Hancock Mut Life Ins. Co. v. Warren, 181 U. S. 73, 21 Sup. 
 Ct 635, 45 L. Ed. 955; Continental Fire Ins. Co. v. Whitaker (Tenn. 1904) 79 
 S. W. 119. 
 
 J 
 
 • 
 
 k 
 
298 
 
 UiSU&ANCB AGENTS AND THEIB FOWBBS. 
 
 (Ch.9 
 
 INSUBANOB AGENTS AND THEIB POWERS, 
 
 108. The Doctrine of Agency In Insurance Law. 
 
 10^110. Classes of Agents and Their Powers. 
 
 111-113. Subagents— Their Appointment and Powera, 
 
 114-117. Limitations upon the Powers of Agents. 
 
 THE DOCTBINE OP AGENCY IN INSUBANCE LAW. 
 
 108. The relation of principal and agent in the conduct of insnranoe 
 business is created and terminated in accordance with the rules 
 of the general law of agency, and characterized by the same 
 incidents as the same relation existing under similar condi- 
 tions in any other business. For the purpose of clearing the 
 view of other questions, the following settled principles should 
 be noted: 
 <a) There is no presumption that one person has authority to bind 
 another by word or act. Such authority must be proved to 
 have been actually or apparently g^ven. 
 (b) The insurer is estopped to deny that his agent possesses that 
 
 authority with which he had apparently clothed him. 
 (o) Limitations upon the powers apparently possessed by an insur- 
 ance agent cannot affect the insured unless communicated. 
 <d) Certain burdensome incidents accompany the conduct of busi- 
 ness through an agent, which, having their basis in a sound 
 public policy, cannot be (escaped. Among these are: 
 (1) Any fraud or wrong perpetrated by the agent in the course 
 of his employnient binds the principal, though not author- 
 ised. 
 C2) Any knowledge possessed by the agent, material to the trans- 
 action in which he is employed, will bind the principal, 
 irrespective of its actual communication by the agent. 
 (e) The person for whom the agent acts is to be determined by the 
 facts of each case, and not by the mere words of the parties, 
 but an agent cannot aot for both parties without the consent 
 of both. 
 
 Scope and Purpose of This Chapter, 
 
 The fact that the business of insurance is almost exclusively in the 
 hands of corporations, which can act only through agents, makes the 
 principles of the law of principal and agent of great importance in the 
 law of insurance, while the complex relations existing between the va- 
 rying orders of agents required for the conduct of such a widely ex- 
 tended business as is carried on by most insurance companies neces- 
 sarily give rise to many difficult questions of law. It is these questions, 
 
 1^^ 
 
 § 108) THE DOOTEINB OP AGENCJY IN INSURANCE LAW. 
 
 299 
 
 peculiar to insurance law, and especially those connected with the doc- 
 trine of waiver and estoppel, to be presently treated, that are to be ex- 
 amined in this chapter. It is not purposed here to set forth a treatise 
 on the general law of agency, almost every phase of which might find 
 illustration in the vast number of insurance cases. Therefore, for a 
 statement of the modes in which an agency may be established or ter- 
 minated, or of the incidents of the relation between principal and agent, 
 such as their mutual rights and duties, or the liabilities of each to third 
 parties in general, the reader should consult a work on agency.^ Nei- 
 ther is it advisable to attempt to set forth here the great mass of insur- 
 ance cases involving these general questions of agency. They may be 
 found in the digests.* 
 
 The constant struggle made by the courts to preserve the equitable 
 rights of parties insured, and, at the same time, the established rules of 
 the law of contracts and of evidence, has given great importance to 
 the equitable doctrines of waiver and estoppel. As will be presently 
 seen, the cases have fallen into seemingly hopeless confusion. Many 
 of the difficulties which have given rise to this confusion grow out of 
 uncertainty as to the powers of agents under the facts of the particular 
 cases presented to the courts for adjudication. It is therefore believed 
 that in the effort to clear away the obstructions found in our case law 
 in the way of any attempt to establish a series of consistent principles 
 that either do govern or should govern the decision of questions of 
 waiver and estoppel in insurance law, a statement of certain applied 
 principles of the law of principal and agent is necessary. The state- 
 ment and establishment of such principles is, then, the sole purpose of 
 this chapter. 
 
 Regulation of Insurance Agencies by Statute. 
 
 It is first to be noted that the conduct of an insurance agency is so 
 far a matter of public concern as to make it a proper subject of legisla- 
 tive control by the states without violating the provisions of the four- 
 teenth amendment of the federal Constitution.* Thus a state may for- 
 bid any person's acting as an agent for any insurance company with- 
 out having first procured a license.* So it may absolutely prohibit 
 soliciting insurance, or otherwise acting as agent, for any foreign insur- 
 
 1 In the Hornbook Series, see Tiffany on Agency. See, also, Joyce on Insur- 
 ance, vol. 1, cc. 17-24. 
 
 * See title "Insurance," vol. 28, Century Digest, cols. 583-640 et passim. 
 
 8 Nutting V. Massachusetts, 183 U. S. 553, 22 Sup. Ct. 238, 46 L. Ed. 324» 
 affirming Com. v. Nutting, 175 Mass. 154, 55 N. E. 895, 78 Am. St Rep. 483. 
 
 For the construction of the anti-rebate statute of Illinois (Laws 1891, p. 
 148), see Metropolitan Life Ins. Co. v. People (111. 1904) 70 N. E. 643. 
 
 * See Acts Va. 1887, p. 348. A similar statute was held constitutional in 
 Nutting V. Massachusetts, 183 U. S. 553, 22 Sup. Ct 238, 46 L. Ed. 324. See 
 Pierce v. People, 106 111. 11, 46 Am. Rep. 683. 
 
 I 
 
 i 
 
 9 
 
 \ 
 
300 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 ance corporation not authorized to do business within the state, and 
 a penalty may be imposed for the enforcement of such a prohibition.* 
 
 In many states, statutes have been enacted declaring that the person 
 who solicits insurance shall in all cases be deemed the agent of the 
 insurer. The language of the Iowa statute « is as follows: "Any 
 person who shall hereafter solicit insurance or procure applications 
 therefor, shall be held to be the soliciting agent of the insurance com- 
 pany or association issuing a policy on such application, or on a re- 
 newal thereof, anything in the application or policy to the contrary not- 
 withstanding." 
 
 The Supreme Court has decided ^ that the provisions of this statute 
 apply to all kinds of insurance, but in other states it is limited to spe- 
 cial forms of insurance. In Virginia « the act applies only to com- 
 panies doing business upon the assessment plan. It has been held, 
 however, that these statutes do not prevent a broker employed by the 
 
 « Nutting V. Massachusetts, 183 U. S. 553, 22 Sup. Ct. 238, 46 L. Ed. 324; 
 Orient Ins. Co. v. Daggs, 172 U. S. 557, 19 Sup. Ct 281, 43 L. Ed. 552, affirm- 
 ing Daggs V. Insurance Co., 136 Mo. 382, 38 S. W. 85, 35 L. R. A. 227. 58 
 Am. St. Rep. 638. 
 
 • Laws Iowa 1880, p. 209, c 211. See, also, McClain's Code Iowa 1888, S 
 1732. The Wisconsin statute (Rev. St § 1977) is as follows: "Whoever so- 
 licits insurance on behalf of an insurance corporation, or transmits an ap- 
 plication for insurance or a policy of insurance to or from any such cor- 
 poration, or who makes any contract of insurance, or collects or receives any 
 premiums for insurance, or in any manner aids or assists in doing either, or 
 in transacting any business for any insurance corporation, or advertises to 
 do any such thing, shall be held an agent of such corporation, to all intents 
 and purposes, and the word 'agenf whenever used in this chapter, shall be 
 construed to include all such persons." For a construction of this statute, 
 see Mathers v. Association, 78 Wis. 588, 47 N. W. 1130, 11 L. R. A. 83, in 
 which it was held that the statute conferred upon a local agent the power 
 to make an oral contract of insurance, despite a stipulation in the application, 
 signed by the insured, that the insurer should not be liable imtil the appli- 
 cation and premium had been received by the secretary of the company. 
 This statute applies to a foreign insurance company. Mutual Ben. Life Ins. 
 Co. V. Robison (0. 0.) 54 Fed. 580. These statutes have been held constitu- 
 tional. Noble V. Mitchell, 164 U. S. 367, 17 Sup. Ct 110, 41 L. Ed. 427. See 
 Code Ala. 1886, § 1205; Gen. St. Conn. 1888, §§ 2898, 2923; Laws Ga. 1887, 
 p. 121, § 9; Rev. St Me. 1883, p. 445, § 19; St Mass. 1887, c. 214, § 87; Laws 
 Minn. 1895, c. 175, §§ 25, 88, 91; Ann. Code Miss. 1892, § 2327; Rev. St Mo. 
 1889, § 5915; Laws N. D. 1891, p. 203, § 28; Comp. St Neb. 1891, c* 16, § 
 8; Laws N. H. 1889, c. 94, § 2; Rev. St Ohio, Smith & B. 1890, § 3644; St 
 Okl. 1890, p. 637, § 23; Pub. Laws R. L 1884, p. 55; Pub. Laws R. I. 1885, p. 
 03; Acts S. C. 1883, p. 460, S 6; Rev. St Tex. 1895, art 3093; Rev. Laws Vt 
 1880. § 3620, p. 697; Acts Va. 1887, p. 349, c. 271, § 5. 
 
 f Continental Life Ins. Co. v. Chamberlain, 132 U. S. 304. 10 Sup. Ct 87. 
 33 L. Ed. 341. 
 
 8 Acts Va. 1887, c. 271, S 5. Under a similar statute in Wisconsin it was 
 held that an incorporated mutual insurance company was within the statute. 
 ZeU ?. Insurance Co., 75 Wis. 521, 44 N. W. 82a. 
 
 §108) 
 
 THE DOCTKLNE OF AGENCY IN INSURANCE LAW. 
 
 301 
 
 insured from binding the insured by agreements made in procuring the 
 insurance." 
 
 General Rule as to Agenfs Powers, 
 
 The maxim that every one deals with an agent at his peril means 
 merely that there is no presumption that any person is authorized to act 
 for another. A man can be made liable to another only through his 
 own words or acts, unless it can be clearly proved that he has deputized 
 another to represent him in the transaction out of which it is alleged the 
 liability grows. Therefore, in the absence of circumstances of estop- 
 pel, it is incumbent upon the one seeking to charge another with lia- 
 bility for the act of a third person to prove that such third person was 
 actually authorized to incur that liability on behalf of that other, or 
 that his unauthorized act in so doing was subsequently ratified. Such 
 proof of actual authority need not, however, show authority expressly 
 conferred. There may be powers not expressly given which are yet 
 necessarily incidental to the proper and efficient exercise of those pow- 
 ers expressly conferred.^** Thus, if an agent is expressly authorized 
 to deliver a policy which can be properly delivered only upon payment 
 of the first premium, that agent has incidental authority to collect and 
 receipt for the premium.*^ So an agent who is authorized to contract 
 for insurance and to sign and issue policies has the incidental power 
 in emergencies to make preliminary oral contracts.*^ 
 
 Likewise a custom or usage may confer powers not expressly given, 
 but which are none the less actual. Thus the custom among fire insur- 
 ance agents of giving credit for premiums authorizes such an agent to 
 make a binding contract without requiring prepayment.^* 
 
 Apparent Powers — Estoppel. 
 
 But despite the rule that every one deals with an agent at his peril, a 
 principal may sometimes be bound by acts of another which were not 
 authorized, or which were even prohibited. This is based upon the 
 principle of estoppel While, under the rule above stated, one must, 
 before dealing with a person professing to act as an agent, satisfy him- 
 self that the agent has been clothed with the powers he proposes to ex- 
 ercise, yet iii so ccin^ he is not obliged to go beyond the requirements 
 
 » JOHN R DAVIS LUMBER CO. v. HARTFORD FIRE INS. CO., 95 Wis. 
 226, 70 N. W. 84, 37 L. E A. 131. 
 
 10 See, on this subject, Tififany, Agency, pp. 174-179. 
 
 11 Sun Mut. Ins. Co. v. Saginaw Barrel Co., 114 111. 99, 29 N. E. 477; Riley 
 V. Insiu-ance Co., 110 Pa. 144, 1 Atl. 528; De Camp v. Insurance Co., Fed. 
 Cas. No. 3,719. 
 
 12 Angell V. Insurance Co., 59 N. Y. 171, 17 Am. Rep. 322; Bames v. Inaup- 
 ance Co., 94 U. S. 621, 24 L. Ed. 298. 
 
 18 Long V. Insurance Co., 137 Pa. St. 335, 20 Atl. 1014, 21 Am. St. Rep. 879; 
 Lebanon Mut Ins. Co. y. Hoover, 113 Pa. St 591, 8 Atl. 163» 57 Am. Rep. 
 511. 
 
 t» 
 
 *4 
 
S02 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 i 
 
 of good faith and reasonable diligence. If the conduct of the princi- 
 pal has been such as to give the third party reasonable grounds for be- 
 lieving, in good faith, that the agent did really possess the powers ex- 
 ercised, the principal will be estopped from saying that the appearances 
 created by his own conduct were false, and that the agent acted with- 
 out authority.^* Thus, if the insurer had repeatedly permitted his 
 agent to extend the time for the payment of premiums, he would be 
 esfopped to say that a subsequent agreement made by the agent for such 
 an extension of time was unauthorized and not binding on himself." 
 
 Thus It is seen that an agent's "apparent scope of authority" in- 
 cludes: (a) Actual powers, which, in turn, are (1) those expressly 
 given (2) those incidental to the express powers, and (3) those con- 
 ferred by custom and usage ; and (b) apparent powers. 
 
 A/<? Secret Limitations upon Apparent Pozvers. 
 
 The insurer may limit the powers of his agent as narrowly as he 
 pleases, provided these limitations are made known to third parties 
 dealing with the agent. But it is manifest from the statement of the 
 rule as to the pnncipars liability for acts done within the apparent 
 scope of his agent's authority, as made above, that any secret limitations 
 upon the agent's apparent powers are wholly inoperative." 
 
 Burdensome Incidents of Agency— Agent's Fraud— Imputed Knowl- 
 edge. 
 
 Another important principle of especial value in determining the 
 rights of parties to insurance contracts, and one that must be con- 
 stantly kept in mind, is that the policy of the law attaches certain bur- 
 densome incidents to the conduct of business through an agent These 
 incidents are not directly contractual in their nature, but arise, rather 
 out of the existent relation of principal and agent ; that is, they have 
 
 1* Declarations of the secretary of a fire Insurance company to the assured 
 that a written approval of a transfer of the policy was not necessary pre- 
 cludes the company from objecting to the want of written approval, though 
 the policy required such approval. Stolle v. Insurance Co.. 10 W Va 546 
 27 Am. Rep. 593. v tt. ▼». ^o, 
 
 Where an application for fire insurance contains a diagram of the insured's 
 property, and the solicitor states, in response to printed questions which it 
 is provided he shall answer, that he has examined the risk, the company 
 cannot deny that the solicitor wag agent for the purpose of examining the 
 property. Springfield Fire & Marine Ins. Co. v. McNulty. 8 Ky. Law Rep. 
 
 n ^^Q^^f' ^""^"ir ^- ^°surance Co., 78 N. C. 149; Anthony v. Insurance 
 CO.. 48 Mo. App. 65; Jennings v. Insurance Co., 148 Mass. 61, 18 N E 601 
 "Knickerbocker Life Ins. Co. v. Norton, 96 U. S. 234, 24 L Ed '689 
 i« See Tiff. Ag. p. 195; Georgia Home Ins. Co. v. Kiniiier's Adm'x 
 28 Grat. 88, 109; Michigan Fire & Marine Ins. Co. v. Wich. 8 Oolo Add 416* 
 
 g 108) THE DOCTRINE OF AGENCY IN INSURANCE LAW. 303 
 
 their origin in status, rather than in contract," and may be more clear- 
 ly understood by reference to the civil-law fiction of identity between 
 principal and agent.^* They are analogous to those incidents attached 
 by the law to the relation of husband and wife, such as the husband's 
 duty of support, or to the relation of master and servant, such as the 
 master's obligation to afford the servant a safe place in which to work, 
 safe tools to work with, and competent fellow servants to aid him, if 
 need be, or to the relation of carrier and passenger, such as the carrier's 
 duty to carry safely and protect from injury his passenger. 
 
 Two of these incidents of agency are of especi^ importance in insur- 
 ance law: 
 
 (1) The principal is liable for any fraud or other wrong perpetrated • 
 by his agent in the course of his employment. Even though such 
 wrong had its origin solely in the wickedness or carelessness of the 
 agent, a wholly innocent principal will be held liable for it, provided it 
 was done in the course of the transaction in which the agent was au- 
 thorized to represent the principal. Thus the principal is liable for 
 slander or libel uttered by the agent in the course of his employment," 
 not because such wrong was authorized, but because the principal is 
 deemed to be acting in the person of his agent, and, in accordance with 
 a sound public policy, must be responsible for the wrong acting of the 
 agent in the premises. In that transaction the agent stands in the place 
 of the principal— according to the fiction, is identified with him. So, 
 on the same principle, a corporation is liable in deceit for the false is- 
 sue of certificates by its agent,*^* and a railway company for false im- 
 
 " TiflP. Ag. p. 10. 
 
 18 See Sohm's Institutes of Roman Law, § 32. 
 
 !• Washington Gaslight Co. v. Lansden, 172 U. S. 534. 19 Sup. Ct. 296, 43 
 L. Ed. 543; Sun Life Assur. Co. v. Bailey, 101 Va. 443, 44 S. B. 692, 9 Va. 
 Law Reg. 187. It should here be noticed that there is a difference in the 
 grounds upon which a principal is held liable for the unauthorized acts of 
 his agent within the apparent scope of his authority, and for those not with- -* 
 in the apparent scope of his authority, but within the course of his employ- 
 ment In the first case the basis of the principal's liability is clearly found 
 in the doctrine of estoppel. The principal is liable, not because he has au- 
 thorized the agent thus to act, but because he has allowed the agent to mis- 
 lead the party to his injury. But the principle upon which a principal is 
 held liable for the unauthorized acts of his agent within the course of his 
 employment, but without the apparent scope of his authority, is entirely dif- 
 ferent Here the principal's liability is based upon the fiction of identity. 
 The basis of the injured party's right to compensation from the principal in 
 these cases is the duty which rests upon every man to conduct his business, 
 whether in person or by agents, so as to injure no one. Sic utere tuo ut 
 alienum non Isedas. 
 
 20 New York & N. H. R. Co. v. Schuyler, 34 N. Y. 30. Upon this question 
 there is a direct conflict of authority. In England it is held that the princi 
 pal is liable only when the wrong was for his (the principal's) benefit. See 
 British Mut Banking Co. v. Charnwood Forest R. Co., 18 Q. B. Div. 714; 
 
 I, 
 
304 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 prisonment by its conductor.'* So, if an insurance agent fraudulently 
 induces the insured to make a contract that otherwise he would not 
 have made, the insurer becomes responsible for the fraud, and may be 
 estopped to claim any advantage growing out of that fraud, even 
 though perpetrated without authority or expressly forbidden. ^^ 
 
 Nor would any other rule be just or reasonable, despite the fact that 
 dishonest or careless agents thus often inflict great hardships upon in- 
 nocent principals, for otherwise the person who carried on his business 
 through representatives would occupy a far more favorable position 
 than if acting in his own proper person, while the third party dealing 
 with such representatives would be put at a gross disadvantage. 
 / Again, (2) a second incident of the relation of principal and agent is 
 that any information material to the transaction either possessed by 
 the agent at the time of the transaction, or acquired by him before its 
 completion, is deemed to be the knowledge of the principal, at least as 
 lar as that transaction is concerned, even though in fact the knowledge 
 is not communicated to the principal at all.** 
 
 It is here to be observed — and the importance of the principle is so 
 great that it cannot be too strongly emphasized — ^that these incidents of 
 J agency are created by the law, and not by the parties. The insurer is 
 charged with the knowledge acquired by his agent in making or nego- 
 tiating a contract of insurance, not because he has consented to be so 
 
 Barwick v. Bank, L. R. 2 Exch. 259. While there is no decision of the Unit- 
 ed States Supreme Court directly in point, it is clear that the tendency of 
 that court is to follow the English view. See Moores v. Bank, 111 U. S. 156, 
 4 Sup. Ct. 345, 28 L. Ed. 385; Friedlander v. Railway Co., 9 Sup. Ct. 570, 130 
 U. S. 416, 32 L. Bd. 991. But the weight of authority and the clear weight 
 of reasoning seem to be as stated in the text The leading case (New York 
 &, N. H. R. Co. V. Schuyler, 34 N. Y. 30) has been followed by the later deci- 
 sions. See Fifth Ave. Bank v. Forty-Second St. & G. St. Ferry R. Co., 137 
 N. Y. 231, 33 N. E. 378, 19 L. R. A. 331, 33 Am. St Rep. 712; Allen v. Rail- 
 road Co., 150 Mass. 200, 22 N. E. 917, 5 L. R. A. 716, 15 Am. St Rep. 185. 
 For a full and clear discussion of this subject, see Tiff. Ag. pp. 290-294. 
 
 »i Palmeri v. Railway Co., 133 N. Y. 261, 30 N. B. 1001, 16 L. R. A. 136, 28 
 Am. St Rep. 632; Krulevitz v. Railroad Co., 143 Mass. 228, 9 N. E. 613. 
 
 22 KAUSAL V. ASSOCIATION, 31 Minn. 17, 16 N. W. 430, Woodruff, Ins. 
 Cas. 517, 47 Am. Rep. 776; .^tna Live Stock Fire & Tornado Ins. Co. v. Olm- 
 stead, 21 Mich. 246, 4 Am. Rep. 483. 
 
 28 Forward v. Insurance Co., 142 N. Y. 382, 37 N. E. 615, 25 L. R. A. 637; 
 Mesterman v. Insurance c8., 5 Wash. 524, 32 Pac. 458, 34 Am. St Rep. 877. 
 In Story on Agency, § 140, it is said: "Notice of facts to an agent is con- 
 structive notice thereof to the principal himself, when It arises from or is 
 connected with the subject-matter of his agency, for, upon general principles 
 of public policy, it is presumed that the agent has communicated such facts 
 to his principal, and, if he has not, still, the principal having intrusted the 
 agent with the particular business, the other party has the right to deem his 
 acts and knowledge obligatory upon the principal; otherwise the neglect of 
 the agent, whether designed or undesigned, might operate mogt injuriously 
 to the rights and interests of such party." 
 
 g 108) THE DOCTRINE OF AGENCY IN INSURANCE LAW. 305 
 
 • 
 
 charged, nor because he has authorized his agent so to bind him, but 
 because, as a legal consequence of the relation he sustains to the agent, 
 the latter 's knowledge is imputed to him. It therefore follows that this 
 incident created by the law in response to the demands of public policy, 
 irrespective of agreement, cannot be destroyed or altered by the agree- 
 ment of the parties. The parties cannot by their contract contravene 
 the policy of the law in this instance any more than the husband, by 
 contract, can escape his duty to support the wife, or the carrier can by 
 contract exempt himself from liability for his negligent failure to carry 
 safely his passenger. Those cases which ignore this principle, and re- 
 gard these legal incidents as powers conferred and subject to limitation, 
 are much to be deplored.** Insurers should undoubtedly be allowed to 
 protect themselves, in any legal way possible, against the fraud of their 
 unfaithful agents, but not at the expense of innocent third parties. 
 And when a loss caused by a dishonest agent must fall upon his prin- 
 cipal or a third party, both equally innocent, the courts should not, and 
 do not, ordinarily, hesitate in putting the burden upon the person who 
 selected and controlled the agent.* • 
 
 Vor Whom the Agent Acted, 
 
 Controversy has not infrequently arisen as to who was represented 
 by an agent taking part in the negotiation of the insurance contract, 
 and it is often sought to avoid such controversy by an agreement set 
 forth in the policy or application. But it is clear that this is a question 
 of fact, not of stipulation. Hence it is to be determined from alTfhe 
 facts of each c^, anSTnot from the mere words used, whether the 
 agent represented the insurer or insured, or whether he acted for both, 
 as a broker ordinarily does.** But it is, of course, fraudulent for the 
 same agent to act for both parties without the knowledge and consent 
 of both." 
 
 «* As examples of such cases, see RYAN v. INSURANCE CO., 41 Conn. 
 168, 19 Am. Rep. 490; NEW YORK LIFE INS. CO. v. FLETCHER, 117 U. 
 S. 519, 6 Sup. Ct. 837, 29 L. Ed. 934. 
 
 25 See Continental Fire Ins. Co. v. Whitaker (Tenn. 1904) 79 S. W. 119; 
 Mutual Fire Ins. Co. v. Ward, 95 Va. 231, 28 S. E. 209; Stemaman v. Insur- 
 ance Co., 170 N. Y. 13, 62 N. a 763, 57 L. R. A. 318, 88 Am. St. Rep. 625. 
 
 2« See Smith & Wallace Co. v. Prussian Nat. Ins. Co. (N. J.) 54 Atl. 458. 
 But the insured may make the agent of the insurer his own agent in behalf 
 of some particular transaction. Thus it has been held that an agent repre- 
 senting a number of insurance companies may be authorized by an owner 
 desiring to keep his property insured to accept for him notice of a cancella- 
 tion of an existing policy, and thereupon to write the risk in another com- 
 pany. Johnson v. Insurance Co., 66 Ohio St. 6, 63 N. E. 610. 
 
 27 See New York Cent. Ins. Co. v. National Protection Ins. Co., 14 N. Y. 
 85; Greenwood Ice & Coal Co. v. Georgia Home Insurance Co., 72 Miss. 46, 
 17 South. 83; Fitzsimmons v. Express Co., 40 Ga. 330, 2 Am. Rep. 577; 
 Smith & Wallace Co. v. Prussian Nat Ins. Co., supra. 
 
 Vance Ins. — ^20 
 
306 
 
 INSUBAMCB AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 CLASSES OF AGENTS AND THEIR POWERS. 
 
 109. Tbe powers of an asent in any particular transaction are alwayi 
 
 to be deteruiined by tbe facts of that case, irrespective of bis 
 title or class, yet, for oonTcnience of reference, insurance 
 agents are classified as 
 
 (a) General agents, wbo possess general powers of m^^'M-ng insurance 
 
 contracts on bebalf of tbe principal. 
 
 (b) Special or local agents, sometimes known as "solicitors," wbose 
 
 powers are ordinarily confined to soliciting applications for in- 
 surance and delivering policies issued tbereon, and receiving 
 initial premiums. Tbeir powers are ratber ministerial tban 
 contractual. 
 (o) Brokers, wbo usually act for tbe insured, but may act for tbe 
 insurer, or for botb insured and insurer, aooording to tbe facts 
 in eacb case. 
 
 110. In addition to tbese more familiar classes of agents are to be 
 
 noted tbe board of directors of tbe corporation, x^bo possess 
 practically all tbe powers of tbe corporation, and tbe execu- 
 tive officers, wbo, tbrougb tbe directors, are autborixed to 
 exercise all tbe active powers of tbe corporation. 
 
 
 The habit of basing rules of law upon titles given to or borne by 
 agents, which, like many other American titles, are of uncertain sig- 
 nificance, has produced so much confusion as to the ultimate principles 
 underlying those rules that it is perhaps to be regretted that such "fluid" 
 terms as "general agent" and "special agent" were ever introduced into 
 the law of principal and agent. In the nature of things, it is impossi- 
 ble that the powers of any agent can be fixed by his title. The pos- 
 session of authority, whether act :al or apparent, is a question of fact, 
 not of words. As shown above, the question whether any given act of 
 an agent binds his principal is to be decided by determining whether 
 the third party had reasonable grounds for believing, under all the 
 facts of the case, that the principal had authorized that act. If such 
 reasonable ground does exist, the principal is bound, whether the agent 
 has been entitled "general agent," "solicitor," or "president." It is 
 easily possible that in reference to some particular transaction a spe- 
 cial agent may be vested with all the powers of the insurer, and it is 
 not impossible that a figurehead president should be stripped of all 
 powers. The giving to an agent of a title having a customary sig- 
 nificance may, however, constitute one of the facts from which the 
 third party may infer the possession of some particular power. Thus 
 an agent given by the insurer the title of general agent will ordinarily 
 be supposed to possess all those powers customarily exercised by in- 
 surance agents so entitled, while denominating an agent a special or 
 soliciting agent is a fact indicating the possession of only limited pow- 
 ers. 
 
 §§ 109-110) CLASSES OF AGENTS AND THEIR POWERS. 
 
 307 
 
 But however unsatisfactory this classification of agents may be as 
 founding rules of law, it is yet of so much convenience in general ref- 
 erence to agents possessing broad or narrow powers that it is deemed 
 advisable to set it forth. In making this classification, however, the 
 agents of corporate insurers only will be considered. It is first to be 
 noted that a corporation must jiecessarily exercise all of its activ e pow - 
 ers throug h_agents. The stockholders who form the corporation can 
 perform certain corporate acts, such as ordering the issue of stock, 
 making by-laws, and electing officers, but the business of the corpora- 
 tion must necessarily be transacted by representatives. These repre- 
 sentatives are of many different ranks of authority, and necessarily 
 differ largely in the powers possessed. To the board of directors are 
 delegated primarily nearly all the powers of the corporation, and the 
 directors in turn delegate all of the active powers of the corporation to 
 certain executive officers selected by them. The executive officers then 
 appoint other agents to represent the company in certain districts of 
 the territory to be occupied, while these secure yet other and more nu- 
 merous representatives for the company within the smaller localities 
 of their respective districts. In addition to these more usual and nu- 
 merous representatives, the insurer appoints other agents for the per- 
 formance of special functions, such as adjusters, appraisers, and attor- 
 neys. The powers usually possessed by these several classes of agents 
 will now be considered. 
 
 General Agents and Their Pqzvers. 
 
 The term "general agent" vaguely indicates an agent who is author- 
 ized to transact all of his principal's business of a particular kind or in 
 a particular place. ^® The place may be narrowly circumscribed, yet, 
 if the agent wiTHin that locality is authorized to do all the acts in the 
 conduct of the business intrusted to his charge that his principal could 
 do if present in his proper person, he is denominated a general agent. 
 In the insurance business the term is largely geographic in its signif- 
 icance, as is indicated by the synonymous expressions, "district" and 
 "division" agents ; that is, an agent who stands as the representative of 
 his principal within a certain district or division of territory is a general 
 agent, and may reasonably be supposed to possess broad powers. But 
 even though an agent has no especial district under his supervision, he 
 will yet be called a general agent if he has full powers of contracting 
 for insurance on behalf of his principal. So if an agent is authorized 
 to pass upon and accept risks, to agree upon the terms of insurance, 
 and to execute and deliver policies in accordance therewith, he will be 
 considered a general agent.*' It follows from a recital of these powers 
 
 28 Tiff. Ag. p. 190. 
 
 2» Travelers' Ins. Co. v. Harvey, 82 Va. 949, 6 S. B. 653; Pitney t. Insur- 
 ance Co., 65 N. Y. 6. 
 
 h 
 
308 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 that such a general agent has always apparent authority to take from 
 or add to the printed form of policy such terms as may be agreed up- 
 on,'® or, discarding the printed form altogether, he may bind his prin- 
 cipal by a parol agreement.'* And, as he can strike from the printed 
 policy any term, so he may expressly or impliedly waive the operation 
 of any term, even though that term may be one denying the power of 
 any agent to waive any term of the contract, save in a specified man- 
 ner.*' So he may waive a condition requiring prepayment of the pre- 
 mium upon delivery of the policy,'' or he may waive proofs of loss 
 after the destruction of property insured.** He can usually appoint 
 subagents, appraisers, and adjusters, and may himself settle losses in 
 such a way as to bind the insurer. He may receive notice "^ on behalf 
 of his company, and do all other acts connected with the business in- 
 
 80 Dayton Ins. Co. v. Kelly, 24 Ohio St. 345, 15 Am. Rep. 612; Taylor v. 
 Insurance Co., 98 Iowa, 521, 67 N. W. 577, 60 Am. St. Rep. 210. An agent's 
 authority to change a policy may be inferred from custom. Day v. Insur- 
 ance Co., 88 Mo. 325, 57 Am. Rep. 416. 
 
 81 Stehlick v. Insurance Co., 87 Wis. 322, 58 N. W. 379; Stlckley v. Insur- 
 ance Co., 37 S. C. 56, 16 S. E. 280; Baker v. Insurance Co., 162 Mass. 358, 38 
 N. E. 1124; Baubie v. Insurance Co., Fed. Cas. No. 1,111; Harron v. Insur- 
 ance Co., 88 Cal. 16, 25 Pac. 982; Wooddy v. Insurance Co., 31 Grat (Va.) 
 362, 31 Am. Rep. 732; Eames v. Insurance Co., 94 U. S. 621, 24 L. Ed. 298; 
 Farnum v. Insurance Co., 83 Cal. 246, 23 Pac. 869, 17 Am. St Rep. 233. 
 
 3 2 Phenix Ins. Co. v. Hart, 149 111. 513, 36 N. E. 990; Mix v. Insurance Co., 
 169 Pa. 639, 32 Atl. 460; Young v. Insurance Co., 45 Iowa, 377, 24 Am. Rep. 
 784; Renier v. Insurance Co., 74 Wis. 89, 42 N. W. 208; Berry v. Insurance 
 Co., 132 N. Y. 49, 30 N. E. 254, 28 Am. St. Rep. 548; Wyman v. Insurance 
 Co., 119 N. Y. 274, 23 N. E. 907; Redstrake v. Insurance Co., 44 N. J. Law, 
 294. 
 
 33 Stewart v. Insurance Co., 155 N. Y. 257, 49 N. E. 876, 42 L. R. A. 147; 
 Cole v. Insurance Co., 22 Wash. 26, 60 Pac. 68, 47 L. R. A. 201; Southern 
 Life Ins. Co. v. Booker, 9 Heisk. (Tenn.) 606, 24 Am. Rep. 344; Universal 
 Fire Ins. Co. v. Block, 109 Pa. 535, 1 Atl. 523. 
 
 34 Little V. Insurance Co., 123 Mass. 380, 25 Am. Rep. 96. Proofs of loss 
 are waived by the agent's promise to pay. Ames v. Insurance Co., 14 N. Y. 
 253; Perry v. Insurance Co. (C. C.) 11 Fed. 478; Prentice v. Insurance Co., 
 77 N. Y. 483, 33 Am. Rep. 651 ; Phoenix Ins. Co. v. Bowdre, 67 Miss. 620, 7 
 South. 596, 19 Am. St. Rep. 326; Indian River State Bank v. Hartford Fire 
 Ins. Co. (Fla.) 35 South. 228. 
 
 3 5 Burlington Ins. Co. v. Lowery, 61 Ark. 108, 32 S. W. 383, 54 Am. St. 
 Rep. 196; Pennypacker v. Insurance Co., 80 Iowa, 56, 45 N. W. 408, 8 L. R. 
 A. 236, 20 Am. St. Rep. 395; West Branch Ins. Co. v. Helpenstein, 40 Pa. 
 289, 80 Am. Dec. 573. The company is chargeable with the knowledge of its 
 agent as to Incumbrances on property insured. Beebe v. Insurance Co., 93 
 Mich. 514, 53 N. W. 818, 18 L. R. A. 481, 32 Am. St. Rep. 519; Tarbell v. In- 
 surance Co., 63 Vt 53, 22 Atl. 533; Frane v. Insurance Co., 87 Iowa, 288, 54 
 N. W. 237. 
 
 Notice to the general agent that the insured is using an engine on the 
 premises is notice to the company. Schaeflfer 7. Insurance Co., 80 Md. 563, 
 31 AtL 317, 45 Am. St Rep. 361. 
 
 §§ 109-110) CLASSES OF agents' AND THEIR POWERS. 309 
 
 trusted to him as fully as the company itself could do them.'* He may 
 also institute legal proceedings on behalf of his principal to recover 
 sums due it." But it must be borne in mind that these powers thus 
 enumerated are but customary, and that any of them may be cut off by 
 a known limitation.®* 
 
 Special Agents. 
 
 The powers of the special agent are partially defined by the other 
 terms used in designating him, such as "soliciting" agent and "local" 
 agent; the latter term being in contradistinction to the title "district 
 agent," sometimes given to the general agent, as stated above. In its 
 most general sense, the term "special agent" includes any representative 
 of the insurer vested with authority to do some special act or acts, or 
 charged with the performance of some special duty. In this sense of 
 the words, solicitors, attorneys, medical examiners, adjusters, and ap- 
 praisers are all special agents. But the term is ordinarily, in insurance 
 law and literature, given a much narrower meaning, and includes only 
 those agents possessed of limited contractual powers, that are to be ex- 
 ercised only within a limited territory, and who, as a class, are recog- 
 nized by the public as having small authority. The customary func- 
 tions of such agents are to induce third parties to make application for 
 insurance, to forward such applications as are made to the insurer, and 
 to deliver the policies issued upon the receipt of the first premium in 
 cash.«» He may have, and frequently has, other powers given him, 
 such as making a binding preliminary contract pending the acceptance 
 
 »« Union Mut Life Ins. Co. v. Wilkinson, 13 Wall. (U. S.) 222, 20 L. Ed. 617; 
 Tubbs V. Insurance Co., 84 Mich. 652, 48 N. W. 298. The insurer is bound by 
 an assignment approved by its general agent. Breckinridge v. Insurance Co.. 
 
 87 Mo. 71. 
 
 The authority of a general agent to act for his company In any given case 
 depends on the powers apparently given him by his principal, which the in- 
 sured may infer from the circumstances. Sheppard v. Insurance Co., 21 W. 
 Va. 381. An Insurance company cannot plead any limitations on its agent's 
 apparent authority unless the insured had knowledge of the restriction. 
 Michigan Fire & Marine Ins. Co. v. Wich, 8 Colo. App. 416, 46 Pac. 689; 
 Georgia Home Ins. Co. v. Kinnier's Adm'x, 28 Grat (Va.) 88, 109; Fireman's 
 Fund Ins. Co. v. Norwood, 69 Fed. 71, 16 C. C. A. 136. 
 
 8T But it is doubtful whether a general agent who is not expressly author- 
 ized can institute criminal proceedings on behalf of his principal. Larson v. 
 Association, 71 Minn. 101, 73 N. W. 711. But it was held in Turner v. Insur- 
 ance Co., 55 Mich. 236, 21 N. W. 326, that a general agent of an insurance 
 company has such authority as will make his principal liable for a malicious 
 prosecution instituted in his principal's behalf. 
 
 «8 See Patrick v. Insurance Co., 43 N. H. 621, 80 Am. Dec. 197. 
 
 »» Lebanon Mut. Ins. Co. v. Erb, 112 Pa. 149, 4 Atl. 8; Bstes v. Insurance 
 Co., 67 N. H. 462, 33 Atl. 515; De Camp v. Insurance Co., Fed. Cas. No. 
 3,719. 
 
 
310 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 or rejection of the risk." He is usually held to bind the company by 
 any interpretation he may give to the questions asked in the applica- 
 tion,*^ or by any knowledge he may acquire in the performance of his 
 duties, so far as it is material to the transactions in which he is acting 
 for the insurer. But he cannot ordinarily collect the first premium 
 otherwise than in cash," or extend the time for the payment of pre- 
 miums, or otherwise modify any of the terms of the printed contract.** 
 "Local" agents are usually special agents, in the sense of having only 
 limited authority, but local agents may have general powers.** In this 
 case, as in all others of agency, the facts govern. If the facts of any 
 case show that the agent was actually possesseSTof the power exercised, 
 or that the third party had reasonable ground for believing that he was 
 possessed of such power, the principal will be bound ; otherwise he will 
 not.** It makes not one particle of difference what may be the desig- 
 nation of the agent. 
 
 Same — Subordinate Lodges, etc. 
 
 Some interesting cases have arisen, involving the relation existing be- 
 tween the controlling board of the various benevolent orders, known 
 variously as the "Supreme Lodge," or the "Grand Chapter," or by 
 some similar appellation, and the several subordinate chapters or lodges 
 and their officers. It is clearly one of limited or special agency. The 
 functions and powers of the subordinate lodges cannot be other than 
 
 *o Oliver v. Insurance C5o., 97 Va. 134, 33 S. E. 536. In this case no such 
 preliminary contract was made, although the agent was empowered so to 
 contract. 
 
 *i Continental Life Ins. Co. v. Chamberlain, 132 U. S. 304, 10 Sup. Ct. 87, 
 33 L. Ed. 341 ; New Jersey Mut. Life Ins. Co. v. Baker, 94 U. S. 610, 24 L. Ed 
 268; New York Life Ins. Co. v. Russell, 77 Fed. 94, 23 C. C. A. 43; Mutual 
 Ben. Life Ins. Co. v. Robison, 58 Fed. 723, 7 C. C. A. 444, 22 L. R. A. 325. 
 *2 Hoffman v. Insurance Co., 92 U. S. 161, 23 L. Ed. 539 
 4a CRITCHETT v. INSURANCE CO., 53 Iowa, 404, 5 N. W. 543, 36 Am. 
 Rep. 230. 
 
 ** See Continental Fire Ass'n v. Norris (Tex. Civ. App.) 70 S. W. 769. 
 
 Statutes have been passed in some of the states defining who are insur- 
 nnce agents, and determining their powers. Many of these statutes give the 
 f)owers of "general agents" to all insurance agents, of whatever kind. See 
 Laws Iowa 18S0, p. 209, c. 211; Code Ala. 1886, § 1205; Acts 18th Gen. 
 Assem. Iowa, c. 211, § 1; Rev. St. Wis. § 1977; Sayles' Ann. Civ. St. Tex. 
 art. 2^i3a; 1 Starr & C. Ann. St. 111. p. 1322. For the construction of these 
 statutes, see Mutual Ben. Life Ins. Co. v. Robison (C. 0.) 54 Fed. 580; Noble 
 V. Mitchell, 100 Ala. 519, 14 South. 581, 25 L. R. A. 238 ; (same case) 164 U. S. 
 307, 17 Sup. Ct. 110, 41 L. Ed. 472 ; Continental Ins. Co. v. Ruckman, 127 111. 364 
 20 X. E. 77, 11 Am. St. Rep. 121; St. Paul Fh-e & Marine Ins. CJo. v. Sharer) 
 76 Iowa, 282, 41 N. W. 19; Fred Miller Brewing Co. v. Council Bluffs Ins. 
 Co.. 95 Iowa. 31, 63 N. W. 565; Schemer v. Insurance Co., 50 Wis. 575. 7 N. 
 W. 544. 
 
 4 5 Hardin v. Insurance Co., 90 Va. 413, 18 S. E. 911; McGonigle v. Insur- 
 ance Co., 108 Pa. 1, 31 AU. 868; Sheppard Y. Insurance Co^ 21 W. Va. 368. 
 
 ^§ 109-110) CLASSES OP AGENTS AND THEIR POWERS. 311 
 
 are given by the constitution and by-laws of the order, and with these 
 each member is presumed to be acquainted. Hence the grand lodge 
 can be bound only by such of the acts of the subordinate lodge or of its 
 agents as are actually authorized.** But the supreme lodge cannot 
 escape liability incurred through the authorized act of the subordinate 
 lodge or its officers by asserting that such acts were done on behalf of 
 the members. Thus, in Supreme Lodge K. P. v. Withers *^ the order 
 sought to avoid payment of a death claim because of the default of the 
 secretary of the local lodge, to whom the insured had paid his dues in 
 accordance with the requirements of the laws of the order, in remit- 
 ting to the grand lodge the sum received within the time required. A 
 by-law of the order stipulated that the officers of the subordinate lodge 
 should be the agents of the members ; but the Supreme Court held that 
 such a stipulation could not change the facts, and that the facts clearly 
 showed that the subordinate lodge and its secretary were agents of the 
 supreme lodge, arid that a payment duly made to the secretary was 
 made to the supreme lodge, which was therefore liable.** So when a 
 subordinate lodge accepts dues from a member with full knowledge of 
 a ground upon which his certificate might be forfeited, and pays the 
 money received over to the grand lodge, the latter will be estopped to 
 claim the forfeiture.*® Nor will the refusal of the subordinate lodge to 
 deliver a certificate to a member who has done everything to entitle 
 him to the certificate enable the order to escape a just liability to the 
 member. ^° 
 
 Insurance Brokers. 
 
 An insurance broker is ordinarily one who is engaged in the business 
 of procuring insurance for such persons as apply to him for that serv- 
 
 46 Clark V. Association, 14 App. (D. C.) 154, 43 L. H. A. 390; Supreme Com- 
 mandery Knights of Golden Rule v. Ainsworth, 71 Ala. 436, 46 Am. Rep. 332: 
 Mutual Life Ins. Co. v. Young, 23 Wall. (U. S.) 85, 23 L. Ed. 152; Campbell 
 V. Supreme Lodge, 168 Mass. 397, 47 N. E. 109. 
 
 *7 177 U. S. 260, 20 Sup. Ct. 611, 44 L. Ed. 762. 
 
 *8 In a Massachusetts case (Campbell v. Supreme Lodge, 168 Mass. 397, 
 47 N. E. 109), in which the defendant was the same as in the Withers Case, 
 a contrary conclusion was reached under a similar state of facts. But in 
 this case the question of agency was not considered. The court based its 
 decision upon the fact that the money should have been received at the office 
 of the board of control before the death of the member, and, as there was no 
 custom by which the company took the risk of payments by mail, the money 
 was not actually received before the death of the member. The member was 
 not reinstated by the receipt given by the board of control, conditioned up- 
 on the member's being alive at its date. 
 
 *» High Court Independent Order of Foresters v. Schweitzer, 171 IlL 325. 
 
 49 N. E. 506. 
 
 60 Lorscher v. Supreme Lodge, 72 Mich. 316^ 40 N. W. 645. 2 L. B. A. 20a 
 
312 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 ice." He IS therefore usually the agent of the insured," and will be 
 so considered even though a statute may declare that whoever "in any 
 manner aids or assists" in making a contract of insurance "on behalf 
 of any insurance corporation or property owner" shall be held to be an 
 "agent of such corporation to all intents and purposes." " The broker 
 is still the agent of the insured, though he may solicit the privilege of 
 placing the insurance, and receive a commission from the insurer with 
 whom it is placed.^"* But in any given case the facts may show that 
 the broker was acting for the insurer as well as for the insured. For 
 one purpose he may represent the insured ; for another, the insurer." 
 
 81 Laws Mass. 1887, p. 825, c. 214, § 93, defines a broker as any person 
 who, "for compensation, acts or aids in any manner in the negotiation of 
 contracts of insurance or reinsurance, or placing risks or effecting insurance 
 or reinsurance, for a person other than himself, and not being appointed 
 agent or officer of the company in which such insurance or reinsurance is 
 effected." "An Insurance 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 insurer, or,' 
 in the absence of any selection by him, then with the company selected by 
 such broker." Per Peckham, J. ARFF v. INSURANCE CO., 125 N. Y. 57, 
 25 N. E. 1073, 10 L. R. A. 609, 21 Am. St. Rep. 721. See Sellers v. Insurance 
 Co., 105 Ala. 282, 16 South. 798, defining an insurance broker. Also, see 
 Pratt V. Burdon, 168 Mass. 596, 47 N. E. 419, defining a broker, and constru- 
 ing the Massachusetts statute quoted above. See, also, Milliken v. Wood- 
 ward, 64 N. J. Law, 444, 45 Atl. 796. 
 
 B2 Fire Ass'n of Philadelphia v. Hogwood, 82 Va. 342, 4 S. B. 617; Allen 
 V. Insurance Co., 123 N. Y. 6, 25 N. E. 309; Continental Ins. Co. v. Allen, 26 
 lU. App. 576. 
 
 63 JOHN R. DAVIS LUMBER 00. v. HARTFORD FIRE INS. CO., 95 Wis. 
 226, 70 N. W. 84, 37 L. R. A. 131, construing section 1977, Rev. St. Wis. To 
 same effect, see United Firemen's Ins. Co. v. Thomas, 82 Fed. 406, 27 C. O. 
 A. 42, 53 U. S. Am). 517, 47 L. R. A. 450. Same case on rehearing, 92 Fed. 
 127, 34 C. C. A. 240, 47 L. R. A. 450, construing Rev. St. 111. c. 73, § 40. 
 
 e* Seamans, etc., v. Knapp, Stout & Co., 89 Wis. 171, 61 N. W. 757, 27 L. 
 R. A. 362, 46 Am. St Rep. 825; American Fire Ins. Co. v. Brooks, 83 Md. 22, 
 34 Atl. 373; Devens v. Insurance Co., 83 N. Y. 168; Sellers v. Insurance Co., 
 105 Ala. 282, 16 South. 798; Commonwealth Mut. Fire Ins. Co. ▼. William 
 Knabe & Co. Mfg. Co., 171 Mass. 265. 50 N. E. 516. In an Indiana case an inter- 
 mediate broker to whom a broker applied for insurance was held to be the agent 
 of the insurance company, so as to charge It with his knowledge regarding the 
 premises insured. Indiana Ins. Co. v. Hartwell, 123 Ind, 177, 24 N. E. 100. 
 The court seemed to reach this conclusion because of the intermediary relation 
 of the broker, but it is contrary to the great weight of authority. 
 
 «6 Under the provisions of the Massachusetts statute (Acts 1887, p. 823, c. 
 214, § 90), an insurance broker Is the agent of the insurer for the purpose of 
 receiving the premium, notwithstanding any condition or stipulation in the 
 policy to the contrary. But this does not make the broker the agent of the in- 
 surer so as to bind him by the broker's knowledge of the condition of the 
 premises insured. Davis v. Insurance Co., 67 N. H. 335, 39 Atl. 902. In Tex- 
 as it has been held that he is agent of the insurer to receive premiums, but 
 
 §§ 109-110) CLASSES OP AGENTS AND THEIR POWERS. 313 
 
 The facts of the case will always govern. Thus the broker may 
 act for the insured in procuring the insurance, and thus bind him by 
 any concealments or representations made, and also act for the insurer 
 in delivering the policy and settling for the premium, with reference to 
 which the broker's acts will bind the insurer." If, as a matter of fact, 
 a broker has been authorized by several companies to make contracts 
 on their behalf, his selection of one of the companies to carry a risk 
 applied for has been held to complete a contract binding upon that com- 
 pany, even though the policy which the broker was authorized to issue 
 was withheld because of an intervening fire.*^ 
 
 Notice given to a broker authorized to procure insurance is to be con- 
 sidered notice to the insured as to any matters preceding the completion 
 of the contract. **• But ordinarily the authority of the broker to repre- 
 sent the insured ends with the completion of the contract, and any no- 
 tice thereafter given to the broker will not affect the rights of the in- 
 sured. This question most frequently arises when the insurer gives to 
 the broker who procured the insurance notice of the cancellation of the 
 contract, which, by the terms of the policy, is required to be given to 
 the insured. But, in accordance with the principle stated above, such 
 notice is not sufficient,'^' unless there is evidence of continued authority 
 conferred upon the broker.*® 
 
 Executive OMcers of Insurance Company, 
 
 It is sometimes said that it is a settled rule of agency "that officers 
 of a corporation or association are special agents, whose powers are 
 limited and prescribed by the charter or articles of association and by- 
 laws, and that persons dealing with them are chargeable with notice of 
 
 for nothing else. East Texas Fire Ins. Co. v. Blum, 76 Tex. 653, 13 S. W. 572. 
 In Pennsylvania he is not the agent of Insurer to receive premiums. Potts- 
 ville Mut. Fire Ins. Co. v. Minnequa Springs Imp. Co., 100 Pa. 137. In Illi- 
 nois, whether the broker acted for the insurer in receiving the premium is 
 held to be a question of fact. Sun Mut. Ins. Co. v. Saginaw Barrel Co., 114 
 111. 99, 29 N. B. 477. 
 
 68 Sellers v. Insurance Co., 105 Ala. 282, 16 South. 798; Hamblet v. Insur- 
 ance Co. (D. C.) 36 Fed. 118; Milliken v. Woodward, 64 N. J. Law, 444, 45 
 Atl. 796; Gaysvllle Mfg. Co. v. Phoenix Mut. Fire Ins. Co., 67 N. H. 457, 36 
 Atl. 367; East Texas Fire Ins. Co. v. Brown, 82 Tex. 631, 18 S. W. 713. 
 
 B7 Croft V. Insurance Co., 40 W. Va. 508, 21 S. E. 854, 52 Am. St. Kep. 902. 
 
 B8 LIPMAN V. INSURANCE CO., 121 N. Y. 454, 24 N. E. 699, 8 L. R. A. 719. 
 
 60 Hermann v. Insurance Co., 100 N. Y. 411, 3 N. E. 341, 53 Am. Rep. 197; 
 Kehler v. Insurance Co. (C. C.) 23 Fed. 709; Grace v. Insurance Co., 109 U. 
 S. 278, 3 Sup. Ct 207, 27 L. Ed. 932; American Fire Ins. Co. v. Brooks, 83 
 Md. 22, 44 Atl. 373 ; Zenos v. Wickham, 2 H. L. Cas. 296 ; Mutual Assur. Soc. v. 
 Scottish Union & Nat Ins. Co., 84 Va. 116, 4 S. E. 178, 10 Am. St Rep. 819. 
 
 «o Royal Ins. Co. v. Wight, 55 Fed. 455, 5 C. C. A. 200; Standard OU Co. 
 V. Triumph Ins. Co., 64 N. Y. 85; Hartford Fire Ins. Co. v. Reynolds, 36 Mich. 
 502; JOHN R. t)AVIS LUMBER CO. v. HARTFORD FIRE INS. CO., 9» 
 Wis. 226, 70 N. W. 84, 37 L. R. A. 131. 
 
 H^l 
 
314 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 these limitations." •* But it is clear that the officers of a corporation are 
 by no means special agents in the sense in which that term is ordinarily 
 used, as explained above. It is true that the powers of such officers 
 may be prescribed in terms by the charter, and are necessarily Hmited 
 to those possessed by the corporation under its charter, and that they 
 may be still further limited by by-laws and regulations adopted by the 
 stockholders or directors, though it is to be here observed that such 
 by-laws and regulations are conclusively presumed to be known only 
 to members of the corporation.** But in the active conduct of the busi- 
 ness for the transaction of which the company was chartered, the ex- 
 ecutive officers usually possess all the powers of the corporation." 
 They would therefore more appropriately be called general agents, as 
 exercising more general authority than any others of the representa- 
 tives of the corporation. 
 
 Such executive officers bear divers titles, being denominated variously 
 ''president," "vice president," "secretary," "assistant-secretary," "treas- 
 urer," "superintendent," or "general manager" ; or, if the association be 
 one established for fraternal or benevolent purposes, the titles of the 
 executive officers are often fairly imperial in their suggestion of author- 
 ity. These titles do not of themselves fix the powers of their posses- 
 sors, but the giving of a title having a customary significance as to ac- 
 companying authority is often an important fact justifying an inference 
 of authority by third persons. For the general public, in the case of 
 these executive officers as well as of other agents, has a right to infer 
 that ostensible authority is actual authority. Thus, as the president of 
 any organization generally possesses authority to supervise and regulate 
 the conduct of all its affairs, the public naturally assumes that the per- 
 son appointed to be president of an insurance company ha's authority to 
 bind the company by any act that he may do in furtherance of the busi- 
 ness in which it is engaged.** The company, of course, can limit these 
 
 «i See 1 Joyce, Ins. § 397. 
 
 «2 Tlie by-laws aod rej?ulations of a corporation are not presumed to be 
 known to persons with whom its agents deal unless they are specially 
 brought to their knowledge. Rathbun v. Snow, 123 N. Y. 343, 25 N. E. 379, 
 10 L. R. A. 355, Clark, Corp. 461. 
 
 «3 Hackney v. Insurance Co., 4 Pa. 187. What the officers of an insurance 
 company say and do when in the discharge of their duties as officers, and in 
 relation to duties assigned them, is evidence against the company. Muhle- 
 man v. Insurance Co., 6 W. Va. 508. See, also, German Ins. Co. v. Gray, 43 
 Kan. 497, 23 Pac. 637, 8 L. R. A. 70, 19 Am. St. Rep. 150. A provision in a 
 policy that its terms cannot be waived or changed by any agent or officer of 
 the company, except in writing, is invalid in so far as it attempts to restrict 
 the power of the company to act through its executive officers. LAMBER- 
 TON V. INSURANCE CO., 39 Minn. 129, 39 N. W. 76, 1 L. R. A. 222. See 
 Renier v. Insurance Co., 74 Wis. 89, 42 N. W. 208; Weed v. Insurance Co.. 
 116 N. Y. 117, 22 N. E. 229. 
 
 «4Dilleber v. Insurance Co., 76 N. Y. 667; Merchants' & Manufacturers' 
 
 g§ 109-110) CLASSES OF AGENTS AND THEIR POWERS. 
 
 315 
 
 apparent powers, but the limitation, to be effective, must be communi- 
 cated. So the secretary has customarily somewhat less extensive pow- 
 ers, but has, impliedly, authority to do all acts properly incident to the 
 duties of his office.®* And the same is true of the treasurer.'* The 
 general manager or superintendent usually has within the territory un- 
 der his control very much the same authority as the president, and ex- 
 <?rcises all the administrative powers of the corporation.*^ 
 
 The board of directors are not executive officers, and a discussion 
 of their powers belongs more properly to a work on the general law of 
 corporations '^ than to a treatise on insurance. It has already been 
 
 Ins. Co. v. Curran, 45 Mo. 142, 100 Am. Dec. 361. He may waive a deviation 
 from the risk when such is in accordance with a uniform practice of the 
 company. Warren v. Insurance Co., 16 Me. 439, 33 Am. Dec. 674. Knowl- 
 edge of the president is knowledge of the company. Pomeroy v. Insurance 
 Co., 9 Colo. 295, 12 Pac. 153, 59 Am. Rep. 144. But in Massachusetts it is 
 held that the president of a mutual company has no authority to waive con- 
 ditions of a policy dependent upon the by-laws, and make a different con- 
 tract from that authorized by such by-laws. Priest v. Insurance Co., 3 Al- 
 len, 602. He has no power to waive a by-law requiring prepayment of the 
 premium as a condition precedent to the validity of the policy. Baxter v. 
 Insurance Co., 1 Allen (Mass.) 294, 79 Am. Dec. 730. Where the president is 
 Iield out as having authority to make oral contracts for insurance, third per- 
 sons are not affected by secret limitations on his authority. Commercial Mut. 
 Ins. Co. V. Union Ins. Co., 19 How. (U. S.) 318, 15 L. Ed. 636. 
 
 65 It is the secretary's duty to carry into effect the votes and directions of 
 the managing body, unless the contrary appears. Leai*y v. Blanchard, 48 
 Me. 269. The assignee of a life policy is justified in concluding that it has 
 been canceled by the company where he receives a letter from its secretary 
 stating that all policies were canceled by the company for failure to pay as- 
 sessments within thirty days. Columbia Ins. Co. v. Masonheimer, 76 Pa. 138. 
 Where the secretary of an insurance company fills out an application for in- 
 surance, the company will be presumed to have waived any statements of 
 facts not inserted in the application. Tiefenthal v. Insurance Co., 53 Mich. 
 306, 19 N. W. 9. 
 
 The secretary of a corporation is one of the general managing agents, and, 
 when in the discharge of the duties of his office, represents the company. 
 Hastings v. Insurance Co.. 138 N. Y. 473, 34 N. E. 289. But the secretary 
 cannot bind the company by his agreement to pay a loss for which the in- 
 surer is not otherwise liable. Arguimbau v. Insurance Co., 106 La. 139, 'M 
 South. 148. Nor, it is held, can the secretary give by letter consent to othei 
 insurance, required by the policy to be indorsed thereon. O'Leary v. Insur- 
 ance Co., 100 Iowa, 173, 69 N. W. 420, 62 Am. St. Rep. 555. But quaere? 
 
 «6 Stark Bank v. United States Pottery Co., 34 Vt. 144. But he has no au- 
 thority to borrow money to pay benefits in an association. Screwmen's Ben. 
 Ass'n V. Smith, 70 Tex. 168, 7 S. W. 793. It has been held that the fact that 
 the treasurer of a mutual company received assessments from the insured aft- 
 er he knew of the misrepresentations as to his age does not validate the policy. 
 Swett V. Society, 78 Me. 541, 7 Ati. 394. 
 
 67 See Eclectic Life Ins. Co. v. Fahrenkrug, 68 111. 463; McGurk v. Insur- 
 ance Co., 5^ Conn. 528, 16 Atl. 263, 1 L. R. A. 563. 
 
 •a See Clark. Corn. d. 485 et sea. 
 
316 
 
 INSURANCE AGENTS AND THEIU POWERS. 
 
 (Ch.9 
 
 I 
 
 shown that the directors have no power to adopt by-laws or to order 
 assessments, except in strict compHance with the charter or articles of 
 association, and unless they are reasonable.'* It may be here added 
 that notice to a director is not notice to the company, unless the circum- 
 stances are such as to make it the duty of that director to communicate 
 his knowledge,^ • 
 
 Other Agents, 
 
 Adjusters, appraisers, medical examiners, and attorneys are strictly 
 special agents, whose authority to bind the company is narrowly con- 
 fined to acts incident to the discharge of the special fimctions for which 
 they are employed.^^ Thus an agent authorized to adjust a loss may 
 waive proofs of loss,^* but cannot revive an already forfeited policy.''' 
 Yet it has been held that he may bind the insurer by stating grounds for 
 his refusal to settle the loss, thus waiving a forfeiture on other 
 grounds.^* In Michigan " it has been decided that the offer made by 
 an adjuster to compromise a disputed claim did not amount to a waiv- 
 er, binding on the company, of a forfeiture incurred under a term of 
 the policy. 
 
 A medical examiner has narrow authority, but within the limits of 
 that authority he may bind the insurer by his acts, or by knowledge ac- 
 quired. Thus it is held ^' that the knowledge of a medical examiner 
 of the truth of a fact or circumstance erroneously set forth in an appli- 
 cation will estop the insurer to claim a forfeiture on the ground of mis- 
 representation. 
 
 •9 See supra, 194. 
 
 TO See Clark, Corp. p. 502. See, also, General Ins. Co. v. United States Ins. 
 Co., 10 Md. 517, 69 Am. Dee. 174. 
 
 71 Dwelling House Ing. Oo. v. Snyder, 59 N. J. Law, IS, 34 Atl. 931. 
 
 72 Germanla Fire Ins. Co. v. Pitcher, 160 Ind. 392, 64 N. E. 921; iBtna 
 Ins. Co. V. Shryer, 85 Ind. 362. See numerous cases cited in 28 Cent Dig. 
 "Insurance," § 1406. 
 
 7 3 Phopnix Ins. Co. v. Lawrence, 4 Mete. (Ky.) 9, 81 Am. Dec. 521. 
 
 74 Rockford Ins. Co. v. Williams, 56 111. App. 338. 
 
 7 8 Richards v. Insurance Co., 83 Mich. 508, 47 N. W. 350, 21 Am. St. Rep. 
 611. But a compromise completed by the adjuster is binding on the compa- 
 ny in the absence of knowledge by the insured of limitations upon the ad- 
 juster's authority. Millers' Nat Ins. Co. v. Kinneard, 136 111. 199, 26 N. E. 
 368. 
 
 7« Grattan v. Insurance Co., 80 N. Y. 281, 36 Am. Rep. 617. See, also, 
 Sternaman v. Insurance Co., 170 N. Y. 13, 62 N. E. 763, 57 L. R. A. 318, 88 
 Am. St Rep. 625; Providence Life Assur. Soc. v. Rentlinger, 58 Ark. 528, 
 25 S. W. 835; Equitable Life Ins. Co. v. Hazlewood, 75 Tex. 338, 12 S. W. 
 623, 7 L. R. A. 217, 16 Am. St Rep. 893. A contrary doctrine to the text is 
 held in Leonard v. Assurance Co., 24 R. I. 7, 51 Atl. 1049, 96 Am. St Rep. 
 G98. But this decision was based on the ground that the advice given by the 
 examiner did not relate to the medical certificate, and therefore was not 
 binding on the insurer. 
 
 %l 111-113) SUBAGENTS— THEIR APPOINTMENT AND POWERS. 31? 
 
 SUBAGENTS-THEIR APPOINTMENT AND POWERS. 
 
 111. Under tlie law of principal and agent, an agent is not allowed 
 
 to delegate to another the authority conferred upon him, un- 
 
 loss 
 
 (a) The power delegated involires the doing of a ministerial act only. 
 
 or unless , j i* ji 
 
 (b) The delegation of such authority has been expressly or impliedly 
 
 authorized by the principal. 
 
 112. The insurer will be deemed to have impUedly authorized the 
 
 delegation of authority conferred upon his agent, if, under the 
 circumstances of the agency, the appointment of subagents 
 
 w^as 
 <a) Necessary to the accompUshment of the purposes of the agency; 
 
 or 
 
 (b) In accordance with a custom or usage; or 
 
 (c) In accordance with the known practice or custom of the agent 
 
 appointed. 
 
 113. A subagent may bind the insurer by exercising all *^« aPP"[tf * 
 
 powers of the agent, provided the agent has clothed him with 
 such powers before the public. 
 
 It is a fundamental principle of the law of principal and agent that, 
 when one person appoints another to perform any act involving the ex- 
 ercise of judgment or discretion, the person so making the appomtment 
 has the right to rely upon his employe to personally discharge the duty 
 intrusted to him, and the latter has no right to delegate to another the 
 performance of that which should be done by himself. This pnnciple y 
 finds expression in the familiar maxim, "Delegatus non potest dele- / 
 
 gare."" , . , 
 
 This principle of agency, however, is only appUcable m case the 
 character of the act to be performed is such as to require the exerase J 
 of skill or discretion, or when the agent is appointed because he pos- 
 sesses peculiar qualities of fitness for the discharge of the particular 
 duty intrusted to him. Thus an agent may delegate to another the per- 
 formance of ministerial acts, and his subagent or clerk employed to 
 perform such acts may, when acting within the scope of his employ- 
 ment, bind the principal, though no immediate contractual relation ex- 
 ists between them.^® Manifestly it would be impossible for the agent 
 
 TT Davis V. King, 66 Omn. 465, 34 Atl. 107, 50 Am. St. Rep. 104; Kohl v. 
 Beach 107 Wis. 400, 83 N. W. 657, 50 L. R. A. 600, 81 Am. St. Rep. 849; 
 Lyon V. Jerome, 26 Wend. (N. Y.) 485, 37 Am. Dec. 271; Inhabitants of Town 
 of Stoughton V. Balier, 4 Mass. 522, 3 Am. Dec. 236; White v. Davidson, 8 
 Md. 169, 63 Am. Dec. 699. See Tiflf. Ag. p. 116. 
 
 7 8 Grady v. Insurance Co., 60 Mo. 116; McKinnon v. Vollmar, 75 Wis. 82, 
 43 N. W. 800, 6 L. R. A. 121, 17 Am. St. Rep. 178; Sayre v. Nichols, 7 Cal. 
 535 68 Am. Dec. 280; Continental Ins. Co. v. Ruckman, 127 111. 364, 20 N. 
 
 1 
 
318 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.» 
 
 ^ 
 
 , 
 
 I 
 
 J 
 
 to give his personal attention to every trivial clerical matter, and the 
 pnncipal cannot fail to know that such matters are usually intrusted to 
 subordinates. An agent may also be authorized to appoint subagents 
 to discharge certain duties, or the nature of the business in which he is 
 engaged may be such that it is to be presumed that the principal in- 
 tended that he should employ others to aid him in the discharge of hi« 
 duties. In case the agent is expressly authorized to make such ap- 
 pointments, clearly the principal is liable for the acts of the subagent, 
 vvithin the scope of the authority conferred upon him. When, however 
 the agent has, at most, only an implied authority to appoint a subagent' 
 it IS often difficult to determine whether such authority actually exists' 
 so as to fasten liability on the principal for the acts of the subagent. 
 
 In cases of express authorization, no peculiar difficulty presents itself 
 in the law of insurance. As in all other cases, the subagent acting with- 
 in the scope of his employment becomes the agent of the principal '* 
 Passing, however, to a consideration of the question as to when an in- 
 surance company may be considered as having impliedly authorized its 
 agent to appoint a subagent, certain considerations peculiar to the law 
 of insurance should be noticed.*'^ The company will be presumed to 
 have known that the agent would employ a subordinate, (1) if the ne- 
 cessities of the business intrusted to the agent are such as to require the 
 services of others; or (2) there is a general custom among insurance 
 companies to allow such appointments for certain purposes; or (3) 
 where the known previous custom of the agent has been such as to 
 warrant the belief that he will employ another to discharge certain of 
 his duties. 
 
 Authority Implied from Necessity, 
 
 Where a general agent is appointed to conduct the business of an 
 insurance company throughout a considerable territory, the companv 
 must know that the duties of the agent can only be properly discharged 
 If he appoints subagents to solicit insurance, and attend to the business 
 incident thereto, within certain districts or subdivisions of the territory 
 
 E. 77. 11 Am. St. Rep. 121; Runkle v. Insurance Co. (C. C.) 6 Fed. 143; Mc- 
 
 Croskey v. Hamilton. 108 Ga. 640. 34 S. E. Ill, 75 Am. St Rep 79 
 
 7» See ^tna Life Ins. Co. v. Fallow (Tenn.) 77 S. W. 937 
 
 80 The usual services required of an insurance agent are not of so person- 
 
 al a nature as to come under tHe maxim, "Delegatus non potest delegare " 
 
 An agent, however, can only delegate to another such powers as he do's- 
 
 TTlr "^J.^^^' ^""^"^^ ^""^ ^^^ ^- Knoxville Fire Ins. Co., 85 Tenn. 76, 
 1 S W 689, 4 Am. St. Rep. 744. As to who is a general agent, and has. as 
 such the power to delegate to others all duties incident to the conduct of 
 
 V ^ ooo'^'olf^c^^'l^^"'"*''''®' ^^^ ^*y' ^°^- § 126; Goode v. Insurance Co.. 92 
 Va. 392^ 23 S. E. .44. 30 L. R. A. 842, 53 Am. St. Rep. 817; Continental Ins. 
 Co. V. Ruckman, 127 111. 364, 20 N. E. 77, 11 Am. St Rep. 121; Flynn v. In- 
 Burance Co., 78 N. Y. 568, 34 Am. Rep. 561. ^ , jim . 
 
 See, also, supra, p. 307. 
 
 -^ 
 
 §§ 111-113) SUBAGENTS — THEIR APPOINTMENT AND POWERS. 319 
 
 assigpned to the agent. In such a case the act of the subagent is bind- 
 ing upon the company, to the same extent as if he owed his appoint- 
 ment to the company itself, and not to the agent.®^ 
 
 So other cases may arise in which the business of the insurance agent 
 is of such a character as to clearly necessitate the appointment of a sub- 
 agent. As has been said by the West Virginia court in a leading case : 
 "Insurance agents are not bound to attend to all the details of their 
 business in person, and, if they could not authorize their clerks or other 
 assistants to carry on the business and renew policies, or contract in 
 reference to them, they would frequently, in case of sickness or ab- 
 sence, have to close their offices altogether." •* 
 
 Authority Implied from Custom or Usage. 
 
 A general custom or usage on the part of insurance companies to 
 allow the appointment of subagents by the general agents of the com- 
 pany will estop the company from denying liability for the act of the 
 subagent, if within the scope of the agent's authority. The custom or 
 usage thus relied on to impose a liability on the insurer owes its origin 
 in most instances to the fact that the appointment of subagents is nec- 
 essary to the proper conduct of the business of the company, and hence 
 we find that the courts, in many cases, base their decisions holding that 
 implied authority to make appointment of subagents exists upon the 
 grounds of necessity or custom, indifferently.®' 
 
 81 Insurance Co. of North America v. Thornton, 130 Ala. 222, 30 South. 
 614, 55 L. R. A. 547, 89 Am. St Rep. 30; Krumm v. Insurance Ck)., 40 Ohio 
 St. 225; Swan v. Insurance Co., 96 Pa. 37; Franklin Fire Ins. Co. v. Bradfora, 
 201 Pa. 32, 50 Atl. 286, 55 L. R. A. 408, 88 Am. St. Rep. 770; ^tna Life Ins. 
 Co. V. Fallow (Tenn.) 77 S. W. 937. 
 
 82 Deitz V. Insurance Co., 33 W. Va. 526, 11 S. Ei 50, 25 Am. St. Rep. 908. 
 See, also, Goode v. Insurance Co., 92 Va. 392, 23 S. E. 744, 30 L. R. A. 842, 
 53 Am. St. Rep. 817. In a leading New York case, Peckham, J., in deliver- 
 ing the opinion of the court, uses the following language: "Elnough has been 
 said to show that an agent of an insurance company has the right to, and, 
 indeed, it is the expectation of the company that he will, employ such clerks 
 and other assistants as may be necessary and proper in order that he may 
 do the business for which he has been appointed agent. Soliciting insurance 
 is part of the business of such agents, and it is not to be assumed that such 
 solicitation can be made only by the agents personally; nor can it be held, 
 as a matter of law, that, when it is made by some person employed exclusively 
 by them, such solicitation on the part of the person thus employed makes him 
 an insurance broker, and takes away from him his character as clerk or em- 
 ploy6 of the agent." ARFF v. INSURANCE CO., 125 N. Y. 57, 25 N. E. 
 1073, 10 L. R. A. 609, 21 Am. St. Rep. 721. 
 
 88 "Insurance companies know or ought to know when they appoint gen- 
 eral agents that, according to the ordinary course of business, they have 
 clerks and other persons to assist them, and that their agents in many instan- 
 ces could not transact the business intrusted to them if they were required 
 to give their personal attention to all of its details. It being necessary, there- 
 fore, and according to the usual course of business, for their agents to employ 
 
 4 
 
 h 
 
 ! ^! 
 
320 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 i 
 
 
 In a leading New York case, in which the company was held liable 
 for the act of a subagent, the court states the reasons for its opinion 
 as follows : "We know, according to the ordinary course of business, 
 that instirance 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 can bind their principals in any of 
 the business which they are authorized to transact. An insurance 
 agent can authorize his clerk to contract for risks, to deliver policies, 
 to collect premiums, and to take payment of premiums in cash or se- 
 curities, and to give credit for 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 
 if it were done by the agent in person." " 
 
 Same — Custom of Particular Agent. 
 
 In the case cited it was also shown that the subagent had been acting 
 as such for some years. Manifestly, where a previous custom or habit 
 of the agent, known to the company, thus to delegate to another the 
 performance of his duties, can be shown, the insurance company is 
 estopped to deny that no authority exists for the appointment of the 
 subagent." Evidence of such a previous custom on the part of the in- 
 surance agent should always be admitted in order to determine whether 
 the subagent has power to bind the company.** 
 
 Extent to Which Subagent may Bind Insurer, 
 
 It would seem clear from the authorities already cited that the agent, 
 having authority, either express or implied, to appoint a subagent, may 
 delegate to the latter the performance of any of his duties, of how- 
 ever personal a character they may be, unless it is manifest that the 
 insurer intended that certain of the powers of the agent should not 
 be delegated.®^ In every case it becomes necessary to determine wheth- 
 
 others to aid them In doing the work, it is Just and reasonable that insurance 
 companies should be held responsible not only for the acts of their agents, 
 but also for the acts of their agents' employes, within the scope of the agents' 
 authority." Goode v. Insurance Co., 92 Va. 392, 23 S. E. 744, 30 L. R. A. 
 842, 53 Am. St. Rep. 817. See, also, Bodine v. Insurance Co., 51 N. Y. 117, 
 10 Am. Rep. 566; Steele v. Insurance Co., 93 Mich. 81, 53 N. W. 514, 18 L. 
 
 R. A. 85. 
 
 84 Bodine v. Insurance Co., 51 N. Y. 117, 10 Am. Rep. 566. 
 
 86 Bodine v. Insurance Co., 51 N. Y. 117, 10 Am. Rep. 566; Continental Ins. 
 Co. V. Ruckman, 127 111. 364, 20 N. E. 77, 11 Am. St Rep. 121; MAYER v. 
 INSURANCE CO., 38 Iowa, 304, 18 Am. Rep. 34. 
 
 8« ARFF V. INSURANCE CO., 125 N. Y. 57, 25 N. B. 1073, 10 L. R. A. 609, 
 
 21 Am. St. Rep. 721. 
 
 87 To quote from the opinion in a recent Alabama case, in which the au- 
 thorities are reviewed: "The power delegated to the agent in express terms 
 being such as to require the services of subagents, carries with it the power 
 to appoint subagents, whatever the nature of the service in respect of being 
 
 §§ 111-113) SUBAGENTS — THEIE APPOINTMENT AND POWERS. 321 
 
 er the appointment of the subagent was authorized, and, if so, whether 
 he has been clothed, before the pubHc, with such powers as he seeks 
 to exercise. If a person enters into a contract with the subagent, hav- 
 ing no reason to believe that he has been authorized to make con- ^ 
 tracts which shall be binding on the insurer, the latter will clearly not 
 be estopped to deny the authority of the subagent.®® 
 
 While, as before stated, the personal character of the duty to be 
 discharged by the agent will not, as a rule, prevent the agent from dele- 
 gating its performance to another, yet in certain cases a different view y 
 has been taken by the courts.®® Probably the greatest difficulty in de- 
 termining whether a subagent, without express authorization by the 
 insurer, may exercise a power, has been found in cases involving the 
 w aiver of a condition of forfeiture by the subagent. It was held by 
 the Alabama court that the power to waive such a condition was a per- 
 sonal trust, which the agent could not delegate to another without the 
 knowledge or consent of the insurer.'® A later case '^ from the same 
 state attempts to explain this decision as based, not upon the personal 
 character of the power sought to be delegated, but rather upon the fact 
 that there were no circumstances such as would indicate that the com- 
 pany by implication authorized the agent to appoint any subordinates. 
 
 Whether this is the real ground for the opinion rendered in the earlier 
 case seems at least doubtful. It is certain, however, that in no other 
 way can the decision in question be reconciled with the great weight ^ 
 of authority holding that the insurer is bound by the subagent's waiver 
 of a condition in all cases in which the agent is authorized to make 
 such a waiver and delegates this power to his subordinate.®* 
 
 in itself a personal confidence may be, for a principal may, of course, dele- 
 gate to an immediate agent clothed with duties involving the exercise of per- 
 sonal skill and judgment, the power of devolving such duties upon sub- 
 agents." Insurance Co. of North America v. Thornton, 130 Ala. 222, 30 
 South. 614, 55 L. R. A. 547, 89 Am. St. Rep. 30. 
 
 See, also, Bodine v. Insurance Co., 51 N. Y. 117, 10 Am. Rep. 566, for an 
 enumeration of many of the duties which it is held that a subagent may per- 
 form. 
 
 88 More V. Insurance Co., 130 N. Y. 537, 29 N. E. 757. 
 
 80Waldman v. Insurance Co., 91 Ala. 170, 8 South. 666, 24 Am. St Rep. 
 883; Lynn v. Burgoyne, 13 B. Mon. (Ky.) 400. See, also, Phoenix Ins. Co. v. 
 Spiers & Thomas, 87 Ky. 285, 8 S. W. 453, where it is held that, although an 
 agent may delegate certain of his powers to a subagent, yet in this particu- 
 lar case the subagent could not be regarded as the agent of the company, 
 because he acted under a mere private arrangement with the agent. 
 
 •0 Waldman v. Insurance Co., 91 Ala. 170, 8 South. 666, 24 Am. St Rep. 
 883. 
 
 •1 Insurance Co. of North America v. Thornton, 130 Ala. 222, 30 South. 614. 
 55 L. R. A. 547, 89 Am. St Rep. 30. 
 
 •2 Bodine v. Insurance Co., 51 N. Y. 117, 10 Am. Rep. 566; ARFP v. IN- 
 SURANCE CO., 125 N. Y. 57, 25 N. B. 1073, 10 L. R. A. 609, 21 Am. St Rep. 
 721; Goode y. Insurance Co., 92 Va. 392, 23 S. B. 744, 30 L. B. A. 842, 63 Am. 
 Vance Ins. — ^21 
 
 \\ 
 
 ., i 
 
822 
 
 INSUBANCB AGENTS AND THBIB POWERS. 
 
 (Ch.9 
 
 §§ 114:-11T) LIMITATIONS UPON THE POWERS OP AGENTS. 
 
 323 
 
 It naturally follows from the fact that a subagent may waive a con - 
 i dition that he may also insert one in the policy which will be bindmg 
 upon the insurer, provided the principal agent could do so. 
 
 114. 
 
 (a) 
 (b) 
 
 115. 
 (a) 
 
 (b) 
 
 (c) 
 
 116. 
 (a) 
 
 LIMITATIONS UPON THE POWERS OP AGENTS. 
 
 Any limitations whatsoever imposed by tbe insnrer upon tbe 
 authority of his agent will be binding upon the third parties 
 dealing with the agent, provided they are 
 
 Properly conimunioated; 
 
 Legally proper, or not opposed to public policy. 
 
 Limitations upon the insurance agent's authority may be com- 
 municated in any of the following ways: 
 
 In the poUcy, when such limitations will be valid as to those 
 acts of the agent that are subsequent to the deUvery of the 
 policy, but invalid as to acts prior to that time. 
 
 In the appUcation, when they will be binding upon the insured, 
 who has signed the appUcation, even though not actually 
 
 hnoum to him. 
 By oral communication, or by writing not immediately con- 
 nected with the contract made. Such limitations, when 
 proved, are clearly binding as to all subsequent transactions. 
 
 Improper limitations are such as are unreasonable, as involving 
 an untruth, or contrary to public policy, as contravening a 
 settled rule of law. The most important of such limitations, 
 as most frequently occurring, are 
 
 That no agent of the company is authorised to alter or waive 
 any condition of the policy save in a specified manner. Such 
 a statement is untrue of any agent having general contracting 
 powers. No agent can limit his own powers, and the power to 
 impose a condition implies the power to remove it. 
 
 That the agent of the insurer, so far as taking the appUcation 
 is concerned, shall be deemed the agent of the insured. Such 
 a limitation is unreasonable, as contrary to fact. 
 
 That the insurer shall not be charged with knowledge acquired 
 by his agent in the course of his employment. This limitation 
 essays to set aside a settled rule of law, and is therefore con- 
 trary to public policy. . , ^^ - ^ * i.* 
 
 That the insurer shaU not be chargeable with the fraud of his 
 agents. Such a limitation is clearly contrary to pubUc policy. 
 
 By the weight of authority, these improper Umitations are not 
 enforceable, and do not in any wise affect the rights of the in- 
 sured. 
 
 As has already been stated, it is competent for any principal to limit 
 the apparent authority of his agent to any extent that seems best to 
 him. It is also true that every agent's authority is presumed to be co- 
 st. Rep. 817; Gnibbs v. Insurance Co.. 106 N. C. 472, 13 S. a 236 f Am St 
 Rep 62 ; Hartford Fire Ins. Ck). v. Josey, 6 Tex. Civ. App. 290, 25 S. W. 685 ; 
 Steele v. Insurance Co., 93 Mich. 81, 53 N. W. 514. 18 L. K. A. 85. 
 
 Cb) 
 Cc) 
 
 (d) 
 117. 
 
 extensive with his employment. Therefore it follows that any limita- 
 tions that the principal may desire to place upon the authority which 
 a third party reasonably supposes the agent to be vested with must be 
 made known; otherwise they are altogether inoperative. There is, 
 however, another limitation upon the right of the principal to restrict 
 the apparent power of his agent. He will not be allowed by any seem- 
 ing restriction imposed upon his agent's authority to set aside any set- 
 tled rule of law which has its basis in public policy, whether that public 
 policy be declared by statute, or by a series of consistent adjudications. 
 The maxim, "Qui facit per alium facit per se," gives expression to a 
 profound truth relative to the law of agency; that is, whatever is done 
 by an agent in the course of his performance of the duty with which 
 he is charged by the principal must necessarily and in all cases be 
 deemed to have been done by the principal.** And this fundamental 
 truth cannot be annulled or evaded by the use of any language, or by 
 the terms of any agreement which the parties may make. The rule is 
 fundamental, and inexorable in its application.** 
 
 Persons employed as agents, in common with other persons, some- 
 times make serious mistakes, and not infrequently they are guilty of 
 dishonest practices. Such mistakes and fraudulent acts on the part of 
 the agents usually result in injury and loss. The insurance company, 
 compelled to transact all its business through agents, naturally desires 
 to safeguard itself against losses incident to the neglect or lack of 
 fidelity of its agents, and, in order to do so, fills its policies and other 
 instruments used in negotiating insurance contracts with conditions, 
 the purpose of which is to cast this burden, as far as may be, upon 
 the third party dealing with its agents. If all these conditions were 
 given eflFect, the benefits for which the insured supposes he is con- 
 tracting would seldom be received. The courts are, however, careful 
 to so construe these limitations as to preserve the rights of the insured 
 as far as is in any wise consistent with the rules of the law of con- 
 tracts. Much confusion has naturally arisen in the decisions of the 
 numerous courts before which cases involving the validity of such lim- 
 itations have come, and it is impossible to reconcile all of them either 
 with one another, or with any harmonizing principle of law. Conse- 
 quently no effort will be made to set out the conflicting doctrines of all 
 the cases, but an attempt will rather be made to state the law with ref- 
 erence to the validity of limitations upon the agent's authority, in ac- 
 cordance with reason and sound principle, and as supported by the bet- 
 ter authority. We will therefore first state what constitutes a sufficient 
 communication of these limitations to the third party dealing with the 
 
 •« Tiff. Ag. p. 10. 
 
 »* UNION MUT. LIFE INS. CO. t. WILKINSON, 13 Wall. 222, 20 L. Ed. G17. 
 
324 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 insurance agent, and what are the effects of the several modes of com- 
 munication. 
 
 Limitations upon Agenfs Authority Contained in the Policy. 
 
 Almost without dissent it is held that the person who accepts a policy 
 of insurance is, in the absence of fraud, conclusively presumed to know 
 and assent to all the terms of the policy; •* therefore a Hmitation upon 
 the power of the insurance agent, set forth in the policy, must be con- 
 sidered as communicated to the insured, whether actually known to him 
 or not, and therefore binding upon him as to the acts done by the agent 
 subsequently to the delivery of the policy. Therefore, if in the policy it 
 is provided that no agent can waive any condition in the policy, except 
 in writing, indorsed thereon, such a limitation will be enforced unless 
 other facts show that the insurer, by his conduct, has subsequently ex- 
 tended the powers of the agent so as to authorize a waiver otherwise 
 than as provided by the policy.®® Or, to state the rule generally, while 
 a provision of the policy limiting the authority of the agent is valid 
 and enforceable as to subsequent acts, if kept true, yet this provision, 
 like any of the terms of a written contract, may be subsequently altered 
 or annulled by parol agreement expressed or implied. And if, as a 
 
 •5 NEW YORK LIFE INS. CO. V. FLETCHER, 117 U. S. 519, 6 Sup. Ct 
 837, 29 L. Ed. 934; Walsh v. Insurance Co., 73 N. Y. 5; Cleaver v. Insurance 
 Co., 65 Mich. 527, 32 N. W. 660, 8 Am. St. Rep. 908; Gould v. Insurance Co., 
 90 Mich. 302, at page 308, 51 N. W. 455; Burlington Ins. Co. v. Gibbons, 43 
 Kan. 15, 22 Pac. 1010, 19 Am. St. Rep. 118; Marvin v. Insurance Co., 85 N. Y. 
 278, 39 Am. Rep. 657; Carey v. Insurance Co., 84 Wis. 80, 54 N. W. 18, 20 L. 
 R. A. 267, 36 Am. St. Rep. 907. But some courts, repudiating the above doc- 
 trine, to some extent, hold that the law does not impose upon the applicant 
 the absolute duty to read his policy. This seems to be the case when the 
 contract, as it appears in the policy, has been materially altered from the 
 agreement made between the insured and the insurance agent without the 
 knowledge of the former. Thus, where an applicant, mistakenly thinking 
 that the policy conformed to the original agreement which he made with the 
 insurance company in regard to the amount of additional insurance, failed 
 to examine the policy, it was held that he had a right to rely upon the knowl- 
 edge of the agent in regard to the amount of additional insurance to be tak- 
 en. Fhreman's Fund Ins. Co. v. Norwood, 69 Fed. 71, 16 C. C. A. 136. In an 
 Indiana case it is said: "The assured is justified in assuming that the agent 
 has in good faith correctly recorded his answers to the questions asked him, 
 and, where he has in good faith made truthful answers, he is not chargeable 
 with negligence if he signs the application thus prepared without reading it. 
 When the company sends out its accredited agents to solicit insurance, those 
 to whom such agents may apply have a right to rely upon the credit thus giv- 
 en them by their principal; and, if the agents act dishonestly, the dishonesty 
 should be charged to their principal." Michigan Mut. Life Ins. Co. v. Leon, 
 138 Ind. 636, 37 N. El 584, per Coflfey, J. Also, see Kister v. Insiu^nce Co., 
 128 Pa. 553, 18 Atl. 447, 5 L. R. A. 646, 15 Am. St Rep. 696; Germania Life 
 Ing. Co. V. Lunkenheimer, 127 Ind. 536, 26 N. E. 1082, and cases there cited. 
 
 •• KNICKERBOCKER LIFE INS. CO. V. NORTON, 96 U. S. 234, 24 L. Ed. 
 680. 
 
 §§ 114-117) LIMITATIONS UPON THB POWERS OF AGENTS. 325 
 
 matter of fact, the insurer has subsequently given to the agent the 
 powers that were denied in the policy, he cannot afterwards be heard 
 to say that the provision of the policy shall govern."*^ 
 
 But as to transactions that have taken place prior to the delivery of 
 the policy, an entirely different rule applies. While engaged in these 
 transactions with the agent the third party has as yet received no no- 
 tice of limitations in the policy, and has a right to suppose that he is 
 authorized to do all acts connected with the business intrusted to him.®* 
 Therefore these restricting provisions in the policy will not affect the 
 rights of the insured as to any act done before the delivery of the 
 policy. Thus it is held, with little dissent, that a stipulation in the 
 policy that the agent taking the application shall be deemed the agent 
 of the insured will not prevent the insurer from being bound by any 
 acts done by the agent in taking the application, or by any informa- 
 tion communicated to the agent at that time.** 
 
 Limitations Contained in the Application. 
 
 On account of the decisions of the courts that limitations contained in 
 the policy could have no effect as to transactions prior to the delivery 
 of the policy, insurers began to resort to the application as the means 
 of communicating such restrictions as they saw fit to impose upon the 
 authority of their agents. The application, which is necessarily the 
 first step in the negotiations for the procurement of insurance, when 
 signed by the applicant, should, in all cases, in the absence of fraud on 
 the part of the agent, bind the insured absolutely, as consenting to, 
 and making his own, every statement set forth therein.*®® The appli- 
 cation, in effect, contains the terms of an offer, which, upon acceptance 
 by the insurer, become the terms of a contract to which the insured 
 must necessarily be presumed to have consented. But the consent so 
 given by the insured may, as in the case of other contracts, be vitiated 
 by any fraudulent practice through which it was procured.*®* Accord- 
 ingly it has been held *®* that a stipulation which had been inserted in 
 
 91 See this point clearly discussed in Knickerbocker Life Ins. Co. v. Nor- 
 ton, supra. 
 
 •8 UNION MUT. LIFE INS. CO. v. WILKINSON, 13 Wall. 222, 20 L. Ed. 617. 
 
 »» KAUSAL V. INSURANCE CO., 31 Minn. 17, 16 N. W. 430, 47 Am. Rep. 
 776. 
 
 i«o Cuthbertson v. Insurance Co., 96 N. C. 480, 2 S. E. 258; School Dist. 
 No. 4 V. Insurance Co., 61 Mo. App. 597; NEW YORK LIFE INS. CO. v. 
 FLETCHER, 117 U. S. 519, 6 Sup. Ct. 837, 29 L. Ed. 934; Virginia Fire & 
 Marine Ins. Co. v. Morgan, 90 Va. 290, 18 S. E. 191. 
 
 101 Smith V. Insurance Co., 173 Pa. 15, 33 Atl. 567; Continental Ins. Co. v 
 Pearce, 39 Kan. 396, 18 Pac. 291, 7 Am. St. Rep. 557; Fireman's Fund Ins 
 Co. V. Norwood, 69 Fed. 71, 16 O. C. A. 136; McMaster v. Insurance Co., 185 
 U. S. 25, 22 Sup. Ct. 10, 46 L. Ed. 64. 
 
 102 McMaster v. Insurance Co., 183 U. S. 25, 22 Sup. Ct 10, 46 L. Ed. 64. 
 
326 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 §§ 114-117) LIMITATIONS UPON THE POWERS OF AGENTS. 
 
 I 
 
 an application by the agent, after it was signed by the insured, and 
 without his consent, was not binding upon the insured, even though 
 he afterwards accepted a policy to which was attached a copy of the 
 application containing the unauthorized insertion. In this case it af- 
 firmatively appeared that the insured did not read the policy when de- 
 livered to him, having been induced by the statement of the agent to 
 believe that it was written in accordance with his instructions. It seems 
 clear that if the insured had actual knowledge of the fraud of the 
 agent, by which a stipulation not then agreed to was inserted in the 
 application, the insured would be estopped to deny that he had con- 
 sented to it.^®* But in order to work such an estoppel against the 
 insured to show the fraud of the agent, he must have had actual knowl- 
 edge, and not merely constructive knowledge, of that fraud; and it 
 has been held by the federal Supreme Court *°* that mere failure to 
 read the policy, and thus to discover the fraud, did not amount to 
 such negligence as would estop the insured to deny that he had given 
 his consent to the fraudulent term. 
 
 But with these exceptions, the insured is charged with knowledge 
 of everything written in the application above his signature, whether 
 actually brought to his notice or not. It is his duty to read the ap- 
 plication before signing it, and, if he fails to perform this duty, which 
 he owes to his own interest, as well as to the insurer, he will not be 
 heard, in a court of law, to say that he did not know or consent to any 
 overlooked stipulation.^®' Therefore the insured is held to be charged 
 with notice of any valid limitation upon the authority of the insurer's 
 agent that may be set forth in the application. And such limitations 
 are effective as to all acts done by the agent in the making of the in- 
 surance contract.* •• 
 
 108 NEW YORK LIFE INS. CO. V. FLETCHER, 117 U. S. 519, 6 Sup. Ct 
 837, 29 L. Ed. 934; Blooming Grove Mut. Fire Ins. Co. v. McAnerney, 102 Pa. 
 335, 48 Am. Rep. 209; Centennial Mut Life Ins. Ass'n v. Parliam, 80 Tex. 
 518, 16 S. W. 316. But it was held in a Texas case that it was immaterial 
 that the insured knew that the statements inserted in the application were 
 false, and made them to deceive the company and obtain the policy, if the 
 agent knew the facts of the case, as knowledge of the agent was notice to 
 the company, and it was liable on the policy. Sun Life Ins. Co. v. Phillips 
 (Tex. Civ. App.) 70 S. W. 603. 
 
 104 McMaster v. Insurance Co., 183 U. S. 25, 22 Sup. Ct 10, 46 L. Ed. 64. 
 
 106 See NEW YORK LIFE INS. CO. v. FLETCHER, 117 V. S. 519, at page 
 530, 6 Sup. Ct 837, 29 L. Ed. 934, at page 938. Also, see Cleaver v. Insur- 
 ance Co., 65 Mich. 527, 32 N. W. 660, 8 Am. St Rep. 908. 
 
 106 NEW YORK LIFE INS. CO. v. FLETCHER, 117 U. S. 519, 6 Sup. Ct 
 837, 29 L. Ed. 934; Bartholomew v. Insurance Co., 25 Iowa, 507, 96 Am. Dec. 
 05; Globe Mut Life Ins. Co. v. Wolflf, 95 U. S. 329, 24 L. Ed. 387; Galbraith's 
 Adm'r v. Insurance Co., 12 Bush (Ky.) 29; RYAN v. INSURANCE CO., 41 
 Conn. 168, 19 Am. Rep. 490. But to the contrary, see Tubbs v. Insurance Co., 
 84 Mich. 646, 48 N. W. 296; Continental Ins. Co. ▼. Pearce, 39 Kan. 396, 18 
 Fac. 291, 7 Am. St Rep. 557. 
 
 327 
 
 In many states statutes have been passed providing that the condi- 
 tions of the application shall not affect the rights of the insured, 
 unless a copy of such application shall be attached to the policy,"^ or, as 
 required by the Virginia statute,*°» unless such conditions or restric- 
 tions are printed in type of a certain size. These statutes are consti- 
 tutional, and are strictly enforced by the courts in order to prevent for- 
 feitures. 
 
 Improper Limitations. 
 
 Granting that restrictions upon the authority of an agent are prop- 
 erly communicated, or even assuming that such restrictions ace made 
 the subject of formal and unquestioned agreement, still there sre some 
 of these restrictions that will not be enforced by the courts. It now 
 becomes necessary to determine what limitations belong to this class, 
 which have been denominated improper limitations. It is to be ob- 
 served at the outstart of this discussion, which involves some questions 
 of great difficulty, that in most instances the invalidity of an attempted 
 limitation rests upon the equitable doctrine of estoppel; and that the 
 insured, claiming the benefit of such a doctrine, must come into court 
 with clean hands. 
 
 Same — Restrictions Extending to All Agents, 
 
 Stipulations are frequently found in policies, and sometimes in ap- 
 plications, to the effect that no agent or representative of the insurer 
 can exercise specified powers, save in a manner designated. The 
 most frequently occurring of these stipulations is that prohibiting any 
 waiver of any condition in a policy, save in writing, indorsed on the 
 policy ; such indorsements to be made by some specified officer. Such 
 a restriction is valid enough, as far as it restricts the power of in- 
 ferior agents not having full contracting powers ; ^®' but it cannot have 
 any effect whatsoever in restricting the authority of a so-called general 
 agent, having full power of contracting for insurance on behalf of 
 his company.* ^° An agent who has authority to make a contract upon 
 
 lOT See supra, p. 184. 
 
 108 See Code 1887, § 3252; and see Dupuy ▼. Insurance Co. (O. C.) 63 Fed. 
 680, holding the above statute constitutional. This statute was held to ap- 
 ply only to the restrictive conditions of the policy, and not to the general in- 
 demnity clause of the policy. Cline v. Assurance Co. (Va.) 44 S. E. 700. 
 
 100 KYTE V. ASSURANCE CO., 144 Mass. 43, 10 N. B. 518; Cleaver v. Insur- 
 ance Co., 65 Mich. 527, 32 N. W. 660, 8 Am. St Rep. 908; Bernard v. Asso- 
 ciation, 11 Misc. Rep. 441, 32 N. Y. Supp. 223; Porter v. Insurance Co., 100 
 Mass. 183, 35 N. E. 678; O'Brien v. Prescott Ins. Co., 134 N. Y. 28, 31 N. ti. 
 265; Marvi9 v. Insurance Co., 85 N. Y. 278, 39 Am. Rep. 657; Gould Y. In- 
 surance Co., 90 Mich. 302, 51 N. W. 455. 
 
 110 Bankers' & Merchants' Mut. Ben. Ass'n v. Stapp, 77 Tex. 517, 14 S. W. 
 168, 19 Am. St. Rep. 772; Marcus v. Insurance Co., 68 N. Y. 625; Hartford 
 Life & Annuity Co. v. Hayden's Adm'r. 90 Ky. 39, 13 S. W. 585. It is said 
 
328 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch. 9 
 
 114-117) LIMITATIONS UPON THE POWERS OF AGENTS. 
 
 321> 
 
 I 
 
 such terms as seem advisable to him can include or omit such of the 
 terms of a printed form of contract as may be agreed upon. If it be 
 necessary to add to the printed form, he may attach a "rider," or, if it 
 is found desirable to strike out any term of the printed form, he may 
 also do that, even though the term struck out be the one purporting to 
 limit his authority in regard to waivers. This rule is a necessary con- 
 sequence of the nature of a restriction upon authority, which must 
 have its source in some authority of a higher order than that upon 
 which it is imposed. It is impossible for any person to put a valid 
 limitation upon his own power of contract."^ A man would as well at- 
 tempt to raise himself by his own boot straps as to limit, by any self- 
 imposed restrictions, powers conferred upon him by a principal. There- 
 fore the general rule may be stated that any limitation contained in 
 the policy or application upon the powers of an agent having full au- 
 thority to make and issue policies of insurance, and having, in that 
 behalf, the powers of his principal, will be altogether inoperative, 
 as repugnant and contrary to truth.^** 
 
 In applying the general rule as thus stated to particular cases, con- 
 sideration must be given to the circumstances under which the restric- 
 tion is sought to be imposed. The cases most frequently arising in 
 
 in an Indiana case : "Whatever may be the rule as to applications prepared by 
 special agents, where the assured has knowledge of the limitations upon his 
 authority, we are of opinion that the rule contended for by the appellant 
 should not be applied to a case like this, where the application is prepared by 
 a general agent having no superior In the state." Michigan Mut. Life Ins. Co. 
 V. Leon, 138 Ind. 636, 37 N. E. 584. A general agent of an Insurance com- 
 pany may waive any stipulation in the policy, though a clause in the policy 
 forbids it. Gwaltney v. Society, 132 N. C. 925, 44 S. E. 659. See, also, Ger- 
 man Fire Ins. Co. v. Gray, 43 Kan. 497, 23 Pac. 637, 8 L. R. A. 70, 19 Am. St 
 Rep. 150. See, also, German-American Ins. Co. v. Humphrey, 62 Ark. 349. 
 35 S. W. 428, 54 Am. St. Rep. 297. 
 
 111 Phenix Ins. Co. v. Hart, 149 III. 513, 36 N. E. 990; Manufacturers* & Mer- 
 chants' Ins. Co. v. Armstrong, 145 111. 469, 34 N. E. 553. In Westchester Fire 
 Ins. Co. V. Earle, 33 Mich. 153, the court said of such a limitation: "The 
 condition literally applied would prevent any unindorsed consent by the com- 
 pany itself, by instruction of its board, or by act of its officers, as effectually 
 as by any one else. And the case seems to settle down to the simple ques- 
 tion whether a person who has agree^ that he will only contract by writing 
 in a certain way precludes himself from making a parol bargain to change 
 it The answer is manifest. A written bargain is of no higher legal degree 
 than a parol one. Either may vary or discharge the other, and there can be 
 no more force in an agreement in writing not to agree by parol than in a 
 parol agreement not to agree in writing. Every such agreement la ended b^ 
 the new one which contradicts it." 
 
 112 Manufacturers' & Merchants' Ins. Co. v. Armstrong et al., 145 111. 469, 
 34 N. E. 553, distinguishing Baumgartel v. Insurance Co., 136 N. Y. 547, 32 
 N. R 991; Allen v. Insurance Co., 123 N. Y. 6, 25 N. E. 309; Quinlan v.' In- 
 surance Co., 133 N. Y. 356, 31 N. E. 31, 28 Am. St Rep. 645; Messelback v. 
 Norman, 122 N. Y. 583. 26 N. E. 34. 
 
 which application of this rule is involved are those in which the policy 
 contains a provision to the effect that no representative of the company 
 shall have authority to waive any condition of the policy, except in 
 writing indorsed thereon. It is clear that the effect of this limiting 
 provision will be different in accordance as the alleged waiver, by the 
 words or conduct of the agent, took place at the inception of the 
 policy or afterwards. If the agent has full power to make the con- 
 tract, certainly this limitation, set forth in a contract which he him- 
 self makes, cannot operate to restrict his power during the making of 
 the contract.^^' But the agent may have power to make a contract, 
 and lack authority to rescind the contract when once made. So this 
 condition, appearing in the regular form of a policy issued by the com- 
 pany, may well be considered as a proper restriction brought to the 
 notice of the policy holder. This notice of a limitation upon the power 
 of the agent, even though that agent may have general powers of 
 making contracts, will preclude the insured from alleging that the 
 agent possessea the powers of the principal for the purpose of chan- 
 ging the contract formerly made. Therefore it easily follows that 
 the same agent may be considered as possessing the full powers of the 
 principal with regard to the making of the contract, so that the limi- 
 tation upon his powers to waive a condition will be inoperative, under 
 the rule stated above, and yet have restricted powers as to any subse- 
 quent modification of the contract made.^^* It is accordingly held, 
 by the great weight of authority, ^^'^ that a subsequent waiver, even by 
 an agent with contractual powers, will not be valid unless it com- 
 plies with the requirements of the policy, except in those cases where 
 
 118 There is no reason why the general agent, having power to agree upon 
 the terms of a contract made on behalf of his company, should not ••'gree to 
 leave out or waive the operation of this limiting condition. In Gibson Elec- 
 tric Co. V. Liverpool & London & Globe Ins. Co., 159 N. Y. 418, 54 N. E. 23, 
 the court said: "This court has several times held that the provisions in a 
 standard policy, restricting the power of an agent to waive any of its condi- 
 tions except in a particular manner, cannot be deemed to apply to the condi- 
 tions which relate to the inception of the contract, where the agent delivered 
 it and received the premium with a knowledge of the true situation. WOOD 
 V. INSURANCE CO., 149 N. Y. 382, 44 N. E. 80, 52 Am. St Rep. 733." 
 
 11* State Ins. Co. v. Hale (Neb.) 95 N. W. 473; Continental Ins. Co. v. 
 Ruckman, 127 111. 364, 20 N. E. 77, 11 Am. St Rep. 121. 
 
 11 B Baumgartel v. Insurance Co., 136 N. Y. 547, 32 N. B. 990; Allen v. In- 
 surance Co., 123 N. Y. 6, 25 N. E. 309; Quinlan v. Insurance Co., 133 N. Y. 
 356, 31 N. E. 31, 28 Am. St. Rep. 645 ; MESSELBACK v. NORMAN, 122 N. Y. 
 578, 26 N. E. 34, Richards, Ins. Cas. 397 ; WALSH v. INSURANCE CO., 73 N. 
 Y. 5, Richards, Ins. Cas. 480; KNICKERBOCKER LIFE INS. CO. v. NOR- 
 TON, 96 U. S. 234, 24 L. Ed. 689, Richards, Ins. Cas. 399; Carpenter v. In- 
 surance Co., 16 Pet. 495, 10 L. Ed. 1044 ; Hutchinson v. Insurance Co., 21 Mo. 
 103, 64 Am. Dec. 220 ; Meyers v. Insurance Co., 27 La. Ann. 66 ; Girard Fire 
 & Marine Ins. Co. v. Hebard, 95 Pa. 51. But see Morrison y. Insurance Co., 69 
 Tex. 353, 6 S. W. 605, 5 Am. St. Rep. 63. 
 
r 
 
 330 
 
 INSURANCB AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 the insurer has himself expressly or impliedly dispensed with such com- 
 pliance, or in fact conferred upon the agent contractual powers equal 
 to his own. 
 
 Again it is held, almost without dissent, that a condition prohibit- 
 ing a waiver of any term of the policy by any representative of the 
 company, unless such a waiver is in writing, applies only to attempted 
 waivers which precede a loss, but has no application to those which 
 are subsequent to the loss.*** The condition of the policy most fre- 
 quently waived after loss is that requiring proofs of loss within a cer- 
 tain time. It is held by practically all the authorities that this condi- 
 tion may be orally waived by an agent of the company, despite the 
 presence of a condition requiring waivers to be in writing. The rea- 
 son for this holding is found in the terms of a general rule stated 
 above. With regard to such conditions as are to be fulfilled after 
 a loss has taken place, the agent is usually a representative having the 
 full powers of the principal — in effect, a vice principal — and the policy 
 can no more do away with the legal significance of his acts as raising 
 an estoppel against the principal than if they were done by the principal 
 himself. 
 
 Same — Stipulation that Agent Taking Application is Agent of Insured. 
 It is quite natural that, when an applicant for insurance is informed 
 that it is necessary that an application shall be filled out in accordance 
 with the rules of the insurer, he should permit the representative of 
 the company, with whom he is negotiating the insurance, to prepare 
 the application for his signature. The questions are numerous, and 
 the answers to be written, from consideration of space alone, must 
 necessarily be general; and it is not unreasonable for the insured to 
 look to the agent, supposed to be skilled in such matters, to fill out 
 these blanks in such a manner as will be satisfactory to the company, 
 from the information that is given him by the insured. It sometimes 
 happens — whether through inadvertence, mistaken judgment, or fraud 
 — ^that the agent, although receiving correct information from the in- 
 sured, writes incorrect statements in the application. This gives rise 
 to a dispute as to whether the agent, in filling out the application to 
 be signed by the insured, is acting for the insured or for the insurer. 
 By the overwhelming weight of authority in this country, the agent, 
 
 ii« Citizens' Ins. Co. v. Stoddard, 197 111. 330, 64 N. E. 355; Firemen's Fund 
 Ins. Co. V. Western Refrigerating Co., 162 111. 322, 44 N. E. 746; Wheaton v. 
 Insurance Co., 76 Cal. 415, 18 Pac. 758, 9 Am. St. Rep. 216; BLAKE v. IN- 
 SURANCE CO., 12 Gray (Mass.) 265; Franklin Fire Ins. Co. v. Chicago Ice Co., 
 36 Md. 102, 11 Am. Rep. 469; New Orleans Ins. Ass'n v. Matthews, 65 Misa 
 301, 4 South. 62 ; Travelers' Ins. Co. 7. Harvey, 82 Va. 949, 5 S. E. 553. But 
 see Smith t. Insurance Co., 60 Vt 682, 15 Atl. 353, 1 L. fi. A. 216, 6 Am. St 
 Rep 144. 
 
 §§ 114-117) LIMITATIONS UPON THE POWERS OP AGENTS. 331 
 
 under such circumstances, is considered the agent of the insurer.**^ 
 The reason for this view is ably set forth in the oft-quoted opinion of 
 Mr. Justice Miller in the leading case of Union Mut. Ins. Co. v. Wilk- 
 inson,^^* as follows: 
 
 "This question has been decided differently by courts of the highest 
 respectability in cases precisely analogous to the present. It is not to 
 be denied that the application, logically considered, is the work of 
 the assured ; and, if left to himself, or to such assistance as he might 
 select, the person so selected would be his agent, and he alone would be 
 responsible. On the other hand, it is well known — so well that no 
 court would be justified in shutting its eyes to it— that insurance com- 
 panies organized under the laws of one state, and having in that state 
 their principal business office, send these agents all over the land with 
 directions to solicit and procure applications for policies; furnishing 
 them with printed arguments in favor of the value and necessity of life 
 insurance, and of the special advantages of the corporation which the 
 agent represents. They pay these agents large commissions on the 
 premiums thus obtained, and the policies are delivered at their hands 
 to the assured. The agents are stimulated by letters and instructions 
 to activity in procuring contracts, and the party who is in this man- 
 ner induced to take out a policy rarely sees or knows anything about 
 the company or its officers by whom it is issued, but looks to and re- 
 lies upon the agent who has persuaded him to effect insurance as the 
 full and complete representative of the company in all that is said 
 or done in making the contract. Has he not a right to so regard him ? 
 It is quite true that the reports of judicial decisions are filled with the 
 efforts of these companies, by their counsel, to establish the doctrine 
 that they can do all this, and yet limit their responsibility for the acts 
 of these agents to the simple receipt of the premium and delivery of 
 the policy; the argument being that, as to all other acts of the agent, 
 he is the agent of the assured. This proposition is not without sup- 
 
 11 T Continental Life Ins. Co. v. Pearce. 39 Kan. 396, 18 Pac. 291, 7 Am. 
 St. Rep. 557; American Life Ins. Co. v. Malione, 21 Wall. (U. S.) 152, 22 L. 
 Ed. 593 ; UNION MUT. LIFE INS. CO. v. WILKINSON, 13 Wall. (U. S.) 222, 
 20 L. Ed. 617 ; Deitz v. Insurance Co., 31 W. Va. 851, 8 S. E. 616, 13 Am. St. Rep. 
 909; Grattan v. Insurance Co., 80 N. Y. 281, 36 Am. Rep. 617; Pickel v. In- 
 surance Co., 119 Ind. 291, 21 N. E. 898; Bebee v. Insurance Co., 25 Conn. 51, 
 65 Am. Dec. 553. An agent for the purpose of soliciting insurance, and send- 
 ing applications to the insurer, is the agent of the insurer, and if any error 
 is made by him the insured should not suffer. STATE INS. CO. v. TAYLOR, 
 14 Colo. 499, 24 Pac. 333, 20 Am. St. Rep. 281; Baker v. Insurance Co., 70 
 Mich. 399, 38 N. W. 216, 14 Am. St. Rep. 485; German Ins. Co. v. Gray, 43 
 Kan. 497, 23 Pac. 637, 8 L. R. A. 70, 19 Am. St Rep. 150; German Fire Ins. 
 Co. V. Hick, 125 111. 361, 17 N. K 792, 8 Am. St. Rep. 384; FoUette v. Asso- 
 ciation, 110 N. C. 377, 14 S. E. 923, 15 L. R. A. 668, 28 Am. St. Rep. 697; Ha- 
 gan V. Insurance Co., 81 Iowa, 321, 46 N. W. 1114, 25 Am. St Rep. 493. 
 
 118 13 Wall. (U. S.) 222, 20 L. Ed. 617. 
 
 1 
 
\\>. 
 
 I 
 
 I 
 
 332 
 
 INSURANCB AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 r 
 I 
 
 port in some of the earlier decisions on the subject ; and at a time when 
 insurance companies waited for parties to come to them to seek assur- 
 ance, or to forward applications on their own motion, the doctrine had 
 a reasonable foundation to rest upon. But to apply such a doctrine 
 in its full force to the system of selling policies through agents, which 
 we have described, would be a snare and a delusion, leading, as it has 
 done in numerous instances, to the grossest frauds, of which the in- 
 surance corporations receive the benefits, and the parties supposing 
 themselves insured are the victims. The tendency of the modem de- 
 cisions in this country is steadily in the opposite direction. The 
 powers of the agent are prima facie coextensive with the business in- 
 trusted to his care, and will not be narrowed by limitations not com- 
 municated to the person with whom he deals.^^* An insurance com- 
 pany establishing a local agency must be held responsible to the par- 
 ties with whom they transact business for the acts and declarations of 
 the agent, within the scope of his employment, as if they proceeded 
 from the principal." ^*® 
 
 But the Supreme Court of Massachusetts,**^ followed by that of 
 Rhode Island,*^* has persistently held that, in filling out the application, 
 on its face purporting to be that of the insured, and which is signed by 
 the insured, the agent is acting for the insured only.**' 
 
 "• Citing Bebee v. Insurance Co., 25 Conn. 51, 65 Am. Dee. 553; Lycomiugr 
 County Mut. Ins. Co. v. Schollenberger, 44 Pa. 259; Beal v. Insurance Co., 
 16 Wis. 257, 82 Am. Dec. 719; Davenport v. Insurance Co., 17 Iowa, 276. 
 
 120 Citing Woodbury Sav. Bank & Bldg. Ass'n v. Charter OalJ Fire & Marine 
 Insurance Co., 31 Conn. 517; Horwitz v. Insurance Co., 40 Mo. 557, 93 Am. 
 Dec. 321; Ayres v. Insurance Co., 17 Iowa, 176, 85 Am. Dec. 553; Howard 
 Ins. Co. V. Bruner, 23 Pa. 50. 
 
 121 See Reed v. Insurance Co., 17 R. I. 785, 24 Atl. 833, 18 L. R. A. 496, cit- 
 ing Batchelder v. Insurance Co., 135 Mass. 449, where it was held that parol 
 evidence was inadmissible to show tbat the insurer knew of other insurance 
 when he delivered the policy; also Lohnes v. Insurance Co., 121 Mass. 439, 
 where it was held that evidence that an agent "received applications for in- 
 surance, took risks, settled rates of premium, and issued policies" will not, 
 imless he was proved to be the general agent of the company, sustain a find- 
 ing that he had authority to waive the preliminary proof of loss required by 
 the policy. 
 
 122 Wilson V. Insurance Co., 4 R. I. 141; Reed v. Insurance Co., 17 R. 1. 
 785, 24 Atl. 833, 18 L. R. A. 496. The decision in the latter case was based 
 upon the fact that the agent who effected the insurance was not a general 
 agent, but merely a soliciting agent, and notice to him of prior insurance was 
 not sufficient to constitute a waiver by the company of a condition prohibiting 
 additional Insurance. O'Rourke v. Insurance Co., 23 R. I. 457, 50 Atl. 834, 
 57 L. R. A. 496, 91 Am. St. Rep. 643. See, also, Leonard v. Assurance Co. 
 (R. I.) 51 Atl. 1049, where it was held that the knowledge of a medical ex- 
 aminer that the applicant was contemplating other insurance was not bind- 
 ing on the company. 
 
 128 In both Massachusetts and Rhode Island the above statement is held not 
 to apply to representativea of the Insurance company known as "general 
 
 f 
 
 §§ 114-117) LIMITATIONS UPON THE POWERS OF AGENTS. 333 
 
 Insurance companies then sought to escape the operation of the 
 prevailing doctrine, by which they were made responsible for the 
 fraud and mistakes of their agents while filling out applications, by 
 inserting in the policy a provision that the person taking the applica- 
 tion should be regarded as the agent of the insured, and not of the 
 insurer. Much conflict arose among the decisions as to the validity of 
 such a provision ; some courts taking the view expressed by the Court 
 of Appeals of New York in Rohrbach v. Germania Fire Ins. Co. : "* 
 "But we must take the contracts of the parties as we find them, and 
 enforce them as they read. By the one before us the plaintiff has 
 so fettered himself as to be unable to retain, as the case now stands, 
 the real essence of his agreement. Though he has frankly and fully 
 laid before the actor between him and the defendant all the facts and 
 circumstances of the case, he is made responsible for error in legal 
 conclusions which he never formed, and which were arrived at by 
 one in whom he trusted, and whom he supposed to stand in the place 
 of the defendant. * * * Held to the letter and substance of his 
 contract, the plaintiff made a breach of a warranty and condition pre- 
 cedent, upon the truth of which his contract rested, and for that rea- 
 son may not recover in this action, as the facts now stand." But many 
 other courts took the view that ''there is no magic of mere words to 
 change the real into the unreal. A device of words cannot be imposed 
 upon a court in place of an actuality of facts." "'^ The reasons for 
 this view are clearly expressed in the language of Mitchell, J., in the 
 leading case of Kausal v. Minnesota Farmers' Mut. Ins. Ass'n:"* 
 "It would be a stretch of legal principles to hold that a person dealing 
 with an agent apparently clothed with authority to act for his prin- 
 cipal in the matter in hand could be affected by notice, given after the 
 negotiations were completed, that the party with whom he had dealt 
 should be deemed transformed from the agent of one party into the 
 agent of the other. To be efficacious, such notice should be g^ven be- 
 fore the negotiations are completed. The application precedes the pol- 
 icy, and the insured cannot be presumed to know that any such pro- 
 vision will be inserted in the latter. To hold that, by a stipulation un- 
 known to the insured at the time he made the application, and when he 
 relied upon the fact that the agent was acting for the company, he 
 could be held responsible for the mistakes of such agent, would be to 
 impose burdens upon the insured which he never anticipated. Hence 
 
 agents." Reed v. Insurance Co., 17 R. I. 785, 24 Atl. 833, 18 L. R. A. 496; 
 Leonard v. Assurance Co. (R. I.) 51 Atl. 1049; Lohnes v. Insurance Co., 121 
 
 Mass. 439. 
 
 124 62 N. Y. 47, 20 Am. Rep. 451, at page 462, per Folger, J. 
 
 125 See KAUSAL v. INSURANCE CO., 31 Minn. 17, 16 N. W. 430, 47 Am. 
 
 Rep. 776. 
 
 is< 31 Minn. 17, 16 N. W. 430, 47 Am. Rep. 776. 
 
334 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch. D 
 
 \. 
 
 i i 
 
 i 
 
 we think that, if the agent was the agent of the company in the mat- 
 ter of making out and receiving the application, he cannot be con- 
 verted into the agent of the insured by merely calling him such m the 
 policy subsequently issued." 
 
 The Mississippi court, however, in Planters' Ins. Co. v. Myers,**^ 
 goes further, and states the ultimate reason why such an attempted 
 limitation cannot be forced. "It is an effort," said the court, "by cove- 
 nant to get the benefits and profits which these agents bring them, 
 and at the same time repudiate the relation they sustain to them, and 
 to set up that relationship with the assured, and that, too, without 
 their knowledge and consent. It is not a limitation or restriction of 
 power, but the dissolution of the relationship with themselves, and the 
 establishment of it between other parties. * ♦ * It converts the 
 agent of one into the agent of both. He deals with the subject-matter 
 for both contracting parties. He is instructed by the company to 
 study his documents and papers, so that he can readily fill up the 
 blanks. He can negotiate for the company for high rates of insur- 
 ance, and at the same time his duty to his other principals is to cheapen 
 the rates. It places the agent in an inconsistent and antagonistic po- 
 sition. On the other hand, he must ply the people to insure, extend, 
 and increase the business and the profits of the company, and thereby 
 put money in his own purse. But in doing all this, if he blunders 
 and makes mistakes, for these he is the agent of his customers, and 
 with them is the responsibility." 
 
 The tendency of the later decisions is strongly in favor of the latter 
 view, and it may be said that, by the very great weight of autliority, 
 a stipulation in the policy making the insurer's agent the agent of the 
 insured, as far as the application is concerned, is of no effect whatever, 
 being contrary to the truth.*** 
 
 The next step taken by the insurers in their efforts to escape re- 
 sponsibility for the acts of their agents in connection with filling out 
 the application was to avoid the objection made to the stipulation in 
 the policy in the Kausal Case,*** by placing a similar provision in the 
 
 i«T 55 MlM. 479, 30 Am. Rep. 521, page 527. 
 
 "8 Coles V. Insurance Co., 41 W. Va. 261, 23 S. B. 732; Deitz v. Insurance 
 Co., 31 W. Va. 851, 8 S. E. 616, 13 Am. St. Rep. 909; Pierce v. People, 106 111. 
 11, 46 Am. Rep. 683; Planters' Ins. Co. v. Myers, 55 Miss. 479, 30 Am. Rep. 
 521; KAUSAL v. INSURANCE CO., 31 Minn. 17, 16 N. W. 430, 47 Am. Rep. 
 776; Eilenberger v. Insurance Co., 89 Pa. 465; Gans v. Insurance Co., 43 
 Wis. 108, 28 Am. Rep. 535; Boetcher v. Insurance Co., 47 Iowa, 253. Though 
 the general laws of a benefit society provide that the secretary of a local 
 lodge shall be the agent of its members, still he is held to be the agent of the 
 supreme order. Supreme Lodge K. P. v. Withers, 177 U. S. 260, 20 Sup. Ct 
 611, 44 L. Ed. 762. See, also. Commercial Ins. Co. v. Ives, 56 111. 402. 
 
 129 KAUSAL T. INSURANCE GO^ 31 Minn. 17» 16 N. W. 430, 47 Am. Rep. 
 770. 
 
 §§ 114-117) LIMITATIONS UPON THE POWERS OF AGENTS. 335 
 
 application. Since there can be no question but that the insured has 
 notice of a limitation contained in the application which he has signed, 
 the act of the insurers in placing the stipulation that the person filling 
 out the application shall be deemed the agent of the insured in the 
 application has forced the courts to face squarely the question as to 
 the validity of such a stipulation. In some states it has been upheld,^*' 
 but the majority of the American courts have flatly decided that the 
 stipulation, however fairly agreed upon, is in itself invalid, and there- 
 fore not enforceable.**^ Thus the Kansas court has said, in a recent 
 case *•* involving the validity of a stipulation under such circum- 
 stances : "This is but a form of words to attempt to create on paper 
 an agency which in fact never existed. It is an attempt of the com- 
 pany, not to restrict the powers of its own agent, but an effort to do 
 away with that relation altogether by mere words, and to make him in 
 the same manner the agent of the assured, when in fact such relation 
 never existed. * * * We do not believe the entire nature and order 
 of this well-established relation can be so completely subverted by this 
 ingenious device of words. The real fact, as it existed, cannot be hid- 
 den in this manner ; much less can it be destroyed, and something that 
 did not in reality exist be placed in its stead. The substance is superior 
 to the mere drapery of words with which one party wishes to bring 
 into existence and clothe an unreal authority." 
 
 In some of the earlier New York cases,*®* it was held that this stip- 
 ulation was enforceable. These decisions had been somewhat discred- 
 ited, but later cases show that the doctrine in that state was greatly con- 
 fused, until the recent important decision of Sternaman v. Metropoli- 
 tan Life Ins. Co.,*** in which it was held that the medical examiner 
 was the agent of the insurer, despite a stipulation in the application that 
 he should be deemed the agent of the insured. In so holding, the court 
 said : "The power to contract is not unlimited. While, as a general 
 rule, there is the utmost freedom of action in this regard, some restric- 
 
 i»o Hubbard v. Association (O. C.) 80 Fed. 681. 
 
 181 Continental Ins. Co. v. Pearce, 39 Kan. 396, 18 Pac. 291, 7 Am. St 
 Rep. 557; Sternaman v. Insurance Co., 170 N. Y. 13, 62 N. E. 763, 57 L. R. A. 
 318, 88 Am. St Rep. 625; Endowment Rank K. P. v. Cogbill, 99 Tenn. 28, 41 
 S. W. 340; Massachusetts Ben. Life Ass'n v. Robinson, 104 Ga. 256, 30 S. E. 
 918, 42 L. R. A. 261. The medical examiner of a mutual benefit society Is the 
 agent of the society notwithstanding conditions to the contrary in the appli- 
 cation. Royal Neighbors of America v. Roman, 177 111. 27, 52 N. E. 264, 69 
 Am. St Rep. 201. 
 
 i8« Continental Ins. Co. v. Pearce, 39 Kan. 396, 18 Pac. 291, 7 Am. St Rep. 
 
 557 
 
 i»« ROHRBACH T. INSURANCE CO., 62 N. T. 47, 20 Am. Rep. 451; Alex- 
 ander V. Insurance Co., 66 N. Y. 464, 23 Am. Rep. 76. 
 
 '-s« 170 N. Y. 13, 62 N. B. 763, at page 764, 57 L. R. A. 318, 88 Am. St Rep. 
 
 625. 
 
336 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch. y 
 
 §§ 114-117) LIMITATIONS UPON THE POWERS OF AGENTS. 
 
 337 
 
 tions are placed upon the right by legislation, by public policy, and by 
 the nature of things. Parties cannot make a binding contract in vio- 
 lation of law or public policy. They cannot in the same instrument 
 agree that a thing exists, and that it does not exist, or provide that one 
 is the agent of the other, and at the same time, and with reference to 
 the same subject, that there is no relation of agency between them. 
 They cannot bind themselves by agreeing that a loan in fact void 
 for usury is not usurious, or that a copartnership which actually exists 
 between them does not exist. They cannot by agreement change the 
 laws of nature or of logic, or create relations, physical, legal, or moral, 
 which cannot be created. In other words, they cannot accomplish the 
 impossible by contract." 
 
 Stipulation that the Insurer shall not be Chwrged with the Knowledge 
 of His Agent. 
 As already indicated, the principal is chargeable with all knowledge 
 acquired by the agent in the course of his employment, not because the 
 agent has been authorized to acquire such information on behalf of 
 his principal, but because of a positive rule of law, founded upon pub- 
 lic policy. It is to be noted here that the rule that the knowledge of 
 the agent is the knowledge of the principal is not subject to the same 
 limitations with regard to these transactions in which the agent pos- 
 sessing information acts for the principal as are found to obtain in those 
 instances where the information with which the principal is sought to 
 be charged was acquired by some agent whose duty it was to com- 
 municate it. In this latter class of cases the principal will not be 
 deemed to know what is known to his agent, (1) when the agent could 
 not, by the exercise of due diligence, have communicated his informa- 
 tion ; or (2) where it was known to be contrary to the agent's personal 
 interest to make such communications.*" Thus, as we have also seen, 
 the owner of a distant vessel, when insuring it, is required to com- 
 municate only such facts as the master of the vessel might have made 
 known to him if he had faithfully performed his duties."* But where 
 the knowledge of any material fact is possessed by the agent who is 
 actually engaged in the transaction, such knowledge is absolutely im- 
 putable to the principal, whether it was possible for the agent to have 
 made actual communication or not;"^ nor will this rule be changed 
 
 i«B See Tlflf. Ag. p. 263. Also see BLACKBURN t. VIGORS, L. R., 12 
 App. Cas. 531, Richards, Ins. Cas. 330, Woodruff, Ins. Cas. 107, n. 1, Elliott, 
 Ins. Cas. 141; PROUDFOOT v. MONTEFIORE, L. R. 2 Q. B. 511, Richards, 
 Ins. Cas. 324, Woodruff, Ins. Cas. 106, Elliott Ins. Cas. 152 ; American Surety 
 Co. V. Pauly, 170 U. S. 144, 18 Sup. Ct. 552, 42 L. Ed. 977. 
 
 i«« See Gladstone v. King, 1 Maule & S. 35. 
 
 i«T Mesterman v. Insurance Co., 5 Wash. 524, 32 Pac. 458, 34 Am. St Rep. 
 877: Burson v. Association, 136 Pa. 267, 20 Atl. 401, 20 Am. St Rep. 919; 
 Phoenix Ins. Co. v. Copeland, 90 Ala. 386, 8 South. 48; Goodwin v. Association, 
 
 by the fact that such an agent failed to communicate information ob- 
 tained because of his own fraudulent purpose to defraud the principal, 
 provided, of course, the third party wIl!. whom the agent is dealing 
 is guilty of no bad faith."' The case most frequently found to in- 
 volve the application of these principles in insurance law arises when 
 the applicant for insurance gives to the agent of the insurer, who 
 writes the answers to the questions in the application, correct infor- 
 mation, which the agent, through mistake or fraud, incorrectly sets 
 forth in the written answers. Under such circumstances, it is gen- 
 erally held that the insurer must be considered as knowing the facts 
 thus correctly communicated to his agent, and therefore estopped to 
 claim a forfeiture on account of the incorrectly written statement^*' 
 
 The principles above discussed being elementary and well estab- 
 lished, it follows that any general limitation or agreement to the effect 
 that the knowledge acquired by the agent shall not be imputed to the 
 principal is but an attempt to contract away a rule of law, which 
 is necessarily nugatory.^*** So far, the principle seems clear that the 
 
 97 Iowa, 226, 66 N. W. 157, 32 L. R. A. 473, 59 Am. St. Rep. 411; Forward v. 
 Insurance Co., 142 N. Y. 382, 37 N. E. 615, 25 L. R. A. 637; Lynchburg Fire 
 Ins. Co. V. West 76 Va. 575, 44 Am. Rep. 177. See Tiff. Ag. p. 257-263. 
 
 188 McArthur v. Association, 73 Iowa, 336, 35 N. W. 430, 5 Am. St. Rep. 684. 
 Where untrue answers are written with the consent of the applicant knowl- 
 edge of the fraud attempted by the applicant cannot be imputed to the insur- 
 ance company. Blooming Grove Mut. Fire Ins. Co. v. McAnerney, 102 Pa. 335, 
 48 Am. Rep. 209; Centennial Mut life Ass*n v. Parham, 80 Tex. 518, 16 S. W. 
 316. 
 
 But it was also held in a recent Texas case that where an agent continued 
 to collect premiums from the insured, who had falsely stated the condition 
 of his health, the agent's knowledge of the true condition of the insured's 
 health was imputed to his principal, and prevented a forfeiture of the policy. 
 Sun Life Ins. Co. of America v. Phillips (Tex. Civ. App.) 70 S. W. 603. But 
 this decision seems contrary to authority and principle. 
 
 139 Continental Life Ins. Co v. Chamberlain, 132 U. S. 304, 10 Sup. Ct 87, 
 33 L. Ed. 341; Union Mut Life Ins. Co. v. Wilkinson, 13 Wall. 222, 20 L. Ed. 
 617; American Life Ins. Co. v. Mahone, 21 Wall. 152, 22 L. Ed. 593; Phoenix 
 Ins. Co. V. Warttemberg, 79 Fed. 245, 24 C. C. A. 547; Kister v. Insurance Co., 
 128 Pa. 553, 18 Atl. 447, 5 L. R. A. 646, 15 Am. St Rep. 696; Smith v. Insur- 
 ance Co., 173 Pa. 15, 33 Atl. 567; Continental Life Ins. Co. v. Chew, 11 Ind. 
 App. 330, 38 N. E. 417, 54 Am. St. Rep. 506; Bennett v. Insurance Co., 106 
 N. Y. 243, 12 N. E. 609; Farmers' Ins. Co. v. Williams, 39 Ohio St. 584, 48 Am. 
 Rep. 474; McCall v. Insurance Co., 9 W. Va. 237, 27 Am. Rep. 558; Menk v. 
 Insurance Co., 76 Cal. 50, 14 Pac. 837, 9 Am. St. Rep. 158; Bartholomew ▼. 
 Insurance Co., 25 Iowa, 507, 96 Am. Dec. 65; German Ins. Co. v. Gray, 43 
 Kan. 49i, 23 Pac. 637, 8 L. R. A. 70, 19 Am. St Rep. 150. 
 
 1*0 Parsons v. Insurance Co., 132 Mo. 590, 31 S. W. 117; Sternaman v. In- 
 surance Co., 170 N. Y. 13, 62 N. E. 763, 57 L. R. A. 318, 88 Am. St Rep. 625; 
 Welch V. Association (Wis. 1904) 98 N. W. 227; Spalding v. Insurance Co., 
 71 N. H. 441, 52 Atl. 858. In some states the rule has been confirmed by 
 statute. See section 1941, Rev. St Wis. 1898; Welch v. Ass'n, supra. 
 
 Vance Ins. — ^22 
 
 » ".I 
 
338 
 
 IMSURANCB AOBNTS AND THEIB POWERS. 
 
 (Ch.9 
 
 principal cannot, by general limitation, wholly escape the operation of 
 the rule of law that makes the agent's knowledge his own. The ques- 
 tion next arises whether he may partially avoid the operation of that 
 rule by providing that he shall not be bound by any information ac- 
 quired by the agent, unless that information be communicated in a 
 specified manner. The stipulation most frequently occurring is that 
 no statements or representations made or information given to the per- 
 sons soliciting or taking the application for the policy shall be binding 
 on the company, or in any manner affect its rights, unless they are 
 reduced to writing, and presented at the home office in the applica- 
 tion. It is exceedingly difficult to determine whether such a limita- 
 tion is valid, and the decisions are in great conflict, while the reason- 
 ing of the courts, whether on the one side or the other, is usually 
 confused and obscure. The Supreme Court of the United States, in 
 the important case of New York Life Ins. Co. v. Fletcher,^*^ which 
 involved the same state of facts as that now under discussion, said: 
 "Where such agents, not limited in their authority, undertake to pre- 
 pare applications and take down answers, they will be deemed as act- 
 ing for the companies. In such cases it may well be held that the de- 
 scription of the risk, though nominally proceeding from the assured, 
 should be regarded as the act of the company. Nothing in these vie\vs 
 has any bearing upon the present case. Here the power of the agent 
 was limited, and notice of such limitation given by being embodied 
 in the application, which the assured was required to make and sign, 
 and which, as we have stated, he must be presumed to have read. He 
 is therefore bound by its statements." 
 
 Although the Supreme Court appears to hold flatly in the Fletcher 
 Case that a limitation of the kind now under discussion is valid and 
 enforceable, yet it is well to observe that in the Fletcher Case the facts 
 clearly showed that the applicant either had, or ought to have had, 
 knowledge of the fraudulent purpose of the agents, and was therefore 
 in no position to claim an estoppel as against the insurer, whom he 
 must have intended to defraud.**^ In some states the Fletcher Case 
 has been approved, and the validity of such limitations sustained,^*® 
 but it is believed that, by the great weight of authority among th* 
 American decisions, the contrary doctrine is established, to the effect 
 that such an attempted limitation is obnoxious to the same principle 
 that renders invalid an agreement that the agent of the insurer shall 
 
 141 NEW YORK LIFE INS. CO. v. FLETCHER, 117 U. S. 519, 6 5Sup. Ct 
 837, 29 L. Ed. 934. 
 
 1*2 See Koerts v. Grand Lodge (Wis.) 97 N. W. 163. And see note 138, supra. 
 
 1*8 Metropolitan Life Ins. Co. v. Dimick (N. J. Err. & App.) 55 Atl. 291, 62 
 L. R. A. 774; Dwelling House Ins. Co. v. Snyder, 59 N. J. Law, 18, 34 Atl. 
 931; Maier v. Association, 78 Fed. 566, 47 U. S. App. 322, 24 0. C. A. 239. 
 
 j§ 114-117) LIMITATIONS UPON THE POWERS OF AGENTS, 
 
 339 
 
 be considered the agent of the insured, for some purposes.^** The 
 Court of Appeals of New York, in the recent case of Stemaman 
 V. Metropolitan Life Ins. Co.,^** speaking of an agreement contained 
 in the application that "no information or statement not contained 
 in this application, and in the statements made to the medical ex- 
 
 1*4 Tubbs V. Insurance Co., 84 Mich. 646, 48 N. W. 296; Royal Neighbors of 
 America v. Boman, 177 111. 27, 52 N. E. 264, 69 Am. St. Rep. 201; Continental 
 Ins. Go. V. Pearce, 39 Kan. 396, 18 Pac. 291, 7 Am. St. Rep. 557; Parno v. In- 
 surance Co., 114 Iowa, 132, 86 N. W. 210; Stemaman v. Insurance Co., 170 N. 
 Y. 13, 62 N. E. 763, 57 L. R. A. 318, 88 Am. St. Rep. 625. 
 
 In Marston v. Insurance Co., 89 Me. 266, 36 Atl. 389, 56 Am. St Rep. 412, the 
 application signed by the Insured contained this certificate: **I have verified 
 the foregoing answers and statements, and find them to be full, complete, 
 and true. I do also adopt as my own, whether written by me or not, each 
 foregoing statement, representation, and answer, and I agree that they are 
 all material, and that statements made to an agent not herein written shall 
 form no part of the contract to be issued hereon." A Maine statute (Rev. 
 St c. 49, § 90) provided that insurance companies should be bound by the 
 knowledge of their agents in connection with the risk. It was held that evi- 
 dence was admissible to show that an answer truly given by the insured was 
 falsely written in the application by the agent, and the insurer thereby estop- 
 ped to insist upon a forfeiture. The Fletcher Case was distinguished, how- 
 ever. 
 
 Mr. Freeman, commenting upon the decision made in NEW YORK LIFE 
 INS. 00. V. FLETCHER, discussed above, in a note in 9 Am. St Rep. 232, 
 makes the following clear and convincing statement of the principle involved 
 in that case: "That portion of the argument of the court which proceeds upon 
 the assumption that as the insurer had no knowledge of the real answers or 
 representations made by the assured, and had every reason to believe that 
 it was contracting upon representations substantially different, the assured 
 had no right to treat the contract as based on the unknown rather than on 
 the known representations, at first seems entitled to very great force; but 
 further consideration produces the conviction that, in contemplation of the 
 law, the assumed facts do not and cannot exist. As a matter of fact, a prin- 
 cipal may be ignorant of every act done, every representation made, and every 
 fact known by his agent. But the law does not tolerate such ignorance, or, 
 at least, does not permit the princit)al to interpose it to screen him from liabil- 
 ity. What his agent said, did, and learned while engaged in the transaction 
 of his business, he, the principal, must be regarded as saying, doing, and 
 learning; and it would be a very unsound public policy which would permit a 
 principal, in his delegation of authority to his agent, to stipulate against the 
 usual consequences of agency, and particularly against the application to the 
 agency in question of the well-known rule of law, that knowledge acquired 
 by the agent while engaged in the discharge of a duty which the principal has 
 confided to him must also be imputed to the principal. If an insurance cor- 
 poration may stipulate that it shall be regarded as ignorant of every fact 
 learned by its agent, but not communicated to it, so may any other principal; 
 and if immunity may be secured from the operation of this principle of the 
 law of agency, it may, in the same mode and with equal propriety, be secured 
 against all other portions of the law of agency from which, in the contem- 
 plation of the principal, it may be profitable to be freed." 
 
 1*6 170 X. Y. 13, 02 N. E. 763, 57 L. R. A. 318, 88 Am. St Rep. 625. 
 
I 
 
 in 
 
 340 
 
 INSURANCE AGENTS AND THEIE POWERS. 
 
 (Ch.9 
 
 aminer, received or acquired at any time by any person, shall be bind- 
 ing upon the company, or shall modify or alter the declarations 
 and warranties made therein," said : "The facts sought to be proved 
 were contained in the oral statements made to the medical ex- 
 aminer, but, assuming that recorded statements only were meant, the 
 result would be an agreement that the company might perpetrate a 
 fraud upon the insured, by issuing a policy and accepting prerniums 
 thereon, knowing all the time that the contract was void or voidable 
 at its election. The law does not permit this, for it declares that the 
 company is estopped from taking advantage of such a contract, be- 
 cause it would be against equity and opposed to public policy." 
 
 While this decision declaring such a limitation contrary to public 
 policy and void was rendered by a divided court— Parker, C. J., and 
 two of the associate justices dissenting— yet it commends itself to rea- 
 son, and seems supported by analogous cases. Thus the federal Su- 
 preme Court has held (1) that the agent taking the application rep- 
 resents the insurer in so doing;*" (2) that a stipulation contained 
 in the by-laws of a mutual benefit association to the effect that the 
 person collecting premiums on behalf of the insurer should be deemed 
 the agent of the insured in so doing was invalid, as contrary to fact; ^*^ 
 and in the argument strongly approving those cases which hold in- 
 valid any agreement purporting to transform the agent of the in- 
 surer into the representative of the insured; (3) that, where a stat- 
 ute makes the person taking the application the agent of the insurer, 
 the latter will be bound by an interpretation given to a question by 
 the agent, in spite of an agreement contained in the application that no 
 statement or representation made to the person soliciting the appli- 
 cation should be binding on the insurer unless written in the applica- 
 tion"®— the court declaring flatly that such stipulation was void as 
 being repugnant to the statute ; and (4) that a failure of the insured to 
 read his policy when delivered was not such negligence as to preclude 
 his showing that, without his consent, an additional term had been 
 inserted in the application, a copy of which application was attached 
 
 to the policy."^ 
 
 It would seem that, if the insurer is prohibited by a rule of public 
 policy from freeing himself by contract from all of the burdensome 
 incidents consequent upon doing business through an agent, he ought 
 
 i4« NEW YORK LIFE INS. CO. v. FLETCHER, 117 U. S. 519, 6 Sup. Ct. 
 837, 29 L. Ed. 934; UNION MUT. LIFE INS. CO. v. WILKINSON. 13 Wall. 
 
 (U. S.) 222, 20 L. Ed. 617. ^ ^. ... ^^ t 
 
 147 Supreme Lodge K. P. v. Withers, 177 U. S. 260, 20 Sup. Ct 611. 44 L. 
 
 Ed 762 
 
 148 Continental Life Ins. Co. T. Cbamberlain, 132 U. S. 304, 10 Sup. Ct. 87, 
 
 33 L Ed. 341. 
 
 i4i McMaster v. Insurance Co., 183 U. S. 25, 22 Sup. Ct. 10, 46 L. Ed. 64, 
 
 §§ 114-117) LIMITATIONS UPON THE POWERS OP AGENTS. 341 
 
 to be equally prohibited from avoiding, wholly or in part, any of 
 those incidents. Therefore we conclude, notwithstanding the great 
 weight to which the decision in the Fletcher Case is entitled, that the 
 usual stipulation that the insurer's agent shall be the agent of the in- 
 sured, or that the insurer will not be bound by any knowledge ac- 
 quired by his agent, or that he shall not be charged with information 
 given to the agent unless it shall be communicated in writing, are all 
 equally repugnant to settled principles of law, and therefore unen- 
 forceable. 
 
 Stipulation that the Insurer will not he Responsible for the Fraud of 
 His Agent. 
 Closely related in principle to the attempted limitations just dis- 
 cussed, and usually contained in the same term of the policy or appli- 
 cation, are those agreements whereby the insurer seeks to escape re- 
 sponsibility for the fraud perpetrated by the agent in the course of 
 the transactions looking to the procurement of the policy. It is a 
 fundamental principle that one shall not be allowed to exempt himself 
 by contract from liability by reason of the fraud of his servants or 
 agents.^ ''^ It would seem, therefore, necessarily to follow that any 
 agreement contained in the policy, by which the insurer is relieved 
 from the consequences of his agent's fraud in making the contract of 
 insurance, is necessarily without effect. It may be contended that the 
 general doctrine of the principal's liability for the unauthorized fraud 
 of his agent, when perpetrated in the course of his employment, should 
 be confined to torts, and should not be relied upon to establish a con- 
 tract to which the principal had never consented. In accordance with 
 such a view, the insurer, declining to ratify the unauthorized fraudu- 
 lent act of his agent, could, upon returning all premiums received, be 
 discharged of all liability on the contract. But there are both prac- 
 tical and theoretical objections of too serious a nature to permit the 
 courts to take this view of the rights of the parties. In the first place, 
 the insurer never discovers the fraud of his agent until the contingency 
 happens, upon which the policy becomes a claim for money to be paid, 
 in which case he desires to repudiate the contract as unauthorized and 
 return the premiums. In all other cases, however, even though fraud 
 had been practiced by the agent, the premiums are always retained by 
 the insurer, who has now no motive to discover his agent's fraud, while 
 the insured is content with the payment as made in the serene, if mis- 
 taken, belief that he has had the protection of his insurance during the 
 term agreed upon. Secondly, from the standpoint of theory, the in- 
 surer must be deemed to know all the means by which the insured 
 
 180 Sternaman v. Insurance Co., 170 N. Y. 13, 62 N. B. 763, 67 L. R. A. 318. 
 88 Am. St. Rep. 625; Rathbone v. Railway Co., 140 N. Y. 48, 35 N. E. 418. 
 
I! 
 
 342 
 
 INSURANCE AGENTS AND THEIR POWERS. 
 
 (Ch.9 
 
 was induced by the agent to make the contract, and, by issuing the 
 policy, and accepting the premiums paid, is estopped to deny that the 
 acts and the representations of his agents were authorized. This being 
 true as a principle of law, based upon a sound public policy, it cannot 
 be changed by the agreement of the parties.^ *^ 
 
 151 See Pamo v. Insurance Co., 114 Iowa, 132, 86 N. W. 210, In which the 
 court said: "If It [the stipulation In the application] was meant to cover such 
 a case. It amounts to no more than a declaration by a party that he will not 
 be liable for the fraud of his agent committed while acting within the scope 
 of his authority, and such a declaration would be futile." 
 
 (n 
 
 \ 
 
 \: 
 
 U 118-120) 
 
 WAIVER AND ESTOPPEL, 
 
 343 
 
 CHAPTER X. 
 
 WAIVER AND ESTOPPEU 
 
 118-120. General Principles. 
 
 121. Parol Waivers. 
 
 122. Prior Parol Waivers. 
 
 123. Subsequent Parol Waivers. 
 
 124. Contemporaneous Parol WalvePfll 
 125-126. What Constitutes a Waiver. 
 127-128. What may be Waived. 
 
 GENEBAX PRINCIPLES. 
 
 118. WAIVER is the voluntary relinquishment of a known riglit. 
 
 It may be express, or implied from circumstances, and it needs 
 no consideration for its support. 
 
 119. AN ESTOPPEI* exists when the insurer has brought about or 
 
 allowed such conditions as make it inequitable for him to 
 claim a right to which he would otherwise be entitled. A 
 waiver is recognized to give effect to the intention of the party 
 waiving, while an estoppel is enforced in order to defeat the 
 fraudulent intention of the party estopped. 
 
 120. While thus distinguishable in theory, the doctrines of waiver 
 
 and estoppel, as applied to insurance contracts, cannot be 
 profitably treated separately, since the same circumstances 
 that will raise an estoppel will usually also afford suflcient 
 evidence of an implied waiver. 
 
 The terms "waiver" and "estoppel" are ordinarily used both by the 
 courts and text-writers as synonymous, in the law of insurance. There 
 is, however, a difference between the strict meanings of these two words, 
 which sometimes becomes important,^ especially with regard to rules 
 of evidence. A waiver may be defined as the voluntary relmquishment 
 
 1 Thus the language of the provision usually found in Insurance policies, 
 that no agent shall have authority to waive that condition requiring written 
 consent to other subsequent insurance, or to waive any other subsequent con- 
 dition, plainly refers to an Intentional act. Such a "waiver" is not even sim- 
 ilar to an estoppel. A limitation upon the agent's authority to waive such 
 conditions is valid, and. If kept true. Is enforceable. Cleaver y. Insurance 
 Co., 65 Mich. 527, 32 N. W. 660, 8 Am. St. Rep. 908. But if notjxue in fact, 
 it is nugatory. Knickerbocker Life Ins. Co. v. Norton, 96 U. S. 234, 24 L. Ed 
 689 A limitation upon the agent's authority to estop the insurer would be 
 absurd Kyte v. Assurance Co., 144 Mass. 43, 10 N. E. 518, WoodrufT. Ins 
 Gas 477 See Bennett v. Insurance Co., 203 111. 439. 67 N. B. 971, and Welch 
 V. Association (Wis.) 98 N. W. 227, in which this distinction between waiver 
 and estoppel is expressly recognized. 
 
844 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 of a known right.* It is contractual in its nature, inasmuch as the 
 insurer consents to relinquish the right or claim in question, and the 
 insured assents to such relinquishment. A strict waiver, therefore, 
 cannot exist unless so intended by the person waiving, while, as will 
 presently be seen, a different rule applies to estoppel. A waiver may 
 be expressly made by words, either written or oral, or it may be im- 
 plied from the conduct of the insurer, when it is such as to indicate 
 that he intends a waiver. 
 
 A Waiver Need not he Supported by a New Consideration, 
 
 A waiver depends for its validity, not necessarily upon a separate 
 valuable consideration given to support it, but upon the doctrine of 
 estoppel,' and in many cases waivers have been enforced even when no 
 circumstances of estoppel were present.* An existing right may be re- 
 linquished by agreement, and such an agreement, if supported by val- 
 
 2 See Globe Mut Life Ins. Co. v. Wolflf, 95 U. S. 326, 24 L. Ed. 387; Ward 
 V. Insurance Co., 66 Conn. 227, 33 Atl. 902, 50 Am. St. Rep. 80; Hoxie v. In- 
 surance Co., 32 Conn. 21, 85 Am. Dec. 240; VIELE v. INSURANCE CO., 26 
 Iowa, 9, 96 Am. Dec. 83. 
 
 3 Georgia Home Ins. Co. v. Klnnier's Adm'x, 28 Grat (Va.) 88 ; VIELE v. 
 GERMANIA INS. CO., 26 Iowa, 9, 96 Am. Dec. 83. 
 
 These cases state the law correctly. In some other Jurisdictions, however, 
 there has arisen some apparent conflict among the cases. Thus in Ripley v. 
 Insurance Co., 30 N. Y. 136, 86 Am. Dec. 362, Mullin, J., said: "It seems to 
 me that a waiver, to be operative, must be supported by an agreement found- 
 ed on a valuable consideration, or the act relied on as a waiver must be such 
 as to estop a party from insisting on performance of the contract or forfei- 
 ture of the condition." See, also, to the same effect, Underwood v. Insurance 
 Co., 57 N. Y. 506, s. c. 48 How. Prac. (N. Y.) 372; Marvin ▼. Insurance Co., 
 16 Hun (N. Y.) 496; Lasher v. Insurance Co., 18 Hun (N. Y.) 104, 8. c. 57 How. 
 Prac. (N. Y.) 229; McDermott v. Insurance Co., 44 N. Y. Super. Ct. 230. In 
 the subsequent case of Titus v. Insurance Co., 81 N. Y. 410, the court said: 
 "It is now settled in this court, after some difference of opinion, that such 
 a waiver need not be based upon any new agreement or an estoppel." See, 
 to the same effect, Roby v. Insurance Co., 120 N. Y. 510, 24 N. E. 808; Pratt 
 V. Insurance Co., 130 N. Y. 206, 29 N. E. 117. But in Armstrong v. Insurance 
 Co., 130 N. Y. 560, 29 N. E. 991, the court says of these decisions that, while 
 "all hold that such waiver need not be based upon a technical estoppel, in 
 all the cases where this question is presented, where there has been no ex- 
 press waiver, the fact is recognized that there exist the elements of an estop- 
 pel." 
 
 The statement of the law as made in Ripley v. Insurance Co., supra, seems 
 more correct than that of the subsequent cases criticising it, and is practically 
 restored by Armstrong v. Insurance Co., supra. It is difficult to see how a 
 purely executory agreement to relinquish a right under a contract can be 
 made enforceable, without the support of a consideration, by merely calling 
 It a waiver. It would seem necessary that in every case the agreement to 
 relinquish must be supported by a consideration or by an estoppel. See Globe 
 Mut. Life Ins. Co. v. WolflC, 95 U. S. 326, 24 L. Ed. 387; Eaton, Bq. 172; and 
 note 83, infra. 
 
 « See preceding note, and cases cited in note 84, infra. 
 
 §g 118-120) 
 
 GENERAL PRINCIPLES. 
 
 845 
 
 uable consideration, wiirbe enforced, but rather as a contract than as 
 a waiver. But when the parties to a contract have agreed that a cer- 
 tain right thereunder shall not be insisted upon, and one party is 
 thereby induced so to change his condition as to make it inequitable 
 for the other to claim the relinquished right, such an agreement will 
 be enforceable, although without a new and separate consideration. 
 From another point of view it may be said that where the insured has, 
 in reliance upon a waiver, prejudicially changed his condition, that 
 fact will of itself constitute a sufficient consideration to support the 
 agreement of waiver.* 
 
 Estoppel, 
 
 Estoppel is an equitable doctrine, enforced for the purpose of pre- 
 venting one party from taking an unfair advantage of another who 
 has reasonably relied upon his words or conduct.® When the insurer 
 has acted in such a way as to give the insured reason to believe that 
 some known right under the policy would not be insisted upon, and 
 the insured has acted upon that belief, the insurer will be estopped to 
 give the lie to his conduct, and claim that right to the prejudice of 
 the insured.^ An estoppel is thus seen to differ from a waiver very 
 much as a so-called quasi contract differs from a true contract. An 
 estoppel is enforced by the courts for the purpose of preventing the 
 insurer from defrauding the insured, and in opposition to his inten- 
 tion, while a waiver is enforced for the purpose of carrying out the 
 intention of the insurer. It is apparent, however, that ordinarily the 
 same circumstances which will raise an implied waiver will also be 
 sufficient to constitute an estoppel; the terms used differing with the 
 point of view. Thus, when the insurer accepts a premium which is 
 overdue, his act may be regarded either as indicating an intention to 
 waive his right to declare the policy forfeited for nonpayment of 
 premium, or as estopping him to set up the forfeiture, which the in- 
 sured reasonably supposed that he would not insist upon. The close 
 relationship of the doctrine of waiver to the equitable doctrine of 
 estoppel is thus expressed by Mr. Justice Field in the important case 
 of Globe Mut. Life Ins. Co. v. Wolff : » "The doctrine of waiver, as 
 asserted against insurance companies to avoid the strict enforcement 
 
 * See Dilleber v. Insurance Co., 76 N. Y. 567. 
 « See Eaton, Eq. p. 165. 
 
