ARTHUR IBLUM. ATTORNEY
Lijie, Uttlti md i<
INSURANCE LAW
THE LIBRARY
OF
THE UNIVERSITY
OF CALIFORNIA
LOS ANGELES
SCHOOL OF LAW
A TREATISE
ON THE
LAW OF INSURANCE
OF EVERY KIND
By
JOSEPH A. JOYCE
Of the New York, California, and Connecticut Bars
Second Edition
In Five Volumes
Vol. Ill
THE LAWYERS CO-OPERATIVE PUBLISHING CO.
ROCHESTER, N. Y.
1917
Copyright 1S97
by
Joseph a. Joyce.
Copyright 1917
by
Joseph A. Joyce.
vJ
LAW OF INSURANCE
CHAPTER XL.
THE PREMIUM— PAID-UP AND NONFORFEITABLE POLICIES.
§ 1178. Paid-up and nonforfeitable policies: extended insurance: gen-
erally.
§ 1178a. Paid-up, extended and temporary insurance distinguished.
§ 1178b. Invalid contracts : surrender value : paid-up policies : loans.
§ 1179. Nonforfeiture statutes.
§ 1179a. Sucb statutes constitutional.
§ 1179b. Whether policy becomes" automatically paid-up: extended in-
surance.
§ 1179c. Forfeiture rule not applicable to policy stipulating for loan value
charge: "automatically nonforfeitable" clause.
§ 1180. Death as affecting right to paid-up policy.
§ 1180a. Insanity as affecting right to paid-up policy.
§ 1181. When only paid-up policy can be claimed, and when the full
amount of insurance.
§ 1181a. Paid-up policy: surrender cannot defeat beneficiary's rights.
§ 1182. Right to claim paid-up policy: demand: surrender value.
§ 1183. Right of infants: paid-up policy.
§ 1183a. Paid-up policy: husband and wife.
§ 1184. When right to claim paid-up policy must be exercised.
§ 1185. Right to paid-up policy must be exercised within specified time.
§ 11S6. Exceptions to last rule and cases contra.
§ 1187. Whether payment of note required to entitle to paid-up policy.
§ 1188. When paid-up policy forfeited: cases.
§ 1189. When paid-up policy not forfeited: cases.
§ 1190. Whether it is new contract or continuation of old one.
§ 1191. Amount of premium under statutes "deducting indebtedness."
§ 1192. Amount of paid-up policy.
§ 1193. Endowment policy: nonforfeiture statutes.
§ 1194. Refusal to issue paid-up policy.
§ 1195. Refusal to issue paid-up policy ; measure of damages.
2283
B67S42
§§ 1178-1178b JOYCE ON INSURANCE
§ 1178. Paid-up and nonforfeitable policies: extended insurance:
generally. — Many questions of construction have arisen under what
are known as nonforfeitable policies. Many policies provide that
i fter the payment of a specified number of annual premiums the
holder shall be entitled to a paid-up policy; or a life policy may be
conditioned for specified annual payments during a term of years
when it will be considered paid-up. The contract may provide the
terms upon which such paid-up policy will be issued, stipulating for
surrender of the old policy, demand for a new one within a specified
period, or it may entitle the assured to a proportionate sum at all
events, and so a policy may by its express terms be a nonforfeiture
policy, and vet limit the condition as to nonforfeiture, by providing
for a surrender within a certain time, and also contain a forfeiture
i Lause, and the court in an opinion in one case declares that such
seemingly conflicting provisions exact a construction against the
company most favorable to the insured.13
§ 1178a. Paid-up, extended and temporary insurance distin-
guished.— Paid-up insurance means that no more payments are re-
quired: that is, it is an insurance for life, fully paid up, and the
distinction between paid-up insurance and temporary and extended
insurance is held to be clearly made and recognized under the Mis-
souri statutes which also provide for extended insurance and paid-up
insurance in different sections.14
§ 1178b. Invalid contracts: surrender value: paid-up policies:
loans. — An agreement by letter, sent by insurer's agent, to pay a
specified sum on surrender of the policy which contains no provi-
sion for a cash surrender value is without consideration when made
after the policy lias lapsed, and although the present cash value of
the policy is stated with a promise to attend to the matter, there is
no agreement to pay.15 A contract by which an insurance company
Loaning money on the security of a paid-up policy issued by it may,
at its option, require a surrender of the policy for its cash value
upon default in payment of the loan or interest thereon, is void.18
13 See Brooklyn Life Ins. Co. v. for paid-up insurance under Laws N.
Dutcher, 95 U. S. 269, 24 L. ed. 410. Y. 1892, c. C90, sec. 88, providing
As to paid-up or nonforfeitable for surrender value of lapsed or for-
policies, see note 15 L.K.A. 449. feited policies. Examine McLeod v.
As to power of mutual, etc., com- Jobn Hancock Mutual Life Ins. Co.
panics or associations as to paid-up 190 Mo. App. 653, 176 S. W. 234.
or extended insurance, and nonfor- 15 Armstrong v. Equitable Life
feitable policies, see § 350g herein. Assur. Soc. of U. S. 14 Ga. App.
"Nicliols v. Mutual Life Ins. Co. 353, 80 S. E. 694.
176 Mo. 355, 62 L.R.A. 657, 75 S. W. 1C New York Life Ins. Co. v.
664, 32 Ins. L. J. 790, Rev. Stat. Curry, 115 Kv. 100, 61 L.R.A. 268,
1889, sees. 5856-5859, as am'd by 24 Am. St. Rep. 1930, 72 S. W. 736.
acts 1895, p. 197. Policy provided
2284
PAID-UP AND NONFORFEITABLE POLICIES § 1179
And an agreement to apply the net revenue in payment of the loan
is void and a failure to protest against such application of the pro-
ceeds does not operate as an estoppel where insured was not fully
cognizant of his rights.17
§ 1179. Nonforfeiture statutes. — There are nonforfeiture statutes
in several states.18 The repeal of such statutes cannot affect con-
17 Gillen v. New York Life Ins. Co. 20 Sup. Ct. 062, aff'g Cravens v. New
178 Mo. App. 89, 161 S. W. 667, un- York Life Ins. Co. 148 Mo. 583, 53
der Rev. Stat. 1800, sec. 7897. Ex- L.R.A. 305, 71 Am. St. Rep. 628, 50
amine Tyson v. Equitable Life As- S. W. 519; Mutual Reserve Life Ins.
sur. Soe. of U. S. 144 Ga. 729, 87 Co. v. Roth, 122 Fed. 853, 59 C. C. A.
S. E. 1055. 63, s. c. 191 U. S. 570, 48 L. ed.
18 California.— Deering's Annot. 306, 24 Sup. Ct. 842); Rev. Stat.
Civ. Code Cal. sec. 2766. 1009, sec. 6946 (construed in Pope v.
Colorado.— 1 Mills' Stats. Colo. New York Life Ins. Co. 192 Mo.
1891, sec. 2223. App. 383, 181 S. W. 1047) ; Rev.
Maine.— Rev. Stats. Me. 1883, p. Stat. 1899, sec. 7897 (construed in
460, sec. 91; and Pub. Laws, 1887, Munn v. New York Life Ins. Co. —
c. 71. Mo. App. — , 181 S. W. 606) ; Rev.
Massachusetts.— 1880, c. 232, sec. Stat. 1909, sec. 6949 (construed in
6; 1882, c. 119, sees. 159, 160; 1887, McLeod v. John Hancock Mutual
c. 217, sec. 76. Life Ins. Co. 196 Mo. App. 653, 176
Michigan.— 1 Gen. Stats. Mich. S. W. 234; Rev. Stat. 1899 (sec.
1882, sec. 4232. 7897) sec. 7900 (construed in Leeker
New York. — Ins. Law, 1909, c. 33, v. Prudential Ins. Co. 154 Mo. App.
sec. 88, as am'd L. 1909, c. 301; L, 440, 134 S. W. 676) ; Rev. Stat. 1899,
1909, c. 595, L. 1910, c. 614. sees. 7897, 7899 (Ann. Stat. 1906,
See also the following: pp. 3752, 3754) sec. 7900; Rev. Stat.
California. — Civ. Code, sec. 450 1909, sec. 6946 (construed in Paseke-
(construed in Straube v. Pacific Mu- daz v. Metropolitan Life Ins. Co.
tual Life Ins. Co. 123 Cal. 677, 56 155 Mo. App. 185, 134 S. W. 102) ;
Pac. 546). Rev. Stat. 1909, sec. 6946 (acts 1903,
Kentucky— Act Apr. 5, 1893 p. 208) and Rev. Stat. 1899 (Ann.
(construed in Metropolitan Life Ins. Stat. 1906, p. 3752) sec. 7897 (con-
Co. v.. Clay, 158 Ky. 192, 164 S. W. strued in Cristensen v. New York
968) ; Kv. Stat. 1909, sec. 659 (con- Life Ins. Co. 152 Mo. App. 551, 134
strued in Mutual Benefit Life Ins. S. W. 100); Rev. Stat. 1899 (Ann.
Co. v. Brien, — Ky. — , 116 S. W. Stat. 1906, pp. 3752-3755) sees.
750). 7897-7900 (construed in Fuhle v.
Massachusetts. — Pub. Stat. c. 119 Connecticut Mutual Life Ins. Co.
(nonforfeiture L. of 1880) sees. 164, 155 Mo. App. 13, 134 S. W. 60, 40
165 (construed in Hazen v. Massa- Ins. L. J. 602) ; Rev. Stat. sec. 7897
chusetts Mutual Ben. Assoc. 170 (construed in Rose v. Franklin Life
Mass. 254, 49 N. E. 119, 27 Ins. L. Ins. Co. 153 Mo. App. 90, 132 S.
J. 242. W. 613, 40 Ins. L. J. 180) ; Rev. Stat.
Missouri. — The construction of the 1899, sec. 7897, as am'd by L. 1903,
statutes of this state has been the p. 208 and sec. 7900 (construed in
source of much litigation as will ap- Burridge v. New York Life Ins. Co.
pear from the following citations: 211 Mo. 158, 109 S. W. 560); Rev.
Rev. Stat. 1879, sec. 5983 (construed Stat. 1889, sec. 5856 (canst rued in
in New York Life Ins. Co. v. Cra- Horton v. New York Life Ins. Co.
vens, 178 U. S. 389, 44 L. ed. 1116, 151 Mo. 604, 52 S. W. 356.
2285
§ 1179 JOYCE ON INSURANCE
tracts made thereunder,19 nor are such statutes retroactive.20 This
is in conformity with general principles, and a statute is to be
deemed retrospective or retroactive where it takes away or impairs
any vested right acquired under existing laws, or creates a new ob-
ligation or imposes a new duty, or attaches a new disability in re-
spect to transactions or considerations already past,1 unless a policy
is issued in violation thereof.2 Such statutes are a part of the con-
tract of insurance,3 although it is held that a statutory provision
that every contract of life insurance shall contain a provision for
the application of the reserve to the purchase of extended insurance
in case of forfeiture or nonpayment of premiums, under penalty of
having the license of insurer withdrawn, does not become part of
an insurance policy which does not contain the provision.4 Wheth-
er the provisions of such statutes can be waived by agreement is
doubtful. The statute is, however, undoubtedly for the benefit of
the assured; its purpose is merely to establish a rule which shall
enable the assured to reap the full benefit of premiums paid before
default on his part, and at the same time to secure to the insurance
company, in case it is obliged to pay, the full amount of the pre-
miums which the terms of the policy call for.5 The general rule
applicable to waiver of statutory provisions has, however, been al-
ready considered.6 Such statutes apply to foreign companies doing
business in the state under compliance with its laws.7 A proviso in
a statute governing the adjustment of claims upon life insurance
policies forfeited for nonpayment of premiums, that "in no in-
stance shall a policy be forfeited . . . after the payment of
19 McDonnell v. Alabama Gold Life When attached note as to paid-up
Ins. Co. 85 Ala. 401, 5 So. 120. policy is part of policy. See Jan-
20 § 1105 herein. der v. Mutual Life Ins. Co. 16 Ohio
1 Hope Mutual Ins. Co. v. Flynn, Cir. Ct. Rep. 530, 40 Wkly. L. Bull.
38 Mo. 483, 90 Am. Dec. 438. 536.
2 Straube v. Pacific Mutual Life 5 Carter v. John Hancock Mutual
Ins. Co. 123 Cal. 677, 56 Pac. 546. Life Ins. Co. 127 Mass. 1",:; (state-
Paid-up policy and nonforfeiture ment made by the court in arguing).
statute. See Cravens v. New York Life Ins.
3 Nelson v. Provident Savings Life Co. 148 Mo. 583, 53 L.R.A. 305, 50
Assurance Soc. 139 Cal. 332, 73 Pac. S. W. 519, aff'd New York Life Ins.
168, rev'g 66 Pac. 663 (construing Co. v. Cravens, 178 U. S. 389, 44
also the New York statute as to ex- L. ed. 116, 20 Sup. Ct. 762, 29 Ins.
tended insurance). L. J. 876.
* Equitable Life Assurance Soc. v. 6 See §§ 194 et seq. herein, "wheth-
Babbitt, 11 Ariz. 116, 13 L.R.A. er common or statutory law part of
( VS.) 1046 (annotated on effect of contract," and cases therein.
statute providing for application of 7 Morris v. Penn Ins. Co. 120
reserve to the purchase of paid-up Mass. 503.
insurance, 89 Pac. 531. See §£ 194
et seq. herein.
2286
PAID-UP AND NONFORFEITABLE POLICIES §§ 1179a, 1179b
three annual premiums thereon ; " but in all such instances "the
holder of such policy shall be entitled to paid-up insurance" the
value of which shall be equal to that provided in another section of
the statute, — does not give a right to extend temporary insurance,
although the section referred to provides for the ascertainment of a
premium which may be used to obtain temporary insurance for the
full amount of the policy.8
§ 1179a. Such statutes constitutional. — A statute is constitu-
tional which provides for non-forfeiture of a life policy after pay-
ment has been made of a specified number of annual premium
payments and that the balance shall be a premium for purchasing
temporary insurance.9 So an exemption of policies of life insur-
ance issued by corporations of other states, which stipulate that
they shall be governed by the laws of another state, from the opera-
tion of the Missouri statute making policies nonforfeitable for de-
fault, in payment of premiums, cannot be claimed by virtue of the
Constitution of the United States, and on the ground that it inter-
feres with the contractual liberty of the corporation, since the state
has power to compel such corporations to be subject to such statute
as a condition of the right to do business in the state.10
§ 1179b. Whether policy becomes automatically paid-up: ex-
tended insurance. — Under a Georgia decision the policy becomes an
automatically paid-up policy under its express provisions upon non-
payment of the premium and a loan for which the policy was
pledged as collateral.11 This is also so held where it is stipulated
that the policy will become automatically paid-up after being in
force two years and premiums are defaulted in payment after be-
coming due and insured is bound thereby in the absence of waiver.12
•
8 Nichols v. Mutual Life Ins. Co. plan or tontine dividend policy. It
176 Mo. 355, 62 L.R.A. 657, 75 S. provided for paid-up policy and stip-
W. 661. ulated that it was to be construed ac-
9 Mun v. New York Life Ins. Co. cording to laws of New York and
— Mo. App. — , 181 S. W. 606, Rev. that the place of contract was the
Stat. 1899, see. 7897 (Ann. Stat, home office of the company in the
1906, p. 3752). See, as to foreign city of New York.
statute, Washington Life Ins. Co. v. On conflict of laws as to paid-up
Glover, 25 Ky. L. Rep. 1327, 78 S. insurance, see notes in 63 L.R.A. 862,
W. 146. and 23 L.R.A. (N.S.) 980.
10 New York Life Ins. Co. v. Cra- n Tyson v. Equitable Life Assur. /
vens, 178 U. S. 389, 44 L. ed. 1116, Soe. of U. S. 144 Ga. 729, 87 S. E.
20 Sup. Ct. 962, 29 Ins. L. J. 876 1055.
(Mo. Stat. 1879, sec. 9583), aff'g 12 Crook v. New York Life Ins.
Cravens v. New York Life Ins. Co. Co. 112 Md. 268, 75 Atl. 3S8. See
US Mo. 583, 53 L.R.A. 305, 71 Am. also Union Central Life Ins. Co. v.
Si. Rep. 628, 50 S. W. 519. Policy Wilkes, — Tex. Civ. App.—, 47 S.
was nonforfeiting, limited tontine W. 546.
2287
§ 1179c JOYCE ON INSURANCE
But under a Federal decision the policy was held to have expired
on the last day of grace the excess of reserve not being sufficient to
carry it beyond said date, although it was provided that "if no such
request for paid-up insurance is made, the net amount that would
have been payable as a death claim on the date to which premiums
are duly paid will automatically continue as term insurance from
such date for such time as said excess of the reserve will purchase
according to the company's published table of single premiums for
term insurance, and no longer." 13 Under a New York decision
the death of insured within the time limited for demand automati-
cal ly extends the insurance for the period which the reserve will pur-
chase.14 So in Kentucky it is held that insurance is automatically
extended on default in payment of the premium as stipulated.15
But the insurance is not of itself extended as the effect of a failure,
upon default, to exercise an election between a paid-up policy, a cash
surrender, or extended insurance.16
§ 1179c. Forfeiture rule not applicable to policy stipulating for
loan value charge: "automatically nonforfeitable" clause. — The
rule above stated, that where the policy so provides, the failure to
pay the premium on the day stipulated forfeits the insurance, does
not apply to a policy stipulating for a loan value charge, under an
"automatically nonforfeitable clause" wThereby, upon failure of
insured to pay the premiums, a loan value becomes immediately
available and insured is required to charge against the policy as a
loan the amount due for that premium and thereby retain the policy"
in force and automatically extend it.17
"New York Life Ins. Co. v. Slo- 1892, c. G40, sec. 88. See § 1180
cum, 177 Fed. 842, 101 C. C. A. 56, herein.
modified by eliminating the direc- 15 Mutual Benefit Life Ins. Co. v.
tion to enter judgment for defendant O'Brien, — Ky. — , 116 S. W. 750.
notwithstanding the verdict and by See Balthaser v. Illinois Life Ins. Co.
substituting a direction for a new 33 Ky. L. Rep. 283, 110 S. W. 258.
trial (Mr. Justice Hughes and three 16 Blake v. National Life Ins. Co.
other justices dissenting) in Slocum 123 Cal. 470, 56 Pac. 101. Examine
v. New York Life Ins. Co. 228 U. Pense v. Northern Life Assur. Co. 9
S. 364, 57 L. ed. 879, 33 Sup. Ct. O. W. R. 646, 10 O. W. R. 826, 14
523, 42 Ins. L. J. 899. The princi- O. L. R. 613, 15 O. L. R. 131. Con-
pal questions, however, before the tract provided for paid-up insurance
court were upon the point on which or extended insurance or loan,
the judgment was modified; partial 17 Perkins v. Empire Life Ins. Co.
payment of premium and waiver. 17 Ga. App. 658, 87 S. E. 1094. The
See Balthaser v. Illinois Life Ins. Co. svllabus by the court is as follows :
33 Ky. L. Rep. 283, 110 S. W. 258. The suit was upon a policy of in-
14 Bartholomew v. Security Mutual surance containing a clause known as
Life Ins. Co. 124 N. Y. Supp. 917, an "automatically nonforfeitable
140 App. Div. 88, N. Y. Ins. Laws clause," as follows: "If any pre-
2288
PAID-UP ASD NONFORFEITABLE POLICIES
§ 1180
§ 1180. Death as affecting right to paid-up policy. — If the in-
sured has defaulted in paying premiums, and has become entitled
mi urn hereon shall not be paid when th.3 insured to pay a note given for
due, the company shall first apply the payment of the premium due
any withdrawal surplus to pay the February 12, 1912, did not operate
same, and the remainder of the pre- to void the policy or to lessen the
miums due, if any, shall be charged duty of the company, on failure to
against this policy as a loan, if the pay the note, to apply such loan value
respective loan value specified here- to the payment of premiums as they
in be sufficient to cover such ad- became due, until expended in accord
vance, in addition to any existing with the "automatically nonforfeit-
liens and accrued interest, provided, able clause" in the policy. The
that if the credits be not sufficient to stipulation in the policy that "if any
cover the entire premium then due, premium is not paid on or before the
the company shall apply the same, day it is due, or if any note or other
if sufficient to pay the premium for obligation that may be accepted by
a shorter period, but not less than the company for the whole or any
a full quarterly premium. At any part of the first or any subsequent
time while this policy is thus sus- premium or any other payment un-
tained in force, the payment of pre- der the policy be dishonored or not
miums may be resumed without medi- paid on or before the day when due,
cal examination, and the accumulated the policy shall, without any affirma-
premiums may be paid or allowed to tive act, on the part of the company
stand as a lien against the policy, or any of its officers or agents, be
No grace will be allowed under this null and void except as herein pro-
provision." The premiums were fully vided," does not apply when there is
paid for three years (from February a loan value attached to the policy,
12, 1909, to February 12, 1912) and sufficient to pay the premium due.
on August 5, 1913, the insured died Policies of insurance will be liber-
without having paid further pre- ally construed in favor of the object
miums. The annual premium was to be accomplished, and the con-
$346.05. The policy at the expira- ditions and provisions of every con-
tion of the second year had a loan tract of insurance will be construed
value of $420, and, if the premium against the insurer who prepares and
due February 12, 1912, had been proposes the contract (Arnold v.
pr id, would 'have had a loan value Empire Life Ins. Co. 3 Ga. App. 695,
of $590. It was held, upon the fad- 60 S. E. 470), and the entire con-
ure of the insured to pay the pre- text of the nonforfeitable clause
miums due February 12, 1912, un- above set out, when construed in con-
der the "automatically nonforfeitable nection with the terms of the policy
clause" above quoted, the loan value as a whole, indicated an intention to"
of $420 became immediately avail- carry the policy automatically, by tb
able, and it was the duty of the com- consumption of the loan value,
pany to charge against the policy, as fully and completely as though
a loan, the amount due for that pre- sured had paid the premiums P "
mium, and thus to retain the policy money secured from any other s£ ' "
of full force, and the policy was thus It was therefore error to str J* •
automatically extended for an addi- plaintiff's petition on deming* • J ■
tional two years and eight months Slocum v. New York Life '
without further payment, in accord 228 U. S. 364, 57 L. ed. 8" _„„_;„_
with the "table of cash loans and Ct. 523, 42 Ins. L. J. 89£j£ J^f™.
guaranteed surrender value," con- New York Life Ins. £L -a
tained therein; and on the failure of 177 Fed. 842, 101 C °!™?*n ^T "
Joyce Ins. Vol. III.-144. 2289 Ctv Wood, 32 K^
§ 1180
JOYCE ON [NS1 EtANCE
to a paid-up policy, provided an application therefor is made with-
in a specified nine and the original policy transmitted, his death
after such defaull and within such period does not defeat his right.
The owner of the policy maj after such death comply with .-aid
conditions, and become entitled to such paid-up policy, and. upon
;l to issue it. a liability is created for the amount for which it
should have been issued.18 And when a policy of life insurance stip-
ulates that the reserve shall be applied as shall have \>r^w agreed in
the application, either to eontinue the insurance or purchase a paid-
up policy, and neither the application nor the policy contains any
agreement with reference to the application of the reserve, the as-
sured must, nevertheless, be given the benefit of the reserve or sur-
plus by having it applied upon an extension of a reinsurance, in-
-ic.id of having it returned to him, and on his death, without any
npplication or agreement, on his part, the right 40 recover the in-
surance cannot be successfully resisted on the ground that he did
not exercise his option of having the reserve applied for the pur-
pose of keeping the policy in force.19 So where a statute gives in-
sured, whose policy has lapsed for nonpayment of premium, the
option to surrender the policy within six months and have the net
18 Wheeler v. Connecticut Mutual
Life Ins. Co. 82 N. Y. 543, 37 Am.
Rep. 594, rev"- s. e. 1(5 Hun (N.
Y.) 317. In the ease below, Daniels,
J., dissented. In this case the court
said: "The tacts stated establish a
demand for a paid-up policy. The
tact that the insured was dead does
rot relieve the defendant from lia-
bility. The conditions were that two
or more annual premiums should be
paid, and then the application should
be made within one year from de-
fault. This had been done. Al-
c though the insured was dead, the
v-right to a paid-up policy or its value
"• villained to his assignees. A refusal
v£o, perform thus created a liability
Pa* l. the amount for which the paid-up
court .y might have been issued." See
the 3ueTyson v. Equitable Life Assur.
payment" tj. S. 144 Ga. 729, 87 S. E.
See Balth.-,,.,] v> Security Mutual Life
33 Ky. L. le, Ga. App. >21, 65 S. E.
14Bartholcn v> New York Life Ins.
Life Ins. Co. ,. 604> 52 S. W. 356;
140 App. Div. . Mutual Security Life
Y. Supp. 917, 140
2290
App. Div. 88 (N. Y. Ins. Laws 1892,
c. 690, sec. 88); Beaudette v. Provi-
dence Savings Life Assur. Soc. Q. R.
30, S. C. 160. See Johnson v. New
York Life Ins. Co. 109 Iowa, 708,
50 L.R.A. 99, 78 N. W. 905; John-
son v. Mutual Benefit Life Ins. Co.
113 Fed. 950, 75 C. C. A. 22 (the
policy lapsed and the non-forfeiture
provisions operated to secure to in-
sured extended insurance to the full
amount of the policy but only for a
limited term. Premiums were pay-
able Nov. 11th, policy was issued and
dated Jany. 15, 1891. It was held
that extended insurance should be
coin 1 uited from Nov. 11, 1893. In-
sured died Sept. 28, 1896. Nonfor-
feiture provisions were not of force
unless payment of two i ill annual
premiums were made). Examine
Blake v. National Life Ins. Co. 123
Cal. 470, 56 Pac. 101; Jander v. Mu-
tual Life Ins. Co. 15 Ohio Cir. Ct.
Ren. 536, 40 Wkly. L. Bull. 536.
19 Nielsen v. Provident Sav. Life
Assur. Soc. 139 Cal. 332, 96 Am. St.
Rep. 146, 73 Pac. 168.
PAID-UP AND NONFORFEITABLE POLICIES §§ 1180a, 1181
accumulated reserve on the policy applied as a single premium in
extending the policy as such term as the reserve will purchase, the
beneficiary of the policy may make such surrender and demand,
after the death of the insured, within the period named.20 If a
policy on a husband- life is payable to the wife, her executors, ad-
ministrators, or assigns, or, in case of her death, then to her chil-
dren, and she is entitled to claim a paid-up policy after payment of
two annual premiums on surrender of the policy, the husband is not
entitled, on tendering payment, to a paid-up policy when she dies
leaving no children before the payment of the second premium.1
Again, it is decided that the rule of construction against insurer
should be strictly applied after insured's death.2
§ 1180a. Insanity as affecting right to paid-up policy. — If the
right to a paid-up policy extended insurance is dependent upon the
exercise of an option within a specified limited time, insanity of in-
sured during said period is no excuse, and where he continues in
that condition and dies within a year after default in paying pre-
miums and a loan, the right of the administrator to exercise the
option is precluded especially when based upon insured's good
health.3
§ 1181. When only paid-up policy can be claimed, and when the
full amount of insurance. — If the policy provides for nonforfeiture
after payment of the first premium, and in case of default in pay-
ment of subsequent premiums, that the company will, upon sur-
render within thirty days after such default, issue a paid-up policy
for an amount which could have been purchased with the net value
of said policy, the contract is an insurance for the full amount of
the policy until the time for the payment of the premium defaulted
has expired. After such default it is only an insurance for such an
amount paid up as the net value of the policy would then purchase.4
But it is held that if the prompt payment of the premium is waived
by the company, it cannot then maintain a claim that the policy is
20 New York Life Ins. Co. v. lated, see notes in 8 L.R.A.(N.S.
Noble, 34 Okla. 103, 45 L.R.A.(N.S.) 193, and 51 L.R.A.(N.S.) 1044.
391, 124 Pac. 612. 4 Mound City Mutual Life Ins. Co.
1 Continental Life Ins. Co. v. Ham- v. Twining, 12 Kan. 475.
ilton, 41 Ohio St. 274. See chapters When only amount of paid-up in-
on beneficiaries herein. surance and not paid-up term insur-
2 Mutual Benefit Life Ins. Co. v. ance for full amount may be had.
First National Bank of Louisville, Sugg v. Equitable Life Assur. Soc.
24 Kv. L. Rep. 580, 69 S. W. 1. See 117 Terra. 658, 94 S. W. 936, 35 Tn<.
§§ 220 et seq. herein. L. J. 790.
3 Tyson v. Equitable Life Assur. When only entitled to receive
Soc. of U. S. 144 Ga. 729, 87 S. E. amount of paid-up insurance and not'
1055. required to elect between paid-up
On effect of failure to apply for and extended insurance. United
paid-up insurance within time stipu- States Life Ins. Co. v. Wood, 32 Kv.
2291
§§ 1181a, 1182 JOYCE ON INSURANCE
only a paid-up one where it has not treated it as such by entry upon
its books or otherwise, and has not notified the policy holder that it
will so claim.6 A demand for a paid-up policy and failure there-
after to pay premiums when due is declared to he an abandonment
of a righl to claim the full amount specified in the policy.6
§ 1181a. Paid-up policy: surrender cannot defeat beneficiary's
rights. — One taking a paid-up policy upon his life for the benefit
of a named beneficiary cannot, in the absence of reservation of
fiowcr to revoke, modify, or surrender the contract, effecl a surren-
der which will defeat the rights of the beneficiary.7
§ 1182. Right to claim paid-up policy: demand: surrender value. —
Nil righl to claim a paid-up policy exists against the company, nor
is the company obligated to issue one unless it has so contracted,8
hut the contract is presumed to have been made in reference to valid
statutes in force at the time of contracting.9 and if the policy does
not stipulate for a paid-up policy, but only that a default in payment
of the premiums shall not work a forfeiture, and upon such default
the amount due shall be reduced to the amount of premiums
paid, equity will not decree issuing a paid-up policy in case the
assured fails to pay his premiums. The rights under the policy
may be obtained by an action after death.10 It is held that the giv-
ing and accepting a note for the premium due on a policy after
default may operate to destroy the right of the insured to a paid-up
policy, although stipulated for in the policy, if the note is con-
ditioned for absolute forfeiture of the contract if not paid at matur-
ity.11 If a life policy payable to the assured's children merely stip-
ulates that after full payment of two or more premiums it becomes
a paid-up nonforfeiture policy for certain "tenths," and also pro-
vides that there shall be no further liability for premiums therein,
but that it is entitled to an apportionment of the surplus in the ratio
of its contribution thereto, neither the right to a paid-up policy nor
the children's or company's rights can be enforced until after the as-
L. Rep. 1120, 107 S. W. 1193 (un- 8 Packard v. Connecticut Mutual
der N. Y. L. 1879, c. 317, p. 427). Life Ins. Co. 9 Mo. App. 469.
5 Ranley v. Life Assn. of America, 9 See §§ 194 et seq. herein.
69 Mo. 380. 10 Earlow v. St. Louis Mutual Life
6 Ashbrook v. Phoenix Mutual Life Ins. Co. 54 Mass. 425, 28 Am. Rep.
Ins. Co. 94 Me. 72, 6 S. W. 462, 3 358.
Mo.(L. ed.) 907. n Holly v. Metropolitan Life Ins.
7 Ferguson v. Phoenix Mutual Life Co. 105 N. Y. 437, 11 N. E. 507.
Ins. Co. 84 Vt. 350, 35 L.R.A. (N.S.) On payment of premium by prom-
844 (annotated on surrender of poli- issory note as entitling insured to
'cy of ordinary life insurance without benefit of paid-up insurance, see note
-consent of beneficiary), 79 Atl. 97. in 5 B. R. C. 376.
2292
PAID-UP AND NONFORFEITABLE POLICIES § 1182
sured's death.12 The right to the surrender value of a policy is not
lost where the assured surrenders the original policy to an agent
with a request for a paid-up policy immediately after payment of
a premium, but does not hear from the same until after the next
premium becomes due, when it is given back to him, indorsed as
forfeited, by another company to which the business of the original
insurer has been transferred without the insured's knowledge.13
The terms of the contract are not changed by representations of the
agent, at the time the contract is made, that it is nonforfeitable
when it does not so provide,14 and the fact that the assured fails to
read the policy does not aid him.15 The failure of assured to pay a
note given by him for unpaid premiums, and in consideration of
which the company extended the policy for twelve months, with the
proviso that if the note was not paid at maturity the policy should
"at once become void without notice to the assured" does not deprive
him of the right to a paid-up policy to which he was entitled by
the original contract. Such note was but a continuation of the
original contract, and not a new contract whereby he forfeited all
rights under the original contract.16 A failure to pay the premium
due does not defeat the right to demand a cash surrender value, and
an offer of absolute surrender and demand for payment is unneces-
sary where insurer refuses payment of any cash or surrender under
a claim that there was no cash value.17 If insured's demand for a
cash surrender value is sufficient under the stipulations of the policy
technical informalities are waived insurer having failed to pay such
cash value on demand.18 A demand for a paid-up policy by an
assured will not be denied in equity, because his policy has been
stolen and he is unable to surrender it as conditioned for, where he
12 Lyon v. Union Mutual Life Ins. lington Ins. Co. v. Young, 58 Ala.
Co. 63 Hun (N. Y.) 629, 44 N. Y. 476, 29 Am. Rep. 770.
St. Rep. 581, 17 N. Y. Supp. 756. 15 Attorney General v. Continen-
13 It appeared in this case that the tal Life Ins. Co. 93 N. Y. 70.
contract provided for a paid-up pol- 16 Southern Mutual Life Ins. Co.
icy upon default in payment of a v. Montague, 84 Ky. 653, 4 Am. St.
premium, and the suit having been Rep. 218.
brought against the original com- 17 Hill v. Bankers' Life Ins. Co.
pany which had deposited certain 112 N. Y. Supp. 120 (insurer
moneys with the state authorities as stated in letter that policy had no
an indemnity fund, he was held en- cash value but insured had option to
titled to recover out of the fund: take paid-up or extended insurance).
Lowell v. St. Louis Mutual Life Ins. When demand unnecessary for ex-
Co. Ill U. S. 264, 28 L. ed. 423, 4 tended insurance, but right thereto
Sup. Ct. 390. vested. New York Life Ins. Co. v.
"Nashville Ins. Co. v. Matthews, Van Meter's Adinr. 137 Ky. 4, 121
8 Lea (76 Tenn.) 499; Attornev Gen- S. W. 438.
eral v. Continental Life Ins. Co. 93 "Majestic Life Ins. Co. v. Win-
N. Y. 70. But see Piedmont & Ar- field, 58 Ind. App. 402, 108 N. E. 249.
2293
\ 1183 JOYCE ON [NSURANCB
has used due diligence to reclaim it and is still the owner. And he
need not plead the execution of some instrument operating as a
surrender of the policy and a discharge of the defendant's liability.19
An insurer as assignee of a policy as security for a loan, who is
given the right in case of insured's death to exercise any option
which the latter might have exercised, is not compelled thereby to
make an election.20 Conceding that the beneficiary of a life in-
surance policy should have offered to surrender it as a condition
precedent to having the reserve applied in continuation of the pol-
icy, such condition is waived if the insurer, immediately after the
death of the insured, denies and disclaims all liability under and
by virtue of the policy, and informs the beneficiary that it will not
pay the amount named in the policy, or any part thereof.1
§ 1183. Right of infants: paid-up policy. — If an infant whom the
company may lawfully insure, and who is insured, elects to rescind
after four years, payments of premiums under a policy for one
thousand dollars, stipulating that after the payment of three of four
annual premiums he will be entitled to a paid-up or nonparticipat-
ing policy for as many twentieths of the amount insured as there
have been annual premiums paid, said assured is entitled to a paid-
up nonparticipating policy for two hundred dollars, or may recover
its cash "surrender" value.2 A change of a policy on a minor's life
to a paid-up policy cannot be effected by consent of his father and
mother as guardians by nature.3 A provision in a policy of life
insurance to the effect that a failure by the insured for three months
after default in the payment of premiums to surrender the policy,
and request to have his interest applied to the purchase of a paid-up
policy payable at the time the original policy would have been pay-
able if continued in force, amounts to an election to have such in-
terest applied to the purchase of term insurance for the full amount
named in the policy and is not affected by the fact that the assignees
of the policy are minors.4
19 Wilcox v. Equitable Life Assur- 189, 57 N. W. 934. Where election
ance Soc. 173 N. Y. 50, 93 Am. St. is to take term insurance: That
Rep. 579, 65 N. E. 857. minors are beneficiaries does not pre-
20 Tyson v. Equitable Life Assur. vent enforcement of policy con-
Soc. of the U. S. 144 Ga. 729, 87 S. ditions. Mutual Benefit Life Ins. Co.
E. 1055. v. Harvey, 117 Ky. 834, 79 S. W.
1 Nielsen v. Provident Sav. Life 218.
Assur. Soc. 139 Cal. 332, 96 Am. St. 3 Burke v. Prudential Ins. Co. of
Rep. 146, 73 Pae. 168. America, 221 Mass. 253, 108 N. E.
2 Johnson v. Northwestern Mutual 1069.
Life Ins. Co. 56 Minn. 365, 378, 379, 4 Mutual Benefit Life Ins. Co. v.
39 Cent. L. J. 337; 59 N. W. 992; Harvey, 117 Ky. 834, 111 Am. St.
45 Am. St. Rep. 473, 26 L.R.A. 187, Rep. 269, 79 S. W. 218.
2294
PAID-UP AND NONFORFEITABLE POLICIES §§ 1183a, 1184
§ 1183a. Paid-up policy: husband and wife. — Where a policy of
life insurance was obtained by one on his life for the benefit of
his wife, and he, being unable to pay the premium, released a
part of the policy and took a policy for a lesser amount, applying
the sum allowed for such release to the payment of the premium
on the remaining amount, and, again not being able to pay the
premium on the new policy, surrendered the same and received a
paid-up policy for a portion of the amount payable to his wife, which
release and surrender were without her authority, — the wife could
subsequently, on the death of the husband, recover of the company
on the first policy, provided she had kept up the payments of the
premium on it.5 There is no such interest in a paid-up policy in
the life of her husband as will pass by the wife's will to him.6 But
a paid-up life insurance policy taken by a man for the benefit of
his wife, is within a statute providing that upon divorce the court
shall restore any property which either party may have obtained
directly or indirectly from or through the other during marriage
and in consideration or by reason thereof.7
§ 1184. When" right to claim paid-up policy must be exercised.8 —
The stipulation of the policy must determine when the right of
election must be exercised. The policy may contain no limitation
as to the time of election, but may provide only that upon default
in the payment of the premiums the party will be entitled to a paid-
up policy, or it may stipulate for compliance with certain conditions,
such as surrender and demand within a limited specified time, or
that demand and surrender must be made while the policy is in
force.9 It is held that if the paid-up policy is to be issued upon re-
quest upon default after payment of a specified number of annual
s Miles v. Connecticut Mutual Life tice at the same time with the de-
Ins. Co. 147 U. S. 177, 37 L. ed. 128, mand, unless there be an agreement
13 Sup. Ct. 275. Cited in Mutual to the contrary expressed in the ap-
Benefit Life Ins. Co. v. Dunn, 106 plication or policy: 3 N. Y. Rev.
Ky. 591, 599, 51 S. W. 20 ; Weather- Stats. 8th ed. p. 1688. "On demand
bee v. New York Life Ins. Co. 182 made, with surrender of the policy
Mass. 342, 344, 65 N. E. 383. within six months after such lapse or
6 Piatt's Ex'r v. Locke, 139 Ky. forfeiture . . . either to continue
72, 129 S. W. 329. the policy in force at its full amount
7 Sea v. Conrad, 155 Ky. 51, 47 so long as such single premium will
L.R.A.(N.S.) 1074, 159 S. W. 622. purchase temporary insurance at that
8 See next section. amount," etc. New York Laws 1909,
9 The New York statute provides c. 33, sec. 88, as am'd by L. 1909,
for demand and surrender within six c. 301, L. 1909, c. 595; L. 1910, c.
months after lapse, and also for the 614; Parker's N. Y. Ins. L. (ed.
exercise of an option for temporary 1915) p. 136.
or paid-up insurance, by giving no-
2295
§ 1185
JOYCE OX LXSIKAXCE
premiums, and no time is specified,10 or if no time i^ fixed,11 the
right of the assured to claim a paid-up policy is limited to the time
during which the policy is in force.18 But it is decided in a Ken-
tucky case thai a provision lhat the insured shall forfeit his right
to a paid-up policy unless he surrenders the policy within thirty
days is not enforceable where a prospectus issued at the same time
u ith the policy represents that the latter is nonforfeitable, and that
i he failure to pay a note at maturity, although the contract stipu-
lated for forfeiture of the policy for its nonpayment, does not de-
stroy i- right to a paid-up policy, though it was terminated in other
respects.13 It is also decided that if the contract merely stipulates
for ;i paid-up policy upon default in payment of the premiums, such
policy may he demanded at any time.14
§ 1185. Right to paid-up policy must be exercised within specified
time.15 — If is expressly stipulated that the policy must be surren-
10 Smith v. National Life Ins. Co. this or any other reason, it ceased to
L03 Pa. St. 177, 19 Am. Rep. 121. exist as a valid contract upon which
11 Bussing \. Union .Mutual Life this or any other application could be
Ins. Co. .".1 Ohio St. 222, 8 Ins. L. based." In a later- case in the same
.1. 218. See Metropolitan Life his. state (Attorney General v. Continen-
. Clay. L58 Ky. 192, 164 S. W. tal Life Ins. Co. 93 N. Y. 70) de-
vils, cided in 1883, the policy was con-
12 In a New York case (People v. difioned that after the payment of
Widows' & Orphans' Benefit Life three or more annual premiums and
Ins. Co. 15 Hun [N. Y.] 8, decided a failure to make further payments
in 1878), it was provided that 'the when due, the company would, upon
company should not be liable in case surrender within thirty days after
of default in nonpayment of the pre- said failure to pay, issue a paid-up
miums when due, but that the policy policy for the proportion of the
in such case should be forfeited, con- amount of insurance paid for. The
ditioned that upon surrender duly re- policy was not surrendered or offered
ceipted of the policy the company to be, and no paid-up policy was de-
would issue a paid-up policy during manded. The company failed, and
the life of the person insured. De- a receiver was appointed, and it was
fault was made, and a paid-up pol- held that nonpayment of the pre-
icy was not demanded until some mium and failure to surrender within
years had elapsed; in the meantime the stipulated time absolutely for-
the corporation had dissolved and fcited the policy. It was also de-
receivers been appointed, and the cided in this case that the fact that
court said that the application came the company had suffered no damage
too late; that if the petitioner could by the assured's neglect to give no-
demand a paid up policy alter neg- tice of his election could not aid the
led to pay tlio premium when due, latter.
it could only l>e within a reasonable 13 Southern Mutual Life Ins. Co. v.
time thereafter, and adds: "Bui we Montague, 84 Ky. 653, 2 S. W. 443, 8
are inclined to think no paid-up pol- Ky. L Hep. 579, 1 Am. St. Rep. 218.
icy could legally be demanded alter 14 Lovell v. Mutual Life Ins. Co.
the forfeiture of the petitioner's pol- 111 U. S. 264, 28 L. ed. 433, 4 Sup.
icy by nonpayment of the premium. Ct. 390.
When the policy was forfeited for 15 See preceding section.
2296
PAID-UP AND NONFORFEITABLE POLICIES § 1185
dered and receipted in full within a specified time after default in
payment of a premium to entitle the assured to a paid-up policy,
such provision must be complied with, and the option must be ex-
ercised within the time designated, otherwise it is lost, for time is
of the essence of the contract. This rule accords with the weight of
authority.16 But insured has the entire period limited within which
to exercise his option.17 So under a policy provision that in case of
lapse for nonpayment of premium, the insured may within six
months surrender the policy and take paid-up insurance for the
cash surrender value, surrender of the policy within the specified
time is necessary to preserve the right to the option, and in the
absence of such surrender all rights under the policy will cease.18
And where the condition was that the paid-up policy should be
issued for a proportionate amount on surrender of the policy "on or
before it shall expire by the nonpayment of" certain premiums, the
word "on" was held to mean that the right was lost to claim a paid-
up policy the instant the policy expired by the nonpayment of said
16 Knapp v. Homeopathic Mutual
Life Ins. Co. 117 U. S. 411, 29 L. ed.
960.
Alabama. — Equitable Life Assur.
Soe. of U. S. v. Golson, 159 Ala. 508,
48 So. 1034.
Georgia. — Tyson v. Equitable Life
Assur. Soe. of U. S. 144 Ga. 729, 87
S. E. 1055.
Illinois. — Phoenix Mutual Life Ins.
Co. v. Baker, 85 111. 410; Blume v.
Pittsburgh Life & Trust Co. 183 111.
App. 295, affd 263 111. 160, 51
L.R.A.(N.S.) 1044, 100 N. E. 1031.
Kentucky.— Metropolitan Life Ins.
Co. v. Clay, 158 Ky. 192, 164 S. W.
968 (industrial policy: time for de-
mand for cash surrender value eight
weeks). See Michigan Mutual Life
Ins. Co. v. Mayfield's Admr. 121 Ky.
839, 90 S. W. 607 ; Koehler v. Phoenix
Mutual Life Ins. Co. 4 Ky. L. Rep.
903.
Maine. — Chase v. Phoenix Mutual
Life Ins. Co. 67 Me. 85.
Mississippi. — Bonner v. Mutual
Life Ins. Co. — Miss. — , 36 So. 538 ;
Universal Life Ins. Co. v. Whitehead,
58 Miss. 226, 38 Am. Rep. 322.
Missouri. — Cravens v. New York
Life Ins. Co. 148 Mo. 583, 53 L.R.A.
305, 71 Am. St. Rep. 628, 50 So.
519, affd New York Life Ins. Co. v.
Cravens, 178 U. S. 389, 44 L. ed.
1116, 20 Sup. Ct. 962, 29 Ins. L. J.
876.
New Jersey. — See Hudson v.
Knickerbocker Life Ins. Co. 28 N. J.
Eq. 167.
Pennsylvania.— Smith v. National
Life Ins. Co. 103 Pa. St. 177, 49 Am.
Rep. 121.
Texas. — Equitable Life Assur.
Soe. v. Evans, 25 Tex. Civ. App.
563, 64 S. W. 74, 30 Ins. L. J. 852.
Virginia. — Universal Life Ins. Co.
v. Devore, 83 Va. 267, 270, 2 S. E.
433, 88 Va. 778, 14 S. E. 532, 21
Ins. L. J. 337, 16 Va. L. J. 114.
On effect of failure to apply for
paid-up insurance within time stipu-
lated, see notes in 8 L.R.A. (N.S.)
193, and 51 L.R.A. (N.S.) 1044.
17 Clappenback v. New York Life
Ins. Co. 136 Wis. 626, 118 N. W.
245.
18 Blume v. Pittsburg Life & Trust
Co. 263 111. 260, 51 L.R.A. (N.S.)
1044n, 104 N. E. 1031.
2297
LL86 JOYCE n.\ ENS1 EtANCE
premiums.19 So the right to a paid-up policy after a default caus-
ing a forfeiture of insurance according to the terms of the contract,
which also provides that ;i paid-up policy may be had on surrender-
ing the original policy withiD six mouths after default and satisfy-
ing all indebtednesSj is lost by failure to make such surrender and
satisfaction within the time limited.20 So if the policy provides for
the return duly receipted within thirty days to entitle assured to a
paid-up policy, such condition must be complied with;1 and one
who has insured his life for the benefit of his children with the
option of surrendering the policy for its cash value within thirty
days of the termination of the term, or of the five-year periods there-
after, can exercise the option only within one of the several periods
of thirty days specified.2 And the fact that the insurer was enjoined
during the specified time from issuing any policies is held not to
excuse compliance with such condition as a condition precedent.3
If the paid-up policy is to be demanded within one year from the
time an accrued premium falls due, such provision refers to an
accrued premium, for the nonpayment of which the company can
determine the policy.4
§ 1186. Exceptions to last rule and cases contra. — It is held in
Vermont that a demand within the specified time is not required.
a reasonable time being sufficient.5 If the failure to pay the pre-
miums when due and to forward the policy within the specified
time rests upon good and sufficient reasons, as where the company
misdirected certain notices to the insured, and proceedings for dis-
solution and a receivership were instituted, and the neglect was also
attributable to the company's agent, equity will relieve, and order
the issuance of a paid-up policy.6 In Arkansas the surrender of
the policy within the six months is not of the essence of a contract
of insurance providing that if, after a specified number of pay-
ments, the policy is forfeited for nonpayment of premiums, upon
19 Sheerer v. Manhattan Life Ins. ceipted would be forwarded. Uni-
Co. 20 Fed. 886 ; contrary held in versal Life Ins. Co. v. Devore, 8S Ya.
same case, 16 Fed. 720. 778, 14 S. E. 532, 21 Ins. L. J. 337,
20 Northwestern Mutual Life Ins. 16 Va. L. J. 114.
Co. v. Barbour, 92 Ky. 427, 15 2 McCutchen v. Townsend, 127 Ky.
L.R.A. 429, 17 S. W. 796. 230, 16 L.R.A.(N.S.) 316, 105 S. W.
1 The fact that a letter was writ- 937.
ten to the secretary by the attorneys, 3 Universal Life Ins. Co. v. White-
stating that the policy had been left head, 58 Miss. 226, 38 Am. Rep. 322.
with them for the purpose of pro- * Michigan Mutual Life Ins. Co. v.
curing such policy, and demanding a Bowes, 42 Mich. 19, 51 N. YV. 962.
paid-up policy, is not a sufficient 5 Bunce v. Life Ins. Co. 58 Vt.
complaint, although the letter also 25:5.
provided that on receipt of the term 6 Coffey v. Universal Life Ins. Co.
policy the original policy duly re- 10 Biss. (C. C.) 354, 7 Fed. 301.
2298
PAID-UP AND NONFORFEITABLE POLICIES § 1186
the surrender of the policy "within six months," a paid-up policy
will be issued for such an amount as the reserve on the policy will
purchase, so that the paid-up policy may be demanded upon sur-
render of the old one with in a reasonable time after the expiration
of the six months.7 So whore the policy provided not only for it-
surrender within twelve months, but also that, in case of a default
in payment of the premiums, the insurers should only be liable for
the loss in a sum proportionate with the annual payments made,
it was held that the insurers were liable for such proportionate
amount, although the policy was not surrendered within the speci-
fied time.8 In another case, where the facts were very similar to
those in the last decision, the same ruling was made.9 In the first
of these two cases, however, the action was brought by the ben-
eficiary of the policy, the insured having died nearly three years
after the fifth annual premium became due, the insured then having
paid a certain sum in cash, and given his note for the balance at
three months, and received a renewal certificate, which note was
never paid. In the latter case the policy was canceled by the com-
pany, although this was held not to affect the assured's right. It
is also held that a surrender made in five years is sufficient.10
Again, in so far as time is not of the essence of the contract if a
surrender and demand are made within a reasonable time, fixed in
Kentucky cases as five years, will be sufficient although the statute
limits the time to within six months after the lapse.11 So one in-
sured under a policy entitling him to a paid-up policy in propor-
tion to the premiums paid, after payment of three annual premiums,
provided he surrenders the policy before making default or within
six months after default in the payment of premiums, is entitled
to a paid-up policy after making three payments although the
original policy is not surrendered or a demand made for the paid-
up policy within the six months after the default if such demand is
made during his lifetime.12 Lapse of the limitation period after
7 Lenon v. Mutual Life Ins. Co. 80 W. 146 (insured paid three annual
Ark. 563, 8 L.R,A.(N.S.) 193, 98 S. premiums and defaulted and two
W. 117. years thereafter demanded a paid-up
8 Montgomery v. Phoenix Life Ins. policy) : Metropolitan Life Ins. Co.
Co. 14 Bush (77 Ky.) 51. v. Clay, 158 Ky. 192, 164 S. W. 968;
9 Chase v. Phoenix Mutual Life Ins. Equitable Life Assur. Soe. of U. S.
Co. 67 Me. 85. See Dorr v. Phcenix v. Warren Deposit Bank, — Kv. — ,
Mutual Life Ins. Co. 67 Me. 438. 75 S. W. 275; New York Life Ins.
10 Southern Mutual Life Ins. Co. v. Co. v. Warren Deposit Co. 25 Kv.
Montague, 84 Ky. 653, 2 S. W. 443, L. Rep. 325, 75 S. W. 234.
8 Kv. L. Rep. 579, 4 Am. St. Rep. "Mutual Life Ins. Co. v. Jarboe,
218.* 102 Ky. 80, 39 L.E.A. 504, 42 S. W.
11 Washington Life Ins. Co. v. 1097. See also Manhattan Life Ins.
Glover, 25 Ky. L. Rep. 1327, 78 S. Co. v. Patterson, 109 Ky. 624, 95 Am.
2299
§ lis; .M.N CE ON [NSURANCE
demanding the issuance of a paid-up policy in accordance with the
contract after forfeiting a life insurance policy for nonpayment of
premiums, without taking steps to compel an insurance of the pol-
icy, will not bar an action to enforce the amount duo under it upon
the death of the insured.13
§ 1187. Whether payment of note required to entitle to paid-up
policy. — Where the payment of premiums for a certain period is
accessary to sustain a claim for a paid-up policy, and a note is given
for a part or the whole of said premiums, the question whether pay-
ment of said note is a prerequisite to claiming said paid-up policy
must necessarily depend upon the terms of the particular contract
in question. It is pertinent to inquire in all cases what constitutes
payment of an annual premium. Sometimes a note is accepted in
place of cash. Such note may constitute payment so far as to pre-
vent a forfeiture, or it may be accepted conditionally, a forfeiture to
occur if it is not paid at maturity; in other cases the premium is
paid partly in cash and partly in premium notes. Again, the pre-
mium may he payable partly in cash, partly by payment of interest
on outstanding notes, and partly in other notes, the notes to be
canceled by application of dividends, and there are other schemes
of insurance,14 so that the court is bound in every case to closely
examine the contract, and apply the rules of construction governing
in like cases as far as possible in order to discover the intent of the
1 duties. If a policy provides that the assured shall be entitled
to a paid-up policy after the payment of two annual premiums,
and notes are given for the second year's premium, the assured
is not entitled to a paid-up policy until the notes are satis-
fied.15 But where the agreement is that the assured is to make cer-
tain semi-annual cash payments, execute annual notes for a portion
of the premium, and to pay annually the interest falling due on
such notes, and the payment of the principal of the notes is other-
wise provided for by the application of dividends and by a deduction
of the unpaid portion of the notes from the amount due on the
policy when payable, the two complete annual payments of pre-
mium required are made when said annual cash premiums, to-
gether with the annual interest on the notes, are paid and notes
given for the balance of the premiums as stipulated. Such premium
notes need not be paid to entitle the assured to a paid-up policy.16
St. Rep. 393, 53 L.R.A. 378, 60 14 See §§ 1320 et seq. herein.
S. \V. 383. 15 Moses v. Brooklyn Life Ins. Co.
13 Lenon v. Mutual Life Ins. Co. 50 Ga. 196.
80 Ark. 563, 8 L.R.A. (N.S.) 193, 98 16 Olule v. Northwestern Mutual
S. W. 117. Life Ins. Co. 40 Iowa, 357.
2300
PAID-UP AND NONFORFEITABLE POLICIES § 1187
And to the same effect is an Ohio case.17 In another case in that
state a condition in a life insurance policy to the effect that "in case
of default for nonpayment of premium after three years, and no
legal surrender having been made, the insured having paid at
maturity all notes given for premiums, then this policy shall, with-
out surrender, but upon payment of all outstanding premium notes,
become a paid-up policy without change of terms or conditions,"
requires the payment of all outstanding premium notes, though
given after three annual premiums have been paid, and is a con-
dition precedent to such policy becoming a paid-up term policy.18
So in another case an endowment policy for ten years stipulated
that upon default the assured should be entitled at its maturity to
as many tenths as there had been complete annual payments, pro-
vided that all the premium notes should be taken up or the interest
thereon paid in cash when the premium matured, until the notes
were canceled by dividends, otherwise the policy would be forfeited,
unless one or more annual payments had been fully made in cash
or by application of the surplus. It was held that the assured could
either pay the premium in cash and take up the notes for the
specified years, and thereby become entitled to said "tenths," or
that, if he was in default for payment of premiums, he could pay
the annual interest on the notes until they were satisfied by the
dividends, and would be entitled to as many tenths as he had so
paid, and so much of the notes as were unsatisfied after the return
of application of dividends should be deducted.19 So it is held that
if the note only extends the time of payment of an overdue pre-
mium, and there is an express stipulation that its nonpayment at
maturity shall absolutely forfeit all claims of the insured under the
contract, its nonpayment at maturity deprives the assured of all
right to demand a paid-up policy within thirty days from the time
its falls due, even though the policy provides for such paid-up pol-
icy upon demand within thirty days after default in payment of a
premium.20
17 Northwestern Mutual Life Ins. Mutual Life Ins. Co. 120 La. 610, 45
Co. v. Bonner, 36 Ohio St. 51. Al- So. 522; Bank of Commerce v. New
though it was held in this case that York Life Ins. Co. 125 Ga. 552, 54
by the nonpayment of further an- S. E. 643 ; Paschedag v. Metropolitan
nual premiums, and the annual in- Life Ins. Co. 155 Mo. App. 185, 134
terest due on prior notes, the right S. W. 102.
of the policy holders to share in fu- 19 Van Norman v. Northwestern
ture dividends was lost. Mutual Life Ins. Co. 51 Minn. 57, 52
18 Union Central Life Ins. Co. v. N. W. 988.
Buxer, 62 Ohio St. 385, 49 L.R.A. 20 Holly v. Metropolitan Life Ins.
737, 57 N. E. 66. Examine Rife v. Co. 105 N. Y. 437, 11 N. E. 507. See
Union Central Life Ins. Co. 129 Cal. Duteher v. Brooklyn Life Ins. Co. 3
455, 62 Pac. 48; Lesseps v. Fidelity Dill. (U. S. C. C.) 87 Fed. Cas.
2301
§ 1188 JOYCE UN L\SIKA\< E
It is also held that if notes are given of a third party in payment
of the annual premiums, and renewal receipts are given, the pay-
ment of the notes is not a condition to be complied with as one
precedent to claiming a paid-up policy.1 Under a Federal Supreme
Court decision where a policy of life insurance provided for a paid-
up policy after two annual payment-, for as many tenths of the
amount originally assured as there had been annual premiums paid
in cash, in the event of the assured desiring to discontinue it, the
assured was held entitled to a paid-up policy without paying a note
given for part of the premiums, but the note to be a lien on the
paid-up policy until the entire amount due the company is paid.2
Under a Kentucky decision surrender of the right to extended in-
surance for the term earned by the premiums paid, is not effected
by the execution of, and failure to pay, a premium note, a clause
in which provides, that such failure shall work a forfeiture of the
policy, "except as to the right to a surrender value or paid-up policy,
which may be provided in the policy," where the policy provides,
under the head of surrender values, for either a paid-up policy or
extended insurance, and states that, in case of a failure to demand a
paid-up policy within six months after default, the policy will be
extended without request or demand for the time specified in the
schedule annexed.*
§ 1188. When paid-up policy forfeited: cases. — Where the origi-
nal policy was conditioned for the payment of interest on the pre-
mium notes, and the new policy is made subject to the conditions
of the original policy, a failure for two years to pay said interest
forfeits the paid-up policy.4 So if the new policy provides for for-
feiture for nonpayment of the interest on the premium note, notice
No. 4,202; aff'd Brooklyn Life In- Life Ins. Co. 5 Fed. 430, 433; Klein
surance Co. v. Duteker, 95 U. S. 269, v. National Benefit Assoc. Ill Ind.
24 L. ed. 410, cited in Gardner v. 462, 466, 60 Am. Rep. 703, 11 N. E.
Central Life Ins. Co. 5 Fed. 430. 620; Franklin Life Ins. Co. v. Wal-
On payment of premium by prom- lace, 93 Ind. 7, 17; Tate v. Mutual
issory note as entitling insured to Benefit Life Ins. Co. 131 N. Car. 389,
benefit of paid-up insurance, see note 391, 42 S. E. 892; Northwestera IMu-
in 5 B. R. C. 376. tual Life Ins. Co. v. Bonner, 36 Ohio
1 Michigan Mutual Life Ins. Co. v. St. 51, 64.
Bowes, 42 Mich. 19, 51 N. W. 962. 8 Drury v. New York Life Ins. Co.
2 Brooklyn Life Ins. Co. v. Dutch- 115 Ky. 681, 61 L.R.A. 714, 74 S.
er, 95 U. S. 269, 24 L. ed. 410. Cited W. 663.
in Hogue v. Northwestern Mutual 4Holman v. Continental Life Ins.
Life Ins. Co. 114 Fed. 778, 782; Co. 54 Conn. 195, 1 Am. St. Rep.
Omaha National Bank v. Mutual 07, 6 Atl. 405 (two judges dissent-
Benefit Life Ins. Co. 84 Fed. 122, ing). See also Ewald v. Northwest-
126, 28 C. C. A. 300, 303, 55 U. S. ern Mutual Life Ins. Co. 60 Wis. 431,
App. 73; Gardner v. Union Central 443, 19 N. W. 513.
2302.
PAID-UP AM) NONFORFEITABLE POLICIES § 1189
of the maturity of said interest is not required to be given.5 So if
a paid-up policy is issued, and the insured gives his promissory note
in form of a loan for the amount of the credit portions on the origi-
nal policy, and the new policy stipulates for the payment of interest
thereon each year, otherwise that the policy will be void without
notice, a default in payment of said interest operates to forfeit the
policy.6 So the paid-up policy is forfeited where the insured never
pays anything, on either the note or interest, notwithstanding the
policy is expressed as a paid-up policy, and has on its margin the
words, "nonforfeiture" policy,7 and where the new policy was in-
dorsed as being conditional on the payment of interest on two
certain notes given in part payment of premiums in advance, non-
payment thereof as specified forfeits the policy.8 A paid-up policy
of life insurance may be forfeited by nonpayment of interest on
premium notes given for premiums accruing while the original
policy remained in force.9
§ 1189. When paid-up policy not forfeited: cases. — Where a paid-
up policy is conditioned upon the payment of a certain amount of
interest annually and of all outstanding loans,. and such sum is the
interest only on a loan, and not a premium, the policy is not for-
feited by its nonpayment; 10 nor is a "nonforfeiture, paid-up" pol-
icy of life insurance forfeited by a failure to pay interest on
premium notes regarded by the company as a loan to the assured ; n
and failure to pay a note for the premium given after a ri 'it to a
paid-up policy has accrued does not forfeit the policy.12 So if the
policy is "nonforfeiting," it is not forfeited for failure to pay notes
given for premiums on the original policy for which the paid-up
policy is exchanged, where it is also stipulated that any indebtedness
of the assured to the company may be deducted upon payment of
the policy. In such case the amount of said notes is to be deducted
from the paid-up policy.13 A policy is not forfeited in Kentucky
5 Helm v. Metropolitan Life Ins. 5 Fed. 430, citing St. Louis Mutual
Co. 7 Daly (N. Y.) 536. Life Ins. Co. v. Grigsby, 10 Bush (73
6 Knickerbocker Life Ins. Co. v. Ky.) 310; Brooklyn Life Ins. Co. v.
Harlan, 50 Miss. 512. See Alabama Dutcher, 95 U. S. 269, 24 L. ed. 410.
Gold Life Ins. Co. v. Thomas, 74 Ala. u Bruce v. Continental Life Ins.
578. Co. 58 Vt. 253, 2 Atl. 710.
7 McQuitty v. Continental Life Ins. 12 Tutt v. Covenant Mutual Life
Co. 15 R, I. 573, 10 Atl. 635. Ins. Co. 19 Mo. App. 677, 681.
8 Patch v. Phoenix Mutual Life Ins. 13 Eddy v. Phoenix Mutual Life
Co. 44 Vt. 481. See Moser v. Phoenix Ins. Co. 65 N. H. 27, 28, 23 Am. St.
Mutual Life Ins. Co. 2 Mo. App. 408. Rep. 17, 18 Atl. 89. "It contains a
9 Holman v. Continental Life Ins. provision for the payment of any in-
Co. 54 Conn. 195, 1 Am. St. Rep. 97, debtedness to the company by deduct-
6 Atl. 405. ting it from the amount of insurance
10 Gardner v. Central Life Ins. Co. secured by the policy, and the fail-
2303
§ 11 DO
JOY( i; ON INSURANCE
by the failure to pay interest on premium notes at maturity whore
the company is entitled to recover on the notes.14 A.gain, where a
paid-up policy is issued subject to the payment annually in advance
dI-' interest on the premium notes, otherwise to be forfeited, payment
thereof on the day following thai specified is not in time, although
reliance has been placed, in making such delay, upon a pamphlet
issued by the company, and which accompanied the original policy,
and which stated that all the company's policies were nonforfeitable,
ami thai it allowed thirty days' grace in the payment of premiums;
the company nol being estopped in such case to claim a forfeiture
for nonpayment.15
§ 1190. Whether it is new contract or continuation of old one. —
Sometimes an indorsement is made upon the old policy, which is
equivalent to a conversion into a paid-up policy.16 Such indorse-
ment is in connection with the provisions of the policy relating to
forfeiture for nonpayment of premiums; 17 and where the company
wrote across the fact of the policy that it was binding for two-
tiftccnths thereof, "subject to the terms and conditions expressed in
this policy," it was held that the paid-up policy was only the orig-
inal policy reduced to an amount corresponding to the premiums
paid.18 And it is held in other cases that the paid-up policy is
ure to pay the interest in advance
upon the notes given on the original
policy is to be treated as an indebted-
ness to the company, and not as a
forfeiture of the 'paid-up' policy:"
Id. 28, per Clark, J., citing:
Indiana. — Franklin Life Ins. Co.
v. Wallace, 93 Ind. 7; Northwestern
Mutual Life Ins. Co. v. Little, 56
Ind. 504.
Iowa. — Ohde v. Northwestern Mu-
tual Life Ins. Co. 40 Iowa, 357.
Kentucky. — Montgomery v. Phoe-
nix Mutual Life Ins. Co. 14 Bush (77
Ky.) 59; Northwestern Life Ins. Co.
v. Fort, 82 Ky. 269, 6 Ky. Law Rep.
271; St. Louis Mutual Life Ins. Co.
v. Crigsby, 10 Bush (73 Ky.) 310.
Minnesota. — Svmonds v. North-
western Life Ins. Co. 23 Minn. 491.
Neir II 'am pshire. — Cowles v. Con-
tinental late Ins. Co. 63 N. H. 300.
New York. — Cole v. Knickerbocker
Ins. Co. 63 How. Pr. (N. Y.) 442,
! 15.
Wisconsin. — Hull v. Northwestern
Life Ins. Co. 39 Wis. 397.
14 Northwestern Mutual Life Ins.
Co. v. Fort, 82 Ky. 269, 6 Ky. L.
Rep. 271.
15 Fowler v. Metropolitan Life Ins.
Co. 116 N. Y. 389, 5 L.R.A. 805, 22
N. E. 576, reversing 41 Hun (N. Y.)
357; Howell v. Knickerbocker Life
Ins. Co. 44 N. Y. 276, 4 Am. Rep.
675, and Ruse v. Mutual Benefit Life
Ins. Co. 23 N. Y. 516, 24 N. Y. 653,
distinguished.
16 See Holman v. Continental Life
Ins. Co. 54 Conn. 195, 1 Am. St. Rep.
97, 6 Atl. 405; Alabama Gold Life
Ins. Co. v. Thomas, 74 Ala. 578 ; Mc-
Quitty v. Continental Life Ins. Co.
15 K. I. 573, 10 Atl. 635.
17 Alabama Gold Lite Ins. Co. v.
Thomas, 74 Ala. 578.
18 McQuitty v. Continental Life
Ins. Co. 15 R. I. 573, 10 Atl. 635.
See Holman v. Continental Life Ins.
Co. 54 Conn. 195, 1 Am. St. Rep. 97,
6 Atl. 405, 8 East Rep. 181; People
v. Knickerbocker Life Ins. Co. 103 N.
Y. 480, 9 N. E. 35.
2304
PAID-UP AND NONFORFEITABLE POLICIES § 1191
a continuation of the old one, so far as the stipulations of the
former are applicable.19 So, in general, a new policy may con-
tain a provision in conformity to the original for which it is
substituted, providing for forfeiture, if the interest on the pre-
mium note is unpaid, although there are exceptions;20 for the
company may validly insert such a condition where it has au-
thority to impose an obligation on the assured to pay such in-
terest on notes outstanding at the issue of the new policy.1 But
otherwise not, for it cannot insert such a provision where it is
not in the original policy and it unwarranted by its terms.2 It is
decided, however, that the company may make the new policy
strictly forfeitable for a default in paying premiums or premium
notes, and is not obligated to insert a provision in the original "non-
forfeitable" policy which stipulates differently.3 It is held that a
forfeiture condition as to residence under the original policy does
not affect the new policy.4
§ 1191. Amount of premium under statutes "deducting indebted-
ness."— Some discussion has been had upon question as to what con-
stitutes an "indebtedness" to be deducted under the statutes provid-
ing therefor, in ascertaining the "single premium" remaining to
the credit of the insured. Under a Massachusetts statute providing
for the continuance and validity of the policy for a limited period
after failure to pay the premium, to be determined as therein pro-
vided, the net value is to be ascertained in a certain manner, and
from it is to be deducted "any indebtedness to the company or notes"
of the assured held by it, which if given for the premium are to be
canceled, and "four-fifths of what remains" constitutes a net single
premium for temporary insurance for a term. to be determined as
specified therein.5 The New York statute provides for "deducting
any indebtedness of the insured on account of any annual or semi-
annual or quarterly premiums then due, and any loan made in
cash on such policy, evidence of which is acknowledged by the in-
19 McDonnell v. Alabama Gold Life the paid-up insurance purchased
Ins. Co. 85 Ala. 401, 5 So. 120 ; Mer- shall be payable at the same time and
ritt v. Cotton States Ins. Co. 55 Ga. under the same conditions, except as
103. to the payment of premiums, as the
20 See cases cited in two preceding original policy: 3 N. Y. Rev. Stats,
sections. 8th ed. p. 1688. That new policy is
1 People v. Knickerbocker Life Ins. not new contract in case of endow-
Co. 103 N. Y. 480, 9 N. E. 35. ment policies, see § 1193, note 3,
2 Cole v. Knickerbocker Life Ins. herein.
Co. 23 Hun (N. Y.) 255, 63 How. Pr. 4 Cotton States Life Ins. Co. v. Ed-
(N. Y.) 442. wards, 74 Ga. 220.
3 People v. Knickerbocker Life 5 Mass. Stats. 1861, c. 186, sec. 1;
Ins. Co. 103 N. Y. 480, 9 N. E. 35. Stats. 1882, c. 119, sec. 159.
The New York statute provides that
Joyce Ins. Vol. III.— 145. 2305
§ 1191 JOYCE ON INSURANCE
sured in writing." 6 The words "dividend additions," as used in
New York Laws providing for the application thereof to lapsed
policies, refer to that part of the premiums charged which was
"loaded" on to the premium in excess of its share of expenses and
losses sustained; and such additions and the earnings thereon, which
constitute the "surplus/' must bo valued and applied in buying
extended insurance for lapsed policies in force three years or
Longer, in the same way that the "reserve" of the policy is required
to be valued and applied in purchasing such extended insurance.7
Such statute is not violated by a stipulation in the policy that the
unpaid portion of the year's premium shall be considered an in-
debtedness to the company, and the failure to pay any premium
when due operates to forfeit the policy except as provided by the
statute.8 And where such a condition exists, the unpaid portion of
the premium must be deducted from the net value at the date the
premium becomes due in ascertaining the net single premium under
the statute.9 But where there is no such stipulation an unpaid
por! ion <»(' a half year's premium is not an "indebtedness," and can-
not be deducted.10 An insurance company will not, in computing
the amount of cash surrender value or the sum applicable to the
purchase of extended insurance after default of payment of pre-
miums, be permitted to discriminate against policy holders who
have borrowed on their policies, by exacting more than the loan
with legal interest, and therefore a method of settlement by which
the amount to be deducted from the reserve applicable to the pur-
chase of extended insurance is ascertained by finding the sum which
bears the same relation to such reserve as the amount borrowed
6 N. Y. Laws 1909, c. 33, see. 88, tion between a premium of insurance
as am'd by L. 1909, c. 101; Id. e. 595; and a debt. The policy itself also
L. 1910, c. 614; Parker's N. Y. Ins. provided that whatever was due to
L. (ed. 1915) p. 136; 3 N. Y. Rev. the company should be deducted
Stats. 8th ed. p. 1688. from the net value of the policy, in-
7 United States Life Ins. Co. v. eluding any unpaid premium notes
S] 'inks, 126 Ky. 405, 13 L.R.A. with interest, but no notes were held
(N.S.) 1053, 96 S. W. 889, see last by the defendant against the insured,
preceding note for N. Y. Stat. and there was no direct promise by
8 Van Creelen v. Massachusetts him to pay any amount, nor any ob-
Mutual Lite Ins. Co. 35 La. Ann. 226, ligation so to do. One-half year's
under Mass. Laws, 1861, c. 186. premium had been paid upon the
9 Van Creelen v. Massachusetts policy when issued, and when the in-
Mntual Life las. Co. 35 La. Ann. surer died said period had elapsed,
226; Howard v. Continental Life and the other half year's premium
Ins. Co. 48 Cal. 229; 2 Deering's Di- was unpaid. It was claimed that the
o-est, L542. policy lapsed when the first six
10'Goodwin v. Massachusetts Mu- months expired: Sec also I'itt v.
lual Life Ins. Co. 73 N. Y. 480. This Berkshire Life Ins. Co. 100 .Mass.
latter decision rests upon the distinc- 500.
2300
PAID-UP AND NONFORFEITABLE POLICIES § 1192
bears to the cash surrender value, and thereby arbitrarily shortening
the time of extended insurance, is invalid.11 Again, insurance com-
panies must keep accurate accounts with their policy holders as
classes, failing which, no presumption will be indulged in the com-
pany's favor when it comes to valuing and applying "surplus" or
"dividend additions" to lapsing policies.12
§ 1192. Amount of paid-up policy. — In estimating the amount
for which a paid-up policy should issue, the holder is not entitled
to the full amount of the premiums paid, but only to an equivalent
of the present value of the policy, nor should a method of computa-
tion be used which deprives the company of its earnings for carry-
ing the risk.13 Accordingly it is error to require the company to
issue a policy for the aggregate amount of the premiums paid subject
to the amount due on the note.14 If annual premium notes are
given on which only the interest, together with cash premiums, is to
be paid annually, they need not be deducted in determining the
amount, where the insured is entitled to a paid-up policy, for as
many "tenths" as complete annual payments have been made.15
But where an endowment policy with premiums payable for ten
years was so worded that complete annual payments might be made
in cash, and cash payments of the interest on annual premium
notes, the payment of the notes being provided for by application
of the surplus, it was held that the notes, so far as uncanceled,
might when the policy became due be deducted from the amount
payable under the paid-up policy ; 16 and in another like case it was
held that the premium notes with their accrued interest should be
deducted, it being so provided by the policy, from the amount pay-
able,17 and it is so decided in a Georgia case with similar provisions.18
It is also so decided in an Ohio case.19 Where the policy provided for
11 Emig v. Mutual Benefit Life Ins. Ins. Co. 4 Mo. App. 386 ; Brooklyn
Co. 127 Ky. 588, 23 L.R.A.(N.S.) Life Ins. Co. v. Duteber, 95 TJ. S.
828n, 106 S. W. 230. 269, 24 L. ed. 410, affirming 3 Dill.
On computation of paid-up insur- (C. C.) 87, Fed. Cas. No. 4202.
ance where insured has borrowed on 16 Van Norman v. Northwestern
policy; see note in 23 L.R.A.(N.S.) Mutual Life Ins. Co. 51 Minn. 57, 52
828. N. W. 988.
12 United States Life Ins. Co. v. 17 Ohde v. Northwestern Mutual
Spinks, 126 Ky. 405, 13 L.R.A. Life Ins. Co. 40 Iowa, 357.
(N.S.) 1053, 96 S. W. 889. "Northwestern Mutual Life Ins.
13 Mound City Mutual Life Ins. Co. v. Ross, 63 Ga. 199.
Co. v. Heath, 49* Ala. 529; Farley v. 19 Northwestern Mutual Life Ins.
Union Mutual Life Ins. Co. 41 Hun Co. v. Bonner, 36 Ohio St. 51. In a
(N. Y.) 303. New York case an option was given
14 Farley v. Union Mutual Life to receive, after payment of two an-
Ins. Co. 41 Hun (N. Y.) 303. nual premiums, a paid-up policy for
15 Fittnan v. Northwestern Life I he full amount of the premiums
2307
1103
JOYCE UN INSURANCE
an amount proportionate to the number of premiums paid, and
prim- to bis death twenty-seven quarterly premiums were paid by
the assured, who then defaulted, and four quarterly premiums be-
came due and were unpaid, a recovery for twenty-seven thirty-oneths
of the amount of the policy, with interest in the discretion of the
court on said amount from the commencement of the action, was
adjudged.?0 A provision for paid-up insurance, in a statute gov-
erning the adjustment of claims upon policies forfeited for nonpay-
ment of premiums, will not be construed to mean paid-up temporary
insurance for the full amount of the policy.1
§ 1193. Endowment policy: nonforfeiture statutes. — Tn a Massa-
chusetts case the policy was payable in case of death within the ten
years, but to the insured if he survived that period. The policy
was conditioned to be forfeited for nonpayment of premiums when
due, subject, however, to the provisions of the Massachusetts stat-
ute.2 The insured survived the endowment period, of which the
company had due notice, but he had failed to pay the last premium.
It w;is held that he was entitled to recover the full amount of the
policy, less the amount due the company with interest thereon.3
paid. The policy was for three thou- adopted in an endowment policy for
sand dollars, and the annual pre- the purpose of qualifying the forfei-
mium three hundred and eighty-nine ture clause, the clause thus qualified
dollars and sixteen cents. After ten is to be so construed as to give the
annual payments a demand was made insured its full benefit, without aller-
for a paid-up policy for the amount ing any other provision of the policy,
of premiums paid. The court held if this can be done without violating
that as the policy contained no words any rule of law. In the endowment
ill' restriction, the plaintiff's right was policy the expiration of ten years
not limited to the amount of the orig- from its date is the occurrence of an
inal insurance, but that he was en- event on the happening of which the
titled to a paid-up policy as stipulat- policy becomes payable," and that in
ed. Christy v. Homoeopathic Mutual this ease the policy was not payable
Life Ins. Co. 93 N. Y. 345.
20 Mutual Life Ins. Co. v. Bratt, 55
Bid. 200.
1 Nichols v. Mutual Life Ins. Co.
176 Mo. 355, 62 L.R.A. 657, 75 S.
\Y. 11(11.
2 Stats. 1861, c. 186.
3 Carter v. John Hancock Mutual
only in case of death within the term
of temporary insurance, and the New
York statute, so much of it as is ap-
plicable to endowment insurance,
contemplates a payment at the end
of the term of the poliey in case the
insured survives the term. "If the
reserve upon any endowment policy.
Life Ins. Co. 127 Mass. 153. The applied, according to the preceding
court said that the effect of incor- section, as a single premium of tem-
porating the statute into such a pol- porary insurance, be more than suf-
icy was not "to make a new contract ficient to continue the insurance till
between the parties, nor to make any the end of the endowment term
change in the time when the amount named in the policy, and if the in-
of the policy becomes payable. . . . sured survive that term, the excess
When the statute provisions are shall be paid in cash at the end of
2308
PAID-UP AND NONFORFEITABLE POLICIES § 1194
The provisions of the Missouri statute which concern temporary in-
surance and the amount thereof, as well as the length of time that
it shall in each case, continue; which makes policies of insurance
nonforfeitable after the payment of two or more full annual pre-
miums thereon ; and which declare that, in case of the death of the
insured within the terms of temporary insurance, to be ascertained
as provided by the statute, the company shall be answerable for the
full amount of the policy, less the unpaid premiums with interest
thereon, apply to a case in which an insurance company has issued
its fifteen year endowment policy, where four annual premiums
have been paid ; where default is made when the next annual pay-
ment becomes due in May, and the insured dies in the following-
November; and where the policy provides, in case of nonpayment
of premiums, for the issuance, upon demand, of a nonforfeitable
paid-up policy after the original policy has been in force for three
years; but those provisions of the statute concerning the paid-up
policy are inapplicable where the insured declines his right to it,
and makes no demand therefor. Statutory provisions of exemptions
from the control of certain statutes are also inapplicable where there
is nothing to bring the policy within the exempted matters. Hence,
if the insured dies, as in this case he did within the term of tem-
porary insurance, thus fixed or ascertained by the statute, the
amount of the policy, less such unpaid premiums and interest must
be paid, notwithstanding any waiver in the policy by the insured of
his statutory rights.*
§ 1194. Refusal to issue paid-up policy. — As a rule a party has a
right to insist upon the issue of a paid-up policy where the contract
stipulates therefor, provided he himself has performed the condi-
tions of the contract on his part necessary to be performed to entitle
him to claim the enforcement of the terms of the contract, unless
of course such nonperformance by the insured has been waived, or
an estoppel has arisen, or the case is otherwise one where relief could
be granted,5 and where the failure to pay the premium on a policy
at the specified time terminates the contract, and no application for
a paid-up policy is made, the contract will not be continued in force
for the full amount, even if the company refuses to issue a paid-up
policy.6
such term on the conditions on which Cravens, 178 U. S. 389, 44 L. ed.
the original policy was issued: " 3 N. 1116, 20 Sup. Ct. 762, 29 Ins. L. J.
T. Rev. Stats. 8th ed. p. 1688. See 876.
N. Y. Stat, cited in note 9, p. 2295 5 Standley v. Northwestern Mutual
herein. Life Ins. Co. 95 Ind. 254.
4 Cravens v. New York Life Ins. 6 Ashbrook v. Phoenix Mutual Ins.
Co. 148 Mo. 583, 71 Am. St. Rep. Co. 94 Mo. 72, 6 S. W. 462, 12 West.
628, 53 L.R.A. 305, 50 S. W. 519, Rep. 613.
aff'd in New York Life Ins. Co. v.
2309
L95 JOYCE (>\ LXSIKANCE
§ 1195. Refusal to issue paid-up policy; measure of damages.7 — If
there is an existing risk and the premiums paid are earned, and the
party demanding the sunt' is entitled to have a paid-up policy is-
sued, the measure of damages is the value of the policy al the time
of the demand and refusal, with interest.8 And where the assured
under a uon forfeitable policy is entitled to participate in the profits,
and an action is broughl to recover damages for a breach of con-
tracl to make a settlement, it La error to withdraw from the con-
dderation of the jury the reserved fund and financial standing of
the company. The equitable value of the policy being dependenl
on the reserve, it is material to -how the financial standing in order
to ascertain how much of the reserve could be safely applied in
settlement.9
7 See § 1191 herein. 200; Nashville Life Ins. Co. v. Mat-
8Rumbold v. Pennsylvania Mutual thews, 8 Lea (76 Tenn.) 499.
Life Ins. Co. 7 Mo. App. 71. See 9 Nashville Life Ins. Co. v. Mat-
Mutual Life Ins. Co. v. Bratt, 55 Md. thews, 8 Lea (76 Tenn.) 499.
2310
CHAPTER XLI.
NOTES FOR PREMIUMS, AND PREMIUM, ETC., NOTES.
§ 1202.
§ 1202a.
§ 1202b.
§ 1202c.
§ 1202d.
§ 1202e.
§ 1202f.
§ 1203.
§ 1204.
§ 1204a.
§ 1205.
§ 1206.
§ 1206a.
§ 1206b.
§ 1206c.
§ 1207.
§ 1208.
§ 1208a.
§ 1209.
§ 1210.
§ 1211.
§ 1212.
§ 1213.
§ 1213a.
§ 1214.
§ 1215.
Payment by note.
Same subject: to what extent note constitutes payment.
Same subject: when note does not constitute payment,
receipt for premium,
note as equivalent to or in lieu of cash.'
effect as loan where agent advances premium and
stipulation that note not payment but extension
Same subject:
Same subject:
Same subject:
takes note.
Same subject:
only.
Premium note and policy one contract.
Condition as to forfeiture for nonpayment of note at maturity :
generally.
When such condition not applicable to note.
Validity of such provisions.
Payment by negotiable paper : demand or notice, etc. : forfeiture.
Same subject: that policy not ipso facto void for nonpayment
of note.
Same subject : statutory notice.
Same subject : place of payment.
Payment by negotiable paper: cases holding no demand or notice
necessary: forfeiture.
Same subject : the rule.
When insurer not bound to notify assignee of maturity of note
of assignor.
When stipulation is that policy void or risk suspended for non-
payment of note.
Note for entire premium : suspension risk.
When condition for forfeiture is in note only.
When there is no condition as to forfeiture for nonpayment of
note.
Subsequent parol agreement: nonpayment of note: forfeiture.
Right to loan after nonpayment of note.
Power of mutual company to take note.
Validity of notes for premium and premium notes.
2311
§ 1202
JOYCE ON INSURANCE
§ 1216. Premium note given unauthorized company.
§ 1217. Premium, etc., notes: generally.
§ 1218. Negotiability of notes for the premium and premium, etc., note6.
§ L219. When note is payable.
§ 1219a. Same subject: conflicting dates: erroneous date.
§ 1219b. Same subject: extension of time.
§ L219c. Same subject: days of grace.
§ L219d. Payment of note by mail.
§ 1220. Validity of provisions as to liability on premium, etc., notes.
§ 1221. Lien on premium notes and funds.
§ 1221a. When insured liable on note for premium.
§ 1221b. When insured not liable on note for premium.
§ 1222. Liability on premium, etc., notes: generally.
§ 1223. When liability absolute on premium, etc., notes: when not.
§ 1224. Liability for losses prior to membership.
§ 1225. When liability continues until policy surrendered and all assess-
ments paid.
§ 122G. Liability after termination of contract or surrender of policy.
§ 1227. Liability after suspension on note for entire premium.
§ 1228. Extent of liability after part payment of note.
§ 1229. Liability after loss.
§ 1230. Liability incurred by default in payment of assessment.
§ 1231. Liability in case of insolvency of company.
§ 1232. Insolvency of maker of note.
§ 1233. Interest on premium notes: forfeiture.
§ 1234. Tender: premium notes.
§ 1235. Payment of premium notes or interest thereon by dividends or
profits.
§ 1235a. Application to unpaid notes, of amounts due for claims for in-
juries: accident policy.
§ 1236. Effect of nonpayment of note upon beneficiary.
§ 1237. Deduction of note from loss.
§ 1238. Counterclaim on note of owner of vessel insured for benefit of
mortgagee.
§ 1239. Amount of recovery on premium notes.
§ 1202. Payment by note. — Insurance companies have implied
power to accept promissory notes in payment of the premium, and
such payment is good, and an agent with the necessary authority
therefor may accept such note,10 even though the policy provides
10 Arkansas. — Home Eire Ins. Co. 966; Jacoway v. German Ins. Co. 49
v. Stancell, 94 Ark. 578, 127 S. W. Ark. 320, 5 S. W. 339.
2312
PREMIUM NOTES
§ 1202a
for a cash payment,11 So the note of a third party may be accepted
as payment of the premium.12 So the company may accept the
notes of a husband as payment of the premium due on a policy on
his life for bis wife'.- benefit,18 and in such case the company is pre-
cluded from insisting that such notes do not constitute payment,14
And a note given for the premium on an open marine policy exe-
cuted to cover such risks as may be afterward indorsed thereon
becomes valid as fast as risks are assumed to the extent of the pre-
miums actually earned by the company, and to this extent only
the maker of the note becomes liable to the company.15
As a general rule, the premium note of an insurance broker re-
ceived by the insurers in payment of a policy for his principal dis-
charges the principal from liability to the insurers on account of the
premium.16
An agent cannot, without authority therefor, receive payment of
premium notes which he has received and sent to the insurer.17
§ 1202a. Same subject: to what extent note constitutes pay-
ment.— Whether or not or to what extent a note given for the pre-
mium constitutes payment involves many factors, including au-
Georgia. — Williams v. Empire of insurance premium, see extensive
Mutual Annuity & Life Ins. Co. 8 Ga. note in 5 B. R. C. 365 ; on commer-
App. 303, 68 S. E. 1082. cial paper as payment thereof, see
Illinois. — Mclntire v. Preston, 5 note in 35 L.R.A.(N.S.) 84.
Gilm. (111.) 48, 48 Am. Dec. 321. "Mississippi Valley Life Ins. Co.
Kansas. — New York Life Ins. Co. v. Neyland, 9 Bush (72 Ky.) 430;
v. McGowan, 18 Kan. 300. Cary v. Nagel, 2 Biss. (U. S. C. C.)
Kentucky. — Mississippi Valley 244, Fed. Cas. No. 2403.
Life Ins. Co. v. Neyland, 9 Bush (72 12 Franklin Life Ins. Co. v. Wall-
Ky.) • 430. ace, 93 Ind. 7 ; Shaw v. Republic Life
Louisiana. — Lawrence v. Penn Ins. Co. 69 N. Y. 286; Timayens v.
Mutual Life Ins. Co. 113 La. 87, 36 Union Mutual Life Ins. Co. 21 Fed.
So. 898. 223. But see Mutual Ben. Life Ins.
Massachusetts. — Pitt v. Berkshire Co. v. Davis, 12 N. Y. (2 Kern.) 569,
Life Ins. Co. 100 Mass. 500. ' as to right of mutual company to
Michigan. — Home Ins. Co. v. Cur- take note of third person having no
interest in policy.
13 Michigan Mutual Life Ins. Co.
v. Bowes, 42 Mich. 19, 51 N. W. 962.
14 Michigan Mutual Life Ins. Co.
v. Bowes, 42 Mich. 19, 51 N. W. 962.
15 Furniss v. Gilchrist, 1 Sand. (N.
Y.) 53; Maine Mutual Marine Ins.
Co. v. Stockwell, 67 Me. 382.
16 Union Ins. Co. v. Grant, 68 Me.
229, 28 Am. Rep. 42.
17 Long Creek Building Assoc, v.
See §§ 76, 197, 550, 553 State Ins. Co. 29 Oreg. 569, 46 Pac.
366.
tis, 32 Mich. 402
Neiv York. — Marcus v. St. Louis
Mutual Life Ins. Co. 68 N. Y. 625;
Farmers' Bank v. Maxwell, 32 N. Y.
579.
Rhode Island. — Mowry v. Home
Ins. Co. 9 R. I. 346.
Emerigon (Emerigon on Ins.
[Meredith's ed. 1850] c. iii. sec. 6, p.
68) referring to Pothier, notes a cus-
tom to give promissory notes for the
premium
herein.
On promisssory note as payment
2313
§ L202a J01 CE ON [NSURANCE
thority of insurer's agents, ratification, waiver and estoppel, varying
according to the circumstances of each case. But it may be stated
generally thai the intent of the parties evidenced by the terms of
the contracl and such explanatory circumstances as are properly
relevanl and admissible, having also in view the rules of construc-
tion, musl govern. Thi • will appear from the decisions considered
throughoui this chapter. So it is held that the sole question in
-mil cases is whether the note was accepted as actual payment.18
And as we have stated elsewhere if a note is accepted conditionally
it is not a payment and the intent that it should not be con-
sidcred a payment unless paid when due may be shown.19 Again,
even though a promissory note does not of itself constitute pay-
ment of a debt, nevertheless where it is accepted by the insurer
'in payment" of premiums due it constitutes a payment to the ex-
tent that such acceptance makes the note a separate and independent
t ransaction so as to preclude, in the absence of a stipulation therefor,
a forfeiture of the policy in case said note is not paid at maturity.20
So the policy is not forfeited for nonpayment of premiums where
a note is taken therefor even though it is held to constitute merely
a waiver of the form of payment.1 Another view is that by accept-
ing notes for the premium the primary condition of forfeiture for
nonpayment of an annual premium is waived but that a secondary
condition thereupon comes into operation where it is stipulated that
the policy is to be void if the notes are not paid at maturity.2
An insurer is presumed to know the terms of a contract entered
into by its agent with respect to the payment of the first premium
by a note, notwithstanding a provision in the policy that it shall
not take effect until the first premium is paid.3 So a note may be
taken by an agent under such circumstances as to constitute an
absolute payment, as it is not necessary that the premium be paid
in cash and it may be paid by note or otherwise as the parties may
agree.4 So the agent may be authorized by custom or a course of
dealing to accept notes for the premium and render himself liable
18 Home Fire Ins. Co. v. Stancell, Thompson v. Knickerbocker Life Ins.
94 Ark. 578, 127 S. W. 966. Co. 104 U. S. 252, 26 L. ed. 765.
19 See § 1204 herein. On effect of express stipulation
20 Massachusetts Benefit Life As- suspending or avoiding policy in case
soc. v. Robinson, 104 Ga. 256, 42 of nonpayment of note at maturity,
L.R.A. 261, 30 S. E. 918, 27 Ins. L. see note in 5 B. R. C. 389.
J. 1003, 1026. 3 Stewart v. Union Mutual Life
1 State Life Ins. Co. v. Chownring, Ins. Co. 155 N. Y. 257, 42 L.R.A.
27 Okla. 722, 113 Pac. 715. 147. 49 N. E. 876.
2 Iowa Life Ins. Co. v. Lewis, 187 4 Devine v. Federal Life Ins. Co.
U. S. 335, 23 Sup. Ct. 126, 47 L. ed. 250 111. 203, 95 N. E. 174, 10 Ins. L.
204, 32 Ins. L. J. 1, relying upon J. 1513.
2314
PREMIUM NOTES § 1202a
therefor to the insurer for its share of the premium.8 And this is
so where the insurer permits the agent for several months to accept
notes for (he premium payable to himself, notwithstanding written
instructions to the agent to the contrary.6 And where an agent
authorized to accept notes, takes one for the first premium and he
is held liable therefor by insurer it will constitute a payment where
the contract is completed by mailing it to insured even though he
dies before receiving it.7 And as between insurer and insured,
although agents are forbidden by the insurer to take notes for first
premiums, the taking of a note will constitute a payment thereof,
where the custom or common practice is for the agent to take the
note in his own name and charge it to himself in his account with
the company, being responsible for its collection.8 So where a note
is given the agent but insurer does not consent to take it in lieu of
money, it constitutes, in so far as insurer is concerned, a payment
to the agent who holds it in place of the amount of the premium,
with which he thereby becomes chargeable, but said note does not
constitute an extension of time for payment of the premium ; and
the above especially applies where the note does not in any way
refer to either the premium or policy.9 So a provision that a life
insurance policy shall not take effect until the payment of the first
premium, is waived, or the insured estopped from setting it up,
if a promissory note for the premium is accepted and representations
made to the applicant that the insurance takes immediate effect.10
50 payment of the first premium by note is sufficient where the
agent takes the note himself and advances the amount to the com-
pany.11 Again where payment has been made to a local agent by
5 Cranston v. West Coast Life Ins. Ins. Co. 155 N. Y. 257, 42 L.R.A.
Co. 72 Oreg. 116, 142 Pae. 762. 147, 49 N. E. 876.
6 Godfrey v. New York Life Ins. u Krause v. Equitable Life Assur.
Co. 70 Minn. 224, 73 N. W. 1, 27 Ins. Soc. 99 Mich. 461, 58 N. W. 496. It
L. J. 300. is held in the superior court in Ken-
7 New York Life Ins. Co. v. Pike, tucky that if the insured gives a note
51 Cal 938 117 Pac 900 f°r ^ne ^rs^ premium payable to the
8 Kimbro' v. New York Life Ins. afent as "agent," and this is accept-
Co. 134 Iowa, 84, 12 L.R.A.(N.S.) ed by. *he J^Pany, ^ « » note re-
421, 108 N. W. 1025. See § 1204a ceived fforfthe P^mmm and its non-
, '. ° payment at maturity forfeits the pol-
£e*n' , „ „ . T.„ T icy; the latter stipulating that if
Griffith v. New York Life Ins. notes for premiums be not paid, there
Co. 101 Cal. 627, 40 Am. St. Rep. shall be a forfeiture, and it is also
96, 36 Pac. 113, 26 Ins. L. J. 212. ileia that this ruling is not changed
See § 1204a herein. by the fact that the agent had re-
On giving of note as a transaction ceipted for the premium as for a cash
with agent personally, see note in 5 premium paid. Union Cent. Life Tns.
B. R C. 436. Co. v. Duvall (Ky. Sup. Ct. 1895)
10 Stewart v. Union Mutual Life 16 Ky. L. Rep. 398.
2315
§ 1202a JOYCE ON INSURANCE
a note which is received by him as cash, and he has become liable to
the insurer for the amounl thereof, such note, as against insurer, is
equivalent to paymenl to said agent so as to preclude a forfeiture
for nonpayment of the note al maturity.12 And as between insured
and insurer the premium is paid where the agent in the ordinary
course of business gives insured credit therefor, especially so where
the agent is given notes for the premium including those on other
policies issued to insured at the same time and on other policies on
other property, and the agent obtains the proceeds of said note and
thereafter takes up the same at its maturity, and the agents pay
insurer the lull amount of said indebtedness, and insurer on
return to it of the policy credits its agents with the amount of the
unearned premium.13 So where the agent who is entitled to the
first premium on a policy as his commission takes, in part payment
of such premium, the note of the insured, sells it, and reports to
the company that the premium is paid, the insurer cannot, in an
action on the policy, avail himself of a default in the payment of
the note, where it also purchases the note from the agent's indorsee
after the death of the insured.14 A note may also be taken for the
premium by the agent who delivers the policy where the insurer,
with knowledge thereof, fails to repudiate the agent's acts.16 And
where the insurer accepts and retains a note for the premium it
constitutes a payment so as to preclude cancelation of the policy
even though the policy had been returned to insurer at its request
made in a notice of cancelation.16 A general agent may also accept
a third party's note as payment, even though the policy provides
for a cash premium.17
It is decided that if a question arises whether or not a note is
given as mere evidence of a debt, or as part payment of the first
premium on an application for insurance, the burden is upon him
who asserts that it was taken as payment of the premium, and if
the circumstances relied on to prove the contract point one way as
12 Griffith v. New York Life Ins. S. W. 786. Compare Mutual Re-
Co. 101 Cal. 627, 40 Am. St. Rep. serve Fund Life Assoc, v. Simmons,
96, 36 Pac. 113. See § 1204a herein. 107 Fed. 418, 46 C. C. A. 393, con-
13 Buckley v. Citizens Ins. Co. of sidered under 1202h herein.
Mo. 188 N. Y. 399, 13 L.R.A.(N.S.) I6Penn Mutual Life Ins. Co. v.
889, 81 N. E. 165, 36 Ins. L. J. 752, Norcross, 163 Ind. 379, 72 N. E. 132.
rev'g 98 N. Y. Supp. 622, 112 App. 16 Buckley v. Citizens Ins. Co. 98
Div. 451. N. Y. Supp. 622, 112 App. Div. 451.
14 Union Life Ins. Co. v. Parker, 17 Mississippi Valley Life Ins. Co.
66 Neb. 395, 62 L.R.A. 390, 103 Am. v. Nevland, 9 Bush (72 Ky.) 430.
St. Rep. 714, 92 N. W. 604. See Rep- See also Home Fire Ins. Co. v. Stan-
pond v. National Life Ins. Co. 100 cell, 94 Ark. 578, 127 S. W. 966.
Tex. 519, 11 LR.A.(N.S.) 981, 101
2316
PEEMIUM NOTES § 1202b
reasonably and significantly as the other, there is presented a ques-
tion of law for the court to decide.18
§ 1202b. Same subject: when note does not constitute payment. —
It is decided that if the insurer's agent takes assured's promissory
note for the amount of the first premium on a life policy it does not
constitute payment thereof within the intent of the contract where
it is expressly stipulated that no agent has power to granl credit or
extend time for payment of any premium.19 It is also determined
that a note given to insurer's agent to procure insurance of the Life
of the maker is held without consideration and void if the contract
for insurance provides that it shall be void, unless the premium is
paid in cash, and that none but certain designated officers have
authority to waive the condition, and the agent receiving the note
did not himself pay the premium to the insurer nor do anything
except to charge himself and credit the insurer with the amount
of such premium and the latter did not know that the payment had
not been made in cash nor in any way wTaive the condition requiring
such payment.20 It is likewise decided that notes cannot be accepted
by a sub-agent instead of cash where the policy stipulates against
waiver except by certain agents and the insurer did not credit pre-
miums to its agents until actual receipt thereof.1 It is further deter-
mined that there must be proof that the note was given for the full
amount of the premium and not merely to cover the insurer's share
thereof, even though the agent was allowed by custom to retain his
commission and had sent the amount of the note to the insurer, and
that there could be no recovery on the policy where the insurer
repudiated the transaction after insured's death while the note was
unpaid.2 And it is held that it is not sufficient where the premium
"McDonald v. Provident Sav. ing premiums, waiver by, see §§ 76
Life Soe. 108 Wis. 213, 81 Am. St. et seq., 550 et seq. herein.
Rep. 885, 84 N. TV. 154. See also Agent may waive conditions not-
Manhattan Life Ins. Co. v. Meyers, withstanding inhibition in policy, see
109 Ky. 372, 22 Ky. L. Rep. 875, 59 § 439 herein.
S. W. 30, as to burden of proof in Ratification of agent's acts: the
such case ; London & Lancashire Life premium, see § 460 herein.
Assur. Co. v. Fleming, App. Cas. Note not a payment when accepted
[1897] L. R. 499. Burden of proof conditionally, see § 1204 herein,
on insured to show cash payment 20 Dunham v. Morse, 158 Mass.
where note taken. 132, 35 Am. St. Rep. 473, 32 N. E.
19Batson v. Fidelity Mutual Life 1116.
Ins. Co. 155 Ala. 265, 130 Am. St. Pennsylvania Casualty Co. v. Ba-
Rep. 21, 46 So. 578. Examine Towa con, 133 Fed. 907, 67 C. C. A. l!'7.
Life Ins. Co. v. Lewis, 187 U. S. 335, 2 Mutual Reserve Fund Life As-
23 Sup. Ct. 126, 47 L. ed. 204, 32 Ins. soc. v. Simmons, 107 Fed. 418, 46 C.
L. J. 1. C. A. 393. See Robinson v. Union
As to authority of agents concern- Central Life Ins. Co. 144 Fed. 1005,
2317
§ L202e J03 CE ON INSURANCE
lias nol been actually paid to allege the execution of notes therefor
where said notes show on their face that they were not accepted as
payment of the premium bul were conditioned that if they were not
paid ;il maturity the policy would be void.3 Again, if an insurance
agenl agrees with another who holds Ins note that he secure an ap-
plication, and thai the premium be paid by an indorsement on said
note, there is no payment of the premium where the policy is not
delivered and no indorsement made on the note, the insured having
deceased before said acts are done, especially where the policy is re-
quired to be delivered and the premium paid during insured's life-
time.4
A partnership is not bound by a note given by a member of a
firm in the firm name for the premium on an insurance of such
member's property, such act not being within the scope of the part-
ner's authority to bind the firm.5
§ 1202c. Same subject: receipt for premium. — If a note is taken
for the premium due and a renewal receipt is given, it constitutes
a p ivmeiit sufficient to prevent a forfeiture.6 There is also a waiver
of actual payment of the initial premium where insurer accepts
notes therefor, delivers the policy and gives a receipt stating that
the premium is settled by the notes.7 And where insurer's agent
accepts a note for the premium and the policy is delivered it be-
comes of full force and effect the same as if cash had been paid.8
And it is held that the insurer is liable on a policy acknowledging
receipt of the premium, where the statute so provides, even though
a note for the premium is overdue and unpaid and notwithstanding
the policy stipulates for forfeiture in such a case.9
rev'd 8 L.R.A.(N.S.) 883, 148 Fed. • Michigan Mutual Life Ins. Co. v.
358, 78 C. C. A. 208. Compare Bowes, 42 Mich. 19, 51 N. W. 962.
Union Life Ins. Co. v. Parker, 66 7 Hipp v. Fidelity Mutual Life Tns.
Neb. 395, 62 L.R.A. 390, 103 Am. St. Co. 128 Ga. 491, 12 L.R.A.(N.S-)
Rep. 714, 92 N. W. 604 (considered 319n, 57 S. E. 872. See Williams v.
under § 1202a herein); Reppond v. Empire Mutual Annuity & Life Tns.
National Life Ins. Co. 100 Tex. 519, Co- 8 Ga- APP- 303> 68 s- E- 1°82;
11 L R A (N S ) 981 101 S W 786 Jacobs v- Omaha Life Assoc. 146 Mo.
As to discrimination as to rates of g*, 48 S- W" 462> 142 M°- 49> 43 £•
premium: rebates of premium, see §§ JJ" 37A5' Mo,°^J\?om? InS" £°" ?°
K. inQ1 ,nm- , " 3S Mo. App. 192, 2 Mo. App. Reptr.
-In 1091-10911 herein iESsteo i. Felter, 132 N. Y.
1^:llli;"11'!' hf ?,°- V- ^eS Supp. 267, 75 Misc. 349.
TJ 35nS*i f i" t T 8?5' 5 A°t0 e^ °f r^ipt >» Policy for
S. W. 30, .JO Ins. L. ,). 1.54. premium, see § 86 herein.
*Hawley v. Michigan Mutual Life 8Muhia] Lif(, Ins Co v A]]on> U3
Ins. Co. 92 [owa, 593, 61 N. W. 201, m. App. 89, affd 212 111. 134, 72 N.
24 Ins. L. J. 216. E. 200.
5 Lime Rock Fire & Marine Ins. 9 Palmer v. Continental Ins. Co.
Co. v. Treat, 58 Me. 415. 132 Cal. 68, 64 Pac. 87.
2318
PREMIUM NOTES §§ 1202d, 1202e
But it is also decided that such receipt may be explained by show-
ing that a note was given for the premium under a policy stipulation
for forfeiture for nonpayment at maturity of said note.10
§ 1202d. Same subject: note as equivalent to or in lieu of cash. —
The acceptance by the agent of a note for the premium operates as
payment to the extent of putting the policy on force from the date
of acceptance of said note, and the agent is, in case of nonpayment
of the note liable therefor, as the note is to be deemed so much cash
which should have been received by him for account of insurer,
especially so where the insurer approves the agent's act by taking
the note as its own.11 So where a note is given by assured for a
premium and accepted by the insurer as payment it is equivalent
to a cash payment and no forfeiture results from nonpayment of
said note at maturity, in the absence of an express stipulation there-
for entered into at the time such note was given and received.12 A
note may also constitute a cash payment of the premium as where
it is made payable to the agent discounted by him and the premium
accounted for to the insurance company, a receipt given by the
agent for the premium and the policy delivered thereafter also
acknowledging the receipt of the premium.13 So a note given for
a part of the first annual premium is based upon a sufficient con-
sideration and stands in lieu of cash for that year, precluding,
under the forfeiture clause for nonpayment of the note at maturity
a default until the expiration of said year.14
But it is decided that the premium is not paid in cash by a note
for the renewal premium, with interest added, given to the agent
who fails to pay the amount thereof to the insurer although he has
the note discounted and credited to his account at a bank, and in
such case although insured pays a part of the note at its maturity
and gives a note for the unpaid amount thereof which is unpaid
at the time of his death. No renewal receipt was, however, de-
livered to assured and the policy provided for forfeiture for non-
payment when due of notes for premiums.15
§ 1202e. Same subject: effect as loan where agent advances pre-
mium and takes note. — The transaction is held to constitute in ef-
10 Williams v. Empire Mutual An- 13 Jacobs v. Omaha Life Assoc. 146
nuity & Life Ins. Co. 8 Ga. App. 303, Mo. 523, 48 S. W. 462, 142 Mo. 49,
68 S. E. 1082. 43 S. W. 375. See § 1202c herein.
"Lawrence v. Penn Mutual Life 14 Union Central Life Ins. Co. v.
Ins. Co. 113 La. 87, 36 So. 898, 33 Zihlman, 68 W. Va. 272, 69 S. E.
Ins. L. J. 788. 855.
12 Massachusetts Benefit Life As- 15Hutehings v. National Life Ins.
soc. v. Robinson, 104 Ga. 256, 42 Co. 26 Canadian L. T. 187. Two
L.R.A. 261, 30 S. E. 918, 27 Ins. L. judges dissented.
J. 1003.
2319
§§ L202f-1204 JOYCE ON INSURANCE
feci a loan by the agent to insured where the former pays the in-
surer the amount of the premium and lakes the insured's notes
therefor.16
§ 1202f. Same subject: stipulation that note not payment but
extension only. — It may be provided that a note for the premium
shall not constitute payment,17 but only an extension of time there-
for,18 and this is decided to be the effect, in the absence of waiver,
where it is stipulated in the policy or note for forfeiture for non-
pax ment of a premium note.19 And if the policy provides that the
note shall not be a payment, but only an extension of the time of
payment of the premium, and that if not paid in full when due
the company shall not be liable while the note remains unpaid,
such payment by note is good until the note is dishonored, and the
delivery of the policy is a sufficient consideration for the note.20
§ 1203. Premium note and policy one contract. — A premium note
and life policy executed at the same time are one contract.1 And
a marginal provision as to the payment of the premium partly in
notes is part of the contract.2
§ 1204. Condition as to forfeiture or nonpayment of note at ma-
turity: generally. — Although a note may be given and accepted as
payment of the premium, it is not a payment when accepted con-
ditionally. Thus, the policy may provide for forfeiture upon non-
payment of the note at maturity or within a limited time thereafter,
and in case of a breach such condition controls, where it is the
contract intent of the parties that it shall so operate. But what
16 Hudson v. Compere, 94 Tex. c. 49, sec. 27. See also Russell v. Ox-
1 H', (il S. W. 389, 30 I. L. J. 464. ford County Patrons of Husbandry
17 Ressler v. Fidelity Mutual Life Mutual Fire Ins. Co. 107 Me. 362, 78
Ins. Co. 110 Tenn. 411, 75 S. W. 735 ; Atl. 459, under Me. Rev. Stat. c. 49,
Guetzkow v. Michigan Mutual Life sec. 30, expressly providing that de-
Ins. Co. 105 Wis. 448, 81 N. W. 652. posit note and policy are one con-
18 Rurnham v. Michigan Mutual tract. Premium note with policy
Life Ins. Co. 149 Mich. 84, 14 Det. constitutes contract which is not sev-
Leg. N. 370, 112 N. W. 704; Guetz- erable, a cancelation of one part
kow v. Michigan Mutual Life Ins. without consent of both parties pre-
Co. 105 Wis. 448, 81 N. W. 652. eluded, Campbell v. Adams, 38 Barb.
19 Occidental Life Ins. Co. v. (N. Y.) 132.
Jacobson, 15 Ariz. 242, 137 Pac. 869. Whether premium note part of pol-
20 Marskly v. Turner, 81 Mich. 62, icy: statutory provisions: standard
45 N. W. 644. policy, see §§ 197, l!)7a herein.
1Laughlin v. Fidelity Mutual Life Policv to contain entire contract,
Ins. Co. 8 Tex. Civ. App. 448, 28 S. see § 190b heroin.
W. 411. A policy issued by a life, 2 Pierce v. Charter Oak Ins. Co.
fire, or marine insurance company, 138 Mass. 151. See Iowa Life Tns.
domestic or foreign, and a deposit Co. v. Lewis, 187 U. S. 335, 23 Sup.
note given therefor, is one contract, Ct. 126, 47 L. ed. 204, 32 Ins. L. J.
under Rev. Stats. Me. 1883, p. 447, 1.
2320
PREMIUM NOTES § 1204
constitutes a conditional acceptance is frequently not clear from the
terms employed or language used, and courts may permit it to be
shown that the parties did not intend that a note should be con-
sidered payment unless paid when due, or that it was the intent, thai
it should so operate to the extent at least of preventing a forfeiture
for nonpayment of the note at maturity.3 Frequently the policy
only provides for a suspension of the risk, as that it shall he void
while the note remains overdue and unpaid,4 or that the company
shall not bo liable for a loss occurring while such note remains due
3 Shultz v. Hawkcye Ins. Co. 42 tion of payment of premium in ad-
Iowa, L'.'lD. • vanee).
See the following decisions: Massachusetts.— Pitt v. Berkshire
I T in led States. — Knickerbocker Life Ins. Co. 100 Mass. 500.
Life Ins. Co. v. Pendleton, 112 U. S. Missouri. — Sims v. State Ins. Co.
696, 28 L. ed. 866, 5 Sup. Ct. 314 47 Mo. 54, 4 Am. Rep. 311.
(usage and course of business may New York. — Holly v. Metropolitan
be shown for purpose of raising Life Ins. Co. 105 N. Y. 437, 11 N. E.
prima facie presumption of fact in 507; Baker v. Union Life Ins. Co. 43
aid of collateral testimony) ; Thomp- N. Y. 283, 6 Abb. Pr. N. S. (N. Y.)
son v. Knickerbocker Life Ins. Co. 144, 37 How. Pr. (N. Y.) 126; Roeh-
104 U. S. 252, 26 L. ed. 765, 2 Wood ner v. Knickerbocker Life Ins. Co. 4
(U. S. C. C.) 457 (a condition in the Daly (N. Y.) 512.
policy for forfeiture for nonpayment Ohio. — Roberts v. New England
of premium or of note therefor and Life Ins. Co. 1 Disn. (Ohio) 355, 12
the acceptance of a note for the pre- Ohio Dec. 668, 2 Disn. (Ohio) 106.
mium, although a waiver of payment West Virginia. — Muhlman v. Na-
of premium brings into operation so tional Ins. Co. 6 W. Va. 508.
much of the condition as relates to Wisconsin. — Kirk v. Dodge Coun-
the note, and nonpayment thereof ty Mutual Ins. Co. 39 Wis. 138.
forfeits the policy without notice. • England. — Neil v. Union Mutual
See §§ 1206 et seq. herein). Life Ins. Co. 45 U. C. Q. B. 593.
Illinois.— Devine v. Federal Life See §§ 1202a, 1202b herein.
Ins. Co. 250 111. 203, 95 N. W. 174, On effect of express stipulation
40 Ins. L. J. 1513. The nature of suspending or avoiding policy in
the transaction may be shown where case of nonpayment of note at ma-
notes are given for the premium ; but turity, see note in 5 B. R. C. 389.
in this case nonpayment of note at 4 Indiana. — Continental Life Ins.
maturity was held not necessarily to Co. v. Dorman, 125 Ind. 189, 25 N.
operate as a forfeiture notwithstand- E. 213.
ing policy condition therefor. Michigan. — Robinson v. Continen-
Indi-ana.— Majestic Life Assoc. Co. tal Ins. Co. 76 Mich. 641, 6 L.R.A.
v. Tuttle, 58 Ind. App. 98, 107 N. E. 96, 43 N. W. 647; Williams v. Re-
22, 45 Ins. L. J. 737. public Ins. Co. 19 Mich. 469; Wil-
Io wa.— Shakey v. Hawkeye Ins. liams v. Albany City Ins. Co. 19
Co. 44 Iowa, 540. Mich. 451, 2 Am. Rep'. 95.
Kansas. — Continental Ins. Co. v. Missouri. — Sims v. -State Ins. Co.
Daly, 33 Kan. 601, 7 Pac. 158; Man- 47 Mo. 54, 4 Am. Rep. 311.
hattan Life Ins. Co. v. Myers, 22 Ky. New York. — Wall v. Home Ins.
L. Rep. 875, 59 S. W. 30, 30 Ins. L. Co. 36 N. Y. 157, 8 Bosw. (N. Y.)
J. 134 (notes provided for forfeiture 597.
and policy was issued in considera- Wisconsin. — Kirk v. Dodge Coun-
Joyce Ins. Vol. III. — 146. 2321
§ 12ii4a JOYCE ON INSURANCE
and unpaid.5 Sometimes the note itself contains such provision for
forfeiture in case of its nonpayment when due, although such con-
dition does not have the same force as if contained in the policy.6
The policy sometimes also provides that in case a note given for a
premium shall not be paid at maturity, the policy shall be void
u ithout notice to any person or persons interested therein ; 7 or both
policy and note frequently stipulate for forfeiture in case of such
nonpayment of the note.8 In sonic cases there is no provision in
either note or policy for forfeiture in case of nonpayment of the
note, either at maturity of within a limited time thereafter,9 and in
one case a printed memorandum on the margin of the policy pro-
vided that the same should be forfeited on nonpayment of a prom-
issory note given for the premium.10 So in another case the con-
dition for forfeiture for nonpayment of a note at maturity may
also be contained in a memorandum on the back of a premium
receipt and it is as effective in such case as if contained in the policy
itself as it is immaterial whether it appears there or in the policy.11
§ 1204a. When such condition not applicable to note. — A pro-
vision in a life policy making it void in case of failure to pay a
premium note, is held not to apply to a note taken by the agent
for his share of the first premium, the share belonging to the com-
pany being paid by the applicant in cash, although the note is
afterwards turned over to the company for collection.12 And there
is no forfeiture for nonpayment of an installment on a note for the
ty Mutual Ins. Co. 39 Wis. 138, 20 Chi. Leg. News, 282; Pitt v. Berk-
Am. Rep. 39. shire Life Ins. Co. 100 Mass. 500.
5 Robinson v. Continental Ins. Co. 9 New England Life Ins. Co. v.
76 Mich. 641, 6 L.R.A. 16, 43 N. W. Hasbrouck, 32 Ind. 447; Trade Ins.
647; Continental Life Ins. Co. v. Co. v. Barraeliff, 45 N. J. L. 543, 46
Miller, 4 Ind. App. 553, 30 N. E. 718. Am. Rep. 792; McAllister v. New
6 Dwell ing-House Ins. Co. v. Har- England Life Ins. Co. 101 Mass. 558,
die, 37 Kan. 674, 16 Pac. 92; Mutual 3 Am. Rep. 404.
Life Ins. Co. v. French, 30 Ohio St. 10 Baker v. Union Life Ins. Co. 6
240, 27 Am. Rep. 443; Montgomery Rob. (N. Y.) 393.
v. Phoenix Mutual Life Ins. Co. 14 H Iowa Life Ins. Co. v. Lewis, 187
Bush (77 Ky.) 51; Hastings v. U. S. 335, 23 Sup. Ct. 126, 47 L. ed.
Brooklyn Life Ins. Co. 44 N. Y. St. 204, 32 Ins. L. J. 1.
Rep. 37, 17 N. Y. Supp. 333, rev'd "Reppond v. National Life Lis.
138 N. Y. 473, 34 N. E. 289, 53 S. R. Co. 100 Tex. 519, 11 L.R.A. (N.S.)
63. 981, 101 S. W. 786. Sec Union Life
7 Thompson v. Knickerbocker Life Ins. Co. v. Parker, 66 Neb. 395, 62
Ins. Co. 2 Wood (U. S. C. C.) 547, L.R.A. 390, 103 Am. St. Rep. 714, 92
Fed. Cas. No. 13,964; Pendleton v. N. W. 604; Mutual Reserve Fund
Knickerbocker Life Ins. Co. 5 Fed. Life Assoc, v. Simmons, 107 Fed.
238, 112 U. S. 696, 28 L. ed. 866, 5 418, 46 C. C. A. 393, and other cases
Sup. Ct. 314. considered under §§ 1202a, 1202b
8 Cardwell v. Republic Ins. Co. 7 herein.
2322
PREMIUM NOTES § 1205
first year's premium where such note has been discounted by the
agent and he has paid insurer his share of that premium.13
§ 1205. Validity of such provisions. — It is undoubted that such
conditions may be validly entered into between the parties, and be-
come a part of the contract of insurance, binding upon the parties
and enforceable ; 14 they are neither against public policy, unwise,
illegal, nor unreasonable, nor is it against public policy for the
insurer to take advantage of such clauses.15 So an agreement that
the premium note shall bind assured even though insurer is re-
lieved from liability for default in payment of any sum due is not
illegal or contrary to public policy.16 So a condition in a premium
note is valid and binding that the policy shall be null and void so
long as the note remains overdue and unpaid, and that the premium
shall be considered earned in case of nonpayment when due.17 So
a condition is valid in a mutual company's policy that if a note
taken for a cash premium is not paid within sixty days after due,
"all obligations of the company to the insured until such note is
paid are suspended." 18 And a stipulation that insurer shall not
be liable for any loss or damage incurred while any promissory
note given for the premium remains past due and unpaid is not in-
valid.19 And a stipulation in the note that judgment may be taken
13 United States Annuity & Life Colorado. — New Zealand Ins. Co.
Ins. Co. v. Peak, 122 Ark. 58, 182 S. v. Manz, 13 Colo. App. 493, 59 Pac.
W. 565. 213, 29 Ins. L. J. 47.
14 Continental Life Ins. Co. v. Georgia.— Neal v. Gray, 124 Ga.
Daly, 33 Kan. 601, 7 Pac. 158; 510, 52 S. E. 622, 35 Ins. L. J. 121,
Shakey v. Hawkeye Ins. Co. 44 Iowa, 123.
540; Blackerby v. Continental Ins. Missouri. — German American Ins.
Co. 83 Ky. 574, 7 Ky. L. Rep. 653, Co. v. Divilbiss, 67 Mo. App. 500.
15 Ins. L. J. 756, per the court; Phe- Nebraska.— Home Fire Ins. Co. v.
nix Ins. Co. v. Bachelder, 32 Neb. Garbacz, 48 Neb. 827, 67 N. W. 864.
490, 29 Am. St. Rep. 443, 49 N. W. Oklahoma— Shawnee Mutual Fire
217, per Norval, J. "The parties Ins. Co. v. Cannedy, 36 Okla. 733, 44
may insert what conditions they L.R.A. (N.S.) 376, 129 Pac. 865.
please in a policy, provided there be 15 Roehner v. Knickerbocker Life
nothing in them contrary to criminal Ins. Co. 63 N. Y. 160, 164, 167, per
law or public policy. This is con- Folger, J.
stantly done in marine policies, and 16 St. Paul Fire & Marine Ins. Co.
the principle extends to all other pol- v. Coleman, 6 Dak. 458, 6 L.R.A. 87,
icies." Beadle v. Chenango Mutual 43 N. W. 693.
Ins. Co. 3 Hill (N. Y.) 161, cited 17 New Zealand Ins. Co. v. Manz,
with approval in Robert v. New Eng- 13 Colo. App. 493, 59 Pac. 213, 29
land Mutual Life Ins. Co. 1 Disn. Ins. L. J. 47.
(Ohio) 355, 12 Ohio Dec. 668, s. e. 2 18 Joliffe v. Madison Mutual Ins.
Disn. (Ohio) 106. Co. 39 Wis. Ill, 20 Am. Rep. 35.
See also the following cases: 19 Robinson v. Continental Ins. Co.
California.— Palmer v. Continental 76 Mich. 641, 6 L.R.A. 95, 43 N. W.
Ins. Co. — Cal. — , 61 Pac. 784. 647.
2323
§ 1206 JOYCE ON INSURANCE
without legal notice to assured by whom the note was given is
enforceable.20
A.gain, a provision as to forfeiture for nonpayment of interest on
premium notes when due is Valid.1
§ 1206. Payment by negotiable paper: demand or notice, etc.:
forfeiture. — In a number of cases a question has been raised whether
when a note or other negotiable paper has been given for the pre-
mium a presentment and demand or notice is necessary to enable
the company to declare a forfeiture. In a Wisconsin case it is held
that if the maker of a note given for the premiums promises abso-
lutely to pay to the order of the payee a certain sum at a fixed time,
its negotiable character is not affected by the fact that it is also
agreed in such note that in case of its nonpayment at maturity the
entire premium shall be considered as earned, and the policy void
during such time as the note remains overdue and unpaid.2 The
Federal court has decided that the insurance company is bound to
present a draft at maturity where it has taken the same in payment
of a premium, and that it must not only present the bill for accept-
ance or payment, but must give the necessary legal notice on refusal
to accept or pay the same as would be required of any other holder
of commercial paper; that such bill is negotiable under the law
merchant, and entitled to protest and notice, which must be given
or excused to entitle the company to claim a forfeiture, even though
the policy and bill itself both provide that the policy shall become
void if the bill is not paid at maturity, and the policy provides that
notice need not be given to any party or parties interested therein.3
And the supreme court of the United States has declared that pre-
sentment must be made in such case, even though the drawer of the
bill has refused acceptance, and has no funds for payment, but that
20 Hutchinson v. Palmer, 147 Ala. Ins. Co. 5 Fed. 238. The charge of
517, 40 So. 339. the court in this case was affirmed in
xNettleton v. St. Louis Life Ins. s. c. 7 Fed. 169, 173 (case rev'd
Co. 7 Biss. (U. S. C. C.) 293, Fed. in Knickerbocker Life Ins. Co. v.
Cas. No. 10,128; Attorney General Pendleton, 112 U. S. 616, 28 L. ed.
v. North American Life Ins. Co. 82 866, 5 Sup. Ct. 314). The draft in
N. Y. 172. See also Knickerbocker this ease was as follows: "325 Au-
Life Ins. Co. v. Dietz, 52 Md. 16. burn, Ark., July 14, 1871. Three
But see Northwestern Mutual Life months after date, without grace, to
Tns. Co. v. Fort, 82 Ky. 269, 6 Ky. the order of the Knickerbocker Life
L. Rep. 271. Insurance Company, three hundred
8 Kirk v. Dodge County Mutual and twenty-five dollars, value re-
ins. Co. 39 Wis. 138, 20 Am. Rep. ceived, for premium on policy No.
39. See Joliffe v. Madison Mutual 2346, which policy shall become void
Tns. Co. 39 Wis. Ill, 119, 20 Am. if this draft is not paid at maturity.
Rep. 35. S. H. Pendleton, to Messrs. Green-
3 Pendleton v. Knickerbocker Life wood & Co., New Orleans, La."
2324
PREMIUM NOTES
§ 1206a
no protest is necessary for nonacceptance or nonpayment.4 In Iowa
the assured does not waive the failure to give the required notice by
applying for extension of time on a note,5 and the notice is com-
plete and the time begins to run when the letter containing the
notice is mailed according to law.6 Again, although a policy stip-
ulates that failure to pay any premium or note, or interest thereon
when due, will forfeit without notice the policy and all payments
thereon "excepting as herein provided," and it is not shown what
the exceptions are, still a forfeiture does not necessarily result where
insured is in default at the time of his death in the payment of a
note given for the premium if the note is taken under such circum-
stance as to constitute an absolute payment of said premium.7
§ 1206a. Same subject: that policy not ispo facto void for non-
payment of note. — A marine policy stipulating that it shall be void
for failure to pay the premium note within a certain time after
maturity and demand, is not rendered void ipso facto, but is void-
able at the company's option, and the insurer may elect to continue
the policy in force notwithstanding the default.8 In Missouri it is
held that mere nonpayment of the note does not ipso facto forfeit
the contract even though it provides for forfeiture on such nonpay-
4 Knickerbocker Life Ins. Co. v. 5 Boyd v. Cedar Rapids Ins. Co.
Pendleton, 112 U. S. 696, 28 L. ed. 70 Iowa, 325, 30 N. W. 585. In Iowa
866, 5 Sup. Ct. 314. See s. c. 115 U. the statute provides that when a
S. 339, 29 L. ed. 432, 6 Sup. Ct. 74. promissory note is given and accept-
The court gave plaintiff (insured) ed by a fire insurance company for
verdict; upon appeal the lower court the premium, written notice must be
decision was reversed; on rehearing, given to the insured of its maturity,
same opinion. In the case reported and that notice must be given of the
in 7 Fed. 173, the cases are distin- intention to suspend the policy, and
guished of Thompson v. Knickerbock- of the amount required to pay the
er Life Ins. Co. 2 Wood (U. S. C. C.) customary short rates: McKenna v.
547, Fed. Cas. No. 13,964; Pitt v. State Ins. Co. 73 Iowa, 453, 35 N. W.
Berkshire, 100 Mass. 500 ; Roehner v. 519 ; Laws Iowa, 1880, c. 210, sec.
Knickerbocker Life Ins. Co. 63 N. Y. 2 ; McLain's Annot. Code Iowa, p.
160; Howell v. Knickerbocker Life 299; Boyd v. Cedar Rapids Ins. Co.
Ins. Co. 44 N. Y. 276, 4 Am. Rep. 70 Iowa, 325, 30 N. W. 585. See §S
675 ; Baker v. Union Mutual Life Ins. 1 320 et seq. herein, as to notice of
Co. 43 N. Y. 283; Roberts v. New forfeiture and statutes requiring no-
England Mutual Life Ins. Co. 2 Disn. tice that premium is due and unpaid.
(Ohio) 106, s. c. 2 Big. 141, s. c. 1 6 Ross v. Hawkeye Ins. Co. 83
Big. 634. See Seamans v. North- Iowa, 586, 50 N. W. 47.
western Mutual Life Ins. Co. 3 Fed. 7 Devine v. Federal Life Ins. Co.
325; Mutual Life Ins. Co. of New 250 111. 203, 95 N. E. 174, 40 Ins. L.
York v. Young, 23 Wall. (90 U. S.) J. 1513.
85, 23 L. ed. 152; Young v. Mutual 8 Louisville Underwriters v. Pence,
Life Ins. Co. of N. Y. 2 Saw. (U. S. 93 Ky. 96, 40 Am. St. Rep. 176, 19
C. C.) 325, Fed. Cas. No. 18,168. S. W. 10, 14 Ky. L. Rep. 21.
2325
§§ 1206b, 1206c JOYCE OX INSURANCE
ment, but the insurer must declare his intent to forfeit.9 Under a
Georgia decision the policy is nol forfeited by nonpayment of the
note at its maturity notwithstanding a stipulation in said note that
such nonpayment should ipso facto, without notice, render the pol-
icy void, and even though it was also provided that payment of the
premium in advance was the consideration on which the contract
was made.10 It is also decided that failure to pay a premium note
at its maturity does not make the policy absolutely void where the
policy contains no clause for forfeiture for nonpayment of notes
given for premiums although it provides for forfeiture for non-
payment of premiums when due, the clause being introduced only
for insurer's benefit makes the contract voidable at its election.11
§ 1206b. Same subject: statutory notice. — No forfeiture can be
claimed where the statute prohibits a forfeiture unless notice is
given of the maturity of the note within a certain number of days
prior thereof and even then if the required notice is given a for-
feiture cannot be claimed for nonpayment where a copy of the note
is not attached to the policy as required by statute in cases of in-
struments affecting the validity of the policy.12 And a policy in a
mutual fire assurance association is not suspended for failure to pay
a note at maturity where the statutory requirement of notice by a
fire association that a premium is due when a note is given therefor
is not complied with.13
§ 1206c. Same subject: place of payment. — The words "place of
payment" when applied to notes in general means a place where
the holder can present the note and the maker can deposit or pro-
vide funds to meet it, and where a legal offer to pay can be made.14
And where a note for the premium is payable at a particular place
and the policy stipulates that the contract is terminated by failure
to pay any premium note or interest when due, such forfeiture pro-
vision is made operative by having the note at the designated place
at the proper time for payment, so as to enable assured to pay the
same if he desires, and his failure to do so terminates the policy
in accordance with its provisions.15 Again, where a note is made
payable in a certain city, presentation at the address which the
9 Raymond v. Metropolitan Life As premiums and statutory notice,
Ins. Co. 8(i Mo. App. 391. see §§ 1320 et seq. herein.
10 Fidelity Mutual Life Ins. Co. v. "Bradford v. Mutual Fire Ins. Co.
Goza, 13 Ga. App. 20, 78 S. E. 735. 112 Iowa, 495, 84 N. W. 693, acts
11 Mutual Life Ins. Co. v. French, 18th Gen. Assemb. c. 210, sees. 1, 2.
30 Ohio St. 240, aff'ff 2 Cin. Sup. Ct. 14Montross v. Doak, 7 Rob. (La.)
321. 13 Ohio Dec. 927. 170, 41 Am. Dec. 278. As to place
12 Robey v. State Ins. Co. 146 of payment of premium, see § 1168
Iowa, 23, 124 N. W. 775, 39 Ins. L. herein.
J. 491; Iowa Code sees. 1727, 1741. 16 Behling v. Northwestern Nation-
2326
PREMIUM NOTES § 1206c
maker appended to his signature, is sufficient, in the absence of
any change of address and notice thereof to the payee, although the
maker was on that day absent from the city.16 If the place of
payment of a note for the premium is at the company's office, and
the policy stipulates for nonliability while the note is due and un-
paid, the insurer, even though there may be a question of waiver
by the agent, may enforce such stipulation by subsequently giving
notice to insured to pay at said office, especially so where the act
claimed as a waiver is a mere voluntary agreement without con-
sideration.17 And where the brother of one who had given a note
for a life insurance premium, but who was absent from home when
it fell due, voluntarily, and not as insured's agent went to the
bank and to the office of the local agent of the insurer, with the
intention of paying the note, but found both places closed, a for-
feiture of the policy for nonpayment is not thereby prevented.18
If no place is designated in the note as that of payment, it is held
that the maker binds himself thereby to seek the payee and offer
payment, and that no demand is necessary, and that mere non-
payment is default, although the court declared that the maker
might have made the note payable at his residence.19 In a Ken-
tucky case the note was given to a foreign company. Both the
policy and note were conditional that the insurance should be void
in case of nonpayment of the note when due, although the policy
provided certain terms on which it might be revived; no place of
payment was specified in the note, and neither the policy nor ap-
plication fixed a place for payment of the premium, nor named
the person to whom it must be paid. The company had an office
in New York City and a branch office in Chicago, and it was held
that no forfeiture resulted from the failure of the plaintiff to pay
the note when due at New York or Chicago, and that he was
not obligated to seek the defendant out of. the state.20 But the
fact that there is written upon a note for the premium the words :
al Life Ins. Co. 117 AVis. 24, 93 Knickerbocker Life Ins. Co. 104 U.
N. W. 800, 32 Ins. L. J. 433. S. 252, 26 L. ed. 765.
16 Hipp v. Fidelity Mutual Life 20 Blackerby v. Continental Ins.
Ins. Co. 128 Ga. 491, 12 L.R,A.(N.S.) Co. 83 Ky. 574, 7 Ky. L. Rep. 653,
319. 57 S. E. 892. 15 Ins. L. J. 756. Where a negotiable
17 Home Ins. Co. v. Wood, 139 Ky. note was payable at a particular
657, 24 Ky. L. Rep. 1638, 72 S. W. city, but at no specified place therein,
15, 32 Ins. L. J. 420. and it provided for an additional
18 Hipp v. Fidelity Mutual Life rate of interest in case of nonpay-
Ins. Co. 128 Ga. 491, 12 L.R.A. ment at maturity, and the note was
(N.S.) 319, 57 S. E. 892. not paid because of the inability of
19 Mclntyre v. Michigan State Ins. the maker, by the exercise of reason-
Co. 52 Mich, 188, 17 N. W. 781, 13 able diligence, to ascertain where the
Ins. L. J. 216, citing Thompson v. note was kept, and he was ready to
2327
§ 1207 JOYCE ON INSURANCE
"Send to the office for collection," is held not to necessitate com-
pliance therewith by insurer but the policy is voided by nonpay-
ment of the note when due <o as to preclude recovery upon assured's
death after said due date.1 .
§ 1207. Payment by negotiable paper: cases holding no demand
or notice necessary: forfeiture —In Roehmer v. Knickerbocker
Life Insurance Company,2 the policy was conditioned that the
failure to pay any premium on the specified day when due, "failure
to pay at maturity any note (other than the annual premium note)
given for the premium, interest, or other obligation on this policy,"
should render the policy void, "without notice to any party or par-
ties interested therein." The promissory note in question was
given for a portion of the annual cash premium payable to the or-
der of the company, and was conditioned that the policy should be
void "in case this note is not paid at maturity according to contract
in said policy." The note was not paid when due, but the fol-
lowing day tiie amount of the note was tendered and refused, and
about four months thereafter the insured died. It was claimed
that there could be no forfeiture of the policy, unless the intention
so to do was. after failure to pay the premium, made known by
the company to the holder of the policy; that is, the policy became
only voidable at the option of the defendant, and not co instanti,
and that defendant was bound to demand payment of the note
before forfeiture could be enforced. The question was thereby
directly put at issue, but the court held that the policy lapsed per se
upon failure to pay the note at maturity, and that the defendant
was not required to make demand for payment of the note, and on
refusal to pay to declare the policy void. That the note and
policy should be construed together, and that it was plainly mani-
fest that it was the intention of the parties that the omission to pay
on the day stipulated should cause the policy to become void. That
it was undoubtedly the intent that if the premium were not paid
on the day specified in the policy, that the policy became void by
force of the agreement made by the parties themselves, the con-
dition being a condition precedent to the continuing life of the
contract, for the insured was bound to a strict performance, unless
the same was waived or the contract modified. It was also said
that although the note was payable to order and negotiable, its very
terms gave notice of the consideration and purpose of it, and of the
conditions attached, and that it was dependent upon the terms of
pay, it was held that he was relieved Life Ins. Co. 149 Mich. 84, 14 Det.
from the penalty. Ansel v. Olson, Leg. N. 370, 112 N. W. 704.
39 Kan. 767, 18 Pac. 939. 2 63 N. Y. 160, 4 Daly (N. Y.) 512.
1 Burnham v. Michigan Mutual
2328
PREMIUM NOTES
§ 1207
the policy, both being one continuing transaction.2* So in another
New York case it is held that if the policy provide for a forfeiture
on nonpayment of the premium, and the note is also conditioned
that all claims under the policy shall become null and void if the
note is not paid at maturity, and the note is renewed and the
second note is not paid when due, the company may insist upon a
forfeiture.2* Under a Federal supreme court decision no affirma-
tive action is necessary on the part of the insurer of I lie note is not
paid at maturity where for such nonpayment the contract stipu-
lates that the policy shall be forfeited. In this case the condition
for forfeiture was not in the policy or note but upon the back of a
premium receipt which memorandum was held a part of the con-
tract the court refused to review the state cases stating that: "We
prefer to follow our own decisions." 3 Again, in a West Virginia
2a The court, per Folger, J., fur-
ther says that: "But in this ease it
is plain that the policy provides for
a lapse of it upon mere nonpayment
of the annual premium, and for a
like lapse upon the mere failure to
pay at the maturity any note given
like this for an accrued premium;
and it is plain that the parties in-
tended that these provisions of the
policy should apply to and control
that part of the transaction between
them represented by the giving and
taking of the note, and the extension
thereby of the time for the pay-
ment of the premium. It was just
as much the case with the contract
embodied in the note as the contract
embodied in the policy, that one of
its conditions was that a mere omis-
sion to pay at maturity did not cause
the policy to be void. The taking of
such note as a means for providing
for the premium was contemplated
by the policy, and hence by the par-
ties at the inception of their relation
of insurer and insured, and there-
fore the payment of it at maturity
was a consideration precedent to the
continuance of the policy, for so are
the terms of the policy in reference
to it, and so are the terms of the
note itself." It was further said
that the defendants, on the day after
maturity of the note, did "signify
their election to avoid the policy be-
cause of nonpayment." What seems
23
to us the principal point of the case,
and one upon which it ought to turn,
was the fact that no place of pay-
ment was named, and the note was
in the possession of the defendants
at their place of business, and was
consequently payable there. The
court, however, declares in this con-
nection that it must "not be under-
stood to admit that in such a case
as this a demand would be necessary
if a place of payment other than the
office of the defendants had been
named in the note." This case is
distinguished in Pendleton v. Knick-
erbocker Life Ins. Co. 7 Fed. 169,
173, case rev'd Knickerbocker Life
Ins. Co. v. Pendleton, 112 U. S. 696,
28 L. ed. 866, 5 Sup. Ct. 114.
2b Holly v. Metropolitan Life Ins.
Co. 105 N. Y. 437, 11 N. E. 507. See
How v. Union Mutual Life Ins. Co.
80 N. Y. 32; Attorney General v.
North America Ins. Co. 80 N. Y.
152. See Baker v. Union Life Ins.
Co. 43 N. Y. (4 Hand) 283, rev'g
6 Bob. (N. Y.) 393, 37 How. Pr.
(N. Y.) 126, 6 Abb. Pr. N. S. fN.
Y.) 144. This case is distinguished
in Pendleton v. Knickerbocker Life
Ins. Co. 7 Fed. 169, 173, which is
rev'd in Knickerbocker Life Ins. Co.
v. Pendleton, 112 U. S. 696, 28' L. ed.
866, 5 Sup. Ct. 314. See Wall v.
Home Ins. Co. 36 N. Y. 157.
3 Iowa Life Ins. Co. v. Lewis, 187
29
§ 1207 JOYCE ON INSURANCE
case the policy provided that "in case any note or obligation given
tor the premium on this risk shall not be paid at maturity, such
failure of payment shall terminate this insurance, and said note
or obligation shall be considered the premium for the risk thus
terminated," and it was held that default in payment of the note
at maturity avoided the policy.4 In a Massachusetts case 5 the note
was given for a part of the premium. It was unpaid when the as-
sured died. The condition in the policy was that it should be void
for nonpayment of the premium when due, or if there should be a
failure "to pay when due any notes or other obligations given for
the premium/' and the note was similarly conditioned, the in-
surers were held discharged.6 In Kentucky notice is not necessary
where both policy and note stipulate for forfeiture for nonpay-
ment,7 nor is notice required where the policy provides that it
shall become void if any note for the premium is not paid when
due.8 In a Georgia case, however, which has been cited upon this
point, the note was given to the agent payable to his order, and was
accepted by him under an agreement that the note should be re-
turned if the application was accepted. A policy was issued and
sent to the agent, who never delivered it. The second premium
became due and was not paid, and the court declared it unnecessary
to determine the question as to the rights of the parties under the
note, but held that no recovery could be had because of nonpayment
of the second premium.9 And under another decision in that
state the policy is forfeited without notice in case of nonpayment
on or before its maturity of a note where the policy stipulates that
the contract shall be null and void and all moneys paid therein
shall be forfeited if all stipulated payments or notes are not paid
on or before due.10 In New Jersey nonpayment of a note taken to
U. S. 335, 23 Sup. Ct. 126, 47 L. Co. 7 Fed. 169, 173, which is rev'd
ed. 204, 32 Ins. L. J. 1. See also in Knickerbocker Life Ins. Co. v.
Thompson v. Knickerbocker Life Ins. Pendleton, 112 U. S. 696, 28 L. ed.
Co. 104 U. S. 252, 26 L. ed. 765. 866, 5 Sup. Ct. 314.
4 Muhlman v. National Ins. Co. 6 7 Manhattan Life Ins. Co. v. Sav-
W. Va. 508. See Mason v. Citizens' age's Admr. 23 Ky. L. Rep. 483, 63
Fire, Marine & Life Ins. Co. 10 W. S. W. 278. Compare Orient Ins. Co.
Va. 572. See Southern Life Ins. Co. v. Clark, 22 Ky. L. Rep. 1066, 59
v. Taylor, 33 Gratt. (Va.) 743, 10 S. W. 863.
Ins. L. J. 208; Continental Ins. Co. 8 Park v. Hilton, 21 Ky. L. Rep.
v. Daly, 33 Kan. 601, 7 Pac. 158. 1319, 54 S. W. 949, 30 Ins. L. J.
5 Pitt v. Berkshire Life Ins. Co. 70.
100 Mass. 500. See Shaw v. Bene- 9 Security Life Ins. & Annuity Co.
diet Life Ins. Co. 103 Mass. 254 ; v. Gober, 50 Ga. 404.
Bigelow v. State Mutual Life Ins. 10 National Life Ins. Co. of II fd.
Co. 123 Mass. 113. v. Brown, 103 Ga. 382, 29 S. K. 927.
6 This case is distinguished in Pen- See Sullivan v. Connecticut Cndem-
dleton v. Knickerbocker Life Ins. nity Co. 101 Ga. 809, 29 S. E. 43.
2330
PREMIUM NOTES
1207
extend the time of payment of the cash premium must be paid at
maturity if so expressly stipulated, or the policy becomes void at
once.11 In a case in Iowa the policy provided that nonpayment of
the note within sixty days after maturity and suit commenced for
its collection should operate as a cancellation, and that collection
of the note should not be a waiver, and it was held that in case
of default in payment and collection of the note the company was
not liable for a loss.12 So under a decision in Connecticut it ap-
peared that a note was given at three months for a half year's
premium then due, and a receipt was given by the agent "for re-
newal of the policy," and it was held that the policy was not re-
newed beyond the time of the maturity of the note, and became
void if the note was not then paid.13 And in another case both the
policy and notes given for the annual premium provided for such
forfeiture, and also wTere conditioned that notice need not be given
to any party or parties interested therein. It was held that pay-
ment at maturity was a condition precedent to the continuance
of the risk; that the company was not compelled to elect whether
or not the policy was forfeited in case of nonpayment of the notes
at maturity, or to give notice, but that the policy became void by
force of the default.14 If the policy and premium note both stipu-
Both cited and distinguished in Mc- Illinois. — Chicago Life Ins. Co. v.
Gehee v. Rinker, 9 Ga. App. 147, 70 Anderson, 80 111. 410.
S. E. 962, 40 Ins. L. J. 1202. Indiana.— New England Mutual
11 Hudson v. Knickerbocker Life Life Ins. Co. v. Hasbrouck, 32 Ind.
Ins. Co. 28 N. J. Eq. 167. 447; Majestic Life Assur. Co. v. Tut-
12 Shultz v. Hawkeye Ins. Co. 42 tie, 58 Ind. App. 98, 107 N. E. 22,
Iowa, 239; Nedrow v. Farmers' Ins. 45 Ins. L. J. 137 (case of waiver,
Co. 43 Iowa, 24; Williams v. Wash- however).
ington Life Ins. Co. 31 Iowa, 541. Kentucky. — Manhattan Life Ins.
13 Wilmot v. Charter Oak Life Ins. Co. v. Pentacost, 105 Ky. 642, 20 Ky.
Co. 46 Conn. 483. See Lewis v. L. Rep. 1442, 49 S. W. 425.
Phoenix Ins. Co. 44 Conn. 72; Bou- Missouri. — Ashbrook v. Phoenix
ton v. American Mutual Life Ins. Mutual Life Ins. Co. 94 Mo. 72;
Co. 25 Conn. 542. American Ins. Co. v. Klink, 65 Mo.
14 Thompson v. Knickerbocker Life 78.
Ins. Co. 2 Wood (U. S. C. C.) 547, Nebraska.— Antes v. State Ins. Co.
Fed. Cas. No. 13,964, 104 U. S. 61 Neb. 55, 84 N. W. 412.
252, 26 L. ed. 765. This case is New Jersey. — Catoir v. American
distinguished in Pendleton v. Knick- Life Ins. & Trust Co. 33 N. J. L. 487.
erbocker Life Ins. Co. 7 Fed. 169, Texas. — Union Central Life Ins.
173 (case rev'd Knickerbocker Life Co. v. Hughes, — Tex. Civ. App. — ,
Ins. Co. v. Pendleton, 112 U. S. 696, 70 S. W. 1010.
28 L. ed. 866, 5 Sup. Ct. 314) ; and Vermont.— Patch v. Phcenix Ins.
New York Life Ins. Co. v. Eggleston, Co. 44 Vt. 481.
96 U. S. 572, 24 L. ed. 841. England,— London & Lancashire
Examine further, as to forfeiture Life Assur. Co. v. Fleming, A^p.
without notice, the following cases: Cas. [1897] L. Rep. 499; Hutchings
2331
§ L208 JOYCE OX INSURANCE
late for forfeiture, the first for failure to pay moneys required to
be paid, and the latter for failure to pay on maturity thereof, non-
payment, on time operates as an absolute forfeiture.15 So whore
the policy and a note given for the premium both provide for for-
feiture in case of nonpayment of the note at maturity, nonpayment
avoids the policy.16 In Washington, upon nonpayment of a note
at its maturity the policy becomes null and void where it provide^
for forfeiture for nonpayment of any premium installment when
due and the premium receipt stipulates that the policy shall be-
come ipso facto null and void if a note given in payment of any
part of the premium is not paid at its maturity.17 And where the
policy becomes void by such nonpayment, accepting the money
after the loss does not make the insurers liable.18
§ 1208. Same subject: the rule. — Incases of (his character the
condition is undoubtedly inserted for the benefit of the insurer,
and it might be claimed in behalf of the policyholder that such
condition should, in conformity with the general rule, be construed
most strongly against the insurer, and that courts do not favor for-
feiture, and that the condition is a condition subsequent and not a
condition precedent, and therefore a demand and declaration of for-
feiture is necessary. But the parties are presumed to have de-
liberately determined the conditions under which they will be
bound; and another general rule is, that contracts must be per-
formed as they are made, when the conditions are valid and not
against public policy. It is competent for the parties to stipulate
in the contract that upon nonpayment of a promissory note or
paper of like character at maturity the same shall be void; such a
condition is valid and enforceable, and not against public policy nor
unreasonable, and will control. Upon breach thereof the liability
of the company will cease, according to the terms agreed upon. A
like condition in the note will, coupled with the condition in the
policy, evidence the intent of the parties at the time the note was
given to be in conformity with the intent evidenced by the policy,
and make the stipulations of the parties more definite, fixed, and
certain.19 Again, it is not necessary, as against the maker of a
v. National Life Ins. Co. 26 Cana- 18 Williams v. Albany City Ins. Co.
diaD L. T. 187. 19 Mich. 451, 2 Am. Rep. 95; Wil-
15 Laughlin v. Fidelity Mutual Life liams v. Republic Ins. Co. 19 Mich.
Ins. Co. 8 Tex. Civ. App. 448, 28 469. See American Ins. Co. v. Con-
S. W. 411. gle, 39 Mich. 536; American Ins. Co.
1G Prank v. Sun Life Ins. Co. v. Stoy, II Mich. 385, 1 N. W. 877;
(Can. S. C. 1894) 14 Can. L. T. 359. Yost v. American Ins. Co. 39 Mich.
17 lies v. Mutual Reserve Life Ins. 531.
Co. 50 Wash. 49, 18 L.R.A.(N.S.) 19 "The rule of law that all the
902, 96 Pac. 522. writings executed by the parties at
2332
PREMIUM NOTES
§ 1208
promissory note or acceptor of the bill of exchange, to either allege
or prove a demand or notice, and a sufficient demand is made in
case of payment at a particular place if the note is then and there
ready to be paid. But the payee of a bill of exchange or check must
properly make presentment and demand for acceptance upon the
drawee within a reasonable time, unless the same be payable at a
specified time, although delay in presenting a check is immaterial
unless it injures the drawer.20
Unless, therefore, there is something in the particular circum-
stance of a case to warrant a departure therefrom, or unless a stat-
ute provide otherwise,1 the rule evidenced by the undoubted weight
of authority is, that the contract ceases in such case upon defaull
according to and in the manner provided by the stipulations, and
that no demand or notice or declaration of forfeiture is necessary ;
that the company may lawfully avail itself of such stipulations as
to forfeiture, and their act in so doing is not against public policy.
But the provision for avoidance must in such case be clear and
distinct. The company may, however, waive such forfeiture, or
the time form a part of the con-
tract is recognized. The policy and
the notes must be taken as one con-
tract, and construed accordingly:"
New England Mutual Life Ins. Co.
v. Hasbrouck, 32 Ind. 447, per the
court.
20 See as to the above general prin-
ciples governing commercial paper:
Alabama. — Knott v. Venable, 42
Ala. 186.
Maine. — Dockray v. Dunn, 37 Me.
442.
Massachusetts. — Pitt v. Berkshire
Ins. Co. 100 Mass. 500; Batchellor
v. Priest, 12 Pick. (2 Mass.) 399.
Michigan. — Phoenix Ins. Co. v. Al-
len, 11 Mich. 501, 83 Am. Dec. 756;
Reeve v. Peck, 6 Mich. 240.
New York. — Syracuse Bingham-
ton & New York R. R. Co. v. Collins,
57 N. Y. 641, 3 Lans. (N. Y.) 29;
Hills v. Place, 48 N. Y. 520, 525, 8
Am. Rep. 568; Smith v. Miller, 43
N. Y. 171, 3 Am. Rep. 690; Mer-
chants' Bank v. Elderkin, 25 N. Y.
(11 Smith) 178; Wolcott v. Van-
voord, 17 Johns. (N. Y.) 248, 8 Am.
Dec. 396; Anderson v. Drake, 14
Johns. (N. Y.) 114, 7 Am. Dec. 442;
Foden v. Sharp, 4 Johns. (N. Y.)
2333
183; Kelley v. Second National Bank,
52 Barb. (N. Y.) 328; Wolff v. Mur-
ray, 2 Sand. (N. Y.) 166.
O h io — Walker v. Stetson, 19 Ohio
St. 400, 2 Am. Rep. 405.
Pennsylvania. — Peirce v. Smithers,
27 Pa. St. 249.
Vermont. — Bank of Remington v.
Raymond, 12 Vt. 401.
West Virginia. — Compton v. Gill-
man, 19 W. Va. 312, 42 Am. Rep.
776.
Wisconsin. — Kinvon v. Stanton, 44
Wis. 479, 28 Am. "Rep. 601 ; Walsh
v. Dart, 23 Wis. 334, 99 Am. Dec.
117.
See notes on place of presentment,
what is sufficient, 15 Am. Dec. 643,
644, 24 Am. Rep. 160, 161. As to
removal of maker out of state, see
note 13 Am. Dec. 346, 347. If a
draft is accepted without specifying
any place of payment, it is held suffi-
cient to present it for payment at
the place of its date. Wittkowski
v. Smith, 84 N. C. 671, 37 Am. Rep.
632.
1 See §§ 1206b, 1320 et seq., as to
nonforfeiture statutes and statutes re-
quiring notice that premium is due
and unpaid.
§§ 1208a, 1209 JOYCE ON INSURANCE
may revive the policy, or an estoppel be raised against it by the
circumstances. To avoid, however, a policy of insurance condi-
tioned on the payment of a premium note, the burden of proving
nonpayment is on the insurer.2
§ 1208a. When insurer not bound to notify assignee of maturity
of note of assignor. — Again, insurer is not bound to notify the as-
signee of the policy of the maturity of the assignor's note given
prior to the assignment for an overdue premium even though in-
surer has agreed to notify said assignee as to all premiums upon the
policy as they become due.3
§ 1209. When stipulation is that policy void or risk suspended for
nonpayment of note. — Insurance contracts of a similar character
are governed by a like rule so far as applicable. Thus, it is fre-
quently stipulated that if a note given for the premium is not
paid at its maturity, the policy shall cease and remain void while
the note is unpaid, or that the risk shall be suspended, and the
company shall not be liable for a loss occurring during such period.
The policy may also provide that if payment be thereafter made, it
shall be revived and continued in force from the time of payment.
In such case, if the note is overdue, payment must be made before
loss to warrant a recovery. A tender after loss of amount due is
not sufficient.4 And the operation of the policy is merely suspended
while notes remain overdue and unpaid where the policy so stipu-
lates and provides that in such case the entire premium shall be con-
sidered earned.6 So in Nebraska, if a fire policy stipulates that a
failure to pay the premium note when due will suspend the risk
until payment, but that it may be revived for the full balance of
the term by making full payment at any time before loss the in-
surer is not liable for a loss occurring after maturity of the note,
and after it has been partly but not fully paid,6 but under a like
stipulation if the note is not due at the time of the loss its non-
payment does not preclude a recovery.7 Under another decision in
that state default in payment of a premium note, unless there is a
waiver, suspends the insurance where the policy so stipulates.8 In
2 Hodsdon v. Guardian Life Ins. 4 Continental Ins. Co. v. Dorman,
Co. 97 Mass. 144, 93 Am. Dec. 73; 125 Ind. 189, 25 N. E. 213.
Behling v. Northwestern National 6 American Ins. Co. v. Harnbar-
Life Ins. Co. 117 Wis. 24, 93 N. W. ger, 85 Ark. 337, 108 S. W. 213.
800, 32 Ins. L. J. 433, 438. 6 Phoenix Ins. Co. v. Bachelder, 32
3 Bank of Commerce v. New York Neb. 490, 29 Am. St. Rep. 443, 49
Life Ins. Co. 125 Ga. 552, 54 S. E. N. W. 217.
643. See Goddard v. Northwestern 'Farmers' & Merchants' Ins. Co.
Mutual Fire Assoc. 85 Wash. 585, 148 v. Wiard, 59 Neb. 451, 81 N. W. 312,
Pac. 893, as to no stipulation in cer- 29 Ins. L. J. 465.
tificate of assignment. 8 Hooker v. Continental Ins. Co.
2334
PREMIUM NOTES § 1209
;in Iowa case the policy contained a like condition, and one of the
notes was not paid when due and was unpaid when the loss oc-
curred. The note in question matured February 1st. The com-
pany sent a notice February 11th that the note was due, and that
unless paid within a specified time thereafter the policy would be
canceled. Such notice was held sufficient to warrant a suspen-
sion of the policy.9 And in Illinois a stipulation in both the policy
and note will be enforced requiring the payment at maturity of a
note given for a premium on a life risk, or that otherwise the policy
will be forfeited.10 Under a Georgia decision if a life policy is
delivered to the insured upon his executing notes for the initial
premium, and it, together with the notes, provides that, if any obli-
gation given for premiums shall not be paid when due, the policy
shall be void until duly reinstated during the lifetime and good
health of the insured, it becomes void upon the failure of the in-
sured to pay one of the notes, and if he is not reinstated before his
death, no right of recovery upon it exists.11 In Michigan if a note
is overdue and unpaid at the time of the loss, and the condition
is that the company shall not be liable while any note for the
premium is past due and unpaid, no recovery can be had.12 But
on subsequent payment of the note the policy revives, and continues
in force from the date of such payment; 13 although an agreement
by the company's agent that the note may lie over for a few-
days in an agreement not to press payment and does not revive or
continue the policy.14 But nonpayment of a note for part of the
•69 Neb. 754, 96 N. W. 663. See bany City Ins. Co. 19 Mich. 451, 2
Home Fire Ins. Co. v. Garbacz, 48 Am. Rep. 95; Kirk v. Dodge County
Neb. 827, 67 N. E. 864. Compare Mutual Ins. Co. 39 Wis. 138, 20 Am.
Farmers' & Merchants' Ins. Co. v. Rep. 39; Wall v. Home Ins. Co. 36
Wiard, 59 Neb. 451, 81 N. W. 312, N. Y. 157.
29 Ins. L. J. 465. 13 Williams v. Albany City Ins. Co.
9 Morrow v. Des Moines Ins. Co. 19 Mich. 451, 2 Am. Rep. 95.
84 Iowa, 256, 51 N. W. 3, under 14 Wall v. Home Ins. Co. 36 N. Y.
Laws Mich. 1880, c. 210, requiring 157, 8 Bosw. (N. Y.) 597. See Har-
that notice be given. ley v. Council Bluffs Ins. Co. 71
10 Pulling v. Travelers' Ins. Co. 55 Iowa, 401, 32 N. W. 396 ; Garlick v.
111. App. 452, 26 Chi. .Leg. News, Mississippi Valley Ins. Co. 44 Iowa,
222. See Lenz v. German Fire Ins. 553. Under a Texas civil appeals
Co. 74 111. App. 341. decision the risk is not terminated
11 Hipp v. Fidelity Mutual Life by a default in the payment of a
Ins. Co. 128 Ga. 491, 12 L.R.A. premium note, but only suspended.
(N.S.) 319, 57 S. E. 892. there being no waiver or estoppel
12 In this case the money for the against the company, where it is stip-
premium was paid immediately after ulated that the policy shall cease
the loss, but was returned by the upon such nonpayment and that the
company: Robinson v. Continental company shall not be liable during
Ins. Co. 76 Mich. 641, 6 L.R.A. 96, such default, and this is so even
43 N. W. 647. See Williams v. Al- though there is a condition that after
2335
S§ 1210, 1211 JOYCE ON INSURANCE
first premium, made payable to the order of the agent, who re-
ported the premium paid, and the policy delivered, does not entitle
the company to deny liability on the policy which provided for its
suspension during default on any notes given for premiums, where
the agent's contract entitled him to the whole of the first premium
as his commission, and he was charged with the amount thereof
and sold the note, and the insured died after its maturity without
having paid it, after which the insurer bought it -from the agent's
indorsee.15
If the note for the premium is given by a third person and with-
out conditions its nonpayment when due does not forfeit the policy
even though the latter stipulates that it shall be void on failure
to pay any notes for premiums when due.16
§ 1210. Note for entire premium: suspension risk. — In Nebraska,
a note payable in one year from its date was given for an entire
premium on a five-year fire risk. The contract therefor, both note
and policy, stipulated for suspension of the risk during default in
payment, and for revival thereof by a subsequent payment. The
note was not paid, and in an action upon the note a recovery for
the full amount was adjudged, on the ground that the plaintiff
had a right to waive the forfeiture, and the contention of the de-
fendant that the recovery should be limited to such an amount as
equaled the customary short rate for one year's risk was not sus-
tained.17
§ 1211. When condition for forfeiture is in note only. — When the
condition as to forfeiture for nonpayment on maturity of a
note given for the premium is contained only in the note, the
mere fact that the note is not paid at maturity does not of it-
self avoid the policy. Such a provision is a condition subse-
quent, of which the company must avail itself by clear and un-
equivocal acts. It must demand payment at the proper time, and,
if no payment is made, it must declare the policy forfeited or
void.18 Thus, a note given for the balance due on a premium,
the default the company is not liable 17 Phenix Ins. Co. v. Rollins, 44
until there is a revival of the risk Neb. 745, 63 N. W. 46.
under a written consent. East Texas 18 Columbian National Life Ins. Co.
Fire Ins. Co. v. Perky, 5 Tex. Civ. v. Mulkey, 13 Ga. App. 508, 79 S. E.
App. 698, 24 S. W. 1080. 482; Arnold v. Empire Mutual An-
15 Union Life Ins. Co. v. Parker, nuitv & Life Ins. Co. 3 Ga. App. 685,
6G Neb. 395, 62 L.R.A. 390, 92 N. W. 60 S. E. 470; Murphy v. Lafayette
604. .Mutual Life Ins. Co. 167 N. Car.
16 Galvin v. Union Central Life Ins. 334, 83 S. E. 461. See also Driver
Co. 115 Ky. 547, 24 Ky. L. Rep. v. Planters' Mutual Ins. Assoc. 78
2452, 103 Am. St. Rep. 336, 74 S. W. Ark. 127, 93 S. W. 752; White v.
275. New York Life Ins. Co. 200 Mass.
2336
PREMIUM NOTES § 1211
part of which had been paid in cash, provided that "if the amount
of this note shall not be paid when due, the said policy shall be null
and void," which note was overdue and unpaid when the insured
died. The company neither demanded payment when due nor
gave notice of its intention to insist upon a forfeiture, and it was
held that the policy continued in force until the maturity of the
note, and was not forfeited by failure to then pay the same.19 In
another case a policy of life insurance contained the usual clause
of forfeiture for nonpayment of premiums. Departing from the
strict rules of the company, a duly authorized agent had allowed
the cash part of the premium to be paid one-half cash, the other
half by a short note. Upon the day the premium was due, the
agent received the check of the assured for the half cash due and
six months' note, giving the renewal receipt for a year. The note
contained the clause, "If not paid at maturity said policy is to be
null and void." Neither check nor note was paid, and it was held
that the mere fact that the note was not paid at maturity did not of
itself avoid the policy, but only gave the insurance company the
option of declaring a forfeiture. That this option must be as-
serted by clear and unequivocal acts, it was also declared that the
clause of forfeiture being inserted in the note for the benefit of the
company could be waived by failure to act, or by other circum-
stances evincing an intention not to claim the benefit of the stipu-
lation, and whether the company had exercised such option or
waived their rights was a question of fact for the jury under all
the circumstances of the case. It was further decided that the
insured was entitled to a renewal upon tendering at the proper
time the proper amount of premium due ; that this amount did not
include interest on premium notes previously given where the
policy did not provide for its forfeiture by reason of nonpayment
of such interest.20 Again, it is held that such a condition in the
note is nugatory, and the continuance of liability on the policy is
not dependent on the payment of the note at maturity where the
policy does not stipulate for forfeiture for such nonpayment.1 In
a New York case the note provided that the policy should lapse
for nonpayment at maturity. Payment was not then made, and a
510, 86 N. E. 928; Ressler v. Fidelity Lewis, 187 U. S. 335, 23 Sup. Ct.
Mutual Life Ins. Co. 110 Tenn. 411, 126, 47 L. ed. 204, 32 Ins. L. J.
75 S. W. 735. 1, where the court refused to review
19 Montgomery v. Phoenix Mutual other state decisions on the ground
Life Ins. Co. 14 Bush (77 Ky.) 51. that it was unnecessary and that:
20 Mutual Life Ins. Co. v. French, "We prefer to follow our own deci-
30 Ohio St. 240, 27 Am. Rep. 443, 2 sions."— Mr. Justice McKenna.
Cin. Sup. Ct. 321, considered and 1 Dwelling-House Ins. Co. v. Har-
explained in Iowa Life Ins. Co. v. die, 37 Kan. 674, 16 Pac. 92.
Joyce Ins. Vol. III. — 147. 2337
§ L2H JOYCE ON" INSURANCE
notice by Letter from the company's secretary was given thai the
policy was forfeited and canceled on the books: that if it was desired
to revive the same, notice should be given the company thereof at
once. This was not done, nor was the note ever paid, and whether
i he Idler was properly mailed or whether there was a waiver was
held a question for the jury.2
But under a clause in a note given for an insurance premium,
that "for any loss occurring by death after this note is due and
remains unpaid then said company shall not be liable," the policy
is not forfeited by failure to make prompt payment, but the lia-
bility of the insurer is merely suspended during the default, per-
mitting the insured by payment to restore the liability.3 And if
notes, given for an unpaid portion of a premium payable in ad-
vance, are conditioned that if not paid at maturity the policy
shall be void, and assured upon being told by the agent that one
of the notes is due and must be paid or the policy will be void
abandons the contract, no demand need be made or notice given
as to the other note, and if the premium is not paid the policy
will be forfeited.4 Again, it is decided that the payment of a
note given for a period of a certain number of calendar months
is a condition precedent to the continuance of the policy in force
for that period where the policy is not a contract for the entire
year, but one for each period of calendar months into which the
year is divided and it is stipulated in said note that the insurance
shall be void if payment is not made when the same is due.5 The
mere insertion by an agent of a life insurance company, of a pen-
cil memorandum of a number of the policy, in a blank left for
that purpose in notes in lieu of the prepayment of the cash pre-
2 It did not sufficiently appear from company, such nonpayment avoids
the evidence, however, that the letter the insurance contract without formal
was mailed as a matter of law, and notice of cancelation.- Union Central
a refusal to submit the question to Life Ins. Co. v. Chowning, 8 Tex.
the jury was declared error. An- Civ. App. 455, 456, 28 S. W. 117.
other question, however, arose in this 3 Kavanaugh v. Security Trust &
case, and that was the power of the Life Ins. Co. 117 Tenn. 33, 7 L.R.A.
secretary to waive prompt payment (N.S.) 253, 96 S. W. 499. Compare
of premiums, and the fact whether Ressler v. Fidelity Mutual Life Ins.
there was a waiver was held to be a Co. 110 Tenn. 411, 75 S. W. 735.
matter for the jury. Hastings v. 4 Manhattan Life Ins. Co. v. My-
Brooklvn Life Ins. Co. 138 N. Y. ers, 109 Kv. 372, 22 Ky. L. Rep.
473, 34 N. E. 289, 53 N. Y. St. 875, 59 S. W. 30, 30 Ins. L. J. 134.
Rep. 631, 63 Hun, 624, 44 N. Y. St. 5 Roberts v. Aetna Life Ins. Co.
Rep. 37, 17 N. Y. Supp. 333. 101 111. App. 313, affd 212 111. 382,
If a premium note is conditioned 72 N. E. 363. See also North Ameri-
(o be void for nonpayment when due, can Accident Ins. Co. v. Bowen, —
without notice being given the par- Tex. Civ. App. — , 102 S. W. 163.
ties, or other act required of the
2338
PREMIUM NOTES
§ 1212
mium, after they were signed, will not, in the absence of anj
question as to the identity of the notes, or of any fraudulent pur-
pose, prevent the forfeiture of the policy for nonpayment in accord-
ance with a stipulation contained in the notes.6
Although the contract would have become a paid-up term policy
upon default in payment still the insurance is forfeiteB upon non-
payment at maturity of a note, given in consideration of an ex-
tension of time for payment of the premium, which stipulates that
the policy, including all additions therein as for surrender or con-
tinuance as a paid-up term policy, shall without notice become
null and void if said note is not paid at maturity.7
§ 1212. When there is no condition as to forfeiture for nonpay-
ment of note. — In the absence of a stipulation in the contract for
forfeiture or suspension of the risk, or similar condition in case
of nonpayment of a note given for the cash premium when due,
payment is not a condition precedent to the validity of the policy.
and it continues in force notwithstanding the note is not paid at
maturity,8 even though the policy provides that if the premium
be not paid when due, the insurance policy shall become forfeited
and void.9 So a fire policy is not invalidated by nonpayment of
6 Hipp v. Fidelity Mutual Life Ins.
Co. 128 Ga. 491, 12 L.R,A.(N.S.)
319, 57 S. E. 892.
7 Seelev v. Union Central Life Ins.
Co. 10 Pa. Super. Ct. 270.
42 L.R.A. 261, 30 S. E. 918, 27 Ins.
L. J. 1003; McGehee v. Rinker, 9
Ga. App. 123, 70 S. E. 962, 40 Ins.
L. J. 1202.
Oklahoma. — Arkansas Ins. Co. v.
8 Franklin Life Ins. Co. v. Wal- Cox, 21 Okla. 873, 20 L.R.A.(N.S.)
lace, 93 Ind. 7; McAllister v. New 421n, 129 Am. St. Rep. 808, 93 Pac.
England Mutual Life Ins. Co. 101 552, 38 Ins. L. J. 205, 214.
Mass. 558, 3 Am. Rep. 404; Trade Washington. — Goddard v. North-
Ins. Co. v. Barracliff, 45 N. J. 543, western Mutual Fire Assoc. 85 Wash.
36 Am. Rep. 792; Michigan Mutual 585, 148 Pac. 893.
Life Ins. Co. v. Bowes, 42 Mich. 19, 9New England Mutual Life Ins.
51 N. W. 962; Shaw v. Republic Life Co. v. Hasbrouck, 32 Ind. 447; Mc-
Ins. Co. 69 N. Y. 286 ; Southern Life Allister v. New England Mutual Life
Ins. Co. v. Booker, 9 Heisk. (Tenn.) Ins. Co. 101 Mass. 558, 3 Am. Rep.
606, 24 Am. Rep. 344. And this 404. In this last case it was stipu-
eonforms to the rule stated by Emeri- lated that "the policy and any sums
gon (Emerigon on Ins. [Meredith's that shall become due thereon from
ed. 1850] c. iii. sec. 7, p. 70) who said company are pledged and hy-
says that if credit is given for the pothecated to said company, and they
premium, there being no stipulation have a lien thereon to secure pay-
for forfeiture, default in payment ment of any premium on which credit
at the time agreed does not operate^ may be given, and of any note or
as a rescission of the contract, unless security therefor." And a recovery
there be a custom at the place of was permitted in a case where notes
contract to the contrary. See also were given for a part of the pre-
the following cases: mium, and the contract did not pro-
Georgia. — Massachusetts Benefit vide for forfeiture, although when
Life Assoc, v. Robinson, 104 Ga. 256, the first instalment note became due
2339
§ 1213 JOYCE ON INSURANCE
premium notes at maturity, where no reference is made to them in
the policy, and its validity is in no way contingent upon their pay-
ment.10 So- the nonpayment of a note given in payment of the
first premium to an agent does not avoid the policy where the
agent is liable to the company for the cash premium, and the note
does not in any way refer to said premium or policy.11 In Louisi-
ana the waiver of the requirement of actual prepayment of the
premium by acceptance of notes therefor precludes the insurer,
under the rule that forfeitures are not favored from forfeiting the
policy without any notice whatever to assured, or special demand,
there being no stipulation in either the policy or note that for-
feiture is to be immediate in case of nonpayment of the note at
maturity.12 And in the absence of such a stipulation as we are
considering, if the note is extended and before maturity death
occurs, the policy is not avoided.13 But in a Kentucky case it is
held that where, as a favor to the insured, credit is extended to
him for some portion of a cash premium, the failure to pay the
note representing such portion is regarded as a failure to pay the
premium, and the policy is thereby forfeited.14
§ 1213. Subsequent parol agreement: nonpayment of note: for-
feiture.— A policy is not rendered void by the mere fact that the
note taken for the cash premium is not paid at maturity, under a
parol agreement that in such case the policy should be surrendered,
where such agreement is not referred to in either the policy or
note, and is made after the delivery of the policy to the bene-
ficiaries, and without their consent, the insurance being taken out
on the life of a father in favor of his children. If the notes are re-
the insured, upon demand for pay- 12 Lawrence v. Penn Mutual Life
ment thereof by the insurer's agent, Ins. Co. 113 La. 87, 36 So. 898, 33
had refused payment and declared Ins. L. J. 788. "Unless it be stipu-
that he had abandoned the insurance, lated in the policy, or in some way
and would have nothing more to do in the contract of insurance, that for-
with the company; it also appearing feiture is to be immediate in event
that the company had not assented the note is not paid, no such result
thereto and held the notes, and that can follow its nonpayment. The
the policy was not surrendered. See power to forfeit or cancel must be
also Lawrence v. Penn Mutual Life 'nominated in the bond.' Here no
Ins. Co. 113 La. 87, 36 So. 898, 33 such consequence was stipulated." —
Ins. L. J. 788. Breaux, C. J.
10 Arkansas Ins. Co. v. Cox, 21 13 Kansas Protective Union v.
Okla. 873, 20 L.R.A.(N.S.) 775, 129 Whitt, 36 Kan. 760, 59 Am. Rep.
Am. St. Rep. 808, 98 Pac. 552. 607, 14 Pac. 275.
11 Griffith v. New York L. Ins. Co. 14 St. Louis Mutual Life Ins. Co.
101 Cal. 627, 40 Am. St. Rep. 96, v. Grigsby, 10 Bush (73 Ky.) 310,
36 Pac. 113, 26 Ins. L. J. 212. 314.
2340
PREMIUM NOTES
§§ 1213a, 1214
tainod by the insurers, and the policy is not surrendered to them,
and no action is taken to dissolve the contract, it continues valid.15
§ 1213a. Right to loan after nonpayment of note. — An insured
is not entitled to a loan on his policy, under a provision therein for
a loan upon it, after he is in default in the payment of a premium
or premium note, where such default works a forfeiture of the policy
by its terms and conditions, unless such default is waived by the
company.16
§ 1214. Power of mutual company to take note. — A mutual com-
pany has power to take notes for a portion of the premium ; 17 but
in general their powers, as to premium, deposit, capital, advance,
or security notes, must depend largely upon the charter provi-
sions, as well as such statutes as affect the right. Thus, under a
statute which provides that in no case shall the premium note be
more than twice the amount of the cash premium, it is held that a
by-law may validly provide for a cash premium the first year, and
the giving of four notes payable annually thereafter for the pre-
mium on a five-year policy.18 So the Indiana statute of 1881 con-
15 Trager v. Louisiana Equitable
Life Ins. Co. 31 La. Ann. 235.
16 Union Central Life Ins. Co. v.
Buxer, 62 Ohio St. 385, 49 L.R.A.
737, 57 N. E. 66, 29 Ins. L. J. 519.
The policy provided that after pay-
ment of three annual premiums in-
sured might obtain loans from in-
surer graded as to amount by the
number of premiums paid, pledging
his policy as collateral security and
he alleged in his petition that he
relied upon this loan as a means of
paying his premium, that he applied
for the loan, was refused and that
the refusal caused his failure to pay
the premium note and it was held
that such effort to obtain a loan Avas
not the equivalent of payment, espe-
cially when payment was never made
or tendered.
17 See citations generally under §
341 and §§ 350 et seq. herein. What
constitutes premium note; mutual
company, see Sands v. Campbell, 31
N. Y. 345, and exam'nie Wood v. Wel-
lington, 30 N. Y. 218. As to want
of power of mutual company to dis-
pense with statutory provisions as
to deposit or premium notes, see
Gibbs v. Richmond Mutual Ins. Co.
9 Daly (N. Y.) 203.
As to deposit notes and cash pay-
ments by members of mutual tire
companies; relinquishment of liabil-
ity; loans, etc., see N. Y. Ins. L.
1909, c. 33, sec. 115, as revised from
L. N. Y. 1848, c. 205. As to capital
stock notes and deposit notes in mu-
tual lire corporations, see N. Y. Ins,
L. 1909, c. 33, see. 113, as revised
from L. 1853, sec. 13, am'd by L.
1854, c. 369. See also N. Y. Ins.
L. 1909, c. 33, sec. Ill, as revised
from L. 1853, c. 466, sec. 6, am'd
by L. 1862, c. 367, am'd L. 1S9S,
e. 147.
18 Davis v. Oshkosh Upholstery Co.
82 Wis. 488, 52 N. W. 771, under
Wis. Rev. Stats, sec. 1907. As to
premium notes in mutual fire com-
panies, see 1 Homers Annot. Stat.
Ind. 1896, sec. 3752, citing as to re-
covery of assessments on premium
notes : Downs v. Hammond, 47 Ind.
131; Manlove v. Burger, 38 Ind. 211;
Manlove v. Navlor, 38 Ind. 424; Km
bree v. Shideler, 36 Ind. 423; Whit-
man v. Meissner, 34 Ind. 487; Bo-
land v. Whitman, 33 Ind. 64; Keller
2341
§ 1214
joyck on lxsikaxce
cerning mutual fire insurance companies provides, as a condition
precedenl to receiving a policy, for the deposit of a note subject
to assessment as the directors may require, or for the payment of
a definite consideration in lieu of such note. It also provides as
to the manner of appropriation of the funds, and such notes are
only assessable to provide indemnity against^ losses by fire, and the
fund created thereby must be first exhausted for the purpose before
resort can be had to the cash funds.19 In case of a mutual company,
if its charter provides for a specific rate of premium to be paid in
cash in the same manner as in companies other than mutual ones,
the object thereof being to enable the company to issue policies
on tho mutual and noninutual plan, it may accept a note for the
premium, such note being a mere extension of the time of pay-
ment.20 But a requirement by the statute of organization that
members pay a percentage in "cash" and such other charges as
the rules and laws of the company require means current money
v. Equitable Ins. Co. 28 Ind. 170; payment of insurance: Gen. Laws
Bersch v. Sinissippi Ins. Co. 28 Ind. R. I. 1896, p. 566, c. 181, tit. 19, see.
64; Sinissippi Ins. Co. v. Taft, 26 16. Construction of statutes relating
Ind. 240; German Mutual Fire Ins. to mutual companies and premium
Co. v. Franck, 22 Ind. 364; Hubler notes: Corey v. Sherman, 96 Iowa,
v. Taylor, 20 Ind. 346. See also 2 114, 32 L.R.A. 490, 60 N. W. 232,
Burns' Ind. Rev. Stat. p. 704, sec. 64 N. W. 828; Code of Iowa, sees.
4883, citing Clark v. Manufacturers' 1058, 1146, 1150, 1160. If assess-
Co. 130 Ind. 332, and other cases, nient on deposit note not paid direc-
noted above. As to premium notes tors may sue: Rev. Stats. Me. 1883,
in mutual fire companies, mariied p. 447, sec. 29, citing York County
woman's note valid, premium reserve, Mutual Fire Ins. Co. v. Knisrht, 48
assessments on premium notes, see Me. 75, 78. Insured not liable be-
Rev. Stats. Me. 1883, p. 447, c. 49, yond amount of deposit note: Rev.
sees. 26, 27; as amended 1895, c. 95, Stats. Me. 1883, p. 447, c. 49, sec.
p. 94. See Freeman's Supp. 1885- 27.
95, p. 305, and as cited in Stats. 19 Clark v. Manufacturers' Mutual
1883; Union Ins. Co. v. Greenleaf, Fire Ins. Co. 130 Ind. 332, 30 N. E.
64 Me. 123, 128; York County Mu- 212, under Rev. Stats. Ind. 1881, sec.
tual Fire Ins. Co. v. Turner, 53 Me. 3752.
225, 226; Maine Mutual Marine Ins. 2° Currv v. Nagle, 2 Biss. (U. S.
€o. v. Neal, 50 Me. 301, 305; Maine C. C.) 244, Fed. Cas. No. 2,403, 2
Mutual Marine Ins. Co. v. Swanton, Abb. (U. S.) 156,' Fed. Cas. No.
49 Me. 448; New England Mutual 2,403. As to acceptance of draft
Fire Ins. Co. v. Butler, 34 Me. 451, and laches of company, see Pendle-
453. As to deposit notes of mutual ton v. Knickerbocker Life Ins. Co. 5
fire companies, see Supp. Pub. Stats. Fed. 238 (consent was, however, giv-
Mass. 1882-88, p. 526, c. 214, sec. 46 en to such deduction in this case.)
(Pub. Stat. 119, sees. 113-15). As s. c. 7 Fed. 169, which was rev'd in
to assessments, see sees. 47 et seq., Knickerbocker Life Ins. Co. v. Pen-
and Crocker's Notes 1891, on Pub. dleton, 112 U. S. 696, 28 L. ed. 866,
>tats. When mutual fire companies 5 Sup. Ct. 314.
<mav refuse premium notes in part
2342
PREMIUM NOTES § 1215
and not notes or other obligations where the fees are payable in
advance under the rules and by-laws.1
§ 1215. Validity of notes for premium and premium notes. —
Premium notes given for insurance are not valid if the policy for
which they are given is void; such notes are without consideration,
and no action thereon can be sustained therefor.2 And this applies
where the policy is invalid for want of insurable interest as in such
case there is no valid consideration for the note.8 So if the notes
are given for a policy which cannot be enforced in the state where
made, they are not enforceable as between the original parties in
another state.4 So where payments on instalment notes fall due
in advance, no recovery can be had on such notes by a foreign
company whose authority to do business within the state has been
revoked,5 and the consideration of notes given for the last four
annual premiums under a five years' insurance has failed, and they
cannot be collected if the company has during the first year become
insolvent and ceased to conduct its business.6 But although the
company is insolvent, if such fact is unknown by its officers or
agents at the time it issues the policy there is nevertheless a valid
consideration for a note given for the premium.7 But notes are
valid for their face in the hands of a receiver, even though the
makers took out no policies, and they are given in advance for
premiums on policies to be taken out, if they are given to encour-
age others to transact business with the company and for the pro-
tection of persons to be insured,8 and if the insurance is an illegal
one, the note given for the premium is void.9 So a note given as
a consideration for the premium on a policy issued over a month
1 State Farmers' Mutual Ins. Co. Virginia. — Ingrams v. Mutual As-
v. Moore, 4S Neb. 870, 67 N. W. 876. sur. Soc. 1 Rob. (Va.) 661.
2 United States.— Gray v. Sims, 3 3 Little v. Arkansas National Bk.
Wash. (U. S. C. C.) 276, Fed. Cas. 105 Ark. 281, 152 S. W. 281.
No. 5 729. 4Ford v. Buckeye State Ins. Co.
Kentucky— Lynn v. Burgovne, 13 6 Bush (69 Ky.) 133, 99 Am. Dec.
B. Mon. (52 Ky.) 400. 663.
Maine.— York County Mutual Fire 5 So held in American Ins. Co. v.
Ins. Co. v. Turner, 53 Me. 225. Stoy, 41 Mich. 383, 385, 1 N. W.
New Hampshire. — Haverhill Ins. 877.
Co. v. Prescott, 42 N. H. 547, 80 6 Home Ins. Co. v. Daubenspeck,
Am. Dec. 123. 115 Ind. 306, 17 N. E. 601.
New York. — Frost v. Saratoga Ins. 7 So held in Lester v. Webb, 5
Co. 5 Denio (N. Y.) 154, 49 Am. Allen (87 Mass.) 569.
Dec. 234; Miner v. Judson, 2 Lans. 8 Brown v. Crooke, 4 N. Y. 51.
(N. Y.) 300. 9 Russell v. De Grand, 15 Mass. 35.
Ohio.— Wadsworth v. Davis, 13 See Chesborough v. Wright, 41 Barb.
Ohio St. 123. (N. Y.) 28.
2343
§ 1216 JOYCE ON INSURANCE
before the company was authorized to commence business is void,10
and a note signed by one of the members with the firm name for an
insurance on his individual property is void.11 But a security note
is valid for its face, though payable to the order of the maker,
though not indorsed by him; 12 and if the policy lias attached and
is valid, it is held that the note is valid, and a note given for pre-
miums in advance as security for dealers with the company is
valid.13 But if the vessel was unseaworthy when the risk com-
menced, the note for the premium cannot be enforced,14 and it is
held that an alienation of the property which avoids the policy also
avoids the note.15 So, also, is a note given under a policy which is
void because the insured has no title to the real estate.16 But the
fact that the insurer was entitled to cancel the policy upon notice
at any time does not make the consideration for the note void,17
and the fact that the directors insured property in one class, which
should under the charter and by-laws have been insured in another
class, does not invalidate the policy, and the note is good.18 A pre-
mium note is a sufficient consideration for a policy,19 and the de-
livery of a policy and receipts is a good and sufficient consideration
for a note for the first premium.20 But if the contract was not
completed, or if the policy has never been accepted, the note is
not valid.1 And there is no consideration for a note where the
policy issued does not conform to that represented and applied
for.2 But the fact that the note was given to an agent who had
neither registered nor paid his license tax, does not invalidate the
note.3
§ 1216. Premium note given unauthorized company. — In Mas-
sachusetts, a premium note given to a foreign company for insur-
10 Williams v. Babcock, 25 Barb. 17 Irwin v. National Ins. Co. 2
(N. Y.) 109. Disn. (Ohio) 68, 1 Disn. (Ohio) 430.
11 Lime Rock Fire & Marine Ins. 18 Union Mutual Fire Ins. Co. v.
Co. v. Treat, 58 Me. 415. Keysor, 32 N. H. 313, 64 Am. Dec.
12Brouwer v. Hill, 1 Sand. (N. 375.
Y.) 629; Atlantic Ins. Co. v. Good- 19 Farmers' & Merchants' Ins. Co.
all, 35 N. H. 328, 369. v. Wiard, 59 Neb. 451, 81 N. W. 312.
13 Cruikshank v. Brouwer, 11 Baib. 20 Wadsworth v. Walsh, 12S Minn.
(N. Y.) 228. 241, 150 N. W. 870; Parker v. Simp-
14 Commonwealth Ins. Co. v. Whit- son, 56 Misc. 537, 107 N. Y. Supp.
ney, 1 Met. (42 Mass.) 21. 199.
15 Miner v. Judson, 5 N. Y. Sup. 1 Real Estate Ins. Co. v. Roessle,
Ct. 46, 2 Hun (N. Y.) 441, 2 Lans. 1 Gray (67 Mass.) 336.
(N. Y.) 300. See Hazard v. Frank- 2Pearlman v. Sutcliffe, 30 Cana-
lin Fire Ins. Co. 7 R, I. 429. dian L. T. 453, 15 O. W. R. 140.
16 Busch v. Sinissippi Ins. Co. 28 3 Lovd v. Pollitt, 144 Ga.~ 91, 86
Ind. 64. S. E. 233.
2344
PREMIUM NOTES § 1217
ance effected in the state is void if such company has not complied
with the statutory requirements whereby alone it may do business.4
§ 1217. Premium, etc., notes: generally. — We have in a prior
chapter 5 stated what constitutes the capital stock of a mutual com-
pany. The premium in such companies is usually paid partly in
• ash and partly in premium notes. If a note is given payable at
such times as the directors may require according to the charter
and by-laws, it will be presumed to be a premium or deposit note,
and no recovery can be had thereon, unless it is duly assessed.6
Sometimes, in addition to cash premiums, note- are'given annually
subject to be canceled by dividends with interest payable thereon
annually until so canceled, and the balance due, if any, to be
deducted out of the amount payable, unless the note is sooner
taken up, as is sometimes provided; 7 and a note may be given in
advance for premiums to be earned and only collectible to that
extent, in which case it is only a premium note, and not a capital
stock note ; 8 or the company may be empowered to receive notes
for advanced premiums to be written against at a compensation
not to exceed a certain per cent to be allowed.9 So a note may be
given as a deposit to constitute the absolute funds of the company
and not liable to assessment, but payable on demand by the com-
pany ; 10 or a deposit note may be received, in pursuance of the
act of incorporation and of the by-laws, in payment of assessments
therefor to be made, and also in payment of a certain amount
fixed by a per cent upon the property insured and required to be
paid into the treasury before the policy is issued ;n or a note
may be made conditional only upon the necessities of the company
and demand of its officers.12 Again, a note may in form be a pre-
mium note, but it may be alleged and proved that it was given,
accepted, and used as a capital note on the organization of the com-
pany, in which case it may be recovered in full without an assess-
4 Reliance Mutual Ins. Co. v. Saw- Life Ins. Co. 40 Iowa, 357; North-
yer, 160 Mass. 413, 36 N. E. 59, western Mutual Life Ins. Co. v. Bon-
under Stats. Mass. 1887, c. 214, sec. ner, 36 Ohio St. 51.
77. But see Connecticut River Mu- 8 Elwell v. Crocker, 4 Bosw. (N.
tual Fire Ins. Co. v. Way, 62 N. H. Y.) 22.
622. See §§ 1267, 1275 herein. 9 Chesborough v. Wright, 41 Barb.
5§§ 341, 341a herein. (N. Y.) 28.
6 Hope Ins. Co. v. Weed, 2S Conn. 10 Shawmut Mutual Fire Ins. Co.
51; Sands v. St. Johns, 36 Barb. v. Stevens, 9 Allen (91 Mass.) 332.
(N. Y.) 628; Savage v. Medbury, 19 » Rix v. Mutual Ins. Co. 20 N. II.
N. Y. (5 Smith) 32. 198.
7 Van Norman v. Northwestern Mu- 12 Howland v. Cuykendall, 40
tual Life Ins. Co. 51 Minn. 57, 52 Barb. (N. Y.) 320.
N. W. 988; Ohde v. Northwestern
2345
§ L218 JOYCE ON INSURANCE
incut.13 Tn case premium miles in advance are received as addi-
tional security to the dealers, and are to be Liable for losses after
the cash capita] and other resources are exhausted, the word "ex-
hausted" goes to the sufficiency of the other assets, and docs hot
require t lie actual collection or sale and application of said other
assets before resorting to such notes. The obligation of the makers
is to the creditors in such case, and not as sureties to the company,
and although a change in doing business by the company may
decrease the cash assets, the makers of the notes are not thereby
discharged by such wrongful acts.14 It may be a question for the
jury whether a note is a security note or one given in advance for
premiums.15 If notes are given and accepted under the com-
pany's charter in advance as security to its dealers, with interest to
he paid thereon, they are the absolute property of the company,
whether taken prior or subsequently to its organization.16 But a
note absolute upon its face may be shown to be a security for losses
upon assessments to be made for that purpose,17 and a person who
has notice of its real character cannot treat such a note as an
absolute one.18 Under Iowa statutes notes given for mutual obli-
gations by persons organized for mutual insurance under provisions
for organizing corporations in general are not within a statute pro-
viding that premium notes must on their face state that they were
given for insurance.19
§ 1218. Negotiability of notes for the premium and premium,
etc., notes. — A note given for premium on an open marine policy
is negotiable, and may be transferred like other notes. There is
no implied agreement that it shall be retained by the insurers until
due, so as then to be subject to the adjustment of losses.20 So
notes given for cash premiums generally may be negotiated if so
made as to be transferred, and parties may become bona fide holders
13 Sands v. St. Johns, 36 Barb. 18 Ball v. Shibley, 33 Barb. (N. Y.)
(N. Y.) 628. 610.
14 Osgood v. Toole, 60 N. Y. 475. 19 Corey v. Sherman, 96 Iowa, 114,
15 Merchants' Mutual Ins. Co. v. 32 L.R.A. 490, 60 N. W. 232, 64 N.
Rey, 1 Sand. (N. Y.) 184. A note W. 828; Iowa Code, sees. 1058, 1146,
given for the premium is not a de- 1160.
posit note under the Maine statute: 20 Furniss v. Gilchrist, 1 Sand. (N.
Union Ins. Co. v. Greenleaf, 64 Me. Y.) 53. And premium notes or
123, under Me. Rev. Stats, e. 49, notes in advance for premiums: ma-
sec 26. rine insurance corporations, see N.
16 Brown v. Crooke, 4 Comst. (N. Y. Ins. L. 1909, c. 33, sec. 152.
V.) 51.
17 Mutual Benefit Life Ins. Co. v.
Jarvis, 22 Conn. 133, 148.
2346
PREMIUM NOTES
§ 1218
thereof,1 and such holder for value who received the note before
it became due may recover upon the same, although given for an
advanced premium to be written against, although it is illegal as
between the parties, where he has no notice of the facts constituting
such illegality, and the statute docs not make the note void.2 If
it is evident from the provisions of the charter or act of incorpora-
tion of a mutual company, or from the terms of the contract with
its members, or from the note itself, the company having authority
to so contract, or to receive such note, that stock or advance notes
given to aid in forming a mutual company, and constituting a
part of the capital stock, are to be payable absolutely without being-
dependent upon losses and expenses, and that they may be in-
dorsed and transferred by the corporation, they will be held abso-
lutely payable and negotiable, and they are also subject to the
statute of limitations. In all such cases the purposes and objects
which it is intended to effect will be considered, having in view the
statute of incorporation or charter, and the powers which the legis-
lature has given to the corporation.3 And parties receiving such
1 Farmers' Bank of Saratoga v.
Maxwell, 32 N. Y. 579. The note in
this case was payable absolutely at
a fixed time and place.
2 Chesborough v. Wright, 41 Barb.
(N. Y.) 28. It is held in Michigan,
although not in an insurance case,
that a note may be valid in the hands
of a holder for value, although it
may be void at the common law, be-
cause of illegality in its consideration
where it is not in contravention of
any statute, and is reserved without
knowledge of the agreement on which
it is based in the ordinary course of
business before maturity : Davis v.
Seeley, 71 Mich. 209, 38 N. W. 901
(one judge dissenting) ; annotated
case, Ball v. Shibley, 33 Barb. (N.
Y.) 610. The sale of a note given
the company's agent for the premium
to a bona fide purchaser for value
renders the insurer liable therefor to
the insured, where the latter has been
compelled through a suit to satisfy
the claim of such holder, said note
having been given under an agree-
ment to return the same, should a
policv not be issued : New York Life
Ins. Co. v. Baese, (1895) — Tex. C.
C. A. — , 31 S. W. 824.
3 White v. Haight, 16 N. Y. 310.
The note in this case was payable as
follows : "I promise to pay the said
company or their treasurer, for the
time being, the sum of five hundred
dollars in such portions, and at such
time or times, as the directors of
said company may agreeably to their
act of incorporation require." De-
nio, C. J., says in this case : "I am
of opinion that the note was absolute
and payable at all events. . . .
They are to be given for premiums in
advance upon risks contracted to be
taken. They are to be considered as
capital. . . . They are to be ne-
gotiable and may therefore be in-
dorsed and transferred by the corpo-
ration at its pleasure:" Id. 321;
Brookman v. Metcalf, 32 N. Y. 591.
The note in this case was given for
premiums in advance, and thw char-
ter provided that such notes might
be negotiated : Sands v. Campbell, 31
N. Y. 345. In this case an injunction
was had restraining the receiver of
the company from collecting and re-
ceiving any moneys on the premium
notes of said company, and il was
declared that the statute of limita-
tions on such notes began to run from
234^
1219
JOYCE ON INSURANCE
notes as bona fide holders, or as collateral security, are entitled
to be protected.4 Consideration should be given in all cases by the
transferee or indorsee to such notice as the terms of the note impart,
as to the condition- upon which it is payable, aa well as to the
character of the note, and this statement applies equally to notes
given for cash premiums as to others.5 Notes which are based upon
a contingency for their payment, such as the ordinary premium or
deposit notes, are not, however, negotiable, nor subject to the statute
of limitations.6
§ 1219. When note is payable. — A note payable in such portions
and at such times as the directors may require is in effect payable
on demand, or when the directors have properly required the
payment thereof,7 although the statute under which the company
is incorporated requires capital notes to be payable at "the end of or
within/' twelve months from their date.8 But it must appear that
the time it was given, citing How-
land v. Edmonds, 24 N. Y. 307; but
that the time duriner which the in-
junction was operative should be de-
ducted; Lawrence v. McCready, 6
Bosw. (N. Y.) 329. The syllabus
in this case reads: "1. In the ab-
sence of any statute or provision in
the charter authorizing an insurance
company to receive notes in advance
of premiums to be earned by the
company, by insuring the maker, or
defining the rights and liabilities of
the parties when such note is given,
the mere fact that the makers united
with several others in giving such
notes to an insurance company upon
an understanding that the notes
should be renewed from time to time
for such amounts as should not be
earned, and that the makers should
be allowed five per cent on the amount
of premiums earned as a compensa-
tion for the advance, do not make the
makers liable to the company, so that
upon its insolvency and discontinu-
ance of its business the receiver can
collect thereon any greater sum than
the company has earned; 2. It seems
that such a note would be good and
collectible in the hands of an in-
dorsee for value:" Howland v. Meyer,
3 Const. (3 N. Y.) 290. The note
here read: ''Twelve months after
date, I promise to pay the Alliance
Mutual Insurance Company or or-
der," etc. The act under which the
company wras incorporated provided
that the company might receive notes
for premiums in advance for the bet-
ter security of its dealers, and might
"negotiate the same for the purpose
of paying claims or otherwise in the
course of its business," and it was
held that such a note might be trans-
ferred to a party who had insured in
the company on account of a claim
for loss. See also as to negotiability,
Holbrook v. Bassett, 5 Bosw. (N. Y.)
147; Raejrener v. Willard, 60 N. Y.
Supp. 478, 44 App. Div. 41.
4Brookman v. Metcalf, 32 N. Y.
591.
5 As to conditions in the latter, see
§ 1211 herein.
6 Savage v. Medbury, 19 N. Y. (5
Smith) 32; Howland v. Cuykendall,
40 Barb. (N. Y.) 320; Howland v.
Edmonds, 24 N. Y. 307; Hope Ins.
Co. v. Weed, 28 Conn. 51.
7 Hill v. Reed, 16 Barb. (N. Y.)
280; Gavtes v. Hibbard, 5 Biss. (U.
S. C. C.) 99, Fed. Cas. No. "5,287;
Nashua Fire Ins. Co. v. Moore, 55
N. II. 48.
8 Hill v. Reed, 16 Barb. (N. Y.)
280.
2348
PREMIUM .NOTES § 1219a
payment was required by the directors, and that losses and. expenses
had been incurred to warrant a recovery.9 So a deposit note con-
stituting the absolute funds of the company and payable on demand
may be enforced after such demand, nor is any assessment or
attempt to collect similar notes necessary;10 and a premium note
may become due and payable not only at maturity, but also at the
time of a loss in case it occurs prior thereto.11 So the contract may
provide that the neglect to pay an assessment when due shall ren-
der the whole of the note due and payable.12 or the contract may
be such that the company has the right, should its necessities so
require, to demand the payment in whole or in part of a note
executed for the unpaid portion of annual premiums.13 The failure
to pay one of certain renewal notes does not mature the others
even though it is agreed that upon nonpayment at maturity the
right to take action on notes or collateral is as fully preserved as
if the original notes had not been surrendered, and also that if,
upon the payee's demand, new collaterals should not be substituted
at a certain date said notes should all become due at that time.14
If an instalment note is stipulated to be payable on the "first days
each" of a stated month for several consecutive years these words
mean only one day and that is the first day in each year.16 If a per-
son has given his note in settlement of a life insurance premium,
which note, is not on its face payable, or to be negotiated at a
bank, but is in fact sent through a bank for collection, he is
entitled to the entire day of maturity in which to make payment,
without a forfeiture resulting from default in payment, and his
right to pay is not terminated at the close of banking hours.16
§ 1219a. Same subject: conflicting dates: erroneous date. — If by
the terms of the application policy and note construed together
the premium is due on a certain day but the contract is to con-
tinue in force until a later date that day will determine the time
when the lapse, if any, may take effect.17 So a policy is in force
and a recovery can be had where a loss occurs after an erroneous
date inserted by mutual mistake in an instalment note, but before
9 American Ins. Co. v. Schmidt, 19 14 Ladd v. Union Mutual Life Ins.
Iowa, 502; Warner v. Beem, 36 Iowa, Co. (U. S. C. C.) 116 Fed. S78.
385. 15 Kimbro v. Continental Ins. Co.
10Shawmut Mutual Fire Ins. Co. 101 Tenn. 245, 47 S. W. 213.
v. Stevens, 9 Allen (91 Mass.) 332. 16 Hipp v. Fidelitv Mutual Life
11 Schimp v. Cedar Rapids Ins. Co. Ins. Co. 128 Ga. 491, 12 L.R.A.
124 111. 354, 16 N. E. 229. (N.S.) 319, 57 S. E. 892.
12 Jones v. Sisson, 6 Grav (72 n Kimbro v. Continental Ins. Co.
Mass.) 288. 101 Tenn. 245, 47 S. W. 213.
13 St. Louis Mutual Life Ins. Co. As to conflicting dates: premiums:
t. Grigsby, 10 Bush (73 Kv.) 310. forfeiture, see § 1115a herein.
234!)
§ 1219b JOYCE ON [NSURANCE
the actual date of the execution of said note and prior to the date
of the expiration of the policy.18
§ 1219b. Same subject: extension of time. — The insurer may
extend the time for the paymenl of a note given for the premium,
the obligation to pay future premiums being a sufficient considera-
tion for an agreemenl made before default.19 And an agreement
for extension of lime for payment of premiums in arrears may
become operative in conformity with usage or a uniform course of
dealing or by way of estoppel.80 It is also held that if time is
extended by insurer's agent who is the owner of the note and so
informs assured there is no forfeiture for nonpayment of the note
when due, notwithstanding a policy stipulation for forfeiture, for in-
asmuch as the insurer has been paid the condition is not broken, and
even were il conceded that the agent might have taken advantage
of the stipulation he had waived his rights.1 And if the time is
extended to a certain date the failure to pay them, forfeits the policy
without further notice under a policy stipulation that it shall
cease upon nonpayment of any note for the premium.2 It is not
necessary, however, that a. contract for extension of time for pay-
ment should fix a precise date. It is sufficient if such date be fixed
with sufficient certainty so that it is not too indefinite to fix it until
corn on insured's farm is gathered and marketed.3 Again, if the
time for payment of the note is extended it operates only as an
extension of time for payment of the premium and the note is left
with a bank for collection with directions to deliver the voucher
upon taking up the note and assured dies without paying it
and there is no agreement to waive payment of the premium and
accept the note in lieu thereof, or any evidence that the note should
be deemed an actual payment there can be no recovery on the
policy.4
But if the extension is granted upon a condition precedent which
is never complied with and there is no waiver it does not preclude
a forfeiture.5 And if in request for a further extension, an exten-
18 Home Ins. Co. v. Clements, 28 teeost, 105 Kv. 642, 20 Ky. L. Rep.
Ky. L. Rep. 953, 90 S. W. 973. 1442, 49 S. W. 425.
19 Michigan Mutual Life Ins. Co. 3 Majestic Life Assur. Co. v. Tut-
v. Custer, H2S Ind. 25, 27 N. E. 124. tie, 58 Ind. App. 98, 107 N. E. 22,
As to extension of time of pay- 45 Ins. L. J. 137.
ment of premiums, see § 1109 herein. * McDonald v. Provident Savings
20 Majestic Life Assur. Co. v. Tut- Life Assur. Soe. 108 Wis. 213, 81
tie. 58 In.l. App. 98, 107 N. E. 22, Am. St. Rep. 885, 84 N. W. 154.
45 Ins. L. J. 137. B Union Central Life Ins. Co. v.
lMooneyv. Home Ins. Co. 80 Mo. Berlin, 101 Fed. G73, 41 C. C. A.
App. 192, 2 Mo. App. Repr. 522. 592, 29 Ins. L. J. 972, s. c. 90 Fed.
2 Manhattan Life Ins. Co. v. Pen- 779, 33 C. C. A. 274.
2350
PREMIUM NOTES §§ 1219c, 1219d
sion form of note is sent to insured for his signature but he fails
to execute and deliver it no contract for extension is effected,6 nor
is there any extension of time where the insurer's agent, to whom
the notes have been sent for collection, offers to extend the time but
said offer is not accepted and insured does not pay the notes or
any part thereof.7
But it is held that although an agent is authorized to extend
time on premium notes he cannot delegate his authority without
insurer's consent unless the necessities of the case or known usage
justifies the same.8
§ 1219c. Same subject: days of grace. — A provision in a policy
allowing grace where notes are given for the premium has no
application to a policy where no note is given.9 So an allowance
by the policy of days of grace with interest does not extend to a
note given for an overdue premium.10 Where a note for premiums
for two years has the effect of payment the policy will be subject
to forfeiture at the expiration of two years and the days of grace
allowed in the contract, computing the time from which the policy
went into effect.11 Again, while days of grace may under the pro-
visions of the policy apply to all premiums in regular course, still
by a special condition of the contract they may be excluded where
the second premium is paid partly in cash and the balance by a
note stipulating that it shall be paid "without grace" and that all
benefits which a full cash premium would have secured shall be
forfeited immediately upon nonpayment of the note at maturity,
except as provided otherwise in the policy, which allows days of
grace for payment of premiums.12
§ 1219d. Payment of note by mail. — If the office of insurer is
designated as the place of payment of a premium note, and a check
is mailed therefor it must be received before the loss insured against
6 Aetna Life Ins. Co. v. Ragdale's .time, see §§ 1109a, 1109b, 1110 kere-
Admr. 95 Va. 579, 29 S. E. 326, 328. in.
7 Manhattan Life Ins. Co. v. Sav- On applicability to premium notes
age's Admr. 23 Ky. L. Rep. 483, 63 of provisions in policy for days of
S. W. 278. grace for payment of premium, see
8 Home Fire Ins. Co. v. Garbacz, note in 5 B. R. C. 434.
48 Neb. 827, 67 N. W. 864. Compare 10 Bank of Commerce v. New York
as to power of agents to delegate au- Life Ins. Co. 125 Ga. 552, 54 S. E.
thority, § 396 herein. 643.
9 Ohio Farmers' Ins. Co. v. Stow- n McDougald v. New York Life
man, 16 Ind. App. 205, 44 N. E. Ins. Co. 146 Fed. 674, 77 C. C. A.
558, 940. 100.
As to payment of premiums : davs 12 Lefler v. New York Life Ins. Co.
of grace: "statutes: computation "of 143 Fed. 814, 74 C. C. A. 488.
2351
§§ L220-1221a JOYCE ON INSURANCE
occurs, where the policy provides for nonliability while such note is
in default.18
§ 1220. Validity of provisions as to liability on premium, etc.,
notes. — A mutual insurance company organized under the laws of
Indiana may validly provide that upon default after notice in pay-
ing instalments on a premium note ordered by the directors, the
whole amount of the note shall be due and collectible.14 So in
Dakota it is held that the policy may provide for liability on notes
given for quarterly premiums, although the liability of the insurer
has determined, and that such provision is not prohibited by the
statute nor against public policy, nor unreasonable.15
§ 1221. Lien on premium notes and funds.16 — A mutual insurance
company may by its charter have a lien not only on the premium
note, but also upon funds due for a loss to the extent of the amount
of said note, and to meet the liability of the insured on assess-
ments which may be levied on said premium notes; and the com-
pany does not lose its lien by paying the money into court to await
an adjustment of liabilities after a judgment against it for the loss.17
And by the terms of the contract the premium notes may be se-
cured by a lien on the policy under an authority to loan part of
the premiums thereon to the holder.18
§ 1221a. When insured liable on note for premium. — The delivery
and retention of the policy is such a valuable and sufficient con-
sideration for a note for the first premium as to make it enforce-
able against insured.19 And the approval of an application, issu-
ance of the policy and properly mailing the same, even though it
is not received before loss, binds the maker of a note for the pre-
mium and renders him liable to the payee brokers who had ad-
vanced the cash for the premium.20 So although the policy is
void for nonpayment of a note given for the first premium the
assured cannot for that reason avoid payment of the note where the
13 Continental Ins. Co. of N. Y. v. western Mutual Life Ins. Co. v. Bon-
Hargrove, 131 Ky. 837, 116 S. W. ner, 36 Ohio St. 51.
256. 19 Tapia v. Daggett, 167 Ala. 381,
Payment of promiuru bv mail, see 52 So. 834. See also Caldwell v.
§§ 1163, 1164 herein. Campbell, 4 Ga. 326. (il S. E. 290;
14 German Fire Ins. Co. v. French, Parker v. Simpson, 167 N. Y. Supp.
22 Ind. 364. 199.
15 St. Paul Fire & Marine Ins. Co. As to insufficient defenses In ac-
v. Coleman, 6 Dak. 458, 6 L.R.A. 87, tions on notes, see § 3735 herein.
43 N. W. 693. 20Van Arsdale-Osborne Broker-
16 As to lien for premiums, see §§ age Co. v. Robertson, 36 Okla. L23,
1131, 1132 herein. 128 Pac. 107, 42 Ins. L. J. 268.
17 Susquehanna Mutual Fire Ins. Insurance upon growing grain
Co.'s Appeal, 105 Pa. St. 615. against loss by hail.
18 Such was the contract in North-
2352
PREMIUM NOTES § 1221b
policy has been delivered even though he refuses to pay the note
and returns the policy.1 So the obligation of the insurer to pay
a policy less the amount of the note constitutes a sufficient con-
sideration for the note even though both policy and note provide
for forfeiture for nonpayment of the note when due.2 So insured
is liable on a note where acceptance thereof for the premium is
so far a waiver of the form of payment that the policy is no1
forfeited for nonpayment.3 If the note for the premium is pay-
able to the agent himself and he pays insurer in cash the amount
of the premium such note is given to the individual and not to
the agent or insurer and is based upon a consideration of the de-
livery of a valid policy.4
§ 1221b. When insured not liable on note for premium. — A note
cannot be enforced where the policy is never issued but there is
merely a conditional contract to insure and this is so even though
an action for damages might lie against the party repudiating such
contract.5 And a mere promise, in concluding a letter, "to pay
you or your order the first annual premium amounting to" a
specified amount is not a negotiable instrument where it is by the
terms of the letter conditional upon the policy being put in force.6
And the original payee cannot recover on a note where the promise
to issue and deliver a life policy is not absolute but is conditioned
upon the maker being an insurable risk and no offer to deliver the
policy is made, and this is so even though the maker refuses com-
pliance with the conditions and in consequence thereof his policy
is not accepted.7 Nor can there be a recovery on renewal notes based
upon a condition precedent, such as procuring a loan, which is not
performed.8 And as one applying for a particular kind of life in-
surance has a right to rely upon the agent's agreement to furnish
such kind of policy, his failure to do so will prevent enforcement
of the notes.9 So the maker of a note for the premium is not liable
thereon where he countermands his application for a new policy in
1 Manufacturers Life Ins. Co. v. Newman, 72 Misc. 52, 129 N. Y.
Rowes, 5 W. L. R. 405, 16 Man. L. R. Supp. 259.
540. 7Alligood v. Daniel & King, 12
2 Union Central Ins. Co. v. Zihl- Ga. App. 220, 76 S. E. 1083. See
man, 68 W. Va. 272, 69 S. E. 855. also Struve v. Moore, — Tex. Civ.
3 State Life Ins. Co. v. Chowning, App. — , 136 S. W. 1178.
27 Okla. 722, 113 Pac. 715. 8 Smith v. Dotterwich, 200 N. Y.
4 Rosenberg v. Johnson, 45 Colo. 299, 33 L.R.A.(N.S.) 892, 93 N. E.
53, 99 Pac. 315. 985.
5 Ten Broek v. Jansma, 161 Mich. As to contemporaneous agreements
597, 126 N. W. 710. and their breach as a defense to a
As to sufficient defenses to actions promissory note, see note in 43
on notes see § 3734 herein. L.R.A. 44!).
6 Equitable Trust Co. of N. Y. v. 9 Summers v. Alexander, 30 Okla,
Joyce Ins. Vol. TIL— 14S. 2353
§ L222 JOYCE ON INSURANCE
plan' of the old one before acceptance thereof.10 Ami a note for a
premium on a policy to be written on the Life of the wife of the
applicant for his benefit, cannot be enforced if the policy is written
for her benefil and the company refuses to be responsible for the
validity of an assignmenl to the husband which the agenl induces
the wife to indorse on the back of the policy.11 Again, notwith-
standing the insurer mighl have recovered the full amount of a uote
upon nonpayment thereof at its maturity and even though the
policy might have been revived by insured, an insistence by insurer
upon a forfeiture of the policy and insured's consent thereto pre-
clude- recovery of any part of the note.12 So although a policy is
forfeited for nonpayment of a note at maturity the insurer cannot
recover the full amount thereof where it has made its election to
settle for a proportionate part of the note for the time the insurance
was in force and insured has paid said proportion.18 Nor can any
recovery be had on notes given to insurers agent where insured.
upon discovery of the agent's fraudulent acts in inducing insurer to
issue the policy and before any benefits had been received or any
part of the contract performed had repudiated the contract, for in
such case there is no consideration for the notes.14 Nor is an instru-
ment evidencing a promise to pay based upon a valid consideration
or enforceable where the maker receives a rebate.15
§ 1222. Liability on premium, etc., notes: generally. — Owing to
the various forms of insurance contracts where premium and other
notes are given, it is impossible to formulate other than the most
general rules in relation thereto, although one or more of the fol-
lowing factors are important in determining the question. They
are: 1. The power of a mutual company to take such notes: 16
2. The validity of the note; 17 3. Its character and form, which in-
cludes its negotiability and terms of payment; 18 4. The validity of
contract provisions relating thereto ; 19 5. The construction of the
terms of the contract, including the charter and by-laws, and such
statutes as may apply, and in this connection whether the powers
198, 38 L.R.A.(N.S.) 787, 120 Pac. "Curry v. Stone, — Tex. Civ.
601. App. — , 92 S. W. 263. Examine
On retention of policy of insurance Weidenaar v. New York Life Ins.
as a waiver of mistake or fraud as Co. 36 Mont. 592, 94 Pac. 1.
to terms of policy, see notes in 67 15 Equitable Trust Co. v. Newman,
L.R.A. 705, and38L.R.A.(N.S.) 787. 72 Misc. 52, 129 N. Y. Supp. 259.
10 Planters Fire Ins. Co. v. Crock- See also Ellis v. Anderson (Pa.) 68
ett, 115 Ark. 606, 170 S. W. 1012. Le<?. Int. 380.
11 Snydor v. Boyd, 119 N. Car. 16 See § 1214 herein.
481, 37 L.R.A. 734, 26 S. E. 92. 17 See § 1215 herein.
12Skillern v. Continental 7ns. Co. 18 See S§ 1217-1219 herein.
— Term. Ch. — , 42 S. W. 180. 19 See § 1220 herein.
"Parker v. Murphy, 56 Misc. 541,
107 N. Y. Supp. 202.
2354
PREMIUM NOTES §§ 1223, 1224
of the company have been lawfully exercised in relation to such
notes from their inception until the final determination of liability
thereon ; 20 6. If the note is negotiable, the rights of bona fide hold-
ers thereof; 1 7. The effect upon the note of withdrawal of the mem-
ber; of surrender of the policy; of the loss or insolvency of either
party, and of breach of conditions generally by the parties.
§ 1223. When liability absolute on premium, etc., notes: when
not. — The distinction, however, between the liabilities of those who
give notes to form the capital stock and those whose notes are not
given until after the stock is made up and the company organized
should be remembered, since the former class are liable on their
notes, irrespective of losses, while the latter are liable only for their
pro rata share of the losses and expenses in common with others
who have given like premium notes, which are available.2 When
a firm gives the premium note in advance for the security of dealers
under the charter of a mutual insurance company, and a new firm
is formed, which succeeds to its business, and which gives a note in
renewal of the one first given, the signers of such note are liable
therefor. And where premiums have been earned against it by the
company while the note is running, the firm is not liable for such
premiums in addition to such note.8 So a note which constitutes
part of the capital stock of a company is, under the New York stat-
ute of 1849, payable absolutely when payable in such proportions
and at such times as the directors of the company, agreeably to their
charter and by-laws, may require.4 And a note may be collected in
full without assessment where it is in fact a stock note given and
used as such, although it be in form a premium note.6
§ 1224. Liability for losses prior to membership. — The terms of
the contract must determine the liability of a member on his pre-
mium note, and he is entitled to insist that such liability shall not
20 See chapters herein on construe- v. Crooke, 4 Comst. (N. Y.) 51;
tion; also cases throughout this chap- Howland v. Meyer, 3 Comst. (N. Y.)
ter. 290; Deraismes v. Merchants' Mutual
!See § 1215 herein. Ins. Co. 1 Comst. (N. Y.) 371; Em-
2 Dana v. Munro, 38 Barb. (N. Y.) met v. Reed, 8 N. Y. (4 Seld.) 312.
528, per Mullin, J. As to mutual fire, etc., companies,
3 Maine Mutual Marine Ins. Co. capital stock notes, deposit notes, re-
v. Blunt, 64 Me. 95. linquishment, loans, etc., see N. Y.
4 Hart v. Achilles, 28 Barb. (N. Ins. L. 1909, c. 33, sees. Ill, 113,
Y.) 570; White v. Haight, 16 N. Y. 115; as to marine insurance corpora-
310; citing Furness v. Gilchrist, 1 tions: restrictions as to premium
Sand. (N. Y.) 53; Brouwer v. Hill, notes, see N. Y. L. 1909, c. 33, sec.
1 Sand. (N. Y) 629; Browner v. 154.
Applebv, 1 Sand. 158; Hone v. Al- 5 Sands v. John, 36 Barb. (N. Y.)
len, 1 Sand. (N. Y) 171; Hone v. 628.
Folger, 1 Sand. (N. Y.) 177; Brown
2355
. L225 JOYCE ON [NSUBANCE
be extended beyond his contract, and in case a premium note is
given payable as the directors may require, he is nol liable in such
case for losses occurring before he became a member; G and in case
of deposit notes subjeel to a pro rata assessment on all the notes to
be determined by the directory, the responsibility to contribute to a
loss begins when the risk lias attached, and terminates when the
policy expires.7 But the terms of the contract may be such that a
note may he collected to pay losses and expenses which accrued be-
fore the maker became a member of the corporation. This was so
held where a deposit note was given to be considered the absolute
funds of the company, and assessed and collected as the directors
should deem expedient, and, in case losses should occur so as to
consume the" absolute funds of the company, then the members
should pay an additional sum not exceeding a certain proportionate
amount.8
§ 1225. When liability continues until policy surrendered and all
assessments paid. — Where the contract so provides, the maker of a
premium or deposit note may be liable to assessment thereon until
the policy is actually surrendered and payments made of all assess-
ments for losses sustained prior to such surrender, even though in-
curred subsequently thereto, and notwithstanding the policy has
become forfeited by alienation of the property.9 So it is also held
6 Koehler v. Beeber, 122 Pa. St. liable to be discharged until the pol-
291, 16 Atl. 354, 23 Wkly. Notes Cas. icy is regularly discharged on the
558. See Long Pond Mutual Fire books of the company. It remains
Ins. Co. v. Houghton, 6 Gray (72 subject to assessments till the dis-
Mass.) 77. charge of the policy, or till such
7 Planters' Ins. Co. v. Comfort, 50 notice to the officers of the company
Miss. 662. of a surrender, assignment of the
8 Nashua Fire Ins. Co. v. Moore, property, or other cause of dis-
55 N. H. 48. See Long Pond Mu- charge as would make it their duty
tual Fire Ins. Co. v. Houghton, 6 to discharge it. In the language of
Gray (72 Mass.) 77; Susquehanna Beardslev, J., in Neely v. Onondaga
Mutual Fire Ins. Co. v. Stauffer, 125 County Mutual Ins. Co. 7 Hill (X.
Pa. St. 416, 17 Atl. 471. Y.) 49, before cited, 'although the
9 In Atlantic Ins. Co. v. Goodall, plaintiff's policy became void by the
35 N. H. 328, in which the question alienation of the property, it does
was considered, the court said: "It not follow that his deposit note was
is assumed by the plaintiff that the also void. On the contrary, until
note and policy were dependent on he surrendered his policy, and paid
each other, and that the policy re- his proportion of all losses which
mained in force so long as the note accrued prior to such surrender, the
was not discharged; but such is not deposit note remained obligatory up-
our view of the case. The note was on him:'" See Neely v. Onondaga
in force until all assessments for loss- County Mutual Ins. Co. 7 Hill (N.
es incurred during the continuance of Y.) I!); Indiana Mutual Fire Ins. Co.
the policy are paid and it is regu- v. Coquillard, 2 Ind. 645; Indiana
larly discharged, and the note is not Mut. Ins. Co. v. Connor, 5 Ind. 170.
2356
PREMIUM NOTES
§ 122G
that the policy once attached is a valid consideration for the pre-
mium note, which remains in force, notwithstanding the release or
discharge of the policy, till the discharge is communicated to the
office and the assessment and dues are paid.10 So where the com-
pany was insolvent, it was held that the maker, by failing to return
the policy as worthless, was obligated to pay the note.11 So instal-
ment notes may be binding, although the policy has been forfeited,
where there is an express agreement therefor.12
§ 1226. Liability after termination of contract or surrender of
policy. — If one insured for a short time has the right to terminate
his contract, and he gives notice of his election so to do, to which
the company makes no reply, no recovery can be had on his pre-
mium notes after the policy has expired.13 So where a rescission of
the contract by the assured is not made until after the first instal-
ment of the premium note becomes due, he is liable for dues until
the rescission.14 Although a petition has been filed, yet if, before
the receiver is appointed, the maker of a premium note pays an
assessment and surrenders his policy, under an agreement with an
authorized agent of the company that such payment shall be in
full, the note is extinguished.15 But where a member withdraws
from the company and surrenders the policy, it is held that he is
Examine § 1215 herein, and the cases that the company before the fire
of Miner v. Judson, 5 N. Y. S. C. waived any right which it had ac-
46, 2 Hun (N. Y.) 441, 2 Lans. (N. quired by reason of the default in
Y.) 300; Tuckerman v. Bigler, 46 the payment of the assessment," per
Barb. (N. Y.) 395, noted therein, the court. Contra, Nelson v. Trum-
See also Crawford Co. Mutual Ins. bull Ins. Co. 19 Pa. St. 372. Pre-
Co. v. Cochran, 88 Pa. St. 230, where mium note in mutual fire company to
it was held that the levying of a be surrendered when insurance ends :
second assessment during a default Rev. Stats. Me. 1883, p. 447, c. 49,
' sec. 27; citing Leary v. Blanchard,
48 Me. 274; Brown v. Donnell, 49
Me. 425; Union Ins. Co. v. Green-
leaf, 64 Me. 128.
10 Atlantic Ins. Co. v. Goodall, 35
N. H. 328.
11 Graff v. Simmons, 58 111. 440.
12 Blackerby v. Continental Ins. Co.
653.
in the payment of a former one did
not operate as a waiver of the com-
pany's right to demand the latter,
nor did it thereby remove the dis-
abling consequences flowing from the
neglect to pay such assessments. "As
long as the assessment remained un-
paid beyond thirty days after being
duly demanded, so long the protec- 83 Ky. 574, 7 Ky. Law Rep.
tion of the policy continued suspend- See further on this subject §§ 1370-
ed An acceptance of its 1373, post, as to waiver of forfeiture
payment at any time before the fire by subsequent assessment,
would have restored its efficiency. If 13 Home Ins. Co. v. Burnett, 26 Mo.
the holder thereof was in default App. 175.
when the loss was sustained, the com- 14 American Ins. Co. v. Garrett, 71
pany was not bound to afterward ac- Iowa, 243, 32 N. W. 356.
cept payment of the assessment. 15 Sands v. Hill, 55 N. Y. 18, 42
There was, therefore, no evidence Barb. (N. Y.) 651.
2357
§§ L227 1229 JOYCE ON INSURANCE
not liable thereafter upon a note which is in effecl given as a mere
security for losses, subject to assessments therefor, and which there
was never an absolute promise to pay, although the note, represent-
ing three-quarters of the entire premium for the period, was car-
ried.18 Bui notes for the security of those concerned given in lieu
of capital stock cannot be surrendered when needed for the debts
by the trustees at the request of the makers where there is no con-
sideration, except an agreemenl by the latter to claim nothing from
the company for their use.17
§ 1227. Liability after suspension on note for entire premium. —
[f a note is given for the entire premium, the company may recover
the full amount, although the term of the policy has not expired,
and even though there is a stipulation in the policy that failure to
pay said note on maturity will operate to suspend the company's
liability.18
§ 1228. Extent of liability after part payment of note. — A mem-
ber can only be assessed for future losses to the face of the premium
note where he has partly paid the amount thereof.19
§ 1229. Liability after loss. — If the contract so provides, recovery
may be had on a premium note after loss, even though the policy
is suspended.20 So it is also held that although there has been a
total loss of the property insured by a mutual fire insurance com-
pany, yet the assured is liable for the payment of assessments made
upon his premium note for his just proportion of all losses sustained
by the corporation during the entire period mentioned in his policy
of insurance.1 But in case the note is one given in advance for
assessments for insurance, and a default occurs in payment thereof,
it is held that recovery may be had for a loss.2 So a liability may
exist upon a deposit note, although the property is destroyed and
16 In this case the charter pro- 18 McEvoy v. Nebraska & Iowa Ins.
vided for an assessment ratably upon Co. 46 Neb. 782, 65 N. W. 888.
the members to meet deficiencies 19 Davis v. Oslikosh Upholstery Co.
where the losses exceeded the funds 82 Wis. 488, 52 N. W. 771; distin-
on hand, and there was no evidence guishing Kennan v. Rundle, 81 Wis.
of such assessments. It also ap- 212, 51 N. W. 426.
peared, however, that the insured paid 20 Robinson v. German Ins. Co. 51
the company in cash very nearly the Ark. 441, 4 L.R;A. 251, 11 S. W.
full value of the risk carried before 686.
the policy was surrendered : Mutual l Swamscot Machine Co. v. Part-
Benefit Life Ins. Co. v. Jarvis, 22 ridge, 25 N. H. (5 Fost.) 369.
Conn. 133, Ellsworth, J., dissenting. On liability of members of mutual
17 Maine Mutual Marine Ins. Co. fire insurance company on premium
v. Pickering, 66 Me. 130. See Mans- note, see note in 32 L.R.A. 483.
field v. Cincinnati Ice Co. 11 Ohio 2 King v. Mutual Ins. Co. 20 N.
Dec. 617, 28 Week. L. Bull. 113. H. 198.
2358
PREMIUM NOTES §§ 1230, 1231
the loss paid.3 So where a note is payable in such portions and at
such times as may be required under the act of incorporation, and
in case of default in paying an assessment the whole note might be
collected and paid into the company's hands, and retained to meet
losses and expenses during the term of the policy, which was six
years, and the property was destroyed in two years, it was held that
the maker was liable on said note for the entire period of six years,
notwithstanding said loss, and that no liability for damages in ex-
cess of the sum limited in the policy existed in the insured.4
§ 1230. Liability incurred by default in payment of assessment. —
The contract may provide; that upon nonpayment of an assessment
on a premium note, the whole amount of the note shall thereupon
become due and payable, and such provision is enforceable in an
action on the note, and it is held to be unnecessary to declare special-
ly thereon.5 So an agreement may be enforced which provides
that nonpayment of an instalment shall operate to forfeit the poli-
cy, and the company's liability cease until payment, and the whole
note shall become due.6 If the maker becomes, under the company's
charter, liable to pay the whole amount of his premium note by
failing to pay an assessment when due, the company is entitled to
retain the note until all losses are paid, for which an assessment on
said note may be made.7 The company may also under the con-
tract be not liable for a loss occurring during the default, and yet
the note be recoverable even after such loss.8
§ 1231. Liability in case of insolvency of company. — A note for
premiums in advance given as security for dealers with the com-
pany passes to the receiver of the company on its being declared
insolvent.9 So a note given upon the formation of the company
and constituting part of its capital stock, and payable absolutely,
may upon the company's insolvency be collected by its receiver.10
But the fact that a mutual company has become insolvent and its
3 Bangs v. Seidraore, 21 N. Y. 136, the full premium shall be deemed
24 Barb. (N. Y.) 29. earned in case of nonpayment of a
4 New Hampshire Mutual Fire Ins. premium note at maturity, the corn-
Co. v. Rand, 24 N. H. 428. pany may after default demand pay-
5 Jones v. Sisson, 6 Gray (72 ment of the overdue premium with-
Mass.) 288; Bangs v. Bailey, 37 out such demand operating as a wai-
Barb. (N. Y.) 630; Limerick v. Gor- ver of the forfeiture: Laughlin v.
ham, 37 Kan. 739, 15 Pac, 909. Fidelity Mutual Life Assoc. (8 Tex.
6 Continental Ins. Co. v. Boykin, C. C. A. 448) 28 S. W. 411.
25 S. C. 323. 9 Cruikshank v. Brouwer, 11 Barb.
7 St. Louis Mutual Fire & Marine (N. Y.) 228.
Ins. Co. v. Boeekler, 19 Mo. 135. As to bankruptcy and insolvency,
8 Palmer v. Continental Life Ins. see §§ 3590 et seq. herein.
Co. 31 Mo. App. 467; Beadle v. Che- 10 White v. Haight, 16 N. Y. 310;
nango County Mutual Ins. Co. 3 Hill Hart v. Achilles, 28 Barb. (N. Y.)
(N. Y.) 16L* If it is stipulated that 576.
2359
§ 1231 JOYCE ON INSURANCE
effects have gone into the hands of a receiver will not increase the
liability of members upon their deposit notes, where the general
act of incorporation tinder which the company was formed pro-
vides that members of such organizations are only liable to pay
upon their premium notes their proper shares of the losses and
damages sustained by the members.11 Again, the insured in a
marine policy on a ship for a year is not entitled to have his pre-
mium note given up, on canceling his policy and paying pro rata
for the time expired, in the event of the insurer becoming bank-
rupt while the policy is running; 12 and the maker of a premium
note or note for the security of dealers is liable thereon, notwith-
standing the insolvency of the company before the expiration of
the policy.13 Nor is it of any consequence that the note was a
renewal note, and past due,14 since a resolution of a mutual insur-
ance company to wind up its affairs is in legal effect an assessment
of one hundred per centum on the premium notes to enable it to
meet its liabilities and divide its excess, if any.15 But where a note
w.i- given for balances unpaid on cash premiums for prior years on
a life policy, and which note included the premiums for the ensuing
year, and the company became insolvent, went into liquidation, and
notified the insured that the contract was terminated, it was held
that, an action on the note by the insurer's assignee brought after
the i\v\A^ were all paid could not be sustained.16 And where after
the tiling of the petition, but before the publication of notice and
appointment of a receiver, an assessment was paid by the maker
of a note, who surrendered his policy, the same being done in full
satisfaction and surrender of the note under an agreement therefor,
it was held that no further liability existed on said note, and the
receiver could sustain no action therefor, notwithstanding a statu-
tory provision that all transfers of choses in action and assets of a
corporation were void when made after the petition for dissolution
in payment of or as security for a debt.17 And after insolvency of
the company, and before decree, the maker of a premium note can-
11 Slmu^hnessy v. Rensselaer Ins. 14 Hone v. Allen, 1 Sand. 137,
Co 21 Barb. (N. Y.) 605. 171n. See Hone v. Ballin, 1 Sand.
12 ll.mc v. Boyd, 1 Sand. (N. Y.) (N. Y.) 181; Hone v. Folger, 1 Sand.
481. (N. Y.) 177.
13 Sterling v. Mercantile Mutual 15 Command v. North Carolina Mu-
Ins. Co. 32 Pa. St. 75, 72 Am. Doc tual Ins. Co. 1 Phill. Eq. (62 N. C.)
77::. See Hone v. Allen, 1 Sand. (N. 341, 98 Am. Dee. 89.
Y.) 137; Alliance Mutual Ins. Co. 16 Bostick v. Maxey, 5 Sneed (37
v. Swift, 10 Cush. (64 Mass.) 433; Tenn.) 173.
Deraismes v. Merchants' Mutual Ins. "Sands v. Hill, 55 N. Y. 18.
Co. 1 Comst. (N. Y.) 37. But see under 2 N. Y. Rev. Slats. 469, sec.
Farmers' & Merchants' Ins. Co. v. 71, relating to the "voluntary disso-
Smith, 63 111. 187. lutions of corporations."
2300
PREMIUM NOTES §§ 1232, 1233
not escape liability by surrendering his policy and paying a small
per cent on the notes by agreement with the officers of the com-
pany.18 The fact that the company had ceased to do business, and
has made an assignment in insolvency for its creditors, does not en-
title the makers of deposit notes to have them canceled without pay-
ing assessments for losses during the time they had the benefit of
insurance, such notes being given to cover future assessments, and
this is so although they may have been misled as to the amount
of the guaranty fund for partial protection against assessments; it
appearing that they deferred asking relief until after such insolv-
ency.19
§ 1232. Insolvency of maker of note. — If the maker of the note
becomes insolvent or bankrupt, and is discharged of his debts, the
contract between the parties is thereby terminated; it ceases to be
mutual and the insurer is released;20 and so although interest is
paid on the premium note after the maker becomes bankrupt, where
such fact is not known to the company, and they have no actual
notice of the proceedings in insolvency and the assured's discharge
until after such payment.1
§ 1233. Interest on premium notes: forfeiture. — In life insurance
the nonpayment of interest on premium notes will not work a
forfeiture unless the contract so provides.2 So where the contract
does not clearly so stipulate, and there would be no forfeiture for
nonpayment of the principal, and the company has sufficient
funds of the assured in its hands to pay the interest, the policy will
not be forfeited for nonpayment of interest on premium notes.3
But if such policy provides for the payment of interest on the pre-
mium note at a specified day, otherwise the policy shall be for-
feited, time is of the very essence of the contract, and noncompli-
ance with such condition forfeits the policy.4 And equity will not
18 Doane v. Milville Mutual Marine Interest on premium notes; when
& Fire Ins. Co. 43 N. J. Eq. 522, failure to pay forfeits paid-up pol-
11 Atl. 739, 10 Cent. L. J. 670, 17 icy, when not, see §§ 1188, 1189 here-
Ins. L. J. 393. in.
19 Corey v. Sherman, 96 Iowa, 114, 3 Northwestern Mutual Life Ins.
32 L.R.A*. 490, 514, 64 N. W. 828. Co. v. Fort's Adm'r, 82 Ky. 269, 6
20 Reynolds v. Mutual Fire Ins. Co. Ky. L. Rep. 271.
34 Md.' 280, 6 Am. Rep. 357. See 4 Knickerbocker Life Ins. Co. v.
Young v. Eagle Fire Ins. Co. 14 Dietz, 52 Md. 16; Holman v. Conti-
Grav (80 Mass.) 150, 79 Am. Dec. nental Life Ins. Co. 54 Conn. 195, 1
673. See § 3599 herein. Am. St. Rep. 97, 6 Atl. 405; Knick-
1 Reynolds v. Mutual Fire Ins. Co. erboeker Life Ins. Co. v. Harlan, 56
34 Md. 280, 6 Am. Rep. 357. Miss. 512; People v. Knickerbocker
2 Gardner v. Union Central Life Life Ins. Co. 103 N. Y. 480, 9 N. E.
Ins. Co. 5 Fed. 430. 35.
2361
§ 1234 JOYCE OX INSURANCE
relieve against such forfeiture,6 in the absence of a waiver or
estoppel. But if, where an insurance company wrongfully and
in violation of the policy demands payment of a greater per cent
of interest on outstanding premium notes than is payable thereon,
and gives notice that a less rate will not be received if tendered,
and That no other premiums will be received on the policy unless
the rate per cent demanded is paid, a subsequent nonperformance
of the conditions by the insured is excused.6 If the premium is to
be paid partly in cash and partly by notes, the interest payable
annually, such interest becomes practically a premium, which
must be promptly paid where so stipulated to prevent a forfeiture.7
And nonpayment of interest on premium notes which are in effect
loans will not operate to effect a forfeiture, notwithstanding the
policy so stipulates.8 And premiums do not comprehend loans
indorsed as such on the policy so that nonpayment of interest there-
on will constitute a forfeiture,9 and the contract may provide for
the payment of the annual premium, one-half in cash and the
other half to remain as a loan, bearing interest the same, together
with all other credits and indebtedness to be deducted from the
sum insured, and the policy is to be forfeited if the premiums and
interest on the note or credit given be not paid annually in advance.
In such case the contract will be so construed as to mean that so
much of the premium as was unpaid became a loan, bearing in-
terest so long as it was retained as such from the time the premium
became due up to the maturity of the note.10
§ 1234. Tender: premium notes. — A tender at the maturity of an
instalment on a note given for the premium made before loss is
valid where the policy does not provide for forfeiture for nonpay-
ment when due, although it does stipulate that the company shall
not be liable for a loss occurring while any note for the premium
remains due and unpaid.11 And the amount of premium due
upon tender of which the assured is entitled to a renewal does not
include interest on premium notes previously given, where there
5 Knickerbocker Life Ins. Co. v. by, 10 Bush (73 Ky.) 310. Compare
Dietz, 52 Md. 16. Anderson v. St. Louis' Mutual Life
6Phconix Mutual Life Ins. Co. v. Ins. Co. Big. L. & A. Cas. 527, 1
Hinesley, 75 Ind. 1. Flip. (U. S. C. C.) 559, Fed. Cas.
'Smith v. St. Louis Mutual Life No. 362. Contra, Patch v. Phoenix
Ins. Co. 2 Tenn. Ch. 727. See also Mutual Life Ins. Co. 44 Vt. is I.
Van Norman v. Northwestern Mutual 9 Gardner v. Union Central Life
Life Ins. Co. 51 Minn. 57, 52 N. W. Ins. Co. 5 Fed. 438.
988 10 Maclntyre v. Cotton States Life
8 Bruce v. Continental Life Ins. Co. Ins. Co. 82 Ga. 478, 9 S. E. 1121.
58 Vt. 253, 2 Atl. 710. See St. u Continental Ins. Co. v. Miller, 4
Louis Mutual Life Ins. Co. v. Grigs- Ind. App. 553, 30 N. E. 718.
2362
PREMIUM NOTES
§ 1235
is no provision in the policy that the nonpayment of said interest
shall work a forfeiture.12 And insurer's refusal to accept pay-
ment of a note on the ground that the policy had been forfeited
precludes the necessity of a subsequent tender of payment of the
premium.13 "Where insured who lias <;ivon his note to a mutual
bail insurance company, he cannot by a tender of the amount of
his note two years after his policy has been forfeited for nonpay-
ment of premiums recreate a liability on his contract.14
§ 1235. Payment of premium notes or interest thereon by divi-
dends or profits.15 — It is held that even though the policy provide
for forfeiture for nonpayment of interest on premium notes, the
fact that the contract also provides that the insured shall be en-
titled to share in the profits necessitates the application of his share
of the dividends to the payment first to the interest, in order to
prevent a forfeiture, and then to the notes,16 even though the policy
also provides that such shares shall be applied on the principal of
the notes.17 So it is held that if an endowment policy provides
for the payment of a certain proportionate sum of the amount of
the policy on default in payment of premiums, conditioned that
the premium notes are taken up or the interest paid thereon an-
12 Mutual Life Ins. Co. v. French, that such dividends should have been
30 Ohio St. 240, 27 Am. Rep. 443. declared and actually due to the pol-
13 Guetzkow v. Michigan Mutual icy-holders." See note to Girard Life
Life Ins. Co. 105 Wis. 448, 81 N. W. Ins. Annuity & Trust Co. v. Mutual
652. Life Ins. Co. 97 Pa. St. 15, 10 Ins.
As to frequency of tender of pre- L. J. 273-75, where the editor con-
miums, see § 1123 herein. eludes as follows: "While the gen-
14Nimic v. Security Mutual Hail eral doctrine laid down in the case
Ins. Co. Inc. 84 Neb. 403, 121 N. W. of the mutual life insurance company
434. above is very broad in its language,
15 See also § 1166 herein. it would seem, after all, as if it must
16 Brooks v. Phcenix Mutual Ins. be viewed in connection with the spe-
Co. 16 Blatchf. (C. C.) 182, Fed. cial facts of that case, rather than
Cas. No. 1,960, 8 Ins. L. J. 741 ; the enunciation of a general principle
Northwestern Mutual Life Ins. Co. applicable to cases where the com-
v. Fort, 82 Ky. 269, 6 Ky. L. Rep. pany had no sufficient ground for
271, Ins. L. J. Jan. 1885 ; St. Louis assuming that the assured would wish
Mutual Life Ins. Co. v. Grigsby, 10 his dividends applied in a particular
Bush (73 Ky.) 310; Smith v. St. way:" Id. 275. The Girard Life In-
Louis Mutual Life Ins. Co. 2 Tenn. surance Company's case is, however,
Ch. 727; Van Norman v. Northwest- approved as resting on solid prin-
ern Mutual Life Ins. Co. 51 Minn, ciple by the court, per Elliott, J.,
57, 52 N. W. 988, as to the doctrine in Franklin Life Ins. Co. v. Wallace,
"that a company having in its pos- 93 Ind. 7, 11.
session dividends to the credit of a 17 Northwestern Mutual Life Ins.
policy holder is bound to so apply Co. v. Fort, 82 Ky. 269, 6 Ky. L.
them as to prevent a forfeiture if Rep. 271, Ins. L. J. Jan. 1885.
it has the power; nor is it necessary
2363
§ L235 JOYCE <>\ [NSURANCE
nually in cash until the notes are canceled by the return of the
surplus, otherwise the policy will be forfeited, unless one or more
annual premiums has been paid in full, in cash, or by dividends,
such condition is binding upon the assured, and although there is
a ,1,. fault iii payment of the interest, it is obligatory to apply the
dividends in payment of the note if sufficient, and so save a forfeit-
ure. 1 1 is also decided that the amount of the interest being only
tour cents, it is too trilling to note a default in its payment.18 A
policy may be for life with the total amount of premiums payable
in a specified time with a participation in the profits. It appeared
in such a case that the annual premiums were payable in cash
and a premium note given for part, and there was a condition that
hi eh notes should be paid out of the dividends. New notes were
given on maturity of each note, including the amount due on the
old note, less the dividends, and it was held that the right to par-
ticipate in dividends continued during the natural life of the as-
sured.19 But under the New York statute the right to participate
in profits or in the distribution of surplus does not apply to tempo-
rary or paid-up insurance, or pure endowment insurance issued or
granted in exchange for lapsed or surrendered policies.20 So the
light to share in future dividends may be lost, although the pre-
mium notes are in the nature of a permanent loan to the policy-
holder, to be paid out of dividends to be declared, or by a deduction
from the policy when payable, where the policy is forfeited by the
nonpayment of annual premiums and the annual interest as stip-
ulated!1 But where the charter required the interest on the deposit
notes to be paid annually on or before a certain day, or the policy
would be suspended, and no liability for loss existed on the part of
the company while it was due and unpaid, it was held that profits
accrued on the policy should not be applied to the interest, so as to
charge the company with liability for a loss in such case, the by-
laws providing only that the profits be calculated annually and
18 Van Norman v. Northwestern plus or profits, Berryrnan v. Banker's
Mutual Life Ins. Co. 51 Minn. 57, Life Ins. Co. 102 N. Y. Supp. 695,
52 N. W. 988. See Dutcher v. Brook- 117 App. Div. 730.
lvn Ins. Co. 3 Dill. (U. S. C. C.) l Northwestern Mutual Life Ins.
87, Fed. Cas. No. 4,202. Co. v. Bonner, 36 Ohio St. 51.
19 Dutcher v. Brooklyn Ins. Co. 3 As to the rule requiring thai apph-
Dill. (I1. S. C. C.) 87, 'Fed. Cas. No. cation of dividends to keep the pol-
4,202, 2 Cent. L. J. 153, 4 Ins. L. J. icy in force being applicable to the
812. payment of interest on loans made
2°3 N. Y. Rev. Stats. (8th ed.) p. on a policy in a mutual company,
1688; N. Y. Ins. L. 1909, c. 33, sec. see Union Central Life Ins. Co. v.
83. See [d. Bee. 87. Caldwell, 68 Ark. 505, 58 S. W. 355,
Dividends only payable out of sur- 30 Ins. L. J. 41, 40.
2364
PREMIUM NOTES §§ 1235a-1237
credited to the members, but that dividends should be declared
only every ten years.2
§ 1235a. Application to unpaid notes, of amounts due for claims
for injuries: accident policy. — The insurer must apply amounts
due for claims acquired by reason of injuries to the payment of
unpaid notes so as to prevent a forfeiture where such is the stipu-
lation under an accident policy which also stipulates for the pay-
ment of four premiums in equal instalments which shall consti-
tute four separate contracts, and then each note for the premium
is to apply to the period for which given.3
§ 1236. Effect of nonpayment of note upon beneficiary. — It is
held that the fact that a policy is forfeited as stipulated by the
nonpayment of premium notes cannot be avoided by one who has
a beneficial interest in the policy, by reason alone of that circum-
stance.4 It is also decided that recovery by the beneficiary is pre-
cluded where, upon refusal of insured to pay a note for the first
premium, insurer and insured agreed that the contract and note
liability should terminate.5 But a forfeiture clause in a premium
note given by the insured, if more onerous than that in the policy
as against the interests of his wife, who is the beneficiary in the
policy in case of his death, will not avail the insurance company
as against the wife, unless she assents thereto, where the note is
given for a premium after the policy has been in force several
years.6 In another case where the annual premium note was con-
sidered as evidence of a loan, it was held that the company was
obligated to enforce the payment of the annual interest thereon,
and that the beneficiary could not be affected by the default in
payment of interest by him to whom the loan was made.7
§ 1237. Deduction of note from loss.8 — In marine insurance the
usual provision in policies is that the amount of the note given for
the premium if unpaid shall be first deducted from the loss, and
in such case the insurers will be allowed to deduct the premium
2 Mutual Fire Ins. Co. v. Miller Buxer, 62 Ohio St. 385, 49 L.R.A.
Lodge, 58 Md. 463. 737 (annotated on power of insured
3 North American Ins. Co. v. Bow- to destroy rights of beneficiary), 57
en, — Tex. Civ. App. — , 102 S. W. N. E. 66.
163. 7 St. Louis Mutual Life Ins. Co. v.
4 Continental Ins. Co. v. Daly, 33 Grigsby, 10 Bush (73 Ky.) 310. See
Kan. 601, 7 Pac. 158. Patch v. Phoenix Mutual Life Ins.
5 Our Home Life Ins. Co. v. Pea- Co. 44 Vt. 481, where the policy was
cock, — Fla. — , 70 So. 775. held forfeited under nearly the same
As to vested interest of beneficiary, facts,
see §§ 730 et seq., 741 et seq. herein. 8 See §§ 1239, 1311 herein.
As to right of assured to surrender As to set-off in actions on notes,
policy, see §§ 853 et seq. herein. see §§ 3736, 3737 herein.
6 Union Central Life Ins. Co. v.
2365
§ I23S JOYCE ON 1XSIK AM'K
note whenever liable for a Loss,8 and so whether the note be given
by the principal or his agent.10 So in other than marine policies
the stipulation frequently is that the amount due on an unpaid
premium note shall be deducted from the amounl payable, in
which case ii may be deducted." But it is held that a claim for a
partial loss is unliquidated in its nature, and cannot be the sub-
ject of set-off under the statute, and in a suil upon a marine policy
to receive a contributory share from the insurers payable to the
insured on the adjustment of the general average alter a partial
loss, it is held that promissory notes due from the insured cannot
be set off, even though the amount due on the policy has been
assented to, provided the set-on3 were permitted.12 Whenever the
right under the terms of the policy to deduct an unpaid premium
note exists, the fact that the note is long past due, or that the stat-
ute of limitations has run against it, will not prevent the exercise of
the right ; 13 and where the contract expressly provides that the com-
pany shall have the right to deduct premiums or interest, or any
notes given for the premiums, and shall not be liable only for the
excess in case of loss, such stipulation does away with the necessity
of paying annual interest-bearing premium notes given for a part
of the annual premium.14 So where annual interest-bearing pre-
mium notes were given, it was held a loan, the amount of which,
with interest due thereon, must be deducted from the amount pay-
able under the policy, even though the assured had defaulted in
payment of interest thereon.15 But in another case where the facts
were substantially the same, it was held that nonpayment of the
interest forfeited the policy.16
§ 1238. Counterclaim on note of owner of vessel insured for ben-
efit of mortgagee. — If shipowners insure the vessel for the benefit
of the mortgagee, a valid counterclaim exists in favor of the in-
surer to the extent of the amount of a premium note due it from
the owners of the vessel at the time of action brought, although it
is not on the policy sued on in said action.17
9 Livermore v. Newburyport Ins. 12 Diehl v. GenernJ Mutual Ins. Co.
Co. 2 Mass. 232; Hurlburt v. Pacific 1 Sand. (N. Y.) 257.
Ins. Co. 2 Sum. (U. S. C. C.) 471, 18 Alexander v. Continental Ins.
Fed. Cas. No. 6,019 ; Wiggin v. Amer- Co. 67 Wis. 422, 58 Am. Rep. 869,
ican Ins. Co. 18 Pick. (35 Mass.) 30 N. W. 727.
145, 158, 29 Am. Dec. 576. 14 Ohde v. Northhwestern Life Ins.
10 Hurlburt v. Pacific Ins. Co. 2 Co. 40 Iowa, 357.
Sum. (U. S. C. C.) 471, Fed. Cas. 16 St. Louis Mutual Life Ins. Co.
No. 6.919. v. Grimsby, 10 Bush (73 Ky.) 310.
11 Currier v. Continental Life Ins. 16 Patch v. Phoenix Mutual Life
Co. 31 Mo. App. 467; Van Norman Ins. Co. 44 Vt. 481.
v. Northwestern Mutual Life Ins. Co. "Murray v. Great Western Ins.
51 Minn. 57, 52 N. W. 988. Co. 72 Hun (N. Y.) 282, 55 N. Y.
2366
PRE MUM NOTES § 1239
§ 1239. Amount of recovery on premium notes. — Where premi-
ums have been paid for risks at lime of insurance, they cannot be
deducted from the premium note; 18 nor is the insured entitled to
any deduction from the premium note or assessments thereon be-
cause (he charter of the company expires before the expiration of
the policy, as this still continues in force.19 Hut the premiums
earned against the insured while a note for the security of dealers
is running should be deducted on his paying the amount of such
premiums, and he is not liable for such premiums in addition to
the amount o,f his subscription note.20 And in case of a deposit
note, it may be reduced by the amount of all previous assessments
without interest where the said note has become due by reason
of default in nonpayment of assessments.1 Such being the con-
tract, the maker of a note for the security of dealers in a mutual
company is entitled to have credited thereon not only premiums
on his own insurances, but premiums on policies of others whom
he has induced to insure, and such transaction cannot be questioned
by the company or its creditors.2 Another question is, however,
involved in such cases, since as between the immediate parties to a
note the consideration may be inquired into, and this may be only
so much of the premium as is actually earned, and the latter is the
amount actually due; therefore, whether there should be a return
premium, and the right of the insured to have such returned pre-
mium deducted from the amount of the note, are important, and it
is held that the indorser in a suit on a premium note is entitled to
have the return premium applied to its reduction.3 So the maker
of a premium note given to a mutual insurance company for the
nominal premium upon an open policy executed to cover such
risks as may be afterward indorsed thereon is liable to the company,
or to a receiver of its effects, on such note only to the amount of the
actual premiums upon risks assumed by the company and in-
dorsed on the policy.4
St. Rep. 748, aff'd without opinion, Y.) 630; Bangs v. Mcintosh, 23
147 N. Y. 711. Barb. (N. Y.) 591.
"Howard v. Hinckley & Egery 2 Emmet v. Reed, 4 Sand. (N. Y.)
Iron Co. 64 Me. 93. 229, aff'd 8 N. Y. 312.
19 Huntley v. Beecher, 30 Barb. 3 Phoenix Ins. Co. v. Fignet, 7
(N. Y.) 580. Johns. (N. Y.) 383, 384.
20 Merchants' Mutual Ins. Co. v. 4 Lawrence v. McCready, 6 Bosw
Leeds, 1 Sand. (N. Y.) 183. (19 N. Y.) 329; Elwell v. Crocker,
1 Bangs v. Bailey, 37 Barb. (N. 4 Bosw. (17 N. Y.) 22.
2367
CHAPTER XLII.
ASSESSMENTS AND DUES.
§ 1245. Assessment defined: consideration.
§ 1245a. "Assessments upon surviving members," construed.
§ 1245b. When decree is assessment and not an order for an assessment.
1245c. Whether or to what extent assessments are debts.
Assessments : generally.
Distinction between premiums and assessments.
Membership fees and dues: generally.
Validity of provisions as to assessments and dues.
Assessment premium, etc., notes: generally.
Who liable to assessments: what members.
Who liable to assessment: mortgagee: assignee.
Liability of member: generally.
Nonpayment of assessment or dues after date of accident insured
against.
§ 1255. Liability to assessments: agreement or provisions contrary to
statute.
§ 1256. Liability: prior and subsequent losses: liability after loss, for-
feiture or suspension.
§ 1256a. Same subject.
§ 1257. Members joining between loss and rendition of judgment against
company.
§ 1258. When dues payable : dues in arrears : forfeiture.
§ 1259. Assessment falling due on Sunday.
§ 1260. Assessments : suspension of member.
§ 1261. When nonpayment of dues or assessments forfeits or suspends:
self-executing provisions.
§ 1261a. Same subject.
§ 1262. Assessments paid in advance in excess of mortuary assessments.
§ 1263. No forfeiture: assessments in advance of death losses.
§ 1264. Forfeiture or suspension : when affirmative act of society necessary.
§ 1265. When member is in good standing: when not.
§ 1266. Nonpayment of assessments : when no forfeitures.
§ 1267. Assessments by unauthorized company.
§ 1268. Liability to assessments: cancelation: surrender: withdrawal.
2368
§
1278.
§
1279,
§
12S0.
§
1281.
ASSESSMENTS AND DUES
§ 1269. Right of member to withdraw and avoid liability for assessments.
§ 1270. Whether contract to pay assessments unilateral.
§ 1271. Right to deny liability for losses on policies to nonmembers.
§ 1272. Dues and assessments: effect of insolvency upon liability.
>5 1273. Assessments : receiver.
§ 127-1. What receiver may include in assessment: premium notes.
§ 1275. Assessments by trustee of unauthorized company.
§ 1 "276. Restoration to membership: reinstatement: revival.
S 1276a. Same subject: good health.
§ 1276b. Same subject : incontestable clause.
S 1276c. Same subject: when reinstatement not effected.
§ 1276d. Same subject : when new contract, when not.
§ 1277. Reinstatement by way of waiver and not as new contract: cred-
itor's rights.
To whom dues and assessments are payable.
Mode of remittance.
Tender of assessments : frequency of tender.
Assessments and dues : death before time specified for payment
expires : loss after suspension.
§ 1281a. Daj'S of grace : death within days of grace.
§ 1282. Death of member during suspension of lodge.
Death while "dues in arrears."
Payment assessment after loss.
Right to have assessment made.
No authority to receive less than the amount of assessment due.
Assessments and dues: safety fund: reserve fund.
Refusal to pay assessments: right to have fund distributed.
Application or appropriation of funds by society or lodge.
Necessity for assessment must exist.
Prescribed mode must be followed in levying assessment.
Who empowered to levy assessments.
Notice of intention to assess not necessary for directors' regular
meeting.
Power of directors to assess cannot be delegated.
When power to assess may be delegated : exceptions to rule.
Assessment by illegally elected board.
Intentional omission of members.
§ 1298. Assessments where risks are classified.
§ 1299. Assessment invalid of certificate changed to life policy with regular
premiums.
§ 1300. When assessment may be made.
§ 1301. Assessment to pay unearned premium.
§ 1302. Slight errors do not invalidate: material errors or omissions do.
§ 1303. Second assessment of note.
Joyce his. Vol. til.— 149. 2369
§
1283.
§
1284.
§
1285.
§
1286.
§
1287.
§
1288.
§
1289.
§
1290.
§
1291.
§
1292.
§
1293.
§
1294.
§
1295.
§
1296.
§
1297.
§§ L245, L245a JOYCE ON [NSUEANCE
§ L304. ALSsessment: new policy substituted for old one through fraud.
§ L305. Levying assessments: amount: inequality.
§ 1305a. Righl to increase assessments.
§ L306. Examination and allowance of claims.
§ 1307. What may be included.
•; L308. What need aol and may uoi be included.
§ 1309. Anticipated losses.
§ L310. Regularity of assessment must be affirmatively shown: allegation
and proof: evidence.
§ L311. Defenses to actions: assessments: premium notes.
§ 1312. Statute of limitations : assessments.
§ 1245. Assessment defined: consideration. — An assessment is a
sum specifically levied in mutual benefit insurances upon a fixed
and definite plan within the limit of the company's or society's
fundamental law of organization to pay losses, or losses and expenses
incurred. They are to a certain degree, substantially the equivalent
of premiums, and form the pecuniary consideration of the con-
tract; 5 that is. a promise to pay duly authorized assessments on call
is a consideration of a member's insurance benefits as a member.6
A periodica] payment of a certain sum stipulated for under a cer-
tificate is not an assessment within a statute specifying what the
uotice of an assessment shall contain.7
§ 1245a. "Assessments upon surviving members," construed. —
The words "assessments upon surviving members" means assess-
ments made after a member's death upon those members who sur-
vive him, to meet the loss caused by such death. "The word- 'surviv-
ing members,' are not . . . the antithesis of dead members. The
word 'surviving' in the insurance business is the antithesis of
'lapsed.' A surviving policy is one in which the assessments have
continued to be paid; a lapsed policy is one where the assured has
failed to pay the assessments. A surviving member is one who has
always paid up his assessments, and is still a member of the com-
5 "The ascertainment and declara- interchangeable words. They are the
tion of death losses is left to the consideration for the contract.'' Hill
members of the association, and their v. Farmers' Mutual Fire Ins. Co. 129
action in thai behalf is known as an Mich. 141, 144, 88 N. W. 392, 394.—
assessment:" Ellerbe v. Barney, 119 Grant, -I. See § 11247 herein.
Mo. 632, 041, 23 L.R.A. 42."),' 25 S. 6 Ellerbe v. Barney, 119 Mo. 632,
AV. 384, 23 Ins. L. .1. 356, per Martin, 23 L.R.A. 425, 25 S. W. 384, 23 Ins.
J. See Commonwealth v. YYctherbee, L. J. 356.
105 Mass. 149, per Grav, J.; State 7 Smith v. Bown, 75 Hun (N. Y.)
.•x rel. x. Monitor Fire Assoc. 42 231, 27 N. Y. Supp. 11, 58 N. Y.
Ohio St. 555, 565. St. Rep. 005, under Laws N. Y. 1883,
" 'Assessments' and 'premiums' are c. 175.
2370
ASSESSMENTS AND DIES §3 12451), L245c
pany; a lapsed member is one who has failed to keep up his policj
by paying the assessments. . . . The requirement of the statute
that 'all indemnities to beneficiaries shall in the main be provided
for by assessments upon all surviving members' simply means that
they shall be paid in the main by assessments upon those members
who have continued to be members of the company by keeping up
their policies and paying their assessments. These assessments the
company can lay either at stated intervals or when a member has
died." 8
But assessments paid by a member of a mutual assessment com-
pany to meet death Losses are not assets of the company.9
§ 1245b. When decree is assessment and not an order for an as-
sessment.— A decree that an "assessment shall be made" against all
policy holders, which determines the unpaid liabilities according to
their accrual by quarterly periods, and fixes the percentage of assess-
ment against every policy in force during the respective periods is
an assessment and not an order for an assessment.10
§ 1245c. Whether or to what extent assessments are debts. — The
question whether or to what extent, assessments are debts depend?
entirely upon the nature of the organization and the entire con-
tract between the parties. It cannot be asserted as an arbitrary rule
that they are debts, for they are not collectible as such in all eases,
and necessarily cannot be, owing to the various kinds of associa-
tions and forms of contracts. Numerous questions involving the
construction of such contracts most be considered and it would
seem that the most important of these are; whether payment is
optional under the terms of the contract; or whether an absolute
promise to pay arises from the benefit derived from part or entire
performance; or whether the consideration has so far failed as to
preclude a recovery.11
A mutual company may be empowered by statute to sue for un-
paid as.-essments.12 And the liability to pay, may under the con-
tract he optional with the member, in which case no action will lie
against him for the amount of the assessment, for it is not then a
debt; in such case he may of his own volition or negligence ter-
minate the contract. But a. member may so stipulate to pay assess-
ments as that upon failure to fulfill such obligation an action will
8 Mutual Benefit Life Ins. Co. v. 80 Md. 99, 44 L.R.A. 149, 73 Am.
Marye, 85 Va. 643, 645, 8 S. E. 481, St. Rep. 169, 42 Atl. !)44.
per Lacy, -I. A., case el' application 10 Swing v. Cloquet Lumber Co.
for mandamus to compel auditor to 121 Minn. 221, 141 X. W. 117.
license assessment life insurance com- n See citations under second nrv
pany, without depositing bonds; de- following note and also citations
nied". throughout this chapter.
9 Condon v. Mutual Reserve Assoc. 12 Morgan v. Hog Kaisers' Mutual
2371
§ L245e JOYCE <>\ [NSURANCE
lie againsl him to recover the same.18 So assessments by a mutual
benefit association are qoI debts recoverable by action a1 law, where
1 he right to the benefit is clcj >ci i< Umi t on <joo<1 standing in the society,
Ins. Co. 62 Neb. I Hi, 87 N. W. L45; though no express promise to pay,
('mil]). Stat. L899, e. 43, sec. 140. where certificate is made considera-
18 United States. -Russell v. tion for of paymenl although forfeit-
O'Donoghue (U. S. C. C.) L78 Fed. ed for nonpayment).
ion. 39 Ins. L. J. 1107 (not liable New Hampshire. — Provident Mu-
to receiver where no implied promise tual Relief Assoc, v. Pelissier, 69 X.
to pay, and nol liable where contract II. (506, 45 Ail. 652, 29 Ins. L. J.
expressly excludes personal liability 350 (society entitled to recover as-
even though there is an implied sessments made during membership) ;
promise to pay. Case considered Farmers' Mutual Fire Ins. Co. v.
fully under § 1272 herein, as to in- Chase, 56 N. H. 341.
solvency); Korn v. Mutual Assur- New Turk. McDonald v. Boss
ance Sue. li Cranch (10 U. S.) 192, Lewin, 2!) llun (N. Y.) 87 (per the
3 L. ed. 195 (liable for assessment court); Globe Mutual Benefit Assoc.,
when forfeiture is consequence of Tn re, 17 N. Y. Supp. 852, 63 Hun,
insured's own neglect to conform to 263.
rule as to revaluation) ; Protection Ohio. — State v. Monitor Fire
Life Ins. Co. In re, 9 Biss. (U. S. Assoc. 42 Ohio St. 555.
C. C.) 188, Fed. Cas. No. 1,444. South Carolina— Palmetto Lodge
Illinois.— Lehman v. Clark, 174 111. v. Fleming, 2 Strob. (S. Car.) 457,
279, 43 L.R.A. 648, 51 N. E. 222 49 Am. Dec. 604 (action lies for
(action for assessments does not lie recovery of dues accruing after sus-
-where contract provides only for for- pension).
feiture of interest in case of non- Vermont. — Baker v. Spaulding, 71
payment). Vt. 169, 42 Atl. 982 (assessment en-
Indiana. — Gibson v. Megrew, 154 forceable, principal point lex loci).
Ind. 273, 48 L.R.A. 362, 56 N. E. West Virginia.— Swing v. Bentley
674 (member cannot be compelled to & Gerwig Furniture Co. 45 W. Va.
pay where contract does not provide 283, 31 S. E. 925 (conditions prece-
therefor or for nonpayment, except dent to recovery on a quasi ex parte
for forfeiture) ; Clark v. Schrmey- assessment on a premium note must
er, 23 Ind. App. 565, 55 N. E. 785, be fully satisfied).
29 Ins. L. J. 47/ (receiver cannot Wisconsin. — Fulton (assignee Wis-
enforce payments). consin Odd Fellows Mutual Life Ins.
Kentucky. — Ancient Order United Co.) v. Stevens, 99 Wis. 307, 74 N.
Workmen v. Moore, 1 Ky. L. Bep. W. 803 (assignee of company can re-
93, 0 Ins. L. J. 539. cover for all assessments before mem-
Michiaan. — Tolford v. Church, 66 bership ceased by failure to pay, but
Mich. 431, 33 N. W. 913. not for those levied thereafter).
Minnesota. — Langworthy v. C. C. England. — Supreme Legion Select
Washburn Flouring Mills Co. 77 Knights of Canada, In re, 19 Cana-
Minn. 256. 79 N. W. 974 (assessment dian L. T. 316 (no implied contract
or notes collectible when member has to pay dues or assessments and no
had benefit of insurance). action lies therefor).
Mississi />/>/. Planters' Ins. Co. v. As to actions for assessments, pre-
Comfort, 50 Miss. 662. miunis, etc., notes, see § 3487 here-
Missouri. — Ellerbe v. Barney, 119 in.
Mo. 632, 23 L.B.A. 135, 25 S. W. Whether premium a debt, see §
484 (member personally liable, even 1098 herein.
2372
ASSESSMENTS AND DUES § 1246
H
and good standing depends on the payment of assessments which
are always made in advance, and not to meet accrued obligations.14
And assessments to become due a foreign mutual insurance com-
pany from policy holders residing within the state, and which by
the terms of the contract arc merely voluntary and when collected
are impressed with a trust in favor of other policy holders, arc not,
when due, debts or choses in action enforceable by suit, at least not
sufficiently so as to justify the appointment of a receiver at the in-
stance of a domestic creditor.15 So under an Illinois decision the
assessment is not a debt and the only right of the association or
company is to declare a forfeiture for nonpayment; it has no right
to recover the assessment in a suit otherwise the member would be
indefinitely liable.16
§ 1246. Assessments: generally. — The plan of organization of
mutual insurance companies or societies may, and does necessarily,
affect the character of the assessment as well as its amount. Such
plan may provide that the members shall receive no money as pro-
fits or dividends, or that the money collected shall be applied only
to the payment of death benefits; or it may provide a guaranty fund
or reserve fund for the payment of losses. The society may agree
to levy an assessment of a certain sum upon each member to pay a
death claim, or to pay a certain sum upon death, or as many dollars
as there are members or as are collected, or the charter may only
authorize an assessment to pay losses, or the company may be vested
with a discretion to hold the reserve fund and levy an assessment for
losses, or to use part or all of such fund therefor.17 And there may
14 I/Union St. Jean Baptiste v. Indiana.— Bersoh v. Sinissippi Ins.
Ostiguy, 25 R. I. 478, 64 L.R.A. 158, Co. 82 Ind. 64.
105 Am. St. Rep. 899, 56 Atl. 681. Kansas.— State v. Bankers' & Mer-
15 Blackwell v. Mutual Reserve chants' Mutual Benefit Assn. 23 Kan.
Fund Life Assoc. 141 N. Car. 117, 499.
5 L.R.A. (N.S.) 771 (annotated on Massachusetts.— Crossman v. Mas-
right to have receiver appointed to saohuettts Benevolent Assoc. 143
take charge of claims not legally or Mass. 435, 9 N. E. 753.
equitably enforceable), 115 Am. St. Missouri.— Craig v. Western Life
Rep. 67*7, 53 S. E. 833. Compare Ins. Co. 136 Mo. App. 5, 116 S. W.
Calkins v. Angell, 123 Mich. 77, 81 1013.
N. W. 977. Ohio. — State v. Monitor Fire
^ Lehman v. Clark, 174 111. 279, Assoc. 42 Ohio St. 555.
43 L.R.A. 648, 51 N. E. 222, 27 Ins. New York.— Wadsworth v. Jewel -
L .7 745, rev'g 71 111. App. 366. ers' & Tradesmen's Co. 132 N. Y.
17 See: United States.— Union Ins. 540, 29 N. E. 1104; Mygatt v. New
Co. v. Hoge, 21 How. (62 U. S.) York Protection Ins. Co. 21 N. Y.
35, 16 L. ed. 61. 52, 19 How. Prac. 61; Thomas v.
/California.— Solidarite Mutual Whallon, 3; Barb. (N. Y.) 172.
Beneficial Assoc, In re, 68 Cal. 392. Pennsylvania.— Rosenberger v.
2373
L247 JOYCE ON [NSURANCE
be no express promise in the contracl to pay iassessments.18 Again,
there are other plan- which have been noted heretofore,19 so that it
is clearly apparenl thai the amounts and times of payments of as-
sessments musl vary, in that they must depend largely upon the
particular plan or scheme contemplated by the fundamental law of
the company or society, and they arc in fact a mutual contribution
for the purpose specified in the fundamental law.
§ 1247. Distinction between premiums and assessments. — A dis-
tinction has been made between a premium and assessment. Thus,
,in annual deposil of a definite sum in lien of an assessment, based
upon the mortality tattles, the certificate being subjeel to forfeiture
Unless said amount he paid in advance each year, and which sum is
ascertained without reference to assessments for actual losses and ex-
penses during the year, is declared to he a, premium or price for
assuming the risk, and not an assessment to pay losses and expense-;
as they may arise. And a by-law of a society which provides for
such annual deposit instead of an assessment for which the charter
only provides, and which is to he made specifically in accordance
therewith, is held ultra vires and void.20 Again, where the certifi-
cate of a co-operative assessment insurance company, in conformity
with the by-laws, provides for the payment of a specified sum, and
a further bimonthly payment of a certain sum, such periodical
sum is not an assessment, even though so denominated, but is to
all intents and purposes a bimonthly premium, subject to no change
of amount or date of payment during the continuance of the mem-
bership, and is unaffected by death losses, or other vicissitudes of
business, but is a certain sum which the defendant has contracted
to pay on the issuance of the certificate, and is not within the pur-
view of a statute requiring what the notice of an assessment shall
state.1 A distinction also exists in case assessment life companies
carry old line policies and also assessment policies which constitute
different and independent classes of risks, for in the former, losses
are paid by premiums collected, while in the latter the losses are
met by assessments.2 And an "advance premium7' is in the nature
of a membership fee and not an advance payment of bimonthly
Washington Fire Ins. Co. 87 Pa. St. 56 Minn. 414, 418, 57 N. W. 1063,
J07, 'JOS. 1064.
"Russell v. O'Donoghue (U. S. 1 Smith v. Bown, 75 Hun (N. Y.)
('. C.) 178 Fed. L06. 231, 27 N. Y. Supp. 11, under New
19 8S 343, 346b— 346d herein. York statute concerning requirements
20 State ex rel. v. Monitor Fire of assessment notices: Laws 1883, c.
Assoc. 42 Ohio St. 555. See also 175.
Bradford v. Mutual Fire Ins. Co. 112 2 Craig v. Western Life Ins. Co.
Iowa, 495, 84 N. W. 693; Ball v. 136 Mo. App. 5, 116 S. W. 1113.
Northwestern Mutual Accideut Assoc.
2374
ASSESSMENTS AND DUES §§ 1248, 1240
calls thereafter made under a provision that the consideration for
the insurance is the receipt of the advance premiums and the pay-
>>_---nient of all bimonthly premiums.8
§ 1248. Membership fees and dues: generally.— In mutual benefit
associations, if the payment of a specified sum known as a member-
ship lee is conditioned to lie paid in advance, and the certificate is
not to be in force until the same is paid, such stipulation is a con-
dition precedent, which must he observed,4 and it is held thai such
provision cannot be waived by an agent of the company.5 And
the contract sometimes provides not only for the payment of such
membership fee and for voluntary assessments, but also lor the pay-
ment of a certain stated sum at specified times for expenses, such as
quarterly, semi-annual, or annual dues. In cases where the society
is of the kind having supreme and subordinate lodges, and the
member is obligated to contribute to the support of the lower lodge
in certain sums payable at specified times, such amounts so to be
paid are designated as dues. These differ from the mortuary as-
sessments levied by the higher lodge, and from dues for insurance
purposes, which may be payable to the supreme lodge.6 And in
some cases, instead of what are known as membership fees, each
person becoming a member may be required to pay what is desig-
nated as a "first assessment," 7 so that membership fees, dues, and
assessments may all be important factors' in determining the right
to membership and its continuance. If credit is given for the mem-
bership fee, as where a note is taken therefor, the question of for-
feiture may depend upon whether or not the policy or certificate
provides for forfeiture or suspension for nonpayment of the note at
its maturity; if it so provides, there is a forfeiture or suspension
according to the terms of the stipulation, otherwise not,
§ 1249. Validity of provisions as to assessments and dues. — The
parties to a contract of insurance in a mutual company may validly
stipulate that the policy shall be forfeited or ipso facto void for non-
payment at or within a specified time of assessments on a premium
3 Smith v. Covenant Mutual Bene- appears that the deceased was one
fit Assoc. 16 Tex. Civ. App. 593, 43 of the charter members, and paid
S. W. 819. witb his associates what was termed a
4 Orniond v. Fidelity Life Assoc, 'first assessment,' in addition to the
96 N. C. 158 1 S. E. 796. fived dues for admission. If they
5 Ormond v. Fidelity Life Assoc, thus voluntarily created a small death
96 N. C. 158 1 S. E. 796. fund in advance, it is prohahle that
6 See further on this subject, § 407 they did so in view of the contin-
herein. gency that a death claim might arise
7 Wadsworth v. Jewelers' & Trades- while the company was too weak to-
men's Co. 132 N. Y. 540, 42 N. Y. meet it in the usual course of its
St. Rep. 765, 29 N. E. 1104, aff'g business:" Id. 543, 544.
31 N. Y. St. Rep. 185. "It also
2375
§ 1250 JOYCE ON INSURANCE
note, or for tin- noiij ki\ tu.-u i <>!' glugs :""1 assessments and such pjmir-
sions arc binding and enlorceafela? and the same rule applies to a
by-law of a co-operative fire insurance corporation in New York9
and also to by-laws in a fraternal association providing for forfeit-
ure for nonpayment of monthly assessments on or before a certain
day10 and the same is true in regard to conditions whereby the
policy is made void or the risk suspended for nonpayment of dues
or assessments, as in like eases of provisions for forfeiture for non-
payment of premiums, and as to such provisions, in so far as they
are lawful and not against public policy, the courts cannot inter-
fere,11 and such provisions are as effectual, when included in an
application which is made part of the policy, as if contained in the
policy itself;12 and the rule would obtain as to similar provisions
contained in any part of the contract, as in case of the charter and
by-laws.
§ 1250. Assessment premium, etc., notes: generally.— Unless the
charter, by-laws, or note otherwise provide, premium notes given
to a mutual lire insurance company are liable to assessments for
losses during the whole period for winch the member was insured; 13
but the power to make assessments must be limited by the amount
of losses sustained and unpaid at the time of levying the assess-
ment.14 and the assessment must be legally made.15 But an assess-
ment which will be binding on nonresident policy holders may be
8 Colorado.— Drum v. Benton, 13 Union, 193 Mo. App. 443, 182 S. W.
App. D. C. 245, 26 Wash. L. Rep. 1043.
642, 31 Chic. Leg. N. 72. u See Madeira v. Merchants' Ex-
Iowa. — Munger v. Brotherhood of change Mutual Benefit Soc. 16 Fed.
American Yeomen, — Iowa, — , 154 749; Ewald v. Northwestern Mutual
N. W. 879 (ipso facto void). Life Ins. Co. 60 Wis. 431, 19 N. W.
Missouri.— Burchard v. Western 513. See also §§ 1100, 1205, 1220
Commercial Travelers' Assoc. 139 herein.
Mo. App. 606, 123 S. W. 973; Old- 12 Mandego v. Centennial Mutual
ham v. Supreme Lodge Modern Life Assoc. 64 Iowa, 134, 19 Ins. L.
Brotherhood of America, 110 Mo. J. 660, 17 N. W. 656, 19 N. W. 877.
App. 564, 157 S. W. 92. In this case the provision was that
New York. — Beadle v. Chenango a failure to pay dues or assessments
County Mutual Ins. Co. 3 Hill (N. should avoid the policy.
Y.) 161 (in this case the provision 13 New Hampshire Mutual Fire
was "in case the insured shall neg- Ins. Co. v. Band. 24 N. H. (4 Fost.)
lect to pay any assessment, the in- 428. See § 1256 herein,
surani-e shall be void"). On liability of members of mutual
Virginia. — Knights of Columbus v. insurance company, see note in 32
Burroughs' Beneficiary, 107 Va. 671, L.R.A. 482.
60 S. E. 40, 17 L.R.A.(N.S.) 2!8. 14 Sinissippi Ins. Co. v. Taft, 26
9Seely v. Tioga Countv Patrons Ind. 240; Sinissippi Ins. Co. v. Far-
Fire Relief Assoc. L5] X.' V. Supp. ris, 26 Ind. 342; Mutual Benefit Lite
126, 165 App. Div. 685. See N. Y. Ins. Co. v. Jarvis, 22 Conn. 133.
Ins. L. 1909, c. 33, sees. 261 et seq. 15 Mutual Benefit Life Ins. Co. v.
10 Crawford v. North American Jarvis, 22 Conn. 133.
2376
ASSESSMENTS AND DUES § 1251
made under the Minnesota statutes upon the premium notes of the
holders of mutual policies in an insurance company organized in
that state to repay unearned premiums on cash policies issued by
the company.16 Although interest-bearing notes may not be assess-
able in the first instance, yet they may be assessable under the by-
laws after other collectible assessments have been paid in, equal to
the interest payable and to be paid for a specified period.17 If the
charter provides that a member shall be liable for losses in propor-
tion to the amount of his premium note, he may be compelled to
pay such part of all losses as his premium note bears to the whole
amount of premium notes which are collectible and legally assess-
able, and not the whole amount of the notes irrespective of the fact
whether they are collectible or not.18 A member of a mutual com-
pany can only be assessed to the remaining face value of a premium
note where he has partly paid the principal.19 Deposit notes must
be assessed in the usual way when under the by-laws they are not
considered as absolute funds, but as assessable notes.20 So, if the by-
laws provide that those giving advance notes shall become mem-
bers, and the directors may, if they deem best for the company's
interest, surrender any and all advance notes, and a note is given
subject to assessments at a certain per cent with all other advance
notes, it is held that all uncanceled advance notes are subject to
assessment, even to the full amount if necessary.1 In all cases,
however, involving the right to assess premium notes the terms of
the particular contract and the character of the note must govern.2
§ 1251. Who liable to assessments: what members. — Only mem-
bers or those who have assumed a contract obligation to pay assess-
ments are liable therefor3 for the contract whereby the member-
ship exists must be completed before a liability to pay assessments
can exist ; the fact that an application only is made and the policy
never accepted cannot render one liable, as a member, to assess-
16 Warner v. Delbridge & C. Co. x Maine Mutual Marine Ins. Co.
110 Mich. 590, 34 L.R.A. 701, 68 v. Swanton, 49 Me. 448.
N. W. 283. 2 See §§ 1202 et seq. herein, and
17 Crawford v. Susquehanna Mu- sections under this chapter.
tual Fire Ins. Co. 9 Sadler (Pa.) 502, 3 See Philbrook v. New England
11 Cent. Rep. 653, 12 Atl. 844. Ins. Co. 37 Me. 137; McDonald v.
18 Bangs v. Gray, 12 N. Y. (2 Ross-Lewin, 29 Hun (N. Y.) 87, per
Kern.) 477. Hardin, J.: Stanley v. Northwestern
19 Davis v. Oshkosh Upholstery Co. Life Assoc. (U. S. C. C.) 36 Fed.
82 Wis. 4S8, 52 N. W. 771, distin- 75; Commonwealth v. Massachusetts
guishing Kennan v. Kundle, 81 Wis. Mutual Ins. Co. 112 Mass. 116; Tol-
212, 51 N. W. 426. ford v. Church, 66 Mich. 431, 33 X.
20' Citizens' Mutual Fire Ins. Co. W. 913. See also subsequent eases
v. Sortwell, 10 Allen (92 Mass.) under this and the following section.
110.
2377
L251 JOYCK ON IXSCRAXCK
nifiiis.4 Nor is a person Liable for losses and expenses where his
membership antedates the approval of the acl Lncojporating a
mutual company.6 Bui all persons who arc members are equally
liable] and the directors have oo right to consider the length of
time the membership has existed;6 although only those who be-
long to a certain class can be assessed in that class to which they
belong where there are separate classes.7 So members of a corpo-
ration existing in one state may nol be made Liable under a by-law
to pay assessments levied by a supreme lodge incorporated in
another state, since it is not competent for a dome-tit' corporation
to subject its members in this way to a foreign authority.8 If the
act of incorporation of mutual lire companies is to take effect when
accepted by the members of all the corporations to which it relate.-,
no member is bound thereby who does not expressly assent there-
to.9 Again, if the charter provides that no benefits shall be paid
to one who has ceased to be a member, and that deaths shall be
reported by trustees, their report is not conclusive as to the fad of
memberships.10 No distinction as to the age of the policies should
be made where the assessment is to be levied in proportion to de-
posits and premiums.11
Unless so provided in the contract, a mutual assessment company
has no power to charge a member with an assessment made before
he became a member, or to assess members for prior losses, and no
forfeiture can be based upon such invalid assessment;12 and the
same rule applies where one has ceased to be a member,13 and if
all the members are assessed for losses and expenses accrued before
4 Real Estate Mutual Fire Ins. Co. Lodge Ancient Order United Work-
er. Roessle, 1 Gray (07 Mass.) 336. men, 47 Mich. 429, 11 N. W. 268.
5 Farmers' Mutual Fire Ins. Assoc. On necessity for compliance with
v. Burch, 46 S. Car. 550, 24 S. E. by-laws as to payment of assess-
503. incuts, gee note in 38 L.R.A.(N.S.)
6 Herkimer County Mutual Ins. Co. 571.
v. Fuller, 14 Barb. (N. Y.) 373, 7 9 Hamilton Mutual Ins. Co. v. Ho-
llow. Pr. (N. Y.) 210; Planters' Ins. hart, 2 Gray (68 Mass.) 543.
Co. v. Comfort, 50 Miss. 662. See 10 Dillingham v. New York Cotton
Marblehead Mutual Fire Ins. Co. v. Exchange, 49 Fed. 719.
Eayward, 3 Gray (69 Mass.) 208; "Commonwealth v. Massachusetts
People's Equitable Mutual Fire Ins. Mutual Fire Ins. Co. 112 Mass. 116.
Co. v. Arthur, 7 Gray (73 Mass.) 12 Evarts v. United States Mutual
267. Accident Assoc. 61 Hun (N. Y.) 024,
7 Allen v. Winne, 15 Wis. 113; Mil- 40 N. Y. St. Rep. 848, 16 N. Y. Supp.
ler v. Georgia Masonic Mutual Life 27; Roswell v. Equitable Aid Union,
Ins. Co. 57 Ga. 221; Kelly v. Troy 13 Fed. 840; Commonwealth v. Me-
Ins. Co. 3 Wis. 254. But see § chanics' Mutual Ins. Co. 112 Mass.
L298 herein. 192. See § 1250 herein.
8 State ex rol. Miller, 00 Iowa, 20, 13 Mutual Benefit Life Ins. Co. v.
23 N. W. 241 ; Lamphere v. Grand Jarvis, 22 Conn. 133.
■j:;7s
ASSESSMENTS AND DUES §§ 1252, L253
some of them became members, the assessmenl is void as to the
latter, but valid as to the others.14
§ 1252." Who liable to assessment: mortgagee: assignee. — Tf a
mortgagee is, under the by-laws, to be liable for assessments pro-
vided the original insured, the mortgagor, shall not pay the same
,,n demand, a failure of the mortgagor to pay the assessmenl rim-
not affect the mortgagee's right to recover.18 An assignee is no1
liable to assessments where he has nol agreed to become a member,
and is under no contract to assume the liabilities of the assignor
to the company or to pay assessments.16 And although the policy
stipulates that in case of assignment the assignee shall be respons-
ible for the unpaid premium, no recovery can be had against the
assignee therefor.17 But where the assignee promises to pay all
future assessments, this is a new contract.18
§ 1253. Liability of member: generally. — The liability of mem-
bers to assessment must depend upon the contract provision.^.19
and also upon such statutes as are applicable.20 And the rule of
strict construction also applies to preclude assessment life com-
panies from making binding assessments otherwise than upon the
conditions prescribed in the contract.1 So a member of a mutual
benefit society cannot be compelled to pay an assessment, where
his contract does not so provide or make any provision as to non-
payment, except that his certificate shall be forfeited therefor.2
Nor does any equitable principle exist which compels a member of
a mutual benefit association to pay assessments on the ground that
he has had the benefit of the insurance, where the plan of the asso-
ciation is that all payments are in advance and entitle the member
14 Rowswell v. Equitable Aid Un- and by-laws are part of contract, see
ion, 13 Fed. 840 ; Long Pond Mutual § 188 herein.
Fire Ins. Co. v. Houghton, 0 Gray On liability of members of mutual
(72 Mass.) 77. insurance company, see note in 32
15 Francis v. Butler Mutual Fire L.R.A. 481; on necessity for com-
Ins. Co. 7 R. I. 159. See §§ 1153, pliance with by-laws as to payment
1158 herein. of assessments, see note in 38 L.R.A.
16 Cummings v. Hildreth, 117 Mass. (N.S.) 571.
309; Commonwealth v. Massachusetts 20 Commonwealth v. Massachusetts
Mutual Ins. Co. 112 Mass. 116; Bran- Fire Ins. Co. 112 Mass. 116, per
nim v. Mercer County Mutual Fire Wells, J. See also § 194 herein;
Ins. Co. 28 N. J. L. 92; New Hamp- Faurot v. Swan. L55 Mich. 284, 118
shire Mutual Fire Ins. Co. v. Hunt, X. \Y. 955.
30 N. H. 219. J Craig v. Western Life Ins. Co.
17 Washington Ins. Co. v. Grant, 13G Mo. App. 5, 116 S. W. 1113.
2 Clark, 308, 4 Pa. Law J. 88. As to the rule of strict construc-
18 Foster v. Equitable Mutual Ins. tion, see §§ i'-!1* ei seq. herein.
Co. 2 Gray (68 Mass.) 216. 2<;i!.son v. Megrew, 154 Ind. 273,
19 See 8*848 herein. That charter 48 L.R.A. 362, 56 N. E. 674.
2379
§ 1253 JOYCE ON INSURANCE
to protection until the nexl assessment is due.8 Nor can members
be assessed to pay demands no1 within the terms of their contracts,
especially where the policies are in different classes of risks,/"5s
when' the company's liabilities arc n<»l only on ;t~< — ment policies
but on old line policies resting on independent bases.4 Bui a mem-
ber of a mutual -benefit society is. however, personally liable for
assessments regularly made during his membership, although there
i- qo express promise on his part to pay them, where his certificate
recites thai it is in consideration, among other things, of his pay-
ment of such assessments, although it is made on the express con-
dition of forfeiture of all his rights and that the contract shall be
null and void if he fails to pay any assessment when due.5 Again,
the liability of a member of a mutual insurance company for
losses occurring during his membership continues until an assess-
ment has been made covering them.6 But a member of a mutual
lire insurance company cannot be held liable for losses other than
those occurring during his membership unless there is some stipu-
lation to the contrary7 and it is held that a party who accepts the
policy cannot escape liability to an assessment on the ground that
lie is ignorant of its provisions^/ But an assessment must be legally
"made, or it-Is not collectible.9 So losses on old line policies in
assessment life companies cannot be paid from assessments on
holders of assessment policies, but must be met by premiums col-
lected.10 But in case of losses on cash policies unlawfully issued
by a mutual company, members who took lawful policies on the
assessment plan cannot be compelled to contribute by assessment
on their premium notes merely because they knew of the issue of
the cash policies, but did nothing to estop themselves from denying
liability on account of them.11 Again, an assessment made upon
the premium notes of the holder of mutual policies in a Minnesota
insurance corporation, made under the statutes of that state and
decided to be valid by the courts of that state, to repay unearned
3 Lehman v. Clark, 174 111. 279, 43 v. Boggs, 5 Pa. Super. Ct. 394, 41
L.R.A. (it8, 51 N. E. 222. Wkly. N. C. 13, 28 Pitts. L. J. N. S.
4 Craig v. Western Life Ins. Co. 106.
L36 Mo. App. 5, 116 S. W. 1113. 8 Morrisson v. Insurance Co. of
6 Ellerbe v. Barney, 119 Mo. 632, North America, 69 Tex. 353, 5 Am.
23 L.R.A. 435, 25 S. W. 384. St. Rep. 63, 6 S. W. 605. See §
On liability of member of benefit 1311 ;is to defenses.
society to action lor assessment, see 9 See S§ 1290-1297 herein.
note in 2:5 LR.A. 435. "Craig v. Western Life Ins. Co.
6 Ionia Eaton & Barry's Farmers' 136 Mo. App. 5, 116 S. W. 1113.
Mutual fire Ids. Co. v. Ionia Cir- n Corey v. Sherman, 96 Iowa, 111.
nut Judge, 100 Mich. 606, 32 L.R.A. 32 L.R.A. 490, 60 N. W. 232, 64
481, 59 N. W. 250. N. W. 828.
7 Capital City Mutual Fire Ins. Co.
2380
ASSESSMENTS AND DUES §§ 1254, 1255
premiums on cash policies issued by such corporation, may 1"'
enforced in the courts of Michigan againsl a member of 3uch cor-
poration residing therein, although such assessment would be in-
valid if the contract of the policy holder were made in the latter
state.18 If the liability to levy assessments is absolute, an investi-
gation by trustees as to whether the deceased had ceased to be a
member is not conclusive, and an assessment may be levied upon
the death of a member to provide for death benefits. In a case on
this point the right to such benefits depended upon the continu-
ation of membership in a cotton exchange, and it was hold that
the fact that the share was hypothecated was not necessarily such
a silo thereof as would terminate the membership.13
§ 1254. Nonpayment of assessment or dues after date of accident
insured against. — Where a member is insured in a benefit society
against personal bodily injuries and against death resulting from
such injuries within ninety days from the date of the accident, the
liability of the company is fixed from the date of the accident, and
the company will not be relieved from liability by reason of the
fact that assured ceased to be a member on account of a failure to
pay a certain assessment falling due after the date of the accident.14
§ 1255. Liability to assessments: agreement or provisions con-
trary to statute. — It is held that where one insured in a mutual in-
surance company is liable under the statute of its incorporation to
pay his proportion of such assessments as shall be sufficient to meet
all of the company's losses and liabilities, he cannot limit such lia-
bility by any arrangements entered into with the company, nor
can his liability be lessened by any provisions in the articles of
association.15 And where the statute obligates members to pay all
assessments for losses and expenses while they continue as members
the insurer cannot limit the number or amount of assessments by
contract provisions.16 But in another case it is held that a general
understanding among all the members should govern as to the
extent of liability for assessments.17
12 Warner v. Delbridge & Cameron 816, 26 L.R.A. 112 (annotated on
Co. lilt Mi,!,. 590, 34 L.R.A. 701, (i4 effect of failure to pay assessment
Am. St. Rep. 367, 68 N. W. 283. between day of accident and time of
On effect of assessment on stock- death). '
holders, made under order of court in 15 Russell v. Berry, 51 Mich. 287,
another state, as res judicata, see 16 N. W. 651.
note in 34 L.R.A. 694. As to stipulation contrary to stat-
13 Dillingham v. New York Cotton ute, see §§ 176, 194 et seq. herein.
Exchange (U. S. C. C. 1892) 19 Fed. 16 Morgan v. Hog Raisers' Mutual
719. Ins. Co. 62 Neb. 446, 87 N. W. 145.
14 Burkheiser v. Mutual Accident 17 Macklem v. Bacon, 57 Mich. 334,
Assoc. 10 U. S. C. C. A. 94, 61 Fed. 24 N. W. 91 (one judge dissenting).
2381
§ 1256 JOYCE ON INSURANCE
§ 1256. Liability: prior and subsequent losses: liability after
loss, forfeiture or suspension. — As a general rule, a member is not,
in the absence of a contract stipulation or by-laws to the contrary,
liable for losses incurred prior to issuing his policy.18 So a by-law
of a mutual insurance company authorizing the directors to order
an assessment to raise funds for the purpose of carrying out the
aims and objects of the association does not justify the assessment
of a member for losses occurring before bis membership.19 So an
assessment levied upon a premium note of a member of a mutual
lire insurance company is voidable by him where such assessment
is for Losses incurred at a time when he was not a member of the
company;20 again, new members of an accident assessment as-
sociation are not liable for a loss which occurred prior to their
becoming members, and assessments can he made only on the mem-
bers liable to pay when the loss occurs.1 Nor in the absence of
some provision therefor in the contract, can a mutual accident
company assess a member for losses arising prior to his member-
ship.2 Nor can money deposited by a member in advance to meet
certain assessments be used by the company to pay such prior
losses,3 and a requirement of payment of one advance mortuary
assessment on becoming a member does not necessitate that one
such assessment be continuously paid up nor does such advance
assessment apply to mortuary assessments levied prior to member-
ship.4
The contract may, however, be such that a member will be liable
to assessments for losses accruing prior to his membership, or after
suspension or forfeiture of the policy, or after loss;5 so, in such
case, the member may under the by-laws be liable for assessments
18 Capital City Mutual Fire Ins. x Collins v. Bankers' Accident Ins.
Co. v. Boggs, 172 Pa. St. 91, 33 Atl. Co. 90 Iowa, 216, 59 Am. St. Rep.
349; Fire Ins. Co. v. Hartshorne, 90 367, 04 N. W. 778.
Pa. St. 405; Detroit Manufacturers 2 Roswell v. Equitable Aid Union,
Mutual Fire Ins. Co. v. Merrill, 13 Fed. 840; Evarts v. United States
101 Mich. 393, 59 N. W. 661. Mutual Accident Assoc. 61 Hun
See also Clark v. Iowa State Trav- (N. Y.) 624, 40 N. Y. St. Rep. 848,
eling Men's Assoc. 156 Iowa, 201, 10 N. Y. Supp. 27; Long Pond Mu-
42 L.K.A.(KS.) 031, 135 N. W. tual Fire Ins. Co. v. Houghton, 6
111!; Mutual Fire Ins. Co. v. Gray '(72 Mass.) 77.
Jean, 96 Md. 252, 94 Am. St. Rep. 3 Evarts v. United States Mutual
570, 53 Atl. 950; Faurot v. Swan, Accident Assn. 61 Hun (N. Y.) 624,
155 Mich. 284, 118 N. W. 955. See 40 N. Y. St. Rep. 848, 16 N. Y. Supp.
§§ 1224, 1251 herein. 27.
19 Clark v. Iowa State Traveling 4 Hetzel v. Knights & Ladies of
Men's Assoc. 150 Iowa, 201, 42 Golden Precept, 106 Iowa, 655, 106
L.RA.(N.S.) 631, 135 N. W. 1114. N. W. 157.
20 Swing v. Akely Lumber Co. 62 5 Susquehanna Mutual Fire Ins.
Minn. 169, 64 N. W. 97. Co. v. Leavy, 136 Pa. St. 499, 20 Atl.
23S2
ASSESSMENTS AND DUES § 1256a
for losses occurring prior to the issue of the policy.6 And a mem-
ber may be liable for losses during the suspension of the risk for
nonpayment of assessments.7 A member may also be liable for all
lawful assessments upon his premium note for the full lime of the
policy, as well before as after loss.8 So a party who is under the
charter a member during the term specified in the policy may be
liable to assessment during such term, even after a loss,9 until the
policy or certificate is surrendered^10 and the provisions of the
application and by-laws may be such thai the company may elect
to continue the membership even after default in payment of
assessments or dues, and hold the member liable for assessments
subsequently thereto and until notice of withdrawal of the mem-
ber.11
§ 1256a. Same subject. — The assured may be liable for assess;
ments even after forfeiture for breach of conditions for losses ac-
cruing while the policy was in force, for he is liable to contribute
to all losses while the policy is in force where the conditions so
stipulate,12 and liability for assessments exists as long as member-
ship continues where the statute so provides and no limitation con-
trary thereto can be placed thereon by the insurer.13 And even
though assessments in a fraternal insurance association, do not be-
come payable until after there has been a forfeiture the member is,
nevertheless, absolutely liable therefor.14 So where the contract
502, 505; Susquehanna Mutual Fire v. Mutual Assur. Soc. 6 Cranch (10
Ins. Co. v. Stauffer, 125 Pa. St. 416, U. S.) 192, 3 L. ed. 195; Seheufler
17 Atl. 471, and cases following. v. Grand Lodge, 45 Minn. 250, 47
6 Susquehanna Mutual Fire Ins. N. W. 799; Thropp v. Susquehanna
Co. v. Stauffer, 125 Pa. St. 416, 17 Mutual Fire Ins. Co. 125 Pa. 427,
Atl. 471. 11 Am. St. Rep. 909, 17 Atl. 473.
7 Webb v. Mutual Fire Ins. Co. 63 See Patrons of Industry Fire Ins.
Md. 213. - Co. v. Harwood, 72 N. Y. Supp. 8,
8 Swamscot Machine Co. v. Part- 64 App. Div. 248; Bennett v. Beav-
ridge, 25 N. H. 369. ers Reserve Fund Fraternity, 159
9 Boot & Shoe Ins. Co. v. Melrose Wis. 145, 150 N. W. 181. See §§
Soc. 117 Mass. 199; Philbrook v. 1225 et seq. herein.
New England Mutual Tns. Co. 37 Me. 13 Morgan v. Hog Raisers' Mutual
137; New Hampshire Ins. Co. v. Ins. Co. 62 Neb. 446, 87 N. W. 145.
Rand, 24 N. H. 428. Comp. Stat. 1899, c. 43, sees. 130,
10 Thropp v. Susquehanna Mutual 137, 140.
Fire Ins. Co. 125 Pa. 427, 11 Am. As to stipulations contrary to stat-
St. Rep. 909, 17 Atl. 473. See also ute, see §§ 176, 194g, 194h herein.
§ 12(50 herein. 14 Bennett v. Beavers Reserve
11 Baker v. New York State Mutual Fund Fraternity, 159 Wis. 145, 150
Benefit Assoc. 27 N. Y. Week. Dig. N. W. 181. Examine Pioneer Furni-
91, 9 N. Y. St. Rep. 653, 45 Hun ture Co. v. Langworthy, St 111. App.
(N. Y.) 588. 594 (liable for assessment for share
12 Smith v. Saratoga Mutual Fire of losses and expenses prior to can-
Ins. Co. 3 Hill (N. Y.) 508; Kom relation).
23S3
§ 1256a JOYCE ON INSURANCE
stipulates for the payment of assessments by the insured for all loss-
es during the term of the policy, the liability to assessments con-
tinues during the term, and is not terminated by the destruction of
the insured buildings by lire and the subsequent sale of the land.15
So the obligation to pay assessments where it is so stipulated in the
by-laws, continues while the member remains in the association,
and, while there is no speeial provision therefor in the contract, the
termination of membership by withdrawal does not operate as a re-
lease from future assessments for liabilities existing prior to such
termination,16 and where the loss has occurred during membership,
it has been held that the assessment may be levied even nine years
after the policy has expired.17 So a suspended member of an Odd
Fellows' lodge is liable for all dues accruing after his suspension if
the by-laws so provide, and the by-laws be reasonable, and for the
recovery of such dues an action lies.18
But it is held that a member is not relieved from liability for loss
incurred while a member although not charged against him before
his withdrawal,19 and also that liability for future expenses is ended
by cancelation of the certificates.20 And a liability exists for all as-
sessments levied prior to notice that membership has ceased, but not
for assessments subsequently levied.1 So, although a member of a
fraternal beneficial association may be liable for assessments made
prior to forfeiture of the contract he is not liable for those made
thereafter, where the statute of incorporation imposes no obligation
to pay as there is no implied promise to pay in such case.2 So again,
payments of assessments in a benefit association after forfeiture of
membership, but in ignorance of that fact, do not estop the member
from denying his liability to pay subsequent assessments.3
It is decided that alienation avoids the contract, determines the
16 Thropp v. Susquehanna Mutual x Fulton (Assignees Wisconsin
Fire Ins. Co. 125 Pa. St. 427, 11 Odd Fellows Mutual Life Ins. Co.)
Am. St. Rep. 909, 17 Atl. 473. v. Stevens, 99 Wis. 307, 74 N. W.
16 Provident Mutual Relief Assoc. 803.
v. Pellisier, 69 N. H. 600, 45 Atl. 2 Faurot v. Swan, 155 Mich. 284,
562, 29 Ins. L. J. 350. 118 N. W. 955. Examine Stockley
17 Smith v. Bell, 107 Pa. St. 352. v. Benedict, 92 Md. 325, 48 Atl. 59.
18 Palmetto Lodge v. Fleming, 2 3 Ellerbe v. Faust, 119 Mo. 653, 25
Strob. (S. C.) 457, 49 Am. Dec. 604. L.R.A. 149, 25 S. W. 390. Examine
But see Vivar v. Supreme Lodge Covenant Mutual Life Assoc, v. Tut-
Knights of Pythias, 52 N. J. L. 455, tie, 87 111. App. 309; Duggans v.
20 Atl. 36. Covenant Mutual Life Assoc. 87 111.
19 Sparks v. Flaccus Glass Co. 16 App. 415.
Pa. Super. Ct. 119.
20 Knipe v. Scholl (Pa.) 16 Montg.
Co. L. R, 209.
23S4
ASSESSMENTS AND DUES §§ 1257, L258
mutuality, and ends the liability of the assured to assessments there-
after; as where the insured 3old the insured property.4
§ 1257. Members joining between loss and rendition of judgment
against company. — An assessmenl to satisfy a claim for loss under
a judgment cannot lie levied on members who have joined between
the time of loss and the rendition of judgment where the by-laws
only provide for assessments on members.5
§ 1258. When dues payable: dues in arrears: forfeiture. — The
time when dues become payable musl depend necessarily upon the
contract provisions, or, in cases where they are payable to a subordi-
nate lodge, it may he left to such lodge to determine under its by-
laws and regulations the times of payment. A paymenl in advance
is, however, not ncces-ary. unless the contract or hy-laws so provide.
Tims, the computation of time in determining whether a member
is "six months" in arrears musl be referred 'as to its commencement
to the time the dues are payable, which, if they are payable quar-
terly, is at the end of each quarter, and a member is in arrears "six
months" from that time, and not as soon as the "six months' dues"
are owed,6 and the last day of the term is excluded, the time within
which the six months are to run commencing the following day.7
So when dues payable quarterly are paid within two weeks after the
end of that quarter on which they became due, the member is not
in arrears "over the amount of thirteen weeks." 8 And where week-
ly payments of dues are required under the by-laws weekly pay-
ments must be made.9 And where a member is in arrears for week-
ly dues for funeral benefits, for a longer period than that specified
there can be no recovery upon his policy.10 But the provisions made
by a local lodge cannot supersede the constitution of the association
and make the dues payable in advance, where the constitution pro-
vides that a certificate cannot be forfeited until the member is more
than six months in arrears for the local lodge dues; u for in such
4 Wilson v. Trumbull Mutual Fire N. Y. Supp. 167. Compare Stack v.
Ins. Co. 19 Pa. St. 372; Wadsworth Williams, 151 N. Y. Supp. 185, 16C
v. Davis, 13 Ohio St. 123; Boland App. Div. 190; Wilkie v. National
v. Whitman, 33 Ind. 64. Council, Junior Order United Ameri-
5 Collins v. Bankers' Accident Ins. can Mechanics, 151 N. Car. 527, 66
Co. 96 Iowa, 216, 59 Am. St. Rep. S. E. 579.
367, 64 X. W. 77S. 9 Stack v. Williams, 151 N. Y.
6Bukofzer v. Grand Lodge, 40 X. Supp. 185, 166 App. Div. L90.
Y. St. Rep. 653, 15 N. Y. Supp. 922, 10 Long v. West Philadelphia Coun-
61 Hun, 625. cil, •~),) Leg- Intel. 258, - l';i. Dist.
7 Wiggin v. Knights of Pythias, 31 Rep. 375 (thirteen weeks arrears al-
Fed. 122. lowed).
8 Strasser v. Staats, 59 Hun (N. " Wiggin v. Knights of Pythias,
Y.) 143. 35 X. Y. St. Rep. 789, 13 31 Fed. 122.
Joyce Ins. Vol. III.— 150. 2385
§§ 1259, 1260 JOYCE ON INSURANCE
case the dues are not demandable in advance at the beginning, but
at the end, of the term for which they are liable, and the fact that
members may. and most of them do, pay their dues in advance of
the day fixed cannot affect the question.12 Again, dues in arrears
may be paid after a member is unconscious from a fatal injury when
payment was authorized by said member when in health, and by
custom of the association payments were allowed without a health
certificate where dues were in arrears.13 So payment of an assess-
ment may be made by the beneficiaries after the death of the in-
sured within the thirty days after an assessment becomes due, where
the by-laws allow that time for payment, if there is no provision to
the contrary in the by-laws.14
§ 1259. Assessment falling due on Sunday. — If the last day of
the month, that being the day on which the assessment becoi in-
due, falls on Sunday, payment may be made on the following Mon-
day in California, even though the assured dies on Monday.15
§ 1260. Assessments: suspension of member. — A contract may be
so expressly or impliedly conditioned that nonpayment of an assess-
ment merely operates to suspend the protection afforded by the pol-
icy or certificate for such period as the assessment shall remain un-
paid,16 and if there be a loss during the suspension, the insurance
cannot be recovered.17 So under a provision that a policy shall be
"null and void until the assessment be paid," nonpayment within
the specified period for payment does not absolutely extinguish the
contract, but merely suspends the obligation.18 So a member en-
titled to sick benefits may be suspended for nonpayment of assess-
ments notwithstanding the rules relating to such benefits provide
for the payment of dues and fines, and that a member shall not be
in arrears so as to preclude his right to benefits; it also appearing
that the rules relating to the widows', etc., fund provided for such
12 Wiggin v. Knights of Pythias, 16 Blanchard v. Atlantic Mutual
31 Fed. 122. Fire Ins. Co. 33 N. H. 9; Joliffe v.
13 Wat kins v. Brotherhood Ameri- Madison Ins. Co. 39 Wis. Ill, 20
can Yeomen, 188 Mo. App. 626, 176 Am. Rep. 35 ; Lycoming Fire Ins. Co.
S. W. 516. v. Rought, 97 Pa. St. 415; Wash-
14 Wright v. Supreme Commanderv ington Mutual Fire Ins. Co. v. Rosen-
Knights of Golden Rule, 87 Ga. 426, herger, 84 Pa. St. 373. See §§ 1261,
14 L.R.A. 283 (annotated on pay- 1264, 1266 herein.
ment of premium after death to keep 17 Blanchard v. Atlantic Mutual
insurance in force), 13 S. E. 564. Fire, 33 N. H. 9; Washington Mutual
15 Northey v. Bankers' Life Assoc. Fire Ins. Co. v. Rosenberger, 84 Pa.
110 Cal. 547, 42 Pac. 1079. St. 373.
As to premium maturing Sunday, 18 Hummel's Appeal, 78 Pa. St.
see § 1129 herein. 320.
2386
ASSESSMENTS AND DUES § 1261
suspension for default in paying assessments." But if there be qo
authority conferred so to do, a vote to suspend for nonpaymenl of
assessments is invalid,20 and unless their is some provision for sus-
pension nonpaymenl of assessments will not so operate in mutual
benefit societies.1 Again, provisions in by-laws of a mutual benefit
association, thai any member three months in arrears, shall be de
clared Don-financial, and thai any member failing to visil the lodge
shall stand suspended until a prescribed fine is paid, unless he has a
lawful excuse, do no1 make a member non-financial for failure to
pay dues, until he is three months in arrears and he has been de-
clared non-financial.8 Nor can there be any suspension of the mem-
ber of a fraternal benefit society, where he is not in default for non-
payment although the constitution provides for suspension after the
expiration of a time certain.3
It is a condition precedent to a valid suspension that the assess-
ment must be regularly made and the member must be subject
thereto.4
§ 1261. When nonpayment of dues or assessments, forfeits, or
suspends: self-executing provisions. — Astipulation or provision in
the contract for forfeiture for nonpayment of dues at a specified
day will operate of itself to work a. forfeiture or suspension, as the
case may be, if said dues are not paid as agreed.5 And if a certifi-
19 Hansen v. Supreme Lodge Hunger v. Brotherhood of American
Knights of Honor, 140 111. 301, 29 Yeomen, - Iowa, — , 154 N. W.
N. E. 1121. 879. But compare Brooks v. Con-
20 New England Mutual Fire Ins. servative Life Ins. Go. 132 Iowa, 377,
Co. v. Butler, 34 Me. 451. 106 N. W. 913, 119 Am. St. Rep.
1 Mutual Benefit Life Ins. Co. v. 560; Jelly v. Muscatine City & Coun-
French, 30 Ohio St. 240, 27 Am. Rep. ty Mutual Aid Soc. 120 Iowa, 689,
443; Borgraefe v. Supreme Lodge 98 Am. St. Rep. 378, 95 N. W. L9*3
Knights of Honor, 22 Mo. App. 127; New York.— Giniso v. Calabrian
District Grand Lodge v. Cohn, 20 American Citizens' Mutual Benefit
111. 335. Assoc. 66 Misc. 162, 121 N. Y. Supp.
8 Murphy v. Independent Order of 209; Paster v. Nagelsmith, 30 Misc.
the Sons & Daughters of Jacob of 791, 63 N. Y. Supp. 154.
America, 77 Miss. 830, 50 L.R.A. Ill Oklahoma. — Modern Brotherhood
(annotated on forfeiture of benefit of America v. Beshara, 42 Okla. 6S4,
certificate by default of subordinate 142 Pac. 1014.
lodge), 27 So. 624. Pennsylvania. — Rhule v. Diamond
3 Polish Roman Catholic Union of Colliery Accidental Fund, 5 Lack.
America v. Warazak, 182 111. 27, 53 Leg. X. (Pa.) 101.
S. W. 2S2. Wisconsin. — Haycock v. Sovereign
4 Stewart v. Grand Lodge Ancient Camp Woodmen of the World, 162
Order United Workmen, 100 Tenn. Wis. 116, 155 N. WT. 923.
267, 46 S. W. 579. As to forfeiture for nonpayment
B Iowa. — Mamlego v. Centennial assessments : "wife's interest, see Harl
Mutual Life Assoc. 64 Iowa, 134, L9 lord Life Ins. Co. v. lbs, 237 U. S.
N. W. 877, 17 N. W. 656. See 662, 59 L. ed. 1165, L.R.A.1916A,
23S7
§ 1261 JOYCE ON INSURANCE
ate of membership in an assessmenl insurance company provides
thai the insured shall make certain payments when due; thai the
certificate shall be null and void if the payments are not so made;
and thai all moneys paid thereon shall he forfeited to the company
in case of neglect to make any required payment, the time of pay-
ment h of the very essence of the contract, and nonpayment when
(he money is due involves absolute forfeiture, and releases the com
pany from liability without any affirmative action on its part.6 So
failure to pay dues ipso facto forfeits a, mutual benelii certificate,
where the constitution and by-laws of the society provide that upon
such failure the benefit certificate shall become absolutely void, and
all liability of the society thereon shall thereupon end.7 So in a
Louisiana case there were two classes of assessments regular and ex-
tra, the lust lixed and levied by the supreme council to be paid
without notice on the last day of the month; and the latter levied
and called by the executive committee, in case of necessity therefor,
which required, as a condition precedent to suspension or a forfei-
ture of benefit rights, that notice should be given of all assessments
to every council. It was held that although both were provided for
in the same by-law that they were separate and distinct so that non-
payment of the regular monthly assessment of itself operated as an
immediate suspension from the order, and a deprivation of all ben-
efits from the policy upon death of the member while under sus-
pension, as the by-laws were self-enforcing and binding and that
the provision relative to notice for calls for assessments had no ref-
erence to notice to individual members of calls for regular monthly
assessments.8 And neglect or refusal to pay an assessment "where
ordered as provided in the by-laws" forfeits membership and all
benefits under the policy unless there is a waiver.9 And the rule as
765, 35 Sup. Ct. 692, rev'g lbs v. L.R.A.(N.S.) 747, and L.R.A.1917B,
Hartford Life Ins. Co. 121 Minn. 310, 214.
141 N. W. 289. Rights as to same ^ Kennedy v. Grand Fraternity, 36
fund decided in Dresser v. Hartford Mont. 325,^25 L.R.A.(N.S.) 78, 92
Life Ins. Co. 80 Conn. 681, 70 Atl. pac 971
«_. ,r P ,T.P „ , • 8 Feiber v. Supreme Council Amer-
Pitts v Hartford Life & Annuity ican L ion of H n2 La 960,
>'1S- o« of P^nk ' ' b ' 36 80. 818, 33 Ins. L. J. 708. The
Rep. 96, 34 Atl. 95. -, ■ ■ • '-»*- • XT ,-■. ,
' ., „ ~ ,. ,. decision in Maginnis v. Mew Orleans
On necessity 01 allirmative action -, ,, -^ , . ,T , , .... A
, , , • • 1, n Cotton Exclusive Mutual Aid Assoc.
in order to terminate rights 01 mem- .„ T . ,,0,. -,n o -1™
ber in mutual benefit society for non- 43,.If- Anf- H36, 10 So. 180, was
payment of dues, see note in 17 relied on, although in that case notice
L.R.A.(N.S.) 246; on effect of fail- was a condition precedent to sus-
ure to pay periodical premium on pension,' but it had been given.
policy of life insurance to terminate 9 Locomotive Engineers' Mutual
the same in the absence of a pro- Life & Accident Assoc, v. Bobo, 8
vision for forfeiture, see notes in 26 Ga. App. 149, 68 S. E. 842.
2388
ASSESSMENTS AND Dl BS § 126]
to forfeiture for nonpayment of assessments within a specified time
provided for in the charter of a mutual benefit society is self-opera-
ting.10 So the failure to pay an assessment when due operates oi
itself to suspend a member, where it is provided in the by-laws that
such act shall operate to forfeil all claim- against the association,
and that his name shall be erased from the roll.11 And where the
by-laws provide that neglect or refusal to pay an assessment for a
specif ic(l period shall determine the membership, and the secretary
shall strike the member's name from the roll, such laws are self-ex-
ecuting, and a defaulting member is nol aided by the fact thai the
secretary does not strike his name from the roll.12 So it is held that
where an assessment may be made by a receiver, its nonpayment
may operate as a forfeiture under a charter provision for forfeiture
for nonpayment of assessments when due.13 Again, a failure or re-
fusal to pay dues under an endowment certificate in a society doing
an insurance business under the Lodge system will operate to forfeit
a member's certificate where it is so provided, although so long as a
member pays his dues and remains in good standing his certificate
cannot be forfeited by a forfeiture of the charter of his lodge de-
clared by the general order, but if a minority of the members secede
from a lodge and refuse to pay dues, their certificates are forfeited.14
So a by-law is self-executing which provides that a member shall
stand suspended without notice where he fails to pay his dues on or
before a specified day.15
Mutual benefit societies may also provide that nonpayment of
assessments within a specified time after notice shall operate of it-
self, without notice or declaration of forfeiture, or other act of the
society, to work a forfeiture or suspension, and a provision of this
character will be effective to accomplish the purpose intended as it
is self-executing and ipso facto forfeits or suspends according to its
On waiver by officers of subordi- Assoc. 31 Fed. 62. See Madeira v.
nate lodge of forfeiture for rionpay- Merchants' Exchange Mutual Benefil
men! of assessments, see notes in 4 Soc. 16 Fed. 749.
L.R.A.(N.S.) 421, and 38 L.R.A. "In re Equitable Reserve Fund
(N.S.) 571. Life Assoc. 131 N. Y. 354, 30 N. E.
10Maginnis' Estate v. New Orleans 111. 40 N. Y. St. Rep. 800, 16 N.
Cotton Exchange & Mutual Aid Y. Supp. (N. Y. S. C. 1892) 80. 43
Assoc. 43 La. Ann. 1136, 10 So. 180, N. Y. St. Rep. 204.
21 las. L. J. 171. See Munger v. l4 Goodman v. Jedidjah Lodge, 6<
Brotherhood of American Yeomen, Md. 117. 9 Atl. 13. 13 Atl. 627.
— Iowa, — . 151 X. \V. 879. l5Neenan \. National Council ol
11 Yoe v. Howard Masonic Mutual Knights and Ladies <>f Security, L88
Benefil Assoc. 63 Md. 86. til. App. 490. Sec Glasky v. United
12 Rood v. Railway Passenger & Brotherhood, — 111. App. — , 43 Nat'l
Freight Conductors' Mutual Benefit Corp. Hep. 285.
2389
§ L261a JOYCE ON INSl U ANCK
terms: said construction will be given the contract where such ap-
pears clearly from its terms to have been the intent of the parties.16
§ 1261a. Same subject.— And no declaration of forfeiture is nec-
essary to terminate the rights of a member of a mutual benefit socie-
ty for nonpayment of dues where the by-laws provide that any
member shall ipso facto forfeit his membership who fails to pay his
assessmenl for thirty days after notice.17 And a by-law is self exe-
cuting which provides for forfeiture of claims for losses where the
member, within a, specified lime after notice, neglects or refuses to
pay assessments.18 And if the member 'is to stand suspended for
failure to pay assessments on or before a specified time, and the
certificate is to be void during such suspension, the members rights
are ipso facto forfeited for nonpayment after notice without rein-
statement.19 So nonpayment of an assessment duly levied within
the time required will invalidate the certificate if due notice is
given.20 The general rule is, however, subject to such exceptions
as may arise from statutory provisions, waiver, and estoppel. But
if the note be a payment in advance of the premium, nonpayment
of an assessment does not suspend the policy, notwithstanding a
vote that if assessments on the premium notes are not paid punctu-
ally the policy will be suspended ; such a vote, not being warranted
by the charter, will be of no validity.1 And under a provision in a
fire insurance policy that all assessments must be paid within thirty
days after notice or the policy will be null, the expiration of thirty
16 Alabama.— United Order of The New York.— McDonald v. Ross-
Golden Cross v. Hoosier, 160 Ala. Lewin, 29 Hun (N. Y.) 87.
334 49 So. 354. Texas. — Fletcher v. Supreme Lodge
IWnois.— Lehman v. Clark, 174 Knights & Ladies of Honor, — Tex.
111. 279, 43 L.R.A. 648, 51 N. E. Civ. App. — , 135 S. W. 201.
222, 27 Ins. L. J. 745; Hansen v. "Knights of Columbus v. Bur-
Supreme Lodge Knights of Honor, roughs, 107 Va. 671, 17 L.R.A.(NS.)
140 111 301 29 N E 1121- Illinois 24o> (annotated on necessity ot afflr-
Masons Benevolent Soc. v. Baldwin, motive action in order to terminate
86 ill. 479; National Union v. Hunter, right* of member in mutual benefit
99 111. App. 146. SCF 40 n°npayment °f dUGS)' G°
Kentucky -Johnson v Southern ' ' ^^l v. Oxford County Pat-
Mutual Life Ins. Co '9 Ivy. 403, ^ of Husband Mutual Fire Ins.
404, 3 Ky. L. Rep. 26; American Cq 1Q7 Me 362 "78 Atl 459
Mutual Aid Soc. v. Quire, 8 Ky. L. 19 Day V- Supreme Forest Wood-
Rep. 101. men Circle, 174 Mo. App. 260, 156
Minnesota. — Benedict v. Grand g y\r 72.
Lodge Ancient Order United Work- 20 Burdon v. Massachusetts Safety
men, 48 Minn. 471, 51 N. W. 371, Fund Assoc. 147 Mass. 360, 1 L.R.A.
21 Ins. L. J. 438. 146, 17 N. E. 874.
Nebraska. — Grand Lodge Ancient l New England Mutual Ins. Co. v.
Order United Workers v. Scott, 3 Butler, 34 Me. 451; Rix v. Mutual
Neb. (Unof.) 845, 93 N. W. 190. Ins. Co. 20 N. II. 198.
2390
ASSESSMENTS AND DUES § 1261a
daya without paymenl annuls the policy without action on the pari
of the insurer.8
If both the statute and certificate preclude recovery of a death
benefit for defaull in paymenl of assessments they will so operate.8
\iiil if dues in a fraternal order are payable in advance but may be
paid at monthly meetings without being in arrears, a failure to
make such periodical payments for several consecutive times de-
termines the membership.* So where it is stipulated that there
shall be a forfeiture for failure to pay assessments due during cer-
tain months in each year, such provision applies in case of nonpay-
ment in one of said months.6 And where the amount of an overdue
assessment is sent insurer, but it refuses the same except upon con-
ditions Which are not fully complied with, the insurance benefit is
forfeited.6 And the agreement of a cashier of a bank, where assured
had an account and where he had paid his assessments, to pay an
assessment and charge the amount thereof to insured's account in
case the latter should forget to pay the same does not constitute pay-
ment so as to prevent a lapse of the policy, even though said bank-
was the depositary of the society and its collecting agent and not-
withstanding assured's balance was larger than the amount of said
assessment.7
Again, the contract is forfeited by failure to pay valid and legally
levied assessments even though the certificate also requires payment
of all assessments due the benefit fund.8 And where the policy stip-
ulates for an annual expense premium and also a mortuary pre-
mium and provides for renewal upon payments of the mortuary
premiums upon notice and that the insurance shall lapse upon fail-
ure to make payment as required and assured had paid the former
but not the latter at the time of his death, the policy was held for-
feited.9 So failure for more than two years to make an attempt to
secure relief from what is alleged to be an irregular forfeiture of a
mutual benefit certificate, or to tender dues and assessments there-
on, will be regarded as an acquiescence in the forfeiture.10
2 Mutual Fire Ins. Co. v. Maple, of Des Moines, 134 Mo. App. 35, 114
60 Oreg. 359, 38 L.R,A.(N.S.) 726, S. W. 551.
119 Pac. 484. 7Grillith v. Merchants' Life Assoc.
8 Grayson v. Grand Temple & of Burlington, 141 Iowa, 414, 119
Tabernacle in S. of T. of Knights & N. W. 694.
Daughters of Labor of the I. 0. T. 8 Supreme Council American Le-
— Tex. Civ. App. — , 171 S. W. 489; gion of Honor v. Landers, 31 Tex.
Kev. Stat. 1911, art. 4834. Civ. App. 338, 72 S. W. 880.
*Sevignyv. Societi St. .lean Bap- 'Baldwin v. Provident Savings
tiste, 36 R*. I. 374, 90 Atl. 741. Life Assurance Soc. of X. Y. 48 X.
