INSURANCE. CHAPTER XLIII. 522. The Contract of insurance is one by which the insurance company agrees for a consideration to reimburse the other party to the contract, or some one they may agree upon, for a certain loss, or in case of a certain contingency. It is a contract every year becoming more popular. It enables the business man to count with certainty in advance upon the cost of certain risks which are incidental to every business undertaking. By it also a man of frugal means is enabled to make suitable provision for his family in case of his death or injury. Almost every year sees some new risk against which insurance can be taken, but these may all be classified under the following general heads: (1) Fire; (2) Life; (3) Casualty; (4) Marine. FIRE INSURANCE. 523. Parties and Terms.-The business is nearly always done by incorporated companies, organized for that purpose. The company is called the insurer, the owner of the property in question is called the insured. The contract of insurance is the policy, and the consideration is called the premium. 524. Companies.-There are two kinds of companies, stock and mutual. The stock company is usually, if not always, a corporation which pledges its whole capital and receipts to the payment of losses. This kind of company takes the contract for a certain premium, which is agreed upon in advance. In a mutual company the amount of premium to be paid depends on the amount of losses which the company may sustain for the period. A small cash payment is usually required, and a conditional note is taken for a much larger sum. If the losses of the company exceed a certain amount, then the makers of the notes are called upon pro rata. While the insured is a member of the com pany, yet he cannot be called upon for more than the amount of his note. Mutual companies usually have no capital, or at least only a small one, the security of the insured being its receipts. Mutual companies are not now so common in fire insurance as formerly, but they are still often found in the country districts. 525. Insurable Interest. The contract of insurance is a wagering contract. The company, for a small sum, takes its chances on the destruction of the property. If it sustains a loss on one risk it will make it up on the many others on which no loss occurs. The loss is sure to occur, and some one must sustain it, for this reason the law upholds contracts of insurance and favors them. It permits the insured to provide against this risk of loss on account of the beneficial effects which follow. It does, however, require that some loss shall occur to the insured in case of fire. It is against this loss that insurance may be taken. The party insured, then, must have some interest in the property in question, not only at the time of the insurance, but at the time of the loss. 526. A Divided Interest.—It is not necessary that one person own the entire property in order to have an insurable interest. Different persons may have different and distinct interests in the same property, and the law permits each to protect his interest by means of insurance. A familiar instance of this is the case of a mortgagor and mortgagee. Thus commission merchants, having an interest in property in their possession to the extent of their commissions. may insure, as may also the owner, and it has been held that each can insure to the full value of the property. It has also been held by the Supreme Court of the United States that a party occupying premises under an agreement to purchase, had an insurable interest up to the value of the property, even though the real owner also had it insured. The general rule is that a person cannot insure his property for its full value. This is not a rule of law, but of the companies. 527. Agents. The company does its business through agents, appointed in the several localities where it is proposed to do business. They act for the company and make reports to the head office of the facts connected with each risk. These agents are governed in all respects by the law of agency, and notice to them is notice to the company which they represent. They are, however, special agents. 528. Board Companies.-Most companies are members of the board of underwriters. This is an association of companies formed for their mutual benefit. A committee is chosen and sent to each town or city where these companies propose to do business. They organize the local agents into a local board of underwriters, and view and inspect the entire business portion of the place. They note for what purpose each building is occupied, the structure of the building, whether of brick, stone or wood, the kind of roof, the "exposures," that is, its proximity to other buildings, in fact they observe all matters that tend to increase or decrease the risk from fire. They then fix from these facts the rate of premium that each building should pay, and the rate that the contents should pay. This is called the "board rate," and no agent of a board company is permitted to take it for less. 529. The Policy. This is the contract between the insured and the insurer, and as each company always uses its own printed form, which differs somewhat from the others, it should always be consulted in case of dispute. It usually contains a minute description of the premises or property insured, the amount insured, the premium paid, or to be paid, and the time for which the insurance is to continue. The latter is exact to an hour. Most policies expire at twelve o'clock, noon. The object for which the premises are to be used should always be stated, for on it depends the degree of risk. 530. Conditions in the Policy.