 7 As said by Miller, J., in UNION MUT. LIFE INS. 00. v. WILKINSON, 
 13 Wall. 222, 20 L. Ed. 617: "The principle is that where one party has, by 
 his representation or his conduct, induced the other party to a transaction to 
 give him an advantage which it would be against equity and good conscience 
 to assert, he would not, in a court of justice, be permitted to avail himself of 
 that advantage." Approved in Manhattan Fire Ins. Co. ▼. Weill, 28 Grat 
 (Va.) 389, 26 Am. Rep. 364. 
 
 8 95 U. S. 326, 24 L. Ed. 387. 
 
346 
 
 WAIVER AND ESTOPPBL. 
 
 (Ch. 10 
 
 of conditions contained in their policies, is only another name for the 
 doctrine of estoppel. It can only be invoked where the conduct of the 
 companies has been such as to induce action in reliance upon it, and 
 where it would operate as a fraud upon the assured if they were after- 
 wards allowed to disavow their conduct and enforce the conditions." • 
 
 PAROL WAIVERS. 
 
 121* There is mnch confliot among the courts as to when the rnles 
 of evidence "will permit a parol waiver of a term of a ivritten 
 contract to be shown. This conflict may, to some extent, be 
 obviated, and the resulting conf nsion as to principles applicable 
 cleared a'way, by dividing all cases involving parol waivers into 
 three classes, as follows: 
 
 (a) Those involving prior parol waivers of subsequently written 
 
 terms. ^ 
 
 (b) Those involving subsequent parol waivers of previously written 
 
 terms, j 
 (e) Those in which the acts sought to be shown by parol occurred 
 contemporaneously with the final execution of the written 
 eontraot. 
 
 Perhaps no branch of the law presents more hopeless confusion and 
 conflict among the cases than is to be found among those involving 
 questions of waiver and estoppel in insurance law. This conflict cen- 
 ters about three inherently difficult questions usually involved in the 
 consideration of the validity of a waiver of a right claimed in accord- 
 ance with the terms of an insurance contract. These concern (1) the 
 power of the agent concerned to make the alleged waiver; (2) the 
 admissibility of parol evidence to show a waiver of a term of writ- 
 
 » In Kieman v. Insurance Co., 150 N. Y. 190, 44 N. E. 098, these terms are 
 thus distinguished: "The distinction between waiver and estoppel, as applied 
 to the law of insurance, is not in all respects clearly defined. An express 
 waiver is in the nature of a new contract, modifying to some extent the old 
 one. It does not require a new consideration, unless it is by inducing a 
 change of position, for the law of waiver seems to be a 'technical doctrine 
 introduced and applied by courts for the purpose of defeating forfeitures.' 
 People V. Manhattan Co., 9 Wend. 351, 381 ; Knickerbocker Life Ins. Co. v. Nor- 
 ton, 96 U. S. 234, 24 L. Ed. 689. An estoppel forbids the assertion of the truth 
 by one who has knowingly Induced another to believe what is untrue and to 
 act accordingly. While express waiver rests upon intention, and estoppel up- 
 on misleading conduct, implied waiver may rest upon either; for it exists 
 when there is an intention to waive, unexpressed, but clearly to be inferred 
 from circumstances, or when there is no such intention in fact, but the con- 
 duct of the insurer has misled the insured into acting on a reasonable belief 
 that the company has waived some provision of the policy. Ronald v. Asso- 
 ciation, 132 N. Y. 378, 30 N. E. 739; Armstrong y. Insurance Co., supra; 2 
 Biddlc, In& § 1052." 
 
 ti 
 
 §121) 
 
 PAROL WAIVERS. 
 
 347 
 
 ten contract; and (3) the elements necessary to constitute a waiver, 
 or estoppel in pais. 
 
 Much of this conflict is due to irreconcilable differences in the points 
 of view taken by the courts in different jurisdictions, while perhaps 
 more is due to misconception of the fundamental principles involved, 
 and to a blind and undiscriminating following of precedents, which 
 themselves are often ill-considered. An attempt has already been made 
 in the preceding chapter to establish some principles of universal and 
 necessary application with regard to the powers of agents represent- 
 ing insurance companies, and these principles, in the following discus- 
 sion, will be strictly applied in the effort to clear away, as far as pos- 
 sible, the confusion in which the doctrine of waiver and estoppel in 
 insurance law has enveloped itself. It is now proposed to state some 
 general principles applicable to the second -subject above mentioned — 
 that is, the admissibility of parol evidence to show a waiver of a writ- 
 ten condition — which, it is hoped, may render less difficult an under- 
 standing of the law of this subject, and make possible the partial har- 
 monizing of the cases. 
 
 The objection to proving a waiver of such a written condition by 
 parol testimony grows out of the well-known parol evidence rule, thus 
 stated by Mr. Greenleaf : ^® 'Tarol contemporaneous evidence is in- 
 admissible to contradict or vary the terms of a valid written instru- 
 ment." It is plain that the effect of proving a waiver is, in one sense, 
 to alter and sometimes to contradict the terms of a written instrument ; 
 and, therefore, as will presently be seen, some courts have declined 
 to allow parol evidence to be admitted in proof of such a waiver. 
 There are, however, many cases of parol waiver that do not in any 
 wise involve the parol evidence rule, and therefore do not afford 
 proper ground for conflict in opinion. In order to distinguish clearly 
 those cases which apparently involve the parol evidence rule from those 
 which clearly do not, parol waivers may be properly divided into three 
 classes, as follows: 
 
 (a) Those parol agreements, whether expressed or implied, which 
 precede the execution of the written contract, and by the terms of 
 which it is provided, in effect, that some condition of the subsequently 
 issued policy shall be inoperative, will be called "prior parol waivers." 
 
 (b) Those parol agreements that are made subsequently to the exe- 
 cution of the policy, by which the parties seek to modify or abro- 
 gate some condition of that policy, will be known as subsequent parol 
 waivers. 
 
 (c) When the acts of the insurer that are sought to be proved by 
 parol as estopping him to enforce some condition or right given by 
 the terms of the contract, took place simultaneously with the final ex- 
 
 1 
 
 1* 1 GreenL Ev. (16th Ed.) i 27& 
 
348 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 
 ecution or delivery of the policy, such an estoppel will be termed a 
 "contemporaneous parol waiver." These three classes of parol waiv- 
 ers will now be discussed, and the principles properly applicable stated 
 and applied to the cases. 
 
 PRIOR PAROL "WAIVERS. 
 
 122. In no case can parol evidence be admitted to gho-w a ^7aiTer» 
 express or implied, of any term of a subsequently issued policy. 
 To admit sucb evidence would unquestionably be to alter by 
 parol tbe temui of a valid written instrum.ent. 
 
 The rule that all prior parol agreements are merged in a subse- 
 quent written contract touching the same subject-matter is now too well 
 established to need the support of cited authority. Therefore, when 
 a policy of insurance, properly executed, is offered by the insurer and 
 accepted by the insured as the evidence of their contract, it must be 
 conclusively presumed to contain all the terms of the agreement for 
 insurance by which the parties intend to be bound. If any previous 
 agreement of the parties shall be omitted from the policy, or any term 
 not theretofore considered added to it, the parties are necessarily pre- 
 sumed to have adopted the contract as written as the final form of 
 their binding agreement. "The entire engagement of the parties, with 
 all the conditions upon which its fulfillment could be claimed, must be 
 conclusively presumed to be there stated. If, by inadvertence or mis- 
 take, provisions other than those intended were inserted, or stipu- 
 lated provisions were omitted, the parties could have had recourse for 
 a correction of the agreement to a court of equity, which is competent 
 to give all needful relief in such cases. But until thus corrected, the 
 policy must be taken as expressing the final understanding of the as- 
 sured and of the insurance company." ^* It is true, as has been here- 
 tofore explained,^ ^ that there is a tendency on the part of some courts, 
 in effect, to enforce the equitable remedy of reformation in actions at law 
 upon insurance contracts, when the equitable position of the insured is 
 unusually strong, as when the Supreme Court of the United States held 
 in McMaster v. New York LJfe Ins. Co.,^' that the insured, by ac- 
 cepting a policy, was not conclusively bound by a stipulation inserted 
 therein without his knowledge or consent. But with the exception of 
 such cases, in which the insurer is clearly estopped to insist upon this 
 rule of law, it must be universally held that a writing, accepted as a 
 
 11 Field J., In UNION MUT. LIFE INS. CO. v. MOWIIY, 96 U. S. 544, 24 L. 
 Ed. 674 ; Richards, Ins. Cas. 381. 
 i« See supra, p. 299. 
 i« 183 U. S. 25, 22 Sup. Ct 10, 46 L. Ed. 64. 
 
 §122) 
 
 PRIOR PAROL WAIVERS. 
 
 349 
 
 contract, contains all the terms to which the parties have given their 
 
 consent, and no others. • r n 
 
 As a necessary consequence of the operation of this rule, it follows 
 that any agreement which may have been made between the insured 
 and the insurer prior to the issue of the policy can have absolutely no 
 effect upon the rights of the parties, unless it is contained in the writ- 
 ten policy. Therefore any evidence offered to show a prior parol 
 agreement, in order to vary in any wise the rights of the parties to a 
 subsequent written agreement, is necessarily inadmissible. This, being 
 true of general agreements, is also true of a waiver,^* which, as we 
 have seen, is contractual in its nature. This rule equally forbids the 
 proof by parol of conduct alleged to constitute an estoppel, if such 
 conduct in fact preceded the issue of the policy. This rule is well 
 illustrated by the leading case of Union Mut. Life Ins. Co. v. Mowry,^ 
 in which the insurance agent, in his efforts to induce the assured to 
 take insurance, promised that he should have notice when each pre- 
 mium should become due, and that he need give himself no uneasi- 
 ness on that subject. Relying on this promise to give notice which 
 was not contained in the subsequently issued policy, the assured failed 
 to pay the premium when it became due ; and the company, under a 
 provision of the policy, declared the policy forfeited, although no no- 
 tice had been given. The lower court admitted evidence of this parol 
 agreement, made by the agent, to give notice, as establishing an estop- 
 pel against the company to claim a forfeiture under the terms of the 
 policy for nonpayment of the premium at its maturity. But the Su- 
 preme Court held the evidence inadmissible, and that no such prior 
 parol agreement could be shown to contradict the terms of the policy. 
 "The only case," said the court, "in which a representation as to the 
 future can be held to operate as an estoppel, is where it relates to 
 an intended abandonment of an existing right, and is made to influ- 
 ence others, and by which they have been induced to act. An estoppel 
 cannot arise from a promise as to future action with respect to a right 
 to be acquired upon an agreement not yet made. The doctrine of 
 estoppel is applied with respect to representations of a party, to pre- 
 vent their operating as a fraud upon one who has been led to rely 
 upon them. They would have that effect, if a party who, by his 
 statements, as to matters of fact, or as to his intended abandonment 
 of existing rights, had designedly induced another to change his 
 conduct or alter his condition in reliance upon them, could be per- 
 mitted to deny the truth of his statements, or enforce his rights against 
 his declared intention of abandonment. But the doctrine has no place 
 
 14 WeUs V. Insurance Co., 28 Ind. App. 620, 62 N. E. 501, 88 Am. St Rep. 
 i»96 U. S^ 544, 24 L. Ed. 674; Richardi, Ins. Cas. 381, 
 
 
350 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 §123) 
 
 SUBSEQUENT PAROL WAIVERS. 
 
 351 
 
 for application when the statement relates to rights depending upon 
 contracts yet to be made, to which the person complaining is to be a 
 party. He has it in his power in such cases to guard in advance against 
 any consequences of a subsequent change of intention and conduct by 
 the person with whom he is dealing. For compliance with arrange- 
 ments respecting future transactions, parties must provide by stipu- 
 lations in their agreements when reduced to writing. The doctrine, 
 carried to the extent for which the assured contends in this case, would 
 subvert the salutary rule that the written contract must prevail over 
 previous verbal arrangements, and open the door to all the evils which 
 that rule was intended to prevent." ^* 
 
 The principles upon which rests the doctrine that prior parol waivers 
 cannot be shown, as thus set forth by the Supreme Court, are so clear, 
 and so little obscured by the shadows cast by closely related principles, 
 that there would seem to be no excuse for any conflict of authority 
 with reference to their application, although unfortunately many con- 
 flicting cases are to be found in our reports. Where cases are found 
 in which evidence of prior parol waivers has been admitted, the error 
 of the court will usually be found to be due to a failure to distinguish 
 prior parol waivers from subsequent parol waivers, which, as will 
 presently be seen, are radically different in nature. Thus, in the re- 
 cent case of Continental Ins. Co. of New York v. Browning,^ ^ the 
 court held admissible evidence to show an agreement made between 
 the insured and the insurance agent, prior to the execution of the 
 policy, to the eflFect that the insured "need not worry about meeting 
 the payments promptly, and that the company would see that his policy 
 was kept alive, even if his payments were behind a few days." This 
 agreement did not appear in the policy, which, instead, contained a 
 provision that a failure to pay any installment of the premium when 
 due would relieve the company of liability during the time in which 
 such installment remained due and unpaid. There was also other evi- 
 dence tending to show that after the issue of the policy the company 
 gave the insured reason to suppose that prompt payment of the pre- 
 mium installments as required by the policy would not be insisted 
 upon. From the principle stated above, it is clear that the previous 
 
 i« To the same effect, see Thompson v. Insurance Co., 104 U. S. 252, 259, 
 26 L. Ed. 765; Gray v. Insurance Co., 155 N. Y. 180, 49 N. E. 675; Moore v. 
 Insurance Co., 141 N. Y. 219, 36 N. E. 191 ; National Mut. Ben. Ass'n v. Hick- 
 man, 86 Ky. 256, 5 S. W. 565; Fitchburg Sav. Banlt v. Amazon Ins. Co., 125 
 Mass. 431; Germania Ins. Co. v. Bromwell, 62 Ark. 45, 34 S. W. 83; Mobile 
 Life Ins. Co. v. Pruett, 74 Ala. 497 ; Union Cent. Life Ins. Co. v. Chowning, 8 
 Tex. Civ. App. 459, 28 S. W. 117; Wells v. Insurance Co., 28 Ind. App. 620, 
 62 N. E. 501, 88 Am. St. Rep. 208. 
 
 17 (Ky. 1902) 70 S. W. 660, 24 Ky. Iaw Rep. 992. See, also. State Mut Ins. 
 Go. V. Latourette (Ark.) 74 S. W. 300. 
 
 ag^reement was wholly inadmissible, but that the evidence of the sub- 
 sequent conduct of the insurer was proper. 
 
 SUBSEQUENT PAROL WAIVERS. 
 
 123. A written contract may be altered or abrogated at will by tbe 
 ■nbsequent parol ag^reement of the parties. Hence any con- 
 dnct or acts of the insurer subsequent to the execution of the 
 policy may be freely shown by parol in order to prove a uraiver 
 of any term thereof. The tenns most frequently thus shown 
 to have been waived are; 
 
 (a) The requirement of prompt payment of premiums by oustoma'- 
 
 rily receiving overdue premiums. 
 
 (b) Limitations upon the authority of inferior agents by permitting 
 
 the exercise of the pow^ers denied. 
 
 (o) The condition of forfeiture for nonpayment of premiums by ac- 
 cepting an overdue premium or otherwise indicating that the 
 policy is regarded as still in force. 
 
 (d) Conditions requiring proofs of loss, submission to arbitration, 
 or other acts subsequent to the completion of the contract, by 
 absolutely denying liability, or otherwise showing that the per- 
 formance of such acts is not desired or expected. 
 
 There is no principle of right or reason, or any rule of authority, 
 which can prevent the parties to a written agreement from altering 
 that agreement in any way they may desire, or abandoning it alto- 
 gether, by mere parol agreement. Under modern decisions it is even 
 held that a contract under seal may be altered by the mutual parol 
 agreement of the parties, the consent of each party to such modifica- 
 tion calling for the similar consent of the other. ^® Hence we con 
 elude, without difficulty, that, however formally a policy may have 
 been executed in writing, the parties thereto can subsequently, at their 
 pleasure, vary that contract in any respect they may desire, and such 
 an agreement will not in any wise involve the parol evidence rule, since 
 it plainly does not come within its terms. This agreement can be 
 made formally or informally, and may be as well implied from the 
 conduct of the parties as it may be expressed by their words. There- 
 fore parol evidence is always admissible to show a waiver, express 
 or implied, of any of the terms of a previously written contract of in- 
 surance.^® So the conduct of the insurer, or of a competent agent, 
 subsequent to the issue of the policy, may be freely shown to establish 
 an estoppel against the insurer claiming a right under the strict letter 
 of the contract. Another leading case decided by the Supreme Court 
 
 i« McCreery v. Day, 119 N. Y. 1, 23 N. R 198, 6 L. R. A. 503, 16 Am. St. 
 Rep. 793. See, also, Clark, Cont. (2d Ed.) p. 418. But in Canada it seems that 
 a parol waiver of a condition of a sealed policy cannot be shown. See Scott 
 v. Insurance Co., 25 U. C. Q. B. 119. 
 
 i» New York Life Ins. Co. v. Eggleston, 96 U. S. 527, 24 L. Ed. 841; VIELE 
 
 !* 
 
 I 
 
 i: 
 
 I 
 
I 
 
 352 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 of the United States only a week later than the Mowry Case, just dis- 
 cussed (Knickerbocker Life Ins. Co. v. Norton 2^), well illustrates the 
 rule that subsequent parol waivers are admissible. In that case the 
 policy contained a provision that "agents of the company are not 
 authorized to make, alter or abrogate contracts or waive forfeitures." 
 The policy also provided that a failure to pay any premium or note 
 at maturity should render the policy null and void. The evidence 
 showed that the company did in fact allow its agents to extend the 
 time for the payment of premium notes, despite the restriction men- 
 tioned in the policy. The insured, after the maturity of a premium 
 note, secured an extension of time from the agent, and died before 
 the expiration of the extended time. It was contended by the counsel 
 for the company that the admission of parol testimony of a waiver 
 of the condition of prompt payment of premium notes at maturity 
 was to vary the terms of the written instrument, but the Supreme 
 Court, in holding the evidence admissible and competent, said: 
 
 "The written agreement of the parties, as embodied in the policy 
 and the indorsement thereon, as well as in the notes and the receipt 
 given therefor, was undoubtedly to the express purport that a failure 
 to pay the notes at maturity would incur a forfeiture of the policy. 
 It also contained an express declaration that the agents of the com- 
 pany were not authorized to make, alter, or abrogate contracts or waive 
 forfeitures. And these terms, had the company so chosen, it could 
 have insisted on.** But a party always has the option to waive a con- 
 dition or stipulation made in his own favor. The company was not 
 bound to insist upon a forfeiture, though incurred, but might waive 
 it. It was not bound to act upon the declaration that its agents had 
 no power to make agreements or waive forfeitures, but might at any 
 time, at its option, give them such power. The declaration was only 
 tantamount to a notice to the assured, which the company could waive 
 and disregard at pleasure. In either case, both with regard to the 
 
 V. INSURANCE CO., 26 Iowa, 9, 96 Am. Dec. 83; German-Amerlcaii Ins. Co. 
 V. Humphrey, 62 Ark. 348, 35 S. W. 428, 54 Am. St Rep. 297; Western Assur. 
 Co. V. WiUiams, 94 Ga. 128, 21 S. E. 370; Burlington Ins. Co. v. Rivers, 9 Tex. 
 Civ. App. 177, 28 S. W. 453; Manufacturers' & Merchants' Ins. Co. v. Arm- 
 strong, 145 111. 469, 34 N. E. 553; Grubbs v. North CaroUna Home Ins. Co., 
 108 N. C. 472, 13 S. E 236, 23 Am. St Rep. 62; Kenyon v. Association, 122 
 N. Y. 247, 25 N. E. 299; McFarland v. Insurance Co., 134 Pa. 590, 19 Atl. 796, 
 19 Am. St Rep. 723; Phenix Ins. Co. v. Bowdre, 67 Miss. 620, 7 South. 596, 19 
 Am. St. Rep. 326; Burson v. Association, 136 Pa. 267, 20 Atl. 401, 20 Am. St 
 Rep. 919; German Ins. Co. v. Gray, 43 Kan. 497, 23 Pac. 637, 8 L. R. A. 70, 
 19 Am. St Rep. 150; Orient Ins. Co. v. McKnight, 197 111. 190, 64 N. B. 339. 
 
 so 96 U. S. 234, 24 L. Ed. 689; Richards, Ins. Cas. 399; Elliott Ins. Cas. 52. 
 
 21 Carey v. Insurance Co., 84 Wis. 80, 54 N. W. 18, 20 L. B. A. 267, 36 Am. 
 St Rep. 907. 
 
 gl23) 
 
 SUBSEQUENT PAROL WAIVERS. 
 
 353 
 
 forfeiture and to the powers of its agent, a waiver of the stipulation 
 or notice would not be repugnant to the written agreement, because it 
 would only be the exercise of an option which the agreement left in 
 it. And whether it did exercise such option or not was a fact provable 
 by parol evidence, as well as by writing, for the obvious reason that 
 it could be done without writing." ^* 
 
 Instances of Subsequent Parol Waivers. 
 
 The reports are full of illustrations of parol subsequent waivers of 
 conditions in insurance contracts concerning the proof of which, by 
 parol testimony, there should be no room for dispute. The principle 
 applicable to all such waivers is the same, but it will be profitable to set 
 forth some specific instances further illustrating the principle re- 
 ferred to. 
 
 Probably the most frequently occurring waiver by subsequent act is 
 the receipt of an overdue premium, by which act the insurer estops 
 himself from claiming that the policy was forfeited by nonpayment of 
 such premium at its maturity.^^ So in many jurisdictions it is held 
 that the insurer, by customarily receiving premiums when overdue, 
 waives that condition of the contract requiring prompt payment, so 
 that the insured may demand that the premium shall be received in 
 accordance with that custom within a reasonable time after its ma- 
 turity.** As heretofore stated, however, it is doubtful whether this 
 view is correct, not because there is any question as to the admissibilit> 
 
 »« To the same effect, see New York Life Ins. Co. t. Eggleston, 96 U. S. 
 572, 24 L. Ed. 841; Phcenix Mut. Life Ins. Co. v. Doster, 106 U. S. 30, 34, 1 
 Sup. Ct 18, 27 L. Ed. 65, 67; Hartford Life & Annuity Ins. Co. v. Unsell, 144 
 U. S. 439, 12 Sup. Ct 671, 36 L. Ed. 496. 
 
 28 Phoenix Mut. Life Ins. Co. v. Doster, 106 U. S. 34, 1 Sup. Ct 22, 37 L. Ed. 
 67; Mutual Ben. Life Ins. Co. v. Robertson, 59 111. 123, 14 Am. Rep. 8; Mutual 
 Life Ins. Co. v. French, 30 Ohio St. 240, 27 Am. Rep. 443; Walsh v. Insur- 
 ance Co., 30 Iowa, 133, 6 Am. Rep. 664. Sweetser v. Association, 117 Ind. 97, 
 19 N. E. 722. 
 
 2* Newark Mach. Co. y. Kenton Ins. Co., 50 Ohio St 549, 35 N. B. 1060, 22 
 L. R. A. 768; Stewart v. Insurance Co., 155 N. Y. 257, 49 N. E. 876, 42 L. R. 
 A. 147; Bodine v. Insurance Co., 51 N. Y. 117, 10 Am. Rep. 566; Dilleber v. 
 Insurance Cb., 76 N. Y. 567; Knickerbocker Life Ins. Co. v. Norton, 96 U. S. 
 234, 24 L. Ed. 689; De Frece v. Insurance Co., 136 N. Y. 144, 32 N. E. 557; 
 HOME PROTECTION OF NORTH ALABAMA v. AVERY, 85 Ala. 348, 5 
 South. 143, 7 Am. St. Rep. 54; Northwestern Mut. Life Ins. Co. v. Umerman, 
 119 111. 329, 10 N. E. 225; Sweetser v. Association, 117 Ind. 97, 19 N. E. 722; 
 Continental Ins. Co. v. Browning, 70 S. W. 660, 24 Ky. Law Rep. 992. The 
 acceptance of premiums waives previous right of setting up a forfeiture on 
 technical grounds. Supreme Lodge K. P. v. Kaliuski, 163 U. S. 289, 16 Sup. Ct 
 1047, 41 L. Ed. 163; Appleton v. Insurance Co., 59 N. H. 541, 47 Am. Rep. 220; 
 McCorkle v. Association, 71 Tex. 149, 8 S. W. 516; Unsell v. Insurance Co. 
 (C. C.) 32 Fed. 443. 
 
 Vance Ins. — 2B 
 
 4 
 

 !l 
 
 
 II 
 
 354 
 
 WAIVBB AND ESTOPPEL. 
 
 (Ch. 10 
 
 of the evidence, but because it is doubtful whether all the elements 
 of a waiver are present.** 
 
 Another class of subsequent waivers frequently occurring includes 
 those cases in which conditions in the policy placing restrictions upon 
 the authority of subordinate agents are shown to be waived by evi- 
 dence that the company has actually allowed the agent to exercise the 
 powers that have been expressly denied by the condition in question. 
 The Norton Case,** discussed above, is typical of this class. So the 
 condition requiring proofs of loss," or appraisement," or that ques- 
 tions in dispute shall be submitted to arbitration," or requiring that 
 any other acts shall be done as conditions precedent to the right to 
 claim performance by the insurer, can be shown to have been waived 
 by him by such acts of himself or his agent as clearly show that the 
 performance of those conditions is not expected or required. 
 
 2 8 KNICKERBOCKER LIFE INS. CO. v. NORTON, 96 U. S. 234, 24 L. Ed. 
 689, Richards, Ins. Cas. 399, Elliott, Ins. Cas. 52. 
 
 2« KNICKERBOCKER LIFE INS. CO. V. NORTON, supra. 
 
 27 If the insured in good faith does what he plainly intends as a compliance 
 with the requirements of his policy in regard to proofs of loss, the failure of 
 the insurance company to notify him of any objections to the proofs furnished 
 constitutes a waiver of any further proof. Moyer v. Insurance Office, 176 Pa. 
 579, 35 Atl. 221, 53 Am. St. Rep. 690. 
 
 Where the insurance company receives and returns proofs of loss without 
 making any objections thereto, it will be deemed to have waived any defects 
 therein. Vangindertallen v. Insurance Co., 82 Wis. 112, 51 N. W. 1122, 33 
 Am. St. Rep. 29; Welsh v. Assurance Corp., 151 Pa. 607, 25 Atl. 142, 31 Am. 
 St. Rep. 786; Insurance Co. of North America v. McDowell, 50 111. 120, 99 
 Am. Dec. 497; McBryde v. Insurance Co., 55 S. C. 589, 33 S. E. 729, 74 Am. St. 
 Rep. 769. If the insurer denies his liability for a loss, he thereby waives any 
 defects in the proofs submitted to him. ANGIER v. ASSURANCE CO., 10 
 S. D. 82, 71 N. W. 761, 66 Am. St Rep. 685; German- American Ins. Co. v. 
 Norris, 100 Ky. 29, 37 S. W. 267, 66 Am. St. Rep. 324; Insurance Co. v. Non- 
 nent, 91 Tenn. 1, 18 S. W. 395; German Ins. Co. v. Gray, 43 Kan. 497, 23 Pac. 
 637, 8 L. R. A. 70, 19 Am. St. Rep. 150. The required proo? of loss within sixty 
 days is waived by the insurer by denying his liability on other grounds till 
 after the lapse of the given period. Germania Fire Ins. Co. v. Pitcher, 160 
 Ind. 392, 64 N. E. 921. 
 
 After the adjuster of an insurance company had visited the premises and 
 examined the loss, it was held no defense that preliminary proofs of loss were 
 not furnished to the company as required by the policy. McClelland v. In- 
 surance Co., 107 La. 124, 31 South. 691. 
 
 28 See Bangor Sav. Bank v. Niagara Fire Ins. Co., 85 Me. 68, 26 Atl. 991, 20 
 L. R. A. 650, 35 Am. St. Rep. 341. 
 
 29 Famum v. Insurance Co., 83 Cal. 246, 23 Pac. 869, 17 Am. St Rep. 233. 
 When an insurance policy makes arbitration of loss a condition precedent to 
 suit, and the insured demands arbitration, which is refused by the insurer, 
 such refusal constitutes a waiver of the arbitration condition. Continental 
 Ins. Co. V. Wilson, 45 Kan. 250, 25 Pac. 629, 23 Am. St Rep. 720; Numey v. 
 Insurance Co., 63 Mich. 633, 30 N. W. 350, 6 Am. St Rep. 338. The right to 
 arbitrate is waived by a failure to respond to a letter of the insured demand- 
 
 g 124) ^ CONTEMPORANEOUS PAROL WAIVERS. 355 
 
 124. 
 
 (a) 
 
 Cb) 
 
 CONTEMPORANEOUS PAROL WAIVERS. 
 
 Evidence of oircnmstances attending the delivery of the policy 
 may be offered as showing a waiver or estoppel as to some con- 
 dition of the policy nnder two different, though apparently sint- 
 ilar, states of fact. 
 
 Snch evidence may be offered by the insured to shox7 a 'waiver 
 of a future or executory condition, in the nature of a condition 
 subsequent. By the weight of authority, parol evidence is not 
 admissible for such a purpose. 
 
 Or the insured may desire to prove by parol that the circum- 
 stances under which the contract was made w^ere such as make 
 it inequitable for the insurer to daini benefit from the breach 
 of a condition which would prevent the valid inception of the 
 contract, being in the nature of a condition precedent. By the 
 great weight of authority, parol evidence is admissible, not for 
 the purpose of altering a term of the written contract, but to 
 estop the insurer from deriving an unfair advantage from snch 
 temL. 
 
 Assuming it to be settled on unquestionable principle that prior 
 waivers of conditions of subsequently written contracts cannot be 
 proved by parol, and that subsequent waivers of the conditions of a 
 previously written contract may always be so shown, we have next to 
 consider the difficult and confusing question as to the admissibility 
 of parol evidence to prove what has been heretofore denominated a 
 contemporaneous waiver or estoppel. It is upon this subject that the 
 greatest confusion and the fiercest conflict are to be found among the 
 authorities. For purposes of clearness, we must note here an impor- 
 tant distinction that exists between a contemporaneous waiver, strictly 
 so called, and a proper estoppel contemporaneous with the delivery of 
 the policy : (1) At the time of delivering a policy that contains a con- 
 dition avoiding it if the building insured shall remain unoccupied for 
 a specified time, the general agent of the insurer expressly waives the 
 benefit of that condition, and the insured accepts the policy with the 
 understanding that that condition shall not be operative. This is a 
 waiver proper, but it is apparent that on sound principle such a waiver, 
 although contemporaneous with the delivery of the policy, and indu- 
 cing its acceptance, cannot be shown by parol without a clear violation 
 of the parol evidence rule. Therefore we conclude that a contempo- 
 raneous waiver of an executory condition, or condition subsequent, 
 
 ing arbitration. Milwaukee Mechanics* Ins. Co. v. Schallman, 188 111. 213, 59 
 N. E. 12. See Hickerson v. Insurance Co., 96 Tenn. 193, 33 S. W. 1041, 32 L. 
 R. A. 172; Hayes v. Insurance Co., 170 Mass. 492, 49 N. B. 754; Manchester 
 Fire Assur. Co. v. Koerner, 13 Ind. App. 372, 40 N. E. 1110; Virginia Fire & 
 Marine Ins. Co. v. Cannon, 18 Tex. Civ. App. 588, 45 S. W. 945; Brock v. In- 
 surance Co., 102 Mich. 583, 61 N. W. 67, 26 L. R. A. 623, 47 Am. St Rep. 562. 
 
356 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 ri 
 
 ,1 1 
 
 tj;! 
 
 cannot be proved by parol testimony." (2) A general agent delivers 
 to the insured a policy which purports to insure his property against 
 destruction by fire, and receives from the insured the premium paid 
 for such insurance, although the agent knows full well that a part of 
 the property which he professes to insure is on leased ground, which 
 fact, by the terms of a condition written in the policy delivered, makes 
 the policy absolutely void in its inception." Again an agent of the 
 insurer, in preparing the application, through mistake or fraud, false- 
 ly writes in the application answers that have been truthfully given by 
 the applicant ; the applicant signs the falsified application ; and subse- 
 quently the insurer, through his agent, delivers to the applicant a 
 policy which contains a provision making it void in its inception by 
 reason of the false statement written in the application. The agent de- 
 livering the policy on behalf of the company knows that the policy is 
 void if the condition referred to is to be enforced.^^ These are typi- 
 cal cases involving the application of the peculiar doctrine of equitable 
 estoppel as especially applied in actions upon insurance contracts. It 
 is clear that there is fraud on the part of the insurer's agent in pre- 
 tending to make a valid contract, when by its terms he knows it to 
 be invalid, and that the insured, if acting in good faith, has been mis- 
 led into paying money for a contract which by its terms conferred no 
 benefit whatsoever upon him. Therefore the insured would have his 
 remedy at law in an action to recover the premiums paid, or in equity 
 in a suit for reformation or rescission. But under the peculiar facts 
 of these cases, such usual remedies would be wholly inadequate, and 
 far from doing justice between the parties. For usually it is only 
 when a loss occurs that the insurer desires to rescind the contract, or 
 that the insured, who has acted in good faith, learns of the fraud of 
 the insurer's agent entitling him to a rescission ; and, when a loss has 
 occurred, the restitution of premiums paid by the insured is not at all 
 what he desires or what he is equitably entitled to receive. He does 
 not wish to rescind the contract, but to enforce it, despite the presence 
 of a condition which, under the facts of the case, will, if given literal 
 effect, render the contract unenforceable. Can he do so in an action at 
 law ? ' To this question different answers have been given by the Amer- 
 ican courts. . . 
 
 Before examining the diverse views taken by these courts, it is ad- 
 visable first to state certain pertinent propositions from which there 
 
 80 Ripley V. Insurance Co.. 30 N. Y. 136, 86 Am. Dec. 362 ; United Firemen's 
 Ins. Co. V. Thomas, 53 U. S. App. 517, 27 C. C. A. 42, 82 Fed. 406, 47 L. R. A. 
 
 450 
 
 8*1 See VAN SCHOICK T. INSURANCE CO., 68 N. Y. 434, Richards, Ins. 
 
 Cas 362 
 
 8i Compare UNION MUT. LIFE INS. CO. Y. WILKINSON, 13 Wall. 222, 20 
 
 L. Ed. 617, Richards, Ins. Cas. 354. 
 
 i 
 
 §124) 
 
 CONTEMPORANEOUS PAROL WAIVERS. 
 
 357 
 
 can be no respectable dissent: (1) The insured cannot be heard to 
 deny, in an action at law, that he has knowledge of all the statements 
 made in an application signed by him, and of all conditions and terms 
 of a policy accepted by him. (2) The knowledge of the agent of a fact 
 material to a transaction on behalf of the insurer must be in all cases 
 imputed to the insurer. (3) The law requires the exercise of a high 
 degree of good faith on the part of both parties to the contract of in- 
 surance — of the insurer in no less degree than of the insured. (4) The 
 insured, in demanding that the insurer shall be equitably estopped 
 from enforcing a legal right given under the letter of his contract, must 
 himself occupy an equitable position, and must show, on his part, 
 conduct free from any imputation of bad faith." (5) Parol contempo- 
 raneous evidence cannot be received for the purpose of contradicting 
 a valid written instrument, whether that instrument be the policy or 
 the application. (6) But parol evidence may always be received to 
 show that a writing alleged to be a valid written instrument is not 
 really what it purports to be, but is invalid, and not the obligation of 
 the alleged parties. Another proposition stated as true in the pre- 
 ceding chapter, but opposed by much authority, will be thus stated and 
 relied upon in the following discussion : (7) The rights of the parties 
 to the contract of insurance will not be affected by attempted limita- 
 tions upon the authority of the agent of the insurer, which are im- 
 proper and invalid because (a) contrary to truth, as that no agent 
 whatever can waive a condition of the policy, save in writing, or that 
 the representative of the insurer is the agent of the insured, or (b) 
 because such limitation is imposed upon a legal incident of the relation 
 of principal and agent, and not upon conferred authority, as that the 
 insurer will not be bound by representation made by or to his agent 
 in the procurement of the insurance, or that he will be bound by only 
 such information acquired as is written in the application. 
 
 These propositions being now regarded as true, we have next to 
 consider whether, under facts such as exist in the typical cases set 
 forth above, the insured shall be allowed, in an action at law, to avoid 
 a forfeiture clearly incurred under a condition oi the written policy 
 by introducing parol evidence showing that it would be inequitable 
 to permit the insurer to take advantage of such a forfeiture. The 
 whole contest, however voluminously waged in the courts, narrows 
 itself to this single issue: Does the admission of such evidence have 
 the effect of altering or contradicting a term of the policy, and thus 
 violating the parol evidence rule? There is need of no argument to 
 prove that the parol evidence rule, derived by the common sense of the 
 
 88 Clemans v. Assembly, 131 N. Y. 485, 30 N. E. 496, 16 L. R. A. 33; Gal- 
 braith's Adm'r v. Insurance Co., 12 Bush (Ky.) 29; NEW YORK LIFE INS. 
 CO. v. FLETCHER, 117 U. S. 519, 6 Sup. Ct 837, 29 L. Ed. 834. 
 
358 
 
 WAIVER AND ESTOPPBL. 
 
 (Ch.10 
 
 I 
 
 race from its common experiences during the centuries of the com- 
 mon law's existence, and carefully defined by successive adjudications 
 of common-law courts, is of too great value to yield to the demands 
 of occasional equities in the determinatin of insurance causes. In 
 speaking of this famous rule. Justice Miller, in Union Mut. Life Ins. 
 Co. V. Wilkinson,'* makes the following sound observations: "The 
 great value of the rule of evidence here invoked cannot be easily over- 
 estimated. As a means of protecting those who are honest, accurate, 
 and prudent in making their contracts, against fraud and false swear- 
 ing, against carelessness and inaccuracy, by furnishing evidence of what 
 was intended by the parties, which can always be produced without 
 fear of change or liability of misconstruction, the rule merits the eulo- 
 gies it has received. But experience has shown that in reference to 
 these very matters the rule is not perfect. The written instrument 
 does not always represent the intention of both parties, and sometimes 
 it fails to do so as to either ; and, where this has been the result of ac- 
 cident or mistake or fraud, the principle has been long recognized 
 that under proper circumstances, and in an appropriate proceeding, the 
 instrument may be set aside or reformed, as best suits the purposes 
 of justice. A rule of evidence adopted by the courts as a protection 
 against fraud and false swearing would, as was said in regard to the 
 analogous rule known as the * Statute of Frauds,' become the instru- 
 ment of the very fraud it was intended to prevent, if there did not 
 exist some authority to correct the universality of its application. It 
 is upon this principle that courts of equity proceed in giving the relief 
 just indicated ; and though the courts, in a common-law action, may be 
 more circumscribed in the freedom with which they inquire into the 
 origin of written agreements, such an inquiry is not always forbidden 
 by the mere fact that the party's name has been signed to the writing 
 offered in evidence against him." 
 
 In answer to the question propounded above, Justice Miller continues 
 in the same case : "In the case before us a paper is offered in evidence 
 against the plaintiff containing a representation concerning a mat- 
 ter material to the contract on which the suit is brought, and it is not 
 denied that he signed the instrument, and that the representation is 
 untrue. But the parol testimony makes it clear, beyond a question, that 
 this party did not intend to make that representation when he signed 
 the paper, and did not know he was doing so, and in fact had refused 
 to make any statement on that subject. If the writing containing this 
 representation had been prepared and signed by the plaintiff in his ap- 
 plication for a policy of insurance on the life of his wife, and if the 
 representation complained of had been inserted by himself, or by some 
 
 »* 13 WalL 222, 20 L. Ed. 617, Rlcliards, Ina Cas. 354^ Woodnifif, Ins. Cas. 
 428. 
 
 §124) 
 
 CONTEMPORANEOUS PAROL WAIVERS. 
 
 359 
 
 one who was his agent alone in the matter, and forwarded to the prin- 
 cipal office of the defendant corporation, and acted upon as true by 
 the officers of the company, it is easy to see that justice would author- 
 ize them to hold him to the truth of the statement, and that, as they 
 had no part in the mistake which he made, or in the making of the 
 instrument which did not truly represent what he intended, he should 
 not, after the event, be permitted to show his own mistake or care- 
 lessness to the prejudice of the corporation. 
 
 "If, however, we suppose the party making the insurance to have 
 been an individual, and to have been present when the application was 
 signed, and soliciting the assured to make the contract of insurance, 
 and that the insurer himself wrote out all these representations, and 
 was told by the plaintiff and his wife that they knew nothing at all of 
 this particular subject of inquiry, and that they refused to make any 
 statement about it, and yet, knowing all this, wrote the representation 
 to suit himself, it is equally clear that for the insurer to insist that the 
 policy is void because it contains this statement would be an act of 
 bad faith and of the grossest injustice and dishonesty. And the rea- 
 son for this is that the representation was not the statement of the 
 plaintiff, and that the defendant knew it was not when he made the 
 contract, and that it was made by the defendant, who procured the 
 plaintiff's signature thereto. 
 
 "It is in precisely such cases as this that courts of law in modem times 
 have introduced the doctrine of equitable estoppels, or, as it is some- 
 times called, estoppels in pais. The principle is that where one party 
 has by his representations or his conduct induced the other party to 
 a transaction to give him an advantage which it would be against 
 equity and good conscience for him to assert, he would not, in a court 
 of justice, be permitted to avail himself of that advantage. And al- 
 though the cases to which this principle is to be applied are not as well 
 defined as could be wished, the general doctrine is well understood, 
 and is applied by courts of law as well as equity where the technical 
 advantage thus obtained is set up and relied on to defeat the ends 
 of justice or establish a dishonest claim. 
 
 "It has been applied to the precise class of cases of the one before 
 us in numerous well-considered judgments by the courts of this coun- 
 try.'" Indeed, the doctrine is so well understood and so often enforced 
 that, if, in the transaction we are now considering, Ball, the insurance 
 agent who made out the application, had been in fact the underwriter 
 of the policy, no one would doubt its applicability to the present case. 
 
 I 
 
 3 8 Citing PLUMB r. INSURANCE CO., 18 N. Y. 392, 72 Am. Dec. 526; Row- 
 ley V. Insurance Co., 36 N. Y. 550; Woodbury Sav. Bank & Bldg. Ass'n v. 
 Charter Oak Fire & Marine Ins. Co., 31 Conn. 526; Combs ?• Insurance Co., 
 13 Mo. 148, 97 Am. Dec. 383. 
 
360 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 \ 
 
 
 r I 
 
 Yet the proposition admits of as little doubt that if Ball was the agent 
 of the insurance company, and not of the plaintiff, in what he did in 
 filling up the application, the company must be held to stand just as 
 he would if he were the principal." This celebrated opinion, which has 
 been followed by nearly all of the courts in this country, and which is 
 of so great importance both on that account and because of its logical 
 force and clearness of expression as to justify such an extensive quo- 
 tation, closes with the following quotation from a New York case : •• 
 
 " 'By the interested or officious zeal of the agents employed by the 
 insurance companies in the wish to outbid each other and procure cus- 
 tomers, they not unfrequently mislead the insured by a false or er- 
 roneous statement of what the application should contain, or, taking 
 the preparation of it into their own hands, procure his signature by an 
 assurance that it is properly drawn and will meet the requirements 
 of the policy. The better opinion seems to be that when this course 
 is pursued the description of the risk should, though nominally pro- 
 ceeding from the insured, be regarded as the act of the insurers/ 
 
 "The modern decisions fully sustain this proposition, and they seem 
 to us founded in reason and justice, and meet our entire approval. 
 This principle does not admit oral testimony to vary or contradict 
 that which is in writing, but it goes upon the idea that the writing of- 
 fered in evidence was not the instrument of the party whose name is 
 signed to it; that it was procured under such circumstances by the 
 other side as estop that side from using it or relying on its contents; 
 not that it may be contradicted by oral testimony, but that it may be 
 shown by such testimony that it cannot be lawfully used against the 
 party whose name is signed to it." " 
 
 A few of the states, however, repudiate this doctrine as laid down 
 by the Supreme Court in the Wilkinson Case, and by a majority of 
 the state courts in those cases which follow it. These dissenting courts 
 hold that the effect of proving such an estoppel as we are now dis- 
 cussing, by parol, amounts to an alteration of the written contract, 
 and a clear violation of the parol evidence rule. The courts of New 
 Jersey have been most earnest in their support of this view, the reason 
 for which may be best set forth by quoting the vigorous language of 
 Beasley, C. J., in Dewees v. Manhattan Ins. Co.,'® decided in New 
 Jersey in 1872. In commenting upon the rule laid down in the leading 
 
 •• Rowley v. Insurance Co., 36 N. Y. 550. 
 
 »T There Is undoubtedly a growing tendency among the courts that allow 
 parol waivers frankly to admit that in doing so the parol evidence rule is vio- 
 lated, and an exception established in favor of holders of insurance policies. 
 See Welch v. Association (Wia) U8 N. W. 227; Spalding v. Insurance Co., 7X 
 N. H. 441. 52 Atl. 858. 
 
 •• 35 N. J. Law, 366, Richards, Ins. Cas. 369. See, also, FRANKLIN FIRE 
 
 §124) 
 
 CONTEMPORANEOUS PAROL WAIVERS. 
 
 361 
 
 t* 
 
 m 
 
 New York case— Plumb v. Cattaraugus County Mut. Ins. Co., 
 which the doctrine permitting parol evidence to be admitted to show 
 an equitable estoppel was first enunciated in New York, the Chief 
 Justice said : "In my apprehension, the doctrine can be made to appear 
 plausible only by closing the eyes to the reason of the rule which re- 
 jects, in the presence of written contracts, evidence by parol. That rea- 
 son is that the common good requires that it shall be conclusively pre- 
 sumed in an action at law, in the absence of deceit, that the parties 
 have committed their real understanding to writing. Hence it neces- 
 sarily follows that all evidence merely oral is rejected, whose effect is ' 
 to vary or contradict such expressed understanding. Such rejection 
 arises from the consideration that oral testimony is unreliable, in com- 
 parison with that which is written. It is idle to say that the estoppel, 
 if permitted to operate, will prevent a fraud or inequitable result Most 
 parol evidence contradictory of a written instrument has the same ten- 
 dency, but such evidence is rejected, not because, if true, it ought not 
 to be received, but because the written instrument is the safer criterion 
 of what was the real intention of the contracting parties. In the case 
 now criticised, the party insured stipulated against the existence of 
 buildings within a definite number of feet from the insured property. 
 By the admission of parol testimony, this stipulation was restricted and 
 limited in its effect. This result, no doubt, was strictly just, if we as- 
 sume that the parol evidence was true; but, standing opposed to the 
 written evidence, the law presumes the reverse. The alternative is 
 unavoidable. It is a choice between that which is written and that 
 which is unwritten. In the case cited, the effect of the rule adopted 
 by the court was to give a different effect to the written terms from that 
 which they intrinsically possessed — a result induced by the admission 
 of oral evidence. This I cannot but think was a palpable alteration of 
 the agreement of the parties. The mistake of the court appears to 
 have been in regarding simply the legal effects of the facts which were 
 proved by parol. Receiving that testimony into the case, a clear estop- 
 pel was made out ; but the error consisted in the circumstance that such 
 oral evidence was, on rules well settled, inadmissible." 
 
 INS. CO. V. MARTIN, 40 N. J. Law, 568, 29 Am. Rep. 271, WoodruflP, Ins. Cas. 
 435. 
 
 In the former case the plaintiff was not permitted to show by parol that at 
 the time of the issue of the policy in suit the agent of the insurer knew that 
 the property insured adjoined a stable, which fact, by the terms of the policy, 
 render the insurance void. In the Martin Case the court held inadmissible 
 evidence that the agent of the insurer had inspected the property insured, and 
 knew that it was a country tavern, though it was misdescribed in the policy 
 as a boarding house. 
 
 See all of the New Jersey cases collected in Dimick y. Metropolitan Life 
 Ins. Co. (N. J. Err. & App.) 55 Atl. 291, 62 L. R. A. 774. 
 
 »• 18 N. Y. 392, 72 Am. Dec. 526. 
 
 . 1 
 
3G2 
 
 WAIYKB, AND ESTOPPBL. 
 
 (Ch. 10 
 
 §124) 
 
 CX)NTEMPORANEOUS PAROL WAIVERS. 
 
 363 
 
 1 
 
 Present State of the Authorities. 
 
 It is believed that nearly all the states have accepted the doctrine 
 allowing parol proof of facts contemporaneous with the delivery of 
 the policy constituting an estoppel, whereby the insurer is prevented 
 from obtaining the benefit of a term of his written contract, provided 
 that term invalidates the policy in its inception.*® Earlier cases *^ in 
 some of these states hold that such estoppels could not be proved by 
 parol, and in New York there has been, almost up to the present time, 
 great uncertainty as to the rule in question. As evidence of this we 
 find, as late as 1890, the court of that state saying in Kenyon v. Knights 
 Templar & Masonic Mut. Aid. Ass'n : *^ "The cases in which knowl- 
 edge of the agent through whom insurance is taken may operate to 
 defeat the right of the company to avail itself of the fact so known 
 at the time it is taken are those in which there is no application signed 
 by the assured stating to the contrary of such existing fact, but rests 
 upon a condition expressed in the policy merely. Then it may be pre- 
 sumed that the statement of it in the policy as required by the condition 
 was omitted by mistake or waived. Such is not understood to be the 
 rule when the alleged breach of warranty is founded upon a misstate- 
 ment by the assured in the application made and subscribed by him." *• 
 
 *o Sternaman v. Insurance Co., 170 N. Y. 13, 62 N. B. 763, 57 L. R. A. 318, 
 88 Am. St. Rep. 625; State Mut. Ins. Co. v. Latourette (Ark.) 74 S. W. 300; 
 Born V. Insurance Co., 120 Iowa, 299, 94 N. W. 849. 
 
 Notice to an insurance agent at the time of the application of facts material 
 to tile risk is notice to the insurer, and will prevent it from insisting on a 
 forfeiture for causes within the knowledge of the agent. Home Ins. Co. v. 
 Mendenhall, 104 111. 458, 45 N. E. 1078, 36 L. R. A. 374; Mesterman v. Insur- 
 ance Co., 5 Wash. 524, 32 Pac. 458, 34 Am. St. Rep. 877; Haire v. Insurance Co., 
 93 Mich. 481, 53 N. W. 623, 32 Am. St. Rep. 516; Philadelphia Tool Co. v. Brit- 
 ish-America Assur. Co., 132 Pa. 236, 19 Atl. 77, 19 Am. St. Rep. 596. Con- 
 ditions in a policy are waived, which, to the knowledge of an agent, would 
 make the policy void as soon as delivered. Menk v. Insurance Co., 76 Cal. 51, 
 14 Pac. 837, 9 Am. St. Rep. 158; Follette v. Association, 110 N. C. 377, 14 S. 
 E. 923, 15 L. R. A. 668, 28 Am. St. Rep. 693; Dowling v. Insurance Co., 92 
 Wis. 63, 65 N. W. 738, 31 L. R. A. 112. Contemporaneous parol evidence is 
 admissible to show that the statements of the insured in the application were 
 true, according to the interpretation put upon them by the insured. Farm- 
 ers' & Mechanics' Benev. Fire Ins. Ass'n v. Williams, 95 Va. 248, 28 S. B. 214. 
 A false statement made by the insured through ignorance, but known to be 
 false to the agent, does not avoid the policy. Hartford Ins. Co. v. Haas, 87 
 Ky. 531, 9 S. W. 720, 2 L. E. A. 64; Lynchburg Fire Ins. Co. v. West, 76 Va. 
 575, 44 Am. Rep. 177. 
 
 ♦1 See Jennings v. Chenango County Mut. Ins. Co., 2 Denio (N. Y.) 75; 
 Kennedy v. Insurance Co., 10 Barb. (N. Y.) 285; Sheldon v. Insurance Co., 22 
 Conn. 235, 58 Am. Dec. 420. In the last case, however, the insured offered to 
 show a parol waiver of an executory condition, which plainly could not be 
 done. 
 
 42 122 N. Y. 247, 25 N. E. 299. 
 
 ^i See, also, BOHRBACH y. U^SUEANGB CO., 62 N. Y. 47, 20 Am. Rep. 
 
 But the later cases have gone the full length of holding that the plain- 
 tiff may show by parol that false statements appearing in an applica- 
 tion signed by himself were falsely inserted by the insurer's agent, 
 and that correct answers had in fact been made to the insurer through 
 his agent, thus avoiding a forfeiture of the policy in accordance with 
 its literal terms.** 
 
 In Rhode Island the courts refuse to acquiesce in the general doctrine 
 that the communication of the facts, as they actually exist, to the agent, 
 will estop the insurer to claim a forfeiture by reason of a false repre- 
 sentation due to an untrue statement inserted by the agent in the ap- 
 plication without the consent of the insured, not, however, on the 
 ground that parol evidence of such facts is inadmissible as contradict- 
 ing a term of the policy, but because of the peculiar holding of that 
 state that the agent, in filling out the application, acts for the applicant, 
 and not for the insurer.* '^ Following the view taken by the New Jer- 
 sey Tcourt, as expressed by Chief Justice Beasley in the quotation given 
 above, are to be found on this side of the Atlantic ** only the courts 
 of Massachusetts,*^ and possibly Connecticut;*® and now, since the 
 
 451; Alexander v. Insurance Co., 66 iS. Y. 464, 23 Am. Rep. 76; Allen v. In- 
 surance Co., 123 N. Y. 6, 25 N. E. 309. 
 
 In Dimick v. Insurance Co. (N. J. Err. & App.) 55 Atl. 291, 62 L. R. A. 774, 
 all the New York cases are set forth and examined. The conclusion of the 
 court being "that the Court of Appeals of New York has not adhered with en- 
 tire consistency to any definite rule." 
 
 ** See Sternaman v. Insurance Co., 170 N. Y. 13, 62 N. E. 7C3, 57 L. R. A. 
 318, 88 Am. St. Rep. 625; WOOD v. INSURANCE CO., 149 N. Y. 382, 44 N. 
 E. 80, 52 Am. St. Rep. 733. In the Sternaman Case the plaintiff was allowed 
 to show by parol that true answers had been given to the medical examiner, 
 and not the false ones written by the medical examiner in the application that 
 was signed by the insured, although it was expressly stipulated that the med- 
 ical examiner should be regarded as the agent of the applicant, and that the 
 company would not be bound by any "information or statement not contained 
 in this application, and in the statements made to the medical examiner, re- 
 ceived or acquired at any time by any person." 
 
 *6 See Reed v. Insurance Co., 17 R. I. 785, 24 Atl. 833, 18 L. R. A. 496; 
 Wilson V. Insurance Co., 4 R. I. 141; O'Rourke v. Insurance Co., 23 R. 1. 457, 
 50 Atl. 834, 57 L. R. A. 496, 91 Am. St. Rep. 643. 
 
 *« That the English rule is firmly established in opposition to parol waivers, 
 see Biggar v. Assurance Co. ri902] 1 K. B. 516, 71 K. B. 79, in which the agent 
 in preparing the application, which he falsified, was held to represent the in- 
 sured, and not the insurer. 
 
 *7 Batchelder v. Insurance Co., 135 Mass. 449; CAKES v. INSURANCE CO., 
 135 Mass. 248; Jenkins v. Insurance Co., 7 Gray (Mass.) 370; Lee v. Insurance 
 Co., 3 Gray (Mass.) 583; Barrett v. Insurance Co., 7 Cush. (Mass.) 175. 
 
 *8 RYAN V. INSURANCE CO., 41 Conn. 168, 19 Am. Rep. 490, Richards, Ins. 
 Cas. 408. 
 
 But in this case the refusal of the court to hold the insurer estopped by 
 the agent's writing a false statement in the application was based rather on 
 the grounds that the act was beyond the agent's authority, and that the insured 
 
 I. 
 
 ri 
 
3G4 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 I 
 
 1 
 
 j 
 ' i 
 
 I I 
 
 decision in the case of Northern Assur. Co. v. Grand View Bldg. Ass'n,** 
 it would seem that the Supreme Court of the United States may be 
 classed as an advocate of this view of the question. Prior to the decision 
 of that case, which was rendered in January, 1902, it was generally 
 thought that the Supreme Court had fully committed itself to the view 
 taken by the majority of the state courts. In fact, the case of Union 
 Mut. Life Ins. Co. v. Wilkinson,*^® from which we have quoted ex- 
 tensively, has long been regarded as the leading authority supporting 
 this doctrine. This case has been followed in two other cases in the 
 same court, '^^ and has been cited with approval in many others. In 
 New York Life Ins. Co. v. Fletcher," decided in 1886, the court dis- 
 tinguished the Wilkinson Case on the ground that in the latter case the 
 application contained no limitation upon the authority of the agent to 
 bind his principal by making representations or receiving information 
 on behalf of the insurer. The theory of the decision in the Fletcher 
 Case, however, undoubtedly shows a tendency to depart from the doc- 
 trine announced by the court in the Wilkinson Case, since it approves 
 the Connecticut case — Ryan v. World Mut. Life Ins. Co.**' — ^in holding 
 that the insured could not escape the consequences of a false represen- 
 tation in the application that has been signed by himself by proving 
 that correct information was given to the agent at the time the appli- 
 cation was made. The case of Northern Assur. Co. v. Grand View 
 Bldg. Ass'n ®* arose upon these facts, as found by the jury in the trial 
 court : The defendant issued to the plaintiff a policy of fire insurance 
 containing the usual clause avoiding the insurance if the insured then 
 had, or should thereafter procure, any other contract of insurance on 
 the same property without the consent of the insurer indorsed on the 
 
 could Dot deny knowledge of the false statement, than because parol proof of 
 the facts was incompetent. See Peck v. Insurance Co., 22 Conn. 575, and 
 Woodbury Sav. Bank & Bldg. Ass'n v. Charter Oak Fire & Marine Ins. Co., 31 
 Conn. 517, which seem to accord with the general rule, 
 
 *» 183 U. S. 308, 22 Sup. Ct. 133, 46 L. Ed. 213. 
 
 The Circuit Court of Appeals for the Seventh Circuit has also apparently 
 so held. See Union Nat Bank v. German Ins. Co., 34 U. S. App. 397, 18 C. C. 
 A. 203, 71 Fed. 473. 
 
 60 13 Wall. 222, 20 L. Ed. 617, Richards, Ins. Cas. 354, Woodruff, Ins. Cas. 
 423. 
 
 61 American Life Ins. Co. v. Mahone, 21 Wall. 152, 22 L. Ed. 593; Eames v. 
 Insurance Co., 94 U. S. 621, 24 L. Ed. 298. 
 
 52 NEW YORK LIFE INS. CO. v. FLETCHER, 117 U. S. 519, 6 Sup. Ct. 837, 
 29 L. Ed. 934, Woodruff, Ins. Cas. 527. 
 
 83 RYAN V. INSURANCE CO., 41 Conn. 168, 19 Am. Rep. 490, Richards, Ins. 
 Cas. 408. 
 
 But that the Insured Is not in all cases bound by all the terms written in a 
 policy accepted without reading, see McMaster v. Insurance Co, 183 U^ &. 
 25, 22 Sup. Ct. 10, 46 L. Bd. 64. 
 
 s« 183 U. S. 308, 22 Sup. Ct 133, 46 L. Ed. 213. 
 
 gm) 
 
 CONTEMPORANEOUS PAROL WAIVERS. 
 
 365 
 
 policy in writing. It also contained the stipulation that no representa- 
 tive of the company should have power to waive this condition unless 
 such waiver should be written on the policy. At the time of the issue 
 of this policy the insured had other insurance on the same property, 
 of which he gave information to the agent of the insurer, but the con- 
 sent of the insurer was not indorsed on the policy. The sum of these 
 two concurrent policies was $4,000, while the total value of the property 
 insured at the time it was destroyed by fire was $4,140. Proofs of 
 loss being duly made, the insurer declined to pay on the ground that 
 the policy had become void by breach of the condition agamst other 
 insurance. In the Circuit Court the plaintiff was allowed to introduce 
 parol evidence showing that the other insurance was known to the 
 agent at the time of the issue of the policy in suit, and the insurance 
 company was held to be estopped thereby to claim the benefit of the 
 forfeiture under the condition against other insurance. In the Circuit 
 Court of Appeals for the Eighth Circuit," the judgment of the lower 
 court was affirmed; Sanborn, J., dissenting. In the Supreme Court 
 of the United States, however, the judgment of the Circuit Court of 
 Appeals was reversed by a divided court ; Chief Justice Fuller and Jus- 
 tices Harlan and Peckham dissenting. The majority of the court held 
 that evidence of the information given to the agent of the existence 
 of other insurance was not admissible to establish an estoppel against 
 the insurer, but on what grounds this decision is based it is extremely 
 difficult to ascertain. They are probably to be found in this extract 
 from the opinion of Mr. Justice Shiras, which the great importance of 
 the case justifies our quoting: "The plaintiff's case stands solely on 
 the proposition that because it is alleged, and the jury have found, 
 that the agent had notice or knowledge of the existence of insurance 
 existing in another company at the time the policy in suit was executed 
 and accepted, and received the premium called for in the contract, 
 thereby the insurance company is estopped from availing itself of the 
 protection of the conditions contained in the policy. In other words, 
 the contention is that an agent with no authority to dispense with or 
 alter the conditions of the policy could confer such power upon him- 
 self by disregarding the limitations expressed in the contract; those 
 limitations being, according to all the authorities, presumably known to 
 the insured. It was not shown that the company, when it received the 
 premium, knew of the outstanding insurance, nor that, when made 
 aware of such insurance, it elected to ratify the act of its agent in ac- 
 cepting the premium. On the contrary, all the record discloses is that 
 the jury found that the agent knew, when the policy in the defendant 
 company was issued and delivered to the plaintiff, that there was then 
 subsisting fire insurance to the amount of $1,500 in another fire in- 
 
 •• 41 C. C. A. 207, 101 Fed. 77, 
 
3G6 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. la 
 
 surance company, and that such knowledge had been communicated to 
 the agent by or on behalf of the assured. There is no finding that the 
 agent communicated to the company, or to its general agent at Chi- 
 cago, at the time he accounted for the premium, the fact that there was 
 existing insurance on the property, and that he had undertaken to 
 waive the applicable condition. Indeed, it appears from the letter of 
 defendant's manager at Chicago, to whom the proofs of loss had been 
 sent, which letter was put in evidence by the plaintiff, and is set forth 
 in the bill of exceptions, that the additional insurance held by the plain- 
 tiff was without the knowledge or consent of the company; and it fur- 
 ther appears, and was found by the jury, that, immediately on the com- 
 pany's being informed of the fact, the amount of the premium was 
 tendered by the agents of the company to the insured. So that there is 
 not the slightest ground for claiming that the insurance company,, 
 with knowledge of the facts, either accepted or retained the premium. 
 The plaintiff's case, at its best, is based on the alleged fact that the 
 agent had been informed at the time he delivered the policy and received 
 the premium that there was other insurance. The only way to avoid 
 the defense and escape from the operation of the condition is to hold 
 that it is not competent for fire insurance companies to protect them- 
 selves by conditions of the kind contained in this policy. So to hold 
 would, as we have seen, entirely subvert well-settled principles de- 
 clared in the leading English and American cases, and particularly in 
 those of this court." From the portion of the opinion thus quoted, it 
 will be seen that Justice Shiras apparently gives the following reasons 
 for a decision that is opposed to the strong and almost unbroken cur- 
 rent of American authority, and certainly inconsistent with the leading 
 early cases decided by the Supreme Court : (1) That the agent, by rea"^ 
 son of the conditions contained in the policy, presumably known to 
 the insured, had no authority to alter the conditions of the policy, and 
 that he could not confer such power on himself. As to this statement, 
 It is submitted that, whatever may be the validity of such a limitation 
 upon the agent's power to waive conditions subsequent, it cannot have 
 any effect upon his power while representing his company in making 
 a contract, so to act as to estop the company from insisting upon 
 a condition precedent, which the insured had a right to suppose, un- 
 der the circumstances, had been waived." (2) That there was no 
 evidence that the agent communicated to the company his knowledge 
 of the other insurance existing at the time the policy in suit was de- 
 
 »« On this point, see especially WOOD v. INSURANCE CO., 149 N Y 382 
 44 N. E. 80. 52 Am. St. Rep. 733, cited by the court, 183 U. S., at p'age* 327! 
 22 Sup Ct. 133. 46 L. Ed. 213. See, also, Continental Life Ins. Co. v. Chamber' 
 
 if 'J' }R^- ^- ^^* ^^ ^'"P- ^^ ^'^' 33 L. Ed. 341; Medley v. Insurance Co. (W. 
 Va.) 47 S. E. 101. 
 
 §124) 
 
 CONTEMPORANEOUS PAROL WAIVERS. 
 
 3G7 
 
 livered, and that therefore the company had never had knowledge 
 of such other insurance. (3) That the company had never ratified the 
 act of the agent in delivering the policy with knowledge of the other 
 insurance, since, upon acquiring information of that fact, it had imme- 
 diately tendered the amount of the premium to the insured. 
 
 In view of the authorities, as well as of the principles of reason in- 
 volved, the reasons thus given for so radical a departure from a doc- 
 trine so generally accepted as that of the admissibility of evidence of 
 parol contemporaneous waivers seem truly remarkable. The doctrine 
 of the New Jersey cases, which are approved by Justice Shiras in the 
 opinion under discussion, is at least logical and consistent throughout. 
 Those cases hold that the evidence is simply inadmissible because it 
 alters a written contract, and that the mode of making the contract is 
 immaterial — ^whether it was made directly with the insurer, or by the 
 intervention of an agent. But the inference to be drawn from the opin- 
 ion of the Supreme Court in the Northern Assurance Company Case 
 is that if the information had been given to the insurer, or to an agent 
 having the power to receive that information, evidence thereof would 
 have been admissible to show an estoppel, but that another — an entirely 
 different — rule applies in this case, because, forsooth, the policy, de- 
 livered after the virtual completion of the contract, contained a stipu- 
 lation that the agent, who had up to that time been the sole representa- 
 tive of the insurer in the premises, had no authority to waive any con- 
 dition of that policy. Such an ex post facto restriction is clearly in- 
 competent to limit the apparent powers of the insurer's agent, even if it 
 be granted that such a restriction can be valid at all when questions of 
 such estoppels as we are now discussing are involved. There seems 
 to be no legitimate means of escape from the conclusion that, as to 
 all transactions affecting the inception of the policy, the knowledge of 
 the agent must, as a matter of law, be deemed to be the knowledge of 
 the insurer. 
 
 Nor is the position of the court, essentially weak in itself, well for- 
 tified by authority. The court, after citing some early English cases, 
 none of which are directly in point, cites cases from Massachusetts 
 and Connecticut, and makes long quotations from New Jersey cases, 
 in all of which states, as heretofore stated, the prevailing doctrine as 
 to parol estoppels is denied. It then cites some New York cases, 
 which, however, are admitted to have been overruled. Other cases are 
 cited from Michigan, Rhode Island, and Vermont, holding that an 
 agent can waive conditions only in the mode prescribed by the policy. 
 These cases, however, refer only to the waiver of conditions subse- 
 quent, and do not involve the question of estoppel to claim a forfeiture 
 under a condition precedent, affecting the inception of the contract. 
 
 The strongest support for the decision in the principal case is found 
 
 
368 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 in Carpenter v. Providence Washington Ins. Co.," in which the facts 
 were very similar, except that in the Carpenter Case there was not only 
 existing insurance, alleged to have been known to the agent of the in- 
 surer, but there was also other insurance subsequently procured in 
 clear violation of the condition of the policy providing that such other 
 insut-ance should avoid the policy unless consent thereto was indorsed 
 on the policy in writing. In that case, in an opinion by Story, J., the 
 court held that parol notice given to the agent of such other insurance 
 was not a sufficient compliance with the conditions of the policy. It 
 is plain, however, from the opinion, that the court had in mind as 
 much the breach of the condition subsequent as of the condition pre- 
 cedent; and, as we have already seen, a majority of the courts hold 
 that any mode of waiving a condition subsequent required by the 
 policy must be strictly complied with, if insisted upon. Further, it 
 has generally been thought that the Carpenter Case, in so far as it 
 holds that a parol contemporaneous waiver cannot be shown, had 
 been repudiated by the Supreme Court in subsequent decisions." 
 
 The court disposed in summary manner of the previous cases in 
 the same court which had been supposed to have committed it to the 
 view that parol evidence of facts communicated to the agent is ad- 
 missible to prove such an estoppel as was claimed by the plaintiff in 
 the case. Union Mut. Life. Ins. Co. v. Wilkinson '^^ was distinguished 
 on the ground that the false statement made in the signed applica- 
 tion was not a part of the contract, so that the evidence of such falsity 
 was admissible, as, in effect, proving the non-execution of the state- 
 ment. But the case of American Life Ins. Co. v. Mahone,'* in which 
 the false statements were made warranties and parts of the policy, 
 and which expressly followed Union Mut. Life Ins. Co. v. Wilkinson, 
 is not even mentioned by the court; nor is Continental Life Ins. Co. v. 
 Chamberlain." Eames v. Insurance Co.,«* which also expressly fol- 
 
 5T 16 Pet. 495, 10 L. Ed. 1044. , „ ^ 
 
 58 See McElroy v. Assurance Co., 94 Fed. 997, 36 C. C. A. 615; Pechner v. 
 Insurance Co., 65 N. Y. 207. See, also. Fireman's Fund Ins. Co. v. Norwood, 
 32 U. S. App. 490, 69 Fed. 74, 78, 16 C. C. A. 136. 
 
 59 Union Mut. Life Ins. Co. v. Wilkinson, 13 Wall. 222, 20 L. Ed. 617, Rich- 
 ards, Ins. Cas. 354, Woodruff, Ins. Cas. 423. 
 
 60 21 Wall. 152, 22 L. Ed. 593. . . ^^ 
 
 •1 132 U. S. 304, 10 Sup. Ct. 87, 33 L. Ed. 341. In this case the plaintiff was 
 allowed to show by parol that the insured had told the agent, who was made 
 the agent of the insurer by an Iowa statute, that he had other insurance m 
 fraternal associations, which the agent declared to be no insurance, and so 
 wrote in the application. The court seemed to distinguish this case from the 
 Fletcher Case on the ground that the limitations in the policy upon the power 
 of the agent to modify or waive any terms of the contract were, in a sense, 
 ne-^atived by the statute, and tliat the term "other insurance" was not of such 
 
 62 94 U. S. 621, 24 L. Ed. 298. 
 
 CONTEMPORANEOUS PAROL WAIVERS. 
 
 369 
 
 §124) 
 
 lows the Wilkinson Case, was distinguished on the same principle 
 
 as was that case. 
 
 In concluding this discussion of the Northern Assurance Case, the 
 length of which is excused only by the great importance of the prin- 
 ciple involved, it is proper to note that the facts as found by the jury 
 come dangerously near to justifying an imputation of bad faith on 
 the part of the insured. Even the well-known liberal valuation of 
 the jury placed the value of the property insured at little more than 
 $100 beyond the aggregate sum of the two concurrent policies. No 
 insurance company would be willing so completely to cover with in- 
 surance any property, as the temptation to secure a ready and easy 
 market for the property by incendiary means would be too great to 
 make the risk safe. The insured in this case must have known that 
 this second insurance contract was in fraud of the company, and, as 
 we have already seen, the insured is in no position to claim an estop- 
 pel as against the insurer unless his own hands are clean. He must 
 have been honestly misled by the act alleged as an estoppel. It is 
 probable that this suspicion of fraud on the part of the plaintiff in this 
 case had much to do with inducing the majority of the court to deliver 
 an opinion which cannot but be regretted. For there can be little 
 doubt but that, whatever may be the merits of the particular case, stu- 
 dents of insurance law will join the Chief Justice and Justices Harlan 
 and Peckham in their dissent from the opinion as written by Justice 
 Shiras." 
 
 certain meaning as to preclude the admission of parol evidence to explain It. 
 See this case followed, and the Northern Assur. Co. Case distinguished, in 
 CarroUton Furniture Mfg. Co. v. American Credit Indemnity Co., 124 Fed. 25, 
 59 C. C. A. 545. 
 
 «« It is probable that this case will not be generally followed. In conclud- 
 ing his opinion in Virginia Fire & Marine Ins. Co. v. Richmond Mica Co. 
 (Va. 1904) 46 S. B. 463, Whittle, J., speaks as follows: "Much reliance has 
 been placed by counsel for the plaintiff in error upon the opinion of Mr. Jus- 
 tice Shiras in the case of Northern Assur. Co. v. Grand View Bldg. Ass'n, 183 
 U. S. 308, 23 Sup. Ct 183, 46 L. Ed. 214, reversing the Judgment of the Cir- 
 cuit Court of Appeals of the Eighth Circuit. While the pronouncements of 
 that great comrt must always command the highest respect, its judgment in 
 the particular case is deprived of much value as a precedent by the circum- 
 stance that it is not in harmony with many former decisions of that court, 
 and that the Chief Justice, Mr. Justice Harlan, and Mr. Justice Peckham did 
 not concur in the opinion of the majority. Since that decision was rendered, 
 Mr. Justice Shiras has retired from the bench, and been succeeded by Mr. Jus- 
 tice Day, who presided in the Circuit Court of Appeals in the case of Queen 
 Insurance Co. v. Union Bank & Trust Co., Ill Fed. 699, 49 C. C. A. 555, where 
 a different conclusion was reached. So there are now on that bench at least 
 four justices who entertain views opposed to those of the majority, as ex- 
 pressed in the case referred to. In this state of the law, this court can 
 hardly be expected to abandon its own well-considered precedents to follow 
 
 Vance Ins. — 24 
 
370 
 
 WAIVEll AND ESTOrPEL. 
 
 (Ch. 10 
 
 Summary, 
 
 As the conclusion to be drawn from the foregoing discussion of 
 the cases, we may add this proposition to those which have been pre- 
 viously stated: That when an insurer, through his agent, delivers 
 a policy of insurance as a valid contract, and receives the premium 
 payable thereunder as for valid insurance, knowing at the time of de- 
 livery that the contract, in accordance with its terms, is null and void, 
 the insurer will be deemed to have waived the operation of the avoid- 
 ing conditions ; and evidence of such a waiver or estoppel may be by 
 parol. Such evidence is received, not for the purpose of altering the 
 written contract made by the parties, or of varying any of its terms, 
 nor to show that the contract intended to be made was different from 
 the contract as written, but merely for the purpose of showing that, 
 under the circumstances attending the making of that contract, it 
 is inequitable for the insurer to claim any advantage under the terms 
 in question. The rule above stated— that the insured, by signing the 
 application or accepting a delivered policy, must be deemed to consent 
 to all the terms written therein — does not interfere with the applica- 
 tion of the principle just stated. He must admit that the policy re- 
 ceived, and upon which he seeks to recover, is the contract which he 
 made; but even then he may show by parol such facts as will estop 
 the insurer to enforce some of the conditions of the contract thus ad- 
 mitted to have been made. But here again must be noted an impor- 
 tant difference between the constructive knowledge of the contents 
 of the application or policy which the law must necessarily impute to 
 the insured, and his actual knowledge of falsehood or fraud in these 
 instruments. When the insured has no actual knowledge of false- 
 hood or fraud in these instruments, he will not be affected with bad 
 faith, and is therefore in a condition to claim an estoppel. But if he 
 has such actual knowledge, he aids and abets the insurance agent in his 
 purpose to defraud the insurer, and should not be heard demanding 
 any equitable relief from the legal consequences resulting from his 
 own fraudulent conduct.'* 
 
 the questionable ruling of another tribunal." See, also, Oarrollton Furniture 
 Mfg. Co. V. American Credit Indemnity Co., 124 Fed. 25, 59 C. C. A. 545, dis- 
 tinguishing the Northern Assur. Co. Case. The Northern Assur. Co. Case was 
 followed in West Virginia in Maupin v. Insurance Co., 45 S. E. 1003, but dis- 
 approved in Medley v. Insurance Co., 47 S. E. 101, 105. It is also disapproved 
 in Orient Ins. Co. v. McKnight, 197 111. 190, 64 N. K 339. 
 
 64 NEW YORK LIFE INS. CO. v. FLETCHER, 117 U. S. 519, 6 Sup. Ct 837, 
 29 L. Ed. 934; Clemans v. Supreme Assembly, 181 N. Y. 485, 30 N. B. 496, 16 L. 
 R. A. 33; Lewis v. Insurance Co., 39 Conn. 100. But see Sun Life Ins. Co. v. 
 PhilUps (Tex. Civ. App.) 70 S. W. 603. 
 
 g§ 125-126) 
 
 WHAT CONSTITDTES A WAIVER. 
 
 371 
 
 WHAT CONSTITUTES A WAIVER. 
 
 125. Tie Insnpep will be deemed to have waived • right ezistiac 
 
 imder a contract of insurance only when the following oircnm- 
 stances exist i ^^ 
 
 (a) The right must be known to the insurer or his proper agent. 
 
 The words or conduct of the insurer must be such as to cause 
 the insured reasonably to beUeve that such right has been re- 
 linquished. 
 
 (c) The insured must, in honest reliance upon such belief, act in 
 such a way as to change his condition, and subject himself to 
 loss or injury if the right were insisted upon. 
 
 126. In some Jurisdictions waivers lacking the third element Co) 
 
 above are enforced; the intention of the insured to regard the 
 forfeited policy as still existing being regarded as sufficient, 
 Respective of its expression or its effect upon the conduct of 
 the insured. It is difficult to Justify such a doctrine on either 
 principle or authority. ~wi« 
 
 Assuming that evidence for the purpose of showing a parol waiver 
 of conditions in an insurance policy is admissible, it next becomes 
 necessary to determine what facts must be proved to exist in order to 
 establish such a waiver. In view of the present state of the authorities, 
 his determination is not without difficulty. In some jurisdictions the 
 terms waiver" and "estoppel" are divorced from their usual joint 
 significance so that evidence not sufficient to constitute a technical 
 estoppel will be regarded as sufficient to raise an implication of a 
 waiver while other courts hold that nothing short of proof of an estop-, 
 pe Iwi 1 estabhsh an implied waiver. The distinction existing between 
 a strict waiver and an estoppel has already been discussed. When the 
 waiver IS express, the distinction is not difficult; but it was concluded 
 that, when the waiver is to be implied from the conduct of the in- 
 surer, by the better authority, the distinction ceases to be of prac 
 Tl ^^Pf/tf ^^- It therefore becomes necessary now to state the 
 elements that go to make up such an implied waiver or estoppel 
 
 A Right cannot be Waived unless Known. 
 
 An estoppel is established for the puqiose of preventing a wrongs 
 It cannot be possible for the insurer to w^ng the insured by aTS 
 of conduct upon which the latter may rely to his prejudice Lless the 
 nsurer knew of the existence of the righi which LUduct a^p^^^^^ 
 to Ignore. The mere fact that the insured mistakes the mS o 
 the insurer's conduct cannot affect the rights of the parties where th. 
 
 w misleading." Thus, if the insurer, knowing of the breach of a con- 
 J, - micii. 40^ i Am. Kep. 670; Allen y. Insurance Ob, 12 Vt 366; 
 
372 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 §§ 125-126) 
 
 WHAT CONSTITUTES A WAIVER. 
 
 373 
 
 dition of the policy which would avoid it in accordance with its terms, 
 accepts a premium, the insured may naturally enough infer that the 
 insurer does not intend to insist upon the forfeiture to which he is 
 entitled, and, so thinking, continues to pay his premiums, which he 
 certainly would not do if he considered the policy annulled. The in- 
 surer knows that he is misleading the insured to his hurt, and thereby 
 wrongs him; consequently he is estopped by the law from reaping 
 the reward of his own wrong. So the receipt by the insurer of a pre- 
 mium paid after a breach of condition which is unknown to him 
 may induce the insured to continue his payments upon the suppo- 
 sition that a forfeiture will not be claimed. But here the insurer has 
 done the insured no legal wrong, not having consciously misled him. 
 Therefore he is not estopped to set up the breach of condition as 
 creating a forfeiture. So, in Globe Mut. Life Ins. Co. v. Wolff,«« it 
 was held that the receipt of a premium by the insurer without knowl- 
 edge that the insured was then residing in a district prohibited by the 
 policy would not waive a forfeiture already incurred on account of the 
 breach of this condition of residence. 
 
 The Conduct of the Insurer must be Misleading. 
 
 The insurer cannot be estopped unless his words and conduct were 
 such as to give the insured reasonable cause for believing that he had 
 relinquished the right in question. Mere silence on the part of the 
 insurer after acquiring knowledge of the right to enforce a forfeiture 
 will not afford the insured any reasonable ground for supposing that 
 
 Finley v. Insurance Co., 30 Pa. 311, 72 Am. Dec. 705; Moore ▼. Life Ass'n 
 (Mich.) 95 N. W. 573; Dover Glassworks Co. v. American Fire Ins. Co., 1 Marv. 
 (Del.) 32, 29 Atl. 1039, 65 Am. St. Rep. 264. 
 
 In Skinner v. Norman, 165 N. Y. 565, 59 N. B. 309, 80 Am. St Rep. 776, the 
 agent of the insured, who procured the insurance, told the insurer that he did 
 not know whether the property was incumbered or not The insurer issued 
 the policy without further inquiry, and was held to thereby waive that pro- 
 vision of the policy declaring the insurance void if the property should be in- 
 cumbered. — A v* 
 
 The knowledge of the insurer must be of such character as to effect nis 
 conscience. Constructive notice is not sufficient Therefore record of an in- 
 cumbrance is not such notice to the insurer as to affect him with an estoppel. 
 Phoenix Ins. Co. v. Overman, 21 Ind. App. 516, 52 N. E. 771; Milwaukee Me- 
 chanics' Ins. Co. v. Niewedde, 12 Ind. App. 145, 39 N. E. 757. 
 
 So, by the better authority, the insurance company is not charged with 
 knowledge of statements made in previous applications of the insured, kept on 
 file, so as to be estopped to take advantage of a misrepresentation in a subse- 
 quently accepted application, unless the officers of the company had actual 
 knowledge of such statements. Hackett v. Supreme Council, 168 N. Y. 588, 
 (X) N. E. 1112, affirming 44 App. Div. 524, 60 N. Y. Supp. 806. 
 
 Contra, O'Rourke v. Insurance Co., 23 R. L 467, 50 Atl. 834, 57 L. E. A. 496, 
 91 Am. St Rep. 643. 
 
 •« 95 U. S. 326, 24 L. Ed. 387. 
 
 the insurer does not at the proper time intend to claim the benefit of 
 the forfeiture,®^ unless the terms of the policy or the peculiar circum- 
 stances of the case impose upon him the duty of affirmative action. •• 
 In opposition to this principle, however, it is held in many states that 
 it is the duty of the insurer to inform the insured of a forfeiture that 
 has come to his knowledge, and to declare the policy canceled, and that 
 if he fails to do so, and allows the insured to continue in the belief 
 that the policy is still valid, the insurer will be estopped to deny its 
 validity.®® 
 
 These latter cases appear to proceed upon the theory that a stipulation 
 that a specified act — procuring other insurance, for example — shall 
 render the policy "void," is to be construed as if it read "voidable at 
 the option of the insurer" ; thus requiring affirmative action on the part 
 of the insurer in order to avoid the contract, as in the case of for- 
 feiture of a lease for condition broken by entry of the lessor. But, 
 it seems more reasonable, and certainly more in accord with authority, 
 to regard the contract of insurance after the breach of a condition that 
 by its terms renders the insurance "void," not as merely voidable, but 
 rather as void until revived by an affirmative act of the insurer. The 
 view that the contract after condition broken becomes merely voidable, 
 and so binding upon the insurer until avoided by cancellation within 
 a reasonable time, and before loss, is well illustrated by Swedish-Ameri- 
 can Ins. Co. v. Knutson.''" A provision of the contract declared that 
 the policy should be "null and void" if the insured should procure other 
 insurance without the consent of the insurer, to be noted on the policy. 
 Without consent, the insured procured other insurance, and then no- 
 
 •7 Equitable Life Assur. Soc. v. McElroy, 83 Fed. 631, 28 C. C. A. 365; Ad- 
 reveno v. Life Ass'n (C. C.) 38 Fed. 806; Gibson Electric Co. v. Liverpool & 
 London & Globe Ins. Co., 159 N. Y. 418, 54 N. E. 23; Armstrong v. Insurance 
 Co., 130 N. Y. 560, 29 N. E. 991; Titus v. Insurance Co., 81 N. Y. 410; Mueller 
 V. Insurance Co., 87 Pa. 399; Knickerbocker Ins. Co. v. Gould, 80 111. 388; 
 Boyd V. Insurance Co., 90 Tenn. 212, 16 S. W. 470, 25 Am. St. Rep. 676; Find- 
 eisen v. Insurance Co., 57 Vt. 520; JOHNSON v. INSURANCE CO., 41 Minn. 
 396, 43 N. W. 59; Insurance Co. v. Kittle, 39 Mich. 51; Robinson v. Fire 
 Ass'n, 63 Mich. 90, 29 N. W. 521; Davey v. Insurance Co., Fed. Cas. No. 3,590; 
 West End Hotel & Land Co. v. American Fire Ins. Co. (C. C.) 74 Fed, 114; 
 Morrow v. Insurance Co., 84 Iowa, 256, 51 N. W. 3. 
 
 «8 For a case in which the circumstances were such as to impose on the 
 insurer a duty to speak, so that silence worked a proper estoppel, see Ben- 
 ninghofif v. Insurance Co., 93 N. Y. 503. Also, see Morrison v. Insurance Co . 
 69 Tex. 353, 6 S. W. 605, 5 Am. St. Rep. 63. 
 
 «• Phoenix Ins. Co. v. Spiers, 87 Ky. 285, 8 S. W. 453; Grubbs v. Insurance 
 Co., 108 N. C. 472, 13 S. E. 236, 23 Am. St. Rep. 62; Hamilton v. Insurance Co 
 94 Mo. 353, 7 S. W. 261; Williamsburg City Fire Ins. Co. v. Gary, 83 111 453- 
 Phoenix Ins. Co. v. Johnston, 143 111. 106, 32 N. B. 429; Orient Ins. Co v Me- 
 Knight, 197 111. 190, 64 N. E. 339; Home Ins. Co. of New York v. Marple 1 
 Ind. App. 411, 27 N. E. 633. ' 
 
 TO 67 Kan. 71, 72 Pac. 526. 
 
374 
 
 WAIVER AND ESTOPPBL, 
 
 (Ch. 10 
 
 tified the insurer of that fact The latter made no response to this 
 notice, and was held thereby to have waived its right to avoid the 
 policy, the court saying: "The company claims that, even though it 
 received proper notice of the additional insurance,' it did not indorse its 
 consent thereto upon the policy, and hence that the policy was void. 
 Some two months elapsed from the giving of the notice until the loss 
 occurred. Upon receiving the notice the company had a right to take 
 advantage of the provisions of its policy and by-laws. The provisions 
 quoted therefrom were inserted for its sole benefit. When it assumed 
 to remain passive, the assured was deprived of any opportunity to 
 protect himself if the policy were to be forfeited. The term Void,* as 
 used in the contract, is to be regarded as meaning that the insurer 
 had, at its exclusive option, the right to treat the policy as a nullity. 
 It was put to its election whether or not it would do so upon receipt 
 of the notice, and, having failed to act within a reasonable time, it is 
 estopped to claim a forfeiture when it became to its advantage to do so, 
 after loss had occurred." 
 
 In conclusion we may safely say that by the better reasoned cases, 
 if not by the clear weight of authority, mere silence is not sufficient 
 to constitute a waiver, in the absence of circumstances of estoppel. The 
 insurer must have actually and consciously misled the insured. 
 
 The Insured must have been Prejudiced. 
 
 By what appears to be the better reason, and by the better consid- 
 ered, though not the more numerous, cases, it is held not to be sufficient 
 that the insurer has done acts manifesting his intention to regard a 
 policy as still existing, although knowing a ground of forfeiture. It 
 is further necessary that the insured, acting in reliance upon this in- 
 tention of the insurer, as expressed by his acts, shall have so changed 
 his position as to be left in a worse condition than would have been 
 his if he had known that the forfeiture was to be enforced. That is 
 to say, the insured must have relied upon this apparent intention of 
 the insurer, and so have been induced to pay out money or do some 
 other act which he would otherwise have left undone, or in some other 
 way have suflFered detriment. In short, an implied waiver should not 
 be considered as established unless the insured shall have proved the 
 existence of all facts necessary to constitute an estoppel in pais. 
 
 The Opposing View — No Estoppel Necessary. 
 
 In some jurisdictions the waiver of rights under insurance policies 
 has been assimilated to that different class of waivers to be found in 
 other branches of the law, whereby a person entitled to escape a just 
 obligation by pleading a mere technical defense declines to avail him- 
 self of that right. Such waivers do not require any consideration, and 
 elements of estoppel are only faintly to be discerned in cases in which 
 
 ga 125-126) 
 
 WHAT CONSTITUTES A WAIVER. 
 
 375 
 
 they arise. Thus a person may, without consideration or estoppel, 
 bind himself by his waiver of a right to plead the statute of limita- 
 tions, if he relinquishes that right in the manner prescribed by law. 
 So a surety entitled to plead in defense of an action on the debt an 
 extension of time to the principal debtor may waive that right by merely 
 acknowledging himself to be liable.''^ Such a waiver is binding with- 
 out consideration or estoppel. Likewise the indorser of a negotiable 
 instrument may waive a defense of a lack of notice of dishonor by 
 merely promising to pay, without more.^* Waivers of this class are 
 peculiar, resting largely upon the conditions which have given rise 
 to the peculiar rules governing in the law merchant, and can scarcely 
 serve as proper precedents or even analogues for the determination 
 of insurance causes. Nevertheless there is undoubtedly a strong tend- 
 ency manifested by the courts to extend to the insurance contract 
 the rule validating waivers that are supported neither by a considera- 
 tion, nor by circumstances of estoppel. This is especially true with 
 regard to those conditions of the insurance policy that pertain to mat- 
 ters after a loss, such as those requiring notice of loss, or proofs of 
 loss, appraisement, or arbitration. These conditions, operating subse- 
 quently to the loss, do not go to the main purpose of the contract, 
 which is to secure current protection. After the loss takes place, 
 the liability of the insurer becomes fixed in accordance with the exe- 
 cuted terms of the contract, and the purpose of these subsequently 
 operating conditions is merely to put the insurer in possession of such 
 facts and information as may be necessary to enable him fairly to ad- 
 just the loss. They operate by their breach to defeat a right already 
 fixed, as do conditions subsequent. They are therefore regarded with 
 even more of disfavor by the courts than are those other conditions 
 operating before a loss, as conditions precedent to the continued exist- 
 ence of the policy. This distinction is made strikingly manifest by 
 the rule already stated — that, while circumstances rendering the pay- 
 ment of a premium at the time of its maturity absolutely impossible 
 do not prevent the forfeiture of the insured's rights in accordance with 
 the terms of the policy, yet impossibility of giving notice of loss or 
 proofs of loss within a stipulated time does excuse a failure to do so."' 
 In view of the highly technical character of these conditions to be 
 performed after loss, the courts go great lengths in order to prevent 
 merely technical forfeitures. In order to do this, it has been dis- 
 tinctly held in some states that any expression of intention, or any con- 
 duct from which can be implied an intention on the part of the in- 
 
 \ 
 
 '» See Hooper v. Pike, 70 Minn. 829, 72 N. W. 8?9, 68 Am. St Rep. 512. 
 »* Sigerson v. Mathews, 20 How. 496, 15 L. Ed. 989. 
 «• See ante, p. 96.^ 
 
376 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 surer not to claim a technical forfeiture, will constitute a waiver,^* 
 which, being once made, can never be revoked.""^ Thus in a Michi- 
 gan case ^® proofs of loss that were furnished a few days later than 
 required by the policy were retained by the insurer without objection 
 being made either to their form or contents or time of presentation. 
 It seems that the insurer also made repairs upon another building 
 covered by the same policy, and damaged by the same fire. It was 
 held that these acts of the insurer were sufficient evidence of an in- 
 tention on his part not to object to the failure of the insured to fur- 
 nish the proofs of loss in season. The acts of the insurer apparently 
 recognizing the validity of the policy did not cause the insured to 
 change his position or act otherwise to his prejudice. Since the in- 
 surer at all times kept within his rights, and did no wrong to the in- 
 sured, there seems to be no reason why he should not have been al- 
 lowed to enforce his contract as it was made.''^ 
 
 A somewhat similar case has recently been decided in Indiana.''' 
 In this case the policy required proofs of loss to be furnished within 
 sixty days. The insured sought to show a waiver of this condition by 
 proving that the company had declined to pay the policy, not because 
 of the breach of this condition, but on an entirely different ground. 
 The court held very properly that, if the refusal to pay took place be- 
 fore the expiration of the sixty days within which the proof of loss 
 could be made, the insurer was thereby estopped to complain of the fail- 
 ure of the insured to give such proofs. But in holding the pleading 
 of the plaintiff to be good, the court went further, and held that,- even 
 though the refusal of the insurer to pay was given after the expira- 
 tion of the sixty days, it would nevertheless constitute a waiver of 
 the condition requiring proofs of loss. Such a holding would seem 
 to be indefensible, and in the last paragraph of the opinion the court 
 apparently recedes from its advanced position. 
 
 T* Home Fire Ins. Co. v. Kuhlman, 58 Neb. 488, 78 N. W. 936, 76 Am. St. 
 Rep. 111. 
 
 7 5 Home Fire Ins. Oo. v. Kuhlman, 58 Neb. 488, 78 N. W. 936, 76 Am. St. 
 Rep. Ill; Bennett v. Insurance Co., 203 111. 439, 67 N. E. 971; Piatt v. Insur- 
 ance Co., 153 111. 113, 38 N. E. 580, 26 L. R. A. 853, 46 Am. St. Rep. 877. 
 
 7* Hibernia Ins. Co. v. O'Connor, 29 Mich. 241. To the same effect, se* 
 Weiss V. Insurance Co., 148 Pa. 349, 23 Atl. 991. 
 
 77 See St Louis Ins. Co. v. Kyle, 11 Mo. 278, 49 Am. Dec. 74. 
 
 78 Germania Fire Ins. Co. v. Pitcher, 160 Ind. 392, 64 N. E. 921. In this case 
 there was evidence that the delay of the Insured was caused by protracted 
 and misleading negotiations for settlement, which should always estop the in- 
 ««urer to complain of the natural consequences of his own conduct. See 
 Gristock v. Insurance Co., 84 Mich. 161, 47 N. W. 549; Id., 87 Mich. 428, 49 
 N. W. 634; Eastern R. Co. v. Relief Fire Ins. Co., 105 Mass. 570; State Ins, 
 Co. V. Todd, 83 Pa. 272; Burlington Ins. Co. v. Toby, 10 Tex. Civ. App. 425, 
 30 S. W. 1111. 
 
 g§ 125-126) 
 
 WHAT CONSTITUTES A WAIVER. 
 
 377 
 
 Same — The New York Decisions. 
 
 The decisions of the Court of Appeals of New York have done 
 much to throw the law into confusion, and are far from being con- 
 sistent and harmonious among themselves. In the leading case of 
 Titus V. Insurance Co.,^® the insurer defended on the ground that the 
 policy was avoided in accordance with its terms by the foreclosure of 
 a mortgage upon the property insured. But it was held that the act 
 of the insurer, after he had notice of the breach of condition, in re- 
 quiring the insured to submit to an examination under oath, and thus 
 to be put to trouble and expense, amounted to a waiver of the forfeiture. 
 The waiver was based specifically on the fact that the insurer recognized 
 the contract as valid when he required the insured to do acts which he 
 was bound to do only under the contract. In so holding, the court said : 
 "But it may be asserted broadly that if, in any negotiations with the 
 insured, after knowledge of the forfeiture, it recognizes the continued 
 validity of the policy, or does acts based thereon, or requires the in- 
 sured by virtue thereof to do some act or incur some trouble or ex- 
 pense, the forfeiture is, as matter of law, waived ; and it is now settled 
 by this court, after some difference of opinion, that such a waiver 
 need not be based upon any new agreement or an estoppel." This 
 case was approved and followed by numerous subsequent cases, until 
 in 1892, in Armstrong v. Insurance Co.,«<> it was stated that, in the 
 absence of an express waiver, there must exist some of the elements 
 of an estoppel before the insurer could be deemed to have waived any 
 condition of the policy. But in Kiernan v. Insurance Co." the court 
 suffered a serious relapse. In that case it was held that the insurer 
 had waived his right to insist upon a forfeiture of the policy incurred 
 by a breach of the condition forbidding the incumbrance of the prop- 
 erty insured without the consent of the insurer, by proceeding with an 
 appraisal of the loss after knowledge of the breach of condition, al- 
 though the policy contained an express provision that no proceeding 
 relating to the appraisal should be deemed a waiver of any condition 
 of the policy. In its opinion the court said : "There may be a waiver 
 by express agreement, or through estoppel ; but neither is required to 
 effect that result, as words or acts from which an intention to waive 
 may reasonably be inferred are sufficient, at least when acted upon." 
 In the latest case — Gibson Electric Co. v. Liverpool & London & Globe 
 Ins. Co.^2 — the court reviews all of the preceding cases, and mani- 
 fests a strong disposition to adopt the sound view that a waiver can- 
 not be valid unless supported either by a consideration or by circum- 
 stances of estoppel. In holding that the insurer's continuation of ap- 
 praisal proceedings, after notice of a breach of condition avoiding the 
 
 T» 81 N. r. 410. 
 
 •0 130 N. Y. 560, 29 N. E. 991. 
 
 81 150 N. Y. 190, 44 N. E. 698. 
 
 82 159 N. Y. 418. 54 N. B. 23. 
 
 m 
 
378 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 ii 
 
 policy, did not amount to a waiver of the forfeiture so incurred, the 
 court said: "Although the decisions of this court of which we have 
 made this brief review •' seem to warrant the conclusion that an in- 
 surer, even under the provision of a standard policy, may estop itself 
 from claiming or may waive a forfeiture under its conditions by its 
 acts and the requirements it makes of the insured after knowledge 
 of the forfeiture, still the circumstances and acts which are required 
 to constitute such an estoppel or waiver seem to be quite firmly es- 
 tablished. Thus, in the absence of an express waiver, at least some of 
 the elements of an estoppel must exist. The insured must have been 
 misled by some act of the insurer, or it must, after knowledge of the 
 
 8» After discussing TITUS v. INSURANCE CO., supra, the court thus states 
 the results of the preceding decisions: "The question as to what constitutes 
 a waiver of a forfeiture under the provisions of a fire insurance policy has 
 often been considered by this court. Thus, in Weed v. Insurance Co., 116 N. 
 Y. 106, 22 N. R 229, it was decided that, to establish a waiver of a forfeiture 
 in a policy of insurance, the proof must show a distinct recognition of the 
 validity of the policy after a knowledge of the forfeiture by the person by 
 whom it is claimed such forfeiture was waived. In Roby v. Insurance Co., 
 120 N. Y. 510, 518, 24 N. E. 810, it was declared that where, after knowledge 
 of the forfeiture of a policy, the insurer recognizes its continued validity, does 
 acts based thereon, and requires the insured, by virtue thereof, to do some act 
 or incur some trouble or expense, the forfeiture is, as a matter of law, waived, 
 and the waiver need not be based upon any new agreement, or upon estoppel. 
 In that case it was said that *the policy in question was void or valid as a 
 whole. If any part was valid, it was all valid. The defendant admitted that 
 it was operative in all its parts.' Pratt v. Insurance Co., 130 N. Y. 206, 29 
 N. E. 117, Is to the eflfect that where the agents or committee of an insurance 
 company, after being apprised of facts affecting the policy, asked the insured 
 to fill out the blank proofs of loss which they gave him, called for his books, 
 required him to furnish information, which they knew involved trouble and 
 loss of time for him to obtain, it was a ratification of the policy, and a waiver 
 of the forfeiture. It was decided in Armstrong v. Insurance Co., 130 N. Y. 
 560, 29 N. E. 991, that, while a waiver of a condition of forfeiture contained in 
 a policy of insurance need not be based upon a technical estoppel, yet, in the 
 absence of an express waiver, some of the elements of an estoppel must exist, 
 and that the insured must have been misled by some action of the company, 
 or it must have done something, after knowledge of a breach of the condition, 
 which could only be done by virtue of the policy, or have required something 
 from the assured which he was bound to do only at the request of the com- 
 pany under a valid policy, or have exercised a right which it had only by vir- 
 tue of such policy. In that case it was held, as it was in the Titus Case, that 
 a waiver could not be inferred from mere silence, but would require some 
 aflSrmative action on the part of the insurer which Indicated that it intended 
 to waive the result of the plalntifTs breach. Bishop v. Insurance Co., 130 N. 
 Y. 488, 29 N. E. 844, is to the eflfect that a company issuing a policy containing 
 a provision that it shall not be modified or changed, except in writing signed 
 by it, may by its conduct estop itself from enforcing the provision against a 
 party who has acted in reliance upon such conduct. Again, in Ronald v. As- 
 sociation, 132 N. Y. 378, 30 N. E. 739, it was, in eflfect, said that, in the ab- 
 sence of any agreement, a waiver of forfeiture of a policy results only from 
 
 g§ 125-126) 
 
 WHAT CONSTITUTES A WAIVER. 
 
 379 
 
 '■ 
 
 breach, have done something which could only be done by virtue of 
 the policy, or have required something of the assured which he was 
 bound to do only under a valid policy, or have exercised a right which 
 it had only by virtue of such policy." 
 
 Bstoppel by Requiring Performance of the Contract 
 
 It will be observed that, in accordance with the theory of the New 
 York decisions, the insurer is deemed to waive any forfeiture in- 
 curred, and to recognize the policy as valid, by requiring the insured 
 to perform any of the conditions pertaining to matters subsequent 
 to the loss, such as furnishing proofs of loss or exhibiting accounts. 
 This theory, however, is believed to be incorrect on principle, though 
 supported by the undoubted weight of authority."* Assuming, as 
 one reasonably may, that the insurer desires to act in all respects fairly 
 
 negotiations or transactions with the insured, by which the insurer, after 
 knowledge of the forfeiture, recognizes the continued existence of the policy, 
 or does acts based thereon, or requires the insured, by virtue thereof, to do 
 fiome act or incur some expense or trouble. Quinlan v. Insurance Co., 133 N. 
 Y. 356, 31 N. E. 31, 28 Am. St. Rep. 645, is in many respects similar to the 
 case at bar. In that case the policy contained the same provisions as the pol- 
 icy in suit, relating to proceedings to foreclose a mortgage, and also as to the 
 power of an agent to waive any of the conditions or provisions of the policy; 
 and it was held that the provisions in a policy to the eflfect that no representa- 
 tive of the company should have power to waive any condition or provision, 
 except by writing indorsed upon the policy, were valid, and that the condition 
 that such waiver was to be written upon the policy was of the essence of the 
 authority of the agent to act, and that a consent or act not so indorsed was 
 void; citing Walsh v. Insurance Co., 73 N. Y. 10; Marvin v. Insurance Co., 85 
 N. Y. 278, 39 Am. Rep. 657. Of that case it may be said, however, that it was 
 held that the agent had no authority whatever to bind the company, in writ- 
 ing or otherwise, or to waive any condition of the policy. In Kiernan v. Insur- 
 ance Co., 150 N. Y. 190, 44 N. E. 698, it was held that, when an appraisal of 
 the loss under a fire insurance policy is proper in any event, the fact that one 
 was had at the request of the company has no bearing upon the question of 
 forfeiture. The question of waiver was also considered in Van Tassel v. In- 
 surance Co., 151 N. Y. 130, 45 N. E. 365, where it was, in eflfect, held that, in 
 the absence of a subsequent waiver, the rights of the insured are to be deter- 
 mined as of the date of the fire, and tliat, to establish a waiver, a preponder- 
 ance of evidence is requisite. In Walker v. Insurance Co., 156 N. Y. 628, 51 
 N. E. 392, where an insurer, after having made a contract of fire insurance, in 
 ignorance of the existence of a chattel mortgage which rendered the insur- 
 ance voidable, learned of the existence of the mortgage, and thereafter treated 
 the policy as valid, and put the insured to trouble or expense on account there- 
 of, it was held that those acts were evidence from which the jury might find 
 a waiver of a forfeiture." 
 
 84 TITUS V. INSURANCE CO., 81 N. Y. 419; Home Fire Ins. Co. v. Phelps. 
 51 Neb. 623, 71 N. W. 303; German Ins. Co. v. Gibson, 53 Ark. 494, 14 S. W. 
 <>72; Marthinson v. Insurance Co., 64 Mich. 372, 31 N. W. 291; Carpenter v. 
 Insurance Co., 61 Mich. 635, 28 N. W. 749; OSHKOSH GASLIGHT CO. v. GER- 
 MANIA FIRE INS. CO., 71 Wis. 454, 37 N. W. 819, 5 Am. St. Rep. 233; Grubbs 
 V. Insurance Co., 108 N. C. 472, 13 S. E. 236, 23 Am. St Rep. 62. 
 
 j 
 
 r ..j 
 
380 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 with regard to the settlement of a loss that has occurred, it would 
 seem that he is justly entitled to all of the information for which he 
 stipulated in the contract. He may have knowledge of a technical 
 ground of forfeiture, and yet consider that his interest would be best 
 subsei*ved by paying the claim, despite the forfeiture, provided that 
 the claim shall prove to be in all respects honest and equitable. In 
 deciding upon the character of the claim, he may very properly desire 
 the information to be obtained through the proofs of loss, or by the 
 award of appraisers, or by the report of an adjuster. If, after se- 
 curing the information desired, the insurer decides that the claim is 
 not a just one, there seems to be no sufficient reason for denying 
 him the right to set up the previously known ground of forfeiture. 
 Nor can the insured justly claim that in demanding proofs of loss 
 or the performance of other subsequent conditions of the contract, the 
 insurer has induced him to do acts or to incur expense and trouble 
 which otherwise he would have omitted. The insured performs these 
 acts because he had contracted so to do, and not because the insurer 
 had induced him to perform them.®" It is in accordance with this 
 principle that the standard form of fire policy provides: "This com- 
 pany shall not be held to have waived any provision or condition of 
 this policy or any forfeiture thereof by any requirement, act, or pro- 
 ceeding on its part relating to the appraisal or to any examination 
 herein provided for ; and the loss shall not become payable until sixty 
 days after the notice, ascertainment, estimate, and satisfactory proof 
 of the loss herein required have been received by this company, includ- 
 ing an award by appraisers when appraisal has been required." This 
 condition is valid, and will be given full effect.®' 
 
 «5 Wheaton v. Insurance Co., 76 Cal. 415, 18 Pac. 758, 9 Am. St. Rep. 216; 
 Banco de Sonera v. Bankers' Mut. Casualty Co. (Iowa) 95 N. W. 232; Freed- 
 man v. Insurance Co., 175 Pa. 350, 34 Atl. 730. See, also, Briggs v. Insurance 
 Co., 65 Mich. 52, 31 N. W. 616; JOHNSON v. AMERICAN INS. CO., 41 Minn. 
 396, 43 N. W. 59. 
 
 8 • Hayes v. Insurance Co., 132 N. C. 702, 44 S. E. 404, 95 Am. St Rep. 
 627; Keet-Rountree Dry Goods Co. v. Mercantile Town Mut. Ins. Co., 100 
 Mo. App. 504, 74 S. W. 469; Gibson Electric Co. v. Liverpool & London & Globe 
 Ins. Co., 159 N. Y. 418, 54 N. E. 23; Kieman v. Insurance Co., 150 N. Y. 190, 
 44 N. E. 698. 
 
 |§ 127-128) 
 
 WHAT MAY BE WAIVED. 
 
 WHAT MAT BE WAIVED. 
 
 881 
 
 127. Either party may waive any condition of the contract innring 
 
 to his sole benefit, or any right which he may have with refer- 
 ence thereto, 
 EXCEPT when the public welfare requires the maintenance of the 
 right sought to be waived, such as is given by a positive rule 
 of common law or of statute. Agreements to waive such 
 rights are of no effect. 
 
 128. While there is some authority to the contrary, it is well settled 
 
 that the by-laws and regulations of a mutual company may 
 be waived by its of&cers as fully as can any other terms of the 
 insurer's contract. ^ 
 
 As a general rule, any person may waive any right that distinctively 
 belongs to him. So either party to a life insurance contract may waive 
 any right or privilege of whatsoever character that he may take under 
 the contract, provided that right or privilege is distinctively his own. 
 As has already been readily inferred, the questions of waiver usually 
 presented to the courts in connection with insurance contracts are 
 those affecting waivers by the insurer, and usually concern those con- 
 ditions of the contract that operate to give special rights or privileges 
 to the insurer, such as the conditions that entitle the insurer to con- 
 sider the policy void in case the insured violates any of the numerous 
 conditions specified in the policy. 
 
 Conditions Against Waiver. 
 
 The validity of the condition found in the ordinary life policy forbid- 
 ding waivers of any terms of the contract by any of the representa- 
 tives of the company, save in some specified manner — usually by 
 writing indorsed on the policy — has already been fully discussed in the 
 preceding chapter, but, for purposes of completeness, the conclusions 
 reached may properly be summarily repeated here. Such a condition is 
 manifestly for the sole benefit of the insurer, and he may waive that con- 
 dition if he sees fit, as well as any other of the policy." It is clear that, 
 if any representative of the company has authority to make such a con- 
 dition against waivers, he must also have authority to unmake or waive 
 it** In such a case the terms of the condition waived can have no 
 
 87 City Planing & Shingle Mill Co. v. Merchants', Manufacturers' & Citizens' 
 Mut. Fire Ins. Co., 72 Mich. 654, 40 N. W. 777, 16 Am. St. Rep. 552; German 
 Ins. Co. V. Gibson, 53 Ark. 494, 14 S. W. 672; Billings v. Insurance Co., 34 Neb. 
 502, 52 N. W. 397; Corson v. Insurance Co., 113 Iowa, 641, 85 N. W. 806; TilUs 
 V. Insurance Co. (Fla.) 35 South. 171. 
 
 8 8 Thus a general agent having general power to make contracts on behalf 
 of the company has apparent power to waive forfeitures, despite a term of the 
 contract limiting that power to certain specified officers, ^tna Life Ins. Oo. 
 V. Fallow (Tenn.) 77 S. W. 937; Indian River State Bank t. Hartford Fire 
 Ins. Co. (Fla.) 35 South. 228. 
 
 
 i 
 
382 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 effect upon the validity of the waiver. These conditions forbidding- 
 waiver operate, therefore, merely as notice to the insured of limitations 
 placed by the insurer upon the powers of the agent under the policy. 
 1 he insured, after the receipt of the policv, must be deemed to have 
 knowledge of the limitation ; and, if that limitation upon the authority 
 of the agent be true in fact, and be kept true, any attempt by the agent 
 to make a subsequent waiver by any act in excess of his powers as thus 
 limited will necessarily be inoperative. »« But as heretofore observed 
 if the insurer has in fact permitted parol waivers by an agent, the 
 condition in the policy denying to the agent the power to make waivers 
 except in wnting, being untrue, will be nugatory.** 
 
 This condition against waivers, being thus seen to be operative only 
 as a notice to the insured, cannot, in the nature of things, in any wise 
 affect the powers of the agent with regard to transactions prior to the 
 delivery of the policy. As to such transactions, the agent will be 
 deemed to have such powers as the insurer has allowed him to appear 
 to possess; that is, powers coextensive with the business intrusted to 
 him. In accordance with this principle, it is held by the great weight 
 of authority that conditions in the policy prohibiting waivers by the 
 agents of the company have no application to transactions relating to 
 the inception of the policy.** 
 
 • 
 
 ««» WILKLNS v. INSURANCE CO., 43 Minn. 177, 45 N. W. 1. Woodruff, Ins. 
 Cas. 515; Walsh v. Insurance Co., 73 N. T. 5; MESSELBACK v. NORMAN 
 Txro^;. J* ^^^' ^^ ^' ^' ^' ^i^^iards, Ins. Cas. 397 ; KNICKERBOCKER LIFE 
 INS. CO. V NORTON, 96 U. S. 234, 24 L. Ed. 689, Richards, Ins. Cas. 399, El- 
 hott Ins. Cas. 52; KYTE v. ASSURANCE CO., 144 Mass. 43, 10 N. E. 518. 
 Avoodniff, Ins. Cas. 477. 
 
 Some courts hold that a condition prohibiting waivers by any representative 
 of the company, save In writing, is repugnant, and therefore void in toto. while 
 the restriction of that power to certain designated officers will operate as a 
 valid hmltation upon the power of other agents to grant waivers Comoam 
 LAMBERTON v. INSURANCE CO., 39 Minn. 129, 39 N. W 76 1 L R T 
 ^f ;.f.''^or'^^^'^^ ^' INSURANCE CO., supra. In Renler v. InsurancrCo ' 
 74 Wis 89, 42 N. W. 208, it was held that a condition that no waiver should 
 be valid, unless "In writing, signed by the president or secretary of the com- 
 pany," was ineffectual, as being unreasonable and repugnant, especially in 
 the case of insurance by a foreign company. See, also, Westchester Fire 
 
 ir* ^?;7* ^^^^^ ^ ^^^^' ^^» Eastern Ry. Co. v. Relief Fire Ins. Co 105 
 Mass. 570. * 
 
 •0 Knickerbocker Life Ins. Co. ▼. Norton, 96 U. S. 234, 24 L. Ed 689 Rich- 
 
 ^^?f '.J[Sf- ^^^- ^^' ^"*°"' ^^«- ^^«- 52. And see cases cited in note 22 'supra 
 •1 The restnctlons^lnserted in the contract upon the power of the agent to 
 waive any condition, unless done in a particular manner, cannot be deemed to 
 apply to those conditions which relate to the inception of the contract when 
 it appears that the agent has delivered it and received the premium with full 
 know edge of the actual situation. To take the benefit of a contract, with full 
 knowledge of all the facts, and attempt afterwards to defeat it when calle<J 
 upon to perform, by asserting conditions relating to those facts, would be tcv 
 claim that no contract wag made, and thus operate as a fraud upon the other 
 
 §g 127-128) 
 
 WHAT MAY RE WAIVED. 
 
 383 
 
 "• 
 
 Rights in Which Public is Concerned cannot he Waived. 
 
 But it follows, as a correlative proposition to that stated above, that 
 a party to a contract of insurance cannot waive any right therein which 
 does not belong solely to himself. If the public is concerned in the 
 maintenance of that right, he will not be allowed to waive it to the 
 prejudice of the public. Such rights involving a public interest are 
 usually statutory, being derived from those statutes that have been 
 enacted for the purpose of protecting the public against the fraudu- 
 
 party." WOOD v. INSURANCE CO., 149 N. Y. 382, 44 N. E. 80, 52 Am. St. 
 Rep. 733. 
 
 That the court considered Itself full-handed with reasons for this holding is 
 apparent from the opinion rendered in Robbins v. Insurance Co., 149 N. Y. 
 477, 44 N. E. 159: "The rule that an insurance company will not be permitted 
 to defeat a recovery upon a policy issued by it by proving the existence of 
 facts which would render it void, where it had full knowledge of them when 
 the policy was issued, is too well established by the authorities in this state 
 to require further discussion. It is manifest that the facts in this case bring 
 it clearly within the principle of the cases cited. Whether the decisions of 
 this class of cases proceed upon the charitable theory that the insurance com- 
 pany by mistake omitted to make the required indorsement, or intended to 
 waive the provision regarding it, or upon the idea that its purpose was to de- 
 fraud the insured, and is for that reason estopped, is of but little consequence, 
 as any one of those theories is sufficient to avoid the defense relied upon in 
 this case." 
 
 To the same effect, see Medley v. Insurance Co. (W. Va.) 47 S. E. 101; Vir- 
 ginia Fire & Marine Ins. Co. v. Richmond Mica Co. (Va.) 46 S. E. 463; Do'wling 
 V. Insurance Co., 168 Pa. 234, 31 Atl. 1087. 
 
 (5ontra, see RYAN v. INSURANCE CO., 41 Conn. 168, 19 Am. Rep. 490, 
 Richards, Ins. Cas. 408, approved in NEW YORK LIFE INS. CO. v. FLETCH- 
 ER, 117 U. S. 519, 6 Sup. Ct. 837, 29 L. Ed. 934. There, however, the limita- 
 tion was contained in the application, and not in the policy merely. But 
 Northern Assur. Co. v. Grand View Bldg. Ass'n, 183 U. S. 308, 22 Sup. Ct. 133, 
 46 L. Ed. 213, seems to be squarely opposed to the prevailing view as stated in 
 the text. 
 
 It is also held by many authorities that this limitation upon the power of 
 agents to waive forfeitures "refers to the conditions which go to the making * 
 of the contract of insurance, and not to provisions relating to the proofs of loss 
 which are to be performed in the event of a loss, and consequently this stipu- 
 lation does not operate to prevent the company from making a waiver of proof 
 of loss by conduct or otherwise than by express agreement." Farmers' Fire 
 Ins. Co. V. Baker, 94 Md. 545, 51 Atl. 184; O'Leary v. Insurance Co., 100 
 Iowa, 390, 69 N. W. 686; Citizens' Ins. Co. v. Stoddard, 197 111. 330, 64 N. E. 
 355; Indian River State Bank v. Hartford Fire Ins. Co. (Fla.) 35 South. 228, 
 246. Probably a more correct statement of the principle involved in these 
 cases (in which the alleged waiver was by absolute denial of liability by an 
 agent authorized to make such denial, always held to dispense with the neces- 
 sity of giving proofs of loss) is that no limitation or term of a contract can do 
 away with the doctrine of estoppel. Any attempt expressly to waive a con- 
 dition operating after loss would be subject to the limitation contained in the 
 policy upon the agent's authority; but, if the company's conduct is such as 
 to work an estoppel in fact, its condition will not be aided by a term in the 
 policy denying its liability to be estopped. 
 
 f 
 
 Ul 
 
 
3Si 
 
 WAIVER AND ESTOPPEL. 
 
 (Ch. 10 
 
 lent and oppressive eonduct of insurance companies. Thus, where a 
 statute provides that no policy shall become forfeited for nonpayment 
 of the premium unless notice of a specified kind is given by the insurer 
 of default in payment, the insured cannot waive his right to receive 
 such notice.®^ So of those statutes requiring the insurer to pay the 
 full amount set forth in his policy in case of total loss; any agree- 
 ment in the policy that the amount recovered shall be limited to the 
 actual value of the property destroyed, or to three-fourths of such 
 value, will not operate to preclude the insured from claiming the full 
 benefit of the statute.®' 
 
 There are certain common-law rights, also, which are so deeply 
 embedded in public policy that a waiver of them will not be tolerated. 
 Thus it is contrary to public poUcy that wagering insurance shall be 
 written. The insurer therefore will not be allowed to waive his right 
 to set up the defense of a lack of insurable interest.®* Neither will 
 the insurer be allowed to waive his right to hold the policy void in 
 case the insured comes to his death by the execution of a legal judg- 
 ment.®*^ Nor when, by some authorities, the insured has died by his 
 sane act of self-destruction.*® 
 
 Again, while rights may be waived, facts, which are known to be 
 stubborn things, cannot be waived. Therefore the agreement by the 
 insured, set forth in the policy, that the person who is really the agent 
 of the insurer shall be, instead, the agent of the insured, cannot, on 
 sound principle, operate as a waiver of the right of the insured to rely 
 upon the truth of the matter, which is that the agent is, under facts of 
 the case, the representative of the insurer." Neither, by the better 
 authority, can the insured waive the consequence of the operation of 
 a settled rule of law by agreeing that the insurance company shall 
 not be charged with knowledge of the facts known or fraud perpe- 
 trated by its representatives.** 
 
 •a Baxter v. Insurance Co., 119 N. Y. 450, 23 N. E. 1048, 7 L. R. A. 293. And 
 «ee Rosenplanter v. Society, 96 Fed. 721, 37 C. C. A. 566, 46 L. R. A. 473. 
 
 »3 Pennsylvania Fire Ins. Co. v. Drackett, 63 Ohio St 41, 57 N. E. 962, 18 
 Am. St. Rep. 608; Reilly v. Insurance Co., 43 Wis. 449, 28 Am. Rep. 552; Hart- 
 ford Fire Ins. Co. v. Bourbon County Court, 72 S. W. 739, 24 Ky. Law Rep. 
 1850. The courts do not seem inclined to extend this rule to statutory provi- 
 sions intended for the benefit of the insurer. See Ellis v. Insurance Co., 113 
 €al. 612, 45 Pac. 988, 54 Am. St Rep. 373. 
 
 •4 CLEMENT v. INSURANCE CO., 101 Tenn. 22, 46 S. W. 561, 42 L. R. A. 
 247, 70 Am. St Rep. 650 ; Anctil v. Insurance Co. [1899] App. Cas. 609. 
 
 •B Burt V. Insurance Co., 187 U. S. 362, 23 Sup. Ot 139, 47 L. Ed. 216. 
 
 •• RITTER v. INSURANCE CO., 169 U. S. 139, 18 Sup. Ct 300, 42 L. Ed. 693. 
 
 »7 Stemaman v. Insurance Co., 170 N. Y. 13, 62 N. E. 763, 57 L. R. A. 318, 
 «8 Am. St Rep. 625; KAUSAL v. INSURANCE CO., 31 Minn. 17, 16 N. W. 
 430, 47 Am. Rep. 776, Richards, Ins. Cas. 392, Woodruff, Ins. Cas. 517. 
 
 •8 Pamo V. Insurance Co., 114 Iowa, 132, 86 N. W. 210; Indian River State 
 
 §§ 127-128) 
 
 WHAT MAY BE WAIVED. 
 
 385 
 
 Regulations of Mutual Companies. 
 
 It is held by the Massachusetts decisions,*' and perhaps in other 
 states, that the by-laws and regulations of a mutual company cannot 
 be waived by its officers, inasmuch as all persons becoming members 
 of such an association are charged with knowledge of its regulations, 
 and therefore of these implied limitations upon the powers of its rep- 
 resentatives. This view, however, is rejected, and properly so, by the 
 great weight of authority in this country.^**® Until the issue of a 
 certificate by which the recipient is made a member of the association, 
 he is a total stranger to it and its regulations, and should not be char- 
 ged with a knowledge of its by-laws and rules any more than would 
 any other stranger. 
 
 Conditions of the Standard Policy, 
 
 There has been some question whether the terms of a contract pre- 
 scribed by law, as the standard form of fire policy in New York, could 
 be waived. Probably an express waiver of any term, though in writ- 
 ing, would be invalid, as changing the prescribed form, but it is now 
 well settled that an implied waiver or estoppel can be shown as readily 
 under the standard policy as in other cases.* ®^ 
 
 Bank v. Hartford Fire Ins. Co. (Fla.) 35 South. 228. But see NEW YORK 
 LIFE INS. CO. v. FLETCHER, 117 U. S. 519, 6 Sup. Ct. 837, 29 L. Ed. 934. 
 
 »» McCoy V. Insurance Co., 133 Mass. 85; Mulrey v. Insurance Co., 4 Allen 
 (Mass.) 116, 81 Am. Dec. 689. And see Pitney v. Insurance Co., 65 N. Y. 21. 
 
 100 Pratt V. Insurance Co., 130 N. Y. 206, 29 N. E. 117; Susquehanna Mut- 
 Fire Ins. Co. v. Elkins, 124 Pa. 484, 17 Atl. 24, 10 Am. St. Rep. 608; Railway 
 Passenger & Freight Conductors' Mutual Aid & Benefit Ass'n v. Tucker, 157 
 111. 194, 42 N. E. 398, 44 N. E. 286; Towle v. Insurance Co., 91 Mich. 219, 51 
 N. W. 987; KAUSAL v. INSURANCE CO., 31 Minn. 17, 16 N. W. 430, 47 Am. 
 Rep. 776, Richards, Ins. Cas. 392, Woodruff, Ins. Cas. 517. 
 
 101 See this question fully discussed in Moore v. Insurance Co., 141 N. Y. 
 219, 36 N. E. 191; Quinlan v. Insurance Co., 133 N. Y. 356, 31 N. E. 31, 28 Am. 
 St. Rep. 645; Skinner v. Norman, 165 N. Y. 565, 59 N. E. 309, 80 Am. St. Rep. 
 776; and WOOD v. INSURANCE CO., 149 N. Y. 382, 44 N. E. 80, 52 Am. St. 
 Rep. 733. As to the Massachusetts standard policy, see Parker v. Insurance 
 Co., 162 Mass. 479, 39 N. E. 179. For a discussion of the Wisconsin cases, see 
 Welch V. Fire Ass'n (Wis. 1904) 98 N. W. 227. 
 
 Vance Ins. — ^25 
 
 I 
 
3S6 
 
 EIGHTS UNDER THB POLICY. 
 
 (Ch. 11 
 
 OHAPTEB XL 
 
 RIGHTS UNDER THB POLIOX; 
 
 129. In General. 
 
 130-131. The Beneficiary. 
 132-134. Vested Rights of the Beneficiary. 
 
 135. (Contingent Interest of the Beneficiary. 
 
 136. Mere Expectancy of Benefit. 
 
 137-138. Beneficiaries in Mutual Benefit Associations. 
 
 139. The Rights of Creditors of the Insured— Fire Polidea 
 
 140. Life Policy Payable to Insured. 
 
 141. Policy Payable to a Third Person. 
 
 142. When the Creditor Is the Assured. 
 143-145. The Rights of the Assignee. 
 
 146-147. Rights of the Mortgagor and Mortgagee. 
 
 148. Rights of Life Tenant and Remainderman. 
 149-150. Subrogation. 
 
 IN GENERAIf 
 
 129. As In the case of any other contract, the rights arising ont of 
 the contract of insurance, whether of the imniediate parties 
 or of others claiming through them, are to be determined by 
 the terms of the contract itself, as soundly and reasonably 
 construed. 
 
 When the right to demand of the insurer the payment of money 
 has, under the terms of the policy, become fixed by reason of the hap- 
 pening of the contingency insured against, many contests may arise 
 as to who shall be entitled to receive the money when paid. In the 
 case of life insurance the creditors of the deceased may contend with 
 his surviving wife and children, or with other designated beneficiaries, 
 or the creditors of an insolvent insured may claim such portion of the 
 proceeds of a policy made payable to a named beneficiary as will make 
 good the sum diverted from the payment of debts to the payment of 
 premiums. If the insurance be of property, a mortgagee may claim the 
 proceeds of a policy to satisfy an incumbrance upon the property dam- 
 aged or destroyed, or a vendee of property destroyed before convey- 
 ance may claim the insurance money paid to the vendor. These, and 
 other questions involving rights under the insurance contract, must 
 necessarily be determined in accordance with the terms of the contract 
 itself. A reasonable and sound construction of the policy is, however, 
 necessary to a correct solution of such questions, due regard being had 
 to the nature of the contract, its purpose, and the intention of the 
 parties as discoverable in the terms of the contract All of the rules 
 
 THE BENEFICIARY. 
 
 387 
 
 §§ 130-131) 
 
 presently to be stated in detail are but amplifications of this general rule 
 as given above. 
 
 Life policies may provide that, upon maturity, the proceeds shall be 
 payable to the insured or his personal representatives, or to some per- 
 son or persons designated as beneficiaries of the insurance. The 
 person designated thus as beneficiary may stand in any one of several 
 relations to the person whose life is insured. The rights of such ben- 
 eficiaries (sometimes termed the "assured") in all of these relations will 
 now be considered. 
 
 THE BENEFICIARY. 
 
 130. 
 
 (a) 
 (b) 
 
 (2) 
 (3) 
 
 The beneficiary is the person designated by tbe terms of tlie 
 contract as the one to receive the proceeds of the insurance. 
 Such beneficiary may be 
 
 A person insured or his personal representative. 
 
 Some one other than the insured, who may be 
 
 (1) The assured, or the one procuring and maintaining the con- 
 tract. 
 
 One whom the insured, for a valuable consideration, has des- 
 ignated as beneficiary, or 
 
 One whose nomination as beneficiary is due to mere bounty 
 of the insured. 
 
 The term as ordinarily used includes only third persons desig- 
 nated by the party insured as beneficiaries. 
 
 131. The rights of beneficiaries vary greatly with the terms of differ- 
 ing contracts. They may be 
 Vested 
 (1> Absolutely and indefeasibly, ov 
 
 (2) Conditionally, subject to being divested by the happealsc of 
 some condition subsequent. 
 
 Contingent upon the happening of some condition precedent. 
 Mere expectancies or possibilities of benefits to be received. 
 
 (a) 
 
 Cb) 
 (c) 
 
 In msurance law the term "beneficiary" is ordinarily used to indicate 
 only those persons who, though not parties to the contract, are men- 
 tioned m It as the recipients of the proceeds of the insurance. Such a 
 restncted significance thus attached to the term merely points to the 
 fact that most of the litigation involving such questions concerns rights 
 claimed by such third persons as beneficiaries. A broader use of the 
 term would include also those who, upon a proper basis of insurable 
 interest, secure insurance for their own benefit upon the lives of others 
 Fortunately, the rights of this latter class of beneficiaries are not com- 
 plex, and seldom give rise to questions of difficulty. 
 
 Insurance for the BeneAt of the Insured or His Personal Representa- 
 tives, 
 
 Policies are frequently made payable to the insured if he survives 
 a specified endowment period, and to his estate, or to his personal rep- 
 
 
388 
 
 BIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 §8 130-131) 
 
 THE BENEFICIABT. 
 
 389 
 
 resentatives upon his death prior to the expiration of that period. In 
 such cases the policy is a chose in action, which the insured may dis- 
 pose of, assign, or incumber as he sees fit, and which can be seized on 
 execution or assigned in bankruptcy, provided it has by its terms a 
 cash surrender value. Otherwise, it is not liable to seizure for pay- 
 ment of debts, even though it may have a reserve value on the books 
 of the company, or even though the insurer, of his own motion, may 
 be willing to pay cash for its surrender.* 
 
 A policy by its terms payable to the "estate" of the insured can be 
 collected by his personal representatives; likewise if it is payable to 
 his "legal representatives," * although it is held in some jurisdictions 
 that the phrase is to be construed as meaning heirs ' or next of kin. 
 So a policy made payable to the "heirs" of the insured requires pay- 
 ment to such of his relations as would be his heirs or distributees 
 if he had died intestate and not to his personal representatives.* 
 
 Policies payable to the insured or his estate, however, cause relatively 
 little litigation, which more frequently arises in connection with those 
 policies that by their terms are payable to some other person than the 
 one whose life is insured. Such other person may occupy one of three 
 relations toward the insured : 
 
 (1) He may himself be the person who procures the contract and 
 i:)ays the premium necessary, to maintain it. Such a person is thus an 
 immediate party to the contract, and is ordinarily called the "assured." 
 
 (2) The third person named as beneficiary may have paid a valuable 
 consideration for his selection as such ; that is, the insured may have 
 taken out the policy for the benefit of a creditor or to secure some 
 other obligation. 
 
 (3) The beneficiary may be one who gives no consideration what- 
 soever for any rights that may be acquired in the policy, but is desig- 
 nated as recipient of the proceeds of the policy through mere bounty 
 of the insured. 
 
 The Assured as Beneficiary, 
 
 The rights of the assured as a party to the contract are, of course, 
 definitely fixed by the terms of that contract, and cannot in any wise 
 be changed or affected by the acts of the insured, unless such acts 
 amount to a breach of some term or condition of the policy. The rights 
 
 1 Phoenix Mnt Life Ina Oo. v. Opper, 75 Conn. 295, 53 Atl. 586. See infra, 
 
 p. 405. 
 
 2 Alford v. Insurance Oo., 88 Minn. 478, 93 N. W. 517. 
 
 • Leonard v. Harney, 63 App. Div. 294, 71 N. Y. Supp. 546, reversed in 173 
 N. Y. 352, 66 N. E. 3. 
 
 4 Mullen V. Reed, 64 Conn. 240, 29 Atl. 478, 24 L. R. A. 664, 42 Am. St Rep. 
 174; Lyons y. Yerex, 100 Mich. 214, 58 N. W. 1112, 43 Am. St Rep. 452; Phil- 
 lips V. Carpenter, 79 Iowa, 600, 44 N. W. 898. 
 
 Contra, gee In re Duncombe's Estate, 3 Ont. Law Rep. 510. 
 
 of such an assured are ordinarily mere choses in action, which may be 
 freely assigned by him or seized in satisfaction of any debts that he 
 may owe, provided they possess a determinable money value. The 
 only serious difficulty that arises in determining the rights of the as- 
 sured occurs in cases in which the policy has been taken out to secure 
 a debt owed by the insured to the assured. Whether, after payment 
 of the debt, the insured or his personal representative has any rights 
 in the policy, is a difficult question, which will be reserved for dis- 
 cussion in a later section.* 
 
 Third Persons as Beneficiaries. 
 
 An immense mass of case-law has grown up in the process of deter- 
 mining the rights of third persons, not parties to the contract, who 
 have been designated as beneficiaries. Before making the statement 
 in detail of the several rules that have been established by the courts, 
 it is well to observe generally that, although the position of the bene- 
 ficiary is peculiar in contract law, it is yet subject in its determination 
 to all the rules governing the construction of ordinary contracts. Con- 
 tracts of life insurance are of almost infinite variety in their terms. 
 These terms fix the rights of the beneficiary, but in their construction 
 all the terms must be taken together in the attempt to discover the 
 intention of the parties, and they must also be construed with refer- 
 ence to the general purposes of the insurance contract. Considering 
 the terms of these widely differing contracts, it will be observed that 
 they fall into three general classes with reference to the relation which 
 such a beneficiary occupies toward the immediate contracting parties: 
 
 (1) The rights of the beneficiary may be vested absolutely or con- 
 ditionally in accordance with the terms of the policy. 
 
 (2) Those rights may be contingent upon the happening of some 
 event set forth in the policy, as a condition precedent to the acquisi- 
 tion of any rights by such beneficiary under the provisions of the 
 contract. 
 
 (3) The person designated as beneficiary may be given no rights such 
 as have the quality of property; that is, he may be designated as the 
 one to whom there is an expectancy or bare possibility of benefit to 
 accrue upon the maturity of the policy. 
 
 The rights of these several classes of beneficiaries will now be con- 
 sidered in detail. 
 
 ■ See infra, S 142. 
 
 v 
 
390 
 
 EIGHTS UNDER THE POLICY, 
 
 (Ch.ll 
 
 VESTED BIGHTS OP THE BENEFICIARY. 
 
 132. TN GENEBAI.— TXThea the poUcy provides that the proceeds shaU 
 
 be payable to a certain designated person, subject to no condi- 
 tion precedent, the law regards the title of the policy as vested 
 in such person Immediately upon Its valid Issue, even though 
 it may remain in the possession of the Insured. 
 
 133. BIGHTS ABSOLUTELY VESTED-Where the title vests in the 
 
 beneficiary without any condition of defeasance, the rights 
 of the beneficiary become absolute, and by the weight of au- 
 thority are characteHzed by all of the attributes of property. 
 They may not be defeated by any act of the insured or of the 
 insurer, or in any other way without the consent of the bene- 
 ficiary. They may be transferred and assigned by the bene- 
 ficiary, and are subject to the payment of his debts as are any 
 other choses in action. This is equally true whether the bene- 
 ficiary has given a consideration for such rights or not. 
 
 134. BIGHTS CONDITIONALLY VESTED—By the terms of the pol- 
 
 icy the rights of the beneficiary, as thus vested, may be subject 
 to be defeated by the happening of some condition subsequent, 
 as of death before the insured. While such rights are neces- 
 sarily defeated by the happening of the condition specified, 
 they cannot be destroyed in any other manner without the con- 
 sent of the beneficiary. 
 
 Rights of Unconditional Beneficiary. 
 
 It is well settled by the courts of all English speaking states, with 
 the solitary exception of Wisconsin,' that the rights of the person ab- 
 solutely designated as the recipient of the moneys to be paid under a 
 contract of life insurance are vested, and indefeasible without the con- 
 sent of that beneficiary^ It must, of course, be borne in mind that 
 the right of the beneficiary is only to receive moneys that shall become 
 
 • Clark v. Durand, 12 Wis. 223; FOSTER v. GILE, 50 Wis. 603, 7 N W 555 
 8 N. W. 217; Estate of Breitung, 78 Wis. 33, 46 N. W. 891, 47 N. W. 17; Elli- 
 son V. Straw, 116 Wis. 207, 92 N. W. 1094. 
 
 The case of Rison v. Wilkerson, 3 Sneed. (Tenn.) 565, is sometimes cited aa 
 opposed to the general doctrine. The insurance in that case was payable to 
 the insured, and not to any third person, and the decision is sound. See Pratt 
 V. Insurance Co. (Tenn.) 17 S. W. 352. 
 
 1 Central Nat. Bank v. Hume, 128 U. S. 195, 9 Sup. Ct 41, 32 L. Ed 370- 
 Griffith V. Insurance Co., 101 Cal. 639, 36 Pac. 117, 40 Am. St. Rep 101- Hen- 
 drie & Bolthofif Mfg. Co. v. Piatt 13 Colo. App. 15, 56 Pac. 211; Harley v' Heist 
 86 Ind. 196, 45 Am. Rep. 285; Glanz v. Gloeckler, 104 111. 573, 44 Am Rep 94- 
 Wirgman v. Miller, 98 Ky. 624, 33 S. W. 937; Pingrey v. Insurance Co.' 144 
 Mass. 374, 11 N. E. 562; Shipman v. Home Circle, 174 N. Y. 398 67 N E 85 
 63 L. R. A. 347; Holmes v. Gilman, 138 N. Y. 382, 34 N. E. 205, 20 L. R.A 566* 
 34 Am. St Rep. 463; Hooker v. Sugg, 102 N. C. 115, 8 S. E. 919, 3 L. R. A. 217,' 
 11 Am. St. Rep. 717; Washington Life Ins. Co. v. Berwald (Tex. Sup ) 76 S W* 
 142; Preston t. Insurance Co., 95 Md. 101, 51 Atl. 838. 
 
 §§ 132-134) VESTED RIGHTS OP THE BENEFICIABT. 
 
 391 
 
 due in accordance with the terms of the policy. Therefore, it follows 
 that any act or default on the part of the insured, which by the terms 
 of the policy will defeat it, will also prevent the rights of the beneficiary, 
 vested under the policy, from becoming effective. It is the right of 
 the beneficiary that is vested, and not the receipt of the money under 
 the policy that is assured. Thus, if the insured travels in latitudes pro- 
 hibited by the policy, or if he takes his own life contrary to a stipula- 
 tion in the policy, the vested right of the beneficiary will be rendered 
 nugatory.* So, a default in the payment of the premiums by the 
 insured will defeat the policy and deprive the beneficiary of any bene- 
 fit thereunder. The beneficiary is, however, entitled to prevent a de- 
 fault in the payment of premiums by himself paying or tendering such 
 premiums," but he is not entitled to notice of the time when premiums 
 fall due,*® unless the insured himself is entitled to such notice. 
 
 Statutory Provisions, 
 
 In many states of the Union, statutes have been passed providing 
 that when a policy is issued upon the life of a husband, payable to his 
 wife or to his wife and children, whether the policy be procured by 
 the wife herself or the husband or by some third party, the rights of 
 the wife and children shall be deemed vested, and the money re- 
 served to them under the policy will come to them free from the debts 
 of the husband. Such statutes, however, usually merely declare in 
 part the more extended rule of the common law as above stated.** 
 
 Donee Beneficiaries within General Rule, 
 
 In some of the earlier cases it is stated that, if the beneficiary has 
 given no consideration for the appointment, a delivery of the policy 
 to the beneficiary, or to some one on his behalf, will be necessary in 
 order to complete his right to the proceeds of the policy.** But the 
 later decisions have established beyond question the rule that the title 
 to the policy vests absolutely in the beneficiary immediately upon its 
 
 t 
 
 r 
 
 8 McCoy V. Relief Ass'n, 92 Wis. 577, 66 N. W. 697, 47 L. R. A. t581. See, 
 also, Behling v. Insurance Co., 117 Wis. 24, 93 N. W. 800. 
 
 » Mutual Life Ins. Co. v. Hill, 178 U. S. 347, 20 Sup. Ct. 914, 44 L. Ed. 1097; 
 Pingrey v. Insurance Co., 144 Mass. 374, 11 N. E. 562. This is true even when 
 the beneficiary is such only as voluntary assignee. McGlynn v. Curry, 82 App. 
 Div. 431, 81 N. Y. Supp. 855. 
 
 10 Union Cent life Ins. Co. v. Buxer, 62 Ohio St. 385, 57 N. E. 66, 49 L. R. 
 A. 737. See, also, Rowe v. Insurance Co., 16 Misc. Rep. 323, 38 N. Y. Supp. 
 621, as to assured's right of notice under the New York statute. 
 
 11 It is sometimes intimated that the rule giving the absolute beneficiary 
 a vested right in the policy had its origin in these statutes. Washington 
 Life Ins. Co. v. Berwald (Tex. Sup.) 76 S. W. 442. See, also, 3 Am. & Eng. 
 Enc. Law, 981. But such can hardly be the case. In North Carolina a simi- 
 lar provision is incorporated in the state constitution. See Burwell v. Snow, 
 107 N. C. 82, 11 S. E. 1090. 
 
 12 See LEMON v. INSURANCE CO., 38 Conn. 294. 
 
 1^ 
 
392 
 
 RIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 issue, even though it may not come into the hands of the beneficiary.** 
 The l3est statement of this general rule under discussion is probably 
 found in the often quoted opinion of Chief Justice Fuller in Central Nat 
 Bank V. Hume/* in which he says: "It is, indeed, the general rule that 
 a policy, and the money to become due under it, belong, the moment 
 It is issued, to the person or persons named in it as the beneficiary or 
 beneficiaries, and that there is no power in the person procuring the 
 insurance, by any act of his, by deed, or by will, to transfer to any 
 other person the interest of the person named." 
 
 The vested rights of the beneficiary will not be defeated by the 
 suicide of the insured, unless the policy expressly so provides, ^'^ nor 
 will the divorce of a wife named as beneficiary in a policy procured 
 by her husband divest her rights.** 
 
 Effect of Murder of Insured by Beneficiary. 
 
 It is a well-settled principle applying to all contracts of insurance that 
 no person insured shall under his contract receive indemnity for a loss 
 that he himself has intentionally brought about. Thus, it is held that a 
 person who bums his own house may not recover under a contract of 
 insurance upon that house, even though no such exception exists in 
 the contract." In like manner it has been frequently held that, where 
 the beneficiary procures the death of the insured under such circum- 
 stances as to amount to a felony, he can receive no benefit under the 
 contract of insurance." In Cleaver v. Reserve Life Ass'n " (arising 
 out of the famous Maybrick Case) it was held that the wife, who 
 poisoned her husband, could not make claim to the money payable 
 under the insurance policy upon his life. 
 
 If, however, the death of the insured was caused under such cir- 
 cumstances as do not amount to felony, as where the beneficiary was 
 insane, the rights of the beneficiary under the policy are not affected.^® 
 
 i« Holmes v. Oilman, 138 N. Y. 382, 34 N. E. 205, 20 L. R. A. 566. 34 Am. 
 St. Rep. 463; Whitehead v. Insurance Co., 102 N. Y. 143, 6 N. E. 267, 55 Am. 
 Rep. 787 ; Laughlin v. Norcross, 97 Me. 33, 53 Atl. 834. 
 
 1* 128 U. S. 195, 206. 9 Sup. Ct. 41, 44, 32 L. Ed. 370. 
 
 "Mutual Life Ins. Co. v. Terry, 15 Wall. 580, 21 L. Ed. 236; Darrow v 
 Fund Soc, 116 N. Y. 537. 22 N. E. 1093, 6 L. R. A. 495, 15 Am. St Rep 430- 
 Fitch v. Insurance CJo.. 59 N. Y. 557, 17 Am. Rep. 372; Morris v. Assurance 
 Co., 183 Pa. 563, 39 Atl. 52; SMLER v. hlFK ASS'N. 105 Iowa. 87 74 N W 
 941, 43 L. R. A. 537. . , . «. vv. 
 
 See, further, "Suicide." post, p. 616. 
 
 i« Overhiser's Adm'x v. Overhiser, 63 Ohio St. 77, 57 N. B. 965, 50 L. R, A. 
 552, 81 Am. St. Rep. 612. ^ »^ ^ 
 
 " Karow v. Insurance Co., 67 Wis. 56. 15 N. W. 27. 46 Am. Rep. 17. 
 
 i« New York Mut Life Ins. v. Armstrong, 117 U. S. 591, 6 Sup. Ct. 877 29 
 L. Ed. 997; Schmidt v. Life Ass'n, III5 Iowa, 41, 83 N. W. 800. 51 L r' A. 
 141, 84 Am. St. Rep. 323. , . xv. ^ 
 
 i» [1892] 1 Q. B. 147. 
 
 20 Holdom V. Ancient Order, 159 111. 619, 43 N. B. 772, 31 L. R. A. 67. 50 Am 
 St Rep. 183. 
 
 §§ 132-134) VESTED RIGHTS OP THE BENEFICIARY, 
 
 393 
 
 The rule prohibiting the beneficiary from taking any rights under a 
 policy that has been matured by the murder of the insured is not based 
 upon the doctrine of fraud, for it has been held that the murderous 
 beneficiary forfeits all rights under the policy, even though it be 
 proved that the hope of obtaining money under the policy was not 
 the motive of the murder. ^^ But while the felonious act of the bene- 
 ficiary will defeat his rights under the policy, it seems that it will not 
 serve as a defense to the insurer, who must pay the amount of the 
 insurance to the representatives of the insured, to whom the property 
 in the policy is deemed to revert. Such is certainly the rule where 
 the right to change the beneficiary is reserved in the policy.** 
 
 The Theory of the Rule. 
 
 The rights thus accorded by the practically unanimous decisions of 
 the courts to the beneficiary in an insurance policy, including the right 
 to bring in his own name an action at law on the contract, are unique in 
 the law of contracts. It is not easy to discover in all cases the theory 
 upon which the courts place the beneficiary in so much more advan- 
 tageous a position than that occupied by the person for whose benefit an 
 ordinary contract is made. It seems, however, that three diflFerent 
 views as to the nature of the beneficiary's right in the insurance policy 
 have been adopted by the different courts: 
 
 (1) It has been held that the designation of the beneficiary is in its 
 nature a declaration of trust, which must be held sacred from inter- 
 ference or destruction by the parties to the contract.^' 
 
 (2) Other courts have considered the beneficiary as a party to the 
 contract made on his behalf by the insured.** This view, making the 
 insured, when procuring the policy, merely the agent of the beneficiary, 
 and therefore without subsequent authority to affect the rights of his 
 principal, affords an excellent basis for the rule that the beneficiary's 
 rights are indefeasible, but unfortunately in most of the cases the view 
 
 21 Schreiner v. High Court, 35 111. App. 576. 
 
 22 Schmidt v. Life Ass'n, 112 Iowa, 41, 83 N. W. 800, 51 L. R. A. 141. 84 Am. 
 St. Rep. 323; Cleaver v. Reserve Life Ass'n [1892] 1 Q. B. 147. See, also, in 
 this connection, Shea v. Benefit Ass'n, 160 Mass. 289, 35 N. E. 855, 39 Am. St. 
 Rep. 475. 
 
 28 Small V. Jose, 86 Me. 120, 29 Atl. 976; National Life Ins. Co. v. Haley, 78 
 Me. 268, 4 Atl. 415, 57 Am. Rep. 807; RYAN v. ROTHWEILER, 50 Ohio St 
 595, 35 N. E. 681; Woodruff's Cases, 368; Pingrey v. Insurance Co., 144 Mass. 
 374, 11 N. E. 562; Ricker v. Insurance Co., 27 Minn. 193, 6 N. W. 771. 38 Am. 
 Rep. 289. 
 
 2* See Washington Life Ins. Co. v. Berwald (Tex. Sup.) 76 S. W. 442; Thomp- 
 son V. Insurance Co., 46 N. Y. 674; Whitehead v. Insurance Co., 102 N. Y. 143, 
 6 N. E. 267, 55 Am. Rep. 787; Holmes v. Oilman, 138 N. Y. 382, 34 N. B. 205, 
 20 L. R. A. 566, 34 Am. St. Rep. 463. 
 
 The New York cases are powerfully affected by statute. See, also, Millard- 
 V. Brayton, 177 Mass. 533, 59 N. E. 436, 52 L. R. A. 117, 83 Am. St Rep. 294. 
 
 f:l 
 
 It 
 
 I 
 
 I 
 
394 
 
 RIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 §§ 132-134) VESTED RIGHTS OF THE BENEFICIARY. 
 
 395 
 
 I 
 
 )♦ 
 
 ^ 
 
 
 is so contrary to fact that it will scarcely answer as a satisfactory 
 theory. 
 
 (3) Another view, already referred to as taken by some of the earlier 
 decisions, is that the policy, as a chose in action, becomes the property 
 of the beneficiary when delivered to him as an executed gift.^** This 
 gift theory, however, will not avail, inasmuch as we have seen that no 
 delivery to the beneficiary is necessary to fix his rights. 
 
 None of these theories satisfies the curious student. Neither can 
 the vested character of the beneficiary's right be explained in accord- 
 ance with the general rule that a third party for whose benefit a con- 
 tract is made may enforce that contract, for it would seem that such 
 a contract, upon the mutual agreement of the two principal parties, 
 could be rescinded. Furthermore, the fact that in both England and 
 Massachusetts the beneficiary is allowed to bring an action in his own 
 right on the policy strikingly diflFerentiates him from the beneficiary 
 of an ordinary contract, who is accorded no such right in those juris- 
 dictions. It seems better and more in accordance with the decisions 
 to say that, under the special common-law rule that has grown up, 
 the beneficiary takes a peculiar property right, which must be recog- 
 nized in accordance with the rule above stated.** 
 
 In construing the insurance contract for the purpose of determining 
 who are entitled to benefits under it, the courts are strongly inclined 
 to consider the designation of the beneficiary as analogous to a testa- 
 mentary provision,*^ and therefore give the probable intention of the 
 insured as full eflFect as possible. But this tendency seems in deroga- 
 tion of the well-established rule of law that the beneficiary takes a 
 property right. Thus, it is held in many jurisdictions that, where a 
 policy is made payable to several joint beneficiaries, the rights of one 
 dying before the insured pass to the survivors among the beneficiarieS; 
 rather than to the deceased beneficiary's personal representatives.*® 
 
 «B LEMON V. INSURANCE CO., 38 Conn. 294. 
 
 2« See discussion in Ricker v. Insurance Co., 27 Minn. 193, 6 N. W. 771, 38 
 Am. Rep. 289 ; also, 6 Va. Law Reg. 366. 
 
 »7 Duvall V. Goodson, 79 Ky. 224. "But when considered with respect to 
 the rights of those who claim to be beneficiaries — especially when they are the 
 natural objects of the affection and bounty of the person procuring and pay- 
 ing for the insurance—should be regarded in the light of a testamentary pro- 
 vision, rather than of a contract" Robinson v. Duvall, 79 Ky. 83, 42 Am 
 Rep. 208. 
 
 2« See Robinson v. Duvall, 79 Ky. 83, 42 Am. Rep. 208; United States Tmst 
 Co. V. Mutual Ben. Life Ins. Co., 115 N. Y. 152, 21 N. E. 1025; Walsh v. Insur- 
 ance Co., 133 N. Y. 408, 31 N. E. 228, 28 Am. St. Rep. 651; Continental Life 
 Ins. Co. V. Webb, 54 Ala. 688. But other courts hold that the shares of de- 
 ceased beneficiaries, dying before the insured, pass to their personal repre- 
 sentatives. See In re Conrad's Estate, 89 Iowa, 396, 56 N. W. 535, 48 Am. St. 
 Rep. 396; Hooker v. Sugg, 102 N. C. 115, 8 S. E. 919, 3 L. R. A. 217, 11 Am 
 St. Rep. 717; GLENN v. BURNS, 100 Tenn. 295, 45 S. W. 784; WoodrufiTe 
 
 « 
 
 Such a holding is clearly due to the analogous rule obtaining when one 
 of several joint legatees or devisees dies before the testator.** 
 
 The Beneficiary s Right to Assign, 
 
 It is generally held that the beneficiary's right in the policy is of such 
 a character that it may be assigned by him with or without the consent 
 of the insured.*® Likewise such rights are regarded as property, which 
 is liable to be seized in satisfaction of debts and is subject to attach- 
 ment, provided the policy has a cash surrender value, or is matured.*^ 
 
 When the Beneficiary Dies before the Insured. 
 
 There is much conflict as to the legal consequence of the death of the 
 beneficiary before the maturity of the policy. In determining whether 
 the right to receive the proceeds shall pass to the personal representa- 
 tive of the beneficiary, or shall revert to the estate of the insured, so as 
 to enable him to appoint another beneficiary, there is a conflict between 
 the theory that regards the policy as a mere chose in action, subject to 
 the same rules of action which apply to any other chose, and that which 
 regards it as in the nature of a testamentary provision. By the great 
 weight of authority, the courts, in determining such cases, abide by the 
 rule that the property in the policy, having vested absolutely in the ben- 
 eficiary, must at his death pass to his personal representative, to be then 
 disposed of in accordance with the laws of distribution of personal 
 property.'* In other jurisdictions, however, it is held that the inten- 
 tion of the parties to the contract must be carried out as far as possi- 
 
 Cases, 372; Andrus v. Association, 168 Mo. 158, 67 S. W. 582, in which the 
 beneficiaries' interest was only conditionally vested. 
 
 2»LocIihart v. Vandylie, 97 Va. 356, 33 S. E. 613; In re Moss [1899] 2 
 Ch. Div. 314. 
 
 »o New York Mut Life Ins. Co. v. Armstrong, 117 U. S. 591, 6 Sup. Ct. 877, 
 29 L. Ed. 997 ; Hewlett v. Home for Incurables, 74 Md. 350, 24 Atl. 324, 17 L. 
 R. A. 445; Wirgman v. Miller, 98 Ky. 620, 33 S. W. 937. The beneficiary's 
 agreement to release his interest amounts to an equitable assignment. CocIj- 
 rell v. Cockrell, 79 Miss. 569, 31 South. 203. The New York statute requires 
 the written consent of the insured husband. Sherman v. Allison, 77 App. 
 Div. 49, 80 N. Y. Supp. 148. And see Ellison v. Straw, 116 Wis. 207, 92 N. W. 
 1094. 
 
 81 See Amberg v. Insurance Co., 171 N. Y. 314, 63 N. B. 1111 (under New 
 York statute); Ellison v. Straw, 116 Wis. 207, 92 N. W. 1094. But in some 
 states the rights of a surviving widow in the proceeds of a policy payable to 
 her are exempt by statute, as is also property purchased with such proceeds. 
 See Cook v. Allee, 119 Iowa, 226, 93 N. W. 93. 
 