6 Smoot v. Bankers' Life Assoc. Y. Supp. 463, 23 App. Div. 5. al'l'd
138 Mo. App. 438. 120 S. \Y. 719. 102 N. Y. 636, 57 N. E. 1103.
6 McCoy v. Bankers' Life Assoc. 10 Sheridan v. Modern Woodmen,
2391
§§ 1262-1264 JOYCE ON INSIKAXCE
It is held that if no hour is specified as that of the termination
of time of payment of ;ni assessment, the policy will lie in force un-
til midnight of the last day specified in the notice as that <>n or be-
fore which the assessment must l>e paid to save a forfeiture. Tims,
if an assessmenl is payable on or before the first day of May, mid-
night of May 1st will he held to have been intended.11 It is decided.
however, that although the certificate expressly stipulates that it
shall be void for nonpayment of assessments within thirty days
after notice, the forfeiture is optional with the society, and the cer-
tificate only voidable,12 The question whether an assessment has
been paid in time to prevent a suspension of the member, may be
one for the jury.13
§ 1262. Assessments paid in advance in excess of mortuary as-
sessments.— A member of a mutual benefit association who has paid
assessments in advance in excess of the amounts required to meet
death claims is not- obligated to pay assessments till the excess is
equaled by unpaid assessments.14 But although there are sufficient
funds of the member in the society's hands or in some of its branch-
es to meet an assessment, yet if his default is prejudicial to his re-
lations wiih the association, it may be enforced against him.15 And
an advance assessment should be applied to payment of the first
assessment for which insured is liable.16
§ 1263. No forfeiture: assessments in advance of death losses. —
A company is authorized to levy assessments upon policyholders
only for death losses that have actually occurred, it cannot claim
a forfeiture of a policy for nonpayment of an assessment made in
advance of a death loss.17
§ 1264. Forfeiture or suspension: when affirmative act of society-
necessary. — There is, as will be noticed by a comparison of the cases,
a well-defined distinction between provisions of the character of
those considered under preceding sections and other cases where
the fundamental law of the order or society provides that for non-
44 Wash. 230, 7 L.R.A.(N.S.) 973, 14 Covenant Mutual Benefit Assoc.
87 Pac. 127. v. Baldwin, 49 111. App. 203.
11 Oh v. Homestead Ins. Co. 4 15 MeGowan v. Supreme Council
Pitts. Leg. Jour. 98. Catholic Mutual Benefit Assoc. 76
Onfirst and last days in computing Hun (N. Y.) 534, 28 N. Y. Supp.
time in case of nonpayment, see note 177, 58 N. Y. St. Rep. 268.
in 4!) L.R.A. 208. 16 Sleight v. Supreme Council of
12 Bosworth v. Western Mutual Aid Mystic Toilers, 133 Iowa, 379, 107
Soc. 75 town, 582, 39 N. W. 903. See N. W. 183; Kirk v. Sovereign Camp
Supple v. Iowa State Ins. Co. 58 Woodmen of the World, ll»9 Me.
Iowa, 29, 11 N. W. 716. App. 449, 155 S. W. 39.
13 Roval Neighhors of America v. 17 Schultz v. Citizens' Mutual Life
Laufman, 158 Ky. 358, 164 S. W. Ins. Co. 59 Minn. 308, 61 N. W.
966. 331.
2392
ASSESSMENTS AND DUES § 1264
paymenl of dues ;ui<l other delinquencies the member may be sus-
pended by the lodge or other judicatory ; in the latter class of cases
the designated authority must exercise the power to suspend, other-
wise there can be no suspension, for the rules of the order must be
looked to as the source of authority, and whatever rights are con-
ferred thereby must be exercised only in conformity therewith, in
so far as those rules are lawful. It is these rules on which the mem-
ber has a right to rely, and by which he is hound, but in cases of
the former class it is not necessary for the lodge or society or any
other judicatory of the order to adjudge a forfeiture against a de-
linquent member for nonpayment of an assessment for a death ben-
efit. The provisions for forfeiture or suspension for nonpayment
of assessments within a specified time, whether contained in the
charter or articles of association, are valid and binding, and the for-
feiture or suspension attaches by operation of the law, and this rule
applies equally to the valid and reasonable by-laws of the society,
or to the by-laws and regulations of a subordinate lodge when such
lodge is empowered to enact them, and they are reasonable.18 The
second class of decisions includes those cases where the constitution
and by-laws of a mutual benefit society provide that a member shall
be excluded from the benefits of the lodge during default in the pay-
ment of dues, and after the default has continued for a specified
time, the member may be suspended. In such cases there must be
an actual expulsion or suspension, for the fact of nonpayment does
not of itself terminate the member's rights.19 So although the con-
stitution provides that members of lodges in default for nonpay-
ment of benefit assessments within a given time shall forfeit all
claim to the funds, yet if a special mode of procedure as to such de-
faulting lodges is also provided, such default does not ipso facto
operate as a forfeiture of the member's rights.20 So in ease the by-
laws provide that any member of the lodge failing to pay his as-
sessment within a specified time "shall be suspended," there must
be some affirmative act of the lodge.1 Again, nonpayment of dues
does not ipso facto work a forfeiture of membership benefits where
a formal method of suspension is provided under the by-laws.
18 See Borgraefe v. Supreme Lodee Minn. 256, 47 N. W. 799, 20 Ins.
Knights of Honor, 22 Mo. App. 127, L. J. 241.
opinion of Thompson, -I. 80 Young v. Grand Lodge S,ms of
On necessity of affirmative action Progress, 173 Pa. St. 302, 33 Atl.
in order to terminate rights of mem- 1038.
ber in mutual benefit society for non- lSeheu v. Grand Lodge Ohio
paymenl of dues, see note in 17 Division Independent Foresters, 1-
L.R.A.(N.S.) 246. Fed. 214. See Commonwealth v.
19 Seheuffer v. Grand Lodge An- Pennsylvania Beneficial Inst. 2 Serg.
cient Order United Workmen, 45 & R. (Pa.) 141; Districl Grand
2393
§ L264 JOYCE ON INSURANCE
even though (lie member, being secretary of the society, has failed
to report his own delinquencies, and therefore no formal pro-
ceedings for suspension are had;2 and where the charter provides
that if a member is suspended by the secretary, appeal may be
made to the board of directors, when in session, it is held thai
such forfeiture cannot properly be imposed as an ex parte result
of mere default in payment, and without giving the assured an
opportunity for hearing.3
There is another class of cases where the contract provides that
notice of assessments shall be given to the member. Here the
notice must be given as provided for, or there can be no forfei-
ture or suspension for default.4 A provision in the constitution is
not self-executory which provides for a prompt remittance of the
amount of the assessment upon notice, and that upon failure to re-
mit within a specified time the member shall forfeit his claim
to membership; some action must be taken by the directors as to
forfeiture.5
It is decided that a provision in the constitution of a mutual
benefit association that a member failing to pay his assessment
within a certain time after notice of delinquency shall be sus-
pended, is not self-executing, but merely declaratory of the right
to suspend for nonpayment of an assessment, and membership
or good standing is not lost or forfeited so long as the associa-
tion does not act.6 It is also held that affirmative action is neces-
sary to a forfeiture of benefits even though no payment may oper-
Lodge v. Cohn, 20 Bradw. (111.) 335; New York.— Waehtel v. Widows &
Lazinsky v. Supreme Lodge Knights Orphans' Soc. 84 N. Y. 28, 38 Am.
of Honor, 31 Fed. 592; Columbia Rep. 478; Payne v. Mutual Relief
Ins. Co. v. Buckley, 83 Pa. St. 293, Soc. 17 Abb. N. C. (N. Y.) 53, 6
24 Am. Rep. 172. N. Y. St. Rep. 366.
2 Osterman v. District Grand Lodge See also §§ 1320 et seq. herein.
No. 4 Independent Order Bnai Brith See Lazinsky v. Supreme Lodge
(111 Cal. XVI.) 43 Pac. 412. Knights of Honor, 31 Fed. Rep. 592,
3 Olmstead v. Farmers' Mutual Fire as to record of suspension in socie-
Ins. Co. 50 Mich. 200, 15 N. W. 82. ty's books not being evidence of sus-
4 United States. — Hall v. Supreme pension.
Lodge Knights of Honor, 24 Fed. On conflict of laws as to notice of
450. premium, see notes in 63 L.R.A. 862,
Illinois. — Supreme Lodge Knights and 52 L.R.A. (N.S.) 283.
of Honor v. Dalberg, 138 111. 508, 28 5 Northwestern Traveling Men's
N. E. 785. Assoc, v. Schauss, 148 111. 304, 51
Michigan.— Pulford v. Fire De- 111. App. 78, 35 N. E. 747.
partment of Detroit Co. 31 Mich. 6 Jelly v. Muscatine Citv & Cent v
458. Mutual* Aid Soc. 120 Iowa, 689, 98
Missouri. — Bange v. Supreme Coun- Am. St. Rep. 378, 95 N. W. 19 < .
cil, Legion of Honor, 128 Mo. App.
461, 105 S. W. 1092.
2394
ASSESSMENTS AND DUES § 12G5
ate as a suspension of a member.7 So a benefit certificate which
provides that for a nonpayment of dues the member shall be
suspended and his rights forfeited, but winch also provides for his
reinstatement on specified conditions, does not contemplate that
a failure to pay dues will ipso facto work forfeiture, without
affirmative action by the association.8 And under other decisions
some affirmative act on the part of the society, association or com-
pany is necessary as provisions for suspension or forfeiture, for
nonpayment of dues or assessments, are not self-executing.9
§ 1265. When member is in good standing: when not. — The term
"good standing" is one frequently used in the certificates issued by
mutual benefit societies. The term, while a general one of wide
application, may also have reference to the nonpayment of dues and
assessments, and a member is not in good standing at the time of
his death, so as to warrant a recovery on his certificate, where he
has not complied with the society's laws in relation to dues and
assessments, and is then in default, and the time has fully ex-
pired within which they might be paid;10 and where it appears
upon trial of an action to recover upon a benefit certificate that
the assessment was regularly and properly levied, and was valid,
and the member fails to pay the same, no recovery can be had
on the ground that the member was not in good standing at his
decease.11 And a member does not, in the absence of waiver, con-
tinue in good standing by an attempt to pay an assessment when
not made in conformity with the rules of the order.12 But if the
7 Warwick v. Supreme Conclave Mississippi.— Murphy v. Independ-
Knights of Damon, 107 Ga. 115, 32 ent Order Sons and Daughters of
S. E. 951. Jacob, 77 Miss. 830, 50 L.R.A. 111,
8 Brooks v. Conservative Life Ins. 27 So. 624.
Co. 132 Iowa, 377, 119 Am. St. Rep. Missouri.— Purr v. Grand Lodge
560, 106 N. W. 913. Compare Mun- German Order of Harugari, — Mo.
ger v. Brotherhood of American Yeo- App. — , 2 Mo. App. Rep. 68.
meil) — Iowa, — , 154 N. W. 879. New Jersey. — American Council
9 California.— Osterman v. District No. 107, O. U. A. M. v. National
Grand Lodge, No. 4, I. O. B. B. Ill Council, 63 N. J. L. 52, 43 Atl. 2.
Cal. xvi. 43 Pac. 412. Pennsylvania. — Wheeler v. Lacka-
////hcJ.s.— Traders Mutual Life Ins. wanna Coal Co. Accidental Fund
Co. v. Johnson, 200 111. 359, 65 N. (Pa.) 5 Lack. Leg. N. 97.
E 634. Wl Ins. L. J. 222 {distinauish- England.— Wooley v. Victoria Mu-
ing Lehman v. Clark, 174 111. 279, 43 tual Fire Ins. Co. (Ont.) 19 Canadian
L.R.A. 648, 51 N. E. 222, 27 Ins. L. L. T. 212.
J. 745, rev'g 71 111. App. 366) ; Co- 10 MeMurry v. Supreme Lodge
lumbus Mutual Life Assoc, v. Ban- Knights of Honor, 20 Fed. 107.
rahan, 98 111. App. 22; High Court n Passenger Conductor's Life Ins.
Independent Order of Foresters v. Co. v. Birnhaum, 116 Pa. St. 565, 11
Schweitzer, 70 111. App. 139, ail'M Atl. 378.
171 111 325, 49 N. E. 506. 12 Scholler v. Grand Lodge Ancient
2395
§ L265 JOYCE ON INSURANCE
company has waived the forfeiture by subsequently levying assess-
ments and recovering prior assessments, the question of good
standing becomes immaterial in the action upon the certificate of a
deceased member;13 although if the officers to whom the assess-
ments so made were paid alter suspension of the member, and he
is not restored, the company may nevertheless deny the member's
good standing.14 If a member neglects to renew a deposit of the
amount necessary to meet his assessments upon notification there-
of as required by the contract, he forfeits his good standing, and
no recovery can be had upon his certificate.15 But the suspension
most he regularly made; thus, if the quarterly dues are payable
"on or before the first meeting in each quarter," it must appear
that a meeting has been held since the commencement of the
quarter; the fact that the association holds a weekly meeting is
not enough where it is attempted to deny a member's good stand-
ing for nonpayment of dues for a certain quarter.16 A mem-
ber also continues in good standing where his dues are advanced by
the local lodge and no steps are taken by it to suspend.17 And
a mere delinquency of a member of a mutual benefit association in
the payment of dues or assessments, does not defeat his good
standing so long as he has a right to pay and the association
forbears to take action.18 So the payment of dues in arrears
entitles the beneficiary to death benefits, where the member dies
after the expiration of the time when he would have been in
good standing under the by-laws, even though he was taken ill
before said period.19 It must be shown, to support a defense that
the member was not in good standing, that such an assessment
as the assured was obligated to pay had been levied.20 And the
burden of proof that a member was not in good standing rests
upon the association when it relies upon that defense.1
In the construction of contracts providing for "good standing,"
Order United Workmen, 96 N. Y. Travelers of America v. McAdam,
Supp. 1088, 110 App. Div. 456. 125 Fed. 358, 61 C. C. A. 22.
13 Millard v. Supreme Council 18 Jelly v. Muscatine City & Coun-
Ameriean Legion of Honor, 81 Cal. tv Mutual Aid Society, 120 Iowa,
340, 22 Pac. 804. See c. XLIV. 689, 98 Am. St. Rep. 3*78, 95 N. W.
herein. 197.
14 Lyon v. Supreme Assembly 19 Tucker v. George Shiftier Coun-
Etoyal Society of Good Fellows, 153 cil, No. 177, Jr. O. U. A. M. (Pa.)
Mass. 83, 26 N. E. 236. 27 Lane. Law Rev. 121.
15 Ziegler v. Mutual Aid & Benevo- 20 Kinney v. Brotherhood of Amer-
lent Life Ins. Co. 1 McGloin (La.) ican Yeomen, 15 N. Dak. 21, 106 N.
284. W. 44.
16 Mills v. Rebstock, 29 Minn. 380, x Sleight v. Supreme Council Mys-
13 N. W. 162. tie Toilers, 133 Iowa, 379, 107 N. W.
17 Order of United Commercial 183.
2396
ASSESSMENTS AND DUES . L266
consideration should be had in all cases to the decisions under simi-
lar contracts in other cases where the provisions for forfeiture
or suspension for nonpayment of dues or assessments exist, and in
view of such decisions the ruling in some of the cases under this
section will be found questionable, or a1 Leasl inconsistent therewith.
§ 1266. Nonpayment of assessments: when no forfeitures. — No
forfeitures or suspensions occurs in mutual benefil societies or com-
panies for uonpaymenl of an assessmenl when due unless so pro-
vided.8 Where money deposited to meel .-ill future assessments is
wrongfully applied on assessments made prior to membership,
the member will not be in default for nonpayment of assessments
to which the said money should have been applied.8 But an as-
sessment must have been legally made by a lawfully constituted
body to authorize suspension of a member, for nonpayment there-
of.4 An assessment must also be legally made; that is, in the
manner and for the purposes specified by the nllicers designated,
otherwise there can be no forfeiture.5 If an assessment falls due
after the loss of the property insured, its nonpayment will not
operate as a forfeiture with reference to that loss, even though the
policy provides that neglect for thirty days to pay an assessment
after notice thereof shall avoid the contract.6 Nor can a forfeiture
for nonpayment of assessments be declared after death to destroy
rights under a certificate in force at the time of death.7 In an
Illinois case a new society became successor of another, and issued
new certificates upon surrender of the old ones under a resolution
therefor, which also provided that assessments made by the old
society not due at the time of transfer of membership should be-
come due and payable to the new society the same as it would have
been to the old one had there been no transfer. The new certifi-
cate of a member thus transferred provided for the payment of a
specified sum and forfeiture for nonpayment of assessments "made
2 Mutual Life Ins. Co. v. French, 973; Smoot v. Bankers' Life Assoc.
30 Ohio St. 240. 27 Am. Rep. 443; 138 Mo. A pp. 438, 120 S. W. 719.
Keeton v. National Union, — Mo. 5 Row-swell v. Equitable Aid Unions,
App. — , 182 S. W. 798. See Brother- 13 Fed. S til ; Agnew v. Ancient Order
hood of Railway Trainmen v. Dee, United Workmen, 17 Mo. App. 254.
- Tex. Civ. App. — , 108 S. W. 492. See §§ L290-1302 herein; Supreme
3 Kvarts v. United States .Mutual Council Catholic Knights of America
Occident Assoc. 40 N. Y. St. Rep. v. txigsdon, 183 Ind. 183, 108 N. E.
878, 16 N. Y. Supp. 27, 61 Hun 587.
(N. Y.) 624. 6 Seyk v. Millers' National Ins. Co.
4 King v. Physicians' Casualty As- 74 Wis. 67, 3 L.R.A. 523, 41 N. \Y.
sociation of America, 97 Neb. 637, 443.
150 N. W. 1010. See also Burchard 7 Baker v. Citizens' Mutual Fire
v. Western Commercial Travelers' Ins. Co. 51 Midi. 243, 16 N. W. 391.
Assoc. 139 Mo. App. 606, 123 S. W.
2397
§ 1266 JOYCE OX INSURANCE
by the society," and it was held that this covered only assessments
made by the new society, and the member's certificate was not for-
feited for nonpayment of an assessment made by the old society.8
Again, if the obligation to pay an assessment arises from an inde-
pendent contract, its violation does not affect the member's rights
under his certificate. The forfeiture or suspension must be pro-
vided for as a part of the contract to be of force.9
A member of a mutual bene! it society cannot be adjudged in de-
fault for nonpayment of dues, where the amount of accrued sick
benefits to which he is entitled exceeds the unpaid dues.10 And
a member is not in default for nonpayment of an assessment
for •'mortuary and disability purposes" where it is not within the
terms of a certificate providing for an annual payment of a cer-
tain sum and also for a certain additional sum as an assessment
on the "death" of a member.11 Nor can there be a legal suspen-
sion for nonpayment of an assessment which was met by that
preceding and so on down to the first one which wras covered by
the advance payment made on admission into the society.12 And
where a member is not in default in his payments, a recovery on
his certificate is not precluded merely by his declaration that he
must drop his insurance because he cannot pay his assessments.13
And if assured dies on the day the assessment is due there is no
forfeiture.14 Failure of a subordinate lodge of a mutual benefit so-
ciety to remit an assessment to the grand lodge, will not forfeit the
rights of a member, although the by-laws provide that the grand
lodge shall not be held for neglect of duty of subordinate lodges.15
And the failure of the secretary of a local, subordinate branch
or section of the Knights of Pythias, to transmit to the general
8 Mutual Life & Aid Soc. v. Mil- fit Life Assoc. 166 Mass. 916, 44
ler, 23 111. App. 34. N. E. 226.
9Sanford v. California Farmers' 12 Demings v. Supreme Lodge
Mutual Fire Ins. Assoc. 63 Cal. 547. Knights of Pythias, 48 N. Y. Supp.
10 Rogers v. Union Benevolent Soc. CA9> 20 APP- Div- 622- See aIso
No. 2, 111 Ky. 598, 55 L.R.A. 695, ^ v Clark 174 111. 279, 43
64 S. W. 444; National Council l j 745 ?4vt 7f Ilf A ' 366 "'
Junior Order American Mechanics "ispetherie^v Order^of Amar-
fJhS w Jo rh2T ' y'r i ' inth, 114 Mich. 420, 4 Det. Leg. N.
173 S. W. 813. But compare Inde- g26 72 N W °62
pendent Order of Sons & Daughters ~u Supreme" Tribe Ben Hur v. Paul,
of Jacob of America v. Enoch, 108 24 Ind. App. 316, 56 N. E. 780.
Miss. 302, 66 So. 744. 15 Murphy v. Independent Order
On application of accrued benefits 0f the Sons & Daughters of Jacob
upon dues or assessments accruing on 0f America, 77 Miss. 830, 50 L.R.A.
a benefit certificate, see note in 55 111 (annotated on forfeiture of ben-
L.R.A. 605. efit certificate by default of subor-
11 Langdon v. Massachusetts Bene- dinate lodge), 27 So. 624.
2398
ASSESSMENTS AND DUES § 12G6
board of control, within the time specified by the general laws
of said order, moneys paid to him in due lime by a member, will
not be ground for a forfeiture of the policy of such member,' since
the secretary's negligence is no1 chargeable to the member, bu1 is
that of an agent of the order, notwithstanding a provision in llio
general laws of the order to the effect that he is to be regarded
as tlu: agent of the member, and not of the order, where the gen-
eral laws also require the member to pay dues to such secretary
only, and provide that the secretary shall transmit, immediately
after the tenth of each month, all moneys collected by him, and
that the local branch shall be responsible to the board of control
for all such moneys collected by the secretary.16 A member of
a mutual benefit society cannot be declared in default for non-
payment of assessments, if he has paid in enough money to meet
the assessments, but it has been wrongfully diverted to other
purposes in excess of the authority of the society.17 Failure to
pay dues will not of itself deprive a member of a mutual benefit
society of the right to sick benefits, under rules which provide
that he may be suspended for failure to pay for a specified time, and
expelled for continued failure where they further provide that no
16 Supreme Lodge Knights of Order Sons & Daughters of America,
Pvtliias v. Withers, 177 U. S. 260, 77 Misc. 830, 836, 50 L.R.A. 115, 27
44 L. ed. 762, 20 Sup. Ct. 611. So. 624.
Cited in : United Slates. — McMast- Missouri. — Winter v. Supreme
er v. New York Life Ins. Co. 183 U. Lodge Knights of Pvthias, 96 Mo.
S. 25, 39, 46 L. ed. 64, 73, 22 Sup. App. 1, 14, 69 S. W. 662.
Ct. 10; Jumper v. Sovereign Camp, New York. — Schoeller v. Grand
127 Fed. 635, 642, 62 C. C. A. 361, Lodge Ancient Order United Work-
368; Modern Woodmen v. Tevis, 117 men, 96 N. Y. Supp. 1088, 110 App.
Fed. 369, 370, 54 C. C. A. 294; Div. 460; Brown v. Independent
Modern Woodmen v. Tevis, 111 Fed. Order Friends, 72 N. Y. Supp. 806,
113, 119, 49 C. C. A. 262. 66 App. Div. 264; Brown v. Inde-
District of Columbia. — Prudent pendent Order Friends, 70 N. Y.
Patricians v. Marr, 20 App. D. C. Supp. 397, 34 Misc. 560.
371. North Carolina. — Bragaw v. Su-
Maryland. — Monahan v. Mutual preme Lodge Knights & Ladies of
Life Ins. Co. 103 Md. 145, 157, 5 Honor, 128 N. Car. 354. 358, 54
L.R.A.(N.S.) 762, 63 Atl. 211; L.R.A. 602, 604, 38 S. E. 905.
Schlosser v. Grand Lodge Brother- Oregon. — Whigham v. Independent
hood of Railroad Trainmen, 94 Md. Foresters, 44 Oreg. 543, 553, 75 Pac.
362, 368, 50 Atl. 1048. 1067.
Michigan. — Wagner v. Supreme South Carolina. — Mitchell v. Leech,
Lodge Knights & Ladies of Honor, 69 S. Car. 413, 421, 66 L.R.A. 726,
128 Mich. 660, 667, 87 N. VY. 903. 104 Am. St. Rep. 811, 48 S. E. 290.
Mississippi* — National Mutual 17Clark v. Iowa State Traveling
Building & Loan Assoc, v. Brahan, Men's Assoc. 156 Iowa, 201. 42
SO Miss. 107. 429, 57 L.R.A. 798, L.R.A.(N.S.) 631, 135 N. W. 1111.
31 So. 840; Murphy v. Independent
2399
■•> L267, L268 JOYCE ON INSURANCE
member shall l>e suspended or expelled without a fair and im-
partial trial.18 If the member of a fraternal association dies
with ol it paying endowment dues and the period limited for pay-
ment in order to prevent a forfeiture has no1 expired, he is not in
arrears.19 Ami where dues are in arrears the payment of those
last in date upon requesl operates to make invalid a suspension
for nonpayment- of dues.20
§ 1267. Assessments by unauthorized company. — Where the
statute of a state provides that no foreign company shall, "directly
or indirectly, take risks or transact any business of insurance" in
such slate, a contract of insurance by a foreign company upon
property in such state is held to necessarily involve the doing of
business within that state, and therefore it is also held that a policy-
holder in such a case is not liable for assessments, though the con-
tract was executed outside the state.1
§ 1268. Liability to assessments: cancelation: surrender: with-
drawal.— An insurance by a mutual company may be canceled
by agreement of the parties, and the insured is not liable to as-
sessment on his premium notes for subsequently contracted indebt-
edness, nor for unpaid assessments made prior thereto ; 2 but the
agreement to cancel must be executed to have such effect.3 And
it is held that upon withdrawal by a member he cannot be held
liable to pay assessments thereafter, although he cannot thereby
avoid obligations already incurred.4 Where the amount of all the
assured's liabilities were more than fully paid at the time of the
cancelation of his policy, it was held that his insurance having
18 Rogers v. Union Benevolent Soc. W. 409. See §§ 1216, 1275 herein.
No. 2, 111 Ky. 598, 55 L.R.A. 605, Examine Russell v. O'Donoghue (U.
64 S. W. 444. S. C. C.) 178 Fed. 106, 39 Ins. L. J.
19 Grand Court of Texas Inde- 1107.
pendent Order of Calanthe v. Johns, 2 York County Mutual Fire Ins.
— Tex. Civ. App. — , 181 S. W. Co. v. Turner, 53 Me. 225; Akers
869. v. Hite, 94 Pa. St. 394, 39 Am.
On validity of payment of pre- Rep. 792; Columbia Ins. Co. v. Buck-
mium or assessment during period of ley, 83 Pa. 293, 24 Am. Rep. 172 ;
extension agreed upon, hut after in- Campbell v. Adams, 38 Barb. 132;
sured's death, see note in 2 B. R. C. Tolford v. Church, 66 Mich. 431, 33
191. N. W. 913, noted below.
20 Walton v. Fraternal Aid As- 3 Columbia Ins. Co. v. Stone, 3
soeiation, 149 Mo. App. 493, 130 Allen (85 Mass.) 385.
S. K. 1124. 4 Union Mutual Fire Ins. Co. v.
xSo held in Rose v. Kimberly & Spaulding, 61 Mich. 77, 27 N. W.
Clark Co. S!) Wis. 545, 46 Am.' St. 860; Borgraefe v. Knights of Honor,
Rep. 855, 27 L.R.A. 556, 62 N. W. 26 Mo. App. 218. See Baker v. New
526, 10 Cent. L. J. 355; Seamens v. York State Mutual Benefit Assn. 27
T.niple Co. 105 Mich. 400, 55 Am. N. Y. Week. Dig. 91, 45 Hun, 588,
St. Rep. 457, 28 L.R.A. 430, 63 N. 9 N. Y. St. Rep. 653.
2400
ASSESSMENTS AM) DUES L269
been terminated by the cancelation he was not liable for losses
iquently accruing.5 There are, however, decisions which are
seemingly in conflict with the doctrine of the above cases, and
which hold that a liability to assessment may still exist, notwith-
standing cancelation and surrender or insolvency.6 But if there
has been an executed agreement to cancel, and an adjustment or
ettlement, and there is no fraud or other ground of relief from
such agreement, and the agreement is one which the company or
society might lawfully make, it is difficult to see how member-
ship or liability will continue.7
It is decided that makers of deposit notes given to a mutual
insurance company to cover future assessments, although they
may have been deceived by misrepresentations as to a guaranty
fund for partial protection against assessments, are not entitled
to have their notes canceled without paying assessments for losses
which occurred during the time for which they had the benefit
of I heir insurance, — at least when they have asked no relief until
after the company has ceased to do business and assigned its prop-
erty for the benefit of creditors.8 So failure to adjust a loss until
a memher of a mutual insurance company cancels his member-
ship will not relieve him from his share of the liability thereon.9
Again, a change in a company's charter may be of such a radical
character as to discharge previous subscribers who do not assent
to the change from liability to pay future assessments on their
stock.10
§ 1269. Right of member to withdraw and avoid liability for
assessments. — A policy holder in a mutual fire company cannot
be permitted to withdraw therefrom and be released from all lia-
bility for losses,11 even though there is a limitation in the contract.12
And although a memher of a mutual company is at liberty to
surrender his policy and withdraw, subject to a liability for his
5 Tolford v. Church, 66 Mich. 431, 9 Ionia, Eaton & Barry's Farmers'
33 N. W. 913. Mutual Fire Ins. Co. v. Ionia Cir-
6 Commonwealth v. Massachusetts cuit Judge, 100 Mich. 606, 32 L.R.A.
Mutual Ins. Co. 112 Mass. 116. In 481, 59 N. W. 250.
tin- case neither insolvency nor can- On liability of members of mutual
olation were held to relieve from insurance company, see note in 32
liability for losses accrued while L.R.A. 481.
members. Commonwealth v. Me- 10 Ashton v. Burbank, 2 Dill. (U.
chanics' Mutual Ins. Co. 112 Mass. S. C. C.) 435, Fed. Cas. No. 582.
192. See also §§ 1231, 1232 herein. "Detroit Manufacturers Mutual
7 See cases under first note in this Fire Ins. Co. v. Merrill, 101 Mich,
section. 393, 59 N. W. 661 ; Nichol v. Murphy.
8 Corey v. Sherman, 96 Iowa, 114, 145 Mich. 424, 108 N. W. 704.
32 L.R.A. 190, 60 X. W. 232, 64 N. "Nichol v. Murphy, 145 Mich. 1-1.
W 828. 108 N. W. 704.
Jovce Ins. Vol. TIT.— 151. 2401
§ 1270
JOYCE ON INSURANCE
proportion of all assessments "to which the company is liable at
the time of his withdrawal/' this privilege does not enable him
by withdrawal to avoid liability for assessments to cover his pro-
portion of losses for previous years, for losses in litigation, for
which the company was liable at the time of his withdrawal, but
which have not been assessed.13 So when members of a mutual fire
insurance association have enjoyed the protection which member-
ship affords, they cannot, after a loss has been sustained, withdraw
and refuse to pay their portion thereof.14
§ 1270. Whether contract to pay assessments unilateral. — If
under the contract the member is to be liable during his member-
ship for assessments duly made by the society's officers upon the
deaths of other members, subject to forfeiture for nonpayment of
said assessments within a limited time, he is liable during his
membership for assessments regularly made upon the death of other
members; the stipulation for forfeiture cuts off the possibility of
future obligation, but does not discharge the members from past
society debts or dues, and the contract is not unilateral.15 It is un-
13 Ionia E. & B. Farmers' Mutual .... On the part of the appel-
Fire Ins. Co. v. Otto, 96 Mich. 558, lant it is contended that he never
22 Ins. L. J. 857, 56 N. W. 88; Id. became indebted for the assessment
97 Mich. 522, 56 N. W. 755. levied against him, but that he had
14 Perry v. Farmers' Mutual Fire the option of forfeiting his rights
Ins. Assoc. 139 N. Car. 374, 2 L.R.A. under the certificate by declining to
(N.S.) 165 (annotated on liability of pay them. ... In his contention
officers of mutual company to mem- the appellant argues that the certifi-
bers, for permitting diversion of cate held by him constituted a con-
funds), 111 Am. St. Rep. 791, 51 S. tract of life insurance
E. 1025. That being a contract of life insur-
15 Ellerbe v. Barney, 119 Mo. 632, ance it must necessarily possess the
23 L.R.A. 425, 23 Ins. L. J. 356, 25 distinguishing features imputed to
S. W. 384. In this case the court, such a contract by the courts in being
per Martin, special judge, says: a unilateral or one-sided undertaking
"The defendant paid assessments of the assured as to all future pay-
until those now in dispute were called, ments required of him. If he chooses
The latter were regularly made by to pay them, the company is bound
the proper officers of the society to to continue the insurance. If he
pay the amounts due upon the deaths declines to make further payments,
of members in good standing holding the insurance ends without imposing
valid certificates. Defendant was duly on him any liability on account of
notified of these assessments. After- them The certificate in
ward the insurance commissioner, controversy differs materially from
now plaintiff, took possession of the the premium paying policies of the
assets of the concern under the laws old capital stock companies. It is
of Missouri, because of the insolvency the undertaking of a corporation
of the company, and now seeks to organized on an entirely different
compel payment of these assessments basis. The Masonic mutual ben< . I
as assets for the benefit of those society of Missouri belongs to that
properly entitled to share therein, class of life insurance companies
2402
ASSESSMENTS AND DUES
§ L270
equivocally decided, however, in an Illinois case, thai the con-
tract of a member of a mutual benefit association is purely uni
lateral, and lie may refuse to continue his payments at any time,
in which event the association can only declare his Lnteresl for-
feited, and cannot sue for unpaid assessments.16 This decision is
known among insurance men by the deavored to show that precisely the
name of 'fraternal beneficiary as- cqntrary is implied in the very nature
social ions.' .... It is mani- and purpose of the contract in ques-
fest that these assessments in their turn I do not regard this
nature bear a near resemblance to the contract unilateral in the sense of
dues incident to membership in a relieving the assured from liability
friendly society, and constitute a con- for insurance carried and considera-
sideration for the promised insur- tion earned. No unilateral contract
ance of the association materially has ever been permitted to accom-
differing from the annual premium plish such an unjust result." Black,
stock companies. When considered C. J., and Brace and Burgess, JJ.,
in the light of society dues, it will dissenting.
be admitted that a person cannot, Whether premium or assessment a
by discontinuing his membership, debt, see S§ 1098, 1245c herein,
escape the obligation of paying those 16 Lehman v. Clark, 174 111. 279, 43
dues which accrued before the ter- L.R.A. 648, 51 N. E. 222, 27 Ins.
initiation of his membership." The L. J. 745, rev'g 71 111. App. 366.
court then considers certain portions The court, per Phillips, J., said:
of the certificate and by-laws, and "A contract for insurance in any
adds: "There is nothing whatever benevolent association is a unilateral
in this language, providing as it does contract, and by the association pro-
for the forfeiture of membership and vision is made that for a failure to
discontinuance of the rights incident pay the assessments made on a mem-
to it, which suggests or intimates a ber who holds a certificate, all bene-
discharge from past society debts fits he may have under and by virtue
and dues. In the first section of the of such certificate are forfeited, and
article the assessment is expressly all payments theretofore made are
declared to be binding as a demand forfeited. Such is the rule with refer-
which the members must pay. In ence to insurance under almost all
the second section he forfeits his circumstances. If any other rule
membership and rights by failure to should exist than that a contract
pay after a notice of twenty days, is purely unilateral, then in effect
A condition of forfeiture of rights a partnership would be formed by
is a well-known feature added to which every person insured would
many contracts which does not in become liable to all others insured,
itself discharge the obligations which and the benefits derived from life
have already accrued under it insurance would be rendered so
The natural eifect of the forfeiture doubtful and uncertain, and so
is to cut off the possibility of future prejudicial to those seeking insur-
obligations, but not to 'disturb the ance, that their individual inter-
validity of past indebtedness. Some- ests would require them to abstain
thing very positive would have to from taking out a policy or a cer-
appear either in the express declara- titicate of membership. If by taking
tion of the contract, or as a neces- out a certificate of membership or a
sary implication from its nature to policy they create a continuous lia-
give it a different effect. No such bilily against themselves which might
declaration appears, and I have en- be enforced by the company, associa-
2403
§<} 1271, 1272 JOYCE ON INSURANCE
quoted from and followed in Indiana where the question was
declared to be a new one in that state, the case being that of an
assessment association where the contract provided for forfeiture
for nonpayment of assessments.1*7
§ 1271'. Right to deny liability for losses on policies to nonraem-
bers. — The fact that regular members of a mutual insurance com-
pany have received the benefits of their insurance does not estop
them to deny their liability to assessments for losses on policies
issued to nonmembers.18
§ 1272. Dues and assessments: effect of insolvency upon liabil-
ity.19— The neglect to pay the monthly dues after a safety fund
association stops business and pending its dissolution, does not for-
feit the policy, but it is otherwise as to the nonpayment of assess-
ments duly made prior to the filing of the bill for dissolution, at
least so as to preclude the right to share in the safety fund.20 In
determining this question, consideration must always be given to
the fact whether the member is liable at all events under his con-
tract, or whether it is optional with the member to pay or not as
he chooses, subject only to forfeiture if he does not.1 If the
charter provides that the member shall be liable to the amount of
the note given in case the losses exceed the funds on hand, in-
solvency does not destroy the obligation to contribute to the speci-
fied amounts.2 So when losses have absorbed the entire funds of
the company, a member may be liable to assessment to the full
tion, or by the court through its re- 18 Corey v. Sherman, 96 Iowa,
ceiver, then few men would avail 114, 32 L.R.A. 490, 60 N. W. 232,
themselves of the benefits of a policy 64 N. W. 828.
or certificate of membership which 19 See also §§ 1231, 1232, 1245c
would create a liability they could herein.
not throw off at pleasure, but would 20 Burdon v. Massachusetts Safety
make them indefinitely liable for as- Fund Assoc. 147 Mass. 360, 1 L.R.A.
sessments or premiums. The whole 146, 17 N. E. 874, 6 New Eng. Rep.
scheme of insurance is based on a 840.
contract purely unilateral, and wheth- 1 See Protection Life Ins. Co. In
er the payment for insurance be re, 9 Biss. (U. S. C. C.) 188, Fed.
termed a premium or an assessment, Cas. No. 1,444; Macklem v. Bacon,
the right of the association or com- 57 Mich. 334, 24 N. W. 91.
pany is to declare a forfeiture for 2 Vanatta v. New Jersey Mutual
non-payment of premium or assess- Life Ins. Co. 31 N. J. Eq. 15. As to
ment, and not a right to recover the power of the court in a proceed-
assessment or premium in a suit." ing for the winding up of a safety
17 Clark v. Scliromeyer, 23 Ind. fund association to order the levying
App. 565, 55 N. E. 785, 29 Ins. L. of a death assessment, see Burdon v.
J. 477, holding also that assessments Massachusetts Safety Fund Assn. 147
could not be collected by a receiver Mass. 360, 6 New Eng. Rep. 840, 1
from one who had ceased to pay L.R.A. 146, 17 N. E. 874.
them.
2404
ASSESSMENTS AND DUES § 1272
amounl authorized by the unexpired contract of insurance.8 So
premium notes of members of a mutual company may be liable
to assessments after insolvency to pay unearned premiums due to
one to whom it had issued a policy for an all cash premium foi
simple insurance, under a statute authorizing it so to do.4 Nor
after insolvency, but before declaration thereof, can a member
make ;i binding agreement with the company whereby his lia-
bility to assessments is determined by cancelation of his policy.5
So the insolvency of the insurers before the expiration of the
policy is no defense to an assessment.6 And the obligations to con-
tribute to the payment of prior losses, on assessments, is not ter-
minated by the insolvency of a mutual insurance company and
its assignment for the benefit of creditors.7 But a member is not
liable when the company is insolvent, where there is no expn ss
provision to pay assessments as the consideration of the contract
is actual bona fide continuing insurance. And this consider-
ation fails if the company is insolvent when an assessment is levied
and to require a member to pay for something he is not getting
would be unfair. And even though a promise to pay may be
implied, insolvency excuses payment where personal liability is
expressly excluded by contract, nor in such case will a contention
be sustained that the member is liable because a statute requires
every life and casualty insurance company doing business on the
assessment plan to specify in the certificate the amount to be
paid and that said statute authorizes an application to show cause
why such an association should not be restrained from doing
business if the matured claims exceed its assets or assessments made
or in process of collection, for said statute does not affect the con-
tract between insured and the association, but provides merely a
method of determining when proceedings may be instituted for
winding up such institutions and where in addition the statute
is a subsequently enacted one.8 And if a fire policy issued by a
3 Commonwealth v. Massachusetts citing as holding that contract must
Mutual Fire Ins. Co. 112 Mass. 116. be implied, Gray v. Daly, 57 N. Y.
4 In re Minneapolis Mutual Fire Supp. 527, 40 App. Div. 41, although
Ins. Co. (Powell v. Wyman) 49 N. Y. court of appeals has not de-
Minn. 291, 51 N. W. 921. cided the question, and as to point
5 Doane v. Millville Mutual Ins. that consideration, failed upon in-
Co. 43 N. J. Eq. 522, 11 Atl. 739. solvency the court per Ward, C. J.,
6 Sterling v. Merchants' Ins. Co. said : "This view is forcibly expressed
32 Pa. St. 75, 72 Am. Dec. 773. by Judge Blodgett in Protection Life
7Corev v. Sherman, 96 Iowa, 114, Ins. Co., In re, 9 Biss. (U. S. C. C.)
32 L.R.A. 490, 60 N. W. 232, 64 188, 196, Fed. Cas. No. 1,444, and
N. W. 82S. his remarks are cited with approval
8 Russell v. 0'Donoc:liue (U. S. C. in the Matter of Equitable Reserve
C ) 178 Fed. 106, 39 Ins. L. J. 1107, Fund Life Assoc. 131 N. Y. 354, 377,
2405
§ 1273 JOYCE ON INSURANCE
mutual company purports to be a standard one upon which in-
sured had paid the regular premium as and for ordinary insur-
ance it does not make insured liable to assessments, even though it
provides that the articles and by-laws of the association form part
of the contract.9
§ 1273. Assessments: receiver. — The same consideration is in-
volved in the determination of this question as is noted at the
beginning of the last section, viz., whether payment by the mem-
ber is optional nr not. If a statute confers upon a receiver a right
to sue for assessments due from members, he may maintain such
suit and recover costs if successful.10 An assessment levied by a
receiver by order of a court of competent jurisdiction is valid.11
And if the order appointing a receiver has not been appealed from,
his right to make an assessment cannot be questioned.12
Although it is held that if the authority to make assessments is
conferred solely upon the directors, courts cannot order an assess-
ment.13 Nevertheless it is decided that the court may upon
insolvency enforce collection of the insolvent company's assets
and as incidental thereto may direct the receiver to levy necessary
assessments even though a certain mode is prescribed by the com-
pany's by-laws, and directors only are empowered to levy assess-
ments.14 And, an assessment by the original receiver may, in the
court's discretion, be set aside for irregularity and because exces-
sive where a successor is appointed.15 The authority, however, of a
receiver to make an assessment where he is so entitled depends
upon the existence of the necessary facts, and not upon the order
of the court;16 and if he fails to comply with the requirements
of the by-laws respecting publication and notice of such assess-
ments, they are invalid.17 So in an action for assessments he must
allege and prove the necessary facts to entitle him to recover,18
30 N. E. 114." Under N. Y. Laws 18 Hill v. Merchants' & Manufac-
1892, e. 690, sec. 210. See N. Y. L. turers' Ins. Co. 28 Grant Ch. (U. C.)
1909, c. 33, sec. 210, Parker's N. Y. 560.
Ins. L. (ed. 1915) pp. 323-334. 14Whitaker v. Meley, 61 N. J. L.
9 Osius v. O'Dwyer, 127 Mich. 249, 1, 38 Atl. 840, aff'd 61 N. J. L. 602,
86 N. W. 831. 40 Atl. 893.
10 1 '.aeon v. Clyne, 70 Mich. 183, 15 Nichol v. Murphy, 145 Mich. 424,
38 N. W. 207, under Howell's Mich. 108 N. W. 704.
Stats, sec. 4263. 16 Thomas v. Whallon, 31 Barb.
11 Schofield v. Lafferty, 17 Pa. (N. Y.) 172.
Super. Ct. 8, under Pa. act 1885, 17 Sands v. Sanders, 26 N. Y. 239.
authorizing court of common pleas 18 Thomas v. Whallon, 31 Barb,
-of county in which seat of govern- (N. Y.) 172; Manlove v. Burger, 38
ment is located to appoint receiver. Tnd. 211; Downs v. Hammond, 47
12 Seamans v. Millers' Mutual Ins. Ind. 131.
Co. 90 Wis. 490, 63 N. W. 1059.
2406
ASSESSMENTS AND DUES § 1273
and if the complain! showa upon its face that neither the receiver
nor the court had examined nor passed upon the validity of the
claims against the company, there can be no recovery.19 h i
necessary, in an action by the receiver, to show all the facts upon
which the claims for losses were allowed, and for which the as
incuts on the premium notes were made It is only requisite that
sufficient claims for losses have been allowed to make up the sum
assessed. The fact thai claims have been allowed prima facie
hinds the members.20 So the statute may provide that the ass
ment shall be prima facie evidence of its regularity and of the
receiver's right to recover.1 If the statute only authorizes receivers
to assess the members and persons insured, they cannot assess
those whoso policies have been surrendered and canceled for
amounts claimed subsequently thereto.2 But even though policies
have expired before a receiver is appointed he may recover an
assessment premium note made to cover losses and expenses in-
curred during the life of the policy.3 And an assessment by a re-*
ceiver which does not include notes illegally surrendered to tho
makers does not invalidate it where he has assessed all the pre-
mium notes in his hands.4 It is held in New York that a receiver
may, under authority of the court, order an assessment where
there are proceedings for the voluntary dissolution of a benefit asso-
ciation.5 But it is also held in the same state that the circum-
stances may be such that no absolute duty rests upon the members
to pay an assessment ordered by the court to meet death losses, and
that the nonpayment of such assessment does not deprive the
members of a right to share in the reserve fund which under the de-
cision was not liable for death claims, but only a fund for the
assistance of living members; although it was held that the ex-
penses of winding up should be borne pro rata by both the "death
fund" and "reserve fund." 6 If a contract of insurance expressly
19 In this case it was held that the 2 Tolford v. Church, 66 Mich. 431,
amount of indebtedness previously 33 N. W. 913.
allowed by the directors, and also of 3 Whitaker v. Meley, 61 N. J. L.
the valid claims against the company, 1, 38 Atl. 840, afiPd 61 N. J. L. 602,
must be ascertained prior to making 40 Atl. 893.
an assessment, and that the averments 4 Davis v. Oshkosh Upholstery Co.
must show the time covered by the 82 Wis. 488, 52 N. W. 771. See
policy, and that the losses occurred §§ 1290-1302 herein, as to validity
during that period. Embree v. of assessment s.
Shiedeler, 36 Ind. 423. 5In re Equitable Reserve Fund
20 Sands v. Hill, 42 Barb. (N. Y.) Life Assoc. 40 N. Y. St. Rep. 800,
651. 16 N. Y. Supp. 80, 61 Hun, 299.
1 Bacon v. Clvne, 70 Mich. 183, 38 6 In re Equitable Reserve Blind
X. W. 207, under How. Mich. Stat. Life Assn. 131 X. Y. 354, 43 X. V.
sec. 42G3. St. Rep. 20 1. 21 Ins. L. J. 385, 30
2407
§ 1273 JOYCE ON INSURANCE
provides that a certain percentage of the assessments thereon shall
be set apart for the purpose therein set forth, the court cannot,
through a receiver, compel the payment of an assessment to be ap-
propriated to the payment of plaintiff's claim in violation of the
terms of the contract and the rights of policyholders.7 And in-
sured is not liable for an assessment on a premium note by a re-
ceiver under a decree to which he was not a party where his
policy has also been canceled and his premium note returned.8 Nor
can any assessment be recovered by a receiver from a member of a
mutual lire association who has paid an additional premium upon
condition that he would be guaranteed against liability for assess-
ment.9 When a premium note in advance for the security of
dealers is given for a mutual insurance company, in accordance
with the provisions of its charter at its commencement in busi-
ness, and is renewed, the makers are equally liable, in case of
insolvency, to the receivers, as if the occasion for its use had arisen
during the existence of the first note ; 10 and trustees for winding
up the company's affairs may recover assessments on a policy con-
taining a contingent liability clause, although the policies were
canceled and the unearned premiums returned.11 An assessment
on premium notes, made by a receiver of a mutual insurance com-
pany under a decree of the court, is not an adjudication binding
on the courts of another state as against the maker of one of such
notes who was not a party to the proceedings resulting in the as-
sessment and who before the bankruptcy of the company has sur-
N. E. 114, modifying the last case, enstoe v. Morgan, 60 Leg. Intel. 228,
See also In re Protection Life Ins. 12 Pa. Dist. Rep. 268.
Co. 9 Diss. (U. S. C. C.) 188, Fed. 10 Howard v. Hinckley & Egery
Cas. No. 1,444. See as to right of Iron Co- 64 Me- 93-
receiver to assess as opposed to . n Mansheld etal Trustees v Cm-
understanding among members to the J™"*1 ,leeT Co- ^ ?9hl0 QDec\,6V )
j. ivr n r> r-Tw- i 28 Week. L. Bull. 113. See Maine
contrary, Macklem v. Bacon, 5/ Mich. u , , ,, T ~ -p.. ,
nn* o/ -vr itt n-i / -i v Mutual Marine Ins. Co. v. Pickering,
.>34 24 N. W. 91 (one judge dis- 66 Me m The New York statute
senting). provides for the cancelation and dis-
7 Blackwell v. Mutual Reserve Fund charge of an insurance contract by
Life Assoc. 141 N. Car. 117, 5 L.R.A. the receiver, with the consent of the
(N.S.) 771 (annotated on right to other parties holding such engage-
have receiver appointed to take ment (2 N. Y. Rev. Stats, sec. 75;
charge of claims not legally or equi- Jones on Business Corporation Laws,
tably enforceable), 115 Am. St. Rep. P- 267J .and. also for the cancelation
677 53 S E 833 policies in fire companies by the
oV' \ 0 ,,.,, „n receiver, and for the issue of cer-
»Langworthy v. Saxony Mills, 72 tificatcs'of mdcbtedness. Gen. Laws
Mo. App. 363. N Y. 1892, c. 38, art. 3, sec. 123;
9 Wetmore v. McElroy, 96 S. Car. Parker's N. Y. Ins. L. (1915) § 123,
182, 80 S. E. 266. Compare Black- p. 225.
2408
ASSESSMENTS AND DUES § 1274
rendered his policy and received back his note.12 The receiver of
a foreign mutual insurance company, appointed by a foreign
court of competent jurisdiction, may maintain an action, in the
courts of Wisconsin against a member of the company resident
there, to recover an assessment levied by a decree of a foreign court,
upon a premium note which was a part of the assets of the com-
pany in the hands of the receiver when the assessment was made13
And a receiver of a foreign company which does not transact
business in New York within the intent of the statute, may en-
force in its courts a liability for assessment.14 A foreign judgment
does not conclude policyholders of a sister state as to the amount
and necessity for an assessment so as to preclude their denying
liability therefor.15 The levy of an assessment by the assignee of
a corporation not in bankruptcy is invalid,16 it is not error for
the court to refuse to order a receiver of stock corporation issuing
assessment plan policies, to levy assessments, as policyholders would
be under no legal obligation to pay them, and where the only pur-
pose in paying such assessments would be to continue the insurance
in force. In addition there would be no consideration for such
payment and no legal obligation to make it. Such a case differs
from that where policyholders in mutual companies are obligated
for death claims.17 And holders of cash premium policies as mem-
bers of a mutual company are liable for assessments levied by a
receiver.18
§ 1274. What receiver may include in assessment: premium
notes. — Where premium notes are given to a mutual insurance
company, it is held that the receiver may, where the company has
become insolvent, include in an assessment upon such notes claims,
shrinkage, interest on loss, and the expenses of the receivership.19
In case of the insolvency of a mutual fire insurance company, if an
order is made by the court appointing a receiver, all existing poli-
cies are canceled from the date of the order, and no assessments
can be made for premiums unearned at the time of the insolvency.80
12 Parker v. C. Lamb & Sons, 99 n Ensworth v. National Life &ssoe.
Iowa, 265, 34 L.R.A. 704, US X. YV. 81 Conn. 592, 71 All. 791, 38 Ins.
686. L J. 401.
13 Parker v. Stoughton Mill Co. 91 l8 Ely v. Oakland Circuit Judge,
Wis. 174, 51 Am. St. Rep. 881, 64 62 Mich. 40(3, 17 Dot. L. N. 62, 125
N. W. 751. N. W. 375. 127 N. W. 769.
14 Stone v. Penn Yan, Keuka Park 19 Davis v. Shearer, 90 Wis. 250,
& Branchport Rv. 109 N. Y. Supp. 62 N. W. 1050; Seamans v. Millets'
374, 125 App. Div. 94. Mutual Ins. Co. 90 Wis. 490. 63 N.
15 Swing v. Arkdelphia Lumber Co. W. 1059. See § 1307 herein.
90 Ark. 394, 119 S. W. 265. 20 Davis v. Shearer, 90 Wis. 250,
16 Hurlburt v. Carter, 21 Barb. (N. 62 N. W. 1050.
Y.) 221.
2409
§§ 1275, 1276 JOYCE ON INSURANCE
§ 1275. Assessments by trustee of unauthorized company. —
Where a mutual fire insurance company not qualified to do busi-
ness in a state because of noncompliance with the statutory re-
quirement of such state becomes insolvent, and a trustee is appoint-
ed, an assessment by such trustee upon the makers of the premium
notes within that state of the full amount due on their notes is
void, where such assessment was never affirmed by the court, and
the insured had surrendered their policies before the appointment
of a trustee.1
§ 1276. Restoration to membership: reinstatement: revival. —
Where b\r the terms of the contract the nonpayment of dues
or assessments operates as a suspension, or deprives the mem-
ber of his good standing, he may be restored to his rights
under the policy or certificate, or may be reinstated upon compli-
ance with the terms of his policy or certificate, and the provisions
of the society or order, and such laws will be liberally construed.
In mutual benefit societies, where the result of a default is a for-
feiture of the policy, and the laws of the society do not specify
the conditions upon which reinstatement may be had, there would
seem to be no doubt but that the society may, so far as empowered
by its laws, impose such conditions for revival of the policy or
reinstatement as are reasonable. The exercise of such a power is
consistent with the purposes and conduct of the organization and
the rights of other members. To hold otherwise would, in effect,
deprive other members of that protection to which their contract
with the society or company entitles them. Such a rule is based
upon the reason and justice of the law, and is not inconsistent with
the adjudicated cases, and must, therefore, when not so expressly
provided by the terms of the contract, be considered as an implied
condition of which every member will be deemed to have notice
when he enters into contract relations with such society. But
where the rules of the order provide that the member may be rein-
stated for valid reasons upon paying assessment arrearages, the so-
ciety is not the sole arbiter as to the validity of the reasons, but the
question is one for the jury.2 But a provision in a mutual benefit
1 So held in Swing v. Akely Lura- many previous assessments, which
her Co. 62 Minn. 169, 64 N.W. 97. fact the court declared manifested
2 Dermis v. Massachusetts Mutual his intent to pay. After the memher
Benefit Assoc. 47 Hun (N. Y.) 338 became unconscious, the company
(one judge dissenting). In this case sent him a notification of the fer-
tile member was rendered powerless feiture, and that the certificate might
by a sudden calamity before the ex- be renewed if he was in good health,
piration of the thirty days within but the court said that the company
which payment might under the con- had no right to add this condition
tract be made. The member had paid to the rule, as it was not included
2410
ASSESSMENTS AND DUES § 1276
certificate that a member who has forfeited his certificate may be
reinstated by presenting an application which shall be appn
by the secretary, refers to the secretary of the grand lodge.8 It is
held that a literal performance of the exacl conditions is requisite
to warrant a reinstatement. Thus, if the laws of the society re-
quire an appearance in person or an application in writing, and
the payment of back due- and assessments, this must be done.4 Ami
where the member after his suspension pays an assessment, and
the same is accepted. Ins rights under the policy revive, and the
company will be liable for a subsequently occurring loss.5 If
payment of all dues within a specified time after forfeiture is all
that is required by the by-laws, usage of the society does not im-
pose other obligations as prerequisites, for the positive terms of the
contract will exclude the custom.6 Again, if a by-law provides for
reinstatement upon presenting sufficient excuse for failure to pay
an assessment, and it appears that a director to whom the assess-
ment had been paid had neglected to pay it over to the company,
and the board refuses to reinstate upon said excuse on the ground
of the member's ill-health, the case is a proper one for a court
of equity.7
A form of policy providing for reinstatement "upon payment
of all arrears, with interest thereon not to exceed six per cent
per annum," is permissible under a statute giving the privilege
"upon the payment of all overdue premiums and every other
indebtedness to the company upon such policy, with interest at a
rate not exceeding six per cent per annum." 8 If a benefit certifi-
cate is forfeited prior to the enactment of a statute, the member's
reinstatement after the act goes into effect does not bring the cer-
tificate within the provisions of the act, so as to affect the right of a
beneficiary, by reason of the fact that he is not included within
those beneficiaries whom the statute designates as the only persons
therein, for if the reason was valid, son, 48 Kan. 718, 30 Pac. 460; re-
it was not dependent upon the mem- viewing 29 Pac. 473; Odd Fellows'
ber's good health. See § 1472 herein. Mutual Aid Assoc, v. Sweetser, 117
On judicial control of discretion as Ind. 97, 19 N. E. 722.
to reinstatement of insured, see note 6 Manson v. Grand Lodge, 30 Minn,
in 40 L.R.A.(N.S.) 148. 509, 16 N. W. 395.
3 Kennedy v. Grand Fraternity, 36 7 Van Houten v. Pine, 38 N. J.
Mont. 325, 25 L.R.A.(N.S.) 78, 92 Eq. 72. That equity has jurisdiction,
Pac. 971. sec Graveson v. Cincinnati Life Assoc.
4 Lehman v. Independent Order 8 Ohio (C. C.) 171. 26 Week. L.
B'nai B'rith, 23 N. Y. Week. Dig. Bull. 183, 66 C. D. 327.
409. 8 New Yoik Life Ins. Co. v. Hardi-
6 Washington Mutual Fire Ins. Co. son, 199 Mass. 190, 127 Am. St. Rep.
v. Rosenberger, 84 Pa. St. 373; Mod- 478, 85 N. E. 468.
era Woodmen of America v. Jarae-
2411
§ 1276a JOYCE <>N INSURANCE
in whose favor certificates in such societies can be issued.9 And
reinstatement of a person insured, to which he had a right upon
certain conditions complied with, constitutes no consideration for
a stipulation exacted from him, reducing the amount for which
the society should be liable.10 The fact that the member neglects
to be reinstated during his lifetime does not prevent his insurance
being revived after his death by payment of the sum due at his
death, provided that the period has not elapsed within which he
might, if living, be reinstated.11 And a reversal by the proper
officers of a masonic lodge as illegal, although after the death of
the member, of a vote by which such member was suspended,
and his restoration to the roles as of the date of his apparent
suspension, render him a member as though no such vote had
ever been passed, so as to create a liability on a certificate of mem-
bership in a mutual benefit society providing that membership shall
be forfeited by suspension or nonmembership in any masonic
lodge.12
A question sometimes arises as to the effect upon a member, who
has been restored or readmitted to membership, of the failure of a
local branch of a society to strictly conform to its constitution and
by-laws as to the routine prescribed in cases of members, and it
would seem that to require too strict a compliance in matters not
material, and which are merely formal and incidental to the ex-
ercise of the power, might, in many cases, be productive of great
injustice, and it has been held that although the proceedings
do not in all respects conform strictly to the rules of the order, the
company is estopped to deny the member's good standing.13
§ 1276a. Same subject: good health. — A provision in a policy of
life insurance that delinquent members may be reinstated if ap-
proved by the medical director and president, by giving reasonable
assurance that they are in continued good health, is valid and
reasonable, and the required approval is not merely a ministerial
act, but involves the exercise of judgment and discretion.14
9 Lindsey v. Western Mutual Aid defaulted policy by payment of pre-
Soc. 84 Iowa, 734, 50 N. W. 29, mium after death), 13 S. E. 564.
under Laws 21st Gen. Assem. Iowa, 12 Connelly v. Masonic Mutual
c. 65, sec. 21. Benefit Assoc. 58 Conn. 552, 9 L.R.A.
' 10 Davidson v. Old People's Mutual 428, 20 Atl. 671.
Benefit Soc. 39 Minn. 303, 1 L.R.A. 13 Gaige v. Grand Lodge, 48 Hun
482, 30 N. W. 803. (N. Y.) 137, 15 N. Y. St. Rep. 455;
11 Modern Woodmen of America v. Hoffman v. Supreme Council of
Jameson, 49 Kan. 677, 31 Pac. 733, American Legion of Honor, 35 Fed.
rev'g 30 Pac. 460, and 29 Pac. 473. 252.
See Wright v. Supreme Commandery 14 Lane v. Fidelity Mutual Life
of Golden Rule, 87 Ga. 426, 14 L.R.A. Ins. Co. 142 N. Car. 115, 115 Am.
283 (annotated on reinstatement of St. Rep. 729, 54 S. E. 854.
2412
ASSESSMENTS AND DUES § 1276a
Payment of arrears alone is not sufficient to reinstate a member
of a mutual benefit society who 1ms forfeited his certificate by
nonpayment of dues, under a provision of the constitution thai one
who has forfeited his certificate by nonpayment of dues may, it' in
good health, be reinstated by presenting an application accom-
panied by the arrears, and, in every such application, applicant
shall furnish satisfactory proof that lie is in good health, but
approval by the proper officer of the evidence of health is also neces-
sary.16
Representations that a person is in good health, made in an ap-
plication for reinstatement of a lapsed policy of life insurance, do
not mean that his health is absolutely perfect, hut only that it is
practically the same as it was when the policy was issued.16 So
the health of body required at the time of making application for
insurance to make the policy attach, is not perfect and absolute
health, nor must it exclude all disorders or infirmities which may
possibly shorten life, only an ordinary and reasonable degree of
health is required, and this question is generally to be determined
by the jury.17 And if insured is reinstated on the payment of back
dues, conditioned that he is of "temperate habits, in good health
then, and for twelve months past, and free from all disease, in-
firmity, or weakness," a slight and temporally illness within the
year previous to his reinstatement which does not render him un-
insurable, and from which he has entirely recovered at the time
of his reinstatement, does not violate such condition nor vitiate
his insurance.18 But if satisfactory evidence of good health is re-
quired, and it cannot be furnished, the society need not reinstate.19
So the refusal to approve a certificate of health by an applicant
for reinstatement to a mutual benefit society cannot be said to be
erroneous where the applicant shows that he has recently had pneu-
monia, although he further states that he feels better "at the
present time" than he has for years, where serious after effects are
shown to sometimes follow pneumonia.20 And a member of a
mutual benefit association cannot affect his reinstatement by paying
15 Kennedy v. Grand Fraternity, 36 St. Rep. 803, 16 S. E. 427. See
Mont. 325, 25 L.R.A.(N.S.) 78, 92 note to 3 Am. St. Rep. 634.
Pae. 971. 19 Ronald v. Mutual Reserve Fund
16 Massachusetts Benefit Life Assoc. Life Assoc. 44 N. Y. St. Rep. 407,
v. Robinson, 104 Ga. 256, 42 L.R.A. 21 Ins. L. J. 634.
261. 30 S. E. 918. 20 Kennedy v. Grand Fraternity, 36
17 Maine Benefit Assoc, v. Parks, Mont. 325, 27 L.R.A.(X.S.) 78 (an-
81 Me. 79, 10 Am. St. Rep. 240, 16 notated on whether breach of insur-
Atl. 339. ance policy which ipso facto termi-
18 Frencn V- Mutual Reserve Fund nated it can be waived), 92 Pac. 971.
Life Assoc. Ill N. C. 391, 32 Am.
24i:}
§ 1276a JOYCE ON INSURANCE
dues when lie is ill. although the local lodge makes no objection,
where the rules of the order allow reinstatement only if the ap-
plicant is in good health, and make the payment of arrears the
warranty of good health.1 And payment by a member of a mutual
benefit society of arrears of dues, for nonpayment of which he has
heen sw.-pcnded. to the clerk of the local camp at a time when he
is not in good health, will not, although it is received and for-
warded by the clerk, effect a reinstatement, where, by the laws of
the order, the clerk had no authority to receive such payment un-
it iss the suspended member was in good health, as such member was
bound to take notice of the rule, and therefore knew that his pay-
ment was ineffectual.2
In case of a requirement that the assured be alive and in good
health to warrant a reinstatement, and the holder of the policy,
after (he assured's neglect to pay, applies within a reasonable time
for reinstatement and offers to show that the assured is alive and in
good health, the refusal to reinstate is a breach of contract by the
company, and an action lies to recover the amount paid with in-
terest.3 But it is also held that if an insured person has forfeited
his policy of life insurance by the nonpayment of dues, and has
then complied with a provision in the policy that "delinquent mem-
bers may be reinstated if approved by the medical director and
president by giving reasonable assurance that they are in good
health," but the officers of the insurance company decline to ap-
prove his application, he is not entitled to recover damages for the
cancelation of his policy and refusal to reinstate him, in the
absence of any showing that the action of such officers was fraudu-
lent or arbitrary.4
The receipt of dues for reinstatement by the secretary of a sub-
ordinate lodge of a benevolent society while the suspended mem-
ber for whom the dues were paid was in a dying condition, does
not waive a requirement of one of the rules of the society that, after
suspension for nonpayment of dues, a member can only be rein-
stated while in good health.5 And the secretary of a mutual
1 Hartman v. National Council of 3 Lovick v. Provident Life Assoc,
the Knights and Ladies of Security, HO N. C. 93, 14 S. E. 506, 21 Ins.
76 Oreg. 153, L.R.A.1915E, 152, 147 L. J. 332.
Pae. 931. *Lane v. Fidelity Mutual Life Ins.
2Bixler v. Modern Woodmen of Co. 142 N. Car. 115, 115 Am. St.
America, 112 Va. 678, 38 L.R.A. Rep. 720, 54 S. E. 854.
(N.S.) 571n, 72 S. E. 704. 5 Roval Highlanders v. Scovill, 66
On waiver by officer of subordi- Neb. 213, 4 L.R.A. (N.S.) 421, 92
nate lodge of forfeiture for nonpay- N. W. 206.
ment of .-issessments, see notes in 4 On waiver by officer of subordinate
L.R.A.(N.S.) 421; 38 L.R.A.(N.S.) lodge of forfeiture for nonpayment
571; and L.R.A.1915E, 152. of assessments, see notes in 4 L.R.A.
2414
ASSESSMENTS AND DUES §§ 1276b, 1276c
benefit society, to whom evidence of good health is submitted with
an application for reinstatement by a member who has forfeited
his rights, does not, by a failure to call for additional evidence,
tacitly admit that the evidence submitted is sufficient, so as to
require him to approve the application where he has a discretion
whether to approve or not.6
§ 1276b. Same subject: incontestible clause. — A provision in a
life policy that it shall be incontestible after one year, applies to
proceedings taken to secure reinstatement after default in pay-
incut of premiums, so that after the lapse of a year from reinstate-
ment the policy cannot be avoided for fraud in securing it, al-
though insured agrees in his application for reinstatement that the
policy shall be void if any statement is untrue.7 If, however, a life
policy which provides that it shall be incontestible after two years
from the date of its issue is forfeited by reason of a default in the
payment of premiums, but subsequently the insured obtains a rein-
statement upon false warranties, the insurer may take advantage
of such misrepresentations at any time within two years after
the reinstatement.8
§ 1276c. Same subject: when reinstatement not effected. — A
partial payment of back dues on a lapsed policy will not work
a reinstatement of the insured, under a stipulation for reinstatement
on the payment of "all back dues." 9 So reinstatement of a lapsed
policy, obtained by fraudulent misrepresentation of material facts,
is ineffectual.10 And bringing suit for the assessment after the
policy has become void by its terms does not reinstate an insurance
policy which provides that failure to pay an assessment within a
certain time shall render the policy void.11 So a voluntary inquiry
by the brother of one insured, made at the bank several days
after the maturity of a premium note given by the insured, and
after it has been dishonored and returned to the company, and an
offer to then pay the local agent, are not sufficient to reinstate
(N.S.) 421; 38 L.R.A.(N.S.) 571; "Pacific Mutual Life Ins. Co. v.
and L.B.A.1915E, 152. Galbraith, 115 Tenn. 171, 112 Am.
6 Kennedy v. Grand Fraternity, St. Rep. 862, 21 S. W. 204.
36 Mont. 325, 25 L.R.A.(N.S.) 78 9 Melvin v. Piedmont Mutual Life
(annotated on whether breach of in- Ins. Co. 150 N. Car. 398, 134 Am.
surance policy which ipso facto ter- St. Rep. 943, 64 S. E. 180.
minates it may be waived), 92 Pac. 10 Massachusetts Benefit Life Assoc.
97] v. Robinson, 104 Ga. 256, 42 L.W.A
7 Great Western Life Ins. Co. v. 261, 30 S. E. 918.
Snavelv, 206 Fed. 20, 124 C. C. A. " Mutual Fire Ins. Co. v. Maple.
154,46L.R.A.(N.S.) L056 (annotated 60 Greg. 359, 38 L.R.A.(N.S.) 726,
on applicability of incontestable 119 Pac. 484.
clause to false statements made in ap-
plication for reinstatement).
2415
L276d JOYCE OX INSURANCE
the policy or to prevent a forfeiture.12 Nor has the beneficiary in
,i mutual benefit certificate a right to reinstate the member against
his will by paying assessments which he has passed.13 Again, where
an insured, in arrears six weeks, pays four week's back due-, and
dies two days later, no recovery can be had on his policy, which
provides that "on a failure to j)ay the weekly premiums for five
weeks, all claims on the company are by such arrears forfeited,"
and that a reinstatement shall occur on the payment of "all hack
dues," hut only after sixty days from paying the hack due- and on
condition that the insured shall he in good health when they are
paid and for five weeks thereafter.14 The right to reinstatement
within a certain period upon payment of accrued assessments after
the forfeiture of membership in a mutual benefit society, which
tikes place eo instanti by operation of law and without notice under
the terms of the contract upon nonpayment of assessments, is ter-
minated by the death of the member without such payment dur-
ing the time allowed for reinstatement; and a tender of the assess-
ments made within that period by the beneficiary is unavailing.15
§ 1276d. Same subject: when new contract, when not. — Where
by the failure of insured to pay premiums when due the policy is
ipso facto forfeited, if the policy is subsequently reinstated with the
consent of the insurer, it becomes a new contract as if then for the
first time issued.16 It is a new contract in the sense that the insurer
in consideration of payment agrees to continue in force a policy
which had expired and which before it is revived is the same to
insured as if it had never been written.17 But it is also decided that
a reinstatement of the insured after a forfeiture is not the making
of a new contract where no different terms are agreed upon. It
simply restores the old contracts, and the fact that the reinstate-
ment occurred in a state different from that in which the policy
was issued does not make it a contract of the state wherein the re-
instatement took place.18 It is pertinent in this connection to
state that in all probability the same form of contract would have
12 Hipp v. Fidelity Mutual Life Galbraith, 115 Tenn. 171, 112 Am.
Ins. Co. 128 Ga. 491, 12 L.R.A.(N.S.) St. Rep. 862, 21 S. W. 204, 35 las.
319, 57 S. E. 892. L. J. 180. Examine O'Brien v.
13 Proctor v. United Order of Gol- Brotherhood of the Union, 70 Conn,
den Star, 203 Mass. 587, 25 L.R.A. 52, 55 Atl. 577.
(N.S.) 370, 89 N. E. 1042. " Lanz v. Vermont Life Ins. Co.
"Melvin v. Piedmont Mutual Life 139 Pa. 546, 10 L.K.A. 577, 21 Atl.
Ins. Co. 150 N. Car. 398, 134 Am. 80.
St. Rep. 943, 64 S. E. 180. 18 Goodwin v. Provident Savings'
15 Carlson v. Supreme Council Loan Assoc. 97 Iowa, 226, 32 L.K.A.
American Legion of Honor, 115 Cal. 473, 59 Am. St. Rep. 411, 66 X. W.
Hid. 35 L.R.A. 643, 47 Pac. 375. 157.
16 Pacific Mutual Life Ins. Co. v.
2416
ASSESSMENTS AND DUES §§ 1277, 1278
been issued had insured become a new member or policyholder
in the same association or company instead of a reinstated mem-
ber.
§ 1277. Reinstatement by way of waiver and not as new con-
tract: creditor's rights. — A creditor who is a beneficiary is not en-
titled to recover upon a certificate, where the member is reinstated
upon the payment of overdue assessments, if the evidence tend- to
show that the reinstatement is by way of waiver of the forfeiture
and not by way of a new contract.19
§ 1278. To whom dues and assessments are payable. — In deter-
mining to whom dins may be paid, the question may depend upon
the nature of the organization and its powers; or the character of
the benefit to be derived, whether mortuary or sick benefits; or the
contract, with all that is included as a part thereof ; or the powers
vested in local or subordinate lodges, if the society transacts its
business under that system; or the effect of customs of the society
or local order, if there be such order; or upon agency and waiver
or estoppel.20 Sometimes the rules of the organization may require
the subordinate secretaries to collect an assessment,1 or the assess-
ment may be collected by the subordinate lodges and forwarded to
the supreme lodge,2 and the subordinate lodge and its financier are
agents of the supreme lodge for such purpose,3 or it may be payable
to the secretary or an officer of the society under the contract or
rules of the organization,4 or it may be paid to the secretary even
though he fails to remit the same where he is empowered to re-
ceive dues and sign receipts,5 and payment to the secretary is pay-
ment to an assistant secretary who is authorized to receive dues.6
The secretary of a local branch of a fraternal society, charged with
the duty of collecting the assessments on benefit certificates issued
by the grand lodge, is the agent of such lodge with respect to the
19 So held in Clarke v. Sehwarzen- 45, 86 Pac. 494. See Supreme Lodge
berg, 164 Mass. 347, 41 N. E. 655, Knights of Pythias v. Withers, 177
before Stat. 1885, c. 183. U. S. 260, 44 L. ed. 762, 20 Sup. Ct.
20 Examine §§ 35, 36, 398, 407 611.
herein. 4 So in McDonald v. Ross-Lewin,
1 So in Demings v. Supreme Lodge 29 Hun (N. Y.) 87; Manson v.
Knights of Pythias, 131 N. Y. 522, Grand Lodge, 30 Minn. 509, 16 N.
30 N. E. 572. W. 395.
2 So in Hall v. Supreme Lodge, 5 Grand Camp Colored Woodmen,
24 Fed. 450; Supreme Lodge v. Ab- Forest of Arkansas v. Ware, 107
bot, 82 Ind. 1 ; Scheu v. Grand Lodge Ark. 102, 153 S. W. 1114, 42 Ins.
Ohio Division Independent For- L. J. 66G.
resters, 17 Fed. 214. 6 LaMarsh v. L'Union St. Jean
8 Johnson v. Grand Lodge Ancient Baptiste De Nashua, 68 N. H. 229,
Order United Workmen, :!1 Utah, 38 Atl. 1045.
Joyce Ins. Vol. III.— 152. 2417
§ 1278 JOYCE OX [NSURANCE
business of such collections.7 So the dues may be payable to the
local collector,8 or assessments may be paid to the local agent,9 or to
an agent with apparent authority,10 or the requirement may be that
the member shall pay the assessment into the beneficiary fund in
his subordinate lodge,11 and it may be a question for the jury
whether the promise of payment to a director, and his promise to
pay i li«' society and neglect so to do, constitutes a sufficient excuse
t«> warrant a reinstatement.18 So payment may be made to any
oilicer who is empowered to recover the same.13 The paymenl to
a local lodge of assessments on a benefit certificate payable after
death is payment to the supreme lodge where the member is ad-
mitted by the local lodge, which has collected the admission fee,
and all assessments due from him. and the member's rights are
not affected by the fact that the local lodge has failed to remit the
same to the supreme lodge.14 If an assessment is made by the sub-
ordinate lodge empowered to levy such an assessment, payment
need not be made of an assessment levied by the grand lodge.16
But whether the act of an oilicer of a subordinate lodge of a given
order is, in a particular instance, binding upon the "Supreme
Conclave" of the same order depends upon the relation of the
former to the latter, as defined by its constitution and by-laws, and
upon what is therein provided. So that, in the absence of necessary
information on these points, it cannot be intelligibly determined
whether or not the payment of an assessment to an officer of the
subordinate lodge would, in legal contemplation, be a payment to
the "Supreme Conclave." 16 The stipulations of the contract as to
the person to whom payments of an assessment shall be made can-
not be set aside by a custom sanctioned by the officers of the lodge,
and which has arisen from a construction of the contract by such
7 Trotter v. Grand Lodge Iowa 13 Manson v. Grand Lodge, 30
Legion of Honor, 132 Iowa, 513, 7 Minn. 509, 16 N. W. 3fl5.
L.R.A.(N.S.) 569, 109 N. W. 1099. As to payment to clerk of local
8 So in Brown v. Grand Council, circle, see Patton v. Women of Wood-
Northwestern Legion of Honor, 81 craft, 65 Oreg. 33, 131 Pac. 521.
Iowa, 400, 46 N. W. 1086. " Barbaro v. Occidental Grove, No.
9 O'Donnell v. Ridgeley Protective 16, 4 Mo. App. 429; Schunk v.
Assoc. 98 Neb. 497, 153 N. W. 547. Gegenseitiger Wittwen und Waisen
_ 10 McLaughlin v. National Protec- Found, 44 Wis. 369.
tive Legion, 184 111. App. 597. 15 Agnew v. Ancient Order United
11 So provided in the constitution Workmen, 17 Mo. App. 254.
of the A. O. U. W. Ancient Order 16 O'Connell v. Supreme Conclave,
United Workmen v. Moore, 1 Ky. 102 Ga. 143, 66 Am. St. Rep. 159,
L. Rep. 93. 28 S. E. 282.
12 Van Houten v. Pine, 38 N. J.
Eq. 72.
2418
ASSESSMENTS AND DUES § 1279
officials. The members arc bound only by the contract,17 and from
the terms of the contracl the member may !»•' obligated to see that
the money for assessments and dues is actually received by the
society,18 or the secretary.19 So it may be necessary to pay ass
ments to a receiver of the company.80 But payment to a local
examining physician nol authorized to receive assessments is in-
sufficient.1 And where an assessment association makes a bank
its depositary, authorizing it to receive assessments from member?
but directing it not to accept those past due unless specially au-
thorized, and a member, who is a depositor al the bank and there
pays his assessments, has an agreement with the cashier to pay his
assessment, if he should at any time forget it, and charge the same
to his account, such agreement does not constitute payment, so as
to prevent a lapse of the policy, of an assessment of which neither
the cashier nor the bank had notice.2
A contract by a member of a mutual benefit society, formed by
its assent to its by-laws, that the local lodge to which he is attached
and its officers shall be his agents in collecting and transmitting
assessments and reinstating suspended members, and that the na-
tional council shall not be bound by any irregularity on the part
of such lodge or officers, is valid and binding.3
§ 1279. Mode of remittance. — If there is no provision as to the
mode of transmission of assessments or dues, or if the notice for
the payment thereof is silent as to the mode of remitting the same,
the assured will be bound to see that the money is actually received
by the company within the time specified as that within which pay-
ment must be made, or he will forfeit his policy, for a party will be
held strictly to his contract with regard to payment of dues. But
if the notice gives instructions as to the mode of remittance, the
right to forfeit the policy for nonpayment is waived, provided the
insured complies with such directions ; 4 and there are other excep-
17 Wiggin v. Knights of Pythias, 3llartman v. National Council of
31 Fed. 122; Manson v. Grand Lodge, the Knights and Ladies of Security,
30 Minn. 509, 16 N. W. 305. 76 Oreg. 153, L.R.A.1915E, L52
18 Protection Life Ins. Co. v. Foote, (annotated on waiver by officer of
79 111.361. See §§ 1346 et seq. here- subordinate lodge of forfeiture for
in, as to waiver and estoppel. nonpayment of assessment), 147 Pac.
19 Fee v. National Masonic Assoc. 931.
110 Iowa, 271, 81 N. W. 483, 29 4 Protection Life Ins. Co. v. Foote,
Ins. L. J. 635. 79 111. 361. See Jenkins v. Ancienl
20 See § 1273 herein. Order United Workmen, 93 Kan. 324,
1 Teeter v. United Life Assoc. 159 144 Pac. 223; Grand Lodge Ancient
N. Y. 411, 54 N. E. 72. Order United Workmen v. Crandall,
2 Griffith v. Merchants' Life Assoc. 80 Kan. 332, 102 Pac. 843; National
141 Iowa, 414, 133 Am. St. Rep. Masonic Accident Assoc, v. Burr, 57
177, 119 N. W. 934. Neb. 437, 77 N. W. 1098.
2419
280 JOYCE ON INSURANCE
lions to the rule.5 Tf ;i member fails to pay his assessment on the
day it becomes due, and the by-laws provide that the certificate
shall be of no force in such case, and can only be revived by pa} -
ment thereof, bu1 thai no indemnity benefits shall be paid for in-
juries received between the time when the delinquent payment
became due and the time when the same is received by the secretary
at his office, such member cannot recover benefits unless such money
is received by the association before the member is injured, even
though the check for the amount due is mailed in time to have
ordinarily reached the association before the time of the injury,
there being other evidence tending to show that it was not received
till after the day of the injury.6 And if a member dies after for-
feiture of his rights as member of his section, the society is not
liable where the section secretary fails to forward dues, but such
dues though mailed are not received by the board of control before
the member's death as required by the laws of the society which
also make section officers of sections, agents of members and not
the agents of the endowment rank or supreme lodge.7
§ 1280. Tender of assessments: frequency of tender. — If an ex-
pelled member regularly tenders his assessments until death, and
the judgment is reversed or the reinstatement ordered by the court,
recovery may be had by the beneficiary.8 And the wrongful
declaration of forfeiture of a mutual benefit certificate and refusal
to accept further premiums, do not prevent a recovery of the
amount due upon the death of the holder if the proper dues were
tendered when they fell due.9 Where the statute so permits, an
assessment may be tendered, and, if refused, the party may keep
the money in his possession, and the tender is good where he sub-
sequently pays it into court.10 And a good tender is as effectual
to preserve rights as payment.11 In mutual assessment companies,
where the contract is such that the amount of the assessment is
necessarily unknown, it cannot be within the intent of the contract
that a member must tender an assessment every time it becomes
•due, and even if the amount is actually known, the case would then
5 See §§ 1163, 1164 herein, as to Grand Fraternity, 132 Tenn. 235,
the rule concerning premiums, and L.R.A.1915F 1056, 177 S. W. 941.
§§ 1345 ct seq. herein, as to waiver 9 Lane v. Grand Fraternity, 132
and estoppel. Tenn. 235, L.R.A.1915F, 1056, 177
6 So held in National Masonic Ac- S. W. 941.
cident Assoc, v. Burr, 44 Neb. 256, 10 Loughbridge v. Iowa Life &
24 Ins. L. J. 423, 62 N. W. 466. Endowment Assoc. 84 Iowa, 141, 50
7 Campbell v. Supreme Lodge N. W. 568, under Code Iowa, sec.
Knights of Pythias, 168 Mass. 297, 2104.
47 N. E. 109. » Beatty v. Mutual Reserve Fund
8 Marke v. Supreme Lodge Knights Life Assoc. 75 Fed. 65, 21 C. C. A.
■•>!■ Honor, 29 Fed. 896. See Lane v. 227, 44 U. S. App. 527.
2420
ASSESSMENTS AND DUES
§ L280
bo brought within that of Meyer v. Knickerbocker Life [nsurance
Company,12 where it is held that a formal annual tender of pre-
miums is not necessary after refusal.18 So tender of further dues
and assessments by a member of a mutual benefil society, is not
necessary to preserve his rights, after receiving notice of his
pulsion from the society and that no more money will be received
from him,14 and this applies where the association has canceled
the policy.15 So it is ordinarily required that notice of an assess-
ment must be given, in which case it is a condition precedent to
payment.16 And in such case insured is not required to pay or
tender an assessment until notified.17 Nor need a tender of arrear-
ages, which are necessary to be paid to reinstate the member be
made at a lodge meeting; a tender is sufficient, in such case, when
made to an officer authorized to receive such moneys.18 As be-
tween a subordinate and supreme lodge, or a member and the lodge,
tender is payment so far as the protection of the relative rights of
12 73 N. Y. 516, 29 Am. Rep. 200. ity, 131 Minn. 82, 154 N. W. 665;
13 See §§ 1122, 1123 herein, as to Marcus v. National Council, Knights
tender and frequency of tender of & Ladies of Security, 127 Minn. 196,
premiums; National Life Ins. Co. v. 149 N. W. 197.
Tullidge, 39 Ohio St. 240, where the New York. — Bochdam v. Supreme
company refused to accept a premi- Lodge Knights of Pythias, 67 Misc.
urn, and it was held that an action 407, 123 N. Y. Supp. 59. Compare
might be maintained to continue the Supreme Tent, Knights of Maccabees
policy in force; Day v. Connecticut of the World v. Fisher, 45 Ind. App
Life "Ins. Co. 45 Conn. 480, 29 Am. 419, 90 N. E. 1044.
Rep. 693, where it was held that the 14 Langnecker v. Trustees of Grand
holder might tender the premium, Lodge Ancient Order United Work-
and wait till the policy became due men, 111 Wis. 279, 55 L.R.A. 185,
and then sue ; McKee v. Phoenix Ins. 87 N. W. 293.
Co. 28 Mo. 383, 75 Am. Dec. 129, "Raymond v. Supreme Lodge
where it was held that if the com- Knights of Pythias of the World,
pany wrongfully refuses to receive 148 N. Y. Supp. 76, 85 Misc. 141,
a premium due, the insured may treat aff'd 165 App. Div. 944, 149 N. Y.
the contract as at an end. Supp. 1108.
See also the following cases: 16 Jones v. Sisson, 6 Gray (72
United States. — Robinson v. Mu- Mass.) 288; Williams v. Babcock. 25
tual Unserve Life Ins. Co. 182 Fed. Barb. (N. Y.) 109; Coyle v. Ken-
850, s. c. 189 Fed. 348, 111 C. C. tucky Grangers' Mutual Benefit
A. 79. Co. 8 Ky. L. Rep. 604, 2 S. W.
Georgia.— Southern Life Ins. Co. 676 ; Hall v. Supreme Lodge, Knights
v. Logan, 9 Ga.' App. 503, 71 S. E. of Honor, 24 Fed. 450.
742. 17 McMahan v. Sewickley Mutual
Illinois.— Stubbs v. Modern Broth- Fire Ins. Co. 179 Pa. 52, 27 Pitts.
erhood of America, 187 111. App. 186. L. J. N. S. 449, 36 Atl. 174, 26
Michigan. — Wagner v. Supreme Ins. L. J. 721.
Lodge, Knights & Ladies of Honor, 18 Manson v. Grand Lodge Ancient
128 Mich. 660, 87 N. W. 903. Order United Workmen, 30 Minn.
Minnesota.— Reiter v. National 509, 16 N. W. 395.
Council, Knights & Ladies of Secur-
2421
§ L2S1 JOYCE u.\ INSURANCE
tin- |>;irlii'< ;iiv concerned. Tt is suflicient if made once where tlie
party stands ready thereafter to pay on demand.19 So a tender to
the secretary of a mutual company of an assessment may 1 e a good
tender.20 If after a policy has been forfeited for nonpayment of
a premium when due, and such payment is afterward tendered and
received by the insurer, fair dealing requires that it be informed of
the condition of the assured, and a payment made without such
information while he is probably in extremis is fraudulent.1
§ 1281. Assessments and dues: death before time specified for
payment expires: loss after suspension. — If a note is given for a
membership fee and the policy eontains no condition for forfeiture
for its nonpayment when due, and the time of payment thereof is
extended, and death occurs before said period expires, oo forfeiture
arises by nonpayment of the note when first due; 2 and the directors
may be empowered to exclude the insured from all benefits under
his certificates, and still collect assessments on his premium note
during his default where the whole note is absolutely collectable.8
And where payment is required to be made within a specified time,
or within a certain number of days after notice, otherwise the pol-
icy is to be forfeited, the fact that the assessment is unpaid when
death occurs does not prevent a recovery if the period specified has
not expired at the time of death.4 But no recovery can be had for
a loss occurring during suspension of the risk. Thus, where the
assessment is required to be paid within ten days after demand,
otherwise the policy is to be suspended until payment, and a loss
occurs after the ten days and before the payment, no recovery can
19 People v. Mutual Life Ins. Co. Indiana. — Painter v. Industrial Life
92 N. Y. 105; Hall v. Supreme Lodge Assoc. 131 Ind. 68, 30 N. E. 876.
Knights of Honor, 24 Fed. 450. But New York.— Elmer v. Mutual Ben-
see |§ 1122-1125 herein, as to tender efit Life Assoc, of America, 19 N. Y.
of premiums. Supp. 289, 64 Hun (N. Y.) 639, 47
20 Loughbridge v. Iowa Life & En- N. Y. St. Rep. 35 ; Baker v. New
dowment Assoc. 84 Iowa, 141, 50 York State Mutual Benefit Assoc.
N. W. 568. 91 N. Y. St. Rep. 653, 27 N. Y. Week.
1 Collins v. Metropolitan Life Ins. Dig. 91.
Co. 32 Mont. 329, 108 Am. St. Rep. Pennsylvania. — Rogers v. Capitol
578, 80 Pac. 609. 1092. Life Ins. Co. 1 Week. Not. Cas.
2 Kansas Protective Union v. Whitt, (Pa.) 589. See § 1256 herein.
36 Kan. 760, 59 Am. Rep. 607, 14 On payment of •premium after
Pac. 275. death to keep insurance in force, see
3 Coles v. Iowa State Mutual Ins. note in 14 L.R.A. 283; on validity of
Co. 18 Iowa, 425. payment of premium or assessment
4 Georgia. — Wright v. Supreme during period of extension, but after
Commandery, 87 Ga. 426, 14 L.R.A. insured's death, see note in 2 B. R. C.
283, 13 S. E. 564. 191.
Illinois. — Protection Life Ins. Co.
v. Palmer, 81 111. 88.
2422
ASSESSMENTS AND DUES § 1281a
be had.8 So where a member fails to pay certain dues and is sus-
pended, .'Hid after his death the same are paid to the collector of
the local society, the company will Dot be liable, even though a re-
ceipl is given therefor by the collector, the latter not having au-
thority so to do.6 Where the assured, in a mutual benefit
association, died on the twenty-seventh day of July, and he had
until the tenth day of the following August in which to pay the
last assessment made by the association, he was not in default and
the policy was still in force at the time of his death, and the lia-
bility of the association was accordingly fixed, and was unaffected
by the fact that no part of such assessment was paid on the date
last mentioned.7
§ 1281a. Days of grace: death within days of grace. — If days of
grace are allowed in that assessments are not payable until on or
before the last day of the month, there can be no default before the
termination of said period.8
In a Kentucky case the time was specified for the payment of
mortuary calls or they might be paid within thirty days after date
of notice thereof or if payment was not made within thirty days
after it was due the policy should terminate and be void. And it
was also provided that the sum to which the beneficiaries were en-
titled should be paid less any balance due the company. It was
held that the policy w^as not forfeited where insured dies twelve
days after date of the notice of a mortuary call even though said
mortuary call had not been paid, as the thirty days' period had not
elapsed, for the instant assured died the contract was terminated
and the company's liability fixed and the company would have had
the right to deduct the unpaid premium had there been no policy
provision therefor. The court, per Paynter, J., notes the case of
Want v. Blunt9 and says: "The provisions of the policy in that
case were unlike those of the policy which is the basis of this action,
and as the facts of that case are distinguishable from those of this
case, it is unnecessary for the court to express an opinion as to
whether it would approve the doctrine of that case were a similar
case presented to it for adjudication." 10
5 Blanchard v. Atlantic Mutual Fire Wash. 666, 76 Pac. 292. Days of
Ins. Co. 33 N. H. 9. grace : premiums, see §§ 1109a-1110
6 Brown v. Grand Council North- herein.
western Legion of Honor, 81 Iowa, 9 12 East, 182, considered under §
400, 46 N. W. 1086. 1119 herein.
7 Kerr v. Minnesota Mutual Bene- "Kentucky Life & Accident Ins.
fit Assoc. 39 Minn. 174, 12 Am. St. Co. v. Kaufman, 102 Ky. 6, 42 S. W.
Rep. 631, 39 N. W. 312. 1104, 27 Ins. L. J. 335. The court
8Logsdon v. Supreme Lodge of also said: "It was evidently con-
Fraternal Union of America, 34 templated that the deceased might
2423
§§1282, 1283
JOYCE ON INSURANCE
§ 1282. Death of member during suspension of lodge. — Tf a by-
law of the supreme lodge provides for suspension of a subordinate
Lodge which refuses or neglects to forward assessments within a
specified time, and also provides that "if a death occur in said lodge
during such suspension no death benefit shall be paid," said clause
shall be construed to read as if the words "during such suspension"
had been added to said clause, for it would be an injustice to hold
that a member who had promptly paid his dues to the local lodge
should forfeit all his rights by reason of the fault or neglect of the
lodge to perform its duty, especially where the lodge might there-
after be restored by paying up. The restoration of the lodge would
restore the member's rights to benefits.11
§ 1283. Death while "dues in arrears." — If the constitution of a
mutual benefit society provides that a member shall be entitled to
funeral benefits when at the time of his death he is "not more than
three months in arrears," such provision will be so construed as not
die while the policy was in force,
owing the company a part or the
whole of the bi-monthly premium.
The ease of Baxter v. Brooklyn Life
lus. Co. L19 N. Y. 450, 7 L.R.A.
293, 23 X. E. 1048, fully sustains
the views we have expressed. Coun-
sel for appellee cites Klein v. New
Fork Lite Ins. Co. 104 U. S. 88, 26
L. ed. 662; Yoe v. Howard Masonic
.Mutual Benefit Assoc, of Bait. 63
M<1. 86, and Dennis v. Massachusetts
Beneficial Assoc. 120 N. Y. 496, 9
L.R.A. 189, 17 Am. St. Rep. 660,
24 N. E. 843. In the case of Klein
v. Insurance Co. the premium was
<Ine on the 1st of March, but was not
paid until after the death of the
insured which occurred March 18th.
The object of that action was to
obtain relief against the forfeiture
and it was held that time was of the
ace of the contract, and refused
the relief sought. In the ease of Yoe
v. Association it was the duty of
the secretary to notify the insured
of the death of a member of the
association, and thereupon the mem-
ber thus notified was required within
thirty days from the date of the no-
tice to pay the sum of $1.10, and in
the case of neglect or refusal to pay
it, his name was to be erased from
the roll of members and he forfeited
all claims upon the association. On
the 29th of August the notice re-
quired was sent to Yoe. On the 30th
of September, Yoe died which was
two davs after the expiration of the
thirty days. The court denied the
right to recover, because the assess-
ment was not paid within thirty
days after the date of the notice.
The thirty days expired before the
death of the insured, and he failed
to pay the assessment. In Dennis v.
Association the insured had thirty
days, in which to pay the premiums,
from the mailing of the notice of
assessment. The notice was mailed
February 15th; payment was due
March 15th. The insured died March
filth, and the court denied the right
of the beneficiary to recover. It will
be observed that the facts of those
cases are entirely different from the
case at bar. Had Kaufman failed
to pay the assessment within thirty
days, and died after the expiration
thereof, then we would have had be-
fore us a question similar to thosi
considered in the cases to which we
have referred."
11 Supreme Lodge Knights of Hon-
or v. Abbott, 82 Ind. 1.
2424
ASSESSMENTS AND DUES §§ 1284, 1285
to exclude a member from funeral benefits wbere, although he is
three months in arrears, he dies the day before the dues of the fol-
lowing month are payable.12
§ 1284. Payment assessment after loss. — If the policy or certifi-
cate provides that nonpayment of an assessment on a premium note
when due shall forfeit the policy, and the assured is notified, but
neglects to pay the same, the policy will be void, and the company
may refuse to accept a payment after loss.13 And payment of an
assessment after death by a friend of the assured — the latter in his
lifetime having refused payment — is of no effect, even though the
company accepts the same, where it is accepted in ignorance of
the death.14 So the collection of an assessment after loss does not
render the insurer liable where by the conditions of the contract
the termination of the same does not affect the validity of the pol-
icy or the note with respect to past dues.15 But the payment to
the company and its retention of assessments after the death of
the assured may render it liable unless accepted without knowl-
edge.16 Thus, if the assured during his lifetime requests payment
of an assessment, and this is done after his death, and the company
retains the money, such payment is good.17
§ 1285. Right to have assessment made. — The company is bound
by its contract, and is obligated to make the necessary assessments
to meet losses in accordance therewith. Thus, where the assured,
as a member of a mutual benefit society, promises to pay assess-
ments in consideration that the company will pay a specified sum
not exceeding a certain amount, and the contract specifies the time
within which the loss shall be payable, giving the form of notice
and process for collecting death assessments, said contract imports
a promise on the part of the company that it will make or cause to
be made the necessary assessment ; 18 and where the right exists to
have an assessment made on all the other policyholders, the mem-
ber's right cannot be limited by the enactment of a by-law to which
he does not assent, which provides that assessments shall only be
12 So held in Sherry v. Operative 376; Pritehard v. Mechanics' Assoc.
Plasterers' Union, 139 Pa. 470, 20 3 Com. B. N. S. 622; Swett v. Pro-
Atl. 1062. tection Relief Soc. 78 Me. 541, 7 Atl.
13 Southern Mutual Ins. Co. v. Tay- 394.
lor, 33 Gratt. (Va.) 743. See §§ 17 Erdman v. Mutual Ins. Co. of
1261 et seq. herein. the Order of Herman's Sons, 44 AVis.
14 Miller v. Union Central Life Ins. 376. See § 1374 herein, as to waiver
Co. 110 111. 102. by acceptance of assessments after
15 Nash v. Union Mutual Ins. Co. loss or death.
43 Me. 343, 69 Am. Dec. 65. 18 Lawler v. Murphy, 5S Conn. 294,
16 Erdman v. Mutual Ins. Co. of 8 L.R.A. 113, 20 Atl. 457.
the Order of Herman's Sons, 44 Wis.
2425
§ 1285 JOYCE ON INSURANCE
made on a certain class, and the directors may become liable per-
sonally to such member where they pay out money to which he is
.-hi it led. even though the same is done in good faith.19 Bui a mem-
ber of a i .utual tire insurance company, whose losses are payable
from assessments upon the other members cannot hold the officers
of the company personally liable for his loss, because they have
diverted funds upon which he had no claim for his loss. His
remedy is to have an assessment made to pay his loss.20 And if
the liability to levy an assessment for a death benefit is absolute.
this is not conclusively changed by an investigation of trustees
whether the deceased was a member or not, even though the charter
and by-laws provide that benefits shall not extend to those whose
membership has ceased, and that deaths are to be reported by the
trustees.1 So although it is provided in the constitution that a pro
rata sum shall be paid in full satisfaction of a claim where a single
assessment is insufficient, yet if the certificate provides that a claim
-hall be payable only from the death fund at the time of death, or
from moneys realized from the next assessment, and every member
is required to pay, when he becomes such, a first death assessment,
a first death claim is not dependent for payment upon the death
fund on hand, but a right exists to have it satisfied out of funds
arising from an assessment to meet such claims.2 But where certain
necessary costs for an appraisal of damages are required to be de-
posited by the insured upon demand before an assessment is made,
there can be no recovery if such security is demanded and refused.3
An agreement to pay a sum received from a death assessment, not
exceeding a certain specified amount with a further provision that
the death claim shall be payable within sixty days after proof,
giving the form of notice and process for collecting death assess-
ments, and containing a promise by insured to pay assessments, —
imports a promise by the insurance association to make, or cause to
be made, the necessary assessment.4 And assured is entitled to have
19 Stewart v. Lee Mutual Fire Ins. 2 Wadsworth v. Jewelers & Trades-
Assoc. 64 Miss. 499, 1 So. 743. men's Co. 132 N. Y. 540, 29 N. E.
Refusal to levy assessment: action 1104, 26 Jones & S. (N. Y.) 88, 31
at law: mandamus: specific perform- N. Y. St. Rep. 185, 9 N. Y. Supp.
ance, see §§ 3473, 3474, 3516 herein. 711. In this case the pro rata clause
20 Perry v. Farmers' Mutual Fire was held vague and indefinite ;it the
Ins. Co. 139 N. Car. 274, 2 L.R.A. least, and not applicable to the Inns.
(N.S.) 165 (annotated on liability of 3 In this case the policy was on
officers of mutual company to mem- growing crops and the loss was by
bers for permitting diversion of hail: Mutual Hail Ins. Co. v. Wilde,
funds), 111 Am. St. Rep. 791, 51 8 Nob. 427, 1 N. W. 384.
S. E. 1025. 4Lawler v. Murphy, 58 Conn. 294,
' l Dillingham v. New York Cotton 8 L.R.A. 113, 20 Atl. 457.
Exch. (U. S. C. C. 1892) 49 Fed. 719.
2426
. ASSESSMENTS AND DUES §§ 1286, 128?
a disability assessment levied upon receipt of proof of his injury
where the certificate so provides.5
§ 1286. No authority to receive less than the amount of assess-
ment due. — In view of the peculiar nature of the relations existing
between members and the association, and the mutual obligations
resulting therefrom, and the objects of the organization, it would
seem to be undoubted that mutual benefit societies have no power
to receive from a member an amount less than the actual sum due
on the assessment, and it would also seem that the company has no
power to accept other than cash or its equivalent in payment, as in
case of promissory notes.6
§ 1287. Assessment and dues: safety fund: reserve fund. — Where
the contract provides for a safety fund for the benefit of living
members by the use of the income of such fund toward the payment
of dues and assessments, or by a division of the same among those
whose certificates are in force on the failure of the association to
pay indemnities, and an assessment is levied prior to filing a bill
for dissolution, the nonpayment of the same within the time limited
for its payment, in order to keep the policy in force, will avoid the
contract so as to preclude the holder from sharing in the safety
fund. But this case differs from that where a certain sum is re-
quired to be paid to the safety fund within one year from the date
of the certificate ; for here, if the payment is made within the year,
it is sufficient to entitle the certificate holder to share in the fund,
even though the amount is not paid until after the bill is filed for
dissolution ; so also where certain monthly dues are not paid until
after the association stops business and proceedings are pending to
wind up its affairs.7 Again, where the reserve fund is of like char-
acter, entirely excluding representatives of members deceased, and
no absolute legal obligation rests upon the members to pay an as-
sessment levied by the receiver, the nonpayment of such assessment
does not forfeit the right to participate in the reserve fund.8 A
mutual insurance company whose constitution and by-laws do not
provide for an emergency fund cannot justify assessments for the
creation of such fund, without amending the constitution and by-
laws in the manner pointed out in those instruments.9 If there is
5Garcelon v. Commercial Travel- 8 Equitable Reserve Fund Life
ers' Eastern Accident Assoc. 184 Assoc. In re, 131 N. Y. 354, 30 N. E.
Mass. 8, 67 N. E. 868. 114, 43 N. Y. St. Rep. 204, 21 Ins.
6Buffum v. Favette Mutual Ins. L. J. 385. See s. c. 61 Hun, 299,
Co. 3 Allen (85 Mass.) 360. But 16 N. Y. Supp. 80, 40 N. Y. St.
see §§ 35, 36 herein. Rep. 800.
7Burdon v. Massachusetts Safety 9 Clark v. Iowa State Traveling
Fund Assoc. 147 Mass. 360, 1 L.R.A. Men's Assoc. 156 Iowa, 201, 42
146 17 N E 874. L.R.A. (N.S.) 631, 135 N. W. 1114.
2427
§ L288 JOYCE ON [NSURANCE
a provision in the constitution of ;m assessmenl c pany that, in ■
case of deficiency in the assessment to meet a death loss, il may be
paid from the emergency fund, it leave- it optional with the com-
pany to make the paj men! or not.10 Payment by a member of a
mutual benefit society of assessments which are being diverted to
the formation of an emergency fund, doe- not show acquiescence on
his part, in the creation of such fund, if he had no knowledge of
the fact, and, under the constitution and by-laws there was no
authority to create such fund.11
§ 1288. Refusal to pay assessments: right to have fund distribut-
ed.— If the contract provides for a reserve fund for the benefit of
living members, and the company goes into a receiver's hands, those
entitled to such fund and whose contracts are in force will share
pro rata according to the amount contributed thereto by each, and
the fact that a member has refused to pay an assessment which he
was under no legal obligation to pay does not preclude his right to
such share.12 In the case establishing this proposition the right to
the fund was limited to the living certificate holders, but the con-
tract provided that the reserve fund should not be applied to the
payment of death claims until it should reach a specified sum,
which it never did. There were also other conditions relating
thereto. But in a Massachusetts case13 the safety fund was to be
divided among certificate holders, and it was held that it should
be divided among all members and representatives of members
whose policies were in force at the date of filing the bill for dissolu-
tion. It is also held in New York that the rights of claimants to
the reserve fund should be referred to the date of the commence-
ment of the proceedings for dissolution of the company.14 If the
company is incorporated as a fraternal beneficiary organization
under a statute providing therefor, and issues benefit certificates
payable out of a fund created by assessments levied for such pur-
pose, and the society employs paid agents to solicit business con-
trary to the statute, a member to whom a certificate has been issued
10 Crawford v. Northwestern Trav- L. J. 385. See s. c. 61 Hun, 290. 16
eling Men's Assoc. 226 111. 57, 10 N. Y. Supp. SO, 40 X. Y. St. Rep.
L.K.A.tN.S.) 264 (annotated on ef- 800. See also Burdon v. Massachu-
feet of provision that deficiency in setts Safety Fund Assoc. 11/ Mass.
assessment nisiv be paid from emer- 360, 1 L.R.A. 1 16, 6 New Eng. Rep.
gency fund), 80 X. E. 736. 840, 17 N. E. 874.
11 Clark v. Iowa State Traveling 1S Burdon v. Massachusetts Safety
Men's Assoc. 156 Iowa, 201, 12 Fund Assoc. 147 Mass. 360, 1 L.R. A.
L.R.A.(N.S.) 631, 135 N. W. 1114. 14G, 17 N. E. 874.
12 In re Equitable Reserve Fund 14 Equitable Reserve Fund Life
Life Assoc. L31 N. Y. 354, 30 N. E. Assoc. In re, 131 N. Y. 354, 30 N. E.
114, 43 X. Y. St. Rep. 204, 21 ins. 114.
2428
ASSESSMENTS AND DUES § 1289
may refuse to pay assessments thereafter levied without forfeiting
payments already made, and the certificate holders will, in such
case, be entitled to have the fund distributed among them.15 In
case of a distribution of the surplus of a mutual insurance com-
pany or of its other assets, there being no charter provision to the
contrary, existing policyholders and such only are the legitimate
distributees. In the aggregate, they are entitled to the whole.16
§ 1289. Application or appropriation of funds by society or lodge.
— Dues and assessments are collected for a specific purpose, and,
with relation to the member who is called upon to pay them, the
contract obligation governs. When said moneys are collected they
should ordinarily be applied to the specific purpose for which they
are collected. When assessments have been levied and paid to the
company, the fund created thereby becomes, to a certain extent, a
trust fund, and if the claim for which the assessment has been
made is a lawful one, the company will be obligated to pay said
benefit. Thus where a death claim has accrued and an assessment
has been levied to satisfy the same, and the payment of the same
having been delayed and the amount having subsequently passed
into the hands of a receiver, the amount is subject exclusively to
the payment of the claim which it was levied to meet, and is not an
asset subject to other claims.17 But while such funds are not assets
subject to general debts, and while the beneficiaries may be entitled
thereto, yet the company has the control of the same, in so far that
it is not, by reason of the mere fact that the assessment has been
levied and collected for a benefit, obligated to appropriate it to the
settlement of the same, for if the claim is illegal and invalid, the
company may refuse to pay it. This is an obligation which rests
upon the proper officers of the company by reason of the fact that
they act for and represent the members in the disposition of the
funds to which they have contributed, and it may be reasonably
presumed that the members did not contract to pay assessments to
meet invalid and illegal claims. No waiver can arise from the fact
that the payment has been made and received of an assessment to
meet a mortuary call, for it may have been apparently valid, and
not have proved to be invalid until afterward.18 Again, the ment-
is F0gg v. Supreme Lodge of Unit- 115 Am. St. Rep. 1023, 105 N. W.
ed Order of Golden Lion, 159 Mass. 1031, 1135.
9, 33 N. E. 692, 156 Mass. 431, 31 17 In re Equitable Reserve Fund
N. E. 289. Life Assoc. 131 N. Y. 354, 40 N. Y.
16Huber v. Martin, 127 Wis. 412, St. Rep. 800, 61 Hun, 299, 16 N. Y.
3 L.R.A.(N.S.) 653 (annotated on Supp. 80, 43 N. Y. St. Rep. 204, 30
distribution of surplus upon dissolu- N. E. 114, 21 Ins. L. J. 3S5.
tion of mutual insurance company), 18 Mayer v. Equitable Life Assoc.
2429
§ L289 JOYCE ON LNSURANCE
bors may be obligated to pay an assessment, although the directors
might have resisted the paymenl of some of the losses included
therein, for this does uot invalidate it.19 Bui although the society
controls the funds, it holds them in trust, and cannot misapply the
same for purposes not within its charter powers.20 The fact that
42 Iluu (N. Y.) 237. The court, per held that an invalid contract is not
Landon, J., said in this ease: "The made valid by the incorporation of
right to paymenl under the contract the members of the voluntary asso
depended upon its validity, or at ciation, and the assumption l>y that
least upon the inability of the defend- corporation of the contracts of the
ant to show its invalidity. That in- voluntary association, and that the
validity it offered evidence tending company's treasurer could not ratify
to show. The defendant was in a and make valid invalid contracts of
certain sense the agent of the mem- insurance by acceptance, after the
bers of the company, but was an member's death, of unpaid assess-
agent with special and defined powers ments, and that the assessments paid
and limitations, and the true and by the members became the compa-
obvious construction of those powers ny's money under its by-laws, and
and limitations forbade payment up- that members could not control the
on a claim which it was able to show disposition of assessments, but that
was procured through misrepresenta- the company could retain the money
tion or fraudulent suppression of and control it: Id. 545, per Libber,
facts, concerning which it required J.; In re Protection Life Ins. Co. 9
answers from Stephan when he ap- Biss. (C. C.) 188, Fed. Cas. No.
plied for membership. That it had 1,444. Under the policies in this case
realized the money with which to the amount to be assessed was held
make payment was no waiver of its not a general asset of the company,
duty to see to it that payment was "It is so much money which each
due; that duty it still owed to its policyholder agrees to contribute to
members who had paid their assess- pay a death loss, and when collected
ments, trusting to the fidelity of the does not belong to the company nor
company to protect them and the to its general creditors, but to this
fund from invalid claims:'' Id. 238. special class of creditors, most of
This case is cited in Stuart v. Mu- whom could only maintain a suit on
tual Reserve Fund Life Assoc. 78 its guarantees, or for damages bv
Hun (N. Y.) 191. 193, 60 N. Y. St. reason of its neglect to make the
Rep. 255, per Brown, P. J., who says : assessment," per Blodgett, J., 198.
"Neither is the fact that the money See Wilber v. Torgerson, 24 111. App.
to pay the claim was collected by 119.
assessments upon the members of the 19 Sands v. Hill, 42 Barb. (N. Y.)
association available to the plaintiff, 651. But see 2 Alb. L. J. 70, 55 N. Y.
nor does it affect the right of the 18.
defendant to reject the claim upon 20 State ex rel. Monitor Fire Assoc,
evidence subsequently obtained. 42 Ohio St. 555. Money collected for
Such, I think, would be the duty the such benefits by a subordinate lodge
officers owed to the association, if cannot be appropriated by it to the
they were satisfied from their exam- payment of assessments and for death
ination that there was a breach of benefits ordered by the grand lodge,
the contract;" citing also Fisher v. The funds out of which sick benefits
Andrews, 37 Hun (N. Y.) 176. In are payable are not the funds oul of
Swett v. Citizen's Mutual Relief So- which death benefits are payable, and
ciety, 78 Me. 541, 7 Atl. 394, it is each fund being for a specific pur-
2430
ASSESSMENTS AND DUES § 1290
the statute under which the company is incorporated provides for
a death fund "belonging to the beneficiaries of anticipated deceased
members," in "an amount not exceeding one assessment," doe- not
necessitate the payment of losses therefrom as they occur, but the
officers may exercise their discretion concerning the application of
the same to particular losses, and they may use all or only a portion,
or none at all, of said fund, and may levy an assessment to meet
losses if it deems proper without using such fund.1 After the as-
sessment has been paid the member cannot thereafter personally
control its disposition, and cannot assign the same.2 If the act of
incorporation so provides, the holders of cash policies have a right
to insist that the premium notes be first exhausted for losses before
the cash fund be drawn on.3 An insurance company does not hold
surplus or profits as trust fund for the benefit of the holders of
policies on the tontine savings fund assurance plan, under the New
York law, where, by its policies, it agrees that the surplus or profits
derived from such policies as shall cease to be in force before the
completion of their respective tontine dividend periods, shall be
apportioned equitably among such policies as shall complete such
periods.4
§ 1290. Necessity for assessment must exist. — An assessment
cannot be validly made unless the necessity therefor properly and
Legally arises. Every prerequisite to its validity must be complied
with, and it must be made for a proper purpose, otherwise payment
l>y a member is not enforceable.5 In other words, the facts must
be such as to occasion a legal necessity therefor;6 for the contract
under which a premium note is given makes the note a conditional
promise to pay. It is dependent upon certain contingencies, and
these conditions are precedent, and must exist, otherwise a vote to
pose, the money paid by the member 6 Pacific Mutual Ins. Co. v. Guse.
cannot in such case be applied other- 49 Mo. 329, 8 Am. Rep. 132; Ameri-
wise than for the purpose contem- can Mut. Aid Soc. v. Helburn, 85
plated without his direction: Ancient Ky. 1, 2 S. W. 495, 28 N. Y. Supp.
Order United Workmen v. Moore, 1 177. "When assessment is legitimate,
Ky. Law Rep. 93, 9 Ins. L. J. 539. under Laws N. Y. 1879, e. 496; Mc-
1 Crossman v. Massachusetts Be- Cowan v. Supreme Council Catholic
nevolent Assoc. 143 Mass. 435, 9 N. Mutual Benevolent Assoc. 7(5 Hun
E. 753. under Mass. Stats. 1880, e. (N. Y.) 534, 8 Ky. Law Rep. 627, 7
196, sec. 3. Am. Law Rep. 571, 58 N. Y. St. Rep.
2 Swett v. Citizens' Mutual Relief 268.
Soc. 78 Me. 541, 7 Atl. 39 \. 6 Thomas v. Whallon, 31 Barb. (N.
3 Clark v. Manufacturers' Mutual Y.) 172, 178; American Ins. Co. v.
Fire Ins. Co. 130 Ind. 332, 30 N. E. Schmidt, 19 Iowa, 502; Pulford v.
212. See § 890 herein. Fire Department of Detroit, 31 Mich.
4 Pierce v. Equitable Life Assur. 458.
Soc. 145 Mass. 56, 1 Am. St. Rep.
433, 12 N. E. 858.
2431
§ 1291 JOYCE ON INSURANCE
assess will have no validity, and the assessment will be unenforce-
able.7 The mere passage of a resolution levying an assessment does
not of itself create any liability;8 but in certain cases acts done by
a corporation presuppose the existence of other facts which are
.,rv fco make them operative, and in such case there is pre-
sumptive proof of the former.9
A courl decree of dissolution is conclusive on the question of
necessity of making assessments and the amount thereof.10 But
a contested claim for the recovery of insurance is not a liability on
which an assessment can be based until allowed or settled by ad-
judication of a court of competent jurisdiction.11
§ 1291. Prescribed mode must be followed in levying assessment.
—Sometimes no form or mode of making an assessment is pre-
scribed, and no formal record thereof required to be kept, but the
duty to assess is nevertheless imperative.12 But if a mode is speci-
fied, it must be followed, and the assessment made on the losses
and in the manner prescribed, otherwise no obligation rests upon
the member to pay it, and no forfeiture can arise in case of its
nonpayment, for the contract does not require that a member
should pay an assessment which is illegally made.13 Thus, if an
7 See cases cited in last two notes. Life Ins. Co. v. Jarvis, 22 Conn. 133,
8 Pacific Mutual Ins. Co. v. Guse, 148.
49 Mo. 329, 8 Am. Rep. 132. Illinois.— Farmers' Mutual Fire
9 Thus the necessity of an assess- Ins. Co. v. Knight, 162 111. 470, 44
ment may be presumed from notice N. E. 834; Chicago Guaranty Fund
to the subordinate secretary, where Life Ins. Soc. v. Wilson, 91 111. App.
the rules of a benefit society require 667.
the supreme secretary to notify the Iowa. — Underwood v. Iowa Legion
subordinate secretary to collect a of Honor, 66 Iowa, 134, 23 N. W.
fixed assessment when the benefit 300.
fund is insufficient: Dealings v. Su- Maryland. — Mutual Fire Ins. Co.
preme Lodge Knights of Pythias of v. Jean, 96 Md. 252, 94 Am. St. Rep.
the World, 131 N. Y. 522, 60 Hun 570, 53 Atl. 950.
(N. Y.) 350, 14 N. Y. Supp. 834, 30 Michigan.— Baker v. Citizens' Mu-
N. E. 572. tual Fire Ins. Co. 51 Mich. 243, 16
i° Swing v. Wanamaker, 124 N. Y. N. W. 391.
Supp. 231,139 App. Div. 627; Stock- Minnesota.— lbs v. Hartford Life
ley v. Riebenback, 12 Pa. Super. Ct. Ins. Co. 121 Minn. 310, 141 N. W.
109. 289.
11 Decker v. Righter, 9 Kan. App. Missouri. — Wayland v. Western
431, 58 Pac. 1009. Life Indemnity Co. 166 Mo. App.
12 Backdahl v. Grand Lodge An- 221, 148 S. W. 626.
cient Order United Workmen, 46 New Hampshire. — Atlantic Fire
Minn. 61, 48 N. W. 454, 20 Ins. L. Ins. Co. v. Sanders, 36 N. H. 252.
J. 459. See Bay State Mutual Fire Pennsylvania. — Passenger Conduc-
Ins. Co. v. Sawyer, 12 Cush. (66 tors' Life Ins. Co. v. Birnbaum, 116
Mass.) 64. Pa. St. 565, 10 Cent. Rep. 63, 11
13 Connecticut. — Mutual Benefit Atl. 378.
24:52
ASSESSMENTS AND DUES § 1291
isse sment is not made according to the terms prescribed by the
by-laws, it is invalid, and need not be paid,14 and it is incumbent
upon the corporation, if it seeks to recover an assessment on a
deposit note, to prove that it was made in conformity with the re-
quirements of the act of incorporation and by-laws.16 The contract
is between the member and the society, and the former has a right
to rely upon the observance by the company and its officers of its
terms. It is this obligation which determines the rights and lia-
bilities of the respective parties as between them, and the member
may insist that the requirements of the fundamental law of the
society shall be observed by the organization, and that the mode
of assessment agreed upon shall be strictly followed;16 and the
directors, in levying an assessment, must no1 overlook the plain
provisions of their charter in a search for some rule of action more
purely equitable.17 But the rule above given presupposes that the
by-law under which the assessment is made is valid, for if it be
invalid the fact that it is followed cannot of itself make the assess-
ment legal, since a member is not estopped to deny the exercise of
an authority not conferred by the charter, nor does the member's
consent to such an authority confer it.18
Again, assessments to meet liabilities on a policy of accident as-
sessment insurance must be made on the basis of membership at
the date of the death or accident.19 And in making an assessment
the officers must not disregard the reasonable limits necessary to
meet losses and an excess of their authority in this respect makes
the assessment illegal and void.20 So assessment for losses must be
HAppleton Mutual Fire Ins. Co. Pennsylvania. — Susquehanna Mu-
v. Jesser, 5 Allen (87 Mass.) 446. tual Fire Ins. Co. v. Gackenbach, 115
See Settle v. Farmers' & Laborers' Pa. St. 492, 9 Atl. 90.
Co-operative Ins. Assoc. 150 Mo. See §§ 325 et seq., 340 et seq. here-
App. 520, 131 S. W. 136. in, as to relative duties and obliga-
15 Atlantic Mutual Ins. Co. v. Fitz- tions of the parties ; Naill v. Kan-
patrick, 2 Gray (68 Mass.) 279; sas Farmers' Fire Ins. Co. 47 Kan.
Chicago Guaranty Fund Life Soc. 223, 27 Pac. 854, on rehearing, 45
v. Wilson, 91 111. App. 667; Settle Kan. 738, 26 Pac. 944, 45 Kan. 74,
v. Farmers' & Laborers' Co-operative 25 Pac. 211.
Ins. Assoc. 150 Mo. App. 520, 131 "Slater Mutual Fire Ins. Co. v.
S. W. 136. Barstow, 8 R. I. 343.
16 Illinois. — Covenant Mutual Ben- 18 Grand Lodge v. Stepp, 31 Pitts,
efit Assoc, v. Spies, 114 111. 463, 2 L. J. 164, where the latter proposi-
N. E. 482. tion is sustained.
Iowa. — American Ins. Co. v. 19 Collins v. Bankers' Accident Ins.
Schmidt, 19 Iowa, 502. Co. 96 Iowa, 216, 59 Am. St. Rep.
Missouri.— Pacific Mutual Ins. Co. 367, 64 N. W. 778.
v. Guse, 49 Mo. 329, 8 Am. Rep. 132. 20 Pencille v. State Farmers'^Mu-
New Hampshire. — Nashua Fire tual Hail Ins. Co. 74 Minn. 67, 76
Ins. Co. v. Moore, 55 N. H. 48. N. W. 1026.
Joyce Ins. Vol. III.— 153. 2433
§ 1291 JOYCE ON INSl'HAXCE
made as soon as possible after they occur, and be against those only
win. were members when the losses were suffered. The assessment
cannot be postponed by borrowing money to pay losses and after-
ward levying an assessment against all who are members when it
is made, when some of them were not such when the loss was
suffered, and others who were members at such time have ceased to
be such, and are therefore omitted from the assessment.1 If the
record shows on its face that the resolution was unanimously
adopted by the directors, as a board, and by the executive committee,
and it contains the necessary date for computing the amount, and
there is no evidence to impeach or rebut the levy and it is not
claimed that the amount is erroneous, it is prima facie evidence
against the members of the association of the validity of the assess-
ment,2
If the by-laws of a mutual insurance company simply add to the
general rule of law that losses shall be paid by the policies in force
at the time of their occurrence, another provision, that if the as-
sessment against such policies prove insufficient, than all existing
policies, even though issued subsequently to the losses, shall be
liable lo make up the deficiency, is not unlawful, and assessments
declared and levied on the basis thereof are regular and lawful.3
Mem Iters of a mutual insurance company who did not pay their
-hares of a void assessment to cover a valid claim, will not be per-
mitted to object to the crediting of the amounts paid thereon by
other members, upon the sums assessed against them under a new
levy to meet the liabilities for which the void assessment was levied.4
An unsigned, uncertified, and otherwise incomplete paper cannot be
treated as an official assessment which under the charter and by-
laws should have been signed, and the forfeiture of a policy cannot
be predicated upon a failure to pay such an assessment.5 If an
assessment is not made in accordance with the society's constitu-
tional provisions, it is no excuse that it was made in conformity
with a custom of the society, unless the member against whom the
forfeiture is claimed had knowledge of such fact.6 Where the stat-
ute provides for petition to ratify assessments or calls made by mu-
1 Mutual Fire Ins. Co. v. Jean, 96 Mutual Fire Ins. Co. v. Ionia Cir-
Md. 252, 94 Am. St. Rep. 570, 53 cuit Judge, 100 Mich. 606, 3,2 L.R.A.
Atl. 950. 481 (annotated on liability of mem-
8 Anderson v. Mutual Reserve bers of mutual insurance company),
Fund Life Assoc. 171 111. 40, 44 N. E. 59 N. W. 250.
205, 27 Ins. L. J. 249. 5 Baker v. Citizens' Mutual Fire
3 Thropp v. Susquehanna Mutual Ins. Co. 51 Mich. 243, 16 N. W. 391.
Fire Ins. Co. 125 Pa. St. 427, 11 Am. 6 Underwood v. Iowa Legion of
St. Rep. 909, 17 Atl. 473. Honor, 66 Iowa, 134, 23 N. W. 300.
4 Ionia Eaton & Barry's Farmers'
2434
ASSESSMENTS AND DUES § 1292
tual companies it applies to calls made under the statute, and not
under the contracts contained in the deposit notes.7
A mutual benefit society in making assessments upon its mem-
bers does not act in a judicial, but in a ministerial capacity, and no
presumption can arise in favor of the regularity or legality of its
assessments.8
§ 1292. Who empowered to levy assessments. — The board of di-
rectors must levy the assessment when it is so provided in the by-
laws,9 and generally the assessment must be made by the officers, or
authority designated,10 although not only the corporation may
levy an assessment, but the receiver may be empowered so to do.11
If the assessments are required by the articles of incorporation and
by-laws to be made by the secretary, they must be so made to be
valid and warrant a forfeiture.12 And a forfeiture of insurance in
a mutual company for nonpayment of an assessment cannot be sus-
tained when such assessment is not made by the officers designated
by law.13 And the assessment may be valid when levied at a meet-
ing of the board called by the president only,14 and the fact that
one director was absent when an assessment was made does not
invalidate it.15 And the authority of an executive committee elected
by the directors under the constitution and by-laws may be of such
a nature as empower them to make assessments at such times as
the directors may determine and for such an amount as said com-
mittee may consider sufficient.16 The directors, when empowered
to make an assessment, can act only in conformity with and to the
extent of the powers conferred, for they can have no arbitrary dis-
cretion.17 The rules of the association may require the supreme
secretary, when the benefit fund is insufficient, to notify the sub-
ordinate secretaries to collect a fixed assessment.18 If an assessment
is required to be made by the secretary, and is made by others, it
is invalid, and neglect to pay the same does not warrant a for-
7 Commonwealth v. Dorchester Mu- 13 Johnson v. Farmers' Mutual
tual Fire Ins. Co. 112 Mass. 142. Fire Ins. Co. 110 Mich. 488, 64 Am.
8 American Mutual Aid Soc. v. St. Rep. 360, 68 N. W. 299.
Helbum, 85 Ky. 1, 7 Am. St. Rep. 14 Fayette Mutual Fire Ins. Co. v.
571, 2 S. W. 495. Fuller, 8 Allen (90 Mass.) 27.
9 Farmers' Mutual Fire Ins. Co. v. 15 Williams v. German Mutual Firj
Chase, 56 N. H. 341. Ins. Co. 68 111. 387.
10 Susquehanna Mutual Ins. Co. v. 16 Beatty v. Mutual Reserve Fund
Trinckhannock Toy Co. 97 Pa. St. Life Assoc. 75 Fed. 65, 21 C. C. A.
424, 39 Am. Rep. 816. 227, 44 U. S. App. 527.
11 See Hurlburt v. Carter, 21 Barb. 17 Thomas v. Whallon, 31 Barb.
(N. Y.) 221. See §§ 1273, 1274 here- (N. Y.) 178. See St. Lawrence Mu-
in, as to receiver. tual Ins. Co. v. Paige, 1 Hilt. (N. Y.)
12 Bates v. Detroit Mutual Benefit 430.
Assoc. 51 Mich. 587, 17 N. W. 67. 18 Demings v. Supreme Lodge
2435
§§ 1293, L294 JOYCE ON LXSl UAXCK
feiture;19 bui the fad that a director had a personal interest as a
member does not of itself invalidate an assessment.80 An assess-
ment is invalid if made by the grand lodge when the charter re-
quires it to be levied by the subordinate lodge.1 If mortuary
assessments can be made under the constitution only by the board
of directors upon submission by the secretary of proofs of deaths to
the board, and, upon indorsement and approval of the president
an assessment may then bo made, the directors are not invested
with a power to make an assessment in their discretion upon pre-
sentment merely of proper proofs of death.2
§ 1293. Notice of intention to assess not necessary for directors'
regular meeting. — An assessment on a premium note may be valid-
ly levied at a regular monthly meeting of the president and di-
rectors, held pursuant to the by-laws of the company and the
statutes of the commonwealth, and in such case affirmative proof
is unnecessary that notice was given to the directors that an assess-
ment would be laid at such meeting, although the directors have
power to order an assessment if needed at any meeting called for
that purpose.8 Such a rule is based upon the fact that the duties
of the directors are marked out by the charter and by-laws, which
duties they are presumed to know, and they should come to a reg-
ular meeting, prepared to act, without special notice that the subject
of levying an assessment would be considered at that meeting, and
a notice of intention to assess is unnecessary in the absence of some
requirement therefor, and the powers of the directors will not be
enlarged by giving such notice. This rule also accords with the
general rule relating to regular business meetings of corporations.4
§ 1294. Power of directors to assess cannot be delegated. —
Although the fact of levying an assessment by the board of directors
Knight of Pythias of the World, 131 arise. These duties being marked out
N. Y. 522, 30 N. E. 572, GO Hun by the charter, no special notice to
(N. Y.) 350, 14 N. Y. Supp. 834. them is necessary.
19 Bates v. Detroit Mutual Benefit 4 Morawetz on Private Corpora-
Assoc. 51 Midi. 587, 17 N. W. 67. tions (2d ed.) sec. 482, citing Samp-
80 Williams v. German Mutual Fire son v. Bowdoinham Steam Mill Co.
Ins. Co. 68 111. 387. 36 Me. 78; Warner v. Mower, 11 Vt.
1 Agnew v. Ancient Order United 385, and other cases; Fayette Mu-
Workmen, 17 Mo. App. 254. tual Fire Ins. Co. v. Fuller, 8 Allen
2 Railway Passenger & Freight (90 Mass.) 27, in which the court
Conductors' Mutual Aid & Benefit said: "In the absence of any express
Assoc, v. Robinson, 147 111. 138, 23 provision in the by-laws as to call-
ins. L. J. 79, 35 N. E. 168. ing of such meetings, the notice given
3 Bay State Mutual Fire Ins. Co. by the secretary was sufficient, and
v. Sawyer, 12 Cush. (66 Mass.) 64. they might proceed to act upon an
The just conclusion is that they are assessment. The rule, 'notify all
to meet to perform duties as thev may meetings of directors,' was complied
2436
ASSESSMENTS AND DUES § 1295
is a ministerial, and not a judicial, act,5 and a distinction is made
in regard to agents in this respect, it being declared that where the
discretion is to be exercised in respect to an act which is ministerial
and not judicial, it may be delegated; 6 yet, inasmuch as the funda-
mental law of the society is the source of authority, if the power
conferred upon the directors to levy assessments invests them with
a discretion which is personal, such power must be exercised per-
sonally, and cannot be delegated.7 This is in conformity with the
rule that directors of corporations cannot delegate powers which it
is intended that they should exercise personally.8 So a board of
directors authorized under the by-laws to levy assessments cannot
delegate their power to the president.9
§ 1295. When power to assess may be delegated: exceptions to
rule.— The board of directors may be expressly authorized by the
charter to appoint a committee to make assessments, in which case
it is necessary that the assessment be levied either by the board or
by the executive committee,10 and the board of directors acting upon
notice of a death may direct the secretary to issue notices of assess-
ments, in case its chairman shall, upon examination of the proofs
of death when they arrive, find them correct. Such assessment con-
forms with a requirement that the board shall make all assessments
with by the secretary, and this meet- gated :" Per the court in Farmers'
ing was competent to make an assess- Mutual Fire Ins. Co. v. Chase, 56 N.
ment." H. 341; People's Mutual Ins. Co. v.
5 Herkimer County Mutual Ins. Co. Westcott, 14 Gray (80 Mass.) 440.
v. Fuller, 14 Barb. (N. Y.) 373, 7 8 2 Morawetz on Private Corpora-
How. Pr. (N. Y.) 210; Sands v. tions (2d ed.) sec. 536; citing Silver
Sweet, 44 Barb. (N. Y.) 108; Ameri- Hood Road v. Greene, 12 R. I. 164,
can Mutual Aid Soc. v. Helburn, 85 and other cases. Thus where, the
Ky. 1, 2 S. W. 495, 8 Ky. L. Rep. charter provided that the directors
627, 7 Am. St. Rep. 571. should "settle and determine losses
6 Burial Board of St. Margaret's, and damages to be paid by the sev-
Rochester v. Thompson, 6 L. R. C. era! members and their respective
P. 445, 454, 458, 19 W. R. 892, 24 proportions" thereof, and the diree-
L. T. N. S. 673, 40 L. J. C. P. 213, tors voted to assess to a certain
per Willes, J. ; Walsh v. Southworth, amount, and a minority committee
6 Ex. 156, per Parke, B.; Baker v. was appointed to make the assess-
Cave, 1 H. & N. 674, 678, per Pol- ment and fr ed it for a less sum, it
lock, C.B.; Winchester v. Ayres, 4 was held illegal: Monmouth Mutual
G. Greene (Iowa) 104; 2 Thompson Fire Ins. Co. v. Lowell, 59 Me. 504.
on Corp. (2d ed.) sees. 1202 et seq. 9 Garretson v. Equitable Mutual
Compare Garretson v. Equitable Mu- Life & Endowment Assoc. 93 Iowa,
tual Life & Endowment Assoc 93 402, 61 N. W. 952.
Iowa, 402, 61 N. W. 952. 10 American Mutual Aid Soc. v.
7 "The general rule is that when Helburn, 85 Ky. 1, 2 S. W. 495, 8
the power to be executed involves Ky. L. Rep. 627, 7 Am. Law Rep.
necessarily the exercise of judgment 571.
and discretion, it cannot be dele-
2437
§ 1296 JOYCE ON INSURANCE
and the chairman approve of the proofs of death.11 So a hoard of
directors may pass a resolution directing the secretary to levy an
issessment, the articles of association specifying the amount.12
§ 1296. Assessment by illegally elected board. — Tt is hold that
an assessement made by a board of directors illegally elected is in-
valid.13 This decision is cited by a learned writer on corporations,
under a section upon the liability of shareholders to pay unau-
thorized calls, and he says: "The shareholders have agreed to con-
tribute the amount of their shares only after an authorized call has
been made by properly elected agents, and Until such a call has
been made a condition precedent to their liability remains unper-
formed."14 This case is, however, upon the point cited by Mr.
Morawetz, opposed to the doctrine of the supreme court of Indiana,
also noted and criticized by that authority, wherein it is held that
;mv irregularity or illegality in the election of the directors by
whom calls were made is no ground on which the payment of the
subscription for stock can he resisted."15 A question might arise
as to the right of a member to collaterally attach an assessment up-
on the ground stated in the above case,16 and it is held that a
member is estopped to say in defense to an action on a note that he
and his associates have not complied with the charter provisions,
nor may he deny the organization of the company.17 It is also
decided that the irregularity of election of the president does not
invalidate the assessment.18 But a member is not obligated to pay
a,u assessment which is invalid because levied under a by-law in-
consistent with the charter ; 19 and there would seem to be every
valid reason in favor of the proposition that the member has a
11 Passenger Conductors Life Ins. ing the functions of an office already
Co. v. Birnbaum, 116 Pa. St. 565, 11 filled:" Per Hoar, J.
Atl. 378. As to powers of directors 14 2 Morawetz on Private Corpora-
of corporations generally to appoint tions ( 2d ed.) sec. 150, p. 151.
a, committee to execute resolutions 15 2 Morawetz on Private Corpora-
of the board, see 2 Morawetz on Pri- tions (2d ed.) sec. 150, citing Stein -
vate Corporations (2d ed.) sec. 535. metz v. Versailles & Osgood Turnpike
12 Van Frank v. United States Ma- Co. 57 Ind. 457, and other Indiana
sonic Benefit Assoc. 158 111. 560, 41 cases.
N E. 1005. 16 People's Mutual Ins. Co. v.
'"People's Mutual Ins. Co. v. Weatcott, 14 Gray (80 Mass.) 440.
Westcott, 14 Gray (80 Mass.) 440. 17 Turnbull County Mutual Fire
•"By the terms of their contract their Ins. Co. v. Horner, 17 Ohio, 407.
liability can only be created by an 18 Currie v. Mutual Assurance Soc.
assessment or call made by the direc- 4 Hen. & M. (Va.) 315, 318, 4 Am.
tors and officers in whose selection Dec. 517.
they were entitled to a voice. ... 19 National Mutual Fire Ins. Co.
They were not bound to recognize as v. Yeomans, 8 R. I. 25, 86 Am. Dec.
directors persons who were never 610.
lawfully chosen, and who were usurp-
2438
ASSESSMENTS AND DUES §§ 1297, 1298
right to insist that the assessment shall be made by those, and those
only, who are authorized to levy the same, and the doctrine of the
case first noted herein seems based on sound principles.20
1297. Intentional omission of members. — If a mutual company
in levying an assessment intentionally omits some of the members
who are liable thereto and should have been included, this invali-
dates the assessment as to all.1 Although it is held in Minnesota
that if other members are knowingly omitted in making an assess-
ment on a premium note, it is merely voidable by the member
assessed.2 An assessment levied against a part only of the members
in proportion to their premium-' and deposits is invalid,3 and the
rule obtains although the assessment is accompanied by the com-
putation of the liability of the omitted members, and by the in-
tention to assess them accordingly on the expiration of their
policies.4 But the assessment will be valid and binding where a
certain percentage is levied on the premium notes of all the mem-
bers, although all their names are not specified nor the exact sum
required to be paid by each,5 and the fact that a few only of the
members are omitted does not invalidate the assessments.6
§ 1298. Assessments where risks are classified. — Although a \r
mutual company may be empowered to divide its risks into classes,7 j
so that a premium note in one class shall only be liable in the first jj\
instance to assessments to meet losses occurring in that particular ;
class to which it belongs YyitTiT the necessity arises all the assets j
and the notes of both classes must he applied to moot losses arising
in either class; so also if the assets in one class are insufficient,
resort must be had to the "other class for the deficiency.8 And a
premium note is assessable for losses where the fund produced by
the cash premiums has been exhausted.9 But in case of cash pre-
20 People's Mutual Ins. Co. v. 7 White v. Ross, 4 Abb. App. Dec.
Westcott, 14 Grav (80 Mass.) 440. (N. Y.) 589, 15 Abb. Pr. (N. Y.)
iMarblehead Mutual Ins. Co. v. 66; Union Mutual Fire Ins. Co. v.
Hay ward, 3 Gray (69 Mass.) 208. Keyser, 32 N. H. 313, 64 Am. Dee.
2 Swing- v. Akely Lumber Co. 62 375.
Minn. 169, 64 N. W. 97. 8 White v. Roes, 4 Abb. App. Dee.
3 People's Equitable Fire Ins. Co. (N. Y.) 589, 15 Abb. Pr. (N. Y.)
v. Arthur, 7 Gray (73 Mass.) 267; 66; Sands v. Sanders, 28 N. Y. 416,
Herkimer County Mutual Ins. Co. 25 How. Prac. 82; Commonwealth v.
v Fuller, 14 Barb. (N. Y.) 373, 7 Mechanics' Mutual Ins. Co. 112 Mass.
How. Pr. (N. Y.) 210. 192.
*Marblehead Mutual Ins. Co. v. 9 White v. Havens, 4 Abb. App.
Hayward, 3 Gray (69 Mass.) 208. Dec. (N. Y.) 582; Sands v. Hill, 42
5 Lycoming Fire Ins. Co. v. Rought, Barb. (N. Y.) 651.
97 Pa. St. 415.
6 Fayette Mutual Fire Ins. Co. v.
Fuller, 8 Allen (90 Mass.) 27.
2439
§ 1298 JOYCE ON INSURANCE
mium policyholders in a mutual company organized under the
Indiana statute, it is held that the premium notes must first be ex-
hausted to pay losses lie fore the cash fund can be drawn upon.10
If the charter or by-laws require the separation of property into
classes, and provide for liability only within each class, such divi-
sion cannot be ignored in levying an assessment, and in such case,
if the assessment is made generally, it is invalid; u and the funds
of one class must, if so required, be exhausted before resorting to
those of another class,12 but only those who are members of a par-
ticular class at the time of the adoption of a by-law authorizing the
directors to assess according to such division can be assessed,13 un-
til such other notes have paid assessments equal to the interest paid
on notes of its class. But although the articles of association allow
a division of risks into classes, and provide that premium notes
shall only be assessed for losses in the class to which they belong.
yet an assessment for notes for losses based upon such a division
is void if such classification is opposed to the policy and provisions
of the statutes. *^J If the business of a mutual fire insurance com-
pany is divided into classes, and the statute requires the same to be
conducted separately and independently each class from the other,
and also specifically provides that in no case shall an assessment be
made by the company or association upon the premium notes of
one class for the losses or expenses of the other class,15 neither the
premium notes of one class nor the proceeds of the same can be
diverted for losses or expenses, neither directly by assessments on
account of the prohibition of the statute, nor may the law be evaded
by suffering a judgment by default, for such judgment is unen-
forceable against property in the class other than that in which the
policy is issued.16
10 Clark v. Manufacturers' Mutual Ins. Co. 47 Kan. 223, 27 Pac. 854
Fire Ins. Co. 130 Ind. 332, 30 N. E. (this case was in court from 1887
212, under Rev. Stats. Ind. 1881, sees, to 1891). See Kansas Farmers' Mu-
3752, 3753. tual Fire Ins. Co. v. Amick, 37 Kan.
11 Atlantic Mutual Fire Ins. Co. 73, 14 Pac. 454, 45 Kan. 74, 25 Pac.
v. Moody, 74 Me. 385; Allen v. 211, 49 Kan. 726, 31 Pac. G91. The
Winne, 15 Wis. 113. See Kelly v. last two decisions were in favor of
Troy Ins. Co. 3 Wis. 254. the insurance company, upon the
12 Longpond Ins. Co. v. Hough- ground that a general judgmeni
ton, 6 Gray (72 Mass.) 77. could not be enforced against prop
13 .Miller v. Geoi'gia Masonic Mu- erty in another class than that to
tual Life Ins. Co. 52 Ga. 221. which the insurance belonged, and it
14 Thomas v. Achilles, 1G Barb. (N. was declared in the opinion of the
Y.) 491. last case "that the premium notes of
15 Sess. Laws Kan. 1875, c. Ill; the first class could not be assessed
Comp. Laws, 1879, c. 50a. or used to pay a loss in the second
16 Naill v. Kansas Farmers' Fire class."
2440
ASSESSMENTS AND DUES §§ 1299, 1300
The conclusion from these decisions is, that the company's right
to divide its risks into classes and to base its assessments upon such
division must be governed by the law under and by virtue of which
it is created and exists, and that it may be empowered to regulate
these matters by its charter or by-laws not inconsistent with express
statutory provisions, mandatory or prohibitory in their nature, and
where the statute is mandatory, it must be followed, and where it
prohibits the use of funds in other than a particular manner, it
must likewise be observed.
§ 1299. Assessment invalid; of certificate changed to life policy
with regular premiums. — If a company organized as an assessment
and endowment company changes its plan after issuing a cer-
tificate, and issues in effect a supplemental ordinary life policy.
with regular premiums at stated intervals, it cannot assess the as-
sured under the first certificate, and a demand therefor, coupled
with a demand for premiums under the supplementary policy, ex-
cuses nonpayment of the premiums on the latter.17
§ 1300. When assessment may be made. — The plans or schemes
of mutual insurance are so many and different, and the contracts
so various,18 that no more definite rule can be formulated for deter-
mining when an assessment may be levied than the general one
that the terms of the contract must govern in all cases. The con-
tract may be such that upon death of a member and notification by
the secretary each surviving member will be obligated to pay, with-
in a specified time after such notification, the amount required by
the rules of the association, otherwise to forfeit his certificate.19 An
assessment may be made although there is a reserve fund, it being
a matter of discretion with the directors or officers whether all such
fund shall be used or only a portion, or none at all.20 So an as-
sessment may be valid, although the benefit has been paid, where
payment is made out of the reserve fund which the assessment is_
levied to reimburse.1 As we have already seen, an assessment may
be made after the policy has been suspended or forfeited, or even^
after loss or death.2 It may also be made after insolvency,3 but an
17 So held in Colby v. Life Indem- efit Assur. Assoc. 143 Mass. 435, 9 N.
nity & Investment Co. 57 Minn. 510, E. 753.
59 N. W. 539. x McGowan v. Supreme Council of
On right of assessment company to Catholic Mutual Benefit Assoc. 76
change plan or class of policies, see Hun (N. Y.) 534, 28 N. Y. Supp.
note in 1 L.R.A.(N.S.) 623. 177.
18 See § 343 herein. 2 Atlantic Ins. Co. v. Goodall, 35
19 McDonald v. Ross-Lewin, 29 Hun N. H. 328.
(N. Y.) 87. 8 See §§ 1256, 1281, 1284 herein.
20 Crossman v. Massachusetts Ben-
2441
§ 1301 JOYCE ON INSURANCE
assessment by directors after an assignment in insolvency is void.4
Delay in Levying an assessment may be excused, although the con-
tracl provides for a Levy without delay, and. in view of all the
circumstances, is not unreasonable, as in ease of intervening Li
tion or a settlement of controverted rights.5 And a mutual insur-
ance company is not obligated after each Loss to compute an assi ss-
menl at once on its deposit notes liable thereto; it is sufficient to
adopt a rule of procedure that will practicably and reasonably ap-
proximate thereto;6 and although the act of incorporation requires
the directors to Levy an assessment "forthwith" to meet claims under
policies exceeding the amount of the company's existing fund.-,
exclusive of the members' deposit notes, yet if the company delays
for a time which is not unreasonable to make an assessment, it is
not thereby invalidated.7
§ 1301. Assessment to pay unearned premium. — It is held that
premium notes of members may be assessed to repay unearned pre-
miums. This was so held where the company was organized under
the Minnesota laws,8 and was also empowered to enter into contracts
for all cash premiums ; 9 the holders of policies in the latter class
not being members of the company, and the contract not being-
mutual, but a simple insurance contract. The unearned premiums
for which it was held the premium notes might be assessed were
those to which the holder of the cash premium policy was entitled
upon the termination of the policy by insolvency proceedings.10
So in Michigan assessments cannot be made to pay unearned or re-
turned premiums where the member contracts to pay only assess-
ments for losses.11 In Massachusetts, however, it is held tliat the
liability under the statute of a member as a corporator in a mutual
fire insurance company does not authorize an assessment to repay
unearned premiums, but that the deposit notes must be first ex-
hausted for the losses.12 So in an Indiana case, where the party
paying a definite sum in cash in lieu of a premium note was not a
member, nor entitled to share in the surplus, and the statute pro-
4 Schimpf v. Lehigh Valley Mutual 9 Under Laws Minn. 1885, c. 180.
Ins. Co. 86 Pa. St. 373. 10 In re Minneapolis Mutual Fire
5 People's Mutual Ins. Co. v. Allen, Ins. Co. (Powell v. Wyman) 49
10 Gray (76 Mass.) 297. Minn. 291, 51 N. W. 921.
6 New England Mutual Ins. Co. v. n Detroit Manufacturers' Mutual
Belknap, 9 Cush. (63 Mass.) 140. Fire Ins. Co. v. Merrill, 101 Mich.
7Marblehead Mutual Ins. Co. v. 393, 59 N. W. 661.
[Jnderwood, 3 Gray (69 Mass.) 210, 12 Commonwealth v. Monitor Mu-
under Mass. Rev. Stats, c. xxxvii, sec. tual Fire Ins. Co. 112 Mass. 150;
31; Shaughnessy v. Rensselaer Ins. Commonwealth v. Mechanics' Mutual
Co. 21 Barb. (N. Y.) 605. Fire Ins. Co. 112 Mass. 192.
8 Gen. Laws, 1881, c. 91.
2442
ASSESSMENTS AND DUES § 1302
vided for the appropriation of funds to the payment first of expenses
and then to whatever damages the member was entitled to claim
under his policy, it was held that the cash premium policyholders
were entitled to claim repayment of unearned premiums upon the
appointment of a receiver, but that the premium notes could only
be assessed for payment of fire losses.13
§ 1302. Slight errors do not invalidate material errors or omis-
sions do.14 — If an assessment made in good faith, under circum-
stances which legally warrant such an exercise of power, is sub-
stantially in conformity with the necessary requirements, and based
upon correct principles, it is valid, and will not be declared illegal
for errors which are slight and immaterial.15 Nor need the state-
ment enter into the minute details; it is only necessary that it
clearly appears from the facts that a necessity existed for the levy.16
and a slight error in the amount stated in the notice which arises
from a miscalculation will not of itself prevent the company from
recovering the amount actually assessed and due.17 But if assessable
notes to any amount which should have been included are omitted
intentionally, the assessment will be void,18 and where the by-laws
provide for the assessment pro rata of all expired policies for losses
occurring at the time they expire, a failure to include such policies
in an assessment avoids it.19 But if the receiver has assessed all
premium notes in his hands, his omission to include certain notes
that have been illegally surrendered will not enable the makers of
such notes, no other member objecting, to resist such assessment.20
But the assessment may be valid, notwithstanding the omission of
such assessable notes, where the omission does not arise from a
fraudulent intent and the amount is so small as to be immaterial.1
If a deficiency does not appear to have arisen by reason of a failure
to collect an assessment, a member is not liable, although the de-
ficiency be the result of "error, mistake, or miscalculation." 2
13 Clark v. Manufacturers Mutual 18 Herkimer Ins. Co. v. Fuller, 14
Fire Ins. Co. 130 Ind. 332, 30 N. E. Barb. (N. Y.) 373; Marblehead v.
212. Hayward, 3 Gray (69 Mass.) 208.
14 See also preceding and following 19 Susquehanna Mutual Fire Ins.
sections. Co. v. Gackenbach, 115 Pa. 492, 9
15 Marblehead Ins. Co. v. Under- Atl. 90.
wood, 3 Gray (69 Mass.) 210; New 20 Davis v. Oshkosh Upholstery Co.
England Mutual Ins. Co. v. Belknap, 82 Wis. 488, 52 N. W. 7-1.
9 Cush. (63 Mass.) 140. x Fayette Mutual Fire Ins. Co. v.
16 Lycoming Fire Ins. Co. v. Bix- Fuller, 8 Allen (90 Mass.) 27.
by, 15 Phila. 647, 38 L. I. 452, 15 2 Ionia Eaton & Barry Farmers'
Week. Not. Cas. 109. Mutual Fire Ins. Co. v. Otto, 96
"Thropp v. Susquehanna Mutual Mich. 558, 22 Ins. L. J. 857, 56 N.
Fire Ins. Co. 125 Pa. 427, 11 Am. W, 88, 97 Mich. 522, 56 N. W. 755.
St. Rep. 909, 17 Atl. 473.
2443
§§ 1303-1305 JOYCE ON INSURANCE
§ 1303. Second assessment of note. — Tf an assessment has hem
levied upon a pren i in i ii note and the same remains outstanding and
uncollected, a second assessmenl for the whole amount of the oote
is not void where it is made upon the same members for the same
purposes, and embraces the same object, or is made by reason of
difficulties and errors existing in a former assessment, or where it is
made in place of a previous illegal assessment not enforced.8 Where
a deficiency arises by reason of the failure to collect an assessment
in full, and a new assessment becomes necessary, it should be levied
upon the same members.4
§ 1304. Assessment: new policy substituted for old one through
fraud. — If the insured has given notes as a premium for a five year
policy, which policy he is induced to surrender by fraudulent rep-
resentations of the company, and upon the assurance that it will
issue a "duplicate," but more liberal and less onerous, policy, but
in fact his liability is doubled under the "duplicate" policy, he is
not liable to an assessment made by the company's receiver on such
notes under the provisions of the new policy.5
§ 1305. Levying assessments: amount: inequality. — The direct-
ors cannot ignore the cardinal rule which requires them to observe
the fundamental law of their corporate existence in making assess-
ments, and an assessment of a certain per cent on all premium
notes without a consideration of the just proportion of the losses
incurred and the amounts paid on said notes is invalid for its in-
equality.6 But where the company transacts business on both the
stock and mutual plan, and moneys received from premiums under
the stock plan are appropriated to paying losses, whereby the early
members of the mutual class are relieved from assessments on their
notes and others are left to be assessed for subsequent losses, there
is no remedy for such inequality, and those whose notes are in force
when such losses occur are liable.7 An assessment cannot be levied
for a larger amount than that provided for by the charter, even
though authorized by a by-law.8 Directors, as a rule, may not
exercise an arbitrary discretion in levying assessments, but must
3 Sands v. Sweet, 44 Barb. (N. Y.) 6 Davis v. Parcher Upholstering Co.
108, following Jackson v. Slyke, 44 82 Wis. 488, 52 N. W. 771; Rev.
Barb. (N. Y.) 116, note; citing Peo- Stats. Wis. sec. 1907. See also Com-
ple's Mutual Ins. Co. v. Allen, 10 monwoalth v. Union Mutual Ins. Co.
Gray (70 Mass.) 297; and question- 112 Mass. 116.
ing Campbell v. Adams, 38 Barb. (N. 7 Shaughnessv v. Rensselaer Ins.
Y.) 132. Co. 21 Barb. (N. Y.) 605.
4 Farmers' Ins. Co. v. Chase, 56 N. 8 National Mutual Fire Ins. Co. v.
H. 341. Yeomans, 8 R. I. 25, 86 Am. Dee.
5 Wyman v. Gillett, 54 Minn. 536, 610.
56 N. W. 167.
2444
ASSESSMENTS AND DUES § 1305
be controlled by the authority conferred upon them, and must act
in good faith and within a reasonable discretion.9 So if fire policies
be for different terms with different rates of premium, an assess-
ment for each month's losses is not void for inequality if based upon
a division of the premium for each policy of the member represent-
ing the years of its duration.10 Although if it appears that the
discretion conferred in levying assessments concludes the members,
as where they under their contract have obligated themselves to
pay such sums as should be assessed, it is held that such act of the
directors is final, especially when the amount of the call does not
appear to be so inconsistent with the established course of business
of the company as to show that it was not made in good faith,
and in the proper and judicious course of administration of the
company's affairs.11 An assessment in a mutual fire company may
be validly levied by percentages upon what is known as an "assess-
ment basis" calculated for each policy, by multiplying the premium
rate by twenty, such "assessment basis" being ascertained by mul-
tiplying the amount of insurance by the premium note, and all
assessments being levied alike upon all members in the same man-
ner.12 The assessment must be levied with reference to the losses
for which the company is then responsible, and to which the mem-
ber may be called upon to contribute.13 Under the Michigan act
providing for mutual insurance companies and for receivers there-
of in certain cases, such receivers have power to assess the members,
not only in such sum as shall be barely sufficient to pay all losses
and liabilities, but in such sums as shall be sufficient to cover all
the probable deficiencies by reason of the failure of some of the
9 See Rosenberger v. Washington company of a greater amount' than
Fire Ins. Co. 87 Pa. St. 207 ; Thomas is necessary to enable it to meet ex-
v. Whallon, 31 Barb. (N. Y.) 178; isting claims against it, together with
Sands v. Graves, 58 N. Y. 94. a reasonable allowance for expenses
10 Citizens' Mutual Fire Ins. Co. and failures to make collections, is in-
v. Sortwell, 10 Allen (92 Mass.) 110. valid; and an allowance for these
11 Commonwealth v. Dorchester purposes of a sum more than the
Mutual Fire Ins. Co. 112 Mass. 142, whole amount of the deficiency in its
145, et seq. The court, per Wells, funds is unreasonable if no special
J., says in this case: "But the basis circumstances are shown to justify
of recovery of the amount of the the excess : People's Equitable Mutual
note or any portion of it, and the Fire Ins. Co. v. Babbitt, 7 Allen (89
test of the validity of an assessment, Mass.) 235; Rosenberger v. Washing-
must be found in the contract, except ton Ins. Co. 87 Pa. St. 207.
so far as it is referred to the statute 12 Susquehanna Mutual Fire Ins.
by the terms of the note or the by- Co. v. Leavy, 136 Pa. St. 499, 20 Atl.
laws of the company :" Id. 147. This 502.
decision, however, overrules that of a 13 Commonwealth v. Union Mutual
former case in the same state, where Ins. Co. 112 Mass. 116.
it was held that an assessment by the
2445
§§ 1305a, L306 JOYCE <>\ [NSURANCE
members to pay.14 The word "remaining" used in ilio article? of
association of a masonic relief society, which is merely ;i mutual life
insurance company, proceeding on the assessment plan and which
articles limit the sum provided for the paymenl of a death benefit
in the total sum of dues "remaining" in the treasury of said society,
must be construed as meaning "received" or "realized."15 The
reasonable limits of an assessment in a mutual insurance company
upon policyholders to meet Losses musl not be disregarded, or the
officers of the company making such assessment^ will be condemned
as having transcended their authority, and the assessment held
illegal and invalid. Such oflicers must act judiciously, as well as
honestly, when levying assessments, and, if they fail to do so, the
courts may interfere in behalf of the injured parties.18 Thirty per
cenl is not an unreasonable amount to levy for contingencies, in
levying an assessment upon the members of a mutual insurance
company to meet liabilities, where a new assessment for deficiencies
arising from failure to collect cannot be made under the law of the
state, and litigation in connection with the collection of the assess-
ment, is probable.17
§ 1305a. Right to increase assessments. — The amount of each as-
sessment stipulated in a mutual benefit insurance contract cannot
be raised by the association without the consent of the member,
although he has agreed to comply with all the laws, rules, and re-
quirements of the order.18 So consent by a member of a mutual
henelil society, to be bound by all present and future rules of the
order, does not empower the society to make an increase in the rate
of his assessment date from the inception of his policy, and deduct
the amount owing by him under such arrangement from the face
on his policy.19 This question, has, however, been fully considered
elsewhere herein.20
§ 1306. Examination and allowance of claims. — As we have
stated, a necessity must exist within the terms contemplated by the
14 Wardle v. Townsend, 75 Mich. 18 Dowdall v. Supreme Council
385, 4 L.R.A. 511, 42 N. W. 950. Catholic Mutual Benefit Assoc. 196
An assessment of $50,000 to pay N. Y. 405, 31 L.R.A. (N.S.) 417, 89
$25,000 not excessive. N. E. 1075.
15 Lake v. Minnesota Masonic Re- On right to increase rates, see ciotes
lief Assoc. 61 Minn. 96, 52 Am. St. in 31 L.R.A. (N.S.) 417, and L.R.A.
Rep. 538, 63 N. W. 263. 1916A, 762.
1G Pencille v. Suite Farmers Mutual 19 Jaeger v. Grand Lodge of Order
Bail Ins. Co. 74 Minn. 67, 73 Am. of Hermann's Sons, 149 Wis. 354, 39
St. Rep. 326, 76 N. W. 1026. L.R.A.(N.S.) 494, 135 N. W. 869.
17 Ionia Eaton & Barry's Farmers' 20 See §§ 380 et seq. herein.
Mutual Fire Ins. Co. v. Ionia Circuit
Judge, 100 Mich. 606, 32 L.R.A. 481,
59 N. W. 250.
2446
ASSESSMENTS AND DUES § 1307
contract for making an assessment, for it is upon these conditions
that the member has promised to contribute.1 And where the con-
tract provides that the premium notes shall be liable for losses and
expenses, an assessment must be based upon an examination and
determination of the amount of losses and expenses, and of the
notes liable to be assessed therefor. While this does not exclude the
exercise of a reasonable discretion in ascertaining the facts, never-
theless the facts must be inquired into, and where the entire amount
of the note is assessed without the necessary inquiry, the assessment
is void,2 and proof is inadmissible to supply such omission,3 and the
claims allowed may be shown in defense to have been void or fraud-
ulently allowed.4 But an assessment may be ordered, subject to the
examination of proofs of death by the secretary and his approval,5
and the fact that some of the losses might have been successfully
resisted on technical grounds does not invalidate the assessment.6
If a death claim accrues after involuntary dissolution of a benefit
association, it is not entitled to participate in the death fund with
claims maturing before the dissolution, although it may be entitled
to participate in the reserve fund.7
§ 1307. What may be included. — An allowance may be made in
making an assessment upon premium notes for losses paid out of
the funds derived from cash premium policies.8 So an assessment
may be made to repay money borrowed to pay a loss if levied upon
those liable for such loss.9 Payments of prior illegal assessments
may be credited the members, and a new assessment may include
the amount paid ; 10 and if such assessment is partly paid, the sum
may be included,11 and an assessment may be made to pay back
sums voluntarily paid the company under a previous assessment
which has been adjudged invalid, together with interest thereon.12
And an assessment by a receiver may be allowed under a statute
for uncollectable claims, and it is not invalid, although for a larger
amount than the company's actual indebtedness and the estimated
expense of collection. It is sufficient, in such cases, that the assess-
1 See § 1290 herein. Life Assoc. 131 N. Y. 354, 40 N. Y.
2 Sands v. Graves, 58 N. Y. 94; St. Rep. 810, 61 Hun, 299, 16 N. Y.
Embree v. Sehiekelor, 36 Ind. 423. Supp. 80, 43 N. Y. St. Rep. 204, 30
3 Sands v. Graves, 58 N. Y. 94. N. E. 114.
4 People's Mutual Fire Ins. Co. v. 8 Sands v. Graves, 58 N. Y. 94.
Allen, 10 Gray (92 Mass.) 297. 9 Tobey v. Russell, 9 R. I. 58.
5 Passenger Conductors Life Ins. 10 People's Equitable Ins. Co. v.
Co. v. Birnbaum, 116 Pa. St. 565, Petitioners, 9 Allen (91 Mass.) 319.
11 Atl. 378. . u People's Mutual Fire Ins. Co. v.
6 Sands v. Hill, 42 Barb. (N. Y.) Allen, 10 Gray (76 Mass.) 297.
651. 12 People's Equitable Ins. Co. v.
7 In re Equitable Reserve Fund Petitioners, 9 Allen (91 Mass.) 319.
2447
§ 1308 JOYCE ON INSURANCE
ment is substantially correcl and is made in good f;iitli.13 An
allowance may be made for return premiums on canceled policies,14
also for claims uncollectable because of noncompliance with state
insurance Law;16 and an assessment may include losses chargeable
upon each policy for the month in which the assessment expired,
and exclude those in the month in which it began, the assessment
being based upon a computation of losses from month 1 onth.16
So a reasonable amount may be included for expenses and the
insolvency of members,17 and for other expenses and debts.18 While ,
the constitution and by-laws provide for bimonthly assessments
for a sum in gross to be fixed by the executive committee sufficient
in amount to meet pending death claims, and while a resolution
properly passed empowers the board of directors to fix a gross sum
of assessment at an amount less than sufficient to meet pending
death claims and to make good the amount necessary therefor by
appropriations from the reserve fund, nevertheless such resolution
does not imperatively require such acts to be done by the board but
only vests it with discretion to limit the assessment and appropriate
the reserve fund as suggested in the resolution.19 Again, assess-
ments upon the members to pay a loss, may include interest and
expenses incident thereto resulting from not paying it when due,
and also the costs of litigation incurred in defending actions.20
But a mutual fire insurance company cannot levy assessments to
create a surplus fund for future losses where its power is limited to
assessments for the payment of losses only.1
§ 1308. What need not and may not be included. — An assess-
ment upon a premium note in which a former unpaid assessment is
included is irregular.2 Claims which are uncollectable and worth-
less need not be considered,3 and the fact that illegally surrendered
13 Tobey v. Russell, 9 R. I. 58; Ins. Co. v. Petitioners, 9 Allen (91
Wardle v. Townsend, 75 Mich. 385, Mass.) 319. As to losses and expen-
4 L.R.A. 511, 42 N. W. 950. But see ses prior to membership, see § 1256
York County Mutual Fire Ins. Co. v. herein.
Bowden, 57 'Me. 280, 286. 19 Barbot v. Mutual Reserve Fund
14 Fayette Ins. Co. v. Fuller, 8 Life Assoc. 100 Ga. 681, 28 S. E. 498,
Allen (*90 Mass.) 27. 27 Ins. L. J. 338.
15 Insurance Commr. v. Commer- 80 Ionia Eaton & Barry's Farmers'
cial Mutual Ins. Co. 20 R, I. 7, 36 Mutual Fire Ins. Co. v. Ionia Circuit
Atl. 930. Judge, 100 Mich. 606, 32 L.R.A. is],
16 People's Mutual Ins. Co. v. Al- 59 N. W. 250.
len, 10 Grav (76 .Mass.) 297. 1 Farmers' Mutual Fire Ins. Co. v.
V Susquehanna Mutual Fire Ins. Knight, 162 111. 470, 44 N. E. 834.
Co. v. Gackenbach, 115 Pa. St. 492, 8 Campbell v. Adams, 3S Barb. (N.
9 Atl. 90 ; Crossman v. Massachusetts Y.) 132; Planters' Ins. Co. v. Corn-
Mutual Benefit Assoc. 143 Mass. 435, fort, 50 Miss. 662.
9 N. E. 953. 3 Maine Mutual Marine Ins. Co. v.
18 People's Mutual Equitable Fire Ncal, 50 Me. 301.
2448
ASSESSMENTS AND DUES §§ 1309, 1310
notes are not included does not invalidate the assessment by a re-
ceiver when lie assesses all notes in his hands.4 A deficiency from
uncollectable notes may no1 be included.5 An assessment for losses
and expenses, or which includes losses and bad debts, is invalid and
uncollectable where the power to assess is limited to the amount of
losses unpaid at the time of making the assessment.6
§ 1309. Anticipated losses. — If no provision is made for an as-
gessment to meet anticipated losses, no such assessment can be
levied, and if the directors are required to examine into a claim
for loss, and to levy an assessment if it be valid, they have no
authority, in such case, to assess for future losses which are in an-
ticipation only.7 So a premium note is not assessable for losses
anticipated upon an assumed failure of others to contribute their
proportion of losses.8 If all the deposit notes and one per cent is
not more than sufficient to pay a loss on property destroyed by fire,
and before the deposit notes are collected other property is de-
stroyed, the losers under the last fire cannot recover any part of the
assessment made under the original loss.9 It is declared, however,
in Wisconsin that an assessment may be levied for anticipated loss-
es.10
§ 1310. Regularity of assessment must be affirmatively shown:
allegation and proof: evidence. — As has been stated in a prior sec-
tion, the act of making an assessment is a ministerial, and not a ju-
dicial, one ; n therefore, no presumption can arise in favor of the
regularity or legality of assessments,12 and it is an affirmative matter,
4 Davis v. Oshkosh Upholstery Co. 26 Ind. 336. The court said: "It
82 Wis. 488, 52 N. W. 771. was not in the power of the board of
6 Bangs v. Grey, 2 Kern (N. Y.) directors to make assessments on pre-
569. See Farmers' Mutual Ins. Co. mium notes beyond the sum necessary
v. Chase, 56 N. H. 341. The defend- to pay the amount due and unpaid
ant was assessed to supply a deficien- on losses : " Bersch v. Sinissippi Ins.
cy from uncollected assessments made Co. 82 Ind. 64.
before the existence of his policy. 7 Pacific Mutual Ins. Co. v. Guse,
Such an assessment would be invalid 49 Mo. 329, 8 Am. Rep. 132 ; Thomas
against the defendant: Long Pond v. Whallon, 31 Barb. (N. Y.) 172;
Co. v. Houghton, 6 Gray (72 Mass.) Rosenberger v. Washington Fire Ins.
77. Co. 87 Pa. St. 207.
6 Sinissippi Ins. Co. v. Taft, 26 8 York County Mutual Fire Ins.
Ind. 240; York County Mutual Fire Co. v. Turner, 53 Me. 225. See also
Ins. Co. v. Bowden, 57 Me. 286. In Thomas v. Whallon, 31 Barb. (N. Y.)
this case the court said : "The provi- 172.
sions of the law contemplate the as- 9 Caston v. Alleghany Mutual Ins.
sessment of notes to meet actual lia- Co. 1 Pa. St. 322.
bilities in just proportions. One class 10 Kelly v. Troy Fire Ins. Co. 3
cannot be called upon to pay losses Wis. 254, 329, per the court,
and expenses of another class: " Sin- n § 1204 herein.
issippi Ins. Co. v. Farris, 26 Ind. 12 American Mutual Aid Society v.
342; Sinissippi Ins. Co. v. Wheeler, Helhurn, 85 Ky. 1, 2 S. W. 495, S Ky.
Joyce Ins. Vol. III.— 154. 2449
§ 1310 JOYCE ON [NSURANCE
both of pleading and evidence, necessary to establish a forfeiture
for nonpayment of an assessment, thai the assessmenl should appear
to have been made in the manner, mode, and in conformity with
the authority given, and for a proper purpose.18 A general allega-
tion thai ii was "duly made"' is insufficient.14 It musl appear that
the loss occurred before making the assessmenl and during the
terms of the policies assessed; also that the levy was made upon all
the members liable to contribution, and, if necessary, the amount.
due from delinquents on assessments should be collected in a proper
suit therefor.15 The person assessed must also be shown to have
been a member when the assessment was levied, and that the loss for
which it. was made accrued during the continuance of the member's
liability therefor.16 There must also be proof of the losses and ex-
penses for which the assessment was levied; 17 and if a receiver sues
to recover assessments, the complaint must aver all the necessary
facts showing a liability on the premium notes.18 If an action is
brought to recover an assessment, and the proof shows an excess
therein, but it is not so large in amount as in itself to import fraud
or gross mistake, the jury may give a verdict for the plaintiff. The
burden of proof of fraud or misconduct rests, in such case, upon the
party relying thereon as a defense.19 Where the defense of nonpay-
ment of an assessment resulting in forfeiture was set up in an
action on a benefit certificate, it was held error to reject evidence of
the receipt from the supreme secretary by the section secretary, of
the notice to pay a fixed assessment required under the by-laws to be
given where there was not enough of the fund in a certain class to
pay the benefit; such evidence was rejected on the ground that it
was not shown that the assessment was regularly made, but it was
declared that the fact of the sending of said notice was presumptive
proof of the necessity for an assessment, and that the fund was in-
Law Rep. 627, 7 Am. Law Rep. 571; Co. v. Guse, 44 Mo. 329, 8 Am. Rep.
Sounds v. Sweet, 44 Barb. (N. Y.) 132.
108. "American Mutual Aid See v.
13 Mutual Benefit Life Ins. Co. v. Helburn, 85 Ivy. 1, 2 S. YY. 495, 8
Jarvis, 22 Conn. 133, US; American Ky. L. Rep. G27, 7 Am. Law Rep.
Mutual Ai.l Soc. v. Helburn, 85 Ky. 571.
1, 2 S. W. 496, 8 Ky. L. Rep. (i27, 7 15 Planters' Ins. Co. v. Comfort, 50
Am. Law Rep. 571; Shea v. Massa- Miss. 662.
cliuselts Mutual Benefit Assoc 160 16 Columbia Fire-Ins. Co. v. Kin-
Mass. 289, 23 Ins. L. J. 214, 35 N. E. yon, 37 N. J. L. 33.
855, 39 Am. St. Rep. 475; Mutual "Pacific Mutual Ins. Co. v. Guse,
Life Ins. Co. v. Houghton, 6 Gray 49 Mo. 329, 8 Am. Rep. 132.
(72 Mass.) 77; Atlantic Mutual Fire 18 Manlove v. Burger, 38 Ind. 211.
Ins. Co. v. Fitzpatrick, 2 Gray (68 19 Susquehanna Mutual Fire Ins.
Mass.) 279; Wayland v. Western Co. v. Gackenback, 115 Pa. St. 492,
Life Indemnity Co. L66 Mo. App. 9 Atl. 90.
221, 231, 148 S. W. 626; Pacific Ins.
2450
ASSESSMENTS AND DUES § 1311
sufficient to meet the loss.20 The record of losses kept by the asso-
ciation may, under the contract, be prima facie evidence that losses
have occurred,1 and the charter of the company may provide thai
the certificate of the secretary shall be prima facie evidence of the
assessment.2 And the provision applies to an action on the note
to the extent that it is prima facie evidence of the validity of the
assessment and its amount.3 The company's books or records, or
an examined and proven copy thereof, showing the proper authori-
ties had acted, etc., and also showing the forfeiture, if relied on,
should first be produced ; if not obtainable, then the absence thereof
accounted for before parol evidence is admissible. An attempt to
prove by the testimony of officers what the records should show is
an attempt to introduce secondary evidence.4
§ 1311. Defenses to actions: assessments: premium notes. — The
noncompliance with the provisions of the charter is no defense to
an action for an assessment on a deposit note.5 The rule is the
same in mutual as in stock companies, that a member is estopped
to deny the organization of the company ; 6 nor may the maker be
heard to say that the notes were given in advance without any in-
surance therefor,7 and insolvency before the expiration of the policy
will constitute no defense to an action on a premium note.8 If the
policy is void ab initio, the premium notes cannot be collected.9 In
an action brought by the subordinate lodges of the Independent
Order of Odd Fellows in Kansas against the grand lodge of such
order in that state, it appeared that an assessment had been made
by the grand lodge of Kansas upon these subordinate lodges, for
20Demings v. Supreme Lodge v. Hill, 42 Barb. (N. Y.) 651 ; Brown-
Knights of Pythias, 131 N. Y. 522, er v. Appleby, 1 Sand. (N. Y.) 158:,
30 N. E. 572, 43 N. Y. St. Rep. 872, Browner v. Hill, 1 Sand. (N. Y.)
reversing 60 Hun, 350, 38 N. Y. St. 629; Dettra v. Kestner, 147 Pa. St.
Rep. 979, 14 N. Y. Supp. 834. 566, 572, 23 Atl. 889. As to estoppel
1 People's Ins. Co. v. Allen, 10 generally to deny illegality of act of
Grav (76 Mass.) 297. corporation in excess of the charter
2 Williams v. German Mutual Fire or the legality of its corporate exist-
Ins. Co. 68 111. 387 ; Susquehanna ence, see 2 Morawetz on Private Cor-
Mutual Fire Ins. Co. v. Gackenbach, porations (2d ed.) sees. 692, 750, 774,
115 Pa. St. 492, 9 Atl. 90. 778 note.
3 Williams v. German Mutual Fire 7 Browner v. Appleby, 1 Sand. (N.
Ins. Co. 68 111. 387. Y.) 158; Brown v. Crooke, 4 N. Y.
4 Phoenix Mutual Fire Ins. Co. of 51.
Cincinnati v. Bowersox, 6 Ohio (C. 8 Sterling v. Mercantile Mutual
C.) 1; Dial v. Vallev Mutual Life Ins. Co. 32 Pa. St. 75, 72 Am. Dec.
Assoc. 29 S. C. 560, 8 S. E. 27. 773.
5 Trumbull Countv Mutual Fire 9 Frost v. Saratoga Mutual Ins. ( !o.
Ins. Co. v. Horner, 17 Ohio, 407. 5 Denio (N. Y.) 154; Bersch v. Sin-
6 Citizens' Mutual Ins. Co. v. Sort- issippi Ins. Co. 28 Ind. 64.
well, 8 Allen (90 Mass.) 217; Sands
2451
311 JOYCE ON |\S[ K.WfK
the purpose < f founding a home fur the orphans of deceased Odd
Fellows. Both parties recognized the sovereign grand Lodge of the
United States as having full legislative and judicial power in all
mallei-- relating to the order, and that an appeal lay to this lodge
from a decision of the grand lodge. The plaintiffs asked for an
injunction of this assessment, but the court refused it. no appeal to
the sovereign Lodge having been taken, and this action of the court
was held no error.10 It is held that the maker of a premium note
may defend an action on the same, on the ground of fraud or false
representations in inducing him to enter into the contract.11 But
such hats constitute no defense to an action by the receiver to re-
cover assessments where members have joined thereafter, and so
even though the fraud is not discovered until after the appointmenl
of the receiver; it being held that the rights of innocent members
having intervened, it was necessary to their protection that the
action be sustained: 12 and the same decision was uiven in another
case under substantially the same facts, with the addition, however,
that the member knowing of said facts had held his policies and
slept on his rights until the appointment of trustees to wind up the
company's affairs.13 But if the representations were made when
the note was uiven in order to obtain it, they constitute a defense,1*
and the insured may not show that he had no insurable interest
in the property in an action on the deposit note for an assessment
levied, where said note acknowdedges the receipt of a policy.15
Where a decree was given against a mutual benefit society ordering
the officers of such society to levy an assessment adjudged due from
defendant to plaintiff, the fact that such officers were not parties to
the action is not a ground for complaint on the part of the defend-
ant, since it adds nothing to the effect of the decree.16 In Pennsyl-
vania, if the by-laws are not attached to the policy, it does not ap-
pear what are legal assessments, and a failure to pay assessments
due operates as a forfeiture so that the assured may in such case
recover, although it is alleged that an assessment was due from
assured at the time of the loss.17
10 Reno Lodge No. 99 of Hutchin- 409, 71 Am. Dec. 602. See § 1256
son v. Grand Lodge of Kansas, 54 herein.
Kan. 7::, 37 Pae. 1003, 26 L.R.A. 98. 15 New England Mutual Fire Ins.
11 Whitman v. Messner, 34 Ind. 487. Co. v. Belknap, 9 Cush. (63 Mass,)
18Dettra v. Kestner, 117 Pa. St. 140.
506, 572, 23 Atl. 889; Fogg v. Pew, 16 Prader v. National Masonic Ac-
10 Gray (76 Mass.) 409, 71 Am. Dec. cident Assoc. 95 Iowa, 149, 63 N. W.
662. 601.
13 M;insfield v. Cincinnati Ice Co. w Haverstick v. Pennsylvania Twp.
28 Week. L. Ball. 113, 11 Ohio Dec. Mutual Fire Ins. Assoc. 156 Pa. St.
617. 333, 27 Atl. 245.
14 Fogg v. Pew, 10 Gray (76 Mass. )
2152
ASSESSMENTS AND DUES
§ L312
§ 1312. Statute of Limitations: assessments. — In cases of assess-
ments on premium or deposit notes, the agreement being to pay
the amount required and when required, the Statute of Limitation
does not commence to run until the date of levying an assessment.18
And although an assessment to the full amount of the note has
been made, the statute runs from the time the same becomes due
and payable.19
18 Bigelow v. Libby, 117 Mass. 35!) ; insurance company, see note in 1
Hope Mutual Ins. Co. v. Weed, 28 L.R.A.(N.S.) 914.
Conn. 51. 19 Sands v. Lillienthal, 46 N. Y.
On when statute of limitations be- 541. See also Smith v. Bell, 107 Pa.
gins to run against unpaid balance on St. 352.
premium or "stock" notes of mutual
2453
CHAPTKli XLIII.
NOTICE: PREMIUMS, ASSESSMENTS, AND DUES.
§ 1320. When notice must be given: generally.
§ 1321. When notice need not be given: generally.
§ 1321a. Notice necessary when insured entitled to profits or reduction of
premiums.
§ 1322. Failure to give written notice: tender unnecessary.
§ 1323. Statutory notice.
§ 1324. Stipulation contrary to statute requiring notice: waiver.
§ 1324a. Waiver of notice in other cases.
§ 1325. Constitutionality of statute requiring notice.
§ 132f>a. Statutory notice: place of contract.
§ 1325b. Statutory notice : effect of repeal of statute.
§ 132G. To what class of policies New York and other statutes apply.
§ 1326a. Same subject : paid-up policy.
§ 1327. Stipulation in guaranty fund note as to notice.
Sufficiency of notice.
Sufficiency of statutory notice.
Authorities holding notice sufficient.
Right to notice: effect of subsequently enacted by-law.
To whom notice should be given.
Notice to assignee who had contracted to pay assessments: liabil-
ity of assignee for failure to pay same.
Cases holding that usage to send notice necessitates giving notice.
Authorities holding the contrary doctrine.
Same subject: conclusion.
Personal notice: whether notice must be actually received.
Service by mail.
Same subject: validity of provisions as to.
§ 1336b. Same subject: last known address: change of address.
§ 1337. Notice wrongly addressed.
§ 1338. Notice by publication.
§ 1338a. Same subject : validity of provisions as to.
§ 1339. Computation of time.
§ 1320. When notice must be given: generally. — Tn life insur-
ance the continuance of the contract is generally made dependent
2454
§ 1328.
§ 1329.
§ 1330.
§ 1330a.
§ 1331.
% 1331a.
§ 1332.
§ 1333.
§ 1334.
§ 1335.
§ 1336.
§ 1336a
NOTICE
§ 1320
upon the payment at stipulated times of a premium which is fixed
and certain, and the amount of which is known by the insured,
so that unless the contract so provides, or notice be required by
law or usage, or a course of dealing,* no notice is necessary. But it
is usually conditioned that notice of assessments shall be given, or
the plan of insurance may be such that the assured cannot know
the amount he will be called upon to pay unless notified thereof.
If, however, the contract provides for notice of the time of pay-
ment of the premium or of the assessment or of dues, such notice
is a condition precedent to the exercise of the company's right to
claim a forfeiture or to suspend a member for nonpayment.20
20 United States. — Thompson v. v. Supreme Tent Knights of Macca-
Knickerbocker Life Ins. Co. 104 U. bees of the World, 140 Mo. App. 76,
S. 252, 26 L. ed. 765 (failure to give 119 S. W. 514 (notice of suspension
notice no excuse for nonpayment necessary) ; Siebert v. Supreme
notwithstanding custom to give no- Council Order of Chosen Friends, 23
tice) ; Union Mutual Life Ins. Co. v. Mo. App. 268.
Mowry, 96 U. S. 544, 24 L. ed. 674 New Jersey.— Supreme Assembly
(policy stipulation for forfeiture for Royal Society of Good Fellows v. Mc-
nonpayment of premium on day spec- Donald, 59 N. J. L. 248, 35 Atl. 1061
ified ; promise that if person will take (notice in mode prescribed must be
out insurance he will be notified wheji given member of benevolent society).
to pav annual premiums does not New York. — Wachtel v. Benevolent
estop "insurer from forfeiture for Soc. 84 N. Y. 28, 38 Am. Rep. 478;
nonpayment when due for policy ex- Meeder v. Provident Savings Life
presses final agreement) ; Hall v. Su- Assur. Soc. 68 N. Y. Supp. 518, 58
preme Lodge Knights of Honor, 24 App. Div. 80 ; Ellis v. National Prov-
Fed. 250. ident Union, 63 N. Y. Supp. 1012, 50
Arkansas. — Haynes v. Masonic App. Div. 255.
Benefit Assoc. 98 Ark. 421, 136 S. W. Ohio.— Union Central Life Ins. Co.
187. v. Pottker, 33 -Ohio St. 459, 31 Am.
Connecticut. — Lewis v. Phoenix Rep. 555; Robert v. New England
Mutual Life Ins. Co. 44 Conn. 72. Mutual Life Ins. Co. 1 Disn. (Ohio)
Georgia. — Locomotive Engineers' 355, 12 Ohio Dec. 668, aff'd 2 Disn.
Mutual Life & Accident Ins. Assoc, v. 106, 13 Ohio Dec. 66.
Bobo, 8 Ga. App. 149, 68 S. E. 842. Pennsylvania.— Smith v. National
Illinois.— Supreme Lodge Knights Life Ins. Co. 103 Pa. St. 117; Grand
of Honor v. Dalberg, 138 111. 508, 28 Mutual Life Ins. Co. v. New York
N. E. 785. Mutual Life Ins. Co. 97 Pa. St. 15;
Indiana.— Supreme Lodge Knights Columbia Ins. Co. v. Buckley, 83 Pa.
of Honor v. Johnson, 78 Ind. 110. St. 293, 298, 24 Am. Rep. 172.
Iowa. — Mandego v. Continental Tennessee. — Hartford Life Ins. Co.
Mutual Assoc. 64 Iowa, 134, 17 N. v. Hyde, 101 Tenn. 396, 48 S. W. 968
W. 656, 19 N. W. 877. (notice necessary to enable insured
Michigan. — Miner v. Farmers' Mu- to know amount payable),
tual Fire Ins. Co. 153 Mich. 594, 117 England. — See Bell v. Hudson's
N. W. 211. Bay, 30 Canadian L. T. 100, 11 W.
Missouri. — Bange v. Supreme L. R. 633.
Council Legion of Honor, 153 Mo. See also cases cited throughout
App. 154, 132 S. W. 276; Meisenbach this section and §§ 1103 et seq. (pre-
2455
§ 1320 JOYCE ON [NSURANCE
Thus, the notice prescribed by the charter or by-Laws must be
ui\<ii.1 .iii.l [f the !'\ laws provide that notice of annual dues
shall be given the member a certain number of days before they
become due, such notice is necessary to establish a forfeiture, even
though the certificate provides for forfeiture.2 And the notice must
be reasonably in accord with the provisions of the contract, and
the company must notify the member with reasonable certainty
what he must do within the time specified for payment, for the
party is entitled to such notice as his contract calls for. and a for-
feiture cannot be based upon a notice of claims for dues in advance
contrary to the terms of the agreement.3
Notice of assessment should lie given when made, and not before 4
unless so expressly provided for by the articles of incorporation and
by-laws.5 It is held, however, in New York that notice may be
given in advance of the time when the premium becomes due.6
The fact that the assessment has been legally and properly made
cannot aid the company to claim a forfeiture if it has neglected
to give notice if required.7 Again, instructions by an insurer that
premiums musl he paid at the office, and that due notice will be
given of the day when due. will prevent forfeiture for nonpayment
unless notice has been given.8 And insured does not cease to be a
member of the association by reason of his failure to pay an as-
sessment, which will become due thirty days after notice, and such
notice is not given, as the assessment does not become due.9 The
stipulation in the contract may be such as to require notice by the
secretary,10 or by the financial secretary of each subordinate coun-
cil ; n and actual notice of an assessment may be required under
miums) ; §§ 1206 et seq. (notes for 5 Corev v. Sherman, 96 Iowa, 114,
premiums, etc.) ; §§ 1261 et seq. (as- 32 L.R.A. 490, 64 X. W. 828.
sessments). 8Phelan v. Northwestern Mutual
On conflict of laws as to notice of Life Ins. Co*. 42 Hun (N. Y.) 419.
premiums, see notes in 63 L.R.A. 862, But see s. c. 113 N. Y. 147, 10 Am.
and 52 L.R.A. (N.S.) 283. St. Rep. 441, 20 N. E. 827.
lPulford v. Fire Dept. of Detroit, 7Frey v. Mutual Fire Ins. Co. of
31 Mich. 458; Supreme Lodge the County of Wellington, 43 U. C.
Knights of Honor v. Dalberg, 138 Q- •?■ 102-
III 508 ''8 N E 785 "Hemlem v. Imperial Life Ins. Co.
"GarretsonV Equitable Mutual ^1^du 2$°> 25 LRA- G27' 59 K
Life & Endowment Assoc. 93 Iowa, a at 1 i t> -n i t -j> a
ac\o a-i v w (.-•) q t\t *. i r Mutual Reserve Fund Life Assoc.
"- 61 N. W. 952. See Mutual En- v Hamli m v s_ ,()- ... L d
•loument Assessment Assoc, v. Es- 167, 11 Sup. Ct. 614.
Sea (™\ , , f63' 10 1>>:l1^ v- Detroit Mutual Life Co.
3 Mutual Endowment Assessment 5] Midi. 587 17 N \V 67
Assoc, v. Essender, 59 Md. 463. "Bridges'v. National Union, 73
4 Bangs v. Mcintosh, 23 Barb. (N. Minn. 186. 76 N. \V. 270, 28 Ins L
Y.) 591. .1. 388.
2456
NOTICE § 1320
the articles of association, even though a by-law provides for notice
by publication.12 And if the constitution makes nonpayment
within a specified time to operate of itself as a forfeiture, notice of
death assessments must be given.13 So where notice is* required to
be given the local subordinate lodge, it must be given as provided,
and the members must be notified by the lodge, for mere notice to
such local agents is not constructive notice to the members.14 A
member may be entitled to a notice from both the local and general
secretary before a forfeiture can be declared if the by-law so pro-
vides, expressly or by construction.15 And notice of intended sus-
pension for nonpayment of dues or assessments is necessary.16 So
failure to pay assessments will not subject a member of a mutual*
benefit society to a suspension without notice of the arrearage, where
the by-laws require each member to be notified as to arrears.17 And
notice of assessment must be given where contract so provides not-
withstanding the member has knowledge of the assessment.18
If the amount of the premium is uncertain on account of divi-
dends, and the insured is dependent upon notice for knowledge of
the sum due, which notice the company has been accustomed to
give, or if the times and amounts of assessments depend upon the
mortality of members, or the amount assessable for a loss is un-
certain, an obligation rests upon the company to give notice as a
condition precedent to forfeiture or suspension, or the depriving a
member of good standing, and the failure to pay through the fault
or otherwise of those obligated to send notice, does not affect the
holder's or member's rights.19
12 Schmidt v. German Mutual Ins. Catholic Knights of America, 95 Mo.
Co. of Indiana, 4 Ind. App. 340, 30 App. 233, 68 S. W. 949. See also
N. E. 939 ; Supreme Lodge Knights Bradford v. Mutual Fire Ins. Co. 112
of Honor v. Dalberg, 138 111. 508, 28 Iowa, 495, 84 N. W. 693.
N. E. 785. n Murphy v. Independent Order
13 Scheufler v. Grand Lodge An- of the Sons & Daughters of Jacob of
cient Order United Workmen, 45 America, 77 Miss. 830, 50 L.R.A. Ill,
Minn. 256, 20 Ins. L. J. 241, 47 N. 27 So. 624; Lamarsh v. L'Union St.
"W. 799. Jean Baptiste De Nashua, 68 N. H.
14 Hall v. Supreme Lodge Knights 229, 38 Atl. 1045. See also Schafer
of Honor, 24 Fed. 450; Covle v. Ken- v. United Brotherhood of Carpenters,
tuckv Grangers' Mutual Benefit As- 22 Misc. 363, 49 N. Y. Supp. 151;
soc. 8 Ky. Law Rep. 604, 2 S. W. Horgan v. Metropolitan Mutual Aid
676. Assoc. 202 Mass. 524, 88 N. E. 890.
15Payn v. Mutual Relief Soc. 17 18 Hannum v. Waddell, 135 Mo.
Abb. N. C. (N. Y.) 53, 6 N. Y. St. 153, 36 S. W. 616.
Rep. 366. 19 United States. — Phoenix Life Ins.
16Meisenbach v. Supreme Tent, Co. v. Foster, 106 U. S. 30, 27 L. ed.
Knio-hts of the Maccabees of the 65, 1 Sup. Ct. 18; New York Life
World, 140 Mo. App. 76, 119 S. W. Ins. Co. v. Eggleston, 96 U. S. 572,
514; Seehorn v. Supreme Council, 24 L. ed. 841.
2457
§ 1320 JOYCE ON [NSURAN< E
Where an agent of an accident insurance company solicit.- an
ignoranl negro employed as extra porter by a railroad company to
take insurance; and. after explaining the object and benefit of
such course, is informed regarding the nature of the porter's em-
ployment and that he has not money enough to take a policy.
whereupon he oilers to take an order on the railroad company
for the amount of the premium, to he paid out of the porter's
wages, winch oiler is accepted and the policy delivered without
being read by the porter, who can scarcely read anything him-
self— before the company can forfeit the policy for nonpayment
of premium, in case it cannot realize on the order, it must give
the insured notice of its nonpayment.20
Notice of an assessment is a condition precedent to an action,1
and the burden is upon insurer to show that notice of an assess-
ment was given assured,2 and it must be shown that the required
notice was given in the prescribed form.3 So when notice is a
condition precedent to payment of an assessment on time, its va-
lidity must be affirmatively alleged and proven; an allegation that
legal notice was duly given is insufficient.4
Illinois.— Covenant Mutual Benefit dent Ins. Co. 89 Tenn. 427, 10 L.R.A.
Soc. v. Spies, 114 111. 463, 2 N. E. 534, 14 S. W. 929. See § 1143 here-
482. in.
Iowa.— Mayer v. Mutual Life Ins. 1 Williams v. Babcock, 25 Barb.
Co. 38 Iowa, 304, 18 Am. Rep. 34. (N. Y.) 109; Columbia Ins. Co. v.
Michigan. — Castner v. Farmers' Buckley, 83 Pa. St. 293, 24 Am. Rep.
Ins. Co. 50 Mich. 273, 15 N. W. 452. 172.
Minnesota. — Gellatly v. Mutual 2 Mutual Life Industrial Assoc, v.
Benefit Soc. 27 Minn. 215, G N. W. Scott, 170 Ala. 420, 54 So. 182.
527. 3 Doggett v. United Order of Gold-
Missouri.—Agnew v. Ancient Or- en Cross, 126 N. Car. 477, 36 S. E.
der United Workmen, 17 Mo. App. 26 ; Mutual Reserve Fund Life Assoc.
254. v. Hamlin, 139 U. S. 297, 35 L. ed.
New York. — Meyer v. Knicker- 167, 11 Sup. Ct. 614. Cited in Equi-
bocker Life Ins. Co. 73 N. Y. 516, 29 table Life Assurance Soc. v. Nixon,
Am. Rep. 200; Attorney General v. 81 Fed. 796, 800, 26 C. C. A. 624, 48
Continental Life Ins. Co. 33 Hun (N. U. S. App. 482. See also Locomotive
Y.) 138; Farrie v. Supreme Council Engineers Mutual Life & Accident
Catholic Benevolent Legion, 47 Hun, Ins. Assoc, v. Bobo, 8 Ga. App. 1 19,
639, 15 N. Y. St. Rep. 155, aff'd 120 68 S. E. 842.
N. Y. 662, 24 N. E. 1104. 4 Coyle v. Kentucky Grangers' Mu
Ohio. — Manhattan Life Ins. Co. v. tual Benefit Assoc. 8 Ky. Law Rep.
Smith, 44 Ohio St. 156, 58 Am. Rep. 604, 2 S. W. 676. In this case the
806, 5 N. E. 417; Union Central Life appellee alleged that the appellant
Ins. Co. v. Pottker, 33 Ohio St. 459, refused and tailed to pay the sum
31 Am. Rep. 555. required within ten days after legal
See also cases throughout this sec- notice of the death of one of the
tion. members of the society, and there
20 Eury v. Standard Life & Acci- were similar allegations in reference
2458
NOTICE § 1321
§ 1321. When notice need not be given: generally. — As stated
in the Last section, in life insurance contracts no notice is. as a
rule, required, in the absence of some statute or usage or some
contract stipulation,5 even though the assured had no actual knowl-
edge, owing to his neglecl to take the policy up from the corn-
pan \'s agent, of a condition for forfeiture for nonpayment at a
specified time of the premium.6 Nor is notice required under a
provision of the by-laws that nonpayment of dues within a speci-
fied time ipso facto forfeits the insurance;7 and such a condition
is valid;8 and unless notice is required of the times of payment,
and amount of dues, no notice thereof need be given ; 9 nor is no-
tice required as a condition precedent to suspension where it is so
provided in the by-laws of a fraternal benefit association;10 nor
where it is stipulated in the policy that it shall be void without no-
tice upon nonpayment at maturity of any note given for the
premium;11 nor where it is provided that nonpayment of any
premium note or interest when due shall forfeit the insurance.12
And if the charter or by-laws require interest on the deposit notes
of members to be paid annually on or before a certain time, and
that no loss will be paid by the company while such interest re-
mains due and unpaid, and there is nothing in the charter requir-
ing notice of the amount due and the time when due, no notice
to failure and refusal to pay other 6 Security Life Ins. Co. v. Gober,
assessments, and the court said: 50 Ga. 404.
"These allegations are not an aver- 'Knights of Columbus v._Bur-
ment of facts. The answer should roughs' Beneficiary, 107 Va. 671, 17
have averred affirmatively the facts L.R.A.(N.S.) 246 (annotated on ne-
showing that the precedent condi- cessity of affirmative action in order
tions above indicated to the liability to terminate rights of member in mut-
of Coyle for the payment of his dues ual benefit society for nonpayment
or assessments had been complied of dues), 60 S. E. 40; Burchard
with by the society ; failing in this it v. Western Commercial Travelers'
is clearly defective." See also Su- Assoc. 139 Mo. App. 606, 123 S. W.
preme Lodge Knights of Honor v. 973.
Dalberg, 138 111. 508, 28 N. E. 785; 8 Britt v. Sovereign Camp Wood-
Siebert v. Chosen Friends, 28 Mo. men of the World, 153 Mo. App. 698,
App. 272; Baxter v. Brooklyn Life 134 S. W. 1073.
Ins. Co. 44 Hun (X. Y.) 184; Su- 9 Mutual Endowment Assessment
preme Lodge Knights of Honor v. Assoc, v. Essenden, 59 Md. 463, per
Johnson, 78 Ind. 110. the court. See cases under first note
5 Security Life Ins. Co. v. Gober, to the last section.
50 Ga. 404. See cases cited under 10 National Council of Knights &
first note of the last section. Ladies of Security v. Burch, 126 111.
On effect of custom to give insured App. 15.
Dotic of maturity of premium where " Park v. Hilton, 21 Ky. L. Rep.
insured is not otherwise entitled to 1319. 54 S. W. 949. 30 Ins. L. J. 70.
notice, see note in 20 L.R.A.(X.S.) 12 Bohling v. Northwestern Life
1037 Ins. Co. 117 Wis. 24. 93 X. W. 800.
24.")!)
>;>; L321a, L322 JOYCE <>\ [NSURANCE
is required : 13 and if one by-law of a beneficiary association provides
for forfeiture for nonpayment «>(' assessments and another by-law
requires thai notice of assessments be given members, nevertheless
notice i- held nol a condition precedenl : H nor need notice of pre-
miums be given on a surrendered policy exchanged for anothei
one;18 nor is each member entitled to notice where assessments
are a fixed, unvarying and permanent charge and the constitution
provides thai masters of every lodge be notified of assessments by
the secretary of the grand lodge.16
§ 1321a. Notice necessary when insured entitled to profits or re-
duction of premiums. — Forfeiture of a life insurance policy for non-
payment of premium when it becomes due, cannot be insisted upon
when the assured is entitled to share in the profits, and therefore
cannot know what amount he is required to pay, and no notice
has been given him of what sum the insurer claims to be due from
him,17 So where insured is entitled to reductions on premiums
and cannot know how much is due notice is a condition precedent
to forfeiture.18 And this applies where, under the contract insured
is entitled to a deduction on dividends on the premium,19 and such
dividends are insufficient to meet a maturing obligation.20 So no-
tice is likewise required in case of a participating policy where the
custom of the parties had been to apply the dividends on premiums,
and, the amount thereof being uncertain, to furnish insured with
an annual statement of the amount required to renew the policy.1
§ 1322. Failure to give written notice: tender unnecessary. — If
a written notice by the insurer's president states that notice will be
given of the time when premiums will be due, and no notice is
given, a tender of premiums due after the surrender of a policy
fraudulently obtained is not necessary under an action to revive the
policy.2
18Mutual Fire Ins. Co. v. Miller 19 Phoenix Insurance Co. (Phoenix
Lodge, .r)S Md. 463. * Mutual Life Ins. Co.) v. Doster, 106
"Chappie v. Sovereign Camp, U. S. 30, 1 Sup. Ct. 18, 27 L. ed. 65;
Woodmen of the World, 64 Neb. 55, Home Life Ins. Co. v. Pierce, 75 111.
89 N. W. 423. 426.
15 Leonhard v. Provident Savings 20 Union Central Life Ins. Co. v.
Life Assur. Soc. 130 Fed. 287, 64 C. Caldwell, 68 Ark. 505, 58 S. \Y. 355,
C. A. 533. 30 Ins. L. J. 41.
16llavnes v. Masonic Benefit As- l Meyer v. Knickerbocker Life Ins.
soe. 98 Ark. 421, L36 S. W. 187. Co. 78 N. Y. 516, 29 Am. Rep. 200.
17 Eddy v. Phoenix Mutual Life 2 Heinlein v. Imperial Lite Ins. Co.
Ins. Co. 65 N. H. 27, 23 Am. St. Rep. 101 Midi. 250, 25 L.I.'. A. 027, 45 Am.
17. is Atl. 89. St. Rep. 409, 59 NT. W. 615. That
18 Nail v. Providenl Savings Life tender is necessary when notice not
Assur. Soc. — Tenn. Ch. — , 54 S. given. See Osborne v. Home Life
W. 100. Ins. Co. 123 Cal. 610, 56 Pac. 616;
2460
NOTICE § 1323
§ 1323. Statutory notice. — If the statute requires that the com
pany give notice of the time of payment of premiums or assess-
ments to the holders of policies or certificates, such notice must be
given, and conformity with the provisions of the statute as to the
kind of notice and the mode of service of the same is a condition
precedent to the enforcement of a forfeiture for nonpayment.3
And if the company assures the holder of a policy issued before
the passage of such an act that the notices required will lie given.
compliance therewith is necessary,4 and if the statute provides
Baxter v. Brooklyn Life Ins. Co. 119 ments) Rev. Stat. Ont. c. 203, sec.
N. Y. 450, 7 LR.A. 293, 23 N. E. 165.
1048, 44 Hun, 184 ; Meyer v. Knieker- See the following nonforfeiture
boeker Life Ins. Co. 73 N. Y. 516, 29 and notice statutes: Arizona, Rev.
Am. Rep. 200. But compare Lone v. Stat. 1901, sec. 809, as am'd by act
Mutual Life Ins. Co. 33 Wash. 577, March 21, 1907.
74 Pac. 689. California. — Deering's Civ. Code,
3 Salmon v. Farm Property Mutual 1903, sec. 450; Id. Appendix, p. 729,
Ins. Assoc, of Iowa, 168 Iowa, 521, sec. 11.
150 N. W. 680; Code Supp. 1913, Colorado.— Sess. Laws, 1907, c.
1759m ; Marden v. Hotel Owners' Ins. 193, sec. 43.
Co. 85 Iowa, 584, 39 Am. St. Rep. Illinois.— Rev. Stat. 1908, sec. 208u
316, 52 N. W. 509; acts 18th Gen. (6).
Assem. Iowa, c. 210 (case of assess- Iowa.— Code, sec. 1788, acts 18th
ments) ; Baxter v. Brooklyn Life Ins. Gen. Assemb. c. 210, sees 1 2
Co. 119 N. Y. 450, 44 Hun (N. Y.) Kansas.— See Gen. Stat. 1905, sec.
184, 29 N. Y. St. Rep. 592, 23 N. E. 36^- c, . 1Qft0 an Aoa0
1048; N. Y. Laws, 1877, c. 321 (re- fm^^^^J^S^t^L
i j . s ion i. • \ t>i i Louisiana. — Acts 19Uo, acts nos.
pealed -see § 1324 herein) ; Phelan h L 1906 86
v. Northwestern Mutual Life Ins. Co. g7' ^
113 N. Y. 147, 10 Am. St. Rep. 441, Maine.— Rev. Stat. 1903, c. 49, sec.
42 Hun (N. Y.) 419, 20 N. E. 827; 101
Laws N. Y. 1877, c. 321 (repealed, Massachusetts.— Acts & Res. 1907,
see § 1324 herein) and see note 35 c 575^ see> 80, Rev. L. c. 118, sees,
under § 1326 herein; Carter v. Brook- 47^ 48 (assessments by mutual fire in-
lyn Life Ins. Co. 110 N. Y. 15, 17 N. surance companies).
E. 396, 12 Cent. Rep. 756, N. Y. Michigan.— Pub. acts 1907, p. 253.
Laws, 1876, c. 341 (repealed, see § Missouri. — Laws, 1903, p. 208.
1324 herein) ; Auspitz v. Equitable Montana. — Rev. Codes, 1907, sec.
Life Assur. Soc. of the U. S. 115 N. 4139.
Y. Supp. 109 ; McDougal v. Provident Nevada. — Comp. Laws 1900, sec.
Savings Life Assur. Soc. of New 953.
York, 64 Hun (N. Y.) 515, 19 N. Y. New Jersey— -Laws 1907, p. 135.
Supp. 481; Milwaukee Trust Co. v. Neiv York. — See § 1326 herein.
Farmers' Mutual Fire Ins. Co. 115 Tennessee. — Acts 1907, p. 1531.
Wis. 371, 91 N. W. 967 (assessment) Wisconsin. — Rev. Stat. 1898, sec.
Wis. Rev. Stat. 1898, sec. 1935; Su- 1934 (assessments),
preme Legion Select Knights of Can- 4 Carter v. Brooklyn Life Ins. Co.
ada, In re: Cunningham's Case (Ont. 110 N. Y. 15, 17 N. E. 396, 12 Cent.
C. A.) 18 Canadian L. T. 380 (assess- Rep. 756.
2461
§ 1323 JOYCE ON [NSURANCE
that there shall be no forfeiture until thirty days after service of
such notice the thirty days must be allowed.6
But statutory notice of maturity of ;i premium note is held
not a prerequisite to forfeiting the policy when the note provides
thai such policy shall be void for nonpayment of the note when
due.6 And when the prescribed statutory notice of a premium
due is given it is not necessary to give notice also of the maturity
of a note executed for the premium,7 and this applies to a re-
newal note taken in part payment of the premium.8 If the policy
provides for the payment of annual premiums, and also of mor-
tality assessments, it is held that the statutory notice as a condition
precedent to forfeiture applies only to premiums or interest payable
at stated intervals, and not to mortality assessments.9 Again, even
though notice is not given under the New York statute, if the
insured was in default in payment for over one year at the time
of his death, recovery is precluded notwithstanding action is brought
within the period limited for suing.10 And the giving of the statu-
tory notice does not aid the insurer where it has not attached a
copy of the premium note to the policy as also required by statute.11
But where the statutory notice is not given of a premium owing
at the time of the death of the insured, neither payment nor ten-
der is required to warrant a recovery.12
It is held that the statute of New York of 1876, amended in
1877, requiring notice of the times of payment of dues and pre-
miums, does not apply to mutual benefit associations,13 nor to poli-
cies issued upon monthly or weekly instalments of premiums.14
50 it is decided that notice is a prerequisite to suspension of a
member for nonpayment at maturity of a premium note given
such a mutual fire association, even though the contract stipulates
5Phelan v. Northwestern Mutual Y.) 635; under Stats. N. Y. 1877, c.
Life Ins. Co. 113 N. Y. 147, 10 Am. 321 (repealed, Hamilton's Stats. Rev.
St. Rep. 441, 20 N. E. 827. See s. c. 1894, e. 600, sec. 1324, and note 35
12 Hun (N. Y.) 419. under § 1326 herein).
6 Bartholomew v. Security Mutual 10 Liesney v. Metropolitan Life Ins.
Life Ins. Co. 124 N. Y. Supp. 917, Co. 151 N. Y. Supp. 1084, 166 App.
140 App. Div. 88. Div. 625, rev'g 148 N. Y. Supp. 1057,
7 O'Brien v. Union Central Life 86 Misc. Rep. 650.
Ins. Co. 125 N. Y. Supp. 470, 140 " Robey v. State Ins. Co. 146 Iowa,
App. Div. 362. 23, 124 N. W. 775, 39 Ins. L. J. 191.
8 Banholzer v. New York Lite Ins. Code sees. 1727, 1741.
Co. 74 Minn. 287, 77 N. W. 295, 78 12 Baxter v. Brooklyn Life Ins. Co.
N. W. 244, 28 Ins. L. J. 193. Citing 119 N. Y. 450, 7 L.R.A. 293, 44 Hun
Conway v. Phoenix Mutual Life Ins. (N. Y.) 184, 23 N. E. 1048.
Co. 140 N. Y. 79, 35 N. E. 120. 13 Ronald v. Mutual Reserve Fund
9 So held in Merriman v. Keystone Life Assoc. 132 N. Y. 378, 44 N. Y.
Mutual Benefit Assoc. 138 N. Y. 116, St. Rep. 407, 30 N. E. 739.
51 N. Y. St. Rep. 665, 63 Hun (N. "Merryman v. Keystone Mutual
2462
NOTICE § 1324
for forfeiture for nonpaymenl .it maturity.16 But it is also de-
termined that a mutual insurance company, organized under a
statute which expressly prohibits such companies from receiving
premiums or making dividends, is no! required to give the notice
called for by a, statute which provides that, in every instance, where
a lire insurance company takes a note for the "premium" of any
policy, such company shall not declare the policy forfeited or sus-
pended for nonpayment of the note, without first giving a pre-
scribed notice; and the failure of a mutual company to give such
a notice is not material in any action on its policy.16
§ 1324. Stipulation contrary to statute requiring notice: waiver.
— If the statute requires that notice of the accruing of premiums
be given assured by the company, such statutory conditions rest
on public or general policy, and cannot be waived by assured, even
though for his benefit.17 So in California it is held that if a stat-
ute declares that no life insurance company shall have the power
to declare forfeited or lapsed any policy by reason of nonpayment
of premiums unless notice be given as required by statute, it is
held that any contract stipulating to the contrary is void, since
the statute indicates the legislative will that as a matter of public
policy life insurance corporations shall be deprived of the power
to declare forfeited policies of insurance for the nonpayment of
premiums, except in the prescribed statutory mode, and a waiver
on the part of assured cannot be held to confer a power which the
statute has taken away.18 So under another California decision a
waiver of the statutory notice required by the law of a foreign
state and a part of the contract, cannot be shown in aid of a for-
Benefit Assoc. 63 Hun (N. Y.) 635, nothing in the statute to prevent the
18 N. Y. Supp. 305, 44 N. Y. St. Rep. parties from abandoning the contract
797. if thej' so desire.
15 Bradford v. Mutual Fire Ins. As to stipulations contrary to stat-
Co. 112 Iowa, 495, 84 N. W. 693; utes, see §§ 176, 194 (g)/l94 (h)
Acts 18th Gen. Assenib. c. 210, sees, herein, and as to assessments and
1 2. agreements or provisions contrary to
16 Beeman v. Farmers' Pioneer Mu- statute, see § 1255 herein.
tual Insurance Assoc. 104 Iowa, 83, 18 Griffith v. New York Life Ins.
65 Am. St. Rep. 424, 73 N. W. 597. Co. 101 Cal. 627, 40 Am. St. Rep. 96,
17 So held in Phinney v. Mutual 36 Pac. 113. But see Laws N. Y.
Life Ins. Co. (U. S. C. C. 1895) 67 1885, c. 328, sec. 1, which provides
Fed. 493. See Mutual Life Ins. Co. for waiver in certain classes of pol-
v. Phinney, 178 U. S. 327, 44 L. ed. icies. See § 1326 and notes herein.
.1088, 20 Sup. Ct. 906, where the con- As to limitation upon power of fra-
tract was for the purposes of the ternal benefit societies to waive pro-
case held made under and governed visions of the society's laws, see N. Y.
by the laws of New York. Although Ins. L. c. 33, sec. 239 added by L.
issued t"> a resident of another state, 1911, c. 198.
it was also decided that there was
2463
§ 1324 JOYCE ON INSURANCE
feiture.19 And if the eontracl and all matters relating to its per-
formance are governed by the laws of the state of New York, then
the fad that the application was made and signed and delivered
in another state <\<>i'* not relea.-e the insurer from the obligation
to give -.iid statutory notice before declaring a forfeiture for non-
payment of premiums, even though the policy contains a waiver
of any other notice than that under the terms of the policy.20
So oral statements by an insured, recognizing the forfeiture of his
policies, and refusing to continue them, when made without any
consideration, will not he sufficient to annul the express provisions
of a statute prohibiting a forfeiture for nonpayment of premiums
without the giving of specified notice.1 And where assured waived
notice but shortly thereafter the statute came into force requiring
notice to assured and the transferee such waiver cannot be invoked
to the prejudice of such assignee to the extent of relieving the in-
surer from continuing to send notices as it had been accustomed to
do.2 Where, .however, the contract is governed by the laws of a
foreign state disallowing forfeiture without a premium notice, the
assured, by i*3glect to pay premiums, long continued after the
statutory period before the expiration of which the policy cannot
be forfeited without such premium notice, may effect an abandon-
ment of his contract and so preclude any right to the protection
to which he might otherwise have been entitled under said statute.3
But as we have stated under a prior section, it is decided in the
Federal Supreme Court that although it is stipulated that the
contract shall be held and construed to have been made in a for-
eign state, nevertheless if the policy does not expressly refer to the
premium notice law of that state forbidding a waiver of the statu-
tory notice, and does contain a provision which is in effect a waiver
of notice, such policy stipulation as to waiver controls.4 Under
19 Osborne y. Home Life Ins. Co. 131 Mo. App. 417, 111 S. W. 604;
123 Cal. 610, 56 Pac. 616; Harrigan See Lone v. Mutual Life Ins. Co. 33
v. Home Life Ins. Co. 128 Cal. 531, Wash. 577, 74 Pac. 689.
58 Pae. 180, 61 Pac. 99. 4 Mutual Life Ins. Co. of N. Y. v.
20Phinncv v. Mutual Life Ins. Co. Hill, 193 U. S. 551, 48 L. ed. 788, 24
(U. S. C. C. 1895) 67 Fed. 493. Sup. Ct. 538, 33 Ins. L. J. 550 (con-
1 Mutual Life Ins. Co. v. Dinglev, sidered also under § 132.1a herein).
100 Fed. 408, 40 C. C. A. 459, 49 The court per Mr. Justice Brewer,
I j. I. '.A. 132, rev'd on other grounds, said: "The ordinary rule in respect
184 U. S. 695, 46 L. ed. 763, 22 Sup. to the construction of contracts is
Ct. 937. this: that where there are two clauses'
2 Klgutter v. Mutual Reserve Fund in any respect conflicting, that which
Life Assoc. 52 La. Ann. 733, 28 So. is specially directed to a particular
289, 29 Ins. L. J. 926; N. Y. L. 1892, matter controls in respect thereto
c. (»!<(), sec. 92. over one which is general in its terms,
3 McGeehan v. Mutual Life Ins. Co. although within its general terms the
2464
NOTICE
§ 1324a
another decision in the same court, however, it was expressly
stipulated that the contract should be governed by the laws of New
York relating to life insurance and also that nonpayment of the
premiums when due should render the policy null and void and
that notice should be given assured but only as a favor and not of
right and the notice having been given the case turned upon wheth-
er the notice sufficiently complied with the statute and it was
held that a forfeiture was not prevented by reason of such claimed
insufficiency under the circumstances of the case.5 Again, it is
held that a provision of a policy issued by a corporation of one
state to a resident of another state, that notice as to payment of
premiums, as stated in the policy, is given and accepted by its
delivery, and "any further notice required by any statute is waived,"
expressly makes inapplicable a statute of the state where the in-
surer is domiciled, requiring certain notices to be given before
policies can be forfeited for nonpayment of premium.6
§ 1324a. Waiver of notice in other cases. — The delivery to and
acceptance by assured of a policy constitute a waiver of notice
where it is so stipulated therein.7 So formal defects in the no-
tice of assessment are waived by failure to object thereto when it
particular may be included. Because, as well as statutes : Bock v. Perkins,
when the parties express themselves 139 U. S. 628, 35 L. ed. 314, 11 Sup.
in reference to a particular matter, Ct. 677; and cases cited; Rodgers v.
the attention is directed to that, and United States, 185 U. S. 83, 46 L. ed.
it must be assumed that it expresses 816, 22 Sup. Ct. 582, and eases cited;
their intent; whereas a reference to Winebrenner v. Forney, 189 U. S.
some general matter, within which the 148, 47 L. ed. 754, 23 Sup. Ct. 590 ;
particular may be included, does not Sedgw. Stat. & Const. Law (2d ed.)
necessarily indicate that the parties 360 and note; 2 Parsons Contr. (6th
had the particular matter in thought, ed.) p. 501 and note."
Here, when the parties stipulate that An earlier decision in the Federal
no other notice shall be required, at- court holds that the statute is a part
tention is directed to the particular of the contract and that there can be
matter of notice. When the stipula- no waiver contrary to its provisions,
tion is that the contract shall be con- Equitable Life Assurance Soc. v.
strued to have been made in New Trimble, 83 Fed. 85, 27 C. C. A. 404.
York, no particular statute is referred 5 Nederland Life Ins. Co. v. Mein-
to, and the attention may not be ert, 199 U. S. 171, 50 L. ed. 139, 26
directed to the matter of notice or Sup. Ct. 115, rev'g 127 Fed. 651, 62
any other special feature of New C. C. A. 377, 36 Chic. Leg. N. 207,
York law. The special controlled the 33 Ins. L. J. 673.
general ; that which must have been 6 Metropolitan Life Ins. Co. v.
in the minds of the contracting par- Bradley, 98 Tex. 230, 68 L.R.A. 509,
ties controls that which may not have 82 S. W. 1031.
been, although included within the 7 Allison's Exctr's v. Fidelity Mu-
language of the latter stipulation, tual Life Ins. Co. 32 Ky. L. 1025, 107
This is the general rule in the con- S. W. 730.
struction of all documents, — contracts
Joyce Ins. Vol. III.— 155. 2465
§§ 1325, 1325a JOYCE OX INSURANCE
is received.8 If. however, the duty imposed upon a member of an
association to inform the company of his failure to receive notice
of an assessment has not been expressly or impliedly made a con-
dition of the contract, his failure to give such information cannot
excuse the failure of the association to give the required notice.9
Again, where the duty to give notice rests only upon custom the
assured waive- his right to notice by mail by a notice of the order
of his refusal to pa> assessments and of his intent to give up his
membership.10 But a waiver of insured's right to be served at his
residence with notice of assessment must be shown to sustain a de-
fense of nonpayment.11
The invalidity of a notice of assessment is not waived by assured
by an offer, under protest, to pay the same.12 Nor does a member
by failing to pay an assessment, of which notice was not given
him though he was entitled to it, waive any rights as such mem-
ber by seeking reinstatement as such upon a claim by the asso-
ciation that he had forfeited such rights by the failure to pay.13
Nor is there any presumption that a member of a benefit associa-
tion has acquiesced in his suspension without notice, and aban-
doned his rights under his contract.14
§ 1325. Constitutionality of statute requiring notice. — The statu-
tory requirement imposed upon insurance companies that they give
notice of the time of the accruing of premiums does not violate the
constitution of the United States, as not affording equal protection
of the laws to companies of the state of enactment of said statute,
or to companies of other states doing business in said state.15
§ 1325a. Statutory notice: Place of contract. — While we have
considered elsewhere the rules of construction and the governing
law as to the place of contract16 the following is pertinent here.
It is decided in a Federal court that the insurance is forfeited for
8 Cronin v. Supreme Council of Mich. 471, 4 Det. L. News, 1212, 74
Royal League, 101 111. App. 479. See N. W. 725.
§ 1384 herein. 13 Mutual Reserve Fund Life As-
9 Mutual Reserve Fund Life Assoc, soe. v. Hamlin, 139 U. S. 297, 35 L.
v. Hamlin, 139 U. S. 297, 35 L. ed. ed. 167, 11 Sup. Ct, Rep. 614. ( ited
L67, 1 1 Sup. Ct, 614. Cited in Hart- in Supreme Council American Legion
ford Life Ins. Co. v. Hyde, 101 Tenn. of Honor v. Orcutt, 119 Fed. 682,
396, 102, s S. W. 968*. 687, 56 C. C. A. 294, 299; Columbus
10 Supreme Council Catholic Mutual Life Assoc, v. Hanrahan, 98
Knights of America v. Winter's 111. App. 22, 24.
Admr. 108 Ky. 141, 55 S. W. 908, 29 14 Meisenhnch v. Supremo Tent.
Ins. L. J. 403. Knights of Maccabees of the World.
11 Wallace v. Fraternal Mystic Cir- 140 Mo. App. 76, 119 S. W. 514.
cle, 127 Mich. 387, 86 N". W. 853. "Phinney v. Mutual Life Ins. Co.
"Dowling v. Knighl Templars & (U. S. C. C.) 67 Fed. 193.
Masons' Life Indemnity Co. 116 16 See §§ 225 et seq. herein.
2466
NOTICE § 1325a
nonpayment of premiums due for over a year where the policy
so stipulates and that the New York statute requiring notice does
not apply where an application is made in another state and the
policy delivered there although issued in New York and by its
terms made payable in that state and although the application
also provides that it is subject to the charter of the insurer and to
the laws of New York.17 This decision was declared to be based
upon the principle governing a Federal Supreme Court case which
is substantially to the same effect and also decides that the New
York statute is applicable only to business transactions within that
state.18 A still later decision of the same court holds to this rule
and determines that said statute has no extra-territorial effect ex-
cept that parties contracting outside of said state may stipulate
that its laws shall control unless in conflict with the laws of the
state where the contract is made, or against its public policy, but
that an express stipulation in the policy waiving notice is para-
mount to an agreement that the contract shall be construed as a
New York contract and to that extent limits the provisions of the
New York law in reference to notice although it does not specially
refer to said notice law and can, therefore, only be invoked because
it is one of the statutes of that state applicable to insurance con-
tracts.19 So it is decided in Texas that a statute forbidding the
17 Mutual Life Ins. Co. of New and 1890 had not been paid, the in-
York v. Hathaway, 106 Fed. 815, 45 surance company was nevertheless in-
C. C. A. 655, rev'g Hathaway v. Mu- debted to them for the full amount of
tual Life Ins. Co. of New York (U. the policy and interest, bv reason of
S. C. C.) 99 Fed. 531, 29 Ins. L. J. the fact that it had failed to give the
325, N. Y. Laws 1877, as repealed bv notice of forfeiture prescribed by
L. 1892, c. 690, am'd by act 1897. chapter 341, Laws 1876, as amended
Contra: Equitable Life Assur. Soc. by chapter 321, Laws 1877, of the
v. Trimble, 83 Fed. 85, 27 C. C. A. state of New York. The complaint
404. set but a copy of the policy, alleged
18 Mutual Life Ins. Co. of New the payment of the first annual pre-
York v. Cohen, 179 U. S. 262, 45 L. mium, the death of the insured, arid
ed. 181, 21 Sup. Ct. 106. On the au- the relationship of the plaintiffs to
thority of this case Mutual Life Ins. the beneficiary. The defendant re-
Cb. v. Dingley, 49 L.R.A. 132, 100 lied upon the nonpayment of the
Fed. 408, 10 C. C. A. 459, is rev'd premiums other than the first, and an
(mem.) 184 U. S. 695, 46 L. ed. 763, abandonment of the contract. A de-
22 Sup. Ct. 937. murrer to these defenses was sus-
19 Mutual Life Ins. Co. v. Hill, 193 tained and a judgment entered for
U. S. 551, 48 L. ed. 788, 24 Sup. Ct. the plaintiffs, which was affirmed by
538, 33 Ins. L. J. 550. "This action the court of appeals for the ninth
was commenced in the circuit court circuit: 97 Fed. 263, 38 C. C. A. 150,
of the United States for the district 49 L.R.A. 127. A writ of certiorari
of Washington. The contention of was issued bv this court (176 U. S.
the plaintiffs is that, although the an- 683, 44 L. ed. 638. 20 Sup. Ct. 1032)
nual premiums for 1887, 1888, 1889 the judgment reversed, and the ease
2467
§ 1325a JOYCE ON INSURANCE
forfeiture by local corporations of insurance policies for nonpay-
ment of premiums, until a certain time after notice of the amount
and date of payment has been mailed to the insured at his last
known postoffice address, "in this state," does not apply to policies
issued in other states, unless expressly made applicable by the
terms of the policy,20 but if the policy provides that it shall be
governed by such foreign law the statutory notice must be given.1
So in Nebraska a contract of insurance entered into therein which
contains no provision that the statute law of a foreign state as to
premium notice shall govern does not necessitate such notice, as the
statute has no extraterritorial force,2 especially so where the policy
is by its terms automatically forfeited by nonpayment of pre-
miums.8 So in Louisiana a statute of one state providing that no
life insurance company doing business in that state, shall declare
any policy lapsed or forfeited for nonpayment of premiums, ex-
cept after special notice as provided therein, applies only to busi-
ness transacted in that state and does not apply to a policy issued
in that state to a citizen of another state where the policy is de-
livered and the premium paid.4 So in Washington the require-
ments of the New York statute as to notice to assured before for-
feiture can be declared for nonpayment of premiums under a life
risk, only applies to New York companies doing business in that
state, and not to said companies issuing policies in other states,5
remanded for further proceedings: v. Sears, 178 U. S. 348, 44 L. ed.
178 U. S. 347, 44 L. ed. 1097, 20 Sup. 1096, 20 Sup. Ct. 912; Rosenplanter
Ct. 914. An amended answer and a v. Provident Savings Life Assurance
replication were then filed by leave Soc. 91 Fed. 728, aff'd 96 Fed. 721,
of the circuit court. A trial was 37 C. C. A. 566, 46 L.R.A. 473.
had before the court and a jury, 20 Metropolitan Life Ins. Co. v.
which resulted in a verdict and judg- Bradley, 98 Tex. 230, 68 L.R.A. 509,
ment for the plaintiffs. This judg- 82 S. W. 1031.
meat was affirmed by the Court of 1 New York Life Ins. Co. v. Orlopp,
Appeals (118 Fed. 708, 55 C. C. A. 25 Tex. Civ. App. 284, 61 S. W. 336.
536) and the case w;is again brought 2 McElroy v. Metropolitan Life
here on certiorari: 188 U. S. 742, 47 Ins. Co. 84 Neb. 866, 23 L.R.A.
L. ed. 678, 23 Sup. Ct. 856." State- (N.S.) 968n, 122 N. W. 27.
ment by Mr. Justice Brewer. See 3 Rye v. New York Life Ins. Co. 88
Northwestern Mutual Life Ins. Co. v. Neb. 707, 130 N. W. 434, 40 Ins. L.
McCue, 223 U. S. 234, 56 L. ed. 419, J. 910.
32 Sup. Ct. 220, 38 L.R.A.(N.S.) 57; 4 Grevenig v. Washington Life Ins.
Mutual Life Ins. Co. of N. Y. v. Co. 112 La. 879, 104 Am. St. Rep.
Allen, 178 U. S. 351, 44 L. ed. 1098, 474, 36 So. 790. Compare Elgutter
20 Sup. Ct. 913, rev'g 97 Fed. 985, 38 v. Mutual Reserve Fund Life Assoc.
C. C. A. 696; Mutual Lite Ins. Co. 52 La. Ann. 1733, 28 So. 289, 29 Ins.
of N. Y. v. Phinney, 178 U. S. 327, L. J. 926.
44 L. ed. 1088, 20 Sup. Ct. 906, 29 5 Griesemer v. Mutual Life Ins. Co.
Ins. L. J. 910; Mutual Life Ins. Co. 10 Wash. 202, 210, 38 Pac. 1031,
2468
NOTICE §§ 1325b, 132G
nor under an Illinois decision does the New York statute apply to
a policy issued on an application made in another state.6 Under
a Tennessee decision, however, the New York statute governs and
becomes part of the contract, where the policy is issued in that state
on the life of a resident of another state.7 So in Minnesota a
policy which stipulated that Hie contract should be deemed a New
York contract and be construed according to the laws thereof, was so
construed and the decisions of the highest courts of that state were
held binding upon the parties.8 It is also held in Missouri that the
policy is a New York contract under an allegation that it was
made there and that the laws of that state were a part of the con-
tract which was governed thereby.9 So in a California case the
New York statute is construed and applied as a part of the con-
tract.10
§ 1325b. Statutory notice: effect of repeal of statute. — A stat-
utory requirement of a certain premium notice as a condition
of forfeiting the policy for nonpayment, notwithstanding any
stipulation to the contrary in the contract, does not become a part
of the contract made by a policy issued while the statute is in
force, so as to be operative after the statute is repealed, but the re-
peal simply permits the enforcement of the contract according to
its own terms and conditions.11
§ 1326. To what class of policies New York and other statutes
apply. — The former New York statute providing for notice of ma-
1034; Laws N. Y. 1877, c. 321 (re- tbat at all affects the question now
pealed, see §§ 1323b, 1324, 1326 here- under consideration" that was wheth-
in). er the "premium notice" applied tc«
6 Rose v. Mutual Life Ins. Co. of certain notes.
N. Y. 240 111. 45, 88 N. E. 204. Com- 9 McGeehan v. Mutual Life Ins. Co.
pare Ihrig v. Mutual Life Ins. Co. of of New York, 131 Mo. App. 417, 111
N. Y. — 111. — 35 Chic. Leg. N. 366, S. W. 604.
26 Nat. Corp. Rep. 746. 10 Osborne v. Home Life Ins. Co„
7 Nail v. Provident Savings' Life 123 Cal. 610, 56 Pac. 616, N. Y. Law-
Assurance Soc. — Tenn. Ch. — , 54 1877. See also Harrington v. Home
S. YV. 109; N. Y. Laws 1877, p. 342. Life Ins. Co. 128 Cal. 531, 58 Pac.
See Rosenplanter v. Provident Sav- 180.
ings Life Assur. Soc. 91 Fed. 728, n Rosenplanter v. Provident Sav-
aff'd 46 L.R.A. 473, 96 Fed. 721, 37 ings' Life Assur. Soc. 96 Fed. 721,
CCA. 556. 37 C. C. A. 566, 46 L.R.A. 473, aff'e:
8Banholzer v. New York Life Ins. 91 Fed. 728 (N. Y. Stat, 1877, 1892).
Co 74 Minn. 387, 77 N. W. 295, 78 Distinguished in Hathaway v. Mutual
N. W. 244, 28 Ins. L. J. 193, under Life Ins. Co. of N. Y. 99 Fed. 534.
N. Y. Ins. L. 1892, c. 690, sec. 92, 29 Ins. L. J. 325, which was reversed
although the court says: "We have in Mutual Life Ins. Co. of N. . Y. v.
compared the language of the two Hathaway, 106 Fed. 815, 45 C. C.
acts" 1877, 1892, "and are unable to A. 655.
discover any difference between them
2469
§ L326
JOYCE ON INSURANCE
turity of premiums as a condition precedent to forfeiture for non-
payment thereof applied to policies issued by a company providing
for the payment of a specified sum solely from the funds accumu-
lated from payments of its insured, and thai if such accumula-
tion is insufficient, then an assessment si la 11 he made on contracts
in force, and that if the assessment fund and accumulations
are insufficient to satisfy all claims, then a distribution pro rata
shall be made.12 The later statute of that state, winch provides
against forfeiture within one year after default in the payment
of any premium, instalment or interest, except upon written or
planted notice, of any life policy not issued upon the payment of
monthly or weekly premiums, or unless the same is a term insur-
ance contract for one year or less,13 applies where an annual ex-
12Jacklin v. National Life Assoc. Div. 488 (notice required by sec. 92
(N. Y. S. C. 1803) 24 N. Y. Supp. need not be given members of socie-
74G; Laws N. Y. 1876, e. 341, sec. 1 tics exempt under sec. 233).
(repealed, see § 1324 berein). The New York statute governing
Amended Laws 1877, e. 321 (re- life or casualty insurance corpora-
pealed, see § 1324 herein). See tions upon the co-operative or assess-
Laws N. Y. 1885, e. 328, sec. 1, which ment plan provides: "Each notice <>f
provides for waiver in certain classes assessment, premium or periodical
of policies. call made by any such corporation,
The Insurance Law of New York association, or society, upon its mem-
1892 provided: "All notices of as- bers or any of them, shall truly state
sessment made upon its lodges, coun- the cause and the purpose of the
oils, branches, or members or any of same, and if the amount paid on the
them, by any such society, order, or last death claim paid has not been
association, shall truly state the cause paid in full at its maximum face
and purpose of the assessment, and value, the name of the deceased mem-
what portion or amount thereof, if ber, and the maximum face value of
any, is to be used for the payment of the certificate or policy, and the rea-
other than beneficiary claims. An son why not paid in full. An affida-
affidavit made by any officer of such vit made by the officer, bookkeeper, or
society, order, or association that such clerk of any such corporation, asso-
notice was mailed, stating the date of ciation, or society, having charge of
mailing, shall be presumptive evi- the mailing of such notice, that such
dence thereof." N. Y. Ins. L. 1892, c. notice was mailed, stating the date
690, art. 7, sec. 238, source; L. 1889, of mailing, shall be presumptive evi-
<•. 520, sees. 11, 12, as am'd by L. dence thereof." N. Y. Ins. Law 1909,
L897, c 503; L. L900, c (ill ; L. 1901, c. 33, sec 210, as revised from L.
c. 307. Sections 233 and 239 of the 1883, c. 175, sec. 17, as am'd by L.
same statute specified what benefici- 1887, c. 285; L. 1906, c. 320; L. 1911,
ary societies, orders, and associations c. 536.
were subject to the provisions of arti- As to New York statute governing
cle 7. Article XI. of the same chap- assessments in mutual fire insurance
ter, and schedule annexed, specified corporations. (N. Y. Ins. L. 1909,
what laws and portions thereof were c. 33, sec. 116). See § 1338 herein.
repealed (all repealed). See Bop- u The Laws of New York govern-
ple v. Supreme Tent Knights of Mac- ing life, health and casualty insurance
cabees, 45 N. Y. Supp. 1096, 18 App. corporations, provide: "No life in-
2470
NOTICE
§ 132G
penso and mortuary premium are required under a policy pro-
viding for renewals from month to month.14 But it does not apply
surance corporation doing business ments of the policy in respect to the
in this state shall within one year aft- time of such payment; and qo such
er the default in paymenl of any pre- policy shall in any case be forfeited,
mium, instalment, or interest declare or declared forfeited, or lapsed, un-
forfeited, or lapsed, any policy here- til the expiration of thirty days after
after issued or renewed, and not is- the mailing of such notice. The affi
sued upon the payment of monthly davit of any officer, clerk, or agent
or weekly premiums, or unless the of the corporation, or of anyone au-
same is a term insurance contract for thorized to mail such notice, that the
one year or less, nor shall any such notice required by this section has
policy be forfeited, or lapsed, by rea- been duly addressed and mailed by
son of nonpayment when due of any the corporation issuing such policy,
premium, interest or instalment or shall be presumptive evidence that
any portion thereof required by the such notice has been duly given. No
terms of the policy to be paid, with- action shall be maintained to recover
in one year from the failure to pay under a forfeited policy, unless the
such premium, interest or instalment, same is instituted within two years
unless a written or printed notice from the day upon which default was
stating the amount of such premium, made in paying the premium, instal-
interest, instalment, or portion there- ment, interest or portion thereof for
of, due on such policy, the place which it is claimed that forfeiture
where it shall be paid, and the person ensued." N. Y. Ins. L. 1909, c. 33,
to whom the same is payable, shall sec. 92 (Consol. _L. c. 28) as re-
have been duly addressed and mailed vised from L. 18/_6, c. 341, sec. 1,
to the person whose life is insured, or as am'd by L. 18/7, c. 321, sec. 2;
the assignee of the policy, if notice L. 1897, c. 218; L. 1906, c. 326 (Ins.
of the assignment has been given to L. 1892, c. 690, sec. 92) (Parker's N
the corporation, at his last known
postofiice address in this state, post-
age paid by the corporation, or by
any officer thereof, or person ap-
Y. Ins. L. [ed. 1915] pp. 148-154).
Assessments by assessment com-
panies or associations are within sec.
210 (above given under this section),
pointed bv it to collect such premium, see Greenwald v. United Life Ins.
at least fifteen and not more than Assoc. 42 N. Y. Supp. 973, 18 Misc.
fort v-five days prior to the day when 91. See Merriman v. Keystone Mu-
the some is pavable. The notice tual Benefit Assoc. 138 N. Y. 116, 33
shall also state that unless such pre- N. E. 738, aff'g 18 N. Y. Supp. 305,
mium, interest, instalment, or por- 63 Hun, 635. Comi?are Elmer v. Mu-
tion thereof, then due, shall be paid tual Benefit Life Assoc. 19 N. Y.
to the corporation, or to the duly ap- Supp. 289, 64 Hun, 639.
pointed agent or person authorized to As to application to policies issued
collect such premium by or before prior to act of 1877, see Carter v.
the day it falls due, the policy and Brooklyn Life Ins! Co. 110 N. Y.
all payments thereon will become for- 15, 17 N. E. 396; see § 1325b herein.
feited and void except as to the right For list of nonfuture and notice
to a surrender value or paid-up pol- statutes in other states, see § 1323
icy as in this chapter provided. If herein.
the payment demanded by such no- 14 Baldwin v. Provident Savings
tice shall he made within its time lim- Life Assurance Soe. of N. Y. 48 N.
ited therefor, it shall he taken to be Y. Supp. 463, 23 App. Div. 5, aff'd
in full compliance with the require- 162 N. Y. 636, 57 N- E. 1103.
2471
§ 1326a JOYCE ON INSURANCE
to policies on the stipulated premium plan under thai section of
the statutes relating thereto which was added by the laws of L898.15
Under a Massachusetts decision payments of fixed quarterly sums
for a certain number of year- which arc necessary to prevent for-
feiture, are nol assessments within the statute of that stale "rela-
tive to assessment insurance corporations." Providing that at the
expiration of the time for payment stated in each call or notice
of an assessment for mortuary, disability or expenses purposes,
persons who have failed to pay are to be notified and allowed fif-
teen days after receipt of notice to make payment and keep the
policy in force; and this is so even though after expiration of the
above-mentioned premium period there was" a liability to calls for
the mortuary funds in addition to said quarterly premiums.16 In
Iowa the statute requiring notice as a condition precedent to for-
feiture or suspension for nonpayment of a note taken by a fire in-
surance company for the "premium," does not apply to and re-
quire notice by a mutual company organized under a statute which
expressly prohibits such companies from receiving premium- or
making dividends.17
§ 1326a. Same subject: paid-up policy. — The conversion of a
life policy into a nonforfeitable paid-up policy for a fixed term,
on a default in the payment of a premium, by virtue of the pro-
visions in the contract, where the insured fails to demand, after
the default, a reinstatement of the policy, or a paid-up policy for
a smaller sum, as he has an option to do, makes it unnecessary, in
case of his death, after the expiration of the stipulated term,
for the insurer to give the notice required by New York Laws as a
basis for declaring a forfeiture or lapse of the policy for nonpay-
ment of premium, since there is neither a forfeiture nor a lapse
where the term expires for which the risk is taken, although sub-
stantially the same extension of the policy would have been given
him without any provision therefor in the contract, by the New
York net reserve statute the operation of which would not have dis-
pensed with the notice required for forfeiture.18
15 Napier v. Bankers Life Ins. Co. tnal Tns. Assoc. 104 Iowa, 83, 65 Am.
100 N. Y. Supp. 1093, 51 Misc. 293; St. Rep. 424, 73 N. W. 597, acts Gen.
N. Y. Ins. L. (1892, c. 690) sec. 312, Assemb. Iowa, c. 210 (notice of as-
added by-laws 1898, c. 85 (repealed) sessments) ; acts 16th Gen. Assemb.
Cumming & Gilbert's Gen'l, etc., c. c. 103, and acts amending same.
Laws N. Y. p. 1965. Compare Bradford v. Mutual Fire
16 French v. Hartford Life & An- Ins. Co. 112 Iowa, 495, 84 N. W. 693.
nuitv Ins. Co. 169 Mass. 510, 48 N. 18 Johnson v. New York Life Ins.
E. 268, 27 Ins. L. J. 331; Mass. Stat. Co., 109 Iowa, 708, 50 L.R.A. 99,
1896. c. 515, sec. 2. writ of error dismissed 187 U. S. 491,
17 Beeman v. Farmers' Pioneer Mu- 47 L. ed. 273, 23 Sup. Ct. 194, 78 N.
2472
NOTICE §§ 1327, 1328
§ 1327. Stipulation in guaranty fund note as to notice. — Tt is
obligatory upon a contributor to pay assessments within a speci-
fied time alter notice of its levy, or he must forfeit prior payments
when a guaranty fund note so stipulates.19
§ 1328. Sufficiency of notice. — In determining the sufficiency of
a notice, reference must always be had to the contract with what it
includes. The requirements of the charter and by-laws must be
followed, in so far as they contain provisions relating to the char-
acter or contents of the notice, the time and mode and service, the
amount payable, or any other material matter relating to its suffici-
ency. The rule should also be constantly considered that forfeitures
are not favored, and rights, the deprivation of which depend upon
notice, will be guarded by the courts to the extent of enforcing com-
pliance with the requirements of the contract, the charter, and by-
law's as to the notice of all material matters relating thereto.20
It is, therefore, a general rule that notice must conform to that
prescribed by the by-laws.1 And a suspension is invalid when based
upon an insufficient notice.2 There must also be an actual notice,
for if a party stipulates in a contract with the association for the
manner and mode of notice, a mere rumor or information from a
third party of the fact which the notice concerns does not constitute
notice of such fact, nor is it such knowledge thereof as obligates
him to act thereupon at his peril, or to reasonably put him upon
inquiry.8
The notice should not require the payment of more than the
agreement calls for.4 for the amount claimed to be due for pre-
miums must be certain, and if the notice specifies a sum greater
than that to which insurer is entitled to, the failure to pay does not
work a forfeiture.5 So where the amount of a premium to be paid
W. 905 ; N. Y. Laws 1877, c. 321, 2 Supreme Assembly Royal Society
see. 1 (notice) ; N. Y. Laws 1892, c. of Good Fellows v. McDonald, 59 N.
690, sec. 88 (net reserve: surrender J. Law 248, 35 Atl. 1061.
value of lapsed or forfeiture poli- 2 Walton v. Fraternal Aid Assoc.
cies. N. Y. L. 1909, c. 33, sec. 88, 149 Mo. App. 493, 130 S. W. 1124;
Consol. L. c. 28). See Baldwin v. District Grand Lodge No. 4, O. K.
Provident Savings Life Assur. Soc. S. B. v. Menken, 67 111. App. 576.
of N. Y. 48 N. Y. Supp. 463, 23 App. 2 Chic. L. J. Wkly. 64.
Div. 5, aff d 162 N. Y. 636, 57 N. E. 3 Siebert v. Supreme Council Or-
1103. Examine Rye v. New York der of Chosen Friends, 23 Mo. App.
Life Ins. Co. 88 Neb. 707, 130 N. W. 268, per the court.
434, 40 Ins. L. J. 910. 4 Mutual Endowment Assessment
19 Berry v. Anchor Mutual Fire Assoc, v. Essender, 59 Md. 463.
Ins. Co. 94 Iowa, 135, 62 N. W. 681. 5 So held in Eddv v. Phoenix Mu •
20 That forfeitures are favored and tual Life Ins. Co. 65 N. H. 27, 23
that construction liberal in favor of Am. St. Rep. 17, 18 Atl. 89.
insured, see §§ 220 et seq. herein.
2473
§ 1328 JOYCE ON INSURANCE
ia variable and a knowledge thereof rests peculiarly with insurer,
he niu-i show that the sum whirl) he demanded was correct.6 Nor
should the notice fail to state a credit for an advance deposit.7 And
if the assured has deposited in advance for assessments, and there
[•i an excess in his favor, the company musl give notice of the cor-
amount which insured is required to pay, and notice of the full
amount is not sufficient notice on which to base a forfeiture.8 And
if the by-laws require that the notice shall include a list of deaths
since the last notice, this must be done; so also where it requires the
amounl due to the benefit fund to be stated, it must appear there
iu.9 If the stipulation is for the payment of quarterly dues, a no-
tice is insufficient which calls for the payment of annual dues in
advance.10 And a notice by a receiver which is published before
the assessment is ascertained, and which does not give information
to each member of the amount he is to pay, is irregular and decep-
tive.11
Again, notice must specify the date from which the time allowed
for payment can be computed or it is of no validity.12 And if the
member is required under the notice to pay an assessment before
the stipulated contract time for payment, such notice is invalid.13
So a notice is insufficient which erroneously limits the time within
which payment must be made.14 And the policy cannot be forfeit-
ed where no allowance is made in the notice for days of grace in
fixing the due date of payment necessary to avoid a forfeiture.15 A
notice is also insufficient to sustain a forfeiture which is published
for a less number of days than is required.16 A notice which is
admitted to inform insured that an assessment will be due on a cer-
tain date, there being no evidence of any other notice, does not
6 Goodwin v. Provident Savings' 12 Williams v. Reserve Fund Live
Life Assurance Assoc. 97 Iowa, 226, Stock Ins. Co. 43 N. Y. Supp. 1083,
32 L.R.A. 473, 59 Am. St. Rep. 411, 19 Misc. 515.
(>6 N. W. 157. 13 Frey v. Wellington Mutual Ins.
7 Dowling v. Knights Templars and Co. 4 Ont. 293.
Masons' Life Indemnity Co. 116 14 Bridges v. National Union, 73
Mich. 471, 74 N. W. 725, 4 Det. L. Minn. 486, 76 N. W. 270, 77 N. W.
News, 1 212. 411.
8 United States Mutual Accident 15 New York Life Ins. Co. v. Ding-
A, 30C. v. Mueller, 151 111. 254, 37 ley, 93 Fed. 153, 35 C. C. A. 177.
N. E. 882. certiorari denied 176 U. S. 682, 44
9 Miner v. Michigan Mutual Benefit L. ed. 637, 20 Sup. Ct. 1024. See
Assoc. 63 Mich. 338, 29 N. W. 852. Trimble v. New York Life Ins. Co.
10 Mutual Endowment Assessment 20 Wash. 386, ?5 Pac. 429.
Assoc v. Essender, 59 Md. 463. 16 Sands v. Groves, 58 N. Y. 94;
11 Bangs v. Mcintosh, 23 Barb. (N. Fitzpatrick v. Mutual Benevolent
V.) 591. Life Ins. Assoc. 25 La. Ann. 443.
2474
NOTICE § 1329
show an election on the part of the company to cancel the contract,
nor will such notice forfeit or terminate the policy.17
A notice must be signed by the person by whom it is required to
be given; thus, a notice is insufficient, which is filled up and ad-
dressed by the local secretary, and upon which the name of the
general secretary is printed, only where the by-laws pro\i<l< for
notice of an assessment by the former, and a forfeiture upon failure
to pay after notice from the latter.18 And a notice may be inoper-
ative for uncertainty; as where, in the alienee of evidence of any
rule in the charter or by-laws on the subject, a notice of an assess-
ment by a receiver on deposit notes specified different rates for small
notes and large notes, but did not show the class to which any note
belonged, it was held void.19 So the company is bound by the act
-of its secretary in sending notice.20 And the fact that the assess-
ment was properly levied will not validate a notice, defective in it-
self.1
It is held, however, that courts will be liberal in determining
what amounts to notice,2 and that the question of due and sufficient
service of notice is for the jury.3
§ 1329. Sufficiency of statutory notice. — If the form, time, and
manner of notice be prescribed by statute, it must be complied with,
especially if a forfeiture is to result from the neglect, of the party
entitled to notice, to do some act to which the notice relates. Thus,
a notice, the phraseology of which is not as clear as the language
of the statute, is insufficient.4 And it may be generally stated that
17 See Finster v. Merchants' & for the protection of all classes, and
Bankers Ins. Co. 97 Iowa, 9, 65 N. W. the language it prescribes for notice
1004. is intelligible to all. To say that in
18 Payne v. Mutual Relief Soc. 17 a declared event 'a policy will become
Abb. N. C. (N. Y.) 53. See s. c. 6 forfeited and void' conveys a mean-
N. Y. St. Rep. 366. ing easily to be comprehended. To
19 Bangs v. Duckinfield, 18 N. Y. refer to a policy and conditions, and
592. say that 'members neglecting so to
20 Olmstead v. Farmers' Mutual pay are carrying their own risk,' is
Fire Ins. Co. 50 Mich. 200, 15 N. quite another thing, and while it may
"vV. 82. be comprehensible to those versed in
1 Frey v. Mutual Fire Ins. Co. of the language of insurers and accus-
the County of Wellington, 43 TJ. C. tomed to their phraseology, it is not
Q. B. 102.' the language of the statute, and does
2 Hollister v. Quincy Mutual Ins. not embody the notice which the stat-
Co. 118 Mass. 478. ute requires:" Per Danforth, J., in
'Buckley v. Columbia Ins. Co. 83 Phelan v. Northwestern Mutual Life
Pa. St. 298. Ins. Co. 113 N. Y. 147, 10 Am. St.
4 "Many ignorant and unlearned Rep. 441, 20 N. E. 827. In this case.
people seek to avail themselves of it was held that notice is insufficient
the advantages proposed by these where it states that a certain pre-
companies. The statute is designed mium, giving the amount, will tall
247f)
§ 1329
JOYCE ON INSURANCE
if a notice required by statute to be sent insured under a life risk
before the policy can be forfeited for nonpayment of premiums ia
insufficient, because of nonconformity to the statutory require-
ments, it will not enable the company to claim a forfeiture.6 Nor
is the statute complied with where the statement in the notice is
that the policy lapses and it omits that part of the statutory clause
as to insured's right to a surrender value or paid-up policy.6
While it is held that the form prescribed by statute must he fol-
lowed, and that a notice the phraseology of which is not as clear as
the language of the statute is insufficient;7 and even though the
notice need not literally follow the statute it being sufficient if there
is a substantial compliance therewith, nevertheless if it departs
therefrom in an essential particular it will he fatally defective as in
case of a failure to state that if the premium or instalment is not
paid by or before the day it falls due the policy will be forfeited.8
So where the statute provides specifically that the notice shall state,
among other things, that "such policy and all payments thereon
will become forfeited and void" for nonpayment of the premium,
a notice is insufficient which fails to so state.9 So under the laws
due at a designated time and place; Benefit Assoc. 63 Hun (N. Y.) 635,
that the conditions of his policy re- 44 N. Y. St. Rep. 707, 18 N. Y. Supp.
quire payment to be made on or be- 305. In this case the court said, per
fore the date the premium is due; Macomber, J.: "The notice which is
that members neglecting to pay are now relied upon to work a most un-
carrying their own risks; that agents conscionable forfeiture does not con-
have a right to waive forfeitures; form to this statutory requirement,
and that prompt payment is neces- ... It failed: 1. To notify the
sary to keep his policy in force. Phe- insured that all payments made there-
Ian v. Northwestern Life Ins. Co. on would become forfeited; and 2.
113 N. Y. 147, 10 Am. St. Rep. It failed to notify the assured that
441, 20 N. E. 827. the policy would be void. Having
As to authorities holding statutory regard for the intelligence and tech-
notice sufficient, see § 1330 herein. nical knowledge of the class of per-
6 Griesemer v. Mutual Life Ins. Co. sons to whom such insurance is most
10 Wash. 202, 38 Pae. 1031; Laws
N. Y. 1877, c. 321.
6 Security Trust & Life Ins. Co. v.
Hallum, 32 Tex. Civ. App. 134, 73
S. W. 554, under the N. Y. Statute.
attractive, we are unable to say that
the notice, as actually served, con-
veyed any such idea to the assured.
We content ourselves by holding that
it did not necessarily convey such
7 Phelan v. Northwestern Mutual idea, and that the assured might, and
Life Ins. Co. 113 N. Y. 147, 20 N. E.
827. But see Phelan v. Northwestern
Mutual Life Ins. Co. 42 Hun (N. Y.)
419.
8 Flint v. Provident Life & Trust
Co. of Phila. 215 N. Y. 254, 109 N.
E. 248, 78 Misc. 673, 140 N. Y. Supp.
167, 42 Ins. L. J. 593.
9 Merryman v. Keystone Mutual
probably did, understand from its
language that before he could be ac-
tually deprived of the benefit of the
policy some step would be necessary
to be taken by the company, and that
such action might, and probably
would, involve the repayment to him
of the premiums and mortuary as-
sessments already disbursed by him."
2476
NOTICE § 1330
of Iowa a notice of the nonpayment of premium will not terminate
the liability of the insurer, unless it states "that unless payment is
made within thirty days the policy will be suspended." A aotice
that the sum unpaid must reach the oil ice not later than the date
thereof does not comply wilh the statute.10 Again, there is not ;i
compliance with the statute where "the notice erroneously specifies
the time when an instalment will be due11
Noncompliance with the statute by an omission of the amount
of the assessment is fatal.12 So notice to the insured by the insurer.
who has issued two policies to the former, stating the aggregate
amount required to pay customary short rates and expenses in order
to cancel both policies, and the amount of premium due under a
note given for unpaid premiums on both policies, but not stating
the amount required on each policy separately is insufficient notice
under the statute to forfeit or suspend one of the policies alone for
nonpayment.13
Again, in serving a notice care should be taken that it be done in
conformity with the special law of the notice which prescribes the
form and manner in which it is to be given.14
A statutory requirement that notice of assessment shall truly
state the cause and purpose thereof has no application to assessments
which are to be used for the sole purpose of increasing a fund to
pay death claims.15
§ 1330. Authorities holding notice sufficient. — It is held that a
notice may be sufficient although it shows the assessment to have
been levied by the society, instead of the board of directors.16 And
where the provisions of the constitution relating to the time of send-
ing notice are merely directory, notice need not be sent on the exact
day; as in case the provision is that notice shall be sent not later
than the eighth day of the month, and it is sent on the twelfth.17
And if the notice admits of no other reasonable construction than
10 Marden v. Hotel Owners' Ins. der of Chosen Friends, 23 Mo. App.
Co. 85 Iowa, 584, 39 Am. St. Rep. 272, per the court.
316, 52 N. W. 509. 15 Bridges v. National Union, 73
11 Dubuque Fire & Marine Ins. Co. Minn. 486, 76 N. W. 270, 77 N. W.
v. Oster, 74 111. App. 139. 411.
12 Milwaukee Trust Co. v. Farmers' 16 Williams v. German Mutual
Mutual Fire Ins. Co. 115 Wis. 371, Fire Ins. Co. 68 111. 387.
91 N. W. 967, Wis. Rev. Stat. 1SDS, 17 Benedict v. Grand Lodge An-
see. 1935. eient Order United Workmen, 48
13 Born v. Home Ins. Co. 110 Iowa, Minn. 471, 51 N. W. 371, 21 Ins. L.
379, 80 Am. St. Rep. 300, 81 N. W. J. 438. The constitution in this case
076, 29 Ins. L. J. 242; Smith v. provided that "written notices of as-
Continental Ins. Co. 108 Iowa, 382, sessments shall be made and sent by
79 X. \Y. 326, 28 Ins. L. J. 534. the financier not later than the eighth
14 Sieberl v. Supreme Council Or- day of the month in which the no-
2477
L330
JOYCE ox [NSURANCE
thai of ;i call for paymenl it is sufficient.18 So it is held that the
fad thai the notice is merely technically defective in form is im-
material, provided the member actually receives notice, as in case
where it has only a facsimile of the seal of the lodge thereon.19 So
net ice of premium due may he written on a card.80 If a member
of a beneficial association had actual notice of assessments, and
promised to pay, hut a reasonable lime, such as about one month,
expired thereafter, before his death in which to pay, hut payment
was not made, there can be no recovery on his certificate.1 And if
there is no provision as to the manner of giving notice, it. is suffi-
cient that insured received notice that if assessments were not paid
on a specified date lie could be suspended.2 So where the form of
notice is not prescribed, mere informalities, such as signing the no-
tice and want of address to the member on the notice, do not make
it insufficient where it is actually received by the member in an
tice was issued by the grand record-
er." The court said in reference to
this provision: "It is contended on
the part el' the plaintiff that the pro-
visions of the constitution as to the
times for making assessments and
sending notices thereof must be con-
st rued, and effect be given to them
exactly according to their terms; in
ether words, that a notice is ineffec-
tual to impose upon a member the
duty to pay an assessment, a neglect
of which duty may result in a for-
feiture of his rights, unless the no-
tice be given on or before the eighth
day of the month; and further, that
the requirement of the constitution is
not complied with if notice is given
only by mail. As to the time within
which notices are to be sent, the ex-
press provision of the constitution
must be deemed to be only directory,
and not a limitation upon the right
and duty to notify members of assess-
ments made, or accordance with the
plaintiff's contention would be plainly
opposed to, and would often defeat,
one of the principal purposes of the
organization, and would be unsup-
ported by any apparent reason, save
the bare language of the constitution
above recited."
18 Sliuman v. Juniata Farmers' Mu-
tual Fire Ins. Co. 206 Pa. 417, 55 At I.
t069.
19 Karcher v. Supreme Lodge, 137
Mass. 308. "The plaintiff here ob-
jects that this notice was invalid, be-
cause it contained only a printed fac-
simile of the seal of the lodge, and
the constitution of the defendant re-
quired that it be under the seal of the
lodge. The provisions of the consti-
tution are not fully set out, and we
are, therefore, unable to determine
whether by the constitution the pres-
ence of the seal is made anything
more than a matter of form, or wheth-
er by the true construction of the
constitution a printed fac simile of
the seal is not. what was intended.
There is no evidence that Karcher
was misled by the notice, or that it
was not in all respects as effectual
in giving him information as if it had
contained an actual impression of the
seal of the lodge. So far as appears,
this defect in the notice, if it was a
defect, was immaterial," per Field, J.
80 Metropolitan Life Ins. Co. v.
Gibbs, 34 Tex. Civ. App. 131, 78 S.
W. 398.
1 Thibert v. Supreme Lodge
Knights of Honor, 78 Minn. I IS, 17
L.R.A. 136, 79 Am. St. Rep. 412,
81 N. W. 220.
2 Bettenhauser v. Templars of Lib-
ert v, 68 N. Y. Supp. 505, 58 A]) p.
Div. 61.
2478
NOTICE § 1330
envelope properly addressed to him, and the notice is otherwise
valid.3 Again, a notice of a mortuary assessment, sent to a mem-
ber of an assessment insurance company, is not rendered defective
by (he fact that it includes an item for three months' expenses in
advance, which the insured had for seven years elected to pay quar
terly, rather than monthly.4 So if it appears that the member en-
titled to notice had actual knowledge that the assessment had been
made, and had stated that he intended to pay it. there is a question
for the jury whether he had notice ; 5 and it is decided that the notice
is suflicient although it fails to specify the amount due on each
note;6 so also though it be mailed by another than the officer desig-
nated to give notice.7 And actual notice by a receiver has been
held sufficient.8 So if the notice specify only the rate per cent, it
is declared sufficient.9
Where a notice is received from the home office, in insurer's of-
ficial stamped envelope, in its form of notice, signed by the proper
officers stating the amount due, the date when due, and requesting
payment ; it is sufficient to bind insurer and prevent forfeiture where
insured dies and tender of the amount due is made thereafter but
before the expiration of the time so fixed.10
Where the notice conforms with the statute, an additional state-
ment as to the forfeiture of the policy by reason of nonpayment
contained therein, does not constitute a failure to comply with the
statute where another notice is received by assured after he defaults
in payment and he has an opportunity to be reinstated but fails to
avail himself thereof.11 And if the notice complies with the stat-
ute and by-laws in stating that its object is to provide a fund for
death losses it is not insufficient even though its purpose is to pro-
vide in part for anticipated death losses.12 It is also decided that a
notice stating that the annual premium will be due on a certain date
3 Hanson v. Supreme Lod^e 8 Cooper v. Shaver, 41 Barb. (N.
Knights of Honor, 140 111. 301, 29 Y.) 151.
X. E. 1121. See Dickert v. Farmers' 9 Bangs v. Duekinfield, 18 N. Y.
Mutual Assur. Assoc. 52 S. Car. 412, 592.
29 S. E. 786. 10 Murphy v. Lafayette Mutual
4 Pitts v. Hartford Life & Annuity Life Ins. Co. 167 N. Car. 334, 83 S.
Ins. Co. 66 Conn. 376, 50 Am. St. E. 461, 45 Ins. L. J. 11.
Rep. 96, 34 Atl. 95. n Nederland Life Ins. Co. v. Mei
5Siebert v. Supreme Council Or- nert, 199 U. S. 171, 50 L. ed. 139,
der of Chosen Friends, 23 Mo. App. 26 Sup. Ct. 15, 4 Am. & Eng. Ann.
268. Cas. 4S0, rev'g 127 Fed. 651, 62 C.
6 Atlantic Mutual Fire Ins. Co. v. C. A. 377, 36 Chic. Leg. News, 207, 33
Sanders, 36 N. H. 252. Ins. L. J. 673. See § 1329 herein.
7Pavn v Mutual Relief Soc. 17 u Mulherin v. Bankers' Life Assoc.
Abb. N. C. (N. Y.) 53, 6 N. Y. St. 163 Iowa, 740, 144 N. W. 1000.
Rep. 365.
2479
*§ 1330a, 1331 JOYCE ON INSURANCE
and if not then paid the policy will be forfeited is sufficient even
though it omits the amount of the premium and fails to state where
or to whom it is payable.13 And a statement that the premium is
due. and unless paid "by (a- before the said day" the policy will be
forfeited, etc., is not insufficient.14 Under a policy providing for
payment on or before a specified date of a "mortuary premium" and
a specified "expense charge" the word "premium" will not accurately
express what is intended in a notice required by statute regulating
forfeiture of life policies, and the policy not being an ordinary one
the word "payments" used in said notice is sufficient.15
§ 1330a. Right to notice: effect of subsequently enacted by-law.
— A member cannot be virtually deprived of all existing rights to
notice of assessments and of his consequent right to the benefit fund
by a subsequently enacted by-law of which he has had no notice.
Such a by-law is unreasonable and of no effect.16 We have, how-
ever, fully considered elsewhere the effect of, and to what extent
changes in by-laws are binding and also the power to alter or repeal
the same, etc.17
§ 1331. To whom notice should be given. — Where notice as to pre-
miums and assessments is required, it should be given to the as-
sured or the member, but if another, as in case of an assignee for
value who has, with the company's consent, assumed the obligation
to pay, or has become a member, and is consequently liable, such
party should be notified.18 But notice need not be given to a volun-
tary assignee, he being a stranger to the contract.19 And if the stat-
ute requires that notice be given to the insured it must be given to
18 Trimble v. New York Life Ins. tied date as stipulated, and that "this
Co. 20 Wash. 386, 55 Pae. 429, un- notice is given to meet the require-
der N. Y. L. 1877, c. 221, see. 1. ment of the" statute. McDougall v.
14Schnell v. Mutual Life Ins. Co. Provident Savings Life Assur. Soe.
of N. Y. 65 N. Y. Supp. 889, 53 of New York, 64 Hun (N. Y.) 515.
A pp. Div. 172. 19 N. Y. Supp. 481. See Elmer v.
15 McDougall v. Provident Savings Mutual Benefit Life Assoc, of
Life Assurance Soc. 135 N. Y. 551, America, 64 Hun (N. Y.) 639, 1!)
rev'g 19 N. Y. Supp. 481, 64 Hun, N. Y. Supp. 289.
515, distinguishing Phelan v. North- 16 Thibert v. Supreme Lodge
western Mutual Life Ins. Co. 113 Knights of Honor, 78 Minn. 441, 17
N. Y. 147, 10 Am. St. Rep. 441, 20 L.R.A. 136, 79 Am. St. Rep. 112,
N. E. 827. The reversed case held SI N. W. 220.
that notice was insufficient where it 17 See §§ 377 et seq. herein,
did not state, as required, that "if 18 Examine Brannin v. Mereer
not paid the policy and all payments County Mutual Ins. Co. 28 X. J. I>.
thereon will become forfeited and 92. See preceding chapter as to who
void," although the notice given speci- are liable to assessments, etc.
tied that it would be necessary to pay 19 Lycoming Fire Ins. Co. v. Storrs,
the premiums on or before the speci- 97 Pa. St. 354.
2480
NOTICE ■§ 1331
him and not to the assignee.20 But where notice to the assignee of
the policy is required by statute it must ho given,1 especially when:
the insurer has due notice of the assignment; 2 or where it has con-
sented thereto and it has induced the assignee by sending notices
to him to believe it would continue to do so.3 It is held, however.
that the notice of nonpayment of a note for the premium need not
be given the assignee of the policy.*
But notice of premium need not be given the beneficiary where
he is not the assignee.5 And the wife who is the beneficiary need
not be sent a notice of premiums due, even though the insurer knew
that she was not residing at her insured husband's address on its
looks, where it had sent a notice to him at such address after knowl-
edge that he had changed the same. It had not, however, been au-
thorized to change his address in said books.6 But the beneficiary
in a certificate of insurance on the life of her father who is insane
or incapable of attending to business is entitled to notice of his de
fault in paying assessments before a forfeiture can be declared there-
for after she has given a notice to the company of his condition and
requested a notice of any default on his part so that she might make
an effort to pay the assessment if he did not.7
Notice of premiums due may be given to the husband where he
has taken out a policy on his life for his wife's benefit; 8 and though
the by-laws require that the society shall notify its members through
its local agents or subordinate lodges, it would be unreasonable and
unjust to hold mere constructive notice to such local agents suffi-
cient ; they must be notified, and in time notify the members.9 And
where the constitution of the society so provides a notice of an assess-
ment to the master of each lodge is sufficient.10
20 Osborne v. New York Life Ins. 5 Linn v. New York Life Ins. Co.
Co. 123 Cal. 610, 56 Pae. 616, N. 78 Mo. App. 192, 2 Mo. App. Rep.
Y. Laws 1877, c. 321. See Rowe v. 201, N. Y. Laws 1892, c. 690, see. 92.
Brooklyn Life Ins. Co. 42 N. Y. 6 Smith v. Mutual Reserve Life
Supp. 616, 11 App. Div. 532. Assoc. 44 Wash. 315, 87 Pac. 347.
1 Strauss v. Union Central Life 7 Buchannan v. Supreme Conclave
?Ins Co 67 N Y. Supp. 509, 33 Independent Order of Heptasophs,
misc. Rep. 333, aff'd 70 N. Y. Supp. 178 Pa. 465, 34 L.R.A. 436, 35 Atl.
U149, 60 App. Div. 632, N. Y. Laws 873.
1897, c 218 8 Whitehead v. New York Life Ins.
2 Strauss v. Union Central Life Co. 102 N. Y. 143, 152, 55 Am. Rep.
Ins. Co. 170 N. Y. 349, 63 N. E. 347, 787, 6 N. E. 267.
N. Y. Laws 1890, c. 690, sec. 92. 9 Coyle v. Kentucky Grangers' Mu-
3 Elgutter v. Mutual Reserve Fund tual Benefit Soc. 8 Ky. Law Rep. 604,
Life Assoc. 52 La. Ann. 1733. 28 So. 2 S. W. 676.
289, 29 Ins. L. J. 926, N. Y. Laws 10 Havnes v. Masonic Benefit
1892, c. 690, sec. 92. Assoc. 98 Ark. 421, 136 S. W. :.87.
4 Wood v. Confederation Life Ins.
■Co. 2 N. B. Eq. Rep. 217.
Joyce Ins. Vol. ITT.— 1.10. 2481
§§ 1331a. L332 JOYCE ON INSURANCE
§ 1331a. Notice to assignee who had contracted to pay assess-
ments: liability of assignee for failure to pay same.— If a person
contracts with assured and the beneficiaries in consideration of the
paymenl to him of a certain sum per year to pay the assessments
and dues and the policy is assigned to him, he is obligated to con-
tinue the payments even though insured discontinues delivering to
him the riotides of assessments as bad been his custom, and such
assignee upon Letting the policy lapse, is liable to assured in dam-
ages for the cash value of the policy at the time of default in such
payments.11
§ 1332. Cases holding that usage to send notice necessitates giving
notice. — If a Life insurance company has been in the practice of
Qotifying the insured of the time when the premium will fall due,
and of the amount, and the custom has been so uniform and so rea-
sonably Long in continuance as to induce the insured to believe that
a clause for forfeiture for nonpayment will not be insisted on, but
thai the notice will precede the insistence upon the forfeiture, and
the insured is in consequence put off his guard, such notice must be
given, and if not given no advantage can be taken of any default in
payment which it has thus encouraged, for the insured is entitled
to expect the customary notification; and to mislead the insured
by not giving such notice, and then insist upon a strict compliance
with the conditions of forfeiture, constitutes, under such circum-
stances, a fraud upon the assured which the courts have refused in
numerous cases to countenance.12 So the fact that by the charter of
11 Vaughan v. Reddick, 32 Ky. L. Indiana.— Franklin Life Ins. Co. v.
Rep. 531, 106 S. YV. 292. Sefton, 53 Ind. 380.
12 United States.— New York Life Iowa.— Mayer v. Mutual Lite Ins.
Ins. Co. v. Eggleston, 9G U. S. 572, Co. 38 Iowa, 304, 18 Am. Rep. 34.
"1 L ed. 841; Southern Life Ins. Co. Louisiana.— Elgutter v. Mutual Re-
v McCain 96 U. S. 84, 24 L. ed. serve Fund Life Assoc. 52 La. Ann.
653; Globe Mutual Life Ins. Co. v. 1733, 28 So. 289, 29 Ins. L. J 926.
Wolff, 95 U. S. 326, 24 L. ed. 387; Missouri, — Hanley v. Lit > Associa-
Seamans v. Northwestern Mutual tion of America, 69 Mo. 380 ; Thomp-
I ife Co 3 Fed 325 son v. St. Louis Mutual Life Ins. Co.
Alabama.— Brooklyn Life Ins. Co. 52 Mo. 409; Britt v. Sovereign Camp
v. Bledsoe, 25 Ala. 538. of Woodmen of the World, 153 Mo.
Connecticut. — Lewis v. Phoenix App. 098, 134 S. W. 1073.
Ins. Co. 44 Conn. 72. New York. — Sullivan v. Industrial
Georgia.— Grant v. Alabama Gold Benefit Assoc. 7:! Hun (N. Y. ) 319,
Life Ins. Co. 70 Ga. 575. 26 N. Y. Supp. 180; Attorney Gen-
Ulinois.—'Rome Life Ins. Co. v. eral v. Continental Life Ins. Co. 33
Pierce, 75 111. 426; Illinois Ins. Co. Hun (N. Y.) 138; Dilleber v. Knick-
v Stanton, 57 111. 351, 354; Supreme erhocker Life Ins. Co. 7 Daly (N. Y.)
Council Catholic Benevolent Assoc, v. 540, aff'd 76 N. Y. 567; Meyer v.
drove 176 Ind. 356, 36 L.R.A.(N.S.) Knickerbocker Ins. Co. 51 How. Pr.
913, 96 N. E. 159. (N. Y.) 263.
2482
NOTICE § L332
a mutual benefit association a particular method of notice of assess
ments falling due is declared to be sufficienl and binding on all
members, does oo1 exempl the corporation from the operation of
the principles of equitable estoppel, which apply to all other per-
sons, natural or judicial.18 So it is held thai it is a question for the
jury whether there has been a forfeiture where it has been the cus-
tom of the c pany to give three ootices, one at the time of the
assessment, one thirty, and one sixty days thereafter, and bul one
notice is given, the assured having promised shortly thereafter to
fix the matter up, and having subsequently corresponded with the
company and made another like promise after a small loss had ac
crued.14 Again, where the assured had been accustomed to receive
notice of the lime when premiums fell due, and he changed his res
idence and notified defendant's agent of the fact, hut notice of the
next premium falling due was sent to his former residence, and con-
sequently he failed to pay the premium on the day. it was held in
an action on the policy that the defendants were bound by their
custom to give notice, and could not set up such nonpayment where
no notice had been given as a forfeiture of the policy.15 So if the
uniform custom of the insurance company lias been to give notice
of the time when the premiums fall due. and to collect the same at
the residence of the policyholder through a local agent residing in
his neighborhood, this mode of collection cannot he discontinued
and payment required at the company's office without notice to the
insured; 16 and it is held in other cases that a continued custom to
give notice cannot he discontinued without notice,17 and that a pay-
ment within a reasonable time after the premium becomes due is
sufficient where the custom has been to send notice and none is
North Carolina, — Braswell v. sured notice of maturity of premium
American Life Ins. Co. 75 X. Car. S. where insured is not otherwise en-
Ohio. — Union Centra! Lite Ins. Co. titled to notice, see note in 20 L.R.A.
v. Pottker, 33 Ohio St. 451). 31 Am. (N.S.) 1037.
Rep. 555. 13(Jnnther v. New Orleans Cotton
Pennsylvania. — Helme v. Philadel- Exchange Mutual Aid Assoc. 40 La.
phia Life Ins. Co. Gl Pa. St. 107. 100 Ann. 775. 2 L.R.A. 118, 8 Am. St.
Am. Dec. 621. Rep. 554. 5 So. 05.
Tennessee. — Kavanaujrh v. Se- 14 Elmondorph v. Citizens' Mutual
curitv Trust & Life Ins. Co. 117 Ins. Co. 91 Mich. 36, 51 N. W. 926.
Tenn. 33, 7 L.R.A. (N.S.) 253, 96 S. "Mayer v. Mutual Life Ins. Co.
W. 499, 36 Ins. L. J. 30, 34; Hart- 38 Iowa, 304, 18 Am. Rep. 34.
ford Life Ins. Co. v. Hyde, KH Tenn. 16 Union Central Life Ins. Co. v.
396, 4S S. \V. 968. Pottker, 33 Ohio St. 459, 31 Am. Rep.
Wisconsin. — Knoebel v. North 555.
American Accident Ins. Co. 135 Wis. 17 Mever v. Knickerbocker Ins. Co.
424. 20 L.R.A.(N.S.) 1037n, L15 51 How. IV. (N. Y.i 263, 73 N. Y.
\. W. L094, 37 Ins. L. J. 376, 380. 516, 29 Am, Rep. 200; Phoenix Ins.
On effect of custom to -rive in- Co. v. Doster, 106 U. S. 30, 27 L. ed.
24S.5
§ 1333 JOYCE ON LVSIKAXCF/
q.18 Ami i( is held that the society is bound by a long-continr
aed custom as to the manner of giving notice, although the by-law
provides for a special mode of giving notice.19 So a mutual benefil
society \\ hich for years has given members notice of the limes w hen
tegular asse sments are payable, waives the righl to forfeit a certifi-
cate for nonpayment of an assessment for failure to give such no-
tice,80 and a uniform custom of the company to give notices of as
sessments and to collect, the same through a residenl agent cannol
be discontinued without notice.1 And where ii is the custom of an
association to conform to by-laws, thai notice should be directed to
the regular address of the member and mailed, it must be complied
with.2 And the assignee must be given the statutory notice of mor-
tuary premiums and dues where insurer has led such assignee by
3ending notices to him to believe that it would continue to do so.3
Again, although a contract for accident insurance, the premiums
on which are to be paid monthly, expressly provides that they must
be paid on the first day of each month, without notice, yet, if for
ten months the insured is sent notice of the maturity of the pre-
mium, with a request that it be sent in a self-addressed envelop, the
insurer cannot suddenly, without warning, cease to send the notice,
and forfeit the policy for nonpayment, which occurs because the
assured has, in good faith, waited for the usual notice; especially
where the payments were to be entered in a hook which must al-
ways be presented with the payment, so that assured might well
assume that the only safe way of preserving the book was in sending
it as directed by the insurer, to a postoffice address designated by it.4
§ 1333. Authorities holding the contrary doctrine. — Opposed,
however, to these decisions are those of several courts wherein the
contrary doctrine is held; thus, it is decided that if the custom to
send notice that dues are payable is merely voluntary on the part
of the insurer, failure to give notice does not waive a condition as to
65, 1 Sup. Ct. 18; Manhattan Life Mass. 330; Union Central Life Ins.
Tns. Co. v. Smith, 44 Ohio St. 156, Co. v. Pottker, 33 Ohio St. 459, 31
58 Am. Rep. 806, 5 N. E. 417. Am. Rep. 555.
18(Jnmt v. Alabama Gold Life Ins. 2 Bange v. Supreme Council Le-
Co. 76 Ga. 575. gion of Honor of Missouri, 128 Mo.
l9Gunther v. New Orleans Cotton App. 461, 105 S. W. 1092.
Exchange Mutual Aid Assoc. 40 La. 3 Elgutter v. Mutual Reserve Fund
Ann. 776, 2 L.R.A. 118, 8 Am. St. Life Assoc. 52 La. Ann. 1733, 28 So.
Rep. 554, 5 So. 65. 289, 29 Ins. L. J. 926, N. Y. Laws
20 Supreme Council, Catholic Be- 1892, c. 690, sec. 92.
nevolent Legion v. Grove, 176 Lid. *Knoebel v. North American Acci-
356, 36 L.R.A.(N.S.) 913, 96 N. E. dent Ins. Co. 135 Wis. 424, 20 L.R.A.
159. (N.S.) 1037n, 115 N. W. 1094, 37
1 White v. Connecticut Ins. Co. 120 Ins. L. J. 376, 380.
2484
NOTICE
§ 1333
forfeiture for nonpayment thereof on the specified day,5 also that
such custom is a mere matter of indulgence, and the insured may
nut legally insist upon its continuance.8 And it is held that the
fact that the exact times and amounts of payments is known to the
assured will permit a discontinuance of a custom to send notice,
without, notifying the insured of the change;7 and thai evidence
that the company has been in the habit of notifying the insured
when his premiums are duo. hut has neglected to do so in the partic-
ular instance in question, is inadmissible, unless it be shown thai
the notice was purposely omitted with the design to work a forfei-
6 "The claim that there was a waiv- ated by the charter or by-laws of the
er of the conditions of the policy company, and we think it clear that
is based on the following propo- there is nothing in the habit or nsage
sitions: 1. That fifteen days before relied on thai could impose such dutj
the annual dues were payable, ac- upon the company, with such conse-
cording to the terms of the policy, the quence of failure to perform it as
defendant caused a notice to be sent that contended for by the appellee:"
1o the assured, reminding her of the Mutual Fire Ins. Co. v. Miller, 58
dav when such dues became payable. Md. 463, per Alvey, J. "The reason
Conceding that this had been the cus- why the insurance company gives no^
torn of the defendant, it was a volun- tice to its members of the time of
tary act on its part, and was not re- payment of premiums is to aid their
quired by the terms of the policy, memory and to stimulate them to
The obligation to pay the annual dues prompt payment. The company is
on a named day was as positive as under no obligation to give such no-
if the assured had given her promis- tice, and assumes no responsibility by
sory note to that effect. The fact giving it. The duty of the assured
that the defendant voluntarily sent to pay at the day is the same, wheth-
such notice to the persons insured, er notice be given or not:" Thomp-
and that in this instance it was, as son v. Knickerbocker Life Ins. Co.
is claimed, negligent in sending the 104 U. S. 252, 26 L. ed. 658, per
notice to the proper place, cannot Bradley, J. "It is contended that the
amount to a waiver of the condition failure of the defendant company to
of the policy," per Seevers, J. ; Man- send the customary notice excused the
dego v. Centennial Mutual Life Ins. plaintiff's default. By the terms of
Assoc. 64 Iowa, 134, 17 N. W. 656, the contract it was certainly the duty
19 N. W. 877, 19 Ins. L. J. 660; New of the assured to pay on the day stip-
York Life Ins. Co. v. Statham, 93 ulated, whether he received notice or
U. S. 24, 23 L. ed. 789. not; he knew, or was bound to know,
6 "In order to make the contention the several dates at which the pre-
good, it must be shown that there was miuras were due, and his neglect to
an obligation on the part of the com- pay was at his own peril; the com-
pany to give the notice, and that the pany was under no obligation to give
giving of such notice was a con- the notice:" Smith v. National Life
dition precedent to the right of the Ins. Co. 103 Pa. St. 177, 49 Am.
company to receive the interest on St. Rep. 121, per Clark, J.
the premium note, according to the 7 Thompson v. Knickerbocker Life
contract of insurance. But, as we Ins. Co. 104 U. S. 252, 26 L. ed.
have seen, this obligation is not ere- 765.
2485
§§ 1334, 1335 JOYCE ON INSURANCE
lure8 And the failure to give the customary notice as to the pay-
ment of annual interest on premium notes does not excuse default
in paymehl of the -nine when due, while the policy provides for
forfeiture on such default.9
§ 1334. Same subject: conclusion. — The better opinion would
seem to be thai evidenced by the cases which hold thai a usage which
is uniform and reasonably long-continued, whereby the insured has
been induced to believe thai the rule as to forfeiture will not be
strictly insisted on, but that the company will continue its custom
to give notice as to the times when the premium will become due.
or notify the insured of the discontinuance of such custom. This
rule is hut fair and just to all parties, and to hold that evidence i~
inadmissible of such a, custom between the parties is to rejecl evi
deuce showing any suhscquent modification by the parties of the
contract, as well as evidence of waiver: hut it is without doubt com-
petent for the parlies to modify subsequently the terms of their
contract, or for either party to waive a, provision in the contract
which is for his benefit.10
§ 1335. Personal notice: whether notice must be actually re-
ceived.— Unless there is some requirement to the contrary, a per-
sonal notice is sufficient, and where notice is required and no mode
is provided, a personal notice is necessary, unless the same purpose
may be otherwise accomplished.11 And personal notice is insulli-
ci< id if the by-laws prescribe some other mode.12 Bui it is also held
that when the reporter of a subordinate lodge of defendant bene-
ficial association notified decedent in person of three assessments
due, and decedent promised to make payment before he went away
to work, such personal notice was sufficient to put decedent in de-
fault, although the by-laws provided for written or printed notice.13
So actual notice by the receiver before bringing action may be suf-
ficient, although notice by publication is required.14 Again, if no-
tice is relied on, it must be shown to have been actually received,
8Girard Life Ins. Annuity & Trust Ind. App. 340, 30 N. E. 939; Jones
Co. v. New York Mutual Life Ins. v. Sisson, (i Gray (72 Mass.) 288.
Co. 97 Pa. St. 15. "Northampton Mutual Livestock
9 Webb v. Baltimore County Mu- Ins. Co. v. Stewart, 39 N. J. L. 486;
dial Fire Ins. Co. (53 Md. 213. Sands v. Shoemaker, 4 Abb. App.
10 Sec §§ 1345 et seq. herein on Dec. (N. Y.) 119, 2 Keyes (N. Y.)
waiver and estoppel. But as to waiv- 271. But see Cooper v. Shaver, 4
er of statutory notice, see $$ 1324, Barb. (N. Y.) 151.
1324a, herein. 13 Thibert v. Supreme Lodge
"Wachtel v. Widows & Orphans' Knights of Honor, 78 Minn. 448, 47
Soc. 84 N. Y. 28, 38 Am. Rep. 178; L.R.A. 136, 79 Am. St. Rep. 412, 81
York County Mutual Ins. Co. v. N. \V. 220.
Knight, 48 Me. 75; S Innidi v. Ger- 14 Cooper v. Shaver, 41 Barb. (N.
man Mutual Ins. Co. of Indiana, 4 Y.) 151.
2486
NOTICE
§ 1335
unless the contract stipulates otherwise; and generally, in the ab-
sence of some provision to the contrary j notice when required to be
given nm-i be shown to have been actually received,16 unless the
statute provides that properly mailing is sufficient.16 And it is aol
is Illinois —Protective Life [ns. Mueller, 151 [11. 254, 37 X. E. 882;
Co. v. Palmer, 81 111. 88.
Indiana. — Schmidt v. Gorman Mu-
tual Ins. Co. of Indiana, 4 End. App.
340, 30 N. E. 939.
Louisiana. — Gunther v. New Or-
Protection Life Ins. Co. v. Palmer,
si 111. 88.
Kentucky. — Continental Fire Ins.
Co. v. A. lams, S Ky. L. Rep. 269.
Maryland. — American Fire In-. Co.
leans Cotton Exchange Mutual Aid v. Brooks, 83 Md. '22, 34 Atl. 373.
Assoc. 10 La. Ann. 77(i, 2 L.R.A. lis,
s Am. St. Rep. 554, 5 So. 65.
Xcir York. — Merriman v. Keystone
Massachusetts. — Mullen v. Dorches-
ter Ins. Co. 121 Mass. 171.
Michigan. — Castner v. Farmers'
Mutual Benefit Assoc. 138 N. Y. 116, Mutual Fire Ins. Co. 50 Mich. 273,
33 N. E. 738, 44 N. Y. St. Rep. 797, 15 X. \V. 452; Burhans v. Corey, 17
51 X. Y. St. Rep. 665, 18 X. Y. Supp. Mich. 282.
305. 63 Hun, (135. New York.— Peabody v. Satterlee,
North Carolina.- -Duffy v. Mutual 166 N. Y. 174, 52 L.R.A. 956, 59 \.
Life Ins. Co. 142 N. Car. 103, 7 E. 818; Merriman v. Keystone Mu
L.R.A.fN.S.) 238, 55 S. E. 79, 36 tual Benefit Assoc. 138 N. Y. 116, 33
Ins. L. J. 25. N. E. 738, aff'g 18 N. Y. Supp. 305,
Ohio.— Crockett v. Order of Red 63 Hun, 035; Crown Point Iron Co.
Cross, 24 Ohio CiV. Ct. Rep. 421. v. iEtna Ins. Co. 127 N. Y. 608, 14
Tennessee.— Kavanaugh v. Security L.R.A. 147, 28 N. E. 653; Wachtel
Trust & Life Ins. Co. 117 Tenn. 33, v. Noah Widows' & Orphans' Bene-
7 L.R.A. (N.S.) 253, 96 S. W. 499, 36 fit Soc. 84 N. Y. 28, 38 Am. Rep.
Ins. L. J. 30. 478.
Texas— McCorkle v. Texas Benev- Tennessee.— State v. Connecticut
olent Assoc. 71 Tex. 149, 8 S. W-. Mutual Life Ins. Co. 106 Tenn. 282,
516. 294, 295, 61 S. W. 75.
™ See § 1324, c, note N. Y. St. Texas. — McCorkle v. Texas Mu-
Rep. Stats., and note under § 1326 tual Benefit Assoc. 71 Tex. 149, 8
herein. Kavanaugh v. Security Trust S. W. 516.
& Life Ins. Co. 117 Tenn/ 33, 7 Vermont.— Brattleboro East Soc.
L.R.A. (N.S.) 253, 96 S. W. 499, 36 v. Reed, 42 Vt. 76. The Court in the
Ins. L. J. 30. In this case the court, principal case continuing said: "It
per Neil, J., said: "In the absence is insisted that the contrary rule is
of a statute, or of an express term in laid down in the following authori-
a contract, making sufficient the mere ties:" Citing and Reviewing:
mailing of a communication contain- United States. — Phoenix Mutual
ing information of the approaching Life Ins. Co. v. Doster, 106 TJ. S. 30,
maturity of the premium, it must ap- 27 L. ed. 65, 1 Sup. Ct. 18; Xew
pear thai such communication was York Life Ins. Co. v. Eggleston, 06
received before it can be operative as U. S. 572, 24 L. ed. 453; McConnell
notice, and thereby effect a forfeiture V. Provident Savings' Life Ins. Co. 92
of the policy upon failure to pay at Fed. 769, 31 ('. C. A. 663.
the date." ' Citing and 'Reviewing: Iowa. — McKenna v. State Ins. Co.
Illinois.— Cronin v. Supreme Council 73 Iowa, 453, 35 X. W. 519.
Royal League, L99 111. 228, 93 Am. Louisiana. — Epstein v. Mutual Aid
St. Rep. 127, 65 X. E. 323: United & Benevolent Assoc. 28 La. Ann. 938.
States Mutual Accident Assoc, v. Massachusetts.— -Lothrop v. Green-
2487
§ 1335
JOYCE ON INSURANCE
essential thai the notice be received under a statutory requirement
thai the notice be properly addressed and mailed."
The question, therefore, whether the notice, when required to I"1
given, must be actually received by the party to whom it should
be given, musl depend upon the provisions, statutory or otherwise,
concerning giving notice. And if the charter, articles of associa-
tions, or by-laws, or, in brief, the contract provides that the mode
of transmission shall be by mail, actual receipt of the notice need
field Stock & Mutual Fire Ins. Co. 2
Allen (84 Mass.) 82.
Tennessee. — Hartford Life Ins.
Co. v. Byde, 101 Tenn. 396, 103, 48
S. W. 968; Otis v. Payne, 86 Tenn.
6G3, 666, 8 S. W. 848.
Virginia. — Surviek v. Valley Mu-
tual Life Ins. Co. — Va. — , 23 S. E.
223; May on Insurance, vol. 2, sec.
35(ia; Bacon on Insurance, sec. 381:
and the court concluded as follows:
"Here we have not a negotiation, hut
properly posted, all of the requisites
of i lie custom were complied with.
This is not a sound view. All of
the previous letters had reached their
(list ination, and had conveyed the in-
formation they were designed to eon
vey. The custom was not merely to
mail, hut to give notice by mail, to
actually convey the information in-
tended to be delivered by that means.
"We see no hardship to the in-
surer in this view of the matter. It
a claim that a right already acquired is surely not admissible to suppose
was forfeited by miscarriage of the that any insurance company is alerl
mail : that the mere posting of a letter for occasions to declare forfeitures
properly stamped and addressed and thereby to keep moneys for which
should be treated as notice and a val- no equivalent has been rendered. The
liable right thereby defeated, although company is entitled to prompt pay-
such letter never reached its destina- ment of premiums. It is only by
tion, no information was conveyed by such payments that its business can
it, and it in no sense performed the be carried on. The power to de-
purpose it was designed to perform, clare forfeitures for nonpayment is
Before such a conclusion can be given to effectuate this purpose. But
properly reached, it seems to us there it is a perversion of the purpose
should be direct statutory provisions when forfeitures are in themselves
requiring it, or the clear terms of a made an object or end to be attained.
contract. Therefore the courts have always
"The purpose of a letter is to give seized upon every reasonable circum-
information. If it never reaches its stance presented in a case to prevent
destination, it fails of its purpose. To the taking effect of a forfeiture. In
say that nevertheless it must be held the case of a miscarriage of the mail,
to have accomplished the purpose the insured performs his duty it,
could only be justified, as we have upon subsequently receiving notice,
said, by the terms of a statute or of he promptly complies by paying the
an express contract authorizing premium due: Grant v. Alabama
such result. In the absence of these,
it would not be reasonable to infer
that a. man would agree that his ig-
norance of a fact should fix him with
all of the consequences of knowledge.
Gold Life Ins. Co. 76 Ga. 575, 583.
The complainants in the present case
did so comply and thereby saved the
forfeiture."
17 New York Life Ins. Co. v. Scott,
"It is said in the present case that 23 Tex. Civ. App. 541, 57 S. AY. 677;
the custom had been to give no- N. Y. Laws 1892, c. 690, sec. 92.
tice by mail, and that, when a letter
2488
NOTICE § 1335
not 1)0 proven; il is sufficient thai the same is properly addressed
and mailed in such a manner thai it would ordinarily be received
in due course of mail.18 Tin.- presumption may, however, be re-
united by proof that the notice was never received.19 So notice of
an assessment need not be received by assured before forfeiture can
be declared, where the by-law provides for forfeiture within a spec
ified time after mailing notice to the member's address,20 and if it
he expressly or impliedly stipulated that notice shall be given by a
deposit of the same in the postoflice in a certain city, addressed to
the address left in writing at the association's office, it is sufficient
notice if such rule is complied with, even though it is never re-
ceived.1 But if the charter requires that members shall be notified
of assessments by circular or verbally, and that if they do not pay
within a fixed time they will forfeit protection through their policy,
such personal liability cannot attach from merely mailing the no-
tice, but it must be actually received.2 So in Illinois mere proof of
the mailing to the member's last address of notice of assessments,
without proof that it was or could have been received by him within
the specified time before actual payment, is insufficient to sustain
a forfeiture.3 And not only must the receipt of the notice be shown
in such case but also that it was properly mailed and if it is not
received the presumption is that it was not mailed.4 So the mere
mailing of a notice properly addressed and stamped is not, in the
absence of a statute or contract provision, a compliance with a cus-
tom to give notice of the maturing of a note given for an insurance
premium, where the letter never reaches its destination, although
18 McConnell v. Provident Savings On necessity that notice of matu-
Life Assur. Soc. 92 Fed. 7(ii), 34 C. rity of premiums or assessments sent
C. A. 663 (N. Y. Stat.) ; Weakly v. through the mails be received, see
Northwestern Benevolent & Mutual note in 7 L.R.A.(N.S.) 253.
Aid Assoc. 19 Bradw. (Bl.) 327; 19 Sherrod v. Farmers' Mutual Fire
Union Mutual Accident Assoc, v. Mil- Ins. Assoc. 139 N. Car. 167, 51 S. E.
ler, 26 III. App. 230; Greeley v. Iowa 910.
State Ins. Co. 50 Iowa, 86 ; Epstein 20 See Survick v. Valley Mutual
v. Mutual Aid Assoc. 28 La. Ann. Life Assoc. (1895) — Va. — , 23 S.
938; Yoe v. Howard Masonic Mutual E. 223.
Benefit Assoc, of Baltimore, 63 Md. 1 Epstein v. Mutual Aid Assoc. 28
86; Lothrop v. Greenfield Stock & La. Ann. 938.
Mutual Fire Ins. Co. 2 Allen (84 2 Castncr v. Farmers' Mutual Fire
Mass.) 82; Borgraefe v. Supreme Ins. Co. 50 Mich. 273, 15 N. W. 452.
Lodge Knights & Ladies of Honor, 3 Northwestern Traveling Men's
22 Mo. App. 127; Sherrod v. Farm- Assoc, v. Schauss, 148 111. 301. 35
ers' Mutual Fire Ins. Assoc. 139 N. N. E. 747, 51 111. App. 78.
Car. 167, 51 S. E. 910. Examine * Duffy v. Mutual Life Ins. Co. 142
Commonwealth Mutual Fire Ins. Uo. N. Car. 103, 7 L.R.A.(N.S.) 238
v. Wood, 171 Mass. 484, 51 N. E. 19. (annotated on mode of proving mail-
2489
§ 1330
JOYCE (>.\ INSURANCE
the custom has been to give notice by mail.8 And if the by-laws
provide thai notice shall be given, notice by mail directed to the
insured without proof of the actual receipl of the same is insuffi-
cient,6 and if the article- of association provide for payment within
,i specified time "after receiving notice," actual lattice must be
shown to have been received, even though the by-laws provide for
notice by publication.7 If assessments are required to be paid with-
in a specified time from "date" of the notice, this means the date
when it is or should be received.8 And if notice is not mailed to
insured's regular address it must be shown to have been received
within the time limit prescribed by the by-laws, and an instruction
which fails to so state is erroneous.9 Again, if the notice is mailed
to an unauthorized address, the company assumes the risk of de-
liverv. even though prior notices sent to the same address had heen
received.10
The question whether a notice has been received is for the jury,11
especially so in ease the evidence is uncertain as to how the notice
was addressed, and whether it was mailed, and it does not appear
that it was delivered or that the member was on the list from which
the notices were made out.12
§ 1336. Service by mail. — Service of notice by mail may be suf-
ficient under the terms of the contract,13 a statute may also provide
for service of notice by registered letter addressed to the assured at
his postoffice address named in or on the policy,14 in which case the
ing of notice of maturity of premiums Miner v. Fanners' Mutual Fire Ins.
or assessments), 55 S. E. 79, 36 Ins. Co. 153 Mich. 594, 117 N. W. 1211 ;
L. J. 25. Bange v. Supreme Council Legion of
5 Kavanaugh v. Security Trust & Honor, 153 Mo. App. 154, 132 S. W
Life Ins. Co. 117 Tenn. 33, 7 L.R.A.
(N.S.) 253n, 96 S. W. 49!). Examine
§ 1163 herein.
6 McCorkle v. Texas Benevolent
Assoc. 71 Tex. 149, 8 S. W. 516.
7 Schmidt v. German Mutual Ins.
Co. of Indiana, 4 Ind. App. 340,
30 N. E. 939.
2/0. See Howell v. John Hancock
Mutual Life Ins. Co. 95 N. Y. Supp.
87, 107 App. Div. 200.
12 Jackson v. Northwestern Mutual
Relief Assoc. 78 Wis. 463, 47 N. \Y.
733.
13Lothrop v. Greenfield Stock Mu-
tual Ins. Co. 2 Allen (84 Mass.) 82;
8 United States Mutual Accident Epstein v. Mutual Aid Assoc. 28 La.
Assoc, v. Mueller, 151 111. 254, 37 N. Ann. 938; Ziegler v. Mutual Aid &
E. 882. Benevolent Life Ins. Co. 1 McGl.
9 Bange v. Supreme Council Legion (La.) 284, and cases under last sec-
of Honor, 153 Mo. App. 154, 132 S. tion. See § 1335 herein.
W. 276. "Laws Iowa, 1880, c, 210, sec. 2;
10 Carter v. Brooklyn Life Ins. Co. McClain's Code, p. 299. See § 1324
110 NT. Y. 15, 17 X. E. 396. herein as to N. Y. Stats.; and notes
11 McCorkle v. Texas Benevolent under § 1326 herein. Smith v. Con-
Assoc. 71 Tex. 11!), S S. W. 516; t mental Ins. Co. 108 Iowa, 382, 7!)
Jackson v. Northwestern Mutual Re- N. YV. 120, 28 Ins. L. .1. 534, act 18th
lief Assoc. 78 Wis. 463, 47 N. W. 733; (Jen. Assemh. c. 210.
2490
NOTICE § L33G
service is complete when the letter is mailed ; 15 bul notice of assess-
ment must be mailed in sufficient time,18 and it may be mailed the
day "before its date.17 [f notice is senl by mail, it is obligatory upon
the sender to comply with nil the prerequisites necessary to enable
it to reach the other pnrtv in due course of mail : thai is, it musl be
properly addressed and mailed, postage prepaid, and the company
must show these facts affirmatively, both in pleading and evi-
dence;18 for the burden of proving notice of assessments is upon a
beneficial association,19 and upon such showing the presumption
attaches that the letter was received in the regular course of mail,20
although as stated under a preceding section such presumption may
be rebutted.1 So it may be shown in defense to an net ion on a ben-
efit certificate that, in conformity with the by-laws a paper was
mailed in which the call for assessments was published.2 If. how-
ever, it does not appear that a by-law authorizing mailing the no-
tice has been complied with forfeiture for nonpayment of the assess-
ment is precluded.3 But a notice is not mailed if it is merely left
in a place, not provided by the government, from which a mail car-
rier is accustomed to take letters for deposit in the mail.4 But the
fact of finding the notice among the policyholder's effects seven-
teen days after the premium was due, and forty-seven days after its
date, does not of itself, in the absence of other evidence, prove that
it was properly addressed and mailed as required by the statute.
especially where the address on the notice was not the policyhold-
15 Ross v. Hawkeve Ins. Co. 83 19 Shea v. Massachusetts Benevo-
Iowa, 586, 50 N. W. 47; McKcnna lent Assoc. 160 Mass. 289, 39 Am.
v. State Ins. Co. 73 Iowa, 453, 35 St. Rep. 475, 35 N. E. 855.
N W 519. 20 Hastings v. Brooklyn Life Ins.
16 State Division Lone Star Ins. Co. 44 N. Y. St. Rep. 37, 17 N. Y.
Union v. Blassengame, — Tex. Civ. Supp. 333, 63 Hun (N. Y.) 624;
App. — , 162 S. W. 6. Benedict v. Grand Lodge Ancient Or-
17 Van Frank v. United States Mu- der United Workmen, 48 Minn. 471,
tual Benefit Assoc. 158 111. 560, 41 N. 51 N. W. 371, 21 Ins. L. J. 438. See
E. 1005. § 1335 herein.
18 Duffy v. Fidelity Mutual Life l Sherrod v. Farmers' Mutual Fire
Ins. Co.' 142 N. C. 163, 7 L.R.A. Ins. Assoc. 139 X. Car. 1ti7, 51 S. E.
(N.S.) 238, 55 S. E. 79. 143 N. Car. Oil). See § 1335 herein.
697, 56 S. E. 1047. 8Rambousek v. Supreme Council
See Haskinsv. Kent nek v (!ran<xers' of the Mystic Toilers, L19 Cowa, 263,
Mutual Benefit Soc. 7 Ky. L. Rep. 93 X. W. 277.
371; Lothrop v. Greenfield Stock Mu- 3 Ellis v. National Provident 1 men.
tual Ins. Co. 2 Allen (84 Mass.) 82. 50 App. Div. 255, 63 X. Y. Supp.
See § 1163 herein. HI 12.
On mode of proving mailing of *Molloy v. Supreme Council Cath-
nntice of maturity of premiums or olic Benevolent Assoc. 93 Iowa, 501.
assessments, see note in 7 L.R.A. 61 N. W. 928.
(N.S.) 238.
2491
§ 1336a JOYCE o\ [NSURANCE
er's last known address;8 and where the mailing was only proved
by the general course of business of the company, and three notices
for three members of the same family, all of whom were certificate
holders in the company, were inclosed in one envelope and received
li\ one of them, it was found thai the notice was not mailed, and
the court refused to disturb such finding.6 If there is an indorse-
ment on the policy that the first premium will be payable on a spec-
ified date, assured has a right to rely thereon, and will not forfeit
his rights under the policy for nonpayment of an assessment mailed
to him before such specified time, even though it is stipulated in the
policy that mailing notice of an assessment, postage prepaid, will be
sufficient notice, and that payment must be made within one calen-
dar month thereafter.7
§ 1336a. Same subject: validity of provisions as to. — A by-law
authorizing a printed or written notice of assessments and dues to
be sent properly addressed and mailed to insured is valid and bind-
ing.8 So a by-law is not void as being unreasonable which provides
for service by mailing a copy of the association's official paper with
notice therein of assessments.9 But a by-law which attempts to
make the certificate of an officer of the association conclusive evi-
dence of mailing of the required notice is illegal as it practically
restricts the right to sue in the courts and is an unreasonable and
dangerous innovation upon a common right especially so where said
by-law does not require the certificate of the officer to state a fact
within his own knowledge nor require him to certify that he mailed
the notice, or that he saw some other person do so, but permits him
to rely upon the statement of others that it was done.10 In this con-
nection it may be stated that the New York statute only makes the
affidavit of the persons therein specified presumptive evidence of
mailing and that notice has been duly given.11
6 Phelan v. Northwestern Mutual As to reasonable and unreasonable
Life Ins. Co. 113 N. Y. 147, 10 Am. by-laws, see §§ 368 et seq. herein.
St. Rep. 441, 20 N. E. 827. As to reasonable and unreasonable
6 Garretson v. Equitable Mutual amendments, see §§ 379k et seq. here-
Life & Endowment Assoc. 74 Iowa, in.
Mil, 38 N. W. 127. 10 Duffy v. Fidelity Mutual Life
7 Ball v. Northwestern Mutual Ac- Ins. Co. *142 N. Car. 103, 7 L.R.A.
cident Assoc. 50 Minn. 414, 57 N. W. (N.S.) 238, 55 S. E. 79, 36 Ins. L.
1063. J. 25.
8 Duffy v. Fidelity Mutual Life Ins. u See statute in note under § 1326
Co. 142 N. Car. 103, 7 L.R.A. (N.S.) herein.
238, 55 S. E. 79, 36 Ins. L. J. 25. What affidavit should contain. See
9 Underwood v. Modern Woodmen Mr-Call v. Prudential Ins. Co. 90 N.
of America, 141 Iowa, 240, 119 N. Y. Supp. 644, 98 App. Div. 225.
\Y (jio. Effect of affidavit made in foreign
2492
NOTICE § 13
§ 1336b. Same subject: last known address: change of address. —
A notice may be addressed to the residence named in the policy mi
til the company is notified of the change.18 And the association
must continue to send notice to the proper address unless it is noti-
fied of a change of such address and if without authority therefor
it sends notice to an address differenl from (hat stated in the con-
tract it has no force as a notice in the absence of proof that it was
received by assured.13 And the notice is sufficient if mailed to the
assured at his last known address where the contract provides for
such mode of transmission. 'The fad that the party has changed
his address does not affect the sufficiency of the notification when
such change is unknown to the society.14 And if the change of ad-
dress is not authorized to be made in the insurer's books, a notice to
the last address there appearing is sufficienl though insured's last
assessment had been paid from another address.16 If, however.
insured has no postoflice address in the state, a statutory require-
ment that notice must be mailed to the last known address does not
apply.16 If insured's address is changed without notice thereof to
insurer and the notice of assessments is sent by second class mail
which cannot be forwarded instead of on a postal as had formerly
been done the policy will nevertheless be forfeited for nonpayment
of premiums as required and so, even though the by-laws require
notice by mail.17 Again, the obligation to give notice before strik-
ing a member's name from the rolls for nonpayment of arrears in
dnes is not excused by such member's neglect to notify the society
of a change in his address where the by-laws provide for such notice,
and for a fine in case of the member's failure to notify the society
of a change of address.18
state. See Carr v. Prudential Ins. 13 Mutual Life Industrial Assoc.
Co. 101 N. Y. Supp. 158, 115 App. v. Scott, 170 Ala. 420, 51 So. 182.
Div. 755. 14Lothrop v. Greenfield Stock &
12 Lothrop v. Greenfield Stock Mu- Mutual Fire Ins. Co. 2 Allen (84
dial Ins. Co. 2 Allen (84 Mass.) 82. Mass.) 82.
Statutory notice sent to joint address. "Smith, v. Mutual Reserve Fund
If a policy is issued to husband and Life Ins. Co. 44 Wash. 315, 87 Pac.
wife on their lives, and the statutory 347.
notice is sent addressed to them joint- 16 Napier v. Bankers' Life Ins. Co.
ly, he cannot avail himself of his neg- 100 N. Y. Supp. 1052, 51 Misc. 283.
lect to deliver the notice to his wife, 17 Mutual Fire Ins. Co. v. Turner,
and so claim a nonforfeiture for the 115 Va. 631, 79 S. E. 1067.
nonpayment of the premium due. 18\Vachtel v. Widows & Orphans'
Mullen v. Mutual Life Ins. Co. Soc. 84 N. Y. 28, 38 Am. Rep. 478.
( L895) — Tex. Civ. App. — , 32 S.
W. 911, rev'd 89 Tex. 259, 31 S. W.
605.
2403
§§ L337, 11338 JOYCE ON INSURANCE
Notice to a bank collecting premiums for an insurance company,
of a change in the postoffice address of an insured, is notice to the
company.19 So notice to a general agenl of insurer, in a conversa-
tion on the street, of insured's change of address hinds insurer and
requires thai notice be sent to the address given, under a statutory
requirement thai notice be sent to the Last known postoffice address
of insured.20
§ 1337. Notice wrongly addressed. — If the notice of assessment
is wrongly addressed, owing to the collector's mistake, to a place
where the member never resided, and it is never received by him,
the nonpayment of such assessment when due does not operate as a
forfeiture where the by-laws require notice to he mailed or left at
the member's last known postoffice address or residence.1 And
there is no presum] tion that the assured received notice of the ma-
turity of premiums where such notice is not mailed to his address,
but is. on the other hand, sent to another city of which he was be-
fore thai time a resident.2 If notice of an assessment is required
by the constitution to be mailed to the "last address as shown" by
certain hooks, there is no forfeiture for nonpayment of assessments
where the notice is mailed to another address.3 So a notice of the
maturity of a premium which is improperly addressed and does not
reach assured, hut is returned to the insurer cannot establish a for-
feiture.4
§ 1338. Notice by publication. — If notice by publication is re-
quired, or if public notice by advertisement is provided for, such
notice must be given in the mode and for the time prescribed, in
oi-der to establish a forfeiture or suspension or to maintain a suit
against a member where such action may be had.5 And notice of
19 Goodwin v. Provident Savings' L.R.A. 473, 59 Am. St. Rep. 411, 66
Life Assurance Soc. !>7 Iowa, '226, 32 N. W. 157, 25 Ins. L. J. 401.
L.R.A. 473, 66 N. W. 157, 25 Ins. L. ^Northampton Mutual Livestock
.1. 401. Ins. Co. v. Stewart, 39 N. .1. L. 186;
20 Goodwin v. Provident Savings' Pennsylvania Training School v. In-
Life Assur. Soc. 97 Iowa, 226, 32 dependent Ins. Co. 127 Pa. St. 559,
L.R.A. 473, 66 N. W. 157> 25 Ins. L. 18 Atl. 392; Fitzpatrick v. Mutual
3. 401. Benefit Life Ins. Assoc. 25 La. Ann.
1 Waterworth v. American Order of 443.
Druids, Kit .Mass. 571, 42 N. E. 10(5. The New York statute governing
2 Goodwin v. Provident Savings' assessments in mutual fire insurance
Life Assur. Assoc. 97 Iowa. 226, 32 corporations provides: "The direc-
L.R.A. 173,59 Am. St. Rep. 411, 66 tors shall, as often as they deem
X. \V. L57, 25 Ins. L. J. 401. necessary, after receiving notice of
3 Mollov v. Supreme Council Cath- any loss or damage by lire sustained
olic Benevolent Assoc. 93 Iowa, 504, by any member, and ascertaining the
til N. \\ . 928. same, or after the rendition of any
4 Goodwin v. Provident Savings' judgment against the corporation for
Life Assur. Soc. 97 Iowa, 226, 32 loss or damage, settle and determine
2494
NOTICE § 1338
assessment must not only be published in the official paper 1ml mu-t
also bo sent, where the constitution of the society provides thai it
shall be made and sent in such manner as the grand Legion shall
provide.6 And if public notice by advertisement is specified, proof
of personal notice is insufficient.1 So in case the statute provides
that the directors may publish notice of assessments in such manner
as they shall see fit, or as the by-laws shall have prescribed, they
must comply with the mode prescribed in the by-laws for publica-
tion of notices, but in the absence of by-laws on the subject they
may exercise their discretion, and defects in the notice arising from
noncompliance with the by-laws will not be aided by a personal de-
mand.8 A requirement in the charter that public notice be given
when advertising an assessment made, means notice by advertise-
ment in a newspaper.9 And if the by-laws provide that payment
must be made in a specified number of days after publication, they
must be so made.10 So where the charter provides for notice of
death by posting notice thereof in the exchange, and for payment
within a specified time thereafter, a member who fails to pay an
assessment of which notice was so posted forfeits his certificate.11 If
the notice is required to be published five days' payment of an as-
sessment to be called for within thirty days thereafter, and the
time of publication is extended by notice to eight days, payment to
be made at the office of the company within thirty days thereafter,
the notice must be published the full eight days, and no forfeiture
the sums to be paid by the several of the losses for which the assess-
members thereof as their respective merit is made." N. Y. Ins. Law 1909,
portion of such loss, and publish the c. 33, sec. 116, as revised from L.
same in such manner as they shall 1853, c. 466, sec. 13, as am'd by L.
see fit or as the by-laws shall have 1854, c. 369 ; L. 1890, c. 302.
prescribed. The sum to be paid by 6 Grand Legion of Illinois Select
each member shall always be in pro- Knights of America v. Beatty, 224
portion to the original amount of his 111. 346, 8 L. R. A.(N.S.) 1124, 7!)
note or notes, and shall be paid to N. E. 565, affd 117 111. App. 647.
the officers of the corporation with- 'Northampton Mutual Livestock
in thirty days next after the pub- Ins. Co. v. Stewart, 39 N. J. L. 486.
lication of such notice. If any mem- 8 Sands v. Sanders, 26 N. Y. 239.
ber shall, for the space of thirty days 9 Pennsylvania Training School v.
after such publication and after per- Independent Mutual Fire Ins. Co. 127
sonal demand for payment shall have Pa. St. 559, 25 Week. Not. Cas. 53,
been made, neglect or refuse to pay 18 Atl. 392.
the sum so assessed upon him, the 10 Madeira v. Merchants' Exchange
directors may sue for and recover the Mutual Benefit Soc. 16 Fed. 749.
whole amount of his note or notes, u Maginnis' Estate v. New Orleans
with costs of suit, but execution shall Cotton Exchange and Mutual Aid
only issue for assessments and costs A -soc. 43 La. Ann. 1136, 10 So. 180,
as they accrue, and every such execu- 21 Ins. L. J. 171.
tion shall be accompanied by a list
2495
§§ 1338a, L339 JOYCE ON [NSURANCE
can be declared for nonpayment prior to the expiration of the thirty
thereafter; 12 and if the by-laws provide for publication of no-
n premium uotes in three newspapers in the
county where the company is organized and transacting business,
compliance with such by-laws must be proven to warrant a recovery
of an assessment, or it musl be shown that it was not possible to com-
ply therewith because there were not the specified number of news-
papers in the county. A proof of publication in two newspapers
without such other proof is insufficient, nor is there any obligation
on the part of the member to show that there were three newspap-
ers.18 But the fact that the by-laws provide for notice by publica-
tion in one or more newspapers does not preclude the necessity for
actual nolicr when articles of association provide for the latter.14
§ 1338a. Same subject: validity of provisions as to. — A statute
which provides that notice of assessments may be given by "publi-
cation or otherwise," is not unconstitutional as not requiring per-
sonal notice.15
§ 1339. Computation- of time.16— In computing the time within
which the days allowed for payment of an assessment begin to run.
regard must be had to the requirements or agreement concerning
notice.17 Thus, if the statute provides that notice may be transmit-
ted by registered letter, the time limited for payment begins to run
from the day the letter is properly and duly mailed.18 In the com-
putation of time under the New York statute as to notice of matur-
ity of premiums, the day of mailing is to be excluded, and a notice
mailed November 2d, stating that the premium will be due Decem-
ber 2d, does not cover the thirty days required.19 If the by-laws
provide for forfeiture in case of nonpayment within thirty days
from the date of the assessment, the "date" means the time when it
was made out by the secretary and mailed to the assured, and it is
no excuse that the notice never reached the assured where it is prop-
erly mailed and addressed. This case distinguishes those cases
12 Fitzpatrick v. Mutual Benefit computation of time generally, see
Life Ins. Assoc. 25 La. Ann. 443. notes 49 L.R.A. 193 (50 pages) ; 15
13 Sands v. Graves, 58 N. Y. 94. L.R.A. (N.S.) 688.
14 Schmidt v. German Mutual Ins. "Weakly v. Northwestern Benevo-
Co. of Indiana, 4 Ind. App. 340, 30 lent Mutual Aid Soc. 19 Bradw. ( 111.)
N. E. 939. 327.
15 Hamilton Mutual Ins. Co. v. 18 Ross v. Hawkeye Ins. Co. 83
Parker, 11 Allen (93 Mass.) 574; Iowa, 586, 50 N. W. 47, 21 Ins. L.
Mass. Stats. 1862, c. 181, sec. 2; J. 121.
Stats 1863, c. 24!). 19 Hicks v. National Life Ins. Co.
i8See §§171, 1446 herein. As to 60 Fed. 690, 9 C. C. A. 215; Laws
exclusion' and inclusion of days in N. Y. 1877, c. 321. See also Ro~en-
2496
NOTICE § 1339
wherein time is to be computed from the "date of notice/' 20 Again,
it is held that sending notice when required under the by-laws is an
essentia] part of the notice or assessment, and it must, therefore, be
sent within a reasonable time after its date, and otherwise the time
allowed for payment should not be computed from such date.1 On
a line with this case are two other cases, one in Kentucky and one
in Minnesota, where the constitution of the society provided that the
assessment should be paid by the member not later than the twenty-
eighth day of the month, and that notices of assessments should be
sent not later than the eighth day of the month on which the ^as-
sessment was issued. Although this provision of the constitution
was construed as allowing twenty days for payment before forfeiture
could be declared, it was held in the first-named state that it was suf-
ficient if a reasonable time was given from the sending of the notice,
even though the full time of payment was not allowed, and in the
latter case a suspension of the member by the society on the twenty-
ninth day of the month was sustained, and this although the notice
in the first case was not sent until the ninth or tenth of the month,
and in the latter case not until about the twelfth of the month.2
While it might be urged that there is a distinction between an
agreement to pay on a specified day, where a reasonable time is given
to meet the obligation, and an agreement that a specified number of
days from the date of notice shall be given for payment, neverthe-
less these decisions are subject to criticism in this, that if the con-
stitution be construed to allow the full twenty days for payment of
an assessment, it is doubtful if rulings which, contrary to contract
stipulations, tend to shorten such specified time, will be favorably
considered, especially where the forfeiture of contract .rights follows
such construction. And the main objection to these decisions must
be based on the point that the constitution was construed to allow
twenty days for payment. There is another class of cases which are
similar, in that the notice frequently provides for payment within
a certain number of days from date, but in addition specifies in the
notice the date on which the time for payment will expire, and in
so far as such specification of a certain day as the time limit con-
forms to the charter or constitution and by-laws, or, in brief, with
the contract, it would seem to exclude the question of computation
planter v. Provident Savings' Life 2 Ancient Order United Workmen
Assur. Soc. 96 Fed. 721, 37 C. C. A. v. Moore (Ky.) 1 Ky. L. Rep. 93;
566, 46 L.R.A. 473. Benedict v. Grand Lodge Ancient Or-
20' Weakly v. Northwestern Benev- der United Workmen, 48 Minn. 471,
olent Mutual Aid Soc. 19 Bradw. 51 N. W. 371, 21 Ins. L. J. 438.
(111.) 327.
1 Stanley v. Northwestern Life
Assoc. 36 'Fed. 75.
Joyce Ins. Vol. III.— 157. 2497
§ 1339 JOYCE ON INSURANCE
of time; but this ought certainly to be based only on the assumption
that the notice must be sent in due and reasonable time after date,
but even in such case if the contract allows a certain number of days
after notice for payment, it is doubtful if the company may, by
designating a certain day, impose an obligation on the insured not
contained in the contract. Thus, it is the genera] rule in cases where
the assessment is to be paid within a specified number of days after
date or after service of notice, or after notice is sent to the assured,
or in cases of like character where the policyholder or assured is
entitled to actual receipt of notice, that the day when the notice is
actually received should be excluded in the computation of time.3
And if the notice is agreed to be sent by mail, the computation of
time must be from the day when a properly addressed and mailed
letter would reach the party in regular course of mail ; that is, such
day must be excluded,4 even though notice is not actually received.5
It, is held, however, that the date of notice is that on which it is ac-
tually received where assessments are to be paid within a specified
number of days "after notice" and if not paid within a certain num-
ber of days "from notice." 6 And time is to be computed from the
date of notice of assessment and not from the date specified in said
notice as that on which the treasurer of the insurer would be at a
certain place to receive payment.7
Where the requirement is for notice by publication for a stated
time and payment within a certain number of days after notice, or
after date of the death of a member and notice thereof by publica-
tion, the time should be computed from and after the expiration
of the last day of publication.8 In computing the time from which
dues commence to be in arrears, as in case of dues in arrears for six
months, the time commences to run from and after the last day of
the period at the termination of which they are due and payable.9
8 Protection Life Ins. Co. v. Palm- e Darlington v. Phoenix Mutual
er, 81 111. 88 (after "date of notice") ; Fire Ins. Co. 194 Pa. 650, 45 Atl. 482,
American Mutual Aid Soe. v. Quire 29 Ins. L. J. 373. See Matthews
8 Kv. L. Rep. 101 (the charter pro- Farmers' Mutual Live Stock Ins. Co.
vided for payment within a specified v. Moore, 580 Ind. App. 240, 108 N.
time after notice "served on" or E. 155.
"scut to" the assured; the date of re- 7 Shuman v. Juniata Farmers' Mu-
ceiving notice is the date from which tual Fire Ins. Co. 206 Pa. 417, 55
time is computed); (ireat Western Atl. 1069.
Mutual Aid Assoc, v. Colmar, 7 Colo. 8 Wet more v. Mutual Aid & Bene-
App. 275, 43 Pac. 159. fit Life Assoc. 23 La. Ann. 770.
4Lothrop v. Greenfield Stock Mu- 9 Bukofzer v. United States (Jrand
tual Ins. Co. 2 Allen (84 Mass.) 82; Lodge Independent Order Suns of
National Mutual Benefil Assoc, v. Benjamin, 40 N. Y. St. Rep. 653, aff'd
M.ller, 85 Kv. 88, 2 S. VY. 900, 8 139 N. Y. 612, 35 N. Iv 20 1, 15 N.
Ky. Law Rep. 731. Y. Supp. 922, 61 Hun (N. V.) 625j
8Lothrop v. Greenfield Stock Mu- Wiggin v. Knights of Pythias, 31
tual Ins. Co. 2 Allen (84 Mass.) 82. Fed. 122.
2498
CHAPTER XLIV.
PREMIUMS, ETC. : EXCUSES, WAIVER AND ESTOPPEL.
§ 1345. Whether war excuses nonpayment of premium.
§ 1346. What excuses nonpayment of premiums and assessments: gen-
erally.
§ 1347. Excuses: omitting customary statement: amount unknown.
§ 1348. Excuses : change of agency without notice.
§ 1349. Excuses : insolvency : company ceasing to do business.
§ 1349a. Acts ultra vires corporation's powers to excuse.
§ 1350. Act of God : sickness : death : accident : insanity : no excuse : ex-
ceptions.
§ 1351. Death of agent: failure to find agent: agent's neglect or misrep-
resentations no excuse.
§ 1352. What is not an excuse : absence of assured : lapse of policy by
accident: other instances.
§ 1353. Waiver of punctual payment of premiums, assessments, and dues :
estoppel : generally.
§ 1354. Waiver and estoppel : prior parol agreements as to payment of
premium, etc.
§ 1355. Waiver and estoppel : subsequent parol agreements as to pay-
ments and premiums, etc.
§ 1356. Payment of premiums: waiver and estoppel, custom, acts, etc
§ 1357. Waiver: holding overdue premium notes and demanding payment.
§ 1357a. Holding overdue notes and requesting payment.
§ 1358. Custom not to treat nonpayment of premium notes as forfeiture.
§ 1359. Enforcing payment of note after forfeiture.
§ 1360. Assured must have known of custom.
§ 1361. Payment of assessments: waiver and estoppel, custom, acts, etc.
§ 1362. Waiver of prepayment.
§ 1363. Where receipt of premiums and assessments is an act of favor.
§ 1364. Waiver of estoppel: acceptance and retention of overdue pre-
miums and assessments: cases.
§ 1365. Right or obligation to accept and retain overdue premium or
assessment : no waiver.
§ 1366. Unconditional offer to accept overdue premium : tender.
§ 1367. Conditional acceptance of overdue premiums, etc.
2499
§ 1372.
§
L373.
§
L374.
§
L375.
§
L376.
§
L377.
§
1378.
§
1371).
§
1380.
§
1381.
§§ L345, L346 JOYCE ON INSURANCE
§ L368. When custom to receive overdue payments may be availed of by
insured: general custom: proof.
§ L369, Waiver of forfeiture generally by receipt of overdue premiums,
assessments and dues.
§ L369a. Demand or requesl for payment.
>? 1369b. Express waiver: knowledge of assured.
§ l .".7(>. Waiver bj collecting assessments on notes or by collecting or suing
On notes.
§ 1371. Whether levy and receipt of subsequent assessments and dues
waive forfeiture.
Same subject : authorities holding a waiver.
Same subject : authorities contra.
Waiver: custom: acceptance of premium or assessment after loss
or death.
Waiver: payment of premium note: generally.
Waiver by failure to declare a forfeiture.
Failure to insist promptly on payment of premium note.
Waiver: collecting loss: adjustment and allowance of loss.
Waiver by recognition of the policy as in force.
Waiver of giving credit for the premium.
Defense that waiver induced by false representations.
§ 1382. Waiver by agents: subordinate lodges.
§ 1383. Waiver by assured of exemption from assessment : illegality of
assessment.
§ 1384. Waiver by assured of defective notice and service of same.
§ 1345. Whether war excuses nonpayment of premium. — We have
already considered somewhat at length the effect of war upon the
contract of insurance, and we refer to the authorities there noted
for the determination of this question.10
§ 1346. What excuses nonpayment of premiums and assessments:
generally. — If the company refuses to perform its contract, nonpay-
ment of the premium at the stipulated day excuses the assured.11
But the company must be in fault, and there must be a readiness
and willingness to perform to excuse a failure to pay a premium as
agreed.12 That an assessment is invalid, or that a required notice
of payment of premiums or assessments is invalid, constitutes a
sufficient excuse for nonpayment of the premium or assessment.13
And if the assured lias been fraudulently induced to surrender his
policy, this affords a sufficient excuse as to the beneficiary for the
10 See §§ 281 et seq. herein. Life Ins. Co. (id How. Pr. (N. Y.)
11 Shaw v. Republic Life Ins. Co. 519; People v. Globe Mutual Life
69 X. V. '286. Ins. Co. 32 Hun (N. Y.) 147.
18 Attorney General v. Continental 18 Cooper v. Shaver, 41 Barb. (N.
2500
EXCUSES, WAIVER AND ESTOPPEL §§ 1347, 1348
nonpayment of premiums.14 The question as to what excuses non-
payment of premiums, assessments, or dues is also involved in
numerous cases relating to the payment of premiums, assessments,
and dues generally already considered, and also in many decisions
concerning waiver and estoppel noted under this chapter.