-Policies usually contain conditions, which are expressly made a part of the instrument. Their fulfillment is in such cases a condition precedent to a right of recovery. One of the common conditions is that the insured shall not alter the premises so as to increase the risk. He cannot, except with the consent of the company, erect other buildings within a certain limit of the insured premises, without rendering his policy void. 531. Another Condition often inserted in policies, is that the insured must notify the company in case he procure additional insurance on the property. The object of this is to prevent the over insuring of the property, and thus put a temptation in the way of the insured for its destruction. Sometimes a provision is inserted in the first policy as follows: "$ additional insurance permit ted." An interesting and important question arises as to whether the insured has any remedy on either policy when he procures two policies, each containing the clause against further insurance, and neither company has knowledge of the other policy. It was decided in Massachusetts that the second policy being void, his right on the first was perfect. 532. The Risk.—The risk is the danger from loss by the particular damage insured against. Sometimes policies against loss by fire also contain a provision including loss by lightning as well as by fire. The actual loss to the insured is the criterion or true measure of damage. By this is meant the actual value of the property at the time of loss. The loss under the peculiar circumstances of the case may occasion the insured damage and inconvenience far beyond its actual value, still the actual value remains the true measure. Without a provision in the policy to the contrary, loss by lightning is not covered, unless ignition actually takes place. It includes losses resulting from water thrown on to put out or control the fire. The negligence of the owner cannot be used as a defense against his right of recovery, unless there be also fraud. CHAPTER XLIV. FIRE INSURANCE-CONTINUED. 533. Abandonment of Fire Insurance.-There is no such thing in fire insurance as an abandonment of the salvage to the company, in case of a partial loss, and then claiming the whole insurance. This right exists only in marine insurance. 534. Amount Insured. The amount stated in the policy is not the amount the company agrees to pay in case of loss, but the maximum amount for which they are willing to become liable. The loss, though total, may be but a small proportion of the amount stated in the policy. The amount stated in the policy is, however, the basis for the computation of the premium, which is a certain per cent of it. A insures his building, valued at $5,000, for $3,000. A partial loss occurs, amounting to $2,000. The loss is said to be fully covered, and he will get the full $2,000. If the loss had been $4,000 he would only get $3,000. So also if it had been total he would only receive $3,000. When a partial loss occurs, and the company pays it, it is then only liable for the remainder of its policy. Thus, in the above case, if the loss had been $1,000, the company would then only be liable for $2,000 additional. If the insured wishes the full $3,000 of insurance, he should pay the additional premium. 535. Insurance in Several Companies.-Insurance companies as a rule prefer many and small risks to few and large ones. Then, in case of loss, their loss is not so much as to affect them, or to cause uneasiness on the part of those who hold their policies. For this reason one who has a large property which he wishes to insure, must do so in several companies. In this case the companies will demand that the written portion of the different policies shall all be alike. This is to make a settlement in case of loss an easy matter. They thus each insure the identical property, and they stand as co-sureties for the loss, each being liable up to the amount mentioned in its policy. If the loss be total each is liable for the full amount of its policy, but if the loss be partial each pays that proportion of the loss which the amount of its policy bears to the whole amount of insurance. A has a property which he insures in the following companies: Etna, $2,000; Hartford, $3,000; Girard, $4,000, and Queen, $3,000. There is a loss of $1,800; this being 15 per cent of the total insurance, each company must pay 15 per cent of the amount of its policy, which will just make the loss good. A would then have to make collection from four companies. Instead of this he can collect the whole amount from any one of them, and it can in turn compel the others to contribute their shares. This is no more than the right of contribution mentioned in sec. 258, which exists among all joint debtors. To prevent this throwing of the burden of collection entirely upon the companies, many have inserted a provision in their policies that only their pro rata can be collected from them. 536. Adjustment of Loss.-The policy usually prescribes what proceedings must take place in the event of loss. It usually specifies that notice must be immediately communicated to the company, stating the cause and extent of the loss, the same to be verified under oath. These provisions have been held as proper, and imposing no unnecessary burden on the insured. In large cities there are parties whose business it is to let their services to those who have suffered a loss which is covered by insurBeing trained "adjusters" they claim to be able to make a ance. |