 82 Block V. Insurance Co., 52 Ark. 201, 12 S. W. 477, 20 Am. St. Rep. 166; 
 Johnson v. Hall, 55 Ark. 210, 17 S. W. 874; Franklin Life Ins. Co. ▼. Galligan, 
 71 Ark. 295, 73 S. W. 102 ; Drake v. Stone, 58 Ala. 133 ; HARLBY v. HEIST, 86 
 Ind. 196, 45 Am. Rep. 285; Woodruff's Cases, 362; Phoenix Mut. Life Ins. Co. 
 V. Dunham, 46 Conn. 79, 33 Am. Rep. 14; Hooker v. Sugg, 102 N. C. 115. 8 
 S. B. 919, 3 L. R. A. 217, 11 Am. St. Rep. 717; Swan v. Snow, 11 Allen (Mass.^ 
 224; United States Trust Co. v. Mutual Ben. Life Ins. Co., 115 N. Y. 152, 21 
 
 I 
 
 * 
 
396 
 
 BIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 I 
 
 ble. Since the insured cannot have intended to make a provision, at 
 the cost of annual premiums paid by him, for the personal representa- 
 tives or distributees of the beneficiary, who may have no claim upon his 
 bounty or interest in his life, they hold that the right vested in the 
 beneficiary reverts to the insured as a lapsed trust, thus enabling him 
 to select another object for his bounty, or, in case no such new appoint- 
 ment be made, allowing the benefit of the insurance to pass to the estate 
 of the insured.^* This latter view has tended to interfere with the 
 operation of the established rule as to the nature of the right of the 
 beneficiary, thus needlessly complicating the law upon this already 
 complicated subject, and is not to be commended. While it is true that 
 the devolution of the beneficiary's rights under the policy to a stranger 
 usually defeats the purposes of the policy, this is a result that can al- 
 ways be avoided by the insured by taking the precaution to have insert- 
 ed in the contract a condition reserving to himself the right to change 
 the beneficiary.'* If he does not do this, it would seem reasonable and 
 proper to require that the rules of law should operate to carry the de- 
 ceased beneficiary's interest in the policy to his personal representatives. 
 Rights Vested Conditionally. 
 
 The beneficiary's rights in the policy may be vested, and yet, m ac- 
 cordance with the terms of the contract, be liable to be defeated by the 
 happening of some condition subsequent. Such rights are analogous to 
 vested future estates in realty that are subject to be divested.^* It is 
 frequently difficult to determine whether the condition imposed upon 
 the beneficiary's rights under any given contract is precedent, making 
 such rights contingent upon the happening of the condition, or whether 
 
 N. E. 1025 (under New York statute); FOSTER v. GILB, 50 Wis. 603. 7 N. 
 W. 555, 8 N. W. 217. 
 
 The rule applies with especial force when the policy Is payable to the ben- 
 eficiary, "his executors, administrators, or assigns." See Glanz v. Gloeckler, 
 104 111. 573, 44 Am. Rep. 94; Preston v. Insurance Co., 95 Md. 101, 51 Atl. 83S. 
 
 It is obvious that, where the beneficiary has paid value for his appointment, 
 his interest must pass. In case of his death before the insured, to his personal 
 representatives. 
 
 33 RYAN V. ROTHWEILER, 50 Ohio St. 595, 35 N. E. 679; Shields v. Sharp, 
 35 Mo. App. 178; Mutual Ben. Life Ins. Co. v. Atwood's Adm'x, 24 Grat. (Va.) 
 497, 18 Am. Rep. 652; Kerman v. Howard, 23 Wis. 108. In some cases it is 
 held that the personal representatives of the predeceased beneficiary may 
 claim the insurance, rather than those of the insured, in case the latter has 
 failed to make a reappointment. Continental Life Ins. Co. v. Palmer, 42 
 Conn. 60, 19 Am. Rep. 530; Walsh v. Insurance Co., 61 Hun, 91, 15 N. Y. Siipn. 
 697. 
 
 »* See HARLEY y. HEIST, 86 Ind. 196, 45 Am. Rep. 285; Woodrurs Cases. 
 362. 
 
 »» Roquemore v. Dent, 135 Ala. 292, 33 South. 178, 93 Am. St. Rep. 33. 
 And see Ellison v. Straw, 116 Wis. 207, 92 N. W. 1094, under Wisconsin stat- 
 ute. 
 
 §§ 132-134) TESTED RIGHTS OF THE BENEFICIARY. 
 
 397 
 
 it is subsequent, merely divesting rights then vested.*' Nor does it 
 seem that the courts are inclined to favor the vesting of such rights, as 
 in analogous cases in the law of real estate. The tendency seems to 
 be to consider conditional rights contingent rather than vested.*^ This 
 tendency is doubtless due to the inclination of the courts to consider 
 the appointment of the beneficiary in the light of a testamentary dispo- 
 sition. The nature of conditional vested rights, and also the impor- 
 tance of the principle in practice, is well illustrated in the striking case 
 of United States Casualty Co. v. Kacer,^^ recently decided in the Su- 
 preme Court of Missouri. The policy in question provided that upon 
 the death of the insured a large sum should be paid to his daughter, 
 "if living" ; if not, to the personal representatives or assigns of the in- 
 sured. The insured and his daughter, the beneficiary, perished by 
 shipwreck in the Gulf of Mexico, there being no evidence whatever as 
 to which survived the other. Under these circumstances a contest 
 arose between the personal representative of the beneficiary and those 
 of the insured, as to which was entitled to the receipt of the insurance 
 moneys. It is manifest that if the right of the beneficiary was to be re- 
 garded as vested, subject to be divested upon her death before the in- 
 sured, the burden would rest upon the representatives of the insured to 
 prove his survivorship and the consequent divesting of the beneficiary's 
 rights. On the other hand, if the expression "if surviving" should be 
 regarded as a condition precedent to the vesting of any rights in the 
 beneficiary, the burden would rest upon the representative of the bene- 
 ficiary to prove the happening of that condition. The court, in a well 
 written and thoroughly sound opinion, decided that the right of the 
 beneficiary under the policy was vested, and could be defeated only by 
 p.-oof of the happening of the divesting condition of death before the 
 
 insured. 
 
 The same person who perished in the disaster described above 
 also had a benefit certificate in a mutual benefit association, like- 
 wise payable to his daughter. As will be seen later, it is with prac- 
 tical unanimity held that the beneficiary designated in a certificate of a 
 mutual benefit association has not a vested right in the insurance. 
 Hence, when the question arose between the representatives of father 
 and daughter as to which should be entitled to the moneys under the 
 benefit certificate, it was held in a Missouri court that the daughter's 
 representative could take only upon proof of her surviving the insured, 
 
 t'.l 
 
 r 
 
 1 
 
 i 
 
 «« Compare FOSTER r. GILB, 50 Wis. 603, 7 N. W. 655, 8 N. W. 217. with 
 Fuller V. Linzee, 135 Mass. 468. 
 
 87 See Fuller v. Linzee, 135 Mass. 468. 
 
 «8 169 Mo. 301, 69 S. W. 370, 58 L. R. A. 436, 92 Am. St. Rep. Wl. 
 also, Cowman v. Rogers, 73 Md. 403, 21 Atl. 64, 10 L. R. A. 550. 
 
398 
 
 RIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 since that was a condition precedent to the vesting of her nghtV So, 
 in the Massachusetts case of Fuller v. Linzee,*^ the policy was made 
 payable to the insured's wife or assigns, but, if she should die before 
 the insured, it was to become payable to their children. The charter 
 of the association which had issued the insurance stipulated that the in- 
 surance should be for the benefit of the wife if she should survive ; oth- 
 erwise for the children. Reading the provision of the policy in connec- 
 tion with that of the charter, the court held that the condition of sur- 
 vivorship was precedent, and therefore the rights of the wife contingent. 
 Hence, when the insured, his wife and children, all perished in the same 
 disaster, the court refused to allow the payment of the insurance money 
 to the wife's personal representatives. As a general rule, however, it 
 would seem that, where a policy is payable to a beneficiary "if surviv- 
 ing," such a beneficiary's rights should be reerarded as conditionally 
 vested. 
 
 i 
 
 CONTINGENT INTEREST OP THE BENEFICIARY. 
 
 186, The terms of the policy may designate some person as contingent 
 recipient of the proceeds of the insurance, his right to take the 
 fund being conditioned upon the happening of some prior event. 
 Upon the happening of the contingency specified, the contingent 
 right becomes vested and indefeasible; and, even while the 
 right remains contingent, it is liable to destruction only in ac- 
 cordance with the terms of the policy. 
 
 In the preceding section, reference has already been made to the im- 
 portance of determining whether the rights of the beneficiary are con- 
 tmgent or vested. It is improbable that such contingent rights would 
 be so far recognized as to permit their assignment prior to the happen- 
 mg of the contingency upon which they vested, or that they would be 
 regarded as estates liable to satisfaction of the beneficiary's debts, al- 
 though some courts hold them to be transmissible." The most fre- 
 quently occurring and natural contingent provision in life insurance is 
 found in those policies that are made payable to the insured's wife, but 
 providing that, in case of her death before that of the insured, the in- 
 surance money shall be payable to their children. In those cases it is 
 
 »• Supreme Council Royal Arcanum v. Kacer, 96 Mo. App. 93, 69 S. W. 671. 
 See, also, declaring the same rule, Males v. Sovereign Camp, 30 Tex. Civ. App. 
 184, 70 S. W. 108, where both insured and beneficiary perished in the great 
 Galveston storm; Screwmen's Benev. Ass'n v. Whitridge, 95 Tex. 539 68 S 
 W. 501; Hildenbrandt v. Ames, 27 Tex. Civ. App. 377, 66 S. W. 131. But see,* 
 contra. Cowman v. Rogers, 73 Md. 403, 21 Atl. 64, 10 Lu R. A. 550. 
 
 *o 135 Mass. 468. 
 
 *i Hooker v. Sugg, 102 N. 0. 116, 8 S. E. 919, 3 L. R. A. 217, 11 Am. St Rep 
 717; In re Conrad's Estate, 80 Iowa, 396, 56 N. W. 535, 48 Am. St. Rep. 396. 
 
 gl36) 
 
 MERE EXPECTANCY OF BENEFIT. 
 
 399 
 
 plain that during the life of the wife the children have a mere con- 
 tingent interest in the insurance, which, however, vests upon the death 
 of the wife during the life of the insured.** It seems that the con- 
 tingent right of the children in such policies cannot be defeated without 
 their consent, and that, even though both the insured and vested bene- 
 ficiary should agree to the surrender and cancellation of the policy,*' it 
 would, nevertheless, become payable to the ^contingent beneficiaries if 
 their rights should become vested by the death of the wife.** 
 
 MERE EXPECTANCY OF BENEFIT. 
 
 136. By the weight of anthority the person designated as benefleiary 
 in a policy, by the terms of which is reserved to the insured the 
 privilege of changing the beneficiary at will, takes no property 
 rights whatsoever in the policy, bnt a mere expectancy of ben- 
 efit. This rule applies to beneficiaries named in certificates of 
 mutual benefit associations, urho may always be changed arbi- 
 trarily* 
 
 As an original question, there would be reason for holding that, 
 where there is reserved to the insured, either by the terms of the pol- 
 icy or by provisions of the charter or by-laws of the benefit association, 
 the right to change the beneficiary at his own pleasure, the rights of 
 such beneficiary should be regarded as vested until divested by the ap- 
 pointment of another as beneficiary.*'' Such, however, is not the con- 
 clusion reached by the courts. It seems rather to have been deter- 
 mined, with practically unanimity of decision, that the rights of a bene- 
 ficiary under a contract allowing arbitrary change of the beneficiary 
 have not in any sense the quality of property, but constitute in such 
 beneficiary merely an expectancy of benefit to be received under the con- 
 tract in case he happens to occupy the position of appointee at the time 
 of the death of the insured.** 
 
 I 
 
 *« Chapin v. Fellowes, 36 Conn. 132, 4 Am. Rep. 49; Connecticut Mnt Life 
 Ins. Co. V. Burroughs, 34 Conn. 305, 91 Am. Dec. 725; Ricker v. Insurance 
 Co., 27 Minn. 193, 6 N. W. 771, 38 Am. Rep. 289. 
 
 Any otlier condition precedent to the beneliciary's right to demand pay- 
 ment will cause his interest to be contingent. See Thomas v. Insurance Co., 
 158 Ind. 461, 63 N. B. 295. 
 
 *8 In New York the statute requires a different ruling. See Anderson v. 
 Goldsmidt, 103 N. Y. 617. 9 N. B. 495. 
 
 ** See Brown's Appeal, 125 Pa. 303, 17 Atl. 419, 11 Am. St. Rep. 900. See, 
 also, Entwistle v. Insurance Co., 202 Pa. 141, 51 Atl. 759; Virgin v. Marwlck, 
 97 Me. 578, 55 Atl. 520. 
 
 *8 Hopkins v. Hopkins, 92 Ky. 327, 17 S. W. 864. 
 
 *e Hoeft V. Supreme Lodge, 113 Cal. 91, 45 Pac. 185, 33 L. R. A. 174; Left- 
 wich V. Wells, 101 Va. 255, 43 S. E. 364. But see Jarvis v. Blnkley (111.) 69 
 N. E. 582, in which it is held that the beneficiaries under mutual benefit cer- 
 
400 
 
 BIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 iP 
 
 t 
 
 If it be true that the beneficiary under such a contract takes no prop- 
 erty rights in the insurance, the inference is natural that the property 
 in the contract remains in the insured, and would, therefore, be subject 
 to attachment for debt or assignment in bankruptcy, in case it had any 
 cash value. It is probable, however, that, when the question arises, the 
 courts will decide that the right of the insured in such a policy is rather 
 that of the donee of a general power of appointment, who may appoint 
 to his creditors if he sees fit, but need not if he desires otherwise.*^ 
 
 BENEFICIARIES IN MUTUAL BENEFIT ASSOCIATIONS. 
 
 137. The desigTiation of the beneficiary in ordinary benefit certificates 
 
 is held to have no contractual significance. Subject to the lim- 
 itations set in the association's charter, constitution, and by- 
 laws, the insured may arbitrarily change the beneficiary named 
 in his certificate, even though the right to make snoh change 
 is not reserved. 
 
 EXCEPT— (a) When the beneficiary has been designated in accord- 
 ance with the terms of a binding contract, in which case the 
 insured is estopped to exercise his right to change. 
 
 (b) When the contract is of such unusual form as to give the bene- 
 ficiary a clearly vested right. 
 
 138. MODE OF CHANGE-The beneficiary can be changed only in the 
 
 mode prescribed by the rules of the association. A clearly 
 proved intention to make the change is not sufficient, if any of 
 
 tbe formal requirements are lacking. 
 
 EXCEPT— (a) When the insured has done all in his power to comply 
 with such requirements, equity will protect the rights of the 
 intended beneficiary. 
 When the association has waived any defects in an attempted 
 change of beneficiaries, the original beneficiary cannot set up 
 such a defect to defeat the change. 
 
 (b) 
 
 While It is generally held that mutual benefit associations engaged in 
 making contracts of insurance with their members are to be regarded 
 as insurance companies,** yet it is also generally recognized that the 
 contracts of such associations diflfer somewhat in nature from those of 
 
 tlflcates had such Interests as could be validly assigned In equity to creditors. 
 See, also, Pomeroy v. Insurance Co., 40 111. 398; Supreme Council Royal Ar- 
 canum v. Tracy, 169 111. 123, 48 N. E. 401. 
 
 *T See Lel^twlch v. Wells, 101 Va. 255, 43 S. E. 364. 
 
 The same rule applies even when the certificate on its face is payable to 
 the devisee of the insured. Northwestern Masonic Aid Ass'n v. Jones 154 
 Pa. 99, 26 Atl. 253. 35 Am. St. Rep. 810. ' 
 
 *• See ante, p. SS. But in some cases wich societies have been held not 
 to be insurance companies. Commonwealth v. Equitable Ben. Ass'n, 137 Pa. 
 412, 18 Atl. 1112; Northwestern Masonic Aid Ass'n t. Jones. 154 Pa. 99. 26 
 Atl. 253. 35 Am. SL Rep. 810. 
 
 §§ 137-133) BENEFICIARIES IN MUTUAL BENEFIT ASSOCIATIONS. 401 
 
 regular life insurance companies. Their purpose is benevolent rather 
 than money-making. Only members have the privilege of securing in- 
 surance, and membership can be acquired only upon complying with 
 the specified requirements of the association. As a consequence of 
 membership in such an association and the discharge of all of the duties 
 assumed in reference to them, the member is entitled to certain con- 
 tingent benefits. These benefits are intended to afford relief either to 
 the member himself, or to those dependent upon him for support, 
 against disabling accidents or death. The charter and by-laws of the 
 associations usually set forth these purposes at length, and specify the 
 classes of dependents who may receive benefits accruing from member- 
 ship. While each member receiving a benefit certificate may designate 
 the beneficiary in such certificate, he is limited in his choice to those 
 classes of beneficiaries set forth in the laws of the association. 
 
 From this statement of the relation between the mutual association 
 and its members, it is apparent that the contractual relation strikingly 
 differs from that existing between the regular insurance companies and 
 their policy holders. The contract of the association is solely with its 
 member, and cannot in any view be regarded as being made with the 
 beneficiary designated in the certificate.** Therefore, it is held with 
 practical unanimity that the beneficiary takes no contract rights under 
 the benefit certificate, and is subject to change at the will of the person 
 taking out the certificate, even though the right to make such change is 
 not expressly reserved in the laws of the association or by the terms of 
 the certificate itself.'''^ 
 
 With the exception of the unusual cases noted below, it is well set- 
 
 <» See Sabin v. Phinney, 134 N. Y. 428, 31 N. E. 1088, 30 Am. St. Rep. 681. 
 in which the court said: "The statute under which the corporation was or- 
 ganized, its by-laws, together with the application for and the certificate of 
 membership, constituted the contract which existed between the member and 
 the society, which instruments, construed together, measure the rights of 
 these litigants. Any person who became an appointee in such a certificate 
 took the position subject to the absolute right of the member to substitute 
 a new one at any moment. The rights acquired by the member by virtue 
 of this relation did not amount to a chose in action. He had no interest in 
 the society that was assignable or transferable until some right of action had 
 accrued. The appointee had no vested interest in the sum which might, in 
 a contingency, become payable on death of the member." See, also, Keefer 
 V. Modern Woodmen, 203 Pa. 129, 52 Atl. 164; Brown v. Grand Lodge (Pa. 
 1904) 57 Atl. 176, the court saying: "Unlike ordinary life insurance, the cer- 
 tificate or policy of a beneficial association creates no vested interest in the 
 beneficiary, but only an expectancy, which cannot become a vested or abso- 
 lute right to the proceeds of the policy until the death of the assured." 
 
 »o Bacon, Ben. Soc. § 321; Niblack, Mut. Ben. Soc. (2d Eld.) 234a; Hoeft 
 
 V. Supreme Lodge, 113 Cal. 91, 45 Pac. 185, 33 L. R. A. 174; Leftwich v. 
 
 Wells, 101 Va. 255, 43 S. E. 364; Martin v. Stubbings, 126 111. 387, 18 N. B. 
 
 657, 9 Am. St. Rep. 620; Knights of Honor v. Watson, 64 N. H. 517, 15 Atl. 
 
 Vance In^. — 26 
 
402 
 
 BIGHTS UNDER THE POLICY. 
 
 (Ch.13 
 
 I 
 
 tied that a person designated as beneficiary in a mutual benefit certificate 
 cannot complain of the subsequent substitution of another in his place, 
 even though such substitution be arbitrary and unjust, or even fraudu- 
 lent.'^ Thus, where a beneficiary had for a long time paid the dues 
 necessary to maintain the certificate, it was held that sha had, notwith- 
 standing this, no rights which the insured was obliged to respect or 
 which would deprive him of his right to change the beneficiary at 
 will.''* So, also, where the insured was induced to change the bene- 
 ficiary by a designing friend or third person who had not so good a 
 claim to his bounty as the original beneficiary, it was held that the 
 change, although fraudulently induced, was sufficient to entitle the sub- 
 stituted beneficiary to the rights conferred by the certificate.** 
 
 Exceptions — Contract Beneficiaries, 
 
 An important exception to this general doctrine of the insured's right 
 to change arbitrarily the beneficiary named in the certificate arises in 
 those cases in which the beneficiary has been designated as such in ac- 
 cordance with the terms of a binding contract. Thus, where a mem- 
 ber of such an association agrees that he will secure a certificate for the 
 benefit of a person who promises to pay all dues necessary to maintain 
 that certificate, the insured will not then be allowed to ignore his con- 
 tract obligation and change the beneficiary thus selected.** Such a 
 
 125; Schilllnger v. Boes, 85 Ky. 357, 3 S. W. 427; Carpenter v. Knapp, 101 
 Iowa, 712, 70 N. W. 764, 38 L. R. A. 128. 
 
 It has been held, however, that there is no essential difiference between 
 mutual benefit and regular insurance in this respect, and that the beneficiary 
 in a benefit certificate takes a vested interest unless the right of change is 
 especially reserved by the charter or by-laws of the association. See Weisert 
 V. Muehl, 81 Ky. 336; Manning v. Ancient Order, 86 Ky. 136, 5 S. W. 385, 
 9 Am. St. Rep. 270. 
 
 51 Hoeft V. Supreme Lodge, 113 Cal. 91, 45 Pac. 185, 33 L. R. A. 174. 
 
 But when the insured was fraudulently induced to make the change at a 
 time when he was mentally incapable of contracting, such change will be 
 declared void and of no effect as to the former beneficiaries. Cason v. Owens, 
 100 Ga. 142, 28 S. E. 75. 
 
 B2 Spengler v. Spcngler (N. J. CJh.) 55 Atl. 285. Nor was she allowed to re- 
 cover the premiums paid. But see Tepper v. Supreme Council, 59 N. J. E]q. 
 322, 45 Atl. Ill; National Trust Co. v. Hughes, 14 Manitoba Rep. 41. 
 
 8» Hoeft V. Supreme Lodge, 113 Cal. 91, 45 Pac. 185, 33 L. R. A. 174; Speng 
 ler V. Spengler, supra. 
 
 By the application of the same principle, the rights of such a beneficiary 
 are defeated by the suicide of the insured, even though the policy should con- 
 tain no clause against suicide. Shipman v. Protected Circle, 174 N. Y. 398, 
 67 N. E. 83, 63 L. R. A. 347, overruling Darrow v. Fund Soc, 116 N. T. 537, 
 22 N. E. 1093, 6 L. R. A. 495, 15 Am. St. Rep. 430; Mooney v. Ancient Order 
 (Ky.) 72 S. W. 288. 
 
 »♦ Smith V. Benefit Soc., 123 N. Y. 85, 25 N. E. 197, 9 L. R. A. 616; Martin 
 V. Stubbings, 126 111. 387, 18 N. E. 657, 9 Am. St. Rep. 620; Jory v. Supreme 
 Council, 105 Cal. 20, 38 Pac. 524, 26 L. B. A. 733, 45 Am. St Rep. IT; Adams 
 
 §§ 137-138) BENEFICIARIES IN MUTUAL BENEFIT ASSOCIATIONS. 403 
 
 contract beneficiary has not any vested right in the certificate, but is 
 rather protected by the doctrine of estoppel, for, even though the in- 
 sured may have the legal right to change the beneficiary, equity will 
 hold him estopped to do so in violation of his contract 
 Same— Rights Expressly Vested, 
 
 While, as explained above, the nature of mutual benefit insurance is 
 such as by implication to give the insured the right to arbitrarily change 
 the beneficiary, yet it is always possible that the form of the contract 
 may be such as clearly to give the person designated in the certificate 
 the vested contractual rights possessed by the beneficiaries in regular 
 life policies. If such be clearly the intention of the contracting parties, 
 the courts will, of course, give effect to that intention, and hold the 
 rights of the beneficiary vested and indefeasible without his consent." 
 Mode of Changing Beneficiary, 
 
 The contract of the association with its members is to pay the sum 
 specified in the certificate to such person as may be, at the time of the 
 member's death, the appointee in accordance with the regulations of 
 the association ; nor is it required to look beyond its regulations in an 
 endeavor to carry out the intention of the deceased member." There- 
 fore the intention of the deceased member to change the appointed bene- 
 ficiary, however clearly expressed, will not avail to defeat the latter's 
 claim to payment, unless the mode of expression is that fixed by the 
 rules of the society.** 
 
 v^ Grand Lodge, 105 Cal. 321, 38 Pac. 914, 45 Am. St. Rep. 45; Grimbley t. 
 Harrold, 125 Cal. 24, 57 Pac. 558, 73 Am. St. Rep. 19. So, if a binding con- 
 tract has been made to change the beneficiary, equity will regard the change 
 as made, as between the nominal beneficiary and the person beneficially en- 
 titled. See Pennsylvania Ry. Co. v. Wolfe, 203 Pa. 269, 52 Atl. 247; Spengler 
 V. Spengler (N. J. Ch.) 55 Atl. 285, in which the beneficiary was allowed to 
 take no advantage from her contract because it was made on Sunday 
 
 55 Mason v. Mason (Ind. App.) 63 N. E. 578, following Presbyterian Mut 
 Assur. Fund v. Allen, 106 Ind. 593, 7 N. E. 317. 
 
 e« See Brown v. Grand Lodge (Pa. 1904) 57 Atl. 176, in which the wife of 
 a member designated as beneficiary was held entitled to payment, though she 
 had been divorced eight years before the member's death. The husband had 
 married again, but had never changed the beneficiary named in his certifi- 
 cate in the manner required by the regulations of the association. 
 
 57 Masonic Mut. Ben. Soc. v. Burkhart, 110 Ind. 189, 10 N. B. 79 11 N E 
 449; Berg v. Damkoehler, 112 Wis. 587. 88 N. W. 606; Canavan v. Insurance 
 Co., 39 Misc. Rep. 782, 81 N. Y. Supp. 304. 
 
 A request for change of beneficiary, together with the required fee sent 
 by mail to the proper authority, but received after the death of the Insured 
 will not confer upon the intended beneficiary any rights under the certifl' 
 cate. See Fink v. Fink, 171 N. Y. 616, 64 N. E. 506. Nor will a change with- 
 out the consent of the association, when the rules require such consent Na- 
 tional Mut. Aid Soc. V. Lupoid, 101 Pa. 111. See, also, Grace v. Relief Ass'n 
 87 Wis. 562, 58 N. W. 1041, 41 Am. St. Rep. 62; McCarthy v. Supreme Lodge' 
 153 Mass. 314, 26 N. E. 866, 11 L. R. A. 144. 25 Am. St Rep 637 ' 
 
404 
 
 RIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 LIFE POLICY PAYABLE TO INSURED. 
 
 405 
 
 f I 
 
 But this eminently reasonable rule knows some seeming exceptions. 
 Thus, the law never requires of any one impossible things. Therefore, 
 when a member has done all in his power to comply with the require- 
 ments of the association, and there remains to be done only acts by 
 the association, or by a third person over whom the member has no 
 control, equity will regard the change as complete, and will protect the 
 rights of the intended beneficiary/® 
 
 Again, since the regulations in question are made for the benefit and 
 protection of the association, and not on behalf of the beneficiary, it is 
 only the association that can complain of a noncompliance with them. 
 Hence, when the association waives any irregularity in the mode of 
 change, and makes payment to the intended beneficiary, the original 
 beneficiary cannot be heard to complain.^' 
 
 58 
 
 THE RIGHTS OF CREDITORS OF THE INSURED— FIRE POWCIES. 
 
 139. Tlie creditors of the insured have no rights whatsoever in the 
 latter*s insurance on property prior to the happening: of a loss. 
 After a loss has occurred, the claim of the insured becomes a 
 mere chose in action, which is t abject, like any other chose, to 
 be seized for the satisfaction of his creditors. But by the 
 weight of authority, the proceeds of insurance upon exempted 
 property are also exempt. 
 
 Since a fire policy is peculiarly personal to the insured, it is mani- 
 fest that such rights as he may have thereunder before the occurrence 
 of a loss are not such as can, without the consent of the insurer, pass 
 to the creditors of the insured. But immediately upon the happening 
 of a loss covered by the policy, there arises under the policy to the in- 
 sured a right to demand a money payment, a free chose in action. This 
 chose, like any other property of the insured, can be subjected to the 
 payment of his debts by garnishment or other appropriate legal process. 
 So far the courts find no embarrassment in determining the rights of 
 the parties, but a difficult and most perplexing problem is presented 
 when the insured property destroyed was exempt from levy. Thus, 
 
 58 Grand Lodge A. O. U. W. v. Noll, 90 Mich. 37, 51 N. W. 268, 15 L. R. A. 
 350, 30 Am. St. Rep. 419; Heydorf v. Conrack, 7 Kan. App. 202, 52 Pac. 700; 
 Jinks V. Banner Lodge, 139 Pa. 414, 21 Atl. 4; State v. Tomlinson, 16 Ind. 
 App. 662, 45 N. E. 1116, 59 Am. St. Rep. 335; Grand Lodge A. O. U. W. v. 
 Child, 70 Mich. 163, 38 N. W. 1; Supreme Conclave Royal Adelphia v. Cap- 
 pella (C. C.) 41 Fed. 1 ; Rollins v. McHatton, 16 Colo. 203, 27 Pac. 254, 25 Am. 
 
 St Rep. 260. 
 
 89 Schoenau v. Grand Lodge, 85 Minn. 349, 88 N. W. 999; Martin v. Stub- 
 bings, 126 111. 387. 18 N. E. 657, 9 Am. St. Rep. 620; Manning v. Ancient Or- 
 der, 86 Ky. 136, 5 S. W. 385, 9 Am. St. Rep. 270; Duvall v. Goodson, 79 Ky. 
 224; Supreme CouncU A. L. H. v. Perry, 140 Mass. 580, 5 N. B. 634. 
 
 §140) 
 
 when an insured house constituted a part of the debtor's homestead, 
 will the insurance fund be subject to attachment in the hands of the 
 insurer? This question has been answered both negatively and affirm- 
 atively by the courts.®** It is probable, however, that by the weight of 
 authority the proceeds of insurance upon exempt property is also ex- 
 empt. In some jurisdictions it is held that such proceeds are exempt 
 only for a reasonable time,'^ or in those cases in which the debtor in- 
 tends to use the insurance fund in replacing the property destroyed." 
 
 Z.IFE POLICY PAYABLE TO INSURED. 
 
 140. LIFE POLICIES payable to the insnred or bis estate, wben ma- 
 tured, are subject to tbe claims of creditors just as any otber 
 oboses mAy be. Sucb policies, before maturity, are to be 
 deemed assets for tbe payment of debts only wben by tbeir 
 terms tbey possess a fixed money value. 
 
 As has already become apparent from the preceding discussions, the 
 doctrine that an insurance policy is a chose in action, and, as such, 
 property, is not applied consistently to all cases.*' The decisions of 
 the courts are especially inconsistent and uncertain when they come to 
 construe the rights of creditors of the insured in policies taken out by 
 himself and for his own benefit. It seems, however, to be settled with- 
 out dispute that such a policy, when matured, by the expiration of some 
 specified period or by the death of the insured, becomes assets subject 
 to the payment of the insured's debts, and therefore liable to be at- 
 tached in a suit «* or to be seized in satisfaction of a judgment; but in 
 
 «o Insurance on homestead exempt. Houghton v. Lee, 50 Oal. 101; Cam- 
 eron V. Fay, 55 Tex. 58; Chase v. S\^ayne, 88 Tex. 218, 30 S. W. 1049, 53 Am. 
 St. Rep. 742; Bernheim v. Davitt, 9 Ky. Law Rep. 229, 5 S. W. 193; Premo 
 V. Hewitt, 55 Vt. 362. 
 
 Contra: Smith v. Ratclifif, 66 Miss. 683, 6 South. 460, 14 Am. St Rep. 606; 
 Wooster v. Page, 54 N. H. 125, 20 Am. Rep. 128 (exempt chattels). See, also, 
 Monniea v. Insurance Co., 12 111. App. 240; Fletcher v. Staples, 62 Minn. 471, 
 04 N. W. 1150. 
 
 «i Cooney v. Cooney, 65 Barb. (N. Y.) 524. 
 
 82 Puget Sound Dressed Beef & Packing Co. v. Jeffs, 11 Wash. 466, 39 Pac. 
 9G2, 27 L. R. A. 808, 48 Am. St. Rep. 885. See, also, Cullen v. Harris, 111 
 Mich. 20, 69 N. W. 78, 66 Am. St. Rep. 380. 
 
 63 See RYAN v. ROTHWEILER, 50 Ohio St. 595, 35 N. E. 679, in which 
 the court says: "The question is not governed so much by the principles of 
 choses in action and vested rights as by the principles, aims, and well-known 
 objects of life insurance. * ♦ * The theory of a failure of trust comes 
 with more force and stronger reasons that the doctrine of choses in action, 
 so strongly urged by counsel for plaintiff in error. We regard the doctrine 
 of choses in action as not fully applicable, because it conflicts in many cases 
 with the controlling doctrine of insurable interest." 
 
 «* Trepagnier v. Rose, IS App. Div. 393, 46 N. Y. Supp. 397, affirmed 155 
 
406 
 
 RIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 §ui) 
 
 
 those cases where the policy has not been matured, or is still subject 
 to a contingency, such as lapse for failure to pay premiums, or forfei- 
 ture for breach of some other condition, it is difficult to determine what 
 IS the accepted rule. It may be stated, however, on the probable weight 
 of authonty, that an unmatured policy is to be regarded as assets 
 available to the creditors of the insured only when, in accordance with 
 the terms of the contract, the policy has, at the time in question, an ab- 
 solute money value, as where the insurer agrees to pay a cash surrender 
 value upon the cancellation of the policy; «« and that in all other cases 
 where the liability of the company is contingent the policy is not to be 
 regarded as available assets.«« And in accordance with the better opin- 
 ion, It seems that this rule holds good even though, as a matter of fact, 
 the insurer may be willing to pay a considerable sum for the cancella- 
 tion of the contract.'^ 
 
 As has been stated above, wherever a policy is of such a character as 
 to make it subject to seizure by the creditors of the insured, it neces- 
 sarily passes to an assignee in bankruptcy when proceedings are insti- 
 tuted against the insured under the bankruptcy law." 
 
 N. Y. 637, 46 N. E. 1105; Sexton v. Insurance Co., 132 N. C. 1, 43 S. E 479- 
 Phenix Ins. Co. v. Willis, 70 Tex. 12, 6 S. W. 825. 8 Am. St. Rep. 566; Girard 
 Fire & Marine Ins. Co. v. Field, 45 Pa. 129. 
 
 Such accrued claims may be attached, though disputed or denied by the 
 Insurer. See Crescent Ins. Co. v. Moore, 63 Miss. 419. 
 
 «6 Kratzenstein v. Lehman, 19 App. Div. 228, 46 N. Y. Supp. 71. 
 
 •« Boisseau v. Bass' Adm'r, 100 Va. 207, 40 S. E. 647; Day v. Insurance 
 Co., Ill Pa. 507, 4 Atl. 748, 56 Am. Rep. 297; Barbour's Adm'r v. Larue's 
 Assignee, 51 S. W. 5, 21 Ky. Law Rep. 94; Pace v. Pace. 19 Fla. 438; Bar- 
 bour V. Insurance Co., 61 Conn. 240. 23 Atl. 154; 1 Freeman on Executions, 
 § 164a; Columbia Bank v. Equitable Life Assur. Soc, 79 App. Div. 601 80 
 N. Y. Supp. 428, reversing 61 App. Div. 594, 70 N. Y. Supp. 767. But see 
 Rhode Island Nat. Bank v. Chase, 16 R. I. 37, 12 Ati. 233; Anthracite Ins. 
 Co. V. Sears, 109 Mass. 383. 
 
 •7 Long V. Britannia Co., 94 Va. 594, 27 S. E. 499. 
 
 •8 So provided by United States bankruptcy act of 1898, § 70 (5) [U. S. 
 Comp. St. 1901, p. 3451], but allowing the bankrupt to redeem his policy hav- 
 ing a cash surrender value by paying such cash amount to the trustee. It is 
 accordingly held that policies, having no surrender value, do not pass to the 
 trustee. Morris v. Dodd, 110 Ga. 606, 36 S. E. 83, 60 L. R. A. 33, 78 Am St 
 Rep. 129; In re Buelow (D. 0.) 98 Fed. 86; In re Lange (D. C.) 91 Fed. 361- 
 Holt V. Everall, 34 L. T. N. S. 599. But otherwise when such surrender value 
 exists. In re Steele (D. C.) 98 Fed. 78; McElroy v. Insurance Co. 88 Md. 
 137, 41 Atl. 112, 71 Am. St Rep. 400; Troy v. Sargent, 132 Mass. ^ But 
 see In re Murrin, Fed. Cas. No. 9,968. 
 
 POLICY PAYABLE TO A THIRD PERSON. 
 
 POLICY PAYABLE TO A THIRD PERSON. 
 
 iOT 
 
 141. The creditors of the insured have no rights in policies payable t© 
 third persons as beneficiaries, nnless 
 
 (a) The premiums are paid wholly or in part with money embeisled 
 
 f romi the creditors, or 
 
 (b) The beneficiary became such by voluntary assignment after the 
 
 indebtedness was incurred, or 
 
 (c) Premiums have been paid by an insolvent insured for the purpose 
 
 of defrauding his creditors, when the proceeds of such insur- 
 ance will be subject to the claims of creditors to the extent of 
 the fraudulent payments. But it seems the payment of pre- 
 miums by an insolvent debtor in maintaining a reasonable 
 amount of insurance is not constructively fraudulent. Actual 
 fraud n&ust be proved. 
 
 It has been heretofore stated that a policy payable to a beneficiary 
 other than the insured, where no right of change of such beneficiary is 
 reserved, becomes the absolute property of the beneficiary immediately 
 upon its valid issue. It necessarily follows that the insured himself, 
 even though he may have procured the insurance and paid all the pre- 
 miums necessary to maintain it, has no title or interest in the contract. 
 Consequently, his creditors can find no interest in such a policy which 
 they can subject to the payment of his debts.«» This general rule is 
 subject, however, to some apparent exceptions, which are strongly in 
 accord with analogies to be drawn from the general rules of law. 
 
 Premiums Paid Wholly or in Part with Embezzled Money. 
 
 When a person procures a policy of insurance for the benefit of his 
 wife or some other beneficiary, and pays the first and all subsequent 
 premiums with money embezzled from his employers, it has been held 
 that the legal title vests in the beneficiary, subject to a trust in favor of 
 the persons from whom the funds have been embezzled.''® This trust 
 equity will enforce within the amount of the embezzlement, even though 
 the sums paid as premiums are very much less than the amount paya- 
 ble under the policy. On principle, this doctrine would seem to be 
 open to grave question.''^ 
 
 «» Bntit is held that where a policy payable to the Insured has heen Issuea 
 In lieu of a former policy payable to his wife, and surrendered without hor 
 knowledge, and has been subsequently assigned, the assignee is entitled to 
 recover the whole amount of such policy, provided he had no knowledge of 
 The fraud upon the beneficiary. The beneficiary was entitled to a paid-up pol- 
 icy as of the time of the surrender of the original policy. Weatherbee y. In- 
 surance Co., 182 Mass. 342, 65 N. B. 383. 
 
 7 Holmes v. Oilman, 138 N. Y. 383, 34 N. E. 205, 20 L. R. A. 572. 34 Am. 
 St. Rep. 470; Shaler v. Trowbridge, 28 N. J. Eq. 595. 
 
 71 It would seem that the proceeds of the insurance should merely be sub- 
 jected to a lien for the repayment of the premiums. Note the reasoning in 
 
408 
 
 RIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 I 
 
 I 
 
 It seems, however, that, if a policy has been once honestly procured 
 by the payment of the first premium with the money of the insured or 
 of the beneficiary, subsequent payments of premiums necessary to main- 
 tain the pohcy, with stolen money, will merely give the creditors from 
 whom the money was improperly taken a lien to the extent of the dis- 
 honest premiums.''* 
 
 Fraudulent Transfers of Policies, 
 
 A beneficiary may be designated in an insurance contract by subse- 
 quent assignment as well as by original appointment, provided the in- 
 sured was solvent at the time of the assignment; but it is universally 
 held, in the absence of a statute to the contrary, that a voluntary as- 
 signment to a person by the insured when insolvent is to be conclu- 
 sively presumed as in fraud of such creditors,^' and will be set aside 
 in any proper proceeding instituted by them. 
 
 Rights of Creditors in Premiums Paid by Insolvent Debtors. 
 
 Much conflict has arisen among the courts as to whether the creditors 
 of an msolvent debtor may subject the proceeds of a policy of insur- 
 ance on his life, but payable to a third person, to the satisfaction of 
 their daims, to the extent to which he has paid premiums in keeping 
 up such insurance after he became insolvent. In some states the mat- 
 ter has been regulated by statute to some extent. Thus by the New 
 York statute a person has the right, although insolvent, to appropriate 
 the sum of not more than $500 a year to the maintenance of insurance 
 for the benefit of his wife and children.^* By implication, however 
 any sum in excess of that statutory amount paid in premiums would 
 
 Central Nat. Bank v. Hume, 128 U. S. 195, 9 Sup. Ct 41, 32 L. Ed. 370: Har- 
 
 io M l* l''^''^'";.?/- ^^^^ 2 ^' ^' '^^^' Holmes v. Oilman, 64 Hun, 227, 
 ^ T J* A i!S;.^^^ (reversed 138 N. Y. 383. 34 N. E. 205, 34 Am. St Rep. 470, 
 
 •iU Li. JK. a. 572). 
 
 72 Holmes v. Davenport, 27 Abb. N. C. 341, 18 N. Y. Supp. 56. 
 
 cJ',^?''*^^^ ^^** ^^""^ ^' H"""^' 128 U. S. 195, 9 Sup. Ct. 41, 32 L. Ed. 370; 
 Stiglers Ex'x v. Stlgler, 77 Va. 163; Stokes v. Coffey, 8 Bush (Ky.) 533; El- 
 liott sExTs Appeal, 50 Pa. 75. 88 Am. Dec. 525 ; Freeman v. Pope, L. R. 9 
 iuq. ^^. Of course, such assignment is valid as against subsequent credit- 
 s'* ^ ll^'^'Y. T; ^^s^ra'^ce Co., 61 Conn. 248, 23 Atl. 156; In re Heilbron, 14 
 Wash. 541, 45 Pac. 155, 35 L. R. A. 604. 
 
 It has been held that a transfer of a policy to one having an interest in 
 the life of the insured will not be regarded as in fraud of creditors unless an 
 actual fraudulent intent is proved. State v. Tomlinson, 16 Ind. App 662 45 
 
 ^* ^^^}^' ^^ ^™- ^*- ^®P- ^^' Johnson v. Alexander, 125 Ind. 575 25 N 
 E. 706, 9 L. R. A. 660. ' 
 
 ^* ^^J'J^^^ 1^^' ^' ^' amended Laws 1870, c. 277. See Stokes v. Amer- 
 man, 121 N. Y. 337, 24 N. E. 819; Baron v. Brummer, 100 N. Y. 372 3 N E 
 474. See, also, Wyman v. Gay. 90 Me. 36, 37 Atl. 325, 60 Am. St. Rep 238* 
 And see Mahoney v. James, 94 Va. 176, 26 S. B. 385, as to premiums' paid 
 from exempted wages. «r */ « 
 
 POLICY PAYABLE TO A THIRD PERSON. 
 
 409 
 
 § 141) 
 
 be deemed as in fraud of creditors." The leading case on this subject 
 iS Central Nat. Bank v. Hume.''* In this case the insured, both before 
 and after he became insolvent, took out policies for large amounts, pay- 
 able to his wife, and on these policies paid large sums in premiums, 
 which the creditors claimed should have been appropriated to the pay- 
 ment of his debts. In the lower court," it was held that such pay- 
 ments, made after the insolvency of the insured, came under the pro- 
 visions of the statute of 13 Eliz., and were in fraud of the rights of the 
 creditors. Consequently it was decreed that such portion of the pro- 
 ceeds of these policies upon the death of the insured as would equal 
 the amount of premiums paid in keeping them up after his insolvency 
 should be paid to the creditors. The case was carried on appeal to the 
 Supreme Court of the United States, which reversed the decision of the 
 lower court on the ground that there was no proof of actual fraud in 
 the case, and that the circumstances did not amount to constructive 
 fraud.'^^ The reasoning of the court may be best given in the lan- 
 guage of Chief Justice Fuller, as follows : 
 
 "This argument in the interest of creditors concedes that the debtor 
 may rightfully preserve his family from suffering and want. It 
 seems to us that the same public policy which justifies this, and recog- 
 nizes the support of wife and children as a positive obligation in law 
 as well as morals, should be extended to protect them from destitution 
 after the debtor's death, by permitting him, not to accumulate a fund 
 as a permanent provision, but to devote a moderate portion of his earn- 
 ings to keep on foot a security for support already, or which could 
 thereby be, lawfully obtained, at least to the extent of requiring that, 
 under such circumstances, the fraudulent intent of both parties to the 
 transaction should be made out." 
 
 This case has been followed by some of the later cases, both in the 
 inferior federal courts and in some of the states,^® but has been sharply 
 criticised in other quarters.*® The question is one of great importance 
 
 w 
 
 7 6 Stokes V. Amerman, supra; Kittel v. Domeyer, 70 App. Div. 134, 75 N. 
 T. Supp. 150. 
 
 76 128 U. S. 195, 9 Sup. Ct. 41, 32 L. Ed. 370. 
 
 77 See 3 Mackey (D. C.) 360, 51 Am. Rep. 780. 
 
 7 8 It sliould be observed that a large portion of the money used by Hume 
 in the payment of premiums was furnished by his wife's mother. Therefore 
 the language used by the court is much broader than the case actually de- 
 cided. 
 
 7 9 Masonic Mut. Life Ass'n v. Paisley (C. C.) Ill Fed. 34; Hendrie & Bolt- 
 hofif Mfg. Co. V. Piatt, 13 Colo. App. 15, 56 Pac. 211; State v. Tomlinson, 16 
 Ind. App. 662, 45 N. E. 1116, 59 Am. St. Rep. 335; Johnson v. Alexander, 125 
 Ind. 575, 25 N. E. 706, 9 L. R. A. 660. 
 
 80 See the article of Prof. Williston in 25 American Law Review, 185, in 
 which all the authorities are reviewed, and the conclusion reached by the 
 Supreme Court in the Hume Case is sharply criticised. A summary of Prof. 
 
410 
 
 BIGHTS UNDER THE POLICY. 
 
 ;' 
 
 
 (Ch. 11 
 
 in insurance law, and it is to be regretted that the Supreme Court has 
 thrown the great weight of its decision in opposition to that generally 
 accepted and thoroughly sound principle of law that no man can be 
 generous, even to those near to his affections, until he has been just in 
 the payment of his debts. 
 
 WHEN THE CREDITOB IS THE ASSURED. 
 
 142. By the better authority, the rights of a creditor taking out vaUd 
 insurance upon the life of his debtor are absolute, as far as the 
 debtor is concerned. He may retain the whole proceeds of such 
 insurance, even though it much exceeds the amount of the debt, 
 or even when the debt is wholly paid. 
 
 It frequently happens that a creditor finds it to his interest to secure 
 a debt by taking out insurance, payable to himself, upon the life of his 
 debtor. It has already been shown that in securing such insurance he 
 
 Williston's views Is thus stated In the concluding paragraph: "It is not in- 
 tended to find fault with the statutory provisions allowing an insolvent debt- 
 or to insure his life for the benefit of those dependent upon him. It may 
 well be that such a policy is better for society than to require all assets of 
 every kind to be given up to creditors. What is insisted upon is this: That, 
 by the common law, as brought to this country, no exceptions were made to 
 the sweeping rule that an insolvent debtor could not in any way convey his 
 property to a volunteer, so as to free it from the claim of creditors. The stat- 
 utes themselves above referred to are an admission of this, for, if the law 
 without the statutes were not what is contended, why pass the statutes? 
 If, now, the sentiment is right and just that a man should make provision to 
 some extent, at least, for those dependent upon him, before paying his debts, 
 and if that sentiment exists among a majority of the people, it should find 
 expression In statute, and the extent of the right should so be properly de- 
 fined. Till then the rule of the common law should prevail, and the courts, 
 uninfluenced by considerations of meritoriousness, which are for the Legisla- 
 ture to consider, should enforce the law." The views so expressed were ex- 
 pressly adopted by the New Jersey Court of Chancery in Merchants' & Miners' 
 Transportation Co. v. Borland, 53 N. J. Eq. 282, 31 Atl. 272, in which it de- 
 clined to follow the Hume Case. 
 
 The cases holding that the payment of premiums by an insolvent insured 
 is constructively fraudulent differ with regard to the extent to which the 
 creditors may subject the proceeds of the insurance to their claims. Some 
 hold that the creditors are entitled to such proportion of the insurance fund 
 as the amount of premiums paid after insolvency bears to the whole sum of 
 premiums paid. See Merchants' & Miners' Transportation Co. v. Borland, 
 supra; Fearn v. Ward, 80 Ala. 555, 2 South. 114; Kittel v. Domeyer 70 
 App. Div. 134, 75 N. Y. Supp. 150; PULLIS v. ROBISON. 73 Mo. 201, 39 
 Am. Rep. 497, Woodruff, Ins. Cas. 375. Other cases hold that the cred- 
 itors may take from the insurance fund only the amount of premiums fraud- 
 ulently paid. Stigler's Ex'x v. Stigler, 77 Va. 163; Stokes v. Coffey, 8 Bush 
 (Ky.) 533; Pence v. Makepeace, 65 Ind. 345. The latter view seems clearly 
 preferable. 
 
 ^142) 
 
 WHEN THE CREDITOR IS THE ASSURED. 
 
 411 
 
 is not limited to the amount of the debt he seeks to secure, but is re- 
 'quired only to contract in good faith. ®^ It sometimes occurs that the 
 proceeds of such policies, whether on account of the unexpectedly early 
 •death of the insured, or because the debt has been paid or reduced, con- 
 siderably exceed the amount of the debt and the charges to which the 
 •creditor has been put on account of the insurance. A dispute then 
 arises as to whether the insuring creditor is entitled to retain the whole 
 of the proceeds, thus taking profit by the transaction, or whether the 
 excess of such proceeds over the debt and expenses of the creditor 
 should belong to the personal representative of the deceased debtor. 
 In determining such contests, the decisions of "the courts have fallen 
 into two classes, in accordance with the theory adopted as to the nature 
 of the transaction: (1) Some courts hold that the creditor, in insur- 
 ing the life of the debtor, acts to a certain extent as the agent of the 
 debtor, and that the policy is for the latter's benefit, subject to the lien 
 of the debt and charges. ^^ As a consequence of this theory, it natural- 
 ly follows that these courts give any excess of the insurance money over 
 the debt and charges to the personal representative of the debtor. (2) 
 Other courts adopt the view that the contract is one purely between 
 the insuring creditor and the insurer; that the debt gives the creditor 
 an insurable interest ; and that the contract made is one with which the 
 
 r 
 
 •1 See ante, p. 138. The creditor insuring is entitled to have paid out of the 
 proceeds of his policy debts that are barred by the statute of limitations. 
 Townsend v. Tyndale, 165 Mass. 293, 43 N. E. 107, 52 Am. St Rep. 513; 
 RAWLS V. INSURANCE CO., 27 N. Y. 282, 84 Am. Dec. 280. 
 
 82 Goldbaum v. Blum, 79 Tex. 038, 15 S. W. 564; Exchange Bank of Macon 
 V. Loh, 104 Ga. 446, 31 S. E. 459, 44 L. R. A. 372; Tate v. Commercial Bldg. 
 Ass'n, 97 Va. 74, 33 S. K 382, 45 L. R. A. 243, 75 Am. St. Rep. 770 (dictum); 
 WARNOCK V. DAVIS. 104 U. S. 775, 26 L. Ed. 924 (dictum); Crotty v. Insur- 
 ance Co., 144 U. S. 621, 12 Sup. Ct. 749, 36 L. Ed. 566, in which the policy 
 was payable to "Michael Crotty, creditor"; Strode v. Drug Co. (Mo. App.) 74 
 S. W. 379. In this case, A. being indebted to B. in the sum of $50, secured 
 life insurance to the amount of $5,000 — $50 payable to A.'s widow, and the 
 balance to B., who was to pay the first and all subsequent premiums. The 
 insurance was out of all honest proportion to the debt (see Commack v. Lew- 
 is, 15 Wall. 643, 21 L. Ed. 244), and the case clearly comes within the rule of 
 WARNOCK V. DAVIS, supra. But the court, in limiting B.'s rights in the 
 proceeds of the policy to his debt and charges, laid down a broader rule, as 
 follows: "The construction our courts put on such transactions as we have 
 here is that the creditor, whether he be named as payee of the policy when 
 It is issued, or becomes the payee afterwards by assignment, acquires the 
 status of beneficiary as far as is necessary to make him whole, and no fur- 
 ther. As to the remainder of the insurance money, he stands as trustee for 
 the estate of the insured, or whomsoever the insured may have validly ap- 
 pointed to be residuary beneficiary. • ♦ • The law views the contract of 
 insurance as having been made for the benefit of the appellant to the extent 
 of its interest in Stokes' life, and for the benefit of Stokes' estate as to th^ 
 excess of the fund realized from the policy.' 
 
 n 
 
412 
 
 RIGHTS UNDER THE POLICY. 
 
 I 
 
 (Ch. 11 
 
 §§143-145) 
 
 THE RIGHTS OP THE ASSIGNEE. 
 
 413 
 
 debtor has absolutely no concern, and in which he can take no interest, 
 since It IS a well-settled principle that the decrease or termination of 
 the interest upon which the life insurance contract is based does not in 
 any wise affect the right of the assured to enforce that contract.®* 
 These courts hold that the insuring creditor may collect and retain the 
 entire amount payable under the policy, even though the debt may have 
 been wholly paid by the insured before his death.®* 
 
 The weight of authority appears to be in favor of the former view 
 although many of the courts that have laid down this doctrine have 
 done so gratuitously;." but it would seem that the second view, as 
 stated above, is more in accordance with the fixed rules of insurance 
 law, as well as the dictates of reason. If this view is supported by the 
 fewer authorities, it will be found that they are better reasoned, and 
 have been decided upon issues properly raised, rather than upon those 
 assumed for purposes of obiter dictum. 
 
 143. 
 
 THE RIGHTS OP THE ASSIGNEE. 
 
 IN GENERAIi—The rlghta of the asslgmees of the proceeds of Are 
 policies are not different from those of assignees of ordinary 
 choses in action, and require no special discussion. Assign- 
 Bients of life policies, however, give rise to some special rales. 
 
 ASSIGNEES OP LIFE POLICIES fall into three classest 
 
 The assignment may be made xidthont consideration to one whom 
 the insured desires to make a beneficiary under the policy. 
 
 The assignment may be conditional— made by the insured as col- 
 lateral security for a debt. An assignment absolute in form 
 may be shown by parol to be conditional in fact. 
 
 The assignment may be absolute— intended to be an outright sale 
 by the insured of aU of his right and interest in the policy. 
 
 EPFECT OP SUCH ASSIGNMENTS-While there is much con- 
 fusion in the cases, the effect of these several kinds of assign- 
 ment may be thus stated: 
 
 A voluntary assignee, intended to be thereby made beneficiary, 
 whether possessing an insurable interest or not, takes the same 
 
 " DALBY y. ASSURANCE CO., 15 C. B. 365, Richards, Ins. Oas. 271, 
 Woodruff, Ins. Cas. 7, overruling GODSALL v. BOLDERO, 9 East. 72- 
 AMICK V. BUTLER, 111 Ind. 578, 12 N. E. 518, 60 Am. Rep. 722; Ferguson 
 V. Insurance Co., 32 Hun (N. Y.) 306; Grant's Adm'rs v. Kline, 115 Pa 018 
 9 Atl. 150; Shaffer v. Spangler, 144 Pa. 223, 22 Atl. 865; Coon v. Swan. 30 
 Vt 6; Corson's Appeal, 113 Pa. 438, 6 Atl. 213, 57 Am. Rep. 479. 
 
 84 DALBY V. ASSURANCE CO.. supra; Ferguson v. Insurance Co.. supra; 
 Central Nat. Bank v. Hume. 128 U. S. 195, 9 Sup. Ct. 41, 32 L. Ed. ^70 (dic- 
 tum). ^ 
 
 8 5 It Will be observed that, in all the cases laying down the rule that the 
 debtor's personal representative may recover from the insuring creditor the 
 balance of the insurance fund after the debt and charges are satisfied the 
 evidence showed either an assignment by the debtor by way of collateral se- 
 curity, or that the creditor had procured the insurance under an agreement 
 with the debtor. Note Exchange Bank of Macon v. Loh, supra. 
 
 144. 
 (a) 
 
 (b) 
 
 (c) 
 145. 
 
 (a) 
 
 rights under the policy as if originally deignated beneficia^r, 
 provided the assignment was not in fraud of creditors, and also 
 provided it was made in good faith. j^x- « i.« 
 
 <b) IJ^en the assignment is conditional, ^^^^^^^^^Y^t^Jl'^ti in the 
 expressed or not, the assignee takes only such interest in the 
 proceeds as will reimburse him for the charges ^^^f^^^^^f " 
 count of the insurance, and repay the debt due, with l^*f '^»*; 
 
 <c) When the assignment is absolute, and no circumstances of fraud 
 or imposition are shown, the assignee takes absolutely the 
 whole proceeds of the policy, even though it be in excess of Ws 
 expen^tures on this account. There is much authority, how- 
 ever, to the contrary. 
 
 The general question of assignability of insurance policies, whether 
 fire or life, will be reserved for discussion in a future chapter. In 
 the present discussion, it will be assumed that the assignments under 
 consideration are valid, so far as the insurer is concerned; the disputes 
 witli reference to them existing only between the assignor and assignee, 
 or their representatives. 
 
 Assignees of Fire Policies. 
 
 The assignment of a fire policy before it becomes a fixed liability by 
 the loss of the property insured can be made only with the consent of 
 the insurer, which transforms the assignment into a novation, and elim- 
 inates any question of conflicting rights of assignor and assignee. 
 The rights of the mortgagee as assignee will be considered m the next 
 
 section. . , ,. .... ., ^ 
 
 After a contract of fire insurance becomes a fixed hability upon the 
 insurer, it may be assigned with all the freedom of any other chose in 
 action «« and the rules applicable to such assignments are those of the 
 general law of contracts. Assignments of life policies, however, raise 
 many peculiar and difficult questions, which must now be considered. 
 
 Assignment of Life Policies. 
 
 It is well first to say that when a life policy has matured, and has 
 become an absolute liability on the part of the insurer, it is subject to 
 assignment, just as are other claims for money. Such assignments 
 
 It of cour*se!'tht assignee takes only such rights as were possessed by the 
 assignor at the time of the assignment; that is. the insurer can set up against 
 the assignee any defenses that might have been set up against the assignor 
 But the consent of the insurer to the assignment will operate as a waiver of 
 Tlf defenseHLVk^^^^^ to him. HALL v. INSURANCE CO., 93 Mich. 184. 
 ^ N W. 727. 18 L. R. A. 135. 32 Am. St. Rep. 497; Ellis v. Insurance Co.. 
 
 ^smPERI^f Fm^'lN^ V. DUNHAM. 117 Pa. 460. 12 Atl. 668 2 
 
 Am. St. Rep. 686. When the insured is bankmpt his rights wiH pass to his 
 trustee in bankruptcy. Fuller v. Insurance Co.. 184 Mass. U 67 N. E. 870. 
 
 <l 
 
4U 
 
 BIQHTS UNDER THB POLICT. 
 
 (Ch. 11 
 
 I 
 
 i 
 
 7lT V. . ' considered." When, however, the policy is as- 
 signed while It remains a contingent liability, many interesting ques- 
 tions pecuhar to insurance law call for determination. 
 
 In considering these questions, the reader will bear in mind the gen- 
 eral rules that have been discussed in the preceding questions. Thus 
 the insured cannot assign a policy payable to a third person as bene- 
 
 fnTJl T "'"' "^^"^fi^^^y'* c^n^ent. Again, a benefit certificate 
 in a mutual association, whose charter and by-laws limit the bene- 
 ficiaries to the exclus on of creditors, cannot, it is apparent, be regarded 
 as commercially assignable.- Likewise it will be apparent that in 
 most jurisdictions, rights vesting in the beneficiary of the policy are re- 
 u^ft ^^//^'^fWe choses in action, when it is not otherwise stipu- 
 lated by statute." Therefore in the following discussion we shall Z- 
 .ider only those assignments rightfully made by the insured, eliminatine 
 those of other parties who may be concerned. m'naiing 
 
 Source of Confusion among the Cases. 
 
 The numerous cases to be found in recent Reports discussing the 
 egal consequences of assignments of life policies made by parties in- 
 sured seem at first to be hopelessly in conflict. This conflict, however 
 IS more apparent than real, resulting in an unfortunate accumulation 
 
 ojL7lu\T'' "^T""- ^^'' ^''"^"^■■°" '^ d"« t° ^ failure to rec- 
 SZ A- I "^, •"?''" °^ assignments that come before the courts 
 for adjudicahon. It is as unwise to consider all the assignments of 
 msurance polices as subject to the same rule, as it wouldTto sub- 
 jec all conveyances of real estate to a single rule; and it is believed 
 that much of the confusion to be found among the cases can be done 
 away with by properly distinguishing the different kinds of assign- 
 ments therein brought in question. 
 
 Beneficiary Designated by Assignment. 
 
 The maxim that one cannot do indirectly what is not allowed to be 
 done directly is frequently made the basis of the statement that, inas- 
 much as one cannot procure insurance directly upon a life in which he 
 IS not interested, he will not be allowed to secure indirectly by assim- 
 raent such insurance upon that life. This observation is eminently 
 
 mTskadinr't '• "'*"?^' ""T' '"P"^'^ "^ ^^"^^^"y- '* becomes most 
 misleading. It is very true that one person cannot induce another, in 
 
 k/,* 2"^^^ '^^ Insurance Co., 90 Cal. 245, 27 Pac. 211, 25 Am. St. Rep 114 
 ^IJ «° ^."^'"Pt to P'oWbit such an assignment by contract be y^id or 
 effective. Bnggs v. Earl, 139 Mass. 473, 1 N E 847 
 
 54 Md.'"': ^ At'l'S"'""' '"^ """• '«'• ^ ^- =• "•' °*'« -• «"-»"y. 
 
 But see Jarvis v. Binkley (111.) 69 N. B. 582. 
 
 •1 See Dannhauser v. Wallenstein, 169 N Y 199 f?2 Tvr t? ipa *► 
 cellent review of the legislation in New Yo^k upo^' tSs suSect' "" '" '^' 
 
 §§ 143-145) 
 
 THE RIGHTS OP THE ASSIGNEE. 
 
 il5 
 
 whose life he has no interest, to procure insurance upon his own life 
 with the intention of assigning it at once to the former person, who 
 agrees to bear all the expense incident to the procurement and mainte- 
 nance of the policy. Such a transaction is plainly but a palpable eva- 
 sion of the sound rule of law prohibiting wager policies. Such an as- 
 signment, being in bad faith and in fraud of the law, is universally held 
 to be void.** 
 
 On the other hand, there is no reason whatsoever why one who has in 
 good faith procured a valid policy of insurance upon his own life shall 
 not afterwards assign that policy to some third person, whom he de- 
 sires to make the beneficiary of the insurance, as where a man assigns 
 to his wife a policy of insurance procured upon his own life, and pay- 
 able to himself, before marriage. As we have seen above, an insolvent 
 debtor may not make such a transfer, since it is regarded as in fraud 
 of the rights of his creditors, but, barring insolvency and bad faith, 
 such assignees, although purely voluntary, take all of the rights that 
 have been heretofore discussed as accruing to a vested beneficiary.** 
 
 Conditional Assignments to Creditors. 
 
 One of the most valuable uses to which unmatured insurance poli- 
 cies are put is their assignment as collateral security for debts already 
 existing or then incurred. The mutual rights of assignors and as- 
 signees in such cases naturally vary in accordance with the terms of the 
 assignment, but frequently it becomes incumbent upon the assignee to 
 pay premiums necessary to keep the policy in force. Applying to as- 
 signments of this kind the general rule applicable to all pledges, we 
 easily derive the rule that the assignee's rights in the proceeds of the 
 policy are limited to an amount equal to the debt secured, the premiums 
 paid, and the interest thereon. As between the insured and assignee, 
 the latter is entitled to the whole proceeds, but he holds the excess be- 
 yond his interest, as above described, in trust for the personal repre- 
 sentatives of the deceased debtor.** From this doctrine there is no 
 dissent 
 
 »2 WARNOCK V. DAVIS, 104 U. S. 775, 26 L. Ed. 924; Mutual Life Ins. 
 Co. V. Armstrong, 117 V. S. 591, 6 Sup. Ct. 877, 29 L. Ed. 997; Heusner v. In- 
 surance Co., 47 Mo. App. 343. See National Life Ass*n v. Hopkins* Adm'r, 
 97 Va. 167, 33 S. E. 539. 
 
 »8 In re Steele (D. C.) 98 Fed. 78; Tremblay v. Insurance Co., 97 Me. 547, 
 55 Atl. 509; Appeal of Colbum, 74 Conn. 463, 51 Atl. 139, 92 Am. St. Rep. 
 231; PATTERSON v. INSURANCE CO., 100 Wis. 118, 75 N. W. 080, 42 L.. R. 
 A. 253, 69 Am. St. Rep. 899. 
 
 »* Roller V. Moore's Adm'r, 86 Va. 512, 10 S. B. 241, 6 L. R. A. 136; Gris- 
 wold V. Insurance Co., 1 Mo. App. 97; Id., 70 Mo. 654; Mutual Benefit Life 
 Ins. Co. of Newark v. First Nat Bank of Louisville, 74 S. W. 1066, 25 Ky. 
 Law Rep. 172; Oilman v. Curtis, 66 Cal. 116, 4 Pac. 1094; Wells v. Archer, 
 10 Serg. & R. (Pa.) 412, 13 Am. Dec. 682; Page v. Bumstine, 102 U. S. 6&4, 
 26 L. Ed. 268; Burnam v. White (Ky.) 22 S. W. 555. 
 
 I 
 
 I 
 
416 
 
 RIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 i 
 
 Absolute Assignments to Purchasers, 
 
 Pursuing the line of reasoning heretofore adopted with reference to 
 the character of the insurance poHcy as a chose in action, it would seem 
 to follow that when the chose belongs to the insured, free from the 
 rights of any other person, he should be allowed to sell it at whatever 
 price he can secure, and to transfer an absolute and complete title to 
 the purchaser. In fact, such a course often becomes necessary to the 
 holder of a life policy. Such a loan or surrender value as he may ob- 
 tain from the company may be inadequate for his necessities, and he 
 may find it expedient to convert his whole interest in the policy into 
 cash. When, under such circumstances, the insured sells a valuable 
 policy to one who purchases it as a chose in action in good faith, it is 
 held by the better-reasoned cases, and by probably a majority of the 
 cases in point, that such a bona fide purchaser takes an absolute ti- 
 tle to the policy, even though he had no preceding insurable in- 
 terest, and even though the proceeds of the policy may greatly exceed 
 the amount which he paid for the assignment.® ** If dictum is to be 
 taken as authority, undoubtedly the weight of authority is in favor of 
 applying to even an absolute assignment of the kind described the same 
 rule that has been stated above as properly applicable to conditional as- 
 signments.®® But a careful examination of the cases will show that, 
 
 •8 Metropolitan Life Ins. Co. v. Brown, 159 Ind. 644, 65 N. B. 908; St. John 
 V. Insurance Co., 13 N. Y. 31, 64 Am. Dec. 529; VALTON v. ASSURANCE 
 CO., 20 N. Y. 32; Olmsted v. Keyes, 85 N. Y. 593; WRIGHT v. ASSOCIA- 
 TION, 118 N. Y. 237, 23 N. E. 18(J, 6 L. R. A. 731, 16 Am. St. Rep. 749; STEIN- 
 BACK V. DIEPENBROCK, 158 N. Y. 24,' 52 N. E. 662, 44 L. R. A. 417, 70 Am. 
 St. Rep. 427; MUTUAL LIFE INS. CO. OF NEW YORK v. ALLEN, 138 
 Alass. 24, 52 Am. Rep. 245; Eckel v. Renner, 41 Ohio St. 232; Martin v. Stub- 
 bings, 126 111. 387, 18 N. E. 657, 9 Am. St. Rep. 620; Ulrich v. Reinoehl, 143 
 ra. 238, 22 Atl. 862, 13 L. R. A. 433, 24 Am. St. Rep. 534; McHale v. McDon- 
 nell, 175 Pa. 632, 34 Atl. 966; Wheeland v. Atwood, 192 Pa. 237, 43 Atl. 946, 
 73 Am. St. Rep. 803; Crosswel v. Association, 51 S. C. 103, 28 S. E. 200; 
 Bursinger v. Bank, 67 Wis. 75, 30 N. W. 290, 58 Am. Rep. 848; Fairchild v. 
 Association, 51 Vt. 613; Mechanics' Nat. Bank v. Comins (N. H.) 55 Atl. 191; 
 Chamberlain v. Butler, 61 Neb. 730, 86 N. W. 481, 54 L. R. A. 338, 87 Am. St. 
 Rep. 478; Fitzgerald v. Insurance Co. 56 Conn. 116, 13 Atl. 673, 17 Atl. 411, 
 7 Am. St. Rep. 288; Clark v. Allen, 11 R. I. 439, 23 Am. Rep. 496; Murphy 
 V. Red, 64 Miss. 614, 1 South. 761, 60 Am. Rep. 68; RITTLBR v. SMITH, 70 
 Md. 261, 16 Atl. 890, 2 L. R. A. 844. See, also, Connecticut Mut Life Ins. Co. 
 V. Schaefer, 94 U. S. 457, 24 L. Ed. 251; British Eq. Ins. Co. v. Great West- 
 em Ry. Co., 38 L. J. Ch. 132; MUTUAL LIFE INS. CO. v. ALLEN, 138 Mass. 
 24, 52 Am. Rep. 245. But see Stevens v. Warren, 101 Mass. 564, in which 
 the policy prohibited assignment. In New Jersey no insurable interest is re- 
 quired to support a contract of insurance. It necessarily follows that an as- 
 signee without interest may acquire absolute rights in the policy assigned. 
 See VIVAR v. KNIGHTS OF PYTHIAS, 52 N. J. Law, 455, 20 Atl. 36. In 
 California the right of absolute assignment is aflSrmed by express statutory 
 provision. Cal. Civ. Code, § 2764. 
 
 •« Alabama Gold Life Ins. Co. v. Mobile Mut Ins. Co., 81 Ala. 329, 1 South. 
 
 5§ 146-14:7) RIGHTS OF MORTGAGOR AND MOIITGAGEE. 
 
 417 
 
 in most of those in which this statement is made, the case actually be- 
 fore the court was one of conditional assignment as collateral security 
 for a debt."' 
 
 ( 
 
 RIGHTS OF MORTGAGOR AND MORTGAGEE. 
 
 146. The rights of the mortgagor and mortgagee In the proceed* of 
 
 insurance npon the mortgaged property vary in accordance with 
 the terms of the contract. 
 
 (a) When the mortgagor insures his own interest for his separate 
 
 benefit, the mortgagee takes no rights whatever in the proceeds. 
 
 (b) When the mortgagee insures his interest on his sole account, 
 
 money paid by the insurer will not inure to the benefit of the 
 mortgagor. 
 
 (o) When the mortgagor insures for the benefit of the mortgagee, or 
 is under contract so to do, the insurance money must be applied 
 to the payment of the mortgage debt. 
 
 (d) When the mortgagee insures under a provision that the pre- 
 miums paid shall be added to the mortgage debt, insurance 
 money received mrill reduce that debt pro tanto. . 
 
 147. A policy issued to the mortgagor, payable to the mortgagee as his 
 
 interest may appear, will be defeated by any default on the 
 part of the niortgagor, unless its terms establish an inde- 
 pendent collateral contract between the insurer and the mort- 
 gagee. 
 
 It is well recognized that both the mortgagor and mortgagee have 
 insurable interests in property mortgaged, and that these interests are 
 separate and distinct from each other. It is usual for the parties to stip- 
 ulate in the mortgage deed for insurance on the subject of the mortgage 
 and for payment of the premiums, but sometimes there is an entire 
 lack of agreement as to insurance. In construing the rights of mort- 
 
 561; Exchange Bank of Macon v. Loh, 104 Ga. 446, 31 S. B. 459, 44 L. R. A. 
 372; Schlamp v. Berner's Adm'r, 51 S. W. 312, 21 Ky. Law Rep. 324; Missouri 
 Valley Ute Ins. Co. v. McCrum, 36 Kan. 146, 12 Pac. 517, 59 Am. Rep. 537; 
 Price V. Bank, 62 Kan. 743, 64 Pdc. 639; Heusner v. Insurance Oo., 47 Mo. 
 App. 336; Mutual Life Ins. C5o. v. Richards (Mo. App.) 72 S. W. 487; Powell 
 V. Dewey, 123 N. C. 103, 31 S. E. 381, 68 Am. St Rep. 818; Tate v. Associa- 
 tion, 97 Va. 74, 33 S. E. 382, 45 L. R. A. 243, 75 Am. St. Rep. 770; WARNOCK 
 V. DAVIS, 104 U. S. 775, 26 L. Ed. 924; New York Life Ins. Co. v. Davis, 96 
 Va. 737, 32 S. K 475, 44 L. R. A. 305; Kessler v. Kuhns, 1 Ind. App. 511, 27 
 N. E. 980; Thornburg v. Insurance Co., 30 Ind. App. 682, 66 N. B. 922. 
 
 •7 This will be apparent from examining the Virginia cases, which declare 
 that the assignee cannot take an absolute interest in an insurance policy, in 
 every one of which the assignment was conditional. Roller v. Moore's Adm'r, 86 
 Va. 512, 10 S. E. 241, 6 L. R. A. 136 ; Long v. Britannia Co., 94 Va. 694, 27 S. E. 
 499; Beaty v. Downing, 96 Va. 451, 31 S. E. 612; New York Life Ins. Co. v. 
 Davis, 96 Va. 737, 32 S. E. 475, 44 L. R. A. 305; Tate v. Association, 97 Va. 
 74. 33 S. E. 382, 45 L. R. A. 243, 75 Am. St Rep. 770. 
 Vance Ins.— 27 
 
 ii 
 
 I 
 
 I 
 I 
 I 
 
 m 
 
418 
 
 RIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 .. 
 
 gagors and mortgagees, respectively, to the proceeds of insurance in 
 the latter event, we shall first consider those cases in which the con- 
 tracts are made separately and independently. 
 
 Separate Insurance by the Mortgagor. 
 
 As heretofore shown, the contract of insurance is strictly a personal 
 contract, and never runs with the property insured. Accordingly it 
 follows that where the mortgagor independently insures his own inter- 
 est in the mortgaged premises, without reference to any contract with 
 the mortgagee, the proceeds of such insurance in case of destruction 
 of the property belong solely to the mortgagor, freed from any lien or 
 other claim by the mortgagee.®* This rule obtains even though there 
 may be a stipulation in the mortgage contract providing that the mort- 
 gagee may insure and charge the premiums to the mortgagor, to be 
 covered by the security of the mortgage. Thus, in a recent case in the 
 Supreme Court of the United States,'* a corporation which had exe- 
 cuted a mortgage to a trustee to secure an issue of bonds insured its 
 plant on its own account. The mortgagee trustee had procured no in- 
 surance, although authorized to do so by the mortgage deed. Upon 
 the destruction of the plant by fire, and the serious impairment of the 
 security offered to the bondholders by the mortgage, the trustee claimed 
 that the proceeds of the insurance obtained by the mortgagor should 
 be impressed with a trust in favor of the bondholders. The court 
 held, however, that there was no contract obligation upon the mort- 
 gagor to insure, and that consequently the insurance money belonged 
 solely and absolutely to the mortgagor. 
 
 Separate Insurance by the Mortgagee. 
 
 In a like manner the mortgagee may insure his interest in the prop- 
 erty independently of the mortgagor.^®® In that event, upon the de- 
 struction of the property the payment of insurance money to the mort- 
 gagee will not inure to the benefit of the mortgagor, whose debt re- 
 mains still wholly, unpaid.^®* The mortgagee, however, is not in a 
 
 t8 Shadgett v. Phillips, 131 Ala. 478, 31 South. 20, 56 L. R. A. 461, 90 Am. 
 St. Rep. 95; Ryan v. Adamson, 57 Iowa, 30, 10 N. W. 287; Stamps v. Insur- 
 ance Co., 77 N. C. 209, 24 Am. Rep. 443; COLUMBIA INS. CO. v. LAW- 
 RENCE, 10 Pet. 507, 9 L. Ed. 512; Wheeler v. Insurance Co., 101 U. S. 439, 
 25 L. Ed. 1055. 
 
 »» Farmers' Loan & Trust Co. v. Penn Plate Glass Co., 186 U. S. 434, 22 
 Sup. Ct. 842, 46 L. Bd. 1234. 
 
 100 The mortgagee insures only his debt. When his debt Is In any way dis- 
 fcjharged, the insurance terminates. Carpenter v. Insurance Co., 16 Pet 495, 
 10 L. Ed. 1044; Phenix Ins. Co. v. First Nat. Bank, 85 Va. 767, 8 S. B. 720, 
 2 L. R. A. 667, 17 Am. St. Rep. 102. So, where a mortgagee has purchased 
 property at foreclosure sale, even though the redemption period is not ex- 
 pired. Reynolds v. Insurance Co., 128 CaL 16, 60 Pae. 467, 79 Am. St Rep. 
 17. 
 
 101 International Trust Co. t. Boardman, 149 Mass. 158, 21 N. B. 239; Ha- 
 
 §§ 146-147) RIGHTS OF MORTGAGOR AND MORTGAGEE. 419 
 
 position to enforce this claim against the mortgagor, but it passes by 
 subrogation to the insurer.^®* 
 
 Insurance by Mortgagor for Benefit of Mortgagee. 
 
 It is competent for the mortgagor to take out insurance for the bene- 
 fit of the mortgagee, and, indeed, this is the usual practice. The mort- 
 gagee may be made the beneficial payee in several diflFerent ways. He 
 may become the assignee of the policy with the consent of the insured, 
 or the mere pledgee without such consent; or the original policy may 
 contain a mortgage clause, or a rider making the policy payable to 
 the mortgagee as his interest may appear may be subsequently at- 
 tached; or, lastly, the policy itself may be payable absolutely to the 
 mortgagor, but taken out in pursuance of a contract to that eflFect with 
 the mortgagee, in which case the mortgagee acquires an equitable lien 
 upon the proceeds.^®* In all of these cases the proceeds of the policy 
 will be subject to the same claims by the mortgagee as could have been 
 enforced by him against the property insured. 
 
 Insurance by Mortgagee on Behalf of Mortgagor. 
 
 In the preceding paragraph we have spoken of the contracts to which 
 the mortgagor is a party, and the mortgagee beneficially interested. 
 Practically the same rules obtain when the mortgagee himself procures 
 the policy as a contracting party in accordance with the terms of an 
 agreement by which the mortgagor is to pay the premiums upon such 
 insurance. Upon the destruction of the property the mortgagee is 
 entitled to receive payment from the insurer, but such payment dis- 
 charges the debt, if equal to it, and, if greater than the debt, the mort- 
 gagee holds the excess as trustee for the mortgagor."* It seems, 
 however, that, if the insurer stipulates for subrogation to the rights 
 of the mortgagee under the mortgage, the payment of such a policy 
 
 ley V. Insurance Co., 120 Mass. 298, 296; Foster v. Van Reed, 70 N. Y. 19, 28 
 Am. Rep. 544. But see Home Ins. Co. v. Marshall, 48 Kan. 235, 29 Pae. 161; 
 Carpenter v. Insurance Co., 16 Pet. 495, 10 L. Ed. 1044. 
 
 The same rule has been held to apply to insurance by an attaching cred- 
 itor. See Trust Co. v. Boardman, supra. 
 
 102 EXCELSIOR FIRE INS. CO. v. ROYAL INS. CO., 66 N. Y. 343, 14 Am. 
 Rep. 271; NORWICH FIRE INS. CO. t. BOOMER, 52 111. 442, 4 Am. Rep 
 618. 
 
 In Massachusetts it seems to be held that the mortgagee may collect both 
 the insurance and the mortgage debt SUFFOLK FIRE INS. CO v BOY- 
 DEN, 9 Allen (Mass.) 123; KING v. INSURANCE 00., 7 Cush. (Mass.) 1, 54 
 Am. Dec. 683. It is otherwise, however, when the mortgagee agrees that the 
 Insurer shall be subrogated. Allen v. Insurance Co., 132 Mass. 480. 
 
 108 Wheeler v. Insurance Co., 101 U. S. 439, 25 L. Ed. 1056. 
 
 10* Buffalo Steam Engine Works v. Sun Mut. Ins. Co., 17 N. Y. 408* War- 
 ing V. Loder, 53 N. Y. 581; KING v. INSURANCE CO., 7 Cush. (Mass!) 1. 54 
 Am. Dec. 683 (dictum). 
 
i i 
 
 
 420 
 
 RIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 i 
 
 ■ I 
 
 will not discharge the debt, even though the mortgagee may have pro- 
 cured the policy by arrangement with the mortgagor.^®* • 
 
 Rights of Mortgagee as Affected by Default of Mortgagor, 
 
 Some confusion will be observed in the cases which treat of the effect 
 wrought upon the rights of the mortgagee under a policy in which he is 
 beneficiary by the default of the mortgagor, but by the better authori- 
 ties it seems to be settled that where the mortgagee is made merely a 
 beneficiary under the contract, and recognized as such by the insurer, 
 but not made a party to the contract itself, any default on the part of 
 the mortgagor, which will by the terms of the policy defeat it, will also 
 defeat all rights of the mortgagee under that contract, even though he 
 himself may not have been in any fault.^**® This result obtains whether 
 the policy is made payable to the mortgagee "as his interest may ap- 
 pear" or by assignment. 
 
 By reason of the insufficiency of the security to the mortgagee under 
 policies taken out by the mortgagor, and made payable to the mortgagee 
 as his interest may appear, on account of the rule just stated above, 
 it has now become customary to insert in the mortgagor's policy a clause 
 not only making the policy payable to the mortgagee so far as neces- 
 sary to cover his interest, but also providing that the default of the 
 mortgagor shall not defeat the rights of the mortgagee. Such a clause 
 in effect amounts to an independent collateral contract between the in- 
 surer and the mortgagee. Therefore we have the general rule that, 
 wherever the terms of the mortgage clause are such as to amount to a 
 contract with the mortgagee, his interest will remain unaffected by any 
 default of the mortgagor to which the mortgagee is not a party.^°* 
 
 105 Springfield Fire & Marine Ins. Co. v. Allen, 43 N. Y. 389, 3 Am. Rep. 
 711; PHENIX INS. CO. v. FIRST NAT. BANL', 85 Va. 765, 8 S. E. 719, 2 
 L. R. A. 667, 17 Am. St Rep. 101; Carpenter v. Insurance Co., 16 Pet 495, 
 10 L. Ed. 1044. 
 
 106 The New York standard policy expressly so stipulates, as follows: "If, 
 with the consent of this company, an interest under this policy shall exist in 
 favor of a mortgagee or of any person or corporation having an interest in the 
 subject of insurance other than the interest of the insured as described here- 
 in, the conditions hereinbefore contained shall apply in the manner expressed 
 in such provisions and conditions of insurance relating to such interest as 
 shall be written upon, attached, or appended hereto." Delaware Ins. Co. v. 
 Greer, 120 Fed. 916, 57 C. C. A. 188, 61 L. R. A. 137; Keith v. Insurance Co., 
 117 Wis. 531, 94 N. W. 295; Jaskulski v. Insurance Co., 131 Mich. 603, 92 N. 
 W. 98; Rosenstein v. Insurance Co., 79 N. Y. Supp. 736, 79 App. Div. 481. 
 
 107 Smith V. Insurance Co., 25 B. L 260, 55 AtL 715; Gleng Falls Ins. Ca 
 T. Porter (Fla.) 33 South. 473. 
 
 g 148) RIGHTS OF LIFE TENANT AND REMAINDERMAN. 
 
 421 
 
 RIGHTS OP UFE TENANT AND REMAINDERMAH. 
 
 148. The interests of life tenant and remainderman are separate, and 
 insurance procured independently by either will not inure to 
 the benefit of the other. But if the life tenant insures the fee, 
 he will hold the excess above his interest as trustee for the re- 
 niainderman« 
 
 Somewhat similar to the relations discussed in the last section are 
 those of the life tenant and remainderman or reversioner, who hold 
 entirely distinct interests in the property in which their several estates 
 inhere. The life tenant may insure the property for the protection of 
 his own interest solely, and, if such be the clear intent of the contract, 
 upon the destruction of the property the life tenant will take the pro- 
 ceeds of the insurance absolutely, and not merely a life interest in 
 them.^®® This is true even though the policy may give the insurer the 
 option to rebuild, in which case, of course, the benefit of the perform- 
 ance of the contract would inure to the ultimate benefit of the remain- 
 derman. 
 
 It appears, however, that a warehouseman, carrier, or other bailee 
 may take out insurance upon the property in his possession which will 
 inure to the benefit of the owners of such property, at the same time as 
 it protects the bailee's interest.^®* In like manner, if the life tenant 
 takes out insurance not merely upon his life interest, but upon the prop- 
 erty as of fee, he will be deemed to be acting for the remainderman or 
 reversioner, even though the contract is made without the knowledge of 
 the latter, since it is entirely competent for him to ratify the act of his 
 unauthorized agent. In such cases the life tenant will receive the whole 
 of the proceeds, but will hold the excess above his interest as trustee for 
 the reversioner."® The principles thus stated apply equally well to 
 all cases of particular and expectant estates, such as those of lessor 
 and lessee. 
 
 108 Bennett v. Featherstone (Tenn.) 71 S. W. 589; HARRISON v. PEPPER, 
 166 Mass. 288, 44 N. E. 222, 33 L. R. A. 239, 55 Am. St. Rep. 404; Kearney 
 V. Kearney, 17 N. J. Eq. 504. But see, contra, Green v. Green, 50 S. C. 514, 
 27 S. E. 952, 62 Am. St. Rep. 846. 
 
 109 See Southern Cold Storage & Produce Co. v. Deehman (Tex. Qv. App.) 
 
 73 S. W. 545. 
 
 110 Welsh V. Assurance Co., 151 Pa. 607, 25 Atl. 142, 31 Am. St. Rep. 786. 
 
 So, when property insured for the benefit of the owner or his personal rep- 
 resentatives is burned after the death of the insured, the life tenant under 
 the will of the decedent will take only a life interest in the insurance mon- 
 ey. See Brough v. Higgins, 2 Grat. (Va.) 408; Haxall's Ex'rs v. Shippeu, 10 
 Leigh (Va.) 536, 34 Am. Dec. 745; Culbertson v. Ctox, 29 Minn. 309, 13 N. W. 
 177, 43 Am. Rep. 204. 
 
 f 
 
 I 
 
422 
 
 EIGHTS UNDER THE POLICY. 
 
 (Ch,ll 
 
 
 
 
 SUBROGATION. 
 
 149. PROPERTY INSURANCE-An insurer indemnifying the insured 
 
 for any loss of property suffered is entitled to be subrogated to 
 any legal right or claim belonging to the insured at the time 
 of loss by virtue of which he might have compelled another to 
 make compensation for such loss. 
 
 150. LIFE INSURANCE-The doctrine of subrogation has no appUca- 
 
 tion to Ufe insurance. It has also been held that it is likewise 
 ii&applicable to accident insurance. 
 
 The Equitable Doctrine of Subrogation, 
 
 The right of subrogation, as enforced by the courts, is defined as "an 
 auxihary equity called into being for the purpose of enabling a party 
 secondarily liable, but who has paid the debt, to reap the benefit of any 
 securities which the creditor may hold against the principal debtor, 
 and by tne use of which the party paying may thus be made whole " "^ 
 Pnmanly, It is the right of the assured, paying his principal's debt, to 
 be placed in the position of the creditor for the purpose of enforcing 
 payment by the principal."' As has been heretofore seen, the law of 
 insurance is but a wide extension of the general doctrine of suretyship 
 and It IS therefore to be expected that the doctrine of subrogation 
 should play a large part in determining the correlative rights of the 
 parties to insurance contracts. The doctrine has easy application to 
 all cases in which the loss for which the insurer is liable under the policy 
 was caused by the tortious conduct of some third person. Thus where 
 property is destroyed by a fire caused by the negligent emission of 
 
 "1 Blsp. Bq. p. 45. •'Whenever, to protect his own rights, one not a volun- 
 teer pays or satisfies a debt for which another is primarily liable, he Is sub- 
 rogated to the rights of the creditor, and may enforce against the person pri- 
 marily liable all the securities, benefits, and advantages held by the credit- 
 or. Eaton, Eq. 511. 
 
 1" The rule is thus stated by Mr. Justice Gray in St. Louis, I. M. & S. Ry. 
 1.S ^-^Commercial Union Ins. Co., 139 U. S. 223, 11 Sup. Ct. 554, 35 L. Ed. 
 154: In fire insurance, as in marine insurance, the insurer, upon paying to 
 the assured the amount of a loss of the property insured, is doubtless subro- 
 gated in a corresponding amount to the assured's right of action against any 
 other person responsible for the loss. But the right of the insurer against 
 such other person does not rest upon any relation of contract or of privity 
 between them. It arises out of the nature of the contract of insurance as 
 a contract of indemnity, and is derived from the assured alone, and can be 
 enforced in his right only. By the strict rules of the common law It must 
 be asserted in the name of the assured. In a court of equity or of admiralty 
 or under some state codes, it may be asserted by the insurer In his own name 
 But in any form of remedy the Insurer can take nothing by subrogation but 
 the rights of the assured, and. if the assured has no right of action nonp 
 passes to the insurer." ' 
 
 §§149-150) 
 
 SUBROGATION. 
 
 423 
 
 sparks from a railroad company's locomotive, it is clear that the insurer, 
 upon indemnifying the insured for the loss, will be entitled to be 
 subrogated to the insured's right of action against the railway com- 
 
 113 
 
 pany 
 
 The operation of this equity also harmoniously supports another well- 
 recognized rule in insurance law; that is, that the insured shall not 
 receive by reason of his contract of insurance anything more than mere 
 indemnity for his loss suffered. If he were allowed to recover the 
 amount of his loss from the tort feasor and also from the insurance 
 company, his misfortune would result in profit, rather than loss, and 
 undoubtedly tend to greatly increase the number of such misfortunes. 
 
 When we come to consider whether the doctrine of subrogation in 
 insurance law shall extend not only to those cases in which the insured 
 possesses some right or claim by virtue of which he can demand from 
 some other person than the insured compensation for the loss suffered, 
 but also to those in which the insured, by reason of the existence of 
 some independent contract not in any wise related to the insurance or 
 the cause of the loss, is in a position to escape injury by that loss, we 
 encounter much difficulty. In the leading English case of Castellain 
 v. Preston,^^* the facts briefly were as follows: The owners of real 
 property previously insured had executed a binding contract for its sale. 
 After the execution of the contract, but before the conveyance, the 
 buildings were damaged by fire, and payment was made by the insur- 
 ance company to the vendor. Subsequently the vendees performed 
 their contract, paying the purchase money, as they were required by 
 law to do, without deducting the loss by fire. The vendors were thus 
 in possession of the insurance money, and also of the purchase money, 
 which represented the full value of the uninjured property; thus 
 having made a handsome profit by reason of the fire. The insurance 
 company then brought its suit to recover the amount of the insurance, 
 claiming to be subrogated to the vendors' rights under the executory 
 contract of sale. In the lower court ^" it was decided by Chitty, J., 
 that the insurer was not entitled to subrogation, but in the Court of 
 
 118 Mobile Ins. Co. v. Columbia & G. R. Co., 41 S. O. 408, 19 S. B. 858, 44 
 Am. St. Rep. 725; HOME MUT. INS. CO. v. OREGON RY. & NAV. CO., 20 
 Or. 569, 26 Pac. 857, 23 Am. St. Rep. 151; CONNECTICUT FIRE INS. CO. 
 V. ERIE RY. CO., 73 N. Y. 399, 29 Am. Rep. 171, Wodrufif, Ins. Cas. 550; 
 PHCENIX INS. CO. V. ERIE & W. TRANSPORTATION CO., 117 U. S. 312, 6 
 Sup. Ct 750, 29 L. Ed. 873, Woodrufif, Ins. Cas. 553. 
 
 In & court of admiralty, the subrogated insurer may proceed against the 
 carrier in his own name. Liverpool & G. W. S. Co. v. Phenix Ins. Co., 129 
 U. S. 397, 9 Sup. Ct. 469, 32 L. Ed. 788. 
 
 114 CASTELLAIN v. PRESTON, 11 Q. B. DiY. 880, Richards^ Ins. Cas. 282. 
 Woodruff, Ins. Cas. 536. 
 
 118 8 Q. B. Div. 613. 
 
 I 
 
424 
 
 RIGHTS UNDEK THE POLICY. 
 
 (Ch. 11 
 
 SUBROGATION. 
 
 425 
 
 Appeal this judgment was reversed; Brett, L. J., laying down the 
 principle of subrogation applicable in these broad terms: "« 
 
 Now It seems to me that, in order to carry out the fundamental rule 
 of insurance law, this doctrine of subrogation must be carried to the 
 extent which I am now about to endeavor to express, namely, that, 
 as between the underwriter and the assured, the underwriter is en- 
 titled to the advantages of every right of the assured, whether such 
 right consists in contract, fulfilled or unfulfilled, or in remedy for tort 
 capable of being insisted on or already insisted on, or in any other 
 nght whether by way of condition or otherwise, legal or equitable 
 which can be or has been exercised or has accrued, and whether such 
 right could or could not be enforced by the insurer in the name of 
 the assured, by the exercise or acquiring of which right or condition 
 the loss against which the assured is insured can be or has been dimin- 
 ished. That seems to me to put this doctrine of subrogation in the 
 largest possible form, and, if in that form, large as it is, it is short of 
 tulhlling that which is the fundamental condition, I must have omit- 
 ted to state something which ought to have been stated." 
 
 Notwithstanding the cogent reasoning of the careful and learned 
 opinion of the English court, one feels sorely discontented with the 
 result reached by the court. It is probable, however, that the mistake 
 in reasomng was made not in this particular case, but in the preceding 
 case of Rayner v. Preston,"^ in which it was decided that the vendor 
 could retain the insurance money as against the vendee. In any event 
 It may be safely stated that the doctrine of Castellain v. Preston has 
 never been accepted in this country,"* nor is it likely to be in future 
 
 f>,"'^^i^* ^' ^}^' ^^' ^^ Justice Brett bases this statement upon this 
 thoroughly sound observation: "The very foundation, In my opinion, of every 
 rule which has been applied to Insurance law, is this, namely: That the con- 
 tract of insurance contained In a marine or fire policy is a contract of Indem- 
 nity, and of ndemnlty only, and that this contract means that the assured 
 in case of a loss against which the policy has been made, shall be fully in- 
 demnified, but shall never be more than fully Indemnified. That Is the fun- 
 damental principle of Insurance, and, If ever a proposition Is brought for- 
 ward which is at variance with It-that Is to say, which either will prevent 
 the assured from obtaining a full Indemnity, or which will give to the as- 
 sured more than a full indemnlty-that proposition must certainly be 
 wrong. "^ 
 
 T,/r ^^^^^rJ' PRESTON, L. R. 18 Ch. DIv. 1, Woodruff, Ins. Cas. 344 
 Richards Ins. Cas. 276. This case has been repudiated in this country. See 
 
 !^J''Sf «J f°' J^i^ ^""^^°^ * ^^ ^^^^ ^- ^- Houghton, 92 Md. 68, 48 
 Atl. 85, 84 Am. St. Rep. 485. But see ante, p. 40 - ^ '±o 
 
 118 Washington Fire Ins. Co. v. Kelly, 32 Md. 421, 3 Am. Rep. 149. 
 
 In Michael v. Insurance Co., 171 N. Y. 25, 63 N. E. 810, It was held that 
 an insurer payhig an indemnity under Its policy for loss of "use and oSu- 
 pancy of an elevator was not entitled to be subrogated to the rights ol the 
 owner of the elevator under a pooling contract by which each of the partiei 
 
 g§ 149-150) 
 
 cases. Therefore we may say that in the United States, at least, the 
 insurer's right of subrogation will be limited to those rights which the 
 insured may have to recover compensation from some third person 
 because of some tort or contract liability arising out of the loss, and 
 not merely collateral to it 
 
 Release of Tort Feasor by the Insured. 
 
 As is apparent from the above definition, the insurer can claim to be 
 subrogated only to such rights as inhere in the insured at the time of 
 the loss. Therefore, if for any reason the insured at that time has no 
 such right, as where he has agreed in a bill of lading that the carrier 
 shall have the benefit of insurance, it is manifest that the insurer's right 
 of subrogation is cut off.^^* But just so soon as the loss occurs the 
 insurer's right to subrogation to any then existing rights of the in- 
 sured become vested, and any act of the insured in releasing such 
 rights will discharge the insurer pro tanto. Thus, if the property in- 
 sured is destroyed by the negligence of some tort feasor, any release 
 
 was to receive a percentage of the profits made by the pooled concerns, even 
 though his elevator might become incapacitated for use by reason of fire. 
 
 So In FOLEY v. INSURANCE CO., 152 N. Y. 131, 46 N. E. 318, 43 Lr. R. A. 
 664, an insurer was denied subrogation under facts practically identical with 
 those in CASTELLAIN v. PRESTON. The owner insured some dwelling 
 houses In course of erection, although under their agreement the contractors 
 were obligated to complete the buildings before receiving any pay. The un- 
 completed houses were burned, and the Insurer held liable to pay, without 
 hope of subrogation to the insured's rights under the building contract In 
 closing its opinion, the court makes this broad statement: "The fact that 
 improvements on land may have cost the owner nothing, or that if destroyed 
 by fire, he may compel another person to replace them without expense to 
 him, or that he may recoup his loss by resort to a contract liability of a third 
 person, In no way affects the liability of the insurer, in the absence of any 
 exemption in the policy." 
 
 119 Deming v. Storage Co., 90 Tenn. 306, 17 S. W. 89, 13 L. R. A. 518; Wa- 
 ger V. Insurance Co., 150 U. S. 99, 14 Sup. Ct. 55, 37 L. Ed. 1013; St Louis, 
 I. M. & S. R. Co. V. Commercial Union Ins. Co., 139 U. S. 223, 11 Sup. Ot 554, 
 35 L. Ed. 154; PHCENIX INS. CO. v. ERIE & W. TRANSPORTATION CO., 
 117 U. S. 312, 6 Sup. Ct. 750, 29 L. Ed. 873. 
 
 The same result follows when the carrier has procured the insurance, and 
 is named as payee in the policy, even though the insurance company may 
 have made payment to the shipper upon the order of the carrier. See Wager 
 V. Insurance Co., supra; Delahunt v. Insurance Co., 97 N. Y. 537. 
 
 The insurer cannot refuse payment because the Insured has agreed that 
 the carrier shall have the benefit of the insurance. Jackson Co. v. Boylston 
 Mut. Ins. Co., 139 Mass. 508, 2 N. E. 103, 52 Am. Rep. 728. But when the 
 policy provides that it shall be void "if the insured shall make or have any 
 contract or understanding whereby any person or corporation shall not be 
 liable for any act or neglect in causing the fire," so as to defeat its right of 
 subrogation, an agreement of release made with the tort feasor before the 
 fire will discharge the Insurer. Kennedy v. Insurance Co., 119 Iowa, 29, 91 
 N. W. 831. 
 
 i t 
 
 
 I 
 
426 
 
 BIGHTS UNDER THE POLICY. 
 
 (Ch. 11 
 
 §§ 149-150) 
 
 SUBROGATION. 
 
 41S7 
 
 given to him by the insured without the consent of the insurer will 
 operate as a discharge of the insurer's liability."* So, if a mortgagee, 
 whose separate interest was insured, should, after loss, release the 
 mortgage to the extent of the insurance, the insurer would be dis- 
 charged.^** 
 
 After the insured is paid under his policy, the tort feasor will not be 
 allowed to do any act that will defeat the insurer's right of subroga- 
 tion. If, with knowledge of the previous payment by the insurer, the 
 tort feasor does procure a release by settlement with the insured, such 
 release will be no defense as against the insurer."* In the absence of 
 a statute permitting a suit in his own name, the insurer must sue in 
 the name of the insured. The recovery, however, will be for the benefit 
 of the insurer.*** 
 
 This right of substitution exists irrespective of contract, but the 
 contract of insurance may expressly provide that the insurer shall 
 be entitled to subrogation as against any one causing a loss for which 
 he is liable."* If such a contract is made, the insured cannot disre- 
 
 "0 FAYERWEATHER v. INSURANCE C50., 118 N. Y. 324, 23 N. E. 192, 
 6 L. R. A. 805, Woodruff, Ins. Cas. 557; Newcomb v. Insurance Co., 22 Ohio 
 St. 382, 10 Am. Rep. 746; HALL v. RAILWAY CO., 13 Wall. 367, 20 L. Ed. 
 594. The insured, while retaining the money received under a settlement 
 with the tort feasor, cannot repudiate the release given on the ground that 
 it was fraudulently obtained. Highlands v. Insurance Co.. 203 Pa. 134, 52 
 Atl. 130. See Chickasaw County Farmers' Mut. Fire Ins. Co. v. Weller, 98 
 Iowa, 731, 68 N. W. 443. Here the insurer was allowed to recover from 
 the insured money paid without knowledge of the fact that the insured had 
 settled with the tort feasor. 
 
 But the insured is under no obligation actively to preserve any lien or other 
 security which might inure to the benefit of the paying insurer. Thus it 
 was held that the failure of the insured to take such steps after a fire as 
 were necessary to perfect a mechanic's lien upon the insured property did 
 not discharge the insurer. See ROYAL INS. CO. v. STINSON, 103 U. S. 25. 26 
 L. Ed. 473. o -s*'. -^u 
 
 121 See Carpenter v. Insurance Co.. 16 Pet 495, 10 L. Ed. 1044. It is evi- 
 dent that a different rule would prevail in Massachusetts. Foster v. Insur- 
 ance Co., 2 Gray (Mass.) 216; International Trust Co. v. Boardman, 149 Mass 
 158, 21 N. E. 239, and cases there cited. 
 
 122 CONNECTICUT FIRE INS. CO. v. ERIE RY. CO., 73 N. Y. 399 29 Am 
 Rep. 171 ; HART v. RAILROAD CORP.. 13 Mete. (Mass.) 99, 46 Am. Dec 719 
 
 123 Monmouth County Mut. Fire Ins. Co. v. Hutchinson, 21 N. J. Eq 107* 
 HART v. RAILROAD CORP., 13 Mete. (Mass.) 99, 46 Am. Dec. 719; Rock- 
 ingham Mut. Fire Ins. Co. v. Bosher. 39 Me. 253, 63 Am. Dec. 618; St. Louis, 
 I. M. & S. Ry. Co. V. Commercial Union Ins. Co.. 139 U. S. 223, 11 Sup Ct 
 554, 35 L. Ed. 154. 
 
 124 The New York standard fire policy so provides In these terms: -If 
 this company shall claim that the fire was caused by the act or neglect of 
 any person or corporation, private or municipal, this company shall, on pay- 
 ment of the loss, be subrogated to the extent of such payment to all right of 
 recovery by the insured for the loss resulting therefrom, and such right shall 
 be assigned to this company by the insured on receiving such payment" 
 
 gard it, and release before loss a right of action which he might other- 
 wise have had. Thus, when the insured had previously agreed that 
 the insurer should be subrogated to any claims which the insured 
 might have against the carriers who were to transport the property, 
 and then accepted a bill of lading from the carriers, in which it was 
 stipulated that they should have the benefit of any insurance procured 
 by the shipper, the unfortunate insured was held to have cut off his 
 rights against both insurer and carriers.^*'' Of course, however, where 
 the tort feasor has contracted for the benefit of the insurance, he will 
 be liable for the excess of the loss actually caused above the amount 
 of insurance. 
 
 No Subrogation until Indemnity Complete. 
 
 As stated above, one of the reasons for enforcing the doctrine of 
 subrogation is to prevent the insured from ever receiving more than 
 an actual indemnity for his loss. But the owner of the destroyed prop- 
 erty is entitled to full indemnity, and the doctrine of subrogation 
 will not be applied in any case so as to deprive him of this right. Thus, 
 where the insurer has paid under a policy of insurance upon the mort- 
 gagee's separate interest, he is not entitled to be subrogated to the 
 mortgagee's rights in the mortgage so long as any of the mortgage 
 debt remains unpaid. The insurer must either pay the unsatisfied 
 balance of the mortgage debt, and then require the assignment of the 
 mortgage, or else must be content to take the remainder of the pro- 
 ceeds upon the foreclosure of the mortgage after the mortgagee's debt 
 has been completely satisfied.^*' 
 
 The equity of subrogation is not enforced in favor of a mere volun- 
 teer. The insurer claiming subrogation must have paid under legal 
 necessity. Therefore it was held that, where one of several insurers 
 paid more than his share of a loss suffered, he was not entitled to be 
 
 128 FAYERWEATHBR V. INSURANCE CO., 118 N. Y. 324. 23 N. E. 192, 
 6 L. R. A. 805. Woodruff, Ins. Cas. 557; Carstairs v. Insurance Co. (C. C.) 
 18 Fed. 473. But if the acceptance of bills of lading from the carrier giving 
 him the benefit of insurance violates a term of the policy and avoids the 
 insurance, so that at the time of loss there is no valid insurance, the carrier 
 cannot set up in successful defense the agreement of the shipper that he 
 shall have the benefit of any insurance procured. Inman v. Railway Co., 129 
 U. S. 128, 9 Sup. Ct. 249. 32 L. Ed. 612. The same rule has been applied even 
 when the insurer paid the avoided policy upon condition of being allowed 
 to enforce the insured's right of recovery against the carrier. Southard v. 
 Railway Co., 60 Minn. 382. 62 N. W. 442. 
 
 126 PHENIX INS. CO. V. FIRST NAT. BANK, 85 Va. 767. 8 S. B. 720, 2 
 L. R. A. 667, 17 Am. St. Rep. 102, Woodruff, Ins. Cas. 578; ROYAL INS. CO. 
 V. STINSON, 103 U. S. 25, 26 L. Ed. 473; Carpenter v. Insurance Co., 16 
 Pet 501, 10 L. Ed. 1044. 
 
 ♦ i 
 
 li 
 
428 
 
 RIGHTS UNDEIl THE POLICY. 
 
 (Ch. 11 
 
 
 I 
 
 subrogated to the rights of the insured in order to secure contribution 
 from the other insurers as to such excess.^*' 
 
 No Subrogation in Life Insurance, 
 
 It is well settled that the insurer making pa)mient under a life policy 
 is not entitled to be subrogated to any rights as against a tort feasor 
 who may have wrongfully brought about the death of the insured. "« 
 The reason given for this holding is the familiar rule that at common 
 law a personal action dies with the person, and that there can be no 
 right of action in the insured at the time of his death to which the 
 insurer could claim subrogation. Lord Campbell's act, giving a right of 
 action for death by wrongful act, bestowed that right upon the ad- 
 ministrator or other personal representative of the deceased as a sep- 
 arate and distinct cause of action, usually stipulated to be for the bene- 
 fit of certain specified persons. The right given by such act is not one 
 belonging to the insured, which could pass to the insurer. 
 
 Another reason doubtless existing for such holding, although not 
 brought out by the courts, is that the doctrine of subrogation and 
 indemnity are indissolubly connected, and that, since a life insurance 
 contract is more truly a contract of investment than of indemnity, the 
 right of subrogation does not accompany it 
 
 Accident Insurance, 
 
 It is manifest that the two reasons assigned above as prohibiting the 
 application of subrogation to life insurance contracts do not so fully 
 apply to accident insurance. A contract of accident insurance is more 
 truly a contract of indemnity, and, save in those cases where death 
 results from the accident, the insured has a right of action against 
 third persons tortiously causing the accident, which could be assigned 
 by him to the insurer, and which, it seems, by all the principles of 
 equity, should be so assigned. It has, however, been held that subro- 
 gation shall not be allowed to the accident insurer on the slender 
 ground that accident insurance is more like life insurance than fire or 
 marine insurance.^** 
 
 127 Hanover Fire Ins. Co. v. Brown, 77 Md. 64, 25 Atl. 989, 27 Atl. 314, 39 
 Am. St. Rep. 386. 
 
 128 Mobile Life Ins. Co. v. Brame, 95 U. S. 754, 24 L. Ed. 580; CON- 
 NECTICUT MUT. LIFE INS. CO. v. NEW YORK & N. H. R. CO., 25 Conn. 
 2G5, G5 Am. Dec. 571. 
 
 129 .^tna Life Ins. Co. v. J. B. Parker & Co., 96 Tex. 287, 72 S. W. 168, 
 580. The only reason given for the decision is: "We think It is to be ob- 
 served that, so far as the right of subrogation is concerned, accident insur- 
 ance is more analogous to life insurance than it is either to marine or fire in- 
 surance, and it has been held that it does not apply in case of life insurance.'* 
 See, further, same case, 30 Tex. Civ. App. 521, 72 S. W. 621 ; also Bradburn v. 
 Railway Co., L. R. 10 Exch. 1. But note the implication that the accident in- 
 surer might be subrogated in Harding v. Townshend, 43 Vt 536, 5 Am. Rep. 304. 
 
 §§ 161-162) 
 
 THE STANDARD FIRE POLICY. 
 
 m 
 
 CHAPTER Xn. 
 
 THE STANDARD FIRE POLICY. 
 
 151-152. The General Rule of Construction. 
 
 153. The Effect of Temporary Breach of Conditloa 
 
 154. The Term of Insurance. 
 
 155-156. The Subject of Insurance— Description. 
 
 157. The Subject of Insurance— Location. 
 
 158^160. The Interest of the Insured. 
 
 161. Change of Interest, Title, or Possession. 
 
 I62! Fraud and False Swearing. 
 
 163. Other Insurance. 
 
 164. Operation of Factories. 
 
 165. Increase of Risk. 
 
 166. Making Repairs. 
 
 • , 
 
 THE GENERAL RULE OF CONSTRUCTION. 
 
 151. The general rule of con.tmetlon applied by the conrt. to all con- 
 tracts of insurance is that while, like other eontraets, they are 
 to be so construed as to give effect to the intention of the par- 
 ties, yet where there exists any doubt as to that intention it is 
 alwkys to be resolved strictly against the insurer and in favor 
 of the insured. 
 
 152 AS APPLIED TO THE STANDARD POLICY-Despite the fact 
 that in some states insurance contracts are required by 1»^ *® 
 be made in accordance with a statutory form, it is now »«*««* 
 that the same rules of construction are to be appUed to tHe 
 terms of the statutory poUcy as to other forms of poUoies. 
 
 It must be confessed that many decisions justify the assertion, 
 s9mipuios made, that a different rule of construction is apphed by 
 the courts to msurance contracts from that which apphes to contract 
 of other kinds.^ But, as a matter of law, an insurance contract should 
 be construed as any other contract,* the real purpose of the construc- 
 tion being to give full effect to the intention of the parties so far as 
 that intv»,ntion is legal. But the peculiar circumstances under which 
 the insurance contract is made, and the fact that its terms are invari- 
 ably chosen by the insurer without consultation with the other party 
 
 1 On this point read Welch v. Fire Ass'n (Wis. 1904) 98 N. W. 227. 
 
 . Crane v Insurance Co. (C. C.) 3 Fed. 558; Fireman's Ins^ Co. v. Ce<^ ^ 
 Ky. Law Rep. 48. 259; American Accident Co. v. Reigart, 94 Ky. 547 23 S. 
 W 191. SI L R. A. 651, 42 Am. St. Rep. 374; Stettiner v. Insurance Co 12 
 N. Y. Super. Ct. 594; Savage v. Insurance Co., 44 How. Prac (N. X.) 40, 
 Farmem* Mut Fire Ins. Co. v. Marsliall, 29 Vt 23. 
 
 (i 
 
430 
 
 THE STANDARD FIRE POLICY. 
 
 . 
 
 
 i 
 
 
 (Ch. 12 
 
 to the contract, together with the necessarily complicated and diffi- 
 cult conditions that are always inserted in these particular contracts, 
 have caused that rule of construction which provides that words shall 
 be taken most strongly against the one using them, to have peculiar, 
 and sometimes rather startling, significance. The tendency of the 
 courts to emphasize this rule was greatly strengthened by the one-time 
 practice of insurance companies of placing such numerous and lengthy 
 conditions in such very small type in their policies as practically to 
 prohibit their being read or understood by the insured. The courts 
 naturally went to the extreme limit of the law, and sometimes even 
 beyond that limit, in order to prevent the insurer from trapping the 
 insured by any such inequitable method of doing business. The natural 
 result has been that in many cases the insurance companies have thus 
 overreached themselves, and induced the courts to allow dishonest 
 claims that would scarcely have been considered if made under con- 
 tracts less unfair on their face. 
 
 The Construction of Standard Policies.* 
 
 While many of the unfair features of the earlier policies have been 
 eliminated from the modem standard policy, the courts still apply to 
 this instrument the same rule of construction as the considerations just 
 mentioned led them to apply to the old forms. Any doubtful terms 
 are always construed in favor of the insured. It has been contended 
 that inasmuch as the law compels the use of the standard policy, and 
 will not allow any variance from it, excepting in certain limited par- 
 ticulars, the insurer cannot be regarded as selecting the terms of the 
 contract, and subjected to an unfavorable rule of construction on that 
 account. This contention, however, has been held to be without merit, 
 for the terms of these statutory policies were chosen with reference 
 to the construction given by the precedent cases to similar terms in 
 other policies, and therefore ought to be regarded as being used in 
 the sense of their previous construction.* It is also apparent from an 
 
 • In discussing the rules of construction that have been applied by the 
 courts to the provisions of the standard policy, no effort will be made to 
 collect and classify all the cases, or even give numerous illustrations of the 
 applications of the rules stated. The purpose of this chapter is merely to 
 indicate the principles which guide the courts in the construction of each 
 clause of the policy, and to give such illustrations from the enormous body of 
 case-law on this subject as will insure a ready understanding of the princi- 
 ple by the reader. A statement of all the cases construing the various 
 clauses, though useful to the practitioner, would be out of place in such a 
 work as this. They are properly to be sought in the digests. 
 
 * See John Davis & Co. v. Insurance Co. of North America, 115 Mich. 382, 
 73 N. W. 393. In Quinlan v. Insurance Co., 133 N. Y. 356, 31 N. B. 31, 28 
 Am. St. Rep. 646, the following language was used by Andrews, J.: "The 
 act (chapter 488, Laws 1886) providing for a uniform policy known as the 
 'standard poUcy,* and which makes its use compulsory upon insurance com 
 
 §§ 151-152) THE GENERAL RULE OF CONSTRUCTION. 
 
 431 
 
 examination of the instruments themselves, as well as the history of 
 their adoption, that their terms were really chosen by the underwriters 
 with particular reference to their own interests.' 
 
 The New York standard policy, which is in more general use than 
 any other standard form, and is therefore selected as the text for this 
 chapter, although carefully drawn, is not in such literary form as to 
 excite the admiration of the reader. It does not admit of any con- 
 structive analysis which would serve as an outline for a treatise upon 
 its construction. Its conditions are roughly divided into those (1) that 
 make the contract void in its inception, (2) those that may render 
 it void during its currency, and (3) those that must be complied with 
 as precedent to a valid claim for payment after loss has occurred. 
 But even such a meager analysis cannot be followed in its treatment, 
 as it is not consistently maintained in the body of the instrument 
 Therefore, in the following pages, for the purpose of economizing 
 space, as well as to give a greater unity to the treatment of the sub- 
 ject, it has been necessary to vary somewhat the order in which the 
 
 1 1 
 
 H 
 
 panies, marks a most Important and useful advance in legislation relating 
 to contracts of insurance. The practice ^which prevailed before this enact- 
 ment, whereby each company prescribed the form of its contract, led to 
 great diversity in the provisions and conditions of insurance policies, and 
 frequently to great abuse. Parties taking insurance were often misled by 
 unusual clauses or obscure phrases concealed in a mass of verbiage, and 
 often so printed as to elude discovery. Unconscionable defenses, based upon 
 such conditions, were not infrequent, and courts seem sometimes to have 
 been embarrassed In the attempt to reconcile the claims of justice with the 
 law of contracts. Under the law of 1886, companies are not permitted to 
 insert conditions in policies at their will. The policies that they now issue 
 must be uniform in their provisions, arrangement, and type. Persons seek- 
 ing insurance will come to understand to a greater extent than heretofore 
 the contract into which they enter. Now, as heretofore, it is competent for 
 the parties to a contract of insurance, by an agreement in writing or by 
 parol, to modify the contract after the policy has been issued, or to waive 
 conditions or forfeitures. The power of agents, as expressed in the policy, 
 may be enlarged by usage of the company, its course of business, or by its 
 consent, express or implied. The principle that courts lean against forfei- 
 tures is unimpaired, and in weighing evidence tending to show a waiver of 
 conditions or forfeitures the courts may take into consideration the nature 
 of the particular condition in question, whether a condition precedent to any 
 liability or one relating to the remedy merely, after a loss has been in- 
 curred. But where the restrictions upon an agent's authority appear in the 
 policy, and there is no evidence tending to show that his powers have been 
 enlarged, there seems to be no good reason why the authority expressed 
 should not be regarded as the measure of his power; nor is there any reason 
 why courts should refuse to enforce forfeitures plainly incurred, which have 
 not been expressly or impliedly waived by the company." See, also, Fidelity 
 & Casualty Co. v. Waterman, 161 III. 632, 44 N. E. 283, 32 L. R. A. 654. 
 
 cFor the history of the adoption of the New York standard policy, see 
 ante, p. 29. 
 
 I.. 
 
 I 
 
432 
 
 THE STANDARD FIRE POLICY. 
 
 ! 
 
 \ . 
 
 (Ch. 12 
 
 several terms of the policy are set forth. In the appendix, however, 
 the standard policy is printed in full, with such reference to the treat- 
 ment of its provisions in the text as will avoid any confusion. 
 
 The Extent to Which the Standard Policy may be Varied. 
 
 In New York and in most of the states in which the New York 
 standard policy has, with minor variations, been adopted, the parties 
 are forbidden by law to depart from or vary the terms of the standard 
 policy, save in certain specified particulars, by the use of prescribed 
 special "clauses" or riders. In Massachusetts, New Hampshire, and 
 some other states, however, the parties may add to or change the 
 terms of the standard form within certain limits, as their various 
 purposes may render expedient. In all of the states that have adopted 
 the standard form of policy, with the exception of North Carolina, its 
 use is enforced by certain penalties. In those states contracts made 
 in any other than the prescribed form are held to be wholly unen- 
 forceable as against the insured, but in most of the states are expressly 
 made binding upon the insurer.' In fact, while the purpose of the 
 standard form is to insure the making of a contract that shall be fair 
 for both parties, it is primarily intended for the benefit of the insured, 
 and he will not be deprived by the operation of such laws of any 
 rights which he might otherwise have taken under a contract^ There- 
 fore it has been held that the doctrine of waiver and estoppel applies 
 against the insurer and in favor of the insured in the case of con- 
 tracts in the standard form as well as when the form of the contract 
 is left wholly to the discretion of the parties.^ So, the subsequent 
 conduct of the insurer may operate to enlarge the authority given in 
 the policy, although it is necessarily held that the insured has knowl- 
 edge of any limitations upon the agent's authority that may be found 
 in the policy. The standard form being a public act, the terms of the 
 policy are deemed to be known to all.' Neither do the standard policy 
 acts preclude the making of a valid oral contract of insurance.** 
 
 • See Armstrong v. Insurance Co., 95 Mich. 137, 54 N. W. 637. 
 
 T Forward v. Insurance Co., 142 N. Y. 382, 37 N. E. 615, 25 L. R. A. 637; 
 THEBAUD V. INSURANCE CO., 155 N. Y. 516, 50 N. E. 284; Stemaman v. 
 Insurance Co., 170 N. Y. 13, 62 N. E. 763, 57 L. R. A. 318, 88 Am. St. Rep. 625. 
 
 8 WOOD V. INSURANCE CO., 149 N. Y. 382, 44 N. E. 80, 52 Am. St. Rep. 
 733; THEBAUD v. INSURANCE CO., 155 N. Y. 516, 50 N. B. 284; Stema- 
 man V. Insurance Co., 170 N. Y. 13, 62 N. E. 763, 57 L. R. A. 318, 88 Am. St 
 Rep. 625; Stage v. Insurance Co., 76 App. Div. 509, 78 N. Y. Supp. 555. And 
 see Welch v. Fire Ass'n (Wis. 1904) 98 N. W. 227, In which the previous 
 cases In that state are reviewed. 
 
 • Quinlan v. Insurance Co., 133 N. Y. 356, 31 N. H. 31, 28 Am. St Rep. 645. 
 10 HICKS v. ASSURANCE CO., 162 N. Y. 284. 56 N. B. 743, 48 L. R. A. 424. 
 
 g 153) THE EFFECT OF TEMPORARY BREACH OF CONDITION. 433 
 
 THE EFFECT OP TEMPORARY BREACH OP CONDITION. 
 
 153. In many jnrisdictions it is held that a temporary breach of a con- 
 dition snbseqnent, not contributing to a subsequent loss, merely 
 suspends the policy. The better opinion is, however, that any 
 breach of condition, which by the terms of the policy avoids it, 
 absolutely defeats all rights of the insured under the policy, 
 which can be re-established only by a waiver of the breach by 
 the insurer. 
 
 The language of the standard policy provides that "this entire policy 
 shall be void" in case any of the conditions thereof are broken. No lit- 
 tle conflict exists among the decisions as to the significance of the 
 phrase. In the first place, we may note that it eliminates the discussion, 
 heretofore considered, as to whether the contract is divisible or indi- 
 visible. By express statement the contract is entire.^ ^ Likewise all 
 of the authorities are agreed that the term "void" is not to be con- 
 strued in accordance with its real meaning, but as "voidable." The 
 insurer can, and frequently does, waive his right to avoid the contract 
 on the ground of breach of condition, and, as we have already seen, 
 such a waiver, whether express or implied, always reinstates the policy. 
 Further, it is agreed that if the breach of condition exists at the time 
 of the fire, or if, previously existing, it contributed to bring about the 
 loss, the insurer is not bound under the contract unless a waiver of the 
 breach can be shown. ^^ 
 
 But suppose the breach of condition has been merely temporary; 
 that it has long ceased to exist before the occurrence of the loss to 
 which it in no wise contributed ; as if, to use an illustration given by 
 the Illinois court," a gallon of gasoline had been kept for a day in 
 a house subsequently destroyed in the Chicago fire? In such cases it 
 seems a great hardship upon the insured to declare his insurance de- 
 feated by what proved to be a wholly immaterial breach of condition. 
 Moved by a most commendable desire to escape working such a hard- 
 ship, many of the American courts have laid down the doctrine that the 
 clause above quoted, declaring that the policy shall be void upon breach 
 of condition, means that the policy shall be merely suspended during 
 
 11 See ante, p. 69; Smith v. Insurance Co., 118 N. Y. 518, 23 N. E. 883. 
 But see Trabue v. Insurance Co., 121 Mo. 75, 25 S. W. 848, 23 U R. A. 719, 
 42 Am. St Rep. 523. 
 
 12 Continental Int. Co. v. Browning, 24 Ky. Law Rep. 992, 70 S. W. 660; 
 Hunt V. Insurance Co. (Neb.) 92 N. W. 921; Cassimus v. Insurance Co., 135 
 Ala 256, 33 South. 163; Mississippi Fire Ass'n v. Dobbins, 81 Miss. 630, 33 
 South. 506; German Ins. Co. v. Shader (Neb.) 93 N. W. 972, 60 L. R. A. 918. 
 
 18 Traders' Ins. Oo. v. Catlin, 163 lU. 266, 46 N. B. 265, 85 L. B. A. 6W, 
 Yancs Ins.— 28 
 
] ■ 
 
 i 
 
 434 
 
 THB STANDARD FIBB POLICY. 
 
 (Ch.l2 
 
 a temporary breach of condition, provided that the breach did not 
 contribute to the loss.^* 
 
 It would seem clear, however, that such a construction ignores the 
 familiar principle that, when the terms of a contract are clearly stated, 
 the court should enforce them as made, however harshly they may 
 bear upon one of the parties.** It seems difficult to escape the con- 
 clusion that, if the insurer once has the right to avoid a policy for 
 breach of condition, that right must remain his until he relinquishes 
 it by a waiver, or estops himself to set it up. On this ground it has 
 been held by the better authorities in this country that a breach of 
 condition may always be set up as a defense by the insurer, even if 
 it may have been temporary, and in no wise have affected the insurer 
 injuriously.** But the courts are zealous to discover that the acts 
 complained of do not amount to a breach of condition, in order, if 
 possible, to save the insured the benefit of his contract.*'' 
 
 i*Pntnum v. Insurance Co. (C. C.) 4 Fed. 753; Phoenix Ins. Co. v. Law- 
 rence, 4 Mete. (Ky.) 9, 81 Am. Dec. 521; Mutual Fire Ins. Oo. v. Coatesvllle 
 Shoe Factory, 80 Pa. 407; New England Fire & Marine Ins. Co. v. Wet- 
 more, 32 111. 245; Schmidt v. Insurance Co., 41 111. 295; Insurance Oo. of 
 North America v. McDowell, 50 111. 120, 99 Am. Dec. 497; Traders' Ins. Co. 
 V. Catlln, 163 111. 256, 45 N. E. 255, 35 L. R. A. 505; Hinckley v. Insurance 
 Co., 140 Mass. 38, 1 N. E. 737, 54 Am. Rep. 445; WORTHINGTON v. 
 BEARSE, 12 Allen (Mass.) 382, 90 Am. Dec. 152; LANE v. INSURANCE 
 CO., 12 Me. 44, 28 Am. Dec. 150; Power v. Insurance Co., 19 La. 28, 36 Am. 
 Dec 665; Obermeyer v. Insurance Co., 43 Mo. 573. 
 
 IB Imperial Fire Ins. Co. v. Coos County, 151 U. S. 452, 14 Sup. Ct 379, 38 
 L. Ed. 231. 
 
 i« Imperial Fire Ins. Co. v. Coos County, 151 U. S. 452, 14 Sup. Ct 379, 38 
 L. Bd. 231; Lyman v. Insurance Co., 14 Allen (Mass.) 329; Germania Fire 
 Ins. Co. V. Deckard, 3 Ind. App. 361, 28 N. E. 868; Howell v. Equitable Soc, 
 16 Md. 377; MEAD v. INSURANCE CO., 7 N. Y. 530; Merriam v. Insurance 
 Co.. 21 Pick. (Mass.) 162, 32 Am. Dec. 252; KYTB v. ASSURANCE CO., 149 
 Mass. 116, 21 N. E. 361, 3 L. R. A. 508, Richards, Ins. Cas. 457; Turnbull y. 
 Insurance CJo., 83 Md. 312, 34 Atl. 875; Newport Imp. Co. v. Home Ins. Co., 
 163 N, Y. 237, 57 N. E. 475; First Congregational Church v. Holyoke Fire 
 Ins. Co., 158 Mass. 475, 33 N. E. 572, 19 L. R. A. 587, 35 Am. St Rep. 508. 
 In Albion Lead Works v. Williamsburg City Fire Ins. Co. (O. O.) 2 Fed. 479, 
 the court said if there were two or more changes, one of which increased 
 the risk, it is no answer to the plea of forfeiture to say that another dimin- 
 ished it 
 
 17 McGannon v. Insurance Co., 171 Mo. 143, 17 S. W. 160, 94 Am. St Rep. 
 778. In this case the plaintiff agreed to keep a watchman on the premises 
 at all times when the machinery was not in operation. Two competent 
 men were employed as watchmen. One of them about 10 o'clock one night left 
 his post, without the knowledge or consent of the insured, and the fire 
 occurred before the other man, whose watch began at 12, came on duty. 
 The court held that the most that could be claimed by the insurer was that 
 the clause was a condition subsequent, breach of which would defeat the 
 insurance; and that the condition was satisfied by the employment of two 
 competent men for that purpose. 
 
 In Springfield Fire & Marine Ins. Co. v. Wade, 95 Tex. 598, 68 S. W. 977, 
 
 §154) 
 
 THE TEBM OF INSURANOB. 
 
 A35 
 
 THE TERM OF INSUBANCB. 
 
 154. The langnage describing the term dnring which the policy affords 
 protection will be so construed as to secure for the insured the 
 benefit of the insurance, if it is reasonably possible to do so. 
 
 In construing the language used to designate the term during which 
 the policy is in force, the general rule of construction as to including 
 and excluding terminal days is as follows: If the policy is said to 
 run from one day to another, the first day is held to be excluded and 
 the latter day included.^* Where no provision to the contrary is found, 
 the insurance does not expire until midnight of the last day of the 
 term." Frequently, however, it is specified that the insurance shall 
 be in force from 12 o'clock noon on one day until the same hour on 
 another day, in which case there can exist no doubt as to the dura- 
 tion of the term, excepting where there are different methods of com- 
 puting time. In Jones v. Insurance Co.,*° a building that was insured 
 until 12 o'clock, at noon, of September 18, 1897, caught on fire at 11 :45 
 a. m. of that date by sun time, and 12:02 p. m. by standard time. 
 The court, in holding the insurance company liable, decided that the 
 expression "12 o'clock at noon" was to be construed as applying to 
 sun time, unless it could be clearly shown that the parties, at the time 
 of the contract, had in mind the standard time. If the fire originates 
 within the time of the insurance, the insurer will be liable for the 
 whole amount of loss within the limits of the insurance, though it may 
 
 58 L. R. A. 714, 93 Am. St. Rep. 870, the policy sued on contained a war- 
 ranty that gasoline should not be "kept, used, or allowed" on the premises. 
 The wife of the insured got a gallon for use on the premises without 
 his consent The part unused was left by her In a basin on the prem- 
 ises. The insured, thinking the basin contained water, threw a burning 
 match into it, which resulted in the destruction of the property. The court 
 allowed the insured to recover, on the ground that he neither "kept, used, or 
 allowed" gasoline on the premises, within the meaning of the policy. 
 
 Plinsky v. Insurance Co. (C. 0.) 32 Fed. 47; Summerfield y. Assurance 
 Co. (C. C.) 65 Fed. 292; HOSFORD v. INSURANCE CO., 127 U. S. 399, 8 
 Sup. Ct. 1199, 32 L. Ed. 196; Bryant v. Insurance Co., 17 N. Y. 200; HAR- 
 PER V. INSURANCE CO., 17 N. Y. 194; London & L. Fire Ins. Oo. v. Crunk, 
 91 Tenn. 376, 23 S. W. 140; Hall v. Insurance Co., 58 N. Y. 292, 17 Am. Rep. 
 255; Lancaster Silver Plate Oo. v. National Fire Ins. Co., 170 Pa. 151, 32 
 Atl. 613; Same v. Manchester Fire Assur. Co., 170 Pa. 166, 32 Atl. 616; Al- 
 bion Lead Works v. Williamsburg City Fire Ins. Co., supra. 
 
 18 McCrea v. Insurance Co., 26 U. C. C. P. 431 ; Isaacs v. Insurance Co., 
 L. R. 5 Exch. 296; Atkins v. Insurance Co., 5 Mete. (Mass.) 439, 39 Am. Dec. 
 692. 
 
 i» Penn Plate Glass Co. t. Spring Garden Ins. Co., 189 Pa. 255, 42 Atl. 138, 
 69 Am. St. Rep. 810. 
 
 20 110 Iowa, 75, 81 N. W. 188, 46 L. R. A. 860. See, alio, Henderson t. 
 Reynolds, 84 Ga. 159, 10 S. B. 734, 7 L. B. A. 327. 
 
 !♦ . 
 
 ji 
 

 436 
 
 THE STANDARD FIBB POLICY. 
 
 (Ch.l2 
 
 ODntinue to rage some time after the expiration of the policy.** This 
 is but an application of the general and reasonable principle that the 
 insurer shall be liable for all direct loss by fire during the term of 
 insurance. If the destructive force is set in operation before the ex- 
 piration of the policy, the mere fact that part of the actual destruc- 
 tion takes place afterwards does not make it any less the approximate 
 result of that force. 
 
 When the policy provides that it shall expire at 12 o'clock noon, this 
 midday limit will not apply to other designations of time that may 
 be made in the policy. Thus, where the insurer is allowed to ter- 
 minate the insurance on giving five days' notice, the policy remains 
 in force until midnight of the fifth day after the notice is given." A 
 policy which, by its terms, is to be operative between certain dates 
 therein specified, is in effect only for a term excluding both dates.** 
 
 THE SUBJECT OF INSURANCE— DESCRIPTION. 
 
 155. The conrts liberally coxLstrne words of description, in order to 
 
 include witMn them, all articles wliioli, by reasonable inference, 
 tbe parties intended to be covered by tbe insurance. Parol tes- 
 timony niay be adniitted to explain tbe nieanins of doubtful 
 expressions. 
 
 156. Tbe expressions "beld in trust" or "on commission," etc., as ap- 
 
 plied to chattels insured, will be construed not technically, but 
 liberally, to mean any goods of others in the possession of the 
 insured. 
 
 In General. 
 
 The construction of the expressions used in describing the property 
 covered by insurance is often difficult, and has given rise to much 
 litigation. The description is necessarily written in the policy by the 
 parties, the terms being usually chosen by the insurer's agent,** and 
 usually is made very brief and indefinite, leaving much to be under- 
 stood, as it would be scarcely possible under the circumstances to de- 
 scribe every article intended to be covered by the insurance with 
 that degree of particularity which is ordinarily required in legal in- 
 struments. On account of these conditions attending the writing of the 
 aescnption, the courts are often more liberal in applying the rules of 
 
 «i See Jones v. Insurance Co., supra. 
 
 3» Penn Plate Glass Co. v. Spring Garden Ins. Co., 189 Pa. 255, 42 Atl. 138, 
 09 Am. St. Rep. 810. 
 
 «• Atkins y. Insurance Co., 5 Mete. (Mass.) 439, 39 Am. Dec. 692. 
 
 «* In Susquehanna Mut Fire Ins. Co. y. Cusick, 109 Pa. 157, the insurer's 
 agent erroneously described the property in an insurance policy, which was 
 signed by him and the insured. The court held that the company could not 
 set up the misdescription as a defense in case of loss. 
 
 §§ 155-156) THE SUBJECT OP INSURANCE — ^DESCRIPTION. 437 
 
 construction to the written terms used for such purpose than to the 
 other parts of the policy. Every effort is made to discover what was 
 the real intention of the parties as to the property to be covered by 
 the insurance." Where there is ambiguity in the terms of the de- 
 scription, parol testimony may be introduced to resolve it. And the 
 insured is allowed to show by parol a custom or usage of busmess 
 which both parties had in mind at the time of making the contract, 
 when its effect is to render clear some doubtful term of the descrip- 
 tion.2« Thus in Harper v. Insurance Co.," insurance was placed upon 
 a printing office and bookbindery. The policy contained a printed con- 
 dition exempting the insurer from liabiUty for any loss or damage 
 by fire occasioned by camphene or other inflammable liquids. In the 
 description of the property insured was found the phrase "privileged 
 for a printing office, bindery, etc." The property was destroyed by 
 a fire occasioned by the ignition of camphene kept by the insured for 
 the purpose of cleaning their presses. It was held that a general usage 
 could be shown as existing among printers to keep camphene in their 
 shops, and that such usage was necessary to the conduct of the busi- 
 ness. It was therefore held that the words quoted from the descrip- 
 tion, when explained by the usage, negatived the provision exempting 
 the insurer from loss by reason of the camphene. 
 
 The words of description are ordinarily intended merely to desig- 
 nate the subject of the insurance, and not intended as warranties." 
 Therefore, as we have already seen, the mere description of a building 
 insured as a dwelling house or as a bam does not amount to a war- 
 ranty that the building shall continue to be used as a dwelling house 
 or bam.** 
 
 Description of Real Property. 
 
 In construing the words used descriptive of a building insured, the 
 greatest liberality is shown by the courts in giving effect to the insur- 
 ance. In view of the custom of insurance agents to examine buildings 
 before writing policies upon them, and since a mistake as to the identity 
 
 28 Maisel v. Fire Ass'n, 59 App. Div. 461, 69 N. Y. Supp. 181. 
 
 2« In Ackley v. Insurance Co., 25 Mont 272, 64 Pac. 665, the Insured was 
 allowed to show by parol a custom or usage of druggists to keep benzine, 
 ether, and gasoline, notwithstanding a clause in the policy which said: "This 
 entire policy, unless otherwise provided by agreement indorsed hereon or 
 added hereto, shall be void • • * If (any usage or custom of trade or 
 manufacture to the contrary notwithstanding) there be kept, used, or al- 
 lowed on the ♦ • * premises, benzine, ♦ • ♦ ether, • ♦ • or gaso- 
 line." 
 
 2T 22 N. Y. 441, Richards, Ins. Cas. 308. 
 
 «8 Albion Lead Works v. Williamsburg City Fire Ins. Co. (C. O.) 2 Fed. 479. 
 
 28 Cumberland Valley Mut Protection Co. v. Douglas, 68 Pa. 419, 98 Am. 
 Dec 298. 
 
 i 
 
 \'r 
 
i38 
 
 THB STANDARD FIBB POLICY. 
 
 (Ch.l2 
 
 and character of the building is extremely unlikely, the courts are in- 
 clined to consider that the policy of insurance covers any building 
 which the parties manifestly intended to insure, however inaccurate 
 the description may be. Thus a policy insuring a "two-story brick 
 building" was held to cover a building owned by the insured which 
 was two stories in front, though only one in the rear, it being ap- 
 parent such building was intended to be covered by the policy.®® So 
 a policy upon a "schoolhouse" was held sufficiently to identify the 
 building insured in which a school was kept, although it was not an 
 ordinary schoolhouse." Likewise the term "store" was held to be a 
 sufficient description of a building used as a restaurant and bakery.*'' 
 
 If, however, the description is so ambiguous in its terms as to make 
 it uncertain whether it covers one or several buildings, the court will 
 not go beyond a reasonable construction of the language used in order 
 to fix a liability upon the insurer. Thus a policy insuring a "pottery 
 building" was held not to cover a building adjacent to the pottery fac- 
 tory, which was used for the storage of pottery, as well as for other 
 purposes distinct from pottery making." Parol testimony cannot be 
 introduced to substitute another buildmg for the one described, on the 
 ground that the substituted building was the one intended to be in- 
 sured.** The written description in the contract can be explained, 
 but not ignored. 
 
 The description of a building always includes by implication all such 
 fixtures and appurtenances as would pass with it under a deed of con- 
 veyance. Thus insurance upon a dwelling house also covers the fur- 
 nace and boiler used for heating it.»* Likewise insurance upon a 
 storehouse was held to include the counters and shelves that were 
 fixed to the building so as not to be easily removed.** 
 
 Goods Held in Trust. 
 
 The property intended to be covered by insurance is often described 
 as "held in trust" or "on commission," or "sold but not delivered," or 
 by words of similar import. The courts are well agreed that these 
 terms are not to be given their technical significance, but arc to be 
 
 •• Carr v. Insnrance Co., 2 Mo. App. 466. 
 
 •1 Garretson v. Insurance Co., 81 Iowa, 727, 45 N. W. 1047, 
 
 •a Richards v. Insurance Co., 60 Mich. 420, 27 N. W. 586. 
 
 »» Forbes t. Insurance Co., 164 Mass. 402, 41 N. B. 656. 
 
 »* Sanders v. Cooper, 115 N. Y. 279, 22 N. E. 212, 5 L. R. A. 638, 12 Am. St 
 Rep. 801, Richards, Ins. Cas. 386. 
 
 ••West V. Insurance Co., 117 Iowa, 147, 90 N. W. 523. 
 
 •• Capital City Ins. Co. v. Caldwell, 95 Ala. 77, 10 South. 355. 
 
 It was held in Tanenbaum v. Simon, 40 Misc. Rep. 174, 81 N. Y. Supp. 655, 
 and Id., 84 App. Div. 642, 82 N. Y. Supp. 1116, that insurance on the "use 
 and occupancy" of a building did not cover salesmen's wages or the profits 
 of the business. 
 
 §157) 
 
 THE SUBJECT OF INSURANCE — LOCATION. 
 
 439 
 
 construed merely as meaning that the insured holds the goods as bailee, 
 and not in his own right, and insures them as such.»^ Thus a earner 
 or warehouseman is deemed to hold goods in his possession in trust, and 
 bis insurance of the goods to their full value will inure to the benefit 
 of the owners.'* The description of goods as "not delivered will 
 also be construed liberally, in accordance with intention of parties. 
 Thus lumber that had been sold and put in a separate place, under 
 such circumstances as to constitute a technical delivery as between the 
 parties, was held not to be "delivered" within the meaning of an in- 
 surance policy upon which the insurer was held liable." 
 
 A later provision of the standard policy expressly excluded from 
 the operation of the contract property held in storage or for repairs. 
 It is probable that this express limitation will go far to qualify the 
 meaning of such general terms as "held in trust," etc, used in de- 
 scribing the property, but even this express limitation will yield to 
 the manifest intention of the parties as derived from the written de- 
 scription to insure property held on storage or for repairs. 
 
 THE SUBJECT OP INSURANCE— LOCATION, 
 
 167. If the location of tlie property insnred is given merely for pnr- 
 posea of description and identification, tlie insurance accom- 
 panies it when removed to other localities. Bnt if the location 
 is given as defining the risk assumed, the policy does not cover 
 the property when removed elsewhere. The statement of loca- 
 tion is, in most cases, construed as defining the risk. 
 
 In connection with the description of goods insured, most policies 
 contain the statement that such goods are "contained in" some desig- 
 nated place. The standard policy uses the expression, "while located 
 and contained as described herein, and not elsewhere." Much diffi- 
 culty has been encountered by the courts in determining whether the 
 statement of location of goods insured is intended by the parties as 
 merely an additional item of description, for the purpose of securing 
 
 «T California Ins. Co. v. Union Compress Co., 133 U. S. 387, 10 Sup. Ct 
 365, 33 L. Ea. 730; Home Ins. Co. v. Baltimore Warehouse Co., 95 U. S. 527, 
 23 L. Ed. 868 ; Southern Cold Storage & Produce Co. v. A. F. Dechman (Tex. 
 Civ. App.) 73 S. W. 545; Home Ins. Co. v. Favorite, 46 111. 263; Siter v. 
 Morrs, 13 Pa. 218; Hough v. Insurance Co., 36 Md. 398. 
 
 »« California Ins. Co. v. Union Compress Co., supra; Southern Cold Stc^ge 
 & Produce Co. v. Dechman, supra; Smith v. Carmack (Tenn.) 64 S. W. 372. 
 In this case it was also held that the insurance policy covered goods taken 
 In storage subsequent to the issuance of the policy. 
 
 8 » Michigan Pipe Co. v. Michigan Fire & Marine Ins. Co., 92 Mich. 482, 
 52 N. W. 1070, 20 L. B. A. 277. But see Lockhart T. Cooper, 87 N. U 149, 42 
 Am. Bep. 514. 
 
440 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 12 
 
 more perfect identification, or whether it is given as defining the risk 
 that is to be assumed by the insurer. It is plain that, if the statement 
 of location of the goods is merely descriptive in character, a change 
 of location will not affect the insurance; but that, if the location is 
 given for the purpose of defining the risk, the insurance will not ac- 
 company the goods upon removal from the place stated. It is for the 
 court to determine what was the intention of the parties in this re- 
 spect, in case the words used do not make it clear. The language of 
 the standard policy, however, excludes any question of construction 
 by the use of the expression "and not elsewhere," the language clearly 
 indicating that the goods will not be protected if removed.*® 
 ^ The cases construing those policies that do not contain the definite 
 limitation of the standard form show much confusion. All are agreed 
 that a removal of goods insured from the location described in the 
 policy does not work a forfeiture of the policy, but merely suspends 
 lit until the goods are returned to the original location. Therefore 
 Jthe rule of construction that favors such interpretation of the words 
 of the contract as will avoid a forfeiture does not apply in these in- 
 stances. So that, when the goods are destroyed in a place different 
 from that described in the policy, it is difficult to state what is the 
 weight of authority as to the insurer's liability. While the cases are 
 confused, there is yet found running through them the principle in- 
 dicated in the black-letter text above, viz., that the insurer will not be 
 liable for the goods as removed, if such removal would impose upon 
 the insurer a risk he had not intended to assume. In determining 
 whether the parties intended that the insurance should cover the prop- 
 erty only in the location described, all the circumstances attending the 
 making of the contract, the knowledge of the parties as to the use to 
 which such property was customarily put, and the known intention of 
 the insured as to that use, must all be considered. Thus in Niagara 
 Fire Ins. Co. v. Elliott," where the property insured included, among 
 other things, carriages and other vehicles described as contained in 
 "the frame metal building * * ♦ occupied as a livery and sales 
 stable," it was held that the insurer was liable for the loss of three 
 of the carriages so described, which, at the time of their destruction 
 by fire, were in a repair shop some distance from the livery stable. 
 This decision, which is manifestly correct, rested upon the theory that 
 the insurer, knowing the use to which livery carriages are put, and 
 that such use must necessarily cause them to be frequently removed 
 
 *o British America Assur. Co. v. Miller, 91 Tex. 414, 44 S. W. 60, 39 L. R. 
 A. 545, 66 Am. St Rep. 901; Village of L'Anse v. Fire Ass'n of Philadelphia, 
 119 Mich. 427, 78 N. W. 465, 43 L. R. A. 838, 75 Am. St. Rep. 410. But see 
 De Graff v. Insurance Co., 38 Minn. 501, 38 N. W. 696, 8 Am. St Rep. 685. 
 
 *i 85 Va. 962, 9 S. E. 694, 17 Am. St Rep. 115. 
 
 r 
 
 §157) 
 
 THE SUBJECT OF INSURANCE — LOCATION. 
 
 441 
 
 from the livery stable, must have intended to insure them wherever 
 they might happen to be in connection with the business of the in- 
 sured." So, where an oil tank was insured as being located in a 
 certain place, it was held to be still covered by the policy, although 
 at the time of the fire it was in a different place, whither it had been 
 carried by a flood.*' Insurance upon a horse described in the policy 
 as being in a certain barn will reasonably be construed to protect the 
 owner while the horse is in use outside of the barn as well as when 
 he is in the location described in the policy.** 
 
 But when the property is of such a character that its use does not 
 necessitate its removal from the place described as its location, the 
 court will infer that the intention of the parties was that the statement 
 of location should be a characterization of the risk.*'' Thus, where 
 a stock of goods is insured as contained in a certain building, it will 
 not be covered by the policy when removed to another place.*' Like- 
 wise the insured cannot be allowed to recover upon a policy insurinji. 
 certain furniture as being in a specified dwelling, when the loss ha? » 
 been suffered when the furniture was in another building:.*^ 
 
 Loss During and After Removal 
 
 It is held that, when consent has been obtained for the removal of 
 goods, they are not protected while in transit; *• but they are protected 
 in the former location, if they are destroyed before removal, evev 
 though consent has been given for their removal. The standard fo-; 
 
 48 To the sam** effect, see McCluer v. Insurance Co., 43 Iowa, 349, 22 Am. 
 Rep. 249; Longueville v. Assmnnce Co., 51 Iowa, 553, 2 N. W. 394, 33 Am. 
 Rep. 146; McKeesport Mach. Co. v. Ben Franklin Ins. Co., 173 Pa. 53, 34 Atl. 
 16. And see Kratzenstein v. Assurance Co., 116 N. Y. 54, 22 N. B. 221, 5 L. 
 R. A. 799, construing a policy on a commercial traveler's clothes and outfit. 
 London & L. Fire Ins. Co. v. Graves. 4 Ky. Law Rep. 706. But see BRAD- 
 BURY v. INSURANCE SOa, 80 Me. 396, 15 Atl. 34, 6 Am. St Rep. 219; 
 Green v. Insurance Co., 91 Iowa, 616, 60 N. W. 189. 
 
 48 WESTERN & A. PIPE LINES v. HOME INS. CO. (1891) 145 Pa. 346, 22 
 Atl. 665, 27 Am. St Rep. 703. Also, see Farrell v. Insurance Co., 66 Mo. App. 
 
 153. 
 
 44 Haws V. Fire Ass'n, 114 Pa. 431, 7 Atl. 159. Compare Haws v. Insur- 
 ance Co., 130 Pa. 113, 15 Atl. 915, 18 Atl. 621, 2 L. R. A. 52; De Graflf v. 
 Insurance Co., 38 Minn. 501, 38 N. W. 696, 8 Am. St Rep. 685; American 
 Cent. Ins. Co. v. Haws, 20 Wkly. Notes Cas. 370. But see Farmers' Mut. 
 Fire Ins. Ass'n v. Kryder, 5 Ind. App. 430, 31 N. E. 851, 51 Am. St. Rep. 284. 
 
 45 Lakings v. Insurance Co., 94 Iowa, 476, 62 N. W. 783, 28 L. R. A. 70; 
 Annapolis & E. R. Co. v. Baltimore Fire Ins. Co., 32 Md. 37, 3 Am. Rep. 112; 
 English V. Insurance Co., 55 Mich. 273, 21 N. W. 340, 54 Am. Rep. 377. 
 
 48 English V. Insurance Co., 55 Mich. 273, 21 N. W. 340, 54 Am. Rep. 377. 
 
 47 Lyons v. Insurance Co., 14 R. I. 109, 51 Am. Rep. 364, Richards. Ins. 
 Cas. 447; Towne v. Fire Ass'n, 27 111. App. 433; Green v. Insurance Co^ »1 
 Iowa, 615, 60 N. W. 189. 
 
 48 Goodhue v. Insurance Co., 184 Mass. 41, 67 N. B. 645. 
 
 I 
 
I 
 
 442 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch.l2 
 
 also contains this clause with reference to the right of removal: "If 
 property covered by this policy is so endangered by fire as to require 
 removal to a place of safety, and is so removed, that part of this policy 
 in excess of its proportion of any loss and of the value of property 
 remaining in the original location, shall, for the ensuing five days 
 only, cover the property so removed in the new location; if removed 
 to more than one location, such excess of this policy shall cover therein 
 for such five days in the proportion that the value in any one such 
 new location bears to the value in all such new locations ; but this com- 
 pany shall not, in any case of removal, whether to one or more loca- 
 tions, be liable beyond the proportion that the amount hereby insured 
 shall bear to the total insurance on the whole property at the time of 
 fire, whether the same cover in new location or not." Such a provi- 
 sion is manifestly wise and fair, and removes much difficulty in adjust- 
 ing losses under such circumstances. 
 
 THE INTEREST OF THE INSUBED. 
 
 158. STATEMENT— The requirement tHat the interest of tlie Insnred 
 
 in the property shall be truly stated is satisfied by a statement 
 of the qnality of that interest. The quantity need not be 
 stated, nor need the title be given. 
 
 159. UNCONDITIONAIi AND SOLE OWNERSHIP ejdsts in the in- 
 
 sured ^^hen his interest in the property is vested in fee, not sub- 
 ject to condition or contingency, and not held jointly ivith 
 others. Such ownership may exist in merely equitable inter- 
 ests, and is not negatived by incumbrances. 
 
 160. The condition invalidating the insurance, if the building insured 
 
 is on ground not oxmaed by the insured in fee simple, urill be 
 satisfied if the interest of the insured in the land is equal in 
 extent to a fee, even though it be only equitable or subject to 
 an incun&brance. 
 
 The value of the interest of the insured, as a general rule, meas- 
 ures the degree of care which he will bestow upon the property, and 
 also the effort which he will make for its preservation in case it be- 
 comes endangered. The relation between the amount of insurance 
 and the value of the interest insured has also a most important bear- 
 ing upon the good faith of the insured in applying for the policy. The 
 insurer is therefore justified in desiring full information as to the 
 nature, extent, and value of the insured's interest in the property to be 
 covered by the policy at the time of the application, and also in stipu- 
 lating for information with reference to any changes that may take 
 place in that interest during the currency of the policy. Accordingly 
 the courts hold that conditions of the policy making its validity de- 
 pendent upon giving correct information concerning such interest are 
 reasonable and enforceable. 
 
 f § 168-160) 
 
 THE INTEREST OF THE INSURED. 
 
 44a 
 
 The courts do not, however, require that a person shall be skilled 
 in the science of conveyancing in order to be able to make a valid con- 
 tract of insurance upon his property. Therefore the language both of 
 the description of the interest insured and of the conditions of the 
 policy with reference to such interest is construed, not technically, 
 but with the consistent purpose of giving the expressions used such 
 meaning as was intended by the parties at the time the contract was 
 made. The court will put itself in the position of an unskilled person 
 required to describe his interest, and will regard that description as 
 sufficient if it substantially describes the interest which the insured in 
 good faith believed that he possessed, even though the language used 
 was technically inaccurate. Before the adoption of the standard form 
 of policy the conditions with reference to the statement of the in- 
 sured's interest varied greatly in different policies, both in regard to 
 language used and the apparent purpose in view. The draftsman of 
 the standard policy, in formulating tiie conditions of that instrument, 
 had in mind the experience of underwriters under the numerous pre- 
 ceding forms of policies, and also the decisions of the court construing 
 them. Consequently the interest conditions of the standard policy are 
 apparently as just to both parties and as accurately expressed as any 
 that could be devised. The conditions intended to secure a true state- 
 ment of the insured's interest at the time of the issuance of the policy 
 are : "This entire policy shall be void * ♦ * if the interest of the 
 insured in the property be not truly stated herein; * * * or un- 
 less otherwise provided by agreement indorsed hereon or added here- 
 to; * * * or if the interest of the insured be other than tmcon- 
 ditional and sole ownership ; or if the subject of insurance be a build- 
 ing on ground not owned by the insured in fee simple; or if the subject 
 of insurance be personal property, and be or become incumbered by 
 a chattel mortgage." Other conditions requiring notice of a change in 
 this interest will be construed later. 
 
 Statement of the Insured's Interest. 
 
 Without this requirement there would be no duty incumbent on the 
 insured to state the character of his interest, provided he had an in- 
 terest that was insurable. The condition above quoted, however, re- 
 quires a description of that interest, and it seems that the condition 
 applies even to those policies that are issued without a previous ap- 
 plication; for, if the policy does not elsewhere contain a statement of 
 the character of the interest, it will be implied, by reference to the 
 later condition, that the interest is represented as being sole and un- 
 conditional.** But the condition that the interest of the insured should 
 
 *• Wilcox V. Insurance Co., 85 Wis. 193, 55 N. W. 188; Crikelalr v. Insur- 
 ance CJo., 168 111. 309, 48 N. E. 167, 61 Am. St. Rep. 119; Fitchburg Sav. 
 Bank Y. Amazon Ins. Co., 125 Mass. 431; Wierengo v. Insurance Co., US 
 
 I. 
 