§ 1347. Excuses: omitting customary statement: amount un-
known.—Where the premium is paid partly in cash and partly in
interest-bearing premium notes, and the company has been ac-
customed for years from the time of .issuing the policy to make out
and deliver to the assured a statement showing the amount due,
it cannot withdraw its agent and discontinue such practice without
notice, and thereupon, without having sent the regular statement.
declare the policy forfeited for nonpayment of the premium when
due, and cancelthe contract.15 Ho if a knowledge of the amount
due is known only to the company, which keeps silent as to tire
same when asked, and the amount is unknown at the time when
payable, there is a sufficient excuse for a default.16 And if the as-
sured has neither knowledge as to the time when premiums will
become due nor possession of the policy, and the company, upon
request made at its office, promises to send the necessary informa-
tion, but does not, it cannot take advantage of its own fault and base
a defense thereon to an action for recovery on the policy.17
§ 1348. Excuses: change of agency without notice. — Nonpay-
ment on the day is excused where the company neglects to inform
the assured of a change of the agent authorized to receive payments,
after it has adopted a rule to give notice in all such cases, and the
premium is tendered when due to the agent accustomed to receive
payments, and there has been a reasonable endeavor by the assured
to find the new agent. And the circumstances may entitle the as-
sured to a reasonable time within which to make payment after the
premium became due, especially when punctual payment had been
waived the previous year and sixty days is held to be a reasonable
time.18
Y.) 151; Rosenberger v. Washington notice, see note in 20 L.R.A.(N.S.)
Fire Ins. Co. 87 Pa. St. 207, 208. See 1037.
§§ 1290-1311, and e. XXXI. herein. 16 Meyer v. Knickerbocker Life Ins.
"Whitehead v. New York Life Co. 73 *N. Y. 510, 29 Am. Rep. 200,
Ins. Co. 102 N. Y. 143, 55 Am. Rep. aff'g 51 How. Pr. (N. Y.) 263; Dean
787, 6 N. E. 267. v. JEtna Life Ins. Co. 2 Hun (N. Y.)
15 Meyer v. Knickerbocker Life 358, 4 N. Y. S. C. 497.
Ins. Co. 51 How. Pr. (N. Y.) 263, n Leslie v. Knickerbocker Life Ins.
aff'd 73 N. Y. 516, 29 Am. Rep. 200. Co. 63 N. Y. 27, 2 Hun (N. Y.) 616,
On effect of custom to give insured 5 N. Y. S. C. 193. See also chapter
notice of maturity of premium where preceding on notice,
insured is not otherwise entitled to 18 Seamans v. Northwestern Mutual
2501
§ 1349 JOYCE ON INSURANCE
§ 1349. Excuses: insolvency: company ceasing to do business. —
In the matter of premiums, the insolvency of the company so far
determines the contracl as to the insured that no obligation rests
upon him to pay premiums thereafter falling due.19 But in the
matter of assessments and dues in mutual companies, the contract
musl govern; thus, in the case of security or premium nun- the
maker may be liable thereon, notwithstanding the company's in-
solvency, for insolvency is not such a failure of consideration as to
[■(■lease the maker.20 although the contract may be such thai after
insolvency the company cannot insist upon forfeiture of the policy
for a refusal to Tenew the same or to pay assessment-, Levied there-
on.1 1 f the insured would avail himself of the excuse of insolvency,
he must show Ids readiness and willingness to pay had the com-
pany been solvent.2 If the company has become insolvent, trans-
ferred its assets, and stopped business, it cannot claim a forfeiture
for nonpayment of premiums, although it is authorized by statute
to discontinue and to reinsure its risks; 3 and no payment need bo
made if an inquiry is pending as to the company's solvency, ii
being meanwhile restrained by an injunction from transacting
business.4 So nonpayment of dues in a safety fund association after
it stops business, and pending the dissolution, does not forfeit the
certificate,6 and it is held that if a foreign company ceases to do
business at the place where the premium is stipulated to be paid,
and maintains no known agency there, nonpayment is excused.6
So where the company becomes insolvent and a receiver is appoint-
Life Tns. Co. 3 Fed. 325, 8 Fed. Cas. x Command v. North Carolina Mu-
No. 278n, and see eases cited in this tual Life Ins. Co. 1 Phil. Eq. (62 N.
case as to reluctance of courts to en- C.) 341, 98 Am. Dec. 89. Sec §§ 1231,
force forfeitures in this class of cases. 1232, 1272, 1273 herein, where this
See also as to forfeitures not being question is considered.
favored, $S 220 et seq. herein. Brings 2 People v. Globe Mutual Life Ins.
v. National Life Ins. Co. 11 Fed. 458. Co. 32 Hun (N. Y.) 147.
See Meyer v. Knickerbocker Life Ins. 3 People v. Empire Mutual Life
Co. 73 N. Y. 516, 51 How. Pr. (N. Ins. Co. 92 N. Y. 105, aff'g 28 Hun
Y.) 26.'!, noted under preceding sec- (N. Y.) 358.
tion, where, agent was withdrawn. 4 Coffee v. Universal Life Ins. Co.
19 Jones v. Life Assur. Co. 83 Ky. 10 Biss. (C. C.) 354, 7 Fed. 301. Con-
75, 7 Ky. Law Rep. 1; People v. Em- tra, Universal Life Ins. Co. v. White-
pire Mutual Life Ins. Co. 92 N. Y. head, 58 Miss. 226, 10 Ins. L. J. 337,
105; Attorney General v. Guardian 38 Am. Rep. 322.
Mutual Life Ins. Co. 82 N. Y. 336, 28 5 Burden v. Safety Fund Assoc. 147
Bun (N. Y.) 358; People v. Globe Mass. 360, 1 L.K.A. 146, 6 New Eng.
Mutual Life Ins. Co. 32 Hun (N. Y.) Rep. 840, 17 N. E. 874.
I 1 1 ; Albert Ins., In re, L. R. 9 Eq. 6 Dorion v. Positive Government
703. Life Assur. Co. 23 Low. Can. Jur.
20 Sterling v. Mercantile Mutual 261. But see § 1168 herein.
Tns. Co. 32 Pa. St. 75, 72 Am. Dec.
773.
2502
EXCUSES, WAIVER AND ESTOPPEL §§ 1349a, 1350
ed, who gives notice that he will receive no more premiums, the
insured is excused.7 But it is not sufficient excuse for a refusal to
pay premiums, that, owing to wrongful acts of the company's
officers, it had become insolvent, and therefore it was unsafe to pay,
if the company still continues to do its ordinary business in the
ordinary way, and is ready to receive premiums,8 nor is the insure* I
excused from payment of a premium which falls due several months
before the insolvency.9 Although the insolvency of the company
terminates the obligation to pay subsequently accruing premiums,
it does not prevent the enforcement of a claim for damages from
the day of the order in insolvency.10 And where premiums have
been paid for some time subsequent to the date of the appointment
of a receiver, the referee may allow the claims of those dying after
the times at which premiums have been paid, and the claimants
are each entitled to be allowed the present value of the policy at
the time of the dissolution of the company and the appointment of
the receiver, deducting the amount of premiums unpaid at the
time of death,11 and where proceedings are instituted in insolvency
against the company, and it admits the fact, and is so adjudged, a
receiver appointed, and the outstanding policies canceled, the con-
tract is so far terminated as to preclude the right to recover for
losses subsequently accruing, and this is so notwithstanding the
policy stipulates for a notice of a contemplated cancelation.12
§ 1349a. Acts ultra vires corporation's powers no excuse. — It
is not a sufficient excuse for nonpayment of assessments to show
that the insurer has engaged in a business ultra vires its powers, in
the absence of a showing that insured is injured thereby in his con-
tract obligations.13
§ 1350. Act of God: sickness: death: accident: insanity: no
excuse : exceptions. — Although it is held that a stipulation for for-
feiture for nonpayment of annual premiums does not apply to a
7 Attorney General v. Guardian 12 Reliance Lumber Co. v. Brown,
Mutual Life Ins. Co. 82 N. Y. 336, 4 Ind. App. 92, 30 N. E. 625.
aff'g 28 Hun (N. Y.) 358. 13 Havdell v. Mutual Reserve Fund
8 Tavlor v. Charter Oak Life Ins. Life Assoc. (U. S. C. C.) 98 Fed.
Co. 9 Daly (N. Y.) 489. 200, affd 104 Fed. 718, 44 C. C. A.
9 Attorney General v. Continental 169 ; Hale v. Michigan Farmers' Mu-
Life Ins. Co. 64 How. Pr. (N. Y.) tual Fire Ins. Co. 148 Mich. 453, 14
519. Det. Leg. N. 214, 111 N. W. 268.
10 In re Albert Life Ins. Co. L. R. As to charter : corporate powers :
9 Eq. 703; Attorney General v. Guar- ultra vires, see § 334 herein.
dian Mutual Life Ins. Co. 82 N. Y. As to power of mutual companies
336, aff'g 28 Hun (N. Y.) 358. affecting the contract: ultra vires, see
11 Attorney General v. Guardian §§ 350 et seq. herein.
Mutual Life Ins. Co. 82 X. Y. 336,
aff'g 28 Hun (N. Y.) 358.
2503
§ 1350 JOYCE ON [NSURANCE
contingency occasioned by the acl of God, or of the law rendering
such paymenl impossible,14 aevertheless the general rule is, thai no
mere accident or act of < rod, however controlling, can keen the policy
in force after the day without payment.16 The fact thai one is so
sick and delirious until he dies thai he can do nothing aboul paying
the premium, does not presenl a case of impossibility caused by the
aci 0f < ;,„! such as to prevenl a forfeiture,16 oor does sudden sickness,
nor mental or physical incapacity, nor paralysis, nor inability to at-
tend to business afford an excuse for nonpayment of premiums or
assessments as stipulated," for where a person, by an express con-
tract, engages absolutely to do an act not impossible or unlawful at
!h(. time, neither inevitable accident, nor other unforeseen contin-
gency not within his control, will excuse him. So thai if a member
of an assessment insurance company promises to pay certain mortu-
ary assessments, and a stated sum annually for expenses, within
thirty days after notice that the same is due. payment by the assured
of the stipulated sums as they become due is a condition precedent to
any subsequent liability on the pari of the company, though the
mental faculties of the insured, at the time of receiving notice of a
mortuary assessment, are so far impaired as to prevent him from
doing business.18 Ho the fact that one insured was sick and unable
to attend to business at the time when a premium note fell due, and
14Hillvard v. Mutual Benefit Life ic Mutual Benefit Assoc, of Balti-
Ins. Co. 35 N. ,J. L 415. more, 63 Md. 80.
15 Howell v. Knickerbocker Ins. Co. Massachusetts. — Rocei v. Massa-
44 N. Y. 27(i, 4 Am. Rep. 675. ehusetts Accident Co. 222 Mass. 336,
16 Carpenter v. Centennial Mutual 110 N. E. 972.
Life Assoc (IS Iowa. 453, 50 Am. New York. — Howell v. Knicker-
Rep. 855, 27 N. W. 456. bocker Life Ins. Co. 44 N. Y. 276,
On effect of incapacitating illness 277, 3 Rob. (N. Y.) 232,4 Am. Rep.
or insanity on failure to pay pre- 075; Ingram v. Supreme Council
tnium when due, see notes in 12 American Legion of Honor, 14 N. Y.
L.R.A.(N.S.) 319, and 40 L.R.A. St. Rep. 400.
(N.S.) 537. Pennsylvania. — Scully v. Kirkpat-
w United Stairs. — Klein v. New rick, 79 Pa. St. 324, 21 Am. Rep. 62;
York Life Ins. Co. 104 U. S. 88, 26 Smith v. Pennsylvania Mutual Life
L. ed. 662; Thompson v. Knicker- Ins. Co. 11 Week. Not. Cas. (Pa.)
bocker Life Ins. Co. 104 U. S. 252, 26 295.
L. ed. 765; Hawkshaw v. Supreme South Carolina. — Donald v. Pied-
Lodge Knights of Honor, 29 Fed. mont & Arlington Life Ins. Co. 4 S.
770. Car. 321.
Connecticut. — School District No. Tennessee. — Thompson v. Fidelity
1 v. Dauchy, 25 Conn. 530, 68 Am. Mutual Life Ins. Co. 116 Tenn. 557,
Dec. 371. (i L.R.A. (N.S.) 1039, 115 Am. St.
Iowa: — Carpenter v. Centennial Rep. 823, 92 S. W. 1098.
Mutual Life Assoc. 68 Iowa, 453, 56 18 Pitts v. Bartford Life & Annui-
A.n. Rep. 855, 27 X. W. 45. ty Ins. Co. 66 Conn. 376, 50 Am. St.
Maryland. — Yoe v. Howard Mason- Rep. 90, 34 Atl. 95.
2504
EXCUSES, VYAIVER AND ESTOPPEL § 1350
so remained until he died, will not prevent a forfeiture of the policy
for nonpayment, in accordance with the express terms contained
in it and in the premium note.19 So failure to pay an assessment
by reason of a stroke of apoplexy causing unconsciousness which
continues until death will not forfeit a benefit certificate which
declares that it shall be void for failure to pay assessments, where it
also provides that a member may be reinstated by paying assessment
arrearages, "for valid reasons to the officers of the association," —
such as a failure to receive notice of trie assessment,20 And an
option provided for in a life insurance policy stipulating that, upon
satisfactory proof to the company of the incapacity or disability of
the insured, the premiums payable for the remaining years shall
cease or be remitted during die continuance of the incapacity,
and that the insurance shall be paid as an endowment at the age
of eighty, or at death if before that age, was not rendered operative
by the fact that the insured was sick with typhoid fever when one
of the premium notes fell due, and that he so remained until his
death some weeks thereafter.1 But this rule as to sickness does not
exclude any agreement to the contrary which the parties may law-
fully make, and it is held in Nebraska that a default in making
payments during illness will not work a forfeiture of a certificate in
the Ancient Order of United Workmen.2 And the charter, con-
stitution, or articles of association may expressly or impliedly pro-
vide to the contrary, as in case where sudden sickness may con-
stitute a "valid reason" for default.3 So it may be stipulated that
the party shall have a right to make payment within a reasonable
time after it is due, and where in such case the assured left his
house in apparent good health for his place of business, intending
then to pay, but was stricken with paralysis and remained uncon-
scious until his death the next day, it was held that payment was
excused.4 So the insanity of the insured is not an excuse for his
failure to pay premiums,5 and this last rule applies to the payment
19 Hipp v. Fidelity Mutual Life 3 See § 1276 herein.
Ins. Co. 128 Ga. 491, 12 L.R.A. 4 Howell v. Knickerbocker Life Ins.
(N.S.) 319n, 57 S. E. 892. Co. 44 NT. Y. 2_76, 3 Rob. (N. Y.) 232,
20 Dennis v. Massachusetts Benefit 4 Am. Rep. 675 (two judges dissent-
Assoc. 120 N. Y. 496, 9 L.R.A. 189, ing).
17 Am. St. Rep. 660, 24 N. E. 843. 5 Wheeler v. Connecticut Mutual
1 Hipp v. Fidelity Mutual Life Ins. Life Ins. Co. 82 N. Y. 543, 37 Am.
Co. 128 Ga. 491, 12L.R.A.(N.S.) 319, Rep. 594; Sheridan v. Modern Wood-
57 S. E. 892. men of America, 44 Wash. 230, 7
2 Grand Lodge Ancient Order Unit- L.R.A.(N.S.) 973, 87 Pac. 127.
ed Workmen v. Brand, 29 Neb. 644,
46 N. W. 95.
2505
§ 1351 JOYCE ON INSURANCE
of assessments in benevolenl societies,6 in the absence of any pro-
vision to the contrary in the rule- of the society or order.7
§ 1351. Death of agent: failure to find agent: agent's neglect or
misrepresentations no excuse. — The death of the local agent is no
excuse for nonpaymenl of premiums, so as to prevenl forfeiture,
where the premiums are agreed to be paid at the home office,8 and
the insured must use reasonable and sufficienl diligence in making
paymenl to avoid a forfeiture; such diligence is not exercised where
the insured goes with the soliciting agent to the general agent's
office to make payment, and, being informed that the general agenl
through whom the policy had been issued was succeeded by an-
other, who was out at the time, went away in company with the
soliciting agent, but left it to the latter to pay the premium, he hav-
ing promised to do so out of his own pocket, and this even though
the latter did call again two or three times during the day.9 So it
is held in Louisiana that there is no law of that state which requires
foreign companies making insurance contracts there to keep resi-
dent agents there to receive premiums.10 But it is held that where
no place of payment of a note given for the premium is specified,
and no place of payment of the premium itself is fixed either in
the policy or application, that no place of payment being found
in the state where the insured resides constitutes a reasonable ex-
cuse for its nonpayment at maturity, even though the policy pro-
vides for forfeiture in case of nonpayment of such note when due,
and that the maker is not obligated to pay the same at the home
office.11 But where the agent of the insured, who was his book-
keeper, was intrusted to pay assessments, but absconded, having
embezzled a large sum of money, it was held that this constituted no
sufficient excuse, as the agent's fault was that of the principal,12
and it is no excuse that the assured relied upon the statements of
the agent of the company that the dividends would pay the pre-
8 Hawkshaw v. Supreme Lodge of 8 Bulger v. Washington Life Ins.
Knights of Honor, 29 Fed. 770; Mc- Co. G3 Ga. 328.
Cann v. Supreme Conclave Indepen- 9 Cronkhite v. Accident Ins. Co. of
dent Order 1 Icptasophs, 119 Md. 655, North America, 35 Fed. 26.
45 L.K.A.(N.S.) 537, 87 Atl. 383; 10 Quinn v. Manhattan Life Ins. Co.
M< I 'raig v. Independent, 30 Canadi- 28 La. Ann. 135. See § 1168 herein.
an L. T. 101. See Sheridan v. Mod- n Blackerby v. Continental Ins. Co.
era Woodmen of America, 44 Wash. 83 Ky. 574, 7 Ky. Law Rep. 653, 15
230, 7 L.R.A.(N.S.) 973, 87 Pac. 127, Ins. L. J. 756.
consiflrrrd under § 1361 herein. 12 Graveson v. Cincinnati Life As-
7 McCann v. Supreme Conclave In- soc. 11 Ohio Dec. 369, 26 Week L.
dependent Order Heptasophs, 110 Bull. 183.
Md. 655, 46 L.R.A.(N.S.) 537, 87
Atl. 363.
2506
EXCUSES, WAIVER AND ESTOPPEL §§ 1352, 1353
minm.13 And a breach of representations made during negotia-
tions, and not embodied in the completed contract, afford no excuse
for nonpayment.14
§ 1352. What is not an excuse: absence of assured: lapse of
policy by accident: other instances. — If the contract provides for
notice of an assessment by mail, and also for forfeiture in case ol
neglect for thirty days to pay the same, and such notice is properly
mailed to the insured at his last known address, but by mistake of
the postmaster is forwarded to the insured, who was then in Europe,
and in consequence the assessment is not paid in time, it is held
that the insured cannot recover for a loss of the property by fire,
even though he had an agent in charge to whom the notice mighl
have been given by the postmaster,15 and that the company has the
policy is held no excuse.16 So a lapse of policy by accident is no
excuse,17 and where a by-law of the company provides for suspen-
sion of the risk unless an assessment is paid within a certain time,
neglect to pay the same is not excused by the fact that the company
owes the member from whom the payment is due a less sum, if he
does not offer to pay the balance,18 nor can it avail the member that
a sum was due from the lodge sufficient to pay the assessment where
it was due from another and distinct fund.19 And it is no excuse
for a default in payment of premiums that the company neglected
to keep separate all the premiums paid on policies of the same class
to which the policy issued belonged, it being issued on the tontine
or ten-year dividend system,20 nor is it any excuse that the com-
pany has not given the local agent a receipt for the premium.1
§ 1353. Waiver of punctual payment of premiums, assessments,
and dues: estoppel: generally.2 — It is undoubted that a provision
for forfeiture for nonpayment of premiums when due is for the
benefit of the insurer, and may be waived by it.8 And this applies
13 Hale v. Continental Life Ins. Co. 20 Bogardus v. New York Life Ins.
20 Blatchf. (U. S. C. C.) 515, 12 Fed. Co. 101 N. Y. 328, 4 N. E. 522.
359 J Morey v. New York Life Ins. Co.
14 Bogardus v. New York Life Ins. 2 Wood (U. S. C. C.) G63, 664, Fed.
Co. 101 N. Y. 328, 4 N. E. 522. But Cas. 9,795.
see § 1235 herein, as to payment by 2 See § 1356 herein.
application of dividends. 8 Indiana. — Michigan Mutual Life
15 Greeley v. Iowa State Ins. Co. Ins. Co. v. Custer, 128 Ind. 125, 27
50 Iowa, 86. N. E. 124; Phenix Ins. Co. v. Toui-
16 Howard v. Mutual Benefit Life linson, 125 Ind. 84, 21 Am. St. Rep.
Ins. Co. 6 Mo. App. 577. 203, 9 L.R.A. 317, 25 N. E. 126.
17 Windus v. Tredegar, 15 L. T. N. Iowa. — Bricker v. Great Western
S. 108. Accident Assoc. 161 Iowa, 61, 140 N.
18 Hollister v. Quincy Mutual Fire W. 851.
Ins. Co. 118 Mass. 478. Kentucky.— New York Life Ins.
19 Ancient Order United Workmen Co. v. Evans, 136 Ky. 39, 124 S. W.
v. Moore, 1 Ky. L. Rep. 93. 376, 39 Ins. L. J. 306 : Home Ins. Co.
2507
§ 1353
JCT5 CE ON INsi i; ami:
to mutual fire insurance companies.4 It is accessary, however, to
supporl a claim of waiver, thai there be an actual knowledge of
ill,, material facts by the party against whom the waiver is claimed,8
or a waiver, to be operative, musl be supported by an agreement
founded on a valuable consideration,6 and it must have been in-
tended,7 or the acl relied on as a waiver musl be such as to estop a
party from insisting on performance of the contract or forfeiture
of the condition,8 or there musl be such a course of conduct or acts
as induces a belief in insured that he has a right to rely thereon and
a just and reasonable ground to infer that no forfeiture will be
asserted and this must be something more than a course of action
within the express term- of the contract.9 And it is declared thai
a waiver cannot be inferred from mere silence as insurer is not
obliged to do or say anything to make the forfeiture effectual.10
Bui it is held that a waiver will lie inferred from slight evidence,
and the company, if it intends to insist upon a forfeiture for non-
payment of premiums, must strictly conform to the stipulations of
i he contract, and not attempt to secure profits which a departure
therefrom would give it.11 Again, notwithstanding notes are given
v. Kan.. 1!) Kv. L. Rep. 276, 39 S. W.
501, 26 Ins. L. .1. 515, 510.
Nebraska. — Nebraska & Iowa Ins.
Co. v. Christiensen, 29 Neb. 572, 26
Am. St. Etep. 107, 15 N. W. 924.
Texas. — Equitable Life Assur. Soc.
of U. S. v. Ellis, — Tex. Civ. A pp.
— 137 S. W. 181, 40 Ins. L. J. 1360.
Utah. — Loftis v. Pacific Mutual
Life Ins. Co. 38 Utah, 532, 114 Pae.
L34, 40 Ins. L. -I. 1048.
* Johnson v. Retail Merchants' Mu-
tual Fire Ins. Co. 112 Minn. 418, 128
X. W. 162.
5 Robertson v. Metropolitan Life
Ins. Co. 88 N. Y. 511; Reynolds v.
Mutual Fire Ins. Co. :!1 Md. 280, 6
Am. Rep. 337; Hondeck v. Mer-
chants' & Bankers' Ins. Co. 102 Iowa,
303, 71 N. W. 354; Berman v. Fra-
ternities Health & Accident Assoc.
1(17 Me. 368, 78 Atl. 462. See Cent-
ral Market St. Co. v. North British
,V Mercantile Ins. Co. 245 Pa. 272,
!M Ail. 662, 11 Ins. L. J. 416 (accept-
ance with knowledge estops).
6 Fanners' & Merchants Fire Ins.
Co. v. Chestnut, 50 111. Ill, 00 Am.
Dec. ]!)_!; Fnderwood v. Farmers'
Joint Stock Ins. Co. 57 N. Y. 500;
Marvin v. Universal Life Ins. Co. 16
Hun (N. Y.) 101; Ripley v. iEtna
Ins. Co. 30 N. Y. 136, 86 Am. Dec.
362; Evans v. United States Life Ins.
Co. 3 Hun (N. Y.) 587.
7 Diehl v. Adams Countv Mutual
Ins. Co. 58 Pa. St. 443, 98 Am. Dec.
302.
8 Riplev v. Mtna Ins. Co. 30 N. Y.
136, 86 Am. Dec 362; Diehl v. Adams
County Mutual Ins. Co. 58 Pa. St.
443, 98 Am. Dec. 302; Marvin v. Uni-
versal Life Ins. Co. 16 Hun (N. Y.)
I'M.
9 Crosby v. Vermont Accident Ins.
Co. 84 Vt". 510, 80 Atl. 817, 10 Ins. L.
J. 2036.
10 Titus v. Glens Falls Ins. 81 N.
Y. 410, 410, quoted from and relied
on in Equitable Life Assur. Soc. v.
Ellis, — Tex. Civ. App. — , 137 S. W.
184, 40 Ins. L. J. 1360, 1367. Com-
pare SS 1264, 1376 herein. See also
Kahler v. Iowa State Ins. Co. 106
Iowa, 380, 76 N. W. 731; East Texas
Fire Ins. Co. v. Perkev. 89 Tex. 604,
35 S. W. 1050, 26 Ins. ... .J. 53.
11 Johnson v. Southern Mutual Life
Ins. Co. 79 Ky. 403, 3 Ky. Law Rep.
26.
2508
EXCUSES, WAIVER AND ESTOPPEL § 1353
in payment or part payment of a premium, and the policy provides
that on default in the payment of the notes the policy shall be-
come ipso facto null and void, the forfeiture can be waived by the
insurer, and is waived, if, after such default, the insurer continues
to assert liability on the part of the insured to pay such notes in
full.12 And acts of the insurer recognizing the policy as continu-
ing in force after nonpayment of the premiums, constitutes a waiv-
er even though it is stipulated that the policy .-hall he terminated
ipso facto by nonpayment of premiums when due.13 If the failure
of the company to -end a notice of an assessment waives a forfei-
ture, its employee's mistake' in the matter is immaterial.14 The gen-
eral doctrine of waiver applicable to other insurance companies is
equally applicable to mutual benefit societies.15 And a provision
in the policy of a mutual fire insurance company that, if the mem-
ber holding the policy "fails to pay any assessment ... at
the time specified in the notice sent him by the secretary," it shall
become void, is within the purview of the rules as to waiver of for-
feitures, and will be waived by acts of the company inconsistent
with an intention to rely thereon.16 But the receipt by the supreme
body of a mutual benefit society of money from a local lodge to pay
the clues of a delinquent member, without knowledge that it is not
his money, but an advancement by the lodge, does not estop it from
contesting liability on his certificate because of his nonpayment of
dues.17 And a local branch of a mutual benefit insurance company,
which has provided for sick benefits for which the general order
has assumed no responsibility, has no authority to apply an amount
due a member for such benefits in payment of an assessment against
him, so as to prevent his certificate from lapsing for nonpayment
12 Galliher v. State Mutual Life Examine Jennings v. Metropolitan
Ins. Co. 150 Ala. 543, 124 Am. St. Life Ins. Co. 148 Mass. 61, 18 N. E.
Eep. 83, 43 So. 833. 601; Pitney v. Glen's Falls Ins. Co.
On waiver of forfeiture for non- 65 N. Y. 6, 21; Mulrey v. Shawmut
payment of premium note, or estop- Mutual Fire Ins. Co. 4 Allen (86
pei to assert it, see note in 5 B. R, C. Mass.) 116, 81 Am. Dec. 689. See
410. §§ 34, 35, 393, 397, 398 herein.
13 Equitable Life Assurance Soc. 16 Johnston v. Phelps County
v Ellis, — Tex. Civ. App. — , 137 S. Farmers' Mutual Ins. Co. 63 Neb. 21,
W. 184, 40 Ins. L. J. 1360. 56 L.R.A. 127, 88 N. W. 142.
14 Mills v. Home Benefit Life Ins. 17 Knights of Columbus v. Bur-
Assoc. 105 Cal. 232, 38 Pac. 723. roughs, 107 Va. 671, 17 L.R.A. (N.S.)
15 Millard v. Supreme Council 246 (annotated on necessity of af-
American Legion. of Honor, 81 Cal. firmative action in order to terminate
340, 22 Pac. 864. Contra, Mitchell v. rights of member in mutual benefit
Mutual Life Ins. Co. of New York, society for nonpayment of dues), 60
not reported, but cited in Bliss on S. E. 40.
Insurance (ed. 1872) sec. 472, p. 739.
2509
§ L353 JOYCE ON [NSURANCE
of dues, where the rules of the order require his dues to be appor-
tioned between the death benefil fund and the general fund of the
order.18 And forfeiture of the rights of a member of a mutual
benefil society for the nonpayment of dues, is not prevented by the
fact thai they were paid by the Local brapch of the order to which
he belonged, where the local branch forwarded the money without
complying with the provisions of a by-law that no money shall he
paid from the treasury unless by a two-thirds vote of the members
al a regular meeting held subsequently to a regular meeting at
which notice of intention to pay and the purpose and amount are
given and read.19 Although the insured may insist upon the waiv-
er, lie ts noi obligated to accept the same, and may insist upon the
forfeiture, and interpose, on account thereof, whatever defense he
may have against the assessment, provided he would otherwise be
obligated to pay it.20 The time of payment of premiums may be
extended by the company or its agent empowered so to do,1 but an
agreement by the agent to carry the policy for a while does not
operate as a renewal.2 So an agent's authority to receive payment
of a premium note unless he has the same in his possession, may
ho restricted by stipulations on both the policy and the note,5
and the company is not obligated to insist upon the forfeiture
when incurred, but it may, at its option, accept payments there-
after made,4 and such act does not operate as a waiver of its
right to insist that prompt payment shall.be thereafter made.5
And there is no doubt but that the company may, by a due
and reasonable notice, terminate a course of business as to re-
ceiving overdue premiums relied on to astablish a waiver by
the assured and insist that the contract stipulations as to pay-
ment be thereafter strictly complied with.6 If a certificate is
issued after a default in paying an assessment, it operates as
18 McCann v. Supreme Conclave State Ins. Co. 29 Oreg. 569, 46 Pac.
[ndependent Order Ileptosophs, 119 366.
Md. 655, 46L.R,A.(N.S.) 537, 87 Atl. 4 MeGcachie v. North American
383 Life Assur. Co. (Out. H. C. of J.
19 Knights of Columbus v. Bur- Q. B. Div. 1892) 12 Can. L. J. 220;
roughs, 107 Va. 671, 17 L.R.A.(N.S-) Tripp v. Vermont Life Ins. Co. 55
246, tin S. K. 40. Vt. 100; Morrow v. Des Moines Ins.
*o Tuckerman v. Bigler, 46 Barb. Co. 84 Iowa, 256, 51 N. W. 3; Smith
(N. Y. l -''.7."). v. St, Paul Fire & Marine Ins. Co.
1 McCraw v. Old North State Ins. 3 Dak. 80.
Co. 78 N. C. 149; Palmer v. Phoenix 5 Morrow v. Des Moines Ins. Co.
Mutual late Ins. Co. 84 N. Y. 63. 84 Iowa, 256, 51 N. W. 3.
2 Matthews v. Travelers' Ins. Co. 6 Phoenix Mutual Life Tns. Co. v.
73 Ore-;. 27S, 144 Pac Sf>. Kinsley, 75 Ind. 1, per the court.
3 Long Creek Building Assoc, v.
2510
EXCUSES, WAIVER AND ESTOPPEL § 1354
a waiver of forfeiture.7 So if the company continues by un-
equivocal acts to recognize the policy as valid after a default, there
is a waiver.8 So also where insured is induced to believe that non-
payment will not work a forfeiture9 and although a notice of for-
feiture is given by the company, yet there may be a waiver by the
failure of the company to comply with the terms of the contract
and return the premium note, which is unpaid.10 So a return of
the policy to the assured who has surrendered it for breach of con-
dition or to use will not waive a condition that the company is not
liable for any loss occurring while any part of the premium re-
mains unpaid.11 If the assured is not alive at the time of the acts
relied upon as a waiver, there is no waiver of forfeiture for nonpay-
ment of premium.12 The waiver by an insurance company of its
right to declare a policy void because the note given for the cash
premium is not paid at maturity, does not preclude the company
from insisting upon a condition in the policy declaring the same
void, in case of loss or damage, if the premium note is unpaid and
past due at the time of such loss.13
§ 1354. Waiver and estoppel: prior parol agreements as to pay-
ment of premiums, etc. — The insured will not be permitted to show,
in order to establish a waiver of punctual pavment of premiums, as-
sessments, or dues, or to avoid a forfeiture for default in payment,
the acts or declarations of the company or its agents made at or prior
to the time the contract was completed, or to show an oral agreement
with the company or its agents, where such agreement, acts, or decla-
rations are contrary to the stipulations of the policy, and are not in-
corporated therein or made part thereof, by reference or otherwise,
and the same rule applies to parol evidence of the same character
to prove an estoppel.14 Thus, parol evidence is inadmissible of the
7Roswell v. Equitable Aid Union, tual Ins, Co. v. Lyman, 15 Wall. (82
13 Fed. 840. U. S.) 664, 21 L. ed. 246.
8 Olmstead v. Farmers' Mutual Fire Connecticut. — Lewis v. Phcemx
Ins. Co. 50 Mich. 200, 15 N. W. 82. Mutual Life Ins. Co. 44 Conn. 72.
9 Baumann v. Metropolitan Life Illinois. — Illinois Mutual Fire Ins.
Ins. Co. 144 Wis. 206, 128 N. W. 864. Co. v. O'Neile, 13 111. 89.
10 Johnson v. Southern Mutual Life Indiana. — Franklin Life Ins. Co.
Ins. Co. 79 Kv. 403, 3 Ky. Law Rep. v. Sefton, 53 Ind. 380.
26. Maine. — Coombs v. Charter Oak
n Nedrow v. Farmers' Ins. Co. 43 Ins. Co. 65 Me. 382.
Iowa, 24. Michigan. — iEtna Ins. Co. v. Olm-
12 Simpson v. Accidental Death Ins. stead, 21 Mich. 246, 4 Am. Rep. 483,
Co. 2 Com. B. N. S. 257. per Cooley, J. See § 40 herein.
"Ferebee v. North Carolina Mu- New York.— Walton v. Acjricultu-
tual Home Ins. Co. 68 N. C. 11. ral Ins. Co. 116 N. Y. 317, 5 L.R.A.
14 United States.— Merchants Mu- 677, 22 N. E. 413; Howell v. Knick-
2511
L355
-Mn CE ON ENSURANCE
representations of the agent, made prior to issuing the policy, that
notice of the times of payments of the premiums should be given
the insured in season to pay them, and thai he need give himself no
uneasiness on that subject; such a representation ban create no
estoppel, for all previous verbal arrangements are merged in the
written contract. The doctrine of estoppel does not apply when
the statements or acts relate to rights dependent upon written con-
tracts in futuro, and in which when making the same the parties
may stipulate as they wish, and may include such matters and
conditions as they intend to rely upon.15 So representations made
by the company's agent as to when assessments will he made can-
not he introduced in evidence in defense of an action on a pre-
mium note.16 lint a parol agreemenl as to the time of payment of
the premium may he shown where it does not conflict with the
written contract, although the law. in the absence of such an agree-
ment, would fix an earlier date.17 Ihit if an assent, hy authority
of the directors, by false representations of the company's solvency,
induces the assured to execute a premium note, such statements con-
stitute a defense to an action on said note.18
§ 1355. Waiver and estoppel: subsequent parol agreements as
to payments and premiums, etc. — There is no doubt but that it is
competent for the parties to alter or modify the terms of the con
tract by a parol agreement entered into subsequently to the execu-
erbocker Ins. Co. 44 N. Y. 276, 4 Am.
Rep. (i7f>.
I'i nnsylvania. — Susquehanna Mu-
tual Fire Ins. Co. v. Swank. 102 Pa.
St. 17.
1802) 13 Ky. L. Rep. 589. In this
case, however, in so far as the rule of
law stated by the decision is incurred,
there is no objection thereto, but I he
case is subject to criticism upon the
Parol evidence: how far contract tacts as reported, for the policy was
merger in written agreement (§ 40 issued on the tenth of the month, ami
herein): parol evidence; what is part the premiums were payable quarter
of the policy (§§ 185, 185a herein): annually, and it was held that an
parol evidence: agent's powers as to agreement could be proven that, the
contract: misrepresentations: (§ 472 payments could he made any time be-
herein) ; parol evidence to explain tween the tenth and twenty-fifth of
contract (§§ 3808, 3809 herein). the month on which they respectively
()n the parol evidence rule as to fell due. If, however, the agreement
varying or contradicting written con- had been made subsequently to the
tracts as affected hy the doctrine of completion of the contract, the case
waiver or estoppel, as applied to would be rightly decided.
18 Whitman v. Meissner, 34 lv<\.
487. See also § 514 herein. For ex-
ceptions to the general rule, see
Browne on Parol Evidence (ed. 1803)
wBoland v. Whitman, 33 Ind. 64. pp. 0, 10, 06-98, etc.; Pindar v. Res-
17 Kentucky Grangers' .Mutual Ben- olute Ins. Cq. 47 N. Y. 1 1 I ; Planters'
etit Soc. v. Adams (Ky. Super. Ct. Mutual Ins. Co. v. Deford, 3s Md.
2512
policies of insurance, see note in 16
L.R.A.(N.S.) 1165.
16 Union Mutual File Ins. Co. v.
Mowry, 96 F. S. 511, 2 1 F. ed. 674.
EXCUSES, WAIVER AND ESTOPPEL § 1356
lion and completion of the contract,19 and, therefore, evidence is
admissible of an agreement by parol to waive the conditions as to
payment of the premiums or one as to notice; and acts and declara-
tions of the company and its authorized agent, done and made sub-
sequently to the consummation of the contract, are admissible to
establish a waiver of such conditions or to raise an estoppel.20 Thus,
parol evidence is admisible to show that the company agreed with
the insured to receive quarterly payments after they became due,
if paid within a reasonable time thereafter, and such fact wull estop
the company to insist upon a technical forfeiture.1 And evidence
is competent and relevant to show that the company has authorized
its agent to grant indulgence as to the time of paying the premium
notes, or to prove that a valid extension has been granted, or that
the forfeiture has been waived, even though the policy expre^lv
provides that the company has no power to alter or abrogate con-
tracts or waive forfeitures.2
§ 1356. Payment of premiums: waiver and estoppel, custom,
acts, etc. — The doctrine of estoppel is applied to some act, declara-
tion, or omission of a party to prevent the same from operating as
a fraud upon one who has been induced to act in reliance thereon ;
as where one has thereby induced another to change his conduct or
alter his condition. The party seeking to avail himself of an
estoppel must have been misled, to his injury or prejudice, by the
words, conduct, or omissions of the other party. If he does not
alter his condition, or if both parties are equally cognizant of the
existing facts, so that he is not prejudiced by conforming to the
course of action on which the claim to an estoppel is based, there is
no estoppel. If an insurance company or its authorized agent, by
its habits of business, or by its acts or declarations, or by a custom
to receive overdue premiums without objection, or by a custom not
to exact prompt payment of the same, or, in brief, by any course of
conduct, has induced an honest belief in the mind of the policy
holder, which is reasonably founded, that strict compliance with
a stipulation for punctual payment of premiums will not be in-
sisted upon, but that the payment may be delayed without a for-
382; Van Sehoiek v. Niagara Fire Co. 19 N. Y. 305 ; Bodine v. Exchange
Ins. Co. 08 N. Y. 434. See also c. Fire Ins. Co. 51 N. Y. 117, 10 Am.
XIX. herein. Rep. 500. See also cases cited under
19 §§ 270 et seq. herein. following- sections.
20 Knickerbocker Life Ins. Co. v. 1 De Frece v. National Life Ins. Co.
Norton, 90 U. S. 234, 24 L. ed. 089; 130 N. Y. 144, 32 N. E. 550; Howell
Phoenix Mutual Life Ins. Co. v. Hine- v. Knickerbocker Ins. Co. 44 N. Y.
sley, 75 Ind. 1; DUleber v. Knicker- 270, 4 Am. Rep. 075.
bocker Life Ins. Co. 70 N. Y. 507; 2 Knickerbocker Life Ins. Co. v.
First Baptist Church v. Brooklyn Ins. Norton, 90 U. S. 234, 24 L. ed. 689.
Joyce Ins. Vol. III.— 158. 2513
§ 1356 JOYCE ON [NSURANCE
feiture resulting therefrom, it will be deemed to have waived the
righl to claim the forfeiture, or it will be estopped from enforcing
the same, although the policy expressly provides for forfeiture for
Qonpaymenl of premiums as stipulated, and even though it is also
conditioned that agents cannot waive forfeitures,3 and even though
^United States.— Hartford Life & Life Ins. Co. v. Warner, 80 [11. 410;
Annuity [ns. Co. v. Qnsell, 144 CL S. Protection Life [ns. Co. v. Foote, 7!)
139, 3 L. ed. 196, L2 Sup. Ct. 671, 21 III. 361 ; Home Life Ins. Co. v. Pierce,
[ns. L. J. 48; Phoenix Ins. Co. v. Dis- 75 111. 426; Davidson v. Foung, 38
ter, 106 I'. S. 30, 27 L. ed. 65, 1 Sup. 111. 152.
Ct. 18; New York Life Ins. Co. v. Eg- Indiana. — Sweetzer v. Odd Fel-
gleston, 96 U. S. 572, 24 L. ed. 841; lows' .Mutual Aid Assoc. 117 [nd. 97,
Union Mutual Life Ins. Co. v. Mow- 19 N. E. 722; Phoenix Mutual Life
ry, 96 I'. S. 544,24 L. ed. 674; South- Ins. Co. v. Hinesley, 75 [nd. 1 ; Ma
era Mutual Life Ins. Co. v. McCain, jestie Life Ins. Co. v. Tuttle, 58 [nd.
96 I'. S. 84, 24 L. ed. 653; Beatty v. App. 98, L07 N. E. 22, 15 Ins. L. J.
Mutual Reserve Fund Life Assoc. 75 137.
Fed. 65, 21 C. C. A. 227, 44 U. S. Kansas.— Mound City Mutual Life
App. 527: Spoeri v. Massachusetts Ins. Co. v. Twining, 19 Kan. 349.
Mutual Life Ins. Co. 39 Fed. 752; Louisiana. — Societe de Bienfai-
Unsell v. Hartford Life & Annuity sance v. Morris, 24 La: Ann. 347.
Co. 32 Fed. 44::, 144 U. S. 439, 36 L. Michigan.— Towle v. [onia Eaton
ed. 496, 12 Sup. Ct. 671. & Barry Farmers' Mutual Fire Ins.
Alabama.— Gallaher v. State Mutu- Co. 91 Mich. 219, 51 N. W. 987.
al Life Ins. Co. 150 Ala. 543, 43 So. Missouri. — Jones v. Mutual Re-
833; Home Protection Ins. Co. v. serve Fund Life Asoc. 148 Mo. 1. 19
Avery, 85 Ala. 348, 7 Am. St. Rep. S. W. 978; Thompson v. Mutual Life
54, 5 So. 143; Mobile Life Ins. Co. Ins. Co. 52 Mo. 469.
v. Pruett, 74 Ala. 487; Mound City New Hampshire. — Appleton v.
Mutual Life Ins. Co. v. Huth, 49 Ala. Phoenix Mutual Life Ins. Co. 59 N.
520; Brooklyn Life Ins. Co. v. Bled- H. 541, 47 Am. Rep. 220; Horn v.
soe, 52 Ala.* 538. Cole, 51 N. H. 287, 12 Am. Rep. 111.
Arkansas. — Pacific Mutual Life New York. — De Frece v. Union
Ins. Co. v. Carter, 92 Ark. 378, 123 Mutual Life Ins. Co. 136 N. Y. 144,
S. \\\ 384. 32 N. E. 556, 43 N. Y. St. Rep. 805;
Connecticut. — Bouton v. American Whitehead v. New York Life Ins. Co.
Mutual Life Ins. Co. 25 Conn. 542; 102 N. Y. 143, 55 Am. St. Rep. 787,
Sheldon v. Connecticut Ins. Co. 25 6 N. E. 267; Ruse v. Mutual Benefil
Conn. 207, 65 Am. Dec. 565. Life Ins. Co. 26 Barb. (N. Y.) 556;
District of Columbia. — National Buckbee v. United States Annuity cV
Benefit Assoc, v. Elzie, — Dist. Col. Trust Co. 18 Barb. (N. Y.) 541;
— , 38 Wash. L. Rep. 442. Markgraf v. Fellowship of Solidarity,
Georgia. Bankers' Health & Life 65 Misc. 64, 119 N. Y. Supp. 665;
Ins. Co. v. Givvins, 12 <!a. App. 378, Griffin v. Prudential Life Ins. Co. of
77 S. E. 203, 42 Ins. L. J. 647; Ala- America, 60 N. Y. Supp. 79, 43 App.
bama Gold Life Ins. Co. v. Garmany, Div. 499.
74 Ga. 51; Southern Life Ins. Co. v. Oklahoma.— St. Paul Fire & Ma-
Kern pton, 56 Ga. 339. - rine Ins. Co. v. Cooper, 25 Okla. 38,
Illinois. — Northwestern Mutual 105 Pac. L98.
Life Ins. Co. v. Amerman, 11!) III. Tennessee. — Equitable Ins. Co. v.
329, 59 Am. Rep. 799, LO X. E. 225; McCrea, 8 Lea (76 Tenn.) 511. See
overruling 16 111. App. 528; Chicago Thompson v. Fidelity Mutual Life
25.14
EXCUSES, WAIVER AND ESTOPPEL § 1350
the policy provides that receiving overdue premiums is merely an
act of courtesy.4
A custom to give short credits for premiums due may be con-
strued as a waiver of the right to insist on the stipulations.5 So
whero for eight years the insurer has permitted an assignee of a
policy to pay the annual premiums by notes falling due quarterly,
and has always notified him when a note was falling due, the policy
cannot be forfeited for nonpayment of a note, unless the customary
notice reached him.6 So where more than half of all the premiums
that fell due during the existence of the policy have been paid by
the assured and accepted by the company after they have matured,
and the last premium was paid about the same time as the others,
the company is estopped to claim a forfeiture.7 And if there has
been a promise to accommodate the insured by giving time, and,
relying thereon, the insured has been accustomed to delay paying
premiums until after they were due, the company must give notice
of discontinuance of such custom before it can claim a forfeiture.8
So waiver of the payment of premiums may be established by evi-
dence of a custom of the agents of both parties to collect premiums
on the first of the month for insurances effected the month prior
thereto.9 So where the company was accustomed to receive over-
due payments of premiums without objection, and sent out letters
with the words "every policy is nonforfeiting" printed thereon in
prominent letters, the company is estopped to thereafter insist on a
forfeiture for failure to make punctual payment of the premium.10
And the rule applies where the notice of payment provides for
forfeiture for default in prompt payment of the premium where
the policy does not so provide, and a literal compliance with the
requirement has not been exacted on any prior occasion.11 So it,
may be legally inferred that the insured is justified in believing;
Tns. Co. 116 Tenn. 557, 115 Am. St. 6 Kavanaugh v. Security Trust &
Rep. 923, 92 S. W. 1098, 6 L.R.A. Life Ins. Co. 117 Tenn. 33, 7 L.R.A.
(N.S.) 1039. (N.S.) 253 (annotated on necessity
Texas. — McCo'rkle v. Texas Benev- that notice of maturity of premiums
olent Assoc. 71 Tex. 149, 8 S. W. 516. or assessments sent through the mail
Utah.— Loftis v. Pacific Mutual be received), 96 S. W. 499.
Life Ins. Co. 38 Utah, 532, 114 Pac. 7 Spoeri v. Massachusetts Mutual
134, 40 Ins. L. J. 1048. Life Ins. Co. 39 Fed. 752.
Vermont. — Tripp & Bailey v. Ver- 8 Dilleber v. Knickerbocker Life
mont Life Ins. Co. 55 Vt. 100. Ins. Co. 76 N. Y. 567.
See § 1368 herein. 9 Potter v. Phoenix Ins. Co. (U. S.
4 Thompson v. St. Louis Ins. Co. C. C.) 63 Fed. 382.
52 Mo. 469. 10 Home Life Ins. Co. v. Pierce, 75
5 Lebanon Mutual Ins. Co. v. 111. 426.
Hoover, 113 Pa. St. 591, 57 Am. Rep. " Alabama Gold Life Ins. Co. v.
511, 8 Atl. 163. Garmany, 74 Ga. 51.
2515
§ 1357 JOYCE ON INSURANCE
that prompt payment of premiums is unnecessary, where it appears
that eighteen payments ou1 of twenty-one have been paid and re-
ceived without objection when overdue.12
§ 1357. Waiver: holding overdue premium notes and demanding
payment.13 — Forfeiture for nonpayment of premium notes is incon*
sistenl with a subsequent demand for the payment of such note and
a notice that if not paid suit will be brought thereon.14 And con-
ceding that the consent of the assured is necessary to the waiver
of a forfeiture and the keeping alive of the liability to pay premium
notes, his assent may be inferred when demand after forfeiture
is made for the payment of the premium note, and is met by its
partial payment and the promise to pay the balance as soon as able.15
So the unconditional demand by insurer of payment of an overdue
premium note is a waiver of the default so that insured may re-
cover on the policy if be immediately complies with the demand by
mailing a cheek for the amount, although the insured property is
burning when the demand is received and the policy provides that
the company will not be liable for any loss which might occur
while any premium note remains due and unpaid.16 Again, if
insured gives notes for the payment of deferred premiums, under a
policy upon his property providing that if any installment of pre-
mium is not paid when due, insurer shall not be liable for loss
during such default, and that the policy shall lapse until payment
is made, and insurer upon delinquency of insured in the payment of
an installment of the premiums, retains the notes, demands pay-
ment, and continues to demand payment in full of such installment
at different times and until long after it is due, it thereby waives
the conditions in the policy providing for lapse thereof during de-
fault and continues the policy in force.17 So notification of a policy
holder by insurer after his premium note is overdue that, unless
the note be paid at once, it will be compelled to return the note,
which will cancel the policy, is a waiver of the forfeiture for non-
payment of the note when due; and the insurer cannot thereafter
12 De Frece v. National Life Ins. 15 Galliher v. State Mutual Life
Co. 136 N. Y. 144, 32 N. E. 556, 46 Ins. Co. 150 Ala. 543, 124 Am. St.
N. Y. St. Rep. 479. Rep. 83, 43 So. 833.
■vil^See § 1356 herein. 16 Limerick v. Home Ins. Co. 150
"Mai-den v. Hotel Owners' Ins. Ky. 827, 44 L.R.A.(N.S.) 371n, 150
Co. 85 Iowa, 584, 39 Am. St. Rep. S. W. 978. Examine Federal Life
316, 52 N. W. 509. Tns. Co. v. Warren, 167 Ky. 740, 181
On unsuccessful attempt to collect S. W. 331.
premium as waiver of forfeiture, see w Walls v. Home Ins. Co. 114 Ky.
notes in 18 LR.A.(N.S.) 902, and 44 611, 102 Am. St. Rep. 298, 71 S. W,
L.K.A.(N.S.) 371. 650, 24 Ky. L. Rep. 1452.
2516
EXCUSES, WAIVER AND ESTOPPEL §§ 1357a-1359
insist upon the forfeiture upon hearing that the insured was in a
dying condition when the notification was mailed.18
But it is decided that holding overdue premium notes and de-
manding payment thereof does not establish a waiver of forfeiture
where the contract stipulates that if said notes are not paid at ma-
turity, the full amount of annual premiums shall be considered as
earned and payable, and that the policy shall not be thereby re-
vived.19 And a demand by insurer's cashier for payment, made
after maturity of a note given in renewal, is not such a waiver as to
validate a tender made during insured's fatal illness.20
§ 1357a. Holding overdue notes and requesting payment. — Tn a
Kentucky case, the policy provided that if premiums are not paid
when due and also for issuance of a paid up policy on demand and
surrender of the policy, under the New York statute, and a note is
given under a like agreement in part payment of the premium in
lieu of cash, and said note is not paid at maturity but is retained
and the insurer repeatedly requests insured to reinstate the policy
which he was notified was canceled although it was not marked
"lapsed" and was in possession of insurer to secure a loan. It was
held that insurer by its acts merely treated the policy as in abey-
ance, deferring final action until it had exhausted the chance of
having insured continue the insurance by payment of the note.
It was also declared that where insurer after the policy has elapsed
retains the note merely as evidence of the fact that it has been
canceled and acts consistently with its claim of forfeiture there is
no waiver, but if insurer retains the note as evidence of indebted-
ness to it or asserts it as a debt against insured the forfeiture is
waived.1
§ 1358. Custom not to treat nonpayment of premium notes as
forfeiture.2 — The terms of the written contract cannot be varied by
evidence of a general custom of the company not to treat nonpay-
ment of premium notes when due as forfeiting the policy.3 */
§ 1359. Enforcing payment of note after forfeiture.4 — If the com-'X
pany never formally cancels the policy, and having full notice of
the facts, enforces payment of the premium note, it waives a stat-
18 New England Mutual Life Ins. 1 New York Life Ins. Co. v. Evans,
Co. v. Springgate, 129 Ky. 627, 19 136 Kv. 391, 124 S. W. 376, 39 Ins.
L.R.A.(N.S.) 227, 112 S. W. 681, 13 L. J. 306.
S. W. 824. 2 See § 1356 herein. — -
19 Union Central Life Ins. Co. v. 3 Union Central Life Ins. Co. v.
Chowning (8 Tex. Civ. App. 455, 456, Chowning (8 Tex. Civ. App. 455, 456,
1891) 28 S. W. 117. 1894) 28 S. W. 117.
20 Mercer v. South Atlantic Life ""r!See § 1356 herein.
Ins. Co. Ill Va. 699, 69 S. E. 961, 40
Ins. L. J. 426.
2517
§§ 1360, 13G1 JOYCE ON INSURANCE
utory requirement thai the assured, in order to revive a policy after
default, must pay his premium note before loss.5
§ 1360. Assured must have known of custom.6 — The assured
must have known of a custom to receive overdue premiums, and
have been induced by such custom to rely thereon, in order to
avail himself thereof to establish a waiver.7 And the fad thai an
insurer waives forfeitures of policies held by other persons is of no
evidentiary value in an action brought to recover on a policy issued
,„, the Life of a person not shown to have had any knowledge of
such waivers and whose policy was by its terms forfeited for non-
payment of premiums.8 But for the purpose of showing deceased's
knowledge of a custom to accept overdue assessments evidence is
competent of his statements as to conversations with the insurer's
secretary.9
§ 1361. Payment of assessments: waiver and estoppel, custom,
acts, etc.10— The rule above stated as to the payment of premiums
is also applicable to the payment of assessments.11 Thus, a habit
of the company to receive overdue assessments estops the company
to claim a forfeiture.12 And when it has been the society's custom
to accept overdue payments when made within a certain number
of days without a health certificate, they may be paid within that
time by authority of a member given when well, although he had
been fatally injured at the time of actual payment.13 And although
the certificate is stipulated to be avoided by nonpayment of as-
sessments within ten days after receiving notice, the association is
estopped to claim a forfeiture for nonpayment within that time
where it is its habit to receive payments within sixty days from
notice,14 although it is a question for the jury whether the facts
5 Bloom v. State Ins. Co. (94 Iowa, Mutual Life Ins. Co. v. Hinesley, 75
359) 62 N. W. 810; McClain's Code, Ind. 1; Fowler v. Metropolitan Life
sec. 1731. Ins. Co. 41 Hun (N. Y.) 357; Illinois
8 See § 1356 herein. Mason's Benevolent Soe. v. Baldwin,
7McGowan v. Supreme Council 86 111. 479; and cases cited under §
Catholic Mutual Benefit Assoc 76 1356 herein. See Rasicot v. Royal
llun (N Y) 534. 28 N. Y. Supp. Neighbors of America, 18 Idaho, 85,
177, 58 N. Y. St. Hep. 268. 29 L.R.A.(N.S.) 433, 108 Pac. 1048.
8 Collins v. Metropolitan Life Ins. As to waiver by subordinate lodges,
Co. 32 Mont. 320, 1 OS Am. St. Rep. see § 1384 herein.
578, 80 Pac. 60!), 1092, 34 Ins. L. J. 12 Stylow v. Wisconsin Odd Fcl-
592 lows' Mutual Life Ins. Co. 69 A\ is.
9 Jones v. Preferred Bankers' Life 224, 2 Am. St. Rep. 738, 34 N. W.
Assurance Co. 120 Mich. 211, 79 N. 151.
W. 204. 13 Watkins v. Brotherhood of
i° Sec § L356 herein. American Yeomen, 188 Mo. App. 626,
"National Mutual Benefit Assoc. 176 S. W. 516.
v Jones, SI Kv. 1 10, 7 Kv. Law Rep. 14 Sweetzer v. Odd Fellows' Mutual
751 8 Ky. Law Rep. 623; Phoenix Aid Assoc. 117 Ind. 97, 19 N. E. 722.
2518
EXCUSES, WAIVER AND ESTOPPEL § 1362
proven constitute a waiver.15 And the fact that the manager has
promised to draw upon a member for an assessment, and has twice
done so, estops the company to claim a forfeiture.16 Although by
custom of the office, known to the company, an agent has power
to and does waive delay in payment of premiums, in case of as-
sured's death before actual payment no recovery can be had.17 If
the association has at various times received assessments after the
time specified for payment, and informs assured that the policy will
not be forfeited for nonpayment after the day they became duo.
such acts constitute a waiver of a right to insist on forfeiture.18
But insurer is not estopped to claim a forfeiture by a custom of
the local secretary to collect assessments from assured at his resi-
dence where no such custom is sanctioned or prescribed by the
rules of the order.19 And where a director promised to pay an
assessment for a member under a promise of repayment, but
neglected to do so, it was held that there was no forfeiture.20 But
such promise by an agent known to have no authority to make the
same does not so operate.1 So a recognition of a policy holder as
a member after he has refused to pay an assessment and failed to
renew his policy waives the right, after the company becomes in-
solvent, to insist that his policy is forfeited.2 But even though
there be a waiver, in such cases the payment must be made within
a reasonable time after it becomes due.3
§ 1362. Waiver of prepayment. — A stipulation as to prepayment
of the premium may be waived by insurer or its agent with the
requisite authority.4 Where the agent delivering the policy tells
15 Elnondorph v. Citizens' Mutual tual Ins. Co. 1 Phil. Eq. (62 N. C.)
Ins. Co. 91 Mich. 36, 51 N. W. 926; 341, 98 Am. Dec. 89.
Sweetzer v. Odd Fellows' Mutual Aid 3Girard Life Ins. Co. v. Mutual
Assoc. 117 Ind. 97, 19 N. E. 722. Life Ins. Co. 86 Pa. St. 236, 97 Pa.
16 McCorkle v. Texas Benevolent St. 15.
Assoc. 71 Tex. 149, 8 S. W. 516. 4 United States.— Fidelity & Casu-
17 Conway v. Phcenix Mutual Life alty Co. v. Getty, 80 Fed. 497, 25 C.
Ins. Co. 140 N. Y. 79, 35 N. E. 420, C. A. 593, 39 U. S. App. 599, 26 Ins.
23 Ins. L. J. 231, 55 N. Y. St. Rep. L. J. 897 (is waived).
571. California. — Griffith v. New York
18 Loughbridge v. Iowa Life & En- Life Ins. Co. 101 Cal. 627, 40 Am.
dowment Assoc. 84 Iowa, 141, 50 N. St. Rep. 96, 36 Pac. 113 (prepay-
W. 568. nient is waived when).
19 Fletcher v. Supreme Lodge Illinois. — John Hancock Mutual
Knights & Ladies of Honor, — Tex. Life Ins. Co. v. Schlink, 175 111. 284,
Civ. App. — , 135 S. W. 201. 51 N. E. 795, 28 Ins. L. J. 132, aff'g
20 Van Houten v. Pine, 38 N. J. 74 111. App. 181; Stoehlke v. Hahn,
Eq. 72. 158 111. 79, 42 N. E. 150 (company
1 Co-operative Life Assoc, v. Mc- may waive payment) ; German Ins.
Connico, 53 Miss. 233. Co. v. Orr, 56 111. App. 637 ; Gosch
2 Conigland v. North Carolina Mu- v. State Mutual Fire Ins. Co. 44 111.
2519
§ 1362 JOYCE ON INSURANCE
assured thai payments may be made a1 the door, and several calls
therefor being made withoul payment, and about six months there-
after, a fire having started in the same block, payment is made to
and accepted by the agent, who docs not at the time believe there
is any danger to the insured premises, and forwards the premium
al once to the insure]-, the latter, however, having no knowledge of
the threatened danger by fire, it is held that a finding by the jury
in favor of the plaintiff might reasonably have been made.5 Pre-
payment of premium is waived where the company's soliciting
agent receives part of the money on delivery of the policy, and
credit is given for the balance in a sum equivalent to the agent's
commissions, notwithstanding provisions in the policy requiring
payment of the money at the home office, and that a waiver must
be in writing over the president's signature, and although the
policy is canceled before loss for nonpayment of premium, the
assured, however, not being notified thereof before loss.6 If the
contract stipulates that no risk is assumed by the insurer except for
that portion of the year for which cash premiums in advance have
been obtained., a forfeiture for nonpayment of premiums is* not
waived by the giving a note for said premium to an agent unauthor-
ized to postpone payment, especially when there was never any
acceptance by the company or knowledge thereof on its part.7 But
App. 263 " (delivery of the policy 70 N. W. 59 (prepayment may be
waives condition as to prepayment), waived).
Iowa. — Union . Building Assoc, v. Prepayment of premium may be
Rockford Ins. Co. 83 Iowa, 647, 14 waived by an agent of the company
L.R.A. 248, 32 Am. St. Rep. 323, 49 where there is evidence that the com-
N. W. 1032 (nonpayment of first pre- pany was aware of the practice of its
mium, when no estoppel against com- agents so to do, and in its contract of
pany). agency had stipulated that such acts
New York. — Equitable Trust Co. of the agent in crediting premiums
of New York v. Newman, 69 Misc. were at their own risk. Smith v.
494, 127 N. Y. Supp. 243. Provident Sav. Life Assur. Co. 13
North Carolina.— Hardy v. Aetna U. S. C. C. A. 284, 24 Ins. L. J. 502,
Tate Ins. Co. 154 N. Car. 430, 70 S. 65 Fed. 765.
E. 828, 40 Ins. L. J. 1148. This subject is further considered
South Dakota. — Chasse v. Bankers' under §§ 76 et seq., 550 et seq. here-
Reserve Fund Life Ins. Co. 27 S. in, and see also as to powers of agents
Dak. 70, 129 N. W. 568. to waive conditions sections through-
Texas. — Supreme Lodge United out the chapters on Agency (§§ 424
Benevolent Assoc, v. Lawson, — Tex. et seq. herein).
Civ. App. — , 133 S. W. 907. 5 Hargrave v. Home Fire Ins. Co.
Virginia— Wytheville Insurance & 43 Neb. 271, 272-75, 61 N. W. 611.
Banking Co. v.' Teiger, 90 Va. 277, 6 Terry v. Provident Fund Ins. Co.
is S. E. L95. 13 Ind. App. 1, 55 Am. St. Rep. 217,
Wisconsin. — John K. Davis Lum- 41 N. E. 18.
ber Co. v. Home Ins. Co. 95 Wis. 542, 7 Smith v. New England Mutual
2520
EXCUSES, WAIVER AND ESTOPPEL § 1363
although the taking of notes for the first premium constitutes a
waiver of actual payment, still nonpayment of said notes at matur-
ity will operate to forfeit the policy.8 If the company has often
extended time to the insured and to others for payment on other
policies, and part of the premium due is accepted when tendered,
there is a waiver of prepayment.9 But a condition in a policy that
the insurance will not be in force until, nor will the company be
liable in respect of any loss or damage happening before, the pre-
mium, or a deposit on account thereof, is actually paid, and that
no such payment or deposit shall be good unless a duly executed
receipt shall have been given to the insured, cannot be considered
as waived by a delivery of the policy to the insured.10 And a policy
containing the following condition "This insurance will not be in
force until, nor will the company be liable in respect of any loss
or damage happening before, the premium or a deposit on account
thereof is actually paid, and no such payment or deposit and no
payment in respect of renewal of this policy shall be good unless a
printed form of receipt for it, issued from the office of the company
and signed by one of the company's authorized officers or agents,
shall have been given to the insured" does not become effective
upon delivery, notwithstanding a recital of the receipt of the pre-
mium contained in the body of the policy.11
§ 1363. Where receipt of premiums and assessments is an act of
favor. — If a custom to allow a few days extra is proved to be merely
a favor or act of courtesy, the company is not, in such case, pre-
cluded to insist upon the forfeiture,12 although there would seem to
be no valid reason why proof that the custom was only a courtesy
or matter of favor should not appear by clear and satisfactory evi-
dence to have been known to the assured to warrant such ruling,
and we would suggest that the proof ought to exclude the conclu-
sion that the assured was reasonably justified, by the acts of the
assurer, in believing that he could safely delay payments, for if
he was clearly misled by such custom to his injury, there ought to
Life Ins. Co. 11 U. S. C. C. A. 411, 76 L. J. C. P. N. S. 31, 96 L. T. N.
63 Fed. 760. S. 1, 23 Times L. R. 200.
8 Satterfield v. Fidelitv Mutual u Equitable Fire & Accident Office
Life Ins. Co. 121 Ala. 429, 55 So. Ltd. v. Cbing Wo Hong, 1 B. R. C.
200. 34 (1907) A. C. 96. Also reported
9 Nebraska & Iowa Ins. Co. v. in 76 L. J. C. P. N. S. 31, 96 L. T.
Cbristiensen, 20 Nob. 572, 26 Am. St. N. S. 1, 23 Times L. R. 200.
Rep. 407, 45 N. W. 924. 12 Jones v. National Mutual Ben-
10 Equitable Fire & Accident Office efit Assoc. 8 Ky. Law Rep. 599, 2 S.
Ltd. v. Cking Wo Hong, 1 B. R. C. W. 447; Servoss v. Western Mut. Aid
(1907) A. C. 96. Also reported in Soc. 67 Iowa, 86.
2521
§ 1364 JOYCE ON INSURANCE
be an estoppel, as much so as in cases where such estoppel controls
the express provisions of the policy or contract; for if the company
has habitually received overdue assessments when tendered, it can-
qoI at the same time avoid the effect of such ads. and continue its
right to insisl upon forfeiting a contract for nonpayment of assess
tnents, either by printed notices or by verbal communications.13
stipulation in an obscure part of the policy in small type that
receipts of overdue premiums should form no precedent as to the
payment of future premiums, bul rather a qualification of the re-
ceipi of premiums, and where it does not appear when the same had
been inserted, and thai the company had failed to take advantage
thereof in two former trials and one argument in error of the same
case ii cannot be set up to establish a forfeiture,14 and if the a-
one of favor in that particular instance, there is no waiver.15 And
mere indulgence in the payment of premiums does not constitute
waiver of a condition of forfeiture for the failure to pay premiums
when due.16
§ 1364. Waiver and estoppel: acceptance and retention of over-
due premiums and assessments: cases.17 — If the company receives
and retains past due premiums or assessments paid after the day
specified in the policy, it renews the contract and waives forfeiture
for nonpayment where such acceptance is unconditional and the
facts known.18 So acceptance of defaulted assessments without im-
13 Sweetzer v. Odd Fellows' Mu- Georgia.— Neal v. Gray, 124 Ga.
trial Aid Assoc. 117 Ind. 97, 19 N. E. 510, 52 S. E. 622, 35 Ins. L. J. 121.
722. 124; Massachusetts Benefit late
14Girard Life Ins. Annuity & Assoc, v. Robinson, 104 Ga. 253, 42
Trust Co. v. New York Mutual Life l.K.A. 261, 30 S. E. 918.
Ins. Co. 97 Pa. St. 15. Idaho. — Price v. North American
15 Illinois Masons' Benevolent Soe. Accident Ins. Co. 28 Idaho, 136, 152
v. Baldwin, 86 111. 470. p.1(, gQ5_
16 Thompson v. Fidelity Mutual Vowa.— Underwood v. Iowa Lop inn
^o^^o «6k TAenn'«f 'p *<Z of Honor, 66 Iowa, 134, 23 N. W.
(N.S.) 1039, 115 Am. St. Rep. 823, 3Q0
92i7ScWs\°Q-8r i • ' Maine.— Williams v. Maine State
IslS^^Srd v. Supreme Relief Assoc 89 Me. 158, 36 AiL 68.
Council American Legion of Honor, ^ffT?^ Jfi M J&
81 Cal. 340 22 Pac. 801. lilncl Mutual Aid Soc. 146 Mass. _',s.
(■It,i,'crlicul. McUurk v. Metro- to X. E. 624.
politan Life Ins. Co. 56 Conn. 528, New York.— Wyman v. Phoenix
1 L.E.A. 563, 16 All. 203. Mutual Life Ins. Co. 45 Hun (N. Y.)
Dakota.— Smith v. St. Paul Fire 184.
Ins. Co. 3 Dak. 80. North Carolina. — Clifton v. Mutual
District of Columbia. — Jacobs v. Life Ins. Co. of N. Y. L68 N. Car.
National Life Ins. Co. 1 MacAr. 499, 84 S. E. 817; Godfrey v. Atlan
i I) ('.) 4S4. 032; National Benefit tic House. Ins. Co. 169 N. Car. 238,
Assoc, v. Elzie, — D. C. — , 38 Wash. S4 S. E. 330.
L. Rep 442 Pennsylvania. — United Brethren
2522
EXCUSES, WAIVER AND ESTOPPEL § 13G4
posing conditions as to a physical examination operates as a
waiver.19 So unconditional acceptance of dues in arrears consti-
tutes a waiver.80 And assurer is estopped after the occurrence ef a
loss to assert that the policy is avoided where with knowledge of
the facts it accepts unearned premiums.1 And an acceptance of
overdue premiums on an industrial policy and an attempt to effect
a settlement with the beneficiary constitute a waiver.2 And where
past due instalments are collected ou1 of insured's wages, nonpay-
ment is waived.3 If money is received and retained by the com-
pany after the time for payment of an assessment has passed, and a
conditional receipt is mailed therefor to assured, it must appear
that it was received by assured in the absence of any stipulation
for communication through the mails, otherwise there is a waiver
of the default.4 Again, if under a reasonable construction of the
contract the insurer, without exercising his option to declare the
policy void, permits, insured to make the weekly payments called
for by the contract, under the impression that such payments are
premiums on a valid contract of insurance, such acts of insurer in
accepting said payments amount to a continuing representation to
the holder that his impression as to the validity of the contract is
correct.5 But the premiums or assessment must be received with
knowledge of the facts and this applies to an accident policy.6 And
if the fact that the member is not in good standing in his local
lodge is unknown at the time of the receipt of assessments or dues,
there is no waiver.7 And although the insurer accepts and retains
payment made of an overdue premium, this does not constitute a
waiver of a later payment of premium long overdue and made after
Mutual Aid Soe. v. Schwartz (Pa.) North British & Mercantile Ins. Co.
12 Cent. Rep. 728, 81 Am. Dec. 689, of London & Edinburgh, 245 Pa. 272,
13 Atl. 769. 91 Atl. 662.
riah. — Loftis v. Pacific Mutual 2 Industrial Mutual Indemnity Co.
Life Ins. Co. 38 Utah, 532, 114 Pac. v. Thompson, 83 Ark. 574, 104 S. W.
134, 40 Ins. L. J. 1048 (accident pol- 200.
icy) . 3 Loftis v. Pacific Mutual Life Ins.
Vermont— Tripp v. Vermont Life Co. 38 Utah, 532, 114 Pac. 134.
Ins. Co. 55 Vt. 100. 4 Shea v. Massachusetts Benefit As-
Wisconsin. — Erdmann v. Mutual soc. 160 Mass. 289, 39 Am. St. Rep.
Ins. Co. of Order of Herman's Sons, 475, 23 Ins. L. J. 214, 35 N. E. 855.
44 Wis. 376. B Melick v. Metropolitan Life Ins.
19 Runbeck v. Farmers' & Bankers' Co. 84 N. J. L. 437, 87 Atl. 75, 42
Life Ins. Co. 96 Kan. 186, 150 Pac. Ins. L. J. 1259, aff'd 85 N. J. L. 727,
586. 91 Atl. 1070.
20 Brotherhood of Painters, Decor- 6 Matthews v. Travelers' Ins. Co.
ators and Paperhangers of America 73 Oreg. 278, 144 Pac. 85.
v. Barton, 45 Ind. App. 160, 92 N. E. 7 Springmeier v. Widows & Orph-
64 ans Benevolent Assoc. 5 Cin. L. Bull,
i Central Market Street Co. v. ~>16, 8 Ohio Dec. 89.
2523
§ 1364 JOYCE <>\ [NSURANCE
the insured was ill, but which, after insurer learned of the facts,
was tendered back and the act <>!' the agenl repudiated,8 and the
waiver arising from such act.- of acceptance ami waiver after de-
mand of an assessmenl cannot, where tie- money has been retained
until after death, he avoided by proof of mistake in demanding and
receiving the assessment.9 But if the assured, seven months after
default in payment of premiums, sends the amount due with a
letter from the company's medical examiner as to his health, and
demands a receipt for said money, and the company does not re-
turn the money but credits him therewith, and immediately writes
both him and its local agent, insisting on a medical examination,
there is a waiver, even though assured dies of consumption six days
after writing the letter, he having no knowledge of the company's
last letter.10 If a local agent receives an overdue assessment with
knowledge of the fact, and forwards it to the company, which
receives it, and after loss adjusts the same, it is a waiver.11 So the
acceptance and retention by the society of assessments paid by a
member, the company knowing that he is in default and taking no
action to effect a legal suspension under the by-laws, waives the
default and forfeiture.12 And the forfeiture is waived by the tender
and acceptance of part of the amount of an overdue premium.13
and the tender and acceptance as payment of the premium due on
a certain day continues the policy in force, notwithstanding pre-
vious premiums may be remaining unpaid.14 lint there may be
acceptance of overdue premiums under such circumstances as not
to constitute a Avaiver.15 So forfeiture is held not to be waived by
the collection of previous assessments.16 So there is no waiver
where the company refuses to accept, but returns, such assessments
to its local agent, who has received them subject to its rejection.17
8 Collins v. Metropolitan Life Ins. Order United Workmen, 10 Utah,
Co. 32 Mont. 329, 108 Am. St. Rep. 110, 37 Pac. 245. See Lycoming
578, 80 Pae. 609, 1092, 34 Ins. L. J. County Mutual Ins. Co. v. Schollen-
592. border, 44 Pa. St. 259.
9 Georgia Masonic Mutual Life Ins. 13 Hodsdon v. Guardian Life Tns.
Co. v. Gibson, 52 Ga. 040; Bailev v. Co. 97 Mass. 144, 93 Am. Dee. 73;
Mutual Benefit Assoc. 71 Iowa, 689, Joliffe v. Madison Mutual Ins. Co.
27 N. AY. 770. See Modern Woodmen 39 Wis. Ill, 20 Am. Rep. 35. But
of America v. Jameson, 49 Kan. 667, see § 1114 herein.
677, 31 Pac. 733, aff'g 48 Kan. 718, 14 Butler v. American Popular Life
::n |\„.. Kill, '21 Ins. L. .1. 711, revers his. Co. 12 X. Y. Sup. I It. 3 12.
ing 29 Pae 173. 15 Clifton v. Mutual Life Ins. Co.
w Rasmusen v. NYw York Life Ins. of New York, 168 N. Car. 499, 84 S.
Co. «U Wis. 81, 64 N. W. 301. E. 817.
11 Fanners' Mutual Fire Ins. Co. v. 16 Nash v. Union Ins. Co. 43 Me.
Bowen, 40 Mich. 147. 343, 69 Am. Dec. 65.
12 Daniher v. Grand Lodge Ancient 17 United Brethren Mutual Aid Soc.
2524
EXCUSES, WAIVER AND ESTOPPEL § 1364
And although dues had in former years been received when in
arrears, there is no waiver where the insured never paid nor ten-
dered the dues until long after he was told that the insurer would
insist on the forfeiture;18 nor is the condition in an insurance
policy as to prompt payment of the premiums waived as to other
premiums by the acceptance of a note for the first and an extension
of time thereon.19 And retention by a farmers' mutual company
of insured's share of an assessment does not preclude relying upon
his fraud as a defense to his claim.20 The receipt by a mutual ben-
efit society of overdue assessments without notice that they were
not made with the consent of the member, does not estop it from
contesting its liability on the certificate on thai ground, if they
were not so made.1 Under a Wisconsin decision retention by an
insurance company of an overdue assessment for a reasonable time
for the purpose of ascertaining whether the facts warrant a rein-
statement of the forfeited policy under the company's by-laws, and
to enable the insured to comply with conditions precedent to such
reinstatement, does not waive the forfeiture caused by the payment
of the overdue assessment. But the retention by the insurer, for
an unreasonable time, of money paid on an overdue assessment
after a forfeiture of the policy has occurred to the knowledge of the
insurer, without notifying the insured that any condition is affixed
to such retention, notwithstanding a special request accompanying
the money for an immediate return of evidence indicating that it
has been received and applied for the purpose for which it is sent,
constitutes a waiver of the forfeiture. It was also decided that a
policy having been assigned, by permission of the insurance com-
pany, to a creditor of the assured, under such circumstances as to
invest in the assignee the whole beneficial interest in the policy,
and render it necessary for him to make the payments required to
preserve the policy, all notices, stipulated to be given to the holder
of the same should be given to such assignee. And in such case if
the assignee of a policy of insurance, holding the whole beneficial
interest therein, allows it to lapse by failing to pay an instalment of
money due thereon at the proper time, and thereafter makes pay-
ment thereon, he will not be affected by any condition affixed by
the company to the retention of the money, not brought home to
v. Schwartz, 10 Sadler (Pa.) 242, 12 20 Lewis v. Farmers' Mutual Fire
Cent. Rep. 728, 81 Am. Dec. 689, 13 Ins. Co. of Town of Clarno, 159 Wis.
Atl. 769. 547, 150 N. W. 949.
18 Mandego v. Centennial Mutual x Proctor v. United Order Golden
Life Assoc. 64 Iowa, 134, 19 Ins. L. Star, 203 Mass. 587, 25 L.R.A.(N.S.)
J. 660, 17 N. W. 656, 19 N. W. 877. 870, 89 N. E. 1042.
19 Mobile Life Ins. Co. v. Pruett,
74 Ala. 487.
2525
§§ 1365-1367 JOYCE ON INSURANCE
him.8 The question as to waiver of forfeiture by retaining assess-
ments an unreasonable Length of time is one of fact for the jury.3
§ 1365. Right or obligation to accept and retain overdue premium
or assessment: no waiver.4 — If the company has by the terms of
the contract, or of the charter or by-laws or articles of association,
included therein a righl to demand and receive overdue assess-
ments, such act does not operate as a waiver of forfeiture, nor estop
the company from insisting therein.6 Thus if the contract provides
for suspension of the risk during the time the premium note re-
mains overdue and unpaid, but is also conditioned that the policy
may be revived on subsequent payment, the receipt of partial pay-
ments on the note does not operate as a waiver of the forfeiture
arising from default in payments, nor render the company liable
for a loss occurring after such default, for the company is obligated
under the contract to receive payment on the note when tendered,
and the policy is not revived until full payment is made.6 So
where the policy provides that upon default in payment as stip-
ulated of instalments due, the policy shall cease and the premium
be considered as earned, the demand, payment, and acceptance of
the premium constitutes no waiver.7
§ 1366. Unconditional offer to accept overdue premium: tender. —
An unconditional offer by the company to accept at a future time
an overdue premium, with a tender of payment in pursuance of
such offer, operates to waive a forfeiture for the nonpayment.8
§ 1367. Conditional acceptance of overdue premiums, etc.8a —
Although the policy may be forfeited or suspended by default in
payment of premiums or assessments, and overdue premiums or
assessments may be received conditionally, as in case they are ac-
cepted provided the assured be alive and in good health, the required
conditions as to life or health must exist to warrant a continuance. of
the policy, or its revival, or a waiver of the forfeiture, or rein-
statement of the member, and the same rule applies to a custom to
receive overdue payments conditionally, for in such case the con-
ditions must exist to constitute a waiver.9 Thus, although several
2 McQuillan v. Mutual Reserve 7 Cohen v. Continental Life Ins.
Fund Life Assoc. 112 Wis. 665, 56 Co. 67 Tex. 325, 60 Am. Rep. 24, 3
L.R.A. 233, 88 Am. St. Rep. 986, 87 S. W. 296. See Joliffe v. Madison
N. W. 1069, 88 N. W. 925. Mutual Ins. Co. 39 Wis. Ill, 20 Am.
3 Matt v. Roman Catholic Protec- Rep. 35; Shultz v. Ilawkeve Ins. Co.
tive Soe. 7 Iowa, 455, 30 N. W. 799 42 [owa, 239.
Minding of no waiver in this case). 8 Murray v. Home Benefit Life As-
4 Sec § L356 herein. soc. 90 Cal. 402, 25 Am. St. Rep. 133,
5 See § 1258 herein, and §§ 1202 27 Pac. 309.
et seq. herein, on premium, etc., notes. 8a See S 135(i herein.
6Carloek v. Phoenix Lis. Co. 138 9 United States.— Hartford Life &
111. 210, 28 N. E. 53. Annuity Ins. Co. v. Unsell, 144 U. S.
2526
EXCUSES, WAIVER AND ESTOPPEL § 13(57
overdue premiums have been received, or if they have been habit-
ually received. ye1 if they have always been accepted on the express
condition that the assured is in good health and that the acceptance
of such overdue payments is wholly optional with the company,
there is no waiver of forfeiture where the insured is not in good
health; 10 and if the member is required to furnish a certificate of
health, this constitutes a condition upon which payment can only
be made.11 If after nonpayment of an assessment when due a
duplicate notice is sent, stating that the forfeited certificates may be
renewed by immediate payment and the receipt thereof at the home
office, if the association approves the risk and the assured pays said
assessment and receives a receipt therefor, conditioned that assured
is in good health, as he then was, there is a waiver of forfeiture.12
And if the facts are such that the satisfactory evidence of good
health provided for by the by-laws could not have been furnished,
and the receipt given for the assessment is conditioned that the
assured should be living, of temperate habits, and in good health,
as when made, a member, there is no waiver.13 But in another case
a life insurance company, being estopped by its contract to insist
on a forfeiture of a policy for nonpayment of premiums, agreed
with the assured to receive the overdue premiums and restore the
policy, if a medical re-examination should be satisfactory, and if
not, to refund the premiums so received. The assured paid th&
overdue premiums, but the medical re-examination was unsatisfac-
tory. The company declined to revive the policy or refund the
premiums so paid, and it was held that the assured might be rein-
stated in the position he occupied when the agreement was entered
into.14 And it has been rather broadly held that there was a waiver
439, 36 L. ed. 496 (U.S. C. C. 1892) efit Assoc. 143 Mass. 435, 9 N. E.
12 Super. Ct. 671, 21 Ins. L. J. 481; 753; Servoss v. Western Mutual Aid
Unsell v. Hartford Life & Annuity Soc. 67 Iowa, 86, 24 N. W. 604. Ex-
Ins. Co. 32 Fed. 443, aff'd 144 U. S. amine Runbeck v. Farmers' & Bank-
439, 36 L. ed. 496, 12 Sup. Ct. 671. ers' Life Ins. Co. 96 Kan. 186, 150
Connecticut. — Lewis v. Phoenix Pae. 586.
Mutual Life Ins. Co. 44 Conn. 72, 73. 12 Sieberg v. Massachusetts Bene-
Ioiva. — Servoss v. Western Mut. fit Life Assoc. 87 Hun (N. Y.) 199,
Aid Soc. 67 Iowa, 86, 24 N. W. 604. 67 N. Y. St. Rep. 750.
New York. — Harris v. Equitable 13 Ronald v. Mutual Reserve Fund
Life Assur. Soc. 3 Hun (N. Y.) 724, Life Assn. 44 N. Y. St. Rep. 407, 132
6 N. Y. St. Rep. 108. N. Y. 378, 30 N. E. 739, 21 Ins. L.
England.— Want v. Blunt, 12 East, J. 634.
183. 14 Meyer v. Knickerbocker Life
10 Mutual Life Ins. Co. v. Girard Ins. Co. 73 N. Y. 516, 29 Am. Rep.
Life Ins. Co. 100 Pa. St. 172; Cross- 200; Appleton v. Phoenix Mutual
man v. Massachusetts Benefit Assoc. Life Ins. Co. 59 N. H. 541, 47 Am.
143 Mass. 435, 9 N. E. 753. Rep. 220.
11 Crossman v. Massachusetts Ben-
2527
§ 1368 JOYCE ON INSURANCE
both of the condition of the certificate and also of prompt pay-
ment,15 where a provision in the by-laws stipulated that overdue
payments of assessments would l>c accepted only on the presenta-
tion of a certificate of good health, and the last three payments
prior to the death of the insured had been accepted a day or two
after maturity without such certificate, and the last payment was
not made at the time the insured died, live days after time of pay-
iiiciit had expired. And the same ruling was made where an oxer-
due assessment was collected and the receipt provided that it was
"received on condition that the member is in good health,"
and six assessments were subsequently levied and unconditionally
received by the company thereafter, even though at the time of the
conditional acceptance the member was in ill health.16 So if the
company being cognizant of the actual state of health of the in-
sured, or if there is no fraud practiced in concealing the same from
the company, the acceptance and retention of the payment con-
stitutes a waiver, even though the receipt provides that it is only
binding on condition that the assured is in good health, unless the
money be paid within the time specified under the notice.17 Al-
though the premium is past due, yet if the company receives and
retains it, there is a waiver of the forfeiture, even though the com-
pany wrote to the assured after the money was in its hands that he
must send a certificate or his owrn statement of good health. And
in such case a verdict for recovery on the certificate will be sus-
tained.18 Although assured pays an assessment, nevertheless he
may question its validity, it having been conditionally received by
the society.19
§ 1368. When custom to receive overdue payments may be availed
of by insured : general custom : proof.20 — Evidence of the acceptance
of one single overdue premium or assignment, or of a few separate
instances, is insufficient of itself to establish a waiver of forfeiture
claimed for nonpayment of a subsequent premium or assessment.21
15 Painter v. Industrial Life Assoc. 27 Wis. 372, 20 Wis. 335. But in
131 Tnd. 68, 30 N. E. 876. the same ease, 21 Wis. 548, it was
16 Rice v. New England Mutual Aid held a question for the jury whether
Soc. 146 Mass. 248, 15 N. E. 624. See the money was taken upon condition
also Stylow v. Wisconsin Odd Eel- that the member was in good health.
lows' Mutual Life Ins. Co. 69 Wis. 19 Shea v. Massachusetts Benefit
224, 2 Am. St. Rep. 738, 34 N. W. Assoc. 160 Mass. 289, 39 Am. St. Rep.
151. 475, 23 Ins. L. J. 214, 35 N. E. 855.
17 Stylow v. Wisconsin Odd Fel- 20 See § 1356 herein.
lows' Mutual Life Ins. Co. 69 Wis. 21 Marston v. Massachusetts Mu-
224, 2 Am. St, Rep. 738, 34 N. W. tual Life Ins. Co. 59 N. II. 92; Bos-
151. worth v. Western Mutual Aid Soc.
18 Rockwell v. Mutual Life Ins. Co. 75 Iowa, 582, 39 N. W. 903; Willcutts
2528
EXCUSES, WAIVER AND ESTOPPEL § 13G8
But three continuous payments of overdue assessments preceding
the last made and accepted have been held sufficient to establish a
waiver.1 And the acceptance by the secretary, who is authorized to
collect assessments of the amount due at various times after the
expiration of the specified days of payment, constitutes a waiver of
forfeiture.2 If there is a custom to charge premiums on renewals
or new policies, and have periodical settlements with insured under
an arrangement with him to that effect, it may be implied thai
credit is given for premiums so charged until the next settlement.3
The rule stated in a prior section presupposes such an habitual and
uniform custom as to wrarrant the presumption that the insured
was justified in believing that he could safely delay payment, not-
withstanding the terms of his contract; such custom as is shown by
an examination of the cases may have extended over a number of
years, and the instances may not have occurred consecutively, or
it may have covered only a comparatively short period of time, or
there may have been several consecutive instances immediately pre-
ceding the time of payment of the last premium or assessment, so
those paid when overdue may have sustained such a proportion to
the whole number of payments during a given period of time as to
warrant the presumption of a waiver.4 Evidence is held admissible
on behalf of the insured to show a custom or usage among insur-
ance companies to receive premiums within a reasonable time after
they fall due, under policies similar to that in suit, if the insured be
in good health, notwithstanding the policies contain a clause of
forfeiture for nonpayment of premiums on the very day they are
due.5 But a custom to receive assessments after default cannot be
availed of unless the member knew of such custom, or had been
indulged in that manner a number of times. The mere fact that
it had been granted to others is also held insufficient.6 Again,
v. Northwestern Mutual Life Ins. Co. Co. v. New York Mutual Life Ins. Co.
81 Ind. 300, 301; Mobile Life Ins. Co. 97 Pa. St. 15. See also Helme v.
v. Pruett, 74 Ala. 487. Philadelphia Ins. Co. 61 Pa. St. 107,
1 Painter v. Industrial Life Assoc. 100 Am. Dec. 621 ; Mayer v. Mutual
131 Ind. 68, 30 N. E. 876. Life Ins. Co. 38 Iowa, 304, 18 Am.
2 Loughbridge v. Iowa. Life & En- Dec. 34; Thompson v. St. Louis Mut-
dowment Assoc. 84 Iowa, 141, 50 N. ual Fire Ins. Co. 52 Mo. 469. In this
"W. 568. case the instruction to the jury by
3 Newark Machine Co. v. Kenton the lower court admitting evidence of
Ins. Co. 50 Ohio St. 549, 22 L.R.A. usual delay in the payments was sus-
768, 35 N. E. 1060. tained upon appeal.
4 See cases cited under § 1361 here- 6 McGowan v. Supreme Council of
in, and Crossman v. Massachusetts Catholic Mutual Benefit Assoc. 76
Benefit Assoc. 143 Mass. 435, 9 N. E. Hun (N. Y.) 534, 28 N. Y. Supp.
753. 177, citing Applet on v. Phoenix Mu-
5 Girard Life Ins. Annuity & Trust tual Life Ins. Co. 59 N. H. 541, 47
Joyce Ins. Vol. III.— 159. 2529
§ 1308 JOYCE ON INSURANCE
where no general custom of waiving such defaults is shown to exist,
and it does no1 appear thai deceased had any knowledge of such
custom, if any. and there is no evidence of waiver as to himself ex-
cept iii a few instances, a finding in favor of the company will not
be disturbed.7 So the fact, of the acceptance of a quarterly premium,
and of the payment of premium notes from one to four months
after they are due during one year, does not establish such a cus-
tom that the assured may rely thereon in delaying payment the suc-
ceeding year.8 And an acceptance of payment of twelve overdue
assessments out of seventeen is held not 1<> establish a custom cal-
culated to mislead assured.9 And a course of dealing which will
justify insured in believing that the insurer will accept a premium
twenty days overdue, is not shown by the receipt of a few when they
were only a few days overdue, and of two others upon presentation of
health certificates and a promise to pay future premiums prompt-
ly.10 And the fact that insurer upon three prior occasions accepted
the premium from the insured after maturity, he being in good
health at the lime, did not continue the policy in force after a sub-
sequent default in the payment of the premium, during which the
insured died.11 A single act of a clerk of a local camp of a mutual
benefit society in attempting to contract notwithstanding a provision
of the laws of the order that no act on his part shall have the effeel
of creating a liability on the part of the society, or of waiving any
right belonging to it; which act consists of promising the repre-
sentatives of an insane member to notify them of assessments, —
will not hind the society so as to prevent its claiming a forfeiture
of the certificate for nonpayment of dues, notice of which is regu-
larly mailed to the member, although no notice is given to the
representatives according to the promise.12 It is also held that the
rule permitting a course of dealing to estop an insurer from in-
sisting upon prompt payment of premiums, does not apply unless
the tender is made during the life of the insured.13 Evidence of
Am. Rep. 220; Crossman v. Massa- 9 Koehler v. Modern Brotherhood
ehusetts Benefit Assoc. 143 Mass. 435, of America, 160 Mich. 180, 125 N. W.
!) X. E. 753; Taylor v. iEtna Life 49.
Ins. Co. 13 Cray (79 .Mass.) 434; 10 Thompson v. Fidelity Mutual
Schwartz v. Germania Life lus. Co. Life Ins. Co. 116 Tenn. 557, 6 L.R.A.
IS Minn. 4-1S; Wood v. Poutfhkeep- (N.S.) 1039, 115 Am. St. Rep. 823,
sie Ins. Co. 32 N. Y. 619; Redfield v. 92 S. W. 1098.
Patterson Fire Ins. Co. 6 Abb. N. C. " Lantz v. Vermont Life Ins. Co.
(N. Y.) 456. 139 Pa. 546, 10 L.R.A. 577, 21 At I.
7Bosworth v. Western Mutual Aid 80.
Soc. 75 Iowa, 582, 39 N. W. 903. 12 Sheridan v. Modern Woodmen
8 Smith v. New England Mutual of America, 44 Wash. 230, 7 L.R.A.
Life Ins. Co. 11 U. S. C. C. A. 411, (N.S.) 973, 87 Pac. 127.
63 Fed. 769. 13 Thompson v. Fidelity Mutual
2530
EXCUSES, WAIVER AND ESTOPPEL
1369
such general usage, is, however, held inadmissible in other case- ; 14
although it is held that evidence of a custom to give credit for fire
insurance premiums in other cases may be shown in connection
with evidence that the company or its authorized agent had given
credit to the insured on previous occasions.15 A finding by the
jury of waiver will not be disturbed when based upon the fact of a
custom of the company to frequently accept overdue premiums
sent to the broker.16
§ 1369. Waiver of forfeiture generally by receipt of overdue pre-
miums, assessments and dues.17 — Tf a forfeiture has occurred for
breach of any condition in the policy or of the contract in a mutual
benefit society, and the company thereafter, with knowledge of the
facts, unconditionally accepts and retains a premium or assessment,
it thereby waives the former forfeiture, and the company is estopped
thereafter from setting up the grounds of forfeiture as a defense,18
and this is so even though a former assessment had been received
Life Ins. Co. 116 Tenn. 557, 6 L.R.A. Barringer, 73 111. 230 ; Commercial
(N.S.) 1039, 115 Am. St. Rep. 823, Ins. Co. v. Spankneble, 52 111. 53, 4
92 S. W. 1098. Compare § 1123 Am. Rep. 582; iEtna Ins. Co. v. Ma-
herein. guire, 51 111. 342; Northwestern Mu-
14 Lewis v. Phoenix Mutual Life Co. tual Life Ins. Co. v. Amerman, 16
44 Conn. 72; Franklin Life Ins. Co. HI. App. 528.
v. Sefton, 53 Ind. 380; Howell v. Iowa. — Viele v. Germania Ins. Co.
Knickerbocker Life Ins. Co. 44 N. Y. 26 Iowa, 9, 96 Am. Dec. 83.
(5 Hand.) 276, 4 Am. Rep. 675; Louisiana.— Story v. Hope Ins. Co.
Wood v. Pou<?hkeepsie Ins. Co. 32 N. 37 La. Ann. 254.
Y. 619; Sheldon v. Atlantic Fire Ins. Maine.— North Berwick County v.
Co. 26 N. Y. 460, 84 Am. Dec. 231; New England Fire & Marine Ins. Co.
Redfield v. Paterson Fire Ins. Co. 6 52 Me. 336.
Abb. N. C. (N. Y.) 456. Massachusetts. — Rice v. New Eng-
15 Wood v. Poughkeepsie Ins. Co. land Mutual Aid Soc. 146 Mass. 248,
32 N. Y. 619, 627, per Davis, J. And 15 N. E. 264; Rindge v. New Eng-
see cases under last note. land Mutual Aid Soc. 146 Mass. 286,
16Estes v. Home Manufacturers & 15 N. E. 628.
Merchants Mutual Ins. Co. 67 N. H. Michigan,— Farmers Mutual Fire
462, 33 Atl. 515. Ins. Co. v. Bowen, 40 Mich. 147.
17 See § 1356 herein. New Hampshire. — Tuttle v. Robin-
18 United States. — Phomix Life son, 33 N. H. 104.
Ins. Co. v. Raddin, 120 U. S. 183, 30 Neic York.— Weed v. London &
L. ed. 644, 7 Sup. Ct. 500. Lancashire Fire Ins. Co. 116 N. Y.
Connecticut. — MeGurk v. Metro- 106, 22 N. E. 229.
politan Life Ins. Co. 56 Conn. 528, North Dakota, — Thompson v.
1 L.R.A. 563, 16 Atl. 263; Fitzpat- Travelers' Ins. Co. 13 N. Dak. 444,
rick v. Hartford Life & Annuity Ins. 101 N. W. 900, 34 Ins. L. 124, 128.
Co. 56 Conn. 116, 7 Am. St. Rep. Pennsylvania.— Lycoming County
2S8, 13 Atl. 673, 17 Atl. 411; Rath-
bone v. City Fire Ins. Co. 31 Conn.
193, 194.
Illinois. — Lvcomins: Ins. Co. v.
Mutual Fire Ins. Co. v. Sehollenberg-
er, 44 Pa. St. 259; Lycoming Fire
Ins. Co. v. Stockbower, 26 Pa. St.
199.
2531
§ L369
JOYCE o.\ [NSUKANCE
conditionally;19 and so although the policy provides that nothing
Less than a distinct specific agreemenl indorsed on the policy shall
constitute a waiver of any condition therein.20 And if insurer with
knowledge thai there has been such a default in the payment of
premiums as would terminate the contract enters into such nego-
tiations with insured as indicate an intention to continue the policy
in force the righl to claim a forfeiture is waived.1 Nor is an in-
surer permitted to collect premiums with full knowledge of facts
which might avoid the policy, and of the purpose of the insured
bo continue to conducl I lie business in disregard to a, provision work-
ing a forfeiture, and then to deny the validity of the policy should
a Loss occur.2 So the retention of a premium on a fire insurance
policy after knowledge of the breach of a condition involving a
right to forfeiture, is an election to waive such breach and con-
tinue the policy in force, and the policy should then be construed
as though such condition had never existed.3
A receipt of the premium i- a waiver of concealment.4 of mis-
representations generally,5 of misrepresentations as to age in a life
policy,6 of conditions respecting residence,7 of removal of residence,8
of engaging in prohibited occupation,9 of alleged fraud in procuring
the policy,10 of a defense that the policy never attached where the
West Virginia. — Schwartzbaoh v.
Ohio Valley Protective Union, 25 W.
Va. 622, 52 Am. Rep. 227.
Wisconsin. — Gans v. St. Paul Fire
& Marine Ins. Co. 43 Wis. 108, 28
Am. Rep. 535.
England- -Winy' v. Hawey, 5 De
Gex, M. & G. 265.
19 Rice v. New England Mutual
Aid Soe. 146 Mass. 248, 15 N. E. 624,
and cases cited.
20 Story v. Hope Ins. Co. 37 La.
Ann. 254.
1 Majestic Life Ins. Co. v. Tuttle,
58 Ind. App. 98, 107 N. E. 22, 45
Ins. L .1. 1:57.
2 Mitchell v.
Co. 72 Miss.
535.
3 Ohio Fanners' Ins. Co. v. Vogel,
Kili Ind. 239, 3 L.R.A.(N.S.) 966n,
117 Am. St. Rep. 382, 70 X. K. 977.
* Armstrong v. Turquand, !) Ir. C.
L 32, :; Irish Jur. X. S. 150.
B Fitzpatrick v. Hartford Life cV.
Annuity Ins. Co. 50 Conn. L16, 7
\1 ississippi Home Ins.
:.:;. 48 Am. St. Rep.
Am. St. Rep. 288, 13 Atl. 673, 17
Atl. 411; Hoffman v. Supreme Coun-
cil, 35 Fed. 252; Wetherell v. Ma-
rine Ins. Co. 49 Me. 200; Schwartz-
bach v. Protection Union Soe. 25 \V.
Va. 022, 52 Am. Rep. 227.
6 Gray v. National Benefit Assoc.
Ill Ind. 531, 11 N. E. 477; Morris-
son v. Odd Fellows' Mutual Life Ins.
Co. 59 Wis. 102, 18 N. W. 13 ; Low-
enstein v. Old Colony Life Ins. Co.
179 Mo. App. 364, 166 S. W. 889.
7 Germania Life Ins. Co. v. Koeh-
ler, 168 111. 293, 61 Am. St. Rep. 108,
48 N. E. 297.
8 Germania Ins. Co. v. Rudwig, 80
Ky. 22::.
9 Hume Life Ins. Co. v. Pierce, 75
111. 421 i.
On waiver of provision as to
change of occupation by continued re-
ceipt of dues, see notes in 27 L.R.A.
(N.S.) 440, and LR.A.191GF, 755.
10 Armstrong v. Turquand, 9 Ir.
Law, N.S. 32,"~3 Irish Jur. N. S. 450.
2532
EXCUSES, WAIVER AND ESTOPPEL § 1369
claim is first made after loss,11 of change in habits of assured after
notice thereof18 of prohibited use of a building,13 of other insur-
ance, and encumbrances,14 of a fireproof safe clause,15 and of ill-
health of assured.16 So the acceptance of an additional premium for
an increase of risk may waive a forfeiture.17 So in a case where
membership in a mutual benefit society was dependent upon the
continuance of membership in another order, the receipt of dues
by the society from a member after his withdrawal from such order
does not constitute a waiver of forfeiture of good standing, where
such fact of withdrawal is not known to the society nor its officers.18
But the society, by accepting and retaining dues and fees under a
beneficiary certificate with knowledge waives all irregularity in
admission of the applicant to membership therein, as well as in the
organization of the subordinate lodge.19 And a benefit assurance
association which, after notice, of after such a length of time that
knowledge would be presumed, of a change of employment, con-
tinues to accept dues from an insured without the filing of a written
waiver, as required by a by-law prohibiting the acceptance of mem-
bers engaged in certain hazardous employments, and providing
that, if a certificate holder enter any such employment after becom-
ing a member he may, by filing a written waiver of liability because
of such increased hazard, continue his certificate, except as to death
or injury directly traceable to the prohibited occupation, waives
such provision, and recovery may be had for a death directly re-
sulting from the engaging by the insured in the prohibited employ-
ment.20 An insurer which, after receiving knowledge of the falsity
11 Powell v. Factors' & Traders' and vouchers in a safe or safe place,
Ins. Co. 28 La. Ann. 19. see notes in 51 L.R.A. 702, and L.R.A.
12 Phoenix Mutual Life Ins. Co. v. 1915F, 759.
Raddin, 120 U. S. 183, 30 L. ed. 644, 16 Rice v. New England Mutual Aid
7 Sup. Ct. 500. Soc. 146 Mass. 248, 15 N. E. 624.
13 Keenan v. Dubuque Mutual Fire On waiver of stipulation of policy
Ins. Co. 13 Iowa, 375. that it shall not become binding un-
14 Scottish Union & Mutual Ins. Co. less delivered to assured while in
v. Wylie, 110 Miss. 681, 70 So. 835; good health, see notes in 17 L.R.A.
E. C. Winsor & Son v. Mutual Fire & (N.S.) 1149; 43 L.R.A.(N.S.) 727;
Tornado Ins. Co. 170 Iowa, 521, 153 and L.R.A.1910F, 171.
N. W. 97. 17 North Berwick County v. New
On waiver of forfeiture because of England Fire & Marine Ins. Co. 52
false representations as to previous Me. 336, per the court,
applications, see note in 55 L.R.A. 18 Burbank v. Boston Police Re-
134. lief Assoc. 144 Mass. 434, 11 N. E.
15 Gish v. Insurance Co. of North 691.
America, 16 Okla. 59, 13 L.R.A. 19 Perine v. Grand Lodge Ancient
(N.S.) 826, 87 Pac. 869. Order United Workmen, 48 Minn. 82.
On waiver of provision in fire pol- 50 N. W. 1022, 21 Ins. L. J. 213.
icy requiring the keeping of books 20 Johnson v. Modern Brotherhood
2533
§ 1369 JOYCE ON INSURANCE
of answers in the application upon which the policy was issued
continues to collect premiums on the policy, is estopped to deny
liability thereon because of such falsity.1 So a fraternal benefit
society which issues a certificate to an applicant, and thereafter
continuously collects dues from her for nearly five years, cannot,
after her death, repudiate the contract on the ground that the cer-
tificate never went into effect, because the applicant had warranted
that she was not pregnant at the time of her application, when in
fact she was, although such fact was not known to her, and in no
w ise contributed to the cause of death, nor increased the risk, \\ here
such condition would not have avoided the policy or been a breach
of the contract, had it occurred after the contract became ell'ective.2
\\ here an open river policy includes all merchandise to be shipped
to and from plaintiff to and from all ports, and there is attached ;i
cotton and produce contract, returns to be made of all produce
shipped, and the contract is to be avoided for failure to do so, and
this is not done, and the company afterward receives the premiums
without raising any question of forfeiture of the produce contract.
nevertheless the plaintiff cannot recover.3 Acceptance by a benefit
society of an overdue assessment and the expense of providing proof
of death, with knowledge that the holder of the certificate was
killed while switching cars, does not waive a, provision in the policy
that it shall not be liable for injuries to switchmen in railroad
yards, where there is nothing to show that if knew it was so em-
ployed at the time of his death.4 An insurance company which
permits payments of overdue premiums without insisting on proofs
of good health on the part of insured, as provided by the contract,
does not wraive its right to require such proof before permitting re-
instatement after a subsequent forfeiture; at least, where the first
default was condoned by a subordinate officer who had no authority
to bind the company without bringing it to the attention of the
officers in whom was vested the power to enforce or waive the for-
feiture.6 A notice at the time of procuring the insurance of inten-
tion to procure additional insurance in the future is not a notice of
existing conditions, so as to make the reception of the premium
of America, 109 Minn. 288, 27 L.R.A. America, IS [daho, 85, 29 L.R.A.
(N.S.) 446 (annotated on waiver of (N.S.) 433, Ids Pac. 1048.
provision as to change of occupation s Palmer v. Factors' & Traders'
hv continued receipt of dues), 123 Ins. Co. 33 La. Ann. 1336.
\. W. 819. See also note in L.R.A. 4 Norton v. Catholic Order of For-
L916F, 755. esters, 138 Iowa, 464, 24 L.R.A.
1 Masonic Life Assoc, v. Robinson, (N.S.) 1030, 114 N. W. 893.
149 Ky. 80, 41 L.R.A. (N.S.) 505, 147 5 Conway v. Minnesota Mutual
S. W. SS2. Life Ins. Co. 62 Wash. 49, 40 L.R.A.
2Rasieot v. Royal Neighbors of (N.S.) 148, 112 Pac. 1106.
2534
EXCUSES, WAIVER AND ESTOPPEL §§ 1369a, 1369b
with such notice work an estoppel against the insurer.6 Nor docs
the acceptance of a premium waive engaging in a prohibited occu-
pation where the insured is told at the time by the company's agent
who received the money that it would not protect him in case of
death before change of the employment.7
§ 1369a. Demand or request for payment. — Demand for payment
of a premium after default and an attempt to collect the same evi-
dences an election to waive forfeiture.8 So forfeiture of insurance
in a mutual benefit association on account of nonpayment of dues
may bo waived by demanding and receiving such dues after the
death of the insured with knowledge of his death.9 And the insurer
cannot demand payment and at the same time insist upon a forfei-
ture under a policy provision that it should be void for nonpayment
of any premium note when due, such demand by its agent estops the
insurer from insisting upon a forfeiture.10 But there is no waiver
where the findings of fact show none, even though a demand for
payment of an overdue premium is made and at the time a permit
to keep a certain hazardous article is indorsed upon the policy.11
So a demand for an overdue premium without its payment is not
sufficient to reinstate a policy which by its terms is forfeited by a
failure to pay promptly, although demand and payment does re-
instate.12 And sending to assured a printed postal card notice of
an overdue assessment requesting payment does not constitute a
waiver.13 But mere knowledge, by an insurance company, of facts
constituting a forfeiture of a policy, does not amount to a waiver
thereof, although a demand for overdue premiums is made on the
insured, if he does not comply with the demand.14
§ 1369b. Express waiver: knowledge of assured. — That a letter
from an insurer waiving a forfeiture for nonpayment of a pre-
6 Black v. Atlanta Ins. Co. 148 N. Mutual Fire Ins. Co. 112 Minn. 418,
Car. 169, 21 L.R.A.(N.S.) 578, 61 128 N. W. 462.
g e 672 12 Cohen v. Continental Fire Ins.
''Northwestern Mutual Life Ins. Co. 67 Tex. 325, 60 Am. Rep. 24, 3
Co. v. Amerman, 119 111. 329, 59 Am. S. W. 296; Edge v. Duke, 18 L. J.
Rep. 799, 10 N. E. 225. Ch. 183.
8 Lof tis v. Pacific Mutual Life Ins. 13 Koehler v. Modern Brotherhood
Co. 38 Utah, 532, 114 Pac. 134. of America, 160 Mich. 180, 125 N.
9 Supreme Tribe of Ben Hur v. W. 49.
Hall 24 Ind App. 316, 79 Am. St. 14 Formena v. German Alliance Ins.
Rep' 262, 56 N. E; 780. Co. 104 Va. 694, 3 L.R.A.(N.S.)
io New England Mutual Life Ins. 444, 52 S. E. 337.
Co. v. Springgate, 129 Ky. 627, 19 On unsuccessful attempt to collect
LR A (N S.) 227, 113 S. W. 824, premium as waiver of forfeiture, see
overruling petition for rehearing, 112 notes in 18 L.R,A.(N.S.) 902, and
S. W. 689. 44 L.R,A.(N.S.) 371.
11 Johnson v. Retail Merchants'
2535
§ 1370 JOYCE ON INSURANCE
iiiimn iioic. is no! received or read by the insured before his death
does qo1 destroy its effecl as i waiver.15
§ 1370. Waiver by collecting assessments on notes or by collect-
ing or suing on notes.16 — Making and collecting assessments upon
the premium note for Losses which accrued prior to the forfeiture
are ool a waiver of it.17 And Liability on a premium note to secure
ssments on a mutual fire insurance policy, is no1 terminated by
refusal to pay a Loss upon the property insured; and. therefore, the
mere enforcement of an assessment made after denial of liability
for the Loss dor- not waive a forfeiture for breach of condition of
the policy.18 So placing a premium note in the hands of an
attorney for collection after the policy has become void according
to its terms for failure to pay the note will not revive the policy if
the collection is not effected, — especially where the policy provides
that no waiver -hall he valid unless in writing.19 Bui the assured
cannot set up his own default to work a forfeiture.80 Where the
premium notes are payable absolutely, whether the policies have
been forfeited or not, an acceptance of a payment after a Loss of
which the company has notice is not a waiver of any forfeiture,1
especially where the company has refused to pay the loss because
of forfeiture of the policy for breach of condition. Thus accept-
ance of money due on a note six weeks after the loss and after
commencement of suit does not. waive a forfeiture for a previous
breach of condition of the policy.2 So if the contract stipulate-
that the note for the premium shall he collectable even in case of
loss, and that legal proceedings shall not revive the policy, the for-
feiture arising from nonpayment of the note when due is not waived
by collecting the amount thereof.3 But if with knowledge of an
act of forfeiture an insurance company makes and collects assess-
ments on premium notes, the forfeiture of the policy is thereby
15 Now England Mutual Life Tns. x Joliffe v. Madison Mutual Ins. Co.
Co. v. Springgate, 129 Kv. 627, 19 39 Wis. Ill, 20 Am. Rep. 35; Nee-
L.R.A.(N.S.) 227, 112 S. \Y. (iSl. lev v. Onondago County .Mutual Ins.
16 See § 1356 herein. Co. 7 11.11 (N. Y.) 49.
17 Smith v. Saratoga Mutual Ins. 2 Schimp v. Cedar Rapids Ins. Co.
Co. 3 Hill (N. Y.) 508. 124 111. 3.14, 13 West. Rep. 857, 16
18 Knowlton v. Patrons' Andres- N. E. 229.
eoggin Mutual Fire Ins. Co. 100 Me. 8 Shakey v. Hawkeye Ins. Co. I ]
481, 2 L.R.A.(N.S.) 517, 62 Atl. Iowa, 540; Knickerbocker Life Ins.
289. Co. v. Pendleton, 112 U. S. 696, 28
19 lies v. Mutual Reserve Life Ins. L. ed. 866, 5 Sup. Ct. 314; Wheeler
Co. 50 Wash. 49, 18 L.R.A.(N.S-) v. Connecticut Mutual Life Ins. Co.
902n, 96 Pae. 522. 82 N. Y. 543, 37 Am. Rep. 594; Cur-
80 Susquehanna Mutual Fire Ins. tin v. Phosnix Ins. Co. 78 Cal. 619,
Co. v. Leavy, 136 Pa. St. 499, 20 21 Pae. 370.
Atl. 502, 505.
2536
EXCUSES, WAIVER AND ESTOPPEL § 1371
waived.4 So retaining and attempting to collect an overdue pre-
mium note on an insurance policy will waive a provision in the
policy that nonpayment of the note at maturity will terminate the
contract.5 An insurance company by retaining premium notes
containing a provision that if they are not paid at maturity the
policy shall be null and void, and endeavoring to collect the notes
in full, waives a provision that the policy should be void if tho
notes are not paid at maturity.6 So an attempt to enforce payment
in full of notes and also treating them as in force and effect con-
stitutes a waiver.7 And where an unpaid note for the premium is
renewed, accepted by the insurer and transferred, and a suit brought
therein by its indorsee, it constitutes a waiver of forfeiture and said
renewal after nonpayment when due is no defense to an action on
the note.8
§ 1371. Whether levy and receipt of subsequent assessments and
dues waive forfeiture.9 — The cases are not in harmony on this
question. Many of the decisions which seem directly in point will
be found, upon examination, to have relied upon authorities which
do not support the doctrine of that case, for the reason that the
cited cases have not rested upon the sole question whether a levy
of subsequent assessments constitutes a waiver of forfeiture; but
there have been other circumstances in proof which, together with
the fact of such subsequent levy, have been held to warrant a for-
feiture or not, as the case may be. Again, it has been declared that
after a breach of condition and consequent forfeiture the rights of
the parties have become fixed as in case of a lease which has become
ipso facto void by the condition, where no acceptance of rent after-
ward can give it countenance.10 In other cases, by the very stipu-
lations of the contract the assurer has the right to levy and collect-
assessments after forfeiture or suspension without subjecting itself
to the claim of waiver of its exemption from liability from the for-
feiture; as in case of premium and like notes, or where the pre-
mium is stipulated to be considered as earned; or the assessment
may be levied under such conditions that a waiver, which might
otherwise exist, cannot be based thereon; as where a resolution of
4 Mackenzie v. Planters' Ins. Co. 9 6 Shawnee Mutual Fire Ins. Co. v.
Heisk. (56 Tenn.) 2G1 ; Susque- Cannedv, 36 Okla. 733, 44 L.R.A.
hanna Mutual Fire Ins. Co. v. Leavy, (N.S.) 376, 129 Pae. 805.
136 Pa. St. 499, 20 Atl. 502, 505 ; 7 Galliher v. State Mutual Life Ins.
Viall v. Genesee Mutual Ins. Co. 19 Co. 150 Ala. 543, 43 So. 833.
Barb. (N. Y.) 440. See next section 8 Neal v. Gray. 124 Ga. 510. 52
herein. S. E. 622, 35 Ins. L. J. 121.
5 Union Central Life Ins. Co. v. 9 See § 1356 herein.
Spinks, 26 Ky. L. Rep. 1205, 69 10 See Gardiner v. Piscataquis Mu-
L R A. 261, 83 S. W. 615. tual Fire Ins. Co. 38 Me. 439.
2537
§ 1372 JOYCE ON INSURANCE
the board of directors provides that notice be given to enable de-
linquent members to reinstate themselves, and the testimony shows
such factj and thai the notice was sent for that purpose only, and
the same is uncontradicted. Here there is no waiver of forfeiture
by sending notices of assessments subsequently levied after others
are overdue and unpaid.11 There arc, however, numerous cases
which hold that if the assui d has been delinquent in the payment
of assessments, or there has been a breach of some other condition
in the policy, the levy of subsequent assessments by the company
for a subsequently occurring loss constitutes a waiver of forfeiture,
provided the insurer has knowledge of all the facts involved.12
We believe this to be the correct rule, provided, however, that the
contract does not otherwise stipulate, that there has been no mis-
take, and that the acts of levying and receipting such subsequent
assessments are not done under such circumstances that it is ap-
parent that no waiver was intended, and that no agreement or
estoppel could be based thereon.
§ 1372. Same subject: authorities holding a waiver. — If a mu-
tual insurance company, with full knowledge of the falsity of a
warranty, assesses the premium note, it is estopped from setting up
the false warranty as a defense.13 Thus in Iowa the sending of
notices of other assessments after default in prior payments, said
notices requesting payment within a specified time to avoid suspen-
sion, extends the time of payment of overdue assessments, notwith-
standing a provision in the certificate to the contrary.14 So in
Michigan, a mutual company having full knowdedge of the facts
may waive a forfeiture, as may also those authorized to act for it,
and where an assessment was set down opposite the policy in suit
in the company's assessment hook, and the notice of assessment
was the same number, and it was claimed that the assessment was
"Mutual Protection Life Ins. Co. Mutual Protective Co. v. Mitchell, 48
v. Laury, 84 Pa. St. 43. Pa. St. 374.
12 United Stairs. — Riswell v. Equi- Wisconsin. — Erdmann v. Mutual
table Aid Union, 13 Fed. R. 840. Ins. Co. of the Order of Hermans'
Indiana. — Sweetzer v. Odd Pel- Sons, 44 Wis. 376.
lows' Mut. Aid Assn. 117 Ind. 97, 19 13 Frost v. Saratoga Mutual Ins.
N. E. 722; Masonic Mut. Benevolent Co. 5 Denio (N. Y.) 154, 49 Am. Dec.
Soc. v. Beck, 77 Ind. 203, 40 Am. 234; Williams v. Marine State Re-
Rep. 295; Farmers' Mutual Relief lief Assoc. 89 Me. 158, 36 Atl. 63;
Assoc, v. Kooiitz, 1 Ind. A|»j>. :>38, 30 Beatty v. Mutual Reserve Fund Life
\'. E. 1 15. Assoc. 75 Fed. 65, 21 C. C. A. 227,
New Hampshire. — Tuttle v. Robin- 44 U. S. App. 527.
son, 33 X. II. 104. 14McGowan v. Northwestern Le-
New York. Sands v. Hill, 42 gion of Honor, 98 Iowa, 118, 67 N.
Barb. (N. Y.) 651. W. 89.
Pennsylvania. — Cumberland Vallev
2538
EXCUSES, WAIVER AND ESTOPPEL § 1372
actually made on another policy of the plaintiff, it was held a ques-
tion for the jury whether such assessment waived a forfeiture aris-
ing from claimed misrepresentations.16 So subsequent assessments
after delinquencies in paying, coupled with the acceptance by the
company of assessments from another member sent in the same
letter with that of the member after his death, waives the right to
declare a forfeiture after death.16 And where sixty-four consecutive
assessments have with one exception been paid when overdue and
unconditionally received, and two subsequent assessments are made,
which remain unpaid and overdue when still another one is levied
by the company it thereby waives the right to insist upon a for-
feiture, although the last three assessments are unpaid at the mem-
ber's death.17 So the acceptance of past due assessments and levy-
ing other assessments constitutes a waiver.18 So forfeiture of policy
for failure to pay an assessment is waived by the receipt of the
amount of subsequent assessments, levied after a loss, in addition to
the assessment levied prior to and delinquent at the time of the
loss, with knowledge of the facts, notwithstanding a provision that
in case of forfeiture, if the policy holder afterwards pays the amount
due, the policy "shall be holding from the date of the receipt of
said amount," where all the property was destroyed, so that nothing
remains to which renewal of the insurance might attach.19 Again
it is held that if no notice is given that the premium is due from
the beneficiary, the contract of insurance being repudiated by the
company, it is estopped to claim a forfeiture where it sends notice,
according to its custom, to others, and the agent refuses to receive
the premium.20 So a levy and acceptance unconditionally of six
subsequent assessments will waive a forfeiture.1 A forfeiture for
the nonpayment of a premium note is inconsistent with a subse-
quent demand for its payment and a notice that if not paid suit
will be instituted therefor.2 And levying and collecting a sub-
15 Towle v. Ionia Eaton & Barry Farmers' Mutual Ins. Co. 63 Neb. 21,
Farmers' Mutual Fire Ins. Co. 91 56 L.R.A. 127, 88 N. W. 142,
Mich. 219, 51 N. W. 987. 20 Sullivan v. Industrial Benevolent
16 Railway Passenger & Freight Assoc. 73 Hun (N. Y. 1894) 319. 26
Conductors' Mutual Aid Assoc, v. N. Y. Supp. 186, 56 N. Y. St. Rep. 4.
Swartz, 54 111. App. 445. J Rice v. New England Mutual Aid
17 Stylow v. Wisconsin Odd Fel- Soc. .146 Mass. 248, 15 N. E. 624.
low's' Mutual Life Ins. Co. 69 Wis. On promissory note as payment of
224, 34 N. W. 151. insurance premium, see note in 5
18 Millard v. Supreme Council Am- B. R. C. 365.
erican Legion of Honor, 81 Cal. 340, 2 Marden v. Hotel Owners' Ins. Co.
22 Pac. 864. 85 Iowa, 584, 39 Am. St. Rep. 316,
19 Johnston v. Phelps County 52 N. W. 509.
2539
§ L373 JOYCE ON [NSURANCE
sequent assessment waives aonpayment on time of prior ones.3
or of a forfeiture.4 So if the society continues to receive assessments
after the member lias been suspended, it is estopped to deny hia
good standing,8 and if the company Levies and receives such sub-
sequent assessments, and retains the same until after the member's
decease, it waives a forfeiture arising from aonpayment of prior
assessments, even though the company did not discover the failure
to pay said prior assessments.6
§ 1373. Same subject: authorities contra. — ( Mlier cases hold that
the subsequent levy of an assessment does not waive the forfeiture,7
and it is so held where the policy has been suspended.8 So a bene-
fit society does not waive a forfeiture for nonpayment of assess-
ments by making further assessments and giving notice thereof
within the period during which the insured has a right to rein-
statement upon making payment of all accrued assessments.9 So
a forfeiture of a policy of insurance for breach of warranty is not
waived by a subsequent assessment of the forfeited policy and the
payment by the insured of the assessment, where the assessment
has been made by mistake.10 So where a resolution of the board
of directors provides that notice be given to enable delinquent mem-
bers to reinstate themselves, and the testimony shows such fact and
is uncontradicted, there is no waiver of forfeiture by sending notices
of assessments subsequently levied after others are overdue and
unpaid.11 So if the assessment is for a loss occurring prior to the
3Rowsell v. Equitable Aid Union, ments, or by the levy of assessments.
13 Fed. 840. see McKinney v. German Mutual
4Watson v. Centennial Mutual Five Ins. Soe. 89 Wis. 653, 46 Am.
Life Ass.,.-. 21 Fed. (i!)8; Phoenix Ins. Si. Rep. 861, 62 N. W. 413, and cases
Co. v. Slaughter, 12 Wall. (79 U. S.) noted on p. 863.
KM, 20 L. ed. Ill; Masonic Mutual 7 Crawford County Mutual Ins. Co.
Benefit Aid Benefit Soc. v. Beck, 77 v. Cochran, 88 Pa. St. 230; Philbrook
Ind. 203, 40 Am. Rep. 295. v. New England Ins. Co. 37 Me. 137.
5 Hoffman v. Supreme Council Le- 8 Nash v. Union Mutual Ins. Co.
gion of Honor, 35 Fed. 252. 43 Me. 343, 69 Am. Dec. 65; Craw
6Tobin v. Western Mutual Aid ford County Mutual Ins. Co. v. Coch-
Soe. 72 lown, 261, 33 N. W. 663. See ran, 88 Pa. St. 230.
Modern W linen of America v. 9 Carlson v. Supreme Council
Jameson, 48 Kan. 718, 30 Pac. 460; American Legion of Honor, 115 Cal.
21 Ins. L. J. 711, reversing 29 Pac. 466, 35 L.R.A. 643, 47 Pac. 375.
473. Retention of overdue payments 10Diehl v. Adams County Mutual
and levying subsequent assessments Ins. Co. 58 Pa. St. 44:?, 98 Am. Dec.
waives 'forfeit ure: Great Western 302; Elliott v. Lycoming County Mu-
Mutual Aid Assoc, v. Colmar, 7 Colo, tual Ins. Co. 66 Pa. St. 22, 5 Am.
A pp. 275, 43 Pac. 159. That a for- Rep. 323.
feiture is waived by the subsequent n Mutual Protection Life Ins. Co.
collection of premiums or assess- v. Laury, 84 Pa. St. 43.
2540
EXCUSES, WAIVES AND ESTOPPEL § 1374
forfeiture, there is no waiver,12 or if the assessment is made after
an assignment, it does not waive the forfeiture arising therefrom
when made for losses occurring prior thereto;18 and where the
policy is avoided by an increase of risk, the subsequent levy and
collection of an assessment constitutes no waiver.14 Nor is there
any answer in such cases where the company has no knowledge of
the facts on which the claimed breach of condition is based.15
And where by the contract the policy was to be invalid while as-
sessments were overdue and unpaid, the mere sending of a notice
of assessment by an agent was held not to constitute a waiver of
default.16
§ 1374. Waiver: custom: acceptance of premium or assessment
after loss or death.17 — If there has been habitual custom to receive
premiums at other times than the stipulated day, a payment with-
in a reasonable time after it is due, according to custom, is good,
and the policy is not forfeited, even though the insured is fatally
sick at the time of the last payment and the company does not know
of the sickness,18 and so even though death has occurred after ma-
turity and before actual payment,19 and so notwithstanding the
home agent inserted a statement in the last receipt, which was not
in former receipts, that the policy holder was in good health : 20
and in such case a recovery is not barred by the fact that no tender
of the premium was made after the death,1 and the receipts of
arrears from the beneficiary after a default in payment of the pre-
mium prevents a lapse of the policy.2 And the frequent accept-
ance of past due assessments some of which were a long time over-
12 Viall v. Genesee Mutual Ins. Co. authorized sending the notice, al-
19 Barb. (N. Y.) 440; Finley v. Ly- though the assessment was in fact
coming Ins. Co. 30 Pa. St. 311, 72 levied upon policies then in force:
Am. Dec. 705. Leonard v. Lebanon Mutual Ins. Co.
13 Smith v. Saratoga Countv Mu- 3 Week. Not. Cas. 527.
tual Fire Ins. Co. 3 Hill (N. Y.) 508. 17 See §§ 1117, 1356 herein.
14 In this case, however, the assess- 18 Cotton States Life Ins. Co. v.
ment was made after the loss of the Lester, 62 Ga..247, 35 Am. Rep. 122.
property by fire and for losses oc- 19 Mayer v. Mutual Life Ins. Co.
curring before the fire: Gardiner v. of Chicago, 38 Iowa, 304, 18 Am.
Piscataquis Mutual Fire Ins. Co. 38 Rep. 34; Spoeri v. Massachusetts
Me. 439. Mutual Life Ins. Co. 39 Fed. 752.
15 Gilbert v. North American Fire 20 Cotton States Life Ins. Co. v.
Ins. Co. 23 Wend. (N. Y.) 42, 43, 35 Lester, 62 Ga. 247, 35 Am. Rep. 122.
Am. Dec. 543. l Hanley v. Life Assoc, of Ameri-
16 This case seems to have turned ea, 4 Mo. App. 253.
upon the fact, held material by the 2 Arnott v. Prudential Ins. Co. of
court, that it did not appear that the America, 63 Hun, 628, 44 N. Y. St.
assessment was levied by the com- Rep. 480, 17 N. Y. Supp. 710, 63
pany intending to recognize the pol- Hun (N. Y.) 628.
icy as being then in force, nor that it
2541
§ 1374 JOYCE (>N [NSUKANCE
due, waives suspension and validates a payment made within a
short time after the member's death.3 And. if, under a policy of
insurance providing that the company shall not he liable for any
loss occurring while any pari of the premium is overdue and un-
paid, the company, with knowledge of a loss, accepts a, premium
overdue, it thereby waives the forfeiture and restores the policy to
in full force, noi only as to the future, hut also from the begin-
ning.4 And an acceptance of additional premiums, based on the
pay roll of an employer, after knowledge of the death of insured
constitutes a, waiver where insurer also refused to take part in suits
by the insured's administrator against a railroad company for
causing insured's death or in the hitter's suit against the employ-
er.6 So a receipt of assessments voluntarily paid for the assured
after his death to his lodge, and forwarded to the society, and ac-
cepted and retained by it, with knowledge of the death, until suit
brought to recover on the policy, waives a forfeiture.6 But there
is no waiver if neither the officers receiving the assessments nor the
company had knowledge of the facts constituting the ground of
forfeiture.7 If a person has insured his property for five years in
a mutual insurance company, and a part of it is destroyed by tire,
hui he does not pay two assessments, one of which is delinquent,
and the other overdue, until after the loss has occurred, the accept-
ance of such payments is not a waiver of forfeiture of the policy.
because of the delinquent assessment, where the insured has the
right, under the laws of the association, to make such payments,
when it is necessary to make them to restore the insurance pro-
vided for in the policy for the remainder of the period of five
years, and where the association is hound to accept such payments
in order to revive the policy for the remaining time it has to run.8
So the demand and receipt of assessments by a life insurance com-
pany after the death of the insured, with knowledge of his death,
and that the contract is voidable on account of misrepresentations
♦by the insured, waives the forfeiture.9 So a mutual lire company
is estopped to deny its liability when after the death of the assured
8Reisz v. Supreme Council Amer- the Order of Hermans' Sons, 44 Wis.
Lean Legion of Honor, 103 Wis. 427, 376.
7:> X. W. 430. 7Swett v. Citizens' Mutual Relief
* Continental Ins. Co. v. Chew, 11 Soc. 78 Me. nth 7 Atl. 394.
Ind. App. 330, 54 Am. St. Rep. 506, 8 Beeman v. Fanners' Pioneer Mu-
38 NT. !'.. 117. tual Ins. Assoc 104 Iowa. 83, 65 Am.
s Fidelity & Casualty Co. of N. Y. St. Rep. 424, 73 N. W. 597.
v. Railway News Co. 31 Kv. L. Rep. 9 Masonic Mutual Benefit Assoc, v.
55, 725. 101 S. W. 900, 103 S. W. Beck, 77 Ind. 203, 10 Am. Rep. 295;
297. Bailey v. Mutual Benefit Assoc. 71
6Erdmann v. Mutual Ins. Co. of Iowa, 689, 27 N. W. 770.
2542
EXCUSES, WAIVER AND ESTOPPEL § 1374
k assesses his administrator upon the policy and receives payment
from him.10 Waiver of a forfeiture of an insurance policy for fail-
ure to pay an assessment, by the receipt of the delinquent assess-
ment after a loss, will he prevented if at the time of the receipt of
such assessment any of the insured property remains in existence
to which the revived insurance may attach, by a provision that, in
case of forfeiture where the policy holder afterward pays the amount
due from him, the policy "shall be holding from the date of the
receipt of said amount."11 So where a premium is accepted after
loss of the property with knowledge of the loss, there is a waiver of
default for nonpayment.12 But a retention of the premium till
after death, there being no knowledge of the facts, constitutes no
waiver.13 So also of a payment received in ignorance of the death.14
And where an overdue premium is to be accepted only on condition
that it be paid at once, and the same is not sent until a fortnight
later, the insured then being sick and having died the next day,
the company is not bound by its acceptance and receipt.15 The
beneficiary of a mutual benefit certificate cannot insist upon an
estoppel against the order because of refusal to accept the dues of
a member who is ill, if, upon the representative of the lodge stat-
ing that he had information that the member is not fit to be such
and should be expelled, and that unless he is permitted to lapse
out by nonpayment of dues he will take the matter before the order
and secure the expulsion, he acquiesces in the suggestion without
further attempt to pay dues.10 When the premium is earned and
forfeiture occurs before the loss, taking and retaining the premium
does not constitute a waiver of the forfeiture nor evidence tending
to show it.17 If the insurer, in a policy of marine insurance, accepts
the balance of the premium due after disaster to the insured vessel,
he does not thereby waive the defense that no such loss has occurred
as that sued for.18
10 Hart v. Pottawattamie County 13 Bursteed v. West of England
Mutual Fire Ins. Co. 74 Iowa, 39, 36 Ins. Co. 5 Irish Ch. 553.
N. W. 880. 14Pritchard v. Merchants' Assur.
11 Johnston v. Phelps County Soc. 3 Com. B. N. S. 622.
Farmers' Mutual Ins. Co. 63 Neb. 21, 15 Servoss v. Western Mutual Aid
56 L.R.A. 127, 8S N. W. 142. Soc. 67 Iowa, 86, 24 N. W. 604.
12 Joliffe v. Madison Mutual Ins. 16 McCann v. Supreme Conclave
Co. 39 Wis. Ill, 20 Am. Rep. 35; Independent Order of Heptasophs,
Schoneman v. Western Horse & Cat- 119 Md. 655, 46 L.R.A. (N.S.) 537
tie Ins. Co. 16 Neb. 404, 20 N. W. (annotated on effect of incapaeitat-
284; Farmers' Mutual Fire Ins. Co. irig illness or insanity on failure to
v. Bowen, 40 Mich. 147. See Central pay premium when due), 87 Atl. 383.
Market St. Co. v. North British & 17 Smith v. Continental Ins. Co. 6
Mercantile Ins. Co. 245 Pa. 272, 91 Dak. 433, 43 N. W. 810.
Atl. 662, 44 Ins. L. J. 416. 18 Searles v. Western Assur. Co. 88
2543
§ 1375 JOYCE ON INSURANCE
§ 1375. Waiver: payment of premium note: generally.19 — The
determination of the question whether the acceptance of payment,
after death or loss, of a promissory note given an insurance com-
pany operates as a waiver of a prior forfeiture or exemption from
liability of the insurer, depends upon the character of the note and
the oature and term- of the contract. Thus, as we have stated in
preceding sections, there may be a liability on a premium note
after loss; or .1 liability to pay the whole note may be incurred by
default in paymenl of an assessment; or the contract may provide
for the deduction of the am >unt due on the note from the loss; or
the note may be given for the premium on an open marine policy
to become valid as fast-as premiums are earned ; or the contract may
stipulate that, in case of default, the entire premium shall be con-
sidered as earned; or the note may be given in advance for pre-
miums; or the liability may, by the character of the note itself, be
absolute at all events; 20 and there are other cases in which the com-
pany will have a right to accept payments on the note without
waiving forfeitures.1 Thus, if the company, with full knowledge
of the facts that a premium note is overdue and unpaid at the time
of the loss of part of the insured property, accents unconditionally
the amount due on said note representing the entire premium, and
there is no stipulation that the premium shall be considered as
earned in case of default in payment at maturity of the note, it
thereby waives its right to insist upon its exemption from liability,
and the company is likewise estopped in such case to assert that it-
liability only revived as to that portion of the property which was
not destroyed, and this even though the contract provides that the
company shall not be liable for loss occurring during the time the
policy is suspended by reason of nonpayment of the note at ma-
turity.2 In Smith v. Continental Insurance Company 3 the policy
Miss. 260, 117 Am. St. Rep. 741, 40 J., said: "The only question which
So. 866. is here open to controversy is wheth-
19 See § L356 herein. er the company did waive the right
20 See §§ 1202 et seq. herein. to forfeit the policy by an acceptance
1 See § 1365 and other sections un- of the premium after the loss bad
der this chapter. occurred. It is proper to say ;.l the
8 Phoenix Ins. Co. v. Tomlinson, outset that this case is to be discrim-
125 Ind. 84, 21 Am. St. Rep. 203, 9 inated from such cases as American
L.R.A. 317, 31 Cent. L. J. 43!), 19 Ins. Co. v. Henley, 60 Ind. 515, and
Ins. L. J. 1004, 25 N. E. 126. See American Ins. Co. v. Leonard, 80
Phoenix Ins. Co. v. Lansing, 15 Neb. Ind. 272, for the reason that in those
494, 20 N. W. 22. The opinion of cases the premium notes were shown
the court in the case in which this to be unpaid at the time of the loss,
ruling was made is of sufficient im- and it did not appear that the insur-
portance to warrant the insertion of ance company had subsequently ac-
a part thereof; the court, per Elliott, cepted payment, while here there was
2544
EXCUSES, WAIVER AND ESTOPPEL § 1375
had become void by reason of misrepresentation and effecting addi-
tional insurance. The note had been paid in full, but after loss,
an acceptance of the premium after paid. It is not jusl that the company
the loss occurred. We cannot per- should retain the premium and give
eeive any valid ground upon which no value in return. The fact thai all
it can be held that an insurance com- of the property insured was not de-
pany may accept payment of the en- stroyed does not affect the que lion,
tire premium after a loss has oc- for the policy is indivisible and con-
curred, and yet escape payment of tinuous. ... It was not in the
the loss. By accepting payment it power of the assured to pay part
affirmed the validity of the policy, only of the premium. lie was hound
and tacitly asserted that the policy to pay it all or lose the benefit of his
was in force from the time it was contract. The rights of the parties
executed. In such a case there is no are reciprocal. The company was
interregnum in which there was a not bound to accept part of the pre-
lifeless policy, for the policy is con- mium, nor had it a right to treat the
tinuous in its nature and effect, and premium as paid upon part only of
the premium covers the risk as an the property insured. It was the
entirety. It would do violence to the right of the company to refuse to ac-
intention of the parties and the Ian- cept part of the premium, but it had
guage of their contract to declare, as no right to accept the whole premi-
the appellants seek to have us do, urn, and treat it as payment for an
that the payment simply revived the insurance upon part only of the
policy. ... In our judgment, ac- property covered by the policy. Hav-
eeptanee of the premium after the ing accepted the entire premium and
loss has occurred is a waiver of the full notice of the loss, it confirmed
right to declare a forfeiture of the the contract as to the whole of the
policy, and not a mere act of revivor, property insured. ... It cannot
... To treat the acceptance of the accept the entire premium and yet
premium as merely reviving the con- assert that it is liable only from the
tract is, in effect, to adjudge a for- time of the acceptance, although the
feiture. . . . This is clear when loss occurred prior to that time. . . .
it is brought to mind that, if the pol- The policy . . . does not provide
icy is held to be lifeless from the time that the default in payment shall en-
of default in payment until after the title the company to treat the pre-
loss, it must also be held that the in- mium as earned. If it did, we should
sured cannot recover anything upon have a more difficult question. In
his contract. A construction of the this instance, the premium was not
conduct of the parties which will earned, for the period covered by the
practically produce the same result as policy was five years, and the loss
a declaration of forfeiture, is one occurred within seventeen months
which it is the duty of the courts to after the policy was written. There
avoid, if it can reasonably be done. It was, in fact, at the time of the loss
is clear that this construction may be and at the time of the acceptance of
reasonably avoided. . . . It is a the amount of the judgment no
familiar general rule that a party earned premium beyond that paid in
who accepts and retains benefit from cash; nor is there any recital that de-
a contract confirms the contract as it fault shall entitle the company to
was executed. . . . It is but just treat the premium as earned. There
that the company having accepted the is, therefore, no tenable ground upon
entire premium alter the occurrence which the company can justify its
of the loss should yield the consider- act in taking the insurer's money,
ation for which the premium was and yet repudiate liability for the
Joyce Ins. Vol. III.— 160 2545
§ 1375
JOYCE o.\ ENSURANCE
and pending suit, the company accepted accrued interest on the note
and ii was held thai there was qo waiver of the forfeiture on the
ground that the premium was earned.4 In another case the policy
contained a like condition with thai in Phoenix Insurance Company
v. Tomlinson.6 A loss occurred while a aote given for a portion
of the cash premium remained unpaid and overdue, and ii was
loss. The moment the risk attached
the premium paid was beyond recov-
er} by the insured: Standley v.
Northwestern .Mutual Life Ins. Co.
95 I nil. •_'."> I ; Continental Life Ins.
Co. v. Bouser, 111 End. 266, L2 X. E.
Gilman, J 12 End. 7, L3 X. I-:. 1 IS;
Williams v. Albany City Ins. Co. 19
Midi. 451, 2 Am. Rep. 95, 469; Jolift'e
v. Madison Mutual Ins. ('<,. 39 Wis.
Ill, 20 Am. Rep. 35; Lyon v. Trav-
elers' Ins. Co. 55 Mich. Ill, ."> 1 Am.
479. This right is correspondent with Rep. 354, 20 X. W. 829; Bane v.
his burden. He cannot get his
money hack, but he can enforce Ins
contract, and his contract is contin-
uous tor the period named and in-
divisible as to the property described.
When the company accepted pay-
ment, of the entire premium, it waived
Travelers' Ins. Co. 85 Kv. (377, 4 S.
W. 787, 0 Kv. Law Rep. 211; Titus
v. (dens Falls Ins. Co. 81 N. Y. 410,
8 Abb. N. C. 315, and concludes:
"The acceptance of the money was
after the loss and after the company
knew that the assured was affirming
all right to forfeit the policy, for as the validity of the policy and his
the insured can gel back no part of right to recover the loss. It knew
l lie premium paid, neither can the that he did not regard the policy as
company escape the performance of suspended, and by accepting the
its part of the contract. It cannot money it confirmed the contract as of
have the benefit and escape the bur- the date of its execution."
den. ... It was in the power of 3 6 Dak. 433, 43 N. W. 810.
the company to accept or refuse pay- 4 This case and others to snbst ail-
ment. It made its election, and it tially the same effect, viz.: Schimp
must abide the legal consequences of v. Cedar Rapids Ins. Co. 124 111. 354,
that act. It was a voluntary per-
formance with full knowledge of all
the material facts, and the election
was e plete. We have studied with
care the cases referred to by the ap-
17 Ins. L. J. 703, 16 N. E. 22!), and
Cohen v. Continental Ins. Co. 07
Tex. 325, 60 Am. Rep. 24, .'! S. W.
296, are considered in a note to 31
Cent. L. J. 442, appended to the case
pedant's counsel, and we cannot re- from which we have quoted the opin-
gard them as sustaining the position ion in last preceding note 2 above,
counsel assume; for we do not be- The writer, Mr. John A. Finch, con-
lieve that in any of them is the doc- eludes that: "It may be safely said
trine asserted that under such a pol- thai the weight of authority on a
icy as that before us the insurance policy worded like this one is with
company may, with knowledge of (he the opinion," citing Schreiber v.
loss and notice that the assured is af- German-American Hail Co. 43 Minn.
firming the validity of the policy, ac- 307, 45 N. W. 708; McMartin v.
cept and retain the entire premium, Continental Ins. Co. 41 Minn. l!)8,
and yet refuse to pay the loss." The 42 N. W. 934; Phoenix Ins. Co. v.
com) then considers and reviews Lansing, 15 Neb. 494, 20 N. W. 22.
Klein v. Xew York Life Ins. Co. 101 5 L25 End. 84, 21 Am. St. Rep. 203,
U. S. 88, 26 L. ed. 662; Wall v. Home
Ins. Co. 36 X. Y. 157; Sweetser v.
odd Fellows Mutual Assoc. 117 End.
!)7, 1!) X. E. 722; Home Ins. Co. v
2543
9 L.R.A. 317, 25 N. E. 120. See
prior note of this case under this sec-
tion.
EXCUSES, WAIVER AND ESTOPPEL § 1375
held that the exemption of the company from liability was waived
by its accepting after notice of loss the amount due on the note.6 So
where the insured died on the day the last of three notes given for
the balance of a cash annual premium matured, and the note was
taken up four days thereafter, the company was held liable for the
loss.7 In a Missouri case the forfeiture was also held to have been
waived under the following circumstances: The policy provided
that when a premium note was taken for a cash premium, and
default in its payment should operate to suspend the company's
liability until it should be paid. The assured gave such a note,
and immediately after it was due. having another policy which he
desired canceled and the unearned premium thereon applied to
this note, and not knowing how much would be due the company.
he proposed by letter to pay, asking for a statement of the amount,
whereupon the company at once applied upon the note the amount
in their hands, and directed him by letter to remit the balance,
which he did by first mail, but a loss occurred before the remittance
was mailed.8 So there may be a waiver by the receipt by an agent
of the amount of an overdue premium note, and the receipt by the
company of the same from the agent without inquiry.9 But in an-
other case where a note was given for the premium and the insured
property was lost by fire, after the maturity of the note and after
the policy wTas forfeited by its terms for nonpayment of the note,
it was held that the mere voluntary payment of the note with legal
interest after loss to a clerk of the insurer at its office, but against
its express objection, did not operate as a waiver.10 So it is decided
in a case under substantially the same facts, with the exception
that the payment was received without objection by the company,
that such acceptance of the amount due on the note did not con-
6 Joliffe v. Madison Mutual Ins. livers the policy, there would seem ftf
Co. 39 Wis. Ill, 20 Am. Rep. 35, be no good reason why the company
distinguished from the case of Wil- should not be bound by it. The con-
limns v. Albany City Ins. Co. 19 sideration for the insurance is the
Mich. 251, 2 Am. Rep. 95; Farmers' premium, and if this is paid and ap-
Mutual Fire Ins. Co. v. Bowen, 40 propriated by the company, the time
Mich. 147. of its payment would not seem to be
7Froehlich v. Atlas Life Ins. Co. material." But see North western
47 Mo. 406. See Schonoman v. West- Lis. Co. v. Amerman, 119 111. 329,
ern Ins. Co. 16 Neb. 404, 20 N. W. 59 Am. Rep. 799, 10 N. E. 225.
284, where it was said by the court 8 Sims v. State Ins. Co. 47 Mo. 54,
that "if there has been a failure to 4 Am. Rep. 311.
pay the premium promptly at the 9 Hodsdon v. Guardian Life Ins.
day, the company certainly may Co. 97 Mass. 144, 93 Am. Dec. 73.
waive this condition, and if it after- 10 Muhlman v. National Ins. Co. 6.
ward receives and retains it, and do- W. Va. 508.
2547
§ 137G JOYCE OX [NSURANCB
stitute a waiver,11 nor La there any waiver of forfeiture where tlio
amount of an overdue premium note is accepted after Loss in
ignorance thereof.18 The insured lias a righl to accepl the pre-
mium ear 1 until the policy ceases to be in force, bu1 if he accepts
the full premium or compensation for the risk when the Loss occurs,
such act is declared not consistent with a claim thai the policy is
forfeited, or that the company is exempt from Liability.18 li is
held in Iowa that an acceptance of a part of the amount of the oote
after maturity does not waive the forfeiture.14 So occasional pay-
ments, after they become due, of notes given for premiums, and
consequent renewals of the policy, are no waiver, as to premiums
afterward due, of the stipulation for forfeiture on failure to pay a
note when due.15 And there is no waiver where the policy provides
thai the collection of the note, by suit or otherwise, shall not be con-
strued to revive the policy.16 So a waiver of a forfeiture cannot
arise from the aet of an attorney employed by the company to
collect a premium note, where he expressly disclaims any author-
ity except to collect the note.17
§ 1376. Waiver by failure to declare a forfeiture.18 — Tf the char-
acter and terms of the contract be such as to necessitate some form-
al declaration of forfeiture by the company, its omission to avail
itself of the right to cancel a policy or declare a forfeiture for a
failure to pay a premium note at maturity will be deemed a waiver
of the right to insist on a forfeiture.19 And a failure cannot be
declared after a member's death so as to deprive the parties con-
cerned of rights then existing. In such cases the liability of the
insurer accrues on the death of the assured, and it is too late after-
11 Williams v. Albany City Ins. Co. 16 Curtin v. Phcenix Ins. Co. 78
19 Mich. 451, 2 Am.' Rep*. 95, dis- Cal. 619, 21 Pac. 370.
tinguished in Joliffe v. Madison Mut- 17 Continental Fire Ins. Co. v.
ual Ins. Co. 39 Wis. Ill, 20 Am. Rep. Coons, 14 Ky. Law Rep. 110.
35, and in Phcenix Ins. Co. v. Tom- 18 See § 1356 herein.
1 in son, 125 Ind. 84, 9 L.R.A. 317, 21 19 Western Horse & Cattle Ins. Co.
Am. St. Rep. 203, 31 Cent. L. J. 439, v. Scheible, 18 Neb. 495, 25 N. W.
19 Ins. L. J. 1004, 25 N. E. 126, both 620; Montgomery v. Phcenix Mutual
noted above within this section. Life Ins. Co. 14 Bush (Ky.) 51. See
12 Harle v. Council Bluffs Ins. Co. Farmers' Mutual Relief Assoc, v.
71 low;., 401, 32 N. W. 396. Koontz, 4 Ind. App. 538, 30 N. E.
18 Joliffe v. Madison Mutual Ens. 145, noted in text in section 1378;
Co. 39 Wis. Ill, 20 Am. Rep. 35, per Phcenix Ins. Co. v. Coomes, 13 Ky.
the court. L. Rep. 238.
14 Garlick v. Mississippi Valley As to forfeiture for failure to pay
Tns. Co. 44 Iowa, 553; Carlock v. premiums or assessments when due:
Phoenix Ins. Co. 138 111. 210, 28 N. when provisions self -executing : when
E. 53. affirmative act necessary, see $§ 1103
16 Marston v. Massachusetts Life et seq., L261 el seq. herein.
Ins. Co. 59 N. It. 92. On whether failure of insurer to
2548
EXCUSES, WAIVER AND ESTOPPEL §§ 1377, 1378
ward to claim for the first time the benefit of a forfeiture.20 It is
also held that a condition in the policy that the note shall be void
if not paid within a specified number of days after maturity, will
be construed as meaning voidable only at the election of the com-
pany.1 Under an open policy reciting payment of premium at a
specified rate, but providing that the- premium on each risk is to be
fixed at the time of indorsement according to the rates of the com-
pany, when the character of the vessel and time of sailing are
known, if the insured, on giving timely notice of a shipment, states
all the facts, the circumstance that the vessel is out of time does
not exonerate the insurers, but it is for them to object on that ac-
count and require the proportionate premium.2 If by the terms of
the policy or certificate the nonpayment of a premium or assess-
ment at the day specified operates ipso facto to determine the con-
tract, the delay of the company in declaring a forfeiture of a policy
on its books for nonpayment of the premium is no waiver of the
condition requiring prompt payment.3
§ 1377. Failure to insist promptly on payment of premium
notes. — Failure on the part of the insurer to insist on payment
promptly at maturity of a premium note, does not operate as a
waiver of the forfeiture arising under a stipulation in the policy
and note that the latter shall lapse on default in payment, where
it appears that one day before the note's maturity the insured
notified the company that he would pay as soon as he could sell son to
property, and ten days thereafter the company wrote requesting
assured to pay and revive the policy, and on the day of so writing
the property was burned.4
§ 1378. Waiver: collecting loss: adjustment and allowance of
loss. — Although a mutual insurance company levies and collects an
assessment to pay the loss under a policy, it does not thereby waive
its right to avail itself of a forfeiture of the policy and its conse-
quent exemption from liability for the loss.5 But the adjustment
speak or act after notice of breach of 3 Aslibrook v. Phoenix Mutual Ins.
policy constitutes a waiver thereof, Co. 94 Mo. 72, 6 S. W. 462, 463.
see notes in 25 L.R.A.(N.S.) 1, and 4 Dale v. Continental Ins. Co. 95
51 L.R.A.(N.S.) 261. Tenn. 38, 31 S. W. 266.
20Olmstead v. Farmers' Mutual As to conditions for forfeiture for
Fire Ins. Co. 50 Mich. 200, 15 N. W. nonpayment of notes at maturity,
82; Young v. Mutual Life Ins. Co. see S§ 1204 et seq. herein,
of New York, 2 Saw. (U. S. C. C.) 5 Nash v. Union Mutual Ins. Co.
325, Fed. Cas. No. 18,168. 43 Me. 343, 69 Am. Dec. 65; Mayer
1 Louisville Underwriters v. Pence, v. Equitable Life Assoc. 42 Hun (N.
93 Kv. 96, 19 S. W. 10, 21 Ins. L. J. Y.) 237. See also § 1289 herein, on
493, 14 Ky. L. Rep. 21, 40 Am. St. appropriation of fund, etc.
Rep. 176.
2Rolker v. Great Western Ins. Co.
4 Abb. App. Dec. (N. Y.) 76.
2549
§§ 1379 L38] JOYCE ON [NSURANCE
and allowance of a loss may operate as a waiver of forfeiture for
failure to pa\ assessments when due where the constitution of the
society provides thai insurance shall be perpetual, and thai oonpay-
menl should only suspend the protection till all dues shall be paid,
and the company fails to declare the forfeiture.6
§ 1379. Waiver by recognition of the policy as in force.7 — As a
general rule if the company lias treated the policy as valid, and
has soughl to enforce paymenl of the premium, or lias otherwise
with knowledge recognized, by its own acts or declarations, or those
of its agents, the policy as still subsisting, it waives thereby prior
forfeiture-.8
§ 1380. Waiver by giving credit for the premium. — The com-
pany may undoubtedly waive the condition as to payment on a
specified day by accepting a note for the premium, or by otherwise
giving credit therefor.9 And where credit is intended to be uiven,
and is unconditionally given, and the policy attache-, the waiver of
a cash payment is irrevocable, and the company cannot thereafter
insist upon a forfeiture, even though death ensues before actual
payment, and in ease of a finding of the court that there has been a
waiver, the correctness or incorrectness of a series of requests which
are founded on an assumption that payment had not been made is
held not subject to review.10
1381. Defense that waiver induced by false representations. —
If the company is induced by false representations or fraud of the
assured to revive a forfeited policy, or to reinstate a suspended mem-
ber, or to otherwise waive a forfeiture, the waiver so procured is
void, and the facts constitute a defense to an action on the policy.
Thus, false representations as to health inducing a waiver of for-
feiture from failure to pay premiums when due may he shown,
and being proven, will void the waiver and prevent a recovery.11
6 Fanners' Mutual Relief Assoc, v. 1356, 1361, on waiver and estoppel
Koontz, 4 lnd. A pp. 538, 30 N. E. by acts, etc.; and also cases through-
1 i;, out this entire chapter; LoftiS v.
7 Sec § L356 herein. Pacific Mutual late Ins. Co. 38 Utah,
»Young v. Mutual Life Ins. Co. 532, 114 Pac. 134, 40 Ins. L. J. 1048,
of New York, •_' Saw. (U. S. C. C.) 1055.
325, Fed. ('as. No. 18,1(58; Robinson 9 Thompson v. Knickerbocker Life
v. Pacific Fire Ins. Co. 18 Hun (N. Ins. Co. 104 U. S. 252,26 L. ed. 765.
V.) 395; Olmstead v. Farmers' Mut- See §§ 70 et seq., 1141 herein.
aal Fire Ins. Co. 50 Mich. 200, 15 X. 10 Miller v. Life Ins. Co. 12 Wall.
W. 82; Behler v. German Mutual (79 U. S.) 285, 20 L. ed. 398.
Fire Ins. Co. OS [nd. 347; Appleton " Harris v. Equitable Lite Ins. Co.
v. Phoenix Mutual late Ins. Co. 59 04 N. Y. 196, 13 All). L. J. 248, 3
N. II. 511, 47 Am. Rep. 220. See SS Hun (N. Y.) 724, 6 N. Y. S. C. 108.
2550
EXCUSES, WAIVER AND ESTOPPEL § 1382
§ 1382. Waiver by agents: subordinate lodges. — It is undoubted
that an authorized agent or one acting within the apparent scope
of his authority may, as well as the company, waive the condition
requiring payment of premiums on specified days, even though the
policy provides that no agent may waive forfeitures.18 And even
though insurer had no actual knowledge that payment had heen
made.13 But insurer is not bound by an agreement of its agent,
who effected the insurance, to extend time for payment of pre-
miums where it has no knowledge thereof, and even though said
agent has accepted an overdue payment after the illness of insured,
there is no waiver where upon learning the facts insurer tenders
back the amount so paid and repudiates its agents acts, especially
where the policy prohibits waivers by agents except by agreement
in writing signed, etc.14 An agent authorized to collect the pre-
miums may waive the payment in cash of the premium by a])] liv-
ing the amount thereof in payment of a debt due from him to the
assured, and if funds which the insured has a right to apply to the
payment of premiums have thus come into the agent's hands, his
retention of the same until after death of the assured will not pre-
vent a recovery on the policy.15 So an officer of the company, such
as the president or secretary, may waive such condition as to punc-
tual payment.16 And where insurers acts amount to a ratification
of those of the agent it will be estopped to deny the latter's author-
12 Sheldon v. Connecticut Mutual pany replies furnishing the informa-
Life Ins. Co. 25 Conn. 207, 65 Am. tion asked, but does not state that
Dec. 565; Price v. North American the policy had lapsed, it will be
Accident Ins. Co. 28 Idaho, 136, 152 deemed to have remained in force:
Pac. 805; Carson v. German Ins. Co. Rowe v. Brooklvn Life Ins. Co.
62 Iowa, 433, 17 N. W. 650, 55 Am. (1896) 38 N. Y. Supp. 621.
Rep.*787, 6 N. E. 267; Whitehead v. On waiver by officer of subordinate
New York Life Ins. Co. 102 N. Y. lodge of forfeiture for nonpayment
143, reversing 38 Hun (N. Y.) 425, of assessments, see notes in 4 L.R.A.
63 How. Pr. 394; Marcus v. St. Louis (N.S.) 421; 38 L.R.A.(N.S.) 571;
Mutual Life Ins. Co. 68 N. Y. 625; and L.R.A.1915E, 152.
Church v. Lafayette Fire Ins. Co. 66 13 Price v. North America Accident
N. Y. 222 ; Godfrey v. Atlantic Ins. Co. 28 Idaho, 136, 152 Pac. 805.
House Ins. Co. 169 N. Car. 238, 84 14 Collins v. Metropolitan Life Ins.
S. E. 339. See chapters on agency, Co. 32 Mont. 329, 108 Am. St. Rep.
§§ 424 et seq., 441 et seq., 550 ef seq. 578, 80 Pac. 609, 1092, 34 Ins. L. J.
herein. 592.
If the premium has become due, 15 Chickering v. Globe Ins. Co. 116
and the assured, the day after having Mass. 321. That agent may waive
failed to pay the same, writes the cash payment by allowing credit, see
company for a detailed statement of Ball Sage Wagon Co. v. Aurora
the condition of the policy, and also Fire & Marine Ins. Co. 20 Fed. 232.
for figures for a paid-up policy, to 16 Dillebar v. Knickerbocker Life
which letter the president of the com- Ins. Co. 76 N. Y. 56/.
2551
§ L382 JOYCE ON INSURANCE
ity, as in case of granting an extension on premium notes.17 But
the receipt of overdue a.-sessmenes l>y an otlieer with qualified power
does doI waive the forfeiture and operate to reinstate a member,
where It is stipulated thai money received from a suspended mem-
ber must be "tendered in open branch meeting,"18 and no waiver
arises from the act of the secretary, in acknowledging payment of
the premium, where he has no knowledge of the facts, and such
acknowledgmenl is made under a mistake of facts.19 But there is
a waiver where the assured relies upon information from the agent
as to the date of payment, and such information is incorrect.80
And if the company declare- a policy forfeited for nonpayment of
premiums, and I hereafter a tender is made by the insured to the
vice-president and manager of the insurer, who refers him to the
agent who issued the policy to arrange the matter, and the latter
agrees to "fix ii up" in accordance with a prior agreemenl to offsel
rents due against the premiums, the company is held by such acts
not to have waived the claimed forfeiture, where the policy pre-
cludes agents from waiving forfeitures;1 and if the assured has
notice! of the agent's want of authority to receive overdue premiums,
no waiver arises from the agent's unauthorized act in so doing,
unless such act is ratified by the company.8 Nor can an agent
receive overdue premiums and give an antedated receipt therefor,
so as to waive a forfeiture or revive the policy, nor is evidence ad-
missible to show a usage so to receive and antedate premiums, or to
authorize, by parol license, agents to do so.3 So if premiums are
required to be paid weekly, and the policy is to be void for arrears
in payments of over four weeks, but a mode of revival is provided,
a delay of fifteen weeks without any steps for revival is not excused
by the fact that a branch superintendent of the company assures
the insured that an arrearage does not matter, agents not having
power, under the terms of the policy, to waive conditions or receive
arrearages.4 It is held in Illinois that the assured may be justified
in believing that time for the payment of premiums is extended
17 Majestic Life Ins. Co. v. Tuttle, tual Life Ins. Co. 12 Fed. 003, 11 Ins.
58 Ind. A pp. 98, 107 N. E. 22, 45 L. J. 653.
Ins. L. .1. L37. * Sullivan v. Germania Ins. Co. 15
l8McGowan v. Supreme Council Mont. 522, 39 Pac. 742.
Catholic Mutual Benefit Assoc. 56 2McGowan v. Charier Oak Life
Bun (N. V.) 534, 58 N. Y. St. Rep. Ins. Co. 16 Fed. 125, 4 Am. L. Rec.
268. 559.
19 Robertson v. Metropolitan Life 3 Busby v. Nortb American Life
Ins. Co. 88 N. Y. 541; reversing 47 Ins. Co. 40 Md. 572, 17 Am. Rep.
N. Y. Super. Ct. 377 (two judges 634.
dissenting under the facts of the 4 Mallory v. Metropolitan Life Ins.
case). Co. 97 Mich. 416, 23 Ins. L. J. 03, 5G
20 Selvage v. John Hancock Mu- N. \Y. 773.
2552
EXCUSES, WAIVER AND ESTOPPEL § 1382
where he receives through the company's agent a circular issued
by it setting forth its liberality in extending the time for said pay-
ment.6 Unless officers of dependent or subordinate lodges are so
authorized, they have no power to waive compliance with the laws
of the higher order relating to payment of such assessments, either
to give credit therefor or by receiving them when overdue,6 although
the extent of the authority of such agents is an unsettled question.7
But certificate holders in a benefit society have the right to rely
upon a construction given to the rules and regulations of the order
by the highest tribunals of the order, and to presume that the
supreme lodge will not enforce a forfeiture under circumstances
which the board of control has held did not create one so that the
continued receipt of monthly assessments up to the date of such
member's death, constitutes a waiver of a technical forfeiture for
nonpayment of lodge dues.8 And where the treasurer of a sub-
ordinate council forwarded to the supreme treasurer the sum total
of assessments due from his council, and this included the amount
due from him, it was held a sufficient payment, although not made
through the collector, and that his widow was entitled to the bene-
fit.9 If the constitution of the endowment rank of the Knights of
Pythias vests the entire charge and full control in a board of con-
trol, and said board treats the continued receipt up to a member's
death, of assessments upon the policy or endowment as a waiver
of the right to insist upon a forfeiture, there is a waiver of non-
payment of lodge dues, for which separate accounts are kept, and
which forms no part of the consideration of the contract, it appear-
ing that the member had not been suspended, but had been re-
quested to pay before the' next meeting, before which time he died.10
So the continued receipt of assessments upon a certificate of mem-
bership in an endowment rank of the Knights of Pythias, up to
the date of the death of the member, is a waiver of any technical
forfeiture of the certificate by reason of the nonpayment of his
5 United States Life Ins. Co. v. 8 Supreme Lodoe Knights of Pvth-
Ross, 159 111. 476, 42 N. E. 859. ias v. Kalinski, 163 U. S. 289, 41 L.
6BorgTaefe v. Supreme Loda-e ed. 1(33, 16 Sup. Ct. 1047.
Knights of Honor, 26 Mo. App. 218, 9 Farrie v. Supreme Council Cath-
22 Mo. App. 127; Bouten v. Ameri- olic Benevolent Lesion, 47 Hun (N.
can Mutual Life Ins. Co. 25 Conn. Y.) 639, 15 N. Y. St. Rep. 155, affd
542; Miller v. Hillsborough Fire As- 120 N. Y. 662, 24 K E. 1104.
soc. 42 N. J. Eq. 459, 7 Atl. 895; 10 Supreme Lodge Knights of Pyth-
Illinois Masonic Benefit Soc. v. Bald- ias of the World v. Kalinski, 163 U.
win, 86 111. 479. S. 289, 16 Sup. Ct. 1047, 41 L. ed.
7 See Manning v. Ancient Order 163, aff'g 57 Fed. 348, 6 C. C. A. 373,
United Workmen, 86 Kv. 136, 5 S. 16 Sup. Ct. 1047.
W. 385, 9 Ky. L. Rep. 428, 9 Am. St.
Rep. 270.
2553
§ 1382 JOYCE ON INSURANCE
Lodge dueSj for which separate accounts were kept and which
formed oo pari of the consideration for the certificate, where the
member had not been suspended bu1 had been told to pay them
before the aexl meeting of the Lodge and died before thai time."
!f the supreme Lodge receives assessments collected by the subordi-
nate Lodge, and retains them with a knowledge of a forfeiture, it
waives the same.12 And where the secretary of the local lodge of
a mutual benefil society is frequently away from home on the last
day prescribed for payment of assessments on certificates, and for a
long time has been in the habil of accepting payments any time
prior to the date of transmitting the assessments to the supreme
body, a rule of the order that failure to pay assessments on or be-
fore the Last specified day shall of its own force suspend the cer-
tificate will he regarded as waived.13 So the subordinate order or
local subdivision may advance for him the amount of a member's
assessment..14 And where in pursuance of a custom the society
notifies insured's wife that the lodge would pay his dues during his
illness there is a waiver of nonpayment,15 If the president assumes
that the Lodge has acted upon an assessment, which is not the fact,
and directs its payment, there can be no forfeiture for its nonpay-
ment by a member.16
Where the secretary of a local lodge is not so authorized by the
the grand lodge, he does not by his habit of receiving past due
assessments waive suspension for nonpayment of assessments.17
And if a local scribe is constituted by custom the agent of the
national organization to collect dues and after they are past due he
receives but fails to remit the same to the national scribe until after
the member's death, there is no forfeiture even though the national
scribe had no knowledge at the time he received said due that in-
sured was dead.18 And acceptance of payment by an agent when
the member is not in good health, as required by the contract, does
11 Supremo Lodge Knights of Pyth- 15 Britt v. Sovereign Camp of
ias v. Wellenvoss, 11!> Fed. 671, Woodmen of the World, 17)3 Mo.
117."., 56 C. C. A. 287, 291; Supreme App. 698, L34 S. W. 1073.
Tent Knights of Maccabees v. Vol- 16 Bagley v. Grand Lodge Ancient
kert, 25 Ind. App. 627, 643, 57 N. E. Order of "United Workmen, 46 ill.
203; Baltimore Life Ins. Co. v. How- App. 411.
ard, 95 Md. 244, 258, 52 All. 397. "Chadwick v. Order of Triple Al-
12 Illinois Masonic Benefit Soc. v. lianee, fib' Mo. App. 463.
Baldwin, 86 111. 479. 18 Mosaic Templars of America v.
"Trotter v. (hand Lodge Iowa Jones, 99 Ark. 204, 137 S. W. 812, 40
Legion of Honoi*, 132 [owa, 513, 7 Ins. L. J. 1535. Also see Saucerman
L.R.A.(N.S.) 569, 109 X. W. L099. v. Court of Honor, 150 111. App. 340.
14 Seheu v. Grand Lodge Ohio Di- Examine Falkenberg v. North Amer-
vision, Independent Forresters, 17 ican Fraternal Order, 149 III. App,
Fed. 214. H22.
2554
EXCUSES, WAIVER AND ESTOPPEL § 1383
not constitute a waiver even though such agent had knowledge of
insured's physical condition, where the policy precludes waiver by
any officer or representative of the society.19 Where a member of
a mutual benefit society has, by the terms of the contract, forfeited
his rights, and ceased to be a member by nonpayment of dues,
neither waiver of the forfeiture nor an estoppel to rely upon it is
effected by a receipt by the collector of the local lodge of current
dues, pending an application for reinstatement, which must be up-
proved by the secretary of the grand lodge, and the statement of
the collector that the member is in good standing until the next
payment becomes due, where neither the applicant nor the bene-
ficiary was in any way misled thereby, especially where the collector
had been given no express or implied authority to bind the order
in that respect and his act was not ratified.20 Where the constitu-
tion of a society provided that in case a member was suspended for
nonpayment of assessments he could be reinstated upon payment
of the assessments within four months, but that if an assessment
remained due for more than four months he could only be rein-
stated by a vote of his lodge, the payment of all assessments, and
the furnishing of a health certificate, and it appeared that the mem-
ber had on several occasions let his assessments become overdue, but
had paid them all within four months, except the last one, which
he did not remit until more than four months from the date there-
of, and then the officer to whom he sent it forwarded to the insured
a copy of the constitution and by-laws, marking the provision as
to reinstatement, but retaining the money, it was held to be a ques-
tion for the jury whether the requirement as to the health certificate
and vote of the lodge had been waived.1
§ 1383. Waiver by assured of exemption from assessment: ille-
gality of assessment. — If the assured pays to the company after
his policy is surrendered the amount claimed by it prior thereto,
and which he at the time believes himself liable to pay, such act
does not constitute a waiver on his part, nor can an estoppel be based
thereon as to exemption from his liability for subsequent losses.2
19 Few v. Supreme Lodge Knights this payment, together with what the
of Pythias, 136 Ga. 181, 71 S. E. 130. defendant paid on the assessment of
20 Kennedy v. Grand Fraternity, January 5th, more than paid all his
36 Mont. 325, 25 L.R.A.(N.S.) 78 liabilities to the company up to the
(annotated on whether breach of an time of the cancelation of his policy,
insurance policy which ipso facto We think this should have discharged
terminates it may be waived), 92 Pac. the defendant from any further lia-
971_ bility. Neither the officers of the
1 Rice v. Grand Lodge, 92 Iowa, company nor the receiver ever re-
417, 60 N. W. 726. turned to the defendant his policy, or
2 Vol ford v. Church, 66 Mich. 431. intimated to him that they did not
33 N W 913. "The court finds that regard the policy canceled, while the
2555
;S4 JOYCE <>N [NSURANCE
And objection to the legality of an assessment is not waived by an
offer, thereafter withdrawn, to pay an exec-.- assessment.8
§ 1384. Waiver by assured of defective notice and service of
same. — There is no question but that the assured may waive any
objection which he is entitled to raise to a mere defect in the notice
of an assessim at. Thus, an application for reinstatement operates,
as against the beneficiary, as a waiver, of defects in the uotice.4 h
is a reasonable assumption that the form and manner of service of
a notice may be waived by the party entitled to the same, since
whatever strictness is necessary in following specified or stipulated
requirements, it is for the benefit and protection of the party en-
titled to notice, and all the circumstances should be considered in
determining whether there has been such a waiver and whether the
service is sufficient. If a party actually receives notice of an assess-
m< nt through the mail, and does not object thereto, or to the man-
ner of receiving the same, and is in no way injured by the depart-
ure from the stipulated mode, which requires either that he be
personally called on or that notice in writing to pay the assessment
be left at his last and usual place of abode or business, he will be
deemed to have waived the mode of service.6
defendant relied upon the fact that it Knights of Honor, 140 111. 301, 29 N.
was no longer of any validity; and E. 1121. "In the application for a
had the defendant's property named reinstatement no objection was made
in the policy burned at any time aft- to the notice or any of the proceed-
ed the 19th of March, 1884, I hardly ings which led to the suspension, and
think counsel for plaintiff would in the absence of objection to the no-
have been willing to admit liability tiee when Hansen had an opportuni-
to the payee named in the policy by ty to make an objection, if any exist-
the company," per the court. ed, it will be presumed that all ob-
3 Langdon v. Massachusetts Bene- jection was waived," per the court.
lit Life Assoc. 166 Mass. 316, 44 N. See §§ 1324, 1324a herein.
E. 226. 5 Hollister v. Quincy Ins. Co. 118
4 Hansen v. Supreme Lodge Mass. 478.
2556
CHAPTER XLV.
RETURN OF PREMIUMS AND ASSESSMENTS.
§ 1390. Principles governing right to return of premiums where risk has
not attached.
§ 1391. Stipulation for return of premium: generally.
§ 1392. Stipulations: statutes governing the right to a return of the pre-
mium.
§ 1393. Return of proportionate premiums: surrender, rescission, cancela-
tion, etc.
§ 1394. Stipulation may entitle to a proportionate return of premium, al-
though there be a partial or total loss of goods, etc.: sailing
with convoy.
§ 1395. Where underwriter discharged before performance of condition on
which return of proportionate premium based.
§ 1396. Where condition satisfied but underwriters discharged from loss:
premiums returnable although loss by excepted risk.
§ 1397. No return if risk has attached.
§ 1397a. Election to refund premium or pay insurance: waiver.
§ 1398. Premium returnable where policy ab initio void: generally.
§ 1399. Insurance contract with infant: return of premium.
§ 1400. Premium returnable where contract voidable or void for mis-
representations or fraud of assurer.
§ 1400a. Premium returnable where contract voidable or void for misrep-
resentation or fraud of assurer's agent.
§ 1401. Premium returnable when paid by mistake of facts: policy based
upon mistake : mistake of law.
§ 1401a. Return of premium where policy does not conform with agreement.
§ 1401b. Premium not returnable : voluntary payments under claim of right.
§ 1402. Whether premium returnable where foreign company has not com-
plied with state laws.
§ 1403. Return of premium: breach of warranty.
§ 1404. Premium returnable for misrepresentation or concealment of as-
sured without fraud.
§ 1404a. Same subject: knowledge of insurer's agent where both parties
act in good faith.
§ 1405. Premium not returnable: policy illegal: parties in pari delicto.
2557
JOYCE ON INSURANCE
§ l 105a. Return of premium: ultra vires contracts.
§ lint:. Premium uoi returnable: policy void for fraud or material mis-
representations of assured or his agent.
§ ll()7. Premium qo! returnable: material alteration of policy.
§ L407a. Return of premiums: demand for additional medical examination.
§ 1408. Return of premium: breach of contract by assurer.
§ 1 K)S;i. Same subject : transfer of assets to another company: winding- up:
reorganization: change of insurance plan.
§ l msb. Same subject : insolvency.
§ 1408c. Same subject: insolvency of foreign mutual (ire insurance com-
panies.
§ 1 Ids. I. Same subject : insolvency of title insurance company: credit insur-
ance company.
>; 1 408e. Same subject: discrimination as to rates: rebates.
§ 1408f. Same subject: reduction of amount of insurance.
§ 1408g. Same subject: increase of assessments.
§ 1408h. Same subject: reinsurance.
§ 1409. Return where note is given.
§ 1409a. When no return where note is given.
§ 1 11(1. Return for want of interest.
§ 1410a. Same subject: when no return.
§ 1410b. Return where insurance without consent of insured.
§ 1410c. Same subject: statutes.
S 1410d. Payment by check of municipal corporation: misappropriated
funds: recovery back.
Proportionate return: overvaluation: short interest.
Whether premium returnable for overinsurance by several in-
surers: pro rata contribution.
Same subject: opinions of the text-writers.
Same subject: the case of Fisk v. Masterman.
Same subject : code provisions.
Same subject: the rule as to double insurances.
Same subject: summary and conclusion.
Stipulations for return of premium: prior and subsequent in-
- surances: the American clause.
When no return in case of several policies.
Premium not returnable when risk entire.
Premium returnable when risk divisible.
Return of premium: effect of usage: review of authorities.
Same subject: conclusion.
Stipulation for return of premium: "sold or laid up."
§ 1425. Return of premium: retention of a certain per centum by the
insurer.
§ 1426. Return of premium: insurance by voluntary agent.
2558
§
1411.
§
1412.
§
1413.
§
1414.
§
1415.
§
1416.
§ 1417.
§
1 lis.
§
1419.
§
1420.
§
1421.
§
1422.
§
1423.
§ 1424.
/
RETURN OF PREMIUMS AND ASSESSMENTS § 1390
§ 1427. Recovery back of premium from agent.
§ 1428. Who may recover back. premium.
§ 1 128a. Name subject: beneficiaries.
§ 1421). Return of premium: assignment: right of assignee.
§ 1429a. Tender or return of premium as prerequisite to defense or for-
feiture.
§ 1429b. Return or tender of premiums as affecting waiver.
§ 141)0. Return of premium: miscellaneous authorities.
§ 1390. Principles governing right to return of premiums where
risk has not attached. — Insurance in a contract. Its very definition
imports the payment of a consideration or price on the part of the
assured, and the assumption of a risk or peril by the assurer. The
premium or cost of insurance is fixed or adjusted with reference to
the risk or peril assumed. Premium and risk are both of the very
essence of the contract, and each is dependent upon and insepar-
able from the other. The very life of the contract involves the pre-
sumption of a risk, and the assurer is paid the premium or price of
insurance to take upon himself the peril or event insured against.
It therefore necessarily follows that if the risk has not attached, or
if no part of the interest insured is exposed to any of the perils in-
sured against, the insurer has no claim to the premium ; if paid, it
must be returned 6 in the absence of fraud by insured.7
6 Illinois. — iEtna Life Ins. Co. v. England. — Mason v. Sansbury, 3
Paul, 10 Bradw. (111.) 431. Doug. 61; Wells v. Abraham, L. R.
Indiana. — Supreme Tribe of Ben 7 Q. B. 554; Davidson v. Case, 8
Hur v. Lennen, — Ind. App. — , 93 Price, 542, 1 Eng. Rul. Cas. 141;
N. E. 869. Dawkes v. Coveneigh, Styles, 346, 1
Kentucky. — Dixie Fire Ins. Co. v. Hale's P. C. 546; Flint v. Fleming',
Wallace, 153 Ky. 677, 156 S. W. 140. 1 Barn. & Adol. 45, 13 Eng. Rul. Cas.
Massachusetts. — Foster v. United 693.
States Ins. Co. 11 Pick. (28 Mass.) See also 2 Arnould on Marine Ins.
85; Penniman v. Tucker, 11 Mass. 66. (ed. 1850) 1225, *1210; Id. (8th ed.
Minnesota.— National Council Hart & Simey) sees. 1247-1251, pp.
Knights i& ; Ladies of Security y, Gar- i502-1510; 1 Duer on Marine Ins.
ber, 131 Minn. 16 154 N W. 512; (ed. m5) 2fj0 201 and CMes under
Parsons Rich & Co v Lane (Re notes following in this section. See §
Millers' & Mfrs. Ins. Co.) 9/ Minn. i™0 i ■ & , -,-, ,. , °
98, 4 L.R.A.(N.S.) 231, 106 N. W. ^JS^S*"1. f8. to English statute.
4g- ' It the risk has never attached un-
New York.— Elbers v. United Ins. df a fire, Polic-y> there must> in the
Co. 16 Johns. (N. Y.) 128 129. absence or fraud by the insured, be a
Ohio. -- Connecticut Mutual Life return of premium: Jones v. Insur-
ing Co. v. Pyle, 44 Ohio St. 19, 58 ance Co. 90 Tenn. 604, 25 Am. St.
Am. Rep. 781, 4 N. E. 465. Rep. 706, 18 S. W. 260. See also
Wisconsin. — Blaeser v. Milwaukee Millers' & Manufacturers' Ins. Co.,
Mutual Ins. Co. 37 Wis. 31, 19 Am. In re, 97 Minn. 98, 4 L.R.A.(N.S.)
Rep. 747. 231, 106 N. W. 485; Metropolitan
2559
§ L390
JOVCI-: (>.\ INSl'l.'AN'CK
In this connection the rule as stated by Lord Mansfield, in a case
decided in the court of King's Bench in 1777, has been 8 extensively
quoted and relied on by the courts and English and American law-
writers. Thai eminenl jurist says thai if the risk has not been run,
whether owing "to the fault, will, or pleasure of the assured, or to
any other cause, the premium shall be returned," and his reasons
are substantially those above given. So, also, in another case he
uses substantially the same words, and says: "If the risk lie not
run. though it be by the neglect, or even the fault, of the insured,
yel the insurer shall nol retain the premium."9 So Emerigon,
quoting from Pothier, says: "As the premium is the price of the
risks thai the insurers are to run, and as there can be no price of
risks when the insurers have not run any, this obligation to pay the
premium naturally includes the tacit condition, if the insurers run
the risk : " and thai if the assurers have not run any risk, "although
by the act of the insured, the premium shall not be due to the in-
surers, . . . and if it had already been paid them, they will
be bound to return it; . . . so if merchants have effected in-
surance on goods, which they propose to load on board a certain
ship, but, having changed their minds, the shipment is not made.
the premium of insurance on these goods shall not be due to the
insurers, who have not in this case run any risk." 10 If the voyage
insured never commences, or it be entirely broken up before the
departure of the vessel, so that the ship never sails on such voyage,
even by the act or fault of the insured, or if the voyage becomes
void by a failure of the warranty, there being no actual fraud, the
insured is entitled to a return of the premium, for the risk must
attach to warrant the retention of the price paid. This rule is un-
disputed.11 So where a vessel sails on a voyage different from the
/
Life Ins. Co. v. Bowser, 20 Ind. App.
557, 50 N. E. 86. See § 140G herein.
8 Tvrie v. Fletcher, Cowp. 666, 14
Eng. Rul. Cas. 502.
9 Stevenson v. Snow, 3 Burr. 1237.
10 Emerigon on Ins. (Meredith's
ed. L850) c. wi. sec. 1, p. 656. See
also this reference for review of law
as stated by the early foreign auth-
ors. See also 2 Marshall on Ins. (ed.
1810) c. xv. sec. '-', pp. 652 et seq. ;
Bermon v. Woodbridge, 2 Doug. 781,
14 Eng. Rul. Cas. 507, per Lord
Mansfield; Tvrie v. Fletcher, Cowp.
666, 1 1 Eng. Rul. Cas. 502, per Lord
field.
11 Marine [ns. Co. of Alexandria
v. Tucker, 3 Cranch (7 U. S.) 357, 2
L. ed. 466; Russell v. De Grand, 15
Mass. 35; Penniman v. Tucker, 11
Mass. 66; Merchants' Ins. Co. v.
Clapp, 11 Pick. (28 Mass.) 56; Com-
monwealth Ins. Co. v. Whitney, 1
Met. (42 Mass.) 21,23; Waddington
v. United States Ins. Co. 17 Johns.
(N. Y.) 23; Lawrence v. Ocean Lis.
Co. 11 Johns. (N. Y.) 241; Murray v.
Columbian Ins. Co. 4 Johns. (N. Y.)
443; Richards v. Marine Ins. Co. 3
Johns. (N. Y.) 307; Murray v. Unit-
ed Ins. Co. 2 Johns. (N. Y.) 168;
Robertson v. United Ins. Co. 2 Johns.
Cas. (N. Y.) 250, 1 Am. Dec 166;
Jackson v. New York Ins. Co. 2
Johns. Cas. (N. Y.) 191 ; Delairgue
v. United Ins. Co. 1 Johns. I 'us. (X.
2560
RETURN OF PREMIUMS AND ASSESSMENTS § 1391
one insured, the insured is entitled to a return of the premium; 12
and the premium is to be returned which is paid for insurance
against a blockade erroneously supposed to exist.13 So also if the
goods are not shipped,14 or if the risk never attached on the goods,
the insurance being on ship and cargo, tlie cargo not being loaded.15
So also if the policy be void ab initio through fault of the insured,
without fraud, or if there be a want of insurable interest.16
And in general this principle of an attachment of the risk governs
the right to a return of the premium in all cases subject to such
exceptions as are noticed under the subsequent sections of this chap-
ter.
Again, where a note is left in escrow to be delivered upon issu-
ance of a policy after the applicant had passed a satisfactory medi-
cal examination, and said note was wrongfully obtained from escrow
and transferred to the state agents of insurer and insured paid a
judgment thereon obtained by said agents, and no policy was ever
issued it was held that it was immaterial whether payment was vol-
untary or compulsory and that a demurrer to a complaint setting
out substantially the above facts was properly overruled where a
statute provided in substance for a return of the premium paid
where insurer has incurred no risk or liability under the policy for
which the premium was paid.17
§ 1391. Stipulation for return of premium: generally. — It is
competent for the parties to stipulate that under certain conditions
or the happening of some event, or the not happeningv of a specified
contingency, a part of the premium shall be returned. Such
stipulations may lawfully be, and should be, inserted in the policy,
or otherwise made a part of the contract, and when so made are
enforceable. Such agreements may be required by statute, as
where a standard form of fire policy is provided, or the stipulation
may exist by virtue of some code provision, with reference to which
Y.) 310; Dus:uet v. Rhinelander, 1 1, pp. 51, 52; c. xvi. see. 1, pp. 650,
Johns. Cas. (N. Y.) 360, rev'd 1 652-54.
Caines Cas. xxv. ; 2 Johns. Cas. 476; 12 Forbes v. Church, 3 Johns. Cas.
Graves v. Marine Ins. Co. 2 Caines (N. Y.) 159.
(N. Y.) 339; Audley v. Duff, 2 Bos. 13 Taylor v. Sumner, 4 Mass. 56.
& P. Ill ; Siffkin v. Alnutt, 1 M. & 14 Martin v. Sitwell, 1 Show, 156 ;
S. 39; Penson v. Lea, 2 Bos. & P. Toppan v. Atkinson, 2 Mass. 365.
330; Martin v. Sitwell, 1 Show, 156; 15 Hornever v. Lushington, 15
Bermon v. Woodbrids?e, 2 Doug. 781, East, 46, 48, *50, *51, 13 Eng. Rul.
14 Eng. Rul. Cas. 507; Boehm v. Cas. 637.
Bell, 8 Term Rep. 154; Horneyer v. 16 See §§ 1398, 1400, 1405, 1410
Lushington, 15 East, 46; 3 Camp. 85, herein.
13 Eng\ Rul. Cas. 637; Emerigon on n Grabinski v. United States An-
Ins. (Meredith's ed. 1850) c. Hi. see. nuity & Life Ins. Co. 33 S. Dak. 300,
Joyce Ins. Vol. III.— 161. 2561
-"7
§1392 JOYCE ON INSURANCE
the contract is assumed to h ive been made, and wnich may thereby
become a part thereof.18
So in accidenl policies it may be stipulated thai qo claim shall
be valid in excess of a specified sum in case of death, or in excess
0f a certain sum payable periodically in case of injury, nor for in-
demnity in excess of the money value of the insured's time., and
iliat all premiums paid for such excess shall be returned on demand
to the insured or his le.ual representative.19 So a limitation may
be imposed by insurer upon its liability for premiums paid in
insured, at the date of the policy, was not in sound health.20
And a receipt for the premium given by solicitors, to whom the
manager had authority to delegate his powers, may stipulate for a
return thereof if the risk is rejected.1 So effect will be given a
clause in the receipt for the premium advanced that it will be re-
turned if no notice is given applicant within a certain time of action
on the application, and this applies even though the policy has
been issued and forwarded but has not been received by the ap-
plicant. Such a case differs from that where the insurance is to
run from the date of the application.2 And insurer is obligated k>
return a note given for the premium where it so agrees to do in
case the application is rejected.8 So insured is entitled to a return
of part of the premium paid under a stipulation that it should be
returned should the vessel be employed in a specified trade during
the '•whole currency of this policy" and it is so employed.4
§ 1392. Stipulations: statutes governing the right to a return of
the premium. — In some of the states statutes have been passed pro-
viding for a return of unearned premiums, in cases of lire risks, for
the excess of insurance over the loss.6 But several states have adopt-
145 N. W. 553; Civ. Code, sees. 1862. 03 Tex. 144, 53 S. W. 1014, 20 Ins.
L863. L. J. 131.
18 1 Marshall on Ins. (ed. 1810) "Mutual Life Ins. Co. v. Gorman,
660a, *670; 2 Arnould on Marine 19 Ky. L. Rep. 295, 40 S. W. 571, 26
[ns. (ed. 1850) 1246, sec. 426; 2 Id. Ins. L. J. 101 I.
(8th ed. Hart & Simey) see. 1263, p. 4 (Josshodd Steamship Co. v.
1520. Sec sections following herein. Forbes, 5 Coml. Cases, 43.
Express stipulation as to return, B Hawaii — Rev. Laws 1905, sec.
see 17 Earl of Ealsbury's Laws of 2622.
England, see. 981, p. 498. See § Idaho.— Civ. Code 1901, see. 2235 ',
1 mil!, herein. Rev. 1881-87, sec. 2759.
19 Taken from form of accident Louisiana. — Const. & Rev. Laws
policy. L904, p. 861 ; Ins. Laws 1906, pp. 23,
20 (ire-eric v. Prudential Ins. Co. 31, sec. 15; acts 1888, no. 1 19.
165 HI. App. 570. Massachusetts.- Acts & Ives. 1!)0/.
1 Mutual Life Ins. Co. v. Herron, e. 576, sec. 57, p. 882.
79 Miss. 381, 30 So. 691. Nevada.— Comp. Laws 1900, sec.
2 Mutual Life Ins. Co. v. Elliott, 921; Gen. Stats. 1885, sec. 993.
2562
RETURN OF PREMIUMS AND ASSESSMENTS . L392
ed laws providing that in fire policies the amount fixed in the
policy shall be taken conclusively to be the true value of the prop-
erty when insured and the true amount of loss; 5a while in Califor-
nia the code provides at length as to when premiums are returnable
and when not.6 So in that state and in other states there are stat-
utory provisions for return of premiums for fraud etc. of insurer,
or wrhere by default of insured other than actual fraud no liability
is incurred by assurer.7 And a code which provides in substance
for a return of the premium paid where the insurer has incurred,
no risk or liability under the contract for which the premium was
paid, is in accord with the common law rule and necessitates a pay-
ment of a premium as a condition precedent to an action for its
return.8 There are also provisions relating to the return of the
unearned premium where the assured rescinds or the assurer cancels
the policy,9 or in case of over-insurance by several insurers.10
Again, the marine insurance act of 1906, of England, expressly
provides for return of premiums or a proportionate part thereof;
the enforcement thereof; for return by agreement, and for failure
of consideration ; also where the policy is void, or avoided by insur-
er; where the risk has not attached; where there is no insurable
interest; where the interest is defeasible; and where there is over-
insurance.11
North Carolina^.
4756.
Oregon. — Bellinger & Cotton's
Ann. Code & Stats. 1902, sec. 3737;
2 Hill's Annot. Stats. 1887, sec. 3585.
Virginia. — Acts 1906, c. 112, sec.
30, p. 140.
Washington.
sec. 2740.
Rev. 1905, see. 145 N. W. 553; Civ. Code, sees. 1862,
1863.
9 See §§ 1634, 1635 herein.
10 See § 1415 herein.
11 Marine Ins. act 1906 (6 Edw.
VII. c. 41) sees. 82-84; Butter-
worth's 20th Cent. Stat. (1900-1909)
Hill's Stats. 1891, "Insurance" p. 421 ; 17 Earl of Hals-
bury's Laws of England, sec. 780, p.
5aAs to valued policy laws, see §§ 496; 2 Arnould on Marine Ins. (8th
163 et seq. herein
ed. Hart & Simey) sec. 1247a, pp.
6 Cal. Civ. Code sees. 2617-22. See 1503-1505. Said statute provides :
Dak. Civ. Code sees. 1542-1544, and
decision thereunder, § 1409 herein.
7 California^— €iv. Code 1903, sees.
2617-2619.
1/ o)i tana. — Rev. Code 1907, sees.
5617-5619.
"(a) If already paid, it may be
recovered by the assured from the in-
surer; and
"(b) If unpaid, it may be re-
tained by the assured or his agent.
Where the policy contains a stipula-
tor^ Dakota. — Rev. Code 1899, tion for the return of the premium,
sees. 4514-4518. or a proportionate part thereof, on
South Dakota. — Civ. Code 1903, the happening of a certain event, and
sees. 1862-1867. See §§ 1400, 1406 that event happens, the premium^ or,
herein. as the ease may be, the proportion-
8(!rahinski v. United States An- ate part thereof, is thereupon ret urn-
nuity & Life Ins. Co. 33 S. Dak. 300. able to the assured.
2563
[93 J01 I E <»N iXM RAN< E
§ 1393. Return of proportionate premium: surrender, rescission,
cancelation, etc. — It is a general rule thai if the risk has once at-
tached, the insurer cannol thereafter entitle himself to a return of
the premium, by giving notice of his intention to terminate the
contract, uor can he do so by rejecting the policy where the risk
has commenced; for he cannol by his own act release himself from
his obligations, and compel the underwriter to relinquish his con-
tracl and return the premium which has hern earned.12
But if the code, in relation to which a contract is assumed to
have been made, provide- that if insurance is made for a definite
period of time the insured shall be entitled, upon a surrender of
"Where the consideration for the "(d) Whore the assured has a de-
paymenl of the premium totally fails, feasible interesl which is terminated
and there has been ao fraud or i lit*- during the currency of the risk, the
gality on the part of the assured or premium is not returnable;
lus agents, the premium is thereupon "(e) Where the assured has over-
returnable to the assured. Where insured under an unvalued policy, a
the consideration for the payment of proportionate part of the premium is
the premium is apportionable and returnable.
there is a total failure of any appor- "(f) Subject to the foregoing pro-
tionable part of the consideration, a visions, where the assured has over-
proportionate part of the premium insured by double insurance, a pro-
is, under the like conditions, there- portionate part of the several pre-
iipou returnable to the assured. miums is returnable; provided that,
"(3) In particular: (a) where the if the policies are effected at different
policy is void, or is avoided by the times, and any earlier policy has at
insurer as from the commencement any time borne the entire risk, or if
of the risk, the premium is returnable a claim has been paid on the policy,
provided that there has been no fraud in respect of the full sum insured
or illegality on the part of the as- thereby, no premium is returnable in
sured; hut if the risk is not appor- respect of that policy, and when the
tionable, and has once attached, the double insurance is effected knowing-
premium is not returnable. ly by the assured no premium is re-
"(b) Where the subject-matter in- turnable."
sured, or part thereof , has never been 12 New York Fire & Marine Ins.
imperilled, the premium, or, as the Co. v. Roberts, 4 Duer (11 N. Y.
case may be, a proportionate part Super. Ct.) 141; Leonard v. Wash-
thereof, is returnable: Provided that burn, 100 Mass. 251; Langhorn v.
where the subject-matter has been. in- Cologan, 4 Taunt. 330, per Lord
sured 'lost or not lost' and has ar- Mansfield. "When the contract, is
lived in safety at the time when the yet imperfect and inchoate, the as-
contraet is concluded, the premium sured by preventing the inception of
is i i < > t returnable unless, at such time, the risk . . . may prevent it
the insurer knew of the safe arrival: from becoming operative, and in ef-
"(c) Where the insured has no in- feet dissolve it, but in no other case
surable interest throughout the cur- can he release himself by his own aet
I'ency of the risk', the premium is re- from his own obligations" so as to
turnable, provided that this rule does entitle him to a return premium: 1
not apply to a policy effected by way Duer on Marine Ins. (ed. 1845) 82,
of gaming or wagering; 143.
2564
RETURN OF PREMIUMS AND ASSESSMENTS § 1393
his policy, to such proportion of the premium as corresponds with
the unexpired term, after deducting from the whole premium ;m\
claim for Loss or damage which has previously accrued under the
policy,13 and the grounds of cancelation are set forth in other sec-
tions of the code, the assured is not entitled to cancel the policy
without cause, and to insist upon such proportionate return of the
premium, unless there is a right of cancelation reserved in the pol-
icy itself.14
In the standard fire policy in New York it is stipulated that if
the policy is canceled as provided therein, or shall become void or
cease, and the premium has been actually paid, the unearned pre-
mium shall be returned on surrender of the policy or last renewal,
the company retaining the customary short rate, except that where
the policy is canceled by the company by giving notice, it shall
retain only the pro rata premium. It is also provided that the
policy may be canceled at any time at the request of the insured
or by the company, by giving notice as provided therein.15 Tf the
policy provides for cancelation by either party and a return of the
unearned premium pro rata, the payment of the earned premium
cannot be avoided by the assured on the ground that the policy is
void, but he must offer to surrender the policy or demand a return
of the premium ; 16 and a party seeking a rescission is liable for any
part of the premium which may have matured previous to such
rescission.17 An agreement for a return of a fair proportion of the
premium, in case the policyholder wishes to cancel the contract, is
not void for uncertainty,18 and although we have elsewhere con-
sidered this subject 19 it may be stated here, that where the right to
cancel by giving notice and refunding a rateable proportion of the
premium is reserved the return premium must be paid or tendered
by the company, otherwise there is no cancelation, and the policy
13 Cal. Civ. Code sec. 2617. New Jersey, North Carolina, North
14 Joshua Hendy Machine Works Dakota, Rhode Island, and West Vir-
v. American Steam Boiler Ins. Co. 86 ginia following the New York form.
Cal. '248, 21 Am. St. Rep. 33, 24 Pac. The standard forms, however, of such
1018. other states as have adopted one by
15 3 N. Y. Rev. Stats. (8th ed.) p. force of the statute differ from that
1663; Laws 18S6, c. 488, am'd by L. of New York, see §§ 176 et seq. liere-
1887, c. 429; L. 1901, c. 513; L. 1903, in.
c 106 ; N. Y. Ins. L. 1909, c. 33, sec. 16 St. Paul Fire & Marine Ins. Co.
121, Consol. L. c. 28, am'd L. 1910, v. Neidecken, 6 Dak. 494, 43 N. AY.
c. 168, 638, 668; L. 1913, c. 181. (See 696.
§§1648, 1671 herein.) As we have n American Ins. Co. v. Garrett, 71
.stated elsewhere herein there are a Iowa, 243, 32 N. W. 356.
number of states which have adopted 18 Hayward v. Knickerbocker Life
a standard form of fire insurance pol- Ins. Co. 12 Daly (N. Y.) 42.
icy, those of Connecticut, Louisiana, 19 See §§ 1671-1673 herein.
2565
393 JOYCE ON INSURANCE
continues in force until such tender or payment is made, and this
although the company has notified the insured or has announced
its readiness to pay,20 even though the company notifies the as-
sured^ agenl thai it is ready to pay it, but does not do so in fact
until nt'tcr the loss;1 And if the unearned premium is paid and
accepted by tli«' assured after the loss, both parties being ignoranl
thereof, the company is nut thereby released from its liability.2
It' the assured accept in full satisfaction less than a ratable return
of his premium upon cancelation, it is sullicient.3
It is held in Illinois that notice alone is sufficient, although stip-
ulation is to return to the assured the unearned premium, where
it is also stipulated that the cancelation may be made "at any time
by cither party."4 And actual tender of the unearned premium
is held unnecessary in Wisconsin, provided the minds of the parlies
have met on the point that the policy is to be canceled.5 Nor is
payment or tender required under a New Jersey decision.6
The insured is estopped or waives his rights if he voluntarily, at
the agent's request, surrenders the policy without exacting pay-
20 Georgia.— Hollingsworth v. Ger- 138 Am. St. Rep. 906, 105 Pac. 354,
mania Ins. Co. 45 Ga. 294, 12 Am. 39 Tns. L. J. 170.
Rep. 579. Pennsylvania. — Philadelphia Linen
Illinois. — Peoria Marine & Fire Co. v. Manhattan Fire Ins. Co. 8 Pa.
Ins. C«>. v. Botto, 47 111. 516; Kinney Dist. Rep. 261, 56 Leg. Int. 212.
v. Caledonian Ins. Co. 148 111. App. But compare El Paso Reduction
260. Co. v. Hartford Fire Ins. Co. (U. S.
Kansas. — Manlove v. Commercial C. C.) 121 Fed. 937; Backno v. Ex-
Mutual Fire Ins. Co. 47 Kan. 309, 27 change Fire Ins. Co. 49 N. Y. Supp.
Pac. 979, 21 Ins. L. J. 174. 677, 26 App. Div. 91. See notes 13
Maryland, — German Union Fire L.R.A.(N.S.) 884, 889.
Tns. Co. v. Fred G. Clarke Co. 116 l Hollingsworth v. Germania Ins.
Md. 622, 39 L.R.A.(N.S.) 829, 82 Co. 45 Ga. 294, 12 Am. Rep. 579.
Atl. 974. 2 Hollingsworth v. Germania Ins.
Michigan. — Metropolitan Life Ins. Co. 45 Ga. 294, 12 Am. Rep. 579.
Co. v. Freedman, 159 Mich. 114, 32 8iEtna Ins. Co. v. Weissinger, 91
L.R.A.(N.S.) 298n, 123 N. W. 547; Ind. 297.
Heme Ins. Co. v. Curtis, 32 Mich. * Newark Fire Ins. Co. v. Sam-
402. mons, 11 111. App. 230. See § 1073
Montana. — Savage v. Phoenix Ins. heroin.
Co. 12 Mont. 458, 33 Am. St. Rep. 6 Bin»ham v. North American Ens.
591, 31 Pac. 66. Co. 74 Wis. 498, 43 N. W. 494. See
New York. — Tisdell v. New Hamp- § 1673 herein.
-mire Fire Ins. Co. 155 N. Y. 163, 40 6 Davidson v. German Ins. Co. 74
L.R.A. 71;:.. Id X. E. 664; Van Valk- N. J. L. 487, 13 LR.A.(N.S.) 884n,
enburgh \. Lenox Fire Tns. Co. 51 N. 65 Atl. 696.
Y. 465; Hathorn v. Germania Ins. On return of premium as condi
Co. 5.") Barb. (N. Y.) 28. tion of cancelation, see notes in 13
Oklahoma, -- Taylor v. Insurance L.R.A.(N.S.) 884, and L.R.A.1915F,
€o. oi' North Amciira. 25 Okla. 92. 444.
2566
RETURN OF PREMIUMS AND ASSESSMENTS § 1394
ment as a condition precedent.7 If the policy provides that if i1
shall become void or cease, the premium being actually paid, the
unearned premium shall be returned on surrender of the policy,
and there is a breach of condition as to vacancy, the policy musl
be surrendered or the insurer is not bound to return any unearned
premium.8 The right to recover unearned premiums on the termi-
nation of insurance in a mutual company, does not exist until the
dues or liabilities which the insured may be liable to pay under the
charter and by-laws of the organization can be ascertained and de-
ducted, where the charter provides for withdrawal by notice and
"paying all dues and liabilities." 9
§* 1394. Stipulation may entitle to proportionate return of pre-
mium, although there be a partial or total loss of goods, etc.: sailing
with convoy. — If there be a stipulation for the return of a propor-
tionate part of the premium if the ship "sails with convoy and
arrives," the condition is so far performed that there shall be a re-
turn of the premium agreed upon: 1. If the ship sails with con-
voy, and actually arrives at the ultimate port of destination although
she does not arrive with convoy ; 2. If having departed with convoy
the ship herself arrives, although the policies be upon other inter-
ests, such as goods or freight, and there be a partial loss of the goods,
as the subject of indemnity, and the safe arrival of the goods con-
stitutes in such case no part of the question as to return of pre-
mium; 3. If the ship arrives, and before she has completed un-
loading her cargo is captured, and the residue of the goods are
thereby totally lost; 4. If the ship departs with convoy, intending
to join convoy for the whole trade at a port at which she is at
liberty to touch and stay, and the convoy with which she sails be-
coming lost the ship runs for and arrives at the port of destination ;
5. If the ship arrives, having sailed with convoy, though being
captured and recaptured, the underwriters are obliged to pay the
salvage. But it will not avail the assured that the arrival was pre-
vented by an act under which the underwriters would be discharged,
and if the ship is to sail with convoy from one port to another, and
7 Bingham v. North American Ins. premium as condition of cancelation,
Co. 74 Wis. 498, 43 N.W. 494; Buck- see notes in 13 L.R.A.(N.S.) 889,
ley v. Citizens' Ins. Co. 188 N. Y. L.R.A.1915F, 444.
309, 13 L.R.A.(N.S.) 889n, 81 N. E. 8 Schmidt v. Williamsburgh City
165; George Hotel Co. v. Liverpool Fire Ins. Co. 95 Neb. 43, 51 L.R.A.
& London & Globe Ins. Co. 106 N. Y. (N.S.) 261, 144 N. W. 1044.
Supp. 732, 122 App. Div. 152. See 9 State Mutual Fire Ins. Co. v.
§ 1673a herein. See Hopkins v. Brinkley State & Heading Co. 61
Phoenix Ins. Co. 78 Iowa, 344, 43 N. Ark. 1, 29 L.R.A. 712, 54 Am. St.
W. 197. Rep. 191, 31 S. W. 157.
On waiver of return of unearned
2567
g L395
JOYCE <>\ [NS1 RANCE
from convoy to thai port to the port of destination, il being stipu-
lated to return different portions of the premium for cadi stage of
tin- voyage, the word "arrives" must refer to the ultimate pori of
destination, and the ship must actually arrive.10 And where the
ship was warranted to deparl with convoy from England, on a voy-
age from Hull to Bilboa, and she sailed from Hull to Portsmouth,
and from there with convoy, which was not the direct course, and
was captured, the premium was apportioned, return being made
excepl as to that part of the voyage from Hull to Portsmouth, for
which the premium was retained!11
§ 1395. Where underwriter discharged before performance of
condition on which return of proportionate premium based. — If the
underwriter be discharged before the condition can be complied
with, on performance of which the additional premium paid is
stipulated to be returned, as in case the underwriter is discharged
10 Simonds v. Boydell, 1 Doug. 255,
per Lord Mansfield (policy on
goods); Horncastle v. Haworth, Sir
J. Mansfield, C. J., in 180(5, report-
ed in 1 Marshall on Ins. (ed.
1810) *G74; Audley v. Duff, 2 Bos.
& P. Ill, per Lord Eldon; Everard
v. Hollingsworth, 2 Bos. & P. Ill,
note; Aguilar v. Rodgers, 7 Terra
Rep. 421, per Lord Kenyon and
Grose and Lawrence, Justices (pol-
icy on freight) ; Kellner v. Le Mesur-
ier, 4 East, 396, per Lord Ellen-
borough; L! Arnould on Marine Ins.
(ed. 1850) 1246, *1232 et seq. ; 2
Marshal] on Ins. (ed. 1810) 669a,
" ' i 7 < ) et seq. See 1 Parsons on Ma-
rine [ns. (ed. 1868) 514; 2 Phillips
on Ins. (3d ed.) 522, sec. 1840. But
see on lasl point, Levin v. Cormac, 4
Taunt. 482, note; Ogden v. Firemen's
Ins. Co. 12 Johns. (N. Y.) 114. Of
the above cited cases in that of Si-
monds v. Boydell the full value stip-
ulated was allowed on the whole
amount of insurance, in addition to
an average loss paid by the under-
writers. In Horncastle v. Haworth
the stipulated return of premium was
recovered, in addition to a total loss.
And Lord Mansfield declared in
the Simonds v. Boydell ease that if
it had been meant that no re-
turn should be made unless all the
goods arrive safe, it would have been
stipulated that the ship "arrive with
all the goods" or "safety with the
goods." And in the Kellner v. Le
Mesurier case it was declared that the
words ''and arrives" annex a condi
tion which overrides and governs all
the several stipulations for a return
of the premium, and meant a sailing
with convoy for the different parts
of the voyage as stipulated, and that
the aggregate of the different por-
tions of the premium should then be
returnable if the ship arrived at the
ultimate port of destination, for
whatever benefit would be derived
from sailing with convoy would not
be derived to the underwriters in
case of partial convoy only. The
rule above stated, however, does not
apply where the stipulation is mere-
ly to sail with convoy; the fact that
she has so sailed does not warrant a
recovery of the stipulated propor-
tionate premium in addition to a to-
tal loss, though in this case the whole
amount of the premium was added
to the invoice and included in the to-
tal loss: Langhorn v. Alnutt, 4 Taunt.
510, before Sir J. Mansliehl ; 2 Arn-
ould on Marine Ins. (ed. 1850) 1250.
As to marine ins. act 1906 of Eng-
land, see § ]'.Y.)'2 herein.
"Rothwell v. Cooke, 1 Bos. & P.
172.
5G8
RETURN OF PREMIUMS AND ASSESSMENTS §§ 1396, 1397
by a breach of warranty as to the time of sailing before the ship can
sail with convoy, il being stipulated for a proportionate return of
premium if the ship sails with convoy and arrives, there shall be a
return of the premium stipulated as to convoy.12
§ 1396. Where condition satisfied but underwriters discharged
from loss: premium returnable although loss by excepted risk. — If
the condition is satisfied on the performance of which a propor-
tionate return of the premium is stipulated to be made, as in case of
a condition for such return "for return," and both ship and goods
arrive safely, the insured is entitled to the agreed upon proportion-
ate return of premium, although after the arrival the goods are
seized in the ship's port of discharge before they can be unloaded,
and although the loss is by an excepted risk, or one not insured
against. In this case the risk on the goods was to continue until
they wero discharged and safely landed, with a warranty to free
from capture or seizure in the ship's port of discharge, and the
underwriters were discharged from the loss.13 Mr. Phillips, rely-
ing upon this and other cases, says they "favor the equitable con-
struction that the condition of arrival or other event on which the
return is to depend is satisfied by the underwriters being exoner-
ated." 14
§ 1397. No return if risk has attached. — If a legal risk has once
attached or commenced, there shall be no apportionment or return
afterward of the premium, so far as that particular risk is con-
cerned. Diminution in its duration has no effect to decrease the
amount stipulated as the premium or price for renewing the risk,
for it is sufficient to preclude a return that the insurer has been
liable for any period, however short. This rule is based upon just
and equitable principles, for the assurer has, by talcing upon him-
self the peril, become entitled to the premium, and although the
rule may result in profit to the insurer, it is but a just compensa-
12 Meyer v. Gregson, 3 Doug. 402, 14 2 Phillips on Ins. (3d ed.) 523,
reported in 1 Marshall on Ins. (ed. see. 1811, citing Kellner v. Le Mcsur-
1880) 658, 676, per Lord Mansfield, ier, 4 East, 396; Dalgleish v. Brooke,
and Justices Ashurst and Buller, as 15 East, 295; Ogden v. Firemen's
to marine ins. act 1906 of England, Ins. Co. 12 Johns. (N. Y.) 114. In
see § 1392 herein. this last ease the condition was not
13 Dalgleish v. Brooke, 15 East, literally fulfilled, hut the court by
295. Mr. Arnould says: "It is no construction held that the risk was
objection to the claim for a return divisible, and that the event contem-
of premium that the loss was not one plated was that the underwriters
insured against provided the ship should run no risk between certain
have arrived :" 2 Arnould on Marine ports, which having happened, the
Ins. (ed. 1850) 1250, *1236, relying premium should be returned.
on this case. As to marine ins. act
1906 of England, see § 1392 herein.
2569
-i L397
JOYCE ON [NSUEANCE
tioD for the dangers or perils assumed; besides the danger incurred
may be greater in one moment than during an entire voyage, and
it would be extremely difficult, a1 the least, to fairly apportion the
premium.16
So it is held in Maine thai the liability of an insurance company
for a return of premiums is not absolute, but depends upon wheth-
er ilif policy lias become a binding contract between the parties.
If it has, and the risk has commenced, there can be no apportion-
ment, and no action lias for the recovery of premiums paid.16 If
one insures the profits of a ship and the ship returns in ballast, the
insured is qo1 entitled to a return of the premium.17 And the
-line rule applies where a return of premium is sought on the
ground of a want of interest, the risk having been run and the ship
arrived.18 Where the policy on goods was of date December 21st,
15 United States. — Clark v. Manu-
facturers' Ins. Co. 2 Wood. & M. (U.
S.) 472, Fed. Cas. No. 2829.
California.- Joshua Hendy Mach-
ine Works v. American Steam Boiler
Ins. Co. 86 Cal. 248, 21 Am. St. Rep.
33, 24 Pac. 1018.
Dakota. — St. Paul Fire & Marine
Ins. Co. v. Coleman, 6 Dak. 458, 6
L.R.A. 87, 43 N. W. 693 (see § 1409
herein ) .
Indiana. — Continental Life Ins.
Co. v. Houser, 111 Ind. 266, 12 N.
E. 479; Gray v. National Benefit As-
soc. Ill Ind. 531, 11 N. E. 477;
Standley v. Northwestern Mutual
Lite Ins. Co. 95 Ind. 254, 258; Su-
preme Tribe Ben Hur v. Lennert, —
Ind. App. — , 93 N. E. 869.
Iowa. — Matt v. Roman Catholic
Mutual & Protective Soc. 70 Iowa,
455, 30 N. W. 799.
Massachusetts. — McLaughlin v.
Supreme Council Catholic Knights
of America, 184 Mass. 298, 68 N. E.
344; Merchants' Ins. Co. v. Clapp, 11
Pick. (28 Mass.) 56; Hoyt v. Gil-
man, 8 Mass. 336; Taylor v. Lowell,
3 .Mass. 331, 3 Am. Dec. 141.
Minnesota. — National Council of
Knights & Ladies of Security v. Gar-
ber, — Minn. — , 154 N. W. 512.
Ohio. — Connecticut Mutual Life
Ins. Co. v. Pyle, 44 Ohio St. 19, 32,
58 Am. Rep. 781, 4 N. E. 465 (but
here the risk had not attached and the
premium was recovered back).
New York. — Hendricks v. Connec-
ticut Ins. Co. 8 Johns. (N. Y.) 1;
New York Marine & Fire Ins. Co. v.
Roberts, 4 Duer (N. Y.) 141; Waters
v. Allen, 5 Hill (N. Y.) 421; Stein-
back v. Columbian Ins. Co. 2 Caines
(N. Y.) 129, 132.
Texas. — Harris v. Schrivener, —
Tex. Civ. App. — , 78 S. W. 705.
Wisconsin. — Blaeser v. Milwaukee
Mutual Ins. Co. 37 Wis. 31, 19 Am.
Rep. 747 (need not tender or offer to
return premium paid where fraudu-
lent misrepresentations).
England. — Moses v. Pratt, 4 Camp.
297; Furtado v. Rogers, 3 Bos. & P.
191, 14 Eng. Rul. Cas. 125 ; Tvrie
v. Fletcher, 2 Cowp. 666, 14 Eng.
Rul. Cas. 502, per Lord Mansfield,
C. J.; Bermon v. Woodbridge,
Don-. 789, 14 Eng. Rul. Cas. 507,
per Lord Mansfield.
Cal. Civ. Code, sees. 2616, 2618.
Emerigon on Ins. (Meredith's ed.
1850) c. xvi. sec. 2, pp. 654, 655; c.
iii. sec. 1, p. 52. As to marine ins.
act 1906, of England, see § 1392 here-
in.
16 Mailhoit v. Metropolitan Life
Ins. Co. 87 Me. 374, 47 Am. St. Rep.
336, 32 Atl. 989.
"Juhel v. Church, 2 Johns. Cas.
(N. Y.) 333.
18 Boehm v. Bell, 8 Term Rep. 154.
2570
RETURN OF PREMIUMS AND ASSESSMENTS §§ 1397a, 1398
with warranty to sail between October 20th and December 1st, and
the cargo was all in before the last date, although the ship had not
then sailed, but did so between December 2d and 21st, it was held
that the risk attached in port, and the premium was not return-
able.19 There may be such an attachment of the risk that, although
the policy be not made when the risk has terminated, a loss would
have been covered during the continuance of the risk. In such
case there can be no return of the premium.20
And where the risk has attached neither it nor the premium
can be apportioned and this applies to preclude an administratrix
of a county trustee from recovering back one-half the premiums ] iaid
in advance on a bond with a surety company for one year although
said trustee died within six months and the major portion of the
funds had been collected and disposed of.1
So assessments paid for a series of years to a mutual insurance
association by a member, cannot be recovered back simply because
he failed to read or to understand the provisions of his contract.2
And where the member is legally expelled there can be no recovery
back of premiums paid prior to such expulsion.3
§ 1397a. Election to refund premium or pay insurance: waiver. —
And an option of the insurer to refund premiums paid, with in-
terest, or pay the amount of the policy on the life of one who died
by his own hand while insane, according to the equities of the case,
is not waived by failure to make it within sixty days allowed after
proofs of loss for payment, if it is made within a reasonable time.4
§ 1398. Premium returnable where policy ab initio void: general-
ly.— The policy may be void ab initio, and the risk never have at-
tached, there being no fault of the insured, as in case of breach of
warranty whereby no liability is ever incurred by the assurer; or
there may be an entire want of interest ; or the policy may be void
for illegality, the parties not being in pari delicto; or it may be
void ab initio by some act or omission of the assurer ; in all of which
cases the premium is returnable.5 Cases of this character are, how-
19 Hendricks v. Commercial Ins. 3 National Council of Knights &
Co. 8 Johns. (N. Y.) 1. Ladies of Securitv v. Garber, —
20 2 Phillips on Ins. (3d ed.) 505, Minn. — , 154 N. W. 512. See Mc-
sec. 1826, citing Park on Ins. 563. Laughlin v. Supreme Council Catho-
Mr. Phillips says: "Policies not un- lie Knights of America, 184 Mass.
frequently admit of this construe- 298, 68 N. E. 344.
tion." 4 Salentine v. Mutual Benefit Life
1 Crouch v. Southern Surety Co. Ins. Co. 79 Wis. 580, 12 L.R.A.
131 Tenn. 260, L.R.A.1915D, 966, 174 690, 48 N. W. 855.
S. W. 1116. 5 Connecticut. — Hogben v. Metro-
2 Condon v. Mutual Reserve Fund politan Life Ins. Co. 69 Conn. 503,
Life Assoc. 89 Md. 99, 44 L.R.A. 149, 61 Am. St. Rep. 53, 38 Atl. 214.
73 Am. St. Rep. 169, 42 Atl. 944.
2571
§ 13!'!' JOYCE ON INSURANCE
ever, to be distinguished from those where the policy is void, the
parties being in pari delicto, and those where it is void through the
fraud of the assured or his agent, and cases where the policy hav-
ing once attached, it has become subsequently void by an ad or
omission of the assured, whereby the policy has become forfeited.6
A note given for the premium is not recoverable where the policy
is one which the company has no authority under its charter to
issue, the act being ultra vires, as in case where a corporation,
formed to insure againsl fire and marine risks, issues a policy in-
suring the lives of animals.7 So also where the Interest is of a char-
acter that should he described and is not.8 So the premium note
may be void because the policy was never countersigned, it being
issued by one without authority therefor.9 And though the policy
be illegal, yet if the parties be ignorant thereof, the premium is
returnable.10
§ 1399. Insurance contract with infant: return of premium. — If
a solvent insurer enters into a contract which it may fairly and
reasonably make, with an infant for a sum fairly commensurate
with his estate and ability to pay, and at the ordinary and usual
rates, there being no fraud or unlawful practices in procuring the
risk, the infant may not rescind mid recover back the premiums,
but the insurer is entitled to those intended to cover the current
annual risks under the policy.11 It is held, however, that the in-
lllinois. — iEtna Life Ins. Co. v. rine ins. act, 1906, of England, see
Paul, 10 Bradw. (111.) 431. § 1392 herein.
Imliana. — American Mutual Life On return of assessment on benefit
Ins. Co. v. Bertram, 163 Ind. 51, 64 certificate proving void for fraud, see
L.R.A. 935, 70 N. E. 258, 33 Ins. note in 3 L.R.A.(N.S.) 114.
L. J. 491, 494; Metropolitan Life 6 See sections following.
Ins. Co. v. Bowser, 20 Ind. App. 557, 7 Rochester Ins. Co. v. Martin, 13
50 N. E. 86. Minn. 59. And see § 334 herein.
Iowa. — Waller v. Northern Assur. 8 Robertson v. United Ins. Co. 2
Co. 64 Iowa, 101, 19 N. W. 865. Johus- Cas. (N. Y.) 250.
Kentucky.— Metropolitan Life Ins. 9 Lynn v. Burgoyne, 13 B. Mon.
Co. v. Asmus, 25 Kv. L. Rep. 1550, ^^ 40°- . See §§ 1-(,7V't se(*' llc>n'-
78 S W 204 1U on Prc>miul" notes. The premium
m .', , i,7, n'n i\r^r<„ v, , •]» r . _ is returnahle "when by any del mil l
Massachusetts. MLc( ann v. .Metro- «,, . , ,, ,, J ■ , . ,
„ i;. T p T n -.r-r, nT OQA oi : the insured other than actual fraud
politan Lite Ins. Co. 1< / Mass. 280, ,, ....
-o xt -n moo -n • xi « >ll(' insurer never incurred any Jia-
i)0 N. h>. J()2(>; 1 nesinuth v. Agra- i i ■. i ,i i- » ., ,' ,,
_, ' _ \ ZT&, hilitv under the policy." Cal. Civ.
warn Mutual lire Ins. Co. 10 Cush. Q0(je sec 9519
(64 Mass.) 587 10 Henry" v. Stainforth, 4 Camp.
New York.— Mount v. Waite, 7 270 ; Orme v. Bruce, 12 East, 225.
Johns. (N. Y.) 434. "Johnson v. Northwest cm Mutual
England.— Anderson v. Thornton, Life Ins. Co. 56 Minn. 365, 45 Am.
8 Ex. 425; Hentig v. Stainforth, 5 St. Rep. 473, 26 L.R.A. 187, 57 N.
M. & S. 122. W. 934, 59 N. W. 992, 39 Cent. L.
See sections following. As to ma- J. 337.
2572
RETURN OF PREMIUMS AND ASSESSMENTS L400
surer is not entitled to deduct the cost of carrying the policy from
the premiums to be returned in case of a repudiation by an infant
of a contract of insurance upon his life but that the entire amount
paid may be recovered from insurer.12
§ 1400. Premium returnable where contract voidable or void for
misrepresentations or fraud of assurer. — That the insured is enti-
tled to a return of the premium when the contract is voidable for
the misrepresentation or fraud of the assurer, is well settled.13
But if the statement relied on of the insurer is only a belief or ex-
pectation on his part, without fraud, there shall be no return.14
This rule is further illustrated by the oft-cited instance where the
underwriter effects an insurance "lost or not lost," the safe arrival
of the ship being already known to him.15
In a New York case the defendant advertised and represented
that its patrons could be insured at half the expense of insuring in
other companies by paying half the premiums in cash and giving
notes for the other half, the dividends always paying the notes.
The dividend never paid the notes, but generally fell far short, as
the managers knew. The plaintiff procured an endowment policy
for five hundred dollars, payable in five years, paying half cash
and giving notes for the other half. Only one small dividend was
made during the term. At the end of the five years the plaintiff
demanded the five hundred dollars, but the defendant refused to
pay more than the difference after deducting the amount due on
the notes. It was held that an action for fraud was maintainable,
that the plaintiff was not estopped by the delay, and that the meas-
ure of recovery would be the money paid and interest.16 Again, if
insured refuses to comply with an agreement to make a loan to in-
sured, which offer was made to induce her to take out the policy,
it may be surrendered and the premiums paid be recovered.16*
12 Simpson v. Prudential Ins. Co. Boyle, 3 Barn. & Adol. 877; Cal. Civ.
184 Mass. 348, 63 L.R.A. 741, 100 Code, sec. 2619. As to marine ins.
Am. St. Rep. 560, 68 N. E. 673. act, 1906, of England, see § 1392
13Boland v. Whitman, 33 Ind. 64; herein.
McCann v. Metropolitan Life Ins. Co. 14 Pauson v. Watson, Cowp. 787, 13
177 Mass. 280, 58 N. E. 1026; United Eng. Rul. Cas. 540.
States Life Ins. Co. v. Wright, 33 15 Carter v. Boelin, 3 Burr. 1909,
Ohio St. 533, 8 Ins. L. J. 169 ; Cald- 13 Eng. Rul. Cas. 501, per Lord
well v. Life Ins. Co. of Va. 140 N. Mansfield. See also Emerigon on In-
Car. 100, 52 S. E. 252; Martin v. surance (Meredith's ed.) 1850, c.
JEtna Life Ins. Co. (1 Tenn.) Cas. xvi. p. 663.
361, 4 Ins. L. J. 899 ; Carter v. 16 Rohrsehneider v. Knickerbocker
Boehm, 3 Burr. 1909, 13 Eng. Rul. Life Ins. Co. 76 N. Y. 216, 32 Am
Cas. 501, per Lord Mansfield; Court Rep. 290.
v. Martineux, 3 Doug. 161; Duffel v. 16a Kev v. National Life Ins. Co.
AVilson, 1 Camp. 401; Lefevre v. 107 Iowa, 446, 78 N. W. 68, 28 In*
2573
§ 1400a JOYCE ON INSURANCE
In an action for damages for fraudulently inducing insured to
take oul insurance, instructions to the jury should conform to the
issues submitted which require a finding whether insurer falsely
represented thai premiums with interest would he repaid at the
end of a certain number of years.17
§ 1400a. Premium returnable where contract voidable or void for
misrepresentations or fraud of assurer's agent. — The rule stated un-
der the last preceding section applies where the company is charge-
able with its agent's knowledge of the invalidity of the policies, and
receives premiums thereafter, said invalidity having been occa-
sioned by the statements of said agent; as in case of a policy taken
,ut by plaintiff on the lives of her brother and sister, payable to
elf, she having signed their names to the application with the
knowledge of the company's agent who had solicited the insurance,
and had assured her of her competency to sign their name-, and
the premiums having been paid thereon for several years before
she ascertained that the policies were void, it was held that the
premiums should be recovered back.18 And where insured was in-
duced by the false and fraudulent representations of insurer's
agents that at the end of a stated period he would receive his money
Lack with interest, and upon the expiration of said period he de-
manded his money but was induced by like representations to
remain with insurer and continue payments for another like period
at the expiration of which the insurer again failed to pay, the tort
can be waived and the money paid be recovered hack in an action
for money had and received and it constitutes no waiver that pay-
ments were continued after the end of the first period or notice by
the failure of insurer to then pay as agreed.19 So where insurer's
agent by false representations induces insured to continue payments
of premiums when she had intended to discontinue them, she is
entitled to recover from insurer, who had retained the same, the
amount so paid, even though said representations were made with-
in J. 259, citing Harniekle v. New R. 111. See also McCann v. Metro-
York Life [ns. Co. Ill N. Y. 390, 2 politan Life Ins. Co. 177 Muss. 280,
L.R.A. 150, 18 N. E. 632. Compare 58 N. E. 1026.
Burns & Reilly Real Estate Co. v. On right of holder of policy to
Philadelphia Life Ins. Co. 239 Pa. recover premiums paid upon t Ik; laith
St. 22, 86 All. 642 (considered un- of tin- agent's false representations,
der § 1400a herein); Lewis v. New notwithstanding part, performance,
York Life Ins. Co. (U. S. C. C.) 173 see note in 3 B. R. C. 852.
K,,l 100!), aim 30 L.R.A.(N.S-) 19 Stroud v. Life Ins. Co. of Vir-
1202, 181 Fed. 133, in I ('. O. A. 181. ginia, 148 N. Car. 54, 61 S. E. 626,
17 .(ones v. Life Ins. Co. of Vir- 37 [ns. L. J. 627; following Caldwell
ginia, 151 N. Car. 51, 05 S. E. 602. v. Life Ins. Co. of Virginia, 140 N.
"Fulton v. Metropolitan Life Ins. Car. 100, 52 S. E. 252.
Co. 19 N. Y. Supp. 000,47 N. Y. St.
2574
RETURN OF PREMIUMS AND ASSESSMENTS § 1400a
out the insurer's authority.20 And where the assured was not ex-
amined by a physician as required, and the beneficiary had paid
premiums under an assurance from the company's agent that he
should have his money or the policy, they may be recovered back.1
It is also held in a Maine case that a life policy, regular in every
respect except that through the fraud of the agent there has been no
medical examination of insured, and the application has not been
signed by him, although it purports to have been, and the whole
transaction has taken place without his knowledge or consent, is
voidable at the election of insurer, but not absolutely void, and the
insured cannot recover premiums paid thereon if the insurer has
treated the policy as a valid subsisting contract.2 If the policy is
void because of misrepresentation of material facts in that the
agent fraudulently inserted in the application false answers, when
the answers made by the assured were truthful, and both insurer
and assured have acted bona fide and have been deceived thereby,
the policy should be canceled and the premiums returned.3 Again,
20 Refuse Assurance Co. v. Ket- is held to be valid: Massachusetts
tlewell [1009] App. Cas. L. Rep. 243 Life Ins. Co. v. Eshelman, 30 Ohio
aff'g [1908] 1 K. B. 545. St. 647. In Iowa, the policy is held
1 Frain v. Life Ins. Co. 67 Mich, valid : McArthur v. Home Life Assoc.
527, 35 N. W. 108. 73 Iowa, 336, 5 Am. St. Rep. 684.
2 Mailhoit v. Metropolitan Life In this case the agent inserted with-
Ins. Co. 87 Me. 374, 47 Am. St. Rep. out the knowledge of the assured
336, 32 Atl. 989. The court, per false answers in the application, and
Foster, J., says : "In Massachusetts, forged the certificate of medical ex-
the court in recent decisions has held animation. In Michigan, the policy
the policy voidable: Leonard v. is held to be valid and binding upon
Washburn, 100 Mass. 251; Plympton the company: Brown v. Metropolitan
v. Dunn, 148 Mass. 523, 20 N. E. Life Ins. Co. 65 Mich. 306, 8 Am.
180. The supreme court of the St. Rep. 894; Temmink v. Metropoli-
United States holds such acts to be tan L. Ins. Co. 72 Mich. 388. So in
the acts of the company, and bind Colorado State Ins. Co. v. Taylor,
it; Ins. Co. v. Wilkinson, 13 Wall. 14 Colo. 499; 20 Am. St. Rep. 281.
(80 U. S.) 222, 20 L. ed. 617; Insur- While in different jurisdictions there
ance Co. v. Mahone, 21 Wall. (88 is a contrariety of opinion as to the
U. S.) 152, 22 L. ed. 593; New Jer- effect of the acts of agents which are
sey Mutual Life Ins. Co. v. Baker, a fraud upon the company, they are
94 U. S. 610, 24 L. ed. 268. In New held either to have estopped the corn-
York the policy is held to be binding pany from taking advantage of them,
upon the companv: Baker v. Home or to have rendered the policy void-
Life Ins. Co. 64 N. Y. 648 ; Miller v. able only."
Phcenix Life Ins. Co. 107 N. Y. 292, 3 New York Life Ins. Co. v. Fletch-
14 N. E. 271; O'Brien v. Home Ben. er, 117 U. S. 519, 29 L. ed. 934, 6
Soc. 117 N. Y. 310, 22 N. E. 954. In Sup. Ct. 837.
Connecticut, the policy is held to be Cited in: United States. — Northern
voidable: Ryan v. World Mutual Ins. Assurance Co. v. Grand View Build-
Co. 41 Conn. 168, 35 N. W. 430, 19 ing Assoc. 183 U. S. 308, 35 <, 40
Am. Rep. 490. In Ohio, the policv L. ed. 233, 22 Sup. Ct. 133 ; Maier v.
2575
* 1400a JOYCE <>X INSURANCE
an insured person induced by false representations material to him
to take out a policy upon his life may elect to rescind and avoid
the policy, and is then entitled to recover the premiums paid, but
if such false representations are noi material to him, and arc a
fraud upon the insurer alone, he is noi entitled to recover.4 And if
it is alleged thai insured was induced to surrender an old policy
and accept a new one by false and fraudulenl representations of
insurer's agent upon which he relied, the evidence should be clear
and convincing to sustain such a claim and if it is sustained the
insurer will be liable for the premiums paid less the actual cosl of
carrying the insurance while it was in force, and credit should
also be given for the value if any of the old policy at the time it
was surrendered, and in such case insured is not estopped to seek
a cancelation by any notice implied from his acceptance and reten-
tion of the policy containing the condition of the contract.5 It is
held, however, that the right of an assured, who, has been induced
to pay premiums on a policy of insurance by the false representa-
tions of the insured's agent, to rescind the policy and recover the
premiums in an action for money had and received, is not affected
by the fact that while the policy was in force the insurer was under
a contingent liability; since a mere risk of that kind, which has qoI
produced any benefit in fact to the assured, is not a part perform-
ance so as to bar the assured from the exercise of an option to a\ oid
it.6 Again, it is decided that premiums cannot be recovered hack
from the insurer where its agent without authority so to do, as an
inducement to take out insurance, represents to a person desiring
to obtain a loan, that it is necessary to make an application for a
policy and that if the loan is refused the premium paid will be re-
Fidelity Mutual Life Ins. Co. 78 Fed. 589. 45 Atl. 414: McDonald v. Met-
5G6, 571, 24 C. C. A. '-'It, 47 U. S. ropolitan Life Ins. Co. 68 N. II. I.
App. 322; Selby v. Mutual Life Ins. 6, 73 Am. St. Rep. 548, 38 Atl. 500.
Co. 67 Fed. 490, 492. New York.— Bernard v. United
California. — McKay v. New York Life Ins. Assoc. 43 N. Y. Supp. 527,
Life Ins. Co. 124 Cal. 270, 273, 56 14 App. Div. 142, 140.
Pac 1112. *Mailhoitv. Metropolitan Life Ins.
Indiana. — American Life Ins. Co Co. 87 Me. 374, 47 Am. St. Rep. 336,
v. Bertram, 163 Ind. 51, 57, 64 L.R.A. 32 Atl. 089.
938, 70 N. E. 258. B Provident Savings' Life Assur-
Maine.- — Mailhoit v. Metropolitan ance Soc. of N. Y. v. Shearer, 151
Life Ins. Co. 87 Me. 374, 382, 47 Am. Ky. 298, 151 S. W. 93S, 42 Ins. h.
St. Rep. 336, 32 Atl. 989. J. 379.
Minnesota. — McCarty v. New York 6 Kettlewell v. Refuse Assur. Co. 3
Life Ins. Co. 74 Minn. 430, 534, 77 B. R. C. 844 (1908)' 1 K. B. 545.
N. W. 426. Also reported in 77 L. J. K. B. N. S.
New Hampshire.— Delouche v. Met- 421, 97 L. T. N. S. 896, 24 Tunes L.
ropolitan Life Ins. Co. 69 N. H. 587. R. 217, 52 Sol. Jo. 158.
2576
RETURN OF PREMIUMS AND ASSESSMENTS § 140]
turned.7 And if the alleged false representations relate to the com-
pany's solvency, there can be no recovery back of the premiums
paid on proof of insolvency long after the payment of the pre-
miums sought to be recovered.8 And even though the meaning
of the policy is fraudulently represented by insurer's agent, insured
is not entitled to recover the premiums paid where he avail- him-
self of legal advice as to said construction.9 So an agent's misrepre-
sentation as to premiums decreasing in the future are waived where
insured continues to make payments for several years after lie finds
such statements untrue.10 But an insured whose application has
been rejected does not waive insurer's obligation to repay premium-
by waiting for the insurer's agents to repay advance premiums for
which they had given their personal note, even though said agents'
acts were fraudulent as to the insurer.11
If it is attempted to recover back money paid upon a contracl
alleged to be void because of fraudulent misrepresentations in ob-
taining the same, parol evidence is not excluded within the gen-
eral rule as to the inadmissibility of such evidence, and the ques-
tion, whether the nature of such claimed fraudulent misrepresenta-
tions was such as to have deceived insured, will be one for the jury.12
§ 1401. Premium returnable when paid by mistake of facts:
policy based upon mistake: mistake of law. — As a general rule, if
the premium is paid through mistake as to the facts, under the sup-
position, which is unfounded, that there is an obligation to pay. it
is returnable; or, in other words, if a premium is paid under a sup-
position that a certain state of facts exists whereby the company
would be entitled to the money, and the supposed facts do not exist,
and the premium would presumably not have been paid had the
actual facts been shown by the payer, such premium so paid may
be recovered back.13
7 Burns &Reillv Real Estate Co. v. 12 State Life Ins. Co. v. Johnson,
Philadelphia Life Ins. Co. 239 Pa. 73 Kan. 567, 85 Pac. 597. But com-
St. 22, 8G Atl. 042. Compare Kev v. pare International Ferry Co. v.
National Life Ins. Co. 107 Iowa, 446, American Fidelity Co. 207 N. Y. 350,
78 N. W. 68, 28 Ins. L. J. 259, con- 101 N. E. 160, 42 Ins. L. J. 875.
sidered under § 1400 herein. 13 Kelly v. Solari, 9 Mees. & W. 55,
8 Life Assoc, of America v. Goode, per Parke, B., and cases following.
71 Tex. 90, 8 S. W. 639. "A person is entitled to a return
9 Frazell v. Life Ins. Co. of Va. of the premium when the contract
153 N. Car. 60, 68 S. E. 912. is voidable ... on account of
10 Hartford life Ins. Co. v. Han- facts of the existence of which the
Ion, 139 Kv. 346, 104 S. W. 729. insured was ignorant without his
11 Mutual Life Ins. Co. v. Her- fault :" Cal. Civ. Code, sec. 2619. See
ron, 79 Miss. 381, 30 So. 691, 31 Ins. § 140 herein.
L. J. 68.
Jovce Ins. Vol. III.— 162. 2577
/
V
§ 1401 JOYCE <'\ [NS1 RANCE
Thus, if a premium be paid after a forfeiture of the policy under
a mistake as to the facl of waiver, it shall be returnable.14 So also
• an assessment collected by mistake after a forfeiture.16
So where a policy is issued under an honesl supposition of the par-
: state of facts exists which does aot, as in case of a block-
ade erroneously supposed to exist, there shall be a return of the
1G And where contributions are made by members of a
benefit order to a relief fund, under the belief that they were com-
pulsory, they may be recovered back after a decision by the court
: , . itributions are not compulsory.17 So if an assessmenl
is levied and collected by a receiver, which under the lads there is
no absolute legal duty on the part of the members to pay, it shall
>aid.18 So also where the illegality of the voyage rests on facts
of which the parties are in ignorance, without their fault, or where
both parties contemplated a legal voyage and contract, but are mis-
•,. the premium shall be returned.19 But where a supposed
deviation has been made, and the insurer, for an additional pre-
mium, agrees in the margin of the policy for an additional pre*
iniuin thai it shall uo1 ailed the risk, the fact that the entire devi-
ation had not been made as supposed does not entitle the assured to
a return of the premium so paid.20 Where a mi-lake of law is made
by both parties in ignorance of the facts, and in consequence an
additional premium is paid, such a mistake cannot he used to the
prejudice of cither party, and the additional premium must he re-
turned.1 And premiums paid under a mistake of law. may he re-
covered back, even though paid upon a policy which is illegal, as
where it was taken out by a daughter upon her father's life without
hi- consent under the belief induced by insurer's agent that the
policy was valid.2 So premiums paid upon a policy which is void
as against public policy for want of insurable interest, may he re-
covered by the assignee as it is a mi-take of law.3. Where insured,
without knowledge of all the fads hut upon representations that
14 Dc TIalin v. Hartley, 1 Term. R. S. Til'; Henty v. Stainforth, 1 Stark.
343, 1 I Eng. Rul. Cas. 171 ; McKee v. 254; Oom v. Bruce, L2 East, 225.
Phoenix Ins. Co. 28 Mo. 383, 75 Am. 20 Crowningshield v. New York Ins.
Dec. L29; Elting v. Scott, 2 Johns. Co. 3 Johns. Cas. (N. Y.) 142.
,X y.) [57. lScriba v. [nsurance Co. of North
15 Hazard v. Franklin Fire Ins. Co. America, 2 Wash. (U. S. C. C.) 10-,
7 1;. I. 429. Fed. Cas. No. 13,107.
16 Taylor v. Summer, -1 Ma--. 56. 8 Metropolitan Life Tns. Co. v.
"Murray v. Buckley, 1 N. Y. Blesch, 22 Ky. L. Rep. 530, 58 S. W.
Supp. 436. See Brokamp v. Metropolitan
i8 In re Equitable Reserve Fund Life Ins. Co. 8 Ohio Cir, Dec. 116, 5
I N. V. 354, 43 N. Y. Ohio Leg. N. 116, 16 Ohio Cir. Ct.
. 30 X. E. 11 1. 630.
19 Hentig v. Stainforth, 5 Maule & 'American Mutual Life Ins. Co.
2578
RETURN OF PREMIUMS AND ASSESSMENTS § L40L
it is necessary to keep the policy from lapsing or becoming void,
continues payments of premiums after he has become entitled to
an endowment fund under the contract, it constitutes such a mis-
take, if one at all, of material facts as to justify a recovery back of
premiums so paid especially so where the payee is responsible foi
the mistake.4
§ 1401a. Return of premium where policy does not conform with
agreement. — The insured cannot recover back the premium paid or
a part thereof on the ground of partial failure of consideration
where the policy issued was represented to conform to a prior parol
agreement to insure, but it did not, since the assured may enforce
the terms of the original contract or have the policy reformed.5
So where it is claimed that it was fraudulently represented by in-
surer's agent, that the policy should contain certain provisions, but
that it did not contain them, there can be no recover)' of premiums
paid where assured had read the policy.6 And acceptance by as-
sured of a policy and retention thereof without objection for some
time after ascertaining the facts, when a casual examination would
have shown that it was different from that for which he contracted,
waives the fraud of insurer's agent in delivering said policy.7 So
where the policy, although different from that applied for, is ac-
cepted by insured, retained without objection, a receipt given there-
for, and one of the premium notes paid, he cannot several months
thereafter recover the amount so paid or rescind the contract and
enforce collection of a judgment on the other note.8 But if the
applicant has refused the policy because it does not comply with
the oral representations of insurer's agent, he may recover the
amount paid to a bona fide holder of a premium note given at the
time the application was made.9
So a verdict for the amount of the advance premium paid is sup-
ported by evidence that the policy described in the application was
not delivered to and accepted by insured, and that the policy ac-
v. Bertram, 163 Ind. 51, 61 L.R.A. 6 Cathcart v. Life Ins. Co. of Va.
935, 70 N. E. 258, 33 Ins. L. J. 491. 144 N. Car. 023, 57 S. E. 390.
4 Hopkins v. Northwestern Na- 7 Bostwick v. Mutual Life Ins. Co.
tional Life Ins. Co. 41 Wash. 592, 83 of N. Y. 11 (i Wis. 302, 67 L.R.A.
Pac. 1019, 35 Ins. L. J. 267. 705, 89 N. W. 53S, 92 X. W. 246.
6 International Ferry Co. v. Amer- 8 Smith v. Smith, 86 Ark. 284, 110
ican Fidelity Co. 207 N. Y. 350, 101 S. W. 1038, 37 Ins. L. J. 090.
N. E. 160, 42 Ins. L. J. 875 (marine: 9 Evans v. Central Life Ins. Co. 87
vessel liability insurance), rev'g 129 Kan. 641,41 L.R,A.(N.S.) 1130 (an-
N. Y. Supp. 1*129, 145 App. Div. 906. notated on right to rescind or reject
As to acceptance or rejection of pol- policy not conforming to represen-
icy not conforming to agreement ; tations of insurer's agent), 125 Pac.
neglect to read; rescission, see §§ 60f- 86.
60i herein.
2579
§ 1401b JOYCE (>N ENSURANCE
tually tend< red did nol conform to thai applied for. but was for a
different sum and a differenl amount and was never accepted; al-
though l1 may be shown in such case that insurer's agent stated to
the applicant thai he could not then obtain the kind of policy ap-
plied for bu1 might be able to do so later ; and it may also be shown
thai the applicant obtained insurance of a similar character from
another company after insurer's refusal to issue the policy applied
for.10 Again, if a policy issued to an illiterate woman does not con-
-iiii the agreement which the insurer's a-ent represented it would
contain, bu< provided to the contrary, and upon ascertaining the
fraud she protested and demanded her rights, she was held cniii led
in recover the amount of premiums paid with interest.11 So where
insurer's agent fills in the application so that the policy issued does
not conform to that orally agreed upon, insured may rescind and
recover the premium paid on making the application.12
§ 1401b. Premium not returnable: voluntary payments under
claim of right: — And although the insurer has for several years
collected premiums in excess of the maximum rates fixed by the
contract and of those which he was legally obligated to pay, and
even though he has protested against said excessive rates, neverthe-
less it is decided that such excessive payments cannot be recovered
back as they were voluntarily made under a claim of right, the
ground of the decision being that, in the absence of a statute, fraud.
compulsion or duress, a person who with full knowledge of the
facts voluntarily pays another money cannot thereafter recover
hack the same even though he protests at the time against his lia-
bility and declarer that he makes the payment under coercion. A
distinction was made between such a case and one of payment under
a mistake of facts.13 So one voluntarily paying insurance premi-
ums with know Ledge of the facts, cannot recover them on the theory
that they were not in accord with his contract,14 So where, under
10 International Life Ins. Co. v. payments: Maryland Casualty Co. v.
Nix, 11 Ga. App. 664, 75 S. E. 1058. Little Rock Ry & Electric Co. 92
"Caldwell v. Life Ins. Co. of Va. Ark. 306, 122 S. W. 994; Millers &
140 N. Car. 100, 52 S. E. 252. Manufacturers Ins. Co. In re, 97
As to misrepresentations by agenl Minn. 98, 4 L.R.A.(N.S.) 231, 106
where applicant is illiterate, sec § X. W. 485; Sas:e v. Finney, 1.16 Mo.
490 herein. App. 30, 135 S. W. 996; Ross v.
12 I^si. Man-he v. New York Life Rubin, 25 Misc. 479, 54 N. Y. Supp.
Ins. Co. 126 Cal. 498, 58 Par. 1053. 1036. Compare Hall v. Prudential
18 Rosenfeld v. Boston Mutual Life Ins. Co. 72 Misc. 525, 130 N. Y.
Ins. Co. 222 Mass. 284, 110 N. E. 304; Supp. 355.
Boward v. Mutual Reserve Fund Life 14 Jones v. Provident Savings' Life
Assoc. 125 N. Car. 49, 45 L.R.A. Assur. Soc. 117 N. Car. 540, 25
853, 34 S. E. 199. See also as sus- L.R.A.(N.S-) 803, 61 S. E. 388.
taining the principle as to voluntary
2580
RETURN OF PREMUMS AND ASSESSMENTS $$ 1402, 1403
an employers' liability policy, an additional premium was paid
after the expiration of the contract, based upon w;igcs of employees
not in the class included by the terms of the policy, it was held that
.siid payment was a voluntary one made under ;i mistake of law
and not recoveraUe.15
§ 1402. Whether premium returnable where foreign company has
not complied with state laws. — In so far as the decisions of a state
hold that noncompliance by a foreign company with the statutes
under which alone it is authorized to do business therein renders
the policy void,16 it would -vein to logically follow that the premium
paid under such policies should be recovered back. It has been
held that a premium note given under such circumstances is not
enforceable.17 But it is also held that the policy holder is not ex-
cused thereby from payment of his premiums, and llmt the policy
is valid.18 So it is declared in Indiana that the insured may, both
as to the company and its agents, recover back his premiums paid
under such a contract, irrespective of the doctrine of recovery of
the consideration upon rescission.19 And it is also held that the
premiums paid can be received back in such case upon the ground
of failure of consideration.20
§ 1403. Return of premium: breach of warranty. — If there be a
breach of a warranty, express or implied, rendering the policy void
ab initio, there being no actual fraud, the premium is returnable.1
Nor can the insurer retain premiums received after a breach of
promissory warranty not to use liquor to excess.2 And where a
warranty is fraudulently inserted by insurer's agent without the
applicant's consent, the insurer, even if there is no estoppel against
it, must return the premiums paid less the value of the insurance
15 Maryland Casualty Co. v. Little 21 Am. Rep. 89 ; Haverhill Ins. Co.
Rock Rv. & Electric Co. 92 Ark. 306, v. Prescott, 42 N. H. 547, 80 Am.
122 S. W. 994. Dec. 123.
16 See §§ 332, 333 herein. 20 Barrett v. Elliott, 24 Canadian
^ Gent v. Manufacturers' & Mer- L. T. 344. See Hudson v. Compere,
chants' Mutual Ins. Co. 107 111. 6.52, 94 Tex. 449, 61 S. W. 389.
s. c. 13 111. App. 308; Hoffman v. 1 Delavino-e v. United Statas Ins.
Banks, 41 Ind. 1; Washington Mti- Co. 1 Johns. Cas. (X. Y. ) 310; El-
tual Ins. Co. v. Hastings, 2 Allen bers v. United Ins. Co. 16 Johns. ( X.
(84 Mass.) 398; Barboir v. Boehm, Y.) 128; Waddington v. United Ins.
21 Neb. 450, 32 N. W. 221; JEtna Co. 17 Johns. (X. Y.) 23. See Corn-
Ins. Co. v. Harvey, 11 Wis. 394. See mercial Life Ins. Co. v. Schreyer, 176
§§ 333, 1216 herein. Ind. 654, 95 X. E. 1004, 40 "ins. L.
18 Union Mutual Life Ins. Co. v. J. 2087, and opinion of court (under
McMillen, 24 Ohio St. 67. See § § 1406 herein).
330 herein. 2 Supreme Lodge of Modern Amcr-
19 Union Central Life Ins. Co. v. ica Fraternal Order v. Watkins, 60
Thomas, 46 Ind. 44. See also Thorne Ind. App. 384, 110 N. E. 1008.
v. Travelers' Ins. Co. 80 Pa. St. 15,
2581
§ 1 ; JOYCE ON INSURANCE
by which insured has been benefited, or it cannot take advantage of
a forfeiture provision where the warranty is false.3 So where in a
fire policy on lumber there was a warranty for maintaining a con-
tinuous clear .-pace between the Lumber and a sawmill, which war-
t inty was untrue when made, and no risk ever attached, in the
nee of intentional fraud by the assured the premiums paid are
returnable.4 So also if the ship be unseaworthy at the time the risk
would commence, and the risk does not attach,6 or there be a breach
of warranty of neutrality, so thai the risk docs not attach;6 or
there is a breach of warranty of the time of sailing;7 or the ship
I eing insured with warranty to sail from a certain port with con-
\oy for the voyage, and on arrival there finds the convoy gone, and
never sails on the voyage, the insured having given notice imme-
diately to the underwriters, the premium is. returnable from the
time of the breach, on the ground that there are two distinct con-
tacts, but it is not returnable for the risk run prior to the breach.8
So in the case of a warranty to depart with convoy, which is not
satisfied, the premium is returnable as to that risk to which the
warranty relates.9
If, however, the policy has once attached and is in full force and
effect ai the time of the loss and the risk is entire and there is no
liability by reason of a breach of warranty as to seaworthiness there
can be no recovery back of the premium.10 And although a vessel
may not be seaworthy for the voyage, hut is seaworthy for port, and
the policy ha- attached in poll, there; shall be no return of the
premium.11 And there shall be no return of the premium for a
3 McDonald v. Metropolitan Life 8 Stevenson v. Snow, 3 Burr. 1237,
Ins. Co. (iS X. II. 1, ?:; Am. St. Rep. per Lord Mansfield; Tyrie v. Fletch-
548, 38 Atl. 500. er, Cowp. 666, 14 Eng. Rul. Cas. 502,
4 Jones v. Insurance Co. of North per Lord Mansfield.
America, no Tenn. 604, 25 Am. St. 9Long v. Allen, 4 Doug*. 277, 14
Rep. 706, is S. W. 260. Eng. Rul. Cas. 517. See § 1394 here-
6 Scriba \. Insurance Co. of North in.
America, 2 Wash. (U. S. C. C.) 107, 10 Mummer v. Insurance Co. of
Fed. Cas. No. 13,107; Merchants' Ins. North America, 114 Me. 128, 95 Atl.
Co. v. Clapp, 11 Pick. (28 Mass.) 56; 605. So decided although the court
Taylor v. Lowell, 3 Mass. 331, 3 Am. declared that it did not understand
Dec. Ill: Porter v. Bussey, 1 Mass. that a recovery back of the premium
436; Richards v. Marine Ins. Co. 3 paid was sought and there was no
Johns. (N. Y.) i!"7: Graves v. Ma- discussion of the point,
rine Tns. Co. 2 Caines (N. V.) 339; "In this case the policy was "at
Annam v. Woodman. 3 Taunt. 299. and from" and the vessel had arrived
6Henkle v. Royal Exch. Assur. Co. at the outer port ami had taken on
1 Ves. Sen. 317. a cargo for the homeward voyage:
7 Meyer v. Gregson, :\ Doug. 102, Annan v. Woodman. :: Taunt. 299.
reported in 1 Marshall on Ins. led. See Merchants' Ins. Co. v. Clapp, 11
1810) G.~)8. Pick. (28 Mass.) .">(j; Hendricks v.
2582
RETURN OF PREMIUMS AND ASSESSMENTS §§ 1404, 1404a
deviation on the voyage, for the deviation annuls the contract as
to subsequent ports of the voyage, and not the contract ab initio,
and forfeits the premium, the risk being entire.12
In case of breach of a warrant}- that an automobile insured
against loss by fire, shall not be used for carrying passengers, no
part of the premium can be recovered back, for where the policy
has attached insured cannot by his voluntary breach deprive in-
surer of the benefits of its contract when it is without fault,13
§ 1404. Premium returnable for misrepresentation or conceal-
ment of assured without fraud. — If the policy is avoided by a mis-
representation of the assured made without fraud, the premium
is returnable,14 especially where the company lias positive knowl-
edge of that which it insists effected the forfeiture, for in such case
it would be inequitable for the company to retain the premium,
and at the same time claim that it is not bound thereby.15 Thus,
a representation that lamps were not used in the building and they
were, and the loss was occasioned thereby, avoids the policy, and the
risk never having attached, and there being no fraud on the part
of the assured, the premium shall be returned.16 So also where the
insured represents that the building is furnished with a brick chim-
ney, and it is not, the policy does not attach, and the premium is
returnable.17 So also where the interest of the insured mortgagee
is not the sole ownership as represented, there being no fraud, the
premiums are returnable, as the risk has never attached.18
§ 1404a. Same subject: knowledge of insurer's agent where both
parties act in good faith. — When both parties to a contract of in-
surance act in good faith, but are alike deceived by reason of false
representations of material facts, such as those concerning the
plaintiff's business, made unwittingly on the applicant's part, but
with full knowledge of the company's agent, the insured should,
in an action for money had and received, be allowed to recover the
Commercial Ins. Co. 8 Johns. (N. Y.) On right of insured to return of
1. premium where policy is void or
12 Hearne v. Marine Ins. Co. 20 voidable because of misrepresenta-
Wall. (S7 U. S.) 488, 22 L. ed. tions on his part, see note in 32
30.3; Tait v. Levi, 14 East, 481; Ber- L.R.A.(N.S.) 298.
mon v. Woodbridge, 2 Doug. 781, 14 16 Clark v. Manufacturers' Ins. Co.
Eng. Rul. Cas. 507. 8 How. (49 U. S.) 235, 12 L. ed.
13 Elder v. Federal Ins. Co. 213 1061, 2 Wood & M. (U. S.) 472, Fed.
Mass. 389, 100 N. E. 655, 42 Ins. Cas. No. 2829.
L J 524. 17 Scott v. Niagara Dist. Mutual
14 Feise v. Parkinson, 4 Taunt. 640, Ins. Co. 25 U. C. Q. B. 119.
14 Eng. Rul. Cas. 530; Penson v 18 Waller v. Northern Assur. Co. 64
Lee, 2 Bos. & P. 330. Iowa, 101, 19 N. W. 865.
15 Williamsburg City Fire Ins. Co.
v. Can-, 83 111. 453.
2583
§ 1405
JOYCE (>X [NSURANOE
premiums paid, less the value of the insurance enjoyed by him
during the existence of the policy.19
§ 1405. Premium not returnable: policy illegal: parties in pari
delicto. — If the contract be illegal in its inception as being a \\
policy, or one illegal as being prohibited by positive law, the parties
being pari delicto, and the premium having been paid and the risk
nm, the premium is not returnable.80 But a premium paid for in-
suring lottery tickets has been held returnable, the parties not being
in pari delicto.1 A distinct ion has been made in some of the early
English cases between contracts executed and executory, it being
held that before the event happens, and while the contract is ex-
19 McDonald v. Metropolitan Life
Co. 08 N. H. 4,73 Am. St. Rep.
.148, 38 All. 500. Compare Metropol-
itan Life Ins. Co. v. Ereedman, HO
Mich. 114, 32 L.R.A.(N.S-) 298, 123
N. W. 147. See § 477 herein.
20 Security .Mutual Life tns. Co. v.
Little, 119 Ark. 49, L.R.A.1917A, 475,
178 S. W. 418; Russell v. De Grand,
L5 Mass. 35: Juhel v. Church, 2
Johns, ('as. (N. Y.) 333; Harse v.
Pearl Life Assur. Co. [1904] 1 K. B.
L. R. 558, rev'g [1903] 2 K. B. 92;
Howarth v. Pioneer Life Assur. Co.
L07 L. T. 155; Andree v. Fletcher, 3
Term Rep. 266; Lowry v. Bourdrea,
2 Doug. 468, 14 Eng. Rul. Cas. 533;
Paterson v. Powell, 2 L. J. Com. P.
X. S. 13; Vandyck v. Hewitt, 1 East,
96, 14 Eng. Rul. Cas. 538 ; Monk v.
Abel, 3 Bos. & P. 35. The English
statute, 8 & 9 Vict. e. 109, sec. 18,
forbids all wagers. See statutes un-
der 5? 11!' herein.
As to marine ins. act, 1906, of Eng-
land, see § 1392 herein.
As to return of premium for want
of interest, see § 1110 herein.
As to rebates contrary to statute
not being1 illegal and parties not in
pari delicto, see § 1408e herein.
As to the general rule that money
paid under an illegal contract cannot
be recovered hack, see Kilpatrick v.
Clark, L32 111. 342, 8 L.R.A. 511, 24
N. E. 71.
Ioica. — Cole v. Brown-TTurlov
Hardware Co. 139 Iowa, 187, 18
L.R.A. (N.S.) 1161, 117 N. W. 7 Hi.
Louisiana. — Rudolf v. Costa, 119
La. 781, 44 So. 477.
Michigan. — Richardson v. Buhl, 77
Mich. 032, 6 L.R.A. 457, 43 N. W.
1102.
Nebraska. — Davis v. Hinman, 73
Neb. 850, 103 N. W. 668; Storz v.
Finkelstein, 46 Neb. 577, 30 L.R.A.
044, 65 N. W. 195.
Neiv Hampshire. — Welsh v. Cutter,
44 N. II. 501.
New Jersey. — Brooks v. Cooper, 50
N. J. Eq. 761, 21 L.R.A. 617, 26
Atl. 978.
Oklahoma. — Atchison, Topeka &
Santa Fe Ry. Co. v. Holmes, 18 Okla.
92, 90 Pac. 22.
Vermont. — Danforth v. Evans, 10
Yt. 538.
Washington. — Stirtan v. Blethen,
79 Wash. 10, 51 L.R.A. (N.S.) 623,
139 Pac. 618; Reed v. Johnson, 27
Wash. 42, 57 L.R.A. 404, 67 Pac.
381.
West Virginia. — Lanham v.
Meadows, 72~ W. Va. 610, 47 L.R.A.
(N.S.) 592 (annotated on right to
recover what has been paid or trans-
ferred in consideration of illicit rela-
tions), 7S S. E. 750.
England. — -Taylor v. Chester, L. R.
4 Q. B. 309, 6 Eng. Rul. Cas. 477;
Edgar v. Fowler, 3 East. 225, per
Lord Ellenborough.
See also 1 Story's Equity Jurispru-
dence (6th cd.) 69.
1 Jacques v. Golightly, 2 W. Black.
1073.
2584
RETURN OF PREMIUMS AND ASSESSMENTS-'' § 1405
ecutory, the money paid or advanced may be received back ; 2 and
such was the opinion of Butler, J., in Lowry v. Bordien,3 although
Lord Mansfield held in that case that the policy, being without in-
terest, was a gaming policy against the statute, and the court would
not interfere to assist either party, in accordance with the maxim
that in pari delicto melior est conditio possidentis, thereby implicit-
ly not concurring in the opinion of Butler, J., although in this case
the action was not brought until after the risk had been run. So
Lord Ellenborough doubted the soundness of the distinction when
it was sought to recover back premiums under illegal insurances, and
in this opinion Lord Tenterden 4 coincided, on the ground that the
contract was completed and the consideration paid.5 Mr. Marshall,
however, notes a case of two wagers in the nature of wagering in-
surances, where, although the action, which was brought on the
ground that the plaintiff had won his wager, was nonsuited, Lord
Mansfield permitted a return of the premium,6 and that author is
of the opinion that Mr. Justice Butler's doctrine applied only "to
the case of an insurance without interest innocently made." 7 Mr.
Arnould doubts whether the distinction between contracts executed
and executory can be sustained as to illegal insurances, and says
that if both parties are in pari delicto, "and no case of oppression
or peculiar hardship be made out, the simple and intelligible rule
of potior est conditio possidentis ought to apply in all its general-
ity." 8 Mr. Phillips states the rule thus broadly: "If the contract
is void on account of illegality, the assured is, in general, not en-
titled to a return of the premium, upon the principle that when
parties are in pari delicto, neither has a remedy against the other."
So also Mr. Parsons.10 In Massachusetts it is held that the amount
of a premium note given on an illegal insurance is not collectable.11
In cases of wagers generally it is also held that a promissory note
2Aubert v. Walsh, 3 Taunt. 276; 7 2 Marshall on Ins. (ed. 1810) 643.
Tappenden v. Randall, 2 Bos. & P. 8 2 Arnould on Marine Ins. (Per-
467. As to the general rule, see also kins' ed. 1850) 1235, *1221. As to
Hasleton v. Jackson, 8 Barn. & C. premium being returnable where no
221; Cotton v. Thurland, 5 Term insurable interest, wager policies ex-
Rep. 405; Edgar v. Fowler, 3 East, cepted, see marine ins.- act, 1906, of
225; Smith v. Bickmore, 4 Taunt. England, § 1392 herein.
474. 92 Phillips on Ins. (3d ed.) sec.
3 2 Doug. 468, 14 Eng. Rul. Cas. 1846.
533_ 10 1 Parsons on Marine Ins. (ed.
4 Then Abbott, J. 1868) 515. See also 2 May on Ins.
5 Palyart v. Leckie, 6 Maule & S. (3d ed.) 1304, sec. 567.
290. ' u Russell v. De Grand, 15 Mass.
*" 6 Wharton v. De la Rive, at N. P. 35.
1782, reported in 2 Marshall on Ins.
(ed. 1810) 642, note a.
2585
§ 1405 JOYCE ON INSURANCE
executed upon a void wager cannol be collected.18 It would be diffi-
uowever, to deduce a rule applicable to illegal insurances from
analogous cases of wagers and like illegal contracts generally, for
in such cases the matter is one largely dependent upon statutory
regulations iu the several states. Thus, while it is held if the con-
tract is executed and the money paid it cannot be recovered back,
yet in many of the stales money paid on an illegal wager can by
statute be recovered back, and other decisions hold that whore a
■ contracl is nol executed, that is, the event has no1 transpired
or the money paid over, the contracl may be rescinded and the
money is returnable.18 In addition it has frequently been a ques-
tion whether or nol a policy is within the class denominated as
wagering contracts.14 Iu a New York ease it is declared that if a
er contracl is void as against public policy it would be uncon-
scientious for the insurer to retain the premium.15 The difficulty,
therefore, of stating a rule which is less general than the one given
at the beginning of this section, is apparent. It would seem, how-
ever, extremely doubtful if parties to an illegal contract of insur-
ance, being both in pari delicto, have any standing in court to
claim a return of the premium, even though the event has not oc-
curred or the risk run. except in eases where some statute provides
a remedy, or perhaps in eases of oppression or peculiar hardship,
or those where public policy clearly necessitates the court's inter-
ference. The rule necessarily excludes those cases where the cir-
cumstances are such that the parties are not both in pari delicto.
Lord Mansfield has made an exception by holding that the parties
are not in pari delicto in cases where the prohibitory statute, by
virtue of which the contract is made illegal is intended to prevent
oppression or imposition upon one set of men by another.16 And
in other cases than those concerning insurances relating to con-
tract- in violation of law it lias been held in law and equity that
two parties may concur in an illegal act without being necessarily in
all respects in pari delicto, and also that the case may be such that
public policy requires the court's interference.17 If the policy is
12 Eldred v. Molloy, 2 Colo. 320, Wait's Actions and Defenses, 83-
•J.") Am. Rep. 752. See also Conley v. !M ; "J Parsons on Contracts ( rth ed.)
Billegras, '.'1 Pa. St. L32, 39 Am. 758, *626 et seq., 896, *755 et seq.
Etep. 774; Blasdel v. Powle, L20 Mass. " See SS 894-89-11) herein.
447, 21 Am. Rep. 533. But see 16 Mount v. Waite, 7 Johns. (X.
Boughner v. Meyer, 5 Colo. 71, 40 Y.) 434.
Am. Rep. 139, where a check so given 16Browning v. Morris, 2 Cowp.
was held valid iti the hands of a 790.
bona tide transferee. 17 Osborne v. Williams, 18 Ves. 379.
13 For a review of the law as to 11 R. R. 218; Reynell v. Sprye, 1
wagers and illegal contracts, see 7 De Gex. M. & (!. 660; 1 Story's
258(3
RETURN OF PREMIUMS AND ASSESSMENTS § 1405a
made illegal by a subsequently enacted statute, the risk having at-
tached, both parties are discharged from their contract obligation,
and the insurer loses his premium.18 So if the policy is invalid.
and the insured was guilty of no fraud in procuring it, the pre-
mium is returnable.19 But if a policy is intended to coven- a trade,
in contravention of the regulations of a statute, the assured, even
though a foreigner and ignorant of the law, is not entitled to a
return of the premium.20 And a license to trade in a prohibited
district cannot operate retrospectively so as to entitle the assured to
a return of the premium, even though the license was procured
before the insured knew of the loss; 1 although where both parties
intend a license should be procured, the premium is returnable,
even though the same is afterward declared invalid ; 2 and so also in
case of trading with an enemy, the same being undertaken owing
to a mistaken construction of a license.3 But the rule in pari delicto
does not apply to a case where the broker receives money from the
underwriters for the use of the assured, the contract being illegal,
but such money may be recovered from the broker as money re-
ceived to and for the use of assured.4
§ 1405a. Return of premiums: ultra vires contracts. — It is de-
clared by high authority in England that if the issue of marine
policies is ultra vires of the company, the policies are invalid, and
the premiums may be recovered back.5 And where insurer has no
power to issue an endowment policy for which it has accepted the
premium but has delivered a straight life policy pending delivery
of the one agreed upon and for which the premium was paid, it
must, after refusal of a demand, to comply with its agreement or
to credit the excess of premium paid upon the straight life policy,
either return the premium paid upon a contract which it had no
power to fulfill or give the credit demanded.6 But a beneficiary cer-
tificate containing an ultra vires agreement for endowment insur-
Equitv Jurisprudence (9th ed.) 284, 52 Arnould on Marine Ins. (8th
286; Clough v. Ratcliffe, 16 L. J. Ch. ed. Hart & Simey) sec. 79, p. 104,
477 citing Re Phoenix Life Ins. Co.
18 Gray v. Sims, 3 Wash. (U. S. C. Burg-es & Stock's Case (1862) 2 J. &
C.) 276." Fed. Cas. No. 5729. H. 441; Hainbro v. Hull & London
19 -Mutual Assur. Co. v. Mahon, 5 Fire Assurance Co. (1858) 3H.&N.
Call. (Va.) 517. 789.
20Morck v. Abel, 3 Bos. & P. 35. As to acts ultra vires of insurance
1 Cowie v. Barber, 4 Maule & S. corporations, societies or associations,
16. defenses, benefits received, etc., see §§
2 Siffkin v. Allnutt, 1 M. & S. 39. 334, 350 et seq. herein.
3 Siffkin v. Allnutt, 1 M. & S. 39. 6 Calandra v. Life Assoc, of Amer-
4 Tennant v. Elliott, 1 Bos. & P. ica, 84 N. Y. Supp. 498.
3. See Smith v. Liudo, 5 Com. B.
N. S. 587.
2587
§ 1406 JOYCE OX INSURANCE
ance will be valid in so far as it is payable to the beneficiaries on
the death of the member; and when the member has not season-
ably rescinded the contract, and the benefits of the beneficiaries
thereunder have intervened, hecannol recover from the corporation
;m< ni- paid by him, none of such assessments having been for
endow menl insurance.7
§ 1406. Premium not returnable: policy void for fraud or ma-
terial misrepresentations of assured or his agent. — If the policy is
void by reason of the fraudulent representation or concealment of
the assured or his agent, or if, by deception and false pretenses in
matters material to the risk, he induces the assurer to assume a
risk which would either have been refused or if taken at all would
only have been taken on different terms, there shall be no return
of the premium.8 So the general rule first above Mated as to non-
attachment of the risk precluding insurer from retaining the pre-
miums8* is subject to such exceptions as may exist by reason of
some intentional fraud on insured's part whereby the risk has been
prevented from attaching and the contract becoming of effect,9 If
;, wife intends to defraud the insurer, or knowingly participates in
its agent's fraud, in procuring a policy on her husband's life with-
out his knowledge and against the company's rules, there can be no
recovery back of premiums paid on such policy, and there being
evidence from which the jury may or may not find her innocent
of such fraud or participation, it is error to refuse a charge of the
7Rockhold v. Canton Masonic Mu- South Carolina.— Himely v. South
tual Benevolent Assoc. — 111. — , 2 Carolina Ins. Co. 1 Mill Const. (S.
L.R.A. 420, 19 N. E. 710, aff'd 129 C.) 154, 12 Am. Dec. 023.
111. 4 10, 21 N. E. 794. Wisconsin. — Blaeser v. Milwaukee
'^United States.— Schwartz v. Mutual Ins. Co. 37 Wis. 31, 19 Am.
United States Ins. Co. 3 Wash. (C. Rep. 747.
C.) 170, Fed. Cas. No. 12,505. England.— Chapman v. Frazer, 3
Connecticut.— Lewis v. Phoenix Ins. Burr. 1361; Prince of Wales Assur.
Co. 39 Conn. 100. Co. v. Palmer, 25 Beav. 605; Car-
Kentucky.— Royal Neighbors of ter v. Boehm, 3 Burr. 1909, 13 Eng.
America v. Spere, 160 Kv. 572, 169 Bui. Cas. 501. Formerly otherwise:
S. W. 984. See cases cited and doubted in Mar-
Massachusetts — Trabandl v. Con- shall on Ins. (ed. 1810) 648 52.
neeticut Mutual Life Ins. Co. 131 See note 32 L.K.A.i N.s. | -JOS, on
Mass. Ki7; Friesmuth v. Agawam right of insured to return of premium
Mutual Fire [ns. Co. 10 Cush. (64 where policy is void or voidable be-
Mass.) 587; Hoyt v. Gilman, 8 Mass. cause of misrepresentations on his
336. part.
New York. — Waters v. Allen, 5 8a See § 1300 herein.
Hill (N. Y.) 421; Palmer v. Metro- 9 National Council of Knights &
politan Life Ins. Co. 47 X. Y. Supp. Ladies of Security v. Garber, 131
347, 21 App. Div. 287. Minn. 60, 154 N. W. 512.
2588
RETURN OF PREMIUMS AND ASSESSMENTS § 1406
character above stated.10 And if through fraud of an applicant
and insurer's agent, membership is obtained by misrepresentations
as to age, and the certificate provides for forfeiture of assessments
in case of false statements on that subject, insured cannot demand
a return of assessments paid when his fraud is discovered and the
certificate declared forfeited, especially so where said payments are
disbursed and the society is not one for profit.11 So one who has
secured a mutual benefit certificate by fraud cannot, after the as-
sessments paid by him have been disbursed to pay claims againsl
the association, demand a return of the amounts paid when his cer-
tificate is forfeited for the fraud, since the parlies cannot be placed
in statu quo.12 So misstatements as to age made to- a fraternal
order, which limits the age at which a person may become a mem-
ber, precludes a recovery back by him of premiums paid while the
order had no knowledge of said misstatements and the by-laws pro-
vided for forfeiture of all premiums paid in such case.13 So a ben-
efit society from which a beneficary certificate has been obtained
by fraudulent understatement of the age of the applicant is under
no legal obligation to return what has been paid as assessments
before it can claim that the contract is not in force.14 Under an
Indiana decision although the contract provides that fraudulent and
untrue statements of insured shall render the insurance void and
work a forfeiture of all premiums paid, still the contract is not ren-
dered absolutely void but only voidable at the election of insurer
who must tender back the premiums received as one of the neces-
sary steps to an election to rescind or avoid the policy. This is
held to be the rule as settled by decisions of that state and it is
applied to statements as to insured's occupation which are warrant-
ed to be true.15
10 Fisher v. Metropolitan Life Ins. Schroyer, 176 Ind. 654, 95 N. E.
Co. 162 Mass. 236, 38 N. E. 503. 1004, 40 Ins. L. J. 2087. The court
11 Elliott v. Knights of Modern per Cox, J., said : "The rule as set-
Maccabees, 46 Wash. 320, 13 L.R.A. tied by the decisions of the courts
(N.S.) 856, 89 Pac. 929. of this state is that contracts of in-
12 Elliott v. Knights of Modern surance with such provisions are not
Maccabees, 46 Wash. 320, 13 L.R.A. rendered absolutely void by a breach
(N.S.) 856, 89 Pac. 929. of warranty or by reason of false
13 Criscuolo v. Societa Monarchica answers to questions affecting the risk
Di Mutuo Soccorso Vittorio Emanu- contained in the application as a part
ele III. 89 Conn. 249, 93 Atl. 532. of the contract of insurance, such as
14 Taylor v. Grand Lodge Ancient are involved in this case, but that they
Order United Workmen, 96 Minn, are voidable at the election of the in-
441, 3 L.R.A. (N.S.) 114 (anno- surer; that, before a defense on such
tated on return of assessment on ben- ground can defeat a recovery by the
etit certificate proving void for beneficiary in a suit on the policy, the
fraud), 105 N. W. 408. insurer must take proper steps to ex-
15 Commercial Life Ins. Co. v. orcise its election to avoid and rescind
2589
§ 1407 JOYCE OX INSURANCE
i
§ 1407. Premium not returnable: material alteration of policy. —
[f there be a material alteration of the contract by the assured with-
the contract; and thai tendering back even though a contract of insurance
the premiums received is one of the is procured by fraud of the insured
necessary steps in making the election and the insurer is in ignorance, and
!,, rescind. Glens Kails Ins. Co. v. the risk attaches, the premium musl
Michael (1906) L67 [nd. 659, 8 be returned where the defense is in-
L.R.A.(N.S.) 708, 7! N. E. 964, 79 terposed in an action at law upon the
X. i-;. 905; American Central Life policy. The rule may be otherwise in
Co. v. Rosenstein, 16 End. App. case of an action in equity to cancel
537, !!'J X. E. 380; State Life Ins. the policy upon the ground of the
Co. v. Jones, 48 End. App. 186, 92 requirement thai the moving party
X. E. 879. See also IS Harvard shall do equity, and the ground of the
Law Review, 364. Answers to a com- distinction between actions inequity
plaint to recover on a policy in such and actions at law on the policy has
eases must, to be sufficient, allege the been lost sight of, and much con-
s showing the condition, its fusion has thereby arisen.
breach, and the election to avoid or "It seems to me no answer to say
rescind the contract; and to defeat when there is an action on the policy
a recovery by reason thereof proof thai the contract becomes noneffective
must be made of the facts so alleged, from the beginning, and hence no risk
"But counsel for appellant contend attaches. That depends upon the fact
the rule as laid down in the cases as to whether there is a discovery, so
cited above does not apply to this that there may he ground for an elec-
because of the provision in the con- tion to rescind, for until discovery,
tract here that the insured shall in some risk necessarily attaches, even
such case forfeit premiums paid. Of though it should not be the full risk
course, it is obvious that, if the in- contracted for, and, in addition, the
surer elect to avoid or rescind the fact that there is a necessary expense
policy, it is as if no contract had in procuring the contract. It is not
been made. The termination of the wholly unilateral. Some risk neces-
contract in case the insurer elects to sarily attaches as an element of non-
rescind it does not date from the time discovery itself, and from the fact of
of the election, but from the breach issuance of the policy, but the con-
of the condition. In this case the tract is none the less fraudulent,
breach was before the consummation though there be no discovery, and, so
of the contract, and at the election of long as any risk attaches, it becomes
the insurer the contract became null in effect a wagering contract, and
from its inception, leaving no obliga- it seems to me in such case, even
tion resting upon either party to it. though there is discovery of the
Appellant could not renounce the con- fraud, there should be no recovery of
tracl for the purpose of refusing to the premium, and this court has held
pay the amount it called for to the that, so long as any risk attaches,
beneficiary, and in the same breath there can be no recovery of premiums
claim it to he in force for enabling it on the ground that there can be no
to retain the premium paid." apportionment risk. American Mu-
Myers, .1. (dissenting) said: "I tual Life Ins. Co. v. Bertram, 163
concur in the result reached in the Ind. 51, 64 L.R.A. 935, 70 N. E. 258;
majoritv opinion on the »round of Continental Life Ins. Co. v. Bouser,
election by appellant after notice of 111 Ind. 266, 12 N. E. 479; Standley
the alleged false answer, but I am v. Northwestern Mutual Life Ins. Co.
impelled to dissent, from so much of 95 Ind. 254. The appellate court has
the opinion as in effect holds that held the same. American .Mutual
'J",! Id
RETURN OF PREMIUMS AND ASSESSMENTS § 1407
out consent of the assurer, whereby it is avoided, the premium is
not returnable, even though there is no fraud on the part of the
assured, for it, is a general rule thai the assure I cannot by his own
act, the risk having attached, rescind the contract, and so compel
a return of the premium, although he might have prevented the
inception of the risk.16
Life Ins. Co. v. Mead, 39 Ind. A pp.
215, 79 N. E. 526; Metropolitan life
Ins. Co. v. Bowser, 20 Ind. A pp. 557,
50 N. E. 86; Metropolitan Life Ins.
Co. v. McCormick, 19 Ind. A pp. 49,
65 Am. St. Rep. 392, 49 N. E. 44.
If it be said that it is a wagering
contract on the part of the insurer,
then the law should leave the par-
ties where they place themselves. It
seems to me that any other rule in-
vites wagering contracts, deception,
and perjury, and that a wise public
policy would be subverted in the rule
I suggest, which has been held by
many of the courts. Tavlor v. Grand
Lodee, 96 Minn. 441, 3 L.R.A.(N.S-)
114, 105 N. W. 408; Ronald v. Mutual
Life Assoc. 132 N. Y. 378, 30 N. E.
739; Thompson v. Travelers' Life
Ins. Co. 11 N. Dak. 274, 91 N. W.
75; Id. 13 N. Dak. 444, 101 N. W.
900; Stringham v. Mutual Ins. Co.
44 Oreg. 447, 75 Pac. 822; Blaeser
v. Mechanics Life Ins. Assoc. 37 Wis.
31, 19 Am. Rep. 747; Georgia Home
Tns. Co. v. Rosenfield, 95 Fed. 358,
37 C. C. A. 96; United States Life
Ins. Co. v. Smith, 92 Fed. 503. 34 C.
C. A. 506: Lewis v. Phoenix Mutual
Life Ins. Co. 39 Conn. 100; Hoyt v.
Gilman, 8 Mass. 336; Metropolitan
Life Ins. Co. v. McTague, 49 N. J.
Law 587, 60 Am. Rep. 661, 9 Atl.
766; Joyce on Insurance, sec. 1406.
The rule of requiring the return of
premiums paid applies in case of ac-
tions in equity to cancel the policy,
and not in actions at law upon the
policy, is asserted in numerous well-
reasoned cases, which seem to me to
declare the true rule. United States
v. Smith, supra; National Mutual
Fire Ins. Co. v. Duncan, 44 Colo.
472, 20 L.R,A.(N.S.) 340, 98 Pac
634; Provident Savings Life As
ance Co. v. Whayne, 131 Ky. 84,
S. W, 1049; Venner v. Sun Life Ens.
Co. 17 Can. S. C. 394.
"It can scarcely be questioned that,
although the contract provides that
fraud shall render the policy void,
they are universally held not to be
void, but voidable at the election of
the insurer, and for that reason alone
a risk attaches, subject to be defeat-
ed at the election of the insurer, and
hence the reason for the rule of re-
quiring tender of the premiums when
equity is appealed to to cancel the
policy, while, on the other hand, when
an action is brought on the law side
of the court on the policy, the in-
surer may stand on his legal defense,
and the law leaves the insured where
he lias placed himself by his own
fraud, from which he is not permitted
to take advantage, or speculate upon
the fact of his having paid money on
a contract rendered fraudulent by his
own conduct." See also Metropoli-
tan Life Ins. Co. v. Freedman, 159
Mich. 114. 32 L.R.A.(N.S.) 298 and
note on right of insured to return of
premium where policy is void or void-
able because of misrepresentations on
his part, 123 N. W. 147.
16 Langhorn v. Cologan, 4 Taunt.
430, per Lord Mansfield, who says:
"The underwriter has fulfilled his
part. The assured can no more com-
pel the underwriter to return the pre-
mium than the underwriter can com-
pel him to relinquish the contract."
The case was one of insurance on
goods and merchandise generally, and
on the vessel, and written words were
inserted describing specific goods
without the consent of the defer
assurer.
2591
§§ i4ii7a. 1 108 JOYCE ON INSURANT E
§ 1407a. Return of premiums: demand for additional medical
examination.— It is held that insured is qoI entitled to recover back
an advanced premium paid on his application for a policy where
he refuses to submit to a required additional medical examination
unless he shows thai his refusal was justified as a matter of law and
go entitled him to rescind the contract."
§ 1408. Return of premium: breach of contract by assurer. — If
the contract is valid and the company is lawfully entitled there-
under to receive premiums, and there is nothing which .-hows that
the refusal of the company to fulfil its contract is not fully justi-
fied by its terms, an action for a return of premium cannot be main-
tained.18 So also in case of assessments claimed to be recovered
hack as overpayments, there shall he no return where there is a
finding that the same arc lawfully levied, and duly and properly
used by the company, and thai they were voluntarily paid by the
assured with a full knowledge of all the facts.19 Again, a policy of
life insurance stipulated that default in the payment of any of the
annual premiums to become due after the first two should not work
a forfeiture of the policy, hut that the amount insured should he
then commuted or reduced to the sum of the annual premiums
paid. The insured brought suit to have the contract declared re-
scinded, and to obtain a decree against the insurance company for
the sums which he paid as premiums, upon the ground that the
company asserted that the policy was forfeited by his failure to pa} ,
and declined to issue a "paid-up policy" equal to the sum of the
several annual premiums paid. It was held that such suit could
17 Witt v. Old Line Bankers' Life tinent in this case. What risk or lia-
Ins. Co. 94 Neb. 748, 144 N. W. 801. bility had the company incurred?
Reese, J., who had dissented from for- If the premium had not been ad~
mer decisions in the case, concurred vanced could the company have recov-
"upon the express condition that, ered the amount thereof in an action
should plaintiff submit to another ex- therefor against insured.' What lim-
amination, and the application be ac- itation exists as to the right to de-
cepted, he shall receive a policy with- mand additional examinations?
out further cost or expense to him As to right to recover back pre-
than if a policy had been issued upon miums paid and as to demand for an
the first examination, and that the an- additional examination being an evi-
nual premium be not increased, dence at the most of an intent to
Should defendant fail or refuse to effect a cancelation of policies, see
accede to these conditions, it is liable Armstrong v. .Mutual Life Ins. Co.
to plaintiff for a return of the ad- 121 Iowa. 362, 96 X. W. 954.
vance premium paid, with legal in- 18 Continental Life Ins. Co. v.
terest from the time of payment.'7 llouscr, 89 Iml. 258.
See dissent imr opinion in Witt v. Old 19<'lanccv v. .Mutual Reserve Fund
Line Bankers' Life [ns. Co. 80 Neb. Life Assoc. (N. Y. City Ct. 1891) 10
Ki:;, 168, 131 N. W. 189. It seems to Court Jour. 1.
the author thai the questions are per-
•_»-.!)2
RETURN OF PREMIUMS AND ASSESSMENTS § 1408a
not be maintained where the only obligation imported by the terms
of the policy was to pay within ninety clays after due notice and
proof of the death of the assured.20 Again, although the policy by
its terms entitles assured to obtain a loan from insurer on the se-
curity of the policy alone, it is held that such a provision is only
a conditional one independent of the contract to insure, and that
both on this account and because statements made by insured at
one of the insurer's subordinate offices when requesting a second
loan were held to have constituted an abandonment of the con-
tract, the refusal of the cashier of the subordinate office to make
said loan, did not operate as a repudiation of the insurance con-
tract, and there could be no recovery back on the premiums paid.1
But the premiums are returnable when the company does not
deliver the policy as agreed, although the parol contract has at-
tached.2 And where the company refuses to receive a premium
when due, it is held that at least all the premiums paid may be
recovered back with proper interest.3 The question, however, of
return of premiums in case of the wrongful cancelation or termi-
nation of the contract by insurer is hereinafter fully considered.4
§ 1408a. Same subject: transfer of assets to another company:
winding up: reorganization: change of insurance plan. — Assured
may rescind and recover back all premiums paid with interest in an
action for money had and received where the company violates its
contract, by transferring all its assets to another company and ceas-
ing to do business.5 A policyholder is under no obligation to con-
tinue his insurance with a new company to which the company
20 Harlow v. St. Louis Mutual Life 238. But see Leonard v. Washburn.
Ins. Co. 54 Miss. 425, 28 Am. Rep. 100 Mass. 251.
358. See Continental Life Ins. Co. 3 Alabama Gold Life Ins. Co. v.
v. Houser, 111 Ind. 206, 12 N. E. Garmany, 74 Ga. 51; xKtna Life Ins.
479. Compare Pbcenix Mutual Life Co. v. Paul, 10 Bradw. (111.) 431;
Ins. Co. v. Baker, 85 111. 410. McKee v. Phcenix Ins. Co. 28 Mo.
1 Lewis v. New York Life Ins. Co. 383, 75 Am. Dec. 129: Cohen v.
(U. S. C. C.) 173 Fed. 1009, aff'd New York Mutual Life Ins. Co. 50
30 L.R.A.(N.S.) 1202, 181 Fed. 433, N. Y. 010. 10 Am. Rep. 522; Meyer
104 C. C. A. 181. Examine Key v. v. Knickerbocker Life Ins. Co. 7.'!
National Life Ins. Co. 107 Iowa, 446, N. Y. 516, 29 Am. Rep. 200; Phoe-
78 N. W. 68, 28 Ins. L. J. 259; nix Mutual Life Ins. Co. 9 W. Ya.
Bums & Reillv Real Estate Co. v. 237, 27 Am. Rep. 558. But see Sneer
Philadelphia Life Ins. Co. 239 Pa. v. Phoenix Mutual Life Ins. Co. 36
St. 22, 86 Atl. 642. Hun (43 N. Y.) 322.
On breach of agreement of insurer 4 See § 1659 herein,
to make loan on policy as justifying 5 Meade v. St. Louis Mutual Life
rescission and recovery of premiums Ins. Co. 51 How. Pr. (N. Y.) 1.
by insured, see note in 30 L.R.A. As to rescission and cancelation:
(N.S.) 1202. transfer of business and assets, see
2 Collier v. Bedell, 39 Hun (N. Y.) § 1644 herein.
Joyce Ins. Vol. III.— 163. 2593
§ 1408a JOYCE ON ENSURANt E
insuring him has transferred its business, but has a right to con-
the contract al an end, and to demand what is due him by
;i of its abandonment, which is the amount of the premiums
paid less the value of his insurance of which he had the benefit and
the sum to which he is so equitably entitled may be recovered from
the assets and he has also the right to resorl to the fund on deposit
with the -late to protect policyholders. This is held to resl upon
the principal that if Ihe performance of an executory contract is
prevented by one of the parties thereto or he puts it out of his
power to perform it. it may be regarded by the other party as termi-
nated and he may demand whatever damages he may have sustained
thereby.6 So in a Texas case in which there were seventeen assign-
ments of error, it is held that if the original insurer transfers prac-
tically all of its assets and assigns its policies to another company
and virtually abandons its business and ceases to be a going con-
cern and has thereby placed it beyond its power to fulfil its obli-
gations directly with a policyholder, such acts constitute a breach
or repudiation of its contract, with him. where said insured does not
consent to the transfer, and the fact that the transferee company is
solvent and willing to carry out the original contract with insured,
does not render it the less a breach of contract for which the trans-
company is liable in an action by assured himself for recovery
of premiums paid and for damages. And it was also held that an
objection that there could be no recovery of damages by insured for
an anticipatory breach of contracl would not be sustained so thai
assured upon his election to consider the contract terminated can
recover hack all premiums paid by him with interest on the several
payments computed from the date when each was made. It further
appeared that at the time of said breach insured on account of his
changed physical condition was unable to obtain life insurance with
other desirable and solvent insurers.7 So where a contract of insur-
6Lovell v. St. Louis Mutual Life tual Life Ins. Co. Ill U. S. 264,
Ins. Co. Ill l\ S. 264, 28 L. ed. 28 L. ed. 423, 4 Sup. Ct. 390; Men
123, 1 Sup. Ct. 390, relying upon ger v. Ward, 87 Tex. 622, 30 S. W.
i aited States v. Behan, 110 U. S. 583; Meade v. St. Louis Mutual Life
!8 L ed. L68, I Sup. Ct. 81. Ins. Co. 51 How. Prac. (N. Y.) 1,
7 Washington Life Ins. Co. v. I. eve- and cites as sustaining the ahove rule
joy, Tex. Civ. App. - , L49 S. W. upon the measure of damages.
,] In . L. .J. L553. The court, Georgia- Alabama Gold Life fns.
per McMeans, J., cites as sustaining Co. v. Garmany, 74 Ga. 51.
the poinl that if, was not within the Illinois. — ./Etna hif'e Ins. Co. v.
power of the original insurer, against Paul, 10 111. App. 431.
insured's consent, i<> substitute an- Iowa. — Van Werden v. Equitable
other company in carrying out its un- Assur. Soc. 99 Iowa, 621, 68 X. W.
dertakings. Lovell v." St. Louis Mu- 892.
2594
RETURN OF PREMIUMS AND ASSESSMENTS § 14081
ance is terminated by the insurer transferring its business to another
without the consent of the insured, one policyholder alone can
maintain a suit for the recovery for what is due him by reason of
the abandonment of the contract, where it does not appear that
any others have not accepted the terms of the arrangement be-
tween the two companies, nor that the fund is insufficient to nice;
all demands upon it.8 But it is held that a reorganization of a
mutual company which does not change its liabilities, rights, or
identity, is not a ground for the recovery back of premiums.9
If the company, by virtue of an act of the legislature, abandons
its plan of insurance without the assured's knowledge or consent,
and thereby reduces its funds upon which the assured relies for
payment of endowments contracted for, he may rescind the con-
tract, and is entitled to a return of his assessments paid thereon.10
§ 1408b. Same subject: insolvency. — Where there is a breach of
the contract obligations by the insolvency of the assurer, the as-
sured, who is the holder of a cash premium policy, is entitled to a
return of his premiums.11 So premiums and assessments which
the policyholders of a stock company, in ignorance of its dissolu-
tion, have paid to a receiver, are without consideration and must be
returned, for when such a corporation is dissolved the insurance
does not continue in force.12 And where insurer fails in insured's
Michigan. — Frain v. Metropolitan Reserve Fund Life Assoc. 81 Minn.
Life Ins. Co. 67 Mich. 527, 35 N. W. 116, 83 N. W. 506, 84 N. W. 457.
108. 8 Lovell v. St. Louis Mutual Life
Missouri.— McKee v. Phoenix Ins. Ins. Co. Ill U. S. 264, 28 L. ed. 423,
Co. 28 Mo. 383, 75 Am. Dec. 129. 4 Sup. Ct. 390. Cited in Black v.
North Carolina. — Braswell v. Homeopathic Mutual Life Ins. Co. 47
American Life Ins. Co. 75 N. Car. 8. Hun (N. Y.) 212.
Pennsylvania. — American Life Ins. 9 Muller v. State Life Ins. Co. 27
Co. v. McAden, 109 Pa. 399, 1 Atl. Ind. App. 45, 60 N. E. 958.
256; March v. Metropolitan Life Ins. 10 People's Mutual Assur. Fund v.
Co. 186 Pa. 628, 65 Am. St. Rep. Brieken, 92 Ky. 297, 13 Ky. L. Rep.
887, 40 Atl. 1100. 58(1. 17 S. W. 625.
Texas. — American Legion of Hon- n In re Minneapolis Mutual Fire
or v. Battle, 34 Tex. Civ. App. 456, Ins. Co. (Powell v. Wyman) 49
79 S. W. 629. Minn. 291, 51 N. E. 921; Clark v.
West Virginia, — McCall v. Pboe- Manufacturers' Mutual Fire Ins. Co.
nix Mut. Life Ins. Co. 9 W. Va. 130 Ind. 332, 30 N. E. 212. See note
237, 27 Am. Rep. 558. 19 L.R.A.(N.S.) 639, on right to re-
19 Am. & Eng. Enc. Law, 99. turn of premiums on adjudication of
The court also considers upon the insolvency of insurer,
same point the case of Supreme As to rights of policyholders after
Lodge of Knights of Pythias v. Neely, dissolution of company, see §§ 3595
— Tex. Civ. App. — , 135 S. W. 1046, et seq. herein.
and holds that it is not applicable. As to rescission and cancelation;
The court also criticizes on the same insolvency, see § 1644 herein,
point the case of Ebert v. Mutual 12 Ensworth v. National Life Assoc.
2595
L08c JOYCE ON INSURANCE
lifetime the latter is entitled to recover premiums paid on a policy
on his life for his wife's benefit.18 So where there is a failure on
the part of insurer to keep on hand the legally required funds and
it becomes insolvent and discontinues business and does qo1 carry
mil its contracts with its policyholders it constitutes a breach of
contract for which said insurers are liable in damages to the value
of the extinguished policy and the excess of premiums over the
cosl of carrying the risk during the early years of the contract con-
stitutes the presenl value in the absence of any change other than
that ordinarily caused by the efflux of time14 Bu< in the case of
insolvency of insurer the holders of unmatured life policies are not
entitled to have refunded to them a pro rata portion of the pre-
miums paid by them before payment out of the assets of any other
< reditors, as such policyholders are not within a statute which pro-
vides for refunding by receivers to holders of open and subsisting
contracts, in the nature of insurance, the premium paid or a pro
rata portion thereof, where such enactment can by its terms apply
only tn insurances which have a definite term to run.15
§ 1408c. Same subject: insolvency of foreign mutual fire insur-
ance companies. — If by the statutes of the state the liabilities of
foreign mutual fire insurance companies are the same as those of
stock fire insurance companies, and policies issued by the former
provide that insured incurs no other or greater liability for pre-
mium or otherwise than that expressly provided in said policy and
also contains a clause providing for cancelation by insured and
payment to him of the unearned premium, and said policies eon-
form in all other respects to the form of standard policies issued by
stock companies, and said policies do not refer to the articles of
incorporation or the by-laws of the company, it follows that the
right of a policyholder to return of the unearned part of the pre-
mium on account of insolvency of insurer, is the same in such case
as in that of a stock company as to which the courts agree that upon
its dissolution insured is a creditor to the amount of the unearned
premium.16
81 Conn. 592, 71 Atl. 791, 38 Ins. L. porations cited in Barney v. Dudley,
J. 401. 42 Kan. 212, 16 Am. St. Rep. 176,
18Universal Life Ins. Co. v. Cog- 21 Pac. 107, to the point that the
bill, 30 Gratt. (Va.) 72. rule is just and equitable but dis-
l4People v. Security Life & An- tinguished in that in the citing case
unity Ins. Co. 78 N. Y. 114, 34 Am. the insurer was still carrying the
Rep. 522. policy.
16 People v. Security Life Ins. Co. 16 Federal Union Surety Co. v.
78 N. Y. 114, 34 Am. Rep. 522; 2 Flemister, 95 Ark. 389, 130 S. W.
Rev. Stat. 1829, p. 170, sec. 75, gov- 574, 30 Jus. L. J. 1485, relying upon
erning voluntary dissolution of eor- note 10 L.R,A.(N.S.) 639, on right
2596
RETURN OF PREMIUMS AND ASSESSMENTS §§ 1408d, 1408e
§ 1403d. Same subject: insolvency of title insurance company:
credit insurance company. — The holder of a policy of insurance
issued by a real estate title insurance company is, upon a cancel-
ation or annulment of the policy by a judicial decree declaring the
company insolvent and appointing a receiver to wind up its affairs,
entitled to a return of a proportionate part of the premium paid
therefor, measured by the time elapsing between the date of the
policy and the date on which the company was so adjudged in-
solvent. But such policyholder is not entitled to the return of
that part of the unearned premium upon the winding up of such
company's affairs which the application for insurance stipulated
might be retained by the company for its services in investigating
the title insured.17 The insolvency, however, of a credit insurance
company during the period for which a policy was issued and be-
fore any loss was suffered by the insured, does not entitle him to
rescind the contract and recover back the whole premium paid, but
only to recover back the unearned premium for the remainder of
the term.18
§ 1408e. Same subject: discrimination as to rates: rebates. — The
question whether or not premiums are returnable in cases of dis-
crimination as to rates, or rebates contrary to statutes prohibiting
the same, depends upon the view taken as to the construction of
such statutes and the effect thereof upon the insurance contract in
respect to its illegality, and also the questions whether or not the
risk has attached and there has been a breach or repudiation of the
to return of premium on adjudiea- Misc. Rep. 727; Ex Parte Independ-
tion of insolvency of insurer, citing ence Ins. Co. 13 Fed. Cas. at page
Franzen v. Hutchinson, 94 Iowa, 95, '12; State Ins. Co. v. Horner, 14 Colo.
62 N. W. 698. On rehearing the 391, 23 Pac. at page 7S8; Van Val-
court said: "Counsel for the Fed- kenburg v. Lennox Fire Ins. Co. 51
eral Union Surety Company contend N. Y. 4C5 at page 468; Burlington
that the policies of insurance are can- Ins. Co. v. McLeod, 34 Kan. at page
celed by act of the insured, and that 192, 8 Pac. 124. As an abstract prop-
the basis of settlement should be the osition of law, we think the views of
rate paid for a short-term policy; in counsel are correct; but we also are
short, that the insurance company is of opinion that the state of the ree-
entitled to charge the customary short ord in the case precludes him from
rates, and the policyholder is only availing his client of that principle of
entitled to the difference between the law."
amount paid by him and the short 17 State ex rel. Schaefer v. Minne-
rate. In support of his contention, sota Title Ins. & Trust Co. 104 Minn,
he cites the following cases: Insur- 447, 19 L.R,A.(N.S.) 639 and note,
ance Commissioners v. Peoples' Fire supra, 116 N. W. 944.
Ins. Co. 68 N. H. 51 at page 63, 44 18 Smith v. National Credit Ins. Co.
Atl. 82; McKenna v. Firemens' Ins. 65 Minn. 283, 33 L.R.A. 511, 68 N.
Co. 63 N. Y. Sirpp. at page 164, 30 W. 28.
2597
§ 1408e JOYCE <>\ [XSURA.NCE
contract by insurer.19 Under a North Carolina decision insured is
entitled to recover, as for money had and received, the premiums
paid by him on ;i contract of insurance, where the parties had
agreed upon a rebate of premium contrary to the statute against
discrimination, and rebates and said reduced rate had been accept-
ed by insurer for several years until it repudiated the contract as
illegal, lor the statute was held to operate upon insurer alone, the
offense being only a prohibited one and the parties not in pari
delicto.20 So in Oregon where a policy was issued by the company's
agent, who allowed a rebate of premiums, and the evidence tended
;<» show a ratification by the company of its agent's acts, and the
company repudiated the contract after the third year's premium
was tendered, the whole amount of the premiums paid was al-
lowed to be recovered with interest, although the insured had
.'•■reived the benefit of the insurance for the years the policy
was in force.1 It is decided, however, thai the granting of a
rebate of premium on a life policy, contrary to a statute againsl
rebates, does not render the contract void so as to permit insured
to recover back premiums paid thereon, where the only rem-
edy provided by the statute for its violation is the imposition
upon insurer of a penalty of forfeiture of its license to do business
within the -tale, and a reduction of the face of the policy to the
amount which could have been purchased by the premium paid.2
It is also held that what is known as a "Board of Consultation Con-
tract." whereby for services rendered the second premium is to be
reduced in amount, does not invalidate a policy so as to enable as-
sured to recover back the first premium paid when he has had full
protection under the policy and in case of his death while it was in
force a claim for the amount thereof would have been sustained.3
It is pertinent in this connection to state that it is held in England
that there can be no recovery back of premiums paid on a policy
prohibited by statute under penalty, and recovery in such case is not
19 As lei discrimination as to rate-; fecting validity of a contract made;
rebates, and effeel thereof, sec SS by a foreign corporation without
L093 el seq. herein. complying with the statutory condi-
20Robinson v. Security Life & An- lions of doing business, see note in
nuity Co. L63 N. Car. 415, 7!) S. E. 4 L.K.A.(N.S.) 688.
681. 'Commonwealth Life Jns. Co. v.
1 Thompson v. New York Life Ins. Bowling, — Ky. — , 114 S. W. .'127,
Co. 21 Or. 466, 28 Pac. 028. 38 Ins." L. J. 144.
2 Laun v. Pacific Mutual Life Ins. As to agreements for services: ad-
Co. 131 Wis. 555, 9 L.R.A,(N.S.) visory boards: rebates, see §§ 1092d,
1204, 111 N. \Y. 660. L092e herein.
On imposition of a penalty as af-
2598
RETURN OF PREMIUMS AND ASSESSMENTS §§ 1408f, 1408g
aided by the claim thai payment of the premiums was induced by
the fraudulent representations of the insurer or its agents.4
§ 140Sf. Same subject: reduction of amount of insurance. — Where
there is an illegal reduction of the amount of insurance by chang-
ing the by-laws and impairing vested rights it constitutes such a
repudiation of the contract by insurer as entitles insured to sue
for and recover the premiums paid with interest.5
§ 1408g. Same subject: increase of assessments. — Tf by election
of insured no anticipatory breach of contract is committed by con-
stantly increasing assessments contrary to the terms of the con-
tract and he stands on his tender of the amount due for asse>.-uienK
which is refused and there is no rescission by him, under the cir-
cumstances he is not entitled to recover either principal or interest
nor should interest be recoverable where the money paid into the
company's treasury for mortality assessments was not used for
4 Hughes v. Liverpool Victoria Le- before a specified day. or in case of
gal Friendly Soe. 31 T. L. R. 635. short interest. In such cases there is
5 Makely v. American Legion of a returnable premium, and unless
Honor, 133 N. Car. 367, 45 S. E. otherwise agreed, where a marine pol-
649; Black v. Supreme Council icy is effected on behalf of the as-
American Legion of Honor (U. S. sured by a broker, the insurer is di-
C. C.) 120 Fed. 580, aff'd Supreme rectly responsible to the assured in
Council American Legion of Honor v. respect of returnable premiums (ma-
Black, 123 Fed. 650, 61 C. C. A. 5; rine insurance act 1906 [6 Edw. VII.
Supreme Council American Legion of c. 41] sec. 53, [1]). The mode in
Honor v. Jordan, 117 Ga. 808, 45 S. which it was customary to deal with
E. 33. See McAlarney v. Supreme returnable premiums as between the
Council American Legion of Honor assured, the broker, and the under-
(U. S. C. C.) 131 Fed. 538, rev'd writer, and the rules of law which
Supreme Council American Legion of were applicable in the case of the
Honor v. McAlarney, 135 Fed. 72, 67 death or bankruptcy of the under-
C. C. A. 546. Compare Porter v. writer are set out in Arnould on Ma-
American Legion of Honor, 183 Mass. rine Insurance, sees. 116-118. Such
326, 67 N. E. 238. custom no longer exists, and returns
As to change of by-laws : vested of premium are now dealt with as
rights : increasing assessments or losses or averages. The underwriter
dues or reducing amounts payable, is credited with the initial premium,
see §§ 380 et seq. herein. and if a return is afterwards found
Marine insurance: return of to be due, it is adjusted on the pol-
premiums on reduction of risk: re- icy and credited to the broker, just
turn as between insured, broker, and as a loss would be adjusted or cred-
underwriter. "The amount of pre- ited. It suffices, therefore, to refer
miums ultimately payable to the un- to the above-mentioned sections of
derwriter may frequently depend on Arnould for the old custom and the
contingencies which cannot at once be law appertaining thereto." 17 Earl
ascertained, as for instance where it of Halsbury's Laws of England, sec.
is agreed that the premium should be C94, p. 351.
reduced if the ship should sail on or
2599
§§ 1408b, 1409 JOYCE ON INSURANCE
the company's benefil but was al once distributed to other policy-
holders for death Losses and no profil was bad from its use.6
§ 1408h. Same subject: reinsurance. — It is decided that there
must be proof of actual loss Ln order to recover in implied assump-
sit the premiums recited in repudiated policies of reinsurance to
have been paid, although it is declared thai if policies of reinsurance
I without complying with the statute are invalid, the con-
sideration received therefor should be returned upon repudiation
of the contract and that rescission would have the same effect.7
§ 1409. Return where note is given. — Although a premium note
is given, it' the maker thereof is entitled to a return of the premium
on the same policy, he may have the amount of the return de-
ducted from the amount of the note; 8 and this is so held although
the maker was at the same time indebted to the insurers for other
notes given for premiums on other policies of insurance, and had
become insolvent.9 And the rule obtains where a promissory note
i- given for the premium, which note is prima facie payment there-
of, the insurer having acknowledged in the policy the receipt of the
premium, and the insured may recover the return premiums by an
action for money had and received, though his note remains un-
paid.10 As will be observed, this is not the case of a promissory
note conditionally received in payment, the policy to he forfeited
if it is not paid at maturity.11
An aj plicant for life insurance who has been compelled to pay
to an innocent holder a negotiable premium note given at the time
<if such application may recover from (he company the amount so
paid, where he has refused the policy because it does not comply
with the oral representations of the agent.12 And where an appli-
cant, who has executed his note to insurer's agent for the pre-
mium on a life policy, is rejected, the fact that he has allowed said
agent to apply to another insurer for a policy does not cancel in-
surer's debt for money received by its agent where no other policy
6 Blakely v. Fidelity Mutual Life 9 Phoenix Ins. Co. v. Fiquet, 7
[ns. Co. 143 Fed. 619, 35 Ins. L. J. Johns. (N. Y.) 383.
699, aff'd 151 Fed. 43, 83 C. C. A. 10 Hemmenway v. Bradford, 14
L55, 36 tns. L. J. 884, certiorari de- Mass. 121.
pied, 207 0. S. 592, 52 L. ed. 355, 28 « Martin v. Sitwell, 1 Show, 156.
Sup. CI. 257. 12 Evans v. Central Life Ins. Co. 87
As to changes in by-laws increas- Kan. 641,41 L.R.A.(N.S.) 1130 (an-
ing assessments or dues, see §§ 380c notated on rigbt to rescind or reject,
et eq. herein. policy not coni'ormin"; to represcn-
7Iowa Life ln~. Co. v. Eastern tations of insurer's agent), 125 Pac.
Mutual Life Ins. Co. 63 N. J. L. 439, 8G, 41 Ins. L. J. 1540.
13 All. 720.
8 Phoenix Ins. Co. v. Fiquet, 7
Johns. (N. V.) 383.
2600
RETURN OF PREMIUMS AND ASSESSMENTS § 1409a
is obtained and no money is returned to the applicant.13 So where
a nolo is given in consideration of the issuance and delivery, within
a stated time, of a policy, and the proceeds of the note are appropri-
ated by the insurer without issuance of the policy, the applicant
may recover such proceeds, although the insurance may actually
have been in effect for some time.14 And where insurer's agent
fraudulently obtained a note from insured on the promise to return
it if the applicant did not accept the policy, and the note is trans-
ferred to a bona fide holder, the insurer is liable therefor even
though it did not authorize the agent's statement.15 So where upon
the false representations of insurer's agent as to the terms of the
application, and the applicant signs it without reading it, he is
entitled to recover from the insurer the amount which he has been
compelled to pay an innocent holder of a negotiable premium
note.16 And if insured is induced to enter into the contract and to
give his note by the agent's representations as to the terms of the
policy, and he relied thereon and they were not true, the policy
never attached and he may maintain an action to avoid the con-
tract and note.17
It is held that a contract for present insurance is not made by
an applicant who gives his note for the first premium in consider-
ation that a policy shall be issued, where his examination is to be
made in the future, and he expressly stipulates that the note shall
not be negotiated until the policy has been delivered and accepted.18
§ 1409a. When no return where note is given. — Where an agent
fraudulently procured from an illiterate person a note for the pre-
mium and it did not appear that the agent's employment was au-
thorized and the note was negotiated and the application rejected,
the insurer, in the absence of ratification, was held not liable to
said applicant for the amount of the note.19 And a mere change
in the time of payment is not such a change from the terms of an
application as to constitute fraud so as to entitle assured to recover
back premium notes.20 So a written agreement by insurer's agent
13 Reserve Loan Life Ins. Co. v. v. Maverick, — Tex. Civ. App. — , 78
Benson, — Tex. Civ. App. — , 167 S. W. 560.
S W °66. 18 Summers v. Mutual Life Ins. Co.
'14 Summers v. Mutual Life Ins. Co. 12 Wyo. 369, 66 L.R.A. 812, 75 Pac.
12 Wvo. 369, 66 L.R.A. 812, 109 Am. 937.
St. Rep. 992, 75 Pac. 937. 19 Weideriaar v. New York Life
15 Mutual Reserve Life Ins. Co. v. Ins. Co. 36 Mont. 592, 94 Pac. 1.
Seidel, 52 Tex. Civ. App. 278, 113 As to misrepresentations by agent
S. W. 91">. where applicant is illiterate, see §
16 Evans v. Central Life Ins. Co. 190 herein.
87 Kan. 641, 41 L.R.A. (N.S.) 1130, 20 New York Life Ins. Co. v. Mil-
125 Pac, 86. ler, 11 Tex. Civ. App. 536, 32 S. W.
17 Equitable Life Assurance Soc, 550.
2601
§ 14io JOYCE ON [NSURANCE
who was payee for a note for the premium to refund the nolo or its
amount in cash it' within a certain time the maker thereof should,
upon investigation, find the company unsatisfactory or not as rep-
resented, does not prevenl the negotiation thereof nor preclude
recover) thereon by the transferee for value in duo course as to
"refund" means, to restore or pay and not to return the note itself.1
An, I where a state agent, as an inducement to obtain a physician's
application, personally executed a separate agreemenl whereby in
consideration of the Latter's notes for the premium it was agreed
thai he should examine applicants for the company to the amount
of his premium, but none v. ire senl to be examined, and the agenl
transferred said note-, retained his commission out of the proceeds
and remitted the balance to the insurer, it tfas held that the amount
of said notes could no1 be recovered from the insurer upon demand
and action therefor after the policy had been in force for six
, iths and a part of the premium earned as the agreement was
unauthorized by the insurer under the restrictions in the applica-
tion on the agent's authority.8 Again, if, under a policy stipula-
tion, the whole premium and not merely a pro rata part of it, is
«ained on default in payment of an instalment due, assured is not
entitled to a reduction under a code providing for the return of
insurance premiums in certain cases, in the amount of his pre-
mium note which he has given for live years' insurance, if he for-
feits his insurance by failing to pay an instalment due on the note
after the risk has attached and been in operation for one year.3
§ 1410. Return for want of interest. — If through mistake, mis-
information, misdescription, or other innocent cause, an insurance
he effected which is not illegal, and the insured has in fact no inter-
est whatever at risk, so that the underwriters arc not liable for a
loss, there shall be a return of the premium.4 Thus, where the
captors of a vessel had no claim of right, it being seized before war
was actually declared, they were held to have no insurable interest,
and the premium was returned.5 So if the policy is issued without
1 Farmers' Bank of RoflE v. Nidi- * Martin v. Sitwell, 1 Show. L56;
(1|s. 25 Okla. 547, L06 Pac. 834. See Steinback v. Rhinelander, 3 Johns.
St. Louis National Life Ins. Co. v. Cas. (N. Y.) 26!); 2 Marshall on Ins.
Inlonuitioiial Hank of St. Louis, IIS (ed. 1810) 639 ; 2 Phillips on Ins. (3d
ko. A|>|'- 551, L28 S. \Y. 761. See ed.) 504, sec 1824; 2 Arnould on
SJj 1221a el seq., 3734, 3435 herein. Marine Ins. (Perkins' ed. 1868) 1239,
2 Dickinson v. National Life & see. 424.
Trust. Co. 20 S. Dak. 437, 107 N. W. 5 Routt v. Thompson, 11 East, 428.
537, 35 Tns. L. J. 710. See also Boehm v. Bell, 8 Term Rep.
8 St. Paul Fire & Marine Tns. Co. 154.
v. Coleman, 6 Dak. 458, 6 L.R.A.
87, 43 N. W. 693; Dak. Civ. Code,
sees. 1542-1544.
2602
RETURN OF PREMIUMS AND ASSESSMENTS § 1410a
any insurable interest in the property, there is no consideration
for the payment of the premiums, and the company cannot, in
equity and' good conscience, retain them, and the same may be
recovered back in an action for money had and received.6 And if
the ship is insured and there is no interest other than a bottomry
interest, the premium shall be returned;7 and the premium may
be recovered back when paid for insurance on goods expected at the
insured's own risk, but which come only consigned to him.8
Again, if one having no insurable interest in the life of another
pays the premiums on a policy purporting to be issued on the life
of the latter, such policy, having never been accepted by the as-
sured, and such payments having been made in the mistaken be-
lief that the policy was valid and might result in benefit to the
payor, he may recover of the insurer the premiums so paid, though
the latter might have been estopped, had the assured died, from
contesting the validity and binding obligation of the policy.9 And
even though in the absence of fraud or mistake, there can be no
recovery of premiums voluntarily paid by one without insurable
interest,10 still the insurer may be so far estopped to set up a want
of insurable interest as to enable the person so paying said pre-
miums to establish a lien against the policy to the extent of such
payments in a proper action.11
§ 1410a. Same subject: when no return. — Where a policy is
fraudulently obtained by one upon the life of another, in whom he
has no insurable interest, there can be no recovery back of the pre-
mium, for the party seeking a return is estopped to show a want of
insurable interest.12 And where no insurable interest exists in
favor of a son, even though he was induced to take out the policy
through fraud of the insurer's agent, and notwithstanding a vali-
dating statute in certain cases where there is no insurable interest,
he cannot have rescission and repayment of premiums paid.13
Again, if a son effects policies in several companies to cover funeral
6 New Holland Turnpike Co. v. insurable interest as affecting right to
Farmers' Mutual Ins. Co. 144 Pa. St. recover back premiums paid, see note
541, 22 Atl. 923, 48 Leg. Intell. 527. in L.R.A.1917A, 477, also 3 B. R. C.
7 Robertson v. United Ins. Co. 2 839.
Johns. Cas. (N. Y.) 250, 3 Am. Dec, 12 Lewis v. Phoenix Mutual Life
415. Ins. Co. 39 Conn. 100.
8 Toppan v. Atkinson, 2 Mass. 365. 13 Tofts v. Pearl Life Assur. Co. 84
9 Hogben v. Metropolitan Life Ins. L. J. K. B. 286, [1915] 1 K. B. 189,
Co. 69 Conn. 503, 61 Am. St. Rep. 112 L. B. 140, 59 S. J. 73, 31 T. L. R,
53, 38 Atl. 214. 29, C. A. dismissing appeal, S. J. 73,
10 See § 1401b herein. 31 L. T. N. S. 29, which affirms 110 L.
11 Hall v. Prudential Ins. Co. 130 T. 190 (see opinion in note § 1063a
N. Y. Supp. 355, 72 Misc. 525. herein).
On illegality of policy for lack of
2603
§ 1410a JOYCE ON INSURANCE
expenses which mighl be incurred by the death of his mother, and
the full amount thereof is paid by one or more companies, he can-
qoI recover the amount of ,-uk »i1km- of said insurances nor in the
absence of fraud or mistake can he recover premiums paid thereon
as the insurer was under risk during the period covered by the
policy.14 And one who, withoul an insurable interest in the life
insured, has paid premiums upon a policy, under the belief that
she was named as beneficiary therein, being induced so to do by
the fraudulent statements of a broker or agent who procured the in-
surance, cannot recover back the amount so paid even though she
has possession of the policy until assured's death, where the policy
money was actually paid to the administrator of assured's estate
upon surrender of the policy, which ho was alleged to have obtained
from her by false representations. What amount of premiums
were paid to the agent or broker, or what he did with the money
was not shown, hut it appeared that she had knowledge that she was
not named as beneficiary for over a year prior to assured's death.15
Nor can premiums paid be recovered by one who has procured in-
surance on the life of another in whom she has no insurable
interest, and in order to obtain the policy she has signed a card,
tilled out by insurer's agent, containing untrue statements as to
her relationship to assured, and the policy provides for forfeiture
in case of material misrepresentations. In such ease, as the con-
tract is illegal, the parties are prima facie in pari delicto and the
party seeking such recovery must, in order to succeed, show the
agent's fraud and also obtain a finding of the jury exculpating
her.16 So one who, in reliance upon the representation of the agent
of an insurer that an insurance effected by him upon the life of
another person would be a valid insurance, has taken out such an
insurance, is not, assuming such insurance to be illegal and void
for want of an insurable interest, entitled to a return of the pre
miums paid, even though the agent made the representation in
good faith, believing it to be true; the parties being in such case
in pari delicto.17 And premiums paid under an illegal contract,
cannot lie recovered back as where a school district had been com-
pelled to pay negotiated premium notes on policies obtained on
lives of persons by school directors without insurable interest as
14 Wolenberg v. Royal Co-operative 16Howarth v. Pioneer Life Assur-
Collecting Soe. 84 L. J. K. B. 1316, ance Co. 107 L. T. 155.
112 L. T. 103G. 17 Harse v. Pearl L. Assur. Co.
15 Monast v. Manhattan Tale Ins. [1904] 1 K. B. L. K. 558, 3 B. R. C.
Co. 32 R. I. 1, 79 Ail. 932, 40 Ins. 832, 73 L. J. K. B. N. S. 373, 52
L. J. 1551, afF d 35 R. I. 294, 86 Atl. Week. Rep. 157, 90 L. T. N. S.
728, 42 Ins. L. J. 909. 245, 20 Times L. R. 264n, rev'g
2004
RETURN OF PREMIUMS AND ASSESSMENTS § 1410b
such.18 Nor is the premium returnable for want of insurable in-
terest if the risk has been run, as in case of an insurance on ship
and freight, and safe arrival, and defective title to the ship.19
In an action by insured to recover the unearned premium under
a policy payable to the mortgagee under the standard mortgagee
clause, the claim that the insurer has without insured's consent,
transferred, on its books or elsewhere, her interest in a policy to
some other person does not, even though it might be the basis of
some relief in equity fixing insured's interest, constitute a ground
for an action for the return of the premium.1
§ 1410b. Return where insurance without consent of insured. —
The right to a return of premiums paid on a policy taken out upon
another's life without the hitter's consent, depends, even though
such a policy is void or voidable,2 to a great extent upon whether
the insurance was taken out with knowledge of its invalidity or
with a fraudulent intent, or whether it was procured in good faith
under the honest belief that it was valid, or whether such belief
was induced by insurer's agent.
Therefore, a wife, who takes out insurance on her husband's life
and pays premiums thereon under the belief induced by insurer's
agent that the policy is valid, is entitled to recover back the pre-
miums so paid, such insurance being illegal under the company's
rules.3 So insurance procured upon misrepresentations of insurer's
agent, by a wife upon her husband's life without his consent, where
it is provided in the contract that no policy on an adult life shall
bind insurer where the insurance is without insured's knowledge,
is void from its inception and the premiums paid thereon can be
recovered back by her.4 Again, if a wife procures insurance upon
the life of her husband without his knowledge, but at the suggestion
of an agent of the insurer, by signing the husband's name to an
application, and to the examination on the back thereof, and sub-
sequently pays the premiums on. such insurance for several years,
and, on being informed that, under the rules if the company and
[1903] 2 K. B. 92. See § 1063a here- tile Ins. Co. 156 N. Y. Supp. 692,
jn_ to point that mortgagee should have
18 Security Mutual Life Ins. Co. v. been made a party to insurer's ac-
Little, 119 ' Ark. 498, L.R.A.1917A, tion for unearned premium.
475, ITS S. W. 418. 2 See § 2531a herein.
19McCnlloch v. Royal Exch. Co. 3 On action to recover premiums
Camp. 406. paid on life of adult insured without
1 Lewis v. London & Lancashire his consent, see note in 56 L.R.A. 586.
Fire Ins. Co. 137 N. Y. Supp. 887, 3 Metropolitan Life Ins. Co. v. As-
78 Misc. Rep. 176, 42 Ins. L. J. 131 mus, 25 Ky. L. R. 1550, 78 S. W.
(the court, however, merely stated the 204.
point without discussion)*. Cited in 4 Metropolitan Life Ins. Co. v. Fe-
Loew v. North British & Mercan- lix, 73 Ohio St. 46, 75 N. E. 941.
2605
§ 14iub JOYCE ON INSURANCE
the conditions of the policy, it is void, because of want of such con-
.(.,,i. and thereupon she demands the repayment to her of moneys
so paid, her right to maintain an action therefor depends upon
whether or not she was innocent of any fraudulent design against
the company, who caused her to obtain the insurance in the manner
employed by her, and told her that it would be valid though so
obtained.6
It is held, however, that where payments of premiums are made
by a wife on policies on her husband's life, they are not recover-
able out of the policy moneys even though, because of his impecu-
aiosity, they were paid by her to keep the policy in force.6 It. is
also decided that the agent's fraud in misrepresenting to the wife of
insured that a policy taken out by her upon her husband's Life
without his consent is regular and valid, are not available as an
aid to the recovery hack by them of premiums paid, as such fraud
is a mailer between the agenl and the insurer, where the risk has
attached even though the policy is within a statute making a policy
incontestable for misrepresentations, except those as to age, in the
absence of fraud.7
Where the policy is void because obtained by a wife upon her
husband's life without his knowledge or consent, premiums paid
by her with his money or with money furnished by him for house-
hold expenses can be recovered by him from the insurer.8 So the
husband is entitled to recover premiums paid with his money on a
policy on his life obtained by his wife without his consent, even
though said premiums were partly paid by him, where he paid
them under the belief that the policy insured the life of his wife
and upon discovering the mistake, repudiated the contract.9
But a verdict for a recovery of premiums paid on a policy on a
husband's life, procured without his consent, will not be sustained
where the evidence does not show that the premiums were paid
with his money.10 So where the policy is regular in every respect,
except for fraud of insurer's agent and the whole transaction is
5 Fisher v. Metropolitan Life Ins. Ins. Co. 8 Ohio Cir. Dec. 110. 5 Ohio
Co. 160 Mass. 386, 39 Am. St. Rep. Leg. N. 11G, 1G Ohio Cir. Ct, 630;
495, 35 X. E. si". Sec also Delouehe Rev. Stat. sec. 3626.
v. Metropolitan Lite Ins. Co. 69 N. 8 Metropolitan Life Ins. Co. v.