444 
 
 THE STANDARD FIRE POLICY, 
 
 
 (Ch. 12 
 
 be truly stated does not require anything more than a statement of the 
 quality of that interest ; as, for instance, whether the property is held 
 as owner, bailee, mortgagee, or trustee. '^'^ It does not require that the 
 quantity of the interest shall be given or its value. Therefore a true 
 statement of the insured*s interest need not include a discovery of any 
 incumbrances or liens that exist upon the land."^ Neither is the in- 
 sured under this condition required to state whether his interest is legal 
 or equitable, for it is well recognized that "interest" is a far broader 
 term than "title." " 
 
 Sole and Unconditional Ownership, 
 
 The purpose of the insurer in requiring information as to whether 
 the interest of the insured be other than unconditional and sole 
 ownership is merely to enable him to determine whether, in case of 
 destruction of the property, the whole loss would fall upon the in- 
 sured, or whether it would be borne partly by the owners of other in- 
 terests. Therefore, in the midst of the numerous confusing decisions, 
 we may discover the consistent purpose, not always avowed, to hold 
 that if the interest of the insured at the time the policy was procured 
 was of such a character as would impose upon him, directly or in- 
 directly, the whole burden of loss consequent upon the destruction of 
 the insured premises, that interest will satisfy the condition of sole 
 and unconditional ownership." Thus, it has been held that a merely 
 
 Mich. 621, 57 N. W. 833; Smith y. Insurance Co., 17 Pa. 253, 55 Am. Dec. 
 546 ; Pennsylvania Ins. Co. v. Gottsman's Adm'rs, 48 Pa. 151 ; Brown v. In- 
 surance Co., 86 Ala. 189, 6 South. 500. But see contra, Morotock Ins. Co. v. 
 Rodefer, 92 Va. 747, 24 S. B. 393, 53 Am. St Rep. 846, Wood, Ins. S 162. 
 
 80 Clay Fire & Marine Stock Ins. Co. v. Beck, 43 Md. 358 ; DOLLIVBR ▼. 
 INSURANCE CO., 128 Mass. 315, 35 Am. Rep. 378; Wooddy v. Insurance Co., 
 31 Grat. (Va.) 362, 31 Am. Rep. 732; De Armand v. Insurance Co. (C. C.) 28 
 Fed. 603; Ellis v. Insurance Co. (O. C.) 32 Fed. 646. 
 
 51 De Armand v. Insurance Co. (C. a) 28 Fed. 603; Friezen T. Insurance 
 Co. (C. C.) 30 Fed. 352; Ellis v. Insurance Co (C. C.) 32 Fed. 646; Carrigan 
 V. Insurance Co., 53 Vt 418, 38 Am. Rep. 687; Alamo Fire Ins. Co. v. Lan- 
 caster, 7 Tex. Civ. App. 677, 28 S. W. 126; Manhattan Fire Ins. Co. t. WeilU 
 28 Grat. (Va.) 389, 26 Am. Rep. 364. 
 
 " WALRADT V. INSURANCE CO., 136 N. Y. 375, 32 N. B. 1063, 32 Am. 
 St Rep. 752; GIBB v. INSURANCE CO., 59 Minn. 267, 61 N. W. 137, 50 Am. 
 St. Rep. 405; Morotock Int. Co. t. Rodefer, 92 Va. 747, 24 S. E. 393, 63 Am. 
 St Rep. 846. 
 
 58 '^The object of the stipulation in the policy was to protect the defend- 
 ant against taking risks beyond the value of the interest insured, so that the 
 insured would use all reasonable precautions to avoid the destruction of the 
 property.*' Security Ins. Co. v. Kuhn, 207 111. 166, 69 N. E. 822. IMPERIAL 
 FIRE INS. CO. V. DUNHAM, 117 Pa. 460, 12 Atl. 668, 2 Am. St Rep. 686 ; 
 DUPREAU V. INSURANCE CO., 76 Mich. 615, 43 N. W. 585, 5 L. R. A. 671; 
 Pennsylvania Fire Ins. Co. v. Dougherty, 102 Pa. 568; Hartford Fire Ins. 
 Co. V. Keating, 86 Md. 130, 38 Atl. 29, 63 Am. St. Rep. 499; ^TNA FIRE 
 INS. CO. V. TYLER, 16 Wend. (N. Y.) 396, 30 Am. Dec 90; Lebanon Mut 
 Ins. Co. V. Erb, 112 Pa. 149, 4 Atl. a 
 
 \% 158-160) 
 
 THE INTEREST OP THE INSURED. 
 
 445 
 
 equitable interest may satisfy this condition as well as if it were 
 legal ; " that a vendee, whether in possession or not, under a binding 
 contract for the purchase of land, owns it unconditionally." It is 
 even held that possession with claim of ownership under a parol con- 
 tract is sufficient to constitute unconditional ownership," although 
 it would seem to be otherwise if the possession was held under a 
 voluntary parol agreement to convey." It is not necessary that the 
 title claimed shall be valid, provided the claim of interest is bona fide." 
 The insured, in stating that his ownership is unconditional, should 
 not be held to make a warranty of title. It seems, however, that if 
 the title under which the insured claims ownership is void on its face 
 the condition is broken." This certainly is true if the insured has 
 reason to know that it is void.*® 
 
 The expression "unconditional ownership" means ownership in fee, 
 and any less interest, such as an estate by the curtesy, or other life 
 estate, or a term of years, does not satisfy the condition." The own- 
 
 M Matthews v. Insurance Co., 115 Wis. 272, 91 N. W. 675; Loventhal v. 
 Insurance Co., 112 Ala. 108. 20 South. 419, 33 L. R. A. 258 57^^ ^^ ^^f 
 17, DUPREAU V. INSURANCE CO., 76 Mich. 615, 43 N. W. o85, 5 L. R. A. 
 671, Ben Franklin Fire Ins. Co. v. Wilsus, 88 Pa. 107; North British & 
 Mercantile Ins. Co. v. Estes, 106 Tenn. 472. 62 S. W. 149, 52 L. R. A. 915. 82 
 
 Am. St. Rep. 892. ^^^^ ,^ ». ,j *u * 
 
 In Security Ins. Co. v. Kuhn, 207 111. 106, 69 N. B. 822, It was held that 
 where the interest of the insured was a life estate in the property or its pro- 
 ceeds united with the absolute right as an active testamentary trustee to 
 dispose of the same as she saw fit for the pui-poses of the trust, the insured 
 was the sole and unconditional owner in fee simple within the meaning of 
 this clause of the standard policy. Lebanon Mut. Ins. Co. v. Erb, 112 Pa. 149. 
 
 4 Atl 8 
 
 55 katthews V. Insurance Co., 115 Wis. 272, 91 N. W. 676; Pennsylvania 
 
 Fire Ins. Co. v. Hughes, 108 Fed. 497, 47 C. C. A. 459. ^„ ^ , ^ ^^ ^ ^ 
 
 56 Milwaukee Mechanics' Ins. Co. v. B. S. Rhea & Son, 123 Fed. 9, 60 C. C. 
 A 103. See, also, Pelton v. Insurance Co., 77 N. Y. 606; Wainer v. Insurance 
 Co., 153 Mass. 335, 26 N. E. 877, 11 L. R. A. 598. ,^,e.TT« . ^.r.^ ^r. 
 
 57 Wineland v. Insurance Co., 53 Md. 276; MILLER ▼. INSURANCE CO.. 
 
 46 Mich. 463, 9 N. W. 493. 
 
 58 Haider v. Insurance Co., 67 Minn. 514, 70 N. W. 805. „ « „^ ^ ^^ 
 69 Liverpool & London & Globe Ins. Co. v. Cochran, 77 Miss. 348, 26 South. 
 
 932, 78 Am. St. Rep. 524. 
 
 «o Liverpool & London & Globe Ins. Co. v. Cochran, 77 Miss. 348, 26 South. 
 
 932, 78 Am. St Rep. 524. «« . ^, „^ ^« * o* 
 
 ei Hartford Fire Ins. Co. v. Keating, 86 Md. 130, 38 Atl. 29, 63 Am. St, 
 Rep 499 The court thus stated the law: "To be *unconditional and sole 
 the interest must be completely vested in the assured, not contingent or 
 conditional, nor for life or years only, nor in common, but of such a nature 
 that the insured must stand the entire loss if the property is destroyed. And 
 this is so whether the title was legal or equitable." See, also. Garver v. 
 Insurance Co., 69 Iowa, 202, 28 N. W. 555; Security J^s- Co. v Mette 27 HI. 
 App 324- IMPERIAL FIRE INS. CO. v. DUNHAM, 117 Pa. 460. 12 AtL 668. 
 
446 
 
 THE STANDARD FIRE TOLICT. 
 
 (Ch. 12 
 
 THE INTEREST OP THE INSURED. 
 
 447 
 
 ership is not unconditional when the insured's title contains within 
 itself a contingency or condition of defeasance; •* but, as shown above, 
 an outstanding adverse claim is not such a condition upon the insured's 
 interest as makes his ownership conditional. But where a mortgagee 
 took an absolute conveyance from the mortgagor, making at the same 
 time a secret agreement to reconvey upon payment of the debt in- 
 tended to be secured, it was held that insurance procured by the pre- 
 tended owner was void by reason of the breach of this condition.*' 
 In Stowell y. Clark,** however, the New York court held that, where 
 the vendee of certain personalty had agreed to resell to the vendor in 
 case of failure to pay any of the purchase notes outstanding, the in- 
 terest of such vendee was nevertheless properly described as uncondi- 
 tional ownership. So, in Kentucky it has recently been held that a 
 condition in purchase bonds given by the vendee of realty, securing 
 to the vendor the right of re-entry in case of nonpayment, did not 
 render insurance procured by the vendee invalid as a breach of this 
 clause requiring sole and unconditional ownership.* • 
 
 Incumbrances not Considered as Conditions. 
 
 It has long been settled that the existence of a mortgage or other 
 incumbrance, voluntary or involuntary, does not constitute a breach 
 of the condition of unconditional and sole ownership,** inasmuch as 
 
 2 Am. St. Rep. 686, Woodruff, Ins. Cas. 152 ; Brown v. Insurance Co., 86 Ala. 
 189, 5 South. 500; Liverpool & London & Globe Ins. Co. v. Cochran, 77 
 Miss. 348, 26 South. 932, 78 Am. St. Rep. 524 ; Southwick v Insurance Co., 
 133 Mass. 457; Messelback v. Norman, 46 Hun, 414; Dwelling House Ins. Co. 
 V. Dowdall, 49 111. App. 33; Collins v. Insurance Co., 44 Minn. 440, 46 N. W. 
 906. 
 
 «2 Hartford Fire Ins. Co. r. Keating, 86 Md. 130, 38 Atl. 29, 63 Am. St 
 Rep. 499. See, also, Dwelling House Ins. Co. v. Dowdall, 49 111. App. 33. 
 ROHRBACH v. INSURANCE CO., 62 N. Y. 47, 20 Am. Rep. 451; Southwick 
 v. Insurance Co., 133 Mass. 457. 
 
 «3 Farmers' & Merchants' Ins. Co. v. Hahn (Neb.) 96 N. W. 255 (upon re- 
 hearing). But it has been held otherwise as to a creditor vendee of per- 
 sonalty in possession. Carey v. Insurance Co., 92 Wis. 538, 66 N. W. 693. 
 
 «* 171 N. Y. 673, 64 N. E. 1125, affirming 47 App. Div. 626, 62 N. Y. Supp. 
 155. 
 
 «5 Scottish Union & Nat Ins. Co. v. Strain, 70 S. W. 274, 24 Ky. Law Rep. 
 958. 
 
 6« "Indeed, the authorities are practically unanimous to the effect that 
 an incumbrance is not an estate in or title to property, within the meaning 
 of the provision that, if the interest of the insured be other than an uncon- 
 ditional or sole ownership, the policy shall be void. To the contrary, an 
 incumbrance constitutes a mere lien upon property, v^hich may be discharged 
 at any time by payment of the sum for which the lien attaches." Union 
 Assur. Soc. V. Nails, 101 Va. 613, 44 S. K 896. 
 
 **Thi8 condition did not have reference to the legal title, but to the inter- 
 est of the insured in the property, and was not a warranty against liens and 
 incambrances. The interest of the insured in the property was, and con- 
 
 §§ 158-160) 
 
 the destruction of the property would not in any wise discharge the 
 debt secured by the lien upon it The whole loss, in case of destruc- 
 tion of the mortgaged property, would fall upon the mortgagor, which 
 would bring the case within the general rule of construction first 
 stated above. But since the incumbrance upon the property insured 
 does not fasten any lien upon the proceeds of insurance upon that 
 property, the owner of heavily mortgaged property is tempted to 
 transform his burdened property into unincumbered insurance money. 
 On this account insurance policies frequently require that the exist- 
 ence of any sort of lien or incumbrance upon the insured property 
 shall be disclosed. 
 
 By requiring that the interest shall be sole, the insurer intends to 
 prevent a co-tenant from insuring, without his consent, property held 
 jointly with others. Consequently any sort of joint ownership, what- 
 ever be its legal characteristics, will defeat a policy issued to any one 
 of the joint tenants, unless this condition is waived.*^ 
 
 Chattel Mortgages, 
 
 The standard policy requires incumbrances to be disclosed only in 
 case the property insured is personalty, it being probably considered 
 that the perishable nature of personalty renders the existence of a se- 
 cret mortgage peculiarly hazardous. 
 
 Following the same rule of liberal construction •• that obtains in all 
 cases affecting the provisions of insurance policies, the courts will not 
 hold that the condition against chattel mortgages is violated unless 
 the transaction complained of is technically a mortgage. A lien of 
 some other character is not sufficient.** 
 
 tinned to be, unconditional and sole ownership, notwithstanding the mort- 
 gage they had given upon It" Morotock Ins. Oo. v. Rodefer, 92 Va. 747, 24 
 S. E. 393, 53 Am. St. Rep. 846. So, a tax lien does not render the ownership 
 conditional. McClelland v. Insurance Co., 107 La. 124, 31 South. 691; Clay 
 Fire & Marine Stock Ins. Co. v. Beck. 43 Md. 358 ; Friezen v. Insurance Co. 
 (C. C.) 30 Fed. 352; Ellis v. Insurance Co. (C. C.) 32 Fed. 646; Carrington 
 V. Insurance Co.. 53 Vt 418. 38 Am. Rep. 687; Alamo Fire Ins. Co. v. Lan- 
 caster, 7 Tex. Civ. App. 677, 28 S. W. 126; Burlington Fire Ins. Oo. t. Coflf- 
 man, 13 Tex. dv. App. 439, 35 S. W. 406. 
 
 67 MILLER V. INSURANCE CO., 46 Mich. 463, 9 N. W. 493. 
 
 But Joint ownership under such circumstances as to make this condition 
 Inapplicable v^rlU not avoid the policy; as. where oil in a tank, owned jointly 
 by several persons, was insured by the plaintiff as his own and "held in 
 trust," the condition was held not to apply to such insurance. Grandin ▼. 
 Insurance Co., 107 Pa. 26. 
 
 ••A mortgage upon a part of the personalty insured is not BufBcIent to 
 violate the condition. It must cover the whole. North British & Mercantile 
 Ins. Co. V. Freeman (Tex. Civ. App.) 33 S. W. 1091; Bills v. Insurance Co.. 
 87 Tex. 647, 29 S. W. 1063, 29 L. R. A. 706, 47 Am. St Rep. 121; Phcenix Ins. 
 Co. V. Lorenz (Ind. App.) 29 N. E. 604. 
 
 •» Caplia V. Insurance Co., 60 Minn. 376, 62 N. W. 440, 61 Am. St Rep. 
 
1 
 
 448 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 12 
 
 §ie>i) 
 
 CHANGE OF INTEREST, TITLE, OR POSSESSION. 
 
 449 
 
 ^|i 
 
 It has been recently held in Virginia that the existence of a chattel 
 mortgage at the time of the issue of the policy does not constitute 
 a breach of this condition when the policy was issued without re- 
 quiring previous application, and without making inquiries of the in- 
 sured as to the existence of incumbrances.''® Although the court says 
 that this doctrine commends itself to the judicial mind, it would seem 
 that both the weight of authority and sound reason are opposed to it^* 
 
 Insured Building on Ground not Owned in Fee. 
 
 The condition invalidating insurance upon a building on ground not 
 owned in fee by the insured is construed in the same spirit as the other 
 conditions affecting the insured's interest, discussed above. The in- 
 sured will be deemed to be the owner in fee simple if his interest in 
 the land is without condition or limitation, even though he may not 
 have the legal title.''* The condition is not violated if the estate of 
 the insured is subject to an outstanding lease,'* since a leasehold is 
 but a chattel interest, and does not negative the existence of the fee 
 simple in the lessor. The Kentucky court has even gone so far as to 
 hold that where the building was situated upon land in which the in- 
 sured had only a one-fourth undivided interest, it could be said truth- 
 fully to be on land owned by the insured in fee, since in a partition 
 suit that portion of the land improved by him would be set off to the 
 insured.''* 
 
 535; Laird r. Littlefield, 164 N. T. 597, 58 N. B. 1089. In the last case the 
 mortgage debt had been paid, but the mortgage not released. The condition 
 was held not to be broken, but a deed of trust on insured personalty is held 
 to violate the condition against chattel mortgages. Hunt v. Insurance Co., 
 
 20 App. D. a 4a 
 
 70 Morotock Ins. Co. v. Rodefer, 92 Va. 747, 24 S. B. 393, 53 Am. St. Rep. 
 846; Union Assur. Soc. v. Nails, 101 Va. 613, 44 S. E. 896. 
 
 71 Wilcox V. Insurance Co., 85 Wis. 193, 55 N. W. 188; Crikelair v. Insur- 
 ance Co., 168 111. 309, 48 N. B. 167, 61 Am. St. Rep. 119; Fritchburg Sav. 
 Bank v. Amazon Ins. Co., 125 Mass. 431; Wierengo v. Insurance Co., 98 
 Mich. 621, 57 N. W. 833; Smith v. Insurance Co., 17 Pa. 253, 55 Am. Dec. 
 546; Pennsylvania Ins. Co. v. Gottsman's Adm'rs, 48 Pa. 151; Brown v. 
 Insurance Co., 86 Ala. 189, 5 South. 500. 
 
 7 2 Swift v. Insurance Co., 18 Vt 305; Elliott t. Insurance Co., 117 Pa. 
 548, 12 Atl. 676, 2 Am. St Rep. 703; Lewis v. Insurance Co. (C. C.) 29 Fed. 
 196. Nor is this condition of the policy broken if the building stands partly 
 on a public street or partly on an adjoining lot in which insured has no in- 
 terest Haider y. Insurance Co., 67 Minn. 514, 70 N. W. 805. 
 
 7» DOLLIVBR v. INSURANCE CO., 128 Mass. 315, 35 Am. Rep. 378. 
 
 T« Kenton Ins. Co. t. Wigginton, 89 Ey. 330, 12 S. W. 668, 7 L. Bi. A. 8L 
 See, also, Secnilty Ins. Co. y. Knhn. 207 111. 166, 69 N. R 822. 
 
 I 
 
 i 
 
 I 
 
 CHANGE OP INTEREST, TITLE, OR POSSESSION. 
 
 161* Tliis condition is intended to protect tlie insurer from any con- 
 tingency that miglit increase tl&e risk assniued by the insurer 
 by decreasing the interest of the insured. Hence it is construed 
 to include only such acts or events affecting the title of the in- 
 sured as substantially change the quantity of his beneficial in- \ 
 terest, immaterial modifications of interest, title, or possession \ 
 being ignored. 
 
 <c« * ♦ If any change, other than by the death of an insured, take 
 place in the interest, title, or possession of the subject of insurance (ex- 
 cept change of occupants without increase of hazard), whether by legal 
 process or judgment or by voluntary act of the insured, or other- 
 wise.'" '^ 
 
 Purpose of this Condition, 
 
 Underwriters realize that any decrease in the value or extent of the 
 interest insured after the issue of the policy will tend directly to in- 
 crease the moral element in the risk, which is known to be a most 
 important one. If by a subsequent decrease in the value of his inter- 
 est covered by the policy the insured could, upon loss of his dimin- 
 ished interest, recover the value of his original interest, the proba 
 bility of fire would undoubtedly be greater. Hence the aim of the 
 underwriters has been to frame such a condition as will give them an 
 opportunity to cancel any outstanding policy when the risk has been 
 increased by reason of a change in the insured's interest'* 
 
 Progressive Attempts to Carry Out This Purpose. 
 
 The first condition inserted in fire policies in the effort to accom- 
 plish this aim- was one prohibiting the sale or alienation of the prop- 
 erty. This condition was, however, construed to mean only a com- 
 plete sale or alienation, and not to be broken so long as any interest 
 whatever remained in the insured.'* The underwriters then added to 
 
 ▼• Thli condition Is valid, and not opposed to public policy as in restraint 
 of alienation. Findlay v. Insurance Co., 74 Vt 211, 62 Atl. 429, 93 Am. St 
 Rep. 885. 
 
 T« See an excellent statement of the rationale of this condition In Cotting- 
 ham V. Insurance Co., 90 Ky. 439, 14 S. W. 417. 9 L. R. A. 627. 
 
 The object of the provision is that the insured shall have no greater motive 
 to destroy, or less interest in watching and guarding, the property insured. 
 German Ins. Co. v. Gibe, 59 111. App. 614. The spirit and intention of the 
 clause is to guard against any moral hazard involved in changed relations 
 to the insured property. Rosenstein v. Insurance Co., 79 App. Div. 481, 79 
 N. Y. Supp. 736. FARMERS' & MERCHANTS' INS. CO. v. JENSEN, 56 Neb. 
 284, 76 N. W. 677, 44 L. R. A. 861; Ayres v. Insurance Co., 17 Iowa, 176, 86 
 Am. Dec. 553. 
 
 ft Cowan V. Insurance Co., 40 Iowa, 551, 20 Am. Rep. 583 ; Hitchcock v. 
 
 Vanoe Ins.— 29 
 
 !' ti 
 
450 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 12 
 
 i 
 
 
 this expression, which had been found insufficient, a prohibition of any 
 "change of title." This, however, was construed to mean only a vol- 
 untary change of title, and to remain unbroken so long as the title of 
 the insured remained unchanged, irrespective of any changes that 
 might have taken place in his interest." In order to escape the jeal- 
 ousy which the courts showed in applying the rule of strict construc- 
 tion against the insurer, many other expressions were devised and made 
 use of in policies. One writer has collected a list of some two hundred 
 varying conditions against alienation. 
 
 The Broad Language of Alienation Clause in the Standard Policy, 
 
 In the effort to compel the discovery of any change whatever in 
 the interest of the insured which would tend to increase the risk, the 
 draftsman of the standard policy broadened the language of the con- 
 dition so as to make it include not only a change in title and posses- 
 sion, but also a change in "interest," the broadest property term that 
 can be used, and expressly included involuntary changes in interest 
 as well as those that are voluntary, while expressly excepting changes 
 due to the death of the insured." Some courts have taken the view 
 that the comprehensive terms of this condition necessarily include any 
 changes whatever in the insured's interest,*** but the majority of the 
 courts, induced either by precedents construing older, less compre- 
 hensive forms, or moved by a determination not to permit a merely tech- 
 nical defeat of a contract entered into in good faith by the insured, 
 have shown a strong inclination to except from the operation of this 
 condition such immaterial changes of interest as do not diminish the 
 value of that interest or increase the moral hazard of the risk. Thus 
 it has been held that the appointment of a receiver '^ does not con- 
 stitute such a change of interest as violates this condition, nor does 
 
 Insurance Co., 26 N. T. 68; HOFFMAN T. INSURANCE CO., 32 N. Y. 4^5, 
 88 Am. Dec 337 : Stetson v. Insurance Co., 4 Mass. 330, 3 Am. Dec. 217 (1808) ; 
 Clinton v. Insurance Co., 176 Mass. 486. 57 N. E. 998, 50 L. R. A. 833, 79 Am. 
 St Rep. 325, and cases cited. 
 
 T8 Thompson v. Insurance Co., 136 U. S. 287, 10 Sup. Ct 1019, 84 L. Bd, 408. 
 Rhode Island Underwriters* Asg*n v. Monarch. 98 Ky. 305, 32 8. W. 959; 
 \ew Orleans Ins. Co. v. Gordon, 68 Tex. 144. 3 S. W. 718; Georgia Home Ins. 
 Co. v. Bartlett. 91 Va. 305, 21 S. B. 476, 50 Am. St. Rep. 832. 
 
 19 Lappin V. Insurance Co., 58 Barb. (N. Y.) 325; Hine v. Woolworth, 93 
 N Y. 75, 45 Am. Rep. 176; Sherwood v. Insurance Co.. 73 N. Y. 447, 29 Am. 
 Rep 180- Virginia Fire & Marine Ins. Co. v. Thomas, 90 Va. 658, 19 S. B. 454. 
 
 80 Lappin V. Insurance Co., 58 Barb. (N. Y.) 325; Hine v. Woolworth, 93 
 N. Y. 75, 45 Am. Rep. 176; Sherwood v. Insurance Co., 73 N. Y. 447, 29 Am. 
 
 RcD 180 
 
 81 Georgia Home Ins. Co. t. Bartlett, 91 Va. 305, 21 S. B. 476, 50 Am. St 
 Rep. 832. So where a receiver is appointed in bankruptcy proceedings 
 Fuller T. Infiurance Co., 184 Mass. 12, 67 N. K. 879. 
 
 § 161) CHANGE OP INTEREST. TITLE, OR POSSESSION. 451 
 
 a change " of receivers, when the policy was procured by a former 
 receiver. 
 
 So other clauses of the policy, especially the description of the risk, 
 may, when read in connection with the condition against alienation, ex- 
 clude from its operation a case apparently falling within its terms. 
 Thus when insurance is granted upon a fluctuating stock of goods, it 
 is plain that the parties contemplate buying and selling of the property 
 insured, and the consequent changes of interest." Likewise insur- 
 ance taken "for the account of whom it may concern" was held by 
 the Supreme Court of the United States " not to be avoided by a sub- 
 sequent change of interest in the insured despite the presence of the 
 standard alienation clause. The written terms quoted cleariy showed 
 an intention that the subject of insurance should be afterwards trans- 
 ferred, and, being in writing, prevailed over the repugnant printed 
 alienation clause. 
 
 Incumbrances, 
 
 Much conflict exists among the decided cases as to whether the 
 giving of a mortgage amounts to a change of interest. It clearly does 
 not amount to a change of title or possession under the older forms," 
 but some of the cases have held that it does amount to a change of 
 interest, and therefore avoids the standard policy unless consented to 
 by the insurer." By the clear weight of authority, however, it is held 
 that the giving of a deed of trust or mortgage does not make such a 
 substantial change in the interest of the insured as to constitute a 
 breach of the alienation clause.*^ In a recent Wisconsin case it was even 
 held that the condition was not violated by an absolute conveyance 
 made by the insured, when he received from the grantee a separate 
 
 82 Thompson v. Insurance Co.. 136 U. S. 287, 10 Sup. Ct 1019. 34 L. Ed. 
 408. 
 
 8» Wolfe V. Insurance Co., 89 N. Y. 49; LANE v. INSURANCE CO . 12 
 Me. 44, 28 Am. Dec. 150. 
 
 8* Hagan v. Insurance Co., 186 U. S. 423, 22 Sup. Ct. 862, 46 L. Ed. 1229 
 86 Aurora Fire Ins. Co. v. Eddy, 55 111. 213; Hoose v. Insurance Co.. 84 
 
 Mich. 309. 47 N. W. 587, 11 L. R. A. 340; Morotock Ins. Co. v. Rodefer. 92 
 
 Va. 747, 24 S. B. 393, 53 Am. St Rep. 846. 
 8« East Texas Fire Ins. Co. y. Clarke, 79 Tex. 23, 16 S. W. 166, 11 L R A 
 
 293; Fireman's Fund Ins. Co. v. Barker, 6 Colo. App. 535, 41 Pac. 513- Olnev 
 
 V. Insurance Co., 88 Mich. 94, 50 N. W. 100. 13 L. R. A. 684. 26 Am. St Rep. 
 
 ^81. 
 
 •T Wolf T. Insurance Co., 115 Wis. 402, 91 N. W. 1014. See. also to the 
 same effect Sun Fire Office v. Clark, 53 Ohio St 414, 42 N. E. 248 38 I* R 
 A. 562; LAMPASAS HOTEL & PARK CO. v. PHCENIX INS. CO. (Tex Civ' 
 App.) 38 S. W. 361; Same v. Home Ins. Co., 17 Tex. Civ. App. 615 43 S W 
 1081; Peck v. Insurance Co., 16 Utah, 121, 51 Pac 255, 67 Am. St Ren 600- 
 ^tua Ins. Co. v. Jacobson, 105 IlL App. 283. 
 
452 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 12 
 
 / 
 
 O 
 
 written agreement to reconvey upon repayment of the debt, and only 
 the deed of conveyance was recorded.®' 
 
 Although it can scarcely be denied that the giving of a mortgage 
 or deed of trust, even in those states where such an incumbrance is 
 regarded merely as a lien, and not as an interest in the land, docs 
 work a substantial change in the equitable interest of the insured, yet 
 it would seem that in view of all the circumstances usually surrounding 
 such cases, and from a reading of all the conditions of the standard 
 policy, these latter cases are probably correct. The policy nowhere 
 expressly stipulates that mortgages on realty shall be disclosed, al- 
 though such a requirement is made with reference to chattel mort- 
 gages, and to the commencement of proceedings to foreclose a mort- 
 gage on realty. Further, a later provision in the policy expressly 
 recognizes the rights of the mortgagee in the property insured. These 
 ^ considerations would seem to indicate that the underwriters do not 
 expect notice of incumbrances upon realty. 
 
 Executory Contracts of Sale. 
 
 On principle it would seem that when a binding contract has been 
 mdde for the sale of insured real estate, so that any loss on account of 
 destruction of the premises by fire would fall upon the vendee, such 
 .sale should be regarded as a substantial change of interest, avoiding a 
 policy containing the alienation clause; and many of the cases so 
 hold, especially when the purchase money has been paid and the ven- 
 dee has gone into possession.** But it seems that the weight of au- 
 thority holds that, so long as there is no change of possession, a 
 mere executory sale, without conveyance of title, does not amount to 
 such a change of interest as defeats the insurance.*® Invalid con- 
 veyances which do not transfer title, as when possession of an unde- 
 livered deed has been fraudulently obtained, are held not to constitute 
 a change of interest** 
 
 •8 Wolf T. Insurance Co., 115 Wi8. 402, 91 N. W. 1014. So a conveyance 
 absolute in form, bnt intended as security for a contingent liability that 
 never became fixed, was held not to be a change of interest such as to de- 
 feat insurance under this condition. Henton v. Insurance Co. (Neb.) 95 N. W. 
 670. 
 
 8» Cotttingham v. Insurance Co., 90 Ky. 439, 14 S. W. 417, 9 L. R. A. 627; 
 Skinner & Sons* Ship-Building & Dry-Dock Co. v. Houghton, 92 Md. 68, 48 
 Atl. 85, 84 Am. St Rep. 485; GIBB v. INSURANCE CO., 59 Minn. 267, 61 
 N. W. 137, 50 Am. St Rep. 405; GermomI v. Insurance Co., 2 Hun, 540. 
 
 »o ERB V. INSURANCE CO., 98 Iowa, 606, 67 N. W. 583, 40 L. B. A. 845; 
 Home Mut Ins. Co. v. Tomkies & Co., 30 Tex. Civ. App. 404, 71 S. W. 812; 
 Tiemann v. Insurance Co, 76 App Div. 5, 78 N. Y. Supp. 620; Boston & S. Ice 
 Co. v. Royal Ins. Co., 12 Allen (Mass.) 381, 90 Am. Dec. 151; Trumbull v. 
 Insurance Co., 12 Ohio, 305. 
 
 •1 Hartford Fire Ins. Co. v. Warbritton, 66 Kan. 93, 71 Pac. 278; nor is 
 policy avoided by a deed which is invalid because of grantor's mental in- 
 
 §161) 
 
 CHANGE or INTEREST, TITLE, OR POSSESSION. 
 
 453 
 
 Transfers between Partners. 
 
 Much conflict is also found as to the effect of a transfer of interest 
 between partners who are jointly insured. The general result 
 of the decisions may, however, be stated to be this: When the' 
 transfer of interest is between the partners themselves, under such 
 circumstances as not to increase the moral hazard by lessening the 
 amount of possible loss to the insured, or by introducing a new per- 
 sonality into the contract, there is no violation of the alienation condi- 
 tion; but such a transferj)y the partners as to decrease the value of 
 the interest, or to bring another person into the partnership, is fatal 
 to the insurance. Thus, where one partner sells out to another and 
 retires from the firm, the insurer can scarcely complain of any in- 
 crease in the risk.** He has already accepted the remaining partner 
 as a proper person to be insured, and the amount of interest still liable 
 to destruction is exactly the same ; therefore such a transfer is held not 
 to avoid the policy. So it has been held that, where one of several 
 partners assigns his interest in the firm to a stranger, no change of 
 interest as to the partnership property results, because the title to the 
 property, and also the beneficial ownership, is still in the firm, the as- 
 signee of the partner taking only a right to an accounting.** But when 
 a new partner is taken into the firm, not only is the interest of the 
 original members thereby diminished, but there is brought into the 
 contract a person whom the insurer did not expect as a party to the 
 contract. Hence it is held that such an enlargement of the member- 
 ship of the firm defeats the insurance under the standard form of 
 poHcy.** 
 
 'i*? 
 
 capacity. Gerling y. Insurance Co., 39 W. Va. 689, 20 S. B. 691. Nor by a 
 deed to a homestead, void because signed by husband alone. German Fire 
 Ins. Co. of Freeport v. York, 48 Kan. 488, 29 Pac. 586, 30 Am. St. Rep. 313. 
 
 »2 WOOD V. INSURANCE CO., 149 N. Y. 382, 44 N. B. 80, 62 Am. St Rep. 
 733; Virginia Fire & Marine Ins. Co. v. Thomas, 90 Va. 658, 19 S. ^ 454; 
 Vhrginia Fire & Marine Ins. Co. v. Vaughan, 88 Va. 835, 14 S. B. 754; Loeb 
 V. Insurance Co., 88 Misc. Rep. 107, 77 N. Y. Supp. 106; Burnett v. Insurance 
 Co., 46 Ala. 11, 7 Am. Rep. 581; Wilson v. Insurance Co., 16 Barb. (N. Y.) 511; 
 Roby V. Insurance Co., 11 N. Y. St. Rep. 93; Texas Banking & Ins. Co. v. 
 Cohen, 47 Tex. 406, 26 Am. Rep. 298. But, contra, see Shuggart v. Insurance 
 Co., 55 Cal. 408; Hartford Fire Ins. Co. v. Ross, 23 Ind. 179, 85 Am. Dec. 452; 
 HATHAWAY v. INSURANCE CO., 64 Iowa, 229, 20 N. W. 164, 52 Am. Rep. 
 438 ; WALTON v. INSURANCE CO., 116 N. Y. 326, 22 N. E. 443, 5 L. R. A. 677. 
 Richards, Ins. Cas. 462. For an interesting case discussing this question, see 
 Royal Ins. Co. v. Martin, 192 U. S. 149, 24 Sup. Ct. 247, 48 L. Ed. 385, recently 
 decided on appeal from the Supreme Court of Porto Rico. 
 
 »3 WOOD V. INSURANCE CO., 149 N. Y. 382, 44 N. E. 80, 52 Am. St Rep. 
 733; Hanover Fire Ins. Co. v. Lewis. 28 Fla. 209, 10 South. 297. Also, see 
 Virginia Fire & Marine Ins. Co. v. Thomas, 90 Va. 658, 19 S. E. 454. 
 ■ »* Malley r. Insurance Co., 51 Conn. 222 ; Drennen v. Assurance Corp. (C. C.) 
 20 Fed. 657, reversed on other grounds in 113 U. S. 51, 5 Sup. Ot 341, 28 L. 
 Bd. 919. 
 
454 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch.l2 
 
 Legal Process or Judgment 
 
 A change of interest, title, or possession "by legal process or judg- 
 ment" does not take place upon the mere institution of legal proceed- 
 ings to subject the property insured to the satisfaction of some legal 
 claim. Even levy of execution upon the property is not sufficient 
 unless the officer takes actual possession.®* The interest is not re- 
 garded as changed, when personalty is the subject of insurance, until 
 there has been an actual sale and the passage of title to the purchaser.*' 
 Even the sale under judicial decree of realty does not constitute a 
 change of interest, so long as the insured remains in possession and 
 retains a right of redemption.®^ The mere rendering of a judgment, 
 even when by statute it constitutes a lien upon realty, does not amount 
 to a change of interest, which would result only upon judicial sale, 
 properly confirmed, and the vesting of the perfected title in the pur- 
 chaser.** 
 
 
 FRAUD AND FALSE SWEARIlf O. 
 
 162. The condition against frand or false swearing extends the mle 
 applicable to statements made in procuring the contract to all 
 matters concerning the insurance, whether before or after loss. 
 False statements n&ade by the insured do not under this condi- 
 tion avoid the policy, unless they are knowingly false and 
 fraudulent. Honest mistakes, however negligent, do not violate 
 the condition. 
 
 As we have seen in a preceding chapter, any false or fraudulent 
 conduct on the part of the insured, inducing the insurer to make a 
 contract which otherwise he would decline, is sufficient to avoid the 
 insurance, without stipulation to that effect. The clause of the stand- 
 ard policy making the entire contract void "in case of any fraud or false 
 swearing by the insured touching any matter relating to this insurance 
 
 •• WALRADT V. INSURANCE CO., 136 N. Y. 375, 32 N. B. 1063, 32 Am. 
 St. Rep. 752; Phoenix Ins. Co. v. Lawrence, 4 Mete. (Ky.) 9, 81 Am. Dec. 521; 
 McClelland v. Insurance Co., 107 La. 124, 31 South. 691; WOOD v. INSUR- 
 ANCE CO., 149 N. Y. 382, 44 N. E. 80, 52 Am. St Rep. 733; Greenlee v. In- 
 surance Co., 102 Iowa, 427, 71 N. W. 534, 63 Am. St. Rep. 455. 
 
 »« Rice V. Tower, 1 Gray (Mass.) 426; Walradt v. Insurance Co., 136 N. Y. 
 375, 32 N. Eu 1063, 32 Am. St. Rep. 752, affirming 64 Hun, 129, 19 N. Y. 
 Supp. 293. 
 
 »7 Lodge V. Insurance Co., 91 Iowa, 103, 58 N. W. 1089; WOOD v. IN- 
 SURANCE CO., 78 Hun, 109, 29 N. Y. Supp. 250, affirmed 149 N. Y. 582, 44 
 N. E. 80, 52 Am. St. Rep. 733; Hammel v. Insurance Co., 64 Wis. 72, 11 N. 
 W. 349, 41 Am. Rep. 1. 
 
 •8 But a voluntary conveyance by a debtor to his son in order to prevent 
 lien of anticipated judgment constitutes a change of interest Rosenstein v. 
 Insurance Co., 79 App. Div. 481, 79 N. Y. Supp. 736; Tefft T. Insurance Co., 
 19 B. L 185, 32 AU. 814, 61 Am. St Rep. 761. 
 
 §162) 
 
 FRAUD AND FALSE SWEARINC 
 
 455 
 
 or the subject thereof, whether before or after a loss," extends this 
 rule to all statements that may be made by the insured with reference 
 to the insurance, either before the loss or after it.** This condition 
 is reasonable and valid, and is intended to afford the insurer a remedy 
 against false and fraudulent claims that may be made with reference 
 to the value of property lost or damaged, and is especially aimed at 
 falsehood and fraud in the statements required to be made in connec- 
 tion with notice and proof of loss. In order to enable the insurer 
 to secure evidence of any fraud or false swearing that may .have taken 
 place in connection with insurance, the following term is inserted in 
 the standard form: "The insured, as often as required, shall exhibit 
 to any person designated by this company all that remains of any prop- 
 erty herein described, and submit to examinations under oath by any 
 person named by this company, and subscribe the same; and, as often 
 as required, shall produce for examination all books of account, bills, 
 invoices, and other vouchers, or certified copies thereof if originals 
 be lost, at such reasonable place as may be designated by this com- 
 pany or its representative, and shall permit extracts and copies there- 
 of to be made." This requirement is held to be valid, but will be en- 
 forced by the courts only when it is reasonably possible for the in- 
 sured to comply with its requirements.^** 
 
 Fraudulent Overvaluation. 
 
 Overvaluation of property by the insured may take place either at 
 the time of making the contract or at the time of submitting proofs 
 of loss. In either event, under the conditions of the standard policy, 
 such overvaluation, if fraudulent, entirely avoids the insurance.^*^ 
 But the mere fact of overvaluation, even though it be great, is not 
 alone sufficient proof of fraud. It must be alleged and clearly proved 
 by the insurer that the insured, in overvaluing his property, did so 
 knowingly and with fraudulent intent. ^''* Overvaluation may be 
 due to a perfectly honest, though mistaken, estimate as to the real 
 value of the property insured. It is a characteristic common to all 
 men to value their property more highly than that of others, and this 
 natural tendency in all men may be strengthened in some cases .by rea- 
 son of inexperience in business matters, or by association, giving to 
 the property a "pretium affectionis," or even by a careless disposition. 
 
 •• Moore t. Insurance CJo., 28 Grat (Va.) 508, 26 Am. Rep. 373. 
 
 100 Liverpool & London & Globe Ins. Co. v. Kearney, 180 U. S. 132, 21 Sup. 
 Ct. 326, 45 L. Ed. 460; Sneed v. Assurance Co., 73 Miss. 279, 18 South. 928. 
 
 101 Baker v. Insurance Co., 31 Or. 41, 48 Pac. 699, 65 Am. St Rep. 807; 
 Moore v. Insurance Co., 28 Grat. (Va.) SOS, 26 Am. Rep. 373; Phoenix Ins. 
 Co. V. Plckel, 119 Ind. 155, 21 N. E. 546, 12 Am. St Rep. 393; TITUS ▼. IN- 
 SURANCE CO., 81 N. Y. 410. 
 
 is2Erman v. Insurance Co., 35 La. Ann. 1095; Daul v. Insurance Coi, 35 
 La. Ann. 08; HUton y. Assurance Co^ 92 Me. 272, 42 AU. 412. 
 
 \l i 
 
456 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 12 
 
 §163) 
 
 1 1 
 
 In no case will an honest overvaluation be sufficient to avoid the pol- 
 icy.108 /pjjg question whether the overvaluation was honest or fraud- 
 ulent is for the jury as a general rule,^^* although there may be in 
 some cases such a disproportion between the real and stated values as 
 to justify the court in declaring the existence of fraud."' 
 
 In Behrens v. Insurance Co.,"« it was held that a valuation of 
 property, subsequently determined to be worth $1,240, at $2,000, was 
 not under the circumstances fraudulent; but in a leading English 
 case "^ Cockburn, C. J., declared that the valuation of property, worth 
 not more than i30, at £418, was fraudulent as a matter of law. In 
 Wisconsin "« it was held that valuing property worth $2,000 at $5,000 
 was not conclusively fraudulent, while in another English case "» a 
 valuation of property at twice its actual value was held to be conclu- 
 sive proof of fraud. In order that overvaluation shall be regarded as 
 fraudulent within the terms of this condition, it is generally held that 
 it must be material, and such as to be injurious to the insurer. In ac- 
 cordance with this principle, even a gross overvaluation of property will 
 not avoid the policy, where the actual value is greater than the amount 
 of insurance.^^* 
 
 False Swearing and False Statement in Regard to the Loss. 
 
 In order that a false statement of value at the time of making the 
 contract shall avoid the insurance, such statement must have been 
 made with the fraudulent intent to injure the insurer."^ But no such 
 specific intent is necessary in order that a consciously false statement in 
 connection with the proof of loss shall avoid the insurance. In accord- 
 ance with the stipulation of the policy, the insurer is entitled to the 
 exact truth with reference to the subjects of his interrogation, and any 
 statement known by the insured to be false would absolutely defeat 
 his claim to indemnity, even though he may have intended by the false 
 statement not to injure the insurer in any wise, but to further some 
 ulterior purpose of his own.^^* 
 
 10* First Nat Bank ▼. Hartford Fire Ins. Oo., 95 U. S. 673, 24 L. Bd. 663; 
 Miller v. Insurance Co. (0. C.) 7 Fed. 649. 
 
 10* Levle V. Insurance Co., 163 Mass. 117, 39 N. B. 792; Helbing v. Insur- 
 ance Co., 54 Cal. 156, 35 Am. Rep. 72. 
 
 108 Levy v. Baillie, 7 Bing. 349; Chapman v. Pole, 22 L. T. (N. S.) 806, 
 Richards, Ins. Cas. 475. 
 
 106 64 Iowa, 19, 19 N. W. 838. Richards, Ins. Cas. 479. 
 
 107 Chapman v. Pole, 22 L. T. (N. S.) 306, Richards, Ins. Cas. 475, 
 
 108 Dogge V. Insurance Co., 49 Wis. 501, 5 N. W. 889. 
 io» Levy v. Baillie, 7 Bing. 349. 
 
 110 Dogge V. Insurance Co., 49 Wis. 501, 5 N. W. 880; Wolf ▼. Insurance 
 Co., 43 Barb. (N. Y.) 400. 
 
 111 Huston V. Insurance Co., 100 Iowa, 402, 69 N. W. 674; Home Ins. Co. 
 of New York v. Mendenhall, 164 111. 458. 45 N. B. 1078, 36 L. R. A 374; 
 Atherton v. Assurance Co., 91 Me. 289, 39 Atl. 1006. 
 
 »" Claflln T. Insurance Co., 110 U. S. 96, 3 Sup. Ot 5OT, 28 L. Bd. 76. See, 
 
 OTHER INSURANCE. 
 
 OTHER INSURANCE. 
 
 457 
 
 163. The purpose of tlie condition against other insnranoe is to pre- 
 vent overinsorance. Hence the double insurance must cover 
 the same interest, and not different interests that may exist 
 in the same property, such as those of mortgagor and mort- 
 gagee. By the better authority the procuring of any other in- 
 surance on the same interest ivithout the consent of the com- 
 pany, even though void on its face, constitutes a breach of the 
 condition as found in the standard policy. 
 
 "This entire policy, unless otherwise provided by agreement indorsed 
 hereon or added hereto, shall be void if the insured now has or shall 
 hereafter make or procure any other contract of insurance, whether 
 valid or not, on property covered in whole or in part by this policy." 
 
 This condition is also intended to give the insurer control of the 
 moral hazard involved in the risk assumed. In the absence of any 
 condition of this kind, the insured can procure as many policies of in- 
 surance as the insurers are willing to issue. In no case, however, 
 could the recovery by the insured in case of loss exceed the actual 
 value of the property destroyed. But the well-known liberality of ju- 
 ries in fixing the value of property which can no more be seen imposes 
 a great temptation upon dishonest persons, whose property is insured 
 up to its full value or above it, to bring about its destruction ; and the 
 same conditions undoubtedly tend to lessen the care that may be ex- 
 ercised by the honest in preventing fire. In view of these facts, as 
 amply demonstrated by experience as they are apparent to reason, the 
 underwriters take every precaution to avoid overinsurance. In pur- 
 suance of this policy, the condition above quoted has been inserted in 
 the standard form. It is dearly worded and certain in meaning, as 
 well as being just and proper in its purpose. It should therefore be 
 given full force and effect by the courts in accordance with its terms.*** 
 
 also, Northwestern Mut Life Ins. Co. T. Montgomery, 116 Ga. 799, 43 8. E. 
 79; Virginia Fire & Marine Ins. Co. v. Vaughan, 88 Va. 832, 14 S. E. 754. 
 In this last case certain invoices were falsified by the insured. The undis- 
 puted proofs showed a loss far in excess of the insurance, so that the falsi- 
 fication could not possibly have injured the insurer or profited the insured. 
 "However that may be," said the court, **the undisputed facts are that he 
 swore to a loss in excess of the actual loss, and furnished false vouchers, for 
 which no explanation lias been offered. We must therefore infer that hia 
 sworn statements were known to him to be false, and, being upon a mate- 
 rial matter, the law presumes that they were made with intent to deceive.** 
 In a second appeal of the same case, this holding was reaffirmed. See 46 
 S. E. 692. 
 
 118 But the courts will avoid a forfeiture when It Is possible to do so. 
 Thus, in Stage v. Insurance Co., 76 App. Div. 509, 78 N. Y. Supp. 555, it was 
 held that taking out a new policy in the place of an old one, that might have 
 
458 
 
 THB STANDARD FIRE POLICY. 
 
 (Ch.l2 
 
 And such has been the construction of the condition *** in all save a 
 few jurisdictions, where there is a tendency to narrow its scope and 
 defeat the plain intent of the condition by holding that subsequent in- 
 surance, which by its terms is absolutely void, does not constitute a 
 breach of this condition.^ ^' 
 
 The Double Insurance must he upon the Same Interest, 
 
 The pu-pose of this condition, as stated above, makes it applicable 
 only when the double insurance covers the same interest and the same 
 risk at the same time, even though several insurances may be obtained 
 upon the same property. The spirit of the condition is not violated 
 if each separate insurance inures to the benefit of the holder of a dis- 
 tinct interest. Thus the interests of the mortgagor and the mortgagee 
 are entirely separate. Insurance taken out independently by either will 
 not inure to the benefit of the other. Hence both mortgagor and mort- 
 gagee may insure the same property without violating the condition 
 against double insurance in the policy.*^' The same thing is true of 
 the Hfe tenant and the remainderman,^ ^^ landlord and tenant,^^* bailor 
 and bailee, and other such persons holding separate interests in the 
 same property. 
 
 But even when a policy which is issued to a person having a separate 
 and distinct interest in the property is of such a form as to inure to the 
 benefit of the owner of a different interest in that same property, in- 
 surance obtained upon this second interest will be double insurance. 
 Thus where a carrier or warehouseman insures goods in his possession 
 
 been renewed, was not procuring "other insurance." In Temple v. Assur- 
 ance Co., 35 N. B. 171, it was held that the condition against other insurance 
 was not broken by an application for other insurance if it was not Issued, 
 and no agreement had been reached between the insured and the other com- 
 pany at the time of the fire. 
 
 11* Arnold V. Insurance Co., 106 Tenn. 529, 61 S. W. 1032; Sugg v. Insur- 
 ance Co., 98 N. C. 143, 3 S. E. 732; Orient Ins. Co. v. Prather, 25 Tex. Civ. 
 App. 446, 62 S. W. 89. 
 
 115 Phenix Ins. Co. v. Lamar, 106 Ind. 513, 55 Am. Rep. 764. In Gee v. 
 Insurance Co., 55 N. H. 65, 20 Am. Rep. 171, it was stated, obiter, that the 
 condition avoiding a policy in case of other invalid insurance was void as 
 repugnant to the purpose of the contract. In Stevens v. Insurance Co., 69 
 Iowa, 658, 29 N. W. 769, the second insurance was held valid, since the for- 
 mer policy had been avoided by a removal of the insured property before 
 the issue of the policy in suit. In Zinck v. Insurance Co., 60 Iowa, 266, 14 
 N. W. 792, it was held that the belief of the insured that no other valid in- 
 surance existed on his property was immaterial in a suit on the second pol- 
 icy, and that the first policy defeated the second. 
 
 lie Home Ins. Co. v. Koob, 68 S. W. 453, 24 Ky. Law Rep. 223, 58 L. R. A. 
 58; Hartford Fire Ins. Co. v. Williams, 11 O. C. A. 503, 63 Fed. 925; Cronin 
 V. Association, 123 Mich. 277, 82 N. W. 45; Breeyear v. Insurance Co., 71 
 X. H. 445, 52 Atl. 860. 
 
 117 Franklin Marine & Fire Ins. Co. v. Drake, 2 B. Mon. (Ky.) 47. 
 
 iisClemson v. Trammel!, 34 UL App. 414. 
 
 -. 
 
 §163) 
 
 OTHER INSURANCE. 
 
 459 
 
 to the full extent of their value to protect his own interest and that of 
 the owner, subsequent insurance taken out by the owner upon the same 
 property will be "other insurance" within the meaning of tiiis clause.*** 
 The criterion in every case is whether the owner of a single interest 
 may look to more than one policy for indemnity.**® 
 
 Double insurance procured without the knowledge or consent of the 
 policy holder will not constitute a breach of this condition,*** but any 
 subsequent act of the insured ratifying the unauthorized procurement 
 of the second policy will operate to defeat the former.*** 
 
 On principle it would seem clear that, if a second insurance was pro- 
 cured upon any part of the property covered by the first policy, the con- 
 dition would be broken, and such is the holding of the better authori- 
 ties,*** although there are cases which take the view that other insur- 
 ance does not exist unless both policies cover identically the same 
 sub j ect-matter. * ** 
 
 Construction of Older Forms of the Condition, 
 
 It will be observed that the condition against double insurance quoted 
 above contains the clause "whether valid or not." This clause was not 
 a part of the early conditions against double insurance, and was in- 
 serted in the standard policy for the purpose of avoiding the difficulty 
 that had been experienced in the construction of those forms, which 
 merely prohibited other insurance. Under such forms the courts held 
 that the procuring of invalid insurance did not avoid existing policies 
 containing a condition against other insurance, "other insurance" being 
 
 ii» Home Ins. Co. v. Baltimore Warehouse Co., 93 U. S. 527, 23 L. Ed. 868. 
 
 i«o Home Ins. Co. v. Baltimore Warehouse Co., 93 U. S. 527, 23 L. Ed. 868; 
 Copeland v. Insurance Co., 96 Ala. 615, 11 South. 746, 38 Am. St. Rep. 134; 
 Westchester Fire Ins. Co. v. Foster, 90 111. 121. 
 
 121 Breeyear v. Insurance Co., 71 N. H. 445, 52 Atl. 860; Home Ins. Co. 
 V. Koob, 68 S. W. 453, 24 Ky. Law Rep. 223, 58 L. R. A. 58; Westchester 
 Fire Ins. Co. v. Foster, 90 111. 121; Cowart v. Insurance Co., 114 Ala. 356, 
 22 South. 574; Hughes v. Insurance Co., 40 Neb. 626, 59 N. W. 112; McKel- 
 vy V. Insurance Co., 161 Pa. 279, 28 Atl. 1115. But in Arnold v. Insurance 
 Co., 106 Tenn. .529, 61 S. W. 1032, it was held that the procurement of insur- 
 ance by the owner of goods after his friend, at his request, had secured in- 
 surance for him, constituted double insurance, although he did not know 
 that his friend had succeeded in obtaining the insurance. 
 
 122 German Ins. Co. v. Emporia Mut. Loan & Savings Ass'n, 9 Kan. App. 
 803, 59 Pac. 1092; Arnold v. Insurance Co., 106 Tenn. 529, 61 S. W. 1032. 
 
 128 Diver V. Insurance Co., 9 N. T. St Rep. 482; OGDEN v. INSURANCE 
 CO., 50 N. Y. 388, 10 Am. Rep. 492; Havens v. Insurance Co., Ill Ind. 90, 
 12 N. E. 137, 60 Am. Rep. 689; Liscom v. Insurance Co., 9 Mete. (Mass.) 205; 
 Phoenix Ins. Co. v. Michigan Southern & Northern I. R. Co., 28 Ohio St 69. 
 
 124 Howard Ins. Co. v. Hocking, 115 Pa. 415, 8 Atl. 592; Sloat v. Insur- 
 ance Co., 49 Pa. 14, 88 Am. Dec. 477; Meigs v. Insurance Co., 205 Pa. 378, 
 54 Atl. 1053. But see Meigs v. Assurance Co. (0. 0.) 126 Fed. 781. applying 
 the general rule to exactly the same facts. 
 
460 
 
 THB STANDARD B^IRB POLICY. 
 
 (Ch. 12 
 
 construed to be other valid insurance.**' When both policies in ques- 
 tion contained the prohibition against other insurance, the courts were 
 hopelessly at variance as to the effect to be given to these conditions. 
 In some states it was held that the first policy was rendered void by the 
 issue of the second,**' which, therefore, was to be held valid, since upon 
 its issue there was no other valid insurance. In other states it was held 
 that the issue of the second policy was inoperative, inasmuch as by its 
 terms it was absolutely void because of the existence of a preceding 
 insurance.**^ This view left the first contract valid and enforceable, 
 because no subsequent valid insurance had been obtained. On principle 
 this would seem to be the sounder view, although the fact that the 
 word "void" in insurance contracts means "voidable" makes the ques- 
 tion one of much difficulty.*** 
 
 OPERATION OF FACTORIES. 
 
 164. A mannfaetiuins establislmient does not cease to be operated, 
 within the meaning of the condition, nnless operation totally 
 ceases of definite purpose, and not merely incidentally, in the 
 course of ordinary uiannf actnre* 
 
 "♦ * ♦ If the subject of insurance be a manufacturing establish- 
 ment and it be operated in whole or in part at night later than ten 
 o'clock, or if it cease to be operated for more than ten consecutive days." 
 
 1*8 Phoenix Ins. Co. y. Copeland, 86 Ala. 551, 6 South. 143, 4 L. R. A. 848; 
 Germania Fire Ins. Co. v. Klewer, 129 111. 599, 22 N. E. 489; Reed T. Insur- 
 ance Co., 17 R. I. 785, 24 Atl. 833, 18 L. R. A. 496. 
 
 i2« In Funke v. Insurance Ass'n, 29 Minn. 347, 13 N. W. 164, 43 Am. Rep. 
 216, it was held that other insurance, though void by its terms, defeated the 
 first insurance. But in Pitney v. Insurance Co., 65 N. Y. 6, it was held that 
 taking out a new policy in the place of renewing an old one was not "other 
 insurance/* within the meaning of the term. Also, see Brown v. Insurance 
 Co., 18 N. Y. 391; Emery v. Insurance Co., 51 Mich. 469, 16 N. W. 816, 47 
 Am. Rep. 590. 
 
 i«7 Sutherland v. Insurance Co., 31 Grat. (Va.) 17(5; Reed v. Insurance Co., 
 17 R. I. 785, 24 Atl. 833, 18 L. R. A. 496; Thomas v. Insurance Co., 119 Mass. 
 121, 20 Am. Rep. 317; Knight v. Insurance Co., 26 Ohio St 664, 20 Am. Rep. 
 778; Hardy v. Insurance Co., 4 Allen (Mass.) 217; Lindley v. Insurance Co., 
 65 Me. 368, 20 Am. Rep. 701; Jersey City Ins. Co. v. Nichol, 35 N. J. Eq. 291, 
 40 Am. Rep. 625; Clark y. Insurance Co., 6 Cush. (Mass.) 342, 53 Am. Dec. 
 44. 
 
 128 In Behrens ▼. Insurance Co., 64 Iowa, 19, 19 N. W. 838, it was held 
 that subsequent insurance did not invalidate a prior policy if that subsequent 
 insurance was known and treated by the parties as void, but that it would 
 be otherwise if the parties, with knowledge of the facts, should regard such 
 insurance as binding. Germania Fire Ins. Co. v. Klewer, 129 111. 599, 22 N. 
 E. 489. It is held in this case that at the expiration of the first poliey the 
 second policy is reyived. 
 
 OPERATION OF FACTORIES. 
 
 461 
 
 §164) 
 
 By this condition the insurer seeks to protect himself against the in- 
 crease of hazard due to the unusual operation of a manufacturing es- 
 tablishment during the later hours of the night, or to the desertion of 
 such establishment when it is shut down for any considerable period. 
 The breach of this condition avoids the policy, irrespective of the ques- 
 tion whether an increase of risk resulted from such breach or not."* 
 The only difficulty arising in the construction of the condition is found 
 in determining when the factory ceases to be operated within the mean- 
 ing of the language used. In deciding whether there has been a cessa- 
 tion of operation in any case, the courts will keep in mind the character 
 of the establishment and the customary method of its operation. Any 
 temporary suspension which may be ordinarily incident to the opera- 
 tion ol the establishment will not constitute a breach of this condition, 
 as where, for instance, a low stage of water causes a sawmill to cease 
 operation for several weeks, during wh*. time high water was daily 
 expected.^*® In order to avoid a policy under this condition, the cessa- 
 tion must be due to a shutting down of the works with the intention 
 to allow them to remain idle for some considerable period, as where a 
 sawmill is deserted during the winter months, operations beginning 
 again only with the opening of spring.^'^ 
 
 In order that a factory shall be in operation within the meaning of 
 this clause, it is not necessary that all of its departments shall be oper- 
 ated. It is sufficient if any portion of the ordinary work of manufac- 
 turing is being carried on.^** 
 
 i2» Dove- Glassworks Co. y. Insurance Co., 1 Mary. (Del.) 32, 29 Atl. 1039. 
 65 Am. St. Rep. 264. Permission that the establishment shall cease to be 
 operated for a specified period merely suspends the condition during that 
 period. Upon its expiration the condition reattaches, and the policy is avoid- 
 ed by continued cessation of operation. El Paso Reduction Co. v. Insurance 
 Co. (O. C.) 121 Fed. 937; Reardon y. Insurance Co., 135 Mass. 121; Cronin v. 
 Association, 123 Mich. 277, 82 N. W. 44. 
 
 i»o City Planing & Shingle Mill Co. y. Merchants*, Manufacturers' & Citi- 
 zens' Mut Fire Ins. Co., 72 Mich. 654, 40 N. W. 777, 16 Am. St. Rep. 552. 
 So when the illness of a foreman requires a temporary suspension in the 
 operation of a sawmill. Ladd y. Insurance Co., 147 N. Y. 478, 42 N. E. 197. 
 The suspension of active operations hi a tannery on account of a temporary 
 failure in the supply of material needed does not avoid the insurance upon 
 it. LEBANON MUT. INS. CO. v. LEATHERS (Pa.) 8 Atl. 424, Woodruft. 
 
 Ins. Cas. 172. 
 
 Ill McKenzie v. Insurance Co.. 112 Cal. 548, 44 Pac. 922. And see Cronin 
 
 y. Association, 123 Mich. 277, 82 N. W. 45. 
 
 18J American Fire Ins. Co. y. Brighton Cotton Mfg. Co., 125 111. 131, 17 
 N. E. 771. 
 
 ■11 
 
( 
 
 !l 
 
 !1 
 
 I 
 
 462 
 
 THE STANDARD FIEB POLICY. 
 
 INCREASE OF RISK. 
 
 (Ch.12 
 
 166. An Inorease of risk, witl&ia the terms of tMs condition, is snoh a 
 substantial ohange of conditions affecting the risk as mate- 
 rially to increase it. Mere negligent acts temporarily endan- 
 gering tke property do not violate tke condition. 
 
 "* * * If the hazard be increased by any means within the con- 
 trol or knowledge of the insured." 
 
 There is an implied term in every contract of insurance that the in- 
 sured will do no act to make the risk greater than that which was as- 
 sumed by the insurer. The standard policy contains an express state- 
 ment of this term, and extends it to such acts of others, increasing the 
 risk, as may be within the control or knowledge of the insured. It is 
 clear that this condition is not violated by the act of the insured's ten- 
 ant, or other agent, in increasing the risk, provided that act is not 
 known to the insured."* It would seem, however, that any act of the 
 insured's tenant substantially and permanently affecting the condition 
 of the property, so as to constitute an increase of risk, would be pre- 
 sumptively known to the insured."* Likewise any acts done on prop- 
 erty adjacent to that insured, although increasing the risk, would not 
 violate this condition unless actually known to the insured.^'* 
 
 M'^hat Constitutes an Increase of Risk, 
 
 One of the principal purposes of the insurance contract is to protect 
 the insured against the consequence of his own negligence and that of 
 his servants."* Hence the insurer will not be permitted to defeat this 
 
 i«« McGammon v. Insurance Co., 171 Mo. 143, 17 S. W. 160, 94 Am. St. Rep. 
 778; Springfield Fire & Marine Ins. Co. v. Wade, 95 Tex. 598, 68 S. W. 977, 
 58 L. R. A. 714, 93 Am. St Rep. 870. But see Thuringia Ins. Co. v. Norwaysz, 
 1(H III. App. 390; Badger v. Platts, 68 N. H. 222, 44 Atl. 296, 73 Am. St. Rep. 
 572; KELLY v. INSURANCE CO., 97 Mass. 284. In Liverpool & London & 
 Globe Ins. Co. v. Gunther, 116 U. S. 113, 6 Sup. Ct. 306, 29 L. Ed. 575, it was 
 held that if any of the conditions of the policy were violated by the presence 
 or use of gasoline, naphtha, or benzine on the insured premises, it was im- 
 material whether or not the insured knew of such violation, and that such 
 acts would be considered as a violation of the condition by the insured him- 
 self. 
 
 184 Liverpool & London & Globe Ins. Co. v. Gunther, 116 U. S. 113, 6 Sup. 
 Ct. 306, 29 L. Ed. 575; Thuringia Ins. Co. v. Norwaysz, 104 111. App. 390. 
 But see Springfield Fire & Marine Ins. Co. v. Wade, 95 Tex. 598, 68 S. W. 
 977, 58 L. R. A. 714, 93 Am. St. Rep. 870. 
 
 "» See German Ins. Co. v. Wright, 6 Kan. App. 611, 49 Pac. 704. 
 
 i»« Des Moines Ice Co. v. Niagara Fire Ins. Co., 99 Iowa, 193, 68 N. W. 
 eOO. In Karow v. Insurance Co., 57 Wis. 56, 15 N. W. 27, 46 Am. Rep. 17, 
 the insured was allowed to recover on his policy, though he burned his own 
 property when insane. Henderson v. Insurance Co., 10 Rob. (La.) 164, 43 
 Am, Dec 176; Cumberland Valley Mut Protection Co. v. Douglas, 58 Pa. 
 
 * 
 
 §165) 
 
 mCEEASB OF RISK. 
 
 463 
 
 proper purpose by claiming such a construction of the condition prohib- 
 iting an increase of risk as to make the contributory negligence of the 
 insured or of his servants a defense to an action on the policy."^ A 
 mere neghgent act, temporarily endangering the property, will not be 
 regarded as increasing the risk within the meaning of this condition, 
 even though the fire may have been caused directly by such negli- 
 gence."« Thus, where an insured carelessly used kerosene in kindling 
 a fire in a stove, and in so doing caused the insured house to catch fire 
 It was held that the insurer was liable on the policy despite the presence 
 of the condition against increase of risk."* The parties must be as- 
 sumed to have intended that the insured building shall be put to such 
 uses as are buildings of the same kind, so that the making of repairs, 
 painting, or doing other acts of similar character, are not to be re- 
 garded as increasing the risk, since the property would be useless to 
 the insured if such acts were prohibited."® 
 
 But any change in the condition of the property insured which tends 
 to increase the risk substantially and permanently, or for a considerable 
 period, is within the condition."^ Thus, keeping in the house a small 
 
 tnwx^n^* ^T^ToSr^ .?^*^^ ""' I^«"™°ce Co.. 5 N. Y. 469, 55 Am. Dec. 360; 
 cTtTj'o^^^^J^^.^^ ^^- ^ ^"^^ ^^^««) 388: Huckins v. Insurance 
 ^ L Ax;^*Sl>^^^^^°^ ^^® ^''^' ^*'- ^- Whiteford, 31 Md. 219, 100 Am. 
 St k^: 4 ^ ""' ASSURANCE CO.. 10 S. D. 82, 71 N. W. 76i, 66 Am. 
 
 137 Des Moines Ice Co. v. Niagara Fire Ins. Co., supra; Henderson v In- 
 
 N. Y. 469, 55 Am. Dec. 360; Huckins v. Insurance Co., 31 N. H. 238- Rogers 
 V. Insurance Co., 35 C. C. A. 396, 95 Fed. 103 ^ • ^. ^, Kogers 
 
 Ren'IS'^^Tl^Ty'''?? -^ ^f • Jf '• ^^- ^- ^^^^^' ^^ «• ^- 274, 24 Ky. Law 
 Rep 958. In Des Momes Ice Co. v. Niagara Fire Ins. Co., supra, it was said 
 
 that anmsurance policy would be of little value if it was permissible to set 
 
 up a defense in every case where negligence could be shown. Pool v Insur- 
 
 SURANPP rn^'l^fn' ^.f; ^- ^2' ^^ ^°^- ^*- ^P- »19' JOHNSON v. IN- 
 C n A raQ «;; t ^"nl^^^"'-^ ^^- ^^ "^^^ova Ins. Co. v. Williams, 11 
 C. O. A. 503, 63 Fed. 925, it was held that the voluntary destruction by the 
 owner would not prevent the mortgagee from recovering on his policy 
 ^^{ ^x?^^^"*® ^''^- ^''' ^- Whiteford, 31 Md. 219, 100 Am. Rep. 45. 
 Ro,! i^^\^^. ""' ASSURANCE CO., 10 S. D. 82, 71 N. W. 761, 66 Am. St. 
 ft« Q w oit°^o^^ Springfield Fire & Marine Ins. Co. v. Wade. 95 Tex, 598, 
 68 S. W. 977, 58 L. R. A. 714, 93 Am. St. Rep. 870. 
 1*0 Mears v. Insurance Co., 92 Pa. 15, 37 Am. Rep. 647; An Sable Lumber 
 
 tmo7;t>?®*^^" ^^^^'' ^^^® ^^^- ^-^ ^ Mich. 407, 50 N. W. 870; O'NIEL v 
 INSURANCE CO., 3 N. Y. 122; Morse v. Insurance Co., 30 Wis. 534, 11 Am 
 Kep. 587; Lutz v. Insurance Co., 205 Pa. 159, 54 Atl 721 
 QQc*\?''^f ^* ^s^^a°ce Co., 124 Mich. 455, 83 N. W. 124, 83 Am. St Rep 
 ^LZ^^f"^?^®^ ""• -Assurance Co., 123 Mich. 291, 82 N. W. 46; Fh-st Con 
 f^^^^*^7»^ Church V. Holyoke Mut. Fire Ins. Co., 158 Mass. 475. 33 N. E- 
 
 Y 97^ ^\^' ^^' ^^ ^™- ^^ ^^P- ^^' Williams V. Insurance Co., 67 N. 
 ^Vmi' ^^^^^^^ V- Insurance Co., 74 Wis. 470, 43 N. W. 487, 5 L R A 779- 
 KYTE V. ASSURANCE 00. 149 Mass. 116. 21 N. E. 361. 3 l! R.* I 5^' 
 
 
464 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 12 
 
 ^A 
 
 quantity of gasoline, needed for removing old paint during the course 
 of making repairs, does not increase the risk,^*^ but keeping such gaso- 
 line permanently in the house, or for sale, or for other purposes, would 
 undoubtedly violate this condition.^*^ So it has been held that, where 
 the insured made a practice of throwing kerosene-soaked clothing in a 
 box kept in the house insured, it was a proper question for the jury 
 whether the risk was increased.^** The use of a naphtha torch in 
 burning off paint from the insured premises, which was continued dur- 
 ing a month, was held to be an increase of the risk.^** The mere fact 
 that additions to or alterations of the insured premises are made with- 
 out the consent of the insurer does not avoid the policy under this con- 
 dition. Whether or not such repairs or additions constitute an increase 
 of risk is, as in all other cases, a question for the jury.^** 
 
 MAKING REPAIBS. 
 
 166* The eondltioii. with regard to the employment of meclianiet ht 
 making repairs is iuam.bigraons, and -will be enforced aocordins 
 to its terms, whether the risk is increased or not. 
 
 **♦ ♦ * If mechanics be employed in building, altering, or repair- 
 ing the within described premises for more than fifteen days at any one 
 time." 
 
 Richards, Ins. Cas. 457; Imperial Fire Ins. Co. t. Coos County, 151 U. S. 
 452, 14 Sup. Ct 379, 38 L. Ed. 231; Liverpool & London & Globe Ing. Co. ▼. 
 Gunther, 116 U. S. 113, 6 Sup. Ct. 306, 29 L. Ed. 575. 
 
 142 Smith V. Insurance Co., 107 Mich. 270, 65 N. W. 236, 30 L. R. A. 368. 
 And see Mears v. Ingurance Co., 92 Pa. 15, 37 Am. Rep. 647; Au Sable Lum- 
 ber Co. V. Detroit Mfrs.* Fire Ins. Co., 89 Mich. 407, 50 N. W. 870; O'NIEL 
 V. INSURANCE CO., 8 N. Y. 122; Williams v. Insurance Co., 54 N. Y. 569, 
 13 Am. Rep. 620; Springfield Fire & Marine Ins. Co. ▼. Wade, 95 Tex. 598 
 68 S. W. 977, 58 L. R. A. 714, 93 Am. St. Rep. 870. 
 
 143 Sperry v. Insurance Co. (C. C.) 26 Fed. 234; Lntz v. Insurance Co., 205 
 Pa. 150, 54 Atl. 721; Steinbach v. Insurance Co., 13 Wall. (U. S.) 183, 20 L. 
 Ed. 615. But see Ackley v. Insurance Co., 25 Mont. 272, 64 Pac. 665, in which 
 a reasonable quantity of the prohibited articles kept by a druggist did not 
 effect a forfeiture, being such things as a druggist usually kept, notwithstand- 
 ing the clause in the policy which prohibited the keeping of them. But in 
 this case the insurers had indorsed on the policy a permit allowing the in- 
 sured to keep such things as were customary for a druggist to keep, and the 
 court, in construing this clause with the conflicting ciause In the policy, 
 reached the above conclusion. 
 
 14* Williams v. Insurance Co., 57 N. Y. 274, Richards, Ins. Oas. 452. 
 
 14 6 First Congregational Church v. Holyoke Mut. Fire Ins. Co., 158 Mass. 
 475, 33 N. E. 572, 19 L. R. A. 587, 35 Am. St Rep. 508. 
 
 i4«MERRIAM V. INSURANCE CO., 21 Pick. (Mass.) 162, 82 Am. Dec 
 252; Pool V. Insurance Co., 91 Wis. 530, 65 N. W. 54, 51 Am. St Rep. 919; 
 Smith V. Insurance Co., 107 Mich. 270, 65 N. W. 236, 30 L. R. A. 368; Wil- 
 liams V. Insurance Co., 67 N. Y. 274; Kircher v. Insurance Co., 74 Wis. 47(^ 
 43 N. W. 487, 6 L. E. A. 779. 
 
 gl66) 
 
 MAKING REPAIRS. 
 
 465 
 
 There appears to be little room for doubt as to the proper construc- 
 tion of this condition, and it seems to have given rise to little litigation. 
 It is supplementary to the preceding condition prohibiting an increase 
 of hazard. If mechanics are employed for the specified time, the con- 
 dition is broken and the policy avoided, unless the insurer has pre- 
 viously consented to such repairs or waived his right to claim the for- 
 feiture. It is immaterial whether the making of the repairs increased 
 the risk or not, or whether it in any wise contributed to the loss.^*^ By 
 the better authority the policy becomes void at the option of the insurer, 
 even though the fire takes place long after the repairs have been com- 
 pleted.^*' Painting or papering the building insured, or any other 
 work done in ornamenting it, constitutes repairs, as well as do changes 
 in its structure ^*' more usually understood as coming within that term. 
 
 . ^ 
 
 147 German Ins. Co. v. Hearne, 117 Fed. 289, 54 a a A. 527, 59 L. R. A. 
 492, Newport Imp. Co. v. Home Ins. Co., 163 N. Y. 237, 57 N. B. 475. 
 
 1*8 Imperial Fh-e Ins. Co. v. Coos County, 151 U. S. 463, 14 Sup. Ct 379, 
 B8 L. Ed. 231; KYTB v. ASSURANCE CO , 149 Mass. 116, 21 N. E. 361, 3 
 L. R A. 508, Richards, Ins. Cas. 457. 
 
 148 German Ins Co. y. Heame, 117 Fed. 289, 54 a G. A. 527, 59 L. B. A. 
 4&2. 
 
 Vanob Ins.— -80 
 
466 
 
 THE STANDARD FIRE POLICT. 
 
 (Ch. 13 
 
 §167) 
 
 PORECLOSURE PROCEEDINGS. 
 
 4G7 
 
 n 
 
 CHAPTER XTTT. 
 
 THE STANDARD FIRE POLICY (CJontlnned)^ 
 
 167. Foreclosure Proceedings. 
 
 168. Assignments. 
 
 169. Generation of Gas. 
 
 170. Explosive and Inflammable Substances. 
 
 171. Vacant or Unoccupied Buildings. 
 
 172. Collapse of Building. 
 173-175. Liability of the Insurer. 
 176-177. Measure of Insurer's Liability, 
 
 178. Appraisal and Arbitration. 
 
 179. Option to Rebuild. 
 
 180. As Affected by Valued Policy Laws. 
 
 181. Documents Made Part of Contract by Referenoa 
 
 182. Authority of Agents — Waivera, 
 
 183. Cancellation of Policy. 
 184^189. Notice and Proofs of Losai 
 
 190. Magistrate's Certificate. 
 
 191. Limitation upon Actions. 
 
 FORECLOSURE PROCEEDINGS. 
 
 167* Tl&e condition avoiding the policy npon foreclosure proceedings 
 is reasonable, and is fairly enforced. By the terms of the con- 
 dition the first legal step institntins the proceedings to fore- 
 close violates the condition. 
 
 *****!£ with the knowledge of the insured, foreclosure pro- 
 ceedings be commenced or notice given of sale of any property covered 
 by this policy by virtue of any mortgage or trust deed." 
 
 This condition, giving the insurer the opportunity to cancel the policy 
 in case any legal proceedings are instituted for the purpose of fore- 
 closing any mortgage or other lien upon the insured property, is in- 
 serted in recognition of the fact that the prospect of early loss of prop- 
 erty by legal process is apt to induce the insured to bring about its 
 more profitable destruction by fire. The condition is reasonable and 
 in full accord with public policy, and as a general rule the courts 
 have given it a construction perfectly fair to the insurer. Its 
 terms clearly indicate that it is the duty of the insured, immedi- 
 ately upon acquiring knowledge in any manner whatever of the com- 
 mencement of foreclosure proceedings, or of notice that the prop- 
 erty will be sold by virtue of the power given in a mortgage or trust 
 deed, to give that information to the insurer, who may then, at his op- 
 tion, cancel the policy, or indorse upon it an agreement for the contin- 
 uance of the insurance in spite of such proceedings. This has been 
 
 the construction given by most of the courts before which the question 
 has come,' but, curiously enough, in a few jurisdictions the courts have 
 looked at the terms of the condition with such distorted vision as to 
 see in it a requirement that notice must be given to the insured before 
 the commencement of the foreclosure proceedings in order that the 
 condition shall be violated. Thus, it has been held in North Carolina 
 that where a sale of the insured property was advertised under a deed 
 of trust without previous notice to the insured, who, however, saw the 
 notice of the sale before the fire, there was no breach of the condition.* 
 It was further held in this case that the knowledge of such impending 
 sale possessed by the local agent of the insurer made it incumbent upon 
 the insurer to cancel the policy and return the unearned premium, and 
 that its failure to do so was meant to be a waiver of the breach, if any 
 existed. This, however, is clearly opposed to both reason and author- 
 ity. In other states it has also been held that the filing of a bill to fore- 
 close a mortgage, without previous notice thereof to the insured, did not 
 avoid the insurance under this condition, although the insured had 
 knowledge of the commencement of the proceedings a short time there- 
 after." 
 
 It will be noted that the condition requires notice to the insurer of the 
 commencement of foreclosure proceedings if known to the insured. It 
 is held by the courts that such proceedings are deemed to "commence" 
 with the first legal step taken to bring about foreclosure, such as the 
 service of the petition to foreclose upon the insured.* So it is generally 
 held that the public advertisement of the sale under a mortgage or deed 
 of trust is such notice as is contemplated by the condition.* 
 
 ifi^ ^5f' especially, Delaware Ins. Co. y. Greer, 120 Fed. 016. 57 0. O. A. 
 ir oo A -^^"^^ ^^^* Quinlan v. Insurance Co., 133 N. Y. 356, 31 N. E. 
 
 QQo \r^: ^** ^®P- ^^' Merchants* Ins. Co. v. Brown, 77 Md. 79. 25 Ati. 
 yy-i; McKinney v. Assurance Co., 97 Ky. 474, 30 S. W. 1004 
 7j* Horton v. Insurance Co., 122 N. O. 498. 29 8. B. 944, 65 Am. St Rep. 
 
 » Bellevue Roller-Mill Co. ▼. London & L. Fire Ins. Co.. 4 Idaho, 307 39 
 W 1091 "^ ^"^^^^ * Mercantile Co. v. Freeman (Tex. Qv. App.) 33 S. 
 
 » ^l^^^I T: l^S"''^^^^ C^' 74 VL 211. 52 Atl. 429. 93 Am. St Rep. 885. 
 9QQ ^P"°^e^d Steam Laundry Co. v. Traders* Ins. Co.. 151 Mo. 90, 52 S W 
 ^8. 74 Am. St Rep. 521; Merchants' Ins. Co. v. Brown, 77 Md. 79. 25 Atl' 
 V 7. ^^^17- Insurance Co.. 132 N. C. 702. 44 S. E. 404; Delaware Ins Co' 
 I;. ^^V^ ^^^ ^^^' ^^ ^' ^' ^' ^^ «1 ^ R- ^- 137. But in wis y I^I 
 
 Zfl'n'' ^' ^^^ ^^- ^^' ^ ^^' ^^' " ^«« ^^'^ «^«t tbe issue of a sci^ 
 racias on tte property was not a commencement of foreclosure proceedmes 
 
 S. m "^ ^^l^O^y. Brown, 77 Md. 64, 27 AtL 814. sT^ It* 
 
4G8 
 
 THB STANDARD FIRE POLICY. 
 
 (Ch. 13 
 
 §§ 169-170) EXPLOSITB AND INFLAMMABLE SUBSTANGB& 
 
 
 ASSIGNMENTS. 
 
 168. Tlie condition avoldins the policy In case of astignmeat without 
 consent of insurer applies to an assignment accompanying a 
 eonveyanoe of the property Insured, and not merely a pledge of 
 the policy as collateral security for a debt. 
 
 •<* m m If this policy be assigned before a loss." 
 
 Since personal and moral considerations are so important an element 
 in the hazard involved in any insurance contract, it is manifest that the 
 insurer cannot be compelled to accept as the party insured any person 
 to whom the policy may be assigned. The contract is personal, and 
 does not in any wise run with or adhere in the property insured. 
 Therefore the assignment of the policy, without the consent of the in- 
 surer, to a person to whom the subject of insurance has been trans- 
 ferred, absolutely avoids the contract of insurance,® unless the insurer 
 has agreed to accept the assignee as the other party to the contract, 
 which agreement in effect creates a novation. Likewise an absolute 
 assignment before loss to one having no interest in the property would 
 be vicious and in violation of the condition.'' -- 
 
 None of the considerations just stated as prohibiting an assignment 
 of insurance to the transferee of the insured property are present in the 
 case of a mere pledge of the policy. The pledgee occupies no contrac- 
 tual relation towards the insurer, nor has he anything to do with the 
 subject of insurance. The insurer, therefore, has no reason for ob- 
 jecting to such a pledge, which is not infrequently made by a mere de- 
 livery of policy as additional security for some debt* The legal effect 
 of such a pledge is merely to make the pledgee the equitable assignee 
 of any fund that may become due under the policy.^ 
 
 An assignment of the policy after loss, when it has become a mere 
 money claim, is not within the condition." Nor would an attempted 
 restraint upon such an assignment be valid.** 
 
 • Buchanan ▼. Insurance Co., 61 N. T. 611; Watertown Fire Ins. Co. v. 
 Cherry, 84 Va. 72, 3 S. E. 876; Stolle v. Insurance Co., 10 W. Va. 546, 27 Am. 
 Rep. 503. But this condition Is not violated by the insured's agreement that 
 the carrier shall be entitled to any Insurance carried, in case of loaa. Jack- 
 son Co. V. Boylston Mut Ins. Co.. 139 Mass. 508, 2 N. B. 103, 52 Am. Rep. 
 
 728. 
 TBentley ▼. Insurance Co., 40 W. Va. 729, 23 S. B. 584. 
 
 • Key T. Insurance Co., 101 Mo. App. 344, 74 S. W. 162; True v. Insurance 
 Co. (C. C.) 26 Fed. 83; Giflfey v. Insurance Co., 100 N. Y. 417, 3 N. B. 309, 53 
 Am. Rep. 202. But see Ferree v. Insurance Co., 67 Pa. 373» 5 Am. Rep. 436, 
 In which the terms of the condition are peculiar. 
 
 • See Cromwell v. Insurance Co., 39 Barb. (N. Y.) 227. 
 
 10 Roger Williams Ins. Co. v. Carrington, 43 Mich. 252, 6 N. W. 203, 
 IX Alkan T. Insurance Co., 53 Wis. 136, 10 N. W. 91. 
 
 GENERATION OF OA8. 
 
 169. The condition prohibiting the generation of illnminating gas «v 
 vapor on the insnred premises is so clearly x7orded as not to 
 have given any occasion for dispute as to its construction. 
 
 «<♦ 
 
 * * If illuminating gas or vapor be generated in the described 
 building (or adjacent thereto) for use therein." 
 
 The insurer is justified in inserting such a provision, which it will be 
 noticed refers only to the generation of gas on the premises, and not 
 to its use. While there may have been litigation involving the con- 
 struction of this condition, the reported cases do not give any evidence 
 of it. It is doubtless true, however, that the same general principle 
 would be applied in construing the terms of this condition as have been 
 so frequentiy applied in connection with other conditions of the fire pol- 
 icy; that is, the condition must be substantially, and not merely liter- 
 ally, violated in order to avoid the policy. It is doubtful whether the 
 generation of illuminating gas in small quantities, as for bicycle lamps, 
 would be construed as a breach of this condition. 
 
 EXPLOSIVE AND INFLAMMABLE SUBSTANCES. 
 
 170. The presence of any of these prohibited substances on the in- 
 sured premises will avoid the insurance only when in such 
 quantities and for such a time as materially to increase the 
 risk. And -when the property insured, as described in the pol- 
 icy, either expressly or by reasonable implication, includes any 
 of the prohibited substances, their presence on the premises in- 
 sured will not avoid the insurance. 
 
 ***** Or if (any usage or custom of trade or manufacture to 
 the contrary notwithstanding) there be kept, used, or allowed on the 
 above described premises, benzine, benzole, dynamite, ether, fireworks, 
 gasolene, greek fire, gunpowder exceeding twenty-five pounds in quan- 
 tity, naphtha, nitro-glycerine or other explosives, phosphorus, or pe- 
 troleum or any of its products of greater inflammability than kerosene 
 oil of the United States standard, (which last may be used for lights 
 and kept for sale according to law but in quantities not exceeding five 
 barrels, provided it be drawn and lamps filled by daylight or at a dis- 
 tance not less than ten feet from artificial light)." 
 
 This condition, while proper and valid, will be given a reasonable 
 construction, so as to carry out the intention of the parties. The pres- 
 ence of such small quantities of these inflammable materials, or of large 
 quantities for so short a time as not to materially increase the hazard. 
 
Il 
 
 470 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 13 
 
 1 
 
 will not be construed as constituting a breach of the condition," which 
 is manifestly aimed at the hazardous consequences resulting from the 
 presence of explosives and other highly inflammable substances. 
 
 It will also be noted that the terms of the condition apply equally 
 well to those cases in which these prohibited articles are kept on the 
 insured premises without the knowledge or consent of the insured nor 
 by his procurement. Thus, the act of a tenant in keeping benzine upon 
 the premises constitutes a breach of this condition, despite the fact that 
 it was done without the knowledge or consent of the insured.^* 
 
 As Affected by Custom and Usage of Trade. 
 
 It has become a settled rule of construction that when the written 
 description of the subject of insurance includes property which custo- 
 marily consists in part of some of the prohibited inflammable sub- 
 stances, or where the building insured is described as being used for 
 some trade or business which customarily involves the use of these 
 inflammable substances, the printed condition will yield to the written 
 description, and the policy remain valid in spite of the presence of such 
 articles.^* Thus, in a New York case it was held when a policy was is- 
 sued on a store that was to be used as "a fancy goods and Yankee no- 
 tion store" it was not avoided by the presence of fireworks in the store, 
 when it was shown that fireworks were ordinarily recognized as part 
 of the stock of goods usually carried in such a store." So, in spite of 
 this provision, gunpowder may be kept as a part of a stock of goods 
 in a country store when it is shown that gunpowder is usually kept in 
 such stores." Likewise insurance upon property described as "watch- 
 makers* material" allows the keeping of benzine upon the premises, al- 
 though expressly forbidden by the policy, since benzine, used for clean- 
 ing purposes, is a necessary material in the watchmaker's shop." This 
 rule of construction, however, like every other such rule, is intended 
 merely to carry out the intentions of the parties, and not to defeat them. 
 
 i« Bayly v. Insurance Co., Fed. Cas. No. 1,145; Phoenix Ins. Oo. ▼. Tay- 
 lor, 5 Minn. 492 (Gil. 393); Williams v. Insurance Co., 54 N. Y. 569, 13 Am. 
 Rep. 620. 
 
 18 Liverpool & L. & G. Ins. Oo. v. Gunther, 116 U. S. 113, 6 Sup, Ct. 306, 
 29 L. Ed. 575; Duncan v. Insurance Co., 6 Wend. (N. Y.) 488, 22 Am. Dec. 
 539; Thuringia Ins. Co. v. Norwaysz, 104 111. App. 390. But see Springfield 
 Fire & Marine Ins. Co. v. Wade, 95 Tex. 598, 68 S. W. 977, 58 L. R. A. 714, 
 93 Am, St. Rep. 870. 
 
 1* Citizens' Ins. Co. v. McLaughlin, 63 Pa. 485; Lancaster Silver Plate Co. 
 V. Fire Ins. Co., 170 Pa. 151, 32 AtL 613; Hall ▼. Insurance Co., 58 N. Y. 
 292. 17 Am. Rep. 255. 
 
 18 Baraum v. Insurance Co., 97 N. Y. 188. 
 
 i« Peoria Marine & Fire Ins. Co. v. Hall, 12 Mich. 202. To the same effect, 
 see Yoch v. Insurance Co., Ill Oal. 503, 44 Pac. 189, 34 L. R. A. 857. 
 
 IT Maril V. Insurance Co., 95 Ga. 604, 23 S. E. 463, SO L. E. A. 835 51 
 Am. St Rep. 102. ' 
 
 §m) 
 
 YACANT OR UNOCCUPIED BUILDINGS. 
 
 471 
 
 Therefore a custom or usage to employ the prohibited articles in a 
 given trade or business will not be allowed to negative the effect of a 
 prohibitory condition, when the court may reasonably infer from all the 
 circumstances in the case that the parties in fact intended to exclude 
 such hazardous articles, despite the custom of trade. Thus, where th? 
 policy prohibited the keeping of nitroglycerin on the insured premises, 
 it was held that this condition was intended to override a usage in the 
 business of the insured to keep nitroglycerin and dynamite for sale.^* 
 So it was held by the Supreme Court of the United States " that in- 
 surance granted upon a stock of fancy goods, toys, and other articles 
 in the insured's line of business as a jobber and importer, with privilege 
 to keep firecrackers, was avoided by the insured keeping fireworks 
 which were expressly prohibited in the policy, although it was shown 
 that fireworks were usually kept by those engaged in the plaintiff's 
 business. The Court of Appeals of New York,*** considering the same 
 clause of a similar policy, under exactly the same facts, held that the 
 insurer was liable on the policy despite the presence of the fireworks 
 in accordance with the general doctrine explained above. These two 
 cases so differently decided, by two such eminent courts, show striking- 
 ly the difficulty of applying this rule of construction. 
 
 The form of this condition, as appearing in the standard policy, con- 
 tains the expression, "any usage or custom of trade or manufacture to 
 the contrary notwithstanding." This clause is evidently aimed at the 
 rule laid down by the courts that a usage of business can be shown in 
 order to include some of the prohibited articles in the subject of insur- 
 ance as described. The effort of the draftsman of the standard policy 
 to abrogate this rule has been wholly abortive, and must necessarily 
 have been. The very theory of the rule is that the written description 
 of the property insured prevails over repugnant printed terms of any 
 condition of the policy. Therefore any expression that may be used in 
 order to strengthen the repugnancy will wholly fail to affect the rule 
 of construction.** 
 
 VACANT OR XTNOCCUFIED BUILDINGS. 
 
 271« The eondition requiring that the building insured shall Hot be 
 vacant or unoccupied is satisfied by such occupation as is in- 
 volved in the ordinary use of buildings of like kind with that 
 insured. A church or a bam is not occupied in the san&e fashion 
 as a dwelling house. A dwelling is "vacant" when permanently 
 deserted by its tenant, and "unoooupied" during his temporary 
 absence. 
 
 IS Sperry y. Ingurance Co., 26 Fed. 234. See, also, Lutz v. Insurance COn 
 205 Pa. 159, 54 Atl. 721. 
 
 " Steinbach v. Insurance Co., 13 Wall. 183, 20 L. Ed. 615. 
 
 «o StPinbach v. Insurance Co., 54 N. Y. 90. 
 
 •1 Ackley V. Insurance Co., 25 Mont 272, 64 Pac. 665. 
 
472 
 
 THE STANDARD FIRE POLICY, 
 
 (Ch. 13 
 
 VACANT OR UNOCCUPIED BUILDINGS. 
 
 475 
 
 "* 
 
 ^ * If a building herein described, whether intended for oc- 
 cupancy by owner or tenant, be or become vacant or unoccupied and so 
 remain for ten days." 
 
 The purpose of this condition is to secure for the insured building 
 the presence and care of some occupant whose watchfulness will tend 
 to preserve the property." But it is apparent at the outset that build- 
 ings designed for different purposes are susceptible of occupancy in 
 very different degrees. Thus a church or schoolhouse cannot, in the 
 nature of things, be occupied in the same manner as a dwelling house, 
 while a barn is less capable of being actually occupied than is a church. 
 Therefore the condition requiring that the property shall be occupied, 
 and not vacant, will be construed reasonably, with reference to what 
 must have been the intention of the parties, in view of the character of 
 the building.^* 
 
 A church or schoolhouse is considered to be occupied when it is used 
 in the customary manner. It is "unoccupied and vacant" when it 
 ceases to be so used." The mere fact, however, that a church build- 
 ing should be closed for one week or several weeks on account of the 
 illness or absence of the pastor, or for other adventitious reasons, would 
 not cause it to be "unoccupied," nor would a schoolhouse be "unoc- 
 cupied" if it was temporarily closed during an epidemic A barn is to 
 be regarded as occupied when used for those purposes to which such 
 buildings are ordinarily put, as the housing of horses, or the storing 
 of hay and grain. If the bam were allowed to fall into disuse, so that 
 it was no longer receiving daily visits of the owner or his representa- 
 tive, it would be "unoccupied." " The same principle applies to in- 
 surance upon a mill *• or factory *^ or store.** 
 
 There is a distinction made even between the different kinds of dwell- 
 
 «« Names v. Insurance Co., 95 Iowa, 642, 64 N. W. 628. Therefore, Eoala 
 fide occupancy does not satisfy the condition. 
 
 2 3 Limburg v. Insurance Co., 90 Iowa, 709, 57 N. W. 626, 23 L. R. A. 99, 
 48 Am. St Rep. 468 ; Hoover v. Insurance Co., 93 Mo. App. Ill, 69 S. W. 42 ; 
 Continental Ins. Co. v. Kyle, 124 Ind. 132, 24 N. E. 727, 9 L. R. A. 81, 
 19 Am. St Rep. 77; WHITNEY v. INSURANCE CO., 72 N. Y. 117, 28 Am. 
 Rep. 116; Georgia Home Ins. Co. v. Kinnier's Adm'x, 28 Grat (Va.) 88; 
 Sonneborn v. Insurance Co., 44 N. J. Law, 220, 43 Am. Rep. 365. 
 
 24 Limburg v. Insurance Co., 90 Iowa, 709, 57 N. W. 626. 23 L. R. A. 99, 
 48 Am. St Rep. 468; Home Ins. Co. v. Scales, 71 Miss. 975, 15 South. 134, 42 
 Am. St Rep. 512; Caraher v. Insurance Co., 63 Hun, 82, 17 N. Y. Supp. 
 85a 
 
 «« See Fritz v. Insurance Co., 78 Mich. 565, 44 N. W. 139. 
 
 «• Bellevue Roller MIU Co. v. London & L. Fire Ins. Co., 4 Idaho, 307, 39 
 Pac. 196; American Fire Ins. Co. v. Brighton Cotton Mfg. Co., 24 111. App. 
 149; Id., 125 111. 131, 17 N. E. 771. 
 
 «T Halpln V. Insurance Co., 118 N. Y. 165, 23 N. B. 482. 
 
 as Limburg Y. Insurance Co., sunra; Rockford Ins. Co. T. Wrlsht 30 IlL 
 App. 574. 
 
 §171) 
 
 ings. Thus it is generally held that the expression "vacant and unoc- 
 cupied" has a different significance when used in reference to houses 
 known by the insurer to be customarily leased to tenants from that 
 which it bears when applied to dwellings occupied by the owner. It is 
 well known that tenement houses are liable to be left unoccupied for a 
 few days between the moving out and the moving in of successive ten- 
 ants. Such temporary lack of occupation is considered to be incident 
 to the known use of the buildings, and therefore not to violate the terms 
 of this condition." It is probable, however, that this peculiar rule of 
 construction will not apply to the condition of the standard policy, 
 which, it will be noted, contains a qualification, "whether intended for 
 occupancy by owner or tenant." 
 
 The Distinction between Unoccupied and Vacant Buildings, 
 
 In the construction of this provision a marked distinction between 
 vacancy and lack of occupation has grown up. A building is said to be 
 vacant when it is wholly and permanently deserted by its former ten- 
 ant, with the removal of all his goods therefrom.*® But when the 
 house is merely closed temporarily during an absence of the tenant it is 
 said to be "unoccupied." Thus, a house which has been shut up for 
 the summer, with all of its furniture and other accessories of habitation 
 remaining in it, is not vacant, but merely unoccupied, even though it 
 may be tenantless for many months ** 
 
 «» Union Ins. Co. v. McCullougn (Neb ) 96 N. W. 79; Liverpool & L. & G. 
 Ins. Co. V. Buckstafif, 38 Neb. 146, 56 N. W. 695, 41 Am. St. Rep. 724; Ger- 
 man-American Ins. Co. V. Buckstaff, 38 Neb. 135, 56 N. W. 692; Hunt v. In- 
 surance Co. (Neb.) 92 N. W. 921; Roe v. Insurance Co., 149 Pa. 94, 23 Atl. 
 718, 34 Am. St. Rep. 595; Traders' Ins. Co. v. Race (lU.) 29 N. E. 846; Home 
 Ins. Co. V. Wood, 47 Kan. 521, 28 Pac. 167; City Planing & Shingle Mill Co 
 V Merchants', Manufacturers' & Citizens' Mut. Fire Ins. Co., 72 Mich. 654, 
 40 N. W. 777, 16 Am. St Rep. 552. A well-expressed statement of the prin- 
 ciple upon which these cases rest may well be quoted from Hotchkiss v. In- 
 surance Co., 76 Wis. 269, 11 N. W. 1106, 20 Am. St. Rep. 69, as follows: "Un- 
 der certain circumstances premises may be vacant or unoccupied when, un- 
 der other circumstances, premises in like situation may not be so, within the 
 meaning of that term in insurance policies. Thus, if one insures his dwell- 
 ing house, described in the policy as occupied by himself as his residence, 
 and moves out of it, leaving no person in the occupation thereof, it thereby 
 becomes vacant or unoccupied. But if he insures it as a tenement house, 
 or as occupied by a tenant, it may fairly be presumed, nothing appearing to 
 the contrary, that the parties to the contract of insurance* contemplated that 
 the tenant was liable to leave the premises, and that more or less time might 
 elapse before the owner could procure another tenant to occupy them, and 
 hence that the parties did not understand that they should be considered 
 vacant and the policy forfeited or suspended,.^cording to its terms, imme- 
 diately upon the tenant's leaving it" — citing Lockw^od v. Assurance Co., 47 
 Conn. 561; Whitney v. Insurance Co., 9 Hun, 39. 
 
 80 See HERRMAN v. INSURANCE CO., 85 N. Y. 162, 39 Am. Rep. 644, 
 Woodruff, Ins. Cas. 165. 
 
 •1 Moody V. Insurance Co., 52 Ohio St 12, 38 N. B. 1011, 26 L. B. A. 313, 
 
474 
 
 THB STANDARD FIRE POLICY, 
 
 (Ch. 13 
 
 In the earlier forms of this condition, the prohibition was against the 
 building's being "vacant and unoccupied," whereas in the standard pol- 
 icy it is "vacant or unoccupied." The courts construed the earlier form 
 as meaning that the insurance should remain valid unless the house was 
 both vacant and unoccupied. But this loophole of escape for the care- 
 less householder seems to have been closed by the provision of the 
 standard policy, which defeats the insurance if the building is either 
 vacant or unoccupied. •• 
 
 ; 
 
 OOIXAPSE OF BUILDINO, 
 
 172. In tlie standard policy a fall of any substantial part of the Iraild- 
 ing insured immediately terminates the insurance. 
 
 "If a building or any part thereof fall, except as the result of fire, all 
 insurance by this policy on such building or its contents shall imme- 
 diately cease." 
 
 The collapse of any building, whether because of a storm or of 
 structural weakness, will almost inevitably cause the fallen structure to 
 take fire. Loss from such a fire would impose a liability upon the in- 
 surer unless such a condition as the one above quoted appears in the 
 policy. Under this condition, however, the insurance comes imme- 
 diately to an end in case the whole or any part of the insured building 
 falls. In older forms of this condition it was held that the insurance 
 was not defeated unless the entire building fell," but the Texas Su- 
 preme Court has recently held that under the standard form of policy 
 the falling of a small cupola surmounting a large building constituted a 
 breach of this condition and defeated the insurance.** 
 
 49 Am. St Rep. 699; Cummins v. Insurance Co., 67 N. Y. 260, 23 Am. EeD. 
 111. 
 
 «2 O^mpare HERRMAN v. INSURANCE CO.. 81 N. T. 184, 37 Am. Rep. 
 488, with HERRMAN v. INSURANCE 00., 85 N. Y. 162, 39 Am. Rep. 644, 
 Woodruff, Ins. Cas. 165. 
 
 33 Security Ins. Co. v. Mette, 27 IlL App. 324; Huck ▼. Insurance Co., 127 
 Mass. 306, 34 Am. Rep. 373. 
 
 34 Home Mut Ins. Co. v. Tomkles & Co., 96 Tex. 187, 71 S. W. 814. To the 
 same effect, see Nelson v. Insurance Co., 86 App. Div. 66, 83 N. Y. Supp. 220. 
 But even under the standard form the falling of an immaterial portion of 
 the building, not a functional part of the structure, will not avoid the Insur- 
 ance. London & L. Fire Idi. Co. t. Orunk, 81 Tenn. 376» 23 S. W. 140. 
 
 §§ 173-175) 
 
 LIABILITY OF THE INSUREB. 
 
 475 
 
 ZiIABHiITY OF THE INSURER. 
 
 173. DIRECT LOSS OR DAMAGE by fire, for wUoIk fhe Inrarev eon- 
 
 tracts to give indemnity, consists of all snch injuries as are 
 proximately due to the action of a hostile fire. These include 
 not only damage done by actual ig:nition, but also such as re- 
 sults from charring, scorching, smoke, water used in quenching 
 the fire, or from the hasty efforts to remove the goods insured 
 to a place of safety. 
 
 (a) Fire is said to be the proximate cause of a loss when that loss has 
 
 been caused by a force set in motion by fire, without the inter- 
 vention of any new and independent force. 
 
 (b) A fire is hostile when it bums in a place or manner not intended. 
 
 174. EXCEPTED CAUSES— Under the standard policy certain causes 
 
 of loss are expressly excepted. These, like all exceptions in 
 favor of the insurer, will be construed strictly against him. 
 
 175. EXCEPTED SUBJECTS— Certain specified kinds of property 
 
 which are peculiarly susceptible of overvaluation in case of 
 loss are expressly excepted from the operation of the policy. 
 Such exceptions will yield to an agreement inferable from the 
 written description of the property insured to include snoh ar- 
 ticles. 
 
 II 
 
 *'♦ ♦ * Does insure ♦ ♦ ♦ against all direct loss or damage 
 by fire, except as hereinafter provided.' 
 
 »> 
 
 Direct Damage by Fire. 
 
 Insurance against loss or damage by fire does not cover damage due 
 merely to heat, unless that heat is due directly to a hostile fire. Thus 
 damage due to intense heat caused by steam escaping from a broken 
 steam pipe is not damage by fire; *' nor is injury that is caused by the 
 blistering heat of the sun. But if ignition actually takes place the in- 
 surer becomes liable, not only for the destruction by the flames them- 
 selves, but also for such damages as are immediately consequent upon 
 the presence of the flames, such as injury by smoke,'* and the charring 
 or blistering of articles that are heated to a point lower than that of 
 ignition. Likewise damage wrought to the property insured by wa- 
 ter *^ used in efforts to extinguish the fire, or due to the efforts made 
 to remove the property to a place of safety,*' or loss by theft in the 
 
 «» Gibbons v. Insurance Co., 30 111. App. 263. 
 
 »• SCRIPTURE V. INSURANCE CO., 10 Cush. (Mass.) 356, 67 Am. Dec, 
 111, Richards, Ins. Cas. 439. 
 
 »T John Davis & Cb. v. Insurance Co. of North America, 115 Mich. 382, 73 
 Nf. W. 393. 
 
 »8 Case V. Insurance Co., 13 111. 676; Le^ber v. Insurance Co., 6 Bush (Ky.) 
 
 639. 99 Am. Dec 695; WHITE T. INSURANCE CO^ 57 Me. 91, 2 Am. Rep. 
 22. 
 
476 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 13 
 
 ' 
 
 I 
 
 course of such removal," as well as the expense of the removal, is 
 covered by msurance against direct loss by fire. 
 
 Fire Must be the Proximate Cause of the Damage, 
 
 The rule that the law looks at the proximate and not the remote cause 
 of an mjury applies as well to the law of insurance as to that of torts 
 There is, however, one exception to the application of the rule as it is 
 ordmanly applied in the law of torts : The insurer is responsible for 
 loss directly caused by fire, even though the fire may have been due to 
 the negligence of the insured or of some third party; that is, even 
 though negligence on the part of the plaintiff or his agent may have 
 been the onginal cause of the loss.** With this one exception, in de- 
 termining whether a given loss has been directly caused by fire the 
 courts strictly apply the doctrine of proximate cause, which may be 
 best defined by quoting the language of Mr. Justice Strong in a leading 
 case : " "The question always is, was there an unbroken connection 
 between the wrongful act and the injury— a continuous operation? 
 Did the facts constitute a continuous succession of events so linked to- 
 gether as to make a natural whole, or was there some new and inde- 
 pendent cause intervening between the wrong and the injury?" The 
 application of this rule may well be illustrated by two leading cases 
 In Lynn Gas & Electric Co. v. Meriden Fire Ins. Co., " the policy in- 
 
 TLf".^*^rfrr." ^' ^"^"'^^c® Co., 49 Me. 200; Newmark v. Insurance Co., 30 
 MO. IfeO, 77 Am. Dec. 608; Leiber v. Insurance Co., 6 Bush (Ky.) 639, 99 Am 
 Dec. 69o; Whitehurst v. Insurance Co., 51 N. C. 352; Independent Mut. Ins' 
 Co. v. Agnew, 34 Pa. 96, 75 Am. Dec. 638. 
 
 *o "For instance, where the negligent act of the insured, or of anybody 
 else, causes a fire, and so causes damage, although the negligent act is the 
 direct proximate cause of the damage, through the fire, which was the pas- 
 sive agency, the insurer is held liable for a loss caused by the fire " LYNN 
 p'^fiQn* f^^^l^^? SS- I'r. ^E^I^EN FIRE INS. CO.. 158 Mass. 570. 33 N. 
 fc^^'J?^ Txi;.?^' ^ ^™- ®*- ^^P- ^' Woodruff, Ins. Cas. 178. citing 
 JOHNSON v INSURANCE CO., 4 Allen (Mass.) 388; Walker v. Maitlan(t 
 o Bam. & Aid. 171; WATERS r. INSURANCE CO., 11 Pet (U. S.) 213 9 L 
 ^t^^l PETERS V. INSURANCE CO., 14 Pet (U. S.) 99, 10 L. Ed. 371 i 
 GENERAL MUT. INS. CO. y. SHERWOOD, 14 How. (U. S.) 351, 14 L. Ed. 
 452; Louisiana Mut Ins. Co. v. Tweed, 7 Wall. (U. S.) 44, 19 L. Ed. 65. But 
 the insurer is not liable for a loss due to the intentional act of the insured 
 or his agent WATERS v. INSURANCE CO., 11 Pet (U. S.) 213, 9 L Ed 
 69. However, the insurance covers a loss due to the intentional act of an 
 
 I^.^l°f ^^^^® ^^ ^^ ^ stranger to the insured. Union Ins. Co. v. McCullough 
 (Neb.) 96 N. W. 79. ^ 
 
 « Milwaukee & St Paul Ry. Co. v. Kellogg, 94 U. S. 469, 474, 24 L. Ed 
 ^56. quoted with approval by Knowlton, J., in LYNN GAS & ELE0TRI(3 
 GO. y MERIDEN FIRE INS. CO., supra. In the latter case ''proximate 
 cause is defined as the "active efficient cause that sets in motion a train 
 of events which brings about a result without the intervention of any force 
 started and working actively from a new and independent source " 
 
 " LYNN GAS & ELECTRIC CO. v. MERIDEN FIRB INS. CO., 158 Mass. 
 
 LIABILITY OF THE INSUKER. 
 
 477 
 
 g§ 173-175) 
 
 sured the building and machinery of the insured against loss or dam- 
 age by fire. A fire occurred in the wire tower, situate some distance 
 from the building in which the dynamos and other electrical machines 
 of the insured were placed. By reason of the burning of the wire tow- 
 er a short circuit was formed. This caused a sudden increase of pres- 
 sure upon the driving belt of the dynamo, which parted, and left the 
 engine without restraint. The fly wheel, thus caused to revolve too 
 rapidly, burst, and wrecked the machinery and building. It was con- 
 tended by the defendant that the loss to the machinery and building 
 was too remote to be covered by the insurance against fire. But the 
 court held that there was an unbroken chain of causation between the 
 fire in the tower and the wrecking of the building and machinery, and 
 therefore held the insurer liable as for damage by fire. 
 
 In the second case, Ermentrout v. Girard Fire & Marine Ins. Co.,*' 
 the building of the insured was damaged by the falling of the wall of 
 an adjacent house, which was on fire. No part of the insured building 
 was actually burnt, but the court held that the damage suffered by the 
 insured was due directly to the falling of the wall of the adjacent 
 building, which was, in turn, caused by fire. So it has been held that 
 damage to a building, due principally to the force of exploding gun- 
 pov;drr, was proximately due to a fire which caused the ignition of the 
 gunpov^der, and to the burning of the powder itself.** 
 
 Hos^Ue and Friendly Fires, 
 
 In determining the liability of the insurer against damage by fire, it 
 is necessary to make a rather subtle distinction between fires that are 
 hostile and those that are friendly in their origin. So long as a fire 
 burns in a place where it was intended to bum, and ought to be, it is 
 to be regarded as merely an agency for the accomplishment of some 
 purpose, and not as a hostile peril. Thus, a fire burning in a furnace, 
 or a stove, or a lamp, is considered a friendly fire; and damage that 
 may be caused by such fires, due to their negligent management, is not 
 considered to be within the terms of the policy. Thus, in the old case 
 of Austin V. Drew,** the plaintiffs sought to hold an insurer against fire 
 
 i570. 33 N. E. 690, 20 L. R. A. 297, 35 Am. St. Rep. 540, Woodruff. Ina. Cas. 
 178 
 
 ♦i ERMENTROUT V. GIRARD FIRE & MARINE INS. CO., 63 Minn. 305. 
 65 N. W. 635, 30 L. R. A. 346, 56 Am. St Rep. 481, Woodruff, Ins. Cas. 184. 
 
 ** SCRIPTURE V. INSURANCE CO.. 10 Cush. (Mass.) 356, 57 Am. Dec. 
 Ill, Richards, Ins. Cas. 439. Such losses are expressly excepted by the ex- 
 plosion clause of the standard policy. 
 
 In Hartford Steam Boiler Inspection & Ins. Co. v. Henry Sonnebom & Cc 
 96 Md. 616, 54 Atl. 610, it was held that a policy against loss by explosion 
 of steam boilers covered damage due to water escaping from an automatic 
 sprinkler when melted by reason of escaped steam from a broken pipe. 
 
 *» AUSTIN V. DREW, 6 Taunt 435, 4 Camp. 360. 
 
 'f i 
 
 » •.' 
 
478 
 
 THE STANDARD FIRB POLICY. 
 
 (Ch. 13 
 
 liable for injury done to a stock of sugar in process of refining, due to 
 overheating from certain flues that were used in the process of manu- 
 facture. These flues, on account of the negligence of a servant of the 
 plaintiff, became overheated, and thus caused the damage complained 
 of, though no actual ignition took place. The court held, however, that 
 such damage was not within the policy ; that it was due rather to the 
 negligent use of an agency employed in the manufacture of sugar than 
 to "fire" in the sense in which the term was used in the policy of in- 
 surance. So it has been held that damage caused by smoke issuing 
 from a lamp that is turned up too high,*« or from a stove pipe that is 
 defective,*^ is not to be considered as directly caused by fire. Neither 
 would damage caused to furniture by an overheated stove be charge- 
 able to the insurer. The principle underlying these cases is simply that 
 the policy shall not be construed to protect the insured from injury con- 
 sequent upon his negligent use or management of fire, so long as it is 
 confined to the place where it ought to be." But a friendly fire may 
 become hostile by escaping from the place where it ought to be to some 
 place in which it ought not to be. Therefore, where a fire in a chim- 
 ney, due to the ignition of soot there, caused soot and smoke to issue 
 from the stove so as to damage the property insured, the court very 
 properly held the damage due to a hostile fire.** The fire was intended 
 to burn in the stove and not in the chimney. 
 
 Excepted Causes of Loss. 
 
 The standard policy, like most other fire policies, contains a list of 
 perils for which the underwriter is unwilling to assume liability, as 
 follows : "This company shall not be liable for loss caused directly or 
 indirectly by invasion, insurrection, riot, civil war or commotion, or 
 military or usurped power, or by order of any civil authority; or by 
 theft; or by neglect of the insured to use all reasonable means to save 
 and preserve the property at and after a fire or when the property is 
 endangered by fire in neighboring premises ; or (unless fire ensues, and, 
 in that event, for the damage by fire only) by explosion of any kind, or 
 lightning; but liability for direct damage by lightning may be assumed 
 by specific agreement hereon." •• 
 
 ♦•Samuels ▼. Insurance Co., 2 Pa. DIst. R. 397. 
 
 *T Cannon v. Insurance Co., 110 Ga. 563, 35 S. R 775, 78 Am. St Rep. 124. 
 
 <« In American Towing Co. v. German Fire Ins. Co., 74 Md. 25, 21 Atl. 553, 
 it was held that a fire policy upon a tug and her fixtures did not cover dam- 
 age done to a leaky boiler by the action of a too fierce fire in the furnace 
 
 *» WAY V. INSURANCE CO., 166 Mass. 67, 43 N. B. 1032, 32 L. E. A. 608, 
 55 Am. St Rep. 379. 
 
 BO The standard "lightning clause" is as foUows: rrhis policy shall cover 
 any direct loss or damage caused by lightning, (meaning thereby the com- 
 monly accepted use of the term lightning, and in no case to include loss or 
 damage by cyclone, tornado, or wind stwrn,) not exceeding the sum insured. 
 
 §§ 173-175) 
 
 LIABILITY OP THE INSURER. 
 
 479 
 
 The rates charged by underwriters for fire insurance are based upon 
 the average percentage of loss under usual conditions. Consequently 
 it is proper that the operaticm of the policy should be restricted to losses 
 such as may happen under ordinary conditions, excluding those due to 
 unusual and peculiarly destructive causes. It is attempted in this enu- 
 meration of excepted risks just quoted from the standard policy to in- 
 clude all such extraordinary causes of loss the presence of which might 
 render unreliable the actuary's calculation of probabilities. The terms 
 used should be construed in their ordinary and generally accepted sense, 
 inasmuch as they are presumed so to have been used by the contracting 
 parties. Thus "invasion" means the entrance of an armed force with 
 hostile intent into a foreign territory.*^ So the words "insurrection, 
 riot, civil war or commotion," will include armed and violent opposi- 
 tion to law and government in all its various phases.** 
 
 Military or Usurped Power. 
 
 Some courts have held that this expression is to be so construed as 
 to make the word "usurped" qualify military, and thus to include with- 
 in it only such acts of military power as are wrongfully and illegally 
 exercised. But the Supreme Court has held that such a construction 
 is unjustifiable. In the case of -^tna Fire Ins. Co. v. Boon •• the in- 
 sured property was destroyed by fire caused by the order of the com- 
 mander of the Federal forces in his desire to prevent certain military 
 stores from falling into the hands of the Confederate forces that were 
 about to enter the town in which it was situated. It was held that this 
 loss was within the exception in the policy, although caused by the law- 
 ful orders of the commander of the government troops. The Connect- 
 icut court had previously held otherwise.** 
 
 Destruction by Order of Civil Authority, 
 
 In the absence of such a provision as that found in the standard pol- 
 icy the insurer is liable for property destroyed by order of civil au- 
 thority, for the purpose of checking the progress of a fire, such loss 
 
 nor the interest of the insured in the property, and subject In all other re- 
 spects to the terms and conditions of this policy. Provided, however, if 
 there shall be any other insurance on said property this company shall be 
 liable only pro rata with such other insurance for any direct loss by light- 
 ning, whether such other insurance be against direct loss by lightning or 
 not" 
 
 Bi Portsmouth Ina Co. t. Reynolds* Adm*x, 32 Grat (Va.) 613; ^tna Fire 
 Ins. Co. V. Boon, 95 U. S. 117, 24 L. Ed. 395. See, also, Royal Ins. Co. v. Mar- 
 tin, 192 U. S. 149, 24 Sup. Ct 247, 48 L. Ed. 385. 
 
 »2 See Lycoming Fire Ins. Co. v. Schwenk, 95 Pa. 89, 40 Am. Rep. 629 
 (riot); Spruill v. Insurance Co., 46 N. C. 126 (insurrection); Portsmouth Ins. 
 Co. V. Reynolds' Adm'x, 32 Grat (Va.) 613. 
 
 " 95 U. S. 117, 24 L. Ed. 395. 
 
 »*Boon ▼, Insurance Co., 40 Conn. 575. 
 
I «l 
 
 480 
 
 THE STANDARD FIRE POLICY, 
 
 (Ch. 13 
 
 §§ 173-176) 
 
 LIABILITY OP THE INSURER. 
 
 481 
 
 
 J I 
 
 
 being considered to be the proximate consequence of fire." It is prob- 
 able, however, that the courts will not be able to find any way of es- 
 caping the effect of the provision in the standard policy, which is un- 
 doubtedly intended to relieve the insurer from liability for any such 
 cause. 
 
 Loss by Theft, 
 
 As stated above, in the absence of an express stipulation to the con- 
 trary, the insurer will be held liable for any such loss sustained by theft 
 that occurs in consequence of removal of goods from the burned build- 
 ing to some place of safety, since such loss can be immediately traced 
 to the fire as an efficient cause." Claims for such losses are peculiarly 
 difficult to test by the ordinary means within the power of the insurer, 
 and are very wisely excluded. 
 
 Neglect of the Insured, 
 
 This exception is aimed at the bad faith of the insured rather than 
 intended to secure a lessened risk to the insurer. The insured's own 
 self-interest will prompt him to use all reasonable means to save his 
 property, if he really desires it to be saved, without the stimulus of 
 a contract, and his failure to do so would cast grave suspicion upon 
 his good faith. Therefore the neglect of the insured in the premises, 
 in order to bring the loss within this exception, must be such as in 
 effect to show bad faith. Negligence on the part of his servants will 
 not bring the loss within the exception.'* 
 
 Loss by Explosion, * 
 
 Under the older policies, which did not except losses due to explo- 
 sions, it was held that the insurer was liable for the full consequence 
 of an explosion, provided there was present, as either the cause or the 
 accompaniment of the explosion, actual fire." But, under the excep- 
 tion as contained in the standard policy, all damage directly caused by 
 explosion is excluded, although the insurer is liable for the damage 
 actually done by a fire resulting from the explosion. It seems, how- 
 ever, that even under the standard policy the mere fact that an explo- 
 sion takes place in a burning building will not bring the loss within this 
 exception." The efficient cause of the damage done in such case is 
 
 •• CITY FIRE INS. (X>. T. CORLIES, 21 Wend. 367, 34 Am. Dec. 25a 
 
 »« See note 39, supra. 
 
 »T Wertheimer-Swartg Shoe Oo. v. United States Casualty Co.. 172 Mo. 135. 
 72 a W. 635. 61 L. R. A. 766, 95 Am. St. Rep. 500. 
 
 »« See SCRIPTURE v. INSURANCE CO.. 10 Cush. (Mass.) 356, 67 Am. 
 Dec. Ill, Richards, Ins. Cas. 439. 
 
 " Washbum v. Insurance Oo. (C. C.) 2 Fed. 804; Washburn ▼. Insurance 
 Co. (C. C.) 2 Fed. 633; Transatlantic Fire Ins. Oo. v. Dorsey. 56 Mo 7u; 
 Renshaw v. Insurance Co., 103 Mo. 609, 15 S. W. 949, 23 Am. St. Rep 913 
 See^ also, WATERS v. INSURANCE CO., 11 Pet (U. S.) 213, 9 L. Ed. 691; 
 
 I 
 
 considered to be the fire, and not the explosion, which is merely the con- 
 sequence of the fire. But, in order that this rule shall apply, the fire 
 causing the explosion must be hostile, and not friendly. Thus, an ex- 
 plosion due to the ignition of vapor by coming in contact with a burn- 
 ing gas jet or lamp is not considered to be a consequence of fire.'® So, 
 where an employe of the insured struck a match in a cellar, thus caus- 
 ing gasoline vapor to explode and destroy the insured building, it was 
 held that the loss was due proximately to the explosion, and was within 
 the exception.'^ 
 
 Some difficulty is encountered in determining whether an explosion 
 is the proximate or the remote cause of a loss in question, and some 
 conilict is found in the decisions on the subject. Thus, it has been held 
 by the Supreme Court of the United States that an explosion which 
 took place in a building across the street from the one insured, causing 
 a great conflagration, which spread to the insured premises through 
 intermediate houses, was the proximate cause of the loss complained 
 of, which was, therefore, not chargeable to the insurer.'^ In some of 
 the state courts, however, a different view has been taken of the scope 
 of this exception. These courts consider that the exception includes 
 only those losses that are caused proximately and immediately by the 
 explosive forces, and not those due to fires originating from explo- 
 sions •• 
 
 Mitchea ▼. Insurance Co., 183 U. S. 42, 22 Sup. Ct 22, 46 L. Ed. 74. But It 
 
 has been held that, where the building insured was wrecked by an explosion 
 caused by the burning of a neighboring structure, the explosion, and not the 
 fire, was the proximate cause of the loss. Hustace v. Insurance Co., 175 N. 
 Y. 292, 67 N. B. 592, 62 L. R. A. 651. See, also, Caballero v. Insurance Co., 
 15 La. Ann. 217. 
 
 •0 Briggs V. Insurance Co., 53 N. Y. 446; United Life, Fire & Marine Ins. 
 Co. V. Foote, 22 Ohio St. 340, 10 Am. Rep. 735; Heuer v. Insurance Co., 144 
 lU. 393, 33 N. E. 411, 19 L. R. A. 594. 
 
 «i Mitchell V. Insurance Co., 183 U. S. 42, 22 Sup. Ct. 22, 46 L. Ed. 74. 
 
 •2 Louisiana Mut Ins. Co. v. Tweed, 7 Wall. (U. S.) 44, 19 U Ed. 65. Here 
 the court said: •*The explosion undoubtedly produced or set in operation the 
 fire that burned the plaintiflTs cotton. The fact that it was can*ied to the 
 cotton by first burning another building supplies no new force or power 
 which caused the burning." 
 
 «3 Heffron v. Insurance Co., 132 Pa. 580, 20 Atl. 698. In this case the court 
 said that the exception "is to be restricted to losses arising from explosions, 
 rather than extended to the much broader ground of losses by fire originat- 
 ing from explosions." See, also, Heuer v. Insurance Co., 144 111. 393, 33 N. 
 B. 411, 19 L. R. A. 594. 
 
 The construction given to this exception by these courts is manifestly the 
 more reasonable. It would be outrageous to hold that all the property own- 
 ers who suffered loss in the recent Baltimore fire would be deprived of any 
 benefit of their insurance in case it should be proved that that disastrous 
 confiagration had its origin in some kind of explosion. Such a conflagration 
 as the great Chicago fire might as easily have originated in a gimpowder ex- 
 ^ARCB Ins. — 31 
 
4S1' 
 
 H 
 
 THE STANDARD FIEB POLICY. 
 \ 
 
 (Ch.13 
 
 §§ 176-177) MEASURE OF INSURER'S LIABILITT. 
 
 483 
 
 'm 
 
 ■■■\\ 
 
 
 Lightning, 
 
 The older cases held the insurer against loss by fire liable also for 
 damage done by lightning, which they declared to be "fire from heav- 
 en." •* Since, however, latter-day scientists have made clear to the 
 judges the mundane origin of lightning, it is uniformly held that a loss 
 due to lightning alone is not covered by a fire policy,** although, of 
 course, damage done by fire caused by the lightning must be made good 
 by the insurer.** 
 
 Excepted Subjects of Loss, 
 
 The standard policy expressly excepts from the operation of the con- 
 tract certain articles enumerated in the following condition : 
 
 "This company shall not be liable for loss to accounts, bills, cur- 
 rency, deeds, evidences of debt, money, notes, or securities ; nor, unless 
 liability is specifically assumed hereon, for loss to awnings, bullion, 
 casts, curiosities, drawings, dies, implements, jewels, manuscripts, med- 
 als, models, patterns, pictures, scientific apparatus, signs, store or office 
 furniture or fixtures, sculpture, tools, or property held on storage or 
 for repairs." 
 
 The insurer declines to make himself liable for loss of such articles 
 because their nature is such as to make their value largely a matter of 
 irresponsible opinion, more apt to be based upon sentiment or fancy 
 than upon the ordinary rules that fix commercial values. The lan- 
 guage in which these exceptions are expressed will, however, be strong- 
 ly construed in favor of the insured.*^ Thus, the terms "store or of- 
 fice furniture or fixtures" will be so limited as to include only those 
 fixtures or furniture that are peculiar to offices or stores as such, and 
 not all of their movable contents.** So, the expression "held on storage" 
 will apply only to goods technically on storage. Goods that are kept 
 on hand or in stock by merchants for sale,** or material kept by a 
 
 plosion at the handg of careless hojn In a stable, as In the historic overturn- 
 ing of a lantern. In such a case the doctrine of Louisiana Mut. Ins. 06. v. 
 Tweed, supra, would surely yield. 
 
 •* SCRIPTURE V. INSURANCE CO., 10 Cush. (Mass.) 356, 57 Am. Dec. 
 Ill, Richards, Ins. Cas. 439, citing 1 Emerigon, c. 12, § 17. 
 
 • 5KENNIST0N v. INSURANCE CO., 14 N. H. 341, 40 Am. Dec. 193; 
 Babcock v. Insurance Co., 4 N. Y. 326. 
 
 •« Babcock v. Insurance Co., 4 N. Y. 326. 
 
 «7 GEORGIA HOME INS. 00. v. ALLEN, 119 Ala. 436, 24 South. 399; 
 Liverpool & London & Globe Ins. Co. v. Kearney, 180 U. S. 132, 21 Sup, Ct 
 326, 45 L. Ed. 460; Canton Ins. Office v. Woodside, 90 Fed. 301, 33 a a A. 
 63. 
 
 •• Thurston v. Insurance Co. (C. C.) 17 Fed. 127. 
 
 •• New York Equitable Ins. Co. v. Langdon, 6 Wend. QL X.) 623; Yogel 
 T. Insurance Co^ 9 Gray (Mass.) 23. 
 
 manufacturer,^* or furniture stored away by a person intending to 
 open a hotel in a building/^ will not be regarded as being on storage. 
 
 MEASURE OF INSUBER'S XJULBILITY. 
 
 176. THE AOTUAI. CASH VALUE of the insnred property «t the time 
 
 of loss is the limit of the insurer's liahUity at oommon law. 
 The standard policy expressly so stipulates, and further limits 
 the insurer's liability upon certain specified losses and risks. 
 
 177. PRO RATA CLAUSE— In case of concurrent insurance upon the 
 
 property damaged, the underwriter is made liable only for such 
 a proportion of the loss suffered as the amount insured by !»<«« 
 bears to the total amount of insurance. 
 
 "This company shall not be liable beyond the actual cash value of the 
 property at the time any loss or damage occurs, and the loss or dam- 
 age shall be ascertained or estimated according to such actual cash 
 value, with proper deduction for depreciation however caused, and shall 
 in no event exceed what it would then cost the insured to repair or re- 
 place the same with material of like kind and quality ; said ascertain- 
 ment or estimate shall be made by the insured and this company, or, if 
 they differ, then by appraisers, as hereinafter provided ; and, the amount 
 of loss or damage having been thus determined, the sum for which 
 this company is liable pursuant to this policy shall be payable after due 
 notice, ascertainment, estimate, and satisfactory proof of the loss have 
 been received by this company in accordance with the terms of this 
 policy." 
 
 In accordance with the well-recognized principle that the contract of 
 insurance is intended to afford merely indemnity for loss, the insured 
 will, under the common law, under no circumstances be allowed to re- 
 cover more than the actual value of his property at the time of the loss. 
 Unless the policy is valued, the sum set forth on its face is intended 
 merely as the maximum limit of the insurer's liability, not as the meas- 
 ure of it" Therefore, the stipulation found in the standard policy, 
 
 »• Vogel v. Insurance Co., 9 Gray (Mass.) 23. 
 
 Ti Continental Ins. Co. v. Pruitt, 65 Tex. 125; Home Ins. Go. T. Gwath- 
 mey, 82 Va. 923, 1 S. E. 209. 
 
 Ti In several states statutes have been passed imposing as a penalty on 
 insurance companies unsuccessfully contesting claims made nnder their pol- 
 icies the payment of the insured's reasonable attorney's fees, and a certain 
 percentage of the loss in addition to the sum otherwise payable. See Oomp 
 St. Neb. 1903, c. 43, § 45; Civ. Code Ga. 1895, § 2140; Rev. St Tex. 1895, { 
 ^71. The constitutionality of these acts has been vigorously and persist- 
 ently assailed, but unsuccessfully. The Supreme Court has upheld the con- 
 stl^tionality of such statutes in Fidelity Mut Life Ass'n v. Mettler 185 U 
 S. 308, 22 Sup. Ct 662, 46 L. Ed. 922; Iowa Life Ins. Co. v. Lewis, 187 U S* 
 <i35. 23 Sup. Ct 126. 47 L. Ed. 204; Farmers' & Merchants' Ins. Ca ^ Dob-' 
 
 I 
 
484 
 
 THE STANDARD FIRE POLICY, 
 
 (Ch. 13 
 
 111 
 
 limiting the liability of the insurer to the actual cash value of the prop- 
 erty damaged or destroyed, would seem to be more or less needless, 
 since it adds nothing to the insurer's common-law rights, and is power- 
 less to prevent the operation of valued policy statutes. The value of 
 the property destroyed is ultimately a question for the jury, but the 
 policy provides for an estimate to be made by appraisers. This pro- 
 vision will be considered later. "'• It will also be noted that the policy 
 contains a rule for determining the value of property destroyed — that 
 it shall in no event exceed what it would cost the insured to repair or 
 replace the same with material of the same kind and like quality. This 
 is substantially the rule by which juries fix the measure of the insured's 
 damage. 
 
 Loss Occasioned by Municipal Regulations. 
 
 In the absence of the condition found in the standard policy as 
 quoted in the note below, ^* the insurer will be liable for loss suffered 
 by the owner of a building damaged by fire, by reason of building regu- 
 lations of the municipality in which the building is situated, which may 
 prohibit the reconstruction of buildings of the type insured, and thus 
 transform a partial into a total loss.^* Under the standard policy, 
 
 ney, 189 U. S. 301, 23 Sup. Ct 565, 47 L. Ed. 821. And the same conclusion 
 has been reached by all the state courts save that of Georgia. Union Cent. 
 Life Ins. O). v. Chowning, 86 Tex. 654, 26 S. W. 982, 24 L. R. A. 504; Fidel- 
 ity & Casualty Co. of New York v. Allibone, 90 Tex. 660, 40 S. W. 399; Brit- 
 ish America Assur. Co. v. Bradford, 60 Kan. 82, 55 Pac. 335; Insurance Co. 
 of North America v. Bachler, 44 Neb. 549, 62 N. W. 911; Lancashire Ins. Co. 
 V. Bush, 60 Neb. 116, 82 N. W. 313; Continental Fire Ins. Co. ▼. Whitaker 
 (Tenn. 190i) 79 S. W. 119. 
 
 The Georgia court was misled by Gulf, O. & S. F. R. Co. ▼. Ellis, 165 U. 
 S. 150, 17 Sup. Ct. 255, 41 L. Ed. 666, into holding such a statute imconstitu- 
 tional. See Phenix Ins. Co. v. Hart, 112 Ga. 765, 38 S. E. 67; Phoenix Ins. 
 Co. v. Schwartz, 115 Ga. 113, 41 S. B. 240, 57 L. R. A. 752, 90 Am. St Rep. 
 98. 
 
 Ts See post, § 178. 
 
 T4 "This company shall not be liable, beyond the actual ralue destroyed by 
 fire, for loss occasioned by ordinance or law regulating construction or re- 
 pair of buildings, or by interruption of business, manufacturing processes, or 
 otherwise; nor for any greater proportion of the value of plate glass, fres- 
 coes, and decorations than that which this policy shall bear to the whole in- 
 surance on the building described." 
 
 7»Larkin v. Insurance Co., 80 Minn. 527, 83 N. W. 409, 81 Am. St. Rep. 
 286. In this case It was said: **These authorities lay down the rule that 
 such ordinances are a part of the contract of insurance, and that the insurer 
 is bound thereby. This is in line with the general doctrine that, where the 
 parties contract upon a subject which is surrounded by statutory limitations 
 and requirements, they are presumed to have entered Into their engagements 
 with reference to such statute, and the same enters into and becomes a part 
 of such contract" Of course, under such circumstances the building will 
 not be considered a total loss unless so badly damaged as to be practically 
 
 §§ 176-177) MEASURE OF INSURER'S LIABILITY. 485 
 
 however, the insurer is clearly liable only for the sum that would be 
 required to restore the property to its original condition if such restora- 
 tion were allowed. 
 
 It is also to be observed that the standard policy carefully limits the 
 liability of the insurer for such fragile and easily damaged articles as 
 plate glass, frescoes, and decorations. 
 
 The Pro Rata Clause, 
 
 "This company shall not be liable under this policy for a greater pro- 
 portion of any loss on the described property, or for loss by and ex- 
 pense of removal from premises endangered by fire, than the amount 
 hereby insured shall bear to the whole insurance, whether valid or not, 
 or by solvent or insolvent insurers, covering such property, and the 
 extent of the application of the insurance under this policy or of the 
 contribution to be made by this company in case of loss, may be provided 
 for by agreement or condition written hereon or attached or appended 
 hereto. Liability for re-insurance shall be as specifically agreed here- 
 
 on. 
 
 Under concurrent policies that do not contain a limitation of this 
 kind, the insured may proceed against any one of the several insurers 
 to recover, within the limit of his insurance, the whole amount of loss 
 suffered, leaving the latter to prosecute his claim for contribution 
 against his co-insurers in a separate proceeding.^* It is to avoid such 
 circuity of action, and to render settlements among co-insurers more 
 easy and satisfactory, that the above condition is included within the 
 standard policy. The condition will be enforced in accordance with its 
 terms, even though it may work some hardship upon the insured.''^ 
 In Pennsylvania, however, a rather peculiar doctrine has grown up, in 
 accordance with which insurance is not deemed concurrent unless it 
 is also co-extensive. Thus, where a policy was issued to cover only a 
 part of property previously insured, it was held that, upon the destruc- 
 
 valueless without the repah-s so prohibited; but In fixing the insurer's lia- 
 bility the value of the material remaining must be deducted from the total 
 value of the uninjured building. Id. 
 
 T« Godin V. Assurance Co., 1 Burrows, 489; Norwich Union Fire Ins. Soc. 
 V. Wellhouse, 113 Ga. 970, 39 S. E. 397. Of course, if the amount of loss 
 should equal or exceed the total insurance, there could arise no question of 
 prorating or contribution. Bach insurer would be liable for the whole amount 
 
 of his policy. 
 
 7 7 The "whole insurance" of this condition is the sum of the face values 
 of all the policies written upon the property in question. And in apportion- 
 ing any loss all policies are to be included, even though some of them may 
 give only partial indemnity, by reason of provisions making the insured co- 
 insurer. Farmers' Feed Ck). v. Scottish Union & National Ins. Co., 173 N. Y. 
 241, 65 N. E. 1105 ; Stephenson v. Insurance Co., 116 Wis. 277, 93 N. W. 19. 
 
486 
 
 THB STANDARD FIBB POLICY. 
 
 (Ch. 13 
 
 APPRAISAL AND ARBITRATION. 
 
 487 
 
 I' 
 
 . i 
 
 tion of the property covered by both policies, there could be no pro- 
 rating of the loss, since the policies were not concurrent/* 
 
 It has been recently held in Kentucky that a condition of a policy 
 making the insured co-insurer, unless he maintained other insurance to 
 a stipulated amount, was void as opposed to the valued policy laws of 
 that state.^* 
 
 APPBAISAI. AND ARBITRATION. 
 
 178. In case of dispute as to the valne of property lost or damaged, It 
 is stipulated tliat appraisers shall be appointed, who, with an 
 umpire, shall make an award as to the amount of loss. Such 
 an appraisal and award, when required, is made a condition 
 precedent to any claim against the insurer. As such, it is valid, 
 in the absence of statute providing otherwise. 
 
 "In the event of disagreement as to the amount of loss the same 
 shall, as above provided, be ascertained by two competent and disin- 
 terested appraisers, the insured and this company each selecting one, ' 
 and the two so chosen shall first select a competent and disinterested 
 umpire ; the appraisers together shall then estimate and appraise the 
 loss, stating separately sound value and damage, and, failing to agree, 
 shall submit their differences to the umpire ; and the award in writing 
 of any two shall determine the amount of such loss ; the parties thereto 
 shall pay the appraiser respectively selected by them and shall bear 
 equally the expenses of the appraisal and umpire." 
 
 This provision for a settlement of disputes as to the value of property 
 destroyed, without a resort to litigation, is one much to be commended 
 But when made a condition precedent to bringing an action on the pol- 
 icy, as in the case of the standard policy, it is sometimes liable to abuse 
 by the insurer, and has frequently been the cause of vexatious litigation. 
 
 It is well settled that a clause intended to refer to arbitration the 
 whole question of the insurer's liability under the contract is void, as 
 ousting the jurisdiction of the court.'* If the matter referred is mere- 
 ly the amount of that liability, the condition is perfectly valid and will 
 be enforced." If, by the terms of the policy, compliance with the con- 
 
 T8 Meigs v. Insurance Co., 205 Pa. 378, 64 Atl. 1053; Clarke v. Assurance 
 Co., 146 Pa. 561, 23 Atl. 248, 15 L. R. A. 127, 28 Am. St Rep. 821; Sloat v. 
 Insurance Co., 49 Pa. 14, 88 Am. Dec. 477. But see, contra, OGDEN v. IN- 
 SURANCE CO., 50 N. Y. 388, 10 Am. Rep. 492. 
 
 T» Sachs V. Insurance Co. (Ky.) 67 S. W. 23. But see Stephenson v. Insui^ 
 ance Co., 116 Wis. 277, 93 N. W. 19. 
 
 soPhcBuix Ins. Co. v. Zlotky (Neb.) 92 N. W. 736; German- American Ins. 
 Co. v. Etherton, 25 Neb. 505, 41 N. W. 406; Hartford Fire Ins. Co. v. Hon 
 (Neb.) 92 N. W. 746, 60 L. R. A. 436 ; Leach v. Insurance Co., 68 N. H. 245. 
 
 «i Hamilton v. Insurance Co., 136 U. S. 242, 10 Sup. Ct 945, 34 L. Ed. 419; 
 Hanover Fire Ins. Co. v. Lewis, 28 Fla. 209, 10 South. 297; Mentz v. Insure 
 
 §g 178-179) 
 
 dition and the return of an award is expressly made a condition preced- 
 ent to the bringing of an action upon the policy, a failure on the part 
 of the insured to submit the question in dispute to arbitration, as agreed, 
 will be a good defense to an action on the policy." But if the agree- 
 ment to submit to arbitration is not so expressly made a condition 
 precedent, the insured may decline to comply with the condition, and 
 maintain his suit on the policy, thus rendering himself liable for a 
 breach of his collateral agreement to arbitrate." 
 
 As in the case of other awards, the award under this condition will 
 not be binding unless it has been rendered strictly .in accordance with 
 the terms of its submission, and by arbitrators who have considered the 
 evidence submitted in a fair and judicial manner. Thus, it was held 
 that when the insurer, acting under this condition, fraudulently ap- 
 pointed his own agent to represent him, and this agent procured the 
 selection of a person friendly to the insurer as umpire, the award re- 
 turned by such a board of arbitrators was not binding upon the insured, 
 who was allowed to maintain his action upon the policy, without refer- 
 ence to the award.'* 
 
 179. OPTION TO KEBXTILD— In order to protect tlio insurer against 
 unfairness in the appraisal and award, or in the proofs of loss, 
 the standard policy reserves to him the option to restore the 
 property damaged, or to purchase it at the appraised valuation. 
 An election by the insurer to rebuild or purchase gives rise to 
 a new and fixed liability, which can be enforced by the insured 
 in appropriate proceedings. 
 
 "It shall be optional, however, with this company to take all, or any 
 part, of the articles at such ascertained or appraised value, and also to 
 repair, rebuild, or replace the property lost or damaged with other of 
 like kind and quality within a reasonable time on giving notice, within 
 thirty days after the receipt of the proof herein required, of its inten- 
 tion so to do ; but there can be no abandonment to this company of the 
 property described." 
 
 ance Co., 79 Pa. 478, 21 Am. Rep. 80; Viney v. Bignold, 20 Q. B. Div. 172; 
 Scott V. Avery, 5 H. L. Gas. 811. 
 
 82 Hamilton v. Insurance Co., 136 U. S. 242, 10 Sup. Ct 945, 34 L. Ed. 419; 
 Fischer v. Insurance Co., 95 Me. 486, 50 Atl. 282, 85 Am. St Rep. 428; Ran- 
 dall V. Insurance Co., 10 Mont 340, 25 Pac. 953, 24 Am. St Rep. 50; Caledo- 
 nia Ins. Co. V. Traub, 83 Md. 524, 35 Atl. 13. 
 
 88 HAMILTON V. INSURANCE CO., 137 U. S. 370, 11 Sup. Ct 133, 34 L. 
 Ed. 708, Woodruff, Ins. Cas. 194; Birmingham Fire Ins. Co. v. Pulver, 128 
 111. 329, 18 N. B. 804, 9 Am. St Rep. 598; Seward v. Rochester, 109 N. Y. 164, 
 16 N. E. 348; Collins v. Locke, 4 App. Cas. 674. 
 
 84 Insurance Co. of North America v. Hegewald (Ind. Sup.) 66 N. El 902. 
 And see Kaiser v. Insurance Co.. 172 N. Y. 663, 65 N. £. 1118; HaU y. Assur- 
 ance Co., 133 Ala. 637, 32 South. 257. 
 
i88 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 13 
 
 i • 
 
 The insurer is also apt at times to suffer from the perverted valua- 
 tion made by appraisers friendly to the insured, or by an award ren- 
 dered by a packed board of arbitrators. While the insurer would have 
 the same right to avoid the award or appraisement, if unfairly made, 
 as would the insured, he would hardly be so successful in proving the 
 fraud before a jury. Therefore, the insurer seeks to escape prejudice 
 to his interests on account of unfair or fraudulent appraisers by reserv- 
 ing the option to take personal property damaged by fire at the valua- 
 tion assigned to it by such appraisers,*** or by the insured in his proof 
 of loss, or to rebuild or repair any building that may have been dam- 
 aged," Thus the provision operates as a wholesome check upon the 
 msured and his friends in estimating the value of damaged goods, and 
 should be given a reasonable construction. 
 
 Insurer^ s Election to Rebuild, 
 
 The insurer must exercise his option to rebuild fairly, and within 
 the time stipulated in tiie policy, or, in the absence of stipulation, 
 witiiin a reasonable time." He must give unmistakable notice of 
 his election to rebuild, and an election once made is irrevocable." 
 While the insurer may take advantage of repairs made by the insured 
 before notice of election, yet he cannot do so if he has unfairly al- 
 lowed the insured to proceed with repairs necessary to preserve the 
 property from further damage, when the latter in good faith believed 
 that the insurer did not intend himself to make repairs." Upon elect- 
 
 8» The Insurer must elect to take the damaged goods within a reasonable 
 time, which may be less than the stipulated thirty days. Thus, when the 
 insured had given due notice of a loss, it was held that a sale of the damaged 
 goods at auction eighteen days after the Are, and after public advertisement, 
 the insurer meanwhile having shown no disposition to take the goods, con- 
 stituted no defense to the insurer under this condition. Davis v. Insurance 
 Co., 158 N. Y. 688, 53 N. B. 1154. 
 
 8 « It is clear that such a right of option could not be claimed In the absence 
 of agreement WYNKOOP v. INSURANCE CO., 91 N. Y. 478, 43 Am. Rep. 
 686, Woodruff, Ins. Cas. 203; Hartford Fire Ins. Co. v. Peebles' Hotel Co., 27 
 C. C. A. 223, 82 Fed. 546, 54 U. S. App. 215; COMMONWEALTH INa CO. 
 V. SENNETT, 37 Pa. 205, 78 Am. Dec. 418. 
 
 87 Beals V. Insurance Co., 36 N. Y. 522; Insurance Co. of North America 
 V. Hope, 58 111. 75, 11 Am. Rep. 48; KeUy v. Sun Fire Office, 141 Pa. 10, 21 
 Atl. 447, 23 Am. St. Rep. 254. It is competent for the insurer, as a defense, 
 to show an extension of time allowed him by agreement with the insured' 
 Frauklin Fire Ins. Co. v. HamUl, 5 Md. 170; Home Mut Fh-e Ins. Co. v Gar^ 
 field, 60 lU. 124. 14 Am. Rep. 27; Haskius v. Insurance Co., 6 Gray (Mass.) 
 
 •» A request for arbitration amounts to an election to pay money in satis- 
 faction of the Insured's claim; and such an election cannot be afterwards re- 
 voked. Iowa Cent. Building & Loan Ass'n v. Merchants' & Bankers' Fire Ins 
 Co., 120 Iowa, 530, 94 N. W. 1100; Fire Ass'n of Philadelphia v. Rosenthal! 
 108 Pa. 474, 1 Atl. 303; Heilmann v. Insurance Co., 75 N. Y. 7. 
 
 89 Eliot Five Cents Sav. Bank v. Commercial Assur. Co., 142 Mass. 145, T 
 N. SL 550. And see Beals t. Insurance Co., 36 N. Y. 522. 
 
 .^^ 
 
 k& AFFECTED BY VALUED POLICY LAWS. 
 
 489 
 
 §180) 
 
 ing to rebuild, the former contract of insurance is discharged, and the 
 parties are deemed to have made a new agreement, under which the 
 insurer undertakes to restore the building to its former condition.*^ 
 Therefore, after such election, the insured cannot bring any action 
 upon the policy,*^ nor can the insurer claim the benefit of any conditions 
 in the policy, unless it be by reason of a ground of forfeiture, of which 
 he had no knowledge at the time of making his election.'* Unless 
 the policy has limited the cost of rebuilding to the amount of the in- 
 surance, the insurer, after electing to rebuild, can be compelled to per- 
 form his undertaking, even though the cost may exceed the oris^nal 
 amount of insurance. •• 
 
 f M 
 
 AS AFFECTED BY VALUED POLICY LAWS. 
 
 1 80. When the standard f onn Is nsed in those states in which a stand- 
 ard policy has not been adopted, any terms or conditions re- 
 png:nant to local statutes are invalid. Of especial importance 
 are the so-called "valued policy laws," existing in many states, 
 which are held to niake invalid those provisions of the standard 
 form, for determining the value of property totally destroyed, 
 for arbitration in case of total loss, and for repairing and 
 rebuilding under the same conditions* 
 
 In nearly half the states of the Union, statutes have been enacted 
 which provide that the amount of insurance written on the face of the 
 policy, and upon which premiums are paid, shall be conclusively pre- 
 sumed to be the value of insured realty in case of a total loss, provided 
 there has been no depreciation between the time of writing the policy 
 and the time of the loss, and also provided that the insured has prac- 
 ticed no fraud upon the insurer in overvaluing the property. These 
 are the usual provisions of such statutes, although their terms vary 
 
 •0 WYNKOOP V. INSURANCE CO., 91 N. Y. 478, 43 Am. Rep. 686, Wood- 
 ruff, Ins. Cas. 203; Hartford Fire Ins. Co. v. Peebles' Hotel Co., 27 C. C. A. 
 223, 82 Fed. 546, 54 U. S. App. 215; Morrell v. Insurance Co., 33 N. Y. 429, 88 
 Am. Dec. 396; Beals v. Insurance Co., 36 N. Y. 522. 
 
 •1 Hartford Fire Ins. Co. v. Peebles* Hotel Co., 27 C. C. A. 223, 82 Fed. 546, 
 54 U. S. App. 215. In this case the insured was allowed to sue for damages 
 owing to the inferior material used by the insurers in repairing the insured's 
 building. Beals v. Insurance Co., 36 N. Y. 522. Here the insured was not 
 allowed to recover on his policy because he refused to permit the insurers to 
 rebuild, which right they claimed by virtue of their policy. 
 
 82 WYNKOOP V. INSURANCE CO., 91 N. Y. 478, 43 Am. Rep. 686; Bersche 
 ▼. Insurance Co., 31 Mo. 546. 
 
 •3 Morrell v. Insurance Co., 33 N. Y. 429, 88 Am. Dec. 396; Fire Ass'n of 
 Philadelphia v. Rosenthal, 108 Pa. 474, 1 Atl. 303; Hartford Fire Ins. Co. ▼. 
 Peebles' Hotel Co., 27 C. C. A. 223, 82 Fed. 546, 54 U. S. App. 215; Heilmann 
 V. Insurance Co., 75 N. Y. 7; Stamps v. Insurance Co., 77 N. O. 209, 24 Am. 
 Rep. 443; Home Mut Fire Ins. Co. v. Garfield, 60 111. 124, 14 Am. Rep. 27. 
 
490 
 
 THE STANDARD FIRE POLICY, 
 
 (Ch. 13 
 
 considerably in the diflFerent states.** These statutes have been held 
 to be constitutional, and not to interfere with the freedom of con- 
 tract.»» 
 
 All insurances effected under the standard form of policy in the 
 states in which these laws exist are necessarily subject to them. In 
 fact, the provisions of these laws become as fully a part of the contracts 
 as if set forth in terms in the policies,"' and all conditions and terms in 
 the standard policy which are in any wise repugnant to the provisions 
 of such statutes are invalid.'^ The provisions of these statutes are 
 held to be in the interest of the public at large, and not merely for the 
 benefit of the insured.®* Hence they cannot be waived by him. An 
 
 •* The Kentucky valued policy law may be here given as an example (Ky. 
 St 1903, § 700): "That insurance companies that take fire or stonn risks on 
 real property in this commonwealth shall, on all policies issued after this act 
 takes effect (in case of total loss thereof by fire or storm), be liable for the 
 full estimated value of the property Insured, as the value is fixed In the face 
 of the policy; and in cases of partial loss of the property Insured, the liabil- 
 ity of the company shall not exceed the actual loss of the party Insured: pro- 
 vided, that the estimated value of the property insured may be diminished 
 to the extent of any depreciation in the value of the property occurring be- 
 tween the dates of the policy and the loss: and provided further, that the 
 insured shall be liable for any fraud he may practice in fixing the value of 
 the property, If the company be misled thereby." 
 
 »8 Orient Ing. Co. v. Daggs, 172 U. S. 557, 19 Sup. Ct 281, 43 L. Ed. 552, 
 affirming 136 Mo. 382, 38 S. W. 85, 35 L. R. A. 227, 58 Am. St. Rep. 638; Bug- 
 ger V. Insurance Co., 95 Tenn. 245, 32 S. W. 5, 28 L. R. A. 796; ^tna Ina. 
 Co. V. Tucker (Tenn.) 32 S. W. 9. 
 
 •« OSHKOSH GASLIGHT CO. v. GERMANIA FIRE INS. CO., 71 Wis. 454, 
 37 N. W. 819, 5 Am. St. Rep. 233; Reilly v. Insurance Co., 43 Wis. 449, 28 
 Am. Rep. 552; Milwaukee Mechanics' Ins. Co. v. Russell, 65 Ohio St 230, 62 
 N. E. 338, 56 L. R. A. 159. 
 
 »T Thompson v. Insurance Co., 45 Wis. 388; Insurance Co. of North Amer- 
 ica V. Bachler, 44 Neb. 549, 62 N. W. 911; Home Fire Ins. Co. v. Bean, 42 
 Neb. 537, 60 N. W. 907; Hartford Fire Ins. Co. v. Bourbon Co. Ct, 24 Ky. 
 Law Rep. 1850, 72 S. W. 739; Hlckerson v. Insurance Co., 96 Tenn. 193, 33 
 S. W. 1041, 32 L. R. A. 172; Dugger v. Insurance Co., 95 Tenn. 245, 32 S. W. 
 5, 28 L. R. A. 796; Reilly v. Insurance Co., 43 Wis. 449, 28 Am. Rep. 552; 
 Queen Ins. Co. v. Leslie, 47 Ohio St 409, 24 N. E. 1072; OSHKOSH GAS- 
 LIGHT CO. V. GERMANIA FIRE INS. CO., 71 Wis. 454, 37 N. W. 819, 5 Am. 
 St Rep. 233; Havens v. Insurance Co., 123 Mo. 403, 27 S. W. 718, 26 L. R. A. 
 107, 45 Am. St Rep. 570. In this case it was held that an agreement to con- 
 sider real property as personal property was invalid. Milwaukee Mechanics' 
 Ins. Co. V. Russell, 65 Ohio St 230, 62 N. E. 338, 56 L. R. A. 159; Bammessel 
 V. Insurance Co., 43 Wis. 463. In this case the insured was allowed to recov- 
 er the face value of his policy, that being the damages agreed upon by the 
 parties, although he knowingly and Intentionally stated the cash value of his 
 property to be greater than It actually was, which, by virtue of one of the 
 conditions In his policy, was to cause a forfeiture. To the same effect see 
 Cayon v. Insurance Co., 68 Wis. 510, 32 N. W. 540. 
 
 •8 Queen Ins. Co. v. Leslie, 47 Ohio St 409, 24 N. B. 1072; Thompson y. 
 
 AS AFFECTED BY VALUED POLICT LAWS. 
 
 491 
 
 § 180) 
 
 attempted waiver is absolutely void.®* Most of the provisions of the 
 standard policy intended to fix the amount of the insurer's liability for 
 a total loss are invalid in the states in which these valued policy laws 
 exist. Thus, it has been held that the condition limiting the liability 
 of the insurer to the cash value of the property at the time of the loss 
 is void.^®® So is the condition giving the insurer his option to re- 
 build, as being repugnant to the provision of the statute fixing the lia- 
 bility of the insurer at the amount named on the face of the policy.*®^ 
 In those states in which valued policy laws do not exist, the question 
 of whether a total loss has been suffered or not may be submitted to 
 the arbitrators, as well as the amount of damage suffered when the loss 
 was only partial.*®^ But under the valued policy acts it is held that 
 the submission of the question whether a total loss has been suffered 
 tn any given case is, in effect, to submit to the arbitrators the question 
 of the insurer's liability, thus ousting the jurisdiction of the courts.^® ^ 
 Hence in those states the arbitration condition of the standard policy 
 is valid as to partial losses, but not as to a total loss. 
 
 A total loss of the insured building exists when the result of the fire 
 is such as to render the property wholly unfit for use as a building, 
 however valuable it may be as mere material. Or, to put it otherwise, 
 
 Insurance Co., 45 Wis. 388; Pennsylvania Ins. Co. v. Drackett 63 Ohio St 
 41, 57 N. B. 962, 81 Am. St Rep. 608. 
 
 »» Reilly v. Insurance Co., 43 Wis. 449, 28 Am. Rep. 552; Queen Ins. Co. 
 V. Leslie, 47 Ohio St 409, 24 N. K 1072; Pennsylvania Ins. Co. v. Drackett, 
 63 Ohio St 41, 57 N. B. 962, 18 Am. St Rep. 608. 
 
 100 Hartford Fire Ins. Co. v. Bourbon Co. Ct., 24 Ky. Law Rep. 1850, 72 S. 
 W. 739. Also, see Queen Ins. Co. v. Leslie, 47 Ohio St 409, 24 N. B. 1072; 
 Hlckerson v. Insurance Co., 96 Tenn. 193, 33 S. W. 1041, 32 L. R. A. 172; 
 Dugger V. Insurance Co., 95 Tenn. 245, 32 S. W. 5, 28 L. R. A. 796. 
 
 101 Hartford Fire Ins. Co. v. Bourbon Co. Ct, 24 Ky. Law Rep. 1850, 72 S. 
 W. 739; Milwaukee Mechanics' Ins. Co. v. Russell, 65 Ohio St 230, 62 N. E. 
 338, 56 L. R. A. 159. But see, contra, Temple v. Insurance Co., 109 Wis. 372. 
 85 N. W. 361. 
 
 102 Williamson v. Insurance Co., 58 G. O. A. 241, 122 Fed. 59; Rutter v. In- 
 surance Co. (Ala.) 35 South. 33; Chippewa Lumber Co. v. Phenix Ins. Co., 
 80 Mich. 116, 44 N. W. 1055; Adams v. Insurance Co., 85 Iowa, 6, 51 N. W. 
 1149. 
 
 108 This Is soundly held, since, In case of total loss, the liability of the In- 
 surer is fixed by statute. Hartford Fire Ins. Co. v. Bourbon Co. Ct, 24 Ky. 
 Law Rep. 1850, 72 S. W. 739; Thompson v. Insurance Co., 43 Wis. 459. Nor 
 does consent to arbitrate estop the insured to claim a total loss as provided 
 for by statute. Pennsylvania Fire Ins. Co. v. Drackett 63 Ohio St 41, 57 N. 
 El 962, 81 Am. St Rep. 608. And see Merchants* Ins. Co. v. Stephens, 22 Ky. 
 Law R^. 999, 59 S. W. 511; Home Fire Ins. Co. v. Bean, 42 Neb. 537, 60 N. 
 W. 907; Daggs v. Insurance Co., 136 Mo. 382, 38 S. W. 85, 35 L. R. A. 227, 58 
 Am. St Rep. 638; Seyk v. Insurance Co., 74 Wis. 67, 41 N. W. 443, 3 L. R. A. 
 523. In this case the jury deducted from the insurance the value of the brick 
 and other material left from the building burned. Queen Ins. Co. v. Leslie. 
 47 Ohio St 409, 24 N. K 1072. 
 
492 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 13 
 
 if any portion of the building left standing could be utilized by a ju- 
 dicious builder in the proper restoration of the building, the loss is not 
 total; but when the standing walls are in such a condition that the 
 owner, in deciding to rebuild, apart from any question of insurance, 
 would tear the walls down to the level of the foundation, a total loss 
 IS said to exist, however imposing may be the appearance of the 
 ruins.^®* 
 
 DOCUMISXTS MADE PART OP CONTBACT BY REFEREITOB. 
 
 181. The provisions of the standard poUcy making surveys, etc., ^^ 
 ferred to in the poUoy, or regnlations of a mutual company, 
 part of the contract, do not add anything to the legal effect of 
 such references and regulations, save in constituting such sur- 
 reys, etc., warranties. 
 
 "If an application, survey, plan, or description of property be re- 
 ferred to in this policy it shall be a part of this contract and a warranty 
 by the insured. ♦ * * If this policy be made by a mutual or other 
 company having special regulations lawfully applicable to its organiza- 
 tion, membership, policies or contracts of insurance, such regulations 
 shall apply to and form a part of this policy as the same may be written 
 or pnnted upon, attached, or appended hereto." 
 
 As we have already seen in a preceding chapter,"' plans, surveys, 
 and other documents descriptive of the risk may be made a part of the 
 contract by proper reference. Therefore the condition above quoted 
 
 w"^,?*^'''^ ^^""^ ^'*^* ^°- ''' Bourbon Co. Ct. 24 Ky. Law Rep. 1850. 72 S. 
 W. i39; Pennsylvania Fire Ins. Co. v. Draclcett, 63 Ohio St 57. 57 N. B. 962. 
 «1 Am. St. Rep. 608; Oorbett v. Insurance Co.. 155 N. Y. 389, 50 N. B. 282 41 
 .;-T .^\^^^*«^^^^°^ ^- IJisurance Co.. 123 Mo. 403. 27 S. W. 718, 26 L. r! A. 
 w ct« ^?V ^ ^^^' ^"^^^ German Fire Ins. Co. v. Eddy, 36 Neb. 461. 54 N. 
 w. 85b, 19 L. R. A. 707; Seyk v. Insurance Co., 74 Wis. 67. 41 N. W 443 3 
 L. R A. 523; Palatine Ins. Co. v. Weiss, 22 Ky. Law Rep. 994, 59 S. W 509; 
 Royal Ins. Co. v. Mclntyre, 90 Tex. 170, 37 S. W. 1068. 35 L. R. A. 672. 59 
 Am. St. Rep. 797. In this case the court said, if any part of the building Is 
 standing after the fire, the rule applied to ascertaining if it is a total loss or 
 not is whether or not such remaining portions would be utilized by a "rea- 
 sonably prudent owner." who was uninsured, in restoring the building to its 
 original condition. But see O'Keefe v. Insurance Co., 140 Mo. 558, 41 S W 
 922 39 L. R. A. 819. It was said that a total loss existed even if the portions 
 of the walls which remained standing could be utilized, if to utilize them 
 would cost as much as building them anew. Oshkosh Packing & Provision 
 Co. v. Mercantile Ins. Co. (C. C.) 31 Fed. 200; Insurance Co. of North Amer- 
 ica v. Bachler, 44 Neb. 549. 62 N. W. 911; Home Fire Ins. Go v Bean 42 
 Neb. 537, 60 N. W. 907; Hamburg-Bremen Fire Ins. Co. v. Gariington 66 Tex 
 103, 18 S. W. 337, 59 Am. Rep. 613; Huck ▼. Insurance Co., 127 Mass. 306. 34 
 Am. Rep. 373. ^ 
 
 io« See ante, p. 183. 
 
 §182) 
 
 AUTHORITY OF AGENTS — WAIVEBS. 
 
 493 
 
 probably does not add anything to the binding effect of such a refer- 
 ence, for it has been held that such documents do not, under this clause, 
 become a part of the contract, unless the reference is such as to indicate 
 the intention of the parties that they should be so made.'" Likewise, 
 the provision making the regulations of mutual companies, as attached 
 to the policy, a part thereof, amounts to nothing more than incorpo- 
 rating such regulations into the contract by reference. 
 
 f r'^ 
 
 AUTHORITY OF AGENTS— WAIVERS. 
 
 182. The provisions limiting the powers of agents of the insnrer oper- 
 ate merely as notice to the insured of the limitations upon such 
 powers, and are binding only in so far as they are kept true in 
 fact. Likewise, restrictions imposed upon the methods and 
 power of waiving conditions have no further effect than to give 
 notice of the existence of such restrictions if they actually 
 exist. 
 
 "In any matter relating to this insurance no person, unless duly au- 
 thorized in writing, shall be deemed the agent of this company." 
 
 ''This company shall not be held to have waived any provision or 
 condition of this policy or any forfeiture thereof by any requirement, 
 act, or proceeding on its part relating to the appraisal or to any exam- 
 ination herein provided for." 
 
 "This policy is made and accepted subject to the foregoing stipula- 
 tions and conditions, together with such other provisions, agreements, 
 or conditions as may be indorsed hereon or added hereto, and no officer, 
 agent, or other representative of this company shall have power to 
 waive any provision or condition of this policy except such as by the 
 terms of this policy may be the subject of agreement indorsed hereon 
 or added hereto, and as to such provisions and conditions no officer, 
 agent, or representative shall have such power or be deemed or held to 
 have waived such provisions or conditions unless such waiver, if any, 
 shall be written upon or attached hereto, nor shall any privilege or per- 
 mission affecting the insurance under this policy exist or be claimed by 
 the insured unless so written or attached." 
 
 Principles covering the determination of the extent of the authority 
 of insurance agents, and of their right to waive conditions of the pol- 
 icy, have already been fully treated."^ It may be stated here, however, 
 that the condition in the standard policy stipulating that "no person 
 shall be agent of the insurer unless authorized in writing" has no con- 
 tractual significance whatever. It does amount to notice to the insured, 
 
 »•• See Vilas v. Insurance CJo., 72 N. Y. 590, 28 Am. Bep. 186; Lft Belle ▼. 
 Insurance Soc, 34 N. B. 51& 
 ^•T See ante, p. 322. 
 
 
494 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 13 
 
 and, as such, is binding on him, if true ; otherwise not. The same gen- 
 eral statement may be made with regard to the limitations imposed by 
 the policy upon the power of any representative of the company to 
 waive any of its conditions except in the prescribed manner. Such 
 hmitations are operative only so far as they are kept true. If any agent 
 has been in fact given power to waive this stipulation, it becomes im- 
 material.^®* 
 
 The stipulation that the company shall not be deemed to have waived 
 a right to claim a forfeiture by taking part in a tentative effort to ad^ 
 just the loss is a reasonable and valuable provision, inasmuch as, in its 
 absence, some states have held that such a participation by the insurer 
 m attempting to adjust the loss constituted a waiver of any known con- 
 dition of forfeiture."* 
 
 CANCELLATION OP POLICY. 
 
 183. Under the cancellation clause of the standard policy, the policy 
 is terminated, as a contract, upon the expiration of the five days 
 after notice of an election to cancel. No act of canceUation is 
 necessary, though it has been held otherwise; nor, by the better 
 authority, is the return of the unearned premium a condition 
 precedent to cancellation. 
 
 "This policy shall be canceled at any time at the request of the in- 
 sured; or by the company by giving five days' notice of such cancella- 
 Uon. If this policy shall be canceled as hereinbefore provided, or be- 
 come void or cease, the premium having been actually paid, the un- 
 earned portion shall be returned on surrender of this policy or last re- 
 newal, this company retaining the customary short rate; except that 
 when this policy is canceled by this company by giving notice it shall 
 retain only the pro rata premium." 
 
 The cancellation clause of the standard form of policy seems so 
 clearly worded that one is surprised to see that disputes have arisen 
 as to its construction. It is held by the better authority that, after the 
 expiration of the five-days notice required in case the cancellation is by 
 the company, the insurance is deemed to be terminated and inoperative, 
 without furtlier act on the part of the insurer or any actual cancellation 
 of the policy."^ The Kentucky court, however, in its zeal to protect 
 the insured, has recently decided that this condition requires of the in- 
 
 108 See ante, p. 324. Also, Virginia Fire & Marine Ins. Co. v. Richmond 
 Mica Co. (Va. 1904) 46 S. E. 463. 
 
 io» Liverpool, London & Globe Ins. Co. v. Verdier, 33 Mich. 138. 
 
 "0 Sehwarzschlld & Sulzberger Co. v. Phoenix Ins. Co., 124 Fed. 52, 59 C. 
 C. A. 572. In this case a telegraphic notice was held to terminate the* policy 
 fire days thereafter, although the poUcy had not been surrendered or the pro 
 rata premium repaid. 
 
 8 183) 
 
 CANCELLATION Or POLICY. 
 
 495 
 
 surer desiring to terminate the insurance that he shall first cancel the 
 policy and return the pro rata premium, when the insurance will be 
 terminated after five days* notice of such cancellation.^^* Such a con- 
 struction seems to stretch the language of the condition almost beyond 
 recognition. 
 
 By the weight of authority the repayment of the unearned premium 
 is not, under the standard policy, a condition precedent to the termina- 
 tion of the insurance by the insurer.*** Such repayment becomes due 
 only upon surrender of the policy. The New York Court of Appeals 
 has, however, in a very unsatisfactory opinion, adopted the contrary 
 rule.**' 
 
 The right to cancel, being derived only from the contract, must be 
 exercised strictly in accordance with the terms of the contract. Noth- 
 ing less will terminate the insurance without the consent of the other 
 party.*** The notice given must be in the form of an explicit notifica- 
 tion, not of a request or of a general expression of intention; **• and it 
 must be given to the insured or to his agent authorized to receive such 
 notice.**' It must also be given in good faith.*** Of course, no right 
 of cancellation exists after a loss.*** 
 
 i 
 
 111 Continental Ins. Co. v. Daniel (Ky.) 78 S. W. 866. 
 
 112 Sehwarzschlld & Sulzberger Co. v. Phoenix Ins. Co., 124 Fed. 52, 59 C. 
 C. A. 572; El Paso Reduction Co. v. Hartford Fire Ins. Co. (C. C.) 121 Fed. 
 937; Newark Fire Ins. Co. v. Sammons, 11 111. App. 230. 
 
 118 Tisdell V. Insurance Co., 155 N. Y. 163, 49 N. E. 664, 40 L. R. A. 765; 
 following Nitsch v. Insurance Co., 152 N. Y. 635, 46 N. E. 1149. 
 
 11* Wicks Bros. v. Scottish Union & National Ins. Co., 107 Wis. 606, 83 N. 
 W. 781. 
 
 115 JOHN R. DAVIS LUMBER CO. v. HARTFORD INS. CO., 95 Wis. 226, 
 70 N. W. 84, 37 L. R. A. 131. See, also. State Ins. Co. v. Hale (Neb.) 95 N. 
 W. 473, in which an illegible notice was held insufficient 
 
 ii« Edwards v. Insurance Co., 101 Mo. App. 45, 73 S. W. 886. But the un- 
 authorized act of an agent in consenting to cancellation is ratified by the in- 
 sured when he accepts a substitute policy in place of the one canceled. Lar- 
 sen V. Insurance Co. (111.) 70 N. E. 31; Amfeld t. Assurance Co., 172 Pa. 605. 
 34 Atl. 580. 
 
 117 Thus, an attempted cancellation upon the approach of a conflagration, 
 and when the insured property was in imminent danger, would not avail the 
 insurer, though complying with the letter of the contract See Home Ins. 
 Co. v. Heck, 65 111. 111. 
 
 lit Massasoit Steam Mills Ca ▼. Western Assur. Go, 125 Masa. IIOL 
 
496 
 
 THB STANDARD FIEB POLICY. 
 
 (Ch. 13 
 
 KOTICE AND PROOFS OF LOSS. 
 
 184. NOTICE OF LOSS ia held to be ''immediate," within the require- 
 
 ment of the standard policy, when it is given as soon after the 
 fire as is reasonably possible under ezisting oironmstanees, in 
 the exercise of due diligence. 
 
 185. PROOFS OF LOSS satisfactory to the insurer are required to be 
 
 given. But the insurer must be satisfied when the insured has 
 done all in his power to furnish the information stipulated for 
 in the policy. It is the duty of the dissatisfied insurer to indi- 
 cate the defects in the proofs of loss as given, so that the de- 
 ficiencies may be supplied. His retention of the defective 
 proofs constitutes a waiver of his objections. 
 
 186. The insurer's denial of all liability under the policy constitutes 
 
 a waiver of his right to receive proofs of loss. 
 
 187. The requirement of the standard policy that proofs of loss shall 
 
 be given within sixty days is, by the better authority, not a 
 condition precedent, the breach of which defeats all rights of 
 the insured under the policy. Time is not regarded as of the 
 essence of the condition, which is to be construed as suspending 
 the right of action until the expiration of the specified period 
 after receipt by the insurer of satisfactory proofs of loss. 
 
 188. Failure to give notice and proofs of loss as required will be ex- 
 
 eused when it is due to the death or incapacity of the insured, 
 or to any other circumstance rendering compliance with the 
 condition impossible. 
 
 189. Notice and proofs of loss can be given to any agent of the in- 
 
 surer expressly or in&pliedly authorized to receive them. They 
 are to be given by the insured himself, or, it seems, if he im 
 dead, absent, or incapacitated, by some one in his behalf. 
 
 The lengthy provisions of the standard policy requiring notice and 
 proofs of loss are set forth in the note below.^^* 
 
 :ii,' 
 
 ii» "If fire occtir the insured ihall give Immediate notice of any loss there- 
 by in writing to this company, protect the property from further damage, 
 forthwith separate the damaged and undamaged personal property, put it in 
 the best possible order, make a complete inventory of the same, stating the 
 quantity and cost of each article and the amount claimed thereon ; and, within 
 sixty days after the fire, unless such time is extended in writing by this com- 
 pany, shall render a statement to this company, signed and sworn to by said 
 insured, stating the knowledge and belief of the insured as to the time and 
 origin of the fire; the interest of the insured and of all others in the property; 
 the cash value of each item thereof and the amount of loss thereon; aU in- 
 cumbrances thereon; all other insurance, whether valid or not, covering any of 
 said property; and a copy of all the descriptions and schedules In all policies; 
 any changes in the title, use, occupation, location, possession, or exposures of 
 said property since the issuing of this policy; by whom and for what purpose 
 any building herein described and the several parts thereof were occupied at 
 the time of fire; and shall furnish, if required, verified plans and specifica- 
 tions of any building, fixtures, or machinery destroyed or damaged; • • • 
 
 §§ 184r-189) 
 
 NOTICE AND PROOFS OF LOSS. 
 
 497 
 
 General Purpose and Nature of Conditions. 
 
 It should be first observed by the reader that these conditions, while 
 in the form of conditions precedent, are in nature conditions subsequent, 
 the breach of which affects a right that has already accrued. Until a 
 loss occurs through a peril covered by the policy, the insurer incurs no 
 liability under his contract, but with the happening of the capital fact 
 of loss his liability arises and becomes properly fixed. All those condi- 
 tions of the policy making requirements of the insured after the loss are 
 intended merely for evidential purposes, and do not properly form any 
 part of the conditions of liability. That the insurer should have the evi- 
 dence that he stipulates for is most reasonable and proper, and it is also 
 reasonable that he should be allowed to stipulate for a penalty to be im- 
 posed upon the insured if he fails to give the evidence required by the 
 contract But all of these conditions concern matters after the loss. 
 When they contain provisions of forfeiture they must be regarded as 
 penalties defeating a right that has already accrued. Such being the 
 nature of these conditions, it is manifest that the general rules of con- 
 struction require that they shall be construed with much less strictness 
 than those conditions that operate prior to the loss. A condition sub- 
 sequent should never be construed as defeating an already vested right, 
 unless the intention of the parties to create a forfeiture is unquestion- 
 able. In accordance with these principles, we find the majority of the 
 courts most unwilling to give such a construction to these subsequent 
 conditions as will defeat the rights of the insured, unless the facts of 
 the case show fraud or clear injustice to the insurer. 
 
 This provision of the standard policy requires that notice in writing 
 of the fire shall be given immediately, and that a carefully drawn state- 
 ment describing the character and extent of the loss, and sworn to by 
 the insured, shall be given within sixty days after the fire. The re- 
 quirement of notice is intended merely to give the insurer information 
 upon which he may act promptly in protecting the property from fur- 
 ther loss for which he may be liable, or to enable him to take any other 
 immediate steps that his interests may require. The statement of loss 
 is, however, a very much more formal requirement, and intended not 
 only to give the insurer information by which he may determine the 
 extent of his liability, but also to afford to him a means of detecting 
 
 and the loss shall not become payable until after the notice, ascertainment, 
 estimate, and satisfactory proof of the loss herein required have been receiv- 
 ed by this company, including an award by appraisers when appraisal has 
 been required. • ♦ • 
 
 "No suit or action on this policy, for the recovery of any claim, shall be 
 sustainable in any court of law or equity until after full compliance Dy the 
 insured with all the foregoing requirements^ not onleBS commenced within 
 twelve months next after the fire.** 
 Vance Ins. — 82 
 
498 
 
 THE STANDARD FIBB POLICY. 
 
 (Ch. 13 
 
 184-189) 
 
 NOTICE AND PROOFS OF LOS8. 
 
 499 
 
 III 
 
 liH 
 
 I 
 
 any fraud that may have been practiced upon him, and to operate as a 
 check upon extravagant claims. 
 
 Immediate Notice of Loss, 
 
 We may easily derive, from the principles stated above, the rule that 
 the courts construe the requirement of immediate notice liberally in 
 favor of the insured. In using the term "immediate" the parties clearly 
 do not intend to impose upon the insured any impossible requirements, 
 and therefore notice will be considered as immediate if it has been given 
 as soon as circimistances permitted the insured, in the exercise of rea- 
 sonable diligence, to communicate it. The question of whether, in any 
 given case, notice has been given within such reasonable time as to be 
 immediate, is for the jury,^'* although there may be some cases in 
 which the delay is so clearly unreasonable as to make the breach of 
 condition a question of law.^*^ No rule can be given fixing even ap- 
 proximately a time which shall be deemed to be reasonable for all cases. 
 Thus, it has been held that a delay of fifty-three days in giving notice 
 of loss was excusable, and not a breach of this condition, in a case in 
 which the policy had come into the hands of an assignee and had been 
 lost at the time of the fire. The assignee, not having before him the 
 policy, and being ignorant of its conditions, was unable to give notice 
 until the policy was found some fifty days after the fire. The notice 
 given within three days after such discovery was considered to be im- 
 mediate, within the condition of the policy.^*' In this case, however, 
 it was proved that the insurer had actual notice of the fire on the day 
 that it had occurred. So, it has been held that a delay of thirty-five 
 days, when excusable under the circumstances, might not be considered 
 a breach of this condition.^** In other cases it has been held that a 
 delay of eleven days,*** or even of forty-eight hours,*** without suffi- 
 cient reason, constituted a breach of this condition requiring immediate 
 notice. Conditions in other forms of policies requiring that notice be 
 given "forthwith," or "as soon as possible," are likewise construed to 
 mean that the notice shall be given within a reasonable time.**' 
 
 i«o Solomon v. Insurance Co., 160 N. Y. 595, 55 N. B. 279, 46 L. R. A. 682, 
 73 Am. St Rep. 707; Fletcher v. Insurance Co., 79 Minn. 337, 82 N. W. 647. 
 
 "1 BRMENTROUT v. INSURANCE CO., 63 Minn. 305, 65 N. W. 635, 30 
 L. R. A. 346, 56 Am. St Rep. 481, Woodruff, Ins. Cas. 487. 
 
 122 Solomon y. Insurance Co., 160 N. Y. 595, 55 N. B. 279, 46 L. B. A. 68% 
 73 Am. St Rep. 707. 
 
 "» Knickerbocker Ins. Co. v. McGinnis, 87 111. 70. 
 
 is« Trask y. Insurance Co., 29 Pa. 198, 72 Am. Dec. 622, 
 
 »«» Brown y. London Assur. Co., 40 Hun, 101. 
 
 i»« See Mason v. Insurance Co., 82 Minn. 336, 85 N. W. 13, 83 Am. St Rep. 
 433; CENTRAL CITY INa CO. v. GATES, 86 Ala. 558, 6 South. 83, 11 Am. 
 St Rep. 67; Harnden v. Insurance Co., 164 Mass. 382, 41 N. E. 658, 49 Am. 
 St Rep. 467. A requirement that proofs of loss should be furnished *'forth' 
 
 Since notice of loss is required merely for the purpose of giving in- 
 formation to the insurer, the insurer who has in some other wav ob- 
 tained full information of the happening of the loss cannot complain 
 that he has not received formal notice. The requirement that the no- 
 tice shall be in writing will not be strictly enforced. Thus, if the in- 
 surer sends an adjuster immediately after the fire to look into the ex- 
 tent of the loss, he cannot afterwards be heard to claim that he had no 
 notice of the loss.^*' 
 
 When no Policy has Issued. 
 
 As we have seen above, oral insurances are valid and enforceable. 
 They generally, however, contemplate the subsequent issue of a policy. 
 There is a difference of opinion as to whether one who has insured un- 
 der an oral contract is obliged to give notice or proofs of loss in accord- 
 ance with conditions of the contemplated policy. By the weight of 
 authority, however, the insured is not chargeable with knowledge of 
 and assent to the conditions of the policy which he has never receiv- 
 ed.^ ^® Certainly, if the insurer denies liability upon the contract, and 
 refuses to deliver the policy as agreed, it would seem that the insured 
 should not rest under any obligation to comply with the conditions thus 
 repudiated by the insurer.* *• The contrary has recently been held in 
 New York, but this decision, by a divided court, would seem to be 
 clearly mistaken.**® 
 
 Proofs of Loss must be Satisfactory, 
 
 The standard policy sets forth with much detail and precision the 
 duties of the insured after the occurrence of a fire. These include the 
 rendering, within sixty days after the fire, of a sworn statement upon 
 numerous specified subjects connected with the insurance and the loss. 
 If it is possible for the insured to give all the information that he has 
 agreed to give, he must do so before he can be entitled to hold the in- 
 surer liable for the loss that has occurred.*'* If the statement as ren- 
 
 wlth" was held to be satisfied, under the circumstances of the case, by ren- 
 dering such proofs eighteen days after the fire. Rines v. Insurance Co., 78 
 Minn. 46, 80 N. W. 839. 
 
 "7 Partridge v. Insurance Co., 162 N. Y. 597, 57 N. B. 1119. 
 
 128 Tayloe v. Insurance Co., 9 How. (U. S.) 390, 13 L. Ed. 187; Wooddy v. 
 Insurance Co., 31 Grat (Va.) 362, 31 Am. Rep. 732; Gold v. Insurance Co., 73 
 Cal. 216, 14 Pac. 786; Nebraska & Iowa Ins. Co. v. Seivers, 27 Neb. 541, 43 
 N. W. 351. But see, contra, Barre v. Insurance Co., 76 Iowa, 609, 41 N. W. 
 373. 
 
 i2» Weeks y. Insurance Co., 29 Fed. Cas. 581, No. 17,353; CAMPBELL y. 
 
 INSURANCE CO., 73 Wis. 100, 40 N. W. 661; Baile y. Insurance Co., 73 Mo. 
 371. 
 
 1*0 HICKS y. ASSURANCE CO., 162 N. Y. 284, 56 N. B. 743, 48 L. R. A. 
 424. 
 
 1*1 Parks y. Insurance Co., 106 Iowa, 402, 76 N. W. 743; BuCTalo Loan, 
 
500 
 
 THE STANDARD FIRE rOLICT. 
 
 (Ch. 13 
 
 NOTICE AND PBOOFS OF LOSS. 
 
 501 
 
 II 
 
 'III 
 
 
 dered by the insured does not contain all the information that the policy 
 requires to be given, and which it is in the power of the insured to give, 
 the insurer has a right to reject the statement as insufficient/^* But 
 it is his duty to make his objections promptly and specifically, so as to 
 give the insured an opportunity to make such corrections as will render 
 the statement satisfactory. If the insurer fails to make his objection 
 within due time, and retains the statement, he will be deemed to have 
 waived his right to object.^^^ 
 
 While the insurer has a right to reject the proofs of loss if they are 
 not satisfactory, he may not set up for himself an arbitrary standard 
 of satisfaction. The courts will deem the proofs satisfactory to the in- 
 surer if, under all the circumstances, the insurer ought to have been 
 satisfied with them.*'* Substantial compliance with the requirements 
 will always be deemed sufficient, even though there may be immaterial 
 literal defects in the statement rendered. Accordingly, when it has be- 
 come impossible, for any reason, to g^ve information stipulated for, the 
 failure to give that information will not render the statement of loss 
 defective.*'' Thus, a failure on the part of the insured to make a com- 
 plete inventory of goods damaged by fire was held not to make the 
 statement of loss insufficient, where a portion of the goods had been 
 entirely destroyed, so that it was impossible for them to be listed, and 
 the remainder of the damaged goods had already been inventoried by 
 representatives of the insurer and the insured.*'* And a failure to in- 
 clude in the statement two policies covering the property destroyed, 
 which had been offered to the insured but refused, was held not to con- 
 stitute a breach of the requirement that "all other insurance, whether 
 valid or not, covering any of the said property," should be reported.*'^ 
 So, the stipulation that "the interest of the insured and of all others in 
 the property" shall be stated is satisfied by a statement of the interest 
 at the time of the fire, even though a change may have taken place in 
 that interest subsequently.* •• 
 
 Trust & Safe-Deposit Co. v. Knights Templar & Masonic Mut. Aid Ass'n, 120 
 N. Y. 450, 27 N. E. 942, 22 Am. St. Rep. 839. 
 
 182 Buffalo Loan, Trust & Safe-Deposit Co. v. Knights Templar & Masonic 
 Mut. Aid Ass'n, 126 N. Y. 450, 27 N. E. 942, 22 Am. St Rep. 839; Fowle v. 
 Insurance Co., 122 Mass. 191, 23 Am. Rep. 308. 
 
 i«» Welsh V. Assurance Co., 151 Pa. 607, 25 Atl. 142, 31 Am. St Rep. 786. 
 
 i84Braker v. Association, 27 App. Div. 234, 50 N. Y. Supp. 547; Flyn v. 
 Association, 152 Mass. 288, 25 N. B. 716. 
 
 188 Sun Mut Ins. Co. v. Crist, 39 S. W. 837, 19 Ky. Law Rep. 305; Roches- 
 ter Loan & Banking Co. v. Liberty Ins. Co., 44 Neb. 537, 62 N. W. 877, 48 Am. 
 St Rep. 745; Boyle v. Insurance Co., 169 Pa. 349, 32 Atl. 553. 
 
 18 « Davis v. Insurance Co., 157 N. Y. 685, 51 N. E. 1090. 
 
 18 T Partridge v. Insurance Co., 162 N. Y. 597, 57 N. E. 1119. 
 
 Its Mauck T. Insurance Co. (Del. Super.) 54 AtL 952. 
 
 §§ 184-189) 
 
 Time within Which Proofs of Loss must be Given. 
 
 The periods within which proofs of loss must be given vary in dif- 
 ferent forms of policies. That specified in the standard policy is sixty 
 days. "Sixty days after the fire" means, however, sixty days after the 
 end of the fire, and not after its beginning."* The sixty-day period 
 does not begin to run until the ruins are in such a condition as to per- 
 mit an examination of the damaged goods.^*^ By the weight of au- 
 thority, the condition is satisfied if the proofs of loss are mailed withm 
 the specified period, even though they may not be received by the m- 
 surer until after the expiration of that period.^" The New York de- 
 cisions, however, hold that the proofs must be received within the sixty 
 days, it being contended that the word "render," used in the standard 
 policy, necessarily implies a delivery."* The former rule seems to be 
 more in accordance with the analogies of the law and the general rules 
 of construction applicable to insurance policies. 
 
 Effect of the Failure to Comply with These Conditions. 
 
 These conditions are reasonable and valid, and substantial compliance 
 with them is undoubtedly a condition precedent to the maintenance of 
 any action under the policy."' But a different question arises when 
 we come to consider what is the effect of the failure to render proofs 
 of loss within the period specified. On this point there is much conflict 
 in the cases, which, however, is partly due to variations in the terms of 
 the different policies that have been before the courts for construction. 
 For purposes of clearness in examining the cases we may well divide 
 them into four classes, in accordance with the different language used 
 in the policies in describing the effect of a failure to comply strictly with 
 
 these requirements. 
 
 (1) Many policies, especially tthe older forms, do not attempt to im- 
 pose any penalty in case of failure to furnish proofs of loss as stipu- 
 lated. In such cases it is manifest that the obligation to furnish the 
 proofs of loss is but collateral to the main contract of insurance, so that 
 a failure to perform that obligation will not in any wise affect the right 
 
 189 National Wall Paper Co. ▼. Associated Mfrs.' Mut Fire Ins. Corp., 175 
 N. Y. 226, 67 N. B. 440. 
 
 140 Id. 
 
 141 Heusinkveld t. Insurance Co., 106 Iowa, 229, 76 N. W. 696; Pennypack- 
 er V. Insurance Co., 80 Iowa. 56, 45 N. W. 408, 8 L. R. A. 236, 20 Am. St Rep. 
 395; Manufacturers' & Merchants' Mut Ins. Co. v. Zeitinger, 168 lU. 286, 48 
 N. E. 179, 61 Am. St Rep. 105; Badger v. Insurance Co.. 49 Wis. 389, 5 N. 
 
 W. 848. 
 
 1*2 Peabody v. Satterlee, 166 N. Y. 174, 59 N. E. 818, 52 L. R. A. 9o6, re- 
 versing the lower court which had held that mailing proofs of loss on the six- 
 tieth day after the fire, when they were received the following day, was a suffi- 
 cient compliance with this condition. See 36 App. Div. 426, 55 N. Y. Supp. 363. 
 
 i*»In some states these conditions are made invalid by statutory enact- 
 ment Maryland Casualty Co. v. Hudgins (Tex. Civ. App.) 72 S. W. 1047. 
 
 ■RBSBI 
 
502 
 
 THE STANDARD PIBB POLICY, 
 
 (Ch. 13 
 
 of the insured to enforce his claim against the insurer under the policy, 
 although he in turn might be subjected to an action for breach of his 
 collateral agreement.^** 
 
 (2) Other policies contain an express provision that a failure to com- 
 ply with the condition requiring proofs of loss within a specified period 
 shall render the policy void. There can be no question, in cases arising 
 under such policies, that a failure to furnish the proofs within the pe- 
 riod agreed absolutely defeats the rights of the insured under the pol- 
 icy."° 
 
 (3) Some policies provide that no action shall be maintained on the 
 policy unless all of the conditions of the policy have been complied with. 
 Such a provision accomplishes practically the same result as the one 
 last discussed, by absolutely taking away any right of action on the 
 policy, and so, in effect, working a forfeiture of the policy."' 
 
 Not a Condition Precedent under the Standard Policy, 
 
 (4) The standard policy provides that no action shall be sustainable 
 on the policy "until after full compliance by the insured with all the 
 foregoing requirements." In New York and some other states it is 
 held that under this provision a failure to give the proofs of loss within 
 sixty days, as specified, operates as a forfeiture of the policy."^ By 
 the great weight of authority, however, it is held that this condition 
 operates merely to suspend the right of the insured to bring an action 
 until sixty days shall have expired after the furnishing of the proofs of 
 loss."* In accordance with this view, the specification of the time 
 
 1*4 COLUMBIA INS. CO. v. LAWRENCE, 10 Pet. 507, 9 L. Ed. 512; Spring- 
 field Fire & Marine Ins. Co. v. Brown, 128 Pa. 392, 18 Atl. 396; Kenton Ins. 
 Co. V. Downs, 90 Ky. 236, 13 S. W. 882. 
 
 i*» Gould V. Insurance Co., 90 Mich. 302, 51 N. W. 455; German Ins. Ob. 
 r. Davis, 40 Neb. 700, 59 N. W. 698. 
 
 i*« Gould V. Insurance Co., 90 Mich. 302, 51 N. W. 465; German Ins. Co. 
 v. Davis, 40 Neb. 700, 59 N. W. 698. 
 
 1*7 Quinlan v. Insurance Co., 133 N. Y. 356, 81 N. E. 31, 28 Am. St. Rep. 
 645; Blossom v. Insurance Co., 64 N. Y. 162; Cannon v. Insurance Co., 110 
 Ga. 563, 35 S. E. 775, 78 Am. St. Rep. 124. 
 
 1*8 Kenton Ins. Co. v. Downs, 90 Ky. 236, 13 S. W. 882; Orient Ins. Co. v. 
 Clark, 22 Ky. Law Rep. 1066, 59 S. W. 863; Northern Assur. Co. v. Hanna, 
 60 Neb. 29, 82 N. W. 97; Tubbs v. Insurance Co., 84 Mich. 646, 48 N. W. 296; 
 Steele v. Insurance Co., 93 Mich. 81, 53 N. W. 514, 18 L. R. A. 85; Rheims v. 
 Insurance Co., 39 W. Va. 672, 20 S. E. 670; Flatley v. Insurance Co., 95 Wis. 
 618, 70 N. W. 828; Welch v. Fire Ass'n (Wis. 1904) 98 N. W. 227; Niagara 
 Fire Ins. Co. v. Scammon, 100 III. 644; Carpenter v. Insurance Co., 52 Hun, 
 249, 4 N. Y. Supp. 925; Weiss v. Insurance Oo., 148 Pa. 349, 23 Atl. 991; Cov- 
 entry Mut Live Stock Ins. Ass'n v. Evans, 102 Pa. 281; Taber v. Insurance 
 Co., 124 Ala. 681, 26 South. 252; Shell v. Insurance Co., 60 Mo. App. 644; 
 Sun Mut. Ins. Co. v. Mattingly, 77 Tex. 162, 13 S. W. 1016; Continental Fire 
 Ins. Co. V. Whltaker (Tenn. 1904) 79 S. W. 119; Indian River State Bank v. 
 Hartford Fire Ins. Co. (Fla. 1904) 35 South, 228. 
 
 NOTICE AND PROOFS OP LOSS. 
 
 503 
 
 §§ 184-189) 
 
 within which the proofs must be given is not of the essence of the con- 
 tract, and the sole penalty for a failure to make the proofs within the 
 sixty days is to postpone, for the time of the default, the right of action 
 against the insurer. The limitation of the time in which an action can 
 be brought to twelve months also operates under this rule as a final and 
 absolute limit within which the proofs of loss must be given. No ac- 
 tion can be brought until sixty days after the proofs are rendered, nor 
 can it be brought later than twelve months after the fire. Consequent- 
 ly, in any event, the proofs of loss must be finally rendered within ten 
 months after the fire. This is said to afford the insurer sufficient pro- 
 tection."® . . 
 There is much to be said in favor of the New York rule, smce it is 
 undoubtedly to the interest of the insurer to have prompt information 
 with regard to the subjects included within the required statement of 
 loss, so that if need be, he may have an opportunity to gather evidence 
 to contest the claim made. It is also probable that the New York 
 standard policy, being drawn up with reference to the New York de- 
 cisions, was intended by its draftsmen to require the proof of loss to be 
 given within the sixty days as a condition precedent to any recovery 
 on the policy. Nevertheless, since the rule of construction is so well 
 settled that a forfeiture will never be implied or enforced unless un- 
 mistakably intended, it would seem that the construction given to this 
 clause by the majority of the courts is more reasonable. This view 
 appeals to the judicial mind the more strongly when it is observed that 
 the policy expressly provides that a breach of certain other conditions 
 shall avoid the policy, while it leaves forfeiture for a failure to give 
 proofs of loss within the sixty days specified to a doubtful inference. 
 Furthermore, the New York decisions do not show any evidence of a 
 consideration of the reasons which have induced other courts to de- 
 clare this condition merely suspensory, and not precedent; that is, that 
 the forfeiture is not expressly declared, but implied. 
 When Noncompliance with These Conditions is Excused, 
 
 It seems now to be well settled, even in those states in which com- 
 pliance with the conditions is required as a condition precedent to the 
 right to recover under the policy, that a failure on the part of the in- 
 sured to comply strictly with their terms will be excused when the cir- 
 cumstances were such as to make strict compliance impossible. Thus, 
 where the insured becomes insane or otherwise incapable of attending 
 to his business, and on that account proofs of loss are not given within 
 the required time, the insurer will nevertheless be held liable."® So, 
 
 i*» Kenton Ins. Co. t. Downs, 90 Ky. 236, 13 S. W. 882. 
 
 150 Woodmen Ace. Ass'n v. Pratt, 62 Neb. 673, 87 N. W. 546, 55 L. R. A. 
 291, 89 Am. St Rep. 7T7; Hayes v. Casualty Co., 98 Mo. App. 410, 72 S. W. 
 135. 
 
 Ml- 
 
604 
 
 THE STANDARD FIEB POLICY, 
 
 (Ch. 13 
 
 when the insured has died, and his personal representatives, at the time 
 of the loss, had no knowledge of the existence of the policy, delay in 
 furnishing proofs of loss beyond the required period is excused."^ In 
 life insurance, a failure on the part of the beneficiaries to give notice 
 of the death of the insured, as required by the policy, has been excused 
 when the beneficiaries had no knowledge of the existence of the Dol- 
 icy."« ^ 
 
 To Whom Notice and Proofs of Loss are to he Given. 
 
 The standard policy requires that notice and proofs of loss shall be 
 given to the company. Manifestly, this can be done only by giving 
 them to some agent of the company who is authorized to receive them. 
 Whether, in any given case, the agent to whom the notice and proofs 
 of loss may have been given was authorized to receive them on behalf 
 of the company, is a matter of fact to be determined by a jury under 
 proper instructions from the court."* Such authority may be given 
 expressly or by implication. If it in fact exists, the company will be 
 bound by the agent's receipt of the notice, irrespective of what may be 
 written in the policy."* As a general thing, local agents are not au- 
 thorized to act in this behalf for the company, but it may be shown in 
 any particular case that the local agent was either actuallv or apparently 
 vested with such authority.^ "• 
 
 By Whom Given. 
 
 The terms of the condition now under discussion require that the 
 insured shall give the stipulated notice and proofs of loss, which shall 
 be sworn to by him. These requirements manifestly will not be met by 
 a statement and affidavit of any other person than the insured, prcK 
 vided it is possible for them to be given by him."« But it is generally 
 held by the courts, in spite of the letter of the condition, that when it is 
 impossible for the insured to comply with these requirements, whether 
 because of his death or absence or incapacity, notice and verified proofs 
 submitted on behalf of the insured by some reputable person interested 
 
 »»i Fuller V. Insurance Co., 184 Mass. 12, 67 N. B. 879. 
 
 "2 McElroy v. Insurance Co., 88 Md. 137, 41 Atl. 112, 71 Am. St. Rep. 400; 
 Trippe V. Fund Sec, 140 N. Y. 23, 35 N. E. 316, 37 Am. St. Rep. 529. See, 
 also, Kentzler v. Accident Ass'n, 88 Wis. 589, 60 N. W. 1002, 43 Am. St Rep. 
 934. 
 
 158 Burlington Ins. Co. v. Lowery, 61 Ark. 108, 32 S. W. 383, 54 Am. St 
 Rep. 196; Farmers' Mut Ins. Co. v. Taylor, 73 Pa. 342. 
 
 1" Travelers' Ina. Co. v. Edwards, 122 U. S. 457, 7 Sup. Ct 1249, 30 L. Ed. 
 1178. 
 
 1" ERMENTROUT ▼. INSURANCE CO., 63 Minn. 305, 65 N. W. 635, 30 
 L. R. A. 346, 56 Am. St Rep. 481 ; Harnden v. Insurance Co.. 164 Mass 382 
 41 N. B. 658. 49 Am. St Rep. 467. 
 
 i5« Graham v. Insurance Co., 77 N. Y. 171; Id., 12 Hun (N. Y.) 446; Ayres 
 T. Insurance Co., 17 Iowa, 176, 85 Am. Dec. 553. 
 
 ,1'^-. 
 
 magistrate's cebtificate. 
 
 505 
 
 §190) 
 
 in the loss must be accepted by the insurer as a sufficient compliance 
 with the requirements of the policy."^ But no trivial excuse for the in- 
 sured's failure to give personally the statement required, such as for- 
 getfulness or indisposition, will suffice."* Compliance must be shown 
 to have been impossible.^** 
 
 Insured Not Estopped by Proofs of Loss. 
 
 It is established beyond question that the insured is not estopped to 
 show that statements made in the proofs of loss as rendered to the in- 
 surer are erroneous, if so on account of a bona fide mistake.^'*^ Such 
 mistakes may always be explained. Thus, where the plaintiff stated in 
 the proofs given the defendant that her husband, the insured, had died 
 by suicide, she was allowed to show that her statement was based upon 
 imperfect knowledge of the facts, and to introduce evidence that the 
 insured came to his death by the accidental discharge of a gun."^ But 
 an unexplained statement in the proofs of loss contradicting a represen- 
 tation made as a warranty in the application will be fatal to the plain- 
 tiff's cabe."= 
 
 MAGISTRATE'S CERTIFICATE. 
 
 130. Tlie requirement of the standard policy tliat the insured, wlien 
 required, sl&aU furnish the certificate of the nearest disinter- 
 ested magistrate as to the facts concerning the loss, is, by the 
 weight of authority, vaUd, but the tendency of aU courts is to 
 require only substantial, and not Uteral, compliance with its 
 requirements. The statements of the certificate are not con- 
 elusive upon the insured. 
 
 1 57 Thus, when the insured mortgagor will not give the required proofs 
 of loss, it is the right and duty of the mortgagee, to whom the insurance is 
 payable, to do so. Nor is he relieved of this duty by the terms of the 
 standard mortgagee clause, exempting him from the consequences of the 
 mortgagor's default. Southern Home Building & Loan Ass'n v. Home Ins. 
 Co., 94 Ga. 167, 21 S. B. 375, 27 L. R. A. ^4, 47 Am. St Rep. 147. 
 
 IBS Fuller V. Insurance Co., 184 Mass. 12, 67 N. E. 879, in which it was held 
 that the bankruptcy of the insured did not render performance of the condi- 
 tion impossible. 
 
 "» Matthews v. Insurance Co., 154 N. Y. 449, 48 N. E. 751, 39 L. R. A. 433, 
 Gl Am. St Rep. 627; Bennett v. Insurance Co., 67 N. Y. 274; and see Semmes 
 v. Insurance Co., 13 Wall. (U. S.) 158, 20 L. Ed. 490. 
 
 leo Leman v. Insurance Co., 46 La. Ann. 1189, 15 South. 388, 24 L. R. A. 
 589, 49 Am. St Rep. 348; Walther v. Insurance Co., 65 Cal. 417, 4 Pac 413; 
 Supreme Lodge Knights of Honor v. Jaggers, 62 N. J. Law, 96, 40 Atl. 783. 
 
 i«i Supreme Lodge K. P. v. Beck, 181 U. S. 49, 21 Sup. Gt. 532, 45 L. Ed. 
 741; Home Ben. Ass'n v. Sargent 142 U. S. 691, 12 Sup. Ct 332, 35 L. Ed. 
 IIGO. 
 
 162 Metropolitan Life Ins. Co. v. Rutherford, 98 Va. 195, 35 S. B. 361, 719. 
 Here the application stated that the insured father died of cholera morbus 
 while in the proofs of loss fistula was said to be the cause of his death. 
 

 ■1 I .iii 
 
 I 
 
 506 
 
 «♦ 
 
 THE STANDARD FIRE POLICY. 
 
 (Ch. 13 
 
 * * And shall also, if required, furnish a certificate of the 
 magistrate or notary public (not interested in the claim as a creditor or 
 otherwise, nor related to the insured) living nearest the place of fire, 
 stating that he has examined the circumstances and believes the insured 
 has honestly sustained loss to the amount that such magistrate or no- 
 tary public shall certify." 
 
 This provision, which enables the insurer to require a magistrate's 
 certificate to the honesty and correctness of the insured's claim, is in- 
 tended as another safeguard of the insurer against dishonest and fraud- 
 ulent claims of loss. It need not be given unless required. When the 
 insurer does elect to require the certificate, his election must be made 
 clearly and unequivocally known to the insured,^®* and mere general 
 notice to the insured that he will be required to comply strictly with the 
 conditions in his policy has been held not to constitute sufficient notice 
 that he will be required to furnish the magistrate's certificate.*'* 
 
 The certificate must be furnished by a magistrate not interested in 
 the claim as a creditor or related to the insured. It is held that thi- 
 does not disqualify a magistrate who may have a mere contract claiir 
 against the insured. He must be a creditor in the sense of having some 
 interest in the proceeds of the insurance.**" It has also been held th.?' 
 a notary who had married the insured's first cousin was related to him 
 within the terms of this condition.*" The courts are, however, not 
 inclined to be very nice in measuring distances, when it is claimed that 
 the certificate is not by the nearest magistrate. If the certificate h.' 
 been secured in good faith, the mere fact that the magistrate giving it 
 is found to have lived a little farther from the property destroyed than 
 another will not render the certificate insufficient.*®' 
 
 This requirement of the policy is generally held to be valid and bind- 
 ing, and the certificate, when required to be furnished within a reason- 
 able time, is a condition precedent to the right of action.**' Some 
 
 i«» If the Insured obtains a magistrate's certificate, without being request- 
 ed to do so, he thereby obviates the necessity of the insurer's request. He 
 will then be subject to all the requirements necessary to an effective certifi- 
 cate, just as if it had been requested. JEtna Ins. Co. v. People's Bank, 
 62 Fed. 222, 10 C. C. A. 342, 8 U. S. App. 554. See, also, Moyer v. Insurance 
 Ofl3ce, 176 Pa. 579, 35 Atl. 221, 53 Am. St. Rep. 690. 
 
 164 Moyer v. Insurance OflSce, 176 Pa. 579, 35 Atl. 221, 53 Am. St Rep. 690. 
 
 16 5 DOLLIVER V. INSURANCE CO., 131 Mass. 39. See, also, SMITH v. 
 INSURANCE CO., 47 Hun (N. Y.) 30. 
 
 i«8 iEtna Ins. Co. v. People's Bank, 62 Fed. 222, 10 C. C. A. 342, 8 U. S. 
 App. 554. 
 
 i«7 Williams v. Insurance Co. (0. C.) 39 Fed. 167; SMITH v. INSURANCE 
 CO., 47 Hun (N. Y.) 41; McNally v. Insurance Co., 137 N. Y. 389, 33 N. EI 475. 
 
 i«8 SMITH V. HOME INS. CO., 47 Hun (N. Y.) 30; Johnson v. Insurance 
 Co., 112 Mass. 49, 17 Am. St. Rep. 65; DOLLIVER v. INSURANCE CO., 131 
 Mass. 39; Lane v. Insurance Co., 50 Minn. 227, 52 N. W. 649, 17 L. R. A. 197; 
 
 ^•■^ 
 
 § 191) 
 
 LIMITATION UPON ACTIONS. 
 
 507 
 
 courts, however, hold that a substantial compliance with the condition 
 is all that can be required, and that, if the nearest magistrate will not 
 give the certificate, it may be secured from the one who is next near- 
 est. *•• In one state, at least, the whole condition is held to be void as 
 repugnant to the purposes of the contract. This view is taken on the 
 ground that the condition subjects the insured's right under his contract 
 to the caprice of a third party, over whom he has no control.*^** 
 
 Like the statements made in the proofs of loss, those set forth in the 
 magistrate's certificate are not conclusive upon the insured. He may 
 subsequently show that statements certified to by the magistrate, wheth- 
 er as to the value of the goods damaged or the circumstances of the 
 loss, were mistaken.*'* 
 
 LIMITATION UPON ACTIONS. 
 
 lOl* The standard policy provides that no action shall he hronght on 
 the policy unless coxumenced within twelve months next after 
 the fire. This condition is valid, and, nnless waived hy the in- 
 surer, absolutely bars any action or suit on the policy after the 
 expiration of the time specified. 
 
 In those states in which standard forms of policies have been prescribed 
 by statute, the provision contained therein limiting the time within 
 
 Edgerly v. Insurance Co., 48 Iowa, 644; COLUMBIA INS. CO. v. LAW- 
 KBNCE, 10 Pet. 507, 9 L. Ed. 512; Gilligan v. Insurance Co., 20 Hun (N. Y.) 
 95, affirming 87 N. Y. 626. 
 
 !•» Noone v. Insurance Co., 88 Cal. 152, 26 Pac. 103. Here it was held that 
 the certificate of the next nearest magistrate was sufficient, if the nearest 
 magistrate refused to issue one because he was employed by the insurance 
 company requiring the certificate. But in California a statute has been passed 
 making the next nearest magistrate's certificate sufficient if for any good rea- 
 son the nearest magistrate refuses to issue one. 
 
 iTo German-American Ins. Co. v. Norris, 100 Ky. 29, 37 S. W. 267, 66 Am. 
 St Rep. 324. The insurer "insists very earnestly that the failure to furnish 
 the certificate of the magistrate when required is a bar to" the Insured's 
 •'right to recover, but we do not think that the policy, when fairly read and 
 construed, constitutes such failure a bar to recovery. It could not be used 
 as evidence against the insured, and, as there is no law by which the insured 
 could compel a magistrate to act in the matter, It is not reasonable that par- 
 ties would undertake to procure the certificate of an officer when there was 
 no law by which he could be required to certify at all." 
 
 iTi Birmingham Fire Ins. Co. v. Pulver, 126 111. 329, 18 N. B. 804, 9 Am. St 
 Rep. 598; Lebanon Ins. Co. v. Kepler, 106 Pa. 28; Miaghan v. Insurance Co., 
 24 Hun (N. Y.) 58; Hoffman v. Insurance Co., 1 Rob. (N. Y.) 501; Id., 32 N. 
 Y. 405, 88 Am. Dec. 337; Parmelee v. Insurance Co., 54 N. Y. 193; McMaster 
 V. Insurance Co., 55 N. Y. 222, 14 Am. Rep. 239; Commercial Ins. Co. v. Huck- 
 berger, 52 111. 464. 
 
 In Parrell v. Insurance Co., 7 Baxt (Tenn.) 542, it was held the statement 
 in the magistrate's certificate as to the value of the property lost is not con- 
 clusive against the insurers. 
 
 If 
 
508 
 
 THE STANDARD FIEB POLICY. 
 
 (Ch. 13 
 
 LIMITATION UPON ACTIONS. 
 
 509 
 
 which an action may be brought to enforce rights claimed under such 
 pohcies, is in effect a special statute of limitations upon actions against 
 insurance companies. As such it has the same standing as any other 
 statute of limitations, and is necessarily valid."* But even in those 
 states in which the standard form of policy has not the sanction of stat- 
 ute this condition is, almost without dissent, held to be valid and bind- 
 ing, provided the circumstances are not such as to make it unreasona- 
 ble ; as where, for instance, the terms of an accident policy, taken in 
 connection with the facts of the case, made it absolutely impossible that 
 any action could have been brought within the specified twelve months 
 after the accident."* Likewise, it was held by the Supreme Court that 
 the intervention of war rendered this condition absolutely inoperative, 
 not m^erely suspending it, as in the case of a proper statute of limita- 
 tions. But with the exception of such unusual cases the courts have 
 enforced the right of the insurer to place this limit upon actions upon 
 the policy, even where it worked hardship. Thus, it is held that the 
 fact that the insured is an infant does not relieve him of the obligation 
 to bring his suit within the twelve months stipulated, and a suit brought 
 by him after reaching majority is held to be barred."' So, the mere 
 fact of instituting, within the twelve months, a suit which was dis- 
 missed did not prevent a subsequent suit, instituted after the expira- 
 tion of the year, from being too late, even though the statute of the 
 state expressly provided that the regular statute of limitations should 
 begin to run only after the dismissal of such a suit."^ 
 
 In one state at least—Nebraska— this condition is held to be abso- 
 lutely void, as contrary to public policy."* Early cases in other juris- 
 dictions show a disposition on the part of the courts to disregard the 
 condition,"- but, with the exception above noted, it is believed that its 
 validity IS practically unquestioned in all of the American states.^** 
 
 "2 Hamilton v. Insurance Co., 166 N. Y. 327. 50 N. a 863, 42 L. R. A. 485 
 To the same effect, see Titus v. Poole. 145 N. Y. 414. 40 N. E. 228; Hayden v 
 Pierce. 144 N. Y. 612. 39 N. E. 638. i^ayaen v. 
 
 173 Friezen v Insurance Co. (C. C.) 30 Fed. 352; Fullam v. Insurance Co.. 
 
 7 Gray (Mass.) 61, 66 Am. Dec. 462. 
 
 "4 Denlson v. Accident Ass'n, 59 App. Div. 294, 69 N. Y. Supp. 291. 
 
 1T& Semmes v. Insurance Co., 13 Wall. 158, 20 L. Ed. 490 
 
 "6 Mead v. Insurance Co. (Kan.) 75 Pac. 475, 64 L. R. A 79 
 
 ITT RIDDLESBARGER v. INSURANCE CO.. 7 Wall. (U. S.) 386, 19 L. Ed 
 
 257. See, also. Ward v. Insurance Co. (Miss.) 33 South. 841; Howard Ins 
 
 Co. y. Hocking, 130 Pa. 170, 18 Atl. 614. 
 ITS Miller v. Insurance Co., 54 Neb. 121, 74 N. W. 416. 69 Am. St Rep 70ft- 
 
 Omaha Fire Ins. Co. v. Drennan. 56 Neb. 623, 77 N. W. 67 
 
 179 Westchester Fire Ins. Co. v. Dodge, 44 Mich. 420, 6 N. W 865- Lon<» 
 
 371^7rAm^'De''c ^^'^ ^^ ^""^ ^^"^ ^' ^®' ^^"""^^ ^' ^""^"^^"^^ ^- ^ ^^^a" 
 
 180 RIDDLESBAR(5ER v. INSURANCE CO.. 7 Wall. 386, 19 L. Bd 257- 
 Provident Fund Soc y. Howell, 110 Ala. 508, 18 South. 311; Universal* Mut 
 
 §191) 
 
 IVhen the Period Begins to Run. 
 
 Some of the older forms of policies provided that no action shall be 
 brought within twelve months "after loss." In considering the condi- 
 tion so worded, probably a majority of the courts came to hold that the 
 specified period did not begin to run until a right of action accrued un- 
 der the terms of the policy, the word "loss" being construed as "lia- 
 bility." ^^^ The standard policy substitutes the expression "next after 
 the fire." This would seem so clearly to indicate the intention that the 
 period of limitation should begin to run immediately upon the happen- 
 ing of the fire, irrespective of the time when the right of action accrues, 
 that one is surprised to find it held otherwise in some jurisdictions. |" 
 It is believed, however, that by the overwhelming weight of authority 
 an action commenced later than twelve months after the occurrence of 
 the fire will be barred.^** 
 
 Fire Ins. Co. v. Weiss, 106 Pa. 20; Farmers' Mut. Fire Ins. Co. v. Barr. 94 
 Pa. 345; Spare v. Insurance Co. (C. C.) 17 Fed. 5G8; Chandler v. Insurance 
 Co 21 Minn. 85, 18 Am. Rep. 385; Mix v. Insurance Co., 9 Hun (N. Y.) 399; 
 Wilkinson V. Insurance Co., 72 N. Y. 499, 28 Am. Rep. 166; Moore v. Insur- 
 ance Co., 72 Iowa, 414, 34 N. W. 183; Vette v. Insurance Co. (C. C.) 30 Fed. 
 668; Spare v. Insurance Co. (C. C.) 17 Fed. 568; Thompson v. Insurance Co. 
 (C C.) 25 Fed. 296; Virginia Fire & Marine Ins. Co. v. Wells, 83 Va. 736, 3 
 S B. 349; Same v. Aiken, 82 Va. 424; Tasker v. Insurance Co., 58 N. H. 469; 
 Chambers v. Insurance Co., 51 Conn. 17, 50 Am. Rep. 1; McElroy v. Insurance 
 Co., 48 Kan. 200, 29 Pac. 478; Killips v. Insurance Co., 28 Wis. 472, 9 Am. 
 
 Rep. 506. „^ ^ _^ ,_-- 
 
 181 Steel V. Insurance Co., 154 U. S. 518, 14 Sup. Ct 1153, 38 L. Bd. 1064. 
 affirming, by a divided court, same case, 7 U. S. App. 325, 51 Fed. 715, 2 C. C. 
 A 463; Hay v. Insurance Co., 77 N. Y. 235, 244, 33 Am. Rep. 607; City of 
 New York v. Hamilton Fire Ins. Co., 39 N. Y. 45, 100 Am. Dec. 400; Chandler 
 V. Insurance Co., 21 Minn. 85, 18 Am. Rep. 385; Vette v. Insurance Co. (C. C.) 
 30 Fed 668; Barber v. Insurance Co., 16 W. Va. 658, 37 Am. Rep. 800; Mur- 
 dock V. Insurance Co., 33 W. Va. 407, 10 S. E. 777, 7 L. R. A. 572; Owen v. 
 Insurance Co., 87 Ky. 574, 10 S. W. 119; Spare v. Insurance Co. (C. C.) 17 
 Fed. 568; German Ins. Co. v. Fairbank, 32 Neb. 750, 49 N. W. 711, 29 Am. St 
 Rep. 459; Ellis v. Insurance Co., 64 Iowa, 507, 20 N. W. 782; Miller v. Insur- 
 ance Co., 70 Iowa, 704, 29 N. W. 411; Steen v. Insurance Co., 89 N. Y. 315, 
 
 42 Am. Rep. 297. „ . , 
 
 182 Friezen v. Insurance Co. (C. C.) 30 Fed. 352; Firemen's Fund Ins. Co. 
 V. Buckstaff, 38 Neb. 150, 56 N. W. 697, 41 Am. St. Rep. 727; German Ins. Co. 
 of Freeport v. Davis, 40 Neb. 700, 59 N. W. 698; Hong Sling v. Insurance Co.. 
 8 Utah, 135, 30 Pac. 307; Case v. Insurance Co., 83 Cal. 473, 23 Pac. 534, 8 
 L. R. A. 48; Read v. Insurance Co., 103 Iowa, 307, 72 N. W. 665, 64 Am. St. 
 Rep. 180; Hocking v. Insurance Co., 130 Pa. 170, 18 Atl. 614. Here it was 
 said that the equitable construction of the clause "twelve months next after 
 the fire shall have occurred" is twelve months after a right of action shall 
 
 have accrued 
 
 188 HART V. INSURANCE CO., 86 Wis. 81, 56 N. W. 333. 21 L. R. A. 745. 
 39 Am. St Rep. 880; Thompson v. Insurance Co. (C. C.) 25 Fed. 296; Owen 
 V. Insurance Co., 87 Ky. 571, 10 S. W. 119, in which the insured was allowed 
 to bring his suit on Monday because the last day allowed him in the policy 
 
 ii' 
 
 .K 
 
510 
 
 THE STANDARD FIEB POLICY, 
 
 (Ch. 13 
 
 Condition may be Waived, 
 
 Like any other condition of the policy, this limitation upon the right 
 to bring an action may be waived by the insurer. Any conduct on his 
 part by which he knowingly induced the insured to postpone bringing 
 action, in the hope of a promised settlement, will estop the insurer to 
 claim the benefit of the condition. ^•* 
 
 fell on Sunday. McElhone v. Benefit Ass'n, 2 App. D. G. 397, 22 Wash. Law 
 Rep. 157; King v. Insurance Co., 47 Hun (N. Y.) 1; State Ins. Co. v. Mees- 
 man, 2 Wash. St 459, 27 Pac. 77, 26 Am. St. Rep. 870; Virginia Fire & Ma- 
 rine Ins. Co. V. Wells, 83 Va. 736, 3 S. E. 349; McElroy v. Insurance Co., 48 
 Kan. 200, 29 Pac. 478; State Ins. Co. v. Stoffels, 48 Kan. 205, 29 Pac. 479; 
 Hart V. Insurance Co., 86 Wis. 77, 56 N. W. 332, 21 L. R. A. 743, 39 Am. St 
 Rep. 877. 
 
 184 MICKEY V. INSURANCE CO., 35 Iowa, 174, 14 Am. Rep. 494. 
 
 "It would be contrary to Justice for the insurance company to hold out the 
 hope of an amicable adjustment of the loss, and thus delay the action of the 
 insured, and then be permitted to plead this very delay, caused by its course 
 of conduct as a defense to the action when brought" Thompson v. Insur- 
 ance Co., 136 U. a 287, 10 Sup. Ct 1019, 34 L. Ed. 408; Killips v. Insurance 
 Co., 28 Wis. 472, 9 Am. Rep. 506; Martin v. Insurance Co., 44 N. J. Law, 485, 
 43 Am. Rep. 397; Allemania Fire Ins. Co. v. Peck, 133 111. 220, 24 N. E. 538^ 
 23 Am. St. Rep. 610; Firemen's Fund Ins. Co. v. Western Refrigerating Co ' 
 162 111. 322. 44 N. H. 746; Illinois Live Stock Ins. Co. v. Baker, 153 111 240 
 38 N. E. 627; HOME INS. & BANKING CO. v. MYER, 93 111. 271; Bonnert 
 V. Insurance Co., 129 Pa. 558, 18 Atl. 552, 15 Am. St Rep. 739; Hand v. In- 
 surance Co., 57 Minn. 519, 59 N. W. 538; Grant v. Insurance Co., 5 Ind. 23, 
 61 Am. Dec. 74; Phenix Ins. Co. v. Had Bila Hora Lodge, 41 Neb. 21, 59 n! 
 W. 752; Dwelling House Ins. Co. v. Brodle, 52 Ark. 11, 11 S. W. 1016, 4 L. B. 
 A. 458; Horst v. Insurance Co., 73 Tex. 67, 11 S. W. 148; Black v. Insurance 
 Co., 31 Wis. 74; Eggleston v. Insurance Co., 65 Iowa, 308, 21 N. W. 652; Blsh 
 V. Insurance Co., 69 Iowa, 184, 28 N. W. 653. 
 
 §192) 
 
 VERMS OF THE LIFE FOLICY. 
 
 1^11 
 
 CHAPTER XIV. 
 
 TERMS OF THE LIFE FGLIOZ. 
 
 102. In General. 
 
 193. Designation of Beneficiary. 
 
 194. Statement of Age. 
 
 195-196. Suicide— When not Excepted In the Policy, 
 
 197-199. Suicide— When Excepted in the Policy. 
 
 200-201. Death In Violation of Law. 
 
 202-204. Assignment 
 
 20S. Incontestable Clausa 
 
 r?1 
 
 IN GENERAL. 
 192. There If no itanclard or generally aeoepted form of life poliey* 
 
 The terms of life insurance policies differ so greatly that no effort 
 has ever been made to prepare a standard form to be used by all in- 
 surers, as was seen to be the case in fire insurance. Nor has practice 
 developed a uniform instrument, as in the case of the Lloyd policy in 
 general use among marine insurers. The very nature of the business 
 of life insurance necessitates this great variation among the forms of 
 policies used. The purposes for which Hfe insurance is procured are 
 many and various, and policies prepared by the insurers for carrying 
 into effect the desires of persons seeking insurance must necessarily 
 vary accordingly. The older forms of life policies were very verbose 
 and perplexing documents, filled with numerous conditions, printed in 
 fine type, that the insured found much difficulty in reading, and more 
 difficulty in tmderstanding when read. The tendency at the present 
 day, however, among insurance companies of the best standing, is to 
 simplify the policy as much as possible, inserting only such conditions 
 as are imperatively necessary to the safe conduct of the business. But 
 even in these simpler forms are to be found many terms and conditions 
 setting forth various elective benefits to the insured or to the bene- 
 ficiaries after the maturity of the policy. These terms are often diffi- 
 cult of construction, but they vary so greatly in the numerous kinds of 
 insurance issued that it will be impracticable to attempt any discussion 
 of the cases construing them, and no safe rule could be laid down that 
 would have any general application. 
 
 Again, in considering the construction of life insurance policies, it 
 must be remembered that all contracts made by mutual associations em- 
 brace as constituent parts thereof the provisions of the charters and by- 
 laws of these associations. These vary almost infinitely, so that any 
 general discussion of their construction, if confined to the limited space 
 
 ^ , 
 
 a 
 
. \ 
 
 I 
 
 I 
 
 512 
 
 TERMS OF THE LIFE POLICY. 
 
 (Ch,U 
 
 permissible in such a treatise as this, would be of little value. There- 
 fore, disregarding the many varying special conditions and terms that 
 may be found in life policies, we shall content ourselves with a discus- 
 sion of those rules of construction which have been laid down by the 
 courts in determining the scope and effect of the few primary conditions 
 of life insurance contracts to be found in practically all policies. 
 
 The scope of such a discussion is much narrowed by the fact that 
 many of the general principles of insurance law already treated of find 
 ready application in determining rights under life policies, and also be- 
 cause many of the principles of construction laid down in the preceding 
 chapters as applying to fire policies have equal application to life poli- 
 cies, such as, for instance, the requirement of proofs of loss, or the con- 
 dition as to the authority of agents of the insurer to affect rights ac- 
 quired under the policy.* 
 
 DESIGNATION OF BENEFICIARY. 
 
 193* Words used in designating the beneficiaries of a life policy will 
 not be given their technical significance, bnt -will be construed 
 broadly, in order that the benefit of the insurance shall be re- 
 ceived by those intended by the insured as the objects of his 
 bounty. 
 
 In a former chapter we found it necessary to consider to some extent 
 the construction of words used in designating beneficiaries under the 
 life policy.* It is now advisable to consider with more detail the rules 
 which guide the courts in determining who are entitled to take the ben- 
 efit of insurance under the expressions used in policies designating ben- 
 eficiaries. 
 
 First, we must observe that, in interpreting the words used by the 
 insured to indicate the person whom he desires to be the object of his 
 bounty, it is necessary for the court not only to consider the whole 
 purpose of the contract as appearing from all of its terms, and from the 
 regulations of mutual associations when the insurance is granted by 
 such bodies, but also to consider all the circumstances surrounding the 
 parties at the time of making the contract In many respects the des- 
 ignation of persons who are to take an insurance fund at the death of 
 the insured is similar to that of devisees or legatees under a will, and 
 the same rule of construction should be applied.* It should be the one 
 
 « That the rule that all doubts as to the meaning of a policy are to be re- 
 solved in favor of the insured applies with especial force to life policies after 
 the death of the insured. See Mutual Benefit Life Ins. Co. v. First Nat Bank, 
 69 S. W. 1. 24 Ky. Law Bep. 580. 
 
 a Ante. p. 388. 
 
 s Du^all V. Goodson, 79 Ey. 224; Buss r. Supreme Council, 110 Lt. 088, 84 
 South. 607. 
 
 §iy3) 
 
 DESIGNATION OF BENEFICIARY. 
 
 513 
 
 aim of the courts to carry out the intention of the insured so far as ma- 
 be possible within the bounds of the language used. An ordinary per- 
 son attempting to designate the objects of his bounty, whether in a will 
 or insurance policy, is not thoroughly skilled .in the law or acquainted 
 with the technical meaning of legal terms. Hence we derive a general 
 rule that the words used in designating a beneficiary will not be con- 
 strued in their technical significance, but in accordance with the sense 
 in which they were used.* Thus the words "heirs" or "legal heirs" will 
 not ordinarily be construed as indicating merely the heirs at law, but 
 rather that class of persons who would take the personalty of the in- 
 sured in case he died intestate.^ Therefore it is generally held that the 
 widow of the deceased is entitled to take under a policy payable to his 
 "heirs" or "legal heirs," as well as the children of the deceased.* If, 
 however, the terms of the policy, read as a whole, show an intention to 
 use the term "heirs" in its technical sense, the children alone will take 
 under such a policy, to the exclusion of the widow.'' So, by the better 
 
 4 Wf^ltei V. Hensel, 42 Minn. 204, 44 N. W. 57. In Pace v. Pace, 19 Fla. 
 438, the words "for the benefit of the estate of the insured," by the aid of 
 extrinsic evidence, were construed to mean that the policy was for the benefit 
 of a minor child of the insured, and not payable to his administrator. See, 
 also, Loos V. Insurance Co., 41 Mo. 538. 
 
 6 Lament v. Grand Lodge (C. C.) 31 Fed. 177; Hubbard, Price & Co. v. Tur- 
 ner, 93 Ga. 752, 20 S. E. 640, 30 L. R. A. 593; Tompkins v. Levy, 87 Ala. 263, 
 6 South. 346, 13 Am. St Rep. 42; Janda v. Union, 71 App. Div. 150, 75 N. Y. 
 Supp. 654; Johnson v. Knights of Honor, 53 Ark. 255, 13 S. W. 794, 8 L. R. 
 A. 732; Britton v. Supreme Council of Royal Arcanum, 46 N. J. Eq. 102, 18 
 Atl. 675, 19 Am. St Rep. 376, in which the insured's mother, who was depend- 
 ent upon him, was held entitled to the fund, the insured having left neither 
 wife nor child. Mullen v. Reed, 64 Conn. 240, 29 Atl. 478, 24 L. R. A. 664. 
 42 Am. St. Rep. 174; Bishop v. Grand Lodge, 112 N. Y. 627, 20 N. E. 562; 
 Hubbard, Price & Co. v. Turner, 93 Ga. 752, 20 S. E. 640, 30 L. R. A. 593. In 
 this case the brother of the assured was said to be the beneficiary if the as- 
 sured died leaving no wife or child, "heir" being construed as meaning his 
 next of kin according to the statute of distribution. See, also. Northwestern 
 Masonic Aid Ass'n v. Jones, 154 Pa. 99, 26 Atl. 253, 35 Am. St. Rep. 810; 
 Walsh V. Walsh, 66 Hun (N. Y.) 297, 20^N. Y. Supp. 933; Gauch v. Insurance 
 Co., 88 111. 251, 30 Am. Rep. 554. 
 
 • Lyons v. Yerex, 100 Mich. 214, 58 N. W. 1112, 43 Am. St Rep. 452 ; Shultz 
 V. Insurance Co., 59 Minn. 308, 61 N. W. 331; Wilbum v. WUbum, 83 Ind. 55. 
 In this case the third wife of the insured was given one-twelfth of the amount 
 of the insurance, the other eleven-twelfths being divided among the eleven 
 children of the insured. The court reached this conclusion in construing the 
 phrase "legal heirs." See, also, Leavitt v. Dunn, 56 N. J. Law, 309, 28 Atl. 
 590, 44 Am. St Rep. 402. In Walsh v. Walsh, 66 Hun (N. Y.) 297, 20 N. Y. 
 Supp. 933, the insured's wife was allowed to take a share of the policy with 
 the brothers and sisters of the insured, as heirs. Hanson v. Association, 59 
 Minn. 123, 60 N. W. 1091; Lawwill v. Lawwill, 29 111. App. 643; Alexander 
 V. Association, 126 111. 558, 18 N. E. 556, 2 L. R. A. 161 ; Young Men's Mut 
 Life Ass'n v. Pollard, 3 Ohio Cir. Ct R. 577. 
 
 T Phillips V. Carpenter, 79 Iowa, 600, 44 N. W. 898 ; Johnson y. Knights of 
 Vance Ins. — 33 
 
i: 
 
 514 
 
 TERMS OF THE LIFE POLICY. 
 
 (Ch.U 
 
 authority, a policy payable to the "legal representatives*' of the insured 
 is payable, not to his personal representatives, but to such as would be 
 his distributees in case of intestacy.® But here, also, other terms of 
 the contract may show that the phrase was intended to be used in the 
 sense of "personal representatives," in which case the fund becomes 
 payable to the estate of the insured, and is subject to his debts.* 
 
 Insurance for Benefit of Children. 
 
 Much litigation has arisen in determining what persons are entitled 
 to take an insurance fund made payable to the "children" of the insured. 
 Ordinarily the term includes only the descendants of the insured in the 
 first generation,^** not grandchildren, but in several cases grandchildren 
 have been allowed to take imder such designations when it was reason- 
 able to infer, from a reading of the whole contract, that such was the 
 intention of the insured.^* So children bom after the issue of the pol- 
 icy are allowed to take equally with those then in existence.^' An 
 adopted child is likewise included among the beneficiaries so desig- 
 nated,*' but not an illegitimate child, though recognized as such.** In- 
 surance made payable to "my wife and children" is for the benefit of all 
 
 Honor, 63 Ark. 255, 13 S. W. 794, 8 L. R. A. 732; Meams v. Ancient Order, 
 22 Ont 34 ; Gauch v. Insurance Co., 88 111. 251, 30 Am. Rep. 554. 
 
 8 Rose V. Wortham, 95 Tenn. 505, 32 S. W. 458, 30 L. R. A. 609; Schultz v. 
 Insurance Co., 59 Minn. 308, 61 N. W. 331; Murray v. Strang, 28 111. App. 
 608; Mutual Life Ins. Go. v. Armstrong, 117 U. S. 591, 6 Sup. Ct. 877, 29 L. 
 Ed. 997 ; Hodge's Appeal (Pa.) 9 Ins. Law J. 709 ; Griswold v. Sawyer, 125 
 N. Y. 411, 26 N. B. 464. 
 
 • People V. Phelps, 78 111. 147; Sulz v. Association, 145 N. Y. 563, 40 N. B. 
 242, 28 L. R. A. 379. 
 
 10 Small V. Jose, 86 Me. 120, 29 Atl. 976; Continental Life Ins. Co. v. Webb, 
 54 Ala. 688; Russell v. Russell, 64 Ala. 500; United States Trust Co. v. Mu- 
 tual Benefit Life Ins. Co., 115 N. Y. 152, 21 N. B. 1025; Martin v. Insurance 
 Co., 73 Me. 25; Winsor v. Association, 13 R. I. 149. 
 
 " Duvall V. Goodson, 79 Ky. 224. In Continental Life Ins. Co. ▼. Palmer, 
 42 Conn. 60, 19 Am. Rep. 530, the court said that as soon as a policy was issued 
 it became property, the title of which vested in the beneficiaries, and on the 
 death of one of the beneficiaries his interest passed to his heirs. In this case 
 his heirs were his children, they being the grandchildren of the Insured. 
 
 12 Scull V. Insurance Co., 132 N. C. 30, 43 S. E. 504, 60 L. R. A. 615, 95 
 Am. St. Rep. 615; Roquemore v. Dent, 135 Ala. 292, 33 South. 178, 93 Am. St 
 Rep. 33; Thomas v. Leake, 67 Tex. 471, 3 S. W. 703; Ricker v. Insurance Co., 
 27 Minn. 193, 6 N. W. 771, 38 Am. Rep. 289. See, also. Virgin v. Marwick, 
 97 Me. 578, 55 AtL 520. But see Connecticut Mut. life Ins. Co. Y. Baldwin, 
 15 R. I. 106, 23 Atl. 105, in which the court said that at the time the policy 
 was issued it vested a right In the insured's wife and children then In being. 
 
 i» Virgin v. Marwick, 97 Me. 578, 65 Atl. 520; Martin v. Insurance Co., 73 
 Me. 25. 
 
 1* But It was held in Hanley v. Supreme Tent, 38 Misc. Rep. 161, 77 N. Y. 
 Supp. 246, that illegitimate children described as "adopted children" would 
 bt allowed to take the fund. 
 
 I 
 
 §193) 
 
 DESIGNATION OF BENEFICIARY. 
 
 515 
 
 children of the insured, whether by the named wife or those of anoth- 
 er; " but if the term "our children" is used, the insurance passes only 
 to the issue of the insured by the wife named in the policy.^* 
 
 Insurance Payable to Insured's "Wife," 
 
 When the regulations of the mutual association allow insurance for 
 the benefit of the wife, this does not permit insurance for the benefit of 
 a woman with whom the insured is living as a wife; " but it has been 
 held that where an insurance company paid a sum due under a benefit 
 certificate, by its terms payable to a certain woman designated therein 
 as wife of the insured, proof that the woman receiving the money was 
 not really the wife of the insured did not render the insurer liable to 
 pay the sum a second time to the real wife of the insured." So, when 
 the by-laws of a mutual association allowed certificates to issue for the 
 benefit of various specified persons and "their dependents," it has been 
 held that insurance made payable to the "affianced wife" of the insured 
 could be collected by her if she was in fact dependent upon the insur- 
 ance,** but otherwise not.*" 
 
 Insurance Payable to the Family of the Insured. 
 
 The rather vague term "family" is frequently used in benefit certifi- 
 cates to indicate the recipient of the fund. In deciding whether a par- 
 ticular person claiming a share of the fund is of the family of the in- 
 sured, the court will consider whether that person was so regarded by 
 the insured. If he was so regarded, he will be allowed to participate, 
 although in no way related to the insured. Thus, where a young lady 
 had lived for many years in the same house with an old man, who sup- 
 ported her as would a father, it was held that she was a part of his fam- 
 ily.** So a widowed mother, or other dependent relatives residing 
 with the insured, are within the meaning of this term." Public policy 
 forbids, however, that the funds should become payable to the mistress 
 
 i» Ricker v. Insurance Co., 27 Minn. 193, 6 N. W. 771, 38 Am. Rep. 289; 
 Stigler's Ex'x v. Stigler, 77 Va. 163. 
 
 i« Evans v. Opperman, 76 Tex. 293, 13 S. W. 312. 
 
 IT Keener v. Grand Lodge, 38 Mo. App. 543. One who marriee a man, ig- 
 norant of the fact that he has a wife living, is entitled to the amount due 
 upon a life benefit certificate made payable to her by the deceased, as against 
 the lawful wife. Crosby v. Ball, 4 Ont Law Rep. 496. And the mother of 
 illegitimate children may be made beneficiary where the father contracts to 
 support them. Brown v. Mansur, 64 N. H. 39, 5 Atl. 768. 
 
 18 Kulp V. Brant, 162 Pa. 222, 29 Atl. 729. 
 
 i» McCarthy v. Supreme Lodge, 153 Mass. 314^ 26 N. E. 868, 11 L. R. A. 144. 
 25 Am. St Rep. 637. 
 
 20 Palmer v. Welch, 132 111. 141, 23 N. B. 412. See, also. Supreme Council 
 V. Perry, 140 Mass. 580, 5 N. E. 634. 
 
 «i Carmichael v. Association, 51 Mich. 494^ 16 N. W. 871. 
 
 22 See Folmer's Appeal, 87 Pa, 133; Carmichael ▼. Association. 61 Mich. 
 494, 16 N W. 871. 
 
 I 
 
516 
 
 TERMS OF THE LIFE POLICY. 
 
 (Ch. 14 
 
 of the insured, even though he may have maintained a family and have 
 lived with her.^^ 
 
 These illustrations will serve sufficiently to indicate in what manner 
 the courts apply the general rule above stated. There are numerous 
 cases presenting other phrases for construction, but as a general rule 
 each case stands upon its own footing, and the construction to be placed 
 upon the words used is governed by all the terms of the contract, con- 
 sidered as a whole, 
 
 STATEMENT OF AGE. 
 
 194. A misstatement of the age of the insured is a material misrepre- 
 
 sentation, whicli, in tlie absence of a provision in tlie policy to 
 the contrary, xirill avoid the insurance. Modem life policies 
 usually contain a provision saving the policy from forfeiture in 
 case of such a uiistake. ^ 
 
 Modern insurance policies ordinarily contain a term of this kind: 
 "In case the age of the insured shall have been misstated, the amount 
 payable hereunder shall be that sum which the premium paid would 
 have provided for had the age been stated correctly in the application." 
 This is an eminently just and reasonable provision. Without it the 
 least mistake made by the insured in stating his age, whether due to in- 
 advertence or forgetfulness, would absolutely avoid the policy, even 
 though there was no intention on the part of the insured to defraud the 
 company.** A person's age is a fact material to the risk, so that, un- 
 der the familiar doctrine that an innocent material misrepresentation 
 avoids the insurance contract, the insured might be deprived of the 
 protection of his policy under circumstances of peculiar hardship. 
 
 SUICXDE-WHEir NOT EXCEPTED IK THE POLICY. 
 
 195. By the ii^eight of authority, suicide is not by implication excepted 
 
 from the risks assumed by the insurer, unless the policy ivas 
 taken out with an intention to conunit suicide and thus defraud 
 the Insurer. This rule applies especially to insurances for the 
 benefit of another than the insured. 
 106* In the federal courts, and in the courts of several states, suicide 
 of the insured is held to avoid the policy, on the double ground 
 of an in&plied exception to the risk, and of public policy pro« 
 hibiting insurance against suicide. 
 
 When the Insured is Sane, 
 
 It seems to be now settled by the clear weight of authority in this 
 country that the self-destruction of the insured, whether it be deliber- 
 
 «« Keener ▼. Grand Lodge, 38 Mo. App. 544. 
 
 «* iBTNA LIFE INS. CO. v. FRANCE, 91 U. a 510, 23 L. Ed. 401; Dolan 
 T. Association, 173 Mass. 197, 53 N. E. 398. 
 
 §§ 195-196) SUICIDE — WHEN NOT EXCEPTED IN THE POLICY. 517 
 
 ately done while sane, or irresponsibly inflicted while insane, is one of 
 the risks assumed by the insurer, unless it is by express terms except- 
 ed.*'' A different view, however, was taken by the Supreme Court in 
 the recent important case of Ritter v. Mutual Life Ins. Co.*' In this 
 case one Runk, already heavily insured, became a defaulter to a large 
 amount. Subsequently to such default he procured additional insurance 
 to a large amount, so that the aggregate sum of his policies at the time 
 of his death amounted to $500,000. There was clear evidence that 
 Runk took his own life while perfectly sane, with the intention of ma- 
 turing his policies in order to make good his default. By reason of a 
 failure of the insurance company to comply with the law of Pennsyl- 
 vania requiring copies of the application to be attached to the policies, 
 the conditions therein against suicide were not allowed to be shown in 
 evidence. Under these facts there was squarely presented to the Su- 
 preme Court the question whether an insurance company is liable for 
 the death of the insured by suicide when the policy contains no pro- 
 vision with reference to self-destruction. The court, in a powerful 
 opinion by Mr. Justice Harlan, affirmed the decision of the lower court, 
 holding the insurer not liable. This decision was based upon two 
 grounds : (1) That there is implied in every contract of life insurance 
 a condition that the insured shall not voluntarily and intentionally in- 
 crease the risk assumed by the insurer; therefore the intentional self- 
 destruction of the insured, while sane, amounts to a violation of this 
 implied condition, in accordance with the same principle that holds a 
 fire policy to be avoided when the insured property is destroyed by the 
 intentional act of the person insured. (2) That an agreement to insure 
 a person against his wrongful act of self-destruction, even though ex- 
 pressly set forth, would be contrary to public policy, and therefore void. 
 The New York Court of Appeals, in a recent decision,*^ thus states the 
 first ground upon which the Ritter Case is based : "It is an inherent 
 and fundamental part of every such contract that the insured shall not 
 mtentionally take his own life. No act so contrary to good morals and 
 
 28 PATTERSON v. INSURANCE CO., 100 Wis. 118» 75 N. W. 980, 42 L. R. 
 A. 253, 69 Am. St Rep. 899; Supreme Conclave Improved Order of Hepta- 
 sophs V. Miles, 92 Md. 613, 48 Atl. 845, 84 Am. St. Rep. 528 ; Eastabrook v. In- 
 surance Co., 54 Me. 224, 89 Am. Dec. 743; Grand Lodge Independent Order 
 of Mutual Aid v. Wieting, 168 111. 408, 48 N. E. 59, 61 Am. St. Rep. 123; Kerr 
 V. Association, 39 Minn. 174, 39 N. W. 312, 12 Am. St Rep. 631; Schultz v. 
 Insurance Co., 40 Ohio St 217, 48 Am. Rep. 676; John Hancock Mut. Life 
 Ins. Co. V. Moore, 34 Mich. 46; Connecticut Mut Life Ins. Co. v. Groom, 86 
 Pa. 92, 27 Am. Rep. 689; Darrow v. Society, 116 N. Y. 537, 22 N. E. 1093, 6 
 L. R. A. 495, 15 Am. St Rep. 430. 
 
 26 RITTER V. MUTUAL LIFE INS. CO., 169 U. S. 139, 18 Sup. Ct 300, 42 
 L. Ed. 693. 
 
 27 Shipman y. Protected Home Circle, 174 N. Y. 398, 67 N. E. 83, 63 L. B. 
 A. 347. 
 
518 
 
 TERMS OF THB LIFB POLICY* 
 
 (Ch. U 
 
 ! ( 
 
 i! 
 
 the usual course of human nature should be held to be within the con- 
 templation of the parties to a contract for life insurance, unless it is 
 dearly and unequivocally expressed." 
 
 There is much in the reasoning of the court in the Ritter Case to 
 commend the rule there adopted, which is established in the English 
 and in a few of the American courts; *® but in a majority of the cases 
 that have been decided since the rendering of the opinion in the Ritter 
 Case, that case has either been repudiated or distinguished, it being 
 generally considered that that state of mind which induces suicide, if it 
 arises after the inception of the policy, is one of the risks assumed by 
 the insurer.*' 
 
 In all jurisdictions it is recognized that a policy procured by a person 
 with intent to commit suicide is characterized by fraud in its inception, 
 and is therefore voidable at the option of the insurer.*® By statute, in 
 one state at least, it has been expressly enacted that suicide of the in- 
 sured shall not be a defense to an action on the policy, unless it be 
 proved that the policy was procured with an intention to commit sui- 
 cide.*^ The constitutionality of this statute has been established be- 
 yond question, both by the state and the federal supreme courts." 
 
 «« AMICABLE SOCIETY v. HOLLAND, 4 Bligh (N. S.) 194-211; BOR- 
 RADAILE V. HUNTER, 5 Man. & G. 639; Clift v. Schwabe, 3 C. B. 437; 
 Breasted v. Trust Co., 8 N. Y. 299, 59 Am. Dec. 482 ; Bradley v. Insurance Co., 
 
 45 N. Y. 422, 6 Am. Rep. 115 ; Smith v. Society, 123 N. Y. 85, 25 N. E. 197, 9 L. 
 R. A. 616; Shipman v. Protected Home Circle, 174 N. Y. 398, 67 N. E. 83, 63 
 L. R. A. 347; Mooney v. Ancient Order, 24 Ky. Law Rep. 1787, 72 S. W. 288; 
 Supreme Commandery of Knights of Golden Rule v. Ainsworth, 71 Ala. 436, 
 
 46 Am. Rep. 332. 
 
 »» In Morton v. Supreme Council, 100 Mo. App. 76, 73 S. W. 259, the court 
 thus expresses this view of the question: "Moreover, self-destruction always 
 indicates, if not insanity, at least an irresponsible state of mind, and may 
 well be considered a part of the risk assumed, if not specially excluded. 
 For this reason the doctrine in question is not welcomed by all courts, and 
 seemingly not by those of this state, which hold that a company doing a life 
 insurance business takes a risk on an insured person's life subject to all his 
 human passions and frailties. Harper's Adm'r v. Insurance Co., 19 Mo. 506; 
 McDonald v. Triple Alliance, 57 Mo. App. 87." Campbell v. Supreme Con- 
 clave, 66 N. J. Law, 274, 49 Atl. 550, 54 L. R. A. 576. 
 
 30 Smith V. Society, 123 N. Y. 85, 25 N. E. 197, 9 L. R. A. 616. In RITTER 
 V. INSURANCE CO., 169 U. S. 139, 18 Sup. Ct. 300, 42 L. Ed. 693, It was held 
 that taking out policies requiring annual premium payments much greater 
 than the insured's income was, in view of a previously expressed intention 
 to commit suicide, sufficient proof of a fraudulent intent at the time of pro- 
 curing the policies. Parker v. Insurance Co., 108 Iowa, 117, 78 N. W. 826; 
 Supreme Conclave Improved Order of Heptasophs v. Miles, 92 Md. 613, 48 
 Atl. 845, 84 Am. St Rep. 528. 
 
 81 The Missouri statute reads as follows (Rev. St. 1889, § 5855): **In all 
 
 «« Knights Templars' & Masons' Life Indemnity Co. v. Jarman, 187 U. S. 
 197, 23 Sup. Ct 106, 47 L. Ed. 139. 
 
 ^.§ 195-196) SUICIDE — WHEN NOT EXCEPTED IN THE POLICY. 619 
 
 / Vhen the Policy is Payable to a Third Person, 
 
 In applying the doctrine that suicide is an implied exception to the 
 risk assumed by the life insurer, many courts make a distinction be- 
 tween policies payable to the estate of the insured and those payable to 
 some third person other than the insured as beneficiary. Some of those 
 states, holding that suicide of the insured defeats the policy of the first 
 class, on the ground that to hold otherwise would be allowing the per- 
 sonal representatives of the insured, who stand in his shoes, to reap the 
 benefit of his wrongful act, have decided that the beneficiary may re- 
 cover in spite of the suicide of the insured.*' This latter view is based* 
 upon the theory that the interest of the beneficiary becomes vested im- 
 mediately upon the valid issue of the policy, and cannot be subject to 
 be defeated by any act of the insured to which the beneficiary is not a 
 party.** Such an exception to the operation of the rule in favor of the 
 beneficiary is certainly not justified by the reasoning of the court in the 
 Ritter Case, and has been denied in a recent case in the federal Circuit 
 Court.** Further, there seems to be no good reason why the bene- 
 
 suits upon policies of insurance on life, hereafter issued by any company do- 
 ing business in this state, it shall be no defense that the insured committed 
 suicide, unless it shall be shown to the satisfaction of the court or jury try- 
 ing the cause that the insured contemplated suicide at the time he made his 
 application for the policy, and any stipulation in the policy to the contrary 
 shall be void." 
 
 S3 Fitch V. Insurance Co., 59 N. Y. 557, 17 Am. Rep. 372; PATTERSON 
 V. INSURANCE CO., 100 Wis. 118, 75 N. W. 980, 42 L. R. A. 253, 69 Am. 
 St. Rep. 899; SEILER v. ASSOCIATION, 105 Iowa, 87. 74 N. W. 941, 43 L. 
 R. A. 537; Shipman v. Protected Circle, 174 N. Y. 308, 67 N. E. 83, 63 L. 
 R. A. 347; Darrow v. Society, 116 N. Y. 537, 22 N. E. 1093, 6 L. R. A. 495, 15 
 Am. St Rep. 430; Morris v. Insurance Co., 183 Pa. 563, 39 Atl. 52; Kerr v. 
 Association, 39 Minn. 174, 39 N. W. 312, 12 Am. St. Rep. 631; Grand Lodge 
 Independent Order of Mutual Aid v. Wieting, 168 111. 408, 48 N. E. 59, 61 
 Am. St. Rep. 123. Contra, Hopkins v. Assurance Co. (C. C.) 94 Fed. 729. 
 
 »* Hence the doctrine is of no avail to the beneficiary under a mutual ben- 
 efit certificate seeking to recover for the suicidal death of the insured, since 
 the rights of such beneficiary are not vested. Shipman v. Protected Circle, 
 174 N. Y. 398, 67 N. E. 83, 63 L. R. A. 347. But see, contra, Parker v. Associa- 
 tion, 108 Iowa, 117, 78 N. W. 826. 
 
 «B In Hopkins v. Assurance Co. (C. C.) 94 Fed. 729, McPherson, J., in refer- 
 ence to Morris v. Assurance Co., 183 Pa. 563, 39 Atl. 52, said: "With much 
 respect for the opinion of that court, we are constrained to believe that this 
 view of the contract was not sufficiently considered, for it is not discussed, 
 and the decision appears to rest mainly upon the ground that the insured 
 cannot defeat the gift to the beneficiary by his own fraudulent conduct 
 afterwards. It seems to us that this begs the question. The beneficiary 
 does not receive a gift of policy against suicide, for the contract does not 
 cover death by such an act, and therefore the insured does not take away 
 what he did not and could not give. But, whatever weight should be al- 
 lowed to this case in the courts of the state, we are bound to follow the de- 
 cision in RITTER v. INSURANCE CO., and this is founded upon the princl- 
 
 / 
 
520 
 
 TERMS OF THE LIFE POLICY. 
 
 (Ch. 14 
 
 •J 
 
 
 i 
 
 1 ^ 
 
 ficiary's rights under the policy should not be defeated by the insured's 
 violation of the implied condition against suicide, as well as by his de- 
 fault in the payment of premiums, or his violation of any other condi- 
 tion of the contract. 
 
 When the Insured is Insane, 
 
 It is manifest that an insane act of self-destruction is not subject to 
 any of the rules that have been stated above as applicable to the inten- 
 tional suicide of a sane person. It is therefore a settled rule in all ju- 
 risdictions that, in the absence of express conditions to the contrary, 
 the suicide of an insured while insane does not discharge the insurer 
 from his Hability on his contract.'® Such insanity is one of the diseases 
 to which the insurer must have known that the insured was liable, and 
 the unwitting act of self-destruction is as much the consequence of that 
 disease as if some vital organ were thereby fatally affected.** 
 
 STJICIDB-^rHEN EXCEPTED IN THE POLICY. 
 
 197. A mere exception of death by suicide is oonstn&ed to inclnde only 
 
 eases of self-destmction while sane. 
 
 198. Within this mle, in accordance with the American cases, the in- 
 
 sured is deenied to be insane when he is in such a mental con- 
 dition as not to understand the moral quality of his act. Under 
 the English rule the insured is considered insane only xirhen he 
 is unable to understand the physical consequences of his act. 
 
 199. SAKE OB INSANE— When the policy excludes death by suicide, 
 
 sane or insane, it is held by the weight of authority that any in- 
 tentional act of self-destruction by the insured, will discharge 
 the insurer front liability. 
 
 Suicide Excepted. 
 
 Where the policy contains a clause excepting from among the risks 
 assumed by the insurer "death by suicide," or words of similar import, 
 it is universally held by the courts that the exception refers only to sui- 
 cide of the insured while sane, and has no application to his self-de- 
 struction due to the misfortime of insanity.** 
 
 pie that recovery cannot be had because the company has not insured against 
 this particular risk." 
 
 36 Grand Lodge Independent Order of Mutual Aid y. Wieting, 168 111. 408, 
 48 N. E. 59, 61 Am. St. Rep. 123; John Hancock Mut. Life Ins. Co. v. Moore, 
 34 Mich. 46; Connecticut Mut Life Ins. Co. v. Groom, 86 Pa. 92, 27 Am. 
 Rep. 689; Schultz v. Insurance Co., 40 Ohio St. 217, 48 Am. Rep. 676; Breast- 
 ed v. Trust Co., 8 N. Y. 299, 59 Am. Dec. 482. 
 
 87 John Hancock Mut Life Ins. Co. v. Moore, 34 Mich. 46; Grand Lodge 
 Independent Order of Mutual Aid v. Wieting, 168 111. 408, 48 N. E. 59, 61 
 Am. St Rep. 123. 
 
 38 Blackstone v. Insurance Co., 74 Mich. 592, 42 N. W. 156, 3 L. R. A. 486; 
 ACCIDENT INS. CO. v. CRANDAL^ 120 U. S. 527, 7 Sup. Ct 685, 30 L. Ed. 
 
 §§ 197-199) SUICIDE— WHEN EXCEPTED IN THE POLICT. 521 
 
 What Constitutes Insanity. 
 
 The construction of this and similar clauses has given rise to much 
 litigation, in the course of which there have developed two rules for 
 determining what constitutes insanity, within the rule that self-destruc- 
 tion by the insured while insane does not violate this condition. 
 
 English Rule. 
 
 The English courts, followed by those of Massachusetts and New 
 York, ha/e established the rule that one committing suicide shall be 
 deemed to have been sane when at the time of the act of self-destruc- 
 tion he understood the physical consequences which would result from 
 his violent acts, and desired that these consequences should be death.*' 
 In accordance with this rule, the insured's appreciation of the moral 
 turpitude of his act is material only as affording evidence of his knowl- 
 edge of the physical consequences. 
 
 The American Rule. 
 
 The Supreme Court of the United States, followed by a great ma- 
 jority of the American courts, has laid down a different rule, which 
 may be properiy stated in the language of Mr. Justice Hunt in the lead- 
 ing case of Mutual Life Ins. Co. v. Terry : *• "We hold the rule in 
 
 740. In this case the court said that neither self-kilUng, suicide, dying by his 
 own hand, nor self-inflicted injuries can be predicated on the act of an insane 
 person, as in either case it is not his act Knickerbocker Life Ins. Co. v. 
 Peters 42 Md. 414; Hathaway's Adm'r v. Insurance Co., 48 Vt 336; Meach- 
 am V. 'insurance Co., 120 N. Y. 237, 24 N. B. 283; SchefCer v. Insurance Co., 
 25 Minn. 534; Life Association v. Waller, 57 Ga. 533; Bastabrook v. Insurance 
 Co., 54 Me. 224, 89 Am. Dec. 748; Phillips v. Insurance Co., 26 La. Ann. 404, 
 21 Am. Rep. 549. But see Cooper v. Insurance Co., 102 Mass. 227, 3 Am. Rep. 
 451, in which it was held that the provision in a policy excepting from the risk 
 assumed the death of the Insured caused by his own hand operated to exempt 
 the insurers from liability, even if the suicide was committed while the insured 
 was insane. To the same effect, see Nimick v. Insurance Co., 3 Brewst (Pa.) 
 502, Fed. Cas. No. 10,266. 
 
 »• BORRADAILE v. HUNTER, 5 Man, & G. 639, 44 E. C. L. 335 ; Cooper v. 
 Insurance Co., 102 Mass. 227, 3 Am. Rep. 451 ; Van Zandt v. Insurance Co., 65 
 N T. 169, 173, 14 Am. Rep. 215; Dean v. Insurance Co., 4 Allen (Mass.) 96; 
 Nimick V.' Insurance Co., 3 Brewst (Pa.) 502, Fed. Cas. No. 10,266; Weed v. 
 Insurance Co., 70 N. Y. 561. See, also. Equitable Life Assur. Soc v. Paterson, 
 
 41 Ga. 338, 5 Am. Rep. 535. 
 
 *o MUTUAL LIFE INS. CO. v. TERRY, 15 Wall. (U. S.) 580, 21 L. Ed. 236. 
 See, also, Connecticut Mut Life Ins. Co. v. Akens, 150 U. S. 468, 14 Sup. Ct 
 155, 37 L. Ed. 1148; RITTER v. INSURANCE CO., 169 U. S. 139, 18 Sup. 
 Ct. 300 42 L. Ed. 693; Grand Lodge Independent Order of Mutual Aid v. 
 Wieting, 168 111. 408, 48 N. E. 59, 61 Am. St. Rep. 123; BIGELOW v. INSUR- 
 ANCE CO., 93 U. S. 284, 23 L. Ed. 918; ACCIDENT INS. 00. v. CRANDAL, 
 120 U. S. 527, 7 Sup. Ct 685, 30 L. Ed. 740; Connecticut Mut Life Ins. Co. 
 V. Lathrop, 111 U. S. 612, 4 Sup. Ct. 533, 28 L. Ed. 536; Manhattan Ufe Ins. 
 Co. V. Broughton, 109 U. S. 121, 3 Sup. Ct. 99, 27 L. Ed. 878; Charter Oak Life 
 Ins. Co. V. Rodel, 95 U. S. 232, 24 L. Ed. 433; Michigan Mut Life Ins. Co. ▼. 
 
522 
 
 TBBMS OF THB LIFB POLICY. 
 
 (Ch. 14 
 
 5§ 197-199) SUICIDE — WHEN EXCEPTED IN TBE POUGT. 
 
 523 
 
 I 
 
 t 
 
 ^ 
 
 question to be this : If the assured, being in the possession of his or- 
 dinary reasoning faculties, from anger, pride, jealousy, or a desire to 
 escape from the ills of life, intentionally takes his own life, the proviso 
 attaches, and there can be no recovery. If the death is caused by the 
 voluntary act of the insured, he knowing and intending that his death 
 shall be the result of his act, but when his reasoning faculties are so far 
 impaired that he is not able to understand the moral character, the gen- 
 eral nature, consequences, and effect of the act he is about to commit, 
 or when he is impelled thereto by an insane impulse which he has not 
 the power to resist, such death is not within the contemplation of the 
 parties to the contract, and the insurer is liable." 
 
 tt 
 
 » 
 
 Suicide, Sane or Insane,* 
 
 In order to escape the operation of the liberal rule established by the 
 Supreme Court as to what constitutes insane suicide, later policies have 
 uniformly included a condition against suicide, "sane or insane." This 
 has been held to be valid and enforceable.** There can certainly be no 
 reason why the insurer should not decline to assume the risk incident 
 to the violence of insanity ; but consistently with the general rule of the 
 courts to construe the insurance policy in such a way as to avoid a for- 
 feiture and to enforce the contract, if possible, the courts generally hold 
 that this condition does not include accidental death, even though the 
 act of the insured may have been the unintended means of causing that 
 death.** Some courts have even gone so far as to hold that where an 
 insured person becomes so violently insane as to make his destructive 
 acts merely those of a raving maniac, and not due to any exercise of 
 volition, the condition is not violated, and the insurer is liable.*' By 
 
 Naugle, 130 Ind. 79, 29 N. B. 393; Knickerbocker Life Ins. Co. y. Peters, 42 
 Md. 414; Grand Lodge Independent Order of Mutual Aid v. Wleting, 168 111. 
 408, 48 N. E. 59, 61 Am. St. Rep. 123; Mutual Benefit Life Ins. Oo. v. Da vies' 
 Elx'r, 87 Ky. 641, 9 S. W. 812; Blackstone v. Insurance Co., 74 Mich. 592, 42 
 X. W. 156, 3 L. R. A. 486; Mutual Life Ins. Co. v. Walden (Tex. Civ. App.) 
 26 S. W. 1012; New Home Ass'n v. Hagler, 29 111. App. 437; Suppiger v. As- 
 sociation, 20 111. App. 595; Connecticut Mut Life Ins. Co. v. Moore, 1 Flip. 
 3C3, Fed. Cas. No. 9,755. 
 
 41 BIGELOW V. INSURANCE CO., 93 U. S. 284, 23 L. Ed. 918; Salentlne 
 V. Insurance Co. (C. C.) 24 Fed. 159; Union Mut Life Ins. Oo. v. Payne, 106 
 Fed. 172, 45 C. O A. 193; Dennis v. Insurance Co., 84 Cal. 570, 24 Pac. 120; 
 Sparks v. Indemnity Co., 61 Mo. App. 109; Union Cent. Life Ins. Co. v. Hol- 
 lowell, 14 Ind. App. 611, 43 N. E. 27; Tritschler v. Association, 180 Pa. 205, 
 36 Atl. 734; Sargeant v. Insurance Co., 189 Pa. 341, 41 Atl. 351; Keefer v. 
 Modern Woodmen, 203 Pa. 131, 52 Atl. 164. 
 
 *2 Union Mut. Life Ins. Oo. v. Payne, 105 Fed. 172, 45 O. O. A. 193; Mutual 
 Benefit life Ins. Co. v. Daviess' Bi'r, 87 Ky. 541, 9 S. W. 812; Keels v. As- 
 sociation (0. C.) 29 Fed. 198. 
 
 ♦8 Supreme Lodge Order of Mutual Protection v. Gelbke, 198 111. 365, 64 N. 
 B. 1058, reversing 100 111. App. 190; Mutual Benefit Life Ina. Oo. ▼. Daviess' 
 Ex'r, 87 Ky. 541, 9 S. W. 812. 
 
 the weight of authority, however, any destructive act of an insane man, 
 «ven though its physical consequences were not known or intended, 
 constitutes a breach of condition.** This would seem clearly to be the 
 sound construction of the condition. 
 
 Presumptions. 
 
 Self-destruction is so contrary to the law of nature and the ordinary 
 rule of conduct that it is never presumed.** The insurer setting up 
 suicide in defense must clearly establish such facts as will exclude any 
 reasonable hypothesis of accidental death.** On the other hand, if the 
 plaintiff desires to show that a death proved to be suicidal was due to 
 the insanity of the insured, the burden rests upon him to prove the ex- 
 istence of such insanity, which will never be presumed.*^ 
 
 44 BIGELOW y. INSURANCE CO., 93 U. S. 284, 23 L. Ed. 918; Streeter ▼. 
 Society, 65 Mich. 201, 31 N. W. 780, 8 Am. St. Rep. 883; Brower v. Supreme 
 Lodge, 74 Mo. App. 495; Dennis v. Insurance Co., 84 Cal. 570, 24 Pac. 120; 
 Sparks v. Indemnity Co., 61 Mo. App. 109; Union Cent Life Ins. Co. v. Hol- 
 Jowell, 14 Ind. App. 611, 43 N. E. 277; Sabin v. Union, 90 Mich. 177, 51 N. 
 W. 202. 
 
 4» Supreme Lodge K. P. v. Beck, 181 U. S. 49, 21 Sup. Ot. 532, 46 L. Ed. 741; 
 Home Benefit Ass'n v. Sargent, 142 U. S. 691, 12 Sup. Ct 332, 35 L. Ed. 1160; 
 TRAVELERS' INS. CO. v. McCONKEY, 127 U. S. 661, 8 Sup. Ct 1360, 32 
 L. Ed. 308; Union Mut Life Ins. Co. v. Payne, 105 Fed. 172, 45 O. C. A. 193; 
 Connecticut Mut Life Ins. Co. v. McWhirter, 78 Fed. 444, 19 C. a A. 519; 
 Supreme Lodge K. P. y. Beck, 94 Fed. 751, 36 C. C. A. 467 ; Keels v. Associa- 
 tion (C. C.) 29 Fed. 198. "The love of life is ordinarily a sufficient Inducement 
 for its preservation, and, In the absence of proof that death resulted from 
 other than natural causes, suicide will not be presumed." Hale v. Invest- 
 ment Co., 61 Minn. 516, 63 N. W. 1108, 52 Am. St Rep. 616. Mutual Life Ins. 
 Co. V. Wiswell, 56 Kan. 756, 44 Pac. 996, 35 L. R. A. 258; Walcott v. Insur- 
 ance Co., 64 Vt 221, 24 Atl. 992, 33 Am. St Rep. 923; Agen v. Insurance Co., 
 105 Wis. 217, 80 N. W. 1020, 76 Am. St. Rep. 905; Games v. Association, 106 
 Iowa, 281, 76 N. W. 683, 68 Am. St Rep. 306; Dennis v. Insurance Co., 84 
 Cal. 570, 24 Pac. 120; Inghram v. Union, 103 Iowa, 395, 72 N. W. 559. 
 
 *8Boynton v. Association, 105 La. 202, 29 South. 490, 52 L. R. A. 687; 
 Keels V. Association (C. C.) 29 Fed. 198; Leman v. Insurance Co., 46 La. Ann. 
 1189, 15 South. 388, 24 L R. A. 589, 49 Am. St Rep. 348; Mutual Life Ins. 
 Co. V. Wiswell, 56 Kan. 756, 44 Pac. 996, 35 L. R. A. 258. "Upon evenly 
 balanced testimony, the law assumes innocence rather than crime." Wal- 
 cott V. Insurance Co., 64 Vt 221, 24 Atl. 992, 33 Am. St Rep. 923. Agen v. 
 Insurance Co., 105 Wis. 217, 80 N. W. 1020, 76 Am. St Rep. 905; Stephenson 
 V. Association, 108 Iowa, 637, 79 N. W. 459; Travelers' Ins. Co. v. Nitter- 
 house, 11 Ind. App. 165, 38 N. B. 1110; Dennis v. Insurance Co., 84 Cal. 570, 
 24 Pac. 120; Inghram v. Union, 103 Iowa, 395, 72 N. W. 559; MUTUAL LIFE 
 INS. 00. V. SIMPSON (Tex. Civ. App.) 28 S. W. 837. 
 
 4T Waters v. Insurance Co. (C. O.) 2 Fed. 892; MUTUAL LIFE INS. CO. v. 
 TERRY, 15 Wall. 580, 21 L. Ed. 236; TRAVELERS' INS. 00. v. McCONKEY, 
 127 U. S. 661, 8 Sup. Ct 1360, 32 L. Ed. 308; Knickerbocker Life Ins. Co. v. 
 Peters, 42 Md. 414; Continental Ins. Co. v. Delpeuch, 82 Pa. 226; Phadei?- 
 hauer v. Insurance Co., 7 Heisk. (Tenn.) 567, 19 Am. Rep. 623; Moore v. In- 
 surance Co., 1 Flip. 363, Fed. Cas. No. 9,755; Dickerson T. Insurance Co., 200 
 lU. 270, 65 N. E. 691. 
 
\ i 
 
 524 
 
 I 
 
 
 i 
 
 TEEMS OF THE LIFE POLICY, 
 
 DEATH IN VIOLATION OF LAW. 
 
 (Ch. 14 
 
 200. The insurer Is not liable for the death of the insured at the hand* 
 
 of the law, even thonch snch risk is not expressly excepted i« 
 the policy. 
 
 201. An exception, in the policy, of death because of violation of law, 
 
 includes only those cases in which death ensues as the proxi- 
 mate result of the criminal act of the insured. By the weight 
 of authority it does not include suicide, or death in violation of 
 a merely civil right* 
 
 Death at the Hands of the Law. 
 
 Most policies of life insurance contain a clause exempting the insurer 
 from liability for the death of the insured in consequence of the known 
 violation of any law or at the hands of justice. It has been held, how- 
 ever, by both the Supreme Court of the United States *• and the Eng- 
 lish House of Lords,** that, even in the absence of such an exception, 
 the insurer could not be required to pay in case the insured came to his 
 death by the execution of a legally imposed sentence. 
 
 The Supreme Court of the United States, in the case of Burt v. 
 Union Cent. Life Ins. Co.,»<» has carried this principle even further than 
 this. In that case the insured was executed for the murder of his wife. 
 The assignees of the policy brought suit against the insurance com- 
 pany, claiming payment on the ground that the insured had been un- 
 justly sentenced and executed, since he was not guilty of the crime with 
 which he was charged. The lower court declined to receive any evi- 
 dence upon this point, and its ruling was sustained by the Supreme 
 Court, not on the ground that the question was res adjudicata, but be- 
 cause to allow proof that the insured had been unjustly executed, and 
 thereby to render the msurer liable on his policy, would be tantamount 
 to construing a contract as insurance against the miscarriage of jus- 
 tice, which would be contrary to public policy. 
 
 Death in Known Violation of Law. 
 
 This condition is evidently inserted in the life policy for the purpose 
 of exempting the insurer from the largely increased risk of death as- 
 sumed by any person violating a criminal law. This purpose the courts 
 keep m mind in construing such clauses. It is held that the clause ap- 
 plies only to cases involving the violation of a criminal law, and not 
 merely the invasion of a civil right. This is well illustrated by the 
 famous case of CluflF v. Mutual Ben. Life Ins. Co.," which was four 
 
 ♦8 Burt V. Insurance Co., 187 U. S. 362, 23 Sup. Ct. 139, 47 L. Ed. 216. Contra 
 McDonald v. Order of Triple Alliance, 57 Mo. App. 87. 
 
 *» AMICABLE SOCIETY v. BOLLAND, 4 Bligh, N. S. 194, 
 
 »o 187 U. S. 362, 23 Sup. Ct 139, 47 L. Bd. 216. 
 
 •1 Cluff T. Insurance Co., 13 AUen (Mass.) 30a See same case, 99 Mass. Sib. 
 
 DEATH IN VIOLATION OF LAW. 
 
 525 
 
 §§ 200-201) 
 
 times tried in Massachusetts, being twice before the Supreme Court of 
 that state. A case involving the same facts and a similar policy sub- 
 sequently came before the Court of Appeals of New York. In this 
 case Cluff, the insured, meeting an alleged debtor on the public road, 
 demanded payment. This being refused, Cluff attempted to seize the 
 horses then in the possession of the debtor. Being greatly incensed by 
 this act, the latter shot and instantly killed the insured. It was held 
 by the Supreme Court of Massachusetts that although Cluff was vio- 
 lating the law in seizing another person's property, yet, since it was not 
 done with a criminal intent, the law violated was merely a rule of civil 
 conduct, and not within the contemplation of the parties to the contract 
 of insurance, which contained the usual clause exempting the insurer 
 from loss in consequence of the violation of law. In the New York 
 court ** a judgment for the defendant was reversed on the ground that 
 the lower court should have submitted to the jury the question whether 
 the wrongful act of Cluff was the proximate cause of the insured's 
 death." 
 
 Suicide not a "Violation of Law." 
 
 By the weight of authority it is held that the suicide of the insured is 
 not a violation of this clause, within the contemplation of the parties.'** 
 This is clearly correct in those jurisdictions in which the common-law 
 crimes have been abolished and suicide is not included within the list of 
 statutory crimes. But the conclusion is not so easily reached in those 
 states in which the common-law crimes are still recognized. Suicide 
 was undoubtedly a crime at common law, but it has generally been held 
 that, even though suicide may still be technically a common-law crime, 
 it will not be regarded as a crime within the meaning of this clause of 
 the insurance policy, since no punishment can be imposed for its com- 
 mission." In a recent New York case," however, a contrary conclu- 
 sion was reached. 
 
 1: 
 
 »« Bradley v. Insurance Co., 45 N. Y. 422, 6 Am. Rep. 115. 
 
 68 In Lehman v. Indemnity Co., 158 N. Y. 689. 53 N. E. 1127, affirming 7 
 App. Div. 424, 39 N. Y. Supp. 912, it was held that the act of the insured in 
 walking along a railway track, though forbidden by law, was not a "viola- 
 tion of law," within the meaning of this clause, when the railway company 
 had impliedly licensed such act. 
 
 8* Kerr v. Association, 39 Minn. 174, 39 N. W. 312, 12 Am. St. Rep. 631; 
 PATTERSON v. INSURANCE CO., 100 Wis. 118, 75 N. W. 980, 42 L, R. A. 
 253, 69 Am. St Rep. 899. So in New York, where common-law crimes have 
 been abolished. Darrow v. Society, 116 N. Y. 537. 22 N. E. 1093. 6 L. R. A. 
 495. 15 Am. St Rep. 430; Royal Circle v. Achterrath, 204 111. 549, 68 N. E. 
 492,' 63 L. R. A. 452. But see Shipman v. Home Circle, 174 N. Y. 398, 67 N. 
 E 83 63 L R. A. 347. in which it was held otherwise under Pen. Code, § 172. 
 
 86 PATTERSON v. INSURANCE CO., 100 Wis. 118. 75 N. W. 980, 42 L. R. 
 A. 253, 69 Am. St Rep. 899. 
 
 •• Shipman v. Home Circle, 174 N. Y. 398, 67 N. E. 83, 63 L. R. A. 347, 
 
 II 
 
526 
 
 TERMS OF THB LIFE POLICY. 
 
 (Ch. U 
 
 §§ 202-204) 
 
 ASSIGNMENT. 
 
 527 
 
 • ' 
 
 i ^ 
 
 'I 
 
 The Unlawful Act must be Proximate Cause of Death, 
 
 It is not sufficient to exempt the insurer from liability that the insured 
 should meet his death while violating the law. The death must have 
 ensued in consequence of that violation." In the language of the court 
 m a recent Tennessee case : " "In order to defeat a recovery because 
 of such provision, there must appear a connecting link between the un- 
 lawful act and the death. It is not sufficient that there was an unlawful 
 act committed by the insured, and that death occurred during the time 
 he was engaged in its commission. There must be some causative con- 
 nection between the act which constituted the violation of the law and 
 the death of the insured. * * * The provision of the policy ex- 
 cluding liability for injury received by the insured while committing an 
 unlawful act refers to such injuries as may happen as the necessary or 
 natural consequences of the act, as its probable and to be anticipated 
 consequences, and the reference to injuries received 'in consequence of 
 any unlawful act' is to those injuries which arise out of or flow natural- 
 ly from the act committed, as its effect or resulting consequence." 
 
 In a recent decision by the Supreme Court of the United States it 
 was held that where a man was killed by the accidental discharge of a 
 gun while he was engaged in a wrongful and violent attempt to recover 
 possession of his wife, who had rightfully left him, the company should 
 be held liable for the death of the insured, since there was no causative 
 connection between the wrong he contemplated and the cause of his 
 death." So it was held that the suicide of an insured, committed in or- 
 der to escape arrest for a crime perpetrated, was not the proximate 
 result of the crime, and therefore not within this clause of the policy.«<> 
 But while the death of the insured must be due proximately to the 
 violation of law, it need not be directly due to that cause. Thus it has 
 been held that when the insured came to his death by reason of a col- 
 lision that took place during a horse race that was being run contrary to 
 
 •T Conboy v. Accident Ass'n, 17 Ind. App. 62, 46 N. E. 363, 60 Am. St. Rep. 
 154; Accident Ins. Co. v. Bennett, 90 Tenn. 256, 16 S. W. 723, 25 Am. St Rep 
 685; Goetzman v. Insurance Co., 3 Hun (N. Y.) 515; Bradley v. Insurance 
 Co., 45 N. Y. 422, 6 Am. Rep. 115; BLOOM v. INSURANCE CO., 97 Ind. 478, 
 49 Am. Rep. 469; Jones v. Accident Ass'n, 92 Iowa, 653, 61 N. W. 485; Trav- 
 elers' Ins. Co. v. Seaver, 19 Wall. 531, 22 L. Ed. 155; MURRAY v. INSUR- 
 ANCE CO., 96 N. Y. 614, 48 Am. Rep. 658. But see Griffin v. Western Ass'n 
 20 Neb. 620, 31 N. W. 122, 57 Am. Rep. 848, where it was held that, al- 
 though the insured was killed while making his escape after having robbed 
 a bank, he was not killed while violating the law, his act of robbing the bank, 
 which was in violation of the law, having been consummated, and according- 
 ly the policy was not avoided. 
 
 »» Accident Ins. Co. v. Bennett, 90 Tenn. 256, 16 S. W. 723, 25 Am. St Rep. 
 685. 
 
 •• Supreme Lodge K. P. v. Beck, 181 U. S. 49, 21 Sup. Ct. 532, 45 L. Ed. 741 
 •• Kerr v. Ben^t Ass'n. 39 Minn. 174. 89 N. W. 812, 12 Am. St Rep. 631. 
 
 law, the insurer was not liable.** Likewise it has been held that when 
 the insured was accidentally killed while returning from a hunting ex- 
 pedition, in which he had unlawfully engaged on Sunday, the insurer 
 was exempted under the clause in question.*' But where such a Sun- 
 day sportsman met an accidental death after returning from the hunt 
 and while at a friend's house, the violation of law was considered not to 
 be the cause of his death.*' Under this clause the insurer was likewise 
 discharged when the insured died by reason of a criminal operation to 
 which she had submitted,** and also when an insured was killed by the 
 husband of a woman upon whom he was committing an assault and 
 battery.* • There seems to be some difference of opinion whether the 
 insurer is liable when the insured is killed while retreating from an 
 altercation in which he had wrongfully engaged. The better view 
 would seem to be that death under such circumstances is proximately 
 caused by the illegal altercation.** 
 
 ASSIGNMENT. 
 
 202. Xn tlie abience of any oondition in the policy prol&ibitins assig:n- 
 
 Tuent, a validly issued life policy may be freely assigned, irre- 
 jpective of the consent of the insurer. 
 
 203. Life policies nsnally provide that no assignment thereof shall be 
 
 valid unless indorsed upon the policy by the insurer, or unless 
 notice in writing is given to the insurer. Failure to comply 
 with such requirenients has no effect whatever upon the validity 
 of the assignment, nor does it deprive the assignee of any of his 
 equitable rights against the insurer. An assignment in accord- 
 ance with the condition of the policy in effect constitutes the 
 assignee a party to the contract, which he may enforce in an 
 action at law. 
 
 204. It seen&s that a condition avoiding the policy in case of assign- 
 
 ment without consent of the insurer is valid and enforceable. 
 
 The insurer does not look to the character of the insured to such an 
 extent when he insures his life as when he insures his property. He 
 naturally looks to the insured's reputation for honesty and carefulness, 
 when insuring his property, as largely affecting the risk, but in the case 
 of life insurance the character of the insured does not affect to any con- 
 
 •» Travelers* Ins. Co. v. Seaver, 19 Wall. 531, 22 L. Ed. 155. 
 
 •2 Duran v. Insurance Co., 63 Vt 437, 22 Atl. 530, 13 L. B. A. 637, 25 Am. 
 St Rep. 773. 
 
 •» Prader v. Accident Ass'n, 95 Iowa, 149, 63 N. W. 601. 
 
 •* Hatch V. Insurance Co., 120 Mass. 550, 21 Am. Rep. 541. 
 
 •5 BLOOM V. INSURANCE CO., 97 Ind. 478, 49 Am. Rep. 469. 
 
 «« MURRAY V. INSURANCE CO., 96 N. Y. 614, 48 Am. Rep. 65a But see 
 Harper's Adm'r v. Insurance Co., 19 Mo. 506; Griffin t« Western Ass'n, 20 
 Neb. 620, 31 N. W. 122, 57 Am. Rep. 848. 
 
 ■II 
 
 »•• 
 
'i I 
 
 528 
 
 TBRMS OF THE LIFE POLICY. 
 
 (Ch. 14 
 
 siderable degree the character of the risk. A dishonest man can be 
 relied upon to protect his own Hfe with quite as much diligence as an 
 honest man. Such being the case, the reasons which preclude an as- 
 signment of a fire policy without the consent of the insurer do not 
 operate in the case of life insurance. By the great weight of authority, 
 a Hfe insurance policy, if once validly issued, is subject to assignment 
 as any other chose in action, unless such assignment is prohibited by 
 the contract.'^ It should be borne in mind, however, that any assign- 
 ment of a life policy that is intended as an evasion of the rule of law 
 prohibiting wager policies is absolutely void.** 
 
 Assignm>ent by Parol Valid, 
 
 No writing is requisite for a valid assignment, unless prescribed by 
 the poHcy.*' Any evidence showing an intention to presently assign 
 will be sufficient to establish the assignment. No manual delivery is 
 accessary J* Even when the contract prescribes that assignments must 
 
 4 
 'If ' 
 
 •T New York Mut Life Ina. Co. v. Armstrong, 117 U. S. 591, 6 Sup. Ct. 877, 
 29 L. Ed. 997; In re Dobbel's Estate, 104 Cal. 432, 38 Pac. 87, 43 Am. St. Rep. 
 123; Morris v. Banking Co., 109 Ga. 12, 34 S. B. 378^ 46 L. R. A. 506; State 
 V. Tomlinson, 16 Ind. App. 662, 45 N. B. 1116, 59 Am. St. Rep. 335; Hewlett 
 V. Home for Incurables, 74 Md. 350, 24 Atl. 324, 17 L. R. A. 449; In re Turcan, 
 L. R. 40 Ch. Div. 5; Murphy v. Red, 64 Miss. 614, 1 South. 761, 60 Am. Rep. 
 68; AMICK v. BUTLER, 111 Ind. 578, 12 N. E. 518, 60 Am. Rep. 722; MU- 
 TUAL LIFE INS. CO. V. ALLEN, 138 Mass. 24, 52 Am. Rep. 245; Davis v. 
 Brown, 159 Ind. 644, 65 N. B. 908; Steele v. Gatlin, 115 Ga. 929, 42 S. E. 253, 
 59 L. R. A. 129. But in many jurisdictions an assignment of a life policy to 
 one having no Insurable interest is void as against public policy, and the fact 
 that the laws of the insurance company allow such assignment does not vali- 
 date it Price v. Supreme Lodge, 68 Tex. 361, 4 S. W. 633 ; and see cases cited 
 ante, p. 416. In Helmetag's Adm'r v. Miller, 76 Ala. 183, 52 Am. Rep. 316, 
 it was held that an insurance policy could not be assigned to one having no 
 interest in the life of the insured, and an assignment of the policy as collateral 
 security was void beyond the amount of the debt 
 
 «8 New York Mut. Life Ini. Co. v. Armstrong, 117 U. S. 591, 6 Sup. Ct. 877, 
 20 L. Ed. 997; CLEMENT v. INSURANCE CO., 101 Tenn. 22, 46 S. W. 561, 
 42 L. R. A. 247, 70 Am. St Rep. 650; STEINBACK v. DIEPENBROCK, 158 
 N. Y. 24, 52 N. E. 662, 44 L. R. A. 417, 70 Am. St Rep. 427; Franklin Life 
 Ins. Co. V. Hazzard, 41 Ind. 116, 13 Am. Rep. 313 ; Roller v. Moore's Adm'r, 86 
 Ya. 542, 10 S. E. 241, 6 L. R. A. 136; Alabama (Jold Life Ins. Co. v. Mobile 
 Mut. Ins. Co., 81 Ala. 329, 1 South. 561; Ruth v. Katterman, 112 Pa. 251, 3 
 Atl. 833. 
 
 69 Hani v. Insurance Co., 197 Pa. 276, 47 Atl. 200, 80 Am. St. Rep. 819; 
 O'Brien v. Insurance Co., 57 Hun, 589, 11 N. Y. Supp. 125; Travelers' Ins. 
 Co. V. Healey, 86 Hun, 524, 33 N. Y. Supp. 911; Macauley v. Bank, 27 S. O. 
 215, 3 S. E. 193. 
 
 TO Colbum's Appeal, 74 Conn. 463, 51 Atl. 139, 92 Am. St Rep. 231. See 
 Richardson v. White, 167 Mass. 58, 44 N. B 1072; McDonough v. Insurance 
 Co., 38 Misc. Rep. 625, 78 N. Y. Supp. 217; Chamberlain v. Williams, 62 111. 
 App. 423; Hurlbut v. Hurlbut, 49 Hun, 180, 1 N. Y. Supp. 854. But the exe- 
 cution of an assignment by a son to his mother, without consideration. 
 
 g§ 202-204) 
 
 ASSIGNMENT. 
 
 529 
 
 %^ *; 
 
 be written on the policy by the insurer, a parol assignment will never- 
 theless be valid as between assignor and assignee. 
 
 Assignment Prohibited by Policy, 
 
 Modern policies usually contain a condition to the effect that no as- 
 signment will be valid until notice is given to the insurer.''^ Older 
 forms sometimes contain the harsh provision that the assignment of a 
 policy without the consent of the insurer shall render it void. While 
 such a provision will receive little favor at the hands of the courts in 
 the way of construction, yet, if violated, it seems the court must give it 
 full effect in accordance with its terms.''* 
 
 The ordinary provision, however, prohibiting an assignment without 
 proper notice to the insurer, is construed to be intended merely for the 
 benefit of the insurer, and cannot affect the rights between the assignor 
 and the assignee."'* The assignee will nevertheless take an equitable 
 title to the proceeds of the policy, which the insurer may recognize, if 
 he so desires, and discharge his liability by making payment to such as- 
 signee Indeed, it seems probable that the only effect of such a condi- 
 tion ill the life policy is to give the insurer a right to decline payment to 
 an assignee claimant until the condition has been complied with.''* It 
 is doubtful, however, whether the insurer, after receiving actual notice 
 of the assignment, even though not in accordance with the requirements 
 of the condition, would be justified in making payment to the assignor 
 O! his personal representatives. 
 
 An assignment made in compliance with the conditions of the policy, 
 and therefore with the consent of the insurer, in effect constitutes the 
 assignee a party to the contract, so as to entitle him to bring a suit on 
 the policy m his own name."" Of course, however, his rights under the 
 policy could not be greater than those of his assignor, unless the assign- 
 ment was made under such circumstances as to constitute a waiver of 
 previously existing grounds of forfeiture. 
 
 though made according to the requirements of the company, will not be 
 valid without delivery as against a subsequent assignee for value. See 
 Weaver v. Weaver, 182 111. 287, 55 N. E. 338, 74 Am. St Rep. 173. 
 
 Ti In Iowa such prohibitions against assignments are void by statute. See 
 Crocker v. Hogin, 103 Iowa, 243, 72 N. W. 411. 
 
 T2 Unity Mut. Life Assur. Ass'n v. Dugan, 118 Mass. 219; Stevens v. War- 
 ren, 101 Mass. 564. See, also, dicta in MerriU v. Insurance Co., 103 Mass. 
 245, 252, 4 Am. Rep. 548, and Hewins v. Baker, 161 Mass. 320, 37 N. E. 441. 
 
 T3 Mut. Protection Ins. Co. v. Hamilton, 5 Sneed (Tenn.) 269; Hogue ▼ 
 Provision Co., 59 Minn. 39, 60 N. W. 812; Hewins v. Baker, 161 Mass. 320, 37 
 N. E. 441. See, especially, the opinion in New York Life Ins. Co. v. Flack, 
 8 Md. 341, 56 Am. Dec. 742. 
 
 T* See Hewins v. Baker, 161 Mass. 320, 37 N. B. 441. 
 
 T» Tremblay v. Insurance Co., 97 Me. 547, 55 Atl. 509, 94 Am. St Rep. t21 ; 
 Southern Fertilizer Co. v. Reames, 105 N. C. 283, 11 S. E. 467. 
 Tancb Ins.— 34 
 
 
 t ti 
 
 A 
 
 
530 
 
 TERMS OF THE LIFE POLICY. 
 
 (Ch. 14 
 
 I* 
 
 INCONTESTABLE GLAXTSE. 
 
 205. Tlie Incontestable clanse applies only to snoh defenses as arise 
 before loss, and does not affect those conditions to be performed 
 after tbe death of the insured. The clanse is valid, and all 
 such defenses as are not expressly excepted in the clanse are 
 barred to the insurer, except— 
 
 Ca) Lack of insurable interest in the person procuring the insurance, 
 rendering the contract illegal in its inception. 
 
 (b) Fraud in the procurement of the insurance, entitling the insurer 
 to rescind the entire contract. This exception is sound in prin- 
 ciple, but is denied by the weight of authority. 
 
 The incontestable clause, now so popular in life insurance contracts, 
 IS an anomaly in contract law, and the decisions of the courts in deter- 
 mining its effect upon the conditions of the contract are quite as anom- 
 alous as the condition itself. In most policies there are certain excep- 
 tions expressly made to the operation of this incontestable clause, the 
 most frequent one being the payment of premiums, as where it is pro- 
 vided that after a certain period "this policy shall be incontestable, pro- 
 vided all premiums that have become due shall have been paid." Other 
 forms except fraud in the procurement, and suicide.''* Where one of 
 these expressly excepted conditions has been violated, there is no diffi- 
 culty in determining that the insurer is not liable, but great difficulty is 
 encountered in determining the effect of the breach of a condition not 
 excepted from the operation of the incontestable clause, but yet distinct- 
 ly set forth as one of the terms of the contract. If one were allowed 
 to theorize unreservedly in the matter, he would reach the conclusion 
 that the statement in the contract that the contract was incontestable 
 should mean merely that the msurer had estopped himself to deny the 
 validity of the contract as executed, and not the operation of the terms 
 of the contract as written. In accordance with such a view, the insurer 
 would not be allowed to deny the valid existence of the policy as a 
 subsisting contract of insurance, unless it had been procured by actual 
 fraud, but he would not be precluded from insisting that the confessedly 
 valid contract should operate in accordance with its written terms. 
 
 T« In Fitch V. Insurance Co., 59 N. Y. 570, 17 Am. Rep. 372, the court said: 
 "A company cannot be permitted in the same papers to say to the insured, to 
 induce him to enter into the contract, that nothing but fraud or intentional 
 misstatements shall avoid his policy, or that payment will be contested only 
 in case of fraud, and, when the claim for payment is presented, to set up 
 in defense a merely technical breach of warranty in relation to some trivial 
 matter." See, also, Wood v. Dwarris, 11 Exch. 493, 25 L. J. Exch. (N. S.) 129 ; 
 Kline v. Benefit Ass'n, 111 Ind. 462, 11 N. E. 620, 60 Am. Rep. 703. Here it 
 was held that nonpayment of premium was no defense against a beneficiary 
 where the policy and application recited payment, and the policy contained a 
 clause providing that it was incontestable except for fraud. 
 
 §205) 
 
 INCONTESTABLE CLAUSE. 
 
 531 
 
 Thus we should expect to find that such a defense as an innocent mis- 
 representation or breach of warranty would not be good under the in- 
 contestable clause, but that suicide, when expressly prohibited by a term 
 of the contract, would afford a good defense ; but such is certainly not 
 the result of the cases so far as decided. The courts seem inclined to 
 construe the clause as an agreement on the part of the insurer not to 
 contest his ultimate liability to pay the sum specified, whereas the in- 
 surer merely binds himself not to contest the policy. It is well settled 
 that under the incontestable clause the insurer is precluded from set- 
 ting up the suicide of the insured in defense, even when the policy ex- 
 pressly stipulates that the insurer will not be liable in case of death by 
 suicide; " yet it is held that the incontestable clause will not prevent a 
 failure on the part of the party in interest to furnish proofs of loss, or 
 to bring his action within the stipulated time, from defeating his rights 
 under the contract.''^ In view of these authorities, we may sav that 
 the law, so far as it is expressible on this subject, is as follows : 
 
 The incontestable clause precludes the insurer from setting up in his 
 defense the breach of any condition that operates prior to the loss in- 
 sured against, but it does not affect the operation of conditions con- 
 cerning matters after loss. 
 
 Lack of Insurable Interest 
 
 Even the incontestable clause cannot abrogate the fundamental rule 
 of public policy prohibiting speculation in human life and the making 
 
 "Royal Circle v. Achterrath, 204 111. 649, 68 N. B. 492, 63 L. R. A 452- 
 Mareck v. Life Ass'n, 62 Minn. 39, 64 N. W. 68, 54 Am. St Rep. 613 ; Simpson 
 V Insurance a>., 115 N. C. 393, 20 S. E. 517; Goodwin v. Assurance Ass'i 97 
 Iowa, 226, 66 N. W. 157, 32 L. R. A. 473, 59 Am. St. Rep. 411; Supreme Coim 
 of Honor v. Updegrafl (Kan. 1904) 75 Pac. 477. In PATTERSON y INSUR- 
 ANCE CO., 100 Wi«. 118, 75 N. W. 980, 42 L. R. A. 253, 69 Am. St Rep. 8^ 
 it is said: "The fact that insurance companies have almost universally 
 deemed it necessary to insert in their policies provisions exempting them from 
 liability in case of suicide. *sane or insane,' may, perhaps, also be consid- 
 ered as showing the general trend of opinion upon the subject in insurance 
 circles; but, whether this deduction is to be properly drawn or not, we think 
 it certain that the fact that life insurance policies universally contain this 
 provision is of weight in determining the construction to be placed upon a 
 policy which omits all specific reference to suicide, and also ostentatiously 
 contains a clause providing that it shall be absolutely incontestable for any 
 cause save for nonpayment of premiums or misstatement of age What 
 would an applicant for insurance be entitled to think was the meaning of 
 such a policy, when presented to him, garnished with the usual and custom- 
 ary commendations of the average solicitor of insurance? Certainly he would 
 not think that its legal effect was the same as that of a policy containing the 
 usual provisions against suicide, sane or insane." See, also, Murray v In- 
 surance Co., 22 R. I. 524, 48 Atl. 800, 53 L. R. A. 742; Mutual Reserve Fund 
 life Ass'n v. Payne (Tex. Civ. App.) 32 S. W. 1063. It Is clear that such a 
 doctrme will not be countenanced by the federal Supreme Court See BIT- 
 TER V. INSURANCE CO., 169 U. S. 139, 18 Sup. Ct 300, 42 L. Ed. 683. 
 »• Brady v. Insurance Co., 168 Pa. 645, 32 Atl. 108, 
 
 v 
 
532 
 
 TERMS OF THE LIFE POLICY. 
 
 (Ch. U 
 
 §205) 
 
 INCONTESTABLE CLAUSE. 
 
 533 
 
 :•,* 
 
 of wagering contracts of insurance. Therefore it is well settled that 
 a policy of insurance issued to one having no insurable interest in the 
 life insured is not made valid by the insertion of an incontestable clause 
 in such a thoroughly vicious contract.'^' 
 
 fraud in the Procurement of the Contract, 
 
 Since it is a fundamental rule of law that fraud vitiates consent, it 
 would seem to be almost axiomatic that an agreement made by the in- 
 surer not to contest the validity of the contract, if procured by actual 
 fraud, could be rescinded by the insurer. If the fraudulently procured 
 agreement not to contest can be rescinded, there would seem to be no 
 reason why the insurer should be bound by such an agreement con- 
 tained in a policy that was procured by fraud. But, however clear this 
 question may seem on principle, the majority of the courts before whom 
 it has come for decision, in their jealous zeal to hold the insurer to the 
 full measure of his liability as assumed, have held that the insurer, by 
 the incontestable clause, has waived in advance his right to contest the 
 validity of the policy on the ground of fraud in its procurement,®® as 
 if such a previous waiver would not also be invalid when induced by 
 fraud. While there is some authority for the view indicated here as 
 preferable on principle,®^ there can be little doubt that the doctrine that 
 the incontestable clause precludes the defense of original fraud in pro- 
 curing the contract will ultimately become a settled rule in the law of 
 life insurance. 
 
 In Kentucky it has been held that under the incontestable clause the 
 
 Tt CLEMENT v. INSURANCE CO., 101 Tenn. 22, 46 S. W. 561, 42 L. R. A. 
 247, 70 Am. St. Rep. 650; Anctil v. Insurance Co. [1899] A. C. 609, affirming 
 same case, 28 Can. Sup. Ct 103; People's Mut Ben. Soc. v. Templeton, 16 
 Ind. App. 126, 44 N. E. 809. Contra, WRIGHT v. BENEFIT ASS'N, 118 N. 
 Y. 237, 23 N. B. 186, 6 L. R. A. 731, 16 Am. St Rep. 749 (dictum). 
 
 «o WRIGHT v. BENEFIT ASS'N, 118 N. Y. 237, 23 N. B. 186, 6 L. R. A. 
 731, 16 Am. St Rep. 749, Woodruff, Ins. Cas. 264; PATTERSON v. IN- 
 SURANCE CO., 100 Wis. 118, 75 N. W. 980, 42 L. R. A. 253, 69 Am. St Rep. 
 899; CLEMENTS v. INSURANCE CO., 101 Tenn. 22, 46 S. W. 561, 42 L. R. 
 A. 247, 70 Am. St Rep. 650; Massachusetts Ben. Life Ass'n v. Robinson, 104 
 Ga. 256, 30 S. E. 919, 42 L. R. A. 261; Franklin Ins. Co. v. Villeneuve, 25 
 Tex. Civ. App. 356, 60 S. W. 1014; Bates v. Insurance Ass'n, 68 Hun, 144, 22 
 N. Y. Supp. 626, affirmed in 142 N. Y. 677, 37 N. E. 824. See, also. Teeter v. 
 Insurance Ass'n, 11 App. Div. 259, 42 N. Y. Supp. 119; Vetter v. Life Ass'n, 
 29 App. Diy. 72, 51 N. Y. Supp. 393; Brady v. Insurance Co., 168 Pa. 645, 32 
 Atl. 102. 
 
 •1 WELCH V. INSURANCE CO., 108 Iowa, 224, 78 N. W. 853, 50 L. R. A. 
 774, Woodruff, Ins. Cas. 267; New York Life Ins. Co. v. Weaver (Ky.) 70 S. 
 W. 628. Some cases make a distinction between policies made incontestable 
 from date and those incontestable after the lapse of a specified time. Fraud 
 in the procurement it is said, is a good defense as to the former, but not as 
 to the latter. See Massachusetts Beo. Life Ass'n v. Robinson, supra; Blisi^ 
 Ini. (2d Ed.) 8S 254^ 255w 
 
 insurer will not be allowed to show in defense that the insured came 
 to his death in consequence of a violation of law.'* But it is probable 
 that death at the hands of justice would afford the insurer a valid de- 
 fense in spite of the incontestable clause.'* 
 
 8« Sun Life Ins. Co. v. Taylor, 108 Ky. 408, 56 S. W. 668, 04 Am. SL Rep. 
 
 B88. 
 •8 See Burt v. Insurance Co., 187 U. S. 181, 23 Sup. Ot 362, 47 L. Bd. 216. 
 
63^ 
 
 MARINE INSUBANCSl. 
 
 (Ch. 15 
 
 §§ 207-208) MARINE POLICIES AND THEIR CONSTRUCTION. 
 
 535 
 
 I 
 
 208. 
 207-208. 
 
 209. 
 
 210. 
 
 211. 
 212-213. 
 214-217. 
 
 218. 
 • 219. 
 
 220. 
 
 221. 
 
 222. 
 223-224. 
 226-227. 
 
 228. 
 
 22a 
 
 CHAPTER XV, 
 
 MARINE INSURANCa 
 
 Scope of This Chapter. 
 
 Marine Policies and Their Construction. 
 
 Insurable Interest— Lost or not Lost 
 
 Property Covered by the Insurance. 
 
 Commencement and Duration of Risk. 
 
 What Risks are Assumed— Proximate Causes of Loaa, 
 
 Implied Exceptions. 
 
 Perils of the Sea. 
 
 Barratry. 
 
 Thefts. 
 
 Captures, Arrests, RestralntB. 
 
 Jettison. 
 Particular and General Average Losseii 
 The Insurer's Liability- Total Losn 
 
 Abandonment. 
 
 Sue and Labor Clause. 
 
 SCOPE OP THIS CHAPTER. 
 
 206. Tlie pnrpose of thim chapter is to set forth in ontline only those 
 rules of law peculiar to marine insurance. Such rules and prin- 
 ciples as are equally applicable to other kinds of insurance will 
 not be further discussed. 
 
 Most of the rules of law applicable to the contract of marine insur- 
 ance are equally applicable to other kinds of insurance. These have 
 already been fully discussed, and need not be further considered. Fur- 
 thermore, some of the rules peculiar to marine insurance, such as that 
 avoidmg the insurance in case of the innocent nondisclosure of a ma- 
 terial fact, have also been considered in preceding chapters of this work. 
 These, also, will receive no further attention. 
 
 There are, however, certain well-settled rules of law that have been 
 established by the courts as applicable only to the contract of marine 
 insurance, which are so essentially peculiar to this branch of insurance 
 law as not to have been mentioned heretofore. The statement of these 
 rules is the purpose of this chapter. 
 
 MABINE POLICIES AND THEIR CONSTRUCTIOIT. 
 
 207. In the United States there is no form of marine poUoy prescHbed 
 by law^ but a conTentional form is in general use. In England 
 the Lloyd's policy is the standard form. 
 
 808. The same rules of construction apply to the marine poUey as to 
 other poUcies, save that the customs of merchants are, perhaps, 
 given more weight in determinins the meaning of the marino 
 policy. 
 
 The Form of the Marine Contract 
 
 In the absence of statute, there is no reason why a contract of ma- 
 rine insurance should not be made by parol as well as any other insur- 
 ance contract. Such parol insurances are, however, very infrequent, 
 the custom of merchants requiring a written instrument. In England 
 every marine insurance is required by statute to be in writing,^ and in 
 the Continental countries the codes of commerce usually require all 
 such contracts to be in writing, and to comply in form with many pre- 
 scribed details. In England the time-honored and judicially berated 
 Lloyd's policy is prescribed by statute as the standard form,' but in 
 the United States no attempt has been made to establish a standard 
 marine policy. While, therefore, in this country the forms of policies 
 used may vary with the desires of the parties, and do so vary some- 
 times, yet general usage has developed a conventional form which ia 
 seldom departed from. This policy follows the general lines of the 
 ancient Lloyd's, with the addition of the more modern "memorandum 
 clause." This conventional policy will be found set out in the ap- 
 pendix. 
 
 Rules of Construction, 
 
 It is not possible or advisable to attempt, within the limits of thi- 
 work, a statement of the rules of construction as applied by the court- 
 to each of the provisions of these policies. It is sufficient to say that 
 the general rules of construction heretofore discussed as applying to 
 contracts of fire and life insurance also apply to marine insurance. 
 There is, however, one seeming peculiarity of construction that should 
 be noticed in connection with sea policies; that is, the great weight 
 g^ven to usage in arriving at the intention of the parties to the contract. 
 More than any other insurance contract, the marine policy is a contract 
 of the law merchant, and it is to be expected that the vital principle of 
 that system of law, the custom of merchants, should be potent in fixing 
 the rights of the parties." Every established usage pertinent to the in- 
 surance contracted for is said to be written into the policy,* but, of 
 course, it cannot operate to contradict or vary the clear meaning of an 
 express term of the policy.' 
 
 Assignments. 
 
 The force of custom in determining the rights of parties to a con- 
 tract of marine insurance is well illustrated by the rule as to assign- 
 
 1 See 54 & 55 Vict c. 39, § 93 (1) [1891]. 
 
 • 35 Geo. Ill, c. 63, and 30 Vict. c. 23. It Is recognized as the standard 
 form in the marine insurance bill of 1899. 
 
 » See Universe Ins. Co. of Milan v. Merchants' Marine Ins. CJo. 11897] 1 Q. 
 a 205, 2 Q. B. 93, and 1 Am. Ins. (7th Ed.) § 55. 
 
 * Preston v. Greenwood, 4 Doug. 28, per Lord Mansfield. 
 
 8 See this subject very ably and fully discussed in 1 Duer, Ins. p. 158 et 
 ■eq. Also see 1 Am. Ins. § 56. 
 
536 
 
 MARINE INSURANCE. 
 
 (Ch. 15 
 
 II < 
 
 ! 
 
 I 
 
 
 
 
 f 
 
 ments. It being the custom of merchants selling property covered by 
 marine insurance to assign their policies to the purchasers, a rule of law 
 has been established to the effect that the insurer remains bound to the 
 assignee, even though he may not have consented to the assignment/ 
 unless such assignment was expressly prohibited by the policyj 
 
 INSURABLE INTEREST— LOST OR NOT LOST. 
 
 209. Am wltH other inanranoes, marine insurance is invalid unless sup- 
 ported by an insurable interest in the insured, except in tbe one 
 case when insurance is taken upon a ship or cargo «*lost or not 
 lost." In such a case the insurer can be compelled to pay, even 
 thoush the subject of the insurance had been totaUy destroyed 
 before the making of the contract. 
 
 In the seventeenth and eighteenth centuries the custom of making 
 wager sea policies, bearing on their faces the words "Interest or no in- 
 terest," or others of similar import, became prevalent, and such insur- 
 ances were, unfortunately, held valid by the courts.' This vicious 
 practice was broken up by the statute of 19 Geo. II, c. 37 (1746), and the 
 rule of law has since become well settled everywhere that marine in- 
 surance can be valid only when protecting a real interest in the insured. 
 The principles upon which the presence of an insurable interest is de- 
 termined have already been discussed. 
 
 ''Lost or not Lost." 
 
 In accordance with the general rule of insurance law, the insured 
 must have an insurable interest at the time of the policy's inception, 
 or one that arises thereafter. That is to say, there can be no valid 
 msurance unless there is something to insure. When one insures a 
 ship, which, without the knowledge of either insurer or insured, is al- 
 ready lost, it is plain that the contract never becomes binding, and the 
 msurer must restore the premium. But it is held that if the insurer ex- 
 pressly agrees, under such circumstances, that he will be bound in any 
 event, even though the vessel be already lost, the contract is binding 
 and the insurer must pay, though it be proved that the insured had 
 nothing to insure when the contract was made. By the same token 
 the insurer is entitled to retain the premium paid, even though the 
 ship lay safe in harbor at the time the contract was made, and the 
 insurer was never put to his risk.» The intention of the parties that 
 
 • Sparkes y. Marshall, 2 Bing. N. C. 761; Earl v. Shaw, 1 Johns. Gas. (N. 
 X.) 314, 1 Am. Dec. 117. 
 
 f See Alexander v. Insurance Co., 51 N. T. 253 
 
 -. * ^^ « ^^""^^^^ ^ Strange, 1250 (1746). And see Keith v. Protection Ins. 
 Co., 10 L. R. Ir. 51. 
 
 • People v. Dlmick, 107 N. Y. 13, 14 N. B. 178. Of course, it would be oth- 
 erwise if the vessel's safety were known to the insurer. Id. 
 
 PROPERTY COVERED BY THE INSURANCB. 
 
 537 
 
 insurance shall be retroactive is usually indicated by the use of the 
 phrase "lost or not lost," although any other words clearly showing 
 such an intention will be sufficient** 
 
 PROFERTT COVERED BY THE INSURANCE. 
 
 210. Tl&r insurance covers any property, coming reasonably ^thin ike 
 words of description nsed, that may be exposed to the perils in- 
 sured against. By express agreement freight or passenger 
 money to be earned by the vessel, or profits to be made on the 
 eargo, niay be inclnded. 
 
 It is manifest that a marine policy may cover any property interests 
 that may become subject to perils of the sea, barring illegality in the 
 venture. Whether any given loss by sea perils is covered by insur- 
 ance depends wholly upon the question whether the parties have so 
 contracted ; that is, upon the construction of language used in describ- 
 ing the subjects of the insurance. In construing such language the 
 courts are guided by the same rules of construction heretofore consid- 
 ered, more weight, however, being given to usage. 
 
 The formal words of description printed in the ordinary American 
 marine policy are, "The body, tackle, apparel, and other furniture of 
 the good ship, or upon all kinds of lawful goods and merchandise 
 laden or to be laden upon the good ship, or upon the freight," etc. The 
 wording of the Lloyd's form is slightly different. These general' terms 
 may be enlarged or modified by the terms written in the policy specific- 
 ally descriptive of the interests intended to be protected, the written 
 terms, of course, prevailing over the printed words. 
 
 It is clear that insurance upon the "ship" alone would cover not 
 only her hull, but also all those things essential to her navigation,^** 
 as her tackle and stores, or, if a steamer, her engines and machinery, 
 and the coal in her bunkers; ^* but it is customary to mention specific- 
 ally these several parts of the ship as being insured. So the provisions 
 stored on board for the ship's crew are included under the term "furni- 
 ture," ^' as are the various cloths and other appliances necessary to the 
 proper carriage of grain, when the policy was upon a vessel engaged 
 in the grain trade.^* But the outfit of a whaler used in capturing 
 whales, and in preparing and storing oil and other products, is held 
 
 10 See Mercantile Mut. Ins. Co. v. Folsom, 18 Wall. 237, 21 L. Ed. 827. 
 
 11 But insurance on a ship in the course of construction does not include 
 the materials intended to be incorporated in it. Mason t. Insurance Co., 12 
 Gill & J. (Md.) 468; Hood v. Insurance Co., 11 N. Y. 532. 
 
 12 Roddick v. Insurance Co. [1895] 1 Q. B. 842. 
 "Brough V. Whitmore, 4 Term R. 206. 
 
 1* Hogarth v. Walker [1900] 2 Q. B. 283. 
 
538 
 
 MARINE INSURANCE. 
 