II. 587, 45 Ai!. 114, 2!) Ins. L. J. Smith, 22 K.\. I>. Rep. 868, 59 S. W.
284. 24, 53 Lit. A. 817; Metropolitan Life
6 Leslie v. French, .~>2 L. J. Ch. Ins. Co. v. Trende, 21 Ky. L. Rep.
762, 23 Ch. I). 552, L6 Eng. Kul. ('as. 90S), 53 S. W. 412.
97. See Stunt v. Jones [1915] 1 Ch. "Mahoney v. Metropolitan Life
373, 84 L. .1. Ch. 106 | mi:.] \V. C. & Ins. Co. 80 N. J. L. 136, 76 Atl. 458,
I. Rep. 277, 112 L. T. t067, 59 S. J. 39 Ins. L. J. 1221.
364. 10 Metropolitan Lite Tns. Co. v.
'Brokamp v. Metropolitan Life Monahon, 102 Ky. 13, 42 S. W. 924.
2606
RETURN OF PREMIUMS AND ASSESSMENTS § 1410c
without insured's knowledge or consent, the insured cannot recover
the premiums paid where the insurer, instead of treating the policy
as void, has elected to consider it as a valid substituting contract,11
Again, although, a policy issued to a wife on her husband's life
may be void because not issued on his application, still such re-
quirement may be waived and the policy being then valid the
premiums cannot be recovered back.12 And there is such a ratifica-
tion by insured as to validate the policy and prevent the recovery
by him of premiums paid, where for several years he recognizes
the policy as in force and obtains a revival thereof after its lapse.13
Although a policy taken out by a daughter upon her father's
life without his consent, is void as against public policy, neverthe-
less she is entitled to receive back the premiums paid, where she
acted in good faith, induced thereto by the representations of as-
sured's agent that she would be entitled to recover upon said poli-
cy.14 So where, upon the fraudulent representations of insurer's
agent that certain requirements as conditions precedent to obtain
insurance need not be complied with, a policy is taken out by a
person upon another's life without his knowledge, for his daughter's
benefit, a. recovery may be had of premiums paid by said person
where it does not appear that the contract was a wager or that said
person was a party to the fraud.15
§ 1410c. Same subject: statutes. — The New York statute pro-
hibits insurance without the consent of the insured with certain ex-
ceptions, including the right of a wife to take out a policy upon
the life or health of her husband or against loss by his disablement
by accident, the right of an employer to insure collectively his em-
ployees' lives, and the insurance of minors' lives.16 One who, with-
11Mailhoit v. Metropolitan Life the property. No policy or agree-
Ins. Co. 87 Me. 374, 47 Am. St. Rep. ment for insurance shall be issued up-
336, 32 Atl. 989, considered under §§ on the life or health of another or
1397, 1400a herein. against loss by disablement by acci-
12 McElwain v. Metropolitan Life dent except upon the application of
Ins. Co. 63 N. Y. Supp. 293, 50 App. the person insured; but a wife may
Div. 63. take out a policy of insurance upon
13Wakeman v. Metropolitan Life the life or health of her husband or
Ins. Co. 30 Ont. 705. against loss by his disablement by ac-
14 Metropolitan Life Ins. Co. v. cident; an employer may take out a
Blesch, 22 Ky. L. Rep. 530, 58 S. W. policy of insurance covering his em-
436. ployees collectively for the benefit of
15McCann v. Metropolitan Life such as inay suffer loss from in. jury,
Ins. Co. 177 Mass. 280, 58 N. E. death, or disablement resulting from
1026. sickness, and a person liable for the
16 "No policy of insurance shall be support of a child of the age of one
issued upon any property except up- year and upward may take a policy of
on the application and in the name of insurance thereon, the amount pay-
some person having an interest in able under which may be made to in-
2607
§ mod JOYCE ON INSURANCE
out insurable interest in the life assured and without knowledge of
the facts, takes an assignment of a policy of life insurance which,
under the statute, is void for such want of interest and because
taken without his consent, and which is also void as against public
policy, and pays the premiums thereon, in reliance upon the assur-
i,v the aucnt of the company, continued by its vice president,
that the policy is valid and the assignment good, may recover hack
i he premiums paid.17
§ 1410d. Payment by check of municipal corporation: misappro-
priated funds: recovery back. — Where a city treasurer pays his
premiums with checks of a municipal corporation signed by him
as treasurer, the company is charged with the knowledge of theii
character and thai they were in payment of the individual debt of
iho treasurer and thai he was using the city's funds to pay his
own debt, and the payee being so charged with notice and knowl-
edge cannot return the proceeds without showing that the execu-
tion of the paper was duly authorized, and the city can recover from
the insurer the amount of said checks so received by it, and this is
so whether or not such acts are prohibited by ordinance. Interest
may also be recovered on said amount from the time it was received.
Nor is the payee aided in such case by the negligence of the audit-
ing officers of the city in not discovering said facts, nor by the fa
insurer had distributed the money. Nor is it any defense thai i1
was customary to receive checks in payment which were drawn on
funds other than those of the maker, nor that it would be prac-
crease with advancing age and discharge for any benefit accruing, or
which shall not exceed the sum for money payable under the coi
specified in the following table, tract." N. Y. Ins. L. 1909, c. 33,
the ages therein specified being the sec. 55, Consol. L. c. 28; Ins. L. lsi 12,
ages at time of death, for an c. 690, sec. 55, am'd by L. 1902, c.
nit not exceeding the sum 437; L. 1910, c. 634; L. 1913, c. 519.
ied in the table." The table is See Domestic Relation Law. 1009, c.
given and the statute continues: L9, sec. 52; Ga. Code L895, sec. 2091;
"In respeel of insurance heretofore Burns' Annot. Stat. Rev. 1908, sec.
or hereafter, by any person not of the 4728; Mass. acts & Res. 1907, sec.
lull age of twenty-one years but of 7.'!. p. SUP
the age of fifteen years or upwards. "American Mutual Life Ins. Co.
effected upon the life of such minor, v. Bertram, 163 Ind. 51, 64 L.R.A.
for the benefil of such minor or for 935, 70 X. E. 258, 33 Ens. L. J. 191;
the benefil of the father, mother, acts 1883, c. 136, p. 204, providing
husband, wife, brother, or sister of that when payments of assessments
such minor, the assured shall not, by were made by any person oilier than
reason only of such minority, be insured and without his written con
deemed incompetent to contract for sent, the beneficiary must have an in-
such insurance or for the surrender surable interest in the Life assured.
of such insurance, or to give a valid
2608
RETURN OF PREMIUMS AND ASSESSMENTS
1411
tically impossible to carry on business if inquiry were made as to
all checks received in payment of premiums.18
§ 1411. Proportionate return: overvaluation: short interest. — If
tin* insurance in a single policy be to a larger amount than the real
value of the property actually covered and at, risk, there shall be a
proportionate return of the premium for short interest, because the
insurer shall not receive the price of a risk which he has not run,
and so even though there is no stipulation for such proportionate
return.19 Mr. Phillips says a proportionate premium shall be re-
turned for short interest on "a policy subscribed by only one under-
writer or one company or one set of joint underwriters," and that
"it is observed that Mr. Marshall 20 limits his proposition to an 'in-
surance in a single policy.' though the French Ordonnance of 1681
and Valin's commentary referred to by him explicitly extend
the rule to divers policies; " and he is also of the opinion that there
shall be a proportionate return of the premium in case the same
policy is subscribed by several underwriters, each for a distinct
amount.1 If one of the joint owners of a ship effects a policy to
18 City of Newburyport v. Fidelity
MutuafLife Ins. Co. 197 Mass. 596,
84 N. E. Ill, 38 Ins. L. J. 117.
19 2 Marshall on Insurance fed.
1810) 639; Holmes v. United Ins. Co.
2 Johns. Cas. (N. Y.) 329; Finney
v. Warren Ins. Co. 1 Met. (42 Mass.)
16, 35 Am. Dec. 343 ; Foster v. United
Ins. Co. 11 Pick. (28 Mass.) 85; 2
Arnould on Marine Ins. (Perkins' ed.
1850) 1241, *1226 et seq., sec. 425;
Id. (8th ed. Hart & Simey, sees. 1259
et seq., pp. 1520 et seq. ; 17 Earl of
Halsburv's Laws of England, sec.
987, p.* 500. The French Ordon-
nance of 1681 provides for a return
of the premium on the surplus by
the insurers "in the case of one pol-
icy made without fraud which exceeds
the value of the effects shipped," and
Emerigon applies this clause to in-
surers who under the same date have
signed the policy, but distinguishes
between this and a case where there
are several policies : Emerigon on
Insurance (Meredith's ed. 1850) c.
xvi. sec. 4, p. 658. He says : "It is
necessary to distinguish the case
where there is only a single policy
from that in which there are several.
'In the case,' says the Ordonnance,
'of one policy made without fraud
which exceeds the value of the ef-
fects shipped, it shall subsist pro-
portionably to the valuation. In case
of loss, the insurers shall be held
each in proportion to the sums by
them insured, as also to return the
premium on the surplus;' Art. 23, h.
t. Thus, the insurer who under the
same date has signed the policy last
shall participate as well as the first
in the profit or the loss. That is to
say, that livre for livre (au sol la
livre) they shall bear the loss in pro-
portion to the valuation of the ef-
fects insured, and shall profit by the
premium only in the same propor-
tion ; the whole relatively to the sums
by them insured. . . . The same
decision is found in the forms of
Hamburg, Antwerp, Rouen, and Bor-
deaux;" Id. As to marine ins. act
1906 (6 Edw. VII. c 41) of Eng-
land, see § 1392 herein.
20 See 2 Marshall on lbs. (ed. 1810)
639.
12 Phillips on Ins. (3d ed.) 514,
sees. 1836, 1837. See sections next
following.
Jovce Ins. Vol. III.— 164. 2609
§ 1412 JOYCE ON INSURANCE
the full value of the ship in his owd name, the loss being averred
to be in him only, it is held thai he is entitled to a return of one-
half of the premium paid on the whole sum, and ran recover for
the loss only according to the value of his interest proved.2 And
where the insured's interesl in the cargo, he being one of the joint
owners, was of the value of thirteen thousand dollars, and the whole
amounl at risk was twenty-five thousand dollar,-, the insured was
held entitled to a proportionate return of premium for the differ-
ence.3 So also in case of a policy on profits, if only pari of the
goods are at risk, a proportionate return of the premium shall In-
had.4 And there may he a proportionate return of the premium
where the amounl of insurance on a debtor's Life by hi- creditor
exceeds, by mistake of law of both parties, the actual debt on which
Ins insurable interesl is based.5 So also shall there he a propor-
tionate return of the premium if a pari only of the goods are
shipped, whether the policy he a valued «]]• open one, although in
case of ;1 valued policy, if all the property is pul at risk, there -hill
be no return of the premium lor overinsurance.6 Bu1 an action
for return of premium on account of short interest will not lie if
the plaintiff's interest to the extent insured is covered at any time
during the voyage.7
§ 1412. Whether premium returnable for overinsurance by sev-
eral insurers: pro rata contribution. — Some question has been made
concerning the right of the assured to a proportionate return of
the premium in cases of several insurers or of several policies, and
also whether, in case of a right to such return, there shall he a pro
rata apportionment among the several underwriters. The classes
of overinsurance presented and considered by the authorities are
these: 1. Where there are several insurers of separate amounts
under one policy, all the insurance-; aggregating an excess of the
value of the interest covered; 2. Where there are several policies
aggregating an excess of such value, all made prior to the com-
mencement of the risk and all attaching; 3. Where there are sev-
eral policies aggregating an excess of such value, which take effect
simultaneously; -I. Where there are successive insurances, and the
prior policy or policies equal the value of the property, while the
2Murray v. Columbia Ins. Co. 11 kins' .,1. L850) 1241, 1242; [d. (8th
Johns. (X. V.) 302. ed. Earl ,v, Simey) sees. L259 et seq.,
3 Eolmes \ . 1 faited I as. <'>>. - pp. l"'-!l <'t seq.
Johns, Cas. .(X. Y.) 329. 7Howland v. Commonwealth Ins.
*-l Phillips .in In-. (3d ed.) 507, Co. Ami.. X. I'. (N. Y.i 26; 2 Ar-
see. L831. nould on Marine [ns. (Perkins' ed.
5London & Liverpool [ns. Co.. v. 1868) L241; [d. (8th ed. Hart &
Lapione, 1 Leg. News, 506. Simey) sees. 1254 et seq., pp. 1520 et
6 'J Arnould on .Marine ins. (Per- seq.
2G10
RETURN OF PREMIUMS AND ASSESSMENTS § 1413
subsequent insurance represents the excess in amount; 5. Where
the prior policy or policies do not equal the value of the property,
and the subsequent insurance attaches up to the value, the aggre-
gate of all the policies exceeding such value.
§ 1413. Same subject: opinions of the text-v/riters. — Emerigon,
having reference to the Ordonnance, distinguishes between the case
of one policy by several insurers who under the same date have
signed the policy, and the case where there are several policies, the
insurance in both classes being made without; fraud. In the first
case, the insurers are to bear the loss, each in proportion to the
sums by them insured, and to return the premium "in the same
proportion, the whole relatively to the sums by them insured." If
there are several policies, and the first equals the value of the effects
shipped, it shall subsist alone, and the other or subsequent insurers
are released and must return the premium. If the first policy does
not equal the value of the property at risk, the second insurer shall
answer for the surplus, and that several policies of the same date
form but one, and come into concurrence.8 Mr. Marshall instances
the cases of a policy by several insurers and several policies. In
the first he declares that all the underwriters must repay a part of
the premium in proportion to their respective subscriptions, with-
out regard to the priority of their dates, and in case of several poli-
cies made without fraud, such policies make in effect but one in-
surance, valid to the extent of the true interest of the assured, all
the underwriters being liable to the extent of the value, without
regard to the priority of dates, and are bound equally to make a
return of the premium for the residue in proportion to their re-
spective subscriptions.9 Mr. Arnould first states the general propo-
sition that if the insurer could at any time, under any conceivable
circumstances, have been obligated to pay the whole sum on which
he has received the premium, the premium is then earned and is
not returnable, but if he could never in any event have been ob-
ligated only to a part of the amount of his subscription, that he
must return a proportionate amount of the premium or the residue.
He then considers the case of double insurances, when, after effect-
ing one insurance on his property, the merchant, who is ignorant
of its real value, in order to fully protect himself, effects other poli-
cies with different underwriters, and says the law is clearly sot lied
in England that there can be a recovery only to the extent of the
value from any set of underwriters, leaving them to contribute
ratably amongst themselves to the loss, and that the insured is
entitled "to a ratable return of premium, proportioned to the
8 Emerigon on Ins. (Meredith's ed. 9 2 Marshall on Ins. (ed. 1810) 639,
1850) c. xvi. sees. 4, 658 et seq. 040.
2611
§ 1413 JOYCE ON [NSURANCE
amount by which the aggregate sum Insured in all the policies ex-
ceeds the insurable value of the property at risk." He add- that in
case of over insurance od a single policy, all the underwriters there-
on contribute ratably to the return of premium, without regard to
the date of their subscriptions, and that Mr. Marshall's rule on this
point is ••accurately laid down." and that the rule stated by Emeri-
gon, thai several policies on the >ame date are considered as one
policy, obtains, and is the rule in England. The rule as to return of
the premium in such case is the same as in the last. Mr. Arnould
!ic\t considers the case where there ;irc several policies of different
dates <m the same subject, and states Mr. Marshall's rule on this
point, already given, ami notes thai subsequent writers have recog-
nized that rule, hut have made adverse comments thereon,10 and
says that the English law in such case is, that the underwriters on
the prior policies which do not equal the value at risk shall make
no return of the premium, as they have earned the same, but that
the underwriters on the subsequent policies shall make a ratable
return.11 Mi'. Phillips considers first the case of a policy "having
divers distinct subscriptions for separate amounts," and says there
is reasonable ground for the conclusion that the construction of
such a policy "will be in favor of a return of premium for short
interest, though the policy contains no provision for such a return,"
and that if the subscriptions are simultaneous, or if they "are all
made prior to the commencement of the risk, they all attach and are
all subject to a return of premium pro rata," without any question
as to the right to a return, the only point being whether the return
is to he made on the latter subscriptions or all of them pro rata, and
says "in this respect the London custom seems, according to Mi'.
Marshall, to have changed since Lord Holt's time; " the decision re-
ferred to being one where it was held that prior insurers were
liable to the full value, the subsequent ones not so, hut only
liable for a return of premium.12 Mr. Phillips next considers the
case of "divers distinct, independent policies," exceeding in the
aggregate the true value of the interest, each policy being under
that amount, and no provision for a return. He says: "Accord-
10 Referring to Stevens on Aver- 12Referring to the African Co. v.
age (5th ed.) tit. Return of Premi- Bull, 1 Show. L32, Gilb. 238, and Mr.
urn, pp. 205, 207 L5; McCulloch's Marshall's statement that "the cus-
Commereial Diet. (ed. 1837) tit. Ma- torn" proven in that ease and upon
line [ns. p. 702. which the decision was based "seems
11 2 Arnould on Marine Ins. (Per- now to be forgotten, for at present
kins' ed. 1850) pp. 1226-32, 1210- the underwriters would he held all
46, sec. 412"); Id. (8th ed. Hart & liable in proportion to their several
Simey) sees. 1259 et seq., pp. 1520 et subscriptions." See 1 Marshall on
seq. Insurance (ed. 1810) *149.
2G12
RETURN OF PREMIUMS AND ASSESSMENTS § 1413
ing to uniform jurisprudence of* a whole century, beginning in
England and followed in the United States, the presumption lias
been that the policies are to be treated as double insurances,"
with the exception of one decision, which he notes at Length and
distinguishes.13 He further considers the rule given by Mr. Mar-
shall, and declares it to be "plainly erroneous in. reference to a
return of the premium on prior policies effected while the risk is
pending and until the value of the subject is covered," on the
ground that the underwriters on prior policies are liable for a
loss until the subsequent insurances are effected, and the premium
is therefore earned, and at the most the rule could only be appli-
cable where all the policies attach before the risk commences.14
In conclusion, this author states no rule other than this, that
if it appears that "an overinsurance was not intended by the as-
sured nor understood by the underwriters," there shall be a return
of the premium for the "excess of the insurance" by "the latter of
the policies made while the risk is pending, and a pro rata return"
on "all the insurances which take effect simultaneously," although
there be no stipulation therefor that a double insurance is prima
facie presumed, the burden of proof being "on the party asserting
the contrary." 15 Mr. Parsons thinks the whole subject in an
obscure position, although he says this: "If there be many simul-
taneous policies on the same subject-matter, no one of which is
beyond the interest, but all together are, as all make but one insur-
ance with mutual claim of contributions, there is a return of pre-
mium paid pro rata by all. If the policies are not simultaneous
the same rule seems to apply, except in cases where the later ones
were not made until after the former ones attached," in which case
the prior insurances might have been held for the whole loss, and
as to them there is no return, but that "it should follow that the
later policies made after the whole interest was covered should re-
turn pro rata, according to the excess of the premium over what
they could in any event have been liable to pay ; " that policies may
be simultaneous, even though made on different days and bear dif-
ferent dates ; that the presumption is that policies of the same date
are simultaneous, but that they may be proven otherwise by evi-
dence of the order of signing, although this may be rebutted by
proof that they were intended to be simultaneous, and that policies,
"if for the same parties, on the same property, against the same
"Referring to Fisk v. Masterman, 15 2 Phillips on Ins. (3d ed.) 515,
8 Mees. & W. 165, 10 L. J. Ex. 306. 520, sees. 1837, 1838, and see Id. 504,
14 Citing Parke, B., and Lord Abin- sec. 1823.
ger, C. B., in Fisk v. Masterman, 8
Mees. & W. 165, 10 L. J. Ex. 306.
2613
i 11.-) JOYCE ON [NSURANCE
," are regarded "very much as if they constituted one policy;
in thai case the insured may recover his whole amount, from any
one or more whom he elects to sue" up to the amounl of the loss.16
§ 1414. Same subject: the case of Fisk v. Masterman. — In the
case of Fisk v. Masterman,17 a marine risk noted by Dearly all the
text-writers on this subject, there were several insurances written
by several underwriters on the twelfth, their total amounl being
less than half the value of the property insured. Several policies
Avcre on the thirteenth effected with several other underwriters for
an amount, which being added to the prior insurances aggregated
an excess of aboul six thousand one hundred and sixteen pounds
overinsurance, thus, the first se1 aggregated fourteen thousand one
hundred and fifty pounds, the second sel twenty-two thousand
three hundred pounds, and the value of the property was thirty
thousand three hundred and thirty-three pound-. The premium
paid to the firs! set of underwriters was at a much higher rate than
that paid to the second set. The underwriters with whom the
policies were effected on the twelfth were held, the risk having
attached, to have earned their premium, and to be entitled thereto,
inasmuch a-- they mighl have been liable to \\w whole amount of
their policies up to the time the later set of policies attached. It
was also held that the amounts under all the policies should be
aggregated to ascertain the overinsurance. and that the policies
effected on the thirteenth should contribute ratably to a return of
the premium in proportion to the respective amounts insured.
It is on this decision that Mr. Arnould bases the English rule,18
applicable in similar eases, saying that it is an important modifica-
tion of the doctrine stated by Mr. Marshall, and assimilates the
English to the Continental rule. While Mr. Phillips says of the
I hat he i< reluctant to put so broad a construction thereon
as to agree that it overrules "the whole array of antecedent rulings
.Mid judgments in England, respecting double insurances supported
by the American jurisprudence;"19 and Mr. Parsons says: "It
is obvious thai the reason on which this decision is based will only
apply to cases where the risk actually commences under the first
insurance before the second is effected."20
§ 1415. Same subject: code provisions. — In California, express
provisions are made by the code concerning the return of premium
in such cases, it being provided that if there be overinsurance by
several insurers, there shall he a "ratable return of the premium
161 Parsons on Marine Ins. (ed. 18Noted in text under lasl section.
1868) 21)1-96, 511, 512 and notes. 192 Phillips on Ins. (3d ed.) .")19.
17 H Mees. & W. 165, 10 L. .J. Ex. 20 2 Parsons on Marine Ins. (ed.
306. L868) 512, 513 note.
2614
RETURN OF PREMIUMS AND ASSESSMENTS §§ L416, 1417
proportioned to the amount by which the aggregate .sum insured in
all the policies exceeds the insurable value of the thing at risk ;" *
that if the overinsurance is effected by simultaneous policies, the
insurers shall contribute to the return in proportion to the amount
insured by the respective policies, but that in case of overinsurance
by successive policies, those only contribute who are exonerated,
by i >rior insurances, from the liability assumed by them in pro-
portion as the sum for which the premium paid exceeds the
amount for which, on account of prior insurance, they could be
held liable.2
§ 1416. Same subject: the rule as to double insurances. — In this
connection it is without doubt the rule that in cases of double in-
surances, either simultaneously or by successive policies, the in-
sured may recover the whole amount from any underwriter, and
leave that company to seek contribution from the others, or he
may recover a proportionate part of the loss from each company.
Although he is entitled to but one satisfaction, all the policies are
considered as one, the insurers being liable pro rata, and are
entitled to contribution to equalize payments made on account of
losses. But the rule is subject to such exceptions as arise in cases
of express stipulations to the contrary, and fire policies generally
express and exact provisions on this subject,3
§ 1417. Same subject: summary and conclusion. — Of the text-
writers above noted, those who state a positive rule substantially
agree that the assured is entitled to a ratable return of the premium
1 Above code quotation is, with a Ins. Co. v. Kepler, 106 Pa. St. 28,
sino-le excention in the exact words 3.") ; Wiggin v. Suffolk, 18 Pick. (3.")
of Mr. Arnould. Mass.) 145, 29 Am. Dec. 576, per
2Deering's Annot. Civ. Code Cal. Shaw, C. J.; Lucas v. Jefferson Ins.
(Civ. Code 1903) sees. 2020-2622. Co. 6 Cow. (N. Y.) 635; Godin v.
Sec Mont. Rev. Code, 1007, sec. 5620; London Assur. Co. 1 Burr. 489, 402.
N. Dak. Rev. Code, 1890, sec. 5967; per Lord Mansfield ; 1 W. Black. 103 ;
S. Dak. Civ. Code 1903, sec. 1865. JBtna Ins. Co. v. Tyler, 16 Wend. (N.
See marine ins. act 1906 (6 Edw. Y.) 385, 30 Am. Dec. 90; Thurston
VII. c. 41) of England, § 1392 here- v. Kock, 4 Dall. (4 U. S.) 348, 352,
in_ 1 L. ed. 802, per the court. See Bcn-
3 Sloat v. Royal Ins. Co. 49 Pa. St. nett v. Council Bluffs Ins. Co. - 0
14, 18, 88 Am. Dec. 477, per the Iowa, 600, 31 N. W. 948. And see
court; followed in Clarke v. Western *§ 2489, 2491, 2492, 2494-2497 here-
Assur. Co. 29 Week. Not. Cas. 237, in; 3 Kent's Commentaries (5th ed.)
240, and following as to pro rata and 280, 281; 2 Arnould on Marine Ins.
contribution, Howard Ins. Co. of New (Perkins' ed. 1850) 298, *293; Id.
York v. Scribner, 5 Hill (N. Y.) (8th ed. Hart & Simey) sec. 1260, p.
^98, 301; followed in Roval Ins. Co. 1522. As to marine ins. act, 1906, of
v. Roedel, 78 Pa. St. 19, 22, 21 England (6 Edw. VII. c. 41) see §
Am. Rep. 1, also adopted in Lebanon 1392 herein.
2615
§ 1417 JOYCE (>N [NSURANCE
in all the cases instanced at the beginning of the discussion,4 but
the difficulty arises upon the point of apportionment of premium
among the underwriters, where there are several policies of dif-
ferent dates, and Mr. Phillips extends this doubl to all the c
I;,,,, the code provisions above noted are substantially a restatement
of the rules given by Mr. Arnould as the English rules, at leasl
as to simultaneous policies, and also as to several policies of dif-
ferent dates, where the amount of the first insurance is not equal
to the value of the risk, though the aggregate amount of both
insurances exceed it. Mr. Arnould declares thai in the United
is the common-law rule is as stated by Mr. Marshall, but he
cites no authority other than Mr. Phillips, and that author, as we
have seen, is in doubl as to the doctrine here, and in fact declares
that Mr. Marshall's rule "is plainly erroneous" as to prior insur-
ances; while Mr. Parsons, in a note in the edition of 18G8 of Ids
work on Marine Cnsurance,6 applies Mr. Marshall's rule only to
the case of simultaneous policies in the United Slates, and says the
whole suhjecl '•needs the light of further adjudication," and the
doctrine is unsettled and obscure. Again, the doctrine here as to
double insurance differs from the rule as stated by Emerigon under
the Ordonnance of 1681, whereby the insurances which equal the
"value of the effects shipped . . . subsist alone, and the other
insurers shall go out of the insurance," but if the first "does not
equal" such value, "the second shall answer the surplus."6 So
that the principle which underlies the foundation of the rule given
by Emerigon for a return of the premium in such cases does not
exist in the United States or in England. The difficulty, therefore,,
of stating a general rule is apparent, and in view of the fact that
such learned writers as Mr. Phillips and Mr. Parsons hesitate to
formulate a positive rule, we can hardly assume, for want of ad-
ditional authority, to go further than they have done; although we
would suggest that the conclusion which necessarily follows from
the doctrine in this country as to double insurances is not con-
sistent with the rule stated by Mr. Arnould and based upon Fisk
v. Masterman.7 And the rule suggested by Mr. Phillips, as de-
duced from thai ease, must necessarily be limited in its application.
;md the code provisions above noted on this subject seem just and
equitable.8
4 See § 1412 herein. 7S Mecs & W. 1G5, 10 L. J. Ex.
5 2 Parsons on Marine Ins. (ed. 30G.
18G8) 512 note 1. 8 See further on this question,
6 Emerigon on Ins. (Meredith's ed. Thurston v. Koch, 4 Dall. (4 U. S.)
1850) c. xvi. sec 4, p. 658; e. 1, see. 348, 1 L. ed. 862; Whiting v. Inde-
7, p. 23; c. ix. sec. 2, p. 214. pendent Mutual Ins. Co. 15 Md. 297.
2616
RETURN OF PREMIUMS AND ASSESSMENTS §§ 1418, 1419
§ 1418. Stipulations for return of premium: prior and subse-
quent insurance: the American clause. — In lire policies, as wo have
above stated, express provisions are generally made with reference
to prior and subsequent insurances on the property, and in marine
risks there is usually inserted in the policies what is known as the
American clause, which substantially stipulates that if the assured
shall have made any other assurance upon the property prior in
date, the assurer shall be answerable only for so much of the
amount thereof as may be deficient toward fully covering the
premises assured, and the assurer shall return the premium on so
much of the sum by them assured as they shall be, by such prior
insurance, exonerated from ; that in case of assurances on the same
property subsequent in date, the assurers shall be liable to the full
extent of the sum subscribed by them, without right to claim con-
tribution from such subsequent assurers, and shall accordingly be
entitled to retain the premium by them received in the same man-
ner as if no subsequent assurance had been made. The manifest
object of such clauses is to prevent contribution, in view of the
decisions as to double insurances.9 In some policies the American
clause does not expressly appear, the code provisions being incor-
porated therein by reference. Under the American clause, it is
held that the subsequent insurers are liable for such proportion of
the loss as the amount they insure bears to the whole value, and
that this clause is of no effect except in cases of double insurance ; 10
also that so much of the clause as relates to prior insurances re-
stricts the insured from recovering the excess of the value of the
vessel, when lost, over the amount of the prior insurance, not ex-
ceeding the sum insured in said policy.11 And that part of the
clause in an open policy relating to subsequent insurances on the
property will not apply in the case of a subsequent valued policy
expressed as intended to cover that part of the property left un-
covered by the prior open policy.12 Further consideration will,
however, be hereafter given to the construction of this clause.13
§ 1419. When no return in case of several policies. — Where there
are several policies on the same subject, but on different risks, they
cannot be taken into consideration in a computation of short
interest, nor can there, for that purpose, be an apportionment of
See §§ 2480, 2489, 2491, 2492, 2494- folk Ins. Co. 18 Pick. (35 Mass.) 145,
97 herein. 153, 29 Am. Dee. 57G, per the court.
9 See Kemble v. Bowne, 1 Caines n Stephenson v. Piscataqua Fire &
(N. Y.) 75; New York Ins. Co. v. Marine Ins. Co. 54 Me. 55.
Thomas, 3 Johns. Cas. (N. Y.) 1. 12 Millaudon v. Western Mutual
10 Whiting v. Independent Mutual Ins. Co. 9 La. 27, 29 Am. Dec. 433.
Ins. Co. 15 Md. 297; Wiggin v. Suf- 13 See § 2496 herein.
2617
1 ;•_>() JOYCE ON [NSURANCE
premium.14 And where insurance was effected here on condition
thai if il had already been effected abroad a certain proportion of
premium was to be returned, it was held that insurance made
abroad after the dale of the policy here did nol entitle the insured
to ,-i return of the premium.15
§ 1420. Premium not returnable when risk entire. — If the in-
surance is for a specified term, the risk being entire and indivisible,
il,,. premium is earned from the instant the risk attaches, and is
therefore qo1 returnable thereafter,16 and though the voyage con-
sists of several distind pari- and to several places, there shall be uo
apportionment of the premium if it be in fact one entire risk and
for one entire premium, and not several distinct risks." And if
the premium be a gross sum for the year, the fact that it is com-
puted at so much each month does not make it a monthly con-
tract, for the premium is entire.18 So Lord Mansfield said in a
similar case: "They might have insured from two months to
two months, or in any less or greater proportion, if they had
thought proper to do so. But the fact is they have made no
division of time al all, bul the contract entered into was one entire
contract" lor the year; in this case the insurance was a time policy
for one yeai-.10' So one who insures his property for a stated
definite period, and the risk having commenced, cannol by his
own act, contrary to the terms of the policy, surrender or terminate
il at pleasure, and reclaim a ratable return of the premium.20 So
in policies "at and from,"' the risk being entire and having com-
menced, the premium is not returnable.1 A voyage may he en-
tire, though the ship is to go to a number of places, and take
l4Howland v. Commonwealth Ins. 172 Marshall on Tns. (ed. 1810)
Co. Anlh. X. P. (X. Y. ) 'J(i. 662 and cases Inst cited.
15 New York Ins. Co. v. Thomas, 3 1S Lorraine v. Thomlinson, Don-;.
Johns, ('as. (N. V.) 1. 564.
"Lorraine v. Thomlinson, Doug. 19 Tyrie v. Fletcher, Cowp. 666, II
564; 'J Anioulil mi Marine Ins. (Per- Eng. Rul. Cas. 502, per Lord Mans-
ions' ed. L850) 1230, *1215 et sen.. Held.
120; Tyrie v. Fletcher, 'J Cowp. 20 Joshua Hendy .Machine Works
. l! Eng. Rul. Cas. 502 ; 2 Phillips v. American Steam Boiler [ns. Co.
on [ns. (3d ed.) 508, sec. L832; 1 86 Cal. 248, 21 Am. St. Rep. 33, 24
Duer on Marine Ins. (ed. 1845) 201; Pac. 1018.
2 Marshall on Ins. (ed. 1810) 664 el l Annan v. Woodman, 3 Taunt.
en.; Emerigon on [ns. (.Meredith's 299 ; Columbian Ins. Co. v. Lynch, 11
.-il. is.)0i c. di. sec. •_*. pp. 52, 53; Johns. (N. V.) 233; Bermon v.
Stone v. Marine Ins. Co. 1 Ex. D. 81 ; Woodbridge, 2 Doug. 781, II Eng.
Samuel v. Royal Exch. Assur. Co. 8 Rul. Cas. 507; Meyer v. Gregson, 'A
Pain. & C. 119, 13 Eng. Rul. Cas. Don-. 402, reported in 2 Marshall on
till; Plummer v. Insurance Co. of Ins. (ed. 1810) 658; Moses v. Pratt.
North America, 114 Me. 128, It.") All. :> Camp. 296; Emerigon on Ins.
G05. (Meredith's ed. 1850) c. iii. see. 2, p.
2618
RETURN OF PREMIUMS AND ASSESSMENTS § 1421
in different cargoes, but the voyage may be supposed to have
been divided in the contemplation of the parties, where con-
tingencies are introduced in tlic insurance which at certain periods
of the voyage may so operate as to avoid the insurance. Thus,
in case goods "out and home"' are covered, a proportionate pre-
mium to be returned if the returns are remitted in bills of ex-
change, the stipulated premium is returnable where neither goods
nor bills are returned.2
§ 1421. Premium returnable when risk divisible. — If the insur-
ance is divisible into separate and distinct risks, the premium may
be apportioned with reference to the several risks, and there shall
be a proportionate return of the premium covering such risk or
risks as have not attached. This rule also applies to cases where
from the contract it is evident that it was in the contemplation
of the parties that there should be several risks or distinct parts to
the contract, and that the premium may be divided in distinct
parts with reference thereto.3 That the contract is divisible may
be deduced by construction from the manifest intention of the
parties evidenced in the contract, the nature of the contract itself,
and the obvious consequences of its terms; as in case of a con-
tingency specified in the policy, upon the not happening of which
the insurance ceases. This is illustrated by the case of an insur-
ance on a ship from A to C, warranted to depart with convoy from
B. Here it was held that the contract was from A to C, but on a
certain contingency only a contract from A to B, which made it
a contract divisible into two distinct parts, relative, as it were, to
two distinct voyages, and the ship not having complied with the
condition as to convoy, and not having sailed from B to C, a pro-
portionate return of the premium was ordered. In this case the
policy was "at and from." 4 So in case of a policy "at and from"
53 et seq. ; Marine Ins. Co. of Alex- 421 ; Bunyon on Insurance, 95 ; Love-
andria v. Tucker, 3 Craneh (7 U. S.) ring- v. Mercantile Marine Ins. Co.
357, 2 L. ed. 466; Marine Ins. Co. v. 12 Pick. (29 Mass.) 348; Ogden v.
Stras, 1 Munf. (Va.) 408. But see New York Firemen's Ins. Co. 12
Tvrie v. Fletcher, Cowp. 666, 14 Eng. Johns. (N. Y.) 114. See Stone v.
Rul. Ca.s. 502, per Lord Mansfield; Marine Ins. Co. 1 Ex. D. 81; Samuel
Gale v. Machell, reported in 2 Marsh- v. Royal Exch. Assur. Co. 8 Barn. &
all on Ins. (ed. 1810) 659. C. 119, 13 Eng. Rul. Cas. 641.
2 Donath v. Insurance Co. of North 4 Stevenson v. Snow, 3 Burr. 1237
America, 4 Ball. (4 U. S.) 463, 471, per Lord Mansfield; 1 W. Black. 318
1 L. ed. 910; 2 Phillips on Ins. (3d Tyrie v. Fletcher, Cowp. 666, 14 Eng
ed.) 513. See Homer v. Dorr, 10 Rul. Cas. 502, per Lord Mansfield
Mass. 26; Pollock v. Donaldson, 3 Rothwell v. Cooke, 1 Bos. & P. 172
Dall. (3 U. S.) 510, 1 L. ed. 699. Long v. Allen, 4 Doug. 276, 14 Eng
3 Marshall on Insurance (ed. 1810) Rul. Cas. 517.
655; Waters v. Allen, 5 Hill (N. Y.)
2619
§ 1422 JOYCE ON INSURANCE
A and P> to C, thence Lack to A, affixing a separate premium for
each risk, and a certain per cenl to be returned if the vessel does
not go to C, and after the first risk the vessel is destroyed by fraud
of the assured, whereby the other risks are not incurred, the voyage
is divisible, and the assured may recover the premium paid for
such oilier risks.5 Lord Mansfield says, in a case of a policy "at
and from," where the contingency is specified, that "there are
great difficulties in the way of apportionments, and therefore the
court has always seemed against them.6 And where the contrad
shows that it is divisible, as where an additional premium is paid
for a licence to perform certain acts, which are never performed,
and the risk paid for is never incepted, the premium is returnable.7
Where the ship, for an additional premium, was to go from Tene-
riil'c to the Isle of May and Bonavista, thence to New York, with
a contingency that if she should not go to Bonavista. and the risk
end safely, one per cent was to be returned, and refusing to per-
form quarantine, she was not permitted to enter Teneriffe, but
went to Madeira, thence to the Isle of May, but did not go to
Bonavista, a return of premium was granted, on the ground that
the voyage from Teneriffe never commenced.8 When, by the
course of trade or the agreement of the parties, the voyage is
divided into distinct parts, and on one of these no risk has been
run, there should be an apportionment of the premium and part
should be returned.9
§ 1422. Return of premium: effect of usage: review of au-
thorities.— We have in a former chapter given some consideration
to the question of admissibility of usage to effect a written con-
tract,10 and the conclusions there given will, so far as applicable,
govern in cases of the character considered under the last two
sections. The court in a Massachusetts case refused to allow a re-
turn of the premium where the insurance was on a cargo outward
;uid return, and no homeward cargo was shipped, although there
was proof of a usage to allow a proportionate return in such cases;
the ground of the decision being that the usage was in opposition
to the principles of law, and could not therefore be maintained.11
This decision must rest upon the fact that the usage was indefinite,
or upon the assumption that the law was positively settled in that
5 Waters v. Allen, 5 Hill (N. Y.) 8Kobertson v. Columbia Ins. Co.
421. 8 Johns. (N. Y.) 491.
6 Long v. Allen, 4 Don?. 270, 14 9 Donath v. Insurance Co. of North
Eng. Rul. Cas. 517, per Lord Mans- America, 4 Dall. (4 U. S.) 463, 1 L.
field; Tyrie v. Fletcher, Cowp. 666, ed. 910.
11 Knjr'. Uul. Cas. 502, per Lord 10 See §§ 246-251 herein.
Mansfield. n Homer v. Dorr, 10 Mass. 26.
7 Bunyon on Ins. 95.
2020
RETURN OF PREMIUMS AND ASSESSMENTS § 1422
case; that is, that the words of the contract were so clear and
explicit that their construction was well settled by law, which tin-
court was hound to adopt, and thai to admit the controlling force of
the claimed usage would bo in effect to nullify and expunge the
plain words of the contract. The rule deduced from Lord Alans-
field's opinions is that, although by the terms of the contract the
risk may be entire, yet if an express usage is found to apportion
the premium in like cases, if shall be apportioned.12 Mr. Duer
also agrees that such is the rule, for he first states the rule as to
nonreturn of premium where the risk and premium are entire, and
adds: "The usage, however, of a particular trade may create an
exception from this last rule, and impose upon the underwriter the
duty of returning a whole or a large portion of the premium that
the law would have permitted him to retain." 13 So in the case of
Stephenson v. Snow,14 although a usage was proven to return a part
of the premium, the quantum was uncertain, as dependent upon
12 Long v. Allen, 4 Doug. 276, 14 rule. The insurer might deduct from
Eng. Rul. Cas. 517, per Lord Mans- the one half he returned one per cent
field and Buller, J., reported in 2 or one-half per cent and if he chose
Marshall on Ins. (ed. 1810) 060; to estimate the risks of the outward
Stevenson v. Snow, 3 Burr. 1237, greater than those of the homeward
opinions of Lord Mmsfield and Wil- voyage, the amount to be returned
mot, J. See Donath v. North Amer- seems to have rested in his sole dis-
ican Ins. Co. 4 Dall. (4 U. S.) 463, cretion. So the usage, for aught that
1 L. ed. 910, per the court; Gale v. appeared, was limited to Boston, and
Machell, per Lord Mansfield, report- did not extend to the other ports of
ed in 2 Marshall on Ins. (ed. 1810) Massachusetts ; and it was justly ob-
659. served by the counsel for the plain-
13 This statement of the rule arises tiff that if a usage was to be admitted
in connection with the very point at all, it ought to be the usage of a
raised in the Massachusetts case state, and not that of a single port,"
above noted, and he considers that and although it was not upon these
case at length and says: "It was grounds that the decision was placed,
proved to be the invariable custom but upon the grounds that "usage of
in all the offices in Boston, public no class of citizens can be sustained
and private, to return a portion of in opposition to principles of law,"
the premium on such policies when the decision was plainly erroneous,
the vessels returned without any car- and "is irreconcilable with that of
go belonging to the assured, and that Lord Mansfield in the King's Bench,
one half except one per centum or and in Long v. Allen, 4 Doug. 276,
one-half per centum is returned, un- 14 Eng. Rul. Cas. 517, which was not
less a greater portion of the risk cited or referred to either by counsel
was applicable to the outward than or court:" 1 Duer on Marine Ins.
to the homeward voyage, in which (ed. 1845) 200, sees. 48 et seq., 246
case the sum returned was conformed et seq., 301-7, where the question is
to the estimated risk. The usage fully discussed. But see 2 Phillips
thus proved was liable to insuperable on Ins. (3d ed.) 511 et seq. and note
objections. It was indefinite and it 3, p. 513.
was local. It provided no certain H 3 Burr. 1237.
2621
§§ 1423 1 !-■> JOYCE OX INSURANCE
uncertain circumstances, and Lord Mansfield said: "These con-
tracts are to be taken with great latitude. The stricl Letter is not
30 much i-» be regarded as the object and intention of the parties.
Equity implies a condition that the insurer shall not receive the
price of running a risk if he runs none I do not go upon
the usage, which is only that in like eases a part of the premium
is returned, without ascertaining what pan. . . . The practice
-hows that it has keen usual in such eases to return a pari of the
premium, though the quantum he not ascertained, and indeed the
quantum musl vary a- circumstances vary. Bui though the quan-
tum has not been ascertained, yet the principle is agreeable to the
general sense of mankind." The case was however, decided prin-
cipally upon the ground that the risk and premium were divisible.
Mr. Arnould says: "Where no usage is proved to the contrary, an
entire premium cannot he divided or apportioned, unless the risks
are divided in the policy in such a manner that the parties had
distinct risks in contemplation."15 Ho also Mr. Parsons declares
that "if the premium is entire, the presumption is that it is not to
he severed or returned in part, hut this presumption may he re-
butted either by provisions of tin1 policy indicating a different
intention, or by a reasonable usage sufficiently established." 1(i
§ 1423. Same subject: conclusion. — It would seem therefore, that
if the parties contracted with reference to the usage in question, or
if the usage is of the proper kind and character, the ride deduced
from the opinions of Lord Mansfield, as above stated, should
govern, unless the words of the contract are so clear and explicit
that their construction is well settled by the law, which the court
is hound to adopt, and then to admit the controlling force of the
claimed usage would be in effect to contradict or vary or nullify
and expunge the plain and explicit words of the contract.
§ 1424. Stipulation for return of premium: "sold or laid up." —
A stipulation for a proportionate return of the premium if the
ship be "sold or laid up" necessitates, to warrant a return, such a
permanent laying up without employment for the current year
as to determine the policy, and not a mere suspension of the risk,
the vessel being again employed.17
§ 1425. Return of premium: retention of a certain per centum by
the insurer. — In many marine policies if is stipulated that in all
cases of return of premium. In whole or in part, a certain per cent
of the premium is to ho retained by the insurer-:18 although it
15 2 Arnould on Marine Tns. (Per- 17 Hunter v. Wright, 10 Barn. &
kins' e.l. L850) L232, TJ17. C 71 I. S 1, .1. K. B. 259, 1 Sel. &
16 1 Parsons on Marine Ins. (ed. W. L38.
1868) 51-'. 18 Under one of 1 lie forms in San
2622
RETURN OF PREMIUMS AND ASSESSMENTS § 1426
appears from Emerigon to have been usual without a stipulation
therefor, and is placed by him on the ground that it is due "for
the trouble of having signed," and "not for damages and ■
for the nonexecution of the contract by the act of the assured." l9
And it seems to be the custom in England to retain one-half per
cent unless the policy stipulates to the contrary.20 Where a pol-
icy was effected, and when it was signed, a memorandum was mafic
that in case insurance had been effected in England, where ii had
been ordered, it should supersede so much of the insurance as was
covered by the policy, and one per cent of the premium should
be retained, and the policy was subsequently effected in England,
the defendants were held liable for the whole loss.1
§ 1426. Return of premium: insurance by voluntary agent. —
There has been some discussion as to the right of the assurer to
retain the premium where the insurance has been effected by a
voluntary agent for another. We have, however, already con-
sidered the authority of agents to insure in case- where the govern-
ing principles are to a large extent applicable here.2 The general
rule would seem to be that a voluntary insurance, the risk having
attached, creates a liability for the loss on the part of the insurer,
as it is always possible that the person for whom it was intended
may ratify the insurance, and in case of loss it is extremely prob-
able that he will do so, and therefore it would be inequitable to
say that the insurer shall run the risk of the goods having arrived
safely, and that he should be deprived of the premium which he
has earned and is justly entitled to retain, and therefore the rule
which best accords with the principles of insurance law is that if
Francisco ten per cent of the pre- has shipped nothing, the half per
mium is retained. cent is due to the insurers. . . .
19Emerigon on Ins. (Meredith's The tax for signature is given to the
ed. 1850) c. xvi, sec. 6, pp. 662 et insurers although the voyage be en-
seq. He adds: "This tax for signa- tirely broken up before the depar-
ture is granted them even though the tare of the ship, even by the act of
contract should be infected with vis- the assured . . . or from any oth-
eeral and legal nullity in case they er cause, provided the insurer be not
had known nothing of it. But if they guilty of fraud." See 1 Phillips on
have been informed of the defect, or Ins. (3d ed.) 33, sec. 53; 2 Phillips
if they could not have been ignorant on Ins. (3d ed.) 520, sec. 839.
of it, they have no claim for the tax 20 2 Arnould on Marine Ins. (Per-
f or signature as . . . if they have kins' ed. 1850) 1252, 1253, see. 428;
insured effects the safe arrival of 2 Marshall on Ins. (ed. 1810) b. 1,
which was already known to them; if c. v. sec. 4, *676.
they have assured effects of which the 1Hogan v. Delaware Ins. Co. 1
importation or exportation is prohib- Wash. (U. S. C. C.) 419, Fed. ('as.
ited by the king. ... In the case No. 6582.
where the insurance is simply migra- 2 See §§ 669, 927, 914-4(3 herein.
tory, ... or because the insured
2023
§ 1427 JOYCE OX INSURANCE
the voluntary insurance is one which could have been ratified by
one entitled to adopt it, and the risk has attached, the insurer
snai] retain the premium, whether the contract be actually ratified
or disclaimed, and there shall be ao return or apportionment there-
of.8 Mr. Phillips and Mr. Duer both agree that a rule which is in
effect the same as thai above stated seems to govern, and the latter
author declares thai such is also the general law of Europe and
in England.4 And while the rule stated by Mr. Parsons accords
uidi thai above given, lie Limits its application, by saying such a
doctrine "must be confined to insurances effected for parties in
interest who have given some authority or appearance of it to the
;lurnt."5 He relics, however, in support of this limitation only
on general principles, and cites no authorities. A New York de-
cision is cited as opposed to the rule above given, but that case
decided that where the interesl of one is insured by mistake by
.■mother, who supposes himself to be an agent, a.nd no risk is run,
the principal may recover the premium advanced:6 and in an-
other New York case it is held that neither a ship's husband, as
such, nor part owners, who insure the interest of their co-owners
in a vessel without express authority, can recover the premium
paid by them.7
§ 1427. Recovery back of premium from agent. — If the insured
has paid the premium to the company's agent, and before he has
paid over the same or assumed any liability on account thereof
the company becomes insolvent, and the insured notifies the agent
that he claims the money, and does not rely upon the policy issued
to him, which is worthless, he may recover back the premium in a
suit against the agent, even though he does not surrender the policy
3 Finney v. Fairhaven Ins. Co. 5 Johns. Cas. (N. Y.) 269. The dis-
Met. (46* Mass.) 192, 38 Am. Dee. sentin»- opinion of Kent, J. (after-
:!!'7: Routh v. Thompson, i:> East, ward chancellor), was based upon the
289, per Bayley, J.; MtcCollough v. ground that the risk had attached,
Royal Exch*. Assur. Co. '.'> Camp, and for like reasons with those above
406; Hagerdon v. Oliverson, 2 M. & stated in the rule that the insurer was
S. 485, per Le Blanc and Bayley, entitled to retain the premium, and
JJ. ; dissenting opinion of Kent, J. Mr. Duer says of the case itself that
(afterward Chancellor) in Steinbach it "was made at an early period
v. Rhinelander, 3 Johns. Cas. (N. Y.) when the law of insurance was yet
269. imperfectly understood, is not sup-
4 2 Duer on Marine Ins. (ed. 1846) ported by argument or analogy, and
141 et seq., 174, note 3, where this is entirely repugnant to the commer-
subject is discussed at length: 2 Phil- cial law of Europe:" 2 Duer on Ma-
lips on Ins. (3d ed.) 505 et seq., sec. rine Ins. (ed. 1846) 144, 175, 170.
1827. 7 Turner v. Burrows, 8 Wend. (N.
5 2 Parsons on Marine Ins. (ed. Y.) 144. Contra, Foster v. United
1868) 510, 511. Slates Ins. Co. 11 Pick. (28 Mass.)
6 Steinbach v. Rhinelander, 3 85.
2624
RETURN OF PREMIUMS AND ASSESSMENTS § 1428
until after suit brought.8 But if the agent has fully complied with
his agreement made with the assured to procure and deliver a
policy, and a valid policy is issued, the agent is not responsible
in an action to recover back the premium paid, although the pol-
icy is rejected by the assured, he not being satisfied with its terms.9
An insurance agent who issues a policy and takes the premium
after the company's certificate of authority to do business in Mis-
souri has been revoked by the superintendent of insurance, is
liable to return the premium, although lie was not then aware of
the revocation, and the statutory notice of revocation has not been
given by the superintendent.10 In another case II. paid an in-
surance agent a premium of ninety-nine dollars, which was not
paid over to the company, and a fire occurring H. compromised,
taking two hundred and seventy-four dollars less than the adjusted
loss. It was held that the difference could not be recovered from
the agent, but that the ninety-nine dollars was evidently not em-
braced in the settlement.11
§ 1428. Who may recover back premium. — The premium if re-
turnable, is due to the assured, as a general rule, although in case
another has paid the premium in good faith, as in case of a ben-
eficiary, the premium being returnable, he may be entitled thereto,12
and the action need not necessarily be brought by the actual in-
sured, but may be maintained by the nominal party in interest.13
So it is held that an assignor of the policy before his bankruptcy
may sue for the premium in his own name, as trustee for the
assignee,14 and a mortgagee may recover back premiums paid on
a policy obtained by him, the policy being void ab initio without
his fraud.15 And mortgagee creditors holding the policy as security
are. upon annulment of bankruptcy proceedings and the reinvest-
ment of securities in the bankrupt insured, entitled to recover
premiums paid with interest from date of the receiving order.16
8 Smith v. Binder, 75 111. 492. 12 Frain v. Metropolitan Life Ins.
As to liability of agent or broker Co. 67 Mich. 527, 35 N. W. 108. See
for the premium, see § 681 herein. § 1428a herein.
As to return of premium between 13 Martin v. Sitwell, 1 Show. 156.
assured, broker and underwriter and 14 Castelli v. Boddington, 1 El. &
rules applicable in marine insurance B. 66, aff'd Castelli v. Boddington, 1
in case of death or bankruptcy of un- El. & B. 879.
derwriter and nonexistence of custom, 15 Waller v. Northern Assur. Co.
etc., see note to § 1408f herein. 64 Iowa, 101, 19 N. W. 865. But
9 Leonard v. Washburn, 100 Mass. see the next section as to the right
251. of a mortgagee to recover premiums
10 McCutcheon v. Rivers, 68 Mo. paid under a decree. See § 1161
122. herein.
"Haight v. Kremer, 9 Phila. 16 Pearee, In re (1909) 2 Ch. L. R.
(Pa.) 50. 492.
Joyce Ins. Vol. III. — 165. 2625
§ 1428a JOYCE ON INSURANCE
Creditors are. in certain cases, held entitled to the amount of pre-
miums on an insuraj ted by a husband for the benefit of
his wiiV. the premiums having been paid out of moneys held in
fraud of creditors. This question, however, goes rather to the
point of who is entitled b c und< c the policy, where it will
osidered.17 And one having qo insurable interest is entitled
to be reimbursed out of the benefil fund, for premiums paid by
him under contract with insured, although he would have no right
to recover payments voluntarily made in the absence of a con-
tract.18
§ 1428a. Same subject: beneficiaries. — Beneficiaries of a life in-
surance contract have, upon the repudiation of the policy by the
company, no such interest in it that enables them to recover the
premiums paid, that rigid being invested in the insured; nor are
they entitled to damages where the law recognizes the right of the
insured to dispose of the policy by assignment, will, or gift, with-
out their consent.19 Nor can the beneficiary, who is not in privity
with the insurance company, has paid none of the premiums, and
was without knowledge of the existence of the policy, recover the
premiums which have been paid, even though the policy was void
and never attached.20 And if assured has failed to pay assessments
and thereby voluntarily abandoned his contract and directed its
cancelation, the beneficiary cannot recover damages for alleged
wrongful act of insurer during insured's lifetime, nor is he en-
titled to a return of alleged 'illegal assessments.1 So the fact that
a policy is for the benefit of insured's wife, does not make her the
insured. She has an equitable interest in the policy, but her
husband is the proper party plaintiff in an action at law to recover
premiums paid by him upon the policy.2 But although a wife has
no vested interest in the proceeds of the certificate of a fraternal
order, yet if she has either regularly or infrequently paid premiums
thereon, she is entitled to a return of the same out of certificate
17 As to the right of a person to re- 20 Sullivan v. Met ropolitan Li Ee
back premiums paid under a Ins. Co.. 174 Mass. 467, 75 Am. St.
bona fide bui mistaken belief of own- Rep. 365, 54 N. E. 879.
ership of t lie policv, see § 1148 here- * Price v. .Mutual Reserve Life [ns.
in. Co. 102 Md. 683, 4 L.R.A.(N.S.) 870
18 Sage v. Finney, 156 Mo. App. (annotated on right of beneficiary to
30, 135 S. W. 996. sue insurer for breach of contract
19 Slocum v. Northwestern Na- other than failure to pay indemnity),
tional Lite Ins. Co. 135 Wis. 288, 1 I 62 Ail. L040.
L.R.A.(N.S.) 4110 (annotated on 8McDonald v. Metropolitan Life
remedv of beneficiary on repudiation Ins. Co. 68 N. H. 4, 73 Am. St. Rep.
of contract by insurer), 115 N. W. 548, 38 Atl. 500.
796.
2626
RETURN OP PREMIUMS AND . VtENTS § I
money.8 So a wife may have a lien on the policy moneys where
payments of premiums were made by her at her husband's re-
quest, in case of an insurance on their joint lives, payable to which-
ever died first.4 And where assessments are paid by named ben-
eficiaries they are entitled to a lien on the hciiefit fund for the
amount so paid where they are not entitled to the fund itself under
the by-laws of the society.5 And beneficiaries may recover back
premiums paid by insured where he has made such material mis-
representations in the application as to avoid a fraternal benefit
certificate.6
§ 1429. Return of premium: assignment right of assignee. — It
is held that if the assured has assigned his policy to another, he
may, after his bankruptcy, sue in his own name, as trustee for the
assignee, for a return of premium.7 If an agreement to sign a life
policy cannot be consummated, because the beneficiaries do not
consent, premiums or assessments paid by the creditor are return-
able upon the death of the assured.8 And if a bank as assignee
of a policy as security is authorized to hold the policy if it desires,
and it does so and pays the premiums, it can recover the amount
so advanced.9 So a purchaser or assignee of insurance on the life
of another has an interest to the extent of the purchase or other
money invested by him, including advancements in the nature of
dues, assessments, and premiums to preserve and keep the insur-
ance in force, with lawful interest thereon. The residue he holds
as trustee for those entitled as heirs of the insured or otherwise.10
But where the mortgagor assigns the policy to B, who in turn
a -signs the same with the mortgage to C, the right to a return of
the premium does not therefore pa*s to C, and if paid to him is held
for the use of A.11 In case of a policy taken out by the mortgagor
and assigned to the mortgagee for his protection, the return pre-
mium belongs to the mortgagor, even when the equity or re-
3 National Union v. Shaw, 20 8 Kentucky Grangers' Mutual Ben-
Ohio Dee. 225, 55 Ohio L. B. 225. efit Soe. v. McGregor, 7 Ky. L. Rep.
4 McKerrell v. Gowans, 82 L. J. 750 ; Hubbard v. Stapp, 32 111. App.
Ch. 22 [1912] 2 Ch. 648 [1913] W. 541; Gibson v. Kentucky Grangers'
C. & I. Rep. 85; 107 L. T. 404, Joyce, Mutual Benefit Soc. 8 Ky. L Rep
J., see § 1410b herein. 520.
5 Tepper v. Supreme Council of 9 Des Moines Savings Bank v.
Royal Arcanum, 59 N. J. Eq. 321, 45 Kennedy, 142 Iowa, 272, 120 N W
Atl. 111. 742.
6 Royal Neighbors of America v. 10 Schonfield v. Turner, 75 Tex
Spore, 160 Ky. 572, 169 S. W. 984. 324, 7 L.R.A. 189, 12 S. W. 626.
7Castelli v. Boddineton, 1 El. & B. n Felton v. Brooks, 4 Gush. (5S
66, afT'd Castelli v. Boddington, 1 El. Mass.) 203.
& B. 879.
2627
§ 1429a JOYCE ON INSURANCE
demption has been purchased by another who pays the premiums.18
This rule, however, is subject to such exceptions as may arise by
hi of the circumstances of the case, dependenl upon principles
already considered.13 And, in general, in determining the ques-
tion considered under this section, the circumstances may be such
that regard should be had to the validity of the assignment.14
§ 1429a. Tender or return of premium as prerequisite to defense
or forfeiture. — Theinsurer is not required to return or lender back
the premiums received in order to defend an action on the policy
or defeat liability on the ground of fraud;16 nor for fraudulent
misrepresent!! li<>ns when such defense is permitted by the con-
tract;16 nor for false representations of its agent in excess of his
authority;17 nor where the question is merely whether the con-
tract is void for fraud;18 nor in order to obtain a forfeiture need
such a tender be made where the risk has attached and the risk is
apportionable, it being entire;19 nor where premiums are volun-
tarily paid before notice that the policy is ab initio for breach of
condition as to title.20 So insurer may insist upon the invalidity of
its policy, for breach of condition therein, and thus avoid Liability
for a loss, without returning or offering to return any portions of
the premiums paid; x so also where the policy becomes void simul-
taneously with a breach of its terms by insured, premiums need
not he tendered or returned as a condition precedent to a defense
on that ground.2 Nor need insurer return or tender the premiums
received, as a condition of setting up as a defense the death of the
insured from an excepted cause, since the insurance contracted for
has been given; 3 and in an action to recover back premiums paid
on a policy of insurance which never attached, because the build-
12 Rafsnyder's Appeal, 88 Pa. St. Kv. 84, 20 Ky. L. Rep. 1G0, 93 S. \Y.
336, 436; Merrifield v. Baker, 9 Al- 1049, 35 Ins. L. J. 656.
len (03 Mass.) 29. 19 Home Ins. Co.. v. Myers, 33 Ky.
13 See §§ 1152-61 herein. Examine L. Rep. 790, 111 S. W. 289.
also Parker v. Trustees of Smith 20 Millers' & Manufacturers' Ins.
Charities, 127 Mass. 499. Co., In re (Parsons, Rich & Co. v.
14 Connecticut Mutual Life ins. Co. L:ine; Lane v- Parsons, Rich & Co.)
v. Burroughs, 34 Conn. 305, 91 Am. 9J Minn. 98, 4L.R.A.(N.S.) 231,106
Dec. 725, and SS 590- 595, 780 herein. N\ ^- 485- T „ TTT.„.
"Duncan v. National Mutual Fire , „ J hcenixlns. Co.- v. Wilhs, 70 Tex.
Ins. Co. 11 Colo. 472, 20 L.R.A. 12, 8 Am. St Rep. 566, 6 S. W. 825.
(N.S.) 340, 98 Pac. 634. ?ee ^S^V* !•> "'-'J1' ■ ^
"United States T i> Ins. Co. v. *£ Co" 141 K Car" 2U> 54 S" E-
rS;;mi f FTeV^o 34 °- C' A- " 'Modern Woodmen of America v.
506 28 Ins. L J. 412. y 59 Ind. A 2 m N ,,
"Merchants' Ins. Co. v. New Mex- 5,39 ' '
ico Lumber Co. 10 Colo. App. 223, " 3Red Men>s Fraternal Accident
51 Pac. 174, 26 Ins. L. J. 969. Assoc, v. Rippey, 1S1 Ind. 454, 50
18 Provident Savings Life AssUr- L.R.A.(N.S.) 1006, 103 N. E. 345
ance Soc. v. Whayne's Adm'r, L31 101 N. E. (ill.
2028
RETURN OF PREMIUMS AND ASSESSMENTS § 1429b
ing insured was on leased mound, the insurer is not obliged to
return, or offer to return, premiums paid voluntarily before notice
of the fact that the policy was not in force, as a condition precedent
to availing itself of such fact as a defense.4 Under a New York
decision while the court declared that it was unnecessary to deter-
mine whether a separate action would lie for a return of the pre-
miums paid it did decide that where a defense was based on alleged
misrepresentations in the application as to the antecedent health
of insured an offer to return the premiums was not a prerequisite
to such defense as such breach of contract differed from a cast-
where it is sought to rescind and avoid the contract.5
But it is also decided that where insurer has neither tendered or
offered to return the premium it cannot set up that the policy is
void for misrepresentations in the application ; 6 or for a breach of
warranty;7 or for fraud even though it is stipulated that l he pre-
miums shall be forfeited for fraud; 8 or set up want of good health
when the policy was delivered;9 so where a policy is merely void-
able, at insurer's election, for breach of its conditions, there must
upon rescission be a return or tender of premiums received after
the breach, and such return or tender must be alleged when the
breach is sought to be availed of as a defense.10
§ 1429b. Return or tender of premiums as affecting waiver. — Tt
is held that a beneficiary association must return all premiums
received after a claimed forfeiture in order to avail itself thereof
and avoid a claim of waiver.11 And the degree of promptness
exercised in tendering back assessments received without knowledge
of facts which might constitute a waiver may be shown.12 But
the mere failure to offer to return the unearned premium on an
4 Parsons, Rich & Co. v. Lane tations on this part), 123 N. W. 547,
(Lane v. Parsons, Rich & Co.; Mil- 16 Det. Leg. N. 816.
lers' & Manufacturers' Ins. Co., In 7 American Central Life Ins. Co. v.
re) 97 Minn. 98, 4 L.R.A.(N.S.) 231, Rosenstein, 46 Ind. App. 537, 92 N.
106 N. W. 485. E-8380- .
5Perrv v. Metropolitan Life Ins. 0 , Commercial Life Ins _ Co. v.
Co. 153 N. Y. Supp. 459, 168 App. f^oyer, 1,6 Ind. 6d4, 95 N. E.
Div. 275, 46 Ins. L. J. 130, citing mJl\ , ... T . „ T _
Flynn v. Equitable Life Ins. Co. 78 M 9M^pohJ tan L ife Ins. Co^ v.
N. Y. 568, 34 Am. Rep. 561 ; ^re^7 ^J^1' 2° ^- L- ReP-
Dowd v. American Pire Ins. Co. 1 in Vr i ' tt't" V n *
,T „ „ „.. ,„ TT „-,„ 1U Modern Woodmen or America v.
N- Y- Supp. 31, 48 Hun 619. y 59 Ind A ± ±Q8 N> E
b Gromnger v. Metropolitan Lire ggn,
Ins. Co. 183 111. App. 618; Metro- ii Thompson v. Modern Brother-
pohtan Life Ins. Co. v. Freedman, hood of America, 189 Mo. App. 15,
159 Midi. 114, 32 L.R.A.(N.S.) 298, 176 S. W. 506.
(annotated on right of insured to re- 12 United Order of the Golden
turn of premium where policy is void Cross v. Hoosier, 160 Ala. 334, 49
or voidable because of misrepresen- So. 354.
2629
§ 1430 JOYCE u\ INSURANCE
ance policy, as required by its terms, upon the discovery,
after loss, of a breach thereof, will not constitute a waiver of the
forfeiture where the premium is ool received by the company after
knowledge of the breach, and no demand is made for the unearned
liums, and do offer is made to surrender the policy, a tender
accompanying a plea of forfeiture in an action to recover on the
policy being sufficient in such a case.18 Again, mere delay in re-
turning the premium upon a policy of fire insurance void because
of breach of warranty of title to the property, does not forfeit the
right to defend againsl an action od the policy for such breach;14
nor is forfeiture waived for violation of a condition against en-
cumbrance by such failure to return the premium before suit is
brought.16
§ 1430. Return of premium: miscellaneous authorities. — The
insured in a mutuaJ fire insurance company is not, because of the
fact of membership, entitled to a return of premium.16 But as a
general rule, where one party to a contract under seal refuses, with-
out right, to perform his part the other party may elect either to
sue on the contract to recover damages for the breach, or to rescind
the contract and sue in assumpsit to recover back money paid
under the contract for which he received no substantial benefit.17
In case of insurance on the ship and cargo, if the cargo is not put
at risk, there shall be a return of premium paid thereon.18 If the
contract has not been completed, as where it does not conform to
the proposal of the assured, the premium is returnable.19 It is
held that the company may be obligated to pay the loss, although
the beneficiary has received back his assessment, and although
the assessment was received and paid to the company when over-
due in ignorance by both parties of the fact of death of the assured,
t appearing that the agent was accustomed to collect the same, and
that the assured was ready and willing to pay it any time when
called for. and also that the amount of the assessment was grossly
disproportionate in amount to the sum due upon loss under the
( ertificate.20
13.Ktn;i Ins. Co. v. Mount, 00 17 American Life Ins. Co. v. Mc-
Miss. 642, to L.R.A.(N.S.) 471, 44 Aden, 10!) Pa. St. 399, 1 Atl. 256.
3o. L62. 18Hornmeyer v. Lushingtony 15
l4Goorberg v. Western Assurance East. 46, 13 Eng. RuL Cas. 637.
Co. 150 Cal. 510, 30 L.R.A.(N.S.) 19Fowlerv. Scottish Eq. Life Ins.
376, L19 Am. St. Rep. 246, 89 Pac. Co. 28 L. J. Ch. 225. As to allow-
130. ance of inn-rest in ease of return of
15 Capital Fire Ins. Co. v. Shear- premium, see Waddington v. United
wood, 87 Ark. 326, 112 S. W. S78. Ins. Co. 17 Johns. (N. Y.) 23.
16 Friesmutli v. Agawam Mutual 20 Mutual Relief Soe. of Druids v.
Fire Ins. Co. 10 Gush. (64 Mass.) Billau (Cin. Sup. Ct.) 5 Ohio Dec.
587. 217, 3 Am. L. Rec. 546.
2630
TITLE VII.
ATTACHMENT AND DURATION OF RISK.
CHAPTER XLVI.
ATTACHMENT AND DURATION OF RISK.
§ 1436. Attachment and duration of risk : generally.
§ 1437. "Receipt and acceptance" of application and fee.
S 1438. Countersigning- policy : death before.
§ 1439. Attachment and duration of risk: parol contract.
S 1440. Necessity of fixing duration of the risk.
§ 1440a. Where duration of risk not specified.
§ 1440b. Attachment of risk by waiver of stipulation as to.
§ 1441. Attachment and duration of risk: date of contract.
§ 1441a. Date of policy: "issuance" of policy.
§ 1442. Attachment and duration of risk : the date : reinsurance.
§ 1443. Attachment and duration of risk : insurance retroactive.
§ 1443a. Attachment and duration of risk: fidelity guaranty insurance:
credit guaranty insurance.
§ 1444. Attachment of risk: time policy may be retroactive.
§ 1445. Risk may attach although mistake in description of property.
§ 1446. Attachment and duration of risk: computation of time.
§ 1447. Attachment of risk: goods shipped "between" two dates.
§ 1448. Attachment and termination of risk: necessity of an insurable
interest.
§ 1449. Termination by change of risk: breach of conditions.
§ 1450. Policy may terminate by its own limitation or by actual loss or
death.
§ 1451. Where attachment of risk not postponed by condition as to repair
of vessel.
§ 1452. Attachment of risk : de facto and de jure existence of corporation :
compliance with statutory requirements as to organization, etc.
§ 1453. Duration of risk: expiration of charter during life of policy.
§ 1454. Attachment and determination of risk: insolvency: dissolution.
§ 1455. Dissolution : reserve fund.
2631
§ l i JOYCE ON rNSURANCE
§ 1 156. Termination of contract by expulsion of member of mutual benefit
society.
§ 1457. Termination by withdrawal of member of mutual benefit society.
§ 1458. Reinstatement by waiver not by new contract.
§ 1 159. Renewal of policy: amount must be fixed.
S 11(1(1. Presumption that renewal policy is like original.
§ 1461. Misrepresentations and warranties in application for revival.
vj 1-1(!'2. Immaterial oral representations not inducing risk: renewal valid.
§ 1 163. Where renewal is on same terms ami conditions as old contract.
§ 1 Hi 1. Renewal : cases.
>: 1 Id."). New policy may he only a renewal.
^ 1 Hiti. Renewal or revival may be conditional.
§ 1467. Agreement or waiver necessary to renewal or revival after for-
feiture.
§ 14GS. Agreement to renew not within statute of frauds.
S 1409. Renewal need not be under seal.
<? 1 170. Agent's agreemenl to renew: delivering renewal receipt.
$ 1470a. Renewal: fidelity guaranty insurance: credit guaranty insurance.
§ 1471. Right to reinstatement may pass to beneficiary.
§ 1472. Reinstatement of member.
§ 1472a. When no reinstatement effected.
§ 1 17.'{. Suspension of risk.
§ 1474. Duration of risk : effect of war.
§ 1436. Attachment and duration of risk: generally. — As pre-
liminary hereto, it may be slated that the very foundation of the
contract of insurance rests upon the principle of nonliability for
any loss not occurring during the continuance of the risk. There
are certain cases, however, where the insurance is clearly intended
to have a retrospective effect as where the contract is "lost or not
lost," although this is rather a, qualification of, than an exception
to, the rule. The principle Unit the loss, damage, or injury must
be sustained during the continuance of the risk is apparent from
the cases under the following chapters as to the attachment and
termination of the risk, as well as from other decisions considered
in various parts of this work. A question, however, has arisen as
to the result, after the termination of the risk, or injuries occurring
during the continuance of the risk, which will be noted hereafter.1
Many questions have been considered under prior chapters relating
to the contract of insurance and reinsurance; the completion, re-
quisites, and validity of the same; the effect of usage thereon; the
attachment and modification of the same; the effect of war thereon;
the payment and nonpayment of premiums, and assessments and
1 See ; L553 herein.
2G32
ATTACHMENT AND DURATION OF RISK § 1436
insurable interest, and all have a more or less important bearing
upon the question of attachment and duration of the risk.2 As
also have the questions of alterations, change or increase of risk.
the breach of contract for noncompliance with conditions and
warranties, or the avoidance of the same for misrepresentations.
In brief, risk being an essential part of the contract of insurance,
there are very few questions connected with that subject which
may not enter into the determination of what constitutes the attach-
ment or duration or termination of the risk. Thus, in unilateral
life contracts conditioned for forfeiture for nonpayment of pre-
miums, the assured may of his own volition, no obligation resting
upon him to pay the premiums, end the contract by neglecting
or refusing to pay the same; although in certain cases noted under
the chapter on assessments he may be liable for assessments after
he has thus terminated the contract, or so even after a loss. The
contract may be terminated by mutual consent of the parties; or
the statute may provide for its rescission or cancelation under cer-
tain conditions; or the policy may stipulate for a cancelation of
the risk; or in case of mutual benefit societies, membership may
be terminated by the assured upon certain conditions; or in case
of a term policy, the expiration of the term will release the parties ;
or in case of a policy upon the voyage, the termination of the same
under the contract will end the obligations of the parties. So in
case of a parol contract for insurance accepted conditionally, it
may be finally rejected. The above principles are supported by
authorities throughout this work. The duration of the policy may
be limited to the payment of the premium, as where the premium
is to be paid within fifteen days after the expiration of the time of
insurance ; in such case it merely vests a right of insurance within
that time, if the insurer agrees to the same.3 And the policy may
never attach, as where the warranty of seaworthiness is not satisfied.4
Where the policy provides that it shall cover such risks as may be
approved and indorsed thereon, such requirement is sufficiently
complied with by an entry of such approval of risks in a book
furnished the assured therefor, especially where such approval and
indorsement are frequently made and written opposite a description
of the risk.5
2 See §§ 43-305, 887-1339 herein. 1 Q. B. D. Ex. Ch. 96. See American
3Tarleton v. Staineforth, 5 Term Ins. Co. v. 0°:den, 15 Wend. (N. Y.)
Rep. 695, 1 Bos. & P. 471. 532, 20 Wend. (N. Y.) 287.
4Hoxsie v. Pacific Mutual Ins. Co. 5 Heilner v. China Mutual Ins. Co.
7 Allen (89 Mass.) 211; Barnewall 28 Jones & S. 362, 45 N. Y. St. Rep.
v. Church, 1 Caines (N. Y.) 217. 2 578, 18 N. Y. Supp. 177.
Am. Dec. 180; Dudgeon v. Pembroke,
2633
§§ 1-137, 1 JOYCE UN [NSURANCE
There musl be a mutuality, a union of minds, to constitute a
contracl so thai where there is a policy on a horse left continually
with insured and to be retained if he kept the animal, and lie
subsequently pays the premium, the contract becomes effective
from the date of acceptance of the premium.6 And ordinarily,
where it is so stipulated, the risk does not attach before approval
at the home office so as to cover a loss occurring before said approval
but after the delivery of the application and together with tho
premium.7 A policy of fire insurance will continue in force for the
term for which it was written unless canceled by mutual consent
or under statutory provisions, or it is stipulated that it may at tho
option of the parties be terminated and it is so terminated. But
in case of a reserved right to terminate, the conditions thereof must
be strictly complied with and we may add that the statutory pro-
visions above mentioned constitute a part of the contract.8 And
the term of the risk under an accident policy payable at the end
of a five year period, may be a continuous one, subject only to
lapse by the failure to pay the premium within the month, on the
first of which it becomes due, whether said month is before or after
tho expiration of live years from the date of issue, especially so in
view of the insurer's by-laws, and its general custom or course of
dealing as to payments of premiums.9 And the time of expiration
of an employer's liability policy may be extended by a binder so
as to cover liability occurring within said extension.10
§ 1437. "Receipt and acceptance" of application and fee. — If the
application, which is expressly made a part of the policy, provides
that there shall be no liability on the part of the company prior to
the "receipt and acceptance'' of the application and membership
fee, the contract does not take effect until after acceptance.11 This
rule would, however, be subject to such exceptions as would arise
in ease of waiver and estoppel.
§ 1438. Countersigning policy: death before. — Where an applica-
tion for a mutual life policy provided that the company would not
6 Mills v. Pennsylvania Live-Stoek 9 Turner v. New York Safety Re-
Ens. Co. 57 Pa. Super. Ct. 483. See serve Fund, 144 N. Y. Supp. 261, 158
§§ 43, 70 et seq. herein. App. Div. 135, 43 Ins. L. J. 274.
7 Johnston v. Indiana & Ohio Live 10 London Guarantee & Accident
Stock Ins. Co. 94 Neb. 403, 143 N. Co. v. Mississippi Cent. R. Co. 97
W. 459, following St. Paul Fire & Miss. 165, 52 So. 787.
Marine Ins. Co. v. Kelley, 2 Neb. u Coker v. Atlas Accident Co.
(unoff.) 720, 89 N. W. 997. See §§ (1895) (Texas C. C. A.) 31 S. W.
59 et seq. herein. 703. See §§ 64, 86 herein.
8 Scheel v. German-American Ins.
Co. 228 Pa. 44, 76 Atl. 507, 39 Ins.
L. J. 1252.
2634
ATTACHMENT AND DURATION OF RISK § 1439
be liable until the application and membership fees were received
by its secretary, and the policy provided that there should be no
liability until the membership fee and premium had been re-
ceived by it, and the policy countersigned by an agent of the
company, it was held that the fact that the application, member-
ship fee, and premium had been received by a solicitor of the com-
pany did not cause the risk to attach so as to render insurer liable
for the death of the applicant two days before the policy was coun-
tersigned and the fee and premium received by the agent.12
§ 1439. Attachment and duration of risk: parol contract. — We
have seen that the contract need not be in writing, in the absence
of a statutory requirement therefor, so that the risk may attach
under a parol contract, whether it be completed or be an agreement
for a policy, unless the risk is taken subject to approval or final
rejection,13 even though, in case of an agreement for insurance the
policy be not executed or delivered until after the loss.14 So a
valid parol agreement, made in October, that a policy for twelve
months should be issued in the early part of November will cover
a loss occurring during the middle of November.15 And where
the contract is made subject to approval, the risk terminates when
notice of the company's disapproval is given.16 So if the contract
provides that the risk shall attach on a date earlier than that of the
policy, the company will be liable, there being no fraud or con-
cealment on the part of the assured for a loss occurring subsequent-
ly to the date fixed, and before the policy is executed and delivered.17
If the terms of insurance are settled between the assured and an
agent of the company having real or apparent authority to bind
the company in this respect, and an agreement is made to issue a
policy to take effect from the date of the agreement, the contract
is binding.18 So the risk may be continued by renewal of the con-
tract by- parol.19 Though the insured insists that he contracted
for insurance for a year, and the agents of the insurer that it was
for three years, yet if the agents had blank policies, signed by the
officers of the insurer, with authority to fill them out and deliver
12 Neweomb v. Provident Fund 16 Goodfellow v. Times Assur. Co.
Soc. 5 Colo. App. 140, 38 Pae. 61. 17 U. C. 411.
As to countersigning policy, see §§ 17 Commercial Ins. Co. v. Hallock,
530 et seq. herein. 27 N. J. L. (3 Dutch.) 645, 72 Am.
13 See "parol contracts," chaps. Dec. 379.
III. and IV. herein, and §§ 44, 72, 18 North British & Mercantile Ins.
103, 104, 119, 120 herein. Co. v. Lambert, 26 Or. 199, 37 Pac.
14 City of Davenport v. Peoria Ma- 909.
rine & Fire Ins. Co. 17 Iowa, 276. 19 § 41 herein.
15 Home Ins. Co. v. Adler, 71 Ala.
516.
2635
§ 1440 JOYCE ON INSURANCE
them, and they made a memorandum on their books, and the fail-
nro to actually issue the policy was due only to ueglect or forget-
fulness on their part, there is an existing agreemenl to insure, which
will support an action, if the property is destroyed within one year
from the perils insured against.80
§ 1440. Necessity of fixing duration of the risk. — The contract
may stipulate that the risk may end at either party's election,1
or the statute may provide for rescission or cancelation on certain
conditions. Bu1 the rule uevertheless obtains that ii is important
t<> know exactly when the risk begins and terminates: thai is, Ik"
period during which the insurance is to continue should he certain
or capable of ascertainment, either from the policy itself or by
reference to extrinsic mailers, when evidence thereof is admissible.2
So the termination of the risk may depend upon some event stipu-
lated in the policy, as in case of death in a life risk, or the arrival
at a certain port, in a, voyage, or mixed policy. In marine risks,
insurances are divided with reference, 1. To the time; as where
the risk begins and terminates on certain days, without regard to
the actual situation of the ship; 2. The voyage, the places of
beginning and ending, or the terminus a quo and terminus ad
quern of the risk, being described or defined and ascertainable;
:!. To both the voyage and time; the beginning and end of the risk
depending upon the time specified, the risks relating to a certain
voyage.3 Or the attachment and duration of the risk may be de-
pen, hut upon a specified event; as by the words "at," "at and
fn an,"' or "from" in the policy.4 So it is held that the policy may
1)0 determined by the determination of the specified event, even
though the insurance be by a time policy ; as in case of insurance
upon a building while the insured was drying hops, where the
lid. was held not to extend beyond the time the insured ceased
drying hops.5 So insurance on a vessel may be effected on time,
aral with reference to the situation of the vessel at the end of the
period fixed; as in case of a policy for a year, and if the ship be on
a passage or at sea at the end of the period, the risk to continue
20 Cn.lt v. Banover Fire Ins. Co. Wheat. (25 U. S.) 383, 6 L. ed. 664;
in W. Va. 508, 52 Am. St. Rep. 902, Seamans v. Loring, 1 Mason (U. S.
21 S. E. 85 I. C. C.) *128, 139, *140; Fed. Cas. No.
1 Sullivan v. Massachusetts Mutual 12,583; Patrick v. Ludlow, :> Johns,
[ns. Co. 2 Mass. 318. Cas. (N. Y.) 10, 2 Am. Dee. 130;
2 See Cleveland v. Union Ins. Co. Parmeter v. Cousins, 2 Camp. 235,
8 Mass. 308; Strohn v. Hartford Ins. 13 Eng. Rul. Cas. 608; Palmer v.
Co. :;? Wis. 625, ID Am. Rep. 777, Marshall, 8 Bing. 79.
Cal. Civ. Code, sec. 2587. BLangworthy v. Oswego Ins. Co.
3 See §§ 170 17.-) herein. 85 N. Y. 632.
*Columbian Ins. Co. v. Catlett, 12
I'll:;!;
ATTACHMENT AND DURATION OF RISK § 1440
until her arrival at her port of destination.6 And in all cases a de-
scription of the risk must have reference as to its duration, to time,
place, or both, or to some event specified or ascertainable from the
contract.7 The insurance may be on time, or on a particular voy-
age, or to several ports named, or a general voyage within a certain
range described by general words. It may be a voyage to a single
port, or to ports in the alternative, or the character of the voyage
may be such that the several ports should be visited in their geo-
graphical order, or in the order named in the policy or the order
observed by custom. Again, the description may exclude certain
ports, or include liberty to touch and stay at certain ports. The
insurance on a particular voyage generally contains no reference to
time, and if the insurance on such particular voyage be one not
on time, the commencement and termination of the voyage must
be expressed in the policy by the termini.8 And these should not
be left in any uncertainty by any omission or blank, either of the
ship's departure or destination. If the insurance is by a time pol-
icy, the termini are the day and hour when the insurance com-
mences and. ends ; 9 yet if the termini or the commencement and
termination of the risk in insurances not on time, but voyage pol-
icies be not clearly or exactly stated, nevertheless if they are capable
of being made certain from the contract, and evidence of such
circumstances as are admissible, the policy will be valid; as where
the vessel was at a certain port on the day of the execution of the
policy, and the cargo was there loaded according to contract, etc.10
So the policy will be valid where the termini are fixed, although
the time of final arrival at the return port of the voyage is in-
definite, as in a voyage from a certain port backward and forward,
etc., until the ship's return to the United States.11 But under a
policy "at and from" to commence on a specified day, without
information being given or asked as to the place where the ship
6 See Cole v. Union Mutual Ins. per Sewall, J. ; 1 Marshall on Ins.
Co. 12 Gray (78 Mass.) 501, 74 Am. (ed. 1810) 321.
Dee. 600 ; Washington Ins. Co. v. 10 Folsom v. Merchants' Mutual
White, 103 Mass. 238, 4 Am. Rep. Marine Ins. Co. 38 Me. 414. See
543. Petrie v. Phcenix Ins. Co. 132 N. Y.
71 Phillips on Ins. (3d ed.) p. 137, 30 N. E. Rep. 380, 43 N. Y. St.
29, sec. 37: Barber on Ins. 71, see. Rep. 478, 21 Ins. L. J. 551, affirm-
48. ing 57 Hun 591, 32 N. Y. St. Rep.
8 Cleveland v. Union Ins. Co. 8 965, 11 N. Y. Supp. 188. But see
Mass. 308. Molloy's De Jure Maritimo, b. 2, c.
9 Grousset v. Sea Ins. Co. 24 Wend. vii. sec. 14, as to omission of terminus
(N. Y.) 209, per the court; Cleve- ad quern.
land v. Union Ins. Co. 8 Mass. 308 ; u Cleveland v. Union Ins. Co. 8
Manly v. United Marine & Fire Ins. Mass. 308.
Co. 9 Mass. 85, 88, 6 Am. Dec. 40,
2637
§ 1440a JOYCE <>\ INSURANCE
then is, it will be implied that the risk is to commence within a
liable time, in the absence of some express provision concern-
ing the same, and if the \c— el does not arrive until forty-seven
days after the policy is effected, the insurers will be discharged.13
In a policy on a cargo in the West India trade to "Barbadoes and a
market," the ship may, in good faith, sail from island to island
until a disposition is made of the whole cargo.13 If the voyage
ribed is not the voyage intended, the risk will not attach.14
Although it is nece—ary, in order to render a contract to insure
binding, that the subject-matter, period, rale, and amount of in-
surance should have been agreed upon, yet the mere fact that the
parties have had previous dealings does not show an adoption of
the provisions of those dealings without a reference to them in the
contract.15
§ 1440a. Where duration of risk not specified. — And an agree-
ment to issue a regular policy on a building newly completed at
a specified rate per thousand, but which does not state the length of
time the contract is to continue, will be held to be for a period of
lime long enough to carry it beyond the date of a fire which
occurred three days after the contract was made, even if it cannot
bo inferred that it was an agreement for an annual policy.16 And
where no time limit was specified except that on the reverse side
of the policy there was indorsed a provision that: "This policy
shall be of an immediate benefit for its full face value: this com-
pany reserving the right to deduct in case of fire, the balance of
what would be one annual premium unpaid at the time of said
fire," and said policy also contained special inducements as to
losses, dividends, and benefits and a provision that the company
could cancel the policy at any time on returning the unearned
premium, it was decided that the policy was to be in force for at
least one year with the right of insurer to deduct in case of loss
any premium that might be then unpaid and also that such a
result was secured by a judgment for the amount of admitted loss,
less the unpaid balance of one year's premium.17
12 De Wolf v. Archangel Maritime 16 New Hampshire Fire Ins. Co. v.
B. & Ins. Co. !) L. K. <L>. I'.. 451, 43 T'.lakelv. 97 Ark. 564, 134 S. W. 926,
L. J. Q. B. 147, L3 Eng. Etui. Cas. 40 Ins. L. J. 822, relying upon Eames
(ill! i. v. Home Ins. Co. 94 U. S. 621, 629,
13 Maxwell v. Robinson, 1 Johns. 24 L. ed. 298, 301, per Mr. Justice
(N. Y.i 333. Bradley.
14 See § 1488 herein, and §§ 2365 "Anthony v. Grier, 57 Pa. Super.
el seq. as to deviation. Ct. 320.
16 Commercial Fire Ins. Co. v. Mor-
ris, 105 Ala. 498, 18 So. 34.
2638
ATTACHMENT AND DURATION OF RISK §§ 1440b, 1441
§ 1440b. Attachment of risk by waiver of stipulation as to. —
So a policy may attach by waiver of a stipulation as to the com-
mencement of liability, as where it is conditioned against loss or
liability for injury to persons other than employees while using
elevators, if the building and elevators arc not completed and ready
for occupancy, but the condition is waived and before said com-
pletion, but after the elevators are put in use and with knowledge
of the exact conditions said elevators are accepted as completed and
ready for occupancy and the policy is delivered and the premium
paid.18
§ 1441. Attachment and duration of risk: date of contract. —
Although the contract of insurance is deemed to have been made at
the date of the policy, and to take effect therefrom, unless a differ-
ent day is specified therein, or it is apparent from the construction
of the contract that another day was intended,19 yet a policy is
not invalid because it has no written date,20 and a policy may by
agreement be antedated and take effect as from that date,1 and if
a verbal contract to issue a policy is made with an authorized agent
of the company, and no date is mentioned from which the in-
surance is to take effect, the risk will commence immediately.2
Nor is the date conclusive of the time of actual subscription,3 it
being only prima facie evidence of its true date.4 So although a
policy is by its terms to take effect at a certain time, yet it may be
shown that, from want of delivery, failure to comply with some
condition precedent, or other cause, it did not take effect, until a
subsequent time or on a different date.5 And as a policy is pre-
18 Scarritt Estate Co. v. Casualty contrary intent, and if the premium
Co. of America, 166 Mo. App. 567, is paid and the policy if not delivered
149 S. W. 1049, 41 Ins. L. J. 1888. until afterward, the policy takes
19 Anderson v. Mutual Life Ins. effect by relation as to its date,
Co. of N. Y. 164 Cal. 712, 130 Pac. though a loss intervenes. Union Ins.
726; Day v. Hawkeye Ins. Co. 72 Co. v. American Fire Ins. Co. 107
Iowa, 597, 34 N. W. 435; Reynolds Cal. 327, 28 L.R.A. 692, 48 Am. St.
v. German American Ins. Co. 107 Rep. 140, 40 Pac. 431.
Md. 110, 15 L.R.A. (N.S.) 345, 6S 20 Lee v. Massachusetts Ins. Co. 6
Atl. 262, 37 Ins. L. J. 277; Keim v. Mass. 208.
Home Mutual Fire & Marine Ins. Co. 1 Anderson v. Mutual Life Ins. Co.
42 Mo. 38, 97 Am. Dec. 291; Light- of N. Y. 164 Cal. 712, 130 Pac. 726.
body v. North American Ins. Co. 23 2 Potter v. Phoenix Ins. Co. 63 Fed.
Wend. (N. Y.) 18; Ruse v. Mutual 3S1, 382.
Benefit Life Ins. Co. 23 N. Y. 516 ; 3 Earl v. Shaw, 1 Johns. Cas. (N.
Philadelphia Life Ins. Co. v. Ameri- Y.) 313, 314, 1 Am. Dec. 117. And
can Life Ins. Co. 23 Pa. St. 65. see cases under first note in this sec-
A policy of insurance or reinsur- tion.
ance, if delivered, takes effect from 4 Lorent v. South Carolina Ins. Co.
its date, unless otherwise stated there- 1 Nott. & McC. (S. C.) 505.
in, or unless there is evidence of a 5 Hall v. Cazanove, 4 East, 477, 14
2639
§ i [ 1 1 JOYCE ON INS U 1 1 A N C B
sumed to attach from the day of its date the risk may attach before
the delivery of the policy, as where it is not delivered until several
days thereafter.6 So although a policy provides for insurance of
property from a time anterior to its date, if il appears expressly
from il,,. application that no liability will attach until the sunt' is
approved, mid it is approved on the day the policy is dated, it
takes effect from the daj of date7 So the surrender of a policy to
take effect from a, certain date releases the insurer, without regard
to the time of his actual discharge by tin1 company.8 If the accept-
ance is conditional upon the payment of the premium, and il is
paid, the risk attaches by relation from the day of date of the pol-
icy, hut it does not attach if the premium is not paid as agreed,9
mile- there has been a, waiver or the circumstances raise an es-
toppel.10 And when the date of the commencement of the risk is
by indorsement made on the policy, whereby the date of the policy
is in effect changed to the date of delivery, the latter date is thai
of the commencement of the risk, the policy being at that time
delivered and the premium then paid.11 If a policy is dated and
delivered on Monday, the fact that on Sunday the agents of the
company examined the property and agreed with the insured as to
the amount of insurance does not render it a Sunday contract.12
An accident insurance policy takes effect from its date, unless
it is otherwise stated that it shall take effect only upon certain
stated conditions, and if such conditions are met, and the policy
delivered, it takes effect as of the day of its date.13 And the day
on which a new policy was dated and signed and on which an
earlier policy was canceled is that from which the insurance takes
effect even though insured was not notified of its issue before loss
and did not receive the policy until after said loss.14 If accident
Eng. Rul. Cas. 737; Atlantic Lis. Co. 56 Me. 371; Hubbard v. Hartford
v. Goodall, 35 N. II. 328; Jackson Ins. Co. 33 Iowa, 325, 11 Am. Rep.
v. Bar.!. 1 Johns. (X. Y.) 230, 4 Am. 125; Home Ins. Co. v. Field, 42 111.
Dec. 267. A pp. 392, 24 Chi. Leg. News, 122;
6Lightbody v. North American Ruse v. Mutual Benefit Ins. Co. 23
Ins. Co. 23 Wend. (N. Y.) 18; Amer- N y, (g Smith) 516.
ican Horse Ins. Co. v. Paterson, 28 io $oe §§ 53 et seq. herein.
Ind. 17; Kentucky Mutual Ins Co n Gloucester Manufacturing Co. v.
v. Jenks, 5 1ml. 96. See Hubbard II(nvard Fire Ins. Co. 5 Gray (71
v. Hartford Fire Ins. Co. 33 Iowa, Mags>) m^ GQ Am< Dec 376 gee
tV i'i i t r to t Bruton v. Metropolitan Life Ins. Co.
7Dav v. Hawkeye ins. ( o. il Jowa, T „ f ,
597, ill X. W. 435. See -Htna Ins. « H™ (N. Y.) 204
Co.' v. Webster, 6 Wall. (73 U. S.) *^?t\%> flpKuq
L29, 18 L. ed. 888; Atlantic Ins. Co. 104 ^hch- 132> G2 N- W- 149-
v Goodall, 35 N. H. 328. 13 Rayburn v. Pennsylvania Casual-
8 Atlantic Ins. Co. v. Goodall, 35 ty Co. 138 N. Car. 379, 107 Am. St.
N. H. 328. Hop. 545, 50 S. E. 762.
9 Walker v. Metropolitan Ins. Co. 14 Allen v. Patrons Mutual Fire
2640
ATTACHMENT AND DURATION OF RISK § 1441a
insurance is applied for and a policy subsequently issues and is
delivered, it is based on the status of the insured at the time of the
application for insurance, and the insurer assumes the risk after
the date of the policy.15 So a receipt, given by the agent of a
mutual fire insurance company for the application money and
note, stating that the insurance is of a specified date, which is the
same as that of said receipt, may constitute a contract for im-
mediate insurance, binding the company for any loss thereafter
sustained before the policy is issued.16 And if the policy bears
the same date as that of the application for the reason that it was
nearest assured's birthday and he thereby secured a reduction of
the premium and accelerated a twenty year accumulation period,
said date is that from which the policy attaches, even though it
was not issued and delivered to assured until several months later
and it provides that it shall take effect on payment of the pre-
mium.17
Again, where Dy mistake and inadvertence, upon obtaining a
reduction of the amount of insurance and of the premium, the
time for the expiration of the policy is, by a slip attached thereto,
fixed at a later date than that of the policy, such mistake may be
shown and also that it was not intended to thereby extend the term
of insurance, nothing having been said when obtaining said re-
duction as to an extension and no consideration having been paid
therefor, even though the slip was in triplicate and one of the
copies was sent to insurer's home office and nothing was done by it
in regard thereto until after the loss.18
§ 1441a. Date of policy: "issuance" of policy. — A distinction is
made in life insurance as to the commencement of risk between
the ''date of this policy" and "issuance of this policy" with refer-
ence to excepted risks, the word "issuance" alone to the execution
without delivery or the delivery of the executed policy.19 In case
of fidelity guaranty insurance the application asked from what
date the bond was to be in force and for what amount and the
answer was "from issuance" specifying the amount the bond agreed
Ins. Co. of Mich. 165 Mich. 18, 130 As to conflicting dates: computa-
N. W. 196, 40 Ins. L. J. 970. tion of time as to forfeiture, see §
15 Rayhurn v. Pennsylvania Casual- 1115a herein.
ty Co. 138 N. Car. 379, 107 Am. St. 18 Evans v. Glens Fails Ins. Co. 38
Rep. 545, 50 S. E. 762. Utah, 461, 113 Pac. 1019, 40 Ins. L.
16 Tucker v. Farmers' Mutual Fire J. 974.
Assoc, of W. Va. 71 W. Va. 690, 77 19 Anderson v. Mutual Life Ins. Co.
S. E. 279. of N. Y. 164 Cal. 712, 130 Pac. 726.
17 Mercer v. South Atlantic Life
Ins. Co. Ill Va. 699, 69 S. E. 691,
40 Ins. L. J. 426.
Joyce Ins. Vol. III.— 166. 2*641
142, 1443 JOYCE OX INSURANCE
to reimburse insured for any loss to be sustained by larceny or
embezzlement from March 8, 1912 to March 7. L913. The risk
was approved March 5, 1912, and executed on March 8th. it was
sent to the Paris office of insured but was returned with a requesl
to deliver il to the tatter's London office which was done on March
L8th. A check for the premium was requested, but that matter
lelayed until the London manager who was away should return.
The payment of the premium was not made a condition precedenl
to Liability. On April 18th the premium was paid with knowledge
on assured's pari that employee had left the Paris office on April
L3th. It was held that the risk had not attached until April 18th,
and did not cover defalcations before thai time.20
§ 1442. Attachment and duration of risk: the date: reinsurance.—
V contract of reinsurance may he referred, with relation to its at-
tachment and duration, to the date of the original insurance,1 or
it may limit the risks to those existing at a specified date.2 and
parol evidence is admissible to show that a reinsurance was in-
tended to and does cover the whole period of the original insur-
ance.3
§ 1443. Attachment and duration of risk: insurance retroactive.—
As stated elsewhere, risk is an essential element of the contract, and
until the risk commences the insurance does not attach.4 But an
insurance may be retroactive and attach, so as to cover a loss
happening before the date of the policy. This is so in cases of an
insurance "lost or not lost" in marine risks, although the words
"lost or not lost" are not necessary. So also in cases of fire risks,
where the thing is distant and its status unknovvn to either party.
such intent that the risk attach may appear from the policy or it
may be implied from the circumstances or appear by extrinsic
20 Allis Chalmers Co. v. Fidelity & is inserted by the plaintiffs in manu-
Deposit Co. of Md. Ill L. T. 327, 30 script. The printed form speaks in
T L R. 445, Lord Sumner said: one place of the bond being exe-
" 'Issuance,' we were told, is a word cuted;' in another of its being is-
originating in the United Stales of mum!' and 'issued to' the assure,!: m
America, where both parlies have ordinary speed, the two words indi-
their head offices. It is a word new cate different things, and 'issuance
to inc. The New Oxford Dictionary corresponds to the latter,
states it as a United Stales word x § 120 herein,
only, the earliest use cited being in 2S 122 herein.
L865. We musl do the besl we cm 8 Philadelphia Life Ins. Co. ▼.
with it. I take it to mean a some- American Life Ins. Co. 23 Pa. St.
what imposing kind of issue. The 65.
printed proposal form in which this * Hart v £d™a™ T"s; nCo-
word i. used is prepared by the de- 2 Wash. (U. S. C. C.) 310, Fed. Cas.
lendauts. The actual word 'issuance' No. 6150.
2642
ATTACHMENT AXD DURATION OF RISK § 1443a
evidence.5 But a policy made out and delivered to the company's
agent, to take effect provided the premium is paid, will not relate
back and cover a loss occurring between its date and the time the
premium is actually paid, even though the insured when he pays
the premium and the agent when he receives it knows nothing of
the fact of loss.6 This rule is subject, however, to such exceptions
as may arise in cases of waiver and estoppel as to the condition
requiring prepayment of the premium.7 But the mere antedating
of the policy by an agent "to make the insurance continuous" does
not cause it to relate back, and make the risk attach from the time
of leaving a memorandum at the agent's office for a certain amount
of insurance on certain property, such memorandum of itself not
being a commencement of the risk.8
§ 1443a. Attachment and duration of risk: fidelity guaranty
insurance: guaranty insurance. — And a fidelity guaranty policy,
agreeing to reimburse a bank for pecuniary loss sustained by rea-
son of the fraud or dishonesty, etc., of its assistant cashier in connec-
tion with the duties of his office or position, is terminated when
said assistant cashier changes his status by obtaining, without
notice to insurer, control of the bank's stock and becomes a director,
even though he continues to act as cashier, for the object of such
an undertaking is not to insure an employer against his own
fraudulent acts but to insure him against the fraudulent acts of
an employee.9 Again, dishonesty in the position of assistant cashier
6 Clement v. Phoenix Ins. Co. 6 roll's becoming- owner of the larger
Blatehf. (U. S. C. C.) 481, Fed. Cas. portion of the stock, and becoming
No. 2881; Merchants' Ins. Co. v. practically master of the corpora-
Paige, 60 111. 448; Security Fire Ins. tion. So far as the appellant knew
Co. v. Kentucky Marine & Fire Ins. or seemed to care at time of issuing
Co. 7 Bush (Ky.) 81, 3 Am. Rep. bond, Carroll may have owned a
301; Paddock v. Franklin Ins. Co. 11 large share of the stock, and been one
Pick. (28 Mass.) 227; Sutherland v. of the directors. I apprehend a bond-
Pratt, 11 Mees. & W. 296; Mead v. ed company would consider the
Davidson. 3 Ad. & E. 303. See §§ 'moral hazard' less in the case of a
105-107 herein. Pai*ty heavily interested in the wel-
6 Home Ins. Co. v. Belle Field, 42 fare of the bank than where such
111. App. 392, 24 Chi. Leg. News, 122. party had little or no interest there-
7 See §§ 70 et seq. herein. in." The case of Fidelity & Casualty
8 Wales v. New York Bowerv Fire Co. v. Gate City National Bank. 97
Ins. Co. 37 Minn. 106, 33 N. W. 322. Ga. 634, 33 L.R.A. 821, 54 Am. St.
9 Farmers' & Merchants State Rep. 440, 25 S. E. 392, ■ considered
Bank of Verdon v. United States in this section and held applicable in
Fidelitv & Guarantv Co. 28 S. Dak. the court's opinion, is declared in the
315, 36 L.R.A. (N.S.) 3152, 133 N. dissenting opinion to be inapplicable.
W. 247, 41 Ins. L. J. 175, Whiting, On effect upon bond conditioned
J., dissenting, said: "I cannot agree for fidelity of employee or agent of
that the question is the effect of Car- ;i change in the latter's field of opera-
2643
§ 1444 JOYCE ON iXSCKAXCE
of a bank is covered by a fidelity policy insuring againsl dis-
honesty as receiving teller or in the duties "to which the employer's
service he may lie subsequently appointed or assigned," although
mi notice of the employee's appointment as assistant cashier bad
been given to the insurer. And a bank cashier's knowledge of the
fraud or dishonesty of an assistant cashier and teller, or of his
acts involving loss to the bank, is not imputable to the latter so as
to make it its duty to give immediate notice thereof to a guaranty
insurance company under a policy requiring notice of such acts of
which (be bank has knowledge.10 And where a state officer is re-
quired by law to give a bond for tbe faithful performance of his
duties, and -aid bond is given but states no definite terms for the
duration or life of the obligation and tbe contract is silent as to
the party who may exercise (lie option to continue or terminate tbe
same, such bond, although an insurance contract, will be given a
reasonable construction in order to effectuate the parties' intention
in accordance with the terms thereof, and standing alone it will
be of force during the incumbency of said officer on his present
term and he will be liable for tbe payment of annual premiums
so long as liability to tbe state on the bond continues. But where
the application has been made a part of the bond, and its language
taken in connection with that of the bond imports that while the
bond may run indefinitely, but one year at a time, and continue,
providing the annual premium is paid, said contract should be
regarded as continuing only upon tbe condition of mutual assent,
and. if such assent is not had, said officer will not be liable for the
premiums ; and in case tbe officer refuses to assent to a continuance
of the contract, liability for future conduct of the officer does not
attach.11 An agreement attached to a policy insuring against loss
by insolvency customers, which policy embraces a period of several
months prior to tbe date of its issuance, which agreement accepts
customers, rated by a mercantile agency not recognized in the
policy, will cover the same period as tbe policy.12
§ 1444. Attachment of risk: time policy may be retroactive. — A
time policy may be retroactive as to the time of its attachment;
that, is, to commence on a certain day anterior to the date of effect-
tion or the nature of his duties, see 77 Ohio St. 90, 82 N. E. 960, 37 Ins.
notes in 28 L.R.A.(N.S.) 4G3, and L. J. 72.
30 L.K.A.fX.S.) 1152. " Shakmah v. United States Cred-
10 Fidelity & Casualty Co. v. Gate it System Co. 92 Wis. 360, 32 L.K.A.
Citv National Bank, 97 Ga. 634, 33 383, 53 Am. St. Rep. 920, 66 N. W.
L.R.A. 821, 54 Am. St. Rep. 440, 25 528.
S. E. 392.
11 Brvant v. American Bonding Co.
2044
ATTACHMENT AND DURATION OF RISK §§ 1445, 1446
ing the insurance ; as where a risk is for a term on a ship "lost or
not lost."13 So the risks may attach, although the words "lost or
not lost" are not used, such being the intent of the parties; as
where the policy was to commence January 1. L869, and to <<»n-
tinue until January 1, 1870, and the policy was effected March 1,
18G9, a previous loss was held covered, such being the intenl of the
parties,14 and if after the risk is offered and accepted, and before
the policy is formally executed, the loss is known to both parties,
the policy will be valid.15
§ 1445. Risk may attach although mistake in description of
property. — If both parties have in view the same vessel, and the
underwriter when the policy is issued knows its true name, and it
is intended to insure that particular ship, a mistake in the name
of the vessel will not prevent a recovery for its loss, there being no
fraud or concealment, and the contract being otherwise valid and'
complete; but the risk will not attach where the mistake is as to
the vessel itself, and the policy is upon another vessel than that
for which the application is made, for in such case there is not that
meeting of minds necessary to complete the contract.16
§ 1446. Attachment and duration of risk: computation of time. —
In the absence of a stipulation otherwise in the policy, the day of
the commencement and termination of the risk specified therein
doubtless begins and ends at midnight.17 Ordinarily, the con-
tract is complete from the date of its acceptance by the comjmny.
Thus, where an application was dated September 11th for one year
from September 12th, and the agent referred the risk to the com-
pany, which accepted it on the 19th, and on the 22d the agent sent
a policy to the insured bearing date of the 22d, it was held that
the company was liable for a loss occurring on the 21st, for the
contract was completed on the 19th.18 But where a bond given for
the fidelity of an employee recited that it was for a term of one
year, from July 1, 1891, to July 1, 1892, and there was an in-
dorsement on the back of the bond to the same effect, but the bond
was dated July 10th, it was held that it was properly construed as
13 Mead v. Davidson, 3 Ad. & E. 16 Hughes v. Mercantile Mutual
303, 4 L. J. K. B. N. S. 193; Hocks Ins. Co. 55 N. Y. 265, 14 Am. Rep.
v. Thornton, Holt N. P. 30. See §§ 254.
105-107 herein. 17 Och v. Homestead Bank & Life
14 Mercantile Mutual Ins. Co. of Ins. Co. 21 Pitts. L. J. 98; Isaacs v.
N. Y. v. Folsom, 18 Wall. (85 U. S.) Royal Ins. Co. 5 L. R, Ex. 296, 39
237, 21 L. ed. 827, affirming 9 Blatchf . L. J. Ex. 189.
(U. S. C. C.) 201, Fed. Cas. No. 18 Hartford Fire Ins. Co. v. King,
4903; 8 Blatchf. (U. S. C. C.) 190. 106 Ala. 519, 17 So. 707.
15 Mead v. Davidson, 3 Ad. & E.
303, 4 L. J. K. B. N. S. 193.
2645
§ 1446 JOYCE ON INSURANCE
taking effect from July 1, 1891, without regard to evidence as to
when it was accepted.19 In determining the duration of a risk
under a time policy commencing on a certain day at noon for one
year, the rights of the parties must be governed by the meridian of
the place where the contract is made3 no other place being speci-
fied.20 And it is decided thai the word "noon" used to denote the
beginning and termination of the risk under an insurance policy
will be interpreted by standard, and not by sun time, whore the
use of the former system of reckoning time has been the prevail-
ing custom in the community for a Long period.1 It is also held that
the expiration of an insurance policy "at 12 o'clock at noon" is
wood to be intended to be at 12 o'clock sun time, in the absence
of statutory enactment or anything to show that a different stand-
ard was intended.2 The question whether a policy "from" a cer-
tain day takes effect on that day. or whether that should be
excluded or included, has been considered in a prior part of this
work, and, as is there stated, the question is unsettled, although in
cases of notice of the times when assessments ar< due and payable,
and in other contracts of insurance especially those relating to the
time when the statute of limitations commences to run. the de-
cisions favor a rule of exclusion.3 The rule of exclusion of the day
cannot, however, apply where it is clearly the intention of the
parties that the contract should attach at the date of the policy, or
where the risk is to commence "on" a certain day. In the latter
case the policy attaches on the day specified, and extends to all
parts thereof.4 If insurances are issued on the same day or arc
concurrent insurances, parts of the day may be considered in de-
termining their privity of attachment,5 Again, the beginning of
a fire in a building which contains insured property, before the
policy expires, will if it continues to burn until it destroys the prop-
erty, render the insurer liable for the loss, although the property
is not actually destroyed before such expiration; but the same rule
19 Supreme Council v. Fidelity & 2 Jones v. Gorman Ins. Co. 110
Casualty Co. 63 Fed. 48, 11 C. C*. A. Iowa, 75, 46 L.K.A. 860, 81 N. W.
96, 39 Cent. L. J. 411. 50 Alb. L. J. 188.
363. 3 Sec § 1 <0 herein.
20 Walker v. Protection [ns. ('«.. 20 41 Phillips on Jns. (3d ed.) 500,
Me. 317 ; Schofield v. Jones. 2 Ins. sec. 921; American Horse Ins. Co. v.
L.J. (Eng.) 640b. Patterson, 28 Ind. 17.
1 Rochester Germain Ins. Co. v. 5 Potter v. Marine Ins. Co. 2 Ma-
Peaslee-Gaulberl Co. 120 Kv. 752, 1 son (U. S. C. C.) 475, Fed. Cas. No.
L.R.A.(N.S.) 364 (annotated on in- 11,332. See § 171 herein,
tention of parties to contract to adopt
standard instead of sun time), s7 S.
\V. 1115.
2646
ATTACHMENT AND DURATION OF RISK §§ 1447-1449
does not apply in case the property is merely imperiled at the
time of the expiration of the policy, by a lire in an adjoining
building, although it eventually reaches and destroys the property.8
§ 1447. Attachment or risk: goods shipped "between" two dates.
— A jx>licy of insurance on goods to be shipped ''between" two cer-
tain days does not attach on goods shipped on either of those days,
for both days are excluded.7
§ 1448. Attachment and termination of risk: necessity of an in-
surable interest. — We have seen that a policy on property wherein
the insured has no interest or title is void,8 and it would necessarily
follow that the risk cannot attach unless or until there be an insur-
able interest in the property.9 But if a policy is otherwise valid,
it attaches to whatever insurable interest the assured has, whether
as owner or otherwise.10 If one on whose account the policy is
made is interested in the ship, but not in the voyage, it is held that
he cannot recover damages for the loss of the voyage.11 So the
risk may be determined by the insurable interest being devested
without the assurer's consent,12 except in case of a life policy origi-
nally valid,13 and a lack of interest at the time the policy is made is
not covered by an interest acquired subsequently.14
§ 1449. Termination by change of risk: breach of conditions. —
If after the policy is effected there is a material change in the
nature of the risk, or there be no material increase of the same,
contrary to the terms of the contract, the risk may be thereby termi-
nated.15 So also in case of a breach of warranty ; 16 or of the con-
6 Rochester German Ins. Co. v. Mutual Safety Ins. Co. 3 Sand. (N.
Peaslee-Gaulbert Co. 120 Ky. 752, Y.) 54; McDonald v. Administrator
1 L.R.A.(N.S.) 364n, 87 S. W. 1115. of Black, 20 Ohio, 185 192, 55 Am.
'Atkins v. Bovlston Fire & Marine Bee 448; Davis v. Home Ins Co
Ins. Co. 5 Met/ (46 Mass.) 439. 39 24 U. C. Q. B 364; Wilson v. Royal
a r» ano Exch. Assur. Co. 2 Camp. 623 ; Knox
8 R?««o " i • v- Wood> ! CamP- 543- See also §^
• §§ 889 et seq herein gQj ^^ and c_ LXiy ( §§
9 Seamans v. Lormg, 1 Mason (U. . alienation.
S. C. C.) 127, Fed. Cas. No. 12,583. efce 1 s
See also Steinbach v. Rhinelander, 3 £ Connecticut Mutual Life Ins. Co.
Johns. Cas. (N. Y.) 269; Marsh v. v Schaefer, 94 U. S. 457, 461-63, 24
Robinson, 4 Esp. 98. L. ed. 251. See §§ 901, 903 herein.
10Riggs v. Commercial Mutual Ins. 14 Seamans v. Loring, 1 Mason (C.
Co. 125 N. Y. 7, 10 L.R.A. 6S4, 21 c.) 127, Fed. Cas. No! 12,583.
Am. St. Rep. 716, 25 N. E. 1058. " Murdock v. Chenango County
11 Pole v. Fitzgerald, 4 Brown Mutual Fire Ins. Co. 3 N. Y. 210:
Pari. C. 439, affirming Willes, 641. Allen v. Massasoit Ins. Co. 99 Mass.
12 Pike v. Merchants' Mutual Ins. 160; Dodge County Mutual Ins. Co.
Co. 26 La. Ann. 505; Fogg v. Mid- v. Rogers, 12 Wis. 3:57; Kern v.
dlesex Mutual Fire Ins. Co. 10 Cush. South "St. Louis Mutual Ins. Co. 40
(64 Mass.) :;;7; Bailev v. JEtna Ins. Mo. 19.
Co 10 Allen (92 Mass.) 286; Reed v. 16 Glendale Woolen Co. v. Pro-
2647
§ 1450
JOYCE OX INSURANCE
ditions of tlie policy3 as in case of a neglect or refusal to pay pre-
iniiini or assessments when duo as stipulated; 17 or the policy may
be terminated by a prohibited use or occupation of the property.18
Ami a policy of fire insurance which has become void by reason of
the violation of a condition therein, that the insured premises
should not be unoccupied for a period of more than ten days with-
out the consent of the insurer indorsed on the policy, is not revived
when occupation of the premises is subsequently resumed.19 And
1 1 a policy of insurance provides that if the insured building should
become vacant or unoccupied without the consent of the company
indorsed on the policy it shall become null and void, and any un-
earned premium will be returned on a surrender of the policy, a
temporary vacancy of the building, though without the knowledge
of the owner, terminates the policy, and the subsequent reoccupan-
cy of the building does not revive the policy unless the forfeiture
has been waived.20
§ 1450. Policy may terminate by its own limitation or by actual
loss or death. — The policy may terminate by expiration of the
time limitation therein, as in case of a policy for a specified term,
or where it extends to noon of a day specified or to a day named,1
although in cases of life contracts conditioned for annual payments
on certain days, the question has arisen whether the contract is one
teetion Tns. Co. 21 Conn. 19, 54 Am. mislead the other to his injury:"
Dee 309; Goicoeehea v. Louisiana United States Life Ins. Co. v. Ross,
]ns. Co. 6 Martin N. S. (La.) 51, 17 159 111. 476, 486, 42 N. E. 859, per
Am. Dee. 175: Ripley v. iEtna Ins. Wilkin, J. "Forfeitures are not fa-
Co. 30 N. Y. 136, 86 Am. Dec. 362; vored in law; they are often the
ECemp v. Coed Templars Mutual Ben- means of great oppression and injus-
efil Assoc. 19 N. Y. Supp. 435, 64 tice, and where adequate compensa-
llun (N. Y.) 637, aff'd 135 N. Y. 658, tion can be made, the law in many
IS 1 j.\i. A. 932; Fowler v. iEtna Fire cases, and equity in all cases, dis-
Ins. Co. 6 Cow. (N. Y.) 673, 16 Am. charges the forfeiture upon such corn-
Dec. 460; Lawrence v. St. Marks Fire pensation being made:" Knicker-
Ins. Co. 43 Barb. (N. Y.) 479; Ball- bocker Life Ins. Co. v. Norton, 96 U.
antyne v. Mutual Life Ins. Co. S. 234, 24 L. ed. 689, per Bradley, J.
(1891) 25 Ir. L. T. & L. J. 538. "Moore v. Phoenix Ins. Co. 64 N.
17 See §§ 1097 et seq. herein. H. 140, 10 Am. St. Rep. 384, 6 Atl.
"United States Fire & Marine 27.
Tns. Co. v. Kimberly, 34 Md. 224, 6 20 East Texas Fire Ins. Co. v.
Am. Rep. 325. See also subsequent Mempner, 87 Tex. 229, 47 Am. St.
parts of this work as to loss, warran- Rep. 90, 99, 27 S. W. 122.
lies, and breach of con. li! ions gener- On effect of temporary vacancy
ally. "Forfeitures being odious to ceasing before loss under provisions
courts are never enforced except against vacancy, see notes in 10
where they are definitely contracted L.R.A.(N.S.) 740, and 28 L.R.A.
for and nothing done by the party (N.S.) 593.
for whose benefit they are made to 1 See §§ 1440, 1441, 1446 herein.
2648
ATTACHMENT AND DURATION OF RISK §§ 1451, 1452
from year to year or an entire contract ; 2 and there are also excep-
tions, as where the last day of payment of an annual premuim falls
on Sunday,3 or there may be no provision for forfeiture in case of
nonpayment of annual premiums in life policies when due.4 The
risk may terminate by a total loss, or by a death actually occurring
within the terms and time limit of the policy.5 But if an accident
insurance company's liability becomes fixed at the time of the acci-
dent, it is not released by the fact that the insured thereafter, and
before his death, ceased to be a member by reason of nonpayment
of assessments.6
§ 1451. Where attachment or risk not postponed by condition as
to repair of vessel. — The attachment of the risk is not postponed,
as to perils specified in the policy other than those of navigation,
by a condition in the policy that prior damages be repaired, where
making the repairs a condition precedent would, owing to the
shortness of time, so far postpone the attaching of the policy as to
make the insurance substantially valueless.7
§ 1452. Attachment of risk: de facto and de jure existence of
corporation: compliance with statutory requirements as to organiza-
tion, etc. — Whether the risk attaches prior to the de facto existence
of the corporation, or prior to compliance with statutory require-
ments as to organization of the company, must depend largely upon
the grant of corporate power under the charter, as well as upon the
fact whether corporate powers may be exercised as soon as the char-
ter is accepted, or not until after the performance of certain require-
ments or conditions precedent ; or in case of organization under
general incorporation laws by domestic corporations, or the transact-
ing of business by a corporation in a foreign state, the question
depends upon whether the conditions imposed by statute as con-
ditions precedent must be fully or only substantially complied with.
In the case of domestic corporations, the question whether the
grantees of a charter are competent to carry on business as a corpo-
ration must differ from those cases wdierein the question is whether
the corporation of one state, which is already fully organized, can
carry on business in a foreign state. There is also a distinction be-
tween compliance with conditions necessary to be complied with to
join the corporations, and compliance with conditions precedent to
carrying on business after the corporation has been formed, or
2 See §§ 1101, 1102 herein. 816, 18 U. S. App. 704, 26 L.R.A.
8 See §§ 1129, 1931 herein. 112. See chapter on assessments
4§ 1098 herein. herein.
6 See §§ 2730-3174 herein, on the 7 Hyde v. Mississippi Marine &
loss. §§ 116-121 herein. Fire Ins. Co. 10 La. 543, 29 Am. Dec.
6 Burkheiser v. Mutual Accident 465.
Assoc. 10 U. S. C. C. A. 94, 61 Fed.
2649
1452 JOYCE OX INSURANCE
after it has accepted its charter.8 Thus, it is held that the risk will
ttach so as to bind the company for a loss occurring prior to
the giving of the final certificate of the condition, on the ground
thai the company has before that time no power to contract,9 But
[i is likewise decided that preliminary contracts authorized to be
entered into by the company may become valid on completion of
3 For an exhaustive consideration Sacchi, 57 N. Y. 331, 338; Cayuga
of the points and distinctions here Lake Rd. Co. v. Kyle, 64 N. Y. L85,
noted sec 1 Morawetz on Private L87; Phoenix Warehousing Co. v.
(2d ed.) sees. 26 32; 2 Mora- Badger, lb X. Y. 294, 298; Chuhh v.
wetz on Private Corp. (2d ed.) sees. Upton, 95 U. S. (Hi."., (Kb, 2-1 U ed.
66] 65. As to de facto corporations 523; While v. Ross, 1 Abo. Dim-. (N.
_■. nerally, see also the note to L9 Am. Y.) 589, 15 Abb. Prac. 66; Eaton v.
Dec. 67. As in mutual benefil socie- Aspinwall, L9 X. Y. 119; Sands v.
ties, see Independent Order Mutual Hill, 42 Barb. (N. Y.) 651; Sanger
Aid Soc. v. Paine, 122 111. 625, 14 N. v. Upton, 91 U. S. 56, 23 L. ed. 220.
E. 12. 23 111. A pp- 171 (in this ease As to "irregular and de facto corpo-
the lodge was held estopped to deny rations" in general, see 1 Thompson's
thai ii was properly organized); Commentaries on Corps. (1st ed.) e.
Poster v. Moulton, 35 Minn. 458, 29 xi. sees. 405-528. And see sec. 501
X. \V. 155. The syllabus in this case as to validity of corporate existence
reads: "Articles of incorporation of not litigated collaterally; sec. 502,
a 'mutual benelit association,' appar- limitations of this doctrine; sec. 503,
ently intended as a sort of mutual in- what is meant by existing de facto;
surance company, were duly executed sec. 504, rule under California Civil
by defendants and duly recorded with Code; sec. 505, rule applied only
the register of deeds and secretary of where the corporation might exist ;
slate. M. became a member of the sec. 507, validates irregularities in
association, paid his dues, and re- organization; sec. 508, except where
ceived a certificate of membership, the thing to be done is a condition
and sustained bodily injury, entitling precedent; sec. 518, obligor in con-
him as such member to pecuniary ben- tract with corporation estopped to
elii, to recover which this action is deny corporate existence; sec. 519, il-
brought against the original signers lustrations of the rule ; sec. 520, vari-
of the articles of association as in- ous statements of this rule; sec. 521,
dividual members. The association corporate existence proved by show-
did not become a corporation de jure, ing that the objecting party has dealt
not having complied with the statute with it as such; sec. 522, rule re-
to become an insurance corpo- strained to cases of de facto corpora-
ration de jure, and not being a 'be- tions; sec. 523, this estoppel is not
nevolent society' under Gen. Stats, raised where there is no law author-
1S7S, c. 34, tit. 3. It was held that izing the corporation; see. 527, party
althougl t a corporation de jure, claiming under legislation creating a
the association is, as between its mem- corporation estopped to deny its ex-
bers, to he regarded and treated as a istence; 1 Thompson's Commentaries
corporation de facto, and hence this on Corp. (1st ed.) pp. 3G1-G5, 308-
action against the defendants as in- 370, 377-84, 386. See also Id. (2d
dividual' persons will not lie." The ed.) sees. 225-259.
court cites Morawetz on Private 9 Manufacturers' & Merchants' Mu-
Corps. sees. 131, 132, 134-37; Buffalo tual Ins. Co. v. Gent, 13 Bradw. (111.)
& Allegany Rd. Co. v. Cary, 26 N. 308.
Y. 75; followed in Aspinwall v.
2650
ATTACHMENT AND DURATION OF RISK § 1453
its organization.10 So it is also decided that a mutual benefit society,
by accepting and retaining fees of an applicant, waives all irregu-
larity in the organization of the subordinate lodge and of the appli-
cant's admission to membership.11 Inasmuch, however, as we have
already considered the question of legislation concerning insurance
companies, as well as the question of contracts by de facto and de
jure corporations, so far as applicable to insurance companies, and
also the validity of contracts entered into by insurance companies
who have not complied with statutory requirements relative to doing
business, we will refer the reader to those sections.12 The question,
however, 'has been much discussed as to whether an intended corpo-
ration not legally formed is a partnership, and the stockholders
liable as partners, although the weight of authority and opinion
seems to be that they are not,13 If a statute provides that no corpo-
ration, association, partnership or individual shall do any business
of insurance of any kind or make any guaranty, contract, or pledge
for the payment of annuities or endowments or money to families
or representatives of any policy or certificate holder in this state, or
with any resident of the state, except according to the conditions
and restrictions of the statute, a contract of insurance made in
Pennsylvania by a corporation of that state to a resident of the
state where the statute is in force, falls within its provisions and is
prohibited thereby, and the statute is not in contravention of the
Constitution of the United States.14
§ 1453. Duration of risk: expiration of charter during life of
policy. — The policy and a premium note, therefore, are not void
because they extend beyond the time limited for the existence of
the insurance company,15 and if the company's charter expires dur-
10 § 333 herein, and eases noted. 4534. And see also as to state laws,
11 Perine v. Grand Lodge Ancient etc., 6 Thompson's Commentaries on
Order United Workmen, 48 Minn. 82, Corp. (1st ed.) sees. 7936-41, 7950,
50 N. W. 1022, 21 Ins. L. J. 213. 7956 et seq.
12 §§ 327-333 herein. For author- 13 Parsons on Partnership (4th
ities and a full consideration of the ed.) see. 57; 2 Morawetz on Private
points and distinctions first noted un- Corp. (2d ed.) see. 748. But see Hol-
der this section, see 1 Morawetz on brook v. St. Paul Fire & Marine Co.
Private Corp. (2d ed.) sees. 26-32; 25 Minn. 229.
2 Morawetz on Private Corp. (2d 14 Presbyterian Ministers' Fund v.
ed.) sees. 661-65. As to powers of Thomas, 126 Wis. 281, 110 Am. St.
insurance corporations generally, see Rep. 919, 105 N. W. 801.
5 Thompson's Commentaries on Corp. 15 Huntley v. Merrill, 32 Barb. (N.
(1st ed.) c. exxix. sees. 5849-61 and Y.) 626. This case is noted in 5
sec. 5860, what policies may and may Thompson's Commentaries on Corp.
not be issued; sec. 5861, validity of (1st ed.) sec. 5860, p. 4533, and he
policies issued by foreign insurance says: "The propriety of this conclu-
companies; 5 Thompson's Commen- sion would seem to appear from the
taries on Corp. (1st ed.) pp. 4533, consideration that in case the legis-
2651
§ 1454
JOYCE ON INSURANCE
ing the term of a policy, the policy is nevertheless valid for the term
during which the charter actually exists.16
§ 1454. Attachment and determination of risk: insolvency: dis-
solution.— It is held that the fact of insolvency of the company does
qoI of itself make the policy void.17 Hut the appointment of a re-
ceiver operates as a cancelation of the policy, and the contract of
insurance is terminated, as to liability for future Losses, by the in-
solvency and dissolution of the company, or after injunction or
sequestration. There is, in such case, a damage to the policyholder
to the value of the policy at the time of dissolution; 18 or in ease of
death under life contracts after insolvency, but before presentment
of proofs, to the full value of the policy,19 although it is held in a
fire insurance case that the rights of the policyholder arc fixed from
lature should renew the charter, or in 16 Huntley v. Beeeher, 30 Barb.
ease the incorporators should under (N. Y.) 580. Mr. Morawetz says a
an enabling act become reincorpo- corporation may exist de facto and
rated, the obligation would continue not de jure after its franchise has
in the renewed corporation:" adding expired or has been extinguished, or
in a note: "Such was the reasoning it may be dissolved de facto before
of Marvin, J." in Huntley v. Beech- its legal right has expired and before
er, 30 Barb. (N. Y.) 580. The same it is dissolved de jure, and where the
writer, in sec. 6651, p. 51254, .says: period of existence of a corporation
"If the charter or governing statute is definitely fixed by charter, the cor-
of the corporation fixes a definite poration will cease to exist de facto
period of time at which the corporate and de jure upon the expiration of
life shall expire, when that period is the time : 2 Morawetz on Private
reached the corporation is ipso facto Corp. (2d ed.) sees. 1002, 1003.
dissolved. . . . Whatever rem-
edies thereafter [after termination of
corporate existence] exist, in respect
to its assets, for the purpose of call-
ing them in and of distributing: them
17 Ewing v. Coffman, 12 Lea (80
Tenn.) 79.
18 Reliance Lumber Co. v. Brown.
4 Ind. App. 92, 30 N. E. 625; Com-
monwealth v. Massachusetts Mutual
among those entitled thereto, must be Fire Ins. Co. 119 Mass. 45, 51; Corn-
supplied either by the statute law or monwealth v. Massachusetts Mutual
by the remedial principles of equi-
ty." See also 5 Thompson's Com-
mentaries on Corp. (1st ed.) sees.
6720, 6721, pp. 5305-7; and Id. see.
6730, p. 5315, where it is said: "The
doctrine of the common law stated in
Ins. Co. 112 Mass. 116; Mayer v. At-
torney General, 23 Alb. L. J. 98;
Dean's Appeal, 98 Pa. St. 101; Mill-
er's Appeal, 35 Pa. St. 481. In the
same rule as to benefit societies, see
Stamm v. Northwestern Mutual Ben-
tlie preceding sections, that the debts efit Assoc. 65 Mich. 317, 32 N. W.
of corporations and the remedies 710. See further as to insolvency,
furnished by that law7 for the collec- Chicago Life Ins. Co. v. Needles, 113
tion of the same die and abate with U. S. 574, 28 L. ed. 1084, 5 Sup. Ct.
the corporation, has been generally 681; Rinn v. Astor Fire Ins. Co. 59
repudiated by the American courts as N. Y. 143. See §§ 1272, 1273 herein,
odious to justice." See 5 Thomp- 19 People v. Security Life Ins. Co.
son's Commentaries on Corp. (1st 78 N. Y. 114, 34 Am. Rep. 522, 7
ed.) sec. 6743, as to effect upon execu- Abb. N. C. 198.
tory contracts.
2652
ATTACHMENT AND DURATION OF RISK §§ 1455, 1456
the date of a voluntary alignment.20 If, under the general statutes
of Minnesota,1 a mutual endowment association, the policies of
which are to be paid from a fund raised by assessments, is dis-
solved, immatured policies cease to mature from that date, and
the holders of such policies can only share as members of the
association in its assets after its liabilities are discharged.2
A policy of credit insurance indemnifying a mercantile con-
cern against losses in excess of a specified amount is terminated by
an assignment for creditors made by the insurer during the term
of the policy.3
But voluntary bankruptcy proceedings do not avoid a policy of
insurance on the property, where a loss occurs after the filing of
the petition but before the appointment of a receiver and a trustee,
for until such appointment the title to the property, together with
the right of possession, remains in the bankrupt.4
The questions, however, of the rights of the policyholders in
such cases will be considered hereafter.
§ 1455. Dissolution: reserve fund. — In a case which arose in
New York assessments were to be applied to create a "reserve fund''
and a "mortuary and benefit" fund. The "mortuary and benefit"
fund was for the payment of death claims, but under the by-laws of
the association the "reserve" fund wTas to be for the exclusive use
and benefit of the members of the association, with the exception
that such fund might be used in the payment of death claims, when
such claims were in excess of the experience table of mortality. The
by-laws also provided that this reserve fund should, when it reached
a certain sum, be divided among the members, or applied to death
claims, "as may be determined by a vote of the members." Upon a
dissolution of the company it was held that the reserve fund was to
be distributed exclusively among holders of certificates in force, and
that death claimants had no right to any share therein.5
§ 1456. Termination of contract by expulsion of member of mu-
tual benefit society. — The right to future benefits of a member of a
20 Miller's Appeal, 35 Pa. St. 481. 5 People v. Life Union, 65 N. Y. St.
1Gen. Stats. 1878, c. 34, sec. 415. Rep. 867 (no opinion) ; relying on
2 Gray v. Merriinan, 56 Minn. 171, Matter of Equitable Reserve Fund
57 N. W. 463, 23 Ins. L. J. 765. Life Assoc. 131 N. Y. 354. This last
3 Smith v. National Credit Ins. Co. case distinguishes People v. Security
65 Minn. 283, 33 L.R.A. 511, 68 N. Life Ins. & Annuity Co. 78 N. Y. 114,
W. 28. 115, 34 Am. Rep. 522. See also
4 Gordon v. Mechanics & Traders' People v. Life and Reserve Assoc. 92
Ins. Co. 120 La. 441, 15 L.R.A. (N.S.) Hun (N. Y.) 592, 36 N. Y. Supp.
827n (annotated on effect of bank- 1059, 72 N. Y. St. Rep. 78, rev'd 150
ruptcy proceedings on fire insur- N. Y. 94, 45 N. E. 8.
ance), 124 Am. St. Rep. 434, 45 So.
384.
2653
1457
JOYL'K UN INSURANCE
mutual benefit society or organization doing what is substantially
an insurance business may be terminated by his Legal expulsion \'<<v
a sufficient cause, as in case of bis expulsion from a Local and sub-
ordinate order of a society conducted on the Lodge system and doing
an insurance business.6 Bui it is otherwise where the expulsion is
illegal, and no sufficient cause exists therefore,7 or if the membi r's
right to benefits Lias accrued prior to his expulsion.8
§ 1457. Termination by withdrawal of member of mutual benefit
society. — In mutual benefit societies or organizations doing an in-
surance business, if the contract provides for Liability of the mem-
ber until notice of withdrawal,9 it would necessarily follow that
the contract would be terminated by withdrawal from member-
ship.10 If the statute provides that a member of a mutual company
may withdraw by giving notice in writing and paying all his dues
6Pfeiffer v. Weisshaupt, 13 Daly 22 Mo. App. 127; Union Mutual Fire
(N. Y.) 151; Society Visitation of Ins. Co. v. Spaulding, 61 Mich. 77,
the Sick & Burial of the Dead v. 27 N. W. 860. In this case the court
Commonwealth (ex rel. Meyer) 52 said: "The charter of this company
Pa. St. L25, 9] Am. Dec. 139; Wool- provides that any member may with-
sey v. Indianapolis Odd Fellows draw, on application to the secretary,
Lodge, CI Iowa, 492, 16 N. W. 576. by surrendering his policy "and pay-
By law providing for expulsion valid ing to the secretary his proportion of
and member who violates same may all assessments to which this com-
be expelled Mazurkiewicz v. St. Adel- pany is liable at the time of with-
bertus Aid Soe. 127 Mich. 140, 86 N.
W. 546.
7 Mulrov v. Supreme Lodge
Knights of Honor, 2S Mo. App. 463.
May resort to courts for illegal ex-
pulsion: Ilorgan v. Metropolitan
Mutual Aid Assoc. 202 Mass. 524,
drawal.' The by-laws contain the
same provision in slightly different
words. 'By paying his proportion
of all assessments, if any, at the time
of his withdrawal.' There can be no
doubt on the findings that defendant
did pay in full all that was his pro-
s'. E. 890; Independent Order of portion of any existing losses of the
Sons & Daughters of Jacob of Amer- company, as well as of any a
ica v. Wilkes, 98 Miss. 179, 53 So. ment levied. Whatever losses sub-
493, see also §§ 352, 355, 372, 3502, sequently arose from failure to col-
3520 herein. lect or from any other cause were not
Question of illegality of expulsion existing losses. . . . The purpose
may be for jury, Dague v. Grand of a surrender is undoubtedly to cut
Lodge Brother! d of Railroad off all future relations between the
Trainmen, 111 Md. 95, 73 Atl. 735. parties. This subject was within the
8 Bachman v. Arbeiter-Bund, 64 contemplation of everyone when the
How. Pr. (N. Y.) 442, 12 Abb. N. C. charter was drawn and when defend-
54. ant became insured. It is a custom-
9 So provided in Baker v. New ary and reasonable arrangement.
York State Mutual Benefil Assoc. 27 There would be no object in provid-
N. Y. Week. Dig. 91, 45 Hun, 588, 9 ing for a surrender which would con-
X. Y. St. Rep. 653, at'fd 112 X. Y. tinue to he of no avail so long as any
672, 20 X E. llti. default might exist on the part of
10 See Borgraefe v. Supreme Lodge any other member."
Knights of Honor. 26 Mo. App. 218,
2654
ATTACHMENT AND DURATION OF RISK §§ 1458-1460
and his proportionate share of the losses up to the date of his with-
drawal, the levying of an assessment by the directors and the sur-
render of the premium note will not relieve a member from further
liability where the assessment is insufficient to meet all claims.11
Where the constitution of a society provides that a member in good
standing may sever his connection with the society by maki im-
proper application, the payment of all dues, and the surrender of
his certificate and all the rights and privileges of a member, it is
held that the mere fact that he ceases to pay assessments will not
of itself terminate his connection with the society, where he takes
no other of the prescribed means of accomplishing that end.12
§ 1458. Reinstatement by waiver not by new contract. — A re-
instatement of a member of a beneficiary association may be by
way of waiver "of a forfeiture, as distinguished from a new contract,
as where the original certificate provides that a defaulting member
may again renew his connection by a new contract made in the
same manner as the first, or that he may be reinstated for valid
reasons to the officers of the association ; as in case of a failure to
receive notice of an assessment, by paying arrearages, and it appears
that the member did not surrender the original certificate, nor re-
quest a new one, and the applications of the member to the associa-
tion are more consistent with the theory that a reinstatement, under
the existing certificate is sought rather than a new and independent
contract.13
§ 1459. Renewal of policy: amount must be fixed. — In case of
an oral agreement for renewal, the agreement must fix the amount
of the contract. Thus if in an oral agreement between the insurer's
and applicant's agent as to the renewal of a policy of fire insurance
the amount of the policy to be taken is not fixed, the contract is
not complete.14
§ 1460. Presumption that renewal policy is like original. — If an
agreement to renew a policy is made and no departure from the
terms of the original contract is suggested or agreed upon, it will
be presumed that the policy to be issued is to be upon the same terms
and conditions as the existing policy.15 So if one contract for a
renewal policy, and is assured by the agent that it will be like the
original one, and the policy is afterward delivered, he has a right
11 Seamans v. Millers' Mutual Ins. 13 Clarke v. Scbwarzenberg, 164
Co. 90 Wis. 490, 63 N. W. 1059, un- Mass. 347, 41 N. E. 655.
der Sanb. & B. Annot. Stats. Wis. 14 Sater v. Henry County Farmers'
sec. 1941f. Mutual Fire Ins. Co. 92 Iowa, 579,
12 In re Canadian Relief Soc. (Pat- 61 N. W. 209, 24 Ins. L. J. 220.
terson's Case) (Ont. H. C. J. Cb. 15 Commercial Fire Ins. Co. v. Mor-
Div.) 15 Can. L. T. 216. ris, 105 Ala. 498, 18 So. 34.
2655
§§ L461 L463 JOYCE ON INSURANCE
to presume thai all its terms and conditions are essentially the same
as th0Se in the firsl contract, and lie is not bound by a warranty
clan-.' in the renewal contract which is not in the first policy.16
§ 1461. Misrepresentations and warranties in application for
revival. — A policy may be avoided for representations in an appli-
cation for revival of a lapsed policy, where such representations are
false, and are incorporated into the renewed policy as warranties
conditioned that they are true, otherwise that the policy shall tie
void." If a suspended member of a mutual benefit society is rein-
stated by the company, with full knowledge on its part of the
falsity of the answers in the application, it waives the benefit of a
condition of forfeiture in the application.18
§ 1462. Immaterial oral representation not inducing risk: re-
newal valid. — An oral statement, not referred to in the policy,
which is a mere representation and immaterial, and which does
not induce the risk, does not invalidate a renewal. This was so
held where a policy was issued on the life of a husband for the
benefit of his wife, and a renewal was procured from year to
year by payment of an annual premium. The last renewal was
obtained during the absence of the husband, the wife telling the
agent of the company, in response to inquiries about her husband,
that she had received a letter from him, and that he was in his
usual health.19
§ 1463. Where renewal is on same terms and conditions as old
contract. — It is the office of a renewal receipt in life insurance to
avoid forfeiture for nonpayment of premium, as required by the
terms of the policy,20 and a renewal receipt is not an independent
contract extending the insurance, but operates only as a continuance
of the old one.1 So a renewal of a policy of fire insurance is, in
effect, a new contract, and, unless otherwise expressed, is on the same
16Bur?on v. Fire Assoc. 136 Pa. Robertson, 59 111. 123, 14 Am. Rep.
St. 267, 20 Am. St. Rep. 919, 20 Atl. 8.
401. 20 Northwestern Mutual Life Ins.
On terms and conditions of usual Co. v. Amerman, 119 111. 329, 59 Am.
written policy as affecting a claim un- Rep. 799, 10 X. E. 225.
der an oral contract to renw the pol- l Northwestern Mutual Life Ins.
icy, see note in 48 L.R.A.(N.S.) 321, Co. v. Amerman, 119 111. 329, 59 Am.
324, Rep. 799, 10 N. E. 22.")-, Mutual Ben-
17 See Metropolitan Life Ins. Co. efit Life Ins. Co. v. Robertson, 59 III.
v McTague, 49 N. J. L. 587, 17 Cent. 123, 14 Am. KYj>. H; Peoria Marine &
L. J. 402, 60 Am. Rep. 661, 9 Atl. Fire Ins. Co. v. Hervey, 34 111. 47;
7GG. Mutual Ins. Co. v. Deale, 18 Md. 26,
"Hoffman v. Supreme Council 79 Am. Dec. 673; Garner v. Germania
American Legion of Honor, 35 Fed. Life Ins. Co. 110 N. Y. 266, 1 L.R.A.
252. 256, 18 N. E. 130. See Franklin Ins.
" » Mutual Benefit Life Ins. Co. v. Co. v. Massey, 33 Pa. St. 221.
2656
ATTACHMENT AND DURATION OF RISK §1464
terms and conditions as the original policy.2 But although it
amounts to a new contract, it in no way changes the terms and con-
ditions of the original policy, except to continue it in force, and
the provisions of the policy as originally issued control the rights
of the parties, except as the same are affected by any waiver thai
may have arisen in the meantime.3 But, as is stated in a Maryland
case,4 if the original policy contains no provision fur extension from
year to year, or for its continuance, the original contract is not
continued by the payment of a premium, but there is a now con-
tract.5 The rule is not changed because the premium for the new
term is paid by one to whom the policy and the interest assured has
been assigned during the life of the original policy, and to whom
the renewal receipt is given, for parties to the original contract are
not thereby changed, nor is there any substitution of parties, and
the renewal is only valid and binding, as to rights and obligations,
by reference to the original contract.6
§ 1464. Renewal: cases. — A notice that the insured premises had
become vacant, required and given under the original policy,
should be given again under the renewed policy, the same state of
vacancy continuing.7 So if nothing is said as to the time the renew-
al policy is to run, and the same premium is paid, the renewal will
be for the same period of time as that in the original policy, as
where the term named therein was one year.8 But where a policy
having expired June 10, 1878, a renewal, dated June 19th, by its
terms continued the policy in force for a year from June 10th, a
loss from a fire occurring June 16. 1879. cannot be deemed within
the policy.9 In another case there was an insurance of two thousand
live hundred dollars, eighteen hundred dollars on a mill and seven
hundred dollars on the machinery, which was renewed for several
years, the renewals expressing the same distribution of the risk,
and was then renewed by a receipt, expressing merely that the
policy was continued in force for another year, and it was held that
the risk was general, of two thousand five hundred dollars, on the
2 Hartford Fire Ins. Co. v. Walsh, 6 New England Fire & Marine Ins.
54 111. 164, 5 Am. Rep. 115; Brady Co. v. Wetmore, 32 111. 221. See
v. Northwestern Ins. Co. 11 Mich. Firemen's Ins. Co. v. Floss, 67 Md.
425; Lockwood v. Middlesex Mutual 403, 1 Am. St. Eep. 398, 10 Atl. 139,
Assur. Co. 47 Conn. 553. 24 Cent. L. J. 558.
3 Aurora Fire & Marine Ins. Co. v. 7 Hartford Fire Ins. Co. v. Walsh,
Kranich, 36 Mich. 289. 54 111. 164, 5 Am. Rep. 115.
4 Firemen's Ins. Co. v. Floss, 67 8 Scott v. Home Ins. Co. 53 Wis.
Md. 403, 1 Am. St. Rep. 39S, 10 Atl. 238. 110 N. W. 387.
139, 24 Cent. L. J. 558. 9 Fuchs v. Germantown Farmers'
5 See Peoria Marine & Fire Ins. Co. Mutual Ins. Co. 60 Wis. 286, 18 N.
v. Hervev, 34 111. 47. W. 84U.
Joyce Ins. Vol. III.— 167. 2657
§ 14G4 ON [NSURANCE
whole premises.10 A renewal or renewals of Hie policy will be
deemed to carry the same waiver of the condition as the original
policy." [f the assured is informed and understands through the
insurer's agent thai the renewal is to be in exactly the same terms
as the old policy, and there are warranties and conditions inserted
therein which were not in the original, the assured will not be
bound : 12 and if warranties are inserted in the renewal to which the
insured's attention has not been called, and of which he has no
knowledge, and which differ from the original policy, this affords
a ground for reformation of the policy as to such stipulations.18
It is presumed that the insurer under a renewal intends to effect a
valid contract.14 A parol contract to renew a policy made before
the expiration of the old policy is valid, though nothing is said or
done about the premium, if the parties have dealt together for
years and know the rate of premium and the insurance agent has
habitually given credit for the premium, and has collected it on
demand.15 "An extension or renewal of a policy of insurance under
an option of the holder is not effected on the insurers refusal to
renew without payment or tender of the premium.16 And where,
prior to the expiration of a policy of insurance the company in-
forms the insured that his insurance will be renewed if he does not
give notice to the contrary, and not receiving notice, the company
issues a policy under its custom and previous dealing with him to
allow thirty days after the policy issues and takes effect in which to
pay the premium, and the insured, eight days after the issuance
of the policy, requests of the company, and is granted, thirty days'
additional time in which to pay the premium, a contract of insur-
ance exists between the company and the insured at the time of a
loss occurring two weeks after such request, the company having
received the check of the insured for the premium two days sub-
sequently to the loss, and having held it for two weeks without ob-
jection.17
MDriggs v. Albany Ins. Co. 10 Ky. 356, 92 Am. St. Rep. 362, 54 S.
Barb. (N. Y.) 440. W. 13.
UKruger v. "Western Tire & Ma- On validity of oral agreement to
rine Ins°Co. 72 Cal. 91, 1 Am. St. renew or extend policy, see note in
Rep. 42, 13 Pac. 156, 1 Rail. & Corp. 22 L.R.A. 772; on validity of agree-
L j 242. ment to renew policy in future, see
12Bmsnn v. Fire Assoc. 136 Pa. note in L.R.A.1916C, 783.
St. 267, 20 Am. St. Rep. 919, 20 All. 1Q Boston & A. R. Co. v. Mercantile
401, 26 Week. Not. Cas. 408. Trust & Deposit Co. (American Cas-
13T1i.mu.ism,, v. Capitol Ins. Co. 02 ualty Ins. Co's Case) 82 Md. 535, 38
Town, 72, <il X. W. 843. L.R.A. 97, 34 All. , ,K.
"Ludwig v. Jersey City Tns. Co. " Long v. North British & Mercan-
48 N Y. 379, 8 Am. Rep. 556. tile Ins. Co. 137 Pa. St. 335, 21 Am.
"Baldwin v. Phoenix Ins. Co. 107 St. Rep. 879, 20 All. 1014.
265S
ATTACHMENT AND DURATION OF RISK §§ 1465, 1466
§ 1465. New policy may be only a renewal. — The fact that a
new policy is issued does not of itself make it a new contract, but it
may be merely a renewal; as in the case where a creditor assignee
for security of a policy on a husband's life in favor of his wife, be-
lieving the assignment void, permits its forfeiture, and obtains upon
the original application, and without a new medical examination, a
new policy to him as creditor, similar in all respects to the old on< .
except as to the time of payment of premiums, such policy will be
deemed a renewal of the original one, and subject to the same trust
in favor of the wife.18 But it is held in the Federal court that the
courts will not regard a second policy as the mere continuation of
the first, even though by collusion with the company the original
policy is suffered to lapse, and another policy is issued naming a
new beneficiary.19
§ 1466. Renewal or revival may be conditional. — A renewal or
revival of a policy may be conditional ; as where renewal is made up-
on condition that the original policy continues in force, and that
there has been no change in risk since first insured "not noticed on
the books of this company, otherwise this renewal is not binding."
In a case of this character under a fire risk issued to the owner of the
building covered by the policy it appeared that a portion of the
property was sold to one who became insured's partner, and a renew-
al receipt was issued reciting the receipt of the premium from the
partnership, and it was held that the insurers intended to continue
the insurance on the property, and on the terms and conditions
expressed in the policy, but to the parties who paid the premium.20
In determining the fact of conditional renewal, the jury may con-
sider all the surrounding circumstances and everything tending to
throw light upon the real intention of the parties.1 If the insurer
receives an overdue premium, but informs assured that the rules
require a certificate of good health, and requests him to send his
18 Barry v. Brune, 71 N. Y. 261, 20Lancey v. Phoenix Fire Ins. Co.
affg 8 Hun (N. Y.) 395. In this 56 Me. 562. But see as to new part-
case the assignment was made under ner, Vicary v. .Moore, 2 Watts (Pa.)
the husband's coercion and influence. 451, 27 Am. Dec. 323; Firemen's Ins.
19 Union Mutual Life Ins. Co. v. Co. v. Floss, 67 Md. 403, 1 Am. St.
Stevens, 19 Fed. 671. But see Tim- Rep. 398, 10 Atl. 139, 24 Cent. L. J.
ayenis v. Union Mutual Life Ins. Co. 558; Lehigh Coal Co. v. Harlan, 2*i
21 Fed. 223, 22 Blatchf. (U. S. C. C.) Pa. St. 429.
405; Connecticut Mutual Life Ins. On effect upon renewal of fire m-
Co. v. Westervelt, 52 Conn. 586; Cha- surance policy of circumstance inval-
pin v. Fellowes, 36 Conn. 132, 4 Am. idating original policy, but which in
Rep. 99 ; Whitridge v. Barry, 42 Md. the meantime has ceased to exist, see
140 ; Whitehead v. New York Life note in 1 B. R. C. 610.
Ins. Co. 102 N. Y. 143, 55 Am. Rep. x Rockwell v. Mutual Life Ins. Co.
787, 6 N. E. 267. 27 Wis. 372.
2659
§ 1467 JOYCE OX INSURANCE
own certificate, if is held that this warrants a jury in finding thai
assured was justified in believing that there had been an absolute,
:lll,l ,„,, a conditional, renewal, even though a certificate of good
health was requested.2 It* the revival of a policy l>.\ the indorse-
ment of consent is at the option of assured, the policy is not re-
vived by an offer to indorse consent upon conditions not complied
with by assured.8
§ 1467. Agreement or waiver necessary to renewal or revival
after forfeiture. — If the policy has become forfeited or void for any
cause, il cannot be renewed or revived except there is a waiver or
estoppel arising from the acts or statements of the company or its
authorized agent, or unless there is an express agreement to revive.
Although it is stipulated that there can be no revival of a forfeited
policy by the issue of a renewal receipt, or in any other way except
by special contract, an authorized agenl of the insurer can waive
this as well as any other condition, and the insurer, after the issue
of a renewal receipt and the receipt of the premium, is estopped to
deny the contract.4 So the parties may agree to revive a lapsed con-
tract upon new terms and conditions, or upon its original terms
and conditions, with such additional terms as they may choose to
incorporate. Thus, if a life policy is forfeited by the nonpayment
of premium when due, and an application is made representing
certain facts and warranting their truth and the truth of those in
the original application, upon the insurer's assent thereto, the pre-
existing contract becomes reinstated upon all its original terms, and
there is incorporated into it the additional terms expressed in the
revival application, and the representations contained in said ap-
plication become part of the completed contract, and their truth is
warranted.5 If an agent authorized to make insurance contracts
^Rockwell v. Mutual Life Ins. Co. of policy is fully discussed. See §§
27 Wis. 372. 1116-1121, 1276 et seq. herein. See
" 3So held in Supple v. [owa State Ohio Fanners Ins. Co. v. Burget, 05
Ins. Co. 58 [owa, 29, 11 X. W. 710 Ohio St. 119, 55 L.R.A. 825, 61 N. E.
(one judge dissenting). 712, 87 Am. St. Rep. 596.
4Shafer v. Phoenix Ins. Co. 53 Jf an insurer claims a forfeiture
Wis. 361, 10 N. W. 381. As to of an insurance policy by reason of a
revival by payment of premiums, see In-each of the contract, the policy
Lantz v. Vermont File Ins. Co. 139 censes to exist, and cannot be ream-
Pa. St. 546, to L.R.A. 577, 21 All. mated except by the mutual consent
80, 2:; Am. Si. Rep. 202. That ex- of the contracting parties. Home
press agreement is accessary, see Fire Ins. Co. v. Kuhlman, 58 Neb.
Dielil v. Adams Count v Mutual Ins. 488, 76 Am. St. Rep. Ill, 78 X. W.
Co. 58 I'a. SI. 11::. !!H Am. Dec 302. 930.
See chapter on agency, where the B Metropolitan Life Ins. Co. v. Mc-
question of the right of an agenl to Tague, 49 X. J. L 587, 60 Am. Rep.
waive contrary to express conditions 661, 9 Atl. 700, 17 Cent. L. J. 402.
2000
ATTACHMENT AND DURATION OF RISK §§ 1468 I 170
represents to insured that his policy is renewed, and accepts and
appropriates money paid over under such belief, the company is
estopped to deny the renewal or extension.6
§ 1468. Agreement to renew not within statute of frauds. — An
agreement that a policy shall be renewed by certificates of renewal
from year to year, either party being at liberty to give notice at any
time that the arrangement shall not be continued, is not within the
statute of frauds.7
§ 1469. Renewal need not be under seal. — A renewal of a policy
of insurance need not be under seal, and this is so held although the
policy is so;8 and an action of covenant will lie on a sealed policy
of insurance, renewed by a parol receipt, where the policy provides
for the continuance of itself by its own terms, on the payment of
the premium and taking a receipt therefor.9
§ 1470. Agent's agreement to renew: delivering renewal re-
ceipt.— The insurer may be bound by an agreement of renewal
made with its authorized agent, even though the renewal receipt or
policy is not delivered to the insured, but to the agent, and is re-
tained by him, it appearing so to have been done at the insured's
request, Thus, where before the date of expiration of certain poli-
cies plaintiffs informed their agents that they wished these policies
renewed, and they in turn notified agents of the insurers to hold
said policies as they would be renewed, and the agents of the in-
surers agreed to this proposition, and also agreed after the policies
had expired to hold them until the plaintiffs had been seen regard-
ing the form, and, though the plaintiffs and their agents lived near
each other, nothing was done for several days, it was held that the
plaintiffs might recover.10 So in a Federal case the agent of the
company, upon request of assured, filled out and countersigned a
renewal receipt, the prior renewal not having expired, and having,
at assured's request, retained the same, it was held that there was a
sufficient delivery of the renewal receipt to continue the policy in
force.11
6 International Trust Co. v. Nor- Assur. Co. 47 Conn. 553; Ludwig v.
wick Fire Ins. Soc. 71 Fed. 81, 17 C. Jersey City Ins. Co. 48 N. Y. 379, 8
C. A. G08, 163 U. S. 691, 41 L. ed. Am. Rep. 556.
316, 16 Sap. Ct. 1202. See chapters 9 Herron v. Peoria Marine & Fire
on agency, herein. Ins. Co. 28 111. 235, 81 Am. Dec 272.
* Commercial Fire Ins. Co. v. Mor- 10 Baker v. Westchester Fire [ns.
ris, 105 Ala. 498, 18 So. 34; Trus- Co. 162 Mass. 358, 38 N. E. 1124.
tees of First Baptist Church v. n Tennant v. Travelers' Ins. Co. 31
Brooklyn Fire Ins. Co. 19 N. Y. 305. Fed. 322.
On validity of oral agreement to On validity of agreement of agent
renew or extend policy, see note in to renew policy in future, see note
22 L.R.A. 772. in L.R.A.1916C, 783.
8 Lockwood v. Middlesex Mutual
•J661
§ 1470a JOYCE on INSURANCE
§ 1470a. Renewal: fidelity guaranty insurance: credit guaranty
insurance. — So in case of fidelity guaranty insurance the original
bond and renewal certificates will constitute but one contract where
if is stipulated for liability for one year or any renewal of said term
and for r< imbursement for loss by reason of the employee's fraud
during said original and renewal term or within six months there-
in, t. so that the insurer was liable for any loss occurring during
said contract term which was discovered within six months after the
expiration of the lasl renewal certificate which continued the bond
for one year.12 When a bond guarantying the fidelity of an em-
ployee is renewed, there is -till only one contract and one penalty,
the renewal certificate being a bond only in extending the indem-
nity provided by the original bond to a new period of time.13 And
if a bonding company issues a fidelity guaranty bond to a lodge for
■ nc year and continues to issue such bond- as they mature the con-
tract is a continuing one.14 In a Federal case the suil involved two
credit insurance policies or bonds indemnifying insured against loss
of account- due them from customers for goods shipped during the
.car commencing and ending 100:;, the second bond furnishing
such indemnity on shipments between October 1, 1903 and Septem-
ber 30, 1904. The first bond provided that "If this bond is re-
newed on or before the date of the termination thereof by the is-
suance of a new bond, the losses occurring during the term of the
renewal on goods shipped dining the term of this bond shall be in-
dialed in the calculation of losses under said renewal, the same as
if the goods had been shipped during the term of such renewal
bond." The second bond was issued before the date of the termi-
nation of the first bond and covered losses on shipments between
the date- last above stated and provided that: "In consideration
.>f issuing the attached bond, it is agreed and understood that losses
occurring on goods shipped on and after ( October 1 , 1903, shall not
be included under "the prior bond' but under the attached bond,
subject to the terms and conditions thereof." It was held that losses
on shipments made prior to October 1, 1003, during the term of
the first bond were covered by the second bond as a renewal of the
first. The court also applied the rule of strict construction against
insurer that is, againsl credit indemnity bonds.15
12rniic<l States Fidelity & Guar- 13 First National Bank v. United
anty Co. \. Citizen's National Bk. 147 States Fidelity & Guaranty Co. 110
Kv. 285, 1 1.; s. W. 997, 1 17 Kv. 781, Tenn. 10, 100 Am. St. Rep. 765, 75
810, II.") s. \v. 750, L112. Examine S. W. 1076.
Fidelity & Deposit Co. of Md. v. "United States Fidelity & Guar-
Champion ice Manufacturings Cold anty Co. v. Shepherds Heme Lodge,
Storage Co. 133 Ky. 74, 117 S. W. No. 2, 163 Kv. 706, 174 S. W. 487.
393. "Philadelphia Casualty Co. v.
2662
ATTACHMENT AXD DURATION OF RISK §§ 1471, 1472
§ 1471. Right to reinstatement may pass to beneficiary. — The
right of insured to be reinstated does not die with him, but passes
to his beneficiary.16 But if a member neglects during his lifetime
to conform to the terms of the certificate and requirements of the
order relating to reinstatement, his restoration to membership can-
not be effected after his death, by payment of the sum due from
him to the company at the time of his death, though the period
within which, if alive, he could have secured his reinstatement has
not yet expired.17
§ 1472. Reinstatement of member. — The right of a member to
be reinstated depends largely upon the laws of the society, or rather
upon his contract made with it, and it may be stated generally that
courts will compel a reinstatement where the member fully com-
plies with all the requirements of the contract or laws of the society ;
for the society may not, for arbitrary reasons, refuse to permit
the assured or his beneficiary to receive the benefits of a contract,
which has been fully complied with in all its legal requirements
as to reinstatement. But, on the other side, the assured is, as
a rule, obligated to comply with the legal requirements of his
contract with the society. These general principles are fully sus-
tained by the authorities.18 So the mere record of a sentence
of suspension, without any proceedings whatever to found it
upon, and which is not according to the laws of the order, is
not conclusive as to membership and standing, and an applica-
tion for reinstatement is not evidence of suspension.19 If the
by-laws of a mutual association provide for reinstatement on pre-
senting sufficient excuse, the member having been dropped for
nonpayment of dues, the association may be compelled to pay the
insurance to the beneficiary, if the member has presented a sufficient
Fechheimer, 220 Fed. 401, 136 C. C. 460, aff'd 49 Kan. 677, 31 Pac. 733.
A. 25, citing and considering Ameri- As to reinstatement by payment of
can Credit Indemnity Co. v. Athens premium after death, see note to 14
Woolen ^Iills, 92 Fed. 581, 34 C. C. L.R.A. 283.
A. 161 ; American Credit Indemnity 18 As to latter proposition, see Mc-
Co. v. Champion Coated Paper Co. Donald v. Supreme Council of the
103 Fed. 609, 43 C. C. A. 340. Order of Chosen Friends, 78 Cal. 49,
16 So held in Dennis v. Massachu- 20 Pac. 41 ; Dickinson v. Grand
setts Benefit Assoc. 120 N. Y. 496, 17 Lodge, 159 Pa. St. 258, 28 Atl. 293,
Am. St. Rep. 660, 9 L.R.A. 189, 24 23 Ins. L. J. 863, See Modern "\\ ood-
N. E. 843. See Van Houten v. Pine, men of America v. Jameson, 4S Kan.
38 N. J. Eq. 72 ; Connellv v. Masonic 718, 30 Pac. 460, aff'd 49 Kan. 677,
Mutual Benefit Assoc. 58 Conn. 552, 31 Pac. 733 ; Lyons v. Supreme As-
18 Am. St. Rep. 296, 9 L.R.A. 428, semblv Roval Society of Good Fel-
20 Atl. 671. lows, 153 Mass. 83, 26 N. E. 236.
"Modern Woodmen of America 19 Lazensky v. Supreme Lodge
v. Jameson, 48 Kan. 718, 30 Pac. Knights of Honor, 31 Fed. 592.
2663
§ 1472 .l<>\ CE ON [NS1 RANCE
ise, where he was no1 reinstated simply because of his pre-
carious health.20 The mere payment of assessments to the financial
secretary or supreme treasurer does no1 operate to reinstate a mem
ber where those officers have no authority to waive the Laws of the
ty, which require a new medical certificate and a majority vote.1
Bui an officer may reinstate if he has authority under the laws of
the order, and the suspension is illegal.2 If a member is expi
on a charge for which only a fine is provided, and is reinsl
merely to ho again expelled on another charge, which is in reality
the same offense as the first, he will be restored to the rights and
privileges of membership.8 The question whether delay in applying
for reinstatement is justifiable is for the jury where the society's
pasl dealings with the members have been such as to induce a be-
lief that such delay was immaterial.4 I f a benefil certificate provides
that the member must be in good standing at the time of his death,
and several months prior thereto he is suspended and receives noti-
fication of the proceedings againsl him, but does not appear to de-
fend against the charge, nor avail himself of any of the remedies
provided by the rules of the society, nor attempt by means of leg il
proceedings to obtain reinstatement, there can be no recovery.5 [fa
member has been expelled from a society and has been subsequently
reinstated by a decree of court, he should present the decree in a
regular manner, and demand his reinstatement of the officers. lie
cannot assert his status by -imply appearing at the next meeting
after the decree, and insisting upon his rights without informing
the officers in a regular manner of the action of the court.6
The mere conferring upon an executive committee under a by-
law the power to reinstate upon conditions, does not obligate it to
do so.7 And an order of a fraternal benefil society permitting rein-
statement without a health certificate confers no vested right and
may be revoked.8 It is also optional with insurer to approve or reject
20 So held in Van Houten v. Pine, On judicial control of discretion as
38 X. -I. Eq, 72. to reinstatement of insured, see note
1 Lynn v. Supreme Assembly Royal in 40 L.I.'. A. ( X.S.) 148.
Society of Good Fellows, L53 Mass. 5 Supreme Lodge Knights of
83, 26 X. E. 236. Pythias v. Wilson, 14 U. S. C. C.
8 Connolly v. Masonic Mutual Ben- 264, 66 Fed. 785.
efil Assoc. 58 Conn. 552, 9 L.R.A. 428, 6 So held in McLafferty v. Swee-
ts Am. Si. Rep. 296, 20 Ail. 671. ney, 19 Wkly. N. Cas. 396, 9 Ail.
3 Otto v. Journeymen Tailors' 21 i .
Protective & Benevolent Union, 75 7Harrington v. Keystone Mutual
Cal. 308, 7 Am. St. Rep. L56, 17 Benefit Assoc. 190 Pa. 77, 42 Atl. 523.
Pac. 217. 8Edgerly v. Ladies of the .Modem
* Jackson v. Northwestern Mutual Maccabees, L85 Mich. lis. i:,l X. YV.
Relief Assoc. 78 Wis. 163, 17 X. W. 692.
7.'i:5.
26C4
ATTACHMENT AND DURATION OF RISK § 14.2
a certificate of health in an application for reinstatement and in-
sured cannot complain of delay in acting upon and rejecting the
same.9 And a reinstatement may so far operate as a new member-
ship as to bring the member within a provision limiting the amount
of recovery in case of death within a specified time from certain
diseases.10
Again, reinstatement is consummated when the minds of tin-
parties meet by the acceptance of an offer to reinstate; n as by the
payment of all arrearages; 12 by a course of dealing continued for
several months in retaining overdue payments and continuing to
levy assessments; 13 by accepting and retaining overdue assessments
even though a by-law provides that acceptance thereof when a sus-
pended member is not in good health shall not operate as a rein-
statement; 14 and a failure to apply for reinstatement after wrong-
ful suspension does not operate as an abandonment of the con-
tract;15 and under the by-laws only the payment of assessments
may be necessary for reinstatement,16 And when in compliance
with the association's requirements the member sends a written
statement of an official form as to his health and mails the same
properly stamped and addressed, it is sufficient, though it is not
received until after his death.17 Again, a member's consent to re-
instatement of a policy and a retention of assessments will take
place upon his signing a certificate of reinstatement with knowledge
that his policy had lapsed.18 And a member in good standing in a
subordinate court cannot be deprived of his right to reinstatement
by suspension of said court, even though he, by reason of physical
disability before such suspension, could not furnish a certificate of
good health.19 But reinstatement by payment of dues within a
9 Fidelity Mutual Life Ins. Co. v. 15 Meisenbach v. Supreme Tent
Price 117" Kv. 25, 25 Kv. L. Rep. Knights of the Maccabees of the
1148, 77 S. W. 384. " World, 140 Mo. App. 76, 119 S. W.
10 O'Brien v. Brotherhood of the 514.
Union, 76 Conn. 52, 55 Atl. 57*. 16 Johnson v. Grand Lodge Ancient
Examine Zahm v. Royal Fraternal Order United Workmen, 79 N. J.
Union of St. Louis, 154 Mo. App. 70, Law 227, 75 Atl. 801, affd 81 N. J.
133 S. W. 374. Law 511, 79 Atl. 333. See Independ-
11 Pennsylvania Lumberman's Mu- ent Order of Foresters v. Hag-
tual Fire Ins. Co. v. Meyer, 126 Fed. gerty, 86 111. App. 31.
352, 61 C. C. A. 254. 17 Sovereign Camp Woodmen of
™ Supreme Council American Le- the World v. Grandon, 64 Neb. 30.
gion of Honor v. Gootee, 89 Fed. 941, 89 N. W. 448.
32 C. C. A. 436. 18 Teeter v. United Life Assoc. 159
~13 Modern Brotherhood of America N. Y. 411, 54 N. E. 72.
Lodge v. Bailev, — Okla. — , L.R.A. 19 Brown v. Supreme Court, Jnde-
1916A, 551, 150 Pac. 673. pendent Order of Foresters. 72 X.
14 Schuster v. Knights & Ladies of Y. Supp. 806, 66 App. Div. 259, afFd
Security, 60 Wash. 42, 110 Pac. 680. 176 N. Y. 132, 68 N. E. 145.
2665
§ 1472a JOYCE OX INSURANCE
certain time is not a matter of right, even though a by-law provides
thai a medical examiner's certificate is not required where payment
is made within such time.20
The requirement of a medical examination may be waived.1 And
whether the requirement of a health certificate has been waived may
he a question for the jury.2
§ 1472a. When no reinstatement effected. — There is no reinstate-
ment where overdue payments are accepted upon a condition that
a health certificate be furnished which is not complied with;3 nor
is it sufficient of itself to tender the required amount of dues with
a health certificate unless full compliance with the laws of the
society is shown;4 and where a health certificate is mailed, but the
next day the member bee es ill and a money order is sent but is
not received until after assur< d's death, there is no reinstatement; 5
nor is there a reinstatement, where, without knowledge by assurer
of assured's illness, it accepts overdue payments, even though as-
sured's agent in making said payments had no knowledge of said
illness;6 and a tender while the member is under suspension but
after his death is too late;7 nor does any right to reinstatement
exist while insured is mortally ill and acceptance of arrearages
without knowledge of such fact does not constitute a waiver; 8 and
where policy has elapsed and payment is accepted without knowl-
edge of an accident during delinquency, there is no liability there-
for;9 and acceptance of overdue payments made by the beneficiary
without insured's knowledge do not operate as a reinstatement; 10
20 Brotherhood of Railwav Train- Cross v. Hoosier, 160 Ala. 334, 49
men v. Dee, 101 Texas, 597, 111 S. So. 354.
W. 396. 'Grand Lodge Ancient Order
1 Baltimore Life Ins. Co. v. How- United Workmen v. Taylor, 44 Colo,
ard, 95 Md. 244, 52 Atl. 397. Sec 373, 99 Pac. 570; Brown v. Knights
Mosiman v. Occidental Mutual Bene- of the Protected Ark, 43 Colo. 289,
ii Assoc. 82 Kan. 670, 10!) Pac. 413. 96 Pac. 450; Dillon v. National Coun-
2 Cauveren v. Ancient Order of eil Knights & Ladies of Security, 244
Pyramids, 98 Mo. App. 133, 72 S. III. 202, 91 N. E. 417.
W. 141. 8 Koehler v. Modern Brotherhood
"Nielsen v. Provident Savings' of America, 160 Mich. 180, 125 N. W.
Assurance Soc. 15 Cal. 111. 66 49. See Miles v. Mutual Reserve
Pac. 663, 31 Ins. L. J. 3; Rice v. Fund Life Assoc. 108 Wis. 421, 84
Grand Lodge Ancient Order United N. W. 159.
Workmen, 103 Iowa, 643, 72 N. W. 9 Crosby v. Vermont Accident Ins.
770. Co. 84 Vt. 510, 80 Atl. 817, 40 Ins.
4 Brun v. Supreme Council Ameri- L. J. 2036.
can Legion of Honor, 15 Colo. App. 10 Proctor v. United Order of the
538, 63 Pac. 796. Golden Star, Inc. 203 Mass. 587, 25
5 Warner v. Modern Woodmen of L.RA.(N.S.) 370, 89 X. E. 1042. See
America, 119 Mo. App. 222, 96 S. Gilford v. Workmen's Benefit Assoc.
W. 222. 105 Me. 17, 72 Atl. 680.
6 United Order of the Golden
2666
ATTACHMENT AND DURATION OF RISK § 1473
and acceptance of dues by the collector of the local lodge, does not
constitute a waiver of suspension or reinstate the applicant, where
his application is disapproved by the secretary of the society who
directs the collector to return the dues ; u nor is there a reinstate-
ment where the rejection of an application therefor is acquiesced
in for years by assured.12 So where there is no agreement to that
effect a partial payment of arrearages does not operate to reinstate
the delinquent.13 Again, an action by assured for the recovery back
of premiums waives his right to reinstatement to which he might
be entitled by paying overdue premiums and furnishing a health
certificate.14 And enforcement of collection of a note after default
in payment does not operate to revive the policy when it is express-
ly stipulated that upon such default it shall be payable without
reviving the contract.15
§ 1473. Suspension of risk. — The policy may provide for sus-
pension of the risk during the existence of a certain contingency, as
in case of an exception of liability for damage from a certain peril,
and that the risk shall be suspended while such peril continues.16
So the contract may exclude certain ports and places from the pro-
tection of a policy within a specified period, which may operate not
as an exclusion of voyages, but only as a suspension of risk during
such time as the vessel may be at the excepted ports and places.17
So a fire risk may be stipulated to be suspended during the existence
of certain conditions, or while the property is exposed to specified
hazards or perils.18 Another class of decisions presents the ques-
tion whether in the case of the nonexistence of a stipulation as
against alienation or assignment a change of title or interest and a
reconveyance merely suspends the risk, or operates to avoid the
policy, and it is held that such temporary transfer merely suspends
the risk, and that upon a retransfer to assured the policy revives.19
So temporary increase in risk forbidden by a policy of fire insur-
11 Kennedy v. Grand Fraternity, ie Commercial Union Assnr. Co. v.
36 Mont. 325, 25 L.R.A.(N.S-) 78, Canada Iron Mining & Manufactur-
92 Pac. 971. ing Co. 18 L. C. Jur. (Q. B.) 80.
12 Crutehfield v. Union Central 17 Palmer v. Warren Ins. Co. 1
Life Ins. Co. 113 Kv. 53, 23 Ky. L. Story (U. S. C. C.) 300, Fed. Cas.
Rep. 2300, 67 S. W. 67. No. 10,698 ; Greenleaf v. St. Louis
13 Melvin v. Piedmont Mutual Life Ins. Co. 37 Mo. 25, 30. See Wilkins
Ins. Co. 150 N. Car. 398, 64 S. E. v. Tobacco Ins. Co. 2 Sup. Ct. Cin.
180. Ohio, 204, 30 Ohio St. 317, 27 Am.
14 Suess v. Imperial Life Ins. Co. Rep. 455.
193 Mo. 564, 91 S. W. 1041, 35 18 Grant v. Howard Ins. Co. 5 Hill
Ins. L. J. 488. (N. Y.) 10.
15 Duncan v. Missouri State Life 19 Worthinston v. Bearce, 12 Allen
Ins. Co. 160 Fed. 616, 87 C. C. A. (94 Mass.) 382, 90 Am. Dec. 152, per
542, 37 Ins. L. J. 664. Bigelow, C. J.
2667
§ 1473 JOYCE n\ [NSURANCE
anee does nol avoid ii when the increase of hazard has come to an
end w ithoul loss, and the Loss occurs from another cause.20 And one
brief violation of the terms of a policy of fire insurance for neces-
sary work incidentaJ to the preservation of the insured property
will not be considered a breach of a condition prescribing Hie use
of the premises.1 And the temporary breach of a stipulation in a
contract of insurance to which there is not attached a, specific for-
feiture, and which docs not exist at the lime of the loss and could
in no way contrihute to the loss will not prevent a recovery on Hie
policy.2 Again, temporary breach by the insured of his warranty
that due diligence will he used thai the automatic sprinkler system
shall at all times he maintained in good working order, will not
prevent his recovering on the policy, if, at the time of the loss, it
was in good working order, and the breach had nothing to do with
the loss, — at least, where there is no express provision in the policy
for its becoming void for such breach, while such provisions art-
found in connection with other conditions and warranties.3 So the
risk may be merely suspended by the removal of goods temporarily
from the protection of the policy; as where under a marine risk
goods are to be covered when only waterborne, and they are tempo-
rarily landed and subsequently placed on board the vessel.4 So
20 Sumter Tobacco Warehouse Co. sured for a voyage, and by construc-
v. Phoenix Assurance Co. 76 S. Car. tion of the policy the risk is nol cov-
76, 10 L.R.A.(N.S.) 654, 121 Am. ered while the goods are on land,
St. Rep. 941, 56 S. E. 654. there is no reason why it should not
1 Krug v. German Fire Ins. Co. revive when the cargo is again put on
1 17 Pa. St. 272, 30 Am. St. Kep. 729, board of the ship. !n this and other
23 Ail. 572. cases, while the goods are not exposed
2 Port Blakely Mill Co. v. Spring- to any of the perils insured against,
field Fire & Marine Ins. Co. 50 Wash, either by not conforming to the de-
501, 28 L.R.A.(N.S.) 596n, 140 Am. scription in the policy or because
St. Rep. 863, 110 Pac. 36. they are for a time not exposed to
3 Port Blakely Mill Co. v. Spring- such perils, the risk temporarily
field Fire & Marine Ins. Co. 56 ceases, and recommences on the goods
Wash. 681, 28 L.R.A.(N.S.) 593,106 being again brought within the situ-
Pac. It* 1. ation contemplated by the parties and
On effect of temporary condition described in the policy. The risk may
which ceased before loss under gener- not be so interrupted when by the
al provision against increase of risk action of the perils insured against,
or specific provision against certain or for the due prosecution of the
conditions, see notes in 10 L.R.A. voyage, the subject matter is put out
(N.s.i 736: 2S L.R.A.(N.S.) 593, of " the condition in which the policy
and 32 L.R.A.(KS.) 240. supposes it to be:" Citing Bondretl
4Worthington v. Bearce, 12 Allen v. Hentigg, 1 Holt, 149; Pelly v.
(94 Mass.) 382,90 Am. Dec 152, per Royal Exch. Assur. Co. 1 Burr. 341,
Bigelow, C. J.; 1 Phillips on [nsur- 14 Eng. Rul. Cas. 30; Ellery v. New
.:,ice (3d ed.) p. 542, § 976, who England Ins. Co. 8 Pick. (25 Mass.)
says: "Tims, where a cargo is in- I 1.
2668
ATTACHMENT AND DURATION OF RISK § 1474
where, according to custom, goods are unloaded and put in a store-
ship, the risk is continued and the underwriters liable for loss.5 We
have, however, considered the question of suspension of risk more
fully elsewhere.6
§ 1474. Duration of risk: effect of war. — It is held that policies
effected in time of peace continue though a war breaks out, but thai
the insured must not do anything to add to the risk of the insurer.7
It is also held that if, after the commencement of the voyage, a
war breaks out between the country to which the property belongs
and a foreign country, the policy is not vacated, and the insurers
are not liable for a loss arising out of the state of war.8 It is also
decided that a war which places the insured and insurer under a
life policy within the opposing lines of the belligerent powers termi-
nates the contract.9
5 Tierney v. Etherington, cited in 1 8 Saltus v. United Ins. Co. 15
Burr. 348, 349. See Australian Agri- Johns. (N. Y.) 523. See Furtado v.
cultural Co. v. Saunders, L. R. 10 Rogers, 3 Bos. & P. 191, 14 Eng.
Com. P. 668. Rul. Cas. 125.
6 See §§ 1483 et seq., 1502, 1562 et 9 Tait v. New York Life Ins. Co.
seq., and chapter on seaworthiness. 1 Flip. (U. S. C. C.) 288, Fed. Cas.
As to suspension of member, see No. 13,726. Examine, however, §§
chapter on assessments. 281 et seq. herein, where this sub-
7 Croussillat v. Ball, 3 Yeates ject is more fully considered.
(Pa.) 375, 2 Am. Dec. 375, s. c. 4
Dall. (4 U. S.) 294, 1 L. ed. 840.
2669
CHAPTER XLvn.
ATTACHMENT AND DURATION OF RISK: THE SHIP.
§ 1483. Attachment and duration of risk on ship: generally.
§ 1484. Detention by embargo after voyage commenced.
§ 1485. Attachment of risk: vessel building: "waterborne : " "safely
launched," etc.
§ 1486. Attachment of risk "at and from" home port.
§ 1487. Prior parol agreement as to time of commencement if risk cannot
change policy.
§ 1488. Attachment and duration of risk where voyage insured is changed
or abandoned.
§ 1489. Attachment and duration of risk : time policy.
§ 1490. Attachment and duration of risk: mixed policy.
§ 1491. Intent to insure vessel on time irrespective of place where she may
be.
§ 1492. Time specified for continuance of risk after arrival on voyage
insured.
§ 1493. Attachment and duration of risk under time policies, the voyage
being described.
§ 1494. Attachment of risk "at and from:" delay in port should not be
unreasonable.
§ 1495. Attachment of risks: sailing on voyage: departure.
§ 1496. Attachment of risk "at and from" foreign port.
§ 1497. What is sufficient repair and seaworthiness for ship to lie in
safety "at" outport.
§ 1498. Whether risk attaches upon first arrival "at" or after vessel has
been moored twenty-four hours, etc.
§ 1500. Same subject : cases and opinions of the courts.
§ 1501. Same subject: attachment and duration of risk "at and from"
island, etc.
§ 1502. Usage may suspend attachment of risk "at and from" beyond time
of ship's first arrival.
§ 1503. Stipulation that risk commence "at and from" on termination of
cruise and preparing for voyage.
§ 1504. Opinions of the courts as to attachment of the risk on the preced-
ing eases.
§ 1505. Meaning of the word "port" generally: "port risk."
§ 1505a. "Port or ports," "place or places," construed.
2070
DURATION OF RISK— THE SHIP § 1483
§ 1506. Duration of risk: time policies "at sea:" "on a passage."
§ 1507. Attachment risk "at and from" vessel lying long in foreign port
or stated to be there in safety: where she now is.
§ 1508. Homeward policy "at and from:" general designation of ports:
case of island or district.
§ 1509. Homeward policy "at and from:" specific designation of port or
place.
§ 1510. Attachment of risk "at and from" foreign port: ownership ac-
quired while vessel lying in port.
§ 1511. "At and from" any one of several ports: voyage from one port to
another before risk attaches.
§ 3512. Attachment of risk "from" a port.
§ 1513. Attachment and duration of risk : entirety of risk.
§ 1514. The words "thence" or "from" used in reference to intermediate
ports.
§ 1515. "At and from" to a port named and "a market."
§ 1516. Commencement of voyage insured to specified port with liberty
to call at, etc.
§ 1483. Attachment and duration of risk on ship: generally. —
Emerigon, in his work published in 1783, reviews the then exist-
ing laws of the several maritime states as to the time of commence-
ment and the duration of the risk, and says that the French Ordon-
nance of 1681, drawn up after the old maritime laws, had taken a
just medium, and provided that "if the time of the risks be not
regulated by the contract, it will run, with regard to the ship, its
rigging, furniture, and stores, from the day it shall have set sail
until anchored in the port of its destination and moored at the
quay." 10 According to both Mr. Marshall and Mr. Arnould, the
time of the commencement of the risk on the ship in England
varies in different cases, depending entirely on the terms of the
policy and the nature of the voyage.11 In the United States, inas-
much as the parties may in this, as in other, cases stipulate as they
shall choose, the time of the commencement of the risk must
depend upon the contract, and such circumstances and usage as
are admissible in evidence to aid in its construction. And in gen-
eral the attachment and duration of the risk must depend upon
whether the policy be a time voyage or mixed policy; upon the
10 Emerieon on Ins. (Meredith's ed. u 1 Marshall on Ins. (ed. 1810)
1850) c. xiii. sec. 2, pp. 536 et seq. *261 ; 1 Arnould on Marine Ins. (Per-
He considers the Reglement of Ant- kins' ed. 1850) 446, *442; Id. (Mac-
the Guidon and Ordonnance. land, sec. 754, p. 381.
2671
>< L484, ; JOYCE ON 1XSI RANCE
character of the voyage as described in the policy, the express stipu-
lations therein with reference to the same, and usage, so Car as the
same may form pan of the contract, and other circumstances, such
as the length of time the vessel has been in port : what constitutes a
port; whether the word "port" or "ports" is used; whether the
tge be an entire voyage or the risk severable; whether the ship
is ,-it a borne pori or a foreign porl ; whether the ship be on a passage
or at sea : upon detention of a ship by an embargo, or a deviation or
an intended deviation, or sailing upon a different voyage, etc.
These various points will, however, he considered hereafter. Only
the precise risk which is contemplated can he introduced into con-
tracts of marine insurance, and this principle applies to contracts
of inland uavigation ; 12 and insurance on the ship docs not cover
both ship and cargo, even though it be upon the ship generally, and
she is then laden.13 So an insurance on ;i ship is an insurance for
the time specified, or of the .-hip for the voyage, not of the ship
and the voyage.14
§ 1484. Detention by embargo after voyage commenced. — Where
die -hip sets sail, and just before she gets under way (he pilot hears
that an embargo lias taken place, and before the ship is out of port
she is stopped and detained by virtue of the embargo act, the in-
sured is not. in such case charged with knowledge of the act laying
an embargo so as to invalidate the policy, and the voyage having
commenced before the detention, the insurer may be liable for a
total loss.15
§ 1485. Attachment of risk: vessel building: "waterborne: "
"safely launched," etc. — If a policy is upon a vessel building at P.,
to "ta!m effect as soon as waterborne" "at and from" P., the policy
will attach at once at the time it i< executed, when the vessel is
waterborne the day prior thereto, although she is at a second port,
where she was towed, according to custom, to be made seaworthy
for the continuance of her voyage, the policy giving her "liberty to
ship at," or "to proceed to,"' a second port.16 And where the insur-
ance is effected upon a new ship still upon the ways, to continue
while being safely launched and until moored twenty-four hours in
safety, the policy being in the usual marine form, the risk attaches
the moment the launching begins, and the policy should be con-
12 At wood v. Reliance Transporta- U. S.) 370, 2 L. ed. 650, per Mar-
tion Co. 9 Watts (Pa.) 87, 34 Am. shall, C. J.; Pole v. Fitzgerald,
Dec. 503. Willcs, 641, per Willes, C.J.
13 1 Marshall on Ins. (ed. 1810) 15 Walden v. Phcenix Ins. Co. 5
320a. Johns. (N. Y.) 310, 4 Am. Dec. 359.
14 Ritchie v. United State Ins. Co. 16(\)bb v. New England Mutual
5 Serg. & R. (Pa.) 501; Alexander Ins. Co. 6 Gray (72 Mass.) 192.
v. Baltimore Ins. Co. 4 Cranch (8
2672
DURATION OF RISK— THE SHIP §§ 148(5-1488
strued with reference to the special nature of the risk designed to be
covered, and affords protection from accidents during launching
not imputable to the fraud, ignorance, or misconduct of those in
charge of the vessel.17
§ 1486. Attachment of risk "at and from" home port. — Tf the
insurance is "at and from" the terminus a quo of the voyage in-
sured, being the home port at which the ship is then lying, the risk
attaches at once the insurance is effected, and continues thereon the
whole time the ship is there preparing for her voyage.18 The phrase
"at and from" A to B, does not describe the property insured, but
only the voyage during which the risk is to continue.19
§ 1487. Prior parol agreement as to time of commencement of
risk cannot change policy. — A parol agreement as to the time the
risk shall commence which is contrary to the terms of the policy
cannot aid the party claiming under such parol agreement; it is
not competent evidence to change the actual written contract.20
§ 1488. Attachment and duration of risk where voyage insured
is changed or abandoned. — In the consideration of this question the
distinction which exists between the voyage insured and the voyage
of the ship is important. Emerigon says : "It is necessary, in this
respect, to distinguish the voyage insured from the voyage of the
vessel, and to consider the voyage that the ship makes only to com-
pare it with the voyage designated in the policy, cum viaggio pro-
misso et comprehenso in assecuratione. This distinction is essential,
and should not be forgotten." x In the case of an intention to devi-
ate only the usual course of the voyage is intended to be voluntarily
departed from without necessity, and the intention of going ulti-
mately to the terminus ad quem of the voyage insured is never
absolutely lost sight of and given up, and herein lies the distinction
between a deviation and a change or abandonment of the voyage
insured. In the latter case the terminus ad quem of the voyage
insured is absolutely lost sight of and given up. The vessel may
sail for an entirely different port of destination than the terminus
ad quem of the voyage insured, the intention of changing being
fixed before the commencement of the risk; or the ship having
17 Frichette v. State Mutual Fire & *442; (Maclachlan's ed. 1887) 404;
Marine Ins. Co. 3 Bosw. (N. Y.) 190. Id. (8th ed. Hart & Simey) sec. 474,
18 Seamans v. Loring, 1 Mason (U. pp. 609 et seq ; 17 Earl of Halsbury's
S. C. C.) 127, Fed. Cas. No. 12,583, Laws of England, sees. 768 et seq.,
per Story, J.; Palmer v. Marshall, 8 pp. 388 et seq.
Bing, 79 ; Motteux v. London Assur. 19 Melcher v. Ocean Ins. Co. 59 Me.
Co. 1 Atk. 548, 13 Eng. Rul. Cas. 217.
467; Smith v. Steinbach, 2 Caines 20 Whitney v. Haven, 13 Mass. 172.
Cas. (N. Y.) 158; 1 Marshall on Ins. 1 Emerigon on Ins. (Meredith's ed.
(ed. 1810) 261a; 1 Arnould on Ma- 1850) c. xiii. p. 531. See § 2366 here-
rine Ins. (Perkins' ed. 1850) 447, in.
Joyce Ins. Vol. III.— 168. 2673
§ 1488
JOYCE ON INSURANCE
sailed, the original destination may be permanently abandoned with
intent not to go at all to the terminus ad quern of the voyage in-
sured, but to go elsewhere In both these latter cases there is a
new and distinct voyage— the voyage is changed.8 In the first of
the two cases above specified as constituting a change of voyage the
risk never attaches. In the latter, the insurer is discharged by the
abandonment of the voyage insured. It therefore constitutes a
defense to an action on the contract that the vessel never sailed on
the voyage insured, or sailed for an entirely different port of desti-
nation, or that the insurer is discharged by the abandonment of
the voyage after it ha.s commenced.8 But if the voyage actually
2 Ilea rn p v. Marine Ins. Co. 20
Wall. (87 U. S.) 488, 490, 22 L. ed.
395; Clark v. Protection Ins. Co. 1
Story (U. S. C. C.) 109, lilt); Fed.
('as. No. 'JS:5'_!; Marine insurance act
of England. "45- (1) Where, after
the commencement of the risk, the
destination of the ship is voluntarily
changed from the destination contem-
plated by the policy, there is said to
be a change of voyage. (2) Unless
the policy otherwise provides, where
there is a change of voyage, the in-
surer is discharged from liability as
from the time of change, that is to
say, as from the time when the de-
termination to change it is manifest-
ed; and it is immaterial that the ship
may not in fact have left the course
of voyage contemplated by the policy
when the loss occurs." Marine ins.
act 190G (0 Edw. VII. c. 41, sec.
45); Butterworth 20th Cent. Stat.
(1IKIO-1909) p. 411. Alexander v.
Baltimore Ins. Co. 4 Cranch (8 U.
S.) 370, 2 L. ed. 650; Marine Ins.
Co. v. Tucker, 3 Cranch (7 U. S.)
357, 2 L. ed. 4G6; Marvland Ins. Co.
v. Wood, 6 Cranch (10 U. S.) 29,
3 L. ed. 143; Friend v. Gloucester
Ins. Co. 113 Mass. 326; New York-
Firemen's Ins. Co. v. Laurence, 14
Johns. (N. Y.) 46, per Kent, Ch.;
Henshaw v. Marine Ins. Co. 2 Caines
(N. Y.) 274; Way v. Modigliani, 2
Term Rep. 30; Foster v. Wiliner, 2
Str. 1249; Tait v. Levi, 14 East, 481;
Sellar v. McVickar, 4 Bos. & P. 23;
Tasker v. Cunningham, 1 Bligh, 87;
Woolridge v. Boydell, Doug. 16a;
26
Kewley v. Ryan, 2 II. Black. 313:
Lawrence v. Ocean Ins. Co. 11 Johns.
(N. Y.) 241. "If the vessel sails for
quite another destination than that of
the voyage insured, or if arrived in
the latitude and view of the place of
destination she goes to a place more
distant, or if in wandering from the
proper route on which she had en-
tered she abandons her original des-
tination to go elsewhere, in all these
cases the voyage is changed . . .
for the converse reason the voyage is
still presumed the same when the cap-
tain, without losing sight of his first
destination, strays from it only in ac-
cessories," etc. Emerigon on Ins.
(Meredith's ed. 1850) c. xiii. sec. 14,
pp. 574 et seq.; sec. 11, p. 568; see.
9, p. 565. See also 2 Parsons on
Marine Insurance (ed. 1868) 36, 40,
41; 1 Arnould on Marine Ins. (Per-
kins' ed. 1850) 350, *344 et seq.; 1
Arnould on Marine Ins. (Maclach-
lan's ed. 1887) 366, 367, 452, 453, et
seq., 459; Jd. (8th ed. Hart & Simey)
sees. 380 et seq., pp. 498, 504, 641;
1 Phillips on Ins. (3d ed.) sees. 541)
et seq., 990-96; 1 Marshall on
Ins. (ed. 1810) *184, *320. As to
distinction between an intended de-
viation and a different vovasje, 1 Mar-
shall on Ins. (ed. 1810) p. 202 et
seq.; Henshaw v. Marine Ins. Co. 2
('.lines (N. Y.) 274. And see §§
2365-2373 herein.
3 Kerr v. Fairlie, 1 Shaw & D. 384;
Forbes v. Church, 3 Johns. Cas. (N.
Y.) 159; Merrill v. Boyleston Fire
& Marine Ins. Co. 3 Allen (85 Mas^.)
74
DURATION OF RISK— THE SHIP § 1489
sailed is thai contemplated by the terms of the policy, the insurance
will attach.4 So the risk may attach though the ship clears for a
different voyage or port, if her actual destination is that of the
voyage insured ; as where a policy is written from C. to P., and the
ship clears for A., but the actual destination for which she sails is
P., the insurer is not discharged.5 But where the voyage insured is
a specific part of another voyage already commenced, the making
without fraud or misconduct, but by necessity, an intermediate voy-
age, whereby the risk insured is postponed as to its commencement,
is not such an abandonment of the previous part of the voyage as
to prevent the commencement of the voyage insured, where the
vessel returns at once to the port of commencement of the insured
voyage and sails thereon.6
§ 1489. Attachment and duration of risk: time policy. — The
time may be limited or not limited in marine insurances. The in-
surance may be on a ship for a limited time specified without
designation of the voyage, and the duration of the risk is limited
thereby. A strictly time policy insures no specific voyage or voy-
ages; it limits the vessel to no geographical track, but extends to
and covers any voyage or voyages undertaken within the period
limited. The protection does not, however, exceed such time, only
extending to the loss and damage the ship may actually sustain
by the perils insured against at any time within the period desig-
nated by the two extreme points of time and intended by the in-
surance, and the insurer is free from the expiration of the time.
The ship may be with or without cargo, and in strictly time policies
no reference is had to the place where the ship may be at the time
of the commencement or end of the period designated, and it is
immaterial whether the object of the voyage be then accomplished
or not. Such insurances are favorable to maritime commerce, and
247; Wooldridge v. Boydell, 1 Doug, being based upon the intelligence that
16. And see cases in last note. the ship was at M. and about to pro-
4 Hobart v. Norton, 8 Pick. (25 ceed to L. on the original voyage,
Mass.) 159; Steinbach v. Columbian which representation was true when
Ins. Co. 2 Caines Cas. (N. Y.) 129. made, but owing to subsequent events,
5 McFee v. South Carolina Ins. Co. not happening through misconduct
2 McCord (S. C.) 503, 13 Am. Dec. chargeable to the insured, the ship
757; Talcot v. Marine Ins. Co. 2 was compelled to return to L., but ar-
Johns. (N. Y.) 130; Barnewall v. riving there the charterers insisted
Church, 1 Caines (N. Y.) 217, 2 Am. that she proceed to S., which she did,
Dec. 180. See §§ 2375-2377, post, as and was captured on the voyage from
to merely intended destination. S. to L. ; the voyage insured was held
6 Driscoll v. Passmore, 1 Bos. & P. to have commenced, and the under-
210. In this case the voyage insured writers liable. It was urged by de-
was from S. to L., being a part of a fondant's counsel in this case that the
voyage from L. to M., thence to S., previous voyage was abandoned. See
and thence back to L., the insurance chapter on "deviation," herein.
2675
§ 1490
JOYCE ON INSIUANCK
are lawful and valid. Time policies arise from the fact thai it is
often impossible, owing to the character of the voyage, i<> li\
definitely the termini by places, as where the ship is to be engaged
in trading or fishing voyages, and the like7 ruder a strictly time
policy it constitutes no objection that the risk may continue as long
as the vessel may exist, for outside of the terms of the insurance
there is no limitation as to the extent of such policies in the United
States.8 In England, a time policy extending over a period of
twelve months is void.9 No such limitation, however, exists in
tins country. If the time of the commencement of the risk under
such a policy is not specified, it will attach from the time the in-
surance is effected.10
Riders attached to a policy of insurance on a vessel, describing
it as "laid up" in a harbor, and giving permission "to make re-
pairs" and "lit out in the spring" and "move from dock to dock"
to load and unload, do not prevent the policy on the vessel against
tire from covering the vessel while on a voyage in permitted waters
by the body of the policy and within the time limits thereof.11
§ 1490. Attachment and duration of risk: mixed policy. — Al-
though the voyage may be designated by the policy, the risk may
nevertheless be limited to time. Thus, in a mixed policy the voy-
age may be prescribed, but the ship may only be protected during
a specified time.12
7 United States. — Bradlie v. Mary-
land Ins. Co. 12 Pet. (37 U. S.) 37*8,
9 L. ed. 1123; per Story, J.
Kentucky. — Firemen's Ins. Co. v.
P.. well, 13 B. Mon. (52 Ivy.) 311.
Maine. — Melcher v. Ocean Ins. Co.
59 Me. 217.
New York. — Union Ins. Co. v. Ty-
sen, 3 Hill (N. Y.) 118, per Cowen,
J.; Grousset v. Sea Ins. Co. 24 Wend.
(N. Y.) 209, per Nelson, C. J.; Cog-
geshall v. American Ins. Co. 3 Wend.
(N. V.) 283.
Ohio.- -Howell v. Protection Ins.
Co. 7 Ohio 284.
England. Tyrie v. Fletcher, 2
Cowp. 666, 1 1 Eng. Rul. Cas. 502;
Lidgeti v. Seeretan, 6 L. R. Com. P.
616, 10 L. J. Com. P. 257, 39 L. J. C.
P. 196; L. R. 6 C. P. 616; 24 L. T.
942, 1!) W. R. 1088; 1 Asp. M. C. 95.
Emerigon on Ins. (Meredith's ed.
1850) c. xiii. sec. 1, pp. 532 el seq.;
see. 4, p. 5 [9 ; 1 Arnould on Marine
Ins. (Perkins' ed. 1850) 414, p. *409
2676
et seq.; Id. (Maclachlan's ed. 1S87)
371; Id. (8th ed. Hart & Simey) sees.
437 et seq., pp. 567 et seq.; 1 Parsons
on Marine Ins. (ed. 1868) 304 et seq.
8 Cleveland v. United Ins. Co. 8
Mass. 308.
9 30 Vict. c. 23, sec. 8. The stat-
ute 35 Geo. III. c. lxiii. provided al-
so that the time covered should not
exceed twelve calendar months, and
thai the risk should commence and
end accordingly wherever the ship
mighl be. See Lishmau v. Northern
Maritime Ins. Co. L. R. 8 Com. P.
216.
10 Ball v. Knight, Fitz-G. 274.
11 Jackson v. British America As-
surance Co. 106 Mich. 47, 30 L.R.A.
636, 63 N. W. 899.
12 Martin v. Pishing Ins. Co. 20
Pick. (37 Mass.) 380, :?2 Am. Dec.
220, examine § 1 I'.M herein; Pitt v.
Phoenix Ins. Co. 10 Dalv (N. Y.)
281; Grousset v. Sea Ins. Co. 24
Wend. (N. Y.) 210; Emerigon on
DURATION OF RISK— THE SHIP § 1491
§ 1491. Intent to insure vessel on time irrespective of place
where she may be.13 — -If it appears that the intent is to insure a
vessel from a specified date or time, irrespective of the place where
she may be, the policy will attach on the day or time specified,
according to the manifest intent of the parties, without regard to
place; nor is it necessary under a time policy on a ship, the day
of the attachment of the risk being specified, that the vessel should
be at the commencement of the risk Avhere she is stated to be in the
policy.14 Thus, an insurance was made on a vessel for one year.
"commencing the risk at I?., on a day certain at noon," and it
happened the vessel had left the port of B. on the day preceding,
but was at good safety at sea on the day fixed, and was afterward
lost within the year. The underwriters were held nevertheless
liable.15 So an insurance on a vessel "at and from Calais, Maine,
on July 16th to, at, and from all places to which she may proceed
in the coasting business for six months," attaches on the day
named, whether the vessel was then at Calais or not.16 And if an
insurance is by the terms of the policy to commence wherever the
ship may be in safety on a specified day, with permission to navigate
the Mississippi from one named city thereon to another, such
permission does not affect the commencement of the risk so as
to control the express agreement concerning the same ; it is a limita-
tion upon the assured, and an exception in favor of the company,
to be construed most strongly against it.17 So an insurance on a
ship at and from N. C. and H. for six calendar months is an in-
surance for the period specified on a trading voyage or voyages at
and from either of the named ports without restriction, and the
six months not having expired when the vessel arrives at H., and
she sails for New York within the period of limitation, the under-
writers are liable for a loss within said period ; 18 and if no port is
mentioned, the policy being on time simply, it is declared that
a trading voyage is necessarily implied.19
Ins. (Meredith's ed. 1850) c. xiii. Ins. Co. 9 Mass. 85, 6 Am. Dec.
sec. 1, pp. 534 et seq. ; Way v. Modig- 40.
liani, 2 Term Rep. 30. 16 Martin v. Fishing Ins. Co. 20
13 See § 1493 herein. Pick. (37 Mass.) 389, 32 Am. Dec.
14Manlv v. United Marine & Fire 220.
Ins. Co. 9 Mass. 85, 6 Am. Dec. 40 ; « Schroeder v. Stock & Mutual Ins.
Martin v. Fishing Ins. Co. 20 Pick. Co. 46 Mo. 174.
(37 Mass.) 389, 32 Am. Dec. 220; 18 Grousset v. Sea Ins. Co. 24
Kent v. Manufacturers' Ins. Co. 18 Wend. (N. Y.) 210.
Pick. (35 Mass.) 19; Schroeder v. 19 Cosrgeshall v. American Ins. Co.
Stock & Mutual Ins. Co. 46 Mo. 174; 3 Wend. (N. Y.) 289, per Savage,
Grousset v. Sea Ins. Co. 24 Wend. C. J. See also Emerigon on Ins.
(N.Y.) 209. (Meredith's ed. 1850) c. xiii. see. 3,
13 Manly v. United Marine & Fire pp. 543 et seq.
2677
§§ 1492, 1493 JOYCE ON INSURANCE
§ 1492. Time specified for continuance of risk after arrival on
voyage insured. — A ship may bo insured on a voyage from port to
port, the risk to continue for a certain time after the ship's arrival
at her final destination. Thus, a policy may be "at ami from" or
"from" a certain port to another, the risk to continue for a certain
number of days after the ship's arrival, and in such case it is held
ilia! if the ship arrives and discharges her cargo, and is chartered
t<> carry another cargo, and thereafter, but within the specified
time, sustains a damage, that the insurers are discharged, for the
substantial purpose of the insurance is effected and the risk ter-
minated.20 But in another ca.se, where the insurance was "on
ship from L. to any port or ports in the North or South Pacific
Ocean," and "during thirty days' stay in her last port of dis-
charge," it was held that a loss occurring within thirty days after
her arrival, excluding from the computation the twenty-four hours
immediately following said arrival, was covered by the policy.1
§ 1493. Attachment and duration of risk under time policies, the
voyage being described. — There is a certain class of policies
wherein the voyage is described by termini, the risk being limited
by time specified; or where the time of the commencement of the
risk is stipulated, the insurance being on the vessel from one port
to another; or where the risk is for a specified time, to commence
at a named port on a day and hour certain. Thus, an insurance
"at and from" A to B for six months; or "at and from" a specified
day "from" and "to" certain ports; or an insurance for one year,
commencing the risk at B. on a certain day and hour. The ques-
tion arising under such policies is one of construction, dependent
upon the intent of the parties and the purpose of the insurance.
The main inquiry should be directed toward discovering that in-
tent and purpose, and ascertaining whether a time or voyage pol-
icy is contemplated. The decisions here incline toward limiting
such contract to be time policies, and seem to indicate that in
describing the voyage it is not thereby intended to control, by
designating the ports or termini, the stipulations as to the time of
the commencement of the risk or its termination, unless the policy
is so worded that it is evidently intended that the port designated
as the terminus a quo should exclude every other place with refer-
ence to the attachment of the risk, and necessitate the ship being
at said port on the particular day from which the policy is to take
20 Gamble v. Ocean Marine Ins. Co. L. J. Ex. 315, 4 Hurl. & N. 699. See
1 Ex. D. S. also sec;;. 1537—1546, as to termina-
1 Mercantile Marine Ins. Co. v. Tit- tion of risk when vessel moored twen-
herington, 5 Best & S. 7(r>, 34 L. J. ty-four hours in safety.
Q. B. 11. See Lindsay v. Janson, 28
2G78
DURATION OF RISK— THE SHIP § 1493
effect. The law, however, is not definitely settled as to the effect of
such stipulations. But if the description of the voyage does not
control, and it is held that it does not,2 the stipulations as to the
time of the commencement and termination of the risk, it would
seem that, 1. The risk must commence and the loss be actually
incurred within the limits of the time specified in the policy;3
2. The ship need not be at the port named as the terminus a quo
in the policy at the day the risk is to commence under the policy ; 4
3. If within the time specified the vessel begins the described voy-
age from the place designated, although not at the day or hour
named as that of the commencement of the risk, the insurance will
attach;5 4. The ship must sail on the voyage described, and no
other ; 6 5. The loss must be incurred while the vessel is sailing
on the voyage described on the course, and within the time
specified ; 7 6. The insurer will be discharged if on the day specified
for the commencement of the risk the ship sails on an entirely
different voyage, even though after said day she is lost while sail-
ing in the same track as the prescribed course;8 7. The risk at-
taches where the vessel has already sailed from the specified
terminus a quo, and is at sea on the prescribed course, on the day
specified, sailing the prescribed voyage;9 8. Such policy may
attach, such being the evident intent of the parties, immediately
upon the expiration of a prior time policy, the ship being at sea
prosecuting her voyage, although the date of the termination of
the time policy is later than the date of the commencement of the
mixed policy ; 10 9. The risk will end within the specified time,
2 Manly v. United Marine & Fire 30, noted in 1 Marshall on Marine
Ins. Co. *9 Mass. 85, 6 Am. Dee. 40, Ins. (ed. 1810) *326.
per the court. 8 Woodridge v. Boydell, 1 Doug.
3 See authorities cited under this 16, noted in 1 Marshall on Ins. (ed.
section. 1810) *325 (H. Black. Rep. 231). In
4 Manly v. United Marine & Fire this case the ship was captured while
Ins. Co. *9 Mass. 85, 6 Am. Dec. 40, sailing on the same track as the pre-
noted above in § 1491 ; Martin v. scribed course before she had reached
Fishing Ins. Co. 20 Pick. (37 Mass.) the point to diverge for continuing
389, 32 Am. Dec. 220, noted above in the voyage on which she had sailed,
§ 1491 (in this case it appeared that but which was not the voyage de-
the intent was to insure for a stated scribed, and it appeared that there
period, irrespective of the place was no intention to sail the voyage
where the vessel was to be) ; Way v. described : Way v. Modigliam, 2
Modigliani, 2 Term Rep. 30. Term Rep. 30, noted in 1 Marshall
6 See the authorities cited under on Ins. (ed. 1810) *326. See § 1488
this section and the opinions of the herein, as to change of voyage,
courts therein. 9 Manly v. United Marine & Fire
6 Way v. Modigliani, 2 Term Rep. Ins. Co. *9 Mass. 85, 6 Am. Dec. 40.
30, noted in 1 Marshall on Marine 10 Kent v. Manufacturers' Ins. Co.
Ins. (ed. 1810) *326. 18 Pick. (35 Mass.) 19.
7 Way v. Modigliani, 2 Term Rep.
2679
§ 1494 JOYCE OX INSURANCE
whether the ship be at the designated terminus ad quern or not,
or there at the time specified or before.11 In applying these rules
ili,. premises above stated should be remembered, and the fact
should qoI be Lost sight of that the cases upon which they arc
based were decided upon thai construction of the terms of the
contract which would in each particular case best effectuate the
manifest intent of the parties to the contract, so far as consistent
with the rules of construction and of law applicable. It should
also be remembered that although the voyage is designated, the
parties may nevertheless stipulate by special agreement that the
risk may be governed as to its duration by time.12 If the original
policy covers a risk upon the vessel within certain waters, but
thereafter, upon request for an extension of the risk, but without
the payment of an additional premium, a rider is attached limit-
ing the risk and excluding trips on waters before included, such
rider controls, and the insurer is not liable for a loss occurring
upon waters exclude. 1 by the terms of said rider.13
§ 1494. Attachment of risk "at and from: " delay in port should
not be unreasonable. — It is undoubtedly true that the ship should
under an insurance "at and from" be ready to .-ail as soon as she
reasonably can. or at least that she must not unnecessarily delay
the commencement of her voyage, but such delay is permitted as
i- reasonable, necessary, and incurred bona fide, and in sound
discretion to enable the ship to leave port in good condition to
pursue her voyage, and if after such an insurance is effected she
lies in port for an unreasonable length of time, unaccounted for,
and does not sail, not being detained for repairs or other neces-
sary cause connected with the purpose of the voyage insured, the
insurers cannot be held. If a long delay is contemplated, the
ship should be insured in port for a definite time and on the voy-
age to be commenced thereafter.14 Although the rule is as above
11 Manly v. United Marine & Fire Martin v. Delaware Ins. Co. 2 Wash,
[ns. Co. 9 Mass. 85, 6 Am. Dec. 40. (U. S. C. C.) 254, Fed. Cas. Mo.
12 Km- a further consideration of 9161; Settle & Bacon v. St. Louis
the questions above considered, see 1 Perpetual Ins. Co. 7 Mo. 379; Pat-
Arnould on Marine Ins. (Perkins' ed. rick v. Ludlow, 3 Johns. Cas. (N. Y.)
L850) Ms 21, '412 15; 1,1. (8th ed. 1 1, 2 Am. Dee. 130; Hartley v. Bug-
Hart & Simey) sees. 137 142, pp. gin, 3 Doug. 39, 9 Eng. Rul. Cas. 391;
567 el seq.; 1 Parsons on Marine [ns. (Irani v. King, 4 Esp. 174; Palmer v.
(ed. 1868) 311-15; 1 Phillips on Ins. Marshall, 8 Bing. 318, per Tindall, C.
(3d ed.) 503, sec 928. J.; Motteux v. London Assur. Co. 1
13 Mark v. Home Ins. Co. 13 U. S. Atk. 548, 13 Eng. Kul. Cas. 467;
C. C. A. 157, til Fed. 804, s. c". 52 Phillips v. Irving, 7 Man. & G. 325,
Fed.170. 9 Eng. Rul. Cas. 396; 1'ahner v.
"Columbian Ins. Co. v. Catlett, 12 Fennina:, 9 Bing. 462, per Park. J.;
Wheat. (25 U. S.) 383, 6 L. ed. 664; Chitty v. Selwyn, 2 Atk. 539, per
_'liSI)
DURATION OF RISK— THE SHIP § 1494
given, its application must be governed by circumstances, for from
the very nature of the case the determination of the point whether
the delay is justified can rest upon no positive or arbitrary rule
What may he a reasonable delay in one case would not necessarily
be excusable in another, as is evident from the decisions. The
existing state of things in the port where the vessel may be affords
a constant rule of guidance in such cases,15 and whether the ship
delays an unreasonable time is a question for the jury.16 Thus,
the length of time which elapses between underwriting the policy
and the sailing of the vessel is not alone of itself sufficient to dis-
charge the insurers, provided the delay be accounted for, as it
may result from necessity or be otherwise justified; there must be
a clear imputation of unjustifiable waste of time.17 If the policy
attaches at the port of lading, but the vessel delays sailing for
nearly four months without excuse, the insurers are discharged.18
But a delay of six months in port after the date of the policy
and before the commencement of the voyage has been held not
an unusual or unnecessary delay, the vessel being insured for
a voyage to India. The court said that several months may have
been necessary to complete the insurance.19 And so although the
vessel is detained forty-live days in making necessary repairs and
testing the machinery, the policy is not thereby avoided, although
the application states that the vessel is in perfect order and "war-
ranted to sail in a few days;''20 and it would necessarily follow
that if the preparation for ihe voyage is entirely suspended, that
the case would be within the principle of the rule above given. If
a policy be "at and from" a named port, the fact that the vessel
is undergoing extensive repairs will not prevent the risk from
attaching in port.1 The last point, however, involves the question
Lord Hardwicke ; De Wolfe v. Arch- 16 Rain v. Case, 3 Car. & P. 496 ;
angel Maritime Bank & Ins. Co. L. R. Moody & M. 262; Foster v. Jackson
9 Q. B. 451, 13 Ens'. Rul. Cas. 609; Marine Ins. Co. Edm. Sel. Cas. (N.
Foster v. Jackson Mar. Ins. Co. Edm. Y.) 290.
Sel. Cas. (N. Y.) 290; Smith v. Sur- "Grant v. King, 4 Esp. 175. But
ridge, 4 Esp. 25 ; Small v. Gibson, 16 see cases following and those in last
Q. B. 141; Langhorne v. Alnutt, 4 note, and opinions of courts.
Taunt. 511. See 1 Arnould on Ma- 18 Palmer v. Marshall, 8 Bing. 79.
rine Ins. (8th ed. Hart & Simey) sec. 317, 1 L. J. Com. P. N. S. 19; Palmer
475, p. 611, discussing effect of ma- v. Penning, 9 Bing. 460, 2 Moore &
rine ins. act, 190G. sched. I. rule 3. S. 624.
See also 17 Earl of Halsbury's Laws 19 Earl v. Shaw, 1 Johns. Cas. (N.
on England (8th ed. Hart & Simey) Y.) 314, 1 Am. Dec. 117.
sec 770, p. 389. 20 Wallerstein v. Columbian Ins.
15 Phillips v. Irving, 7 Man. & G. Co. 3 Rob. (N. Y.) 528.
328, 9 Eng. Rul. Cas. 396, per Tyn- 1 McLanahan v. Universal Ins. Co.
dall, C. J. See Mount v. Larkin, 8 1 Pet. (26 U. S.) 170, 7 L. ed. 98.
Bing. 122, per Tyndall, C. J., and
cases in last note.
2681
;< L4y5, L496 JOYCE ON INSURANCE
whether the warranty of.seaworthiness is to be implied under time
policies, which will be considered hereafter, and the question of
delay in commencing the voyage will also be more fully considered
hereafter under the head of "I deviation."
§ 1495. Attachment of risks: sailing on voyage: departure. — The
leasl locomotion with readiness of equipment and clearance, in-
tending i" sail on her voyage, satisfies a warranty to sail.2 The
moment a ship quits her moorings in readiness for sea,, or in com-
plete preparation of her voyage, intending to sail, she has sailed on
her voyage within the meaning of that term,8 even though she
is afterward stopped by head winds,4 or is detained by some sub-
sequent occurrence.6 But the ship must sail on the voyage insured.
and must not only have broken ground, but on or before the day
must be so far in a state of complete preparation and fitness for
the performance of her voyage that nothing remains to be done
afterward as to the commencement of it, and she must intend to
at once prosecute her voyage without further delay.6 But the
fact that a vessel so fitted is moving down a river does not neces-
sarily determine that she has sailed on her voyage; the quo animo
decides the point,7 But in case of an insurance from A to B,
warranted to have sailed before a certain day, the warranty ap-
plies to the voyage, and not to the risk in port, and the policy
attaches on the subject in port, so that whether the vessel sailed
before the day or not, a risk has been run, and the insured is
entitled to his premium.8 Departure, however, imports an effectual
leaving of the place behind, and if the vessel be detained or driven
back, though she may have sailed, there is no departure.9 Other
points are, however, involved in the determination of these ques-
tions of what is a sailing and a departure, and they will be more
fully considered under the subject of warranty to sail.
§ 1496. Attachment of risk "at and from" foreign port. — In
insurances "at and from" or "from her arrival" at a foreign port
2 Union Ins. Co. v. Tyson, 3 Hill Barn. & Adol. 514, per Lord Tenter-
(N. Y.) 118; Nelson v. Salvador, den; Lang v. Anderson, 3 Barn. & ('.
Moody & M. •'!<»!). per Lord Tenterden; Thellusson v.
3Bowcn v. .Merchants' Ins. Co. 20 Staples, 1 Doug. 366n, per Lord
Pick. (37 Mass.) 275, 32 Am. Dec. Mansfield; Cochran v. Fisher, 4 Tyrw.
A 13, per Cowen, J. 424; 2 Crornp. & M. 581, per Lord
4Bowen v. Merchants' Ins. Co. 20 Lyndhurst, C. B.; Fisher v. Cochran,
Tick. (37 Mass.) 275, 32 Am. Dec. 5 Tyrw. 496; 1 Cromp. M. & R. 809.
213. 7 Dennis v. Ludlow, 2 Caines (N.
5Pettigrew v. Pringle, 3 Barn. & Y.) 111.
Adol. 514, per Lord Tenterden. 8 Hendricks v. Commercial Ins. Co.
6Bowen v. Hope Ins. Co. 20 Pick. 8 Johns. (N. Y.) 1.
(37 Mass.) 275, 32 Am. Dec. 213, per 9 Union Ins. Co. v. Tysen, 3 Hill
Cowen, J.; Pettigrew v. Pringle, 3 (N. Y.) 118, per Cowen, .).; Moir v.
2G82
DURATION OF RISK— THE SHIP § 1497
at which the vessel is expected to arrive, and which is the terminus
a quo of a homeward voyage, the risk attaches at once from the
moment of her first arrival "at" or within the specified port in a
state of sufficient repair and seaworthiness to enable her to lie
there in safety or reasonable security till she is properly pre-
pared and equipped for her voyage, and the risk continues there
during her stay in port as long as the ship is preparing for
the voyage insured. This rule, however, is subject to such modifi-
cations as may arise from an unreasonable delay in such port,
from a construction of the policy showing an evident intent other-
wise, and from the usages of particular trades.10 And this rule is
also qualified by the proviso that the ship must arrive within such
time as not to materially increase the risk, as where an unrea-
sonable delay in arriving changes the character of the risk, as to
a more dangerous season of the year, and this exception applies
whether the delay be voluntary or involuntary.11
§ 1497. What is sufficient repair and seaworthiness for ship to
lie in safety "at" outport. — It would necessarily follow that the
converse of the proposition stated under the last section is true,
and that the policy will not attach if the ship arrives at such for-
eign port in so crippled a condition, or so badly wrecked, that
she cannot lie there in safety or reasonable security to properly
prepare and equip her for voyage.12 By the term "seaworthiness,"
Royal Exeh. Assur. Co. 6 Taunt. 241, v. London Assur. Co. 1 Atk. 545, 13
4 Camp. 84, 3 Moore & S. 461. Eng. Rul. Cas. 467; De Wolf v. Arch-
10 Seamans v. Loring, 1 Mason (U. angel Maritime Bank & Ins. Co. L.
S. C. C.) 127 Fed. Cas. No. 12,583; R. 9 Q. B. 451, 13 Eng. Rul. Cas
and cases cited; Merchants' Ins. Co. 609. See 1 Arnould on Marine Ins
Cas. (N. Y.) 10, 2 Am. Dec. 130, seq., pp. 389 et seq. And see § 1018
per Kent, J. (Mr. Parsons says the herein, and §§ 1498, 1500, post,
words of this judge are obiter); n DeWolf v. Archangel Maritime
Smith v. Steinbach, 2 Caines (N. Y.) Bank & Ins. Co. L. R. 9 Q. B. 451,
158; Kemble v. Bowne, 1 Caines (N. 13 Eng. Rul. Cas. 609, relying upon
Y.) 75; Parmeter v. Cousins, 2 Camp. Hull v. Cooper, 14 East, 472; Mount
235, 13 Eng. Rul. Cas. 608; Vallance v. Larkins, 8 Bing. 108, 122; Val-
v. Dewar, 1 Camp. 503 ; Haughton v. lance v. Dewar, 1 Camp. 501, and
Empire Marine Ins. Co. L. R. 1 Ex. other cases.
206; Bell v. Bell, 2 Camp. 475; Bird 12 Parmeter v. Cousins, 2 Camp,
v. Appleton, 8 Term Rep. 562, 13 257, 13 Eng. Rul. Cas. 608, per Lord
Eng. Rul. Cas. 547; Forbes v. Wil- Ellenborough, and cases cited in last
son" 1 Park 72; Hunting & Son v. note. See" also Shawe v. Felton, 2
Boulton, 1 Com. Cas. 120, 122; Cam- East, 109, 13 Eng. Rul. Cas. 631;
den v. Conley, 1 W. Black. 417, 14 Horneyer v. Lushington, 15 East, 46,
Eng. Rul. Cas. 46; Stone v. Marine 13 Eng. Rul. Cas. 637.
Tns. Co. L. R, 1 Ex. D. 81; Motteux
2683
§ 1498 JOYCE ON ENSURANCE
as used in the lasi section, applied to the ship in the connection
there stated, is meant a state of seaworthiness commensurate with
her then risk, and condition consistenl with the ship's then security
in the specified port. A state of repair and equipmenl "at" such
a port may be sufficient, although it would be unseaworthiness for
the sea voyage. It may reasonably be assumed from the nature of
the thing thai repairs may probably be necessitated upon the ship's
arrival at such specified port; a necessity for repairs and some de-
lay for that purpose to put her in a lit condition to undertake her
voyage being events unavoidably contemplated under every such
contract for insurance.18 Thus, a policy on a ship "a1 and from
a p^rt*' will attach although the ship he at the time undergoing
i xtensive repair- in port, so as to be utterly unseaworthy, in the
genera] sense, for a voyage.14 The safety required is a physical
safety from the perils insured against, a freedom from political
danger uol being necessitated.15
§ 1498. Whether risk attaches upon first arrival "at" or after
the vessel has been moored twenty-four hours, etc. — Where a vessel
insured "at and from" a foreign port has not, been lying in port,
but is expected to arrive, and the homeward risk is preceded by
the risk under the outward policy, which is to continue after the
-hip's arrival for either a specified number of days or until she
is moored twenty-four hours in safety, the question has been raised
whether the homeward policy attaches immediately upon the ship's
first arrival "at" or within the place, or not until the ship has
been moored twenty-four hours in safety. The true rule undoubt-
edly is that above stated by us.16
13 McLanahan v. Universal Ins. Co. 15 Bell v. Bell, 2 Camp. 475, per
1 Pet. (26 U. S.) 170, 184, 7 L. ed. Lord Kllenborough.
98; Paddock v. Franklin Ins. Co. 11 16 8 1496 herein. Mr. Marshall
Pick. (28 Mass.) 227, per Shaw, C. says that in such cases "the risk be-
J.; Merchants' Ins. Co. v. Clapp, 11 gins from the first moment of her
Pick. (28 Mass.) 56; Taylor v. Low- [the ship's] arrival at the place speci-
ell, 3 Mass. 331, 3 Am. Dec. 141, per lied, and the words 'first arrival' are
Sew all, J.; Parmeter v. Cousins, 2 implied and always understood in
(amp. 237, 13 Eng. Etui. ('as. 608; policies so worded':" 1 Marshall on
Smith v. Surridge, 4 Esp. 25; Abit- Ins. (ed. 1810) *262. Mr. Arnould
hoi v. Bristow, (> Taunt. 464; Annen declares thai the risk ''commences im-
V. Woodman, 3 Taunt. 299; Forbes mediately on her lirst arrival at such
v. Wilson, reported in 1 Marshall on port, and continues during the whole
Ins. (ed. 1810) '■' l.V>; and see sec- time that she remains there in a
tions as to warranty of seaworthi- course of preparation for the voyage
ness. insured," and this rule remains un-
14 McLanahan v. Universal Ins. Co. changed in Mr. Maclachlan's edition
1 Pet. (26 U. S.) 170, 184, 7 L. ed. of 1887, of Mr. Arnould's work 1
98. Arnould on Marine Ins. (Perkins' ed.
2684
DURATION OF RISK— THE SHIP
§ 1500
§ 1500. Same subject: cases and opinions of the courts. — The
case of Garrigues v. Coxe17 holds that the homeward risk in such
cases begins only when the vessel has been moored twenty-four
hours in safety. This was, however, a case at nisi prius. Lord
Hardwicke declares in Motteux v. London Assurance Company,18
that the words "first arrival" are always implied and understood
in such insurances. In Seamans v. Loring19 Judge Story states
that the homeward policy "at and from" a foreign port attaches
from the ship's first arrival there.20 In Vallance v. Dewar1 the
court says: "According to the general import of the words 'at
and from,' the policy would attach upon the ship's first mooring
in a harbor" at the place where the risk is to commence. In
Patrick v. Ludlow2 Mr. Justice Kent places the time of the attach-
ment of the risk on the ship in these cases "from the time of her
arrival" in such a foreign port.8
1850) 448, *444, Id. (Maclachlan's ed. 20 Haughton v. Empire Marine Ins.
1887) 406, 407. See discussion Id. Co. L. R. 1 Ex. 206. The risk in
(8th ed. Hart & Simey) sees. 474 et this ease was under a policy "at and
seq., pp. 609 et seq., where it is said from" a foreign port, and the point
"When the insurance is 'at and was raised that the policy did not
from' there are three possible cases — attach until the vessel had been safely
(1) The ship may then be lying at moored within the harbor. It was
the terminus a quo, (2) she may not nevertheless declared by the court that
have arrived there, (3) she may al- risk on the ship commenced on her
ready have sailed." 17 Earl of Hals- first arrival in port, and that the first
bury's Laws of England, sees. 769, arrival need not be identical with the
770, pp. 388, 389. Mr. Phillips says : mooring in good safety named in out-
"In insurances on a vessel 'at' a port, ward policies, since the terms in one
the risk generally commences from contract could not be construed by
the time of its being there:" 1 Phil- reference to another not referred to.
lips on Ins. (3ded. 506) sec. 932. Mr. The cases relied on are Parmeter v.
Parsons says : "If the policy on the Cousins, 2 Camp. 235, 13 Eng. Rul.
homeward voyage is stated to be in Cas. 608; Bell v. Bell, 2 Camp. 475;
continuance of the policy on the out- Motteux v. London Assur. Co. 1 Atk.
ward, it would certainly take effect 545, 13 Eng. Rul. Cas. 467. The
on the termination of the outward, Haughton case is in accord. Marine
but perhaps not otherwise:" 2 Par- ins. act 1906 (6 Edw. VII. c. 41)
sons on Marine Ins. (ed. 1868) 46. sched. I. rule 3 (a), (b), given un-
Emerigon, however, declares that the der Appendix C herein; 17 Earl of
ship can never perish outward and Halsburv's Laws of England, sec.
inward, although the rule is otherwise
in regard to the goods: Emerigon
on Ins. (Meredith's ed. 1850) c. xiii.
sec. 20, pp. 592-94.
17 1 Binn. (Pa.) 592, 2 Am. Dec.
493.
18 1 Atk. 545, 13 Eng. Rul. Cas.
467. 471; Id. pp. 016, 617 note.
769, p. 338 note (m).
1 1 Camp. 503.
2 3 Johns. Cas. (N. Y.) 10, 2 Am.
Dec. 130.
3 Criticised in 2 Parsons on Marine
Ins. (ed. 1868) 46, as an opinion al-
together obiter. It is also declared in
another case that if the ship has once
19 1 Mason (U. S. C. C.) 127, Fed. been "at" the outward port or ter-
Cas. No. 12,583. minus a quo of the homeward vovage
2685
§§ 1501, 1502 JOYCE ON INSURANCE
§ 1501. Same subject: attachment and duration of risk "at and
from" island, etc.4 — In case of an insurance on a ship "at and
from" an island or district with several ports, such as the West
[ndies, the outward risk in continue until the ship has been moored
twenty-four hours in safety, the homeward policy will attach upon
the expiration of the outward; that is, after she has been m vd
twenty-four hours in safety after her voluntary arrival ;it her first
port of discharge, even though at thai time she lias not discharged
.ill her outward cargo, and although she thereafter goes from port
to port of the island. In this case it appeared, however, that the
-hip was hound to the island generally, and by the course of trade,
to touch at the several ports there to discharge and take in cargo,
and the decision was based upon evidence of the custom of mer-
chants as to the time when the outward risk ended, and the verdict
was found by a special jury that the risk ended as above stated.5
But in a similar case under a policy "at and from'' Georgia to
Jamaica and "till moored twenty-four hours in safety," Lord
Kenyon said, the risk on the ship ceased on her being moored
twenty-four hours within the first port of the island for the purpose
of unlading.6
§ 1502. Usage may suspend attachment of risk "at and from"
beyond time of ship's first arrival. — A notorious and established
usage of a particular trade, presumptively within the knowledge
of both parties, may suspend the attachment of a risk "at and
from" beyond the time of the ship's first arrival, so that in such
case the risk wall only commence on the homeward voyage when
the vessel begins preparations therefor. This is illustrated by the
case of an insurance upon ship, freight, and cargo at and from
Newfoundland to a port in Europe, it being an established usage
of the Newfoundland trade for vessels, after arrival there and
in such good physical safety as to the court was distinct from this."
admit of repairs, it is sufficient: He also says of that in Mottoux v.
Bell v. Bell, 2 Camp. 475, cited in 1 London Assnr. Co. 1 Atk. 545, L3
Arnould on Marino Ins. (Perkins' Eng. Rul. Cas. 467, above noted, "The
cd. 1850) 448, *443, *444; 1 Ar- chancellor did not intend In distin-
nould on Marine Ins. (Maclachlan's guish between the moment of arrival
ed. 1887) 406; Id. (8th cd. Hart & and the being moored twenty-four
Simey) sec. 478, p. 615; Parmeler v. hours."
Cousins, 2 Camp. 235, 13 Eng. Rul. 4 Sec § 1 .12 4 herein.
Cas. 608, per Lord Ellenborough. 5 Camden v. Cowley, 1 W. Black.
Mr. Parsons criticises the opinion of 417, 14 Eng. Rul. Cas. 46. See
Mr. Justice Kent (2 Parsons on Ma- opinions of Lord Mansfield and Wil-
rine Ins. (cd. 1868) 4(>n, 47m) in mot, J. ; Leigh v. Mather, 1 Esp. 412,
Patrick v. Ludlow, 3 Johns. Cas. (N. per Lord Kenyon.
Y.) 10, above noted, as "altogether 8Leisrh v. Mather, 1 Esp. 412, per
obiter," saying "The question before Lord Kenyon.
2686
DURATION OF RISK— THE SHIP §§ 1503, 1504
finding no cargo ready, to be employed in fishing upon the banks,
or in making intermediate trading voyages to some adjacent port,
before they begin to take in their homeward cargo. Here the risk
is not determined by the delay or intermediate voyage, but is
suspended as to its attachment, by the usage of which the insurers
are bound to take notice until the vessel begins to prepare for the
voyage insured, and the underwriters in such case are not liable
for any antecedent loss. It also appeared in this case that it was
a custom to cover the ship by a separate insurance during such
fishing or intermediate voyages.7 But in case of an insurance "at
and from" any ports in Newfoundland, and the vessel leaves the
port there and goes to the banks and fishes for several days, the
insured cannot recover for a loss thereafter sustained.8
§ 1503. Stipulation that risk commence "at and from" on ter-
mination of cruise and preparing for voyage. — An insurance may
stipulate that the adventure shall begin on the termination of the
cruise and preparing for her homeward voyage, the policy being
"at and from" a specified port," "or any other port or ports" on a
certain coast, and where in such case the master sent a boat from
the vessel lying off said coast to the specified port to see if he could
obtain a cargo, but was unsuccessful, and sailed for another port
on said coast for a cargo, and the vessel was lost, the homeward
risk was held to have attached, and a preparation for the voyage
to have been commenced.9
§ 1504. Opinions of the courts as to attachment of the risk in
the preceding cases. — Lord Ellenborough says: "While the ship
remains at the place, a state of repair and equipment may be
sufficient which would constitute unseaworthiness after the com-
mencement of the voyage. But while in port she must be in such
condition as to enable her to lie in reasonable security till she is
properly repaired and equipped for the voyage ; she must have
once been at the place in good safety. If she arrives at the out-
ward port so shattered as to be a mere wreck, a policy on the
homeward voyage never attaches." 10 Lord Kenyon says: "Where
a ship is insured to a particular port of delivery, if forced into a
different port by stress of weather, where she discharges a part of
her cargo and then proceeds to her port of delivery, I am of the
opinion that the policy will remain good. But where a ship,
under a general policy to a port and until moored twenty-four
7 Vallance v. Dewai', 1 Camp. 503. 9 Lambert v. Liddard, 5 Taunt. 480.
See Ougier v. Jennings, 1 Camp. 505, 10 Parmeter v. Cousins, 2 Camp.
n. 235, 13 Eng. Rul. Cas. 608.
8 Way v. Modigliani, 2 Term Rep.
30.
2GS7
§ 1505 JOYCE UN INSURANCE
hours, came to another port, and there voluntarily remained and
discharged pari of her cargo, such action will put an end to the
policy, whether on ship or goods." u In Motteux v. London A.ssur-
ance Company la Lord Kardwicke says: "In a former case before
in,- it was debated whether the words 'at and from Bengal to
England' meanl Hie firsl arrival of the ship at Bengal; and ii was
agreed that the words 'firsl arrival' were implied and always under-
stood in policies." In Seamaid v. Luring18 Story, J., says: "The
true construction of the words 'at and from' in a policy musl in a
measure depend on the state of things at the lime of the insuring.
If ii,.. ship is al that time in a foreign port or expected to arrive
at such port in the course of her voyage, tin1 policy, by the word
'at,5 will attach upon the vessel and cargo from the time of her
arrival there. If, on the other hand, the vessel has been a long time
in such port without reference to any particular voyage, the policy
will only attach from the time that, preparations begin to be made
with reference to the voyage assured." In Patrick v. Ludlow,14
Radcliff, J., says: "A policy on goods for any voyage cannot
attach until they leave the shore to be put on board. Here the
insurance is expressed to be 'at and from S.,5 and yet. as in other
policies, describes the adventure to begin from the loading thereof
on board. It manifestly cannot apply to a period during which
an intermediate voyage was performed. That voyage cannot,
therefore, constitute a deviation."
§ 1505. Meaning of the word "port" generally: "port risk."—
The meaning of the word "port" is generally accepted to be
synonymous with the word "harbor."' in the sense that it is a place
where ships may be safe from the perils of the ocean; a space of
water inclosed by land within which a vessel may be sheltered
from storms. But this meaning is not exclusive, for it may be
controlled by the terms of the policy-, by the peculiar sense in which
it is used, or by commercial usage, and is generally to be taken in
reference to the subject matter to which it is applied. It may be
applied to places on a coast where there are no harbors, or to a
certain named port, there being no actual port or harbor there.
In such cases it may mean only a road or anchorage place for tin1
purpose of loading and unloading cargoes, and may extend to an
exposed and open roadstead; such a construction being warranted
by the facts and the peculiar sense in wdiich the word "port"' is
used.15 Thus a vessel insured "at and from" a place has been
11 Leigh v. Mather, 1 Esp. 412. 14 3 Johns. Cas. (N. Y.) 10, 2 Am.
12 1 Atk. 545, 13 Eng. RuL Cas. Dec 130.
467. 15 United States. — Hancox v. Fish-
13 1 Mason (U. S. C. C.) 127, Fed. ing Ens. Co. 3 Sum. (TJ. S. C. C.) 132,
Cas. No. 12,583. 134, Fed. Cas. No. 6013; Gray v.
'JliSS
DURATION OF RISK— THE SHIP § 1505
held "at" the place, so that the risk would attach when she lay
at an island nine miles below the town, such island being deemed
a port of such place.16 Again, in case of an insurance "to any port
in the Baltic," the Baltic may be shown to comprehend, as gen-
erally used and understood, the gulfs and inlets which communi-
cate with the sea, and might include the Gulf of Finland, if so
proven.17 So a policy issued upon a vessel at and from Sydney,
C. B., to St, John, will attach when the vessel calls at Sydney for
orders, though she only comes into waters known on charts and
to practical men as "Sydney Harbor," which is ten miles distant
from the harbor of Sydney proper, and five miles distant from that
of North Sydney.18 And it is held to have been a proper ques-
tion for the jury whether the words "New York harbor," under
the particular facts of the case, included Tarrytown, on the Hud-
son River, about twenty-nine miles north of New York.19 So
when the policy contains a clause that the insurers take no risk
in port, but sea risk, the term "port" is not to be confined to the
port of departure or discharge, but is used in contradistinction to the
high seas, and refers to any port into which the vessel may of
necessity enter during the voyage insured.20 And the term "port
risk," under New York policies, is held to mean the risk upon a
vessel while lying in port and before departure upon another
voyage.1 Where a vessel was warranted in port on a certain day.
and was insured from Hamburg to Vigo, and was in the port of
Harper, 1 Story (U. S. C. C.) 574, Taunt. 405, n; Uhde v. Warlters, 3
Fed. Cas. No. 5716. Camp. 16 ; Moxon v. Atkins, 3 Camp.
Louisiana. — Osacar v. Louisiana 200, 13 Eng. Rul. Cas. 590; Neilson
State Ins. Co. 17 Mart. (La.) 386. v. De La Cour, 2 Esp. 619; 1 Green,
Massachusetts. — Fav v. Alliance 534; Van Baggen v. Baines, 9 Ex.
Ins. Co. 16 Gray (82 'Mass.) 455; 253; 1 Duer on Ins. (ed. 1845) 281,
Cole v. Union Mutual Ins. Co. 12 sec. 74. See cases under next sec-
Gray (78 Mass.) 501, 74 Am. Dec. tion.
609. 16 Bell v. Marine Ins. Co. 8 Serg.
New York. — De Longuemere v. & R. (Pa.) 9S.
New York Firemen's Ins. Co. 10 n Uhde v. Warlters, 3 Camp. 16.
Johns. (N. Y.) 120. 18 Troop v. St. Paul Fire & Marine
England.— Birch v. De Peyster, 4 Ins. Co. 33 N. B. 105.
Camp. 385 ; Brown v. Tayleur, 4 Ad. 19 Petrie v. Phoenix Ins. Co. 43 N.
& E. 241; Hull Dock Co. v. Browne, Y St. Rep. 478, 132 N. Y. 137, 30
2 Barn. & Adol. 43; Constable v. N. E. 380, 45 Alb. L. J. 419.
Noble, 2 Taunt. 403, 13 Eng. Rul. 20 Patrick v. Commercial Ins. Co.
Cas. 587; Sea Ins. Co. v. Gavin, 2 11 Johns. (N. Y.) 9.
Dow & C. 124; Cockey v. Atkinson, l Slocovich v. Oriental Mutual Ins.
2 Barn. & Aid. 460; Sailing-Ship Co. 13 Dalv, 264, aff'd 108 N. Y.
"Garston" v. Hk-kie & Co. L. R. 15 56, 14 N. E. 802, 12 L. R, 806; Nel-
Q. B. Div. 580, per Lord Esher; son v. Sun Mutual Ins. Co. 71 N.
Robertson v. Clark, 1 Bing. 445, 8 Y. 453, 40 N. Y. Super. Ct. 417.
Moore, 622 ; Payne v. Hutchinson, 2
Joyce Ins. Vol. III. — 169. 2689
§§ 1505a, 1506 JOYCE ON INSURANCE
Cuxhaven, outside of the port of Hamburg, about ninety miles
below, on said day, tin- risk was hold not to have attached.2 And
the term "port risk" is a technical term, the meaning of which,
as used in marine policies, may be proven by expert evidence.8
But evidence is held inadmissible of a custom for vessels to go to
two ports in the same island where the terms of the contract are
clear, and insure "to a port in Cuba, and at and from thence to a
port of advice in Europe."4 So also, an insurance "at and from"
her poll of lading excludes a construction thai Lading at two dif-
i. r>nl places was intended, although located in the same hay with-
in a few miles each of the other, the contract clearly evidencing
that only one port was intended.5
§ 1505a. "Port or ports," "place or places," construed. — Where
;i -hip was insured "at and from . . . whilst at port or ports,
place or places in New Caledonia" and while on the way to a port
m that island and within the geographical limits thereof she in-
curred losses by striking upon a reef, it was held that the words
"place or places" was intended to add something to the meaning
of "port or ports" and that the words being so used together meant
"place or places" at which the vessel might arrive with some object
other than that of merely passing on her way to some other point,
and, therefore, the vessel was not "at a port or ports, place or places
in New Caledonia" within the meaning of the policy, when the
loses incurred. The Court, per Walton, J., said: "I think that,
used as they are in connection with the words 'port or ports,'
the words 'place or places' have a meaning somewhat wider than
that attributed to them by the witnesses. They seem to me to
mean place or places at which the vessel arrives in the course of her
voyage for the purpose of loading, discharging, repairing, or even
taking shelter — in other words, a place to which she has come for
some purpose and with some object other than that of merely pass-
ing through it without stopping on her way to some other point.6
§ 1506. Duration of risk: time policies "at sea: " "on a passage." —
In insurances on time it is frequently stipulated that if the ship
be "at sea" or "on a passage" when the period for limitation for
the duration of the risk expires, that the insurance shall continue
until her arrival at her port of discharge or port of destination.
2 Colby v. Hunter, 1 Moody & M. 5 Brown v. Tayleur, 4 Ad. & E.
81, 3 Car. & P. 7. 241.
3 Nelson v. Sun Mutual Ins. Co. 6 Maritime Ins. Co. Ltd. v. Aliaza
71 N. Y. 453, 40 N. Y. Super. Ct. Ins. Co. of Santander [1907] 2 K.
417. B. 060.
4 Hearne v. New England .Mutual
Marine Ins. Co. 20 Wall. (87 U. S.)
488, 22 L. ed. 395.
2090
DURATION OF RISK— THE SHIP § 1506
In construing these terms, reference must necessarily be had to
the connection in which they are used, and the evident intent of
the parties to be ascertained by the language employed, together
with such other aids to construction as may be legally available.
If a vessel has sailed on or commenced her voyage, she would pre-
sumably seem to be at sea from the commencement to the ter-
mination of that voyage. In connection with this question, the
point considered under the last section may be important. As will
be seen, however, there is some disagreement between the courts
as to the effect of these words. Thus, where an insurance is upon
a ship for a specified time, and if she should be at sea at the ex-
piration of said period, the insurance to continue at the same rate
of premium until she reaches her port of destination, the vessel
is held to be at sea, within the intent of the policy, if at the expira-
tion of the time she is lying ready to sail in a river leading from a
port twenty-five miles inland, but cannot get down nor sail till
after the year, because of headwinds and a heavy sea, and the in-
surers are liable for her damage after sailing from the river after
the year, there being no fraud nor want of diligence.7 But where
a vessel was insured for a year by a policy containing a provision
that if she was "on a passage at the end of the term" the risk
should continue until her arrival at her port of destination, and
she sailed from the Chincha Islands and put into Callao, on the
mainland, there being no other port of entry for the Chinchas,
for the necessary clearance, water, and crew for her further voyage,
and while there the year expired, it was held that she was not "on
a passage" within a meaning of the policy.8 So in a similar case
the vessel was held not "at sea" at the end of the year, but had
arrived at her "port of destination," where she had anchored be-
tween two of those islands for want of a port before the term ex-
pired, and took in her cargo in boats, obtaining her clearance at
Callao, and sailing after the year. The rule stated was that the
risk in such cases will terminate when the ship at the end of the
year is, or afterward first arrives, at some port to which she is sent
to take in cargo, and this though the place is not an open port by
law, but an open roadstead, with no haven, harbor, or custom-
house, and is not her final destination.9 In New York, the vessel
was held not "at sea" under a like policy, the risk to continue until
7 Union Ins. Co. v. Tyson, 3 Hill vessel is "on a passage" under such-.
(N. Y.) 118. The court cites and circumstances.
relies upon Bowen v. Merchants' Ins. 8 Washington Ins. Co. v. White,
Co. 20 Pick. (37 Mass.) 275, 32 Am. 103 Mass. 238, 4 Am. Rep. 543.
Dec. 213, a case directly in point, be- 9 Cole v. Union Mutual Ins. Co. 12
ing based upon substantially similar Gray (78 Mass.) 501, 74 Am. Dec.
facts, and which also holds that the 609. Here the court said : "Al-
2691
§ 1507 JOYCE ON INSURANCE
her arrival at her port of destination, in a case where she was de-
tained undergoing repairs in a foreign port, although not her
lilial port, at the expiration of the specified time, and was subse-
quently Los1 <>ii her return passage. In this case no port of destina-
tion was named.10 In another case the risk was to continue if
••mii a passage" at the end of the term until the ship's arrival at her
port of destination, and until arrived and moored at anchor twenty-
four hours in safety; the vessel was on a charter to the French
marine to proceed directly to Woosung, near Shanghai, there to
receh ders whether to discharge at Woosung or to proceed
farther; she was on a passage at the end of the term. She arrived
al the mouth of the Shanghai river within the port of Woosung,
and was directed to await there for further orders, in accordance
with the terms of the charter-party. She was lost at that place
after the term had expired, and it was held that Woosung was the
port of destination, and the risk ended when she had been moored
in safety there twenty-four hours.11 Again, the underwriters were
held discharged under a time policy for twelve months ending
November 10, 1838, with liberty of the globe, and if "at sea" at
the end of the time limit, the insurance to continue at the same
rates until her arrival at her port of destination in the United
States, and while on her voyage to England she encountered a gale
in December, 1838, and sustained damage. The decision was
based upon the point that the underwriters were not liable unless
she was on her voyage to the United States at the time of sustain-
ing the loss.12
§ 1507. Attachment risk "at and from" vessel lying long in for-
eign port or stated to be there in safety: where she now is. — In
cases where an insurance is effected "at and from" some foreign
port in which the vessel may have been lying a long time, without
reference to any particular voyage, the risk attaches from the time
though there was no customhouse, and that, being- in a foreign port at the
do clearance could be obtained there, expiration of the term, having been
she was, in reference to condition in captured and carried thither against
policy as to the extension of same, not the will of the master, she was still
•at sea,' and not entitled to the bene- "at sea" within the meaning of the
fit of the extension of the time se- policy: Wood v. New England Ma-
cured thereby to vessels 'at sea' at the rine Ins. Co. 14 Mass. 31, 7 Am.
end of the year:" Tilton v. Tremont Dec. 182.
Ins. Co. 12 Gray (7s Mass.) 519, and l0 American Ins. Co. v. Hutton, 7
note. Although the last three cases Hill (N. Y.) 321, affirming 24 Wend.
were decided in Massachusetts, yet in (N. Y.) 330.
another case in that state, where the n Wales v. China Mutual Ins. Co.
risk was to continue at an agreed pre- 8 Allen (90 Mass.) 380.
mium until she reached her port of 12 Eyre v. Marine Ins. Co. 6 Whart.
discharge if the vressel was at sea (Pa.) 247. See s. c. 5 Watts & S.
when the year expired, it was held (Pa.) 116.
2692
DURATION OF RISK— THE SHIP § 1508
the ship begins to make preparations for the voyage insured, or
when some act is done toward equipping her for the voyage, or on
the day on which she is stated to have been in safety in the porl
from which she is to sail, and in case the ship is stated to have
been at the port on a certain day, it means that she was there in
safety. If the loss or injury occurs before that day, the under-
writers are not liable, for the risk has not commenced.13 So the
words "where she now is," following the words "at and from the
port of Gibraltar," will amount to a warranty that the ship is there
at said port in safety.14
§ 1508. Homeward policy "at and from:" general designation
of ports: case of island or district. — In insurances "at and from" it
may be evident that it was the intent of the parties not to confine
the limits of the risk to a specific port or place, but that the pro-
tection of the policy should be extended to the ship in sailing from
one port to another for the purpose of loading. Thus, insurances
"at and from" an island or district with several ports is not the
same as a policy at and from a port. The general words of the
former may evidence an intent to license the use of all the differ-
ent ports of the island or country named, and gives the ship a
liberty of going from one port to another in the island or district
for the purpose of loading or completing her cargo.15 But where
the insurance was On freight, the description being to a port on the
north side of Cuba, with liberty to a second port thereon, the risk
was held limited to a second port on the side specified, viz., the
north side.16 The terms of the policy may be such as to evidence
an intent that the risk may attach "at" one of two ports in the
alternative, at the insured's election ; thus, in case of a policy "at
and from either of" two ports,17 or "at and from" a port or ports, or
ports and places, which would contemplate a sailing to several ports
13 Seamens v. Loring, 1 Mason (U. and under that word the ship is pro-
S. C. C.) 127, Fed. Cas. No. 12,583, tected in going from port to port
per Story, J., and cases cited; Kern- round the coast of the island; Thel-
ble v. Bowne, 1 Caines (N. Y.) 75, lusson v. Staples, 1 Doug. 352n. See
79, per the court. also Brown v. Tayleur, 4 Ad. & E.
14 Callaghan v. Atlantic Ins. Co. 1 248, per Patterson, J. ; Constable v.
Edw. (N. Y.) 64. Noble, 2 Taunt. 405, 13 Eng. Rul.
15 Dickey v. Baltimore Ins. Co. 7 Cas. 587; Inglis v. Vaux, 3 Camp.
Cranch (11 U. S.) 327, 3 L. ed. 360, 437; Lambert v. Liddard, 5 Taunt,
relying upon Camden v. Cowley, 1 479; Leigh v. Mather, 1 Esp. 412.
W. Black, 417, 14 Eng. Rul. Cas. 16 Nicholson v. Mercantile Marine
46 ; Bond v. Nutt, Cov. 601 ; Thellus- Ins. Co. 106 Mass. 399.
son v. Ferguson, 1 Doug. 346, per 17 Vandervoort v. Smith, 2 Caines
Lord Mansfield, who said that under (N. Y.) 155. So used in Gardner
an insurance "at and from" such a v. Columbian Ins. Co. 2 Cranch (TJ.
place as Guadaloupe or Jamaica, the S. C. C.) 473, Fed. Cas. No. 5,224
word "at" comprises the whole island, (a policy on goods).
2693
§§ 1509-1511 JOYCE ON INSURANCE
or places to take in cargo. The question, however, in cases of the
character of t lie above is dependent largely upon the construction
of the contract.18 And in certain cases of insurances upon a par-
ticular voyage, governed by a custom as to a course of trade, the
meaning of genera] words, such as "in all ports and place-." etc.,
in policies "at and from" may be governed, within the reasonable
import of the terms of the insurance, by the general usage of
merchants with reference to that particular trade or voyage, for
every underwriter is bound to know the usage of the trade to which
his insurance relates.19
§ 1509. Homeward policy "at and from: " specific designation of
port or place. — In cases where the homeward policy is "at and
from" a port or place specifically designated, or "at and from" the
ship's port of lading in an island or districl having several ports,
it seems to be the rule that the intent evidenced by such specific
designation will control and limit the risk taken by the insurer,
and will exclude other ports or places, restricting the risk to one
particular place.20 In such case Mr. Arnould says: "It is fair to
conclude that the underwriter, with a view of limiting his risk,
confined it to the ship while she was taking in her cargo at one
specific place or harbor town." 1
§ 1510. Attachment of risk "at and from" foreign port: owner-
ship acquired while vessel lying in port. — If under a policy "at and
from" a foreign port at which the vessel has been lying the owner-
ship is acquired while the vessel is lying in port, and subsequently
to the time that preparations are begun to be made with reference
to the voyage insured, the policy will attach only from the time
such ownership is acquired.2 So the risk was held to attach from
the time of purchase at Trinidad, in case of an insurance "at and
from" that place.3
§ 1511. "At and from" any one of several ports: voyage from
one port to another before risk attaches. — If an insurance be "at
18 See Brown v. Tavleur, 4 Ad. & ll Arnould on Marine Ins. (Per-
E. 241; 1 Arnould on Marine Ins. kins' ed.) 1850, 452, *448. See 1
(Perkins' ed. 1850) 452, *448; 1 Ar- Arnould on Marine Ins. (Maclach-
nould on Marine Ins. (Maclaehlan's lan's ed. 1887) 410. So much of the
ed. 1887) 410; Id. (8th ed. Hart & text as is above quoted is from Per-
Simey) sec. 397, p. 518; Td. sees, kins' edition but is omitted, however,
185, 486, pp. 622, 623. 1 Phillips on in Maclaehlan's edition. See chap-
Ma i-ine Ins. (3d ed.) 525 et seq., sees, ter on "Deviation," herein.
958, 959. 2 Seamans v. Loring, 1 Mason (U.
"Salvador v. Hopkins, 3 Burr. S. C. C.) 127, Fed. Cas. No. 12,583,
1707. per Story, J.
20 Smith's Mercantile Law, Am. ed. 3 Steinbach v. Rhinelander, 3
404; Brown v. Tayleur, 4 Ad. & E. Johns. Cas. (N. Y.) 269.
241, per Patterson, J.
2694
DURATION OF RISK— THE SHIP §§ 1512, 1513
and from" any one of several ports of departure to a port of destina-
tion, and before the ship's final departure on the voyage insured
she undertakes a voyage from one of these several ports to another,
the voyage insured does not attach so as to protect the prior voyage.4
§ 1512. Attachment of risk "from" a port. — In insurances on a
ship "from" a port, the rule as to the time of the commencement
of the risk differs from that which obtains in cases of insurances
"at and from" a port, since in the former case the risk in port is
not covered, the risk only commencing when the ship actually
sails on her voyage, and the insurers are not liable for her loss or
damage occurring before she so sails ; 5 and under such an insur-
ance the risk may commence "from" a port by the vessel taking in
part of her cargo there and completing her loading at an outport,
according to usage in case of vessels of like burden.6 The attach-
ment of a risk from a port, said risk being part of an entire risk,
may be postponed by a justifiable intermediate voyage.7
§ 1513. Attachment and duration of risk: entirety of risk. — In
determining how far the risk is entire, consideration must always
be given to the fact that the voyage insured is a legal term de-
pendent upon the stipulations of the contract. The evidence of the
intent as to the duration of the risk must be looked for in such
stipulations, as qualified by the expressed termini; that is, the
specific designation of the times when or places where the risk
commences and terminates, such times and places being the ex-
tremes. If in the voyage insured the terminus a quo and the ter-
minus ad quern are expressly specified as the two extremes of the
risk, and the premium is entire, there is a presumption that the
risk is entire, covering the entire voyage insured between the
termini ; the insurance in such case is only a single insurance, and
ships are thus often insured for the round voyage out and home,
4 Sellar v. MeVickar, 1 Mer. Rep. 307, n. a. See § 1495 herein, as to
23, cited in 1 Marshall on Ins. (ed. what constitutes sailing on voyage;
1810) *323, *324. See § 1488 herein, and see also § 2082, post, as to war-
6 Nelson v. Sun Mutual Ins. Co. ranty to sail. "Where the subject
71 N. Y. 453; Union Ins. Co. v. Ty- matter is insured 'from' a particular
son, 3 Hill (N. Y.) 118; Mey v. place, the risk does not attach until
South Carolina Ins. Co. 3 Brev. (S. the ship starts on the voyage in-
C.) 329; Bond v. Nutt, 2 Cowp. 601, sured." Marine ins. act 1906 (6 Edw.
607; Pittegrew v. Pringle, 3 Barn. & VII. c. 41) sched. I. rule 2; Butter-
Adol 514; 1 Arnould on Marine Ins. worth's Twentieth Cent. Stat. (1900-
( Perkins' ed. 1850) 343, *337, *338, 1909) p. 426.
447, *442 ; 1 Arnould on Marine Ins. 6 Mey v. South Carolina Ins. Co.
(Maclachlan's ed. 1887) 369, 404; 1 3 Brev. Const. (S. C.) 329.
Marshall on Ins. (ed. 1810) 261 a; 7 D rise oil v. Passmore, 1 Bos. & P.
2 Parsons on Marine Ins. (ed. 1868) 200.
48; 3 Kent's Commentaries, 5th ed.
2695
§ 1513 JOYCE OX INSURANCE
and the voyage insured is one entire and indivisihle. although her
outward voyage and homeward voyage are in reality separate and
distincl passages, and the underwriter is liable under such policy,
the risk being entire for the entire voyage so insured, no matter
how many separate and distincl passages or intermediate voyages
the ship is by the terms of the policy permitted to make But
if it is evident from the contract that the risk was intended to he
severable and qoI entire, it will be so held.8 "When a ship is in-
sured both outward and homeward for one entire premium, this,
with reference to the insurance, is considered but as one voyage,
and the terminus a quo is also the terminus ad quem." 9 Thus.
in case of an insurance at and from Boston to Archangel and back
to Boston, the risk was held entire.10 So in case of a policy on
ship and cargo at and from A to B during her slay and trade
there, thence to her port or poils of discharge in C, and at and
from thence hack to A. the contract was held entire.11 And if
the risk has once commenced upon a policy at and from such a
port to any other porl or place whatsoever for twelve months, at
a lump premium, the risk is entire.12 In this connection the dis-
tinction should be observed between the voyage insured and the
route or voyage of the ship. In the former case the termini are
expressed, but the route or prescribed course of the voyage of the
ship is implied.13 And, as we have already stated, the voyage
insured may be changed or abandoned, so that the risk may never
be incepted, or being abandoned, may terminate;14 but the route
may in several cases be changed or altered without the voyage
insured being so, and the voyage insured may be entirely broken
up without the route being departed from. So a ship may be
chartered for a round voyage out and home, while the outward and
the homeward voyage may be two distinct voyages insured.15
8 Emerigon on Ins. (Meredith's ed. the mute and direction of the voy-
L850) c. iii. sec. 2, *53; e. xiii. sec. 4, age insured, rather than to designate
pp. 549 et seq. ; Waters v. Allen, 5 the vovage itself:" Emerigon on
Hill (X. Y.) 421. See § 1420 here- Ins. (Meredith's ed. 1850) c. xiii. sec.
in, and cases. 5, p. 550; see. 3, p. 548.
91 Marshall on Ins. (ed. 1810) 14 § 1488 herein.
"217. 1B Emerigon on Ins. (Meredith's
10 Homer v. Dorr, 10 Mass. 20. ed. 1850) c. xiii. sec. 4, p. 548; 1
11 Bermon v. Woodbridge, 2 Doug. Arnould on Marine Ins. (Perkins' ed.
781, 1 I Eng. K'ul. Cas. 507. 1808) 339-42, *333-3G; 1 Arnould on
12Tvnc v. Fletcher, Cowp. GGG, 14 Marine Ins. (Maelaehlan's ed. 1887)
Eng. Bui. Cas. 502. 365 70; Id. (8th ed. Hart & Simey)
13 Emerigon says: "The route is sec. 375, p. 491, and cases above
the way that one takes to make the noted under this section. It is also
voyage insured est iter viaggii. . . . provided by the Ordonnance of 1081
The word 'iter' is ordinarily em- that, "If the voyage is designated by
ployed by our authors to designate the policy, the insurer runs the risk
2090
DURATION OF RISK— THE SHIP §§ 1514-1516
§ 1514. The words "thence" or "from" used in reference to in-
termediate ports.16 — Where an insurance was on a vessel "at and
from" N to H, "from thence to" B and back to N, the rule was
deduced that the words "thence" or "from," when used in refer-
ence to the intermediate ports of a voyage, are not terms of ex-
clusion, but descriptive of the voyage, and that the word "at" is
not necessary to cover the risk on the vessel at an intermediate
port, but that the policy covered the vessel while stopping at any
of the intermediate ports described in the policy.17
§ 1515. "At and from" to a port named and "a market." 18 — If
a'vessel is insured "at and from" a specified port to a specified port
"and a market" in the West Indies, or a named island of the
group, the words "and a market" permit the insured to take his
vessel back and forth, bona fide, from port to port of the islands
or island, in search of a market ; 19 and if different ports are per-
mitted to be visited to dispose of the cargo, a bona fide delay will
be allowed for the purpose of procuring a price limited to a rea-
sonable extent.20
§ 1516. Commencement of voyage insured to specified port with
liberty to call at, etc. — A voyage insured to a port named, with
liberty to call at other places, must appear to have been commenced
either as a voyage to the port named, or to the port named by
way of the place at which liberty has been given to call; as in
case of an insurance on a ship and outfit for a voyage from New
South Wales to Otaheite, during her stay and back, with liberty
to call at Macquarrie Island and all other ports for South Sea
fishing and sailing, the voyage must have been commenced directly
to Otaheite, or there by way of Macquarrie Island, and there being
no evidence of any intention to go to Otaheite, there can be no
recovery, even though the vessel sailed directly for Macquarrie
Island with intention to proceed to the South Sea Islands, and is
lost off Macquarrie Island, about two thousand miles from Ota-
heite,1
of the entire voyage, on condition al- affirmed 1 Exch. 257, 17 L. J. Ex.
ways that if its duration exceeds the 135; and examine Marine Ins. Co. v.
time limited, the premium shall be Stras, 1 Munf. (Va.) 408.
increased in proportion :" Emerigon 18 See chapter on "Deviation."
on Ins. (Meredith's ed. 1850) e. xiii. 19 Deblois v. Ocean Ins. Co. 16
sec. 1, p. 534; sec. 13, pp. 573 et Pick. (33 Mass.) 303, 28 Am. Dec.
seq. This rule, being dependent up- 245; Maxwell v. Robinson, 1 Johns.
on the Ordon nance, has never ob- (N. Y.) 333. See Nelson v. De La
tained in England or the United Cour, 2 Esp. 619.
States 20 Columbian Ins. Co. v. Catlett, 12
16 See chapter on "Deviation." Wheat. (25 U. S.) 383, 6 L. ed. 664.
17 Bradlev v. Nashville Ins. Co. 3 l Lord v. Robinson, 6 L. J. K. B.
La. Ann. 708, 48 Am. Dec. 465. See 212. See next section.
Ashlev v. Pratt, 16 Mees. & W. 471,
2697
CHAPTER XLVIII.
CONTINUANCE AND TERMINATION OF RISK— THE SHIP.
§ 1523. Continuance of risk: liberty to "touch and stay," etc.: intermediate
voyage: usage of trade.
§ 1524. Termination of risk on ship to island, with liberty of several ports
or to port or ports of discharge.
§ 1525. Insurance to several successive ports of discharge: election of
port.
§ 1526. Continuance of risk where completion of voyage insured is com-
pelled to be temporarily delayed.
§ 1527. Risk continues although vessel be compelled to stop without the
harbor by municipal or like regulations: quarantine.
Ship insured to designated port without provision as to duration
of risk after arrival.
Insurance "at and from" a port: several ports within one classifi-
cation.
Termination of risk: time policy.
Risk terminates by abandonment or change of voyage insured.
Risk terminates in ease of island or district at first port of dis-
charge, etc.
Continuance of risk while loading at specified port.
Confinuance of risk on fishing voyage: part of cargo arriving by
another ship.
Continuance of risk on furniture, etc., of ship.
Putting into port other than that of original destination and dis-
charging small part of cargo.
Moored twenty-four hours in good safety.
What constitutes being moored twenty-four hours in good safety.
Limitation of the rule.
When vessel has arrived.
Vessel may have arrived and yet never have been moored in safety.
Mere temporary mooring not sufficient.
Degree and kind of physical safety required.
Degree and kind of safety required: seizure, etc.
Ship moored at outer harbor or outside place of usual discharge
and unable to enter.
§ 1546. Mere liability to damage does not of itself prevent the ship from
being in safety.
2698
§ 1528.
§ 1529.
§
1530.
§
1531.
§
1532.
§
1533.
§
1534.
$ L535.
§
1536.
§
1537.
§
1538.
§
1539.
§
1540.
§
1541.
§
1542.
§ 1543.
§
15*14.
§
1545.
TERMINATION OF RISK— THE SHIP § 1523
§ 1547. Port of discharge: last port of discharge.
§ 1548. Until she shall arrive in safety in any port or harbor of a particu-
lar place.
§ 1549. Risk may be terminated by substituting another port of delivery.
§ 1550. To port or ports of discharge: usage of trade to keep cargo on
board for a time after arrival.
§ 1551. Ship insured to one or two ports in alternative.
§ 1552. Termination of risk by undertaking distinct voyage before com-
mencing voyage insured.
§ 1553. Loss incurred before expiration of risk: expense incurred there-
after to repair injury.
§ 1554. Mutual insurance association : termination of risk : nonpayment of
contribution.
§ 1555. Expiration by limitation of "binding" memorandum.
§ 1523. Continuance of risk: liberty to "touch and stay," etc.:
intermediate voyage: usage of trade. — A liberty "to touch and
stay" or "to touch, stay, and trade" may, by a notorious and
established usage of trade, cover, and the risk continue during,
an intermediate voyage, whether the liberty be to touch and stay
at "any ports or places" or "any port or place," 2 although a
liberty "to touch at any" ports or places gives a license to stop
only at ports or places in the usual course of the voyage, and the
liberty to touch is strictly construed, and must be strictly adhered
to to prevent a deviation.3 And the ship, no liberty to touch and
stay being given, must not, after having sailed on the voyage
insured, make an intermediate voyage which is not in further-
ance of the voyage insured, for such act will terminate the con-
tract, unless said act be warranted by the usages of trade; for, as
we shall note hereafter, it is necessary that the ship sail on the
voyage insured and no other, direct from one of the termini to
the other, and she is not permitted to stop at intermediate ports
except by necessity or permission, or under the terms of the con-
2 Gregory v. Christie, 3 Doug. 419 ; port of departure to the port of des-
Farquharson v. Hunter, this and the tination." Marine ins. act 1906 (6
last case are reported in 1 Marshall Edw. VII. c. 41) sched. I., p. 426,
on Ins. (ed. 1810) *273, *274; Sal- rule 6; Butterworth's 20th Cent,
vador v. Hopkins, 3 Burr. 1707. See Stat. 1900-1909.
also chapter on "deviation." 31 Marshall on Ins. (ed. 1810)
Liberty to touch and stay: marine *275, citing Lavabre v. Wilson,
insurance act of England.— "6. In the 1 Doug. 271 ; Stitt v. Wardell, 1 Esp.
absence of any further license or 610, per Lord Kenyon; Sheriff v.
usage, the liberty to touch and stay Potts, 5 Esp. 96, per Lord Ellen-
'at any port or place whatsoever' does borough. See Murray v. Columbian
not authorize the ship to depart from Ins. Co. 4 Johns. (N. Y.) 443. See
the course of her voyage from the chapter on "Deviation."
2699
§ 1524 JOYCE ON [NSURANCE
tract, or by established usage, and in certain other cases to be
specified hereafter.4 ^gain, a voyage from one port to another,
stopping ;ii an intermediate porl to unload and reship the cargo
in order to avoid confiscation, may be insured as a voyage from the
first porl to the last vvithoul mentioning the intermediate port.6
§ 1524. Termination of risk on ship to island, with liberty of
several ports or to port or ports of discharge.6 — If an insurance is
effected on a vessel to an island with liberty to touch and stay at
■•any ports or places whatsoever," or to port or ports of discharge
in a country, and the principal and ultimate object of the voyage
insured is to dispose of the outward cargo, the outward risk will
terminate at the firsl of those porta where the vessel has been
moored twenty-four hours in safety, and discharges the bulk of
her outward cargo, even though a small quantity of the cargo
remains on hoard. Thus, in the case of an insurance on the ship
"at and from Liverpool to Martinique and all or any of the wind-
ward and leeward islands, with liberty to touch at any ports or
places whatsoever to take on board and land goods, stores," etc.,
and the vessel arrived at Martinique and discharged substantially
all her outward car^o, that is, the great bulk thereof, only a
trifling quantity remaining on board, with which she proceeded to
and arrived to Antigua, hut was afterward lost while she lay at
said place waiting to procure a homeward cargo and to discharge
the remnant of her outward cargo, the insurers on the outward
voyage were held discharged;7 and it is a question for the jury
whether the outward cargo is substantially discharged at the port
in question.8 The rules as to insurance on the cargo in like cases
will be considered hereafter.
4 Martin v. Delaware Ins. Co. 2 Mather, 1 Esp. 412, reported in 1
Wash. (U. S. C. C.) 254, Fed. ('as. Marshall on Ins. (ed. 1810) *267.
No. 9161; Kettle v. Wiggin, 13 .Mass. 'Upton v. Commercial Ins. Co. 8
68; Collin v. Newburyport Ins. Co. Met. (40 Mass.) 605, citing Moore v.
9 Mass. 436, 440; Clason v. Sim- Taylor, 1 Ad. & E. 25. The question
monds, 6 Term Rep. 533, 9 Eng. Rul. was left to the jury in Inglis v. Yaux,
Cas. 381; Mellisli v. Andrews, 2 •'> Camp. 437. Emerigon says that.
Maule & S. 26, 5 Taunt. 495; Bot- in case of such insurances "the risk
tomley v. Bovill, 5 Barn. & C. 210; on the ship is terminated . . . only
Gairdner v. Senhouse, 3 Taunt. 16. alter the cargo has been landed
5 Steinbach v. Columbian Ins. Co. wholly or nearly so." In one of the
2 Caines (N. Y.) 120. cases relied on by him the risk was
6 See §§ L501, 1532 herein. "out from Marseilles to the French
7 Upton v. Commercial Ins. Co. 8 islands in America, with leave to the
Met. (49 Mass.) 605; tnglis v. Yaux, captain to touch and made a port in
'.'■ Camp. 436. See Crowley v. Cohen, all places and parts he might think
1 W. Black. 417, 13 Eng. Rul. Cas. tit, the insurers taking the risk as to
314, per Lord Mansfield; Moore v. the goods, etc., and for the hull
Taylor, 1 Ad. & E. 25; Lei«h v. . . . until arrived at the French
2700
TERMINATION OF RISK— THE SHIP §§ 1525, 1526
§ 1525. Insurance to several successive ports of discharge: elec-
tion of port. — Where an insurance is to several successive desig-
nated ports or places of discharge, as from A to B and at and from
B to C, the vessel may elect to go immediately to the final port, for
she need not sail to all the ports, and if the insured intends to go
to but one of the specified ports, that one is at his election, but if
to more, then he must follow the order specified in the policy,
without regard to whether that be the geographical order or not,
and if the ship in such case sails from A, and is obliged to put into
a port of necessity, she may go to the final port at once without
stopping at B. Usage may, however, change the rule. If not
named then the relative geographical order must be followed.9
§ 1526. Continuance of risk where completion of voyage insured
is compelled to be temporarily delayed. — The voyage insured may
be accidentally delayed by unavoidable obstructions temporary in
their nature, such as the blocking of a river or harbor approaches
by ice. In such case, if the character of the obstruction is only
temporary in its nature, and the intent is to prosecute to its com-
pletion the original voyage insured is never abandoned, and if it
appears that necessary and proper measures are taken to that end,
the delay being necessitated by inability at the time to overcome
such temporary obstacle, the risk will continue the whole time
isles and landed the whole in safety," and trade at divers ports, or 'to the
and the risk was held determined at final port of discharge,' the risk will
Logane, where the sale of the cargo terminate when the whole cargo . is
was completed, except "only a mat- discharged, or when the objects to the
ter of one per cent on the entire voyage to ports for the purpose of
cargo:" Emerigon on Ins. (Mere- delivering cargo are so far accom-
dith's ed. 1850) c. xiii. sec. 18, pp. plished that the delivery of the re-
586 et seq. Mr. Arnould says that in mainder at any ulterior port is no
cases of ships insured to a West In- inducement with consideration to pro-
dia island, "the risk on the ship un- ceed thither . . . the risk should
der the outward policy comes to an continue upon the ship so long at
end immediately after she has been least as the disposal of the outward
moored twenty-four hours in good cargo is the principal or substantial
safety at the one port where the great reason for proceeding to an ulterior
bulk of the outward cargo is substan- port:" 1 Phillips on Ins. (3d ed.)
tially discharged, and it will not be 628 et seq., sec. 963. See also 1 Mar-
considered as continuing longer mere- shall on Ins. (ed. 1810) *266 et seq.
ly because a small portion of the out- 9 Kane v. Columbian Ins. Co. 2
ward cargo is still on board :" 1 Ar- Johns. (N. Y.) 264: Hale v. Mer-
nould on Marine Ins. (Perkins' ed. eantile Ins. Co. 6 Pick. (23 Mass.)
1850) 460, 463, *456-58, 441, *436 172; Marsden v. Reid, 3 East, 572;
et seq., 465, *460, sec. 174; Id. (Mac- Beatson v. Haworth, 6 Term Rep.
laclilan's ed. 1887) 397, 418-23. Mr. 531, 9 Eng. Rul. Cas. 385. See El-
Phillips says: "Where insurance is liott v. Wilson, 7 Brown Pari. C.
made to a port or ports, as to an is- 459. See chapter on "Deviation."
land or district, with liberty to touch
2701
§ 1527 JOYCE ON [NSURANCE
of such delay. I > 1 1 1 if the vessel, being prevented from entering
her port of destination, turns away therefrom and seeks another
port of discharge, from that momenl the insurers are released, even
though the ship goes to the riearesl place of safety.10 And the
voyage insured may continue within the terms of the policy till
stopped by ice or the closing of navigation, in which case the
question whether it is so stopped may be for the jury.11 So if a
ship is ordered to quarantine, even after being moored, but within
the twenty-four hours, the risk nevertheless continues.12 Emer-
igon says: "Arrival at lazarettos does not terminate the voyage;"
and again: "A ship is put into quarantine . . . ; the risk of
the vessel is at the charge of the insurers until her entry into
port." 13 Usage may, however, control when not inconsistent with
the express terms of the policy. Thus, Gracie v. Marine Insur-
ance Company14 was a case resting "upon usage of ancient date
and general notoriety" that the place of landing was the lazaretto,
and that the landing would he made under the direction and con-
trol of the local authorities; the policy was upon goods until safely
landed at Leghorn, and Chief Justice Marshall declared that the
actual landing of the goods at the lazaretto, about half a mile
helow Leghorn, was the landing contemplated under the -aid
usage by the parties, and therefore terminated the risk, and had
the parties intended otherwise, it should have been so stipulated.15
§ 1527. Risk continues although vessel be compelled to stop
without the harbor by municipal or like regulations: quarantine. —
If by the municipal regulations of the country the vessel is com-
pelled to stop without her harbor or port of destination, in order
in be examined, the risk is not thereby determined, but continues
until the vessel is moored twenty-four hours in safety.16
10 Brown v. Vigne, 12 East, 283, Craneh (12 U. S.) 75, 3 L. ed. t92,
13 Eng. Rul. Cas. 652; Parkin v. Cited in Constable v. National S. S.
Tunno, 2 Camp. 59, 11 East, 22; Co. 154 U. S. 63, 66, 38 L. ed. 912;
Brown v. St. Nicholas Ins. Co. 61 Hostetter v. Park, 137 U. S. 39, 40,
N. Y. 332; Blackenhagen v. Lon- 34 L. ed. 572; Crew-Levick Co. v.
don Assur. Co. 1 Camp. 455, 13 Ens'. British & Foreign Marine Ins. Co.
Rul. Cas. 650; Samuel v. R oval Exch. 103 Fed. 48, 54, 43 C. C. A. 113;
Co. 8 Barn. & C. 119, 13 Eng. Rul. Devato v. 823 Barrels of Plumbago,
Cas. 641. But compare §§ 1488, 1531 20 Fed. 510, 517; The Gazelle, 5
herein. Eughes (U. S. C. C.) 391, 395, 11
11 Sherwood v. Agricultural Ins. Fed. 429, 432; Hostetter v. Gray, lj
Co. 73 N. Y. 1 17. 29 Ami. Rep. 180. Fed. 179, 181; Hearn v. New Eng-
12 Waplrs v. Eames, 2 Sir. 1248. land .Mutual Marine Ins. Co. 3 Cliff
"Emerigon on Ins. (Meredith's ed. (U. S. C. C.) 318, 320, Fed. ('as. X,..
1850) c. xiii. sec. 18, pp. 585, 586. 6,301; Bradstreet v. Beron, Abb.
148 Craneh (12 U. S.) 75, 3 L. ed. Adiu. 20<i, 211, rV4. Cas. No. 1,792.
492. "Dickey v. United Ins. Co. II
15 Gracie v. Marine Ins. Co. 8 Johns. (N. Y.) 358. See Gracie v.
2702
TERMINATION OF RISK— THE SHIP §§ 1528, 1529
§ 1528. Ship insured to designated port without provision as to
duration of risk after arrival. — In case of an insurance generally
upon a ship to a designated port, without any provision as to the du-
ration of the risk after her arrival there, the risk continues upon the
vessel until her arrival at said port of destination, and till safely
moored at the usual place.17 AVhere a vessel was insured from
Sissa to Havana, and having arrived at said last-named port was
ordered to anchor under Moro Castle, hy reason of a frigate's
entering the harbor, and suffered damage the next day while at-
tempting to reach the usual place of discharge, the insurers were
held liable.18
§ 1529. Insurance "at and from" a port: several ports within one
classification. — A port may comprehend within one legal classifica-
tion as members thereof, for the purposes of revenue, etc., other
places which are geographically distinct or distinct within the
meaning of a contract of marine insurance, or in a commercial
sense, as where one port has a separate harbor, but is within cus-
tomhouse limits of another port. The question whether the one
port embraces within its limits, for the purposes of attachment of
the risk "at and from" any one of the places w7ithin such general
classification must depend upon mercantile usage, and also upon
the exact construction of the terms of the contract; the point
being, What is the terminus a quo contemplated by the contract?
What one place is generally understood as the port? And ordi-
narily the port so ascertained will, in the absence of usage to the
contrary, be construed to be the place of attachment of the risk,
so that the risk will not attach "at" another place which is geo-
graphically and as a port of lading separate and distinct there-
from; even though it be within its limits as a member thereof.
The same question may arise as to whether a place may be con-
sidered as a single port of discharge, comprehending within it
several other places, and in such case a usage to treat such single
port as a port of discharge, taking the other places as merely
separate landing places within it, will make it such where such
Marine Ins. Co. 8 Cranch (12 U. S.) seq., pp. 625 et seq.; 1 Phillips on
75, 3 L. ed. 492 (ease of insurance Ins. (3d ed.) 536, sec. 969. Emeri-
on cargo). gon says that, according to the Or-
17 Dickey v. United Ins. Co. 11 donnance of 1681, "the voyage, so far
Johns. (N. Y.) 358; Anonymous, as the ship is concerned, is finished
Skin. 243; Stone v. Marine Ins. Co. only when the vessel is anchored in
L. R. 1 Ex. D. 81; Bill v. Mason, 6 the port of her destination and
Mass. 313; 1 Marshall on Ins. (ed. moored to the quay:" Emerigon on
1810) *265; 1 Arnould on Marine Ins. (Meredith's ed. 1850) c. xiii. sec.
Ins. (Perkins' ed. 1850) 459, *455; 18, p. 585.
Id. (Maclachlan's ed. 1887) 418; Id. 18 Zacharie v. New Orleans Ins. Co.
(8th ed. Hart & Simey) sees. 488 et 17 Mart. (La.) 637.
2703
$ 1530 JOYCE ON INSURANCE
usage is settled, uniform., and well understood at the time the con-
trad is made.19 The following cases illustrate the rule: Goods
were insured "al and from" C, and the cargo was taken in at L,
which a member of the port of C, but the vessel cleared at L,
where there was a customhouse, there being also a customhouse
at C, and it was held that the risk had not attached.80 So in
case of an insurance on a cargo at and from Lyme to London, the
Policy will not attach upon goods shipped at Bridport, a separate
harbor aboul eighl miles from the town of Lyme, although the
former pint is within the customhouse limits of the latter.1 Where
an insurance was upon freight from New York to a port of dis-
charge in Australia, and the vessel arrived at Geelong, in the bay
of Port Phillip, where so much of the cargo as was destined for
thai place was discharged, and the balance of the cargo being
destined to Melbourne, the ship proceeded to Hobson's Bay, an
anchorage ground in the port of Melbourne, bul within the bay
of Port Phillip and twenty-five miles from Geelong, the ship and
cargo being there lost, it was held that the insurers might be
bound by usage to treat the bay of Port Phillip as a single port
of discharge, taking Geelong, Hobson's Bay, and Melbourne as
separate landing places included therein.2
§ 1530. Termination of risk: time policy. — As already stated, a
policy wdiich contemplates an insurance strictly on time terminates
by the expiration of the time specified, and this is also true where
the voyage under a time policy is designated, but not for the pur-
pose of determining the duration of the risk.3 although the clauses
"at sea" or "on a passage" in the policy have an effect of con-
tinuing the risk beyond the period originally limited.4 Where a
privateer was insured from Jamaica, to "any ports or places what-
soever at sea or shore, a cruising from port to ports and places"
for four calendar months, and by reason of mutiny and desertion
the cruise was prevented and lost, but she arrived at Jamaica and
was there in safety at the end of the period, it was held that the
19 Fay v. Alliance Ins. Co. 16 Gray 20 Payne v. Hutchinson, 2 Taunt.
(82 Mass.) 455; Brown v. Tavleur, 405 n.
4 Ad. & E. 241; Constable v. Noble, * Constable v. Noble, 2 Taunt. 405,
2 Taunt. 403, 13 Eng. Rul. Cas. 587; 13 Eng. Rul. Cas. 587, it was de-
Moxon \. Atkyns, 3 Camp. 200, 13 dared in this ease that usage for
Kng. Kul. Cas. 590; Cockey v. Atkin- ships to load at Bridport might have
son, 3 Barn. & Aid. 460; Payne v. been proven.
Hutchinson, 2 Tauid. 405 n; 1 Ar- 2 Fay v. Alliance Ins. Co. 16 Gray
nould on Marine Ins. (Perkins' ed. (82 Mass.) 455.
1850) 451, 452, *447, sec. 169; Id. 3 S§ 1489, 1490, 1493 herein.
(8th ed. Hart & Simey) see. 69, p. 4§ 1506 herein.
91, sec. 454, p. 588, sec. 485, p. 622.
See also § 1505 herein.
2704
TERMINATION OF RISK— THE SHIP §§ 1531, 1532
insurers were discharged.5 But where a vessel insured at and
from Boston to all places on the globe till her return to Boston,
not exceeding two years, sailed from a foreign port for Boston, it
was held that the risk did not terminate on her arrival at Salem.
where she had been ordered by the owner for repairs, on arriving
within the term in the bay below Boston harbor.6
§ 1531. Risk terminates by abandonment or change of voyage
insured. — If the voyage insured is commenced, but is thereafter
actually changed or abandoned, the intent to proceed to the ter-
minus ad quem being actually and absolutely given up, the risk
is terminated and the insurers discharged.7 In this connection the
question arises whether an abandonment of, or departure from,
the voyage insured is justified by an endeavor to avoid a peril not
insured against, or an excepted peril. It is a general rule that if
the voyage is broken up and lost, the loss, to bind the insurers,
must be by some peril insured against acting directly upon the
subject of insurance, and it is held that it is not sufficient that the
voyage be abandoned for fear of the operation of an excepted peril
or peril not insured against, or that it be abandoned or broken up,
or another and distinct voyage undertaken by reason of such
peril. And the weight of authority, although the law does not
appear clearly settled, seems to be that the fear of an excepted
peril or peril not insured against does not justify the ship's de-
parture from the course to avoid the same, nor an abandonment
of the voyage.8 This question will, however, be fully considered
hereafter.
§ 1532. Risk terminates in case of island or district at first port
of discharge, etc. — In case of an insurance generally to an island
without naming any specific port, the risk on the ship ends on
being moored twenty-four hours in safety in the first port of the
island for the purpose of unloading and discharging her cargo,
8 Pole v. Fitzgerald, 4 Brown 8 United States. — Smith v. Univer-
Parl. C. 439, affirming Willes, 641. sal Ins. Co. 6 Wheat. (19 U. S.) 176,
6 Ellery v. New England Ins. Co. 5 L. ed. 235, per Story, J.
8 Pick. (25 Mass.) 14. See Dodge Maryland. — Riggin v. Patapsco
v. Essex Ins. Co. 12 Gray (78 Mass.) Ins. Co. 7 Har. & J. (Md.) 288.
65. Massachusetts. — Lee v. Gray, 7
7 Blackenhagen v. London Assur. Mass. 349; Richardson v. Marine
Co. 1 Camp. 454, 10 R. R. 729, 13 Ins. Co. 6 Mass. 102, 121, 4 Am. Dec.
Eng. Rul. Cas. 650; 1 Arnould on 92.
Marine Ins. (Perkins' ed. 1850) 469, New York. — Speyer v. New York
*465; Id. (Maelaehlan's ed. 1887) Ins. Co. 3 Johns. (N. Y.) 88; Ros?et
427; Id. (8th ed. Hart & Simey) v. Thurston, 2 Johns. Cas. (N. Y.)
sec. 504, p. 641; 1 Phillips on Ins. 248.
(3d ed.) 533, sec 966. See sec. 1488, England.-^-Scott v. Thompson, 1
and compare § 1526 herein. Bos. & P. N. R. 81. Examine Brown
Joyce Ins. Vol. III. — 170. 2705
§§ 1533-1535 JOYCE ON INSURANCE
and where she unloads the bulk thereof, and does not continue
till the vessel reaches her last port of delivery.9 If a vessel is in-
sured "to a port or ports in the island of Cuba," a denial of entry
into one of such ports is ool a loss within the policy.10
§ 1533. Continuance of risk while loading at specified port —
The risk may continue on a vessel while she remains at a specified
pori under the clause "while loading" at said port, although she
be not engaged in "loading" during all of said period of her stay
then-.11
§ 1534. Contir. lance of risk on fishing voyage: part of cargo
arriving by another ship. — Where a ship is insured lor a fishing
voyage, and sends home by another vessel a portion of her catch-
ings, in order to preserve the part thereof which is retained from
1 icing infected and destroyed, such act does not terminate the
voyage.18
§ 1535. Continuance of risk on furniture, etc., of ship. — Ordina-
rily, a marine policy extends to sea risks and the risk on the rig-
ging, tackle, furniture, and provisions of the ship continues only
so long as they remain attached to or on hoard the vessel. But
if it becomes necessary to put these articles temporarily on shore
to repair or to relit the ship during the usual course of the voyage,
and such act is sanctioned by a universal usage in like cases, the
risk will continue upon the same while they remain on shore for
the purpose stated herein, and the insurer of such articles is liable
in such case for their loss from a peril insured against.13 But
spars, blocks, etc., required for the proper building and equipment
v. Vigue, 12 East, 283, 13 Eng. Rul. purpose of loading, or while at the
('as. 652. said port actually loading. If it
But see Vigors v. Ocean Ins. Co. means the latter, the company is
12 La. 362, !5(i7, 32 Am. Dec. 118; liable. The clause would revive at
Savage v. Pleasants, ."j Binn. (Pa.) any time after loading commenced if
403, b' Am. Dec. 424. discontinued by stress of weather. It
9 Leigh v. Mather, 1 Esp. 412, re- would revive at night while the men
ported in 1 Marshall on Ins. (ed. slept. . . . At no time after her
1810) *267, per Lord Kenyon; Cam- arrival was it possible to discharge
den v. Cowley, 1 W. Pdaek. 417. 14 ballast or receive cargo. The facts
Eng. Rul. Cas. 46, per Lord Mans- show that she was at the port for the
field; [nglis v. Vaux, 3 Camp. 437; purpose of loading. That the process
1 Marshall on Ins. (ed. 1810) *266 had not actually commenced is of no
et seq. Sec §§ 1501, 1524, 1547 here- consequence. The suspension of the
in. risk commenced as soon as the vessel
10 Suydam v. Marine Ins. Co. 1 arrived at the island and was safely
Johns. (N. Y.) 181, 3 Am. Dec. 307. moored in her station for loading."
11 Reed v. Merchants' Mutual Ins. 12 Phillips v. Champion, 6 Taunt. 3.
Co. 95 U. S. 23, 24 L. ed. 348, Mr. 13 Stone v. Ocean Marine Ins. Co.
Justice Bradley said: "The case of Gothenburg, 1 B. J. Ex. Div. 81;
turns upon the point whether the Brough v. Whitmorc, 4 Term Rep.
clause means while at a port for the 206; Pelly v. Royal Exch. Assur. Co.
2706
TERMINATION OF RISK— THE SHIP §§ 153G, 1537
of a vessel then in the course of construction are not covered by a
policy insuring the vessel against loss by fire, unless it is proven
that by the custom of that place articles of that character are
protected by the policy even though in a warehouse. Evidence
is not admissible of the usage of another place to show that such
articles are .covered.14
§ 1536. Putting into port other than that of original destination
and discharging small part of cargo. — If a ship is insured to a par-
ticular port of delivery, and by stress of weather puts into a port
other than that of her original destination, and there discharges a
small part of her cargo, the risk nevertheless continues till her
arrival at her port of delivery.15 And if a vessel engaged in the
East India trade is insured to her last port of discharge, and she
stops at a port other than that which was originally intended by
the parties as her last port of discharge, and unloads a portion of
her cargo, but retains on board that portion intended for said
last port of discharge, the risk continues until said final port is
reached and she has there moored in safety for the purpose of dis-
charge.16
§ 1537. Moored twenty-four hours in good safety. — Under this
clause in the policy the risk on the ship continues, and does not
terminate until she has moored twenty-four hours in good safety
at the port to which she was originally destined.17 Emerigon
says the French Ordonnance of 1681 provides that the risk shall
continue on the ship, its rigging, furniture, and stores "until
anchored in the port of its destination and moored at the quay,"
differing from the former law under the Guidon, which provided
for its continuance "until arrived at its destination, anchored, and
remained moored twenty-four hours in harbor." 18 Mr. Marshall
quotes with approval the objections of Magen to the use of this
1 Burr. 341, 14 En«'. Rul. Cas. 30; "Leeds v. Mechanics' Ins. Co. 8 N.
1 Marshall on Ins. (ed. 1810) *269, Y. 351; Bill v. Mason, 6 Mass. 313.
*270. 18 Emerigon on Ins. (Meredith's
14 Mason v. Franklin Fire Ins. Co. ed. 1850) c. xiii. sec. 1, pp. 536, 537
12 Gill & J. (Md.) 468. et seq. The author notes also the
15 Leigh v. Mather, 1 Esp. 412, per Ordonnances and forms then existing
Lord Kenyon. See also Delaney v. in several maritime countries. See
Stoddart, 1 Term Rep. 22, per Lord also 1 Arnould on Marine Ins. (Per-
Mansfield, where a vessel was by kins' ed. 1850) 454 et seq., *450 et
stress of weather compelled to finish seq., sec. 171; Id. (Maclachlan's ed.
her loading at another port than that 1887) 412, where references are given
specified as the place of commence- to the more recent foreign laws; Id.
ment of the risk. See "Deviation," (8th ed. Hart & Simey) sees. 487 et
herein. seq., pp. 625 et seq.
16 Preston v. Greenwood, 4 Doug.
28.
2707
§§ 1538-1540 JOYCE ON INSURANCE
clause, on the ground thai the freight remains unprotected there-
under after the twenty-four hours in case the ship is not discharged,
and therefore the risk should be stipulated to continue a specified
number of days after the -hip's arrival.19 We have, however, noted
cases where policies so stipulate.20
§ 1538. What constitutes being moored twenty-four hours in
good safety. — In case of insurance on a ship under this clause, she
must arrive at her ultimate point or place of destination in the
usual anchorage ground and usual place of discharge, and be there
securely moored twenty-tour hours in safety from the perils in-
sured against, in a situation to unload or discharge her cargo.
If. under such conditions she does not suffer a Loss insured against,
she is sate: and when she is moored at her port of original destina-
tion, the fact that she does not within the twenty-four hours unload
or discharge her cargo, and has not broken hulk, does not aid the
insured, and the insurers are not in such case liable for herloss
or damage actually sustained after the expiration of the specified
period.1
§ 1539. Limitation of the rule.— This rule has, however, been
limited by the case of An-erstein v. Bell2 which holds that if a
ship is fastened outside of a tier of vessels at the wharf where she
is to unload, there beinti no room for her inside, and lies there
over twenty-four hours awaiting her turn to unload, she has moored
twenty-four hours in good safety.
§ 1540. When vessel has arrived.— Ordinarily, a vessel has not
arrived until she has dropped anchor or is moored,3 and the ques-
tion whether the ship has arrived and when will be one for the
jury.4 If the vessel be insured until she has "arrived and moored
twenty-four hours in safety." and for want of sufficient water she
cannot come to the wharf which is the place of her final destination,
and consequently anchors in the harbor for more than twenty-
four hours and is lightened, and thereafter, while properly pur-
suing her course to complete her final unloading, she is lost by a
peril insured against, the underwriters arc liable, for reaching the
harbor is uol arriving; the vessel must reach and be moored at that
19 1 Marshall on Ins. (ed. 1810) Assur. Co. 8 Barn. & C. 119, 13 Eng.
'2fi2, riling 1 Magen, 23, 47; Skin. Rul. Cas. 64; Waples v. Games, 2
243. Strange, 1248.
20 $ L492 herein. See also Lidgett 2 Reported in 1 Marshall on Ins.
v. Secretan, 6 L. R. Com. P. 616, 40 (ed. 1810) *262; also in 1 Park on
L. J. ('"in. P. 257. Ins. 54.
1 Mariatigue v. Louisiana Ins. Co. 8 3 Gray v. Gardner, 17 Mass. 188.
La. 65, 28 Am. Dec. 129; Meigs v. 4 Lindsay v. Jansen, 28 L. J. Ex.
Mutual Marine Ins. Co. 2 Cush. (56 315, 4 Hurl. & N. 699.
Mass.) 439; Samuel v. Royal Exeh.
2708
TERMINATION OF RISK— THE SHIP §§ 1541, 1542
particular place or point which is the ultimate destination of the
ship.6 A vessel arrives at a "port of discharge" when she arrives
at any place at which it is usual to discharge cargo, and to which
she is destined for the purpose of discharging cargo. Thus, where
the insurance was "until she shall be safely arrived at such port
of discharge and moored twenty-four hours in good safety," and
she arrived and anchored at a port which was an open roadstead,
where all vessels were compelled to anchor and discharge part of
their cargo in lighters, in order to be lightened enough to go into
an inner basin, and the ship having so discharged a part of her
cargo, remaining there over twenty-four hours, was wrecked be-
fore making the inner basin, it was held that she had safely
arrived and was moored in safety; and in such case the policy
terminates, and cannot be extended or revived after such discharge
by her removal to another port, or to another place in the same
port, either for the purpose of discharging the rest of her cargo
or for any other purpose.6 Where a vessel was insured to a port
of discharge in the United States, and entered the port of New
York to await orders, and thereafter proceeded as ordered to
Middletown, in Connecticut, New York was held to be her port of
arrival and that of discharge.7
§ 1541. Vessel may have arrived and yet never have been moored
in safety. — Although a vessel may have arrived, yet if she is never
moored twenty-four hours in safety, the requirements of the clause
are not satisfied. Thus, the ship may have arrived in a hostile port
with simulated papers, and be there seized to all intents and pur-
poses, being afterward condemned,8 or the ship may have arrived
in port a mere wreck ; 9 in neither of these instances is the ship
moored in good safety.
§ 1542. Mere temporary mooring not sufficient. — A mere tempo-
rary mooring at the usual place of discharge does not constitute
a mooring in good safety; as where a vessel had moored for a
short time at the wharf, but within the twenty-four hours was
ordered into quarantine, and was lost after the twenty-four hours
by a peril insured against, she was not considered to have moored
in good safety, because as it would seem she had not, before the
loss for which recovery was claimed, been finally moored at the
ordinary place of mooring.10
5 Meigs v. Mutual Marine Ins. Co. 8 Horneyer v. Lushington, 15 East,
2 Cush. (56 Mass.) 439. 46, 13 Eng. Rul. Cas. 637.
6 Bramhall v. Sun Mutual Ins. Co. 9 Shawe v. Felton, 2 East, 110, 13
104 Mass. 510, 6 Am. Rep. 261. Eng. Rul. Cas. 631.
7 King v. Middletown Ins. Co. 1 10 Waples v. Eames, 2 Strange,
Conn. 184. 1243. See Samuel v. Royal Exch.
2709
§ 1543
JOYCE ON INS PRANCE
§ 1543. Degree and kind of physical safety required. — Although
the ship is required to be moored as safely as the particular port or
harbor permits in the usual course of navigation, nevertheless
being moored in safety refers rather to the safety of the ship, than
to perils of a local character, such a- the moorings. It- is not
necessary that the ship arrive absolutely free from all physical
damage <>r injury from the effects of the voyage; it cannot be rea-
sonably contended that the loss of a masl or a sail or a rope pre-
sents a vessel, which is perfectly fit to keep a river or the sea.
from being considered in safety.11 A vessel may be considerably
damaged and leaky at the time of her arrival, and yet he able to
keep afloal a.- a -hip. and to moor in such a condition at the usual
place of discharge, and there remain in a situation to discharge
her cargo during the twenty-four hours in the possession and con-
trol of her owner-, and in safety from the perils insured against.
In such a case the insurers are not liable for a total loss occurring
after the period specified.18 The facts of the last case13 suggest
the question. Exactly where can the dividing line as to the degree
of physical safety of the ship be drawn? The vessel in said case
required extraordinary pumping to keep her clear of the water
which was in one of her compartments; she wa,s also injured in her
Co. 8 B. & Cr. 119, 13 Eng. Rul.
('as. 041; Stone v. Marine Ins. Co.
(Ocean Ltd. of Gothenburg) 1 Ex.
D. 81 ; § 1527 herein.
11 Waples v. flames, 2 Strange,
1.243; Lidgett v. Seeretan, L. R. 5
Com. P. 190, per Bovill, C. J.
12 In (lie derision upholding this
rule which was made in England in
1870 in the court of common pleas,
the risk was "at and from London
to Calcutta, and for thirty days after
arrival," to continue upon the ship
''until she have moored at anchor
twentj four hours in good safety."
The facts were those last above
. tated, \\ ith the addit ion thai the ship
completely and safely discharged her
cargo, except a portion, which was
left for ballast. She was moored and
left in safety on I he 28th of October,
and her cargo was discharged by the
8th of November. On the 12th of
November she was taken from her
moorings into drydock for survey and
repairs, and while there was wholly
destroyed by fire the 5th of Decem-
ber, and the question was distinctly in
issue whether having been moored in
a damaged state extended the time so
ns to cover the total loss by tire, the
defendant claiming that the plaintiff
could only claim in respect to the par-
tial loss by sea damage, and it was
declared that the claim for total loss
could not be sustained. It "will be ob-
served, however, that the court in so
ruling placed stress upon the facts:
1. That the vessel had discharged her
cargo; and 2. That the ship remained
so long a time in the possession and
control of her owners after the ex-
piration of the twenty-four hours be-
fore the loss occurred, viz., until the
t hiily-eighth day after she was
moored: Lidgetl v. Seeretan, L. R. 5
Com. P. 190; citing Bell v. Mason, 6
Mass. 313; Shawe v. Kelt on. 2 Past.
109, 13 Eng. Rul. Cas. 631; Horneyer
v. Lushington, 1"> East, 46, 13 Eng.
Rul. Cas. ti.!7; Waples v. Eames, 2
Strange, L243; Lockver v. Ollley, 1
Term Rep. 252.
13 See last note.
2710
TERMINATION OF RISK— THE SHIP §§ 1544, 1545
rudder and steering apparatus, so as to materially affect her steer-
ing, and was unfit for the sea, so much so that if she had broken
away from her moorings she would have been at the least greatly
endangered. It is distinctly held in another case that the condition
as to safety is not satisfied if the vessel arrives a mere wreck, or if
she is moored in a sinking state, and is obliged to be lashed to a
hulk to keep her afloat, and the vessel sinks on being moored to
the shore.14 The court in the former case says that in the case
before him the vessel existed as a ship at the time of her arrival,
while in the latter case he declares that the vessel arrived as a
wreck, and not as a ship.
§ 1544. Degree and kind of safety required: seizure, etc. — If
upon arrival, and before the ship has been moored the twenty-four
hours at the usual place of discharge, she is so subjected to a seizure,
either actual or constructive, as that she is to all intents and pur-
poses within the power and control of the enemy or hostile force,
or of the government of the port, she cannot be said to have been
moored twenty-four hours in safety, since that term has reference
as well to political as to physical safety, and it makes no difference,
in such case, that the master is permitted by the enemy to unload
his cargo after the seizure.15 But if the vessel be not seized until
after she has been moored the twenty-four hours, she is none the
less in safety, even though the offense be one which rendered her
liable to seizure within or before the twenty-four hours ; as in case
of smuggling by the master during the voyage, for the seizure can-
not be held to be retroactive in effect ; and insurers are released, for
although the remote cause of the loss was the barratry of the master,
it does not, in such case, result in loss till the risk has terminated.16
§ 1545. Ship moored at outer harbor or outside place of usual
discharge and unable to enter. — A ship is not moored in good safety
at her destined port where she awaits at an outer harbor, which is
not a place of discharge, permission from the customhouse author-
ities to enter the inner harbor and discharge her cargo. It was so
held where a vessel having arrived with a cargo of slaves under a
policy "at and from" St. Bartholomew's to Havana, she anchored
off Moro Castle, where all vessels stop to be visited, and, while
awaiting the result of a petition to the customhouse for permission
to land the slaves, she was lost in a storm ; and the fact that there
was a warranty "free from loss if not permitted entry in conse-
14 Shawe v. Felton, 2 East, 109, 13 16 Mariatigue v. Louisiana Ins. Co.
Eng. Rul. Cas. 631. 8 La. (0. S.) 65, 28 Am. Dec. 129;
15 Minett v. Anderson, Peakes N. Loekyer v. Offley, 1 Term Rep. 252.
P. 211; Hornever v. Lushins:ton, 15
East, 46, 13 Eng. Rul. Cas. 637.
2711
§ 1546 JOYCE ON INSURANCE
quence of having negroes on board,'5 cannot in such case aid the
insurer.17 And if a vessel is prevented by shallow water from reach-
ing her wharf of destination, and while anchored outside and being
lightened, to enable her to reach said wharf, she is destroyed by
one of the perils insured against, the insurers are liable.18 Nor does
the mere fad of mooring and lying for several days outside the
docks into which the captain has received orders to take the ship,
and within which is the usual place of discharm', constitute a moor-
ing in good safety, even though a certain class of vessels occasion-
ally discharge at the place where she is actually moored; especially
where it appears that the captain, having arrived outside the dock
gates, was unable to enter, owing to ice, and also by reason of the
fact that permission had not been granted to enter.19 But a mooring
at an open roadstead, where all ships are compelled to anchor and
lighten their cargo before they can be admitted to an inner basin,
will constitute a mooring in safety when the ship is there over
twenty-four hours safely moored.80 And if a vessel lies outside an
anchorage ground outside the harbor of the port to which the vessel
is destined, and there discharges a part of her cargo by lighters to
enable her to pass the bar, vessels of her draught being accustomed
so to do, the risk terminates on her being moored at such anchorage
ground twenty-four hours in safety.1
§ 1546. Mere liability to damage does not of itself prevent the
ship being in safety. — The fact that the ship during the twenty-
four hours after being moored is liable to damage or total loss does
not of itself prevent the ship being in safety within the meaning of
that term; the terminating factor is whether she was in fact lost or
damaged within the specified period by a peril insured against. A
ship is none the less in safety, within the meaning of that term,
merely because she is exposed during the twenty-four hours to a
storm or other peril insured against, even though it may have
begun before the vessel moored. The condition is satisfied if the
safety continues during the twenty-four hours.2 "We think also
thai the mere liability to damage, whether partial or total, during
the twenty-four hours, by the occurrence of some or all of the perils
insured against, cannot prevent the running of the twenty-four
hours, because the extension of the period of risk for twenty-four
hours after having moored in good safety clearly implies that not-
17 Dickey v. United States Ins. Co. 20 Bramhall v. Sun Mutual Ins. Co.
11 Johns. (N. Y.) 358. 104 Mass. 510, G Am. Rep. 261. See
18Meigs v. Mutual Ins. Co. 2 § L505 herein.
Cush. (.".(I Mass.) 439. i Simpson v. Pacific Mutual Ins.
19 Samuel v. Royal Exch. Co. 8 Co. 1 Holmes (U. S. C. C.) 130, Fed.
Barn. & C. 119, 13 Eng. Rul. Cas. Cas. No. 12,886.
641. 2 BeU v Mason, 6 Mass. 313.
2712
TERMINATION OF RISK— THE SHIP § 1547
withstanding the safety intended, the ship is liable to partial or
total loss by the occurrence of a peril insured against." 3
§ 1547. Port of discharge: last port of discharge. — Under an in-
surance on the ship to her port of discharge, if the parties originally
intended to discharge at a certain port, and the vessel there moors
twenty-four hours in safety and breaks bulk for that purpose, or
substantially discharges her cargo, this will be held her port of dis-
charge.4 So where a vessel was insured to her discharging port in
the United Kingdom, and until there moored twenty-four hours in
good safety, and she arrived in the Mersey, and was towed up
abreast the Wollasly Pool, and being unable by reason of her great
draught to enter, and anchored outside the pool more than twenty-
four hours, and discharged a large portion of her cargo, the master
having engaged lumpers therefor, it was held that the risk was
terminated, the court declaring that it was evident that Wollasly
Pool was intended as the place of discharge of the cargo, and the
fact that the captain intended to carry the vessel with so much of
the cargo as he could into Wollasly Pool could not alter the decision,
since the whole cargo might have been duly discharged where she
was moored, had no accident prevented, if the water were not suffi-
cient for the vessel to enter. A controlling factor in this case, how-
ever, was that the vessel was chartered to take the cargo into Wol-
lasly Pool, or as near thereto as she could safely get and discharge.5
And the fact that a vessel arrives at a port in a specified country and
discharges the seamen there and employs others, does not prove such
port to be a port of discharge.6 The last port of discharge may,
however, be the one where the ship actually discharges her cargo,
although it is not the port at which it was originally intended to
discharge.7 If a ship is insured to a port of discharge in a certain
country, as in case of an insurance to the United States, the ques-
tion arises as to the purpose of the ship in entering the first port.
If the ship enters a port in said country to ascertain the state of the
market, and to determine whether it will discharge there or proceed
to another port, the fact that the master intends to discharge there
in case of a favorable market does not of itself make that port a port
of discharge and terminate the risk, where the ship proceeds to
another port and discharges, and this is so even though the ship
moors at said port twenty-four hours in safety.8 And a port of dis-
charge does not extend to the anchorage in the open sea seven miles
8 Lidgett v. Secretan, L. R. 5 Com. 5 Whitwell v. Harrison, 2 Exch.
P. 190, per Bovill, C. J. See also 2 127.
Parsons' Marine Law, 326. 6 King v. Hartford Ins. Co. 1
4 Clason v. Simrnonds, 6 Term Conn. 333.
Rep. 533n, 9 Eng. Rul. Cas. 384; 7 Moffat v. Ward, 4 Doug. 31.
Coolidge v. Gray, 8 Mass. 527. 8 Lapham v. Atlas Ins. Co. 24 Pick.
2713
1548
JOYCE ON INSURANCE
from the port of destination, and a capture there is not a capture in
the ship'.- pori of discharge, even though she is brought into the
roads, where part of her goods are discharged by lighters.9 And it
is al.-o held thai an open roadstead is not a port of discharge so as to
discharge the insurers from a loss by capture there made.10 If a
ship insured to a port of discharge to the United States enters a
port there to await orders, this does not constitute such port a port
of discharge, where in pursuance of orders received she proceeds to
another port and there discharges, and so even though, for the pur-
pose of lightening, she puts part of her cargo into lighters to be
conveyed to such port of discharge, for such putting into lighters is
not breaking hulk, nor is the risk on the ship terminated by dis-
charging perishable goods at a port where she is awaiting orders,
where the ship, after waiting a reasonable time, proceeds to another
port with a view to make the latter port her port of discharge, and
the insurers are in such case liable for a loss occurring between the
two said ports.11
§ 1548. Until she shall arrive in safety in any port or harbor of
a particular place. — AVhere a vessel is insured, the risk to continue
until she shall arrive in safety in any port or harbor of the Firth
(41 Mass.) 1; Coolidge v. Gray, 8
Mass. 527. But see Brown v. Yigne,
12 East, 283, 13 Eng. Rul. Cas. 052.
See also Upton v. Commercial Ins.
Co. 8 Met. (49 Mass.) 605, 606; Wil-
son v. Delacour, 2 Esp. 019; Oliver-
son v. Brightman, L. K. 8 Q.'B. 1781,
13 Eng. Rul. Cas. 656.
»Mellish v. Staniforth, 3 Taunt,
499; Keyser v. Seott, 3 Taunt, 660.
10 Anthony v. Moline, 5 Taunt. 711.
11 King v. Middletown Ins. Co. 1
Conn. 184. "If the port of arrival
is of course the port of discharge,
being one and the same thing, the
argument is with the defendants, and
in that case the agents of the owners
will be obliged to select their port of
discharge when in a foreign country
wit limit any means of knowing the
state of the market to which they are
going. This appears to me unreason-
able. But if the port of discharge
may mean a different port from the
port of arrival, (hen to such different
port is the vessel insured, and the risk
does not terminate upon her arrival at
any port. And this appears most
reasonable, that the agents of the in-
sured may be able to learn upon their
arrival in the United States at what
port they can sell their cargo to great-
est advantage, and thus sail to their
port of discharge protected by the
policy. If by the port of discharge
we may conclude that the parties
meant where the vessel should unload,
on what principle could the court be
justified in saying that they meant
where the vessel should first arrive?
This the court could never say, un-
less 'port of arrival' and 'port of
discharge' are synonymous terms.
They certainly are not so used in com-
mon parlance, and in no book tan
we find that in a legal sense they
mean one and the same thing. We
are, therefore, bound to understand
them in a policy of insurance as the
terms naturally import," per Reeve,
C. J. See Sage v. Middletown Ins.
Co. 1 Conn. 239. See also §§ 1501,
1505, 1508, 1524, and 1532 herein.
2714
TERMINATION OF RISK— THE SHIP §§ 1549-1554
of Forth, and she is forced by stress of weather into a place within
said Firth of Forth, and is there wrecked, it is held that the risk
determines on her arrival there. 12
§ 1549. Risk may be terminated by substituting another port of
delivery. — Although a vessel is insured to a designated port, the
substitution by consent of another port as that of delivery oper-
ates to terminate the risk at such substituted port.13
§ 1550. To port or ports of discharge: usage of trade to keep
cargo on board for a time after arrival. — Where a vessel is insured
to port or ports of discharge, and the custom of vessels engaged in
that trade is to keep their cargoes on board for several months after
arrival, such usage will control.14
§ 1551. Ship insured to one of two ports in alternative. — If the
port of destination is placed in the alternative, as to S. or B., and
she proceeds to the first port without electing to go to the latter, the
risk will terminate at the first port.15
§ 1552. Termination of risk by undertaking distinct voyage be-
fore commencing voyage insured. — If a vessel insured "at and
from" undertakes another voyage before commencing that insured,
this releases the insurers, even though the trip is a trial trip to test
the engines and take in coal.16
§ 1553. Loss incurred before expiration of risk: expense incurred
thereafter to repair injury. — If a vessel is insured on time, and be-
fore the term expires she is injured by a peril insured against, what-
ever expense is incurred, whether before the risk expires or there-
after, to repair the damage and place the vessel in a situation to
make her valuable, is a loss within the policy.17
§ 1554. Mutual insurance association: termination of risk: non-
payment of contribution. — In an English case "by the rules of a
marine insurance association the members insured each other's
ships from noon on February 20th in any year, or from the date of
entry of a vessel, until noon of February 20th in the succeeding
year, and the managers were empowered to levy contributions of
one-fourth part of the estimated annual premiums quarterly in each
year, such premiums of insurance to form a fund for the payment
of claims ; and if any members should refuse to pay his contribu-
tions thereto, his respective ship or ships should cease to he insured,
and he should thenceforth forfeit all claims in respect of any loss.
12Melvill v. Stewart & Wallace, 3 571, 3 Rob. (N. Y.) 457; Enierigon
Faculty Dec. 254. on Ins. (Meredith's ed. 1850) c. xiii.
13 Shapley v. Tappan, 9 Mass. 20. sec. 10, pp. 565-67, who says: "If
14 Noble v. Kenneway, 2 Doug-. 510. before the voyage insured be com-
15 Dodge v. Essex Ins. Co. 12 Gray nienced the captain undertakes an-
(78 Mass.) 65. other, the insurance is null."
16 Fernandez v. Great Western 17 Fireman's Ins. Co. v. Powell, 13
Ins. Co. 48 N. Y. 571, 8 Am. Rep. B. Mon. (52 Ky.) 311.
2715
§ 1555 JOYCE ON INSURANCE
On the 5th of April. 1881, a Loss incurred in the year 1SS0-81 upon
a ship belonging to the plaintiff, and insured in the association, was
fixed by an average adjuster at one hundred and eighty pounds. A
call of forty-one pounds ten shillings, made on the plaintiff on the
oth of .May. 1881, for the second quarter of L88J -82, was by mutual
consenl set off against the loss. On the l.'ith of May. L881, the asso-
ciation paid the plaintiff one hundred pounds on further account
of the loss. On the 2:>d of June, 188], a call was made mi the plain-
tiff of fifty-two pounds sixteen shillings eight pence, and on the 5th
of July, 1881, another call of thirty-one pounds four shillings.
The plaintiff having tendered the balance due from him, the asso-
ciation refused to accept it. and during the pendency of an action
to recover the full amount of the two calls one of the plaintiff's
-hips insured in the association was wholly lost. It was held in
the case stated that as the calls were made in respect of matters re-
lating to the 1880-81 policy, and it was not shown that they were
in respect of his ship insured as aforesaid, the plaintiff's ship did
not cease to be insured, and that he had not forfeited his claim in
respect to the los>."- 18
§ 1555. Expiration by limitation of "binding" memorandum. —
If the memorandum or "binding" slip under a contract on the
chartered freight of a vessel leaves the rate of premium "open for
particulars," and there is nothing to show that the rate of premium
is to be kept open for any other particulars than those which are
shown by the charter-party, and these are in the possession of in-
sured ten days before the vessel sails, it becomes the duty of in-
sured to communicate these facts at once to the insurer, and the
failure so to do within a reasonable time, and not until after loss,
causes the contract to expire by limitation.19
18 Syllabus in Williams v. British- tion which we put upon this prelimi-
Marine Mutual Ins. Assoc. Lim. as nary arrangement in regard to the
reported in G Asp. Rep. Mar. Cas. undertaking of the plaintiff to fur-
X. S. L34, by J. Smith, Esq. nish additional facts without unneces-
19 Scannell v. China Mutual Ins. sary delay accords with the testimony
Co. lb' 1 Mass. 341, 49 Am. St. Rep. of all the experts as to usage in shni-
462, 41 N. E. G49. The court, per lar cases."
Knowlton, J., says: "The construc-
2716
CHAPTER XLIX.
ATTACHMENT AND DURATION OF RISK ON GOODS.
§ 1562. Attachment and duration of risk on goods: generally.
§ 1563. Insurance on goods may be retrospective.
§ 1564. Risk will not attach until assured acquires an interest in the goods:
exception.
§ 1565. Goods on shore in warehouses: on the wharf awaiting shipment:
for trading voyages: temporally landed in government ware-
houses: landed for transportation to port: quarantine.
§ 1566. "Safely landed" defined and construed.
§ 1567. "Safely landed :" risk of craft while waiting for transshipment.
§ 1568. Goods "to be shipped :" time policy.
§ 1569. Goods in transit in boats or lighters, etc. : usage : attachment and
termination of risk.
§ 1570. Attachment of risk: substituted goods: goods laden at intermediate
port : trading voyages.
§ 1571. Where goods subsequently loaded at intermediate port are not
substituted goods.
§ 1572. Outward goods and proceeds home: attachment risk.
§ 1573. "At and from :" undisposed of outward cargo may be protected
by the words "wheresoever loaded."
§ 1574. "At and from:" outward cargo to be considered homeward inter-
est, etc. : loading "at."
§ 1575. Laden or to be laden between designated points.
§ 1576. Shipments to be subsequently declared: risk attaches in order of
shipment : usage to correct declaration.
§ 1577. The insurance applies to the first voyage or the one commenced.
§ 1578. "At and from" a specified port : commencement of the risk from
loading, etc.: what is port of loading.
§ 1579. Cases relied on in support of the last rule.
§ 1580. Construction of policy may warrant loading elsewhere than "at"
designated place.
§ 1581. Attachment of risk on goods "at and from."
§ 1582. "At and from" on goods : several ports within one legal classifica-
tion.
§ 1583. Goods on board ship or ships: certain ports named: attaches at
port where loaded, etc.
2717
§
15S5.
§
15SG.
§
1587.
§
1588.
§ L589.
§ L590.
§ L591
§ 1592.
§ 1593.
§ 1562 JOYCE ON INSURANCE
§ 1584. Unloading and reloading goods to make vessel seaworthy or for
other purposes.
Attachment and duration of risk on goods: abandonment and
change of voyage insured.
Homeward policy "at and from:" case of island or district: from
the loading aboard ship "at" port or ports.
Duration of risk: liberty to make ports or ports: insurance to
several ports, island or district.
Attachment of risk from a port from loading: duration of risk:
usage.
To specified port : anchoring outside of harbor.
Till safely landed: final or last port of discharge.
Goods partly landed: whether the risk is entire.
Within what time goods must be landed.
Termination of risk: voyage stopped or delayed by ice: inland
navigation.
§ 1594. Risk terminates where goods are transshipped without necessity
or agreement.
§ 1595. Risk does not terminate where goods transshipped from necessity.
§ L596. Risk does not terminate when transshipment is by agreement.
S 1597. Termination of risk: outfits of whaling voyage.
$ 1598. Till arrival of goods to a market at final port of discharge.
§ 1599. Termination of risk by consignee or owner taking possession:
consignees : lighters.
§ 1562. Attachment and duration of risk on goods: generally. —
In determining when the risk upon goods attaches and ends under
marine policies, reference must be had to the contract stipulations
to usage as well as to the character of the risk and the object of the
voyage. Under the French Ordonnance of 1081, if the time of the
risk is not regulated by contract, it will run as to the goods as soon
as they have been shipped in the vessel or the lighters to be carried
on board ship, and continue until said goods are delivered on shore.
Emerigon says: "The reason of it is this: the maritime risk begins
the moment that the merchandise is exposed to the sea, whether it
be in the vessel or on the traject to reach the vessel." 20 But in
England and this country the ordinary form of marine policy in
general use is so worded as to establish a different rule, since the
20 Emerigon on Ins. (Meredith's also 1 Marshall on Ins. (ed. 1810)
ed. 1850) c. xiii. sec. 2, p. 538. This *247 a; 1 Arnould on Marine Ins.
author also notes the different ordon- (Perkins' ed. 1850) 423, *417, note
nances and forms then existing in a; Id. (Maclachlan's ed. 1887) 378,
the different continental states; note 1, where the modern codes,
Emerigon on Ins. (Meredith's ed. ordonnances, and forms are noted.
L850) c xiii. see. 2, pp. 536, 537. See
2718
RISK ON GOODS §§ 1563-1565
risk under such policies attaches only from the loading of the goods
on board the vessel, and this contemplates an actual loading, and
excludes the goods from protection of the insurance before that
time,1 and the risk continues on said goods until they are discharged
and safely landed. Usage may, however, modify the terms of the
contract; thus, as we shall note hereafter, it is held that under the
ordinary form above mentioned the risk may, under a notorious
and established usage, attach before the goods are loaded aboard the
vessel.2 Again, the risk may attach under a trading voyage, how-
ever often the goods may be changed.3 So parties may stipulate
that the risk may commence on goods before they are loaded, or
the contract may be so framed as to apply to particular cases, or to
cover contemplated contingencies. The various points involved
will, however, be considered under this chapter so far as there are
decisions upon them. The goods must be insured, for they are not
protected by an insurance on the ship on which they are laden.4
§ 1563. Insurance on goods may be retrospective. — A policy may
be effected upon goods "lost or not lost," and may cover a loss oc-
curring prior to the date of the policy.5
§ 1564. Risk will not attach until assured acquires an interest
in the goods: exception. — It has already been stated that the in-
sured must have an insurable interest in the property covered by
the policy, and if the assured does not acquire title to the goods until
the shipment of the cargo is completed, the policy will not attach
so as to cover the goods in the course of shipment.6 But if the policy
be upon goods lost or not lost, it may render the insurers liable for
a partial loss occurring before the insured acquired his interests.7
§ 1565. Goods on shore in warehouses: on the wharf awaiting
shipment: for trading voyages: temporarily landed in government
warehouses: landed for transportation to port: quarantine. — Goods
may be insured by a policy covering them while on shore awaiting
shipment.8 So cotton placed upon the ground with the intention
of immediately shipping the same, is covered by a policy indem-
nifying a common carrier against liability as such for cotton in
*1 Marshall on Ins. (ed. 1810) land v. Pratt, 11 Mees. & W. 296, 7
•249. Jur. 261, 13 L. J. Ex. 246 ; Schroeder
2 See § 1569 herein. v. Stock & Mutual Ins. Co. 46 Mo.
3 Coa-ershall v. American Ins. Co. 174. See §£ 105-108, 1444 herein.
3 Wend (N Y.) 283. 6 Anderson v. Morice, 3 Asp. Mar.
*1 Marshall on Ins. (ed. 1810) 320 L. Cas. 291, 23 Eng. Rul. Cas. 302.
a 7 Sutherland v. Pratt, 11 Mees. &
' 6 Merchants' Insurance Co. v. W. 296, 7 Jur. 261, 13 L. J. Ex. 240.
Paige, 60 111. 448 ; Clement v. Phce- 8 Fire Ins. Co. v. Merchants' &
nix Ins. Co. 6 Blatchf. (U. S. C. C.) Miners' Transportation Co. 66 Md.
481; Fed. Cas. No. 2881; Suther- 339, 59 Am. Rep. 162, 7 Atl. 905.
2719
§ 1565 JOYCE ON INSURANCE
bales in transil in car-, or in or on it.- depots or platforms on the
line of its road.9 Or the policy may provide against risk of fire,
and from the date of storage until the goods arc shipped, and such
a description will cover goods od shore in storage where a premium
is charged therefor in addition to the marine premium, it appear-
ing from the application thai such goods were described together
with those intended to be insured under a marine policy.10 But
goods on shore or in warehouses or on the wharf awaiting ship-
mi'iit are not protected by the ordinary marine policy containing
the clause providing that the risk shall attach upon the goods from
and immediately following the loading thereof on hoard ship, even
though the insurance is upon "goods laden or to be laden." and the
goods are on the wharf of the steamship company awaiting ship-
ment in one of its vessels.11 Emerigon notes the following ca.-e,
where the risk was, under the stipulations of the contract, to com-
mence on the merchandise as soon as brought on board the ship.