 (Ch. 15 
 
 not^to be covered by a policy upon the ship's "body, tackle, apparel," 
 
 "Goods and Merchandise," 
 
 Under the term "goods and merchandise" are included all articles 
 laden upon the ship for mercantile purposes, but not those on board for 
 other reasons. Therefore these general words do not apply to the 
 clothes of the officers and crew,^« nor to the provisions intended for 
 consumption on a passenger vessel," nor to bills and notes that are 
 being transported from one country to another." But it seems that 
 coin, precious metals and stones, when transported as merchandise, can 
 be protected under this general expression. ^«» Live stock and supplies 
 for feeding them are not covered by insurance upon the vessel's "car- 
 go, It being customary to describe such shipments specifically. 
 Goods on Deck. 
 
 By an exception implied from the usage to stow all goods and mer- 
 chandise below decks on sea-going vessels, goods stowed on deck are 
 not covered by insurance upon "goods and merchandise laden upon" 
 any vessel," unless it is expressly stipulated that the goods are to be 
 so carried, or there is a custom to that effect known to the insurer." 
 Freight Money. 
 
 The freight covered by the ordinary sea policy is something more 
 than the interest indicated ordinarily by the use of the word "freight " 
 It means, broadly, the benefit which is to accrue to the owner of the 
 vessel, from its use in the voyage contemplated ; " or, to use Lord 
 
 nh^^i'^^M^f^^SS ^ ?""";• * ^ ^^^' ^^' " =• ^' ^ 187; Macy y. Insurance 
 U)., l3o Mass. 328; Lewis v. Insurance Co., 131 Mass. 364- Hoskina v 
 
 239. And see Phil. Ins. §§ 496, 497. 
 
 !• R<^s y. Thwaltes, 1 Parker, 23. The same rule would apply to the per- 
 sonal eff^ts of passengers, unless shipped as a part of the cargo. Wilkinson 
 V. Hyde, 3 C. B. (N. S.) 30 ; Duflf v. Mackenzie, 3 C. B. (N S ^ 16 91 in p t ift 
 
 " Brown v. Stapylton, 4 Bing. 122. ' ** ^- ^- ^^- »•) lb, 91 B. a L. 16. 
 
 185,'9^TU"3?3''^^^' ^^''*' ^'''^' ^''" ^ ^"^^ ^^' ^^^°'®'* ^' ^^ 2 ^*°«- 
 
 c2'tZ'^T}r\^>!'\^^ ^J^""?!^' ^^ ^^°^ ^' ^^ 399; Seton y. Insurance 
 ^a^^ J^'?'^ ^^^' ^^- ^^'- ^^- 12.675; De Costa v. Firth, 4 Burr. 
 1966, Wolcott v. Insurance Co., 4 Pick. (Mass.) 429 
 
 20 Wolcott y Insurance Co., 4 Pick. (Mass.) 429; Allegre's Adm'rs y. Insur- 
 er n*"" \T t ': 1.™-^ ''^' 2^ ^^- ^- ^24; Id., 8 Gill & J. (Md.I m!^ 
 Am Dec. 536. But If live stock is the usual cargo carried as a trade \lZ 
 the insurance is made with a view to cover It, It will be included under the 
 head of cargo. Chesapeake Ins. Co. v. AUgre's Heh«, 2 Gill & J. (Md.) 164- 
 Allegre's Adm'rs v. Insurance Co., supra. 
 
 «i Backhouse v. Kipley, 1 Parker, 24; Ross y. Thwaltes, Id, 23. 
 
 2« De Costa v. Edmunds, 4 Camp. 142. 
 
 «• Winter y. Haldimand, 2 Barn. & Adol. 649; FORBES v. ASPINALL^ 18 
 
 § 210) 
 
 PROPERTY COVERED BY THE INSURANCE. 
 
 539 
 
 Tenterden's expression, "the benefit derived from the use of the 
 ship." ^* Therefore the freight money assured to the shipowner may 
 be (1) freight, in its ordinary acceptation, to be earned and payable 
 upon the completion of the voyage; or (2) the hire of the vessel, pay- 
 able by the charterer; or (3) the benefit accruing to the owner from 
 the use of his vessel in the way of profits upon his own goods car- 
 ried.** While freight money is earned only with the completion of 
 the voyage, and then properly payable, it is well settled that advances 
 of freight money are covered by a policy on freight *® issued to a 
 charterer. 
 
 Freight will not be considered within the protection of a marine 
 policy unless expressly insured eo nomine. 
 
 Passage Money, 
 
 Passage money, unlike freight, is customarily payable in advance; 
 nor, in the absence of statute, can it be recovered if the vessel is lost 
 before the completion of the passage.*^ Under such circumstances 
 the passenger can clearly insure his advances of passage money.** So, 
 if the passage money becomes payable only upon the completion of 
 the voyage, the shipowner may insure it, as well as freight so payable. 
 But insurance upon freight does not cover passage money.** 
 
 Fronts. 
 
 .As already explained,*® inchoate profits of a voyage may be in- 
 sured in either an open or a valued policy.*^ In Great Britain it is 
 held, however, that no recovery can be had for profits, on either valued 
 or open policy, unless proof is adduced that some profit would have 
 been earned had the voyage been successfully made.** In the United 
 
 East, 323, 325 ; Devaux v. J' Anson, 5 Blng. N. C. 519, 35 E. C. L. 207 ; Flint 
 V. Flemyng, 1 Barn. & Adol. 45. It includes freight on cargo contracted for or 
 to be shipped on the way, as well as that already on board when the vessel 
 leaves its port. Stillwell v. Insurance Co., 2 Mo. App. 22. 
 
 2* Flint V. Flemyng, 1 Barn. & Adol. 48. 
 
 2B Flint V. Flemyng, 1 Barn. & Adol. 48. See also Devaux y. J* Anson, 5 
 Bing. N. C. 519, 35 E. C. L. 207. 
 
 2« Trayes v. Worms, 19 C. B. (N. S.) 177; Allison v. Insurance Co., 1 App. 
 Cas. 209; Hall v. Janson, 4 El. & Bl. 509; Bobbins y. Insurance Co., 1 Hall, 
 363. 
 
 27 And usually no obligation to return passage money is imposed upon the 
 shipowner or master of a ship by his contract with the passenger. See Glllan 
 V. Sempkln, 4 Camp. 241 ; Gibson v. Bradford, 4 El. & Bl. 586, 24 Law J. Q. B. 
 159. 
 
 28 See 1 Am. Ins. (7th Ed.) § 235. 
 
 «» Denoon v. Insurance Co., L. R. 7 0. P. 341, 41 L. J. C. P. 162. 
 
 •0 See ante, p. 120. 
 
 •lEyre v. Grover, 3 Camp. 276, 16 East, 218. No insurable Interest In 
 profits of a cargo exists if they have not been contracted for at the time of 
 the loss. Knox v. Wood, 1 Camp. 543. 
 
 sa Eyre y. Grover, 3 Camp. 276, 16 East, 218; Hodgson t. Same^ 6 East, 
 
540 
 
 MARINE INSURANCE. 
 
 (Ch. 15 
 
 ^211) 
 
 COMMENCEMENT AND DURATION OF RISK. 
 
 541 
 
 States, however, no such proof is required in the case of a valued 
 policy.** 
 
 COMMENCEMENT AND DURATION OP RISK. 
 
 211. The beginnine of the risk assnmed, and its duration, depend alto- 
 eether npon the agreement of the parties as expressed in the 
 policy, and interpreted in the light of the circumstanoes and 
 nsages with reference to which the contract was made. 
 
 In deciding whether a given loss occurred during the currency of 
 the policy under which the plaintiff makes his claim, it is merely neces- 
 sary for the courts to discover the contractual intentions of the parties 
 to the policy. When a time policy is involved, the questions as to 
 whether the insurance was in force at the time of loss are not ordinarily 
 different from those already considered in connection with fire policies. 
 But the construction of the words used to indicate the commencement 
 and termination of the risk assumed under voyage policies presents 
 some new considerations. 
 
 The American form of policy referred to above contains the fol- 
 lowing language: "Beginning the adventure upon the said goods 
 and merchandise from and immediately following the loading thereof 
 
 on board of the said vessel at aforesaid, and so shall continue 
 
 and endure until the said goods and merchandise shall be safely landed 
 
 ^} aforesaid." The Lloyd's form defines the termination of 
 
 the voyage for which a ship is insured thus : "Until she hath moored 
 at anchor twenty-four hours in good safety ; and upon the goods and 
 merchandises until the same be there discharged and safely landed." 
 "At and From," 
 
 A voyage policy upon a vessel and cargo is generally described as 
 beginning "at and from" one designated port to another, as "at and 
 xrom New York to Lisbon," such words being written in the policy 
 immediately before the words above quoted from the printed form 
 A policy running "from" one port to another attaches only at the 
 moment of sailing," while a policy "at and from" attaches while the 
 
 316. Proof must also be given that the goods were exposed to the dangers 
 of the sea at some time. 
 
 •8 It is conclusively presumed that profit would have been realized had the 
 goods arrived safely, and upon this the valuation in the policy attaches. 
 Patapsco Ins. Co. v. Coulter, 3 Pet 222, 7 L. Ed. 659. 
 
 8* Pittegrew v. Pringle, 3 Bam. & Adol. 514, 23 E. O. L. 136; Tasker v 
 Cunningham, 1 Bligh, 87; Murray v. Insurance Co., 4 Johns (N Y) 443- 
 Maryland Ins. Co. v. Bosslere. 9 Gill & J. (Md.) 121. In Mey v. Insurance 
 Co., 3 Brev. (S. C.) 329, a ship was insured from Amsterdam, it being cus- 
 tomary for vessels of the insured kind to take on part of their cargo at Am- 
 sterdam and the rest at Pexel, Tlie vessel, after being fully laden was 
 
 vessel still lies in the port of departure. The time at which a policy 
 "at and from" attaches to the vessel in the initial port depends upon 
 the conditions under which she is lying there : 
 
 (1) If the vessel arrives at the designated port in the course of a 
 voyage, or at that port as a destination, preparatory to beginning from 
 there another voyage, then the policy attaches as soon as she is within 
 the harbor,^" provided she arrives a ship, and not merely a wreck.^® 
 But if the vessel cripples into the harbor in such a condition as not 
 to be able to keep afloat until repairs are made, the policy will not 
 be deemed to have attached. Thus, in Parmeter v. Cousins,^ ^ a vessel 
 insured "at and from St. Michaels" arrived at that island in such a 
 leaky condition that she was kept afloat only by continuous pumping. 
 After having lain at anchor more than twenty-four hours, she was 
 blown out to sea and wrecked. It was held, Lord Ellenborough de- 
 livering the opinion, that the vessel had never been safely "at" St. Mi- 
 chaels, and that the policy never attached. 
 
 (2) But a voyage policy at and from a vessel's home port, in which 
 she has bee-j lying for a considerable time, without reference to the 
 voya*^-^ insured, will attach only when preparations for the voyage in 
 qu.:sticn hC'Vo been actually begun.*' 
 
 rerirt.'ncHjn of the Voyage. 
 
 Ship and cargo are protected by the insurance from the beginning 
 to the end of the voyage insured, regardless of accidental delays by 
 reason of the vessel's being laid up for repairs or being frozen in,'* 
 
 lotf*. while lying at Pexel. The insurer was held liable, the vessel having 
 <iomiiienced her voyage when she left Amsterdam. 
 
 85 Motteux V. Assurance Co., 1 Atk. 545; Bell v. Bell, 2 Camp. 475; Smith 
 V. Surridge, 4 Esp. 25; Patrick v. Ludlow, 3 Johns. Cas. (N. Y.) 10, 2 Am. 
 Dec. 130; Snyder v. Insurance Co., 95 N. Y. 196, 47 Am. Rep. 29; Seamans 
 V. Loring, 1 Mason, 127, Fed. Cas. No. 12,583. But see Vallance v. Dewar, 1 
 Camp. 503 ; Ougier v. Jennings, 1 Camp. 505, note. In case a policy is made to 
 commence "at and from" an island, it attaches the moment of the vessePs 
 arrival in any port of the island. Warre v. Miller, 4 Barn. & C. 538, 10 E. C. 
 L. 405; Camden v. Cowley, 1 W. Bl. 417; Cruikshank v. Janson, 2 Taunt 301. 
 
 86 She must be in such a seaworthy condition as to be able to lie in the 
 harbor safely. St. Paul, etc., Ins. Co. v. Troop, 26 Can. Sup. Ct 5. See, 
 also, PARMETER v. COUSINS, 2 Camp. 235; Haughton v. Empire Marine 
 Ins. Co., L. R. 1 Exch. 206, 4 Hurl. & C. 41, 12 Jur. N. S. 376. The arrival in 
 safety requisite for the commencement of a risk refers to physical safety 
 only, and not to political safety. Bell v. Bell, 2 Camp. 475. 
 
 87 2 Camp. 235; Richards, Ins. Cas. 535. But the policy will attach to a 
 damaged vessel immediately upon her arrival at the designated port, if her 
 injuries are not fatal. Haughton v. Insurance Co., L. R. 1 Exch. 206. 
 
 88 Seamans v. Loring, 1 Mason, 127, Fed. Cas. No. 12,583; Snyder v. In- 
 surance Co., 95 N. Y. 196, 47 Am. Rep. 29; Taylor v. Lowell, 3 Mass. 347, 3 
 Am. Dec. 141; Kemble v. Bowne, 1 Caines (N. Y.) 75; Grant ▼• Sing* 
 4 Esp. 175. See Hughes, Admiralty, p. 69. 
 
 •» See Delahunt v. Insurance Co., 97 N. Y. 537. 
 
 !- 
 
542 
 
 . 
 
 if" 
 
 MARINE INSURANCE. 
 
 (Ch. 15 
 
 or in the case of the cargo, even when it is necessarily transshipped, or 
 taken from the vessel and stored in a warehouse.** Ordinarily it is 
 agreed that the risk shall be terminated after the vessel shall have 
 been moored in the harbor of her destination for twenty-four hours in 
 good safety The expression "good safety" has reference not only ta 
 physical safety, but also to political safety." Thus, where an Eng- 
 lish vessel was delayed by an embargo laid by the French authorities 
 within twenty-four hours after her arrival, the insurer was held liable 
 for losses sustained by the shipowner." In order that the vessel 
 sha be moored in good safety physically, it is not necessary that she 
 sha come to her moorings wholly uninjured, but merely that she 
 shal be in such condition as will permit her to discharge her car^o 
 safely and keep afloat until repaired." But if she had received her 
 death wound when she came into port, the insurer will be liable even 
 though her death struggle may have lasted longer than twenty-four 
 
 WHAT RISKS ABE ASSUMED-PROXIMATE CAUSES OP LOSS. 
 
 212. The in.^er assume. UablUty for aU lo.se. proximately can.ed by 
 
 tbe peril. in.nred aeain.t. 
 
 213. PROXIMATE CAUSE-When .everal eau.e. contributed to the 
 
 lo.. ■nffered, tbat one i. deemed to be proximate, within the 
 
 !!T'^A '^*' *• •***•** ****^*' ^^^^'^ "* ^ "motion the force 
 that, without the intervention of any new and independent 
 agency, brought about the lo.. complained of. 
 
 What risks have been assumed by the insurer is, of course, a question 
 of contract and construction. As enumerated in the customary marine 
 
 /L^I^^^J""^ T* ^"^^^^^^e Co- 23 Mo. 553, 66 Am. Dec. 687. But a delay 
 of twelve days In toansportetlon of goods occasioned by waiting for necessary 
 repairs will not Justify their transshipment In another vessel. See, also 
 Mahnckrodt v. Insurance Co., 1 Mo. App. 205. 
 
 *i Horneyer v. Lushington, 15 East, 46, 3 Camp. 85. See Lockyer v Of- 
 fley, 1 Term a 252. in which a vessel was taken from its owner, nearly a 
 month after arriving in port, for having smuggled. The insurer was not ifeld 
 liable, as the vessel was said to have been in port twenty-four hours in safe- 
 ty. See, also, Mariatiqui v. Insurance Co., 8 La. 65, 28 Am. Dec 129 
 
 *« See Minett v. Anderson, Peake, 211. 
 
 " Lidgett V. Secretan, L. R. 5 C. P. 190; Annen v. Woodman, 3 Taunt 299- 
 Meigs ;• Insurance Co.. 2 Cush. (Mass.) 439; Dickey v. Insurance oi., 11 
 Johns. ^. Y.) 3o8. But see Bill v. Mason, 6 Mass. 313, in which it was held 
 that, when a ship has been twenty-four hours at the usnal place of anchor- 
 age, the insurer was relieved from liability, although her cargo conld not have 
 been safely landed at any time within the twenty-four hours. It was said 
 that she was "lafe." within the meaning of the policy. untU she suffered a 
 loss insured against *^ •"« ouuerea a 
 
 ** SHA WE V. FELTON, 2 East, 109. 
 
 §§ 212-213) WHAT RISKS ASSUMED — ^PROXIMATE CAUSES OF LOSS. 543 
 
 « 
 
 policy, they ^e "perils ♦ * ♦ of the seas, men-of-war, fires, en- 
 emies, pirates, rovers, thieves, jettisons, letters of mart and counter- 
 mart, reprisals, takings at sea, arrests, restraints and detainments of 
 all kings, princes, or people, of what nation, condition, or quality so- 
 ever, barratry of the master and mariners, and all other perils, losses, 
 and misfortunes that have or shall come to the hurt, detriment, or 
 damage of the said goods and merchandises, or any part thereof." 
 
 In accordance with a familiar rule of construction, the general term 
 "all other perils" is confined in its application to perils of a kind similar 
 to those specifically enumerated; that is, to perils of the sea.** 
 
 To these risks thus generally assumed there are certain exceptions, 
 either expressly stated in the policy under the form of warranties, or 
 implied from the custom of the business. These implied exceptions 
 are also termed "implied warranties," and are to be presently dis- 
 cussed as such. 
 
 Proximate Cause of Loss, 
 
 The insurer is liable for any loss or injury to the insured venture 
 proximately caused by one of the perils specified, or by a peril of simi- 
 lar kind. The principle determining what is the proximate cause of 
 a loss suffered is ultimately the same in marine insurance as that 
 already discussed as obtaining in connection with fire policies. But 
 the extreme difficulty found sometimes to exist in applying established 
 rules to marine losses renders expedient a brief consideration of the 
 matter in this connection. 
 
 It frequently happens that a marine disaster is attributable to the 
 joint action of several causes, some within and some without the 
 terms of the policy. In such cases the liability of the insurer depends 
 upon whether the proximate cause of the loss was a peril assumed or 
 one excepted, and this question is to be decided by properly applying 
 the rule stated in the black-letter text above.*' Thus, in the oft-cited 
 case of lonides v. Insurance Co.,*^ a cargo of coffee was insured 
 
 *» De Peau v. Russcl, 1 Brev. (S. C.) 441, 2 Am. Dec. 676; Moses v. Insur- 
 ance Co., 1 Duer (N. Y.) 159. Lord Bramwell, in THAMES, & M. INS. CO. v. 
 HAMILTON, 12 App. Cas. 492, said that the phrase would Include "every ac- 
 cidental circumstance, not the result of ordinary wear and tear, delay, or 
 the act of the assured, happening in the course of the navigation of the ship, 
 and incidental to the navigation, and causing loss to the subject-matter of 
 insurance." See, also, CULLEN v. BUTLEIR, 5 Maule & S. 461. 
 
 *« See Howard Fire Ins. Co. v. Norwich & N. Y. Transp. Co., 12 Wall. 194, 
 20 L. Ed. 379, In which the rule Is thus stated: "When there is no order of 
 succession in time, when there are two concurrent causes of a loss, the pre- 
 dominating, efficient one must be regarded as the proximate, when the dam- 
 age done by each cannot be distinguished. • • • And certainly that cause 
 which set the other In motion, and gave to it Its efficiency for harm at the 
 time of the disaster, must rank as predominant" 
 
 4 7 14 C. B. (N. S.) 259 (108 E. C. L. 259). See Hughes, Adm. p. 75, where this 
 and other cases are examined. 
 
 J\ 
 
544 
 
 MARINE INSURANCE. 
 
 (Ch. 15 
 
 "warranted free from all consequences of hostilities," during the Ameri- 
 can Civil War. The light on Cape Hatteras having been extinguished 
 by the Confederates for military reasons, the captain of the vessel 
 4nissed his reckoning in rounding that cape, and ran his ship ashore, 
 Adhere the whole ship's company were taken prisoners. A small por- 
 uon of the coifee was saved by Federal salvors, who could have saved 
 inore but for the interference of the Confederate forces. It was held 
 that the proximate cause of the vessel's disaster was running ashore, 
 and not the hostile extinguishing of the light. Therefore the insurer' 
 vvas liable for all of the coffee lost directly through the stranding of 
 .he vessel, but not for that part which might have been saved but for 
 the hostile action of the Confederates. As to the latter loss, the hos- 
 tilities excepted from the operation of the policy were the proximate 
 cause. 
 
 If the effects produced by concurrent causes are distinguishable, the 
 loss may be apportioned. Thus, in a leading case," a steamer was 
 protected by a policy against loss by fire, but not against damage by 
 collision. The steamer came into collision with a schooner, receiving a 
 cut below the water line, which admitted the water rapidly. When the 
 water reached the furnace, steam was formed, which by its explosive 
 force scattered burning coals among inflammable materials. The vessel 
 rapidly burned, and sank in deep water. It was proved that the dam- 
 age due to the collision alone was not sufficient to have caused the 
 vessel to sink, and might have been repaired for $15,000. The insurer 
 claimed that the collision was the efficient cause of the loss, as with- 
 out the collision no fire would have occurred ; but the court held that 
 the fire was the efficient cause of the loss of the vessel in her damaged 
 condition, and that the insurer was therefore liable for the whole value 
 of the vessel, less the damage due to the collision. 
 
 IMPLIED EXCEPTIONS. 
 
 814. There we ImpUed in every ia.nranoe npon mny marine Tentnre, 
 whether of vessel, cargo, or freight, three conditions of excep- 
 tion to the underwriter's liability for the risks assumed, usual- 
 ly termed < implied warranties." Th»t is, the insurer will not 
 He liable for any loss under his poHcy in case the vessel (1) is 
 nnseaworthy at the inception of the insurance, or (2) deviates 
 from the agreed voyage, or (3) engages in an Illegal venture. 
 In England the warranty of seaworthiness is not implied in the 
 ease of time policies. 
 
 215. SEAWORTHINESS-A vessel is seaworthy when she is sufficiently 
 strong and tight to resist the perils reasonably incident to the 
 
 T *i^°Q'^S'''*«^'^ ^^^' ?• ""' ^''^''^ * ^- ^' '^'^■P- Co. 12 Wall. 194. 20 
 V ^ JrV f ' * ^^' ^^ Interesting case of Brown t. Ixwuranoe Co., 61 N. 
 Y. 332, Richards, Ins. Cas. 549. 
 
 5§ 214^217) 
 
 IMPLIED EXCEPTIONS. 
 
 545 
 
 voyage for which she is Insured, and is properly manned and 
 equipped for such a voyage.^* 
 
 216. DEVIATION from the agreed voyage exists whenever the vessel 
 
 unnecessarily departs fron& the course fixed by express agree- 
 ment, maritime custom, or, in the absence of either of these, by 
 the discretion of a reasonably careful and skillful navigator; or 
 ivhen the vessel unreasonably delays in pursuing such course. 
 
 217. IliLEGALITY— Insurance upon any venture contemplating the 
 
 violation of law is, like any other contract to the same effect, 
 void. This rule, it seemis, does not apply to ventures in viola- 
 tion of foreign revenue laws* 
 
 In General. 
 
 It is ordinarily said that every one insuring a sea venture impliedly 
 warrants that the vessel is seaworthy,^* that there will be no unneces- 
 sary deviation from the prescribed voyage, and that the venture shall 
 be legal ; and that these warranties are as much terms of the contract 
 as if expressly written on the face of the policy. The last, however, 
 is certainly not a "warranty," in any proper sense of the word; for, 
 if the contemplated illegality of the voyage is known to both insurer 
 and insured, the contract insuring it is necessarily void, in accordance 
 with an elementary rule of the law of contracts; whereas, if the ille- 
 gality is known only to the insured, his concealment of so material a 
 fact will per se avoid the insurance. So, while the rule as to sea- 
 worthiness is properly considered a warranty in connection with voy- 
 age policies, it is a mere condition of exception to the risks assumed 
 by the insurer in connection with time policies, as interpreted by the 
 American decisions. 
 
 Warranty of Seaworthiness — Voyage Policies. 
 
 It is well settled on both sides of the Atlantic that a voyage policy, 
 whether on ship or cargo, never attaches unless, at the beginning of the 
 voyage insured, the vessel leaves port in a seaworthy condition.** It 
 is now equally certain that this warranty applies to the beginning 
 of the voyage only, and does not extend through the whole period of 
 its prosecution. °* While the willful misconduct of the insured in in- 
 
 
 *» Adapted from Hughes, Adm. p. 56. 
 
 »« The implied warranty of seaworthiness is not excluded by the fact that 
 "loss from unseaworthiness" is enumerated among the risks insured against 
 Quebec Marine Ins. Co. v. Commercial Bank, L. R. 3 P. C. 234. 
 
 81 Higgle V. American Lloyds (D. C.) 14 Fed. 143, 11 Biss. 395; Seaman 
 V. Insurance Co. (C. C.) 21 Fed. 778; Taylor v. Lowell, 3 Mass. 331, 3 Am. Dec. 
 141; Van Wickle v. Insurance Co., 97 N. Y. 350; Heilner v. Insurance Co., 60 
 N. Y. Super. Ct. 362, 18 N. Y. Supp. 177; Merchants' Ins. Co. v. Morrison, 62 
 111. 242, 14 Am. Rep. 93 ; Wedderburn v. Bell, 1 Camp. 1 ; Knill y. Hooper, 
 2 H. & N. 277; Lemelin v. Assurance Co., 1 Quebec, 337. 
 
 » Bermon y. Woodbridge, 2 Doug. 788 ; Copeland y. Insurance Co, 2 Mete 
 Yaitce Ins. — 35 
 

 itlni 
 
 546 MARINE INSUEANCB. (Ch. 15 
 
 tentionally rendering his vessel unfit to encounter the perils of the voy- 
 age will discharge the insurer, the fact that a vessel became unsea- 
 worthy after leaving port, even though her unseaworthiness was due to 
 the negligence or unskillfulness of the officers and crew, will not de- 
 feat the insurance.** 
 
 Same — Time Policies, 
 
 It is now settled in England that there arises no implied warranty of 
 seaworthiness in the case of time policies," but that the insurer must 
 rely merely upon the self-interest and good faith of the insured to 
 keep his vessel in as good a condition as is possible during the insured 
 period.'" In America, however, the greatest confusion prevails in 
 regard to the extent of the insured's duty to keep his vessel seaworthy 
 during the currency of a time policy. Some states have adopted the 
 English rule," while one, at least, has declared that the same rule is 
 applicable to time policies as to voyage policies.*^ The general tendency 
 of authority in this country, however, is to establish this rule : If at 
 the time of the beginning of the risk the vessel is in her home port, or 
 in any other port in which she might be refitted, she must be sea- 
 worthy when she sails," but, if the policy attaches while the vessel is 
 at sea, seaworthiness is not warranted.*' After the policy has once 
 properly attached, it becomes the duty of the insured or his representa- 
 tives to use ordinary diligence and skill in keeping the vessel in a sea- 
 worthy condition, refitting her as opportunity offers and necessity re- 
 
 (Mass.) 432; American Ins. Go. v. Ogden, 20 Wend. (N. Y.) 287; Lockwood v. 
 Insurance Co., 46 Mo. 71. 
 
 53 See excellent opinion of Parke, B., in DIXON v. SADLER, 5 Mees. & W. 
 405, Richards, Ins. Cas. 415. See, also, Cross v. Insurance Co., 22 L. C. 
 Jur. 10. 
 
 5* GIBSON V. SMALL, 4 H. L. Cas. 353, 17 Jur. 1131; Dudgeon v. Pem- 
 broke, 2 App. Cas. 284; Hollingworth v. Brodrick, 7 Ad. & El. 4, 34 E. C. L. 
 28 ; Stewart v. Wilson, 12 Mees. & W. 11 ; Fawcus v. Sarsfleld, 6 El. & Bl. 192, 
 88 B. C. L. 192; Anchor Mar. Ins. Co. v. Keith, 9 Can. Sup. Ct. 483; Phoenix 
 Ins. Co. V. Anchor Ins. Co., 4 Ont 524. 
 
 «» But if a ship insured under a time policy Is knowingly sent to sea in 
 an unseaworthy state, and is lost, the assured cannot recover. All that is 
 necessary to establish is that the unseaworthiness was so connected with the 
 loss that it must necessarily have led thereto. It need not be the proximate 
 and immediate cause of the loss. Thompson v. Hopper, 6 El. & Bl. 192, 88 
 B. C. L. 192. 
 
 •• Merchants* Ins. Co. v. Morrison, 62 111. 242, 14 Am. Rep. 93. 
 
 »T Hoxie V. Insurance Co., 32 Conn. 21, 85 Am. Dec. 240. 
 
 •« HOXIE V. INSURANCE CO., 7 Allen (Mass.) 211; Union Ins. Co. t. 
 Smith, 124 U. S. 405, 8 Sup. Ct. 534, 31 L. Ed. 497; Jones v. Insurance Co., 
 2 Wall. Jr. (U. S.) 278, Fed. Cas. No. 7,470; Rouse v. Insurance Co., 3 Wall. 
 Jr. (U. S.) 367, Fed. Cas. No. 12,089. 
 
 »• Macy V. Insurance Co., 12 Gray (Mass.) 497 ; Capen v. Insurance Co., 12 
 Cosh. (Mass.) 517; Hathaway y. Insurance Go., 21 N. Y. Super. Ot 33w 
 
 §§ 214-217) 
 
 IMPLIED EXCEPTIONS. 
 
 547 
 
 quires but the failure of the insured to perform his obligation in this 
 respect does not release the insurer from liability for a bss suffe^^ 
 unless that loss was due to the default of the insured.** 
 What Constitutes Seaworthiness, 
 
 n.I^ wYvf ^"^ n"" ^"""""^ ^" ^^' ^^^^ '"^"y definitions of seaworthi- 
 ness but they all amount to the ultimate requirement that the vessel, 
 
 fn .^L f. ''^^^"^' '^'" ^" "" '''^'^'' b^ reasonably fit to make 
 LnunZr^^ ^""^^^^ contemplated.- What is reasonable fitness to 
 encoun er the penis expected to arise in the course of a voyage vary 
 naturally, with the character of the voyage. A vessel well fifted fo 
 the navigation of the Mississippi would be wholly unfit for a voyage 
 
 in" tt St .^''1' "'"' V^^^ ^^^^"^^ "^"^^ ''^'^-'y be seaworthj 
 in the Atlantic. A crew that would be quite adequate for a vessel 
 
 Slin^TJ; """^^ ^ ?^"^^ "^^^^^ b^ insufficient for the proper 
 handling of the same vessel on the high seas • 
 
 riSo.'i^^^ T-^ *^' ^^T^ ^' '^^""'^ ^"^'*^^ht ^^ hull, complete in 
 rigging,- machinery and equipment,- and properly manned,-* fu^ 
 nished and provisioned," but the cargo must also be properly stowed •• 
 ^nl t.^'''*'' '^'" '^' '"^^ ^^^y^"^ ^^P^^ity ^^ the ship.- Of 
 2nhy)^^^^^'' '' '' "''' ""'"''^'^ *^^' '^^ ^^^^ ''"^^^ ^h^» be sea- 
 It stands to reason that the warranty of seaworthiness is not an ab- 
 
 •0 See Union Ins Co. v. Smith, 124 U. S. 405, 8 Sup. Ct 534, 31 L. Ed 497 
 
 •1 Moores V Louisville Underwriters (C. O.) 14 Fed 226; Cobb y. Intura^e 
 
 mai, 3''TaLr2'^^^^ '''^ ^" ^' ^^^^^^' ' ^"^^- * ^^ ^77; Annen ".Wo^d! 
 
 14^' ?e^ ""ca'fNo* 2 I22' ^m' "'"' ?^""'^ ^' '^^"^^^^« ^^'^ ^ "^ ^' S) 
 
 J^. u^^^ ^^"^ *** ^^*^^P^ ^^ ^°^™y by keeping her speed 
 
 «* Merchants' Ins. Co. v. Morrison, 62 111. 242 14 Am Rpn fl^- Onah^ im 
 
 Ins. Co. V. Commercial Bank L R S P p 9^. lu ^^^'T' ^ ^*^ ^*'*- 
 Pa. 192. «. 3 F. C. 234; Myers v. Insurance Co., 26 
 
 27o' Pnn 7* Y^.^^ ^^'*' ^^^' Treadwell v. Insurance Co.. 6 Cow (N T) 
 
 •« Chase v. Insurance Co., 5 Pick. (Mass.) 51. 
 
 •^Cincinnati Mut. Ins. Co. v. May. 20 Ohio 211* ATifiiii^«« t« v « 
 Greenwich Ins. Co. (D. C.) 79 Fed. 125 ' ' Anderson Lumber Co. y. 
 
 ^20* ^""^^f ""' S^^^^"' 17 C. B. (N. S.) 71, 112 B. O. L. 71. 10 Jur N S 
 «h • ^''n l"* ^''^^y P°*^^y ^° *^^ ^^^go there is an implied warranty tLfVh: 
 Bhip shall be seaworthy. Van Wickle v. Insurance cT..^ N Y 3?o HI^Sp 
 ^. American Lloyds (D. C.) 14 Fed. 143; Knill y. Hooped. 2 Hurl & N 27^ 
 
 I 
 
 <!l 
 
5^8 
 
 MARINE INSURANCE. 
 
 (Ch. 15 
 
 m 
 
 solute guaranty that the vessel will safely meet all possible perils. Nei- 
 ther is it a mere warranty of due diligence on the part of the insured 
 in endeavoring to make her seaworthy. The vessel must actually be 
 seaworthy at the time of sailing. Thus, where a vessel set out upon 
 the voyage in which she was wrecked, with a defective compass, it was 
 held that the vessel was unseaworthy, and the insurer discharged, 
 despite the master's ignorance of the defect in the compass.** 
 
 Deznation. 
 
 Just as a surety is discharged if the creditor materially changes the 
 contract with the principal debtor, irrespective of actual injury to the 
 surety, so the marine underwriter is entitled to be discharged if the 
 risk assumed is changed by a deviation from the voyage insured. And 
 the fact that the deviation did not increase the risk, or in any wise 
 contribute to the loss suffered, is wholly immaterial. This principle 
 is strikingly illustrated by the leading case of Burgess v. Insurance 
 Co.''® A fishing vessel was insured from Plymouth for a fishing voy- 
 age to the Banks of Newfoundland. In former seasons she had se- 
 cured a supply of bait on the Banks, but on this voyage no bait could 
 be obtained there. Under these circumstances she was compelled to 
 sail to a nearby port, St. Peter's, to procure the bait necessary to the 
 accomplishment of the purpose of her voyage. After an absence of 
 less than a week she returned to the Banks and resumed fishing. Sev- 
 eral days later a severe storm arose, in which the vessel foundered. 
 The court held that the voyage to St. Peter's was a deviation which dis- 
 charged the insurer, although it did not in any respect contribute to 
 the loss. 
 
 The voyage may be expressly prescribed by naming the terminal and 
 intermediate ports, or only the terminal ports may be named, when 
 the vessel must pursue the customary course between such ports,^* 
 or, if they chance to be little frequented ports, between which no cus- 
 tomary course has been established, the master must follow that route 
 which to an ordinarily skillful mariner would appear most direct and 
 proper.''* 
 
 The insurer is also entitled to expect the voyage to be prosecuted 
 with all reasonable dispatch, to have his risk discharged as soon as is 
 
 «• Richelieu & O. Nav. Co. y. Boston Marine Ins. Co., 136 U. S. 408, 10 Sup. 
 Ct 934, 34 L. Ed. 398. 
 
 TO BURGESS V. INSURANCE CO., 126 Mass. 70, 30 Am. Rep. 654, Richards, 
 Ins. Cas. 420. See, also, Snyder v. Insurance Co., 95 N. Y. 196, 47 Am. Rep. 
 29; Martin v. Insurance Co., 2 Wash. 0. C. (U. S.) 254, Fed. Cas. No. 9,161; 
 KETTELL v. WIGGIN, 13 Mass. 68; Natchez Ins. Co. v. Stanton, 2 Smedes 
 & M. (^liss.) 340, 41 Am. Dec. 592. 
 
 Ti Commonwealth Ins. Co. v. Cropper, 21 Md. 311. 
 
 Ts Hearne t. Insurance Co., 20 Wall 488, 22 L. Ed. 395. 
 
 IMPLIED EXCEPTIONS. 
 
 649 
 
 §§ 214r-217) 
 
 reasonably possible.''' Therefore, any unreasonable delay in the course 
 of the voyage will be considered a deviation and avoid the insurance.''* 
 
 Necessary Deviation not a Breach of Warranty, 
 
 The warranty against deviation refers only to voluntary deviation. 
 If the vessel is driven out of her course by a storm," or departs from 
 it to escape capture," or to avoid any imminent peril,^^ or to secure 
 necessary repairs,^® the insurance is not affected. Such compulsory 
 deviations are risks impliedly assumed by the underwriter. A deviation 
 for the purpose of saving life does not constitute a breach of warran- 
 ty,^ ^ but a deviation in order to save property is not so justified.'" 
 
 Illegality. 
 
 The only peculiarity about insurances of illegal sea ventures that re- 
 quires our attention is the doctrine as to foreign revenue laws. A policy 
 upon a vessel known to be engaged in violating the revenue laws of 
 the country to which the parties owe allegiance, or before whose courts 
 the question may come, is undoubtedly void. But in England, at 
 least, it is settled law that English courts will not aid in enforcing 
 
 78 Arnold v. Insm-ance Co., 78 N. Y. 7, 8 Ins. Law J. 869; Himely v. In- 
 surance Co., 1 Mill, Const. (S. C.) 154, 12 Am. Dec. 623; Coffin v. Insurance 
 Co., 9 Mass. 436; Mount v. Larkins, 8 Bing. 108, 21 E. C. L. 241. In Augusta 
 Ins. & Bank'->g Co. v. Abbott, 12 Md. 348, it was held that the detention of 
 the ship in port by proceedings instituted in the Circuit Court of the United 
 States for the recovery of a debt due for repairs was no excuse for delay, and 
 the insurer was relieved from liability. 
 
 74 Oliver v. Insurance Co., 7 Cranch (U. S.) 487, 3 L. Ed. 414; BURGESS v. 
 INSURANCE CO., 126 Mass. 70, 30 Am. Rep. 654; AMSINCK v. INSURANCE 
 CO., 129 Mass. 185, 9 Ins. Law J. 581; Audenreid v. Insurance Co., 60 N. Y. 
 482, 19 Am. Rep. 204. 
 
 7 5 BURGESS V. INSURANCE CO., 126 Mass. 70, 30 Am. Rep. 654; Graham 
 V. Insurance Co., 11 Johns. (N. Y.) 352. 
 
 76 Whitney v. Haven, 13 Mass. 172; Reade v. Insurance Co., 3 Johns. (N. 
 Y.) 352, 3 Am. Dec. 495; Patrick v. Ludlow, 3 Johns. Gas. (N. Y.) 10, 2 Am. 
 Dec. 130; O'Reilly v. Gonne, 4 Camp. 249. 
 
 77 Reade v. Insurance Co., 3 Johns. (N. Y.) 352, 3 Am. Dec. 495; Byrne v. 
 Insurance Co., 7 Mart. (N. S., La.) 126; Rlggin v. Insurance Co., 7 Har. & J. 
 (Md.) 279, 16 Am. Dec. 302. 
 
 78 Han v. Insurance Co., 9 Pick. (Mass.) 466; Turner v. Insurance Co., 25 
 Me. 515, 43 Am. Dec. 294; Miller v. Russell, 1 Bay (S. 0.) 309. 
 
 7» Bond V. The Brig Cora, 2 Wash. C. C. (U- S.) 80, Fed. Cas. No. 1,621; The 
 Schooner Boston, 1 Sumn. (U. S.) 328, Fed. Cas. No. 1,673; Dabney v. Insur- 
 ance Co., 14 Allen (Mass.) 300; Fernandez v. Insurance Co., 48 N. Y. 571, 8 
 Am. Rep. 571. 
 
 80 Mason v. The Blaireau, 2 Cranch, 240, 2 L. Ed. 266; Settle ▼. Insurance 
 Co., 7 Mo. 379; Dabney v. Insurance Co., 14 Allen (Mass.) 300. If the para- 
 mount consideration for the deviation is the desire to save life, and the sav- 
 ing of property is merely incidental thereto, it is otherwise. Williams v. Box 
 of Bullion, 1 Spr. (U. S.) 57, Fed. C^s. No. 17,717; Crocker v. Jackson. 1 Spr. 
 (U. S.) 141, Fed. Cas. No. 3,398; Scaramauga v. Stamp, 6 C. P. Div. 295. 
 
 i 
 
 •♦i 
 
 
 
550 
 
 MARINE INSURANCE. 
 
 (Ch. 15 
 
 foreign revenue laws by declaring void insurances upon ventures con- 
 templating the violation of such laws.** And such is generally thought 
 to be the law in this country,®* although a recent writer of high au- 
 thority expresses the opinion that the Supreme Court of the United 
 States, when called upon to decide the question, may repudiate the Eng- 
 lish rule.®* 
 
 PERELS OF THE SEA* 
 
 218. The phrase *'perlls of the aea" includes only those oasnaltles dne 
 to the nnnsnal violence or extraordinary action of xirind and 
 wave, or to other extraordinary oanses connected xHth naviga- 
 tion. It does not include losses resulting from ordinary vreax 
 and tear, or other damage usually incident to the voyage. 
 
 A ship, like any other mechanical contrivance, suffers a certain 
 amount of damage in being used for ordinary purposes and under or- 
 dinary conditions. Rigging will chafe and weaken and break; sails, 
 exposed to the weather, will split and be carried away ; machinery will 
 break or gradually wear out; and a wooden hull will weaken from 
 decay or through the ravages of worms.** Such damage is termed 
 "ordinary wear and tear," for which the insurer assumes no liability.*'^ 
 The perils of the seas which he expresses himself content to bear are 
 those which do not ordinarily occur, but are fortuitous and unusual.*" 
 The mere fact that an injury is due to the violence of some marine 
 force does not necessarily bring it within the protection of the policy 
 if such violence was not unusual or unexpected.** Thus, the insurer 
 
 •1 Lever v. Fletcher, Parker, Mar. Ins. (8th Ed.) p. 506; PLANCHfi y. 
 FLETCHER, 1 Doug. 251. 
 
 8» Livingston v. Insurance Co., 7 Cranch, 506, 3 L. Ed. 421; Parker v. Jones, 
 13 Mass. 173; Skidmore v. Desdoity, 2 Johns. Cas. (N. Y.) 77; Decrow v. 
 Insurance Co., 43 Me. 460. 
 
 8« See Hughes, Adm. p. 66, citing the analogous case of Oscanyan v. Arms 
 Co.. 103 U. S. 261, 26 L. Ed. 539. 
 
 8* Hazard v. Insurance Co., 8 Pet 557, 8 L. Ed. 1043; Martin ▼. Insur- 
 ance Co., 2 Mass. 420; ROHL v. PARR, 1 Esp. 445. 
 
 sePaterson v. Harris, 1 Best & S. 336, 101 B. C. L. 336; Bullard v. In- 
 surance Co., 1 Curt. (U. S.) 148, Fed. Cas. No. 2,122; The Gulnare (C. C.) 42 
 Fed. 861; HUNTER v. POTTS, 4 Camp. 203; THAMES & M. INS. CO. v. 
 HAMILTON, 12 App. Cas. 492; THOMPSON v. WHITMORB, 3 Taunt. 227. 
 
 »• "Perils of the sea," is defined by Judge tush in Merchants* Trading Go. 
 V. Universal Marine Co., cited by Blackburn, J., in Dudgeon v. Pambroke, 
 L. R. 9 Q. B. 596, as those "casualties arising from the violent action of 
 the elements, as distinguished from silent, natural, gradual action of the ele- 
 ments upon the vessel itself, which latter properly belong to wear and tear." 
 See, also, Howell v. Insurance Co., 7 Ohio, 276, pt 1. 
 
 87 Coles V. Insurance Co., 3 Wash. C. C. (U. S.) 159, Fed. Cas. No. 2,988; 
 Neidlinger v. Insurance Co. (C. C.) 11 Fed. 514; Baker v. Insurance Co., 12 
 Gray (Mass.) 603. An insurance company la not liable on a policy on pas- 
 
 \m 
 
 219) 
 
 BARRATRY. 
 
 551 
 
 is not liable for a sail carried away by the violence of a tempest, for 
 tempests are not unusual, nor is the loss of a sail. But the carrying 
 away of a mast, or the loss of an anchor, by a storm, will entail lia- 
 bility upon the insurer, for such damage is due only to unusual vio- 
 lence in the elements, and is not ordinarily to be expected as incident 
 to navigation. So, it was held in a leading case ®® that damage re- 
 sulting to a vessel's hull from taking the ground at ebb tide, as was 
 customary for all vessels visiting that harbor, and as the insured ves- 
 sel intended to do, was not due to a peril of the sea, but chargeable 
 to mere wear and tear. But when, in making a landing on a river 
 bank, a steamer accidentally struck the river bank with such violence 
 as to cause her to sink, the insurer was held liable for the loss.®' Like- 
 wise it has been held that, when a vessel rolled in a storm so violently 
 as to throw cattle carried between decks together with such force 
 that they were killed, the loss was chargeable to the insurer as result- 
 ing from a peril of the seas.*® 
 
 But a peril of the seas must be connected with navigation, maritime 
 in character. The mere fact that a loss is due to an accident aboard 
 ship does not necessarily bring it within the phrase "perils of the sea." 
 Thus, in a leading case before the House of Lords,*^ the insured 
 sought to hold the underwriter responsible for damage accidentally 
 done to the ship's pumping machinery while engaged in filling the 
 boilers of the ship, which was then lying at anchor and preparing 
 for a voyage. It was held by the House of Lords, reversing the lower 
 court, that such damage, though unusual and accidental, had nothing 
 to do with the sea, nor was it peculiar to a ship as such. Therefore, 
 ft was not such a peril of the seas as the insurer had agreed to bear. 
 
 1 
 
 BARRATRY. 
 
 219. Barratry is any willfnl misconduct on the part of master or crew, 
 in pursuance of some unlawful or fraudulent purpose, urithout 
 the consent of the owners, and to the prejudice of the owner's 
 interest. 02 
 
 sage money that had to be refunded because of a delay occasioned by "perils 
 of the sea." Howard v. Insurance Co., 18 N. Y. Super. Ct 38. 
 
 88 MAGNUS V. BUTTEMER, 11 C. B. 876. 
 
 •» Seaman v. Insurance Co. (C. C.) 21 Fed. 778. 
 
 •0 Lawrence v. Aberdein, 5 Barn. & Aid. 107, 7 B. O. L. 38. See, also, Colt 
 V. Smith, 3 Johns. Cas. (N. Y.) 16; Snowden v. Gulon, 101 N. Y. 458, 5 N. E. 
 322, affirming 50 N. Y. Super. Ct. 137. In Gabay v. Lloyd, S Barn. & C. 793, 
 10 K C. L. 229, the insurers were held liable though the cattle died from 
 "wounds inflicted by their kicking one another. 
 
 »i THAMES & M. MARINE INS. 00. v. HAMILTON, L. R. 12 App. Cas. 
 484, Richards, Ins. Cas. 543. 
 
 »2 See Justice Story's definition In Marcardier ▼. Insurance Co., 8 Cranch, 
 39, 3 L. Ed. 481, approved in Hughes, Adm. p. 72. 
 
5a2 
 
 ilAUlXE UNSUILINCB. 
 
 (Ch. 15 
 
 qufresTwilJful\„TT:-"^,'^"'"^' ""*^ *erefore necessarily re- 
 errronSenTorrr "'•"'* '" ''' conunission." No honest 
 
 dicial to the owner of the vessel " Ji^hl ^ „ . be preju- 
 
 n^aster in doing the frandullm or «nl w ul aTtheT "dt ^'"^ *'^ 
 may not be criminal, but it cannot beTarratrous " I iZ ""7 °' 
 thisprinciole thatamacf*»t.«,i,^ • i ^^^^rdirous. it follows from 
 
 Butff the'„ s o"y plrt ollrh^^^^^^^ """°* ^'^r* ""'''^'^y" 
 his absent co-owners »• ' "^^ '=°'"™' ''^"^''"y ^g^mst 
 
 thinking thus to benefit' th. T u^ '"°'^*^ P°'* °' ""^^^nue '^ws. 
 
 ject the vS to arrest or^„T'''' ''"*' T" '"* '"^?^' «<='« ««b- 
 
 they are r^a ly nfurious to Z ^'^'"i k°^ P'"""'"' " « '=>^^'- that 
 w;iif..i 1 '.nji/'ous to the owner, and barratrous."" 
 
 orSg\^;"^rtt1h?p^«r;b ""^''"^^ ''^^^^^^^ - -"-^ 
 
 unlawfully selling the * reo »» „r 2k"""^ °' ''"1.*""^ ^^^-'^ ^o. 
 or even willfullvVowirg fh; careo on d- J^'l ^'* "'^ Proceeds,"* 
 under deck,"» amounts"! torf ''' ^''"^ "'''™<='^'l *"=> ^^^^^ 
 
 »» Dederer v. Insurance Co., 2 Wash n r fti tP«^ /^ 
 v^EUome. I Starve. 2.0; Me^sonlS'f In^suL^^ Ll,*^-/- ^^;,,To.. 
 
 1 Humph. (Tenn.) 242 * Stewart v. Insurance Co., 
 
 Thurston T. Insurance Co. 3 catoesTN I) M^V.' ^^'""S" ^ Strange. 1173; 
 
 Ni:SoriOE"rS=^ ^•' ^^ «-•"• <"-•) ««>. »» A.'^ec. ISS, ,ones v. 
 oJt.'^s'E^sZm""""* *^- *^ ='"'• * " N. T. Snpp. 410; Earle .. Bow- 
 
 108 \fn?il T ^- ^°**^' ^^ ^^a. 284, 56 Am Ren 31 
 
 108 Meyer v. Insurance Co.. 104 Cal 382 i« L« w., S' * 
 
 V. Albro Co.. 112 U. S. 506, 5 Sup. a 2^9 '2^ L f;, L^^"" ^"^"^°» '°»- <»^ 
 
 104 Falkner v. Ritchie. 2 Maule & s ^0- Im^wT ,*k 
 
 !•• Atkinson t, InsuriLice CoTeB N f ^f "^ ^' ^"^^^ * ^^« a«^ 
 
 g§ 220-221) 
 
 CAPTURES, ARRESTS, RESTRAINTS. 
 
 THEFTS. 
 
 66a 
 
 220. The word "thieves" in the marine policy la held by the English 
 courts to apply only to persons ontside of the vessel, who by the 
 exercise of force break into the vessel and rob her. But the 
 American authorities include theft by members of the crew or 
 by passengers. 
 
 The word "thieves" in the marine policy, being associated with "ene- 
 mies, pirates, rovers," against whose violent acts the insurer covenants 
 to insure, is held by the English authorities to mean those persons, 
 not of the ship's company, nor yet pirates or rovers, who by the exer- 
 cise of force rob the vessel."® In the view of these authorities the 
 underwriter does not intend to assume liability for mere thefts by 
 passengers or crew, against which the master may protect the prop- 
 erty in his charge by the exercise of a proper degree of diligence. 
 Further, the wrongful appropriation of any part of the ship's furniture 
 or cargo by one of the crew would be barratry, for which the insurer 
 expressly agrees to be liable. 
 
 In America, however, it seems that thefts of any sort, whether by 
 persons belonging to the ship's company or by strangers, are in- 
 cluded within the meaning of the word as used in sea policies.^®' 
 
 2S>1 
 
 CAPTURES, ARRESTS, RESTRAINTS. 
 
 Thr teims "takings at sea, arrests, restraints, and detainments 
 cf all kings, princes, and people," refer only to extraordinary 
 acts done by virtue of any sovereign authority in times of war, 
 or under other unusual international conditions. They do not 
 include acts done in the course of regular legal proceedings. 
 
 War has always been peculiarly disastrous to shipping, not only to 
 that of the belligerent powers, which is liable to capture whenever over- 
 hauled by an enemy, but also to that of neutrals, which is subject to 
 constant interference, and even capture, under the rules of international 
 law in reference to blockades and contraband traffic. It is against 
 such perils that the shipowner seeks protection under the terms of 
 the marine policy as above quoted. Even strained international rela- 
 tions may cause arrest and detention of vessels under embargoes, thus 
 
 io« Harford v. Maynard, 1 Park. Ins. 36. See Taylor v. Liverpool, etc., Co.. 
 L. R. 9 Q. B. 546. This case, however, involved a bill of lading. But see 
 Stelnman v. Angler Line [1891] 1 Q. B. 619. 
 
 "T See Spinettl v. Steamship Co.. 80 N. Y. 71, 36 Am. Rep. 579. and 1 
 Parsons, Mar. Ins. pp. 563-566. See, also, ATLANTIC INS. CO v STOR- 
 nOWS, 5 Paige (N. Y.) 285; American Ins. Co. v. Bryan, 26 Wend.' (N. Y) 
 i>63, 37 Am. Dec. 278. 
 
 ' :n 
 
554 
 
 MARINE INSURANCE. 
 
 (Ch. 15 
 
 |. '■ 
 
 causing great loss to the owners.*®* Such losses are all fortuitous in 
 character, and may properly be indemnified by the underwriter, who, 
 however, frequently inserts in his policy express exceptions against war 
 risks of every kind. 
 
 Under these terms the insurer is not liable for the consequences of 
 arrests and detentions that may occur by virtue of legal process, or by 
 the operation of ordinary laws. 
 
 This principle is well illustrated by a recent English case.*®* A 
 cargo of cattle from Liverpool to Buenos Ayres was insured against 
 the usual risks, including "arrests, restraints, and detainments by kings, 
 princes, and people." Upon arrival at Buenos Ayres it was discovered 
 that the cattle were afflicted with a disease which, under the laws of 
 the Argentine Republic, prohibited their being admitted into that port 
 Not being allowed to land, the cattle were transshipped into lighters, 
 and ultimately sold at considerable loss at another port. The owners 
 claimed that this loss was due to restraint imposed upon their venture 
 by the people of the Argentine Republic, but the court held that the 
 insurer was not liable under the policy, such a restraint as was suf- 
 fered in this case being merely due to the operation of ordinary mu- 
 nicipal regulations. 
 
 In another English case, certain shipments of gold that had been 
 likewise insured against arrests and seizures were seized by the order 
 of the Transvaal government a few days before the outbreak of hostili- 
 ties between Great Britain and that Republic. It was held in this case 
 that the seizure was within the meaning of the policy, and the insurer 
 was therefore liable.**® In a second case, arising under almost similar 
 facts, the insurer of gold seized by the Transvaal government was 
 held exempted from liability by a clause of the policy which war- 
 ranted the subject of the insurance free from "capture, seizure, and 
 detention." *** 
 
 These seizures were due to extraordinary international conditions, 
 and fortuitous. But a vessel that does not pay her debts may expect 
 to be libeled and detained. There is nothing fortuitous or unexpected 
 about such an arrest.*** The captures, arrests, and restraints insured 
 against are acts of state, as opposed to the unauthorized depredations 
 of "pirates, rovers, and thieves." 
 
 While the title of the owner of captured property is not completely 
 
 108 Walden v. Insurance Co., 5 Johns. (N. Y.) 310, 4 Am. Dec. 359. 
 
 io» Miller v. Insurance Soc, 71 Law J. K. B. 551, [1902] 2 K. B. 694, 50 
 Wkly. Rep. 474. 
 
 iiojanson v. Consolidated Mines, 71 Law J. K. B. 857, [1902] App. Cas. 
 484, 87 Law T. 372, 51 Wkly. Rep. 142. 
 
 Ill Robinson Gold Min. Co. v. Alliance, etc., Assur. Co., 71 Law J. K. B. 
 942, [1902] 2 K. B. 489, 8G Law T. 858, 51 Wkly. Rep. 105. 
 
 ii« Finlay v. Liverpool, etc., Co., 23 L. T. (N. S.) 251. 
 
 §§ 222-224) PARTICULAR AND GENERAL AVERAGE LOSSES. 
 
 add 
 
 divested until sentence of condemnation by a prize court, the in- 
 sured owner need not await such proceedings, but may abandon the 
 captured property to the underwriter as a total loss. The owner of 
 a vessel arrested under an embargo has the same privilege of aban- 
 donment. If the underwriter declines to accept the abandonment, the 
 insured can successfully prosecute an action against him as for a total 
 loss, unless, perchance, the vessel is released before judgment. The 
 same is true of captured property. 
 
 JETTISON* 
 
 222. Jettison is the intentional casting overboard of any part of a ven- 
 ture exposed to peril, xirhether it be of the cargo, or of the ship's 
 furniture or tackle, in the hope of saving the rest of the ven- 
 ture. 
 
 In cases of emergency it sometimes becomes necessary to lighten a 
 vessel by throwing a part of the cargo overboard, or to relieve strains 
 upon her by cutting away masts, rigging, or sails. Such losses, known 
 as "jettisons," are properly to be attributed to perils of the seas, even 
 though they are immediately caused by the intentional acts of the crew, 
 and are therefore to be made good by the insurer.^ ^' But the insurer 
 paying such a loss is subrogated to the insured's claim of general av- 
 erage against that part of the venture saved.^^* 
 
 While jettison is ordinarily a sacrifice of a part of a venture im- 
 perilled to save the remainder, it need not always be so. Thus, it has 
 been held that the value of certain coin thrown overboard in order to 
 avoid its capture by an enemy close at hand was a jettison for which 
 the insurer was liable/^* 
 
 I 
 
 I 
 
 PARTICULAR AND GENERAL AVERAGE LOSSES. 
 
 223. PARTICniiAR AVERAGE losses are merely those losses suffered 
 
 by and borne alone by particular interests in a venture, being 
 usually partial losses. 
 
 224. GENERAL AVERAGE losses are those due to the voluntary and 
 
 intentional sacrifice of a part of a venture for the purpose of 
 saving the rest of the venture from imminent peril. A general 
 average loss must be borne equally by all of the interests con- 
 cerned in the venture. 
 
 »i« Dickenson v. Jardlne, L. R. 3 C. P. 639; Merchants' & Manufacturers' 
 Ins. Co. V. Shillito, 15 Ohio St. 559, 86 Am. Dec. 491; Wood v. Insurance Co. 
 (0. C.) 8 Fed. 27; Hazleton v. Insurance Co. (D. C.) 12 Fed. 159. 
 
 11* Hazleton v. Insurance Co. (D. C.) 12 Fed. 159. 
 
 11 » Butler y. WUdman, 3 Barn. & Aid. 398. 
 
 i 
 
* 
 
 556 
 
 MARINE INSURANCE. 
 
 (Ch. 15 
 
 The doctrine of general average contribution in cases of marine dis- 
 aster belongs properly to admiralty law, and the reader must refer to 
 works on admiralty for a discussion of its origin, development, and 
 particular rules.^^* Its striking analogy to insurance, and the fre- 
 quency with which its rules are involved in adjusting insurance pay- 
 ments, require that it shall be briefly explained here. 
 
 Particular Average, 
 
 The term "particular average" is applied to those losses which occur 
 under such circumstances as do not entitle the unfortunate owners tc 
 receive contribution from other owners concerned in the same ven- 
 ture ; as, where a vessel is accidentally run aground and goes to pieces 
 after the cargo is saved. Such a loss is particular average, and must 
 be borne by the owner of the vessel alone. The term "particular av- 
 erage" is used in the memorandum clause of the marine policy in the 
 sense of partial loss. 
 
 General Average. 
 
 General average is a principle of customary law, independent of con- 
 tract, whereby, when it is decided by the master of a vessel, acting for 
 all the interests concerned, to sacrifice any part of a venture exposed to 
 a common and imminent peril in order to save the rest, the interests 
 so saved are compelled to contribute ratably to the owner of the in- 
 terest sacrificed, so that the cost of the sacrifice shall fall equally 
 upon all.^*^ A recent writer on admiralty thus admirably summarizes 
 the requisites to the right to claim general average contribution:^^* 
 "The sacrifice (a) must be voluntary, and for the benefit of all; (b) 
 must be made by the master or by his authority ; (c) must not be caused 
 by any fault of the party asking the contribution ; (d) must be success- 
 ful; (e) must be necessary." 
 
 The most frequent causes of general average loss are putting into 
 port for repairs to the vessel or the rehandling of the cargo, and jet- 
 tisons.^^* 
 
 Strandmg. 
 
 In England it is held that voluntary stranding of a vessel is not a 
 ground for general average contribution, since such an act is done 
 
 lie See Hughes, Adm. p. 39. 
 
 117 McAndrews v. Thatcher, 3 Wall. 366, 18 L. Ed. 155; Fowler v. Rath- 
 bone, 12 Wall. 114, 20 L. Ed. 281; Hobson v. Lord, 92 U. S. 404, 23 L. Ed. 
 613; Burton v. English, 12 Q. B. Div. 218. See, also, Wright v. Marwood, 7 
 Q. B. Div. 67. 
 
 118 Hughes, Adm. p. 41. 
 
 ii» Padelford v. Boardman, 4 Mass. 548; Stevens t. Wallace. 3 Q. B. Div. 
 69 ; Hall v. Janson, 4 El. & Bl. 500, 82 E. C. L. 500 ; Barker v. Insurance Co. 
 8 Johns. (N. Y.) 307, 5 Am. Dec 339; Hazleton t. Insurance Co. (D. 0.) 12 
 Fed. 159. 
 
 g§ 225-227) THE insurer's liability— total loss. 557 
 
 with a view to saving the vessel as well as the cargo."® But in this 
 country the rule is otherwise ; it being well settled that when the mas- 
 ter, in his effort to save the cargo, intentionally runs his vessel 
 aground, as he would not otherwise have done, the damage to the ves- 
 sel is a subject for general average contribution by the cargo if it is 
 saved.^^^ 
 
 THE INSURER'S lilABILITY— TOTAL LOSS. 
 
 225. Tte insurer becomes Uable, under the terms of his policy, as for 
 
 a total loss, when the loss is either actuaUy or constructively 
 total. 
 
 226. AN ACTUAL TOTAL LOSS exists when the subject-matter of the 
 
 insurance is wholly destroyed or lost, or when it is so damaged 
 as no longer to eadst in its original character. 
 
 227. A CONSTRUCTIVE TOTAL LOSS exists, (a) according to the 
 
 English rule, when the subject-matter of the insurance, while 
 still existent in specie, is so damaged as not to be worth, when 
 repaired, the cost of the repairs; (b) according to the American 
 rule, when the vessel is so damaged that the cost of repairs 
 would exceed one-half of the value of the vessel as repaired. 
 
 Like any other insurer, the underwriter of marine risks is liable in 
 accordance with the terms of his contract. The general principles gov- 
 erning the measure of that liability have already been sufficiently con- 
 sidered elsewhere. It now remains to discuss that doctrine so strik- 
 ingly peculiar to marine insurance — ^total loss and abandonment. 
 
 Actual Total Loss. 
 
 The rule for determining when a marine loss is actually total is, in 
 effect, the same as that previously discussed in connection with the 
 fire policy."* In case of marine losses it may be stated generally as 
 in the black-letter text above. When a vessel sinks in deep water,"* 
 or is captured and condemned,"* or is burned, or runs on a reef and 
 is broken wholly to pieces, the loss is actually total. So, when a ves- 
 sel is so badly injured that she no longer exists as a ship, but is a 
 mere confused mass of material, an actual total loss has been suf- 
 fered."** But if she still remains a ship, capable of being repaired and 
 
 120 Amould, Mar. Ins. (7th Ed.) § 939. 
 
 121 THE STAR OF HOPE, 9 Wall. 203, 19 L. Ed. 638, Richards, Ins. Cas. 
 428 ; Barnard v. Adams, 10 How. 270, 13 L. Ed. 417. 
 
 122 See ante, p. 491. 
 
 12 • Merchants' S. S. Co. v. Commercial Mut Ins. Co., 51 N. Y. Super. Ct 
 444 ; Crosby v. Insurance Co., 5 Bosw. (N. T.) 369. 
 
 124 Sawyer v. Insurance Co., 12 Mass. 291; Monroe v. Insurance Co., 52 
 Fed. 777, 3 C. C. A. 280, 5 U. S. App. 179; Mullet v. Shedden, 13 East 304; 
 Abel V. Potts, 3 Esp. 242, 6 Rev. Rep. 826. 
 
 126 Merchants' S. S. Co. v. Commercial Mut. Ins. Co., 51 N. Y. Super. Ct 
 444; Burt y. Insurance Co., 9 Hun (N. Y.) 383. 
 
558 
 
 MARINE INSURANCB. 
 
 (Ch. 15 
 
 If 
 
 I 
 
 ^l ^^l'"^ J^'^'^^S upon the seas, the loss is not actually total, even 
 though the cost of repairing her would be greater than her value 
 when repaired. In the latter case the loss would be constructively 
 total, as we shall presently see. 
 
 Actual Total Loss of Goods. 
 
 A loss of goods is total when the goods are wholly lost or de- 
 stroyed,^ »• or when they are so greatly damaged as to be worthless.* 
 1 he question whether a loss of goods insured is total or only partial 
 IS of great importance in cases of insurances "warranted free from par- 
 ticular average," which means that the insurer will not be liable for 
 any loss not total. Thus, in the leading case of Great Western Ins. Co. 
 V. Fogarty,"^ certain machinery, constituting a single sugar-packing 
 apparatus, was shipped with insurance subject to such a warrant. The 
 vessel was wrecked, but a part of the machinery, about one-half in 
 weight, was recovered by the insurer and tendered to the insured in a 
 very rusty condition. As only a part of the machinery had been ac- 
 tually lost, the insurer claimed that there was only a partial loss 
 for which he was not liable. But the court held that as the parts re- 
 covered were without value as a machine, and of very small value as 
 old iron, and so rusty as not to be worth using in making another ma- 
 chine, there was, in effect, a total loss. 
 
 But a different rule applies where such insurance covers a large 
 number of articles of the same kind, or a bulk of homogeneous goods. 
 Thus, where a part of a shipment of hides was lost, it was held to be 
 only a partial loss of the whole and not a total loss as to a part."' 
 So, where more than half of a cargo of corn was lost, and the re- 
 mainder seriously damaged, the loss was only partial."" This rule 
 
 "• In Robinson y. Insurance Co., 3 Sumn. (C. O.) 220, Fed. Gas. No. 11 949 
 a cargo of goods, permanently prevented from arriving at the port of destina- 
 tion by reason of the perils insured against, was held a total loss. See 
 also, BONDRETT y. HENTIGG, 1 Holt, 149, 3 E. C. L. 66. 
 
 Hides and skins becoming so putrid, as a result of being soaked with water 
 that they endanger the lives of the crew, will be considered a total loss De 
 Peyster v. Insurance Co., 19 N. Y. 272, 75 Am. Dec. 331. See, also. Ogden v 
 Insurance Co., 35 N. Y. 418. » s ^u v. 
 
 Ro?croff3%.Vp.T7r ^" ' ^°"- ^''' '-^ '''^ '' ^- ^^- ^^^ ^^«- - 
 
 127 GREAT WESTERN INS. CO. y. FOG ARTY. 19 Wall. 640 22 L E» 
 216. See, also, the interesting case of Canton Ins. Office y. Woodside, 90 Fed. 
 301, 33 C. C A. 63, in which the insurance covered the personal effects 
 of the vessel's captain. These effects consisted of many distinct articles, 
 most of which were lost The court held the loss total as to the separate 
 articles lost 
 
 128 Biays y. Insurance Co., 7 Cranch (U. S.) 415. SJL. Ed. 389. 
 
 "» Morean v. Insurance Co., 1 Wheat (U. S.) 219, 4 L. Ed. 75. »ee, also, 
 Washburn & Moen Mfg. Co. v. Reliance Marine Ins. Co., 179 U. S. 1, 21 Sup! 
 Ct 1, 45 L. Ed. 49, in which the cases are reviewed. 
 
 g§ 225-227) THE INSUBEE's liability — ^TOTAL LOSS. 
 
 559 
 
 is often varied by a stipulation that the insurer shall be liable for a 
 total loss of a part of the whole, provided that part amounts to a 
 specified percentage of the whole,^** 
 
 Constructive Total Loss, 
 
 As to what constitutes a constructive total loss, radically different 
 rules obtain in England and America. The general theory of con- 
 structive total loss is undoubtedly based on the presumed course of ac- 
 tion by an uninsured owner. If such an owner, in the exercise of an 
 interested discretion, would abandon his property, though still existing 
 in specie, as not being worth the probable cost of raising or repairing 
 or other necessary expense required to make it available, it is properly 
 regarded as constructively lost to him. And such, in effect, is the cri- 
 terion established by the English courts for determining when a loss is 
 constructively total.*** 
 
 The American Rule, 
 
 The rule laid down by the American decisions, if less scientific and 
 more arbitrary than the English rule, is also more certain in applica- 
 tion, and therefore more satisfactory in practice. It is ordinarily 
 spoken of as the "fifty per cent, rule," and roughly said to be that, if 
 the vessel or other thing insured is damaged to an extent greater than 
 fifty per cent, of its value, the insured may claim a total loss.**' But 
 the more accurate statement of the rule would seem to be based upon 
 the value of the vessel or other thing after it has been saved and re- 
 paired; that is, if the expenditures estimated to be necessary to put 
 the vessel again in serviceable condition, or to put damaged cargo in 
 merchantable condition, would amount to more than fifty per cent, of 
 the value of the vessel or cargo as restored, the loss may be consid- 
 ered total.*" 
 
 The value of the vessel, the cost of repairs, and other questions of 
 value entering into the application of the rule as to constructive total 
 loss, must be determined as of the time and under the circumstances 
 
 i«o Note the memorandum In the policy in suit in Washburn & Moen Mfg. 
 Co. y. Reliance Marine Ins. Co., supra. See, also, Wadsworth y. Insurance 
 Co., 4 Wend. (N. Y.) 33; Moses y. Insurance Co., 6 Johns. (N. Y.) 219; SILr 
 LOWAY y. INSURANCE CO., 12 Gray (Mass.) 73; Brooke v. Insurance Co., 
 4 Mart. N. S. (La.) 640. 
 
 181 Rankin y. Potter, L. R. 6 H. L. 83; Rosetto y. Gumey, 11 O. B. 176, 73 
 B. C. L. 176 ; Domett y. Young, Car. & M. 465 ; Fleming v. Smith, 1 H. L. Cas. 
 513; Irving y. Manning, 1 H. L. Cas. 289; Moss y. Smith, 9 C. B. 94; Allen v. 
 Sugrue, 3 M. & R. 9, 8 B. & C. 561. 
 
 132 See Washburn & Moen Mfg. Co. y. Reliance Marine Ins. Co., 179 U. S. 
 1, 16, 21 Sup. Ct. 1, 45 L. Ed. 49. 
 
 183 BRADLIE y. INSURANCE CO., 12 Pet. (U. S.) 378, 9 L. Bd. 1123; Ful- 
 ton Ins. Co. v. Goodman, 32 Ala. 127; Cincinnati Ins. Co. v. Bakewell, 4 B. 
 Mon. (Ky.) 541. 
 
560 
 
 MARINE INSURANCE. 
 
 (Ch. 15 
 
 "^1 I 
 
 existing*'* when the abandonment under claim of total loss was 
 made. The mere fact that some good fortune may have subsequently 
 occurred to lessen the expense of saving vessel or cargo, or to make 
 the damage less than it seemed probable that it would be, does not 
 render invalid a previous claim of total loss, made with reasonable 
 reference to all the probabilities of the case.^** 
 
 ABANDONMENT. 
 
 228. When damage sniPered by an insured venture Is such as to oonsti- 
 tute a constructive total loss, the insured may give notice of 
 abandonnient to the underwriter, and claim the whole in/- 
 ■urance. 
 
 In case of an actual total loss the right of the insured to claim the 
 whole insurance is absolute. He need give no notice of abandonment, 
 nor formally abandon to the insurer anything that may rerrtain of the 
 insured property."* But it seems that the insurer, paying as for a total 
 actual loss, is entitled to take possession of any such remnants that may 
 be saved. ^'^ 
 
 But when the loss is only technically total, the insured cannot claim 
 the whole insurance without showing due regard to the interest which 
 the underwriter may take in the abandoned property. Therefore, 
 whenever the underwriter, by prompt action, might be able to save 
 some portion of the insured property, he is entitled to timely notice of 
 abandonment by the insured, and cannot be made liable for a total 
 loss without it"« Such notice of abandonment will not, however, be 
 a condition precedent to the insured's right to recover in those rare 
 cases in which the receipt of such notice could not by any possibility 
 
 134 Center v. Insurance Co., 7 Cow. (N. Y.) 564; Smith v. Insurance Co., 7 
 Mete. (Mass.) 448; Greely v. Insurance Co., 9 Cush. (Mass.) 415; Goold v. 
 Shaw, 1 Johns. Cas. (N. Y.) 293; Patapsco Ins. Co. v. Southgate. 5 Pet. (U. S.) 
 <K>4, 8 L. Bd. 243. 
 
 136 See Bradlie ▼. Insurance Co., 12 Pet (U. S.) 378, 9 L. Ed. 1123; Orient 
 Mut. Ins. Co. V. Adams, 123 U. S. 67, 8 Sup. Ct 68, 31 L. Bd. 63. 
 
 136 Parker, O. J., said, in Gordon v. Insurance Co., 2 Pick. (Mass.) 249: 
 "The money arising from the sale in such case must be held by the master 
 to the use of the underwriters; it is their property without any abandon- 
 ment; and, if it comes to the hands of the insured, it may be deducted from 
 the loss as so much paid." 
 
 i»7 Stewart v. Insurance Co., 2 H. L. Cas. 183. 
 
 1*8 New Orleans Ins. Co. v. Piaggio, 16 Wall. (U. S.) 378, 21 L. Bd. 358; 
 McConochle v. Insurance Co., 26 N. Y. 477; Bosley v. Insurance Co., 3 Gill & 
 J. (Md.) 450, 22 Am. Dec. 337; Taber v. Insurance Co., 131 Mass. 239; Globe 
 Ins. Co. V. Sherlock, 25 Ohio St. 50; American Ins. Co. v. Francia, 9 Pa. 390; 
 Thomas v. Insurance Co., 45 Me. 116; Hubbell v. Insurance Co., 74 N. Y. 246; 
 Townsend v. Phillips, 2 Root (Conn.) 400; Gomila v. Insurance Co 40 lia. 
 Ann. 553, 4 South. 490. ' 
 
 §228) 
 
 ABANDONMENT. 
 
 661 
 
 benefit the insurer; as, for example, when the insured learned at the 
 same time of the damage to insured goods and their sale.^*' 
 
 Upon receiving notice of abandonment, the underwriter may accept 
 or reject the abandonment. If he accepts, he becomes at once liable 
 for the whole of his insurance,^*® and also becomes entitled to all rights 
 which the insured possessed in the thing insured.^*^ He acquires the 
 same title to the abandoned vessel as he might have acquired by pur- 
 chase. He may save and repair her, sell her, or otherwise do as he 
 will with her. If the injury to the vessel was due to the tort of an- 
 other, the insurer's right of subrogation, heretofore limited to the 
 amount of payments made by him, becomes extended by abandonment 
 to the full amount recoverable from the tort feasor, even though that 
 may exceed the amount of insurance paid.^** 
 
 The acceptance of an abandonment fixes the rights of the parties, and 
 no subsequent developments affecting the expediency of either the 
 abandonment or the acceptance can give either party the right to res- 
 cind the transaction. ^** 
 
 If the insurer declines to accept a proper abandonment, the insured 
 may bring his action for the whole insurance, his recovery, of course, 
 to be diminished to the extent of any benefits he may have received on 
 account of the damaged property. If the abandonment was improp- 
 erly made, the insurer is liable in such an action to the extent of the 
 damage proved. 
 
 *H 
 
 188 ROUX V. SALVADOR, 3 Ring N. C. 266. 
 
 1*0 Phoenix Ins. Co. v. Copelin, 9 Wall. (U. S.) 461, 19 L. Ed. 739; Fulton 
 Ins. Co. V. Goodman, 32 Ala. 108; Watson v. Insurance Co., 1 Bin. (Pa.) 47; 
 Reyn-lds v. Insurance Co., 22 Pick. (Mass.) 199, 33 Am. Dec. 727; Cincinnati 
 Ins. Co. \ Bakewell, 4 B. Mon. (Ky.) 541; Buffalo City Bank v. Northwestern 
 Ins. Co., 30 N. Y. 251; Childs v. Insurance Co., 2 Sandf. (N. Y.) 76; Citizens' 
 Ins. Ck>. V. Glasgow, 9 Mo. 411. 
 
 1*1 Patapsco Ins. Co. v. Southgate, 5 Pet. (U. S.) 622, 8 L. Ed. 243; The 
 Manitoba (D. C.) 30 Fed. 129; Kirby v. Insurance Co. (D. C.) 27 Fed. 221: 
 Mercantile Marine Ins. Co. v. Clark, 118 Mass. 288; Mercantile Ins. Co. v. 
 Calebs, 20 N. Y. 174; Hooper v. Whitney, 19 La. 267; Northwestern Transp. 
 Co. V. Thames & M. Ins. Co., 59 Mich. 214, 26 N. W. 336; CINCINNATI INS. 
 CO. V. DUFFIELD, 6 Ohio St. 200, 67 Am. Dec. 339; Norton v. Insurance Co., 
 16 111. 235. 
 
 142 North of England Iron Steamship Ins. Ass*n v. Armstrong, L. R, 5 Q. B. 
 244; Yates v. Whyte, 4 Ring. N. C. 272, 33 E. C. L. 349; Mercantile Marine 
 Ins. Co. V. Clark, 118 Mass. 288. 
 
 i*» Northwestern Transp. Co. v. Insurance Co. (O. C.) 24 Fed. 171; Fulton 
 Ins. Co. V. Goodman, 32 Ala. 108; Lee v. Boardman, 3 Mass. 238, 3 Am. Dec. 
 134; Dickey v. Insurance Co., 3 Wend. (N. Y.) 658, 20 Am. Dec. 763; Fuller v. 
 Insurance Co., 31 Me. 325; Maryland Ins. Co. v. Bathurst, 5 Gill & J. (Md.) 
 230; Cincinnati Ins. Co. v. Bakewell, 4 B. Mon. (Ky.) 541; Wood T. Lincoln 
 Ins. Co., 6 Mass. 479, 4 Am. Dec. 163. 
 Vance Ins.— 36 
 
 u 
 
;. I- 
 
 562 
 
 MARINE INSURANCE. 
 
 (Ch. 15 
 
 SUE AND LABOR CLAUSE. 
 
 I t 
 
 229. Under tlie sue and labor clanse of fhe marine poliey, th% Intnrer 
 may become liable to pay the insnred, in addition to the lost 
 actually suffered, such expenses as he may have incurred in his 
 efforts to protect the property against a peril for which the in« 
 surer would have been liable. 
 
 1' '", 
 
 *! 
 
 That term of the American policy known as the "sue and labor 
 clause" reads as follows: "And in case of any loss or misfortune, it 
 shall be lawful and necessary to and for the assured, his factors, serv- 
 ants and assigns, to sue, labor, and travel for, in and about the de- 
 fense, safeguard and recovery of the said goods and merchandises, or 
 any part thereof, without prejudice to this insurance, * * * to 
 the charges whereof the said insurance company will contribute ac- 
 cording to the rate and quantity of the sum herein insured." 
 
 The form of the clause in Lloyd's policy, while somewhat more 
 verbose, is to the same effect. 
 
 This curious clause is not a part of the contract of insurance,*** 
 but an independent, collateral agreement, which is, however, to be 
 construed in connection with the contract of insurance to which it is 
 attached. Its purpose is to stimulate the owner of the insured venture, 
 or his representatives, to do all things possible to avoid loss or damage, 
 or to lessen its extent when incurred, by providing compensation for 
 their efforts.^*' The insurer's liability under this sue and labor clause 
 is wholly distinct from the question of his liability to indemnify the 
 insured for a loss incurred.^*' If the insured has labored to preserve 
 the venture from a peril for which the underwriter would be liable, 
 the latter must make good the insured's expenditures in that behalf,"^ 
 even though the property is subsequently lost through an excepted 
 peril. So, the underwriter is equally liable under this clause, even 
 though he has become also liable to pay the full amount of his in- 
 surance, because of a total loss in spite of the insured's suing and 
 laboring. It thus comes about that the underwriter sometimes ap- 
 parently becomes liable for a greater sum than is expressed on the 
 face of his policy. 
 
 i**Lohre y. Altchlson, 2 Q. B. Dlv. 509; Nicholson v. Chapman, 2 H. BL 
 257 ; Xenos v. Fox, L. R. 8 C. P. 630, L. R. 4 C. P. 665. 
 
 1*5 AITCHISON V. LOHRE, 1 Q. B. Div. 502, 3 Q. B. Dlv. 553, 4 App. Cas. 
 755; Mitchell v. Edle, 1 Term R. 608; Kldston v. Insurance Ck>., L. R. 1 C. P. 
 535, Exch. 2 0. P. 357. 
 
 !*• AITCHISON V. LOHRB, 1 Q. B. Dlv. 502, 3 Q. B. Dlv. 553, 4 App. Cas. 
 755 ; Nicholson v. Chapman, 2 H. Bl. 257 ; Xenos v. Fox, L. B. 3 C. P. 630, L. E. 
 4 C. P. 665. 
 
 i*T Kldston v. Insurance Oo^ L. B. 1 0. P. 535, Ebceh. 2 C. P. 357. 
 
 §229) 
 
 SUE AND LABOR CLAUSE. 
 
 563 
 
 From the wording of the sue and labor clause, it is apparent that 
 two requisites must exist in order that the expense of suing and labor- 
 ing shall be chargeable to the insurer: i" (1) The efforts made to 
 preserve the thing insured must have been made by the person insured 
 or by some one employed as his representative. Therefore, salvors 
 cannot make, nor can salvage payments be made, a claim under this 
 clause, imless the salvors work under the employ of the owner or the 
 master.^" (2). The loss or damage which the insured labors to avoid 
 
 """^^so ^u^ ^^ "^^"^"^ ^^ chargeable to the insurer if it should oc- 
 cur. The purpose of the clause is not to stimulate philanthropic 
 v^'i^'TA ^H^^.^^ss^^ the loss for which the underwriter would be 
 liable. The insurer is certainly not commercially interested in se- 
 curing protection of the venture against a misfortune for which he had 
 declined to assume responsibility. Thus, when insurance is warranted 
 free of particular average, the insurer would not be liable for expenses 
 incurred m avoiding a partial loss.^"* 
 
 Of course, the expense of repairing losses covered by the policy 
 is not chargeable to the insurer under the sue and labor clause, since 
 It forms a part of the loss to be indemnified.*** 
 
 1*8 See Richards, Ins. 252. 
 
 i*»See International Nav. Co. v. Atlantic Mut Ins. 06. (D C) 100 Fpd 
 313; AITCHISON v. LOHRE, 4 App. Cas. 755. ' 
 
 160 Kldston V. Insurance Co., L. R. 1 C. P. 535, Bxch. 2 a P 357 8e^ 
 also, Booth V. Galr, 15 C. B. (N. S.) 291, 33 L. J. C. P. 9a. ' ^ 
 
 181 Zenos V. Fox, L. R. 3 C. P. 630, 4 C. P. 665. 
 
 162 Kldston V. Insurance Co., L. R. 1 C. P. 543. 
 
 i»» Alexandre v. Insurance Co., 61 N. Y. 253, 
 
564 
 
 ACCIDENT INSUBANCB, 
 
 (Ch. 16 
 
 CHAPTER XVI. 
 
 ACCIDENT INSURANCE. 
 
 230. In General. 
 
 231. Accident Policies and Their Constructloa 
 
 232. Accidental Injuries— External, Violent, and Accidental Cansea. 
 
 233. Disease Induced by Accident — Proximate Cause. 
 
 234. External and Visible Signs of Injury. 
 
 235. Risks of Travel. 
 
 236. Excepted Risks— In General. 
 
 237. Poison, or Contact with Poisonous Substances, 
 
 238. Inhaling Gas. 
 
 239. Bodily Infirmities or Disease. 
 
 240. Voluntary and Unnecessary Exposure to Injury* 
 
 241. Intentional Injury by Another. 
 
 242. Occupation and Employment. 
 
 243. Injuries Received while Intoxicated. 
 
 244. Liability of the Insurer- Total Disability, 
 
 245. Right to an Autopsy. 
 
 IN GENEBAIi. 
 
 230. Accident insurance is similar in most respects to life Insurance, 
 of whicli it is properly a branch. The same mles of law apply 
 to the making of the accident insurance contract, and to its 
 construction when made, as have already been disonssed aji ap" 
 plicable to life insurance* 
 
 As heretofore shown, accident insurance is the most recently de- 
 veloped of all the important branches of insurance, being derived 
 from the practice of life insurance. Most of the conditions existing in 
 connection with contracts of life insurance are found present also in 
 the writing of accident policies, so that it will not be necessary for 
 us to consider such questions as pertain to the making of the contract, 
 representations, concealments, and warranties, waiver and estoppel, 
 and the other numerous matters that have already been discussed in 
 treating of the life insurance policy. 
 
 Accident insurance is so closely akin to life insurance that it is 
 generally held that statutes which have been enacted for the regulation 
 of the business of life insurance, or for the purpose of fixing the rights 
 of parties under contracts of life insurance, apply equally well to those 
 of accident insurance.^ 
 
 1 Thus, a statute declaring that breach of warranty shall not avoid a pol- 
 icy of insurance unless the warranty is materially or fraudulently false, ap- 
 plies to accident insurance. Maryland Casualty Co. y. Gehrmann, 96 Md. 
 634, 54 AtL 67& 
 
 § 251) ACCIDENT POLICIES AND THEIR CONSTRUCTION. 565 
 
 While accident insurance is of later origin, it more clearly accords 
 with the original principles of insurance than does life insurance. Un- 
 der life insurance, the insurer undertakes to pay a certain sum upon 
 the happening of an event which will certainly take place, the only 
 contingency being with reference to the time at which death will 
 occur. On the other hand, the accident insurer merely takes upon him- 
 self the risk of a misfortune which may or may not happen, and 
 which, in fact, in the great majority of cases never does happen. 
 Therefore, in accident insurance, there is nothing of the investment 
 feature that requires the preservation of the reserve fund which 
 we have found to play so important a part in the conduct of life 
 insurance business. 
 
 ACGIDEXT POLICIES AND THEIR CONSTRUCTIOW. 
 
 831- Accident policies vary greatly in their terms, whicli the courts are 
 always zealous to construe strictly in favor of the insured. 
 
 Policies of accident insurance were originally relatively simple in 
 form, merely promising indemnity to the insured for injury and death 
 by accident. The uncertainty of the meaning of the word "accident," 
 and the great liberality of the courts in extending the protection of 
 the poHcy against accident to a great many injuries which the insurer 
 did not contemplate being liable for, has induced accident companies 
 gradually to add terms of definition and restriction to their promises, 
 until at the present time the usual accident policy is so full of con- 
 ditions defining the risk assumed, and excepting all others, that its 
 construction is a matter of the greatest difficulty even to a perfectly 
 fair-minded court. In connection with this policy, as with those in 
 other branches of insurance law, the meaning of the language employed 
 in defining the risks assumed has been greatly distorted by the constant 
 struggle carried on between the courts striving to extend the liability 
 of the insurer, and of the insurer attempting to so restrict his liability as 
 to make that feat on the part of the courts impossible. The result has 
 been to cause the greatest variation in the forms of accident policies, 
 so that anything like a consistent treatment of the rules of construc- 
 tion as applied to their specific clauses is impossible. 
 
 There are, however, certain fundamental terms and usual provisions 
 found in all of these varying forms that we may profitably consider. 
 
 The Primary Purpose of the Contract. 
 
 The first principle to be borne constantly in mind is that the courts 
 never lose sight of the fact that an accident policy, whatever may be 
 its form, conditions, and limitations, is intended by the parties to give 
 indemnity for accidental injury. It will therefore be found that the 
 
566 
 
 ACCIDENT INSURANCE. 
 
 (Ch. 16 
 
 courts, wherever possible, take, as the criterion of the liability of the 
 insurer under any form of policy, the existence of an injury properly 
 to be called "accidental/' If such an injury has been suffered, the 
 courts will go far to hold the insurer liable for it, unless, in so doing. 
 It would be necessary to make a new contract for the parties. 
 
 ACCIDENTAL INJURIES-EXTERNAIi, VIOLENT, AND 
 
 ACCIDENTAI. CAUSES. 
 
 232. An accidental injnry is a bodily injury cansed by some external 
 force or agency, operating contrary to the intention of the in- 
 sured, unexpectedly, and not according to tbe usual order of 
 •rents. The accident policy usually defines an accidental in- 
 Jury as one due to external, violent, and accidental causes. 
 
 Accidental Injury and Disease. 
 
 The term "accident" has been defined in many different ways. Thus, 
 It is defined by a standard law dictionary * as "an event which,' under the 
 circumstances, is unusual, and unexpected by the person to whom it 
 happens." ^ Neither this definition, however, nor any other that is to 
 be found in the dictionaries, will serve as an effective guide in deter- 
 mining whether a given injury is due to accident or not. In fact, 
 there are many bodily misfortunes reco^ized as diseases that will 
 come fairiy within any of the definitions of the term "accident" to be 
 found in the books. This is naturally accounted for by the fact that, 
 m the broadest sense of the term, practically every disease results from 
 accident, inasmuch as it is unexpected by the person who contracts it, 
 and certainly it is contracted without his desire or intention. Thus, the 
 drinking of water infected with typhoid fever germs might be termed 
 an accident from which very serious consequences may ensue, yet it is 
 plain that the parties to a contract of accident insurance do not con- 
 template an insurance against such a misfortune as the accidental con- 
 tracting of a disease.' This illustration, however, makes apparent 
 
 » Bouvier. Black defines It as "an unforeseen event occurring without the 
 wiU or design of the person whose mere act causes It; an unusual, unex- 
 pected, or undesigned occurrence." This definition would exclude murder, 
 or other injuries intentionally inflicted by another, which all authorities agree 
 are accidental injuries. 
 
 » The physiological distinction between contracting typhoid fever from ac^ 
 cldentally drinking water infected by germs, and contracting blood poison- 
 ing through the infection, by germs, of a toe accidentally abraded by wear- 
 ing a new shoe, is so subtle, if it exists at all, as not to be capable of expres- 
 sion in language intelligible to any one but a physician. Yet the former is 
 a disease, and the latter has been held an accidental injury. WESTERN 
 COMMERCIAL TRAVELERS' ASS'N v. SMITH. 85 Fed. 401, 56 U. S. App. 
 393, 29 C. C. A. 223, 40 L. R. A. 653. Every argument used by the court will 
 apply to the one case as well as to the other. 
 
 §232) 
 
 EXTERNAL, VIOLENT, AND ACCIDENTAL CAUSES. 
 
 567 
 
 the great difficulty which is encountered by the courts in deciding 
 just what the parties to an accident contract do contemplate by the 
 use of the term "accidental injury," and of the mass of cases in which 
 questions of accident insurance have been litigated the greater number 
 involve merely the question whether the injury suffered in each case 
 is included under the risk assumed by the insurer in his policy. 
 
 Definitions being thus unreliable, we can come to a satisfactory un- 
 derstanding of what is regarded in law as an accidental injury only, 
 by considering the cases as they have actually come before the courts 
 for decision. In Lovelace v. Travelers' Protective Ass'n,* the question 
 arose tmder the following facts: The deceased, who was insured 
 against "death by accident," while a guest in a tavern was provoked 
 by the indecent behavior of another guest to attempt to expel him from 
 the house. In the struggle which ensued, the insured was shot and 
 killed by the one whom he sought to expel. The only question before 
 the court was whether death under such circumstances was accidental 
 or not. It was claimed by the defendant that such a fatal injury was 
 but the natural and probable consequence of such an assault, and there- 
 fore could not be regarded as accidental. The court .concluded, how- 
 ever, that the deceased could not reasonably have expected such a fatal 
 termination of his attempt to expel a disagreeable person, since, under 
 the circumstances, he had no reason to suppose the person attacked to 
 be armed. The insurer was therefore held liable.* In other cases, 
 however, where the deceased had entered into a combat under such 
 circumstances as would justify an expectation that fatal results would 
 probably ensue, it has been held that injuries received were not acci- 
 dental.' In another case it has been held that death by hanging at the 
 hands of a mob was an unexpected happening that might be regarded 
 as an accident.'' Likewise it has been held by the Supreme Court of 
 the United States « that, when the insured received an injury by the 
 wrenching of his muscles when jumping from a platform four or five 
 feet high to the ground, the injury could be regarded as an accident, 
 although the insured intentionally took the leap. While he intended to 
 
 • LOVELACE V. TRAVELERS' PROTECTIVE ASS'N, 126 Mo. 104, 28 S. 
 W. 877, 30 L. R. A. 209, 47 Am. St. Rep. 638. 
 
 8 Other cases to the same effect are numerous. See Hutchcraft's Bx'r v. 
 Insurance Co., 87 Ky. 300, 8 S. W. 570, 12 Am. St. Rep. 484; Supreme Coun- 
 cU V. Garrigus, 104 Ind. 133, 3 N. E. 818, 54 Am. Rep. 298; Richards v. In- 
 surance Co., 89 Cal. 170, 26 Pac. 762, 23 Am. St Rep. 455; TRAVELERS' 
 INS. CO. V. McCONKEY, 127 U. S. 661, 8 Sup. Ct 1360, 32 L. Ed. 308. 
 
 • Taliaferro v. Association, 80 Fed. 368, 49 U. S. App. 275, 25 C. a A. 494. 
 T FIDELITY & CASUALTY CO. v. JOHNSON, 72 Miss. 333, IT South. 2, 
 
 30 L. R. A. 206. The record does not disclose the color of the insured. 
 
 • United States Mut Ace. Ass'n v. Barry, 131 U. S. 100, Sup. Ct. 755, 33 
 !«. Ed. 60. 
 
 t .)] 
 
oUS 
 
 ACCIDENT INSURANCE. 
 
 (Ch. 16 
 
 Iff*' 
 
 leap he did not intend to leap so as to suffer the injury which caused 
 his death. 
 
 Injuries inflicted by another person upon the insured,' or those 
 self-inflicted when insane,^^ ^re considered to be accidents. So are 
 injuries due to mistakes in taking medicine/^ to the inhaling of gas,^« 
 and to coming in contact with poisonous substances unintentionally, 
 considered accidental injuries. In Omberg v. United States Mut. Ace. 
 Ass n, the Kentucky Supreme Court held that the bite of an insect, 
 inflicted upon the toe of the insured, which caused blood poisoning 
 to set in and the consequent death of the victim, was an accident for 
 which the insurer should be held liable. In a New York case, under 
 somewhat similar facts, the contrary conclusion was reached ^* In 
 Texas it was held by the Court of Civil Appeals " that death due to 
 intestinal inflammation set up by the eating of unsound oysters was 
 an accidental injury; but upon appeal the Supreme Court reversed the 
 decision of the lower court, principally, however, upon the ground 
 that the eating of the oysters brought the injury, if it was accidental, 
 under the terms of an exception in the policy. 
 
 Again, death by choking consequent upon an attempt to swallow a 
 piece of beefsteak has been held to be death by accident.^* But it is 
 weU settled that death by sunstroke," though unusual, is not to be 
 
 • The fact that the blow struck by the other party was designed makes 
 the injury to the victim none the less accidental If he had no reason to ex- 
 ?!. ol^ ^ natural course of events. American Aec. Co. v. Carson. 99 Ky. 
 441, 36 S. W. 169, 34 L. R. A. 301, 59 Am. St. Rep. 473. ^ 
 
 T '^:J^^.?n^^^'^ ^^'^- ^^- ^- ORANDAL, 120 U. S. 527, 7 Sup. Ct 685, 30 
 Li. hjCL. 740. 
 
 11 Games v. Association, 106 Iowa, 281, 76 N. W. 683, 68 Am. St. Rep. 306. 
 Here it was said that if the Insured died because he took more morphine 
 than he Intended, the death was accidental, but it would be otherwise if he 
 had taken only as much as he had intended, not knowing that such a dose 
 ^^'w 1102 ^""^ ^^^ ^^^" ^' Fidelity & Casualty Co., 176 Mo. 253, 75 
 
 12 United States Mot Ace. Ass'n v. Newman, 84 Va. 52. 3 S E 805 
 
 13 101 Ky. 303, 40 S. W. 909, 72 Am. St. Rep. 413. 
 
 9f"p^^%V* ^^^^.^^.a^^'^' 123 N. Y. 304, 25 N. E. 399, 9 L. R. A. 617, 20 Am. 
 bt. Rep. 748. In this case some putrid animal matter came In contact with 
 an abrasion on the insured's lip. causing infection and the formation of a 
 malignant pustule, which proved fatal. The court held that death was due 
 to disease merely. 
 
 " Maryland Casualty Co. v. Hudgins (Civ. App.) 72 S. W. 1047 reversed 
 in Supreme Court, 76 S. W. 745, 64 L. R. A. 349 ^- -^"^^ reversed 
 
 42'l^ltTe^l74^''* ^' ^^^^^"^ ^^ ^^' ^^' ^ ^- ^- ^®^' 21 U R. A. 651, 
 
 IT SINCLAIR V. ASSURANCE CO.. 3 E. & E. 478 ; Dozler v. Fidelity & Cas- 
 
 't^^l ?•/ f ^ FT^ ^''' ""'^ ^' ^'^' ^^' ^^ ^' «• ^' 114- in Railway ol 
 
 E. A. 401, 95 Am. St. Rep. 370, often cited as contra, the policy in terms ex- 
 
 § 232) EXTERNAL, VIOLENT, AND ACCIDENTAL CAUSES. 569 
 
 regarded as accidental ; nor is the mere rupture of a blood vessel to 
 be regarded as an accident, unless it was induced by some sort of vio- 
 lent accidental occurrence.^' So, when the insured, while stooping 
 over to put on his socks, suffered such a disarrangement of the intes- 
 tines that death ensued, his fatal injury was held not to be accidental.^* 
 
 External}, Violent, and Accidental Causes. 
 
 The terms "external" and "violent" have been added by the insurer 
 for the purpose of restricting the sense of the term "accidental," with 
 which they are coupled, but their presence has had little, if any, in- 
 fluence upon the construction given to the term "accidental cause or 
 injury." The term "external" applies to the force, and not to the in- 
 jury.^® Thus, poison taken into the system, and operating entirely in- 
 ternally, is nevertheless an external cause, as is the water which causes 
 death by drowning, and gas which causes asphyxiation. Likewise, the 
 term "violent," as applied to causes of accidental injury, means merely 
 that the cause is efficient in producing a harmful result. It is not neces- 
 sary that it shall be violent in the sense of breaking tissues or other- 
 wise physically and visibly affecting the body." Thus, where the 
 insured was injured by his straining efforts to stop his horse that 
 was running away, it was held that the cause of the injury was both 
 external and violent, although the result was entirely internal, being 
 probably a rupture of a blood vessel near the heart." And so it is 
 generally held that where an injury is received in attempting to lift a 
 heavy weight, or from any other kind of over-exertion, the result may 
 be attributed to an external and violent accidental cause.^* 
 
 pressly recognized sunstroke as one of the risks assmned, subject to condi- 
 tions. 
 
 18 See Standard Life & Accident Ins. Co. v. Schmaltz, 66 Ark. 588, 53 S. 
 W. 49, 74 Am. St. Rep. 112. Here the rupture was caused by a sudden and 
 violent wrenching of the body in an effort to remove a cylinder head from 
 an engine. A similar rupture caused by an effort to close a shutter was held 
 not to be accidental. Feder v. Association, 107 Iowa, 538, 78 N. W. 252, 43 
 L. R. A. 693, 70 Am. St. Rep. 212. 
 
 i» Clidero v. Insurance Co., 29 Scot. L. R. 303. See, also, Southard v. As- 
 surance Co., 34 Conn. 574, Fed. Cas. No. 13,182. 
 
 20 American Ace. Co. v. Reigart, 94 Ky. 547, 23 S. W. 191, 21 L. R. A. 651, 
 42 Am. St. Rep. 374. 
 
 21 See the excellent discussion of this matter in Paul v. Insurance Co., 112 
 N. Y. 472, 20 N. E. 347, 3 L. R. A. 443, 8 Am. St. Rep. 758. 
 
 22 McGLINCHEY v. FIDELITY & CASUALTY CO., 80 Me. 251, 14 Atl. 
 18, 6 Am. St Rep. 190, Woodruff, Ins. Cas. 277. 
 
 2« Standard Life & Accident Co. v. Schmaltz, 66 Ark. 588, 53 S. W. 49, 74 
 Am. St. Rep. 112; RUSTIN v. INSURANCE CO., 58 Neb. 792, 79 N. W. 712. 
 46 L. R. A. 2I»3, 76 Am. St Rep. 136, Woodruff, Ins. Cas. 294. 
 
570 
 
 ACCIDENT INSURANCE. 
 
 (Ch. 16 
 
 §234) 
 
 EXTERNAL AND VISIBLE SIGNS OF INJURT. 
 
 671 
 
 II 
 
 DISEASE nTDTTCBD BY AOOIBENT-PKOXIMATE CAUSE. 
 
 833. " '"qnenUy occ«« that the death of the per«,n in,urea under 
 an accWent poUey U cau.ed by .ome dlsea.. Indneed by an ac- 
 !l. !?^ ^Y'- " *"" •''•"'"•tanee. are .neh a. to make the 
 accident, and not the disease, the proximate oan.e of the death, 
 the Intnrer U Uable a. for an accidental Injury. 
 
 fn'!!!'l*'*i?''*'°t" **^ P'"°'^™ate from remote causes, always difficult 
 to make, often becomes peculiarly difficult in deciding questions aris- 
 mg under accident policies. The insurer, under an accident policy, is 
 not liable for death by mere disease, even in the absence of the usual 
 clause expressly excluding disease from among the risks assumed. 
 But It frequently happens that, while the immediate cause of death is 
 a disease, that disease is directly attributable to some accident that 
 has previously happened. If the causal connection between the dis- 
 
 rt?,t r.v. T " '^"■^'* ^"*^ ''"^'' *^ -^^^th ^'» be considered as 
 ThJ lu ^ "1^ ^' proximate cause, and not to the disease. Thus, 
 where the msured's toe was bruised and rubbed by a new shoe, which 
 injury caused blood poisoning from which he died, it was held that 
 the cause of his death was the accidental injury to his toe" So 
 
 lured'^hL 2;*^ ^' *! ^^^^^^husetts Supreme Court, where the in-' 
 sured had died of peritonitis that was induced by a heavy fall the 
 
 Xh^ H-*'*' ''*r^' 'I' •"^"^^'^ "^^ -- "'^-^ b-n afflicted 
 3i *'',;^'^^^*«'.^d w^s therefore evidently peculiarly liable to con- 
 tract it, the proximate cause of his death was the accidental fall, so 
 
 f^^c .%r"'' "^u "^^'' ^°' ^'' ^^^th.» In connection with the 
 facts of this case, the court makes this clear statement of the doctrine 
 of proximate cause, as applicable to such cases: "The law does not 
 
 cause wht'h'^^on • "^"-r "^T"! ''^"^'"^ '^' ^'«"^"* predominant 
 ^^11; r i. *°"°^'."? 't no farther than those consequences that 
 might have been antiapated as not unlikely to result from it, has 
 prcKluced the effect An injury which might naturally produce deaA 
 nf ?;P7°"°^/«rtam temperament or state of health is the cause 
 of his death If he dies by reason of it. even if he would not have 
 died If his temperament or previous health had been different; and 
 this IS so. as well when death comes through the medium of a disease 
 
 ™Si I"X5e'^ -'°''' " "'■" "" ""■"" '"-«''"* '•"'■ 
 
 "FREEMAN y. ASSOCIATION, 156 Mass. 351. "sO N. E. 1013 17 L R 
 H^!f • ^' " ^" ^^"^ ^^^^ *^^* ^^ accidental fall, causing a ruptoe of a 
 Wdney and consequent death, was the proximate cause of the dSS^ou^h 
 
 FidXT;? '"^^*'r ^' *^^ ^^^°^y ^^^^ the rupture possible Fett^^t 
 FideUty & Casualty Co.. 174 Mo. 256. 73 S. W. 592. 61 L. R ^459 
 
 In another case an insurer was held liable for the death of the 
 insured, caused by peritoneal inflanmiation which was induced by a 
 blow received from the handle of a pitchfork which accidentally slip- 
 ped from his grasp while being used in pitching hay.** So, an accident 
 insurance company was held liable for a death caused directly by in- 
 flammation of the intestines which had been weakened by disease, the 
 inflammation being caused by the presence of hard food substances 
 that had been swallowed by the insured, who had no knowledge of 
 the weakened condition of his digestive organs.*^ 
 
 Another and different phase of the question of proximate and remote 
 cause appears in the leading English case of Lawrence v. Accidental Ins. 
 Co.** In that case the insured was standing near a railway track upon 
 which a locomotive was approaching. He was suddenly seized with a 
 fit of illness which caused him to fall forward helpless upon the track, 
 where he was almost immediately crushed to death under the wheels of 
 the locomotive. The defendant claimed that it was not liable under an 
 accident policy for the death of the deceased, on the ground that the 
 proximate cause of his death was his fit of illness, while the plaintiff 
 claimed that the predominant cause was his being run over by the 
 locomotive, which was accidental. The policy provided that the in- 
 surance company should be liable only when the accidental injury "was 
 the sole and direct cause of death to insured." The court held that 
 the efficient cause of the death of the insured was the locomotive, 
 which hapjpened accidentally to be present at that time, while the fit was 
 merely the cause of his being upon the track in a place of danger, and 
 therefore remote. 
 
 EXTERNAL AND VISIBLE SIGNS OF INJURY. 
 
 234. The nsnal term of the accident policy, proridine that the insurer 
 will be liable only for those injuries of which there shall be 
 some external and visible sign, does not require that the injury 
 itself shall be external and visible, but merely that the evi- 
 dences of accidental injury shall be external and visible. 
 
 In the course of their efforts to avoid liability for injuries and deaths 
 due to merely natural causes, and for feigned internal injuries, difficult 
 
 ••North American life & Accident Oo. v. Burroughs, 69 Pa. 43, 8 Am. 
 Rep. 212. 
 
 27 Miller v. Fidelity & Casualty Co. (C. 0.) 97 Fed. 836. So, in Travelers' 
 Ins. Co. V. Hunter, 30 Tex. Civ. App. 489, 70 S. W. 798, the insurer was held 
 liable for a fatal attack of rheumatism caused by an accident. 
 
 28 7 Q. B. Div. 216, Richards, Ins. Cas. 522. A similar case is Winspear 
 v. Insurance Co., 6 Q. B. Div. 42, in which the insured, while crossing a river, 
 was seized with a fit, which caused him to fall into the water and drown. 
 The death was considered to be accidental. 
 
572 
 
 ACCIDENT INSURANCE. 
 
 (Ch. 16 
 
 to disprove, all accident insurers now insert in their policies a provision 
 to the effect that they will not be liable for any bodily injuries that 
 shall be suffered by the insured, unless there are found some external 
 and visible signs of such injuries. The courts have, however, largely 
 done away with any restrictive effects of this provision, by giving to it 
 such a construction as seldom defeats recovery in a case in which the 
 plaintiff would succeed in its absence. It has been held that the pro- 
 vision has no application whatever to injuries that result in death,^' 
 but only temporary nonfatal injuries. And when the provision is 
 so worded as to make it clearly apply to fatal injuries, the courts have 
 found little difficulty in discovering the requisite external and visible 
 signs. 
 
 We must first note that the signs of injury ordinarily required need 
 not be on the body itself, although such was the probably intended 
 meaning of the insurers when the term was incorporated in the policy. 
 Any sign at all indicating the occurrence of an injury that is visible 
 to the eye, or otherwise capable of sense perception, is held to satisfy 
 the requirements of this clause. Thus, froth on the mouth of a person 
 who has died from asphyxiation through inhaling gas is a visible 
 sign of the cause of his death.'^ It has even been held that where 
 artificial respiration was resorted) to in the case of the asphyxiated 
 person, and the odor of inhaled gas could be detected, that was a 
 sufficient sign of his fatal injury by inhaling gas.^^ Discoloration of 
 the skin is a sufficient external evidence of an internal injury,^^ and 
 the unnatural redness of one lobe of the brain discovered by autopsy 
 has been also regarded as an external visible sign of an accident.^^ 
 Even an unusual color of the skin is sufficient ;3* and the court may 
 take into consideration as evidence other external circumstances, not 
 immediately connected with the body, but which would show the cause 
 and probable presence of an accident, as the odor of gas in the room 
 in which a dead body is found. •• 
 
 In another case, where the injury for which it was sought to hold 
 
 2» McGLINCHEY y. FIDELITY & CASUALTY CO., 80 Me. 251, 14 Atl. 13, 
 6 Am. St. Rep. 190. In this ease the court said: "There are reasons for the 
 condition applying to a surviving claimant. He has unusual chance for feign- 
 ing an internal injury, if disposed to defraud the insurers. But no such pro- 
 tection is required where the accident causes death. The dead body is ex- 
 ternal and visible sign enough that the injury was received." 
 
 30 United States Mut. Ace. Ass'n v. Newman, 84 Va. 52, 3 S. E. 805. 
 
 «i Menneily v. Assurance Corp., 148 N. Y. 596, 43 N. E. 54, 31 L. R. A. 686 
 51 Am. St Rep. 716. ' 
 
 82 Thayer v. Insurance Co., 68 N. H. 577, 41 Atl. 182. 
 
 »» Union Casualty & Surety Co. v. Mondy (Colo. App.) 71 Pac. 677. 
 
 «♦ Horsfall v. Insurance Co., 32 Wash. 132, 72 Pac. 1028, 63 L. R. A 425. 
 
 «B See Menneily v. Assurance Corp., 148 N. Y. 596, 43 N. E. 54. 31 L. R. 
 A. 686, 51 Am. St Rep. 716* »^ ox u, a. 
 
 §235) 
 
 RISKS OF TRAVEL. 
 
 573 
 
 the insurer liable was entirely internal, presenting no evidence what- 
 ever upon the surface of the body of its presence, a physician was 
 allowed to testify that by external pressure with the hand he cou d 
 detect the presence of the internal injury; and such evidence was held 
 to satisfy the requirement of an external sign of the injury. ^ ^ 
 
 The result of the cases on this subject has been well summanzed in 
 the instruction of the court to the jury in Barry v. United States Mut. 
 Ace Ass'n," as follows: " ^Visible signs of injury,' within the mean- 
 ing of this policy, are not to be confined to broken limbs or bruises on 
 the surface of the body. There may be other external indications or 
 evidences of an injury. Complaint of pain is not a visible sign because 
 pain you cannot see. Complaint of internal soreness is not such a sign, 
 for that you cannot see. But if the internal injury produces, for ex- 
 ample, a pale and sickly look in the face; if it causes vomitmg and 
 retching, or bloody and unnatural discharges from the bowels ; if, in 
 short, it sends forth to the observation of the eye, in the struggle of 
 nature, any sign of injury— then those are external and visible signs, 
 provided they are the direct result of the injury." 
 
 BISKS OF TRAVEL. 
 
 235. In.urai.ce against accidental injuries incurred wMe « ?*"7f^' 
 on a public conveyance, or other conveyance specified, is Ixel J to 
 cover any injuries received while doing anything naturally and 
 properly incident to the accompUshment of the journey in hand. 
 
 The first accident insurance, as well as a considerable portion of 
 that now written, was upon travel risks alone. Those pohcies issued 
 against accidents that may happen to the insured while engaged in 
 prosecuting a journey stipulate specifically the circumstances under 
 which the insurer will become liable, although the terms in which the 
 assumed risks are described vary considerably. The one most fre- 
 quently inserted is against accidents that may happen to the insured 
 "while traveling as a passenger on any conveyance using steam, cable, 
 or electricity as a motive power," or "while traveling in a public con- 
 veyance provided bv a common carrier." It is clear that, when the 
 insurance is only against injuries received while traveling in a specified 
 manner or in a specified vehicle, the insurer should not be liable for 
 such accidents as may happen to the insured while in other places 
 or vehicles than those mentioned. Thus, where a certain stock dealer 
 received a policy insuring him against injuries that might be receivea 
 while riding in the public conveyances of any common carrier, he was 
 not allowed to recover for an injury that he received by falling from 
 
 «« Gale V. Association, 66 Hun, 600, 21 N. Y. Supp. 893. 
 
 tt (^ C.) 23 red. 712, affirmed 131 U. S. 100, 9 Sup. Ct 755, 33 L. Ed. 60. 
 
ill 
 
 u 
 
 574 
 
 ACCIDENT INSURANCE. 
 
 (Ch. 16 
 
 Incidental Risks, 
 
 risS «'he t! « ""IP'r' *° ''"^'^ *^ '"^"^<=^ ««We for only such 
 
 onlv fV,r n^«.„ will consiaer that the insurer assumes the liability not 
 
 .„ th. V IT ^""^"J*' ^^^^ '"^y '^"^^ to the insured while he is 
 n the vehicle expressly described, but also for those other risks thl 
 
 nev whkh h^r ""'7^°, '' '"S'^"' *° *^ prosecution of "he joS 
 "hose rist f 1' undertaken. This rather subtle distinction between 
 those nsks impliedly assumed as incidental to those exoresslv dl 
 scnbed, and those others which are excluded by impHcation from tZ 
 express description, may be best illustrated by consTdeS Ae fa^t, nf 
 some leading cases In Northrup v. Railwa/Snger Astr Co " 
 ient'thXr™^'^ •:!*^'""'*y '" ^^« «f de^'h caused bjany «d- 
 cou se o Lt "^ •^.P"''"" °' P"^^*^ conveyances. DuriL the 
 
 the land2 J?™'^ l''''^'"' "^^^^^^^^ f°^ the insured to pass frS^^ 
 
 ^i ^^.p-^is^^^^ ctiin::: hf foi^ 
 
 P^r^'r™:' ?edtn?"^"^"*'r .^'^^ ThelSl^er'^Sd To 
 cXed wWle Sw h ^"""'^ .*^* *" «J"^ had not been re- 
 The New YoJL r™,^^,, T^T '""^ °^ conveyance, but while on foot, 
 th^ ;i^ . ''^'*^' however, that the insurer was liable since 
 
 ient Tth/'' ''T"*^ r*""^ ^°'"^ ^" ^<=* that was neces^ri'; inci 
 dent to the prosecuhon of the journey. This case goes to the e^tre,^ 
 
 liable, under a policy similar to that in the NoSrun Case for •"""•'' 
 
 f^mt '^ -^ '""^^ *"^^'^' *-- rob^rX'^hTwa; wis 
 from the railway station to his home, a distance of some^ShSs 
 
 .t declined to extend the doctrine of the Northruo Case%?!Sw !•' 
 reached the conclusion, that seems sufifcifrnj apparent hat h'eTn 
 in tS^^^cy^"^*"^ *"• "^' ^"'^ "''^ - -^ -* ^' veiiclt'sptifi:^- 
 
 thJ?!^"' •' j'^^f''^*" ?«W that a policy containing such provision as 
 tha now under discussion covered a fatal injury to the insured^!^X^^ 
 while attempting to board a train from UTch he ^ tel^J 
 
 *• Ripley V. Aflsurance Co., 16 Wall. (U. S.) 336, 21 L. id. 460. 
 
 §236) 
 
 EXCEPTED RISKS — IN GENERAL, 
 
 575 
 
 alighted, while the train was in motion.*^ But in another case, when 
 the insured left a train at a station from which he expected to con- 
 tinue his journey by a later train, but afterwards turned again to 
 speak to one of the trainmen about a matter not connected with the 
 journey, and was injured by falling from the car platform, it was 
 held that the insurer was not liable.*^ As far as that train was con- 
 cerned, the insured had discontinued his journey, and, when injured, 
 was not properly engaged in the prosecution of the journey. 
 
 In a recent California case it has been held that a passenger who 
 leaves the regular coach, and at the invitation of an officer of the rail- 
 way company rides in the engine, does not cease to be a passenger, 
 within the terms of an accident policy against travel risks.** 
 
 Double Indemnity for Travel Risks, 
 
 In some accident policies it is provided that a double indemnity 
 shall be paid for injuries received while traveling in specified convey- 
 ances. In determining when the insurer is liable for double indemnity, 
 the same rules of construction are to be applied as in the cases just 
 discussed above. Thus, it has been held that under such a policy the 
 insurer is not liable for double indemnity when the insured came to his 
 death by falling from the open platform of a railway car, the double 
 indemnity being promised only when the injury is received while rid- 
 ing "in" a public conveyance.** Again, a paymaster of a railway com- 
 pany, riding from station to station in the regular discharge of his 
 usual duties, was held not to be a passenger, within the meaning of 
 the double indemnity clause, nor was his pay car, although merely a 
 specially equipped coach, to be regarded as a passenger car, within 
 the terms of the clause in question.*' 
 
 EXCEPTED RISKS— IN GENEBAI^ 
 
 236. The terms of an aooident policy exceptins risks that wonld other- 
 wise be included will be construed in connection neith all the 
 terms of the instrument, so as to carry out, ^^herever possible, 
 the general purpose of the contract, ^^hich is to grant inden&- 
 nity for accidental injury. 
 
 As already stated above, modem accident policies are bound in nu- 
 merous conditions of exception, some of which are consistent with 
 
 *» Tooley v. Assurance Co., 3 Biss. (U. S.) 399, Fed. Cas. No. 14,098. 
 
 «s Hendrick v. Assurance Corp. (C. C.) 62 Fed. 893. In this case the insur- 
 ance was against injuries received **as a passenger in a public conveyance 
 provided by a common carrier." 
 
 «• Berliner v. Insurance Co., 121 Cal. 458, 53 Pac. 918, 66 Am. St Rep. 49. 
 
 **Van Bokkelen v. Insurance Co., 34 App. Div. 399, 54 N. Y. Supp. 307, 
 affirmed in 167 N. T. 590, 60 N. E. 1121. 
 
 «» Travelers' Ins. Co. T. Austin, 116 6a. 264, 42 S. E. 522, 59 L. B. A. 107, 
 94 Am. St Bep. 125. 
 
I 
 
 676 
 
 ACCIDENT INSURANCE. 
 
 (Ch. 16 
 
 Other terms of the policy and with the general purpose of the contract." 
 While the courts cannot make new contracts for the parties, they yet 
 go very far in construing away exceptions that would defeat the gen- 
 eral purpose of the contract to afford indemnity for accidental injury. 
 
 POISON, OR CONTACT WITH POISONOUS SUBSTANCES. 
 
 237. Exceptions in the policy of death or injury by taking poison or 
 by coming in contact with poisonous substances are generally 
 construed to refer only to intentional acts of taking poison or 
 coming in contact with it, unless the wording of the clause is 
 •uch as to make it perfectly clear that accidental poisoning is 
 intended to be included within the exceptions. 
 
 The clauses to be found in the different insurance policies which 
 are mtended to exempt the insurer from liability for injuries due to 
 the operation of poisonous substances differ very greatly in their word- 
 ing. Where it is provided that the insurer will not be liable for in- 
 junes due to "taking poison," the courts almost unanimously hold that 
 the msurer is still liable for the accidental taking of poison.*^ The 
 
 " The pervasive extent and complicated language of the list of exceptions 
 to be found in the ordinary accident policy may be illustrated from the fol- 
 lowing quotation from the policy in suit in TRAVBI.ERS' INS CO v Mo- 
 CONKEY 127 U. S. 661, 8 Sup. Ct. 1360, 32 L. Ed. 308: "Provided always, 
 ^, lit iiisurance shall not extend to hernia, nor to any bodily injury of 
 which there shall be no external and visible sign, nor to any bodily injury 
 happening directly or indirectly in consequence of disease, nor to any death 
 or disability which may have been caused wholly, In part, or jointly, by bod- 
 ily Infirmities or disease existing prior or subsequent to the date of this con- 
 tract, or by the taking of poison or contact with poisonous substances or 
 by any surgical operation or medical or mechanical treatment; nor to anv 
 case except where the injury is the proximate and sole cause of the disabil- 
 ity or death; and no claim shall be made under this policy when the death 
 or injury may have been caused by dueling, fighting, wrestling, lifting or bv 
 over exertion, or by suicide (felonious or otherwise, sane or insane) or bv 
 sunstroke, freezing, or Intentional injuries inflicted by the insured or anv 
 other person, or when the death or injury may have happened in consequence 
 of war, not, or invasion, or of riding or driving races, or of voluntary ex- 
 posure to unnecessary danger, hazard, or perilous adventure, or of violatin*' 
 the rules of any company or corporation, or when tiie death or injury mav 
 have happened while the insured was, or in consequence of his having been 
 under tiie influence of Intoxicating drinks, or while employed in minin- 
 blastmg, or wrecking, or in the manufacture, transportation, or use of gu^! 
 powder or other explosive substances (unless insured to cover such occupa- 
 tion), or while engaged in or in consequence of any unlawful act- and this 
 insurance shall not be held to extend to disappearances, nor to any case of 
 death or personal injury, unless the claimant under this policy shall estab- 
 lish by direct and positive proof that the said death or personal injurv wa« 
 caused by external violence and accidental means" 
 
 « TRAVELEBS' INS. CO. v. DUNLAP, 160 Ul. 642, 43 N. B. 765, 52 A-^ 
 
 § 237) POISON, OR CONTACT WITH POISONOUS SUBSTANCES. 577 
 
 principal object of the whole transaction being to insure against acci- 
 dental injury, the courts will not allow that purpose to be defeated in 
 any given case by an exception, unless the language of the exception 
 is so clear and certain as to imperatively demand such a result; that 
 is, if the parties intend to defeat the natural purpose of their con- 
 tract, they must express that intention in language wholly unambig- 
 uous. Thus, it has been held that where the insured drank carbolic 
 acid, supposing it to be peppermint, and died from the poisoning, the 
 insurer was liable, despite the presence of the clause exempting from 
 liability for injury by taking poison. The court thought that the or- 
 dinary meaning attached to the expression "take poison" was the inten- 
 tional taking of poison, and held that the parties must be deemed 
 to have used the terms adopted for the expression of their contract in 
 accordance with their popular meaning.*® 
 
 In order to avoid the narrow construction placed by the courts upon 
 the simple phrase "take poison," the accident insurers have added nu- 
 merous qualifying phrases in the hope of effectively accomplishing their 
 purpose; but even these qualifying phrases will not avail the insurer 
 in his effort to escape liability for accidental death from poison, if 
 there is an)' possible ambiguity in the language of the exception.*' 
 
 St. Rep. 355; Omberg v. Association, 101 Ky. 303, 40 S. W. 909, 72 Am. St 
 Rep. 413; Dezeil v. Fidelity & Casualty Co., 176 Mo. 253, 75 S. W. 1102. 
 
 But see, contra, Early v. Insurance Co., 113 Mich. 58, 71 N. W. 500, 67 
 Am St. Rep. 445; Pollock v. Association, 102 Pa. 230, 48 Am. Rep. 204. 
 
 48 TRAVELERS' INS. CO. v. DUNLAP, 160 111. 642, 43 N. E. 765, 52 Am. 
 St Rep. 365. 
 
 *» It wac held in DezeU v. Fidelity & Casualty Co., 176 Mo. 253, 75 S. W. 
 1102, that the insurer was liable for the death of the insured caused by an 
 overdose of morphine, taken to alleviate severe pain under the advice of a 
 physician, although the policy excepted injuries "resulting from poison or 
 anything accidentally or otherwise taken." The argument of the court is as 
 follows: "The policy Insured 'against bodily injuries sustained through ex- 
 ternal, violent, and accidental means.' The exception was: *This insurance 
 does not cover ♦ ♦ • injuries, fatal or otherwise, resulting from poison 
 or anytliing accidentally or otherwise taken, administered, absorbed, or in- 
 haled.* It will be observed that it is not limited to poison, but extends to 
 'anytliing,* and is not confined to poison or anything taken, but includes poi- 
 son or anything not only taken, but also such as may be administered, ab- 
 sorbed, or inhaled, and that it applies whether the same be accidentally or 
 intentionally done. Literally construed, it would cover everything known to 
 man that would injure or kill, whether taken by the assured himself or ad- 
 ministered to him by a physician, or whether absorbed or inhaled without 
 and in spite of himself, or with the aid of any one else, or as the result of 
 natural laws. It would also cut ofiC a recovery where the poison or anytliing 
 was taken or administered to save life, and was given for the best and most 
 scientific reasons, as fully and completely as if it was taken with suicidal 
 Intent If this was the true meaning and intent of the insured, it ought to 
 have been expressed in such unequivocal and plain words that there could 
 be no misunderstanding its meaning. Instead of emj^lojing the necatlTe 
 
57« 
 
 ACCIDENT INSURANCB. 
 
 (Ch. 16 
 
 Thus, it has been held that, where the policy provided that the insurer 
 should be exempt from liability for death by poison in any way taken, 
 the qualifying phrase "in any way taken" referred merely to the man- 
 ner of the taking of the poison, and not to the motive with which it is 
 taken, and therefore the insurer was held liable for accidental poison- 
 ing, despite his attempted exception.** When, however, the language 
 of the exception is such as to expressly include accidental poisoning, 
 the courts have no alternative but to excuse the insurer from pay- 
 ment ^ 
 
 It has been held that the inhaling of gas, causing the death of the 
 insured, is not taking poison.'* So, death caused by the poisonous sting 
 of an insect has been held not to be within the exception of injuries 
 caused by poison in any form or by contact with poisonous sub- 
 stances.''' In a recent Texas case the policy provided that "this in- 
 surance does not cover injuries, fatal or otherwise, resulting from poi- 
 son or anything accidentally or otherwise administered, absorbed, or 
 inhaled." The insured swallowed two unsound oysters, which caused 
 mflammation of the intestines, and death. The court held that the 
 swallowing of these oysters came within the terms of the exception as 
 quoted above.** 
 
 INHALING GAS. 
 
 238. Clauses In accident policies exempting the Insnrer front liability 
 for death by inhaling gas are generally oonstmed as referring 
 only to intentional acts of inhaling gas, and not to injuries 
 caused by accidental inhalation. 
 
 
 Exceptions in the policy of death by inhaling gas have given rise to 
 much difficulty in construction. On general principles it would seem 
 that the same rule should be applied to such exceptions as to the ex- 
 form of expression, and clothing the Intention In such general terms, It 
 should have been affirmatively stated that the policy meant that no recov- 
 ery could be had, unless the physical evidences of the cause of the injury 
 were apparent to the naked eye, and that the company would not pay for 
 any injury unless the gaping wound told its own tale. The better reason 
 supports the rule that such exceptions in such policies do not cover medicine 
 (even though it contain poison) or anything taken or administered in good 
 faith to alleviate physical pain, even though it result! In unexpected and un- 
 intentional death." 
 
 00 Metropolitan Ace. Ass'n y. Froiland, 161 111. 30, 43 N. B. 766, 52 Am. St 
 Rep. 359. 
 
 61 See Early v. Insurance Co., supra; McOlother ▼. Accident C3o., 89 Fed. 
 685, 60 U. S. App. 705, 32 C. O. A. 318. 
 
 62 United States Mut Ace. Ass'n v. Newman, 84 Va. 52, 3 S. B. 805. 
 
 »« Omberg v. Association, 101 Ky. 303, 40 S. W. 909, 72 Am. St Hep. 413. 
 »♦ Maryland Casualty Co. v. Hudgins (Tex. Civ. App.) 76 S. W. 746, 64 L. 
 R. A. 349, reversing same case in Court of Civil Appeals, 72 S. W. 1047. 
 
 §238) 
 
 INHALING GAS. 
 
 579 
 
 ception of death by poison, just considered. But the courts seem to 
 be more unwilling to gfive effect to the gas clause, and have held, in 
 practically all cases, that death due to purely accidental and uninten- 
 tional inhaling of poisonous gases is not within the exception, which, 
 It IS said, IS mtended to apply only to cases of suicide by inhaling gas, 
 or to cases where gas is intentionally inhaled, in surgical operations or 
 for other like purposes." A typical case presenting the difficulty of 
 giving a fair construction to the words of this exception is Pickett 
 V. Pacific Mut. Life Ins. Co." In this case the policy involved con- 
 tained the usual exception of "death or injury resulting from, or at- 
 tributable partially or wholly to, inhalation of gas." The insured 
 descended into a shallow well for the purpose of repairing a pump, and 
 was quickly asphyxiated by the gas that had, in some inexplicable 
 way, accumulated in the well. There was no reason to suspect the 
 presence of this deadly gas in the well, and the circumstances of the 
 death were unquestionably accidental, and by every consideration of 
 fairness should fall within the operation of an accident policy. On the 
 other hand, there could be no question but that the immediate cause of 
 the death of the insured was his breathing air charged with this deadly 
 gas, and that would seem to amount to "inhalation of gas," in the or- 
 dinary acceptance of that term. The court held, however, that in- 
 halation meant mtentional, and not accidental, inhalation, and held 
 the insuier liable. In the opinion, the following language of the 
 New York Court of Appeals " was approved : "In expressing its 
 intention not to be liable for death from 'inhaling of gas' the com- 
 pany can only be understood to mean a voluntary and intelligent act 
 ot the msured, and not an involuntary and unconscious act Read in 
 that sense and in the light of the context, these words must be inter- 
 preted as haying reference to medical or surgical treatment, in which, 
 ex VI termim, would be included the dentist's work or a suicidal pur- 
 I>ose. Of course, the deceased must have, in a certain sense, inhaled 
 gas; but in view of the finding that death was caused by accidental 
 nieans, the proper meaning of the words compels, as does the lo^c 
 of the thing, the conclusion that there was not that voluntary or con- 
 scious act necessarily involved in the process of inhaling. An acci- 
 clent IS the happening of an event without the aid and the desi^ of 
 the person, and which is unforeseen. * ♦ ♦ To inhale gas requires 
 an act of voFition on the person's part before the danger is incurred, 
 i^oison may be taken by mistake, or poisonous substances may be inad- 
 
 Am'lt Re^ J^™^"^ ^'' ^ ^' ^' 4^ 20 N. a 847. 8 U R. A. 443. 8 
 «e PICKETT v. PACIFIC MUT. LIFE INS. CO.. 144 Pa. 79, 22 Atl 871 
 « X^ ^' ^^ ^'^ ^™- S*- ^^P- ^IS* Woodruff, mi. Cas 290 
 foun?!Jl!?/T l^^J^ Insurance Co., supra, in which the insured 
 found dead in his bed, the room being fnU of escaped coal 
 
 • « 
 
 ii 
 
580 
 
 ACCIDENT INSURANCE. 
 
 (Ch. 16 
 
 il^ 
 
 vertently touched; but, whatever the motive of the insured, his act 
 precedes either fact. * * * If the policy had said that it was not 
 to extend to any death caused wholly or in part by gas, it would have 
 expressed precisely what the appellant now says is meant by the pres- 
 ent phrase, and there could have been no room for doubt or mistake." "• 
 The courts often go so far as to hold the insurer liable for the accidental 
 death of the insured by breathing gas, even when the policy excepts 
 death resulting from "anything accidentally or otherwise taken, ad- 
 ministered, absorbed, or inhaled," it being said that "accidental inhal- 
 ing" means merely accidentally drawing gas into the system by a con- 
 scious and voluntary act of inspiration. **• 
 
 BODII.Y INFIRMITIES OR DISEASE. 
 
 230* Temii ezcepting injuries sustained in consequence of any disease 
 or bodily infimiity are ordinarily construed to mean serious de- 
 rangements of tl&e bodily organs or functions, and not mere 
 temporary disorders. 
 
 As we have already seen, the insurer is liable, in the absence of ex- 
 ception, for the death of the insured by disease induced by an accident, 
 or for an accident that was due to a disease. In order to avoid such 
 liability, modern policies usually contain a provision that the company 
 will not be liable for injuries "resulting directly or indirectly, in whole 
 or in part, from any disease or bodily infirmity." 
 
 The terms "disease or bodily infirmity" are defined rather liberally 
 in favor of the insured. It is held that bodily infirmity means the state 
 of being physically infirm, as opposed to a mere temporary condition 
 of weakness due to hunger or other passing cause.'** So, disease means 
 some functional defect in the vital organs, of a serious and more or 
 less lasting character. Thus, it has been held that, where a mere tem- 
 porary fit of weakness contributed to the accident suffered, the insurer 
 was liable despite the presence of this exempting clause.'^ 
 
 But it seems that this exception does away with the operation of the 
 lule of proximate cause heretofore considered, and exempts the in- 
 
 »» But see, contra to the reasoning of these cases, Richardson v. Insurance 
 Co. (C. 0.) 46 Fed. 843. 
 
 B» Fidelity & Casualty Co. of New York v. Waterman, 161 111. 632, 44 N. 
 B. 283, 32 L. R. A. 654. See, also, Menneily v. Assurance Corp., 148 N. Y. 
 596, 43 N. E. 54, 31 L. R. A. 686, 51 Am. St Rep. 716. 
 
 •0 See Meyer v. Fidelity & Casualty Co., 96 Iowa, 378, 65 N. W. 828, 59 Am. 
 kjt Rep. 374. 
 
 •1 Manufacturers* Accident Indemnity Co. t. Dorgan, 58 Fed. 945, 16 U. 
 S. App. 290, 7 C. a A. 581, 22 L. R. A- 620. But prostration by heat Is a 
 disease. Dozler y. Fidelity & Casualty Co. of New York (C. C.) 46 Fed. 446. 
 But insanity is not a bodily disease. ACCIDENT INS. CO. y. CRANDAU 
 120 U. B. 527, 7 Sup. Ct 685, 30 L. Bid. 740. 
 
 § 240) VOLUNTARY AND UNNECESSARY EXPOSURE TO INJURY. 581 
 
 surer in case a real disease contributes directly or indirectly to the ac- 
 cident. Thus, in a recent Missouri case •* it was proved that the in- 
 sured was delirious from an attack of grippe at the time he jumped from 
 a hospital window and received the injury for which he brought suit 
 The court held that, even though it might be true that the accidental 
 jump from the window was the proximate cause of the injury, the in- 
 jury was yet at least indirectly due to the delirium of the disease, and 
 therefore the insurer was held not liable. 
 
 VOIiUNTART AKD UNNECESSARY EXFOSUIIE TO IN JUBT. 
 
 240. The exception of injnries due to volnx&tary and nnnecessary ez» 
 posure by the insured nierely abrogates the rule that the in- 
 surer is liable for the consequences of the nesligenoe of the 
 insured, so far as they fall within the terms of his policy. This 
 term merely requires the insured to exercise reasonable dili- 
 genco in avoiding injury. 
 
 It is a familiar principle that the insurer assumes the risk of the in- 
 sured's negligence, provided there be no bad faith on the part of the 
 latter. Accident insurers, however, have essayed to change this rule, 
 and to import into the insurance contract the doctrine of contributory 
 negligence, by inserting a provision excepting themselves from liability 
 for "injury or death caused by the voluntary exposure of the insured 
 to nnnecessary danger," or other words of similar effect. This excep- 
 tion merely imposes upon the insured the duty of exercising ordinary 
 care in order to avoid sustaining any sort of injury. He is not re- 
 quired to exercise any unusual degree of care. As is well said by the 
 Nebraska court,* ^ in a case in which the proprietor of a pleasure resort 
 injured himself by attempting to raise a very heavy dumbbell, in order 
 to discover whether one of his performers was telling the truth as to 
 its weight: "Accident insurance is not designed to furnish indem- 
 nity only in cases where the policy holder orders his conduct with 
 grave circumspection and a provident foresight of consequences. Mere 
 contributory negligence is no answer to an action on a contract of in- 
 surance. Neither is there any absolute inference that the lifting was 
 unnecessary. According to the plaintiff's testimony, the act was the 
 product of a reasonable motive, and was performed in the line of duty." 
 
 In order to come within the terms of this exception, the exposure 
 must be not only voluntary — ^that is, intentional — but also must be 
 unnecessary. Thus, the man who is injured in a fight which he could 
 not avoid,'* or a painter who is injured by a fall from the side of a 
 
 •» Carr t. Insurance Co., 100 Mo. App. 602, 76 S. W. 180. 
 «» RUSTIN v. INSURANCE CO., 58 Neb. 792, 79 N. W. 712, 46 L. B. A. 
 253, 76 Am. St. Rep. 136, Woodruff, Ins. Cas. 294. 
 •* OoUins v. Fidelity & Casualty Co., 63 Mo. App. 258i 
 

 ri 
 
 iB 
 
 I 
 
 582 
 
 ACCIDENT INSURANCE. 
 
 (Ch. IG 
 
 house that he was painting,*' while incurring voluntary danger, is yet 
 entitled to recover, since the exposure was necessary. 
 
 While, to come within the language of this exception, it is neces- 
 sary that the exposure shall be voluntary, an actual appreciation of the 
 danger is not always necessary, provided the circumstances are such 
 that a reasonable man would be aware of the danger. Thus, the act 
 of walking along a railway track, even though the track was used as 
 a passway, is a voluntary exposure to danger. •• So is an attempt to 
 cross a track before a rapidly approaching train ; '^ but not the act of 
 carefully crossing a railway track or a thoroughfare.*® So, attempting 
 to walk across a railway trestle on a dark night is within this excep- 
 tion ; •• but the act of the insured in stepping upon the floor of the 
 bridge, which he had reason to think was safe, is not, although the 
 insured fell through a hole in the bridge to his death beneath.''® Stand- 
 ing on the open platform of a moving railway car is voluntary ex- 
 posure to danger,^* but passing from one car to another in a vestibule 
 train is not.^* 
 
 INTENTIONAI. INJURY BY ANOTHIHEt. 
 
 241. The terms excepting from the operation of tlie policy injuries 
 intentionally inflicted by another are valid, bnt they 'will ex- 
 empt the insnrer only -when the injury is not more extensive 
 than the intent ivith ivhich it "was inflicted. 
 
 Injuries intentionally inflicted upon the body of the insured, either by 
 his own hand while insane, or by that of another,'* are deemed ac- 
 cidental, and chargeable to the insurer, unless excepted from the risks 
 assumed, as is usually the case in the modern policy. The language of 
 the exception is "injuries or death resulting from intentional injuries 
 inflicted by the insured or another person." 
 
 In order that an injury shall come within this exception it is not 
 
 •• Matthes v. Association, 110 Iowa, 222, 81 N. W. 484. 
 
 •• Lovell V. Insurance Co. (Q. B. 1874) 3 Ins. Law J. 877. 
 
 •7 Cornish v. Insurance Co., 23 Q. B. Div. 453. 
 
 •8 Payne r. Association, 119 Iowa, 342, 93 N. W. 361. 
 
 «» Follis V. Association, 94 Iowa, 435, 62 N. W. 807, 28 L. R. A. 78, 58 Am. 
 St. Rep. 408. See, also. Travelers' Ins. Co. t. Jones, 80 Ga. 541, 7 S. B. 83, 
 12 Am. St. Rep. 270. 
 
 70 BURKHARD v. INSURANCE CO., 102 Pa. 262, 48 Am. Rep. 205. 
 
 Ti Travelers' Ins. Co. v. Randolph, 78 Fed. 754, 24 C. C. A. 305; Travelera' 
 Ins. Co. V. Austin, 116 Ga. 264, 42 S. E. 522, 59 L. B. A, 107, 94 Am. St Rep. 
 125. 
 
 T 2 Robinson v. Society (Mich.) 94 N. W. 211. 
 
 T8 When the peraon inflicting the injury Is insane or so grossly Intoxicated 
 as not to be capable of forming an intention, tlie injury does not fall with- 
 in this exception, and the insurer is liable. Northwestern Bene v. Soc. ▼. 
 Dudley, 27 Ind. App. 327, 61 N. E. 207. 
 
 OCCUPATION AND EMPLOYMENT. 
 
 583 
 
 § 242) 
 
 necessary that it shall be inflicted with the consent of the insured ; the 
 intent of the other party to inflict the injury is sufficient. But the in- 
 jury received must have been one that the other party intended to in- 
 flict,^* or otherwise it would be accidental. For instance, if A. should 
 shoot at B. and kill C, he would, in a criminal trial, be presumed to 
 have intended to murder C, but the injury to C. would not be "inten- 
 tionally inflicted," under the terms of an accident policy." So, it has 
 been held that, where the insured was shot by a robber, the insurer was 
 held liable despite the presence of this clause, as there was no evidence 
 that the robber intended to kill the insured.^* 
 
 OCCUPATION AND EMPLOYMENT. 
 
 242. An accident policy issued to the insured as beingr engaged Im a 
 specified occupation or employuLent does not cover injuries 
 suffered by Mm -wliile engaged in son&e other vocation, but it 
 does cover such injuries as may be inflicted upon the insured 
 while engaged in doing other incidental acts not in the line of 
 the occupation specified* 
 
 Some accident policies grant insurance only against the risks of a 
 certain specified occupation, while in other cases the insurance com- 
 pany may have classified the various occupations as more or less haz- 
 ardous, and apportioned the amount of the indemnity to be paid in 
 case of accident in accordance with this classification. In such cases 
 it is usually provided that, when the insured is injured in an occupa- 
 tion classed as more hazardous than that in which he is insured, either 
 there shall be no indemnity paid at all, or only the amount which is 
 apportioned to the occupation in which the insured was engaged when 
 he received the injury. 
 
 It is held by the authorities that the fact that the insured has had 
 issued to him a policy describing him as engaged in a specified occupa- 
 tion, and denying any liability on the part of the insurer for injuries 
 suffered while otherwise occupied, does not prevent the insured from 
 being protected while doing those other acts, whether of business or 
 pleasure, which are ordinarily incidental to one's existence in a civil- 
 ized community. Thus, where the plaintiff was insured as a banker, he 
 was allowed to recover for the loss of a hand suffered while trying to 
 saw some boards which he intended to use in making a cabinet. ''^ So, 
 
 T4 Richards v. Insurance CJo., 89 Oal. 170, 26 Pac. 762, 23 Am. St. Rep. 455; 
 Railway Officials' & Employes' Ace. Ass'n v. Drummond, 56 Neb. 235, 76 N. 
 W. 562. 
 
 »» Richards v. Insurance Co., supra. 
 
 7 6 Railway Officials' & ESmployfis' Ace. Ass'n v. Drummond, 56 Neb. 
 76 N. W. 562. 
 
 " Hess V. Association, 112 Mich. 196, 70 N. W. 460, 40 L. R. A. 444. 
 
 I • 
 
I "1 
 
 
 ir 
 
 5S4 
 
 ACCIDENT INSUKANCB. 
 
 (Ch. IG 
 
 another person who was insured as a teacher was allowed to recover 
 when he was killed by falling from a barn which he was having built.^* 
 So, where a barber was out hunting and received an injury, he was not 
 considered to have been hurt while engaged in the occupation of hun- 
 ter J » The same rule has been applied in the case of similar injuries 
 received by persons insured as grocer «<* and bookkeeper.*^ In another 
 case it was held, however, that where a man, who had obtained insur- 
 ance as a "retired gentleman," was injured while operating a buzzsaw 
 merely for the fun of it, he was not entitled to charge the consequences 
 of his fun to the insurance company.®* 
 
 More Hazardous Employments, 
 
 The same principles, in effect, apply to those cases in which a less 
 amount of indemnity is paid for an injury received while engaged in 
 an employment classified as more hazardous than that in which the 
 plaintiff was insured. In order that the payment may be reduced to 
 that apportioned to the more hazardous occupation, it must be proved 
 that the insured had engaged in that occupation as his regular voca- 
 tion. The mere fact that he may have done some acts which are or- 
 dinarily done by persons of a certain vocation does not necessarily put 
 him in that class. Thus, a person insured as a farmer, when injured 
 while driving piles for a private bridge that he was building on his 
 farm, was held not to be engaged in the occupation of a pile driver, and 
 therefore not subject to have his indemnity cut down to the amount 
 apportioned to the more hazardous occupation of pile driving.** But 
 where a person insured as "importer and dealer in Chinese merchan- 
 dise and contractor for Chinese labor," was injured while acting as 
 foreman of a gang of Chinese laborers, it was held that the company 
 was liable to pay only in accordance with the rating of the more hazard- 
 ous employment of foreman, despite the fact that the agent of the in- 
 surer knew at the time of the issue of the policy that the insured was 
 accustomed occasionally to act as such foreman.** So, where a per- 
 son insured in the class of blacksmiths was killed while he was acting 
 as a car coupler, an occupation more hazardous than that of black- 
 
 Ti STONE'S ADM'RS v. CASUALTY CO., 34 N. J. Law, 371. 
 
 79 Wildey Casualty Co. v. Sheppard, 61 Kan. 351, 59 Pac. 651, 47 L. R. A. 
 650. 
 
 80 Kentucky Life & Accident Ins. Co. v. Franklin, 102 Ky. 512, 43 S. W. 
 709. 
 
 81 Holiday t. Association, 103 Iowa, 178, 72 N. W. 448, 64 Am. St Rep. 
 170. So of an insured merchant, injured while hunting. Union Mut Ace. 
 Ass'n V. Frohard, 134 111. 228, 25 N. E. 642, 10 L. R. A. 383, 23 Am. St Rep. 
 664. 
 
 82 Knapp y. Association, 53 Hun, 84, 6 N. Y. Supp. 57. 
 88 National Ace. Soc. v. Taylor, 42 111. App. 97. 
 
 84 Employers' Liability Assurance Corp. t. Back, 102 Fed. 229, 42 a 0. A. 
 286. 
 
 §243) 
 
 INJURIES RECEIVED WHILE INTOXICATED. 
 
 585 
 
 smith, the liability of the insurer was reduced to that payable to car 
 couplers.*^ In another case, where the insured was injured when 
 riding home on his bicycle from a friend's funeral, taking a more cir- 
 cuitous route than was necessary, it was held that, as the indirect 
 route was taken for recreation, he was entitled only to the indemnity 
 payable to the class to which amateur bicyclists belong. ®® As a general 
 rule, it is for the jury to determine whether the acts done by the in- 
 sured, in any case, constitute engaging in the occupation in which these 
 acts are usually done, or whether the acts are incidental and occa- 
 sional." 
 
 A classification once made by the agent of the insurer, there being 
 no circumstances of fraud on the part of the insured, is binding upon 
 the insurer, though the classification may have been wrong on account 
 of an error of the agent. Thus, a cattle dealer, who was accustomed 
 occasionally to accompany his cattle when shipped by railway, was in- 
 sured as belc«iging to the class of cattlemen not accompanying ship- 
 ments, which occupation was regarded as less hazardous than that of an- 
 other class designated as "cattle dealers accompanying shipments." 
 The facts being fully stated to the agent, he classified the insured in the 
 less hazardous class. The insured being subsequently injured while at- 
 tending to some cattle that were being shipped, it was held that the 
 company was Kable to pay the sum due to the less hazardous class, it 
 being bound by the mistaken classification of its agent*' 
 
 INJUltlES RECEIVED WHILE INTOXICATED. 
 
 243. Accident policies usnally except injnries received by tlie insnred 
 isrhile nnder the influence of intoxicants. This exception ex- 
 empts the insnrer from liability for any injury that may bs 
 sustained by the insured when in a condition of inteidcation, 
 'orhether his intoxication contributed to the injury or not. 
 
 As we have heretofore seen, there is some difference of opinion as to 
 what constitutes "intemperance," within the meaning of the usual war- 
 ranty of temperance in the life policy. There is likewise some diffi- 
 culty in deciding when the insured is to be considered "under the in- 
 fluence of intoxicating drinks," *® within the terms of the exception 
 
 
 «6 Standard Life & Accident Ins. Co. r. Taylor, 12 Tex. Civ. App. 386, 34 
 S. W. 781. 
 
 8« Eaton V. Insurance Co^ 89 Me. 570, 36 Atl. 1048. 
 
 87 Eggenberger v. Association (C. C.) 41 Fed. 172; Tucker v. Insurance 
 Co., 50 Hun, 50, 4 N. Y. Supp. 505. 
 
 8« Pacific Mut Life Ins. Co. v. Snowden, 12 U. S. App. 704, 58 Fed. 342, 7 
 C. C. A. 264. Compare Employers' Liability Assur. Corp. v. Back, 102 Fed. 
 229, 42 C. C. A. 286. 
 . •» It is well settled that the phrase *'under the influence of intoxi<sating 
 
586 
 
 ACCIDBNT INSURANCB. 
 
 v: 
 
 I' * 
 
 I 
 
 (Ch. 16 
 
 ordinarily inccwporated in every accident policy. Courts have always 
 found difficulty in deciding when a man is to be considered drunk, but 
 for the purpose of the insurance polky it is considered that the insured 
 is under the influence of intoxicating liquor when he has so far in- 
 dulged himself as to render himself incapable of that deliberate ex- 
 ercise of all of his faculties, for the purpose of protecting himself from 
 injury, upon which the insurer reasonably relies. •• 
 
 In a leading case** the insured partook too freely of intoxicants 
 during the course of a dinner with a convivial friend. The ccxiver- 
 sation chanced to turn upon shooting, whereupon the friend offered 
 to make good his boast of skill in shooting, by shooting the ear of 
 the insured without hitting him otherwise. The insured, while not 
 too drunk to stand erect, was not sober enough to decline the propo- 
 sition. His friend's skill had evidently forsaken him in the midst 
 of his cups, for the result of the trial was that the bullet, instead of 
 piercing the ear of the insured, struck him fairly in the forehead, 
 killing him instantly. The New York court held very reasonably that 
 the insured was brought to his death while intoxicated, and therefore 
 that there could be no recovery under the policy. 
 
 It is not necessary, however, that the intoxication of the insured shall 
 in any wise have contributed to his injury. If he was intoxicated at 
 the time of receiving the injury, he loses his right to claim indemnity 
 from the insurer, even though there was no causal relation between 
 the intoxication and the injury.** 
 
 I 
 
 MABTT . T TY OF THE INSURER— TOTAI. DISABHiITT. 
 
 244. The liability of the insurer is fixed exclusively by the terms •£ 
 tbe policy. Total disability, upon which certain payments are 
 usually conditioned, exists, as a general rule, when the injury 
 is such as to prevent the insurer from engagring; in his cus- 
 tomary occupation. This rule, however, may be varied by the 
 terms of the contract. 
 
 drinks,** as used in accident policies, has the legal significance of •'drank" or 
 •'intoxicated." Standard Life & Accident Ins. Co. v. Jones, 94 Ala. 434, 10 
 South. 530. 
 
 00 SHADER V. ASSURANCE CO., 66 N. Y. 441, 23 Am. Rep. 65, affirming 
 3 Hun (N. Y.) 424, 5 Big. Ins. Cas. 331. In this case the court thus expresses 
 the reason of this provision: "Accidental policies are issued principally to 
 travelers or persons exposed to unusual peril and danger, and, the risk in 
 such cases being extremely hazardous, it is by no means unreasonable that 
 the insurer should require that the insured should be under no exciting in- 
 fluence which may affect his self-possession or judgment, or seriously inter- 
 fere with the free, full, and deliberate exercise of bis faculties in protecting 
 himself from accident or harm.** 
 
 •1 SHADER v. ASSURANCE CO., supra. 
 
 •2 See SHADER v. ASSURANCE CO., supra; Standard Life & Aoddent 
 Ins. Go. y. Jones, 94 Ala. 434, 10 South. 920, 
 
 §244) 
 
 LIABILITY OF THE INSURER — TOTAL DISABILITY. 
 
 587 
 
 Loss of a Member, 
 
 Granting that the policy is once validly issued, the measure of the 
 insurer's liability depends solely upon its terms, no embarrassing ques- 
 tions of indemnity being allowed to arise.*' The extent of the in- 
 surer's liability for any one of the innumerable injuries which a mortal 
 may sustain varies almost infinitely with the character of the injury 
 under the terms of the policy. Therefore, any general discussion of 
 the liability of the instu*er will, for the most part, be useless, just as 
 a particular discussion of individual cases would be at once tedious 
 and profitless. Two general cases, however, may be properly noted. 
 Where the insurer agrees to pay a certain sum in case of the loss of 
 a member, or of members, as of "one entire hand," or "sight in both 
 eyes," etc., it is not necessary, in order that the member shall be lost, 
 within the meaning of this phrase, that it shall be severed or separated 
 from the body. If it is so injured as to be practically useless to the 
 insured, it is to be deemed entirely lost. Thus, where a man received 
 an accidental gunshot wound in the spine, causing paralysis (A the lower 
 limbs, it was held that he suffered an entire loss of both his legs.** 
 Again where a one-eyed man had that eye knocked out, he was held 
 to have lost the sight of both eyes, witiiin the terms of his policy.* • 
 
 Total Disabiiky, 
 
 Much litigation has arisen in determining when the insured shall 
 be deemed to have been "totally disabled," within the terms of the usual 
 accident policy. Of coarse, there may be qualif3ring phrases coupled 
 with the one in question, which wifl more or less cleariy indicate its 
 definition in particular cases. For instance, where it is stipulated that, 
 in order to recover, the insured shall be disabled from carrying on "all 
 kinds of business," *• or that the injury shall cause a "total inability 
 to labor," '^ in such cases the limiting adjuncts should receive a rea- 
 sonable construction. 
 
 But where the provision is for a certain payment in case of mere 
 
 '\ 
 
 •3 Of course, the policy may stipulate for liability measured by actual loss 
 to the insured, as where "the money value" of the insured's time loss was 
 fixed as the limit of his recovery. Bean v. Insurance Co.. 94 Cal. 581, 29 
 Pac. 1113. 
 
 »* Sheamon v. Insurance Co., 77 Wis. 618, 46 N. W. 799, 9 L. B. A. 685, 20 
 Am. St. Rep. 151. 
 
 95 Humphreys v. Association, 139 Pa. 214, 20 Atl. 1047, 11 L. R. A. 564. 
 
 »• Lyon v. Assurance Co., 46 Iowa, 631. For an interesting case in which 
 an attempted restriction of this kind was turned against the insurer in a 
 most surprising fashion, see YOUNG v. INSURANCE CO., 80 Me. 244, 13 
 Atl. 896. 
 
 »T Total inability to labor does not exist so long as the injured person is 
 capable of doing any labor whatever by which he could earn a livelihood. 
 Baltimore & Ohio Employes' Relief Ass'n v. Po«t, 122 Pa. 579, 15 AtL 885 
 2 L. R. A. 44, 9 Am. St Rep. 147. 
 
 ft 
 
H 
 
 I 
 
 ' i 
 
 I: 
 
 5S8 
 
 ACCIDENT INSURANCB. 
 
 (Ch. 16 
 
 total disability, or total disability to engage in his usual occupation, it 
 IS generally held that such total disability exists when the insured is 
 so injured as to be incapable of safely and efficiently engaging in his 
 usual employment It necessarily follows, therefore, that the extent 
 of the injury necessary to cause total disability will vary greatly with 
 the character of the employment. Thus, where an active solicitor was 
 so injured as to be confined to his room, so that he was unable per- 
 sonally to attend to the business of his clients, he was held to be to- 
 tally disabled, although he was able to conduct his correspondence and 
 to direct his clerks." So, a surgeon would be totally disabled by the 
 loss of an arm, since it would be practically impossible for him to per- 
 form surgical operations without the use of both ; but a druggist, hav- 
 ing lost one arm, could carry on his business very well with the other, 
 and therefore was not totally disabled.** 
 
 In order to be totally disabled it is not necessary that the insured 
 should be wholly incapable of doing any acts at all in furtherance of 
 his business interests. He might be capable of doing single, incon- 
 siderable acts in connection with his business, and yet be wholly unable 
 to conduct it efficiently.!'* So, the insured will be held to be totally 
 disabled if considerations of prudence would require him to refrain 
 from carrying on his business, even though he might be physically ca- 
 pable of conducting it, though at the risk of his health.^** 
 
 KIGHT TO AN AUTOPST. 
 
 245. The Tight reserved in accident policies to the insurer to demand 
 an autopsy in case of alleged accidental death is not absolute, 
 but one to be exercised reasonably, with due consideration to 
 all the circumstances of the case. 
 
 In order to avoid fraudulent claims, most accident policies contain 
 a stipulation that, upon demand by the insurer, the body of the insured 
 shall be subject to examination by the medical examiner of the in- 
 surer, and that, if demand is made, the insurer shall be permitted to 
 hold an autopsy upon the body of the deceased insured. Such a pro- 
 vision is reasonable, and well calculated for the proper protection of 
 the insurer. It will, therefore, be enforced, provided it is claimed 
 
 »« Hooper ▼. Insurance Co., 5 H. A N. 546, 7 Jur. (N. S.) 73. But an attor- 
 ney is not totally disabled by losing the use of one hand. United Statea 
 Mut Ace. Ass'n v. Biillard, 43 111. App. 148. 
 
 •» Smith V. Supreme Lod^e, 62 Kan. 75, 61 Pac. 416. 
 
 100 Turner v. Fidelity & Casualty Co.. 112 Mich. 425, 70 N. W. 898 38 L. 
 R. A. 529, 67 Am. St Rep. 428; Lobdill t. Association. 69 Minn 14* 71 N 
 W. 696, 38 U R. A. 537, 65 Am. St Rep. 5^. * ' 
 
 101 YOUNG V. INSURANCE CO., 80 Me. 244, 13 Atl. 896; Lobdill t. Asso- 
 ciation, 69 Minn. 14. 71 N. W. 696. 38 L. R. A. 537. 65 Am. St Rep 542. 
 
 .:i 245) 
 
 EIGHT TO AN AUTOPSY. 
 
 589 
 
 under reasonable circumstances.*®* The insurer, if desiring an autopsy, 
 must make his demand within a reasonable time, and of the proper 
 ijcrson. As a general thing, if he delays making such a demand until 
 after the burial of the corpse, he will be deemed to have forfeited his 
 right.*®* Reasons, both of sentiment and public policy, would prohibit 
 the insurer from making a tardy demand for an autopsy that could 
 be complied with only by exhuming the buried body. If, however, 
 circumstances awakening suspicion of fraud come to the knowledge 
 of the insurer only after interment has taken place, it seems that he 
 may insist upon the exhuming and dissection of the body, especially if 
 the collateral proof of fraud is strong.*®* 
 
 !•« See Tompkins ▼. Insurance CJo., 53 W. Va. 479, 44 S. E. 439, 62 L. R. 
 A. 489. 
 
 108 American Employers' Liability Ins. Co. v. Barr, 32 U. S. App. 444, 68 
 Fed. 873, 16 C. C. A. 51. In this case the demand was made several weeks 
 after burial, and of the widow of the deceased, rather than of the beneficiary. 
 Bwing V. Association, 55 App. Div. 241, 66 N. Y. Supp. 1066; Wehle T. As- 
 sociation, 153 N. Y. 116, 47 N. B. 35, 60 Am, St Rep. 598. 
 
 104 Wehle y. ABiodation, supra. 
 
 f' 
 
590 
 
 
 ti 
 
 ■J" 
 
 aUARANTY, CREDIT, AND LIABILITY INSURANCE. (Ch. IT 
 
 CHAPTER XVn. 
 
 OUARANTT. CREDIT, AND LIABILITY INSURANOm 
 
 24a 
 247-248. 
 249-250. 
 
 251. 
 262-253. 
 
 254. 
 
 In General. 
 
 Fidelity and Guaranty Insurance. 
 
 Liability of the Guaranty Insurer. 
 
 Credit Insurance. 
 
 Employers' Liability Insurance. 
 
 Rights of the Injured Person in the Insurance Fund. 
 
 ZN OENEBAIc 
 
 246. The Tighu of the parties to oontracti for the speolal Unds of 
 insurance recently developed are to be determined in accord- 
 ance with the terms of each contract, constmed in the Ught of 
 the purpose for which it was made, and according to the gen- 
 oral rules of insurance law. 
 
 Reference has already been made, in considering the development of 
 the practice of insurance, to the remarkably rapid extension within 
 recent times of the principles of insurance to almost every important 
 commercial or industrial enterprise the conduct of which necessarily 
 subjects those concerned in it to risk of loss from fortuitous causes. 
 Thus special contracts are now made insuring against loss by lightning 
 hail, floods, tornado or other windstorm, or by failure of crops. 
 Many of these special insurances have assumed sufficient importance 
 to have received special names that are fast becoming familiar not 
 only to the lawyer, but to the general public as well. Live stock in- 
 surance protects the owners of live stock against damage or loss by 
 lightning or disease; boiler insurance, against the injurious conse- 
 quences of boiler explosions ; title insurance, against defects in or fail- 
 ure of title to real estate ; ' rent insurance, against loss by reason of 
 the failure of tenants to pay rent ; burglar insurance, against loss by 
 burglary ; and plate-glass insurance against all the evils that may be- 
 fall that fragile but costly kind of property. Probably the latest of 
 these special forms of insurance is strike insurance, devised for the 
 
 » Title insurance: The business of insuring titles of real estate to purchas- 
 ers or mortgagees has become very extensive, every considerable city having 
 ''^L^LT''^ .^'^^^ companies, which unite the business of examining tities 
 with that of Insuring them. The thoroughness that characterizes the work of 
 these companies is attested by the remarkably small number of cases involv- 
 ing title insurance that are to be found in our reports. The usual terms and 
 general scope of title Inaurance contracts may be seen in the following cases • 
 Place V. Trust Co 67 Minn. 126, 69 N. W. 70C, 64 Am. St Rep. 404 ; Stensgaard 
 
 §246) 
 
 IN GENEBAL. 
 
 591 
 
 purpose of protecting employers of labor from losses that may be 
 caused by strikes among their employes. 
 
 But the special insurances which are most important and popular, 
 as answering a more generally recognized need, are fidelity and guar- 
 anty insurance, intended to protect employers against the consequences 
 of the dishonesty of employes; liability insurance, against liabilit>' 
 incurred by masters or passenger carriers on account of personal in- 
 juries suffered by servants or passengers ; and credit insurance, against 
 loss to merchants from bad debts. Only these three forms last men- 
 tioned are of sufficient importance at the present time to justify special 
 treatment in such a work as this. The oldest and most important kind 
 of special insurance, accident insurance, has already been separately 
 treated. 
 
 General Principles of Construction. 
 
 Contracts for these kinds of insurance often assume forms very dif- 
 ferent from that of the conventional insurance policy, and bear names 
 suggestive of other commercial contracts. Thus a contract of fidelity 
 or guaranty insurance may be set forth in an instrument bearing the 
 form of an ordinary official bond, while another writing purporting 
 to be a contract of conditional sale may prove to be a contract of 
 credit * insurance or of crop * insurance. But whatever be the outer 
 form of such contracts, the courts always look to their inner na- 
 ture, and if they are found in reality to be agreements "by which 
 one party for a consideration promises to pay money or its equiv- 
 alent, or to do some act of value to the assured, upon the destruc- 
 tion or injury of something in which the other party has an interest," * 
 they are declared to be contracts of insurance, and subject in their 
 making to all the laws regulating insurance. Thus in a lecent Massa- 
 chusetts case a contract whereby one party agreed to purchase at a 
 fixed price all the accounts which the other should have, during a 
 designated period, against certain defined insolvent debtors, or judg- 
 
 » 
 
 2 Claflln V. Credit System Co., 165 Mass. 501, 43 N. B. 293, 52 Am. St Rep. 
 528; Shakman v. Credit System Co., 92 Wis. 366, 66 N. W. 528, 32 L. R. A. 
 383, 53 Am. St Rep. 920; Robertson v. Credit System Co., 57 N. J. Law. 12. 
 29 Atl. 421. 
 
 8 See State y. Hogan, 8 N. D. 301, 78 N. W. 1051, 45 L. R. A. 166, 73 Am. 
 St Rep. 759. In this case it was held that a contract whereby a farmer, by 
 the payment of a certain sum, purchased an option to sell the produce of cer- 
 tain described farm lands at $5 an acre, was one of guaranty insurance, and 
 that the corporation engaged in making such contracts should comply with 
 all the requirements of the state insurance laws. 
 
 * This definition of a contract of insurance, first given In COMMONWEALTH 
 V. WETHERBEE, 105 Mass. 149, 160, was adopted by the Massachusetts In- 
 surance act of 1887 (St 1887, c 214^ i 3). And see Claflin y. Credit System Co.. 
 •supra. 
 
 I « 
 
592 GUARANTY, CREDIT, AND LIABILITY INSURANCE. (Ch. 17 
 
 1 
 
 ment debtors, against whom execution should have been returned un- 
 satisfied, was held to be an insurance contract.* 
 
 Being thus insurance contracts, these agreements are subject to 
 the same general rules of law that have already been discussed as 
 applicable to fire, marine, and life insurance, although there are to be 
 found in the cases occasional intimations that the courts will be loath 
 to apply to these new kinds of insurance the arbitrary technical rules 
 that have so often operated to embarrass the courts and to defeat just 
 claims under policies of insurance of the older kinds.^ 
 
 Contracts Construed in Favor of Insured. 
 
 Probably the most important general rule guiding the courts in the 
 construction of insurance policies is that all doubt or uncertainty as 
 to the meaning of the contract shall be resolved in favor of the insured. 
 This rule, it is well settled, applies in full force to these contracts of 
 special insurance,^ which, unfortunately for both insurer and insured, 
 are often filled with numerous conditions, the legal significance 
 and economic purpose of which are alike uncertain, as was the case 
 with life policies a quarter of a century ago. Such a contract was 
 thus commented on by the North Carolina Supreme Court in a recent 
 case: « "One of these conditions is as follows: 'And, lastly, should 
 the employe become a defaulter and seek refuge in any foreign coun- 
 try, he hereby agrees to the enforcement against him of the laws of 
 such country, as they are now or may be hereafter enacted, relative to 
 the commission of injuries or offenses against an employer resident in 
 
 8 Claflln V. Credit System Co.. 165 Mass. 501, 43 N. B. 293, 52 Am. St Rep. 
 528. The same contract was similarly construed in the other cases cited in 
 note 1, supra. 
 
 • Thus, in Guarantee Co. of North America v. Trust Co., 80 Fed. 766, 26 
 C. C. A. 146, it is said : "Marine, fire, or life insurance against the destrurtive 
 forces of nature is not quite the same thing as an insurance against the dangers 
 of dishonesty ; and the courts must interpret the contracts in view of this dif- 
 ference, applying the words used to the purpose of covering the peculiarities 
 of the risk assumed on the one hand, and on the other intended to be dis- 
 carded or shifted to others. And if these new contracts, whatever their form 
 are to be turned into contracts of insurance, the courts will be careful not to 
 again perplex themselves with regrettable technicalities of law, such as have 
 sometimes crept into the older contracts of insurance, and have reaulped 
 statutes for their removal." 
 
 T Mechanics* Sav. Bank & Trust Co. v. Guarantee Co. (C. C.) 68 Fed 469 • 
 Shakman v. Credit System Co.. 92 Wis. 366, 66 N. W. 528, 32 L. R. A. 383! 
 53 Am. St Rep. 920; American Surety Co. v. Pauly, 170 U. S. 144, 18 Sup 
 Ct 652, 42 L. Ed. 977; American Credit Indemnity Co. v. Cassard, 83 Md. 
 272, 34 Atl. 703. And see, especially. Bank of Tarboro v. Deposit Co., 126 
 N. C. 320, 35 S. E. 588. 83 Am. St Rep. 682; s. c. on rehearing, 128 N. C 366 
 38 S. E. 908, 83 Am. St Rep. 682. 
 
 8 Bank of Tarboro v. Deposit Co., 126 N. 0. 320, 36 S. D. 688. 83 Am. St Rep. 
 682. 
 
 §2^6) 
 
 IN GENERAL. 
 
 593 
 
 such country.' How an agreement between private parties can affect 
 the criminal laws of a foreign country we fail to comprehend, and we 
 are glad the question is not before us. We allude to it only to show 
 the complicated nature of the conditions injected into bonds of in- 
 demnity which often tend to defeat the primary object of the contract 
 The old bond of indemnity was a simple instrument, which could be 
 easily comprehended and promptly enforced. If these new forms of 
 contract are to take its place, we hope they will preserve some of its 
 simplicity and efficiency. This is a matter of great importance, as 
 surety companies arc now allowed to make the bonds of trustees, guar- 
 dians, administrators, and all other fiduciaries; and we would much 
 regret to see the rights of orphan children, as well as other helpless 
 beneficiaries, depend not upon the substantial merits of their case, but 
 upon a multitude of technicalities in an instrument to which they were 
 not parties." • 
 
 But this rule of construction favoring the insured will not be car- 
 ried so far as to make a new contract for the parties. It has no room 
 for application when rights under the contract as written are clear. 
 Thus in a recent Massachusetts case ^** the defendant had insured the 
 plaintiff railway company "against loss from liability to every person 
 who may, during a period of twelve months" from a specified date, 
 "accidentally sustain bodily injuries while traveling on any railway 
 of the insured, or while in a car or upon the railway bed or other 
 property of the insured, under circumstances which shall impose upon 
 the insured a common-law or statutory liability for such injuries." 
 The insured became liable to the administrator of a passenger who 
 was instantly killed while on one of its cars, and sought indemnity 
 from the insurer. The court, however, held that, as the insurer had 
 promised indemnity only for liability to the person injured, the in- 
 sured could not make legal claim for indemnity against liability to the 
 injured person's administrator, whose right of action, given only by 
 statute, was original and distinct, and not a surviving right. While 
 the plaintiff was doubtless surprised to learn from the court what a 
 peculiar contract it had made, the decision appears to be sound. 
 
 • The principle underlying the rule that all presumptions are in favor of the 
 validity of a contract of insurance is thus forcibly put in a second appeal of 
 the Bank of Tarboro Case (128 N. C. 366, 38 S. B. 908, 83 Am. St Rep. 682) : 
 "The object of an indemnifying bond is to indemnify; and if it fails to do 
 this, either directly or indirectly, it fails to accomplish its primary purpose, 
 and becomes worse than useless. It is worthless as an actual security, and 
 misleading as a pretended one." 
 
 10 Worcester & S. St R. Co. v. Insurance Co., 180 Mass. 263, 62 N. E. 364, 
 67 L. R. A. 629, 91 Am. St Rep. 275. See, also, People's Ice Co. t. Assurance 
 Corp., 161 Mass. 122, 36 N. B. 754; Phillipsburg Horse Gar Co. ?• Fidelitj 
 Co., 160 Pa. 350, 28 Atl. 823. 
 
 Yancb I«s.— 88 
 
 ! 
 

 594 GUARANTY, CREDIT, AND LIABILITY INSURANCE. (Ch. 17 
 
 Good Faith Required of the Parties, 
 
 As in the case of other insurances, the parties to these contracts of 
 special insurance must exercise the highest degree of good faith in 
 dealing with each other. It has been intimated in some of the cases 
 that the parties to these new insurances contract with each other at 
 arm's length," but this is certainly not the case. Thus it has been held 
 that the failure of the employer to inform the surety company of pre- 
 vious known acts of dishonesty on the part of the employe discharged 
 the fidelity bond given in ignorance of such dishonesty." That is 
 to say, the insured owes to the insurer in such cases the duty of making 
 full disclosure of all facts known by him to be material to the risk 
 which the insurer proposes to assume. Likewise it is the duty of the 
 insured to inform the surety-insurer of any occurrences during the 
 currency of the insurance which will materially increase the risk, such 
 as embezzlement, or other acts of the employe concerned that involve 
 moral turpitude.** 
 
 Proofs of Loss. 
 
 The same rules that have already been discussed as applying to re- 
 quirements of proofs of loss found in the more familiar kinds of insur- 
 ance policies, also apply to similar requirements that usually appear in 
 contracts for these special kinds of insurance. Thus the requirement 
 of "immediate notice" of an injury entailing liability, usually found in 
 employers' liability insurance policies, is satisfied by giving notice 
 within a reasonable time.'* 
 
 "See Guaranty Co. of North America v. Trust Co., 80 Fed. 766, 26 0. O. A, 
 146. 
 
 "Capital Fire Ins. Co. v. Watson, 76 Minn. .387, 79 N. W. 601, 77 Am. St 
 Rep. 657 ; Lancashire Ins. Co. v. Callahan, 68 Minn. 277, 71 N. W. 261 64 Am. 
 St Rep. 475. ' 
 
 i» See Lancashire Ins Co. ▼. Callahan, supra. 
 
 1* Ward V. Casualty Co., 71 N. H. 262, 51 Atl. 900, 93 Am. St Rep. 514 ; 
 Columbia Paper Stock Co. v. Casualty Co. (Mo. App.) 78 S. W. 320; Mandell 
 T. Casualty Co., 170 Mass. 173, 49 N. E. 110, 64 Am. St Rep. 291 ; Trippe v 
 Society, 140 N. Y. 23, 35 N. E. 316, 22 L. R. A. 432, 37 Am. St Rep. 529. 
 
 All conditions requiring notice must of course be construed with reference 
 to the purpose for which they are inserted. Thus a condition in a live stock 
 insurance policy requiring telegraphic notice to the Insurer In every case of 
 sickness of an animal Insured was held not to be broken by failure to give 
 notice of a slight sickness of only a few moments duration. Kells v. Insurance 
 Co., 84 Minn. 390, 67 N. W. 215, 58 Am. St Rep. 641. 
 
 §§ 247-248) FIDELITY AND GUARANTY INSURANCE. 
 
 595 
 
 FIDELITY AND GUARANTY INSURANCS. 
 
 247. DEFINITION— A contract of fidelity and guaranty insurance Is 
 
 one whereby the insurer, for a valuable consideration, agrees, 
 subject to certain conditions, to indemnify the insured against 
 loss consequent upon the dishonesty or default of a designated 
 employs. 
 
 248. The contract partakes of the nature both of insurance and of 
 
 suretyship. Hence, even in the absence of contract stipula- 
 tions to such efPect, the contract is avoided by the failure of the 
 insured to disclose to the insurer, at the time of making the 
 contract, any known previous acts of dishonesty on the part of 
 the employe, or any dishonest practices that may occur during 
 the currency of the policy. But the insured is not required to 
 give notice of mere irregularities not involving moral turpi- 
 tude; nor, in the absence of agreement to that effect, does the 
 insured owe to the insurer any duty of watching the conduet 
 and accounts of the employ^ concerned. 
 
 The term "fidelity and guaranty insurance," or, in its more ab- 
 breviated and frequent form, "guaranty insurance," is sometimes held 
 to include contracts guarantying titles to real estate and the solvency 
 of debtors, as well as those granting indemnity for losses suffered by 
 reason of the infidelity or dishonesty of employes." Here, however, 
 only the latter kind of contracts will be treated under this title, the 
 other contracts being considered under the subsequent specific titles 
 of "credit insurance" and "title insurance." 
 
 Guaranty Insurance Subject to Principles of Suretyship, 
 
 The insurance contract, in its general form strikingly analogous to 
 the contract of suretyship, becomes almost identified with it in the 
 form of guaranty insurance. Indeed, the principal reason for the 
 existence of the contract of guaranty insurance is its substitution for 
 the older official and fiduciary bonds with their personal sureties: 
 and to this day guaranty insurance contracts are drawn in the form 
 of bonds, and are ordinarily so called. These bonds of incorporated 
 fidelity and guaranty companies are generally regarded as more effi- 
 cient than the personal bond with sureties, since there is much less 
 danger of the corporate surety's becoming insolvent, and because public 
 policy is better conserved, in the case of criminal default of the prin- 
 cipal, by the relentless prosecution carried on by the corporate surety, 
 who is usually unaffected by those considerations of sentiment and 
 local expediency which frequently induce personal sureties to shield 
 a criminal principal from the punishment that should be visited upon 
 
 " And, see, State v. Hogan, 8 N. D. 301, 78 N. W. 1051, 45 L. R. A. 166 73 
 Am. St. Rep. 759, in which a contract guarantying crop return* was called 
 guaranty insurance* 
 
 •I 
 
 f-\! 
 
 ,: I 
 
 ^'! 
 
 lk^{ 
 
 \ 
 
 
596 
 
 QUABANTY, CREDIT, AND LIABILITY INSURANCE. (Ch. 17 
 
 i 
 
 
 him. In many states statutes have been passed expressly authorizing 
 the acceptance of these fidehty bonds for all officers and fiduciaries 
 instead of the personal bonds formerly required.^' Such legislative 
 recognition of the value of guaranty insurance renders the courts even 
 less patient of technical rules and unnecessary conditions in these con- 
 tracts that tend unfairly to defeat the indemnity contemplated by the 
 parties, than might otherwise have been the case. While there are, 
 as yet, few cases construing these contracts, it is clear that the courts 
 will go far to prevent them from affording less protection than the 
 old personal bonds which they have displaced. ^^ But it is settled that 
 guaranty insurance contracts, when properly executed, are valid, and 
 not contrary to public policy as tending to reduce the care which em- 
 ployers customarily exercise in selecting honest employes,** 
 
 Duty of Diligence on Part of Insured. 
 
 In the absence of contract to that effect, there is no obligation on 
 the part of the insured to watch over the conduct of his employe, 
 and his failure to detect instances of dishonesty, even though clearly 
 negligent, will not, in the absence of bad faith, afford a ground of 
 defense to the insurer.*® But, in accordance with a well-settled rule 
 applicable to suretyship, the insured must promptly communicate to 
 the insurer any actual information he may have acquired of any dis- 
 honest acts done by the employe, whose fidelity is insured, in the 
 course of his employment; and failure to impart such information 
 will discharge the insurer, just as it would any other surety.*® But 
 in order that the insurer may be thus discharged, the employer must 
 have had actual knowledge of the employe's dishonesty; mere sus- 
 picion is not enough.** Further, the rule applies only to acts involv- 
 
 i« See Bank of Tarboro v. Deposit C3o., 126 N. C. 320, 35 S. B. 588, 83 Am. 
 St Rep. 682. 
 
 IT "It would be contrary to public policy to Inconsiderately allow the pro- 
 tection afforded by this new insurance to the vast business interests of the 
 country, In public administration as elsewhere, to be endangered by any lesser 
 indemnity than that of the old form by bond, which is being so rapidly dis- 
 placed, the new contracts being offered by the companies as superior to the old 
 in safety." Guarantee Co. of North America v. Trust Co., 80 Fed. 766, 26 C. C. 
 A. 146. 
 
 18 FIDELITY & CASUALTY CO. v. EICKHOFF, 63 Minn. 170, 65 N. W. 351, 
 30 L. R. A. 586, 56 Am. St. Rep. 464. 
 
 i» Fidelity & Casualty Co. v. Bank, 97 Qa. 634, 26 S. B. 392, 33 L. R. A. 821, 
 54 Am. St Rep. 440; Guarantee Co. of North America v. Trust Co., 80 Fed. 
 766, 26 C. C. A. 146. 
 
 »o Capital Fire Ins. Co. v. Watson. 76 Minn. 387, 79 N. W. 601, 77 Am. St 
 Rep. 657 ; Lancashire Ins. Co. v. Callahan, 68 Minn. 277, 71 N. W. 261, 64 Am. 
 St Rep. 475 ; Saint v. Manufacturing Co., 95 Ala. 362, 10 South. 539, 36 Am. 
 St Rep. 210; Phillips v. Foxall, L. R. 7 Q. B. 666. 
 
 SI American Sure^ Co. y. Fauly, 170 U. S. 144, 18 Sup. Ct 552, 42 L. Ed. 977« 
 
 §§ 247-248) FIDELITY AND GUARANTY INSURANCE. 
 
 597 
 
 ing moral turpitude, in which case the failure of the insured to inform 
 the insurer of those facts that show the risk to be greater than that 
 contemplated by the parties when making the contract will amount 
 to bad faith. The insured is under no obligation, in the absence of 
 contract, to report mere irregularities or neglect on the part of his 
 employ^, not involving dishonesty, so long as there is no bad faith.** 
 
 In most guaranty insurance contracts, however, it is specifically 
 stipulated that notice shall be given to the insurer of irregularities as 
 well as dishonesty of the employe, when known to the insured. In 
 such cases this requirement must be strictly complied with before the 
 insurer's liability becomes fixed.*' 
 
 Knowledge of Co-Bmploye not Imputed to Employer, 
 
 In the stipulations just referred to provision is made for the com- 
 munication of such acts of dishonesty as come to the knowledge of the 
 "employer." ** Since, however, the employers so insured are usually 
 corporations, it is often difficult to say when any specific acts of dis- 
 honesty on the part of the employe have come to the knowledge of the 
 corporate employer. Plainly the knowledge of the peculating employe 
 cannot be imputed to the corporate employer, on the well-known prin- 
 ciple that the law will not presume that an agent will communicate to 
 his principal information that would prove prejudicial to his own in- 
 terests.*' But an equally well settled rule of law is that, in the ab- 
 sence of such hostile interest in the agent, the principal is charged 
 with all knowledge acquired by the agent in so far as it affects those 
 matters intrusted by the principal to the agent. Applying this rule 
 
 i:J 
 
 If 
 
 u 
 
 r 
 
 »* Atlantic & P. Tel. Co. v. Barnes, 64 N. Y. 385, 21 Am. Rep. 621 ; Charlotte, 
 C. & A. R. Co. V. Gow, 59 Ga. 685, 27 Am. Rep. 403 ; Watertown Fire Ins. Co. 
 V. Simmons, 131 Ma«s. 85, 41 Am. Rep. 196 ; Richmond & P. R. Co. v. Kasey, 
 30 Grat. (Va.) 218. But, see, Ida County Sav. Bank v. Seidensticker (Iowa) 
 92 N. W. 862. 
 
 28 Guarantee Co. of North America v. Trust Co., 80 Fed. 766, 26 C. C. A. 
 146; Harbour Com'rs v. Guarantee Co., 22 Can. Sup. Ct Rep. 542. In the 
 former case it was held that a policy which stipulated that the employer 
 should notify the insurer of any speculation in which the employ6 might en- 
 gage, to the knowledge of the employer, was not avoided by failure of the em- 
 ployer to give notice to the insurer of speculation in which it was learned the 
 employe had formerly been engaged, but which was honestly, though mis- 
 takenly, believed to have been discontinued. 
 
 2* A typical form of this condition is as follows : 'This bond will become 
 void as to any claims which may arise subsequent to the occurrence of any act 
 on the part of the employ^, involving loss, for which the company is responsible 
 hereunder to the employer, if the employer shall fail to notify the company 
 of the occurrence of such act at the earliest practicable moment after it shall 
 have come to the knowledge of the employer, and on receipt of such notice 
 the company shall have the right immediately to cancel the bond as to subse- 
 quent acts or defaults." 
 
 SB American Surety Ca ¥. Pauly, 170 U. S. 144» 18 Sup. Ct 6B^ 42 L. Ed. 977. 
 
 11 f 
 

 « 
 
 598 QUABANTT, CREDIT, AND LIABILITY INSURANCB. (Ch. 17 
 
 to the ordinary case of a corporate employer, a banking corporation, 
 for example, we should expect to find the cases to hold that knowledge 
 by one employe of dishonest practices on the part of a co-employe of 
 relatively the same rank would not affect the employer, but that where 
 an employe of superior rank discovered instances of dishonesty among 
 co-employes of subordinate rank, who were under his authority and 
 control, and over whose conduct of the affairs of the corporation he 
 exercised supervisory powers, such knowledge would necessarily be im- 
 puted to the corporation, provided, of course, such superior officer were 
 not an accomplice in the wrongdoing. Thus it would seem clear that the 
 knowledge of the bookkeeper that the teller was misappropriating the 
 funds of the bank would not affect the bank with notice of that fact, 
 smce the duty of the bookkeeper is to keep books, and not to keep 
 watch upon the teller. But a similar knowledge on the part of the 
 cashier, it would seem, should bind the bank, irrespective of his fidel- 
 ity in communicating it, since it is the duty of the cashier, on behalf 
 of the bank, to supervise the conduct of the teller as well as of his 
 other assistants and subordinates. But while there is some authority " 
 for the view thus suggested, it seems, so far as a rule may be deduced 
 from the few cases in which such a provision has come before the courts 
 for construction, to be held broadly that the knowledge of one employe 
 of dishonest acts done by a co-employe is not to be imputed to the em- 
 ployer so as to defeat the rights of the employer as against the insurer." 
 Many of the cases, however, that are cited in support of the rule thus 
 broadly stated, in reality merely decide that, where the cashier or other 
 superior officer participates in the wrongdoing of the subordinate em- 
 ploye, the former's knowledge of the wrongdoing is not chargeable to 
 the employer, which is manifestly correct within the adverse interest 
 rule stated above, as the superior officer could hardly be expected to ex- 
 pose the crime to which he was an accomplice. But there is un- 
 doubtedly a tendency to introduce an exception to the rule of agency 
 stated above, in order to increase the protection afforded to banks and 
 similar institutions by fidelity bonds." But to press the doctrine as 
 
 o.n* ^.^/°ol^- Manufacturing Ck)., 95 Ala. 362, 10 South. 539, 36 Am. St. Rep. 
 210 ; McShane v. Howard Bank, 73 Md. 135, 20 Atl. 776, 10 L. R. A 552 
 coi" ^i'^f '^o? Casualty Co. v. Bank. 97 Ga. a34, 25 S. E. 392, 33 L. R. A. 
 fS' t ?• ® S^^' ^^' Pittsburg, Ft. W. & C. Ry. Co. v. ShaeflPer, 59 Pa. 
 350; Taylor v. Bank, 2 J. J. Marsh. (Ky.) 564. This doctrine applies with 
 
 f^'i^l£'''^r''^^''tlT^''^ °®^^^- ^^ J°°«« ^- United States, 18 Wall, 
 ^u. a.) bbj, ^1 jj. Ed. 867. i 
 
 " Sharswood, J., In Pittsburg. Ft W. & C. Ry. Co. v. ShaeflPer, supra, argues 
 thus powerfully in favor of this doctrine: "Corporations can only act by of- 
 
 S^fJ ^? .T^'lt: '^^'SL ^"^ ""^^ guaranty to the sureties of one officer the 
 fidelity of the others. The rules and regulations which they may establish In 
 regard to periodical returns and payments are for their own security, and not 
 for the benefit of the sureties. The sureties, by executing tiie bon^ b^ome 
 
 §§ 249-250) LIABILITY OF THE GUARANTT INSURER. 599 
 
 Stated in the Georgia case '• to its logical conclusion would render 
 the stipulation in question meaningless in all cases in which the in- 
 sured employer was incorporated. It is as impossible for a corporation 
 to know anything as it is for it to do anything save through some 
 agent of high or low degree. If it be true that no agent whatever 
 can acquire such notice of another agent's infidelity as will be charge- 
 able to the metaphysical corporate principal, the condition of the in- 
 surer of such corporate employes is hazardous indeed. 
 
 (' 
 
 ' 
 
 LIABILITY OF THE GUARANTY INSURER. 
 
 249. The liability of tl&e gnaranty insurer, determined in aoeordanc^ 
 
 with the provisions of the policy, is, within the limit of the 
 ■nm written in the policy, measured by the amount of actual 
 loss suffered by the insured. 
 
 250. SUBROGATION— Upon payment of a loss caused by a default in- 
 
 sured against, the insurer has a comnion-law right to be sub- 
 rogated to all rights and claims of the insured against the de- 
 faulting employe by 'which such default n&ay be made good. 
 
 Whether the guaranty insurer is liable for any specific loss that falls 
 upon the employer through the dishonesty of his employe depends, 
 of course, upon whether that loss comes within the terms of the con- 
 responsible for the fidelity of their principal. It is no collateral engagement 
 into which they enter, dependent on some contingency or condition different 
 from the engagement of their principal. They become joint obligors with him 
 in the same bond, and with the same condition underwritten. The fact that 
 there were other unfaithful oflScers and agents of the corporation who knew 
 and connived at his infidelity ought not in reason, and does not in law or 
 equity, relieve them from the responsibility for him. They undertake that he 
 shall be honest, though all around him are rogues. Were the rule different 
 by the conspiracy of the officers of a bank or other moneyed institution, all 
 their sureties might be discharged. It is impossible that a doctrine leading to 
 such consequences should be sound.'* ' 
 
 2» Fidelity & Casualty CJo. v. Bank, 97 Ga. 634, 25 S. B. 392, 33 L, R. A. 
 821, 54 Am. St Rep. 440, in which the doctrine is thus stated: '*The above 
 authorities will suffice to show that the doctrine of constructive notice has no 
 application to transactions such as that in the present case. Not' having re- 
 quired the bank to insure the fidelity of all its other employes as a condition 
 precedent to recovery on Redwine's bond, the company cannot take advantage 
 of the failure of duty on the part of one of the bank's employes. Undoubtedly 
 It was the duty of McCandless, the cashier, to inform the bank as to any mis- 
 doings of Redwine of which he knew. This was, however, a duty he owed 
 the bank, and not the company, which could only derive a benefit therefrom 
 by express stipulation in its contract to the effect that it should be entitled 
 to have such duty of McCandless to the bank faithfully performed. The bank 
 suffered from such neglect to a far greater extent than did the company, 
 whose liability under its bond was limited in amount and surely the bank is 
 not equitably estopped from claiming a benefit under the bond which it ex- 
 pressly stipulated for." 
 
 
j 
 
 600 GUARANTY, CREDIT, AND LIABILITY INSURANCE. (Ch. 17 
 
 tract as reasonably construed, all doubts being resolved in favor of 
 the insured. These fidelity contracts vary so greatly in their terms, 
 and the cases construing them are so few, that no rules of construction 
 having general application can safely be deduced. We may, how- 
 ever, profitably note some of the more frequently occurring terms. 
 
 The insurance is usually against the dishonesty of employes, and 
 therefore does not cover losses due to the negligence, incompetence, or 
 lack of sound discretion on the part of the employe.'® But the guar- 
 anty may include losses attributable to mere negligence. Under such 
 a contract it was held that when a bonded railway agent negligently 
 left a large sum of the insured railway company's money in an inse- 
 curely locked room, whence it was stolen during his absence, the 
 railway company was entitled to indemnity from the insurer.** 
 
 Period of Risk. 
 
 Since defalcations by employes and other fiduciaries are usually so 
 well concealed as not to be discovered for a considerable time after 
 they are committed, and frequently not until the defaulter has quit 
 the service that he abused, it is customary for guaranty insurance con- 
 tracts to specify that the insurer shall be liable only for those defaults 
 that may occur during the currency of the bond and are discovered 
 within a specified period, usually six months, after the defaulting 
 employe quits the service of the insured, or after the expiration of 
 the bond. Under such a provision the federal Supreme Court has 
 recently held that the cashier of a suspended bank was not to be con- 
 sidered as having retired from the service of the bank when the bank 
 examiner took possession of it, so long as he continued to render any 
 service in connection with the affairs of the bank. As a consequence, 
 the surety company which had bonded the cashier was required to 
 make good a defalcation by that officer discovered more than six 
 months after the bank suspended business." 
 
 In many fidelity bonds there is incorporated an additional condition 
 limiting the liability of the insurer for embezzlements or other acts of 
 dishonesty by the employe to such as shall be discovered within some 
 specified time after their commission. •• 
 
 Subrogation. 
 
 Policies of guaranty insurance usually contain an express stipula- 
 tion subrogating the insurer to all rights of the insured by which he 
 
 •0 See, for example, Reed y. Casualty Co., 189 Pa. 596, 42 Atl. 294. 
 
 •1 In re Citizens' Ins. Co., 16 U. C. Law J. 334. 
 
 »« American Surety Co. v. Pauly. 170 U. S. 144, 18 Sup. Ct B52, 42 L. Bd. 
 
 VT T. 
 
 »» For an example of such a limitation, see Fidelity & Casualty Co. y. Bank 
 71 Fed. 116, 17 C. a A. 641. 
 
 iK'ii' 
 
 CBEDIT INSURANCE. 
 
 mi 
 
 § 251) 
 
 might make good his loss against the defaulting employe,** but apart 
 from contract the guaranty insurer is entitled to such subrogation 
 under a settled principle of the law of suretyship." The contract 
 also usually provides that the insured shall, in case of a default for 
 which the insurer is liable, render to the insurer all aid in his power 
 in procuring the defaulter's arrest and conviction. 
 
 CREDIT INSURANCE. 
 
 251* Oredit Insurance is a contract wltereby the Insurer promises, in 
 consideration of a premium, paid, and subject to specified condi- 
 tions as to the persons to urliom credit is to be extended, to 
 indemnify tbe insured, wholly or in part, against loss that may 
 result from the insolvency of persons to whom he may eartend 
 oredit within the term of the insurance. 
 
 This kind of insurance, like guaranty insurance, to which it is 
 closely related, strikingly analogous to suretyship, has been recognized 
 as legal and proper. As was said by the Wisconsin court in Shak- 
 man v. United States Credit System Co. : " "The peril of loss by the 
 insolvency of customers is just as definite and real a peril to a mer- 
 chant or manufacturer as the peril of loss by accident, fire, lightning, 
 or tornado, and is, in fact, much more frequent. No reason is per- 
 ceived why a contract of indemnification against this ever-present 
 peril is not just as legitimately a contract of insurance as a contract 
 which indemnifies against the more familiar, but less frequent, peril 
 by fire." But however great may be the need of such insurance to 
 the merchant and manufacturer, it is manifest that the very nature 
 of the risk renders the business most hazardous to the insurer. Not 
 only are the elements that go to make up the risk numerous, and so 
 uncertain as to defy accurate calculation, but there is also lacking that 
 guide so necessary to the safe conduct of any insurance business, an 
 extensive experience, since credit insurance is of very recent origin, 
 especially in the United States.'^ We are therefore not surprised to 
 
 «*A stipulation that the voucher or other evidence of payment by the 
 guaranty company to the employer shall be conclusive of the liability of the 
 employ^ to the guaranty company has been held invalid as contrary to public 
 policy. FIDELITY & CASUALTY CO. v. EICKHOFF, 63 Minn. 170, 65 N. W. 
 351, 30 L. R. A. 586, 56 Am. St. Rep. 464. 
 
 «5 FIDELITY & CASUALTY CO. v. EICKHOFF, 63 Minn. 170, 65 N. W. 351, 
 30 L. R. A. 586, 56 Am. St Rep. 464; London Guaranty & Accident Co. t. 
 Geddes (C. C.) 22 Fed. 639. 
 
 «« 92 Wis. 366, 66 N. W. 528, 32 L. R. A. 383, 53 Am. St. Rep. 920. 
 
 •T "Insurance against mercantile losses is a new branch of the business of 
 underwriting, and but few cases dealing with policies of that character have 
 as yet found their way into the courts. The necessarily nice adjustments of 
 the respective portions of loss to be borne by insurer and insured, the some- 
 
 
 mi 
 
 c 
 
 { 
 
602 GUARANTY, CREDIT, AND LIABILITY INSURANCE. (Ch. 17 
 
 find, among the few cases involving this kind of insurance that appear 
 in our reports, records of frequent failures among such insurers." 
 The busmess appears to be increasing, however, and, with the aid of 
 experience and a better understanding of commercial conditions, credit 
 insurance may become a very useful branch of tlie underwriter's busi- 
 ness. 
 
 The business being still in a formative state, it is natural that credit 
 insurance contracts should vary greatly in form and in terms. Some 
 of these contracts assume the form of a conditional sale of uncollecti- 
 ble debts," while others directly promise indemnity for loss through 
 insolvency of debtors made ascertainable under the terms of the 
 agreement.** So such contracts may be made by mutual as well as 
 by stock companies." But however made, they are all equally con- 
 tracts of insurance." It is clear that the insurer could not attempt 
 to insure a trader against all loss by bad debts. Under such insur- 
 ance the readiness with which ambitious merchants extend credit un- 
 der ordinary conditions, would become recklessness. Consequently it 
 becomes the first care of the insurer to limit his responsibility to those 
 debts incurred by men who are accustomed to paying their debts 
 and who are thought to be able to pay within the limits of the credit 
 pven. The insurer thus hopes to limit the risk assumed to that of 
 business misfortune and insolvency overtaking some among this se- 
 lect class of debtors, such a risk being deemed susceptible of estimation 
 If not of calculation. The basis of this selection of persons to receive 
 credit IS furnished by the reports of one of the great mercantile 
 agencies. That is, the insurance extends only to credit sales made 
 to persons having a specified rating on the books of Bradstreet's or 
 of Dun s agency, as the case may be. Insurance limited to debtors 
 rated in one of these agencies will not, of course, cover losses by reason 
 of debtors rated in the other only ; but where a general agent of the 
 insurer indorsed upon a policy, covering only Dun's rating, permis- 
 
 vvhat intricate provisions which are required in order to make such business 
 successful and the lack of experience in formulating the stipulations to be 
 
 ^r^T^V ."^ ^^ ^''}^ *^^ P^^*^^' *^ '"^^ * ^°t^^^t' bave naturally tended to 
 make the forms of policies crude and difficult of Interpretation." Tebbets v 
 Guarantee Ck)., 73 Fed. 95, 19 C. C. A. 281. 
 
 in«H? ^ll^""?* ^^ *^^ *°^"'*^'* constitutes a breach of contract with the 
 
 IfTIfU^K. ""^^^^^^ ^^ ^^"^^ ^^^^ ^^^ ^°t^*^ obligation to make proofs 
 of loss within a given period after the expiration of his policy. Smith v. In- 
 surance Co., 65 Minn. 283, 68 N. W. 28, 33 L. R. A. 511 
 
 5J8, 32 L. R. A. 383, 53 Am. St. Rep. 920. 
 40 Mercantile Credit Guarantee Co. v. Wood, 68 Fed. 529, 15 C. a A 663 
 *» See Solvency Mut. Guarantee Co. v. York, 3 Hen. & N 588 
 
 KOfi' P^^i^ I' ^""^^ ^^'*^°' ^""^ ^^^ ^''^^' ^1' 43 N. E. 293, 52 Am. St Rep 
 528, In which a credit insurance contract was held void for noncompUaace hi 
 the company with the insurance laws of the state, wmyuiuice oj 
 
 §251) 
 
 CREDIT INSURANCE. 
 
 603 
 
 sion to the insured to sell, under the protection of the insurance, to 
 persons not rated in Dun's, provided they were properly rated in 
 Bradstreet's, it was held to be binding on the insurer.*^ Further, it 
 was held that under the policy in suit the insurance covered a loss due 
 to the insolvency of a purchaser to whom a fair credit, but no capital 
 rating, was given in Dun's agency, while both capital and credit were 
 rated as satisfactory in Bradstreet's. The court considered that the 
 debtor in question was not rated in Dun's, within the system of the 
 insurer, so that the insured was entitled to have recourse to Brad- 
 street's.** 
 
 The policy also usually limits the amount of credit to be extended to 
 any purchaser to some percentage of his" capital as recorded on the 
 books of the designated mercantile agency. But it has been held 
 that giving credit in excess of the agreed percentage does not exclude 
 the entire debt, but only that part in excess of the stipulated limit.** 
 Considering the purpose of such a condition, this decision seems un- 
 fortunate. The efforts of an overburdened debtor to meet his obli- 
 gations are not apt to be so strenuous as are those of the debtor who 
 carries his burden easily. In order still further to stimulate the in- 
 sured to carefulness in deciding when credit shall be given, the credit 
 policy usually provides that the insured shall be co-insurer, and him- 
 self bear a certain initial amount of loss, only losses in excess of that 
 amount falling upon the insurer.*' 
 
 Loss by Insolvency of Debtors. 
 
 When the policy provides for indemnity for loss sustained by the 
 insolvency of debtors, it is held that the term "insolvency" is to be 
 interpreted in its usual sense. No adjudication of bankruptcy is nec- 
 essary, nor need the debtor's assets be less than his liabilities; he is 
 insolvent when he is no longer able to meet his obligations as they fall 
 due in the ordinary course of business.*^ Therefore a debtor who has 
 made a general assignment for the benefit of his creditors is insolvent 
 within the meaning of such a policy.*' Of course the form of the 
 assignment, whether statutory or common-law, whether for the benefit 
 
 *8 Shakman v. Credit System Co., 92 Wis. 366, 66 N. W. 528, 32 L. R. A. 383. 
 53 Am. St Rep. 920. See, also, Robertson v. Credit System Co., 57 N. J. Law, 
 12, 29 Atl. 421. 
 
 ** Shakman v. Credit System Co., supra. 
 
 *B Shakman v. Credit System Co., supra. 
 
 *• See Strouse v. Indemnity Co., 91 Md. 244, 259, 46 Atl. 328, 1063 ; Smith 
 ▼. Insurance Co., 65 Minn. 283, 68 N. W. 28, 33 L. R. A. 511. An interesting 
 discussion of such a provision is found in Mercantile Credit Guarantee Co. t. 
 Wood, 68 Fed. 529, 15 C. C. A. 563. 
 
 *7 Strouse v. Indemnity Co., 91 Md. 244, 46 Atl. 328. 
 
 48 But not when the assignment is only partiaL Goodman t. Guarantee Co.. 
 17 App. Div. 474. 45 N. Y. Supp. 508. 
 
 N' 
 
 II 
 
 K ' 
 
eo4 
 
 GUARANTY, CREDIT, AND LIABILITY INSURANCE. (Ch. 17 
 
 of all his creditors equally or preferring certain ones of them, is imma- 
 terial. It is sufficient if the debtor is deprived of the use of his prop- 
 erty so as to be unable to pay his debts as they fall due.** 
 
 i' 
 
 i^ 
 
 252. 
 
 Ca) 
 Cb) 
 
 253. 
 (a) 
 
 Cb) 
 
 (•) 
 
 EMPLOTERS' LIABILITT INSURANCE. 
 
 Under the general term "employers' liability insnranoe" is Isp 
 clnded insurance agains't— 
 
 Liability incurred beoanse of personal injury sustained by em- 
 ployes of the insured, and 
 
 Liability imposed upon the insured by the negligence of employes 
 in causing personal injury to third persons. 
 
 THE LIABILITT OP THE INSURER accrues diiferently under 
 the terms of differing contracts. 
 
 When the contract is for insurance against 'liability" for per- 
 sonal injuries, the insurer may be required to pay upon the 
 determination of the insured's liability by Judgment or settle- 
 ment, irrespective of actual payment by the insured. 
 
 When the promise of the insurer is to indemnify the insured for 
 loss actually sustained and paid on account of such personal 
 injuries, the insurer is not liable under the policy until the 
 Uability of the insured to the injured person has been actually 
 discharged. 
 
 The insurer is also liable, under the terms of the usual policy, to 
 indemnify the insured for expenses incurred in defending ac- 
 tions brought on account of such personal injuries as are cov- 
 ered by the policy. 
 
 In a former generation persons exposed to danger of accidental in- 
 jury secured accident insurance for their own protection. In latter 
 days, however, it is the employer or the railway carrier who needs 
 the protection of insurance, while the injured individual relies upon 
 the verdict of a sympathetic jury to indemnify him, not onlv for his 
 bodily suffenngs, but also for his mental anguish. Partly on account 
 of the pernicious activity of the legal ghoul ordinarily termed the 
 ambulance chaser," the numerous suits that are now brought for 
 personal injuries, and the appalling verdicts that are sometimes ren- 
 dered and sustained, present a new and very real danger to the suc- 
 cess of any enterprise requiring the employment of many men. This 
 new and formidable risk has given rise to a new and extensive branch 
 of insurance for assuming it Employers' liability insurance, thus 
 originating within the last twenty years, has already become, perhaps, 
 the most important of the special insurances discussed in this chapter! 
 This kind of insurance would more accurately be called "liability 
 insurance," for it embraces not only insurances against the employer's 
 Hability for injury suffered by his employe, but also those that in- 
 
 *• People v. Guarantee Co, 166 N. T. 416, 60 N. B. 24 
 
 g§ 252-253) employers' liability insurance. 605 
 
 demnify public carriers for losses incurred through injuries to passen- 
 gers or strangers, or protect, in similar manner, other persons engaged 
 in extensive business of such a character that they are subject to the 
 risk of incurring liability for injuries to third persons not employes. 
 But insurance against the employer's liability to his injured employe 
 is so much the more important that it has given the whole group of 
 related contracts a name that is now fixed in insurance parlance. 
 
 Liability Insurance not Contrary to Public Policy. 
 
 It has been contended that since public policy requires the exercise 
 of the highest degree of diligence by masters to protect their servants 
 from injury, and especially of public carriers in carrying their passen- 
 gers safely, it is contrary to that policy to allow these persons to shift 
 the responsibility for their negligence upon an insurance corporation, 
 thus indirectly exempting themselves from a liability which the law 
 will not allow them to avoid directly by contract. But the courts have 
 declined to press the rule of public policy so far, holding without 
 dissent that, since these contracts of liability insurance do not in any 
 wise exempt the tortious insured from liability directly to the person 
 injured, it is not a matter of proper concern to the public that the 
 employer or carrier makes a collateral contract for indemnity.** In- 
 deed, the value of employers' liability insurance is now expressly rec- 
 ognized in some states by statutes authorizing employers to take out 
 insurance for the benefit of their employes." There can be no doubt 
 but that employers' liability insurances are supported by a proper in- 
 surable interest** ^ 
 
 The Liability of the Insurer. 
 
 Of course no claim can be enforced against the liability insurer tin- 
 less it can be brought within the terms of the policy issued, and these 
 are found to vary greatly. Some companies insure against any lia- 
 bility for personal injury which the insured may incur under any cir- 
 cumstances whatever;** others against liability for injury to em- 
 ployes only; ** and still others against liability so incurred to all but 
 employes. Again, nearly all policies granting this kind of insurance 
 
 BO Trenton Pass. Ry. Co. v. Guarantor's, etc., Co., 60 N. J. Law, 246, 37 AtL 
 609, 44 L. R. A. 213 ; American Casualty Co.'s Case, 82 Md. 535, 34 Atl. 778, 
 88 L. R. A. 97; Kansas City, M. & B. R. Co. v. News Co., 151 Mo. 373, 52 
 S. W. 205, 45 L. R. A. 380, 74 Am. St. Rep. 545. See, also, California Ins. Ca 
 V. Compress Co., 133 U. S. 387, 10 Sup. Ct 365, 33 L. Ed. 730. 
 
 81 New York St 1892, e. 690, § 55. 
 
 82 See EMPLOYERS' LIABILITY ASSUR. CORP. v. MERRILL, 155 Mass. 
 
 404 29 N. E. 529. 
 
 b'« Bain v! Atkins, 181 Mass. 240, 63 N. E. 414, 57 L. R. A, 791. 92 Am. St 
 
 Rep. 411. 
 
 54 Frye ▼. Electric Co., 97 Me. 241, 54 Atl. 395, 59 L. E. A. 444, 94 Am. St 
 
 Rep. 50a 
 
 ill 
 
 If 
 
 II 
 
 I'll 
 
llJ 
 
 606 GUARANTY, CREDIT, AND LIABILITY INSURANCE. (Ch. IT 
 
 fall into two classes, according as they are, by their terms, "liability" 
 policies or "indemnity" policies. 
 
 "Liability" and "Indemnity'* Policies. 
 
 When the agreement of the insurer is to pay "all damages with 
 which the insured may be legally charged, or be required to pay, or 
 for which he may become legally liable," it is clear that the insurer 
 can be required to pay as soon as the liability of the insured becomes 
 legally determined." He is not concerned with the question whether 
 the insured has paid or can pay the judgment entered against him. 
 And the amount of the liability, when so fixed, determines the measure 
 of the insurer's liability to pay, provided, of course, it does not exceed 
 the sum written in the policy. Thus, in an Arkansas case," a cer- 
 tain young woman had secured a judgment for $1,200 for personal 
 injury against a street railway company, which had liability insurance 
 containing a term similar to that quoted above. The railway com- 
 pany was insolvent and wholly unable to pay the judgment, but the 
 receiver nevertheless demanded of the insurer payment of the amount 
 of the judgment. This demand was contested by the insurer on the 
 ground that an insurance contract could only be for indemnity, and 
 that, since the insolvent insured had not been damnified by the judg- 
 ment in question, it ought not ask to be indemnified. But the court 
 held the insurer liable for the full amount of the judgment, thus 
 clearly stating its reasons for so doing: "This is not simply a con- 
 tract of indemnity. It is more. It is also a contract to pay liabilities. 
 The diflFerence between a contract of indemnity and one to pay legal 
 liabilities is: Upon the former an action cannot be brought, and a 
 recovery had, until the liability is discharged ; whereas, upon the lat- 
 ter, the cause of action is complete when the liability attaches. ♦ * ♦ 
 The measure of damages is the amount of the accrued liabilities." 
 
 In Frye v. Bath Gas & Electric Co." the insurer had contracted to 
 indemnify the insured "for loss actually sustained and paid by him 
 in satisfaction of a judgment after trial of the issue." A judgment 
 for a large amount was recovered against the insured employer for 
 personal injuries that came within the terms of the insurer's policy. 
 The insured, however, had become insolvent, and an execution issued 
 against it was returned unsatisfied. The plaintiflF then filed his bill 
 against the insured, its assignees, the insurer, and other parties in in- 
 
 «» American Employers* Liability Ins. Co. ▼. Fordyce, 62 Ark. 662, 86 S. W. 
 1051, 64 Am. St Rep. 305; Anoka Lumber Co. v. Casualty Co., 63 Minn. 286] 
 66 N. W. 353, 30 L. R. A. 689 ; Hoven v. Assurance Corp., 93 Wis. 201 67 N 
 W. 46, 32 L. R. A. 388; Bain v. Atkins, 181 Mass. 240, 63 N. B. 414, 67 L. r! 
 A. 791, 92 Am, St Rep. 411 ; Seeberger v. Wyman, 108 Iowa, 527, 79 N. W 290 
 
 B6 American Employers* Liability Ins. Co. y. Fordyce, 62 Ark. 562. 36 S. W 
 1051, 54 Am. St Rep. 306. -«^ ou o. w. 
 
 »» 97 Me. 241, 64 AtL 895, 69 L. R. A. 444, 94 Am. St. Rep. 50a 
 
 §§ 252-253) 
 
 employers' LIABILITT INSURANCE. 
 
 607 
 
 terest, praying that the insurer should be compelled to pay in satisfac- 
 tion of his judgment the amount due under the employer's liability 
 policy. But the court held, aside from the question whether the plain- 
 tiff had any rights in the premises, that no payment was due under 
 the insurer's contract until the insured had sustained some actual 
 loss by making actual payment under the judgment. But as the in- 
 sured was wholly unable ever to discharge its liability to the plaintiff, 
 the insurer had incurred no liability whatever. "There can be no 
 reimbursement," said the court, "where there has been no loss. The 
 contract of insurance contains nothing to show that it was the object 
 or intention of the contracting parties that the insurer should guaranty 
 the gas company's liability for negligence to its employes. It was 
 not a contract of insurance against liability, but of indemnity against 
 loss by reason of liability." '* In a recent New Jersey case '• the court, 
 construing a provision identical with that in the case just discussed, 
 held that, while "not the amount of the employe's judgment, but the 
 amount paid by the employer thereon, was the sum for which the 
 insurer was responsible," yet a transfer of the employer's property to 
 a trustee in bankruptcy was a sufficient payment to satisfy the terms 
 of the policy and perfect the liability of the insurer. Only such a pro- 
 portion of the judgment was held to be paid, however, as corresponded 
 to the percentage of all the assets of the insolvent, excluding the in- 
 surance claim, to all of its debts, excluding this judgment. Such an 
 amount the insurer was required to pay to the receiver for the use of 
 the complainant. 
 
 Insurer Liable for Expenses of Defense, 
 
 The insurer agrees to indemnify the insured only for liabilities legal- 
 ly ascertained. Therefore it is the duty of the insured to resist claims 
 made against him for personal injuries, and to give due notice to the 
 insurer of the pendency of any action brought, so that the latter may 
 take steps to defend the action.*® In order to secure prompt notice 
 of a possible claim against him, the insurer by contract usually stipu- 
 lates for "immediate" notice of any injury that may give rise to lia- 
 bility. As we have seen, notice is deemed "immediate," under the 
 requirements of this provision, when it is given with such promptness 
 •s is reasonable under all the circumstances of the case.'* If, after 
 igreeing that the insurer shall have control of all litigation, the in- 
 ured settles the claim without the knowledge and consent of the in- 
 
 •• See, to the same effect, Cushman v. Fuel Co. (Iowa) 98 N. W. 509. 
 
 »» Travelers' Ins. Co. v. Moses, 63 N. J. Bq. 260, 49 Atl. 720, 92 Am. St Rep. 
 663. 
 
 80 Glens Falls Portland Cement Co. v. Insurance Co.. 162 N. Y. 399, 66 N. 
 E. 897. 
 
 *i See cases cited in note 14. suprau 
 
 I! 
 
 II 
 
608 
 
 GUARANTY, CREDIT, AND LIABILITY INSURANCE. (Ch. 17 
 
 § 254) RIGHTS OF INJURED PERSON IN INSURANCE FUND. 
 
 609 
 
 iiri 
 
 fit 
 
 surer, the latter is released from any liability under the policy.'* But 
 if the insurer had proper notice of the pending action, the failure of 
 the insured to send the summons served on him, or a copy thereof, will 
 not, in the absence of stipulation to that effect, release the insurer.'* 
 ^ If, after due notice to the insurer, he fails to defend the pending ac- 
 tion, it is the duty of the insured then to make a bona fide defense, the 
 expenses of which, as well as the amount of the judgment entered, 
 will become chargeable to the insurer.'* And the judgment in such 
 an action, over which the insurer might have exercised complete con- 
 trol, is conclusive evidence against him as to the liability of the in- 
 sured which he has agreed to indemnify." Likewise the insurer, not 
 defending after due notice, will be bound by a judgment entered 
 against the insured by consent as the result of a bona fide compromise. 
 In that event, however, the judgment is only prima facie evidence of 
 the amount of the insured's liability." 
 
 But a judgment for personal injury against one partner only of a 
 firm will not render an insurer liable under a policy promising in- 
 demnity to the firm for liability for such damages.** 
 
 BIGHTS or THE INJURED PERSON IN THE INSURANCE FUND. 
 
 254. The fund payable under a liability policy is not snbject to any 
 trust in favor of the person whose right to damages for per- 
 ■onal injury gave rise to the insurer's liability, nor has such 
 third person any other right in connection with the insurance, 
 save the conunon right of reaching the fund, when payable, by 
 gamishn&ent mat other proper process. 
 
 The contract between the employer and the insurer against liabil- 
 ity is solely for the benefit of the employer. The injured employe, 
 whose just claim may fix the liability of the insurer, is no party to the 
 insurance contract, nor has he any rights, legal or equitable, growing 
 
 •« Pickett ▼. Casualty Co., 60 S. C. 477, 38 S. B. 160, 629. 
 
 •« Ward V. Casualty Co., 71 N. H. 262, 51 Atl. 900, 93 Am. St. Rep. 514. 
 
 •4 Mott V. Hicks, 1 Cow. (N. T.) 513, 13 Am. Dec. 550 ; Curtis v. Banker, 136 
 Mass. 355; Howard v. Lovegrove, L. R. 6 Exch. 43. It has been held that, 
 under a contract obligating the insured to permit the insurer to control all 
 claims and actions brought against the Insured for Injuries, the insurer was 
 not liable for the expenses incurred by the insured in defending a groundless 
 action. Cornell v. Insurance Co., 175 N. Y. 239, 67 N. E. 578. But see, to 
 the contrary, Chilson v. Downer, 27 Vt. 536; also the dissenting opinion of 
 Cullen, J., in Cornell v. Insurance Co., supra. 
 
 «» City of St Joseph v. Railway Co., 116 Mo. 636, 22 S. W. 794, 38 Am. St 
 Rep. 626. 
 
 «« Kansas City, M. & B. R. Co. ▼. News Co., 151 Mo. 378, 62 S. W. 205, 45 
 Jj. R. A. 380, 74 Am^ St. Rep. 545 ; Conner v. Reeves, 103 N. Y. 527, 9 N. E. 439. 
 «7 Kelley v. Accident Co., 97 Mo. App. 623. 71 S. W. 711. 
 
 out of it.*® Of course, the injured employe might be made the bene- 
 ficiary under the contract by the insurer's promising the insured to 
 discharge any judgment or other legally ascertained claim for personal 
 injury by paying the amount of such claim to the owner of it Under 
 such a contract the injured person could, in most jurisdictions, recover 
 from the insurer by an action brought directly on the policy. But 
 such contracts are rarely, if ever, made, although they are expressly 
 authorized by statute in New York." 
 
 The consequence of this doctrine is that a judgment recovered 
 for personal injury against an insolvent employer may enable him to 
 recover the full amount of it against the insurer who has contracted 
 to indemnify him against liability, while the judgment may be wholly 
 worthless in the hands of the injured person or his representative. It 
 follows, therefore, that the insurer may, without notice to the injured 
 person, make a settlement with the insured, either before judgment 
 against the latter, or after it, and be wholly discharged of his liability 
 on the insurance contract.''® Likewise the injured person having a 
 claim against an insolvent employer has absolutely no rights against 
 an insurer who has contracted to indemnify the employer for loss sus- 
 tained by actual payment of damages for personal injury, even when 
 a statute allows contracts to be enforced by the person in interest."* 
 
 Of course, the injured person or his representative, like any other 
 judgment creditor, can by garnishment or attachment reach any fund 
 in the hands of an insurer that may be due and payable to the judg- 
 ment debtor.''* 
 
 «• Frye v. Bath Gas & Electric Co., 97 Me. 241, 54 Atl. 395, 59 L. R. A. 444, 94 
 Am. St Rep. 500 ; Bain v. Atkins, 181 Mass. 240, 63 N. E. 414, 57 L. R. A. 791, 
 92 Am. St Rep. 411 ; Travelers' Ins. Co. v. Moses, 63 N. J. Eq. 260, 49 Atl. 720, 
 92 Am. St Rep. 663 ; Cushman v. Fuel Co. (Iowa) 98 N. W. 509 ; Embler v. In- 
 surance Co., 158 N. Y. 431, 53 N. E. 212, 44 L. R. A. 512. 
 
 «» St 1892, c. 690, 8 55. For two interesting cases discussing the rights of 
 the injured person in contracts of liability insurance, see Travelers' Ins. Co. 
 V. Moses, 63 N. J. Eq. 260, 49 Atl. 720, 92 Am. St Rep. 663, and Embler v. In- 
 surance Co., 158 N. Y. 431, 53 N. E. 212, 44 L. R. A. 512. 
 
 70 Bain ▼. Atkins, 181 Mass. 240, 63 N. B. 414, 57 L. R. A. 791, 92 Am. St 
 Rep. 411. 
 
 71 See Cushman v. Fuel Co. (Iowa) 98 N. W. 509. 
 
 Ts Anoka Lumber Co. v. Fidelity Co., 63 Minn. 286, 65 N. W. 353, 30 L. R. 
 ▲. 689. 
 
 Vanck Ins. — 89 
 
 ^ 
 
 I 
 
I 
 
 APPENDIX. 
 
 NEW YORK STANDARD^ FIRE POLICY.! 
 
 [References are to pages of the text in which the corresponding provisions 
 of the standard policy are construed or considered.] 
 
 The Insurance; Company, in consideration of the stip- 
 ulations herein named and of dollars premium,^ does 
 
 insure for the term • of from the 
 
 day of , at noon, to the day of 
 
 , at noon, against all direct loss or damage by fire,* except 
 
 as hereinafter provided, to an amount not exceeding '^ 
 
 dollars, to the following described property • while located and con- 
 tained as described herein, and not elsewhere,^ to wit : 
 
 This company shall not be liable beyond the actual cash value of the 
 property at the time any loss or damage occurs, and the loss or damage 
 shall be ascertained or estimated according to such actual cash value, 
 with proper deduction for depreciation however caused, and shall in 
 no event exceed what it would then cost the insured to repair or replace 
 the same with material of like kind and quality ; • said ascertainment 
 or estimate shall be made by the insured and this company, or, if they 
 differ, then by appraisers, as hereinafter provided ; and, the amount of 
 loss or damage having been thus determined, the sum for which this 
 company is liable pursuant to this policy shall be payable sixty days 
 after due notice, ascertainment, estimate, and satisfactory proof of the 
 loss have been received by this company in accordance with the terms 
 of this policy. It shall be optional, however, with this company to take 
 all, or any part, of the articles at such ascertained or appraised value,® 
 and also to repair, rebuild, or replace the property lost or damaged 
 with other of like kind and quality within a reasonable time on giving 
 notice, within thirty days after the receipt of the proof herein requirecf, 
 of its intention so to do; ^^ but there can be no abandonment to this 
 company of the property described. 
 
 This entire policy shall be void ^^ if the insured has concealed or 
 
 5 In full, cc. 12, 13, pp. 429-510. 
 
 2 34. 175 et seq. 
 
 3 435. 
 M75. 
 
 Vance Ins. 
 
 »489. 
 
 • 115, note 74, 43S. 
 
 T 439. 
 
 8483. 
 
 •488. 
 10 488. 
 ai433. 
 
 P 
 
 I 
 
 ( 
 
 i!i 
 
 (611) 
 
 1 
 
 1 
 
I:; f ' 
 
 I 
 
 612 
 
 APPENDIX. 
 
 iTiisrepresented, in writing or otherwise, any material fact or cirGum- 
 itance concerning this insurance or the subject thereof;^' or if the 
 interest of the insured in the property be not truly stated herein; ^* or 
 m case of any fraud or false swearing by the insured touching any 
 matter relating to this insurance or the subject thereof, whether before 
 or after a loss.** 
 
 This entire policy, unless otherwise provided by agreement indorsed 
 hereon or added hereto, shall be void if the insured now has or shall 
 hereafter make or procure any other contract of insurance, whether 
 valid or not, on property covered in whole or in part by this policy; *' 
 or if the subject of insurance be a manufacturing establishment and it 
 be operated in whole or in part at night later than ten o'clock, or if 
 it cease to be operated for more than ten consecutive days ; *• or if the 
 hazard be increased by any means within the control or knowledge of 
 the insured ; *^ or if mechanics be employed in building, altering, or 
 repairing the within described premises for more than fifteen days 
 at any one time; *® or if the interest of the insured be other than un- 
 conditional and sole ownership ; *• or if the subject of insurance be a 
 building on ground not owned by the insured in fee-simple ; *® or if 
 the subject of insurance be personal property and be or become incum- 
 bered by a chattel mortgage ; ** or if, with the knowledge of the insured, 
 foreclosure proceedings be commenced or notice given of sale of any 
 property covered by this policy by virtue of any mortgage or trust 
 deed ; ** or if any change, other than by the death of an insured, take 
 place in the interest, title, or possession of the subject of insurance (ex- 
 cept change of occupants without increase of hazard) whether by legal 
 process or judgment or by voluntary act of the insured, or otherwise; *' 
 or if this policy be assigned before a loss ; ** or if illuminating g^s or 
 vapor be generated in the described building (or adjacent thereto) for 
 use therein ; •• or if (any usage or custom of trade or manufacture to 
 the contrary notwithstanding) there be kept, used, or allowed on the 
 above described premises, benzine, benzole, dynamite, ether, fireworks, 
 gasolene, greek fire, gunpowder exceeding twenty-five pounds in quan- 
 tity, naphtha, nitro-glycerine or other explosives, phosphorus, or pe- 
 troleum or any of its products of greater inflammability than kerosene 
 oil of the United States standard, (which last may be used for lights 
 and kept for sale according to law but in quantities not exceeding 
 five barrels, provided it be drawn and lamps filled by daylight or at 
 a distance not less than ten feet from artificial light) ; •• or if a building 
 herein described, whether intended for occupancy by owner or tenant, 
 be or become vacant or unoccupied and so remain for ten days.** 
 
 is2S0et tcq. 
 
 1*442. 
 1*454. 
 "457. 
 
 i«4«). 
 
 IT 462. 
 i«464. 
 
 1*444. 
 *0 44a 
 «i447. 
 
 1*466. 
 s*449. 
 
 t4 46a 
 
 **469. 
 *«462. 
 «T471. 
 
 APPENDIX. 
 
 613 
 
 •<l 
 
 This company shall not be liable for loss caused directly or indirectly 
 by invasion, insurrection, riot, civil war or commotion, or military or 
 usurped power, or by order of any civil authority; or by theft; or by 
 neglect of the insured to use all reasonable means to save and preserve 
 the property at and after a fire or when the property is endangered by 
 fire in neighboring premises ; or (unless fire ensues, and, in that event, 
 for the damage by fire only) by explosion of any kind, or lightning ; but 
 liability for direct damage by lightning may be assumed by specific 
 agreement hereon.** 
 
 If a building or any part thereof fall, except as the result of fire, all 
 insurance by this policy on such building or its contents shall immediate- 
 ly cease.** 
 
 This company shall not be liable for loss to accounts, bills, currency, 
 deeds, evidences of debt, money, notes, or securities; nor, unless lia- 
 bility is specifically assumed hereon, for loss to awnings, bullion, casts, 
 curiosities, drawings, dies, implements, jewels, manuscripts, medals, 
 models, patterns, pictures, scientific apparatus, signs, store or office 
 furniture or fixtures, sculpture, tools, or property held on storage or 
 for repairs ; •* nor, beyond the actual value destroyed by fire, for loss 
 occasioned by ordinance or law regulating construction or repair of 
 buildings,** or by interruption of business, manufacturing processes, 
 or otherwise; nor for any greater proportion of the value of plate 
 glass, frescoes, and decorations than that which this policy shall bear 
 to the whole insurance on the building described. 
 
 If an application, survey, plan, or description of property be referred 
 to in this policy it shall be a part of this contract and a warranty by the 
 insured.** 
 
 In any matter relating to this insurance no person, unless duly au- 
 thorized in writing, shall be deemed the agent of this company.** 
 
 This policy may by a renewal be continued under the original stipula- 
 tions, in consideration of premium for the renewed term, provided that 
 any increase of hazard must be made known to this company at the time 
 of renewal or this policy shall be void. 
 
 This policy shall be canceled at any time at the request of the insured ; 
 OF by the company by giving five days notice of such cancelation. If 
 this policy shall be canceled as hereinbefore provided, or become void 
 or cease, the premium having been actually paid, the unearned portion 
 shall be returned on surrender of this policy or last renewal, this com- 
 pany retaining the customary short rate ; except that when this policy 
 is canceled by this company by giving notice it shall retain only the 
 pro rata premium.** 
 
 If, with the consent of this company, an interest under this policy 
 shall exist in favor of a mortgagee or of any person or corporation 
 
 I 
 
 r 
 
 •1 
 
 ; 
 
 «• 478. 
 2*474. 
 
 •0 482. 
 •1484. 
 
 •2 183. 492. 
 
 ••493. 
 
 M491 
 
614 
 
 APPENDIX. 
 
 
 having an interest in the subject of insurance other than the interest of 
 the insured as described herein, the conditions hereinbefore contained 
 shall apply in the manner expressed in such provisions and conditions 
 of insurance relating to such interest as shall be written upon, attached, 
 or appended hereto. •• 
 
 If property covered by this policy is so endangered by fire as to re- 
 quire removal to a place of safety, and is so removed, that part of this 
 policy in excess of its proportion of any loss and of the value of prop- 
 erty remaining in the original location, shall, for the ensuing five days 
 only, cover the property so removed in the new location; if removed to 
 more than one location, such excess of this policy shall cover therein for 
 such five days in the proportion that the value in any one such new loca- 
 tion bears to the value in all such new locations ; but this company shall 
 not, in any case of removal, whether to one or more locations, be liable 
 beyond the proportion that the amount hereby insured shall bear to the 
 total insurance on the whole property at the time of fire, whether the 
 same cover in new location or not.** 
 
 If fire occur the insured shall give immediate notice of any loss there- 
 by in writing to this company, protect the property from further dam- 
 age,^ forthwith separate the damaged and undamaged personal property, 
 put it in the best possible order, make a complete inventory of the same, 
 stating the quantity and cost of each article and the amount claimed 
 thereon; and, within sixty days after the fire, unless such time is ex- 
 tended in writing by this company, shall render a statement to this 
 company, signed and sworn to by said insured, stating the knowledge 
 and belief of the insured as to the time and origin of the fire; the in- 
 terest of the insured and of all others in the property ; the cash value 
 of each item thereof and the amount of loss thereon; all incumbrances 
 thereon; all other insurance, whether valid or not, covering any of 
 said property ; and a copy of all the descriptions and schedules in all 
 policies ; any changes in the title, use, occupation, location, possession, 
 or exposures of said property since the issuing of this policy ; by whom 
 and for what purpose any building herein described and the several 
 parts thereof were occupied at the time of fire; and shall furnish, if 
 required, verified plans and specifications of any building, fixtures, or 
 machinery destroyed or damaged ; »^ and shall also, if required, furnish 
 a certificate of the magistrate or notary public (not interested in the 
 claim as a creditor or otherwise, nor related to the insured) living near- 
 est the place of fire, stating that he has examined the circumstances 
 and believes the insured has honestly sustained loss to the amount that 
 such magistrate or notary public shall certify.** 
 
 The insured, as often as required, shall exhibit to any person desig- 
 nated by this company all that remains of any property herein described, 
 
 ■• 420, note 106. 
 
 ••441. 
 
 M49a 
 
 ••60& 
 
 I'l' 
 
 APPENDIX. 
 
 615 
 
 4tfii 
 
 and submit to examinations under oath by any person named by this 
 company, and subscribe the same; and, as often as required, shall 
 produce for examination all books of account, bills, invoices, and other 
 vouchers, or certified copies thereof if originals be lost, at such reason- 
 able place as may be designated by this company or its representative, 
 and shall permit extracts and copies thereof to be made.*" 
 
 In the event of disagreement as to the amount of loss the same shall, 
 as above provided, be ascertained by two competent and disinterested 
 appraisers, the insured and this company each selecting one, and the 
 two so chosen shall first select a competent and disinterested umpire ; 
 the appraisers together shall then estimate and appraise the loss, stating 
 separately sound value and damage, and, failing to agree, shall submit 
 their differences to the umpire ; and the award in writing of any two 
 shall determine the amount of such loss; the parties thereto shall 
 pay the appraiser respectively selected by them and shall bear equally 
 the expenses of the appraisal and umpire.*® 
 
 This company shall not be held to have waived any provision or 
 condition of this policy or any forfeiture thereof by any requirement, 
 act, or proceeding on its part relating to the appraisal or to any ex- 
 amination herein provided for ; *^ and the loss shall not become pay- 
 able until sixty days after the notice, ascertainment, estimate, and satis- 
 factory proof of the loss herein required have been received by this 
 company, including an award by appraisers when appraisal has been 
 
 required 
 
 This company shall not be liable under this policy for a greater pro- 
 portion of any loss on the described property, or for loss by and expense 
 of removal from premises endangered by fire, than the amount hereby 
 insured shall bear to the whole insurance, whether valid or not, or by 
 solvent or insolvent insurers, covering such property, and the extent of 
 the application of the insurance under this policy or of the contribution 
 to be made by this company in case of loss, may be provided for by 
 agreement or condition written hereon or attached or appended here- 
 to." Liability for re-insurance shall be as specifically agreed hereon." 
 
 If this company shall claim that the fire was caused by the act or 
 neglect of any person or corporation, private or municipal, this company 
 shall, on payment of the loss, be subrogated to the extent of such pay- 
 ment to all right of recovery by the insured for the loss resulting there- 
 from, and such right shall be assigned to this company by the insured 
 on receiving such payment.** 
 
 No suit or action on this policy, for the recovery of any claim, shall 
 be sustainable in any court of law or equity until after full compliance 
 by the insured with all the foregoing requirements,** nor unless com- 
 menced within twelve months next after the fire.** 
 
 •» 455. 
 *o486. 
 
 41 880, 493. 
 4S54,485. 
 
 48 61 et seq. 
 44 422, 426. 
 
 MC02. 
 
 MOOT. 
 
 1 1 
 
 i 
 
 
 j 
 
 
 1 
 
 III 
 
 j 
 
 1 
 
616 APPENDIX. 
 
 Wherever in this policy the word "insured" occurs, it shall be held to 
 include the legal representative of the insured, and wherever the word 
 "loss" occurs, it shall be deemed the equivalent of "loss or damage." 
 
 If this policy by made by a mutual or other company having special 
 regulations lawfully applicable to its organization, membership, poli- 
 cies or contracts of insurance, such regulations shall apply to and form 
 a part of this policy as the same may be written or printed upon, at- 
 tached, or appended hereto. 
 
 This policy is made and accepted subject to the foregoing stipulations 
 and conditions, together with such other provisions, agreements, or 
 conditions as may be indorsed hereon or added hereto, and no officer, 
 agent, or other representative of this company shall have power to waive 
 any provision or condition of this policy except such as by the terms 
 of this policy may be the subject of agreement indorsed hereon or 
 added hereto, and as to such provisions and conditions no officer, agent, 
 or representative shall have such power or be deemed or held to have 
 waived such provisions or conditions unless such waiver, if any, shall 
 be written upon or attached hereto, nor shall any privilege or permission 
 affecting the insurance under this policy exist or be claimed by the 
 insured unless so written or attached.*^ 
 
 In witness whereof, this company has executed and attested these 
 presents this day of ,19 
 
 This policy shall not be valid until countersigned by the duly author- 
 ized managrer or agent of the company at 
 
 «v 827, 482. 
 
 APPENDIX. 
 
 617 
 
 A FORM OF POLICY OF MARINE INSURANCE UPON CARGO. 
 
 Thb Insurance Company, , on account 
 
 of , in case of loss to be paid in funds current in the 
 
 United States, or in the city of New York, to , do make 
 
 insurance, and cause to be insured, lost or not lost, at 
 
 and from , upon . • , laden or to be laden on 
 
 board the good ship , whereof is master 
 
 for this present voyage , or whoever else shall go f of 
 
 master in said vessel, or by whatever other name or names the said 
 vessel, or the master thereof, is or shall be named or called. 
 
 Beginning the adventure upon the said goods and merchandises 
 from and immediately following the loading thereof on board of the 
 
 said vessel, at as aforesaid, and so shall continue and 
 
 endure until the said goods and merchandises shall be safely landed at 
 
 as aforesaid. And it shall and may be lawful for the 
 
 said vessel, in her voyage, to proceed and sail to, touch and stay at, any 
 ports or places, if thereunto obliged by stress of weather, or other un- 
 avoidable accident, without prejudice to this insurance. The said goods 
 and merchandises, hereby insured, are valued (premium included) at 
 dollars. 
 
 Touching the adventures and perils which the said 
 
 Insurance Company is contented to bear, and takes upon itself in this 
 voyage, they are of the seas, men of war, fires, enemies, pirates, rovers, 
 thieves, jettisons, letters of mart and countermart, reprisals, takings 
 at sea, arrests, restraints, detainments of all kings, princes, or people, of 
 what nation, condition, or quality soever, barratry of the master and 
 mariners, and all other perils, losses, and misfortunes that have or shall 
 come to the hurt, detriment, or damage of the said goods and mer- 
 chandises, or any part thereof. And, in case of any loss or misfortune, 
 it shall be lawful and necessary to and for the assured, his factors, 
 servants, and assigns, to sue, labor, and travel for, in, and about the 
 defense, safeguard, and recovery of the said goods and merchandises, 
 or any part thereof, without prejudice to this insurance ; nor shall the 
 acts of the insured or insurers in saving, recovering, and preserving the 
 property insured, in case of disaster, be considered a waiver or an ac- 
 ceptance of an abandonment ; to the charges whereof the said insurance 
 company will contribute according to the rate and quantity of the sum 
 herein insured ; having been paid the consideration for this insurance, 
 
 by the assured or his assigns, at and after the rate of 
 
 per cent. 
 
 And in case of loss, such loss to be paid in thirty days after proof of 
 
 loss, and proof of interest in the said (the amount of the 
 
 note given for the premium, if unpaid, being first deducted), but no 
 
 4 
 
 • 
 
 i 
 
 . 
 
 
I 
 
 618 
 
 APPENDIX. 
 
 partial loss or particular average shall in any case be paid, unless 
 amounting to five per cent. Provided always, and it is hereby further 
 agreed, that if the said assured shall have made any other assurance 
 upon the premises aforesaid, prior in day of date to this policy, then 
 
 the said Insurance Company shall be answerable only 
 
 for so much as the amount of such prior assurance may be deficient 
 towards fully covering the premises hereby assured; and the said 
 
 Insurance Company shall return premium upon so much 
 
 of the sum by them assured as they shall be by such prior assurance 
 exonerated from. And in case of any assurance upon the said prem- 
 ises, subsequent in day of date to this policy, the said 
 
 Insurance Company shall nevertheless be answerable for the full ex- 
 tent of the sum by them subscribed hereto, without right to claim con- 
 tribution from such subsequent assurers, and shall accordingly be en- 
 titled to retain the premium by them received, in the same manner as 
 if no such subsequent assurance had been made. Other assurance upon 
 the premises aforesaid, of date the same day as this policy, shall be 
 
 deemed simultaneous herewith ; and the said Insurance 
 
 Company shall not be liable for more than a ratable contribution in the 
 proportion of the sum by them insured to the aggregate of such simul- 
 taneous insurance. It is also agreed that the property be warranted by 
 the assured free from any charge, damage, or loss which may arise in 
 consequence of a seizure or detention, for or on account of any illicit or 
 prohibited trade, or any trade in articles contraband of war. 
 
 Warranted not to abandon, in case of capture, seizure, or detention, 
 until after condemnation of the property insured; nor until ninety 
 days after notice of said condemnation is given to this company. 
 Also warranted not to abandon in case of blockade, and free from any 
 expense in consequence of capture, seizure, detention, or blockade, but 
 in the event of blockade to be at liberty to proceed to an open port, 
 and there end the voyage. 
 
 In Witness Whereof the president or vice president of the said 
 
 Insurance Company hath hereunto subscribed his name, 
 
 and the sum insured, and caused the same to be attested by their secre- 
 taiy^in •••••, the day of » 19..*« 
 
 TABLE OF CASES CITED. 
 
 [THE FIGURES REFER TO PAGES. 3 
 
 Abbott T. Sebor, 120. 
 
 Abel V. Potts, 657. 
 
 Abell v. Insurance Co., 95, 197, 219. 
 
 Accident Ins. Ck). t. Bennett, 526. 
 
 V. Crandal, 183, 520, 521, 568, 580. 
 Ackley v. Insurance Co., 437, 464, 471. 
 Adams v. Grand Lodge, 402. 
 
 y. Insurance Co., 491. 
 
 V. Heed, 135. 
 Adreveno v. Ass'n, 373. 
 Mtn& Fire Ins. Co. y. Boon, 479. 
 
 y. Tyler, 112, 444. 
 -^tna Ins. Co. y. Bank, 506 
 
 y. Haryey, 87. 
 
 T. Jackson, 111, 114. 
 
 T. Jacobson, 451. 
 
 T. Resh, 70. 
 
 T. Shryer, 316. 
 
 V. Tucker, 490. 
 
 V. Webster, 169, 171. 
 iOtna Life Ins. Co. y. Dayey, 280. 
 
 V. Fallow, 318, 319, 381. 
 
 V. France, 104, 130, 273, 286, 291, 
 516. 
 
 ▼. Greene, 210. 
 
 y. J. B. Parker & Co., 428. 
 
 y. Ragsdale's Adm'r, 222. 
 -ffitna Liye Stock Fire & Tornado Ins. 
 
 Co. V. Olmstead, 304. 
 Agen y. Insurance Co., 523. 
 Agricultural Ins. Co. y. Hamilton, 70. 
 
 V. Montague, 117. 
 Aitcbison y. Lobre, 562, 563. 
 Akers y. Hite, 198. 
 
 Alabama Gold Life Ins. Co. ▼. Insur- 
 ance Co., 416, 528. 
 
 y. Johnston, 288, 292. 
 Alamo Fire Ins. Co. T. Lancaster, 444, 
 447. 
 
 Albert y. Insurance Go., 128. 
 
 Albion Lead Works y. Insurance Ga, 
 
 434, 435, 437. 
 Alexander y. Ass'n, 513. 
 
 T. Insurance Co., 235, 335. 363, 
 536. 
 Alexandre y. Insurance Co., 563. 
 Alford y. Insurance Co., 388. 
 Alkan y. Insurance Co., 468. 
 Allegre y. Insurance Co., 190. 
 Allegre's Adm'rs y. Insurance Co., 538. 
 AUemania Fire Ins. Co. v. Peck, 510. 
 Allen y. Insurance Co., 312, 328, 329, 
 363, 371, 419. 
 
 V. Railroad Co., 304. 
 
 y. Sugrue, 559. 
 Allgeyer y. Louisiana, 76, 83, 89. 
 Allison y. Insurance Co., 539. 
 Alsop y. Coit, 153. 
 Alston y. Insurance Co., 275-277. 
 Amberg y. Insurance Co., 395. 
 American Accident Co. y. Carson, 568. 
 
 y. Reigart, 429, 568, 569. 
 American Casualty Co.'s Case, 605. 
 American Cent Ins. Co. y. Haws, 441. 
 American Credit Indemnity Co. y. 
 
 Cassard, 592. 
 American Employers* Liability Ins. 
 Co. y. Barr, 589. 
 
 T. Fordyce, 137, 606. 
 American Fire Ins. Co. y. Bank, 186. 
 
 T. Brooks, 202, 312, 313. 
 
 y. Center, 186. 
 
 y. Mfg. Co., 461, 472. 
 American Ins. Co. y. Bryan, 553. 
 
 T. Francla, 560. 
 
 V. Griswold, 538. 
 
 V. Henley, 199. 
 
 T. KUnk, 199, 212. 
 
 ▼. Ogden, 546. 
 
 ▼. Stoy, 164^ 184k ISQi 20a 
 
 I 
 
 Vance Ins. 
 
 (619) 
 
620 
 
 CASES CITED. 
 mi« flffUTM refer to pagea.] 
 
 American Legion v. Smith, 192. 
 American Life Ins. Co. y. Mabona, 
 
 258, 331, 837, 86^ 868L 
 American Life Ins. <& Trust Oo. t. 
 
 Shultz, 234. 
 American Mut Aid Soc. t. Helbum, 
 
 238, 240. 
 American Mut Life Ins. Co. v. Bert- 
 ram, 248. 
 American Popular Life Ins. Co. ▼. 
 
 Day, 184. 
 American Surety Co. t. Pauly, 336, 
 
 592, 596, 597, 600. 
 American Towing Co. T. Insurance 
 
 Co., 478. 
 Ames V. Insurance Co., 294, 308. 
 Amicable Soc. v. Holland, 189, 518, 
 
 524. 
 Amick V. Butler, 412, 528. 
 Amsinck v. Insurance Co., 549. 
 Anchor Mar. Ins. Co. v. Keith, 546. 
 Anctll V. Insurance Co^ 384, 532. 
 Anderson y. Ass'n, 240. 
 y. Fitzgerald, 269. 
 V. Goldsmidt, 399. 
 T. Insurance Co., 214. 
 y. Thornton, 248. 
 Anderson Lumber Co. t. Insurance 
 
 Co., 547. 
 Andree y. Fletcher, 247. 
 Andrews y. Heme, 126. 
 
 y. Insurance Co., 266. 
 Andrus y. Ass'n, 395. 
 Angell y. Insurance Co., 168, 301. 
 Angler y. Assurance Co., 354, 463. 
 Annapolis & B. R. Co. y. Insurance 
 
 Co., 441. 
 Annen y. Woodman, 542, 547. 
 Anoka Lumber Ca y. Casualty Co., 
 606. 
 y. Fidelity Co., 609. 
 Anthony v. Insurance Co., 302. 
 Anthracite Ins. Co. y. Sears, 406. 
 Appleton y. Insurance Co., 353. 
 Arff V. Insurance Co., 312, S1&-S21, 
 Arguimbau y. Insurance Co., 315. 
 Armour y. Insurance Co., 268. 
 Armstrong y. Insurance Co.. 161, 844, 
 
 346, 373, 377, 378, 432. 
 Amfeld y. Assurance Co., 495. 
 Arnold y. Insurance Co., 458, 459, 549. 
 Ash brook v. Insurance Co., 21& 
 Ashley y. Ashley, 144. 
 
 Atherton y. Assurance Co., 456. 
 
 Atkins y. Insurance Co., 203, 435, 48t. 
 
 Atkinson y. Insurance Co., 158, 552. 
 
 Atlantic Ins. Co. v. Storrows, 558. 
 
 Atlantic & P. TeL Co. y. Barnes, 697, 
 
 Attorney General y. Insurance' Ckkt 
 213, 218, 220, 232. 
 
 Audenreld y. Insurance Co., 549. 
 
 Audubon y. Insurance Co., 159, 177. 
 
 Augusta Ins. & Banking Co. y. Ab- 
 bott, 549. 
 
 Aurora Fire Ins. Co. y. Eddy, 451. 
 
 Au Sable Lumber Ga t. Insurance Go^ 
 463, 464. 
 
 Austin y. Drew, 477. 
 
 Ayres T. Insurance Go., 113, 332, 448, 
 504. 
 
 B 
 
 Babcock y. Insurance Co., 482. 
 Backhouse y. Ripley, 538. 
 Bacon y. Ass'n, 568. 
 
 y. Clyne, 198. 
 Badger y. Insurance Co., 166, 167, 501. 
 
 y. Platts, 462. 
 Balle y. Insurance Co., 499. 
 Bain y. Atkins, 605, 606, 609. 
 Baker y. Assurance Co., 157, 205. 
 
 T. Insurance Co., 181, 236, 308, 
 331, 455, 550. 
 Baldwin y. Fraternity, 191. 
 
 V. Insurance Go., 99, 108, 170, 175, 
 177, 260. 
 Ballard y. Insurance Co., 76. 
 Baltimore & Ohio Employes' Relief 
 
 Ass'n y. Post, 587. 
 Baltimore & O. B. Go. y. Harris, 83. 
 Bammessel y. Insurance Co., 490. 
 Banco de Sonora y. Casualty Co., 380. 
 Bane y. Insurance Co., 205, 210. 
 Bangor Say. Bank y. Insurance Co., 
 
 354. 
 Bangs y. Skldmore, 200. 
 Bankers' Ufe Ins. Co. y. Bobbins, 21. 
 Bankers' & Merchants' Mut Ben. 
 
 Ass'n y. Stapp, 327. 
 Bank of Augusta y. Earle, 83. 
 Bank of Columbia y. Patterson, 151. 
 165. 
 
 Bank of Tarboro y. Deposit Co., 692, 
 
 593, 596. 
 Barber y. Insurance Co., 600l 
 Barbot y. Ass'n, 239. 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 621 
 
 f 
 
 Barbour y. Insurance Co., 406, 408. 
 Barbour's Adm'r y. Larue's Assignee, 
 
 406. 
 Barclay y. Cousins, 120. 
 Baring y. Claggett, 287. 
 Barker y. Insurance Co., 287, 556. 
 Barnard y. Adams, 557. 
 Barnes y. Ass'n, 273. 
 
 T. Insurance Co., 63, 65, 66, 177, 
 214. 
 
 T. People, 83. 
 Bamum y. Insurance Co., 470. 
 Baron y. Brummer, 408. 
 Barre y. Insurance Co., 499. 
 Barrett y. Insurance Co., 363. 
 Barron y. Burnside, 84, 85. 
 Barry y. Ass'n, 573. 
 Barteau y. Insurance Co., 268. 
 Bartholomew y. Insurance Co., 326, 
 
 337. 
 Bartlet y. Walter, 115. 
 Bartlett y. Insurance Co., 63. 
 Barwlck y. Bank, 304. 
 Basch y. Insurance Co., 180. 
 Basye y. Adams, 192. 
 Batchelder y. Insurance Co., 332, 363. 
 Bates y. Ass'n, 532. 
 
 y. Hewitt 262. 
 Bauble y. Insurance Co., 308. 
 Baumgart y. Modern Woodmen, 294. 
 Baumgartel y. Insurance Co., 328, 329. 
 Baxter y. Insurance Co., 81, 178, 225, 
 
 315, 384. 
 Bayly y. Insurance Co., 470. 
 Beal y. Insurance Co., 332. 
 Beals y. Insurance Co., 488, 489. 
 Bean y. Insurance Co., 587. 
 Beaty y. Downing, 417. 
 Bebee y. Insurance Co., 255, 331, 332. 
 Beck y. Railroad Co., 25. 
 Beebe y. Insurance Co., 308. 
 Beeber y. Walton, 87. 
 Behllng y. Insurance Co., 391. 
 Behrens y. Insurance Co., 456, 460. 
 Bell y. Bell, 541. 
 
 y. Insurance Co., 149. 
 Belleyue Roller-Mill Co. y. Insurance 
 
 Co., 467, 472. 
 Benedict y. Insurance Co., 182. 
 Ben Franklin Fire Ins. Go. y. Wllgus, 
 
 445. 
 Benham t. United, etc., Go^ 280. 
 
 Bennett y. Featherstone, 421. 
 
 y. Insurance Co., 337, 343, 876^ 
 505. 
 BennlnghofT y. Insurance Co., 373. 
 Bentley y. Insurance Co., 468. 
 Benton y. Brotherhood, 193. 
 
 y. Insurance Co., 220. 
 Berg V. Damkoehler, 403. 
 Berliner y. Insurance Co., 676. 
 Bermon y. Woodbridge, 545. 
 Bernard y. Ass'n, 327. 
 Bemheim v. Davitt, 405. 
 Berry y. Indemnity Co., 87. 
 
 y. Insurance Co., 62, 308. 
 Bersche y. Insurance Co., 489. 
 Bevin y. Insurance Co., 135, 187. 
 Biays v. Insurance Co., 558. 
 Biddeford Say. Bank y. Insurance Oo., 
 
 75, 110. 
 Bigelow y. Ass'n, 236. 
 
 y. Insurance Co., 521-523. 
 Biggar y. Assurance Co., 363. 
 Bilbrough y. Insurance Co^ 289. 
 Bill y. Mason, 542. 
 Billings y. Insurance Co., 283, SSL 
 Bills y. Insurance Co., 447. 
 Bird y. Appleton, 189. 
 Birmingham y. Insurance Co., 110. 
 Birmingham Fire Ins. Co. y. Pulyer, 
 
 487, 507. 
 Blsh y. Insurance Co., 510. 
 Bishop y. Grand Lodge, 191, 613. 
 
 y. Insurance Co., 378. 
 Black y. Insurance Co., 510. 
 Blackburn y. Vigors, 265, 271, 33a 
 Blackerby y. Insurance Co., 182, 202. 
 Blackstone y. Insurance Co., 64, 65, 
 
 520, 522. 
 Blaeser y. Insurance Co., 45, 241, 246. 
 Blake y. Insurance Co., 231, 330. 
 Blanchard y. Walte, 172. 
 Block y. Insurance Co., 395. 
 Bloom y. Insurance Co., 526, 527. 
 Blooming Groye Mut. £^e Ins. Go. ▼. 
 
 McAnemey, 326, 337. 
 Bloomlngton Mut Ben. Ass'n y. Blue, 
 
 128, 186. 
 Blossom y. Insurance Co., 502. 
 Blue Grass Ins. Co. y. Cobb, 174. 
 Bobbitt y. Insurance Co., 183, 287. 
 Bodlne T. Inforance Oo^ 178» 820, 821, 
 868. 
 
 i^ 
 
622 
 
 Boehen ▼. Insurance Co., 177-180, 
 
 Boetcher v. Insurance Co., 334. 
 
 Bohn Mfg. Co. t. Sawyer, lia. 
 
 Boisseau y. Bass' Adm'r, 400. 
 
 Bolton T. Bolton, 68. 
 
 Bond V. The Brig Cora, 649. 
 
 Bondrett v. Hentigg, 558. 
 
 Bonnert v. Insurance Co., 610. 
 
 Boon V. Insurance Co., 479. 
 
 Booth V. Galr, 563. 
 
 Borden v. Insurance Ob., 53, 64. 
 
 Born V. Insurance Co., 362. 
 
 Borradaile v. Hunter, 518, 521. 
 
 Bosley v. Insurance Co., 660. 
 
 Boston, The, 649. 
 
 Boston Ins. Co. v. Insurance Co., 120. 
 
 Boston & S. Ice Ca y. Insurance Co.. 
 110, 452. 
 
 Bowden y. Vaughan, 273, 278. 
 
 Bowman y. Insurance Co., 70, 178. 
 
 Bowrlng v. Insurance Co., 116. 
 
 Boyd y. Insurance Co., 373. 
 
 Boyer y. Insurance Co., 463. 
 Boyle y. Insurance Co., 500. 
 Boynton y. Ass'n, 523. 
 Bradbum y. Railroad Co., 428. 
 Bradbury y. Insurance Soc, 441. 
 Bradford y. Insurance Co., 236. 
 Bradley v. Insurance Co., 196. 215. 618. 
 
 525, 526. 
 Bradlle y. Insurance Co., 659, 560. 
 Brady y. Ass'n, 204, 210. 
 
 V. Insurance Co., 186, 212, 631 
 532. 
 Bragdon y. Insurance Co., 172. 
 Braker y. Ass'n, 500. 
 Brannln y. Insurance Co., 226. 
 Braswell y. Insurance Co., 243, 244. 
 Breasted y. Trust Co., 518, 520. 
 Breckinridge y. Insurance Co., 800. 
 Breeyear v. Insurance Go., 458, 469. 
 Breitung, Estate of, 390. 
 Briggs y. Earl, 192, 414. 
 
 y. Insurance Co., 880, 481. 
 Brighthope Ry. Co. y. Rogers, 65. 
 British America Assur. Co. v. Brad- 
 ford, 484. 
 ▼. Miller, 440. 
 
 British Bq. Ins. Co. t. Ralhx>ad Co.. 
 416. 
 
 British Ins. Co. v, Magie Cooke A AI- 
 cock, 126b 
 
 CASES CITED. 
 [Ttat flguriM refer to pages.] 
 
 British Mut Banking Co. y. Rallroa* 
 
 Co., 303. 
 Britton v. Supreme Council, 513. 
 Brock y. Insurance Co., 355. 
 Brockway v. Insurance Co., 128. 
 Brooke v. Insurance Co., 559. 
 Brooklyn Life Ins. Oow t. Dutcher. 
 283. 
 
 y. Miller, 180. 
 Brough V. Higgins, 421. 
 
 y. Whitmore, 11, 164, 537. 
 Brower y. Supreme Lodge, 523. 
 Brown y. Assurance Co., 498. 
 
 y. Grand Lodge, 401, 403. 
 
 T. Insurance Co., 170, 177, 
 180, 208, 444^ 44^ 448L 
 460,544. 
 
 T. Mansur, 515. 
 
 y. Smith, 552. 
 
 y. Stapylton, 53L 
 Browning v. Insurance Co., 254, 256w 
 Brown's Appeal, 399. 
 Bruce y. Insurance Co., 182, 214^ 234. 
 Bryan y. Insurance Co., 283. 
 Bryant y. Insurance Co., 435. 
 Buchanan y. Insurance Co., 125, 46a 
 
 y. Supreme Conclave, 226. 
 Buck y. Insurance Co., 76, 262. 
 Buell y. Grain Co., 87. 
 Buelow, In re, 406. 
 Bufe y. Turner, 252, 255. 
 Buffalo City Bank y. Insurance Co.^ 
 561. ^ 
 
 Buffalo Loan, Trust & Safe-Deposit 
 Co. y. Ass'n, 499, 500. 
 
 Buffalo Steam Engine Works y. In- 
 surance Co., 419. 
 
 Bulger y. Insurance Co., 211. 
 
 Bullard y. Insurance Co., 547, 550. 
 
 Burden y. Ass'n, 220. 
 
 Burgess r. Insurance Co., 548, 549. 
 
 Burke y. Dulaney, 171. 
 
 Burkhard y. Insurance Co., 582. 
 
 Burleigh y. Insurance Co., 287. 
 
 Burlington Fire Ins. Co. y. Coffman,. 
 
 Burlington Ins. Co. v. Brockway, 283. 
 
 y. Gibbons, 824. 
 
 V. Lowery, 308, 504. 
 
 y. Rivers, 352. 
 
 y. Toby, 376. 
 Bumam ?. White, 416. 
 
 B 
 
 CASES CITED. 
 [The flgurea refer to pages.] 
 
 623 
 
 Burnett y. Insurance Co., 468. 
 Bums y. Grand Lodge, 77. 
 Burridge y. Row, 201. 
 Burritt y. Insurance Co., 188, 262, 253, 
 
 293. 
 Burrows y. Turner, 76. 
 Burrus y. Insurance Co., 244. 
 Burruss y. Ass'n, 150. 
 Bursinger y. Bank, 144, 416. 
 Burson v. Ass'n, 336, 362. 
 Burt V. Insurance Co., 182, 188, 884, 
 
 524, 533, 557. 
 Burton v. English, 666. 
 
 y. Insurance Co., 126, 185. 
 Burwell v. Snow, 391. 
 Business Men's League y. Waddlll, 30. 
 Bussing's Ex'rs v. Insurance Co., 231. 
 Butchers' Union Slaughter-House, etc., 
 
 Co. y. Live Stock Landing, etc., Co., 
 
 77, 88. 
 Butler y. Wildman, 566. 
 Byrne y. Insurance Co., 649. 
 
 Caballero t. Insurance Co., 481. 
 Caffery y. Insurance Co., 188. 
 Caledonia Ins. Co. y. Traub, 487. 
 California Ins. Co. y. Compress Co., 
 
 114, 439, 605. 
 Camden y. Cowley, 541. 
 Cameron y. Fay, 405. 
 Cammack y. Lewis, 103, 139, 140. 
 Campbell y. Insurance Co., 128, 156, 
 282, 293, 294, 499. 
 y. Supreme Conclave, 518 
 T. Supreme liOdge, 311. 
 Canavan y. Insurance Co., 403. 
 Cannon y. Insurance Co., 478, 502. 
 Canton Ins. Office y. Woodside, 482. 
 
 558. 
 Capen y. Insurance Co., 546. 
 Capital City Ins. Co. y. Caldwell, 438. 
 
 y. Jones, 75, 77. 
 Capital City Mut Fire Ins. Co. t. 
 
 Boggs, 239. 
 Capital Fire Ins. Co. y. Watson, 594, 
 
 596. 
 Caplis y. Insurance Co., 447. 
 Caraher y. Insurance Co., 472. 
 Carey v. Insurance Co., 324, 352, 446. 
 Carlock v. Insurance Co., 177. 
 Carmichael y. Ass'n, 616. 
 
 Games y. Ass'n, 523, 568. 
 Carpenter y. Ass'n, 97, 2ia 
 
 T. Insurance Co., 49, 100. Ill, 112, 
 121, 132, 253, 329, 368» 879^ 
 418-420, 426, 427, 502. 
 
 T. Knapp, 402. 
 
 y. Snelling, 161. 
 Carr y. Insurance Co., 438, 581. 
 Carrigan y. Insurance Co., 444. 
 Carrington y. Insurance Co., 447. 
 Carrollton Furniture Mfg. Co. Y. In- 
 demnity Co., 251, 369, 370. 
 Carson v. Insurance Co., 258. 
 Carstairs v. Insurance Co., 427. 
 Carter v. Boehm, 252, 261-264. 
 
 y. Insurance Co., 206, 225, 229, 
 230. 
 Case y. Insurance Co., 476, 509. 
 Cason y. Owens, 402. 
 Cassimus y. Insurance Co., 433. 
 Cassity y. Insurance Co., 55. 
 Castellaln y. Preston, 55, 423-125. 
 Castner y. Insurance Co., 224. 
 Catlin y. Insurance Co., 283, 289. 
 Catt y. Olivier, 171. 
 Cauffleld v. Insurance Co., 199, 215. 
 Cawthon y. Perry, 127. 
 Cayon v. Insurance Co., 490. 
 Cazenove y. Assurance Co., 258. 
 Centennial Mut Life Ass'n v. Par- 
 ham, 326, 337. 
 Center y. Insurance Co., 560. 
 Central Bank y. Hume, 102. 
 Central City Ins. Co. v. Gates, 498. 
 Central Nat Bank y. Hume, 390, 392. 
 
 408-410, 412. 
 Chadsey v. Guion, 182. 
 Chaffee v. Insurance Co., 287. 
 Chamberlain v. Butler, 416, 
 
 y. Insurance Co., 162. 
 
 y. Williams, 528. 
 Chambers v. Insurance Co., 288, 609. 
 Chandler y. Insurance Co., 509. 
 Chapin y. Fellowes, 399. 
 Chapman y. Pole, 456. 
 Charlotte, C. & A. R. Co. v. Gow, 597. 
 Chartbrand y. Brace, 59. 
 Charter Oak Life Ins. Co. v. Rodel, 
 
 521. 
 Ohartiers & R. Turnpike Co. y. Mc- 
 
 Namara, 151. 
 Chase v. Insurance Co.» 281, 547. 
 
 ▼. Swayne, 406. 
 
 i 
 
 1 1; 
 
 h 
 
 « 
 
 _ 
 
1 
 
 !) 
 
 1 
 
 ; 1 
 i 1 
 
 i 
 
 1 
 < 1 
 
 i 
 
 ■ 
 
 
 1 
 
 
 1, 
 
 
 1 
 
 '■^ 
 
 i 
 
 
 
 624 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 Chesapeake Ins. O). t. Allgre's Heirs, 
 
 538. 
 Chicago, B. ft Q. R. Co. t. Curtis, 25. 
 Chicago Guaranty Fund Ldfe Soc. y. 
 
 Dyon, 145. 
 Chicago Lift Ins. Co. t. Warner, 211. 
 Chicago Mut Life Indemnity Ass'n y. 
 
 Hunt, 90, 191. 
 Chickasaw County Farmers' Mat Fire 
 
 Ins. Co. V. Weller, 426. 
 Childs y. Insurance Co., 561, 
 Chilson V. Downer, 608. 
 Chippewa Lumber Co. t. Insurance 
 
 Co., 481. 
 Chisholm y. Insurance Co., 125, 136. 
 Chosen Friends y. Fairman, 59. 
 Chrisman y. Insurance Co., 121. 
 Church y. Insurance Co., 205. 
 Cincinnati Ins. Ga t. Bakewell, 559, 
 561. 
 y. Duffleld, 561. 
 Cincinnati Mut. Health Assur. Go. y. 
 
 Rosenthal, 87, 88. 
 Cincinnati Mut Ins. Co. y. May, 647. 
 Citizens' Ins. Co., In re, 600. 
 y. Glasgow, 661. 
 y. McLaughlin, 470. 
 y. Marsh, 189. 
 y. Stoddard, 330, 383. 
 City Fire Ins. Co. y. Carrugl, 186. 
 
 y. Corlies, 480. 
 City of Dayenport T. Insurance Co., 
 
 172. 
 City of New York y. Insurance Co., 
 
 110, 118, 509. 
 City of Petersburg y. Ass'n, 60. 
 City of St Joseph y. Railroad Ca, 606. 
 City Planing & Shingle Mill Go. y. In- 
 
 surance Co., 381, 461, 473. 
 Claflin y. Credit System Co^ 48. 691, 
 592, 602. 
 y. Insurance Co., 466. 
 Clapham v. Cologan, 287. 
 Clapp y. Ass'n, 273. 
 
 y. Insurance Ass'n, 118. 
 Clark y. Allen, 144, 410. 
 y. Ass'n, 166, 811. 
 y. Durand, 890. 
 
 y. Insurance Co., 117, 188, 243, 
 254r-267, 291, 460. 
 Clarke y. Assurance Co., 480b 
 y. Insurance Co., 118. 
 T. Schwarzenberg, 414 
 
 Clay Fire & Marine Stock Ins. Co. y. 
 
 Beck. 444, 447. 
 Cleaver v. Ass'n, 392, 393. 
 
 y. Insurance Co., 324, 326, 827 
 843. 
 Clemans y. Assembly, 357. 
 
 V. Supreme Assembly, 370. 
 Clement y. Insurance Co., 384, 528. 
 
 532. 
 Clements y. Insurance Co., 532. 
 
 v. Railroad Co., 25. 
 Clemmltt y. Insurance Co., 84, 18&^ 
 
 220. 
 Clemson y. Trammell, 458. 
 Clendlning y. Church, 125. 
 Clidero y. Insurance Co., 668. 
 Clift y. Schwabe, 6ia 
 Cline y. Assurance Co., 20, 327. 
 Clinton y. Insurance Co., 50, 111, 121, 
 
 450. 
 Cluff y. Insurance Co., 624. 
 Cobb y. Ass'n, 286, 291. 
 
 V. Insurance Co., 647. 
 Cockerill y. Insurance Co., 122, 149. 
 Cockrell v. Cockrell, 395. 
 Coffin y. Insurance Co., 549. 
 Cohen y. Insurance Co., 64, 80, 82, 84, 
 
 220. 
 Colt V. Smith, 551. 
 Coker v. Insurance Co., 161. 
 Colburn, Appeal of, 415, 528. 
 Colby y. Investment Co., 222. 
 Cole y. Haven, 44. 
 
 y. Insurance Co., 178, 308. 
 Coles y. Insurance Co., 334, 650. 
 Collett y. Morrison, 185, 272. 
 Collins V. FideUty & Casualty Co., 581. 
 
 y. Insurance Co., 446. 
 
 y. Locke, 487. 
 Columbia Bank y. Society, 406. 
 Columbia Ins. Co. y. Buckley, 224. 
 
 y. Cooper, 110, 116. 
 
 T. Lawrence, 418, 602, 507. 
 
 y. Masonheimer, 316. 
 Columbia Paper Stock Co. t. Casualty 
 
 Co., 594. 
 Columbian Ins. Co. ▼. Lawrence^ 113, 
 
 257. 
 Combs y. Insurance Co., 868. 
 Commack y. Lewis, 411. 
 Commercial Fire Ins. Go. T. Iiunumnot 
 Co., 121, 123. 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 625 
 
 Commercial Ins. Go. y. Hallock, 161, 
 170, 259. 
 y. Huckberger, 507. 
 y. Ives, 334. 
 Commercial League Ass'n ▼• People, 
 
 69. 
 Commercial Mut Ace. Co. y. Bates, 
 
 289, 292. 
 Commercial Mut Ins. Co. y. Insur- 
 ance Co., 61, 63, 150, 156, 315. 
 Commercial Mut. Marine Ins. Co. y. 
 
 Insurance Co., 168, 175, 177. 
 Commercial Nat Bank y. Armstrong, 
 
 249. 
 Commercial Union Assur. Co. y. In- 
 surance Co., 64. 
 y. Urbansky, 149. 
 Commonwealth v. Andrews, 45. 
 y. Ass'n, 59, 60, 90, 400. 
 y. Insurance Co., 113. 
 v. Nutting, 83, 299. 
 V. Philadelphia Inquirer, 43. 
 y. Society, 196. 
 y. Vrooman, 76, 77. 
 y. Wetherbee, 59, 591. 
 Commonwealth Ins. Co. y. Cropper, 
 548. 
 y. Insurance Co., 62. 
 y. Sennett 488. 
 Commonwealth Mut Fire Ins. Co. v. 
 Hayden, 87. 
 y. Mfg. Co., 312. 
 y. Place, 86. 
 Conboy y. Ass'n, 526. 
 Connecticut Fire Ins. Co. y. Railroad 
 Co., 423, 426. 
 y. Tilley, 72. 
 Connecticut Mut. Life Ins. Co. y. 
 Akens, 521. 
 y. Baldwin, 514. 
 y. Burroughs, 201, 399. 
 y. Duerson's Ex'r, 220. 
 y. Groom, 517, 520. 
 y. Lathrop, 521. 
 y. Luchs, 75, 137, 139, 258. 
 y. McWhlrter, 523. 
 y. Moore, 522. 
 y. Railroad Co., 428. 
 y. Schaefer, 30, 58, 98, 101, 104, 
 105, 126, 127, 129, 416. 
 Connelly y. Ass'n, 190. 
 Conner y. Reeves, 608. 
 
 Vance Ins. — 40 
 
 Conrad's Estate, In re, 394, 398. 
 Consolidated Fire Ins. Co. v. Cashow, 
 
 65. 
 Constant v. Insurance Co., 152. 
 Continental Fire Ass'n v. Norris, 310. 
 
 y. Wbitaker, 295, 297, 305, 48i. 
 502. 
 Continental Ins. Go. y. Allen, 312. 
 
 V. Boykin, 199. 
 
 v. Browning, 353, 433. 
 
 y. Daniel, 495. 
 
 y, Delpeuch, 523. 
 
 y. Dorman, 184, 223. 
 
 y. Kasey, 268, 284, 293^ 
 
 y. Kyle, 472. 
 
 y. Miller, 220. 
 
 y. Munns, 50. 
 
 y. Pearce, 825, 326, 335, 339. 
 
 y. Pruitt, 483. 
 
 T. Ruckman, 310, 317, 318, 320, 
 329. 
 
 y. Wilson, 354. 
 Continental Ins. Co. of New York y. 
 
 Browning, 350. 
 Continental Life Ins. Co. y. Chamber- 
 lain, 21, 300, 310, 337, 340, 
 366, 368. 
 
 y. Chew, 337. 
 
 y. Houser, 241. 
 
 y. Palmer, 396, 514. 
 
 y. Pearce, 331. 
 
 y. Rogers, 292. 
 
 y. Volger, 125, 129, 131, 183. 
 
 y. Webb, 394, 514. 
 
 y. Yung, 294. 
 Cook y. Allee, 895. 
 Cooke V. Insurance Co., 159. 
 Coon y. Swan, 412. 
 Cooney y. Cooney, 405. 
 Cooper y. Insurance Co., 621. 
 
 y. Shaeffer, 139. 
 
 y. Weaver's Adm'r, 139. 
 Copeland y. Insurance Co., 459, 646^ 
 
 547. 
 Corbett y. Insurance Co., 492. 
 Cornell y. Insurance Co., 608. 
 Cornish y. Insurance Co., 582. 
 Corson, Appeal of, 58, 103, 104^ 127, 
 129, 134. 
 
 y. Insurance Co., 381. 
 Corson's Appeal, 189, 412. 
 Cory y. Patton, 170, 269, 201* 
 
 li 
 
 lit 
 
 I 
 
 
626 
 
 CASES CITED. 
 [The flgurss refer to pages.] 
 
 Gotten y. Casualty Co., 205, 210. 
 Cottingham t. Insurance Co., 449, 452. 
 Cotton States Life Ins. Co. T. Ed- 
 wards, 230. 
 Conch ▼. Insurance Co., 166. 
 Cousins V. Nantes, 126, 
 Covenant Mut Life Ass'n y. Kentner, 
 
 239. 
 Coventry Mut. Live Stock Ins. Ass'n 
 
 V. Evans, 502. 
 Cowan V. Assurance Corp., 87. 
 y. Insurance Co., 449. 
 V. Robberds, 46. 
 Cowart y. Insurance Co., 459. 
 Cowles y. Insurance Co., 214. 
 Cowman v. Rogers, 397, 398. 
 Crane y. Bell, 7, 8. 
 
 y. Insurance Co., 429. 
 Craufurd y. Hunter, 126. 
 Cravens y. Insurance Co., 187, 212, 
 
 228, 229, 231. 
 Crawford County Mut Ins. Co. T. 
 
 Cochran, 207. 
 Creed y. Fire Office, 109. 
 Crescent Ins. Co. y. Moore, 406. 
 Crikelalr y. Insurance Co., 443, 448. 
 Critchett v. Insurance Co., 310. 
 Crocker y. Hogln, 529. 
 
 y. Jackson, 549. 
 Croft y. Insurance Co., 150, 176, 205. 
 
 313. 
 Cromwell y. Insurance Co., 468. 
 Cronin y. Ass'n, 458, 461. 
 
 y. Insurance Co., 132, 135. 
 Cronkhite v. Insurance Co., 170, 173. 
 Crosby y. Ball, 515. 
 
 y. Insurance Co., 557. 
 Cross y. Insurance Co., 546. 
 Crosswel v. Ass'n, 56, 98, 103-105, 130, 
 
 144, 416. 
 Crotty y. Insurance Co., 136, 411. 
 Crowley v. Cohen, 113. 
 Cruikshank y. Janson, 541. 
 Culbertson y. Cox, 421. 
 Cullen y. Butler, 543. 
 
 y. Harris, 405. 
 Cumberland Valley Mut. Protection 
 
 Co. y. Douglas, 283. 437, 462. 
 Cummins y. Insurance Co., 474. 
 Cunningham y. Smith's Adm'r, 143. 
 Currier y. Insurance Co., 101, 132, 136, 
 
 204. 
 Curry y. Insurance Co., 109, 253. 
 
 Curtis y. Banker, 608. 
 Curtlsa y. Insurance Co., 414, 
 Cushman y. Fuel Co., 607, 609. 
 Cuthbertson y. Insurance Co., 82Bw 
 
 Dabney y. Insurance Co., 549. 
 
 Dacey v. Insurance Co., 53. 
 
 Daggs y. Insurance Co., 83, 165, 800^ 
 
 491. 
 Dailey y. Ass'n, 168, 173. 
 Dalby y. Assurance Co., 57, 68, 101, 
 
 102, 126, 127, 412. 
 Dale y. Brumbly, 414. 
 Daniels y. Insurance Co., 183, 187, 255, 
 
 257, 268, 287, 292, 293. 
 Daniher y. Grand Lodge, 59. 
 Dannhauser y. Wallenstein, 414. 
 Darrow y. Society, 392, 402, 517, 519, 
 
 525. 
 Daul y. Insurance Co., 455. 
 Davenport v. Insurance Co., 332. 
 Davey y. Insurance Co., 286, 373. 
 David y. Insurance Co., 110. 
 Davidson y. Society, 193. 
 Davis y. Brown, 528. 
 
 y. Insurance Co., 101, 123, 312, 
 
 488, 500. 
 T. King, 317. 
 Day V. Insurance Co., 183, 244, 294, 
 
 308, 406. 
 Dayton Ins. Co. y. Kelly, 149, 166, 30a 
 Dean y. Dicker, 536. 
 
 y. Insurance Co., 521. 
 De Armand y. Insurance Co., 444. 
 De Camp y. Insurance Co., 301, 309. 
 De Costa y. Edmunds, 538. 
 
 V. Firth, 538. 
 Decrow y. Insurance Co., 550. 
 Dederer v. Insurance Co., 552. 
 De Forest y. Insurance Co., 115. 
 De Frece y. Insurance Co., 353. 
 De Graff y. Insurance Co., 440, 441. 
 Deitz y. Insurance Co., 319, 331, 334. 
 Delahunt v. Insurance Co., 425, 541. 
 De Lancey y. Insurance Co., 18. 
 De La Vergne Refrigerating MaclL 
 
 Co. V. Institution, 186. 
 Delaware Ins. Co. y. Greer, 420, 467. 
 De Longuemere v. Insurance Co., 262. 
 Delouche y. Insurance Co., 247. 
 
 i: 
 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 627 
 
 Deming y. Storage Co., 425. 
 
 Denison y. Ass'n, 508. 
 
 Dennis y. Insurance Co., 522, 528. 
 
 Dennison v. Insurance Co., 268, 273. 
 
 Dennistoun y. Lillie, 276. 
 
 Denoon y. Insurance Co., 539. 
 
 Denver Fire Ins. <So. v. McClelland, 
 
 186. 
 De Peau y. Russel, 543. 
 De Peyster y. Insurance Co., 659. 
 Des Moines Ice Go. y. Insurance Co., 
 
 462, 463. 
 Devaux y. J' Anson, 539. 
 Devens y. Insurance Co., 812. 
 Dewees y. Insurance Co., 360. 
 Dewey y. Davis, 245. 
 Dezell y. Casualty Co., 568, 677. 
 Dibble v. Assurance Co., 174. 
 Dick y. Insurance Co., 111. 
 Dickenson y. Insurance Co., 263. 
 
 y. Jardine, 555. 
 Dickerman y. Insurance Co., 123. 
 Dickerson v. Insurance Co., 242, 523. 
 Dickey y. Insurance Co., 542, 561. 
 Dickinson y. A. O. U. W., 193. 
 Dillard v. Insurance Co., 93, 97, 197, 
 
 219. 
 Dilleber ▼. Insurance Co., 314, 345, 
 
 353. 
 Dlmick y. Insurance Co., 361, 363. 
 Disbroi^ y. Jones, 49. 
 Diver y. insurance Co., 459. 
 Dixon y. Heed, 552. 
 V. Sadler, 546. 
 Dobbel's Estate, In re, 528. 
 Dobyns y. Association, 180. 
 Dogge V. Insurance Co., 456. 
 Dolan V. Ass'ti, 516. 
 
 y. Court,! 191. 
 Dolliver v. insurance Co., 444, 448, 
 
 506. 
 Domett y. T</ung, 559. 
 Donald y. Railway Co., 00. 
 Donaldson v. Uhlfelder, 171. 
 Donnell y. Donnell, 116. 
 Dooly y. Insurance Co., 256, 272. 
 Dorr y. Insurance Co., 231, 232. 
 Douglas y. Insurance Co., 231. 
 Dover Glassworks Co. y. Insurance 
 
 Co., 372, 461. 
 Dow y. Insurance Co., 120. 
 Dowdale's Case, 8. 
 Dowling y. Insurance Co., 362, 383. 
 
 Doyle y. Insurance Co., 23, 84, 85. 
 Dozier y. Fidelity & Casualty Go., 668| 
 
 580. 
 Drake y. Stone, 396. 
 Drennen y. Assurance Corp., 463. 
 Drury's Adm'x v. Insurance Co., 229, 
 
 231. 
 Dudgeon v. Pambroke, 560. 
 Dudgeon y. Pembroke, 646. 
 Duff V. Mackenzie, 538. 
 Dugger y. Insurance Co., 490, 491. 
 Duluth Nat Bank y. Insurance Co., 
 
 318. 
 Duncan v. Insurance Co., 183, 470. 
 Duncombe's Estate, In re, 388. 
 Dupreau v. Insurance Co., 444, 446. 
 Dupuy y. Insurance Co., 327. 
 Duran v. Insurance Co., 527. 
 Duvall y. Goodson, 394, 404, 612, 614. 
 Dwelling House Ins. Co. y. Brodie^ 
 510. 
 T. Dowdall, 446. 
 V. Hardie, 236. 
 y. Snyder, 316, 33a 
 Dwyer v. Edie, 137. 
 Dyson y. Bowcroft, 668b 
 
 Eagan v. Insurance Co., 178. 
 Eagle Ins. Co. v. Insurance Co., 88. 
 
 y. State, 297. 
 Eames v. Insurance Co., 163, 164^ 163, 
 
 177, 301, 308, 364, 368. 
 Earl y. Shaw, 536. 
 Earle y. Rowcroft, 552. 
 Early y. Insurance Co., 677, 678. 
 Easley y. Insurance Co., 190. 
 Eastabrook v. Insurance Co., 517, 521. 
 Eastern B. Co. y. Insurance Co., 370, 
 
 382. 
 East Texas Fire Ins. Co. y. Blum, 313. 
 
 y. Brown, 313. 
 
 y. Clarke, 451. 
 Eaton V. Insurance Co., 585. 
 Ebert v. Association, 239, 245. 
 Ebsworth y. Insurance Co., 100. 
 Eckel y. Renner, 143, 416. 
 Eclectic Life Ins. Ca y. Fahrenkrug, 
 
 315. 
 Eddy y. Insurance Co., 211, 214. 
 Edgerly y. Insurance Go, 507. 
 
 ♦ 
 
 I 
 
C2S 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 f 
 
 Edwards v. Footner, 277. 
 V. Insurance Co., 495. 
 Eenrorn, The, 189. 
 Egan V. Insurance Ck)., 63, 150. 
 Eggenberger v. Association, 585. 
 Eggleston v. Insurance Co., 510. 
 Eilenberger v. Insurance Co., 81, 334. 
 Eliot Five Cents Sav. Bank v. As- 
 surance Co., 488. 
 Elkhart Mut. Aid B. & R. Ass'n »v. 
 
 Houghton, 128. 
 Elkins V. Insurance Co., 178. 
 EHorbe v. Barney, 198, 238. 
 Elliott V. Insurance Co., 448 
 Elliott's Ex'rs' Appeal, 408. 
 Ellis V. Insurance Co., 50, 384, 413, 
 
 444, 447, 509. 
 Ellison V. Straw, 390, 395, 396. 
 El Paso Reduction Co. v. Insurance 
 
 Co., 461, 495. 
 Embler v. Insurance Co., 609. 
 Embry's Adm'r v. Harris, 138. 
 Emery v. Insurance Co., 149, 460. 
 Employers' Liability Assurance Corp. 
 V. Back, 584, 585. 
 V. Merrill, 43, 137, 605. 
 Endowment Rank K. P. v. Cogbill, 
 281, 294, 335. 
 T. Rosenfeld, 281, 282. 
 Endowment & Benev. Ass'n t. State, 
 
 59. 
 English V. Insurance Co., 441. 
 Entwistle v. Insurance Co., 399. 
 Equitable Fire Ins. Co. v. Alexander, 
 
 174. 
 Equitable Life Assur. Soc v. Bank, 
 232. 
 T. Cole, 205-207. 
 T. Com., 75, 196, 205. 
 ▼. McElroy, 149, 161, 373. 
 T. Nixon, 188, 225, 226. 
 ▼. Paterson, 136, 521. 
 V. Pettus, 297. 
 T. Spillman, 233. 
 V. Trimble, 188. 
 Equitable Life Ins. Co. v. Hazelwood, 
 
 100, 104, 130, 137, 138, 140, 316. 
 Erb T. Insurance Co., 452. 
 Erman v. Insurance Co., 455. 
 Ermentrout v. Insurance Co., 477, 498, 
 
 504. 
 Essex Say. Bank ▼. Insurance Co., 
 113. 
 
 Estes V. Insurance Co., 309. 
 Eury V. Insurance Co., 205, 210. 
 Evans v. Insurance Co., 97, 220. 
 
 V. Opperman, 515. 
 Ewing V. Association, 589. 
 Excelsior Fire Ins. Co. v. Insurance 
 
 Co., 112, 419. 
 Exchange Bank v. Loh, 127, 140. 
 Exchange Bank of Macon v. Loh, 57, 
 
 411, 412, 417. 
 Exchange Bank of St Louis ▼. Bice, 
 
 66. 
 Byre v. Grover, 539. 
 
 Fabbrl v. Insurance Co., 191. 
 
 Failey v. Fee, 193. 
 
 Fairchild v. Association, 144, 416. 
 
 Falkuer v. Ritchie, 552. 
 
 Faneuil Hall Ins. Co. V. Insurance 
 
 Co., 64, 68. 
 Farley v. Insurance Co., 234. 
 Farmers' Bank of Saratoga v. Max- 
 well, 235. 
 Farmers' Feed Co. v. Insurance Co.. 
 
 485. 
 Farmers' Fire Ins. Co. v. Baker, 383. 
 Farmers' Ins. Co. v. Williams, 337. 
 Farmers' Ins. & Loan Co. v. Snyder, 
 
 184, 269. 
 Farmers' Loan & Trust Co. v. Glass 
 
 Co., 418. 
 Farmers' Mut Fire Ins. Ass'n v. Kry- 
 
 der, 441. 
 Farmers' Mut Fire Ins. Co. v. Barr, 
 509. 
 T. Marshall, 429. 
 Farmers* Mut. Ins. Co. v. Insurance 
 Co., 242. 
 V. Taylor, 504. 
 V. Turnpike Co., 76, 118. 
 Farmers' & Drovers' Ins. Co. v. Curry, 
 
 285, 296. 
 Farmers' & Mechanics' Benev. Fire 
 
 Ass'n v. Williams, 362. 
 Farmers' & Merchants' Ins. Co. v. 
 Dobney, 483. 
 T. Hahn, 446. 
 V. Jensen, 449. 
 Farmers' & Traders' Bank v. Johnson. 
 143. 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 629 
 
 Farnum v. Insurance Co., 178, 180, 
 
 215, 308, 354. 
 Farrell v. Insurance Co., 441, 507. 
 Farrow v. Insurance Co., 75. 
 Faust V. Insurance Co., 182. 
 Fawcus V. Sarsfield, 546. 
 Fayerweather v. Insurance Co^ 426, 
 
 427. 
 Fearn v. Ward, 410. 
 Feder v. Association, 569. 
 Feibelman v. Assurance Co., 189. 
 Feise v. Parkinson, 247, 248. 
 Ferdon v. Canfield, 75. 
 Ferebee v. Insurance Co., 209. 
 Ferguson v. Insurance Co., 412. 
 Fernandez v. Insurance Co., 549. 
 Ferree v. Insurance Co., 468. 
 Fetter v. Fidelity & Casualty Co., 570. 
 Fidelity Mut. Life Ass'n v. Ficklin, 
 285, 296. 
 T. Jeffords, 281. 
 v. Mettler, 483. 
 V. Miller, 285, 298. 
 Fidelity & Casualty Co. T. Alpert, 293. 
 V. Ballard, 158. 
 V. Bank, 596, 598-600. 
 V. Chambers, 177. 
 V. Eickhoff, 596, 601. 
 V. Johnson, 205, 210, 667. 
 V. Waterman, 431. 
 Fidelity & Casualty Co. of New York 
 V. AlUbone, 484. 
 V. Teter, 574. 
 V. Waterman, 580. 
 Fifth Ave. Bank v. Railroad Co., 304. 
 Findlay v. Insurance Co., 449, 467. 
 Fineisen v. Insurance Co., 373. 
 Fink V. Fink, 403. 
 Flnlay v. Liverpool, 554. 
 Finley v. Insurance Co., 372. 
 Fire Ass'n of Philadelphia T. Hog- 
 wrood, 312. 
 V. Rosenthal, 488, 489. 
 Fire Ins. Ass'n v. Transportation Co., 
 
 76, 115, 116, 182. 
 Fireman's Fund Ins. Co. v. Barker, 
 451. 
 ▼. Buckstaff, 509. 
 T. McGreevy, 254. 
 T. Norwood, 309, 324, 325. 368. 
 V. Refrigerating Co., 330, 510. 
 Fireman's Ins. Co. v. Cecil, 429. 
 ▼. Kuessner, 177. 
 
 First Baptist Church Trustees v. In- 
 surance Co., 176. 
 First Congregational Church v. Insur- 
 ance Co., 434, 463. 464. 
 First Nat. Bank v. Insurance Co., 292, 
 456. 
 ▼. Speece, 127. 
 V. Terry's Adm'r, 127. 
 Fischer v. Insurance Co., 487. 
 Fish V. Cottenet, 151. 
 Fisher v. Donovan, 192. 
 
 V. Insurance Co., 50, 53, G8, 244, 
 246, 248. 
 Fitch v. Insurance Co., 278, 279, 287, 
 
 292, 392, 519, 530. 
 Fitchburg Sav. Bank v. Insurance Co„ 
 
 350, 443. 
 Fithian v. Insurance Co., 236. 
 Fitzgerald v. Insurance Co., 143, 416. 
 Fitzherbert v. Mather, 264. 
 Fitzsimmons v. Express Co., 305. 
 Flagg V. Baldwin, 126. 
 Flanagan v. Insurance Co., 49. 
 Flatley v. Insurance Co., 502. 
 Fleming v. Smith, 559. 
 Fletcher v. Insurance Co., 186, 498. 
 
 V. Staples, 405. 
 Flinn v. Headlam, 277. 
 
 V. Tobin, 277. 
 Flint V. Flemyng, 539. 
 Flippen v. Insurance Co., 286. 
 Flyn V. Association, 500. 
 Flynn v. Flynn, 109. 
 
 V. Insurance Co., 318. 
 Folb V. Insurance Co., 169. 
 Foley V. Insurance Co., Ill, 112, 525. 
 Follette V. Association, 331, 362. 
 Follis V. Association, 582. 
 Folmer's Appeal, 515. 
 Fontaine v. Insurance Co., 547. 
 Forbes v. Aspinall, 538. 
 V. Church, 45. 
 T. Insurance Co., 102, 438. 
 Ford V. Relief Co., 182. 
 Forward v. Insurance Co., 304, 337. 
 
 432. 
 Foster v. Gile, 390, 396, 397. 
 V. Insurance Co., 426. 
 V. Van Reed, 108, 112, 419. 
 Fowle V. Insurance Co., 500. 
 Fowler v. Insurance Co., 121, 185, 213, 
 214, 253, 288. 
 y. Rathbone, 5561 
 
 »l 
 
 If 
 
N 
 
 ^^ 
 
 63U 
 
 Fox J, Insurance Co., 112. 
 Fraue 7. Insurance Co., 308, 
 Fra ik v. Assurance Co., 238. 
 Fra-ikiin Fire Ins. Ca v. Bradford, 
 319. 
 T. Colt. 150, 152, 153. 168, 170, 
 
 172, 174, 176, 177, 205. 
 T. Hamill, 488. 
 V. Ice Co., 110, 330. 
 V. Martin, 112, 360, 361. 
 V. Vaugtian, 54. 
 Franklin Ins. Co. v. Villeneuve, 532. 
 Franklin Life Ins. Co. v. Galligan, 284, 
 395. 
 V. Hazzard, 528. 
 Franklin Marine & Fire Ins. Co. v. 
 
 Drake, 109, 458. 
 Fraternal Mystic Circle v. Crawford, 
 
 273. 
 Fred Miller Brewing Co, v. Insurance 
 
 Co., 310. 
 Freedman v. Insurance Co., 380. 
 Freeman v. Association, 53, 570. 
 
 V. Pope, 408. 
 Fried v. Insurance Co., 174. 
 Friedlander v. Railway Co., 304. 
 Frierson ▼. Brenham, 110. 
 Friezen v. Insurance Co., 444, 447, 508, 
 
 509. 
 Frisbie v. Insurance Co., 290. 
 Fritchburg Sav. Bank v. Insurance 
 
 Co., 448. 
 Fritts V. Palmer, 88. 
 Fritz V. Insurance Co., 472. 
 Frost V. Insurance Co., 235. 
 Frye v. Electric Co., 605. 
 
 V. Gas & Electric Co., 606, 609. 
 Fullam T. Insurance Co., 508. 
 Fuller V. Insurance Co., 413, 450, 504, 
 505, 561. 
 T. Llnzee, 397, 398. 
 Fulton Ins. Co. v. Goodman, 559, 661. 
 Funke ▼. Insurance Ass'n, 460. 
 
 e 
 
 Gabay ▼. Lloyd, 551, 
 
 Galbraith's Adm'r T. Insurance Co., 
 
 326, 357. 
 Gale y.. Association, 573. 
 
 T.' Laurie, 538. 
 
 V. Machell, 242. 
 Galyln v. Insurance Co- 235. 
 
 CASES CITBD. 
 [Tli« figures refer to pages.J 
 
 Gans V. Insurance Co., 334. 
 Garland v. Gaines, 151. 
 Garner v. Insurance Co., 221, 
 Garretson v. Association, 238, 292. 
 
 V. Insurance Co., 438. 
 Garver v. Insurance Co., 445. 
 Gates V. Insurance Co., 254, 463. 
 Gauch V. Insurance Co., 513, 514. 
 Gaysvllle Mfg. Co. v. Insurance Ca. 
 
 313. 
 Gee V. Insurance Co., 458. 
 General Ins. Co. v. Insurance Co., 316. 
 General Mut. Ins. Co. v. Sherwood. 
 
 476. 
 Georgia Home Ins. Co. v. Allen, 482. 
 V. Bartlett, 450. 
 
 V. Kinnier's Adm*x, 302, 309, 344, 
 472. 
 Gerling v. Insurance Co., 453. 
 German-American Ins. Co. T. Buck- 
 staff, 473. 
 T. Etlierton, 486. 
 T. Humphrey, 328, 352. 
 V. Norris, 256, 354, 507. 
 German Fire Ins. Co. v. Eddy, 492. 
 V. Gray, 328. 
 V. Hick, 331. 
 German Fire Ins. Co. of Freeport t. 
 
 York, 453. 
 Germania Fire Ins. Co. v. Deckard, 
 434. 
 T. Klewer, 460. 
 V. Pitcher, 316, 354, 376. 
 Germania Ins. Co. v. Ashby, 188. 
 V. Bromwell. 350. 
 V. Rudwig, 52, 186, 285, 296. 
 Germania Life Ins. Co. v. Lunken- 
 heimer, 324. 
 T. Saur, 232. 
 German Ins. Co. v. Ass'n, 459. 
 V. Davis, 502. 
 ▼. Fairbank, 509. 
 V. Gibe, 449. 
 ▼. Gibson, 379, 381. 
 V. Gray. 314, 331, 337, 352, 354. 
 ▼. Heame, 465. 
 V. Helduk, 55. 
 T. Hyman, 108. 
 ▼. Shader, 433. 
 T. Wright, 462. 
 German Ins. Co. of Freeport T. Da- 
 
 vis, 509. 
 Germier y. Insurance Co., 286L 
 
 CASKS CITBB. 
 [The figures refer to pages.] 
 
 631 
 
 tiermond v. Insurance Co., 452. 
 (iibb V. Insurance Co., 444, 452, 
 Gibbons v. Insurance Co., 476. 
 Gibson v. Bradford, 539. 
 
 V. Small, 546. 
 Gibson Electric Co. T. Insurance Co., 
 
 329, 373, 377, 380. 
 Giddings v. Insurance Co., 174, 176. 
 Giffey v. Insurance Co., 468. 
 Gillan v. Sempkin, 539. 
 Gilliat V. Insurance Co., 289, 290. 
 Gilligan v. Insurance Co., 507. 
 Gilman v. Curtis, 415. 
 
 V. Insurance Co., 112, 113. 
 Girard Fire & Marine Ins. Co. v. 
 Field, 406. 
 V. Hebard, 329. 
 Girard Life Ins., Annuity & Trust Co. 
 
 V. Insurance Co., 225. 
 Girard Life Ins. Co. v. Insurance Co., 
 
 211, 221. 
 Gladstone v. King, 264, 266, 336. 
 Glanz V. Gloeckler, 390, 396. 
 Glen V. Insurance Co., 66-68. 
 Glendale Woolen Co. v. Insurance Co., 
 287, 289, 290. 
 
 Glenn v. Burns, 394. 
 
 Glens Falls Ins. Co. v. Porter, 420. 
 
 Glens Falls Portland Cement Co. v. 
 Insurance Co., 607. 
 
 Globe Ace. Ins. Co. v. Reld, 166. 
 
 Globe Ins. Co. v. Sherlock, 560. 
 
 C.lobe Mut. Ben. Ass'n, In re, 90. 
 . Globe Mut. Life Ins. Co. v. Wolflf, 326, 
 344, 345, 371, 372. 
 
 Glover v. Wells, 117. 
 
 Goddard v. Insurance Co., 186, 287. 
 
 Godin V. Assurance Co., 54, 4S5. 
 
 Godsall V. Boldero, 58, 126, 412. 
 
 Goetzman v. Insurance Co., 526. 
 
 Gold V. Insurance Co., 499. 
 
 Goldbaum v. Blum, 411. 
 
 Golden Rule v. People, 191, 192. 
 
 Goldman v. Insurance Co., 183. 
 
 Gomila v. Insurance Co., 560. 
 
 Good V. Elliot, 126. 
 
 Goode V. Insurance Co., 318-321. 
 
 Goodhue v. Insurance Co., 441. 
 
 Goodman v. Guarantee Co., 603. 
 
 Goodrich's Appeal, 65, 66. 
 
 Goodwin V. Ass*n, 336, 531. 
 V. Insurance Co., 134, 196. 
 
 Goold V. Shaw, 560. 
 
 Gordon v. Insurance Co., 113, 500. 
 
 Goucher v. Association, 281. 
 
 Gould V. Insurance Co., 70, 324, 327. 
 
 502. 
 Gove V. Insurance Co., 46. 
 Grace v. Ass'n, 403. 
 
 V. Insurance Co., 190, 313. 
 Grady v. Insurance Co., 317. 
 Graham v. Insurance Co., 119, 5(H, 
 
 549. 
 Grandin v. Insurance Co., 447. 
 Grand Lodge v. Wieting, 45. 
 Grand Lodge A. O. U. W. v. Brand, 
 219. 
 v. Child, 404. 
 V. Noll, 404. 
 Grand Lodge Independent Order of 
 Mutual Aid v. Wieting, 517, 519- 
 522. 
 Grant v. Insurance Co., 225, 289, 510. 
 
 V. King, 541. 
 Grant's Adm'rs v. Kline, 139, 412. 
 Grattan v. Insurance Co., 294, 316, 331. 
 Gray v. Insurance Co., 350. 
 V. Supreme Lodge, 192. 
 Great Western Ins. Co. v. Fogarty. 
 
 558. 
 Greeff v. Society, 41, 78, 80. 
 Greeley v. Insurance Co., 219. 
 Greely v. Insurance Co., 560. 
 Green v. Green, 421. 
 
 V. Insurance Co., 441. 
 Greene v. People, 82. 
 
 V. Insurance Co., 263. 
 Greenlee v. Insurance Co., 454. 
 Greenwich Ins. Co. v. Imp. Co., 210. 
 Greenwood Ice & Coal Co. v. Insur- 
 ance Co., 74, 305. 
 Grevemeyer v. Insurance Co., 100, 108. 
 Grieve v. Young, 266. 
 Griffin v. Association, 526, 527. 
 Griffith V. Insurance Co., 188, 208, 225, 
 
 235, 390. 
 Grimbley v. Harrold, 403. 
 Gristock v. Insurance Co., 376. 
 Griswold v. Insurance Co., 415. 
 
 V. Sawyer, 514. 
 Grubbs v. Insurance Co., 322, 352, 373, 
 
 379. 
 Guarantee Co. of North America v. 
 
 Trust Co., 592, 596, 597. 
 Guaranty Co. of North America T. 
 Trust Co., 594, 
 
 . 
 
 1) 
 
 1 ^ 
 
 I 
 
 
 
•ir 
 
 : t ' 
 
 632 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 Guardian Mut Life Ins. Co. v. Hogan, 
 
 125, 129, 131, 133, 135. 
 Guerlain v. Insurance Co., 182. 
 Guest V. Insurance Co., 111. 
 Gulf, O. & S. F. R. Co. V. ElUs, 484. 
 Gulnare, The, 116, 550. 
 Gunther v. Insurance Co., 185. 
 Gwaltney y. Society, 244, 328, 
 
 H 
 
 Hackett ▼. Supreme Council, 372. 
 Hackney r. Insurance Co., 314. 
 Haden v. Ass'n, 157, 158. 
 Hagan v. Insurance Co., 331, 451. 
 Haider y. Insurance Co., 445, 448. 
 Haire v. Insurance Co., 362. 
 Hale V. Investment Co., 523. 
 Haley v. Insurance Co., 418. 
 Halford v. Kymer, 57, 132. 
 Hall V. Assurance Co., 487. 
 
 V. Insurance Co., 256, 258, 272, 
 413, 435, 470, 549. 
 
 V. Janson, 539, 556. 
 
 V. Railway Co., 426. 
 Ha Hock V. Insurance Co., 209. 
 Halpin v. Insurance Co., 472. 
 Hamblet v. Insurance Co., 313. 
 Hamburg-Bremen Fire Ins. Co. v. Gar- 
 
 lington, 492. 
 Hamilton, In re, 115. 
 
 V. Insurance Co., 158, 163, 873, 
 486, 487, 508. 
 Hammel v. Insurance Co., 454. 
 Hammond v. Insurance Co., 203. 
 Hancock Mut Life Ins. Co. v. War- 
 ren, 297. 
 Hancox v. Insurance Co., 115. 
 Hand v. Insurance Co., 510. 
 Hani v. Insurance Co., 528. 
 Hanley v. Supreme Tent, 514. 
 Hanover Fire Ins. Co. v. Botm, 100, 
 117. 
 
 T. Brown, 428, 467. 
 
 V. Lewis, 453, 486. 
 Hanson v. Ass'n, 513. 
 Harbour Com'rs v. Guarantee Co., 697. 
 Hardin v. Insurance Co., 310. 
 Harding v. Townshend, 428. 
 Hardman t. Insurance Co., 257. 
 Hardy v. Insurance Co., 185, 460, 
 Harford v. Maynard, 553. 
 Harley v. Heist, 390, 395, 396. 
 Harlow v. Insurance Co., 230. 
 
 Harnden v. Insurance Co., 498, 504. 
 Harnickell v. Insurance Co., 170, 171. 
 Harper v. Insurance Co., 435, 437. 
 Harper's Adm'r v. Insurance Co., 518, 
 
 527. 
 Harris v. Carson, 190. 
 
 V. Insurance Co., 53, 54, 109, 118, 
 182. 
 Harrison v. Ingram, 408. 
 
 V. Pepper, 421. 
 Harron v. Insurance Co., 308. 
 Hart V. Insurance Co., 509, 510. 
 
 V. Railroad Corp., 426. 
 Hartford Fire Ins. Co. v. Court, 188, 
 384, 490-492. 
 V. Haas, 109. 
 y. Hon, 48G. 
 y. Hotel Co., 488, 489. 
 y. Josey, 322. 
 y. Keating, 444-446. 
 y. Reynolds, 313. 
 y. Ross, 453. 
 y. Warbritton, 452. 
 y. Williams, 189, 458. 
 y. Wilson, 170, 171, 173. 
 Hartford Ins. Co. v. Haas, 362. 
 y. Hyde, 225, 238. 
 y. Williams, 463. 
 Hartford Life & Annuity Co. y. Hay- 
 den's Adm'r, 327. 
 Hartford Life & Annuity Ins. Co. v. 
 
 Unsell, 190, 353. 
 Hartford Live Stock Ins. Co. T. Mat- 
 thews, 87. 
 Hartford Protection Ins. Co. y. Bann- 
 er, 253, 287, 293. 
 Hartford Steam Boiler Insi)ection & 
 Ins. Co. y. Henry Sonneborn 
 & Co., 477. 
 y. Stocking Co., 163, 169, 173. 
 Harvey v. Cherry, 113, 116. 
 Haskell v. Society, 40, 213. 
 Haskin y. Insurance Co., 149, 157. 
 Haskins v. Insurance Co., 488. 
 Hastings v. Insurance Co., 75, 315. 
 Hatch V. Insurance Co., 527. 
 Hathaway y. Insurance Co., 453, 546. 
 Hatha way's Adm'r y. Insurance Co., 
 
 521. 
 Haughton v. Insurance Co., 541. 
 Haven v. Gray, 120. 
 Havens y. Insurance Co., 71, 459, 490, 
 492. 
 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 63a 
 
 Haverhill Ins. Co. v. Prescott, 87. 
 llawkshaw v. Supreme Lodge, 219 
 Haws V. Ass'n, 185, 441. 
 
 V. Insurance Co., 182, 441. 
 Haxall's Ex'rs v. Shippen, 421. 
 Hay V. Insurance Co., 509. 
 Hayden v. Pierce, 508. 
 Hayes v. Casualty Co., 503. 
 
 y. Insurance Co., 119, 355, 380, 
 467. 
 Hayner v. Insurance Co., 221. 
 Flazard v. Insurance Co., 208, 550. 
 Hazleton v. Insurance Co., 555, 556, 
 Hea<^ V. Insurance Co., 151, 166. 
 Hearing's Succession, 144. 
 Hearne v. Insurance Co., 190, 548. 
 Hebdon v. West, 137. 
 Heebner v. Insurance Co., 187. 
 Hefifron v. Insurance Co., 481. 
 Heilbron, In re, 408. 
 Ileilmaun v. Insurance Co., 488, 489. 
 Heilner v. Insurance Co., 545. 
 Heiman v. Insurance Co., 169, 170, 
 
 174, 176, 196. 
 Helnlein v. Insurance Co., 221. 
 Helbing v. Insurance Co., 456. 
 Hellenberg v. I. O. B. B., 192. 
 Ilelme v. Insurance Co., 225, 244. 
 llelmetag v. Miller, 127. 
 Helmetag's Adm'r v. Miller, 125, 528. 
 Helvetia Swiss Fire Ins. Co. y. AUis 
 
 Co., 110. 
 Henderson y. Insurance Co., 189, 462, 
 463. 
 y. Reynolds, 435. 
 Ilendrick y. Assurance Corp., 575. 
 Hendricks y. Insurance Co., 45, 174, 
 
 241. 
 Hendrie & Bolthoflf Mfg. Co. y. Piatt, 
 
 390, 409. 
 Henn v. Insurance Co., 255, 286. 
 Henning v. Insurance Co., 152. 
 Heni-y v. Staniforth, 248. 
 Henton v. Insurance Co., 452. 
 Herkimer v. Rice, 108. 
 Hermann y. Insurance Co., 313. 
 Hermany y. Ass'n, 186, 189, 285, 296. 
 Herrick v. Insurance Co., 282, 289. 
 Herrman v. Insurance Co., 473, 474. 
 Hess V. Ass'n, 583. 
 Heuer v. Insurance Co., 481. 
 HeusinkTeld y. Insurance Co., 501. 
 
 Heusner y. Insurance Co., 415, 417. 
 
 Hewins v. Baker, 529. 
 
 Hewlett y. Home for Incurables, 395, 
 
 528. 
 Hexter y. Insurance Co., 232. 
 Heydorf y. Conrack, 404. 
 Hibernia Ins. Co. y. O'Connor, 167, 
 
 376. 
 Hickerson v. Insurance Co., 188, 355, 
 
 490. 491. 
 Hicks V. Assurance Co., 150, 154r-156, 
 167, 432, 499. 
 V. Insurance Co., 225. 
 Higgle V. American Lloyd's, 268, 293, 
 
 545, 547. 
 High Court Independent Order of For- 
 esters V. Schweitzer, 311. 
 Highlands v. Insurance Co., 426. 
 Hildenbrandt v. Ames, 398. 
 Hill V. Insurance Co., 110, 225. 
 
 y. Secretan, 113. 
 Hillier v. Insurance Co., 53. 
 Hillyard v. Insurance Co., 219. 
 Hilton V. Assurance Co., 455. 
 Himely v. Insurance Co., 246, 257, 549. 
 Hinckley v. Insurance Co., 434. 
 Hine v. Woolworth, 450. 
 Hinman v. Insurance Co., 70. 
 Hitchcock V. Insurance Co., 449. 
 Hoadley v. Purifoy, 77. 
 Hobbs V. Ass'n, 194. 
 Hobson V. Lord, 556. 
 Hocking v. Insurance Co., 509. 
 Hodge's Appeal, 514. 
 Hodgson V. Glover, 120. 
 
 V. Grover, 539. 
 Hoeft v. Supreme Lodge, 399, 401, 
 
 402. 
 Hoffman y. Insurance Co., 120, 205- 
 
 208, 310, 450, 507. 
 Hogarth v. Walker, 537. 
 Hogben y. Insurance Co., 161, 247, 
 
 248. 
 Hogue y. Provision Co., 529. 
 Holdom v. Ancient Order, 392. 
 Holiday v. Ass'n, 584. 
 Holland v. Taylor, 192. 
 Hollingsworth v. Insurance Co., 242. 
 Hollingworth v. Brodrick, 546. 
 Hollowell v. Insurance Co., 204, 209, 
 
 210, 244. 
 Holly y. Insurance Co., 223, 236-238. 
 
 
 I 
 
 4 
 
 f 
 > 
 
 !1 
 
fi34 
 
 CASES CITEL 
 [The figures refer to pages.] 
 
 !i 
 
 f 
 
 ll: h 
 
 U 
 
 Uolman v. Insurance Co., 214. 
 Holmes y. Blogg, 91. 
 
 V. Davenport, 408. 
 
 V. Oilman, 390, 392, 393, 407, 408. 
 
 V. Insurance Co., 53, 183. 
 Holt V. Everall, 406. 
 Home Ben. Ass'n v. Sargent, 505, 523. 
 Home Fire Ins. Co. v. Bean, 188, 490- 
 492. 
 
 V. Kuhlman, 376. 
 
 V. Pbelps, 379. 
 Home Forum Ben. Order v. Jones, 
 
 161. 
 Home Ins. Co. v. Adler, 158. 
 
 V. Allen, 110. 
 
 V. Cary, 186. 
 
 V. Curtis, 169, 172-174. 
 
 V. Davis, 84. 
 
 V. Favorite, 439. 
 
 V. Field, 109. 
 
 T. Gibson, 109, 
 
 V. Oilman, 110, 207. 
 
 ▼. Owathmey, 483. 
 
 V. Heck, 495. 
 
 ▼. Koob, 458, 459. 
 
 V. Marple, 224, 373. 
 
 V. Marshall, 419. 
 
 T. Mendenhall, 108, 362, 456w 
 
 T. Morse, 23, 84. 
 
 V. Scales, 472. 
 
 T. Warehouse Co., 114, 115, 439, 
 459. 
 
 ▼. Wood, 219, 473. 
 Home Ins. & Banking Co. v. Myer, 
 
 510. 
 Home Mut Fire Ins. Co. t. Garfield, 
 
 488, 489. 
 Home Mut Ins. Co. ▼. Railway & 
 Nav. Co., 423. 
 
 T. Tomkies & Co., 452, 474. 
 Home Protection of North Alabama 
 
 V. Avery, 353. 
 Homer v. Insurance Co., 215. 
 Hong Sling v. Insurance Co., 509. 
 Hood V. Insurance Co., 537. 
 Hooker v. Sugg, 390, 394, 395, 398. 
 *• Hooper v. California, 83. 
 
 V. Insurance Co., 120, 588. 
 
 V. Pike, 375. 
 ' V. Robinson, 76, 116, 123, 124. 
 T. Whitney, 561. 
 Hoose V. Insurance Co., 286, 287, 451. 
 Hoover ▼. Insurance Co., 472. 
 
 Hopkins v. Assurance Co., 519. 
 
 ▼. Hopkins, 399. 
 Horneyer v. Lushington, 542. 
 Horsch V. Insurance Co., 118. 
 Horsfall v. Insurance Co., 572, 
 Horst v. Insurance Co., 610. 
 Horton v. Insurance Co., 467. 
 Horwitz V. Insurance Co., 332. 
 Hosford V. Insurance Co., 283, 290, 
 
 435. 
 Hoskins v. Pickersgill, 538, 
 Hosmer v. Welch, 134. 
 Hotchkiss V. Insurance Co., 473. 
 Hough V. Insurance Co., 112, 115, 439. 
 Houghton V. Lee, 405. 
 Hoven v. Assurance Corp., 606, 
 How V. Insurance Co., 181. 
 Howard v. Insurance Co., 121, 124, 
 219, 551. 
 
 y. Lovegrove, 608. 
 
 v. Society, 247. 
 Howard Fire Ins. Co. v. Chase, 111. 
 