The merchandise was ready to be embarked, and part of it had been
placed on board the vessel, when a violent gale arose, necessitating
the leaving a part of the merchandise on shore, and it was held that
the risk had never attached on the merchandise on shore, because
it had never been exposed to the perils of the sea. and therefore the
-a me never formed the subject of the insurance.12 Nor are goods
on shore protected even though the policy gives liberty to touch at
different ports, and the goods are destined for the cargo insured, and
the vessel is in port awaiting their shipment, unless it is otherwise
stipulated, as it is necessary that the goods be exposed to the perils
insured against.18 But the goods may be temporarily placed on
shore or in warehouses in furtherance of the purposes of the voy-
ages; as in the case of trading or bartering voyages, where the .uoods
are landed for the purpose of exchange or delivery to a purchaser.
In such case, if the exchange cannot be effected or the delivery is
not made, and the goods are lost by a peril insured against on being
returned to the ship, and while on board the launch for that pur-
9 Bennettsville & C. R. Co. v. Glens 12 Emerigon on Ins. (Meredith's ed.
Falls Ins. Co. 96 S. Car. 44, 79 S. 1850) c. xii. sec 47, pp. 521, 522.
E. 717. 13 Harrison v. Ellis, 7 El. & B.
10 Kennebec County v„ Augusta 465, 26 L. J. Q. B. 23!). Sec Martin
Tns. & Banking Co. 6 Gray (72 v. Salem Ins. Co. 2 Mass. 120; Aus-
Mass.) 204. tralian Agricultural Co. v. Saunders,
11 Smith & Holt v. Mobile Naviga- L. R. 10 Coin. P. 668; Emerigon
tion & Mutual Ins. Co. 30 Ala. 167; on Ins. (Meredith's ed. 1850) c. xii.
Cottam v. Mechanics' & Traders' Ins. sec. 47, p. 521.
Co. 40 La. Ann. 259, 4 So. 510. Ex-
amine Cobban v. Downe, 5 Esp. 41.
2720
RISK ON GOODS § 1566
pose, the insurers are liable.14 And if liberty is given to touch at
any port for any purpose whatsoever, and part of the goods de-
scribed in the policy are taken, the policy attaches upon goods so
taken.15 And where the goods are landed and put into government
warehouses in the charge of the revenue officers, the goods are aol
protected in the warehouses, for the risk terminates upon the goods
being landed ; 16 or if they are lost after being landed on the wharf,
the insurers are not liable.17 And it is also declared that unless a
custom exists to land the goods on the beach for transportation to
the town, the risk terminates so soon as they are put on shore.18
And if the goods are landed on shore to be transported, according
to the usages of trade, by railroad to the place of destination, the
risk ends at once the goods are put on shore.19 But the risk will
continue on goods carried ashore, by reason of damage to the ship,
and transported by land to be reshipped ; 20 and goods may, by ex-
press stipulation, be protected while being transported overland
after landing.1 If goods are deposited in the lazaretto, the laws of
the place requiring ships and cargoes to perform quarantine, the
risk terminates there, even though the consignees cannot remove
the goods, and the risk is by the terms of the policy to continue till
the goods are "safely landed." It was held in this case that the
lazaretto was by custom the place of landing.2 And in general the
risk on goods terminates, except there be a usage otherwise, as soon
as they are put on land, except, as above stated, they are temporarily
landed under certain circumstances warranting their protection by
the policy.3
§ 1566. "Safely landed" defined and construed. — Landing goods
under a marine risk means putting them upon land, or upon that
which, by custom of the port, is its equivalent.4 If the goods are
insured "until safely landed at /' the risk is not continued
14 Parsons v. Massachusetts Fire & 19 Mobile Marine Dock & Mutual
Marine Ins. Co. 6 Mass. 197, 4 Am. Ins. Co. v. McMillan, 27 Ala. 77.
Dec. 115. 20 Brvant v. Commonwealth Ins.
See Martin v. Salem Ins. Co. 2 Co. 13 Pick (30 Mass.) 543,555,558.
Mass. 420; Harrison v. Ellis, 7 El. & x Rodocanachi v. Elliott, L. R. 8
B. 465, 26 L. J. Q. B. 239; Brough v. Com. P. 649.
Whitmore, 4 Term Rep. 206 ; Tier- 2 Grade v. Marine Ins. Co. 8
ney v. Etherington, 1 Burr. 388, 349; Cranch (12 U. S.) 75, 3 L. ed. 492.
Pelly v. Royal Exch. Assur. Co. 1 See Emerigon on Ins. (Meredith's ed.
Burr. 341, 14 Eng. Rul. Cas. 30. 1850 ) c. xii. sec. 47, p. 523.
15Violett v. Allnut, 3 Taunt. 419. 3 Pellv v. Roval Exch. Assur. Co,
16 Brown v. Carstairs, 3 Camp. 1 Burr. 341, 14 Eng. Rul. Cas. 30.
161. 4 Houlder Bros. v. Merchants'
17 Mansur v. Mutual Marine Ins. Marine Ins. Co. Lim. 6 Asp. Rep.
Co. 12 Gray (78 Mass.) 520. Mar. Cas. N. S. 12, per Bowen, L.
18 Osacar v. Louisiana State Ins. J. See Langdon Branch U. P. Bak-
Co. 5 Mart. N. S. (La.) 386. ing Co. v. Home Ins. Co. (C. A. Par-
Joyce Ins. Vol. III.— 171. 2721
§§ L567-1569 JOYCE ON INSURANCE
until arrival at the warehouse, or till they reach the consignee's
hands, although there is a marginal provision that all risks are
covered "to the final destination." 5
§ 1567. "Safely landed:" risk of craft while waiting for trans-
shipment.— A policy (Hi the cargo of a coasting vessel "at and from
Hull to London, including -ill risk of crafl until the goods arc dis-
charged and safely landed," does not cover the risk on the cargo
while waiting on lighters at the port of delivery for transshipment
into an export vessel.6
§ 1568. Goods "to be shipped: " time policy. — ruder an insurance
for a specified time from and after a certain date on goods "to be
-hipped."' the word ■"shipped" does not mean putting on board or
lading, but dispatching the goods, and the faet that the cargo is
loaded before the date specified as that of the commencement of the
risk does not prevent the risk attaching on all goods on board the
vessel at the time she sails, within the time agreed upon as that of
the duration of the risk.7
§ 1569. Goods in transit in boats or lighters, etc.: usage: attach-
ment and termination of risk. — Insurance may he effected to cover
the goods while in transit from shore in boats or lighters, in which
case the risk will attach directly they arc put on board said boats or
lighters. No particular form of clause is necessary, provided it is
evident therefrom that the risk of craft while loading is intend-
ed to he covered. In an English case the words were used,
ish, New Orleans, 1893) 22 Ins. L. with the usages of the port. A
J.. 640. lighter which is intended to trans-
5 Beddall v. British & Foreign ship the goods to another ship may
Marine Ins. Co. 143 N. Y. 94, 37 N. have to wait its arrival and till it
E. 613, 60 X. Y. St. Rep. 471, af- is ready to take the cargo, and may
firming (J7 Hun. 648, '-'1 N. Y. Supp. thus he subject to additional risks of
709. 50 N. Y. St. Rep. 745. exposure to the weather, and of
6 Houlder Bros. v. Merchants' collision with other vessels or barges
Marine Ins. Co. Lim. 6 Asp. Rep. in the dock. In the smaller London
Mai\ Cas. N. S. 12, Bovven, L. J., docks lighters may be comparatively
says in this case: "In the present safe, but in the larger docks they are
case, instead of placing the goods up- often swamped by the winds and by
on lighters to carry them to the the waters, and yet might be obliged
shore, the goods were placed upon to wait days, and possibly weeks, for
lighters which were to take them to the arrival of the export vessel to
an export vessel, and there to load which the goods were consigned,
them as soon as she was ready to re- Cargo discharged upon lighters for
ceive them. Such transshipment, transshipment to an export vessel is
however usual in the trade, is not accordingly exposed to a peril which
the same thing :is landing the goods is not the same as that which it en-
directly and immediately upon the counters if discharged upon lighters
quay. A lighter which has to land to take it to the shore at once."
its cargo has only to make for the 7 Sorbe v. Merchants' Ins. Co. 6
quav and wait its turn in accordance La. (0. S.) 185.
2722
RISK ON GOODS § 1569
"Beginning- the adventure on the said goods from and immediately
following the loading thereof on board boats at;"8 so where the
ship is engaged in a trading voyage, the risk may cover goods while
they are being carried to the ship in boats or lighters at different
ports during the course of the voyage, the same as if they had been
c.n board the ship, where usage at the particular port of loading
sanctions this way of taking the goods on board, though (he policy
only contains the customary clause, "Beginning (he adventure on
such goods from and immediately following the haling thereof on
hoard the said vessel." 9 This clause last noted does not, however,
as a rule, either in England 10 or here, cover the goods in transit in
boats or lighters to the ship. If there be an established and notorious
usage of trade of a place or port "to" which the goods are destined
under the contract, or if the risk is to continue until the goods are
"safely landed,'' the risk extends to and covers the goods in transit
in boats, lighters, or launches to the shore, and goods are protected
in boats employed in discharging goods as auxiliary to the legiti-
mate purposes of the voyage insured.11 Thus, where cattle are
placed in boats according to the usual mode at that port of landing-
cattle, and some of them becoming frightened rush overboard, and
are lost, the insurers are liable therefor.12 If goods are insured
to a specified port, and the vessel arrives' at the roadstead, and
in accordance with the custom of that place sends the cargo on
shore in launches, the risk does not terminate until the goods ar-
rive at the place of the destination, although the town may
be twenty leagues distant from the roadstead.13 Goods may also be
protected in lighters in which they are placed for transportation.14
8 Hurry v. Royal Exchange Assur. Fire & Marine Ins. Co. 6 Mass. 197,
Co. 2 Bos. & P. 430, 435, 13 Eng. 4 Am. Dee. 115; Wadsworth v. Paci-
Rul. Cas. 620. Cited in Strong v. fie Ins. Co. 4 Wend. (N. Y.) 33;
Natally, 1 Bos. & P. (N. R.) 16, 8 Rueker v. London Assur. Co. 2 Bos.
R. R. 741, 13 Eng. Rul. Cas. 627. & P. 432n; Hurry v. Royal Exchange
9 Coggeshall v. American Ins. Co. Assur. Co. 2 Bos. & P. 430, 3 Esp.
3 Wend. (N. Y.) 283. See also 289, 13 Eng. Rul. Cas. 620, cited
Hurry v. Royal Exchange Assur. Co. Id. 364, 627, 628, 629; Brown v.
2 Bos. & P. 430, 435, 13 Eng. Rul. Carstairs, 3 Camp. 161; Matthie v.
Cas. 620. Cited in Strong v. Natal- Potts, 3 Bos. & P. 23; Stewart v. Bell,
lv, 1 Bos. & P. (N. R.) 16, 8 R. R. 5 Barn. & Aid. 238, 24 R, R, 342;
741, 13 Eng. Rul. Cas. 627. Tierney v. Etherington, 1 Burr. 348,
10 1 Arnould on Marine Ins. (Perk- per Lord Mansfield; Sparrow v. Car-
ins' ed. 1850) 423, *417; Id. (Mac- uthers, 2 Str. 1236.
lachlan's ed. 1887) 378; Id. (8th ed. 12 Anthony v. ^tna Ins. Co. 1 Abb.
Hart & Simey) sec. 447, p. 580; sees. (U. S. C. C.) 340, 343, Fed. Cas. No.
457, 458, pp. 592 et seq. 3304.
11 Gracie v. Marine Ins. Co. 8 13 Osacar v. Louisiana State Ins.
Cranch (12 IT. S.) 75, 3 L. ed. 492; Co. 5 Mart. N. S. (La.) 386.
Osacar v. Louisiana Ins. Co. 5 Mart. 14 Houlder v. Merchants' Marine
(La.) 386; Parsons v. Massachusetts Ins. Co. 17 Q. B. Div. 354.
2723
§ 1570 JOYCE ON [NSURANCE
§ 1570. Attachment of risk: substituted goods: goods laden at
intermediate port: trading voyages. — If it appears by a fair con-
struction of the terms of the contract that a trading voyage is con-
templated, the evident intent being that the ship shall he permitted
to touch at several ports in the course of the voyage to unload goods
or to take others on board, either in exchange for them or purchased
with the proceeds thereof, goods so exchanged or purchased at any
port at which the ship lias liberty to touch and trade are substituted
goods, and will he covered by the policy, and this extend- to Load-
ing and unloading the goods at such intermediate port under such
policies, such ports being deemed Loading ports.15 In determining
this point, the whole policy should he construed together, and the
construction given which is fairly deducible from its terms. The
risk should not he extended beyond what the description fairly
warrants. The Liberty given must he always construed with refer-
ence to the voyage insured, and must he lor some purpose contem-
plated by the insurance, and not tor a purpose wholly foreign to
the main object of the voyage insured.16 If it is evident that no
intention of unloading the cargo and employing it in trade is con-
templated by the parties, the words giving Liberty "to touch and
-tax at any ports or places whatsoever" will not extend the protec-
tion of the policy to goods shipped at an intermediate point; as in
case the cargo is one of tea. and the policy stipulates that the ad-
venture shall begin from the loading of the goods at a particular
place, this will not cover goods shipped at an intermediate port
where the vessel has stopped for repairs and has forwarded the tii-t
cargo by another vessel, even though the Liberty to touch and stay
has been stipulated.1' A policy on all goods Laden or to he laden
15 1 Marshall on Ins. (ed. 1810) die policy." This author also says
■111'; Violetl v. Allnutt, 3 Taunt, that if liberty be given the captain
419 ; Grant v. Delacour, 1 Taunt. 466 ; of touching at and making port in
Barclay v. Stirling, 5 Maule & S. t>. all places that he shall please, such
16 Williams v. Slice, .'! Camp. 469, liberty gives him the right of trading
per Lord Ellenborough ; Hunter v. and making purchases at such ports,
Leathley, 10 Barn. & C. 858, 7 Bing. and the ports where the vessel stops
a 17, per Lord Tentenlen ; Hammond become the place of loading, and thai
v. Reid, I Barn. & Aid. 72, 9 Eng. the insurance is valid although the
Etui. Cas. 372. entire loading insured may have been
17 Granl v. Paxton, 1 Taunt. 4(i3. made at an intermediate port. He
The above general rule is in conform- refers to a case where the insurance
ity with that given by Emerigon, who was on cargo out from Vinaros to
says thai if the captain under such Marseilles, liberty to touch at inter
a policy discharges goods at an inter- mediate ports being given. The ves-
mediate port ana take- in others, the sel departed from Vinaros, and took
latter "stand in the place of sent on board her lading at Alcanor, a
sebrogees, or are substituted for those roadstead belonging to Catalonia, and
discharged there, and are covered by the policy was held to have attached:
2724
RISK ON GOODS §§ 1571, 1572
during a specified time, with a privilege of extension by the assured,
and no ports mentioned, is a policy upon a trading voyage, and
attaches to substituted goods.18 So in an English case, where part
of the goods described in the policy were loaded at an intermediate
port, the policy was held to have attached to the goods so laden to
complete the voyage.19 And it is not necessary that the port should
be designated in the policy if it is comprehended by construction
within the terms of the policy.20
§ 1571. Where goods subsequently loaded at intermediate port
are not substituted goods. — If the risk has not commenced upon
goods, by reason of their not having been loaded at the designated
port, the policy will not attach upon goods subsequently loaded
under a liberty to touch at other ports given by an indorsement
made upon the policy under a mistake of law by both parties, aris-
ing from a mistake of the facts.1
§ 1572. Outward goods and proceeds home: attachment risk. — If
the policy provides for an insurance upon outward cargo and the
proceeds thereof home, if the outward cargo is discharged and the
proceeds invested in a homeward cargo, the policy will attach there-
upon and cover the same ; 2 and this is so even though the proceeds
home or return cargo is taken on credit before the outward cargo,
which is left on consignment for sale, is actually sold, for the home-
ward cargo in such case is intended as a substitute for the outward
cargo, and is to all intents and purposes the proceeds thereof.3 So
where a policy from Bordeaux to India stipulates that the risk shall
end when the outward cargo shall be landed, and the proceeds en-
tirely invested in produce of India, and a second policy is taken
from India to a port of discharge in the United States, with liberty
to stop and trade at the isles of France or Bourbon, or both, and the
vessel disposes of part of the outward cargo at Sumatra for produce
and of the balance at the isle of France, investing the same in home-
ward cargo, the second policy will attach.4 But the identical goods
constituting the outward cargo are not covered on the homeward
Emerigon on Ins. (Meredith's ed. underwriter can suppose that, wheth-
1850) e. xiii. see. 8, pp. 558, 559. er the return cargo was procured
18 Coggeshall v. American Ins. Co. by the sale or exchange of the out-
3 Wend. (N. Y.) 283. ward cargo, or by a deposit of the-
19 Violett v. Allnutt, 3 Taunt. 410. outward cargo and a credit raised
20 Hunter v. Leathley, 10 Barn. & upon it, any difference as to his lia-
C. 858, 7 Bing. 517. bility can exist," per Parker, C. J...
1 Scriba v. Insurance Co. of North in Haven v. Gray, 12 Mass. 71; Whit-
America, 2 Wash. (U. S. C. C.) 107, nev v. American Ins. Co. 3 Cow.
Fed. Cas. No. 12560. (N. Y.) 210.
2 Cleveland v. Fettyplace, 3 Mass. 4 Cleveland v. Fettvplace, 3 Mass.
392. 392.
3 "It is difficult to imagine how the
2725
j§ 1573-1576 JOYCE ON [NSURANCE
voyage by the word "proceeds," unless a mercantile usage is proven
to thai effect, in which case the -nine i2,oods will be included under
an insurance upon the return cargo.6
§ 1573. "At and from:" undisposed of outward cargo may be
protected by the words "wheresoever loaded." — Where an insur-
ance is effected "at and from" on o,>«„l< wheresoever they may be
loaded, the effeel of such clause will be to cover goods of the out-
ward voyage undisposed of at the destined market, and which are
necessitated being carried baek on the homeward voyage, for the
policy is to attach wheresoever the loading takes place.6 But if
the risk is to commence on goods to be loaded "at" a specified out-
port for the homeward voyage, the risk will not attach upon goods
loaded at the port of departure of the outward voyage and still re-
maining on hoard the vessel after her arrival at the outport.7
§ 1574. "At and from:" outward cargo to be considered home-
ward interest, etc.: loading "at." — Where risk is to commence from
the loading of the goods "at," and these words are qualified by the
words "outward cargo to be considered as homeward interest twenty-
four hours after her arrival at her first port of discharge," the voy-
age being a trading voyage, the word "loading" is here used in a
sense different from that which ordinarily prevails, and does not
refer to the mere putting on board "at," and the clause last noted
will be constructed to mean that the loading was to commence prior
to the attaching of the policy "at," and the insurance, for the home-
ward voyage will attach to and cover the goods on board at once
the twenty-four hours expire after the ship's arrival at her first port
of discharge within the terms of the policy.8
§ 1575. Laden or to be laden between designated points. — If an
insurance policy is issued for a specified term on cargo laden or to
be laden on barges trading between points, it will attach upon and
cover the described cargo whenever the same is taken on or delivered
between the places designated, if the barges are engaged in trading
between said places.9
§ 1576. Shipments to be subsequently declared: risk attaches in
order of shipment: usage to correct declaration.10 — If an insurance
is effected on goods by ship or ships to be thereafter declared, or the
5 Dow v. Whetton, 8 Wend. (N. 8Jovee v. Realm Marine Ins. Co.
Y.) Kilt. See also Dow v. Bope Ins. 7 L. R. Q. B. 580, 41 L. J. Q. B. 356;
Co. 1 Ball (N. Y.) 1GG. Tobin v. Barford, 13 Com. B. N. S.
6 Gladstone v. Clay, 1 Maule & S. 791, 34 L. J. Com. P. 239, 13 Eng.
420. Rul. Cas. 598.
7 l.'ickinan v. Carstairs, 5 Barn. & 9 Phoenix Fire Ins. Co. v. Cochran,
Adol. 051, 2 Kcv. & M. 500; Murray 51 Pa. St. L43.
v. Columbian las. Co. 11 Johns. (N. 10 See § 1/36 heroin.
V.i 302.
2720
RISK ON GOODS § 1577
policy provides "the several shipments to be subsequently declared."
the risk attaches to the goods in the order in which and as soon as
they are shipped. The insured, in such case, is bound to declare
them in that order at once he knows of their shipment. But if, by
mistake or otherwise, a subsequent shipment is declared before a
prior one, the insured is by usage bound to rectify the error, and
this may be done even after a loss, there being no fraud, and the
underwriter may require that the declarations conform to the order
of the shipments.11 And where goods are shipped under an open
policy from Melbourne to London, by one set of steamers to Sydney
and another set to London, and it is also stipulated that declaration
be made within a specified time after departure from Sydney, two
declarations must be made, one Under the open policy and one
under the contract; the former to identify the shipments at Mel-
bourne, the latter to identify the goods actually shipped to London,
it appearing that the policy covered certain goods in a certain fac-
tory at Sydney.12
Under a warranty in an open marine policy of insurance that all
risks shall be reported to the insurer as soon as known to the in-
sured, the fact that the insurer retains notice of other risks after a
loss does not estop him from insisting on a breach of the warranty,
provided that he had not received and retained premiums on risks
reported, or done any affirmative act in respect to them.13
§ 1577. The insurance applies to the first voyage or the one com-
menced.— Emerigon says the insurance in effect refers to goods
which have been or shall be loaded on board the vessel, and that the
insurance for the voyage means, if the ship is in port, the first or
next voyage, but if the voyage be already commenced, the insur-
ance concerns that voyage, and not a subsequent or different one,
unless the contrary appears from the contract.14 So if the insurance
is upon certain merchandise from A to B on a steamer, the policy
will not be extended beyond the first voyage the ship undertakes,
and covers part of the described goods taken by the vessel on a
second voyage.15 And where the policy was from London to Berbice,
and by its terms was to attach from the loading thereof of the goods
11 Stephens v. Australasian Ins. Co. 13 Camors v. Union Marine Ins.
L. R. 8 Com. P. 18, per the court. Co. 104 La. 349, 81 Am. St. Rep. 128,
12 Davies v. National Fire & Marine 28 So. 926.
Ins. Co. of New Zealand H. of L. " Emerigon on Ins. (Meredith's ed.
A pp. Cas. L. R. 485. See marine 1850) c. xiii. see. 9, pp. 564, 565.
ins. act 1906 (6 Edw. VII. c. 41) 15 Courtenay v. Mississippi Marine
sec. 29 (2), (3), (4) ; Butterworth's & Fire Ins. Co. 12 La. (0. S.) 233.
Twentieth Cent. Stats. (1900-1909)
p. 406; Chitty's Stats. England
(1902-1907) p/888.
2727
§ 157S
.loYCK ON l\M WANVK
aboard the ship, and the words "al sea'3 were inserted thereafter, tho
ship being represented as at sea between Rarbadoes and Herbice,
where she actually was when the policy was effected, and the vessel
had prior thereto touched at Madeira, where she had discharged
and taken on cargo and sailed, it was held that the policy attached
at London; that the goods taken on at Madeira were not covered,
and the insurers were released by the touching at Madeira.16
§ 1578. "At and from" a specified port: commencement of the
risk from loading, etc.: what is port of loading. — Under an insur-
ance "at and from" a specified port, the question has been frequent-
ly before the courts as to wh it constitutes the port of loading under
thi> usual clause providing for the commencement of the risk from
and immediately following the loading thereof on "hoard ship at,"
or nn "hoard ship"" merely. The earlier English eases which have
been followed by decisions in this country unequivocally decide that
the clause in question excludes every other port than the one
designated as the terminus a quo of the voyage, and that the goods
must he loaded at the exact place specified, and no other, to enable
the risk to attach thereon, and this is true even though the goods
loaded elsewhere are the very goods intended to be insured, holding
the parties strictly to the term- of the contract, without regard to
the extrinsic evidence of a, different intention, and the fact that
there is no statement of the place where after the words "on board
.-hip," does not warrant a more favorable construction, but on the
contrary such fact is declared to afford more cogent reason for a
strict construction.17
16 Redman v. Lowden, 3 Cam]). 503.
17 Scriba v. Insurance Co. of North
America, '2 Wash. (U. S. C. C.) 107,
Fed. Cas. No. 12,560; Murray v.
Columbian Ins. Co. 11 Johns. (N.
Y.) 302; Vredenbur"' v. Grade, 4
Johns. (N. Y.) 44 la ; Richards v.
Marine Ins. Co. 3 Johns. (N. Y.)
30, ; Graves v. Marine Ins. Co. 2
Caines (N. Y.) 339; Park v. Ham-
mond, 6 Taunt. 495, 4 Camp. 344, 1
Boll N. P. 80; Langhoni v. Eardy,
4 Taunt. 628, 630, 13 R. R. 708;
Robertson v. French, 4 East, 130, 7
R. R. 535, 14 Eng. Rul. Cas. 1; Glad-
stone v. Clay, 1 Maule & S. 418, 423,
14 R. I,'. 479, per Bayley, J.; Horn-
ever v. Lushington, L5 East, 4(i, .3
(■■an ij). 85, L3 R. R. 7;",!), L3 Eng.
Rul. Cas. 637; Rickman v. Carstairs,
2728
5 Barn. & Adol. 651, 663; Mellish v.
Andrews, 2 Maule & S. 106; Con-
stable v. Noble, 2 Taunt. 403, 11 R.
R. 617, 13 Eng. Rul. Cas. 587; Spitta
v. Woodman, 2 Taunt. 416, 11 R. R.
628, 16 East, 188n, 13 Eng. Rul. Cas.
56! I.
From I he loading thereof: marine
insurance act of England. "4.
Where jroods or other moveables are
insured 'from the Loading thereof,' tin'
risk does not attach until such goods
or moveahles are actually on hoard,
and the insurer is not liable for them
while in transit from the shore to the
ship." Marine ins. act 1906 (0 Edw.
VII. e. 41) sched. I. p. 426, rules
4. 5. 6; Butterworth's 20th Cent. Stat.
( 11)00 L909); Chitty's Stats. Eng.
i L902 1007) p. 907.
RISK ON GOODS § 1579
§ 1579. Cases relied on in support of the last rule. — Tn case of a
policy on goods "at and from Genoa, from the loading to equip for
the voyage," the goods were loaded elsewhere, and the risk was held
not to have attached.18 Again, the policy was "at and from Gotten-
burg . . . from loading thereof on hoard the said ship; " the
goods were loaded at a prior port, and the risk was held not to have
attached. The underwriters knew that the cargo had been loaded
previously, and that the insurance was intended to protect said
cargo, but this appeared by extrinsic evidence.19 In another case
the insurance was upon a trading voyage upon the ship and goods
"at and from," the risk to commence "on the goods from the loading
thereof twenty-four hours after her arrival on the coast of Africa."
It was held that the cargo on board after that period and loaded else-
where, being part of the out cargo, was not covered. The court's
opinion in this case indicates very clearly the then tendency of the
courts to adhere to a strict construction of the terms of the contract,
since Lord Denman, C. J., declared that it appeared that the as-
sured intended by the policy to insure both the outward and home-
ward cargo, but that unfortunately the words used would not effec-
tuate the intention.20 This case is on a line with the preceding one 1
in this respect: that the court felt constrained to uphold the contract
in strict accordance with the express words used, notwithstanding
the fact that the policy in question was in reality a continuation of
a preceding policy, and was undoubtedly by the evidence intended
by the parties to protect the cargo previously loaded. In another
case, however, Lord Ellenborough relaxed this rule of strict con-
struction, on the ground that it was apparent upon the face of the
contract that it was intended to protect goods previously loaded at
another port, since it was stated in the policy that it was in continu-
ation of other policies, and said policies had been effected on the
same cargo.2 And in another case, while the court holds to a strict
construction of the words so used, it is evident from the language
employed by the court that had there been anything on the face of
the policy or in the circumstances of the case to have warranted a
different construction, it would have been given.3 In Graves v.
18 Hodgson v. Richardson, 1 W. x Spitta v. Woodman. 2 Taunt.
Black. 463. 416, 16 East, 188, 13 Eng. Rul. Cas.
19 Spitta v. Woodman, 2 Taunt. 569.
416, 16 East, 188n, 13 Eng. Rul. 2 Bell v. Hobson, 16 East, 240, 3
Cas. 569; criticized in Bell v. Hobson, Camp. 273, 13 Eng. Rul. Cas. 578.
16 East, 240, 3 Camp. 273, 13 Eng. 3 Grant v. Paxton, 1 Taunt. 463.
Rul. Cas. 578, per Lord Ellenbor- See also Bell v. Hobson, 10 East,
ough; and also in Carr v. Montefiore, 240, 3 Camp. 273, 13 Eng. Rul. Cas.
33 L. J. Q. B. 256, per Earle, C. J. 578, per Lord Ellenborough; Carr v.
20 Rickman v. Carstairs, 5 Barn. & Montefiore, 33 L. J. Q. B. 256, per
Adol. 651. Earle, C. J.
2729
§ L580 JOYCE ON INSURANCE
Marine [nsurance Company4 it was particularly specified thai the
risk should commence from the "loading on board said vessel at
Vera < !ruz." The ship was no1 able to discharge there, and returned
with her outward cargo, and the risk was held not to have attached.
Stress was placed upon the point thai it might become importanl to
know the condition of the goods at loading, distinguishing herein,
however, the ship and the cargo, on the ground thai the former was
warranted seaworthy at the commencemenl of the risk, whereas no
like warranty existed as to the goods. But whatever weight this
distinction may carry, the words of Lord Ellenborough in an
English case arc pertinent. He says that although a construction
favoring an attachment of the risk at a port other than that desig-
nated as the place of loading "at" might "probably aid in covering
a damage which happened before the commencement of the risk,
yet when we consider that the assured is bound to prove that the
loss happened within the limits of the voyage insured, that difficulty
is in a great measure removed." 5 In another English case, how-
ever, a similar reason for a like decision was urged as that in the
New York case, viz., that the condition of the goods as to their state
of damage or preservation prior to the attachment of the risk could
not be known.6 Again, a policy was on a cargo from Nuevitas to
New York. The ship arrived but was not permitted to dispose of all
her outward cargo there : the usual clause as to loading was contained
in the policy and the risk was held to have never attached, as the
policy was intended to cover only the goods loaded at Nuevitas.7
But a policy on treasure bullion and bonds beginning the adven-
ture from and immediately after the loading thereof at certain ports
named, attaches thereon when the treasure is actually on board for
transportation at one of the specified ports, in possession of the mes-
senger of the insured, whether it is taken on board at a port named
or some other port in the course of the voyage. The policy in this
case was an open or running marine policy, and also provided
"risks applicable thereto to be reported to this company for indorse-
meiM ;i< soon as known to the insured." 8
§ 1580. Construction of policy may warrant loading elsewhere
than "at" designated place. — The first inquiry should, in cases of
this character, be directed to the point whether the designation of
the terminus a quo or place "at" is intended strictly as a warranty
that the goods -hall be loaded "at" the specified place, or is intended
4 2 Caines (N. Y.) 339. 7 Richards v. Murine Ins. Co. 3
Gladstone v. Clay, 1 Maule & S. Johns. (N. Y.) 307.
418. 8 Wells Fargo & Co. v. Pacific Ins.
G Borneyer \. Lushington, 15 East, Co. 44 Cal. 397.
46, 13 Eng. Bui. < las. 637. See Hodg-
son v. Richardson, 1 W. Black. 463.
2730
RISK ON GOODS § 1580
as a mere description. It is true that the courts have, as a rule, been
inclined toward a strict construction of contracts of_ marine in-
surance,9 but nevertheless construction should not override the plain
terms of the contract, and the intent of the parties deducible there-
from by means of those aids to construction which are legally avail-
able, nor, on the other hand, should courts by construction ingraft
upon the words used an intention which the words themselves do
not fairly import,10 Again, a construction of the usual words which
would of themselves require the loading to be at the port of depar-
ture for the voyage insured will not necessarily be exclusive, since a
different intent may appear from a special memorandum, and be
controlled thereby, or by circumstances showing that such construc-
tion was not intended in the particular case.11 So that if the con-
tract, fairly construed in accordance with sound principles of con-
struction, evidences that the words used in such cases were not
intended as a warranty, but only as a mere description, then such in-
terpretation should govern, and the words should not be held a war-
ranty. This conclusion substantially accords with the views of
other text-writers, although it perhaps seemingly implies a more
liberal rule than that stated by Mr. Arnould.12 And the later Eng-
lish and American decisions evidence the fact that the courts will
now favor, so far as the construction admits, a relaxation of the
rule established by those decisions which hold that the goods are not
protected if laden elsewhere than at the place designated. Thus, a
policy on goods "at and from" a certain port without more, does
not imply that the goods shall be loaded at that port ; as in case of
the insurance "at and from" B., from the loading thereof "at
— i as aforesaid." 13 The tendency of the courts in this direc-
tion is further evidenced from some of the cases noted herein under
a prior section,14 as well as in the cases cited below.15
9 See § 205 herein. 452, pp. 602 et seq.; 2 Parsons on
10 See § 209 herein. Marine Ins. (ed. 1868) 50; 1 Phillips
11 Clark v. Higgins, 132 Mass. 586, on Ins. (3d ed.) sec. 939, p. 516.
593, per the court, citing Bell v. Hob- 13 Clark v. Higgins, 132 Mass. 586,
son, 16 East, 246, 14 R. R. 337, 13 589; Silloway v. Neptune Ins. Co. 12
Eng. Bui. Cas. 578; Carr v. Monte- Gray (78 Mass.) 73.
fiore, 5 Best & S. 408, 422, 33 L. J. 14§ 15/9 herein.
Q. B. 256, 10 Jur. N. S. 1069, 11 L. 15 Manly v. United Fire & Marine
T. 157, 12 W. R. 870; Nonnen v. Ins. Co. 9 Mass. 85, 6 Am. Dec. 40;
Reid, 16 East, 176. Jovce v. Realm Marine Ins. Co. L.
12 1 Arnould on Marine Ins. (Per- R. 7 Q. B. 580, 41 L. J. Q. B. 356,
kins' ed. 1850) 426, *420, sec. 158; 27 L. T. 144; Violett v. Allnutt, 3
Id. (Maclaehlan's ed. 1887) 381 et Taunt. 419, 13 R. R. 676; Hunter v.
seq. Mr. Maclachlan does not, how- Leathley, 10 Barn. & C. 858, 7 Bing.
ever, use the words of Mr. Arnould 517; Carr v. Montetiore, 33 L. J. Q.
given in Mr. Perkins' edition; Id. B. 256, 5 Best & S. 408, 425; Nonnen
(9th ed. Hart & Simev) sees. 448- v. Kittlewell, 16 East, 176; Behn v.
2731
§§ L581, L582
JOYCE ON [NSURANCE
§ 1581. Attachment of risk on goods "at and from." — Unless it
be provided otherwise in the policy,16 the risk on goods "at and
from" only attaches from the time the i>-<>ods arc laden on hoard the
.ship by which they are to be transported and subjected to a marine
risk.17 I'nder such a policy the risk does not all attach on the goods
where the ve^el is lost when proceeding to the port of Loading for
the purpose of taking in the cargo there awaiting shipment.18 But
usage may warrant the risk attaching upon goods so soon as they are
placed on boats for transportation to the ship,19 and the risk attaches
"at and from" on cargo and on freighl from loading,. even though
the ship needs repairs to make her seaworthy.20 If the insurance
be "at and from," and there is no stipulation that the risk i- to
begin on taking in the cargo, the policy will attach upon goods pre-
viously laden ai another port.1 And although the insurance be "at
and from" a foreign port, the rule first stated applies, and the risk
attaches on the goods loaded, wholly or in part, for the homeward
voyage, even though all the outward cargo has not been discharged,
hnl a part thereof remains on hoard.2
§ 1582. "At and from" on goods: several ports within one legal
classification. — We have, under a prior chapter, given some con-
Burness, 3 Best & S. 751. (i Eng. Rul.
Cas. 492; Barclay v. Stirling, 5
Maule & S. 6, 17 R.* R. 245. See next
section.
16 See Kennebec County v. Augusta
Ins. & Banking Co. 6 Gray (72
.Mass.) 20 1.
17 T'nited States. — Cruder v. Phila-
delphia Ins. Co. 2 Wash. (U. S. C.
C.) 2(12, Fed. Cas. No. 3453, per
Washington, J.
Alabama. .Mobile Marine Deck &
Mutual Ins. Co. v. McMillan & Son,
31 Ala. 711.
Maine. — Folsom v. Merchants' Mu-
tual Marine Ins. Co. 38 Me. 414.
New York. — Patrick v. Ludlow, .'?
Johns. Cas. (N. Y.) 10, 2 Am. Dec.
130.
England. — Mellish v. Allnutt, 2
Maule & S. 106, 14 B. B. 599.
"Halhead v. Young, 6 El. & B.
312. 25 L. .1. Q. B. 290.
19 Coggeshall v. American Ins. Co.
3 Wend. (N. Y.) 283.
20 Merchants' Ins. Co. v. Clapp, 11
Pick. (28 Mass.) 56; Taylor v. Low-
ell, 3 Mass. 331, 349, 3 Am. Dec. 341.
This last point lias, however, been
27
the subject of discussion and doubt.
See § 1584 herein.
1 Silloway v. Neptune Ins. Co. 12
Gray (78 Mass.) 73; Gardner v. Col.
Ins. Co. 2 Cranch (U. S. C. C.) 473,
Fed. Cas. No. 5254. In this ease the
fact was also considered that the
goods were not laden subsequently to
the ship's departure from the desig-
nated port, but, as we have already
noted, goods so laden, as in case of
substituted goods, may be covered.
Se(. >;S 1570-1575 herein.
2 1 Arnould on Marine Ins. (Perk-
ins' ed. 1850) 432, * 427, sec. 161; Id.
( Maclachlan's ed. 1887) 388; Id. (8th
ed. Hart & Simey) sees. 448 et seq.,
pp. 580 et seq. This accords with the
rule early stated by Fmerigon, who
says that goods insured may perish
outward and inward, and notices a
case where the ship was wrecked,
having on board <,roods outward and
inward, and the respective insurers
of the goods were held liable: Eineri-
gon on Ins. (Meredith's ed. 1850)
c ■ iii. sec. 20, pp. 592 !> 1. See §
1586 herein.
32
RISK OX GOODS g§ 1583, 1584
sideration to this question, and the general principles there con-
sidered are applicable here, some of the cases relied on there being
insurances on goods; the rule as to goods being that except usage
warrant otherwise, the goods must be loaded "at" the particular
terminus a quo, or place designated, and not a place which is geo-
graphically a separate port, and merely within the legal limits of
the designated port.3 Mr. Phillips* rule is broader than this, inas-
much as he included not only the port itself, but "such places as
are comprehended as part of it."4 Inasmuch as the cases relied
upon by that learned author warrant the insertion of the words "by
usage'' after the word "comprehend," so that the clause would read,
"such places as are comprehended by usage as a part of it," we
may fairly and reasonably assume that this is what Mr. Phillips
intended.
§ 1583. Goods on board ship or ships: certain ports named: at-
taches at port where loaded, etc. — If an insurance be upon goods
or property on board ship or ships, and certain ports are named, the
risk commences from the time the property is on board at one of
the specified ports, or in fact at any port where the goods are loaded
on board within the limits of the voyage. The policy should, how-
ever, be fairly construed upon this point, for the insured may neces-
sarily be ignorant as to the exact port of loading, and the policy
may designate certain limits; as in case of an island or district,
without naming particular places. But the insurance will not cover
goods loaded at a port clearly, and by fair and reasonable construc-
tion, not within the terms of the policy or the limits designated.5
§ 1584. Unloading and reloading goods to make vessel seaworthy
or for other purposes. — While this question has been the subject of
discussion and doubt,6 it is held where a vessel is loaded for the
voyage, and having sailed thereupon puts into a port of necessity
for repairs, and unloads and reloads her cargo, the risk on the goods
will attach at the place of original loading from the loading on
board ship, and also at the place of reloading after the ship is made
seaworthy; 7 and the same is true where, being found unseaworthy,
she returns to port, discharges her cargo, and reships the same.
And this applies to a risk upon ship, cargo, and freight, each being
8 § 1529 herein. See also Murray 10 Barn. & C. 858. See Emerigon on
v. Columbian Ins. Co. 11 Johns. (N. Ins. (Meredith's ed. 1850) c. vi. sec.
Y.) 302; Park v. Hammond, 6 Taunt. 5, p. 139.
495, 1 Holt. N. P. 80. 6 See chapter on Deviation.
41 Phillips on Ins. (3d ed.) 504, 'Merchants' Ins. Co. v. Clapp, 11
sec. 931. Pick. (28 Mass.) 56. See Carr v.
5 Wells Fargo & Co. v. Pacific Ins. Montefiore, 33 L. J. Q. B. 57, 256,
Co. 44 Cal. 397; Hunter v. Leathlev, 5 Best & S. 408, 425.
2733
§§ L585, L586 JOYCE ON [XSCKAXCE
distinctly valued.8 And the rule obtains where the goods are taken
uiu. on the quay for inspection by the customhouse officers and then
reloaded.9 Bui the mere taking the goods oul of the vessel and put-
ting them Leek, and afterward returning them in perfect order,
is nut ,-i "loading thereof on hoard" at the designated port.10
§ 1585. Attachment and duration of risk on goods: abandonment
and change of voyage insured.11 — It' a cargo insured "at and from''
i- taken on board ship at the port of loading, the fact that, the ves-
sel -ailed, merely intending to go first to a port other than that of
it- destination and thence to its port of destination, does not prevent
an attachment of the risk. The intent of itself is not sufficient to
prevent the risk attaching.18 Hut if the goods are insured to a speci-
fied port, it being represented that the voyage insured is to said port,
but that the -hip will clear for another port, and the cargo is in
tact shipped for the latter port on the voyage to which the vessel
sails, the policy does not attach upon the goods, even though she
puts into the original port of destination to avoid 1 lie perils of the
sea.13 So if the original voyage insured is abandoned, the risk
terminates.14 But where the policy is on goods to a specified port,
and the vessel clears for another port, but sails directly to the ori-
ginal port of destination, the insurers are liable. It appeared in
this case, however, that a war risk was contemplated.16
§ 1586. Homeward policy "at and from:" case of island or dis-
trict: from the loading aboard ship "at" port or ports. — In case of
an insurance • "at and from'* several ports16 within a specified dis-
trict "from the loading thereof aboard ship at" port or ports, or
where the risk for the homeward voyage is from an island or place
with several ports, the homeward cargo which is loaded on hoard
ship is protected from the time of loading aboard ship, even though
the ship has not discharged all her outward cargo, and even though
the homeward cargo be not completed, hut the ship is proceeding to
another port to complete her homeward cargo.17 But the cargo
must have been laden for the homeward voyage, since the risk in
8 Taylor v. Lowell, 3 Mass. 331, 3 12 Marino Ins. Co. v. Tucker. 3
Am. Dec. 141. Craneh (7 U. S.) 357, 2 L. ed. 46(i.
9 Xonnon v. Reid, and Nonnen v. 13 Forbes v. Church, 3 Johns. (N.
Kittlewell, 10 East, 176. Y.) tail.
10 Murray v. Columbian Ins. Co. 11 14 Tasker v. Cunningham, 1 Bligh,
Johns. (N. Y.) 302. "The hoisting 87. See Wooldridge v. Boydell, 1
the cargo out of the hold of the ship Doug. 16.
and restowing it docs not amount to 15 Planche v. Fletcher, 1 Doug. 251.
loading it on board the ship, either ie See § 1581 herein,
according to the words, the reason, 17 Forbes v. Aspinall, 13 East, 323,
or the spirit of the contract," per Van 13 Eng. Kul. Cas. 673; Tobin v. Har-
Ness, J. ford, 13 Com. B. N. S. 791, 34 L. J.
11 See §§ 1488, 1531 herein. Com. P. 37, 32 L. J. Com. P. 134,
2734
RISK ON GOODS § 1587
such cases does not attach upon any cargo not so laden, nor doc- it
attach if no homeward cargo is laden.18
§ 1587. Duration of risk: liberty to make port or ports: insur-
ance to several ports, island or district. — The words "with liberty
of" a certain port only confer a power subordinate to the general
course of the voyage; they do not necessarily imply that a trading-
voyage is intended, nor unequivocally intimate the nature of the
cargo insured, nor do they evidence that the parties contemplated
such port as that at which the voyage was intended to terminate.19
And in case of an insurance from A to B, with liberty "to touch at
intermediate points, with the privilege of coasting and transacting
any lawful business connected with the voyage," B is the place of
termination of the risk, and not an intermediate point where, ac-
cording to custom, the ship remains several days in order to effect
sales, and then drops down to B to deliver the goods, and this is so
even though said place is the usual market where sales of like cargo
are negotiated, and all the hands except two were there discharged
and paid off. It appeared, however, in this case that said market
place was a separate municipality.20 And where an insurance was
from New York to Baxracoa, with liberty to touch at one or two ports
on the north side of Cuba, the risk to continue till the goods were
safely landed at one of said ports, the fact that the ship breaks bulk
at Barracoa does not terminate the risk, where she is unable to dis-
pose of her cargo there and sails for Havana.1 If goods are insured
to an island or district or place containing several ports, the risk
on the outward cargo continues until the same is wholly, or the
great bulk thereof, safely discharged at a place in said island or
district which is specified as the port of discharge, or which is evi-
dently intended as the ultimate place of discharge. If only a por-
tion of the cargo is discharged at any port, so that departure for
another port or the contemplated ultimate port is really a continu-
ance of the outward voyage, the risk Avill not terminate by reason of
such part discharge of the cargo, but if the remnant of the cargo on
board is only trifling in quantity with relation to the whole, or is
retained merely as ballast, the risk will be terminated.2 The fact,
13 Eng. Rul. Cas. 598; Robertson v. 19 Allegre v. Maryland Ins. Co.
French, 4 East, 130, 4 Esp. 246, 14 8 Gill. & J. (Md.) 190, 29 Am. Dee.
Eng. Rul. Cas. 1; Camden v. Cowlev, 530.
1 W. Black. 417, 14 Eng. Rul. Cas. 20 Grant v. Lexington Ins. Co. 5
40 ; Warre v. Millar, 4 Barn. & C. Ind. 23, 61 Am. Dec. 74.
538. 1 Gilfert v. Hallett, 2 Johns. Cas.
18 Robertson v. French, 4 East, (N. Y.) 296.
130, 4 Esp. 246, 14 Eng. Rul. Cas. 2 Stocker v. Harris, 3 Mass. 409;
1; Halhead v. Young, 25 L. J. Q. B. Barrass v. London Assur. Co. and
290, 6 El. & B. 312. Leigh v. Mather, both reported in 1
2735
§§ 1588, 1589 JOYCE ON INSURANCE
however, thai a certain port is named or intended as the ultimate
pori of discharge does not control, since if the cargo be wholly, or
the greal bulk thereof, safely landed and discharged at a substituted
port, the risk will there terminate.8 If the risk be to one of two
ports in the alternative, the risk terminates at the lirst of said ports
at which the vessel arrives, notwithstanding a former custom be-
tween the parlies to put into said port and proceed thence to the
latter port.4
§ 1588. Attachment of risk from a port from loading: duration
of risk: usage. — [f an insurance be effected on goods from a certain
port by a specified steamboal under the usual clause as to Loading
on board ship, the risk commences when the goods are put on board,
and continues until they reach the usual place in the specified port
of discharge and are there delivered in the course of that trade, un-
less it is proved that, according to the custom and usage of under-
writers and persons concerned in the insurance business at the place
where the contract was made and at the time it was made, the name
of the port, when used in such a contract, was understood to mean,
and did mean, the usual place of unloading the boat in the course
Of that trade.5
§ 1589. To specified port; anchoring outside of harbor. — If the
insurance be on goods, and the custom is for vessels to anchor out-
side the bar and send up the cargo in launches, the risk continues
until they are discharged at the very place of destination of the
cargo, and this was so held where the town was twenty leagues from
Marshal] on Ins. (ed. 1810) *266, stances a case which forms the ex-
*267. The last case is reported in 1 ception, where the stipulation was
Esp. 412, somewhat differently, and "the insurers to be free at the place
as there reported does not support of entire discharge." In this instance
the rule: Moore v. Taylor, 1 Ad. & E. the vessel did not entirely discharge
25; Upton v. Salem Commercial Ins. her cargo, and the risk did not de-
Co. 8 Met. (49 Mass.) 605; Richard- termine: Emerigon on Ins. (Mere-
son v. London Assur. Co. 4 Camp, dith's ed. 1810) c. xiii. sec. 18, pp.
94. 586-89.
3 See Moffatl v. Ward, 4 Doug. 29, 4 Dodge v. Essex Ins. Co. 12 Gray
31; Shapley v. Tappan, 9 Mass. 20; (78 Mass.) 65.
Ellery V. New England Mutual Ins. 6Mobile Marine Dock & Mutual
Co. 8 Pick. (25 Mass.) II. The Ins. Co. v. McMillan & Sons, 31 Ala.
above rule conforms with that stated 711, 723, citing Mallan v. May, 13
l>\ Emerigon, tor lie says that iii case Mees. & \V. 511; Parr v. Anderson,
of insurances on the cargo to the 6 East, 207; notes to Wigglesworth
Levant, or to the French isles of v. Dallison, 1 Smith's Lead. ('as.
America, with a clause to make ports, 677-81; Smith's Mercantile Law,
"the risk on the cargo is at the charge 325; 1 Duer on Marine Ins. (ed.
of the insurers until the goods in- 1845) 185 et seq. E.ranii>if Thelluson
sured are entirely, or almost entirely, v. Ferguson, 1 Doug. 346; Sellar V.
discharged at a place in the Levant M'Vicar, 4 Bos. & P. 23; Audley V.
or in the French islands," but he in- Duff, 2 Bos. & P. 111.
2736
RISK ON GOODS § 1590
the usual place of anchorage.6 So if the goods are safely landed at
the lazaretto, which is the usual and customary place of discharging,
the insurance terminates.7 So the vessel may put into the nearest
practicable port where the place of discharge is not of sufficienl
depth for a vessel of like draught, and may laud the goods.8
§ 1590. Till safely landed: final or last port of discharge.9—
Under the usual form of policies providing for the continuance of
the risk on goods until they are discharged and safely landed, the
risk continues until the goods reach the usual or customary landing
place or places of discharge in the speciiied port of destination, or in
the port contemplated by the parties as such, and are there safely
landed ; that is, the risk terminates at once the goods are there put
on shore or on the ordinary wharves and quays, in conformity with
custom or usage, unless by usage the name used to designate the port
is shown to mean not the usual place of unloading, but some other.10
The fact that the goods are not delivered to the consignee, or that he
is unable to immediately obtain possession of them, does not change
the rule.11 And if goods are insured to a certain place, and the goods
are safely landed at a port distant from the city to which ships
usually come, and there discharge their cargo, this constitutes a safe
landing of the goods.12 But this rule does not preclude landing the
goods for temporary purposes warranted by usage or otherwise,13
6 Osacar v. Louisiana State Ins. Co. 1 Burr. 348 ; Barrass v. London As-
17 Mart. (La.) 386; Cockey v. At- sur. Co. reported in 1 Marshall on
kinson, 2 Barn. & Aid. 460. Ins. (ed. 1810) *266, per Lord Mans-
7 Gracie v. Marine Ins. Co. 8 field.
Cranch (12 U. S.) 75, 3 L. ed. 492; Safely landed: marine insurance
Brown v. Carstairs, 3 Camp. 161. act of England. "5. Where the risk
8 Stewart v. Bell, 5 Barn. & Aid. on goods or other moveables con-
238. See § 1569 herein, as to lighters, tinues until they are 'safely landed,'
9 See § 1588 herein. they must be landed in the customary
10 United States. — Gracie v. Marine manner and within a reasonable time
Ins. Co. 8 Cranch (12 U. S.) 75, 3 after arrival at the port of discharge,
L. ed. 492. and if they are not so landed the risk
Alabama. — Mobile Marine Dock & ceases." Marine ins. act 1906 (6
Mutual Ins. Co. v. McMillan, 31 Ala. Edw. VII. c. 41) Sched. I. p. 426,
711, 723, per the court. Rule 5; Butterworth's 20th Cent.
Massachusetts.— Mansur v. New Stat. 1900-1909.
England Ins. Co. 12 Gray (78 Mass.) " Gatliff v. Bourne, 4 Bing. N. C.
520. 528. 314, 7 Man. & G. 850 ; Gracie v.
Mis ;so uri — Fletcher v. St. Louis Marine Ins. Co. 8 Cranch (12 U. S.)
Marine Ins. Co. 18 Mo. 193. 75, 3 L. ed. 492. See Fletcher v. St.
England. — Gatliff v. Bourne, 4 Louis Marine Ins. Co. 18 Mo. 193.
Bing. N. C. 314, 3 Man. & G. 643, 7 12 Tierney v. Etherington, cited in
Man. & G. 850; Matthie v. Potts, 3 1 Burr, 348, per Lee, C. J.; Mobile
Bos. & P. 23; Brown v. Carstairs, 3 Marine Dock & Mutual Ins. Co. v.
Camp. 161; Hyde v. Trent & Mersey McMillan, 27 Ala. 77.
Navigation Co. 5 Term Rep. 389, 13 See § 1565 herein.
397; Tiomev v. Etherington, cited in
Joyce Ins. Vol. III.— 172. 2737
§ L591 JOYCE ON INSURANCE
and if the goods are discharged under the inspection of government
officers and warehoused, they are discharged and safely landed;"
and the risk is terminated and the goods landed, within the intent
of the policy, where they are sold on board the ship and withoul un-
loading upon her arrival at her port of delivery, and the purchaser
contracts for freight to another port, for this is a contracl de novo,15
Bui the goods may. by express stipulation, be protected after they
are landed.16 1 1" the goods arc insured to the lasl place of discharge
in an island, and the cargo is discharged at one of the port.- of the
island and takes in ballast, the risk terminates outward, and the
fad thai a part of the cargo is reloaded for another market does
qoI change the rule.17 And where cargo and freighl arc insured
to several ports, or to a final port of discharge, with liberty to
wait at one of said ports a specified time, the risk determines
when the vessel waits the designated period at the specified port.18
So where goods arc insured to a "final port of destination," the
question as to what is that final port may he dependent upon
the circumstances of the case or usage, the main point being to
arrive at the intention of the parties.19
§ 1591. Goods partly landed: whether the risk is entire. — There
lias been some conflict of opinion upon the point whether the risk
is so far divisible that the safe landing- of a part of the goods at the
usual place of discharge terminates the risk as to them. It is de-
cided in Massachusetts that the risk terminates as to those g Is
which arc landed; in other words, that the risk is severahlc.20 The
same rule obtains in the United States supreme court,1 and also in
14 Brown v. Carstairs, 3 Camp. 161. separate parcels cannot all be effected
15 1 Marshall mi Ins. (ed. 1810) in the same moment of time. But
*258, and Leigh v. Mather, therein as often as separate parcels arc
reported, '266. landed upon the wharf where the
16 Rodocanachi v. Elliott, L. R. 8 landing is to constitute a delivery,
Com. P. 649. the power over the goods no longer
17 Richardson v. London Assur. Co. remains in the master of the ship,
4 Camp. 94. but is transferred at once to the con-
18 Doyle v. Powell, 4 Barn. & Adol. signee, or to some intermediate agent
267, 1 Nev. & M. 678. who thenceforward is to act for him.
10 Oliverson v. Brightman, 15 L. J. The master having thus discharged
Q. B. 274, L3 Eng. Rul. Cas. 656. his duty is thereby relieved from all
20 Mansur v. New England Ins. Co. further obligation to look after and
12 Gray (78 Mass.) 520. In tliis case protect the goods, and the marine
the court said : "This rule respecting risk, which in its nature is to con-
the delivery of the cargo must, in tinue only during the transportation
the absence of any stipulation in- and landing of the goods insured,
tended to control it, apply to each must necessarily have the same termi-
part and parcel, as well as to the nation."
whole of the goods. The entire de- x Gracie v. Maryland Tns. Co. 8
livery of a cargo of provisions or Cranch (12 U. S.) 75, 84, 3 L. ed.
of any other property consisting of 1-92.
273S
RISK ON GOODS § 1592
Alabama;2 likewise in Louisiana.3 In Missouri, however, part of
the insured goods were put ou1 upon the levee upon the ship's ar-
rival at St. Louis, which was her port of destination, and the re-
mainder of the goods on board ship, together with those on the
levee, were destroyed. The consignees had been notified of the
arrival, and were at the levee when the cargo was being landed, and
it was held that the risk was entire, since the insurer could not split
up his liabilities or the insured's rights; that the carrier's obligation
was to land the cargo within the time permitted by the terms of the
contract, and that the carrier must deliver them, which con-
templated his discharging himself as common carrier of the
custody of the goods.4 On a line with this decision a part of the
goods had been landed over the twenty -four hours specified as that
of the duration of the risk after the goods were landed, when they
with the undischarged cargo were seized as illicit, and the risk was
declared entire and the insurers liable, it being held that the specifi-
cation of twenty-four hours meant until that time after all the goods
were landed.5 It is also laid down as a general rule under the Eng-
lish decisions that the words "until discharged and safely landed''
protects the goods until the bulk, or the whole of them, are dis-
charged and safely landed at the port where the ship breaks bulk
for the purpose of discharging the goods.6 The true rule sup-
ported by the weight of authority would seem to be that the goods
are protected on board ship or in boats or lighters, to be landed
according to custom, until the whole or the bulk of them are dis-
charged and safely landed at the usual place for discharging goods
at Vie port of destination specified or contemplated as the ultimate
port of discharge, and that goods on shore are not protected,
whether they be the bulk or the whole of the cargo, or only a
part thereof; or if the policy provides that the risk on the goods
shall continue a specified time after they are landed, then the risk
terminates as to those landed at the specified time, and therefore
the risk is severable.7
§ 1592. Within what time goods must be landed. — The clause
"covering goods until they are safely landed'' contemplates a dis-
charge of the cargo within such a reasonable time as they can be
2 Mobile Dock & Mutual Ins. Co. goods safely at the quay to the con-
v. McMillan, 27 Ala. 77. signees or their agents or by usage
3 Osaear v. Louisiana State Ins. as soon as the merchandise "passed
Co. 17 Mart. (La.) 386. under the king's weights," but Eraer-
4 Fletcher v. St. Louis Marine Ins. igon says this is "foreign to the in-
Co. 18 Mo. 193. surers," since they are not bound "for
6 Gardner v. Smith, 1 Johns. Cas. that which has happened on shore : "
(N. Y.) 141. Emerigon on Ins. (Meredith's ed.
6 Clason v. Simmonds, 6 Term Rep. 1850) c. xii. sec. 48, pp. 525, 520.
533, 9 Eng. Bui. Cas. 384. The 7 See 1 Phillips on Ins. (3d ed.)
Guidon required the delivery of the 539, sec. 973.
2739
§ 1593 JOYCE ON [NSURANCE
conveniently and safely landed after the arrival of the -hip at the
ultimate port of delivery at the usual place for discharging. It
[s ,,,,i ;, reasonable construction that the insured has power to
prolong the risk indefinitely at his own pleasure or by unnecessary
delay. The question as to what is a reasonable time is dependent
upon usage, upon the customs of a particular trade, upon particular
circumstances, as well as upon the character and purpose of the
voyage insured as in ease of fishing or trading voyages.8 It is
-Mm,. lime- expressly stipulated in policies that a reasonable time
shall be allowed t<> discharge the cargo,9 or that the risk shall
continue a certain number of days after arrival, or that a spec-
ified time shail he allowed for discharging.10 And in case of inland
navigation, where three days are given within which to discharge
the cargo in case the voyage is stopped by ice, the time for dis-
charging should be computed from the actual stoppage.11 The
risk will continue, although the goods are kept on board several
days after arrival, where the custom of that particular trade war-
rants it.12
§ 1593. Termination of risk: voyage stopped or delayed by ice:
inland navigation. — if the cargo on a canal boat he insured, with
a provision that if the voyage cannot he completed that same
season by reason of ice or the closing of navigation, the risk shall
terminate, three days being allowed for the discharge of the cargo,
the voyage can only be stopped by the act of the master or causes
making further progress impossible. Mere delays from obstruc-
tions by ice, although coupled with the impossihility of completing
the entire voyage, are not sufficient, nor do they preclude the
right to continue the voyage to a proper place where the cargo
may he safely discharged and the boat laid up for the season, and
the three days for discharging only commence to run from the
lime of actual stoppage.13 And although under a similar policy
upon the cargo the boat is actually frozen in and the canal de-
clared dosed by the canal commissioners, this is not such a stop-
page by ice as to terminate the risk where a channel is thereafter
cut and the hoat towed to its destination within the same season,
and in such case, if the boat is sunk upon its arrival, the insurers
are liable.14
81 Marshall on Ins. (ed. 1810) ll Sherwood v. Mercantile Mutual
*257, and Parkinson v. Collier, re- Ins. Co. 66 N. Y. 630. See next
ported therein; Yal lance v. Dewar, section.
1 Camp. 503 ; Noble v. Kennoway, 2 12 Noble v. Kennoway, 2 Doug. 510.
Doug. 510. 18 Sherwood v. Mercantile Mutual
9 So in Fletcher v. St. Louis Marine Ins. Co. (W N. Y. 630.
Ins. Co. is Mo. L93. "Delahunt v. /Kina Tns. Co. 97 N.
10 Noble v. Kennoway, 2 Doug. Y. 537 (two judges dissenting).
510.
2740
RISK ON GOODS §§ 1594, 1595
§ 1594. Risk terminates where goods are transshipped without
necessity or agreement. — The settled rule is that if insured goods
are reshipped or shifted, without necessity, from a named ship on
which they are insured to another, the risk is thereby terminated,
unless the insurance company assents to the reshipment.16 And
this accords with the rule stated by Emerigon, who says: "If
the change of vessel is made during the course of the voyage with-
out necessity, and without consent of the insurers, they will he
discharged from the risks ... ; so soon as without necessity
the thing insured is placed in another vessel, the contract is dis-
solved ipso jure," and also "thai without their consent and without
necessity they [the insurers! could not be made to run the risk
on another vessel, although larger and better." 16 So it is declared
in a California case that it is an implied condition of marine in-
surance of freight that the ship shall not be changed without
necessity or consent. In this case wheat was insured on a certain
steamer "and connections" from San Francisco to Hongkong. It
was the custom to carry without transshipment, but here the cargo
was unnecessarily transferred to other ships of the same company
at Yokohama, and conveyed to Hongkong, where it was lost. It
was decided that "connections" meant regular connections, and
not an unusual substitution anticipated at the time of the issuing
of the policy, and that the policy was avoided.17 A delay of twelve
days in transportation of insured cargo, occasioned by waiting for
necessary repairs, will not justify transshipment of cargo in an-
other vessel. By such transshipment the insurers are discharged
from liability for loss subsequently happening to the cargo in the
new bottom.18
§ 1595. Risk does not terminate where goods transshipped from
necessity. — If through necessity the goods insured on board a cer-
tain ship are transshipped or changed to another vessel for safe
transportation to the original port of destination, the risk continues
on said goods in the substituted ship until they are safely landed
at said port. In brief, the fact that the goods are reshipped through
necessity, as where the ship is disabled and cannot complete her
voyage, does not terminate the risk.19 The distinction here made
is also made by Emerigon, who says: "If in the course of the
voyage, and in consequence of a peril of the sea, the captain is
15 Malinckrodt v. Jefferson Fire 17 Sehroeder v. Sehweizer Lloyd
Ins. Co. 1 Mo. App. 205. See also Transport Versicherungs Gesells-
Sehroeder v. Sehweizer Lloyd Trans- ehaft, 60 Cal. 467, 44 Am. Rep. 61, 66
port Versicherungs Gesellschaft, 60 Cal. 294.
Cal. 467, 44 Am. Rep. 61. 18 Salisbury v. Marine Ins. Co. 23
16 Emerigon on Ins. (Meredith's ed. Mo. 553, 65 Am. Dee. 687.
1850) c. xii. sec. 16, pp. 339-41 et 19 Columbian Ins. Co. v. Pierce, 14
seq. Allen (96 Mass.) 320; Bryant v.
2741
§§ 1596, L597 JOYCE ON INSURANCE
obliged to hire another vessel to transfer on board of her the goods
insured, the insurer- will run the risk on the goods until their
disembarkation at the place of destination."80 An<l in cases of
necessity, where the goods saved are transshipped and the voyage is
;i trading voyage, the risk continues on the produce thereof re-
shipped from oecessity on a third ship.1
§ 1596. Risk does not terminate when transshipment is by agree-
ment.— By agreement goods can be transshipped as upon arrival
at a specified place, thence to be transported in other vessels to the
porl of destination.2 So where the vessel sustains injury before
loading, the insurers may consenl to a transfer <>!' the risk to an-
other ship; in such case, where the policy is to run a specified
number of days, the delay caused by changing ships and transship-
ping is not to be counted in the specified period of duration of the
risk.3 And where goods are transshipped by agreement, with
liberty to put them on board one or more ships upon arrival at a
certain port, and there are no ships there except a storeship, which
was by custom always considered a warehouse, the risk continues
on said goods while in said storeship. in which they have been
placed to await the arrival of the ships.4 So insurers may he liable
for accident to stock while being transshipped.6 Thus insurers of
safe carriage of stock are liable for accident to the stock while being
transshipped from cars to a boat, under a policy which covered,
with the usual exceptions, the perils of railway and river, and by
special indorsement fixed the places of shipment and destination
and the route to be taken.6 And under this head of transshipment
by consent it may be stated that usage may undoubtedly, in cer-
tain cases, warrant, or perhaps necessitate, a transshipment of
goods.
§ 1597. Termination of risk: outfits of whaling voyage. — An
insurance on outfits of a whaling voyage does not terminate pro
tanto with their consumption or distribution, but attaches to the
proceeds of the adventure.7 In ca.se of an insurance on the outfits
Commonweal Hi Ins. Co. 13 Pick. (30 1 Burr. 348; Bold v. Rotherham, L5
Mass.) 543, 555; Ludlow v. Colum- L. J. Q. B. 274, 279; Plant v. Eufalia
bian Ins. Co. 1 Johns. (N. Y.) 335; Home Ins. Co. 41 Ga. 130.
Plantamour v. Staples, 1 Term Rep. 3 Plant v. Eufalia Home Ins. Co.
(ill, 3 Doug. 1; 1 Marshall on Ins. 41 Ga. 130.
(ed. 1810) *249. See De Cuadra v. 4 Tierney v. Etherington, 1 Burr.
Swann, HI Com. P.. N. S. 772; Dick 348.
v. Barrell, 2 Str. 1248. 6 iEtna Ins. Co. v. Stivers, 47 111.
20 Emerigon on Ins. (Meredith's ed. 86, 95 Am. Rep. 407.
1850) c. xii. sec. 16, pp. 33!), 340. 8JEtna Ins. Co. v. Stivers, 47 111.
1 Plantamour v. Staples, 1 Term 86, 95 Am. Dec 167.
Rep. 611, 3 Doug. 1. But see Ludlow 7 Hancox v. Fishing Lis. Co. 3
v. Cohunhian Ins. Co. 1 Johns. (N. Sum. (P. S. C. C.) 132, Fed. Cas.
Y.) 335. No. 6013.
2 Tierney v. Etherington, cited in
2742
RISK ON GOODS §§ 1598, 1599
of a whaling ship, with liberty of ports and to ship home catchings
at the risk of the insured, the catchings may be shipped home
without diminishing the valuation specified in the policy, but as
to that part which is sent home, the risk terminates.8
§ 1598. Till arrival of goods to a market at final port of dis-
charge.— If outward goods are insured till their arrival to a market
at their final port of discharge, they will be protected till they are
finally disposed of at some foreign market.9
§ 1599. Termination of risk by consignee or owner taking pos-
session: consignees: lighters. — If the goods are delivered into the
consignee's or assured's possession, or he takes them under his own
care and management, or completely accepts them, the risk is
determined, even though they would otherwise have been at the
risk of the insurer ; as in case the goods are put into lighters of the
insured, and they are in his possession and completely accepted
by him, the risk ceases.10 And where they are brought in the
usual way, according to the customs of that port, in public
lighters to the wharf, and, owing to the roughness of the weather
and the evening, they cannot be landed, the risk ends by the
insured telling the lighterman that he need not stay, and that he
will look to the landing thereof himself.11 This rule, however,
is subject to such qualification as may arise from usage; as where
it is customary to employ public lightermen to effect the dis-
charge, the fact that the consignee or assured employs them for
that purpose does not constitute a delivery to him, nor a taking
into his possession and control, and the risk is not thereby termi-
nated.12
8 Mutual Marine Ins. Co. v. Munro, v. Natally, 1 Bos. & P. N. R. 16, 8
7 Gray (73 Mass.) 246. R. R. 741, 13 Eng. Rul. Cas. 627.
9 Richardson v. London Assur. Co. "It is perfectly true that by taking
4 Camp. 93, per Lord Ellenborough. delivery short of the shore the con-
10 Sparrow v. Carruthers, 2 signee determines the risk insured ;
Strange, 1236, commented upon in but this is not because in such a case
Hurry v. Royal Exch. Assur. Co. 2 the risk is terminated by an actual
Bos. & P. 430, 3 Esp. 289, 13 Eng. landing, but because the consignee
Rul. Cas. 620. The rule above given, waives the landing and himself termi-
however, is deduced not alone from nates the risk, instead of taking de-
the case of Sparrow v. Carruthers, livery short of the land : " Houlder
but from that case in connection with Bros. v. Merchants' Marine Ins. Co.
the opinions and decisions of other Lim. 6 Asp. Rep. Mar. Cas. N. S.
courts : Rucker v. London Assur. Co. 12, per Bowen, L. J.
2 Bos. & P. 432, per Buller, J. ; Low n Strong v. Natally, 1 Bos. & P.
v. Davy, 5 Binn. (Pa.) 595; North N. R. 16, 13 Eng. Rul. Cas. 627.
of England Oil Cake Co. v. Arch- 12 Hurry v. Royal Exch. Assur. Co.
angel Maritime Ins. Co. L. R. 10 Q. 2 Bos. & P. 430, 3 Esp. 289, 13 Eng.
B. 249, 13 Eng. Rul. Cas. 360; Bold Rul. Cas. 620.
v. Rotherham, 8 Q. B. 797; Strong
2743
CHAPTER L.
ATTACHMENT AND DURATION OF RISK ON FREIGHT.
§ 1G06. Attachment and duration of risk on freight: generally.
§ 1607. The case of Tonge v. Watts.
§ 1608. Risk on freight will only attach from loading of the vessel where
so stipulated.
§ 1G0D. Risk on freight will attach only on goods laden where no contract
for the goods exists.
§ L610. Risk on freight attaches under valued policy where part only of
goods are laden.
§ Kill. Risk mi freight under valued policy may attach only propor-
tionately to goods and freight actually at risk.
§ 1612. Risk attaches on freight if cargo purchased or contracted for, and
both ship and cargo are ready.
$ 1013. Risk on freight will not attach where loss is incurred on voyage
other than that insured.
§ 1611. Risk on freight "at and from:" homeward voyage.
§ 1615. Valued policy on freight outward and homeward covers each
voyage.
§ 1616. Freight where voyage insured consists of distinct or successive
passages : valued policy.
§ Kil7. Risk terminates where freight is earned: freight partly earned.
§ 1618. Risk on freight terminated by assured accepting goods at inter-
mediate port.
§ 1619. Risk on freight against total loss only not terminated by delivery
of some goods at intermediate port.
§ 1620. Termination of risk on freight at port or ports of discharge.
S 1621. General rule as to attachment of risk on freight: chartered freight.
S 1(122. Extension of the rule last stated.
§ 1623. Attachment of risk where vessel is being fitted at place of load-
ing to receive contracted-for cargo.
§ 1624. Risk on chartered freight attaches by inception of voyage even
in ballast to port of loading.
§ 1625. Contract stipulation may supersede the above rule.
§ 1626. Where there is a second charter party at and from outport.
§ 1627. Outward and homeward freight where contract for freight is
entire.
2744
ATTACHMENT AND DURATION OF RISK § 1606
§ 1606. Attachment and duration of risk on freight: generally. —
The first distinction to be observed herein is between freight which
is the compensation for the carriage of goods in the ship, and
chartered freight, which is the price paid the owner as charter
money under a contract of affreightment, whether for the ship or
for a part thereof, as in case of a part owner for a certain time or
a certain voyage.13 In case, of an insurance upon freight, where
a price is to be paid for the carriage of goods in the ship, there
are two extremes: 1. An inchoate right to freight; and 2. The
consummation of that right. In other words, it is necessary, in
order to determine whether the risk on freight attaches, to ascer-
tain whether the insured has such an inchoate right to freight as
that it would in all reasonable probability have been earned
had not a peril insured against intervened, and at what point of
time he wTas so situated. This point of time must be determined
largely by circumstances, since a positive rule of law is not ap-
plicable to every case. At the other extreme, the risk will de-
termine, so that the insurer can have no further risk nor interest
concerning the freight insured from that point of time when the
freight shall have been earned. In the case of freight generally
there are two material factors which must be so relatively situated,
with reference to the earning of freight and the ship, as to create
a well-grounded expectation of freight being earned. A mere
probability or reasonable expectation is not of itself sufficient,
while in chartered freight no goods may ever be put on board
the ship, nor be contracted for or ready to be shipped. In many
instances the termination of the risk on goods may be simultaneous
with the ceasing of the risk on freight generally ; as in cases where
the goods are wholly or partly discharged and safely landed and
the freight earned or partly earned. So the risk may attach both
on the goods and on the freight from the loading thereof aboard
ship, but the freight will attach before that time in frequent in-
stances. In the case of chartered freight the main inquiry is at
what point of time the inchoate right to such freight accrues, and
to this point of time must be referred the attachment of the risk,
since if the assured be in a condition to earn his freight under the
charter-party, and is prevented therefrom by the voyage being
stopped by a peril insured against, he is entitled to recover the
loss.14 It may be stated that the nature of the contract of insur-
ance on freight is that the goods shall arrive at the port of delivery,
13 See §§ 1009, 1010 herein. 346, Fed. Cas. No. 6150; M'Gaw v.
14 For an affirmance of the above Ocean Ins. Co. 23 Pick. (40 Mass.)
general principles, see Hart v. Dela- 405, 409, per Shaw, C. J.; Adams
ware Ins. Co. 2 Wash. (U. S. C. C.) v. Warren Ins. Co. 22 Pick. (39
2745
§ L607 JOYCE ON INSURANCE
notwithstanding the perils insured against.15 So in ease the ship-
owner has made a lawful and valid contract of affreightment, the
owner's interest in freight has accrued if the ship is in the proper
place and ready to receive the cargo.16 It is also contemplated by
an insurance upon freight that t ho goods shall arrive at the port
of destination or delivery, and if they are destroyed by the perils
of the sea the insurer is liable.17
§ 1607. The case of Tonge v. Watts. — The case of Tonge v.
Watts, reported in Strange,18 was at nisi prius, and Lord Lee, C. J.,
ruled thereon that as the goods were not actually on board the ship
at the time of Loss, the right to freight had not commenced. From
this decision Mr. Marshall deduces the rule that the risk in freight
does not commence till the goods are on board, although he qual-
ifies it by saying the risk generally begins from that time.19 And
the courl in a Pennsylvania decision says that Tonge v. Watts
"settled long ago that although the goods are ready to be Loaded,
yet if none of them arc actually on board, and the vessel is driven
from her moorings and lost, there can be no recovery on an in-
surance on freight."20 So in Thompson v. Taylor,1 Lord Kenyon,
C. J., says that "in the case in Strange, the inception of the con-
tract would have been the taking of the goods on board, but as
the loss happened before the goods were put on board, there was
no inception of the contract;" and Grose, J., in the same case,
declares that the right to freight had not commenced in the case
in Strange, because the goods were not on board the ship. Lord
Kenyon, C. J., however, distinguishes the case before him, which
was one of chartered freight, from the Strange case, saying the
latter rested upon peculiar circumstance-, and he decided in favor
of the plaintiff for a recovery of the freight upon the same prin-
ciple, as he declared, upon which the case in Strange was decided,
and the principle underlying the case before him was, "that if the
Mass.) 163; Robinson v. Manufactur- 15 De Wolf v. State Mutual Fire &
ers' Ins. Co. 1 Met. (42 Mass.) 143, Marine Ins. Co. 6 Duer (N. Y.) L91,
per Shaw, C. J.; Davy v. Hallett, 3 per the court.
Caines (N. Y.) 19, per Kent, J.; 16 Gordon v. American Ins. Co. 4
Thompson v. Taylor, 6 Term Rep. Denio (N. Y.) 360; Williamson v.
478; Davidson v. Willasey, 1 Maule Innes, 8 Bing. 81, 1 M. & R. 88.
& S. 313, 315, per Lord Ellen- « De Wolf v. State Mutual Fire
borough and Laurence, J.; Forbes & Marine Ins. Co. G Duer (N. Y.)
v. Aspinall, 13 East, 323, 324, 13 191.
Eng. Rul. Cas. 673; per Lord El- 18 2 Str. 1251.
lenborough; Barber v. Fleming, L. 19 1 Marshall on Ins. (ed. 1S10)
R. 5 Q. B. 59, 13 Eng. Rul. Cas. 697, *278.
per Coekburn, C. J., and Blackburn, w Adams v. Pennsylvania Ins. Co.
J.; Curling v. Long, 1 Bos. & P. 636, 1 Rawle (Pa.) 97. per Buston, J.
per Evre, J. l 6 Term Rep. 478.
2746
ATTACHMENT AND DURATION OF RISK § 1607
contract had its inception, if anything were done under it by the
plaintiff, . . . his right to freight commenced;" and "as the
plaintiff had begun to perform his part of the contract, as he had
done something under it which, if matured, would have entitled
him to his freight," he could recover. It is further evident that
Lord Kenyon did not consider the point as to the goods being
actually on board ship as controlling, and that he was inclined to
adhere rather to what he considered the principle of the case in
Strange, than to the ruling of Lord Lee, C, J., therein, from the
fact that he directed a verdict for the plaintiff for the whole freight
in another case where only a part of the cargo was shipped at the
time of loss.2 In a line with the principle indicated by Lord Ken-
yon as underlying the case in Strange, and relying upon said case.
Mr. Phillips deduces the rule that "the ship must be ready, and
something must have been done . . . toward earning freight,"
and in another section he says that "a contract for freight gives
an insurable interest so soon as the ship is ready to take it," rely-
ing for this latter rule upon Thompson v. Taylor,3 the words of
Lord Kenyon therein.4 And it will be observed that Mr. Phillips
incorporates in his rule based by him upon these two cases the
principle deduced from the case in Strange by Lord Kenyon, and
also the additional factor of the ship being ready to receive the
freight. So Mr. Maclachlan says of the case in Strange that "al-
though the cargo was ready, the ship was not, and consequently
both were not then, in fact of law, in that relation proper and
necessary to the earning of freight, so that the risk had not com-
menced. This, as the law now stands, seems to be the principle of
the case, and not the absence of the goods on board, although that
is said to have been the ratio decidendi." 5 The principle involved
in the Strange case was clearly this: That the ship and the goods
must be so relatively situated, with reference to the earning of
freight, as to create a well-grounded expectation of freight being-
earned, and since the ship was not ready to receive the goods, an
inchoate right to freight had not accrued, and the decision was
right, both upon principle and under the facts. If, however, the
words of Lord Lee, C. J., in this case be held to establish in the
abstract an unqualified rule that the goods must be actually on
board the ship, otherwise the risk on freight will not commence,
then that such a rule thus unqualifiedly stated is not law and the
2 Montgomery v. Egginton, 3 Term 5 Arnould on Marine Ins. (Mae-
Rep. 362, 1 R, *R. 718. lachlan's ed. 1887) 433; Id. (8th ed.
3 6 Term Rep. 478. Hart & Simey) sec. 268, pp. 349 et
41 Phillips on Ins. (3d ed.) 185, seq.
186, sees. 329, 332.
2747
§ L608 JOYCE ON [NSURANCE
case is qoI an authority is well settled, for it would exclude the
righl to freight on goods contracted for and ready to be shipped,
the ship being ready to receive them. That the principle above
stated, as established by the case of Tonge \. Watts,6 is in con-
formity with the law governing in like cases ;it the present time,
will also be apparent from the cases hereafter noted under this
chapter.
^ 1608. Risk on freight will only attach from loading of the
vessel where so stipulated. — If the contract expressly stipulates
thai the insurance on freight is to begin from the Loading of the
vessel, the risk will no1 attach as to the freight until the goods are
aboard,7 notwithstanding the preceding words of the policy would,
if the clause as to loading had not been used, have brought the
risk, as to the time of its attachment under a different rule;8 and
the rule obtains even though the ship is lying in port at the proper
place ready to receive the cargo engaged for her.9 But a complete
loading is intended by such clause.10 and although the insurance
is upon chartered freight, if the goods are completely loaded the
risk attaches as to the freight, irrespective of the fact whether the
vessel has broken ground lor the chartered voyage or not.11 In
an English case it appeared that a, policy was issued upon "freight
of meat at and from Montevideo," to certain ports in the River
Platte, and thence to the United Kingdom. The policy also de-
clared that the underwriters should he liable for such losses as
might be caused by the breaking down of the machinery until the
final sailing of the vessel. These provisions were in writing. In
a subsequent part of the policy, however, there was a provision
that the insurance should commence "upon the freight and goods
or merchandise on board from the loading of said goods or mer-
chandise on board the said ship or vessel at Montevideo." This
lasl clause was in print, with the exception of the word "Monte-
video." At the time of effecting the insurance is was known to
both the insurer and insured that though meat could be loaded
at other ports in the River Platte, that it could not be loaded at
Montevideo, in consequence of the absence of appliances at that
6 2 Strange, 1251. eriean Ins. Co. 4 Denio (N. Y.)
7. Jones v. Neptune Marine Ins. Co. 360.
L. R. 7 Q. B. 702; Gordon v. Am- 9 Gordon v. American Ins. Co. 4
eriean Ins. Co. 4 Denio (X. Y.) 360. Denio (X. Y.) 360; Beckett v. West
See also Beckett \. West of England of England Ins. Co. 25 L. T. N. S.
Ins. Co. 25 L. T. N. S. 739; Hopper 7'A'.l
v. Wear Marine Ins. Co. 46 L. T. X. 10 Jones v. Xeptune Marine Ins.
S. 107. Co. L. R. 7 Q. B. 702.
8 Jones v. Neptune Marine Ins. Co. n Jones v. Xeptune Marine Ins. Co.
L. R. 7 Q. B. 702; Gordon v. Am- L. R. 7 Q. B. 702.
2748
ATTACHMENT AND DURATION OF RISK § 1609
port. The vessel arrived at Montevideo on her outward voyage,
and thence proceeded to Boca, one of the ports named where a
cargo of meat was ready for shipment. Here her refrigerating
machinery broke down and rendered necessary t lie abandonment
of the design as to loading the meat. It was held that the words
used in the clause as to the commencement of the risk with regard
to the loading of the goods, being inapplicable under the cir-
cumstances of the case, should be rejected, and that the policy
attached, notwithstanding the fact that the meat had not been
loaded on board the ship.12
§ 1609. Risk on freight will attach only on goods laden where no
contract for the goods exists. — The risk on freight will only attach
on goods actually laden where there is no contract to supply a
cargo, and only a part cargo is provided, and this is true even
though the policy be a valued one on freight, since a mere prob-
ability or reasonable expectation is not of itself sufficient to give an
inchoate right to freight. The goods must either be actually
shipped, or there must be an actual valid and binding contract
therefor.13 The case of Riley v. Hartford Insurance Company14
was a valued policy on ship, and an open one on freight laden or
to be laden. The voyage was from New Orleans to Gibraltar, with
liberty to go to Malaga and the Cape de Verds for salt, and back to
the United States. Her cargo out was delivered and the freight
earned, with the exception of about two thousand dollars, which
was kept on board, and was used in purchasing a cargo at Gibraltar,
which was laden on freight. The vessel proceeded thence for the
Cape de Verds, intending to invest the two thousand dollars there
in salt. No contract, however, was made therefor, but had the
money been so invested, the freight thereon to the United States
would have exceeded the two thousand dollars, and the vessel was
competent to have carried sufficient salt to have earned said freight.
The vessel never reached the Cape de Verds, being totally lost on
the voyage by a peril insured against, and abandonment was made
to the defendants. The claim of total loss of freight was resisted.
and it was held that the insurers were liable for only the loss of
freight of the goods actually on board. It will be observed that the
12 Hydarnes Steamship Co. v. In- Tobin v. Harford, 13 Com. B. N. S.
demnity Mutual Marine Assur. Co. 791, 13 Eng. Rul. Cas. 598; Forbes
(Eng. C. A. Q. B. D.) L. R. 1 Q. B. v. Cowie, 1 Camp. 520; Flint v.
500, reversing the decision of Willes, Flemvng, 1 Barn. & Adol. 45, 13 Eng.
J. Rul. Cas. 693, per Tenterden, C. J.,
13 Patrick v. Eames, 3 Camp. 441 ; Bavlev, J., and Parke, J. See Hart
Devaux v. J Anson, 5 Bing. N. C. 519, v. Delaware Ins. Co. 2 Wash. (U. S.
per the court; Forbes v. Aspinall, 13 C. C.) 346, Fed. Cas. No. 6150.
East, 323, 13 Eng. Rul. Cas. 673; 14 2 Conn. 368.
2749
§ 1609 JOYCE ON INSl'WANCE
principal factors in the case are: 1. The policy on the ship was
valued; 2. The insurance was on freight of goods laden or to be
laden under an open policy: :'.. It was not a case of chartered
freight; the freighl was to have been derived from the transporta-
tion of merchandise by the shipowner; 4. Recovery was sought on
the freight of a cargo expected to be laden; 5. No pail of any such
cargo was received on board, nor was it ready to he shipped; <>. No
cargo had been procured or contracted for at the Cape de Verds,
oor was there any title to any cargo there; 7. There was a cargo
actually on hoard on freight when the ship was lost on her voyage
to the Cape de Verds, but the freight thereon was less than two
thousand dollars. The court 15 expressly and unequivocally de-
clared that the freighl must have once commenced to he earned
before the policy could attach, and that the insurance could operate
only on such freight as actually existed, by having a cargo on
hoard the vessel, and could not operate on a cargo expected to be
laden: that in determining when the right to freight commenced,
the case was to be distinguished from that of chartered freight for
a round voyage; that the right commences in the case of freighl
when the goods are on hoard, or at furthest when a part have been
received and the rest are ready to be shipped; that ''if matters not
whether the shipowner contemplates the purchase of goods at a
port on which to procure a freight with money he has in possession
or which is due to him at the place of destination, or on his per-
sonal credit-. In either event, his right to freight cannot commence
until he has shipped on board the contemplated cargo." The court
relied upon Forbes v. Aspinall.16 AVe would suggest that this case
also involves the same principles which underlie the case of Tonge
v. Watts.17 A case was decided in Pennsylvania which, although
the ship sailed under a charter-party, involved the principle that
a mere expectation of earning freight, neither the cargo nor any
portion thereof being purchased or even contracted for. is not
sufficient; or in other words, that if the vessel sails for a port upon
the mere contingency of obtaining a load there, a recovery will
not lie.18 The principle involved in these two cases does not con-
trovert the rule that by contract there may he an interest created
in freight before the goods are put on hoard, nor does it conflict
with the law that in case of a charter-party of affreightment the
right to freight commences as soon as the voyage is entered upon.
and that if there is an entire freight for the performance of the
15 Id., per Swift, C. J., and Hos- 17 2 Strange, 1251. Hoe § 1607
mer, J. herein.
18 13 East, 323, 13 Eng. Rul. Cas. "Adams v. Pennsylvania Ins. Co.
,673. 1 Rawle (Pa.) 97.
2750
ATTACHMENT AND DURATION OF RISK §§ 1610, 1611
whole voyage, the inchoate right to freight stipulated for com-
mences as soon as the ship breaks ground, and this is so even
though in such case of chartered freight there be numerous ports
of destination;19 but the cases do establish the principle which
underlies all insurance law, that a mere expectation of itself, when
not founded upon an actual right to the thing nor upon a valid
contract to it, or which is not coupled with an existing title to that
out of which the expectancy arises, does not constitute an insur-
able interest.20
§ 1610. Risk on freight attaches under valued policy where part
only of goods are laden. — Under a valued policy on freight the
right to indemnity attaches if any part of the cargo is taken on
board, where the balance of the goods to the amount of the rest of
the freight are ready to be shipped, or are contracted for and are
prevented from being laden by reason of a peril insured against.1
Although Lord Kenyon, C. J., in Thompson v. Taylor,2 bases the
decision in Montgomery v. Egginton,3 relied on in support of the
above rule, upon the fact that there was an inception of the con-
tract, because part of the goods were taken on board, nevertheless
the rule does not rest alone upon such fact, but upon the prin-
ciple that both ship and goods were so relatively situated, with
reference to earning freight, as to create a well-grounded expecta-
tion that freight would be earned, which the intervention of a
peril insured against prevented, and that a mere probability or
reasonable expectation is not of itself sufficient.4
§ 1611. Risk on freight under valued policy may attach only
proportionately to goods and freight actually at risk. — If the pol-
icy be valued on goods and freight, and through mistake or derign
only a part of the goods be put on board, there can be, in case of
total loss, only such a proportionate recovery as the goods and
freight at risk bear to the whole valuation.5 But the general rule
19 See Rilev v. Hartford Ins. Co. Rawle (Pa.) 97; Forbes v. Aspinall,
2 Conn. 368, per Hosmer, J.; Knox 13 East, 323, 13 Eng. Rul. Cas. 673;
v. Wood, 1 Camp. 543. Tobin v. Harford, 13 Com. B. N. S.
20 See § 897 herein. 791, 13 Eng. Rul. Cas. 598; Mount v.
1 So held in Montgomery v. Eggin- Harrison, 4 Bing. 388, 1 Moore &
ton, 3 Term Rep. 362. See also Hart P. 14; Parke v. Hebson, cited in 2
v. Delaware Ins. Co. 2 Wash. (U. S. Br. & B. 326; Rhand v. Robb, vol. 13,
C. C.) 346, Fed. Cas. No. 6150; Faculty, Dee. 1801 to 1807, p. 433;
Gordon v. American Ins. Co. of New Truscott v. Christie, 2 Brod. & B.
York, 4 Denio (N. Y.) 362; De 320,329. See § 1612 herein.
Longuemere v. Phoenix Ins. Co. 10 2 6 Term Rep. 482.
Johns. (N. Y.) 126; De Longuemere 83 Term Rep. 362.
v. New York Fire Ins. Co. 10 Johns. 4 See eases under § 1606, and
(N. Y.) 201, 202, s. e. 10 Johns. 120; examine § 1612 herein.
Adams v. Pennsylvania Ins. Co. 1 5 Woleott v. Eagle Ins. Co. 4 Pick.
2751
§ 1012 JOYCE OX INSURANCE
is that in case of a valued policy on freight the valuation cannot
pened, vvhere there is an inchoate right to some freight, and
the valuation is bona fide.6
§ 1612. Risk attaches on freight if cargo is purchased or con-
tracted for, and both ship and cargo are ready. — It is now an estab-
lished rule, settled by the courts and agreed upon by the text-
writers ou the subject, that the risk en freight will attach, although
no -nods are laden on board the ship, where the vessel is in a con-
dition to receive the goods, and the latter are purchased or con-
tracted tor and ready to he shipped, and nothing prevents their
being Laden hut the intervention of a peril insured against.7 Bui
a question has been raised by a learned writer whether such a
rule is exclusive, or may he extended to cover freighl on goods
which are not fully ready to be shipped, although they are pur-
cha>ed or contracted for, and also whether so much of the rule
i- not too strict which restricts the relative situation of the ship
and the goods to that point where nothing hut the intervention of
a peril insured against can prevent freight being earned.8 The
above rule will be enforced where the following facts exist in
addition to the fact that the intervention of a peril insured against
prevents the loading: 1. Where a cargo is purchased or con-
tracted for and is ready to be laden, and the ship is in the proper
place and ready to receive it;9 2. Where the policy is "at and
from," and the outward cargo is discharged, and the ship has
purchased a part of her homeward cargo and contracted for the
(21 Mass.) 429; Forbes v. Aspinall, tracted with him to ship, the risk
13 East, 323, L3 Eng. Ivul. Cas. 073. attaches as soon as the ship is ready
6 Cole v. Louisiana Ins. Co. 2 Mart, to receive such cargo." Marine ins.
N. S. (La.) 165; Patapseo Ins. Co. act L906 (G Edw. VII. c. 41) sched.
v. Briscoe, 7 Gill & J. (Md.) 293, 28 I. rule 3 (d) ; Butterworth's Twen-
Am. Dec. 219; Coolidge v. Gloucester tietli Cent. Stat, (1900-1909) p. 426.
Mutual Ins. Co. 15 Mass. 341; Rob- 81 Parsons on Marine Jns. (ed.
iiiM.ii v. Manufacturers' Ins. Co. 1 1868) 171.
Met. (42 Mass.) 143; Davy v. Hallett, 9 De Longuemere v. New York
3 ('nines (N. Y.) 16. Mutual Fire Ins. Co. 10 Johns. (N.
7 See cases under the following sec- Y.) 120; Gordon v. American Ins.
tions, and Cal. Civ. Code, sees. 2662, Co. 4 Denio (N. Y.) 360, per the
2663. court; Devaux v. J'Anson, 5 Bing.
"Where freight, other than char- N. C. 519, 539, 8 L. J. (N. S.) C. P.
fcered freight, is payable without 284; per Tindal, C. J.; Flint v. Flem-
spccial conditions and is insured 'at yng, 1 Barn. & Adol. 45, 8 L. J. (N.
and from' a particular place, the risk S.) K. B. 350, 13 Eng. Kul. Cas. 693;
attaches pro rata as the goods or Forbes v. Aspinall, L3 East, .'523, 12
merchandise are shipped; provided Et. H, 352, 13 Eng. Kul. Cas. 673;
that it' there be cargo in readiness Parke v. 1 Ichson, < -itnl in 2 Bos. & P.
which belongs to the shipowner, or 326, 329; Truscott v. Christie, 2 Brod.
which some other person has con- & B. 320, 23 R. R. 446.
2752
ATTACHMENT AND DURATION OF RISK
§ 1612
residue, or has either purchased or contracted for the homeward
cargo, and both ship and cargo are ready at the place of loading; 10
3. Where the cargo is purchased or contracted for, and is ready
for shipping, but is at a distance from the place of loading, the
ship being ready ; u 4. Where the goods are purchased and in
readiness to be shipped, but the vessel having been in the drydock
for repairs, she is reported ready for sea, but the loss is sustained in
getting her out of the dock ; 12 5. Where the vessel has not unloaded
all her cargo at the outport, but has retained a part for ballast, the
vessel being ready and the cargo being contracted for and ready ; 13
6. Where the ship engaged in a trading voyage is completing her
loading from port to port, and has contracted for the residue of her
cargo, and is on her voyage ready to load the same on arrival ; 14
7. Where the necessary conditions as to the ship and cargo being
in readiness exist, and the contract for the loading rests only in
parol.15 But the ship will not be held to be in condition to receive
the goods, even though they are purchased or contracted for and
in readiness for being laden, if the ship has not discharged the bulk
of her outward cargo, and cannot therefore ship the homeward
cargo.16 It will be observed that in the cases above noted in sup-
port of the rule stated at the beginning of this section, the cargo
was in readiness to be shipped, in the sense that it was either pur-
chased or contracted for, and in such case the rule seems to ex-
clude, by the decided cases, any other proposition than the one
that the goods and ship must be so relatively situated as to create
a well-grounded expectation of freight being realized.17 And it
10 Flint v. Flemyng, 1 Bam. &
Adol. 45, 8 L. J. K. B. 350, 13 Eng.
Rul. Cas. 693, cited Id. 289, 291, 311,
692, 715; Williamson v. Innes, 1 M.
& R. 88, 8 Bing. 79, 80n; Patapsco
Ins. Co. v. Briscoe, 7 Gill & J. (Md.)
293, 28 Am. Dec, 219; Devaux v.
J'Anson, 8 L. J. Com. P. N. S. 284,
5 Bing. N. C. 519.
11 Devaux v. J'Anson, 8 L. J.
Com. P. N. S. 284, 5 Bing. N. C.
519.
12 Devaux v. J'Anson, 8 L. J.
Com. P. N. S. 284, 5 Bing. N. C.
519.
13 Williamson v. Innes, 1 M. & R.
88, 8 Bing. 80, n.
14 Parke v. Hebson, 2 Brod. & B.
326n. See Warre v. Miller, 4 Barn.
6 C. 538, 1 Car. & P. 237, 4 L. J.
K. B. N. S.
Joyce Ins. Vol. III.— 173. 27
15 Patrick v. Eames, 3 Camp. 441,
per Lord Ellenborough ; Parke v.
Hebson, 2 Brod. & B. 326n ; Flint v.
Flemyng, 1 Barn. & Adol. 45, 13
Eng. Rul. Cas. 693.
16 Forbes v. Aspinall, 13 East, 323,
12 R. R. 352, 13 Eng. Rul. Cas. 673.
17 Curling v. Long, 1 Bos. & P.
636, per Eyre, C. J. ; M'Gaw v. Ocean
Ins. Co. 23 Pick. (40 Mass.) 405, 409,
per Shaw, C. J. Examine Truscott
v. Christie, 2 Barn. & Adol. 320, 23
R. R. 446; 1 Phillips on Ins. (3d ed.)
185, sec. 330, and criticisms thereof
in 1 Arnould on Marine Ins. (Mae-
lachlan's ed. 1887) 443, 434, and
note 1 (see Id. [8th ed. Hart &
Simey] sees. 266 et seq., pp. 345 et
seq. ; sec. 511, p. 648) and also in
Parsons' Marine Ins. (ed. 1868) 171;
17 Earl of Halsbury's Laws of Eng-
53
§§ L613, L614 JOYCE <)N INSURANCE
would seem that by a cargo being ready to be laden is meant not
that the g Is must be actually and necessarily upon the quay or
wharf, but that they in;iy be .-it n comparatively distant place, in
;m actual state of readiness under an existing valid contract which
contemplates their being laden, and in all cases reference must
be had to usage and the nature of the risk and the character of
the voyage.18
§ 1613. Risk on freight will not attach where loss is incurred
on a voyage other than that insured. — If freight is insured on a
specified voyage, and the vessel agrees for freight for another and
differenl voyage than the one insured, and undertakes said voyage
and sustains damage thereon which prevents her from earning
fivi-lil nn the voyage insured, the risk does not attach so as to
make the insurers liable.19 If the policy insures freight for a
particular voyage by a named vessel, and the goods arc laden and
the voyage commenced, the risk attaches upon and covers the
freight of that cargo in that vessel and for thai voyage,20 but the
risk may attach upon and cover freight of goods taken at an inter-
mediate port, under a policy on freight "from" a specified port,
with liberty to call and take g Is.1 And in a case already noted
the risk on freight was held to have attached where an intermediate
voyage was made through necessity, which effected a postponement
of the ri-k.2
§ 1614. Risk on freight "at and from:" homeward voyage —
Freighl for the return cargo may be covered by the words "at
and from,"8 and such words exclude the freight on the outward
cargo "to" the same port, although the former policy be expressed
as in continuation of the latter.4 It will be noted from the char-
land, sec. 775, pp. 392 et scq. And 19 Seller v. McVickar, 4 Bos. & P.
3ee Barber v. Fleming, L. R. 5 Q. 23.
B. 59, 13 Eng. Rul. Cas. G97, per 20 M'Gaw v. Ocean Ins. Co. 23
Blackburn, J., which, however, was a Pick. (40 Mass.) 405, 409, per Shaw,
ease of chartered freight. C. J.
18 See Devaux v. J' Anson, 5 Bing. x Barclay v. Stirling, 5 Maule &
N. C. 539, per Tindall, C. J., and S. 6. "In principle and good sense
cases cited above under this section, there can be no reason why this pol-
|„ this sense the words of Mr. I *ji i- icy which was intended to cover the
suns will be applicable where he says freight upon the whole voyage should
of the goods: "If they are in port not attach upon the Ereighl of goods
but need that something be done to loaded at an intermediate port in
them before they are in a condition the voyage. ... It would be
to go on board, we should say that unjust to hold otherwise;' per
the ship still has ; u insurable interest Bayley, J.
in the freight of them, although in 2 Driscol v. Passmore, 1 Bos. & P.
one sense thev cannot be said to be 200.
ready to go on board:" 1 Parsons on 3 Bell v. Bell, 2 Camp. 475.
Marine Ins. (ed. 1868) 169. 4 Bell v. Bell, 2 Camp. 475.
2754
ATTACHMENT AND DURATION OF RISK §§ 1615, 1616
acter of the cases considered under the section preceding the last
that the rule there stated governs in cases of insurance "at and
from" a foreign port, so far as the facts may warrant, and, as a
general rule, such insurances are governed by the general prin-
ciples staled herein under the preceding sections relating to freight.
And the risk will attach when the homeward cargo is laden or
partly laden or contracted for or purchased, and both ship and
cargo are ready.5
§ 1615. Valued policy on freight outward and homeward covers
each voyage. — If the policy be on freight outward and homeward
on a particular voyage, the outward risk will terminate upon the
cargo outward being discharged and safely landed and the freight
earned, and the homeward risk will attach when the goods are
laden or purchased or contracted for, and in readiness to be shipped,
the ship being in a condition to receive them. But the valuation
covers each voyage, and precludes the insurer, in case of loss of
the homeward freight by a peril insured against, from any claim
to credit for freight earned on the outward voyage.6
§ 1616. Freight where voyage insured consists of distinct or
successive passages: valued policy. — Freight "at and from" B. to B,.
and back to M., or home, is not a policy for one entire voyage, but
for successive voyages, and the risk attaches upon and covers freight
of the goods for each passage. The same principle governs in all
cases where the voyage is not entire and consists of successive
passages, or where the insurance on freight is for a specified period.
With regard to the valuation of freight in such cases, the better
rule seems to be that the valuation applies to the successively
pending voyages. This presumption is, however, subject to re-
buttal by the express terms of the policy, or by other proper proof
that the valuation covers successive freights in the aggregate.7 A
policy on freight from Baltimore to Rio Janeiro, and back to
Havana or Matanzas, or a port in the United States, covers freight
5 See also Patapseo Ins. Co. v. v. Union Ins. Co. 8 Wheat. (21 U. S.)
Briscoe, 7 Gill & J. (Md.) 293, 28 294, 5 L. ed. 620.
Am. Dee. 219. Maryland. — ■ Patapseo Ins. Co. v.
6 Davy v. Hallett, 3 Caines (N. Briscoe, 7 Gill & J. (Md.) 293, 28
Y.) 16; Patapseo Ins. Co. v. Bris- Am. Dee. 219.
coe, 7 Gill & J. (Md.) 293, 28 Massachusetts.— Locke v. Swan, 13
Am. Dec. 219 ; Insurance Co. of the Mass. 76.
Valley of Virginia v. Mordecai, 22 Xew York. — Pennover v. Hallett,
How/ (63 U. S.) Ill, 16 L. ed. 329; 15 Johns. (N. Y.) 332, 8 Am. Dec.
Thwing v. Washington Ins. Co. 10 239.
Gray ( / 6 Mass. ) 443. Pennsylvania. — Adams v. Pennsyl-
7 United Stales. — Hugg v. Augusta vania Ins. Co. 1 Rawle (Pa.) 97.
Ins. & Banking Co. 7 How. (48 U. England. — Smith v. Wilson, 8 East,
S.) 595, 12 L. ed. 834. See Hughes 437.
2755
§ 1H17 JOYCE OX INSURANCE
upon separate voyages, out and home, and not for one entire
round voyage.8
§ 1617. Risk terminates where freight is earned: freight partly
earned. — The risk upon freighl terminates at that point where the
freighl has been wholly earned, or in case a part thereof has been
earned, thou it ceases as to such part. If the whole freight insured
has been earned, the insurer can have no further risk or interest
concerning it by abandonment or otherwise.9 If the goods are
carried to the place of destination and accepted by the consignee,
the freight is earned, although the goods are not permitted to be
landed by the government of the country at the port of destina-
tion, and they are brought back on the return voyage, and in such
case (be insured cannot recover.10 And where the goods are vol-
untarily accepted by the owner at a port short of the ship's destina-
tion, into which the vessel has put as a port of necessity, being
unable to complete her voyage, freight pro rata itineris must be
deducted in behalf of the underwriter-: that is, freight must be
paid according to the proportion of the voyage performed, and
this is a partial loss of freight. But this is not so if the cargo be
not voluntarily accepted at such other port.11 If the cargo is
carried to the port of destination and the freight earned, the con-
tract is terminated and there is no loss of freight, even though the
ship may be rightfully abandoned.12 And though the vessel be
prevented from loading, owing to her detention by the govern-
ment of the place and consequent detention by weather, yet if she
8 Ilugg v. Augusta Insurance & Hurtin v. Union Ins. Co. 1 Wash.
Banking Co. 7 How. (48 U. S.) 595, (U. S. C. C.) 530, Fed. Cas. No.
12 L. ed. 834. Cited in : Insurance 6942.
Co. of Valley of Virginia v. Mor- Maryland. — Merchants' Mutual
deeai, 22 How. (63 U. S.) Ill, 118, Ins. Co. v. Butler, 20 Md. 41.
16 L. ed. 329, 332; Thwing v. Wash- Massachusetts— McGaw v. Ocean
ington Ins. Co. 76 Mass. (10 Gray) Ins. Co. 23 Pick. (40 Mass.) 405.
143, 454; Lincoln v. Boston Marine New York. — Atlantic Mutual Ins.
Ins. Co. 159 Mass. 337, 341, 34 N. E. Co. v. Bird, 2 Bosw. (N. Y.) 195;
456. Williams v. Smith, 2 Caines (N. Y.)
9Patapsco Ins. Co. v. Briscoe, 7 13, 21, 2 Am. Dec. 209.
(Jill & .1. (Md.) 293, 28 Am. Dec. South Carolina. — Teasdale v.
219: Mavo v. Maine Fire & Marine Charleston Ins. Co. 2 Brev. (S. C.)
Ins. Co. 4 Mass. 374. 190, 3 Am. Dec. 705.
10Morgan v. Insurance Co. of See also Robinson v. Marine Ins.
North America, 4 Dall. (4 U. S.) 455, Co. 2 Johns. (N. Y.) 323; Post v.
1 L. ed. 907. This decision was based Robertson, 1 Johns. (N. Y.) 24; Mc-
upon the Ordonnance of Louis XIV. Kibbin v. Peck, 39 N. Y. 262, 100
11 United States. The Joseph Par- Am. Dec. 440.
rell, 31 Fed. 844; Propeller Mohawk, 12 Fiedler v. New York Ins. Co. 6
s Wall. (75 U. S.) 153, 19 L. ed. Duer (N. Y.) 282; Scottish Ins. Co.
406; Caze v. Baltimore Ins. Co. 7 v. Turner, 4 H. L. Cas. 311.
Cranch (11 U. S.) 358, 3 L. ed. 370;
2756
ATTACHMENT AND DURATION OF RISK § 1617
earns freight on her return voyage the insurers are discharged,
although the detention caused an expense exceeding the freight
earned.13 Nor does the insurer ordinarily contract that freight
shall be earned within any specified period. If the freight is
earned, this terminates the insurance, so that a policy on freight
does not in such case include loss by detention of the ship by sea
perils.14 Where a right exists in the shipowners, in case the ship
is damaged, to keep the cargo a reasonable time, repair the vessel,
and make her seasonably ready to prosecute the voyage and earn
freight, and repairs are not prevented by the perils of the sea,
and can be made at an expense which a prudent owner uninsured
would have incurred, and they lose their freight, not by any peril
insured against, but by a voluntary relinquishment of that right,
and they have no claim upon the cargo owners for freight earned,
the insurers of freight are discharged.15 And this is so even though
the cargo be damaged,16 for a voluntary surrender of the cargo
free of freight prematurely made so far terminates the insurance
on freight, as to preclude a recovery of freight money.17 So the
risk on freight may be terminated by the master losing the freight,
by unwarrantably giving up the voyage and delivering the cargo
to the shipper at an intermediate port,18 But the safe delivery
of the cargo at the port of destination does not necessarily relieve
the insurer of freight, since the vessel may be wholly lost by a
peril insured against and the power to earn freight be thereby
lost, and the rule applies equally to cases of constructive as of actual
total loss, since the owner's right to abandon in the former case
and his inability to receive freight must have been a risk contem-
13 Everth v. Smith, 2 Maule & S. 11 Com. B. (N. S.) 270, 30 L. J.
278. Com. P. 358. See Jordon v. Warren
14 Mayo v. Maine Fire & Marine Ins. Co. 1 Story (U. S. C. C.) 342,
Ins. Co. 4 Mass. 374. Fed. Cas. No. 7524.
"McGaw v. Ocean Ins. Co. 23 16MeGaw v. Ocean Ins. Co. 23
Pick. (39 Mass.) 405; Clark v. Mass- Pick. (40 Mass.) 405; Saltus v.
achusetts Fire & Marine Ins. Co. 2 Ocean Ins. Co. 14 Johns. (N. Y.)
Pick. (19 Mass.) 104; Lord v. Nep- 138; Allen v. Mercantile Mutual Ins.
tune Ins. Co. 10 Gray (76 Mass.) Co. 44 N. Y. 437, 4 Am. Rep. 700,
109; Allen v. Mercantile Mutual Ins. rev'g 46 Barb. (N. Y.) 642; Lord v.
Co. 44 N. Y. 437, 4 Am. Rep. 700, Neptune Ins. Co. 10 Gray (76 Mass.)
rev'g 46 Barb. (N. Y.) 642; Saltus v. 109.
Ocean Ins. Co. 14 Johns. (N. Y.) 17 Allen v. Mutual Ins. Co. 44 N.
138; Herbert v. Hallett, 3 Johns. Cas. Y. 437, 4 Am. Rep. 700; Hubbell v.
(N. Y.) 93; Griswold v. New York Great Western Ins. Co. 74 N. Y.
Ins. Co. 1 Johns. (N. Y.) 205, 3 246.
Johns. (N. Y.) 321, 3 Am. Dee. 490; 18 Clark v. Massachusetts Ins. Co.
Moss v. Smith, 9 Com. B. 94, 19 L. 2 Pick. (19 Mass.) 104, 13 Am. Dec.
J. Com. P. 225; Philipot v. Swann, 400.
2757
§ 1018 JOYCE ON INSURANCE
plated by the insurers.19 But if no freight is earned and the
vessel becomes a total loss, and there is no opportunity to trans-
ship Hie goods, the insurers are liable.20 And if the vessel is unable
to take her cargo owing to delay for repairs, and it is sent by an-
other ship, and full freight is afterward earned by her in carrying
oilier goods, there is no recovery for a partial loss of freight.1
And the underwriters are not liable under a policy on freight where
(lie vessel is disabled at sea, although there is not a constructive
total loss and the cargo has been actually delivered.2 In case,
however, of a constructive total loss, the general rule is that it is
incumbent upon the master to earn freight by forwarding the
cargo by another ship, except no other vessel may be obtained for
that purpose. Otherwise the insurers are not liable, and the master
is not bound to seek another vessel to forward the cargo, unless
one can be found at the port of distress or a contiguous one.3 But
regard must be had to the freight to be paid for forwarding goods
mi another ship, and unless the ship may be procured at an expense
not exceeding the freight that would have been earned had the
voyage been completed, the master cannot be required by the in-
surers oh freight to procure another ship for forwarding the goods.4
But in case of a valid policy, if there is no opportunity to forward
the goods to their destination and no freight is earned, the in-
surers are liable for the whole loss.5
§ 1618. Risk on. freight terminated by assured accepting goods
at intermediate port. — If the assured accepts his goods at an in-
termediate port, paying full freight, this terminates the risk on
freight, even though the goods are there accepted on account of
blockade of the port of destination, and are transshipped, nor in
such case can the insured recover the expenses incurred by trans-
shipment, employment of lighters, or of insurance on the lighters.6
19 This was so held in a ease where * Brocklebank v. Sugrue, 1 Moody
the policy was on freight valued, & R. 102, 1 Barn. & Adol. 88.
and the vessel became constructively 8 Fiedler v. New York Ins. Co. 0
a total loss, the cargo being trans- Duer (N. Y.) 282.
shipped for the freight that would 3 Kinsman v. New York Mutual
have been earned and arriving safely Ins. Co. 5 Bosw. (N. Y.) 460; Salt us
at its destination: Thwing v. Wash- v. Ocean Ins. Co. 12 Johns. (N. Y.)
in- ton his. Co. 10 Gray (76 Mass.) 107, 7 Am. Dee. 200.
1 13. See also Hugg v. Augusta Ins. 4 Hugg v. Augusta Ins. & Banking
& Banking Co. 7 How. (48 U. S.) Co. 7 How. (48 U. S.) 595, 12 L.
595, 12 L. ed. 834. Examine Gris- cd. 831; \V ilia id v. Millers' & Manu-
wold v. New York Ins. Co. 1 Johns, facturers Ins. Co. 24 Mo. 5(51.
(N. Y.) 205; Coolidge v. Gloucester B Lockwood v. Atlantic Mutual Ins.
Ins. Co. 15 Mass. 341. Co. 47 Mo. 50.
20 Lockwood v. Atlantic Mutual 6 Low v. Davy, 5 Binn. (Pa.) 595.
Ins. Co. 47 Mo. 50.
2758
ATTACHMENT AND DURATION OF RISK §§ 1619-1622
§ 1619. Risk on freight against total loss only not terminated
by delivery of some goods at intermediate port. — The fact thai
some freight has been earned prior to the less by the delivery of
goods at intermediate ports does not terminate the risk on freight
against a total loss only, so far as to preclude a recovery of freight
pending at the time of the loss.7
§ 1620. Termination of risk on freight at port or ports of dis-
charge.— A policy of insurance upon freight to a port of discharge
in a certain country will terminate at the first port there where the
cargo is discharged.8 But if the port of discharge is limited to a
given locality by the description of the voyage, then the liberty
of a port must be confined to that locality; as in case the voyage
is to a port on the north side of Cuba, with the liberty of a second
port therein, this will be construed to mean that the second port
must be on the north side of the island.9
§ 1621. General rule as to attachment of risk on freight: char-
tered freight. — We have already noted the distinction between
freight and chartered freight,10 and a different rule applies in the
latter case, as to the attachment of the risk, than in the former.
It may be stated as a general rule that the risk on chartered freight
attaches when the ship has broken ground for the voyage upon
which she would have earned freight under the charter-party ex-
cept for the intervention of peril insured against, and the fact that
there are no goods aboard is immaterial.11
§ 1622. Extension of the rule last stated. — The rule stated under
the preceding section has been extended in numerous cases beyond
the point of breaking ground on the port of loading. Thus, if the
insured has begun to perform his part of the contract, so that there
is such an inception thereof that his right to earn freight is only
prevented by the introduction of a peril insured against, the right
to freight has accrued.12 And it is said that if a shipowner, hav-
7Willard v. Millers' & Manufac- Taylor, 6 Term Rep. 478, 3 R. R.
turers Ins. Co. 30 Mo. (9 Jones) 35. 233, noted under § 1607 herein:
8 Fay v. Alliance Ins. Co. 16 Gray Horneastle v. Stuart, 7 East, 400 ;
(82 Mass.) 465. Moses v. Pratt, 4 Camp. 297; Trus-
9 Nicholson v. Mercantile Mutual cott v. Christie, 2 Brod. & Bing.
Ins. Co. 106 Mass. 399. 320, 23 R. R, 446; Hobbs v. Hannam,
10 § 1606 herein. 3 Camp. 93; Ellis v. Lafone, 8 Ex.
"Hart v. Delaware Ins. Co. 2 546, 22 L. J. Ex. 124, Cal. Civ.
Wash. (U. S. C. C.) 346, Fed. Cas. Code, sees. 2662, 2663; N. Y. Civ.
No. 6150; McGaw v. Ocean Ins. Co. Code, sees. 1450-51. See 17 Earl of
23 Pick. (40 Mass.) 409, per Shaw, Halsbury's Laws of England, sec.
C. J.; Adams v. Warren Ins. Co. 22 7/6, p. 398; 1 Arnould on Marine Ins.
Pick. (39 Mass.) 163; Davidson v. (8th ed. Hart & Simey) sees. 513
Willasey, 1 Maule & S. 313, 14 R. R, et seq., pp. 650 et seq.
438, per Lawrence, J.; Thompson v. 12 Thompson v. Taylor, 6 Term
2759
§§ L623, L624 JOYCE ON LNSURANCE
ing a contract with another person by which he may earn freight,
has "taken steps and incurred expense upon the voyage toward
earning it." this constitutes an inchoate interest, which if after-
ward destroyed by a peril insured againsl entitles him to indemnity
for the loss.18 We cannot believe, however, that the court intended
by this statement to formulate a rule not embodied within the
principle first stated under this section. Auain. the risk will attach
where the vessel is being fitted at the place of loading to receive and
carry goods contracted for. So also where the vessel is loaded, but
has not -ailed; or if she has set sail for the place of loading; or
if there be an express contract for a load, though none is taken:
or if the vessel sails under a contract; or being in port an express
contract is made to load her. and she is fitted to take in such a
load, the risk will attach.14 But in cases of chartered freight gen-
erally, as well as in eases of freight outward and homeward, where-
in the question may arise whether the voyage is entire, reference
must be had. as to the inception of the risk, to the terms of the
charter-party or contract of affreightment, as well as to the de-
scription of the voyage insured, since there can be no inception
of a right to freight on the voyage insured where the voyage under-
taken is another or different one from that contemplated by the
parties.15
§ 1623. Attachment of risk where vessel is being fitted at place
of loading to receive contracted-for cargo. — If the ship under a con-
tract of affreightment is at the port of loading, and has under an
agreement therefor commenced to fit the ship to carry a cargo
contracted for, and before she is fully refitted for the specified
purpose is lost by a peril insured against, the risk attaches upon
the freight which the ship would in all probability have earned
had the loss not occurred.16
§ 1624. Risk on chartered freight attaches by inception of voy-
age even in ballast to port of loading. — If the voyage has com-
Rep. 478, 3 R, R. 233, per Lord See also Davidson v. Willasey, 1
Km von, C. J. Maulc & S. 313, 14 R. R. 438, per
18 In this case the vessel had sailed Lawrence, J.; Gordon v. American
in ballast for the port from which Ins. Co. 4 Denio (N. Y.) 302, per
the voyage was to commence, but she Bronson, C. J.
stopped at an intermediate port for 15 Seller v. McViear, 1 Bos. & P.
supplies, and was there lost, and the N. R. 23, 8 R, R. 744. See Meech
assured was held entitled to recover: v. Philadelphia Ins. Co. 3 Whart.
Barber v. Flemyng, L. R. 5 Q. B. 59, (Pa.) 473, and Livingston v. Colum-
K! Eng. Etui. Cas. 697, per Black- bian Ins. Co. 3 Johns. (N. Y.) 49, as
burn. J.; s. e. 39 L. J. Q. B. 25, 18 to voyage being entire.
Week. Rep. 254. "Truscott v. Christie, 2 B. & B.
14 Adams v. Pennsylvania Ins. Co. 320, 5 Moore, 33.
1 Etawle (Pa.) 97, per Houston, J.
2700
ATTACHMENT AND DURATION OF RISK §§ 1625, 1626
menced under which, pursuant to the terms of the charter-party,
freight is to be earned, the inchoate right to freight has accrued,
and within this principle is the well-settled rule that there may
be an inception of the voyage on which freight is to be earned by
the inception of a voyage from one port to another for the pur-
pose of there taking in cargo pursuant to the terms of the charter-
party, even though the vessel sails in ballast, and the fact that no
goods are ever laden, or that the ship never arrives at said port
of lading, is immaterial where the same is prevented by a peril
insured against. This rule, however, implies that the voyage to
the port of loading is for the object and purposes of the charter-
party, within the terms thereof, and that the ship has broken
ground on a voyage for that purpose.17 And it is held that the
rule obtains even though the insurers did not know that the
vessel was under a charter-party, and had made no inquiries as to
the fact,18
§ 1625. Contract stipulation may supersede the above rule.-^-The
contract may stipulate when the risk shall commence on chartered
freight, in which case the stipulation will supersede the rule stated
under the last section, and the risk will commence only as spec-
ified under the contract,19
§ 1626. Where there is a second charter-party at and from out-
port. — An inchoate right to chartered freight may accrue under a
second charter-party, the risk being "at and from" the outport of
the first, by the ship's sailing on her outward voyage, in pursuance
of the charter-party, to said outport, for the purpose of there dis-
charging her outward cargo, and of then taking on the cargo to
earn freight under the second charter-party. Thus, where a ship
"United States.— Hart v. Dela- Potter) L. R. 6 H. L. 83, 151, 1
ware Ins. Co. 2 Wash. (U. S. C. C.) Eng. Rul. Cas. 70; Warre v. Miller,
346, Fed. Cas. No. 6150. 4 Barn. & C. 538 ; Barber v. Flemyng,
Louisiana.— Hodgson v. Mississip- L. R. 5 Q. B. 59, 39 L. J. Q. B. 25,
pi Ins. Co. 2 La. (0. S.) 341. 18 Week. Rep. 254, 13 Eng. Rul.
Massachusetts. — Adams v. Warren Cas. 697; Thompson v. Taylor, 6
Ins. Co. 22 Pick. (39 Mass.) 163; Term Rep. 478; Atty v. Lindo, 1
Robinson v. Manufacturers' Ins. Co. Bos. & P. (N. R.) 236; Foley v.
1 Met. (42 Mass.) 143, per Shaw, C. United Fire & Marine Ins. Co. 5 L.
J. R, Com. P. 155, 39 L. J. Com. P.
New York. — Gordon v. American 206.
Ins. Co. 4 Denio (N. Y.) 362, per 18 Hodgson v. Mississippi Ins. Co.
Bronson, C. J. 2 La. (0. S.) 341. See Thompson
England. — Jackson v. Union Ma- v. Tavlor, 6 Term Rep. 478.
rine Ins. Co. 10 L. R. Com. P. 125, 8 19 Jones v. Neptune Marine Ins.
L. R. Com. P. 572, 6 En?. Rul. Cas. Co. 7 L. R. Q. B. 702, 41 L. J. Q. B.
650; Horncastle v. Suart, 7 East, 370, 27 L. T. N. S. 308; § 1608 here-
399; Potter v. Rankin (see Rankin v. in.
2761
§ 1027 JOYCE ON INSURANCE
was loaded and about to sail from C. to M., and was chartered to
proceed to M. and there discharge, and a policy was effected on
chartered freight at and from M.. where she was chartered to take
a cargo of rice, and she arrived at M. and was lost while discharg-
it was held that the policy attached upon arrival at M.20 The
case was, however, decided upon the authority of Thompson v.
Taylor1 and Barber v. Flemyng,8 under which decisions an in-
choate right to freight would have accrued from the inception of
tin- via ;i,ue from C.
§ 1627. Outward and homeward freight: where contract for
freight is entire. — In the case of outward and homeward chartered
freight, if the contract for freight is entire by the terms of the
charter-party, an inchoate right to the homeward freight will com-
mence upon the inception of the voyage to the outport, notwith-
standing the fact that the whole outward cargo is not discharged
and no part of the homeward cargo is loaded. Thus, where a ship
was chartered from L. to D. and back to L. at certain freight for
the outward and homeward cargo, and a policy was effected on
the freight of the ship at and from D. to L., and the ship having
arrived at D. was captured before she had discharged her outward
cargo or taken on any part of her homeward cargo, it was held by
Lord Ellenborough that the risk on the homeward freight was in-
cepted by the ship's departure from L.3 So where the policy was
a valued one at and from Philadelphia to Tampico, thence to
Laguna and at and from thence to New York, and under the
charter-party the charterer agreed to pay for her hire part at the
port of discharge on delivery of the cargo and the balance on her
return to New York, the contract was held entire for one sum out
and home, and the assured was entitled to recover, though the
vessel was lost in the outward voyage.4 So the risk was held to
attach on the whole freight, which was the sum for which the
vessel was chartered, where said sum was entire for a voyage- from
A to B, and at and from thence to C, and the vessel, on arrival
at B, was detained by an embargo and the insured abandoned.5
20 Folev v. United Fire & Marine Am. Dec. 54; Burrill v. Cleeman, 17
Lis. Co. "5 L. R. Com. P. 155, 33 L. Johns. (N. Y.) 72; Scott v. Libby,
J. Com. P. 206, 18 Week. Rep. 437. 1 Johns. (N. Y.) 336, 3 Am. Dec.
See next section. 431; Smith v. Wilson, 8 East, 437;
16 Term Ri p. 478. Mackrell v. Simond, 2 Chit. 666.
2 5 L. R. Q. B. 59, 13 Eng. Rul. 4Meeeh v. Philadelphia Ins. Co.
Cas. 697. 3 Whart. (Pa.) 473.
3 Eorncastle v. Suart, 7 East, 399. B Livingston v. Columbian Ins. Co.
See Blanehard v. Bueknam, 3 Greenl. 3 Johns. (N. Y) 49. See also Ellis
(3 .Me.) 1; Hamilton v. Warfield, v. Lafone, 8 Ex. 546, 2 L. J. Ex. 124.
2 Gill & J. (Md.) 482, 20 Am. Dec. Bui see §§ 1615, 1616 herein.
148; Coffin v. Storer, 5 Mass. 252, I
27(12
CHAPTER LI.
RESCISSION AND CANCELATION.
§ 1634. Rescission and cancelation generally.
§ 1634a. Construction of cancelation provision against insurer.
§ 1635. Statutory provisions relating to rescission or cancelation.
§ 1635a. Same subject: mortgagee included and consent of, necessary.
§ 1636. Rescission or cancelation before contract delivered or finally com-
pleted.
§ 1637. Rescission or cancelation by consent.
§ 1637a. Action for breach of agreement to surrender and cancel lost policy.
§ 1638. Agreement to cancel marine risk need not be in writing.
§ 1639. Option reserved by company to cancel.
§ 1640. Cancelation for nonpayment of premiums or assessments, or other
breach of condition.
§ 1640a. Cancelation or rescission for misrepresentations, breach of war-
ranty or fraud.
§ 1641. Cancelation where policy is assigned.
§ 1642. Effect as to cancelation of repeal of charter.
§ 1643. Cancelation by mutual company: authority of directors or sec-
retary.
§ 1644. Rescission and cancelation: insolvency: appointment of receiver:
termination of business and transfer of assets.
§ 1644a. Cancelation: insolvency: appointment of temporary receiver.
§ 1645. Cancelation by receiver: statutory provision: certificates of in-
debtedness.
§ 1646. What acts do not effect a cancelation: instances.
§ 1646a. Surrender and cancelation: guardian and ward: infant.
§ 1647. Rescission by assured and surrender of policy.
§ 1648. Cancelation by request of assured under terms of policy or statutes.
§ 1648a. Surrender and cancelation by person insane or mentally incom-
petent.
§ 1649. Right to reject policy not of class ordered.
§ 1649a. Surrender and cancelation where policy does not conform to
application.
§ 1650. Rescission and surrender: mutual company: withdrawal of mem-
ber.
§ 1650a. Cancelation: unincorporated association: withdrawal of member.
2763
JOYCE ON INSURANCE
§ 1650b. Surrender and cancelation: effect of death of assured.
§ 1651. Right of assused to surrender life policy dependent upon bene-
ficiary's consent.
§ 1652. Proposition to cancel must be accepted or declined as a whole if
indivisible.
§ 1 653. Want of insurable interest as a ground of rescission or cancelation.
§ 1654. Rescission or avoidance of compromise or release.
$ 1655. Right of agent to rescind or cancel: notice of cancelation to
agent or broker.
§ L655a. Cancelation: when other insurance or substituted policy does not
attach.
§ L655b. Cancelation: when other insurance or substituted policy attaches.
§ 1656. Cancelation by mistake of agent.
§ 1657. Partner's consent to cancelation or substitution binds firm.
§ 1658. Release by part of the insured parties.
§ 1659. Wrongful cancelation or termination of contract by assurer.
§ 1659a. Rescission or cancelation: increase of assessments or reduction
of policy amount.
§ 1660. Strict compliance with stipulation as to rescission or cancelation
required unless waived: when stipulation not binding.
§ 1661. Rights relating to rescission or cancelation must be exercised with-
in a reasonable time.
§ 1662. Company cannot cancel when loss is imminent.
§ 1663. Cancelation and rescission after loss or forfeiture.
§ 1664. Cancelation in equity after policy has become void or inoperative.
§ 1665. May the policy be terminated eo instanti on notice: reasonable
time.
§ 1665a. Same subject: specified time must intervene: computation of
time.
§ 1665b. Entire or divisible contract: notice.
§ 1666. Cancelation of parol contract: notice.
§ 1667. Cancelation : notice to insurer.
§ 1668. Cancelation: notice to the assurer: to mortgagee: to one of
several.
§ 1668a. Notice by publication: decree of foreign court.
§ 1669. Cancelation: notice by mail must be received.
§ 1669a. "When mailing notice and unearned premium to foreign company
sufficient.
§ 1669b. Notice by registered letter: when insured not put on inquiry.
§ 1670. Cancelation: company must give notice: sufficiency and service
of same.
§ 1670a. Same subject : when notice sufficient.
§ 1670b. Same subject: when notice insufficient.
§ 1671. Cancelation: company must return or tender unearned premium.
2764
RESCISSION AND CANCELATION § 1634
§ 1672. Cancelation : what is not a sufficient payment or tender of the
unearned premium.
§ 1673. Cancelation: when actual payment or tender of unearned pre-
mium unnecessary.
§ 1673a. Cancelation : waiver.
§ 1673b. Same subject : surrender of policy upon assured's request.
§ 1674. When equity will rescind or cancel: generally.
§ 1675. When equity will rescind or cancel: cases.
§ 1676. When equity will not rescind or cancel : cases.
§ 1677. Equity may rescind cancelation made by mistake.
§ 1678. Where equity will refuse to cancel after loss or death.
§ 1679. When equity will cancel after loss or death.
§ 1680. Same subject : conclusion.
§ 1680a. Effect of cancelation upon liability.
§ 1681. Proof as to cancelation or rescission.
§ 1682. Whether question of rescission or cancelation is one of law or fact.
§ 1634. Rescission and cancelation generally. — Fire policies usu-
ally contain provisions relating to their rescission or cancelation
by either party dependent upon certain conditions. In life policies
depending upon the payment of premiums at specified times it
is within the power of the assured to refuse or neglect payment on
the day stipulated, and thereby abrogate the contract, so that the
very nature of this class of contracts implies a right of the assured
to annul the same, and the same rule applies, with certain ex-
ceptions, to certificates or contracts in mutual benefit societies; so
a breach of contract by either party may, on general principles,
afford a ground for rescission or cancelation. In mutual benefit
societies not only the certificate, but the charter or articles of
association and b}r-laws, must govern as to the mode of terminating
the contract relations between the society and its members. In-
asmuch, however, as the relations of the parties to a contract of
insurance are destroyed by rescission or cancelation the act must
be that of both parties, insured and insurer, subject to such excep-
tions as may arise from the nature of the contract itself, including'
those above-mentioned, or from some statutory provision, and it
may be generally stated that the right to rescind, abandon, or
cancel a contract of insurance must arise either: (1) by virtue
of some statute: (2) from the terms of the contract itself; (3) by
reason of some breach thereof: or (4) under a power reserved
therein: or (5) by mutual consent of the parties thereto, (a) If,
however, the policy has been obtained under certain circumstances
of fraud, misrepresentation, or mistake, a court of equity may order
a cancelation; it may also rescind on a proper showing, (b) It
2765
§ 163 1a
JOYCE <>\ (INSURANCE
is necessary in cases of rescission or cancelation by agreement thai
there be a complete contract or meeting of minds, otherwise the
eemenl will not stand, (c) To the extenl thai insurance is a
contracl of indemnity that essential must be considered as must
also, the right to have the policy continue in force according to its
terms.6
§ 1634a. Construction of cancelation provision against insurer. —
The rule of construction against insurer applies to a policy stipula-
tion as to cancelation.7
^United States.— Connecticut Mu- Now England Mutual Life Ins. Co.
tual Life Ins. Co. v. Home Cns. Co. 17 101 Mass. 510, ."> Am. Rep. 404 (case
Blatchf. (U. S. C. C.) 14:2, Vv(\. ('as. of no assent by assurer to rescission
No. Mo, (policy canceled for intern- or abandonment of contract: assured
perance but assured refused consent retained policy and assurer retained
to cancelation; held that bill in equity note); Alliance Mutual Ins. Co. v.
would lie to have policy set aside). Swift, 10 Cush. (04 Mass.) 433 (as-
Alabama. — Farmers' Mutual Ins. sured must consent to cancelation or
Assoc of Ala. v. Tankersley, — Ala. vote of mutual company to cancel
— , 69 So. 410 (policy stipulation a ineffective).
condition precedent unless special New Hampshire.— Fabyan v. Union
agreement mutually concurred in and Mutual Fire Ins. Co. 33 N. H. 203
carried out). (election by assurer to cancel under
Arkansas.— Commercial Union Fire by-laws for increase of risk ) .
Ins. Co. v. King, 108 Ark. 130, 156 Pennsylvania.— Scheel v. German-
S. \\ . 145, 412 Ins. L. J. 1021 (right American Ins. Co. 228 Pa. 44, 76 Atl
to cancel must be reserved in policy 507, 39 Ins. L. J. 1252 (sustaining
and can only be exercised as there last statement in text),
provided). Tennessee.— Skillern v. Continen-
Georgia. — Home Ins. Co. v. Chatta- tal Tns. Co. — Tenn. Ch. — , 42 S W
hoochee Lumber Co. 126 Ga. 334, 55 180 (may cancel by consent though
8. E. 11 (cancelation or rescission no right expressly reserved).
may be by consent when minds of England.— Thornton v. Knight 16
parties must meet, or under stipu- Sim. 509, 13 Jur. 180 (bill dismissed
lation in policy). to have policy delivered up and can-
inSi"P'-Bard v. Firemen's Ins. Co. celed on ground of deviation and
t xoo6'/ ' 81 Atl' 87°' 41 Ins- L- unseaworthiness where only deviation
J. 423 (may be effected by mutual proven); Barker v. Walters, 8 Beav
agreement, by statute, or under pol- 92 (bill for cancelation on ground
icy provisions, or reservation of right of fraud but it contained no offer
to cancel). ro pav premiums back).
Massachusetts. - Massasoii Steam See also cases throughout this
Mills Co v. Western Assur. Co. 125 chapter. See chapters on premiums
Mass. 110 (reservation of right and assessments as to the principles
to terminate at insurers option governing life policies and certifi-
on notice: agent no authority to cafes.
rescind without consent of 'par- As to riefht to rescind for default
ties); Bennett v. City Ins. Co. of other party, see note 30 L.rv.A.
L15 Mass. 241 (acts of agent re- 09.
Milting in cancelation of policy by 7 American Automobile Ins. Co v
assurer were done without assured's Watts, 12 Ala. App. 518, 67 So 758-
knowledge or consent); McAllister v. Williamson v. Waxfield, Pratt Bow-
2700
RESCISSION AND CANCELATION
§ 1635
§ 1635. Statutory provisions relating to rescission or cancela-
tion.—Under the statutes of many of the states the assured or his
legal representatives are entitled, upon making request therefor, to
a cancelation of the policy in companies, associations, or corpora-
tions transacting the business of fire insurance, and also to a certain
proportionate return of the premium.8 The effect of such a statute
is, that once the request of the assured is made it operates as a
cancelation, in so far that a further continuance thereafter would
be in contravention of the statute.9 But if the code specifies the
grounds of cancelation, the insured cannot surrender his policy
and claim a return of a ratable proportion of the premium under
a statute so providing^ unless the policy is canceled for a reason
specified in the code, or unless the same be done under a right
reserved in the policy itself.10
Other states also provide by statute that no company shall cancel
Montana. — See 2 Mont. Codes
(Civ. Code) Annot. 1895, see. 3421.
Nebraska. — Comp. Stat. 1903, sec.
3905; Comp. Stat. 1899, e. 43, sec.
46, art. 2.
New York. — See last note under
ell Co. 136 111. App. 168; Rawl v.
American Central Ins. Co. 94 S. Car.
299, 45 L.R.A. (N.S.) 463, 77 S. E.
1013, 42 Ins. L. J. 804, s. c. 97 S.
Car. 189, 81 S. E. 505.
As to construction against insurer
and in favor of assured, see §§ 221 this section,
et seq. herein. Ohio. — Bates' Ann. Stat. 1906,
8 California.— Civ. Code, sees. 2617 sees. 3664 et seq.; 1 Rev. Stat. 1890,
et seq.; Appx. Civ. Code 1903, p. sees. 3664 et seq.
737, sec. 16 (countv fire companies). Oklahoma,— Stats. 1890, sec. 3112.
Colorado.— Sess."l907, c. 193, sec. Pennsijlvania — See Pub. Laws
57, p. 470 ; 1 Mills' Stats. 1891, sec. 1891, 5, sec. 2 ; 1 Pepper & Lewis'
2234
Connecticut. — Gen.
see. 2852.
Dakota. — Comp. L
3103, 3104
Dig. 1700-1894, p. 2388, sec. 107
Stats. 1888, (boiler insurance).
South Dakota.— Rev. Codes 1903
1887, sees. (Civ. Code) sec. 676.
Wisconsin. — Sanb. & B. Anno.
Iowa,— Ann. Code 1897 and Suppl. Stat. 1898, sees. 1941-52, p. 1440 ;
1907, sees. 1728, 1745; McClain's sec. 1946d, p. 1456.
Annot. Code 1888, see. 1724; Morrow On rescission or cancelation of eon-
v. Des Moines Ins. Co. 84 Iowa, 256, tract by members of mutual fire in-
surance companv, see note in 32
L.R.A. 492.
9 Crown Point Iron Co. v. 2Etna
Ins. Co. 127 N. Y. 608, 14 L.R.A.
147, 28 N. E. 653, 40 N. Y. St. Rep.
426, 21 Ins. L. J. 31.
10 Joshua Hendy Machine Works
v. American Steam Boiler Ins. Co.
Michigan.— Pub. Acts 1887, e. 305, 99 Cal. 421, 21 Am. St. Rep. 33, 24
see. 17. Pae. 1018.
2767
260, 51 N. W. 3
Kansas.— 1 Gen. Stat. 1889, see.
3435.
Kentucky. — Stat. sec. 7112 (mutu-
al); Stat. 1909, sec. 4324 (assess-
ment companies).
Massachusetts. — See last note un-
der this section
§ 1635a JOYCE ON INSURANCE
fire policies without a special notice and return of a ratable pro-
porl ionate premium.11
§ 1635a. Same subject: mortgage included and consent of, neces-
sary.— The Now York statutory provision that insurer shall upon
11 California. — Appx. Civ. Code upon the same terms as are provided
L903, p. 737, sec. 16 (county fire for corporations organized under its
companies). laws." N. Y. Ins. Law 1909, c. 33,
( onne{ !,:, „/. _ Gen. Stat. 1902, § sec. 122 (Consol. L. c. 28) ; N. Y. L.
3526; Gen. Stats. 1888, sec. 2852. 1880, c. 110, sec. 3; am'd L. 1886, c.
Dakota.— Comp. L. Dak. 1887, sec. 612; N. Y. Ins. L. 1892, c. 690, sec.
3104. L22. The same law sec. 123 pro-
Iilnlio. — Act March 10, 1003, sec. vides for cam-elation by the receiver
15 (mutual co-operative companies), of any domestic fire insurance corpo-
Towa. — Ann. Code 1897, sec. 1727, ration upon written request of policy
suppl. sec. 1727. holder. Sec 264, N. Y. L. 1910, c.
Kansas.— Gen. Stats. Kan. 1889, 328, am'd L. 1911, c. 323, provides for
sec. 3435. the exclusion of members of co-oper-
Keniucky. — Stat. sec. 712 (assess- afire insurance corporations and can-
ment of co-operative company). celation of l he policy issued to him.
Michigan. — Pub. acts Mich. 1887, The New York standard fire policy
c. 305, sec. 17. provides: "This policy shall be
North Dakota. — Rev. Code 1899, canceled at any time at the request
sec. 4502. of the insured; or by the company
South Dakota. — Civ. Code 1903, by giving five days' notice of such
sec. 677. cancelation. If this policy shall be
Washington. — 3 Rem. & Bal. Code, canceled as hereinbefore provided,
sees. 6059-108 (Ins. Code, sec. 108). or become void or cease, the premium
West Virginia. — Acts 1907, c. 77, having been actually paid, the im-
sec. 67. earned portion shall be relumed on
Wisconsin. — Sanb. & B. Ann. Stat, surrender of this policy or last re-
1898, sees. 1941-52, p. 1440. newal, this company retaining the
The New York statute provides: customary short rate; except that
"Any corporation, person, company, when this policy is canceled by this
or association transacting the busi- company by giving notice it shall re
oess of fire insurance in this state tain only the pro rata premium." X.
shall cancel any policy of insurance Y. L. 1909, c. 33, sec. 121 (Consol.
upon request of the insured or his L. c. 28); Laws of 1886, c. 188;
legal representatives, and shall re- am'd L. 1887, c. 429 ; L. 1901, c. 513 ;
turn to him or to such representative L. 1903, c. 106; L. 1909, c. 240; L.
the amount of premium paid, less 1910, chaps. 168, 638, 668; L. 1913,
the customary short rate premium for c. 181.
the expired time of the full term The Massachusetts standard fire
of which the policy has been issued policy provides: "This policy may
or renewed, notwithstanding any- be canceled at any time at the re-
thing in the policy to the contrary. <|uest of the insured, who shall there-
Where the laws of any state permit upon be entitled to a return of the
corporations organized under its laws portion of the above premium re-
to cancel policies of insurance upon maining after deducting the cus-
different terms than herein set forth, tomary monthly short rates for the
corporations organized under the time this policy shall have Ik en in
laws of this state may cancel poli- force. The company also reserves
cics upon risks in any such state the right, after giving written notice
2768
RESCISSION AND CANCELATION §§ 1636, 1637
request of assured, etc., cancel any policy includes by the term in-
sured a mortgage under a mortgagee clause in the policy so that
said .mortgagee's consent to such cancelation is necessary.12
§ 1636. Rescission or cancelation before contract delivered or
finally completed. — If a binding slip is given the applicant for a
policy binding the company for insurance upon the property in-
tended to be covered until the policy is delivered, such binding-
receipt is only a conditional contract, and the company's right
to cancel such slip is the same as if it contained the same con-
ditions usually found in the company's ordinary policies, and the
company is not compelled to wait until the policy is issued before
exercising the right to cancel.13 If the application provides that
the company shall have authority to determine whether a policy
shall issue or not, the company may cancel a policy issued but
not actually delivered, although it is sent to the company's agent
for delivery, and although a receipt that the contract shall be
binding until the policy is received is given the applicant by the
agent.14 But the policy must be actually canceled if delivered,
and if a right is given in the application executed after such de-
livery whereby the contract is not to go into effect until approved
by the company or its general agent, the mere fact that the local
agent is notified to cancel does not of itself operate as a cancela-
tion, and said agent neglecting to cancel before loss, the policy will
be upheld.15
§ 1637. Rescission or cancelation by consent. — There is absolute-
ly no doubt of the right of the parties to a contract of insurance
to cancel the same by mutual consent, where the rights of third
to the insured and to any mortgagee Fire Ins. Co. 78 Misc. 176, 137 N. Y.
to whom this policy is made payable, Supp. 887, 42 Ins. L. J. 131. See §
and tendering to the insured a rata- 1668 herein.
ble proportion of the premium, to On necessity of giving mortgagee
cancel this policy as to all risks sub- notice to cancel policy, see note in 45
sequent to the expiration of ten days, L.R.A. (N.S.) 463.
from such notice, and no mortgagee 13 Karelson v. Sun Fire Office, 122
shall then have the right to recover N. Y. 545, 25 N. E. 921; Lipman v.
as to such risks." Mass. Rev. L. c. Niagara Fire Ins. Co. 121 N. Y. 454,
118, sec. 60 (Rev. L. Supp. 1902- 8 L.R.A. 719, 24 N. E. 699.
1908, sec. 60; pp. 1191-1193). See "Cotton States Life Ins. Co. v.
also Mass. acts & res. 1913, c. 625, p. Scurry, 50 Ga. 48; Goodfellow v.
554, given under § 1671 herein. Times & Beacon Assur. Co. 17 U. C.
On return of premium as condition Q. B. 411. But see Kennedy v. New
of cancelation, see notes in 13 L.R.A. York Life Ins. Co. 10 La. Ann. 809.
(N.S.) 884, and L.R.A.1915F, 444; 15 ^Etna Ins. Co. v. Webster.^ 6
on sufficiency of notice to insured of Wall. (73 U. S.) 129, 18 L. ed. 8S8;
cancelation of fire policy, see note in Franklin Ins. Co. v. Massey, 33 Pa.
50 L.R.A. (N.S.) 35. St. 221.
12 Lewis v. London & Lancashire
Joyce Ins. Vol. III.— 174. 2769
§ ie37 JOYCE OX INSURANCE
parties are not injured thereby. Such an agreement to annul the
policy may be validly entered into by the parties, but all the con-
ditions of such agreement must be observed, and observed in their
entirety, unless the performance of some of them be waived. Such
agreemenl to cancel may be embodied in the policy in the nature
of a reservation, or it may be an extrinsic agreement made sub-
sequently to the execution" of the policy, and totally independent
therefrom, or it may be in the nature of a compromise agreement.
The question, however, more generally turns upon the point
whether the cancelation is in conformity with the terms of the
contract, or whether certain acts or statements amount to an agree-
ment to cancel, and if so, whether the cancelation has been effected.
These general principles are well settled.
The contract may be canceled by a compromise agreement;16
or by acts of both parties evidencing an agreement to cancel;17
or by acts of insurer in connection with those of assured showing
a ratification by the latter;18 or by acts as well as by express lan-
guage evidencing an intent to immediately cancel without giving
notice;19 or by notice acquiesced in by insured, as evidenced by
his acts thereafter in stopping payment of a check for an instal-
ment on a note and in bringing suit to enjoin payment of the
note;20 so there may be a rescission by mutual consent of the
contract consisting of the policy and premium note precluding
further liability;1 and even though the right is not expressly re-
served so to do there may be a rescission of the contract,2 And
the policy may be canceled by mutual consent notwithstanding the
provisions of the standard policy of New York as to cancelation ; 3
so a marine policy may be rescinded by mutual assent although
it provides for notice;4 so a policy provision, that it may be can-
celed by notice and repayment of unearned premiums, is held to
be in the nature of a continuing irrevocable offer by the insured,
On when insurance agent is agent 19 Home Ins. Co. v. Chattahooehie
of assured as to notice of cancelation, Lumber Co. 126 Ga. 334, 55 S. E. 11.
see note in 20 L.R.A. 283; on in- 20 Skillern v. Continental Ins. Co.
surance broker as agent for insured — Tenn. Ch. — , 42 S. W. 180.
as to cancelation, see note in 38 l Brown v. Frailey, 63 Leg. Intel.
L.R.A. (N.S.) 623. (Pa.) 104.
16 King v JEtna Ins. Co. 36 Mo. 2 Skillern v. Continental Ins. Co.
App. 128, 142. - Tenn. Ch. -, 42 S. W. 180.
"Missouri State Life Ins. Co. v. 8 Polcmanakos v. Austin Fire Ins.
Hill, 109 Ark. 17, 159 S. W. 31 ; Co. — Tex. Civ. App. — , 160 S. W.
Sea Ins. Co. Ltd. v. Johnston, 105 1134.
Fed 286 44 C. C. A. 477. 4 Sea Ins. Co. Ltd. v. Johnston,
"Lampasas Hotel & Park Co. v. 105 Fed. 286, 44 C. C. A. 477.
Home Ins. Co. 17 Tex. Civ. App
615, 43 S. W. 1081.
2770
RESCISSION AND CANCELATION § 1637
which, when accepted according to its terms, terminates the policy
from the date of such acceptance; but such acceptance is neces-
sary to effect a cancelation, in the absence of further action on the
part of the insured.5
But the agreement must be completed and the minds of the par-
ties must meet, as negotiations of themselves are insufficient to effect
a cancelation, and if an acceptance by letter is relied on it must be
sent before the loss occurs.6 And, in the absence of some con-
trolling statute, inasmuch as a policy of fire insurance is a contract
of indemnity and continues in force for the term for which and
upon the conditions upon which it is written, it must be canceled
by mutual consent unless there is some policy provision that it
may be terminated on the option of the parties or there is a reserved
right to cancel and it is so terminated or canceled.7 So where a
written agreement provides that a marine policy shall continue
in force from the date of expiration until notice to insurer of
discontinuance, the assured to pay pro rata for the time used,
sending a check for an additional month's insurance, is not a
notice of discontinuance at the end of that month, nor an election
to continue the policy in force for the additional month only, for
the policy by its own terms continues in force until notice of dis-
continuance by assured.8 The agreement must also be executed.
An unexecuted parol agreement to cancel and surrender the pre-
mium note is no defense to an action on the note.9 And if in-
sured in a mutual benefit society has fully performed the con-
ditions of the contract on his part to be performed, his certificate
cannot be canceled without his consent ; 10 nor is insured bound
by a cancelation consented to without his knowledge by a mort-
gagee to whom the policy is payable in case of loss.11 Again, the
right to rely upon a surrender and cancelation of the contract
in a mutual company as terminating liability of assured, is held
to be dependent upon the agreement being made in good faith r
based upon a valid consideration and the ability of the company
to liquidate its claims at the time.12 If, however, the parties all
5 John R. Davis Lumber Co. v. 9 Columbia Ins. Co. v. Stone, 3
Hartford Fire Ins. Co. 95 Wis. 226, Allen (85 Mass.) 385.
37 L.R.A. 131, 70 N. W. 84. 1C Royal Fraternal Union v. Lundv,
6 Home Ins. Co. v. Chattahoochie 51 Tex. Civ. App. 637, 113 S. W.
Lumber Co. 126 Ga. 334, 55 S. E. 11. 185.
7 Seheel v. German American Ins. n Peterson v. Hartford Fire Ins.
Co. 228 Pa. 44, 76 Atl. 507, 39 Ins. Co. 87 111. App. 567.
L. J. 1252. 12 Newton's Estate, 60 Leg. Intel.
8 Greenwich Ins. Co. v. Providence 217, 12 Pa. Dist. Rep. 260. See
& S. Steamship Co. 119 U. S. 481, Backenstoe, Receiver, v. Morgan, 60
30 L. ed. 473, 7 Sup. Ct. 292. Leg. Intel. 228, 12 Pa. Dist. Rep. 268.
2771
g L637a JOYCE ON LNSURANCE
mutually agree and understand thai the policy is to be canceled,
ii is Q0t aecessary to formally surrender the policy or tender the
unearned premium.18
Again, an abandonment of the contract is, in the absence of
fraud, effected by mutual consent, where assured upon assurer's
insistence voluntarily surrenders his policy before his note becomes
,!,„., the acceptance of which by assurer had operated as a waiver
of a forfeiture.14 And an abandonment and rescission of a con-
trad of life insurance by mutual agreement of the parties after
the insured is m defaull by nonpayment of premiums will put
an end to the contract, although a forfeiture could not have been
declared by reason of the failure of insurer to give notice required.15
So a termination of a life policy by mutual agreement, after de-
i, , 1 1 1 1 in the payment of premiums and the refusal of the insured to
continue the policy, is conclusive against the insured, notwith-
standing a statutory provision which precludes the forfeiture of
the policy by reason of the default because the notices required by
the .-tatutc had not been given.16
The agreement to cancel the contract means an abrogation of
the rights of both parties under the contract, and not that the
obligations of one shall stand and that of the other be released.17
§ 1637a. Action for breach of agreement to surrender and cancel
lost policy. — A breach of an agreement under a separate paper to
13 Hillock v. Traders' Ins. Co. 54 Texas.— West v. Terrell, 96 Tex.
Mi.h. 531, 20 N. W. 571. 548, 557, 74 S. W. 903.
14 Pioneer Life Ins. Co. v. Cox, 112 Washingt on. —Lone v. Mutual Life
Ark. f>S_\ Uiii S. \Y. 951. Ins. Co. 33 Wash. 577, 581, 74 Pae.
On cancelation by return of policy, 689.
see note in 13 L.R.A.(N.S.) 805. 16 Mutual Life Ins. Co. v. Sears,
is .Mutual Lite Ins. Co. v. Phinney, 178 U. S. 345, 44 L. ed. 1096, 20 Sup.
178 U. S. 327, 44 L. ed. 1088, 20 Ct. 912.
Sup. Ct. 906. Cited in: United States. — Mutual
Cited in : United States. — Mutual Lite Ins. Co. v. Cohen, 179 U. S. 262,
Life [ns. Co. v. Sears, 178 U. S. 345, 264, 45 L. ed. 184, 21 Sup. Ct. 106;
346, I ' L. ed. L096, 20 Sup. Ct. Rep. Hill v. Mutual Life Ins. Co. 113 Fed.
912; Leonhard v. Providenl Savings' 4 1, 47.
Life Assurance So.-. 130 V\><\. 287, Maryland.— Price v. Mutual Re-
292, 111 C. C. A. 538; Hill v. Mutual serve Life Ins. Co. L02 M<1. 683, 688,
Lite Ins. Co. 113 Fed. II. 47; Sea 1 I,K.A.(N.S.) 872, 62 Atl. 1040.
Ins. Co. v. Johnston, 105 Fed. 286, North Carolina.— Green v. Barl
44 C. C. A. 478. ford Life Ins. Co. 139 N. Car. 309,
Maryland. Price v. Mutual Re- 313, 1 L.R.A.(N.S.) 625, 51 S. E.
serve Lit,. Ins. Co. L02 Md. 683, 688, 887.
1 L.IJ.A.tN.S.) 872, 62 Atl. L040. "Merchants' Mutual Ins. Co. v.
North Carolina. — Green v. Hart- Underwood, 1 Sand. (N. Y.) 474.
ford Life [ns. Co. 139 X. Car. 309,
313, 1 L.R.A.(N.S.) 625, 51 S. E.
887.
2772
RESCISSION AND CANCELATION §§ 1638-1640
surrender and cancel a lftst policy constitutes a ground of action
by insurer to recover the amount paid out by it for a loss under the
policy and this applies where such agreement is signed by the
owner and mortgagees to whom the policy is payable and having
been found it is wrongfully assigned by the latter after the fire
occasioning the loss, and the assignee recovers thereon and said
action will lie against one of said mortgagees.18
§ 1638. Agreement to cancel marine risk need not be in writ-
ing.— If by custom or statute a contract is required to be in writ-
ing,19 such fact might perhaps afford a basis upon which to predi-
cate the rule that the cancelation thereof should be in writing,
upon the theory that the release must be of as high a nature as the
contract itself; but where a steamboat is insured while running
between certain points, and the risk is extended upon payment of
an additional premium, the cancelation of such agreement for
extension need not be in writing.20
§ 1639. Option reserved by company to cancel. — If it is optional
with the company to cancel a policy, under a right reserved in
the policy, such option is not exercised by a request for the return
of the policy for cancelation,1 nor is a mere notice of a desire or
intention to cancel sufficient.2 The right to cancel may be reserved
in such broad terms as to make it entirely optional with the com-
pany as to the time when and for what reason it will terminate
the contract, and exclude the right to inquire into the motive and
sufficiency of the cause. This was so held in a case where specific
reasons were assigned as a basis for cancelation, and in addition
thereto the policy reserved the right to cancel for any other cause
the company should elect, after notice being given and upon re-
funding a ratable proportion of the premium.3
§ 1640. Cancelation for nonpayment of premiums or assess-
ments, or other breach of condition. — We have elsewhere considered
the question of the rights of the parties as to forfeiture for non-
18 Aachen & Munich Fire Ins. Co. 20 King v. Enterprise Ins. Co. 45
v. Morton, 156 Fed. 654, 84 C. C. A. Ind. 43.
366, 15 L.R.A.(N.S.) 156 (annotated Griffey v. New York Central Ins.
on whether statute of limitations Co. 100 N. Y. 417, 53 Am. Rep. 202,
commences to run at the time of 3 N, E. 309.
bieach of contract or at the time ac- 2 Goit v. National Protection Ins.
tual damages are sustained in conse- Co. 25 Barb. (N. Y.) 189; y£tna Ins.
quence thereof). Co. v. McGuire, 51 111. 342, 343. See
19 See Davies v. National Fire & § 1670 et seq. herein.
Marine Ins. Co. of New Zealand (H. 3 International Life Ins. & Trust
L. C. App. Eng. 1891) L. R. App. C. Co. v. Franklin Life & Trust Ins. Co.
485. See § 35 herein. 66 N. Y. 119.
2773
§ 1640 JOYCE ON INSURANCE
payment of premiums when due;4 but concerning the right to
camel upon such nonpayment it is undoubted that the parties may
mutually consenl to a rescission or cancelation, or their acts may
lie such as to evidence such consent as in case of assured's refusal
to pay premiums, or there may be an abandonment of the contract
acquiesced in.5
Cancelation for nonpayment of premiums is effected by direct-
ing the agent to cancel the policy on assurer's books after receipt
by assured of proper and sufficient notice and the expiration of
the required time limit without payment.6 And failure to pay the
premium when due where there is an unpaid loan, will, when so
stipulated, authorize insurer at its option to cancel the policy for
its customary cash surrender value less the amount of the loan
especially where assured did not offer to pay the loan and in no way
repudiated the insurer's act, although it was stipulated that the
policy would, after the payment of any indebtedness, be extended.7
But failure to promptly protest against the cancelation of her pol-
icy for nonpayment of the premium will not operate to make the
policy void where insured had no reason to believe that her protest
would be of any avail.8 And a policy provision is void where
contrary to a statute providing for exclusion from the society for
nonpayment of assessments and cancelation of the certificate upon
notice.9 If the policy is canceled for the nonpayment of pre-
miums, the insurer is ordinarily entitled to recover the premiums
earned while the risk was carried.10
A policy may also be canceled or the risk suspended by a mutual
company for nonpayment of premiums or assessments where it is
so stipulated.11 But in case of assessments, the right to cancel for
nonpayment thereof depends upon the legality of the assessments,
4 As to forfeiture for nonpayment 8 Kenyon v. National Life Assoc,
of premiums, notes for premiums, 39 App. Div. 276, 57 N. Y. Supp.
etc., assessments and dues, see §§ 60.
1103 et seq., 1206 et seq., 1256 et seq. 9 Hurst Home Ins. Co. v. Muir,
herein; as to paid-up and nonforfeit- 107 Ky. 148, 53 S. W. 3. See Ger-
able policies, see §§ 1178 et seq. here- man Mutual Fire Ins. Co. v. Weikel,
in. 153 Ky. 288, 155 S. W. 373, 42 Ins.
6 See cases upon this point under L. J. 811, as to construction of the
§ 1637 herein. statute.
6 Ralston v. Royal Ins. Co. Ltd. 10 Hibernia Ins. Co. v. Blanks, 35
of Liverpool, 79 Wash. 557, 140 Pac. La. Ann. 1175.
552. See § 1655 herein. u Merchants & Manufacturers
7 Hayes v. New York Life Ins. Co. Mutual Ins. Co. v. Baker, 4 Neb.
68 Misc. 558, 124 N. Y. Supp. 792, (Unof.) 830, 94 N. W. 627.
39 Ins. L. J. 1529.
2774
RESCISSION AND CANCELATION § 1640
for the assured cannot be obligated to pay an assessment illegally
levied, and his nonpayment of such an assessment gives no right
to cancel.12
It is held that if a clause in a policy provides that "it shall be
void" upon the breach of a specified condition, the insurer's ex-
emption from liability becomes absolutely fixed as soon as that
condition is broken, and does not depend upon whether he notifies,
or omits to notify, the insured, after such breach, what action he
intends to take in regard to the continuance or forfeiture of the
policy.13 And insurer is not obligated to elect to rescind after loss
for failure of insured to make an inventory stipulated to be made
before the risk attaches and the policy could not, for such failure
have been avoided by assurer prior to loss.14 A failure, however,
to cancel immediately upon the discovery of facts rendering the
policy void, as in case of other insurance may, under the terms of
the policy, operate as a waiver of forfeiture.15
In case of a breach of condition against encumbrances there
must be a tender or return of the pro rata unearned premium as
a condition precedent to declaring the policy void.16 If insurer,
upon learning that insured has taken a double line of insurance
with it, contrary to his agreement not to do so, immediately
tenders back the premium, and demands a return of the latter pol-
icy, and maintains that position consistently, the policy cannot
be enforced for a loss which occurred after its date and before the
fact of the double line of insurance was discovered and the notifica-
tion of the intention not to be bound by the contract given.17 The
surrender of the policy is also a condition precedent to entitle
assured to a return of the unearned premium under a stipulation
for such return if the policy shall become void or cease upon sur-
12 Matter of People's Mutual Ins. L. J. 1588. See Bank of Ander-
Equitable Fire Ins. Co. 9 Allen (91 son v. Home Ins. Co. 14 Cal. App.
Mass.) 319. 208, 111 Pac. 507.
13 Carey v. German American Ins. 16 St. Paul Fire & Marine Ins. Co.
Co. 84 Wis. 80, 20 L.R.A. 267, 37 v. Peck, 40 Okla. 396, 139 Pac. 117.
Am. St. Rep. 907, 54 N. W. 18. See As to return of unearned premium,
§§ 1103 et seq. herein. But see as to see also §§ 1390 et seq., 1671 et seq.
conditions voiding the policy, §§ 2190 herein.
et seq. herein; as to alienation, see As to encumbrances, see §§ 2015
§§ 2246 et seq. herein. et seq. herein.
14 Northern Assurance Co. of Lon- As to alienation, see §§ 2246 et seq.
don v. Carpenter, — Ind. App. — , herein.
92 N. E. 1042. " John R. Davis Lumber Co. v.
15 Lawver v. Globe Mutual Ins. Hartford Life Ins. Co. 95 Wis. 226,
Co. 25 S. Dak. 549, 127 N. W. 615, 39 37 L.R.A. 131, 70 N. W. 84.
2775
-: L640a JOYCE ON INSURANCE
render of the policy or its last renewal, and Ihere is a breach of
condil ion as to vacancy. 18
§ 1640a. Cancelation or rescission for misrepresentations, breach
of warranty or fraud. — Where any of the material representations
in a fire insurance policy are false, the insurer's tender of the
premium and notice that the policy is canceled, before the com-
mencement of suil thereon, operate to rescind the contract of in-
surance.19 And where there are material misrepresentations, con-
cealment, and breach of warranty as to medical examinations,
symptoms of disease, and health, the policy will upon a counter-
claim be ordered delivered up and canceled.20 So a known false
denial of rejection by other companies in an application for life in-
surance is ground for cancelation of the policy before loss, if the
contract provides that it is based on the application, the answers to
which are warranted to he true.1 But assured's misrepresentations
in his application constitute no ground for rescission where they
are not relied on by assurer and relate to future matters.2 And
a statutory provision that no misrepresentation made in securing a
life insurance policy shall render it void, unless the matter mis-
represented shall have actually contributed to the contingency
or event on which the policy is to become payable, has no applica-
tion to a suit to cancel a policy for misrepresentation prior to the
loss.3 So a misstatement by an applicant of fire insurance as to
the nature of his title, is a delinquency within the meaning of a
mortgage clause attached to the policy, which provides that notice
of delinquency on the part of insured will be given the mortgagee
before any suspension or cancelation is made affecting his interest.4
A tender of dues and assessments paid for twenty-one years up
to the time of death of insured is a condition precedent to repudia-
18 Schmidt v. Williamsburgh City of British America, 24 Canadian L.
Fire Ins. Co. 95 Neb. 43, 51 L.R.A. T. 10.
(N.S.) 261, lit N. W. 1044. 'Pacific Mutual Life Ins. Co. v.
is to premises being vacant and Glaser, 245 Mo. 377, 45 L.R.A.(N,S.)
unoccupied, see S§ 2225 et seq. here- 222 (annotated on right of insurer to
• cancelation of the policy in equity,
\ . , n • j before loss upon the ground that it
As to return of premiums and as- ,, . -,1, „ 5. ryt L ,„
* << ion/1 i. 1 was obtained by iraud), 150 S. A\ .
sessments, see §§ Lo90 et seq. herein. ,- .,. ■*'
On whether failure of the insurer 2 "c „,, ,i„ „ t •?„ a ~ e a
. * Samuels v. Lile Assoc, ol Amer-
to speak or acl alter notice oj breach •„ im -qj ^nr) 045
of pohcy constitutes a waiver there- j'Pacific Mutual Life Ins. Co. v.
of\S« ?°tfs»^xT2o NL^-A.(N.S.) 1, (iiaser, 245Mo. 377, 45L.R,A.(N.b.)
and 51 L.R.A.(N.S.) 2bl. 222 150 S. W. 549.
» Rankin v. Amazon Ins. Co. 89 ~ 4pe0ples' bavings Bank v. Retail
Cal. 203, 23 Am. St. Rep. 460, 26 Merchants' Mutual Fire Ins. Co. 146
Pac. 872. |owa, 536, 31 L.R.A.(N.b.) 455, 123
20 Smith v. Grand Orange Lodge \". W. 108.
2776
RESCISSION AND CANCELATION § 1640a
tion of the policy for alleged misrepresentations as to age.5 And
there is no acceptance of a return of the premium where a money
order therefor is sent under the claim that there is a breach of
warranty, but said order is never cashed and insurer is notified
that it will be held subject to its order or applied towards payment
of the policy amount and upon bringing suit it is deposited in
court.6 And where insured was entitled to a certain sum per
month because of disability resulting from accident, and assurer
after notice of the injury and before assured's right of action had
accrued, sent to him a draft for the amount of premiums received,
claiming that the policy was void for alleged falsity of warranty,
and thereafter a check for the premium due was sent but returned,
and assured retained both and tendered them back in court, such
retention' of the draft was held not a satisfaction and settlement of
the claim, as there was no disputed demand and the draft was not
used, but that there was simply a repudiation of the contract by
assurer, said draft having been sent for the purpose of declaring the
contract void and to repudiate liability.7
Fraud of insurer in concealing material facts is a ground of
rescission by assured.8 And a policy may be canceled for fraud-
ulent representations in the application as to age, health, and
previous rejections made by the beneficiary aided therein by in-
surer's agent.9 And where an ignorant applicant for life insurance
did not actually know of false statements in the application as to
his age and rejection by other companies, a cancelation of the
policy for fraud is not prevented if the application is made a part
of the contract and the statements therein are warranted, while
the policy goes into his possession and is retained by him, since
it is his duty to know that the representations in the application
are true.10 A policy of insurance may also be rescinded by the
5 Waltz v. Workmen's Sick & 7 Dineen v. General Accident Ins.
Death Benefit Fund of the U. S. of Co. 110 N. Y. Supp. 344, 126 App.
A. 78 Misc. 499, 139 N. Y. Supp. Div. 167.
1016. 8 Moore v. Mutual Reserve Fund
On the effect of fraud of an ap- Life Assoc. 106 N. Y. Supp. 255, 121
plicant for membership in a benefit App. Div. 335.
insurance society on the obligation 9 Metropolitan Life Ins. Co. v.
of the society to return what has Freedman, 159 Mich. 114, 32 L.R.A.
been paid as assessments or dues (N.S.) 298 (annotated on right of
before it can claim the contract un- insured to return of premium where
enforceable, see note in 3 L.R.A. policy is void or voidable because of
(N.S.) 114. misrepresentation on his part), 16
As to return of premiums and as- Det, Leg. N. 816, 123 N. W. 547.
sessments, see §§ 1390 et seq. herein. 10 Metropolitan Life Ins. Co. v.
6 Shipman v. National Live Stock Freedman, 159 Mich. 114, 32 L.R.A.
Ins. Co. 187 Mo. App. 400, 173 S. (N.S.) 298, 123 N. W. 547.
W. 735.
2777
§ 1041 JOYCE ON INSURANCE
injured on discovery of misrepresentations in the application, made
without his knowledge by the agent of the insurer, although the
latter would be bound by the policy if it were not rescinded.11
And a demurrer is properly overruled to a complaint in an action
by insured to set aside and cancel a policy where said complaint
avers facts showing that the policy was fraudulently obtained on
his life and assigned to another by insurer's agent and that the in-
sured had no knowledge thereof for several years when suit was
brought.18 Again, if representations made by insurers agent are!
fraudulent, material, and induce insured to enter into a contract
and he is himself without fault and does equity he may reseind.-but
where the taking out of a policy is a condition precedent to becom-
ing a financial director of the insurance company under a contract
whereby he was to assist the general agent in obtaining business
and he fails to perform his part of the contract he is not entitled to
rescind.18 Where, however, assured does not discover that the agent
made false and fraudulent statements in the application, until
after the delivery of the policy and payment of the first premium,
he is not relieved from the duty of taking steps for the cancelation
of the contract. No one can claim the benefit of an executory con-'
tract fraudulently obtained, after discovery of the fraud, without ■
approving and sanctioning it.14
§ 1641. Cancelation where policy is assigned. — If the policy is
assigned as security to another, the consent of the assured is neces-
sary to a cancelation by the company.15 But a question may arise
wl let her an action can be maintained on the policy by the vendee,
or whether the same has been canceled by the assured under the
terms of the policy before the loss has occurred, so as to preclude a
recovery by the vendee. Thus, where a cargo was insured at and
from G. to E., and at and from thence to port or ports in the United
Kingdom, with privilege to claim a return of a proportionate pre-
mium if the risk should terminate at E. and the cargo was sold
before arrival at E., the policy being transferred to the vendee, who
brought suit thereupon to recover indemnity for a loss sustained
after the ship reached E., it was held that the action could not be
maintained by the vendee, as the vendor had claimed the stipulated
"Michigan Mutual Life Ins. Co. agent, see note in 41 L.R.A.(N'.S.)
v. Reed, 84 Mich. 524, 13 L.R.A. 349, 1131.
47 N. W. 1106. 14 New York Life Ins. Co. v.
12 Mutual Life Ins. Co. v. Cham- Fletcher, 117 U. S. 519, 29 L. ed.
bliss, 131 Ga. 60, 61 S. E. 1034. 934, 6 Sup. Ct. 837.
13 Central Life Ins. Co. of U. S. v. 15 Van Loan v. Farmers' Mutual
Mnlford, 45 Colo. 240, 100 Pac. 423. Fire Ins. Co. 90 N. Y. 280, 24 Hun,
On cancelation for nonconform- 132.
ance to representations of insurer's
2778
RESCISSION AND CANCELATION §§ 1642, 1643
return of premium for termination of the risk at E., and it also
appeared in evidence that the cargo was sold free on board at G.,
including freight and insurance to E.16 And where an insured
assigns his paid-up policy to the company as security for a loan, it
cannot, on his default in paying the debt, forfeit, cancel, or sell the
policy, but it must resort to equity to enforce its rights, basing them
on the surrender value of the policy. If the court finds that the
surrender value exceeds the debt, the insured is entitled to receive
such excess in money, or in paid-up insurance, as he elects.17 And
a wife who is a beneficiary in a policy on her husband's life is en-
titled in equity to a cancelation of an assignment by her husband
of all her interest in the policy where there is no consideration given
her for such assignment even though she had signed the same with-
out reading it.18 If the assignee of policy, holds the whole bene-
ficial interest therein and allows it to lapse for failure to pay an
assessment when due, and thereafter makes payment thereof, he is
not affected by any condition relating to the life of the policy,
notice to which is not brought home to him by the insurer who re-
tains the money; notice to the assignor is not sufficient.19
§ 1642. Effect as to cancelation of repeal of charter. — If a com-
pany organized under the statute forfeits its charter by reason of a
failure to comply with the provisions of a subsequently enacted
repealing statute within the period therein limited, policies of the
company outstanding at the time of the later act are not thereby
canceled.20
§ 1643. Cancelation by mutual company: authority of directors
or secretary. — If the charter, articles of association, or by-laws
passed in conformity therewith empower the directors of a mutual
company to cancel or annul the policy at their option, such grant
of power is in effect a reservation under the contract of the right to
cancel, and the directors may lawfully exercise the power granted
within the limits of the grant.1 So directors of a mutual assess-
16 Ionides v. Harford, 5 Hurl. & 1 See Coles v. Iowa State Mutual
N. 944, 29 L. J. Exch. 36. Ins. Co. 18 Iowa, 425; Travelers
17 Mutual Life Ins. Co. of Ken- Protective Assoc, of America v.
tuckv v. Twyman, 122 Ky. 513, 121 Dewey, 34 Tex. Civ. App. 419, 78 S.
Am. St. Rep. 471, 92 S. W. 335, 97 W. 1087.
S. W. 391. As to powers of directors, see §
18 Way v. Union Central Life Ins. 404 herein. Ky. Stat. sec. 712, pro-
Co. 61 S. Car. 501, 39 S. E. 742. vides for exclusion by directors of a
19 McQuillan v. Mutual Reserve member of a mutual fire company,
Assoc. 112 Wis. 665, 56 L.R.A. 233, who fails to pav his assessments and
88 Am. St. Rep. 986, 87 N. W. 1069. for a cancelation or withdrawal by
20 Manlove v. Commercial Mutual the secretary of his policy and notice
Fire Ins. Co. 47 Kan. 309, 27 Pac. thereof. Construed in German Mu-
979, 21 Ins. L. J. 174. tual Fire Ins. Co. v. Weikel, 153 Ky.
2779
§ Ki4 i JOYCE ON INSURANCE
merit company arc limited in the exercise of their power to cancel
by the mode or manner prescribed by the by-laws.2 So where the
by-law provides thai (lie directors may cancel after notice, and if
such is given and received within the specified time and before loss
by the insured, the contract is terminated, provided always that the
cancelation is tor the purpose specified.3 And where the policy of
a member of a mutual fire insurance company is canceled cither by
agreement or for breach of condition its secretary has power to
notify such member of the cancelation.4
But although the by-laws prescribe a method of cancelation such
proA ision is not exclusive so as to prevent a rescission by the deposit
of the amount of the premium due in court and by pleading such
rescission.8 And where an unincorporated mutual fire insurance
company has power to cancel any policy upon the return of the
deposit money without returning any share of the accumulated
profits, although the subscribers to the deed of settlement were en-
titled to share equally in the gains and losses, it is a matter resting
in the insurer's discretion whether or not it is for the best interests
of all other policyholders that a policy should be canceled and the
terms thereof.8
§ 1644. Rescission and cancelation: insolvency: appointment of
receiver: termination of business and transfer of assets. — The
effect of a decree of dissolution of an insurance company which is-
sues policies for a certain term for an advance premium is to pre-
clude it from, and render it incapable of, fulfilling its contracts with
its policyholders, and they become creditors to an amount equal to
the equitable value of their respective policies and entitled to par-
ticipate pro rata in its assets.7 So a life insurance company, when
adjudged insolvent and dissolved, has broken its engagements with
its policyholders and become liable in damages for such breach.8
A final decree of dissolution, therefore, of a company which is-
288, 155 S. W. 373, 42 Ins. L. J. 811. of Kokomo, 183 Ind. 694, 110 N. E.
See Hurst Home Ins. Co. v. Muir, 60, 47 Ins. L. J. 55.
107 Ky. 148, 53 S. W. 3. 6 Commonwealth (ex rel. Todd) v.
2 Patrons' Mutual Aid Soe. v. Philadelphia Contributionship, 212
gall, 10 Ind. App. 118, 49 N. E. Pa. 209, 88 Atl. 929.
279 7 Shloss v. Metropolitan Surety
3Emraott v. Slater Mutual Fire Co. L49 Iowa. 382. 12S N. W. 384.
Ins. Co. 7 K. 1. 562. See § 1268 40 Ins. L. J. 140. See §§ 1454, 1455,
herein, as to cancelation by agree- 3595 et seq. herein,
inent iii mutual companies. 8 Commonwealth v. American Life
4. Matten v. Leichtenwalner, 6 Pa. Ins. Co. 162 Pa. St. 586, 42 Am. St.
Super. Ct. 575. Rep. Ml, 29 Atl. 660.
Aj3 to powers of secretary, see § As to policyholders' rights, etc.,
401 herein. after dissolution, see §§ 3595 et seq.
5 Mendenhall v. Farmers' Ins. Co. herein.
2780
RESCISSION AND CANCELATION § 16 14
sues policies for a certain term for an advance premium, terminates
the executory contracts of the company.9 So a decree adjudging a
fire insurance company insolvent operates ipso facto to cancel all
existing policies on which no loss. has occurred prior to such ad-
judication.10 So an insurer may be adjudged insolvent and a
receiver appointed and the policies ordered canceled, so as to bar
members from recovering for subsequently occurring losses, and
this is so notwithstanding the policy stipulates for notice to the as-
sured of an intention to cancel.11 If, however, the policy may under
its terms be canceled at pleasure of the company upon notice, the
policy is not canceled by merely making an assignment for the
benefit of creditors, nor does the mere institution of proceedings in
insolvency have that effect; a decree of dissolution must be ob-
tained, although if such proceedings are commenced, the assured
may legally demand a cancelation where it is stipulated that the
assured shall have a right to cancel upon request,12 But it is also
held that a decree appointing a receiver of an insurance company
does not operate as a repudiation by assurer of its legal contracts
nor as a cancelation or termination thereof and that losses occurring
after such appointment are provable claims against the estate.13
It is decided that the right of insured under the terms of the
policy to cancel it upon request without other notice of an election
so to do, is not affected by the appointment of a receiver of an in-
surance company.14 And that if assured has a right under the
policy to cancel it at any time upon request and he surrenders it
9Shloss v. Metropolitan Suretv Atl. 660; Taylor v. North Star Mu-
Co. 149 Iowa, 382, 128 N. W. 384, tual Ins. Co. 46 Minn. 198, 48 N. W.
40 Ins. L. J. 149. The court, per 772. See also The American Casualty
McClain, J., said : "It may be con- Ins. Co.'s case, 82 Md. 535, 545, 569,
ceded that, on the decree of final dis- 571, 38 L.R.A. 97, 34 Atl. 778, per
solution in a receivership proceeding, McCherry, C. J., citing Doane v. Mill-
the executory contracts of an insur- ville Mutual Marine & Fire Ins. Co.
ance company are terminated, and 43 N. J. Eq. 522, 11 Atl. 739. See §
that a policyholder is entitled to re- 1454 herein.
cover only what is due to him for 10 Todd v. German-American Ins.
breach of contract or by way of re- Co. 2 Ga. App. 789, 59 S. E. 94.
turn of reserve value or premiums n Clark v. Manufacturers' Mutual
unearned, and that he cannot main- Fire Ins. Co. 130 Ind. 332, 30 N. E.
tain a claim in the receivership pro- 212; Reliance Lumber Co. v. Brown,
eeeding for the amount provided in 4 Ind. App. 92, 30 N. E. 625.
the policy to be paid in the event of 12 Relfe v. Commercial Ins. Co. 10
loss on account of a loss suffered Mo. App. 393.
subsequently to the date of such final 13 Insurance Commissioner v. Peo-
decree of dissolution. People v. pies' Fire Ins. Co. 68 N. H. 51, 44
Commercial Alliance Life Ins. Co. Atl. 82, 28 Ins. L. J. 931.
154 N. Y. 95, 47 N. E. 968; Com- "Insurance Commissioner v. Peo-
monwealth v. American Life Ins. Co. pie's Fire Ins. Co. 68 N. H. 51, 44
162 Pa. 586, 42 Am. St. Rep. 844, 29 Atl. 82, 28 Ins. L. J. 931.
2781
§ 1044 JOYCE n\ INSURANCE
for that purpose, the cancelation becomes effective as against any
right to hold him liable for losses after the subsequent appointment
of a receiver.15 In case of appointment of a receiver of an insur-
ance company and the surrender by assured of his policy for can-
celation under the terms of the contract his right upon cancelation
to be repaid, and whether the amount of such repayment is to be
pro rata or short rates is determined by the contract as it would
have been had there been no receivership proceedings.16
A mere suspicion of insolvency and of abuse of the corporate
franchises is not sufficient in itself to justify a member of a mutual
company in lapsing his policy,17 unless by the terms of the contract
the assured has the right to cancel upon request at pleasure. But
when a mutual company becomes insolvent, the order of court ap-
pointing a receiver cancels all existing policies.18 So where an in-
solvency occurs while policies are outstanding in a mutual fire in-
surance company, the action of the court in adjudging such in-
solvency, granting an injunction, and appointing a receiver
operates to cancel all existing policies in such company.19 But
although when a mutual insurance company becomes insolvent, and
a receiver is appointed, outstanding policies are canceled as to future
losses, still the premiums that have been paid, for future as well
as past protection, and premium notes, remain a fund for the pay-
ment of all liabilities of the company, including losses that have
l>een incurred.20 Again, if a mutual company being insolvent votes
to cancel its policies, and notifies the assured thereof, the latter will
be liable upon his premium note where he neglects to have his
policy canceled.1 But the appointment of a receiver of a mutual
fire insurance company is held to preclude any right assured may
have under the terms of his policy to cancel it at any time upon
request and have the unearned premiums returned.2 Where the
president of a mutual marine insurance company, writes a policy-
15 Moore, Receiver, v. Frey, 29 Pa. 19 Bovd v. Mutual Fire Assoc. 116
Co. Ct. Rep. 298. Wis. 155, 61 L.R.A. 918, 96 Am. St.
16 Insurance Commissioner v. Peo- Rep. 948, 94 N. W. 171.
pie's Fire Ins. Co. 68 N. H. 51, 44 20 Hill v. Baker, 205 Mass. 303,
Atl. 82, 28 Ins. L. J. 931. 137 Am. St. Rep. 440, 91 N. E. 380.
As to insolvency ; return of pre- : Alliance Mutual Ins. Co. v.
mium, see §§ 1408b et seq. herein. Swift, 10 Cush. (64 Mass.) 433.
17 Tavlor v. Charter Oak Life Ins. 2 Hammond v. Knox, 109 N. Y.
Co. 59 How. Pr. (N. Y.) 468. Supp. 367, 125 App. Div. 9.
18 Davis v. Shearer, 90 Wis. 250, As to insolvency of foreign mu-
62 N. W. 1050. tual fire insurance company; return
As to effect of appoiyitment of of premium, see § 1408c herein.
temporary receiver in case of an as-
sessment company, see note to §
1644a herein.
2782
RESCISSION AND CANCELATION § 1644a
holder on a certain day of the month that his policy has been can-
celed as requested, and subsequently a receiver is appointed, the
policy will be treated as canceled on said day, there being no inti-
mation that this was not done in good faith on both sides in ignor-
ance of the insolvency, and the policyholder is entitled to a reduc-
tion on his premium note for the period after said date. The case
is otherwise with a policyholder who does not request cancelation
until after the appointment of a receiver.3
If an insurance company terminates its business and transfers its
assets to another company, the assured is justified in terminating
his contract, and is thereupon entitled to receive an equitable pro-
portionate share of the assets of the company,4 or to recover in an
action for damages for breach or repudiation of its contract by
insurer the amount of premiums paid with interest from the dates
when paid, and the transferee company which had taken over the
contracts and assets of the original insurer and had assumed its obli-
gations may be liable ; 5 and if the company abandons its plan of
insurance, and thereby reduces the fund on which a member has a
right to rely for payment of endowments under his policy, he has
a right to rescind the contract.6 But where insurer consolidates
with another insurer, the insured cannot elect to treat his policy as
repudiated and recover as upon an anticipatory breach of contract,
especially so where the insurer has not refused performance and its
affairs have never been liquidated and it is not by said consolidation
deprived of its ability to fulfil its obligations to its policyholders
nor is the transferee company liable in such case on the ground
that it has absorbed all the assets of said transferring insurer.7
§ 1644a. Cancelation: insolvency: appointment of temporary
receiver. — The appointment of a temporary receiver of a company
which issues policies for a certain term for an advance premium
does not terminate its contract with an insured, nor is a final decree
of dissolution retroactive so as to preclude recovery for a loss occur-
ring between the appointment of a temporary receiver and the de-
cree of final dissolution.8
3 Hill v. Baker, 205 Mass. 203, 137 6 People's Mutual Assurance Fund
Am. St. Rep. 440, 91 N. E. 380. v. Bricken, 92 Ky. 297, 17 S. E. 625,
4 Lovell v. St. Louis Mutual Life 13 Ky. Law Rep. 586.
Ins. Co. Ill U. S. 264, 28 L. ed. 423, 7 Provident Savings Life Ins. Co.
4 Sup. Ct. 390. of N. Y. v. Ellinger, — Tex. Civ.
As to transfer of assets; winding App. — , 164 S. W. 1024.
up; reorganization; change of plan; 8 Shloss v. Metropolitan Surety
return of premium, see § 1408a here- Co. 149 Iowa, 382, 128 N. W. 381. 40
in. Ins. L. J. 149. The court, per Mc-
5 Washington Life Ins. Co. v. Clain, J., said : "It may well be that,
Lovejoy, — Tex. Civ. App. — , 140 in the case of an assessment com-
S. W. '398, 41 Ins. L. J. 1553. pany, the appointment of a tem-
2783
/
645 JOYCE ON INSURANCE
§ 1645. Cancelation by receiver: statutory provision: certificates
of "indebtedness. — In Vu York, the receiver may with the consenl
,,1' the parties cancel and discharge subsisting contracts in the nature
porary receiver and the granting of of continuing validity. The situation
a temporary injunction againsl the of a policyholder who has paid the
officers of the company restraining premium for a term of insurance is
them from collecting the assessments very different from thai of a member
losses are by the terms of ;i mutual assessment association
of the contracl to I"- paid also ter- which by a temporary receivership
ttes the right of a member to and an order restraining it from col
participate in the distribution of the lecting assessments ipso facto inca-
company's funds on account of a loss pacitated from continuing the con-
occurring pending the temporary re- templated relation between itself and
ceivership. People v. Equitable Re- its members.
serve Fund's Life Assoc. 131 N. Y. "It would also be manifestly nn-
30 N. E. 114; People v. Life & just to hold that as to a loss occurring
Reserve Assoc. 1 .">(> X. V. 94, 45 N. E. pending a temporary receivership,
8; Commonwealth v. Massachusetts and for which if the receivership
.Mutual Fire Ins. Co. 119 Mass. 46. should be subsequently terminated
But it by no means follows in princi- without an adjudication of disso-
ple or on authority that, pending a lution the policyholder would be
temporary receivership for the com- entitled to claim the full amount of
pany in which dissolution is alleged on the loss, a subsequent decree of dis-
the ground of insolvency, its ordinary solution should relate back to the ap-
policies of insurance are terminated pointment of the temporary receiver,
and the policyholders are related to so as to relegate the policyholder
the position of creditors entitled only who has suffered such loss to the po-
to a return of the reserve value of sition of a creditor entitled only to a
their policies or of unearned pre- right of reserve value or unearned
miums. The very purpose of the premiums. We discover no reason
proceeding being to ascertain wheth- for giving a final decree of dissolu-
er the company is insolvent and tion any such retroactive effect. No
i should be dissolved, it would seem to doubt such a decree might relate
be clear that, until the fact is ascer- back to the appointment of the re-
turned and the dissolution decreed, ceiver so far as it affected the dispo-
the policies continue in force. 'The sition of the funds coming into his
appointment of a temporary receiv- hands; hut in the case before us the
er pendente lite does not dissolve a receiver had had nothing whatever to
corporation or restrain the exercise do with this plaintiff nor with the
of its corporate powers. His func- funds of the company in this state
tions are related to the care and out of which he seeks to have his loss
preservation of the property com- satisfied. In support of the conten-
tnitted to his charge.' Sigua Iron tion that the decree relates back to
Co. v. Brown, 171 N. Y. 488, 64 N. the appointment of the temporary
E. 194. It would be most unreason- receiver counsel rely upon Mayer v.
able to hold that policyholders could Attorney General, 32 N. J. Eq. 815,
be compelled to carry the risk of the and Doane v. Millville Mutual Ma-
result of such proceeding during its rine & Fire Ins. Co. 43 N. J. Eq. 522,
pendency and of any loss happening 11 All. 739. But these were cases
while it Continued, except for the re- relating to mutual assessment eom-
serve value of their policies, although panies, and for reasons already in-
ultimately the company might lie dicated, are nol in point. In the case
found to be solvent and its contracl before us the policy was for a fixed
2784
RESCISSION AND CANCELATION §§ 1646, 1646a
of insurance, etc., by "refunding to such party the premium or con-
sideration, ... or so much thereof as shall be in the same
proportion to the time which shall remain of any risk assured by
such engagement as the whole premium bore to the whole term of
such risk." 9 The receiver is also authorized to receive a voluntary
surrender of policies or to cancel them where by the charter the
directors are authorized so to do.10 It is further provided by statute
in the same state that upon written request of the policyholder, and
upon receipt of any policy in force, the receiver of any fire com-
pany may cancel policies and issue a certificate of indebtedness in
lieu thereof for the amount of the premium paid less the propor-
tion of premium for the expired time of the full term for which the
policy had been issued or renewed, and upon receipt of such cer-
tificate by the policyholder, the policy shall become null and void,
notwithstanding anything in the policy to the contrary.11
§ 1646. What acts do not effect a cancelation: instances.— The
company cannot effect a cancelation of the policy by making upon
its books an entry of the cancelation, such act being without the
knowledge or consent of the insured. In such case the insured is
not bound by such entry, nor is the same admissible in evidence to
show a cancelation.12 If the cancelation is effected by a written in-
strument, the execution of which is induced by the false representa-
tions of the company's agent, the assured is not thereby estopped
from asserting his rights under the policy.13 The fact that the
company does not, after notice of additional insurance in violation
of the conditions of the policy, elect to cancel the same under a
right reserved to cancel upon notice and return of a ratable pro-
portion of the premium, does not justify the legal conclusion that
it elects to continue it in force.14
§ 1646a. Surrender and cancelation: guardian and ward:
infant. — A father made by statute natural guardian of his child,
without defining his powers, has no power to consent to the sur-
term and the premium had been paid « Ins. L. of N. Y. 1909, c. 33, see.
in advance. 123 (Consol. L. c. 28); Ins. Law of
"We reach the conclusion, there- N. Y. 1909, c. 33, sec. 123 (Consol.
fore, that plaintiff was entitled to L. c. 28) ; L. 1880, c. 110, see, 4; Ins.
recover for the alleged loss under his L. 1S92, c. 38. art. 3, sec. 123.
policy, although such loss occurred 12 King v. Enterprise Ins. Co. 4o
pending a temporary receivership Ind. 43.
for the defendant company." 13 Holden v. Putnam Fire Ins. Co.
9 Rev. Stats, pt. 3, c. 8, tit. 4, sec. 46 N. Y. 1, 7 Am. Rep. 287.
75 14 Johnson v. American Fire Ins.
io Ins. L. N. Y. 1909, c. 33, sec. Co. 41 Minn. 396, 43 N. W. 59.
62 (Consol. L. c. 28) ; L. 1852, c. 71,
sec. 3.
Joyce Ins. Vol. III.— 175. 2785
§ 1647 JOYCE ON INSURANCE
render of life insurance which has been taken out for the benefit of
the ward.15 And in such a case, of attempted surrender, by the
father as guardian, a policy of insurance on his own life in which
the infant is named as beneficiary, due- not ratify the ad by mere
failure to give Dotice of disaffii mance within a reasonable time after
attaining his majority.16 Bui a guardian securing a loan for the
benefit of his ward upon a paid-up life insurance policy in his favor.
may agree to waive notice and demand for repayment, so that the
policy may be canceled in accordance with its term-, without notice,
in case of defaull in repayment.17 And an infant's surrender of a
policy on his life for a cash value, fairly mad" without undue in-
fluence is not a sale which can be avoided by his administrator and
the insurance contract enforced, although the infant did not receive
the whole amount to which the contract entitled him.18 Nor can a
ward enforce payment of a paid-up life insurance policy in his
favor, where his guardian, to procure funds for hi- education.
secured a loan upon it to the amount of its cash surrender, and
permitted it to he canceled, under terms of the contract, for failure
to repay the loan.19
§ 1647. Rescission by assured and surrender of policy. — If an
assurance ha- been effected and the perils insured against exist for
any period of time, however short, the assured is not entitled to
insist that the policy he canceled and part of the premium returned
to him.20 But the assured may rescind where no risk has ever
ittached under the policy; as where a warranty, although made
without fraud, is untrue when made.1 If there is a breach of the
contract condition- by the company, the insured may rescind.8 If
the policy is surrendered for cancelation under the terms of the
policy, the same is thereby terminated, and its subsequent redelivery
"Ferguson v. Phoenix Mutual 201 N. Y. 492, 35 L.K.A.tX.S.)
Life Ins. Co. 84 Vt. 550, 3") L.R.A. 1123 (annotated on rig-lit of guard-
• \.S.) 844 (annotated on surrender ian to surrender policy in favor of
of policy of ordinary life insurance ward), 94 N. E. 1075.
withoul consent of beneficiary), 79 20 Joshua Hendry Machine Works
\tl. 007. v. American Steam Boiler Ins. Co.
^Ferguson v. Phoenix Mutual 8(3 Cal. 248, 21 Am. St. Pep. 3:i. 1\
I. itc Ins. Co. 84 Vt. 350, 35 L.R.A. Pac. 1018.
. N'.S.) 844, 79 All. 997. l James v. Insurance Co. of North
"Clare v. Mutual Life Ins. Co. America, 90 Tenn. 604, 25 Am. St.
Jfil N. Y. 402, 35 L.R.A.(N.S.) Pep. 700, 18 S. W. 260.
1123, 94 N. E. 1075. 2 Loviek v. Provident Life Assoc.
"Pippen v. Mutual Benefit Life 110 N. C. 93, 14 S. E. 506, 21 Ins.
Ins. Co. 130 N. Car. 23. 57 L.R.A. L. J. 332; Meade v. St. Louis Mutual
505 (annotated on surrender of pol- Life Ins. Co. 51 How. Pr. (N. Y.)
icy on infant's life), 40 S. E. 822. 1. See c. XLV. (§§ L390 el seq.)
19 Clare v. Mutual Life Ins. Co. herein, on return of premium.
2786
RESCISSION AND CANCELATION § 1647
by the agent of the company after a loss, and with knowledge there-
of, does not restore the contract.3 And where the surrender of the
policy is clearly made for the purpose of cancelation il will so
operate4 and although the policy is not actually surrendered, yet
if it is clearly evident that such surrender was attempted to be made
by the assured, it is a sufficient surrender; as where the company's
agent, pursuant to an order of the company to cancel, told the as-
sured that the policy was canceled, and the latter went to the agent's
office intending to leave the policy there, but did not do so, owing to
the agent's absence, and negotiated for other insurance as a substi-
tute for that evidenced by the canceled policy, it was held that there
was a cancelation by both parties.5 But although the policy is sur-
rendered, still, if there is not evidence that an immediate cancel-
ation was intended it will not have that effect.6 Again, an instruc-
tion by assurer to its agent to cancel and the agreement of insured
upon said agent's request to return the policy operates as a cancel-
ation.7 And if upon instructions by assurer to cancel the agent
agrees with assured that the policy shall remain in force until other
insurance can be obtained, a reasonable time will be allowed for
that purpose and preclude a termination of the contract at the ex-
piration of the limited five days.8 But it is held that an insurance
agent instructed to take up a policy for cancelation has no power to
agree to accept surrender of the policy on condition that he will
obtain other insurance, and, therefore, such conditional surrender
does not prevent the cancelation from being effective at the time
specified.9 If it is intended to surrender the policy and substitute
another therefor, it is sufficient that the policy be surrendered after
the expiration of the prior policy, in pursuance of a proposition
made before the original contract expired and not dissented from.10
Where a policy on the life of plaintiff's husband was issued without
the latter's knowledge, and contrary to the rules of the company, it
was held that if the plaintiff was innocent of any fraud, and was
induced by fraudulent representations of defendant's agent to make
3 Crown Point Iron Co. v. 2Etna 7 Citizens' Ins. Co. v. Henderson
Ins. Co. 53 Hun (N. Y.) 220, 6 N. Elevator Co. 123 Ky. 478, 96 S. W.
Y. Supp. 602, 40 N. Y. St. Rep. 601, 97 S. W. 810.
426, s. e. 127 N. Y. 608, 14 L.R.A. 8 Citizens' Ins. Co. v. Henderson
147, 28 N. E. 653, 21 Ins. L. J. 31. Elevator Co. 123 Ky. 478, 96 S. W.
4 Wvgal v. Georgia Home Ins. Co. 601, 97 S. W. 810.
148 Ky. 674, 147 S. W. 394, 41 Ins. 9 Miller v. Fireman's Ins. Co. 54
L. J. 1337. W. Va. 344, 46 So. 181.
5 Hopkins v. Phoenix Ins. Co. 78 10 Train v. Holland Purchase Ins.
Iowa, 344, 43 N. W. 197. Co. 68 N. Y. 208; Morrison v.
6 Wicks v. Scottish Union & Na- American Popular Life Ins. Co. 17
tional Ins. Co. 107 Wis. 606, 83 N. Fed. 832, 5 Ins. L. J. 752. See §§
W. 781. 1655a, 1655b herein.
2787
§ 1648 JOYCE OX l.\ SI RANGE
the application, she mighl rescind the contract and recover the pre-
miums paid on discovering the fraud.11 It is held that there may
be a rescission of the contract on the refusal of the company to
allow a rebate, where the contract is not repudiated by the company
until after the premium for the third year is tendered.18 If it is
agreed thai upon surrender of the policy the premium note shall be
delivered up the insured musl surrender directly to the company or
its authorized agent. A delivery to a stranger with notice to the
company is doI sumcienl to release the insured.18 Tin1 insured musl
tender the policy for cancelation before it is forfeited by him by a
breach of its condition-.14 And assured upon a repudiation of his
contract and a surrender of his policy and its cancelation may be
liable for the earned premium.15
§ 1648. Cancelation by request of assured under terms of policy
or statute. — The standard fire policy of New York provides that it
shall be canceled at any time at the requesl of the assured or by the
company, by giving live days' notice of such cancelation, and that
if the policy he canceled, or shall become void or cease, and the
premium has been paid, the unearned portion shall be returned on
surrender of the policy or last renewal, the company retaining the
customary short rate, except that when the policy is canceled by giv-
ing notice it shall retain only the pro rata premium.16 In case the
11 Fisher v. Metropolitan Life Ins. portion of the premium, to cancel
Co. 162 .Mass. 236, 38 N. E. 503, 24 this policy as to all risks subsequent
Ins. I.. .). 129. to the expiration of ten days from
12 Thompson v. New York Life such notice, and no mortgagee shall
Ins. Co. 21 Or. 466, 28 Pae. 628. then have the right to recover as to
13 American Ins. Co. of Chicago such risks:'' Me. Laws 1905, c. 158,
v. Woodruff, 34 Mich. 6. p. 169; Stats. Me. 1885-95, Supp.
14('oIbv v. Cedar Rapids Ins. Co. (Freeman) p. 334, c. 49. See also
IJ6 Iowa,' :>77. 24 X. \Y. 54. Supp. Pub. Slats. Mass. 18S2-88,
15 Oe Wolf v. Washington, 119 p. 532, c. 214, sec. 60, same as
Wis. 554, 97 X. W. 220. Maine; Laws Minn. 1895, p. 417, c.
16 See §§ L393, L635, 1671 et seq. 175, sec. 53, same as .Maine. The
herein. The Maine standard policy Pennsylvania act (Pub. Laws, L891,
providesthal "this policy may be can- 22, sec. 1) requiring the insurance
celed at any time at the request of commissioner to prepare and tile a
the insured, who shall thereupon he standard form of lire insurance
entitled to a return of the portion policy is unconstitutional: 1 Pepper
of the above premium remaining & Lewis' Dig. 1700-1894, p. 2oSl,
after deducting the customary sec. 95; O'Neil v. American Fire
monthly shorl rates for the time this Ins. Co. 166 Pa. St. 72, 45 Am. St.
policy shall have been in Force. The Rep. 650, 26 L.R.A. 715, 30 Atl.
company also reserves the right, aft- 943. But see Id. p. 2385, sees. 96,
er giving written notice to the in- 97; act 1891, Pub. Laws 22, sees,
sured and to any mortgagee to whom 2, 3.
this policy is made payable, and ten- The Massachusetts statute pro-
dering to the insured a ratable pro- vides '•nor shall any such compauy,
2788
RESCISSION AND CANCELATION § 1648
termination of the contract is desired by assured he must, under
the above requirement of the standard policy of New York give
notice of cancelation, surrender the policy and permit assurer to
retain the customary short rate premium.17 And a conditional re-
quest which is rejected by insurer leaves the policy in force as
where the request is to mark off the policy, which differs from one
to cancel a policy under the provisions of the statute or of the poli-
cy.18 And insured is entitled to unearned premiums where request
therefor and for cancelation is received by assurer before other in-
surance is effected.19 But consent of insurer is not essential under
a statutory provision for cancelation upon request of assured as the
request is sufficient when communicated to insurer in compliance
with the statute.20 The surrender of a policy, with a request that
it be terminated, operates ipso facto as a cancelation, where the
policy provides that the "insurance may be terminated at any time
at the request of the assured." x So the policy is canceled and be-
comes void by a refusal to pay assessments and dues and directing
insured to cancel the same.2 But where a policy in a mutual fire
insurance company so stipulates the assured must pay all assess-
ments before he is entitled to a cancelation.3 If the policy provides
that it may be canceled at insured's request and does not require
him to notify insurer of his election to terminate the contract he
may do so by delivering it to insurer's agent with a request for its
agent, or broker make any misrepre- Fire Ins. Co. 193 N. Y. 323, 85 N.
sentation to any person insured in E. 1087.
said company or in any other com- 19 Farmers' Mutual Ins. Co. v.
pany for the purpose of inducing or Phenix Ins. Co. 65 Neb. 14, 90 N.
tending to induce such person to W. 1000, 95 N. W. 3.
lapse, forfeit, or surrender his said 20 Roberta Manufacturing Co. v.
insurance." Acts & Res. 1909, c. Royal Exchange Assur. Co. 161 N.
467, p. 470, amd'g acts 1907, c. 576, Car. 88, 76 S. E. 865, 42 Ins. L.
sec. 74, by inserting the above. J. 407, relying upon Crown Point
17 Buckley v. Citizens Ins. Co. 188 Iron Co. v. Hamburg-Bremen Fire
N. Y. 349, 81 N. E. 165, 36 Ins. L. Ins. Co. 127 N. Y. 608, 14 L.R.A.
J. 752. Although this point was not 147, 28 N. E. 653, citing Stone v.
involved in the above case, which Franklin Fire Ins. Co. 105 N. Y.
was one of the cancelation by in- 513, 12 N. E. 545.
surer nevertheless it is a positive dec- l Crown Point Iron Co. v. iEtna
la ration of the law, as the court de- Ins. Co. 127 N. Y. 608, 14 L.R.A.
clares: "It is a question of vital 147, 28 N. E. 653.
importance to the insurer and in- 2 Price v. Mutual Reserve Life
sured as to the precise meaning of Ins. Co. 107 Md. 374, 68 Atl. 689.
the cancelation clause of the stand- See also Supreme Lodge Knights of
ard policy. The situation is not a Honor v. Halin, 43 Ind. App. 75,
complicated one and the court de- 84 N. E. 837, 67 Ins. L. J. 69.
sires to so construe the clause that its 3 Backenstoe v. O'Neill, 18 Pa.
meaning may be made clear." Super. Ct. 55.
18BoutweU v. Globe & Rutgers
2789
§ 1648 JOYCE ON INSURANCE
cancelation or with notice that it is surrendered for thai purp
or vvith an \ direcl manifestation of his intention to then terminate
tme and such action is sufficient.4 And when assured refuses
to pay ili«' rate charged and assurer requires a payment of said rate
or a surrender of the policy, and it is surrendered, there is a cancel-
ation even though insured after such surrender writes assurer that
he shall hold the rating bureau liable for any damages which may
ustained on account of tire.5 So one who voluntarily ceases to
paj bis insurance premiums and abandons his policy, cannot main-
tain an action for damages for its cancelation.6 And it is held that
i member of a fraternal beneficiary society abandons his policy by
failing to exhaust his remedies within the order as a condition
precedent to resorting to the courts.7 Again, where by its stipu-
lations the policy may be terminated, upon the requesl of the as-
sured, upon the repayment of both the "customary short rates" from
the date of the policy and the ••expenses of writing the risk.'1 such
expenses may not be included under the former clause, although
such expenses will cover the agent's commissions for procuring the
risk.8
Breach by an insurance company of its contract to lend money
on a policy does not justify the insured in treating the contract as
rescinded, and suing for a return of the premiums paid.9 Nor does
the holder of a policy which contains a provision for loans upon
the policy make a case for rescission of the contract for failure to
grant, a loan, where he does not allow time between the making of
his demand and the bringing of the suit for the application to reach
t be home office and the reply is to be returned, and he does not
execute the loan agreement which the policy makes a condition
precedent to the granting of a loan.10 And the holder of a policy
is not entitled to have his policy canceled and to recover the pre-
miums paid merely because he failed to understand the provisions
insurance Commissioner v. 3501, 3502 herein, wherein this ques
People's Fire Ins. Co. 68 N. H. 51, 44 tion of jurisdiction and right to re
Ml. go !8 Ins. L. -I. 931, citing sort to the courts is fully considered.
Crown Poinl tron Co. v. .Ktna [ns. 8 State Ins. Co. v. Homer. II Colo.
12/ >. ^ . (His. Iil4, 616, 11 391, 23 Pac. 788.
L.R.A 1 17. 28 N. E. 653. 9 Lewis v. New York Life Ins. Co.
5.Ltna Ins. Co. v. Kobards To- 181 Fed. 133, 104 C. C. A. 181, 30
bacco Co's Trustee, 33 Ky. L. Rep. L.RA.(N.S.) 1202 (annotated on
257 Will S. \V. lis:.. breach of agreement of insurer to
~ 6Green v. Bartford Life Ins. Co. make loan on policy as justifying
L39 X. Car. 309, 1 L.R.A.(N.S.) 623, rescission and recovery of premium
:>1 S. E. 887. by insured).
7Easter v. Brotherhood of Amer- ' 10 Lewis v. New York Life Ins.
,,-an Yeomen, 172 Mo. App. 292, 157 Co. 181 Fed. 13:5, 10 1 C. C. A. 131,
s. w. 992. Sec §§ 352, 355, 3194, 30 L.R.A.(N.S-) 1202.
2700
RESCISSION AND CANCELATION §§ 1648a-1649a
of the policy, the constitution, and the by-laws.11 In a case in the
United States Supreme Court a policy upon a marine risk for six
months, dated April 5, 1880, was stipulated "to continue in force
from the date of expiration until notice is given this company of
its discontinuance, the assured to pay for such privilege pro rata
for the time used." There was a loss by a sea peril on November
6th, and it was held that the act of insured in sending a check on
October 9th for one monthly premium, from October 5th to Novem-
ber 5th, did not operate as a notice of discontinuance, but merely
as a monthly payment.12 Nor, in case of an indemnity bond con-
ditioned that a certain sum per annum shall be paid as premium,
is there such a cancelation as to preclude recovery of the renewal
premium by returning a bill sent therefor marked canceled.13 And
liability for the premiums or assessments in a mutual company
continues where, under the agreement, the term of insurance has
been commenced and there has been no written request for its termi-
nation by assured.14
§ 1648a. Surrender and cancelation by person insane or mentally
incompetent. — An insane person is incompetent to surrender or as-
sent to a surrender of a policy on his own life.15 But the evidence
may be such as to show an estoppel to assert that a surrender of the
policy was invalid because of mental incapacity of assured to trans-
act business.16
§ 1649. Right to reject policy not of class ordered. — If one re-
quests a policy of a particular class, he has the right to reject and
return in a reasonable time a policy not of the class ordered, and he
is not obligated to pay a note, because of his retention of said policy,
where he has offered to return the same and has made no use there-
of.17
§ 1649a. Surrender and cancelation where policy does not con-
form to application. — That a life policy is returned by applicant
because it does not correspond with his application, and is in pos-
session of the company at the time of his death, does not show a
cancelation of the contract, where the company has insisted that it
11 Condon v. Mutual Reserve 15 Hicks v. Northwestern Mutual
Assoc. 89 Me. 99, 44 L.R.A. 149, 73 Life' Ins. Co. 166 Iowa, 532, L.R.A.
Am. St. Rep. 169, 4 Atl. 944. 1915A, 872, 147 N. W. 883.
12 Greenwich Ins. Co. v. Provi- 16 Franklin Life Ins. Co. v. Mor-
denee & Stonington Steamship Co. rell, 84 Ark. 511, 106 S. W. 680.
119 U. S. 481, 30 L. ed. 473, 7 Sup. Examine Shields v. Equitable Life
Ct. 292. • Assurance Soc. 121 Mich. 690, 80 N.
13 Illinois Surety Co. v. Paoli, 121 W. 793, 29 Ins. L. J. 122.
N. Y. Supp. 340, 66 Misc. 160. "Jones v. Gilbert, 93 Ga. 604, 20
"Hill v. Baker, 205 Mass. 303, S. E. 48.
137 Am. St. Rep. 440, 91 N. E. 380.
2791
§ 1650 JOYCE ON INSURANCE
w.i- .ill right, but offered to take the matter up with applicant and
make it right, without any oiler to return the premium notes.18
And where there was never any actual surrender of the policy or
any efforl made to rescind the same, except that assured was dissat-
isfied with the policy on the ground that it was not worded as he
had been induced to believe it would be, a verdict against recovery
on a ssi i red's premium note will not he sustained.19 So assured must
return and repudiate the contract as a condition precedent to an
avoidance of his liability on a premium note under a claim that it
is invalid as Dot covering the property specified in his application.20
§ 1650. Rescission and surrender: mutual company: withdrawal
of member. — A rescission and withdrawal of the policy or certificate
in a mutual company will, where the agreement is completed, ter-
minate the contract and release the member from subsequently
accruing liability to assessments,1 but such rescission must be based
upon some right reserved under the charter, by-laws, or certificate
itself, or must rest upon some statute or arise from the mutual con-
sent of the parties. Thus, a mere declaration of the assured, made
after the policy and premium note are delivered to the respective
parties, that he abandons the whole thing and will have nothing
more to do with it, does not effect a cancelation and release the as-
sured from his liability on his premium note.2 A question some-
times arises as to what acts of a mutual company are sufficient under
its by-laws to effect or consummate a cancelation of the policy.
But if the assured voluntarily surrenders his policy, clearly intend-
ing that it shall be canceled, and the company accepts such surren-
der for that purpose, the fact that there has not been at the time of
the loss a strict compliance with the by-laws as to matters merely
formal, such as a formal cancelation and erasure of the member's
name from the books, will not render the company liable.3 But it
is held that although a member of a mutual company directs his
name to be taken off the books of the company, and pays all assess-
ments then due, as required by the charter, his membership is not
thereby terminated if he does not surrender his policy, the charter
18 Waters v. Security Life & An- 1 § 1268 herein. See Patrons of
nuity Co. 144 N. Car. 663, 13 L.R.A. Industry Fire Ins. Co. v. Harwood,
(N.S.) 805 (annotated on cancelation 72 N. Y. Supp. 8, 64 App. Div. 248
of insurance contract by return of (not liable for assessments alter can-
policy), 57 S. E. 437. celation and settlement under N. Y.
As to return of premium where Laws 1892, c. 690, sees. 267, 268,
policy does not conform with agree- 27-1 ) .
ment, see § 1401a herein. 2 ] McAllister v. New England Life
19 Allen v. Smith, 145 Ala. 657, 39 Ins. Co. 101 Mass. 558, 3 Am. Rep.
So. 615. 104.
20 American Ins. Co. v. Dilla- 8 Farmers' Mutual Ins. Co. v.
hunty, 89 Ark. 416, 117 S. W. 245. Wenger, 90 Pa. St. 220.
2792
RESCISSION AND CANCELATION §§ 1650a, 1650b
also requiring that his policy be returned to the secretary.4 So
where by the terms of the contract a member of a mutual insurance
company might obtain a cancelation of his contract, by the pay-
ment of all assessments due from him at the time of the request and
a fee of two dollars for cancelation, and a member wishing to have
his contract terminated paid the cancelation fee, but neglected to
pay an assessment due at the time of surrendering his contract, it
was held that the insurance and membership contract remained in
force.5 Where an endowment benefit association incorporated under
the statute employs paid agents to solicit business contrary thereto,
members to whom benefit certificates are issued have a right to have
the contract terminated and the accumulated fund distributed
among the certificate holders.6 If under the charter of a mutual
fire insurance company any member "may withdraw therefrom by
notice in writing to the secretary and paying all dues and liabili-
ties," and by a provision of the policy the insurance "may be ter-
minated at any time at the request of the assured, in which case the
association shall retain only the customary short rates for the time
the policy has been in force," the company is entitled, in case of an
application for cancelation, to such time as may be necessary to
determine the amount of the applicant's liability, and if the member
desires cancelation of his policy from the date of the application,
he must pay his full share of the liabilities to that date.7
§ 1650a. Cancelation: unincorporated association: withdrawal
of member. — It is decided that the cancelation of his policy is not
ipso facto effected by the withdrawal of a member of an unincorpo-
rated association of underwriters which issues policies to its sub-
scribers and is composed of a changing membership.8
§ 1650b. Surrender and cancelation: effect of death of assured. —
The death of assured operates to revoke all unaccepted offers to
rescind or cancel a policy upon his life as the happening of such
contingency fixes the rights of the parties.9 Where, however, a
statute provides for the surrender value of lapsed or forfeited poli-
cies the required demand with surrender of the policy within a
specified time, may be made by the beneficiary after assured's
death.10
4 Schroeder v. Farmers' Mutual 7 State Mutual Fire Ins. Assoc, v.
Fire Ins. Co. 87 Mich. 310, 49 N. W. Brinklev Stave & Heading Co. 61
536 (one judge dissenting). Ark. 1, 31 S. W. 157, 29 L.R.A. 712,
5 Burmood v. Farmers' Union Ins. 54 Am. St. Rep. 191.
Co. 42 Neb. 598, 60 N. W. 905. 8 Williamson v. Warfield, Pratt,
6 Fogg v. Supreme Lodge of the Howell Co. 136 111. App. 168.
Order of Golden Lion, 159 Mass. 9, 9 Travelers Ins. Co. v. Jones, 32
33 N. E. 692, s. c. 156 Mass. 431, Tex. Civ. App. 146, 73 S. W. 978.
31 N. E. 289. 10 Nielsen v. Provident Savings
2793
§ 1651 JOYCE ON INSURANCE
§ 1651. Right of assured to surrender life policy dependent upon
beneficiary's consent. — In determining the right of one whose life
is assured for the benefit of another, the same principle is involved
as in cases where the question arises as to the right to change a
iciary, which has already been considered,11 but it may be
stated here thai except there be nunc right reserved in the contract,
or unless the ad be within the intent of some permissive statute,
one whose Life is insured for the benefit of another cannot rescind
or surrender the policy withoul the beneficiary's consent, where the
right of the beneficiary is vested 12 and this rule applies even though
such surrender is acquiesced in by assurer's agent.18 There are
cases, however, involving the same principle which arc decided to
the contrary.14 and the wife's interest in the policy may be such as
Dot to require her joinder in a surrender and rescission of the poli-
cy."
In support of the rule above stated, it is held that a policy pro-
cured by a wife upon her husband's life, payable to herself on his
death, or to her children in case of her decease before his, cannot
be surrendered by him to the company after her death without the
children's knowledge and against their interests, even though the
children did not know of the insurance until after his death, and
Life Assur. Co. 139 Cal. 332, 73 45 N. J. L. 453 ; Schneider v. United
Pae. 168, rev'g 66 Pae. 663, one judge States Life Ins. Co. 52 Hun, L30, I
dissenting under N. Y. L. revised N. Y. Supp. 797; lie Booth, 11 Abb.
from L. 1879, c. 347, sees. 1, 2; Ins. N. C. (N. Y.) 145; Fraternal Mu-
L. 1892, c. 690, sec. 88; am'd by L. tual Life Ins. Co. v. Applegate, 7
1906, c. 326; Ins. L. 1909, c. 33, Ohio St. 292. See Union Central
sec. 88 (Consol. L. c. 28). Sec liar- Liu; Ins. Co. v. Buxer, 62 Ohio St.
tholomew v. Security Mutual Life 385, 400, 49 L.R.A. 737, 57 N. E.
[ns. Co. (mem.) 204 N. Y. 649, 97 66, 29 Ins. L. J. 519, 527.
X. K. 869. On power of insured to destroy
11 §§ 730 et seq., 741 et seq. here- rights of beneficiary by surrendering
in. policy, see note in 49 L.B.A. 746,
18 Washington Central Bank v. 751.
Hume, L28 U. S. 195, 32 L. ed. 370, Sec § 853 herein.
9 Sup. Ct. 11: Knapp v. Homeo- 18 Griffith v. New York Life Ins.
pathic Mutual Life Ins. Co. 117 U. Co. 101 Cal. 627, 40 Am. St. Rep.
s. ill. 29 1.. ed. 960; Breard v. New 96, 36 Pae. 113, 26 Ins. L. J. 212.
Yorl Life In-. Co. L38 La. 774, 70 14 See change of beneficiary under
So. 799; Chase \. Phoenix Mutual chapters on beneficiaries herein.
Life Ins. Co. 67 Me. 85; Unity Mu- Compare Slocum v. Northwestern
tual Life Assurance Assoc, v. Dugan, National Life Ins. Co. L35 Wis. 288,
118 Mass. 219; Ricker v. Charter Oak 14 L.R.A.(N.S. i 111!) (annotated on
Life Ins. Co. 27 .Minn. 193, 38 Am. re dy of beneficiary on repudiation
Rep. 289, 6 N. W. 771; Mutual of contract by insurer), 115 N. \Y.
Benefit Life Ins. C«. \. Willoughby, 796.
99 Miss. 88, 33 L.R.A.(N.S.) 804,54 I6La Marche v. New York Life
So. 834; Lattan v. Royal Ins. Co. Ins. Co. 126 Cal. 498, 58 Pae. 1053.
2794
RESCISSION AND CANCELATION § 1651
the surrender was made by him as guardian of the children, and
although all except one of the children had attained majority.16
And although a policy is made payable to the children of the in-
sured equally, without naming them, or their executors, adminis-
trators, or assigns, such provision does not render their interest so
contingent and uncertain that he has power to surrender the policy
so as to cut off their interest.17 So an attempted cancelation because
of false answers in the application of an insurance policy, by agree-
ment with the applicant before it has become incontestable, without
the knowledge or consent of the beneficiary named therein, is not
binding on him, although the policy provides that the beneficiary
may be changed by written notice to the company and indorsement
of the change upon the policy.18 And a beneficiary, whose interest
is not vested until assured's death, is not concluded from denying
that she joined in a surrender agreement by signing the same, by
alleging in her pleadings that said signature was procured by fraud
and duress, where she withdraws said allegation and there is an
issue as to assured's sanity and consequent want of assent to the
alleged surrender.19 And it is held that a right to change the bene-
ficiary does not include the power to surrender and cancel the
policy without his consent.20 And the fact that he has obtained a
divorce from his wife for adultery will not enable him to have the
policy reformed, notwithstanding an intention existing when the
policy was issued that it should not be payable to her in such case
where such intention was not communicated to the company.1 Nor
can the wife's vested interest as a beneficiary be defeated by cancel-
ation thereof, upon granting the insured husband a divorce.2 And
although the husband fraudulently represents that his wife is dead
16 Whitehead v. New York Life Life Ins. Co. 166 Iowa, 532, L.R.A.
Ins. Co. 63 How. Pr. (N. Y.) 394, 33 1915 A, 872 (annotated on benefi-
Hun (N. Y.) 425. See People v. ciary's consent to surrender of poKcy
Globe Life Ins. Co. 15 Abb. N. C. as affecting his right to question
(N. Y.) 75. See also Watts v. Phoe- validity thereof), 147 N. W. 883.
nix Mutual Life Ins. Co. 16 Blatchf. 20 Roberts v. Northwestern Na-
(U. S. C. C.) 228, Fed. Cas. No. tional Life Ins. Co. 143 Ga. 780, 85
17,294. S. E. 1043.
17 Ferguson v. Phoenix Mutual x Goldsmith v. Union Mutual Life
Life Ins. Co. 84 Vt. 350, 35 L.R.A. Ins. Co. 17 Abb. N. C. (N. Y.) 15.
(N.S.) 844 (annotated on surrender See Grego v. Grego, 78 Miss. 443,
of policy of ordinary life insurance 28 So. 817, as to reformation of pol-
without consent of beneficiary), 79 icy in such case upon amendment
Atl. 997. of pleadings.
18 Indiana National Life Ins. Co. 2 Grego v. Grego, 78 Miss. 443, 28
v. McGinnis, 180 Ind. 9, 45 L.R.A. So. 8lY, as to effect of divorce or
(N.S.) 192, 101 N. E. 289. separation, see §§ 817-819 herein.
19Hi-ks v. Northwestern Mutual
2795
§ 1651 JOYCE ON INSURANCE
lie cannot surrender the policy and have it canceled so as to affect
her rights under the policy.8
But in case the beneficiary dies, the intent to benefit such person
is defeated, and thereafter he may surrender the policy without the
consenl of the legal representatives of the beneficiary, and effect
another policy payable to another person.4 So consent to the termi-
nation of a policy of life insurance, given by the insured, who is
also the beneficiary, after default in the payment of premiums, will
end the contract,5 And seeking a recovery under a policy substi-
tuted after death of the named beneficiary constitutes an election
to treat the first as canceled.6 And a beneficiary who with full
knowledge of the acts of the parties amounting to a consent to a
cancelation acquiesces therein is estopped to asseri any rights under
the policy.7 Nor can any action be maintained by the beneficiary
upon a life insurance policy where the insured, because of wrongful
acts on the part of the insurer, refused to pay assessments and
directed the cancelation of the policy, which he acquiesced in for
more than four years before his death.8 Nor can the beneficiary
recover damages for a rescission by the insurer where the law gives
the insured the right to dispose of the policy without the consent
of the beneficiaries.9 And a policy provision that upon reaching a
certain age insured might, if he so desired, surrender the policy and
receive back his payments with interest, is a condition subsequent
which does not impair vested interests of the beneficiary, unless
and until insured reaches the age designated and surrenders the
policy.10 Again, a beneficiary in a life insurance policy who secures
its issuance by means of false representations as to the age of the
insured and as to his rejection by other companies, cannot avoid a
3 Knapp v. Homeopathic Mutual 7 Missouri State Life Ins. Co. v.
Life Ins. Co. 117 U. S. 411, 29 L. ed. Hill, 109 Ark. 17, 159 S. W. 31.
960. 8 Price v. Mutual Reserve Life
* Continental Life Ins. Co. v. Pal- Ins. Co. 102 Md. 683, 4 L.R.A.
mer, 42 Conn. 60, 19 Am. Rep. 530; (N.S.) 870 (annotated on right of
Bickerton v. Jacques, 28 Hun (N. beneficiary to sue insurer for breach
Y.i 119, 12 Abb. N. C. (N. Y.) 25; of contract other than failure to pay
Walsh v. Mutual Life Ins. Co. 61 indemnity), 62 Atl. 1040.
Hun (N. Y.) 91. 9 Slocum v. Northwestern Na-
5. Mutual Life Ins. Co. v. Allen, tional Life Ins. Co. 135 Wis. 288, 14
178 U. S. 351, 44 L. ed. 1098, 20 L.R.A. (N.S.) 1110 (annotated on
Sup. Ct. 913. Cited in: Mutual Life remedy of beneficiary on repudiation
In.-. Co. v. Cohen, 179 U. S. 262, of contract by insurer), 128 Am. St.
264, 15 L. ed. 184, 21 Sup. Ct. 106; Rep. 1028, 11.5 N. W. 796.
Hill v. Mutual Lite Ins. Co. 113 Fed. » Filley v. Illinois Life Ins. Co.
44, 17. 91 Kan. 220, L.R.A.1915D, 130, 137
6 Wood v. Brotherhood of Ameri- Pac. 703.
can Yeomen, — Iowa, — , 113 N. W.
825.
2796
RESCISSION AND CANCELATION §§ 1652, 1653
cancelation of the policy on the ground that the company took pre-
miums after having the means of knowing the falsity of the state-
ments, if the means of knowledge came from information furnished
by one not the agent of the company, but who wras aiding the bene-
ficiary in securing the issuance.11
§ 1652. Proposition to cancel must be accepted or declined as a
whole if indivisible. — If the policy is surrendered for cancelation
upon a proposition which is indivisible, the company cannot cancel
by accepting a part of the conditions and rejecting other condi-
tions, but must accept or decline the proposition as a whole. If
accepted in part only, there is no fulfilment of the conditions.
Thus, where the company's agent proposed to cancel the policy in
whole or in part, and it was returned to him with a direction that
the risk be placed in another company, it was held that the com-
pany's agent could not cancel without complying with the condition
upon which the cancelation was ordered.12 So also where the as-
sured requested the underwriters to cancel an existing policy upon
a boat, where there had been a partial but unadjusted loss, and to
issue a new policy for the same amount but with additional privi-
leges, and offering to remit the increased premium for the added
privileges, it was held that the company could not refuse to agree to
the proposed change, and "cancel pro rata" and credit unearned
premiums on outstanding premium notes, for the proposal to cancel
must be accepted or rejected as an entirety.13
§ 1653. Want of insurable interest as a ground of rescission or
cancelation. — If the policy is issued to one who has no insurable in-
terest in the property insured, the policyholder may rescind.14
But if a policy is taken out on the life of another by one who at
the time has an insurable interest, it is not a sufficient ground for
11 Metropolitan Life Ins. Co. v. coupled together, and there is no evi-
Freedman, 159 Mich. 114, 32 L.R.A. dence that the plaintiff agreed that
(N.S.) 298 (annotated on right of the policy should be canceled with-
insured to return of premium where out a reinsurance, and as the Hud-
insurer defends action on the policy son Company did not reinsure, they
on ground of misrepresentation by cannot insist upon the cancelation,
insured), 123 N. W. 547. There was no agreement of the par-
12 The court said : "The first ties :" Poor v. Hudson Ins. Co. 2
proposition of the Hudson Company Fed. 432, 434, 435.
was to cancel the policy in whole or 13 Wilkins v. Tobacco Ins. Co. 30
in part, to place the risk in the Lan- Ohio St. 317, 27 Am. Rep. 455, 1
eashire Company, or return the pre- Cm. (Ohio) 349.
mium as the plaintiff might elect. 14 New Holland Turnpike Co. v.
He assented that the policy might be Farmers' Mutual Ins. Co. 144 Pa.
canceled for the whole, and the prop- St. 541, 22 Atl. 923, 48 Leg. Intell.
erty reinsured by them in the Lan- 527.
eashire Company. The two were
2797
§ L654 JOYCE ON INsi RANCE
cancelation thai such interesi has ceased, and the payee lias become
hostile to the insured, where it. does qoI appear that the insured's
life is in danger, and so notwithstanding an offer to return the pre-
miums.16
§ 1654. Rescission or avoidance of compromise or release. — If
original contract of insurance is surrendered, the sole consider-
ation of such release being a void policy, such release may be avoid-
ed without offering to return the void policy.16 And where the
.,i for specified sums on a dwelling house, barn, and produce
therein, and the barn and its contents were destroyed, the amount
of the insurance upon the produce being paid upon a release being
executed to the company stating that said amount was received in
full satisfaction of the loss, "canceling" the entire amount of in-
surance on all the property, it was held that there was no sufficient
consideration for the release to discharge the company from liability
ad to the barn, and that the release did not cancel the policy beyond
the amount paid.17 And a receipt fraudulently procured from an
insured in full acquittance of her claim does not bind her.18 And
a settlement may be rescinded on the ground of mutual mistake or
of fraud on assurer's part and mistake on assured's part.19 So one
who has been induced to accept in full satisfaction of a loss under a
policy of insurance one half of the amount due through fraud and
imposition upon him and wilful misrepresentation made by the
agents of the insurer, he being, as they knew, ignorant of his legal
rights under the contract, may maintain an equitable action to
rescind such contract of satisfaction.20 But insured, after accept-
ing a sum of money in settlement of a disputed loss, cannot rescind
Mich settlement on the ground that it was procured by fraud, with-
out first returning the money received.1 And if a compromise for
a less sum than the amount of the loss is obtained by the fraudulent
15 Peckham v. Grindley, 17 Abb. x Harkev v. Mechanics' & Traders'
N. C. (N. Y.) 18. Ins. Co. 62 Ark. 274, .14 Am. St.
"Dayton Ins. Co. v. Kelly, 24 Kep. 295, 35 S. W. 127. See Mc-
Ohio St. 345, 15 Am. Rep. 612. Craeken v. McBee, 96 Ark. 251, 131
17 Redfield v. Holland Purchase S. W. 450 (bequest of insurance:
las. Co. 56 N. Y. 354, 15 Am. Rep. settlement with guardian); Ameri-
424. tan Ins. Co. v. McGehee Liquor Co.
"Industrial Mutual [ndemnity 92 Ark. 62, 121 S. W. 252; Wester-
Co. \. Thompson, s.'i Ark. 575, 1<> feld v. New York Life Ins. Co. 157
L.R.A.(N.S.) KHl In. ll!i An.. St. Cal. 339, 107 Pac. 699; Joslyn v.
Rep. 110. KM s. W. 200. Empire State Degree of Honor, 129
19 Prussian National Ins. Co. v. N. Y. Supp. 505, 145 App. Div. 14.
Terrell, 142 Ky. 732, 135 S. W. 416. See § 3481 herein.
20 Titus v. Rochester German Ins. When tender unnecessary, see
Co. 97 Kv. .',07. 28 Lb'. A. 478, 53 Commonwealth Life Ins. Co. v.
Am. St. Rep. 120. :;i S. W. 127. Hughes, 144 Ky. 608, 139 S. W. 769.
2798
RESCISSION AND CANCELATION § 1654
statements of the company's adjuster, such compromise may be
rescinded upon an offer to return the payment made under such
fraudulent compromise, there being a sufficient tender and sur-
render of the same.2
But settlements or adjustments of insurance losses by agreement
of the insurer and the insured, when fully performed, have all the
elements and properties of a contract, and, in the absence of fraud,
are as incapable of rescission as any other contract.3 So affirmation
of misrepresentation by an insurer of matters of law or of judgment,
or mere expression of opinion inducing a settlement of loss between
himself and insured, the facts being open equally to the observa-
tion and inquiry of both parties, is not ground for the rescission of
the settlement into which the parties have entered, and which has
been fully executed by performance on the part of the insurer.4
Nor can a compromise be vacated on the ground that the plaintiff
signed a contract of release without knowing its contents and ac-
cepted a check from the insurance company in the supposition that
he was receiving payment of his policy, if it appears that, though
he did not read the release, he understood that the agents of the in-
sured were there to settle the entire claim and had no other purpose,
and that by signing and delivering the release and surrendering
the policy he was assenting to a settlement for the amount paid.5
And if a claim for loss of an insured stock of goods has been adjust-
ed and settled between the parties thereto, and the insurer has paid
the amount agreed upon, and the insured has given his receipt
therefor, the fact that the insured was ignorant of contracts of in-
surance and of the proper basis for adjusting losses, and was so
hurried in the settlement in the absence of counsel that he signed
the settlement without reading it, is not ground for a rescission of
the settlement and a restoration to the insured of his rights under
the policy, when the absence of, or a desire to consult with, counsel
is not communicated with the insurer, and the haste of the insured
in making the settlement cannot be attributed to any act of the
former.6
2 Berry v. American Central Ins. 4 Georgia Home Ins. Co. v. War-
Co. 132 N. Y. 49, 28 Am. St. Rep. ten, 113 Ala. 479, 59 Am. St. Rep.
548, 30 N. E. 254, 21 Ins. L. J. 455, 129, 22 So. 288.
45 Alb. L. J. 402; Holden v. Put- 5 Manhattan Life Ins. Co. v.
nam Fire Ins. Co. 46 N. Y. 1, 7 Am. Burke, 69 Ohio St. 294, 100 Am.
Rep. 287. St. Rep. 666, 70 N. E. 74.
3 Georgia Home Ins. Co. v. War- 6 Georgia Home Ins. Co. v. War-
ten, 113 Ala. 479, 59 Am. St. Rep. ten, 113 Ala. 479, 59 Am. St. Rep.
129, 22 So. 288. See Wood v. Mas- 129, 22 So. 288.
sachusetts Mutual Accident Assoc.
174 Mass. 217, 54 N. E. 541.
2799
§ 1655 JOYCE ON INSURANCE
§ 1655. Right of agent to rescind or cancel: notice of cancelation
to agent or broker. — If the company's agent is instructed to cancel,
I. ut through negligence or otherwise he tails to notify the assured,
there is no cancelation;7 and although such agent may notify the
assured, ye1 if he Tails to return or lender a ratable proportion of
the premium, there is no cancelation.8 although if notice is given
the broker and he notifies the insured, who surrenders the policy,
there is a cancelation, even though no money is tendered by the
company to the broker to whom the company had charged the
premium.9 So service of notice of cancelation of an insurance poli-
cy, upon the broker who procured it. after the policy has been
delivered and the broker's connection with the action as agent to
procure it has ceased, is not sufficient to bind the principal.10
Though power may be given to an agenl to procure insurance upon
a building, yet this docs not authorize him to cancel a policy pro-
cured by him.11 A soliciting agent with authority as to matters
connected with the application lias the power to fill it out and to
provide for cancelation of the proposed insurance and a return of
the premium and where ho agrees with the applicant to do this and
fails through oversight or fraud to do it, the company must suffer
whatever loss is sustained thereby.12 Inasmuch as the conditions
attached to a reservation in the policy of the right of assurer to can-
cel are conditions precedent and must be complied with in accord-
ance with the terms thereof both in the requirement of notice and
in that of the return of the unearned premium, no cancelation is
effected by the arbitrary acts of insurer's agent in verbally demand-
ing an immediate cancelation and surrender of the policy and can-
celing the same upon receiving it without tendering or returning
7 Scott v. Sun Fire Office, 133 Pa. 10 John R. Davis Lumber Co. v.
St. 322, 1!) All. 360; Watertown Fire Hartford Life Ins. Co. 95 Wis. 226,
Ins. Co. v. Rust, 141 111. 85, 40 111. 37 L.R.A. 131, 70 N. W. 84. See
A pp. 119, 30 N. E. 7712; London & Martin v. Palatine Ins. Co. 106
Liverpool Fire Ins. Co. v. Turnbull, Tenn. 523, 6 S. W. 1024, 30 Ins. L.
86 K\. 230, 5 S. W. 542. See Mc- J. 928, 931, quoting from Herman v.
Lean v. Republic Ins. Co. 3 Lans. Niagara Fire Ins. Co. 100 X. Y. Ill,
(N. Y.) 421. 3 N. E. 341.
8 Franklin Fire Ins. Co. v. Mas- n So held in Bolan v. Fire Assoc.
sey, 33 Pa. 221. of Philadelphia, 58 Mo. A.pp. 225.
9 Stone v. Franklin Fire Ins. Co. See Standard Leather Co. v. North-
L05 X. V. 543, 12 N. E. 45 (one ern Assur. Co. (U. S. J). C.) L56
judge dissenting). See Goit v. Na- Fed. 689, rev'd 165 Fed. 602, 91 C.
tional Protection Ins. Co. 25 Barb. C. A. 440.
i\. Y.) 189. "Phipps v. Union Mutual Ins.
On insurance broker as agent for Co. — Okla. — , 150 Pac. 1083.
insured as to cancelation of policy,
see note in 38 L.R.A.(N.S.) 623.
2800
RESCISSION AND CANCELATION § 1655a
the unearned premium.18 And insurer cannot cancel by giving
notice to an agent when the statute requires notice to assured.14
And a notice from insurer's general agent to its local agent is not
a notice of cancelation within the requirement of notice to assured.15
In a comparatively recent case in New York an agent with power to
countersign and issue policies, solicited insurance from insured and
was given the risk upon the express understanding that the policy
should be issued by a straight line company and not by an as-
sessment company. No written application was made. It was
procured, however, from a mutual or co-operative company, counter-
signed by said agent, and delivered to insured who paid the pre-
miums thereon for some time. The policy was the New York
standard form and exactly like that issued by old line companies.
Subsequently said agent obtained the policy from insured stating
that he was going to cancel it and would give another policy in its
place and insured thereupon delivered the same to the agent with-
out asking him "the whys or wherefores" and the unearned pre-
mium was applied on another policy which was issued. It was
held that said agent acted for insured as his agent and not for the
insurer in these transactions; that there was no such rescission of
the policy as constituted a defense to an action for an assessment,
the liability for which arose, not under the terms of the contract by
itself, but under the statute making property insured in companies
of that character liable to assessment for losses in excess of its cash
on hand. It was also decided that there was a mistake of law which
led the agent acting for assured and not for insurer under the old
policy to exceed his instructions.16 The right, however, of an agent
to rescind or cancel, and the effect of giving notice of cancelation to
an agent or broker, has, however, been fully considered in another
part of this work.17
§ 1655a. Cancelation: when other insurance or substituted policy
does not attach. — If the notice given does not effect a cancelation,
a policy intended as a substitute does not attach.18 Nor does the
13 Bard v. Firemen's Ins. Co. 108 v. King, 108 Ark. 130, 156 S. W.
Me. 506, 81 Atl. 870, 41 Ins. L. J. 445, 42 Ins. L. J. 1021.
423. le Hicks v. Grimley, 213 N. Y. 447,
On return of premium as condition 107 N. E. 1037, 45 Ins. L. J. 606
of cancelation, see notes in 13 L.R.A. (three justices dissenting) ; N. Y.
(N.S.) 884, and L.R.A.1915F, 444. Laws 1909, e. 33, sec. 267 (Consol.
14 Tacoma Lumber & Shingle Co. L. c. 28) case modifies 136 N. Y.
v. Firemen's Fund Ins. Co. 87 Wash. Supp. 1137, 152 App. Div. 902.
79, 151 Pac. 91. 17 See §§ 451, 454, 636-642 here-
On when insurance agent is agent in.
of assured as to notice of cancelation, 18 Tacoma Lumber & Shingle Co.
see nole in 20 L.R.A. 283. v. Firemen's Fund Ins. Co. 87 Wash.
16 Commercial Union Fire Ins. Co. 79, 151 Pac. 91.
Joyce Ins. Vol. III.— 176. 2801
§ 1655a JOYCE ON INSURANCE
procuring of other insurance upon the property at once on receiving
notice of cancelation evidence of itself an intention on the part of
assured to accept the cancelation. Such acceptance or consent must
be averred and proved by the insurer.19 And if there is no delivery
nor offer to deliver a new policy and no surrender of the old one
there is no such substitution as to invalidate the old contract before
the expiration of the time limit fixed in the notice of cancelation
thereof even though insurer's agenl upon being instructed to cancel
the old risk wrote a new policy in another company and made
proper book entries showing cancelation of one policy and the issue
of the other.20 Nor is a. policy canceled by returning to a broker,
who was not authorized to act for the insured, part of the unearned
premium in cash, and also giving him a new policy in another
company, the premium of which is equal to the remainder of such
premium, where the insured refuses to accept such money from the
broker, and take- the policy only on the erroneous statement of the
broker that the original policy was of no effect, hut with orders to
the broker to cancel such new policy as soon as he could procure
another tor the whole amount, of the original. The action of the
insured did not ratify the act of the broker in accepting the new
policy in part payment of the unearned premium.1 And an at-
huipt to transfer a risk from a company which has refused to carry
it. to another company, made by an insurance agent without the
consent of the assured, after the agent had placed the risk in the
former company under a general request for insurance, without
specifying any company, is not effectual when the five days' notice
of the cancelation of the first policy stipulated for therein was not
given.2 And if a policy is conditioned to continue in force a cer-
tain number of days after cancelation unless other insurance is
effected, insurer's agent cannot effect other insurance so as to com-
plete the cancelation, by writing a properly executed policy and
entering it upon his register of policies where no premium is paid or
promised to be paid nor the policy delivered to insured.3 Nor is can-
celation of a policy effected by a letter from the insurer to an agent
directing him to cancel it and his directing a clerk to make a new
policy in another company and his own entry of the new insurance
in a daily report which was not actually mailed, while the new
policy was not actually written or the insured notified of any change
19 Sehcel v. German-American Tns. 1 Quong Tue Sing v. Anglo-Ne-
Co. 228 Pa. 44, 76 Atl. 507, 30 Ins. vada Assurance Corp. 86 Cal. 566,
L. J. 1252. 10 L.K.A. 144, 25 Pac. 58.
20 Patcr.-nn v. St. Paul Fire & Ma- 8 Clark v. Insurance Co. of North
rine Ins. Co. 148 N. V. Supp. 506, America, SO .Ale. 26, 35 L.R.A. 270,
164 App. Div. 002, 44 Ins. L. J. 35 Atl. 1008.
406. 3 Milwaukee Mechanics Ins. Co. v.
2802
RESCISSION AND CANCELATION § 1655a
or intention to cancel the policy until after the loss had occurred.4
Nor is a cancelation effected by the agent's act, upon notice from
the company to cancel the policy, in writing and placing in his
safe, without the knowledge of the insured, a new policy in another
company, debiting the latter company and crediting the former one
with the premium paid, and writing across his register of the old
policy the wTord, "Canceled," where the original policy provided
that it could be canceled by the company only by a return of the
unearned premium after a notice of five days; and a surrender of
the original policy by the insured and acceptance of the new one,
after the insured building had been burned, upon the agent's rep-
resentation that the company in which he had written the second
policy was liable, did not release or avoid the claim of the insured
on the old policy.5 Nor does the exchanging by one who has suf-
fered a fire loss, of a policy which had been duly issued and paid for,
for one in another company, upon receiving notice that the former
was to be canceled, constitute a ratification of the attempted change
of insurers, so as to release the one which issued the surrendered
policy, since after the loss the agent could not bind the substituted
company.6 And the first policy is valid if the agent had no author-
ity to surrender it and it was not legally canceled.7 It is held that
seeking a recovery under a policy substituted after death of the
named beneficiary constitutes an election to treat the first policy
as canceled.8 This case affirmed the action of the trial court in
directing a verdict for the defendant on the theory that the plain-
tiff's action was founded on the second certificate and that the evi-
dence did not show acceptance of the latter by assured. Said affirm-
ing decision was reversed on the ground that there was sufficient
evidence of acceptance of the second certificate to go to the jury and
that under the pleadings the plaintiff did not rely wholly upon the
second certificate.9 The same case was again before the court and
it was decided that a new certificate bearing the date of the original
certificate and changing the beneficiary could be enforced. It was
also held that where the certificate was surrendered for the sole pur-
pose of changing the beneficiary with the request that the insurance
be continued in favor of other beneficiaries insured impliedly re-
Graham, 181 111. 158, 54 N. E. 914, Moines Ins. Co. 158 Iowa, 563, 51
29 Ins. L. J. 914, aff'g 80 111. App. L.R.A. 539, 138 N. W. 504.
540. 7 Kooistra v. Rockford Ins. Co.
4 Clark v. Insurance Co. of North 122 Mich. 626, 81 N. W. 568, 29 Ins.
America, 89 Me. 26, 35 L.R.A. 276, L. J. 247.
35 Atl. 1008. 8 Wood v. Brotherhood of Ameri-
5 Phenix Ins. Co. v. Kerr, 129 Fed. can Yoemen, — Iowa, — , 113 N. W.
723, 64 C. C. A. 251, 66 L.R.A. 569. 825.
6 Waterloo Lumber Co. v. Des 9 Wood v. Brotherhood of Ameri-
2803
§ 1655b JOYCE ON INSURANCE
quests the issue of a new certificate substantially identical with the
firsl except as to the designated payees and that delivery is not es-
sential in such cases as the contract has been accepted, but that if
the terms of the new certificate are changed from those of the orig-
inal there must be an acceptance of the new terms and that an
action would not lie by the substituted beneficiaries upon the second
certificate and recovery was denied on the first certificate because of
its forfeiture by suicide.10
§ 1655b. Cancelation: when other insurance or substituted pol-
icy attaches. — If insurer's agent upon receiving instructions to
cancel, substitutes a policy in place of the one ordered canceled,
and such act is ratified by assured by accepting the new policy, he
is thereby precluded from recovering on the old policy even though
it had not at the time of loss been formally canceled.11 Again, if a
person applies to an agent to procure insurance and he places it
through another agent in a company other than his own, and upon
notice of cancelation lie surrenders the policy and procures several
other policies, all of which are canceled in turn, the first policy is
valid if the agent had no authority to surrender it and it was not
legally canceled, but if insured ratified said agent's acts and he left
a policy in her hands whereby insurer was misled, she cannot deny
her agent's authority and recover on the policy.12 And where an
insurance agent, with general authority from the owner to keep his
property insured, cancels one policy on order of the company issu-
ing it, and immediately reinsures in another company, paying the
premium, notifying the assured by mail of the transaction, and
depositing the policy in his safe for the assured, this is a sufficient
cancelation of the first and delivery of the second policy.13 And
if an insurance broker upon receiving notice of cancelation procures
other or substituted insurance with insured's knowledge and after
a loss occurs claim is made therefor under the new policies and
payment is received under the same the old insurance ceases and
the new policies are of force even though not delivered at the time
of loss.14 So the surrender of a policy to a person whom the as-
sured believes to be the agent of the insurer, though his agency has
can Yeomen, 140 Iowa, 98, 18 L.R.A. 12 Kooistra v. Rockford Ins. Co.
(N.S.) 226n, 117 N. W. 112:5. 122 Mich. 026, 81 N. W. 568, 29 Ins.
10 Wood v. Brotherhood of Amer- L. J. 247.
ican Yeomen, 148 Iowa, 400, 126 N. 13 Dibble v. Northern Assur. Co.
W. 940. 70 Mich. 1, 14 Am. St. Rep. 470,
11 Finley v. New Brunswick Fire 37 N. W. 704.
,1ns. Co. (U. S. C. C.) 193 Fed. 195, "White v. Insurance Co. of N. Y.
11 Ins. L. J. 933; Finley v. Western (White v. German-Alliance Ins. Co.)
Empire Ins. Co. 69 Wash. 673, 125 93 Fed. 161, 28 Ins. L. J. 557, aff'd
Pac. 1012, 41 Ins. L. J. 1723. 103 Fed. 200, 43 C. C. A. 216.
2804
RESCISSION AND CANCELATION § 1656
in fact terminated, and the acceptance of another policy in its
stead, implies a request that the former policy be canceled, and
amounts to a cancelation thereof.15 And although the time fixed in
the notice of cancelation had not expired a new policy is of force
and effect when received by insured's agent, who while acting as
assured's agent, had been authorized by insured to procure insur-
ance upon his property whenever any policy thereon had expired
or been canceled and said agent had received notice of cancelation.16
Again, where a policy was owing to a mistake in issuing it to an
individual instead of to a partnership, returned for correction to
insurer's agent, who wrote that he had been directed to cancel the
policy and enclosed a policy in another company, for which he was
also an agent, but the letter was not received until after the fire,
and the first policy provided for cancelation upon five days' notice
to assured, it was held in a suit against the insurer issuing the new
policy, that a nonsuit was properly granted, but the court intimated
that the insurer under the first policy was liable and declared that
one of the insurers was bound to pay. It was also decided that the
nonsuit could not prevent a joinder of the two insurers on a new
action.17
Though an agent of the insurer notifies the assured that the for-
mer is instructed to cancel the policy, yet if the agent tells the as-
sured that the policy may remain in force until such agent gets the
assured another policy for the same amount, then the cancelation is
waived, unless the assured knows that the insurer directed the agent
to cancel the policy immediately.18
§ 1656. Cancelation by mistake of agent. — The legal owners of
the property, and also owners by indorsement to them of a certificate
of insurance at the time of the alleged cancelation, cannot be bound
by a cancelation ordered by mistake as to the meaning of a telegram
sent by them to one who has purchased goods and effected insur-
ance thereon under an agreement with said parties.19 And cancel-
ation is ineffectual as to the mortgagee where, even though he has
consented thereto, it is based upon a mistake of fact made in re-
liance upon the representations in good faith of insurer's agent.20
And the assured is not bound by a cancelation made by a broker by
15 .Etna Ins. Co. v. Stambaugh- Elevator Co. 123 Ky. 437, 124 Am.
Thompson, 76 Ohio St. 138, 118 Am. St. Rep. 371, 96 S. W. 601, 97 S.
St. Rep. 834, 81 N. E. 173. W. 810.
16 Warren v. Franklin Ins. Co. 161 19 Marsh v. Northwestern National
Iowa, 440, 143 N. W. 554. Ins. Co. 3 Biss. (U. S. C. C.) 351r
17Jovner & Long v. Scottish Fire Fed. Cas. No. 9118.
Ins. Co. 155 N. Car. 255, 71 S. E. 20 Glens Falls Ins. Co. v. Walker,
434. — Tex. Civ. App. — , 166 S. W. 122.
18 Citizens' Ins. Co. v. Henderson's
2805
§§ 1657, I JOYCE 0>. INSURANCE
mistake where it is no part of the broker's duty to cancel, and he is
nut authorized by the assured so to do.1 It is held in New York that
if a policy is returned for cancelation by mistake of the broker's
clerk, even though done without the knowledge or consent of the
assured, it precludes the assured from maintaining an action on
,!■! policy.8 The better opinion is, however, that there must he
some express or implied authority from the principal, and thai the
evidence of an implied authority must be clear to warrant an exer-
cise by the broker or agenl of the right of the assured to cancel, and
the mere fact that the policy is left in the broker's hands does not
of itself justify him in canceling a policy. Such is the rule estab-
lished by the English decisions, where the authority of a broker is
much more extensive than here.3
§ 1657. Partner's consent to cancelation or substitution binds
firm. — A partner may by consenting to the cancelation of a pol-
icy or substitution of another policy, hind the firm to the extent
of the partnership interest, and this is so in case of a cancel-
ation, even though the policy is not formally surrendered, such act
being only an evidence of the cancelation.4 But a mere agreement
made by one with certain parties to purchase merchandise and ship
the same to them and effect insurance thereon, of which they he-
come owners before the alleged cancelation, does not constitute the
purchasing party a partner with authority to bind said parties by a
cancelation of the policy.5
§ 1658. Release by part of the insured parties. — A release by
part of the insured parties does not hind those of the insured who
do not join therein, and who have no knowledge of its execution.
where it is not intended when executed to have such effect, or where
the release is obtained by insurers with intent to defraud those not
signing.6
1 Kenos v. Whickham, 14 Com. B. are not entitled to special rate of
N. S. 801, 36 L. -I. Com. !'. 313, premium provided for on discontinu-
rev'g L3 Com. B. N. S. 381, 14 Com. ance if insured goes out of business.
B. N. S. 135, 33 L. .J. Com. I'. 13, 13 Ocean Accident & Guaranty Corp. v.
fejng. put. Cas, 122. Combined Locks Paper Co. L62 Wis.
Standard Oil Co. v. Triumph 255, 156 N. W. 156.
[ns Co. (i X. Y. S. C. 300. 5 Marsh v. Northwestern National
3 Sec § 636 herein. Ins. Co. 3 Biss. (U. S. C. C.) 351,
4 Bingham \. North American Ins. Fed. Cas. No. t'118.
Co. 74 Wis. 198, 43 N. W. 494; 6 Lumberman's Ins. Co. v. Preble,
Whiteman Bros. v. American ('cm- 50 [11.332.
tral Ins. Co. 1! Lea (82 Tenn.) 327. As to release of claim procured
When parties jointly insured un- through fraud, see:
der employer's liability policy, obtain Illinois. — Star Accident Co. v.
cancelation of policy, and only one Sibley. .~>7 111- App. 31.3, 27 Chic. L.
goes out of business, join! parties News, 204.
2800
RESCISSION AND CANCELATION § 1659
§ 1659. Wrongful cancelation or termination of contract by as-
surer.— In considering this subject we restate here as a premise,
what we have asserted under a prior section; that inasmuch as the
relations of the parties to a contract of insurance are destroyed by
rescission or cancelation, the act must be that of both parties, in-
sured and insurer, subject to such exceptions as may arise from the
nature or terms of the contract itself, or of a reservation therein,
or from some statutory provision. In other words it may be gen-
erally stated that the right to rescind, abandon, or cancel a contract
of insurance must arise either by virtue of some statute, from the
terms of the contract itself, or under a power reserved therein, or by
mutual consent of the parties thereto, although under certain cir-
cumstances equity may rescind or cancel.7 So it is forcibly declared
that: "Where one party to a contract to be performed in the future,
before the time for performance arrives, refuses to perform, he
thereby, so far as he is concerned, declares his intention then and
there to rescind the contract. Such renunciation, however, in and
of itself does not work a rescission, for one party to a contract can-
not by himself rescind it. But by making the wrongful renunci-
ation he entitles this other party, if he pleases, to agree to the con-
tract being put an end to, subject to the retention by him of his
right to bring an action in respect to such wrongful rescission:
. . . A declaration by the promisor, before the time for per-
formance has arrived, of his intention not to perform, is not of
itself, and unless acted upon by the promisee, a breach of the con-
tract. Such declaration only becomes a wrongful act if the promisee
elects to treat it as such. If he does so elect, it becomes a breach of
contract and he can recover upon it as such." 8
Indiana. — Wabash Valley Protec- Reserve Fund Life Assoc. 159 Pa.
tive Union v. James, 8 Ind. App. 625, 23 Ins. L. J. 334, 28 Atl. 445.
449, 35 N. E. 919. Ohio.— Springfield Fire & Marine
Kansas-. — Northwestern Mutual Ins. Co. v. Hull, 51 Ohio 270, 46
Life Ins. Co. v. Woods, 54 Kan. 663, Am. St. Rep. 571, 25 L.R.A. 37, 37
39 Pac. 189. • N. E. 1116.
Kentucky.— Titus v. Rochester Wisconsin. — Lord v. American
German Ins. Co. 97 Ky. 567, 53 Mutual Accident Assoc. 89 Wis. 19,
Am. St. Rep. 426, 28 L.R.A. 478, 46 Am. St. Rep. 815, 26 L.R.A.
31 S. W. 127, 41 Cent, L. J. 110. 741, 61 N. W. 293.
Michigan. — Heinlein v. Imperial 7 §§ 1634 et seq. herein.
Life Ins. Co. 101 Mich. 250, 45 Am. 8 Per the court in Supreme Coun-
St. Rep. 409, 25 L.R.A. 627, 59 N. cil American Legion of Honor v.
W. 615. Lippineott, 134 Fed. 824, 67 C. C.
New Jersey. — Henry v. Imperial A. 650, 69 L.R.A. 803 (citing John-
Council Order of United Friends, 52 stone v. Milling, L. R, 16 Q. B. Div.
N. J. Eq. 770, 29 Atl. 508. 460, 467, 473, per Lord Esher, M.
Pennsylvania. — Silk v. Mutual R.), quoted in Blakely v. Fidelity
2807
§ 1659 -JOYCE ON INSURANCE
Therefore, in view of these governing principles if there is a
wrongful cancelation, repudiation, forfeiture, or termination of the
contract by insurer, and it refuses to receive premiums or by any
act to longer recognize the policy as binding upon it, assured has
certain rights in the premises which the courts will enforce, the
only question being as to the remedy. In some of the earlier cases
an action could be maintained to recover back the premiums paid
with interest in an action of trespass on the case in assumpsit,9 or
,in action could be brought for money had and received to insured's
use or upon the implied promise to save him harmless.10 And in
a Pennsylvania ease an action was brought to recover premiums
paid on the ground that the policy had been wrongfully forfeited.
There was a nonsuit in the court below, but this was declared error
and the nonsuit set aside. The decision, however, turned princi-
pally upon the question of waiver, custom, and consequent wrong-
ful forfeiture.11
The general rule, however, which is undoubtedly the result of the
authorities, is this, that upon such wrongful cancelation, repudia-
tion, forfeiture, or termination of the contract by insurer, insured
has the right: 1. To consider the policy terminated and recover its
just value in a proper action therefor; 2. To institute an equitable
proceeding to adjudge the policy in force, and the question of for-
feiture can then be determined; 3. To tender the premiums, and
when the policy becomes payable, an action may be brought upon
the policy and the question of forfeiture be then tested. So in a
Connecticut case, insurer insisted that the policy had been forfeited
by a breach of condition therein by assured. The contract was not
rescinded by assured, but he brought an action to recover back the
premiums paid, relying upon an implied promise to keep the policy
alive. The court refused to entertain the action, and it was declared
that in such case the policyholder had only three remedies:
Mutual Life Ins. Co. (U. S. C. C.) 10 Burr us v. Life Ins. Co. of Vir-
1415 Fed. 019, 35 Ins. L. J. 699, 704, ginia, 124 N. Car. 9, 32 S. E. 323,
which is aff'd 154 Fed. 43, 83 C. C. 28 Ins. L. J. 354. See Gwaltney v.
A. 155, 36 Ins. L. J. 884 (upon point Provident Savings Life Assurance
of finality of election by assured) Soc. 132 N. Car. 925, 44 S. E. 659
certiorari' denied 207 U. S. 502, 52 (affg 130 N. Car. 029, 41 S. E.
L. ed. 355, 28 Sup. Ct. 257. See 795) aff'd 134 N. Car. 552, 47 S. E.
also as to same principle Lake Shore 122.
& Michigan Southern R. Co. v. Rich- n Helme v. Philadelphia Life Tns.
ards, 152 111. 59, 30 L.R.A. 33, 38 Co. 61 Pa. 107, 100 Am. Dec. 621.
N. E. 773. See American Life Ins. Co. v. Mc-
'»McCall v. Phoenix Mutual Life Adam, 109 Pa. St. 399, 1 Atl. 256;
Ins. Co. 9 W. Va. 237, 27 Am. Rep. Kerns v. Prudential Ins. Co. 11 Pa.
558 Super. Ct. 209.
2S08
RESCISSION AND CANCELATION
§ 1659
namely, those last above mentioned.12 The same three remedies
are stated as the ones to l>e pursued in an Indiana case as governing
where insurer repudiates the contract and denies liability there-
under and refuses to continue to receive premiums thereon, but
that in such cases insured or the policyholder cannot elect to treat
his contract as in force and preserve his right to sue for damages
for the breach. The evidence in said case, however, failed to show
a repudiation of the contract by insurer.13 The above remedies are
12 Day v. Connecticut General
Life Ins. Co. 45 Conn. 480, 29 Am.
Rep. 693; Alabama Gold Life Ins.
Co. v. Garmany, 74 Ga. 51.
13 Indiana Life Endowment Co. v.
Carnithan, — Ind. App. — , 109 N.
E. 851 (action for damages). The
court, per Hottel, J., said : "The law
applicable to these questions seems
to be well settled. The doctrine that
there may be an anticipatory breach
of an executory contract resulting
from an absolute refusal to perform
is now accepted and followed in
most jurisdictions; that is to say
where parties enter into a contract
embodying mutual and independent
conditions and obligations, and one
of the parties thereto disables him-
self from performing or prevents the
other party from performing, or be-
fore the time for performance arrives
repudiates the contract and 'refuses
to be longer bound thereby, com-
municating such repudiation to the
other party, the latter is not only ex-
cused from further performance on
his part, but. may, at his option, treat
the contract as terminated for all
purposes of performance and main-
tain an action at once for damages
occasioned by such repudiation with-
out waiting the time fixed by the
contract for performance.'
"O'Neill v. Supreme Council
American Legion of Honor, 70 N. J.
Law 410, 57 Atl. 463. 1 Ann. Cas.
422, and cases cited; Indiana Life
Endowment Co. v. Reed, 54 Ind.
App. 450, 458, 459, 103 N. E. 77.
This doctrine has been long an-
nounced and followed in the English
courts, the leading case being that
of Hochester v. De Lafour (1853)
2 El. & Black 678, 22 L. J. (Q. B.)
455, 6 Eng. Rul. Cas. 576. While
some of the state courts, notably
Massachusetts, Daniels v. Newton,
114 Mass. 530, 19 Am. Rep. 384;
Collins v. Delaporte, 115 Mass. 159,
have refused to follow this doctrine,
the great weight of authority in such
courts is in its favor. O'Neill v. Su-
preme Council American Legion of
Honor, supra; Day v. Connecticut
Life Ins. Co. 45 Conn. 480, 495, 29
Am. Rep. 693; Mutual Reserve Fund
Life Ins. Co. v. Taylor, 99 Va. 208,
37 S. E. 854; 3 Elliott Contracts,
sees. 202, 209, and cases cited in
notas, and it also has the approval
of the United States Supreme Court,
Roehm v. Horst, 178 U. S. 1, 44 L.
ed. 953, 20 Sup. Ct. 780. In .each
of these cases will be found a com-
prehensive discussion of the doc-
trine, together with a collection of
numerous cases decided by the courts
of different jurisdictions. An ex-
amination of these cases will show
that the doctrine has been applied
by various state courts to insurance
contracts similar to that under con-
sideration, and this court in a recent
case of this same company, Indiana
Life Endowment Co. v. Reed, 54
Ind. App. 450, 103 N. E. 77, held
the doctrine applicable where a con-
tract was involved identical with the
one now under consideration. The
cases which approve and follow the
doctrine, however, all agree that the
repudiation of the contract relied on
must be positive and absolute and
unconditional in order that it may
be treated as an antici^'itorv breach
2809
§ 1659 JOYCE ON INSURANCE
also declared in a Texas case to be the proper ones where there has
been a wrongful cancelation of the insurance contract; and it is
of such contract. Dingley v. Ober, in the case of Roehm v. Horst, 178
117 [J. s. 490, 502, 503, 29 L. ed. U. S. 13, 44 L. ed. 058, 20 Sup. Ct.
its I. 088, 6 Sup. Ct. S'.ii; Indiana. 785, quotes with approval the fol-
Life Endowment Ins. Co. v. Reed, lowing Language of Lord Justice
supra, and cases cited; Zuck v. .Me- Bowen:
Clure, 98 Pa. 541; 1 Beach on Con- "'We have therefore to consider
tracts, sec. 413. upon what principles and under
"The authorities also emphasize what circumstances it must be held
the tact that one party to such a con- that a promisee who finds himself
tract may not by himself rescind it, confronted with a declaration of in
and that a repudiation by him alone, tention by the promisor not to carry
although absolute and sufficient to out the contract when the time for
justify the other party in treating it performance arrives may treat the
as an anticipatory breach, does not courts as broken and sue for the
necessitate such action by the latter breach thereof: It would seem on
parly, but the latter party may elect principle that the declaration of such
to stand upon his contract and per- intention by the promisor is not in
form, or offer to perform, all the itself, unless acted on by the prom-
conditions thereof required of him, isee, a breach of the contract, and
and then, when the clay of perform- that it only becomes a breach when
ance arrives, proceed to enforce his it is converted by force of what fol-
contract. It seems in cases like the lows it into a wrongful renunciation
one under consideration, where an in- of the contract. Its real operation
surer repudiates its contract and de- appears to be to give the promisee
nies liability thereunder, and refuses the right of electing either to ti'eat
to receive premiums, the policyhold- the declaration as brutum fulmen (a
ers may pursue either of three harmless thunderbolt, a noisy, but
courses, viz: 'First, he may elect to ineffectual, menace) and holding fast
consider the policy at an end and re- to the contract, to wait till the time
cover the equitable and just value of for its performance has arrived, or
the policy; second, he may institute to act upon it and treat it as a final
proceedings to have the policy ad- assertion by the promisor that he is
judged to be in force in which case no longer bound by the contract, and
the question of forfeiture may be de- a wrongful renunciation of the con-
termined; third, he may tender the tractual relation into which he has
premiums, and, if acceptance is re- entered. But such declaration only
fused, wait until the policy by its becomes a wrongful act if the prom-
ti rms becomes payable, and then test isee elects to ti'eat it as such. If he
the forfeiture in a proper action on does so elect, it becomes a breach
the policv.' Day v. Connecticut Life of the contract and he can recover
Ins. Co. 45 Conn. 480, 20 Am. St. upon it as such.'"
Tvep. O'.l.'l; Metropolitan Life Ins. Co. See also to the point that a party
v. McCormick, 10 Ind. A pp. lit, 56, cannot elect to treat his contract as
65 Am. St. Rep. 302, 40 N. E. 44, in force and sue for damages as for
27 Ins. L. J. 271, and cases cited. a breaeh. Johnstone v. Milling, L.
"In such cases, however, the pol- R. L6 Q. B. Div. 460, 467, per \jnrd
icyholder may no! treat his policy Esher, M. R., quoted from to some
as in force and effect and still pre- effect in Supreme Council American
serve his right to sue for damages Legion of Honor v. Lippincott, 69
for its breach. Upon this subject the L.K.A. 803, 1.14 Fed. 824, 87 C. C.
Supreme Court of the United Stale- A. 650, and requoted in Blakely v.
2810
RESCISSION AND CANCELATION § 1659
there decided that where insured in a fraternal organization was in-
duced by it to surrender his policy of a certain class upon its agree-
ment to issue to him in exchange therefor a policy in another class
for the same amount at a different rate and said insurer refused to
either issue a new policy on the agreed upon terms or to return the
old one, a course of action against insurer was given insured. The
action in this case was brought to recover damages by reason of said
wrongful acts.14 It is also held that where a forfeiture is insisted
upon where war prevents the payment of premiums when due that
insured may in an action either at law or in equity recover the
equitable value of the policy arising from the premiums paid.15
So under an Iowa decision assured may elect whether to enforce
the contract or treat it as rescinded and recover for the breach and
he elected to rescind the policy when it was wrongfully revoked.16
Under another Indiana decision, which is directly in line with
and followed as to the remedies declared to be the proper ones in
the case in that state which we have above considered 17 the distinc-
tion is made that insured, where the policy has been wrongfully can-
celed by insurer, cannot maintain an action for the premiums
paid where the risk has attached and the insurer has assumed
liability in case of loss, but that if the risk has not attached all the
premiums must be returned and an action will lie for their re-
covery. In this case, however, it was assumed by the court that
the policies contained no provision for return of premiums, and
it was held that the complaint did not state facts sufficient to
•constitute a course of action.18
Fidelity Mutual Life Ins. Co. (U. Assur. Soe. of the U. S. 99 Iowa,
S. C. C.) 143 Fed. 619, 35 Ins. L. J. 621, 66 N. W. 892.
699, 704, affd 154 Fed. 43, 83 C. C. 17 Indiana Life Endowment Co. v.
A. 155, 36 Ins. L. J. 884, certiorari Carnithan, — Ind. App. — , 109 N.
denied 207 U. S. 592, 52 L. ed. 355, E. 851.
28 Sup. Ct. 257. 18 Metropolitan Life Ins. Co. v.
14 Supreme Lodge Knights of McCormick, 19 Ind. App. 49, 65 Am.
Pythias v. Neclev, — Tex. Civ. App. St. Rep. 392, 49 N. E. 44, 27 Ins.
— , 135 S. W. 1046, 40 Ins. L. J. L. J. 271.
1123. That there is no return of pre-
As to measure of damage in such miums if risk has attached, see §
cases, see § 3454a herein. 1397 herein, and see also for full
On measure of damages for wrong- discussion as to return and nonre-
ful cancelation of policy issued on turn of premiums, §§ 1390 et seq.
assessment plan, see note in 7 L.R.A. herein. As to return for hreach of
(N.S.) 1163. contract by assurer, see §§ 1408 et
15 New York Life Ins. Co. v. seq. herein.
St a I ham, 93 U. S. 24, 23 L. ed. 789. As to measure of damages or
See also Abell v. Penn Mutual Life amount of recovery for wrongful
Ins. Co. 18 W. Va. 400. cancelation or breach of contract.
16 Van Werden v. Equitable Life
2811
§ 1059a JOYCE ON INSURANCE
Inasmuch, however, as the authorities are evidently irreconcilable
as to the amount recoverable or the damages to«be awarded where
there has been a wrongful cancelation or repudiation of the con-
tract by assurer, we shall further consider in connection with the
discussion of that subject the form of remedy which has been
pursued in cases where such recovery is sought.19
It is also competent for equity to restore a policy at any time
and before any liability has been incurred upon it; in other words
it is not necessary to wait until by death of insured a claim has
accrued where the insurer within just and legal cause has de-
clared that a policy is lapsed and forfeited.20 So it is held that for
a wrongful cancelation for nonpayment of premiums the plaintiff
was entitled to have the policy declared in force, but that it should
also be adjudged that the premiums due with proper interest be
paid.1
Under an Ohio decision, equity may compel the insurer, if the
contract is found to be in force after the company refuses to re-
ceive a premium under a claim that there is a forfeiture or lapse,
to receive the premiums due.2
§ 1659a. Rescission or cancelation: increase of assessments or
reduction of policy amount. — The rules given elsewhere herein as
to the validity of increase of assessments or reduction of the amount
payable8 should be considered in this connection, although it
may be stated here that the determining question in these cases is
whether or not vested rights have been injuriously affected or the
obligation of contract impaired and the terms and nature of the
contract are most important factors in arriving at any conclusion.
A rescission by assured and a suit for damages for breach or
19 See § 3454a herein. Y. 161. In this case the insuring
20 Hayner v. American Popular company was succeeded by a new
Life Ins. Co. 4 Jonas & Spencer company, and the question arose as
(N. Y.) 211 aff'd (mem.) 62 N. Y. to policyholder's redress if not ac-
620, cited in Danner v. Equitable cepting policy from the succeeding
Life Assur. Soc. 141 N. Y. Supp. company.
442, 444, 156 A pp. Div. 562, 564, 2 National Life Ins. Co. of the U.
although it was declared in said case S. v. Tullidge, 39 Ohio St. 240.
that it was unnecessary to decide On power of equity to take juris-
whether the action would then lie if diction of suit to cancel insurance
all rights under the policy had been policy for fraud, and to enjoin ac-
f'orfeited. Hon at law on policv, see notes in 12
1 Meyer v. Knickerbocker Life L.R.A.(N.S.) 881, 48 L.K.A.(N.S.)
Ins. Co. 73 N. Y. 516, 29 Am. Rep. 265.
200. See Whitehead v. New York 3 As to changes in by-laws etc.:
Life Ins. Co. 102 N. Y. 143. 55 Am. increasing assessments or dues or
Rep. 787, 6 N. E. 267; Fisher \. reducing amount payable, see §§
Hope Mutual Life Ins. Co. 69 N. 380c et seq. herein.
2812
RESCISSION AND CANCELATION § 1659a
repudiation of the contract is justified by the act of assurer in
amending its by-laws and unlawfully increasing assessments and
reducing the policy or certificate amount.4 And where there is
an illegal discrimination against old and in favor of new members
in changing the rules of assessments, such rates not being con-
templated in the contract of insurance an action will lie to recover
damages for the unauthorized cancelation for refusal to pay such
illegally increased assessments.5 So where insured surrenders his
certificate for the purpose only of changing the beneficiary the
insurer cannot add to, alter, or change any of the conditions of
the original surrendered certificate without assured's consent. Such
attempted change is in effect a new proposal or counter proposition
which must in some way be accepted, there must be a mutual
assent, and this applies to a change increasing assessments and
reducing the indemnity.6 So where after issuing the policy the
association reduces the amount payable under his contract, assured
has the right to refuse to pay further assessments and rescind even
after the expiration of the time limit for suing as fixed by the
by-laws has expired as such claim upon said reduction is not one
within the meaning of said time limitation.7
It is decided, however, that assured must promptly elect to
rescind in order to take advantage of the act of a mutual company
in rerating and increasing premiums and scaling down his policy
and that a delay of four years after notice during which he con-
tinued to pay premiums was too late to rescind and sue for the
present value of the policy and that he was estopped.8 So a delay
of seven years after an illegal increase of assessments before suing
for wrongful cancelation is too late even though limitations had
not ran and the first assessment had been paid under protest.9
Again an election to treat the original contract as still in force,
upon notification of reduction in the amounts of certificates in a
mutual benefit society, adhered to for two years and five months,
is not subject to change, so as to permit a certificate holder to
treat the contract as rescinded, and sue for assessments paid.10
4 Fort v. Iowa Legion of Honor, 8 Voss v. Northwestern National
146 Iowa, 183, 123 N. W. 224. Life Ins. Co. 137 Wis. 492, 118 N.
5Ebert v. Mutual Reserve Fund W. 212.
Life Assoc. 81 Minn. 116, 81 N. W. 9 Brockenbrough v. Mutual Re-
506, 84 N. W. 457. serve Life Ins. Co. 145 N. Car. 354,
6 Wood v. Brotherhood of Ameri- 59 S. E. 118.
can Yeomen, 148 Iowa, 400, 126 N. 10 Supreme Council American Le-
W. 940, s. c. 140 Iowa, 98, 117 N. gion of Honor v. Lippincott, 134
W. 1123, 113 N. W. 825. Fed. 824, 67 C. C. A. 650, 69 L.R.A.
7 Supreme Council American Le- 803.
gion of Honor v. Daix, 130 Fed. 101,
64 C. C. A. 435.
2813
§ 1059a JOYCE <>\ INSURANCE
v
But llic election to rescind or not when made is final and can-
nol be changed after an election is made to keep the policy in force
and after tendering the premiums thereon and in such case a
mere difference of opinion as to the validity of the increased assess-
ments under the terms of the contract or as to the construction of
the by-laws i- held not sufficient to justify a rescission as for an
anticipatory breach of contract.11 The turning poinl in the above
case, however, was, in view of the affirming decision, evidently
the finality of election, and the question of difference of opinion
as to construction of the by-laws and the validity of the assess nicnts
can he held to be only incidental to the determination of whether
or not ihere was a finality of election, for undoubtedly much the
same difference of opinion exists between insured and insurer as
to the construction of all by-laws or other amendments increasing
assessments or reducing policy amounts or certificate benefits. In
such case- ihe opposing views of the parties as to construction of
the contract is not the test, but, as we have above stated, the test
is whether or not vested rights are affected injuriously or the
obligation of contracts is impaired by the illegal assessment or
reduction of the amount payable. And breach of the contract of
a mutual benefit society by arbitrary reduction of the amounts of
outstanding certificates is not a continuing one, so as to entitle
a certificate holder to elect to treat the contract as rescinded at any
time before the time set for performance.12
11 Blakely v. Fidelity Mutual Life dered such assessment as lie deemed
Ins. Co. (U. S. C. C.) 143 Fed. 619, would continue it in force. This was
35 Ins. L. J. 699, aff'd 154 Fed. 43, an express unequivocal election,
83 C. C. A. 155, :56 Ins. L. J. 884, which, standing- without change for
certiorari denied 207 U. S. 592, 52 ten months, he could not by bringing
L. i''l. 355, 28 Sup. Ct. 257. "The suit, then convert into an acceptance
defendant in the present case stood of an alleged anticipatory breach.
on its contract as made. It did not The court below was warranted in
attempt to change its provisions. Its holding this case was governed by
position was simply a contention for our decision in" Supreme Council
an alleged construction. It insisted American Legion of Honor v. Lip-
upon carrying it out, and in so do- pincott, 134 Fed. N21, (17 C. C. A.
ing levied a certain assessment. The 650, 69 L.R.A. 803 "for of this case
plaintiff likewise stood on the policy, it may he, as was there, said: 'The
He too insisted on carrying it out principle of the finality of an elec-
and in so doing tendered a certain tion once made is applicable, we
premium. Under the proofs here think, to the present case,'" per
shown it is clear the plaintiff did not Buffington, C. J., in the affirming
treat and accept the defendant's ac-' case 154 Fed. 43.
tion as a breach by anticipation, and 12 Supreme Council American Le-
then elect to consider the contract as gion of Honor v. Lippincott, 134
at an end. On the contrary, be Fed. 824, 67 C. C. A. 650, 69 L.R.A.
treated the contract in life and ten- 803.
2814
RESCISSION AND CANCELATION § 1GG0
But it is decided that the increase of assessment rates in excess
of those provided for in the by-laws at the time membership
commences does not give a right to rescind and recover assessments
paid where the member has agreed to abide by all thereafter-
enacted rules and regulations and especially is this so in view of a
statutory provision that additional increased or extra rates of con-
tribution shall be collected to meet deficiencies in the funds for
payment of death and disability claims.13 And where assured
refuses to pay a mortuary call and declares his intention not to
continue the insurance on account of increased assessments, there
can be no recovery on the policy irrespective of the question of
illegality of the increase.14
§ 1660. Strict compliance with stipulation as to rescission or can-
celation required unless waived: when stipulation not binding. —
If the contract has been fairly entered into, and has taken effect,
the right to rescind or cancel can only be exercised by either party
acting strictly in compliance with the exact stipulations of the
policy relating thereto. If the cancelation is asked for by the
company, no burdens can be imposed upon the assured neces-
sitating trouble and expense. The demand must also be uncon-
ditional, except in certain cases where the right to cancel is absolute
upon breach of condition.15 But the party against whom the
13 Thomas v. Knights of Macca- Ins. L. J. 423; Clark v. Insurance,
bees of the World, ^85 Wash. 065, Co. of North America, 89 Me. 26, 35
L.R.A.1916A, 750, and note, 149 Pac. L.R.A. 276, 35 Atl. 1008; Chase v.
7. Phoenix Mutual Fire Ins. Co. 67 Me.
On right of mutual benefit society 85.
to decrease benefits, see note in 31 Massachusetts.— Bennett v. City
L.R.A.(N.S.) 423; on right to in- Ins. Co. 115 Mass. 241.
crease rates, see notes in 31 L.R.A. Missouri. — Landis v. Home Mu-
(N.S.) 417, and L.R.A.1916A, 762. tual Fire & Marine Ins. Co. 56 Mo.
14 Ryan v. Mutual Reserve Fund 591; Payne v. President & Directors
Life Assoc. (U. S. C. C.) 96 Fed. of Insurance Co. of North America,
796. 170 Mo. App. 85, 156 S. W. 52, 42
15 United States.— Mohr & Mohr Ins. L. J. 1049.
Distilling Co. v. Ohio Ins. Co. 13 Nebraska.— State Insurance Co.
Fed. 74; Runkle v. Citizens' Ins. Co?. of Des Moines v. Hale, 1 Neb.
of Pittsburgh, 6 Fed. 143. (Unof.) 191, 95 N. W. 473.
Arkansas. — Commercial Union Ins. New Jersey. — Fritz v. Pennsyl-
Co. v. King, 108 Ark. 130, 156 S. vania Fire Ins. Co. 85 N. J. L. 171,
W. 445, 42^Ins. L. J. 1021. 50 L.R.A. (N.S.) 35, 88 Atl. 1065, 43
Illinois. — Peoria Fire & Marine Ins. L. J. 250.
Ins. Co. v. Botto, 47 111. 516. Neio York.— Griffey v. New York
Kentucky.— General Accident Fire Central Ins. Co. 100 N. Y. 417, 53
& Life Assur. Corp. v. Lee, 165 Ky. Am. Rep. 202, 3 N. E. 309, s. c. 30
710, 178 S. W. 1025. Hun (N. Y.) 299; International Life
Maine.— Bard v. Firemen's Ins. & Trust Ins. Co. v. Franklin Life &
Co. 108 Me. 506, 81 Atl. 870, 41 Trust Co. 66 N. Y. 119; Goit v. Na-
2815
§ 1661 JOYCE ON INSURANCE
abrogation of the contract is claimed may waive strict compliance
with such stipulations.16 A contract stipulation, however, that the
insured cannot cancel the policy, to take out insurance in another
company, without incurring a forfeiture of his premium, does not
hind him where the policy in question was substituted by the
company's agent for other policies, giving him a right to cancel,
and the insured relied upon the agent for the insertion of a similar
clause in the substituted policy, and there was a concealment by
the agent of the fact that said clause was not contained in the
substituted policy.17 If it is stipulated that a mutual fire policy
may be terminated at the request of the member of the company
where the premium or note given therefor has been paid such con-
dition as to payment must be complied with or the request or
demand for cancelation may be ignored by the company unless
there is an express or special agreement with the insurer permitting
cancelation and such special agreement cannot be inferred from
the failure of insurer to respond to insured's demand where the
above-stated condition has not been complied with and to effect
such special agreement the proposition of assured to cancel must
be accepted and the unearned premium returned.18
§ 1661. Rights relating to rescission or cancelation must be exer-
cised within a reasonable time. — The right to rescind or cancel 3
policy where the policy would otherwise continue in force must
be exercised within a reasonable time after such right accrues.
Thus, if a right to rescind for breach of contract is claimed by
the assured, he must act within a reasonable time after the claimed
breach, and a delay of three and one-half years, the assured during
all that time treating the contract as in force, knowing the fact
of the breach thereof, will prevent a rescission.19 And it is held
that if the assured requests the company to cancel, it must refuse
to accept said proposition within a reasonable time; if it remains
silent for two and a half months after receiving such request, and
then sends a notice bearing .a date prior to that of the loss, but
tional Protection Ins. Co. 25 Barb. 16 Bennett v. City Ins. Co. 115
(N. Y.) 189. Mass. 241.
Pennsylvania. — Baldwin v. Penn- 17 Hartford Steam Boiler Inspec-
svlvania Fire Ins. Co. 206 Pa. 248, tion & Ins. Co. v. Cartier, 89 Mich.
55 Atl. 976. 41, 50 N. W. 747.
Texas. — Planters' Ins. Co. v. 18 Farmers' Mutual Ins. Assoc, of
Walker Lodge, 1 White & W. Civ. Ala. v. Tankersley, — Ala. — , 69 So.
Cas. Ct. App. (Tex.) sec. 758, W. & 410.
W. (Tex.) 415. t 19Marg;ut v. United Brethren Mu-
Wisconsin. — John R. Davis Lum- tual Aid Soc. 148 Pa. St. 185, 23 Atl.
ber Co. v. Hartford Fire Ins. Co. 95 89G.
Wis. 226, 37 L.R.A. 131, 70 N. W.
84.
2816
RESCISSION AND CANCELATION §§ 1662, 16G3
postmarked a day later, refusing to cancel, it will be estopped to
deny that it has assented to the cancelation. In this case the point
was raised that the validity of the policy issued by another com-
pany was dependent upon whether the prior policy was canceled.20
But if a time is specified within which the right to cancel must be
exercised, such limitation governs, and if the right is not exercised
within the specified time, it is lost.1 So in case of fraud in pro-
curing the policy or of breach of warranty, the election to rescind
notice, and a tender or return of the premium must be made or
given within a reasonable time upon discovery of the breach or
fraud, or the right is waived and merely giving notice is in-
sufficient.2
§ 1662. Company cannot cancel when loss is imminent. —
Although a reserved right to cancel a policy may be exercised
in case the risk is subjected to a greater danger of fire than ex-
isted when the policy was issued, provided the right is exercised
in good faith, yet if the act of cancelation will operate as a
fraud upon the assured, by reason of some special emergency,
such as an approaching conflagration, or a probable and threat-
ened peril from fire which makes the liability to loss imminent,
the privilege reserved to terminate the policy on notice cannot
be exercised, for to admit such a right would render policies
valueless. And in case the notice of cancelation is given in the
face of such imminent danger, it cannot aid the assurer that the
property is actually destroyed by fire from another quarter. On
the other side, however, the assured ought to be obligated to use
every reasonable endeavor to avail himself of such means as are
afforded of protection from an approaching conflagration, and
which every prudent man would use, especially so if his neglect
so to do is such as to clearly evidence an intent to defraud the
company.3
§ 1663. Cancelation and rescission after loss of forfeiture. — As
a rule, the right of the company to cancel a policy must be exer-
20 Walters v. St. Joseph Fire & implied that he shall have a reason-
Marine Ins. Co. 39 Wis. 489. able time after he is called upon to
1 Tough v. Provincial Ins. Co. 20 do the thing- or render the service.
L. C. J. Q. B. 168. The privilege reserved by the com-
2 Mutual Life Ins. Co. v. Finkel- pany to terminate the policy upon
stin, 58 Ind. App. 27, 107 N. E. 557. notice cannot be exercised under cir-
3 Home Fire Ins. Co. of New York cumstances which would make it a
v. Heck, 65 111. Ill, approved in fraud on the insured. Reversion
Lipman v. Niagara Fire Ins. Co. 121 Lipman v. Niagara Fire Ins. Co. 48
N. Y. 454, 8 L.K.A. 719, 24 N. E. Hun (N. Y.) 503, 1 N. Y. Supp. 384.
699. The rule is well settled that See Home Ins. Co. v. Heck, 65 111.
when a person undertakes to do an 111; Imperial Fire Ins. Co. v. Gun-
act upon notice from another, it is ning, 81 111. 236.
Joyce Ins. Vol. III.— 177. 2817
§ 1GG4 JOYCE ON 1\SI NAWi:
cised before the rights of the assured thereunder have become
fixed by a loss within the terms of the contract, although in cer-
tain cases of fraud and mistake which arc noted under the sections
herein relating to cancelation in equity the contract may be can-
celed.4 It is held, however, in a case in Canada that if the righl
to cancel for forfeiture is absolute, dependent upon notice merely,
such notice may be given after a loss.5 If the cancelation depends
upon a return of the unearned premium, which is not paid until
after the loss, and is then received in ignorance thereof, the in-
surer is not released from liability under the contract, for there is
no cancelation.6 even though the assured in such case signs a can-
celation receipt.7 Where insurance is obtained for a private cor-
poration by its president acting without authority and his act in
so doing is not ratified prior to a loss the insurer may. notwith-
standing any claimed recognition of the policy after loss, upon
learning the facts repudiate the contract as void from its inception
by notice so declaring and denying all liability.8 It is not neces-
sary thai rescission takes place before suit is brought as the answer
to a complaint for loss may operate as a rescission and if ac-
companied with a proper tender back of the premium it will he
sufficient.9
§ 1664. Cancelation in equity after policy has become void or
inoperative. — As a general rule, a court of equity will not exercise;
jurisdiction to cancel a contract merely because it has become void
or inoperative by reason of some fact which has taken place since
its execution.10 Although equity will entertain jurisdiction in
cases of contracts generally to cancel a contract void upon its face.11
And it is also held in numerous cases that a policy which lias be-
come void since its execution by reason of some fact not apparent
4 See Monasi v. Manhattan Life of Kokomo, 183 Ind. 694, 110 N. E.
Ins. Co. 32 K. I. 557, 79 Atl. 932. 00, 47 Ins. L. J. 55.
5 Bruce v. Gore District Mutual l0 Connecticut Mutual Life Ins.
Ins. Co. 20 U. C. C. P. 207. Co. v. Home Ins. Co. 17 Blatch. (U.
6 Hollingsworth v. Germania Fire S. C. C.) 142, Fed. Cas. No. 3107,
Ins. Co. 45 Ga. 294, 12 Am. Rep. per Shipman, J.; Connecticut Mutu-
579; Van Valkenburgh v. Lenox al Life Ins. Co. v. Bear, 20 Fed. 582.
Fire Ins. Co. 51 N. Y. 465. See New , On power of equity to take juris-
Jersey Rubber Co. v. Commercial diction of suit to cancel policy for
Union Assur. Co. of London, 64 N. fraud and to enjoin action at law on
J. L. 51, 44 Atl. 848, aff'd 04 N. J. the policy, see notes in 12 L.R.A.
L. 580. 46 Atl. 777, 30 Ins. L. J. 70. (N.S.) 881, and 48 L.R.A.(N.S.)
7 Van Valkenburgh v. Lenox Fire 265; on right of insurer to cancela-
[ns. Co. •")] X. Y. 465. tion of the policy in equity before
8 Marqusee v. Insurance Co. of loss upon the ground that it was ob-
North America, 211 Fed. 903, 128 tained by fraud, see note in 45
C. C. A. 281, 43 Ins. L. J. 77:.. L.R.A. (N.S.) 222.
9 Mendenhall v. Fanners' Ins. Co. n See Cornish v. Bryan, 10 N. J.
2818
RESCISSION AND CANCELATION § 1665
upon its face, as in case of a breach of condition or fraud, mis-
representations, or concealment in its procurement, that equity will
upon proper showing, decree a cancelation, not exercising such
jurisdiction as a matter of right in the party, but in the court's
equitable discretion.12 So notwithstanding the rule, if the special
circumstances of the case would render it unjust or oppressive for
the policy to remain outstanding, the court will, under such cir-
cumstances assume equitable jurisdiction, and cancel performed
and inoperative contracts, and it will also, under like circumstances
and for like reasons, set aside contracts for defects not apparent
upon their face, although such defects arise after their execution,
and even though an action at law could have been maintained,13
It is said, however, with much reason that if the objection does not
appear upon the face of the instrument, it cannot be held that law
affords that relief which is obtainable in equity.14
§ 1665. May the policy be terminated eo instanti on notice:
reasonable time. — It was held in the superior court of New York
that notwithstanding a reservation in the policy enabling the com-
pany to cancel upon giving notice to the assured, that the latter
was entitled to a reasonable time after notice, and that a notice
given within a very short time before the fire and at a time of the
day when insurance would be difficult to obtain, was unreason-
able.15 The court of appeals, however, did not sustain this ruling,
but decided that inasmuch as there was no special emergency at
the time, and as the notice was given in good faith, under a right
reserved in the policy, that the cancelation was effected. The court
said that although the rule was "well settled that where a person
undertakes to do an act upon notice from another, it is implied
that he shall have a reasonable time after he is called upon to do
the thing or render the service, and no time for performance is
specified, the law gives him a reasonable time;" but that the rule
of reasonable time did not apply where the time of performance
is fixed by the contract, and that if the obligation is only to con-
Eq. (2 Stock.) 146; Hays v. Hays, App. C. 22; Hartford v. Chipman, 21
2 Ind. 28. Conn. 488; Ferguson v. Fisk, 28
12 Wilson v. Ducket, 3 Burr. 1361 ; Conn. 501.
Barker v. Walters, 8 Beav. 92; At- 14 Fenn v. Craig, 3 Younge & C.
lantie Ins. Co. v. Lamar, 1 Sand. Ch. 216.
,(N. Y.) 91; and cases cited in §§ 15 Lipman v. Niagara Fire Ins. Co..
1674-1676 herein. 48 Hun, 503, 1 N. Y. St. Rep. 384;
13 Connecticut Mutual Life Ins. followed in Karelsen v. Sun Fire Of-
Co. v. Home Ins. Co. 17 Blatehf. (U. fice, 1 N. Y. St. Rep. 387, 48 Hun,
S. C. C.) 142, Fed. Cas. No. 3107, 621.
per Shipman, J.; citing Hamilton v. On sufficiency of notice to insured
Cummings, 1 Johns. Ch. (N. Y.) of cancelation of fire policy, see note
517; Hoare v. Bremridge L. R. 8 in 50 L.R.A.(N.S.) 35.
2819
§ 1665a JOYCE ON INSURANCE
tinue until notice given to the other party, it cannot continue after
the not ice is given, and the court added that it was competent for
the parties, had they so desired, to have stipulated that the com-
pany should carry the risk a reasonable time after notice, to enable
the assured to secure insurance elsewhere, but not having so pro-
vided, the policy must be so construed according to its terms, and
that a custom to give reasonable no.tice could not be admitted to
control the explicit Language used in the contract. In this case
the question of tender of Unearned premium was eliminated, since
no premium had been paid.16 It is held, however, in a Massa-
chusetts ease that the insured must give reasonable notice.17
§ 1665a. Same subject: specified time must intervene: compu-
tation of time. — The full time specified as that upon the expiration
of which the notice to cancel becomes effective must intervene or
the policy will remain in force.18 And where the policy or stat-
ute fixes a five day limit the policy remains in full force and effect
for that length of time after receipt of the notice of cancelation
even though said notice fixes a shorter period of time as insured
is entitled to the full number of days allowed by statute or the
policy to enable him, if he so desires, to protect himself by other
insurance before the canceled policy expires.19 Nor can the re-
quired time within which the cancelation will become effective be
shortened by insurer.20 And the cancelation will take effect in
five days after receipt of the notice although the hour is specified
as the expiration of said time.1 And a notice which allows only five
days inclusive of the time of mailing and which is received the
16Lipman v. Niagara Fire Ins. Co. premiums does not render the policy
L2I X. V. 454, 8 L.R.A. 719, 24 N. void, but that some affirmative ac-
E. 699; citing Mueller v. South Side tion must be taken by the company.
Fire Ins. Co. 87 Pa. St. 399; Grace O'Brien v. Prudential Ins. Co. 66 N.
v. American Central Ins. Co. 109 U. Y. St. Rep. 724, 33 N. Y. Supp. 67,
S. 278, 27 L. ed. 932, 3 Sup. Ct. 207. 12 Misc. Rep. 127.
See also Imperial Fire Ins. Co. v. 18 Selieel v. German-American Ins.
Gunning, 81 111. 236, where it is de- Co. 228 Pa. 44, 76 Atl. 507, 39 Ins.
dared that if a company waits until L. J. 12.~>2.
after a loss, a court will not then re- 19 Commercial Union Fire Ins.
scind the contract. Co. v. King, 108 Ark. 130, 156 S.
"Massasoit Steam Mills Co. v. W. 445, 42 Ins. L. J. 1021, citing
Western Assurance Co. 135 Mass. American Ins. Co. v. Brooks, 83 Md.
110. See also Chadbourn v. German- 2, 31 Atl. '■'•Til
American Ins. Co. 31 Fed. 533, 20 Bard v. Firemen's Ins. Co. 108
where the policy provides that un- Me. 500, 81 Atl. 870, 41 Ins. L. J.
less the premiums are paid within a 423.
certain time, the company may can- x Ralston v. Royal Ins. Co. Ltd.
eel the policy without notice. It is of Liverpool, 79 Wash. 557, 140 Pac.
held that the mere nonpayment of 552.
2820
RESCISSION AND CANCELATION §§ 1665b, 1660
second day thereafter does not effect a cancelation.2 It is held in
Pennsylvania that it is lawful for the parties to a contract of in-
surance to stipulate in the policy that the insurance shall begin
at noon and expire at noon of the days named, and such an agree-
ment becomes the special rule for the fixing of dates so referred
to, for its object is to avoid possible dispute on the fundamental
basis of any liability for loss; but such rule should not be applied
to the five days' notice of cancelation, and other collateral questions
of time, in the policy, as the better rule to apply to those com-
putations is the general one of excluding the first day, and counting
the days as legal days beginning and ending at midnight.3
If statutory notice is a condition precedent to cancelation, the
day of mailing is to be excluded in the computation of time.4
§ 1665b. Entire or divisible contract: notice. — If the policy covers
separate buildings and it is treated as a separate contract or as an
insurance upon each building, it is held that the insurer may,
by proper and sufficient notice in conformity with the statute,
cancel the contract as to one of the buildings which is in an un-
satisfactory condition contrary to the policy conditions and leave
the policy in force as to the other buildings.5
§ 1666. Cancelation of parol contract: notice. — The fact that a
contract rests in parol does not enable it to be canceled, except upon
notice,6 such a contract being dependent upon the conditions of
the ordinary policy issued in such cases.
2 German Union Fire Ins. Co. of noon of standard time of the place
Bait. v. Fred G. Clarke Co. 116 Md. where the property covered by the
622, 39 L.R,A.(N.S.) 829 (annotated policy is situated.*" Massachusetts
on from what time notice of cancela- standard form of tire policy, Rev. L.
tion of fire insurance becomes effec- c. 118, sec. 60 (Rev. L. Supp. 1902-
tive), 82 Atl. 974, 41 Ins. L. J. 1047. 1908, sec. 60, pp. 1191-1193) refer-
3 Penn Plate Glass Co. v. Spring ring to the term of the policy "be-
Garden Ins. Co. 189 Pa. St. 255, 29 ginning on ... at noon," etc.
Pitts. L. J. N. S. 318, 43 Wkly. K As to meaning of "noon" see also
C. 516, 69 Am. St. Rep. 810, 42 Atl. Rochester-German Ins. Co. v. Peas-
138, 28 Ins. L. J. 223. lee-Gaulbert Co. 120 Ky. 752, 1
Inasmuch as the notice of cancel- L.R.A. (N.S.) 364 and note on inten-
ation may by provision of the stat- tion of parties to contract to adopt
ute or policy become effective in a standard instead of sun time, 87 S.
specified or limited time, the follow- W. 1115.
ing may become pertinent in the 4 Hicks v. National Life Ins. Co.
computation of time although it has 9 C. C. A. 215, 60 Fed. 690.
more particular relation to the dur- 5 German Mutual Fire Ins. Co. v.
ation of the risk under the terms of Weikel, 153 Ky. 288, 155 S. W. 373,
the policy. "The word 'noon' oc- 42 Ins. L. J. 811.
curring in the standard form above As to entire or severable contract,
set forth shall be construed to be the see § 1931 herein.
2821
§§ 1667, 1008 JOYCE ON INSURANCE
§ 1667. Cancelation: notice to the insurer. — If the risk is in-
•( ipted under an open policy of insurance, the insured cannot
terminate the policy by merely giving notice to the insurer; the
latter's consenl is necessary.7 And this rests upon the general
principle already noticed, that except there be a right to rescind
under the policy, or sonic statute provide otherwise, a policy can-
not be terminated by one party, except by the consent of the other,
subjeel to such exceptions as are noted under this chapter.
§ 1668. Cancelation: notice to the assured: to mortgagee: to
one of several. — If the policy reserves a right to cancel upon notice,
this moans a notice to the assured or his agent authorized to receive
notice;8 especially where the insurer has knowledge of the limit-
of the agent's authority, and that the policy has been delivered to
assured.9 If, however, the policy provides for notice of cancela-
tion to insured or his representatives, an affidavit of defense may
set up cancelation and notice to brokers who were assured's agents
and representatives in all matters relating to insurances.10 The
mere fact that an agent has authority to effect a particular in-
surance does not authorize him to accept notice of cancelation,11
and if the agent is a general agent employed to keep certain prop-
erty insured to a certain amount, and he is intrusted with the
charge of all the policies, although only for the purpose of prevent-
ing 1 lie inconvenience arising from frequently sending and return-
ing policies, such an agent has authority to receive notice of can-
celation.12
A mortgagee to whom loss is payable as his interest may appear
and to whom also the conditions of the policy expressly apply is
entitled to notice of cancelation.13 To cancel a policy payable to
6 Commercial Union Assur. Co. v. 84 Va. 110, 125, 10 Am. St. Rep.
State, 113 Ind. 331, 15 N. E. 518. 810, 4 S. E. 178.
7 New York Fire Marine Ins. Co. 9 Snedicor v. Citizens' Ins. Co. 100
v. Roberts, 4 Duer (N. Y.) 141. Mich. 83, 04 N. W. 350.
8 London & Lancashire Co. v. 10 Royal Ins. Co. v. Wight, 5 C.
Turnbull, 80 Ky. 2:50, 5 S. W. 542; C. A. 200, 55 Vod. 455; reversing 53
Lancashire Ins. Co. v. Nill, 114 Pa. Fed. 340; distinguishing Grace v.
St. 248, 0 Atl. 43; Van Loan v. American Central Ins. Co. 109 U.
Farmers' Mutual Fire Ins. Co. 90 N. S. 278, 27 L. cd. 932, 3 Sup. Ct. 207.
Y. 280, 24 Hun, 132. "British-American Ins. Co. v.
To terminate a contract of insur- Cooper, 0 Colo. App. 25, 40 Pac.
ance notice to the assured, or to 147.
someone who is his agent to receive 12 Sehauer v. Queen City Ins. Co.
such notice, is required. Grace v. 88 Wis. 561, 00 N. W. 994.
American Central Ins. (',.. ion I'. w Rawl v. Insurance Co. of North
S. 278, 27 1,. ed. 932, 3 Sup. Ct. 207. America, 94 S. Car. 299, 15 L.R.A.
Cited in Mutual Assurance Soc. v. (N.S.) 463 (annotated on necessity
Scottish Union & National Ins. Co. of giving mortgagee notice to cancel
2822
RESCISSION AND CANCELATION § l(J(58a
a mortgagee as his interest may appear, notice must be given to
the mortgagee, where the policy provides that it may be canceled
by giving five days' notice of cancelation.14 Notice to the mort-
gagee is a prerequisite to cancelation under a standard policy con-
taining a mortgagee clause and providing that it may be
canceled at any time at assured's request where it is also provided
that no act or default of any person other than the mortgagee or
his agent shall affect his right to recover in case of loss.15 Notice
to a mortgagee is insufficient where the mortgagor is alone obligated
to pay the premium.16 But it is held in Pennsylvania that notice
of cancelation to the mortgagee alone to whom the loss is payable
is sufficient.17 A misstatement by an applicant of fire insurance
as to the nature of his title, is a delinquency within the meaning
of a mortgagee clause attached to the policy, which provides that
notice of delinquency on the part of the insured will be given
the mortgagee before any suspension or cancelation is made affect-
ing his interest.18
Notice to one of several holding an interest under the policy is
insufficient.19
§ 1668a. Notice by publication: decree of foreign court. — And
publication in a newspaper of an order of a foreign court requir-
ing all claims to be presented to the receiver in a foreign state, is
policy, 77 S. E. 1013, 42 Ins. L. couver National Bank v. Law Union
J. 804 (same case 97 S. Car. 189, & Crown Ins. Co. 153 Fed. 440."
81 S. E. 505). The court, per Jus- 14Rawl v. American Central Ins.
tice Woods, said: "There can be no Co. 94 S. Car. 299, 45 L.R.A.(N.S-)
doubt that under a policy like this, 463n, 77 S. E. 1013.
a mortgagee, or other person, named 15 Gilman v. Commonwealth Ins.
as the payee as his interest may ap- Co. 112 Me. 528, L.R.A.1915C, 758,
pear holds his protection under the 92 Atl. 721. See also note 45 L.R.A.
policy subject to having it defeated (N.S.) 463, on necessity of giving
by any act or omission of the assured mortgagee notice to cancel policy,
which under the policy produces a On effect of breach of policy by
forfeiture. Under such a policy it mortgagor on rights of mortgagee,
is the owner's, not the mortgagee's see notes in 18 L.R.A. (N.S.) 197; 25
interest that is insured, and the L.R.A. (N.S.) 1226; 31 L.R.A. (N.S.)
mortgagee must stand or fall on the 455, and L.R.A.1915C, 758.
performance or breach by the owner 16 Chadbourne v. German Ameri-
of his contract. Bates v. Equitable can Ins. Co. 31 Fed. 533.
Ins. Co. 10 Wall. (U. S.) 33, 19 L. 17 Mueller v. South Side Fire Ins.
ed. 882; Ermentrout v. American Co. 87 Pa. St. 399.
Fire Ins. Co. 60 Minn. 418, 62 N. W. 18 People's Savings Bank v. Re-
543; Brunswick Savings Institution tail Merchants' Mutual Fire Ins. As-
v. Commercial Union Ins. Co. 68 soc. 146 Iowa, 536, 31 L.R.A. (N.S.)
Me. 313, 28 Am. Rep. 56; Seania 455, 123 N. W. 198.
Ins. Co. v. Johnson, 22 Colo. -476; 45 19 Guggisberg v. Waterloo Mutual
Pac. 431 ; Delaware Ins. Co. v. Greer, Fire Ins. Co. 24 U. C. Ch. 350.
120 Fed. 916, 61 L.R.A. 137; Van-
2823
§ 1668a
JOYCE ON INSURANCE
not of itself a compliance with a policy requirement of notice to
insured and return to him of the unearned premiums, as such
requiremenl necessitates a personal notice unless otherwise pro-
vided by law. especially so as a receiver has no extraterritorial
jurisdiction and under the statute of the state where the prop-
city insured is situate dissolved corporations continue bodies cor-
porate for the purpose of suing or being sued and settling their
affairs.20 In connection with the question of extraterritorial .juris-
diction, it may he stated here that in an Iowa case it is held that -a
foreign receiver of a company which issues policies for a certain
term and an advance premium, is not entitled to claim funds or
said company found in Iowa as such claim will not be recognized
even by way of comity if the result would he to relegate Iowa
creditors to the relief to which they would be entitled in a foreign
jurisdiction when there are funds in said state from which such
claims mav be satisfied.1
20Frink v. National Mutual Fire 49 L. ed. 1163, 25 Sup. Ct. 770; Hale
Ins. Co. 90 S. Car. 544, 74 S. E. 33, v. Allinson, 188 U. S. 56, 47 L. ed.
41 Ins. L. J. 928. The court, per 380. 123 Sup. Ct. '244; Booth v. Clark,
Frazer, J., after reciting the provi- 17 How. (58 U. S.) 322, 15 L. ed.
sion as to cancelation declared that 104; Barth v. Backus, 140 N. Y. 230,
there were no authorities in the state 23 L.R.A. 47, 37 Am. St. Rep. 545,
bearing directly on the question. 35 N. E. 425; Howarth v. Angle, 162
(The decision was rendered in 1912.) N. Y. 179, 47 L.R.A. 725, 56 N. E.
Watts, J., dissented on the grounds 489. The court then considers the
that insolvency and appointment of case of Relfe v. Rundle, 103 U. S.
a receiver operate to cancel all pol- 322, 26 L. ed. 337, declares that it
icies, even though notice is required has no direct application, and as to
by policy where insurer desires to the cases of Fry v. Charter Oak Life
cancel, and that executory contracts Ins. Co. (U. S. C. C.) 31 Fed. 197,
of a corporation become nugatory and Parsons v. Charter Oak Ins. Co.
when it is forced into involuntary (U. S. C. C.) 31 Fed. 305, it states
liquidation and dissolution, and that that they are not analogous and adds
the decree of the foreign state was that : "without acceding to the
effectual everywhere. soundness of the reasoning employed
1 Shloss v. Metropolitan Surety in deciding 'the Relfe ease' it is
Co. 149 Iowa, 382, 128 N. W. 384. sufficient to say that the case before
Citing: Nebraska Fire Ins. Co. v. us is not analogous, for plaintiffs'
Baton, 107 Iowa, 214, 43 L.R.A. 695, rights as against this defendant com-
70 Am. St. Rep. L93, 77 N. W. 865; pany were determined by contract,
State Bank v. McElroy, 106 Iowa, and by contract alone, and those sub-
258. 76 X. \Y. 715; Parker v. Lamb, stantive rights are not to be affect-
99 Iowa, 265, 34 L.R.A. 704, 68 N. ed, as we think, by statutory provi-
W. 086; Ayres v. Siebel, 82 Iowa, sions with reference to the method in
347, 47 N. W. 989. The court, per which the company may be wound
McClain, J., declares that "this is up." The court also considers Bern-
the recognized rule in New York and heimer v. Converse, 206 U. S. 516,
the United States courts." Citing: 51 L. ed. 1163, 27 Sup. Ct. 755, de-
Great Western Mining & Manufac- clares it not in point and disapproves
turing Co. v. Harris, 198 U. S. 561, Bockover v. Life Association, 77 Va.
2824
RESCISSION AND CANCELATION § 166D
§ 1669. Cancelation: notice by mail must be received. — Notice
of cancelation, if given by mail, must be received before loss by
the party entitled thereto, or by his agent authorized to receive the
same, otherwise there is no cancelation,2 even though a by-law pro-
vides for service of the notice personally or by mail.3 A receipt of
notice by mail must be affirmatively shown, the burden of proof
being upon insurer, and if such receipt is not established, there
is no cancelation.4 If there is no positive evidence that the letter,
claimed to have contained the notice of cancelation, was ever
mailed or even directed, there is no cancelation, especially in the
face of a denial by the assured of a receipt of the letter.5 The
mailing of a notice of an intention to cancel an insurance policy
five days later, which is not received until two days after the mail-
ing, is not, in case no notice of cancelation is given, sufficient to
render valid the cancelation on the day named, under a provision
in the policy permitting cancelation upon giving five days' notice
thereof.6 As has been noted under a preceding chapter, there are
many cases which hold that in case of notice of the time of pay-
85, so far as its application in the New York. — Crown Point Iron Co.
case before the court is concerned, v. Aetna Ins. Co. 127 N. Y. 608, 14
and concludes: "It must be borne in L.R.A. 147, 28 N. E. 653.
mind that the receiver here defend- Wisconsin. — Whiting v. Missis-
ing is simply a receiver of an insol- sippi Valley Mutual Ins. Co. 76 Wis.
vent company who is by the corpor- 592, 45 N. W. 672.
ation laws of New York authorized England. — Tough v. Provincial
to collect the debts, preserve the Fire Ins. Co. 20 L. C. J. Q. B. 168.
property, and distribute the assets of Mailing a letter inclosing policies
the company among its creditors, for cancelation will effect such can-
and we fail to see how any receiver celation only when it is actually re-
thus provided for can in this state, ceived by the insurer or his repre-
as against the established rule of our sentative ; and the policies will be
law, take the company's assets found binding in case of loss while the let-
in this state and seized for the plain- ter is in the mails. Crown Point
tiff in an attachment proceeding out Iron Co. v. Aetna Ins. Co. 127 N. Y.
of our state without satisfying the 608, 14 L.R.A. 147, 28 N. E. 653.
valid claim of the attaching creditor, 3 Mullen v. Dorchester Mutual
and compel him to resort to the Fire Ins. Co. 121 Mass. 171.
courts of New York for the purpose 4 Commercial Union Fire Ins. Co.
of securing payment of such claim." v. King, 108 Ark. 130, 156 S. W.
2 United States. — Chadbourne v. 445, 42 Ins. L. J. 1021.
German-American Ins. Co. 31 Fed. 5 Whiting v. Mississippi Vallev
533. Mutual Ins. Co. 76 Wis. 592, 45 N.
Maryland. — German Union Fire W. 672.
Ins. Co. of Bait. v. Fred G. Clarke 6 German Union Fire Ins. Co. v.
Co. 116 Md. 622, 82 Atl. 974, 41 Ins. Fred G. Clarke Co. 116 Md. 622, 39
L. J. 1047. L.R.A. (N.S.) 829 (annotated on
Massachusetts. — Mullen v. Dor- from what time notice of cancelation
Chester Mutual Fire Ins. Co. 121 of fire insurance becomes effective),
Mass. 171. 82 Atl. 974.
2825
§§ 1669a, 1669b JOYCE ON INSURANCE
men! of premiums <>r assessments, the notices are sufficiently served
by depositing the same properly mailed and addressed, even though
never received.8" If personal notice is required, the assured may,
by receiving it without objection, waive the personal service.7
§ 1669a. When mailing notice and unearned premium to foreign
corporation sufficient. — Where insured is a foreign corporation, and
all its officers are absenl from the state in which its office, its
principal place of business, and the property insured are situated,
and the policy provides that it may be canceled by insurer by
giving notice and tendering a ratable proportion of the premium
to insured, mailing a notice, or a copy of it, and the return pre-
mium in a letter postpaid and addressed to insured at it,- post-
ollice address, or delivering a copy of the notice and the returned
premium to insured's agent in charge of its office and business,
are sufficient to effect a cancelation. And it is declared that a
higher degree of service of notice of cancelation of a policy ought
not to be necessary than is required by a statute which provides
that service of a summons in a civil action may be made on a
foreign corporation having property and doing business in the
state by delivering a copy thereof to any of its officers or agents
within the state. It is also declared that a notice by mail which
is received by the party to be notified is sufficient, where no other
method of giving the notice is prescribed, and the legal pre-
sumption is that a letter properly addressed to the party to he
notified, postpaid and mailed, is received by the addressee.8
§ 1669b. Notice by registered letter: when insured not put on
inquiry. — A notice of cancelation sent by registered letter marked
return in five days, is insufficient where it was not received by
assured on account of his absence and was returned to insurer in
accordance with his request upon the letter and in compliance with
Federal statute regulating such matters, even though the policy
stipulation made a notice sufficient by depositing the same in the
mail addressed to insured, postage prepaid.9 A postpaid registered
6a See § l(>69a herein. ness, and postoffice address are sit-
'Hollistor v. Quiney Ins. Co. 118 uated, and failing to give express au-
Mass. 478. thority to its agent in charge thereof
8 Liverpool, London & Globe Ins. to accept notice of cancelation and
Co. Ltd. v. Harding, 201 Fed. 515, the return premium." The court
11!' ('. C. A. (ill, 42 Ins. L. J. 534. cites as to notice by mail being suf-
The court, per Sanborn, C. J., said: ficient and to the presumption that
"A foreign corporation may not per- it is received, Crown Point Eron Co.
petuate its insurance under such a v. Aetna Ins. Co. 127 N. Y. 608, 619,
policy by selecting officers who ah- 14 L.R.A. 147, 28 N. K. 653.
sent themselves from the state where 9 American Automobile Co. v.
its property insured, its office, busi- Watts, 12 Ala. App. 518, 67 So. 758.
2826
RESCISSION AND CANCELATION § 1G70
envelop addressed to insured and received but unopened by him is
not sufficient to put him on inquiry and charge him with notice
of an inclosed cancelation of his policy where said envelop bears
upon its face the card of an insurance company other than the one
in which he holds a policy, said name being that of concern with
which he had no dealings, even though it has upon it the name of
the agents of the company in which he is insured.10
§ 1670. Cancelation: company must give notice: sufficiency and
service of same. — A reservation in the policy of a right to cancel
upon notice and return of a proportionate premium is, as will be
noted hereafter, a condition precedent to the exercise of the right
of the company to cancel the policy,11 and the rule applies as well
to the notice as to the return of the unearned premium.12 And a re-
quirement in the policy for five days' notice to effect a cancelation,
applies to a binder.13 If the policy stipulates as to the manner and
time of the notice, such condition must be observed,14 except there
be a waiver of the notice or its sufficiency by the assured, for a
notice not otherwise sufficient may be accepted by the insured, and
be thus made binding upon him as well as upon the party giving
it.15 If the policy provides that the insurance may be terminated
at the option of the company at any time, it is canceled upon notice
to the assured that the local agent has been instructed that the
company will be no longer liable thereon.16
The rule as to sufficiency of notice is this, that such notice must
be unconditional and unequivocal. Something more than an
expression coupled with a request for the performance of certain
conditions, or that the policy will be canceled, is requisite. In
other words, the assurer, under such a stipulation, cannot claim
that a policy has been canceled, unless the notice be as provided,
one of actual cancelation, not of future conditional cancelation, nor
a notice of doubtful meaning as to time or purpose.17 To the above
10 Fritz v. Pennsylvania Fire Ins. v. New Palestine Bank, 59 Ind. App.
Co. 85 N. J. L. 171, 50 L.R.A.(N.S.) 69, 107 N. E. 544 (burglary in-
35 (annotated on sufficiency of no- surance).
tice to insured of cancelation of fire 13 Jacobs v. Atlas Ins. Co. 148 111.
policy), 88 Atl. 1065, 43 Ins. L. J. APP- 325-
250, citing and quoting Hand v. ".Lan?s v. Home Mutual Fire &
Howell, 61 N. J. L. 142, 146, 38 Atl. Mjj™e,Ins- C°; 56 5f°* 59\r
748 749 Columbia Ins. Co. v. Mason-
lx' s *_, . . heimer, 76 Pa. St. 138.
12 d 10(1i1_erein- . _. _ „ "Springfield Fire & Marine Ins.
"Peoria Marine & Fire Ins. Co. v. Co v McKinnon, 59 'Tex. 507.
Botto, 47 111. 516 {distinguishing 17 Georgia.— Petersburgh Savings &
labyan v. Union Mutual Fire Ins. ins. Co. v. Manhattan Fire Ins. Co.
Co. 33 N. H. 203); Fowler Cycle 66 Ga. 446.
Works v. Western Ins. Co. Ill 111. Maine.— Clark v. Insurance Co. of
App. 631, 36 Chic. Leg. N. 201: See North America, 89 Me. 26, 35 L.R.A.
also New Amsterdam Casualty Co. 276, 35 Atl. 1008.
2827
§ 1G70 JOYCE ON INSURANCE
rule, which was stated in our lir-t edition of this treatise we add
the following: Provisions for cancelation in an insurance policy
must be strictly followed to effect that result.18 A notice to cancel
a policy must be unequivocal when it has a stipulation for a spec-
ified notice;19 and the notice must not, only he unequivocal and
certain in its terms hut it must he brought to the personal attention
of assured or the circumstances musl be such as at least to have put
him on such inquiry as that had it heen made actual notice would
have resulted.20 Nor is an expression of an intention to take action
at some future time sufficient. It must not depend upon some
tut ure event hut, the notice must state clearly and unequivocally
insurer's intent to cancel and terminate the contract. It must
clearly express a present purpose to carry out such intent so that the
policy will he canceled at the expiration of the policy or statutory
period of time fixed therefor.1 Again, notice to cancel must be
an actual one within the terms and meaning of the policy. It is
not sufficient to state merely an intent to cancel upon compliance
with some condition but it must so unequivocally inform insured
as to leave no doubt on his part that his policy will expire on the
time limited within the terms of the policy and that insurer's
liability under the contract will cease upon the expiration of said
specified time.2 So in order to bring about the cancelation of a
fire insurance policy, the notice to be given by the company need
not be in any particular form, and may be oral, so long as it
Michigan. — American Ins. Co. v. 20 Fritz v. Pennsylvania Fire Ins.
AVoodruff, 34 Mich. 6. Co. 85 N. J. L. 171," 50 L.K.A.(N.S.)
Massachusetts.— Lyman v. State 50, 88 Atl. 1065, 43 Ins. L. J. 250,
Mutual Ins. Co. 14 Allen (96 Mass.) citing and quoting from Davidson v.
329. German Ins. Co. 74 N. J. L. 487, 491,
Missouri.— Crisman & Sawyer 13 L.R.A.(N.S.) 884, 12 Am. & Eng.
Banking Co. v. Hartford Fire Ins. Ann. Cas. 1005, 65 Atl. 996, 997.
Co. 75 Mo. App. 310, 1 Mo. App. Citing and considering Lattan v.
Repr. 335. . Royal Ins. Co. 45 N. J. L. 453. 458.
New York. — Griffey v. New York Citing Van Valkenburgh v. Lenox,
Central Ins. Co. 100 N. Y. 417. 53 51 N. Y. 465.
Am. Rep. 202, 3 N. E. 309 ; Goit v. 2 Payne v. President & Directors
National Protective Ins. Co. 25 Barb, of Insurance Co. of North America,
(N. Y.) 189. 170 Mo. App. 85, 156 S. W. 52, 42
Wisconsin. — Whiting v. Miss- Ins. L. J. 1049.
issippi Valley Mutual Ins. Co. 76 2 Commercial Union Fire Ins Co.
Wis. 592, 45 N. W. 672. y. King, 108 Ark. 130, 156 S. W.
18 John K. Davis Lumber Co. v. 445, 42 Ins. L. J. 1021, citing South-
Hartford Fire Ins. Co. 95 Wis. 226, ern Ins. Co. v. Williams, 62 Ark. 386,
37 L.R.A. 131, 70 N. W. 84. 35 S. W. 1101; German Fire Ins.
19 Clark v. Insurance Co. of North Co. v. Clarke, 116 Md. 622, 39 L.R.A.
America, 89 Me. 26, 35 L.R.A. 276, (N.S.) 829, 82 Atl. 974; Latton v.
35 Atl. 1008. Royal Ins. Co. 45 N. J. L. 453.
2828 *
RESCISSION AND CANCELATION § 1670a
positively and unequivocally indicates to the insured that it is the
intention of the company that the policy shall cease to be binding
as such upon the expiration of five days from the time when its
intention is made known to the insured.3 So the form of the
notice is immaterial where it unequivocally informs insured that
the policy is or will be canceled even though there is a mistake in
the date.4
The principle that underlies these decisions, however, is that
which has already been noted, and which precludes a party from
destroying existing contract rights except upon a strict observance
of the reservations contained in the contract itself, or some statute,
or by agreement or waiver of his rights by the other party. The
fact that the notice of cancelation was prepared on the third of the
month, and that several months after the fire the notice was found
among the papers of the assured, does not sufficiently prove its
service.5
§ 1670a. Same subject: when notice sufficient. — Under a provi-
sion providing for termination at election of the company upon an
increase of risk, notice of an intention to terminate is sufficient,6
and under such a stipulation the notice may be conditional.7 And
a notice to cancel, coupled with a promise to pay and a promise
to call for the premium, is sufficient.8 Where insurer is empowered
to cancel the policy upon its books without further notice to insured
as in case of an election to take the cash surrender value of the
policy ; 9 where it advises insured that cancelation is intended and
it is signed by the agent in the same manner as the policy is
signed; 10 where it is signed by the manager's name as "manager"
it is sufficient where said notice is both given and received as notice
from the insurer ; u where it states that the policy will stand can-
celed without further notice if the premium is not paid at a
3 Davidson v. German Ins. Co. 74 46 III. 394. See Peoria Marine &
N. J. L. 487, 13 L.R.A.(N.S.) 884, 65 Fire Ins. Co. v. Botto, 47 111. 516.
Atl. 996. Compare as to oral notice 7 Bergson v. Builders' Ins. Co. 38
Bard v. Firemen's Ins. Co. 108 Md. Cal. 541.
506, 81 Atl. 870, 41 Ins. L. J. 423. 8 Runkle v. Citizens' Ins. Co. 6
4 American Glove Co. v. Pennsyl- Fed. 143.
vania Fire Ins. Co. 15 Cal. App. 77, 9 Wilson v. Royal Union Mutual
113 Pac. 688, 40 Ins. L. J. 767. See Life Ins. Co. 137" Iowa, 184, 114 N.
as to time or date, § 1665a herein. W. 1051.
5 Lattan v. Roval Ins. Co. 45 N. J. 10 Ralston v. Roval Ins. Co. Ltd.
L. 453. of Liverpool, 79 Wash. 557, 140 Pac.
On sufficiency of notice to insured 552.
of cancelation of fire policy, see note n American Glove Co. v. Pennsvl-
in 50 L.R.A.(N.S.) 35. vania Fire Ins. Co. 15 Cal. App. 77,
6 Albany City Ins. Co. v. Keating, 113 Pac. 688, 40 Ins. L. J. 767.
2829
§ 1670a JOYCE <>\ INSURANCE
specified hour.12 And a notice is sufficienl in form under a stipula-
tion thai the policy may be canceled by insurer by giving five days'
notice of such cancelation where it states that the company by its
audit "herewith gives five days' formal notice ol its intention to
cancel" the policy, describing it in brief, and following with (be
statement thai Liability will absolutely cease at noon of a certain
day, which is six days after the date of the notice.13 80 a notice
from the local agenl to insured is sufficient which state- that insurer
has ordered the policy canceled as practically all the companies
have discontinued writing country business and it will be impossible
to rewrite the insurance and it- policy will be canceled "to-morrow,
and if you can make other arrangements, with some other agency,
it will be well for you to do this before noon." Bui the Length of
time fixed in said notice does not, however, preclude the con-
tinuance of the policy in force for the full five days lixed in said
contract of insurance for cancelation.14 So a notice of cancelation
given by an insurance company to the insured, which states that
the company, through its agent, "herewith gives five days' formal
notice of its intention to cancel" the policy, which it describes,
and follows this with an assertion that liability will cease at noon
of a certain date, is sufficient in form to comply with a provision
in the policy that the policy "shall be canceled at any time at
the request of the insured or by the company by giving five days'
notice of such cancelation." 15 A notice is also sufficient where
it expresses insurer's present desire to cancel, states that it will be
canceled on the books on a stated time five days from date and
request a return of the policy with earned premium on that date.