 V. Transportation Co., 543, 544. 
 Howard Ins. Co. v. Bruner, 332. 
 
 T. Hocking, 459, 508. 
 Howard's Case. 203. 
 Howell V. Insurance Co., 215, 219, 550. 
 
 v. Society, 434. 
 Howland v. Edmonds, 235. 
 Hoxie v. Insurance Co., 344, 546. 
 Hubbard v. Ass'n, 335. 
 Hubbard, Price & Co. v. Turner, 513. 
 Hubbell V. Insurance Co., 560. 
 Huck V. Insurance Co., 474, 492. 
 Huckins v. Insurance Co., 463. 
 Hudson V. Compere, 208. 
 Hugg V. Insurance Co., 558. 
 Hughes V. Insurance Co., 459. 
 Huguenin v. Rayley, 252. 
 Humphreys v. Association, 587. 
 Hunt V. Insurance Co., 433, 448, 478. 
 Hunter v. Cobb, 151. 
 
 V. Potts, 550. 
 Hunton v. Society, 78. 
 Hurd V. Doty, 133. 
 Hurlbut V. Hurlbut, 528. 
 Hustace v. Insurance Co., 481. 
 Huston V. Insurance Co.*, 456. 
 Hutchcraft's Ex'r v. Insurance Cto^ 
 
 567. 
 Hutchins v. Ford, 46. 
 Hutchinson v. Insurance Co., 329. 
 Hutchison T. Insurance Co., 280, 
 
 i 
 
 I 
 
 Ida County Say. Bank T. Seidenstlck- 
 
 er, 597. 
 Illinois Live Stock Ins. Co. v. Baker, 
 
 510. 
 Illinois Mut Fire Ins. Co. y. Insur- 
 ance Co., 62, 65. 
 Imperial Fire Ins. Co. y. Coos County, 
 434, 464, 465. 
 V. Dunham, 112, 413, 444, 445. 
 ▼. Murray, 110. 
 Imperial Life Ins. Co. y. Glass, 236. 
 Independent Mut Ins. Co. v. Agnew, 
 
 476. 
 Indiana Ins. Co. y. Hartwell, 312. 
 Indian River State Bank v. Insurance 
 
 Co., 308, 381, 383, 384, 502. 
 Inghram v. Union, 523. 
 Inhabitants of Town of Stoughton y. 
 
 Baker, 317. 
 Inman v. Railway Co., 427. 
 Insurance Co. v. Kittle, 373. 
 y. Nonnent, 354. 
 y. Pyle, 45, 247. 
 Insurance Co. of North America v. 
 Bachler, 484, 490, 492. 
 T. Hegewald, 487. 
 T. Hope, 488. 
 y. Insurance Co., 62. , 
 V. McDowell, 354, 434. 
 y. Thornton, 158, 319, 321. 
 International Life Ins. & Trust Co. v. 
 
 Trust Co., 242. 
 International Nav. Co. y. Insurance 
 
 Co., 563. 
 International Trust Co. y. Boardman, 
 
 116, 418, 426. 
 lonides v. Insurance Co., 543. 
 
 v. Pender, 252. 
 Iowa Cent. Building & Loan Ass*n y. 
 
 Insurance Co., 488. 
 Iowa Life Ins. Co. v. Lewis, 237, 483. 
 Irving y. Manning, 559. 
 Isaacs y. Insurance Co., 203, 435. 
 
 J 
 
 Jackson y. Assurance Co., 183. 
 
 y. Insurance Co., 63, 64, 111, 
 Jackson Co. y. Insurance Co., 425, 468. 
 Jacobs y. Insurance Co., 161. 
 Janda y. Union, 513. 
 Janson y. Consolidated Mines, 554. 
 
 CASES CITED. 635 
 
 £Tlie figures refer to pages.] 
 
 Jarvis v. Binkley, 399, 414. 
 Jaskulski v. Insurance Co., 420. 
 J. C. Smith & Wallace Co. v. Insur- 
 ance Co., 158, 159. 
 Jefferson Ins. Co. v. Cotheal, 257, 281, 
 
 287, 288, 291-293. 
 Jeffrey y. United Order, 282. 
 Jeffries y. Insurance Co., 286, 291. 
 Jenkins v. Insurance Co., 363. 
 Jennings y. Insurance Co., 183, 302, 
 
 362. 
 Jersey City Ins. Ca y. Carson, 258. 
 
 V. Nichol, 460. 
 Jinks y. Banner Lodge, 404. 
 Johannes v. Insurance Co., 68. 
 John Davis & Co. y. Insurance Co., 
 
 430, 475. 
 John Hancock Ins. Co. y. Schlink, 205, 
 
 207, 208. 
 John Hancock Mut Life Ins. Ca y. 
 Moore, 517, 520. 
 v. Warren, 295. 
 John R. Davis Lumber Co. y. Insur- 
 ance Co., 301, 312. 313, 495. 
 Johnson v. Alexander, 408, 409. 
 V. Hall, 395. 
 
 Y. Insurance Co., 47, 89, 91, 92, 
 158, 232, 242, 256, 305, 373, 
 380, 463, 476, 506. 
 Johnson v. Knights of Honor, 513. 
 Jones v. Ass'n, 220, 526. 
 
 y. Insurance Co., 176, 203, 247, 
 
 285, 288, 435, 436, 546. 
 y. Nicholson, 552. 
 y. U. S., 598. 
 Jory y. Supreme Council, 402. 
 Joseph, The, 100. 
 
 Joshua Hendy Mach. Works y. Insur- 
 ance Co., 45, 241. 
 Joyce V. Insurance Co., 283i. 
 Juhel y. Church, 125. 
 
 Kaiser y. Insurance Co., 487. 
 
 Kansal y. Ass'n, 81. 
 
 Kansas City, M. & B. B. Co. y. News 
 
 Co., 605, 608. 
 Kansas Ins. Co. y. Berry, 110. 
 Kantrener y. Insurance Co., 220. 
 Karow y. Insurance Co., 45, 189, 392. 
 
 462. 
 Kase y. Insurance Co., 49, 50. 
 
 X 
 
 I 
 
 ;. 
 
 
 
 Ill 
 
636 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 W 
 
 Kausal y. Ass'n, 304, 333. 
 
 Y. Insurance CJo., 325, 334, 384, 
 385. 
 Kearney v. Kearney, 421. 
 Keefer t. Modern Woodmen, 401, 522. 
 Keels V. Association, 522, 523. 
 Keener v. Grand Lodge, 515, 516. 
 Keet-Rountree Dry Goods Co. v. In- 
 surance Co., 380. 
 Kehler v. Insurance Co., 313. 
 Keim v. Insurance Co., 170, 175, 177, 
 
 260. 
 Keith V. Insurance Co., 420, 536. 
 Kelley v. Accident Co., 608. 
 Kelley-Goodfellow Shoe Co. t. Insur- 
 ance Co., 186. 
 Kells V. Insurance Co., 594.. 
 Kelly V. Clearing Co., 286. 
 V. Insurance Co., 462. 
 T. Sun Fire Office, 488. 
 Kemble v. Browne, 541. 
 Kendrick v. Insurance Co., 204: 
 Kennedy v. Insurance Co., 362, 425. 
 Kenniston v. Insurance Co., 482. 
 Kensington Nat Bank v. Yerkes, 182. 
 Kenton Ins. Co. v. Downs, 502, 603. 
 
 V. Wigginton, 273, 448. 
 Kentucky Farmers' Mut Ins. Ck). v. 
 
 Mathers, 200. 
 Kentucky Life & Accident Ins. Co. v. 
 
 Franklin, 584. 
 Kentucky Mut Ins. Co. v. Jenks, 205, 
 
 206. 
 Kentucky & L. Mut Ins. Co. v. South- 
 ard, 183. 
 Kentzler v. Ass'n, 504. 
 Kenyon v. Ass'n, 204, 205, 352, 362. 
 Kerlin v. Association, 209. 
 Kerman v. Howard, 396. 
 Kerns v. Insurance Co., 238. 
 Kerr v. Ass'n, 517, 519, 525, 62a 
 Kershaw v. Kelsey, 93. 
 Kessler y. Kuhns, 417. 
 Kettell V. Wiggin, 54a 
 Key V. Insurance Co., 468. 
 Keystone Mut Ass'n t. Beayerson, 
 
 135. 
 Kidston v. Insurance Co., 562, 563. 
 Kieman y. Insurance Co., 346, 377, 
 
 379, 380. 
 Klllips V. Insurance Co., 609, 610. 
 Kimball y. Insurance Co., 168, 275, 
 276. I 
 
 King V. Cram, 143. 
 
 King y. Insurance Co., 112, 419, 5ia 
 
 V. Preston, 49. 
 King Brick Mfg. Co. ▼. insurance G^ 
 
 187. 
 Ivingsley v. Insurance Co., 75, 
 Kirby v. Insurance Co., 561. 
 Kircher y. Insurance Co., 463, 464. 
 Kister y. Insurance Co., 324, 337. 
 Kittel y. Domeyer, 409, 410. 
 Klein y. Insurance Co., 97, 150, 166, 
 
 157, 197, 213, 219. 
 Kline y. Ass'n, 180, 530. 
 Knapp y. Ass'n, 584. 
 
 y. Insurance Co., 232. 
 Knecht y. Insurance Co., 275, 289. 
 Knickerbocker Ins. Co. y. Gould, 378. 
 
 T. McGinnis, 498. 
 Knickerbocker Life Ins. Co. y. Diets, 
 214. 
 V. Foley, 280. 
 V. Norton, 302, 324, 325, 329, 343, 
 
 346, 352, 353, 354, 382. 
 V. Pendleton, 156, 205, 209, 211. 
 V. Peters, 521-523. 
 Knight y. Insurance Co., 460. 
 Knights of Honor y. Dickson, 294. 
 
 y. Watson, 401. 
 Knights Templar & Masons* Life In- 
 demnity Co. V. Berry, 187. 
 ▼. Jarman, 21, 186, 194, 518. 
 KnlU V. Hooper, 545, 647. 
 Knox y. Rossi, 151. 
 
 y. Wood, 539. 
 Koebel y. Saunders, 547. 
 Koehler y. Beeber, 239. 
 Koerts y. Grand Lodge, 338. 
 Kohl y. Beach, 317. 
 Kortlander y. Elston, 49. 
 Kratzenstein y. Assurance Co., 182, 
 441. 
 ▼. Lehman, 406. 
 Kronk y. Insurance Co., 111. 
 Kruh V. Insurance Co., 80. 
 Krulevitz y. Railroad Co., 304. 
 Krumm y. Insurance Co., 319. 
 Kulp y. Brant 515. 
 Kyte y. Assurance Co., 109, 327, S48, 
 382, 434, 463, 465. 
 
 La Belle t. Insurance Soc., 498. 
 Ladd y. Insurance Co., 461. 
 Laird y. LitUefield, 448. 
 
 CASES CITED. 
 [The figures refer to pages.] 
 Laker v. Fraternal Union, 192, 193. \ Leonard v. Harney, 388. 
 
 t>a7 
 
 Lakings v. Insurance Co., 441. 
 Lamberton y. Insurance Co., 314, 382. 
 Lament y. Grand Lodge, 513. 
 Lampasas Hotel & Park Co. v. Insur- 
 ance Co., 451. 
 Lampkin y. Insurance Co., 136. 
 Lancashire Ins. Co. v. Bush, 484. 
 
 V. Callahan, 594, 596. 
 Lancaster Silver Plate Co. v. Assur- 
 ance Co., 435. 
 
 V. Insurance Co., 435, 470. 
 Landis y. Insurance Co., 205, 210. 
 Lane y. Insurance Co., 120, 434, 451, 
 
 506. 
 Lange, In re, 406. 
 Langstaflf y. Insurance Co., 161. 
 Lappin y. Insurance Co., 450. 
 Larkin y. Insurance Co., 484. 
 Larsen y. Insurance Co., 495. 
 Larson y. Ass'n, 309. 
 Lasher y. Insurance Co., 344. 
 Latham y. Smith, 151. 
 Laughlin y. Ass'n, 184. 
 
 y. Norcross, 392. 
 Laurent y. Insurance Co., 109. 
 Law V. Policy Co., 127, 132, 137. 
 Lawrence y. Aberdein, 551. 
 
 y. Fox, 66. 
 
 y. Insurance Co., 571. 
 Lawwill y. Lawwill, 513. 
 Leach y. Insurance Co., 486. 
 Leary y. Blanchard, 315. 
 Leavitt v. Dunn, 513. 
 Lebanon Mut. Ins. Co. v. Erb, 309, 
 444,445. 
 
 V. Hoover, 301. 
 
 y. Kepler, 258, 507. 
 
 Y. Leathers, 461. 
 
 y. Losch, 287. 
 Le Cheminant v. Pearson, 29. 
 Lee V. Boardman, 561. 
 
 V. Insurance Co., 120, 363. 
 Leftwich y. Wells, 78, 201, 399-401. 
 Lehman y. Indemnity Co., 525. 
 Leiber y. Insurance Co., 475, 476. 
 Leigh y. Insurance Co., 203. 
 Leman v. Insurance Co., 505, 523. 
 Lemelin r. Assurance Co., 645. 
 Le Mesurier v. Vaughan, 287. 
 Lemon y. Insurance Co., 391, 394. 
 Leonard T. Assurance Co., 816, 332, 
 833. 
 
 Leslie v. French, 201. 
 Lester y. Webb, 235. 
 Lett y. Insurance Co., 49. 
 Lever y. Fletcher, 550. 
 Levie v. Insurance Co., 255, 284, 456. 
 Levy y. Baillie, 456. 
 Lewis v. Insurance Co., 134, 370, 448. 
 538. 
 v. Thatcher, 287. 
 Lidgett V. Secretan, 542. 
 Life Ass'n v. Waller, 521. 
 Life Ins. Clearing Co. y. O'Neill, 130- 
 
 133. 
 Light y. Insurance Co., 108. 
 Lightbody v. Insurance Co., 161. 
 Limburg v. Insurance Co., 472. 
 Lindauer y. Insurance Co., 166, 174. 
 Lindenau y. Desborough, 252. 
 Lindley v. Insurance Co., 460. 
 Lindsay y. Pettigrew, 153. 
 Lipman y. Insurance Co., 154, 160, 
 
 313. 
 Liscom y. Insurance Co., 459. 
 Lithgaw y. Supreme Tent 193. 
 Little v. Insurance Co., 308. 
 Liverpool & G. W. Steam Co. y. In- 
 surance Co., 114, 423. 
 Liverpool & L. & G. Ins. Co. v. Buck- 
 staff, 473. 
 V. Cochran, 445, 446. 
 y. Gunther, 462, 464, 470. 
 V. Kearney, 455, 482. 
 y. Verdier, 494. 
 Livingston v. Insurance Co., 257, 550. 
 Lobdill V. Ass'n, 588. 
 Lockhart v. Cooper, 115. 121, 439. 
 
 y. Vandyke, 395. 
 Lockwood y. Assurance Co., 473. 
 y. Bishop, 77, 78. 
 V. Insurance Co., 546. 
 Lockyer y. Offley, 542. 
 Lodge y. Insurance Co., 454. 
 Loeb y. Insurance Co., 453. 
 Lohnes y. Insurance Co., 332, 333. 
 Lohre v. Aitchison, 562. 
 London Assur. v. Mansel, 252, 258. 
 London Guaranty & Accident Co. ▼. 
 
 Geddes, 601. 
 London & L. Fire Ins. Co. t. Crunk, 
 435, 474. 
 T. Graves, 441. 
 Long T. Allen, 242. 
 
 It 
 
 w .1 * 
 
038 
 
 Long ▼. Britannia Co., 406, 417 
 
 V. Insurance Co., 178, 204, 801, 
 508. 
 Longueville y. Assurance Ca, 441. 
 Loomis V. Insurance Co., 71, 100, 104, 
 130, 132, 134. 
 V. Shaw, 120. 
 Loos V. Insurance Co., 513. 
 Lord V. Dall, 15, 100, 132, 134. 
 Lorillard Fire Ins. Co. v. McCullougb, 
 
 258. 
 I.orscher r. Supreme Lodge, 311. 
 Louis V. Insurance Co., 256. 
 Louisiana Mut Ins. Co. v. Tweed, 476, 
 
 481. 482. 
 Lovelace v. Ass'n, 567. 
 Lovell V. Insurance Co., 221, 231, 244, 
 
 245, 582. 
 Loventhal v. Insurance Co., 445. 
 Lovick V. Ass'n, 244. 
 Lowry v. Bourdieu, 248. 
 
 ▼. Insurance Co., 77. 
 Lucas V. Insurance Co., 54, 55. 
 Lucena v. Craufurd, 99, 107-109. 
 Lutz V. Insurance Co., 285, 296, 463, 
 
 464, 471. 
 Lycoming County Mut Ins. Co. y. 
 
 Schollenberger, 332. 
 Lycoming Fire Ins. Co. v. Haven, 110. 
 V. Jackson, 111, 184. 
 T. Schwenk, 479. 
 y. Storrs, 226. 
 V. Woodworth, 81. 
 Lyman v. Insurance Co., 434. 
 Lynch V. Dalzell, 49. 
 y. Hamilton, 257. 
 Lynchburg Fire Ins. Co. v. West, 337, 
 362. 
 
 Lynn v. Burgoyne, 166, 235, 321. 
 Lynn Gas & Electric Co. y. Insurance 
 
 Co.. 53, 476. 
 Lyon V. Assurance Co., 587. 
 
 y. Insurance Co., 205, 210. 
 
 V. Jerome, 317. 
 Lyons v. Insurance Co., 441. 
 
 y. Yerex, 388, 513. 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 McAllister y. Insurance Co., 178, 236. 
 McAndrews y. Thatcher, 556. 
 McArthur v. Ass'n, 337. 
 Macauley y. Bank, 528. 
 McBryde y. Insurance Co., 354. 
 
 McCall V. Insurance Co., 243, 244, 337. 
 McCarthy v. Supreme Lodge, 403, 615. 
 McClain v. Society, 294. 
 McCIare v. Ass'n, 161. 
 McClave v. Ass'n, 174. 
 
 McClelland v. Insurance Co., 854. 447. 
 454. 
 
 McCluer v. Insurance, 441. 
 McClurg V. Price, 70. 
 McCounell v. Society, 225, 226. 
 McConochie v. Insurance Co., 560. 
 McCorkle v. Ass'n, 224, 353. 
 McCormick v. Bank, 186. 
 McCoy V. Ass'n, 192, 391. 
 
 V. Insurance Co., 81, 385. 
 McCraw v. Insurance Co., 302. 
 McCrea v. Insurance Co., 435. 
 McCreery v. Day, 351. 
 McCroskey v. Hamilton, 318. 
 McCulloch V. Insurance Co., 161, 163. 
 McCully's Adm'r v. Insurance Co., 16L 
 169. 
 
 McCutcheon y. Ingraham, 110. 
 McDermott v. Insurance Co., 344. 
 McDonald v. Black's Adm'r, 49, 111. 
 
 V. Humphries, 201. 
 
 y. Order, 524. 
 
 V. Ross-Lewln, 198. 
 
 y. Society, 209. 
 
 y. Triple Alliance, 518. 
 McDonnell v. Insurance Co., 230. 
 McDonough v. Insurance Co., 528. 
 Mace y. Ass'n, 137. 
 McElhone v. Ass'n, 510. 
 McElroy v. Assurance Co., 368. 
 
 y. Insurance Co., 97, 406, 504, 509; 
 510. 
 McFarland v. Ass'n, 97. 
 
 V. Insurance Co., 352. 
 McGammon v. Insurance Co., 462. 
 McGannon v. Insurance Co., 205, 434. 
 McGarry v. Nicklin, 187. 
 McGlinchey y. Casualty Co., 569, 572. 
 McGIother v. Accident Co., 578. 
 McGlynn y. Curry, 391. 
 McGonlgle v. Insurance Co., 310. 
 McGurk V. Insurance Co., 315. 
 McHale v. McDonnell, 416. 
 Maclntyre y. Insurance Co., 185, 202. 
 236. 
 
 McKee v. Insurance Co., 243, 244. 
 McKeesport Mach. Co. y. Insurance 
 Co., 441. 
 
 McKelvy y. Insurance Co., 459. 
 
 CASES CITED. 
 [Tlitt figures refer to pages.] 
 
 t>39 
 
 I 
 
 McKenna v. Insurance Co., 224, 225. 
 McKenzie v. Insurance Co., 461. 
 McKinuey v. Assurance Co., 467. 
 McKinnon v. Vollmar, 317. 
 McLanahan y. Insurance Co., 252, 266. 
 McLaughlin y. Insurance Co., 76. 
 McLoon V. Insurance Co., 288. 
 McMaster v. Insurance Co., 215, 217, 
 
 325, 326, 340, 348, 364, 507. 
 McNally v. Insurance Co., 97, 506. 
 McNeilly v. Insurance Co., 202. 
 McQuitty V. Insurance Co., 182. 
 McSbane v. Bank, 598. 
 McVey v. Grand Lodge, 268. 
 Macy V. Insurance Co., 538, 546. 
 Magnus v. Buttemer, 551. 
 Mahoney v. James, 408. 
 Maier v. Ass'n, 338. 
 Mailhoit v. Insurance Co., 241, 247. 
 Maine Ben. Ass'n v. Parks, 282. 
 Maisel v. Ass'n, 437. 
 Majestic, The, 182. 
 Males V. Sovereign Camp, 398. 
 Malinckrodt v. Insurance Co., 542. 
 Mallery v. Frye, 153. 
 Malley v. Insurance Co., 453. 
 Mallory v. Insurance Co., 254. 
 Manchester Fire Assur. Co. y. Glenn, 
 71. 
 
 V. Koemer, 355. 
 Mandell v. Casualty Co., 97, 594. 
 Manhattan Fire Ins. Co. v. Weill, 52, 
 
 256, 345, 444. 
 Manhattan Life Ins. Co. y. Broughton, 
 521. 
 
 y. Myers, 184, 236. 
 
 V. Patterson, 231, 232. 
 
 T. Pentecost, 236. 
 
 y. Smith, 211, 221. 
 
 V. Warwick, 57, 94, 186, 187, 220. 
 Manitoba, The, 561. 
 Mann v. Insurance Co., 49. 
 Manning v. Ancient Order, 402, 404. 
 Manson v. Insurance Co., 111. 
 Manufacturers' Ace. Indemnity Co. y. 
 
 Dorgan, 580. 
 Manufacturers' Fire & Marine Ins. Co. 
 
 V. Assurance Co., 62. 
 Manufacturers* & Merchants' Ins. Co. 
 
 V. Armstrong, 328, 352. 
 Manufacturers' & Merchants* Mut. 
 
 Ins. Co. V. Zeitinger, 501. 
 Marcardier v. Insurance Co., 551, 552. 
 March v. Insurance Co., 296. 
 
 Marcus v. Insurance Co., 327. 
 Marden v. Insurance Co., 187. 
 Mareck y. Ass'n, 531. 
 Mariatiqui v. Insurance Co., 542. 
 Maril v. Insurance Co., 470. 
 Mark y. Insurance Co., 185. 
 Markey v. Insurance Co., 172. 
 Marston y. Insurance Co., 339. 
 Marthinson v. Insurance Co., 379. 
 Martin v. Insurance Ca, 77, 126, 510, 
 514, 548, 550. 
 V. Stubbings, 59, 143, 192, 401, 
 402, 404, 416. 
 Martine v. Society, 220. 
 Marvin v. Insurance Co., 324, 327, 844, 
 
 379. 
 Maryland Casualty Co. v. Gehrmann, 
 564. 
 v. Hudgins, 501, 568, 678. 
 Maryland Fire Ins. Co. v. Whiteford, 
 
 463. 
 Maryland Ins. Co. v. Bathurst, 561. 
 V. Bossiere, 540. 
 y. Ruden, 257. 
 y. Woods, 164. 
 Mascott V. Insurance Co., 185. 
 Mason v. Insurance Co., 498, 537. 
 y. Mason, 403. 
 V. The Blaireau, 549. 
 Masonic Mut. Ben. Soc. y. Burkhart, 
 
 192, 403. 
 Masonic Mut. Life Ass'n y. Paisley. 
 
 409. 
 Massachusetts Ben. Life Ass'n y. Rob- 
 inson, 235, 335, 532. 
 V. Sibley, 173. 
 Massasoit Steam Mills Co. v. Assur- 
 ance Co., 495. 
 Mathers v. Ass'n, 162, 300. 
 Matkin v. Supreme Lodge, 191. 
 Matthes v. Ass'n, 582. 
 Matthews v. Insurance Co., 445, 505. 
 Mauck V. Insurance Co., 179, 202, 500. 
 Maupin v. Insurance Co., 370. 
 Mayer v. Insurance Co., 190. 225, 320. 
 Meacham v. Insurance Co., 521. 
 Mead v. Insurance Co., 434, 508. 
 Meams v. Ancient Order, 514. 
 Mears v. Insurance Co., 463, 464. 
 Mechanics* Nat Bank y. Comins, 137, 
 
 144, 416. 
 Mechanics' Sav. Bank & Trust Co. v. 
 
 Guarantee Co., 592. 
 Mechler y. Insurance Co., 113. 
 
<>40 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 Medley t. Insurance Co^ 366, 370, 383. 
 
 Meier v. Meier, 201. 
 
 Meigs y. Assurance Co., 459. 
 
 y. Insurance Co., 459, 486, 542. 
 Meuk y. Insurance Co., 337, 362. 
 Menneily y. Assurance Corp., 572, 580. 
 Mentz y. Insurance Co., 486. 
 Mercantile Credit Guarantee Co. y. 
 
 Wood, 602, 603. 
 Mercantile Ins. Co. y. Calebs, 561. 
 Mercantile Marine Ins. Co. y. Clark, 
 
 561. 
 Mercantile Mut Ins. Co. y. Folsom, 
 
 537. 
 Merchants' Ins. Co. y. Brown, 467. 
 V. Morrison, 545-647. 
 V. Nowlin, 110. 
 V. Stephens, 491. 
 Merchants' Mut. Ins. Go. y. Insurance 
 Co., 63. 
 V. Lyman, 170, 177, 260. 
 Merchants* S. S. Co. y. Insurance Co., 
 
 557. 
 Merchants' Trading Co. y. Marine Co., 
 
 550. 
 Merchants' & Manufacturers' Ins. Co. 
 V. Curran, 314. 
 y. Shillito, 555. 
 Merchants' & Miners* Transp. Co. v. 
 
 Borland, 410. 
 Merrett y. Insurance Co., 118. 
 Merrlam y. Insurance Co., 434, 464. 
 Merrill y. Insurance Co., 529. 
 Merritt y. Insurance Co., 230. 
 Merry v. Prince, 62. 
 Messelback y. Norman, 328, 329, 382, 
 
 446. 
 Messonier y. Insurance Co., 552. 
 Mesterman y. Insurance Co., 304, 336, 
 
 362. 
 Metropolitan Ace. Ass'n v. Froiland, 
 
 578. 
 Metropolitan Ins. Co. v. Trende, 145. 
 Metropolitan Life Ins. Co. y. Blesch, 
 145. 
 y. Brown, 143, 416. 
 y. Dempsey, 294. 
 y. Dimlck, 338. 
 V. Howie, 294. 
 y. McCormick, 241. 
 y. Monohan, 145, 248. 
 y. People, 299. 
 
 y. Rutherford, 286, 288, 295, 605. 
 ▼. Sehlborst, 145, 248. 
 
 Metropolitan Life Ins. Co. y. Smith, 
 145, 248. 
 y. Trende, 248. 
 Metropolitan Safety Fund Ace. Ass'n 
 
 y. Windover, 191, 193. 
 Mey y. Insurance Co., 540. 
 Meyer v. Casualty Co., 580. 
 y. Gregson, 242. 
 y. Insurance Co., 176, 190, 211, 
 
 220, 221, 223, 230, 552. 
 y. Krohn, 224. 
 Meyers y. Insurance Co., 329. 
 Miaghan y. Insurance Co., 507. 
 Michael y. Insurance Co., 424. 
 Michigan Fire & Marine Ins. Co. y. 
 
 Wich, 302, 309. 
 Michigan Mut Life Ins. Co. ▼. Bowes, 
 209, 234, 235. 
 V. Leon, 324, 328. 
 V. Naugle, 521. 
 Michigan Pipe Co. v. Insurance Co., 
 
 170, 172, 259, 439. 
 Mickey y. Insurance Co., 510. 
 Miles V. Insurance Co., 221. 
 Millandon y. Insurance Co., 64. 
 Millard v. Brayton, 393. 
 Miller y. Casualty Co., 571. 
 
 y. Insurance Co., 132, 177-179, 
 205, 208, 445, 447, 456, 508, 
 509. 
 y. Insurance Soc, 554. 
 y. Railroad Co., 26. 
 y. Russell, 549. 
 y. Tuttle, 194. 
 Millers' Nat. Ins. Co. v. Kinneard, 
 
 316. 
 Milliken y. Woodward, 312, 313. 
 Millville Mut. Marine & Fire Ins. Co. 
 
 y. Collerd, 170, 174. 
 Milwaukee Mechanics* Ins. Co. y. B. 
 S. Rhea & Son, 446. 
 T. Niewedde, 372. 
 y. Russell, 490, 491. 
 y. Schallman, 355. 
 Milwaukee & St P. R. Co. t. Kellogg, 
 
 476. 
 Minett y. Anderson, 542. 
 Minneapolis Mut Fire Ins. Co., In re 
 
 243. 
 Minnock y. Insurance Co., 182. 
 Misselhom y. Ass'n, 169, 173. 
 Mississippi Fire Ass*n t. Dobblni, 
 433. 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 641 
 
 Mississippi Valley Life Ins. Co. y. 
 
 Neyland, 178. 
 Missouri, K. & T. Trust Co. y. Bank, 
 
 292, 293. 
 Missouri Valley Life Ins. Co. y. Kel- 
 so, 234. 
 
 y. McCrum, 417, 
 Mitchell y. Edie, 562. 
 
 y. Insurance Co., 101, 109, 132, 
 166, 481. 
 Mix y. Insurance Co., 308, 509. 
 Mobile Ins. Co. y. Railroad Co., 423. 
 Mobile Life Ins. Co. y. Brame, 428. 
 
 y. Pruett, 350. 
 Monaghan y. Insurance Co., 89, 90. 
 Monmouth County Mut Fire Ins. Co. 
 
 y. Hutchinson, 426. 
 Monniea y. Insurance Co., 405. 
 Monroe y. Insurance Co., 557. 
 Monroe County Mut Ins. Co. ▼. Rob- 
 inson, 110. 
 Montgomery y. Insurance Co., 231, 
 
 232, 236, 237. 
 Moody y. Insurance Co., 473. 
 Mooney y. Ancient Order, 402, 618. 
 
 y. Grand Lodge, 193. 
 
 y. Insurance Co., 190. 
 Moore y. Ass'n, 372. 
 
 V. Insurance Co., 71, 360, 885, 466, 
 509, 523. 
 
 T. Moore, 151. 
 Moores y. Bank, 304. 
 
 y. Louisville Underwriters, 647. 
 More y. Insurance Co., 321. 
 Morean y. Insurance Co., 668. 
 Morel y. Insurance Co., 46. 
 Morey y. Insurance Co., 220. 
 Morgan y. Mather, 161. 
 Morotock Ins. Co. y. Rodefer, 256, 272, 
 
 444, 447, 448, 451. 
 Morrell y. Insurance Co., 137, 489. 
 Morris y. Assurance Co., 46, 392, 619. 
 
 y. Banking Co., 628. 
 
 V. Dodd, 406. 
 
 y. Insurance Co., 519. 
 Morrison y. Insurance Co., 174, 193, 
 262, 329, 373. 
 
 V. Muspratt, 252. 
 Morrow y. Insurance Co., 373. 
 Morse y. Insurance Co., 84, 463. 
 Morton v. Hart, 153. 
 
 y. Supreme Council, 518. 
 Moses y. Insurance Co., 262, 643, 569. 
 Moss, In re, 395. 
 
 Vancb Ins.— 41 
 
 Moss V. Smith, 559. 
 
 Mosser v. Donaldson, 76. 
 
 Mott V. Hicks, 608. 
 
 Motteux y. Assurance Co., 541. 
 
 Moulor y. Insurance Co., 281, 287, 292, 
 
 294. — 
 
 Mount y. Larkins, 549. 
 Mowry y. Insurance Co., 127, 134. 
 Moyer y. Insurance Office, 354, 506. 
 Mueller y. Insurance Co., 373. 
 Muhleman y. Insurance Co., 236, 314. 
 Mullen y. Reed, 388, 513. 
 Mullet y. Shedden, 557. 
 Mulrey y. Insurance Co., 81, 178, 385. 
 Mulville y. Adams, 257, 293. 
 Munroe y. Ass'n, 77. 
 Murdock y. Insurance Co., 114, 115, 
 
 183, 609. 
 Murphy y. Red, 144, 416, 528. 
 Murray y. Insurance Co., 626, 627, 
 531, 640. 
 
 y. Strang, 514. 
 Murrin, In re, 406. 
 Mutual Assur. Soc. y. Faxon, 200. 
 
 y. Insurance Co., 813. 
 
 y. Korn, 166. 
 
 y. Stone, 200. 
 
 y. Watts, 200. 
 Mutual Ben. Life Ins. Co. y. Atwood'a 
 Adm'x, 94, 220, 396. 
 
 y. Bank, 213, 415, 512. 
 
 y. Daviess' Ex'r, 622. 
 
 y. Dunn, 221. 
 
 ▼. Hillyard, 77, 80, 94, 220. 
 
 V. Miller, 294. 
 
 y. Robertson, 197, 353. 
 
 y. Robison, 187, 300, 310. 
 
 y. Ruse, 185. 
 Mutual Fire Ins. Co. y. Deale, 118. 
 
 y. Shoe Factory, 434. 
 
 y. Ward, 116, 305. 
 Mutual Life Ins. Co. y. Allen, 130, 136, 
 144, 416, 628. 
 
 V. Armstrong, 415, 514. 
 
 y. Baker, 255. 
 
 y. Cohen, 184, 187, 226, 298. 
 
 V. French, 236, 353. 
 
 y. Hill, 225, 226, 285, 391. 
 
 V. Insurance Co., 211, 
 
 V. Jarboe, 232. 
 
 V. Phinney, 225, 226. 
 
 y. Richards, 417. 
 
 V. Sears, 226. 
 
 ?. Simpson, 280, 528. * 
 
 « 
 
 ii 
 
[ ' I 
 
 ^ 
 
 642 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 Co. T. Terry, 392, New England 
 
 Mutual Life Ins. 
 521, 523. 
 ▼. Thomson, 170, 174, 259. 
 V. Walden, 522. 
 T. Wiswell, 523. 
 V. Young, 311. 
 Mutual Protection Ins. Co. t. Hamil- 
 ton, 144, 529. 
 Mutual Reserve Fund Life Ass*n y. 
 Payne, 531. 
 V. Taylor, 240, 244. 
 Mutual Reserve Ins. Co. t. Kane, 134. 
 Mutual Safety Ins. Co. v. Hone, 65. 
 Myers v. Insurance Co., 167, 174, 547. 
 
 N 
 
 Nail y. Society, 211, 223, 226. 
 Names v. Insurance Co., 45, 472. 
 Nashville Life Ins. Co. y. Mathews, 
 
 234. 
 Natchez Ins. Co. v. Stanton, 548. 
 National Ace. Soc. v. Taylor, 584. 
 National Ben. Ass'n y. Jackson, 209, 
 
 210. 
 National Life Ass'n y. Brown, 236. 
 
 V. Hopkins' Adm'r, 254, 415. 
 National Life Ins. Co. y. Globe, 209. 
 y. Haley, 393. 
 y. Twiddell, 205. 
 National Mut Aid Soc. y. Lupoid, 403. 
 National Mut Ben. Ass'n y. Hickman, 
 350. 
 y. Miller, 203. 
 National Mut Ins. Co. y. Society, 221. 
 National Trust Co. y. Hughes, 402. 
 National Wall Paper Co. y. Insurance 
 
 Corp., 501. 
 Nease v. Insurance Co., 51. 
 Nebraska & Iowa Ins. Co. y. Chris- 
 tiensen, 177. 
 y. Seivers, 499. 
 Neidlinger v. Insurance Co., 550. 
 Nelson v. Insurance Co., 182, 474. 
 Nenendorff v. Insurance Co., 74. 
 Newark Fire Ins. Co. y. Sammons, 
 
 495. 
 Newark Mach. Co. y. Insurance Co., 
 149, 154, 168, 169, 172, 174, 178, 353. 
 Newby v. Reed, 54. 
 Newcomb y. Insurance Co., 426. 
 New England Fire & Marine Ins. Co. 
 V. Robinson, 156. 
 • ▼. Wetmore, 434. 
 
 Loan & Trust uo. y. 
 Kenneally, 50. 
 New England Marine Ins. Co. y. Dun- 
 ham, 4, 6, 8. 
 New Era Life Ass'n v. Rossiter, 193. 
 Newhall v. Supreme Council, 194. 
 New Hampshire Mut Fire Ins. Co. y. 
 
 Noyes, 91. 
 New Home Ass'n y. Hagler, 522. 
 New Jersey Mut Life Ins. Co. T. 
 
 Baker, 310. 
 Newmark v. Insurance Co., 476. 
 New Orleans Ins. Ass'n y. Matthews, 
 
 330. 
 New Orleans Ins. Co. y. Albro Oo^ 
 552. 
 y. Gordon, 450. 
 y. Piaggio, 560. 
 Newport Imp. Co. y. Insurance Co^ 
 
 434, 465. 
 Newson's Adm'r y. Douglass, 75, 76. 
 New York Cent. Ins. Co. y. Insurance 
 
 Co., 305. 
 New York Equitable Ins. Co. y. Lang- 
 don, 482. 
 New York Gas Light Co. y. Insurance 
 
 Co., 120. 
 New York Life Ins. Co. y. Babcock, 
 161, 162, 168-170, 172. 174, 
 185. 
 y. Clopton. 94, 204, 220. 
 y. Curry, 214. 
 y. Davis, 202, 219, 417. 
 y. Eggleston, 190, 222, 224, 351, 
 
 353. 
 y. Flack, 529. 
 
 y. Fletcher, 167, 186, 246, 248, 
 805, 324-326, 338, 339-341, 
 357, 364, 368, 370, 383, 385. 
 y. Hendren, 94, 220. 
 y. Russell, 310. 
 y. Statham, 92, 94, 07, 102, 197, 
 
 213, 218, 219. 
 y. Weaver, 532. 
 New York Mut. Life Ins. Co. y. Arm- 
 strong, 189. 392, 395, 528. 
 New York State Marine Ins. Co. T. 
 
 Insurance Co., 64. 
 New York & N. H. R. Co. y. Schuyler, 
 
 803, 304. 
 Niagara Fire Ins. Co. t. Elliott, 440. 
 y. Heflln, 53, 120. 
 y. Scammon, 502; 
 
 CASES CITED. 
 [The figures refer to pages.) 
 Niblo V. insurance Co., 120. 
 Nichols V. Insurance Co., 228, 258. 
 Nicholson v. Chapman, 562. 
 Nickels v. Ass'n, 166. 
 Nicolet y. Insurance Co., 182. 
 Nielsen y. Society, 40, 188, 212. 
 Nimick v. Insurance Co., 521. 
 Nitsch V. Insurance Co., 495. 
 Noble V. Mitchell, 83, 300, 310. 
 Noone v. Insurance Co., 507. 
 Norcross v. Insurance Co., 111. 
 Norris v. Insurance Co., 262. 
 North America Life Ins. Co. y. Wil- 
 son, 77, 78. 
 North American Fire Ins. Co. y. 
 
 Throop, 258. 
 North American Life & Accident Co. 
 
 V. Burroughs, 571. 
 North British & Mercantile Co. y. 
 
 Freeman, 467. 
 North British & Mercantile Ins. Co. 
 y. Estes, 445. 
 y. Freeman, 447. 
 Northern Assur. Co. y. Ass'n, 364, 369, 
 370, 383. 
 y. Hanna, 502. 
 North of England Iron S. S. Ins. 
 
 Ass'n y. Armstrong, 561. 
 Northrup v. Assurance Co., 574. 
 Northwestern Benev. Soc. v. Dudley, 
 
 582. 
 Northwestern Life Assur. Co. v. Stur- 
 
 divant 204, 210. 
 Northwestern Masonic Aid Ass'n v. 
 
 Jones, 59, 128, 400, 513. 
 Northwestern Mut Life Ins. Co. v. 
 Bank, 280. 
 y. Barbour, 232. 
 y. Fort's Adm'r, 214, 232. 
 y. Montgomery, 255, 457. 
 y. Umerman, 353. 
 y. Woods, 294. ' 
 
 Northwestern Transp. Co. y. Insur- 
 ance Co., 561. 
 Norton v. Insurance Co., 167, 354, 561. 
 Norwich Fire Ins. Co. y. Boomer, 419. 
 Norwich Union Fire Ins. Soc. y. Well- 
 house, 485. 
 Nurney v. Insurance Co., 354. 
 Nussbaum v. Insurance Co., 111. 
 Nutt V. Bourdien, 552. 
 Nutting V. Massachusetts, 83, 299, 300. 
 Nye y. Grand Lodge, 57. 
 
 64a 
 
 Oakes y. Insurance Co., 868. 
 Obermeyer v. Insurance Co., 484. 
 O'Brien v. Insurance Co., 178, 272, 
 
 327, 528. 
 O'Connell y. Knights of Damon, 288. 
 Ogden V. Insurance Co., 459, 486, 56S. 
 Ohde V. Insurance Co., 214. 
 Ohio Farmers' Ins. Co. y. Stowman, 
 212. 
 y. Vogel, 121, 124. 
 O'Keefe v. Insurance Co., 492. 
 O'Leary v. Insurance Co., 315, 388. 
 Oliver v. Greene, 115, 252. 
 
 y. Insurance Co., 158. 169, 176, 
 310, 549. 
 Olmsted v. Keyes, 416. 
 Olney v. Insurance Co., 451. 
 Omaha Fire Ins. Co. v. Drennan, 508. 
 Omberg v. Ass'n, 568, 577, 578. 
 O'Niel V. Insurance Co., 289, 290, 488, 
 
 464. 
 Oom V. Bruce, 248. 
 O'Reilly v. Gonne, 54a 
 Orient, The, 547. 
 Orient Ins. Co. v. Adams, 114. 
 V. Clark, 502. 
 
 y. Daggs, 22, 83, 165, 300, 490. 
 y. McKnight 352, 370, 373. 
 y. Peiser, 255. 
 v. Prather, 458. 
 Orient Mut Ins. Co. y. Adams, ISKKk 
 
 V. Wright 158, 191. 
 Ormond v. Ass'n, 174, 176, 180. 
 O'Rourke v. Insurance Co., 90, 132, 
 
 332, 363, 372. 
 Oscanyan v. Arms, 550. 
 Osceola, The, 6, 9. 
 Oshkosh Gaslight Co. T. Insurance 
 
 Co., 187, 379, 490. 
 Oshkosh Packing & Provision Co. y. 
 
 Insurance Co., 492. 
 Ougier v. Jennings, 541. 
 Overhiser's Adm'x y. Overhlser, 58. 
 
 127, 392. 
 Overseers of Poop of Norfolk y. Bank, 
 
 249. 
 Owen y. Insurance Co., 203, 509i. 
 
 Pace V. Pace, 406, 518. 
 I Pacific Mut Ins. Co. t. Guse, 24a 
 
 I 
 
 I 
 
 
 
 
 
G4^ 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 i 
 
 Pacific Mut. Ins. Co. v. Shaffer, 149. 
 
 V. Williams, 210. 
 Pacific Mut. Life Ins. C!o. v. Snowden, 
 585. 
 V. Williams, 205. 
 Padelford v. Boardman, 556. 
 Page V. Burnstine, 415. 
 Palatine Ins. Co. v. Weiss, 492. 
 Palmer v. Insurance Co., 204. 
 V. Pratt, 538. 
 V. Welch, 515. 
 Palmeri v. Railroad Co., 304. 
 Paltrovitch v. Insurance Co., 97. 
 Parker v. Ass'n, 519. 
 
 V. Insurance Co., 385, 518. 
 T. Jones, 550. 
 Parks V. Insurance Co., 115, 499. 
 Parmelee v. Insurance Co., 507. 
 Parmeter v. Cousins, 541. 
 Pamo V. Insurance Co., 339, 342, 384. 
 Parsons v. Insurance Co., 337. 
 Partridge v. Insurance Co., 499, 500. 
 Patapsco Ins. Co. v. Biscoe, 53. 
 V. Coulter, 120, 540, 552. 
 V. Southgate, 560, 561. 
 Paterson v. Harris, 550. 
 Patrick v. Insurance Co., 309. 
 
 V. Ludlow, 541, 549. 
 Patterson v. Insurance Co., 415, 517, 
 519, 525, 531, 532. 
 V. Powell, 126. 
 Patton V. Janney, 266. 
 Paul V. Insurance Co., 569, 579. 
 
 V. Virginia, 83. 
 Pawson V. Watson, 281. 
 Payne v. Ass'n, 582. 
 Peabody v. Satterlee, 501. 
 Pechner v. Insurance Co., 368. 
 Peck V. Insurance Co., 364, 451. 
 Peele v. Society, 97. 
 Pelton V. Insurance Co., 445. 
 Pelzer Mfg. Co. v. Fire Office, 113, 
 
 256. 
 Pence v. Makepeace, 410. 
 Penn Mut. Life Ins. Co. v. Bank & 
 Trust Co., 254, 255-257, 268, 270, 
 285, 288, 296, 297. 
 Penn Plate Glass Co. T. Insurance 
 
 Co., 202, 435, 436. 
 Pennsylvania Fire Ins. Co. y. Doug- 
 herty, 444. 
 Pennsylvania Fire Ins. Co. ▼. Drack- 
 ett, 384, 491, 492. 
 T. Hughes, 445, 
 
 Pennsylvania Ins. Co. v. Gottsman's 
 
 Adm'rs, 444, 448. 
 Pennsylvania Mut. Life Ins. Co. T. 
 
 Bank & Trust Co., 187. 
 Pennsylvania R. Co. v. Wolfe, 403. 
 Pennsylvania Training School v. In- 
 surance Co., 224. 
 Penny packer v. Insurance Co., 88, 308, 
 
 501. 
 People V. Dimick, 536. 
 V. Guarantee Co., 604. 
 V. Insurance Co., 197, 214, 220, 
 
 231. 
 Y. Insurance & Annuity Co., 78. 
 
 245. 
 Y. Manhattan Co., 346. 
 V. Phelps, 514. 
 People's Fire Ins. Co. Y. Hartshome. 
 
 200. 
 People's Ice Co. y. Assurance Corp.. 
 
 593. 
 People's Mut. Ben. Soc. v. Lester, 87. 
 
 V. Templeton, 132, 133, 532. 
 People's Mut Ins. Fund v. Bricken, 
 
 243. 
 Peoria Marine & Fire Ins. Co. Y. Hall 
 
 470. 
 Peoria Sugar Refinery v. Insurance 
 
 Co., 178. 
 Perkins v. Insurance Co., 172. 
 Perry v. Insurance Co., 189, 308. 
 Peters v. Insurance Co., 476. 
 Phadenhauer v. Insurance Co., 523. 
 Phelan v. Insurance Co., 225. 
 Phenix Ins. Co. v. Bank, 418, 420, 427. 
 
 v. Bowdre, 352. 
 
 Y. Guano Co., 185. 
 
 Y. Hart, 308, 328, 484. 
 
 Y. Lamar, 458. 
 
 Y. Lodge, 510. 
 
 Y. Pickel, 274. 
 
 Y. Willis, 406. 
 
 Y. Wilson, 273. 
 Philadelphia Tool Co. y. Assurance 
 
 Co., 109, 362. 
 Phillips v. Carpenter, 388, 513. 
 
 Y. Foxall, 596. 
 
 Y. Insurance Co., 117, 521. 
 Phillipsburg Horse Car Co. y. Fidel- 
 ity Co., 593. 
 Phoenix Ins. Co. Y. Adams* Trustee, 
 111. 
 
 Y. Bowdre, 308. 
 
 T. Copeland, 336, 460. 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 645 
 
 Phcenix Ins. Co. y. Copelin, 661. 
 
 V. Hamilton, 115. 
 
 Y. Insurance Co., 546. 
 
 Y. Johnston, 373. 
 
 Y. Lawrence, 316, 434, 454. 
 
 Y. Lorenz, 447. 
 
 Y. Meier, 174. 
 
 Y. Mitchell, 110. 
 
 Y. Moog, 552. 
 
 Y. Overman, 372. 
 
 V. Pickel, 455. 
 
 V. Railroad Co., 87, 459. 
 
 V. Ryland, 156. 
 
 Y. Schwartz, 484. 
 
 Y. Spiers, 150, 321, 378. 
 
 Y. Stevenson, 242. 
 
 Y. Taylor, 470. 
 
 Y. Transportation Co., 61, 113, 
 114, 116, 423, 425. 
 
 Y. Warttemberg, 337. 
 
 Y. Zlotky, 486. 
 Phoenix Life Ins. Co. v. Bailey, 56, 57. 
 Phoonix Mut Life Ins. Co. v. Baker, 
 234. 
 
 ▼. Doster, 211, 223, 353. 
 
 Y. Dunham, 395. 
 
 Y. Opper, 388. 
 
 Y. Raddin, 184, 196, 252, 258, 263, 
 292, 293. 
 Pickel v. Insurance Co., 331. 
 Pickett v. Casualty Co., 608. 
 
 V. Insurance Co., 161, 579. 
 Piedmont & A. Ins. Co. v. Ewing, 158, 
 
 170, 285, 288. 
 Pierce v. Assurance Soc, 78. 
 
 Y. People, 299, 334. 
 Pietrl V. Seguenot 186, 187. 
 Pingrey v. Insurance Co., 390, 391, 
 
 393. 
 Pitney v. Insurance Co., 307, 385, 460. 
 Plttegrew v. Prlngle, 540. 
 Pittinger v. Pittinger, 192. 
 Pittsburgh, O., C. & St L. B. Co. y. 
 
 Montgomery, 25. 
 Pittsburg, Ft W. & C. R. Co. y. Shaef- 
 
 fer, 598. 
 Place V. Trust Co., 590. 
 Planche v. Fletcher, 550. 
 Planters* Ins. Co. v. Myers, 334. 
 Planters' Mut. Ins. Co. v. Rowland, 
 
 182. 
 Planters* & Merchants' Ins. Co. y. 
 
 Thurston, 119. 
 Platho Y. Insurance Co., 149. 
 
 Piatt V. Insurance Co., 376. 
 Plimpton Y. Insurance Co., 50. 
 Plinsky y. Insurance Co., 182, 188, 
 
 435. 
 Plumb Y. Insurance Co., 359, 361. 
 Plymton y. Dunn, 200. 
 Pollock Y. Association, 577. 
 Pomeroy y. Insurance Co., 315, 400. 
 Pool V. Insurance Co., 186, 463, 464. 
 Porter v. Insurance Co., 182, 327. 
 Portsmouth Ins. Co. Y. Reynolds' 
 
 Adm'x, 479. 
 Post v. Insurance Co., 156. 
 Potter V. Insurance Co., 158, 178. 
 Pottsville Mut Fire Ins. Co. v. Im- 
 provement Co., 313. 
 Powell Y. Dewey, 417. 
 Power Y. Insurance Co., 434. 
 Powers v. Ass'n, 294. 
 Prader v. Ass'n, 527. 
 Prall V. Society, 173. 
 Pratt V. Burdon, 312. 
 
 Y. Insurance Co., 74, 344, 378, 
 385, 390. 
 Preferred Ace. Ins. Co. y. Stone, 166. 
 Premo v. Hewitt, 405. 
 Prentice v. Insurance Co., 308. 
 Presbyterian Mut Assur. Fund y. Al- 
 len, 403. 
 Preston v. Greenwood, 535. 
 
 V. Insurance Co., 390, 396. 
 Price V. Bank, 417. 
 
 V. Insurance Co., 77, 288, 293. 
 Y. Supreme Lodge, 528. 
 Priest V. Insurance Co., 315. 
 Pritchard v. Society, 197, 215. 
 Protection Ins. Co. v. Hall, 116. 
 Proudfoot Y. Montefiore, 51, 264-266, 
 
 336. 
 Providence Life Assur. Soc. t. Rent- 
 linger, 292, 316. 
 Provident Fund Soc. y. HoweU, 508. 
 Provident Life Ins. & Inv. Co. y. 
 Baum, 128. 
 Y. Martin, 46. 
 Provident Sav. Life Assnr. Soc y. 
 Cannon, 292. 
 Y. Llewellyn, 294. 
 Prudential Assur. Co. y. Insurance 
 
 Co., 275. 
 Prudential Ins. Co. y. Hunn, 128^ 131, 
 133. 
 Y. Jenkins, 134. 
 
 'J 
 
 ■1 
 
 i! 
 
;1 
 
 64G 
 
 (i 
 
 CASES CITED. 
 [Th« figures refer to pages.} 
 
 Puget Sound Dressed Beef & Pack- 
 ing Co. V. Jeffs, 405. 
 
 Pullis V. Robison, 410. 
 
 Purdy V. Ass'n, 193. 
 
 Putnam t. Insurance Ck)., 113, 158, 
 244. 
 
 Putuum V. Insurance Co., 434. 
 
 Pythian Life Ass'n y. Preston, 205. 
 
 Quarles t. Clayton, 49. 
 
 Quebec Marine Ins. Co. t. Bank, 545, 
 
 547. 
 Queen Ins. Co. v. Leslie, 186, 188, 297, 
 490, 491. 
 T. Trust Co., 369. 
 V. Young, 256. 
 Quinlan v. Insurance Co., 328, 329, 
 379, 385, 430, 432, 467, 502. 
 
 Railway Officials' & Employes* Ace. 
 Ass'n V. Drummond, 583. 
 ?. Johnson, 568. 
 Railway Passenger & Freight Con- 
 ductors' Mut. Aid & Ben. 
 Ass'n V. Robinson, 191, 192. 
 ▼. Tucker, 385. 
 flandall v. Insurance Co., 487. 
 Rankin v. Potter, 559. 
 Rathbone v. Railway Co., 341. 
 Rathbun v. Snow, 314. 
 Rawls V. Insurance Co., 57, 58, 127, 
 
 137, 254, 411. 
 Rayner v. Preston, 48, 49, 112, 424. 
 Read v. Insurance Co., 509. 
 Reade v. Insurance Co., 549. 
 Reardon v. Insurance Co., 461. 
 Redfield v. Insurance Co., 109, 112. 
 Redstrake v. Insurance Co., 308. 
 Reed v. Assurance Co., 136. 
 ▼. Casualty Co., 600. 
 T. Insurance Co., 332, 333, 363, 
 
 460. 
 T. Lukens, 49. 
 Reg. T. Flanagan, 138. 
 Reilly t. Insurance Co., 188, 384, 490, 
 
 491. 
 Relief Fire Ins. Co. v. Shaw, 152, 157. 
 Renier v. Insurance Co., 308, 314, 382. 
 Renner v. Bank, 190. 
 Renseuhouse v. Seeley, 59. 
 
 Renshaw v. Insurance Co., 480. 
 Reserve Mut. Ins. Co. v. Kane, 130, 
 
 134. 
 Ressler v. Insurance Co., 23& 
 Uex V. Insurance Co., 122. 
 Reynolds ▼. Insurance Co., 182, 418, 
 
 561. 
 Kheims y. Insurance Co., 502. 
 Rhind v. Wilkinson, 120. 
 Rhode Island Nat Bank v. Chase, 406. 
 Rhode Island Underwriters' Ass'n v. 
 
 Monarch, 450. 
 Rice V. Butler, 243. 
 
 V. Tower, 454. 
 Richards v. Ass'n, 294. 
 
 V. Insurance Co., 248, 816, 438, 
 567, 583. 
 Richardson v. Insurance Co., 167, 190, 
 580. 
 V. White, 528. 
 Richelieu & O. Nav. Co. v. Insurance 
 
 Co., 548. 
 Richmond & P. R. Co. v. Kasey, 597. 
 Rioker v. Insurance Co., 393, 394, 399, 
 
 514, 515. 
 Riddlesbarger v. Insurance Co., 508. 
 Riggin V. Insurance Co., 549. 
 Riggs V. Insurance Co., 100, 107, 108, 
 
 117. 
 Riley v. Insurance Co., 301. 
 Rines v. Insurance Co., 499. 
 Rlngle V. Railroad Co., 25. 
 Ripley v. Assurance Co., 574. 
 
 y. Insurance Co., 190, 286, 289, 
 291, 344, 356. 
 Rison y. Wilkerson, 390. 
 Ritter v. Insurance Co., 20, 45, 128, 
 150, 184, 189, 384, 517-519, 521, 531. 
 Rittler y. Smith, 57, 139, 143, 416. 
 Robbins v. Insurance Co., 383, 539. 
 Roberts y. Insurance Co., 114, 183. 
 Robertson y. Credit System Co., 691, 
 
 603. 
 Robinson y. Ass'n, 373. 
 V. Duvall, 394. 
 V. Insurance Co., 200, 558. 
 y. Society, 204, 220, 582. 
 Robinson Gold Min. Co. y. Assurance 
 
 Co., 554. 
 Roby y. Insurance Co., 344, 378, 453. 
 Rochester Loan & Banking Co. y. In- 
 surance Co., 500. 
 Rockford Ins. Co. y. Williams, 810. 
 T. Wright, 472, 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 647 
 
 Uockhold y. Society, 192. 
 Itockingham Mut Fire Ins. Co. y. 
 
 Bosher, 426. 
 Roddick v. Insurance Co., 537. 
 Koe V. Insurance Co., 473. 
 Roebuck v. Hammerton, 126. 
 Roehuer v. Insurance Co., 218, 236. 
 Rogers v. Insurance Co., 50, 292, 463, 
 
 547. 
 Roger Williams Ins. Co. y. Carring- 
 
 ton, 468. 
 Rohl V. Parr, 550. 
 
 Rohrbach v. Insurance Co., 108, 109, 
 333, 335, 362, 446. 
 y. Moore's Adm'r, 142, 143, 201, 
 415, 417, 528. 
 Rollins V. McHatton, 404. 
 Rombach v. Insurance Co., 125, 129, 
 
 131, 136, 146. 
 Ronald v. Ass'n, 346, 378. 
 Roquemore v. Dent, 396, 514. 
 Rose V. Clark Co., 87. 
 V. Wortham, 514. 
 Rosenberger v. Insurance Co., 191, 
 
 238, 240. 
 Rosenplanter v. Society, 225, 384. 
 Roseustein v. Insurance Co., 420, 449, 
 
 454. 
 Rosenthal v. Walker, 224. 
 liosetto V. Gurney, 559. 
 Ross V. Thwaites, 538. 
 Rouse V. Insurance Co., 546. 
 Routh V. Thompson, 76, 99, 100. 
 Roux V. Salvador, 561. 
 Rowe V. Insurance Co., 391. 
 Rowley v. Insurance Co., 359, 360. 
 Rowswell y. Union, 239. 
 Royal Circle v. Achterrath, 525, 531. 
 Royal Ins. Co. v. Mclntyre, 492. 
 
 V. Martin, 453, 479. 
 Royal Ins. Co. v. Stinson, 111, 116, 426, 
 
 427. 
 Royal Ins. Co. y. Wight, 313. 
 Royal Neighbors of America y. Bo- 
 man, 335, 339. 
 V. Wallace, 282. 
 Riiggles V. Insurance Co., 168, 265. 
 Rumbold v. Insurance Co., 234. 
 Runkle v. Insurance Co., 318. 
 Ruse V. Insurance Co., 125, 126, 185, 
 
 218, 272. 
 Russ V. Supreme Council, 194, 512. 
 Russel y. Insurance Co., 113, 
 Russell y. De Grand, 24S. 
 
 Russell y. Russell, 514. 
 Rustin y. Insurance Co., 669, 581. 
 Ruth y. Katterman, 528. 
 Rutter V. Insurance Co., 491. 
 Ryan y. Adamson, 418. 
 
 y. Insurance Co., 305, 326, 363. 
 364, 383. 
 
 T. Rothweiler, 393, 396, 405. 
 
 Sabin y. Phinney, 128, 401. 
 
 V. Union, 192, 523. 
 Sachs y. Insurance Co., 486. 
 Sadler y. Dixon, 46. 
 Sadlers' Co. v. Babcock, 121, 122. 
 Saint y. Mfg. Co., 596, 598. 
 St John V. Insurance Co., 416. 
 St Louis Ins. Co. v. Kyle, 376. 
 St. Louis I. M. & S. R. Co. y. Insur- 
 ance Co., 422, 425, 426. 
 St Louis Mut Life Ins. Co. y. Grigs- 
 by, 213, 214. 
 
 V. Kennedy, 169, 176. 
 St Paul, etc., Ins. Co. v. Troop, 541. 
 St. Paul Fire & Marine Ins. Co. v. 
 Coleman, 199, 215. 
 
 V. Kidd, 185. 
 
 V. Sharer, 310. 
 Salentine v. Insurance Co., 622. 
 Salisbury v. Insurance Co., 542. 
 Salvin v. James, 1S5, 215. 
 Samuels v. Insurance Co., 478. 
 Sanborn v. Insurance Co., 149, 150. 
 
 152, 157. 
 Sanders v. Cooper, 438. 
 Sands v. Graves, 238. 
 
 V. Insurance Co., 93, 94, 96, 204, 
 220. 
 Sanford y. Insurance Co., 110, 150, 
 
 156. 
 Santa Clara Female Academy y. In- 
 surance Co., 111. 
 Sargeant v. Insurance Co., 522. 
 Savage y. Insurance Co., Ill, 116, 429. 
 
 V. Medbury, 235. 
 Sawyer y. Insurance Co., 119, 557. 
 
 y. May hew, 153. 
 Sayre y. Nichols, 317. 
 Scammell y. Insurance Co., 158-160. 
 Scara manga v. Stamp, 549. 
 SchaeflCer y. Insurance Co., 110, 808. 
 Scheffer v. Insurance Co., 621. 
 Schillinger ▼. Boea, 402. 
 
 M' 
 
 
648 
 
 CASES CITED. 
 [The figiires refer to pages.] 
 
 Schimp T. Insurance Co., 200, 218. 
 Schlaxnp y. Bemer's Adm'r, 417. 
 Schmaebile v. Insurance CJo., 3L 
 Schmidt v. Ass*n, 128, 189, 192, 392, 
 393. 
 V. Insurance Ck)., 224, 225, 434. 
 Schneider t. Insurance Co., 46, 221. 
 Schoenau v. Grand Lodge, 404. 
 Schemer v. Insurance Co., 3i0. 
 School Dist. No. 4 v. Insurance Co., 
 
 325. 
 Schultz V. Insurance Co., 163, 289, 514, 
 
 517, 520. 
 Schwartz v. Insurance Co., 161. 
 Schwarzbach v. Union, 281, 294. 
 Schwarzschild & Sulzberger Co. t. In- 
 surance Co., 494, 495. 
 Scott V. Avery, 487. 
 
 V. Dickson, 132, 138. 
 ▼. Insurance Co., 351. 
 Scottish Union & Nat Ins. Co. v. 
 
 Strain, 46, 446, 463. 
 Screwmen's Ben, Ass'n v. Smith, 315. 
 
 V. Whitridge, 398. 
 Scripture v. Insurance Co., 475, 477, 
 
 480, 482. 
 Scull V. Insurance Co., 514. 
 Seaman v. Insurance Co., 545, 551. 
 Seamans v. Knapp-Stout & Co., 187, 
 312. 
 V. Loring, 541. 
 T. Temple Co.. 87, 88. 
 Seamen v. Insurance Co., 117. 
 Sebring v. Hazard, 200. 
 Security Fire Ins. Co. v. Insurance 
 
 Co., 152, 157, 168. 
 Security Ins. Co. v. Fay, 371. 
 V. Kuhn, 444, 445, 448. 
 V. Mette, 445, 474. 
 Seeberger t. Wyman, 606. 
 Seller v. Ass'n, 392, 519. 
 Sellers v. Insurance Co., 312, 813. 
 Semmes ▼. Insurance Co., 505, 508. 
 Seton V. Insurance Co., 538. 
 Settle V. Insurance Co., 549. 
 Seward v. Rochester, 487. 
 Sexton V. Insurance Co., 406. 
 Seyk V. Insurance Co., 491, 492. 
 Shader ▼. Assurance Co., 686. 
 Shadgett v. Phillips, 418. 
 Shafifer v. Spangler, 137. 139, 412. 
 Shakman y. Credit System Co., 43, 
 
 591, 592. GOl-nO?.. 
 Shaler t. Trowbridge, 407. 
 
 Shaw V. Insurance Co., 113, 115, 221, 
 234. 
 V. Mining Co., 83. 
 Shawe v. Felton, 542. 
 Shea V. Ass'n, 143, 393. 
 Sheamon v. Insurance Co., 587. 
 Shear v. Insurance Co., 220. 
 Sheerer v. Insurance Co., 230. 
 Sheldon v. Insurance Co., 174, 178- 
 
 181, 184, 205, 362. 
 Shell V. Insurance Co., 502. 
 Sheppard v. Insurance Co., 109, 121, 
 
 309, 310. 
 Sherman y. Allison, 395. 
 Sherwood v. Insurance Co., 450. 
 Shields v. Sharp, 396. 
 Shipman t. Home Circle, 390, 402, 
 
 517-519, 525. 
 Shoaf V. Insurance Co., 66. 
 Short V. Insurance Co., 254. 
 Shuggart v. Insurance Co., 453. 
 Shultz V. Insurance Co., 289, 513. 
 Schreiner v. High Court, 393. 
 Sibley v. Insurance Co., 111. 
 Sides V. Insurance Co., 137. 
 Sigerson v. Mathews, 375. 
 Silloway y. Insurance Co., 559. 
 Simonton y. Insurance Co., 150. 
 Simpson y. Insurance Co., 215, 531. 
 Sinclair y. Assurance Co., 568. 
 Singer Mfg. Co. y. Brown, 87. 
 Singleton y. Insurance Co., 67, 104, 
 
 125, 134. 
 Siter V. Morrs, 115, 439. 
 Skldmore y. Desdoity, 550. 
 Skinner y. Houghton, 49. 
 y. Norman, 372, 385. 
 Skinner & Sons' Ship Building & Dry 
 
 Dock Co. V. Houghton, 424, 452. 
 Sloat y. Insurance Co., 459, 486. 
 Small y. Jose, 393, 514. 
 Smith y. Benefit Soc., 402. 
 y. Carmack, 439. 
 T. Huddleston, 116. 
 T. Insurance Co., 75, 97, 112, 230, 
 232, 243, 245, 256, 258, 289, 
 290. 325, 330, 337, 420, 433, 
 444, 448, 464, 606, 560, 602, 
 603. 
 y. Ratcllff, 405. 
 y. Society, 208, 518. 
 T. Supreme Lodge, 688. 
 T. Surridge, 641. 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 64^ 
 
 Smith & Wallace Co. y. Insurance Co., 
 305. 
 
 Sneed y. Assurance Co., 455. 
 Snow V. Carr, 116. 
 
 V. Insurance Co., 266. 
 Snowden v. Guion, 551. 
 Snyder v. Insurance Co., 641, 548. 
 
 V. Loan Co., 287, 291. 
 Solebury Mut Protective Soc, In re, 
 
 43. 
 Solomon y. Insurance Co., 498. 
 Solvency Mut. Guarantee Co. y. York, 
 
 602. 
 
 Solvin y. James, 272. 
 
 Somers y. Protective Union, 167. 
 
 Sonneborn y. Insurance Co., 472. 
 
 Southard y. Assurance Co., 569. 
 V. Railway Co., 427. 
 
 Southern Cold Storage & Produce Co. 
 V. Dechman, 421, 439. 
 
 Southern Fertilizer Co. T. Beames, 
 529. 
 
 Southern Home Building & Loan 
 Ass'n y. Insurance Co., 505. 
 
 Southern Ins. Co. y. Bstes, 151. 
 
 Southern Life Ins. Co. y. Booker, 178, 
 180, 308. 
 y. McCain, 202. 
 
 Southern Mut. Life Ins. Co. y. Mon- 
 tague, 185, 232. 
 
 South StaflCordshire Tramways Co. y. 
 Ass'n, 203. 
 
 Southwick y. Insurance Co., 446. 
 
 Spalding y. Insurance Co., 337, 360. 
 
 Spare v. Insurance Co., 108, 509. 
 
 Sparkes y. Marshall, 536. 
 
 Sparks y. Indemnity Co., 522, 523. 
 
 Spengler y. Spengler, 402, 403. 
 
 Sperry y. Insurance Co., 464, 471. 
 
 Spinetti y. Steamship Co., 553. 
 
 Spoeri v. Insurance Co., 215. 
 
 Springfield Fire & Marine Ins. Co. T. 
 Allen, 55, 420. 
 V. Brown, 502. 
 V. McNulty, 302. 
 y. Wade, 434, 462-464, 470. 
 
 Springfield Steam Laundry Co. v. In- 
 surance Co., 467. 
 
 Spruill V. Insurance Co., 479. 
 
 Stage y. Insurance Co., 432, 457. 
 
 Stamma v. Brown, 552. 
 
 Stamps y. Insurance Co., 77, 418, 489. 
 
 Standard Life & Accident Ins. Co. y. 
 Jones, 586. 
 
 Insurance Cou» 
 
 313. 
 
 Standard Life ft Accident Ins. O©. ▼. 
 Lauderdale, 284. 
 
 y. Martin, 183. 
 
 y. Schmaltz, 569l 
 
 y. Taylor, 585. 
 Standard Oil Co. t. 
 
 313. 
 Stark Bank y. Pottery Co. 
 Star of Hope, The, 557. 
 State v. Ackerman, 82. 
 
 y. Ass'n, 59. 
 
 y. Hogan, 591, 595. 
 
 y. Insurance Co., 77, 204. 
 
 y. Insurance Com'rs, 82. 
 
 y. Investment Co., 43. 
 
 V. Railroad Co., 1, 25. 
 
 y. Scougal, 77. 
 
 y. Stone, 83. 
 
 y. Tomlinson, 404, 408, 409, 628. 
 
 y. Towle, 44. 
 
 y. Whitmore, 60. 
 
 y. Woodmansee, 77. 
 State ex rel. Atty. Gen. y. Society. 69. 
 State Ins. Co. v. Hale, 329, 495. 
 
 y. Meesman, 510. 
 
 y. Stoflfels, 510. 
 
 y. Taylor, 53, 331. 
 
 y. Todd, 376. 
 State Mut. Fire Ins. Ass'n t. Stave 
 
 & Heading Co., 87, 88. 
 State Mut. Fire Ins. Co. y. Updegraff, 
 49. 
 
 State Mut. Ins. Co. y. Latourette, 350, 
 362. 
 
 Statham y. Insurance Co., 94, 220. 
 Steel v. Insurance Co., 509. 
 Steele, In re, 406. 416. 
 
 y. Gatlln, 528. 
 
 y. Insurance Co., 320, 322, 502. 
 Steen v. Insurance Co., 509. 
 Stehlick y. Insurance Co., 308. 
 Steinbach v. Insurance Co., 464, 471. 
 Steinback t. Diepenbrock, 143, 416, 
 528. 
 
 Steinman y. Angier Line (1891), 653. 
 Stensgaard y. Insurance Co., 590. 
 Stephenson v. Ass'n, 523. 
 
 y. Insurance Co., 485, 486. 
 Stepp y. Ass'n, 235. 
 Stemaman v. Insurance Co., 305, 816^ 
 335, 337, 339, 341, 362, 363, 384, 432. 
 Stetson v. Insurance Co., 112, 450, 
 Stettiner v. Insurance Co., 429. 
 Stevens v. Insurance Co., 71, 458b 
 
 
 i 
 
 i. 
 
650 
 
 Stevens t. Wallace, 556. 
 
 V. Warren, 144, 416, 529. 
 Stevenson v. Snow, 242. 
 Stewart v. Insurance CJo, 87, 308, 853, 
 552, 560. 
 
 V. Wilson, 546, 547. 
 Stlckley v. Insurance Co., 308. 
 Stigler's Ex'x v. Stigler, 408, 410, 515. 
 Stillwell V. Insurance Ck)., 539. 
 
 V. Staples, 114. 
 Stock V. Inglis, 120. 
 Stokes V. Amerman, 408, 409. 
 
 V. Coffey, 408, 410. 
 
 ▼. Mackay, 156. 
 Stolle V. Insurance Co., 302. 468. 
 Stone's Adm'rs v. Casualty Co., 584. 
 Stout V. Insurance Co., 97, 116, 508. 
 Stowell V. Clark. 446. 
 Strauss v. Ass'n, 193, 244. 
 Streeter y. Society, 523. 
 Strode v. Drug Co., 411. 
 Strohn v. Insurance Co., 158. 
 Strong y. Insurance Co., 64, 112, 113. 
 Strouse y. Indemnity Co., 603 
 Strum y. Insurance Co., 54. 
 Suckley v. Dela field, 281. 
 Suess y. Insurance Co., 244. 
 Suffolk Fire Ins. Co. y. Boyden, 419. 
 Sugg y. Insurance Co., 458. 
 Sullivan y. Insurance Co., 123. 
 Sulphur Mines Co. y. Insurance Co., 
 
 20. 
 Sulz y. Ass'n, 166, 514. 
 Suramerfield v. Assurance Co., 435. 
 Sun Fire Ins. Co. v. Merz, 101, 124. 
 Sun Fire Office v. Clark, 451. 
 
 y. Wich, 183. 
 Sun Ins. Office v. Merz, 120. 
 Sun Life Assur. Co. y. Bailey, 303. 
 Sun Life Ins. Co. v. Phillips, 326, 370. 
 
 V. Taylor, 533. 
 Sun Life Ins. Co. of America ▼, Phil- 
 lips, 337. 
 Sun Mut. Ins. Co. t. Barrel Co., 301, 
 313. 
 
 ▼. Crist, 500. 
 
 ▼. Insurance Co., 62, 252, 253, 261. 
 
 V. Mattingly, 502. 
 
 y. Tufts, 115. 
 Suppiger v. Ass'n. 522. 
 Supreme Commandery K. G. R. y. 
 Ainsworth, 166, 192. 811, 6ia 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 Supreme Conclave Improved Order of 
 
 Heptasophs v. Miles, 517, 518. 
 Supreme Conclave Royal Adelphia ▼. 
 
 Cappella, 404. 
 Supreme Council v. Garrigus, 567. 
 V. Larmour, 59. 
 V. Perry, 515. 
 Supreme Council American Legion of 
 Honor v. Gootee, 203. 
 y. Jordan, 243, 244. 
 v. Perry, 404. 
 Supreme Council Catholic Knights of 
 
 America v. Gambati, 200, 243. 
 Supreme Council Royal Arcanum y. 
 Rrashears, 287. 
 y. Kacer, 398. 
 y. Tracy, 400. 
 Supreme Court of Honor v. UpdegrafT, 
 531. 
 
 Supreme Lodge A. O. U. W. y. Hutch- 
 inson, 81. 
 Supreme Lodge Knights of Honor t. 
 Dalberg, 224. 
 y. Jaggers, 505. 
 Supreme Lodge K. P. t. Beck, 505, 
 523, 526. 
 y. Kaliuski, 353. 
 V. Knight, 193. 
 y. La Malta, 60, 191. 
 v. Withers, 201, 311, 334, 340. 
 Supreme Lodge Order of Mutual Pro- 
 tection V. Gelbke, 522. 
 Supreme Ruling of the Fraternal Mys- 
 tic Circle v. Crawford, 273. 
 Survick v. Ass'n, 224, 239. 
 Susquehanna Ins. Co. v. Perrine, 81. 
 Susquehanna Mut. Fire Ins. Co. ▼. 
 Cusick, 436. 
 ▼. Elkins, 178, 385. 
 V. Gackenbach, 240. 
 Sutherland v. Insurance Co., 460, 
 Swan V. Insurance Co., 87, 319 
 
 V. Snow, 395. 
 Swedish-American Ins. Co. y. Knut- 
 
 son, 373. 
 Sweeney y. Insurance Co., 118, 288. 
 Sweetser v. Ass'n, 190, 353. 
 Swett v. Society, 315. 
 Swick y. Insurance Co., 294. 
 Swift y. Insurance Co., 448. 
 Swing y. Lumber Co., 239. 
 V. Munson, 87. 
 
 CASES CITED. 
 £The figures refer to pages.] 
 
 iTidmarsh v. 
 
 651 
 
 I Swinnerton y. Insurance Ca, 182^ 
 
 Taber r. Insurance Co., 502, 538, 560. 
 Tait V. Insurance Co., 98. 
 
 y. Levi, 547. 
 Taliaferro v. Ass'n, 567. 
 Talley v. Robinson's Assignee, 151. 
 Tanenbaum v. Simon, 438. 
 Tarbell v. Insurance Co., 308. 
 Tasker v. Cunningham, 540. 
 
 y. Insurance Co., 509. 
 Tate V. Ass'n, 138, 143, 411, 417. 
 Tayloe v. Insurance Co., 156, 163, 205, 
 
 210, 499. 
 Taylor v. Bank, 598. 
 
 y. Insurance Co., 136, 220, 287, 
 808. 
 
 T. Liverpool, 553. 
 
 y. Lowell, 174, 241, 541, 545. 
 Tebbets v. Guarantee Co., 43, 44, 602. 
 Tebo V. Supreme Council, 194. 
 Teeter v. Ass'n, 532. 
 Tefft v. Insurance Co., 454. 
 Temple v. Assurance Co., 458. 
 
 V. Insurance Co., 491. 
 Tepper v. Supreme Council, 402. 
 Texas Banking & Ins. Co. y. Cohen, 
 
 453. 
 Thames & M. Ins. Co. v Hamilton, 
 
 543, 550, 551. 
 Thayer v. Insurance Co., 572. 
 Thebaud v. Insurance Co., 432. 
 Thibert v. Supreme Lodge, 194, 240. 
 Thomas v. Assurance Co., 538. 
 
 y. Insurance Co., 399, 460, 560. 
 
 y. Leake, 514. 
 Thompson v. Adams, 172. 
 
 y. Hopper, 546. 
 
 y. Insurance Co., 97, 115, 190, 205, 
 213, 218, 219, 223, 225, 236, 
 350, 393, 450, 451, 490, 491, 
 509, 510. 
 
 V. Whitmore, 550. 
 Thomson v. Insurance Co., 203. 
 
 V. Weems, 280, 284. 
 Thomburg v. Insurance Co., 417.> 
 Thorne v. Insurance Co., 88. 
 Throop y. Insurance Co., 183. 
 Thropp y. Insurance Co., 239. 
 Thuringia Ins. Co. v. Norwaysz, 286, 
 
 462, 470. 
 Thcrston v. Insurance Co., 482, 552. 
 
 V. Koch, 54. 
 Tibbitts y. Insurance Co.. 218. 
 
 Insurance Co., 273. 
 Tiefenthal v. Insurance Co., 315. 
 Tiemann v. Insurance Co., 452. 
 Tilley v. Insurance Co., 77, 113. 
 Tillis V. Insurance Co., 381. 
 Tisdell V. Insurance Co., 495. 
 Titus V. Insurance Co^ 344, 373, 877- 
 379, 455. 
 
 y. Poole, 508. 
 Todd y. Ritchie, 552. 
 Toledo Tie & Lumber Co. T. Thomas, 
 
 88. 
 Tolford y. Church, 199. 
 Tompkins v. Insurance Co., 589. 
 
 V. Levy, 513. 
 Tomsecek v. Insurance Co., 207. 
 Tooley v. Assurance Co., 575. 
 Towle V. Insurance Co., 385. 
 Towne v. Ass'n, 44L 
 
 V. Insurance Co., 258. 
 Townsend v. Phillips, 560. 
 
 V. Tyndale, 411. 
 Trabue v. Insurance Co., 433. 
 Trade Ins. Co. v. Barracliff, 117, 236. 
 Traders' Ins. Co. v. Catlin, 433, 434. 
 
 V. Newman, 109, 117, 118. 
 
 V. Race, 473. 
 Train v. Insurance Co., 208. 
 Transatlantic Fire Ins. Co. v. Dor- 
 
 sey, 480. 
 Trask v. Insurance Co., 498. 
 Travelers' Ins. Co. v. Austin, 575, 582. 
 
 y. Dunlap, 576, 577. 
 
 y. Edwards, 504. 
 
 y. Harvey, 307, 330. 
 
 y. Healey, 528. 
 
 y. Hunter, 571. 
 
 y. Jones, 582. 
 
 y. McConkey, 523, 567, 576. 
 
 y. Melick, 53. 
 
 v. Moses, 607, 609. 
 
 y. Nitterhouse, 523. 
 
 y. Pulling, 220. 
 
 y. Randolph, 46, 582. 
 
 V. Seaver, 526. 527. 
 Travelers' Life & Accident Ins. Co. v. 
 
 Cash, 205, 210. 
 Trayes v. Worms, 539. 
 Treadwell y. Insurance Co.. 547. 
 Tremblay v. Insurance Co., 75, 415, 
 
 529. 
 Trenton Mut. Life & Fire Ins. Co. ?. 
 Johnson, 57, 126. 
 
 
 f i 
 
 4 
 
 * 
 
652 
 
 CASES CITBD. 
 [Tb* figures refer to pages.] 
 
 CASES CITED. 
 [The figures refer to pages.] 
 
 653 
 
 Trenton Pass. R. CJo. y. Guarantor's 
 
 etc. Co., 605. 
 Trepagnler v. Rose, 405. 
 Trinity College v. Insurance Co., 67, 
 
 125, 138. 
 Trippe v. Society, 97, 504, 594. 
 Tritsctiler v. Association, 522. 
 Trott V. Insurance Co., 117. 
 Troy V. Sargent 406. 
 True T. Insurance Co., 468. 
 Trumbull v. Insurance Co., 452. 
 Trust Co. V. Boardman, 419. 
 Trustees of First Baptist Church t. 
 
 Insurance Co., 152, 158. 
 Tubbs V. Insurance Co., 309, 326, 339, 
 
 502. 
 Tucker v. Ass'n, 294. 
 
 V. Insurance Co., 585. 
 Turcan, In re, 528. 
 Turnbull v. Insurance Co., 434. 
 Turner v. Fidelity & Casualty Co., 
 588. 
 ▼. Insurance Co., 309, 549. 
 Tyrie v. Fletcher, 45, 200, 241, 246. 
 
 u 
 
 Uhlman v. Insurance Co., 78. 
 Ulmer v. Insurance Co., 123, 
 Ulrich V. Reinoehl, 139, 416. 
 Underwood v. Insurance Co., 154, 344. 
 Union Assur. Soc v. Nails, 256, 272, 
 
 446, 448. 
 Union Casualty & Surety Co. v. Mon- 
 
 dy, 572. 
 Union Cent. Life Ins. Co. v. Buxer, 
 230, 391. 
 
 V. Caldwell, 211, 223. 
 
 ▼. Chowning, 350, 484. 
 
 V. Duvall, 205. 
 
 V. Hilliard, 90. 
 
 ▼. Hollowell, 522, 623. 
 
 V. McHugh, 234. 
 
 ▼. Pauly, 169, 170, 173, 174, 17a 
 
 V. Pollard, 21, 186, 187, 295. 
 
 V. Pottker, 190, 225, 244. 
 Union Fraternal League v. Walton, 
 
 128. 
 Union Ins. Co. t. McCullough, 473, 
 476. 
 
 ▼. Smart, 87. 
 
 V. Smith, 546, 547. 
 Union Life Ins. Co. y. Winn, 180L 
 
 Union Mut Ace. Ass*n v. Frohard, 584. 
 Union Mut. Life Ins. Co. y. McMillen, 
 88. 
 V. Mowry, 104, 202, 348, 349, 852. 
 v. Payne, 522, 628. 
 V. Reif, 280. 
 
 V. Wilkinson, 278, 802, 323, 825, 
 331, 337, 340, 345, 356, 358, 
 364, 368, 369. 
 Union Nat Bank y. Insurance Co., 
 
 364. 
 United Brethren Mut. Aid Soc y. Mc- 
 Donald, 125, 129. 
 United Firemen's Ins. Co. y. Thomag, 
 
 312, 356. 
 United Life, Fire & Marine Ins. Co. 
 
 y. Foote, 481. 
 U. S. V. Tobacco Co., 111. 
 United States Casualty Co. y. Kacer, 
 
 397. 
 United States Fire & Marine Ins. Co. 
 
 V. Kimberly, 290. 
 United States Life Ins. Co. y. Ross, 
 
 212, 218. 
 United States Mut Ace Ass'n y. Bar- 
 ry, 567. 
 y. Millard, 588. 
 y. Mueller, 239. 
 y. Newman, 568, 572, 578. 
 United States Trust Co. v. Insurance 
 
 Co., 394, 395, 514. 
 Unity Mut Life Assur. Ass'n y. Du- 
 
 gan, 529. 
 Universal Fire Ins. Co. v. Block, 308. 
 Universal Life Ins. Co. v. Binford, 93. 
 245. 
 y. Devore, 228, 230, 232. 
 y. Whitehead, 232. 
 Universal Mut. Fire Ins. Co. y. Weiss. 
 
 508. 
 Universe Ins. Co. of Milan y. Insur- 
 ance Co., 535. 
 Unsell y. Insurance Co., 363. 
 
 Vallance y. Dewar, 541. 
 
 Valley Mut Life Ass'n y. Teewalt 
 
 130. 
 Valton V. Assurance Co., 416. 
 Van Bokkelen v. Insurance Co., 575. 
 Vandalia Mut. County Fir« Ins. Co. 
 
 T. Peasley, 238. 
 
 Vandervolgen v. Assurance Co., 463. 
 Van Dyck v. Hewitt 248. 
 Vangindertallen v. Insurance Co., 354. 
 Van Loan v. Ass'n, 168. 
 Van Schoick v. Insurance Co., 20, 356. 
 Van Tassel v. Insurance Co., 379. 
 Van Valkenburgh v. Insurance Co., 
 
 280. 
 Van Werden y. Society, 244. 
 Van Wickle y. Insurance Co., 545, 
 
 547. 
 Van Zandt v. Insurance Co., 45, 521. 
 Vette y. Insurance Co., 509. 
 Vetter y. Ass'n, 532. 
 Vezina v. Insurance Co., 144. 
 Vielt y. Insurance Co., 344, 351. 
 Vilas V. Insurance Co., 183, 493. 
 Village of L'Anse v. Ass'n, 440. 
 Viney y. Bignold, 487. 
 Virgin v. Marwick, 399, 514. 
 Virginia Fire & Marine Ins. Oo. y. 
 Aiken, 509. 
 
 y. Buck, 290. 
 
 y. Cannon, 355. 
 
 y. Mica Co., 369, 383, 494. 
 
 y. Morgan, 325. 
 
 y. Thomas, 450, 453. 
 
 y. Vaughan, 453, 457. 
 
 y. Wells, 509, 510. 
 Vivar y. Knights of Pythias, 126, 143, 
 285, 287, 292, 293, 416. 
 
 y. Supreme Lodge, 269. 
 Vogel V. Insurance Co., 482, 483. 
 Volsin y. Insurance Co., 552. 
 Vose y. Insurance Co., 253, 282. 
 
 w 
 
 Wachtel y. Society, 225. 
 Wadsworth v. Insurance Co., 559. 
 Wager y. Insurance Co., 425. 
 Wainer v. Insurance Co., 172, 174, 
 
 196, 445. 
 Wakeman v. Insurance Co., 249. 
 Walcott V. Insurance Co., 523. 
 
 y. Tappin, 126. 
 Walden v. Insurance Co., 253, 255, 
 
 654. 
 Waldman y. Insurance Co., 321. 
 Walker v. Insurance Co., 161, 203, 379. 
 
 y. Larkin, 137. 
 
 y. Maitland, 476. 
 Wall y. Insurance Co.. 287« 
 
 ▼. Society, 186, 188. 
 
 Waller v. Assurance Co., 248. 
 Walradt v. Insurance Co., 444, 454. 
 Walsh V. Insurance Co., 324, 329, 353, 
 379, 382, 394, 396. 
 y. Walsh, 513. 
 Walter v. Hensel, 513. 
 Walter A. Wood Mowing & Reaping 
 
 Mach. Co. V. Caldwell, 87. 
 Walther v. Insurance Co., 505. 
 Walton V. Insurance Co., 453. 
 Want V. Blunt 197, 215. 
 Ward V. Casualty Co., 594, 608. 
 V. Insurance Co., 344, 508. 
 y. Wood, 552. 
 Waring v. Insurance Co., 114, 115. 
 
 V. Loder, 117, 419. 
 Warner v. Ass'n, 188. 
 Warnock v. Davis, 100, 104, 125, 129, 
 
 131, 140-143, 411, 415, 417. 
 Warre v. Miller, 541. 
 Warren y. Insurance Co., 100, 117, 
 
 315. 
 Washburn v. Insurance Co., 480. 
 Washburn & Moen Mfg. Co. y. Insur- 
 ance Co., 558, 559. 
 Washington Cent. Bank y. Hume, 186, 
 
 187. 
 Washington Fire Ins. Co. T. Kelly, 
 
 111, 424. 
 Washington Gaslight Ca y. Lansden, 
 
 303. 
 Washington Life Ins. Co. y. Berwald, 
 226, 390, 391, 393. 
 y. Miles, 232. 
 Waters v. Allen, 241, 242. 
 
 V. Assurance Co., 114, 115. 
 v. Insurance Co., 476, 480, 523. 
 Watertown Fire Ins. Co. y. Cherry, 
 468. 
 y. Rust, 87. 
 y. Simmons, 597. 
 Watson V. Delafield, 266. 
 
 V. Insurance Co., 77, 136, 66L 
 Watts V. Insurance Co., 234. 
 Way V. Insurance Co., 478. 
 Weatherbee v. Insurance Co., 407. 
 Weaver v. Weaver, 529. 
 Webb v. Insurance Co., 219. 
 Weber v. Supreme Tent, 194. 
 Wedderbum v. Bell, 545, 547. 
 Weed V. Insurance Co., 75, 314, 378, 
 
 521. 
 Weeks y. Insurance CJo., 4991 
 Wehle y. Ass'n, 589. 
 
 i 
 
 I 
 
 M 
 
 j 
 
654 
 
 CASES CITED. 
 [Th« figures refei* to pages.] 
 
 Weinberger ▼. Insurance Co., 183. 
 Weisert v. Muehl, 201, 402. 
 Weiss V. Insurance Co., 376, 467, 502. 
 Welch T. Ass'n, 337, 343, 360, 885, 429, 
 432, 502. 
 ▼. Insurance Co., 532. 
 Wells V. Archer, 415. 
 
 ▼. Insurance Co., 349, 350. 
 Welsh V. Assurance Corp., 354, 421, 
 500. 
 T. Cutler, 248. 
 Werthelmer-Swarts Shoe Co. t. Cas- 
 ualty Co., 480. 
 West V. Insurance Co., 438. 
 West Branch Ins, Co. v. Helpenstein, 
 
 308. 
 Westchester Fire Ins. Co. t. Dodge, 
 508. 
 V. Earle, 172, 328, 382. 
 V. Foster, 45, 459. 
 West End Hotel & Land Co. t. Insur- 
 ance Co., 373. 
 Western Assur. Co. v. McAlpin, 156, 
 158, 168, 195, 208. 
 T. Transp. Co., 55. 
 V. Williams, 352. 
 Western Commercial Travelers* Ass'n 
 
 V. Smith, 566, 570. 
 Western Horse & Cattle Ins. Co. v. 
 
 O'Neill, 45, 189. 
 Western Massachusetts Ins. Co. v. 
 
 Dufifey, 151. 
 Western & A. Pipe Lines v. Insurance 
 
 Co., 441. 
 West Rockingham Mut. Fire Ins. Co. 
 
 V. Sheets, 254, 256. 
 Wheaton T. Insurance Co., 292, 330, 
 
 380. 
 .Wheeland v. Atwood, 416. 
 Wheeler v. Ass'n, 248. 
 
 V. Insurance Co., 97, 172, 174, 219, 
 
 232. 418, 419. 
 V. Trust Co., 590. 
 Wheeling Ins. Co. v. Morrison, 110, 
 
 112. 
 WTieelton t. Hardlsty, 185, 252, 272. 
 Whipple V. Insurance Co., 238. 
 Whitaker v. Meley, 238. 
 White V. Davidson, 317, 
 V. Haight, 235. 
 V. Insurance Co., 63, 475. 
 T. Madison, 116w 
 T. Bobbins, 50. 
 
 White V. Society, 186, 284, 296. 
 Whitehead v. Insurance Co., 221, 392, 
 
 393. 
 Whitehurst v. Insurance Co., 476^ 
 Whiting V. Insurance Co., 176, 201. 
 Whitley v. Insurance Co., 204. 
 Whitmarsh v. Insurance Co., 190. 
 Whitmore v. Supreme Lodge, 125, 126. 
 Whitney v. Haven, 549. 
 
 v. Insurance Co., 120, 472, 473. 
 Wicks Bros. v. Insurance Co., 495. 
 Wiebeler v. Insurance Co., 150. 
 Wierengo v. Insurance Co., 443, 448, 
 Wiggin v. Amory, 552. 
 
 v. Insurance Co., 54. 
 Wilber v. Insurance Co., 202. 
 Wilburn v. Wilburn, 513. 
 Wilcocks V. Insurance Co., 552. 
 Wilcox V. Insurance Co., 443, 448. 
 
 V. Society, 228, 232. 
 Wildberger v. Insurance Co., 74. 
 Wildey Casualty Co. v. Sheppard, 584. 
 Wilkius v. Insurance Co., 382. 
 Wilkinson v. Hyde, 538. 
 
 V. Insurance Co., 509. 
 Willcutts V. Insurance Co., 214. 
 Williams v. Box of Bullion, 549. 
 V. Cheney, 87. 
 T. Insiinince Co., 117, 463, 464, 
 
 470, 506. 
 ▼. Lilley, 49. 
 Williamsburg City Fire Ins. Co. ▼. 
 Cary, 373. 
 V. Gwlnn, 54. 
 Williamson v. Insurance Co., 491. 
 Wilson V. Insurance Co., 332, 363, 453, 
 552. 
 V. Jones, 117. 
 Wineland v. Insurance Co., 445. 
 Wingert v. Zeigler, 151. 
 Winnesheik Ins. Co. v. Holzgrafe, 161. 
 Winsor v. Ass'n, 514. 
 Winspear v. Insurance Co., 671. 
 Winter v. Haldimand, 538. 
 Wirgman v. Miller, 390, 395. 
 Wist V. Grand Lodge, 194. 
 Witherell v. Insurance Co., 476. 
 Woehrle v. Insurance Co., 294. 
 Wolcott V. Insurance Co., 538. 
 Wolf V. Insurance Co., 451, 452, 456b 
 Wolfe V. Insurance Co., 451. 
 Wolff V. Horncastle, 113. 
 I Wood T. Dwarris, 185, 272, 63a 
 
 CASES CITED. 
 [The figurM refer to pages.] 
 
 655 
 
 I 
 
 Wood V. Insurance Co., 86, 110, 178, 
 179, 329, 363, 366, 383, 885, 
 432, 453, 454, 555, 561. 
 • V. Moriarty, 63. 
 Woodbury Sav. Bank & Bldg. Aas'n 
 
 V. Insurance Co., 332, 359, 364. 
 Wooddy V. Insurance Co., 149, 156, 
 
 208, 308, 444, 499. 
 Woodfln y. Insurance Co., 212. 
 Woodmen Ace. Ass'n t. Byers, 97. 
 
 V. Pratt, 503. 
 Woolf V. Claggett, 547. 
 Wooster t. Page, 405. 
 Worcester & S. St. R. Co. r. Insurance 
 
 Co., 593. 
 Worthington y. Bearse, 122, 434. 
 
 ▼. Insurance Co., 93, 97, 196, 197, 
 219. 
 Wright V. Ass'n, 182, 416, 532. 
 V. Insurance Co., 49. 
 T. Marwood, 556. 
 Wright & Pole, Matter of, 63, 120. 
 Wyman y. Gay, 408. 
 
 ▼. Insurance Co., 308. 
 V. Prosser, 50. 
 
 Wytheville Ins. Co. v. Stuliz, 254. 
 Wytheville Insurance & Banking Co. 
 T. Teiger, 178, 208. 
 
 Xenos T. Fox, 562. 
 
 ▼. Wickham, 168, 169, 172, 175. 
 
 Yates T. Whyte, 561. 
 
 Yeaton v. Fry, 164. 
 
 Yoch V. Insurance Co., 470. 
 
 Yonge V. Society, 173. 
 
 Young V. Insurance Co., Ill, 808, 687, 
 588. 
 
 Young Men's Mut Life Ass'n ▼. Pol- 
 lard, 513. 
 
 Zell V. Insurance Co., 300. 
 Zenos V. Fox, 563. 
 V. Wickham, 313. 
 
 
 Wynkoop t. Insurance Co., 488, 489. ! Zinc v. Insurance Co., 468. 
 
 I 
 
 » ■ ' 
 
 I 
 
 I. 
 
I 
 
 f 
 
 INDEX 
 
 [fHX FIOUBES BEFEB TO PAOBI.] 
 
 I 
 
 ABANDONMENT, 
 
 no right of In fire Insurance, 487. 
 in marine insurance, 560. 
 
 ACCIDENT INSURANCE, 
 origin of, 13, 564. 
 development of, in England, 13. 
 
 in United States, 17. 
 closely resembles life insurance, 564. 
 accident policies and their construction, 665, 571-589. 
 accidental injuries, what are, 566. 
 
 "external, violent, and accidental causes," 569. 
 disease caused by accident— proximate cause, 570. 
 external and visible signs of injury, 571. 
 injuries received while traveling, 573. 
 
 incidental risks, 574. 
 excepted risks, 575-586. 
 
 poison, or contact with poisonous substances, 57a 
 usually applied only to intentional acts, 577. 
 death by inhaling gas, 578-580. 
 not death by poison, 578. 
 
 exception of applies only to Intentional act, 578. 
 bodily infirmities or disease, exception of injuries due to, 58a 
 
 trifling affections not included, 580. 
 Injuries due to voluntary and unnecessary exposure, 581. 
 
 construction of exception as to, 581. 
 exception of injuries intentionally Inflicted by another, 582. 
 occupation and employment specified, as limiting risk, 583-585. 
 injuries due to incidental acts, 583. 
 employments classified as to hazard, 584. 
 classification made by agent of insurer binding, 588. 
 exception of injuries received while intoxicated, 585. 
 liability of insurer, in general, 586-588. 
 for loss of a member by insured, 587. 
 for total disability of insured, 587. 
 Insurer's right to autopsy, 588. 
 
 ACTIONS ON POLICIES, 
 
 beneficiary of life policy may bring in his own name, 898. 
 limitation In policy upon time for bringing Is valid, 507. 
 rendered inoperative by war, 508. 
 
 Vanok Ins.— 42 (657) 
 
 I 
 
658 INDEX. 
 
 [The figures r«f«r to pagw.] 
 
 ACTIONS ON POLICIES— Continued, 
 when period begins to run, 6091 
 may b« waived, 610. 
 
 ADJUSTERS, 
 
 as agents of the insurer, 818. 
 
 AQB, 
 
 representations as to are material, 516. 
 
 AGENTS AND AGENCY, 
 
 general principles of agency applicable to insurance, 81, 298. 
 
 delivery to agent as delivery of policy, 173. 
 
 payment of premium by personal arrangement between agent and liumivd, 
 
 206. 
 regulation of insurance agencies by statute, 289. 
 for insurer or insured, 305, 312, 330. 
 
 statutory regulations, 21, 300. 
 
 waiver, 384. 
 burdensome incidents of agency, 302. 
 
 when fraud of agent is imputed to principal, 303. 
 
 when agent's knowledge is imputed to principal, 304. 
 
 these incidents not created nor terminable by contract, 80^ 
 general rule as to agent's powers, 301. 
 
 apparent powers, 301. 
 
 agent cannot insure his own property, 74. 
 classes of agents and their powers, 306-310. 
 
 general agents, 307. 
 
 special agents, 309. 
 
 subordinate lodges, 310. 
 
 brokers, 311. 
 
 executive officers of company, SIS. 
 
 other agents, 316. 
 tubagents, agent's authority to appoint, 817. 
 
 authority implied from necessity, 318. 
 
 authority implied from custom, 819. 
 extent of subagent's powers, 320. 
 limitations upon the powers of agents, in general, 822 et seq. 
 
 when contained in the policy, 324, 493. 
 
 when contained in the application, 325. 
 
 secret limitations upon agent's powers, 302. 
 Improper or void limitations upon agent's powers, 827. 
 
 restrictions extending to all agents, 327, 493. 
 
 stipulation that agent of insurer is agent of insured, 330-336. 
 
 stipulation that the agent's knowledge shall not be imputed to the 
 principal, 336. 
 unless communicated by writing, 338. 
 
 ■tipulation that principal shall not be charged with fraud of agent, 
 841. 
 
 ALIENS, 
 
 as parties Insured, see Tartles.* 
 
 AI/TBRATIONS AND REPAIRS, 
 as ground of forfeiture, 464. 
 
 AMENDMENTS, 
 
 of by-laws, where binding, 193. 
 
 INDEX. 
 [The figures refer to pages.] 
 APPLICATION, 
 
 where a part of the contract, 183. 
 
 required by statute to be attached to policy, 184, note 194. BT. 
 how far insured is bound by its contents, m 
 APPRAISAL AND ARBITRATION, 
 
 under provisions of standard fire policy, 486, 49]. 
 ASSESSMENT INSURANCE, 
 
 advantages and disadvantages, 38. 
 
 see "Mutual Benefit Insurance" ; "Mutual Companies.* 
 ASSESSMENTS AND DUES, 
 defined, 237. 
 liability of Insured for, 198, 200, 238. 
 
 must be legally levied and reasonable, 23a 
 when assessments are reasonable, 240. 
 ASSIGNEES, 
 
 rights of, in general, 412-417. 
 of fire policies, 413. 
 
 assignee of life policy need have no Insurable Interest 140 14a. 144. 
 
 assignees of life policies classified, 412. "^^rest, 140, 148. 144. 
 
 voluntary assignee as beneficiary, 414. 
 
 bad faith defeats rights of, 415 
 under conditional assignments as collateral security. 4iaL 
 under absolute assignments, 416. ^^ 
 
 ASSIGNMENTS, 
 
 fire policies not ordinarily assignable, 50. 
 
 of fire policy not void without consent, 50 468. 
 otherwise after loss, 51, 468. 
 
 if consented to, waives known defenses, 41S. note 87 
 provision of standard policy, 468. * *^ «•• 
 
 «# M* ^?®® °°* ^PP^y *^ ^^^^^ o^ PoWcy, 468. 
 
 valid by parol, 528. 
 
 ^Si^^T^^lf *''*^''^^* ^ assignee necessary, 140. 143. 62a 
 efl-ect of when prohibited by policy, 629 » «»» «^ 
 
 benefit certificate not ordinarily assignable, 414. 
 conditional and absolute assignments, 415-417 
 of marine policy, valid without insurer's consent CSfiL 
 see "Assignees." *«c"h voa, 
 
 AUTOPSY, 
 
 accident insurer's right to demand, 58a 
 AVOIDANCE OF POLICY. 
 
 by breach of condition as to title or interest 442. 
 
 for breach of warranty, see "Warranty " 
 
 for misrepresentationg, see "Representitiona.*' 
 
 BARRATRY, " 
 
 defined, 551. 
 
 BENEFICIARIES, 
 
 in general, 387 et seq. 
 
 in property not in existence, 119. 
 
 659 
 
660 INDEX. 
 
 [The figures refer to paees.] 
 
 BBNEFICIARIES— Continued, 
 defined and classified, 387, 389. 
 designation of, 387, 512. 
 "estate." 887. 
 
 "legal representatirei,'' 888; Bli. 
 "heirs," 388, 513. 
 "children," 614. 
 •*wife," 616. 
 "family," 515. 
 the assured as beneficiary, 388, 410. 
 third persons as beneficiaries, 389. 
 vested rights of, in general, 390. 
 confirmed by statute, 391. 
 not dependent on consideration, 391. 
 how afifected by murder of insured, 392. 
 not afllected by divorce, 392. 
 guicide of insured, 392. 
 theories as to the legal basis of such rights, 393. 
 right to assign, 395. 
 
 when the beneficiary dies before the insured, 89B. 
 rights conditionally vested, 396. 
 contingent interests of, 398. 
 mere expectancy of benefit, 399. 
 In mutual benefit certificates, in general, 400-434. 
 no vested interest, 401. 
 
 unless appointment is by contract, 402. 
 or clearly given by certificate, 403. 
 change of beneficiary must be in prescribed mode, 408. 
 but only association can object to irregularity, 404. 
 creditors as beneficiaries (see "Creditors' Rights"), 410-412. 
 assignees of the beneficiary (see "Assignees"), 412-417. . 
 BENEVOLENT AND FRATERNAL ASSOCIATIONS, 
 see "Mutual Benefit Insurance." 
 
 BINDING SLIP, 
 
 see "Contracts of Insurance." 
 
 BODILY INFIRMITIES OR DISEASE, 
 
 as an excepted risk in accident insurance, 680. 
 see "Health." 
 
 BOILER INSURANCE, 
 
 see "Casualty Insurance.* 
 
 BROKERS, 
 
 see "Agents and Agency." 
 
 BURGLARY INSURANCE, 
 see "Casualty Insurance.* 
 
 BY-LAWS, 
 
 part of contract only by reference, 188. 
 bind members of mutual company, 191. 
 
 conflict between by-laws and certificate, 192. 
 
 amended by-laws, 193. 
 
 amerdments must be reasonable, 194^ 240. 
 
 INDEX. 
 £Tlie figures refer to p&gM*] 
 
 Ml 
 
 CANCELLATION OF POLICY, 494. 
 when insurance terminates, 494. 
 return of premium not condition precedent, 495, 
 
 CAPTURE, ARREST AND DETENTION, 
 as a marine risk, 553. 
 
 CASUALTY INSURANCE, 
 
 forms of in general, 24, 26, 590. 
 
 against hail, tornadoes, burglary, strikes, etc., 24, 590. 
 
 boiler insurance, 27, 590. 
 
 plate glass insurance, 27, 690. 
 
 live stock insurance, 590. 
 
 subject to the same rules of construction as other insurance contracts, 691. 
 
 doubts resolved in favor of insured, 592. 
 
 notice and proofs of loss, 594. 
 
 CHANGE OF INTEREST, TITLE, OR POSSESSION, 
 conditions against, 449^54. 
 
 purpose of, 449. 
 
 forms of, 449. 
 
 in standard policy, 450. 
 
 incumbrances do not violate, 451. 
 
 nor executory contracts of sale, 452. 
 
 transfers between partners. 453. 
 by legal process or judgment, 454. 
 
 CHARTER, 
 
 charter provisions, when part of contract, 186, 
 
 CIVIL AUTHORITY, 
 
 1 1 
 
 destruction by, as an excepted risk, 479. 
 
 COMMENCEMENT AND DURATION OF RISK, 
 computed by standard or solar time, 435. 
 in fire insurance, 435. 
 in guaranty insurance, 600. 
 in marine insurance, 540. 
 
 COMMON LAW, 
 
 as part of contract, 189. 
 
 CONCEALMENT, 
 
 general principles, 250. 
 what must be disclosed, 251-267. 
 the English rule, 251. 
 the American rule, 253. 
 marine insurance, 253. 
 fire and life insurance, 254. 
 
 when no questions are asked, 266. 
 what facts are material, 257. 
 
 facts made material by inquiry, 258. 
 when duty to disclose terminates, 259. 
 
 special circumstances rendering disclosure unnecessaiy, 281» 
 matters which insurer ought to know, 262. 
 matters relating to excepted risks, 263. 
 
C63 INDEX. 
 
 [Th« flcwM refer to paces.] 
 
 CONCSkALMBNT— Contkraed. 
 
 failure to disclose facts known to agent of Insured, 263. 
 failu«« of agent to disclose facts known to insured, 26d. 
 
 CONDITION AND USB OF PROPERTY. 
 
 breach of condition at ground of forfeiture, 437. 
 CONDITIONS OF POLICY, 
 
 limiting jurisdiction of federal courts invalid, 84. 
 
 operating before loss — nonperformance not excused by impossibility, 
 218. 
 
 operating after loss — ^nonperformance excused by impossibility, QQ, 97* 
 breach as rendering policy void or voidable, 378, 
 waivers of, before and after loss, 375. 
 temporary breach only suspends insurance, 433, 
 against alienation, 449. 
 
 CONDITIONS PRECEDENT, 
 
 warranties, 287. 
 
 as to appraisal and arbitration, 480, 
 
 as to notice and proof of loss, 497. 
 
 CONDITIONS SUBSEQUENT, 
 
 relating to notice and proof of loss, 97, 497. 
 conditions imposing forfeiture, 218, 
 promissory warranties, 289. 
 waiver of, 355. 
 
 CONFLICT OF LAWS, 
 
 what law governs Insurance contract, 187, and note 148, 226, 29(L 
 
 CONSENT OF THE INSURED, 
 
 necessary to validity of a life policy, 145, 248i 
 
 CONSENT OF THE PARTIES, 
 in general, 250 et seq. 
 
 CONSTRUCTION OF INSURANCE CONTRACTS, 
 subject to same rules as other contracts, 1, 429. 
 always in favor of insured, 430. 
 of warranties and representations, 292. 
 of standard policy, see "Standard Fire Policy.* 
 
 CONTRACT OF INSURANCE, 
 
 purx)ose of, its nature, in general, 42-55b 
 
 requisites for validity, 72. 
 
 construed as other contracts, 1, 429. 
 
 as entire or divisible, 45, 69-72, 241, 438. 
 
 is based on distribution of risk, 2, 43, 
 
 is aleatory, but not a wager, 46. 
 
 executory and conditional, 47. 
 
 is personal and uberrimee fidel, 48. 
 
 is essentially a contract of indemnity, 52. 
 
 contract of life insurance, 100. 
 fire Insurance contract not ordinarily assignable, SQL 
 
 does not run with the land, 48. 
 strangers acquire no rights under, 77. 
 made by insurer not complying with statutory regulations, 
 who may be insured, 88. 
 the maidng of the contract, in general, 147 et seq. 
 
 INDEX. 663 
 
 [The figures refer to pafes.] 
 
 CONTRACT OF INSURANCE— Continued, 
 offer and acceptance, 147. 
 oral contracts valid, 148-157. 
 
 as affected by statute and charter provisions, 150, 151. 
 as affected by stamp laws, 150. 
 preliminary oral contracts of present insurance, 154. 
 
 subject to all terms of contemplated policy, 154, 155, 
 preliminary executory oral contracts, 155, 156, 
 when oral contract is complete, 157 et seq. 
 informal written contracts, 160. 
 the binding slip, 160, 16L 
 acceptance of application, 161. 
 formal written contracts, see "Policies.* 
 execution of policy, 165. 
 when policy becomes binding, 167. 
 what papers form written contract, 181-189. 
 written and printed terms, 182 and note, 
 writing on back of policy, 182. 
 application and survey, 183, 492. 
 
 what reference necessary, 183, 184, and notes. 
 premium notes, 184. 
 circulars and prospectuses, 185. 
 charter and by-laws, 186. 
 public statutes, 186. 
 
 prevail over repugnant terms of the policy, 187, 484, 480L 
 ' rules of common law as part of contract, 189. 
 usage as part of contract, 190. 
 
 of benevolent associations (see "Mutual Benefit Insurance*'X 190, 
 when contract terminates, 435. 
 
 CONTRIBUTION, 
 
 between co-insurers, see "Liability of Insurer." 
 
 CREDIT INSURANCE, 
 
 see "Guaranty Insurance.* 
 
 CREDITORS' RIGHTS, 
 
 insurable interest in life of debtor, 138. 
 
 amount for which creditor may insure, 138-140. 
 in fire policies on debtor's property, 404. 
 
 after loss, 404. 
 
 when insured property was exempt, 405, 
 in life policy payable to debtor, 395, 405. 
 
 when subject to execution, 406. 
 
 when passes to assignee in bankruptcy, 406. 
 in life policy payable to third person, 407. 
 
 when premiums have been paid with embezzled funds, 407. 
 
 when transferred in fraud of creditors, 408. 
 
 when premiums were paid by insolvent debtor, 408-410. 
 in policy procured by creditor, 410. 
 
 rights in proceeds after debt is paid, 410. • 
 
 in policy assigned to creditor (see "Assignees"), 412-417. 
 
 rights of mortgagee creditor (see "Mortgagor and Mortgagee")^ 417- 
 420. 
 
 CUSTOMS AND USAGES, 
 as part of contract, 1901 
 
664 
 
 INDEX. 
 £Tlie figures refer to pages.] 
 
 DAMAGED GOODS, 
 
 insurer's option to purchase at appraised value, 486. 
 when a total loss, 558. 
 
 DEATH AT THE HANDS OF LAW, 
 defeats insurance of criminal, 524. 
 
 DEATH IN VIOLATION OF LAW, 
 as excepted risk, 524. 
 
 condition in life policy refers to criminal violation of law, 524. 
 unlawful act must be proximate cause of death, 526. 
 suicide not a "violation of law," 525. 
 
 DELIVERY OF POLICY, 
 when complete, 169 et seq. 
 procured by fraud, 170. 
 subject to parol conditions, 170. 
 evidence of intention to deliver, 172. 
 
 physical possession only prima facie evidence of delivtiy, 172. 
 delivery to agent of insurer, 173. 
 policy held for insured, 175. 
 
 delivery of policy containing receipt for first premium, ITflL 
 
 DESCRIPTION OF INSURED PROPERTY, 
 In general, 436. 
 
 when usage may be shown to aid description, 437. 
 words of description not ordinarily warranties, 286, note 57, 437. 
 of real property, 437. 
 
 goods "held in trust," etc., 115, note 74, 438, 482. 
 of location, 439. 
 In marine policy, 537. 
 
 DEVIATION, 
 
 warranty against in marine insurance, 548. 
 what is, 548. 
 when excused, 549. 
 
 DIVIDENDS, 
 
 when member of mutual company is entitled to, 41. 
 when to be applied to premiums due, 211. 
 
 DOUBLE INSURANCE, 
 
 contribution between co-insurers, 54, 485, 
 provision of standard policy, 485. 
 
 DUTY TO DISCLOSE, 
 see "Concealment," 251. 
 
 EMPLOYERS* LIABILITY INSURANCE, 
 in general, 26, 590. 
 origin, 604. 
 scope, 604. 
 
 not contrary to public policy, 605i. 
 as contract of insurance, 43. 
 construction of contract, 591, 592. 
 risk and cause of loss, 606. 
 
 INDEX. 665 
 
 [The figures refer to pages.] 
 
 EMPLOYERS' LIABILITY INSURANCE— Continued, 
 when liability of the insurer accrues, 605. 
 
 on "liability" contracts, 606. 
 
 on "indemnity" contracts, 606. 
 when insurer liable for expenses of defense, 607. 
 
 notice of claim to be given to insurer, 607. 
 notice and proof of loss, 594. 
 insurance fund not subject to trust in favor of injured person, 607. 
 
 ENTIRE AND SEVERABLE CONTRACTS, 
 see "Contracts of Insurance." 
 
 EVIDENCE, 
 
 when parol evidence of a promissory representation is admissible, 27& 
 of experts as to materiality of statement not admissible, 285. 
 burden of proof as to breach of warranty, 285, 288. 
 
 as to misrepresentation, 285. 
 when waivers may be shown by parol evidence, 346. 
 
 not when waiver precedes delivery of policy, 348. 
 
 otherwise when waiver is subsequent 351. 
 presumption as to suicide, 523. 
 
 EXCEPTED RISKS, 
 
 matters relating to need not be disclosed, 263. 
 see "Risk and Cause of Loss." 
 
 EXECUTION FOR CRIME, 
 as excepted risk, 524. 
 
 EXPIRATION OF INSURANCE, 
 
 see "Commencement and Duration of Risk." 
 
 EXPLOSION, 
 
 as an excepted risk, 480. 
 
 EXPLOSIVES, ETC., 
 
 see "Standard Fire Policy.* 
 
 EXTENDED INSURANCE, 
 
 see "Paid-Up Policies and Extended Insurance.* 
 
 FALLING OF BUILDING, 
 
 as excepted risk, 474. 
 
 FIDELITY INSURANCE, 
 see "Guaranty Insurance.* 
 
 FIFTY PER CENT. RULE, 
 in marine insurance, 559. 
 
 see "Liability of Insurer." 
 
 FIRE INSURANCE, 
 
 establishment and development of in England, 11. 
 
 in the United States, 14. 
 essentially a contract of indemnity, 102. 
 standard fire policy, see separate title. 
 
 P^ORFEITURE OF POLICY, 
 statutory regulations, 20. 
 
 provisions for forfeiture are valid, but not favored, 213, 
 of paid-up insurance held void as a penalty, 213. 
 
 '1 
 
 
 I'f 
 
666 INDEX. 
 
 [The figures refer to pagM.] 
 
 FORFEITURE OF POLICY— Continued, 
 for nonpayment of premium, 213. 
 for nonpayment of interest, 214, 233. 
 "days of grace," 215. 
 
 when annual premium Is made payable within less than a year, 21flL 
 for nonpayment of premium note, 234. 
 for breach of condition as to other insurance, 457. 
 
 as to operation of factories, 460. 
 
 as to increase of risk, 462. 
 by removal of goods, 439. 
 by change of interest, title or possession, 449. 
 by making repairs, 464. 
 by unauthorized assignment of policy, 468. 
 by falling of building, 474. 
 by building becoming vacant, 471. 
 provisions for forfeiture ordinarily self-executing, 218. 
 effect of breach of condition to render policy void or voidable, 433. 
 effect of temporary breach of condition to suspend policy, 433. 
 by act of mortgagor, effect on rights of mortgagee, 420. 
 recovery of premiums for wrongful forfeiture, 243. 
 
 FRATERNAL INSURANCE, 
 
 see "Mutual Benefit Insurance.** 
 
 FRAUD, 
 
 of insured defeats claim of waiver, 337, 357, 369. 
 against creditors in transfer of policies, 408. 
 of assignee defeats rights, 415. 
 as affected by Incontestable clause, 532. 
 
 FRAUD AND FALSE SWEARING, 
 
 condition against in standard policy, 454. 
 overvaluation, when fraudulent, 455. 
 false statements in regard to loss, 456. 
 
 FREIGHT, 
 
 In marine Insurance, 53S. 
 
 FRIENDLY* FIRES, 
 loss by, 477. 
 
 a 
 
 GENERAL AVERAGE, 
 
 in marine insurance, 556. 
 
 GOVERNMENT INSURANCH, 
 In Germany, 25. 
 in Portugal, 27. 
 in Switzerland, 27. 
 
 GUARANTY INSURANCE, 
 
 in general, 26, 590. 
 
 construction of contract, 591. 
 
 construction in favor of insured, 592. 
 
 rent insurance, 590. 
 
 title insurance, 590, note 1. 
 
 fidelity insurance defined, 595. 
 
 not contrary to public policy, 595. 
 
 subject to rules of suretyship, 595. 
 
 INDEX. 
 [The figures refer tQ pagee.] 
 OUARANTY INSURANCE— Continued. 
 
 duty of diligence on part of insured, 696. 
 known acts of dishonesty must be communicated, 596. 
 when knowledge of co-employ6 imputed to employer, 697. 
 risk and cause of loss, 599. 
 extent of guaranty insurer's liability, 599. 
 period of risk, 600. 
 subrogation, 600. 
 credit insurance defined, 601. 
 
 designation of debts Insured, 602. 
 
 rating in mercantile agencies, 602. 
 risk and cause of loss, 603. 
 
 what deemed insolvency within terms of policy, 603. 
 
 u 
 
 HABITS, 
 
 representations as to, 280, 284. 
 
 HAIL INSURANCE, 
 
 see "Casualty Insurance." 
 
 HAZARDOUS OCCUPATION, 
 as excepted risk, 584. 
 
 HEALTH, 
 
 representations concerning, 279, 281. 
 warranties as to, 294, 
 
 I 
 
 ILLEGALITY, 
 
 avoids insurance, 72, 98. 
 
 wager policies, 98, 125. 
 
 contracts between alien enemies, 92. 
 
 noncompliance with statutory requirements, 85. 
 
 insurance without consent of insured, 145. 
 
 right of Insured to recover premiums, 241 et seq. 
 In marine insurance, 549, 
 
 INCENDIARY FIRES, 
 Increase of, 12. 
 
 INCONTESTABLE CLAUSES, 
 In life policies, 530-533. 
 
 do not apply to conditions operating after loss, 531. 
 what defenses may be set up under, 531. 
 lack of Insurable interest, 531. 
 suicide, 531. 
 ftaud in procuring the contract, 532. 
 
 INCUMBRANCES, 
 
 do not render ownership conditional, 446. 
 
 chattel mortgages required by standard poUqy to be disclosed. 44T. 
 as change of interest, 451. ^ ^ 
 
 effect of foreclosure proceedings, 466. 
 
 INDEMNITY, 
 
 the basis of all insurance, 62. 
 
 667 
 
 » 
 
668 INDEX. 
 
 [The figures refer ta paffM.] 
 
 INDEMNITY INSURANCE, 
 
 see "Employers* Liability Insurance.** 
 
 INDORSEMENTS, 
 when binding, 182. 
 
 INDUSTRIAL INSURANCE, 
 workingmen's insurance, 26. 
 
 INFANTS, 
 
 validity of insurance on life of, 145. 
 as parties to contract, see "Parties." 
 
 INHALING GAS, 
 
 as excepted risk in accident insurance, 578. 
 is not "poison," 57a 
 
 INSANITY, 
 
 as excuse for breach of condition, 96. 
 
 as affecting suicide, see "Suicide." 
 
 insane persons as parties insured, see "Parties." 
 
 INSOLVENT DEBTORS, 
 
 rights of creditors in premiums paid by, 408-410. 
 
 INSURABLE INTEREST, 
 
 the general theory of insurable interest, necessary to support «T«fy 
 
 tract of insurance, 52, 57, 89, 98, 125, 536. 
 cannot be waived, 384. 
 in property, what constitutes, 106-120. 
 
 defined, 106-108. 
 
 must exist at time of loss, 101, 124. 
 
 surety in property of principal, 100. 
 
 stockholder in property of corporation, 100, 117. 
 
 of creditor in property of debtor, 108. 
 
 of remaindermen, 109. 
 
 of tenants in dower and curtesy, 109. 
 
 in chattels real. 109. 
 
 lessor and lessee, 109. 
 
 in defective titles, 110. 
 
 of trustee and vendor, 110. 
 
 of mortgagor and mortgagee, 110, 112, 117. 
 
 assignee for benefit of creditors. 111. 
 
 executor. 111. 
 
 in equitable rights, 112, 113. 
 
 of bailees, 113-115. 
 
 lienor, 115. 
 
 in mere right of possession, 116. 
 
 where interest is less than property right, 116-118. 
 
 arising out of contract rights, 118. 
 
 in property not in existence, 119. 
 
 in profits, 120, 539. 
 
 when insurable interest must exist, 121-124. 
 In lives, 12&-144. 
 
 interest at Inception of policy Is sufl3cient, 126, 127. 
 
 need not exist at time of loss, 101. 
 
 when policy is procured by insured, beneficiary need have no interest 
 127. 
 
 necessary when insurance is procured on life of another, 1291 
 
 INDEX. 669 
 
 [Tbe figures refer to pages.] 
 
 INSURABLE INTEREST— Continued. 
 
 not waived by incontestable clause, 631. 
 
 defined, 129. 
 
 mere relationship not alone sufllclent, 100, 130-136. 
 
 pecuniary interest as essential element, 103, 105. 
 
 brother and sister, 100. 
 
 parent and child, 101, 132-134. 
 
 husband and wife, 101, 117, 136. 
 
 commercial relations, 136-138. 
 
 creditor's interest in life of debtor, 138. 
 
 amount for which creditor may insure, 138-140. 
 assignee of valid policy need have no insurable interest, 140, 143, 144 
 contrary view, 142, 143. 
 evasion of law, 414. 
 in marine insurance, 536. 
 
 "lost or not lost" policies, 536. 
 
 INSURANCE, 
 defined, 1. 
 
 among the ancients, 3. 
 earliest traces of, 3. 
 ancient treatises on, 5, 6. 
 historical origin of, 2-11. 
 part of the law merchant, 4. 
 in mediaeval Italian cities, 4. 
 Introduction into England, 6. 
 development of in England, 9. 
 volume of business in the United States, 16. 
 extension of in modern times, 24. 
 proper subject of police power, 76. 
 
 INSURANCE COMPANIES, 
 statutory restrictions, 76. 
 Lloyds associations, 79. 
 stock companies defined, 79. 
 mutual companies defined, 79. 
 mutual benefit associations, 80. 
 mixed companies, 80. 
 foreign companies, rights of, 81. 
 
 not citizens, 83. 
 
 license to do business, 84. 
 
 failure to comply with statutory regulations, 85. 
 
 INSURED, 
 
 see "Parties." 
 
 INSURER, 
 
 see "Parties." , 
 
 INTENTIONAL INJURIES, 
 
 as excepted risk, in accident Insurance, 582, 
 
 INTEREST OF THE INSURED. 
 
 when interest is insurable, see "Insurable Interest." 
 statement of, in policy, when sufllcient, 442, 443. 
 ■ole and unconditional ownership, what is, 444. 
 
 incumbrances not conditions, 446. 
 
 but ownership of co-tenant is not sole, 447. 
 
 r 
 
^70 INDEX. 
 
 rni« figures refer to pages.] 
 
 INTEREST OF THE INSURED— Continued. 
 
 chattel mortgages, when required to be disclosed, 447. 
 
 building on leased ground, 448. 
 
 change of interest, see "Change of Interest, Title or PosseMion.* 
 INTOXICATION, 
 
 as excepted rlak, in accident insurance, 585. 
 
 JETTISON, 
 defined, 55& 
 
 LEASED GROUND, 
 
 Insured building on, 448. 
 
 LIABILITY OF INSURER, 
 
 in fire Insurance, based on indemnity, 102, 483. 
 cannot exceed actual loss, 483. 
 actual cash value, 483. 
 
 rule as to valued policies, 30, 53. 
 rule under valued policy laws, 48»-492. 
 total loss, 491. 
 
 not subject to arbitration under valued policy laws, 491. 
 occasioned by municipal regulations, 484. 
 under concurrent policies, 485. 
 contributions between co-insurers, 54. 
 In marine insurance, 557. 
 actual total loss, 557. 
 
 of goods, 558. 
 constructive total loss, 659. 
 
 fifty per cent rule, 559. 
 general average contribution, 556. 
 
 stranding, 556. 
 particular average, 556. 
 under sue and labor clause, 562. 
 abandonment, 560. 
 
 necessity of notice, 660. 
 co-insurance in marine policy, 65. 
 in accident insurance, 586-588. 
 extent of disability, 586. 
 total disability, 587. 
 double indemnity for travel risk, 675. 
 In guaranty insurance, 599. 
 in employers* liability insurance, 607. 
 
 LIFE INSURANCE, 
 
 , origin and rise in England, 12. 
 in the United States, 15. 
 volume of business, 16. 
 not a contract of indemnity, 56. 
 to a large extent a contract of investment, 66, 102. 
 forms of policies, 31. 
 
 no standard policy, 511, 
 
 671 
 
 INDEX. 
 [The figures refer to pages.] 
 LIFE INSURANCE— Continued, 
 calculation of premium, 35. 
 beneficiaries, see "Beneficiary." 
 
 see "Assessment Insurance" ; -Mutual Benefit Insurancit* 
 LIFE TENANT, 
 
 rights of, in Insurance fund, 421. 
 
 LIGHTNING, 
 not fire, 482. 
 
 clause of standard policy, 478. note 60. 
 as an excepted risk, 482. 
 lightning insurance, 590. 
 
 LIMITATION UPON ACTIONS, 
 by term of policy, 607. 
 
 LIVE-STOCK INSURANCE, 
 
 °° 'z^z^'f::^:^''''' ""^^ ^^^^ »' '^'"' ^«»' -««• «»• 
 
 LLOYDS ASSOCIATIONS, 
 origin, 10. 
 
 organization and methods of business, 82. 
 form of policy, 29, 164, 535. 
 as parties to contract, 79. 
 
 LOCATION OF INSURED PROPERTY 
 in general, 43^-442. ' 
 
 when insurance protects property taken elsewhere. 44a 
 loss during and after removal, 441. 
 
 LOSS OR DAMAGE BY FIRE, 
 see "Risk and Cause of Loss." 
 
 "LOST OR NOT LOST" POLICIES. 
 validity, 536. 
 
 M 
 
 MAGISTRATE'S CERTIFICATE, 
 
 as to loss, condition requiring is valid, 505. 
 when magistrate is disinterested, '5O6.' 
 statements in certificate do not conclude insured 507 
 MARINE INSURANCE, 
 
 development in England, 10. 
 in the United States, 14. 
 Insured deemed co-insurer, 55. 
 general treatment of, 533-663. 
 marine policies, 634. 
 
 Lloyd's standard form, 29, 164, 535. 
 American form (see Appendix), 535. 
 rules of construction, 535. 
 assignments of, 535. 
 insurable interest, 98, 536. 
 
 "lost or not lost" policies, 536. 
 property covered by insurance, 537. 
 "hull and tackle," 537. 
 "goods and merchandise," 538, 
 goods on deck, 538. 
 
6*^2 INDEX- 
 
 [The figures refer to pages.] 
 
 MARINE INSURANCE— Continued. 
 
 freight money, 538. 
 
 passage money, 539. 
 
 profits, 120, 539. 
 commencement and duration of rlak, 540. 
 
 "at and from," 540. 
 
 when voyage insured terminates, 541. 
 risks assumed by insurer, 542. 
 
 proximate cause of loss, 543. 
 Implied warranties (see "Seaworthiness"; "Deriation" ; and "Illeeal- 
 
 ity"), 544. 
 perils of the sea, 550. 
 barratry, 551. 
 thefts, 553. » 
 
 captures, arrests, etc., 553. 
 jettison, 555. 
 
 particular average losses, 555. 
 general average losses, 556. 
 
 stranding, 556. 
 abandonment, 560. 
 sue and labor clause, 562. 
 
 MATERIALITY, 
 
 of facts concealed, 257. 
 
 of representation, 268, 284, 285. 
 
 of warranties, and representations, 293. 
 
 statement of age, 516. 
 
 MEASURE OF DAMAGES, 
 
 see "Liability of the Insurer." 
 
 MEDICAL EXAMINERS, 
 
 as agents of the insurer, 316. 
 
 MILITARY POWER, 
 as excepted risk, 479. 
 
 MISIiEPRESENTATIONS, 
 see "Representations." 
 
 MORTGAGOR AND MORTGAGEE, 
 
 insurable interest of, see "Insurable Interest" 
 mortgagee as party to contract, 75. 
 rights of, in insurance fund, in general, 417-420. 
 insurance by mortgagor for his own benefit, 418. 
 
 for benefit of mortgagee, 419. 
 insurance by mortgagee for his sole benefit, 418. 
 
 in behalf of mortgagor, 419. 
 rights of mortgagee as affected by default of mortgagor, 420. 
 
 MORTUARY TABLES, 
 
 use of, in calculating premiums, 35. 
 
 MUNICIPAL ORDINANCES, 
 
 may transform partial into total loss, 484. 
 
 MUTUAL BENEFIT INSURANCE, 
 
 origin of, 27. 
 
 mutual benefit associations as insurance companies, 80l 
 ^ railway relief association, 25. 
 
 ' 
 
 I 
 
 INDEX. 
 [The figures refer to pages.] 
 
 MUTUAL BENEFIT INSURANCE— Continued. 
 
 subject to same rules as other life insurance, 5a-«0. 
 
 relation of members to, 80. 
 
 infants as members, 90. 
 
 the contract, what constitutes, 190-194. 
 
 admission to membership, 191. 
 
 the certificate of membership, 191. 
 as contract of insurance, 43. 
 
 conflict between certificate and by-laws, 192. 
 
 amended by-laws, 193. 
 liability for dues and assessments, 38, 237. 
 subordinate lodge as agent for superior body, 310. 
 rights of beneficiaries, 400-104. 
 certificate not assignable, 414. 
 
 MUTUAL COMPANIES, 
 
 relation of members to, 80. 
 liability for assessments, 237. 
 regulations of, waiver, 385. 
 
 N 
 
 673 
 
 NEGLIGENCE OF INSURED, 
 
 no defense to insurer, 45. . . 
 
 as an excepted risk, 480. 
 
 NOTICE AND PROOFS OF LOSS, 
 
 in fire insurance, conditions requiring, 496-505. 
 purpose of such conditions, 497. 
 liberally construed in favor of insured, 497. 
 notice of loss distinguished from proofs of loss, 497. 
 when notice of loss is "immediate." "forthwith]" etc., 498, 594. 
 when notice excused, 499. 
 oral insurances, 499. 
 proofs of loss must be satisfactory to insurer, 500. 
 but only a reasonable compliance with requirements of policy is nec- 
 essary, 500. 
 
 objections to proofs furnished deemed waived unless stated, 50a 
 time within which proofs of loss must be given, 501. 
 effect of failure to give proofs of loss within time specified, 501. 
 under standard policy merely suspends right of action, 502. 
 when noncompliance with these conditions is excused 97 503 
 waiver, 830, 375, 376, 380. 
 
 by adjuster, 316. 
 fraud and false swearing in proofs of loss, 454, 456. 
 magistrate's certificate, 505. 
 to whom to be given, 504. 
 by whom given, 504. 
 
 insured not estopped by proofs of loss, 605. 
 In life insurance, 97, 504, 512. 
 in employers' liability insurance. 594, 607. 
 NOTICE OF PREMIUMS DUE, 
 
 not required in absence of contract, 228. 
 
 when required by contract, 223, 224. 
 
 usage, how far binding, 224. ! 
 
 Yamok Imb. — 13 
 
 \ 
 
 i 
 
674 INDEX. 
 
 [Th« figures refer to pages.] 
 
 NOTICE OF PREMIUMS DUE— Continued, 
 required by statute, 225. 
 
 not extraterritorial in operation, 220. 
 to whom given, 226b 
 
 OCCUPATION, 
 
 as element in risk, 583. 
 hazardous, 584. 
 classification, 585. 
 
 OPTION TO REBUILD, 
 
 must be exercised fairly, 488. 
 
 election to rebuild constitutes new contract, 489. 
 
 ORAL CONTRACTS, 
 
 not forbidden by standard policy law, 432. 
 see "Contract of Insurance." 
 
 OTHER INSURANCE, 
 
 contribution between co-insurers, 54. 
 recovery of premiums on over insurance, 247. 
 conditions against, 457, 459. 
 when double insurance exists, 458. 
 
 OVERVALUATION, 
 
 when fraudulent, 274, note 19, 455. 
 efCect of, 455. 
 
 PAID-UP AND EXTENDED INSURANCE, 
 defined, 227. 
 
 sources of the right, 228. 
 construction of provisions for, 229. 
 conditions precedent to right, 230. 
 
 time within which demand for paid-up insurance must be made, 2S0, 
 
 Kentucky rule, 231. 
 when required premium is paid by note, 233. 
 
 PARTICULAR AVERAGE, 
 in marine insurance, 555. 
 
 PARTIES, 
 
 in general, 74 et seq. 
 assignee as a party, 75. 
 mortgagee as party, 75. 
 the insurer, 78-88. 
 
 statutory qualifications, 76, 78. 
 
 statutes prohibiting insurance by natural persons, 7fi. 
 corporate insurers, 79-81. 
 stock companies, 79. 
 mutual companies, 79. 
 mixed companies, 80. 
 mutual benefit associations, 80. 
 Lloyd's associations, 79. 
 
 whether requiring license in foreign state, 82. 
 
 INDEX. 
 IThe figures refer to pages.] 
 PARTIES — Continued. 
 
 rights of foreign insurers, 81-85. 
 when natural persons, 82. 
 when incorporated, 
 ^ not citizens under Constitution of United States, 83. 
 
 license may be required, 84. 
 license may be arbitrarily revoked, 84. 
 agreement not to remove causes is invalid, 84. 
 when not complying with statutory requirements, 85-88. 
 •insured" distinguished from "assured," 75. 
 
 "for the benefit of whom it concerns," 75, 116. 
 
 rights of. In contracts with unlicensed insurers, 85-88. , 
 
 infants, as parties insured, 89-92. 
 
 as members of mutual benefit associations, 90L 
 right to recover premiums paid, 91. 
 aliens as parties insured, 92-95. 
 when war intervenes, 93-96. 
 Insane persons as parties insured, 96, 97. 
 
 intervening insanity excusing breach of conditioii, QQb 
 assured, see "Beneficiary." 
 
 PASSAGE MONET, 
 
 see "Subjects of Insurance.** 
 
 PAYMENT OF PREMIUMS, 
 see "Premiums." , 
 
 PERILS OF THE SEA, 
 
 defined, 550. , ' 
 
 PLATE GLASS INSURANCE, 
 see "Casualty Insurance." 
 
 POISON, 
 
 as excepted risk in accident Insurance, 676L 
 
 POLICIES, 
 
 defined, 159. 
 
 development of, 163. 
 
 kinds of policies, 28-33. ^ 
 
 Lloyd's standard policy, 29, 164, 63S. 
 
 standard fire policy, 29, 430. 
 
 wager policies, 30, 125. 
 
 valued policies, 30, 53. 
 ' open policies, 31. 
 
 time policies, 31. 
 
 voyage policies, 31. 
 
 blanket, fioating, and running policies, SI 
 
 tontine policies, 32. 
 
 endowment policies, 32. 
 reserve value of, 39. 
 "equitable value" of, 95. 
 surrender value of, 40. 
 mode of executing policy, 165. 
 when the policy becomes binding, 167 et seq. 
 
 upon delivery (see "Delivery of Policy"), 169. 
 
 upon payment of first premium (see "Premiums")^ 176. 
 
 675 
 
 f I 
 
 
 41 
 
676 INDEX. 
 
 [The figures refer to pages.] 
 
 POLICIES— CJontinued. ' 
 
 conclusively presumed to contain entire contract of the parties, 164, 324, 
 
 forfeiture of, 213-218. 
 
 nonforfeitable policies, 227 et seq. 
 
 paid-up policies, 227. 
 
 payable to insured or his estate, 387. 
 
 how far property, see Chapter 11, pp. 386-428. 
 
 a life policy not in all respects a chose in action, 405. 
 
 PRECAUTIONS AGAINST LOSS, 
 conditions relating to, 290. 
 
 PREMIUMS, 
 
 how calculated, 34, 35. 
 natural and level premiums, 36. 
 
 when payment of first premium a condition precedent to Inception of pol- 
 icy, 175. 
 what constitutes payment, 177, 204. 
 when prepayment is waived, 178. 
 
 effect of receipt for premium contained in the policy delivered, 179 et 
 seq. 
 liability of insured for premiums. 
 In general, 195. 
 for life insurance, 196, 200. 
 when premium Is a debt, 199. 
 payment, in general, 201-211. 
 by whom paid, 201. 
 where paid, and to whom, 201. 
 time of payment, 202. 
 
 Sundays and holidays, 203. 
 when sent by mail or express, 203. 
 "days of grace," 215. 
 mode of payment, 
 
 in Confederate notes, 204, note 37. 
 
 by personal arrangement between insured and insurer's agent, 
 
 206-209. 
 by check, note, etc., 209? 233. 
 by application of dividends, 211. 
 consequences of nonpayment, 211. 
 excuses for nonpayment, 218 et seq. 
 act of God not an excuse, 218. 
 war, 219. 
 
 insolvency of the insurer, 220. 
 refusal of tender, 220. 
 wrongful act of insurer, 221. 
 want of notice, 222. 
 
 when notice must be given, 223-226. 
 recovery of premiums paid, 241-249. 
 
 when insurance terminated by act of insurer, 243. 
 
 on cancellation, 495. 
 when required by statute, 245. 
 when risk has never attached, 240. 
 
 because of breach of warranty, 246. 
 when insurance is illegal, 247. 
 
 because of over insurance, 247. 
 
 INDEX. 
 [The figures refer to pages.] 
 PREMIUMS— Continued. 
 
 because of lack of insured's consent, 248. 
 right of infant to recover premium paid, 91. 
 PREMIUM NOTES, 
 
 may contain part of contract, 184, 236. 
 installment notes, 199. 
 effect of nonpayment of, 234-237. 
 PROFITS, 
 
 when insurable, 120, 539. 
 
 measure of recovery for loss of, 120. 
 
 PROHIBITED ARTICLES, 
 effect of use of, 437. 
 increase of risk, 462. 
 generation of gas, 469. 
 
 use of explosive and inflammable subsiances, 400. 
 PROOFS OF LOSS, 
 
 see "Notice and Proofs of Loss.* 
 PROXIMATE CAUSE OF LOSS, 
 see "Risk and Cause of Loss." 
 PUBLIC STATUTES, 
 
 regulating insurance business, 17-23, 76, 78. 
 when deemed part of contract, 186. 
 
 not when contract made outside of enacting state, 226 296. 
 annul repugnant terms of the policy, 187 491 
 cannot ordinarily be waived, 188, 490. 
 
 RAILWAY RELIEF ASSOCIATIONS, 
 see "Mutual Benefit Insurance." 
 
 RECOVERY OF PREMIUMS PAID, 
 see "Premiums." 
 
 REINSURANCE, 
 
 defined, 33, 61. 
 
 does not mean other or double insurance, 62. 
 
 not within statute of frauds, 63. 
 
 rights of insurer and reinsurer, 0:3-65. 
 
 rights of original insured, 65-68. 
 
 when reinsurer Is liable to the original insured, 67. 
 REMAINDERMEN, 
 
 rights of, in insurance fund, 421. 
 REMOVAL OF CAUSES, 
 
 agreement not to remove to federal courts invalid, 84. 
 REMOVAL OF GOODS INSURED, 
 
 when defeats insurance, 439. 
 
 loss during and after, 441. 
 
 REPRESENTATIONS, 
 defined, 267. 
 
 distinguished from warranties, 291 et seg. 
 
 from terms of policy, 275. 
 may be oral or written, 267, 271. 
 
 •77 
 
 i 
 
li 
 
 678 INDEX. 
 
 [The figures refer to pages.J 
 
 REPRESENTATIONS— Continued, 
 construction, 292. 
 If false and material, insurance avoided, though innocent, 269. 
 
 legal basis of this rule, 270. 
 as to opinion and belief, 272, 281. 
 promissory representations, 275. 
 
 when oral, cannot be shown to vary terms of policy, 275. 
 required to be only substantially true, 278, 281. 
 
 as to injuries and disease, 279, 281. 
 
 as to habits, intemperance, etc., 280, 283. 
 
 statements of opinion, 281. 
 time to which representations refer, 284. 
 test of materiality, 284. 
 
 as affected by statute, 284, 296. 
 
 validity of statutory provisions, 296. 
 
 not to be shown by expert testimony, 285. 
 
 question for the jury, 285. 
 
 RESERVE FUND, 
 
 meaning and function of, 89. 
 
 RIDERS, 
 
 as part of the contract, 181, 185. 
 attached to standard policy, 432. 
 
 RIGHT TO PROCEEDS, 
 
 see "Assignees"; "Beneficiaries"; "Creditors' Rights"; "Mortgagor and 
 
 Mortgagee.** 
 
 RISK AND CAUSE OF LOSS, 
 
 Are insurance, what is loss by fire, 475, 491. 
 hostile and friendly fires, 477. 
 fire caused by lightning, 482. 
 limitations as to place of loss, 439, 441. 
 excepted risks, 478. 
 
 loss caused by insured, 45, 189. 
 
 falling of building, 474. 
 
 military or usurped power, 479. 
 
 destruction by civil authorities, 479. 
 
 explosion, 480. 
 
 theft, 480. 
 
 neglect of insured, 45, 480. 
 
 Ughtning, 482. 
 
 excepted subjects, 482. 
 proximate cause of loss, 47S. 
 
 explosion, 481. 
 t fsk marine insurance, 542. 
 perils of the sea, 550. 
 barratry, 551. 
 theft, 553. 
 capture, 553. 
 jettison, 555. 
 stranding, 556. 
 proximate cause of loss, 542. 
 In life insurance, suicide, when not excepted, 516. 
 excepted risks, death caused by beneficiary, 392. 
 
 suicide, when excepted in the policy, 520. 
 
 INDEX. jg79 
 
 [Tbe figures refer to pages.] 
 RISKAND CAUSE OF LOSS— Continued. 
 
 death at the hands of the law, 524, 
 death in violation of law, 524. 
 proximate cause of death, 526. 
 In accident insurance, external, violent and acddentarcauses, 6601 
 disease induced by accident, 570. 
 external and visible signs of injury, 571. 
 risks of travel, 573. 
 risks of occupation, 583. 
 excepted risks In general, 575. 
 poison, 576. 
 
 applies only to Intentional acts, 577. 
 does not include inhaling gas, 578. 
 Inhaling gas, 578. 
 
 applies only to intentional act, 579. 
 bodily infirmities or disease, 580. 
 voluntary and unnecessary exposure to injury, 681. 
 Intentional injuries, 582. 
 hazardous occupations, 584. 
 
 classification of occupation, 585. 
 Injuries received while Intoxicated, 585w 
 proximate cause of injury or death, 57a 
 right to demand autopsy, 588. 
 in live stock insurance, 189, note 157. 
 in guaranty insurance, 599. 
 in credit insurance, 603. 
 in employers' liability insurance, 606. 
 
 SEAWORTHINESS, 
 
 what constitutes, 547. 
 warranty of, in voyage policies, 545. 
 in time policies, 546. 
 
 SOLE AND UNCONDITIONAL OWNERSHIP, 
 see "Interest of Insured." 
 
 STANDARD POLICY, 
 
 history of adoption, 29, 165. 
 
 purpose of standard policy laws, 430, note 4. 
 
 general rules of construction, 430. 
 
 how far its terms may be varied, 432. 
 
 oral preliminary contract valid, 150, 155. 
 
 when terms may be waived, 385, 432. 
 
 construction of its terms, 430-510. 
 
 effect of temporary breach of condition, 433. 
 
 contract is Indivisible, 433. 
 
 the term of insurance, 435. 
 
 words describing property insured (see "Description of Insured ProD- 
 erty"), 436-439. 
 
 words describing location of property (see "Location of Insured Pron- 
 erty"), 439. *^ 
 
 statement of insured's interest (see "Interest of Insured"), 442-44& 
 
 chattel mortgages, 447. 
 
 change of Interest, etc. (see separate title), 449-454 
 
680 INDEX. 
 
 [The figures refer to pages.] 
 
 STANDARD POLICY— Continued. 
 
 fraud and false swearing, 454r^57. 
 other insurance (see separate title), 457-460. 
 operation of factories, 460. 
 increase of risk, 462. 
 
 what constitutes, 462. 
 making repairs, 464. 
 foreclosure proceedings, 466. 
 assignments, 468. 
 generation of gas, 469. 
 explosive and inflammable substances, 469. 
 
 as affected by custom and usage, 470. 
 vacant or unoccupied buildings (see separate title), 471, 
 collapse of building, 474. 
 direct loss or damage by fire, what is (see "Loss or Damage by Flre**X 
 
 475-i78. 
 excepted causes of loss, 478. 
 
 military or usurped power, 479. 
 
 destruction by civil authority, 479. 
 
 theft, 480. 
 
 neglect of insured, 480. 
 
 explosion, 480. 
 
 lightning, 481. 
 excepted subjects of loss, 482. 
 measure of insurer's liability (see "Liability of Insurer"), 483-48a 
 
 appraisal and arbitration, 486. 
 
 option to rebuild, 487. 
 documents made part of contract, 492, 
 agent's authority to waive, 493. 
 right to cancel, 494. 
 
 notice and proofs of loss (see separate title), 496. 
 magistrate's certificate of loss, 505. 
 limitation upon actions, 507. 
 
 STATUTORY REGULATION OF INSURANCE, 17-23. 
 necessity and purpose in general, 17. 
 relating to forfeiture, 20. 
 not applicable to mutual benefit Insurance, 60. 
 of foreign insurance companies, 81. 
 effect of Insurer's failure to comply with, 85. 
 cannot be waived, 285, 383, 490. 
 
 no extraterritorial operation save by consent, 226, 296. 
 as to effect of warranties and representations, 284, 294. 
 
 validity, 296. 
 of Insurance agencies, 299. 
 relating to beneficiaries, 391. 
 
 penalizing unsuccessful contests by Insurers, 483, note 72, 
 valued policy laws, see separate title. 
 
 STRANDING, 
 
 as affecting extent of liability, 556. 
 
 STRIKE INSURANCE, 
 
 see "Casualty InsurancOb* 
 
 SUBAGENTS, 
 
 •Agents," 317-322. 
 
 INDEX. 
 [The figures refer to pages.] 
 SUBJECTS OP INSURANCE, 
 property not In existence, 119. 
 
 lost or not lost, 536. 
 profits, 120, 539. 
 freight, 538. 
 passage money, 539. 
 
 SUBROGATION, 
 
 right In general, 55. 
 
 general right of insurer to claim, 422. 
 
 extent of the right, 423. 
 
 effect of Insured's release of tort feasor, 425. 
 
 when tort feasor has contracted for benefit of Insurance, 4261 
 
 no subrogation till indemnity is complete, 427. 
 
 has no application to life and accident Insurance, 428. 
 
 in guaranty Insurance, 600. 
 
 SUE AND LABOR CLAUSE, 
 In marine Insurance, 562. 
 
 requisites for insurer's liability under, 563. 
 SUICIDE, 
 
 as a defense, statutory regulations, 21. 
 effect of, on insurance, 516-523. 
 
 when not excepted in the policy, 5ia 
 when Insured is sane, 516. 
 
 rule when Insurance payable to third person, 619. 
 when insured Is Insane, 520. 
 when excepted in the policy, 520. 
 
 does not apply to insane suicide, 520. 
 unless expressly so specified, 522. 
 what constitutes insanity, 621. 
 English rule, 521. 
 American rule, 521. 
 suicide never presumed, 523. 
 as affected by incontestable clause, 581. 
 SURPLUS, 
 
 not a trust fund, 41. 
 
 SURRENDER VALUE, 
 
 none without agreement, 40, 405. 
 
 681 
 
 
 THEFT, 
 
 as an excepted risk, 480. 
 as used in marine policy, 553. 
 
 TITLE INSURANCE, 
 
 see "Guaranty Insurance." 
 
 TORNADO INSURANCE, 
 see "Casualty Insurance." 
 
 TOTAL DISABILITY, 
 
 in accident insurance, see **Liabilil7 of Insurer."* 
 TOTAL LOSS, 
 
 ae% "Liability of Insurer.* 
 
682 
 
 INDEX. 
 CThe flffures refer to paies.] 
 
 VACANT AND UNOCCUPIED BUILDINGS, 
 conditions against, 471. 
 
 what constitutes "occupation," 472. 
 
 distinction between "vacant" and "unoccupied," 471b 
 
 VALUED POLICY LAWS, 
 expediency of, 21. 
 as affecting standard policy, 489. 
 prevail over three-fourths value clause, 188. 
 
 arbitration clause, 491. 
 
 rebuilding clause, 491. 
 
 co-insurance clause, 486. 
 cannot be waived by insured, 490. 
 
 VOLUNTARY AND UNNECESSARY EXPOSURE^ 
 excepted risk in accident insurance, 681. 
 
 w 
 
 WAGER POLICIES, 
 
 see "Insurable Interest" 
 
 WAIVER AND ESTOPPEL, 
 
 defined and distinguished, 343, 345. 
 
 waiver requires no new consideration, 844. 
 
 whether based on estoppel, 344, note 3, 374^ 
 powers of agent, 308. 
 
 agency for insurer or Insured, 333. 
 powers of adjuster, 316. 
 powers of subagent, 321. 
 limitation on agent's authority, 324, 
 conditions of standard policy, 432. 
 parol waivers, in general, 346. 
 
 If prior to issue of policy, cannot be shown, 348. 
 If subsequent to issue of policy, may be shown, 351. 
 waivers at time of delivery of policy, 355 et seq. 
 of executory conditions cannot be shown, 355. 
 Of conditions affecting inception of policy may be shown, 356w 
 contrary view, 360. 
 view of Supreme Court, 364 et seq. 
 insured can claim a waiver only when acting in good faith, 357, 369, 370.. 
 what constitutes a waiver, 371. 
 
 right waived must be known, 371. 
 Insurer's acts must be misleading, 372. 
 when silence of Insurer is sufficient, 373. 
 Insured must have been prejudiced, 374. 
 the opposing view, 374. 
 the New York decisions, 377. 
 estoppel by requiring performance of contract, 379. 
 provision of standard policy, 380, 493. 
 what may be waived, 381-385. 
 
 conditions against waiver, 327, 329, 381. 
 as to acts after loss, 330. 
 
 INDEX. 683 
 
 [The figures refer to page*.] 
 
 WAIVER AND ESTOPPEL— Continued. 
 
 statutory rights cannot be, 285, 383, 490. 
 
 80 of certain common-law rights, 384. 
 
 regulations of mutual companies, 385. 
 
 conditions of standard policy, 385. 
 by consent of Insurer to assignment known defenses waived, 41S, note 87. 
 by mistake and negligence of agent, 337. 
 
 knowledge of agent imputable to insurer, 330. 
 by knowledge of medical examiner, 316. 
 ' waiver of prepayment of first premium, 178. 
 
 nonpayment of premium, 222, 345, 350, 352, 353. 
 
 of condition subsequent, 355. 
 
 WAR, 
 
 effect of war upon insurance contracts, 93-96, 219, 608. 
 when excepted In marine policies, 543, 553. 
 
 WARRANTIES,. 
 
 In general, 285 et seq. 
 
 defined, 285. 
 
 distinguished from representations, 286, 291, et seq. 
 
 as part of contract, 286, 291. 
 
 papers made part of the contract In standard policy, 482. 
 in the nature of conditions precedent, 287. 
 
 but burden of showing breach of warranty Is on the defendant, 
 when descriptive words construed as warranties, 286, note 67, 437. 
 affirmative and promissory warranties, 289. 
 
 how distinguished, 290. 
 construction, 292. 
 
 materiality conclusively presumed, 293. 
 required to be literally true, 293. 
 
 warranties of health, 294. 
 as affected by statutes, 20, 294-297. 
 
 such statutes have no extraterritorial effect, 298. 
 
 validity of statutes, 296. 
 recovery of premium on breach of warranty, 248. 
 implied warranties as to marine risks. 544. 
 
 seaworthiness, 645. 
 
 deviation, 548. 
 
 legality of voyage, 549. 
 
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