The meaning being in substance that insurer desiring then to
cancel the policy and terminate its risk, thereby gave insured the
five days' notice prescribed by the policy, at the expiration of which
the cancelation would become effective.16 It is also sufficient if
the statute authorizing a mutual fire insurance company to cancel
a policy be substantially followed as to giving notice and effecting
a cancelation, where it appears that assured had actual notice of
12 Ralston v. Roval Ins. Co. Ltd. 15 Fritz v. Pennsylvania Fire Ins.
of Liverpool, 79 Wash. 557, 140 Pac. Co. 85 N. J. Law 871, 50 L.R.A.
552. (N.S.) 35 (annotated on snlliciency
13 Fritz v. Pennsylvania Fire Ins. of notice to insured of cancelation of
Co. 85 N. J. L. 171,50 L.R.A.(N.S.) lire policy), 88 At!. 1005.
35, 88 Atl. L065, 13 [ns. I,. .). 250. »• American (Hove Co. v. Pennsyl-
The notice was, however, held insuffi- vania Fire Ins. Co. 15 Cal. A pp. 77,
eient tor oilier reasons than its form. 113 Pac. 688, 40 Ins. L. J. 7G7.
14 Commercial Union Fire Ins. Co.
v. King, 108 Ark. 130, 156 S. W.
445, 42 Ins. L. J. 1021.
2830
RESCISSION AND CANCELATION §§ 1670b, 1671
cancelation and had ample time to protect himself by insurance
before the fire, even though the entry on the company's books is
not made as required at the time of giving said notice.17
§ 1670b. Same subject: when notice insufficient. — A notice in
the alternative requesting insured to forward the premium or re-
turn the policy for cancelation is insufficient. The notice must
be unequivocal.18 A mere intention to cancel is insufficient. There
must be an actual cancelation.19 Nor is the requirement of a written
notice complied with by a verbal notice in the absence of waiver.20
And the act of insurer's agent in marking the policy canceled on
the books is insufficient where five days' notice is stipulated for.1
And a notice to a mortgagee is insufficient when obscure as to
assured's name, its date, and the authority of the person signing it
as agent or for whom he was acting.2
§ 1671. Cancelation: company must return or tender unearned
premium. — A reservation of a right to the company to cancel the
policy at any time by giving notice to that effect and refunding
a ratable proportion of the premium, is valid.3 In such case the
return of the proportionate premium or a tender of the same to the
assured or to his agent authorized to receive the same is an essential
part of the condition, and is a prerequisite or condition precedent
to the cancelation. If the proportionate premium be not actually
returned or tendered, the condition is not performed, and the pol-
icy continues in force, even though notice of the cancelation be
given as specified. The authorities are wTell settled upon the point
17 German Mutual Fire Ins. Co. v. notice to cancel policy, see note in 45
Weikel, 153 Ky. 288, 155 S. W. 373, L.R.A.(N.S.) 463.
42 Ins. L. J. 811 ; Ky. Stat. sec. 3 Irwin v. National Ins. Co. 2 Disn.
7112. (Ohio) 68.
18 General Accident, Fire & Life Massachusetts statute. Insurers
Assur. Corp. v. Lee, 165 Ky. 710, issuing standard form fire policies
178 S. W. 1025. "may cancel any such policy in the
19 Crisman & Sawyer Banking Co. manner provided by law without
v. Hartford Fire Ins. Co. 75 Mo. tendering to the assured a ratable
App. 310, 1 Mo. App. Repr. 335. proportion of the premium, if the
20 Bard v. Firemen's Ins. Co. 108 premium has not been paid to the
Me. 506, 81 Atk 870, 41 Ins. L. J. company or its agent or to a duly
423. Compare Davidson v. German licensed insurance broker through
Ins. Co. 74 N. J. L. 487, 13 L.R.A. whom the contract of insurance was
(N.S.) 884, 65 Atl. 906. negotiated." But such condition
1 Cassville Roller Mill Co. v. iEtna "shall be printed on the margin of
Ins. Co. 105 Mo. App. 146, 79 S. W. the policy near the part thereof that
720. relates to cancelation, in type not
2 State Ins. Co. v. State Ins. Co. smaller than long primer, or attached
of Des Moines, 1 Neb. (Unof.) 191, to such policy by rider in the form
95 N. W. 473. permitted by law." Mass. acts and
On necessity of giving mortgagee ^es. 1913, c. 625, p. 554.
2831
§ 1G71 JOYCE ON INSURANCE
that actual payment must be made, and the returned proportionate
premium be actually received by or tendered to the assured or his
agent authorized to act in the premises, to release the company
from its obligations under the contract.4 This rule, however, does
not apply to cases where the policy expressly stipulates for termina-
4 United States. — Chadboume v. Fire Ins. Co. 75 Mo. App. 310, 1 Mo.
German American Ins. Co. 31 Fed. App. Repr. 335.
533. New York. — Griffey v. New York
Alabama.— Farmers Mutual Ins. Central Ins. Co. 100 N. Y. 417, 53
Co. of Ala. v. Tankersley, 13 Ala. Am. Rep. 202, 3 N. E. 309; Van
App. 524, (i!) So. 410. Valkenburgh v. Lenox Fire Ins. Co.
Arizona. — Hartford Fire Ins. Co. 51 N. Y. 465; Hathorn v. Germania
v. Stephens, — Ariz. — , 161 Pac. Ins. Co. 55 Barb. (N. Y.) 28; Goit
684 (not within Civ. Code 1913, par. v. National Protective Ins. Co. 25
3441. Barb. (N. Y.) 189.
Georgia.— Hollingsworth v. Ger- Oklahoma..— Tavlor v. Insurance
mania Ins. Co. 45 Ga. 294, 12 Am. Co of North America, 25 Okla. 92,
Rep. 579. 138 Am st R 906) 105 Pac. 354,
" 51*11] M542- pSora°Marine & 3° InS< L" J' 17°-
Fire'lns. Co. v. kottoT^ SFh.*, - Pennsylvania.-Potts^ie Mutual
•a- x> ee 1 r>„„L„„ t„o n~ Ins. Co. v. Minnequa Springs Imp.
Kinney v. Buttalo German Ins. Co. * V-i 1 1 w
14S 111. App. 260; Kinney v. Roch- Co- 10® Pa- rSt- 13' '> Philadelphia
ester German Ins. Co. 141 111. App. Linen Co. v. Manhattan lire Ins. Co.
543; Hartford Fire Ins. Co. v. Mc- 8 Pa. Div. Rep. 261, 56 Leg. Int. 212;
Kenzie, 70 111. App. 599. Franklin Fire Ins. Co. v. Massey,
Indiana. — Indiana Ins. Co. v. 33 Pa. 221.
Hartwell, 100 Ind. 566; Mutual Life South Carolina.— See Hollings v.
Ins. Co. of N. Y. v. Finkelstein, 58 Bankers Union of the World, 63 S.
Ind. App. 27, 107 N. E. 557; Su- C. 192, 41 S. E. 90 (benefit certif-
preme Tribe of Ben Hur v. Lennert, icate).
— Ind. App. — , 93 N. E. 869. Texas.— Polemanakos v. Austin
Kansas. — Manlove v. Commercial Fire Ins. Co. — Tex. Civ. App. — ,
Mutual Fire Ins. Co. 47 Kan. 309, 27 160 S. W. 1134; Phomix Assur. Co.
Pac. 979, 21 Ins. L. J. 174. v. Munger Improved Cotton Machine
Maine.— Bard v. Firemen's Ins. Co. Mfg. Co. — Tex. Civ. App. — , 49
108 Me. 506, 81 Atl. 870, 41 Ins. L. S. W. 271, affirmed 92 Tex. 297,
J. 423. 49 S. W. 222, 28 Ins. L. J. 248.
Maryland. — German Union Ins. But see Newark Fire Ins. Co. v.
Co. of Bait. v. Fred G. Clarke Co. Sammon, 11 111. App. 230. If the
lit, Rid. 622, 39 L.R.A.(X.S.) 829, policy provides that the company by
82 Atl. 974, 11 Ins. L. J. 1047. which it is issued may cancel the
Massachusetts. — White v. Connect- same, and that upon cancelation che
ieut Fire Ins. Co. 120 Mass. 330; unearned portion of the premium
Lyman v. State Mutual Fire Ins. Co. shall be returned on surrender of the
14 Allen (96 Mass.) 329. policy, it is held necessary to make
Michigan. — Home Ins. Co. v. Cur- an actual return or tender of the
tis. 32 Mich. 402. unearned premium, in order to cancel
Missouri. — Payne v. President & the policy: Tisdell v. New Hamp-
Directors of Insurance Co. of North shire Fire Ins. Co. 11 Misc. 20, 65
America, 170 Mo. App. 85, 156 S. N. Y. St. Rep. 306, 32 N. Y. Supp.
W. 52, 42 Ins. L. J. 1049; Crisman & 166. In this case it appeared that
Sawyer Banking Co. v. Hartford notice had twice been served by the
2832
RESCISSION AND CANCELATION
1671
lion at any time at the option of the company by notice to the
assured, unless there be a waiver by the assured of his rights under
the contract, and the burden of such proof is upon the company.0
In New York the rule governing the meaning or interpretation
of the cancelation clause of the standard policy is, that if insurer
desires to cancel it must not only give the required notice but must
accompany it by the payment or tender of the pro rata amount
of the unearned premium and until this is done it cannot legally
demand of insured the surrender and cancelation of the policy and
in so construing said clause the court, per Bartlett, J., says that
it "desires to so construe the clause that its meaning may be clear." 6
company upon the insured; that the
company had elected to cancel the
policy, and that the unearned pre-
mium had been placed in the hands
of one of the company's agents, sub-
ject to plaintiff's order. It was ad-
mitted by the company, however,
that no actual tender of the unearned
premium had been made. The plain-
tiff admitted that there had been no
tender or surrender of the policy or
demand made for the unearned pre-
mium. As to Fed., Mich., N. J., and
Ohio eases opposed to the text, see
§ 1673 herein.
As to return of premium as con-
dition of cancelation, see notes in 13
L.R.A.(N.S.) 884, and L.R.A.1916F,
444.
5 Hathorn v. Germania Ins. Co.
55 Barb. (N. Y.) 28; JEtna Ins. Co.
v. Maguire, 51 111. 342.
6 Buckley v. Citizens Ins. Co. 188
N. Y. 349, 81 N. E. 165, 36 Ins. L. J.
752, following Tisdell v. New Hamp-
shire Fire Ins. Co. 155 N. Y. 163,
40 L.B.A. 765, 49 N. E. 664, 27 Ins.
385, affirming 32 N. Y. Supp. 166,
11 Misc. 20, wherein the court, per
Bartlett, J., declared that the ques-
tion was "no longer an open one in
this court," following Nitsch v.
American Central Ins. Co. 152 N.
Y. 635, 46 N. E. 1149, and continuing
said : "It need not be argued that, to
notify an assured that the 'unearned
premium will be returned by T. Y.
Brown, agent,' does not amount to a
return of it. No more does the as-
sertion that the notice does not con-
Joyce Ins. Vol. III.— 178. 2833
stitute a tender of the unearned
premium require support by way of
discussion of the elements which go
to make up a legal tender. It has
been passed upon by this court in
Van Valkenburgh v. Lenox Fire
Ins. Co. 51 N. Y. 465. In that case
it was necessary for the defendants,
under its contract of insurance with
the plaintiff, either to refund or
tender the unearned premium, in
addition to giving a notice of can-
celation in order to terminate the
policy. It claimed before the court
that its notice that the unearned pre-
mium would be returned to him sat-
isfied its obligation in that respect;
but the court held that holding the
amount of the premium subject to
the call )of insured was insufficient.
The company was bound to seek
him out, and tender to him the
amount due." Chief Justice Parker,
dissenting, considers the Nitsch case
and states that prior to the enactment
of the Laws of 1886, c. 488 (Stand-
ard fire policy: as am'd by L. 188 7,
c. 429; L. 19*01, e. 513; L. 1903, c.
106, N. Y. Ins. L. 1909, c. 33, sec.
121) there were but two cases: the
Van Valkenburgh case, above noted,
and Griffey v. New York Central Ins.
Co. 100 N. Y. 417, 3 N. E. 309, hold-
ing that the clause was not operative
unless the company should tender or
return to insured the amount of the
unearned premium and that "the
cancelation clause in those contracts
differs very materially from the one
in question" and after stating said
§ 1671 JOYCE ON INSURANCE
So the return of the unearned premium is essential to a cancelation
by the company, where the policy, among other things, pro-
vides, "when this policy is canceled by this company by giving
notice, it shall retain only the pro rata premium."7 It is also
essentia] that the tender of the unearned premium be a legal otic:8
and the actual money must be tendered;9 and the requiren
thai the tender shall be a legal one is not complied with by sending
an express money order.10 But a check for the unearned premium
mailed with the notice of cancelation is hold sufficient.11 If a
'!i is enrolled and becomes a member of a mutual rail
insurance association without the formal application or physical
examination required by the by-laws of the association, immediate-
ly after being notified of such person's disability, in case of sub-
sequent sickness, cannot absolve itself from liability, and cancel
the membership by refunding the member's contribution by "time
check," which offer is made and refused just before the member's
death, because the tender is not a legal one and because liabilities
have already accrued against the association from which it cannot
discharge itself by refunding the assessment.12 Under a Kentucky
decision although the corporation's check for the unearned pre-
mium is returned as stipulated in the policy yet if the notice is
otherwise insufficient no cancelation is effected.13 And a deposit
with the clerk of the court of the amount of the premium due "for
the use of the plaintiffs" after refusal to accept a tender and offer
to repay said amount is sufficient and is not objectionable because
not made for the "use and benefit" of those entitled.14 If the pol-
icy so stipulates the short rate system adopted by the different
companies on cancelation by insurer controls the amount recover-
elause, declares that the statute was 9 Phenix Ins. Co. of Brooklyn v.
passed in view of those eases to make Hunter, 95 Miss. 754, 49 So. 740.
cancelation less difficult. See Mineho 10 Niagara Fire Ins. Co. v. Mitch-
v. Banker's Life Ins. Co. 109 N. Y. ell, — Tex. Civ. App. — , 164 S. W.
Supp. 179, 121 App. Div. 578. See 919.
also N. Y. cases cited under second u Gruen v. Standard Life & Acci-
note to this section. See also § 1673 dent Ins. Co. 169 Mo. App. 161, 152
for Fed., Mich., N. J., and Ohio cases S. W. 407.
contra. 12 Burlington Voluntary Relief De-
7 Taylor v. Insurance Co. of North partment v. White, 41 Neb. 547, 43
America, 25 Okla. 92, 138 Am. St. Am. St. Rep. 701, 59 N. W. 747.
Rep. 906, 105 Pac. 354, 39 Ins. L. "General Accident Fire & Life
J. 170; German Union Fire Ins. Co. Assur. Corp. v. Lee, 165 Ky. 710,
v. Fred. G. Clarke Co. 116 Md. 622, 178 S. W. 1025.
39 L.R.A.(N.S.) 829, 82 All. 974. 14Mendenhall v. Farmers' Ins. Co.
8 Niagara Fire Ins. Co. v. Mitchell, of Kokomo, 183 Ind. 694, 110 N. E.
— Tex.' Civ. App. — , 164 S. W. 919. 60, 47 Ins. L. J. 55.
2834
RESCISSION AND CANCELATION § 1671
able and insured is entitled to the full short rate without deduction
of commissions to brokers.15
But it is not necessary that the premiums be returned through
the broker.16 To render a tender of the unearned premium to an
alleged agent of the insured effective for the purpose of terminating
a policy of insurance, which provides that it may be terminated by
refunding a ratable proportion of the premium for the unexpired
term of the policy, it must be (shown that the one to whom the
tender was made was at the time the authorized agent of the insured
for the purpose of the cancelation of the policy, or that the act
was subsequently ratified by the insured.17 If both parties deal
through a broker and insurer accepts his credit as payment of the
premiums it cannot cancel the policy without payment to insured
who had paid the premiums to the broker.18
To entitle an insurance company to cancelation of a policy be-
cause of fraudulent statements in the application, it must return
the premiums paid, although the contract provides that in case of
such statement all payments shall be forfeited.19 To entitle an
insurance company to cancelation of a policy because of fraudulent
statements in the application, it must return the premiums paid,
although the contract provides that in case of such statements all
payments shall be forfeited.20
15 McKenna v. Firemen's Ins. Co. 163 Mo. App. 314, 143 S. W. 1104,
63 N. Y. Supp. 164, 30 Misc. 727, 41 Ins. L. J. 957.
29 Ins. L. J. 376. Usual short rate On insurance broker as agent for
is customary rate for like property insured as to cancelation of policy,
and like amount. Home Ins. Co. v. see note in 38 L.R.A.(N.S.) 623.
Hamilton, 143 Mo. App. 237, 128 S. 19 Metropolitan Life Ins. Co. v.
W. 273. See also as to "short rates," Freedman, 159 Mich. 114, 32 L.R.A,
Insurance Commission v. People's (N.S.) 298, 123 N. W. 547. That
Fire Ins. Co. 68 N. H. 51, 44 Atl. unearned premium returnable in case
82, 28 Ins. L. J. 931. of breach of warranty and action, see
What part of premium is to be American Central Life Ins. Co. v.
returned upon cancelation, see Han- Rosenstein, 46 Ind. App. 537, 92
ford v. Toledo Fire & Marine Ins. Co. N. E. 380. See United States Health
71 Wash. 240, 128 Pac. 235, 42 Ins. & Accident Ins. Co. v. Clark, 41 Ind.
L. J. 282. A question here, however, App. 345, 83 N. E. 760 ; Modem
of agency and liability in accounting Woodmen of America v. Vincent, 40
and whether too large a proportion Ind. App. 711, 82 N. E. 475.
of the premium had been returned On right of insured to return of
upon cancelation. premium where insurer seeks rescis-
16 Ryder-Gougar Co. v. Garretson, sion on ground of misrepresentation
53 Wash. 71, 101 Pac. 498. by insured, see note in 32 L.R.A.
"Quong Tue Sing v. Anglo-Neva- (N.S.) 299.
da Assurance Assoc. 86 Cal. 566, 10 20 Metropolitan Life Ins. Co. v.
L.R.A. 144, 25 Pac. 58. Freedman, 159 Mich. 114, 32 L.R.A.
18 Leader Realty Co. v. Markham. (N. S.) 29S, 123 N. W. 547.
2S35
g L672 JOYCE ON INSURANCE
§ 1672. Cancelation: what is not a sufficient payment or tender
of the unearned premium. — The acceptance of llic unearned pre-
mium after the Loss, but in ignorance thereof, or even with a knowl-
edge of the loss by the insurer and assured, will not release the
company,1 although in the Latter case circumstances mighl exist
which would make the surrender of the policy and acceptance of
the return premium under a distinct compromise or adjustment
binding upon both parties. So in a mere statement of the com-
pany's a^ent that he is ready to pay the unearned premium is
insufficient, where he does not actually pay it until after the Loss.2
So the assured's obligation for premiums in a mutual company
must 1)0 surrendered, as in case of a premium note; 3 and the de-
maud for a surrender and offer to return the premium note is
insufficient where the company retains the right to make assess-
ments up to the actual day of cancelation.4 So if the company
has taken the insured's promissory note for the premium, the un-
earned premium must nevertheless he returned,5 and a credit upon
the company's books of the unearned premium is not a perform-
ance of the condition, although it is subject to the order of the
assured.6
Notice that an unearned premium will be returned, and holding
the amount subject to the call of the insured, does not satisfy the
obligation of an insurer to return the premium as a condition of
canceling the policy.7 And a tender of unearned premium upon
an insurance policy, and demand for surrender of the policy, made
for the purpose of rescission of the contract from the beginning,
and refused upon that ground, is not a sufficient tender to effect a
cancelation under the terms of the policy.8 And when the pre-
mium on a policy of fire insurance has in fact been unpaid, a
Letter from the insurer notifying the latter of the effect of non-
payment of the premium, and calling attention to cancelation
conditions on the policy, is not sufficient notice to arbitrarily ter-
1 Eollingsworth v. Gennania Tns. 4Landis v. Home Mutual Fire &
Co. 45 Ga. 294, 12 Am. Rep. 579; Marine Ins. Co. 56 Mo. 591.
Van Valkenburgh v. Lenox Fire Ins. 5 Home Ins. Co. v. Curtis, 32 Mich.
Co. 51 N. Y. 465. 402, 5 Ins. L. J. 120.
8 Hollingsworth v. Germania Ins. 6 Van Valkenburgh v. Lenox Fire
Co. 45 Ga. 294, 12 Am. Rep. 579. Ins. Co. 51 N. Y. 465.
8Landis v. Eome Mutual Fire & 7 Tisdell v. New Hampshire Fire
Marine Ins. Co. 56 Mo. 591; Chad- Ins. Co. 155 N. Y. 163, 40 L.R.A.
bourne v. German-American Ins. Co. 765,49 N. E. 664.
:;i Fed. 533; .Etna [ns. Co. v. Web- 8John R. Davis Lumber Co. v.
ster, 6 Wall. (73 U. S.) 129, 18 L. Hartford Fire Ins. Co. 95 Wis. 226.
ed. 888. 37 L.R.A. 131, 70 N. W. 84.
2836
RESCISSION AND CANCELATION § 1673
minate the policy, if the insurer does not refund the amount of
unearned premium as required by such cancelation conditions.9
§ 1673. Cancelation: when actual payment or tender of unearned
premium unnecessary. — The rule stated under the last section is
subject to such exceptions as may arise from agreement of the par-
ties, from waiver or rescission in cases of fraud or fraudulent mis-
representation or concealment, or where the policy is forfeited by
breach of condition. Thus, the assured may agree to accept in full
satisfaction a less amount than the ratable proportion of the pre-
mium due, in which case the condition as to return of a propor-
tionate premium is sufficiently performed.10 So if the minds of
the parties have met upon the point that there is an actual can-
celation, tender of the unearned premium is unnecessary; as in
case the assured voluntarily surrenders the policy and agrees with
the company's agent, at the latter's request, that the return of such
proportionate premium may be postponed, this constitutes a can-
celation ; u and if the company's authorized agent is induced by
the assured to believe that he agreed to the cancelation without
payment of the unearned premium, he will be estopped to claim
nonperformance of the condition as to payment.12 So a tender is
unnecessary where the insured has not paid the premium, or is
indebted to the company on the premium account for a sum equal
to, or in excess of, the returned premium.13 And it is also held
where no part of the premium has been actually paid, but credit
therefor has been given to the broker.14 And where both parties
expressly understand that the policy is canceled, formal tender of
the premium is not required, and a direction to the agent to procure
other insurance in other companies evidences an intent that the
unearned premiums should be used for that purpose.15 And the
company may insist upon the invalidity of the policy for a breach
of its conditions relating to forfeiture, without offering to return the
unearned premium.16 And the rule requiring a payment or tender
of the unearned premium, as a condition precedent to cancelation,
has no application to a case resting upon the fraud or fraudulent
9 Savage v. Phrenix Ins. Co. 12 14 Stone v. Franklin Ins. Co. 105
Mont. 458, 33 Am. St. Rep. 591, 31 N. Y. 543, 12 N. E. 45.
Pac. 66. 15 Hillock v. Traders' Ins. Co. 54
10 JEtna Ins. Co. v. Weissinger, 91 Mich. 531, 20 N. W. 571.
Ind. 297. 16 Phenix Ins. Co. v. Willis, 70
11 Bingham v. Insurance Co. of Tex. 12, 8 Am. St. Rep. 566, 6 S. W.
North America, 74 Wis. 498, 43 N. 825; Harris v. Royal Canadian Ins.
W. 494. Co. 53 Iowa, 236,* 5 N. W. 124, 9
12 Hopkins v. Phoenix Ins. Co. 78 Ins. L. J. 525 ; Albany City Ins. Co.
Iowa, 344, 43 N. W. 197. v. Keating, 46 111. 394; International
13 Bergson v. Builders' Co. 38 Cal. Life Ins. Co. v. Franklin Fire Ins.
541. Co. 66 N. Y. 119, 5 Ins. L. J. 371.
2837
§ 1673a JOYCE OX INSURANCE
misrepresentations of the assured concerning a fact material to the
risk." A cancelation of a renewal is sufficient without returning
any premium none having been paid therefor.18 And require-
of the return of the unearned premium is held not applicable
where there is an acceptance of a substituted policy in place of the
one ordered canceled.19 If an insurer takes advantage of a lawful
forfeiture of a policy, there is no unearned premium which the
insured is entitled to receive.80
I fader a New Jersej decision the cancelation clause in a standard
policy of fire insurance providing for the cancelation of the policy
by the company upon giving- five days' notice, and stipulating that
the. unearned portion of the premiums shall be returned on the
surrender of the policy, the company is not required to pay or
tender the unearned premium in order to bring about a cancela-
tion of the policy.1 So in Michigan the insurer is only bound to
return the premium on surrender of the policy and a tender or
return of the unearned premium is not required as the cancelation
is complete on giving the live days' notice.2 And to the same effect
are the Federal decisions.8
§ 1673a. Cancelation: waiver. — The right of insured, after re-
ceiving notice from the insurer of cancelation of the policy, to
treat the same as in full force and effect until the company has
paid or tendered to him the unearned premium, under the clause
of the New York standard policy of fire insurance providing that
the policy may be canceled by the company by giving live days'
notice of cancelation, but that the unearned portion of the pre-
mium shall be returned upon surrender of the policy, is waived by
his voluntary and unconditional surrender of the policy upon
receiving the notice of cancelation.4 So insured may waive the
17 Blaser v. Milwaukee Mechanics' anee Co. v. Brecheisen, 50 Ohio St.
Mutual Ins. Co. 37 Wis. 31, 19 Am. 542, 35 N. E. 53.
Rep. 747. On return of premium as condi-
18 Gruen v. Standard Life & Acci- tion of cancelation, see notes in 13
dent Ins. Co. 169 Mo. App. 161, 152 L.R.A.(N.S.) 884, L.R.A.1916F, 444.
S. W. 407. As to cases contra and the rule,
19 Finley v. New Brunswick Fire see § 1671 herein.
Ins. Co. (U. S. C. C.) 193 Fed. 2 Webb v. Granite State Fire Ins.
L95, 41 Ins. L. J. 933; Finley v. Co. 164 Mich. 139, 129 N. W. 19.
Western Empire Ins. Co. 69 Wash. 3 El Paso Reduction Co. v. Hart-
673, 125 Pae. 1012, 41 Ins. L. J. ford Fire Ins. Co. (U. S. C. C.) 121
1723. Fed. 937; Schwarzchild & Sulzberg-
20 Home Fire Ins. Co. v. Kuhlman, er Co. v. Phoenix Ins. Co. of Hfd.
58 Neb. 488, 76 Am. St. Rep. Ill, 115 Fed. 653, affirmed 124 Fed. 52,
78 N. W. 936. 59 C. C. A. 572.
'Davidson v. German Ins. Co. 74 * Buckley v. Citizens' Ins. Co. 188
N. J. Law, 487, 13 L.R.A.(N.S.) N. Y. 399, 13 L.R.A.(N.S.) 889n, 81
884n, 65 Atl. 990. See also Insur- N. E. 165. This decision is criticised
2838
RESCISSION AND CANCELATION § 1673a
requirements of a policy as to cancelation which are for his benefit
as in case of the return of the unearned premium, and there is a
waiver by him of such condition precedent where he has knowledge
of an intention to cancel and voluntarily and unconditionally
surrenders the policy for said purpose.5 So where an insurer, with
knowledge that conditions have been broken, giving him the right
to cancel a policy of insurance, fails to notify the insured within
a reasonable time of his intention to cancel the policy, and fails to
return the unearned premium as required by the policy, this must
be taken as evidence showing a waiver of the breach of such con-
ditions.6 And the right to a tender or payment of the unearned
premium is waived by the act of insured in delivering up the policy
to the agent for cancelation upon receiving notice of cancelation.7
The statutory right to receive notice of cancelation is waived where
assured makes insurer's agent his agent to procure other insurance
where any policy expires or is canceled and a new policy is issued
by another company and received by said agent before the time
limit in tlie notice of cancelation given him expires.8
But asking insurer's agent, who had notified insured of the can-
celation, if the policy cannot be written in another company is
not a waiver of his right to have the policy continue in force for
the five days' limit.9 Nor does a retention of a note for the premium
operate as a waiver of the right to cancel.10 When a local agent
for an insurance company, under instructions thereto, gives the
assured notice of the cancelation of the policy, without tendering or
offering to tender the unearned premium, and neither being author-
ized to make such tender nor seeking a waiver thereof, or being
authorized thereto, the fact that the assured does not protest against
such cancelation does neither amount to a waiver of tender nor con-
in Richards on Ins. (3d ed.) sec. 7 George Hotel Co. v. Liverpool &
287, p. 386, as taking an "exceptional London & Globe Ins. Co. 106 N. Y.
view" in that "to accomplish a can- Supp. 732, 122 App. Div. 152.
celation the insured must both give 8 Warren v. Franklin Fire Ins. Co.
notice and surrender the policy." 161 Iowa, 440, 143 N. W. 554.
5 Hancock v. Hartford Fire Ins. 9 Northern Pine Crating Co. v.
Co. 81 Misc. 159, 142 N. Y. Supp. Liverpool & London & Globe Ins. Co.
352, 42 Ins. L. J. 1326, quoting from 143 Wis. 433, 128 N. W. 70. See also
Buckley v. Citizens' Ins. Co. 188 N. Rosen v. German Alliance Ins. Co.
Y. 399, 13 L.R.A.(N.S.) 889, 81 106 Me. 229, 76 Atl. 688. Compare
N. E. 165. George Hotel Co. v. Liverpool &
Waiver of return of unearned pre- London & Globe Ins. Co. 106 N. Y.
mium as condition of cancelation, see Supp. 732, 122 App. Div. 152.
notes in 13 L.R.A.(N.S.) 889, and 10 Buckley v. Citizens' Ins. Co. 98
L.RA.1916F, 446. N. Y. Supp. 622, 112 App. Div. 451.
6 Horton v. Home Ins. Co. 122 N.
Car. 498, 65 Am. St. Rep. 717, 29
S. E. 944.
2839
§ 1673b JOYCE UN INSURANCE
sent to such cancelation. The local agenl being in possession of
the policy as bailee for the assured, his marking the same "can-
" and returning same to the company, without the consent or
knowledge of the assured, does neither constitute a waiver or estop-
pel nor a consent or acquiescence.11 And where an agent's authority
as to waiver is limited to indorsements on or additions to a policy,
his acts in notifying insured that his policy is canceled for breach
nt' warranty against increase of risk does not waive said breach or
estop the insurer from relying thereon as a defense notwithstanding
the agent's knowledge of said breach.12 And assured does nol waive
his right to a legal tender of the unearned premium by retaining an
express money order therefor until after loss and then returning
it to insurer.18 Nor does insured waive any of the conditions prece-
dent to a cancelation by assured by surrendering the policy to as-
surer's agent where she was ignorant of her rights and said surrender
was in effeel an enforced one made under protest upon the agent's
representations that the policy was already canceled and that she
was obliged to turn it over to him.14 And there is no waiver by
assured of his righl to a sufficient notice of cancelation and a return
of the unearned premiums such as to amount to a mutual consent
that the policy be canceled, by the acts of assured in writing a letter
to insurer's agent, in answer to the notice from insurer which was
but an expression of an intent to cancel in the future, wherein in-
sured states that if the insurer "won't carry it any longer, and you
• an place it in another good company for the unexpired time with-
out any further expense to me you can do so." 15 And cancelation
by an insurer'.- agent without authority to waive conditions does not
operate to waive a prior breach of promissory warranty.16 A pro-
vision for an extension of time in favor of the mortgagee in case of
cancelation may be waived by him.17
§ 1673b. Same subject: surrender of policy upon assurer's re-
quest.— It is decided in New York that if the notice of cancelation
request- assured to return the policy when the unearned premium,
if any. will be returned pro rata and assured upon such request and
11 Tavlor v. Insurance Co. of North Alliance Ins. Co. 106 Me. 229, 76
America, 25 Okla. 92, 138 Am. St. Atl. 688.
Rep. 906, In.") Pac. 354. 15 Payne v. President & Directors
12 Ru finer Bros. v. Dutchess Ins. of Insurance Co. of North America,
Co. 59 W. Va. 432, 115 Am. St. Rep. 170 Mo. App. 85, 156 S. W. 52, 42
924, 53 S. E. 943. Ins. L. J. 1049.
13 Niagara Fire Ins. Co. v. Mitchell, 16 Ruffner Bros. v. Dutchess Ins.
— Tex. Civ. App. — , 164 8. W. 919. Co. 59 W. Va. 432, 53 S. E. 943.
14 Bard v. Firemen's Ins. Co. 108 17 Glens Falls Ins. Co. v. Walker,
Me. 506, 81 Atl. 870, 41 Ins. L. J. — Tex. Civ. App. — , 166 S. W. 122.
423, relying on Rosen v. German
2840
RESCISSION AND CANCELATION
§ lG73b
not upon his own initiative voluntarily surrenders the policy with-
out receiving or having tendered to him the amount due him, he
thereby waives his right to treat the policy as in full force and effect
until the unearned premium is paid or tendered to him ; but he can
sue for the amount thereof.18 This decision trends towards the con-
stant claim of the insurance companies, as evidenced by the cases,
and it constitutes at least a modification in that state of the rale
which requires a tender or return of the unearned premium in
addition to notice in order to effect or complete a cancelation of the
contract by assurer. It is noteworthy, however, that Justice Vann
rendered a dissenting opinion which is entitled to great weight as
being fully in accord with governing principles of the law.19
18 Bucklev v. Citizens' Ins. Co. 188 is returned. Tisdell v. New Hamp-
N. Y. 399, "13 L.R.A.(N.S.) 889, 81 shire Fire Ins. Co. 155 N. Y. 163,
N. E. 165, 36 Ins. L. J. 752, reversing 165, 40 L.R.A. 765, 49 N. E. 664, 27
98 N. Y. Supp. 622, 112 App. Div. Ins. L. J. 385. If the insured is the
451. The court, per Justice Bartlett, actor, the surrender of the policy and
distinguishes the cases of Tisdell v. the return of the premium are con-
New Hampshire Fire Ins. Co. 155 current acts. If the insurer is the
N. Y. 163, 40 L.R.A. 765, 49 N. E. actor, the notice and the return of
664, 27 Ins. L. J. 385 (affirming 32 the premium are sufficient, for the
N. Y. Supp. 166, 11 Misc. 20) and insured might be unwilling to sur-
Nitsch v. American Central Ins. Co. render the policy. If, however, after
152 N. Y. 635, 46 N. E. 1149, in this the insurer has given notice, the pol-
that in the former case the policy icy is surrendered by the insured,
had not been surrendered or tendered return of the premium must be made
to it by insured and no demand had concurrently, or, if this surrender is
been made for the return of the pre- by mail, as soon as practicable, un-
miums or the unearned portion there- less such return is duly waived. In
of, and in the latter case the only the case before us the company treat-
question was whether the insurer re- ed the act of surrender and the act
turned or tendered the unearned of returning the premium as con-
premium, while in the case at bar current in the notice served by its
the insured "had voluntarily and un- agents, for they therein requested
conditionally surrendered his policy him 'to return said policy to this
immediately on receiving the notice office, when the unearned premium,
of cancelation." if any be due, will be returned to
19 The following is the opinion of you.' Pursuant to this notice, the
Justice Vann in which Justice Chase insured mailed the policy to the
concurred : "Cancelation of the policy agents without instructions or corn-
was authorized 'at any time at the ment, and the premium had not been
request of the assured, or by the com- returned or tendered when the fire
pany by giving five days' notice.' occurred, although there was both
In either event, as the contract fur- time and opportunity to do so.
ther provided, 'the premium having "Under these circumstances, is the
been actually paid, the unearned por- question of waiver one of fact or of
tion shall be returned on surrender law? The learned referee treated it
of the policy.' Whether the insurer as one of fact, for he found that 'the
or the insured is the actor in the unearned premium (being the sum of
attempt to cancel, cancelation is not $19.30) was not paid or tendered to
complete until the unearned premium the plaintiff before the fire, and the
2841
§ 1674 JOYCE ON INSURANCE
§ 1674. When equity will rescind or cancel: generally. —
Whether a court of equity will entertain jurisdiction or not in the
er of an application to haw a policy canceled or delivered up
in the sound discretion of the court, not arbitrarily exercised,
but a discretion regulated and governed by the general principles
appertaining to equity, and applied to the case presented by the bill
under which the relief prayed for is based, and although equity may
• jurisdiction to entertain the suit by reason of the allegations
of the bill, yet if under the case made by the bill it is inexpedient to
exercise such jurisdiction, and it would be a more reasonable and
proper exercise of that discretion which the court has in bills to
cancel to leave the parties to their remedy at law, rather than retain
tho bill and exercise the authority asked, the court will so do. If
it appears that the petitioner has an adequate remedy at law, either
by action or by way of a full, plain, and perfect defense, and no
reason is shown why a resort to equity is necessary, expedient, or
proper, and there is no danger of indefinite delay, the court may
refuse to entertain jurisdiction. As a general rule, insurance con-
tracts stand upon the same footing as other contracts, with respect
to interference by a court of equity. If the contract is obtained by
fraud or deception, or by false and fraudulent misrepresentations,
or the relief sought rests upon accident or mistake, equity will take
cognizance and grant relief; so also will jurisdiction be entertained
if the party has no adequate remedy at law. But the fact that the
plaintiff has an adequate remedy at law does not of necessity p re-
plaintiff did not at any time waive company contained in a notice of in-
such payment or tender.' In his tent to cancel, and accompanied with
opinion he gave his reasons in part the statement that the premium
for so finding as follows : 'Presump- would be returned 'when' the policy
tively the return of the policy to was returned. The policy was re-
Beeker & Co. was in compliance with turned, but the premium was not,
the request in the notice, in order to although the agents had an interview
obtain the unearned premium, and with the plaintiff after the surrender
was not an assent to a cancelation and before the fire. Moreover, at
-without the performance of Becker & that interview the agents expressly
Co. of what they had expressly of- agreed to hold the policy until it
fered to do in the notice. No intent was placed in another company. It
of that kind can properly be in- was not placed in another company,
ferred.' As, according to the policy, but held by the agents until after the
surrender and return are concurrent fire, when it was sent to the defend-
aets so far as practicable, in the ab- ant.
senee of evidence to the contrary, "In my opinion there was im wail r
the former is presumed to be made as matter of law; and, the ret
upon the condition that it shall not having found upon sufficient evidence
t.ike effect until the latter is per- that there was no waiver as o
formed. While the surrender is vol- of fact, the judgment should be
untary, it was not volunteered, for affirmed."
it was made upon the request of the
2842
RESCISSION AND CANCELATION
§ 1674
elude a resort to equity, nor does it follow that for such reason a
court of equity will refuse to entertain jurisdiction. If the special
circumstances would render it inequitable, unjust, or a hardship to
compel the plaintiff to await a suit at law at the instance of the
other party, the court will exercise its power, or if the court has
obtained jurisdiction for one purpose, it may retain it for all pur-
poses, even though circumstances have arisen which would give an
adequate remedy at law, and the same are set forth in the case by
supplemental bill.20 Equity may cancel a life insurance policy
before loss, for mistake of fact, in. case the policy is based on the
application, the statements in which are made warranties, and the
applicant erroneously states that he had never been rejected by any
other company.1
20 United States.— Fayloe v. Mer- tual Life Ins. Co. v. Reals, 48 How.
chants Ins. Co. 9 How. (50 U. S.) Pr. (N. Y.) 502, s. c. 79 N. Y. 202.
390, 13 L. ed. 187; Riggs v. Union Ohio. — Union Central Life Ins. Co.
Life Ins. Co. of Ind. 129 Fed. 207, v. Pottker, 33 Ohio St. 459, 31 Am.
63 C. C. A. 365 ; Union Life Ins. Rep. 555.
Co. of Ind. v. Riggs, 123 Fed. 312, Pennsylvania. — Reigel v. American
s. c. 194 U. S. 637, 48 L. ed. 1161, Life Ins. Co. 140 Pa. 857, 21 Atl.
24 Sup. Ct. 860, s. c. 203 U. S. 243, 392, s. c. 153 Pa. 131, 19 L.R.A. 166,
51 L. ed. 168, 27 Sup. Ct. 126; 25 Atl. 1070.
Ingersoll v. Missouri Valley Ins. Co. Tennessee. — Home Ins. Co. v.
37 Fed. 530; Home Ins. Co. v. Connally, 104 Tenn. 3, 56 S. W. 828.
Stanehfield, 2 Abb. (U. S. C. C.) 6, England.— Thornton v. Knight, 16
1 Dill. (U. S. C. C.) 424, Fed. Cas. Sim. 509; French v. Conolly, 2 Anstr.
No. 6660, per Dillon and Miller, JJ.; 454; Prince of Wales Assur. Co. v.
Connecticut Mutual Life Ins. Co. v. Palmer, 25 Beav. 605.
Home Ins. Co. 17 Blatchf. (U. S. C. As to the rule in contracts gen-
C.) 142, Fed. Cas. No. 3107; North erally that equity will retain juris-
American Ins. Co. v. Whipple, 2 diction and grant final relief if
Biss. (U. S. C. C.) 418, Fed. Cas. jurisdiction has once attached, see
No. 10,315; Ocean Ins. Co. v. Fields, Currie v. Clark, 101 N. C. 321, 7
2 Story (U. S. C. C.) 59, Fed. Cas. .S. E. 776; Towns v. Smith, 115 Ind.
No. 10,406. 480, 16 N. E. 811 ; Taylor v. Florida
7 owa.— Franklin Ins. Co. v. Mc- East Coast Rd. Co. 54 Fla. 635, 16
Crea, 4 G. Greene (Iowa) 229. L.R.A. (N.S.) 307, 45 So. 574; Kil-
Minnesota. — Bankers Reserve Life mer v. Wuchner, 79 Iowa, 722, 8
Co. v. Omberson, 123 Minn. 285, 48 L.R.A. 289, 45 N. W. 299.
L.R.A. (N.S.) 265, and note, 143 N. On power of equity to take juris-
W. 735. diction of suit to cancel policy for
Missouri. — American Ins. Co. v. fraud and to enjoin action at law on
Barnett, 73 Mo. 364, 39 Am. Rep. the policy, see notes in 12 L.R.A.
517; Green v. Security Mutual Life (N.S.) 881, 48 L.R.A. (N.S.) 265.
Ins. Co. 159 Mo. App. 277, 140 S. Pacific Mutual Life Ins. Co. v.
W. 325, 41 Ins. L. J. 32. Glaser, 245 Mo. 377, 45 L.R.A. (N.S.)
New Hampshire.— Gerrish v. Ger- 222n, 150 S. W. 549.
man Ins. Co. 55 N. H. 355. On right of insurer to cancelation
New York.— McEvers v. Lawrence, of the policy in equity before loss
1 Hoff Ch. (N. Y.) 172; Globe Mu- upon the ground that it was obtained
2S43
§ 1075 JOYCE UN INSURANCE
§ 1675. When equity will rescind or cancel: cases. — Equity will
take cognizance of a l»ill by policyholders of a life insurance com-
pany to compel the termination of their contracts and decree the
payment of the presenl value of their policies, where the company's
corporate existence is only for the purpose of winding up its affairs
and its premium receipts do not pay expenses, the company having
transacted qo new business for several years.8 Tf the policy is con-
ditioned to become void if the assured should hecome so far in-
temperate as to impair hi- health, equity will not decree that the
policy be delivered up to be canceled.3 If the policy be obtained by
fraud, or by misrepresentation or concealment amounting to fraud,
equity will order a cancelation upon a suit brought before loss or
death, and, in certain cases, even after loss or death. Thus, where
the insured misrepresented and concealed facts concerning his
health which materially affected the risk, it was canceled, even
though the policy had been assigned.4 So it is held that cancelation
will be decreed for want of insurable interest,5 or for concealment in
marine risks of material facts.6 A mutual mistake in supposing a
person whose life was insured to be still alive is ground for setting
aside a contract by which the insurance policy was surrendered for
a paid-up policy in order to avoid further payment of burdensome
premiums.7 Equity will set aside and cancel a policy issued to
insured in exchange for a prior policy and reinstate the latter where
the cancelation of the old policy and the substitution of another was
obtained through misrepresentations and fraud of insurer's agent
practised upon insured and it is sufficient in such a proceeding to
offer in the bill to return the benefits received, and with the prayer
for cancelation and reinstatement to present the new policy for the
court to act upon; nor in such case will rescission be denied where
the impossibility of restoring the status quo because of the protection
afforded by the policy, results from insurer's fraud without fault of
insured.8
by fraud, see note in 45 L.R.A.(N.S.) 5 Goddard v. Garrett, 2 Vern. 269.
222. 6 London Assur. Co. v. Mansel, 3
2 Ingersoll v. Missouri Vallev Life Younge & C. 216; De Costa v. Scan-
Ins. Co. 37 Fed. 530. dret, 2 P. Wms. 170.
8 Connecticut Mutual Life Ins. Co. 7Reigel v. American Life Ins. Co.
v. Bear, 26 Fed. 582. Contra, Con- 140 Pa. 193, 11 L.R.A. 857, 21 Atl.
necticut Mutual Life Ins. Co. v. 392, s. c. 153 Pa. 134, 19 L.R.A. 166,
Home Ins. Co. 17 Blatclif. (U. S. 25 Atl. 1070.
C. C.) 142, Fed. Cas. No. 3107. 8 Green v. Security Mutual Life
4 British Equitable Assur. Co. v. Ins. Co. 159 Mo. App. 277, 140 S.
Great Wester., K.v. ( V 20 L. T. N. S. W. 325, 41 Ins. L. J. 32.
422; Hancock v. McNamara, 2 Ir-
ish Eq. 486.
2844
RESCISSION AND CANCELATION § 1676
§ 1676. When equity will not rescind or cancel : cases. — Although
fraud and concealment are alleged in a bill for cancelation of the
policy, and the court has jurisdiction, it may refuse relief where its
interference would withdraw the case from a court of law wherein
the plaintiff has, upon the case made by the bill, a full and perfect
defense.9 Equity will not decree the cancelation of a policy after a
loss has occurred, and enjoin the assured from bringing any action
thereon, where the facts upon which the bill is based, although
alleging fraud in obtaining the policy, could, if true, be fully availed
of as a defense in an action at law, and no such cause as indefinite
delay or that equitable relief is necessary or expedient is set up, and
no suggestion of any obstacle to making a defense at law.10 Nor
will relief be granted simply on the ground of unseaworthiness of
the ship and deviation, no case of fraud being made out upon the
bill.11 And equity will not decree that a policy is void for breach
of condition against the premises being vacant, where there is no
evidence to show that the loss would not have occurred exactly as
it did had it been occupied.12 Nor will the court order the policy
canceled nor an action at law enjoined upon the allegation of fraud
in the assignor in effecting the policy, the matter set up in the bill
being a good defense in the action at law.13 Nor will equity take
jurisdiction although estoppel is relied on to defeat recovery where
the issues are insured's incompetency by reason of insanity to sur-
render the policy or assent thereto, and the genuineness of the
beneficiary's signature to the agreement to surrender.14 And an
action after a loss under an insurance policy, to cancel the policy
for fraud, or to restrain a suit at law thereon, cannot be maintained
by the insurer in the absence of some special circumstances of a
nature to cause irreparable loss to him if he is not permitted a rem-
edy in equity.15
9 Hoare v. Bremridge, 8 L. R. Ch. 13 Scottish Amicable Life Assur.
22, 42 L. J. Ch. 1. See Marine Ins. Soc. v. Fuller, 2 Irish Eq. 53. See
Co. v. Hodgson, 7 Cranch (11 U. S.) Carter v. United Ins. Co. 1 Johns.
332, 3 L. ed. 362; Des Moines Life Ch. (N. Y.) 463.
Ins. Co. v. Seifert, 210 111. 157, 71 14 Hicks v. Northwestern Mutual
N. E. 349; Northwestern Mutual Life Life Ins. Co. 166 Iowa, 532, L.K.A.
Ins. Co. v. Amos, 136 Mich. 210, 98 1915A, 1872, 147 N. W. 883.
X. W. 1018; The Sailors v. Woefle, On beneficiary's consent to surren-
118 Tenn. 753, 102 S. W. 1109, 12 der of policy as affecting his right to
L.R.A.(N.S.) 881. question validity thereof, see note in
10 Home Ins. Co. v. Stanchneld, 1 L.R.A.1915A, 8*72.
Dill. (U. S. C. C.) 424, Fed. Cas. 15 Bankers' Reserve Life Co. v.
No. 6,660, 2 Abb. (U. S. C. C.) 1. Omberson, 123 Minn. 285, 48 L.R.A.
11 Thornton v. Knight, 16 Sim. 509. (N.S.) 265, 143 N. W. 735.
12 Traders' Ins. Co. v. Race, 142
111. 338, 31 N. E. 392.
2845
§§ 1G77, 1678 JOYCE ON INSURANCE
§ 1677. Equity may rescind cancelation made by mistake. — If
a cancelation of a marine risk is made by mutual mistake after a
loss, and in ignorance thereof by both parties, equity will rescind
the cancelation, though said cancelation was in consideration of a
returned proportionate premium.18 Although this rule is based
upon a case in the lower courts, the principle underlying the
decision is that which obtains in numerous cases where relief has
been granted by equity, and the case was affirmed in highest court
of the state.
§ 1678. Where equity will refuse to cancel after loss or death. —
The fact whether the suit to cancel has been brought before or after
loss has been declared by high authority to be a turning point in
determining whether equity would entertain jurisdiction, it being
declared that although in the case presented, the action being
brought after loss, jurisdiction would not be entertained, yet if
such a bill had been brought before loss, or in case of a life policy
before death, there would be a strong inclination to sustain the bill.17
And although the intention of the insured to destroy the property
by fire will justify an immediate cancelation before loss, yet if the
company seeks to rescind in equity after the loss, the court will
refuse to entertain the bill, and the remedy must bo at law if the
assured consummates his intention to burn the property.18 And
although the bill alleged fraudulent representations and conceal-
ment, but there was no averment of an intended assignment, and
the obligation to pay -had become fixed by the death of the party,
and the matter had become purely one of an adequate remedy at
Law, the court refused to entertain the bill.19
16 Duncan v. New York Mutual ease upon the bill, and this test,
Ins. Co. 18 N. Y. Supp. 863, 46 N. whether the suit is brought before or
Y. St. Rep. 241, 61 N. Y. Sup. Ct. after loss, has been held the turning
13, affirmed 138 N. Y. 88, 20 L.R.A. point in other cases, the suit not be-
386, 33 N. E. 730. ing sustained where filed alter loss.
17 Home Ins. Co. v. Stanchfield, 2 Phoenix Ins. Co. v. Bailev, 13 Wall.
Abb. (U. S. C. C.) 6, 1 Dill. (U. S. (80 U. S.) 616, 20 L. ed. 501; Mutual
C. C.) 424, Fed. Cas. No. 6660, per Life Ins. Co. of N. Y. v. Blair (U. S.
Miller, J. In this ease there was a C. C.) 130 Fed. 971; Imperial Fire
limitation in the policy as to the time Ins. Co. v. Gunning, 81 111. 236; See
of bringing suit, and it was alleged Globe Ins. Co. v. Reals, 79 N. Y.
Una the defendants were threaten- 205, 50 How. Pr. (N. Y.) 237; Fow-
ing to sue at law, and there was ler v. Palmer, 62 N. Y. 533; Tov
therefore no danger of indefinite de- Venice v. Woodruff, 62 X. Y. 462, 20
lay, and the company would have a Am. Rep. 555; Hoare v. Brembridge,
full, plain, and perfect defense at L. E. 8 Ch. App. 22.
law; and generally, by the occurrence "Imperial lire Ins. Co. v. Gun-
of the loss a suit at law arises to ning, SI 111. 236.
which the company may interpose a 19 Phoenix Mutual Life Tns. Co. v.
defense, the facts presented by its Bailey, 13 Wall. (80 U. S.) 616,
2846
RESCISSION AND CANCELATION §§ 1679, 1680
§ 1679. When equity will cancel after loss or death. — Nothwith-
standing the decisions noted under the last section, there are nu-
merous cases wherein equity has entertained jurisdiction and
decreed cancelation of the policy, even upon a bill filed after loss
or death, upon a proper case made under the bill. Thus, it is held
that even after the loss has been adjusted and payment promised,
equity will order the policy canceled and the promise to pay rescind-
ed, upon the ground that the insured has misrepresented his title to
the property, by means of which the policy under the contract stip-
ulations is forfeited, it appearing that the company did not discover
the facts alleged until after adjustment and its promise made.20
So equity may cancel a policy even after a loss occurs, it appearing
that the policy was by mistake issued for a longer time than was
intended by either party.1 So where one who had no interest in
either ship or cargo effected a policy on the ship, which was lost
before the policy expired, it was held that equity would order the
policy surrendered for cancelation.2 Again, where a marine policy
was effected by the insured upon his ship, and he concealed the fact
that he had heard that a ship answering the description of his vessel
had been lost, a cancelation was decreed.3 And in another case
where it appeared that the policy had been obtained on the life of
another by fraudulent means for a fraudulent purpose, which was
consummated by the holder of the policy by the murder of the in-
sured, it was held that equity would order the policy delivered up
for cancelation.4 This case would, however, differ from that where
the policy is forfeited by the act of one who, after effecting for his
own benefit insurance on the life of another, murders him to obtain
the insurance, in which case the defense could be availed of at law.5
§ 1680. Same subject: conclusion. — The result of the above cases
seems to be this: That if equitable interposition is sought before
20 L. ed. 501, citing Hipp v. Babin, Fed. Cas. No. 10315. See Witting-
19 How. (60 U. S.) 271, 15 L. ed. ham v. Thornborough, 2 Vern. 206,
633; Parker v. Winnipiseogee Lake Einch, 20.
Cotton & Woolen Co. 2 Black (67 2 Goddart v. Garrett, 2 Vern. 269.
U. S.) 545, 17 L. ed. 333; Boyce v. 3 De Costa v. Seaudret, 2 P. Wins.
Grundy, 3 Pet. (28 U. S.) 210, 7 L. 170.
ed. 655 ; Graves & Barnewall v. Bos- 4 Prince of Wales Assur. Co. v.
ton Marine Ins. Co. 2 Cranch (6 U. Palmer, 25 Beav. 605.
S.) 215, 419, 2 L. ed. 324. 5 See New York Mutual Life Ins.
20 American Ins. Co. v. Barnett, 73 Co. v. Armstrong, 117 U. S. 591, 29
Mo. 364, 39 Am. Rep. 517. See also L. ed. 997, 6 Sup. Ct. 877.
North American Ins. Co. v. Whipple, On murder of insured as affecting
2 Biss. (U. S. C. C.) 418, Fed. Cas. right to insurance, see notes in 3
No. 10315. L.R.A.(N.S.) 727; 2S L.R.A.(N.S.)
1 North American Ins. Co. v. 675; and L.R.A.1917B, 671*
Whipple, 2 Biss. (U. S. C. C.) 418,
2847
§§ 1680a, 1681 JOYCE ON INSURANCE
loss or death, the right of the plaintiff to the aid of the court is
i than ii would be were he to wait until after loss or death,
v, !,, ii the question might arise whether his remedy by way of de-
fense to an action at law on the policy would not he adequate, and
when it would be necessary to .-how that some obstacle prevented
making the defense at law. In other words, having no remedy at
law he hi re loss, the case presented by a hill brought after Loss would
have to show, notwithstanding a then existing adequate remedy at
law, that a resort to equity was necessitated hy some particular cir-
cumstance of equitable cognizance warranting equitable relief, and
it would seem reasonable to state, as a rule, that the fact that the
loss ha.- occurred is not conclusive, and upon a proper averment
of facts showing that a resort to equity is either necessary, expe-
dient, or proper, or that some obstacle prevents a complete defense
at law, the court may, in a reasonable and proper exercise of that
discretion which is generally exercised in matters of cancelation,
take cognizance and grant relief. The words of Judge Dillon are,
however, pertinent in this connection. Referring to the English
decisions on the question of equitable cancelation, he says: "The
old cases are entitled to very little respect as authority, and the
modern ones tend to show that equity will not oust the law juris-
diction or interfere with the legal remedies where there is a full
defense at law, and no obstacle in the way of making it." 6
§ 1680a. Effect of cancelation upon liability. — Although a policy
of insurance against liabilities issued and in force reserves the right
of cancelation for nonpayment of premiums, the exercise of such
right does not prevent the insured from recovering any liability
accruing under the policy between the time of its issuance and
cancelation, less the premium earned up to the latter time7 And if
a sick benefit policy is not canceled at the inception of insured's
sickness, but future premiums are thereafter accepted with a full
knowledge thereof, insured is entitled to recover.8
§ 1681. Proof as to cancelation or rescission. — The burden of
proving a rescission or cancelation of the contract is upon the
party claiming that it has been thus terminated,9 and where the
6 Home Ins. Co. v. Stanehfield, 2 Fordvee, 62 Ark. 562, 54 Am. St.
Abb. (U. S. C. C.) 6, 1 Dill. (U. S. Rep. 305, 36 S. W. 1051.
C. C.) 424, Fed. Cas. No. 6660, per 8 Baranowski v. Baltimore Mutual
Dillon and Miller, JJ.; Connecticut Aid Soe. 3 Super. Ct. (Pa.) 367, 39
.Mutual Life Ins. Co. v. Home Ins. W. N. C. 533.
Co. 17 Blatchf. (U. S. C. C.) 142, 9Runkie v. Citizens' Ins. Co. of
Fed. Cas. No. 3107, per Shipman, J. ; Pittsburgh, 6 Fed. 143 ; Gomila v.
Fenn v. Craig, 3 Younge & C. 216, Hibernian Ins. Co. 40 La. Ann. 553,
11 Chip. D. 363. 4 So. 490.
7 American Kmplovers' Ins. Co. v.
2848
RESCISSION AND CANCELATION § 1682
statute provides that fire companies shall, upon request of the as-
sured, cancel any policy, issued or renewal, the burden of proof is
upon the company to show that the request for cancelation has been
received before the fire.10 But the insurers are bound by the speci-
fied reason assigned for the cancelation, and cannot set up another
reason, nor can they assign a specific reason when a general right
to rescind is claimed.11 And where the fact as to whether there has
or has not been a cancelation depends largely upon the agent's acts
in reference thereto, such acts and declarations may be shown in
evidence.12 The company must prove that it has given the assured
notice of cancelation where it relies upon a reservation in the policy
giving it the right to cancel upon notice, etc.13 The fact that the
notice was found among the assured's papers several months after
the loss is not sufficient proof of service of notice, even though
coupled with the fact that a notice was prepared by the company.14
If, in an action to recover insurance, the defense is set up that there
was a cancelation of the policy before the loss by reason of a failure
to pay the premium within five days after notice, as required by the
policy, and the evidence shows a completed contract by the issuance
and delivery of the policy, the burden of showing such cancelation
is upon the defendant, and if there is a conflict of evidence the ques-
tion must be determined by the jury.15 And where the evidence is
conflicting upon the question whether or not an oral notice was
accepted, written notice of cancelation being required by the con-
tract, a direction of a verdict is improper.16 In an action to rescind
a settlement of insurance loss made between the insured, the de-
fendant insurer, and other insurance companies, a letter written by
an agent of an insurer other than the defendant is not admissible
in evidence against him, although such agent was present at the
settlement.17
§ 1682. Whether question of rescission or cancelation is one of
law or fact. — The question whether there has been a cancelation
may depend upon the legal construction of written communication
by the court, and all transactions relating to the cancelation of a
10 Crown Point Iron Co. v. iEtna 13 Runkle v. Citizens' Ins. Co. 6
Ins. Co. 127 N. Y. 608, 14 L.R.A. Fed. 143.
147, 28 N. E. 653, 21 Ins. L. J. 31; 14Lattan v. Royal Ins. Co. 45 N.
citing Griffey v. New York Central J. L. 453.
Ins. Co. 100 N. Y. 417, 53 Am. Rep. 15 Phoenix Assurance Co. v. Me-
202, 3 N. E. 309, affirming 25 N. Y. Arthur, 116 Ala. 659, 67 Am. St.
St. Rep. 728, reversing 26 N. Y. St. Rep. 154, 22 So. 903.
Rep. 983. 16 New Amsterdam Casualty Co. v.
11 Cahill v. Andes Ins. Co. 5 Biss. Spaeth, 120 N. Y. Supp. 745.
(U. S. C. C.) 211, Fed. Cas. No. 17 Georgia Home Ins. Co. v. Wart-
2289. en, 113 Ala. 479, 59 Am. St. Rep.
12 Mallorv v. Ohio Farmers' Ins. 129, 22 So. 288.
Co. 90 Mich. 112, 51 N. W. 188.
Joyce Ins. Vol. III.— 179. 2849
§ 1682 JOYCE <>.\ INSURANCE
contract of insurance must be reasonably and fairly construed ac-
cording to the manifesl understanding of the parties a1 the time
and u ithin the limits of good faith ; or the question may, in certain
upon the veracity of the respective parties and their wit-
- as to tlif facts, or upon what was said or done by and between
them, and thus be a question for the jury.18 H the evidence of can-
celation by mutual consent raises no real question of fact under the
issue, the conn need not submit it to the jury.19 Where the policy
was to Lapse if the premium note was not paid when due, the ques-
tion in an action for wrongfully canceling the policy as to what was
a reasonable time within which the plaint ill' might notify the com-
pany of acceptance of the cancelation, is a question of law for the
courts.20 What is a reasonable notice of cancelation is a question
for the jury, where the fact is controverted whether there wTas a suf-
ficient time for a survey required by the company and reinsurance
after notice and before the fire.1 It is a question for the jury
whether or not notice of cancelation was received by assured.2 And
question whether the policy was canceled by mutual consent,3 or
before loss is for the jury.4 And the question whether a surrender
agreement was signed by the beneficiary is one for the jury.5 The
question of waiver is generally one of fact for the jury. The ques-
tions as to whether an indemnity policy sued upon had been ab-
solutely canceled, and whether a provision therein, in the light of
evidence concerning it, limited liability for injuries to places with-
in the United States, should be submitted to the jury.6
18 Ionides v. Hartford, 29 L. J. 2 Commercial Union Fire Ins. Co.
Ex. 36; Bingham v. insurance Co. of v. King, 108 Ark. 130, 156 S. W.
North America, 74 Wis. 498, 43 N. 4-15, 42 Ins. L. J. 1021.
W. 494; Barnes v. Woodfall, 6 Com. 3 Polemanakos v. Austin Fire Ins.
B. N. S. 657, 28 L. J. Com. P. 338; Co. — Tex. Civ. App. — , 160 S. W.
Mallory v. Ohio Farmers' Ins. Co. 1134.
90 Mich. 112, 51 N. W. 188. 4Naslund v. Svea Ins. Co. 64
19Candee v. Citizens' Ins. Co. 4 Wash. 520, 117 Pac. 264.
Fed. 143; citing Pleasants v. Faut, 5 Hicks v. Northwestern Mutual
22 Wall. (89 U. S.) 116, 22 L. ed. Life Ins. Co. 166 Iowa, 532, 147 N.
780; Commissioners v. Clark, 94 U. W. 883.
S. 278, 24 L. ed. 59. 6 Currie v. Continental Casualty
20 Willmot v. Charter Oak Life Ins. Co. 147 Iowa, 281, 140 Am. St. top.
Co. 46 Conn. 483. 300, 126 N. W. 164.
1 Chadbourne v. German-American
Ins. Co. 31 Fed. 533.
2850
TITLE VIII.
SUBJECT OF INSURANCE.
CHAPTER LII.
DESCRIPTION OF PARTIES AND SUBJECT-MATTER.
§ 16S9. Description of parties.
§ 1690. Description of the property: general rule.
§ 1691. Extent of interest need not be specifically described.
§ 1692. Same subject: carriers: shipowner: consignee: undivided in.
terest : assignee.
§ 1692a. Same subject : bailees or agents.
§ 1693. Same subject: joint owners: partners.
§ 1694. Same subject: trustee: tenant by curtesy: administrator: exec-
utor : agent : charterer.
§ 1695. Same subject : mortgagor and mortgagee : reinsurer.
§ 1696. Goods shipped by carriers : owner's interest covered.
§ 1697. Specific description, how far exclusive: the terms "including"
and "consisting of."
§ 1698. "When specific designation of interest of property is required.
§ 1699. Same subject : particular words and phrases : instances.
§ 1689. Description of parties.7 — In this country it is usual to
insert in the policy the names of the parties.8 In marine policies
7 See §§ 310, 311 herein. used meant those succeeding to Rieh-
8 But see "Weed v. London & Lan- ards' title upon his death. There was,
cashire Fire Ins. Co. 116 N. Y. however, held to be a breach of con-
106, 22 N. E. 229 (policy was issued dition as to title).
to "estate of 0. Richards," which If the name and residence of an
estate had no title when the policy applicant for life insurance in two
was issued and although the court different companies and of the pro-
declared that it was not necessary posed beneficiary are the same in
to the validity of the policy that the both applications, it must be pre-
name of assured should appear in the sumed that the same person made
contract, that he may be described both applications, Taylor v. Grand
in other ways, and that extrinsic ev- Lodge, Ancient Order U. "W. 101
idence was admissible to show who Minn. 72, 118 Am. St. Rep. 606, 111
was intended and that the words here N. W. 919.
2851
§ 1G89 JOYCE ON INSURANCE
the parties intended to be benefited may be covered by descriptive
words. There may be a nominal insured, and the party actually
interested be covered by the words "whom it may concern/' or
words of like import. Fire policies may also be effected "for whom
it may concern," or equivalent words. In England, policies in
blank are prohibited: as construed by the courts, the statute renders
it necessary that the name of the person actually procuring the
policy to be effected be inserted, and in practice the name usually
inserted is thai of the insurance broker, and while such polices are
usually effected by such broker in his name and on his own account,
or in iiis name and on the principal's account, neither the law nor
practice preclude a change as to the descriptive words used. Mr.
Maclachlan says a policy in blank "is either prohibited by the laws
or rejected by the practice of all mercantile states." Mr. Duer, how-
ever, is of the opinion that the prohibitory act of England evidences
thai such policies were valid at the common law, and that in this
country, unless the law has been superseded by an appropriate usage
in the absence of a statute, they are valid, even though in blank.
But the question would, however, hardly arise under the practice
of the present day.9 A policy of marine insurance taken out in the
9 Clinton v. Hope Ins. Co. 45 N. under the pages above referred to in
Y. 454, affirming 51 Barb. 047; Fire this note. See also 35 Geo. III. c.
Jns. Assoc, v. Merchants' & Miners' 63; 30 Vict. c. 23, where it is printed
Transp. Co. (i(i Md. 331), 59 Am. Rep. in the schedule. Both this writer and
162, 7 Atl. 905; 1 Phillips on Ins. Mr. Arnould give the mode of tilling
(3d ed.) p. 26, sec. 28; Emerigon up said blank as to insertion of the
on Jns. (Meredith's ed. 1850) c. ii. names of the assured or the agent.
sec. 7, p. 40 ; c. v. sees. 1-6, pp. 106- See above reference. The first stat-
14; e. xi. sec. 4, pp. 262 et seq.; 1 ute was passed in 1785 (25 Geo. III.
Arnould on Marine Ins. (Perkins' c. 44), and provided that it the in-
ed. 1850) pp. 22, *23 et seq.; Id. sured resided in Great Britain, his
Maclachlan's ed. 1887, 231-35; Id. name, or that of his agent, should be
(8th ed. Hart cV Simey) sec. 11, p. inserted in the policy as the person
20, sees. 169-171, pp. 224 et seq.; 17 interested, and when he resided
Earl of Halsbury's Laws of England, abroad the name of his agent should
sec. 675, p. 337; 1 Duer on Marine be inserted. This act was repealed
Ins. (ed. 1845) pp. 11-20, sees. 10- by 28 Geo. III. c. 56, which provided
17; Richards on Ins. (ed. 1892) 220, that "it shall not be lawful for any
sec. 200. The Massachusetts standard person or persons to make or effect,
form of lire policy provides for the or cause to be made or effected, any
insertion of "the corporate name of policy or policies of assurance upon
the company or association, and its any ship or ships, vessel, or vessels,
principal place or places of busi- or upon any goods, merchandises,
ness:" Pub. Stats. Mass. pp. 713- effects, or other properties whatso-
15; Mass. Rev. L. C. 118, see. 60 ever, without first inserting, or caus-
(Supp. 1902-1908, p. 1191, sec. 60) ing to be inserted, in such policy or
provides that the name, location, etc., policies of assurance, the name or
of company may be priided on the names, or the usual style and firm of
policy. The English form of marine dealing of one or more of the per-
policv is given by Mr. Maclachlan sons interested in such assurance, or
2852
DESCRIPTION OF PARTIES AND SUBJECT-MATTER § 1689
name of a person "for account of whom it may concern" covers the
interest of the person for whom it was intended by the party taking
out the insurance, even though the particular person intended is not
then known,10 although it is declared that a ''policy in the name of
A." for covers "whom it may concern," where it appears that
the blank was intended to be filled.11 The phrase "whom it may
concern" is a technical one, and means those whose interests were
intended to be covered, even though foreigners, and not everybody
who may have an interest,12 So a policy "on account of whom it
may concern" will lie applied to the interest of the persons for whom
it was intended by the person who ordered it, provided the latter
had the requisite authority from the former, or they subsequently
adopted it.13 The words "for account of whom it may concern," in-
without, instead thereof, first insert- S. 479; Palmer v. Marshall, 8 Bing.
ing, or causing to be inserted, in such 79. The construction of these stat-
policy or policies of assurance, the utes is also considered in 1 Arnould
name or names, or the usual style on Marine Ins. (Perkins' ed. 1850)
and firm of dealing of the consignor pp. 165-71, *164-70; Id. (8th ed.
or consignors, consignee or con- Hart & Simey) sec. 11, p. 20; sees,
signees, of the goods, merchandises, 169-171, pp. 224 et seq.; 1 Duer on
effects, or property so to be insured; Marine Ins. (ed. 1845) pp. 11-18,
or the name or names, or the usual sees. 10-16; 1 Marshall on Ins. (ed.
style and firm of dealing of the per- 1810) *306-12a.
son or persons residing in Great The marine ins. act 1906 (6 Edw.
Britain who shall receive the order VII. e. 41) sec. 23; Butterworth's
for and effect such policy or policies Twentieth Cent. Stat. (1900-1909) p.
of assurance, or of the person or per- 405, provides : "A marine policy
sons who shall give the order or must specify — (1) The name of the
direction to the agent or agents im- assured, or of some person who ef-
mediately employed to negotiate or fects the insurance on his behalf:
effect such policy or policies of as- . . . (5) The name or names of the
surance." This act makes null and insurers."
void all policies underwritten con- 10 Hagan v. Scottish Union &
trary to its "true intent and mean- National Ins. Co. 186 U. S. 423, 46
ing." For cases construing the act L. ed. 1229, 22 Sup. Ct. 862. Cited
25 Geo. III. c. 44, see Cox v. Parry, in Munich Assurance Co. v. Dod-
1 Term Rep. 464; Pray v. Eadie,*l well & Co. 128 Fed. 414, 63 C. C. A.
Term Rep. 313 ; Woolf v. Horncastle, 156 ; Atlas Reduction Co. v. New
1 Bos. & P. 321, 13 Eng. Rul. Cas. Zealand Ins. Co. 138 Fed. 508, 71
265, per Buller, J. For cases con- C. C. A. 32.
struing the act 28 Geo. III. c. 56, see " Turner v. Burrows, 8 Wend.
Woolf v. Horncastle, 1 Bos. & P. 316, (N. Y.) 144, aff'g 5 Wend. (N. Y.)
13 Eng. Rul. Cas. 265; Bell v. Gil- 541, per Walworth, Ch.
son, 1 Bos. & P. 345 ; De Vi^uier v. 12 Newton v. Douglass, 7 Har. &
Swanson, 1 Bos. & P. 346n; Hibbert J. <Md.) 417, 450, 16 Am. Dec. 317;
v. Martin, 1 Camp. 538; Routh v. Seamans v. Loring, 1 Mason (U. S.
Thompson, 13 East, 274; Lucena v. C. C.) 127, Fed. Cas. No. 12,583,
Crawford, 1 Taunt. 325, 3 Bos. & P. per Story, J.
N. R. 269, 13 Eng. Rul. Cas. 151; 13 Hooper v. Robinson, 98 U. S.
Bell v. Janson, 1 Maule & S. 202; 528, 25 L. ed. 219. Cited in:
Dickson v. Lodge, 1 Stark. 180: United States.— Hagan v. Scottish
Hagerdorn v. Oliverson, 2 Maule & Union & National Ins. Co. 186 U. S.
2853
§ 1690 JOYCE ON INSURANCE
serted in writing immediately following the name of the insured
in a policy of marine insurance, protects a subsequent vendee of an
interest in the vessel, notwithstanding the retention in the policy,
which is written on a blank intended for insurance of property on
land, of the printed clause, that such policy shall be entirely void,
unless otherwise provided by agreement, if any change in interest,
title, or possession shall be made.14 Again, a policy on goods in the
name of a bailee, for account of whom it may concern, will enure
to the interests of the owner for whom it was intended by the as-
sured, provided he, at the time of effecting the insurance, had the
risite authority from such owner or the latter subsequently
adopted it.15 If the owner of a vessel insures the cargo for account
of whom it may concern, and collects the insurance on it, upon
loss of the cargo by fire, for which he is liable to the shippers, be-
cause of limitation of liability proceedings, he must account to them
for the money collected, and cannot retain the same for his own
use.16 Bodies politic and corporate may be included under the
iat ion of "person or persons" in the policy.17
§ 1690. Description of the property: general rule. — The policy
should designate the property, so that the subject insured and at
risk may be determined. In describing the property intended to
be covered it should be so clearly set forth in the policy, that the
obligation concerning the same embodied in the contract is certain
of ascertainment, either from the specific terms themselves or by
relation; or some means of determining to what the contract is to
be applied, should be prescribed. This rule does not, however, pre-
clude resort to extrinsic evidence in such cases where by usage, am-
biguity, or use of technical words, or otherwise, such evidence is
rendered admissible. Care should also be taken in describing the
subject of insurance to use such words as that neither party shall
have it in his power to render the contract inoperative, or to enlarge
423, 427, 46 L. ed. 1232, 22 Sup. Ct. era Ins. Co. 30 N. Y. Supp. 1044, 16
802; Virginia-Carolina Chemical Co. Misc. 170.
nary Ins. Co. 108 Fed. 451, 459; 14 Hagan v. Scottish Union & Na-
tish Union & National tional Ins. Co. 186 U. S. 423, 46 L.
Ins. Co. 98 Fed. 129, 130; Scranton ed. 1229, 22 Sup. Ct. 862.
Steel Co. v. Wind's Detroit & Lake 15 Sturm v. Baker, 150 U. S. 312,
iriorLine, 40 Fed. 866, 872; The 37 L. ed. 1093. Cited in Virginia-
Sydney, 21 Fed. 125; The Sydney, Carolina Chemical Co. v. Sundry Ins.
1. 88, 93. Co. 108 Fed. 459.
Maryland. — Fire Ins. Assoc. Limtd. 16 Symmers v. Carroll, 207 N. Y.
v. Merchants' & Miners' Transporta- 632, 47 L.R.A.(N.S.) 196, 101 N. B.
tion Co. 66 Md. 339, 349, 59 Am. 698.
Rep. 162, 7 Atl. 905. "United States v. Amedy, 11
yPir York.— Duncan v. China Wheat. (24 U. S.) 392, 6 L. ed.
Mutual Ins. Co. 129 N. Y. 237, 244, 502.
29 N. E. 76; Palmer v. Great West-
2S54
DESCRIPTION OF PARTIES AND SUBJECT-MATTER § 1690
or diminish its provisions according as his personal interest may
dictate. This may best be accomplished by reliance upon the ad-
judicated cases in point, and upon well-ascertained general prin-
ciples applicable thereto.18 The description should sufficiently
designate the property. A subscription to a printed form of marine
policy wherein the ship is not named, nor the specific subject of
insurance set forth, nor any value declared, nor any sum men-
tioned, is not a policy on which the underwriter is liable, although
the description of the goods is thereafter inserted.19 In cases of
doubt as to what property is covered, the construction will be
against the insurer.20 So where property is misdescribed, as in case
of land with growing crops insured against hail, a recovery is not
thereby precluded and the error may be shown to be solely that of
insurer's agent even in a court of law without resorting to equity
for reformation of the policy.21 And insured's one-half interest in
a party wall is covered where, in addition to the policy description
a rider is attached which expressly and by reference justifies such
construction.22 It is a controlling presumption that policies of
insurance have reference to the character and use of the insured
property, and to the incidents and usages of that particular risk,
and contemplate its use by the owner in the ordinary manner and
for the purposes to which such use is ordinarily applied, unless the
laws and usage of the policy is such as to exclude such presump-
tion.1 If a vessel or goods are insured, that vessel or those goods
are covered which compare most accurately with the description.2
18 Alabama Mutual Fire Ins. Co. v. Ins. L. J. 356. See Monteleone v.
Minchener, 133 Ala. 632, 32 So. 225, Royal Ins. Co. 47 La. Ann. 1563, 56
31 Ins. L. J. 909, 911. See Emerigon L.R.A. 784, 18 So. 472, 31 Ins. L. J.
on Ins. (Meredith's ed. 1850) c. x. 689.
p. 233 ; e. ii. sec. 7, p. 46. See chap- x See Holbrook v. St. Paul Fire
ter herein on Evidence, and §§ 237 et & Marine Ins. Co. 25 Minn. 229, per
seq. herein. the court; Macy v. Whaling Ins. Co.
19Langhorn v. Cologan, 4 Taunt. 9 Met. (50 Mass.) 354; Livingston v.
330, 13 R. R. 613. Maryland Ins. Co. 7 Cranch (11 U.
20 Planters' Mutual Ins. Co. v. S.) 506, 3 L. ed. 521; Glendale
Engle, 52 Md. 468; Franklin Fire Woolen Co. v. Protection Ins. Co.
Ins. Co. v. Updegraff, 43 Pa. St. 350. 21 Conn. 19, 54 Am. Dec. 309.
See also Alabama Mutual Fire Ins. 2 Sea Ins. Co. v. Fowler, 21 Wend.
Co. v. Minchener, 133 Ala. 632, 32 (N. Y.) 600. Cited in Hughes v.
So. 225, 31 Ins. L. J. 909, 911. See Mercantile Mutual Ins. Co. 55 N. Y.
§§ 205 et seq. herein. 265, 267, the policy in this case
21 French v. State Farmers Mutual was upon the bark "Empress or by
Hail Ins. Co. 29 N. Dak. 426, 151 whatever other name or names the
N. W. 7. See also Norman v. Kelso vessel is or shall be named or called."
Farmers Mutual Fire Ins. Co. 114 The bark lost was the "St. Mary" but
Minn. 49, 130 N. W. 13, 40 Ins. L. J. the mistake in the name was held
772. See §§ 3509 et seq. herein. no obstacle to the recovery if in
22 Nelson v. Continental Ins. Co. point of fact the underwriter, when
182 Fed. 783, 105 C. C. A. 293, 40 the policy was issued knew the true
2855
§ 1690 JOYCE ON INSURANCE
Property which would reasonably be included in the description is
covered, and if the insurers intend otherwise, it should be excluded
by proper terms, or they should insist upon a representation as to
tin- character of the property or some warranty in regard to it
which would prevent the policy attaching.3 Reference may be had
to tin' bill of lading to identify the goods and determine the right
of the assured to receive them.4 And in a fire policy the reference
to the plan must be regarded as identifying the building, or as show-
ing its relative situation to other buildings.6 So a building de-
scribed as "•known on*' an insurance map will be construed as
meaning a building on said map and not one not on the map.6a
And in fad the voyage or time of shipment not only go to the ques-
tion of attachment of the risk, but also serve to identity the goods
covered, and this is especially true of insurances on goods, etc., by
ship or ships.6 Although separate forms of marine insurance are
provided in this country for ship and cargo,7 the English form of
marine policy covering the subject insured is upon "any kind of
goods and merchandise, and also upon the body, tackle, apparel, ord-
nance, munition, artillery, boats, and other furniture of and in the
good ship or vessel called the ." This is applicable to insur-
ances on both ship and cargo, but it is written in the body or other-
wise to cover the subject intended to be insured, to which alone it
then becomes applicable, for the written words control the printed
ones so far as they arc a part of the policy. And if the policy is up-
on ship alone the words "on ship" should be inserted in the margin
or at the foot of the policy or it should appear in the valuation
clause.8
name, or intended to insure the par- 6 Crowley v. Cohen, 3 Barn. &
ticular vessel which was lost. This Adol. 478, 13 Eng. Rul. Cas. 314;
last case is distinguished in Mead v. Sorbe v. Merchants' Ins. Co. 6 La.
Saratoga & Washington Fire Ins. 185. See Murrav v. Columbian Ins.
Co. 80 N. Y. Supp. 885, 880, 81 App. Co. 11 Johns. (N. Y.) 302.
Div. 28:2, 284, where the question was 7 It is the practice in this country
held not one of identity of property to insure ship and freight under the
as in the Hughes case. same policy.
'Baltimore Ins. Co. v. Taylor, 3 81 Arnould on Marine Ins.
Har. & .). (Md.) 198. But see Rich- (Perkins' ed. 1850) 28 et seq.; Id.
ardson v. Home Ins. Co. 47 N. Y. (Maclachlan's ed. 1887) 237-39;
Super. Ct. 138, 15 Jones & S. 138. citing Robertson v. French, 4 East,
4 Ballard v. Merchants' Ins. Co. 9 141,' 14 Eng. Rul. Cas. 1, per Lord
La. (O. S.) 258, 24 Am. Dec. 444. Ellenborough ; Robinson v. Tobin, 1
5 Fair v. Manhattan Ins. Co. 112 Stark. 333; Haughton v. Ewbank, 4
Mass. 320. See A. A. Griding Iron Camp. 89; Dudgeon v. Pembroke, 2
Co. v. Liverpool & London & (ilol.e App. Cas. 284, 293, 14 Eng. Rul. Cas.
Ins. Co. 68 N. J. L. 368, 54 Atl. 409. 105; Id. (8th ed. Hart & Simey) sec.
BaBumpus v. Central Ins. Co. 108 10, p. 15; sec. 218, p. 282; 17 Earl
Me. 217, 79 Atl. 848, 40 Ins. L. J. of Halsbury's Laws of England, sec.
1500. 716, p. 363. Above is form under
2S56
DESCRIPTION OF PARTIES AND SI'B.JECT-MATTER §§ 1691, L692
§ 1691. Extent of interest need not be specifically described. —
It is not necessary, as a general rule, that the extent of the insured's
interest be specifically set forth in the policy. One who holds an
undivided interest need not specifically describe his share or pro-
portion of interest in the policy, but may effect insurance thereon
in general terms. If it appears that the description was intended to
cover and apply exclusively to the individual interest of the assured,
he will recover for such interest as he has.9 Such exceptions as
exist to the above rule will be noted under the sections of this and
the following chapter, wherein the several interests are specified,
and also under the chapter on ''concealment" herein.
§ 1692. Same subject: carriers: shipowner: consignee: undi-
vided interest: assignee. — The general rule above stated is applied
to a carrier's interest as such in goods.10 A policy of fire insurance
issued to a carrier, insuring it, "and other owners as interest may
appear," against loss by merchandise, on property belonging to the
carrier or in its custody as a warehouseman, contained in a certain
warehouse, covers the property designated, and not merely the
marine ins. act 1906 (6 Edw. VII. The subject-matter insured must be
c, 41) sec. 30, sched. I.; Butterworth's designated in a marine policy with
Twentieth Cent. Stat. (1900-1909) reasonable certainty. (2) The nature
p. 424. One form used in San Fran- and extent of the interest of the as-
cisco being "upon his or their inter- sured in the subject-matter insured
est as in the body, machinery, need not be specified in the policy.
tackle, apparel, and other furniture (3) Where the policy designates the
of the good called the ," subject-matter insured in general
cargo being "upon valued at terms, it shall be construed to apply
(if no overvaluation be written to the interest intended by the assured
herein, then the property is hereby to be covered. (4) In the application
valued at invoice cost on board), of this section regard shall be had to
laden or to be laden under deck on any usage regulating the designation
board the good ." of the subject-matter insured."
9 See Emerigon on Ins. (Meredith's Where a policy is issued without
ed. 1850) e. xi. sec. 4, pp. 262 et seq.; any application or written request,
c. x. sec. 1, p. 233; Palmer v. Pratt, describing insured's interest in the
2 Bing. 185, 192, per Park, J., s. c. property, and it does not appear
9 Moore, 358, 27 R. R. 583, 3 L. J. that any actual representation of any
(O. S.) C. P. 250; Carruthers v. kind was made by assured, it will be
Sheddon, 6 Taunt. 114; Crowley v. presumed that the policy was written
Cohen, 3 Barn. & Adol. 478, s. c. upon insurers knowledge, and was
1 L. J. K. B. 158, 37 R. R. 472, 13 intended to cover in good faith as-
Eng. Rul. Cas. 314, per Lord Tenter- sured's interest in the property,
den; Glover v. Black, 1 TV. Black. 405, AVestern & Atlantic Pipe Lines v.
423, 3 Bum 1394; Cal. Civ. Code, Home Ins. Co. 145 Pa. St. 346, 27
sees. 2591, 2592. The marine ins. act Am. St. Rep. 703, 22 Atl. 665.
1906 (6 Edw. VII. c. 41) sec. 26; 10 Crowley v. Cohen, 3 Barn. &
Butterworth's Twentieth Cent. Stat. Adol. 478, 1 L. J. K. B. 158, 37 R. R.
(1900-1909) p. 405, provides: "(1) 472, 13 Eng. Rul. Cas. 314.
2857
§ It, JOYCE ON INSURANCE
carrier's interesl or liability in respect to it.11 If goods shipped to a
person are allowed, under a long standing arrangement between
him and the carrier, to remain in the latter's warehouse until the
former, by written order, directs delivery to his customers, such
goods are in the custody of the carrier as a warehouseman within
the meaning of a tire insurance policy issued to such carrier;12
and to ;i uvneral policy on the owner's interest in the ship without
the insured specifying in the policy its character or extent; 13 like-
wise to a consignee's interest where he is entitled to insure by
on of a lien for advances and the like.14 So also has the rule
bi en held to apply where insurance was effected by the plaintiffs,
who were owners of only one third of the cargo, in their own name
"as well as in the name or names," etc.; it being declared that if
it appeared thai if the insured had an interest in the cargo, it was
sufficient, and it was not material whether it was a distinct or un-
divided si i a re.15 And an assignee for a valuable consideration of
property, it being in his possession, and subject to his control, need
not specifically set forth his interest, but may in general terms.16
So where insurance was effected for the "owners of the brig," it
held that such words were merely descriptive of the persons
intended to be insured; that the policy was effected for the benefit
of "whom it might concern," and that extrinsic evidence was ad-
missible to show who were intended and what their interests were.17
§ 1692a. Same subject: bailees or agents. — If a bailee or agent
holding property of another insures it against loss or damage by
firo for the protection of his special interest and that of the owner,
it is one of the requisites of the validity of the contract that it ap-
1 herefrom that such owner was within the contemplation of
the parties when it was made, but it is not essential that the in-
surance fasten upon specific property, nor need the owner be known
at the inception of the contract, and if such owner, when informed
of the contract of insurance, assents to and adopts it, he thereby
11 Kellner v. Fire Association of 15 Lawrence v. Van Horn, 1 Caines
Philadelphia, 128 Wis. 233, 116 Am. (N. Y.) 276.
St. Rep. 45, 106 N. W. 1060. " Paradise v. Sun Mutual Ins. Co.
12 Kellner v. Fire Association of 6 La. Ann. 596.
Philadelphia, 128 Wis. 233, 116 Am. "Foster v. United States Ins. Co.
St. Rep. 45, 100 N. W. 1060. 11 Pick. (28 Mass.) 85; Catlett v.
18Kenney v. Clarkson, 1 Johns. Pacific Ins. Co. 1 Wend. (N. Y.) 561,
(N. Y.) 385, 3 Am. Dec. 336; Irving aff'd 4 Wend. (N. Y.) 75; Id. 1
v. Ric . 2 Barn. & Adol. 203, Paine (U. S. C. C.) 615; Finney v.
1 Moody & R. 153, 9 L. J. (O. S.) Warren Ins. Co. 1 Met. (42 Mass.)
K. B. 225, 38 R. R. 541. 16, 35 Am. Dec. 343. See Routh v.
"Carruthers v. Shedden, 6 Taunt. Thompson, 11 East, 428; De Bolle v.
14. Contra, Tappan v. Atkinson, 2 Pennsylvania Ins. Co. 4 Whart.
Mass. 365. (Pa.) ^68, 3 Am. Dec. 38.
2858
DESCRIPTION OF PARTIES AND SUBJECT-MATTER § 1693
becomes entitled to its advantages as fully as if originally made by
his express authority. The right of such adoption and ratification
continues while the contract is in force, and for a reasonable time
after a loss thereunder.18 So merchandise which is stored with in-
sured as a bailee for hire is covered where the warehouse in which
said goods were stored is one of the buildings described in the
policy.183,
§ 1693. Same subject: joint owners: partners. — Where a policy
was on goods owned jointly by N. and G'., and the policy was after-
ward indorsed, by request of insured, "loss, if any, payable to G.,
as his interest may appear," it was held that the intent was to insure
the joint property of the parties, and should be so construed.19
So it is held that if an acting partner effects insurance on his own
account by his individual name and of "whomsoever else it may
concern," it is an insurance on joint account if it is shown that
such was the intention of the insured, and if the moiety of the
other partner was acquitted and that of the named partner con-
demned, the recovery must be of a moiety of a sum insured.20 So
goods owned jointly but insured in the name of one covers the
interest of both, it appearing that the agent informed the assured
that it would make no difference whether the insurance were
effected in the name of one or both.1 But an insurance upon a
stock of goods in which the estate of a deceased partner has an
interest and which does not refer to said estate or interest is void
as assured is not the sole and unconditional owner under a stipula-
tion providing that he is such owner.2 One of several part owners
may insure freight generally without specifying what share he has
in the ship.3 A case in the United States Supreme Court decides
that a policy in the name of one partner without the general clause
"as well for the persons named in the policy as for the benefit of
18 Johnston v. Charles Abresch Co. Keyes) 416, 4 Abb. Dee. 279, 5 Abb.
123 Wis. 130, 68 L.RA. 934, 107 Am. Prae. (N. S.) 201.
St. Rep. 995, 101 N. W. 395. 20 Lawrence v. Sebor, 2 Caines (N.
On right of principal to proceeds Y.) 203. See Deering's Annot. Civ.
of insurance taken by agent in his Code Cal. sec. 2590; Bailey v. Hope
own name, see note in 13 L.R.A. Ins. Co. 56 Me. 474; Emerigon on
(N.S.) 152. Ins. (Meredith's ed. 1850) c. x. sec.
18a Czerwenev v. National Fire Ins. 1, p. 240.
Co. 139 N. Y. 'Supp. 345, 42 Ins. L. x Manhattan Ins. Co. v. Webster,
J. 417. See also Utica Canning Co. 59 Pa. St. 227, 98 Am. Dec. 332.
v. Home Ins. Co. 116 N. Y. Supp. 2 Crescent Ins. Co. v. Camp, 64
934, 132 App. Div. 420, 38 Ins. L. J. Tex. 521. See Citizens Fire Ins.
813. Securitv & Land Co. of Bait. v.
19 Pitncv v. Glens Falls Ins. Co. Doll, 35 Md. 89, 6 Am. Rep. 36.
61 Barb. (N. Y.) 335. See Solms v. 3 Rising v. Burnett, reported in 2
Rutgers Fire Ins. Co. 42 N. Y. (3 Marshall on Ins. (ed. 1810) *730.
' 2859
§ 1693 JOYCE ON INSURANCE
all concerned," does aol cover the interest of copartners not named.4
In a N«\\ York case, under a policy to one to cover the interest of
himself and another, it was held that the interest of a third person
was not covered by the policy, although its terms might seem to
include him.5 Where one of two equal owners effects a policy in
his own name, the other's interest is not covered, nor is the insured
liable to the other joint owner for any portion of the insurance
money.6 If the evidence does not show an intention to cover the
interesl of any other person, the recovery will he limited to that of
insured's own interest.7 So if one effects a policy in his own name
on specie, and after the payment of the loss discovers that only
a portion of the property was his. and returns the balance to the
insurers, another cannot recover on the ground that his interest was
intended to be covered.8 And where parties are joint owners of a
stock of goods, and one of the copartners insures the whole in his
own name, it will cover only his individual interest where there
is no evidence of an intent to insure for the firm's benefit.9 Mr.
Parsons says: "Whether the partner insured, in an action for the
whole loss, averring in his declaration an entire interest, can upon
proof ot the firm ownership recover anything, and if anything,
whether his pro rata share only or the whole, has been variously
decided," although he notes that the decision in the United States
Supreme Court 10 "is entitled to the highest respect.*' " Mr. Phillips
says the rule governs which is established by this decision.12 So
also does Mr. Duer, who considers at length the cases bearing upon
the question.13 It would seem that the following rule might be
deduced from the cases: If the policy is made in the name of one
person or an individual partner without general words or the words
"for whom it may concern," or "as the property may appear," or
4 Graves v. Boston Marine Ins. Co. 8 Bauduy v. Union Ins. Co. 2
2 (ranch (6 U. S.) 419, 2 L. ed. 324, Wash. (U. S. C. C.) 391, Fed. Cas.
per Marshal], C. J.; Kemble v. No. 1112.
Rhinelander, 3 Johns. Cas. (N. Y.) 9 Peoria Fire & Marine Ins. Co. v.
130. See Pearson v. Lord, 6 Mass. Hall, 12 Mich. 202.
81. 10 Graves v. Boston Marine Ins. Co.
5 Pacific Ins. Co. v. Catlett, 4 2 Craneh (6 I'. S.) 419, 2 L. ed.
Wend. (N. Y.) 75, aff'g 1 Wend. 324, per Marshall, C. J.
(N. Y.) 561. See Id. 1 Payne (U. "Parsons on Partnership (4th
S. C. C.) G15. See opinions of Wal- ed.) 318, sec. .239. Sec 1 Bates on
worth, Ch., and Thompson, J. Partnership (ed. 1888) sec. 409, p.
6(!arrcll v. Hanna, 5 Har. & J. 426.
(Md.) 412. ™1 Phillips on Ins. (3d ed.) 219,
'Murray v. Columbian Ins. Co. 11 sec. 391. But see 2 Phillips on Ins.
Johns. (N. Y.) 302. See Holmes v. 014. sec 2021.
Marine Ins. Co. 2 Johns. Cas. (N. 13 2 Duer on Marine Ins. (ed. 1846)
Y.) 329. pp. 25-27, sec. 22, pp. 71-83.
2S60 N
DESCRIPTION OF PARTIES AND SUBJECT-MATTER §§ 1694, 1695
it contains no words importing an interest in any other than the
person named, the insurance is confined to the sole benefit of the
nominal insured, and in case of a partner it makes no difference
in this respect that the insurance is on the firm property.14 An
insurance "as the property may appeal*" covers the interest the
assured has.15
§ 1694. Same subject: trustee: tenant by curtesy: administra-
tor: executor: agent: charterer. — A trustee need not describe his
interest where he has the title, possession, control, and management
of the property, but may insure in his own name.16 So a hus-
band who is tenant by curtesy may insure his interest in his wife's
estate without a specific description, although this might rest upon
the principle of trusteeship.17 And one who holds as administrator
may insure without stating the capacity in which he holds,18 al-
though it was held in an English case that an executor could not
recover on a policy where the testator's name was not inserted
therein.19 If one insures himself as agent generally, evidence is
admissible to show whose interest was intended to be covered.20
But an agent need not describe himself as agent,1 although a pol-
icy effected by one as agent for a particular person covers only the
interest of that person.2 A charterer who is also a part owner
need not describe the character of his interest, but may insure gen-
erally.3
§ 1695. Same subject: mortgagor and mortgagee: reinsurer. —
A mortgagee may insure as general owner without specifying the
nature of his interest or disclosing the same to the insurers in the
absence of a specific inquiry, although he may insure as mort-
14 Burgher & Lacour v. Columbian 17 Franklin Marine & Fire Ins. Co.
Ins. Co. 17 Barb. (N. Y.) 274; v. Drake, 2 B. Mon. (Ky.) 47, 51;
Dumas v. Jones, 4 Mass. 647; Turner Clarke v. Firemen's Ins. Co. 18 La.
v. Burrows, 8 Wend. (N. Y.) 144, 431.
s. e. 5 Wend. (N. Y.) 541; Bell v. 18 Finnev v. Warren Ins. Co. 1
Ansley, 16 East, 141; Cohen v. Han- Mete. (42* Mass.) 16, 35 Am. Dec.
nam, 5 Taunt. 101. Emerigon on 343.
Ins. (Meredith's ed. 1850) c. v. sec. 19 Cox v. Parry, 1 Term Rep. 464.
1, p. 107, says : "If the person effect- 20 Davis v. Boardman, 12 Mass.
ing the insurance does not introduce 80.
the expression 'for account' he is x De Vignier v. Swanson, 1 Bos. &
presumed to act for himself as own- P. 346n, 4 R. R. 825n.
er." 2 Russell v. New England Marine
15 Graves v. Boston Marine Ins. Ins. Co. 4 Mass. 82 ; Holmes v. Unit-
Co. 2 Cranch (6 U. S.) 419, 2 L. ed. ed States, 2 Johns. Cas. (N. Y.)
324. 329.
16 Stetson v. Massachusetts Fire & 3 Oliver v. Greene, 3 Mass. 133, 3
Marine Ins. Co. 4 Mass. 330, 3 Am. Am. Dec. 96.
Dec. 217. See Hibbert v. Martin, 1
Camp. 538.
2861
§§ 1696, 1697 JOYCE ON INSURANCE
gagee.* And where a part owner mortgaged the ship to the extent
of his interest therein, and the mortgagee insured to the full amount
of the iiioit-am'. and subsequently the mortgagee, at request of the
mortgagor, effected several additional insurances upon the ship
generally, without specifying any particular share or interest, it
was held, in an action against the mortgagee by a pan owner to
recover his proportionate share of the insurance, that if the jury
should determine that the mortgagee knew at the time of effecting
the insurance that the interests of persons other than the mort-
gagor were intended to be covered, the action could bo sustained,
the mortgagor having become bankrupt.5 A mortgagor or mort-
gagee of a ship may insure under a general description,6 although
it was formerly held otherwise;7 and although his interest is gen-
erally so expressed, the rule is that a reinsurer need not specify
his interesl in the policy.8
§ 1696. Goods shipped by carriers: owner's interest covered. —
Where a steamship company effected an open policy on goods to be
shipped on its steamers, and which it might agree to insure prior
to the sailing of the vessel, losses payable to it or order, and it
appears from the policy, bill of lading, and evidence that other
owners' goods had been covered by like insurances, and losses
under the same had been paid without question, and that it was
evidently intended to protect the general ownership of the plain-
till' and not merely the steamship company's interest as carriers,
the owner's interest will be protected.9
§ 1697. Specific description, how far exclusive: the terms "includ-
ing" and "consisting of." — If the property intended to be insured
4 United States.— Russell v. Uni- Co. 4 Dall. (4 U. S.) 391, *421, 1
versal Ins. Co. 4 Dall. (4 U. S.) 421, L. ed. 892, 1 Wash. (U. S. C. C.) 409,
1 L. ed. 892, 1 Wash. (U. S. C. C.) Fed. Cas. No. 12,146 (lien on cargo
409, Fed. Cas. No. 12,146. gives insurable interest) ; Locke v.
Illinois. — Norwich Fire Ins. Co. v. North American Ins. Co. 13 Mass.
Boomer, 52 111. 442, 4 Am. Rep. 618, 61 ; Kenny v. Clarkson & Van
per Walker, J. Home, 1 Johns. (N. Y.) 385, 3 Am.
Maine. — Buck v. Phoenix Ins. Co. Dec. 336.
76 Me. 586. 7 Emerigon on Ins. (Meredith's ed.
New York.— Titus v. Glens Falls 1850) c. x. sec. 2, p. 243.
Ins. Co. 81 N. Y. 410, 8 Abb. N. C. 8New York Bowery Fire Ins. Co.
315. v. New York Fire Ins. Co. 17 Wend.
England. — Irving v. Richardson, 2 (N. Y. ) 359. See Mackenzie v.
Barn. & Adol. 193, 1 Moody & K. Wl itworth, 1 Exeh. Div. 36, L. R. 10
153, 9 L. J. (O. S.) K. B. 225, 36 R. Exeh. 142, 45 L. J. Ex. 233, 33 L. T.
K- 5 H . 655, 24 W. R. 287, 2 Asp. M. C. 490,
5 Braik v. Douglass, 4 Mylne & C. 13 Eng. Rul. Cas. 322 and notes.
320n. 9 Insurance Co. of North America
8Higginson v. Dall, 13 Mass. 96, v. Forcheimer, 86 Ala. 541, 5 So.
97, 101. See Russell v. Union Ins. 870.
2862
DESCRIPTION OF PARTIES AND SUBJECT-MATTER § 1G98
is specifically described, the kind and character of goods being
designated, such description operates to exclude goods not within
the description ; or if there be a general description, and the policy
or the application, which is made a part thereof by express refer-
ence or otherwise, contains other clauses or terms showing clearly
that it was intended to limit the general words used to a particular
class or kind of property, the policy will be so construed; or in
other words, although the courts are inclined in cases of doubt
toward a liberal construction in favor of the assured, yet they will
not go beyond what is manifestly and clearly the intent of the
parties as evidenced by the language chosen to describe the prop-
erty insured. A distinction has been frequently made between the
words "including" and "consisting of" following a general de-
scription, the former being held not a word of limitation, but other-
wise as to the latter; especially so when other words of the contract
clearly warrant such a construction. In case, therefore, the goods
are specifically described, care should be taken that the description
be accurate, and include the articles intended to be covered. These
general principles are alike applicable to marine and fire risks, and
their application will be noted in the cases cited under this section.
In this connection we will also consider many of the articles men-
tioned in what is known as "memorandum articles," and which,
being of a more or less perishable nature, are made the subject of
special stipulations governing the liability of the insurers therein.10
If the goods insured are specifically described in marine policies,
and are not loaded on board ship, they are not protected, nor does
it avail the assured that goods of equal value are shipped. Thus
Emerigon says: "If in the policy the subject has been specified
on which insurance was intended, and it has not been placed on
board, the insurance would be null, though the person should have
for his account other goods on board the ship." n
§ 1698. When specific designation of interest or property is re-
quired.— The general rule is that the policy must specify the sub-
ject-matter, whether it be goods, ship, freight, or whatever its
character, and although this rule has been applied to marine risks,12
it is equally applicable to property covered by other risks. By
long and well-ascertained usage, especially in marine policies, cer-
tain descriptive words have come to have an ascertained and certain
10 The effect of the memorandum 12 1 Marshall on Ins. (ed. 1810)
clause and stipulations therein will 316; 1 Arnould on Marine Ins.
be considered under another section. (Perkins' ed. 1850) 28, sec. 22; Id.
"Emerigon on Ins. (Meredith's (Maclachlan's ed. 1887) 237; Id.
ed. 1S50) c. x. sec. 1, p. 234; 1 (8th ed. Hart & Simey) sees. 251 et
Marshall on Ins. (ed. 1810) *31G. seq., pp. 323 et seq.
28G3
§ 1699 JOYCE ON INSURANCE
meaning, so that general terms will frequently include what might
qoI otherwise be covered. There are, however, certain interests and
property which are not covered by general words, but which must
be specifically designated in the policy; such as those special
interests which, owing to their peculiar nature, are in reality the
subject-matter of the contract, and which may materially affect,
alter, or increase the risk.13 These different interests or properties
will, however, be noted under the following chapter, where they are
so far as possible, reference being had to the character and kinds of
interest, arranged alphabetically.14
§ 1699. Same subject: particular words and phrases: instances. —
A policy on American, English, and West Indian goods will not
cover goods belonging to any of the specified classes: 15 A policy
upon a two-story brick building and '"additions thereto" will in-
clude a building, part of which was occupied by the servants of the
assured, and one room of which was used as laundry, though this
building was not annexed to the main building, it appearing that
there were no other buildings in the assured's yard which could
be claimed to be an addition, and not built in the main building
originally as a part thereof.16 Whether "bundles of rods" are "bar
iron" within a stipulation against partial loss on certain enumer-
ated articles, "unless the same shall amount to twenty per cent on
the whole aggregate value," is not a question for the court, but
one for the jury.17 Cattle includes hogs.18 An insurance upon
the "contents" in a granary, or on "stocks" on the farm does not
cover grain stored in buildings other than the granary;19 nor
does an insurance upon a frame building and its "contents" cover
property which is removed from such building to a new building.20
Corn, in the memorandum, includes malt,1 peas, and generally
every sort of grain,2 but does not include rice.3 A policy on stock
in trade, consisting of corn, seed, hay, show fixtures, and utensils
13 See Mackenzie v. Whitworth, 1 18 Decatur Bank v. St. Louis Bank,
Ex. Div. 36, 45 L. J. Ex. 233, L. R. 21 Wall. (88 U. S.) 294, 22 L. ed.
10 Ex. 142, 33 L. T. 655, 24 W. R. 560.
287, 2 Asp. M. C. 490, 13 Eng. Rul. 19 Benton v. Farmers' Mutual Fire
Cas. 322 and notes, per Blackburn, Ins. Co. 102 Mich. 281, 26 L.R.A.
J.; Emerigon on Ins. (Meredith's 237, 60 N. W. 691, 24 Ins. L. J. 34,
ed. 1850) c. x. sec. 2, p. 242. 39 Cent. L. J. 502.
14 See LIII. heroin. 20 Id.
"Hutchins v. People's Mutual x Moody v. Surridge, 2 Esp. 333.
Fire Ins. Co. 7 La. Ann. 244. 2 Mason v. Skurry, reported 1
16Plicenix Ins. Co. v. Martin, — Marshall on Ins. (ed.1810) *22f>.
Miss. — , 16 So. 417, 24 Ins. L. J. 3 Scott v. Bourdillon, 2 Bos. & P.
319. See Walls, under this section. N. R. 213.
17 Evans v. Commercial Mutual
Ins. Co. 6 R. I. 47.
2864
DESCRIPTION OF PARTIES AND SUBJECT-MATTER § L699
in business, does not include hops and matting, even though the
same usually constitute a part of the stock of that particular trade.4
Cotton in bales may by usage mean pressed bales.5 Cornstarch is
covered by a policy on a stock of toilet articles, labels, machinery,
bottles and powder.5a Counters, shelve*, and drawers arc covered by
a policy on the building, if so connected therewith that they cannol
be taken away without injury to the building.6 Decorations to
walls and ceiling does not cover painting of exterior walls. 6a Elec-
trotype plates are not covered by policy on bank furniture, etc.,
with exception of liability for dies, implements, etc., unless specific-
ally assumed. 6b A fire policy on the estate of O covers property
left by O to trustees for the benefit of creditors.7 And estate of
S. H. includes all beneficially interested therein, even though the
policy was procured and is held by one of them only.7* Family
groceries, etc., does not ordinarily include fireworks* A haypress
used upon a farm is within the meaning of the term "farm ing
utensils" as used in a fire policy, but where the policy is upon
"reapers, mowers, harvesters, and other farming- utensils, wagons,
buggies, and harness in buildings on said premises." it is held that
a haypress in a stockyard at a distance from a building is not
covered by the description.9 A privilege of keeping firecrackers
does not include fireworks.10 Fixtures do not include furniture and
movables.11 A policy upon all fixtures and gas meters placed, or to
be placed, in buildings, etc., of subscribers, does not limit the in-
surance to the property placed when the policy was issued, but
covers all such fixtures and meters to the amount of the insurance
whether placed before or after the date of the policy.12 Fixtures
4 Joel v. Harvey, 5 W. R, 488. Hun (N. Y.) 621, 42 N. Y. St. Rep.
5 Taylor v. Brings, 2 Car. & P. 525. 477.
5a Aachen & Munich Fire Ins. Co. 7a Phoenix Ins. Co. v. Hancock,
v. Arabian Toilet Goods Co. 10 Ala. 123 Cal. 222, 55 Pac. 905, 28 Ins.
App. 395, 64 So. 635. L. J. 344.
6 Capital Citv Ins. Co. v. Caldwell, 8 Georgia Home Ins. Co. v. Jacobs,
95 Ala. 77, 10'So. 355. 56 Tex. 366.
6a Sherlock v. German- American 9 Phoenix Ins. Co. v. Stewart, 53
Tns. Co. 47 N. Y. Supp. 315, 21 App. 111. App. 273.
Div. 18, aff'd 162 N. Y. 656, 57 N. E. 10 Steinbach v. Relief Fire Ins. Co.
1124. 13 Wall. (80 TJ. S.) 183, 20 L. ed.
6b Agricultural Ins. Co. v. Collins, 615.
— Tex. Civ. App. — , 175 S. W. "Holmes v. Cbarlestown Mutual
1120. Ins. Co. 10 Mete. (51 Mass.) 211, 43
7 Weed v. Hamburg-Bremen Fire Am. Dec. 428.
Ins. Co. 133 N. Y. 394, 31 N. E. 231, 12 The New York Gas Light Co. v.
45 N. Y. St. Rep. 105, 21 Ins. L. J. The Mechanics Fire Ins. Co. 2 Hill
577; Weed v. Fire Association of (N. Y.) 208.
Philadelphia, 17 N. Y. Supp. 206, 69
Joyce Ins. Vol. III.— ISO. 2865
§ 1699 JOYCE ON INSURANCE
in a shoe factory arc not covered by the term store fixtures.19
Under a policy containing an exception of "store furniture and
fixtures," shelving in the store and an office inclosed with railings
in one corner are store fixtures within the exception.14 So evidence
is admissible that store fixtures cover by usage all furniture and
other articles in a shop necessary or convenient for use in the course
of trade.15 Dried fish does not include pickled fish.16 Fruit in
the memorandum covers dried prunes.17 Furs may be shown to be
not perishable in their nature, and evidence is also admissible to
show that the term fur includes skins chiefly valuable for their
fur.18 Giant powder is held to be excluded by a stipulation exclud-
ing nitro-glycerine, on the ground that the latter is the basis of the
former, a decision which should at least be the subject of adverse
criticism.19 Grain in stack covers tlax in stack raised solely for
seed.20 But grain in stacks does not cover unthreshed grain in a
mow in a Large barn.1 In another case, the policy was in stock in
trade, consisting of grain, guano, and salt. At the time the in-
surance was effected, the assured had fertilizers on hand, but no
guano, and it was held that the word guano embraced fertilizers.2
Whether groceries includes alcohol and spirituous liquors is a ques-
tion of fact for the jury, where there is evidence that they formed
a part of the stock insured, and that the insurer knew of such
fact.3 An exclusion of gunpowder is not an exclusion of fireivorks*
A policy on a stock of hair, wrought, raw, and in process, does not
cover other goods, even though they are such as is usually kept in
stores of the class insured.5 The term hazardous goods does not
embrace extrahazardous or specially hazardous goods.6 Hides and
skins cover deerskins.7 An insurance upon goods held "in trust"
18 Thurston v. Union Ins. Co. 17 l Benton v. Farmers' Mutual Fire
Fed. 127. Ins. Co. 102 Mich. 281, 26 L.R.A.
14 Connecticut Fire Ins. Co. v. 237, 60 N. W. 691.
Allen, 80 Ala. 571. 2 Planters' Mutual Ins. Co. v.
15 Whitmarsh v. Conwav Fire Tns. Engle, 52 Md. 468, one judge dis-
Co. 16 Gray (82 Mass.) 359, 79 Am. senting.
Dec. 414. 3 Niagara Fire Ins. Co. v. De Graff,
16 Baker v. Ludlow, 2 Johns. Cas. 12 Mich. 124.
(N. F.) 289. 4Tischler v. California Farmers'
17 De Pau v. Jones, 1 Brev. (S. C.) Mutual Fire Ins. Co. 66 Cal. 178, 4
437. Pac. 1169.
18 Astor v. Onion Ins. Co. 7 Cow. 6 Medina v. Builders' Ins. Co. 120
(N. V.) 202 (see hides and skins). Mass. 225.
19Sperry v. Springfield Fire & 6 Pindar v. Continental Ins. Co.
Marine Ins. Co. 26 Fed. 234, 15 Ins. 38 N. Y. 364, 97 Am. Dee. 795.
L. -I. 270. 'Bakewell v. United Ins. Co. 2
20 Hewitt v. Watertown Fire Ins. Johns. Cas. (N. Y.) 246 (see furs).
Co. 55 [owa, 623, 39 Am. Rep. 174.
2866
DESCRIPTION OF PARTIES AND SUBJECT-MATTER § 1699
covers goods held by an agent employed to manage a store and
who carries on business in his own name, but who is obliged to
account to his principal for the profits, whenever called upon so to
do by the principal, and who is obliged to turn over to the latter
at the end of his employment all property in his possession.8 A
threshing machine is not "in use" under a policy covering property
while not in use, when, not having been used for about two weeks,
it is hauled near a farmhouse and left there preparatory to its in-
tended use a few days later, and the fire was not caused by any
hazard incident to its use and occupation.8* Iron covers steel.9 A
policy on jewelry and clothing, being stock in trade, does not in-
clude musical or surgical instruments, guns, pistols, etc., since the
words "stock in trade" are limited by the antecedent words, "jewel-
ry and clothing." 10 Linen does not cover linen drapery when from
the context household linen or apparel is meant,11 Machinery
which is constructed for and used in a flour mill is held to be real
property within the meaning of a statute.12 A fire policy on mer-
clvandise "consisting principally of clothing made and in process oi
making and materials for same" covers the stock in trade and all
articles necessarily and conveniently used in the business, and em-
braces tools and implements of the business as conducted by as-
sured.12a The term "perishable articles" does not include pickled
fish,13 and it may be shown not to include deei>kins ; 14 nor flour; 15
nor furs.16 Piece goods does not cover hats.17 Plate does not in-
clude silver forks, tea or tablespoons, under a clause excluding
plate, etc., unless particularly specified.18 Neither premises, nor
premises and building, apply to personalty.19 A policy of insur-
ance upon goods, locating the premises and describing the property
as "being situated on or confined to premises actually occupied by
8 Roberts v. Firemen's Ins. Co. 165 Key, — Tex. Civ. App. — , 152 S.
Pa. St. 55, 44 Am. St. Rep. 642, 30 W. 440.
Atl. 450. See as to "in trust." 13 Baker v. Ludlow, 2 Johns. Cas.
Hough v. People's Ins. Co. 36 Md. (N. Y.) 289.
398. 14 Bakewell v. United Ins. Co. 2
8a Minneapolis Threshing Machine Johns. Cas. (N. Y.) 246.
Co. v. Firemen's Ins. Co. 57 Minn. 15 Nelson v. Louisiana Ins. Co. 8
35, 23 L.R.A. 576, 58 N. W. 819. Mart. (La.) 527, vol. 5 (N. S.) 289.
9 Hart v. Standard Marine Ins. Co. 16 Astor v. Union Ins. Co. 7 Cow.
22 Q. B. D. 499. (N. Y.) 202.
10 Rafel v. Nashville Marine & Fire 17 Hunter v. Prinsep, 10 East, 378 ;
Ins. Co. 7 La. Ann. 244. 1 Marshall on Ins. (ed. 1810) *316:
11 "Watchorn v. Langford, 3 Camp. :8 Hanover Fire Ins. Co. v. Man-
422. nasson, 29 Mich. 316.
" Havens v. Germania Fire Ins. 19 Carr v. Roger Williams' Ins. Co.
Co '123 Mo. 403, 26 L.R.A. 107, 45 60 N. H. 513; Morely v. Vermont
Am. St. Rep. 570, 27 S. W. 718. Mutual Fire Ins. Co. 55 Vt. 142.
12a Oklahoma Fire Ins. Co. v. Mc-
2867
§ 1G99 JOYCE ON [NSURANCE
the assured," and the application being for insurance upon the
goods "while on the pn mises only" will not cover a loss upon such
goods while on premises twenty miles distant.20 Private stock
"contained in" a certain building may. under a policy to stock-
holders, In- shown to mean capital stock.1 Refined oil does not
include lard oil.2 If an accident policy provides that it doe- not
i over accidents on a "railroad bridge, trestle, or roadbed/' the word
"roadbed" will not include a space of ten feet between railroad
tracks ; 3 nor does it include the ends of ties of such unusual lengths
that a person standing or sitting thereon would be beyond the reach
of passing train-.4 The word "roadbed" as used in accident policy,
doe-, not mean the entire space included in the company's right of
way, but only refers to that part of the right of way which is
occupied by the ties and rail-.5 Roots in the memorandum covers
pink-root, and usage is admissible to show the meaning of the word
roots.6 It may also be shown that the term is confined in such
to perishable article- and therefore does not cover sarsaparilla.7
Under an insurance on their stock of watches, watch trimmings,
etc., the word stock is held not limited by the following words, but
covers the assured's general stock, a case not in accord with the
authorities above noticed.8 An insurance on a stock of eggs in
pickle covers eggs which are a part of the stock, though not in
pickle, where the agent testified that it was intended to insure the
entire stock while being pickled and disposed of.9 So the words
stock in trade, or like words, may cover fireworks when they are
shown to be usually kept in a stock of the class insured.10 An in-
surance on a stock of ship timber, including specified goods, may
cover other than those specified.11 Tools of a flour mill does not
cover paper bags.12 Tools used in the manufacture of boots and
20Lakin<rs v. Phenix Ins. Co. 94 427, 31 S. W. 578, 24 Ins. L. J.
Iowa, 476, 28 L.R.A. 70, 62 N. W. 721.
783, 24 Ins. L. J. 545; and see note 6 Klett v. Delaware Ins. Co. 23 Pa.
to 2fi L.R.A. 237. St. 262.
1 Warren v. Davenport Fire Ins. 7 Coit v. Commercial Ins. Co. 7
Co. :il Iowa, 464, 7 Am. Rep. 160. Johns. (N. Y.) 385, 5 Am. Dec. 282.
2 Weisinger v. Harmonv Ins. Co. 8 Crosbv v. Franklin Ins. Co. 5
56 Pa. St. 442. Ray (71 Mass.) 504.
3 Meadows v. Pacific Mutual Life 9 Hall v. Concordia Fire Ins. Co.
Ins. Co. 129 Mo. 76, 50 Am. St. Rep. 90 Mich. 403, 51 N. W. 524.
427, 31 S. W. 578, 24 Ins. L. J. 721. 10 Barnum v. Merchants' Fire Ins.
4 Standard Life & Accident Assoc. Co. 97 N. Y. 188.
v. Langsdon, 60 Ark. 381, 30 S. W. " Webb v. National Fire Ins. Co.
427. 2 San. If. (N. Y. ) 497.
5 Meadows v. Pacific Mutual Life 12 Hutchinson v. Niagara Fire Ins.
Ins. Co. 129 Mo. 76, 50 Am. St. Rep. Co. 39 lT. C. Q. B. 483.
2868
DESCRIPTION OF PARTIES AND SUBJECT-MATTER << L699
shoes cover shoe patterns.18 So patterns for iron castings, used by
the hands of a single person, are "tools," within a policy insuring
against fire. "Fixed and movable machinery, engine, lathes, and
tools" of a manufacturer of machinery, are not within an exception
of "jewels, plate, watches, ornaments, medals, patterns, printed
music," etc.14 A traveling salesman's trunk- is not covered by a pol-
icy on bank furniture and fixtures, where implements, store and
office furniture, etc., are excepted.14* Connecting walls are cov-
ered by an insurance on front and rear building.15 Wearing apparel
does not cover linen sheets and shirts which have been smuggled
and are only kept for the purpose of clandestine sale.16
13 Adams v. New York Bowery 15 Monteleone v. Royal Ins. Co. 47
Fire Ins. Co. 85 Iowa, 6, 51 N. W. La. Ann. 1563, 56 L.R.A. 784, 18 So.
1149. 472, 31 Ins. L. J. 689. When one-
14 Lovewell v. Westchester Fire half interest in party wall covered,
Ins. Co. 124 Mass. 418, 26 Am. Rep. see Nelson v. Continental Ins. Co.
671. 182 Fed. 783, 105 C. C. A. 293, 40
14a Agricultural Ins. Co. v. Collins, Ins. L. J. 356.
— Tex. Civ. App. — , 175 S. W. 16 Clav v. Protection Ins. Co. 1
1120. Wright (Pa.) 228.
2869
§ 1705.
§
170G.
§
1707.
§
1708.
§
L709.
§
1710.
§
1711.
§ 1712.
§
1713.
§
1714.
§
1715.
§ 1716.
§
1717.
§
1718.
CHAPTER LIII.
DESCRIPTION OF PROPERTY.
Accounts : evidences and securities of property.
Advances: advancements by charterer and master: advances on
freight.
"All or either:" "both or either."
Alterations and repairs of property: additional construction.
Banknotes and bills of exchange.
Bottomry and respondentia.
Captor's interest: prize of war.
Cargo.
Contingent or special interest in property of others.
Contraband of "war: belligerent and neutral property.
Curiosities: scientific cabinets and collections.
Equitable interest may be covered by the term "property."
Freight must be insured eo .nomine.
Freight: right reserved by owner and vendor: whether such
interest covered by insurance on freight.
§ 1719. Freight: whether charterer may insure it eo nomine: difficult to
formulate a rule.
§ 1720. Same subject: cases.
§ 1721. Same subject : opinions of the text-writers.
§ 1722. Same subject : conclusion.
§ 1723. Freighl : designation of shipowner's interest.
§ 1724. Freight: other interests.
§ 1725. Goods, waras, and merchandises : cargo.
§ 1726. Goods laden on deck.
§ 1727. Goods, wares, and merchandise "in trust or on commission :" on
consignment.
§ 1728. Clause "in (rust or on commission" may be limited and controlled
by other words in the policy.
§ 1729. Goods, etc.: "sold but not delivered:" "sold but not removed."
§ 1730. Goods, etc.: "in trust or on commission:" on storage: where policy
requires specific declaration or separate insurance.
§ 1731. Where policy stipulates specific insurance of goods "in trust" and
specifies what interests those words cover.
2870
DESCRIPTION OP PROPERTY
§ 1732. Goods and merchandise : shifting and successive cargoes.
§ 1733. Goods or merchandise: shifting and successive goods: after-ac-
quired property : fire risks.
§ 1734. What goods are covered may be determined by custom between
the parties.
§ 1735. What goods are covered may be determined by known usage of
a particular place.
§ 1736. Goods or merchandise to be described by indorsement: approval
of risks: goods to be thereafter declared and valued: marine
risks.
§ 1737. Gunpowder: marine risk.
§ 1738. House or building: dwelling house.
§ 1739. Houses and buildings: connected structures and additions.
§ 1740. Household furniture: hotel furniture.
§ 1741. Live-stock: marine risks.
§ 1742. Locality important in fire risks.
§ 1743. Locality : property "contained in."
§ 1744. Locality: property "contained in" connected or adjoining build-
ings : new buildings substituted for old.
§ 174"). Locality: "contained in:" goods in different parts of building.
§ 1746. Locality: "contained in:" removal of goods from a specified
location : permanent removal.
§ 1747. Locality : temporary removal of property from specified location.
§ 1748. Locality: property on premises.
^ 1749. Locality: premises owned and occupied: property on wharf.
§ 1750. Locality: occupation, ownership, or use of premises acquired
subsequently to issuing policy.
§ 1751. Manufactories: factories: mills.
§ 1752. Materials not included in "building:" unfinished vessel.
§ 17.~)3. Medals: models: specific description: standard policy.
§ 1754. Money, specie, bullion, coin, treasure, jewels.
§ 1755. Paintings: patterns: specific description: standard policy.
§ 1756. Passage money.
§ 17-17. Personal effects: money, jewelry, etc. : master's effects.
§ L758. Personal property: wearing apparel : master's clothes : baggage.
§ 1759. Plate: specific description: standard policy.
§ 17(50. Profits and commissions.
§ 1761. "Property."
§ 1762. Provisions and provender under marine risk.
§ 176.".. Scientific cabinets and collections : sculpture: specific description:
standard policy.
§ 1764. Ship.
§ 1765. Ship's stores and outfits : what ship includes.
£ 1766. Ship's boat or launch.
2871
§§ L705, L706 JOYCE ON [NSURANCE
§ L767. Ship: character or kind of vessel : rating.
§ L768. Ship's name important: master's name.
§ L769. Change of ship or master or name of ship.
§ 177i). Ship's enrollment as affecting validity of policy.
§ 1771. Ship as privateer or letter of marque.
§ 177'J. Ship or ships.
§ 177.'!. Ship or ships: right to apply policy in case of different ship-
ments and hisses.
§ 1771. Stock of goods, etc., in manufacturing: stock in trade of mechanic:
fire risk.
s; 177"). Stock in trade : goods or merchandise for sale: fire risks.
*j 177(i. Stock in trade: stock in building: owner and goods of others.
§ 1777. Stock in trade, etc., any cover property specifically excluded or
the keeping of which is prohibited.
>$ 1778. Whaling and fishing voyages: outfits: stores, catchings, etc.
§ 1705. Accounts: evidences and securities of property of every
kind are not included under the form of the Massachusetts stand-
ard fire policy unless .specially mentioned.17
§ 1706. Advances: advancements by charterer and master: ad-
vances on freight. — As has been already slated the common printed
English form of marine policy is generally written in, either in the
body or elsewhere, upon the face of the policy, so as to cover the
subject intended to be insured, the written part excluding by con-
struction so much of the printed part as is not applicable, although
the whole policy is to be construed together as far as possible and
made to apply to the subject insured.18 So where a policy was
effected at Lloyds "on advances,'' the words being written in the
valuation clause, it was held that not advances for repairs, but
something independent of the ship, must be held to have been
intended, such as money advanced in her business, since that which
was printed fully described all parts of the ship.19 Advancements
by the charterer for shipping the homeward cargo may be made
ihe subject of a distinct and special insurance, but are not covered
by a policy on "specie and returns."20 But advances consisting
of money laid out by the master for the use of the ship may. by
"Mass. Pub. Stats, pp. 713-15; herein, for," etc., not mentioning the
acts 1887, c. 214, see. 60. Mass. Rev. above. For X. V. Stat. & Amdts.
L. e. 118, sec. (in (Rev. 1>. Supp. sec § 17].") herein.
L902 1008, sec. 00, pp. 1191, 1192. 18 See § 1690 herein.
"Not liable for loss to accounts, hills, 19 Providence- Washington Ins. Co.
currency, deeds, evidences of debt, v. Eowring, 1 C. C. A. 583, 50 Fed.
money, notes, or securities; nor un- 613.
less liability is specifically assumed 20 Winter v. Haldimand, 2 Barn.
2872
DKSCWII'TION <>K L'KOKERTY
§ 1707
the usage of a particular trade, be recovered at respondentia interest
under a policy on "goods, specie, and effects."1 The shipowner
may by the designation "freight" cover advancements made as
part of the freight by the charterer under the charter party.8 An
assignee of a charter-party may recover under the term "freight"
actual advances on account of the eharter-partj as pari of the
freight,8 although i( is held thai "advancements by the charterer"
are not properly "freight," bul the price of the privilege of put-
ting (lif goods on board the ship for the opportunity of trans-
portation, and should be specifically described as such advam
Mr. Arnould sees no reason why they should nol be insured eo
nomine as freight, although he says "in practice it will be safer
to insure it specially." Mr. Maclachlan says the question depends
upon the terms of the charter party.5
§ 1707. "All or either:" "both or either."— If the policy he "on
all or either*' of certain designated buildings for a specified sum,
and one of the buildings is destroyed, the insurers are liable for the
entire loss not exceeding the amount insured.6 So a marine policy
on cargo or freight, "both or either to the amount insured, valued
at the sum insured," is an insurance on cargo or freight as interest
& Adol. 649, 9 L. J. (0. S.) K. B.
318, 36 R. R. 693, per Lord Tenter-
den.
1 Gregory v. Christie, 3 Doug:. 419.
See further as to advances, §§ 997-
1000, 1016, 1017 herein.
2 Etches v. Aldan, 1 Man. & R.
165, 6 L. J. (O. S.) K. B. 65, 31 R.
R. 309, per Bavlev, J. See Winter
v. Haldimand, 2 Barn. & Adol. 649,
9 L. J. (O. S.) K. B. 318, 36 R. R.
693; Allison v. Bristol Marine Ins.
Co. 1 App. Cas. 209, L. R. 9 C. P.
559, 34 L. T. 809, 24 W. R. 1039, 3
Asp. M. C. 178; Williams v. North
China Ins. Co. 35 L. T. N. S. SSI, 1
C. P. D. 757, 3 Asp. M. C. 342 ; Saun-
ders v. Drew, 3 Barn. & Adol. 445,
37 R. R. 460. See §§ 997, 1000, 1016
herein.
3 Robbins v. New York Ins. Co. 1
Hall (N. Y.) 325. See Samson v.
Ball, 4 Dall. (4 U. S.) 459, 1 L. ed.
908.
4 Winter v. Haldimand, 2 Barn.
& Adol. 649, 9 L. J. (O. S.) K. B.
313, 36 R. R. 693, per Lord Tenter-
den.
5 Arnould on Marine Ins. (Perkins*
ed. 1850) 226, 227, *220, *221; Id.
(Maclachlan's ed. 1887) 34; Id. (8th
ed. Hart & Simey) sec. 232, p. 29 1,
citing Allison v. Bristol Marine Ins.
Co. 1 App. Cas. 209, L. R. 9 C. P.
559, 34 L. T. 809, 24 W. R. 1039, 3
Asp. M. C. 178; De Silvale v.
Kendall, 4 Maule & S. 37, 16 R, R.
373; Manfield v. Maitland, 4 Barn.
6 Aid. 582, 23 R. R. 402; Winter v.
Haldimand, 2 Barn. & Adol. 649, 9
L. J. (O. S.) K. B. 313, 36 R. R,
693; Wilson v. Martin. 11 Ex. 684,
25 L. J. Ex. 217; Hicks v. Shield,
7 El. & B. 633, 26 L. J. Q. B. 205,
7 E. & B. 633, 8 Jur. N. S. 715, 5
W. R. 536; Williams v. North China
Ins. Co. 35 L. T. N. S. 884, 1 C. P.
D. 757, 3 Asp. M. C. 342; Maclachlan
on Merchant Shipping, 519, 520;
Ellis v. Lafone, 8 Ex. 546, 22 L. J.
Ex. 124, 8 Ex. 546, 1 W. R. 200. 17
Jur. 213, 91 R. R. 615.
6 Commonwealth v. Hide & Leather
Ins. Co. 112 Mass. 136, 17 Am. Rep.
72.
2S73
§ 1708 JOYCE ON [NSURANCE
shall appear, not on either cat the election of the assured. If only
one of this species of property be at risk, it is covered; or it will
cover both, if both be at risk, proportionately to the insured's in-
terest in the respective subjects.'
§ 1708. Alterations and repairs of property: additional construc-
tions.— Where property is insured under a fire policy, if alterations
or repairs are not prohibited they may be made, unless they change
or increase the risk, and the property is still covered, for the righl
to alter and repair is incidental to that of ownership.8 "A ship,"
says Emerigon, "is always presumed the same, though all the mate-
rials which at first had given it existence have been successively
changed,"9 and an insurance upon the ship covers the ship when
repaired.10 [f, however, in making alterations and repairs, even
under a permit to do so, -a part of a single compact building is de-
tached, and while so detached, is struck by lightning, it is not
within the contract, as it is no longer a part of the building insured
and no recovery can be had therefor.103
In a Minnesota case there was an action in equity to apportion
the liability of different insurers upon tornado policies, and the
question of what was covered by the policies was in issue. It ap-
peared by the description in the policy that the insurance was on
steel superstructures consisting of towers, bridges, etc., on insured's
docks. Permission under one form of policy was given to make
alterations and repairs, and under another form to make altera-
tions and repairs for additional construction. Nearly all the poli-
cies were subsequent in date to the completion of construction and
all of them covered additional construction. Some of the policies
were issued while the false work was up and while a bridge was in
the course of active construction. It was held that policies not pur-
porting to cover subsequent construction covered property in the
process of construction at the time of their issuance, but that cer-
tain other policies of similar form did not cover a later erection of
a superstructure then in contemplation and for a portion of the
time under contract, where there was at that time nothing in the
7 Fans v. Newburyport Marine 9 Emerigon on Ins. (Meredith's ed.
Ins. Co. 3 Mass. 476. 1850) c. vi. see. 7, p. 144.
8 Dorn v. Germania Ins. Co. Fed. 10 Livie v. Jansen, 12 East, 648,
Cas. No. 4005, 4 Am. Law Ree. 445. 11 R. R. 513; Le Cheminaut v. Pear-
5 Ins. L. J. 183, 1 L. & Eq. Rep. son, 4 Taunt. 367, 13 R. R. 636.
132; James v. Lycoming Fire Ins. 10a Evanston Golf Club v. Heme
Co. 4 Cliff. (U. S. C. C.) 272, Fed. Ins. Co. 119 Mo. App. 175, 05 S. W.
Cas. No. 7,182; Planters' Mutual 980.
Ins. Co. v. Rowland, 66 Md. 236, 7
Atl. 257.
2874
DESCRIPTION OF PROPERTY §§ 1709, 1710
way of a structure in process of erection.1011 Again, a room with a
metal roof erected upon the roof of the rear pari of a building some
two years before the policy was issued is within a description cover-
ing a "two and one story brick, gravel-roof building."100 Where
the policy by its terms precludes recovery in case of ''additions to
or alterations in, or the construction of any building or struc-
ture" a vestibule at each entrance, constructed as a temporary
device for winter use only is not an "addition to or alteration"
or the construction of a "structure" within the meaning of the pol-
icy terms, as the word "additions" as used therein, means an en-
largement or extension so as to include additional space and not a
temporary device which effects no substantial change in the build-
ing insured; so the word "alteration" should also be construed to
mean a substantial change and the word "structure" is applied to a
building of some size, an edifice.104 The questions of alterations
and repairs will, however, be more fully considered hereafter.11
§ 1709. Bank notes and bills of exchange. — There is a question
whether bank notes and bills of exchange should be specifically de-
scribed in marine policies. They are not, technically speaking,
cargo or merchantable goods or goods used in commerce, except
possibly in those cases where they are intended to be used for the
purchase of cargo ; but if bills of exchange are specifically described,
they are not covered except they be legal bills of exchange, as
in case of bills payable on a contingency.12 Bank bills are covered
by the term "property," when the same are intended to be used in
the coasting trade, the word "property" being held more com-
prehensive than "goods, wares, and merchandise." 13 Bills of
exchange and notes are not, however, covered under the Massachu-
setts standard fire policy unless specially mentioned.14
§ 1710. Bottomry and respondentia. — The interest of the lender
l0b Northwestern Fuel Co. v. Bos- Stainbank v. Fenning, 11 Com. B.
ton Ins. Co. L31 Minn. 19, 154 N. 557. 15 Jur. 1082, 20 L. J. C. P. 226,
W. 513, 46 Ins. L. J. 715. 87 R. R. 561; 1 Arnould on Marine
10c Prussian National Ins. Co. v. Ins. (8th ed. Hart & Simey) see. 224,
Terrell, 142 Kv. 732, 135 S. W. 416, p. 289 (citing Dampier, J., Mann-
40 Ins. L. J. 732. ing's Index, 165; Palmer v. Pratt, 2
10dKresge v. Maryland Casualtv Bin":. 185, 191, 192); 17 Earl of
Co. 154 Wis. 627, 143 N. W. 668, 43 Halsburv's Laws of England, see.
Ins. L. J. 146. 718, p. 364.
11 See chapters on increase of risk 13 "Whiton v. Old Colony Ins. Co. 2
and loss, or average. Mete. (43 Mass.) 1, per Shaw. C. J.
12 Hill v. Patten, 8 East, 373, 1 14 Mass. Pub. Stats, pp. 213-15;
Camp. 72, 9 R. R. 469. 13 Eng. Rul. acts 1887, c. 214, sec. 60; Mass. Rev.
Cas. 59">, per Lord Ellenboroush ; L. c. 118, sec. 60 (Rev. L. Supp.
Brown v. Stapleton, 4 Bin- 121, 1902-1908, pp. 1191, 1192) not liable
5 L. J. (O. S.) C. P. 121, 12 to loss to notes under N. Y. standard
Moo. C. P. 334, 29 R. R. 524, form, for N. Y. Stat, and amdts. see
per Best, C. J., and Park, J.; § 1715 herein.
2875
§ 1710 JOYCE ON INSURANCE
on bottomry is a special interest, which must be specifically de-
scribed and insured eo nomine; it is not covered by a policy in
general terms, and the same is true of respondentia bonds. These
securities are of themselves a specie- of insurance, and have always
expressed as on bottomry or respondentia by the custom of
merchants, although another reason winch has hen assigned, and
which due- not now seem applicable under the common form of
contract, is that there is neither average dot salvage, and a capture
does not mean a temporary taking, but one that occasions a total
loss.15 Where the master borrowed money to repair the vessel in
a foreign port, and designated his interesl a- "mi bottomry,"' and
the master bound himself for repayment eight days after his
arrival a! the port of London, it was held that the interest was well
described, and that "alter my arrival" meant after the ship's
arrival, and noi whether the .-hip arrived or not, although the words
"whether .-he dues or not arrive*' were used.16 And if the policy
is in general terms, not specifically designating the interest, the
insured is not aided by the fact that the words "grants, bargains,
and sells'' are contained in the bond, for the master as such can
only pledge, and not sell, the vessel in such ease.17 The bond
15 "Considering the contract as expressly or by implication, subject
bottomry only, it created a special to salvage, and entitles the lender to
interest, which, when insured, must salvage, and subjects him to the ex-
be particularly expressed in the pol- pense of salvage in the same manner
icy. This has long been determined as an insurer, and the rale of marine
to be the law and practice of mer- interest and of the premium in effect-
chants," per Kent, J., in Robertson ing insurance on his interest is reg-
v. United Ins. Co. 2 Johns. Cas. (N. ulated accordingly." See further on
Y.) 250, 1 Am. Dec. 166. See also this point, Gibson v. Philadelphia
Glover v. Black, 3 Burr. L394; 1 Wm. Ins. Co. 1 Binn. (Pa.) 405. "Taken
Black. 396, 399, 405, 422; Kenny v. by the enemy .... does uot
Clarkson, 1 Johns. (N. Y.) 394, 'A mean merely a temporary taking
Am. Dec. 336; Simonds v. Hodgson, which is only an obstruction. To
3 Barn. & Adol. 50, 7 L. J. (O. S.) come within the clause, it must be
C. P. 239, 1 L. -I. K. I'.. 51, :'. M. such a taking as constitutes the loss
P. 385, 6 Bing. 114, 37 P. P. 319; of (he ship, and which would amount,
Emerigon on Ins. (MereditlTs ed. between the insurer and the insured;
1S50) c. viii. sec. 6, p. 173; 1 to a total loss." per Lord Mansfield,
Marshall on Ins. (ed. 1810) *317 et in Joyce v. Williamson, IS I long. 164;
seq.; 1 A mould on Marine Ins. Insurance Co. of Pennsylvania v.
(Perkins' ed. 1850) 229, *223. sec. Duval, 8 Serg. & R. (Pa.)' 138.
L02; Id. (Madachlan's ed. 1887) 40 16 Simonds v. Bodgson, 3 Barn. &
el seq.; Id. (8th ed. Mart & Simey) Adol. 50, 1 L. .1. K. I;. \. S. 51, 7
sec. 243, p. 308; 1 Phillips on Ins. L. J. (O. S.) C. P. 239, 3 M. & P.
(3d ed. 234) sec. 427. See also § 385, rev'g 3 Moore & P. 385, 6 Bing.
1017 herein. This author also says 114.
in relation to (he point of average 17 Robertson v. 1'nited Ins. Co. 2
and salvage: "But this reason lias Johns. C. (N. Y.) 250, 1 Am. Dec.
become somewhat obsolete, as bot- 166.
tomry is more frequently now made,
2876
DESCRIPTION OF PROPERTY §§ 1711, 1712
must also be a valid bottomry bond, otherwise the interest on
bottomry is not covered.18 So a joint insurance upon a bottomry
bond given to two jointly, contrary to the prohibition of a statute,
is void, although the lenders are copartners.19 Mr. Marshall in-
stances a ca^c -where a departure from the rule requiring a specific
description of these interests is warranted by usage, the case being
that where "goods, specie, and cll'ccts on hoard-' covered a respond-
entia interest, in accordance with a usage of the East India trade
to effect insurances of such interests in that manner.20 And in a
Massachusetts case on insurance the "property on board" is held
to cover the captain's interest arising from an agreement with the
owners that he should receive for his services a certain per cent of
the return cargo.1
§ 1711. Captor's interest: prize of war. — As has been stated un-
der a prior section, a captor's right to an interest in prizes depends
upon a grant from the government, and the early English cases
which were exhaustively discussed by the courts, and which have
been constantly cited and reviewed by the text-writers, gave an
insurable interest to captors in certain cases, based upon a reason-
able expectation of a grant or a reasonable expectation of an allow-
ance of the claim,2 and it is upon this point of a reasonable
expectation of a profit which is not actually a vested property, but
which resembles an interest in probable profits, and the point of
a vested interest in the government, that the question whether
such interest should be specifically described has turned; it being
held in the former case that the captor's interest must be specifically
described, and the interest vested by grant need not be so desig-
nated, but may be covered by a general policy upon ship and
cargo.3
§ 1712. Cargo. — An insurance upon the cargo does not cover the
ship. The word "cargo," says Emerigon, "signifies the contained,"
and the word "body," or "hull," signifies "the container and all
its accessories," so that an insurance upon the body or hull does
not cover merchandise or cargo on board. In certain cases usage
may be resorted to in order to ascertain what is meant by the word
18 Simonds v. Hodgson, 6 Bing. 19 Evereth v. Blackburn, 6 Maule &
114, 3 Moore & P. 385. Although S. 152, 2 Stark. GO.
the decision was reversed upon the 20 1 Marshall on Ins. (ed. 1810)
construction of the instrument, it *319, citing Gregory v. Christie, 3
being decided a valid bond, the prin- Doug. 419.
ciple was not denied; Id. 3 Barn. & l Holbrook v. Brown, 2 Mass. 280.
Adol. 50, 1 L. J. K. B. N. S. 51, 3 2 § 1025 heroin.
Barn. & Ad. 56, 1 L. J. K. B. 51, 7 3 Routh v. Thompson, 11 East. 433.
L. J. (0. S.) C. P. 239, 3 M. & P. per Lord Ellenborough, s. c. 13 East,
385. 274. See The Joseph. 1 Gall. (CO
2877
§§ 1713, 1711 .lover. ON INSURANCE
"cargo." Tin' insurance may, however, be so framed as to cover
both ship and cargo.4 The words "cargo and fr< ight" do not cover
goods laden on deck, or Livestock, the provender, and their freight.6
The word "cargo" is, however, so far synonymous with goods and
merchandise in marine policies, thai it will be further considered
under the subsequent section covering those word.-.
§ 1713. Contingent or special interest in property of others. —
If there is nothing upon the face of the policy to indicate that it
intended to cover other than the insured's interest in properly
as owner, the policy should be limited to that species of property
which naturally and obviously is included within its terms and
cannot be extended in its terms by implication so as to cover a
special and contingent interest in the property of others, although
the locality of the property mighl seem to bring it within the de-
scriptive words of the policy. This is illustrated by the case where
a fire policy was effected by a railroad corporation upon "all the
wood and logs cut and piled along the line of their railroad" be-
tween specified points. About two hundred cords of wood and a
quantity of hemlock logs were piled and lying upon land not
owned or occupied by the railroad company, the piles being only
a short distance from the railroad, but none of the wood was owned
by the company, and it was held that the contingent interest of
the railroad in the property of others endangered by fire from its
engines was not covered unless specifically described. In this case
the wood was consumed by fire kindled by sparks from the loco-
motive, and it also appeared thai the company had property along
the line of its road which came within the description.6
§ 1714. Contraband of war: belligerent and neutral property. —
Emerigon says: "In cases where it is allowed to insure goods of
contraband or enemies' property, it is just that the insurers should
be informed of it, because of the increased risk.'*7 Mr. Duer is of
the opinion "that an insurance on contraband of war is a valid
contract, but that the underwriter is never responsible for a loss
occasioned by the seizure of goods unless their true character was
known. . . . His consent to assume the risk is never to be im-
plied from the use of general terms in the policy that in their
literal extent embrace the property. . . . Where the goods in-
545, 558, Fed. Cas. No. 7,533, per (21 Mass.) 429. See also §§ 1726,
Story, J. 1741. 1762 herein.
4 Emerigon on Ins. (Meredith's ed. 6Monadnock R. R. Co. v. Manu-
1850) e. x. sec 1. pp. 233, 234; faeturers' Ins. Co. 113 Mass. 77. See
Boughton v. Gilhart, 7 Car. & P. § 808 herein.
701; 1 Marshal] on Ins. (ed. 1810) 7 Emerigon on Ins. (Meredith's ed.
320a. 1850) c. x. see. 2, p. 243.
5 Wolcott v. Eagle Ins. Co. 4 Pick.
2878
DESCRIPTION OF PROPERTY § 1714
sured, although described by general words, are declared in the
policy to bo contraband of war, the agreement on the part of the
assurer to assume the risk is express, and it may be regarded as
equally so where the goods that are in fact contraband by the
general law of nations, although not so declared in the policy, are
specifically insured by their appropriate names. . . . But where
the consent of the underwriter to assume the risk does not appear in
any form on the face of the policy," it must appear that he had
knowledge of their character, or that other circumstances or usages
of trade exist whereby he is bound to infer their character.8 Mr.
A mould says: "Although the underwriter would not be held
liable unless he were told of the nature of the intended risk, yet
it has never been decided that the contraband character of the cargo
must be specified in the policy," and Mr. Maclachlan, in his edition
of Mr. Arnould's work, says the same.9 And in the last edition of
said work, it is said that if "the nature of the risk be not disclosi d
to the underwriter he will be entitled to avoid the insurance on the
ground of concealment" although insurances on such goods or
voyages are not illegal" and also that "insurance by a neutral of
articles contraband of war being per se a valid contract may be
enforced by the courts of the neutral country, provided the nature
of the trade and of the goods was disclosed to the underwriter, or
provided there be just ground, from the circumstances of the trade
or otherwise, to presume that he was duly informed thereof." 10
It is declared that "if goods contraband of war are on cargo, the
assurer is not responsible for their capture and condemnation on
that account, unless either with a full knowledge of the nature of
the goods and of the voyage, or by an express undertaking, he
shall insure them against such capture." n The rule as stated by
8 2 Duer on Marine Ins. (ed. 1845) ed. Hart & Simey) sec. 598, p. 743;
612, citing numerous foreign authori- see. 613, p. 758.
ties, and Richardson v. Maine Ins. 10 2 Arnould on Marine Ins. (9th
Co. 6 Mass. 102, 4 Am. Dec. 92; ed. Hart & Simey) sec. 760, p. 947,
Cook v. Essex Fire & Marine Ins. sec. 765, p. 955 (citing 2 Kent's
Co. 6 Mass. 122; Maitland v. Gray, Comm. 267). See also Id. sec. 598,
<i .Mass. 124; Parker v. Jones, 13 p. 771 et seq.; sec. 613, p. 787, citing
Mass. 173; Archibald v. Mercantile Juhel v. Rhinelander, 2 Johns. Cas.
Ins. Co. 3 Pick. (20 Mass.) 70; 3 (N. Y.) 120, 487; Seton v. Low, 1
Kent's Commentaries (5th ed.) 268. Johns. Cas. (N. Y.) 1; Barker v.
On liability of insurer under policy 1 '.lakes. 9 East, 283, but noting that
of marine insurance for losses aris- the question of concealment was not
ing out of state of war, see note in raised in the Barker Case.
5 B. R. C. 4. n Richardson v. Maine Ins. Co. 6
9 1 Arnould on Marine Ins. Mass. 102, 4 Am. Dec. 92, per Par-
(Perkins' ed. 1850) 216, *212: Id. sons, C. J.
(Maclachlan's ed. 1887) 26; Id. (8th
2879
§§ 1715, L716
JOYCE ON INSURANCE
an eminent authority in this country is, thai although the policy
is in general terms, the underwriter cannot be presumed to under-
take risks occasioned by the insured or bis agents in known viola-
tion of law, and thai it' is well settled thai the general terms of the
policy do not render the underwriters liable for any loss arising
from foreign or illicit trade, unless the policy be written with a full
knowledge thai the object of the voyage was illicit trade.12 If
contraband articles are specifically named in the policy, the in-
surers assume the risk, unless the printed clauses by construction
with the written description exclude the presumption that the
underwrite!- intended to assume such risk. This, however, is a
question of construction, governed by the general rule that the
written control the printed clauses, except it be possible to con-
strue th.au together and so effectuate the intention of the parties.18
Belligerenl and neutral property are covered by a general policy
which contains no warranty of neutrality and insures all persons
interested.14
§ 1715. Curiosities: scientific cabinets and collections are not
covered under the Massachusetts Standard fire policy unless special-
ly mentioned, and substantially the same provision is in the New
York and other standard forms.15
§ 1716. Equitable interest may be covered by the term "prop-
erty."— A bona fide equitable interest in property, even though the
legal title be in another, is covered by the term "property." 16 And
12 Andrews v. Essex Fire & Marine
Ins. Co. 3 Mason (U. S. C. C.) (>,
Fed. Cas. No. 374, per Story. J. See
Seton v. Low, 1 Johns. Cas. (N. Y.)
1, per Kent, C. J. To the same ef-
fect are Skidmore
Johns. Cas. (N. Y
Rhinelander, 2 Johns
120, aff'd 2 Johns, ('as. (N. Y.i
('ranch (9 lT. S.) 100, 3 L. ed.
48.
"Pub. Stats. Mass. pp. 713-15;
acts 1887, c. 214, sec. 60. Mass.
Rev. L. e. 118, sec. 60 (Rev. L. Supp.
7 Desdoity~2 L902-1908, sec. 60, pp. 1191, 1192).
^ 77- na.oi' v That liability must he "specifically
r (X v \ assumed on ( uriosities
is. Cas. UN. I. geientifie Apparatus"' under New
i. cas. t.v *.) Y()rk stamlanl tonUi x. Y. Ins. L.
487; Gardiner v. Smith, 1 Johns. Cas. l!l()!)< e 33j sec V2\ (Consol. L. c.
(N. Y.) 141. It will he observed that 2S) ;'Laws 1886, c. 488, and L. 1887,
these decisions conflict with the (. 429; p. 1901, (.. 513; L. 1903, c.
Massachusetts cases above cited, and 200; L. 1009, c. 240; L. 1910, c. 168,
Chancellor Kent says that they are 638, 668; L. 1013, c. 181. See list
overruled: 3 Kent's Commentaries of statutes adopting standard forms
(5th ed.) 268. of fire policies under § 17(5 herein.
13Goicoechea v. Louisiana State "Bartlett v. Walker, 13 Mass.
Ins. Co. (i Mart. (La.) 51, 17 Am. 267, 7 Am. Dec. 143 (citing Oliver
Dec. 175; Andrews v. Essex Fire & v. Greene, 3 Mass. 133); Locke v.
Marine Ins. Co. 3 Mason (U. S. C. North American Ins. Co. 13 Mass.
C.) 6, Fed. Cas. No. 374; Seton v. 61; Gaylord v. Lamar Ins. Co. 40
Delaware Ins. Co. 2 Wash. (U. S
C.) 175, Fed. Cas. No. 12,075.
14 Hodgson v. Marine Ins. Co. 5 605; Tyler v
2880
Mo. 13,^03 Am. Dec 289; Pelton v.
Westchester Fire Ins. Co. 77 N. Y.
JEtna Ins. Co. 12
DESCRIPTION OF PROPERTY § 1717
unless the terms of the policy require a disclosure of the exact in-
terest, or specific inquiries concerning the same are made, the
equitable interest of a person who holds possession under a con-
tract of purchase, the legal title being in another, may be described
by the insured as his property without more specific designation.17
But it is also held by Mr. Justice Story that a common policy on
the ship covers only the legal ownership, and if the insured has a
special or equitable ownership, he must give notice to the under-
writer, on the ground that the nature of such a title is ordinarily
material to the risk, and that there is an implied representation
that the ship's papers are according to the real legal ownership.
In this case the equitable title was sought to be established, how-
ever, by parol.18 This case was distinguished from a New York
case where the equitable title and the possession of the ship was
held under a written contract of sale from the legal owner. A large
portion of the purchase money had been paid, and a recovery for
a total loss was adjudged, although the equitable interest was
neither specified in the policy nor disclosed.19
§ 1717. Freight must be insured eo nomine. — It is well settled that
freight must be insured eo nomine.20 So upon an insurance on
goods the underwriters are not liable for freight pro rata itineris
paid by the owners of the goods to the shipowner, for the insurers
on cargo have nothing to do with the freight.1
Wend. (N. Y.) 507, s. c. 16 Wend. Home, 1 Johns. (N. Y.) 385, 3 Am.
(N. Y.) 385, 30 Am. Dec. 90n. Dec. 336. See Locke v. North
17 Connecticut. — Hough v. City America Ins. Co. 13 Mass. 61; Oliver
Ins. Co. 29 Conn. 10, 76 Am. Dec. v. Greene, 3 Mass. 133, 3 Am. Dec.
581. 96: Examine §§ 896, 1696 herein;
Illinois. — Rockford Ins. Co. v. chapter on evidence, § 3762; "Insur-
Nelson, 65 111. 415; Norwich Fire able interest in ship and the ship's
Ins. Co. v. Boomer, 52 111. 442, 4 Am. register," and see §§ 1822, 1859 here-
Rep. 618. in.
Massachusetts.— Walsh v. Phila- 20 1 Phillips on Ins. (3d ed. 259)
delphia Fire Assoc. 127 Mass.' 383. sec. 469 ; 1 Arnould on Marine Ins.
New Jersey.— Franklin Fire Ins. (Perkins' ed. 1850) 225, *220; Id.
Co. v. Martin, 11 Vroom (40 N. J. (Maclachlan's ed. 1887) 34; Id. (8th
L.) 568, 20 Am. Rep. 271. ed. Hart & Simey) sec. 233, p. 298;
New York. — Pelton v. Westchester 1 Duer on Marine Ins. (ed. 1845)
Fire Ins. Co. 77 N. Y. 605. 448, sec. 44; Emerigon on Ins.
Pennsylvania. — Lebanon Mutual (Meredith's ed. 1850) c. x. sec. 2,
Ins. Co. v. Erb, 112 Pa. St. 149, 4 p. 243, states the same rule as to
Atl. 8 ; Millville Mutual Fire Ins. Co. freight earned,
v. Wilgus, 88 Pa. St. 107. 1 Baillie v. Modigliani, reported in
18Ohl v. Eagle Ins. Co. 4 Mason 2 Marshall on Ins. (ed. 1810) 72Sa ;
•fU. S. C. C.) 390, Fed. Cas. No. 10,- 1 Park on Ins. 116, per Lord Mans-
473. field; Gibson v. Philadelphia Ins. Co.
19Kenney v. Clarkson & Van 1 Binn. (Pa.) 405.
Joyce Ins. Vol. III. — 181. 2881
§§ 1718, 1719 JOYCE ON INSURANCE
§ 1718. Freight: right reserved by owner and vendor: whether
such interest covered by insurance on freight. — In a much discussed
New York case the owner sold his vessel under an agreement with
the purchaser, in whose name the ship was registered, that the
original owner should have the benefit of freight to be earned on a
voyage for which he had previously chartered the ship. The pur-
chaser insured as owner for the voyage, and the vendor also effected
a policy on freight on the goods on the same voyage, and it was
held that one who is not the owner of the vessel, although he may
have an interest in the earnings, cannot insure his interest under
the general designation of "freight," but must specifically describe
his interest, since it does not accrue to him as owner; that by
failing to disclose the nature of his interest he imposes upon the
insurer, who may rightfully assume that in insuring "freight" be
is insuring the owner of the ship, and not a stranger, and that to
permit the latter to insure "freight" without explanation would
lead to abuse and fraud by affording an opportunity for cumulative
insurances.2 This decision has been criticized by Mr. Phillips;3
also by Judge Duer 4 and by Mr. Parsons.5 Mr. Arnould says the
vendor ought, in such case, to have an insurable interest in the
freight to be earned, for he stands precisely in the situation of a
charterer who takes goods on freight.6 And Mr. Maclachlan refers
to the doubts raised by this New York case, but says that neither
in this country nor in England "have such doubts prevailed
against the opinion that such persons have an interest which may
be covered by a valid policy on freight,"7 Under the marine
insurance act of England "'freight' includes the profit derivable
by a shipowner from the employment of his ship to carry his own
goods or movables, as well as freight payable by a third party."8
§ 1719. Freight: whether charterer may insure it eo nomine:
difficult to formulate a rule. — AVhether a charterer can insure freight
2Rilev v. Delafield, 7 Johns. (N. 42 Duer on Ins. (ed. 184(5) 452,
Y.) 522. See Robbins v. New York, sees. 47 et seq., note a, p. 453.
1 Hall (N. Y.) 325; Mellin v. Na- 51 Parsons on Marine Ins. (ed.
tional Ins. Co. 1 Hall (N. Y.) 452; 18G8) 186, n. 1; 528, n. 2, citing the
Cheriot v. Baker, 2 Johns. (N. Y.) same authorities as Mr. Phillips.
346, 3 Am. Dee. 437. 6 1 Arnould on Marine Ins.
31 Phillips on Ins. (3d ed.) sec. (Perkins' ed. 1850) 265, *259; Id.
40, citing Taylor v. Wilson, 15 East, 228, *222; Id. (8th ed. Hart &
324; Oliver v. Greene, 3 Mass. 133, Simey) sec. 234, p. 300.
3 Am. Dec. 96, per Parsons, C. J.; 71 Arnould on Marine Ins. (Mac-
Bartlett v. Walter, 13 Mass. 267, 7 lachlan's ed. 1887) 35. See also Id.
Am. Dec. 143; Clark v. Ocean Ins. (Maelachlan's ed. 1887) 62; Id. (8th
Co. 16 Pick. (33 Mass.) 289, as op- ed. Hart & Simey) sec. 234. p. 300.
posed thereto. 8 Marine ins. act 1906 (6 Edw.
2882
DESCRIPTION OF PROPERTY § 1720
eo nomine has been a subject of much discussion. We have
noted under the last section the criticisms upon the case of Riley
v. Delafield,9 and have under a preceding chapter considered the
question of the insurable interest of the charterer in freight. But
upon the point whether a charterer may insure under the name of
freight generally, without particularly specifying his interest, it
is difficult to formulate a rule which will be clearly supported by
the weight of authority, since there is at the least an apparently
irreconcilable conflict in the authorities.
§ 1720. Same subject: cases. — In a New York case10 the insured
under a general policy upon freight was assignee of a charter-
party. There was no obligation to pay the chartered freight until
the safe arrival of the ship, and it was held that the insured could
not insure freight eo nomine, although an actual advance on
account was declared recoverable.11 So where the plaintiff under
an insurance on freight chartered a vessel and agreed to pay a
specified sum for freight on delivery of the cargo, of which he was
the owner, and the ship being lost no cargo was delivered and no
freight became due, it was decided that there could be no recovery.12
In a Massachusetts case 13 one A, part owner of the vessel, hired
of M, a part owner, his moiety for eighteen months, agreeing to
pay therefor a certain sum per month, and if the vessel was lost
during the term, A was to pay M a specified sum for his share.
The charterer insured his interest generally without any further
designation, and it was held that he was entitled to recover the
amount insured, he being interested in the vessel to that sum.14
So where the charterer agreed to pay a certain sum for the ship for
the out passage, and a like amount for the return passage, and
insured the out freight under a valued policy for an amount about
equal to the freight he was to receive at the outport, and nothing
became due the shipowner because of the loss of the ship on her
outward voyage, it was held that the charterer's interest was pro-
tected by the policy ; the case turning upon the point whether the
valuation was made with a full knowledge of the facts and was
VII. e. 41) sec. 90. See Id. sec. 30, Co. 1 Hall (N. Y.) 452; Huth v. New
Sched. I. r. 3 (c) (d) ; Butter- York Mutual Ins. Co. 8 Bosw. (N.
worth's Twentieth Cent. Stat. (1900- Y.) 538.
1909) sec. 90, p. 423; sec. 30, Sched. 12 Cheriot v. Baker, 3 Johns. (N.
I. r. 3 (c) (d) p. 426. Y.) 346.
9 7 Johns. (N. Y.) 522. 13 Oliver v. Greene, 3 Mass. 133, 3
10 Bobbins v. New York Ins. Co. Am. Dee. 96, per Parsons, C. J.
1 Hall (N. Y.) 325. 14 See Silloway v. Neptune Ins. Co.
11 See also Mellin v. National Ins. 12 Gray (78 Mass.) 73; Flint v.
28S3
§ 1721 JOrCE ON INSURANCE
fair, and not a cover for a wager.15 It was held in this last case
that the charterer might set up the ship as a general freighting
ship, and would ".-land as owner pro haec vice in relation to those
who' should load her. He would assume the risks and dangers of
the sea in respect to them just as the original or absolute owner
had assumed the risks in respect to him," and that if he was to pay
a certain sum for the hire, and was to receive a larger sum from
those who loaded her, the excess would be at his own risk in case
of loss.16 Other cases bearing upon this subject have been noticed
under preceding sections.17
§ 1721. Same subject: opinions of the text- writers.— Mr. Ar-
nould says: "It is clear law in this country [England] that the
shipowner has an insurable interest in the benefit which he expects
to derive or the profit he expects to make by carrying his own
goods in his own ship, and may protect this interest under a gen-
eral insurance on freight. There is no reason why the charterer,
who under the circumstances is supposed to stand in the same posi-
tion, may not do the same." 18 Mr. Parsons is of the opinion that
"a charterer may insure under the name of freight what he is to
receive for carrying the goods of others, provided that amount is
at his risk ;" he also says in regard to the profit the charterer ex-
pects to make from carrying his own goods : "We do not know
why the charterer does not stand in the same condition with the
shipowner, and as the shipowner has an insurable interest in the
freight of his own goods which he may insure under that name,
the charterer should have an insurable interest in the carriage of
his own goods, and may insure it simply as freight. . . . We
believe that the charterer may insure his interest in the freight
under the word 'freight.' " 19 Mr. Phillips deduces from the cases
the rule "that a charterer who is the only person interested in the
freight or a part of it, or is bound by his agreement to insure it,
Flemyng, 1 Barn. & Adol. 45, 8 L. "is not well founded ; for the charter-
J. K. B. 350, 13 Eng. Rul. Cas. 693. er or former owner must be regarded
See also cases cited in § 1009 herein, as owner pro hac vice, having as
15 Chirk v. Ocean Ins. Co. 16 Pick, much interest in the ships arriving as
(33 Mass.) 289. See also Taylor v. the owners would have if insured to
Wilson, 1") East, 324. the full value of the freight to be
16 Per Putnam, J. earned," and that the charterer who
17 See §§ 1007-1010, 1012, 1015, carries goods on freight, or the
1016 herein. owner who sells his ship reserving the
18 1 Arnould on Marine Ins. freight, may insure by a policy on
(Perkins' ed. 1850) 227, 228, 265, freight. See also 17 Earl of Ilals-
*221, *222, *259; (Maclachlan's ed. bury's Laws of England, sec. 719, p.
1887) 34; Id. (8th ed. II an & Simey) 365.
sec. 234, p. 300, where, referring to 19 1 Parsons on Marine Ins. (ed.
the objections made, it is said that it 1868) 173, 174, 529, notes.
2884
DESCRIPTION OF PROPERTY §§ 1722-1724
and make it good at all events, may insure it generally to the
amount of his interest, without particularly specifying it." 20
§ 1722. Same subject: conclusion. — Were we to formulate a rule,
we should only state in substance what is contained in the opinions
of Mr. Arnould, Mr. Parsons, and Mr. Phillips, noted under the
last section, with which opinions we fully concur, and which find
support in the words of Putnam, J., in Clark v. Ocean Insurance
Company,1 and are sustained upon analogy and principle by the
cases relied on; and we would suggest that in all cases where the
charterer has an insurable interest in freight as such, and the
insurance is fairly made by the parties with a full knowledge of
the material facts, the amount of interest which the charterer has
at risk, under such circumstances, ought to be fully protected
within the rules of indemnity by a general policy on freight and
by that name without more specific description.
§ 1723. Freight: designation of shipowner's interest. — By reason
of the extensive meaning of the word "freight/5 that term as used
in policies of insurance signifies all the benefit derived by the ship-
owner either from the chartering of the ship or its employment for
the carriage of the goods of others, and the shipowner may also,
under the general designation of "freight," insure the profit he
expects to realize from the increased value of his own goods arising
from their transportation in his own ship.2 In case of insurance
of the shipowner's profit in carrying his own goods, it is better to
insure goods and freight together, describing them as goods and
freight.
§ 1724. Freight: other interests. — Where by a written clause the
insurance was "declared to be on freight earned or not earned,
policy to be proof of interest," freight, and not cargo, was held
within the terms.3 "Freight on board," means freight of the
20 1 Phillips on Ins. (3d ed.) 262, Pick. (82 Mass.) 289, per Putnam,
263, sees. 480, 481, relying upon J. ; Woleott v. Eagle Ins. Co. 4 Pick.
Taylor v. Wilson, 15 East, 324, 13 R. (21 Mass.) 429; Robinson v. Manu-
R, 488; Oliver v. Greene, 3 Mass. 133, facturers' Ins. Co. 1 Met. (42 Mass.)
3 Am. Dee. 96; Bartlett v. Walter, 143. But see Dumas v. Jones, 4
13 Mass. 267, 7 Am. Dec. 143. Mass. 647; Etches v. Aldan, 1 Man.
1 16 Pick. (33 Mass.) 289. & R. 157; Devaux v. J'Ansen, 5 Bing.
2 Hart v. Delaware Ins. Co. 2 N. C. 519 ; Denoon v. Home &
Wash. (U. S. C. C.) 346, Fed. Cas. Colonial Ins. Co. L. R. 7 Com. P.
No. 6,150; Riley v. Hartford Ins. 341; Flint v. Flemyng, 1 Barn. &
Co. 2 Conn. 368, 373; Silloway v. Adol. 45, 13 Eng. Rul. Cas. 693, per
Neptune Ins. Co. 12 Gray (78 Mass.) Lord Tenterden; Cal. Civ. Code, sec.
73; M'Gaw v. Ocean Ins. Co. 23 2661.
Pick. (40 Mass.) 405, 409, per Shaw, 3 Huth v. New York Ins. Co. 8
C. J.; Clark v. Ocean Ins. Co. 16 Bosw. (N. Y.) 538.
2885
§ itl'-. JOYCE ON INSURANCE
si.4 Freight is susceptible of apportionment as between the
owners and the insurers, so as to give to each of the parties the
usufruct of tin1 ship during the time of their respective owner-
ship.8 Where a policy was on freight from a certain port, and
part of the outward cargo was bartered for other cargo which was
11 on board, it was held that the freight covered only the sub-
stituted cargo, and not any part of the outward cargo remaining
on board; e nor does a cargo on freighl valued cover specie.' The
earnings of a ship on a fishing voyage are not ''freight'' in this
country, but are otherwise designated in the policy.8 Freight is
not covered by the term "property," and where an insurance was
on property on board, a pari of the cargo being timber, three fifths
of which was to be taken as freight, it was held that the policy
covered three fifths of the lumber, but not the freight of the rest of
the cargo.9 Freight generally does not cover the freight of goods
laden on deck, since a policy would not generally attach to goods
so laden, for the risk is greater than that contemplated.10 This rule
is, however, subject to such exceptions as may arise in case of usage
or a particular designation or disclosure of the nature of the risk.11
Many of the principles underlying the question of attachment and
duration of the risk on goods and freight are applicable here, and
it will be sufficient to refer to the chapter thereon, as they are more
fully stated there than could be done here except by unnecessary
repetition.12
§ 1725. Goods, wares and merchandise: cargo. — The policy in
marine risks may be upon goods or merchandise generally. A
policy on goods need not specify the different kinds; this arises
both from the fact of the almost impossibility of particularizing in
many cases, and again the policy is so framed, by reason of the
usual memorandum clause, as to afford protection to the under-
writer in case of articles perishable in their nature.13 The question
4 Robinson v. Manufacturers' Ins. Toledo Fire & Marine Ins. Co. v.
Co. 1 Met. (42 Mass.) 143. Speares, 16 Ind. 52. See § 1726
5 Kennedy v. Baltimore Ins. Co. herein.
3 Ear. & J. (Md.) 367, 6 Am. Dec. » Mihvard v. Herbert, 3 Ad. & E.
499. X. S. 120, 24 Eng. Rul. Cas. 473;
6 Forbes v. Cowie, 1 Camp. 520. Northwestern Ins. Co. v. ^Etna Ins.
7 Adams v. Pennsylvania Ins. Co. Co. 26 Wis. 78. See § 1726 herein.
1 Rawle (Pa.) 97. 12 See §§ 1483 et seq. herein.
81 Phillips on Ins. (3d ed.) 269, "The English form of the policy
see. 496. is "upon any kind of goods and mer-
9 Wiggin v. Mercantile Ins. Co. chandise." Of the cargo found in use
7 Pick. (24 Mass.) 271. here we will notice two; thus, one
10 Adams v. Warren Ins. Co. 22 form is, "Upon valued at
Pick. (39 Mass.) 163; Dodge v. laden or to be laden under deck on
Bartol, 5 Me. 286, 17 Am. Dec. 233; board." Another is, "Upon
2886
DESCRIPTION OF PROPERTY § 1725
might, however, arise whether the words "laden under deck" are
more conclusive than the implied condition, and would supersede
a well-known and well-ascertained usage so as to exclude evidence
thereof.14 As a general rule, one may, by the terms "goods" or
"merchandise" secure the protection of the policy upon such goods
of the insured as are on board at the time of loss. This rule,
however, does not apply to those cases where the nature or kind
of the goods are such as to require a specific designation.15 The
term "cargo" is held to be one of extensive signification, and to
mean the lading of a ship of whatever it consists.16 When the
cargo consists of a few articles, or of goods valued by the hogs-
head, pipe, bale, etc., it is customary to specify them, but under
the English form of policy this would not be necessary.17 An
insurance on the "cargo" or "goods and merchandise" of a whaling
ship will cover oil and other articles which are the ordinary pro-
ducts of the voyage.18 The clause "goods laden or to be laden'' on
board covers all goods laden and to be laden embraced in the
contract.19 "Merchandise," in marine policies, is said to include
all property of great value on board ship and not attached to the
person of passengers.20 An insurance by common carriers on a
canal on "goods and merchandise" was held a sufficient description
to cover their interest,1 "Merchandise," as used in a fire policy,
does not cover every kind of inanimate movable property; so that
laden or to be laden on board." See 17 De Svmonds v. Shedden, 2 Bos.
§ 1690 herein. & P. 153'; 1 Marshall on Ins. (ed.
14 See §§ 1718 et seq., and § 1726 1810) *317; 1 Arnonld on Marine
herein. Insurance (Perkins' ed. 1850) 221,
15 For the general principles above *215; Id. (Maclachlan's ed. 1887)
stated, see 1 Marshall on Ins. (ed. 29, 30. Id. (8th ed. Hart & Simev)
1810) *316; 1 Arnould on Marine sec. 15, pp. 26-28, sees. 222 et seq.,
Ins. (Perkins' ed. 1850) 214 et seq., pp. 287 et seq.
*210 et seq.; Id. (Maclachlan's ed. 18 Paddock v. Franklin Ins. Co. 11
1887) 24 et seq.; Id. (8th ed. Hart & Pick. (28 Mass.) 227; Hill v. Patten,
Simey) sec. 15, pp. 26-28; sees. 222 8 East, 374, 13 Eng. Rul. Cas. 595.
et seq., pp. 287 et seq. ; 17 Earl of 19 Hinck v. Home Ins. Co. 19 La.
Halsburv's Laws of England, sec. Ann. 527.
718, p. 364. "It suffices," savs Emer- 20 Brown v. Stapyleton, 4 Bin?,
igon, "that the ailment of the risk is 119, 122, 5 L. J. (O. S.) C. P. 121.
found contained in the ship to render 12 M. C. P. 334, 29 R, R, 524, per
the insurance on cargo and goods Park, J. See Hill v. Patten, 8 East,
valid; for, as the Guidon decides, 374, 1 Camp. 72, 9 R, R. 469, 13 Eng.
there is no need in insurance to s])eci- Rul. Cas. 595, per Lord Ellenbor-
fy the quantity or quality of the mer- ough.
chandise insured :" Emerigon on 1 Crowlev v. Cohen, 3 Barn. &
Ins. (Meredith's ed. 1850) c. x. sec. 1, Adol. 478,' 1 L. J. K. B. 158, 37 R.
p. 233. R. 472, 13 Eng. Rul. Cas. 314.
16 Macy v. Whaling Ins. Co. 9 Met.
(50 Mass.) 354.
2887
§ 1726 JOYCE ON INSURANCE
a policy on "grain and other merchandise" in warehouses is held
not to cover a platform scale bedded in the floor, a beam scale,
corn sheller, and belting, although they had been dispensed with
in the business and offered for sale, nor does it include implements
used or necessary to the business,8 although as a rule "merchandise"
will cover, without more specific designation, all property kept for
sale and all kinds of goods in which the assured deals.3 Under a
policy on "merchandise" a small railroad car and a mast and boom
in store for sale were held covered;4 and "merchandise" will cover
a curricle,6 and also furniture, wearing apparel, and books.6 Goods
"shipped on board the G. Steamship Co." covers goods on a char-
tered ship of the company.7 Goods being landed in shallops, boats,
or launches, according to usage, in such cases are covered.8 Cargo
temporarily landed may be covered.9 Goods remaining on board
after the bulk of the cargo is discharged are not covered.10
§ 1726. Goods laden on deck. — Goods laden on deck, in order to
be covered by the policy, must be specifically mentioned, or it must
be stated in the application that they are so shipped. Goods go
stowed are not covered by a policy on "cargo," "goods," or "mer-
chandise," or "goods and merchandise." The risk on goods so
laden is greater than when laden the customary way, nor are they
considered as part of the cargo in which other shippers are in-
terested.11 The rule, however, is subject to such exceptions as
arise in the case of usage, or whore such goods are so carried with
the consent of the insurer, or where the policy is on property
specifically named and is of a character which is usually carried on
2 Kent v. Liverpool & London Ins. u Taunton Copper Co. v. Mer-
Co. 26 Ind. 294, 29 Am. Dec. 463. chants' Ins. Co. 22 Pick. (39 Mass.)
3 Stillwell v. Staples, 19 N. Y. 401. 108.
4 Burgess v. Alliance Ins. Co. 10 See also the following cases :
Allen (92 Mass.) 22. Indiana.— Toledo Fire & Marine
5 Duplanty v. Commercial Ins. Co. Ins. Co. v. Spears, 16 Ind. 52.
Antli. N. P. (N. Y.) 114 (2d ed.) Louisiana. — Smith v. Mississippi
157. Ins. Co. 1 La. (0. S.) 142, 30 Am.
6 Siter v. Morrs, 13 Pa. St. 218. Dec. 714.
7 Crosswell v. Mercantile Mutual Maine. — Dodge v. Bartol, 5 Me.
Ins. Co. 19 Fed. 24. See Red Wing 286, 17 Am. Dec. 233.
Mills v. Mercantile Mutual Ins. Co. Maryland. — Allegre v. Marvland
19 Fed. 115. Ins. Co. 2 Gill & J. (Md.) 136, 20
8 Stewart v. Bell, 5 Barn. & A. 238, Am. Dec. 424.
24 R. R. 342. § 1569 herein. See Massachusetts. — Adams v. Warren
§ 1599 herein. Ins. Co. 22 Pick. (39 Mass.) 163;
9 § 1576 herein. Wolcott v. Eagle Ins. Co. 4 Pick.
10 Moore v. Taylor, 1 Ad. & E. 25, (21 Mass.) 429.
3 Nev. & M. 406, 3 L. J. K. B. 132, New Jersey.— Lenox v. United Ins.
46 R. R. 242. See §§ 1483 et seq. Co. 3 Johns. C. (N. Y.) 178.
herein. England. — Miller v. Titherington,
2888
DESCRIPTION OF PROPERTY § 1726
deck, not only for its own safety, but the safety of the ship, in
which last case the insurer is presumed to know that they were in-
tended to be insured as laden.12 But in cases where usage is relied
upon, the question is held to go beyond mere proof of the fact that
it was customary so to stow the goods, and that it must be shown
as evidencing the intent to insure goods so stowed that losses have
been paid by insurers in like cases under a general policy.13 It
would seem, however, that the principle underlying the cases so
deciding ought not to be held to require anything more than clear
and satisfactory proof that such a custom exists, so as to raise the
presumption that the insurers have knowledge thereof;14 but if
both the character of the goods are specified and a usage of long
standing to stow such goods on deck is shown, and they are laden
on the deck of a steamer, their loss, they being necessarily jetti-
soned, will be covered by the policy.15 Where the application failed
to state that the goods were shipped on deck, and the underwriters
had no knowledge of that fact, it was held that there could be no
recovery. It appeared, however, that the fact was stated in the bill
of lading which was given to the secretary of the company, but the
secretary did not open or read it.16 In this connection the case of
Wood v. Phoenix Insurance Company17 is important. The action
was a libel by the owner of goods jettisoned to recover contribution
by general average. The cargo, which was iron, was loaded a part
under and a part on deck, and the insurance was upon the part
stowed under deck, but the underwriter knew that a part was
loaded above deck. The deckload was, however, not included in
the policy, because the insured was unwilling to pay the under-
writers the terms asked. It was sought to establish a custom of the
trade in shipping cargo of such a character to load a part thereof
on deck. The court held that in the absence of clear evidence of
such a custom, the claim against the underwriters could not be
sustained, although it was admitted that if such a custom were
proven, it constituted an exception to the general rule. The other
exceptions noted were where the goods are carried on deck by con-
7 Hurl. & N. 954, 31 L. J. Ex. 363, per Co. v. Merchants' Ins. Co. 22
affirming 6 Hurl. & N. 278, 30 L. J. Pick. (39 Mass.) 108. See North-
Ex. 217. western Iron Co. v. iEtna Ins. Co.
12 Wadsworth v. Pacific Ins. Co. 26 Wis. 78.
4 Wend. (N. Y.) 33, 34; De Costa v. " See Wood v. Phoenix Ins. Co. 1
Edmunds, 4 Camp. 142, 2 Chit. 227; Fed. 235. §§ 255-258 herein.
Blackett v. Royal Exchange Assur. 15 Merchants' & Manufacturers'
Co. 2 Cromp. & J. 244, 14 Eng. Rul. Ins. Co. v. Shillito, 15 Ohio St. 559.
Cas. 179, per Lord Lvndhurst, C. B. 16 Smith v. Mississippi Ins. Co.
13 Wadsworth v. Pacific Ins. Co. 4 11 La. 142, 30 Am. Dec. 714.
Weud. (N. Y.) 33, 34; Taunton Cop- 17 1 Fed. 235.
2889
§ 1727 JOYCE ON INSURANCE
tract and whore they are so earned on steam vessels. The decision
is valuable, and extensively reviews the authorities.18 Mr. Ar-
nould is, however, of the opinion that as "the custom only applies
to certain descriptions of goods in any trade, it may be doubtful
whether even in this case the goods ought not to be specifically
described in the policy in order that the underwriter may be ap-
prised that he is to run the extra risk;" and Mr. Maclachlan ex-
presses the same doubt and caution.19
§ 1727. Goods, wares, and merchandise "in trust or on commis-
sion:" on consignment. — An insurance upon goods held in trust
or on commission covers goods held by the assured on storage, for
which he is to receive a compensation.20 So a policy on stock, etc.
"i heir own or held in trust" covers goods on storage for hire in in-
sured's warehouse which was destroyed by fire.21 The phrase "held
in trust" must be understood in a mercantile sense, and not in a
strictly technical sense,1 and the words "held by them in trust" will
extend to and cover property held exclusively in trust for railroad
companies, who have an insurable interest in such goods; the words
cannot be limited so as to exclusively apply to a holding in trust
only for an absolute owner.2 An insurance on a stock in trade,
on consignment, or held in trust, covers goods bought on the joint
account and to be sold for mutual profit of the insured and another
not named in the policy.3 The clause "in trust or on commission"
covers cloth sent the insured to be manufactured into clothing.4
Again, a policy issued to a carriage maker who also does repairing,
covering all vehicles, either his own or held by him in trust, or on
commission, or in storage for repairs, will cover a carriage belong-
18 See also Milward v. Hibbert, 3 Co. 139 N. Y. Supp. 345, 42 Ins. L.
Q. B. 120, 11 L. J. Q. B. N. S. 137, J. 417. See Utica Canning Co. v.
2 G. & D. 142, 6 Jur. 706, (il R. R. Home Ins. Co. 116 X. Y. Supp. 934,
155, 24 Eng. Rul. Cas. 473; Miller 132 App. Div. 420, 38 Ins. L. J. 813.
v. Titherington, 7 Hurl. & N. 278, 1 Home Ins. Co. v. Baltin
6 Hurl. & N. 278, 30 L. J. Ex. 217, Warehouse Co. 93 U. S. (3 Otto)
31 L. J. Ex. 363, 7 Jur. N. S. 214, 8 527, 23 L. ed. 868; Lucas v. Liverpool
Jur. N. S. 1039, 3 L. T. 893, 9 L. T. & London & Globe Ins. Co. 23 W. Va.
231, 9 W. R, 437, to W. R. 356; 258, 48 Am. Rep. 383; Home Ins.
ra v. Mechanics' Ins. Co. 1 Story Co. v. Favorite, 46 111. 263, 266.
(U. S. C. C.) 603, Fed. Cas. No. 2 California Ins. Co. v. Union Com-
12,016. press Co. 133 U. S. 387, 33 L. ed.
19 1 Arnould on Marine Ins. (Per- 730, 10 Sup. Ct. 365, 19 Ins. L. J.
kins' ed. 1850) 218, *213; Id. (Mac- 385, 7 Rail. & Corp. L. J. 363. See
laehlan's ed. 1887) 27; Id. (8th ed. also Houerh v. People's Fire Ens. Co.
Hart & Simev) sec. 222, p. 287; sec. 36 Md. 398; Snow v. Carr, 61 Ala.
225, pp. 290 et seq. 363, 32 Am. Rep. 3.
20 Home Ins. Co. v. Favorite, 46 8MiIlaudon v. Atlantic Ins. Co. 8
111. 263, 266. La. (O. S.) 557, 558.
21 Czerweny v. National Fire Ins. 4 Stilhvell v. Staples, 19 N. Y. 401.
2890
DESCRIPTION OF PROPERTY § 172S
ing to a customer, which has been delivered to the insured to be re-
paired and sold for the customer's account. And in order so to
bring such property in possession for repair within the terms of a
policy insuring all vehicles, either his own, or held in trust or on
commission, or in storage or for repairs, its owner need not be
known at the inception of the policy, nor need the policy fasten
upon it at the time of its issuance; it being sufficient if it is within
the terms of the policy at the time of loss, and its owner has adopted
and ratified the contract,4* So goods intrusted to a warehouseman
for keeping are covered under the words "merchandise held in
trust." 6 And the same is true of the words "in trust or on com-
mission," even though one is not bound to insure the same, and
without regard to the fact whether the insured had a lien thereon
or not for storage.6 So household furniture and wearing apparel
in the warehouse of a commission and forwarding firm, and also
books deposited with them subject to the owner's orders, are cov-
ered by a clause insuring merchandise generally, "and without ex-
ception, their own or held in trust or on consignment." 7 So the
words "held in trust" will cover the interest of a commission mer-
chant or other consignee in goods consigned to him.8 Goods
pawned may be covered by like words.9 But a policy on goods
bought at the assured's own risk does not cover goods consigned to
him nor his commissions thereon.10
§ 1728. Clause "in trust or on commission" may be limited and
controlled by other words in the policy. — The meaning of the words
"in trust or on commission" may be limited and controlled by the
use of other words and clauses. Thus, where the insurance was
upon "merchandise, the insured's own, in trust or on commission,"
followed by the clause "for which they are responsible," it was
held that said clause controlled the rights of the parties, and that
the policy did not cover goods deposited in bond for which the
warehousemen gave wharfingers' warrants, deliverable to the per-
sons named therein or assigns, upon payment of duty and ware-
house charges, which goods were purchased by the assured from
importers, who indorsed the warrants in blank and delivered them
to the insured, who in time sold them to others on credit under an
agreement to have the goods cleared and delivered. For these
4a Johnston v. Charles Abresch Co. 7 Siter v. Morrs, 13 Pa. St. 218.
123 Wis. 130, 68 L.R.A. 934, 101 N. 8 Parks v. General Mutual Ins. Co.
W. 395. 5 Pick. (22 Mass.) 34; Johnson v.
5 Home Ins. Co. v. Baltimore Campbell, 120 Mass. 449.
Warehouse Co. 93 U. S. (3 Otto) 9 In re Wright, 1 Ad. & E. 621.
527. 23 L. ed. 868. 10 Toppan v. Atkinson, 2 Mass.
6 Waters v. Monarch Ins. Co. 5 365.
El. & B. 870, 25 L. J. Q. B. 102.
2S91
§ 1729 JOYCE UN INSURANCE
goods the insured were in no way responsible to the purchasers in
case of I"- by fire, and were under no obligations to have them
insured, nor were the purchaser, cither charged with the premiums
nor in any way liable therefor, and the assured would not be aided
in such case by the fact that they paid the purchasers the value of
the goods destroyed by fire, since such payment must be held to
have been voluntarily made under the circumstances.11
§ 1729. Goods, etc.: "sold but not delivered:" "sold but not re-
moved."— The words "sold but not delivered" apply to goods or
property which have been sold, but the ownership of which has not
been changed by delivery.12 So the words "their own or held by
them in trust or on commission, or sold but not delivered," in a
policy issued to a packing establishment will cover goods held on
storage, although not held for sale or commission, for the clause
should not be limited in its operation to cases where the title of
goods has been vested in a trustee.13 And a policy upon "property
held by it in trust or sold but not delivered, and piled on the
docks," will cover property sold, piled, and marked for delivery
awaiting removal by the purchaser.14 The words "sold but not
removed" have, however, a more extensive meaning than the words
"sold but not delivered," for in the former case it makes no differ-
ence that the title to the property and the ownership and right to
control has passed to another by delivery; the gist of the obligation
is that the property has not in fact been removed, and to that
extent it is covered by a policy containing the clause "sold but not
removed." 16 A policy against loss and damage by fire of the stock
and material of a specified person or company contained in a par-
ticular building, whether such stock and material are "either its
own or held in trust, or on commission, or in storage for repairs,
or sold and not delivered," covers the property of a third person
received by the insured to be repaired by him and thereafter held
by him for the purpose of selling it for the owner, and in the
building at the time it is destroyed by fire.16 Under a policy pro-
viding that assured is insured in his own name on a "stock of
wall paper, shades, and other merchandise not more hazardous, his
own or held by him in trust, or on commission, or sold, but not
removed," while contained in a certain building, the insured who
11 North British & Mercantile Ins. u Michigan Pipe Co. v. Michigan
Co. v. Moil alt, 7 L. R. Com. P. 25, Fire & Marine Ins. Co. 92 Mich. 482,
41 L. J. Com. P. 1. 20 L.R.A. 277, 52 N. W. 1070.
12 Waring v. Indemnity Fire Ins. 15 Waring v. Indemnity Fire Ins.
Co. 45 N. Y. 606, 6 Am. Rep. 146. Co. 45 N. Y. 606, 6 Am. Rep. 146.
13 Home Ins. Co. v. Favorite, 46 16 Johnston v. Charles Abresch Co.
111. 263, 266; Plmmix Ins. Co. v. 123 Wis. 130, 68 L.R.A. 034, 107 Am.
Favorite, 49 111. 259. St. Rep. 995, 101 N. W. 395.
2892
DESCRIPTION OF PROPERTY §§ 1730; 1731
holds such goods for the benefit of the true owners, as their prop-
erty for their use and advantage, receiving a fixed compensation
for his services, holds them in trust, and it is not necessary that, in
addition to such holding, there should be superadded a personal
and individual interest of his own as owner, in order that he may
recover in case of loss.17
§ 1730. Goods, etc.: "in trust or on commission:" on storage:
where policy requires specific declaration or separate insurance. —
If by the express stipulations of the policy goods held in trust or
on commission or on storage are to be particularly described or
specified, or expressly declared as such or separately insured, such
provision must be complied with, and an insurance upon goods
generally, or in fact otherwise than in such terms as to apprise the
insurers of the character of the risk in conformity with the special
requirement, will not cover goods in trust or on commission.18
And in such case, if the policy indicates that no other interest than
that of ownership in the goods is covered, the indemnity will be
confined to that interest, and if it appears that the goods destroyed
are held in trust merely, and that the insured is not the owner of
any of them, and is not subjected to any loss or liability by the
fire, there can be no recovery ; 19 and it is so held even though the
property be goods held on commission, and upon which the insured
has a lien for advances.20 If a policy be effected upon a stock of
music and musical instruments, and the policy provides that goods
held in storage must be specifically and separately insured, a piano
received from the owner to be forwarded to another place for repairs
is covered to its full value by the clause "held by him in trust or
on commission;"1 nor under such a requirement will a policy
upon "jewelry and clothing, being his stock in trade," effected by
a pawnbroker, cover articles in pawn.2
§ 1731. Where policy stipulates specific insurance of goods "in
trust" and specifies what interests those words cover. — Where the
policy stipulates that property held in trust must be insured as
such, and also specifies what interests are intended to be covered by
the wrords "in trust," the requirement is thereby limited in its
application to the interests expressly designated as those intended
17 Roberts v. Firemen's Ins. Co. x Lucas v. Liverpool & London &
165 Pa. St. 55, 44 Am. St. Rep. 642, Globe Ins. Co. 23 W. Va. 258, 48 Am.
30 Atl. 450. Rep. 383. See Dalglish v. Buch-
18 Baltimore Fire Ins. Co. v. Lonev, anan, 16 C. C. S. 332, 26 Scot. Jur.
20 Md. 20. 160.
19 Duncan v. Sun Mutual Ins. Co. 2 Rafel v. Nashville Co. 7 La. Ann.
12 La. Ann. 486. 244.
20Brichta v. La Favette Ins. Co.
2 Hall (N. Y.) 372, 403.
2893
. !23 1733 JOYCE ON INSURANCE
to be covered. Nevertheless, an interest arising out of a secret
trust in fraud of creditors will not be protected, even though tech-
nically within the terms of the specification. Thus, where the
stipulation is thai "property held in trust must be insured as such,"
and tli«' clause follows, "By property held in trust is intended
property held under a deed of trust or under appointment of a
court, or held as collateral security.'" property held in trust to de-
fraud the owner's creditors is not within the protection of the
limiting clause, but, otherwise, where the property is held as
security for a debt.3
§ 1732. Goods and merchandise: shifting and successive car-
goes.— Emerigon says: "Effects laden on board during the course
of the voyage for account of the insured are covered by a general
insurance on the cargo;" and again: "The insurance covers all
goods laden on board the ship . . . during the course of the
voyage, provided the clause to touch at has been stipu-
lated."4 So the rule is that a marine policy on goods and mer-
chandises generally covers shifting or successive cargoes loaded on
board the same ship in the course of the same voyage in substitu-
tion of the original cargo; as in case of a trading voyage out and
home, and substituted goods loaded at intermediate ports. The
character of the traffic or produce or good- changed may differ, and
yet. according to the course of such trailing voyage, constitute one
continued subject-matter of insurance under the name of "goods"
or "merchandises."6 And the same rule applies where by the
description of the subject-matter the policy indicates that a trading
voyage is contemplated, although not expre.-sed.6
§ 1733. Goods or merchandise: shifting and successive goods:
after-acquired property: fire risks. — If a fire policy is effected upon
a stock of goods or merchandise to be sold and replenished, and
which is fluctuating in character, or the property is of a particular
class, or is constantly changing in value, goods successively in
stock, consisting of additions made from time to time after the pol-
icy is effected, are covered, for the insurance in such cases is not
confined to the particular goods or merchandise in stock when the
policy was effected; but where the nature of the risk, the character
of the property, and business usages so indicate, it will be held
that the insurance covers the goods or merchandise of the character
3Avres v. Hartford Fire Ins. Co. L. J. Com. P. 37, 13 Com. B. N. S.
17 Iowa. 176. 85 Am. Dee. 553. 791, 32 L. J. Com. P. 134. 13 Eng.
4 Emerigon on Ins. (Meredith's Rul. Cas. 598; Crowley v. Cohen, 3
ed. 1850) c. x. sec. 1, pp. 237-39. Barn. & Adol. 178, 13 Eng. Rul. Cas.
5 Hill v. Patten. 8 East, 377, 13 314.
Eng. Rul. Cas. 595, per Lord Ellen- 6 See § 1569 herein,
borough. See Tobin v. Harford, 34
2894
DESCRIPTION OF PROPERTY §§ 1734/1735
and description or class specified on hand or in stock at the time of
loss, not exceeding the amount insured. This rule arises not only
from the principles of indemnity, but also accords with the rules
of construction whereby the policy is to be given effect, so far as
possible, in accordance with the manifest intention of the parties,
and also to make the protection the policy affords coextensive with
such intent, so far as is consistent with the words used and the
risk assured.7 So furniture for a household, acquired after the pol-
icy was issued and during the life thereof is covered.73- And in
case of an insurance upon live stock on the premises, the policy is
not avoided by the fact that the horse killed was acquired bv as-
sured, after the policy issued, by exchange for horses then on the
premises.8
§ 1734. What goods are covered may be determined by custom
between the parties. — A custom between the parties may determine
what goods are covered by the policy. Thus all goods consigned
may be covered by an open policy, in the absence of a reservation
to the contrary expressed in the bill of lading, where such is the
custom between the parties.9
§ 1735. What goods are covered may be determined by known
usage of a particular place. — A usage of a particular place govern-
ing the mode of shipping goods and of effecting insurances upon
the same, and under which shipments are rarely known either to
the consignee or the insured until the arrival of the vessel, and
which is so well known among merchants that the underwriters are
bound to take notice thereof, will bind them, and goods insured
in accordance wTith such custom will be covered.10
7 Illinois. — American Central Ins. Hooper v. Hudson River Eire Ins.
Co. v. Rothschild, 82 111. 166; City Co. 17 N. Y. 424; Whitwell v. Put-
Fire Ins. Co. v. Mark, 45 111. 482. nam Fire Ins. Co. 6 Lans. (N. Y.)
Iowa. — Mills v. Farmers' Ins. Co. 166.
37 Iowa, 400. Pennsylvania. — West Branch Ins.
Louisiana. — Power v. Ocean Ins. Co. v. Helfenstein, 40 Pa. St. 289, 80
Co. 19 La. 28, 36 Am. Dec. 665, 666, Am. Dec. 573 ; Perrv County Ins. Co.
per Morphy, J. v. Stewart. 19 Pa. St. 45.
Maine. — Lane v. Maine Mutual Wisconsin. — Sawyer v. Dodge Mu-
Fire Ins. Co. (3 Fairf.) 12 Me. 44, tual Ins. Co. 37 Wis. 503, 504.
28 Am. Dec. 150. England. — British- American Ins.
Man/land.— Planters' Ins. Co. v. Co. v. Joseph, 9 L. C. Rep. Q. B. 448.
Engle, 52 Md. 468. 7a Delaware Ins. Co. v. Wallace,
New Hampshire. — Crombie v. — Tex. Civ. App. — , 160 S. W.
Portsmouth Fire Ins. Co. 26 N. H. 1130.
3S9. 8 Mills v. Farmers' Ins. Co. 37
New York. — Butler v. Standard Iowa, 400.
Fire Ins. Co. 4 Abb. New Cases (N. 9 Brainstem v. Crescent Mutual
Y.) 391; Hoffman v. .Etna Fire Ins. Ins. Co. 24 La. Ann. 589.
Co. 32 N. Y. 405, 88 Am. Dec. 337: 10 Hartshorne v. Union Mutual
2895
§ 1736 JOYCE ON INSURANCE
§ 1736. Goods or merchandises to be described by indorsement:
approval of risks: goods to be thereafter declared and valued:
marine riks.11 — It is no doubt perfectly competent to effect insur-
ances on goods, merchandises, or property agreed to be subsequently
declared or indorsed upon the policy or otherwise, and the policy
may be open or valued, or what is known as a "running policy."
These policies are differently framed; they may be upon such sums
or property from such places and on board such vessels as shall be
agreed upon and indorsed ; or they may stipulate that no shipments
are to be considered or be binding until approved and indorsed; or
that risks are to attach from the time of shipments, which are to be
reported to insurers on receipt of invoices for indorsement ; or that
all sums or the various sums at risk be indorsed, or that the risks
applicable be reported to the underwriters for indorsement as soon
as known to the assured; or that indorsement on the policy are to
be evidence of property at risk; or the premium on risks may be
stipulated to be fixed at the time of indorsement; or other words of
similar import.12 Although a policy of this character may be prac-
tically a new and separate insurance upon each successive parcel of
goods as indorsed,13 nevertheless the object or purpose of such in-
surances is to afford protection under a general policy upon expected
shipments by indorsements, and thus protect all merchandises of
the assured at risk, instead of effecting a particular policy upon each
shipment; and again, the nature and kind of the goods to be shipped
may not be known, or it may not be known that the goods are
shipped until after the loss, as in case of goods expected from abroad.
In many of the decisions the principal point involved is whether
Ins. Co. 36 N. Y. 172, aff'g 5 Bosw. Manufacturers' Ins. Co. 19 Ohio, 452,
(N. Y.) 538; Pratt v. Union Mutual s. c. 17 Ohio, 192; Protection Ins.
Ins. Co. 9 Bosw. (N. Y.) 100. Co. v. Wilson, 6 Ohio St. 553.
11 See § 1576 herein. Pennsylvania. — Newlin v. Ins. Co.
12 California— Wells Fargo & Co. of North America, 20 Pa. St. 312.
v. Pacific Ins. Co. 44 Cal. 397. England. — Langhorne v. Cologan,
Louisiana. — Marx v. National Ma- 4 Taunt. 330; Kewley v. Evan, 2 H.
rine & Fire Ins. Co. 25 La. Ann. 39; Black. 343; Da Costa v. Frith, 4
Douville v. Sun Mutual Ins. Co. 12 Burr. 1966; Ralli v. Janson, 6 El. &
La. Ann. 259. B. 422; Gledstanes v. Royal Ex-
Maryland. — Schaefer v. Baltimore change Assur. Co. 5 Best cv S. 797,
Mutual Ins. Co. 33 Md. 109. 34 L. J. Q. B. 30, 14 Eng. Rul. Cas.
Massachusetts. — Carver County v. 234; Harman v. Kingston, 3 Camp.
Manufacturers' Ins. Co. 6 Gray (72 150, 14 Eng. Rul. Cas. 232. Nearly
Mass.) 214; Kennebec County v. all the above cases are noted in the
Augusta Insurance & Banking Co. 6 text of this section.
Gray (72 Mass.) 204. 13 Hartshorne v. Shoe & Leather
Missouri. — Edwards v. St. Louis Dealers' Ins. Co. 15 Grav (81 Miss.)
Perpetual Ins. Co. 7 Mo. 382. 240 ; Douville v. Sun Mutual Ins. Co.
Ohio.— See Neville v. Merchants' & 12 La. Ann. 159.
2896
DESCRIPTION OF PROPERTY § 1736
the contract has been completed. Other questions, however, are
whether the indorsement may be made after loss; whether the
underwriter is obligated to indorse shipments or give his approval ;
whether he has a right to reject a declaration, etc. The wording of
the contract must necessarily affect its construction and the rela-
tive rights of the parties. The effect of these contracts will, how-
ever, be seen from the cases following in this section.14 In an Ohio
case 15 the policy was an open one on such sums and property from
such places and on board such vessels as should be mutually agreed
upon between the parties and indorsed upon the policy. The point
involved was whether there was a completed contract, there being a
modification of the value to be insured, and it was held that there
was to be no acceptance of the modification. Again, it is held ob-
ligatory upon the underwriters to indorse the shipments notwith-
standing the loss where they are notified within a reasonable time
after the shipment and the insured acts in good faith, although
in such cases the insured cannot, as to any shipments made by them
and coming within the conditions of the policy, wait until he hears
that the ship is lost or in peril and then elect, and in such cases,
upon notification of the insured to the office of the underwriter, the
insurance takes effect from the shipment, and covers the goods lost
or not lost.16 In a Maine case the insurance wras under an open
running policy "lost or not lost" to a specified sum on property on
board vessel or vessels, "with such other risks as may be agreed as
per indorsement herein accepted by this company." The nominal
assured, by virtue of an authorization by the underwriter, indorsed
a risk and filled out a blank certificate in favor of the plaintiff to a
specified sum on certain merchandises on a named vessel, designat-
ing the place from and the destination, and received the premium.
The court decided that the contract was completed.17 In another
case, however, the policy was upon property "lost or not lost on board
vessel or vessels," etc., all sums at risk to be indorsed upon the policy
and valued at the sum indorsed at such a per cent as should be
specified against each indorsement. The underwriter refused to
indorse on the ground that a loss had occurred, and it was held that
the agreement was to effect a new and separate insurance on suc-
cessive shipments by indorsement and an agreed-upon rate of pre-
mium, and therefore the consent of both parties was necessary, and
there was no completed contract.18 If the policy provides for an
14 See also cases cited in the first 16 Carver County v. Manufaetur-
note in this section. ers' Ins. Co. 6 Gray (72 Mass.) 214.
15 Neville v. Merchants & Mann- 17 Massachusetts v. Maine Mutual
facturers' Ins. Co. 19 Ohio, 452, Marine Ins. Co. 61 Me. 537.
overruling 17 Ohio. 192. 18 Hartshorne v. Shoe & Leather
Joyce Ins. Vol. III.— 182. 2897
§ 1730 JOYCE ON INSURANCE
insurance upon "such property in such sums."' etc.. as may be ap-
proved "and entered in the book attached to this policy.'' and that
the risk shall not be binding "until so approved and entered," the
goods are properly described by indorsement and entry in accord-
mice with the stipulations of the contract, and are covered by the
policy by the entry made as specified by the insurer or his authorized
agent.19 In another case the stipulation was that shipments were
qoI to he "considered insured until approved and indorsed on this
policy" by the underwriter, "indorsements valued at the same, pro-
vided they do not vary from the cost more than" a certain per cent.
Indorsements were customarily made of the shipment-, and shortly
thereafter, upon receipt of the invoices, the value and rate were
filled in. After the vessel was overdue it was discovered that, owing
to a mistake in writing in an indorsement, the value of the goods
shipped was not stated, and it was declared that the insurers were
not then obligated to indorse the same, and were not liable.20 Where
treasure and bullion to be shipped by W was insured under an open
or running marine policy, the various sums to be indorsed thereon,
and risks applicable to be reported to the company for indorsement
as soon a- known to the assured, the policy to attach from the load-
ing thereof on board at specified ports, it was held that treasure on
board at one of the specified ports was covered, and that the com-
pany was liable although a loss had occurred and was known to the
parties before indorsement; alt bough it was said in this case that
it was the duty of the insured to report the amount of shipments as
soon as the fact became known to the insured, without regard to the
sources of information.1 It is declared by a learned writer that if
the a.-sured effects a policy on goods to be thereafter declared and
valued, as in case of goods expected from foreign ports, and the kind
and amount are unknown to the assured, and since he may have
no knowledge thereof before the loss, it is not obligatory upon him
to declare the same before the loss, although the effect of not so
declaring will be to make the policy an open, and not a valued,
one.2 It will be observed that the wording of the clause relating to
indorsement is the point upon which rests the determination of the
relative rights of the parties, and that in most of those cases where
Dealers' Ins. Co. 15 Gray (81 Mass.) 20 Sehaefer v. Baltimore Mutual
240. Ins. Co. 33 Md. 109.
19 Marx v. National Marine & Fire x Wells Fargo v. Pacific Ins. Co.
Ins. Co. 25 La. Aim. 39. "No risk 14 Cal. 397.
was to be binding till approved and 21 Arnould on Marine Ins. (Per-
entered. When 'this was done, the kins' ed. 1850) 327. *321; Id. (Mae-
contract of insurance became oper- laehlan's ed. 1887) 315, citing I
ative, and it covered the property, ford v. Hunter, 8 Term Rep. lOn.
whether lost or not Inst, at the time
nt' the abandonment," per Wyley, J.
2898
DESCRIPTION OF PROPERTY §§ L737, L738
the decision was adverse to the claim of the insured it depended
Upon the fact that the contract lacked some essential necessary to
its completion, or that the insured had failed to fully comply with
whai the court by its construction of the requirements of the policy
deemed some condition precedent. Thus, in one can- the modifica-
tion of the value was not accepted; in others the premium was not
fixed, or being fixed the terms were not accepted or the premium
had not been paid or secured. Some of the cases seem to have been
arbitrarily decided, and out of these arbitrarily made decisions
arises a conflict with those cases wherein the courts have endeavored
to follow principle and precedent.
§ 1737. Gunpowder: marine risk. — Where gunpowder forms a
part of the cargo, and is an article notoriously suitable to the market
where it is destined, it will be covered by a policy indorsed "cargo,"
and which makes no exception as to gunpowder, and such article is
"lawful goods and merchandise" under such policy.3 Tt is perti-
nent to this rule to note thai the decision rests upon a principle dif-
fering from that wherein certain specified article- generally known
as "hazardous" or "extra-hazardous" are excluded by a provision
in the policy from its protection, and where the rule would obtain
that the enumeration of designated articles as those which cannot
be kept amounts to a consent that all others may be kept.
§ 1738. House or building: dwelling house. — The word "house,"
as used in a policy of insurance, embraces everything appurtenant
and accessory to the main building and which is a part and parcel
thereof, even though separated therefrom.4 But. in the absence of
proof that it was so intended, a two story frame building and addi-
tions adjoining and communicating does not include a servant's
house one hundred and fifty feet away although connected by a sys-
tem of call bells and exclusively occupied by servants of assured.4*
An incubator building used for the sole purpose of hatching chick-
ens is not a "farm building" within the meaning of those word-, as
used in a statute prohibiting insurances in mutual fire companies
3 Lapene v. Sun Ins. Co. 8 La. insured, and is an article notorious-
Ann. 1, 58 Am. Dee. 668. "We think ly suitable to the market to which
there is nothing in another ground the cargo was destined. It clearly
of defense urged in this court, viz.: eomes within the word 'cargo,' which
Thai the risk was unduly enhanced was indorsed on the policy," per
bv there being gunpowder among the Eustis. C. J.
plaintiffs' goods. The invoice shows 4 Workman v. Insurance Co. 2 La.
that some twenty kegs of powder (0. S.) 510. s. p. 507, 22 Am. Dec.
were on board. We do not find any 141. See §§ 1739, 1744 herein,
exception in the policy as to gun- 4a North British & Mercantile Ins.
powder. It is construed in the gen- Co. v. Tye. 1 Ga. App. 380, 58 S. E.
eral laws, 'lawful goods and mer- 110, 36 Ins. L. J. 1006.
chandise,' under which the plaintiffs
2899
§ 1738 JOYCE ON INSURANCE
on any property other than detached buildings and farm build-
ings.5 So a hog pen and hen house, covered with hoard- and neither
shingled nor battered, are not a building under a representation
that there are no buildings within a specified distance of the prop-
erty insured.6 So it is held competent to show by the testimony of
builders whether structures arc ''brick buildings."7 If a house is
described as a "brick building," the fact that a wall which had
settled has been replaced by wood does not make it a misdescrip-
tion.8 The insurance upon a building applies to the structures as
such, so much so that if it loses its distinctive character and ceases
to exist as a building through some agency other than that of the
peril specified in the policy, it at that moment loses the protection
offered by the insurance. The materials existing separately or in
some other form do not constitute the building.9 But after a build-
in- has been partly destroyed by fire and in that form is again
insured as a building, the company cannot avoid liability under a
claim that the property insured was not a building at the time the
policy was issued, nor can it successfully defend on the ground that
the total loss resulted from both tires.10 A building with a granite
front only and three stories high in the front and rear and one
story high in the middle is a "three-story granite building" within
the meaning of those words in a policy.11 An insurance, however,
upon a stone dwelling-house does not cover a house partly wood
and partly stone.12 And a building which is in fact a hotel is not
covered by insurance as a dwelling house.12a Although insurance
on a farmhouse described as insured's residence is not avoided by
the fact that assured also kept an inn or public house, if the char-
acter of the house was not changed after insurance thereon was
effected, and was then known to insurer's agent.12b And the fact
that a policy on a dwelling house misdescribes the land on which
the dwelling is situated does not affect the risk nor avoid the pol-
50'Neil v. Pleasant Prairie Mu- v. Garlington, 66 Tex. 103, 59 Am.
tual Fire Ins. Co. 71 Wis. 621, 38 Rep. 613, 18 S. W. 337.
N. \V. 345, under Laws Wis. 1885, " Medina v. Builders' Mutual Fire
c. 421, sec. 2. Ins. Co. 120 Mass. 225.
6 White v. Mutual Fire Assur. Co. 12 Chase v. Hamilton Ins. Co. 20
8 Gray (74 Mass.) 566. N. Y. 52, s. c. 22 Barb. 527 (two
7 Mead v. Northwestern Ins. Co. judges dissenting).
7 N. Y. 530, 536. 12a Thomas v. Commercial Union
8 Gerhauser v. North British & Assur. Co. 162 Mass. 29, 44 Am. St.
Mercantile Ins. Co. 7 Nev. 174. Rep. 323, 37 N. E. 672.
9 Nave v. Home Mutual Ins. Co. 12b State Ins. Co. of Des Moines v.
37 Me. 430, 90 Am. Deo. 394. Taylor, 14 Colo. 499, 20 Am. St.
10 Hamburg-Bremen Fire Ins. Co. Rep. 281, 24 Pac. 333.
2900
DESCRIPTION OF PROPERTY § 1738
icy.12c So a policy upon a "frame building and additions thereto
with a shingle roof," occupied "as a dwelling," covers a carriage-
house under the same shingle roof used for keeping therein car-
riages and horses, and also having a room over the carriage part
which was occupied by a servant, said "carriage-house" being sepa-
rated by a plain board partition from the woodshed, which con-
nected it with the kitchen.13 A "one-story" building covers a story
and a half.14 A cellar mentioned in the application is covered,
although not described in the policy, if the policy makes the ap-
plication a part thereof,15 otherwise a cellar will not be considered
as a story of the house.16 The dwelling house of the insured may
mean only one room in which he lives.17 But if a building is
described as "occupied as a machine-shop," when in fact it is occu-
pied for a purpose which makes the risk greater, as where it was
actually occupied as an organ factory, the property will not be
covered ; 18 nor does a policy upon "buildings and fixtures" cover
furniture.19 Where the building is described as "standing de-
tached," it will cover a building seven feet away from other build-
ings, and the words "standing detached" may not be shown to
mean buildings at a greater distance.20 Language in the second
clause of an insurance policy, the first clause of which insures a
building, which covers machinery and all appurtenances and ap-
pliances necessary and used in the owner's business, does not imply
that the building is a manufacturing establishment.1 A contract
is to be construed in the light of circumstances under which it was
made, and a contract of insurance, to run for a period of years,
made upon a building and machinery, then known to be in process
of construction, is applicable to the property when complete as the
parties had contemplated. A description in the policy of the build-
ing insured as a "Sawmill building" does not limit the use of the
property to the purposes of a sawmill.2 If there are two buildings
12c Kansas Farmers Ins. Co. v. 18 Goddard v. Monitor Ins. Co. 108
Saindon, 52 Kan. 486, 39 Am. St. Mass. 56, 11 Am. Rep. 307.
Rep. 356, 35 Pac. 15. 19 Holmes v. Charlestown Marine
18Hannan v. Williamsburgh City & Fire Ins. Co. 10 Met. (51 Mass.)
Fire Ins. Co. 81 Mich. 561, 45 N. 211, 43 Am. Dee. 428.
W. 1122. 20 Hill v. Hibernia Ins. Co. 10
14Eakin v. Home Ins. Co. 1 Tex. Hun (17 N. Y. Sup. Ct.) 26.
Civ. Cas. sees. 1234, 1235. l Home Ins. Co. v. North Little
15Menk v. Home Mutual Ins. Co. Rock Ice & Electric Co. 86 Ark. 538,
76 Cal. 50, 9 Am. St. Rep. 158, 18 23 L.R.A.(N.S.) 1201, 111 S. W.
Pac. 117, 14 Pac. 837. 994.
16 Benedict v. Ocean Ins. Co. 31 2 Frost's Detroit Lumber & W. W.
N. Y. 389. Works v. Millers' Ins. Co. 37 Minn.
17 Friedlander v. London Assur. 300, 5 Am. St. Rep. 846, 34 N. W.
Co. 1 Moody & R. 171. 35.
2901
§ 1739 JOYCE OX INSURANCE
and one is delineated on an insurance map and the other not and
the description refers to said map it will be construed as referring
bo and the policy will cover the building shown by the map and
not the other one.2a
§ 1739. Houses and buildings: connected structures and addi-
tions.— The policy may by express terms include connected build-
ing, structures, or additions; or the term "building, factory, or
warehouse" may by implication include other buildings or struc-
tures so connected with the main building as to be actually a part
thereof, and in the case of factories or other buildings devoted to
particular uses, it may be evident that certain connected buildings
were necessary to the continued occupation of the main building,
and were therefore evidently contemplated as included in the de-
scription as a part of the property intended to be insured, and so
under certain circumstances parol evidence will be admitted that
connected buildings were intended to be included. Thus, where a
policy was effected upon a brick building used as a "tobacco factory
and warehouse," it was held competent to show by parol evidence
that the policy was intended to include a room which was connected
with the main building by bridges and used as a part of the factory.3
So insurance on a grain '"elevator, buildings, and additions" will
extend to and include a building through which all the grain is
received into or discharged from the warehouse, although such
building is only attached to the elevator proper by boards nailed to
both structures and they are two and a half feet apart.4 So a build-
ing described as a "car factory," the policy being upon goods there-
in, includes goods in a wing connected with the main building by
an opening through the wall usually closed by an iron door, where
both the wing and main building are known as the car factory and
are both used for manufacturing cars.5 So a policy on a brick store
will include a wooden shed or awning projected over the sidewalk
supported on pillars sunk into the ground on the farther side and
having rafters extended into the brick wall of the building.6 And
the term "one building" in a policy will include an entire structure
under one common outer wall which is under one management and
2a Bumpus v. American Central Mills) — Ky. — , 119 S. W. 1190, 38
Ins. Co. 108 Me. 217, 79 Atl. 848, 40 Ins. L. J. 871, 873.
Ins. L. J. 1500. See Fair v. Man- 4 CarstfU v. Millers & Manufactur-
h.ittan Ins. Co. 112 Mass. 320; A. A. ers' Mutual Ins. Co. 33 Minn. 90, 22
Grriffin Iron Co. v. Liverpool & Lon- N. W. 6. See also Pettit v. State
don & Globe Ins. Co. 68 N. J. L. 308, Ins. Co. 41 Minn. 299, 43 N. W. 378.
54 Atl. 409. 5 Blake v. Exchange Mutual Ins.
3 Harris v. ^Etna Ins. Co. 1 Cine. Co. 12 Gray (78 Mass.) 265.
(Ohio) 361; Georgia Home Ins. Co. 6 Commercial Fire Ins. Co. v.
v. Mayfield Planing Mills (Hanover Allen, 80 Ala. 571, 1 So. 202.
Fire Ins. Co. v. Mayfield Planing
2902
DESCRIPTION OF PROPERTY § 1739
control and devoted to the same use, although it is a warehouse five
stories high, divided into three compartments on each floor by two
main partition walls, with doors eight feel square connecting the
several compartments on each floor; and a custom of a particular
place to class certain stories as distinct buildings and risks will do1
bind the parties to an insurance effected in another place in tin-
absence of proof that the custom was known to said parties.7 So
an engine-room and its contents located al a distance of twenty-two
feet from the mill, connected therewith by a shaft for transmitting
power and by a spout for carrying shavings, is covered by a policy
upon a planing-mill and addition and machinery therein, especial-
ly where there is no evidence of any other addition, and even though
there be a roadway separating the buildings.8
Again, a storeroom used for family stores and other things used
for family purposes and which is close to an insured dwelling bul
not directly attached to the main building is an "addition" within
the words "dwelling and addition" which are insured.83- So out-
houses will be held included within the word "'additions" under a
policy upon a "frame building and additions" where it appears that
the parties so intended ; for the word "additions" will in such case
be given a broader meaning than that of something attached to the
building.811 And where, in order that a building, which is con-
nected by an enclosed passage way with the main building may be
covered, assurer's agent cancels the policy and issues another on
the "building and its additions adjoining and communicating with
their foundations" it will include said connected structure, espe-
cally so where there is no other building to which "additions"
could apply.80 So a policy on an hotel and additions covers a two
story sample room connected with a covered board walk and used
for storage and for the display of their goods by commercial trav-
elers who are guests of the hotel. 8d A carriage house and stable is
also covered by insurance on "one two-story frame dwelling and
additions thereto, with shingle roof" used as a dwelling including
the foundation, gas and water pipes, etc. — where they are under the
7 German-American Ins. Co. v. Mutual Ins. Co. 133 Mo. App. 584,
Commercial Fire Ins. Co. 95 Ala. 113 S. W. 659, 38 Ins. L. J. 74.
469, 16 L.R.A. 291, 21 Ins. L. J. 626, n Ideal Pump & Manufacturing
11 So. 117. Co. v. American Central Ins. Co. 167
8 Home Mutual Ins. Co. v. Roe, 71 Mo. App. 566, 152 S. W. 408.
Wis. 33, 36 N. W. 594 (annotated 8c Shepard v. Germania Fire Ins.
case); see also Georgia Home Ins. Co. 165 Mich. 172, 33 L.R.A.(N.S.)
Co. v. Mayfield Planing Mills (Han- 156, and note, 130 N. W. 626, 40 Ins.
over Fire Ins. Co. v. Mayfield Plan- L. J. 941.
in? Mills) — Ky. — , 119 S. W. 8d Interstate Fire Ins. Co. v. Nel-
1190, 38 Ins. L. J." 871. son, 105 Miss. 437, 62 So. 425.
8a Tate v. Jasper Countv Farmers'
2903
§§ 1740, 1741 JOYCE ON INSURANCE
same shingle roof that covers the dwelling, and are partitioned off
only by a single row of studding, while the second story is divided
by a different arrangement of partitions, and over the carriage
house is a bedroom occupied by a hired man, which is supplied
with gas and other conveniences, and furnished like other parts of
the house.86 And where the main floor of a building used as a
stable is extended by an excavation, partly of unoccupied higher
ground, and planked over, and is partly under another building on
higher ground, it is within the intent of the words "additions at-
tached thereto," as the word "attached" means ''connected with"
or "joined to."8f
§ 1740. Household furniture: hotel furniture. — "Household furn-
iture," in the absence of restrictive words in the policy, covers goods,
vessels, utensils, and such jther articles and property which are
reasonably necessary, useful, and convenient for housekeeping,9 in-
cluding subsequently acquired furniture.9a And in marine policies
household furniture may sometimes be covered under the designa-
tion of "cargo."10 So insurance upon a hotel and its furniture.
covers furniture stored and being used in the business of the hotel,
and the latter is not within the exception in the policy of "goods
held on storage."11 And within the same principle furniture in
a dwelling house describes and covers goods stored in the attic and
occasionally used when needed in the house.12
§ 1741. Live stock: marine risks. — Live stock is not- included
under the general description of "cargo" or "goods," for such prop-
erty is the subject of particular insurance, except in case of a usage
to that effect,13 Such property is, however, generally insured in
England by a declaration in the policy specifically describing such
property by kind and number of each kind shipped, or by a specific
valuation of the property as such under an annexed statement made
a part of the policy.14 And as a rule, in this country such property
8eHannan v. Williamsburg City "Continental Ins. Co. v. Pruitt,
Fire Ins. Co. 81 Mich. 556, 9 L.R.A. 65 Tex. 125.
127, 45 N. W. 1120. 12 Clarke v. Firemen's Ins. Co. 18
"Montana Stables v. Union Assur. La. (O. S.) 431.
Soe. of London, 53 Wash. 274, 101 Bank furniture and fixtures covers
Pac. 882. iron safe. Mecca Fire Ins. Co. v.
9 Reynolds v. Iowa & Nebraska First State Bank of Hamlin, —
Ins. Co. 80 Iowa, 563, 46 N. W. 659. Tex. Civ. App. — , 135 S. W. 10S3.
Carpets and bed clothing are 13 Allegre v. Maryland Ins. Co. 2
household furniture. Patrons Mu- Gill & J. (Md.) 136, 20 Am. Dec.
tual Aid Soc. v. Hall, 19 Ind. App. 424; Wolcott v. Eagle Ins. Co 4
118, 49 N. E. 279. Pick; (21 Mass.) 429; Chesapeake
9a Delaware Ins. Co. v. Wallace, I ;. Co. v. Allegre, 2 Gill. & J. (Md.)
— Tex. Civ. App. — , 360 S. W. 1130. 164.
10 Vasse v. Ball, 2 Dall. (2 U. S.) 14 Lawrence v. Aberdeen. 5 Barn.
270, 1 L. ed. 377. & Aid. 107, 14 L. g. Rul. Cas. 296:
2904
DESCRIPTION OF PROPERTY § 1742
ought to be particularly represented to the underwriters and de-
scribed in the policy, as such a rule requiring such specific designa-
tion would at least seem reasonable, for the underwriter is entitled
to know the extent of the risk he assumes.15
§ 1742. Locality important in fire risks. — Asa rule, locality and
place are essential, but in determining how far locality is important
in describing the property insured reference must be had to the
character of the property, to a consideration of what is the primary
object in effecting the insurance, and also to the fact to what uses
the property insured would in all reasonable probability be put. So
usage may be a controlling factor in the matter, as may also be the
fact, in the case of certain kinds of property, whether the removal
thereof is permanent or temporary. Where the policy is upon a
class of property the risk upon which, from its particular character,
depends so much upon place or location that the same constitutes
an essential element of the contract, as in the case of a stock of
goods or furniture "contained in" a specified building, then such
property will, as a rule, not be covered, if changed or removed to
another place or locality. The insurer for various reasons in cases
of this character might refuse to accept the risk altogether, or might
accept it at an enhanced premium if he had known that its location
was other than that designated, and the right of the insurer to know
exactly what risk he is undertaking cannot be denied. But if the
primary object is to insure the property described, and the character
of the property is such as to warrant that presumption, then its
exact location may be a subordinate matter of more or less impor-
tance.16 The above distinctions will, however,' clearly appear fin mi
Gabay v. Lloyd, 3 Barn. & C. 793. Marine Ins. Co. 48 Iowa, 349, 22 Am.
See Brown v. Stapylton (Staple- Rep. 249.
ton) 4 Bing. 119. Maine. — Bradburv v. Fire Ins. As-
15 See Wolcott v. Eagle Ins. Co. soc. 80 Me. 396, 6 Am. St. Rep. 219,
4 Pick. (21 Mass.) 429, 434, per Put- 15 Atl. 34.
nam, J., and cases cited under first Massachusetts. — Sampson v. Se-
note to this section. For insurance eurity Ins. Co. 133 Mass. 49.
of live stock under fire risks, see § Michigan. — Wilson v. Farmers'
2791 herein. Mutual Ins. Co. 150 Mich. 545, 121
16 United States. — Severance v. N. W. 284.
Continental Ins. Co. 5 Biss. (U. S. New Jersey. — Trade Ins. Co. v.
C. C.) 156, Fed. Cas. No. 12,680. Barracliff, 45 N. J. L. 543, 46 Am.
Colorado. — German American Ins. Rep. 792.
Co. v. Messenger, 25 Colo. App. 153, Pennsylvania. — Haws v. Fire As-
136 Pac. 478. soc. 114 Pa. St. 431, 7 Atl. 159.
Illinois. — Towne v. Fire Assoc, of Rhode Island. — Lyons v. Provi-
Philadelphia, 27 111. App. 433. dence-Washington Ins! Co. 14 R. I.
Iowa.— McCluer v. Guard Fire & 109, 51 Am. Rep. 364.
2905
§ 1743 JOYCE ON INSURANCE
an examination of the cases under this and the sections next fol-
lowing. A policy upon a house insured as the house of A on a cer-
tain road does not cover a house of A located in another place,
although he resided in the latter place and the agent supposed that
he was insuring the house in which he resided.17 So where the
property is specified a- located in a certain building, it is not covered
if situate in an adjoining building, nor can the policy he reformed
SO as to protect such goods SO located.18 A policy upon an oilmill
for crushing linseed and grinding dyewood, and upon fixed ma-
chinery and grinding gear therein, and which also insure- one log-
wood house in which chopping dyewood is performed, does not cover
machinery and gear in the logwood house.19 Again, if the building
insured is described as located at a certain place and an insurance
map is referred to in aid of the description, but there are twTo build-
ings located as described and only one is within the map designation
that one will be held to be the one referred to and covered, so that
a verdict for the loss of the other building will not be sustained.19*
And where the insured property is situated on the northwest quarter
of a certain section of land, instead of the northeast quarter thereof,
as described in the policy, the variation is not material, and insured
is not compelled in case of loss to seek a reformation of the policy
in equity before he can recover in a court of law.m So the locality
of a launch with reference to distance from exposing buildings, at
the place where it was laid up, is important where the launch is
insured against and is destroyed by fire.190
§ 1743. Locality: property "contained in." — A policy or mer-
chandise "contained in letter 'C,' Patterson stores," does not cover
goods in the same building in section "A," said stores consisting of
a warehouse divided into sections by fireproof walls designated by
letters of the alphabet, such description of locality being a war-
ranty.20 So an insurance upon a brick "pottery building" and upon
machinery, stock, etc., "contained in said building, situate" on D
street near the F railroad, covers only the pottery building and its
Texas.— British American Assur. Ins. Co. 108 Me. 217, 79 Atl. 848, 40
Co. v. Miller, 91 Tex. 414, 39 L.R.A. Ins. L. J. 1500.
545, 66 Am. St. Rep. 901, 44 S. W. 19b State Ins. Co. of Des Moines
60. v. Sehreek, 27 Neb. 527, 20 Am. St.
On location of movable property, Rep. 626, 6 L.R.A. 524, 43 N. W. 340.
see note in 26 L.R.A. 237, 267. 19c Macatawa Transportation Co.
17 Mead v. Westchester Fire Ins. v. Firemen's Fund Ins. Co. 179 Mich.
Co. 3 Hun (N. Y.) 608. 443, 146 N. W. 396.
18 Severance v. Continental Ins. 20 Brvce v. Lorillard Fire Ins. Co.
Co. 5 Biss. (U. S. C. C.) 156, Fed. 55 N. Y. 240, 14 Am. Rep. 249, s. c.
Cas. No. 12,680. 46 How. Pr. (N. Y.) 498, 3 Jones
19llare v. Barstow, 8 Jur. 928. & S. 394.
19a Bumpus v. American Central
2906
DESCRIPTION OF PROPERTY § 171:5
contents.1 If a policy describes the property as contained in a build-
ing of a certain kind, parol evidence may sometimes be resorted to
to determine whether the building answers the description.2
goods insured as being in "the store part" are not covered when
located elsewhere,8 and goods in a tavern are not goods in a "stew
Goods described as in a building used as a furnace-house in the rear
of number 82 on a specified street are held not covered when in a
storehouse in the rear of numbers 82 and $4 of said street.6 In a
policy on goods "contained in" a house at a specified number on a
certain street, the exact locality is important.6
Locality is also especially important where the policy insures per-
sonal property "while contained in" and "not elsewhere."8" So
where a standard fire policy insures certain merchandise "while
located and contained as described herein and not elsewhere," fol-
lowed by a description of the location of the building and "on stock
of merchandise" in a certain amount, "only while contained in the
building" "above described," assured has no cause of action unless
at the time of the fire occasioning a loss the insured merchandise
was contained in said building.8* It is not necessary, however, in
insuring property that its locality be fixed by such technical, legal
descriptions as are ordinarily employed in conveyances of real prop-
erty; and this applies and it is therefore not material, in a fire
policy insuring a dwelling house and personal property therein
that the block in which the dwelling was situated was described
as being in Harlington addition to Mt. Tabor, when there is no
such addition, and the property was in Harlem addition to East
Portland.60 So where through an error of a broker, a building,
the contents of which were insured, is described as located at a cer-
tain corner when it is on another corner, and there is no other
building on any of the four corners, the insurance is not avoided,
as the rule applies of rejection of the erroneous part of the descrip-
1 Hews v. Atlas Ins. Co. 126 Mass. 6a L'Anse, Village of, v. Fire
3S9. Assoc, of Phila. 119 Mich. 427. 75
2 Medina v. Builders' Mutual Fire Am. St. Rep. 410, 43 L.R.A. 838, 7->
Ins. Co. 120 Mass. 225. N. W. 405; British American Assur.
3Bovnton v. Clinton & Essex Mu- Co. v. Miller, 91 Tex. 414, 39 L.R.A.
tual Ins. Co. 16 Barb. (N. Y.) 254. 645, 66 Am. St. Rep. 901, 44 S. W.
4 Prudhomme v. Salamander Ins. 60. See Rev. Stat. Wis. 1913, sees.
Co. 27 La. Ann. 695. 1941-43.
5 Eddy St. Foundry v. Camden 6b Miller v. Connecticut Fire Ins.
Stock & Mutual Ins. Co. 1 Cliff. (U. Co. — Okla. — , 151 Pac. 605.
S. C. C.) 300, Fed. Cas. No. 4,277. *> Baker v. State Ins. Co. 31 Oreg.
6 Lyons v. Providence-Washington 41, 65 Am. St. Rep. 807, 48 Pac. 699.
Ins. Co. 14 R. I. 109, 51 Am. Rep.
364, rev'g 13 R. I. 347, 43 Am. Rep.
32.
2907
§ 1744
JOYCE ON INSURANCE
tion in case of inaccuracies, if there is enough left to identify the
property.64 And if the location of personal property is misdescribed
by insurer's agent with knowledge of the facts, the assured without
asking for reformation of the policy, may, it is held, so allege the
facts in an action to recover for a total loss, as to entitle him to
equitable relief.66 Again, malt "contained in" a warehouse covers
malt not then therein but subsequently shipped thereto.6' So
smoked meats taken from a smokehouse to a storage-room as fast
as they are cured are contents of the smokehouse within the mean-
ing of a policy in separate sums upon a butcher shop and its con-
tents, and the smokehouse and its contents, where it was the under-
standing of the parties that the smoked meats so taken out for
storage were properly insured as contents of the smokehouse; and
recovery may be had therefor when burned with the butcher shop,
although the smokehouse is not burned. 6g
§ 1744. Locality: property "contained in" connected or adjoining
buildings: new buildings substituted for old. — The property may be
so described that it is evident from the character of the risk or the
nature and uses of the property that it was intended that the insur-
ance should extend to and cover property in connected or adjoining
M Carmen v. Law Union & Rock not void because building used by
Ins. Co. Ltd. 144 N. Y. Supp. 499, others, etc).
159 App. Div. 493, 43 Ins. L. J. 245. Missouri.— Smith J. Sidney & Son
See also Shivers v. Farmers' Mutual v. Phoenix Ins. Co. 181 Mo. App.
Fire Ins. Co. 99 Miss. 744, 55 So. 455, 168 S. W. 831 (grain and seeds
965, 40 Ins. L. J. 1706; State Ins. while contained in elevator and in
Co. of Des Moines v. Schreck, 27 cars on side track within certain dis-
Neb. 696, 6 L.R.A. 524, 43 N. W. 340. tance from elevator, covers cars
6oiEtna Ins. Co. v. Brannon, 99 within distance, but certain others
Tex. 391, 89 S. W. 1057, 2 L.R.A. not covered).
(N.S.) 548, and note. Pennsylvania. — Western & Atlan-
6f Johnson v. Stewart, 243 Pa. 485, tie Pipe Lines v. Home Ins. Co. 145
90 Atl. 349. Pa. St. 346, 27 Am. St. Rep. 703,
6*Graybill v. Penn Twp. Mutual 22 Atl. 665 (oil while contained in
Fire Ins. Co. 170 Pa. 75, 29 L.R.A. tanks on certain land; removed by
55, 32 Atl. 632. flood; policy not avoided) ; Haws v.
For other instances in support of St. Paul Fire & Marine Ins. Co. 130
the text under this and § 1742, see Pa. 113, 2 L.R.A. 52, 18 Atl. 621
the following cases : (colt killed by lightning while in
Indiana. — Farmers' Fire Assoc, v. field; not covered).
Kryder, 5 Ind. App. 430, 51 Am. St. Wisconsin. — Rosenthal v. Insur-
Rep. 284 (barn and contents; no lia- ance Co. of North America, 158 Wis.
bility for horses killed by lightning 550, 149 N. W. 155; Faust v. Amer-
when not in barn). ican Fire Ins. Co. 91 Wis. 158, 51
Maine. — Robinson v. Pennsylvania Am. St. Rep. 876, 30 L.R A 7S3 64
Fire Ins. Co. 90 Me. 385, 38 Atl. 320, N. W. 883 ("while contained there-
27 Ins. L. J. 36 (on property in car- in" applh i to merchandise kept in
riage house buildings; contained in: trade in the stoic).
2908
DESCRIPTION OF PROPERTY § 1744
buildings. This is especially true in cases of insurances upon man-
ufactories and their contents, or where the buildings are used in a
special business, and are so constructed with reference to the par-
ticular purpose for which they were intended thai although they
are separate structures, yet together they constitute one structure
within the intent of a description in an insurance policy. Manu-
factories and structures of the latter class are generally within one
inclosure, or so connected with each other that the one is in reality
a part of the other, both being used together for a common purpose,
the use of the property in one being necessarily incident to the use
of that in the other.7 Thus, where the property was described as a
"frame steam sawmill" situate, etc., "boiler, engine, machinery, and
belting contained therein/' the insurance covers a planing machine
in the building twenty-five feet distant from the other machinery,
but located upon the same floor, connected therewith by belting
and plainly visible.8 So grain in an elevator covers grain in an
adjacent annexed building, both being connected by passage-ways
and operated as one elevator.9 And in the case where "chair, lum-
ber, and such other stock as is usually used in a chair factory" was
insured as "contained in" a designated factory situate, etc., it was
held that chair material was included, although in an engine-house
ten feet in the rear, but connected by a platform eight feet wide
and by belting. The chair material was in a drying-room in the
second story of the engine-house.10
Where a policy described the property as "contained in" a new
frame barn, wagon, and wareroom situate, etc., it was held not to
cover goods and merchandises, contained in a brick addition to the
storeroom erected after the policy was issued, although such addi-
tion covered a place where part of the barn had stood at the time
the insurance was effected, and which part had been removed for
the additional structure.11 So an insurance on barns and contents
of "barn buildings" does not cover grain, tools, etc., removed to a
subsequently erected barn, in the absence of waiver by or estoppel
against insurer; and whether or not such a description includes by
7 Georgia Home Ins. Co. v. May- 9 Pettit v. State Ins. Co. 41 Minn.
field Planing Mills (Hanover Fire 299, 43 N. W. 378. See also Cargill
Ins. Co. v. Mayfield Planing Mills) v. Millers' & Manufacturers' Mut.
— Ky. — , 119 S. W. 1190, 38 Ins. Ins. Co. 33 Minn. 90, 22 N. W. 6.
L. J. 871, 874. See Liddle v. Market 10 Liebenstein v. Baltic Fire Ins.
Fire Ins. Co. 4 Bosw. (N. Y.) 179; Co. 45 111. 301. Contra, Liebenstein
Blake v. Exchange Mutual Ins. Co. v. iEtna Ins. Co. 45 111. 303.
12 Gray (78 Mass.) 265; Sampson v. n Lycoming County Fire Ins. Co.
Security Ins. Co. 133 Mass. 49, and v. Updegraff, 40 Pa. St. 311.
cases cited under this section.
8 James River Ins. Co. v. Merritt,
47 Ala. 387.
2909
§ 174 I JOYCE ON INSURANCE
insurer's consent the content? of said newly erected liarn is a ques-
tion for the jury.lla In another ease it appeared that at the time
the policy took effect an insured clubhouse including the kitchen
was a <in-,de compact building, and there was also insurance on the
Hock (if wines, liquors, etc., "all while contained in" said "club-
house building and additions." A permit by insurer was to cover
the building of a new kitchen in place of the attached old one. hut
in doing so the old one was detached and removed although it
remained on assured's grounds. "While it was so standing, with an
exposed side out. it was struck by lightning and burned. Jt was
held that no recovery could be had.llb
Again, where the primary object is to insure property described
within certain limits, its exact location is a subordinate matter.12
It is incumbent, however, upon assured in seeking a recovery upon
a policy for a loss to bring his case by proper allegations and proof
within the provision ''while contained in the building and its addi-
tions above described." 12a
A grain separator on a vacant lot diagonally across the street is
covered by a policy on a stock of farm implement business includ-
ing that in a building and additions adjoining, where said lot is
the only adjoining place which will come within the policy terms;
especially so where insurer's agent had knowledge of the existence
of the goods in said place and acquiesced. 12b In another case a
policy insured machinery, tools and appliances, "boilers and con-
nections," etc., used by assured, lumber, etc.. and all other building
material while contained in a one-story frame metal roof building
"its additions" thereto attached, and ''while stacked in yard" "with-
in one hundred feet of above described mill building, situate,'' etc.,
and "occupied by assured as a saw and planing mill." It was held
that a brick structure located twenty-seven feet away, containing
the boilers and connected with said planing mill by steam pipes
and a conduit for shavings and chips, constituted an "addition''
and was covered, as was also building material situate within one
hundred feet of the boiler house or "addition." but over that dis-
tance from the mill building itself.120 So a brick ''building, in< Lud-
lla "Wilson v. Farmers' Mutual 12b German American Ins. Co. v.
Fire Ins. Co. 15G Mich. 545, 121 N. Messenger, 25 Colo. App. 153, 136
W. 284. Pac. 478.
llbEvanston Golf Club v. Home 12c Georgia Home Ins. Co. v. May-
Ins. Co. 119 Mo: App. 175, 95 S. W. field Planing Mills (Hanover Fire
980, 35 Ins. L. J. 958. Ins. Co. v. Mayfield Planing Mills)
12 Meadoweraf I v. Standard Ins. — Kv. — , 11!) S. W. 1190, 38 Ins.
Co. (il Pa. Si. dl. L. J. 871, 874. See Hum,. Mutual
12a German Alliance Ins. Co. v. Ins. Co. v. Roe, 71 Wis. 33, 36 N.
Lee, — Okla. — 151 Pac. 642. W. 594.
2910
DESCRIPTION OF PROPERTY § 1744
ing frame addition" and occupied by assured "as wood turners and
manufacturers" and insuring machinery and material "while con-
tained in the above described building" covers the frame addition
attached and in which is the machinery and shops, but does not
include another building about twenty feet away which with its
contents of lumber and material was destroyed. 12d
Although a storeroom constitutes an "addition" to a dwelling
house, and is accordingly covered by the insurance, still the con-
tents thereof are not protected by the policy where it only specific-
ally mentions "the contents of said dwelling."126 Again, where a
policy was upon a stock of varnish, etc., "all contained in or at-
tached to the buildings, additions and extensions, situate," etc.,
"privileged to do such work and to use such materials as are usual
in the business of a varnish warehouse," it was decided that it was
intended that the building insured was to be used as a varnish
warehouse but that contiguous sheds or buildings could not be con-
sidered as additions or extensions and their use could not be in-
cluded in the term "varnish warehouse;" and, although they were
used in the manufacture of varnish, still the word "warehouse"
could not be construed to cover the manufacturing end of the busi-
ness, so that no recovery could be had for loss by fire in any such
adjacent buildings.12* So where a policy reads "in a ginhouse" and
"in additions thereto attached" it will be construed against in-
surer.12g
i2d Franklin Fire Ins. Co. v. Hel- some distance from mill held inelud-
lerick, 20 Kv. L. Rep. 1703, 49 S. W. ed and covered) ; Bovd v. Mississippi
106G, 28 Ins. L. J. 1034. Home Ins. Co. 75 Miss. 47, 1 Miss.
126 Tate v. Jasper Countv Farmers' Dec. (No. 1) 20, 21 So. 708, 26 Ins.
Mutual Ins. Co. 133 Mo. App. 584, L. J. 532 ("form for gin houses and
113 S. W. 659, 38 Ins. L. J. 74. contents" pasted on policy insured
12f Leavitt v. National Fire Ins. cotton and cotton seed "in cotton
Co. 151 N. Y. Supp. 71, — App. house adjacent to gin." followed in
Div. — , 45 Ins. L. J. 357. print by words "all while contained
12g Exchange Underwriters Agency in the above-described gin house
of The Royal Exchange Assur. v. building;" policy held to be on cot-
Bates, 195 Ala. 161, 69 So. 956. ton, etc., in said building and build-
For other instances see also the ing was not insured) ; Still v. Con-
following cases: Bickford v. iEtna necticut Fire Ins. Co. 185 Mo. App.
Ins. Co. 101 Me. 124, 63 Atl. 552 550, 172 S. W. 625 (frame barn and
(hay, carriages, etc., "contained in frame barn building covers silo; rule
frame building and addition" situ- applied as to additions, connected
ate, etc., and "occupied as a livery buildings, etc., devoted to one gen-
and sale stable" connected building eral common purpose being one
held an "addition"); Wolverine building; tornado policy); Meri-
Lumber Co. v. Phoenix Ins. Co. 145 wether v. Phenix Ins. Co. 137 Mo.
Mich. 558, 108 N. W. 1088 (lumber App. 38, 119 S. W. 535 (electric
"in mill building." and "in mill sheds motor and connections "all while
adjoining said mill building;" sheds contained in the above described
2911
§§ 1745, 1746 JOYCE ON INSURANCE
§ 1745. Locality: "contained in:" goods in different parts of
building. — [f there is nothing in the policy nor in any plan or other
paper constituting a part of the contract to show that the descrip-
tion was intended to limit the location of the property insured to a
particular part of the building, it will not be so limited, and a clause
providing againsl removal of the goods will not in itself be sufficient
to constitute such a limitation, and this rule applies even though
the property be placed and located in stores in said building other
than those in which they were situate when the policy wa.s issued.13
In a burglary insurance case there was a limitation of liability if
assured was the occupant of an apartment in a flat-house and the
goods were in a locked storeroom in the same house provided for
the use of assured by the landlord. The goods or articles stolen
were, however, in a basement room partitioned off and used by
tenants, and assured used said room for laundry purposes, for cook-
ing at times, for storing food, etc., and also for storing winter
clothing and household goods or materials when not in use. It was
held that the limitation of liability clause did not apply.13a
§ 1746. Locality: "contained in: " removal of goods from a speci-
fied location: permanent removal. — If from the terms of the policy
or by reason of the plan or other paper constituting a part of the
contract it is evident that the description was intended to limit the
location of the property insured to a particular part of the build-
ing, it will be so limited. Thus, where the policy is upon goods
"in the store part," they are not covered when removed to the
second and third stories of the building, said locality not being the
"store part." 14 Nor are goods, insured as "contained in" a dwell-
ing house, covered when removed to a barn.15 So tools, pumps, etc.,
quartz mill building" which with ad- for this claim. This is a case of con-
ditions was insured; motor of dif- tract, and the question is what eon-
i'erent size in detached power house tract the parties have made. For
not covered). some purposes the law regards a
13 Fair v. Manhattan Ins. Co. 112 barn within the curtilage as part of
Mass. 320 ; West v. Old Colony Ins. the dwelling house, but it is not prop-
Co. 9 Allen (91 Mass.) 316. crly so regarded, and it must be very
13a Michaels v. Fidelity Casualty rare indeed that in a contract it is
Co. of N. Y. 128 Mo. App. 18, 105 treated as such. It certainly was not
S. W. 783. so treated in this case. There were
14 Boynton v. Clinton & Essex Mu- two classes of insured property, and
tual Ins. Co. 16 Barb. (N. Y.) 254. the class to which the goods in ques-
15 English v. Franklin Fire Ins. lion belonged was insured as situated
Co. 55 Midi. 273, 54 Am. Rep. 377, in a described building, which the
21 N. W. 340. "It is claimed for the policy designates as the dwelling-
plaintiff that the barn in this case house, and the description makes it
may be considered a part of the very clear that no other building was
dwelling house, it being within the understood to be included. The par-
curtilage. But there is no ground ties certainly did not understand that
2912
DESCRIPTION OF PROPERTY § 17 ie
described as "contained in" a certain building situate, etc. are not
protected by the policy when removed to another building thirty
feet away.16 And the words "contained in" as applied to rolling
stock of a railroad company in car and engine houses are not mere-
ly descriptive of the cars and engines covered, but are words of lim-
itation intended to limit the risk on that property to the time dur-
ing which they are actually within the car and engine houses."
The rule above stated is especially applicable to cases where it is
evident that the removal is intended as a permanent one, as is
clearly illustrated by a case of removal of household goods from
the place where located when insured to another residence, there to
be used by the insured.18
The rule also applies to prohibit the removal of persona] property
without written consent therefor where such permission is a condi-
tion precedent to the continuing validity of the policy;18* and re-
moval without approval, as required under the by-laws, of the secre-
tary of a mutual company relieves the insurer from liability. 18b So
a removal of a stock of goods to a new town contrary to the policy
provisions, will avoid the policy in the absence of waiver or estop-
pel;180 but insurer may be so far charged with notice and knowledge
on the part of its agent as to preclude it, by waiver or estoppel, from
defending in such cases of removal an action on the policy to re-
cover for the loss;18d this also applies even though the rate of pre-
mium is greater in the new location than in the old, when insured
agreed to pay the difference;186 but especially does the removal not
avoid the insurance where such agent consents thereto, cancels the
old policy, issues a new one covering the property in its new loca-
tion, for a larger amount, and charges an increased rate of pre-
in insuring- the household goods, etc., Co. 162 111. App. 202, 42 Nat. Corp.
in the dwelling house, and also horse, Rep. 522.
buggies etc., and barn tools, that the 18a Pringle v. Spring Garden Ins.
horse, buggies, and barn tools were Co. 205 Mass. 88, 91 N. E. 209.
in the dwelling-house. . . . We 18b Bready v. Farmers' Mutual
find the contract to be that defend- Eire Ins. Soe. (Pa.) 15 Mont. Co. L.
ant will be responsible for the loss Rep. 43.
by tire of these goods while they re- 18c Taylor-Baldwin Co. v. North-
main in the dwelling house, but not western Fire & Marine Ins. Co. 18
™hen out of it," per Cooley, C. J. N. Dak. 343, 122 N. W. 396, 39 Ins.
16 Harris v. Canadian Ins. Co. 58 L. J. 985; Delaware Ins. Co. v. Wal-
lowa, 236, 5 N. W. 124. lace, — Tex. Civ. App. — , 160 S. W.
17 Annapolis Elk Ridge R. R. Co. 1130.
v. Baltimore Fire Ins. Co. 32 Md. 37, 18d Drver v. Security Fire Ins. Co.
3 Am. Rep. 112. — Iowa, — , 82 N. W. 494; Cooper
18 Lyons v. Providence-Washing- v. German American Ins. Co. 96
ton Ins. Co. 14 R, I. 109, 51 Am. Minn. 81, 104 N. W. 687.
Rep. 364, rev'g 13 R. I. 347. 43 Am. 18e Cooper v. German American
Rep. 32. See also Krol v. Royal Ins. Ins. Co. 96 Minn. 81, 104 N. W. 687.
Jovce Ins. Vol. III.— 183. 2913
§ 1747 JOYCE (>N [NSURANCE
mium.18' Again, though a policy insuring personal property
against destruction by fire contains a rider granting permission to
remove such property to another building, and that the policy shall
attach to and cover all property in both Locations during the re-
moval, if the property is removed and stored in another building,
with a view to its subsequent removal to the building designated in
the rider, such property is not covered by the policy, and no recov-
ery can be had for its loss from the peril insured against.186 And
an insurance on the "contents" of a building, describing them in
no other way. will not cover the article- then contained in the build-
in-, after they are removed and stored elsewhere.1811
§ 1747. Locality: temporary removal of property from specified
location. — In considering the effect upon the risk of a removal, an
important consideration is that of the character of the property,
and the uses which it must be presumed it was contemplated that
the property would in all reasonable probability he subjected to
during the period of insurance, and in connection with this fact
another point is involved, and that is. whether the removal is per-
manent or temporary. But the mere fact that the removal is a
temporary one, when its character and use does not warrant it, ought
not of itself to protect property insured when removed and situate
at the time of loss in another place than that specifically desig-
nated. In marine risks usage may become another important
factor in determining the right to change a designated locality.
Accordingly, furniture temporarily stored and situate at the time
of the loss in a building other than that designated is not covered.19
But wearing apparel which with other articles is insured as con-
tained in a certain "dwelling house," and which in the course of its
ordinary use and while being worn away from the premises is de-
stroyed or damaged, has been held to be covered by the policy.80
18f Weston v. American Ins. Co. are words of description of the prop-
1!)] Mo. App. '282, 177 S. W. 792,46 erty insured, indicating- the place of
Tns. L. .1. 345. deposit when not in ordinary use.
18& Palatine Ins. Co. v. Kehoe, 197 The character of the property in-
354, L25 Am. St. Rep. 375, 83 sured must be considered in deter-
X. E. 866. mining the true construction of the
18h Benton v. Farmers' Mutual policy. The household furniture is
Fire Ins. Co. 102 Mich. 281, 26 used only in the dwelling. It is
L.E.A. 237, 60 N. W. 691. proper to infer that the parties to
19 English v. Franklin Fire Tns. the contract intended (he risk should
Co. 55 Mich. 273, 54 Am. Rep. 377, attach to it only when in the building
2] X. W. 340. specified. But wearing apparel,
20 Longueville v. "Western Assur. when used, must of necessity be worn
Co. 5] Iowa, 553, 33 Am. Rep. 146, sometimes away from the dwelling.
2 X. W. 394. "The words 'contained Of course, the use of the apparel
in the two-story frame dwelling,' etc., away from the dwelling must be an
2914
DESCRIPTION OF PROPERTY § 1717
But even though insurer's agent had knowledge ilia) assured was
accustomed to take his family away periodically for a bemporar
stay, still it is decided that insurance on wearing apparel, jewi
satchels, trunks, books, etc., "while contained in" a specified build-
ing, does not cover the property when located at another place where
the insured was temporarily staying with his family.208 So a ship's
furniture which is temporarily placed on shore in a storehouse
while the ship is being repaired is covered under a usage wan-ant-
ing such temporary removal.1 But the temporary removal of cars
and engines from ear and engine houses, even for a regular trip
upon the road, will not protect them where the policy limits the
risk by the words "contained in" such buildings.2 And a policy of
insurance on a steam fire engine, hose pipe and hose cart, whili
located and contained in the fire engine house, "and not elsewhere/'
does not cover such property while being used in attempting to
extinguish a fire several hundred feet from that building.28.
There are several cases wherein the courts have considered the
character of the property and the use contemplated, and have held
that horses have been covered by the policy although not in the
place designated by the policy, as in a case where a horse was killed
while being used in the ordinary course of business ai a place other
than that specified in the policy, even though the animal was pur-
chased after the policy was issued.3 And the same ruling was made
when the horse was lost while in the barn of a hotel ai which the
insured had stopped over night while hauling grain to market.4
ordinary use, and the dwelling must 2aL'Anse v. Fire Assoc, of Phila.
be the place of deposit for the ap- 119 Mich. 427, 43 L.R.A. 838, 78 N.
parel when not in use. The policy, W. 465.
therefore, does not contemplate that 3 IMills v. Farmers' Ins. Co. 37
the insured may take a journey or Town, 400; American Central [ns.
sleep away from his dwelling; thus, Co. v. Haws (Pa.) 11 Atl. 107. See
when the apparel is not worn, keep- also Haws v. Fire Assn. of Phila-
ing it in a place of deposit other delphia, 11 1 Pa. St. 431, 7 Atl. 159;
than his own dwelling," per Beck, C. Trade Ins. Co. v. Barracliff, 45 N. • '.
J. See also Noyes v. Northwestern L. 543, 46 Am. Rep. 792.
Mutual Ins. Co. 64 Wis. 415, 54 Am. 4 Peterson v. Mississippi Valley
Rep. 631, 25 N. W. 419, and cases Ins. Co. 24 Iowa, 494, 95 Am. Dee.
cited therein. <1S. But examine Wildey v. Farm
20a British America Assur. Co. v. Mutual Fire Ins. Co. 52 Mich. 446,
Miller, 91 Tex. 414, 39 L.R.A. 545, IS N. YV. 212. See Boright v.
44 S. W. 60, 27 Ins. L. J. 538. Springfield Fire & Marine [ns. Co.
^elly v. Royal Exchange Assur. 34 Minn. 352, 25 X. W. 796; Hol-
Co. 1 Burr. 341, 14 Eng. Rul. Cas. brook v. St. Paul Fire & Marine [ns.
30. Co. 25 Minn. 229. See also Everett
2 Annapolis & Elk Ridge R. R. v. v. Continental [ns. Cn. 21 Minn. 76.
Baltimore Fire Ins. Co. 32 Md. 37, Bui see Eaws v. St. Paul Fire & Ma-
3 Am. Rep. 112. rine Ins. Co. 130 Pa. 113, 2 L.R.A.
2915
§ 1747 JOYCE i'N [NSURANCE
So a fire policy on a farm barn and live stock therein "and on the
farm and from lightning .-it large," covers a horse while In accord-
ance with custom, ii Is temporarily off the farm and on another
farm for the purpose of being broken.48 And where a certificate In
a mutual benefil society covered certain buildings, (heir contents,
and "live stock," being situated, etc., and a brood mare which was
included in said live stock was taken to be bred to a farm some
eighl miles from the described section of land, where she was killed
by lightning, it was held that the instrument merely identified the
live stock by it- location and did not restricl the indemnity while
on the premises described, as the intention was to remove the mare
only temporarily and to bring her back as soon as safely in foal;
also, thai even if the purport of the language of the certificate was
thai the place mentioned was the usual location of the live stock.
the loss was within its terms.411 So live stock temporarily off the
farm for the purpose of pasturage is covered.40 Again, insurance
of live stock is not restricted to them while on the farm of insured
under a policy describing the property as live stock, carriages, and
farm implements situated on section, etc., in a designated township,
hut adding "stock insured against lightning anywhere in Kent, Al-
legan and < Htawa counties." 4d But it is also decided that insurance
hi farming utensils and live stock on described premises occupied
by the assured, doe- not cover such property when taken tempo-
rarily, for the purpose of plowing, to a place twenty miles distant,
especially so where insurance on Live stock "while on the premises
only" was applied for and the application is a part of the policy.40
On a line with the cases above noted is a case where the policy
was upon "carriages, buggies, hacks." etc., contained in ''livery and
sales stable," in which it was expressly decided that the words "con-
tained in" could not be construed so as to exclude the use of the
property reasonably contemplated by its very character, and that
the word- merely designated the place of usual deposit of the prop-
erty when not in use or while being prepared for use, and therefore
a carriage or hack at a repair shop, temporarily there for repairs,
was covered.5 And like decisions under similar facts have also
52, 15 Atl. 915 (annotated case); 4c Kinney v. Farmers' Mutual Fire
Gorman v. Hand-in-Hand Ins. Co. & Ins. Soc. 159 Iowa, 490, 141 N. W.
11 W. R. C. L 224. 70.
*» Lathers v. Mutual Fire Ins. Co. 4d Hapeman v. Citizens Ins. Co.
L35 Wis. 431, 22 L.R.A.(N.S.) 848, 120 Mich. 191, 80 Am. St. Rep. 535,
and note, 110 N. W. 1. 85 N. W. 454.
4»Cottrell v. Munterville Mutual ** Lakings v. Phenix Ins. Co. 94
Fire & Lightning Ins. Assoc. 145 Iowa, 470, 28 L.R.A. 70, 02 N. W.
Iowa, 051, 124 N. W. 012, 39 Ins. 783.
L J 508 5 Niagara Fire Ins. Co. v. Elliott,
2910
DESCRIPTION OF PROPERTY § 17 l^
been made in other states.6 On the contrary, however, it is held
in .Maine that a policy containing a like description does ool cover
a hack in a repair shop one eighth of ;i mile away for the tem-
porary purpose of repair, the insurers not consenting to the re-
moval.7 So, under another decision, insurance on a harvester
"operating in the grain fields and in transit from place to place in
connection with harvesting," decs not cover a loss of the machine
by lire while standing near a blacksmith shop to which if had
been taken for repairs from the place where it was stored, with
intent to take it from the shop directly to the main fields as soon
as it was repaired.78
Notwithstanding adverse decisions, reason and principle would
seem to favor the rule that if the property is of such a character
that it may be reasonably presumed that the insurer knew that it
was contemplated that the property would he used in the ordinary
way in which property of a like character is generally used, and
that the real and beneficial enjoyment of the same precludes any
supposition that it would be kept at all times in one particular place,
then the words "contained in" cannot exclude such property from
the protection of the policy where it is temporarily removed for the
use contemplated or for purposes which are an incident to such
use, and language which would exclude such a construction ought
to be very clearly expressed.
§ 1748. Locality: property on premises. — If the property is de-
scribed as being on certain premises, the word "premises" will limit
the pr. section of the policy to the property within or upon the
specified locality, except there be a usage warranting the conclusion
that other property was intended to be covered, or unless the char-
acter and use of the property is such that the rule given under the
last section will apply. The meaning, however, of the word "prem-
ises" may be limited or extended by the other clauses of the policy,
or by a specific description of the property with which the word
"premises" is clearly intended to be synonymous Thus, where a
certain building was insured as a "three-story brick, gravel-roof,
hotel building" situate, etc., and known as the "Tremont House,"
and permission was granted to light "the premises" with gasoline,
but that the same should not be "stored on the premises," it was
held that the word "premises" was limited to the building itself,
and did not extend to building lots outside of the hotel belonging
85 Va. 0G2, 17 Am. St. Rep. 115, 9 7 Bradbury v. Fire Ins. Assoc, of
S. E. 694, 18 Ins. L. J. 628. England (and four other companies)
6 McCluer v. Girard Fire & Marine Si) .Me. 396, 6 Am. St. Rep. 219, 15
Ins. Co. 43 Iowa, 349, 22 Am. Rep. Atl. 34 (annotated ease).
249, and note 253; London & Lan- 7aMawhinney v. Southern Ins. Co.
caster Fire Ins. Co. v. Graves, 4 Ky. 98 Cal. 184, 20 L.R.A. 87, 32 Pac.
Law Kep. 706, 12 Ins. L. J. 308. 945.
2917
§ 17 JOYCE OX INSUKANCE
to tlic insured, so as to prohibil him from depositing gasoline in
reasonable quantities thereon for use in the hotel.8 Property de-
scribed as being situated in the rear of a building, situate, etc.,
covers all property of the kind specified which is on any part of the
.slid premises.9 Bui where an oil-tank was described as incited on
certain land, and at the time of the loss was situate in another place,
to which it had been carried by floods, it was held to be covered by
the policy.10 The term "shipyard," even though specifically desig-
nated by boundaries in the policy, may by usage extend to the
) ard actually used, and so cover timber Lying on the sidewalks, even
though designated as a "stock of ship timber in a shipyard."11
In an Eowa case assured was engaged in genera] farming includ-
ing the keeping and raising of stock. The policy was on "farming
utensils" and "farm and garden tools" situate "on the premises,"
certain article- or property appertaining to or used in such occupa-
tion or business being enumerated. There was also insurance on
"hay in stacks on cultivated premises on farm," etc. It was held
thai hay in the mow of a barn was not covered; thai the words
"garden tools" meant instruments or devices movable in character
and operated by hand or other motive power in the performance of
work or doing work in the garden or farm: that "utensils" was a
void much broader in meaning, although applicable to many im-
plements designated as tools in common parlance; that "farming
utensils" was also of broader signification than "farm tools; " that
'fanning utensils" covered windmills for pumping and stock scales
for weighing, although neither were "farming tools," when they
were not appurtenances to the land, for they might be so annexed
to the soil as to become part of the realty or so as to be removable
as a trade fixture.11* But where the policy conforms to the appli-
cation which is for insurance upon farm products, farm implement-.
and carriages and live stock on the premises, it does not cover fix-
tures and utensils of a slaughter house, etc., where insurer, a mutual
company, is only authorized to insure "farm property both build-
ings and their content-, farm implements, live stock," etc.. "being
upon the premises of insured," and it also appears that insured is
a member of said company and is, therefore, presumed to know the
extent of its power.-; nor is assured aided by the fact of knowledge
8 Northwestern .Mutual Ins. Co. v. 10 Western & Atlantic Pipe Lines
Germania Kin- [ns. Co. -JO Wis. 446. & Ins. Co. v. Home Ins. Co. 145 Pa.
Sec Sawyer v. Dodge County Mutu- 346, 27 Am. St. Rep. 703, 22 All.
al Ins. Co. 37 Wis. 503; Soli v. 665,2] Ins. L. J. 24.
farmers' Mutual Ins. Co. of .Man- n Webb v. National Fire Ins. Co.
Chester, 51 Minn. 24, 52 N. W. 979. 2 Sand. (X. V.) 497.
9 Eddy Street Foundry v. Farmers' lla Murphy v. Continental Ins. Co.
Mutual Fire Ins. Co. 5 R. I. 426. — Iowa, — , 157 N. W. 855.
2918
DESCRIPTION OF PROPERTY §§ 1749-1751
of insurer's president of the nature of the property and the char-
acter of the risk.11*
§ 1749. Locality: premises owned and occupied: property on
wharf. — A policy of insurance which described the property in-
sured as a frame building "while occupied as a flour and roller
mill" and the fixed and movable machinery, pipes, belting, pulleys,
shafting, roller mills and appurtenances, smut mill and appur-
tenances, purifiers, blowers, dusters, tools, etc., "and such other
machinery not more hazardous as is usual to roller mills," will be
held to include machinery used in the manufacture of meal, bran,
and other feed product?, where not to do so will render the policy
void from its execution.110
In case of burglary insurance the words "premises" occupied by
assured will cover only the specified floor insured and not the entire
building of which said floor is a part.lld
A wharf belonging to the assured will constitute their premises,
so that a policy will cover a dredge-boat made fast thereto,
said policy being upon "any property belonging" to the insured
"on premises owned and occupied by them and situate on railroad
premises.'' 12 And the same ruling was made as to cars standing at
the extreme end of a wharf upon a track which by adoption had
become a part of the company's line.13
§ 1750. Locality: occupation, ownership, or use of premises ac-
quired subsequently to issuing policy. — A policy insuring property
•"on ]>remises used or occupied" by the insured means "used'' or "oc-
cupied" at the time of the issuance of the policy, and not a use or
occupation subsequently acquired.14
§ 1751. Manufactories: factories: mills. — A policy upon a man-
ufactory, factory, mill, manufacturing establishment, and the like,
includes whatever is essential and necessary or incident to a proper
conduct of the business, whether the property be hazardous or
otherwise, unless the same be expressly excepted from the protec-
tion of the policy.15 So the insurance of a starch manufactory, in-
m Geraghty v. Washtenaw Mu- 13 Fitchburg R. R. v. Charlestown
tual Fire Ins. Co. 145 Mich. 635, 108 Mutual Fire Ins. Co. 7 Gray (73
N. W. 1102, 36 Ins. L. J. 3. Mass.) 64.
110 Capital Fire Ins. Co. v. Carroll, "Providence & Worcester R. R.
26 Okla. 286, 109 Pac. 535, 39 Ins. Co. v. Yonkers Fire Ins. Co. 10 R.
L. J. 1258. I. 74.
lld Axe v. Fidelity & Casualty Co. 15 Citizens' Ins. Co. v. McLaugh-
of N. Y. 239 Pa. 569, 86 Atl. 1095. lin, 53 Pa. St. 485; Seavey v. Cen-
12 Farmers' Loan & Trust Co. v. tral Mutual Fire Ins. Co. Ill Mass.
Harmony Fire & Marine Ins. Co. 41 540 ; Home Ins. Co. v. Favorite, 40
N. Y. (2 Hand.) 619, aff'g 51 Barb. 111. 263; Phoenix Ins. Co. v. Favor-
(N Y.) 33. ite, 49 111. 259.
2919
s< 1752 JOY i E ON INSURANCE
eluding machinery and fixtures, will cover all fixtures and ma-
chinery necessary and incident to the process of manufacturing
starch.16 The words " mills and manufactories'' will be construed
according to common usage, aor will a stricl and literal interpreta-
tion be given those words. A manufactory is not necessarily a
place where article- are made by hand, nor is a "mill" limited to
the designation of a place where something may be ground; nor
does the fad thai an article is made by band in a certain building
necessarily constitute that place a "manufactory" within the mean-
ing of a prohibition of such buildings in an insurance policy.17
The word "manufactory" is not necessary in all cases to cover ma-
chinery used therein, for it has been held to be covered by the words
"mill building."18 A steam flourmill driven by steam and fur-
nished with the necessary machinery is a "manufacturing establish-
ment." 19 So a "steam eawmill" is a manufactory in the sense that
machinery necessary to be used therein will be covered by a policy
on such mill.20 '•Factory'* may cover adjoining or connected build-
ings.1 The wheels of a machine used for polishing are covered,
though detached therefrom.2
§ 1752. Materials not included in "building: " unfinished vessel. —
There is a distinction between materials as such and materials
which have actually 'entered into the construction of buildings,
structures, or vessels, and have become a part thereof. Materials
so used lose their distinctive character as materials, and become
in a certain sense, identified with the particular structure, build-
ing, or vessel into the construction of which they have entered.
But while materials exist as such they are not covered by a pol-
icy on a building, vessel, or structure, even though the latter be
in an unfinished state and the material is intended to be used
in the completion of the same. So a policy on an unfinished
house does not cover materials for finishing the house which are
lo.ited in an adjoining building. 3 Nor are spars, blocks, cordage,
and other articles necessary for building and equipping a vessel so
far a part of the vessel as to be covered by a policy on the latter, or
a general usage warranting such a construction of the policy.4 This,
16 Peoria Marine & Fire Ins. Co. *° Bigler v. New York Central Ins.
v. Lewis, 18 111. 553. Co. 20 Barb. (X. Y.) 635, alfd 22 N.
17 Franklin Fire Ins. Co. v. Block, Y. 402.
7u Pa. St. 74. i See § 1744 herein.
18 Brugger v. State Ins. Co. 5 Saw. 2 Pierce v. George, 108 Mass. 78,
(U. S. C. C.) 304, Fed. Cas. No. 11 Am. Rep. 310.
2,051, 4 Fed. 472, $ Ins. L. J. 293. 8Ellmaker v. Franklin Fire Ins.
19Carlin v. Western Assur. Co. of Co. 5 Pa. St. 183, 6 Watts & S.
Toronto, Canada, 57 Md. 515, 40 Am. (Pa.) 439.
Rep. 440. * Mason v. Franklin Fire Ins. Co.
2920
DESCRIPTION OF PROPERTY §§ 1753, 1754
however, is not the case of an insurance upon the building, struc-
ture, or vessel in an unfinished state, for under such a policy, as in
the case of an insurance upon a "bark now being built," the risk-
attaches to and covers the same whatever its state of completion.5
§ 1753. Medals: models: specific description: standard policy-
Medals and models are required to bo specifically described under
the Massachusetts standard (ire policy.6
§ 1754. Money, specie, bullion, coin, treasure, jewels. — Money,
specie, bullion, coin, treasure, jewels, and the like, are generally
specifically described in marine policies, although the rule seems
to be that a general policy on goods, wares, and merchandises will
cover such articles although not specifically designated.7 Money
and jewels must, however, be specially mentioned under the Mas-
sachusetts standard fire policies.8 The rule as stated by Emer-
igon is: "With regard to specie and jewels, where their transport
is not prohibited, it suffices that a bill of lading is made for them
in due form to cover them by a general insurance on cargo and
goods," referring, of course, to marine risks.9 Thus, goods and
merchandise in such policies will cover specie dollars arising from
the sale of the cargo insured; so also coin and doubloons to be ex-
pended for cargo at the port of discharge.10 But money paid for
the use of the vessel during an embargo is not covered by a policy
12 Gill. & J. (Md.) 468; Hood v. 364, where it is said that they are
Manhattan Ins. Co. 11 N. Y. 532, included if put aboard as merchan-
rev'g 2 Duer (N. Y.) 191, and citing dise, but the term does not comprise
Johnson v. Hunt, 11 Wend. (N. Y.) jewels, ornaments, cash, etc., not in-
135; Andrews v. Durant, 11 N. Y. tended for trade and carried about
35, 62 Am. Dec. 55; Merritt v. John- and belonging to persons on board,
son, 7 Johns. (N. Y.) 473, 5 Am. 8 Mass. Pub. Stats, pp. 713-15;
Dec. 289; Ellmaker v. Franklin Ins. acts 1887, c. 214, sec. 60; Mass. Rev.
Co. 5 Binn. (Pa.) 183, 6 Watts & L. c. 118, sec. 60 (Rev. L. Supp.
S. (Pa.) 439; Ferard on Fixtures, 9, 1902-1908, sec. 60, pp. 1191, 1192).
note a. Not liable for money, nor unless
5 Mason v. Franklin Ins. Co. 12 specifically assumed for loss to jew-
Gill. & J. (Md.) 468. els under N. Y. standard form; for
6 Massachusetts Pub. Stats, pp. N. Y. Stat, and Amdts. see § 1715
713-15; acts 1887, c. 214, sec. 60. herein.
7 Da Costa v. Firth, 4 Burr. 1966; 9 Emerigon on Ins. (Meredith's ed.
1 Marshall on Ins. (ed. 1810) 320a. 1850) c. x. sec. 2, p. 243.
Goods and merchandise covers money, 10 American Ins. Co. v. Griswold,
bullion and jewels although there 14 Wend. (N. Y.) 399; Wolcott v.
was formerly some doubt on this Eagle Ins. Co. 4 Pick. (21 Mass.)
point, usually, however, they are 429. See Whiton v. Old Colony Ins.
specifically described, 1 Arnould on Co. 2 Met. (43 Mass.) 1. See Man-
Marine Ins. (8th ed. Hart & Simey) ning's Index to N. P. R. 2d ed. 165,
sec. 224, p. 289. See 17 Earl of Hals- re. 5.
bury's Laws of England, sec. 718, p.
2921
755-1757 JOYCE ON INSURANCE
on cargo."11 A policy on cargo containing a written clause on
and -[mtu', both or either, and which also contains a war-
ranty againsl illicit or prohibited trade, covers the specie when the
same is known to be prohibited,18 although it is held that the in-
surer is not liable for the risk of clandestine exportation of precious
metals intended to be used in clandestine trade.13 An insurance on
"treasure, bullion, and bonds laden or to be laden . . . begin-
uing the adventure from and immediately after the loading there-
of at certain specified ports, risks to be indorsed, covers the treas-
ure from the time it is on board at any one of the specified ports
for transportation.14
§ 1755. Paintings: patterns: specific description: standard
policy. — Paintings and patterns are required to be specially men-
tioned under the Massachusetts standard lire policy.15
§ 1756. Passage money. — Passage money is not insurable as
lit, so as to be covered by a policy on the latter, if there is any
freight to which such a policy may be applied. But it has been
declared, however, that whether "freight" includes passage money
must depend upon the terms of the policy, and also upon the par-
ticular circumstances of the case. It is usual, however, to describe
such subject matter as passage money, or to so otherwise designate
it that it may be distinguished from freight of merchandise.16
§ 1757. Personal effects: money, jewelry, etc.: master's effects. —
1\i marine risks money, jewelry, and articles of personal property of
like character which arc not part of the cargo as articles of com-
merce, but attached to the person of passengers or owned by them,
or otherwise part of their personal effects, are not covered by a gen-
eral marine policy on goods, wares, or merchandises, for a policy on
goods generally means merchandisable goods and those which are a
part of the cargo.17 Emerigon says: "If a passenger desires to
effect insurance on his baggage, he will designate it in the policy,
"Penny v. Now York Ins. Co. 3 acts 1887, c. 214, sec. 60. Mass. Rev.
Caines (N. Y.) L55, 2 Am. Dec. 260. L. c. 118, sec. 60 (Rev. L. Supp.
12Seton v. Delaware las. Co. 2 1002-1908, sec. 60, pp. 1191, 1192).
Wash. (U. S. C. C.) 175, Fed. Ca.s. Liability must be specifically assumed
No. 12,675. as to patterns and pictures under X.
13 1 Marshall on Ins. (ed. 1810) Y. standard fire policy, see § 1715
320a, citing 1 Magens, 10, sec. 15; herein, for N. Y. stat. and aradts.
Da Costa v. Firth, 1 Burr. 1966. See 16 See § 1021 herein; Denoon v.
criticism in 1 Phillips on Ins. (3d ed.) Home & Colonial Ins. Co. 7 L. R.
237, 238, sec 432. Com. P. 341, 26 L. J. N. S. 628.
14 Wells Fargo & Co. v. Pacific "1 Marshall on Ins. (ed. 1810)
Ins. Co. 44 Cal. 397. 320a; 1 Phillips on Ins. (3d ed.) 238,
15 M ass. Pub. acts, pp. 713-15; sec. 435.
2922
DESCRIPTION OF PROPERTY §§ 1758-1760
giving it a value."18 So in a fire policy jewelry is not included
under household furniture or wearing apparel.19
§ 1758. Personal property: wearing apparel: master's clothes:
baggage. — Wearing apparel must be specifically described under
the provisions of the Massachusetts standard fire policy.20 Wearing
apparel is, however, usually designated as such in fire policies. The
master's clothes are not goods, wares or merchandise within the
meaning of those words in a marine policy.1 And goods intended to
be brought over in the trunks of a partner or employee of the house
as baggage are not covered where nothing is agreed upon bevond
the policy. "How, then, can it be construed to cover the loss of
goods packed in the trunks of travelers not subject to the payment
of freight nor covered by bills of lading, nor stowed with the cargo,
nor contained in covers or boxes commonly subject to entry at the
customhouse? The company has a right to stand upon its written
policy, and to say to the plaintiff, non in Kaec ferera veni. The
goods were not, in a legal sense, laden on board the Arctic," although
they were to be declared and indorsed, and the invoices were not
presented nor the premium offered until after the loss.2
§ 1759. Plate: specific description: standard policy. — Plate must
be specificalty mentioned as such under the provisions of the Massa-
chusetts standard fire policy.3
§ 1760. Profits and commissions. — An insurance may be validly
made on profits.4 Profits should be specifically described, whether
the property be insured under a marine or fire risk, and this rule is
unquestionably the law in England.5 "Lloyd's form of policy is
adopted as usual by the insertion of the words 'profits' or 'commis-
sions' in the margin ; or in the valuation clause adopting or adapt-
ing the language of the clause according as the subject of the policy
18Emerigon on Ins. (Meredith's acts 1887, c. 214, see. 60; Mass. Rev.
ed. 1850) c. x. sec. 2, p. 243. L. 118, see. 60 (Rev. L. Supp. 1902-
19 Clary v. Protection Ins. Co. 1 1908, sec. 60, pp. 1191, 1192).
Wright (Ohio) 228. 4 Barclay v. Cousins, 2 East, 544.
20 Puh. Stats, pp. 713-15 ; acts 5 See § 682 herein, and cases ; Lu-
1887, c. 214, sec. 60. cena v. Craufurd, 2 Bos. & P. N. R.
1 Duff v. Mackenzie, 3 Com. B. N. 315, 5 Bos. & P. 269 ; Ellinaker v.
S. 16, 26 L. J. Com. P. 313, 1 Mar- Franklin Ins. Co. 5 Pa. St. 183; Sun
shall on Ins. (ed. 1810) *319, *727a, Fire Office v. Wright, 3 Nev. & M.
citing Brough v. Whitmore, 4 Term 819, s. c. 1 Ad. & E. 621; Sawyer v.
Rep. 206; Ross v. Hunter, and Ross Dodge Co. Ins. Co. 37 Wis. 503;
v. Thwaite, 1 Park on Ins. 20. See Anderson v. Morrice, L. R. 10 Com.
King v. Glover, 2 Bos. & P. N. R. P. 609, 23 Eng. Rul. Cas. 302; Tom
206, 13 Eng. Rul. Cas. 336. v. Smith, 3 Caines (N. Y.) 245, 249;
2 Douville v. Sun Mutual Ins. Co. 1 Arnould on Marine Ins. (Perkins'
12 La. Ann. 259, per Merrick, C. J. ed. 1850) 228, *222, sec. 101; Id.
And see § 1736 herein. (Maclachlan's ed. 1887) 39.
3 Mass. Pub. Stats, pp. 713-15;
2923
§§ 1761, 1762 JOYCE OX INSURANCE
is valued or not."'6 A loss of tolls sustained by the insured on its
road while a bridge is rebuilding is not covered by a policy on the
bridge,7 oor does a policy on a building cover a Loss of profits dur-
ing repairs.8 But commissions and profits are held in Massachusetts
i" be covered by the words "property on board." 9 A policy on (he
ship does not cover profits, and the same is true of a policy on
freight.10 So if there be a usage to that effect, a policy on "goods"
will cover profits.11 Where an insurance was effected on "profits on
lice,'" it was held (hat the policy only attached to the rice on board
the ship when the voyage was abandoned, and not to the entire
quantity which was purchased by the insured and expected to ar-
rive.12 In case of an insurant e on profits under a valued policy on
goods and an abandonment is made, and the insured takes the ^oods
and sells them, it is held that he cannot recover profits lost.13
§ 1761. "Property." — An insurance on ''property" will cover
property kept tor use as well as for sale,14 and it is held that it will
cover a bona fide equitable interest, though the legal title be in an-
other.15 And the term "property" means all the insured property
under a provision invalidating the policy if "the property shall here-
after become mortgaged or encumbered," so that a mortgage of a
part only was held not within the condition.16
§ 1762. Provisions and provender under marine risk. — Provisions
on board for the use of the crew are part of the necessary furniture,
stores, and equipment of the ship, and are covered by a policy there-
on under the usual clause, or by a policy on "hull and outfit." 17
61 Arnoukl on Marine Ins. (Mae- 15 Locke v. North American Ins.
lachlan's ed. 1887) 39, 40, citing Co. 13 Mass. 61; Tvlor v. JEtna Ins.
Eyre v. Glover, 1G East, 218. Co. 12 Wend. (N. Y.) 507, s. c. 16
'Farmers' Mutual Ins. Co. v. New Wend. ( X. Y.) 385, 30 Am. Dec. 90.
Holland Turnpike Road Co. 122 Pa. See § L716 herein.
37,15 Atl. 563. "Phoenix Ins. Co. v. Lorenz, 7
8 Wright v. Pole, 1 Ad. & E. 621. Ind. App. 266, 33 X. E. 111. 34 X.
9Holbrook v. Brown, 2 Mass. 280. E. 495. As to "property on board,"
"Lucena v. Crawford, 2 Pes. & see Holbrook v. Brown, 2 Mass. 280,
P. N. R. 315, 5 Bos. & P. 269. noted in § 2030 herein; Whiton v.
nPritchett v. Insurance Co. of Old Colony Ins. Co. 2 Met. (43
North America, 3 Yeates (Pa.) 458, Mass.) 1, noted in § 1180 herein;
461. Wiggin v. .Merchants Ins. Co. 7 Pick.
12 McSweeney v. Royal Exchange (24 Ma.ss.) 271.
Assur. Co. 13 Eng. Rul. Cas. 27!). li) "Hancox v. Fishing Ins. Co. 3
L. .1. Q. B. 222, 13 Ens-. Rul. Cas. Sum. (U. S. C. C.) 138, per Story,
287, rev'g 18 L. J. Q. B. 193, 14 Q. J.; Macy v. Whaling Ins. Co. 9 Met.
B. 634. (50 Mass.) 354, per Hubbard, J.;
13 Tom v. Smith, 3 Caines (X. Y.) Hill v. Patten, 8 East, 373, L3 Eng.
245. Rul. Cas. 595, per Lord Ellenbor-
14 Bunress v. Alliance Ins. Co. 10 ough; Forbes v. Aspinwall, 13 East,
Allen (92 Mass.) 221. 325, 13 Eng. Rul. Cas. 673, per Lord
2924
DESCRIPTION OF PROPERTY §§ 1763, 1764
But this rule does not apply to provisions consumed during the ship's
detention by an embargo.18 That such was the rule established by
this case is evidenced by the words of Lord Kenyon and Butler in
a later case.19 A ship's provisions are also held not to be covered
by a policy on goods or merchandises,20 nor are provisions for pas-
sengers included, nor is a provender for live-stock included in a
policy, either on ship or cargo and freight; these must be specifically
designated.1 Nor are provisions consumed by slaves on board a part
of the cargo covered.2
§ 1763. Scientific cabinets and collections: sculpture: specific
description: standard policy. — Scientific cabinets and collections
and sculpture are required to be specially mentioned under the terms
of the Massachusetts standard fire policy.3
§ 1764. Ship. — The English form of policy reads "upon the body,
tackle, apparel, ordnance, munition, artillery, boats, and other fur-
niture of and in the good ship and vessel called the ." 4 One
of the several forms used here reads: "Upon his or their interest as
in the body, machinery, tackle, apparel, and other furniture
of the good called the ." 5 Under the English form
as we have elsewhere stated if the policy is on the ship alone the
words "on ship" must be indorsed on the margin or foot of the
policy or it must appear in the valuation clause.6 Insurance on the
body of the ship does not extend to cargo, goods or merchandise,
Ellenborough ; Brough v. Whitmore, 3 Mass. Pub. Stats, pp. 713-15;
4 Term Rep. 208, per Lord Kenyon acts 1887, c. 214, see. 60; Mass. Rev.
and Buller, J.; Eraerigon on Ins. L. c. 118, sec. 60 (Rev. L. Supp.
(Meredith's ed. 1850) c. x. sec. 1, p. 1902-1908, sec. 60, pp. 1191, 1192).
234. See Emerigon on Ins. (Mere- Liability must be specifically as-
dith's ed. 1850) c. viii. sec. 6, pp. sumed on "scientific apparatus" and
172 et seq. ; Stevens on Average (5th sculpture under N. Y. standard form,
ed.) 60. see § 1715 herein.
18 Robertson v. Ewer, 1 Term Rep. 4 Marine ins. act 1906 (6 Edw.
127. . VII. c. 41), sec. 30, Sched. I.; But-
19 Brough v. Whitmore, 4 Term terworth's Twentieth Cent. Stat.
Rep. 206. (1900-1909) p. 424; 7 Arnould on
20 Ross v. Hunter, Ross v. Marine Ins. (8th ed. Hart & Simey)
Thwaites, Park on Ins. (8th ed.) 20, sec. 10, p. 15; sec. 218, p. 282; 17
23; 1 Marshall on Ins. (ed. 1810) Earl of Halsbury's Laws of England,
*319a, *727a. sec. 716, p. 363.
1 Wolcott v. Eagle Ins. Co. 4 Pick. 5 A San Francisco form.
(21 Mass.) 429; 1 Arnould on Ma- 61 Arnould on Marine Ins. (8th
rine Ins. (Maclachlan's ed. 1887) 29, ed. Hart & Simey) sec. 10, p. 15,
48. sec. 218, p. 282;* 17 Earl of Hals-
2 Robertson v. Ewer, 1 Term Rep. bury's Laws of England, sec. 716, p.
127, as construed by Buller, J., in 363.
Brough v. Whitmore, 4 Term Rep.
206.
2925
§ 1705 JOYCE ON INSURANCE
even though at the time the policy on the ship is effected it be
laden."7
§ 1765. Ship's stores and outfits: what ship includes. — An insur-
ance on the ship covers the hull and outfits, comprehending rigging,
tackle, furniture, apparel, sails cordage, armament, provisions for
the crew, and in fad all that properly belongs to and which is nec-
ry, appurtenant, and usual to it, reference being had to the char-
acter of the vessel and the trade in which she is employed, and the
usage of that trade, and generally to what is usual and necessary for
the navigation or voyage intended. So such charts, compasses, and
chronometers belonging to the shipowner as are necessary for the
safe navigation of the ship are covered where warranted by custom,
and machinery of steamships are covered, although generally desig-
nated. In applying this rule, however, the requirements of a par-
ticular trade, as in the case of whaling or fishing voyages, may give
to the word "outfits" a particular meaning, and exclude the neces-
sary fishing stores from the protection of a general policy on the
ship, and require a description of the several interests.8 Emerigon
says: "The rigging and apparel from part of the ship ; " also that the
French Ordonnance "permits insurance on the rigging, apparel,
armament, and stores. By 'armament' is understood advances made
to the crew, provisions and munitions of war, and all expenses in-
curred up to the departure of the vessel. All these are subject to
daily diminution ; but this is compensated by the freight the vessel
earns; " and again: "The expression in the body embraces in its
generality ... all that regards the ship, such as the hull of
the vessel, its rigging and apparel, munitions of war, stores and
victualing, advances to the crewr, and all that has been expended in
fitting it out."9 But wages paid to hands that were of the crew,
di.-charged at a port of repair, and re-employed as ordinary work-
men, are not covered by a policy on the hull of a steamboat on
time.10
71 Marshall on Ins. (ed. 1810) Adm. Rep. 100; Macy v. Whaling
320a: Emerigon on Ins. (Meredith's Ins. Co. 0 Met. 354; Gale v. Laurie,
ed. 1850) c. x. see. 1, p. 1231. 5 Barn. & C. 156.
8 Forbes v. A i u n wall, 13 East, 9 Emerigon on Ins. (Meredith's ed.
325, 13 Eng. Rul. Cas. 673, per Lord 1850) c. vi. see. 7, p. L44; e. viii. sec.
Ellenborough; Brough v. Whitmore, C, p. 172; c. x. sec. 1, p. 234. And
4 Term Rep. 208, per Lords Ellen- see c. x. sec. 2, p. 2 1 I, where he says
borough ami Buller; Hill v. Patten, the detail of the London policy "is
8 East, 375, 13 Eng. Rul. Cas. 595, superfluous — it is sufficient to say on
per Lord Ellenborough; Robertson the body."
v. Ewer, 1 Term Rep. 127, per Lord 10 Webb v. Protection Ins. Co. 6
Mansfield; Haskins v. Pickersgill, 3 Ohio, 450.
Doug. 222; The Dundee, J Hagg.
^2926
DESCRIPTION OF PROPERTY §§ 1766, 1767
§ 1766. Ship's boat or launch. — Emerigon says: "In practice, the
ship's launch is comprised in the rigging and apparel of the ship,
because it is absolutely necessary for the navigation. The name is
the case with the smaller boats," and he is of the opinion that a
policy on the ship includes the launch.11 And the rule in England
and in this country is that a policy on the body or hull of the ship
includes the ship's boat carried in a way usual and necessary, al-
though the English policy expressly designates it in the description
clause.12 But it may be shown, however, that the boat was slung or
carried in an unusual way, calculated to extraordinarily increase
the risk assumed by the underwriter.13
§ 1767. Ship: character or kind of vessel: rating. — A ship,
according to the generally accepted meaning of that term, compre-
hends every species of vessel which navigates the seas. Emerigon,
however, distinguishes in practice between the term "ship (vais-
seau)" and "vessel (navire)," saying the former "includes only
vessels with three masts," while the latter "comprehends every
structure of carpentry fit for floating and making way on the water,"
including shallops, the smallest vessels, and even rafts, although he
he adds: "According to all our dictionaries the word 'ship (vais-
seau)' is not less generic than 'vessel (navire) ; ' " and, referring to
Cleirac, adds that that wTriter under the term "ship" includes "every
species of ships, galleys, barques, and boats ; " but he also says :
"The words just mentioned receive the signification that usage in
each country attaches to them. There cannot be established on this
point any sure rule." 14 So far, however, as this distinction between
ship and vessel is concerned in matters relating to insurances, its
principal importance really goes to the question of representation or
false description. It is true that the character of the ship or vessel
is important, with relation to its capability of performing the voy-
age insured and to enable the insurer to judge the risk, and there-
fore affects the question of what degree of risk or hazard is assumed,
and consequently the rate of premium, for ships are not all equally
capable of performing a particular voyage, but there are other ways
of identifying the ship or vessel, such as its name, and the name
of the master, and the general term "ship" would ordinarily, in the
absence of fraudulent misrepresentation, be sufficient. If there be
11 Emerigon on Ins. (Meredith's Sched. I.; Butterworth's Twentieth
ed. 1850) c. vi. see. 7, p. 144; c. x. Cent, Stat. (1900-1909) p. 424.
sec. 2, p. 244. 13 Hall v. Ocean Ins. Co. 21 Pick.
12Blaekett v. Royal Exchange As- (38 Mass.) 472.
sur. Co. 2 Cronip. & J. 250. 14 Eng. 14 Emerigon on Ins. (Meredith's
Bui. Cas. 179; Hall v. Ocean Ins. Co. ed. 1850) e. vi. sec. 3, p. 129; e. vi.
21 Pick. (38 Mass.) 472; Marine ins. sec. 6, pp. 143 et seq. See 1 Marsh-
act 1900 (6 Edw. VII. c. 41) sec. 30. all on Ins. (ed. 1810) *314.
2927
§ 1767 JOYCE OX [NSURANCE
a fraudulent misdescription calculated to mislead, if would avoid
tli»> policy; otherwise not.15 So Emerigon says: "Care should be
taken to announce in the policy the true character of the ship. It
is true thai if the insurers knew certainly upon what ship they were
taking a risk it. would little matter that a false description had been
given to it . . . the known intention of the parties overcomes
i he error in the words of the contract ; " but it is mailer of proof for
the insured to show the insurer's knowledge.16 A "steamship" has
been defined as a three-masted, square-rigged vessel, capable of pro-
pulsion by steam or .-ail-, and implies a warranty thai she is proper-
ly equipped, manned, and provisioned with reference to its char-
acter.17 A .-team propeller which is wrecked and abandoned as a
total loss, and which is taken in tow by a wrecking master and then
sinks, is still a "vessel" at the time of sinking within the provisions
of a statute limiting the liability of owners of vessels, and the under-
writer to whom the abandonmenl i- made i- an "owner'"' under such
act.18 Goods are sometimes shipped under a stipulation for an addi-
tional premium if upon vessels below a certain rating. In this con-
nection the word "rating" mean- the determination of the relative
state or condition of vessels with reference to their insurable quali-
ties, and unless the policy affords some rule of guidance in the
matter, it must be left to the jury, depending for its determination
upon all sources of information available, the same as any other
question of value, quantity, or quality, and the rate of classification
on the insurer's register is not conclusive, and even in case of a usage
to consider the rating of vessels on the insurer's register conclusive,
the rating mint be of that particular vessel and of a recent date.19
Where a vessel was designated as a "brig" of a certain name under
a policy on cargo, and she was not a brig proper, but an hermaph-
rodite brig, and there was a vessel of the same name which was a
brig, it was held that the deseriptixe term "brig5' was so far a word
of limitation that the insured must show that the half brig was the
vessel intended.20
15 1 Arnould on Marino Ins. (Per- 19 Insurance Cos. (Orient Mutual
kins' ed. 1850) 174 et seq., *pp. 172 & Sun) v. Wright, 1 Wall. (6'8 U.
el seq.; M. (Maelachlan's ed. 1887) S.) 456, 17 L. cd. 505.
18, 19, 336; 1 Marshall on Ins. (ed. On temporary absence of insured
1810) *p. 313. property from location stated in the
16 Emerigon on Ins. (Meredith's policy, see note in 22 L.U.A.(N.S.)
ed. 1850) c. vi. sec. 3, pp. 128, 129. 848.
17 Howard v. Orient Mutual Ins. 20 Sea Ins. Co. v. Fowler, 21 Wend.
Co. 2 Rob. (25 N. Y.) 539. (N. Y.) 600.
18 Craig v. Continental Ins. Co. 141
U. S. 638, 35 L. ed. 886, 12 Sup. Ct.
97, 21 Ins. L. J. 127.
2928
DESCRIPTION OF PROPERTY § 1-68
§ 1768. Ship's name important: master's name. — The ship's
name may be important to enable the underwriter to fix the identity
of the ship, to apply certain information, and to determine whether
he shall assume the risk at all or at an enhanced premium. It may,
notwithstanding the extensive means of information now posse
and available to underwriters, involve a question of misrepresenta-
tion or concealment whereby the assurer is so materially misled in
assuming the risk as to vitiate and annul the contract, It is also im-
portant to so far designate the property covered that the contract
will be complete in the sense that the minds of the parties will meet
as to the subject matter, and this rule applies equally where the in-
surance is upon goods or merchandise on board ship.1 A mere mis-
nomer, however, which does not prevent recognizing the identity of
the ship, there being no uncertainty as to the subject designated, will
be immaterial so far as the validity of the contract is concerned, but
otherwise if the misnomer is intended to mislead or prevents the
identification of the ship,2 and Emerigon is of the opinion that
an error in the name of the ship is not material where the error does
not prevent recognizing the ship's identity.3 Under the English
marine policy the master's name should be inserted, the rule relat-
ing thereto depending upon much the same reasons as those above
stated in relation to the ship, and also for the reason that the under-
writer may be governed in determining the acceptance of the risk
by his knowledge of the degree of skill, prudence, capabilities, and
reputation of the master. That the strictest accuracy is not required
in this matter is evidenced by the additional clause in the policy "or
whoever else shall go for master" used in the English form, thereby
avoiding the question of error in the master's name.4 In this coun-
try many policies designate no blank for the master's name, and
frequently a designated blank therefor is left unfilled. If, however,
the name of the master be absolutely necessary to dasignate the ves-
sel insured, as in case of other vessels of the same name, it should be
11 Marshall on Ins. (ed. 1810) 2 Q. B. 595, 6 Eng. Rul. Cas. 817:
312a; 1 Arnould on Marine Ins. Hall v. Molineux, cited in 6 East.
(Perkins' ed. 1850) 30, sec. 23, pp. 385; 1 Duer on Marine Ins. (ed.
172, *170, see. 76; Id. (Maclaeklan's 1845) 172, sec. 20.
ed. 1887) 239 et seq., 333 et seq.; 3 Emerigon on Ins. (Meredith's ed.
Emerigon on Ins. (Meredith's ed. 1S50) c. vi. sec. 1, p. 127. The Eng-
1850) c. ii. sec. 7, p. 47; c. vi. sec. 1, lish policy contains the clause, "by
p_ 123. whatsoever other name or names the
2Le Mesurier v. Vaughan, 6 East, same ship . . . is or shall be
383; Ionides v. Pacific Fire & Marine named or called."
Ins. Co. L. R. 6 Q. B. 674, 13 Eng. 4 1 Arnould on Marine Ins. (Per-
Rul. Cas. 471; Ruan v. Gardiner, 1 kins' ed. 1850) p. 31, sec. 24; Id.
Wash. (U. S. C. C.) 145, Fed. Cas. (Maclachlan's ed. 1887) 240.
Xo. 12,100; Bates v. Hewitt, L. R.
Jovce Ins. Vol. III.— 1S4 2929
§ 1769 JOYCE ON ENSURANCE
inserted. So its insertion may be required in cases where the under-
writer depends upon the knowledge, degree of skill, prudence, ca-
pabilities, and reputation of a master.6 Bui as a general rule, if
the vessel is sufficiently known and designated withoul the master's
name, it would seem that the omission thereof oughl nol to invali-
date the contract, and cases arise where it is not known who is to lie
the master, which necessarily precludes such naming in the policy.
In a New York case A was named in the register as master, and
signed shipping articles and gave a bond to the collector of customs.
The whole charge of navigating the ship, however, devolved upon
the first mate, as the nominal master was to act as purser. The mate
was thoroughly skilled and competenl for the undertaking, and it
was held that this was no concern of the insurers; that it was suffi-
cient compliance with the insurance contract thai the vessel was
under the command of a competent and skillful master, without
regard to the facts whether his name appeared in the register or
not.6
§ 1769. Change of ship or master or name of ship. — After the
risk lias commenced only necessity or consenl of the insurer will
warrant the change of the ship. This rule, however, can only apply
to cases of insurances on goods, etc., and has already been eon-
sidered.7 The form of the English policy covers a change of the
master, and Emerigon notes that it was customary to insert in poli-
cies in that country the ordinary clause "or other for him," the effect
of which would permit a change of masters, and he asserts that such
a clause is not to he implied, and if omitted, and there he a change
of masters, the insurers would be released, unless they had consented
thereto or the change had been made through necessity; so the gen-
eral rule is, that a change effected in good faith before the com-
mencement of the voyage and without any fraudulent purpose, the
master substituted being competent, docs not avoid the policy, and
if the voyage has commenced and the master die-, or through sick-
ness or otherwise he becomes disabled or incompetent, or resigns,
or another is appointed, or other necessity arises, the change will
not vitiate the policy, and it is held in this country that the mate
may by substitution become a de facto master in eases where the
master is rendered incompetent, although the rule seems to he other-
wise in England, except in cases of special necessity, hut a foreign
5 Sec Orr v. Home Mutual Ins. Co. 7 See §§ 1594 L596 herein. Sec 1
12 La. Ami. 255, 68 Am. Dee. 770. Marshall on Ins. (ed. L810) *l(i< et
6 Draper v. Connecticut Ins. Co. seq.; Emerigon on Ins. (Meredith's
21 N. Y. 378, rev'g 4 Duer (N. Y.) ed. 1850) c. xii. sec L5, pp. 339 et
234. seq.
2930
DESCRIPTION OF PROPERTY §§ 1770, 1771
master cannot be substituted.8 In a Massachusetts case it is declared
that a mate as well as the master is presumed to be competent and
skilled in theoretic and practical navigation and general seaman-
ship, and that he is the regular successor of the master, and his
appointment as mate is in effect the prospective appointment of a
master, to take effect in any of the exigencies which may require
such appointment, and by substitution in case of the master's death
or of his sickness, or such other cause as shall render him incapable
of having command, he becomes de facto master, and therefore if
the master is found incompetent at a foreign port to command the
vessel, the mate may take command, and that if under his command
the vessel is lost on her voyage home, the insurers are not discharged
because of the substitution.9 In Missouri, the policy stipulated that
notice should be given the underwriters without delay in case of a
change of masters or owners, and that in such case the assurers
might return a pro rata premium and terminate the contract. A
sale and change of masters was effected, of which notice was given
and no objection made. Another master was substituted on account
of sickness in the family of the second master and the assurers were
not notified, and it was held that the assurer was discharged.10
§ 1770. Ship's enrollment as affecting validity of policy. — Where
the ship was insured under a time policy by the name "Mary," and
it appeared that she was remodeled and enlarged upon the keel,
floor timbers, and naval timbers of the "Sophronia," and then
named as insured, and so enrolled before her enrollment under her
original name was surrendered to the customhouse, it was held that
noncompliance with the laws of the United States in obtaining her
register did not avoid the policy.11
§ 1771. Ship as privateer or letter of marque. — Emerigon is of
the opinion that a vessel fitted out as a privateer should be described
8 Emerigon on Ins. (Meredith's ed. M. 103, 3 Car. & P. 16; Marigny v.
1850) c. vii. sec. 3, pp. 149, 150; 1 Home Mutual Ins. Co. 13 La. Ann.
Arnould on Marine Ins. (Perkins' ed. 338, 71 Am. Dee. 511, citing Bell v.
1850) 182, *181 et seq.; Id. (Mac- Western Marine & Fire Ins. Co. 5
lachlan's ed. 1887) 343 et seq. This Rob. (La.) 423, 446, 39 Am. Dec.
latter (pp. 344, 345) refers to Moroc- 542.
co Land & Trading Co., Limited v. 9 Copeland v. New England Ma-
Fry, 11 L. T. N. S. 618, 11 Jur. N. rine Ins. Co. 2 Met. (43 Mass.) 432,
S. 76, per Stuart, V. C. ; Farmer v. per Shaw, C. J.
Legg, 6 Term Rep. 186 ; to statute, 10 Tennessee Marine & Fire Ins.
17 & 18 Vict. c. 104, sec. 136 ; 25 & Co. v. Scott, 14 Mo. 46 ; Eddy v. Ten-
26 Vict. c. 63, sec. 5, requiring cer- nessee Marine & Fire Ins. Co. 21 Mo.
tificated masters, mates, etc.^ and 587. See Walden v. Firemen's Ins.
other cases construing this statute. Co. 12 Johns. (N. Y.) 128; 3 Kent's
See also Richards on Ins. (ed. 1892) Commentaries (5th ed.) 257.
^25, 226, he cites no cases, however. n Ocean Ins. Co. v. Polleys, 13
See Clifford v. Hunter, 1 Moody & Pet. (38 U. S.) 157, 10 L. ed. 105.
2931
§ L772 JOYCE ON INSURANCE
as such, because of the increased peril.12 In this country the prin-
cipal cases concerning a privateer or letter of marque have been be-
fore the courts upon the question of deviation and what is meant
by the relative terms. Mr. Arnould says: "II is quite certain that
if it were verbally represented to the underwriter that such was her
destination, this would be sufficient in this country, though she were
not so described in the policy." 13 And such a rule might seem to
be sanctioned in this country by as eminent an authority as Mr.
Justice Story, who says that the description as a letter of marque
does not enlarge the construction of the policy, provided it be known
to the underwriter thai the ship sails under such a commission, it
being merely evidence on the point of concealment calculated to
rebut any presumption thereof.14 It would seem, however, from
the facts of this case to which the language of Mr. Justice Story must
be held to have reference, and also from other decisions, that the
rule here is that the mere fact of taking a commission as a letter of
marque does not of itself affect the validity of the policy, and it
would also seem that the vessel ought to be insured as a privateer
or letter of marque in all cases where the use of the commission
would enhance the risk actually assumed, as where such use would
constitute a deviation, but as the policy only evidences the contract,
if the proof is otherwise clear from admissible evidence that the in-
surers knew the full nature and extent of the risk in the absence of
a description in the policy, then they ought to be bound.15 This
question will, however, be further considered under the head of
"deviation."
§ 1772. Ship or ships. — The necessities of commerce frequently
give rise to an occasion for effecting insurances where the merchant
is ignorant of the fact on board what ships his goods will be laden,
or it may be important that the merchant should be able to avail
12 Emerigon on Ins. (Meredith's not make the construction of the pol-
ed. 1850) c vi. sec. 3, p. 131. icy more broad, but it repels any de-
13 1 Arnould on Marine Ins. (Per- fense founded upon the concealment
kins' ed. 1850) 174; Id. (Maclach- of a fact material to the risk," per
lan's ed. 1887) 336. But see Moss Story. J.
v. Byrom, G Term Rep. 379, per Lord ' 15 Wiggin v. Boardman, 14 Mass.
Kenyon. 12, per Parker, C. J. See Wiggin
14 Haven v. Holland, 2 Mason (U. v. Amory, 13 Mass. 118, s. c. 14
S. C. C.) 230, 232, Fed. Cas. No. Mass. 1, 10, 7 Am. Dec. L75; Moss v.
6,229. "It appears to me that it is Byrom, 6 Term. Rep. 379, per Lord
wholly immaterial whether the ves- Kenyon; Hooe & Harrison v. Mason,
sel be described in the policy as a 1 Wash. (Va.) 204. See Bates v.
letter of marque or not, provided the Hewitt, L. R, 2 Q. B. 595, 15 N". K.
fact of her sailing under such a com- 1172, 36 L. J. Q. B. 282, 6 Ens?. Rul.
mission be known to the underwrit- Cas. 817, and criticism in 1 Parsons
ors. The description of the tact docs on Marine Ins. (ed. 1868) 481.
2932
DESCRIPTION OF PROPERTY § 1772
himself of an opportunity to ship his goods on board the first vessel
which may offer for that purpose, especially so in time.-: of war; or a
merchant may expect a consignment of goods from a foreign port
and be desirous that they should be immediately covered by a pol-
icy, and yet in such cases it may be impossible to specify the name
of the ship, or it may happen that to do so would injuriously affect
the insured's interests. In cases of this character, by usage an
authority so firmly established as to make the legality of such in-
surances indisputable, the policy may be effected upon goods on
board any ship or ships or on board ship or ships.16 If the policy
be upon "ship or ships," and the insurer knows the ship's name
and that that ship is advertised as in danger, which intelligence
could be applied by the underwriter had he been informed of the
ship's name, the failure to disclose, coupled with the other fact that
the ship is advertised as in danger, would be a concealment fatal to
a recovery.17 In cases of insurances on goods on board '"ship or
ships" it is the duty of the assured to declare the name of the ship
or ships so soon as he has knowledge thereof, but nevertheless it is
not a condition precedent to the right of recovery that the ship's
name be declared before loss, and cases frequently occur where the
assured has no knowledge of the ship's name before the loss.18 But
although the policy is upon property on board "ship or ships," it
may be so worded as to necessitate a declaration before loss,19 or it
may contain such stipulations that the insurers may not be liable in
case the vessel is not declared before loss, even though the name of
the vessel on which the goods are to be shipped or the loss be not
known to either party at the time; as where the policy provided that
in case of loss by certain perils "known to the applicant, the public,
or the company at the time application was made, and evidence
16Emerigon on Ins. (Meredith's Duer on Ins. (ed. 1846) 404, 409,
ed. 1850) c. vi. sec. 5, pp. 139 et 511-14.
seq.; 1 Marshall on Ins. (ed. 1810) "Arkansas Ins. Co. v. Bostick, 27
*172 et seq., 314; Kewley v. Ryan, 2 Ark. 539; Wells Fargo & Co. v. Pa-
ll. Black. 343; De Costa v. Firth, 4 eifie Ins. Co. 44 Cal. 397; Kennebec
Burr. 1966; 3 Kent's Commentaries County v. Augusta Ins. & Banking
(5th ed.) 257 et seq.; Orient Mu- Ins. Co. 6 Gray (72 Mass.) 204, per
tual Ins. Co. v. Wright, 23 How. (64 Merrick, J.; Crawford v. Hunter, 8
U. S.) 401, 405, 16 L. ed. 524, per Term Rep. 16; Harman v. Kingston,
Nelson, J. 3 Camp. 150, 14 Eng. Rul. Cas. 232;
17 But see 1 Arnould on Marine Glddstanes v. Royal Exchange Assur.
Ins. (Perkins' ed. 1850) 175, *173. Co. 11 Jur. N. S. 103, 5 Best. & S.
But the rule stated by Mr. Arnould 797, 34 L. J. Q. B. 30, 14 Eng. Rul.
is evidently not noted by Mr. Mac- Cas. 234.
laehlan: Id. (Maclachlan's ed. 1S87) "Edwards v. St. Louis Perpetual
omitted on p. 337, corresponding to Ins. Co. 7 Mo. 382.
p. 175 of Perkins' ed. And see 2
2933
§ 1773 JOYCE ON INSURANCE
whether such property was known to be involved or not." the com-
pany should qo1 be liable excepl it should be so provided in the
policy, and the name of the vessel not being known was not declared,
Inn the goods were on a vessel known by both parties to be Losl by
one of the peril- enumerated, the insurers were held discharged.20
Bui it' the valuation is extended under a policy on goods in any
-hip to be declared, and a1 that time of extension the ship he actual-
ly lost, and such fact he known to both parties, nevertheless the in-
surers will lie liable where it appears that it was not then known to
either party that the -hip lost was one upon which any risk had
been taken.1 Where the policy is effected on all sums al risk above
;, certain amount on goods on board any ship of a specified class to
be thereafter declared, the words "to be thereafter declared" do nol
give the righl to reject the risk when declared, but will he construed
10 mean that the insured will declare the name of the ship to which
they will apply the policy as soon as the excess over the specified
-urn i- taken.2 So in a policy on goods on hoard ship or ships to be
thereafter declared, the declaration doe- not require the under
writer's consent. Ii is a power conferred upon the assured which he
has a righl to exercise, and an error may he revoked and the in-
sured correcl hi- declaration.3 for an error declaring the ship or
ships will not he fatal.4 A policy on cargo by steamers cannot Ik;
limited to those only in which the insured had an interest, notwith-
standing such steamers were contemplated when the insurance was
effected.5
§ 1773. Ship or ships: right to apply policy in case of different
shipments and losses. — It was early decided that where an insurance
is effected by different policies in different amounts on goods on
board .-hip or -hip.-, the assured has the right by declaration to ap-
ply the policies to specific goods on hoard a particular ship, and
uhelv he so applies the policy the underwriters on the policy so
appropriated -hall alone he liable in case of the loss of that ship.
The genera] principle being also deduced that in case of policies on
board -hip or -hip- the assured may apply either policy to a loss of
20 Mark v. iEtna In.-. Co. 29 Ind. "158, 1 Maule & S. '217. See Carver
;;!HI County v. Manufacturers' Ins. Co. 6
^Gledstanes v. Royal Exchange Gray (72 Mass.) 214, per the court;
A.SSUT. Co. 11 Jur. X. S. L03, 5 Best Imperial .Marine Ins. Co. v. Fire Ins.
& S. 7D7, .'SI L. .1. Q. I'.. 30, 14 Eng. Corporation, Limited, 4 C. P. Div.
Rul. Cas. 234. 166.
2Gledstanes v. Royal Exchange * Robinson v. Touray, 3 Camp. 158,
Assur. Co. 11 Jur. X. S. 103, 5 Best 1 Maule & S. 217.
& S. 797", 34 L. J. Q. B. 30, 1 1 Eng. 5 New York Marine & Fire Ins. Co.
Rul. Cas. 234. v. Roberts, 4 Duer (11 N. Y. Super.
» Robinson v. Touray, 3 Camp. Ct.) 141.
2934
DESCRIPTION OF PROPERTY
1773
property on board any ship which comes within the terms thereof.6
In a case in Massachusetts the court said: "We think . . .
that the plaintiff . . . had the right (under the limitations
hereafter stated) to elect upon which of the shipments made they
would apply the policy stipulated for," declaring, however, that the
insured must notify the insurer of his election seasonably, and must
6 The two cases relied on by the less the sum of eleven hundred ami
leading text writers are Henchman v. eleven pounds for what had been
Offlev, and Kewley v. Ryan, 2 H. saved, the ground of the decision
Black. 345n, and ''2 H. Black. 343, being that the assured had a right
both reported in Marshall on Ins. to apply the policy for six thousand
(ed. 1810) *173, *175. In the case pounds to the ship lost, The respec-
of Henchman v. Offley, there were tive names of the ships differ in the
two separate policies; one for six regular report and Mr MarshaU s re-
,, , \ -, i j port ot this case: See note a, in
thousand pounds on o-0ods on board 4^ ,T , ,,, , T T- ' ,
, . t , . , • , i n -i Mr. Marshall s report, In ivewlev
any ship or ships which should sail y R & Ucy wag effecte(1 for
from certain specified ports between the Amount of twelve hundred and
designated dates, the other was for sixty pounds 0n goods of the as-
four thousand pounds on goods on sured on Doard ship A. Another in-
board any ship or ships which should SUrance for the sum of thirteen hun-
sail from specified ports between cer- dred pounds was effected under two
tain other dates. The insured loaded policies, one for seven hundred
goods on board a certain vessel, and pounds, another for six hundred
entered a certificate before a magis- pounds, on board ship or ships for
trate in India, appropriating each the same party, on like goods intend-
policv to specific goods on board each ed to be shipped. Ship A arrived
ship, naming them. The goods load- safely; the ship containing the sec-
ed on board ship A, to which the six ond car^°, was ,totally ,lost ,An ae"
thousand pounds policy was applied, tl0n w,as fought on the policy for
,, , n o ,, seven hundred pounds, and a recov-
were in the amount ot tour thou- ,. -, * , ,, ' , , ,-,-
■, . , , , 7 t j . , , . ery was adiudced, the court holding
sand eight hundred and eightv-mne - , * , , , °A '• .. „_i i.^^ iJT
, & ,, '7 4~, ,, that the assured might apply the in-
pounds; on the other vessel, B, the surance to whatever ship came with-
amount loaded was in the sum of in itg termg_ Thig decision was based
four thousand five hundred pounds. upon that first noted_ The rule de_
Both ships sailed within the stipu- duced by Mr> Marshall from this
lated time, ship B arriving in safety, case is this, that "If two distinct in-
ship A being lost, Evidence of the SUrances be made on goods for the
declaration made in India was sought same person and the same voyage,
to be rejected, but it was admitted the one on board a specific ship, the
by Lord Mansfield in evidence. It other on board any ship or ships,
was also urged in defense that there and the former arrive safe, but the
should be a contribution, as for an ]atter is lost, the insured shall apply
average loss, in the ratio of four the policy on goods on board ship or
thousand eight hundred and eighty- ships to the goods lost :" 1 Marshall
nine pounds to four thousand five on Ins. (ed. 1810) *173-75. See
hundred pounds, and that in any also 1 Arnould on Marine Ins. (Per-
event the defendants were only liable kins' ed. 1850) 177, *175, sec. 78;
for the former sum, and a verdict Id. (Maclachlan's ed. 1887) 340,
being found for the six thousand 341, 1 Parsons on Marine Ins. (ed.
pounds, and a new trial had, the re- 1868) 519, 1 Phillips on Ins. (3d
eoverv of this amount was adjudged ed.) 239-41, see. 438.
2935
§ 1774 JOYCE ON INSURANCE
act in entire good faith, and that the mere fact alone of loss intcr-
vening the election being seasonably made, and in good faith, does
not prevent the insurance attaching. The case, however, \wi> a
policy "losl or qoI lost on board any steamer or steamers," risks to
lie indorsed.7 Our authors agree, however, that if the insured lias
not appropriated, or by some ad or others ise evidenced an intent to
appropriate, the policy to goods in ;i particular ship, it will apply to
and cover all goods of the insured at risk which come clearly within
the terms of the policy by reason principally of the peculiar facili-
ties which are offered for fraud under this class of policies. I'.nt the
contract nevertheless would seem to require the utmosl good faith on
the part of both assured and assurer, as is evidenced by the fact of
the difficulty of proof to aid the assured in case he seeks a return
of the premium.8
§ 1774. Stock of goods, etc., in manufacturing: stock in trade of
mechanic: fire risk. — Aninsurance upon a stock of goods used in a
manufacturing business or industry, or upon the stock in trade of a
mechanic, covers everything necessarily or usually or commonly
employed in the manufacture of the particular class of goods to
which the insurance relates, and has a more extended application
than an insurance upon a stock in trade of a merchant.9 'Inns, a
policy on an engine and machinery for the manufacture of tinware
will cover dies used in giving form to the goods manufactured.10
So articles used in packing cover coal in the yard reasonable for the
amount of business done.11 and extrinsic evidence may he admis-
sible to show what presses are covered by a policy upon lithographic
presses.12 So the court may properly refuse to instruct the jury
that- stock in a tannery doe< not embrace bark properly used in the
business, hut exclusively refers to hides and leather; 13 and fixtures,
tools, materials implements of business, and everything necessary
to carry on the business are included in a policy on the stock in
trade of a mechanic.14 A policy on the insured's stock as rope manu-
7E. Carver Co. v. Manufacturers' Moadinger v. Mechanics' Ins. Co 2
Ins. Co. 6 Gray (72 Mass.) 214. Hall (N. Y.) 490, 527.
8 See citation of text -writers in 10 Seavey v. Central Mutual Fire
note preceding last. Jn<. Co. lit .Mass. 540.
9Phoenix Ins. Co. v. Favorite, 40 "Phoenix Ins. Co. v. Favorite, 1!>
II!. 259; Seavey v. Central Mutual III. 259.
Fire Cns. Cm. Ill Mass. 7)11); Baley 12Mauger v. Holyoke Mutual Fire
v- Dorchester Mutual Ins. Co. 12 Ins. Co. 1 Holmes (U. S. C. C.) 287,
Gray (78 Mass.) 545; Crosby v. Fed. Cas. No. 9,305.
Franklin In-. Co. 5 Gray (71 Mass.) 13 Planters' Mutual Ins. Co. v. De-
504; Pindar v. Kings Co. Ins. Co. 36 lord. 38 Md. 382.
X. Y. tils. 93 Am. I)-.-. 7)tl; Bryant "Moadinger v. Mechanics' Fire
\. Poughkeepsie In-. Co. Vi X. Y. Ins. Co. 2 Hall (N. Y.) 490, 527
200, s. c. 2] Barb. (X. Y.) 154;
203G
DESCRIPTION OF PROPERTY § 1775
facturers in a certain building, although it does not prevent using
the stock in the building for the purpose of rope manufacture. ye1
it will not cover the manufactured article.15 The stock in trade of
a baker covers everything necessary for the business, and includes
bread-troughs, sieves, pans, stoves, baskets, benches, etc.16 The
words "stock of lumber and goods manufactured and in process of
manufacturing in said building,'"' cover all the property in the
building, and not merely that in process of manufacture.17 So
lumber in process of manufacture for cradles and washing machines
is within a policy clause covering ''lumber manufactured or in
course of manufacture." 17a Unmanufactured or raw stock of the
kind mentioned is covered by a policy on a blacksmith and car-
riage-maker's stock, manufactured and in process of manufacture.18
§ 1775. Stock in trade: goods or merchandise for sale: fire risks. —
A policy on a stock in trade upon goods or merchandises generally
covers all articles of merchandise such as are usually kept for sale
in the business specified, unless the risk be limited by a specific
description of what the stock consists of, or unless the policy by ex-
plicit terms excludes goods of a certain or designated class or goods
of a named specific kind from its protection, or otherwise limits the
insurance to certain articles, although in certain cases prohibited
articles may be kept notwithstanding the inhibition in the policy.
The policy may also include articles which will not ordinarily be
insured except at special rates, and evidence may be admissible to
show that certain articles come within the description in the policy,
and in this connection the written description will control the
printed part.19 The words "stock in trade" may, however, be limit-
15 Wall v. Howard Ins. Co. 14 Massachusetts. — Whitmarsh v. Con-
Barb. (N. Y.) 383. way Fire Ins. Co. 16 Gray (82
16Moadinger v. Mechanics' Fire Mass.) 359, 77 Am. Dec. 414; Cros-
Ins. Co. 2 Hall (N. Y.) 490, 527. by v. Franklin Ins. Co. 5 Gray (71
17 North American Fire Ins. Co. v. Mass.) 504.
Throop, 22 Mich. 146, 7 Am. Rep. New Hampshire. — Crombie v.
638. Portsmouth Fire Ins. Co. 26 N. H.
17a Kreutzinger v. Standard, 13 0. 389.
AY. R. 645, 29 Canadian L. T. 633. New York.— Hall v. Insurance Co.
18 Spratlev v. Hartford Ins. Co. 1 of North America, 58 N. Y. 292, 17
Dill. (U. S. C. C.) 392, Fed. Cas. No. Am. Rep. 255; Pindar v. Kings
13,256. County Ins. Co. 36 N. Y. 648, 93 Am.
19 United States. — James v. Ly- Dec. 544; De Lonsj'uemere v. Trades-
coming Fire Ins. Co. 4 Cliff. (U. S. man's Ins. Co. 2 Hall (N. Y.) 589.
C. C.) 272, Fed. Cas. No. 7,182. Pennsylvania.— Citizens' Ins. Cn.
Louisiana. — Rafel v. Nashville Ins. v. McLaughlin, 53 Pa. St. 485;
Co. 7 La. Ann. 244. Franklin Fire Ins. Co. v. Updegraff,
Maine.— Moore v. Protection Ins. 43 Pa. St, 350.
Co. 29 Me. 97, 48 Am. Dec. 514. Vermont. — Corrigan v. Lycoming
2937
§ 1776 JOYCE ON INSURANCE
ed by other words and clauses.20 Where the insured conducted the
wholesale and retail drug business in .-tore- in the -nine building
separated only by a partition, and the policy was upon "their whole-
sale stock of drugs/' etc., and "other goods on hand for sale." while
"contained in the building," it was held thai the whole clause should
be construed together, and all the goods in the building, whether in
the wholesale or retail department and otherwise within the descrip-
tion, were covered.1 Reference must, however, be had to the char-
acter of the trade or business engaged in: thus, a policy upon a
jeweler's stock in trade doe- not cover blankets, although used for
the purpose of protecting the store from a near-by lire, and even
though purchased with the insurer's consent.2 Whale oil. friction
matches, glassware, and the like may he shown by parol evidence to
be included in the term "usual variety of a country -tore."3 The
woid- "stock of family groceries" will not. warrant keeping hazard-
ous articles..4 A policy on a "stock of vinegar in store and in tank"
does not cover a mixture in the process of manufacture, nor does an
insurance on the implements of the plant include the same.5
§ 1776. Stock in trade: stock in building: owner and goods of
others. — The policy may by its terms limit the meaning of the
words "manufactured or being manufactured," as where it stipu-
lates "not liable for loss on property owned by any other party"
unless specified. In such case it will not cover goods of others left
to he manufactured.6 And where the application stated that the
applicants proposed to insure "our property," and said application
was made a part of the contract, it was held thai the insurance only
covered such stock in trade as belonged to the insured, and not goods
consigned to them for sale on commission.' So a policy on all
articles making up the stock of a pork-house, and all within and
appurtenant to the buildings, covers everything belonging, neces-
sary to. and commonly used therein as part of the business, without
Fire Ins. Co. 53 Vt. 418, 38 Am. Rep. Co. 16 Gray (82 Mass. ) 359, 77 Am.
687. Dec. 414.
20 Rafel v. Nashville Ins. Co. 7 La. 4 People's Ins. Co. v. Kuhn, 1 Cent.
A.m. 244. L. J. (Mo.) 214, s. e. 12 lleisk. (50
Stock of merchandise defined, see Tenn.) 515.
Spring Garden Ins. Co. v. Brown, 5 Panes v. Germania Ins. Co. 44
— Tex. Civ. App. — , 143 S. W. La. Ann. 123, 10 So. 495, 21 Ins.
292. L. .1. 306.
1 Wilson Din- Co. v. Phoenix 6GetcheU v. .Etna Ins. Co. 14
Assur. Co. 110 X. C. 350, 14 S. E. Allen (!)(i Mass.) 325.
R. 790. 'Planters' Mutual Ins. Co. v.
2 Wells v. Boston Ins. Co. 6 Pick. Engle, 52 Md. 468, one judge dis-
(2:; Mass.) 182. senting.
3 Whit marsh v. Conway Fire Ins.
2938
DESCRIPTION OF PROPERTY § 1777
regard to the particular ownership of .such articles.8 A policy issued
to a railroad corporation upon "any property upon which they may
be liable in freight buildings or yards" of the corporation covers
merchandise belonging to other parties for which the corporation
are liable as common carriers, although other common carriers are
by contract bound to indemnify the corporation for all loss upon
such merchandise. But such a policy will not cover articles of a
kind specified in the policy to be not insurable unless by special
agreement.9 But in cases of property held in trust or on commis-
sion, if the policy stipulates that it must be declared as such, the
provision must be complied with, otherwise property so held will
not be covered.10
§ 1777. Stock in trade, etc., may cover property specifically ex-
cluded or the keeping of which is prohibited. — Although the policy
stipulates that the keeping or storing enumerated articles or articles
of a class usually denominated as hazardous, extrahazardous, and
the like, will avoid the contract, yet if the property described in the
policy and the purposes to which the building is dedicated sufficient-
ly indicate the nature and character of the articles kept or to be
kept, or if the risk is upon a stock of goods, and the description in-
dicates that it is a class of property which usually contemplates the
keeping of a small quantity of a hazardous article, and the business
to be transacted and the nature and extent of the risk must have
been known to the insurers to embrace articles and pursuits -pro-
hibited by the schedule, the policy is not avoided by the keeping of
such of those articles as would come within the above rule.11 The
above rule, however, does not apply to and cover those cases where
instead of a general description covering such stock there is such a
specific description as to clearly evidence the intent of the parties to
exclude the keeping of goods other than those of the specified class,
and even knowledge that the insured kept such goods may be pre-
sumed on the part of the insurers.12 Where the written part of a
fire policy includes "drugs" and "such other merchandise as is
usually kept in a country store," and the printed part excepts
8 .Etna Ins. Co. v. Jackson, 16 B. v. Taylor, 5 Minn. 492 ; Archer v.
Mon. (55 Ky.) 242. Merchants' & Manufacturers' Ins.
9 Commonwealth v. Hide, 112 Co. 43 Mo. 434; New York v. Brook-
Mass. 136, 17 Am. Rep. 72. See lyn Fire Ins. Co. 41 Barb. (N. Y.)
Eastern R. R. Co. v. Relief F. Ins. 431; Citizens' Ins. Co. v. McLaugh-
Co. 98 Mass. 420, 105 Mass. 570. lin, 53 Pa. St. 485.
10 See § 2001 herein ; Duncan v. 12 Pindar v. Continental Ins. Co.
Sun Mutual Ins. Co. 12 La. Ann. 47 N. Y. 114, s. c. 38 N. Y. 304, 97
486. Am. Dec. 795; Pittsburgh Ins. Co. v.
11 Niagara Fire Ins. Co. v. De Frazee, 107 Pa. St. 521.
Graff, 12 Mich. 124 ; Phoenix Ins. Co.
2939
§ 177S JOYCE ON INSURANCE
benzine without written permission, it is a question of fact whether
benzine is permitted.13 In a policy insuring "manufactured barrels
and materials for same," the word '''materials" mean- such as are
necessarily or usually or commonly employed in their manufacture,
and benzine being prohibited by the policy is not included as an
article insured or covered by the above language in the absence of
proof: nor could an insurance company have presumptive knowl-
1 lint benzine was an article necessarily or commonly used in
the manufacture of barrels.14 If the printed clauses prohibit such
keeping and the written ones permit it, the written clauses will pre-
vail.15
§ 1778. Whaling and fishing voyages: outfits: stores, catching,
etc. — The word "outfits" has a more extensive meaning when
used in connection with whaling voyages than when applied to ships
in general, and will include in the former case, in addition to the
ordinary tackle and apparel of the ship, those articles necessary
for consumption and use in prosecuting a voyage for the term con-
templated, or in accomplishing the object and purpose thereof,
such as stores, provisions, clothing, casks, stoves, boilers, cisterns,
and fishing gear, apparatus, and instruments for storing the pro-
duce or catchings, and the term is also held to cover by usage in
fishing voyages a certain proportion of the catchings substituted for
the outfits consumed or used.16 Although under a custom for men
on fishing voyages to furnish their own provisions, as in case of
cod and mackerel fishing, such provisions will not be covered by
the term "outfit." The word "catchings" is the technical word,
which in whaling voyages includes the blubber taken on board, the
oil, and casks, and inasmuch as "outfits" generally refers to the
outward lading, it is said to be a reasonable inference that the word
"cargo" is limited to the produce and "catchings" on board the
ship for the homeward voyage, and it is also declared that there is
no reason why on principle "cargo" should not cover "outfits."17
The words "cargo" or "goods and merchandise" will, however,
cover oil, catchings, and other products of the adventure.18 Under
13 Carrigan v. Lycoming Fire Ins. 3 Sum. (U. S. C. C.) 132, Fed. Cas.
Co. 53 Vt. 418, 38 Am. Rep. 687. X... 6,013; Bill v. Patten, 8 East,
14McFarland v. Pcabody Ins. Co. 373, 13 Eng. Rul. Cas. 595, por Lord
ii W. Va. 425. Ellenborough.
15 Stout v. Commercial Ins. Co. 11 17 Macy v. Whaling Ins. Co. 9 Met.
Biss. (U. S. C. C.) 309, 12 Fed. 554, (50 Mass.) 354, 366, per Hi. I. hard. .1.
11 Ins. L. J. 688. But see Steinbach See also Paddock v. Franklin Ins.
v. Relict' Fire his. Co. 13 Wall. (80 Co. 11 Pick. (28 Mass.) 227, per
U. S.) 183, 20 L. ed. 615. Shaw, C. J.
16"Macy v. Whaling Ins. Co. 9 18 Paddock v. Franklin Ins. • Co. 11
Met. (50 Mass.) 354, 366, per Eub- Pick. (28 Mass.) 227; Hill v. Patten,
bard, J.; Hancox v. Fishing Ins. Co. 8 East, 374, 13 Eng. Rul. Cas. 595.
2910
DESCRIPTION OF PROPERTY § 1778
a policy on "his five-eighths catchings" of a whaler, if the owner's
interest is specified "as about two-thirds" and the "crew's .-hare.
about one-third" is expressly excluded, this is held to mean the
owner's share reserved according to the ratio of the lays agreed on
in the shipping articles, and that the crew's accounts with the vessel
at the time of the loss should not be considered.19 An insurance
on "outfit and upon catchings" substituted for the outfits in a whal-
ing voyage protects the "blubber'' or pieces of whale flesh cut from
the whale and on deck.20 AYe have seen in a prior section that the
outfits in an adventure of this character are not covered by the
word "ship." "Oil, bone, and other takings" covers by usage sea-
elephant oil.1
19 Swift v. Mercantile Ins. Co. 113 1 Child v. Sun Mutual Ins. Co. 3
Mass. 287. Sand. (N. Y.) 26.
20 Roger v. Mechanics'- Ins. Co. 1
Story (U. S. C. C.) 603, Fed. Cas.
No. 12,016.
2941
CHAPTER LIV.
CON ( ' E A I . M E X T— M AIM N E RISKS
§ 1780. Coneealmenl in marine insurances: generally.
§ L787. Coneealmenl arising from uegligence, accident, mistake, etc., avoids.
§ L788. Concealment: voluntary ignorance will not excuse.
§ L789. A specific and lull disclosure is required, no! an evasive one, or
one in genera] terms.
§ L790. Coneealmenl is referred to the lime of making the contract.
§ L791. What constitutes a ••material fact": must it be a fact material to
the risk.
§ 17! »"J. Same subject : opinions of the text-writers.
S 1793. Same subject : conclusion.
^ L794. Whatever affects the state and condition of the ship at the time
is material.
^ 17!)"). Facts and information affecting the condition or safety of the
ship on her voyage: subsequently occurring events.
§ 179G. Suspicions: rumors: reports: apprehensions: opinions: gener-
al intelligence.
§ 1797. Same subject : cases.
§ 1798. Facts implied from, or underwriter put on inquiry by information
given : waiver.
§ 1799. Information, belief, or expectation of third person.
§ 1800. Failure to communicate a fact which would show known informa
tion is material.
§ 1801. Where intelligence or report proves untrue.
§ 1802. Intelligence, reports, or rumors of loss.
§ 1803. Whether time of sailing must be disclosed: opinions of text-
writers.
§ 1804. Same subject : cases.
§ 1805. Same subject : the general rule.
§ 1800. Underwriters presumed to know causes which occasion natural
perils.
§ 1807. Restrictions on commerce: commercial and foreign regulations.
§ 1808. Underwriter presumed to know causes which occasion political
peril.
§ 1809. Degree of publicity which will bind underwriter with knowledge*
of material tad.
2942
CONCEALMENT— MARINE RISKS § 1786
§ 1810. Same subject: the English rule.
§ 1811. Same subject : the case of Bates v. Hewitt.
§ 1812. Same subject: opinions of Mr. Arnould and Mr. Maclachlan.
§ 1813. Usage need not be disclosed.
§ 1814. Exceptions to last rule.
§ 1815. Ownership of vessel need not be stated when not material and
insurance is on cargo.
§ 1816. Nature and condition of cargo.
§ 1817. Cases where entire contract is not vitiated, but only that part
relating to risk concealed.
§ 1818. Whether it need be disclosed that goods are contraband : bellig-
erent risks: neutral: national character.
§ 1819. Presumption concerning underwriter's knowledge of ports and
places.
§ 1820. Repairs consequent upon outward voyage,
§ 1821. Disclosure of interest in ship or goods.
§ 1822. Must an equitable title be disclosed.
§ 1823. Facts not within assured's knowledge: degree of diligence re-
quired of assured.
§ 1824. Need not disclose matters of express or implied warranty.
§ 1825. Whether information which falsities a warranty must be disclosed.
§ 1826. Mode of construction of vessels.
§ 1827. Destination of vessel : port or ports.
§ 1828. By-gone calamities : previous condition of ship : latest intelligence.
§ 1829. That goods are to be stowed on deck need not be disclosed.
§ 1830. Particular language of bill of lading.
§ 1831. Excepted risks.
§ 1832. Ship's papers : false clearance, etc.
§ 1833. Whether the fact that letters of marque are on board need not be
disclosed.
§ 1834. Ship's true port of loading.
§ 1835. Other matters not necessary to be disclosed.
§ 1836. Other matters necessary to be disclosed.
§ 1837. Where inquiries are made.
§ 1786. Concealment in marine insurances: generally. — Conceal-
ment in marine insurances is the failure to disclose any material
fact or circumstance which is in fact or law within, or which ought
to be within, the knowledge of one party, and of which the other
party has not actual or presumptive knowledge. This rule applies
to both assured and underwriter, and rests upon the doctrine of good
faith as well as the prevention of fraud. There are certain gen end
principles governing this matter which may be stated substantially
as follows : The underwriter is presumed to act upon the belief
2943
§ L786 JOYCE ON INSURANCE
thai the assured is not a1 tin1 time of effecting the insurance in pos-
session of any material facts which he has not disclosed, and that
do loss has occurred which by reasonable diligence might have been
communicated. It is obligatory upon the assured, if he desires to
avoid the charge of material concealment, to place the underwriter
,i- far as possible in the same situation as he himself stands, so thai
the latter may have the same means and opportunity of judging
the character and value of the risk. The chances of the assured
and underwriter should be equal in this respect. The common
ground on which both the assured and underwriter oughl to stand
is thai of good faith and fairness. The assured is bound to com-
municate what it is in his power to communicate by ordinary
means, and which might be communicated by the exercise of due
and reasonable diligence. The assured is also obligated to com-
municate what is known in mercantile language as intelligence,
material in itself or rendered so by other facts and circumstances.
Common prudence would dictate to a reasonable business man that
he should keep himself informed of all fact- and circumstances
whatsoever thai mighl have a bearing upon the nature and perils
of the risk were he himself to assume it. and that he should un-
reservedly communicate the same to the underwriter when he asks
him to assume the risk. The information imparted should be as
full and specific, so far as material, as that possessed by the assured.
The facts as stated should not evade the whole truth by bearing
merely the semblance thereof. The truth must be stated. It is
not enough thai the truth might be inferred from what is disclosed,
and which is evidently intended to convey a wrong impression.
Vague and general statements should not be made when specific,
full, and exact information is in the possession of the assured and
could be given. No presumption exists that Ihe assured or his
agents have concealed material facts. The concealment and ma-
teriality must be proven. There are many circumstances which are
not material; they could not reasonably he held to affect the judg-
ment of the underwriter in determining whether he will assume the
risk, or, if he assumes it. what premium he will charge. Conceal-
ment of such facts will not be fatal. Again, the means of infor-
mation and juduing may be equally open to both parties, and con-
cerning such matte'- each professes to act from his own skill and
sagacity, and there is no need in such cases, for either to communi-
cate to the other party. Silence in such matters does not affeel the
validity of the contract: nor is it incumbent upon the assured to
state what the underwriter actually knows, no matter how the
knowledge was obtained, nor need matters be mentioned which the
underwriter ought to know, or is presumed to know, nor of what
he waives information concerning, nor what lie takes upon himself
2044
CONCEALMENT- MARINE RISKS
§ 1786
the knowledge of. The main point in all cases is, Was there at the
time the contract was effected a fair and truthful representation of
material facts, or a fraudulent suppression of the truth in matters
which arc material; or there being no fraud or design, was there a
failure, through neglect, accidental, or otherwise, to disclose facts
which vary materially the object of the insurance and change the
risk understood to be run, or increase the hazard? The preceding
statements will be found sustained by the cases and opinions of the
courts herein cited below, and also in those noted throughout this
chapter.2
2 Carter v. Boehm, 3 Burr. 1905, 1 Blackburn Low & Co. v. Haslam, L.
Wm. Black. 593, 13 Eng. Rul. Cas. R. 21 Q. B. D. 144, 59 L. T. 407, 57
501, per Lord Mansfield, noted at L. J. Q. B. 479, 6 Asp. M. C. 326;
length under § 1845 herein, in note Ratcliffe v. Shoolbred, reported in
19. 1 Marshall on Ins. (ed. 1810) *468;
See also the following eases : Shirley v. Wilkinson, 1 Doug. 306;
United States. — Russell v. Union Shoolbred v. Nutt, reported in 1
Ins. Co. 4 Dall. (4 U. S.) 421, 424, Park on Ins. (8th ed.) 492; 1 Mar-
1 L. ed. 888; Murgatroyd v. Craw- shall on Ins. (ed. 1810)
ford, 3 Dall. (3 U. S.) 491, 1 L. ed. "Dolus malus non tantum in eo est,
692; McLanahan v. Universal Ins. qui fallendi causa obscuri loquitur;
Co. 1 Pet. (26 U. S.) 170, 185, 7 L. sed etiam qui insidiose obscuri dissi-
ed. 98; Biays v. Union Ins. Co. 1 mulat;" and again: "Honorable mer-
Wash. (U. S. C. C.) 506, Fed. Cas. chants . . . never abuse the ig-
No. 1,383. norance of the assured, and when
Maryland. — Neptune Ins. Co. v. effecting insurance for themselves
Piobinson. 11 Gill & J. (Mel.) 256. they omit no circumstance of the
Massachusetts. — Oliver v. Greene, risks to which the insurers are about
3 Mass. 133, 3 Am. Dec. 96. to expose themselves:" Emerigon on
New York. — Howe Machine Co. v. Ins. (Meredith's ed. 1850) c. i. sec.
Farrington, 82 N. Y. 121, 126; De 5, pp. 17 et seq.; c. xv. sec. 3, pp.
Longuemere v. New York Fire Ins. 634 et seq. "A neglect to communi-
Co. 10 Johns. (N. Y.) 120; Ely v. cate that which a party knows and
Hallett, 2 Caines (N. Y.) 57. ought to communicate is called a con-
Pennsylvania. — Norris v. Insur- ceahnent:" Cal. Civ. Code, sec. 2561.
ance Co. of North America, 3 Yeates "'Each party to a contract of insur-
(Pa.) 84, 2 Am. Dec. 360. ance must communicate to the other
England. — Salvador v. Hopkins, 3 in good faith all facts within his
Burr. 1707; Proudfoot v. Montefiore, knowledge which are or which he be-
L. R. 2 Q. B. 511; Pimm v. Lewis, lieves to be material to the contract,
2 Fost. & F. 77S: Seaman v. Fonre- and which the other has not the
reau, 2 Strange. 1183; Blackburn v. means of ascertaining, as to which
Vigors, L. R. 12 App. Cas. 531. 13 he makes no warranty:" Deerim:-.-
Eng. Rul. Cas. 514; North British Annot. Civ. Code Cal. sees. 2563,
Assurance Co. v. Lloyd, 10 Exch. 2580n, 2669.
523; Friere v. Woodhouse, Holt, N. The marine insurance act of Eng-
P. 572; Bates v. Hewitt, 4 Fost. & F. land 1906 (6 Edw. VII. c. 41) sec.
1023, 36 L. J. Q. B. 282, 6 Eng. Rul. 17; Lutterworth's Twentieth Centurv
Cas. 817; Ionides v. Pender, L. R. 9 Stat. (1902-1909) p. 402, provides
Q. B. 531; Haywood v. Rodgers, 4 that "a contract of marine insurance
East, 590. per Lord Ellenborough ; is a contract based upon the utmost
Joyce Ins. Vol. III.— 185. " 2945
g§ 1787, . JOYCE OX INSURANCE
§ 1787. Concealment arising from negligence, accident, mistake,
etc., avoids. — A concealmenl of any material fact, circumstance,
intell or information which ought to have been disclosed,
and of which the insured has or ought to have, or is presumed to
have knowledge, will be equally fatal whether such concealmenl
- from fraud, design, negligence, mistake, accident, or inad-
vertence.8
§ 1788. Concealment: voluntary ignorance will not excuse. — If
the assured fails to disclose material facts to the underwriter, his
voluntary ignorance, whether it arises from fraud,, design, or neg-
ice, will not excuse him.4
good faith, and, if the utmost good (IT. S. C. C.) 385. 387, Fed. Cas. Xo.
faith be not observed by either party, 5,872.
the contract may be avoided by Hie Connecticut. — Bebee v. Fire Ins.
other party." This provision is un- Co. 25 Conn. 51, 65 Am. Dee. 553.
der the head of disclosures and rep- Massachusetts. — Stetson v. Mi
resentations. Applied in Thames & ehusetts .Mutual Fire Ins. Co. 4 Mas-.
Mersey Marine Ins. Co. Ltd. v. 330, 3 Am. Dee. 217, per Sewall, J.
"Guni'ord" Ship Co. (Southern Ma- New York. — New York Bowery
rine Mutual Assur. Assoc. Ltd. v. Fire Co. v. New York Fire Ins. Co.
"Gunford" Ship Co.) [1911] A. C. 17 Wend. (N. Y.) 359; Burritt v.
529, 534, SO L. J. P. C. 146, 105 L. Saratoga Mutual Fire Ins. Co. 5 Hill
T. 312, 16 Com. Cas. 270. 12 Asp. (X. Y.) 183, 40 Am. Dee. 345, per
M. C. 40, 55 S. J. 031, 27 T. L. R. Bronson, J.
518, Lord Alverstone, C. J. See Ma- South Carolina. — Union Ins. Co.
rine ins. act 1906, sees. 18, 19, given v. Stoney, Harp. (S. C.) *235, s. c.
in Appendix C. herein. Stoney v. Union Ins. Co. 3 McCord
"It is a fundamental principle (S. C.) *387; Money v. Union Ins.
that a contract of marine insurance Co. 4 McCord (S. C.) *511 (result-
is a contract uberrimae fidei, that is, ing in third verdict for plaintiff sus-
a contract based upon the utmost tained).
good faith, and. if the utmost good England.— Thompson v. Buchanan.
faith he not observed by either party, 4 Bos. & P. 482: Hodgson v. Rich-
the contract may he avoided by the ardson, 1 Wm. Black. 463; McDow-
other party." 17 Earl of Halsbury's al\l'./.razer> }„ Doug\ } !* : . Shl*ley
Laws of England, p. 404. J'- Wukmson, 3 Doug. 41 306n; Car-
On concealment of facts by insured gf \ Bjj '"'V, ,,,m- 2 n 1 ^m.
in case of Doyds policies, see note in Blac^ 5J\13 f*f R~ ' Cas • 501^
55 T R \ 20? Per Lord Mansfield, noted under s
' United States. - McLanahan v. 184£ herein in note.
TT . , T /-. i t, t /nr tt c \ The nondisclosure ot a material
Universal [ns. Co. 1 Pet. (26 U. S.) faet from . ran negiigenCe, or
1/0 >,7L. ed. 98, per Story J ; Kohne illJMlverteil,.c, is as Eata] 1o the con.
v. Insurance Co of North America, tract ag whore ifc ig the regult of de.
1 \\ ash. (U. S. C. C.) 158, 161, led. sigQ . „ McArthur on Marine Ins. (ed.
Cas. No. 7,922, per Washington, J.; ls<)n) 8; Curry v. Commonwealth
Vale v. Phoenix Ins. Co. 1 Wash. (U. |,,<. Co. 10 Pick. (27 Mass.) 535, 20
S. C. C.) 283, Fed. Cas. Xo. Hi.Sll; Am. Dec. 5 17.
Biays v. Union Ins. Co. 1 Wash. (U. *Biays v. Union Ins. Co. 1 Wash.
S. C. C.) 500, Fed. Cas. No. 1,383; (U. S. C. C.) 500, Fed. Cas. No.
Moses v. Delaware Ins. Co. 1 Wash. 1,383.
2946
CONCEALMENT— MARINE RISKS §§ 1789, 1790
§ 1789. A specific and full disclosure is required, not an evasive
one or one in general terms. — The assured is obligated by good faith
and the requirements of the contract of insurance to make a spe-
cific and full disclosure of all material facts of which he has or
ought to have knowledge, and an evasive statement which is in
reality only a part disclosure, or one made in general terms, or one
calculated to give rise to an inference that the risk is less hazardous
than it is in reality, is concealment; for the underwriters should be
placed so far as possible, as to knowledge of material facts, upon the
same grounds as the assured.5
§ 1790. Concealment is referred to the time of making the con-
tract.— A concealment has reference not to the event itself, but to
the materiality of the fact at the time of" making the contract or
assuming the risk,6 and cannot depend upon subsequent events or
facts learned subsequently to assuming the risk; and in England,
for this purpose, the time of making the contract will be held to be
that when the slip is initialed, notwithstanding the stamp act.7
"The duty of the assured or of his agent in making such com-
munications of material facts must attach at the time of making the
insurance, and cannot depend upon the subsequent event." 8
"These things are to be considered in the situation they were at
5 Moses v. Delaware Ins. Co. 1 J.; Lynch v. Hamilton, 3 Taunt. 37,
Wash. (C. C.) 385, Fed. Cas. No. 12 R. R. 591, per Lord Mansfield;
5,872; Carpenter v. American Ins. Striblev v. Imperial Marine Ins. Co.
Co. 1 Story (U. S. C. C.) 57, Fed. 1 Q. B.*" D. 507, 45 L. J. Q. B. 396, 34
Cas. No. 2,248 ; Ely v. Hallett, 2 L. T. 281, 3 Asp. M. C. 134, 13 Eng.
Caines (N. Y.) 57, per Thompson, J.; Rul. Cas. 491, per the court; Emer-
Storey v. Union Ins. Co. 3 MeCord igon on Ins. (Meredith's ed. 1850) c.
(S. C.) 387, 15 Am. Dee. 634; Shir- i. sec. 5, p. 18. See McLanahan v.
ley v. Wilkinson, 1 Doug. 306n, 3 Universal Ins. Co. 1 Pet. (26 U. S.)
Doug. 41, per the court ; 3 Kent's 170, 7 L. ed. 98, per Story, J. ; Mar-
Commentaries, 283. "A conceal- shall v. Union Ins. Co. 2 Wash. (U.
ment, whether intentional or uninten- S. C. C.) 357, Fed. Cas. No. 9,133,
tional, entitles the injured party to per Washington, J.
rescind a contract of insurance:" 7 Cory v. Patton. 7 L. R. Q. B.
Cal. Civ. Code, sec. 2562. 304, 41 *L. J. Q. B. 195n, aff'd 9 L. R.
6 Livingston v. Maryland Ins. Co. Q. B. 577, 43 L. J. Q. B. 181; Lish-
6 Cranch (10 U. S.) 274, 279, 3 L. man v. Northern Maritime Ins. Co.
ed. 222; Maryland Ins. Co. v. Rud- L. R. 8 Com. P. 216, 10 Com. P. 179,
en, 6 Cranch (10 U. S.) 338, 3 L. ed. aff'd 10 L. R. Com. P. 179; Ionides
242; Commercial Mutual Marine Ins. v. Pacific Fire & Marine Ins. Co. L.
Co. v. Union Mutual Marine Ins. Co. R. 7 Q. B. 517, 26 L. T. 738, 13 Eng.
19 How. (60 U. S.) 318, 15 L. ed. Rul. Cas. 471, cited in 1 Arnould on
636; Lynch v. Dunnsford, 14 East, Marine Ins. (Maclachlan's ed.) 1887,
494, 497, 13 R. R. 295, per Lord 540.
Ellenborough ; Ely v. Hallett, 2 8 Lynch v. Dunsf ord, 14 East,
Caines (N. Y.) 57, per Thompson, *494, per Lord Ellenborough.
2947
§§ 1791, 1702 JOYCE ON INSURANCE
the time of the contract, and not to be judged of by subsequent
events." '■'
§ 1791. What constitutes a "material fact:" must it be a fact
material to the risk. — The concealment of immaterial circum-
stances by the assured will not vitiate the policy.10 I'm the question
arises. What constitutes a materia] fad or circumstance? Mr. Duer
has exhaustively considered the point whether the fad concealed
must be one material to the risk alone or one which would influence
the mind of the underwriter in determining whether he will accept
the risk, at what premium, and so embrace facts extrinsic to the
risks, and he says the authorities are conflicting.11 Some of the
judges have unequivocally stated the rule to be this, that every
fact and intelligence must be communicated that may affect the
mind of the underwriter upon the point whether he will insure at
all and as to the point what premium lie will charge.12 So it is
held that this rule governs, even though the fact concealed may
not be material to the risk.13 Other judges have stated that the
facts concealed must he material to the risk.14 and in other opin-
ions the terms "material facts" and "material to the risk" are used
interchangeably.16
§ 1792. Same subject: opinions of the text-writers. — Emerigon
says: "One is guilty of fraud . . . when to procure himself
insurers or to induce them to rest, content with a less premium
he conceals important circumstances which it concerns
them to know before underwriting the policy. ... So far as
the nature of the contract will allow, the chance of the insurers
and of the assured must be the same. A person about to effect in-
surance must reveal all the facts which it imports the assurers to
know."16 Mr. Marshall says: "Every fact and circumstance
which can possibly influence the mind of any prudent and intelli-
gent insurer in determining whether he will underwrite the policy
at all or at what premium he will underwrite it is material." 17
Mr. Arnould says: "By a 'material fact' is meant one which if
communicated to the underwriter would induce him either to re-
fuse the insurance altogether, or not to effect it except at a higher
premium ; " and again : "It is the duty of the assured to communi-
9 Seaman v. Fonereau, 2 Strange, 14 Livingston v. Maryland Ins. Co.
118:5, per Lea. C. J. 6 Crunch (10 U. S.) 274, 3 L. ed.
10 Pine v. Vanuxem, 3 Yeates (Pa.) 222; Maryland Ins. Co. v. Ruden, 6
30. Craneh (10 U. S.) 338, 3 L. ed. 242.
11 2 Duer on Marine Ins. (ed. 1846) 15 See opinions in § 1792 herein.
388 et seq., 518 et seq. 16 Emerigon on Ins. (Meredith's
12 See opinions in § 1792 herein, ed. 1850) c. i. sec. 5, pp. 17 et seq.
18 Rivaz v. Gerussi, 6 Q. B. D. 222, "1 Marshall on Ins. (ed. 1810)
44 L. T. 79, 50 L. J. Q. B. 176. *467.
2948
CONCEALMENT— MARINE RISKS § 1793
cate to the underwriter all the intelligence that he has that may
affect the mind of the underwriter in either of these two ways: 1.
As to the point whether he will insure at all; 2. As to the point at
what premium he will insure." 18
§ 1793. Same subject: conclusion. — The underwriter takes upon
himself certain perils, and his liability to loss is based thereon
under the contract made. Every prudent underwriter weighs care-
fully the probable extent of that liability in the light of all the
facts and circumstances, intelligence, and information imparted to
him or within his own knowledge which would increase or tend to
increase the same, and such facts, circumstances, intelligence, and
information must be and are material so far as they measure or
aid in determining the insurers' liability were they to assume the
risk, and are in this sense material to the risk. The test seems to
be this, Is the fact such that it might, in the mind of any prudent
underwriter governing himself by the principles on which under-
writers in practice act, increase the liability to loss and thus influence
him in determining whether he will accept the risk at all or at what
premium? It is difficult to conceive how a prudent and reasonable
underwriter acting within these conditions, and having in view
the obligations of the contract which he is about to make, can have
his judgment upon the point of his liability to loss influenced by a
fact which does not affect that liability and is wholly extrinsic
thereto. If it is a fact which would influence his judgment under
the conditions above stated, it is in reality material to the risk, even
though it might possibly be not strictly material to the technical
peril assured. Such a rule would impose no hardship, for its ap-
plication does not rest upon the arbitrary and perhaps unreasonable
judgment of a single underwriter, but upon certain principles gov-
erning prudent and reasonable underwriters in practice. It would
seem, therefore, that a concealment is material, with reference to
the validity of the risk or right to recover, when the fact concealed
would if known have shown the risks or the liability of the under-
writer to loss to be greater than appears upon the representation
made, and would in consequence have induced a rational under-
writer, acting upon principles which are presumed to govern pru-
dent underwriters in practice, to have refused the risk or to have
demanded a higher premium.19 Facts must be regarded as material
18 1 Arnould on Marine Ins. (Per- on Ins. (ed. 1846) 383, 388 et seq.,
kins' ed. 1850) 540, 542, *536, *538; (58] note, 468, sec. 52.
Id. (Maelachlan's ed. 1887) 548, 560. 19 Murgatroyd v. Crawford, 3 Dall.
See also 1 Phillips on Ins. (3d ed.) (3 U. S.) 491, 1 L. ed. 692; Carpen-
312-16, sees. 572-75; 1 Parsons on fcer v. American Ins. Co. 1 Story (U.
Marine Ins. (ed. 1868) 467; 2 Duer S. C. C.) 57. Fed. Cas. No. 2,428;
2949
§ 1794
JOYCE OX INSURANCE
to the risk in insurance when knowledge or ignorance thereof would
naturally influence the judgmenl of the underwriter in making the
contract at all or in estimating the degree and character of the risk,
or in fixing the rate of the premium.20 There are, however, cer-
tain facts which are not necessary to be disclosed, as will appear
i subsequenl -eel ions under this chapter.
§ 1794. Whatever affects the state and condition of the ship at
the time is material. — Whatsoever the insured knows concerning
state and conditions of the ship at the time must be disclosed.1
1 1' the broker at the time the insurance is effected, in representing
to the underwriter the state of the ship and the last intelligence
concerning her, does not disclose the whole, and what is concealed
appears material to the jury, it is fatal, even though the conceal-
ment be innocent and be deemed immaterial by the broker.2
Where an insurance is upon a steamboat insured against fire, which
Is tied up for repairs and is so seriously damaged as to be unable to
run, such facts materially affeel the risk, and if concealed are fatal
to a recovery.3 So the fact that the ship has been driven upon a
rock at an outport is material although she gets off without apparent
damage, the ship being insured for her homeward voyage "at and
from'* and the loss resulting from the accident.4 It is not, however,
Haley v. Dorchester Mutual Fire Ins. 336; Rosenheim v. American Ins. Co.
Co. 12 Gray (78 Mass.) 545; Ker 33 Mo. 230, 239; Boggs v. American
nochen v. New York Bowery Fire Ins. Co. 30 Mo. 63 ; Quinn v. Nation-
Ins. Co. 5 Duer (N. Y.) 1: Hay- al Assur. Co. 1 dones & C. (Ir.) 316;
wood v. Rodgers, 4 East, 590, per [onides v. Pender, L. R. 9 Q. B. 531,
Lord Ellenborous:h ; Rivaz v. Gerus- -'in \j. T. 547.
si, 6 Q. B. I). 222, 11 1,. 'I'. 79, 50 L. 20 Daniels v. Hudson River Fire
J. Q. B. 17ti: Carter v. Boehm. 3 Ins. Co. 12 Cush. (66 Mass.) 416,59
Burr. 1905. 1 Win. Black. 593, 13 Am. Dee. 102. Any fact is material.
Eng. K'lil. < !as. 501, per Lord Mans- the knowledge or ignorance of which
geld. would naturally influence an insurer
"Materiality is to be determined, in making the contract at all, or in
not by the event, bul solely by the estimating the degree and character
probabli and reasonable influence of of the risk, or in fixing the rate of
the facts upon the party to whom insurance: Clark v. Union Mutual
ill.- communication is due, in form- Fire Ins. Co. 40 N. H. 333, 77 Am.
inu' his estimate of the disadvantages Dec. 721.
n\- th,. proposed contract or in mak- IFillis v. Brutter, reported in 1
ing his inquiries : " Deering's Annot. Marshall on Ins. (ed. 1810) *467,
Civ. Code C:i\. sec. 2565; Columbian per Lord Mansfield.
[ns. Co. v. Lawrence, 10 Pet. (35 U. 2 Shirley v. Wilkinson, 1 Doug.
S.) 507, 0 L. ed. 512; Livingston v. 306n (2 B. M. 22 Geo. III). See
Maryland Ens. Co. 6 Cranch (10 1'. Ely v. Hallett, 2 Caines (N. Y.) 57.
s.i 274. 3 L. ed. '2-I-2; Bardman v. 3 Eamblet v. City Ins. Co. 36 Fed.
Firemen's In,. 20 Fed. 594; Protec- 118.
tion In-. Co. v. Hall, 15 B. Mon. (54 4 Gladstone v. King, 1 Maule & S.
Kv.) Ill ; llovt v. Gilman, 8 Mass. 35.
2950
CONCEALMENT— MARINE RISKS § 1795
required that the insured should collect from all his documents all
the materials for the history of his ship from the time of her being
constructed to time of effecting the insurance ; 5 nor unless there be
an inquiry need the age of the vessel, nor where she was built,6
nor whether the ship be home or foreign built be disclosed.7
§ 1795. Facts and information affecting the condition or safety
of the ship on her voyage: subsequently occurring events. — It' the
assured at the time of effecting the insurance receives or has intelli-
gence or information or knowledge of facts which affect the con-
dition and safety of the ship on her voyage, and which in the mind
of a prudent and rational underwriter would increase the hazard
or liability to loss, it ought to be disclosed. Thus, where a letter
was received containing particulars of a hurricane occurring after
the ship had sailed, it was held fatal to recovery not to disclose the
same, even though the underwriter knew generally that there had
been severe gales off that coast; the ground of the decision being
that the assured's knowledge was particular, that of .the underwriter
general.8 So information that there were French privateers in
certain seas was held material.9 In another case the agent withheld
information that vessels bound to the same port as that of the
assured were ordered confiscated, and a recovery was denied.10
Information received from the master that the vessel had been
aground and had received heavy blows is material.11 Whether the
rule as to concealment of subsequently occurring weather would
affect a retrospective policy is doubtful, except in cases of the char-
acter above stated where the information is privately received, is of
a particular character, and is so near the time of the ship's sailing
that it is highly probable that she would be exposed thereto. But
if the fact is publicly known and is of an equally particular char-
acter as that of the assured's, so that the underwriter would be pre-
sumed to have had a special knowledge thereof, or in case of sailing
from a home port, the reason for a disclosure ought not reason-
ably to be held to exist.12
5 Haywood v. Rodders, 4 East, 590, 9 Beekwaite v. Nalgrove, Holt, N.
per Lord Ellenborough. P. 288, 3 Taunt. 41n.
6 Popleston v. Ketchen, 3 Wash. 10 Hoyt v. Gilman, 8 Mass. 336.
(U. S. C. C.) 138, Fed. Cas. No. "Russell v. Thornton, 4 Hurl. &
11,278. N. 788, 6 Id. 140, 30 L. J. Ex. 69;
7 Long v. Duff, s. c. Long v. Bolt- Morrison v. Universal Marine Ins.
on, 2 Bos. & P. 209. Co. L. R. 8 Ex. 197.
8 Moses v. Delaware Ins. Co. 1 12 See 1 Arnould on Marine Ins.
Wash. (U. S. C. C.) 385, Fed. Cas. (Perkins' ed. 1850) 560. *556; Id.
No. 9.872 ; Ely v. Hallett, 2 Caines (Maclachlan's ed. 1887) 576 ; 2 Duer
(N. Y.) 57. on Marine Ins. (ed. 1846) 401 et seq.
2951
§ 1796 JOYCE ON INSURANCE
§ 1796. Suspicions: rumors: reports: apprehensions: opinions:
general intelligence. — As a genera] rule the insured is do1 obligated
to anticipate every possible ground of suspicion. He Deed uol
communicate loose rui 's, mere idle talk, or reports gathered to-
gether no one know-, how, nor need he disclose to the underwriter
his fears, sensations, or apprehensions, his opinions, or expecta-
tions, his speculations or conclusions from the fad-.13 "We do not
know thai the insured is bound to anticipate every possible ground
of suspicion which mighl weigh with some minds and totally escape
the observation of others, . . . bul it is nol every conjecture
or opinion as to the materiality of the circumstances concealed
which oughl to weigh with the jury."' u The assured i- "nol bound
to communicate . . . his fears or his hopes, bu1 only to com-
municate any facts which justified them."15 If it is alleged as a
defense that the insured concealed from the insurer, at the time of
making the contract, material facts within the knowledge of the
former and nol of the latter, such concealment musl be made out
affirmatively by the insurer.16 But such a rule does not do away
with the obligation to disclose doubtful rumors which are not too
remote in their application, nor with the necessity of communi-
cating a fact which operates to cause a reasonable belief, expi
tion, or fear that a material fact exists which would increase the
risk were it, known. And if the fact he material, whether it lie an
article of intelligence as that term is understood by mercantile
men, or a rumor or report, it oughl to be communicated. Tf
immaterial, no disclosure is necessary, and the materiality is to he
judged by the tesl whether the fact of the rumor, report, or intel-
ligence would if communicated have, in the minds of reasonable
and prudent men, made an impression affecting the liability to
loss, and a rumor or report originating no one knows where may
13Durrell v. Bederly, Holt. X. P. of insurance is bound to communi-
283, 285, per Gibbs, C. J.; Folsom eate even on inquiry, information of
v- Mercantile Mutual Ins. Co. 8 his own judgment upon the matters
Blatch. (!'. S. C. C) L70, Fed. Cms. in question:" Deering's Annot. Civ.
No. 4,902, case aff'd Insurance Co. Code Cal. sec 2570.
f. Folsom, L8 Wall. (85 U. S.) 237, "Marshall v. Union Ins. Co. 2
21 L. ed. 82; ; Marshal] v. Union Ins. Wash. (U. S. C. C.) 357, Fed. Cas.
Co. 2 Wash. (U. S. ('. C.) 357, Fed. No. 9,133, per Washington, J.
\o. 9,133; McBride v. Republic l5Ruggles v. General Mutual Ins.
Kite [ns. Co. 30 Wis. 562; Brine v. Co. ! Mason (U. S. C. C.) 71. Fed.
4 Taunt. 869, per Cas. No. 12,119, per Story, J.
Gibbs, C. J.; Bell v. Bell, 2 Camp. 16Folsom v. Mercantile Mutual
475, per Lord Ellenborou-h; Bowden Ins. Co. S Hlatch. ( ('. S. ( '. C.) 170,
v. Vaughan, LO East, 415, 13 Eng. Fed. Cas. No. 4,902, aii'd [nsurance
Rul. Cas. 533, per Lord Ellenbor- Co. v. Folscm, is Wall. (85 U. S.)
ough. "Neither party to a contrad 237, 21 L. ed. 827.
2952
CONCEALMENT— MARINE RISKS § 1797
have become so prevalent and of so much importance as to be
material in the sense that a failure to disclose the fact may be
fatal.17 Thus, if there is a fair and reasonable apprehension that
property is exposed to danger, and the danger i- really and sub-
stantially one which would enhance the risk in the mind of a man
of ordinary prudence and caution, and is not mere idle talk or
reports, the fact should be disclosed.18 Again, this may be more
clearly illustrated by the case where the moving cause of procur-
ing the insurance is the apprehension that the property will he
destroyed, brought about by rumors of an attempt to destroy it.
Such fact is material, and should be communicated.19 In cases of
this character the apprehension relates to a fact which from its
very nature might influence, any prudent and reasonable under-
writer in assuming the risk.
In giving the above rules we have endeavored as far as pos-
sible to embody leading principles governing this class of cases,
but it is not intended to state any positive rule, for we believe
this to be impossible, in view of this, that what may consti-
tute a material fact in one case may be actually immaterial
in connection with other facts in another case. A fact differs
from an apprehension, belief, or expectation. A rumor may have
become so prevalent as to be material ; it may be material only be-
cause of its connection with other facts, or it may be of no im-
portance whatever. We believe that the assured would find it a
safe and practical rule to always disclose what he knows and what
he has heard, even though its tendency to increase the risk may be
doubtful in his mind. The assured "ought to have disclosed to
them (the underwriters) what intelligence he had of the ship's
being in danger and which might induce him at least to fear that
the ship was lost, though he had no certain account of it." 20
§ 1797. Same subject: cases. — A vessel laden like that of the
assured was reported ashore, and it was held fatal to conceal the
fact.1 Where it is rumored that the vessel is lost and the insured
believes that she is out of time, and though he entertains doubts.
17 Johnson v. Phcenix Ins. Co. 1 18 McBride v. Republic Fire Ins.
Wash. (U. S. C. C.) 378, Fed. Cas. Co. 30 Wis. 562, per the court.
No. 7,405 ; Graham v. General Mu- 19 Walden v. Louisiana Ins. Co. 12
tual Ins. Co. 6 La. Ann. 432; Hoyt La. (0. S.) 134, 32 Am. Dee. 116;
v. Gitman, 8 Mass. 336; Durrell v. Bufe v. Turner, 6 Taunt. 338, 2
Bederly, 1 Holt, 104, per Gibbs, C. Marsh. 46.
J.; Lynch v. Hamilton, 3 Taunt. 37; 20 De Costa v. Seandret, 2 P. Wms.
Seamen v. Fonereau, 2 Strange, 483 ; 170, per Macclesfield, Ch.
Bowker v. Smith, Fac. Coll. (Scot.) 1 Nicholson v. Power, 20 L. T. N.
571; Lynch v. Dunsford, 14 East, S. 580.
494; Nicholson v. Power, 20 L. T.
N. S. 580.
2953
§§ 1798, L799 JOYCE OX INSURANCE
yel has reasonable ground to believe her wrecked, this must be dis-
■ i 2 An insurance was upon a ship with letters of marque as a
privateer. The ship was captured the day next after sailing by
French frigates. Reports were prevalent that French frigates were
about thai coast, ami a capture was reported to have been made. A
binnacle had actually been seen floating with a compass upon it,
and no disclosure was made to the underwriters. The jury, under
a charge of Chief Justice < ribbs, found for the defendants.3 Where
an insured heard a doubtful rumor thai a -hip like his was cap-
tured, it was held that he oughl to have disclosed intelligence
which might induce him to fear that the .-hip was lost, though he
had no certain account thereof.4 Intelligence that the ship had
been seen and was reported leaky, was lost sigrrl of. and that the
next day there was a hard gale, is material and must be disclosed.5
§ 1798. Facts implied from, or underwriter put on inquiry by
information given: waiver. — The right to information of material
facts may be waived by neglect of the underwriter to make in-
quiries as to facts distinctly implied by the information communi-
cated, or where the facts disclosed are such as are calculated to put
any reasonable and prudent underwriter on inquiry. Thus, a
second letter referring to a former one was shown the insurers, but
they did not call for the former one. The letter referred to con-
tained information showing the loss of the master and that the
crew was short-handed, and was not disclosed other than as above
stated, and it was held immaterial.6 "Where the owners received a
letter stating the apprehensions at Riga, arising from detention
which would be necessitated by compliance with an order that the
papers of all vessels arriving there should be forwarded to St.
Petersburg, and only disclosed the fact that the ship's papers were
sent to St. Petersburg for examination, it was held that failure to
communicate the other contents of the letter was not fatal.7
§ 1799. Information, belief, or expectation of third person. — The
California code provides that "in marine insurance information of
the belief or expectation of a third person, in reference to materia!
fact, is material." 8 This rule would qualify the preceding cases
and rule upon which they are based.
2 Graham v. General Mutual Ins. 37. See also Westbury v. Aberdein,
Co. 6 La. Ann. 432. 2 Mees. & W. 267; Sawtell v. Lou-
3Durrell v. Bederlv, 1 Holt, 283. don, 5 Taunt. 359.
4De Costa v. Scandret, 2 P. Wms. 6 Freeland v. Glover, 7 East, 457,
170, 2 Eq. Cas. Abr. 636. 6 Esp. 14.
5 Seamen v. Fonereau, 2 Strange, 7 Bell v. Bell, 2 Camp. 479.
L183; Lynch v. Dunsford, 14 East. 8 Cal. Civ. Code, sec. 2676.
494; Lynch v. Hamilton, 3 Taunt.
2954
CONCEALMENT— MARINE RISKS §§ 1800-1802
§ 1800. Failure to communicate a fact which would show known
information is material. — If the assured is in possession of certain
facts which if known by the underwriter would enable him to
apply that fact to known information, intelligence, or rumors, and
the disclosure of that fact would show the information, intelligence,
or rumor material, the fact becomes material and must be dis-
closed.9
§ 1801. Where intelligence or report proves untrue. — The fact
that the intelligence or report proves untrue or unfounded does not
aid the assured if it is a fact which is material and ought to have
been disclosed.10
§ 1802. Intelligence, reports, or rumors of loss. — What has been
already said upon the point of rumors, intelligence, etc., under the
preceding sections is applicable here, but in cases of loss the factor
of fraud would perhaps enter more frequently into the cases.
Thus, procuring a policy without disclosing secret information of
a loss is fraudulent and avoids the insurance, even though only
withheld from the agent who obtains the insurance, provided the
intelligence could have been conveyed by the exercise of due and
reasonable diligence.11 And generally the failure of the applicant
to state to the insurer material information possessed by him of
material facts concerning the probable loss of a vessel which is over-
due, is such a concealment as entitles the insurer to rescind the con-
tract.12 If the insured has directed insurance by letter, and he learns
of a loss, and being in the neighborhood, he is bound to communi-
cate the intelligence thereof by mail when he can do so in time.13
But where the master took measures to prevent the loss being
known, and the owner, not knowing of the loss, effected the policy
in good faith, it was held that the master's act, even though fraud-
9 Lynch v. Dunsford, 14 East, 494, Wash. (U. S. C. C.) 378, Fed. Cas.
per Lord Ellenborough and Beyley, No. 7,405. "A person insured by a
J.; Bates v. Hewitt, L. R. 2 Q. B. contract of marine insurance is pre-
595, 36 L. J. Q. B. 282, 6 Eng. Rul. sumed to have had knowledge at the
Cas. 817; Lynch v. Hamilton, 3 time of insuring of a prior loss, if
Taunt. 37, per Lord Mansfield; Nich- the information might possibly have
olson v. Power, 20 L. T. N. S. 580. reached him in the usual mode of
10 Hoyt v. Gilman, 8 Mass. 336; transmission, and at the usual rate
Seamen v. Fonereau, 2 Strange, of communication : " Deering's An-
1183; Lynch v. Dunsford, 14 East, not. Civ. Code Cal. sec. 2671; but
494, per Lord Ellenborough ; Lynch see Id. sec. 1961. See Emerigon on
v. Hamilton, 3 Taunt. 37. See also Ins. (Meredith's ed. 1850) c. xv. sees.
Westbury v. Aberdein, 2 Mees. & 1-4, pp. 621-37.
W. 267. 12 Hart v. British Marine Ins. Co.
11 McLanahan v. Universal Ins. 80 Cal. 440, 22 Pac. 312.
Co. 1 Pet. (26 U. S.) 170, 7 L. ed. 13 Watson v. Delatield, 1 Johns.
98; Johnson v. Phoenix Ins. Co. 1 (N. Y.) 150, 152, aff'd 2 Johns. 526.
2955
§ 1803 JOYCE OX INSURANCE
uli-nt and done for the purpose of enabling the owner to secure him-
self, would qoI prevenl a recovery.14 It is held thai failure to dis-
close .1 loss occurring before the contract is reduced to writing and
the policy delivered, even though the contract is by parol, is fatal.16
§ 1803. Whether time of sailing must be disclosed: opinions of
text-writers. — Mr. Marshall declare- that whatever the insured
knows respecting the time of the ship'.- sailing oughl to be fully
disclosed, and a concealmenl thereof vitiates the policy, and in
support of this opinion reports two cases wherein Lord Mansfield's
language in connection with the facts evidently supports such a
rule.16 This writer also deduce- the rule that a fad from winch
the time of the ship's sailing might be inferred is also material and
must be disclosed.17 Both Mr. Arnould and Mr. Duer, although
they do not state the former rule so positively as Mr. Mar-hall, are
nevertheless of the opinion that the same rule is evidently to be
deduced from the early English ease-, and Mr. Duer, citing the ease
of Bridges v. Eunter,18 quotes the words of Le Blanc, J., therein.
who says: "I believe it has always been considered that the time
of the ship's sailing, if known to the assured, is a material fad to
be communicated to the underwriter." Mr. Arnould, however,
relying upon the words of Tindall, C. J., declares that the law is
well settled that the time of the ship's sailing is not material except
the vessel be what is known as a "missing ship." 19 Mr. i >uer, while
giving substantially the same rule as Mi-. Arnould, qualifies it, how-
ever, by saying that the time of the ship's sailing "is not in all
cases necessary to be given to the insurer. It must appear from the
evidence that the disclosure would have enhanced the premium, or
have induced the underwriter to decline the risk, or the conceal-
14 General Interest Ins. Co. v. Rug- *4fi7, 468, citing McAndrews v. Bell,
gles, 12 Wheat. (25 U. S.) 408, 419, 1 Esp. 373, Holt, 572.
6 L. ed. 678, aff'g 4 Mason (U. S. C. 18 1 Maule & S. 15, decided in 1813.
C.) 74, Fed. Cas. No. 12,119. See 19 1 Arnould on Marine Ins. (Per-
§§ 643 649 herein. kins' ed. 1850) 544, 5!:,. 540, sec.
15 Merchants .Mutual Ins. Co. v. 200, citing HI ton v. Larkins, 5 Car.
Lyman, 1.". Wall. (82 U. S.) 664, 21 & P. 392, per Tindall, C. J., quoting
\j. ed. 2 Hi: Centra, Lishman v. North- as follows: "'The law' is now clear
'■in Maritime Ins. Co. 8 L. K. Com. ly settled that a party is 'no1 bound
I'. '-'Hi, 12 L. J. Com. P. 108, affd to communicate the time of the sail-
10 !,. R. Com. P. 179; Cory v. Pat- ing of the ship, unless at the time <>!'
ton, 7 L. P. Com. B. 304, 41 L. J. Q. effecting the. policy, or the ship is
B. 195n, affd 9 L. K. Q. B. 577, A.) what is called a missing ship,' i. e.,
L. J. Q. B. 181. See §§ 107, G43-(il!) lias been so long on the voyage thai
herein. the owner has reason to suspect she
16 1 Marshall on Ins. (ed. 1810) has met with some casualty," rel'er-
*467, 408, reporting Fillis v. Brutt- ring also to Niele arguendo in the
er, and Etatcliffe v. Shoolbred. same case. He there considers at
171 .Marshall on Ins. (ed. 1810) length the case for and against.
2956
CONCEALMENT— MARINE RISKS § 1804
merit is deemed immaterial," and thai if the ship is a "missing
ship/' or ''out of time," a disclosure is always necessary, and he
still further qualifies the rule by stating that the disclosure is not
to be confined to those cases where the ship is "out of time" or a
"missing ship," and adds that ''whenever the fear or suspicion of
disaster exists, the facts on which it is grounded ... are ma-
terial to the risks and ought to he disclosed," including the fact of
the time of sailing.20 Mr. Maclaehlan says the question whether
the time of the ship's sailing or the time of her being last heard of
is a material fact necessary to be disclosed "is often a question of
critical and perplexing difficulty," and that no more definite rule
than that of the materiality of any fact can be stated he quotes the
opinion of Tindall, C. J.,1 referred to above, and declares that in
so far as it seems to establish any definite rule on this point, it
"must now be considered as set aside" by the cases which he then
considers at length, and also that it "is no longer the doctrine of
the English courts." 2 Mr. Phillips asserts that it is necessary to
disclose "intelligence or knowledge of the time of the vessel's hav-
ing sailed, or being expected to sail, or being spoken, where it
affords no such ground."3 Subsequently, however, he qualifies
this rule in several cases, making the disclosure dependent upon
the materiality of the fact to the risk.4 Mr. Parsons says the time
of sailing or rate of sailing may or may not be material to the
risk.5
§ 1804. Same subject: cases. — The shipper wrote to the con-
signee, by letter of date November 30th, that he thought the ship
would sail the following day, and asking to have insurance made
as low as possible on his account. The letter was not received till
December 13th, when the policy was effected without making
20 2 Duer on Marine Ins. (ed. * In Elton v. Larkins, 5 Car. & P.
1846) 468 et seq. 541 et sea., citing 86, 385, 392.
McLanahan v. Universal Ins. Co. 1 2 1 Arnould on Marine Ins. (Mac-
Pet. (26 U. S.) 170, 7 L. ed. 98; lachlan's ed. 1887) 562-67 et seq.;
Ruggles v. General Interest Ins. Co. Id. (9th ed. Hart & Liney) sees. 592
4 Mass. 74; Fiske v. New England et seq., pp. 761 et seq.
Mutual Ins. Co. 15 Pick. (32 Mass.) 3 1 Phillips on Ins. (3d ed.) 340,
310; Livingston v. Delafield, 3 Caines sec. 615, citing Mc Andrews v. Bell,
(N. Y.) 49; Fort v. Lee, 3 Taunt. 1 Esp. 3/3; Webster v. Foster, 1
381; Foley v. Moline. 5 Taunt. 430, Esp. 407; Willis v. Glover, 4 Bos. &
15 R. I. 541; Elton v. Larkins, 5 Car. P. 14; Livingston v. Delafield, 3
& P. 385; Ratcliffe v. Shoolbred. 1 Caines (N. Y.) 49; Foley v. Moline,
Park on Ins. (8th ed.) 433; Shirley 5 Taunt. 43, and other cases.
v. Wilkinson, 3 Doug. 41; Willis v. 41 Phillips on Ins. (3d ed.) 340-
Glover, 4 Bos. & P. 14 ; McAndrews 45, sees. 616-23.
v. Bell, 1 Esp. 373, Holt, 572; Web- 51 Parsons on Marine Ins. (ed.
ster v. Foster, 1 Esp. 407; and other 1868) 498.
eases.
2957
§ 1804 JOYCE ON INSURANCE
known the contents of the letter. The voyage took from five to
ten days, depending upon favorable winds, and it was customary
for ship- to await in thai port for fair winds. The ship actually
sailed "ii heci'inhcr 21th, and the insurance was declared void for
concealment.6 If there has been a severe storm immediately after
the vessel sails of which the insured has information and the under-
■', rit( r uot, or if the vessel is a missing ship, the time of her sailing
should be disclosed.7 Another ship had sailed at the same time
with the one insured, and the plaintiff effected a policy, but did
not state that lie had received. a letter on the twenty-fourth dated
ighth of the same month, the contents of which were that the
ship insured was then ready to sail, and it was held a material con-
cealment.8 So a failure to make known tin? contents of a letter
stating when the voyage commenced may be material especially
when the ship is out of time.9 The plaintiff was informed by letter
that the ship was to sail on the 22d of November, and the insurance
was effected on the 29th of December. The voyage was from Cadiz
to London. Held a fatal concealment.10 A vessel which had sailed
two days before the insured -hip. arrived three days before the in-
surance was effected. This fact, as well as the day of sailing of the
insured vessel, was disclosed, hut the plaintiff did not disclose the
fact that on the same day another ship had arrived which had sailed
three days before the insured vessel. The insurers claimed a
rial concealment, but the court, upon evidence that the ships
which arrived were both fast sailers and coppered, and that the in-
sured vessel was not coppered, was full built, and a slow sailer, jand
that the fact could not have increased the premium, and that site
could not be considered a missing ship, held that there was no
material concealment.11 Where the ship has not been out the full
length of time which such a ship on such a voyage usually take.-.
the time of her sailing is not material.12
6 Willis v. Glover, 1 Bos. & P. N. held in the following cases that there
K. It. was no concealment : McLanahan v.
7 Fiske v. New England .Marine Universal Ins. Co. 1 Pet. (26 U. S.)
[ns. Co. L5 Pick. (32 Mass.) 310. 170, 188, 7 L. ed. 98; Fiske v. New
BMcAndrews v. Bell, 1 Esp. 373. England Marine Ins. Co. 15 Pick.
9 Johnson v. Phoenix Ins. Co. 1 (32 Mass.) 310; Rice v. New Eng-
Wash. (U. S. C. C.) 378, Fed. Cas. land Marine Ins. Co. 4 Pick. (21
No. 7,405. .Mass.) 439; Mackay v. Ethinelander,
10 Elton v. Larkins, :» Car. & P. 1 Johns. Cas. (N. Y.) 408: Foley v.
8G, 385, 392. See comments on this Moline, 5 Taunt. 430; lakin v. Jan-
case under preceding section. sen, 13 Mees. & W. 655; Fort v. Lee,
11 Littledale v. Dixon, 1 Bos. & P. 3 Taunt. 381. In the following eases,
(N. R.) 151, 8 R. R. 774, 1 New Rep. that there was a concealment: Bax-
151. ter v. New England Marine Ins. Co.
12 Under the above rales it was 3 Mason (U. S. C. C.) 96, Fed. Cas.
2958
CONCEALMENT— MARINE RISKS §§ 1805, 180G
§ 1805. Same subject: the general rule. — As the law now stands
the time of the ship's sailing may or may not be material. It not
infrequently happens that either by itself or in connection with
other facts the day and fact of sailing would be a very important
circumstance in aiding the underwriter's judgment, and it may un-
doubtedly be proven that the same was material. In cases whore it
is material, it should be disclosed. No definite rule upon the ques-
tion can, however, be positively stated. Whether the day or fact of
sailing is material depends upon the nature, purposes, and length
of the voyage, usages of trade as to navigation, the existing political
situation, the time or season of the year, the prevalence of storm-,
and other matters difficult, if not impossible, to specify. If there
was a severe storm immediately after the ship sailed, or if the ship
was missing or out of time, or if in times of war the ship's depart-
ure was watched by a hostile vessel, such additional facts would in
all probability make the time of sailing material, and the conceal-
ment thereof the evidence of a fraudulent intent. So the fact or
time of sailing would generally be material if the disclosure of the
same would have increased the liability to loss, and have induced a
reasonable and prudent underwriter to have refused the risk or
have charged a higher premium, within the limitations and condi-
tions embodied in the general rule already stated as to what should
be disclosed.13
§ 1806. Underwriter presumed to know causes which occasion
natural perils. — The underwriter is bound to know every cause
which may occasion natural perils, such as the recurrence and
kinds of seasons, the probable difficulties of the voyage arising from
winds, weather, lightning, earthquakes, storms, and the like, from
the security or insecurity of certain ports, and other like matters.14
No. 1,127; Ely v. Hallett, 2 Caines day when she had in fact sailed on
(N. Y.) 57; Bridges v. Hunter, 1 that day).
Maule & S. 18 ; Mackintosh v. Mar- 13 McLanahan v. Universal Ins. Co.
shall (1843) 11 Mees. & W. 119, per 1 Pet. (26 U. S.) 170, 7 L. ed. 98,
Maule, J. ; Richards v. Murdoch per Story, J. ; Fiske v. New England
(1830) 10 Barn. & C. 527; Shirley Marine Ins. Co. 15 Pick. (32 Mass.)
v. Wilkinson (1781) 3 Doug. 41; 1 310, per Putnam, J.; Eoley v. Mo-
Doug. 306n (held a concealment, as line, 5 Taunt. 430, and authorities
it might have influenced the pre- noted under the two preceding see-
mium) ; Stribley v. Imperial Marine tions, and rule stated in § 1793 here-
Ins. Co. 1 Q. B. D. 507, 13 Eng. Rul. in.
Cas. 491 ; Webster v. Foster, 1 Esp. 14 Carter v. Boehm, 3 Burr. 1905,
406 (held a concealment, as the ship 1 Wm. Black. 593, 13 Eng. Rul. Cas.
must have been reported as missing) ; 501, per Lord Mansfield, noted at
Ratcliffe v. Shoolbred, reported in 1 length under § 1845 herein, note.
Marshall on Ins. (ed. 1810) *468 That it is not necessary to prove
(held a concealment, as the ship was things that must have happened ac-
represented on the coast on a certain cording to the ordinary course of na-
2959
§ 1807
JOYCE ON INSURANCE
§ 1807. Restrictions on commerce: commercial and foreign regu-
lations.— The assured is not bound to communicate a circumstance
made materia] by a foreign ordinance of which he has no knowl-
edge and which be is under no obligation to know, especially if the
ordinance be one contrary to the Law of nations; nor need he dis-
close restrictions upon commerce, public transactions, foreign laws,
or ordinances relating to matters of revenue or protection 15 which
are general, well established, and notorious, and of which the
underwriter should be equally as well informed as himself. But if
the ordinance or prohibition be one recently enacted, or one no!
established, and the assured bas actual knowledge thereof, the rule
would be otherwise. The above rules rest upon the fad that com-
mercial regulations and foreign ordinance- may not infrequently
very materially affect the risk or Liability of the underwriter to
Loss, in that the pro]. oily may be liable by reason thereof to seiz-
ure, etc. It also rests upon the fad that the nature of the trade
.Mid the circumstances under which it is carried on must be con-
sidered as entering into the contemplation of the parties to every
contract of insurance.16 In case the property insured is subject to
line, such matters being so far those enumeration of powers, and is dis-
ci' general knowledge thai courts will tinct from the right to levy taxes and
take judicial notice thereof, see 1 imposts. The power to regulate
Greenieaf on Evidence (14th ed.) 9, commerce ami of taxation are sep-
citing King v. Luffe, 8 East, 202; arate and distinct. Duties of this
Pay v. Prentice, !> Jur. 876; Ross v. character imposed with a view to
Boswell, 60 Iml. 235; Tomlinson v. revenue are under the taxing power,
Greenfield, 31 Ark. 557. Sec Deer- and the same is true as to duties lin-
ing's Annot. Civ. <'ode Cal. sec 2566, posed on tonnage, although they may
noted in § 1808, note 18 herein. See he imposed with a view to regulate
marine ins. act 1906, of England, commerce, per Marshall, C. .J.
sec. 18 (3) (b) given in Appendix
C. herein.
15"Kverv sovereign has the right
to prohibit within his states the ini- man
portal ion and exportation of partic-
ular articles of merchandise, without
foreigners, who have the same privi-
lege at home, having the right to con-
si rain:" Emerigon on Ins. (Mere
dith's ed. 1850) c. viii. sec. 5, p. 170.
It will not lie irrelevant to notice here
l6Calbreath v. Gracy, 1 Wash. (U.
S. C. C.) 219, Fed. ('as. No. 2,296,
per Washington, J.; Hoyt v. Gil-
Mass. 336; Parker v. Jones.,
L3 Mass. 173; Pollock v. Babkock,
6 Mass. '234, per Parke, J.; Blagge
v. New York Ins. Co. 1 Caines (N.
Y.) 549; Mayne v. Waller, reported
in 1 Marshall on Ins. (ed. 1810) 397.
The ship here was warranted Por-
tuguese. It had an English super-
the leading case of Gihhons v. Ogden, cargo on board, contrary to a recent
9 Wheat. (22 U. S.) 1, 6 L. ed. 23, French Ordonnance, ami Lord Mans-
wherein it is held that the acts of lay- field declares that "this is an arbi-
ing "duties or imposts on imports and trary and oppressive regulation, con-
exports" is a branch of taxing power trary to the law of nations. But as
under the constitution of the United neither the insured nor the under-
states. The power to regulate com- writers knew anything of it, neither
merce is in a separate clause of the of them was guilty of any fault. If
296.0
CONCEALMENT— MARINE RISKS
§ .1808
the probable or possible application of a regulation, ordinance, or
decree of a foreign belligerent, not consistent with the law of na-
tions, or one known only to the insured, he should disclose the same
and the facts rendered material in consequence, and such facts so
rendered material should also be disclosed, even though the regula-
tions are public in their nature. If such regulations are known
only to the underwriter, he assumes all the consequent or attend-
ant risks if he insures without inquiry as to facts rendered material
by such regulations, but if assured also knows of such regulations,
he must disclose such facts as may be material. And if the prop-
erty would be subjected to an increased liability to loss by rules of
decision of foreign courts known only to the assured, such rules
and facts rendered material thereby should be disclosed.17
§ 1808. Underwriter presumed to know causes which occasion
political peril. — The underwriter is bound to know every cause
which may occasion political peril, general and notorious facts as
the insured had known of it, he might Cas. No. 374, per Story, J.; Arch-
have taken care to conform to it. If ibold v. Mercantile Ins. Co. 3 Pick.
Hie underwriters had known of it, (20 Mass.) 70; Parker v. Jones, 3
they ought to have inquired who was Mass. 173 ; McFee v. South Carolina
the supercargo," and that both being Ins. Co. 2 McCord (S. C.) 503, 13
innocent, the underwriters were lia- Am. Dec. 757; Gardiner v. Smith, 1
bio: Barnewell v. Church, 1 Caines Johns. Cas. (N. Y.) 141.
(N. Y.) 217, 2 Am. Dec. 180; Sperry 17Kohne v. Insurance Co. of North
v. Delaware Ins. Co. 2 Wash. (U. S. America, 1 Wash. (U. S. C. C.) 93,
C. C.) 243, Fed. Cas. No. 13,236; Fed. Cas. No. 7,920, per Washing-
Livingston v. Marvland Ins. Co. 7 ton, J., s. c. 6 Binn. (Pa.) 219;
Craneh (11 U. S.) 506, 3 L. ed. 421; Sperry v. Delaware Ins. Co. 2 Wash.
Seton v. Delaware Ins. Co. 2 Wash. (U. S. C. C.) 243, Fed. Cas. No.
(U. S. C. C.) 175, Fed. Cas. No. 13,236, per Washington, J. "Did the
12,675; Kohne v. Insurance Co. of letter of instruction to the master
North America, 1 AVash. (U. S. C. expose the property to a risk not eon -
C.) 158, Fed. Cas. No. 7,922, per templated by the policy? If it did,
Washington, J.; Lever v. Fletcher, then the policy is void. If not so,
reported in 1 Marshall on Ins. (ed. still the danger of capture and loss
1810) 61; Park on Ins. (8th ed.) was as certain as if the rule laid down
507, where it was said that if the un- had been in all respects correct. This
derwriters know that it is the inten- rule was that a vessel destined to a
tion of the insured to carry on a blockaded port, and so known to be
smuggling trade with Spain, it was before she sailed with instruction to
a fair contract, as no country paid go elsewhere only in case of her being
attention to the revenue laws of an- turned away, is considered as guilty
other country, per Lord Mansfield; of a breach of blockade, and subject
but the jury found for the defendant to confiscation. This rule was known
on another ground: See in connec- to the insured, and should have been
tion with this last case. The Euro- to the underwriters, but whether the
paa, 2 Rob. Adm. Rep. 6, per Sir vessel was placed in a situation where
William Scott; Planche v. Fletcher, the rule would apply was known only
1 Doug. 251; Androus v. Essex Ins. to the insured:" Hoyt v. Gilman, 8
Co. 3 Mason (U. S. C. C.) 6, Fed. Mass. 336.
Joyce Ins. Vol. III.— 186. 2961
§ 1809 JOYCE ON INSURANCE
to peace or war, ruptures, and political dissensions or allegiance of
particular countries, the operations of war, the course and directions
of hostilities, and the consequenl probabilities of safety or danger;
to be acquainted with the general risks affecting commerce with
particular countries with established mercantile regulations, the
probabilities in general with reference to the course of trade and
its character, and the attendant risks of capture or seizure by hostile
or belligerent powers, as regulated by treaties with his own country,
by general decrees of belligerents, and rides of international law.
But nothing in this rule excuses the assured from disclosing ma-
terial facts relating to recent and changing decrees of foreign
powers of which the underwriter has no actual or Legally presump-
tive knowledge, and of which the assured has actual knowledge.18
§ 1809. Degree of publicity which will bind underwriter with
knowledge of material fact. — There are many matters which the
assured is not obligated to disclose, because the underwriter has
actual knowledge thereof, or because they are facts which the under-
writer ought to know, and is therefore presumed to know, or matters
of information or intelligence so public in their nature as to he
equally open to the underwriter and the assured.19 There are ex-
18 Carter v. Boehm, 3 Burr. 1905, Co. 2 Wash. (U. S. C. C.) 24.'], Fed.
1 Win. Black. 593, 13 Eng. Rul. Cas. Cas. No. 13,236; Hoyt v. Gilman, 8
501, where Lord Mansfield says: Mass. 336, and see cases under last
The underwriter "is bound to know section. "Each party to a contract
every cause which may occasion polit- of insurance is bound to know all the
ical perils from the ruptures of general causes which are open to his
states, from war, and the various inquiry equally with that of the oth-
operations of it. He is bound to er, and which may affect either the
know the probability of safety from political or material perils contend
the continuance or return of peace, plated:" Deering's Annot. Civ. Code
from the imbecility of the enemy, Cal. sec. 256b'.
through the weakness of their coun- 19 Carter v. Boehm, 3 Burr. 1905,
cils, or their want or strength, etc.: " 1 Wm. Black. 593, 13 Eng. Rul. Cas.
Buck v. Chesapeake Ins. Co. 1 Pet. 501, per Lord Mansfield; Norris v.
(26 U. S.) 160, 7 L. ed. 90, per the Insurance Co. of North America. 3
court; Kohne v. Insurance Co. of Yeates (Pa.) 84, 2 Am. Dec. 360;
Xu.th America, 1 Wash. (U. S. C. Pimm v. Lewis, 2 Fost. & F. 778; De
C.) 158, Fed. Cas. No. 7,922, s. c. Longuemere v. New York Ins. Co. 10
6 Binn. (Pa.) 219; De Longuemere Johns. (N. Y.) 120, 126. "Neither
. New York Ins. Co. 10 Johns. (N. party to a contract of insurance is
Y. ) 120. In this case it was said bound to communicate information
by the court: "Whether the rate of of the matters following, except in
premium might not have been high- answer to the inquiries of the other:
er had the defendants sufficiently in- 1. Those which the other knows; 2.
formed themselves of the risk of the Those which in the exercise of ordi-
voyage is a poind not open for in- nary care the other oughl to know,
quiry, so Long as there was no undue and of which the former lias no reason
concealment on the pari of the plain- to suppose him ignorant," etc.: Cal.
till':" See Sperry v. Delaware Ins. Civ. Code, sec. 2561.
2962
CONCEALMENT— MARINE RISKS § 1809
tensive means of information available to underwriters, especially
at Lloyds, where the system in this respect is most extensive and
efficient. The rule, however, above given involves the question as
to what degree of publicity will be presumed to exist, with refer-
ence to these extensive and available means of information, so as
to determine what the underwriter is presumed to know and what
the assured need not disclose. The mere fact of publication in a
public newspaper of intelligence ought not, unaided by other proof,
to bind the underwriter or raise any presumption not subject to re-
buttal against him. Nor does it seem consistent with the reason of
the law that the underwriter should in all cases be presumed to
be acquainted with all the intelligence contained in newspapers
taken by him. If, however, the insurer subscribes to and regularly
receives, a public newspaper at his office which contains marine
intelligence, or a paper devoted almost wholly, if not exclusively, to
such matters, it cannot be an unfair or unreasonable presumption
that he or his authorized agent will examine with some degree of
care such a source of information designed as the medium of com-
munication of the latest marine intelligence available. To go
farther, if it were proven that such a paper containing the intel-
ligence in question was subscribed to and received sufficiently long-
before the insurance was effected to warrant the presumption that
it was so examined, it ought, in the absence of evidence in rebuttal,
to be sufficient to bind the underwriter with knowledge of the intel-
ligence, or at least to excuse the insured from disclosing the same,
but such presumption would undoubtedly be always open to rebut-
tal.20 Under the California code neither party is bound to com-
municate information "which in the exercise of ordinary care the
20 Alsop v. Commercial Ins. Co. 1 dwells. Quid enim si omnes in civi-
Sum. (U. S. C. C.) 451, Fed. Cas. tate seiant quod ille solus ignorat?
No. 262; Merchants' Ins. Co. v. Again, that he is not to be presumed
Paige, 60 111. 448; Ruggles v. Com- ignorant of what is manifested in
mercial Ins. Co. 4 Mason (U. S. C. public advertisements. Valin and
C.) 74, 81, Fed. Cas. No. 12,119, per Pothier say that ''the limitation runs
Story, J. ; 3 Kent's Commentaries, from the time at which the news has
285; 1 Arnould on Marine Ins. (Per- begun to be public and notorious in
kins' ed. 1850) 568, *564, sec. 209; the place where the insurance has
Id. (Maelaehlan's ed. 1887) 584 et been made." This is applied to the
seq. ; 1 Phillips on Ins. (3d ed.) 335, assured, however, in case of news of
sees. 605, 606; 2 Duer on Marine Ins. loss; Emerigon on Ins. (Meredith's
(ed. 1846) 478-82; 1 Parsons on Ma- ed. 1850) c. xv. sec. 3, p. 634. It is
rine Ins. (ed. 1868) 478 et seq. See also said that the news of the loss
Mackintosh v. Marshall, 11 Mees. & must be proven to have been known,
W. 116. The Roman law says that a but not that the assured knew it :
person is not to be presumed ignor- Emerigon on Ins. (Meredith's ed.
ant of what is known to all the in- 1850) c. xv. sec. 3, p. 634.
habitants of the town where he
2963
§ 1809 JOYCE ON INSURANCE
other oughl to know, and of which the former has no reason to
suppose him ignorant."1 This would seem to reasonably warrant
the presumption thai the insurer has knowledge of matters of pub-
lic notoriety such as are here under consideration, when by ordi-
,1;I1N Care he might have known them; but this rule if true ought
not to exclude proof that the matters were of public notoriety in
the place, or, if contained in newspapers, that they were available
and at the hand of the underwriter. The rule in Massachusetts is
evident I v this, that if it be proven that such a newspaper was so
subscribed to and received at the office, the general presumption is
thai agents of the office will examine with some care the items of
marine intelligence contained therein, and if such intelligence was
actually seen by the underwriter or an official of the company; or
if circumstances are shown from which the reasonable presumption
may arise that the underwriter had actual knowledge of the in-
formation contained in such public news] taper, and such presump-
tion is imt rebutted, then the fact of actual knowledge may be
properly found by the jury, and render a disclosure thereof by the
assured unnecessary, and thai underwriters are not under all cir-
cumstances to be presumed to be acquainted with all the intelli-
gence contained in papers taken at their office.2 The rule first
stated relates, however, to general intelligence where its applicability
in the risk is a matter of which the assured has no greater knowledge
than the underwriter: hut assume a case where the information was
known by the assured to he peculiarly applicable to the risk which
he asks the underwriter to assume, and the intelligence was of the
most genera] character, then there would seem to he no doubt but
that the facts which make Mich information material should be
disclosed, or that the applicability of the intelligence should be
Mated. Such a doctrine would rest upon general principles, for the
assured'* knowledge would be more particular than that of I he
underwriter.3 If. however, the assured has no peculiar or particu-
lar knowledge which would make the general information material,
the fad that the news is general and of no particular application,
and of a character concerning which the underwriter may form his
1 Deering's Annot. Civ. Code Cal. son v. Power, 20 L. T. N. S. 580. See
sec. 2564. See marine ins. act. 1906, the case of Moses v. Delaware Ins.
of Falkland, se«-. 18 (3) (b) given in Co. 1 Wash. (U. S. C. C.) 385, Fed.
Appendix C. herein. Cas. No. 9,872, noted under § 1795
8 Green V. Merchants' Ins. Co. 10 herein; 1 Arnonld on Marine Ins.
Pick. (27 Mass.) 402. See Dieken- (Perkins' ed. 1850) 568, *564, sec.
son v. Commercial Ins. Co. Anth. N. 209; Id. (Maelachlan's ed. 1887^
P. (N. Y.) 126, per Van Ness, J. 584; Id. (9th ed. Hart & Simey)
3 Morrison v. Universal Marine sees. 614-616, pp. 788-791.
Ins. Co. L. R. 8 Ex. 40, 197; Nichol-
2964
CONCEALMENT— MARINE RISKS § 1810
own opinion as to its applicability, would not make its disclosure
necessary; for, as we have already slated, the assured need not dis-
close his fears, hopes, or apprehensions.4
§ 1810. Same subject: the English rule. — The question has been
much discussed, with some conflicting conclusions, in England as
to what degree of publicity will be presumed to exist with reference
to "Lloyds' Lists" and public newspapers, so as to determine what
the underwriter who has access to or receives such intelligence will
be presumed to know, and what it is or is not incumbent upon the
assured to disclose. A careful examination of the English c
and opinions will discover the difficulty that arises in attempting
to formulate a rule. The earlier English eases relied on hold that
the underwriter who is a member or subscriber at Lloyds is pre-
sumed to have consulted the lists, upon the ground that what he
may by due diligence and a fair inquiry ascertain from the ordi-
nary sources of information need not be disclosed, and that these
lists are admissible as evidence against the underwriter on this
ground upon a question of concealment,5 And this rule has been
carried to the extent that where a vessel has registered at Lloyds
as "Al," and the name was stricken from the register because the
owner refused compliance with a requirement that a vessel should
be examined, it was held that the insurer ought to have known
that her continuance in the class depended upon whether the usual
survey had been made, and that this knowledge was sufficient to
have put him on inquiry.6 An anonymous communication was
posted at Lloyds, stating the intention of the owners to lose the
vessel on her next voyage. The insured property was indorsed and
shipped on the vessel, and it was held a failure to disclose was
fatal.7 In another case which we will consider under the next
section the court did not deny the rule, but adhered to the prin-
ciple above stated relative to a presumption against the insurer in
such cases, and distinguished the case before it, holding that the
rule did not apply to the facts under consideration.8 It was inti-
4 See § 1796 herein ; Bates v. Hew- Car. & P. 86, 8 Bins:. 198 ; Nicholson
itt, L. R. 2 Q. B. 595, 6 Eng. Rul. v. Power, 20 L. T. N. S. 580. As to
Cas. 817, 3 Kent's Commentaries, foreign lists, quaere, see Elton v.
285; Morrison v. Universal Marine Larkins, 5 Car. & P. 85, 8 Bing. 198.
Ins. Co. L. R. 8 Ex. 40, 197, per 6 Gan'dy v. Adelaide Mutual Ins.
Bramwell, B. ; Friere v. Woodhouse, Co. 6 L. R. Q. B. 716, 40 L. J. Q. B.
1 Holt, 572; Alsop v. Commercial 239.
Ins. Co. 1 Sum. (U. S. C. C.) 451, 'Leigh v. Adams, 25 L. T. N. S.
Fed. Cas. No. 262, per story, J. 566.
5 Friere v. Woodhouse, 1 Holt N. 8 Bates v. Hewitt, L. R. 8 Ex. 40,
P. 572, per Burroughs, J., decided in 697, 6 Eng. Rul. Cas. 817, per Shee,
1817; Foley v. Tabor (1861) 2 Fost. J.
& F. 663; Elton v. Larkins (1831) 5
2965
§ 1811 JOYCE OX IXSIKAXCK
mated, however, by Lord A.binger thai the presumption that the
underwriter had looked al the lists is subverted where the amount
of the premium is such that it may be reasonably concluded that
he would never have taken such a premium had he examined the
lists. The case, however, rested anon false representation.9 An-
other decision, however, which has heen relied on presents such
facts that, taken with the opinion therein, the general rule may
fairly be deduced therefrom that a presumption may exist binding
the underwriter prima facie to a general knowledge of general in-
telligence so conveyed; but if it is attempted to apply his knowl-
edge to any particular ship, no presumption of knowledge exists
against him sufficient to excuse a disclosure on the part of the as-
sured assuming thai he has or ought to have knowledge. It is
declared that it would be a difficult and useless burden upon the
underwriter to require that he shall carry in his head intelligence
of such a character so that he may be enabled to apply it to some
particular ship in which at the time he has no interest, and that
to require a disclosure from the assured would obviate the difficulty
and impose no unnecessary burden upon him.10
§ 1811. Same subject: the case of Bates v. Hewitt. — In connec-
tion with the subject noted above the case of Bates v. Hewitt n can-
not be passed by merely citing the same, because of the criticism
of Mr. Parsons thereon, and also for the reason that the opinions of
the judges therein do not in the language used deny the doctrines
of the earlier cases, but distinguish the case from the ruling that
information contained in "Lloyds' Lists" need not be communi-
cated to the underwriter when by fair inquiry and due diligence he
could have ascertained the facts therein contained. The case is
also of further interest from the fact that the judge- assert an ad-
herence to the established principle that the assured having especial-
ly within his knowledge a fact material to the risk which the un-
derwriter does not know, must disclose the same, and that the
assured need not disclose matters which are well known to both,
or facts and circumstances within the ordinary professional knowl-
edge of the underwriter, and notwithstanding their express declara-
tion of adherence to what they specify as established principles, or
what they tacitly admit to be decided law, nevertheless they do by
I heir ruling asserl what is substantially a new principle, if it be con-
sidered apart from the facts of this particular case. But the question
may be open to discussion whether they did intend to establish a
9 Mackintosh v. Marshall (1843) 10 Morrison v. Universal Marine
II Mees. & W. Ilfi. per Lord Abing- Ins. Co. L. R. 8 Ex. 40, 197.
er, C. B. See Dickens, mi v. Commer- " L. R. 2 Q. B. 595, 6 Eng. Rul.
cial Ins. Co. Anth. N. P. (N. Y.) 126. Cas. 817.
2966
CONCEALMENT— MARINE RISKS § 1811
new principle. The case was briefly this: The defendant was an
underwriter at Lloyds. The policy was effected upon the steamship
"Georgia," which had been a confederate cruiser in 1863-64, which
fact, as well as the one that she had been dismantled and laid up
at Liverpool, was notorious at the time through public newspapers
and published debates of the House of Commons, and these facts
were then known to the underwriter. At the exact time, however,
of effecting the insurance she was not posted at Lloyds. The vessel
was merely insured as the "Georgia Steamship, chartered" for a
specified voyage, without disclosing her character as a cruiser, and
there was nothing which indicated to the underwriter, nor did it
occur to him, that the steamship insured was the cruiser. The ship
was captured, and the jury found as a fact that the assurer did not
know that the vessel insured had been a confederate cruiser, and it
was declared that the underwriter was not bound by his previous
knowledge, the fact as to the ship's character being absent from his
mind at the time of insuring, and therefore the failure to disclose
was fatal to a recovery. Mr. Parsons' . criticism on this case is as
follows: "The facts may perhaps justify the verdict, but the prin-
ciples of insurance law have not yet led to the conclusion that if the
insurer knew a fact and did not think of it while making the in-
surance or did not think it material enough to take into considera-
tion, the noncommunication of the fact would discharge him. But
the language used by the court in deciding this case would go
almost if not quite as far as this." 12 If it be conceded that the
language of the judges go to the extent believed by Mr. Parsons,
then it cannot but be admitted that there is much force in his criti-
cism, but we do not so construe the opinions given. Decisions
made, and the language of courts used with reference to the special
circumstances of a given case, ought to be carefully considered be-
fore they can be held to establish a new principle, especially one at
variance with, or an exception to, general rules. And the courts
expressly disclaim a departure from, and unequivocally assert an
adherence to, general principles. Again, the principal factor seems
to have been that the assured had especial knowledge of a fact
material to the risk. Good faith required that he should inform the
underwriter of all material facts. General knowledge that there
was a confederate cruiser "Georgia" would not be held to be par-
ticular knowledge that the "Georgia Steamship" was necessarily
the same vessel, and in fact it had been bought by the plaintiff
and converted into a merchant vessel. The decision, in view of all
the facts, does not impose upon the assured any greater burden than
12 1 Parsons on Marine Ins. (ed. 1868) 481.
2967
§§ 1812 lbl-1 JOYCE ON [NSURANCE
that he should exercise good faith and disclose to the assurer ma-
terial facts of which he has particular knowledge. Il will be
noticed in this case thai the jury found that the assurer did not
know that he was underwriting what had been a confederate
cruiser, and the courl says: "This was a fact material to the risk
which the per-. hi proposing the insurance knew, and winch the
person to whom the insurance was proposed did no1 know."
§ 1812. Same subject: opinions of Mr. Arnould and Mr. Mac-
lachlan. — Mr. Arnould concludes from an examination of the
13 thai London underwriters are presumed to he acquainted
with the intelligence contained in "Lloyds' Lists." Mr. Maclach-
lan concludes from an examination of the cases "againsl any pre-
sumption of knowledge of particular facts concerning particular
ships on the part of the underwriter merely on the ground that such
facts have appeared in 'Lloyds' Lists,' or the 'London Gazette,' or a
newspaper." 14
§ 1813. Usage need not be disclosed. — General, established, and
notorious usages are presumed to he known to the underwriter, and
need not be disclosed; so also as to the nature and circumstances of
the trade involved and the usual course of loading or unloading at
particular ports, or a usage to prolong the ship's stay.15
§ 1814. Exceptions to last rule. — But this rule does not excuse
a disclosure of facts of which the underwriter has no knowledge,
and which make the application of the usage material; as where the
usage relate- to the mode of transporting goods of a certain class,
the kind of goods oughl to be disclosed, or else the fact ought to be
stated that they are goods subject to the usage claimed with certain
13 Morrison v. Universal Marine McArthur on Marine Ins. (ed. 1890)
Ins. Co. L. R. 8 Ex. 40, 197, and 10.
Bates v. Hewitt, L. R. 2 Q. B. 595, 15 Livingston v. Maryland Ins. Co.
6 Eng. Rul. Cas. 817, are not noted 7 Cranch (11 U. S.) "506, 3 L. ed.
by him. 421; Maryland Ins. Co. v. Bathurst,
~141 Arnould on Marine Ins. (Perk- 5 Gill & J. (Md.) 159; Norris v. In-
ins' ed. 1850) 565, * 562, sec 208; suranee Co. of North America, 3
Id. (Maclachlan's ed. 1887) 581 et Yeates (Pa.) 84, 2 Am. Dec 360
seq. Mr. Maclaehlan deduces liis Long v. Bolton, 2 Bos. & P. 210
opinion from the two cases referred Kingston v. Knibbs, 1 Camp
to in the last note. Id. (9th ed. 508; Salvador v. Hopkins, 3 Burr
Earl & Simey) see. 614, p. 790. See 1707; Vallance v. Dewar, 1 Camp
also 2 Duer on Marine Ins. (ed. 503; Hoskins v. Pickersgill, reported
1846) 554 et seq. ; 1 Parsons on Ma- in 2 Marshall on Ins. (ed. 1810)
iiuc Ins. (ed. 1868) 477, note, 478- *727; Tennant v. Henderson, 1 Dowl.
81, and notes, 491, note. "It would Pr. C. 324; Stewart v. Bell, 5 Barn,
appear that the underwriter is not & Aid. 238. Both parties are bound
hound to know everything which has to know "all general usages of
appeared in the public press, with trade:" Deering's Annot. Civ. Code
respect to u risk offered to him:" Cal. sec. 2566. See § 239 herein.
2968
CONCEALMENT— MARINE RISKS §§ 1815-1817
exceptions, as in case of trading voyages with shifting or successive
cargoes, or time policies wherein the underwriter assumes the risk
of every valid usage of the trade in which the ship may be em-
ployed.16
§ 1815. Ownership of vessel need not be stated when not material
and insurance is on cargo. — It is not necessary for the assured,
when no inquiry is made and the fact is nol material and the policy
is on cargo, to state the ownership of the vessel on which the goods
are to be transported in his application. Such nondisclosure will
not vitiate (he policy.17
§ 1816. Nature and condition of cargo. — As a general rule the
assured need not disclose to the underwriter the nature, state, or
condition of the cargo intended to be carried. This is a matter of
inquiry by the underwriter.18 Nor need the damaged condition of
perishable goods be stated.19 Mr. Maclachlan is of the opinion that
"the nature of the cargo . . . may be most material to be
communicated; for without exactly rendering the ship unsea-
worthy, a cargo may be of a nature less desirable for safety than
another, owing to the dead weight in proportion to bulk, or its
tendency to shift, its unwieldiness for storage, or its gaseous or other
dangerous chemical and inflammable qualities, and "the like."20
§ 1817. Cases where entire contract is not vitiated, but only that
part relating to risk concealed. — Under the California code the
underwriter is merely exonerated from the risk concealed. The
entire contract is not vitiated in case of a concealment of the nation-
al character of the insured; the liability of the thing insured to
capture and detention ; the liability to seizure from breach of for-
eign laws of trade, the want of necessary documents, and the use of
false and simulated paper's.1 This code provision, so far as it enu-
merates the risks, is taken verbatim from Mr. Duer's work on In-
surance, wherein he lays down the proposition as that of the com-
mon law.2
16 1 Duer on Marine Ins. (ed. Lord Ellenborough. But see Wol-
1845) 204, sees. 51, 250; 2 Duer on eott v. Eagle Ins. Co. 4 Pick. (Mass.)
Marine Ins. 446, 447, citing Cogges- 429; Allege v. Maryland Ins. Co.
hall v. American Ins. Co. 3 Wend. 8 Gill & J. (Md.) 190, 29 Am. Dec
(N. Y.) 283; Milward v. Hibbert, 3 536. But see § 1813 herein, latter
Q. B. 123, 24 Eng. Rul. Cas. 473. part.
17 Chase v. Washington Mutual 19 Boyd v. Dubois, 3 Camp. 133.
Ins. Co. 12 Barb. (N. Y.) 595. 201 Arnould on Marine Ins. (Mac-
18Duplanty v. Commercial Ins. Co. lachlan's ed. 1887) 576.
Anth. N. P. (N. Y.) 114; Chesa- x Deering's Annot. Civ. Code Cal.
peake Ins. Co. v. Allege, 2 Gill & J. sec. 2672.
(Md.) 136, 164, 20 Am. Dec. 424; 2 2 Duer on Marine Ins. (ed. 1846)
Boyd v. Dubois, 3 Camp. 133, per 588 et seq.
2969
§ 1818 JOYCE ON INSURANCE
§ 1818. Whether it need be disclosed that goods are contraband:
belligerent risks: neutral: national character. — Jt is held in New
York thai goods contraband <>l war arc lawful, and the insured need
not disclose their character as such.3 Chancellor Kent, however,
declares the cases so holding to be without authority,4 and the
general rule seems to he that the insurer must expressly undertake
such insurance, or musl know from the kind of goods or from a
disclosure that they are contraband, or must otherwise have full
knowledge thereof, or of the trade, in order to render him liable
for tlaar seizure and confiscation, although the fact in itself that the
ship is bound on a contraband voyage will not void the policy, and
the assurer will be liable as to other risks against which he has in-
sured.5 In a Federal case the facts were substantially thes* Tht
insured goods of an American merchant destined to a Spanish port
were captured by the British and condemned. The goods were
originally Spanish goods, but had been sold in good faith to a
third party, from whom the insured had obtained his title in good
faith. The original Spanish owner was a passenger on the ship,
and it was claimed that these facts should have been disclosed; the
verdict, however, was for the plaintiff.6 Again, insurance was
effected on a vessel "at and from Charleston to Marseilles, and at
and from thence to Havana." Another policy was made on the
same day on the cargo "from the loading thereof at Charleston."
In the offer of the insured on which both policies were effected
every material circumstance was said to be disclosed. The vessel
had l)een laden at Havana and had touched at Charleston, where
the goods were not landed, and the manifest showed they were
shipped in the names of Spaniards. It was held that an omission
to disclose these facts (Spain and her colonies being then at war)
3 Seton v. Low, 1 Johns. Cas. (N. Mass. 122; see Bauduy v. Union Ins.
Y.) 1; Skidmore v. Desdoity, 2 Co. 2 Wash. (U. S. C. C.) 391, Fed.
•Johns. Cas. (N. Y.) 77; Juhel v. Cas. No. 1112; Kohne v. Insurance
Rhinelander, 2 Johns. Cas. (N. Y.) Co. of North America, 1 Wash. (U.
120, aff'd in Rhinelander v. Juhel, 2 S. C. C.) 93, Fed. Cas. No. 7,920;
Johns. Cas. (N. Y.) 487; De Peyster Maryland Ins. Co. v. Bathurst, 5
v. Gardner, 1 Caines (N. Y.) 492. Gill & J. (Md.) 159; Browne v.
4 3 Kent's Commentaries (5th ed.) Shaw, 1 Caines (N. Y.) 489; Kohne
268. v. Insurance Co. of North America,
On effect of carriage of contraband 6 Binn. (Pa.) 219; see also Rad-
upon marine insurance, see note in 5 cliffe v. United Ins. Co. 7 Johns. (N.
B. R. C. 58. Y.) 38, 46; Skidmore v. Desdoity, 2
5 Richardson v. Marine Ins. Co. 6 Johns. Cas. (N. Y.) 77; Goix v.
Mass. 102, 4 Am. Dec. 92, per Par- Knox, 1 Johns. Cas. (N. Y.) 337.
sons, C. J.; Buck v. Chesapeake Ins. 6 Marshall v. Union Ins. Co. 2
Co. 1 Pet. (26 U. S.) 151, 7 L. ed. 90; Wash. (U. S. C. C.) 357, Fed. Cas.
Parker v. Jones, 13 Mass. 173; Cook No. 9,133, per Washington, J.
v. Essex Fire & Marine Ins. Co. 6
2970
CONCEALMENT— MARINE RISKS § 1818
was not such a concealment of material circumstances as vitiated
the policy.7 It is held that where the insured is engaged in carry-
ing on a trade in a belligerent country, and fails to disclose the
belligerent character of the risk at the time of the insurance, he
cannot recover under a policy "for whom it may concern." 8 But
the rule is now considered as settled here that in case of an in-
surance "for whom it may concern," or words of like import, the
fact that the owner is a belligerent need not be disclosed.9 At a
time when the war of 1812 was imminent and anticipated between
Great Britain and this country, the insured, an American subject,
effected a policy upon a ship and goods, which were his property,
from London to ports in America "against all risks, American
capture and seizure included." At the time of effecting the policy
hostilities had been declared, but this fact was not then known in
England. No disclosure was made as to the national character of the
assured, nor did the underwriter know that the property was Ameri-
can property. The ship was seized by the government here upon its
arrival, and upon an action against the assured the concealment
was held fatal to a recovery. The opinion of the judges in declar-
ing the ground of this decision has been the subject of much dis-
cussion and adverse comment in this country, and has been declared
to have no weight as an authority.10 Where the insurance covers
lawful goods, and the underwriter knows that contraband goods
are shipped on board the same vessel, he assumes the consequent
risk, and if the goods are seized and condemned, the underwriter
7 Union Ins. Co. v. Stoney (Mon- Hubbard, 3 Bos. & P. 291; Conway
ey) 4 McCord (S. C.) 511, overruling v. Gray, 10 East, 536. See adverse
3 McCord (S. C.) 387, 15 Am. Dec. criticism in McBride v. Marine Ins.
034, Harper (S. C.) 235. Co. 5 Johns. (N. Y.) 299, per Kent,
8Bauduy v. Union Ins. Co. 2 C. J.; Francis v. Ocean Ins. Co. 6
Wash. (U. S. C. C.) 391, Fed. Cas. Cow. (N. Y.) 404, per Sutherland,
No. 1,112, per Washington, J.; J.; Odlin v. Insurance Co. of Penn-
Stocker v. Merrimack Ins. Co. 6 svlvania, 2 Wash. (U. S. C. C.) 312,
Cranch (10 U. S.) 274, 3 L. ed. 222. 320, Fed. Cas. No. 10,433, per Wash-
See Juhel v. Rhinelander, 2 Johns, ington, J. Mr. Duer has exhaustive-
Cas. (N. Y.) 120. ly reviewed the cases, and distinctly
9 Hodgson v. Marine Ins. Co. 5 denies the authority of the English
Cranch (9 U. S.) 100, 3 L. ed. 53; cases, subject to such exception as
Seamans v. Loring, 1 Mason (U. S. may exist in the case of a loss which
C. C.) 127, Fed. Cas. No. 12,583; may arise from a deliberate violation
Murray v. United Ins. Co. 2 Johns, by the assured of the laws of his own
Cas. (N. Y.) 263; Buck v. Chesa- country, and he also decides that if
peake Ins. Co. 1 Pet. (26 U. S.) 151, the national character of the assured
7 L. ed. 90; Maryland Ins. Co. v. named in the policy would increase
Bathurst, 5 Gill & J. (Md.) 159. the risk, it ought to be disclosed: 2
10 Campbell v. Innes, 4 Barn. & Duer on Marine Ins. (ed. 1846) 589-
Aid. 426. And see also Simeon v. 601.
Bazett, 2 M. & S. 94; Touteng v.
2971
§§ 1819-182] JOYCE ON INSURANCE
is liable.11 Tn cases of warranty exempting the insurer from losses
from illicit trade or trade in contraband of war, and the assured
knows thai such goods arc intended to be laden, be should disclose
the fact in order to receive protection to his own g Is, provided
the construction of this clause be held to be limited to the property
insured, although if such warranty be construed as an absolute ex-
ception of the risks specified, without regard to their source or
cause, and the assured has knowledge of the existence of the risks,
be oughl to disclose the facts, and by alteration of the terms of
the policy have the risks covered which he wishes, otherwise they
will be excluded.12 And it is also declared that circumstances which
arc the grounds of condemnation by established adjudications of
belligerenl courts, even though not generally known, and though
in opposition to the law of nations, must be disclosed if known to
the assured.13
§ 1819. Presumption concerning underwriter's knowledge of ports
and places. — The underwriter is presumed to have a knowledge of
the nature and situation of places with relation to which the con-
tract is made, and that the word "port," although it usually means
a harbor, is not always used strictly in that sense, and where it is
a matter of fact and general notoriety that certain ports or places
arc merely open roadsteads or anchorage places, and not sheltered
harbors, such fact need not be disclosed. This was so held in a
case where the insurance was on "ship to the port of Sisal."' 14 So
the underwriters are presumed to know the depth of water in cer-
tain harbors,16 and thai there are no pilots on certain coasts.16
§ 1820. Repairs consequent upon outward voyage. — The need of
repair- consequent upon an outward voyage is not necessary to be
stated under an insurance homeward.17 Nor need it be disclosed
that the ship must remain at a foreign port for repairs beyond the
time necessary to take in her cargo.18
§ 1821. Disclosure of interest in ship or goods. — The interest of
the assured in the ship or goods may be of such a character that its
11 Bown v. Shaw, 1 Caines (X. Y.) 14De Longuemere v. New York
489. See Cueulla v. Orleans Ins. Co. Fire Ins. Co. 10 Johns. (N. Y.) L20,
(i Mart. N. S. (La.) 11; Bodgson v. 126.
Marine Ins. Co. 5 Craneh (!) I'. S.) 15 Paterson -v. Duguid, Bell's Sess.
LOO, 3 L. ed. 53. See De Peyster v. Cas. 281. •
Gardner, 1 Caines (N. Y.) 492; 16 Nelson v. Louis Ins. Co. 5 Mart.
Barker v. Blake, 8 East, 283. X. S. (La.) 289.
122 Duer on Marine Ins. (ed. 17 Shoolbred v. Nutt, reported in 1
1846) 631 et seq. See chapter here- Marshall on Ins. (ed. 1810) *475.
in on excepted risks. See § 1824 herein.
"Marshall v. Union Ins. Co. 2 "Beckwith v. Sydebotham, 1
Wash. (U. S. C. C.) 357. Led. Cas. Camp. 116. See Haywood v. Rod-
No. 9,133, per Washington, J. cers, 4 East, 590.
2972
CONCEALMENT— MARINE RISKS § 1822
concealment would operate as a fraud upon the underwriter, or
would bo material or necessary to be disclosed within the limits of
the rule that requires the assured to disclose all facts within his
knowledge which may affect his judgment in accepting or reject-
mo- the risk or charging the premium.19 But it need not be dis-
closed that one whose name is not upon the customhouse docu-
ments or bill of sale is interested in the ship,20 nor that the master
sailed the vessel on shares and was the owner pro hac vice,1 nor
that he was part owner.2 Although where one of the company's
agents was with others authorized to effect policies at a certain
place on marine risks, on which if not rejected by the company the
agents were to receive a commission, and a risk was taken on a
steamship in which the agent was a part owner, and the fact was
purposely concealed, it was held that even though immaterial, it
was a fraudulent concealment vitiating the contract.3
§ 1822. Must an equitable title be disclosed. — There is a con-
flict of authority upon the point whether it is necessary for one
who is merely the equitable owmer of ship or goods to disclose the
nature of his interest, or whether the same is covered by general
words in the policy. In Massachusetts, it is declared that such an
interest may be insured generally as property, although the legal
ownership is in another, upon the ground that neither in England
or in that state had such a representation been deemed essential in
any of the decided cases, and the underwriter could not be in-
jured by an adherence to what appeared to be the generally
understood construction of the law, and the assured's remedy would
be confined to an actual indemnity where he cannot by abandon-
ing transfer the legal title to the underwriter, and, in the absence
of inquiry, the special nature of the insured's title need not be
disclosed.4 In the Federal courts, however, the rule as stated in
the decisions is that an equitable interest must, in order to be
19 Columbian Ins. Co. v. Lawrence, 2 Turner v. Burrows, 8 Wend. (N.
10 Pet. (35 U. S.) 507, 9 L. ed. 512. Y.) s. e. 5 Wend. (N. Y.) 541.
"Information of the nature or 3 Ritt v. AVashington Marine &
amount of the interest of one in- Fire Ins. Co. 41 Barb. (N. Y.) 353.
sured need not be communicated un- 4 Locke v. North America Ins. Co.
less in answer to an inquiry," 13 Mass. 61. In this case A, who
although the policy must specify "the had borrowed money of B for the
interest of the insured in property, purchase of a cargo, assigning' the
if he is not the absolute owner there- same to B, and taking a bill of lad-
of :" Deering's Annot. Civ. Code Cal. ing, and making invoice in B's name
sees. 2568, 2587. See § 1793 herein, under agreement that B was first to
20 Bixby v. Franklin Ins. Co. 8 receive his debt from the sale of the
Pick. (25 Mass.) 86. cargo, and surplus to belong to him,
1 Russ v. Waldo Mutual Ins. Co. and, if not sufficient to discharge his
52 Me. 187. obligation to B, was to be holden
2973
5§ 1823, 1S24
JOYCE ON INSURANCE
protected, be disclosed as such, for the reason that an insurance od
the ship may be reasonably assumed by the underwriter to refer
to the legal title.5
§ 1823. Facts not within assured's knowledge: degree of diligence
required of assured. — There is no concealmenl if the information
is not within the insured's knowledge, nor a fact which he is pre-
sumed to know or ought to know, nor one within his means of
knowledge;6 nor is it obligatory upon the assured to use all
accessible means of information up to the very last moment of
time where he acts in entire good faith.7 although he should exer-
cise all reasonable and due diligence in communicating those facts
of which he has knowledge; as where he receives intelligence
after the order is given to insurer, and he might have communi-
cated the same, a failure to do so is fatal.8
§ 1824. Need not disclose matters of express or implied war-
ranty.— The state or condition, quality, or circumstances of the
ship previously to effecting the policy, such as her age, repairs,
where she was built, and other matters relating to her seaworthi-
ness, as that term is generally used, need not be stated. It is
not necessary to communicate or disclose matters concerning which
the insured undertakes for by warranty, express or implied, pro-
accountable for the balance, was held
to have an insurable interest in the
cargo and entitled to recover, al-
though the nature of his interest was
not made known to the underwriters
at the time of insurance: Hi^gm-
son v. Dall, 13 Mass. 97, 101; Hill
v. Secretan, .'> Mass. 315; Livermore
v. Newburyport Marine Ins. Co. 1
Mass. 264; Holbrook v. Brown, 2
Mass. 280; Bixby v. Franklin Ins.
Co. 8 Pick. (25 Mass.) 86, where
Parker, C. J., said: "The fact of the
apparent ownership by A from the
documents in the customhouse and
the new register under the names X
V, after the transfer to the company,
do not, affect the question of prop
erty, unless the sale should be con-
tested by a creditor of X. Such a
document as a hill of sale or other
instrument, may he required in the
admiralty courts, hut we are not
aware that the principle has been
introduced into our common law.''
5 Old v. Eagle Ins. Co. 4 Mason
(U. S. C. C.) 172, Fed. Cas. No.
2974
14,312, per Storv, J.; Russell v.
Union Ins. Co. 4 Dall. (4 U. S.)
421, 1 L. ed. 892. See §§ 1716, 1859
herein.
6 Foley v. Tabor, 2 Fost. & F. 663 ;
Greenwell v. Nicholson, 1 Jur. 285:
Mayne v. Walter, reported in 1
Marshall on Ins. (ed. 1810) 479,
Doug. 79.
7 Neptune Ins. Co. v. Robinson, 11
Gill & J. (Md.) 256. But see An
drews & Boerum v. Marine Ins. Co.
9 Johns. (N. Y.) 32.
8 Watson v. Delafield, 2 Caines
(N. Y.) 224, s. c. 1 Johns. (N. Y.)
152, s. c. 2 Johns. (N. Y.) 521 i;
M'Lanahan v. Universal Ins. Co. 1
Pet. (26 U. S.) 170, 7 L. ed. 98, per
Story, J. "If there is no fraud, and
one of the parties is not better in-
formed than the other, the least un-
certainty of the event, fortunate or
unfortunate, suffices to render the
insurance valid:" Emerigcn on Ins.
(.Meredith's ed. 1850) c. xv. sec. 3,
p. 635.
CONCEALMENT— MARINE RISKS
§ 1825
vided, however, such matters are not otherwise material.9 Thus,
where no inquiry is made, the assured need not disclose matters
affecting the seaworthiness of the vessel,10 and a statement upon
information that the vessel had carried a cargo of coal on a
previous voyage adds nothing to the warranty of seaworthiness
for the voyage insured ; u nor need assured disclose facts, such as
carelessness or want of economy in the master, which do not im-
peach his honesty,12 nor that she had been set down as unseaworthy
in marine reports at the place of insurance.13 But the rule herein
given may not govern under a time policy in England,14 where
there is no implied warranty of seaworthiness in time policies.15
§ 1825. Whether information which falsifies a warranty must
be disclosed. — Mr. Duer advances the proposition that the insured
must not conceal facts or information which he knows falsifies a
warranty. He exhaustively considers the point and concludes
that the assured's "concealment of the facts or information that
falsify the warranty is in all cases to be deemed a fraud that
vitiates the policy. It is the fair and reasonable construction of
9 Rubles v. General Interest Ins.
Co. 4 Mason (U. S. C. C.) 74, Fed.
Cas. No. 42,119; Popleston v. Ketch-
em, 3 Wash. (C. C.) 138, Fed. Cas.
No. 11,278; Silloway v. Neptune Ins.
Co. 12 Gray (78 Mass.) 73; Houston
v. New England Ins. Co. 5 Pick. (22
Mass.) 89; De Wolf v. New York
Fire Ins. Co. 20 Johns. (N. Y.) 214,
affirmed 2 Cow. (N. Y.) 56; Walden
v. New York Fire Ins. Co. 12 Johns.
(N. Y.) 128, 513; Astor v. Union Ins.
Co. 7 Cow. (N. Y.) 202; Haywood
v. Rodgers, 4 East, 590, per Lord
Ellenborough; Long v. Duff, 2 Bos.
& P. 209 ; Shoolbred v. Nutt, reported
in 1 Marshall on Ins. (ed. 1810)
*475, per Lord Mansfield; see Liv-
ingston v. Marine Ins. Co. 6 Crunch
(10 U. S.) 274, 3 L. ed. 222, 7
Cranch (11 U. S.) 506, 3 L. ed. 421.
Neither party is obligated to com-
municate matters "which prove or
tend to prove the existence of a risk
excluded by a warranty, and which
are not otherwise material :" Deer-
ing's Annot. Civ. Code Cal. sec. 2564.
"The right to information of mate-
rial facts may be waived ....
by the terms of insurance :" Deer-
ing's Annot. Civ. Code Cal. sec. 2567.
29
In the absence of inquiry need not
disclose "any circumstance which it
is superfluous to disclose by reason
of any express or implied warranty."
Marine ins. act 1906, sec. 18 (3) (d)
given under Appendix C. herein.
10 Walden v. New York Fireman's
Ins. Co. 12 Johns. (N. Y.) 513, af-
firming 12 Johns. (N. Y.) 128; Sillo-
way v. Neptune Ins. Co. 12 Gray
(78 Mass.) 73; Augusta Insurance &
Banking Co. v. Abbott, 12 Md. 348.
11 Augusta Insurance & Banking
Co. v. Abbott, 12 Md. 348.
12 Walden v. New York Fireman's
Ins. Co. 12 Johns. (N. Y.) 128, af-
firmed 12 Johns. (N. Y.) 513.
13 Augusta Insurance & Banking
Co. v. Abbott, 12 Md. 348.
14 Russell v. Thornton, 4 Hurl. &
N. 788, 29 L. J. Ex. 9, 30 L. J. Ex.
69.
15 Dudgeon v. Pembroke, L. R. 9
Q. B. 581, 1 Q. B. D. 96, 2 App.
Cas. 284, 14 Eng. Rul. Cas. 105;
Thompson v. Hopper, 6 El. & B. 188,
25 L. J. Q. B. 249; West India &
Panama Telegraph Co. v. Home &
Colonial Marine Ins. Co. 6 Q. B. D.
51, 50 L. J. Q. B. 41, disapproved
7">er the court.
75
§§ 1826, L827 JOYCE ON INSURANCE
every warranty that it is an allegation on the part of the assured
of 1 1 to truth of the facts thai it embraces, and such an allegation
lie can never be justified in making when he knows or believes it
to be untrue, since its accessary tendency in all cases is to deceive
the insurer by leading him to assume a risk that with a knowledge
of tin1 truth he would certainly have declined. It is on the truth
of the warranty, not merely on the fact thai it is given, that the
underwriter relies. Had he believed it to be false, he would not,
by consenting- to the insurance, have incurred the hazard of being
made the victim of a fraud that lie would have known was de-
signed."16 So much importance has been attached to the propo-
sition thus advanced by .Mr. Duer that a rule based thereon lias
been incorporated into the code of California,17 and it is decided in
New York in the matter of a representation as to the age and
rating of a ship that if the representation as to the rating was
material and untrue, it would avoid the policy,18 but this was a
case of allegatio falsi, rather than of suppressio verb and. -while
it might have some bearing upon the matter, could easily be
decided without reference to Mr. Duer's rule. If, however, a case
should arise within that rule, there seems no valid reason why
outside of any code provi>ion such a case should not be governed
by the rule.
§ 1826. Mode of construction of vessels. — That boats of a certain
class are constructed in a way usual to that class need not be dis-
closed, for it is presumed to he known to the underwriter.19
§ 1827. Destination of vessel: port or ports. — If the underwriter
insures private ships of war from and to ports and places, it is not
necessary to disclose the secret enterprises upon which they are
destined, since he waives the information, knowing the nature of
the contract, and therefore must know some expedition is in-
tended:20 nor need the particular destination of a vessel be dis-
closed under an insurance to several ports or to a specified port
and a market.1 An ulterior destination beyond a neutral port
16 2 Duer on Ins. (ed. 184(i) 435 matters proving or intending to prove
(quotation at p. 437) et seq. 573 et the falsity of a warranty entitles the
seq., considering and relying upon insurer to rescind:" sec. 2569.
Woolmer v. Muilman, 3 Burr. 141!), 18Bulkley v. Protection Ins. Co. 2
1 Win. Black. 427, 42!); 1 Park on Paine (U.'S. C. C.) 82, Fed. Cas.
Ins. 406; Uy<U> v. Bruce, reported No. 2,118.
in 1 Marshall on Ins. (ed. 1810) 19 Lexington Fire, Life & Marine
347a; and Stewart v. Morrison, re- Ins. Co. v. Paver, 16 Ohio, 324.
ported in Millar on Ins. 59. 20 Carter v. Boehm, 3 Burr. 1905, 1
17 The California Civil Code reads : YVm. Black. 593, 13 Eng. Bui. Cas.
"An intentional and fraudulent omis- 501, per Lord Mansfield.
sion on the part of one insured to 1 Houston v. New England Ins. Co.
communicate the information of 5 Pick. (22 Mass.) 89.
2970
CONCEALMENT— MARINE RISKS §§ 1828-1831
need not be slated where the voyage is to the neutral porl from a
belligerent country.2
§ 1828. By-gone calamities: previous condition of ship: latest
intelligence. — By-gone calamities need not be disclosed. If the
assured in good faith truly states all his latest information or
intelligence concerning the state or condition of the ship, it is
sufficient.3 It would seem, however, that if the character of such
previously occurring events was such that it might be fairly in-
ferred that the danger was continuing they would be material and
ought to be disclosed, and certainly if they prove in fact to have
been material and are not disclosed, the policy would be avoided.4
§ 1829. That goods are to be stowed on deck need not be dis-
closed.— That goods are stowed or intended to be stowed on dock
need not be stated, nor that the ship is to and does carry a deck-
load.5
§ 1830. Particular language of bill of lading. — The particular
language of bills of lading need not be disclosed to underwriters
on the cargo. It is sufficient that they are so general as to com-
prehend the part concerning which the insurance is effected.6
§ 1831. Excepted risks. — Facts or information which relate or
are material to a risk expressly or impliedly excepted from the
policy need not be disclosed, provided the existence of such risk
does not in itself change or increase, or tend to change or increase,
the risks which the underwriter actually undertakes.7
2 Steinbaeh v. Columbian Ins. Co. tion of loss or damage to goods or
2 Caines (N. Y.) 130. Neither party property on deck, see § 2695 herein,
need disclose matters "of which the 6 Hurtin v. Phoenix Ins. Co. 1
other waives communication:" Deer- Wash. (U. S. C. C.) 400, Fed. Cas.
ing's Cal. Civ. Code, sec. 2564. No. 6,941. It is held that it must
3 Freeland v. Glover, 6 Esp. 14, / be shown that the goods specified in
East, 457, per Lord Ellenborough ; the bill of lading were actually loaded
Kemble v. Bowne, 1 Caines (N. Y.) on board the vessel: M' Andrew v.
75. Bell, 1 Esp. 373. And also if the bill
4 See Ingraham v. South Carolina of lading was for the outward cargo,
Ins. Co. 3 Brev. (S. C.) 522; 2 Duer the proceeds must be shown to have
on Marine Ins. (ed. 1845) 443 et been shipped for the homeward voy-
seq.; 2 Parsons on Marine Ins. (ed. age, for such outward bill is not ev-
1868) 489 et seq. idence of an interest in the homeward
5 Clarkson v. Young, 22 L. T. N. goods : Beale v. Pettit, 1 Wash. (U.
S. 41; Da Costa v. Edmund, 4 Camp. S. C. C.) 241, Fed. Cas. No. 1,158.
142, 2 Chit. 227. 7 Neither party is obligated to dis-
As to specific description of goods close information or matters "which
laden on deck; usage, see § 1726 relate to a risk excepted from the
herein ; marine ins. act 1906. First policy, and which are not otherwise
Sched. Rule 17, given in Appendix material:" Deering's Annot. Civ.
C. herein. Code Cal. sec. 2564; 2 Duer on
As to usage, and also as to excep- Marine Ins. (ed. 1846) 577 et seq.
Joyce Ins. Vol. III.— -187. 2977
§§ 1832, 1833 JOYCE OX INSURANCE
§ 1832. Ship's papers: false clearance, etc. — Tf a letter submitted
to the underwriters ordering insurance refers to another letter
previously laid before them, which letter contains information that
the vessel had -permission to trade to the Spanish colonies, the
underwriters are bound to notice that fact, and to know that the
vessel would take all the papers necessary to make the voyage
legal,8 nor need a false clearance under a general policy on war
risks be disclosed.9 The use of false papers, when rendered m
sary by the nature of Ihe trade insured and by its known course
and usage, need not be disclosed.10 So if the vessel have on hoard
a document usual and customary in the course of the trade in
which she is engaged, although it may expose her to capture and
condemnation, it need not he disclosed.11 But the rule is other-
wise where their use is not so warranted by necessity or usage, and
there is no consent by the insurer thereto.12 So the want of
necessary papers to show the ship's national character should be
disclosed where a policy is effected upon the ship or freight, or
the owner's or charterer's goods; otherwise in case of goods of one
who has no interest therein.18 There would exist, however, an
exception where an arbitrary ordinance of a belligerent enjoins
the use of such a paper, and the policy is effected by a neutral.14
§ 1833. Whether the fact that letters or marque are on board
need be disclosed. — It has been held that the fact that letters of
8 Livingston v. Maryland Ins. Co. belonging to subjects of one of the
7 Crunch (11 U. S. i 506, 3 L. ed. belligerents, and the real agency has
421. net been declared to the insurers,
9 Bnrnewoll v. Church, 1 Caines they are not responsible for capture
(N. Y.) 217, 2 Am. Dec. 180 j Planche and confiscation. They would be re-
v. Fletcher, 1 Doug. 251, per Lord sponsible if the true agency, con-
Mansfield, cealed under simulated papers, had
10 Livingston v. Maryland Ins. Co. been declared to them:*' Emerigon on
7 Cranch (11 U. S.) 506, 3 L. ed. Ins. (Meredith's ed. 1850) c. viii.
421, per Marshall, C. J.; Buck v. sec. 5, p. L70.
Chesa ike [n . Co. 1 Pet. (26 I'. S.) 18 Cleveland v. Marine Ins. Co. S
151,7 L. ed. 90, per Johnson, J. ; Cab Mass. 308; Bell v. Carstairs, 14 East,
breath v. Gracv, 1 Wash. ( U. S. C. 394, 14 Eng. Rul. ('as. 319, per Lord
('.) 219, Fed. Cas. No. 2,296. Ellenborough ; Polleys v. Ocean Ins.
»Le Roy v. United Ins. Co. 7 Co. 2 Shep. (14 Maine) 141, where it
Johns. (N. Y.) 343. was decided that where the national
12 Horneyer v. Lushington, 15 character of a vessel is not made a
. 16, 3 Camp. 85; L3 Eng. Rul. pan of the contract of insurance, the
1 637; Phoenix Ins. Co. v. Pratt, want of proper documents to show
2 Bin. (Pa.) 308; Bell v. Bromfleld, such character is not material, unless
L5 East, 364; Steele v. Lacy, 3 Taunt, it appear that loss happened or risk
'JS4. Fed. Cas. No. 12,504; Schwartz was increased in consequence of the
v. Insurance Co. of North America, absence of such documents.
3 Wash. (U. S. C. C.) 117. If the "Pollard v. Bell, 8 Term Rep.
neutral has shipped as his own, goods 434.
2978
CONCEALMENT— MARINE RISKS
§ 1834
marque are on board must be disclosed,15 but the better opinion
seems to be that such fact alone can have no effecl upon the policy j
and need not be stated.16
§ 1834. Ship's true port of loading. — The insured should disclose
the true port of loading to the underwriter where such port is
unknown as a place of loading, and not one which by the usages
of trade they are bound to know, especially where the knowledge
by the underwriters would have caused them to charge a higher
premium. Thus, where it is uncertain from the terms of the
policy or application whether the ship will proceed to one of sev-
eral ports, and the insured has positive information that the master
will proceed to a certain port and load her there, a failure to com-
municate such fact will be a material concealment avoiding the
policy.17
15 Denison v. Modigliani, 5 Term
Rep. 580, per Lord Kenyon.
16 "Wiggin v. Boardman, 14 Mass.
12, per Parker, C. J.; Jarratt v.
Ward, 1 Camp. 263, 266, per Lord
Ellcnborough ; Moss v. Byrorn, 6
Term Rep. 379.
17 Ilarrower v. Hutchinson, 10 B.
& S. 469, 5 L. R. Q. B. 584; 22 Law
T. 684, 39 L. J. Q. B. 229; rev'g 17
W. R. 731, 4 L. R. Q. B. 523 (three
judges dissenting). The facts of the
case were these: The plaintiffs ef-
fected a policy on bone and bone-ash
on board a certain vessel at and from
Buenos Ayres and port or ports of
loading in the province of Buenos
Ayres, to port or ports of call and
discharge in the United Kingdom.
It was known to the plaintiffs at the
time that the vessel was going from
Buenos Ayres to Laguna de Los
Padres, a port in the province, to
complete her cargo, but at that time
the defendant did not know that L.
was a port in the province. Vessels
could not clear therefrom, but had
to return to Buenos Ayres to obtain
clearance. There was no artificial
port at L., but only a roadstead pro-
tected by natural headlands, and
forming a kind of bay. The vessel
went to L., but was unable to obtain
eargo there, and on her return to
Buenos Ayres was lost. Had the
underwriters known of said fact.
29
they would have charged a higher
premium. The fact of her going to
L. was held a material one, the non-
disclosure of which avoided the pol-
icy. The court, per Kelly, C. B.t
says : "Within the general rule, there-
fore, laid down in many cases, it was.
a fact which the assured was bound
to disclose, unless it can be correctly
affirmed that it was a fact which the
assured had a right to assume was
within the knowledge of the un-
derwriter, or concerning which the
underwriter had waived further in-
formation, or which the under-
writer was bound to know. The
facts and correspondence set out in
the case show that the plaintiffs and
their agents knew that Laguna de Los
Padres was unknown to underwriters
in general as a port of loading, and
even, as we think, that it was un-
known to the defendant. It is im-
possible, therefore, as it seems to us.
to maintain that the plaintiffs were
authorized to assume that the de-
fendant knew of the port as a port of
loading. The case in which an un-
derwriter is said to waive being
informed of a fact is where a rep-
resentation made to him should sug-
gest a doubt or inquiry to the mind,
and lie omits to make the inquiry:
Phillips on Insurance, sec. 568. In
the present case there was no such
representation, and therefore the
i9
JOYCE ON [NSURANCE
§ 1835. Other matters not necessary to be disclosed. — Tlie in-
sured need nol disclose how long a ship has been in port prior to
ilic time of effecting the insurance,18 nor what lessens the risk
agreed to be run; as upon a policy for three years thai it will be
over in two, nor under a policy with liberty of deviation, what
shows or tends to -how that there will be no deviation need nol be
sold.19 So the underwriter is presumed to he acquainted with the
genera] course and incident- of trade with the general risks affect-
ing commerce with particular countries, with the established im-
port of terms used in their contracts, and such facts need not be
doctrine cannot apply. It might have not be represented to the under
applied if the name of Laguna de Los writer.' Now, usages of trade can
Padres had been mentioned, and the only exist in a known and established
defendant had made no inquiry aboul trade, and all the analogies seem to
it. The real question in this case, show that the usages of trade men-
therefore, is, What are the facts tinned in see. 593, are eonlined to a
which an underwriter ought to know ? known and established trade. . . .
In Carter v. Boehm, 3 Burr. 1910, The underwriter was not bound to
L3 Eng. Rul. ("as. 501, Lord Mans- know that which no other underwrit-
tield thus states the proposition: er, i. e., no other person engaged in
■The assured need not mention what the same trade or business as him-
the underwriter oughl to know, what self, knew. He was not bound to
be takes upon himself the knowledge know that Laguna de Los Padres was
of, or what he waives being informed a loading port in the province of
of.' He then gives several instances Buenos Ayres, or that it was subject
of facts which the underwriter ought to local dangers. . . . We are of
to know, and then he continues : 'The opinion, therefore, that the assured
reason of the rule which obliges par- in this case concealed from the under-
lies to disclose is to prevent fraud writer a material fact which was
and to encourage good faith. It is known to the assured and was not
adapted to such facts as vary the known to the underwriter, and that
nature of the contract, which are the fact so concealed was not one
privately known, and the other is which the assured was entitled to
ignoranl of and has no reason presume was known to the under-
to suspect.' ... In Phillips on writer, nor one as to which the
In-, sec. 531, the material tact which underwriter had waived further
may not lie concealed is thus information, nor one which the un-
described: 'And which is known or derwriler ought to have known, and
presumed to be so to the party not consequently it was the duty of the
disclosing it. and is not known or assured to communicate the fact to
presumed to he so to the other.' In the underwriter, and the noncom-
sec. 571, speaking of the knowledge munication vitiated the policy:'' Id.
of the trade which is to be assumed, 590-92. This case is cited in Tale
lie says: 'The assured is not required v. Hyslop, L. R. 15 Q. B. 1). 368,
to communicate to the underwriter 376, 53 L. T. 581. See also Hodgson
facts which are presumed or proved v. Richardson, I Win. Black. 4(i.'».
to be known to those conversant with 18Kemble v. Bowne, 1 Caines (N.
the trade,' etc. In sec. 593: 'The Y.) 75.
underwriter is presumed to know the 19 Carter v. Boehm, 3 Burr. 1909,
usages of the particular trade in- 1 Wm. Black. 593, L3 Eng. Rul. Cas.
sured, and these, accordingly, need 501, per Lord Manslield.
2980
CONCEALMENT— MARINE RISKS
§ 1836
disclosed.20 That other insurers have insured the ri-k need not
be disclosed, nor their conclusions, fears, or apprehensions con-
cerning the same;1 nor need it be disclosed thai the insured is a
subject of a belligerenl state and has immigrated to this country
flagrante bello and become naturalized.2 Where a ship has been
chartered for a lump sum, and the charterers have insured their
"profit on charter," they are not bound to voluntarily disclose to
the insurers the fact thai the charter freighl is a lump sum and
not a tonnage rate, for where insurers purport to insure the profil
on charter, they are put upon inquiry to ascertain the terms of
the charter.3
§ 1836. Other matters necessary to be disclosed. — If the order to
insure states that upon the arrival of the ship the owner will send
notice thereof to the broker by express, such fact should be dis-
closed, unless circumstances exist, such as the high rale of pre-
mium or relative dates, from which the fact might reasonably be
inferred that the insurer knew of the ship's nonarrival.4 It is
held that where a policy is altered to correct a mistake so as t<>
change the subject matter, the insured should communicate ma-
terial facts learned after the policy was effected and known at the
time the alteration was made.5 An excessive valuation, even
though there lie no fraud, may be material and necessary to be
disclosed.6 If in time of war the insured knows that the vessel
20 Buck v. Chesapeake Ins. Co. 1
Pet. (26 U. S.) 151, 160, 7 L. ed.
90, per Johnson, J. ; Kohne v. In-
surance Co. of North America, 1
Wash. (U. S. C. C.) 154, 15S, Fed.
Cas. No. 7,922, per Washington, J.;
Green v. Merchants' Ins. Co. 10 Pick.
(27 Mass.) 402; De Longuemere v.
New York Ins. Co. 10 Johns. (X. Y.)
120; Norris v. Insurance Co. of
North America, 3 Yeates (Pa.) 84,
2 Am. Dec. 360; Pimm v. Lewis, 2
Fost. & F. 778.
1 Rus'2'les v. General Interest Ins.
Co. 4 Mason (U. S. C. C.) 74, Fed.
Cas. No. 12,119, affirmed 12 Wheat.
408, 6 L. ed. 674; Clason v. Smith,
3 Wash. (U. S. C. C.) 156, Fed. Cas.
No. 2,868. But see Johnson v. Phoe-
nix Ins. Co. 1 Wash. (U. S. C. C.)
378, Fed. Cas. No. 7,405; Hoyt v.
Gilman, 8 Mass. 336; Moses v. Dela-
ware Ins. Co. 1 Wash. (U. S. C. C.)
385, Fed. Cas. No. 5,872. And see
Harrower v. Hutchinson, 5 L. R. Q.
B. 584; 39 L. J. Q. B. 229, where the
fad that other insurers had refused
to take the risk at the premium paid
was considered, together with another
point against the insured.
2 Dugnet v. Rhinelander, 2 Johns.
C. (N. Y.) 476.
3 Asfar v. Blundell, 65 L. J. Q. B.
138, 1 Q. B. 123, 73 L. T. 648, 44
W. R. 130, 8 Asp. M. C. 106.
4 Court v. Martineau, 3 Doug. 161.
The court found that under the facts
of this case there was no conceal-
ment.
5 Sawtell v. Lowdon, 5 Taunt. 359.
See Weir v. Aberdein, 2 Barn. & Aid.
321): French v. Patton, 9 East. 331.
6 Ionides v. Pender, L. R, 9 Q. B.
531. In this case a paper was shown
the underwriter containing certain
words in German, and which, had the
underwriter understood them, would
have at least caused an inquiry.
Quaere, ought not the underwriter to
have been held put on inquiry, and
2981
§ 1837 JOYCE OX INSURA1
will nol sail with convoy, and permits tlio underwriter to insure
under the belief thai she will or may sail with convoy, this is a
material concealment.7 If an order to insure is received, directing
the correspondent to wait a specified time to give the ship time to
arrive be ecting the insurance, neglect to communicate the
time of receiving such order and the delay before insuring is fatal
to a recovery.8 Where a fact is material and oughl to he dis-
closed, it is held that the knowledge of a director of a company
is not the company's knowledge.8 But where the presidenl of the
insuring com]. any had actual knowledge learned from uewspapei
at the office, the company was held to have knowledge.10 The
moral character of the master need not he disclosed according in
Mr. Phillips, while Mr. Duer thinks otherwise.11 (instructions
violating rules of admiralty courts of England must be disclosed,
although such rules are opposed to the law of nations.12
§ 1837. Where inquiries are made. — In case of inquiry by tic
insurers, the failure to disclose or truly state the fact inquired
about will be fatal to the contract, even though not material; for
by making the inquiry it is a reasonable presumption that the in-
surer considers such facts material.13
by neglect to ascertain the inter- 10 Green v. Merchants' Ins. Co. 10
pretation of the words, have been Pick. (27 Mass.) 402.
precluded from alleging a material n 1 Phillips on Ins. (3d ed.) 331;
concealment.' How does it differ in 2 Duer on Marine Ins. (ed. I'm
principle from the case where a letter 441 et seq., both citing Walden v.
is shown the insurer which refers to Fireman's Ins. Co. 12 Johns. (N. Y.)
another letter, and the letter contains 128, 51:?.
the facts alleged to have been con- 12 Kohne v. Insurance ( !o. of North
cealed, in which case there is no America, 1 Wash. (U. S. C. C.) 93,
concealment of matters contained in Fed. Cas. No. 7,920, s. e. li Binn.
the letter referred to: Freeland v. (Pa.) 219.
Glover, 7 East, 457, 6 Esp. 14. See 13 Bimely v. South Carolina Ins.
§ 17! IS herein. Co. 1 Mills' Const. (S. C.) 15;}, 154,
7Reid v. Harvey, 4 Dow. 97. See 12 Am. Dec. 623; Dennison v. Thom-
Sawtell v. Loudon", 5 Taunt. 358. aston Mutual Fire Ins. Co. 20 Me.
8 Richards v. Murdoch, 10 Barn. & 125, 37 Am. Dec. 42. As to what
C. 527. facts are waived by failure to in-
9 Himely v. South Carolina Ins. quire, see Deering's Annot. Civ. Code
Co. 3 Const. Rep. 154, 1 Mills' Const. Cal. sec. 2507; § 1798 herein.
(S. C.) 153, 154, 12 Am. Dec. 623.
2982
CHAPTER LV.
CONCEALMENT IN OTHER THAN MARINE RISKS.
§ 1814. Concealment in other than marine risks: absence of inquiries:
fraud : materiality : other tests : generally.
§ 1845. English decisions.
§ 1S46. Assured's knowledge: nondisclosure affecting acceptance of risk
or rate.
§ 1847. Assured's knowledge: concealment arising from negligence, acci-
dent or mistake, etc.
§ 1848. Assured's knowledge : his belief as to materiality of facts.
§ 1849. Same subject: conclusion.
§ 1850. Insurer's knowledge.
§ 1851. Insurer's knowledge: constructive knowledge from examination
by surveyor.
§ 1852. Insurer's knowledge: use of insurance map in fire risks.
§ 1853. Insurer's knowledge: public records of title.
§ 1854. Insurer's knowledge : political perils.
§ 1854a. Knowledge of insurer's agents.
§ 1855. A specific and full disclosure is required, not an evasive one.
§ 1856. Concealment must be referred to the time of making the contract
and not to a subsequent event.
§ 1857. Disclosure of assured's interest.
§ 1858. Same subject: exception to rule.
§ 1859. Must an equitable title be disclosed.
§ 1860. Unusual or extraordinary circumstances of peril to which property
is exposed.
§ 1861. Same subject : distinctions to be 'observed.
§ 1862. Apprehensions that property is exposed to danger: suspicions,
rumors, opinions, and speculations.
§ 1863. Where insured's belief, apprehension, or fear of danger is the
moving cause in effecting insurance.
§ 1864. When moral character of assured may become material: rein-
surance: moral risk.
§ 1865. Belief that property has been destroyed.
§ 1866. Facts implied from or assurer put on inquiry by information
given : waiver.
2983
§ lMi JOYCE ON INSURANCE
§ L867. Whatever affects the state or condition of the property at time:
materiality: facts affecting risk or premium.
§ 1S6S. Whal constitutes a material Eact: must it be material to the
risk: tacts affecting risk or premium as tesl of materiality.
§ L869. Inquiries.
§ L870. Enquiries: no inquiries: limited inquiries: questions in applica-
tion unanswered or incompletely answered: waiver.
L871. Same subject, continued.
S 1S7i\ Same subject: distinctions to be observed.
§ L873. When subsequent reception of premium no waiver of conceal-
ment.
§ 1874. Concealment of same facts from other insurers.
§ 1875. Other matters: code provisions, etc.: general statements.
§ 1844. Concealment in other than marine risks: absence of in-
quiries: fraud: materiality: other tests: generally. — As stated under
the l.-i-i chapter, the rule in this country in regard to concealment
is not so strict in other risks as in cases of marine insurances,
excepl possibly to some degree in fire risks, and there is some rea-
son for this relaxation of the rule required in marine risks, since
many cases will undoubtedly arise, especially in life risks, where
the information cannot be certain and specific.14 An exception
also exists in cases where a statute requires the utmost good faith
on the part of the applicant and his representations are considered
to bo true.16 In England, however, the rule seems to be equally
strict in all risks,16 except perhaps in those cases of guaranty
where the nature of the contract warrants a relaxation of the rule,
although where such contracts are those of insurance it seems that
the rule is not relaxed.17
14 Hartford Protection Ins. Co. v. the English eases does not obtain
Harmer, 2 Ohio St. 452, 5!) Am. Dec. here, at least so tar as the rule there
684; Horn v. American Mutual Life impliedly stated »-oes. See § 206
Ins. Co. 64 Barb. (N. Y.) 81. See herein. "Contracts of insurance are
§ 1240 herein. contracts in which uberrima fideis is
15 .Etna Life Ins. Co. v. Conway, required not only from the assured
11 Ga. 4pp. 557, 75 S. E. 915, 41 but also from the company insuring."
Ins. L. J. 802. As to statutes see § Bradley v. Essex <& Suffolk Accident
L916 herein. Indemnity Soc. In re, si L. J. K. I'..
"London Assurance Co. v. Man- 523,530, [1912] 1 K. B. 415, L65 L
sel, L. R. 8 Ch. D. 363, 11 Ch. 1). T. 919, 28 T. L. If. L75, [ L9121 W. < !.
363. See criticism by Mr. Justice Rep. 6, per Parwell, L. J., applied
Gray in Phoenix Life Ins. Co. v. in this case to a policy taken out, un-
Etaddin, 120 U. S. 183, 30 L. ed. 644, >\cv the workmen's compensation
7 Sup. Ct. 500, of the remarks of Sir act 1906, againsl accidents to em-
George Jessel, .M. K., who delivered plovees.
the judgmenl in the above ease, which 17 The ordinary contract of guar-
criticism shows that the strict rule of anty is not, strictly speaking, a con-
2984
CONCEALMENT IN OTHER THAN MARINE RISKS § 1844
Concealment exists where the assured has knowledge of a fact
materia] to the risk, and honesty, good faith, and fair dealing re-
quire* that he should communicate it to the assured, but he
designedly and intentionally withholds the same.18
Another rule is that if the assured undertakes to state all the
circumstances affecting the risk, a full and fair statement of all
is required.19
It is also held that the concealment must, in the absence of
inquiries, he not only material, but fraudulent, or the fad musl
■have been intentionally withheld;20 so it is held under English
law that if no inquiries are made and no fraud or design to con-
ceal enters into the concealment the contract is not avoided.1 And
it is determined that even though silence may constitute mis-
representation or concealment it is not of itself necessarily so as
it is a question of fact.2 Nor is there a concealment justifying a
forfeiture where the fact of insanity is not disclosed no questions
being asked concerning the same.3 It is also decided that if in-
tract uberrimae fidei." 17 Earl of Milling Co. 50 Colo. 424, 116 Pac.
Halsburv's Laws of England, p. 572 154, 40 Ins. L. J. 1717, 1 i 22,
(citing British Ins. Co. v. Lloyd, 10 Nebraska.— Seal v. Farmers &
Exch. 523). But compare Id. p. 573, Merchants Ins. Co. 59 Neb. 253, 80
and cases cited. But it is also de- N. W. 807 ; Phoenix Ins. Co. v. Fuller,
clared that: "Where the contract of 53 Neb. 811, 40 L.R.A. 408, 68 Am.
suretyship may with equal propriety Rep. 637, 74 N. W. 269; Fadden v.
be called either a contract of insur- Insurance Co. of North America, 77
ance or of guaranty, it is apparently N. H. 392, 92 Atl. 335.
a contract in which uberrima tides is Oregon.— Arthur v. Palatine Ins.
required." 15 Earl of Halsbury's Co. 35 Oreg. 27, 76 Am. St. Rep.
Laws of England, p. 539. 450, 57 Pac. 62.
18 Daniels v. Hudson River Fire South Dakota. — Milhson v. Mutual
Ins. Co. 12 Cush. (66 Mass.) 416, Cash Guarantee Fire Ins. Co. 24 S.
59 Am. Dec. 192; Clark v. Union Dak. 285, 140 Am. St. Rep. 788, 123
Mutual Fire Ins. Co. 40 N. H. 333, N. W. 839.
77 Am. Dec. 721; Connecticut Fire Washington.— Dooley v Hanover
Ins. Co. v. Colorado Leasing, Min- Fire Ins Co 16 Wash 155, 58 Am.
ing & Milling Co. 50 Colo. 424, 116 St Rep. 26, 47 Pac. 507.
d in /in t t t 1717 T7oo. Wisconsin— Alkan v. JSew Mamv
Pae. 154, 40 Ins L. J 1717 1/22 ^ ^ Cq 53 wig 136 1Q N w
Vaughn v United States Title & gi am] caseg eited in last two notes_
Guaranty & Indemnity Co. 122 K See j>g 1894 et geq> herein. As to
Y. Supp. 393, 137 App. Div. 623. statutes see § 1915 herein.
As to statutes, see § 1916 herein. 1 Laidlaw v. Liverpool, London &
19 Stoney v. Union Ins. Co. 3 Mc- G]obe rrS- Co. 13 Grant Ch. (U. C.)
Cord (S. C.) 387, 15 Am. Dec. 634. 377.
See also Jeffries v. Economical Mu- 2 y[ii]er v. Phenix Ins. Co. of
tual Life Ins. Co. 22 Wall. (89 U. S.) Bklvn. N. Y. 105 Miss. 4, 61 So. 983.
47. 22 L. ed. 833. 3 Blaekstone v. Standard Life
20 Colorado.— Connecticut Fire Ins. Accident Ins. Co. 74 Mich. 592, 3
Co. v. Colorado Leasing, Mining & L.R.A. 486, 42 N. W. 156.
2985
§ 1844 JOYCE OX INSURANCE
sured is no1 asked and answers nothing as to incumbrances on
the property and he pays his money under the belief that lie is
procuring insurance he Is not bound by the incumbrance clause
in the standard policy where he is guilty of no intentional con-
cealment or misleading conduct.4 In the case of bonds where the
circumstances an- such as to charge the surety on a Mih-con-
tractor's bond with notice and pu1 him on inquiry the failure of
the obligee to disclose tacts ami his silence in regard thereto does
not constitute a fraud where no inquiry is made.6 So sureties on
a Ik. nd for the prompt accounting of moneys collected arc re-
leased by a failure to disclose an indebtedness on accounl of ;i
known embezzlemenl hut the duty is not imposed upon the obligee
to give unasked to the sureties, information of such facts where
-,iid acts involve no moral turpitude, are consistent- with honesty
and only show negligence or unskilfullness.6 If it is known to
the obligee in a bond that the principal has in the past been guilty
of irregularities in respect of the duties for the faithful perform-
ance of which in the future the bond is given, the failure of the
obligee to disclose thai act is a defense to the liability of the
surety.7
But it would seem that if a material fact is actually known to
the assured, its concealment must of itself necessarily be a fraud.
and if the fact i> one which the assured ought to know, or is pre-
sumed to know, the presumption of knowledge ought to place the
assured in the same position as in the former case with relation to
material facts; and if the jury in such cases find the fad material,
and one tending to increase the risk, it is diflicult to see how the
inference of a fraudulent intent or intentional concealment can he
avoided.8 And it i- declared that if a material fact is concealed
4 Humble v. German Alliance Ins. 185 Mass. 582, 102 Am. St. Rep. 370,
«... 85 Kan. 140, 116 Pae. 47:2. 91 71 X. E. 63.
Kan. 307, 137 Pae. 980, 92 Kan. 4S6, 8 See the following cases:
141 Pac. 243, 44 Ins. L. J. 171. United States.— Columbian Ins.
5 Tinted States Fidelity & Guar- Co. v. Lawrence, 2 Pet. (27 U. S.)
anty Co. v. Cleans & Fulton Iron 25, 7 L. ed. 335; Columbian Ins. Co.
Works, — Tex. Civ. App. — , 132 v. Lawrence, 10 Pet. (35 U. S.) 507.
S. W. 536. 9 L. ed. 512.
6 Herbert v. Lee, 118 Tenn. 133, 12 Louisiana. — Walden v. Louisiana
L/R.A.fN.S.) 1247n, 121 Am. St. Ins. Co. 12 La. 134, 32 Am. Dec. 116.
Rep. 989, 101 S. W. 175. Massachusetts.— Hoyt v. Gilman,
On duty of obligee in fidelity bond 8 Mass. 336.
to disclose prior defalcation to sure- New Jersey. — Sussex Comity Ins.
ties in the absence of any inquiry in Co. v. Woodruff, 26 N. J. L. 541.
regard thereto, see note in 12 L.R.A. New York. — People v. Liverpool
(N'.S.) 247. London & Globe Ins. Co. 2 X. V. S.
'Inhabitants of Hudson v. Miles, C. 268; New York Bowerv Fire Ins.
2986
CONCEALMENT IN OTHER THAN MARINE RISKS § 1844
by assured it is equivalent to a false representation that it does
not exist, and that the essentials are the truth of the representations
whether they were intended to mislead and did insurer accept
them as true and act upon them to his prejudice.9 So it is de-
cided that under a stipulation voiding the policy for concealment
or misrepresentation of any material fact or if his interest is not
truly slated or is other than the sole and unconditional ownership
the facts are unimportant that insured did not intend to deceive
or withhold information as to encumbrances even though no
questions were asked.10 And if insured, while being examined
for life insurance and knowing that she had heart disease, falsely
.Mated that she was in good health, and though she could not read
the application, it was explained to her and the questions asked
through an interpreter, and the application like the policy con-
tained a provision that no liability should be incurred unless the
policy was delivered while the insured was in good health, the
court properly directed a verdict for the insurer, though a witness
who was present at the examination testified that the insured was
not asked whether she had heart disease.11
This does not, however, include those cases where by warranty
the question of materiality is excluded from the jury, nor questions
where inquiries are specially made.12
Co. v. New York Fire Ins. 17 Wend, delivered to assured while in good
(N. Y.) 359. See § 1847 herein. health, see notes in 17 L.R.A.(N.S-)
North Carolina.— Schus v. Equit- 1144; 43 L.R,A.(N.S.) 725; and
able Life Assur. Soe. 166 N. C. 55, L.R.A.1916F, 171.
81 S. E. 1014. 12 Connecticut.— Bebee v. Hartford
Compare Owen v. United States Mutual Ins. Co. 25 Conn. 51, 65 Am.
Surety Co. 38 Okla. 123, 131 Pac. Dec. 550.
1091, 42 Ins. L. J. 1068, considered iiunois.— Mutual Benefit Life Ins.
under § 184/ herein. _ Cq> y Robertson 59 I1L 123, 14 Am.
As to statutes see § 1916 herein g F Ins> Qq y Th 1Q
9 Pelican v. Mutual Life Ins. Co. T.,1 . ' f..r
of N. Y. 44 Mont. 277, 119 Pac. 778, UL APP- D40'
41 Ins. L. J. 778. Indiana. — Mutual Benefit Life Ins.
10 Haves v. United States Fire Ins. Co. v. Cannon, 48 Ind. 264; Mutual
Co. 132* N. Car. 702, 44 S. E. 404. Benefit Life Ins. Co. v. Miller, 39
11 Haapa v. Metropolitan Life Ins. Ind. 475.
Co. 150 Mich. 467, 16 L.R.A.(N.S.) Massachusetts.— Campbell v. New
1165 (annotated on the parol evi- Engiand Mutual Life Ins. Co. 98
deuce rule as to varying or contra- Magg 381; Vose y Eagle Life &
dieting written contracts as affected HeaUh Ing Cq q Cugh> (6Q Mass }
by the doctrine of waiver as applied ,Q
to policies of insurance), 121 Am. ' " _^ , „ . XT . ,
St. Rep. 627. 114 N. W. 380. Oregon,— Beard y Royal Neigh-
On effect of stipulation in applica- »ors of America, o3 Oreg. 102, la
tion or policy of life insurance that L.R.A.(N.S.) 798, 99 Pac. 83.
it shall not become binding unless Pennsylvania. — March v. Metro-
2987
§ 1844 JOYCE ON INSURANCE
These rules must, however, be qualified by many exceptions,
as in cases where the insurer has actual knowledge of the facts,
or where he is presumed to know or ougtri to know them, or where
he waives information concerning the same either by himself
or his authorized agent, which several exception.- or qualifica-
tions, as well as others, will be hereafter specifically noted.
Concealment which is not fraudulent will avoid a lire policy it'
the conditions annexed to the policy and the form of application
require the concealed fact to he stated, and if one of the conditions
expressly provides that '"any misrepresentation or concealment"
will vitiate the policy.13 A concealment or breach of warranty
which will avoid a policy of fire insurance is not shown by proof
l hat facts material to the risk, which were known to the insured
when he applied for the policy, were not disclosed by him.14
Other important factors to he considered in connection with the
question of concealment, are such statutory provisions as are ap-
plicable to the various stipulations of the contract among which
are these: that a fact immaterial in itself may be made material
by the requirement of the policy, and a material fact may become
immaterial by the terms of the contract. The entire contract.
therefore, is matter of consideration, especially when inquiries are
made concerning such matters. This is illustrated in part by
the case where the question of other insurance and whether the
same has been applied for and refused are made material, and a
basis of the contract and inquiries are made concerning the same.15
politan Life Tns. Co. 18G Pa. St. 629, (8G Mass.) 417. Nt w Fork.— Eding-
05 Am. St. Rep. 3S7, 40 Atl. 110. in,, v. .Ilina Life Ins. Co. 77 X. V.
See §§ 18G9-1872 herein. As to 5G4, 100 N. Y. 536, 3 X. E. 315.
statutes, see § 1916 herein. Pennsylvania. — Columbia Ins. Co. v.
"Burritt v. Saratoga County Mu- Cooper, 50 Pa. St. 331. England. -
tual Ins. Co. 5 Hill (N. Y.) 188, 40 Aha- 1). maid v. Law Union Tns. Co. L.
Am. Dec. 345. R. 9 (,). 15. 328; Anderson v. Fitz-
14Catcs v. Madison County Mutual gerald, 4 II. L. Cas. 484).
Ins. Co. 5 N. Y. (1 Seld.) 469, f>.~> Arkansas.— Capital Fire Ins. Co.
Am. Dee. 360. v. King, 89 Ark. 346, 116 S. W. 894.
15 United States. — Phoenix Life Illinois. — Triple Link Mutual In-
Ins. Co. v. Raddin, 120 U. S. 183, demnity Assoc v. Froebe, HO HI.
30 L. ed. 644, 7 Sup. Ct. 500, per A pp. 2!)!).
Gray, .1. (citing Carpenter v. Prov- Kentucky. — Western & Southern
idenee Washington Ins. Co. 1G Pet. Life Ins. Co. v. Quinn, L30 K\. 397,
(41 U. S.) 405, 10 L. e.l. 1044; 113 S. W. 456.
Jeffries v. Economical Mutual Lite Maine. — Wrighl v. Fraternities
Ins. Co. 22 Wall. (89 II. S.) 47, 22 Health & Accidenl Assoc. 107 Me.
I,, ed. 833. Massachusetts.— Shaw- 418, 32 L.R.A.(N.S.) 461, 78 Atl.
mut Mutual Fire Ins. Co. v. Stevens, 475.
9 Allen (91 Mass.) 332: Hardy v. Rhode Island— O'Ronrke v. Han-
Union Mutual Fire Ins. Co. 4 Allen cock Mutual Life Ins. Co. 23 R. I.
2988
CONCEALMENT IN OTHER THAN MARINE RISKS § 1845
Again, the insurer may limit his right to information to special
fads, or the limitation may extend to the materiality of facts.16
In determining what constitutes a concealment, considered sepa-
rately and strictly as such, the question is far from being free of
difficulties. The matter is so closely interwoven with that of war-
ranties and representations dependent upon the terms of the policy,
that it is to those cases that wre must look almost exclusively for
decisions involving the point. Necessarily, if specific inquiries
are made, the matter is greatly simplified, but even then assume
the case of a life risk wherein the assured, without actual knowl-
edge of a fact, answers a question in accordance with his honest
belief, without any design or fraudulent intent to withhold a
material fact, then the question has not infrequently arisen
whether the fact is not one which he ought to have known and
is presumed to know, and consequently has concealed.17
§ 1845. English decisions. — Some of the English cases are im-
portant, in so far as they establish general principles, although as
above stated the rule as to concealment in fire and life risks is
more strictly enforced than in this country, and this fact should
not be lost sight of in the considerations of these decisions. The
leading case in that of Carter v. Boehm,18 in which the celebrated
judgment of Lord Mansfield was given. That opinion has been
frequently quoted and relied on both in England and this country.
The opinion of Lord Mansfield cannot well be abridged, and as
the lack of space prevents its being given in the text, the principal
points in the case and the opinions are given below.19 Information
457, 91 Am. St. Rep. 643, 57 L.R.A. was effected for the term of one year
496, 50 Atl. 834. in the amount of £10,000 by an un-
New York. — Clemens v. Supremely derwriter in London, against the
Royal Society Good Fellows, 131 N. capture of a fort in the island of
Y. 485, 16 L.R.A. 33, 30 N. E. Sumatra, for the benefit of the gov-
496. ernor, who had £20,000 effects in the
North Carolina. — Roper v. Na- fort. The fort was captured within
tional Fire Ins. Co. of Hfd. 161 N. the term of insurance. The questions
Car. 151, 76 S. E. 869. involved in the case were: 1. That
England. — Dupere v. London, 6 the governor did not state the condi-
E. L. 232, 29 Can. L. T. 873. tion of the place. It was declared
16 Jones v. Provincial Ins. Co. 3 that no obligation rested upon him to
Com. B. N. S. 65, 25 L. J. Com. P. do this, so far as it might be incon-
272. sistent with his duty to the state. As
17 See notes, p. 2962, under last a matter of fact, however, he wrote
chapter giving code provision in Cal- the company everything which he
fornia relating to concealment. See knew or suspected, and no questions
also as to statutes § 1916 herein. were asked by the underwriters, by
18 3 Burr. 1905, 1 Wm. Black. 593, which they were held to have taken
13 Eng. Rul. Cas. 501. upon themselves a full knowledge of
19 The case was this : An insurance its state and condition, and the court
2989
§ L845
JOYCE ux INSURANCE
or facts which arc of public knowledge, or so notorious that the
presumption may reasonably exist that the insurer has knowledge
also said it was sufficient that the
tort was in the condition which it
bl tn !>c for i In' purposes intend
ril, and that it was insured against
a runi ingency in t he contemplal ion of
the pari i< s. 2. Thai there was no
disclosure that the French tnighl at-
tack t he fort. This was declared to
he a "mere speculation, dictated by
fear, and not a tact in the case.
. . . The practicability of it de-
pended upon the English naval force
in those seas, of which the under-
writer could better judge at London
. . . than the governor" at the
fort. 3. That the governor concealed
the design of the French to attack
the fort tin1 year before. "That de-
sign rested merely on report . .
the report of a design of the year be-
fore, lint then dropped," and hence
immaterial. 4. That there was no
disclosure that the governor was ap-
prehensive of a Dutch war. This
'•must have arisen from a political
speculation and general intelligence,"
and need not, there 1'ore, have been
disclosed. And the conclusion is, that
as to those matters it was the duty
of the underwriter to inquire at the
time, and that "if he dispensed with
the information, and did not think
this silence an objection then, he
cannot take it up now after the
event." Mr. Marshall criticises this
case as that of an insurance against
tie policy of the law, and that it is
without an example: 1 Marshall on
Tns. fed. 1810) *479-84a. But al-
though he criticises the case because
of the particular facts involved, he
does riot criticise (he opinion and the
iral principles stated, and in fact
such a criticism would be neither
warranted nor sustained. Although
we have generally referred in the lasl
chapter to this celebrated opinion,
we give it here. Lord Mansfield
says: ''If may be proper to say some-
thing in general of concealments
which avoid a policy. Insurance is
a contract upon speculation. The
special facts upon which the contin-
gent chance is to be computed lie
mi' i commonly in the knowledge of
the insured only. The underwriter
trusts to his representation, and pro-
ceeds upon confidence that he does
not keep back any circumstance in
his knowledge to mislead the under
writer into a belief (hat the circum-
stance does noi exist, and to induce
him to estimate the risk' as if it
did not exist. The keeping back such
a circumstance is a fraud, and there-
fore the policy is void, because the
risk run is really different from the
risk understood and agreed to be run
at the time of agreement. The policy
would be equally void against the
underwriter if he concealed any-
thing, as if he insured the ship on
the voyage which he privately knew
to be arrived, and an action would
lie to recover the premium. The
governing principle is applicable to
all contracts and fair dealings. Good
faith forbids either party, by con-
cealing what he privately knows, to
draw the other into a bargain from
his ignorance of that fact and his be-
lieving the contrary. But either par-
ty may be innocently silent as to
grounds open to both to exercise their
judgment upon. Aliud est cilare
aliud tacere; neque enim id est cilare
quicquid reticeas; sed cum quod tu
scias, id ignorare, emolumenti tui
causa, velis eos, quorum intersit id
scire. This definition of concealment,
restrained to the efficient motives and
precise subject of any contract, will
generally hold to make it void in
favor of the party misled by his ig-
norance of the thing concealed.
There are many matters as to which
the insured may he innoc ntly silent,
lie need not mention what the under-
writer knows, scientia utrinque par,
pares contrabentes facit. An under
writer cannot insist that the policy is
void because the insured did not tell
2990
CONCEALMENT IN OTHER THAN MARINE RISKS § 1845
20
thereof, need not be disclosed in the absence of specific inquiry.
If the assured refers to a medical attendant or one who has attended
him professionally, he is none the less obligated to make a full dis-
closure of all the material facts necessary to be made known to
the insurer.1 Again, it is held that if no inquiries are made
and no fraud or design enters into the concealment, it will not
avoid the insurance2 It has also boon declared that it is im-
material whether the death was caused by the fact withheld or
him what he actually knew, what way nomena .and political appearances ;
soever he came to the knowledge, they have different capacities, differ-
The insured need not mention what ent degrees of knowledge, and dif-
the underwriter ought to know, what ferent intelligence. But the means of
he takes upon himself the knowledge information and judging are open to
of, what he waives being informed both; each professes to act from his
of. The underwriter needs not to be own skill and sagacity, and there-
told what lessens the risk agreed and fore neither needs to communicate to
understood to be run by the express the other. The reason of the rule
terms of the policy. He needs not which obliges parties to disclose is to
be told general topics of speculation, prevent fraud, and to encourage good
as, for instance, the underwriter is faith. It is adapted to such facts as
bound to know every cause which vary the nature of the contract, winch
may occasion natural perils; as the one privately knows and the other
difficultv of the voyage, the kind of other is ignorant of and has no rea-
seasons,* the probability of lightning, son to suspect. The question, there-
hurricanes, earthquakes, etc. He is fore, must always be, 'whether there
bound to know every cause which was, under all the circumstances at
may occasion political perils, from the time the policy was underwritten,
the ruptures of states, from war, and a fair representation or a conceal-
the various operations of it. He is ment, fraudulent if designed, or,
bound to know the probability of though not designed, varying mate-
safety from the continuance or re- rially the object of the policy, and
turn 'of peace, from the imbecility of changing the risk understood to be
the enemy, through the weakness of run.' "
their councils or their want of 20 Bronson v. Ottawa Agricultural
strength, etc. If an underwriter in- Ins. Co. 42 U. C. Q. B. 282, and see
sures private ships of war by sea and last chapter.
mi shore, from port to ports and Forbes v. Edinburg Life Assur.
place to places anywhere, he needs Co. 10 S. & D. 451, 4 Scot. Jur. 385 ;
not be told the secret enterprises Abbott v. Howard, Hayes. 3S1. To
they are destined upon, because he what extent the insured is bound by
knows some expedition must be in the representations or concealment of
view, and from the nature of his the party referred to, see also Mayn-
contract, without being told, he ard v. Rhodes, 1 Car. & P. 3G0, 5
waives the information. If he in- Dowl. & R, 266; Rawlins v. Des-
sures for three years, he needs not brough, 2 Moody & R. 32S; Wheel
be told any circumstance to show it ton v. Hardisfy, 3 Jur. X. S. 1169,
to be over 'in two; or if he insures a 8 El. & B. 232; Huckman v. Fernie,
vovage, with libertv of deviation, he 3 Mees. & W. 505, 7 L. J. Ex. 163.
needs not be told what tends to show 2 Laidlaw v. Liverpool London &
there will be no deviation. Men Globe Ins. Co. 13 Grant Ch. (U. C.)
argue differently from natural phe- 377.
2991
L845 JOYCE '»\ [NSURANCE
concealed or oot; the sole test being its materiality at the lime;3
although it is also declared thai the insured is ool obligated to
volunteer statements of every circumstance which anybody may
subsequently deem importanl as affecting the risk upon his life,
hut thai it is requisite only thai he answer all questions truly,
make qo untrue statements, and submit himself to a full examina-
tion.4 It' a fad produces a fear in the mind of the assured which
operates as the moving cause for effecting a policy, the fad which
occasioned the fear thereby becomes material, and should be dis-
closed.6 So the information may be sufficient although it does not
disclose minutely every specific detail with relation to the assured's
health.6 Contracts of insurance require on both sides uberrima
fides, and the insured may fail in the duty of disclosure even
though he acts in good faith. He must diligently and carefully
review all facts of which he has knowledge which hear upon the
risks asked of the insured to be assumed, and state every fact
and circumstance and all information which any reasonable man
would suppose might in any way influence the insurer in de-
termining whether he will undertake the risk. The insured is not
excused by any negligence or want of fair consideration of the
insurer's interesl with reference to material facts, even though
there bo no dishonesty, and although the assured may nol have
believed at the time that the fact known by him to exist was ma-
terial, provided it subsequently transpires to be material.7 The
rule, however, as to disclosure must be one which is not unrea-
sonable in its requirements, for there must be some limitation,
especially in cases of disorders which may tend to shorten life. If
all disorders which may have such a tendency were required to be
disclosed, whether organic or not, it would be difficult to conceive
many cases wherein the life would be insurable.8 It is field that
although the insured knows of a material fact and conceals the
same at the time of the proposal, yet if before issuing the policy
the insurer learns of the fact, the issuance of the policy waives
the concealment.9 It is said that the mere noncommunication of
3 Maynard v. Rhodes, 1 Car. & P. 7 Life Assoc of Scotland v. Foster,
360, 5 Dowl. & R. 266, per Abbott, C. 11 Ct. of Sess. Cas. 3d ser. 351, 4
J. Sec Ross v. Bradshaw, 1 W. Big. L. & A. Ins. Cas. 520; Dalglish
Black. 312. v. Jarvie, 2 Mam. & G. 243, per
* Rawlins v. Desbrough, 2 Moody Rolfe, B.
& R. 230. 8 Watson v. Mainwaring, 4 Taunt.
B Campbell v. Victoria Mutual Fire 7(>3, per the court; Jones v. Pro-
Ins. Co. 45 U. C. Q. B. 412 (one vincial Ins. Co. 3 Com. B. N. S. 65,
judge dissenting) ; 17 Can. L. J. 48. 20 L. J. Com. P. 272.
8 Chattock v. Shawe, 1 Moody & R. 9 Royal Canadian Ins. Co. v.
408; Watson v. Mainwaring, 4 Taunt. Smith. 5 Russ. & Geld. (N. Scot.) 322
7G3. (one judge dissenting).
2992
CONCEALMENT EN OTHER THAN MARINK RISKS $ 1-846
the insured's habits of life is not fatal when not inquired about,10
but it is decided thai if the insured, without being interrogated
particularly aboul his habits, studiously conceal- the same, it
vitiates the insurance.11 In cases of guarantee insurance the ques-
tion of fraud is of the utmosl importance, since if it enter as a
factor into the concealment the contract will be vitiated.12
§ 1846. Assured's knowledge: nondisclosure affecting acceptance
of risk or rate. — There arc two important factors involved in cases
of concealment; one is the assured's knowledge and the other the
insurer's knowledge. In both cases the knowledge may be actual
or rest upon a presumption based upon the fact that the circum-
stances are of such a character that they ought to be known and
may reasonably be presumed to be known.13 The assured could
not reasonably be held to have concealed a fact of which he had
no knowledge or one of which he has no knowledge actual or pre-
sumed, or one concerning which it cannot be said that he ought to
have known it. Even the strict rule in marine insurance does not
require this.14 So it must appear that the circumstances alleged
to have been concealed were such that insured must have known
them or such that an ordinarily prudent man would have known
of their existence.15 Again, in the absence of express stipulation,
and where no inquiry is made, a failure to state facts known to the
insured or his agent, or which he ought to know, is no conceal-
10 Lord Lindineau v. Desbrouedi, 3 Kentucky. — Brotherhood of Rail-
Car. & P. 353, 8 Barn. & C. 586. per road Trainmen v. S.wearingen, 161
Lord Denman. Ky. 665, 171 S. W. 445; Metro-
11 Rawlins v. Desbrough, 2 Moody politan Life Ins. Co. v. Ford, 126
& R. 328, 8 Car. & P. 321. Ky. 49, 31 Ky. L. Rep. 513, 102 S.
12 Watson v. Aleock, 4 De Gex & W. 876, 36 Ins. L. J. 644, (147.
J. 242. Missouri. — Boggs v. American Ins.
13 See § 1850 herein, as to assurer's Co. 30 Mo. 63.
knowledge. New York. — Mallory v. Travelers'
14 Dennison v. Thomaston Mutual Ins. Co. 47 N. Y. 52, 7 Am. Rep. 410;
Ins. Co. 20 Me. 125, 37 Am. Dec. 42. Gates & Downer v. Madison County
per Washington, J.; Terwilliger v. Mutual Ins. Co. 3 Barb. (N. Y. ) 73,
Supreme Council Roval Arcanum, 2 rev'd 2 N. Y. 43, s. c. 5 N. Y. 469,
X. Y. St. Rep. 144; Carter v. Boehm, 55 Am. Dec. 360.
3 Burr. 1905, 1 Wm. Black. 593, 13 Pennsylvania. — March v. Metro-
Eng. Rul. Cas. 501, per Lord Mans- politan Life Ins. Co. 186 Pa. 629, 65
field, quoted from under § 1845 here- Am. St. Rep. 887, 40 Atl. 1100, 28
in, note 19. Ins. L. J. 30.
See also: Illinois. — Globe Mutual England. — Sprott v. Ross, 16 Ct.
Life Assoc, v. Wagner, 188 111. 133, Sess. Cas. 1145, 3 Big. L. & A. Ins.
52 L.R.A. 49, 58 N. E. 970; Mutual ('as. 121. See §§ 1823, 1913a herein.
Benefit Life Ins. Co. v. Robertson, 15 Continental Life Ins. Co. v.
59 111. 123, 14 Am. Rep. 8. Ford, 140 Kv. 406, 131 S. W. 189.
Joyce Ins. Vol. III.— 188. 2993
§ 1840
JOYCE ox INSURANCE
ment. Failure to state thai property insured is situated on the
bank of a river is ao1 a concealment of a material t';ict.16
The basis of the rule vitiating the contrad in cases of conceal-
menl is thai it misleads or de eives the insurer into accepting the
risk, or accepting ii a1 the rate of premium agreed upon. The in-
surer, relying upon the belief that the assured will disclose every
material fad within his actual or presumed knowledge, is mis
into a belief thai the circumstance withheld does no1 exist, and he
is thereby induced to estimate the risk upon a false basis that i1
does not exist. The principal question, therefore, must be, Was
the assurer misled or deceived into entering a contract obligation
or in fixing the premium of insurance by a withholding of ma-
terial information or facts within the assured's knowledge or pre-
sumed knowledge?17
It therefore follows thai the assurer in assuming a risk is entitled
to knew every material fact of which the assured has exclusive
16IIev v. Guarantor's Liability In-
demnity Co. 181 Pa. St. -220, 59 Am.
St. Rep. (ill, :57 All. 402.
"United States— Columbia Ins.
Co. v. Lawrence, 10 Pet. (35 U. S.)
507, 9 L. ed. 512; Miller v. Mary-
land Casualty Co. 193 Fed. 343, 113
C. C. A. 267.
California. — Victoria Steamship
Co. v. Western Assurance Co. of
Toronto, L67 Cal. 348, 139 Pac. 807.
Colorado. — Duncan v. National
Mutual Fire Ins. Co. 44 Colo. 4,2.
20 L.R.A.(N.S.) 340 (annotated on
misrepresentation as to dimensions
of insured building), 98 Pac. 634.
Georgia. — Empire Life Ins. Co. v.
Jones, 14 Ga. App. 647, 82 S. E. 62.
Illinois. — Keith v. Globe Ins. Co.
52 111. 518,4 Am. Rep. 634.
Kentucky. — United States Casual-
1v Co. v. Campbell, 148 Ky. 554, 146
S. \Y. 1121.
Massachusetts. — Everson v. Gen-
eral Fire & Life Assur. Corp. Ltd.
202 Mass. L69, 88 N. E. 658, 38 Ins.
L. J. 023; Daniels v. Hudson River
Fire Ins. Co. 12 Cusli. (66 Mass.)
41(5. 5! • Am. Dec 102.
Mississippi.-1 American Life Ins.
Co. v. Mali. me, 56 Miss. 180, 192.
Missouri. — Smith v. American
Automobile Ins. Co. 188 Mo. App
207. 175 S. W. 113, 45 Ins. L. J.
720.
New Hampshire. — Clark v. Union
Mutual Fire Ins. Co. 40 X. H. 333,
77 Am. I >ec. 721.
North Carolina. — Schas v. Equita-
ble Life Assur. Soc. 166 N. Car. 55,
SI S. !•]. 1014; Gardner v. North
State Mutual Life Ins. Co. 163 N.
Car. 307, 79 S. E. 800, 43 Ins. L. J.
25.
Ohio. — Hartford Protection Ins.
Co. v. Harmer, 2 Ohio St. 452, 59
Am. Dee. 084.
Pennsylvania. — Young v. Ameri-
can Bonding Co. of Bait. 228 Pa.
373, 381, 77 Atl. 623; McCaffrey v.
Knights of Columbia, 213 Pa. 609,
612, 63 Atl. ISO; Smith v. Columbia
Ins. Co. 17 Pa. St. 253, 55 Am. Dec.
540.
Texan. — St. Paul Fire Marine Ins.
Co. v. I lull". — Tex. Civ. App. — ,
172 S. W. 755,45 Ins. L. J. 363.
England. — Carter v. Boehm, 3
Burn. 1903, 1 Wm. Black. 593, 13
Eng. Rul. Cas. 501, per Lord Mans-
field, ({noted from under § 1845 here-
in, note.
See §§ 1793, 1867, 1868, 1802 •
1800 herein. This governing princi-
ple also appears in numerous eases
throughout this and the chapters next
following.
2004
CONCEALMENT IN OTHER THAN MARINE RISI\S § 1847
or peculiar knowledge,18 as well as all material fads which directly
tend to increase the hazard or risk which are known by the
assured, or which ought to be or are presumed to be known by him.18
And a concealment of such facts vitiates the policy.20 "It does
not seem to be necessary . . . that the . . . suppression
of the truth should have been willful. If it were but an inad-
vertent omission, yet if it were material to the risk and such as
the plaintiff should have known to be so, it would render the
policy void.1 But it is held that if untrue or false answers are
given in response to inquiries and they relate to material facts the
policy is avoided without regard to the knowledge or fraud of
assured, although under the statute statements are representations
which must be fraudulent to avoid the policy.2 So under certain
codes the important inquiries are whether the concealment was
willful and related to a matter material to the risk.3
§ 1847. Assured's knowledge: concealment arising from negli-
gence, accident, or mistake, etc. — Keeping in view what is said
under the preceding section, if the act of the assured in with-
Am. Rep. 522; Kernoehan v. New-
York Bowery Fire Ins. Co. 5 Duer
(N. Y.) 1, aff'd 17 N. Y. 428; Vaughn
v. United States Title & Guaranty
Indemnity Co. 122 N. Y. Supp. 343,
18 Smith v. Columbia Ins. Co. 17
Pa. St. 253, 55 Am. Dec. 546.
19 Keith v. Globe Ins. Co. 52 111.
518, 4 Am. Rep. 034; Rosenheim v.
American Ins. Co. 33 Mo. 230.
20 United States.— Phoenix Life 137 App. Div. 623.
Ins. Co. v. Raddin, 120 U. S. 183, Ohio— Howell
30 L. ed. 644, 7 Sup. Ct. 500, per
Gray, J.; Columbia Ins. Co. v. Law-
rence, 10 Pet. (35 U. S.) 507, 9 L.
ed. 512; Vale v. Phoenix Ins. Co. 1
Wash. (U. S. C. C.) 283, Fed. Cas.
No. 16,811.
Illinois. — Mutual Benefit Life Ins.
Co. v. Robertson, 59 111. 123, 14 Am.
Rep. 8.
Indiana. — Mutual Benefit Life Ins.
Co. v. Miller, 39 Ind. 475
Cincinnati Ins.
Co. 7 Ohio, 276, 277.
South Carolina. — Ingraham v.
Carolina Ins. Co. 2 Tread. Const. (S.
C.) 707.
Virginia.- — New York Life Ins. Co.
v. Franklin, 118 Va. 418, 87 S. E.
584.
See also citations under third next
preceding note to this section this
rule is also supported by numerous
cases appearing under this and the
Louisiana.— Briemac v. Pacific chapters next following.
Mutual Life Ins. Co. 112 La. 574, 66 * Dennison v. Thomaston Mutual
L.R.A. 322, 36 So. 595. Ins. Co. 20 Me. 125, 37 Am. Dec.
Massachusetts. — Haley v. Dor- 42, per Whitman, J.
Chester Mutual Fire Ins. Co. 12 Grav 2 Niagara Fire Ins. Co. v. Layne,
(78 Mass.) 545; Vose v. Eagle Life 162 Ky. 665, 172 S. W. 1090; Pelican
(60 Mass.) v. Mutual Life Ins. Co. 44 Mont. 2/ - .
119 Pac. 778, 41 Ins. L. J. 327. As
v. North to statutes applicable, see § 1916
Co. 7 New herein.
3 ^Etna Life Ins. Co. v. Conway.
New York.— Swift v. Massachusetts 11 Ga. App. 557, 75 S. E. 915.
Mutual Life Ins. Co. 63 N. Y. 186, 20
2995
& Health Ins. Co. 6 Cush
42.
Nevada. — Gerhauser
British & Mercantile Ins
174.
-17 JOYCE ON INSURANCE
holding material information or a material facl or circumstance
is intentional or designed, then it will be an actual fraud neces-
sarily avoiding the contract.4 But the rule in the last section must
be und< rstood with the qualification thai if the information is
not fraudulently suppressed or inquired about, a tire policy is not
necessarily avoided by a failure to disclose every material fact;
differing herein, as already noted, from marine risks. Good faith
and fair dealing requires thai the assured .-hall not misrepresent
or designedly conceal material fact.-, and if inquiries are made,
that he will fully and truthfully answer the same, and also that
he will not conceal or withhold such information concerning un-
usual and extraordinary circumstances of peril affecting the prop-
erty as the insurer could not with reasonable diligence discover
or reasonably anticipate a- the foundation of specific inquiries.5
In stating this qualification we have not intended to ignore the
question whether concealmenl can be held to extend beyond an
intentional or designed withholding of a. material fact, and cover
facts which are undisclosed by mistake, negligence, or accident,
or those which the assured has the present means of knowing. In
such cases the question would reasonably seem to be limited by the
rule concerning facts which the assured ought to or is presumed to
know, and the point whether there is a fraud or a designed, in-
tentional withholding may or may not exist. Thus the assured
may have no actual knowledge that a material fact exist-, and yet
by his voluntary act fail to make presumed knowledge actual
knowledge, lie may intentionally fail to convert what he oughl
to know into actual knowledge, preferring to remain in ignorance
of certain fact-, which if known to him would necessarily have
to be disclosed. In such case he ought not to be permitted to
shelter himself behind the plea that he had no knowledge. The
intentional or designed failure to learn what he ought to know
would seem to he as much tainted with fraud as if he had actually
known the fact and designedly concealed it. In cases of pure
accident and mistake, however, the party may absolutely have no
intent or design to withhold material facts, and actual fraud may
4 See Daniels v. Hudson River Fire 58 N. H. 245. "The omission of the
Ins. Co. 12 Cush. (66 Mass.) U6, 59 plaintiff to state truly his title to
Am. Dec. 192; Clark v. I'uion Mutual the property insured was not willful
fire Ins. Co. 40 N. PL 333, 77 Am. and fraudulent, and did no; avoid the
Dec. 721; Vale v. Phoenix his. Co. policy/' per Allen, J.; Alkan v. New
1 Wash. (U. S. C. C.) 283, Led. (as. Hampshire Ins. Co. 53 Wis. 136, 10
No. 16,811. N. W. 91; Pelican v. Mutual Life Ins.
6 Hartford Protection Tns. Co. v. Co. 44 Mont. 277, 119 Pac. 778, 41
llarmer, 2 Ohio St. 45:2, 5!) A in. Dec. Ins. L. J. 327.
684; Leach v. Republic Lire Ins. Co.
2996
CONCEALMENT IN OTHER TITAN MARINE RISKS § 1847
not exist on his part; yet if the fact so withheld is material, and
one which the assured is presumed to or ought to know, the in-
surer ought not to be bound by a contract which had ho known of
the existence of the fact concealed would have never been made, ex-
cept perhaps at a higher premium.6 Accordingly, it will ho hold that
a policy will be vitiated by the suppression of material facts by
the insured, though withhold unintentionally or by mistake or
inadvertence, without actual fraud.7 And it may be stated gen-
erally that if a material fact is concealed by the assured, whether
willfully, intentionally, or through mistake, the policy is thereby
avoided, except in those cases where the assured docs not undertake
to state the matter charged to be false as a matter of positive knowl-
edge on his part; as where he states it a.« a matter of opinion or
belief, whereby the insurer is put upon inquiry.8 It is error to
6 See Life Assn. of Scotland v. Life & Health Ins. Co. 0 Cush. (60
Foster, 11 Ct. Sess. Cas. 3d ser. 351, Mass.) 42.
4 Bio-. L. & A. Ins. Cas. 520; conti- Missouri. — Smith v. American
nental Ins. Co. v. Kasev, 25 Gratt. Automobile Ins. Co. 188 Mo. App.
(Va.) 268, 18 Am. Rep.~ 681; Lewis 297, 175 S. W. 113, 45 Ins. L. J. 727
v. Phoenix Ins. Co. 39 Conn. 100. (immaterial that misrepresentation
There the court said: "The law not innocently made),
only refuses to enforce such a con- Pennsylvania. — Smith v. Columbia
tract, but will decline to aid a party Ins. Co. 17 Pa. St. 253, 55 Am. Dec.
in recovering money paid in pur- 546.
suance of it from the party upon Wisconsin. — But see Wright v.
whom the fraud was attempted to be Hartford Fire Ins. Co. 36 Wis. 522.
practised :" ' Bebee v. Fire Ins. Co. 25 England. — Life Assoc, of Scotland
Conn. 51, 69, 65 Am. Dec. 553 ; Miles v. Foster, 11 Ct. Sess. Cas. 3d ser.
v. Connecticut Mutual Life Ins. Co. 351, 4 Big. L. & A. Ins. Cas. 520.
3 Gray (69 Mass.) 580; Dennison v. See S 1964 herein.
Thomaston Mutual Ins. Co. 20 Me. 8 Weigle v. Cascade Fire & Marine
125, 37 Am. Dec. 42. It is not nee- Ins. Co. 12 Wash. 449, 41 Pac. 53,
essary, to render a policy void, that per Dunbar, J., citing 1 May on Ins.
there should be a willful misrepre- (3d ed.) sec. 181; 1 Wood on Ins.
sentation of the truth. A mere in- pp. 555, 557, and sees. 229, 230;
advertent omission of facts material distinguishing Mall v. People's Mutu-
to the risk, and such as the party in- al Fire Ins. Co. 6 Gray (72 Mass.)
sured should have known to be so, 185; and considering Union Mutual
will avoid it: Price v. Phoenix Life Life Ins. Co. v. Wilkinson, 13 Wall.
Ins. Co. 17 Minn. 497, 10 Am. Rep. (80 U. S.) 222, 20 L. ed. 617;
160; Vose v. Eagle Life & Health examine §§ 1902, 1903, herein, as
Ins. Co. 6 Cush. (60 Mass.) 42; to innocent, etc., representations^ and
Campbell v. New England Mutual $ 1964 herein as to mistakes, etc..
Life Ins. Co. 98 Mass. 381. in warranties.
7 Connecticut. — Bebee v. Fire Ins. On effect of qualifying statements
Co. 25 Conn. 51, 65 Am. Dec. 553. or warranties by words "to best of
Maine. — Dennison v. Thomaston ray knowledge or belief," or Avords of
Mutual Ins. Co. 20 Me. 125, 37 Am. like import, .see note in 43 L.R.A.
Dec. 42. • (X.S.) 431.
Massachusetts. — Vose v. Eatde
' 2907
§ 1848 JOYCE ON [NSURANCE
instruct a jury thai a concealment to avoid a policy, must have
beeD willful and intentional.9 And it is declared, where a claim
was made that the failure to mention the existence of other in-
surance raised the presumption that it was intentional or fraudu-
lent, that there is a oatural, and perhaps a Legal presumption of
the continuance of a state of knowledge, bu1 such presumption
is out conclusive. "Men do forgel entirely a fact previously
known t<> them, and they do forget it temporarily, so that they
may make an untrue statement inadvertently about it, though
recently known to them. The possibility or probability of their
doing so depend- on the character of the fact in question, and all
the circumstances under which the misstatement concerning it i<
made. There is also a presumption that a man does not make a
fraudulent misstatement, but men frequently do; oevertheless,
make such statements; and the question whether the presumption
;- overcome depends on the evidential weight to he given to all the
circumstances, including Ike possible motive, together with the
positive evidence of witnesses" and the question is therefore one
for the jury. Under the statute the burden of proof to establish
fraud was upon insurer and if was held that it was not shifted by
showing insured had made an untrue answer as to other insur-
ance.10 While the cases in fire and lift1 risks are far from war-
ranting the deduction of any clear and positive rule, yet we believe
thai the above principles may he fairly deduced from the decisions
wherein this question or analogous one- have arisen. It will not
exact from the assured more than a reasonably prudent person of
intelligence, acting within the limits of good faith and lair deal-
in-;, could fulfill. I > u 1 in applying the rule the suggestion already
made should not he ignored; namely, that a fad immaterial in
it-elf may he made material by the terms of the agreement, and
one material may become immaterial by the requirements of the
contract.11 Again, a question of waiver on the part of the insurer
may arise; a- where there is an omission to state matters not called
for. or a Qeglecl to answer inquiries made.12 And so other excep-
tions and qualifications exist which will he noted hereafter under
this chapter.
§ 1848. Assured's knowledge: his belief as to materiality of facts.
— If the assured has exclusive knowledge of material facts, he
should fully and fairly disclose the same, whether he believes them
9Weigle v. Cascade Fire & Marine pare Owen v. Metropolitan Life Ins.
Ins. Co. L2 Wash. 449, 41 Pae. 5.3. Co. 74 N. J. L. 770. 122 Am. St. Rep.
10 Owen v. United States Surety 413, 67 Atl. 25.
Co. 38 Okla. 123, l.'il Pac. L091, 42 "See § 1844 herein.
Ins. L. .J. L068, per Kane. J. Com- 12 See § 1869 herein.
2998
CONCEALMENT IN OTHER THAN MARINE RISKS § 1848
material or not.13 But notwithstanding this general rule it will
not infrequently happen, especially in life risks, that the assured
may have a knowledge actual or presumed of material facts, and
yet entertain an honest belief that they are not material. Thus,
a man may be presumed to know that certain diseases will shorten
or have a tendency to shorten life, but he may entertain an honest
opinion and belief that such disease has no such tendency or he
may be entirely ignorant of the possible or probable results of
the disease. Would it necessarily follow in such case that his
failure to disclose Avould vitiate the policy, or will such honest be-
lief so fully eliminate the question of design or fraud in withhold-
ing the fact as to render it not a material concealment? It has
been held even in England that if there is no designed and in-
tentional withholding and no fraud, the failure to disclose, resting
entirely upon the honest belief that the fact is not material, will
not avoid the contract,14 And there are other rulings here in a line
with this decision holding that if the facts not disclosed are not
material in the mind of the assured, the policy is not thereby
vitiated, there being no intended or designed withholding or
fraud.15 Again, if such rulings be held not to express a sound
13 Smith v. Columbian Ins. Co. 17 might influence the mind of the
Pa. St. 253, 55 Am. Dee. 516. In this underwriter in forming or declining
case Gibson, J., said: "The contract the contract. A building held under
of insurance is eminently a contract a lease, about to expire might be
of good faith. When the insurer spoken of as the building of the ten-
relies on the representations of the ant, but an offer for insurance stating
insured, he is entitled to the benefit this would be a gross imposition:"
of every material fact within the McLanahan v. Universal Ins. Co. 1
exclusive knowledge of the applicant ; Pet. (26 U. S.) 170, 7 L. ed. 98;
not to his surmises, opinions, and Bombay v. Union Ins. Co. 2 Wash.
fears, but to the specific facts, if ma- (U. S. C. C.) 391, Fed. Cas. No.
ferial, on which they are founded, in 1112.
order that he may judge for himself ; 14 Jones v. Provincial Ins. Co. 3
and this, too, whether the insured be- Com. B. N. S. 55. See note 53 L.R.A.
lieve those facts to be material or 193, on innocent misrepresentation
not, or whether they are undisclosed as to health.
by accident or design." See also 15 United States. — Moulor v. Ameri-
Columbian Ins. Co. v. Lawrence, 10 can Life Ins. Co. Ill U. S. 335, 28
Pet. (35 U. S.) 507, 9 L. ed. 512, 2 L. ed. 447, 4 Sup. Ct. 466.
Pet. (27 U.S.) 25, 7 L.ed. 335. Here Alabama.— Massachusetts Mutual
Mr. Chief Justice Marshall said: Life Ins. Co. v. Crenshaw, 195 Ala.
"The contract of insurance is one in 263, 70 So. 768, s. c. 186 Ala. 460,
which the underwriters generally act 65 So. 65.
on the representations of the assured, Georgia. — iEtna Life Ins. Co. v.
and this ought consequently to be Conway, 11 Ga. App. 557, 75 S. E.
fair, and to omit nothing which it is 915.
material for the underwriters to New Jersey. — Smith v. Prudential
know, and fair dealing requires that Ins. Co. 83 N. J. L. 719, 43 L.R.A.
he should state evervthing which (N.S.) 431n, 85 Atl. 190.
2999
§ 1S48 JOYCE ON INSURANCE
view of the law, ili. mi where must the line of demarkation be drawn?
All disorders of the system may have a tendency in some degree
i" shorten life. Musi the assured give a careful and exact history
of all his disorders, temporary illnesses, and the like, without
regard to their permanenl effecl upon his physical health? [f so,
then it is doubtful if recovery could be had upon any life policy,
for all lives would be rendered uninsurable. So it' a disease pro-
ceeds from one of two causes, such as a defed of some of the vital
organs or from a mere temporary disorder. In both cases it would
have a tendency to shorten life, but in the latter the tendency
would not lie so great as in the former, for i1 would depend upon
whether ii existed to an excessive degree, [f the assured failed
to disclose such a disorder, would it be a material concealment?
In a case of this character it was said that the parties could not
have intended to include all disorders, and that it was properly
left to the jury whether the disorder was organic or merely tended
to shorten life by its excess.16 The determination of the point
whether there has or has not been a material concealment must
rest largely in all cases upon the form of the questions propounded
ami the exact terms of the contract. Thus, where in addition to
specifically named diseases the insured was asked whether he had
had any sickness within ten years, to which he answered "No,"
and it was proven that within that period he had had a slighl
attack of pharyngitis, it was held a question properly for the jury
whether such an inflammation of the throat, was a "sickness" within
the intent of the inquiry, and the court remarked on the appeal
decision that if it could he held as a matter of law that the policy
was thereby avoided, then it was a mere device on the part of in-
surance companies to obtain money without rendering themselves
liable under the policy.17 So in a case in the Federal Supreme
New York.— Mallory v. Travelers' See also Germania Ins. Co. v. Rud-
Ins. Co. 47 N. Y. 52, 7 Am. Rep. 410, wig, SO Ky. 223; Wood v. Firemen's
and note 414. Ins. Co. 126 .Mass. 316; B] tone v.
Pennsylvania. — March v. Metro- Standard Life & Am i ■ [ns Co 71
politan Life Ins. Co. 186 Pa. 629, Mali. 592, :5 L.R.A. I 6, 42 \. W
or, Am. St. Rep. 887, 40 'Atl. 1100, 150; Horn v. American Mutual Li e
28 [ns. L. J. 30 (if made in good [ns. Co. 64 Barb. (N. Y.) 81. See
faith does not avoid unless material ; Mutual Life Ins. Co. ,0' X. V. v.
statute: bul character of ailmenl was Witte, DO Ala. 327, 07 So. 263, 45
such that ii must have been known) ; Ins. L. J. 437; Gates v. Ma
Imperial Fire Ins. Co. v. Murray, County Ins. Co. 5 N. Y. (1 Seld.) 469,
7:i Pa. St. L3. 55 Am. Dec. 300. See SS L870, 2003
West Virginia.— Schwartzbach v. et seq.
Ohio Valley Protective Union, 25 W. l6Watson v. Mainwaring, -1 Taunt
Va. 02-. 52 Am. Rep. 227. 70:{.
England.— Hutchinson v. National "Mutual Benefit Life Ins. Co. v.
Loan Assur. Soc. 7 Ct. Sess. Cas. Wise, 34 M<1. 582.
(Scot.) 407.
3000
CONCEALMENT IN OTHER THAN MARINE RISKS § 1848
Court an applicant for life insurance was required to state whether
lie had ever I icon afflicted with certain specified diseases. He an-
swered that he had not. TT|>(,n an examination of the application
in connection with the policy, it was held that the company re-
quired, as a condition precedent to the contract, nothing more than
that the insured would observe good faith towards it, and make
full, direct, and honest answers to all questions, without evasion,
fraud, misrepresentations, or concealment of facts. In the absence
of explicit stipulations requiring such an interpretation, it should
not be inferred that the insured took a life policy with the under-
standing that it should be void if, at any time in the past he was,
whether conscious of the fact or not, afflicted with the diseases, or
any one of them, specified in the questions propounded by the
company.18 So a statement by an applicant for life insurance
18Moulor v. American Life Ins. 75 Fed. 637, 641; Connecticut Mutu-
Co. Ill U. S. 335, 28 L. ed. 447, 4 al Life Ins. Co. v. McWhirter, 73
Sup. Ct. 466. Fed. 444, 450, 19 C. C. A. 526, 44
Cited in: United States. — Home U. S. App. 492; Mechanics' Savings
vLife Ins. Co. v. Fisher, 188 U. S. Bank & Trust Co. v. Guarantee Co.
726, 728, 47 L. ed. 669, 23 Sup. Ct. of North America, 68 Fed. 459, 463;
380; Liverpool & London & Globe Burkheiser v. Mutual Accident Assoc.
Ins. Co. v. Kearney, 180 U. S. 132, 61 Fed. 816, 818, 10 C. C. A. 96, 18
136, 45 L. ed. 462, 21 Sup. Ct. 326; U. S. App. 704, 26 L.R.A. 114;
Phoenix Mutual Life Ins. Co. v. Brady v. United Life Ins. Assoc.
Raddin, 120 U. S. 183, 189, 30 L. ed. 60 Fed. 727, 728, 9 C. C. A. 254, 20
646, 7 Sup. Ct. 500; Standard Life U. S. App. 337; Provident Savings
& Accident Ins. Co. v. Sale, 121 Fed. Life Assurance Soc. v. Llewellyn, 58
664, 668, 57 C. C. A. 422, 61 L.R.A. Fed. 940, 942, 7 C. C. A. 580, 16 U.
339; McClain v. Provident Savings S. App. 405; Small v. Westchester
Life Assurance Soc. 110 Fed. 80, 86, Fire Ins. Co. 51 Fed. 789, 792 ; Steel
49 C. C. A. 38; Fidelitv Mutual Life v. Phoenix Ins. Co. 51 Fed. 715, 723,
Assoc, v. Jeffords, 107 Fed. 402, 409, 2 C. C. A. 471, 7 U. S. App. 325;
46 C. C. A. 384, 53 L.R.A. 208; Mc- Cleaver v. Traders' Ins. Co. 40 Fed.
Clain v. Provident Savings & Life 711, 716; Hoffman v. Supreme Conn -
Assur. Soc. 105 Fed. 834, 835: eil American Legion of Honor, 35
Hubbard v. Mutual Reserve Fund Fed. 252, 253; Fisher v. Crescent
Life Assoc. 100 Fed. 719, 721, 40 C. Ins. Co. 33 Fed. 544, 552.
C. A. 667; McMaster v. New York Alabama. — Alabama Gold Life Ins.
Life Ins. Co. 99 Fed. 856, 878, 40 C. Co. v. Johnson, 80 Ala, 467, 472, 60
C. A. 841; Palatine Ins. Co. v. Am. Rep. 112, 2 So. 125.
Ewing, 92 Fed. Ill, 114, 34 C. C. A. Arizona.— Mutual Life Ins. Co. v.
239 ; Guarantee Co. of North America Arheiger, 4 Ariz. 271, 277, 36 Pac.
v. Mechanics' Savings Bank & Trust 895.
Co. 80 Fed. 766, 784, 26 C. C. A. Arkansas. — Providence Life Assur-
163, 47 U. S. App. 91; McMaster v. ance Soc. v. Reutlinger, 58 Ark. 528,
New York Life Ins. Co. 78 Fed. 33, 533, 25 S. W. 835.
35; Missouri K. & T. Trust Co. v. Georgia— -Supreme Conclave
German National Bank, 77 Fed. 1 17, Knights of Damon v. Wood, 120 Ga.
H9, 23 C. C. A. 67, 40 U. S. App. 328. 336, 47 S. E. 940.
710; Kelley v. Mutual Life Ins. Co. Illinois.— Globe Mutual Life Assur-
3001
§ 18 JOYCE ON INSURANCE
thai he has never had a certain ailmenl which i- an obscure dis-
ease, concerning which the insurer should know that the applicant
ance Assoc, v. Wagner, L88 III. L33, v. New York Life Ins. Co. 47 La.
L37, 52 L.R.A. 651, 80 Am. St. Rep. Ann. 1405, 1414. 17 So. 853.
L69, 58 \. i-:. !'7(>; Metropolitan Life Mame— Johnson v. Maine & N. B.
[ns. Co. \. Moravec, L16 III. App. Ins. Co. 83 Me. 182, 189, 22 Atl.
270; Supremo Lod^o Order of Col- L07.
umbian Knights v. McLaughlin, 108 Maryland. — Supreme Council
III. App. 85, 94; Providenl Savings Royal Arcanum v. Brashears, 89 Md.
Life Assurance Soc. v. Cannon, L03 624, 633, 73 Am. St. Rep. 244, 43
111. App. 534, 546; Fraternal Trib- Atl. 866.
uius v. llanos, 100 III. App. 1, 4; M«*s<i<-hnscl Is. — Clapp v. Massa-
Globe Mutual Life Ins. Assoc, v. chusetts Benefil A ssoc. 146 Mass. 519,
Wagner, 90 III. App. 111. 446; 531, L6 1ST. E. 433.
Bloomington Mutual Life Benefil Missouri. — Offneer v. Brotherhood
Assoc, v. Cummins, 53 111. App. 530, of American Yeomen, 109 Mo. App.
538; Illu mis Mutual Ins. Co. v. Boff- 75, 83 S. W. 67; McDermotl v. Mod-
man, 31 111. App. 295, 299; Conti- era Woodmen of America, 91 Mo.
nental Life Ins. Co. v. Thoena, 26 App. 636, 650, 71 S. W. 833; Aufder-
III. App. 'JO"), 200; Northwestern heide v. German-American Mutual
Mutual Aid Assoc, v. Cam. 21 111. Life Assoc. 66 Mo. App. 285, 287._
App. 471, 475. Nebraska. — ZEtna Ins. Co. v. Sim-
Indiana. Continental Ins. Co. v. mons, 40 Neb. 811, 835, 69 N. W.
Vanlue, 126 Ind. 410, 415, 10 L.R.A. 125.
845, 26 X. E. 110; Rogers v. Phoenix New Jersey. — Dimick v. Metro-
Ins. Co. 121 Ind. 570, 577, 23 X. E. politan Life Ins. Co. 67 N. J. Law,
(OS; Northwestern Mutual Life Ins. 367, 373, 51 Atl. 002; Henn v.
Co. v. Bazelett, 105 Ind. 212, 215, 55 Metropolitan Life Ins. Co. 67 N. J.
Am. Rep. 192, 4 N. E. 582; Supreme Law, 310, 312, 51 Atl. 689.
Tout Knights of Maccahees v. Vol- New York. — Jennings v. Supreme
kert, 25 End. App. 027, 641, 57 N. E. Council Royal Additional Benefil
203; Banover Fire Ins. Co. v. Dole, Assoc. 81 N. Y. Supp. 90, 81 App.
20 Ind. App. 233, 237, 50 N. E. 772; Div. 87; Louis v. Connecticut Mutual
Supreme Lodge Knights of Pythias Life Assoc. 08 N. Y. Supp. 083, 58
v. Edwards, 15 Ind. App. 524, 52S, App. Div. 141; Ames v. Manhattan
41 N. E. 850; Indiana Farmers Live Life Ins. Co. 58 N. Y. Supp. 244,
Stock Ins. Co. v. Rundell, 7 Ind. 40 App. Div. 470; Fitzgerald v. Su-
App. 421), 430. preme Council Catholic Mutual Bene-
lowa. Petersen v. Dcs Moines lit Assoc. 56 N. Y. Supp. 1005, 39
Life Assoc. 115 Iowa, 608, 673, 87 App. Div. 257.
S. W. 307; Goodwin v. Provident Oklahoma. — Woodmen of the
Savings Life .Assurance Assoc. 97 World v. Gilliland, 11 Okla. 384, 404,
Ioua. 220. 233, 32 L.R.A. 470, 59 07 Pac. 485.
Am. St. Rep. 411, 66 X". W. 15/; Pennsylvania. — Illinois Mutual Ins.
Garretson v. Equitable Mutual Life Co. v. 11 oilman, 40 Phila. Leg. Int.
& Endowment Assoc. 93 Iowa, 402. 488.
409, 61 N. W. 952. South Carolina.— Sample v. Lon-
Kansas. — Northwestern Mutual don & Liverpool Fire Ins. Co. 40 S.
Life Ins. Co. v. Woods, 54 Kan. Car. 491, 495, 47 L.R.A. 704, 57 Am.
663, 668, 39 Pac. 189. St. Rep. 701, 24 S. E. 334.
Louisiana. — Brignac v. Pacific Tennessee. — Roval [ns. Co. v.
Mutual Life Ins. Co. 112 La. 574, Vanderbilt Ins. Go. 102 Tenn. 204,
580, 06 L.R.A. 329, 36 So. 595; Weil 270, 52 S. W. 108.
3002
CONCEALMENT IN OTHER THAN MARINE RISKS § 1848
could not have certain knowledge, saving as lie might be told by
a physician or other expert, is properly construed as a warranty
only of the bona fide belief and opinion of the applicant.19 Ami
a concealment of the fact that one has dyspepsia in its milder forms
is not a fatal concealment.20 And even in case where the question
was whether the party had ever met with any accidental or serious
injury, and the assured did not disclose the fact of an accidental
fall from a tree, it was held that this was not a material conceal-
ment, as the injury was only a temporary one and did not effect
the insured's health.1 So a failure to disclose that a wTound was
received in the throat by fencing about a year prior to effecting
the policy, which was only temporary in its effects is not fatal to
the insurance.2 Other cases might be cited showing the views
taken by the courts upon matters of the above character. Thus,
the fact that the deceased had failed to disclose that twenty years
before he was ill with a fever and more or less insane, and four
years before wras insane, it was declared to be no evidence of a
fraudulent concealment.3 And even in case of a warranty it is
held in England that if the assured states according to his own
knowledge and reasonable belief that he has no diseases material
to the risk, that this does not import a freedom from disease dis-
coverable only by a post mortem, or symptoms disclosed subse-
quently to effecting the policy.4 Whether a personal injury was
so serious as to make its nondisclosure avoid a policy of insurance,
Texas. — Phoenix Ins. Co. v. missible disease, see note in 48 L.R.A.
Munger Improved Cotton Machine (N.S.) 714.
Manufacturing Co. 92 Tex. 297, 303, 20 Morrison v. Wisconsin Odd Fel-
49 S. W. 222; Mutual Life Ins. Co. lows' Mutual Life Ins. Co. 59 Wis.
v. Baker, 10 Tex. Civ. App. 515, 525, 1G2, 18 N. W. 13.
31 S. W. 1072: Mutual Life Ins. Co. 1 Wilkinson v. Connecticut Mutual
v. Blods:ett, S Tex. Civ. App. 45, 50, Life Ins. Co. 30 Iowa, 119, 6 Am.
27 S. W. 286. Rep. 657, aff'd Union Mutual Life
Washington. — Remington v. Fi- Ins. Co. v. Wilkinson, 13 Wall. (80
delity & Deposit Co. 27 Wash. 429, U. S) 222, 20 L. ed. 617.
441, 67 Pac. 989. 2 Bancroft v. Home Benefit Assoc.
West Virginia.— Bettman v. 120 N. Y. 14, 8 L.R.A. 68, 23 N. E.
Harness, 42 W. Va. 433, 447, 36 997, 30 N. Y. St. Rep. 175, 19 Ins.
L.R.A. 573, 26 S. E. 271. L. J. 468.
Distinguished in Aloe v. Mutual 3 Mallorv v. Travelers' Ins. Co.
Reserve Life Assoc. 147 Mo. 561, 47 N. Y. 52, 7 Am. Rep. 410.
575, 49 S. W. 553; Dwight v. Ger- 4 Hutchinson v. National Loan
mania Life Ins. Co. 103 N. Y. 341, Assur. Soc. 7 C. C. S. 467, 17 Scot.
352, 57 Am. Rep. 729, 8 N. E. 654. Jur. 253. See also Holloman v. Life
19 Owen v. Metropolitan Life Ins. Ins. Co. 1 Wood (U. S. C. C.) 674,
Co. 74 N. J. Law, 770, 122 Am. St. Fed. Cas. No. 6,623; Northwestern
Rep. 413, 67 Atl. 25. Mutual Life Ins. Co. v. Heimann, 93
On scope and effect of questions or Ind. 24; Thierolf v. Universal Fire
provisions as to contract with trans- Ins. Co. 110 Pa, St. 37, 20 Atl. 412.
3003
§ 1849 ,I(»VCE OX IXSlh'AXCE
where the assured answers thai she has never received such injury,
ia imt to be determined exclusively by the impression of the matter
at the time, bul its more or less permanenl influence on the health,
strength, and longevity of the party is to be taken into account.6
§ 1849. Same subject: conclusion. — The decisions seem to agree
that the terms "sickness" and "disease'5 do nol mean a trifling ill-
ness nor occasional physical disturbances resulting from accidental
causes and n<>t permanenl in their effects, nor a temporary illness
which readily yields to professional treatment and leaves no per-
manenl physical injury or disorder calculated or having a tendency
to shorten life; that an inquiry as to certain diseases must refer to
thai alone, and not to one not included within the term nor con-
nected therewith in symptoms or effect upon the system.6 If,
5 Union Mutual Life Ins. Co. v. Minnesota. — Price v. Phoenix
Wilkinson, 13 Wall. (80 U. S.) 222, Mutual Life Ins. Co. 17 Minn. 497,
20 L. ed. 617. 10 Am. Rep. L66.
6Uviir<l States. — Connecticut Mississippi. — Grangers' Life Ins.
Mutual Life Ins. Co. v. Union Trust Co. v. Brown, 57 Miss. 308, 34 Am.
Co. 112 (J. S. 250, 28 L. ed. 708, 5 Rep. 440.
Sup. Ct. ID; Life Ins. Co. v. Fran- New Jersey. — Metropolitan Life
eisco (Manhattan Life Ins. Co. v. Ins. Co. v. McTague, 49 N. J. L. 587,
Francisco) 17 Wall. (84 U. S.)' 672, 60 Am. Rep. 661, 0 Atl. 766.
21 L. ed. 698; .Manufacturers Acci- New York. — Higbie v. Guardian
dent Indemnity Co. v. Dorgan, 58 Mutual Lite Ins. (o. 53 \. Y. 603;
Fed. 04.",, 7 C. C. A. 581, 16 U. S. Peacock v. New York Life Ins. Co.
A|.|». 290, 22 L.R.A. 20; Dreier v. 20 N. Y. 293, s. e. 1 Bosw. (14 N.
Continental Life Ins. Co. 24 Fed. Y.) 338; Hogle v. Guardian Life
670; Goucher v. Northwestern Ins. Co. 6 Rob. (N. Y.l 567.
Traveling Men's Assn. 20 Fed. 596. North Carolina. — Selias v. Equita-
Arkansas. — Des Moines Life Ins. ble Life Assur. Soc. of U. S. 170 N.
Co. v. Clay, 89 Ark. 230, 116 S. W. Car. 420, 87 S. E. 222.
232. Oklahoma. — Eminenl Household of
Georgia. — Southern Life Ins. Co. Columhus Woodmen v. I 'rater, 24
v. Wilkinson. 53 Ga. 535. Okla. 214, 23 L.R.A.(N.S.) 917, an-
Illinois. — Illinois Masons' Benefit uotated on what constitutes "spitting
Soc. v. Winthrop, 85 111. 537. or coughing blood," 103 Pac. 558.
Kehlitcln/.- Mutual Benelit Life Tents. — Mutual Life Tns. Co. v.
Ins. Co. v. Davies, 87 Ky. 541, 10 Simpson, 88 Tex. 333, 28 L.R.A. 763,
Ky. Law Rep. 577, 9 S. W. 812; 31 S. W. 501, 53 Am. St. Rep. 757.
Galbraith v. Arlington Mutual Life Vermont. — Billings v. Metro-
Ins. Co. 12 Bush (76 Ky.) 29. politan Life Ins. Co. 70 Vt. 477. 11
Man/land.— /Etna Life Ins. Co. of Atl. 516.
Hfd. \. Millar, 113 M<l. 686, 78 Atl. Washington.— Hoeland v. Western
483. Union Life Ins. Co. of Spokane, 58
Massachusetts.— Tyler v. Ideal Wash. 100, 197 Pac. Sin;, 39 Ins.
Ben. Assoc. 172 Mass. 536, 52 N. E. L. J. 611.
L083, 28 Ins. L. J. 477. Wisconsin. French v. Fidelity &
Michigan.— Brown v. Metropolitan Casualty Co. 135 Wis. 259, 17 L.R.A.
Life Ins. Co. 65 Mich. 300, 8 Am. (N.S.) 1011, L15 v. W. 869; Cady
St. Rep. 894, 32 N. W. 610. v. Fidelity & Casually Co. 134 Wis.
3004
CONCEALMENT IN OTHER THAN MARINE RISKS § 1849
however, the assured has actual knowledge as to the fact that the
state of his health is such as to materially affect the risk and in-
crease the hazard, it must he disclosed, [f he has knowledge thai
certain sicknesses or disorders have permanently affected his gen-
eral health, or that he was habitually and constitutionally subject
to certain disorders affecting his general health, these facts should
be disclosed. So, also, if he knows that he has an organic disease
which i ni] -airs his vitality, and in general if his physical condition
is such that he must as a reasonably intelligent man know that he
has a sickness or disorder or disease which musl in all probability
tend to shorten his life, or if he knows within the same limitations
that he has symptoms peculiar to specific diseases generally known
to be permanently injurious to health, and which tend to shorten
life, the sickness, disorder, disease, or symptom should be dis-
closed. But if the assured at the time of effecting the policy is
in such a condition of health and strength as would warrant a
reasonable and honest belief that his health is good, and that he is
free from disorders and disease or symptoms of disease which would
tend to shorten life, and this fact is not one which he ought
reasonably to know, and he is not guilty of any negligence in
failing to learn his physical condition, then his policy ought not
to be vitiated, though he fails to disclose that he has had some
disorder, sickness, or symptom of disease, even though it might be
actually material. The question should be left to the jury whether
the assured truly represented the state of his health so as not to
mislead or deceive the insurer; and if he did not deal in good faith
with the insurer in that matter, then the inquiry should be made,
Did he know the state of his health so as to be able to furnish a
proper answer to such questions as are propounded?7 A Massa-
322, 17L.R.A.(N.S.) 260, 113 N. W. Co. 112 U. S. 250. 28 L. ed. 708,
967. 5 Sup. Ct. 119; Moulor v. American
England.— Chattock v. Shawe, 1 Life Ins. Co. Ill U. S. 335, 28 L. ed.
Moody & R. 498; Ross v. Bradshaw, 447, 4 Sup. Ct. 466 (see citations of
1 Wiii. Black. 312. This case given under § 1848 herein) ;
The English cases, as a rule, are Knickerbocker Life Ins. Co. v. Trefz,
more strict in their enforcement of 104 U. S. 197, 26 L. ed. 708.
the rule as to concealment: See Alabama. — Alabama Gold Life Ins.
Maynard v. Rhode, 1 Car. & P. 360 ; Co. v. Johnson, 80 Ala. 467, 59 Am.
3 L. J. K. B. 64; Geach v. Ingall, Rep. 816, 2 So. 125.
14 Mees. & W. 95, 15 L. J. Ex. 37; Louisiana.— Murphy v. Mutual
Duckett v. Williams, 2 Cromp. & Benefit Life & Fire Ins. Co. 6 La.
M. 348; Von Lindenau v. Des- Ann. 518.
borough, 3 Car. & P. 353, 8 Barn Maine.— Dennison v. Thomaston
& C. 586, 7 L. J. K. B. 42. Mutual Ins. Co. 20 Me. 125, 37 Am.
See §§ 2003 et seq. herein. Dec. 42.
7 United States.— Connecticut New York. — Fitch v. American
Mutual Life Ins. Co. v. Union Trust Popular Life Ins. Co. 59 N. Y. 557,
3005
§ 1849 JOYCE ( >\ INSURANCE
chusetts case, if construed as it is frequently cited, would be
opposed to the above conclusion; but, on the contrary, it sus-
tains it. for the reason that symptoms of consumption had so far
developed themselves within a few months prior to effecting the
insurance as to induce a reasonable belief thai the applicanl had
thai fatal disease, and we should further construe this case as
establishing the rule that such a matter cannot resl alone upon
the assured's belief irrespective of what is a reasonable belief, but
thai it ought to be judged by the criterion whether the belief is
one fairly warranted by the circumstances.8 A case in Indiana,
however, holds thai if the assured has some affection or ailment
of one or more of the organs inquired aboul so well-defined and
marked as to materially derange for a time the function,- of such
organ, as in the case of Bright's disease, the policy will be avoided
by a nondisclosure, irrespective of the fact whether the assured
knew of such ailment or not. Although it was decided in the
same case that an instruction that it' a certificate of death of in-
sured, made by the attending physician and furnished the com-
pany, contained a statement that the insured died of Bright's
disease, such statement might he considered as tending to show
that he was afflicted with thai ailment when he signed the applica-
tion for insurance, is properly refused, in an action on the policy,
issued shortly before the death of the insured, although the in-
ference to he drawn from the statement is a proper subject for
the jury.9 This decision would nevertheless be within 1 lie rule
above stated by us. since such derangemenl of a vital organ would
necessarily he a symptom calculated to induce a reasonable belief
that the applicant had some disease winch might permanently
affect physical health. But, however, although one believes and
affirms that he has not a disease, yet if the answers are made
warranties, he answer at his peril. Neither his ignorance nor the
immateriality of the fact concealed will aid him. and by numerous
decisions, if he expressly stipulates that all his statements shall
he material, the result would be substantially the same.10
17 Am. Rep. 372; Mallory v. Travel- 8 Vose v. Eagle Lite & Health Ins.
ers' Ins. Co. 47 N. Y. 52, 7 Am. Rep. Co. (i Cush. (60 Mass.) 42.
410. 9 Continental Life Ins. Co. v.
En<)UnnL— Swdc v. Fairlie, 6 Car. Young, 113 Ind. 159, 3 Am. St. Rep.
& P. 1; Jones v. Provincial Ins. Co. 630. 15 N. E. 220.
3 Com. B. N. S. 65; Butchinson v. "Mutual Benefit Life Ins. Co. v.
National Loan Assur. Sue 7 Ct. Cannon, 48 Ind. 264; Powers v.
Sess. Cas. (Scot.) 407; Watson v. Northeastern Mutual Life Assoc. 50
Mainwaring, 4 Taunt. 763. Vt. (530; Campbell v. New England
See §§ 2003 et seq. herein, and Ins. Co. 98 Mass. 381. See chapter
cases cited in last note. herein on warranties.
3006
CONCEALMENT IN OTHER THAN MARINE RISKS § 1850
§ 1850. Insurer's knowledge. — Lord -Mansfield early stated the
rule in maxine insurances, already noted, thai one party need not
disclose facts known to the oilier, nor facts which the other oughl
to know.11 Such being the rule in marine risk-, it must govern
in other insurances, especially in this country, where the rale is
not so strict as to such oilier risks, and that this is the rule is well
settled.12 And the rule extends to the knowledge, actual or pre-
sumed, of the insurer's authorized agent.13 So insurer is pre-
sumed to know that which is obvious in regard to the property
insured, including the natural perils to which it is exposed, such
as the fact that it is situated on the bank of a river.14 Where
insurer is in such actual possession of knowledge that by turn in-
to its own record it can inform itself better than by the imperfect
memory of the applicant, it is a perversion of the purpose of war-
ranty to allow it to avoid its contract.15 Where the policy was
directed by the insurer to be canceled because of rumored attempts
to burn a building, and an insurance is thereafter effected by the
11 Carter v. Boehm, 3 Burr. 1905,
1 Wm. Black. 593, 13 Eng. Rul. Cas.
501, per Lord Mansfield, given here-
in under note in § 1845.
12 United States. — Howard Fire
Ins. Co. v. Chase, 5 Wall. (71 U. S.)
509, 18 L. ed. 524; Clark v. Manu-
facturing Ins. Co. 8 How. (49 U.
S.) 235, 12 L. ed. 1061.
loir a. — iller v. Mutual Benefit
Life Ins. Co. 31 Iowa, 21G, 7 Am.
Rep. 122.
Indiana. — Grav v. National Bene-
fit Assur. Co. Ill Ind. 531, 11 N. E.
477.
Louisiana. — Lvnn v. Commercial
Ins. Co. 2 Rob. (La.) 2G6.
Massachusetts. — Haley v. Dor-
chester Mutual Fire Ins. Co. 12 Gray
(78 Mass.) 545; Green v. Merchants'
Ins. Co. 10 Pick. (27 Mass.) 402.
Michigan. — Richards v. Washing-
ton Fire & Marine Ins. Co. 60 Mich.
420, 27 N. W. 586.
New Hampshire. — Leach v. Repub-
lic Fire Ins. Co. 58 N. H. 245; Patten
v. Merchants' Ins. Co. 40 N. H. 375.
New York. — Fish v. Liverpool
London & Globe Ins. Co. 44 N. Y.
538, 4 Am. Rep. 715 ; De Longuemere
v. New York Fire Ins. Co. 10 Johns.
(N. Y.) 120; Fowler v. iEtna Ins.
Co. 6 Cow. (N. Y.) 673, 16 Am. Dec.
460; Bnrritt v. Saratoga Mutual Ins.
Co. 5 Hill (N. Y.) 188, 40 Am. Dec.
345.
Pennsylvania. — Girard Fire &
Marine Ins. Co. v. Stephenson, 37
Pa. St. 293, 73 Am. Dec. 423 ; Norris
v. Insurance Co. of North America,
3 Yeates (Pa.) 84, 2 Am. Dec. 360.
South Carolina. — Monev v. Union
Ins. Co. 4 McCord (S. C.) 511.
Texas. — Knights of Pythias v.
Bridges, 15 Tex. Civ. App. 196, 39
S. W. 333.
England. — Perrine v. Lewis, 2
Fost. & F. 778; Royal Canadian Ins.
Co. v. Smith, 5 Russ. & Geld. (X.
Sco.) 322 (one judge dissenting on
the facts).
See § 1869 herein.
13 Deitz v. Providence-Washington
Ins. Co. 33 W. Va. 526, 25 Am. St.
Rep. 908, 11 S. E. 50. See § lS54a
herein.
14 Hev v. Guarantor's Co. 181 Pa.
St. 220, 59 Am. St. Rep. 644, 37 Atl.
402.
"O'Rourke v. Hancock Mutual
Life Ins. Co. 23 R. I. 457, 57 L.R.A.
496, 91 Am. St. Rep. 643, 50 Atl.
834.
3007
§§ 1851, 1852 JOYCE ON INSURANCE
plaintiff, it cannot avail the insurer? as a defense that such fact
0f attempted burning was no1 disclosed.16 But if the assured
undertakes to state all the circumstances which can effect the risk,
he must do so fully and fairly. He will not be permitted to excuse
himself by saying that he failed to communicate a fact because it
was already known to the insurer.17 If a policy is conditioned to
be void in case of the concealment of any material fact, as if
gasolene be used on the premises and the broker employed by the
insured to procure insurance does not inform the insurer of the
i <: gasolene upon the premises such concealment will avoid the
v.18 Concealment by insurer of a material fact from an ap-
plicant for insurance as to the extent of its liability and the amount
of its funds collectible from assessments, is such a fraud as to
justify rescission of the contract into which insured was thereby
induced to enter and entitles him to recover back the premiums
paid without deduction.-.19
§ 1851. Insurer's knowledge: constructive knowledge from exam-
ination by surveyor. — If the insurer's act of incorporation requires
it to appoint a surveyor to examine, survey and take a correct
description of the property, to value the same, fix the premium,
determine the conditions of insurance, and take into consideration
the exposure and liability of the property to fire, the company
is obligated to ascertain all material facts relating to the risk. And
it cannot, defend on the ground of material concealment that the
insured did not disclose a fact which it was the duty of the sur-
veyor to have ascertained.20
§ 1852. Insurer's knowledge: use of insurance map in fire risks. —
In connection with the subject of insurer's knowledge we would
suggest that what are known as "insurance maps" are used, the
purpose of which is to furnish the insurer with definite and exact
information of a certain character concerning fire risks. It would
bo proper, in case the defense of concealment is set up by the
insurer, to ascertain whether the defendant regularly uses, as a
16 Fish v. Liverpool London & presence of designated articles on
Globe Ins.- Co. 44 N. Y. 538, 4 Am. premises, see note in 3 B. R. C. 7.
Rep. 715. 19 Moore v. Mutual Reserve Fund
On indications that building may Life Assoc 106 N. Y. Supp. 255, 121
be intentionally set on tiro as an in- App. Div. 335.
crease of risk,' see note in 31 L.R.A. 20 Satterthwaite v. Mutual Benefi-
(N.S.) 603. cial Ins. Co. Assoc. 14 Pa. St. 393.
"Stonev v. Union Ins. Co. 3 Mc- See Sheldon v. Hartford Fire Ins.
Cord (S. C.) 387, 15 Am. Dec. 634. Co. 22 Conn. 235, 58 Am. Dec. 420.
18Turnlmll v. Home Fire Ins. Co. As to reference to survey etc: war-
83 Md. 312, 34 Atl. 875. ranties, see §§ 1959, 1960 herein.
On effect of provision prohibiting
3008
CONCEALMENT IX OTHER THAN MARINE RISKS §§ L853 L854a
matter of business these insurance maps, and if the fact alleged to
have been concealed is proven to have been evidenl or capable of
being learned from such map, thai the insurer's defense ought not
to avail. We have not, however, discovered any case wherein such
a defense has been met with such proof to show the insurer'?
knowledge of the fact alleged to have been concealed; yet it is
based upon the principle governing throughout the cases resting
upon the knowledge or presumed knowledge of the insurer, and
is analogous to the cases considered under the sections relating to
information contained in newspapers subscribed to and regularly
received by the underwriter.1
§ 1853. Insurer's knowledge: public records of title. — If by the
terms of the contract or by inquiry on the part of the insurers
the assured's interest or title in the property becomes material, the
insurer is not bound by the public records concerning title, but
may rely upon the obligation resting upon the assured to disclose
title so far as necessitated by such contract or inquiries.2
§ 1854. Insurer's knowledge: political perils. — The insurer is
presumed to have knowledge of the political or disturbed condition
of the country at the time the policy is effected, and cannot claim
that a fact is concealed which a knowledge of such disturbed
political condition would have shown. Thus, where the property
insured was in one of the southern states during the Civil War,
it was held unnecessary to state that the guards smoked pipes and
had fires in the immediate vicinity, or that the insured was ob-
noxious to numerous persons in the vicinity, or the property's
liability to seizure.3
§ 1854a. Knowledge of insurer's agents. — Inasmuch as we have
fully considered under the chapters on agency the principles and
rules governing the powers of limitations thereon of agents, and
the exceptions thereto and qualifications thereof including the
questions of waiver4 and the extent to which insurer is bound by
the knowledge of its agents,5 we shall notice here certain decisions
in point as to such knowledge and its effect upon the contract so
far only as they affect concealment and disclosure by assured.6
1 See §§ 1809-1812 herein, and 3 Keith v. Globe Ins. Co. 52 111.
last section. 518, 4 Am. Rep. 634.
As to insurance maps in connec- 4 Chaps. 22 et seq. (§§ 386 el seq.)
tion with description of property, herein.
see Bumpus v. American Central Ins. 5 See §§ 496, 515 et seq., 544-546,
Co. 108 Me. 217, 79 Atl. 848, 40 Ins. 1905, 1906 herein.
I. J. 1500 (considered under § 1742 6 As to concealment by assured; by
herein). principal from agent and by as-
2 Mutual Fire Ins. Co. v. Deale, sured's agent, see §§ 643-680 herein.
18 Md. 26, 79 Am. Dec. 673.
Jovce Ins. Vol. III.— 189. 3009
jo\< i: iin lxsruAN'ci:
Tlir fact thai the person in whose name a policy of insurance
-ii, .,1 was at the time dead, ami his death was nol communi-
cated to the insurer, does uol affect the insurance, if it. was com-
municated to the agents of the insurer. If the policy was issued
in the name of a deceased through the negligence and mistak
the agents of the insurance company, it cannot avoid the policy on
that ground.7 And if an insurance agent has the supervision and
ection of the insurer's risks, the Latter must be charged with
knowledge of any fad learned by such agent while engaged in
the performance of his duty as Mich inspector.8 The assurer is
also bound where it- agent has knowledge that insured is not the
sole and unconditional owner;9 where he has knowledge a- to
the use and occupation of the property;10 where he is advised and.
has at the time that the policy is delivered full knowledge that a
portion of the property is encumbered and accept- the premium,"
although the question as to the agent's knowledge or information
as to encumbrances may he one for the jury;12 where he accepts
the first premium knowing the facts as to insured's illne-:13
where he has full knowledge of assured's prior sickness;14 where
the misrepresentations in an application for burglary insurance
are made by the insureds agenl with knowledge of the truth:15
where the agent was grossly negligent is not informing himself
as to the character of the insured property in assuming that it was
a dwelling when it was used as a factory;16 and there could he
no concealment or unfair dealing in the procurement of insurance
on a church, where the agent of the underwriter was a cotrustee
with the one who procured the policy, and had actual knowledge
7 Lumberman's Mutual Ins. Co. v. Co. v. ITalsey, — Okla. — , 153 Pac.
Bell, 1G6 111. 400, 57 Am. St. 140, 145. Sec SS 563, 564 herein.
45 N. E. 130. 12 Queen of Arkansas Ins. Co. v.
8 Phrenix Ins. Co. v. Holcombe, 57 Laster, 108 Ark. 261, 15G S. W.
Neb. 022, 73 Am. St. Rep. 532, 78 N. 858.
W. 300. See also First National "McClelland v. Mutual Life Ins.
Bank v. iEtna Ins. Co. 188 Mich. Co. of N. Y. 135 X. Y. Supp. 735,
251, 153 N. W. 1063, 46 Ins. L. J. 151 App. Div. 264, 41 Ins. L. J.
712, where insurers agent examined 1265.
the property. "Strickland v. Peerless Casually
9 O'Brien' v. Greenwich Ins. Co. Co. 113 Me. 566, 90 Atl. 974, under
95 Mo. App. 301, 68 S. W. 976. See Rev. St. c. 49, see. 93. See §§ 477,
§ 562a herein. 492, 492a, 512 herein.
10Guptill v. Pine Tree State 16New Amsterdam Casualty Co.
Mutual Fire Ins. Co. 109 Me. 323, v. New Palestine Bank. 59 Ind. App.
84 All. 529, 41 Ins. L. J. 1823; De 69, 107 N. E. 554. 45 Ins. L. J. 401.
Xovelles v. Delaware Ins. Co. 13S See § 484 herein.
N. Y. Supp. 403, 78 Misc. Rep. 649, 16 Bailey v. Liverpool London &
42 Ins. L. J. 403. Globe Ins. Co. 166 Mo. App. 593,
11 Springfield Fire & Marine Ins. 149 S. W. 1169. 41 Ins. L. J. 1819.
3010
CONCEALMENT IN OTHER THAN MARINE RISKS § 1855
with him of the whole transaction.17 So the knowledge of an
assistant district superintendent of a life insurance company, who
has entire charge of taking applications, delivering policies, and
collecting premiums within his district, having agents under him,
that an insured is connected with the liquor business, is imputable
to the company; and the receipt of premiums by such agent with
such knowledge may be construed as a waiver, by the company,
of a provision in the policy requiring a written permit signed by
the president or secretary, to be connected with the liquor busi-
ness.18
But where the agent is held to have been merely a broker act-
ing for insurer, his knowledge as to the untruth of a representa-
tion, innocently made by assured, as to the age of an automobile
is insufficient to bind insurer.19 And the validity of a policy of
life insurance must depend upon the statements made in the
written application, regardless of any oral communications made
by the applicant to the soliciting agent.20 Nor does the doctrine
as to imputed knowledge apply where insured has assigned for
the benefit of creditors and the agent is one of the creditors.1 Nor
is insurer bound where the agent is informed by insured that he
intends to obtain other insurance and is told by said agent that he
could do so if not satisfied with the amount of the policy.2 And
if facts of falsity of answers or of other fact of forfeiture exist and
are known to the officers of a local section and are not commu-
nicated to the supreme lodge, their mere concealment, unless by
collusion with insured or at his instance, cannot be charged to
insurer even if such officers are agents of the supreme lodge.3
§ 1855. A specific and full disclosure is required, not an evasive
one. — Although the assured is not required to make other than a
general statement of facts as a rule, and is not expected to go into
details about which the insurer manifests no interest and makes no
inquiry, especially where such matters are open to general observa-
tion,4 yet a concealment of the true state of the property insured
17 Howard Fire Ins. Co. v. Chase, x Roper v. National Fire Ins. Co.
5 Wall. (71 U. S.) 509, 18 L. ed. of Hartford, 161 N. Car. 151, 76 S.
524. E. 869.
18 MeGurk v. Metropolitan Life 2 Carlton v. Patrons Androscoccr'n
Ins. Co. 56 Conn. 528, 1 L.R.A. 563, Mutual Fire Ins. Co. 109 Me. 79,
16 Atl. 263. 39 L.R.A. (N.Sj 951, 82 Atl. 649, 41
19 Smith v. American Automobile Ins. L. J. 1067. See §§ 556-558a
Ins. Co. 188 Mo. App. 297, 175 S. herein.
W. 113, 45 Ins. L. J. 726. See 8 Knights of Pythias v. Bridges,
§§ 472 et seq. herein. 15 Tew Civ. App. 196, 39 S. W. 333.
20Fidelitv Mutual Life Assoc, v. 4Bebee v. Fire Ins. Co. 25 Conn.
Harris, 94 Tex. 25, 86 Am. St. Rep. 51, 65 Am. Dec. 553; Towne v. Fitch-
813, 57 S. W. 635. burg Ins. Co. 7 Allen (89 M
3011
L855 JOYCE ON INSURANCE
I- :i fraud,5 a wide distinction, however, being made between those
where there is no inquiry and those where questions arc pro-
pounded by the insurer,6 and in all cases involving the poinl here
under consideration, the express terms of the contract and the fact
whether the assured has warranted a full and true disclosure are
important factors.7 But where a disclosure is required and is
made, it should be full and complete, do1 partial, evasive, or
calculated to mislead or deceive, omitting matters of importance
and materiality which if disclosed would make the answer full;
as in case of the concealmenl of a serious and recenl sickness under
a disclosure of a slighl illness, or the partial disclosure of an acci-
dent resulting in a serious internal injury by a statement concern-
ing the same in such terms as are intended to convey the impression
that it was only slight. So if the answer made suggests a con-
clusion which is untrue; as whore the insured in answer to an in-
quiry stated that he had made an application to a certain other
company which he had withdrawn, when in fact he had applied to
other companies and his application was rejected, thereby sug-
gesting the conclusion that there was no objection to the risk. So
also where the assured concealed marked symptoms of consump-
tion under the statemenl that he could not say that he was afflicted
with any disease or disorder, hut was troubled with general debility
of the system.8 But in a New York case the assured, in answer to
a question whether he had had any sickness or disease within a
stated period and if so to give the nana' of the physician, merely
disclosed a slight illness and the name of the attending physician,
when in fact ho had had a sickness not disclosed, the name of the
51; Burritl v. Saratoga Mutual Eire Life Ins. Co. (iii X. Y. 186, 20 Am.
Ins. Co. 5 Hill (N. Y.) 188, 40 Am. Rep. 522; Rawls v. American Mu-
Dec. 345; Lyon v. Commercial Ins. tual Life Ins. Co. 27 N. Y. 282, SI
Co. 2 Rob. (La.) 266. Am. Dec. 280; Gates v. Madison
5 Fowler v. .Etna Ins. Co. 6 Cow. Countv Ins. Co. 2 N. Y. (1 Seld.) 13,
i\. Y.) 073, 10 Am. Dec. 4(10. See s. c. 5 X. Y. 169, 55 Am. Dec. 360;
Hardman v. Fireman's Ins. Co. 20 Hartford Protective Ins. Co. v.
Fed. 594. Bui see cases in next note, thinner, 2 Ohio St. 452, ")!) Am. Dec.
6 As to absence of inquiries ami 684, per Ramsay, -I.
inquired, see §§ 1844, L869-1872, 8 American Life- Ins. Co. v. Ma-
1914 herein. hone, 56 .Miss. 180, 192, per the
7 See Clark \. Manufacturers' Ins. court; Vose v. Eagle Life iV Health
Co. 8 TJow. (49 U. S.) 235, 12 L. ed. Ins. Co. (i Cush. (60 Mass.) 12;
1061; Clement v. Phmnix Lis. Co. (i Towne v. Fitchburg Ins. Co. 7 Allen
Blatchf. (U. S. C. C.) 481, Fed. Cas. (89 Mass.) 51; Story v. Williams-
Xo. 2,881; Commonwealth v. Hide & burgh Masonic Mutual Benefil As-
Leather Ins. Co. 112 Mass. 136, 17 soc. 95 N. Y. 47-1; Smith v. .L.tna
Am. Rep. 72: Vose v. Kaule Life & Life Ins. Co. 49 N. Y. 211; Hartman
Health Ins. C. 6 Cush. (60 Mass.) v. Keystone Ins. Co. 21 Pa. St. 4(i(i.
42; Swift v. Massachusetts Mutual
3012
CONCEALMENT IN OTHER THAN MA If INK RISKS § L856
physician attending him during such illness not being given,
and it was hold that such evidence did doI establish a breach of a
warranty that the answers were "full, correct, and true."9 Ex-
ceptions exist in all eases when the insurer waives his righl to a
full and complete answering, where it is apparenl on the face of
the application that the question is imperfectly answered.10
§ 1856. Concealment must be referred to the time of making the
contract and not to a subsequent event. — We have already stated
under the rule upon this point in marine risks that the conceal-
ment has reference not to the event itself, but to the materiality
of the fact at the time the contract is made, and cannot depend
upon subsequent events or facts learned after the contract is com-
pleted.11 This rule is equally true in other risks.12 So if the policy
provides that it will be void in case of an omission to make known
any fact material to the risk, such condition must be held to refer
to what existed at the time the contract was completed.13 And if
the contract is so far completed that the company may be held
to have assumed the risk and a death or loss occurs before the pol-
icy is delivered, or in some cases even before the premium is paid.
no obligation rests upon the party entitled to the benefit of the
insurance to disclose the fact. This doctrine is well settled in this
country.14 So where insured's brokers do not learn of the loss
at the time and assured has no knowledge of continued negotia-
tions, the failure to disclose such loss after a telegram binding the
contract is sent but before the policy is issued does not constitute
fraud.15 And where a policy is effected on the assured's homestead,
the docketing of a judgment against him after the contract is made
does not vitiate it, even though there be a clause against encum-
9 Dilleber v. Home Life Ins. Co. 69 rine Ins. Co. v. Wieh, 8 Colo. App.
N. Y. 256, 25 Am. Rep. 182. 409, 46 Pac. 687. See also as to rep-
On what constitutes a consultation resentations, §§ 1886, 1909, 1921-
with or attendance by a physician 1923 herein and as to warranties, §§
within the meaning of an application 1956, 1967, 1968 herein.
for life insurance, see note in 18 13 Allemania Fire Ins. Co. v. Pitts-
L.R.A.(N.S.) 362; on time covered burgh Exposition Soc. 8 Sadler (Pa. )
by question or representation as to 308, 11 Atl. 572, 10 Cent. Rep. 292.
consultation with physician, see note 14 American Horse Ins. Co. v. Pat-
in 45 L.R.A.(N.S.) 162. terson, 28 Ind. 17; City of Daven-
10 See § 1870 herein. port v. Peoria Marine lV Fire Las.
11 Pirn v. Reid, 6 M. & G. 1, 12 L. Co. 17 Iowa, 276; Keini v. Home
J. Com. P. 299; Blood v. Howard Mutual Fire Ins. Co. 42 Mo. 38, 97
Fire Ins. Co. 12 Cusli. (66 Mass.) Am. Dec. 291; Whitaker v. Farmers'
472. § 1790 herein, and eases cited. Union Ins. Co. 29 Barb. (N. Y.) 312.
12Roark v. City Trust, Safe De- See also SS L03 el seq. herein,
posil & Surety Co. 130 Mo. App. 40. 15 El Dia Ins. Co, v. Sinclair, 228
110 S. W. 1; Michigan Fire & Ma- Fed. S33, 143 C. C. A. 231.
3013
§ 1857
JOYCE ox [NSURANCE
brance§.16 If, however, before paymenl of the premium, con-
summation of the contract and issuing the policy there is a ma-
terial change in assured's health it must be disclosed, especially so
where it is stipulated that the risk shall not attach until the first
premium is paid while assured's condition is the same as that de-
scribed in the application when the risk attaches.11
§ 1S57. Disclosure of assured's interest. — It is not obligatory
upon the assured, as a rule, to disclose the nature or extent of his
interest nor the particulars of his title, and a withholding of such
; hi will not avoid the policy in the absence of fraud or some
requirement of the contract that the interest he disclosed, or some
inquiry concerning the same. It is within the power of the insurer
to protect himself by requiring a description of the applicant's
interest. But even if he does not, and it appears that the con-
cealment i- fraudulent, intentional, material and to the prejudice
of the insurer, the policy is avoided.18 Thus, insured need not
state that he is a chattel mortgagee,19 nor that the buildings are
upon land not owned by him, except the contract require such
disclosure.20 And even though the policy expressly stipulates for
a full disclosure of the assured's interest, great particularity is not
16 Eddy v. Hawkeye Ins. Co. 70
[owa, 172, 59 Am. Rep. 444, 30 N.
W. 808.
17 Gordon \ . Prudential Ins. Co. 68
Phila. Leg. Intel. 98.
On duty to notify insurer of facts
which develop after submission of
policy or certificate, see notes in >S
L.R.A.(N.S.) 983, and 39 L.R.A.
(X.S.) 951.
18 Colorado. Connecticut Fire Ins.
Co. v. Colorado Leasing, Mining &
Milling Co. 50 Cole. 424, 116 Pac.
154, ID [ns. L. -). 1717.
Illinois. Norwich Fire Ins. Co. v.
Boomer, 52 III. I 12, 1 Am. Rep. 618.
Mai, ir. Buck v. Phoenix Ins. Co
7i I Me. 586.
Massachusetts.- -Fletcher v. Com-
monwealth Ins. Co. 18 Pick. (35
Mass.) 119; Strong v. Manufactur-
ers' Ins. Co. l'O Pick. (27 Mass.) 40,
20 Am. Dec 7)07.
Missouri.- Morrison v. Tennessee
Marine & Fire Ins. Co. 18 Mo. 262,
59 Am. Dec 299.
New Fork. Riggs v. Commercial
Mutual Ins. Co. 125 N. Y. 7, 21 Am.
St. Rep. 716, 10 L.R.A. 684, 25 N.
E. 1058.
Ohio. — Hartford Protection Ins.
Co. v. Harmer, 2 Ohio St. 452, 59
Am. Dec 684.
Virginia.- VYvtheville Ins. Co. v.
Stultz, 87 \"a. 620, 13 S. E. 77, 15
\a. L. .). 32S; Wooddy v. Old Do-
minion Ins. Co. 31 Gratt. (Va.) 362,
31 Am. Hep. 7: J2.
Policies need not disclose the na-
ture of the interest of the assured un-
less some condition in them requires
such disclosure: Riggs v. Commer-
cial Mutual Ins. Co. 125 N. Y. 7. 21
Am. St. Rep. 716, 10 L.R.A. 684, 25
N. E. L058. See Curry v. Common-
wealth Ins. Co. 10 Pick. (27 Mass.)
535, 20 Am. Dee. 547.
19 Norwich Fire Ins. Co. v. Boom-
er. 7)2 111. 442, 4 Am. Rep. 618.
*°Fletcher v. Commonwealth Ins.
Co. 18 Pick. (35 Mass.) 419.
On want of title to land where in-
sured is sole and absolute owner of
building, see note in 38 L.R.A. (N.S.)
427.
3014
CONCEALMENT IN OTHER THAN MARINE RISKS § 1857
necessarily required, but if the title is .-fated in general words such
as clearly evidence its nature, it appears to be sufficient.1 So al-
though a policy contains a condition declaring it to be void if the
interest of insured be other than unconditional or sole ownership,
it cannot be avoided on the ground that insured did nol own the
legal title, he having purchased the property and paid therefor
without having received a conveyance, if no written application
was made by him for the policy, and no questions were asked of
him concerning his title.2 And if insured has an insurable interest
in the property, and in good faith applies for insurance thereon,
and makes no actual misrepresentation or concealment of his in-
terest therein, and the insurer refrains from making inquiry con-
cerning his interest and issues a policy to him, accepts and retains
his premium, it must he presumed to have knowledge of the
condition of his title, and to insure the property with such knowl-
edge.3 So it is held that if assured occupies under an agreement to
purchase, on which he has made payments but has no deed, he
cannot by concealing this fact effect a valid policy upon it as his
own for an amount larger than he has paid.4 And the nondis-
closure, there being no inquiry, of the exact amount paid on ac-
count on lumber which insured had contracted to sell and in which
he had an insurable interest, will not avoid the policy where the
fact of sale and part payment of the purchase price had been dis-
closed.5 And if insured is not questioned respecting encumbrances
on his property or other facts material to the insurance, and does
not intentionally conceal them, their existence does not invalidate
the policy.6 So where no inquiries are made of insured as to the
condition of his title to property insured, or as to encumbrance
thereon, and he does not intentionally conceal the existence of an
encumbrance, and does not keep silent in regard thereto from any
sinister motive, while he has an insurable interest in the property,
and the premium is paid, accepted, and retained, the insurance
1 Williams v. Roger Williams Ins. 4 Reynolds v. State Mutual Ins.
Co. 107 Mass. 377, 9 Am. Rep. 41; Co. 2 Grant Cas. (Pa.) 326. Contra,
Washington Fire Ins. Co. v. Kelly, <33tna Fire Ins. Co. v. Tyler, 16
32 Md. 421, 3 Am. Rep. 149. Wend. (N. Y.) 385, 30 Am. Dee. 90.
2 Dooly v. Hanover Fire Ins. Co. § 1859 herein, and chapters on war-
16 Wash. 155, 58 Am. St. Rep. 26, ranties and representations.
47 Pae. 507. 5 Fuhrman v. Sun Office of Lon-
On vendee under executory con- don, 180 Mich. 4.'i9, 147 N. W. 618.
tract as owner where vendor holds 6 Doolv v. Hanover Fire Ins. Co.
legal title, see note in 20 L.R.A. 16 Wash. 155, 58 Am. St. Rep. 26,
(N.S.) 775. 47 Pac. 507.
3 National Fire Ins. Co. v. Three
States Lumber Co. 217 111. 115, 108
Am. St. Hep. 239, 75 N. E. 450.
3015
§ L857 JOYCE ON [NSURANCE
company is conclusively presumed to have insured such insurable
interest, and to have waived a condition in the policy providing
for its forfeiture by reason of an encumbrance upon the property.
In case of loss, the insurer cannot avoid liability by reason of such
encumbrance.7 And where insured is asked and answers nothing
as i" encumbrances the existence thereof in violation of the policy
stipulation docs not avoid the contract.8 So failure to inform
assurer, upon an oral application, of the existence of liens and
encumbrances on the property, where no inquiries in reference
thereto are made, does not render a policy void under a provision
thai it shall be void if the insured has concealed or misrepresented
any material fact or condition, unless such failure was intentional
and with the design to defraud.9
Again, where -rain insured in the name of a partnership was in
the sole custody of a railroad company, and though there had
hern a dissolution of the partnership, the retiring partner con-
tinued to be liable as to third persons, and the insurance agent did
not inquire who were the owners — the omission to notify the
insurer of such dissolution of the partnership was not a conceal-
ment which would avoid the policy.10 So in another case a policy
was issued to M., of the firm of M. and B., loss payable to P. and
Co., as their interest might appear, and conditioned that "if the
interest of the assured in the personal property be other than its
unencumbered and sole ownership, without such fact being en-
dorsed upon the policy, the same shall be void." The property
was stored with the firm of M. and B., warehousemen, B. having
no title to the property, but only an interest in the profits of the
business of buying and storing grain, and being liable with M. to
hold and ship the grain, as provided in the warehouse receipts issued
by the firm. It was held that although B. had an insurable interest
in the grain stored, his interest was not one which the assured were
required to disclose in taking out the policy to protect their own
interest.11 And where a person doing business under a firm name.
represents that the insured goods belong to the firm and insures
them in its name, the policy is not avoided even though it is
stipulated that it shall he void for concealment or misrepresenta-
7Phoenix his. Co. v. Fuller. 53 10 Phoenix Ins. Co. v. Hamilton
Neb. Ml. la L.R.A. 108, 63 Am. 14 Wall. (SI P. S.) 504, 20 L ed
Rep. 637, - ! X. W. 269. 729. Cited in Texas Banking & Ins.
8llunil)li' v. German Alliance Tns. Co. v. Cohen, -47 Tex. Kill, 412 :i(i
Co. 92 Kan. t86, 111 Pac. 243, 1-1 Am. Rep. -JUS.
Ins. L. .1. 1-1. "Traders Ens. Co. v. Pacaud L50
9 Arthur v. Palatine Ins. Co. 35 111. 245, 11 Am. St. Rep. 355, :',T X
Ore- '21, 7li Am. SI. Wop. 450, 57 E. 460.
Pac. 62.
3016
CONCEALMENT IN OTHER THAN MARINE RISKS § 1858
tion of any material fact or circumstance or if the interest of
assured be not truly stated.12 So where insurance is applied for
and granted on goods held in trust or on consignment, an omis
sion to disclose the ownership is not a fatal concealment unless the
policy requires such disclosure.13
In cases of insurances effected in mutual companies where by
the terms of the contract the premium notes constitute a lien upon
the real property insured, the title of the assured becomes an im-
portant consideration, and a material concealment as to the same
will vitiate the policy.14
§ 1858. Same subject: exception to rule. — If the assured states
the nature or extent of his interest, he must state it truly, and
where no inquiry is made or statement given, on the happening
of a loss he will recover according to his real interest, whether it
be absolute or qualified,15 but the requirements of the contract or
particular inquiries may necessitate a disclosure.16 So if the nature
of the assured's interest is such that it would influence the under-
writer to charge a higher premium or not to insure at all, it must
be disclosed, for it is material to the risk.17 It is also held that
12 Bonnet v. Merchants' Ins. Co. policy void. We have dismissed the
— Tex. Civ. App. — , 42 S. W. 316. first condition. In the case of Co-
13 Pliomix Ins. Co. v. Hamilton, 14 lnmhia Ins. Co. v. Lawrence, 2 Pet.
Wall. (81 U. S.) 504, 20 L. ed. 729. (27 U. S.) 25, 7 L. ed. 335, it was
See § 1731 herein. decided that it was the duty of the
14 Mutual Fire Ins. Co. v. Deale, assured to communicate to the in-
18 Md. 26, 79 Am. Dec. 673. surer the nature and character of his
15 Niblo v. North American Fire interest when it is of a limited or
Ins. Co. 1 Sand. (N. Y.) 551. special nature. This was reaffirmed
16 See Wilson v. Commercial in the same case at a later trial and
Union Assur. Co. — Vt. — , 96 Atl. in a case in 16 Peters the same prin-
540. See also cases under last sec- ciple is announced. It is conceded
tion and cases in next note. that the materiality of the disclos-
17 Carpenter v. Washington Ins. ure or concealment is a question of
Co. 16 Pet. (41 U. S.) 495,^10 L. ed. fact, which must be submitted to the
1044; Columbian Ins. Co. v. Law- jury. None of the prayers of the
rence, 10 Pet. (35 U. S.) 507, 9 L. defense present this question. They
ed. 512, per Story, J., aff'g s. c. 2 assume the ground that the appellees
Pet. (27 U. S.) 25, 7 L. ed. 335; had no insurable interest, not having
Franklin Fire Ins. Co. v. Coates, property in the building insured, or
14 Md. 285. In this case Bartol, that the omission to communicate to
J., said: "It is argued by the the company the extent and nature
plaintiff that the policy was taken of their interest rendered the policy
upon the property as if Coates was void. It follows that none of these
the owner of it, and that the omis- prayers could have been granted."
sion to state the nature and charac- And see opinion of Mr. Chief Justice
ter of the interest was a violation of Marshall in case above cited in note
the first condition in the policy, or to § 1848 ante; Sussex County Ins.
that it was concealment of a fact Co. v. Woodruff, 26 N. J. L. 541 .
material to the risk, and renders the See Tyree v. Virginia Fire & Marine
3017
859 JOYCE <>N i\M RANCE
statements respecting the nature and extenl of the interest of the
insured are material, and must be construed so as to effectuate the
purposes of the parties.18 So omission to state the nature of one's
interest, upon application for insurance, when it make- a material
difference in the risk, will avoid the policy.19 Again, the nature of
the interesl of the assured in the insured property should be made
known to the insurer when required by the policy provisions and
other insurance should be disclosed.20 And under a stipulation
that the policy shall be void if the subjeel of insurance be a build-
ing standing mi ground nol owned by assured in fee simple it is
incumbenl upon an applicant I'm- fire insurance to disclose the
nature of his title.1 So the concealmenl of encumbrances avoids
the policy where insured's interest is required to be stated and
wlnro it is stipulated that concealment of material facts avoids the
policy.8
§ 1859. Must an equitable title be disclosed. — In marine risks,
as already noted, there seems to he some conflict of opinion upon
the point whether an equitable title must he disclosed to the in-
surer.3 But in lire risks, if the insured has an equitable title in
the property, as where he holds possession under a contract of pur-
chase, the legal title being in another, it is held sufficient to de-
scribe the property as his, provided, however, no inquiry is made
and the policy does not require that the exact title or character of
the assured's interest shall be disclosed.4 This question will, how-
ever, be more fully considered hereafter.5
Ins. Co. 55 W. Va. G3, 66 L.R.A. 3 See § 1822 herein.
657, 46 S. E. 706, 104 Am. St. Rep. ^United Slates. — American Basket
!)83; §§ 1846, 1868, 1892-1S9!) here- Co. v. Farmville Ins. Co. 3 Hughes
in. (U. S. C. C.) 25, Fed. Cas. No.
18 Hartford Fire Ins. Co. v. Keat- 17,603; Rumsey v. Phoenix Ins. Co.
ii j. 86 M<1. 130, 63 Am. St. Rep. 490, 17 Blatchf. (U. S. C. C.) 527. 1 Fed.
38 Ad. 2!i. 396, 2 Fed. 429, and cases cited.
19 Russet use of Crucet v. Union Connecticut. — Hough v. City Fire
Ins. Co. 4 Dall. (1 C. S.) 121, 1 L. Ins. Co. 29 Conn. 10, 76 Am. Dec.
ed. 892. 581.
20 Carpenter v. Providence Wash- Illinois. — Norwich Fire Ins. Co. v.
ington Ins. Co. 16 Pet. (II C S.) Boomer, 52 111. 442, \ Am. Rep. 618.
in."). 10 L. ed. Kill. Cited in Prank- Maine.— Buck v. Phoenix Ins. Co.
tin Fire Ins. Co. v. Coates, 14 .Md. 76 Me. 586.
285, 298. Massachusetts. — Walsh v. Phila-
1 Parsons, Rich & Co. v. Lane delphia Fire Assoc. 127 Mass. 383;
i Lane v. Parsons, Rich & Co.: Re Fletcher v. Commonwealth Ins. Co.
Millers & Manufacturers Ins. Co.) 18 Pick. (35 Mass.) 419; Jackson v.
97 Minn. 98, 4 L.R.A.(N.S.) 231, 106 Farmers' Mutual Fire Ins. Co. 5
X. W. 485. Gray (71 Mass.) 52.
2 Roper v. National Fire Ins. Co. of New Jersey. — Franklin Fire Ins.
Hartford, 161 N. Car. 151, 76 N. F. Co. v. Martin', 11 Vroom (N. J.) 568.
869. ■ 29 Am. Rep. 271.
3018
CONCEALMENT IN OTHER THAN MARINE RISKS § 18G0
§ 1860. Unusual or extraordinary circumstances of peril to which
property is exposed. — The insured must not, when he has knowl-
edge actual or presumed thereof, withhold information of unusual
or extraordinary circumstances of peril to which the property is ex-
posed, where the same could not with rcasonahle diligence be dis-
covered by the insurer or reasonably anticipated by him as the
foundation of specific inquiries.6 So anything unusual in the use
of a building, enhancing the risk, or any extrinsic peril outside and
near a building insured, and which increases the risk, the insured
must communicate, although not requested.7 Thus, the omission to
notify the insurer of a recent attempt to burn the building next
to that on which insurance was sought is held to vitiate the policy
obtained.8 And where a policy was effected upon twro warehouses,
and the insured failed to disclose the fact that an adjoining build-
ing had been on fire at the time, and that the danger still existed
from the probable breaking out again of the fire, the concealment
was held to have vitiated the contract, even though no fraudulent
intent was proven ; but it appeared that after the first fire was put
out that the assured employed extraordinary means of conveyance
to forward his instructions to his agent to effect insurance, show-
ing clearly that his purpose in effecting the policy was caused by a
fear of danger from fire.9 In determining the materiality of the
concealed fact that the house insured had prior to effecting the
policy been on fire, caused in the opinion of the assured by in-
cendiaries, the jury should inquire for and be governed by the
true cause of the fire, and not by the belief of the assured as to the
cause.10 But the fact that lamps are used in the picker-room of a
cotton factory upon which the insurance was effected is not a fact
necessary to be disclosed where no representations are made or
New York. — Noves v. Hartford 8 How. (49 U. S.) 235, 12 L. ed. 1001.
Eire Ins. Co. 54 N. Y. 008. Cited in Bebee v. Hartford County
Pennsylvania. — Lebanon Mutual Mutual Eire Ins. Co. 25 Conn. 51, 03,
Ins. Co. v. Erb, 112 Pa. St. 149, 4 05 Am. Dec. 553; Mercbants & Man-
Atl. 8; Pennsylvania Fire Ins. Co. v. ufacturers' Mutual Fire Ins. Co. v.
Douafhertv, 102 Pa. St. 508. Washington Mutual Ins. Co. 1 Handy
See § 1710 herein. (Ohio) 181, 188.
5 See chapter on warranties and 8 Walden v. Louisiana Ins. Co. 12
representation. La. 134, 32 Am. Dec. 116.
6 Hartford Protective Ins. Co. v. 9 Bufe v. Turner, 2 Marsh. 46, 0
Harmer, 2 Ohio St. 452, 59 Am. Dec. Taunt. 338.
C84, per Ramsey, J.; North Ameri- On indications that building may
can Fire Ins. Co. v. Throop, 22 Mich, be intentionally set on fire as an in-
140, 7 Am. Rep. 038; Curry v. Com- crease of risk, see note in 31 L.R.A.
monwealth Ins. Co. 10 Pick. (27 (N.S.) 003.
Mass.) 535, 20 Am. Dec. 547. See § "Hartford Protection Ins. Co. v.
1861 herein. Harmer, 2 Ohio St. 452, 59 Am. Dec.
7 Clark v. Manufacturers' Ins. Co. 684.
3019
§ 186] JOYCE ON lNSl'KAXCK
asked, even though the risk might have been thereby increased,
unless such use of said lamps is unusual.11
It is held, however, thai an omission to disclose to the insurers
repeated incendiary attempts to destroy the property insured will
not avoid the insurance.12 It is also decided thai il is nol the duly,
of an applicanl for fire insurance to disclose a previous attempt by
some one to burn the property soughl to be insured unless as
aboul it.13 An<l when insured knew of an attempt to burn his
property bu1 did nol disclose such knowledge a distinction was made
between the fad of incendiarism and the fear thereof as where the
answer was "no" to the question concerning "incendiarism" and
whether the applicant had "any fears" that his property was in
danger.14 So the throat of a cook, because of a temporary quarrel
with the manager thereof, to burn a sanitarium is not such a ma-
terial fad as to necessitate its disclosure.16
§ 1861. Same subject: distinctions to be observed. — The distinc-
tion exists in all cases of this character between knowledge on the
part of the assured of material facts and mere suspicion- and
rumors too remote and general to warrant a reasonable opinion or
belief that the fact exists; in brief, mere idle talk, reports, and
loose rumors, the source of which nobody knows, and which have
not become so prevalent as to warrant any reasonable belief of their
importance. Of necessity, the knowledge actual or presumed on
the part of the assured that the property insured is located near
other property wherein a hazardous occupation is carried on, or
which is used for hazardous purposes, becomes material. This is a
fact increasing the risk. The principle is one which runs through
all the cases, marine or otherwise, that the assurer cannot be held
responsible under a risk which he has assumed without a knowl-
edge of facts which materially increase the liability to loss, and of
the existence of which he has no knowledge actual or presumed,
and of which the assured has knowledge and ought in good faith to
have disclosed.16
11 Clark v. Manufacturers' Ins. Co. notice to him was notice to insurer.
8 How. i I!) |J. S.) 235, 10 L. ed. Guffy, J.
1061. 14 Home Ins. Co. v. Feyerbend, 7
l2CIark v. Hamilton Mutual Ins. Kan. App. 231, 52 Pac. 899.
Co. 9 Gray (75 Mass.) 148. "Washington Fire Ins. Co. v.
18 German- American Ins. Co. v. Cobb, — Tex. Civ. App. — , L63 S.
Norris, Ion Kv. 29, is Kv. ].. Rep. W. 608.
537, 66 Am. Si. Rep. 324, :!7 s. \\\ w Vale v. Phoenix Ins. Co. 1 Wash.
627, 26 Ins. I,. .}. 384. It was de- (U. S. C. C.) 2S3, Fed. Cas. No.
elared, however, thai it was reason- 16,811; Boggs v. American ins. Co.
able to suppose from the proven 30 Mo. 63; McFarland v. Peabody
facts that the agent was well aware Ins. Co. 0 W. Va. 125; Bell \. Bell,
of such attempted burning and that 2 Camp. 47f); Kelly v. Hochelaga
:;o'jn
CONCEALMENT IN OTHER THAN MARINE RISKS §§1862-1864
§ 1862. Apprehensions that property is exposed to danger: sus-
picions, rumors, opinions, and speculations. — In line with whal is
stated under the last section is that class of cases where the assured
has apprehensions that the property is exposed to danger. We
have already considered the rule in marine risks in case of suspi-
cions, rumors, reports, apprehensions, etc., and what we have there
stated applies here, which is substantially this, that mere idle
rumors, reports, and talks need not be disclosed. If, however, they
are not too remote in their application to cause a reasonable belief,
expectation, or fear that a material fact exists which would increase
the risk were it known, and if there exists a reasonable apprehen-
sion of danger to the property, and the danger itself is of such a
real and substantial character as would enhance the risk in the mind
of an ordinarily prudent and intelligent man, the fact should be
disclosed. But the assured is not bound to communicate his own
expectations, opinions and speculations upon facts, especially where
it is not proven or claimed that he knew or had received informa-
tion, true or false, which he has failed to communicate; 17 although
if a specific inquiry is made concerning the assured's apprehen-h
sions as to a particular danger, and he answers contrary to the
truth, he cannot recover.18
§ 1863. Where insured's belief, apprehension, or fear of danger
is the moving cause in effecting insurance. — If the insured's appre-
hension or fear of danger to the property is the moving cause of
procuring insurance, the rumor, report, information, or other ap-
prehension or fear should be disclosed,19 and the fact that it was the
moving cause would undoubtedly be fairly evidenced by proof that
the assured used extraordinary means of conveyance to forward
his instructions to effect insurance.20
§ 1864. When moral character of assured may become material:
reinsurance: moral risk. — The moral character of assured, that he
had had difficulties concerning losses and was not in good repute
among insurance companies in general may be material and neces-
Mutual Fire Ins. Co. 24 L. C. J. 298, -the court; Bell v. Bell, 2 Camp. 475.
2 L. N. 347. 3 L. N. 63, S. C. R. 1880. See § 1796 herein.
See § 1862 herein. 18 Whittle v. Farmville Ins. Co. 3
17 Vale v. Phoenix Ins. Co. 1 Wash. Hughes (U. S. C. C.) 421, Fed. Cas.
(U. S. C. C.) 283, Fed. Cas. No. No. 17,603. See § 2009 herein.
16,811; Walden v. Louisiana Ins. 19 Walden v. Louisiana Ins. Co. 12
Co. 12 La. 134, 33 Am. Dee. 116; La. (0. S.) 134, 32 Am. Dee. 116.
Graham v. German Mutual Ins. Co. But see Smith v. Home Ins. Co. 47
6 La. Ann. 432; Hartford Protective Hun (N. Y.) 30.
Ins. Co. v. Harmer, 2 Ohio St. 452, 20 Bufe v. Turner, 6 Taunt. 338, 2
59 Am. Dee. 684 ; McBride v. Repub- Marsh. Rep. 46.
lie Fire Ins. Co. 30 Wis. 562, per
3021
§ 18G4 JOYCE UN INSURANCE
sary to be disclosed, as in case where such knowledge is possessed
by the reassured a1 the time of effecting reinsurance.1 And where
partnership property hi to be insured, the insurer lias a
right to know who its members are as the moral hazard is one of
the essential elements of the risk and the materiality to insurer of
Mich knowledge especially when inquiry made is of such im-
portance thai it is the applicant's duty to give to insurer full and
truthful information possessed by him upon the subject.8 So
where; the representation forming the basis of the contract was thai
the "moral risk" was first class, and that the corporation named as
owner of the policy had gone ou1 of business "as its presidenl is a
very sick man" which facts were untrue and the corporation was
insolvenl and a mortgage on its property had been foreclosed and
those tacts were not disclosed, it was held that the policy was there-
by vitiated.8 Bu1 the failure of one of the stockholder's of a corpo-
ration to disclose an alleged previous attempt by him to burn
another store is not such a fraudulent concealment or suppression
of truth as to the policy and in the case so holding the court says:
"We do not understand that the rule which makes a suppression of
the truth fraudulent applies to transactions foreign to the contract
which is the subject of litigation; it applies only to misrepresenta-
tions or suppressions of the truth in relation to the contract which
is the subject of the litigation in hand. . . . If appellants had
made (John's moral character an element of ' consideration in issu-
ing the policies, and had asked him if he had burned his Morgan-
field -fore, and he had denied it, although, in fact, he had done so,
they would have presented the case they now argue. ]>ut no such
case is presented by the record, or decided" referring to the conten-
tion that the policies were avoided by the fraudulent concealment
of Colin that he had procured his Morganfield store to be burned
for the purpose of collecting the insurance thereon.4 Again, where
insurer's agent examined the property owned by assured and it was
conceded to be largely in excess of the amount of insurance, and a
policy was issued covering "lumber owned by the assured" and
after the fire the state made a claim for the value of lumber alleged
to have been taken from state lands, which matter was settled by
paying for the claimed trespassed lumber, and assured had no
knowledge of any such claim until after the loss, it was held that
1 New York Bowery Fire Ins. Co. Ins. Co. 82 Wash. 55, L43 Pac. 447,
v. NVw York Fire Ins. Co. 17 Wend. -11 Ins. L. J. 671.
(N. Y.) 359. * Hamburg-Bremen Fire Ins. Co.
2 Jacobs v. Queen Ins. Co. of v. Ohio Valley Dry Goods Co's
America, 183 Mich. 512, L50 N. W. Trustee, 160 Kv. 252,169 S. W. 724,
.117. 45 Ins. L. J. 17.3. il Ins. L. J. 649, per Miller, J.
3 Bank of Ellensburg v. Palatine
3022
CONCEALMENT IN OTHER THAN MARINE RISKS §§1865-1867
the confusion of goods or mixing of tb -1 Lumber with thai
owned by assured did not increase the moral hazard, and thai any
question of misrepresentation, fraud or concealment was precluded.6
§ 1865. Belief that property has been destroyed.— Tf the assured
at the time, of effecting the insurance has reason to believe that the
property has been destroyed, he should disclose thai Pact, and it' he
fails to communicate the same to the insurer, no recovery can be
had upon the policy.6
§ 1866. Facts implied from or assurer put on inquiry by informa-
tion given: waiver. — The assurer may waive his right to disclosure
of material facts by his n to make inquiries as to material
facts concerning which he has been distinctly put on inquiry by the
facts stated. Thus, where the insured exhibited to the insurer an
extract from a letter and the latter knowing of the fact that it was
such extract does not ask to sec the whole letter, there is no mate-
rial concealment of a fact contained in the part not shown.7 And
answers as to insured's physical condition or disease, which are
euch as ought to put a reasonably prudent man on inquiry which
would have resulted in ascertaining the fact are equivalent to ac-
tual notice.8 But where an affirmative answer to a general ques-
tion as to any disease does not put insurer on inquiry if a subse-
quent question calls for full particulars, and in response thereto
facts are suppressed which are material and which if known by
assurer would have been a ground for rejection of the risk, in such
case the policy is avoided.9 Constructive knowledge, however, of
facts which it is asserted ought to have put the insurer on inquiry
does not constitute a waiver of a defense that assured had falsified
his statements as to age.10
§ 1867. Whatever affects the state or condition of the property
at time: materiality: facts affecting risk or premium. — It is a gen-
eral rule that all material facts which directly tend to increase the
hazard must be disclosed by the applicant.11 and also whatever
would influence a reasonable insurer, governed by the general rules
applicable in such cases, to either reject the risk or to charge a
higher premium must be stated.12 So that within the limitations of
5 First National Bank v. Aetna 9 Talley v. Metropolitan Life Ins.
Ins. Co. 188 Mieh. 251, 153 N. W. Co. Ill Va. 778, 60 S. E. 936.
1063, 46 Ins. L. J. 712. w Brotherhood of Railroad Train-
6 Hart v. British & Fire Marine men v. Roberts, 48 Tex. Civ. App.
Tns. Co. 80 Cal. 440, 22 Pac. 302. 325, 107 S. W. 626.
See § 107 herein n Keith v. Globe Ins. Co. 52 111.
7 Lovermg v. Merchants' Ins. Co. l^J -18 , A t> cti
Pick. (29 Mass.) 348. See §§ L788, ^ * Am; *^; bJ4' ...
1870, 1871 herein. ™ Umted States -Cohxmbmn Ins.
8 Euestess v. South Atlantic Life Co. v. Lawrence, 10 Pet. (do U. b.J
Ins. Co. 88 S. Car. 31, 70 S. E. 403. 507, 516, 9 L. ed. 512, per btory, J.;
3023
L867 JOYCE ON INSURANCE
rules whatever materially affects the state or condition of the
property a1 the time must be disclosed.18 Accordingly, it is held
thai the failure of one insured from Loss by fire to disclose in any
material particular his title would very probably relieve the insurer
from liability, although the policy contains no express provision to
thai effect.14 And a proposal for insurance, such as to convey an
impression to the insurer that the title was complete and absolute,
while ii was in fad precarious, depending for its continuance on
contingenl events, is misleading and vitiates the insurance, since a
misrepresentation which is material to the risk avoids the policy.15
FEardman v. Firemen's Ins. Co. 'JO 515, 0 L. ed. 515 (reaffirming as to
594. misdescription the <-itin<r case 'J I'd.
a. Brignae v. Pacific Mu- [27 V. S.] 26, 53, 56); Manchester
tual Life Ins. Co. L12 La. 574, 66 Fire Assur. Co. v. Abrams, 89 Fed.
L.R.A. 322, 36 So. 932, 940, 32 C. C. A. 426, 135, 6]
Maryland. — Mutual Fire [ns. Co. CJ. S. App. 276; Equitable Life As-
v. Deale, IS Md. 26, 79 Am. Dec. sur. Soc v. McElroy, 83 Fed. 631,
673. 637, 28 C. C. A. 365, 371, 40 U. S.
Missouri. — Boggs v. American Ins. App. 548; Penn .Mutual Life Ens.
Co. 30 Mo. ti.'!. Co. v. Mechanics' Savings Bank &
North Carolina.— Gardner v. North Trust Co. 72 Fed. 413, 431, 19 C. C.
Mutual Life Ins. Co. 163 X. A. 286, 305, :57 U. S. App. 692;
Car. 367, 48 L.R.A.(N.S.) 714, 79 S. Waller v. Northern Assur. Co. 10
E. 806, 43 Ins. L. J. 25; Whitehurst Fed. 234, 2 McCrary, 637, 639;
v. Fayetteville Mutual Ins. Co. 6 Nicoll v. American Ens. Co. 3 Woodb.
Jones L. (5] N. C.) 352. & M. 529, 535, Fed. Cas. No. L0,259;
Washington. Lank of Ellensburg Clark v. Manufacturers' Ins. Co. 2
v. Palatine Ins. Co. 82 Wash. 551, Woodb. & M. 472, 489, Fed. Cas. No.
143 Pac. ! 17. I! Ins. L. .1. 671, 674. 2,829; James v. Lycomingjns. Co. 1
See §§ 1793 (as to marine risks); Cliff. 272, 282, Fed. Cas. No. 7,182;
1846, 18G8, 1892-1899 (as to repre- Cady v. Imperial Ins. Co. 4 Cliff.
mentations); 1962 et seq. (as to war- 203, 210, Fed. Cas. No. 2,283.
ranties herein). Alabama. — Scottish Union & Na-
13 Fowler v. iEtna Ins. Co. 6 Cow. tional Ins. Co. v. Boulden, 90 Ala.
(KY.) 673, 16 Am. Dec. 460; Peoria 508, 512, 11 So. 771; Commercial
Sugar Refining Co. v. People's Fire Fire Ins. Co. v. Allen, 80 Ala. 571,
Ins. Co. 52 Conn. 581. 577, 1 So. 202.
14Hinman v. Hartford Fire Ins. Arkansas. — Planters' Mutual Ins.
Co. 36 Wis. L59, citing numerous Co. v. Lloyd. 07 Ark. 584, 590, 77
eases. As to interest and title, see Am. St. Rep. 36, 56 S. W. 44.
§§ 2026 et seq. herein. Louisiana. — Allen v. Lafayette
15 Columbian Ins. Co. v. Lawrence, Ins. Co. 34 La. Ann. 763, 765; Duclos
2 Pet. (27 EJ. S.) 25, 7 L. ed. 335. v. Citizens' Mutual [ns. Co. 23 La.
Cited in: United states. — Phoenix Ann. 332, 333; Rafel v. Nashville
Ins. Co. v. Hamilton, 14 Wall. (81 Marine & Fire Ins. Co. 7 La. Ann.
U. S.) 504, 509, 20 L. ed. 731 (held 244, 246.
that failure to inform of dissolution Maryland. — Westchester Fire Ins.
of partnership no concealment avoid- Co. v. Weaver, 70 Md. 540, 5 L.l.'.A.
ing policy); Columbia Ins. Co. v. 480, 47 Atl. 401; Washington Fire
Lawrence, 10 Pet. (35 U. S.) 507. Ins. Co. v. Kelly, 32 Md. 421, 446,
3024
CONCEALMENT IN OTHER THAN MARINE RISKS § 186;
So within the above test is the question whether a failure to dis-
close the occupancy, by two tenants instead of one, of the insured's
premises is fatal.16 x\nd the fact that an adjoining building con
tains benzine should be stated.17 So also whether the fact that the
building is unoccupied is necessary to be stated.18 The existence
of an unfiled chattel mortgage is likewise material to the existence
of a risk on goods.19 But a mortgagee insuring in his own name
need not disclose an agreement with the mortgagor that the latter
should pay the premiums ; 20 although if the insured undertakes to
state all the circumstances which can affect the risk, he must do so
fully and faithfully.1 It is held unnecessary, however, to disclose,
in the absence of inquiries, the fact as to the manner of heating or
3- Am. Rep. 149; Franklin Fire Ins.
Co. v. Coates, 14 Md. 285, 29S.
Massacliusetts. — Stetson v. Massa-
chusetts Mutual Fire Ins. Co. 4
Mass. 330, 339, 3 Am. Dee. 217
South Carolina. — Martin v. Sub-
er, 39 S. Car. 525, 18 S. E. 125.
Tennessee. — Catron v. Tennessee
Ins. Co. 6 Humph. 176, 181.
West Virginia. — Tvree v. Virginia
Michigan. — Clay Fire & Marine Fire & Marine Ins. Co. 55 W. Va.
Ins. Co. v. Huron' Salt & Lumber 63, 68, 66 L.R.A. 664, 104 Am. St.
Manufacturing Co. 31 Mich. 346, Rep. 983, 46 S. E. 706.
357; Hill v. Lafayette Ins. Co. 2 Wisconsin.— Ryan v. Springfield
Mich. 476, 485. Fire & Marine Ins. Co. 46 Wis. 671,
New Hampshire.— Marshall v. Co- 675, 1 N. W. 426; Fuller v. Madison
lumbian Mutual Fire Ins. Co. 27 N. Mutual Ins. Co. 36 Wis. 509, 604;
H. 157 167. Hinman v. Hartford Fire Ins. Co.
New' Jersey.— Sussex County Mu- 36 Wis. 159, 165.
tual Ins. Co. v. Woodruff, 26 N. J. Distinguished in Commercial Fire
Law, 536, 552. Ins. Co. v. Allen, 80 Ala. 571, 577,
New York.— Tyler v. JEtna Fire 1 So. 202.
Ins. Co. 12 Weiid. 512; White v. 16 Hardman v. Firemen's Ins. Co.
Hudson River Ins. Co. 7 How. Pr. 20 Fed. 594. As to use and occupa-
341, 343; Hennessey v. Manhattan tion, see § 2101 herein.
Fire Ins. Co. 28 Hun, 98, 103. " McFarland v. Peabody Ins. Co.
Ohio. — Hartford Protection Ins 6 W. \ a. 42o.
Co. v. Harmer, 2 Ohio St. 452, 474,
50 Am. Dec. 684; Merchants' & Man-
ufacturers' Mutual Ins. Co. v. Wash-
ington Mutual Ins. Co. 1 Handy
(Ohio) 408, 419; Western Farmers'
Mutual Ins. Co. v. Miller, 1 Handy,
333.
18 Thayer v. Providence- Washing-
ton Ins. Co. 70 Me. 531. But see
Howard Fire & Marine Ins. Co. v.
Cornick, 24 111. 455. As to use and
occupation, see §§ 2101 et seq. here-
in.
19 Madsen v. Farmers & Merchants
Ins. Co. 87 Neb. 107, 29 L.R.A.
(N.S.) 97, 126 N. W. 1086. As to
2015 et seq.
Pennsylvania. — Hartman v. Key-
stone Ins. -Co. 21 Pa. 466, 477; Smith encumbrances, see
v. Cash Ins. Co. 1 Pittsb. 430, 6 herein.
Pittsb. L. J. 21. 20 Kernochan v. New York Bow-
Ehode Island. — Dow v. National ery Fire Ins. Co. 17 N. T. 428.
Assurance Co. of Ireland, 26 R. I. x Stoney v. Union Ins. Co. 3 Me-
379, 67 L.R.A. 480, 58 Atl. 999. Cord (S. C.) 387, 15 Am. Dec. 634.
Joyce Ins. Vol. III.— 190. 3025
§ 18G8 JOYCE ON ENS! RANCE
lighting the building, unless the manner of so doing is unusual.1
Again, the assured is not bouii<l to report to the company the fact
that personal property insured is under levy of execution at the
time the application is mad.', and the insurance effected, where
there is no fraud on the part of the assured, and the sheriff has
never taken the g 1- out of his possession, and the policy contains
no claim thai the insurance -had cease, if the property should he
levied upon or taken under execution, and there is nothing in the
policy to warn the assured that the company regarded a Levy as an
increase of the risk.8 If a married woman has an insurable interest
in goods purchased by her on credit, her concealment of her cover-
ture at the time of taking the policy is not a fact material to the
risk, nor are her Tights affected by private instructions to agents,
uncommunicated to her, that they are not to issue insurance on
stocks of merchandise in the hands of married women.4 But, the
facts that the insured company was insolvent, had suspended busi-
ness, was in a receiver's hands, and that its premises had been fore-
closed, should be disclosed.6
§ 1868. What constitutes a material fact: must it be material to
the risk: facts affecting risk or premium as test of materiality. —
"We have considered this question fully under the chapter on marine
insurance.6 In connection, however, with risks of the character
here considered, it is held that the nde where the question of
materiality is involved is. that the fact concealed must be one which
is material to the risk, otherwise it will not avoid the policy.7 But
this rule should he taken in connection with the other rule that
if the fact concealed would have shown the liability of the insurer
to loss to be greater than appears upon the facts disclosed, and
would in consequence have induced a rational underwriter, gov-
erned by principles presumed to govern prudent and intelligent
underwriters in practice, to have rejected the risk or to accept it
only at an increased premium, it is material.8 So it is held that
whether a misrepresentation or concealment will avoid the policy
2 Clark v. Manufacturing Ins. Co. Ins. Co. 82 Wash. 55, 143 Pae. 447,
8 How. (4!) U. S.) 235, 12 L. ed. 44 Ins. L. J. 671.
1061. See Girard Fire & Marine Ins. 6 See §§ 1791-1793 herein.
Co. v. Stephenson, 37 Pa. St. 293, 'Lexington Fire, Life & Marine
73 Am. Dee. 123; Elstner v. Equit- Ins. Co. v. Paver, 16 Ohio, 324; Su-
able Ins. Co. 1 Disn. (Ohio) 412, 12 tual Fire Ins. Co. v. Deale, 18 Md.
Ohio Dec. 703. 26, 79 Am. Dec. 673.
8 Niagara Fire Ins. Co. v. Miller, 8 United States. — Miller v. Mary-
L20 Pa. St. 504, 6 Am. St. Rep. 726, land Casualty Co. 193 Fed. 343, 113
1 1 Atl. 385. C. C. A. 267; Pelzer Manufacturing
*Queen Ins. Co. v. Young, 86 Ala. Co. v. St. Paul Fire & Marine
424, 11 Am. St. Rep. 51, 5 So. 116. Co. 41 Fed. 271, dismissed in 1 1!) U.
5 Bank of Ellenburg v. Palatine S. 785, 37 L. ed. 95/, 13 Sup. Ct.
3026
CONCEALMENT IN OTHER THAN MARINE RISKS § 1868
depends upon its materiality to the risk undertaken; and whether
the policy would have attached unless insurer had been induced to
enter into the obligation by reason of such concealment or mis-
representation of material facts, which if known to the company
would have influenced it in making the contract,9 In other words
a false representation or wilful concealment of a material fact which
enhances the risk or changes the extent or character thereof is
material if it operates as an inducement to insurer to enter into the
contract when except for such inducement he would not have done
so. The misrepresentation or wilful concealment need not in order
to be material be of facts which bring about or contribute to or are
connected with insured's death as that is not the test.10 So in a
1051; Hardman v. Fireman's Ins. dential Ins. Co. of America, 205 Pa.
Co. 20 Fed. 591. See St. Paul Fire 444, 454, 55 Atl. 19.
& Marine Ins. Co. v. Balfour, 168 South Carolina. — Himely v. South
Fed. 212, 93 C. C. A. 498 (war risk Carolina Ins. Co. 1 Mills' Const. 153,
on flour cargo). 154, 12 Am. Dec. 623; Ingraham v.
Georgia. — iEtna Life Ins. Co. v. South Carolina Ins. Co. 3 Brev. 522.
Conway, 11 Ga. App. 557, 75 S. E. Virginia. — Continental Ins. Co. v.
915 (under code).
Kentucky. — United States Health 681.
Kasey, 25 Gratt. 268, 18 Am. Rep.
& Accident Ins. Co. v. Jollv, — Ky
— , 118 S. W. 281; iEtna Life Ins
Co. v. Howell, 32 Ky. L. Rep. 935,
107 S. W. 294; United States Health
Washington. — Bank of Ellensburg
v. Palatine Ins. Co. 82 Wash. 55, 143
Pac. 447, 44 Ins. L. J. 671, 674.
See as to marine risks, § 1793
& Accident Co. v. Bennett's Admr. herein; as to representations, §§
32 Ky. L. Rep. 235, 105 S. W. 433.
Louisiana. — Brignae v. Pacific Mu-
tual Life Ins. Co. 112 La. 574, 66
L.R.A. 322, 36 So. 595.
If an/land. — Mutual Fire Ins. Co.
v. Deale, 18 Md. 26, 79 Am. Dec. 673.
Massachusetts. — Daniels v. Hud-
1846, 1867, 1892-1899; and as to
warranties, §§ 1962 et seq. herein.
One of the tests whether a misrep-
resentation or concealment is mate-
rial to the risk, is to ascertain wheth-
er, if the true state of the property
or title had been known, it would
son River Fire Ins.- Co. 12 Cush; (66 have enhanced the premium; and if
Mass.) 416, 59 Am. Dec. 192. it would, then the misrepresentation
Missouri. — Boggs v. American Ins. or concealment is fatal to the policy.
Co. 30 Mo. 63. Columbia Ins. Co. v. Lawrence, 10
New Hampshire.— Clark v. Union Pet. (35 U. S.) 507, 9 L. ed. 512.
Mutual Fire Ins. Co. 40 N. H. 333, Citing: Adema v. Lafayette Fire Ins.
77 Am. Dec. 721. Co. 36 La. Ann. 660, 664; Hartman
North Carolina. — Gardner v. North v. Keystone Ins. Co. 21 Pa. 466, 477 :
State Mutual Life Ins. Co. 163 N. Catron v. Tennessee Ins. Co. 6
Car. 367, 48 L.R.A. (N.S.) 714, 79 Humph. (Tenn.) 176, 182; Ryan v.
S. E. 806, 43 Ins. L. J. 25, 30 ; Fish- Springfield Fire & Marine Ins. Co.
blate v. Fidelitv & Casualty Co. 140 46 Wis. 671, 675, 1 N. W. 426.
N. Car. 589, 53 S. E. 354; White- 9 Mutual Fire Ins. Co. v. Deale, 18
hurst v. Favetteville Mutual Ins. Co. Md. 26, 79 Am. Dec. 673. See §§
6 Jones (51 N. C.) 352.
Pennsylvania. — McCaffrey v.
Knights of Columbia, 213 Pa." 609,
612, 63 Atl. 189; Murphy v. Pru- 14 Ga. App. 642. S2 S. E. 62.
3027
1793, 1846, 1S67, 1892-1899, herein
and cases in last note.
10 Empire Life Ins. Co. v. Jones,
L86g JOYCE OX INSURANCE
oil, v on a woman's life the fact of pregnancy may so far affect the
risk as to be material and necessary to be disclosed, even though no
inquiry is made.11 Again, it is decided that where the insured
•roperty Mood on a right of way of a railroad company, and the
insured had released the company from liability for loss by fire
a by its locomotives, and such fact was not disclosed, there
to mate-rial concealment, it appearing that the insurer made no
lifference in rates with or without the rigid of subrogation,, and
here being no usage or custom showing the materiality of such
ight of subrogation among insurance companies.12 But if the rate
if premium would have been greater in consequence of such release,
the case would have been brought within that of Tate v. Hyslop,
already noted.13 So answers to questions asked to ascertain the
date of applicant's health are material where the acceptance or
rejection of the risk as well as the rate of premium depends upon
such answers.14 Where., however, specific inquiries are made, the
matter has passed beyond the ground of materiality,15 and where
there is a warranty or where the conditions annexed provide that
any concealment shall avoid the policy, the materiality of the fact
concealed is not open to discussion, and in the last-mentioned
instance concealment stands upon the same footing as a warranty.16
§ 1869. Inquiries.— A party applying for insurance is bound to
answer truthfully all questions concerning facts material to the
risk," and if answers, in an application for a life policy, to^ ques-
tions propounded by insurer are such as may influence it in de-
termining whether to accept the risk, and what premium to charge,
buch answers must be truthful.18 And whether the insurance be a
lire or life risk, if inquiries be made, the concealment or suppres-
sion of material facts is a fraud, and as fatal to the contract as a de-
"Lefavour v. Insurance Co. of Ins.* Co. 4 Allen (86 Mass.) 217;
Pa 1 Phila (Pa) 55S, 2 Bldg. Ins. Barteau v. Phoenix Mutual Ins. Co.
r,s 67 N. Y. 595; Burritt v. Saratoga
12Pelzer Manufacturing Co. v. St. County Mutual Fire Ins. C<>. 5 Bill
•aul Fire & Marine Ins. Co. 11 Fed. (N. Y.) 18S, 40 Am. Dec. 345; Co-
'71 dismissed in 149 Q. S. 785, 37 lumbia Ins. Co. v. Cooper, 50 Pa. St.
, ed 957, L3 Sup. Ct. 1051. 331.
13 15 O B. 368. See § 1836 here- 17 Lueders v. Hartford Life & An-
in ^ nuity Ins. Co. 4 MeCrary (U. S. C.
w Murphy v. Prudential Ins. Co. C.) 149,12 Fed. 165.
i America, 205 Pa. 1 1 1, 45 1, 55 All. "Brignac v. Pacific Mutual Life
Ins. Co. 112 La. 574, 66 L.R.A. 322,
is Fame Ins. Co. v. Thomas, 10 111. 36 So. 595. As to materality of facts
\pp. 545. See § 1869 herein. affecting increase of risk and rate of
16 Jeffries v. Economical Life Ins. premium, sec § 1793 herein (ma-
Co. 22 Wall. (89 U. S.) 47, 22 L. ed. rine); §§ 1846, 1867, 1S68, 1892
Bardy v. Union Mutual Fire (representations) herein.
3028
CONCEALMENT IN OTHER THAN MARINE RISKS § 1869
nial would be, and such concealment equally invalidates the insur-
ance as iu case of a marine risk.19 So the concealment of a material
fact is equivalent to a false representation that it doc- not exist.20
Again, if a matter is specifically inquired about by insurer of a
party making a proposal for life insurance, the question and answer
thereto, are equivalent to an agreement that said matter is material:
and any misrepresentation, although such matter may not be
really material to the risk in the particular case, avoids the con-
tract.1
It is not absolutely necessary that specific inquiries be made or
designed to draw out every particular from the assured; it is suffi-
cient if a general question covering the matter in point is asked,
calculated to elicit the whole truth concerning the matter.2 But if
a direct question is asked and the answer purports to be complete,
there must be no substantial misstatement or omission in the answer.
else the policy will be avoided.3 And the failure to disclose the
existence of an unfiled chattel mortgage in answer to a question
calling for such disclosure, is a concealment which avoids the
policy.4 But an incorrect or untrue answer in an application for
life insurance in reference to matters of opinion or judgment will
not avoid the policy if made in good faith and without intention to
deceive, although an untrue answer in regard to matters which are
shown to be within the actual knowledge of the applicant and are
material to the risk will avoid the policy.5 And if an applicant for
fire insurance answers frankly and truthfully all questions put to
him as to the situation and exposures of the building to be insured,
he discharges his duty if there be no fraud.6
The fact that the insurer has knowledge does not excuse a dis-
closure of material facts when inquired about.7 The questions of
19 Smith v. ^Etna Life Ins. Co. 49 Equitable Assur. Co. 29 L. J. Com.
N. Y. 211; Burritt v. Saratoga Coun- P. N. S. 160, aff'g 6 Com. B. N. S.
ty Mutual -Eire Ins. Co. 5 Hill (N. 437.
Y.) 188, 40 Am. Dee. 345; Talley v. 4 Madsen v. Farmers & Merchants
Metropolitan Life Ins. Co. Ill Va. Ins. Co. 87 Neb. 107, 29 L.R.A.(N.S.)
778. 69 S. E. 936. 97, 126 N. W. 1086.
20 Pelican v. Mutual Life Ins. Co. 5 Brvant v. Modern Woodmen of
of N. Y. 44 Mont. 277, 19 Pac. 778, America, 86 Neb. 372, 27 L.R.A.
41 Ins. L. J. 327, 334. (N.S.) 326, 125 N. W. 621.
1 Brignac v. Pacific Mutual Life 6 Gates v. Madison County Ins.
Ins. Co. 112 La. 574, 66 L.R.A. 322, Co. 5 N. Y. (1 Seld.) 469, 55 Am.
36 So. 595. Dec. 360.
2 Vose v. Eagle Life & Health Ins. 7 Green v. Merchants' Ins. Co. 10
Co. 6 Cush. (60 Mass.) 42. Pick. (27 Mass.) 402; North Amer-
8 Phcenix Mutual Life Ins. Co. v. ican Fire Ins. Co. v. Throop, 22
Raddin, 120 U. S. 183, 30 L. ed. 644, Mich. 146, 7 Am. Rep. 638.
7 Sup. Ct. 500; Cazenove v. British
3029
§ 1870 J01rCE ON INSURANCE
materiality and fraudulent intent where a matter is„alleged to have
beeD canceled are for the jury.8
§ 1870. Inquiries: no inquiries: limited inquiries: questions in
application unanswered or incompletely answered: waiver. — In the
celebrated opinion of Lord Mansfield in Carter v. Boehm,9 the rule
is clearly stated thai the insured need not mention whal the under-
writer "waives being informed of," and it is well settled thai where
the application for insurance is made in writing, and questions
therein as i aterial facts are unanswered or incompletely an-
swered and the insurer without further inquiry issues the policy,
he must be held to have waived all righl to a disclosure or to a more
complete answer in relation to the Tact to which the unanswered
question or incompletely answered question relates, and the policy
cannol thereafter, in the absence of clear proof of a fraudulent or
intentional suppression of the fact, be avoided on the ground of
concealment or that the answer is incomplete. The applicant in
such case has the righl to suppose thai the insurer, in making in-
quiries as to certain facts, waive- all voluntary information concern-
ing all others. This rule applies equally whether the risk be that
of lire, life, or accident, and the contract will be considered as based
on the answers made,10 for if representations are not asked or given,
and an insurer chooses to assume the risk with only his general
8 Connecticut Fire Ins. Co. v. Colo- tual Life Ins. Co. v. Van Fleet, 47
rado Leasing, Mining & .Milling Co. Colo. 101, 107 Pac. 1087.
50 Colo. 424, 116 Pac. 154, 40 Ins. L. Idaho.— Allen v. Phoenix Assur.
•I. 1-1/; Dolan v. Missouri Town Co. 14 Ida. 728, 95 Pac. 829.
Mutual Fire Ins. Co. 88 Mo. App. Illinois.— Keith v. Globe Ins. Co.
COG. See § 1898 herein. 52 111. 518; Iowa Lite Ins. Co. v.
9 3 Burr. 1905, 1 Win. Black. 593, Zehr, 91 111. App. 93; Fanners Mu-
13 Eng. Rul. ('as. 501, given m note ,„.,] Fire & Lightning Ins. Co. v. Le-
toiii8*5 ';rm"- rr * i „ ™y> ,)] ni. app. 4i.
.' nle ftatr'~S?Srr0Ti qqq^o India™- ~ Pennsylvania Mutual
I !';e Sr/'iln"-,' '^ ''- Co. v. Wiler, 100 Ind. 92,
L. ed. L96, S Sup. ( t. 1199: Phoenix ,.,. -,. . -r, _,.,., ,,
Mutual Lite Ins. Co. v. Raadin, 120 J?'50 K™'*% lW' '"''' ,""• ?°?f*J
U. S. 183, 30 I, (.1. (ill. 7 Sup. Ct. !)alV Hancock Mutual Life
500; Connecticul Mutual Life Ins. Ins. Co. 65 Ind. 6.
,Co. v. Luchs, L08 1". S. IDS, 27 L. '""'"■ Jamison v. State Ins. Co.
ed. 800. 2 S„p. Ct. Did; Clark v. 85 Iowa, 229, 52 N. W. is:,.
Manufacturers' Ins. Co. s Eow. (49 Kansas. — Humble v. German AI-
U. S.) 235, 12 I., ed. L061. liance Ins. Co. 85 Kan. 140, 116 Pac.
Arfcawsas— Fidelity Mutual Life 472, 40 Ins. L. J. 1783 (principle
Ins. Co. v. Beck, SI Ark. 57, 104 S. asserted and sustained although in
W. 533, 1102. thi> case there was an oral applica-
Colorado. Connecticul Fire Tns. tion).
Co. v. Colorado Leasing, Mining & Kentucky. Niagara Fire Ins. Co.
Milling Co. 50 Coin. 124, 116 Pac. v. Layne, 162 Ky. 665, 172 S. W.
154, in Ins. L. J. 1717; Pacific Mu- 1090; Continental Ins. Co. v. Ford,
3030
CONCEALMENT IN OTHER THAN" MARINE RISKS § 1870
knowledge, he must do so at bis own peril.11 So it is said by Mr.
Justice Gray in the United States supreme court that "where upon
140 Ky. 406, 131 S. W. 189, 39 Ins. Lorillard Fire Tns. Co. v. McCul-
L. J. 1760. ]o,-h, "21 Ohio St. 176, 8 Am. Rep.
Massachusetts. — Bardwell v. Con- 52; Hartford Protective Fire [ns.
way Ins. Co. 122 Mass. 90 ; Common- Co. v. Harmer, 2 Ohio St. 452, 59
wealth v. Hide & Leather Ins. Co. Am. Dec. 684; per Ramsay, .1.
112 Mass. 136, 17 Am. Rep. 72; Pennsylvania. — Lebanon Mutual
Nichols v. Fayette Mutual Fire Ins. Ins. Co. v. Kepler, 106 Pa. St. 28;
Co. 1 Allen (83 Mass.) 63; Blake v. Armenia Ins. Co. v. Paul, 91 Pa. St.
Exchange Mutual Ins. Co. 12 Gray 520, 36 Am. Rep. 676.
(78 Mass.) 265; Haley v. Dorchester Texas. — American Central Ins.
Mutual Fire Ins. Co. 12 Gray (78 Co. v. Nunn, — Tex. Civ. App-. — ,
Mass.) 545; Liberty Hall Assoc, v. 79 S. W. 88.
Housatonic Mutual Fire Ins. Co. 7 Virginia. — West Rockinffham Mu-
Gray (73 Mass.) 261. tual Fire Ins. Co. v. Sheets, 26
Michigan.— Fuhrman v. Sun Ins. Gratt. (Va.) 854.
Office of London, 180 Mich. 439, 147 Wisconsin.— Kludt v. German Mu-
N. W. 618; Baker v. Ohio Farmers' tual Fire Ins. Co. 152 Wis. 637, 140
Mutual Ins. Co. 70 Mich. 199, 14 N. W. 321; French v. Fidelity &
Am. St. Rep. 485, 38 N. W. 216, 14 Casualty Co. 135 Wis. 259, 115 N. W.
West. Rep. 438; Sibley v. Prescott 869; Campbell v. American Fire Ins.
Ins. Co. 57 Mich. 14, 23 N. W. 473 ; Co. 73 Wis. 100, 40 N. W. 661 ;
Tiefenthal v. Citizens' Mutual Fire Dunbar v. Phoenix Ins. Co. 72 Wis.
Ins. Co. 53 Mich. 306, 19 N. W. 9. 492, 40 N. W. 386; Dodge County
Minnesota. — O'Connor v. Modern Mutual Ins. Co. v. Rogers, 12 Wis.
Woodmen of America, 110 Minn. 337.
18, 25 L.R.A.(N.S.) 1244, 124 N. England.— O'Neill v. Ottawa Ag-
W. 454. ricultural Ins. Co. 30 U. C. C. P.
Mississippi. — American Life Ins. 151.
Co. v. Mahone, 56 Miss. 180. But see Hayes v. United States
Nebraska.— Seal v. Farmers' & Fire Ins. Co. 132 N. Car. 702, 44
Merchants' Ins. Co. 59 Neb. 253, 80 S. E. 404; Chrisman v. States Ins.
N. W. 807. Co. 16 Oreg. 283, 18 Pac. 466. See
New Hampshire.— Fadden v. In- §§ 643 et seq. 1914, 2015, 2026 here-
surance Co. of North America, 77 N. in.
H. 392, 92 Atl. 335. As to concealment and agents, see
New Jersey. — Carson v. New Jer- §§ 643 et seq. herein. As to repre-
sey Fire Ins. Co. 43 N. J. L. 300, sentations in answer to inquiries, see
39 Am. Rep. 584, s. c. 44 N. J. L. § 1914 herein. As to partial an-
210. swers and warranties, see § 1969
New Yorfc.— Higgins v. Phcenix herein. As to inquiries as to incum-
Mutual Life Ins. Co. 74 N. Y. 69; brances, see § 2015 herein. As to
Brownina,' v. Home Ins. Co. 71 N. inquiries as title and interest see §
Y. 508, 27 Am. Rep. 86; Edington 2026 herein.
v. Mutual Life Ins. Co. 67 N. Y. "Clark v. Manufacturers' Ins.
185; Rawle v. American Mutual Life Co. 8 How. (49 U. S.) 235, 12 L.
Ins. Co. 27 N. Y. 282, 84 Am. Dec. ed. 1061.
280; Brink v. Guaranty Mutual Ac- Cited in: United States. — Penn
cident Assoc. 7 N. Y. Sup. Ct. 847, Mutual Life Ins. Co. v. Mechanics'
28 N. Y. St. Rep. 921. Savings Bank & Trust Co. 72 Fed.
Ohio.— Davton Ins. Co. v. Kellv, 413, 439, 19 C. C. A. 312, 37 U.
24 Ohio St, 345, 15 Am. Rep. 612: S. App. 692, 3S L.R.A. 68; Dumas
3031
§ 1870 JOYCE <>X INSURANCE
the face of the application a question appears 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 imma-
terial." ia So in Kentucky the rule is thai the insured has the right
-nine thai the as-urer made inquiries of lum enneeming every
material fad affecting the risk and it must he found, in order to
avoid the policy, thai the matter concealed was do1 only material
hut also that the concealment was intentional and fraudulent.13 So
die failure to answer a question is not a fraudulent concealment
avoiding the policy.14 In a Virginia case the rule is thus substan-
tially stated: If a policy of insurance does not require that the
insured shall state the Liens or encumbrances on the property in-
sured or his title thereto, and no questions are asked of him by the
insurer, the policy is do1 avoided by his failure, without any
fraudulent intent, to mention a lien upon it.15
v. Northwestern National [ns. Co. (Scot.) 451; Cazenove v. British
L2 A pp. D. C. 245, 258, H> L.R.A. Equitable Assur. Co. 2!) L. J. Com.
362. p. N. S. 160; aff'g (i Com. B. N. S.
Indiana. Continental Ins. Co. v. 437; Rowe v. London & Lancashire
Manns. L20 End. 30, 3(5, 5 L.K.A. Fire Jus. Co. 12 I'. C. Ch. 311.
132, 22 X. E. 78; Indiana Ins. Co. Since it clearly distinguishes between
v. Pringle, 21 Ind. App. 599, 569, the views taken by the En
52 X. E. 821; German .Mutual Ins. courts and our own, Mr. Justice
Co. v. Niewedde, 11 Ind. App. 524, Gray says that "so much of the re-
627. marks of" said court "as implies
Missouri. — Boggs v. America Ins. that an insurance company is not
Co. 30 Mo. 63, 69. bound to look with the -rent est at-
Ohio. — Hartford Protection Tns. tention at the answers of an appli-
Co. v. Harmer, 2 Ohio St. 452, 473, cant to the great number of q
59 Am. Dec. 684. lions framed by the company or its
South Carolina. — Pelzer Manuiac- agents, and that the intentional omis-
turers' Co. v. Sun Fire Office, 36 sion of the insured to answer a ques-
s. Car*. 213, 270, 15 S. E. 562. tion put to him is a concealment
Virginia. — Wytheville Ins. Co. v. which will avoid a policy issued with-
Stultz, 87 Va. 629, 637, 113 S. E. out further inquiry, can hardly be
'7. _ reconciled with the uniform consent
Washington. — Dooly v. Hanover of American decisions:" Phoenix
Fire Ins. Co. 36 Wash. 155, 159, Life Ins. Co. v. Etaddin, L20 U. S.
58 Am. St. Rep. 26, 47 Pac. 507. 183, 30 L. ed. 644, 7 Sup. Ct, 500,
"Phoenix Life [ns. Co. v. Rad- per Gray, J.
din, 120 V. S. 183, 30 L. ed. 644, 7 18 Continental Tns. Co. v. Ford,
Sup. Ct. 500. The language of the 140 Ky. 406, 131 S. W. 189, 39 Ins.
court is particularly noteworthy in L. J. 1760.
its criticism of the remarks of Sir I4Parkerv. Otsego County Farm-
George Jessel, M. !«.. in delivering ers' Co-operative Eire Ins.' Co. 62
the judgment in the ease of Lon- N. Y. Supp. L99, 17 App. Div. 204.
don Assur. Co. v. Mansel, 11 (Mi. 15 West Ro.-kimrliam Mutual Fire
I). 363. See Foihes v. Fdinburgh Tns. Co. v. Sheets, 26 Gratl (Va.)
Life Ins. Co. 10 Ct. Sess. Cas. 854.
3032
"CONCEALMENT IN OTHER THAN M AH INK KTSKS § 1871
§ 1871. Same subject continued. — In Massachusetts an innocent
failure by an applicant for fire insurance to communicate facts
about which he was not asked will not avoid the policy.16 And the
rule stated in the last section applies even though the policy by its
terms requires a full disclosure concerning the matters to which the
question relates,17 and so even though the applicant has answered
in the negative another interrogatory whether there are any other
circumstances affecting the risk.18 It also applies to the applicant's
refusal to answer, whether the question was propounded separately
or in connection with others.19 It must be assumed that if further
answers had been insisted upon at the time, that they would doubt-
less have been given, as it would be virtually a fraud for the insurer
to ignore the fact of the nonanswer, accept the premiums, and then,
in case of loss, be enabled to assert and sustain the defense of non-
disclosure concerning the matter to which the unanswered questions
relate.20
So the case of insurances issued without any application or upon
oral applications rests upon substantially the same basis. If the
insurer issues a policy without requiring any written application or
any representation concerning the situation, value, and risk of the
property insured, and there are no inquiries and no voluntary state-
ments made by assured and there is no intentional or fraudulent
suppression of material facts, or in case a printed slip is furnished
describing the property only in the most general terms, and the
insurers issue the policy upon their own examination, they cannot
after loss avail themselves of their own negligence in failing to
make proper inquiries, to defeat the policy.1 In other word-, if
there is no written application and no inquiries are made, concern-
16 Washington Mills Kmerv Man- Indiana.— Glens Falls Ins. Co. v.
ufacturing Co. v. Weymouth & Michael, 167 Ind. 659, 8 L.R.A.
Braintree Mutual Fire Ins. Co. 135 (N.S.) 708, 74 N. K. 964.
Mass. 503. Kansas. — Humble v. German Alli-
17 Dunbar v. Phoenix Ins. Co. 72 ance Ins. Co. 85 Kan. 140, 116 Pae.
Wis. 492, 40 N. W. 386, and eases 472, 40 Ins. L. J. 1783.
cited under preceding section. Massachusetts. — Commonwealth v.
18 Liberty Hall Assoc, v. Housa- Hide & Leather Ins. Co. 112 Mass.
tonic Mutual Fire Ins. Co. 7 Gray 136, 17 Am. Dec. 72 ; Hall v. People's
(73 Mass.) 261. Mutual Fire Ins. Co. 6 Gray (72
19 American Life Ins. Co. v. Ma- Mass.) 185.
hone, 56 Miss. 180. Michigan.— Kennedy v. London &
20Lorillard Fire Ins. Co. v. Mc- Lancashire Fire Ins. Co. 157 Mich.
Culloch, 21 Ohio St. 176, 8 Am. 411, 122 N. W. 1034; Gristock v.
Rep. 52, per the court. Royal Ins. Co. 87 Mich. 428, 49 N.
1 Colorado.— Connecticut Fire Ins. W. 634. aff'g 84 Mich. 161, 47 N. W.
Co. v. Colorado Leasing, Mining & 549; Hoose v. Prescott Ins. Co. 84
Milling Co. 50 Colo. 424, 116 Pac. Mich. 309, 11 L.R.A. 340, 47 N. W.
154, 46 Ins. L. J. 1717. 587; Baker v. Ohio Farmers' Ins.
3033
g L872 JOYCE OX INSURANCE
ing the alleged concealed matters, there must, in order to avoid
contract, be some intentional withholding of material facts which
good faith and fair dealing on the pari of assured requires him to
disclose.2 Although it is also held thai if there is no application the
assured is bound by the conditions of the policy upon his acceptance
of the same without objection.8 It is decided, however, in a federal
case thai where a policy required a disclosure on the part of the in-
sured, and did no1 require the insurer to make inquiry or to requesl
information, a waiver of this condition of the policy could not >e
presumed from the mere fact that the assured was not requested to
make disclosure, and no inquiry was made upon the subject.4
Sometimes the policy provides that unanswered questions shall be
construed in favor of the insurers.5
§ 1872. Same subject: distinctions to be observed. — In applying
the above rules it should be remembered that a distinction clearly
exists between an answer which is apparently on the face of the
application incomplete and imperfectly answered, and one which is
apparently complete, hut yet in fact incomplete, untrue, and cal-
culated to mislead and deceive by attempting, under the guise of a
full and complete answer, to partially or evasively state the fad in-
quired about, for if the answer purports to be complete, full, and
true, and the policy is issued on the facts thereof, it is avoided if
Co. (70 Mich.) 199, 14 Am. St. Rep. 50 Colo. 424, 116 Pac. 154, 40 Ins.
35, 8 N. YY. 216, 14 West. Rep. L. J. 1717.
1-38. 3 Swan v. Watertown Fire Ins. Co.
Minnesota. — Newman v. Spring- 90 Pa. 37, 10 Ins. L. J. 392.
field Fire & .Marine Ins. Co. 17 4 Waller v. Northern Assur. Co. 2
Minn. 123. McCrary (U. S. C. C.) 637, 10 Fed.
isylvania. — Western & Atlan- 232.
tie Pipe Lines v. Home Ins. Co. 145 5 Haley v. Dorchester .Mutual Fire
Pa. 346, 27 Am. St. Rep. 703, 22 Ins. Co. 12 Gray (78 Mass.) 545,
At! 665, 21 Ins. L. J. 24. See § based upon an application \
herein and cases provided thai "questions not
- ith CaroUna.-Pe\zev Manufac- swer«;d should be construed most fa,
turing C... v. Sun Fire Office (10 yorably to the risk. . . In his
\ or a n oi q t k g t? zro instruction to the .]urv, llunti
'J8 S. 0.213,15 8. E. 562 said. ..Th;|, ^ )ar ag ,
South Dakota.-U^on v. Mu- ^ ^ iyen fco tions in ,hl.
tual Cash (.uarantee Fire Ins Co. applieatioilj they migh1 , the
24 S. Dak. 285, 140 Am. St. Rep. (.,,lll)innv waived such answers, but
788, 1-3 N. W. S39. tlia.t the company musl have the ben-
Wisconsin. Johnson v. Scottish efit of the provision in the contract ;
Union & National Ins. Co. 93 Wis. that such provision, should be con-
223, 67 N. W. 416, 26 Ins. L. J. .,,,„.,] most favorably to the risk,
59. and that any material co
2 Connecticut Fire Ins. Co. v. Col- or concealment of a material fact
orado Leasing, Mining & Milling Co. would avoid the policy."
3034
CONCEALMENT IN OTHER THAN MARINE RISKS §§ 1873-1875
there be any substantial misstatement or omission.6 And within this
distinction exist cases of unusual or extraordinary circumstances of
peril to which the property is exposed, information concerning
which is withheld within the rule already stated.7
§ 1873. When subsequent reception of premium no waiver of con-
cealment.— If the fact concealed is material and the company can
not be charged with knowledge of its existence at the time, the fact
that the company accepts the premium cannot operate as a waiver
to bind the company.8
§ 1874. Concealment of same facts from other insurers. — The
assurer cannot show, as evidence in defense of an action against it,
that the assured has effected insurance in other companies by a con-
cealment of the same facts.9 And materiality of a concealment
of other insurance, upon a life risk, cannot be presumed from the
fact that such concealment was made by the applicant in applica-
tions to other companies.10
§ 1875. Other matters: code provisions, etc: general statements. —
"We have considered under this chapter the principle points involved
in decisions relating particularly to other than marine risks. As
to such other questions as may arise we refer to the code provisions
and general principles stated under the preceding chapter, having
in view the general rule that in this country the rule as to conceal-
ment in other risks is not so strict as in marine insurances ; and we
also refer to the numerous cases under the chapter on warranties
and representations hereinafter noted.11
6 Phoenix Life Ins. Co. v. R ad din, 9 People's Ins. Co. v. Spencer, 53
120 U. S. 183, 30 L. ed. 644, 7 Sup. Pa. St. 353, 91 Am. Dee. 217.
Ct. 500, per Gray, J. See § 1855 10 Penn Mutual Life Ins. Co. v.
herein; Moulor v. American Life Mechanics' Savings Bank & Trust
Ins. Co. Ill U. S. 335, 28 L. ed. Co. 38 L.R.A. 33, 72 Fed. 413, 19
447, 4 Sup. Ct. 46G; Cazenove v. C. C. A. 286. 37 U. S. App. 692. 73
British Equitable Assur. Co. 29 L. Fed. 653, 19 C. C. A. 316. 43 TT. S.
J. Com. P. N. S. 160, aff'g 6 Com. App. 75, 38 L.R.A. 70.
B. N. S. 437. n As to statutes, see § 1916 herein.
7 See § 1860 herein.
8 Allen v. Fire Ins. Co. 12 Vt.
366.
3035
CHAPTER LVI.
REPRESENTATIONS AND MISREPRESENTATIONS.
§ 1882. Representations: misrepresentations: distinction between repre-
sentations and warranties: generally.
§ 1883. Representations defined.
§ 1884. Misrepresentation defined.
§ 1885. Representation may be oral or written.
§ 1886. Representation precedes tbe contract.
§ 1887. Representation is collateral to but no part of the contract.
§ 188S. Same subject: the view that representations are a part of the
contract.
§ 1889. What weight should be given the theory that representations are
a part of the contract.
§ 1890. Statements which are part of contract may sometimes be repre-
sentations by express stipulation, or implied: construction.
§ 1891. When statements in application are representations: references
to application : generally.
§ 189:2. Test of materiality of representation : facts affecting risk or pre-
mium.
§ 1893. Representation only relates to material facts except it be other-
wise stipulated.
§ 1894. False representations in regard to material matters avoid contract.
§ 1894a. Same subject : presumptions.
§ 1895. Misrepresentations or false representations must- be of material
facts.
§ 1896. Same subject: where statement is intentionally false: effect of
the fraud as to materiality of fact to risk: burden of proof.
§ 18D0a. Material false representations vitiate binding' slip.
§ 1897. Where positive representation is false and material fraud need
not be proven.
$ 1898. Representation may be of facts actually material to the risk:
question for jury.
§ 1899. Representations may be of facts in no way material to the risk.
§ L900. Representation may be of facts intentionally false: when material.
§ L901. Positive statement of fact which assured does not know to be true.
§ 1902. Representations through mistake, ignorance, or negligence.
3036
REPRESENTATIONS AND MISREPRESENTATIONS
§ 1903. Cases qualifying the last rule.
§ 1904. Representations: expectation, belief, or opinion, without fraud.
§ 1905. False representations owing to fault, etc. of agent: knowledge
of agent: waiver and estoppel.
§ 1906. Statements founded on information from agent.
§ 1907. Positive statements founded on information derived from others.
§ 1908. Statements not positive based on information from others.
§ 1909. Positive statement defining time of commencement of risk.
§ 1910. Facts actually material but not relied on by insurer.
§ 1911. Matters of description or facts relating to property.
§ 1912. Facts rendered material by stipulation : statements stipulated to be
true and basis of contract.
§ 1913. Statement limited as to its effect by assured.
§ 1914. Facts stated in answer to inquiries.
§ 1914a. Same subject : presumptions : false answers.
§ 1914b. Same subject: where answer incomplete or inaccurate.
§ 1914c. Where no inquiries made.
§ 1914d. Statements in other applications.
§ 1914e. Adoption of original insured's representations by assignees on
renewal.
§ 1915. When the stipulated materiality of statements is qualified: war-
ranties thereby construed as representations.
§ 1915a. Qualified statements continued: best of assured's knowledge and
belief: other qualifications.
§ 1915b. Same subject: fidelity guaranty insurance.
§ 1916. Statements under statutory provisions.
§ 1917. Promissory representations : statement of proposition.
§ 1918. Opinions of text-writers as to promissory representations.
§ 1919. Same subject: cases and opinions.
§ 1920. Same subject: conclusion.
§ 1921. To what time the representation refers.
§ 1922. Representation falsified in the future does not operate retroactive-
iy.
§ 1923. Representations true when made, but untrue when contract com-
pleted.
§ 1924. Representation must be substantially true.
§ 1925. Loss need not be connected with misrepresentation to avoid the
contract.
§ 1926. Misrepresentations to other insurers.
§ 1927. Representation must not be evasive.
§ 1928. Statements volunteered and irrelevant: irresponsive answers.
§ 1929. Ambiguous or doubtful representations.
§ 1929a. Answer illegible or ambiguous in original application but plain
in attached copy.
3037
§ 18S2 JOYCE ON INSURANCE
§ 1030. Answers to ambiguous or doubtful questions.
§ 1931. Representations false as to part of properly: entire or severable
contract.
§ 1032. Representations of third parties: parties referred to.
§ 1033. Representations may be changed, modified, altered or withdrawn.
>j 1934. Construction of representation.
§ L934a. Construction of questions.
§ 1935. Rules as to representations apply to modification of contract.
§ 1882. Representations: misrepresentations: distinction between
representations and warranties: generally. — Thai a distinction ex-
ists as to their legal effed between representations and warranties
is unquestioned, for a representation is clearly distinguishable from
a warranty. The former is part of the proceedings which propose
a contract, while the latter is a part of the completed contract, either
expressly inserted therein or appearing therein by express reference
to statements expressly made a part thereof. The falsity of the
former may render the contract voidable for fraud; but a non-
compliance with the latter is an express breach of the contract.12
12 Arkansas. — Metropolitan Life ern Union Life Ins. Co. 58 Wash.
Ins. Co. v. Johnson, 105 Ark. 101, 100, 107 Pac. Slid.
150 S. W. 393, 42 Ins. L. J. 73, 76, There is a distinction between a
Hart, J.; National Annuity Assoc, v. warranty and representation; the
Carter, 96 Ark. 495, 132 S. W. 633, first being a part of the contract,
40 Ins. L. J. 495. and the latter only a part of the pro-
California. — Wheat on v. North posal: Wed v. New York Life Ins.
British Ins. Co. 76 Cal. 415, 9 Am. Co. 47 La. Ann. pt. 2, 1405, 17 So.
St. Rep. 216, 18 Pac. 758. 853. "A representation differs from
Delaware. — Baltimore Life Ins. an express warranty in this respect
Co. v. Floyd, 5 Boyce (28 Del.) 201, viz.: That the former does not, and
01 Atl. 653, s. c. 5 Boyce (28 Del.) the latter does, appear in the policy.
401, 94 Atl. 515. A statement which if collateral to
Illinois. — Spence v. Central Acci- the policy only amounts to a rep-
dent Ins. Co. 236 111. 444, 19 L.R.A. resentation, acquires the force of a
(N.S.) 88n, 86 N. E. 104, 38 Ins. warranty if inserted in the instru-
L. J. 87. ment:" McArthur on .Marine Ins.
Missouri. — Salts v. Prudential (ed. 1890) 5. "There is a material
Tn^. Co. 140 Mo. App. 142, 120 S. difference between a representation
W. 714. and a warranty; a warranty is al-
Montana.- Pelican V. .Mutual Life ways part of the written policy, and
I"-. Co. 1 1 Mont. 277, 119 Pac. 778, must appear upon the I it ; but
41 Ins. L. J. 327. a, representation is only a matter of
New York.- -Richards v. King, 57 collateral information on the subject
Mi--. 177, 107 X. Y. Supp. 720; Al- of the insurance, and makes no part
den v. Supreme Ten; Knights of of the policy. A warranty must be
Maccabees of the World, 79 N. Y. strictly and literally complied with;
S. 89, 78 App. Div. 18. but it is sufficient if a representation
Washington. — Hoelland v. West he substantially correct :" Ellis on
3038
REPRESENTATIONS AND MISREPRESENTATIONS § 1SS2
A distinction between representations and warranties also exists;
as to the materiality to the risk of the fact involved and the effecl
thereof;13 as to the requirement of only the substantial truth of
material representations,14 and the necessity that ;i warranty be
strictly true.15 In addition, consideration should be given to the
ofl'eel of eontrael stipulations or conditions under which a matter3
although made by terms a warranty, may be only a representa-
tion; 16 while other factors to be considered are that facts may be
rendered material by stipulation ; 17 or statements may by express
agreement become warranties;18 or it may be stipulated that the
statements are representations and not warranties or it may be
so implied from the language used; 19 or a warranty may be quali-
fied by other words in the contract ; 20 and in cases of doubt, con-
struction is against a warranty.1 But these distinctions are
nevertheless dependent upon the proviso that it is once ascertained
exactly what constitutes a representation and what a warranty.
When this point is reached the law is comparatively clear. But
there is a difficulty in formulating a certain positive rule which
shall determine what constitutes a representation and what a war-
ranty in a contract of insurance.2 In the consideration of this
question, the fact is important to be noted that while the contract
is evidenced by the policy, the application, plan, survey, and other
papers and documents may be expressly or otherwise made a part
of the policy, and it is not infrequently that a question arises as to
the sufficiency of a reference to other papers, etc. So again in
Fire and Life Ins. and Annuities pressly denominated in the policy as
(ed. 1834) pp. 18, *30; Hammond warranties, see note in 11 L.R.A.
on Fire Ins. (ed. 1840) 82. See also (N.S.) 981.
§§ 1886 et seq., 1947 et seq., 1956 13 As to representations see §§
et seq. herein. 1893 et seq. herein.
Fraud is the ground upon which 14 See § 1924 herein.
a contract is made void by a misrep- 15 See §§ 1970 et seq. herein,
resentation while noncompliance 16 See §§ 1890, 1891 herein and
with a warranty operates as an ex- compare §§ 1956 et seq. herein.
press breach of the contract. Owen " See § 1912 herein,
v. United States Surety Co. 38 Okla. 18 See §§ 1956 et seq. herein.
123, 131 Pac. 1091, 42 Ins. L. J. >9 See §§ 1890, 1891 herein.
1068. So it is declared that a mis- 20 See § 1965 herein,
representation avoids the policy on l See §§ 1949, 1950 herein, and see
the ground of fraud. Pelican v.' Mu- rule first stated under § 1891 here-
tuafLife Ins. Co. 44 Mont. 277, 119 in. The rules governing- construc-
Pae. 778, 4l Ins. L. J. 327. See tion given under §§ 219 et seq. here-
also Drakeford v. Supreme Con- in are also applicable,
clave, Knights of Damon, 61 S. Car. 2 Daniels v. Hudson River Fire
338. 39 S. E. 523. Ins. Co. 12 Cush. (66 Mass.) 416, 59
On when statements may be re- Am. Dec. 192, per Shaw, J.
garded as representation although ex-
3039
§ 1883 JOYCE ON INSURANCE
mutual companies and societies the charter, articles or association,
constitution, and by-laws are generally made a part of the con-
. a and the statutes of certain states contain express provisions
(.11 this subject.4 Another poinl should be considered, and that is,
that greal strictness has always prevailed in contracts of marine
insurance, and that between these risks and fire contracts a differ-
ence exists in the knowledge of facts upon which the respective
contracts are founded, especially where the agent examines the
properly or lire insurance maps are used. That also in life risks
the questions propounded are generally so framed as to specifically
cover all material points, and that some consideration must be
given to the fact that in matters relating to disease, sickness, and
the like the assured ordinarily has no special knowledge concern-
in- the human system or the vital organs, and again, at the present
time the life insurers rely largely, if not entirely, upon their own
medical advisers.5
§ 1883. Representations defined.— A representation is an oral or
written statement which precedes the contract of insurance, and
is no part thereof, unless it be otherwise stipulated, made by the
assured or his authorized agent to the underwriter or his authorized
3 Alabama.— Supreme Command- United States Life Ins. Co. 63 N.
ery Knights of the Golden Rule v. Y. 404; Fitch v. American Popular
Ainsworth, 71 Ala. 430, 4G Am. Rep. Life Ins. Co. 59 N. Y. 557, 17 Am.
332. Rep. 372, rev'g 2 T. & C. 247.
Connecticut. — Kelsey v. Universal North Carolina.— Delias v. Equi-
Life Ins. Co. 35 Conn. 225, 236. table Life Assur. Soc. 166 N. Car.
Da^jta.— Clevenger v. Mutual 55, 81 S. E. 1014, following Cuth-
Life Ins. Co. 2 Dak. 114, 3 N. W. bertson v. North Carolina Home Ins.
313. Co. 96 N. Car. 400, 2 S. E. 258. See
7//,„o/s.— Peckham v. Modern also Babbitt v. Liverpool & Lon-
W linen of America, 151 111. App. don Globe Ins. Co. 66 N. Car. 70, 8
g5. Am. Rep. 494.
Indiana. — Bauer v. Sampson For full discussion of what is pari
Lodge Knights of Pythias, 102 Ind. of the policy, see chap. VII. §§ 185
262, 1 N. E. 571 ; Phoenix Ins. Co. v. et seq. herein.
Benton, 87 Ind. 132. * White v. Connecticut Mutual
Iowa.— Simeral v. Dubuque Mu- Life Ins. Co. 4 Dill. (U. S. C. C.)
tual Fire Co. is [owa, 319, 322. 177, Fed. Cas. No. 17,545. See §§
Maryland. Maryland Fire Ins. 190 et seq., 1916, herein.
Co. v. Whiteford, 31 M<1. 219. 5 Campbell v. Merchants' & Farm-
Massachusetts.— Kimball v. iEtna ers' Mutual Fire Ins. Co. 37 N. H.
Ins. Co. 9 Allen (91 Mass.) 540, 85 41, 72 Am. Dee. 324, per Eastman,
Am Dec. 786. J.; Horn v. Amicable Mutual Life
New Jersey.— Miller v. Hills- Ins. Co. 64 Barb. (N. Y.) 81; and
borough Mutual Eire Assurance § 206 herein, where both the above
Assoc. 42 N. J. Eq. 159, 7 Atl. 895. cases are noted. See also the chap-
New York. Dwighl v. Germania ter on particular representations and
l.i ■ Ins. Co. 103 N. Y. 341, 57 Am. warranties, §§ 1987 et seq. herein.
Rep. 729, 8 N. E. 654; Cushman v.
3040
REPRESENTATIONS AN!) MISREPRESENTATIONS § 1884
agent, and relate.- to facts necessary to enable the underwriter to
form his judgment whether he will accept the risk and at what
premium.6
§ 1884. Misrepresentation defined. — A misrepresentation in in-
surance is an oral or written statement made by the assured or his
authorized agent to the underwriter or his authorized agenl of
something as a fact which is untrue, is known to be untrue, and is
stated with intent to mislead or deceive, or which is stated positively
as true without its being known to be true, and which has a ten-
dency to mislead, such statement relating in both eases to ma-
terial tacts.7
6Buford v. New York Life Ins. and is a communication of facts and
Co. 5 Or. 334; Alabama Gold Life circumstances relative to the insur-
Ins. Co. v. Johnston, SO Ala. 467, ance made to the underwriters, with
59 Am. Rep. 816, 2 So. 125; Met- a view to enable them to estimate
ropolitan Life Ins. Co. v. Goodman, the risk and calculate "the premium
10 Ala. App. 446, 65 So. 449; iEtna to be paid. A representation is said
Ins. Co. v. Simmons, 49 Neb. 811, to be material when it communicates
69 N. W. 125; Moore v. Prudential any fact or circumstance that may
Casualty Co. 156 N. Y. Supp. 892, be reasonably supposed to influence
170 App. Div. 849, 47 Ins. L. J. 313, the judgment of the underwriters in
315, Woodward. J.; Kasprzyk v. undertaking the risk or calculating
Metropolitan Life Ins. Co. 79 Misc. the premium, and whatever may be
263, 140 N. Y. Supp. 211, 42 Ins. the form of expression used by the
L. J. 607; Higbee v. Guardian Life insured or his agent in making a rep-
Ins. Co. 66 Barb. (N. Y.) 462, aff'd resentation, if it have the effect of
53 N. Y. 603; Livingston v. Mary- imposing upon or misleading the un-
hand Ins. Co. 7 Cranch (11 U. S.) derwriter, it will be material and fa-
506, 3 L. ed. 421, and cases under tal to the contract:" Ellis on Fire
section next following. and Life Insurance and Annuities
"A representation," in the techni- (ed. 1834) pp. 18, *29.
cal sense which the word bears to the To constitute a representation (in
law of insurance, is an oral or writ- making insurance), there should be
ten statement made by the assured an affirmation or denial of some
or his agent at the time of effecting fact, or an allegation which would
the insurance, whereby the under- plainly lead the mind to the same
writer is more readily induced to en- conclusion. Livingston v. Maryland
ter into the contract than he would Ins. Co. 7 Cranch (11 U. S.) 506,
otherwise have been :" McArthur on 3 L. ed. 421. Cited in Nicoll v.
Marine Ins. (ed. 1890) 5, citing Wil- American Ins. Co. 3 Woodb. & M.
Hams, J., in Behn v. Burness, 32 L. 529, 536, Fed. Cas. No. 10,259: Al-
ii. Q. B. 204, 205, 6 Eng. Rul. Cas. legre v. Maryland Ins. Co. 2 Gill &
492; Arnould on Marine Ins. (6th J. 136, 159, 160, 20 Am. Dec. 4:24 ;
ed.) 514; Marshall on Ins. (4th ed.) Marshall v. Columbian Mutual Fire
345. Ins. Co. 27 X. H. 157, 166.
Be presentation, defined: when ma- "Representations" and "state-
terial: "A representation in insur- ments" synonymous. McClain v.
ance is in the nature of a collateral Provident Sav. Life Assur. Soc. 110
contract, cither by writing not in- Fed. 80, 88, 49 C. C. A. 31.
serted in the policy or by parol, 7 Daniels v. Hudson River Fire
Joyce Ins. Vol. III.— 191. 3041
§§ 1S85-1887 JOYCE ON INSURANCE
§ 1885. Representation may be oral or written. — A representa-
tioD inM\ be oral or written, made by the assured or his agent, but
is ool written on the face of the policy.8 Warranties are not
favored by construction; they should be express. The fact thai a
statement is not written on the policy itself would, in the absence
of some stipulation evidencing the contrary, show an intent to
have such statemenl considered a representation.9
§ 1886. Representation precedes the contract. — A representation
precedes the contract, being an inducement to it. It is a statement
made to the insurer, before the subscription of the policy or its
completion, with reference to the proposed contract and as part of
the preliminary proceedings.10
§ 1887. Representation is collateral to but no part of the con-
tract.— A representation is not per se of the essence of the contract,
but is merely collateral to it. It is a preliminary statement of
material facts or circumstances relating to the proposed adventure,
Ins. Co. 12 Cush. (66 Mass.) 416, Co. v. Protection Ins. Co. 21 Conn.
59 Am. Dec. L92; Clark v. Union 19,54 Am. Dec 309.
I ire In-. Co. tO N. 11. 333, Da&ota.^-Waterbury v. Dakota
77 Am. Dec 721. Sei cases through- Fire & Marine Ins. Co. 6 Dak. 408,
out this chapti 43 X. \Y. 697.
8 Vandervoort v. Smith. 2 Caines Illinois. Spence v. Central Acci-
(N. V.i L55, per Thompson, .1.; dent Insi Co. 236 111. 444, 19 L.R.A.
Li ingston v. Delafield, 1 Johns. (N. (N.S.) 88n, 86 N. E. 104, 38 Ins.
523, s. c. 3 Caines (N. Y.) 40; L. J. 8.
Hartford Protection Ins. Co. v. Har- Montana. — Pelican v. Mutual Life
. 2 Ohio St. 452, 59 Am. Dec. Ins. Co. of N. Y. 44 Mont. 277. 119
Pawson v. Watson, Cowp. 788, Pac. 778. 11 Ins. L. J. 327 (appli-
L3 Eng. Etui. Cas. 540; Pawson v. cation recited that statements were
Barnevelt, 1 Doug. 12, n. 4; Cal. Civ. offered as an inducement to the con-
Code, sec. 2571. See § 1888 herein, tract).
As to policy issued without writ- New Jersey. — Dewees v. Manhat-
ten application or on oral applica- tan Ins. Co. 34 N. J. L. 244.
tion and effect of absence of inquiry, New I ork. — Vandervoort v.
etc. see § 1871 herein. Smith, 2 Caines (N. V.) 155, per
9 As to construction (representa- Thompson, J.; Higbee v. Guardian
;) see §§ L930, 1934 herein; Mutual Life Ins. Co. till Barb. (N.
(warranties) 149 el seq. here- Y.) 462, aff'd 53 N. V. 603.
in. Ohio. — Hartford Protection Ins.
"> Alabama.— Alabama Gold Life Co. v. Harmer, 2 Ohio St. 452, 59
[ns. Co. v. Johnston, 80 Ala. 167, 59 Am. Dec. 684.
Am. Rep. 816, 2 So. 125. Oregon.— Buford v. New York
Arkansas. — National Annuity Life Ins. Co. 5 Or. 334.
Assoc, v. Carter, 96 Ark. 495, 132 See Metropolitan Life Ins. Co. v.
s. W. 633, Hi [ns. L. J. 205. ason, 105 Ark. 101, 150 S. W.
California.— Wheaton v. North 393, 42 Ins. L. J. 73 ; Cal. Civ. I
British [ns. I Cal. 415, 9 Am. sec. 2572. As to other statuti
St. Rep. 216, 18 I § 1916 herein.
Con , -Glendale Woolen
3042
REPRESENTATIONS AND MISREPRESENTATIONS § 1S87
and made for the information of the assurer, such statements being
ti i her proposed by the assured or made in answer to questions by
the assurer, the purpose of which is to enable the hitter to form a
just estimate of the risk and to determine whether he will accept
or reject the same, and whal premium lie will charge it' he accepts.11
A representation is not necessarily a part of the contract, but is an
inducement thereto,12 and if neither the policy nor application
11 Alabama. — Metropolitan Life 155, per Thompson, J.; Richards v.
King, ~u Misc. L77, L01 X. Y. Supp.
720.
Oklahoma. — Mutual Life Ins. Co.
Ins. Co. v. Goodman, 10 Ala. App.
446, 65 So. 449; Alabama Gold Life
Ins. Co. v. Johnston, 80 Ala. 467,
59 Am. Rep. 816, 2 So. 125; per of N. Y. v. Morgan, 39 Okla. 205,
Somerville, J.
Arkansas. — National Annuity
Assoc, v. Carter, 96 Ark. 495, 132 S.
W. 633, 40 Ins. L. J. 205.
135 Pac. 279.
Oregon. — Buford v. New York
Life Ins. Co. 5 Or. 334.
Pennsylvania. — Lycoming Ins. Co.
ecticut. — Glendale Woolen v. Mitchell, 48 Pa. St. 367.
Co. v. Protection Ins. Co. 21 Conn.
19, 54 Am. Dec. 309.
Delaware. — Baltimore Life Ins.
Co. v. Floyd, 5 Boyce (28 Del.) 201,
91 Atl. 653, s. c. 5 Boyce (28 Del.)
401, 94 Atl. 515.
Illinois. — Spence v. Central Acci-
Texas. — Goddard v. East Texas
Fire Ins. Co. 67 Tex. 69, 60 Am.
Rep. 1, 1 S. W. 900.
England. — Joel v. Law Union &
Crown Ins. Co. [1908] 2 K. B. L.
R. 899; Pawson v. Watson, Cowp.
785, 13 Eng. Rul. Cas. 540, per
dent Ins. Co. 236 111. 444. 19 L.R.A. Lord Mansfield; Bize v. Fletcher,
(N.S.) 88n, 86 N. E. 104, 38 Ins.
L. J. 87; Mutual Benefit Life Ins. Co.
v. Robertson, 59 111. 123, 14 Am.
Rep. 8.
1 Doug. 271, per Lord Mansfield;
Simond v. Boydell, 1 Doug. 208, 271,
per Lord Mansfield. •
12 Weil v. New York Life Ins. Co.
Indiana.— Catholic Order of For- 47 La. Ann. pt. 2, 1405, 17 So. 853;
esters v. Collins, 51 Ind. App. 285, Spence v. Central Accident Ins. Co.
99 X. E. 745, 42 Ins. L. J. 82. 236 111. 444, 19 L.R.A. (N.S.) 88n,
Kentucky.— Kentucky & Louis- 89 N. E. 104, 38 Ins. L. J. 87, and
ville Mutual Ins. Co. v. Southard, 8 cases cited in last preceding note.
B- Mon. (Ky.) 634. "A representation precedes the
Maine. — Williams v. New England contract of insurance, and is no part
.Mutual Fire Ins. Co. 31 Me. 219. of it." "A warranty is a part of
Maryland. — Supreme Council the contract, and must be exactly
Royal Arcanum v. Brashears, 89 Md. and literally fulfilled. ... A
624, 73 Am. St. Rep. 624, 43 Atl.
866.
Massachusetts. — Campbell v. New
England Mutual Life Ins. Co.
Mass. 381.
warranty is a binding agreement
that the facts stated are true. The
assured by his warranty engages that
whatever may he the condition of
things when he makes his applica-
Montana. — Pelican v. Mutual Life tion, the facts shall be as warranted
Ins. Co. of N. Y. 44 Mont. 277, 119 when the policy attaches." Flanders
Pac. 778. 41 Ins. L. J. 327.
New York. — Higbee v. Guardian
Mutual Life Ins. Co. 66 Barb. (N.
Y.) 462, aff'd 53 N. Y. 603; Van-
dervoort v. Smith, 3 Caines (N. Y.
on Fire Ins. (2d ed.) 222. 220. 227.
On what reference in policj to ap-
plication will make it part of policy,
see notes in 19 L.R.A. (N.S.) 88, 33
L.R.A.(N.S.) 676.
3043
§ 1888 JOYCE ON INSURANCE
stipulates thai the answers are made warranties, or are in effect
made warranties, they are representations, as a general rule13 A
reference to an annexed paper is not sufficient in itself to
make it a part of the contract and the statements therein war-
ranties.14 So if there are no words to indicate that the parties
intended thai the statements in the application should be con-
sidered other than representations, they will be so held15 It is
held, however, thai in actions on life policies the application and
policy arc to l»e construed together as one instrument.16 So
representations in the application for a policy which provide for
the avoidance thereof if such representations are false or insuf-
ficient should be considered as part of the contract, to the same
effeel as if they were recited and set forth at large in the policy.17
In case of mutual benefit and like societies doing an insur-
ance business, the courts are inclined to construe the statements
in the application as representations, even though it be therein
provided that they shall be held warranties; although if they are
incorporated in the policy and stipulated to be warranties, it would
be otherwise.18
§ 1888. Same subject: the view that representations are a part
of the contract. — Although the law as stated under the last section
seems to be settled by a long course of judicial decisions both in
England and this country, nevertheless Mr. Duer advance- the
proposition that a positive representation is not collateral to, but
is actually a part of, the contract to which it relates. The object of
his discussion, for he enters into an exhaustive argument in sup-
port of the proposition, is to prove that the substantial truth of the
representation is a condition precedent to the right of the assured
lsCushman v. United States Life §§ 1891 et seq., 1912, 1957 et seq.
[ns. Co. ! Hun (N. Y.) 783. herein.
14 Wall v. Howard [ns. Co. 14 "Illinois Masons' Benevolent Soc.
Barb. (N. Y.) 383; Cumberland Val- v. Winthrop, 85 111. 537; Grossman
Mutual Protection Co. v. v. Supreme Lodge, 16 X. Y. Civ.
Mitchell, is Pa. St. 374. Proc. 215, 22 N. V. St. Rep. 522,
"Campbell v. New England Life 5 X. Y. Supp. L22; Clapp v. Ma-
ins. Co. 98 Mass. 381. tual Benefit Assn. lit; Mass. 519, L6
16 Studwell v. Mutual Benefit Life N. E. 133; Presbyterian Mutual
Assoc, of America, L9 X. Y. Supp. Assur. Fund v. Allen, L06 lml. 593,
709, iil X. Y. Super. Ct. 287. 7 N. E. 317. Soc Co-operative Life
On conflict of laws as to necessity Assoc, v. Leflore, ">,'} Miss. 1; and §
of attaching application or cony ism herein.
thereof to policy, see notes in 03 On when statements may be re-
L.R.A. 867; 23 L.R.A.(N.S.) 982; garded as representations, although
and 52 L.R.A. | X.S. i 285. expressly denominated in polic\ as
nHoughton v. Manufacturers' warranties, see note in 11 L.R.A.
Mutual Fire Ins. Co. 8 Met. (49 ( X.S.) 981.
Mass.) 111. M Am. Dec. -ISO. See
3044
REPRESENTATIONS AND MISREPRESENTATIONS § 1S88
to recover; that the question of constructive fraud is eliminated
where the representation is nol substantially true, and the avoid-
ance of the policy in such case rests alone upon a breach "I* the
contract.19 This idea is perhaps in line with the suggestion by
Mr. Ellis that a "representation in insurance is in the nature of a
collateral contract."20 The proposition also derives some support
from a Massachusetts marine case, whore it is held thai a positive
representation is as essentially a part of the contracl as a warranty,
and must be literally true, otherwise the underwriter is qoI bound.
In this case the representation was that the ship had arrived safe
and was clear of her cargo, when in fact she was entering the
harbor, was grounded upon the bar. and sustained injuries.1 And
it is also bold in another case that the description of property in
an application for insurance is, strictly speaking, a part of the
contract only so far as it defines the subject matter.2 And Chan-
cellor Kent is evidently in accord with the proposition, al leasl
to the extent of asserting that in the absence of actual fraud there
is no other fraud than exists in every case where a party relies on
a promise that is unfulfilled.3 In cases of actual fraud, however,
Mr. Duer himself admits that a representation is a collateral state-
ment and no part of the agreement, and considers that whatever
fallacy exists is in cases of constructive fraud.4 But if the mis-
representation be of facts, inasmuch as insurance is a contract
uberrimae fidei, such misrepresentation must be deemed equivalent
to fraud.5 Mr. Phillips objects to the "anomalous application of
the technical terms 'fraud' and 'fraudulent' to many of the mis-
representations" held to defeat the policy, and says the subject is
one of implied stipulation, or rather rests upon the ground of an
implied condition that there is no misrepresentation in analogy
with implied warranties, such as seaworthiness, etc.6 Mr. Arnould
considers somewhat at length Mr. Duer"s proposition, but con-
19 2 Duer on Marine Ins. (ed. 188, 40 Am. Dec. 345, per Bron-
1846) 644 et seq., 738 et seq., 766 et son, J.
sen 2 Howard Fire Ins. Co. v. Brunei',
20 Ellis on Life and Fire Ins. 29, 23 Pa. St. 50.
cited in Alston v. Mechanics' Mu- 8 3 Kent's Commentaries (5th ed.)
tual Ins. Co. 4 Hill (N. Y.) 329, 334, 282.
per Walworth, Ch. 4 See substance of Mr. Duer's ar-
1 Sawyer v. Coasters Mutual In*, gument noted above. See Cornfool
Co. 6 Gray (72 .Mass.) 221, per v. Fowke, 6 Mees. & W. 37S. per
Metcalf, J. See also Bryant v. Lord Abinger.
Ocean Ins. Co. 22 Pick. (39 Mass.) 5 Elkin v. Jansen, 13 Mees. & W.
200; Kimball v. iEtna Ins. Co. 9 655, 659, 14 L. J. Ex. 201. per
Allen (91 Mass.) 540, 85 Am. Dec. Baron Burke.
786; Burritt v. Saratoga County 61 Phillips on Ins. (3d ed.) 287,
Mutual Fire Ins. Co. 5 Hill (N. Y.) sec. 537.
3045
389, 1890 JOYCE ON [NSURANCB
cludea thai it is not in accord with the cases, and that whether
legal fraud, actual or constructive, or a virtual breach of contract
be taken to be the ground on which misrepresentation avoids the
contract, parol evidence is equally admissible of representations
,;! the time of effecting the policy to merely control or explain
written contract whenever they are not inconsistent therewith.7
§ 1889. What weight should be given the theory that representa-
tions are a part of the contract. — We have seen that a representa-
tion precedes the contract, is preliminary to its completion or
subscription, and is of a material fact, and one which operates as
hi inducement to the risk, and upon which the underwriter bases
bis judgmenl in accepting or rejecting, the same and fixing the
premium. The contract of insurance is peculiarly one of the
utmost good faith, especially in marine risks, and it is an implied
condition that the good faith required shall be strictly observed in
all negotiations and representations materially affecting the con-
tract. A representation materially untrue or false, or actually
fraudulent, is a breach of the condition on which the contract is
b ised, and therefore necessarily vitiates the contract. It is difficult
to conceive of a rule which shall make a representation, or rather
:i collateral agreement, not expressly or impliedly embodied in said
contracl a pari thereof so as to bind the insured by a breach
1 hereof the same as if it were embodied therein, when the ver\
purpose of reducing the contract to writing is to have some certain
evidence of what the exact agreement is between the parties. To
admit evidence that the contract was induced by fraud, misrepre-
sentation, or deceit or evidence of the terms of the representations
when they do not contradict or materially vary the express terms
of the writing, is not inconsistent with legal principles, and is a
safe rule sanctioned by a long course of judicial decisions.8 Some
liscussion has arisen in regard to the validity or existence of an
oral promissory representation, and the words of the court in a
New York case are pertinent in this connection, and will be noted
under the consideration of the question of promissory representa-
tion-.9
§ 1890. Statements which are part of contract may sometimes be
representations by express stipulation, or implied: construction. —
Although a representation is not generally written in or made a
71 Arimuld on Marine Ins. (Per- J. L. 17, 20 Atl. 873. See also
kins' ed. L850) .",110 et seq., '496 et cases cited under § 1881 herein.
U. (Dili ed. Hart & Simey) see. 9 Alston v. Mechanics' Mutual Ins.
535, p. 698. Co. 4 Hill (N. Y.) 329, 334, per
8 See McVey v. Grand Lodge An- Chancellor Walworth,
cient Order United Workmen, 53 N.
3040
REPRESENTATIONS AND MISREPRESENTATIONS § 1890
part of the contract, yet the rule does not preclude the insertion
of statements of matters relating to the risk in the policy, under
an express stipulation that they are nol to be deemed warranties.
So if it appears from the whole policy thai the statements are qo1
intended as warranties, they will not be so held.10 And if ii is
stipulated thai the statements shall be deemed representations and
not warranties they will be so construed where such is the intent
of the parties or where there is any uncertainty as to the mean-
ing by reason of the language of the entire contract.11 So it may
be provided that in the absence of fraud all statements shall be
representations and not warranties, that the entire contrad is
contained in the policy and that no such statement shall con-
stitute a defense or avoid the policy unless contained in the applica-
tion and unless a copy of said application be attached to or
endorsed upon the policy, in which case fraud musl be shown to
avoid the contract and such representations need be only sub-
stantially true in so far as material to the risk, which question is
one for the jury.12 Again under a like stipulation if material fact-
are not fraudulently concealed statements substantially true as to
•applicant's physical condition, etc., do not avoid the contract.13
And where the stipulation is that the answers are to be deemed rep-
resentations and not warranties the materiality of the statement- is
important as are also the good faith of the applicant in answering
questions and of insurer's agent in writing them down, and the
question of insured's good faith is one for the jury.14
The question whether a statement is a representation merely or
a warranty is dependent largely upon the form of expression and
the apparent purpose of the statement, with a tendency on the part
of courts to favor a construction that they are representations in
cases of doubt.15 It is also held that within the class of cases under
10 National Bank of D. 0. Mills & failure to attach copy of application
Co. v. Union Ins. Co. 88 Cal. 497, to policy as affecting right of insurer
22 Am. St. Rep. 324, 26 Pac. 509 ; to rely on representations or -warran-
Baltimore Life Ins. Co. v. Floyd, 5 ties incorporated in the policy itself,
Boyce (28 Del.) 201, 91 Atl. 653, see note in 19 L.R.A.(N.S.) 102.
s. c. 5 Boyce (28 Del.) 401, 94 Atl. 13 Citizens National Life Ins. Co.
515. v. Swords, 109 Miss. 635, 68 So.
11 Pelican v. Mutual Life Ins. Co. 920.
of N. Y. 44 Mont. 277, 119 Pac. 778, 14 Suravitz v. Prudential Ins. Co.
41 Ins. L. J. 327. of America, 244 Pa. 582, L.R.A.
12 Prudential Ins. Co. of America 1915A, 273, 91 Atl. 495.
v. Sellers, 54 Ind. App. 326, 102 On effect of agent's insertion in
N. E. 894, 42 Ins. L. J. 1692. the application of false answers to
On what must he attached in or- questions correctly answered by the
der to satisfy requirement that "ap- insured, see notes in 4 L.R.A. | X.S. i
plication'' be attached to policy, see 607, and L.R.A. 1915A. 273.
note in IS L.R.A.(N.S.) 1190; on "Alabama Gold Life Ins. Co. v.
3047
§ 1890 JOYCE ON [NSURANCE
consideration are those where it may be clearly implied from the
language used thai the parties intended-to stipulate thai the stater
ments should not be deemed warranties. Accordingly, an agree-
nirin thai the application contains a full and true exposition of the
- as to the situation, value, and risk of the property, so far as
known to the assured, mus1 be construed in favor of a representa-
tion.16 So a representation may be implied from the words used in
the policy ; as where by the terms of the policy the adventure was to
begin from the loading, and the risk was al and from a uamed
port, it was held thai the words were qo1 a warranty to load a1
the designated port, bu1 a representation as to a materia] fact,
which being untrue avoided the contract.17 And in a voyage policy
the legal import of the words "al and from the loading of the goods
on board" is thai the goods must be loaded at the port of departure
specified.18 So in a policy upon thirty-six mules, the words "all
contained in the two-story framed barn (36 by 100 ft.) situate on
sec. No. 19," etc., are held to be merely matter of description and
not a warranty;19 The word- "clerk sleeps in the store"' in an
application for insurance, copied into the policy, are a mere de-
scription and not a warranty.20
Statements may also be qualified by the stipulation "to the besl
of his knowledge and belief," 1 or by the statement that the answers
made a part of the contract are "as nearly correct as the assured
could remember."2 So an express warranty may he qualified
by the words of the application, "material to the risk," so as to
make the statements so far representations as to necessitate their
being "'material" to avoid the policy.3 And the warranty is quali-
Johnston, 80 Ala. 467, 59 Am. Rep. 19 Holbrook v. St. Paul Fire &
816, 2 So. L25; Reid v. Harvey, 4 Marine Ins. Co. 25 Minn. 229.
Dow, 97, l(i R. R. 38. See § 1891 20 Frisbie v. Fayette Mutual Ins.
herein. Co. 27 Pa. St. 325.
16 Fisher v. Crescent Ins. Co. 33 x Clapp v. Massachusetts Benefit
Fed. 549 (annotated case). See also Assoc. 146 Mass. 519, 16 N. E. 433;
MullviHe v. Adams, 19 Fed. 887; Washington Life Ins. Co. v. Haney,
Redman v. Bartford Fire Ins. Co. 10 Kan. 525. See §§ 1913, L915
47 Wis. 89, 32 Am. Pop. 751, 1 N. herein.
W. 393; Wilkins v. German ia Fire On effect of qualifying statements
Ins. Co. 57 Iowa, 529, 10 N. W. or warranties by words "to best of
916. my knowledge and belief," or words
17 Hodgson v. Richardson, 1 of like import, see note in 43 L.R.A.
Black, 463. (N.S.) 431.
18 Spit ta v. Woodman, 2 Taunt. 2JEtna Life Ins. Co. v. France.
416, 13 Eng. Bui. Cas. 569; Hor- 4 Otto (94 U. S.) 561, 24 L. ed.
never v. Lushington, 1"> East, 46, 28*.
13 Eng. Pul. Cas. 637. See Non- 3 Waterburv v. Dakota Fire Ins.
nen v. Kettlewell, 16 East, 176. Co. 6 Dak. 468, 43 N. W. 697. See
§ 1965 herein.
3048
REPRESENTATIONS AND MISREPRESENTATK >NS § 1890
fied so as to apply only to the risk and value where the words are
used, "the foregoing is a correct description, correct as to risk and
value." 4 So the rule applies where the word- used arc. "we believe
the above particulars and statements arc true."' since the whole con-
strued together shows the intent to make the statements representa-
tions and not warranties.5
Statements in an application not required by the policy are
representations when not descriptive of the property, even though
the application is expressly referred to in the policy as a part
thereof;6 and a fact, quality, or circumstance specified in the pol-
icy may relate to the risk, or may be used for the purpose of
identifying the subject matter. In the former case it will be a
warranty;7 but if facts are stated merely by way of recital or
mere description, or for the purpose of identifying the subjed
matter, and do not relate to the risk, they are representations.8
So a statement as to occupancy may be only by way of description,
and not a continuing warranty.9 And where a policy is upon
four ice-boats to be towed by a certain steamer or some other good
boat equal thereto, there is no implied warranty that the tow-
boat is of sufficient capacity to manage the four ice-boats.10
Statements of belief or expectation or information, though in
writing in the policy, are representations merely.. A representa-
tion-of an expectation is not the same as the positive representa-
tion of an existing fact, and even though the latter might be in
the nature of a warranty, the former does not become a warranty.11
So the words in the margin of the policy that the ship was "ex-
pected to sail" on a specified date, made in good faith, amounts
only to a representation of the belief or expectation of the assured,
and not a warranty that she will sail on the date named.12
Inasmuch as within the class of cases properly noted under
4 Lindsay v. Union Mutual Fire 10 Merchants' Ins. Co. v. Algeo,
Ins. Co. 3 R, I. 157. See § 1965 31 Pa. St. 446.
herejn n Herriek v. Union Mutual Fire
MVheelton v. Hardesty, 27 L. J. Ins. Co. 48 Me. 558, 77 Am. Dee.
Q. B. 241, 5 Jur. N. S. 14, 8 El. & 244. See § 1904 herein.
gj 030 12 Rice v. New England Ins. Co.
6 Hartford Protection Ins. Co. v. 4 Pick. (21 Mass.) 439. See Baxter
Harmer, 2 Ohio St. 452, 59 Am. v. New England Ins. Co. 3 Mason
Dec G84 (F. S. C. C.) 96, Fed. Cas. No.
7 Wood v. Hartford Fire Ins. Co. 1127, and see as to marginal ref-
13 Conn. 533, 35 Am. Dec. 92. erence, Kenyon v. Berthon, 1 Doug.
8Schultz v. Merchants' Ins. Co. 12n; Wood v. Hartford Fire Ins.
57 Mo. 331. " Co- 13 Conn. '533, 35 Am. Dec 92;
9 Burlington Ins. Co. v. Brockway, Co-operative Life Assoc, v. Leflore,
138 111. 644, 28 N. E. 799. 53 Miss. 1.
3049
§ 1801 JOYCE ON [NS1 RANGE
this section are those contracts wherein the qui stion arises whether
pulation i- a representation or a warranty, it may be stated
that the determination of this poinl rests upon the intention of
the parties, the presumption, however, being in favor of con-
struing stipulations as representations, in cases of doubt. But
if the words used show a clear purpose to make the statements of
the assured of the same force as warranties, or in effect warranties,
then courts musl be governed by the contract which the parties
made for themselves, otherwise if there is room for con-
struction the stipulation will not be held to bind the assured by
the rigid rules of a warranty.13
§ 1891. When statements in application are representations:
reference to application: generally.14 — The general rule is that a
statement in an application is a representation, rather than a war-
ranty, unless made a warranty by express terms or otherwise so
clearly referred to as to become a part of the contract and neces-
sitate such a construction, or unless the language used in the
contract clearly and unequivocally evidences the intent that it
should be construed as a warranty.15
13 Wood v. Hartford Fire Ins. Co. Ark. 471, 33 L.R.A.(N.S-) 676, 117
13 Conn. 533, 544, 35 Am. Dec. 92. S. W. 537, 38 Ins. L. J. 722. 729.
See s' 1891 herein. Delaware. — Baltimore Life Ins.
14 When statements in application Co. v. Floyd, 5 Boyee (28 Del. I 201,
are warranties, see §§ 1957 et seq. 91 Atl. 653, s. c. 5 Boyce (28 Del.)
herein. 431, 94 Atl. 515.
As to misrepresentations and stat- Illinois. — Spence v. Central Acci-
utes, see § 1916 herein. dent Ins. Co. 236 111. 444, 19 L.RA.
As to particular representations (N.S.) 88n, 86 X. E. 104, 38 Ins.
and warranties, see §§ 1987-2112 L. J. 87. See also Weisguth v. Su-
herein preme Tribe of Ben Hur, 272 111.
^United States.— Columbia Ins. 541, 112 N. E. 350, aff g 194 111. App.
Co. v. Lawrence, 10 Pet. (35 U. S.) 17.
507, 9 L. ed. 512; Columbian Ins. Co. Indiana.— Presbyterian Assurance
v. Lawrence, 2 Pet. (27 U. S.) 25, Fund v. Allen, 106 Ind. 593, i X. E.
47, 7 L. ed. 335; Missouri K. & T. 317.
Trust Co. v. German National Bank, Massachusetts.— Daniels v. Hud-
77 Fed. 117, 23 C. C. A. 65, 40 U. son River Fire Ins. Co. 12 Cush. (66
S. App. 710. .Mass.) 416, 59 Am. Dec. 192.
Alabama. Kelly v. Life Ins. Minnesota. — Price v. Phoenix Mu-
chaim- Co. 113* Ala. 153, 21 So. tual Life Ins. Co. 17 Minn. 497, 10
361, 26 In-. L. J. 892 (the opinion Am. Rep. 166.
by Haralson, J., and cases cited "Nebraska. — Modern Woodmen Ac-
therein, sustains the text, although cident Assoc, v. Shryock. 54 Neb.
in this case it appeared that a war- 250, 39 L.RA. 826, 74 X. W. 607,
ranty was created by the words 27 Ins. L. J. 772.
used). New Hampshire. — Boardman v.
Irkansas. — Title Guaranty & New Hampshire Mutual Fire Ins.
Suretv Co. v. Bank of Fulton, 89 Co. 20 N. H. 551.
3050
REPRESENTATIONS AND MISREPRESENTATIONS § 1891
Answers to questions in an application for insurance are there-
fore to be construed as representations, as to which substantial
truth in everything material to the risk is all that is required of
the applicant; unless clearly shown by the form of the contract to
have been intended as warranties.16 So statements by an applicanl
for life insurance which by the terms of the policy are made pari
of the contract with the insurance company, arc not to be regarded
as warranties, unless the policy upon its face plainly declares that
they shall be treated as such.17 And if the policy contains no
warranty of the truth of the statements in the application, and
the latter is not made a part of the policy, the statements, or
some of them, must be both material and untrue to defeat a re-
covery.18
There must be something more than a mere reference to the
application to make representations therein warranties. It must
be clearly made a part of the policy to have that effect, and lan-
guage which states that the policy is issued in consideration of
the warranties and agreements in the application and of a certain
sum of money, is merely by way of recital acknowledging consid-
eration and does not make the application a part of the policy,
and the statements in the application, in such case, are representa-
tions only and avoid the contract when their materiality and
falsity are shown, and this has been applied where an accident
policy contains a recital that it was based on the statements which
were warranted true and that it was agreed that the application
and warranty were the basis of the contract.19 It is likewise
New Jersey. — Vivar v. Supreme 38; Fidelity Mutual Life Assoc, v.
Lodge Knights of Pythias, 52 N. J. Jeffords, 107 Fed. 402, 408, 46 C. C.
L. 455, 20 Atl. 36. A. 383, 53 L.R.A. 208; Hubbard v.
Neio York. — Alden v. Supreme Mutual Reserve Fund Life Assoc.
Tent of Knights of Maccabees of the ioo Fed. 719, 721, 40 C. C. A. 667;
World, 78 App. Div. 18, 79 N. Y. Guarantee Co. of North America v.
Supp. 89. Mechanics' Savings Bank & Trust
Oklahoma.— Mutual Life Ins. Co. Co 80 Fed 766> 784? 26 q c A
v Morgan, 39 Okla. 20o, 135 Pac. ^ 47 LT g App 01; Fidelity Mu_
' , T , , -r^., ~ tual Life Assoc, v. McDaniel, 25 Ind.
Rhode Island. — Wilson v. Conway . rnQ P-,n K- XT t^ Ra^. Tani;,,^
Fire Ins Co 4 R I 141 App' 608' 6 ' 5 ; Bllhn-S
t, , ^ T • n T v. Metropolitan Life Ins. Co. 70 Vt.
But compare Oermama Lite Ins. .__ .1 f . _ir
Co. of N. Y. v. Klein, 25 Colo. App. 4S?' 4i AtL blb- .. _ . .
326, 137 Pac. 73. See §§ 1890, 1916 " Supreme Council Royal Ar-
herein canum v. Brashears, 89 Md. 624, id
"Phoenix Mutual Life Ins. Co. v. Am St. Rep. 624. 43 Atl. 866.
Raddin, 120 U. S. 183, 30 L. ed. "Fidelity & Casualty Co. v. Al-
644, 7 Sup. Ct. 500. Cited in Mc- pert, 16 U. S. C. C. A. 474, 67 Fed.
Clain v. Provident Savings Life As- 460.
sur. Soc. 110 Fed. 80, 87, 49 C. C. A. 19 Spence v. Central Accident Ins.
3051
: :
JOYCE <>N [NSURANCE
decided in a Federal supreme court case thai a recital in a policy
that the insurance is made 'in consideration of the representations
made," etc., and of certain sums paid, etc., does nol make these
representations pari of the consideration in the technical sens .
i r render ii necessary or proper t<> plead them as such.20 So where
certain explanations and declarations are inserted by the assurer
in the application specifying the degree of responsibility to be
assumed in answering questions, il may reasonably be deduced
therefrom that a stricl warranty was qoI intended ; and if it appears
that the assured was thereby induced to answer the questions and
to enter into the contract, such answers will be held only repre-
sentations, notwithstanding the application is made a part of the
contract, and the term "warranty'" is employed in such case to des-
ignate the character of the statements.1 Nor is an application for
insurance describing a building a warranty, unless inserted in the
policy or clearly made a part thereof, and a mere general reference
in the policy to the application is not sufficient to give it the effect
Co. 236 111. 444, 19 L.R.A.(N.S.) 88, canum, 28 N. Y. Supp. 952, 78 Hun,
*i! \. R. 104,38 1ns. L. .7. S7.
As to misrepresentations, warran-
ties and statutes, see § 1916 herein.
20 Phoenix Mutual Life Ins. Co. v.
Raddin, 120 U. S. 183, 30 L. ed. 644,
7 Su,.. Ct. 500.
Cited in: United States. — North-
ern Assurance Co. v. Grand View
ooo 094
Texas. — Tines v. Kentucky Mutual
Life Ins. Co. 13 Tex. Civ. App. 280,
285, 35 S. W. 676.
Vermont. — Billings v. Metropol-
itan Life Ins. Co. 70 Vt. 477, 485,
41 Atl. 516.
1 Fitch v. American Popular Life
Building Assoc. 183 U. S. 308, 348, Ins. Co. 59 N. Y. 557, 1, Am. Rep.
46 L. ed. 213, 230, 22 Sup. Cl
133; American Credit Indemnity Co.
v. Carrollton Furniture Manufactur-
ing Co. 95 Fed. Ill, 112, 36 C. C. A.
673.
Illinois. — Bloomington
Lite Benefit Assoc, v. Cummins, 53
111. App. 530,537.
Louisiana. — Union National Bank
v. Manhattan Life Ins. Co. 52 La.
Ann. 36, 45, 26 So. 800.
Michigan. — McGannon v. Mich-
igan Millers' Mutual Fire Ins. Co.
372. The facts in the case upon
which this rule is based are these: In
an application and policy the state-
ments of the insured were declared
to be warranties and the basis of the
-.r j. i contract, but in other parts of the
application it was stated, in sub-
stance, that nothing but fraud or in-
tentional misstatements would avoid
the policy, and that payment of the
sum assured would be contested only
in case of fraud. Tt was held that
the statements would nol be regarded
as warranties, and that to sustain a
12; Mi.-h. 636, 650, 54 L.R.A. r39, defense to an action on the policy,
746, 89 Am. St. Rep. 501, 87 X. W. the defendant must show, not only
61. thai the statements were untrue, but
Missouri. — Aloe v. Mutual Reserve that they were known by the insured
Life Assoc. 147 Mo. 561, 579, 49 S. so to ho. and that they were made m-
W. 553. tentionally and with a fraudulent
New York. — Foley v. Royal Ar- design.
3052
REPRESENTATIONS AND MISREPRESENTATIONS § 1891
of a warranty.2 So representations as to age and value of build-
ings made in an application, even though declared to be warranties,
are mere expressions of opinion,3 especially where the building is
worth more than double the amount insured and the mistake
could not in any way affect the risk.4
Again, even though the application is made a part of the policy
and both application and policy provide thai the statements are
warranties, yet if it is apparent from the entire contract that it
was not intended that the word warranty should be used in its
technical sense as meaning that the statements should be literally
true, or that the policy should be of no effect in case any of the
statements were untrue, even as to immaterial matters, but that the
intent was that the policy should be inoperative only in case of
untruth in some material matter, as where it is stipulated that the
contract shall be void if insured has concealed or misrepresented
any material fact or circumstance upon which the policy shall
be void, the statements are representations and not warranties.5
And where by the terms of the contract it is to be void for
concealment or misrepresentation of any material fact, the state-
ments in the application are representations even though they
are expressly declared warranties in said application which is
made part of the policy.6 In another case a policy of life
insurance declared upon its face that it was upon the fol-
lowing condition: "If the statements made by or in behalf of
or with the knowledge of the said insured to said company, as
the basis of or in the negotiations for this contract, shall be found
in any respect untrue," then and in each of said cases this policy
shall be null and void. It was held that the answers contained in
the application were in the nature of representations only, and
that in order to defeat the policy they must be shown to be materi-
ally untrue, or untrue in some particular material to the risk.7
So even though statements in the medical examination are de-
clared and warranted true, and it is stipulated that said statements
and warranties form the basis of the contract, still they will
2 Jefferson Ins. Co. v. Cotheal, 7 Iowa, 472, 59 Am. Rep. 444, 30 N.
Wend. (N. Y.) 72, 22 Am. Dec. 567. W. 808.
3 Phoenix Ins. Co. v. Wilson, 132 5 Phoenix Assurance Co. of London
Ind. 449, 25 N. E. 592, 20 Ins. L. J. v. Munger Imperial Cotton Machine
73; Eddv v. Hawkeve Ins. Co. 70 Mfg. Co. 92 Tex. 297. 49 S. W. 222,
Iowa, 472, 59 Am. Rep. 444, 30 N. 28 Ins. L. J. 24, aff'g — Tex. Civ.
W. 808. But see German Ins. Co. v. App. — , 49 S. W. 271.
Gibson, 53 Ark. 494, 14 S. W. 672. 6 JEtna Ins. Co. v. Simmons, 49
As to age of building, etc., see Neb. 811, 69 N. W. 125.
§ 1991 herein. 7 Campbell v. New England Mu-
4 Eddv v. Hawkeve Ins. Co. 70 tual Ins. Co. 98 Mass. 381.
3053
§ 1S91 JOYCE OX IXSl'KAXCU
be deemed representations which do not, unless material, in the
absence of fraud, or intentional misstatement, avoid the policy
although they are false;8 and where an application for life in-
surance warranted thai the answers therein were correct and true,
and stipulated thai if any of them should be in any material respect
untrue or false, or tend to deceive the insurer, the contract should
be void, it was held a mere representation and not fatal, unless
fraudulently false.9 And a provision in a life insurance policy,
that statements are warranted to be full, complete, and true, "with-
out suppression of any fact or circumstance which would tend to
influence the company in issuing a policy," make the statements and
agreements amount to representations only.10 In another case an
plication for a policy of life insurance 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 re-
spects true and correctly stated, the said policy shall be void
according to the terms thereof." The policy declared that the
insurance was "in consideration of the representations," etc., and
that fraud and intentional misrepresentations vitiated the policy,
but did not otherwise refer to the application. It was held that
the agreemenl and statements in the application did not become a
pari of the policy and were not warranties, and that the policy was
avoided only for fraud Or intentional misrepresentations.11 So
qualifying words voiding the policy for concealment, misrepre-
sentation or fraud, following statements in the application, make
them representations even though they might otherwise be war-
ranties.18 So an agreement which warrants that the statements are
true, but which is not a, part of the application or policy, does
not make such statements other than representations.13 Under
another decision a policy of life insurance provided that "if any of
the declarations or statements made in the application for this
policy, upon the faith of which this policy is issued, shall be found
in any resped untrue," the policy shall be void, and purported
to be made by the insurers in consideration of the representations
made to them in the application for the policy. It was held that
8 Globe Mutual Ins. Co. v. Wag- "American Popular Life Ins. Co.
ner, 90 III. App. 444, aim 188 111. v. Day, 39 X. J. L. 89, 23 km. Rep.
L33, 52 L.R.A. 646, 80 Am. St. Rep. L98. Compare Germania Life Ins.
L69, 58 X. E. 970. Co. of X. V. v. Klein, 25 Colo. App.
9 Schwarzbasb v. Ohio Valley Pro- 326, L37 Pae. 73.
teetive Union, 25 W. Va, 622, 52 Am. 1;- 3Etna Life Ins. Co. v. King, M
Rep. 227. III. App. 171.
10 Reppond v. National Life Ins. 18 Northwestern Life Assur. Co. v.
. LOO Tex. 519, 11 L.R.A.(N.S.) Tietze, 16 Colo. App. 205, 64 Pac.
. 101 S. W. 786. 773.
3054
REPRESENTATIONS AND MISREPRESENTATIONS § 1891
the answers to the questions in the application were representa-
tions and not warranties, and that their untruth was matter of
defense to be pleaded and proved by the insurer, but that such
representations were made conclusively material by the terms of
the policy.14
A statement in an accident policy that, in consideration of the
warranties and agreements in the application, the applicant is
insured, does not make the application a part of the contract, so
as to render a statement in it as to the age of the applicant a
warranty.15 And where an accident policy provided that "in
<•< moderation of the warranties and agreements contained in the
application indorsed hereon" it accepted the applicant as a member
subject both to the conditions, agreements, and limitations con-
tained in or endorsed thereon, the particular manner of attaching
the application is unimportant, and where it is so attached to or
physically connected with the policy as to furnish insured with
knowledge of its contents, and the answers are untrue and the
misrepresentations are material and increase the risk of loss, the
policy is avoided.16
Answers to questions in a written application, made by in-
surer's request after a policy is issued without one or any agreement
therefor, are neither representations nor warranties and are im-
material.17 And the statements are not binding when not made
by assured but by another, who forged his name in signing the
14 Price v. Phoenix Mutual Life evidence an application for insur-
Ins. Co. 17 Minn. 497, 10 Am. Rep. ance made by the plaintiff to a eom-
166. pany other than the defendant, and
15 Spence v. Central Accident Ins. delivered to MeCandless several days
Co. 236 111. 444, 19 L.R.A.(N.S.) after the policy in this case was is-
S8n, 86 N. E. 104. sued. That the application was
As to misrepresentations and stat- inadmissible, even if made to the de-
utes, see § 1916 herein. fendant, when it does not appear
18 Reynolds v. Atlas Accident Ins. that the making of the application
Co. 69 "Minn. 93, 71 N. W. 831, 26 was a condition precedent to the pol-
Ins. L. J. 778. icy taking effect, or that it was made
17 Colorado Leasing, Mining & under an agreement on the part of
Milling Co. v. Palatine Ins. Co. 57 plaintiff to make one after the issu-
Colo. 235, 141 Pac. 860. See § 187a ance of the policy, is settled by this
herein. See Connecticut Fire Ins. court in Loyal Mutual Fire Ins. Co.
Co. v. Colorado Leasing, Mininsr & v. Brown & Bros. Mercantile Co. 47
Milling Co. 50 Colo. 424, 116 Pac. Colo. 467, 107 Pac. 1098, and, when
154, 40 Ins. L. J. 1717, where the made to an entirely different compa-
applieation was made by assured to ny than the defendant, there is much
another insurer after the policy in more reason for not admitting it.
(|uc<tion was sued on and was held The defendant at no time before or
inadmissible and the court, Musser after the issuance of the policy asked
J., said: "The defendant says the for any representations from the
court erred in refusing to admit in plaintiff."
3055
§ 189] JOYCE OX INSURANCE
application.18 A statutory requirement of the annexation or attach-
ment to the policy of a copj of the application or prescribing the
manner of making it a pari of the policy musl be complied with
ti enable assurer to avail itself of any falsity of statements in said
application.19 Misrepresentations in an application for reinstate-
ment of an insured will be immaterial if no such application is
necessary because the policy has nol in fad lapsed.80
In the case of benefil certificates it' the entire contract is con-
tained therein, and they do not mention oor refer to the applicant's
answers to questions, such answers arc representations and not
warranties, and arc no pari of the contract.1 and the representa-
tions must qo1 only be made a part of the contract, lait must
clearly appear from the entire contract to be deemed stricl con-
ditions, upon the literal truth or fulfillment of which the contract
rests.2 And where it is specified in the certificate that the con-
sideration upon which it is issued are the representations and dec-
larations in the application, the statements will be represi citations
notwithstanding they are declared in the latter to be warranties.3
And the falsity of a statement material to the risk in an application
for a fraternal benefil certificate, precludes a recovery, where false
representations have the same effect under the society's by-laws,
although said application warrants the truth of the answers and
the certificate also makes them a strict warranty, and it is also
stipulated that they are the basis of liability and the agreement
and thai the application is a part of the contract.4
Whether the answers made by the applicant for a policy of
indemnity are warranties or mere representations must depend
upon the character of the question and its answer, the opportunity
of the insurer to guard against the representation in the light of
its consequences, or whether it is material to the risk.5 And where
a fidelity bond or policy, issued by a paid surety, states that the
representations in what is designated as the "employer'- declara-
tion" are made for the purpose of inducing the execution of the
18 Wells v. Metropolitan Life Ins. of Pythias, 52 N. J. Law, 4.")."), 20
Co. 4G N. Y. Supp. 80, 19 App. Div. Atl. 36.
18. See Leonard v. New England 8 Supreme Lodge Knights of Pyth-
Mutual Life Ins. Co. 22 R. I. 519, 48 ias v. Edwards, 15 Ind. App. 524.
Atl. 808. See § 1916 herein.
19 See § 1916 herein. 4 Enright v. National Council
20 Massachusetts Benefit Life Knights & Ladies of Security, 253
Assoc, v. Robinson, 104 Ga. 256, 42 111. 460. 97 N. E. 681, s. e. 161 111.
L.R.A. 261, 30 S. E. 918. App. 365, 42 Nat. Corp. Rep. 37S.
1 McVey v. Grand Lodge Ancient 6 Poult rv Producers' Union v. Wil-
Order United Workmen, 53 N. J. L. Hams, 58 Wash. 64, L37 Am. St. Rep.
17. -Jit Atl. 873. See § 1887 herein. 1041, 107 Pac. 1040.
2 Vivar v. Supreme Lodge Knights
3056
• REPRESENTATIONS AND MISREPRESENTATIONS S 1S92
bond and constitute a part of the basis and consideration of the
contract, but does not stale that any of the provisions are a war-
ranty, such statements are representations only and they are not
so material and essential as to operate as a forfeiture if made in
good faith, such declaration being a statement expressly limited
by the employer's knowledge concerning the matters stated.8
§ 1892. Test of materiality of representation: facts affecting risk
or premium. — Tt is said that a misrepresentation must be of a fact
material to the risk.7 While it is true that a misrepresentation
will avoid the policy if it is of a fact actually material to the risk,
it is not true that it must be material to the risk as such in all cases.
It need not actually have any bearing upon the state or condition 'of
the subject matter. The rule already given concerning what con-
stitutes a material fact in cases of concealment is generally ap-
plicable here. The question is, Did the fact or circumstance
represented or misrepresented operate to induce the insurer to
accept the risk or to accept it at a less premium? If it offers a false
inducement which is acted upon in either case, the insurer being
misled or deceived, the representation is material. And this is so
if the truth would have disclosed a fact increasing or materially
changing the risk as understood and agreed upon to be taken,
or if, had the truth been known, the insurer would have materially
modified the terms of the contract, or have rejected the risk or
charged a higher premium, or if the representation was calculated
to mislead and does mislead; it being assumed, however, that the
insurer is governed by the rules governing prudent and intelligent
underwriters in practice in like cases.8 So where the assured knows
6 Title Guaranty & Surety Co. v. tual Life Ins. Co. of N. Y. v. Hilton-
Bank of Fulton, 89 Ark. 471, 33 Green, 211 Fed. 31, 127 C. C. A. 467,
L.R.A.(N.S.) 676, 117 S. W. 537, 43 Ins. L. J. 685; Miller v. Mary-
38 Ins. L. J. 722. See § 2002a land Casualty Co. 193 Fed. 343, 113
herein. C. C. A. 267, 41 Ins. L. J. 990 ; Mill-
7 Battles v. York County Mutual ville v. Adams, 19 Fed. 887.
Fire Ins. Co. 41 Me. 208. Alabama. — Finpire Life Ins. Co.
8 United States.— Columbian Ins. v. Gee, 178 Ala. 492, 60 So. 90.
Co. v. Lawrence, 2 Pet. (27 U. S.) Dakota.— Waterbury v. Dakota
25, 7 L. ed. 335; Murgatroyd v. Fire & Marine Ins. Co. 6 Dak. 468,
Crawford, 3 Dall. (3 TJ. S.) 491, 1 43 N. AY. 697.
L. ed. 692; Clason v. Smith, 3 Wash. Georgia. — Empire Life Ins. Co. v.
(U. S. C. C.) 156, Fed. Cas. No. Jones, 14 Ga. App. 647, 82 S. E. 62.
2,868; Carpenter v. American Ins. Indiana. — Mutual Benefit Life Ins.
Co. 1 Story (U. S. C. C.) 57, Fed. Co. v. Miller, 39 Ind. 475; Common-
Cas. No. 2,428; Nicoll v. American wealth v. Monninger, 18 Ind. 352.
Ins. Co. 3 Wood. & M. (TJ. S. C. C.) Iowa.— Delaney v. Modern Acci-
529, Fed. Cas. No. 10,259; Hollo- dent Club, 121 Iowa, 528, 97 N. W.
man v. Life Ins. Co. 1 Wood ( U. S. 91.
C. C.) 674, Fed. Cas. No. 6,623; Mu- Kentucky— Niagara Fire Ins. Co.
Joyce Ins. Vol. III.— 192. 3057
§ L892
JOYCE ON INSURANCE
thai the application is to be forwarded to the company, and that
the description of the property therein is by the terms thereof to
be the basis on which the risk will be accepted or rejected, such
statements are material, and musl ool be essentially untrue.9 If
the facts and attendant circumstances show thai the representations
could nol have induced the acceptance of the risk a1 all, p.or have
influenced the rate of premium, it is not material.10 If the assured
v. Lavno, 162 Kv. 005, \7'2 S. W.
llliM); .Etna Lite Ins. Co. v. Howell,
32 Ky. L. Rep. 035, 107 S. \\\ 294;
United States Health & Accident Ins.
Co. v. Jolly, — Kv. — , 118 8. W.
281.
Louisiana. — Goff v. Mutual Life
Ins. Co. of N. Y. 131 La. 98, 59 So.
28, 41 Ins. L. J. 1415.
Maryland. — Mutual Life Ins. Co.
v. Mullen, 107 Md. 457, 69 Atl. 385,
37 Ins. L. J. 507.
Massachusetts. — Everson v. Gen-
eral Fire & Life Assur. Corp. Ltd.
202 Mass. 169, 88 N. E. 658, 38 Ins.
L. J. 923.
Missouri. — Sehroeder v. Stocks &
Material Ins. Co. 46 Mo. 174.
New Jersey. — Franklin Fire Ins.
Co. v. Martin, 40 N. J. L. 568. 20
Am. Rep. 271.
New York. — Vandervoort v. Smith,
2 Caines (N. Y.) 155, per Thomp-
son, J.; Jefferson Ins. Co. v. Cotheal,
7 Wend. (N. Y.) 72, 22 Am. Dec
567; Moore v. Prudential Casualty
Co. 156 N. Y. Supp. 892, 170 App.
Div. 849, 47 Ins. L. J. 313.
North Carolina. — Lummus v. Fire-
man's Fund Ins. Co. 167 N. Car. 632,
83 S. E. 688, 45 Ins. L. J. 190; Schas
v. Equitable Life Assur. Sue. 166 N.
Car. 55, 81 S. E. 1014 (so by com-
mon law and by statute) ; Gardner v.
North State Mutual Life Ins. Co. 163
N. Car. 367, 48 L.R.A.(N.S.) 714, 79
S. E. 806, 43 Ins. L. J. 25; Bryant
v. Metropolitan Life Ins. Co. 147 N.
Car. 181, 60 S. E. 983; Bobbitt v.
Liverpool London & Globe Ins. Co.
66 N. C. 70, 8 Am. Rep. 494.
Pennsylvania. McCaffrey v.
Knights of Columbia, 213 Pa. 609,
612, 63 Atl. 189.
South Carolina. — Himely v. South
Carolina Ins. Co. 1 Mill's Const. (S.
C.) 153, li' Am. Dec. 623; Engraham
v. South Carolina Ins. Co. 3 Brev.
(S. C.) 522; Quinn v. National As-
sur. Co. 1 Jones & C. 316.
Texas. — St. Paul Fire Marine Ins.
Co. v. Huff, — Tex. Civ. App. — ,
172 S. W. 755, 45 Ins. L. J. 363;
Mutual Life Ins. Co. of N. Y. v.
Crenshaw, — Tex. Civ. App. — , 116
S. W. 375.
Virginia. — Tallev v. Metropolitan
Life Ins. Co. Ill Va. 778, 69 S. E.
936.
Washington. — Dunham v. Citizens'
Ins. Co. 34 Wash. 205, 75 Pac. 804,
33 Ins. L. J. 473.
England.— Sibbald v. Hill, 2 Dow,
263.
See also § 1793 herein (conceal-
ment: marine); § 1846 herein (con-
cealment) ; §§ 1867, 1868 herein
(representations) ; § 1916 herein
(statutory provisions); §§ 1962 et
seq. herein (warranties).
The materiality and truth of state-
ments in an application not made
part of the policy is for the jury :
Fidelity & Casualty Co. v. Alpert,
16 U. S. C. C. A. 474, 67 Fed. 460.
9 Bartholomew v. Merchants'- Ins.
Co. 25 Iowa, 507, 96 Am. Dec. 65.
10 Clason v. Smith, 3 Wash. (U. S.
C. C.) 156, Fed. Cas. No. 2,868;
Liverpool & London & Glohe Ins.
Co. v. Lester, — Tex. Civ. App. — ,
17(i S. W. 602. "The materiality of
the representation is determined by
the same rule as the materiality of a
concealment:" Deering's Annot. Civ.
Code Cal. sec. 2581.
3058
REPRESENTATIONS AND MISREPRESENTATIONS § 1892
was in apprehension of incendiarism and falsely states to the con-
trary, he cannot recover.11 A misrepresentation as to the time the
vessel is out on her voyage is not material, provided the actual
time she has been out is within the usual time of her voyage.18
A recital that certain parties are insured on account of other named
parties is not a representation of ownership of the vessel insured.18
So a representation that imports that the vessel is seaworthy ia
immaterial, as seaworthiness of a vessel is impliedly warranted in
marine risks.14 But if such a fact is in answer to inquiries by the
insurer, it would be otherwise. And a representation as to where
the ship was at the date of the commencement of a time policy
is immaterial, because the true commencement and termination
of the risk are the termini fixed by the policy.15 80 where the risk
was refused upon the ground that the beneficiary was the first cousin
of the applicant, but thereafter the applicant wrote to the com-
pany that the beneficiary was a creditor and his friend, dependent
upon him for support, which statement was false in part, but
was not a material inducement to issuing the policy, it was held
that in view, of the fact that the statements in the application were
made warranties, that the letter was not a part of the application,
but was admissible to show fraud, although it was not a state-
ment the falsity of which would render the policy void, and it was
immaterial whether the applicant authorized writing and sending
the letter or not.16 A representation that adjoining land is vacant
is immaterial,17 as is also a representation that the building was fin-
ished, made at the time of obtaining consent to other insur-
ance ; 18 and a statement of the dimensions of the building
in an application for insurance is not within a provision of the
policy that it shall be void for misrepresentation of any material
fact, if it does not appear that the insured was influenced in issuing
the policy because of the statement regarding the dimensions of
the building.19 An oral representation made to the company's
11 Whittle v. Farmville Ins. Co. 3 tin v. Fishing Ins. Co. 20 Pick.
Hughes (U. S. C. C.) 421, Fed. Cas. (37 Mass.) 389, 32 Am. Dee. 220.
No 17 603 16 Mace v. Provident Life Ins. As-
« Maeka'v v. Rhinelander, 1 Johns. s°% ™} _£; C- 122> j g. E 674
„ /XT -\ .„„ 17 Stebbms v. Globe Ins. Co. 2
Cas. (N. Y.) 408. H-iH (N Y ) 675
"Chase v. Washington Mutual is Wiliiam's v. -New England Ma-
ins. Co. 12 Barb. (N. Y.) 595. tual Fire Ing Co gi Mo 219
"Augusta Insurance & Banking 19 Duncan v. National Mutual Fire
Co. v. Abbott, 12 Md. 348. jns Qo. 44 Colo. 472, 20 L.R.A.
15 Vigneaux v. Lime Rock Ins. Co. (N.S.) 340, 98 Pac. 634.
59 Me. 457, 8 Am. Rep. 428; citing On misrepresentation as to dimen-
Manly v. United Marine & Fire Ins. sions of insured building, see note in
Co. 9 Mass. 85, 6 Am. Dee. 40; Mar- 20 L.R.A. (N.S.) 340.
3059
§ 1893 JOYCE OX INSURANCE
agent but never communicated to the company, and which did
not induce the risk or have any influence upon the company, ig
not material.20 Further illustrations will appear under the subse:
quent sections in this chapter.
In rase of a bond to secure the performance of a contract which
bond is essentially a contract of insurance in order to determine
whether a variance in the performance is material resort must be
bad to the tesl whether such variance substantially increased the
chances of the loss insured against and whether there would be a
reason because of such increase of risk for demanding a higher
premium than was paid. The question is not whether the variance
actually caused a breach hut whether it was such a variance as a
reasonably careful and prudent person undertaking the risk would
have regarded as substantially increasing tjie chances of loss.1
§ 1893. Representation only relates to material facts except it
be otherwise stipulated. — Within the limits of the rule above stated,
unless it is otherwise stipulated, a representation is a statement of
or relating to facts actually material; or which concern the risk
or to a fact intended to be made material,2 or the representation
20 Girard Fire & Marine Ins. Co. Life Ins. Co. 95 Kan. 427, 148 Pac.
v. Stephenson, 37 Pa. St. 293, 73 619 (statute).
Am. Deo. 423. Kentucky. — iEtna Life Ins. Co.
1 Young v. American Bonding Co. v. Claypool, 32 Ky. Law Rep. 856,
of Rait. 228 Pa. 373, 381, 77 Atl. 935, 107 S. W. 325.
623, citing Murphy v. Prudential Maine.— Wright v. Fraternities
Ins Co of America. 205 Pa. 444, Health & Accident Assoc. 107 Me.
454, 55 Atl. 19. 418, 32 L.R.A.(N.S.) 461n, 78 Atl.
2 United States. — Maryland Ins. 475.
Co. v. Rudens Admr. 6 Cranch (U. Mississippi. — Citizens National
S ) 338, 3 L. ed. 242; Nicoll v. Life Ins. Co. v. Swords, 109 Miss.
\mrnr.-m Ins. Co. 3 Wood. & M. 635, 68 So. 920; American Central
!( S. C. C.) 529, Fed. Cas. No. Ins. Co. v. Antram, 88 Miss. 518, 41
1(1.2.")!). So. 257.
Alabama.— Alabama Gold Life Neb rasha — Bryant v. Modern
Ins ('«» v. Johnston. 80 Ala. 467, Woodmen of America, 86 Neh. 372,
59 Am. Rep. 816, 2 So. 125; Atlas 125 N. W. 621; JEtna Life Ins. Co.
hilc Ins. Co. v. Moman, 14 Ala. App. v. Simmons, 49 Neb. 811, 69 N. \\ .
100, 69 So. 989. 125.
Colorado. -Lampkin v. Traders' New Hampshire.— Chirk v. Union
Ins. Co. 11 Colo. App. 249, 52 Pac. Mutual Fire Ins. Co. 40 N. H. 333,
Klin. 77 Am. Dec. 721; Boardman v. New
Illinois.— Manufacturers' & Mer- Hampshire Fire Ins. Co. 20 N. H.
chants' Mutual Ins. Co. v. Zeitinger, 551.
H is [11. 286, 61 Am. St. Rep. 105, New Jersey. — Vivar v. Supreme
is \ k. 179, Lodge Knights of Pythias, 52 N. J.
Iowa. -Delaney v. Modern Acci- L. 455, 20 Atl. 36.
dent Club, 121 Iowa, 528, 97 X. W. New York— Moore v. Prudential
91, Casualty Co. 156 N. Y. Supp. 892,
Kansas.— NewtoD v. New York 170 App. Div. 849, 47 Ins. L. J. 313.
:;iiiiii
REPRESENTATIONS AND MISREPRESENTATIONS § 1894
must be made under such circumstances sis to be deemed material
by the underwriter.3 In the absence of fraud the materiality of
mere verbal representation? is the controlling elemenl in determin-
ing their effect, and if immaterial, the contracl cannot be affected,
even though the policy stipulates thai representations in the ap-
plication avoid the policy if untrue in any respect.* A representa-
tion need only be true as to matters material to the risk, and this
distinguishes it from a warranty.6
§ 1894. False representations in regard to material matters avoid
contract. — A false representation in regard to material matters
within the rule as to what constitutes a material fact above given,
will avoid the contract,6 even though not embraced in the con-
Ohio- Unit ford Protection Ins. 4 Higbee v. Guardian Mutual Life
Co. v. Harmer, 2 Ohio St. 452, 59 Ins. Co. 53 N. Y. 603.
Am. Dec. 684. 5 Duncan v. Sun Eire Ins. Co. 6
Oklahoma.— Mutual Life Ins. Co. Wend. (N. Y.) 488, 22 Am. Dee.
of N. Y. v. Morgan, 39 Okla. 205, 539; Fowler v. Mtna Fire Ins. Co.
135 Pae. 279. 6 Cow. (N. Y.) 673, 16 Am. Dec.
Oregon. — Buford v. New York 460; Waterbury v. Dakota Fire &
Life Ins. Co. 5 Or. 334. Marine Ins. Co. 6 Dak. 468, 43 N.
Texas— Mtna Accident & Lia- W. 697. See § 1962 herein,
bilitv Co. v. White, — Tex. Civ. 6 United States. — Hoffman v. Le-
App. — , 177 S. W. 162 (under stat- gion of Honor (U. S. C. C.) 35 Fed.
ute). 252; Carpenter v. American Ins. Co.
Washington.— Miller v. Commer- 1 Story (U. S. C. C.) 57, Fed. Cas.
rial Union Assur. Co. Ltd. 69 Wash. No. 2,428.
529, 125 Pac. 782, 41 Ins. L. J. 1599 ; California— Parrish v. Rosebud
Holland v. Western Union Life Ins. Mining & Milling Co. 140 Cal. 635,
Co. 58 Wash. 100, 107 Pac. 866. 71 Pac. 694.
England. — Elkin v. Jansen, 13 M. Colorado. — Germania Life Ins. Co.
& W. 655, 684, 9 Jur. 353. of N. Y. v. Klein, 25 Colo. App. 326,
A misrepresentation must be "of 137 Pac. 73.
a matter material to the risk, either Illinois. — Kotek v. Court of Hon-
desig-ned or otherwise:'' Hammond or, 152 111. App. 92; Walsh v. John
on Fire Ins. (ed. 1840) 89, citing Hancock Mutual Life Ins. Co. 162
Farmers' Ins. & Loan Co. v. Snvder, 111. App. 436, 42 Natl. Corp. Repr.
16 Wend. (N. Y.) 481, 488, 30'Am. 656; Schwartz v. Berkshire Life Ins.
Dec. 118. A false representation Co. 91 111. App. 494.
must be of a fact actually material Kentucky. — Craddock, Vinson &
to the risk, or one clearly so intended Co. v. Connecticut Fire Ins. Co. 160
by the agreement of the parties in Kv. 519, 169 S. W. 1015, 45 Ins. L.
order to vitiate the policy : Weil v. J. 44.
New York Life Ins. Co. 47 La. Ann. Louisiana. — Prudhomme v. Sala-
pt. 2, 1405, 17 So. 853. mander Fire Ins. Co. 27 La. Ann.
As to misrepresentations and stat- 695; Louisiana Mutual Ins. Co. v.
utes, see § 1916 herein. New Orleans Ins. Co. 13 La. Ann.
3 Vivar v. Supreme Lodge Knights 246.
of Pythias, 52 N. J. L. 455, 20 Atl. Maine.— Strickland v. Peerless
36. See Delanev v. Modern Accident Casualty Co. 112 Me. 100, 90 Atl.
Club, 121 Iowa, 528, 63 L.R.A. 603, 974.
97 N. W. 91. Maryland.— Mutual Life Ins. Co.
3061
§ 1S94
JOYCE o.\ ENSURANCE
tract, and therefore qoI a part thereof.7 So a false representation,
though qo breach of contract, if material, avoids a policy of in-
surance mi the ground of fraud;8 and a misrepresentation of the
interest of the assured, which is material to the risk, will avoid
the policy.9 Under the California code "a representation is to be
v. Robinson, 115 Md. 408, 80 Atl. 417; Anderson v. Thornton, 8 Exch.
ins;,. 425.
Massachusetts. — Lewis v. Fa^le As to misrepresentations and stat-
ins. Co. in Gray (76 Mass.) 508; utes, see § L916 herein.
Friesmutb v. Agawam Mutual Fire 7McVey v. Grand Lodge Ancient
Ins. Co. 10 Cush. ((it Mass.) 587. Order United Workmen, 53 N. J. L.
Minnesota. Johnson v. National 17, 20 Atl. 873.
Lite Ins. Co. 123 Minn. 453, 144 X. 8 Livingston v. Maryland Ins. Co.
W. 218. 7 Cranch (11 U. S.) 5()(i, 3 L. ed.
Nebraska. — Bryant v. Modern 421. Cited in Clark v. Manufac-
W linen of America, S(i Neb. 372, turers' Ins. Co. 8 How. (4!) U. S.)
125 N. W. 621. 235, 248, L2 L. ed. 1066; Callaghan v.
New Jersey. — McVey v. Grand Atlantic In>. Co. 1 Edw. Ch. 64, 7<.
Lodge Ancient Order United Work- 9 Columbia Ins. Co. v. Lawrence,
men, 53 N. J. L. 17, 20 Atl. 873. 10 Pet. (35 U. S.) 507, 9 L. ed. 512.
New York.— Ely v. Hallett, 2 Cited in
Caines (N. Y.) 57; Kaspryk v. Met- United States. Lycoming Fire Ins.
ropolitan Life Ins. ('.,. 7!) 'Misc. 263, Co. v. Haven, 95 U. S. 242. 248, 24 L.
140 N. Y. Supp. 211, 42 Ins. L. J. ed. 476; Howard Fire Ins. Co. v.
607. Chase, 5 Wall. (72 U. S.) 509, 515,
North Carolina. — Schas v. Equit- 18 L. ed. 526; Clark v. Manufac-
able Life Assur. Soc. 166 N. Car. turers' Ins. Co. 8 How. (4!) U. S.)
551, 81 S. E. 1014; Babbitt v. Liver- 235, 248, 12 L. ed. 1066; Waller v.
pool London & Globe Ins. Co. 66 N. Northern Assur. Co. 2 McCrary, 637,
Car. 70, 8 Am. Dec. 494. 640, 10 Fed. 235; Holbrook v. Ameri-
Pennsylvania. — Archer v. Metro- can Ins. Co. 1 Curt (U. S. C. C.)
politan Life Ins. Co. 13 Phila. (Pa.) 193, 107, Fed. Cas. No. 6,589; Clark
139, 6 Wklv. Notes Cas. 332.
v. Manufacturers' Ins. Co. 2 Woodb.
Virginia.— Talley v. Metropolitan & M- 472> 481> Fed- Cas. No. 2,829.
Alabama. — Scottish Union & Na-
tional Ins. Co. v. Boulden, 96 Ala.
508, 512, 11 So. 771; Commercial
Fire Ins. Co. v. Allen, 80 Ala. 571,
577, 1 So. 202.
Illinois. — Illinois Mutual Fire Ins.
Co. v. Marseiles Manufacturing Co.
Co.
Life Ins. Co. Ill Va. 778, 69 S. E.
936.
Washington. — Bank of Ellensburg
v. Palatine Ins. Co. 82 "Wash. 55,
143 Pac. 447, 44 Ins. L. J. 671;
Poultry Producers Union v. Wil-
liams, 58 Wash. 64, 107 Pac. 1040; 6 111 ''.'iii J'iii
Dunham v. Citizens Ins. Co. 34 Indiana.— Indiana Ins
\\ ash. 205, 75 Pac. 804. Brehm, 88 Ind. 578, 582.
West Virginia. -Tyree v. Virginia Maryland.— Franklin Fire Ins.
Ins. Co. 55 W. Va. 6. 69, in I Am. Co. v. Coates, 14 Md. 285, 298.
St. Rep. 983, Hi S. E. 706. Michigan.— Hill v. Lafayette Ins.
England. Bufe v. Turner. 6 Co. 2 Mich. 476, 485.
Taunt. 338, 2 Marsh. 47: Darby v. Neiv Jersey. — Franklin Fire Ins.
N'ewt (i Taunt. 544, 2 Marsh. 252; Co. v. Martin, 40 N. J. Law, 568,
Wainwrighl v. Bland, 1 Moody & R. 571, 29 Am. Rep. 271.
481, 1 Mees. & W. 32, 1 Tyrw. & G. New York.— Hastings v. West-
3062
REPRESENTATIONS AND MISREPRESENTATIONS §§ 1894a, 1895
deemed false where the facts fail to correspond with its assertions
and stipulations."10 Where any of the material representation- in
a fire policy are false, the insurer's tender of the premium and
notice that the policy is canceled before the commencement of suit
thereon operate to rescind the contract of insurance.11
§ 1894a. Same subject: presumptions. — There is a presumption
that a man does not make a fraudulent misstatement, but such
presumption may be overcome by proof. It may also be presumed
at least to a certain extent, that knowledge of the existence of a
condition or state continue-. bu1 this presumption is also uol con-
clusive and the question in either case depends upon circumstances
and is for the jury.12
§ 1895. Misrepresentations or false representations must be of
material facts. — As a general rule misrepresentations will not. in
the absence of stipulations to the contrary, avoid the policy, unless
they relate to material facts.13 So a representation must not only
Chester Fire Ins. Co. 73 N. Y. 141, Ins. Co. 1 Wood (U. S. C. C.) 674,
152; Springfield Fire & Marine Ins. Fed. Cas. No. 6,623.
Co. v. Allen, 43 N. Y. 389, 394, 3
Am. Rep. 711.
Ohio. — Miller v. Western Farmers'
Mutual Ins. Co. 1 Handy (Ohio)
208. 216.
10 Deerings Annot. Civ. Code Cal. 43 N. W. 697
sec. 2579. And if a representation Delaware. — Baltimore
Alabama. — Atlas Life Assur. Co.
v. Moman, 14 Ala. App. 400, 69 So.
989.
Dakota. — Waterbury v. Dakota
Fire & Marine Ins. Co. 6 Dak. 468,
Life Ins.
is false in a material point, the in- Co. v. Floyd, 5 Boyce (28 Del.) 201,
jured party may rescind from the 91 Atl. 653, s. c. 5 Boyce (28 Del.)
time it becomes false: Deering's 431, 94 Atl. 515.
Annot. Civ. Code Cal. sec. 2580. See Illinois. — Minnesota Mutual Life
§ 1916 herein. Ins. Co. v. Link, 230 111. 273, 82 N.
11 Rankin v. Amazon Ins. Co. 89 E. 637.
Cal. 203, 23 Am. St. Rep. 460, 26 Louisiana.— Goff v. Mutual Life
Pac. 872.
12 Owen v. United States Surety 28
Ins. Co. of N. Y. 131 La. 98, 59 So.
Co. 38 Okla. 123, 131 Pac. 1091, 42
Ins. L. J. 1068. See Evans v.
Columbia Fire Ins. Co. 81 N. Y.
Supp. 933, 40 Misc. Rep. 316. As
burden of proof: warranties: see
§ 1977 herein.
13 United States. — Hodgson v. Ma-
rine Ins. Co. 5 Cranch (9 U. S.) 100,
3 L. ed. 48 : Mutual Benefit Life Ins.
Maine. — Bellaty v. Thomaston Ins.
Co. 61 Me. 414.
Massachusetts. — Stetson v. Massa-
chusetts Ins. Co. 4 Mass. 330, 3 Am.
Dec. 217; Daniels v. Hudson River
Fire Ins. Co. 12 Cush. (66 Mass.)
416, 59 Am. Dec. 192.
Mississippi. — Fidelity Mutual Life
Co. v. Robison, 58 Fed. 723, 7 C. Ins- Co- v- Muzza> 93 Mlss- 18> 46 So-
C. A. 444, 19 U. S. App. 266, 22 81'-
L.R.A. 325; Clason v. Smith, 3 Missouri.— Schroeder v. Stock &
Wash. (U. S. C. C.) 156, Fed. Cas. Material Co. 46 Mo. 174. See Ash-
No. 2,868; Alsop v. Commercial Ins. ford v. Metropolitan Life Ins. Co.
Co. 1 Sum. (U. S. C. C.) 451, 458, 98 Mo. App. 505 (under statute).
Fed. Cas. No. 262; Holloman v. Life New Hampshire. — Boardman v.
3063
§ 1896 JOYCE ON INSURANCE
be false, hnl musl also be material to avoid the policy,14 and it
is also held that its known falsity will not vitiate the contract unless
the representation was material, or deemed so by the insurer;16
So it i- decided that to adopt a rule that misrepresentations of an
immaterial nature, made by an applicant for insurance, shall
avoid the policy, merely because the contract states that any mis-
statement shall be deemed material, can serve no purpose of right.16
And it is also held that representations must be materially dif-
ferent from the truth in a way that increases the risk, in order
to avoid the contract.17 So a misrepresentation not averred to be
material to the risk is no bar to an action on a policy of marine
insurance.18 Unintentional misstatements by an assured will not
be treated as a breach of warranty rendering his policy void when
the policy itself declares that "fraud, false swearing, misstatement,
or concealment of a material fact by the assured shall render this
policy void." 19
§ 1896. Same subject: where statement is intentionally false:
effect of the fraud as to materiality of fact to risk: burden of proof.
— If the representation is calculated to mislead or deceive, it is
material.20 So also where it is intentionally false and calculated
to mi-lead the insurers into issuing the policy, and is material, the
policy is avoided.1 And while an intentionally false statement
New Hampshire Mutual Benefit Fire Knights of Pythias, 52 N. J. L. 455,
Ins. Co. 20 X. II. 551. 20 Atl. 36.
New Jersey. — Dewees v. Manhat- 16 Fidelity Mutual Life Ins. Co. v.
tan I us. Ce. 34 N. J. 244. Miazza, 93 Miss. 18, 136 Am. St.
New York. — Cushman v. United Rep. 534, 46 So. 817.
States Life Ins. Co. 4 Hun (N. Y.) 17 Nicoll v. American Ins. Co. 3
7S3; Maokav v. Rhinelauder, 1 Johns. Wood. & M. (U. S. C. C.) 529, Fed.
(as. (X. Y.) 408; Moore v. Pruden- Cas. No. 10,259.
tial Casualty Co. 156 N. Y. Supp. 18 Hodgson v. Marine Ins. Co. 5
892, 170 App. Div. 849, 47 Ins. L. J. Cranch (9 U. S.) 100, 3 L. ed. 48.
313. Cited in Dewees v. Manhattan Ins.
Ohio. Hartford Protection Ins. Co. 34 N. J. Law, 244, 251.
Co. v. Harmer, 2 Ohio St. 452, 59 19 National Bank v. Union Ins. Co.
Am. Dec. 684. 88 Cal. 497, 22 Am. St. Rep. 324,
Pennsylvania. — Aicher v. Metro- 26 Pac. 509.
politan Lite Ins. Co. 13 Phila. (Pa.) 20 Babbitt v. Liverpool London &
139, 6 YYkly. Notes ('as. 332. Globe Ins. Co. 66 N. C. 70, 8 Am.
Vermont. — Mosley v. Vermont Dec. 494. See § 1916 herein.
Mutual Fire Ins. Co. 55 Vt. 142. 1 McVey v. Grand Lodge Ancient
England. — Kirby v. Smith, 1 Order United Workmen, 53 N. J. L.
Barn] & Aid. 672. 17, 20 Atl. 873; Dunham v. Citizens
As to misrepresentations and stat- Ins. Co. 34 Wash. 205, 75 Pac. 804,
utes, sec § L916 herein. 33 Ins. L. J. 473, 475.
14 Clason v. Smith, 3 Wash. (U. S. In England, in marine insurance
C. C.) L56, Fed. ('as. No. 2,868. "It is not necessary thai a represen-
15 Vivar v. Supreme Lodge tation be fraudulent in order to
3064
REPRESENTATIONS AND MISREPRESENTATIONS § 1896
presents a case of actual fraud, and might seemingly constitute
an exception to the rule last stated,2 nevertheless it is within the
rule, for it comes within the test of materiality already stated.3
So that it may be given as a general rule that if the representa-
tion is intentionally false, the conclusion is necessitated that the
purpose was to mislead or deceive the insurer, and thereby induce
him to take the risk, and in such case the presumption fairly
arises that the underwriter was so induced, and the fraud will
vitiate the contract. But the distinction exists between this and
cases within the rule noted under the last section, namely, that
although an intentionally false representation by fraudulently
inducing the risk is made material, yet an inquiry into its actual
materiality to the risk is precluded by the intentional fraud when
the same is not denied and clearly proven.4 Thus, it is held that
the assurer must prove either that the representation was untrue
or fraudulent.5 But to preclude an inquiry into the materiality
to the risk of the fact intentionally misrepresented, the fraud of
the assured and his intent to mislead and deceive should be clearly
and satisfactorily established, for the law will not presume fraud;
the burden is upon the affirmative.6 And an intent to deceive,
avoid the insurance; a representa- Mutual Life Ins. Co. v. Hilton-
tion, if material, though wholly Green, 211 Fed. 31, 127 C. C. A. 467,
untainted with fraud, will also dis- 43 Ins. L. J. 685.
charge the underwriter from lia- 6 National Annuity Assoc, v. Mo-
bility unless the representation be Call, 103 Ark. 201, 48 L.R.A.(N.S.)
substantially correct, or unless he 418, 146 S. W. 125; Kahn v. Traders
knew the truth at the time the con- Ins. Co. 4 Wyo. 419, 62 Am. St. Rep.
tract was concluded." 17 Earl of 47, 34 Pac. 1059. See Livingston v.
Halsbury's Laws of England, sec. Delafleld, 3 Caines (N. Y.) 49, s. c.
809, p. 414. Much stress is placed 1 Johns. (N. Y.) 523; Williams v.
in that country as we have stated Delafleld, 2 Caines (N. Y.) 329;
elsewhere, upon the contract being Ionides v. Pender, 9 L. R. Q. B. 531,
one of the utmost good faith. 43 L. J..Q. B. 227. As to statute*,
2 See § 1895 herein. see § 1916 herein. As to burden of
3 See § 1892 herein. proof : materiality of misrepresent a-
4 2 Duer on Marine Ins. (ed. 1846) tions, see § 3780 herein.
691-93; Pawson v. Watson, Cowp. "As fraud is never presumed, an
785, 787, 13 Eng. Rul. Cas. 540, 3 underwriter who would impute fraud
Kent's Commentaries (5th ed.) 283; to the insured must be prepared to
Roberts v. Fonnereau, Park on Ins. prove it by evidence according to the
176; Imperial Fire Ins. Co. v. Mur- maxim, Incumbit sans probandi ei
rav, 73 Pa. St. 13. qui dicit:" 1 Marshall on Ins. (ed.
5Cushman v. United States Life 1810) *466.
Ins. Co. 4 Hun (N. Y.) 783; National See as to proof of fraud in other
Annuity Assoc, v. McCall, 103 Ark. contracts :
201, 48L.R.A.(N.S.) 418, 146 S. W. Alabama.— Beck & Pauli Litho-
125; Goff v. Supreme Lodge Roval graphing Co. v. Houpert, 104 Ala.
Achates, 90 Neb. 578, 37 L.R'.A. 503, 53 Am. St. Rep. 77, 16 So. 522;
(N. S.) 1191, 134 N. W. 239. See Moses v. Katzenberger, 84 Ala. 95,
3065
§ 1896
JOYCE OX IXSl'KANCE
or fraud, is nol I" be prc-uincd f r« >tn the mere falsity of statement*
or representations made in the application.7 In Oklahoma while
;i tni.-rcpn'.-cMitation renders the policy void on the ground of
fraud, still in thai state fraud mus1 be proven by a preponderance
of evidence so greal as t<> overcome all opposing evidence and
repel all opposing presumptions of u 1 faith.8 Hut fraud may
in other contracts be established by circumstances from which
fraud may he inferred, as well as by direct and positive proof, and
the rule would no doubt cover insurance contracts,9 especially so
where it appears that the fact- were clearly within assured's knowl-
edge and so entirely at variance with his statements in his applica-
tion that the inference of fraud cannot he resisted.10 And in
cases where upon the proof there is a doubl as to the fraudulent
intent, then evidence is admissible of the immateriality of the facts
misrepresented.11 Mr. Parsons, however, raises a question whether
even in cases of actual fraud it would not be proper to admit
4 So. 237 ; Wan-en v. Gabriel, 51 Ala. North Carolina.— Smith v. Webb,
235. 64 N. C. 541.
Arkansas. — Nelson v. Cowling, 77 Pennsylvania. — Pine v. Vanuxem,
Ark. 351, L13 Am. St. Rep. 155, 91 3 Yeates (Pa.) 30.
S. \Y. 773. Texas. — Gilliam v. Alford, 69 Tex.
Colorado— Adams v. Schuffer, 11 267, 6 S. W. 757.
Colo. 15, 7 Am. St. Rep. 202, 17 Par. Wisconsin.— Standard Manufac-
21 turing Co. v. Slot, 121 Wis. 1 I. L05
Illinois.— Strauss v. Kranert, 56 Am. St. Rep. 1016, 98 N. W. 923.
111. 254. See also 2 Chamberlayne on Ev-
Iowa. — McCreary v. Skinner, 75 idence, sec. 1015.
[owa, 111. 39 X. YV. 674. 'Provident Savings Life Ins. Soc.
Kentucky.— Marksbury v. Taylor, v. Pruett, 157 Ala. 540, 47 So. 1019;
10 Bush (7:5 Ky.) 519 (evidence of Dolan v. Mutual Reserve Fund Life
fraud same in equity as at law; gen- Assoc. 173 Mass. 197, 53 N. E. 398.
oral rule). 8 Owen v. United States Surety Co.
Massachusetts— Beatty v. Fishel, 38 Okla. 123, 131 Pac. 1091. 42 Ins.
LOO Mass. 448 (case of fraudulent L. J. 1068. See § 1916 heroin. Ex-
misrepresentation), limine Kansas Mill Owners & Manu-
Michigan. — Sweeney v. Devens, 72 facturers Mutual Fire Ins. Co. v.
Mil h. 301, 40 N. W. 454 (fraud mast Rammelsberg, 58 Kan. 531, 50 Pac.
be clear). 446, considered under § L914 herein.
Missouri. — Hopkins v. Sievert, 58 9 Robinson v. Lord Vernon, 7 Com.
Mo. 20] (fraud in transfer of prop- B. N. S. 231; Craig's Appeal,' 77
erty) ; Waddingham v. Loker, 44 Mo. Pa. St. 448; Goodwin v. Pall, L02
L32, LOO Am. Dec. 200 (equity: Me. 353, 66 All. 727; Klauber v.
fraud). Schloss, 198 Mo. 502, 115 Am. St.
' Mont ana.— Gehlert v. Quinn, 35 Rep. 486, 95 S. W. 030.
Muni. 151, L19 Am. St. Rep. 864, 90 "Linderman v. Metropolitan Life
Pac. 168 (only preponderance of ev- Ins. Co. 120 N. Y. Supp. 96.
idence). u2 Duer on Marine Ins. (ed.
Nebraska.— Riley v. Melquist, 23 1846) 693.
Neb. 474, 36 X. YV. 657 (fraud is for
jury).
3066
REPRESENTATIONS AND MISREPRESENTATIONS § 189G
evidence that the insurers were wholly uninfluenced by the in-
tentional falsehood.12 We would suggesl thai the fraud consists
not alone in the intent to mislead or deceive, but also upon the
presumption that the insurer was induced thereby to assume the
risk or lower the rate of premium. So that upon the question
whether intentional fraud actually exists, it oughl to be proper
and relevant to the issue to show as an actual fact, or from such
surrounding facts and circumstances as may be admissible, that
the assurer wasi wholly uninfluenced by the intentional falsehood,
or that it was of a character which could not have possibly in-
fluenced his judgment.13 It is a rule in other contracts th.it a
fraud which vitiates a contract does not consist alone of the intent,
but in the intent coupled with the fact that the matter in question
related to and was of the essence or substance thereof; or that it
actually misled or deceived the other party to his injury: or that
it induced the act or omission of the other party. If the agree-
ment would not have been completed had the fraud not been
practised, then it is material; but if it appears or is reasonably
probable that the contract or act done would have been completed
upon the same terms or done in the same way, then it is not
material.14 Under the code of California, in case a representation
12 1 Parsons oh Marine Ins. (ed. er, 37 Ind. 3, 10 Arn. Rep. 62; Hagee
1868) 416 et seq. and notes. v. Grosman, 31 Ind. 223.
13 See Vivar v. Supreme Lodge Iowa. — Mohler v. Carder, 73 Iowa,
Knights of Pythias, 52 N. J. L. 455, 582, 35 N. W. 647 (case where re-
20 Atl. 36 ; ■ Sihbald v. Hill, 2 Dow, scission was sought in equity ) .
263 ; Commonwealth Ins. Co. v. Mon- Kansas— Morrow v. Bonebrake,
ninger, 18 Ind. 352; Cushman v. 84 Kan. 724, 115 Pac. 585, 34 L.R.A.
United States Life Ins. Co. 4 Hun (N S ) 1147
{W78?- j?e? § 19Q10 lrein- n KentucJcy'.-Southem Express Co.
"United States.-Sovthern Be- y_ p ^ Ry ^ Am gt
l25Tesnt24?; 3f L^r^S^: **■ ^ ™ S. W. 184, 117 S. YV.
Ct. 881; Laidlaw v. Organ, 2 Wheat. *™;. w „ ino ,,
(15 U. S.) 178, 4 L. ed. 214; Banque- Maine.— Goodwin v. Fall, 103 Me.
Franco-Egyptienne v. Brown, 34 353, 66 Atl. 727; Lmscott v. Orient
Fed. 162. Ins. Co. 88 Me. 497, 51 Am. St. Rep.
Alabama. — Moses v. Katzenberger, 435, 34 Atl. 405.
84 Ala. 95 4 So. 237. Maryland. — McAleer v. Horsey,
Georgia!— Griffin v. Griffin, 130 35 Md. 439.
Ga. 527, 16 L.R.A. (N.S.) 937, 14 Massachusetts.— Hazard v. Irwin,
Am. & Eng. Ann. Cas. 866, 61 S. E. 18 Pick. (35 Mass.) 95.
16; Elder v. Allison, 45 Ga. 13. Nebraska— J akway v. Proudfit, 76
Illinois.— -Crocker v. Manlev, 164 Neb. 62, 14 Am. & Eng. Ann. Cas.
111. 282, 56 Am. St. Rep. 196,* 45 N. 258, 106 N. W. 1039, 109 N. W. 388;
E 577 Tepoel v. Saunders Co. Nat. Bank,
'Indiana.— Brown v. Cody, 115 24 Neb. 815, 40 N. W. 415.
Ind 484 18 N. E. 9 ; Frenzel v. Mill- Nevada.— Foulks Accelerating Air
3067
§§ L896a, L897 JOYCE OX INSURANCE
in a contracl of marine insurance is intentionally false in any
respect, whether material or immaterial, the insurer may rescind
the entire contract.18
If an application is made for a certificate in a mutual benefit
society the nature of the inquiry whether general or specific must
be considered as musl also the materiality of the matters inquired
about, and whether by fair construction the meaning of the ques-
tion was comprehended by the applicant, especially so where such
meaning may be doubtful These factors are important in de-
termining whether or not there was an intent to deceive, or such
,, suppression of truth as to constitute the basis of fraud, there
being a distinction as to a warranty which is based upon an
affirmation of a matter not true. The questions and answers may
also he such as to exclude construction or so relate to the ordinarily
material or immaterial matters as to require interpretation of the
court to the jury or to be such as to relate purely to facts for the jury
upon the point whether the applicant acted honestly without an
intent to falsify or misrepresent.16
§ 1896a. Material false representations vitiate binding slip. —
Material false representations in an application for insurance viti-
ates the binding slip a.s well as the policy.17
§ 1897. Where positive representation is false and material fraud
need not be proven. — In eases where the misrepresentation is posi-
tive and of a fad actually material, it is not necessary to prove that
the representation was fraudulently made; the materiality of the
Motor Co. v. Tines. 26 Nev. 158, 99 408, GO Am. St. Rep. 90G, 48 Pac.
Am. St. Rep. 684, 65 Pac. 373. 37.
New Jersey.— Crosby v. Wells, 73 West Virginia— Tolley v. Poteet,
N. J. L. 790, 67 Atl. 295; Byard v. 62 W. Va. 231, 57 S. E. 811.
Holmes, 34 N. J. L. 296. Wisconsin.— Kathan v. Cmnstock,
New York— Kountze v. Kennedy, 140 Wis. 427, 28 L.R.A.(N.S.) 201
147 N. Y. 124, 29 L.R.A. 360, 49 Am. and note, 122 N. W. 1044; J. II.
St. Rep. 651, 41 N. E. 414; Stitt v. Clark Co. v. Rice, 127 Wis. 451, 7
kittle, 63 N. Y. (18 Sick.) 427. Am. & Eng. Ann. Cas. 505, 106 N.
Oklahoma. Garvin v. Han ell, 27 W. 231.
Okla. 373, 35 L.RA.(N.S.) 862, 113 England.— Clapham v. Skillets, 7
Pac 186. Beav. 149.
Pennsylvania. — Hexter v. Bast, 15 Deering's Annot. Civ. Code Cal.
125 Pa. St. 52, 11 Am. St. Hep. 874, sec. 2676. See § 1916 herein.
17 Atl. 252; (Mark v. Everhart, 63 16 Erickson v. Ladies of the
Pa. St. 347; Babcock v. Case, 61 Pa. Maccabees of the World, 25 S. Dak.
St. 427, 100 Am. Dec. 654. 183, 126 N. W. 259.
Texas.— Chatham v. Jones, 69 Tex. 17 Gardner v. North State Life Ins.
744, 7 S. W. 600. Co. 163 N. Car. 367, 48 L.R.A. (N.S. |
I'tah.— Hecht v. Metzler, 14 Utah, 714, 79 S. E. 806.
3068
REPRESENTATIONS AND MISREPRESENTATIONS § 1897
misrepresentation, and its proven falsity doas away with the neces-
sity of showing actual fraud.18
So in ease of a policy of fidelity guarantee insurance, false
representations which induced the contract were made as to the
amount of moneys intrusted to the care of the party whose fidelity
was guaranteed, and also as to the length of time moneys paid into
his hands were retained and the frequency of accounting, and the
falsity of the representations were held to avoid the insurance.19
And positive representations as to the time of the ship's sailing
will, if the fact is material to the risk, avoid the policy if false.20
and a positive statement that the ship was seen safe at a certain
place on a specified date, when she was in fact lost at the time, the
representation heing found material by the jury, will avoid the
policy.1 In an early English case, however, it is held that where
the contract is in writing, the misrepresentation must have been
fraudulent, otherwise evidence thereof is inadmissible. The case
was a representation of a future fact.2 But in a Massachusetts
case the representation was positive. The policy stipulated for
forfeiture for misrepresentation of material facts. The court
charged the jury that the representations were material, and if
falsely and fraudulently made and relied on, the contract was
vitiated. In response to a request by the insurer the court further
instructed the jury that if the insurer in fact relied upon the state-
ments, and they were in fact untrue, there could be no recovery,
even if the insured believed them true, and the court added, '•pro-
vided these statements were false and fraudulent," and it was held
18 United States.— Hoffman v. 66 L.R.A. 657, 104 Am. St. Rep.
Legion of Honor (U. S. C. C.) 35 983, 46 S. E. 706.
Fed. 252. England. — Anderson v. Thornton,
Massachusetts. — Lewis v. Eagle 8 Exch. 425.
Ins. Co. 10 Gray (76 Mass.) 508. As to misrepresentations and stat-
New York.— Kasprzvk v. Metro- ute> see § 1916 herein-
politan Life Ins. Co. 79 Misc. 263, . Towle ▼■ T National Guardian
140 N Y Sudd 211 42 Ins L J Assur- Soe- 30 L' J* Ch- 900> 5 L- T-
' 193, 10 W. R. 49. See § 2002a
herein.
20 Fillis v. Brutter, reported in 1
^VtrP?,0 ^°nd°4n r? , ]US- C0' Marshall on Ins. (ed. 1810) *467.
66 N. C. 70, 8 Am. Rep. 494. See §§ 1803-1805, 2082-2087 herein.
Pennsylvania.— Aicher v. Metro- l Macdowall v. Fraser, 1 Doug.
politan Life Ins. Co. 13 Phila. (Pa.) 260.
139, 6 Wkly. Notes Cas. 332. 2Flinn v. Tobin, 1 Moody & M.
Virginia.— Continental Ins. Co. v. 367, 31 R. R. 739. See Edwards v.
Kasey, 25 Gratt. (Va.) 268, 18 Am. Footner, 1 Camp. 530; Steel v. Laey,
Rep. 681. 3 Taunt.- 285; Bryant v. Ocean Ins.
West Virginia. — Tyree v. Virginia Co. 22 Pick. (39 Mass.) 200, 205;
Fire & Marine Ins. Co. 55 W. Va. 63. Whitney v. Haven, 13 Mass. 172.
3069
607
North Carolina. — Bobbiett v
§ L898
JOYCE ON [NSURANCE
that tl 10 plaintiff had qo grounds for exception.8 If it is sought
to avoid the contracl by the facl thai false representations as to
materia] points were made al the time the policy was applied for,
it is qoI Qecessary for the insurers to sho^ thai the representations
moral falsehoods; it is sufficient to prove that they were in
point of fact untrue.4
§ 1898. Representation may be of facts actually material to the
risk: question for jury. — A representation may be of a fact actually
material t<> the risk which the assurer is asked to assume.5 and
whether it is so material is a question for the jury.6 But while
3 Wood v. Fireman's Ins. Co. L26
Mass. 31(i. The ('acts were these:
An application for a fire policy
stated that the copy was of a paint-
ing, the original of which was in I ho
Vatican, or one of the churches at
Rome. That it was by Leonardo de
Vinci, and could not be purchased
for one million dollars. That no
other copy existed in America, and
the Pope would never allow another
copy to he made.
4 'Mutual Benefit Life Ins. Co. v.
Wise, 34 Md. 582.
5 Sheldon v. Hartford Fire Ins.
Co. 122 Conn. 235, 58 Am. Dee. 420;
Ely v. Eallett, 2 Caines (N. Y.) 57;
Darby v. Newton, 6 Taunt. 544, 2
Marsh. 252; Price v. Depeau, 1 Brev.
(S. Car.) 452, 2 Am. Dec. 680; Reid
v. Earvey, 4 Dow. 07, 16 R. R. 38.
6 I' iiited States. — Fidelity Mutual
Life Ins. Co. v. Miller, 02 Fed. 63,
34 C. C. A. 211; Hadley v. Provi-
dence Savings Life Assur. Soc. of
N. Y. 90 Fed. 390, aff'd Provident
Savings Life Assur. Soc. of N. Y.
v. Eadley, 102 Fed. 856, 43 C. C. A.
25, 29 Ins. L. J. 998, certiorari denied
L79 I". S. 686, 40 L. ed. 386, 21 Sup.
Ct. 919.
Colorado.— Connecticut Fire Ins.
Co. v. Colorado Leasing, Mining &
Milling Co. 50 Colo. 428, 116 Pac.
L54, 40 Ins. L. J. 1717.
/Hindis. — Spence v. Central Acci-
dent Ins. Co. 236 111. 444, 19 L.R.A.
iX.S., 88n, 86 X. E. L04, 38 Ins.
L. J. s7 : Manufacturers' <.V Mer-
chants' Mutual Ins. Co. v. Zeitinger.
30
1(58 111. 2S6, (51 Am. St. Rep. 105, 48
N. E. 170.
Kentucky. — Little v. Security
Mutual Life Ins. Co. 150 Ky. 35, 14*9
S. W. 112.
Man/hi ml. — Mutual Life Ins. Co.
v. Robinson, 115 Md. 408, 80 Atl.
1085, 40 Ins. L. J. 1085; Maryland
Casualty Co. v. Gehrmann, 96 Md.
634, 54' Atl. 678.
Massachusetts. — Locke v. Royal
Ins. Co. Ltd. (Locke v. Columbia Ins.
Co.) 220 Mass. 202, 107 N. E. 911,
45 Ins. L. J. 603.
Minnesota. — Price v. Standard
Life Ins. Co. 00 Minn. 264, 95 N. W.
1118.
M ississippi. — A meri can Centra 1
Ins. Co. v. Antrim, 88 Miss. 518, 41
So. 257.
Missouri. — Conner v. Life &
Annuity Assoc. 17.1 Mo. App. 364,
157 S.*W. 814, 42 Ins. L. J. 1270;
Lynch v. Prudential Ins. Co. of
America, 150 Mo. App. 461, 131 S.
W. 145 (statute): Dolan V. Missouri
Town Mutual Fire Ins. Co. 88 Mo.
App. 666.
Oklahoma. — Springfield Fire &
Marine Ins. Co. v. Null, 37 Okla.
665, 133 Pac. 235, 42 Ins. L. J. 132]
(for jury under instructions which
take into account materiality).
Pennsylvania. — Rigby v. Metro
politan Life Ins. Co. 240 Pa. 332, 87
Atl. 428, 42 Ins. L. -J. 1235; Landes
v. Safety Mutual Eire Ins. Co. 190
Pa. 536, 42 Atl. 961, 28 Ins. L. J.
564.
Texas. — St. Paul Fire & Marine
70
REPRESENTATIONS AND MISREPRESENTATIONS § 1899
this is ordinarily the rule ii is subject to certain qualifications or
exceptions which preclude the submission of such materiality to
the jury and make it a question for the court to determine.7 We
have, however, fully considered this question elsewhere.8
§ 1899. Representations may be of facts in no way material to
the risk. — The representation may he misrepresentation of a fact
in no way material to the risk, and which does not relate to the
state or condition of the property, to the ship or to the nature of I he
voyage, and yet be made under such circumstances and in such a
Ins. Co. v. Huff, — Tex. Civ. App. Michigan. — New Era Assoc, v.
— , 172 S. W. 755, 45 Ins. L. J. 363 Mactavish, 133 Midi. 64, Hi Dot. L.
(statute) ; Fidelity Mutual Life N. 107, 94 N. W. 599.
Assoc, v. Harris, 94 Tex. 95, 86 Am. Missouri. — Conner v. Life &
St. Rep. 813, 57 S. W. 635, 29 Ins. Annuity Assoc. 171 Mo. App. 364,
L. J. 769. 157 S. W. 814, 42 Ins. L. J. 1274.
England. — Flinn v. Headlam, 9 Nebraska. — Roval Neighbors of
Barn. & C. 693, 7 L. J. K. B. 307. America v. Wallace, 66 Neb. 543, 92
As to fire insurance see 17 Earl of N. W. 897, s. c. 64 Neb. 330, 89 N.
Halsburv's Laws of England, sec. W. 758, 31 Ins. L. J. 447, s. c. 73
1059, p. '532; marine ins. act of 1906 Neb. 409, 102 N. W. 1020, 34 Ins.
(6 Edw. VII. c. 41) sec. 20;- Butter- L. J. 450.
worth's Twentieth Century Statutes Oregon. — Beard v. Royal Neigh-
(1900-1909) sec. 20, p. 404, also bors of America, 53 Oreg. 102, 19
provides: "(7) Whether a par- L.R.A.(N.S.) 798, 99 Pac. 83.
ticular representation is material or Pennsylvania. — Rigby v. Metro-
not is, in each case, a question of politan Life Ins. Co. 240 Pa. 332, 87
fact." Atl. 428, 42 Ins. L. J. 1235; Smith
7 United States. — Carrolton Furni- v. Northwestern Mutual Life Ins.
ture Manufacturing Co. v. American Co. 196 Pa. 314, 46 Atl. 426, 30 Ins.
Credit Indemnitv Co. 115 Fed. 77, L. J. 61; March v. Metropolitan
52 C. C. A. 671, aff'd 124 Fed. 25, Life Ins. Co. 186 Pa. St. 629, 65 Am.
59 C. C. A. 545, certiorari denied, St. Rep. 887, 40 Atl. 1100; Lutz v.
192 U. S. 605, 48 L. ed. 585, 24 Sup. Metropolitan Life Ins. Co. 186 Pa.
Ct. 849; Fidelity Mutual Life Ins. 527, 40 Atl. 1104.
Co. v. Miller, 92 Fed. 63, 34 C. C. A. South Dakota.— Eriekson v. Ladies
211 of the Maccabees of the World, 25
Colorado.— Connecticut Fire Ins. S. Dak. 183, 126 X. W. 259.
Co. v. Colorado Leasing, Mining & Texas. Fidelity Mutual Life
Milling Co. 50 Colo. 428, 116 Pac. Assoc, v. Harris, 94 Tex. 75. 86 Am.
154, 40 Ins. L. J. 1717. St. Rep. 813. 57 S. W. 635, 29 Ins.
Kentucky.— Metropolitan Life Ins. L. J. 769; Supreme Ruling Fra-
Co. v. Schmidt, 29 Kv. L. Rep. 255, ternal Mystic Circle v. Hansen, —
93 S. W. 1055. See Continental Ins. Tex. Civ. App. — , 153 S. W. 351
Co. v. Ford, 140 Kv. 406, 131 S. W. (construction of statute).
189, 39 Ins. L. J. 1760, 1763, — 8 See § 3710a herein. That war-
Clay, C. ranty reserves consideration of ma-
Maryland. — Mutual Life Ins. Co. teriality from court or jury see JEtna
v. Robinson, 115 Md. 408, 80 Atl. Life Ins. Co. v. France, 91 U. S.
1085. 40 Ins. L. J. 1967; Mutual Life 510, 23 L. ed. 401. See also §§ 1962,
Ins. Co. v. Mullan, 107 Md. 457, 69 1963, 1970 et seq. herein.
Atl. 385.
3071
§ 1900 JOYCE ON INSURANCE
way as is calculated to and does gain the confidence of the assurer,
and induces him to accept the risk or to fix a certain rate of pre-
mium. Thus, where the insured represented thai he was the
moneyed man of the concern, which was a fraudulent representa-
tion, and thereby induced the insurer to assume the risk, such a
statement, even though not material to the risk, will avoid the
policy.8 And it is also held that a representation which is not
material must not only he untrue, hut willful to avoid the policy.10
I '.ut where the policy is a combination accident insurance, insuring
against loss of life or limb by accident in specified amounts, and
also providing a weekly indemnity in case of incapacitating in-
jury, misrepresentations as to weekly earnings are immaterial and
have no reference to a right to recover for the accidental loss of
life or limb, but only material to the question of weekly indem-
nity.11 And where it was expressly agreed that the truthfulness
of each statement was material to the risk and the sole basis of
the contract, and that if any concealment or untrue statement or
answer he made, the policy shall be ipso facto null and void, the
court declared that it was not prepared to hold that such a stipu-
lation would have the effect of making every statement made, or
contained in an application material to the risk and so avoid the
contract whether such statement be in fact material and that
"courts are not given to avoiding contracts for misrepresentations
of an immaterial nature, and to adopt this rule in its application
to contracts of insurance merely because it is stated in the con-
tract that any misstatement should be deemed material can sub-
servo no purpose of right; " but that a positive statement of a fact
must be true and a misrepresentation or misstatement of a material
fact which might reasonably have influenced insurer in making
the contract avoids the contract. Accordingly so held.12
§ 1900. Representation may be of facts intentionally false: when
material. — The representation may be of a fact which the assured
intentionally and falsely states as true, with the purpose of mis-
Leading or deceiving the insurer into an acceptance of the risk, or
9 Valton v. National Life Fund Ins. Co. 12 Cush. (66 Mass.) 416, 59
Assoc. 20 N. Y. 32, s. c. 40 N. Y. Am. Dee. 192.
(1 Keyes) 21, 22 Barb. 9, 17 Abb. " ^Etna Life Ins. Co. v. Clavpool.
Pr. 268, 4 Abb. Dee. 437. See also 128 Ky. 43, 107 S. W. 325, 37 Ins.
Sibbald v. Hill. 2 Dowl. 63, 14 R. R. L. J. 302.
160. As to immaterial matters made 12 Fidelity Mutual Lite Ins. Co.
material by stipulation, see § 1956a v. Miazza, 03 Miss. 18, 136 Am. St.
herein. Rep. 534, 46 So. 817, 37 Ins. L. J.
As to misrepresentations and stat- 810, Mayes, J. Compare Jeffries v.
utes, sec § L916 herein. Economical Life Ins. Co. 22 Wall.
10 Daniels v. Hudson River Fire (89 U. S.) 47, 22 L. ed. 833.
3072
REPRESENTATIONS AND MISREPRESENTATIONS §§ 1901,1902
an acceptance thereof at a lower rate of premium, in which case
it is material.18
§ 1901. Positive statement of fact which assured does not know
to be true. — A representation may be the positive statement of
some tact as true without the assured knowing it to be true, in
which case, if it has a tendency to mislead or deceive, and if the
underwriter is actually deceived thereby and so enters into the
contract, the representation will be so far material as to avoid the
contract.14
§ 1902. Representations through mistake, ignorance, or negli-
gence.— A representation of a fact may lie false or untrue through
mistake, ignorance, accident, or negligence, in which case if ii
induces the risk which the assurer would not otherwise have taken,
it is material, so also where it induces acceptance of the risk at a
lower rate of premium. Actual fraud is not, in such case, a material
factor. The ground of avoidance is that of legal or constructive
fraud, and it is now well settled that in cases of the character above
specified, the misrepresentation of a material fact preceding or con-
temporaneous with the contract avoids the policy, even though
the assured be innocent of fraud or an intent to deceive, or to
wrongfully induce the assurer to act, or whether the statement was
made in ignorance or good faith, or unintentionally. A mere
inadvertent omission of material facts which the insured should
have known to be material will avoid the contract if false and
relied on by the assurer.15 And the rule is carried to the extent
18 Daniels v. Hudson River Fire about a material matter." Fidelity
Ins. Co. 12 Cush. (66 Mass.) 416, Mutual Life Ins. Co. v. Miazza, 93
59 Am. Dee. 192; McVey v. Grand Miss. 18, 136 Am. St. Rep. 534, 46
Lodge Ancient Order United Work- So. 817, 37 Ins. L. J. 810— Mayes,
men, 53 N. J. L. 17, 20 Atl. 873. See J.
§ 1896 herein. 15 United States. — MeLanalian v.
14 Daniels v. Hudson River Fire Universal Ins. Co. 1 Pet. (26 U. S.)
Ins. Co. 12 Cush. (66 Mass.) 416, 170, 185, 7 L. ed. 98; Carrolton
59 Am. Dec. 192; Macdowall v. Furniture Mfg. Co. v. American
Fraser, 1 Doug. 260, per Lord Mans- Credit Indemnity Co. of N. Y. 115
field. See Kasprzvk v. Metropolitan Fed. 77, 52 C. C. A. 671, aff'd 124
Life Ins. Co. 79 Misc. 263, 140 N. Fed. 25, 59 C. C. A. 544, certiorari
Y. Supp. 211, 42 Ins. L. J. 607 {con- denied 192 U. S. 605, 48 L. ed. 5S5,
sidered under § 1912 herein). See 24 Sup. Ct. 849 ; Carpenter v. Ameri-
§ 1916 herein. can Ins. Co. 1 Story (U. S. C. C.)
"If the applicant for insurance 57, Fed. Cas. No. 2,428; Hazard v.
undertakes to make a positive state- New England Mutual Ins. Co. 1
ment of a fact, if it be material to Sum. (U. S. C. C.) 211, s. c. 8 Pet.
the risk such fact must be true. It (33 U. S.) 557, S L. ed. 1043; Kohne
is not sufficient that he believes it v. Insurance Co. of North America,
true but it must be so in fact, or 1 Wash. | TJ. S. C. C.) 93, 15S, Fed.
the policy will be avoided, provided Cas. No. 7,920.
always that the misstatement be Louisiana. — Curell v. Mississippi
Joyce Ins. Vol. III.— 193. 3073
L902 JOYCE ON INSURANCE
of holding thai if the conducl or declarations of the insured induce
the misapprehension of a material matter on the part of the insurer,
in consequence of which he enters into a contract of insurance,
he i- entitled to be released, whether the act or declaration so in-
ducing the act of the insurer was through fraud or innocent mis-
take.16 So also will unintentional omissions have the -nine effect
in a lire risk.17 So a representation, though not intentionally
false, that a vessel has arrived at her porl of destination and is
dear <.f her cargo, when in fact she is only just entering the harbor
of that port, avoids a policy of insurance issued thereon.18 So a
material misrepresentation will avoid the policy even though hon-
estly made, and if made by the assured's authorized agent, it will
avoid the policy even though made without fraudulent intent on
Marine & Fire Ins. Co. 9 La. 163, politan Life Ins. Co. 13 Phila. (Pa.)
29 Am. Dec. 439. L39, 6 Wkly. Notes Cas. 332. See
Ifai'ne.— Dennison v. Thoinaston Kreedman v. Providence- Washington
Mutual Ins. Co. 20 Mc. 125, 37 Am. Ins. Co. 182 Pa. 64, 37 All. 909, 27
Dee. 42. Ins. L. J. 21") (where it was declared
Massachusetts. — Mickerson v. that insured could not avoid responsi-
Massachusetts Title Ins. Co. 178 bility of a misrepresentation by her
Mass. 308, 59 X. E. 814; Campbell own agent whether made knowingly
\. New England Ins. Co. 98 Mass. or.not).
381; Kimball v. iEtna Ins. Co. 9 Vermont. — BoUtelle v. Westchester
Allen (!H Mass.) 540, 85 Am. Dee. Eire Ins. Co. 51 Vt. 4, 31 Am. Rep.
Balej \. Dorchester Mutual 666.
Eire Ens. Co. L2 Gray (78 Mass.) 545, Wisconsin. — Wright v. Hartford
per Bigelow, J.; Wilbur v. Bowditeh Fire Ins. Co. 36 Wis. 522.
Ins. Co. Hi Cush. (64 Mass.) 446; England.— FAkin v. Jansen, 13
Bryanl v. Ocean Ins. Co. 22 Pick. Mees. & W. 655, 658, 14 L. J. Ex.
(39 Mass.) 200; Fiske v. New Eng- 201, per Baron Parke; Feise v. Park-
laud Ins. Co. 15 Pick. (32 Mass.) inson, 4 Taunt. 640, 13 R. R. 710,
310; Stetson v. .Massachusetts Ins. 14 Eng. Rul. Cas. 530; Traill v. Bar-
Co. 1 Mass. 330, 3 Am. Dec. 217. ing, 4 De Gex & S. 318, aff'g 4 Giff.
Mississippi.— Hoke v. National 485, 33 L. J. Ch. 521, L0 Jur. < X. S.)
Life & Accident Ins. Co. 103 Miss. 377; McDowell v. Frazer, 1 Doug.
269, 60 So. 218. 260; Steel v. Lacy, 3 Taunt. 285, 12
Nebraska. — Seal v. Farmers' & R. H. 65S; Button v. Waterloo Life
Merchants' Ins. Co. 59 Neb. 253. 80 Ins. Co. 1 Lost. & F. 735; Cornfoot
X. W. si 17. 29 Tns. L. J. 177, 179. v. Fowke, 6 Mees. & W. 358, 9 L. J.
New Fork. — Armour v. Trans- Ex. 297, per Lord Abinger; Dennis-
atlantic Eire [ns. Co. 90 N. Y. 450; toun v. Lillie, 3 Bligh. 202.
New York Brewery Fire Tns. Co. v. As to misrepresentations and stat-
Xew York- [ns. Co. 17 Wend. (N. utes, see § 1916 herein.
Y.) 359; Farmers' Ins. Co. v. Snyder, 16 Continental Ins. Co. v. Kasey,
L6 Wend. (X. Y.i 481, 30 Am. Dee. 25 Gratt. (Va.) 268, 18 Am. Rep.
118; Fowler v. .Etna Ins. Co. 6 681.
Cow. (N. Y.) 673, 16 Am. Dec. 460. "Wright v. Bart ford Fire Ins.
North Carolina. — Hayes v. United Co. 36 Wis. 522.
States Fire Ins. Co. L32 X. Car. 702, "Sawyer v. Coasters' Mutual Ins.
44 S. E. 404, 32 Ins. L. J. 764. Co. 6 Gray (72 Mass.) 221.
Pennsylvania. — Aicher v. Metro-
3074
REPRKSKXTATIOXS AND MISREPRESENTATIONS § L903
the part of the agent, and although the assured has qo knowledge
thereof.19
lint if the misrepresentation is immaterial, it will not avoid the
contract. Thus, it was so held in case of an immaterial description
of the property;20 unless in addition to being untrue it is willful.1
and induced the insurer to act either in fact or presumptively so,
the presumption not being rebutted.8
§ 1903. Cases qualifying the last rule. — It is held, however, thai
undesigned and unintentional misstatements will not avoid the
policy,3 unless willfully erroneou- or LU-ossly negligent,4 or the
assured had knowledge thereof. Thus, where one, as the agent of
his reputed wife, represented to an insurance company thai she
was his wife, and effected an insurance upon his own life in her
name as her agent, for her benefit, and the truth of the case was
thai tli«' marriage was void, by reason of the reputed wife having
a former lawful husband living at the time of the second marriage,
it was held that the policy was not void by reason of the illegality
of the lasl marriage, unless it further appeared that the said re-
puted husband and wife knew at the time that the policy was
effected that at the time of their supposed marriage the lawful
husband of the wife was living and the marriage was illegal, and
that they failed to inform the company of the fact.5 So where the
assured made a fair and honest statement of all that was required,
bis merely erroneous representations were held not to avoid the
policy; so also of merely inaccurate representations honestly be-
lieved by the insured to be true.6 In the chapter on concealment
an analogous question i- fully considered, and what i.~ said there
would have some application here.7 It is also held that the policy
is not avoided by an innocent mistake or error on the part of the
applicant as to his title.8 So an honest and excusable mistake in
19 Armour v. Transatlantic Fire S. C. C.) 33 Fed. 544, 549 (anno-
Ins. Co. 00 X. Y. 450. tated case).
20 Continental Ins. Co. v. Kasev, 5 Equitable Life Assurance Soc. v.
25 Cratt. (Va.) 268, 18 Am. Dec. Paterson, 41 Ga. 338, 5 Am. lop.
681. 535.
1 Daniels v. Hudson River Fire 6 Columbia Ins. Co. v. Cooper, 50
Ins. Co. 12 Cush. (66 Mass.) 416, 59 Pa. St. 331; Imperial Fire Ins. Co.
Am. Dec. 102. v. Murray. 73 Pa. St. 13. See SS
2 See §§ 1806, 1916 herein. 1896, 1916 herein.
8 Miller v. Mutual Benefit Life Ins. 'Hartford Protective Ins. Co. v.
Co. 31 IoAva, 216, 7 Am. Rep. 122. Earmer, 2 Ohio St. 452, 59 Am.
But see Wright v. Hartford Fire Dec. 684, see S* ISIS. L849 herein.
Ins. Co. 36 Wis. 522. See §§ 1846, 8 Perry v. Dwelling-House ln<. Co.
1848, 1849, 2003 herein. 67 X. H. 201. 08 Am. St. Rep. 668.
As to statutes, see Jj 1016 herein. Sec as to title and interest §§ 2026
4 Fisher v. Crescent Ins. Co. (U. et seq. herein.
3075
§ L904 JOYCE ON INSURANCE
computing the amount of an encumbrance in order to secure a
renewal will not vitiate the policy.9
§ 1904. Representations: expectation, belief, or opinion, without
fraud. — A representation, instead of being a positive statement of
fact, may be only of the expectation, intention, belief, or opinion
iif the assured, in which case it is immaterial, in the sense thai
although false, it will not avoid the policy, provided there is no
actual fraud in inducing the acceptance of the risk or its acceptance
.it a lower rale of premium. And even though the representation
be materia] to the risk, if the statement amounts only to an ex-
pectation or belief that certain facts do or will exist, or that they
will happen in a certain way, the insurer is not bound to rely upon
such belief or expectation of the assured, but is obligated to make
further inquiry before reiving thereon. Bu1 there is a clear dis-
tinction between a case of this character and one where the assured
intentionally and fraudulently states that, as a matter of expectation
or belief, which he then knows to be actually untrue, or which the
facts within his knowledge show to him that it is impossible that
the matter stated by him as one of belief or expectation could exisl
or happen. Here the intent to deceive the insurer is apparent and
there is actual fraud, and the fraud vitiates the contract where the
insurer is misled or deceived in acting to his injury when he other-
wise would not have so acted, and the rule applies where the state-
ment appears from all the surrounding circumstances to have been
one merely of expectation or belief, even though the exact terms
thereof would seem to carry the force of a positive statement of a
material fact, for no matter what the actual form of expression, yet
if it is apparent that the underwriters were not misled, but under-
stood it to import nothing but a probable expectation or belief, the
courts will give the words used the construction intended. Bui good
faith of the insured must exist in all cases.10 Thus, in case of a
9Bowlus v. Phoenix Ins. Co. 133 Ins. Co. 22 Pick. (39 Mass.) 200;
Ind. 106, 20 L.R.A. 400, 32 N. E. Rice v. New England Marine Ins.
31!). As to encumbrances. See §§ Co. 4 Pick. (21 Mass.) 439; Whitney
2015 et seq. herein. v. Haven, 13 Mass. 172.
10 Iowa. — Behrens v. Germania New York. — Alston v. Michigan
Fire Ins. Co. 04 Iowa, 19, 19 N. W. Mutual Ins. Co. 4 Hill (X. Y.) 329,
838. 330.
Maine. — Eerrick v. Union Mutual Vermont. — Boutelle v. West-
Fire Ins. Co. 48 Me. 55S, 77 Am. Chester Fire Ins. Co. 51 Vt. 4, 31 Am.
Dec. 244. Rep. 6G6.
Maryland. — Augusta [nsurance & England. — Bubbard v. Glover, 3
Banking Co. v. Abbott, 12 Mil. 348; Camp. 313; Brine v. Featherstone,
Allegre v. Maryland [ns. Co. 2 Gill. 4 Taunt. 869, II K. li. 689. Bowden
& J. (Md.) 136, 20 Am. Dec. 424. v. Vaughan; L0 East, 415, 10 R. R.
Massachusetts. — Brvant v. Ocean '111), 13 Eng. Rul. Cas. 533. See
3070
REPRESENTATIONS AND MISREPRESENTATIONS § L904
policy on goods, the representation thai the ship "is about to sail
or will sail soon/' or of the day on which -he is expected to sail, is
immaterial.11 So a representation thai the assurance could be
effected at a specified rate, when the surrounding facts and circum-
stances show thai it was only an opinion, and oughl qo1 to have
influenced the acceptance of the risk nor the rate of premium, and
which is nol actually fraudulent, is immaterial, and qo defense to
the insurer.-.12 And the statement that "a cargo is ready for her.
and she is sure to ho an early ship," is a representation merely of
expectation or belief, the vessel being in a foreign port.18 So a state-
ment of intention merely is not a binding representation, and in
the absence of actual fraud will not avoid the contract. No positive
duty is created; it is a promise that if nothing occurs to justify the
change of intention it will be executed as declared.14 So where the
integrity of a certain person was insured, and it was represented that
his accounts would he examined every fortnight, it was held a mere
representation of intention, and that a recovery could be had. al-
though the loss was occasioned by neglect to examine said accounts
as stated.15 If the language of questions contained in an applica-
Pawson v. Watson, Cowp. 787, 13
Eng. Rul. Cas. 549, 17 Earl of Hals-
bury's Laws of England, sec. 810, p.
11 1. see. 1102 p. 5.32, per Lord Mans-
field.
"Neither party to a contract of
insurance is bound to communicate,
even on inquiry, information of his
own judgment upon the matters in
question:" Deering's Annot. Civ.
Code Cal. sec. 2570. "The eventual
falsity of a representation does not,
in the absence of fraud, avoid a con-
tract of insurance:" Cal. Civ. Code,
sec. 2677.
As to concealment : assured's
knowledge or belief, see §§ 1846 et
seq. herein.
As to statements as to health, see
§§ 2003 et seq. herein.
As to statements limited as to their
effect; or qualified statements, see SS
1913, 1915, 1915a herein.
As to misrepresentations and stat-
utes, see § 1916 herein.
11 Augusta Insurance & Banking
Co. v. Abbott, 12 Md. 348; Rice v.
New England Marine Ins. Co. 4
30
Pick. (21 Mass.) 439; Bowden v.
Vaughn, 10 East, 415, 10 R. Et. 340,
13 Eng. Rul. Cas. 533; Barber v.
Fletcher, 1 Doug. 305, 13 Eng. Rul.
Cas. 532.
"Clason v. Smith, 3 Wash. (U.
S. C. C.) 156, Fed. Cas. No. 2,868.
13 Hubbard v. Glover, 3 Camp. 313.
14 "No representation of a party's
expectation or belief, unless fraud-
ulently made, will avoid a policy.
Nor is there any distinction between
a party's expectation and intention
as to any matter relating to the voy-
age," per Wilde, J., in Bryant v.
Ocean Ins. Co. 22 Pick. (39' Mass.)
200. See Grant v. .Etna Ins. Co. 15
Moore P. C. 516, 6 L. T. 735, 2 Duer
on Marine Ins. (ed. 1845) 707, sec.
40.
On expression of opinion as fraud,
see note in 35 L.R.A. 417; on future
promise as fraud, see notes in 10
L.R.A.(N.S.) 640, and 24 L.R.A.
(N.S.) 735.
15 Benham v. United Guarantee &
Life Assur. Co. 7 Exch. 744, 21 L. J.
Ex. 317.
77
§ 1905 JOYCE ON INSURANCE
tion calls for answers which may be, to some extent, a matter of
opinion, the insured, if answering in good faith, will be excused,
though he does nol give the desired answer.16 So where matters of
opinion or judgmenl are called I'm' answers made in good faith and
without intent to deceive will no1 avoid the policy although incbr-
iv.t or untrue.17 So representations as to the age and value of
buildings arc mere expressions of opinion, although by the terms of
the policy all answers are declared to be warranties.18 But where
the representation was, "The 'Brilliant' will sail from Nassau for
Clyde mi May 1st. a running ship." and die sailed April 23d, op-
portunity for convoy hein- ollered. it was held not a representa-
tioE of an expectation merely, but of a material fact necessary to be
complied with.19 So statements as to value and like kindred matters
are matters of opinion, immaterial if not actually fraudulent.20
While the representation of an expectation is not the same as the
representation of an existing fact.1 still in this connection the ques-
tion of intention evidenced by the surrounding circumstances, the
position of the parties, and other relevant matters must be con-
sidered, for if it appears that the representation is a positive asser-
tion that a certain fact exists or event shall happen, then so far as
it is actually and clearly a positive stipulation the,rule above given
does not apply.2
§ 1905. False representations owing to fault, etc., of agent:
knowledge of agent: waiver and estoppel. — We have fully con-
sidered under prior chapters the powers of different agents of insurer
16 Dooly v. Hanover Fire Ins. Co. Concealment; whether time of sail-
Ki Wash. 155, 58 Am. St. Rep. 26, ing must be disclosed, see §§ 1803-
47 Pac. 507. 1805 herein.
17 Bryant v. Modern Woodmen of As to sailing1; representations and
America, 86 Neb. 372, 125 N. W. warranties, see §§ 2082-2087 herein.
621, 27 L.R.A.(N.S.) 326. See § 20 National Bank v. Ins. Co. 95 U.
L884 herein. S. (5 Otto) 673, 24 L. ed. 563 (see
18Pbcenix Ins. Co. v. Wilson, 132 First National Bank v. Hartford
In.l. 449, 20 Ins. L. J. 73, 25 N. E. Fire Ins. Co.); Wheaton v. North
592. See Rogers v. Phoenix Ins. Co. British & Mercantile Ins. Co. 76 Cal.
121 I ml. 570, 23 N. E. 498; Lamb 415, 9 Am. St. Rep. 216, 18 Pac.
v. Council Bluffs Ins. Co. 70 Iowa, 758. See Titus v. Glens Falls Ins.
238, 30 N. W. 497; Eddy v. Hawkeye Co. 81 N. Y. 410, 8 Abb. N. C.
Ins. Co. 70 Iowa, 472, 59 Am. Rep. 315.
lib .ill N. W. 808. See also Baker 1 Herrick v. Union Mutual Fire
v. State Ins. Co. 31 Oreg. 41, 65 Am. Ins. Co. 48 Me. 558, 77 Am. Dec.
St. Rep. S07. 48 Pac. 600, 27 Ins. L. 244.
J. 86, 89. 2 See Alston v. Mechanics Mutual
As to representations as to age and Assur. Co. 4 Hill (X. Y. ) 330;
character of building, see § 1991 Brvant v. Ocean Ins. Co. 22 Pick.
herein. (39 Mass.) 200.
19 Dennistoun v. Lillie, 3 Bligb,
202, 22 R, R. 13.
3078
REPRESENTATIONS AND MISREPRESENTATIONS § 1905
and their acts in connection with the various questions concern inu
the application, representations, misrepresentations, knowledge,
concealment, omissions, negligence, fraud, etc., and the effect there-
of as to the binding force of the contract,3 so thai those matters will
be only briefly mentioned here by way of illustrative decisions.4
A policy is not avoided by false representations in the applica-
tion under a provision that the statements contained in the applica-
tion are warranties, and if any of them arc false the policy shall be
Void, when the false statements in the application are made hy the
agent of the insurance company without the knowledge and with-
out any fraud or attempt to deceive or misrepresent on the part of
the assured.4 So it is held to be the settled law of Missouri thai if
insurer's soliciting agent is empowered to take written applications
for insurance and is informed as to the facts and ye1 puts down a
falsehood or directs the applicant to do it the company is neverthe-
less liaMe, although this statement of the law is subjeel to the quali-
fication that the applicant acted honestly and in good faith and
that there was no collusion or conspiracy to defraud.5 In another
case an application was made to a solicitor of a mutual fire insurance
company, for insurance and the applicant signed an application,
which the solicitor transmitted to insurer and in due time received
a policy making the by-laws of the company a part of the contract.
The answers to certain material questions, as they appeared in the
application, wore not true, and, if they had been true, the by-laws
would have forbidden the risk. When the application was taken
the questions referred to were propounded to applicant by the
solicitor, and were truthfully answered, but the solicitor set down
answers, not as given by said applicant, but in his own way. The
applicant signed the application without knowledge of what the
solicitor had written. The property was subsequently destroyed by
fire originating from a source inquired about by one of the ques-
tions. It was decided that assured was entitled to recover.6 So
3 See c. XXIII. §§ 424 et seq., 441 168 Mo. App. 503, 153 S. W. 1065,
et seq.; c. XXIV. SS 472 et seq. See 42 Ins. L. J. 619.
also §§ 643 et seq. herein. As to On bad faith of assured as affect-
notice to, or knowledge of agent, see ing estoppel of insurer to set up
>j>j 515 et seq. herein. falsity of answers in application
4 Continental Ins. Co. v. Pearce, 39 because of agent's knowledge of such
Kan. 396, 7 Am. St. Rep. 557, 18 falsity, see note in 14 L.R.A.(N.S.)
Pac. 2!)1 ; Kansas Farmers' Fire Ins. 27!'.
Co. v. Saindon, 52 Kan. 486, 39 Am. 6 Broadv v. Patrons' Fire &
St. Rep. 356, 35 Pac. 15. Tornado Assoc. 94 Kan. 245, 146
On effect of knowledge by insurer's Pac. 343.
agenl of falsity of statements in ap- On effect of agent's insertion in the
plication, see note in 16 L.R.A. 33. application of false answers to ques-
5 M alien v. National Life Assoc, tions correctlv answered bv insured,
3079
§ 1905 JOYCE ON INSURANCE
where an application for life insurance is drawn by insurer's agent,
and the answers to interrogatories contained therein are written hy
such agent, without fraud or collusion on the part of the applicant,
parol evidence is admissible to -how that the recitals in the applica-
tion are not, under the circumstances, the representations of the
applicant, although signed by him, bul the statements of the insurer
made with full knowledge of all the facts, and he is estopped from
controverting the truth of such statements.7 And when a local
a-cnt of a fire insurance company, who has the power to accept a
risk and deliver the policy of insurance, at and prior to the time of
the delivery of the policy, is advised and has full knowledge of the
fact that other insurance upon the property is in force, and with
that knowledge accepts the premium and delivers the policy, Mich
policy is binding upon the company, notwithstanding the fact that
it contains a provision prohibiting the existence of concurrent in-
surance without written consent thereto indorsed on the policy, and
notwithstanding it contains a provision that none of the company's
officers or agents can waive any of its provisions, except in writing
indorsed on the policy. This rule is established hy an overwhelming
weight of authority and it is immaterial whether it is called a waiver
or an estoppel or any other name. The burden of proof in such
cases rests upon the insured to .-how that the agenl of the insurer was
advised and had knowledge of the pre-existing insurance.8 And
knowledge of the agents that the applicant was making false state-
ments as to health, estops insurer, notwithstanding it is stipulated
that the statements in the application shall he binding and that
insurer should not be bound by the agent's knowledge unless
such information be reduced to writing and presented to the head
officers of the insurer in the application.9 So when an applicant for
insurance tells an agent of an accident insurance company, who has
authority to solicit insurance, countersign and issue policies therefor,
facts which are contradictory to statements contained in the appli-
cation, which application the agent procured the applicant to sign,
see notes in 4 L.R.A.(N.S.) 607, and L. J. 1726, citing as supporting the
L.R.A. 1915A, 273. first point, cases from forty-two
7Marston v. Kennebec Mutual states. See §§ 439, 556 et seq. herein.
Life Ins. Co. 89 Me. 226, 56 Am. St. On power of agents to bind in-
Rep. 412, 36 Atl. 389. surer by oral waiver or estoppel in
On parol evidence rule as affected pais as to forfeitures occurring after
by waiver or estoppel in case of issuance of policy and before loss,
fraud or mistake of agent preparing under policy of insurance requiring
application, see note in 16 L.R.A. consent or waiver to be in writing,
(N.S.) 1233. see note in 10 L.R.A. (N.S.) 1064.
8 Western National Ins. Co. v. 9 Rearden v. State Mutual Life
Marsh, 34 Okla. 414, 42 L.R.A. Ins. Co. 79 S. Car. 526, 60 S. E. 1106,
(N.S.) 991, 125 Pac. 1094, 41 Ins. 37 Ins. L. J. 309.
3080
REPRESENTATIONS AND M ISW Ki'KHSENTATIONS § 1905
knowing that he had not read the same, and that his attention had
not been called to such statements, the agent may and will he pre-
sumed to have waived the statements in the printed application on
behalf of the company, and the company will he presumed to have
known all the facts communicated to such agent during the trans-
action and relating thereto. And this, notwithstanding the applica-
tion contains a restriction upon the authority of the agent to make
such waiver; the applicant being ignorant of such restriction, at
least until after the policy is issued, and securities taken for the pay-
ment of the premium.10
It is held, however, that if an application for life insurance con-
tains a warranty of the truth of the answers given therein, and that
such warranty and answers shall form the basis, and be part of the
contract, and, if untrue in any respect, the policy shall be void;
and further, that no statement made to any agent or other person
and not contained in the application shall be considered as having
been brought to the knowledge of the insurer, a willfully false
answer contained in the application avoids the policy, whether
written by the insured or the insurance agent, and in such case, in
the absence of an allegation of fraud or mistake, parol evidence is
not admissible to show that the insurance agent filled out the
answers contained in the application, and that the applicant signed
it at his request, without reading it, or that the applicant gave to
the insurance agent a true answer to the questions in issue.11 And
a beneficial corporation is not estopped to deny the truth of state-
ments contained in an application for membership and insurance
therein by the hearsay information of one. of its officers, who was in
no way charged with the duty of ascertaining the truth or falsity of
such statement.12 A life insurance policy may also be avoided for
false answers written by the agent of the insurance company, after
leaving the presence of the assured, in an application signed in
blank, if the answers so written conform to those actually made by
the applicant.13 Where the defense is misrepresentations as to the
value of a horse, and it appears that the plaintiff could neither read
nor write, and the insurer's agent examined the horse, made every
statement in the application, signed plaintiff's name to the state-
10 Despain v. Pacific Mutual Life 12 Supreme Council of American
Ins. Co. of California, 81 Kan. 722, Legion of Honor v. Green, 71 Md.
106 Pac. 1027, 39 Ins. L. J. 540. See 263, 17 Am. St. Rep. 527. 17 Atl.
Pacific Mutual Life Ins. Co. v. Van 1048.
Fleet, 47 Colo. 401, 107 Pac. 1087, 13 Brown v. Metropolitan Life Ins.
39 Ins. L. J. 951. Co. 65 Mich. 306, 8 Am. St. Rep.
11 R inker v. ^Etna Life Ins. Co. 849, 32 N. W. 610.
214 Pa. SOS, 112 Am. St. Rep. 773,
64 Atl. 82.
3081
§§ 1906, 1907 JOYCE OX INSIK AM'K
ment, she affixing her mark, and then on the back indorsed a state-
ment thai the horse was worth the amount represented, it was held
a case for the jury.14
§ 1906. Statements founded on information from agent. — The
representation may be founded on the advice- or information from
an agent of the assured, who sustains such relations to hi- principal
that his representations are virtually and legally those of his prin-
cipal, in which case the representation based upon such advices will
be material to the same extent as if proceeding from the principal,
even though the assured may himself be innocent. But if the char-
acter of the agency is such that the acts of the agenl in making such
statement- cannot be held to he those of the assured, the rule does
not apply, except within the limit- stated under the next rule;16
and we believe that the assured may in any ease make known that
the advices or information is received from the agent, and expressly
qualify or limit their binding force. This question above con-
sidered i- distinct from that relating to the concealment of material
facts by an agent, where the assured acts in good faith and is inno-
cent. Upon the point of the legal effect of such concealment the
authorities are in conflict.
§ 1907. Positive statements founded on information derived from
others. — The statement may be a positive representation founded
on information derived from others, neither the source of the in-
formation nor the fact that it is derived from others being stated,
in which case it will be material if it operates as an inducement to
making the contract or in fixing the rate of premium.16
14 Smith v. People's Mutual Live Representing information: When
Stock Ins. Co. 173 Pa. St. 15, 33 Atl. a person insured has no personal
567. knpwledge of a fact he may neverthe-
15 Dennistoun v. Lillie, 3 Bligh, less repeat information which he has
202; Fitzherbert v. Mather, 1 Term upon the subject, and which he be-
Rep. 12, opinions of Lord Mansfield, lieves to be true, with the explana-
and Willis, Ashurst, and Buller, JJ. ; tion that he does so on the informa-
Ruggles v. General Interest Ins. Co. tion of others, or he may submit the
4 Mason (U. S. C. C.) 75, per Story, information, in its whole extent, to
J., s. c. 12 Wheat. (25 U. S.) 408, the insurer; and in neither case is
409, 6 L. ed. 674. In this case the he responsible for its truth, unless
agency of the master was held to it proceeds from an agenl of the
have terminated at the time. See insured whose duty it is to give the
Cal. Code provisions noted in § 1908 intelligence. Cal. Civ. Code, sec.
herein. 2578.
As to powers of insured's agent, In England in marine insurance if
see c. XXVII. §§ 60S et seq. herein, representations concerning certain
As to agent's duties, see c. XXVIII. information is submitted to assurer
§§ 655 et seq. herein. to draw bis own conclusions there is
16 McDowell v. Frazer, 1 Doug, no untrue representations even
260. though it proves incorrect. 17 Earl
3082
REPRESENTATIONS AND MISREPRESENTATIONS §§1908-l"Ul
§ 1908. Statements not positive based on information from
others. — If the representation, although based upon the information
of others, is not positive, but is made in good faith, without fraud,
and the assured makes known that his information is derived from
others and submits the same, he does not undertake for the truth
of the facts, but only for the truth of the information.17
§ 1909. Positive statement defining time of commencement of
risk. — The statement may be a positive representation, material in
that it really defines the time when the assured's right to the pro-
tection of the insurance shall attach; as where the ship in a policy
"at and from" was represented to be at a certain port on a certain
day, in which case it would be in the nature of a warranty that the
ship was safe in port at the day named.18
§ 1910. Facts actually material but not relied on by insurer. —
The misrepresentation may be of a fact actually material to the risk,
but the circumstances may clearly evidence that the insurer did not
rely upon it, but upon other matters, in forming his judgment, and
it does not therefore operate as an inducement to enter into the con-
tract or in fixing the rate of premium, in which case its falsity will
not be fatal, for the circumstances make the fact immaterial.19
This applies also to an indemnity policy against loss of divi-
dends.20
§ 1911. Matters of description or facts relating to property. — The
representation may be matter merely of description or facts relating
to the property insured ; its occupancy, use, or interest of the insured
therein. It is material if it induces the risk or affects the rate of
premium.1 But a representation is immaterial if it appears not to
of Halsbury's Laws of England, p. the intelligence :" Deering's Annot.
414. Civ. Code Cat. sec. 2578.
17 Tidmarsh v. Washington Fire & 18 Kemble v. Bonne, 1 Caines (N.
Marine Ins. Co. 4 Mason (U. S. C. Y.) 75.
C.) 439, Fed. Cas. No. 14,024, per 19 Flinn v. Headlam, 9 Barn. & C.
Story, J.; Williams v. Delafield, 2 093. See Commonwealth Ins. Co.
Caines (N. Y.) 329. See note to v. Monninger, 18 Ind. 352. Era wine
last section. Bankers Union of the World v. Mix-
The California code provides that, on, 74 Neb. 36, 103 N. W. 1049.
''when a person insured has no per- See § 1916 herein,
sonal knowledge of a fact, he may, 20 Liverpool & London & Globe Ins.
nevertheless, repeat information Co. v. Lester, — Tex. Civ. App. — ,
which he has upon the subject, and 176 S. W. 602.
which he believes to be true with * Illinois. — Howard Fire & Marine
the explanation that he does so on Ins. Co. v. Cornick, 24 111. 455.
the information of others, or he may Massachusetts. — Dolliver v. St.
submit the information in its whole Joseph Fire & Marine Ins. Co. 131
extent to the insurer; and in neither Mass. 39.
case is he responsible for its truth, Minnesota. — Everett v. Continental
unless it proceeds from an agent of Ins. Co. 21 Minn. 76.
the assured whose duty it is to give New York. — Jackson v. St. Paul
3083
§ 1911 JOYCE ON [NSURANCE
have been considered by either party as important,8 and an im-
material description will not avoid the policy.8 And statements in
an application concerning the condition or value of the property,
are immaterial and cannol be fraudulent where the policy is sub-
ject to the statute requiring the Insurer to cause a personal examina-
tion to be made, and a full description of the property given, and its
insurable value fixed in the policy.4 And a misdescription of the
property does not avoid the policy where the building covered is
the one intended by the parties;5 or where it is not a question
whether the description is sufficient to carry title, or to identify
property conveyed or transferred, hut only an objection which goes
to the identification of the locus in quo of the building, and in such
case the intention of the parties may be shown.6 Although the
description in the representation max- differ very considerably from
the actual state of the property insured, if such variation were not
fraudulently intended, and did not in fact ailed the rate of insur-
ance or change the actual risk, the policy is not avoided.7 So where
the building insured was represented as a "one-story, shingle roof,
box and frame building," and it was covered with clapboards in-
stead of shingles, and was in reality constructed of logs cut and laid
one upon another and had but a slight box-frame addition thereto,
it was held that it must appear, in order to avoid the policy for a
false representation, that the risk was increased by reason thereof,
or that the insurer was thereby induced to accept the risk or to fix
the rate of premium lower than he otherwise would have done had
the actual facts been known.8 Where the building was described as
a "story and a half hard-finished frame boarding-house building,''
and the upper story was cloth finished, it was held merely a misrep-
Fire & Marine Ins. Co. 33 Hun (N. 3 Continental Ins. Co. v. Kasev, 25
Y.) 60; Hobby v. Dana, 17 Barb. (N. Gratt. (Va.) 268, IS Am. Rep. 681;
Y.) 111. Howard Fire & Marine Ins. Co. v.
North Carolina. — Hayes v. United Corniek, 24 111. 455; Atborton v.
States Fire Ins. Co. 132 N. Car. 702, British America Ins. Co. 91 Me. 289,
44 S. E. 404, 32 Ins. L. J. 764. 39 Atl. 1006.
Pennsylvania. — Frisbie v. Fayette 4 Queen Ins. Co. v. Leslie, 47 Ohio
Mutual Ins. Co. 27 Pa. St. 325. St. 40!). !> L.R.A. 45, 24 N. E. 1072.
England. — Bufe v. Turner, 6 5 Hartford Fire Ins. Co. v. Moore,
Taunt. 338, 2 Marsh. 46. 13 Tex. Civ. App. 644, 36 S. W.
As to encumbrances, see §S 2015 146.
el seq. herein. As to title, interest, 6 Baker v. State Ins. Co. 31 Oreg.
ownership, see §§ 2026 et seq. herein. 41, 65 Am. Rep. 807, 27 Ins. L. J.
As to use and occupation, see §§ 86.
2101 et seq. berein. As to misrepre- 7 Jefferson Ins. Co. v. Cotheal, 7
sentations and statutes, see § 1916 Wend. (N. Y.) 72, 22 Am. Dec.
berein. 567.
2 Boardman v. New Hampshire 8 Germania Fire Ins. Co. v. Deck-
Mutual Fire Ins. Co. 20 N. H. 551. ard, 3 Ind. App. 361, 28 N: E. 868.
30S4
REPRESENTATIONS AND MISREPRESENTATIONS § 1911
reservation, but one which would avoid the contract.9 So any mis-
representation of a material fact in describing the property avoids
the contract,10 and if in the description or designation of the build-
ings in which the goods insured are located there is misrepresenta-
tion of a materia] fact, the contract is vitiated.11 The description of
a building intended to be insured filed in the office of the company
is not a warranty that the building shall correspond in all respects
with it, but only in substantial respects.12 So a misdescription of a
building by a mistake of the surveyor, in stating that a stone par-
tition running through the building extended to the level of the
roof, when in fact it was several feet below that level, will not avoid
a policy on a stock of goods described as contained in such building
where the risk is not shown to have been materially increased.13
And describing a building in an insurance policy as a five-story
brick building, making no mention of a cellar under it, is not a
misdescription, which will avoid the contract, though there is a
cellar under the building.14
If a misrepresentation or breach of warranty as to the condition
of a flue is sought to be availed of by insurer it is estopped by its
agent's knowledge of such condition.15 And its agent's knowledge
of all the facts concerning the property operates to estop insurer
from claiming a forfeiture by reason of false representations as to
the manner in which the chimneys in the insured building were
constructed and the arrangement thereof, especially so where said
agent wrote the application.16 So questions as to the condition of
walls and openings therein will not be held a warranty where, after
a subsequent inspection of the premises by special agent of insurer,
the old policy was canceled and a new one issued for an additional
premium.17 It is a question for the jury whether the misdescription
of the risk is material as where it was described as a brick building
but it was not stated that it had a frame addition, but the fire caus-
ing the loss did not originate therein nor extend thereto and the
risk was inspected by insurer's agent.18
9 Jackson v. St. Paul Fire & 14 Benedict v. Ocean Ins. Co. 31 N.
Marine Ins. Co. 33 Hun (N. Y.) 60, Y. 389.
one judge dissenting. 15 Wooldridge v. German Ins. Co.
10 Bute v. Turner, 6 Taunt. 338, 69 Mo. App. 413.
2 Marsh. 46. 16 Rickey v. German Guarantee
11 Prudhomme v. Salamander Fire Town Mutual Fire Ins. Co. 79 Mo.
Ins. Co. of New Orleans, 27 La. Ann. App. 485, 2 Mo. App. Repr. 472.
695. "Phoenix Ins. Co. v. Padgitt, —
12 Delonguemare v. Tradesmen's Tex. Civ. App. — , 42 S. W. 800.
Ins. Co. 2 Hall (N. Y.) 589. 18 Landes v. Safety Mutual Fire
13 Farmers' Ins. Co. v. Snyder, 16 Ins. Co. 190 Pa. 536. 42 Ail. 961, 28
Wend. (N. Y.) 4S1, 30 Am. Dec. 118. Ins. L. J. 564. See § 1898 herein.
3085
§ 1912 JOYCE ON INSURANCE
§ 1912. Facts rendered material by stipulation: statements stip-
ulated to be true and basis of contract. — A representation may by
express stipulation be made material, in the sense that an in-
quiry into its materiality is thereby precluded, and the insured
will lie bound in such case, even though the fact he actually
immaterial. The truth of the statements being generally made
in such cases the basis of the contract, it is sufficienl to show
thai they are actually untrue.19 So where the policy contained the
clause that if the proposal, answers, and declarations, which were
made part of said policy and which assured declared to he absolutely
true, should he in any respect false or fraudulent, the policy should
he void, such statement:- must, by agreement of the parties, he abso-
lutely true; and if untrue in any respect, however immaterial, the
policy is void.20 And while warranties are not to be created by
19 Maryland. — Mutual Life Ins. of England, sec. 1101, p. 555, title
Co. v. Robinson, 11". Md. 408, 80 Ail. "Life Insurance."
1085, 40 Ins. L. J. 19G7. What clear intent necessary to
Massachusetts. — Cobb v. Covenant make immaterial matters part of
Mutual Benefit Assoc. 15:5 Mass. 176, policy either as representation or
25 Am. St. Rep. 619, 10 L.R.A. 666, warranty, see Baltimore Life Ins. Co.
26 N. E. 230. v. Floyd, 5 Boyce (28 Del.) 201, 91
Minnesota. — Stensgaard v. St. Atl. 653, s. c. 5 Boyce (28 Del.)
Paul heal Estate Title Co. 50 Minn. 431, 94 Atl. 515.
429, 17 L.R.A. .".7.-), 52 N. W. 910; 802Etna Life Ins. Co. v. France,
Price v. Phoenix Mutual Life Ins. use of Selvage, 91 U. S. 510, 23 L.
Co. 17 .Minn. 497, 10 Am. Rep. 1G6. ed. 401. Cited in:
New Jersey. — Glutting v. Metro- United States. Moulor v. Ainer-
politan Life Ins. Co. 50 N. J. L. 287, ican Life Ins. Co. Ill U. S. 335,
13 Atl. 4, 11 Cent. Rep. 348. 341, 28 L. ed. 449, 1 Sup. Ct.
New York. — Higbee v. Guardian 466; Knickerbocker Life Ins. Co.
Mutual Life Ins. Co. 53 N. Y. 603; v. Trefz, 104 U. S. 197, 202, 26 L.
Duncan v. Sun Fire Ins. Co. 6 Wend. ed. 710; National Surety Co. v. Long,
(N. Y.) 488, 22 Am. Dec. 539. L25 Fed. 892, 60 C. C. A. 628;
Oklahoma. — Deming Investment Standard Life & Accident Ins. Co.
Co. v. Shawnee Fire Ins. Co. 16 Okla. v. Sale, 121 Fed. 667, 57 C. C. A.
1, 83 Pac. 918, 35 Ins. L. J. 241, 42 421, 61 L.R.A. 339; Security Mutual
L.R.A. (X.S.i 207n (statements were Life Ins. Co. v. Webb, 106 Fed.
also made warranties). 808, 45 ('. C. A. 651, 55 L.R.A. L29;
Pennsylvania. Pottsville Mutual Rice v. Fidelity & Deposit Co. 103
Fire Ins. Co. v. Boran, 89 Pa. St. Fed. 430, 43 C. C. A. 273; Hubbard
438. See also Rinker v. iEtna Life v. Mutual Reserve Fund Life Assoc.
[ns. Co. 214 Pa. 808, 112 Am. Rep. 100 Fed. 722,40 C. C. A. 667; Hunt
773. 64 Atl. 82 (considered under § v. Fidelity & Casualty Co. 99 Fed.
1905 herein). 245, 39 C. C. A. 499; American
Washington. — Miller v. Com- Credit Indemnity Co. v. Carrolltou
mercial Union Assur. Co. 69 Wash. Furniture Mfg. Co. 95 Fed. 113, 36
529, 125 Pac 7S2, 41 Ins. L. J. 1599. C. C. A. 673; Brady v. United Life
See § 1916 herein. Ins. Co. 60 Fed. 729, 9 C. C. A. 254,
See 17 Earl of Halsbury's Laws 20 U. S. App. 337; Hoffman v. Su-
:;iisi;
REPRESENTATIONS AND MISREPRESENTATIONS § 1912
construction, and such statements are not actually warranties, such
stipulations are in the nature of and have the effect of warranties,
and must be strictly complied with so far as they are expressly and
in terms declared, for the parties have by their agreement made the
facts to which they relate material,1 or, as is said in a case in Mississ-
prerae Council American Legion of Knights & Ladies of Honor, 100 Mo.
Honor, 35 Fed. 253; Trefz v. 36, 47, 13 S. W. 495.
Knickerbocker Life Ins. Co. 6 Ins. New Hampshire. — Ball v. Granite
L. J. 853, Fed. Cas. No. 14,160; State Mutual Aid Assoc. 64 N. H.
Metropolitan Life Ins. Co. v. Harper, 291, 292, 9 Atl. 103.
3 Hughes, 260, 266, Fed. Cas. No. North Carolina. — Dupree v. Vir-
9,505. ginia Home Ins. Co. 92 N. Car. 417,
Alabama. — Kelly v. Life Ins. 436.
Clearing Co. 113 Ala. 453, 465, 21 Ohio.— Connecticut Mutual Life
So. 361; Commercial Fire Ins. Co. Ins. Co. v. Pvle, 44 Ohio St. 19, 30,
v. Allen, 80 Ala. 571, 577, 1 So. 202; 58 Am. Rep. 781, 4 N. E. 465.
Alabama Gold Life Ins. Co. v. Johns- Pennsijlvania. — Lennox v. Green-
ton, 80 Ala. 467, 475, 60 Am. Rep. wich Ins. Co. 29 Pittsh. L. J. (N. S.)
112, 2 So. 125; Alabama Gold Life 279, 281, 9 Atl. 171.
Ins. Co. v. Garner, 77 Ala. 210, 215; Tennessee. — McCarthy v. Catholic
Fire Ins. Co. v. Felrath, 77 Ala. 194, Knights, 102 Tenn. 345, 351, 52 S.
199, 54 Am. Rep. 58. W. 142.
Dakota. — Waterbury v. Dakota Vermont. — Powers v. North East-
Fire & Marine Ins. Co. 6 Dak. 468, ern Mutual Life Assoc. 50 Vt. 630,
475, 43 N. W. 697. 636.
Iowa. — Xelson v. Nederland Life Wisconsin. — Boyle v. Northwestern
Ins. Co. 110 Iowa, 600, 602, 81 N. Mutual Relief Assoc. 95 Wis. 312,
W. 807 ; Stewart v. Equitable Mutual 319, 70 N. W. 351 ; Blumer v. Phoenix
Life Ins. Co. 110 Iowa, 528, 531, 81 Ins. Co. 45 Wis. 622, 654.
N. W. 782. Distinguished in Alabama Gold
Kansas. — Johnson v. Massachusetts Life Ins. Co. v. Johnston, 80 Ala.
Benefit Assoc. 9 Kan. App. 238, 244, 467, 475, 60 Am. Rep. 112, 2 So. 125 ;
59 Pac, 669. Equitable Life Ins. Co. v. Hazel-
Louisiana— Weil v. New York wood, 75 Tex. 338, 346, 7 L.R.A. 221,
Life Ins. Co. 47 La. Ann. 1405, 1419, 16 Am. St. Rep. 893, 12 S. W. 621.
17 So. 853. x Albama Gold Life Ins. Co. v.
Maine.— Johnson v. Maine & N. B. Garner, 77 Ala. 210; Philadelphia
Ins. Co. 83 Me. 182, 188, 22 Atl. v- Phoenix Mutual Life Ins. Co. 17
207. Minn. 497. Compare Title Guar-
Massachusetts.— Cobb v. Covenant *nt,ee & Sur,etyC°- J- ^ank °?
Mutual Benefit Assoc. 153 Mass. 176, ,F.!\lton' f A*k- 4'h 33 ^•^•^
178, 10 L.R.A. 667, 25 Am. St. Rep. f 6> Tanc] ?£>e' £7 S/ W: 53'< 3S
619 ?6 N E 930 ' c}tm9 American Pop-
Michigan. — Tobin v. Modern
Woodmen of America, 126 Mich.
161, 168, 85 N. W. 472.
Mississippi. — Co-operative Life
Assoc, v. Leflore, 53 .Miss. 1, 15.
ular Life Ins. Co. v. Dav, 39 X. J.
L. 89, 23 Am. Rep. 198. See §§ 1890,
1891 herein.
As to misrepresentations and stat-
utes, see § 1916 herein.
In England in life insurance een-
Missouri.— Aloe v. Mutual Reserve erally it is expressly stipulated in the
Life Assoc. 147 Mo. 561, 575, 49 S. policy, or in conditions endorsed
W. 553 ; Whitmore v. Supreme Lodcre therein, that the declaration is true
'3087
§ 1912 JOYCE ON INSURANCE
ippi, all stipulations and conditions contained in the body of an in-
surance policy are warranties, to the absolute truth of which the
parties have pledged themselves by their agreement, which precludes
any inquiry into their materiality, and any deviation from the
truth thereof will defeat a recovery, and in this respeel the same is
true of statement- contained in other papers or documents expressly
referred to or otherwise clearly made a part thereof, and no dis-
tinction exists in this regard between insurance policies and other
contracts.2 It is also held thai it', taking the whole instrument to-
gether, it is obvious that insurance companies have made the strict
and literal exactness of the answers to certain questions a condition
of the contract of insurance and a warranty on the part of the in-
sured, they cannot he deprived of the advantage thus secured, for
they have a legal right to say that they will determine for them-
selves what is or is not material to the risk, and will base their con-
tract upon the answers of the insured to specific interro.uatotie-.3
So where a life policy stipulates that it shall be void if certain state-
ments, upon the faith of which the agreement is made, are untrue
in any respect, the representation is thereby made a part of the con-
tract, and the statements become material so as to preclude an in-
quiry into their materiality or immateriality, leaving the only ques-
tion of fact to be determined to be simply whether they are true or
false, and if false the policy is vitiated.4 And it is even decided that
where a policy is made and accepted on the express condition that
the statements in the application are a part of the contract and are
in all respects true, that this stipulation is made as to all statements
irrespective of their materiality to the risk and whether they are
deemed warranties or not.5
and is to tic taken as the basis of Indiana. — Mutual Benefit Life Ins.
the contract and in effect is a war- Co. v. Miller, 39 Ind. 475.
ranty of the truth, and if anything Massachusetts. — Campbell v. \ew
slated is untrue, whether to the England Ins. Co. 98 Mass. 381.
knowledge of assured or not, or ]^ew York.—Yoot v. iEtna Life
whether material or not, the contract jns qq 4 ]);lIv (X Y ) 285' Monk
is avoided. 17 Earl of Halsbury's v. Union Mutual Life Ins. Co.' 6 Rob.
Laws 01 England, sec. 1101, p. 555, ,^- y ) 455
"Life Insurance." At.-" tt • n *. 1 t •*> t
9 r, T -n A T Ohio. — Union Central Life Ins.
* Co-operative Lite Assoc, v. Le- n n. or „,. „ om OQ
flore, 53 Miss. 1. <Jo. v Cheever, 36 Ohio St. 201, 38
3Tebbetts v. Hamilton Mutual Am. hep. 5,3
Ins. Co. 1 Allen (S3 Mass.) 305, 79 England.— Anderson v. Fitzgerald,
Am. Dec. 740. 4 H. L. Cas. is I, 17 Jur. 995;
4Dav v. Mutual Benefit Life Ins. Sceales v. Scanlan, 6 Ir. L. 367, rev'g
Co. 1 MacAr. (8 Dist. Col.) 41, 29 5 Ir. L. 139. See Scanlan v. Sceales,
Am. Rep. 565n, aff'd 95 U. S. 380, 13 Ir. L. 71.
24 L. ed. 499. See §§ 1848, 1849 herein.
See also the following cases: 5 Jeffries v. Economical Life Ins.
3088
REPRESENTATIONS AND MISREPRESENTATIONS § 1U12
So an express sti|mlation that the policy will be void unless the
statements, representations or answers are full, true, and complete,
and that the policy is issued in consideration of the premium or
fees paid, such statements must be complied with as it calls for
truth in fact, full and complete, and if they are not so the con-
tract is void in the absence of waiver or estoppel, regardless of as-
sured's sincerity or belief at the time that his answers met such re-
quirement.6 And where the application provides that the answers
and statements therein are wholly true and form the bases of the
contract, and the policy stipulates thai it is issued in consideration
of the premium and the application therefor, a copy of which is at-
tached to and made a part thereof, and that all statements shall,
in the absence of fraud, be deemed representations and not war-
ranties, and the misrepresentations are not mere matters of opinion
but of facts, which are all material resulting in the issue of a policy
on a risk entirely different from that which insurer believed it had
Co. 22 Wall. (89 IT. S.) 47, 22 L. Ohio.— Queen Ins. Co. v. Leslie,
ed. 833. Cited in : 47 Ohio St. 409, 465, 9 L.R.A. 47, 24
United States. — Phoenix Mutual N. E. 1072; Connecticut Mutual Life
Life Ins. Co. v. Raddin, 120 U. S. Ins. Co. v. Pyle, 44 Ohio St. 19, 30,
183, 189, 30 L. ed. 646, 7 Sup. 58 Am. Rep. 781, 4 N. E. 465.
Ct. 500; Knickerbocker Life Ins. Texas. — Equitable Life Ins. Co. v.
Co. v. Trefz, 104 U. S. 197, 202, 26 Hazelwood, 75 Tex. 338, 345, 7
L. ed. 710; American Credit Indem- L.R.A. 221, 16 Am. St. Rep. 893, 12
nitv Co. v. Carrollton Furniture S. W. 621.
Manufacturing Co. 95 Fed. Ill, 113, But compare Fidelity Mutual Life
36 C. C. A. 673; Hoffman v. Su- Ins. Co. v. Miazza, 93 Miss. 18, 46
preme Council American Legion of So. 817, 37 Ins. L. J. 810, considered
Honor, 35 Fed. 253. under § 1899 herein. And examine
Alabama. — Alabama Gold Life Ins. the opinion of Dunbar, J., in Port
Co. v. Johnston, 80 Ala. 467, 475, 60 Blakely Mill Co. v. Springfield Fire
Am. Rep. 112, 2 So. 125. & Marine Ins. Co. 59 Wash. 501,
Dakota.— Waterbury v. Dakota 28 L.R.A. (N.S.) 596, 140 Am. St.
Fire & Marine Ins. Co. 6 Dak. 468, Rep. 863, 110 Pac. 36, 39 Ins. L. J.
475, 43 N. W. 697. 1447, and in which case it was de-
Maine. — Johnson v. Maine & N. clared in a dissenting opinion, per
B. Ins. Co. 83 Me. 182, 188, 22 Atl. Morris, J., that : "The majority
107. opinion as herein expressed wipes
Missouri. — Whitmore v. Supreme out the law of warranty in this state,
Lodge Knights & Ladies of Honor, a principle that is as old and well
100 Mo. 36, 47, 13 S. W. 495; Conti- founded as any other principle in in-
nental National Bank v. Farris, 77 surance law," s. c. 56 Wash. 681, 28
Mo. App. 196. L.R.A. (N.S.) 503, 106 Pac. 194, 39
Neiv Hampshire. — Ball v. Granite Ins. L. J. 352.
State Mutual Aid Assoc. 64 N. H. As to representations, warranties
291, 292, 9 Atl. 103. and statutes, see § 1916 herein.
New York. — Gaines v. Fidelity & 6 Herman v. Fraternities Health &
Casualty Co. 87 N. Y. Supp. 821, Accidenl Assoc. 107 Me. 368, 78 Atl.
93 App. Div. 528. 462, 40 Ins. L. J. 466.
Joyce Ins. Vol. III.— 194. 3089
§ L913 JOYCE ON INSURANCE
assumed, the contract is void whether insured know thai the state-
ments were or were not false7 So it is decided thai where the ap-
plication states, and the policy is made and accepted upon the ex-
press condition and agreement, thai the statements and declarations
contained in said application arc in all respects true, and that in
case of the violation of the foregoing condition the policy shall
become null and void, the answers in the application are to be held
as warranties.8 A clause in an insurance policy thai it' any false or
erroneous representations or concealmenl material to the risk are
made by the applicant, the policy shall he null and void, will not
lender the policy absolutely void in case of such representations,
but merely voidable at the election of the insurer.9 If a lire insur-
ance policy is conditioned to be void "in case of any misrepresenta-
tion, whatever," any misrepresentation, whether material or not,
will avoid it.10 And where the evident purpose of an agreement to
repair a defect in insured premises is to reduce the risk and the
premise is relied on by assurer it is material and it is of no im-
portance whether it is a representation or a warranty as there is a
breach for failure to repair.11
§ 1913. Statement limited as to its effect by assured. — A rep-
resentation may he a statement of fact, the eU'ect of which is ex-
pressly limited by the assured at the time of making the same. In
such ease the limitation will be in the nature of a stipulation by the
assured, agreed upon by the assurer as to the effect of the representa-
'Kasprzvk v. Metropolitan Life Life Tns. Co. 4 Dill. 177, 181, Fed.
Ins. Cm. IK) N. Y. Supp. 511, 79 Cas. No. 17,545.
Mis.-. !,V|>. 263, 42 Ins. L. J. 607. Alabama.— Alabama Gold Life
See § 1916 herein. Ins. Co. v. Garner, 77 Ala. 210, 215.
8 Jeffries v. Economical Mutual Missouri. — ('allies v. Modern
Life Ins. Co. 22 Wall. (89 U. S.) 47, Woodmen of America, 98 Mo. App.
22 L. ed. 833. Cited in: 521, 52!). 72 S. \Y. 713.
United Slates. National Surety Rhode Island. — Sweeney v. Metro-
Co. v. Long, 125 Fed. 887, 892, politan Life Ins. Co. 19" R. I. 171,
60 C. C. A. 623, 628; Rice v. Fi- 172, 38 L.R.A. 297, 61 Am. St. Rep.
delity & Deposit Co. 103 Fed. 427, 751, 36 Atl. 9.
430, 43 C. C. A. 270, 27:5; Eub- West Virginia.— Schwartzbach v.
bard v. Mutual Reserve Fund Life Ohio Valley Protective Union, 25 W.
Assoc. 100 Fed. 71!), 722, 40 C. Va. 622, 653, 52 Am. Rep. 227.
C. A. 665, 667; Hunt v. Fidel- As to statutes, see ^ L916 herein.
itv & Casualty Co. 99 Fed. 242, 245, 9 St. Paul Fire & Marine Ins. Co.
3!) C. C. A. 496, 499; Kelley v. Mutu- v. Neideeken, 6 Dak. 494, 43 N. W.
al Life Ins. Co. 75 Fed. '637, 643; 696.
Brady v. United Life Insurance 10 Graham v. Fireman's Ins. Co. 87
Assoc. 60 Fed. 727, 729, 9 C. C. A. N. Y. 69, 41 Am. Rep. 349.
252, 254, 20 U. S. App. 337; Metro- "Mendenhall v. Farmers' Ins. Co.
politan Life Ins. Co. v. Harper, 3 of Kokomo, 183 Ind. 694, 110 N. E.
Bughes, 260, 266, Fed. Cas. No. 9,- 60, 47 Ins. L. J. 55.
505; White v. Connecticut Mutual
3090
REPRESENTATIONS AND MISREPRESENTATIONS § 1914
tion. Thus, in a marine risk the refusal to warrant will show the
intention of the assured not to be bound by other than whal the rep-
resentation imports of itself; as where the good- are represented
neutral property, but is coupled with a refusal to warrant them
neutral, in which case a sentence of condemnation of a foreign courl
will not ho admitted to falsify the representation.12
§ 1914. Facts stated in answer to inquiries.— By making in-
quiry, the fact inquired about is made material, as it is brought into
prominence by very force of the fact that information is thereby
sought concerning that particular matter; 18 and for the same reason
a matter, even though it is not in itself material, is made material
by a specific inquiry, and in both such cases a misrepresentation of
fact avoids the policy, as a general rule; 14 and it is not necessary
12 Nonnen v. Kettlewell, 16 East, Indiana.— Mutual Benefit Life Ins.
176. See Von Tungeln v. Dubois, 2 Co. v. Cannon, 48 Ind. 264.
Camp. 151. See §§ 1915, 1915a, Iowa.— Miller v. Mutual Benefit
herein. Life Ins. Co. 31 Iowa, 216, 7 Am.
13 United States. — Kerr v. Union Rep. 122.
Marine Ins. Co. 130 Fed. 415, 64 C. Maryland.— Mutual Benefit Life
C. A. 617, certiorari denied 194 U. Ins. Co. v. Wise, 34 Md. 582.
S. 635, 48 L. ed. 1160, 24 Sup. Ct. Massachusetts.— Campbell v. New
854. England Mutual Ins. Co. 98 Mass.
l'owa.— Miller v. Mutual Benefit 381 ; Towne v. Fitehburg Mutual Fire
Life Ins. Co. 31 Iowa, 216, 7 Am. Ins. Co. 7 Allen (89 Mass.) 51;
Rep. 122n. Draper v. Charter Oak Fire Ins. Co.
Louisiana.— Brignac v. Pacific 2 Allen (84 Mass.) 509; Jenkins v.
Mutual Life Ins. Co. 112 La. 574, 66 Quincy Mutual Fire Ins. Co. 7 Gray
L.R.A. 32-2, 36 So. 595. (73 Mass.) 370; Clark v. New Eng-
New York. — Fitch v. American land Mutual Ins. Co. 6 Cush. (60
Popular L. Ins. Co. 59 N. Y. 557, 17 Mass.) 342, 53 Am. Dec. 44; Daven-
Am. Rep. 372. port v. New England Mutual Ins.
West Virginia. — Schwartzhach v. Co. 6 Cush. (60 Mass.) 340.
Protective Union, 25 W. Va. 622, Michigan. — North American Fire
655, 52 Am. Rep. 227. Ins. Co. v. Throop, 22 Mich. 116, 7
See cases cited under next follow- Am. Rep. 638.
ing note. Minnesota. — Price v. Phoenix
14 United States.— JEtna Life Ins. Mutual Life Ins. Co. 17 Minn. 497,
Co. v. France, 91 U. S. 510, 23 L. 10 Am. Rep. 166.
ed. 401; Jeffries v. Economical Life New Jersey. — De Wees v. Man-
Ins. Co. 22 Wall. (89 U. S.) 47, 22 hattan Ins. Co. 34 N. J. L. 244.
L. ed. 833; Kerr v. Union Marine New York. — Fitch v. American
Ins. Co. 130 Fed. 415, 64 C. C. A. Popular Life Ins. Co. 59 N. Y. 557,
617, certiorari denied 194 U. S. 635, 17 Am. Rep. 3/2; Brennan v. Se-
48 L. ed. 1160, 24 Sup. Ct, 854. eurity Life Ins. Co. 4 Daly (N. Y.)
District of Columbia.— Bay v. 296; Foot v. JEtna Life Ins. Co. 4
Mutual Benefit Life Ins. Co. 1 Mac- Daly (N. Y.) 285. See Armour v.
Ar. (8 Dist. Col.) 41, aff'd Mutual Transatlantic Fire Ins. Co. 90 N. Y.
Life Ins. Co. v. Higginbothan, 95 U. 450.
S 380, 24 L. ed. 411. North Carolina. — Cuthbertson v.
3091
§ 1914 JOYCE OX INSURANCE
to show thai the fact so inquired about was material to the risk.15
And this is true and the rule above stated applies even though the
fad be one concerning which it may be presumed that the assurer
has knowledge, or one which he might otherwise have easily ascer-
tained by the use of due and reasonable diligence, and although it
be of a fact which the assured would not have been obligated to
have disclosed had no inquiries been made.16 In cases of the char-
acter we are now considering some difference exists between oral
representations and those which are contained in the usual printed
application, since in the latter class of cases either the application
or the policy, or both, generally stipulate that the statements in the
application are made the basis of the contract, or the application is
by express reference or otherwise clearly made a part of the con-
tract.17
Although the general rule is that above stated, yet, as we have
seen under a prior chapter, many cases have upheld the doctrine
that in life risks the statement that the applicant has never had any
serious illness will be construed to mean that the applicant has
never been so seriously ill as to permanently impair his constitution
and render the risk unusually hazardous, and also that where the
state of the insured's health is good, and he is actually in a sound
physical and mental condition at the time, and honestly believes
that the answers relative to his health arc true, the fact that he has
had some slight disease, etc., will not nec&ssarily render the policy
void.18 In Nevada, the court has seriously questioned whether an
inquiry into the materiality of a statement in answer to a question
is admissible, the assured having acted in good faith and the fact
North Carolina Home Ins. Co. 96 N. Ins. Co. 22 Wall. (89 U. S.) 47, 22
C. 480, 2 S. E. 258. L. ed. 833; iEtna Life Ins. Co. v.
Rhode Island.— Wilson v. Conway France, 91 U. S. 510, 23 L. ed. 901.
Ins. Co. 4 R. I. 141. 17 See Byers v. Farmers' Ins. Co.
Vermont.— Mullin v. Vermont 35 Ohio St. 606, 35 Am. Rep. 603;
Mutual Fire Ins. Co. 54 Vt. 323. Cobb v. Covenant Mutual Benefit
England. — Macdonald v. Law Assoc. 153 Mass. 176, 25 Am. St.
I 'm..„ Fire & Life Ins. Co. 9 L. R. Rep. 619, 10 L.R.A. 666, 26 N. E.
Q. B. 328, 43 L. J. Q. B. 131. 230.
15 Jeffries v. Economical Life Ins. 18 See Illinois Masons' Benevolent
Co. 22 Wall. (89 U. S.) 47, 22 L. Soc. v. Winthrop, 85 111. 537; Morri-
ed. 833; iEtna Life Ins. Co. v. son v. Wisconsin Odd Fellows Mutual
France, 111 U. S. 510, 23 L. ed. 401. Life Ins. Co. 59 Wis. 162, 18 N. W.
Rule modified by statute, see Mc- 13. See §§ 1848, 1849, 2003 herein.
Kwen v. New York Life Ins. Co. 23 As to misrepresentations and stat-
Cal. App. 694, L39 Pae. 242, 43 Ins. utes, see § 1916 herein.
L. J. 546, see S L916 herein. On innocent misrepresentation as
16 See Mackintosh v. Marshall, 11 to health, see notes in 53 L.R.A. 193,
Mees. & W. L16, 12 L. J. Ex. 337; and 15 L.R.A.(N.S.) 1277.
Jeffries v. Economical Mutual Life
3092
REPRESENTATIONS AND MISREPR KSK STATIONS § 1014
being clearly immaterial.19 In certain cases a departure from the
rule might be justified by the fact that the terms of the contract are
such as to leave room for construction, in which case the familiar
rule applies that courts are inclined to construe the contract in favor
of the assured.20 Thus, in construing the answers to the interroga-
tories in a printed application for fire insurance, although the proper
meaning of the words used are to be first resorted to, yet the mean-
ing attached by the applicant to them and clearly ascertainable
from the connection in which he uses them is to prevail over their
proper meaning.1 So inaccuracies in the answers to such inter-
rogatories caused by the ambiguity of the same, taken in connection
with each other, are to be charged to the account of the insurers who
prepared the applications.2
In support of the rule above given it may be argued that in
marine risks, where the rule of strict construction obtains in matters
of representation, it is a reasonable presumption that the insurer,
in asking a question upon a specific point, desires that information
thereon as a material factor in enabling him to form his judgment
or determine whether or not he will assume the risk and at what
premium, and it is equally reasonable to conceive that the insured
must have so understood and answered the inquiry. In case of oral
19 Gerhauser v. North British & New Hampshire Mutual Life Ins. Co.
Mercantile Ins. Co. 6 Nev. 15. 20 N. H. 551, 557.
See the following eases : New York.— Dilleber v. Home Life
United States.— Maulor v. Ameri- Ins. Co. 60 N. Y. 256, 25 Am. Rep.
can Life Ins. Co. 101 U. S. 708, 25 182 ; Fitch v. American Popular Life
L. ed. 1077, s. c. Ill U. S. 335, 28 Ins. Co. 59 N. Y. 557, 17 Am. Rep.
L. ed. 447, 4 Sup. Ct. 466; Conover 372, rev'g s. c, 2 N. Y. Sup. Ct. 24, ;
v. Massachusetts Mutual Life Ins. Mallory v. Travelers' Ins. Co. L N.
Co. 3 Dill. (U. S. C. C.) 217, Fed. Y. 52, 7 Am. Rep. 416.
Cas. No. 3,121. Pennsylvania. — Lebanon Mutual
Connecticut.— Hough v. City Fire Ins. Co. v. Losch, 109 Pa. St. 100.
Ins. Co. 29 Conn. 10, 76 Am. Dec. Virginia.— Virginia Fire & Marine
581. Ins. Co. v. Kloeber, 31 Gratt. (Va.)
Indiana. — Phomix Ins. Co. v. 749.
Wilson, 132 Ind. 449, 25 N. E.- 592, O n tario. — Reddick v. Sauseen
20 Ins. L. J. 73. Mutual Fire Ins. Co. 14 Ont. Rep.
Iowa.— Eddv v. Hawkeye Ins. Co. (Q. B. Div.) 506.
70 Iowa, 472, 59 Am. Rep. 444, 30 20 Alabama Gold Life Ins. Co. v.
N. W. 808. Johnson, 80 Ala. 467, 59 Am. Rep.
Kentucky.— Germania Ins. Co. v. 816, 2 So. 125. See §§ 220 et seq.
Rudwig, 80 Ky. 223. herein.
Massachusetts. — Wood v. Fire- x Wilson v. Hampden Fire Ins. Co.
man's Ins. Co. 126 Mass. 316. 4 R. I. 159.
Michigan. — Hoose v. Prescott Ins. 2 Wilson v. Hampden Fire Ins. Co.
Co. 84 Mich. 309, 47 N. W. 587, 11 4 R. I. 159. See Lebanon Mutual
L.R.A. 340. Ins. Co. v. Losch, 109 Pa. St. 100.
New Hampshire. — Boardman v.
3093
§ 1914a
JOYCE ON IXSUKANCE
answers in other risk.-, the same presumption could fairly be held to
exist, [f the answer is made to printed interrogatories, no reason
exists on thai ground why the rule should be relaxed, and if the
statemenl in the application is stipulated to be mat. 'rial, or if it is
made a warranty, there is a still greater reason for the enforcement
of the rule.3 If. however, the contract be of thai class so worded as
to leave a loophole of escape to the insurer in any event, and such
that the assured cannot safely answer, if he answer at all. then there
mighl be a case of ambiguity warranting a construction againsl the
insurer.4 Bui what ha- been -aid upon the -oiuewhat analogous
question of concealment would perhaps have some bearing here,
although the case of a positive representation in answer to a specific
interrogatory would presenl a distinguishable point.5
§ 1914a. Same subject: presumptions: false answers. — While
it is a presumption that statements and answers in an application
for life insurance are true,* still the falsity of answers constitutes a
defense when their truthfulness is a condition upon which recovery
may he had.7 And where the application state-, and the policy is
made and accepted upon the express condition and agreement, that
the statements and declarations contained in said application are in
all respects true, this stipulation is held made as to all statements,
whether material or not ; and a false answer to an inquiry whether
the applicant has made any other application to have his life in-
sured, and whether he is married or single, will avoid the policy.8
3 Tti relation to a contract of this
character the words of Lord Chan-
cellor Cranworth are pertinent, lie
says: "Nothing can he more reason-
able than that the parties entering
into the contract should determine
for themselves what they think to
he material, and if they choose to do
SO, to stipulate that unless the as-
sured shall answer a question ac-
curately, the policy or contract which
they are entering into shall be void,
it is perfectly open to them to do so,
and this false answer will then avoid
the policy:" Anderson v. Fitzgerald,
1 II. P. '('as. 4S4, 513, 17 Jur. 995,
quoted in Thompson v. W'eems, 9 L.
K. A pp. Cas. 671. And see Wood v.
Eartford Ins. Co. 13 Conn. 544.
4 Sec Pitch v. American Popular
Life Ins. Co. 59 N. Y. 557, 17 Am.
Rep. 372, rev'g 2 X. V. Sup. Ct. 247;
Wilson v. I lampden fire Ins. Co. 1
R. I. 159.
5 See §§ 1848, 184!) herein.
6 Yore v. Booth, 110 Cal. 238, 52
Am. St. Rep. SI. 42 Pac. 808;
O'Connell v. Supreme Conclave
Knights of Damon, t02 Ga. 1 13, 28
S. K. 282; Marston v. Kennebec
Mutual Life Ins. Co. 89 Mr. 266, 56
Am. St. Rep. 412, 36 Atl. 389.
7 Jefferson v. Supreme Tent
Knights of Maccabees <>t' the World,
152 111. A pp. 1242. See § 1894 here-
in, and cases throughout this chapter
and the chapter on particular repre-
sentations, etc, >;>; 1987 et seq. here-
in.
As to statutes, see § L916 herein.
8 Jeffries V. Economical Mutual
Lite Ins. Co. 22 Wall. .(SO U. S.)
47, 22 «L. ed. 833. Cited in:
UniMM States. — Phoenix Mutual
Life Ins. Co. v. Raddin, 120 U.
S. 183, 189, 30 I,, ed. (i-l(i, 7 Sup.
Ct. 500; Moulor v. American Life
Ins. Co. Ill U. S. 335, 341, 28 L.
3094
REPRESENTATIONS AND MISREPRESENTATIONS § 1914a
If an application for insurance upon the life o*f a wife is signed by
her husband and contains an absolutely false answer, the insurance
being payable to him, he cannot recover on the ground thai the
wife did not sign the application and therefore was not guilty of
misrepresentation.9
The circumstances may be such that it is for the jury to deter-
mine whether the particular question and the false answer in the
ed. 449, 4 Sup. Ct. 46G; iEtna Life Missouri. — Aloe v. Mutual Reserve
Ins. Co. v. France, 91 U. S. 510, 512, Life Assoc. 147 Mo. 561, 575, 49 S.
23 L. ed. 402; Standard Life & Acci- W. 553; Callies v. Modern Woodmen
dent Ins. Co. v. Sale, 121 Fed. 667, of America, 98 Mo. App. 521, 529,
57 C. C. A. 421, 61 L.R.A. 539; 72 S. W. 713; Ashford v. Metro-
Home Life Ins. Co. v. Mvers, 112 politan Life Ins. Co. 80 Mo. App.
Fed. 849, 50 C. C. A. 546; Security 638, 648.
Mutual Life Ins. Co. v. Webb, 106 New York.— Makel v. John Han-
Fed. 811, 45 C. C. A. 651, 55 L.R.A. cock Mutual Life Ins. Co. 88 N. Y.
129; Penn Mutual Life Ins. Co. v. Supp. 757, 95 App. Div. 243.
Mechanics' Savings Bank & Trust North Carolina. — Dupree v. Vir-
Co. 72 Fed. 431, 19 C. C. A. 304, 37 ginia Home Ins. Co. 92 N. Car. 417,
U. S. App. 692, 38 L.R.A. 63 ; Schultz 436.
v. Mutual Life Ins. Co. 6 Fed. 672, Ohio.— Byers v. Farmers Ins. Co.
674; Trefz v. Knickerbocker Life 35 Ohio St. 606, 619, 35 Am. Rep.
Ins. Co. 6 Ins. L. J. 853, Fed. Cas. 623.
No. 14,166; Buell v. Connecticut Pennsylvania. — Kneeht v. Mutual
Mutual Life Ins. Co. 2 Flipp, 12, Life Ins. Co. 90 Pa. 118, 35 Am.
Fed. Cas. No. 21.104. Rep. 641; iEtna Life Ins. Co. v.
Alabama.— Kelley v. Life Ins. France, 33 Phila. Leg. Int. 149.
Clearing Co. 113 Ala. 453, 465, 21 Rhode Island.— Sweeney v. Metro-
So. 361; Commercial Fire Ins. Co. politan Life Ins. Co. 19 R. I. 171,
v. Allen, 80 Ala. 571, 577, 1 So. 172, 38 L.R.A. 297, 61 Am. St. Rep.
202. 751, 36 Atl. 9.
Georgia. — Waters v. Supreme Con- Virginia. — Virginia Fire & Marine
clave Knights of Damon, 105 Ga. Ins. Co. v. Morgan, 90 Va. 290, 293,
151, 152, 31 S. E. 155. 18 S. E. 191.
Indiana — Northwestern Masonic Wisconsin. — Boyle v. Northwestern
Aid Assoc, v. Bodurtha, 23 Ind. App. Mutual Relief Assoc. 95 Wis. 312,
121, 128, 77 Am. St. Rep. 414, 53 318, 70 N. W. 351; Blumer v. Phoenix
N. E. 787; Masons' Union Life Ins. Ins. Co. 45 Wis. 622, 654.
Assoc, v. Brockman, 20 Ind. App. Distinguished in Selby v. Mutual
206, 218, 50 N. E. 493. Life Ins. Co. 67 Fed. 490, 492.
Kansas. — Johnson v. Massa- Cited as overruled in Guiltinan v.
chusetts Benefit Assoc. 9 Kan. App. Metropolitan Life Ins. Co. 69 Vt.
238, 244, 59 Pac. 669. 469, 476, 38 Atl. 315.
Louisiana. — Weil v. New York But compare Fidelity Mutual Life
Life Ins. Co. 47 La. Ann. 1405, Ins. Co. v. Miazza, 93 Miss. 18, 46 So.
1419, 17 So. 853. 817, 37 Ins. L. J. 810, considered
Michigan. — Tobin v. Modern under § 1899 herein.
Woodmen of America, 126 Mich. 161, 9 March v. Metropolitan Life Ins.
168, 85 N. W. 472. Co. 186 Pa. St. 629, 65 Am. St. Rep.
Mississippi.— Co-operative Life 887, 40 Atl. 1100.
Assoc, v. Leflore, 53 Miss. 1, 15.
3095
§§ 1914b, 1914c JOYCE ON INSURANCE
application were actually asked insured and falsely and fraudulent-
ly answered by him.10
§ 1914b. Same subject: where answer incomplete or inaccurate.
— Where an answer is upon its face inaccurate or i in perfect and
incomplete and assurer fails to avail itself of its rights by making
further inquiries concerning the matter, or to do any act evidencing
its dissatisfaction therewith, but on the contrary accepts the pre-
mium money and issues the policy, it cannot avoid the contract,
even though the answer suggests an affirmative which is false or con-
trary to the truth.11
§ 1914c. Where no inquiries made. — Generally where there are
no inquiries and no intentional or fraudulent misrepresentations or
concealments of a fact which assured ought to make known, the
policy is not invalidated.12 And it will be assumed that if informa-
tion about any material matter, which it is not assured's duty to
disclose without inquiry, will be asked for, and this is true where
specific information, or more specific information, is desired in cases
where no questions are asked or where the information is inaccurate
or incomplete.13 And the unintentional or nonfraudulent withhold-
ing of material facts does not avoid the policy where it is issued
without any written application, and no inquiries are made, even
though said policy provides that if any material fact is concealed it
will be void.14 So although the policy is conditioned to be void
10 Clark v. North American Ins. Washington. — Dooly v. Hanover
Co. 189 Mi.-h. 589, 155 N. W. 580, 47 Fire Ins. Co. 15 Wash. 155, 58
Ins. L. J. 238. Am. St. Rep. 26, 47 Pac. 507. Com-
11 Pacific .Mutual Life Ins. Co. v. pare Haapa v. Metropolitan Life
Van Fleet, 47 Colo. 401, 107 Pae. Ins. Co. 150 Mich. 467, 16 L.R.A.
1087, 39 Ins. L. J. 951; French v. (N.S.) 1105, 114 N. YV. 380; Vir-
Fidelitv & Casualty Co. 135 Wis. ginia Fire & Marine Ins. Co. v.
259, 17 L.R.A.(N.S.) 1011, 115 N. J. I. Case Threshing Machine Co.
W. SG9. See Baughton v. iEtna 107 Va. 588, 122 Am. St. Rep. 875,
Life Ins. Co. 42 Ind. App. 527, 85 59 S. E. 369.
N. E. 125. See §§ 1870, 1928, 1969 As to inquiries, etc., concealment,
herein. see £ 1869 herein.
12 Kansas. — Humble v. German 13 Johnson v. Scottish Union &
Alliance Ins. Co. 92 Kan. 486, 141 National Ins. Co. 93 Wis. 223, 67 N.
Pac. 243, aff'g 91 Kan. 307,137 Pac. W. 416, 26 Ins. L. J. 59,— Pinney,
980. J.; Pacific Mutual Life In*. Co. v.
Kentucky. Niagara Fire Ins. Co. Van Fleet, 47 Colo. 401, 107 Pac.
v. Lavne, 162 Kv. 665, 172 S. W. 1087, 39 Ins. L. J. 951.
1090. "Johnson v. Scottish^ Union &
New Hampshire. — Fadden v. In- National Ins. Co. 93 Wis. 223, 67
surance Co. of North America, 77 N. N. W. 416, 26 Ins. L. J. 59. See
11. 392, 92 Atl. 335. also Bumble v. German Alliance Ins.
Oregon. — Koshland v. Hartford Co. 85 Kan. 140, 116 Pac. 472, 40
Fire Ins. Co. 31 Oreg. 402, 49 Pac. Ins. L. J. 1783.
866, 26 Ins. L. J. 945.
3096
REPRESENTATIONS AND MISREPRESENTATIONS § 1914d
for misrepresentation or concealment of material facts, still if no
inquiries arc made by insurer's agent, who is familiar with the
property, and said policy is issued on an oral application without
any representations being made and insured is not guilty of fraud
and has no intention to conceal the facts, the policy is not avoided
by such concealment.15 So a printed question does not become a
statement by being left unanswered, and should be disregarded as
it is no part of the contract.18 And failure to fill in by answer
a question in a printed blank constitutes neither assent nor dissent
and does not avoid the policy.17 But even though it is testified by
a witness present at the time, that no inquiries are made, still if
assured has actual knowledge of a fact material to the risk, and her
answers are absolutely false concerning the same, the policy will be
void.18
§ 1914d. Statements in other applications.188 — If assurer's atten-
tion is, by assured's answer to a question, specifically directed by
number to a prior application to it, it amounts to actual notice there-
of and it will be inferred that it was examined and that information
therein contained concerning matters material to the risk was ob-
tained and assurer will be charged with knowledge thereof.19 But a
statement in a rejected application for insurance that applicant has
consulted a physician for rheumatism, does not charge the company
with knowledge that he has that disease, so that its acceptance of a
subsequent application in which applicant states that he has never
had it, will constitute a waiver of the falsity of the statement.20
Answers in a prior application to another company may be re-
15 Arthur v. Palatine Ins. Co. 35 ing also that the same case (Rhode v.
Oreg. 27, 57 Pae. 62, 28 Ins. L. J. Metropolitan Life Ins. Co. 129 Mich.
545. As to notice to and knowledge 112. 8 Det. L. N. 888, 88 N. W. 400,
of agent, see §§ 484, 4S7, 515 et seq. 31 Ins. L. J. 249) presented a differ-
535 herein. As to oral application; ent question on its prior hearing,
agent's knowledge, see § 496 herein, wherein it was held that assurer was
As to statutes, see § 1916 herein, not bound to take notice of a prior
16 Brown v. Greenfield Life Assoc, application and its contents which
172 Mass. 498, 53 N. E. 129, 28 Ins. appeared in its records following
L. J. 231. Brown v. Metropolitan Life Ins. Co.
17 Parker v. Otsego County Farm- 65 Mich. 306, 8 Am. St. Rep. 894,
ers' Co-operative Fire Ins. Co. 62 32 N. W. 610.
N. Y. Supp. 199, 47 App. Div. 204, On notice from taking- previous
aff'd 168 N. Y. 655, 61 N. E. 1132. application as waiver of false repre-
18 Haapa v. Metropolitan Life Ins. sentation with respect to previous
Co. 150 Mich. 467, 16 L.R.A.(N.S.) applications for life or mutual ben-
1165, 114 X. W. 380. efit insurance, see note in L.R.A.
18a See § 477a herein. 1916A, 9S2.
19 Rhode v. Metropolitan Ins. Co. 20 O'Rourke v. John Hancock
132 Mich. 503, 9 Det. L. N. 682, 93 Mutual Life Ins. Co. 23 R. I. 457, 57
N. W. 1076, 32 Ins. L. J. 473. Hold- L.R.A. 496, 50 Atl. 834.
3097
§§ L914e, 1915 JOYCE OX INSURANCE
iterated by the acts of insurer's agent, who had made the same, in
writing across other blank questions identical with the firsl that the
original answers still held good and were valid as to the lasl ex-
amination and thai there was no change therefrom.1 Bui an ap-
plicant who, after producing, at the requesl of the agent, a policy
written previously, from which answers to the questions arc copied,
and. upon being told thai the application is prepared according to
the rules and regulations of the association, si.uns it. cannot lie
charged with had faith merely because some of the answers are un-
true at the time of the signature.8 And a statement in an appli-
cation as to a certain condition of assured, which is made the siih-
jecl of separate inquiry therein, is not reaffirmed in an application
for increased benefits which does not make such inquiry, although
it is directed by assured to he filed with the original application and
made a part thereof.3
Where statements in a new application are copied verbatim from
a prior one, with the exception that in the new one an answer "no"
to a certain question is written by insurer'.- agenl instead of "yes"
as in the old one. upon an issue of fraud in an action to recover on
the policy, it was held error to charge the jury that the preponder-
ance of evidence need only he slight.4
§ 1914e. Adoption of original insured's representations by as-
signees on renewal. — Where assignees of insured obtain a renewal
of insurance on a factory, "agreeahly to the representations herein-
I i lore made by" a previous owner, originally insured, they adopt
as their own and are hound by such representations as are binding
under the original policy.5
§ 1915. When the stipulated materiality of statements is quali-
fied: warranties thereby construed as representations. — If the rep-
resentation i- made material by a stipulation in the policy, or even
expressly warranted, hut the answers are expressly qualified, or if
from other express terms of the contract or of the application it
appears that the answers or representations were not intended to
1 Fletcher v. Bankers' Life Ins. Co. Manufacturers' Mutual Fire Ins. Co.
116 X. V. Supp. lin.), (12 Arise. Rep. v. Central National Bank, 60 Kan.
546. 630, 57 Pae. 524, 28 Ins. L. .1. 741,
2 Roe v. National Life Ins. Assoc, where case turned upon questions of
131 [owa, 696, 17 L.R.A.(N.S.) 1144, error in the admission of evidence
1 lo X. w. 500. and the obligation el' assured to learn
8 American Order of Protection v. the contents of the application and
Stanley. 5 Neb. (Unof.) 132, 07 N. policy.
W. 467, 33 Ins. I.. .1. L93. 5 Clark v. Manufacturers' Ins. Co.
4 Kansas Mill Owners' & Mann- 8 How. (49 U. S.) 235, 12 L. ed.
facturers' Mutual Fire Ins. Co. v. ]0fil. See Garrison V. Fanners'
Rammelsberg, 58 Kan. 531, 50 Pac. Mutual Fire Ins. Co. 56 N. .1. L. 235
446. See Kansas Mill Owners' & 28 Atl. 8. See §§ 1461 et seq. herein.
3098
REPRESENTATIONS AND MI SHE PRESENTATIONS § 1915a
have the force and effect of a warranty, or if from the words used
it is doubtful if they were intended to be so construed, the court will
not hold them to he strict warranties or .-trietly material as a matter
of law. And in such cases the absolute truth of the representation
is not required, and unless the statement is materially and substan-
tially false, <>r actually fraudulent or grossly negligent, the com-
pany is not released from the contract, and the insurer must prove
that as thus limited the representations are untrue.6 So a statemenl
in an application for insurance that it is a full statement of all the
facts known to the applicant and material to the risk, so far quali-
fies and limits the effect of warranties as to render them representa-
tions merely.7 . And as appears elsewhere herein warranties are by
statute either excluded or converted into representations or qualified
thereby. 7a
§ 1915a. Qualified statements continued: best of assured's knowl-
edge and belief: other qualifications. — Statements in applications
6 United States. — Home Life Ins.
Co. v. Fisher, 188 U. S. 726, 47 L.
ed. 677, 22 Sup. Ct. 380; ^tna Life
Ins. Co. v. France, 94 U. S. 561, 24
L. ed. 287; MeClain v. Provident
Savings Life Assur. Soc. 110 Fed.
80, 49 C. C. A. 31, 30 Ins. L. J. 1027,
certiorari denied. Providence Savings
Assur. Soc. v. MeClain, 184 U. S.
699, 46 L. ed. 765, 23 Sup. Ct. 938;
Fisher v. Crescent Ins. Co. 33 Fed.
549 (annotated case).
Delaware. — Baltimore Life Ins.
Co. v. Flovd, 5 Bovce (28 Del.) 201,
91 Atl. 653, s. c. 5 Boyce (28 Del.)
431, 94 Atl. 515.
Illinois. — Minnesota Mutual Life
Ins. Co. v. Link, 230 111. 273, 82 N.
E. 637; Continental Life Ins. Co. v.
Rogers, 119 111. 474, 59 Am. Rep.
810, 10 N. E. 242; Kidder v. Su-
preme Assemblv of American Stars
of Equity, 154 111. App. 489.
Iowa. — Wilkins v. Germania Fire
Ins. Co. 57 Iowa, 529, 10 N. W. 916.
Kansas. — Washington Life Ins.
Co. v. Haney, 10 Kan. 525.
Maryland. — Supreme Council of
Roval Arcanum v. Brashears, 89 Md.
624, 43 Atl. S66, 73 Am. St. Rep.
244.
Massachusetts. — Clapp v. Massa-
chusetts Benefit Assoc. 146 Mass.
519, 16 N. E. 433; Elliott v. Hamil-
3099
ton Mutual Ins. Co. 13 Gray (79
Mass.) 139.
Nebraska. — Goff v. Supreme Lodge
Roval Achates, 90 Net). 578, 37
L.R.A.(N.S.) 1191, 134 N. W. 239;
Roval Neighbors of America v. Wal-
lace, 64 Neb. 330, 89 N. W. 758, 31
Ins. L. J. 447, s. c. 66 Neb. 543, 92
N. W. 897, s. c. 73 Neb. 409, 102 N.
W. 1020, 34 Ins. L. J. 450.
Ohio. — Schwarzbach v. Ohio Val-
ley Protective Union, 25 W. Va. 622,
52 Am. Rep. 227.
Texas. — Reppond v. National Life
Ins. Co. 100 Tex. 519. 11 L.R.A.
(N.S.) 981, and note, 101 S. W. 786,
rev'g National Life Ins. Co. v. Rep-
pond, — Tex. Civ. App. — , 96 S.
W. 778.
Wisconsin. — Redman v. Hartford
Fire Ins. Co. 47 Wis. 89, 32 Am. Rep.
751, 1 N. W. 393.
Examine Mutual Life Ins. Co. of
N. Y. v. Hilton-Green, 241 U. S. 613.
60 L ed. 1202, 30 Sup. Ct. 670.
rev'g 211 Fed. 31, 127 C. C. A. 407.
43 Ins. L. J. 685. Compare Sco-
field's Admx. v. Metropolitan Life
Tns. Co. 79 Vt. 161, 64 Atl. 1107.
See illustrations in § 1890 herein.
' Waterbury v. Dakota Fire &
Ar.,;.;.,n InQ -Co fi Dak. 40S, 43 N.
W. 697. See §S 1S90, 1891 herein.
7a See § 1916 herein.
§ 1915a JOYCE ON [NSURANCE
may undoubtedly be qualified, as where they are expressly declared
to be made according to assured's besl knowledge and belief, or sim-
ilar qualify injj; words arc used. In such cases these limitations may
aid in determining the character of the statements, that is whether
they are representations or warranties, and they also involve nec-
essarily and primarily the question of assured's knowledge and
belief and his good faith and fair dealing, and he cannol knowingly
or fraudulently falsity or make untrue statements with intent to
deceive and to induce insurer to accept the risk and thereby obtain
tbe benefit of the contract: and while the harshness of warranties
may be taken away, as where by such qualifications or by aid of
them they become representations only, still if assured knowingly
and with intent to deceive, makes untrue statements, and wilfully
or fraudulently falsifies he should not be permitted to shelter him-
self behind such qualifying words or to extend their meaning and
application beyond what they fairly import, even under those rules
of construction which favor assured. On the other hand assurer is
so far bound by such qualifications or restrictions, that while it may
refuse to assume the risk as they stand, and may insist that they be
withdrawn where they emanate from assured, still if it does not do
so and permits them to stand it will be bound by the contract as it
is, but even then it may insist that assured be held to his contract to
the full extent stipulated. These assertions are fully sustained by
the decisions.
Where the applicant is required to declare that his statements are
true to the "best of his knowledge and belief" and the application
and medical examination make his statements therein warranties,
and provide that any untrue or fraudulent statements shall forfeit
his rights under the policy, such qualifications make the answers
representations and not warranties.8 But the qualifying words "so
far as you know and believe" used in one question, call for assured's
opinion and cannot be impliedly or by construction added to other
questions which are direct and positive inquiries, without qualifica-
tion, calling for facts.9 Where questions call for assured's knowl-
edge or belief or for information based thereon, the policy is not
8 Jennings v. Supreme Council, On effect of qualifying statements
Loyal Additional Benefil Assoc. 81 or warranties by words "to best of
N. Y. Supp. 90, 81 App. Div. 76; my knowledge and belief" or words
Kidder v. Supreme Assembly of of like import, see note in 43 L.R.A.
American Stars of Equity. 154 111. (N.S.) 431.
A ] 1 1 > . 489. See also Yeomen of Amer- 9Blenke v. Citizens' Life Ins. Co.
ica v. Rott, 145 Kv< 604, 14(1 S. W. 145 Kv. 332, 140 S. W. 561, 41 Ins.
1018. See note 53 L.R.A. 201, on L. J. 94.
representations to the best of knowl-
edge and belief, etc., as to health.
3100
REPRESENTATIONS AND MISREPRESENTATIONS § 1915a
avoided by a misstatement or omission to answer unless the answers
are knowingly and wilfully made with an intent to deceive, and
where statements are mere representations, good faith and fair deal-
ing on assured's part arc necessitated.10 As pertinent hereto it has
been held that to avoid a policy for false representations, insurer
must establish their falsity, materiality, and insured's knowledge
thereof, actual or imputed, but this decision is reversed.11
Good faith of assured is also made important in a Federal Su-
preme Court case where the principal question was whether assured
had assumed the strict obligation which the law attaches to a war-
ranty, which question involved also the construction of the entire
contract, and it was .held that where the application for insurance
states that assured has, in that instrument, made a just, full, and
true statement of all material facts in regard to the condition, situ-
ation, value, and risk of the property, so far as known to him, it is
only a covenant of good faith, and is not broken as to valuation
unless the estimates by the assured are intentionally excessive.12 So
10 Pelican v. Mutual Life Ins. Co. 747; Hubbard v. Mutual Reserve
of N. Y. 44 Mont. 277, 119 Pac. 778,
41 Ins. L. J. 327. See § 1884
herein.
11 Mutual Life Ins. Co. of N. Y.
v. Hilton-Green, 211 Fed. 31, 127 C.
C. A. 467, 43 Ins. L. J. 685 (express-
ly qualified by stipulation that state-
ments are representations in absence
of fraud, etc.) rev'd in 241 U. S. 613,
60 L. ed. 1202, 30 Sup. Ct. 676;
Supreme Council of Golden Star
Fraternitv v. Conklin, 60 N. J. L.
565, 41 L.R.A. 449, 38 Atl. 659. See
also Egan v. Supreme Council Cath-
olic Benevolent Legion, 52 N. Y.
Supp. 978, 32 App. Div. 245. Com-
pare O'Connell v. Supreme Conclave
Knights of Damon, 102 Ga. 143, 66
Am. St. Rep. 159, 28 S. E. 282. See
§ 1916 herein.
12 First National Bank of Kansas
City v. Hartford Fire Ins. Co. (Na-
tional Bank v. Insurance Co.) 95 U.
S. 673, 24 L. ed. 563; Franklin Fire
Ins. Co. v. Vaughan, 92 U. S. 516, 23
L. ed. 740. Cited in:
United States. — Moulor v. Ameri-
can Life Ins. Co. Ill U. S. 335,
341, 28 L. ed. 449, 4 Sup. Ct. 466;
Northwestern Mutual Life Ins.
Co. v. Gridlev (Insurance Co. v.
Gridley) 100 U. S. 614, 25 L. ed.
3101
Fund Life Assoc. 100 Fed. 719, 721,
40 C. C. A. 667; Guarantee Co. of
North America v. Mechanics' Sav-
ings Bank & Trust Co. 80 Fed. 766,
783, 26 C. C. A. 163, 47 U. S. App.
91 ; Connecticut Mutual Life Ins. Co.
v. McWhirter, 73 Fed. 444, 450, 19
C. C. A. 526, 44 U. S. App. 492;
Mutual Life Ins. Co. v. Selby, 72
Fed. 980, 985, 19 C. C. A. 336, 44
U. S. App. 282; Mechanics' Savings
Bank & Trust Co. v. Guarantee Co.
of North America, 68 Fed. 459, 463 ;
Fisher v. Crescent Ins. Co. 33 Fed.
549, 550 ; Miller v. Alliance Ins. Co.
19 Blatchf. 308, 310, 7 Fed. 649,
650.
Alabama. — Alabama Gold Life
Ins. Co. v. Johnston, 80 Ala. 467,
472, 60 Am. Rep. 112, 2 So. 125.
Arkansas. — Providence Life As-
surance Soc. v. Reutlinger, 58 Ark.
528, 535, 25 S. W. 835.
California. — National Bank v.
Union Ins. Co. 88 Cal. 497, 504, 22
Am. St. Rep. 324, 26 Pac. 509 ; Noone
v. Transatlantic Fire Ins. Co. 88 Cal.
152. 156, 26 Pac. 103.
Illinois. — Commercial Ins. Co. v.
Friedlander, 156 111. 595, 598, 41 N.
E. 183; Manufacturers' & Merchants'
Ins. Co. v. Zeitinger, 68 111. App. 268,
L915a
JOYCE ON INSURANCE
an untrue statement will not avoid the contract when it was made
in good faith and upon the best information possessed by assured.18
Again, where, in an application for life insurance, the statement
of the insured upon the question of hereditary disease, was thai there
was "no hereditary taint on either side of the house to my knowl-
edge," then in order to show falsity of the statement, in an action on
the policy, it is necessary for the insurance company to prove thai a
hereditary taint alleged was known to the applicant when lie mad*!
the statement.14 In this case the affirmation was thus narrowed
270; Merchants & Mechanics Ins. Co. 77; Virginia Fire & Marine Ins. Co.
v. Schroeder, 18 111. App. 216, 219. v. Saunders, 86 Va. 969,972, 11 S. E.
Indiana. — Citizens' Fire & Marine 794; Virginia Fire & Marine Ins. Co.
Ins. ('«.. v. Short, 62 End. 316, 320. v. Saunders, 84 Va. 215, 4 S. E. 584;
Iowa. Behrens v. Germania Fire Lynchburg Fire Ins. Co. v. West, 76
his. Co. 64 Iowa, 19, 22, 19 N. \Y. Va. 575, 582, 44 Am. Rep. 177.
s.is. Washington- Remington v. Fi-
Kansas. — Northwestern Mutual delity & Deposit Co. 27 Wash. 429,
Life Ins. Co. v. Woods, 54 Kan. 441, 67 Pac. 989.
663, 669, 39 Pae. 189.
Kentucky. — Germania Ins. Co. v.
Rudwig, 80 Ky. 223. 235.
Louisiana. — Lewis Baillie & Co. v.
Western Assur. Co. 49 La. Ann. 658,
662, 21 So. 736.
Massachusetts. — King Brick Manu-
facturing Co. v. Phoenix Ins. Co. 164 Gridlev) 100 U. S. 614, 25 L. ed.
Mass. 291, 294, 41 N. E. 277; Clapp 746. Cited in:
Wisconsin. — Blumer v. Phoenix
Ins. Co. 45 Wis. 622, 623.
13 Supreme Lodge Knights of
Honor v. Dickson, 102 Tenn. 255, 52
S. W. 862.
14 Northwestern Mutual Life Ins.
Co. v. Gridlev (Insurance Co. v.
v. Massachusetts Benefit Assoc. 146
Mass. 519, 531, 16 N. E. 433; Bridge-
water Iron Co. v. Fmterprise Ins. Co.
134 Mass. 433, 438.
United States. — Guarantee Co. of
North America v. Mechanics' Sav-
ings Bank & Trust Co. 80 Fed.
766, 783, 26 C. C. A. 163, 47
Michigan. — McGannon v. Michi- U. S. App. 91; Mechanics' Savings
pan Millers' Mutual Fire Ins. Co. Bank & Trust Co. v. Guarantee Co.
127 Mich. 636, 648, 54 L.R.A. 745, of North America, 68 Fed. 459, 463.
89 Am. St. Rep. 501, 87 N. W. 61. California.— Kumie v. Grand
Nebraska. — ^Fltna Ins. Co. v. Sim- Lodge Ancient Order United Wood-
mons, 49 Neb. 811, 838, 69 N. W. 125. men, 1 L0 Cal. 204, 209. 42 Pac. 034.
New Forfc.— American Mortgage Indiana. — Northwestern Mutual
Co. v. Butler, 73 N. Y. Supp. 334, Life Ins. Co. v. Ha/.letl, 105 Ind.
30 Misc. 25;,; Dolan v. ^Etna Ins. 212, 220, 55 Am. Rep. 192, 4 N. E.
Co. 22 1 1 mm (N. Y.) 396, 401; Fitz- 582.
gerald v. Supreme Council Catholic Maine.— Johnson v. Maine & New
Mutual Benefit Assoc. 56 N. Y. Supp. Brunswick Ins. Co. 83 Me. 182, 187,
1005, .'59 App. Div. 263. 22 All. 107.
Texas. — Eakin v. Home Ins. Co. Minnesota. — Perine v. Grand
1 Tex. Civ. App. Cas. (White & W.) Lodge Ancient Order United Work-
sees. 363, 368. men, 51 Minn. 224, 227, 53 N. W.
Virginia. — Virginia Fire & Marine 367.
Ins. Co. v. Morgan, 90 Va. 290, 295, Ohio.— Schultz v. Insurance Co. 40
18 S. E. 191; Wvtheville Ins. Co. v. Ohio St. 217, 223, 48 Am. Rep. 676.
Stulz, 87 Va. 629, 638, 13 S. E. Virginia— Morotoek Ins. Co. v.
3102
REPRESENTATIONS AND MISREPRESENTATIONS § 1915a
down and restricted to what the applicant himself personally knew
upon the subject. It went to that extent; and no further; and al-
though insurer might have refused to insure unless said qualification
was withdrawn, still not having done so, such is the contract of the
parties.16 And where the applicant for life insurance certifies thai
his health is good according to the best of his knowledge and belief,
a recovery may be had, on the death of the assured, if it appear that
lie had reason to believe, and did believe, that at the time he was in
good health, although it subsequently develops that this was not in
fact his condition, for his statement was not unqualified, but only
to the extent of his knowledge and belief.16 So where a benefit cer-
tificate is granted upon the express condition that the statements in
the application therefor are true, but the applicant, while affirming
himself to be in good health, also makes a general declaration as to
the statements subscribed by him, that they are true to the best of
his knowledge and belief, the effect of this qualification is that re-
covery upon the certificate can be defeated by showing that he knew
or had reason to believe that he was not in good health at the time
the application was made.17
Where answers which are made part of the contract, are qualified
by the statement that they are "as near correct as I remember," in
order to defeat recovery on the policy, the insured must have been
consciously incorrect in some one of the answers.18 And if an
answer in the negative is qualified by the words "except as herein
stated" and said negative part of the answer is untrue, still, inas-
much as such statement is inaccurate and incomplete in that it sug-
gests an affirmative, the contract is not avoided where assurer does
not then express its dissatisfaction by any act but accepts the pre-
mium and issues the policy.19 And a statement may be of such a
character as to be equivocal to an assertion that assured had
Fostoria Novelty Glass Co. 94 Va. l8 JFAna Life Ins. Co. v. France,
361, 364, 26 S. E. 850. 94 U. S. 561, 24 L. ed. 287. Cited
15 Northwestern Mutual Life Ins. in Mutual Life Ins. Co. v. Sell. v. 72
Co. v. Gridlev (Insurance Co. v. Fed. 980, 985, 19 C. C. A. 336, 44
Gridley) 100 U. S. 614, 616, 25 L. U. S. App. 282; Manhattan Life Ins.
ed. 746,— Mr. Justice Swayne. Co. v. P. J. Willis & Bro. (ill Fed.
16 Smith v. Prudential Ins. Co. 83 236, 242, 8 C. C. A. 599, 23 I'. S.
N. J. Law, 719, 43 L.R.A.(N.S.) App. 103; Perine v. (nam I Lodge
431n, 85 Atl. 190. See §§ 1848, Ancient Order United Workmen, 51
1849, 2003 et seq. herein. Minn. 224, 227, 53 N. W. 367;
17 Hann v. National Union, 97 Schwartzbach v. Ohio Valley Protec-
Mich. 513, 37 Am. St. Rep. 365, 56 tive Union, 25 W. Va. 622, 653, 52
N. W. 834. Compare O'Connell v. Am. Rep. 227.
Supreme Conclave Knights of Dam- 19 Pacific Mutual Life Ins. Co. v.
on, 102 Ga. 143, 66 Am. St. Rep. Van Fleet, 47 Colo. 401, 107 Pac.
159, 28 S. E. 282. 1087, 39 Ins. L. J. 951.
3103
§§ 1915b, 1916 JOYCE OX INSURANCE
answered so far as bis memory permitted and so put assurer upon
further inquiry by following up the sources of information sug-
gested by tin' answer.20
§ 1915b. Same subject: fidelity guaranty insurance. — Good faith
ia held sufficient in answering questions to the best of assured's
knowledge and belief concerning whether he had known or heard
anything unfavorable as to the habits of an employee for whom a
fidelity insurance bond was executed or of any matters concerning
him about which assured deems it advisable for assurer to make in-
quiry.1 It was subsequently decided, however, in the case holding
as above, that if an officer of assured knows that certain acts are
regarded by insurer as unfavorable to an employee's habits, and he
has information regarding such habits, a negative answer by him
to an inquiry of the character first above stated constitutes a mis-
representation.2 But even though a representation in an applica-
tion for fidelity guaranty insurance is declared to be based upon
the best of the knowledge and belief of assured's officers or to be
true so far as known to them, still if such representations are
material and are false or untrue to said officer's knowledge, or to
such knowledge as a proper effort by them to obtain information
would have given, then the bond is unenforceable. But knowledge
of acts on the part of the employee, which were mere errors of
judgment and not dishonest, does not as a matter of law constitute
such known fraudulent misrepresentations as to avoid the con-
tract, although a different result would follow in case of a warranty
unless the warranty is qualified and not absolute when the question
of knowledge of said officers of such material facts, or. whether they
ought to have known them would be for the jury and such knowl-
edge must be shown.3
§ 1916. Statements under statutory provisions. — Statutes have
been enacted in a number of states relating generally to the effect
of misrepresentations by assured, and in some cases the effect
of warranties; their provisions, however, are such that while, per-
haps, they seek to obtain the same result, nevertheless a composite
statement of them would be very difficult if not impossible, and
20 Mutual Life Ins. Co. v. Selbv, court when decree not final. See §§
72 Fed. !)S(l, 1!) ('. ('. A. 381, 44 U. 1916, 2002a herein.
S. A pp. 282. See § 1806 herein. 2 Guarantee Co. of North America
1 Guarantee Co. of North America v. Mechanics' Savings Bank & Trust
v. Mechanics' Savings Bank & Trust Co. 183 U. S. 402, 46 L. cd. 253, 22
Co. 80 Fed. 766, 29 C. C. A. 146, Sup. Ct. 124.
rev'd 173 U. S. 582, 43 L. ed. 18, 3 zEtna Indemnity Co. v. Farmers'
1!) Sup. Ct. 551, on ground that National Bank, 169 Fed. 737, 95
circuit court of appeals had no ju- C. C. A. 169.
risdiction to review decree of circuit
3104
REPRESENTATIONS AND MISREPRESENTATION'S § 1916
this results undoubtedly from the intent of each legislative body
to make clearer its own enactment than were those of other like
bodies covering the same subject.
This much may be said, however, that it may be reasonably
assumed that the several legislatures, in enacting the greater part
of the statutes of the character under consideration, evidently had
in view the numerous constant attempts, largely successful by
reason of carefully worded contract provisions, to impress upon
immaterial representations the strict obligation imported by war-
ranties. It would seem, therefore, that the object or intent of must
of these statutes is to prevent immaterial matters being made sub-
ject to the strict rule existing as to warranties, abrogate or abolish
to some extent, at least in this respect, such technical distinctions
as existed between them and representations and thereby provide
some degree of certainty by placing all statements or misstatements
upon the basis of representations or misrepresentations, so that the
contract will not, according to the particular statutory provision,
be avoided; unless claimed false statements or misrepresentations
are material to the risk; or, are made with the actual intent to
deceive; or, unless the misstatement is of a matter which actually
induced effecting the insurance to insurer's prejudice; or which
increased the risk or hazard underwritten, or the risk of loss; or,
unless it actually contributed to the contingency or event on which
the policy is to become due and payable, etc. But, as above inti-
mated, some of these enactments have not been so construed as
to bring them fully within such seeming intent; and under certain
decisions the rule of strict construction as to warranties, as it
existed prior to the statute becoming of force and effect, has been
adhered to, and in other cases said rule has not been relaxed, at least
not in any marked degree; but some of the courts have construed
the statute before them as abrogating said rule of strict construc-
tion. The interpretation placed by the courts upon the statutes
involved in the cases before them, will, however, appear in the
following consideration of this subject.
It is declared in Alabama, per Sayre, J., that: ''Perhaps our
own statute does not say what it means as cle^y as it might.
But by the introduction of the word 'warranties' it makes even
clearer than do the statutes" of some of the states '''that it was in-
tended to break down in a measure the technical distinction between
warranties and representations." It is also said that where fraudu-
lent representations are pleaded in defense it must be shown that
false statements have been made with intent to deceive, that they
related to matters intrinsically material to the risk, and that the
insurer relied on them. This rule has not been changed by
Joyce Ins. Vol. III.— 195. 3105
§ 1916 JOYCE ON INSURANCE
statute. But in ease of a breach of warranty under the law as
it was prior to said statute, that was material which was made so
by agreement whether intrinsically so or not. Whatever assured
warranted to be true, he, by necessary implication, agreed to be
material, and its falsity precluded recovery, bu1 the statute includes
"warranty" and puts it in a class with representations, and abro-
gated in a measure the distinction theretofore exist ing between them
by providing that no misrepresentation or warranty shall defeat
or avoid the policy unless "such misrepresentation" is made with
actual intent to deceive, or unless the matter misrepresented increase
thr risk of loss.4
In Arkansas a statute making "proof of a substantial compli-
ance with the terms, conditions and warranties" of a lire policy by
assured sufficient to entitle assured to recover, applies to personalty.
As to real property the rule of law as to warranties is left un-
changed.6
Under the California Code the rule of the common law that a
policy is avoided by breach of a promissory warranty regardless
of its materiality does not apply, and the provisions of said Code
construed together abrogate the common-law rule that the policy is
avoided by breach of an express warranty whether the same is
material or not.6 And the rule that by inquiry and answer a
statement is made material is declared to be modified in that state
by code provisions whereby the "materiality of a representation"
"is to he determined not by the event, but solely by the probable
and reasonable influence of the facts upon the party to whom the
4 Empire Life Ins. Co. v. Gee, 171 1907, see. 4572 (2596) also construed
Ala. 435, 55 So. 156, 40 Ins. L. J. in Massachusetts Mutual Lite Ins.
1384; Code 1907, sees. 4572, 4579. Co. v. Crenshaw, 105 Ala. 263, 70
See also Metropolitan Life Ins. Co. So. 768.
v. Goodman, 10 Ala. App. 446, 65 5 Capital Fire Ins. Co. v. King,
So. 4 4!). 82 Ark. 400, 102 S. W. 194, 36 Ins.
See Atlas Life Assur. Co. v. Mo- L. J. 655; Kirbv's Dig. sec. 4375a,
man. 14 Ala. App. 400, 69 So. 989 s. c. 89 Ark. 346* 116 S. W. 894.
(upon point of what constitutes a 6 Victoria Steamship Co. v. "West-
material fact.) em Assur. Co. of Toronto, 167 Cal.
"No written or oral misrepresenta- 318, 139 Pac. 807; under code pro-
tion of warranty therein made, in visions defining a warranty (sec.
the negotiation of a contract or pol- 2608) ; authorizing rescission for
icy of life insurance, or in the appli- violation of a material warranty
cation therefor or proof of loss (sec. 2610) ; and providing that a
1 hereunder, shall defeat or void the policy may declare that a violation
policy, or prevent its attaching, nn- of specific provisions may avoid it;
Less such misrepresentation is made otherwise the breach of an immate-
with actual intent to deceive, or rial provision does not avoid it (sec.
unless the matter misrepresented in- 2611).
crease the risk of loss." Civ. Code
3106
REPRESENTATIONS AND MISREPRESENTATIONS § 1016
communication is duo in forming his estimate of the disadvanl
of the proposed contract, or in making his inquiries;" and "the
language of a representation is to be interpreted by the same rules
as the language of contracts in general."7 In an earlier case in
that state it is held that if it appears from the whole policy that
a statement was not intended as a warranty, the court will no1
construe it, even though the Civil Code provides thai a statement
in a policy of a matter relating to ihe person or thing insured or
to the risk as a fad is an express warranty thereof.8
The Connecticut statute provides that "in all policies of insur-
ance against loss by fire, made by companies chartered by or doing
business in this state, no condition shall be valid unless stated in
the body of the policy." 9 There are also provisions in that state
as to health and accident policies.10
Under the Georgia code the policy cannot be avoided upon the
ground of falsity of a representation, though warranted, unless
the representation be material and the variations from the truth
be such as to change the nature, extent or character of the risk;
but if the representations have such variation, although the appli-
cant may have made them in good faith, not knowing that they
were untrue, if they were made the basis of the contract it is void,
so that it is immaterial whether the warrantor acted in good faith
in making them; and the contract is therefore avoided if the state-
ments are made the basis of the contract, are material, and the
variations from the truth are such as to change the nature, extent
or character of the risk, even if made in good faith without knowl-
edge that they were untrue ; and this is so if they are made fraudu-
lently or wilfully.11 It is also decided in that state that the code
7 McEwen v. New York Life Ins. falsity of any statement in the ap-
Co. 23 Cal. App. 694, 139 Pac. 242, plication for any policy covered by
43 Ins. L. J. 546; Civ. Code, sees, this act shall not bar the right to
2565, 2573, 2581. recovery thereunder unless such false
8 National Bank of D. 0. Mills & statement was made with actual in-
Co. v. Union Ins. Co. 88 Cal. 497, 22 tent to deceive or unless it mate-
Am. St. Rep. 324, 26 Pac.^ 509. __ rjauy affected cither the acceptance
9 Conn. Gen. Stat, 1902, p. 875, of t'jie rjsk or tjie hazard assumed
sec. 3496. by the insurer."
10 Such policies are required to pub Lawg Conn< (19i3_i9i5) p.
contain the provision that ' no state- ^g-,4 c 293 sec 6
ment made by the applicant for in- u-'g^p^ Conclave, Knights of
surance not included herein shall y_ ., 4J g,
avoid the policy or be use d m a y 9 Prudential Ins. Co. of An.r-
lesal proceeding hereunder. 1 lib; ' ,
T ^,.„ r>„„„ nnr; iqi^ r% m4Q 1(,a v- Moore, 231 U. S. 560, 58 I>. ed,
Law^ Conn. (1913-1915) p. 1849, ^ ^ g^ ^ ^ ^ ^ ^ j;
' It is further provided as to health 321 ; iEtna Life Ins. Co. v. Moore,
and accident policies that "The 231 U. S. 543, 58 L. ed. 3o6, 34 Sup.
3107
§ 1916
JOYCE ON INSURANCE
not only requires the utmost good faith to be observed in making
contracts of insurance, but by force of its provisions the representa-
tions in the application are covenanted to be true, and although
this is not held to mean that they are warranties vitiating the policy
if untrue, whether material or not, yet if they vary from the
truth and thereby the nature, extent, or character of the risk is
changed, the policy will he vitiated if they are made the basis
of the contract, without regard to the fact whether they are wilfully
and fraudulently made;12 and under other decisions in the same
state it is decided that under its code a policy is not avoided by
falsity of a warranty or representation, the subject matter of which
is wholly immaterial to the risk.13
In Indiana the policy must provide: "that all statements made
by the insured in the application shall, in the absence of fraud,
be deemed representations and not warranties."14
In Iowa there are certain statutes whereby a medical examina-
tion and its approval is required, and if insurers issue certificates
or contracts of insurance without the same they are estopped from
setting up defenses as to health.15
Ct. 186, 43 Ins. L. J. 311; under "Wilful misrepresentation by the
Ga. Code sees. 2479-2481, 2483, 2499. assured, or his agent, as to the inter-
"Every application for insurance est of the assured, or as to other in-
must be made in the utmost good suranee, or as to any other material
faith, and the representations con- inquiry made, will void the policy."
tained in such application are con- Ga. Code 1911, see. 248.5 (2101).
sidered as covenanted to be true by Acts of 1906, p. 10/, modified sec.
the applicant. Any variation by 2097, code 1895, in so far as it pro-
wbich the nature or 'extent, or char- vides that the representations are
acter of the risk is changed will considered as covenanted to be true,
void the policy." Ga. Code 1911, sec. Construed in Johnson v. American
2479 (2097). National Life Ins. Co. 134 Ga. 800,
"Any verbal or written representa- 68 S. E. 731, 39 Ins. L. J. 1410.
tions of facts by the assured to in- 12 Southern Life Ins. Co. v. YVil-
duce the acceptance of the risk, if kinson, 53 Ga. 535. See /Etna Life
material, must be true, or the policy Ins. Co. v. Conway, 11 Ga. App.
is v«.id. If, however, the party has 557, 75 S. E. 915, 41 Ins. L. J. 1802;
no knowledge but states on the rep- Code 1910, sees. 2479-2481, 2483.
resentation of others, bona fide, and 13 Mobile Fire Department Ins.
so informs the insurer, the falsity of Co. v. Coleman, 58 Ga. 251 ; Mobile
the information does not void the Fire Department Ins. Co. v. Miller,
policy." Ga. Code 1911, sec. 2480 58 Ga. 420. See Georgia Code, 1882,
(2098). §§ 2803, 2804.
"A failure to state a material fact 14 Acts Ind. 1909, p. 251, subdv.
if not done fraudulently, does not (5).
void; but the wilful concealment of 15 Iowa Ann. Code 1897, p. 645,
such fact which would enhance the sec. 1812; Id. Supp. Code Iowa
risk, will void the policy." Ga. Code (1898-1907) p. 144, c. 6, sec. 1783b.
1911, sec. 2481 (2099).
3108
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
The Kansas statute makes provision as to life 16 and also a.- to
mutual hail insurance.17
Under the Kentucky statute making statements representations
and not warranties, the distinction seems to be held to apply thai
the former need be only substantially true, while the latter must
be literally complied with.18 It is also said per Clarke, J., in
another case that: "It is the purpose of this section to prevent
the insured from losing his indemnity upon either a misrepresenta-
tion or warranty that was not fraudulent or material to tin' risk,
as has been held by this court in numerous cases, and the same
rule applies with equal force to statements in the proof of loss." 19
It is also held in that state that the policy is not avoided either
upon a representation or warranty which is not fraudulent or
material.20
In a Louisiana case the distinction between representations and
warranties is stated; the. rule affirmed as to substantial compliance
only with a representation and literal compliance with a warranty
being necessary and the case turned upon "the question whether
the said answers of the assured were material" the same having by
express agreement in the application made "inducements to is<no
of the proposed policy," and it was held that a representation could
not thereby be converted into a warranty or into a statement having
16 "No misrepresentation made in Campbell, 148 Ky. 554, 146 S. W.
obtaining or securing a policv of in- 1121.
suranee'on the life or lives of any "All statements or descriptions in
person or persons, citizens of this any application for a policy of msn-
etate, shall be deemed material or ranee shall be deemed and held rep-
render the policy void unless the resentations and not warranties; nor
matter misrepresented shall have ac- shall any misrepresentations, unless
tually contributed to the eontingen- material or fraudulent prevent a re-
ey or event on which the policv is covery on the policy. Russell's Ky.
to become due and payable. Kan. Stat. 1909, p. 1031, sec. 4286 (Ky.
Laws 1907, p. 359, c. 226, sec. 1, see Stat. 639). This statute has been
Genl. Stat. 1909, sec. 4200; Genl. in force since 1874, see Blenke v.
Stat. 1915, sec. 5290. Citizens Life Ins. Co. 145 Ky. 332,
17 "No oral or written misrepre- 140 S. W. 561, 41 Ins. L. J. 94
sentation made by the assured or in (citing or considering a number of
his behalf, in the negotiation of in- previous decisions in that state),
surance, shall be deemed material See also Citizens' Ins. Co. v. Crist,
or defeat or void the policy, or pre- 22 Ky. L. Kep. 47, 56 S. W. 608, 29
vent its attaching, unless made with Ins. L. J. 765.
intent to deceive and defraud, or "Kentucky Live Stock Ins. Co.
unless the matter misrepresented in- v. McWilliams, 173 Ky. 92, 190 S.
creases the risk." Laws Kan. 1913, W. 697; Ky. Stat. sec. 639.
p 366, c 206, sec. 20 (mutual hail 80 Gennania Ins. Co. v. Rudwrg,
insurance companies.) See Id. sec. 80 Ky. 223. See Ky. Gen. Stat.
19. 1887, p. 308.
"United States Casualty Co. v.
3109
§ 1916 JOYCE ON INSURANCE
Hi,. .-;iiiM' effect, ami. therefore, the alleged false answer or warranty
was not material nor recovery defeated.1
In Maryland the Legislation on this subjeci has modified the
harsh rule respecting warranties in life insurance contracts and
has swepl away a group of merely technical objections to recovery
on such policies, ><> that the lethal eil'ecl of a warranty is controlled
by the statute, even though the statement in question is a warranty.2
It seems to have been determined in a Massachusetts case that
technical warranties as well as representations made in an appli-
cation for insurance, although referred to in the policy as part of
the contract, are included in the provisions of the Massachusetts
statute. It was said by the court in this case thai the legislature
intended to change the rule as to warranties "to some extent, and
to enact in place of it one. which should hold the contract valid,
unless the misstatement, if made in the negotiation of the contract
was made with an actual intent to deceive, or unless the misstate-
ment was of a matter which actually increased the risk of loss;
and this with reference to statements which may he said by the
parties to he warranties, as well as those which were only repre-
sentations. Such was already the law as to statements not technical
warranties. As to mere representations the statute may be held
to he only declaratory, but as to warranties it made a new rule.
In the opinion of a majority of the court, it speaks in terms
neither of warranties nor of representations, technically so called,
but deal- with representations made in negotiating the contract or
policy. Misstatements of fact, whether the statement if said to
he by the parties a warranty or a representation, are equally mis-
representations, and are placed in each case upon the same footing
by the statute which applies to them, if the statements are called
warranties by the parties, no less than if they are mere representa-
tions." It was also said that the statutes "show a general intention
lGoff v. Mutual Life Ins. Co. 131 policy of life insurance contains a
La. 98. 59 So. 28, 41 Ins. L. J. 1415; clause of warranty, of the truth of
act 1900, p. 86, No. 52. Hie answers therein contained, no
'•All statements purporting to be misrepresentation or untrue state-
made hv the insured shall in the ab- ment in such application made in
senee of fraud he deemed representa- good faith by the applicant, shall
tions and not warranties. Any waiv- effect a forfeiture or be a ground of
er of this section shall he void." La. defense in any suit brought upon a
acts 1906, |>. 86, No. 52. See La. policy of insurance issued upon the
act 1908, p. L39, No. 97. faith of such application, unless such
2.Ktna Lite Ins. Co. v. Millar, misrepresentation or untrue state-
113 Md. 686, 78 Atl. 483, 40 Ins. ment relate to some matter material
I, J. 556, Burke, J.; Code Pub. Gen. to the risk." Md. Code Pub. Genl.
L. 1904, art. 23, sec. 196. Laws 1904, sec. 196, art. 23.
"Whenever the application for a
3110
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
on the part of the legislature to make in lieu of the rules which
spring from the doctrines held in the law of insurance as to techni-
cal warranties and representations a statute rule by which to deter-
mine the effect upon the contract of all statements on the part
of the assured and also the effect of by-laws and similar matters
which it might otherwise be contended would avoid or modify the
contract."3 It is asserted in another case in that state that the
statute accentuates the distinction between a warranty and a condi-
tion precedent in that it prohibits the parties to the contract from
attaching to a breach of warranty the effect of defeating all insured's
rights under the policy, unless in good conscience it ought to have
such a result, either as increasing the risk, or because made with
intent to deceive, ft thus mitigates the harshness of clauses, for-
merly common in policies, whereby literal compliance therewith
was exacted in that the policy was avoided if a warranty was found
untrue in any respect, for under such provisions it was inevitable
that recovery would be precluded if the truth of a statement, even
though in fact immaterial and not effecting the risk, was made
the basis of the contract and it was falsified. It is also further
declared that the word "negotiation" in a statute providing that
no "warranty made in the negotiation of a contract or policy of
insurance by the assured" shall "be deemed material," etc., means
the entire transaction of applying for and finally issuing the com-
pleted contract of insurance. It comprehends all warranties
whether made in the policy itself or in separate or subordinate
or inducing instruments or agreements. Its collocation with "war-
ranty" necessarily implies this; and this applies so that statements
in a "schedule of warranties" are made in the negotiation of the
3 White v. Provident Savings Life adds force to the reasoning of the
Assur. Soc. 163 Mass. 108, 27 L.R.A. court in that decision).
308, 39 N. E. 771. (In the Barker "No oral or written misrepresenta-
case, considered below under this sec- tion or warranty made in the nego-
tion, the court, per Sheldon, J., tiation of a contract or policy of
says of this decision: "But it has insurance by the assured or in his he-
been decided by this court that the half, shall he deemed material or
statute above cited was only declara- defeat or avoid the policy or prevent
tory of the common law as to repre- its attaching unless such misrepre-
sentations, but that it changed the sentation or warranty is made with
rule as to warranties by putting them actual intent to deceive and unless
in the same category as mere repre- the matter represented or made a
sentations. . . . The fact that warranty increased the risk of loss."
the language of the statute there re- Mass. Rev. Laws, Supp. 1908, p.
ferred to [St. 1887, p. 785, e. 214, 1169, c. .118, sec. 21: Rev. L. L902,
sec. 21] has since been changed, so p. 1128, c. 118, sec. 21; Laws 18.s7. c.
as expressly to include warranties 214, sec. 21.
3111
§ 1916 JOYCE ON INSURANCE
insurance contract.4 Tn the decision so asserting the law it is said
thai there is nothing inconsistent therein with a certain earlier
case in thai state. In said referred to case, however, it is expressly
and unequivocally declared thai the statute does no1 purport to
apply to a warranty in the body of the policy, and thai the common
law remains in full force as to such a warranty, even though said
enactmenl puis both misrepresentations and warranties in the
same class and the same rule as to the burden of proof applies to
each of them. A distinction seem- also to he made in this case
between the later and earlier statutes and the effect thereof.5 This
last decision as to the construction of the statute in that state is
followed in another case inasmuch as it is decided that a warranty
which is inserted in the body of the policy is not dependent upon
the negotiations embodied in the application and final issuance
of the policy and upon a breach of the warranty the policy hecomes
void so that no recovery can he had for a subsequently occurring
loss; accordingly where there is a warranty that an automobile
insured againsl loss or damage by fire shall not be used for carry-
ing passengers for hire and it is so used there is a violation of
the warranty at common law which precludes recovery. In such
case it is immaterial whether or not the risk has been increased.8
In Michigan the statute requires that policies of life insurance
contain provisions "thai all statements by insured shall in the
absence of fraud be deemed representations and not warranties." •*
4 Everson v. General Eire & Life the court, per Sheldon, J., said:
Assur. Corp. Ltd. 202 Mass. 169, 88 "We need not consider whether or
X. E. 658, 38 Ins. L. J. 923 (sub- how far this rule," that is, the one
stance of language of Rugg, J.) ; stated in the above text, will be
St. L907, p. 854, e. 576, sec. 21, affected by the Stat. 1907, p. 896, c.
riliim Cobb v. Covenant Mutual 576, sec. 75, cl. 3.) In the Everson
Benefil Assoc. 153 Mass. 176, 10 case (cited in the last note), the
L.R.A. 666, 25 Am. St. Rep. 619, 26 court, per Rugg, J., also says of
X. E. 230 ; Miles v. Connecticut Mu- this (Barker) case: "The distinc-
tual Life Ins. Co. 3 Gray (69 Mass.) tion between a condition precedent
580. inserted in the body of the policy as
Thai warranty is in effect condi- to a subject apart from the common
tion precedent ; also qualifications of field of warranties or rcpresenta-
rule, see SS 195'] et seq. herein. tions, on the one side, and warranties,
That warranty must be strictly which are statements as to the
true, etc., see §§ 1970 et seq. here- physical, material or ancestral con-
in. dition of the insured bavin? relation
5 Barker v. Metropolitan Life Ins. to his desirability as a risk, on the
Co. 1 98 Mass. 375, 84 N. E. 490, 37 other, was there adverted to and
Ins. L. J. 4.'59, 442. s. c. 188 Mass. made the basis of the decision."
:»(•_', 71 X. E. 94.".. 34 Ins. L. J. 961 6 Elder v. Federal Ins. Co. 213
(Stat. 1887, p. 785, c. 214; sec. 21, Mass. 389, 100 N. E. 655, 42 Ins. L.
declared to have been changed so as J. 524; Stat. 1907, c. 576, sec 1.
to expressly include warranties and 7 Pub. acts 1907, No. 187, sec. 1.
3112
REPRESENTATIONS AND MISREPRESKXTATIONS § 1916
It is also provided no policy of fire insurance is to be declared void
by assurer by breach of condition if insurer is qoI injured by such
breach or where a loss has not occurred during such breach and
by reason of such breach.8
Under the Minnesota statute it is held in an action on a life
policy (a) That a material misrepresentation made with intent to
deceive and defraud avoids the policy, (b) That a material mis-
representation, not made with intent to deceive and defraud, does
not avoid the policy, unless the matter misrepresented yncreases the
risk of loss; and if it does increase the risk of loss, the policy is
avoided, regardless of the intent with which it was made, (c) That
an immaterial misrepresentation, though made with intent to
deceive and defraud does not avoid the policy; and a "representa-
tion," within the provisions of a statute that all statements shall
be deemed representations and not warranties, means a statement
made by the applicant as a basis for the policy or insurance, but
a "warranty"' within said statute constitutes a statement or covenant
of the contract: the former need be only substantially true, while
the latter must be strictly or literally fulfilled.9 So under another
decision the statute as to the effect of representations and warranties
is controlled as to the materiality of misrepresentations in that they
See 3 Howell's Mieh. Stat. Ann. "The falsity of any statement in
(2d ed.) p. 3388, sees. 8310, 8312, the application for any policy cov-
subd. 4; Id. p. 3393, sees. 1, 2; Id. ered by this act shall not bar the
p. 3406, sec. 8342. See Pub. Acts, right to recovery thereunder unless
1913, p. 501, given under § 2075 such false statement was made with
herein. actual intent to deceive or unless it
8 3 Howell's Mich. Stat. Ann. (2d materially affected either the accept-
ed.) p. 3409, sec. 8348, in point here ance of the risk or the hazard as-
in view of warranty as a condition sumed by the insurer." Laws Minn,
precedent. 1913, p. 188, c. 156, sec. 6; Laws
9 Johnson v. National Life Ins. Co. 1895, p. 400, c. 175, sec. 20.
123 Minn. 453. 144 N. W. 218; Laws "If any claim upon a policy issued
1907, c. 220, sec. 5, par. 4; Rev. Laws in this state without previous medical
Supp. 1909, sec. 1695, par. 4, subd. examination, or without the knowl-
6. edge or consent of the insured, or,
"No oral or written misrepresenta- in case of a minor, without the con-
tion made by the assured, or in his sent of his parent, guardian, or other
behalf, in the negotiation of insur- person having his legal custody, the
ance, shall be deemed material, or statements made in the application
defeat or avoid the policy, or prevent as to the age, physical condition,
its attaching, unless made with in- and family history of the insured
tent to deceive and defraud, or unless shall be valid and binding upon the
the matter misrepresented increases company unless wilfully false or in-
fche risk of loss. Minn. Rev. Laws tcntionallv misleading." Rev. Laws
1905. sec. 1623 (Genl. St. 1913, see. Minn. 1905, sec. 1693 (Genl. Stats.
3300). 1913, sec. 3467).
3113
§ 1916
JOYCE ON INSURANCE
inii-t be made with intenl to deceive 01 the matter misrepresented
must have increased the risk of loss.10
Under a Missouri decision when- a statute provides in substance
that no condition in any policy shall be taken or construed as
other than a mere representation unless it is material to the risk
insured against, it is declared thai it does not avoid all warranties
but only such as are not not material to the risk: that all other
matters warranted which are material to the risk art' left just as
they were before the statute; therefore such a statute will not be
held to mean that no policy condition shall be construed as other
than a mere representation unless it contributes to the loss.11 And
to the same effect is an assertion in another case in that state per
Nbrtoni, J., that "formerly the law required a literal compliance
10 Price v. Standard Life & Acei- in his or her application for insur-
dent Ins. Co. 90 Minn. 264, 95 N. W. ainr against loss by fire, tornado or
1118; Laws 1895, p. 400, c. 175, sec. cyclone, which application, or any
20. part thereof, shall thereafter be made
11 Kenefick v. Norwich Union Lire a part of a policy of insurance, by
Ins. Sue. 205 Mo. 'JIM, 103 S. YV. 957, being attached thereto, or by being
36 Ins. L. J. 817; Rev. Stat. 1899, referred to therein, or by being in-
sec. 7!)73; Ann. Stat. 190(3, p. 3791, corporated in such policy, shall, if
rerying upon Dolan v. Missouri Town not material to the risk insured
Mutual Lire Tns. Co. 88 Mo. App. against, he deemed, held and con-
666, 672, in support of this construe- strued as representations only, in
tion. any suit brought at law or in equity
"No misrepresentations made in in any of the courts of this slate.
obtaining or securing a policy of in- upon such policy to enforce payment
surance on the life or lives of any thereof, on account of loss of or
person or persons, citizens of this damage to any property insured by
state shall be deemed material, or such policy." Mo. Rev. Stat. 1909,
render the policy void, unless the pp. 2238, 2239, c. 61. sec. 7024.
matter misrepresented shall have ac- "The warranty of any fact or eon-
tually contributed to the contingency dition hereafter incorporated in or
or event on which the policy is to made a part of any fire, tornado, or
become due and payable, and whether cyclone policy of insurance purport-
it so contributed in any case shall ing to he made or assented to by
be a question for the jury. Mo. Rev. assured which shall not materially
Stat. 1909, p. 2202, c. 61, sec. 6937 affect the risk insured against, shall
(lite ami acident) ; Mo. Rev. Stat, he deemed, taken and construed as
1809, sec. 7890 (same as above) ; representations only in all suits at
Mo. Rev. Stat. 1889, sec. 5849 (same law or in equity brought upon such
as above except words "citizens of policy in any of the courts of this
this state" relating to insurance com- state." Id. sec. 7025.
panies other than those in the assess- Defense based on misrepresenta-
ment plan, construe! in Jacobs v. tions requires deposit in court. Mo.
Omaha Life Assoc. 142 Mo. 49, 43 Rev. Stat. 1909, see. Oil in. construed
S \V. 75, see s. c. 146 Mo. 523, 48 in Welsh v. Metropolitan Life Ins.
S. W. 462). Co. of N. Y. 165 Mo. App. 233, 147
"The warranty of any fact or con- S. W. 147.
dition hereafter made by any person
3114
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
with a warranty of fact, whether material or not, in an insurance
contract, and for the breach of such avoided the policy, but this
rule no longer obtains, for the statute12 provides otherwise. By
the provisions of that statute the warranty of any facl or condition
incorporated in a policy of fire insurance purporting to be assented
to by the assured, which shall not materially affecl the risk insured
against, shall be deemed and taken as a representation only in a
suit on the policy. Though this statute serves to annihilate the
force of a warranty at common law touching immaterial matters,
it in no wise impairs the effect of a warranty pertaining to a fact
material to the risk insured against which is otherwise not con-
cluded by some other statute, that is, remains open as a competent
subject of contract, and a warranty in respect to such fact in such
cases inheres with like force and effect as attended them prior to
the statute."13 In another case in that state where the statements
in the application were warranties it is said, per Goode, J., that
"the effect of untrue warranties is now controlled in this state by
the statute" and also that "the word 'misrepresentation,' used in
the statute, has been construed to embrace statements in the nature
of a warranty which are introduced into the policy as a part of it.
. . . Our essential inquiry is not whether, in the absence of
a statute, an unfulfilled warranty of the existence of a certain fact
or condition precedent at the date of the policy, would avoid the
contract or prevent it from taking effect; but whether if the insured
warranted the existence of a fact ... it is an accurate inter-
pretation of our statute on the subject to say it will allow recovery
notwithstanding the warranty was untrue, if the fact misrepresented
did not contribute to the loss, but will not allow recovery if the
policy elsewhere provided against liability if the fact did not exist.
even though its nonexistence had nothing to do with the loss. To
our mind this construction of the statute is not called for by the
language in which it is framed and would go far towards defeating
its purpose and destroying its usefulness." The court then con-
siders the statute of Massachusetts 14 and Ohio 15 and continues: "In
view of the language used, the courts of the respective states held
the statutes did not relate to clauses of the contract itself but to
negotiations anterior to the contract. Our statute simply says no
misrepresentation made in obtaining or securing a policy of insur-
ance, etc. These words less clearly import that the statute has
reference only to what was represented prior to the date of the con-
12 Sec. 7025, Rev. St. 1909. 14 2 Mass. Rev. Laws, p. 1128, e.
13 Farber v. American Automobile 118, sec. 21.
Ins. Co. 191 Mo. App. 307, 177 S. 15 Ohio Rev. Stat. 1890, sec. 3625.
W. 675, 46 Ins. L. J. 327, 339, 340.
3115
§ 1916 JOYCE ON" INSURANCE
tract, and not to the contents of the policy itself. It is qoI our task
to criticize the interpretation of their statutes by the courts of those
state-. What we decide is that the same interpretation cannot
rationally I"' given to our statute; for thereby we would -auction the
very mischief the legislature intended to obviate, i. e., avoidance of
liability because of immaterial errors in representations or war-
ranties. Such defenses based on warranties as the statute aims to
exclude would be introduced into the policy as conditions prece-
dent." and it was held thai assurer could not evade payment of
the policy by virtue of a policy clause, which referred to the
application in such a way as to make warranties therein a part
of said policy, unless the matter so warranted contributed to or
caused assured's death.16 So under another decision in that state
the statute is construed only as having the effect of converting
into a mere representation a stipulation relating to facts exist-
ing ;,t the time the policy was made; that is facts which before
the enactment had been treated by the courts as a condition
precedent, but not as affecting the construction of promissory
warranties.17 But under still another decision the statute abro-
gates the distinction between a warranty and a representation SO
that a warranty in the policy is included within the intent of
the statute.18 So the word "misrepresentation" in the said statute
is held to include warranties.19 And in another ease representations
which are warranties are held within the intent of the statute.20
Again the statute applies to fraudulent as well as to innocent mis-
representations where it provides that no misrepresentation in
obtaining a life policy shall be deemed material unless it actually
contributed to the event on which the policy becomes payable.1
And said statute will also be interpreted as intending to ignore all
distinctions between innocent and fraudulent representations in
applications.2 It is further decided that if a misrepresentation is
16 Salts v. Prudential Ins. Co. 140 America, 186 Mo. App. 168, 171 S.
Mo App. 142, 120 S. W. 714, 38 W. 655; Rev. Stat. 1909, sec 6937.
Ins. L. -I. 943; Rev. Stat. 1899, sec. 20 Jenkins v. Covenant Mutual Life
7890, Ann. Stat. 1906, p. 3746. Ins. Co. 171 Mo. 375, 71 S. W. 68S;
"Harwood v. National Union Fire Rev. Stat. 1889, sec. 5849; Rev. Stat.
Ins. Co. 17(1 Mo. A p).. 298, 156 S. 1899, sec. 7890.
\V. 475, 12 Ins. L. J. 1(102; Rev. l Kern v. Supreme Council Amer-
Stat L909, sees. 7024, 7025 (act ican Leg-ion of Honor, 167 Mo. 471,
1887). 67 S. W. 252; Rev. Stat. 1889, sec.
"Lvncli v. Prudential Ins. Co. of 5949. See also Keller v. Home Life
America, 150 Mo. App. 461, 131 S. Ins. Co. 198 Mo. 440, 95 S. W. 903;
W. 145; Rev. Si; t. 1899, sec. 7890; Rev. Stat. 1S99, sec. 7890. _
Ann Stat. 1906, p. 3746. 2 Connor v. Life & Annuity Assoc.
19Dodt v. Prudential Ins. Co. of 171 Mo. App. 364, 157 S. W. 814,
3116
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
made in good faith, even though it is material to the risk, its
falsity will not by reason of its untruth render the contract induced
thereby void or voidable.8
In Nebraska the breach of a warranty must have existed at the
time of loss and must have contributed thereto in order to avail
the insurer as a defense.4
ruder the New IlampsJtirc statute "descriptions of property and
statements concerning its value and the title of the insured thereto
in an application for insurance or in an insurance policy shall not
be treated as warranties. A policy shall not be avoided by reason
of any mistake or misrepresentation unless it appears to have been
intentionally and fraudulently made, or unless the difference
between the property as it was represented and the property as it
really existed contributed to the loss; but the sum insured by the
policy shall be taken to be such fractional pari of the sum men-
tioned therein as the premium paid by the insured is of the
premium which he ought to have paid, not exceeding in any event
the value of the insured's interest in the property.5
The North Carolina statute provides that "all statements or
descriptions in any application for a policy of insurance, or in the
policy itself, shall be deemed and held representations and not
warranties; nor shall any representations, unless material or fraud-
ulent, prevent a recovery on the policy.'" 6 It is also declared that
no policy of insurance issued upon any property shall be held void
because of the failure to give notice to the company of a mort-
gage or deed of trust existing thereon or thereafter placed thereon,
except during the life of the mortgage or deed of trust.7
In North Dakota statements in the application which are war-
ranties are held included in the statute which provides that mis-
representations in applications or contracts for insurance shall not
be deemed material unless made "with actual intent to deceive or
unless the matter misrepresented increased the risk of loss/' 8 But
42 Ins. L. J. 1274; Rev. Stat. 1909, Rev. Stat. 1913, sec. 3187, construed
see. 6937; Bruek v. John Hancock in Stephenson v. Germania Fire Ins.
Mutual Life Ins. Co. 194 Mo. App. Co. 100 Neb. 456, L.R.A.1917D, 307,
529, 185 S. W. 753 (same statute). 160 X. W. 962.
3 Commercial Bank v. American 5 Pub. Stat. & Sess. Laws, N. H.
Bonding Co. 194 Mo. App. 224, 187 1901, p. 570, c. 176, sec. 2; Laws
S. W. 99. 1885, c. 73.
4 "The breach of a warranty or 6 N. Car. Pell's Revisal of 1908, p.
condition in any contract or policy 2354, sec. 4808; Revisal 1905, sec.
of insurance shall not avoid the pol- 4808; act March 4, 1893, sees. 8, 9.
icy nor avail the insurer to avoid 7 N. Car. Pub. Laws 1915, c. 109,
liability unless such breach shall ex- p. 174, sec. 4.
ist at the time of the loss and con- 8 Soules v. Brotherhood of Amer-
tribute to the loss, anything in the ican Yeoman, 19 N. Dak. 23, 120 N.
policy or contract of insurance to W. 760; Rev. Code 1905, sec. 5934.
the contrary notwithstanding." Neb.
3117
§ 1916 JOYCE ON INSURANCE
the effect of a false warranty as to a fact material to the risk is
not changed by said enactment.9
Under the Ohio statute the policy shall contain "a provision that
all statements made by the assured in the application, shall, in the
absence of fraud, be deemed misrepresentations and not warran-
ties."10
Under the Oklahoma statute where the policy is issued without
previous medical examination, ii must, appear that the statements
relied on in defense were wilfully false, fraudulent and mislead-
ing.11
The Pennsylvania statute "was intended to strike down literal
warranties so far as they were, used to enforce actual immaterial
matters."12 And it is held that under a statute providing that,
BSatterlee v. Modern Brotherhood other person having legal custody of
of America, L5 N. Dak, 92, 10(5 N. said minor, the statements made in
W. 561; Rev. Code 1899, see. 4485. the application shall, in the absence
As to warranty, see N. Dak. Rev. of fraud, be deemed representations
Codes 1899, p. 965, art. 7, sees, and not warranties: Provided, bow-
4503-4512 (Civ. Code sees. 1531- ever, that the company shall not be
1540). As to representations (ma- debarred from proving as a defer e
rine) see Id. p. 969, art. 4, sees. 4549- to such claim that said statements
4550 (Civ. Code to sees. 157."), 1577- are wilfully false, fraudulent or mis-
L583). leading, and, provided, further, that
10 2 Gen. Code Ohio 1910, p. 2031, every policy which contains a refer-
sec. 9420, subd. (4) (life policy) ; ence to the application of the in-
Rev. L. 1908, p. 171. sured, either as a part of the policy
Under Ohio Rev. Stat. 1894,' p. or as having any bearing thereon
1899, Ohio Rev. Stat. sec. 3625, no must have attached thereto a correct
answer to any interrogatory made by copy of the application, and unless
an applicant for a policy shall bar so attached the same shall not be con-
right of recovery, or be used in evi- sidered a part of the policy or re-
dence, unless it be clearly proved that ceived in evidence." Okla. Comp.
the answer is wilfully false, fraudu- Laws 1909, sec. 3784.
lently made, and material "and in- 12 Miller v. Maryland Casualty Co.
duce'd the company to issue the 193 Fed. 343, 113 C. C. A. 267, 41
policy, and that but' for such answer Ins. L. J. 990, 997,— Burlington, C.
the policy would not have been is- J.; act Pa. June 23, 1885, P. L. 134.
sued;" and that "the agent of the "That hereafter whenever the ap-
company had no knowledge of the plication for a policy of life insur-
falsitv or fraud of such answer." ance contains a clause or warranty
11 Continental Casualty Co. v. of the truth of the answer therein
Owen, 38 Okla. 107, 131 *Pac. 1084, contained, no misrepresentation or
Comp. Laws 1909, sec. 37S1. untrue statement in such application
"In any claim arising under a pol- made in good faith by the applicant,
icy which has been issued in this shall effect a forfeiture or be a
state by any life insurance company, ground of defense in any suit
without previous medical examina- brought upon any policy of insur-
tion or without the knowledge and ance issued upon the faith of such
consent of the insured, or in case application, unless such misrepre-
said insured is a minor, without the sentation or untrue statement relates
consent of the parent, guardian or to some matter material to the risk."
3118
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
in case of warranty of answers in an application for insurance,
no misrepresentation made in good faith shall defeal the policy
unless it is material to the risk, the mere fad of warranty in form
will not render every statement of fact material, bul the question
of materiality is subjecl to judicial investigation; and a representa-
tion is made in bad faith, within the meaning of a statute provid-
ing that it shall not avoid the policy unless made in bad faith, only
when it is made with actual intent tomislead, nol when it is made
through forgetfulness and inadvertence. So false answers in an
application for insurance, knowingly made for the purpose of mis-
leading the company, although not material, will avoid the policy
under a statute providing that such answers innocently made shall
have nil effecl upon the policy.18 Again, a misrepresentation or
untrue statement in an application for life insurance, if made in
good faith, does not under the statutes of said state, avoid the
policy, mile-- it relates to some matter material to the risk.14
In a Rhode Island ease its statute had no application as it was
enacted Long after the insurance in question was agreed upon.
but inasmuch as the policy was a Massachusetts contract the rea-mi-
ing of that court in passing upon its statute was adopted.15 In a
recent case, however, in that state where the same statute was in-
volved, the court per Sweetland, J., said: "In our opinion this
statute does not apply to the case before ns. It has been the long-
settled rule in this state that 'statements in an application for
insurance, made as of the applicant's own knowledge, upon which
the contract is based, are warranties" and this was applied to
certain misrepresentations made by insured where the policy
stipulated that said insured made and warranted the agreements
and statements in said application to be true and material, and it
13 Penn Mutual Life Ins. Co. v. "No misstatement made in procur-
Mechanies Savings Bank & Trust Co. ins: a policy of life insurance shall
19 C. C. A. 286,^37 U. S. App. 692, be deemed material or render the
72 Fed. 413, 19 C. C..A. 316, 43 U. policy void unless the matter thus
S. App. 70, 73 Fed. 653, 38 L.R.A. represented shall have actually con-
33; Pa. act June 23, 1885. tributed to the contingency or event
14 March v. Metropolitan Life Ins. on which the policy is to become due
Co. 186 Pa. St. 629, 65 Am. St. Rep. and payable; and whether the matter
887, 40 Atl. 1100, 28 Ins. L. J. 31. so represented contributed to said
15 Leonard v. State Mutual Life contingency or event, in any case.
Ins. Co. 27 R. I. 121, 61 Atl. 52, 34 shall be a question for the jury land
Ins. L. J. 850, modifying and setting the court shall instruct the jury on
aside judgment, and granting new the law relative thereto)." R. 1.
trial in s. c. 24 R. I. 7, 86 Am. St. Laws 1902, p. 75. c. 997, in amend-
Rep. 698, 51 Atl. 1049. (The Mass. ment and in addition to c. 244 of
Stat. Laws 1894, p. 675, c. 522, as Gen. Laws; Gen. Laws 1909, c. 292,
am'd by c. 271, p. 272, L. 1895, sec. sec. 53. Words in above parenthesis
21, was the statute involved.) not in L. 1909.
3119
§ 1916 JOYCE ON INSURANCE
was held thai the policy was voidable at insurer's election where
such statement was false or fraudulent, even though not material.16
h, South Carolina "no statement in the application for insurance
shall be held to prevent a recovery U'f'oiv a jury on said policy in
case of partial or total Loss; Provided, after the expiration of sixty
.lavs the insurer shall hi' estopped to deny the truth of the state-
ment in the application for insurance which was accepted except
for fraud in making the application for insurance."17
In South Dakota there are code provisions governing the general
questions of concealment, representations and warranties.18
In T> nnessee "the purpose of the statutory provision was to bring
technical warranties to the level of representations . . . as to
mere representations the statute is but declaratory of the common
law. . . . Therefore it is apparent that if the representation made
by insured'' in answer to a certain question made by the policy "as
an inducement to issue" it. and said answer "is one that was held, in
cases that arose prior to the passage of such statute and based on the
common law. to he material as affecting the risk, no purposed
change the effect of the representation as bearing upon the risk
of loss in the original sense of the phrase is found in the statute.
In other words it was not the purpose of the statute to make a
further change in common law, as set forth in such decisions, so
as to require that the matter misrepresented should be one that
contributed to the hazard after issuance of the policy, that is, by
the death of the insured, in order to make the policy valid. . . .
We believe that his representations respecting these examinations
and applications found to be false, render the policy voidable." w
It is declared in Texas that it was the intention of the legis-
lature that its statute should apply to and cover covenants of war-
ranty and the statute is not restricted to only such answers or state-
ments made by the assured in his application or in the contract
as were not by the terms of the contract made warranties. The
Legislation in that state upon this subject matter was enacted for
16 Wells v. Great Eastern Casualty "No written or oral misrepresenta-
Co. — R. T. — , 100 Atl. 395. tion or warranty therein made in the
17 S. Car. Code Laws 11)12, see. negotiations of a contract or policy
2719, construed in Camden Whole- of insurance, or in the application
sale Grocery v. National Fire Ins. therefor, by the assured or in his be-
Co. — S. Car. — , 91 S. E. 732. half, shall be deemed material or de-
18 As to concealment and repre- feat or void the policy, or prevent
sentations see Rev. Codes 1903, pp. its attaching, unless such misrepre-
87, 88, sees. 1815, 1836 (Civ. Code), sentation is made with actual intent
As to warranties, see Id. pp. 809, 810, to deceive, or unless the matter rep-
sees. 1851-1860. resented increase the risk of loss."
19 Mutual Life Ins. Co. v. Dibrell, Shannon's Code sec. 3306 (acts 1895,
— Tenn. — , 191 S. W. 581. e. 160, sec. 22.)
3120
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
the purpose of preventing forfeitures upon immaterial matters.
The statute is remedial Legislation and "was enaeted for the pur-
pose of remedying what the legislature must have deemed an evil.
It is a matter of common knowledge that for many years prior to
the enactment of the statute insurance companies, as a general rule
embodied in the policies which they had issued stipulations making
many things warranties which, when the policy was sou-lit to be
enforced, appeared to be immaterial. Such stipulations were
always embodied in the printed forms of contract furnished and
used by the insurance companies. It was that supposed evil that
the legislation under consideration was intended to remedy." 20
20 Mecca Fire Ins. Co. v. Strieker, shall not constitute any defense to
— Tex. Civ. App. — , 136 S. W. 599, any suit brought upon such eon-
40 Ins. L. J. 12G2, — Key, C. J. ; Laws tract, unless it be shown upon the
1903, p. 94, c. 69, amending and add- trial thereof that the matter or thing
ing to Rev. Stat. 1895, c. 5, arts, misrepresented was material to the
3000aa, 3090bb. risk or actually contributed to the
Representations in application do contingency or event on which said
not affect validity of policy unless policy became due and payable, and
material. Vernon's Sayles' Ann. whether it was material and so con-
Civ. Stat. 1914, art. 4947. And if tributed in any case, shall be a ques-
insurer relies upon defense he must tion of fact to be determined by the
show within reasonable time after court or jury trying such case."
discovering falsity of representations Supp. Sayles' Tex. Civ. Stat. (1897-
that it gave notice to insured and re- 1904, Herron) p. 290, art. 3096;
fused to be bound, and also that Tex. Laws 1903, c. 69, p. 94, amend-
ninety days shall be considered a ing and adding to Rev. Stat. 1895,
reasonable time. Id. art. 4948, con- c. 5, art. 3096aa.
strued in Guarantee Life Ins. Co. v. "That in all suit brought upon in-
Evert, — Tex. Civ. App. — , 178 S. surance contracts or policies here-
W. 643. Recovery not to be de- after issued or contracted for in this
feated upon life policy by misrepre- state, no defense based upon misrep-
sentations in application which is resentations made in the applications
immaterial and does not affect risk for, or in obtaining or securing the
assumed. Acts 1909, art. 4959. said contract, shall be valid unless
Policy must contain provision: the defendant shall show on the trial
"That all statements made by the in- that within a reasonable time after
sured shall, in the absence of fraud, discovering the falsity of the mis-
be deemed representations and not representations so made, it gave no-
warranties." Supp. Sayles' Tex. tice to the assured, if living, or, if
Civ. Stat. (1908-1910, Herron) p. dead, to the owners or beneficiaries
242, title 58, sec. 22. of said contract, that it refused to
"That any provision in any con- be bound by the contract or policy ;
tract or policy of insurance issued provided that ninety days shall be a
or contracted for in this state, which reasonable time; provided, also, thai
provides that the answers or state- this article shall not be construed as
ments made in the application for to render available as a defense any
such contract, or in the contract of immaterial misrepresentation nor in
insurance, if untrue or false, shall any wise modify or affect article
render the contract or policy void 3096aa." Id. 3096bb.
or voidable, shall be of no effect and As to benefit certificates being non-
Joyce Ins. Vol. III.— 196. 3121
§ L916 JOYCE ON INSURANCE
It is also asserted and held that the manifest purpose of the enact-
!,,,., ,t was to leave open to judicial investigation in the ordinary
the question of whether the fad concerning which the inquiry
was made and an untrue answer given was material to the risk,
and if qoI found to be so material in thai respeel the contract is
n01 avoided.1 Bu1 it is also decided that the statute is restricted
to representations of past and present facts and ii does qo1 apply
to agreements to perform or not to perform future acts, or to what
are termed "promissory warranties."2 So, under another decision
in thai state while the statute applies to both fire and life policies
ii covers only those cases in which there has been a misrepresenta-
tion made by insured either in the application or in the policy
itself, and such enactmenl does not apply to a policy provision
which is a warranty contractual in nature, where no representa-
tion of any kind is made by assured in either application or policy ;
so thai 11 is unnecessary to either plead or prove that the existence
of the matter to which the warranty relate-, was material to the
risk; in other words a breach of warranty avoids the policy regard-
less <'f the statute.8 Again, it will also be assumed that the statute
was enacted in view and with knowledge of the construction of
representations and promissory warranties and of the legal require-
ments of literal or strict compliance with the latter, and upon this
assumption it is held that the doctrine governing warranties was
QOi abolished by the legislature so that a breach of warranty will
avoid the policy.4 The misrepresentations must, however, be ma-
terial. If the claimed false answers do not appear from the evi-
dence to be material to the risk and they do not influence the issu-
ing of the policy the policy is not avoided.5
contestable by reason of any state- Tex. Civ. App. 456, 128 S. W. 625,
menl or representation, see Tex. Civ. 39 Ins. L J. LL51.
Stat. 1911, art. 4384, as am'd by 'Hartford Fire Ins. Co v WngM,
-innn o c W Tw Qfnt r, 58 IeX. ClV. App. lit, 120 O. W .
acts 1009 2 Sayles Tex. Stat. p. ^ ^ ^ L h ^ ^ ^^
i St. Paul Fire & Marine Ins Co. by ^ March 2? im3> amending
v. Huff, - Tex. Civ. App. —,172 Tif -^ Rey St;|( lg95
S. W. 755, 15 Ins. L. J. 363,— Levy, 4 Gross v. Colonial Assnr. Co. 56
J.: Rev. Stat. sec. 4947. Tex. Civ. App. 627, 12] S. W. 517,
2 National Fire Tns. Co. v. J. W. Rev< Stat. 1895, art. 3096aa, added
Caraway & Co. 60 Tex. Civ. App. by acts 28th Leg. 1903, p. 94, c. 69,
566, 130 S. W. 458, 39 Ins. L. J. see. 1.
1 166,— Pleasants, C. J.; act 1903. 5 Guarantee Ins. Co. v. Evert, —
Laws L903, e. 69; Rev. Stat. art. Tex. Civ. App. — , 178 S. W. 643;
3096aa; Sayles' Ann. Civ. Stat. Vernon's Sayles' Ann. Civ. Stat.
Supp. (1897-1904) art. 3096aa. See 1914. art. 4947; "Acts 1909, sec. 68,
also Home Ins. Co. v. Rogers, 60 art. 4959.
3122
REPRESENTATIONS AND MISREPIv'KSKNTATloNS § 1916
Under the Vermont statute: "The falsity of any statement in
the application for a policy covered by this act shall nol bar the
right to recovery thereunder unless such false statement was made
with actual intent to deceive, or unless it materially affected either
the acceptance of the risk or the hazard assumed by the insurer." 6
It is said in a Virginia case where the statute had been enacted too
late to be availed of therein, that said enactment was needed to
modify the strict rule of law governing warranties.7
The Washington statute contains three conditions; one relating
to material misrepresentations made in the negotiation of the con-
tract with intent to deceive; one covering a breach of warranty
existing at the time of loss and contributing thereto; and one
reducing the recovery if a loss occurs while a breach of warranty
contributing thereto exists;8 and "it is not enough under this
6 Laws of Vt. 1912, No. 173, p. 212, policy nor avail the insurer to avoid
see. 0 (approved Jan. 11, 1913, liability unless such breach shall
standard policy; life and accident.) exist at the time of such loss under
7 Metropolitan Life Ins. Co. v. SUCD contract or policy." Laws of
Rutherford, 2 Va. Dec. 707, 35 S. \Vash. 1915, p. 703. c." 192, sec 34,
E. 719 (Laws Va. 1899-1900) aff'g approved March 23, 1915 : Rem. Code
98 Va. 195, 5 Va. L. Reg. 842. 35 JJfg se(. (;n-()_,u
S. E. 361, 29 Ins. L. J. 365 (winch KThp )H.(,;|rh of g warrantv ()f pon_
applied the strict rule or warranties.) ■,-,■ ■ ,'• « .
'.',,, , „ . ■ , dition in anv contract or pohev ot m-
1 hat no answer to any mterroga- , • . ,' , ■ ,.
torv made by an applicant for a surance .fhJ not av0ld the '"' ,,'v
policy of insurance .shall bar the ™r avai tho insun'r fc° *™d I,:'-
right to recover upon any policy is- blllt.v "llless s'"'h breaeh s,l:,n exist
sued upon such application by reason a1 the time of the loss and eontnb-
of any warranty in said application, "ted to the loss; anything in the
or policy contained, unless it be policy or contract to the contrary
clearly proven thai such answer was notwithstanding. In case a loss oc-
willfully false or fraudulently made, curs while a breach of warranty ex-
or that it was material." Laws Va. ists, if it contributes to the loss, the
1899-1900, acts 1906, p. 139, c. 112, insured shall only be entitled to re-
par. 28; Cod" 1904, sec. 3344a. cover the amount of insurance the
BWoods v. Insurance Co. of State premium paid would purchase at
of Penn. 82 Wash. 563, 144 Pac. the rate that would be charged with-
050; Laws 1911, p. 197, sec. 34. out the warranty. This section shall
"No oral or written misrepresents!- be iiberanv construed." Wash. Ins.
tion or warranty made m the negoti- ,,„,,, L911 sec 3i Laws 1911 pp.
ation ot a contract or policy or in- -igj -.gy ^
surance, by the assured or on his w„„u:! 1 " t „ rwi„ t „„„. ion
i ,,..,•,, , j , -i \\ aslunffton Ins. Lode Laws 1SI11,
behalf, shall be deemed material or ... .,. , , ,
defeat or avoid the policy to prevent c" «J. Sfiec' 3f> was not "P"** hv
it attaching, unless such misrepre- **• 106 °f *« same act, adopt, m:
sentation or warrantv is made with the New York Standard form of pok-
the intent to deceive." If any breach (T '• nor 1S tho operation oi sec 34,
of a warrantv or condition in any hunted as to point of time to the
contract or policy of insurance shall !*( day of .January, 1912, when
occur prior to a loss under such poll- sec. 106 became operative. E. H.
cy, such breach shall not avoid the Stanton Co. v. Rochester German
* 3123
§ 1916 JOYCE ON INSURANCE
statute to find that the representations were false. It must further
be found that they were made with intent to deceive."9
Jn a Wisconsin case il is said per Kerwin. J., in referring "in
passing" tq the statute of that state, that it was obviously intended
by the legislature by said enactment to cut off many technical de-
fenses, although it would seem from the opinion that the court evi-
dently had in mind said statute in reaching its conclusion that the
representation involved was made in good faith and without any
intention to misrepresent and the policy was not avoided, which con-
elusion is in. conformity with the statutory provision that no
warranty or misrepresentation shall defeat a policy unless it was
falsely made with intent to deceive, etc.10
(a) Statutes of this character are valid, not against public policy
and are within the police power of the state.11 So a statute pro-
viding that no misrepresentation or warranty, unless made with
actual intent to deceive, or unless the risk or loss is thereby in-
creased, shall defeat or avoid an insurance policy, is not uncon-
stitutional as class legislation, and is a valid exercise of the police
power, although it applies only to nonassessment insurance com-
. panics.12 And although a statute applies only to old line companies
doing business on the stipulated premium plan, it does not con-
travene a constitutional provision which prohibits the enactment
of any special law regulating the practice or jurisdiction of or
Underwriters Agency (U. S. D. C.) of such warranty increased the risk
206 Fed. 978, 42 Ins'. L. J. 1621. at the time of the loss, or contributed
9Brigham v. Mutual Life Ins. Co. to the loss, or unless such breach
of N. Y. — Wash. — , 163 Pac. 380, existed at the time of the less."
per Morris, J., Rem. Code 1915, sec. Wis. Stat. 1913, p. 1982, sec. 4202m.
6059-34. " John Hancock Mutual Life Ins.
10Pagel v. United States Casualty Co. v. Warren, 181 U. S. 73, 45 L.
Co. 158 Wis. 278, 148 N. W. 878, 44 ed. 755, 21 Sup. Ct. 535, 30 Ins. L.
Ins. L. J. 698, 701. J. 623, aff'g 59 Ohio St. 45, 51 N.
"No oral or written statement, rep- E. 546; Ohio Rev. Stat. sec. 3625,
resentation, or warranty, made by Rev. Stat. 1894, p. 18!)!) : New York
the insured or on bis behalf in the Life Ins. Co. v. Hamburger, 174
negotiation of a contract of insurance Mich. 254, 140 N. W. 510; Pub.
shall be deemed material or defeat acts 1907, No. 187, sec. 1; Continen-
or avoid the policy, or prevent its tal Casualty Co. v. Owen, 38 Okla.
attaching unless such statement, rep- 107, 131 Pac. 1084; Comp. Laws
resentation or warranty was false and 1909, sec. 3784.
made with actual intent to deceive 12 Continental Fire Ins. Co. v.
or unless the matter misrepresented Whitaker, 112 Tenn. 151, 64 L.R.A.
or made a warranty increased the 451, 105 Am. St. Rep. 916, 79 S. W.
risk or contributed to the loss. (2) 119; Fidelity & Casualty Co. v. Free-
No warranty incorporated in a con- man, 109 Fed. 847, 48 C. C. A. 692.
tract of insurance relating to any Construing Tenn. acts 1895, ,c. 160,
fact prior to a loss shall defeat or sec. 22.
avoid such policy unless the breach
3124
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
changing the rules of evidence in any judicial proceeding, or
providing or changing methods for the collection of debts, for it
is within the constitutional rights of the legislature to discriminate
between liabilities of such insurance companies and assessment
plan companies.13 So an enactment concerning warranties in
tire policies, the breach of which does not contribute to Loss is held
constitutional.14 It is also decided that the statute is declaratory
as to misrepresentations and only formulates a new rule as to war-
ranties.15 The Texas statute is held remedial and in construing it
the courts will consider the evil intended to be remedied, and give
the language a liberal construction in order to accomplish the
legislative purpose.16
(b) These statutes should be liberally construed against insurer
and in favor of assured,17 especially so where another enactment
provides in effect that legislation shall be construed liberally in
order to accomplish the legislative purpose.18 And in Alabama
puch statute should be liberally construed to preclude forfeiture
for breach of warranty, when the same relates to an immaterial
matter.19 If the criticisms of the courts in certain cases20 are
admitted to be just, they evidence the existence of a certain class
13 Jenkins v. Covenant Mutual L. 1909, see. 3784 (is remedial in
Life Ins. Co. 171 Mo. 375, 71 S. W. its nature).
688; Const, art. 4, see. 53; Rev. Stat. "American Bonding Co. of Bait.
1889, see. 5S49; Rev. Stat. 1899, sec. v. Ballard County Bank's Assignee,
78P0. 165 Ky. 63, 176 S. W. 368; Ky. St.
14 McPherson v. Camden Fire Ins. sec. 639 ; Soules v. Brotherhood of
Co. — Tex. Civ. App. — , 185 S. W. American Yeomen, 19 N. Dak. 23,
1055; acts 33 Leg. c. 105; Vernon & 120 N. W. 760; Rev. Code, 1905,
Sayles' Ann. Civ. Code 1914, arts. sec. 5934; Mecca Fire Ins. Co. v.
4874a, 4874b. Strieker, — Tex. Civ. App. — , 136
15 Kidder v. Supreme Command- S. W. 599, 40 Ins. L. J. 1262; Laws
ery United Order of Golden Cross, 1903> c- 69> amending and adding to
199 Mass. 326, 78 N. E. 469,'35 Ins. *ev. Stat. 1895, tit. 58, c. 5, arts
L. J. 778; Stat. 1894, p. 684, c. 522, ^9f6aa' 3098bb; Pagel v United
sec. 21, as am'd by Stat. 1895, p. State. Casualty Co. lo8 Wis. 2,8,
n„. ' r, t no o-t. 148 N. \v. 8/8, 44 Ins. L. J. 698,
S^Q^ibE* '\o 'loo ' 70°; Stat- M sec. 4202m. See
Rev Stat 1901 p. 349 c. 422, sec. gecs; m ^ geq ^
27 ; Rev. L. 119 see. 12. u Meeca Fire Ing Co y Strieker,
" Mecca Fire Ins. Co. v. Strieker, _ Tex Ciy App _ 136 g w ^
— Tex. Civ. App. — , 136 S. \\ . 599, 40 Ins L j 1262 sec. 3 finai titie
40 Ins. L. J. 1262; Laws 1903, c. 69, of Rev. Stat 1895.
amd'g Rev. Stat. 1895, title 58, by ^Metropolitan Life Ins. Co. v.
adding arts. 3096aa, 3096bb; Soules Goodman, 10 Ala. App. 446, 65 So.
v. Brotherhood of American Yeomen, 449, Code 1907, sec. 4572.
19 N. D. 23, 120 N. W. 760; Rev. 20 Combs v. Hannibal Savings &
Code 1905, see. 5934 (is remedial) ; Ins. Co. 43 Mo. 148, 152, 97 Am. Dec.
Continental Casualty Co. v. Owen, 3S3; Delancev v. Rockingham Farm-
38 Okla. 107, 131 Pac. 1084; Comp. ers' Mutual Ins. Co. 52 N. H. 581.
3125
§ L916 JOYCE ON ENSURANCE
of contracts which at the least are not based upon the good faith
which is the basis of every contract of insurance, and it may there-
fore be reasonably assumed thai the legislatures, in enacting stat-
utes which arc intended to avoid technical forfeitures, have had
in view the benefit of the assured, and in construing the same the
purpose of the legislature should be paramount.1 It is held, how-
ever, that a statute prescribing the form of policies of insurance
and requiring the insertion therein of provisions in favor of the
insured should lie strictly construed, as where the statute exacts
provisions stating that the policy included the application, that no
statement made by the assured shall he used in defense unless it is
contained in the written application and a copy of the application
is indorsed upon or attached to the policy.2
(c) Place of contract. If a policy is countersigned and delivered
in Pennsylvania the statute of that state as to material representa-
tions, applies.3 It is also held that if a contract is sought to be
enforced in one state and it was made and executed in another, it
will he governed by a statute of the latter state as to material mis-
representations.4 We have, however, fully considered this ques-
tion elsewhere.5
(d) Lex loci; contract stipulation. If a benefit certificate pro-
vides that it shall be construed according to the laws of a specified
state it will be so construed in an action thereon in the courts of
another state and the statute of the named state as to materiality of
statements by assured will he given effect.6
(e) Such enactments also become a part of the policy and must
be construed as if incorporated therein ; 7 that is, a statute con-
cerning the effect of misrepresentations and warranties, which is
in force at the time the policy is issued, becomes a part thereof by
implication the same as if embodied therein;8 it becomes a part
of the policy with the legal effect as if copied therein, and controls
1 See Fidelity Mutual Life Assoc, v. Bovce (27 Del.) 308, 88 Atl. 553,
Ficklin, 71 Md. 172, 21 Atl. 680, 23 42 Ins. L. J. 1715; Penn. act June
Atl. 197, above .noted. 23, 1885, P. L. 134. See § 231d
2 New York Life Ins. Co. v. Hard- herein.
ison, 199 Mass. 190, 127- Am. St. 7 Camden Wholesale Grocery v.
Rep. 478, 85 N. E. 410. National Fire Ins. Co. — S. Car. — ,
3. Miller v. Maryland Casualty Co. 91 S. E. 732, 734; Civ. Code 1912,
193 Fed. 343, 113 C. C. A. 267, 41 sec. 2719.
Ins. L. J. 990. Whether common or statutory law
4 Leonard v. State Mutual Life a part of contract, see §§ 194 et
Assur. Co. 27 R. I. 121, 114 Am. St. sea. herein.
Rep. 30, 61 Atl. 52, 34 Ins. L. J. 8 Christian v. Connecticut Mutual
850. Life Ins. Co. 143 Mo. 460, 45 S. W.
6 See §§ 225 et seq. herein. 268, 27 Ins. L. J. 968; Rev. Stat.
6 Grand Fraternity v. Keatley, 4 1889, sec. 5849.
3120
REPRESENTATIONS AND MISREPRESENTATIONS § L916
its construction and operation and fixes the measure of the obliga-
tion thereunder.9 And the presumption exists thai the parties have
contracted with reference to such statute- as well as to the con-
struction placed thereon with reference to its purposes.10 So under
a Nova Scotia decision if there is a warranty in the policy in
addition to the statutory condition it musl comply with the statu-
tory requirement to be effective.11 In Missouri, under a statute
which provides that misrepresentations in the application in life
risks shall not he deemed material unless the facts misrepresented
contributed to the death of the assured, it is held thai such enact-
ment becomes a part of every life policy made while the act is
in force, and applies as well to representations fraudulently made
as to those made in good faith.12
(f) As to stipulations in the policy contrary to these statutes,
or in the matter of waiver of statutory provisions by contract: if
the enactment is mandatory or does not operate as a positive pro-
hibition, or does not stipulate requirements in the nature of con-
ditions precedent to acquiring certain rights, there would seem
perhaps to be no good reason why it may not be waived by the
use of apt and clearly expressed terms agreed upon as having that
effect, although if the matter is doubtful, a question might arise
whether the construction should not be such as to favor the insured.
The cases, however, afford no certain rule for guidance.13 although,
as appears from the statutes, some of the states have by legislative
enactments expressly provided against such contract stipulations
under a Maryland decision, where a policy was issued by a Pennsyl-
vania company, it is held that a stipulation is unenforceable in
so far as it conflicts with the terms of a statute; and this was applied
where a stipulation in the contract made the application a part
thereof and the answers therein material, and warranted them to
be full, complete, and true, and further provided that the policy
should be void if said statements were untrue, even though the
same were made in good faith, notwithstanding any statutory
provision to the contrary.14 In Missouri, policy provisions incon-
sistent with or contrary to the statute are void; and this is in
9 North American Accident Ins. Ins. Co. 6 Mo. App. 582. See White
Co. v. Sickles, 23 Ohio C. C. R. 594, v. Connecticut Mutual Life Ins. Co.
24 Ohio C. C. R. 232; Rev. Stat. 4 Dill (U. S. C. C.) 177, Fed. Cas.
sec. 3265. No. 17,545. See Rev. Stats. Mo.
"American Bonding Co. of Bait. 1879, sec. 5976; Rev. Stats. 1889, sec.
v. Ballard Countv Bank's Assignee, 5849.
165 Kv. 63, 176 S. W. 368. 13 See § 194 (g) p. 529 herein.
nMcNutt v. Western Assur. Co. 14 Fidelity Mutual Life .Assoc, v.
40 N. S. 375; R. S. N. S. 147. Ficklin, 74 Md. 172, 23 Atl. 197,
12 Klostermann v. Germania Life affirming on rehearing, 21 Atl. 680.
3127
§ 1916 JOYCE OX INSURANCE
conformity with the express provisions of the statute.15 Under a
Louisiana decision a policy cannot stipulate contrary to the statute
and make statements material or warranties regardless of whether
or not they are so, especially where the statute expressly provides
thai any waiver of its provisions shall he void.16 In Ohio express
stipulations making the answers warranties or other provisions
contrary to the statute are of no effect.17 In Oklahoma the require-
ments of a statute that statements by assured in his application
must be construed as representations and not warranties cannot
be evaded by endorsing such statements upon the policy which f
also contains a provision to the effect that the policy is issued in
consideration of such statements each of which the insured by
accepting the policy warrants to be full, complete and true.18
Under a Texas decision if the policy stipulation and that of the
application conflict and the policy makes statements therein repre-
sentations and not warranties, representations as to immaterial
matters do not constitute warranties the falsity of which will avoid
the policy.19 In an early Kentucky case the parties entered into
a contract for insurance, providing that the statements in the
application should be deemed part of the policy and warranties,
and that any false representation should render the policy void,
and it was held that the contract waived the benefit of the statute
and was avoided by any untrue statement, although immaterial.20
(g) Such statutes have no retroactive effect and no such con-
struction can be impliedly incorporated therein.1 The statutes of
Rhode Island providing that "no misstatement made in procuring
a policy of life insurance shall be deemed material or render the
15 Burns v. Metropolitan Life Ins. 594, 24 Ohio Cir. Ct. R. 232; Rev.
Co. 141 Mo. App. 212, 124 S. W. Stat. 326").
.139; Rev. Stat. 1899; Ann. Stat. "Continental Casualty Co. v.
1906, p. 374(i. Owen, 38 Okla. 107, 131 Pac. 1084;
No insurance company, corpora- Comp. Laws 1909, sec. 3784.
tion or association of persons doing 19 Guarantee Life Ins. Co. v.
a fire, cyclone or tornado insurance Everts, — Tex. Civ. App. — , 178
business in this state, shall have the S. W. 643; Vernon's Sayles' Ann.
right, power or authority, by con- Civ. Stat. arts. 4947, 4959 (acts
tract or otherwise, to contract 1909, sec. 68).
against or in any manner whatever 20 Farmers' & Drovers' Tns. Co. v.
evade the provisions of sections 7024 Curry, 13 Bush (76 Ky.) 312, 26 Am.
and 7025 of this article. Mo. Rev. Rep. 194. But compare Kentucky
Stat. 1909, pp. 2238, 2239, c. 61, sec. decisions considered above under this
7026. section.
16 Goff v. Mutual Life Ins. Co. of * Leonard v. State Mutual Life
N. Y. 131 La. 98, 59 So. 28, 41 Ins. Assur. Co. 27 R. I. 121, 114 Am. St.
L. J. 1415; act 1906, No. 52. Rep. 30, 61 Atl. 52, 34 Ins. L. J.
17 North American Accident Ins. 850.
Co. v. Sickles, 23 Ohio Cir. Ct. R. /
3128
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
policy void unless the matter thus represented shall have actually
contributed to the contingency or event on which the policy is to
become payable; and whether the matter so represented con-
tributed to said contingency or event, in any case, shall be a ques-
tion for the jury," does not apply to contracts not in existence
;,t the time of it's enactment.2 Ho a statute providing that state-
ments as to age physical condition, etc., shall be valid and binding
upon insurer unless wilfully false or intentionally misleading,
will not control a case under an accident policy, where it was
written and assured's death, claimed to be accidental, occurred
before the enactment went into effect, but claimed misstatements
will be governed by the statute in force as to materiality of mis-
representations generally and when they are available as a defense.8
Again, a statute which is enacted after argument and submission
of a case to the appellate court cannot, after decision rendered, be
invoked upon a petition for a rehearing to change the court's
decision, where the law existing at the time of rendition of judg-
ment governs the disposition made of writs of error.4
(h) The test of the application of these various statutes neces-
sarily depends upon the language thereof and the conditions
therein under which a defense may be availed of by insurer. The
decisions, however, bring the test within the general rule which
we have elsewhere stated as to materiality} A misrepresentation
is material under the Kentucky statute when the insurers would
not as careful and intelligent men have issued the policy had the
truth been known, or where they would in such case have demanded
a higher premium.6 And the Louisiana rule is to the same
effect; 7 so, also, in Ohio,8 and in Texas.9 It is further decided in
2 Leonard v. State Mutual Life 5 See §§ 1892 et seq. herein.
Assur. Co. 27 R. I. 121, 114 Am. 6 United States Casualty Co. v.
St. Rep. 30, 61 Atl. 52. Campbell, 148 Ky. 554, 146 S. W.
3McAlpine v. Fidelity & Casualty 1121; Ky. Stat. sec. 639; United
Go. of N. Y. 134 Minn'. 192, 158 N. States Health & Accident Ins. Co.
W 967- Rev. Laws 1005, sec. 1693, v. Bennett's Admr. 32 Ky. L. Rep.
(Gen. Stats. 1913, sec. 3167); Laws 235, 105 S. W. 433, 38 Ins. L. J.
1913, c. 156 (Gen. Stat. 1913, sees. 200 (same statute).
3529 3535)- Rev. Laws 1905. sec. 7 Goff v. Mutual Life Ins. Co. ot
1623' (Gen. Stat. 1913, sec. 3300). N. Y. 131 La. 98, 59 So. 28, 41 Ins.
* Metropolitan Life Ins. Co. v. L. J. 1415 ; act 1906, p. 86, No. 52.
Rutherford, 2 Va. Dec. 707, 35 S. 8 John Hancock Life Ins. Co. v.
E 719 (Laws 1899-1900) aff'er 98 Warren, 59 Ohio 45, 40 Ohio L J.
Va 195 5 Va. L. Reg. 842, 35 S. 309, 51 N. E. 546; Rev. Stat. sec.
E. 361, 29 Ins. L. J. 365 (which held 3625. See North American Accident
that where answers to questions in Ins. Co. v. Sickles, 20 Ohio Cir. Ct.
the application are made warranties 594, 24 Ohio Cir. Ct. R. 232 -
they must be strictly complied with 9 St. Paul Fire & Marine Ins. Co.
and being untrue the policy was v. Huff, — Tex. Civ. App. . — Id-
avoided.) S. W. 755, 45 Ins. L. J. 363; Rev.
3129
§ 1916 JOYCE ON INSURANCE
the last named state that a statutory requirement that a misstate-
ment or misrepresentation must be material to the risk assumed
otherwise a certificate issued by a fraternal association shall be
noncontestable, will be construed as meaning that the risk as-
sumed is the hazard of the contract with relation to the perils by
which assured's life is menanced.10 The test, under the Pennsyl-
vania statute, is also whether the representation or warranty was
material to the risk, and whether it was of such substantial im-
portance as that the insurer would not have entered into the con-
trad had the truth been known.11 In construing the North Carolina
statute it is held that every fact stated in an application for a
policy will be deemed material which would materially influence
the judgment of insurer in accepting the risk or in fixing the
premium rate, and that it is not necessary that a material repre-
sentation should, in order to preclude recovery, be shown to have
contributed to the loss.12 And a misrepresentation in an accident
insurance application which would influence assurer's judgment
in accepting the risk, is material within the intent of the statute
even though the matter misrepresented does not affect the injury
for which insured seeks recovery.13 Failure, however, to state a
material fact will not in Georgia avoid a policy unless such failure
be fraudulent; "but the wilful concealment of such a fact which
would enhance the risk will void the policy;" although in deter-
mining whether a statement is material the test is whether or not
a prudent insurer would have been thereby influenced to accept
the risk, or in fixing the amount of premium.14 (i) What is or is
Stat. see. 4947; Indiana & Ohio Live Co. 140 N. Car. 5S9, 53 S. E. 354;
Stock Ins. Co. v. Smith, — Tex. Civ. 2 Revisal, sec. 4646.
A i > | > . — , 157 S. W. 755; Rev. Civ. As to disease and accident, and
Stat. 1911, art. 4947. disease or accident as cause of in-
10 United Benevolent Assoc, v. jurv or death, see Penn v. Stand-
Baker, — Tex. Civ. App. — 141 S. ard Life Ins. Co. 160 N. Car. 399,
W. 541; acts 31st Leg. 1st called 42 L.R.A.(N.S.)_ 597, 76 S. E. 26.2,
sess. c. 36, sec. 8, as am'd by acts 42 Ins. L. J. 145; Penn v. Standard
31st Leg. 2d called sess. c. 22, sec. 1. Life & Accident Ins. Co. 158 N.
"Miller v. Marvland Casualty Co. Car. 29, 42 L.R.A.(N.S.) 593, 73 S.
193 Fed. 343, 113 C. C. A. 267, 41 E. 99, 41 Ins. L. J. 550 (both cases
Ins. L. J. 990, 997; Pa. act June considered elsewhere herein), see also
23, 1885, P. L. 134. §§ 2629 et seq., 2879 et seq. herein.
12 Lunnnus v. Fireman's Fund Ins. 14 Empire Life Ins. Co. v. Jones,
Co. 167 N. Car. 654, L.R.A.1915D, 14 Ga. App. 647, 82 S. E. 62; Civ.
239, 83 S. E. 688, 45 Ins. L. J. 190; Code 1910, sees. 2479-2481. See
Revisal 1905, sec. 4808; Schas v. German American Mutual Life As-
Equitable Life Assur. Soc. 166 N. soc. v. Farley, 102 Ga. 720, 29 S.
Car. 55, 81 S. E. 1014 (same stat- E. 615, 27 Ins. L. J. 657; Ga. Civ.
ute). Code, § 2098, construed in connec-
"Fishblate v. Fidelity & Casualty tion with Id. see. 3533.
3130
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
not included or within the meaning of statutes of this character
must depend necessarily upon the language used and intenl of
the statute, having in view the rules of construction applicable
in such cases. The North Carolina statute of 1893 applies to
all lire and life policies,16 and the words "life insurance'" in the
Pennsylvania act applies to accident policies.16 The Tennessee act
includes policies in both domestic and foreign companies; although
there are certain classes of insurers which are specially excepted."
The Kentucky statute is inapplicable to a ease where neither an
application nor statements are made in order to procure insur-
ance;18 nor does the Nebraska statute apply to a case where no
contractual relations existed.19 And the Missouri statute- <hn^ not
apply in an action brought during insured's lifetime to avoid the
policy.20
(j) Fidelity guaranty insurance. Such a statute applies to an
application for fidelity insurance, and the presumption attaches
that the parties have contracted in reference to the construction
thereto in view of the purposes intended.1 So a fidelity insurance
renewal contract is avoided by a falsely and fraudulently made
statement that the employee was not in default, as such representa-
tion is material.2
(k) Automobile insurance. A representation that an auto-
mobile was a certain year model is material to the risk even
though such statement was innocently made.3 And a breach of
"Albert v. Mutual Life Ins. Co. signee, 165 Ky. 63, 176 S. W. 368;
122 N. Car. 92, 65 Am. St. Rep. 693, Ky. Stat. sec. 639. See also United
30 S. E. 327, 27 Ins. L. J. 723; act States Fidelity & Casualty Co. v.
March 4, 1893, c. 299. Foster Deposit Bank, 148 Ky. 776,
16 .Miller v. Maryland Casualty Co. 147 S. W. 406; Ky. Stat. sec. 639;
193 Fed. 343, 113 C. C. A. 267, 41 First National Bank v. Fidelity &
Ins. L. J. 990; act Pa. June 23, Guaranty Co. 110 Tenn. 10_, 100 Am.
1885; P. L. 134. St. Rep. 765, 75 S. W. 10<6; Whin-
17 Arnold v. New York Life Ins. field v. Massachusetts Bonding & Ins.
Co. 131 Tenn. 720, 177 S. W. 78; Co. 162 Wis. 1, 154 X. W. 632; Stat.
ads 11)07, c. 441, 457. 1913, sec. 4202m (statute was placed
18 Independent Life Ins. Co. of in chapter entitled "Provisions
America v. Rider, 150 Ky. 505, 42 Common to Actions and Proceedings
L.R.A.(N.S.) 560, 150 S. W. 640; in all Courts").
Ky. Stat. 639. But contra see Commercial Bank
19 Stephenson v. Germania Fire v. American Bonding Co. 194 Mo.
Ins. Co. — Neb. — , 160 N. W. 962; App. 224, 187 S. W. 99; Rev. Sim.
Rev. Stat. 1913, sec. 3187. 1909, sees. 7024, 7026, and sec. 6937.
80 Pacific Mutual Life Ins. Co. v. See § 2002a herein.
Glaser, 245 Mo. 377, 45 L.R.A. 2 Commercial Bank v. American
(N.S.) 222, 150 S. W. 552; Rev. Banking Co. 194 Mo. App. 224, 187
Stat. 1900, sec. 6937. S. W. 99.. See § 1470a herein.
1 American Bonding Co. of Balti- 3 Smith v. American Automobile
more v. Ballard County Bank's As- Ins. Co. 188 Mo. App. 297, 175 S.
3131
§ 1916 JOYCE OX INSURANCE
a warranty as to location of an automobile in a private garage
voids the policy issued at a reduced rate of premium because of
said warranty, irrespective of the fact whether or not said breach
in any way contributed to the loss; therefore the statute is no
defense.4 And a false statemenl of the cost of an automobile
insured against fire, is material and a warranty within the statute,
especially so where it appears that the insurer would not have
issued the policy had it known the truth as to cost of said prop-
erty.6 Bui where it appears thai the policy is an open one in
which the value of an insured automobile is left to be estimated,
11,, i in excess of the specified sum insured, in case of loss by fire,
also thai the valuation by assured was rejected and the value fixed
at a less sum by assurer's agents acting independently, such state-
ments may be regarded as bearing only upon insurable value so
that it could, in view of said agent's acts and of a comparison
between the value or cost stated by assured and the amount for
which the policy was issued, he reasonably inferred that insurers
were not influenced thereby in accepting or rejecting the risk, and
the misrepresentations were therefore not material to the risk,
especially so where it also appears that the matters stated did not
a licet and would not have changed the premium rate charged.6
(1) "Whether or not mutual benefit, etc., associations and assess-
ment companies are within misrepresentation statutes must depend
not only upon the construction of such statutes but upon the status
of such organizations in each jurisdiction wherein the question
arises.7 Under an Alabama decision a fraternal order cannot
avoid the provisions of the statute as to misrepresentations where
it is not within the class of insurers which another statute exempts
therefrom.8 A statute of Massachusetts applying to mutual benefit
association incorporated in that state, and which provides that
when any certificate of insurance is issued to a resident of that state
no misrepresentations made by the assured shall be deemed ma-
terial or defeat the certificate unless such misrepresentation is
W. 113, 45 Ins. L. J. 726. See § 6 St. Paul Fire & Marine Ins. Co.
1991b herein. v. Huff, — Tex. Civ. App. — , 172
*Lummus v. Fireman's Fund Ins. S. W. 755, 45 Ins. L. J. 363; Rev.
Co. 167 N. Car. 654, L.R.A.1915D, Stat. sec. 4947.
239, S3 S. E. 688, 45 Ins. L. J. 190; 7 See c. XVII. (§§ 340 et seq.) ; c.
Rovisal 1905, sec. 4808. See Com- XVIII. (§§ 345 el seq.) herein,
mercial Union Assur. Co. of London 8 Eminent Household of Columbian
v Hill, — Tex. Civ. App. — , 167 Woodmen v. Gallant, 194 Ala. 680,
S. YV. 1095. See § 2068 herein. 69 So. 884; Code 1907, sec. 4572
5 Farber v. American Automobile (misrepresentations); see. 4562 (ex-
Ins. Co. 191 Mo. App. 307, 177 S. cepting therefrom secret benevolent
W. 675, 46 Ins. L. J. 327; Rev. Stat, orders).
1909, sec. 7025.
3132
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
made with actual intent to deceive, or unless tlio matter represented
increased the risk of loss, is applicable to a certificate of insurance
issued to a nonresident, because in a purely mutual association all
members must be treated alike.9 It is also decided in thai state
that the statute applies to statements as to health or occupation in
a policy in a benevolent society, and they must be made with
intent to deceive to defeat recovery.10 So an insurer's omission
to state that fifteen years before he had sprained an ankle and had
made local applications thereon and that for several hours it bad
troubled him, is not such a misrepresentation as increased the
risk under a statute governing misrepresentations in application-
for membership in fraternal benefit associations.11 And a statute
which only exempts certain domestic beneficial associations from
the operation of the general insurance laws does not operate in
favor of a foreign fraternal association so as to enable it to avoid
the operation of an enactment concerning the effect of assured's
misrepresentations as a defense; but a statute which is so worded
as to include foreign fraternal societies in the operation of the
general insurance laws will exempt such societies from the laws
relating to the defense of misrepresentations.12 Under an Ohio
decision the statute applies to mutual benefit and assessment associa-
tions whose funds are applied for members' families, their heirs
and legal representatives.13 In Texas the statute expressly in-
cludes all benefit certificates.14 Under a Massachusetts decision
the statute applies to assessment insurance issued by a foreign
9 Supreme Council Royal Arcanum "Wilson v. General Assembly of
v. Brashears, 89 Md. 624, 73 Am. St. American Benevolent Assoc. 125 Mo.
Rep. 244, 43 Atl. 866. App. 597, 103 S. W. 109; Rev. Stat.
10 Kidder v. Supreme Commandery sec. 7890; Ann. Stat. 1906, p. 3746.
United Order of Golden Cross, 192 13 Protected Home Circle v. Win-
Mass. 326, 78 N. E. 469, 35 Ins. L. ter, 14 Ohio C. C. 194; Rev. Stat.
J. 778; Stat. 894, p. 684, c. 522, sec. sec. 3625.
21, as am'd by Stat. 1895, p. 272, c. " "All benefit certificates shall
271 ; Rev. L. c. 118, sec. 21 ; Rev. from the date of their issuance be
Stat. 1901, p. 349, c. 422, sec. 27; made non-contestable on account of
Rev. L. c. 119, sec. 22. any statement or representation made
11 Tyler v. Ideal Benefit Assoc. 172 by said applicant for membership,
Mass. 536, 52 N. E. 1083, 28 Ins. L. either in his application or other-
J. 477; Stat. 1895, c. 281. wise, or his medical examination, un-
12 Kern v. Supreme Council Amer- less such representation shall be ma-
ican Legion of Honor, 167 Mo. 471, terial to the risk assumed; and the
67 S. W. 252, construing and apply- burden of proof shall be upon the de-
ing Rev. Stat. 1879, sees. 972-974; fendant to affirmatively establish such
Rev. Stat. 1889, sees. 5849, 5850, defense." Tex. Civ. Stat. 1911, art.
6606; Laws 1881, p. 87. 4384, as am'd by acts 1909; 2 Sayles'
"When beneficial association con- Tex. St. p. 443, sec. 8, applicable to
tract not within statute and defense mutual benefit societies, construe! in
of false representations not available. Supreme Ruling Fraternal Mystic
3133
§ 191G JOYCE (>N [NSURANCE
company and which is under a contracl which is by construction
within the law of that state15 It is decided in Missouri that if
a statute relates only to insurance companies other than those on
the assessment plan, a company which is nol within the statute
cannot avail itself of its provisions.16 But under a Texas decision
the Missouri statute as to misrepresentations is held broad enough
to embrace assessment policies.17
(m) [f misrepresentations in an application for n newal or rt in-
staU rrn nt are made with intent to deceive, or if the matters misrep-
resented increase the risk the insured is bound thereby even
though they are not expressed in the renewal policy issued in
reliance on such misrepresentations.18 The Missouri statute also
applies to warranties in applications for reinstatement.19 The
words "material to the ri>k" in a statute precluding, in action? on
mutual benefit certificates, a defense of misrepresentations unless
so material, means, as applied to an application for reinstatement
any statements as to health, etc., which would operate as an induce-
ment to the association to reinstate the member.1
(n) Other instances of application of these statutes. Although
we have considered elsewhere the validity and effeel of particular
representations and warranties2 the following decisions involving
the application of these statutes are pertinent here. A statutory
provision that no misrepresentation shall he deemed material Or
avoid the policy unless the matter misrepresented increases the
risk or loss, etc.. has heen applied to concealment of a matter ma-
terial to the risk as in case of an omission to state the proximity
Circle v. Hanson, — Tex. Civ. App. S. W. 753, 29 Ins. L. J. 97, constru-
— , 153 S. W. 351. ing Mo. Rev. Stat. sec. 5849, and
Statute does not apply to frater- rev'g - Tex. Civ. App. — , 51 S.
nal beneficiary societies. Modern ^ . 547.
W linen of America v. Owens, 60 18 Mutual Life Ins. Co. v. Allen,
Tex. Civ. App. 398, 130 S. W. 858; 166 Ala. 159, 51 So. 877; Code L907,
act 1903, c. 69, art. 3090aa. Ex- sees. 4572, 4579. See § 1916 (j)
amine .Modern Order of Praetorians herein.
v. Holmig, — Tex. Civ. App. — , As to renewal, reinstatement or re-
103 S. W. 474, rev'd -- Tex. Civ. vival, see §§ 1276 et seq. 1461, 1470a,
App. — , 105 S. W. 846, acts 1903, et seq. herein.
c. 69, art. 3096aa. "Jenkins v. Covenant Mutual Life
15Dolan v. Mutual Reserve Fund Ins. Co. 171 Mo. 375, 71 S. W. 688;
Life Assoc. 173 Mass. 197, 53 X. E. Rev. Stat. 18S9, sec. 5849; Rev. Stat.
398, under stat. 189 1. «-. 522. sees. 77, 1899, sec. 7890.
78 ; Stat. 1890, c. 421, sees. 21, 27. Supreme Ruling of Fraternal
16 Jacobs v. Omaha Life Assoc. Mvstic Circle v. Hansen, — Tex. Civ.
1 12 Mo. 49. 43 S. W. 375; Rev. Stat. App. — , 153 S. YV. 351 : Rev. Civ.
1889, sec. 5849. Stat. 1911, art. 4834.
17 Seiders v. Merchants Life Assoc. 2 §§ 1981/ et seq. 2063 et seq. 2065
of the United States, 93 Tex. 194, 54 et seq. herein.
3134
REPRESENTATIONS AND MISh'KPKKSKXTATIOXS § L916
of property to a railroad under ;i fire policy; and in such case
assured cannot avoid the common law resull of a misrepresenta-
tion of u material fact.3 So where insurer is induced to issue a
policy upon a horse by misrepresentations as to its COSl price, its
value and whether it was mortgaged, the policy is avoided, and said
false statements are also material to the risk within the intent
of the statute.4 And the statute does not control a case where the
answer clearly appears to be material, as where the assured's mis-
representation, which was made a warranty, was that the "benefi-
ciary" was his wife, which was false, as she was a woman with
whom he was living in illicit cohabitation.6 A policy which is
not within the da>s subject to the statute is not avoided by giving
a false date as to the time the injury was sustained, unless it is
material to the risk.6 And where a combination policy fixes certain
amounts as payable for loss of life or limbs by accident, and in
case of less severe injuries causing incapacity of assured to attend
to his vocation, a misstatement as to weekly earnings is only ma-
terial to the question of weekly indemnity and has no reference
to his right to recover for the accidental loss of life or limbs for
which a different certain amount is payable and which is an
entirely distinct risk.7
A promissory warranty to keep books of account in an iron safe
is not breached so as to invalidate the policy by failure to comply
in view of a statutory provision that all statements in any applica-
tion for a policy shall be deemed and held representations and not
warranties and shall not prevent recovery unless material or fraud-
ulent, for such a warranty at most only tends to the better preserva-
tion of the evidence of loss and does not decrease the risk.8 So a
warranty in a fire policy that the insured will keep his books of
3 Davis v. JEtna Mutual Fire Ins. 7 JEtna Life Ins. Co. v. Claypool,
Co. 68 N. H. 315, 44 Atl. 521, s. c. 32 Kv. L. Rep. 856, 107 S. W. 325,
67 N. H. 33."), 39 Atl. 902, 27 Ins. 37 Ins. L. J. 302; Ky. Stat. 1903,
L. J. 549; under Mass. Laws 1887, c. see. 639. See Miller v. National Cas-
214, sec. 21; Pub. L. e. US. sec. 21. ualty Co. 62 Pa. Super. Ct. 117.
4 Indiana & Ohio Live Stock Ins. 8 Citizens Ins. Co. v. Crist, 22 Kv.
Co. v. Smith, — Tex. Civ. App. — , L. Rep. 47, 56 S. W. 658, 20 Lis. L.
157 S. W. 755; Rev. Civ. Stat. 1911, J. 765; art of Feb. 4. 1874. amd'g
art. 4047. Sec §§ 2022 et seq. here- c. 22. Gen. Stat, title "Contracts."
in. (Upon this point, however, the opin-
6 Continental Casualty Co. v. Lind- ion is not so dear as might lie de-
say, 111 Ya. 389, 60 S. E. 344, 40 sired, as the point chiefly discussed
Ins. L. J. 124; acts 1906, p. 139, see. and decided was, that the knowledge
28. of insurer's agent that insured had
6 Jacobs v. Omaha Life Assoc. 142 no safe was that of insurer.) As
Mo. 49, 43 S. W. 375; Rev. Stat, to iron-safe, inventory, bookkeeping
1889, sec. 5849 (governing insurances clauses, see §§ 2063-2064b herein,
other than assessment).
3135
§ 1916 JOYCE ON INSURANCE
account and inventories securely locked in a fire-proof safe at
night, and when the building is not actually open for business, or
in some place not exposed to lire which would destroy the build-
ing insured, is directly within the terms of a statute providing
that no misrepresentation or warranty, unless made with actual
intent to deceive, or, unless the risk or loss is thereby increased,
shall defeat or avoid the policy. Therefore, failure to observe the
warranty contained in the fireproof safe clause does not neces-
sarily avoid the policy.9 But the Texas statute does not apply to
a policy stipulation or covenant to keep and produce an inventory.10
nor is the iron-safe clause an application within the statutory intent
and the statute does not apply.11
A misrepresentation in proofs of loss as to the value of a certain
article of personal property docs not avoid the policy where the
loss, excluding the value of said article, largely exceeds the policy
amount, and said misstatement was therefore not material to the
liability of insurer.12 But it is also held that even though a statute
provides that no misrepresentation shall be deemed material unless
the matter misrepresented shall have actually contributed to the
event on which the policy is to become payable, nevertheless
admissions by the beneficiary in proofs of loss is conclusive evi-
dence of the fact that insured was in the hospital suffering from
certain diseases at the time the policy was dated and when it was
delivered and that such disease^ resulted in his death.13
(o) Other statutes. In a line with the statutes above considered
are enactments in many states the effect of which is substantially
to exclude evidence or preclude defenses of misrepresentations in
the application, unless a copy of the application or representation
is attached to or indorsed on the policy. There are also in
addition statutory requirements that the policy contain the entire
9 Continental Fire Ins. Co. v. n Prudential Fire Ins. Co. v. Al-
Whitaker, 112 Tenn. 151, 64 L.R.A. ley, 104 Va. 356, 51 S. E. 812; Va.
451, 105 Am. St. Rep. 916, 79 S. W. Code 1904, p. 1766, sec. 3344.
119 12 Camden Fire Assoc, v. Puett,
10 National Fire Ins. Co. v. J. W. — Tex. Civ. App. — , 164 S. W.
Caraway & Co. 60 Tex. Civ. App. 418; Rev. Stat. 1911, art. 1911).
566, L30 S. W. 458, 39 Ins. L. J. As to conclusiveness of statements
1 Kill; act L903, Laws 1903, c. 69; in proofs of loss or death, see §§
Rev. Stat, an 3096aa; Sayles' Ann. 3319, 3320 herein.
Civ. Stat. Supp. (1897-1904) As to proofs of loss as evidence,
3096aa; Home Ins. Co. v. Rogers, see § 3766 herein.
(ill Tex. Civ. App. 456, 128 S. W. 13 Stephens v. Metropolitan Life
625 (under same statute). See also Ins. Co. 190 Mo. App. 073, 176 S.
Scottish Union & National Ins. Co. W. 253, 46 Ins. L. J. 126; Rev. Stat.
v. Weeks Drug Co. 55 Tex. Civ. App. 1909, sec. 6986.
263, 118 S. W. 1086 (same statute).
3136
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
contract and in certain states one or both these provisions are
combined with clauses of like or similar character with those
heretofore considered under this section.14 The New York statute
^Alabama. — Code 1907, sec. 4579 sec. 1819 (copy attached, etc.) sec
(plainly expressed) construed in Salzman v. Machinery Mutual In-.
Hunt v. Preferred Accidenl Ins. Co. Assoc. 142 Iowa, mi, 120 N. W.
172 Ala. 442, 55 So. 201 (warranty) ; 697 (Code sec 1711; misrepresenta-
Empire Life Ins. Co. v. Gee, 171 tion no defense when copy not at-
Ala. 4:r>, 55 So. 166, 40 Ins. L. J. tached); Knapp v. Brotherhood of
1384; Code 1896, sec. 2602 (plainly American Yeoman, 139 [owa, 136,
expressed construed in Manhattan 117 N. W. 298 (Code see. 1826; breach
Life Ins. Co. v. Verneuille, 156 Ala. of warranty when too lato to objecl
592, 47 So. 72, 37 Ins. L. J. 892). that copy not attached) ; Kirkpat-
Colorado. — Rev. Stat. 1908, p. rick v. London Guarantee & Accidenl
843, sec. 3123; c. 70, sec. 37, as am'd Co. 139 Iowa, 370, 19 L.R.A.(X>. I
by Sess. L. 1913, c. 99, sec. 43 (policy 102n, 115 N. W. 1107 (insurer not
to contain entire contract: statement precluded from defense of breach of
must be in written application en- warranty) ; Kauen v. Prudential Ins.
dorsed upon or attached to policy). Co. of America, 129 Iowa, 725, 106
Connecticut. — Pub. L. 1913-1915, N. W. 195, 35 Ins. L. J. 288 (Code
p. 184, c. 223 (health and accident: sec. 1819; defense of misrepresenta-
policy to contain provisions as to in- tion or warranty precluded when
dorsements, attached papers, and copy not attached) ; Goodwin v.
entire contract except, etc.). Provident Savings Life Assur. Soc.
Georgia.— Act Aug. 17, 1906; acts 97 Iowa, 226, 32 L.R.A. 473, 66 N.
1906, p. 107 (application or copy to W. 157 (McClain's Code, sec. 1733;
be attached, etc.) construed in John- defense is precluded) ; Cook v. Fed-
son v. American Mutual Life Ins. Co. ei'al Life Assoc. 74 Iowa, 746, 35 N.
134 Ga. 800, 68 S. E. 731, 39 Ins. W. 500.
L. J. 1410 (fraud may be shown Kansas. — Laws 1913, p. 366, c.
though copy not attached, etc., acts 206, sec. 19 (mutual hail insurance;
1906, p. 107, modifying sec. 2097, policy to contain reprinted copy of
Code 1895); Southern Life Ins. Co. application, also copy of by-laws).
v. Logan, 9 Ga. App. 503, 71 S. E. Kentucky. — Stat. sec. 679, con-
742 (statements in application not strued in Metropolitan Life Ins. Co.
warranties or covenants unless ap- v. Little, 149 Ky. 717, 149 S. W. 998,
plication attached etc.; fraudulent 41 Ins. L. J. 1798 (truth or falsity
representations, may, however, void) ; of representations and materiality
Gonackey v. General Accident Fire & precluded when copy not attached) ;
Life Assur. Corp. 6 Ga. App. 381, Southern States Mutual Life Ins. Co.
65 St E. 53 (policy not attached to v. Herlihy. 138 Ky. 359, 128 S. W.
complaint under Civ. Code 1895, sec. 91 (Stat. sec. 677; Russell's Stat.
4963). sec. 4400; application excluded as
Illinois.— Hurd's Rev. Stat. 1912, evidence).
p. 1358, sec. 208u, (3) (4) (life). Louisiana.— , Acts 1906, p. 86, No.
See Laws 1915, pp. 472 et seq. (acci- 52, in effect Jan. 1, 1907 (policy to
dent and casualty; copy to be at- contain entire contract, by-laws,
tached, etc.; to constitute entire con- rules, application, etc., to be en-
tract except, etc.). dorsed upon or attached to policy;
Indiana. — Acts 1909, p. 251 (copy all statements to be representations,
attached, etc.; to constitute entire not warranties, in absence of fraud;
contract). waiver of provisions void).
Iowa.— Ann. Code 1897, p. 646, Maine.— Laws 1907, p. 204, c. 187,
Joyce Ins. Vol. III.— 197. 3137
§ 1916 JOYCE OX INSURANCE
provides not only that every life policy "shall contain the entire
contract" but also that "nothing shall be incorporated therein by
sec. 1 (accident, health or casualty; age, physical condition, etc., unless
correct copy to be attached, etc., sec wilfully false, etc., also copy of ap-
2, provides penalty for wilful, etc., plication to be attached).
false statements in application); Mississippi. — Code L906, p. 779, c.
Laws 1907, p. 28, c. 3L (certain com- 69, sec. 2597 ("In all insurance
panies excepted); see Laws 1913, |>. against loss by fire the condition of
110, c. IK'. insurance shall be stated in full and
Massachusetts. — As to form of life the rules and by-laws of the com-
policy under statute authorizing sub- pany shall not he considered as a
mission of same to insurance com- warranty or a part of the contract
missioner and providing thai the pol- except so far as they are incorpo-
iey and the application shall const i- rated in full into the policy and are
tute the entire contract between the not in conflicl with this chapter");
parties, and that all statements made Id. p. 797, c. 69, see. 2676 (applica-
hy the insured shall, in the absence tion to be delivered with life policy
of fraud, be deemed representations, and "in default thereof said life in-
and not warranties, and that no such surance company shall not be permit-
statements shall be used in defense ted in any court in this state to deny
of a claim under the policy, unless that any of the statements in said
it is contained in a written applica- application are true").
tion and a copy of such application Missouri. — Rev. Stat. 1909, sec.
shall he indorsed on or attached to 6978; Schuler v. Metropolitan Life
the policy when issued. See iEtna Ins. Co. 192 Mo. App. 52, 176 S. \Y.
Life Ins. Co. v. Hardison (Travelers 274 (requirement as to attaching pol-
Ins. Co. v. Hardison) 199 Mass. 181, icy, etc., does not invalidate policy,
85 X. E. 107, 37 Ins. L. J. 818; New but only precludes evidence in de-
York Life Ins. Co. v. Hardison, 199 fense of misrepresentations).
Mass. 190, 127 Am. St. Rep. 478, 85 Nebraska.— Rev. Stat. 1013, p.
N. E. 410, 37 Ins. L. J. 848; Stat. 915, sec. 3240, art. VI. sec. 104 (copy
1907, p. 895, c. 576, sec. 7.">. As to to be attached or endorsed; to const i-
form of policy; statutes; standard tute entire contract except upon
form, see §§ 176 et seq. herein. As policy of industrial insurance with
to Rev. Laws Mass. c. 118, sec. 73, monthly etc., payments otherwise
and proof of fraud, see Holden v. defenses of misstatements precluded
Prudential Life Ins. Co. 191 Mass. except, etc.).
L53, 77 X. E. 309. New Hampshire.— Supp. (1901-
Michigan. 3 Howell's Stat. Ann. 1013) Pub. Stat. & Sess. Laws, p.
(2d ed.) p. 3406, sec. 8342 (copy to 40;"); Pub. Stat. 1913. c. 89, sec. 1
be attached, etc.; life, cooperative (life policy to contain entire- con-
mutual benefit, and fraternal bene- tract, etc.).
ficiary; includes all or any repre New Jersey. — Comp. Stat. (1709-
sentations of any kind made by ap- 1910) p. 2869, sec. 94 (policy to con-
plicant in application); Id. p. 3393, tain entire contract; nothing to be
sees. 1, 2 (standard accident policy); incorporated by reference, etc., un-
see also p. 3389, sec. 8312; Id. p. less indorsed upon or attached; all
3388, sec. 8310; Pub. ads 1907, No. statements, in absence of fraud,
L80, sec. 1 (endorsed upon or at- representations, and not warranties;
tached to policy; all statements in ah- no waiver).
sence of fraud, representations and New York. — Ins. Law, sec. 58,
not warranties, etc.). added by laws 1906, c. 326, in force
Minnesota. — Rev. Laws 1905, sec. .Jan. 1, 1907 (same as N. J.).
1623 (as to misstatements, etc., as to
3138
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
reference to any constitution, by-laws, rules, application or other
writings, unless the same are endorsed upon or attached to the
policy when issued; and all statements purporting to be made by
the insured shall in the absence of fraud be deemed representa-
tions and not warranties. Any waiver of the provisions of this
section shall be void." 1S And it is held in that state that defenses
based upon a breach of warranty in the application are not avail-
able in the absence of sufficient proof of fraud, where the applica-
tion is not attached to or endorsed on the policy as the statute
requires that the policy contain the entire contract; and this
applies to warranties as to attendance by a physician and as to
not having pulmonary disease.16 So under a Tennessee decision
a policy is not avoided for misrepresentations in the application
where insurer fails to comply with statutory provisions which
require a copy of the application to be incorporated in or attached
to the policy, also that the policy shall provide that all statements
by assured shall, in the absence of fraud be deemed representa-
tions and not warranties, and also that the insurance shall not
Ohio.— 2 Gen. Code 1910, p. 2031, attached to policy) ; Code 1900, c.
sec. 9420, subd. (3) (life policy and 34, sec. 62, as revised and re-enacted
application, a copy of which must by acts 1907, c. 77 (same sees, as
be endorsed thereon, constitute en- above).
tire contract, except, etc.) ; Bates Wisconsin. — Laws 1905, c. 51, p.
Ann. Stat. 1906; sec. 3623. 108. See Dunbar v. Phoenix Ins. Co.
Oklahoma. — Comp. Laws 1909, 72 Wis. 492, 40 N. W. 386.
sec. 3784; Rev. Stat. 1903, sec. 3200; Ontario.— Ins. corp. act 1892, sec.
Stat. 1890, sec. 3155. 33, subsee. 2, construed in Jordan v.
Pennsylvania— -Bright. Purd. Dig. Provincial Provident Institution
(12th ed.) p. 1046, sec. 62; act May (Can. S. C.) 18 Canadian L. T. 299
11, 1881 ; P. L. 20. See Fidelity & (materiality of statement need not
Trust Co. v. Illinois Life Ins. Co. appear on endorsement ; statement
213 Pa. 415, 63 Atl. 51; Metropoli- avoids only if statement judicially
tan Life Ins. Co. v. Jenkins, 4 Sad- found material ; if so found avoids
ler, 197. though made in good faith, etc.).
Tennessee.— Acts 1907, p. 1529, c. 15 Added by Laws 1906, c. 326, sec.
457; p. 1496, c. 441. 58, in force Jan. 1, 1907.
Texas.— Rev. Civ. Code 1911, art. 16 Cohen v. Metropolitan Life Ins.
4951; Supp. Sayles' Tex. Civ. Stat. Co. 147 N. Y. Supp. 434, Ins. Law
(1908-1910, Herron) p. 242, tit. 58, sec. 58 (consol. L. c. 28) in force
sec. 22 (policy and application to Jan. 1, 1907; Archer v. Equitable
constitute entire contract; all state- Life Assur. Soc. of the U. S. 218 N.
ments, in absence of fraud, deemed Y. 18, 112 N. E. 433, aff'g 154 N. Y.
representations and not warranties). Supp. 519, 169 App. Div. 43. Gom-
West Virginia. — Ann. Code Supp. pare Aarenson v. New York Life
1909, p. 219, c. 34, sec. 1107al5 (con- Ins. Co. 142 N. Y. Supp. 508, 8 Misc.
tract to be plainly expressed in pol- 228, see citations in first note under
icy); Id. p. 237, sec. 1107a69 (no this subd. (o). See also § 190q
condition valid unless stated in or herein.
3139
§ 1916 JOYCE OX INSURANCE
be forfeited unless the application shall be so attached, etc.17 But
,,, Oklahoma it is held thai to proving that statements made in
the application are ••wilfully false, fraudulent or misleading"
the introduction of the application in cases where the policy con-
taina no reference thereto "either as a part of the policy or as
having any bearing thereon" is not prevented by the statute.18
In West Virginia a reference to an accidenl or health policy to
an application containing warranties which mighl otherwise be
sufficient, is not so unless it complies with the statute which
requires policies of insurance fully and plainly to set forth the
contracts between the parties and excludes therefrom all con-
ditions, agreements, and warranties not • expressed in the policy,
or papers attached thereto. But even though inadmissible, under
said statute, to prove a statement therein as part of the contract,
the application for the policy containing a false statement is ad-
missible as part of the evidence of fraud in the procurement of
the policy.19 An exception of fraternal societies from the opera-
tion of a statute requiring the attachment of a copy of the appli-
cation to the policy, etc., includes societies operating exclusively
under a lodge system and organized under the law governing
fraternal organizations.20
(p) Fraudulent misrepresentations: equity jurisdiction. A
mere allegation that fraudulent misrepresentations were made
by assured and a prayer that the policy be canceled docs not
make the suit one for equitable cognizance under a statute which
makes it a question for the jury whether or not the misrepresenta-
tion actually contributed to the event on which the policy becomes
payable, and also requires insurer to deposit in court the premiums
paid as a condition precedent to the validity of the defense.1 But
it is also decided that the power of courts of equity to relieve
against actual fraud is not restrained by a statute providing that
misrepresentations in obtaining life insurance shall not be deemed
material or render the policy void unless the same shall have
17 Arnold v. New York Life Ins. sec. 62, as revised, amended and re-
Co. 13] Tenn. 720, 177 S. W. 78; enacted by acts 1907, c. 77 (serial
acts 1907, chaps. 441, 457. See New sec. 1107a, Ann. Code Supp. 1909)
York Life Ins. Co. v. Hamburger, and sees. 15, 69.
174 Mich. 254, 140 N. W. 510: Pub. 20 Yeoman of America v. Rott, 145
acts 11107. Xo. 180, sec, 1. Ky. 604, 140 S. W. 1018; Russell's
"Continental Casualty Co. v. Stat. sec. 4400. See § 190p herein.
Owen, 38 OMa. 107, 131 Pac. 1084; x Kern v. Supreme Council Amer-,
Com p. Laws 1909, sec. 3784. ican Legion of Honor, 167 Mo. 471,
"Bowver v. Continental Casualty 67 S. W. 252; Rev. Stat. 1889, sec.
Co. 72 W. Va. 333, 78 S. E. 1000, 5949.
42 Ins. L. J. 1565 ; Code 1906, c. 34,
3140
REPRESENTATIONS AND MISREPRESENTATIONS § 1916
actually contributed to the contingency or event on which the
policy is to become due and payable and whether it so contributed
shall be a question for the jury.2
(q) Condition precedent to defense of misrepresentations. If
the statute makes it obligatory upon assurer to give notice within
a certain time after discovery of the falsity of representations, of
its refusal to be bound by its contract, it must comply with the
statute and notify assured in accordance with said requirements,
and within the time specified or fixed therein, or it will be
precluded from relying on said misrepresentations as a defense;3
and this applies to an action on an accident policy.4 So where
a statute requires assurer, after discovering the falsity of mis-
representations, to give reasonable notice that it refuses to be
bound by the policy and that ninety days thereafter is a reason-
able time, a defense of misrepresentations is precluded where the
answer setting up the same is too late.5 And where the statute
so requires the insurer must as a condition precedent in order to
avail himself of the defense of misrepresentations in obtaining
the policy, deposit in court the premiums received on the contested
life policy.6
(r) Pleading, evidence and burden of proof. In order to make
a misrepresentation available as a defense, it must be properly
pleaded so as to bring it within the terms of the statute; and if
two alternatives exist under said enactment the misrepresentation
must by appropriate averments be brought within one or both of
said alternatives, as the mere averment that a certain misrepresenta-
tion was made, without more, is insufficient, especially so where
neither the natural or necessary effect of the relied upon misrep-
resentation is to show that it is within either alternative of the statu-
tory defense.7 Under a Missouri statute the assurer must also raise
2 Bruck v. John Hancock Mutual 5 Guarantee Life Ins. Co. v. Evert,
Life Ins. Co. — Mo. App. — , 185 — Tex. Civ. App. — , 178 S. W.
S. W. 753, Rev. Stat. 1909, sec. 643; Vernon's Sayles' Ann. Civ. Stat.
6937. 1914, art. 4948.
3 National Surety Co. v. Murphy- 6 Welsh v. Metropolitan Life Ins.
Walker Co. — Tex. Civ. App. — , Co. of N. Y. 165 Mo. App. 233, 147
174 S. W. 997; Rev. Stat. 1911, art. S. W. 147; Rev. Stat. 1909, sec.
4948 ; Commonwealth Bonding & 0940. The Kansas statute also makes
Surety Co. v. Wright, — Tex. Civ. a deposit in court by insurer a con-
App. — , 171 S. W. 1043; Vernon's dition precedent to a defense of mis-
Savles' Ann. Civ. Stat. 1914, art. representation. Kan. Laws 1907, c.
4948. 226, sec. 2.
4 Order of United Commercial 7 Mutual Life Ins. Co. of N. Y. v.
Travelers v. Simpson, — Tex. Civ. Allen, 174 Ala. 511, 56 So. 368, 41
App. — , 177 S. W. 169 (same stat- Ins. L. J. 221 ; Code 1907, see. 4592.
ute).
3141
§ 1916 JOYCE ON 1XSI K'.\N< !■:
the issue and plead the defense of false representations; this applies
where an answer contains no allegation that insurer would not have
i.-sued the policy had it known the actual facts, and said answer fails
to allege and the evidence docs not disclose that any such mis-
statements in any way induced or contributed to the issuance of
the policy.8 So the requirements of the statute must be me1 by
proper allegations, and conditions precedent to assurer's availing
itself of the defense of misrepresentations must be complied with,
or evidence in support of the defense of misrepresentation is inad-
missible.9 And evidence tending to show the falsity of misrepre-
sentations is inadmissible where said falsity is not pleaded and
there is no evidence that it was material to the risk.10 So in case
of false statements as to cost and ownership of a safe in a burglary
insurance contract, it must be shown that such statements were
material to the risk or contributed to insurer's liability in order
to preclude a recovery.11 And it must be shown by the evidence
that the matter alleged to have been misrepresented actually con-
tributed to produce assured's death.12 And where the issue under
the pleadings are such as to raise the questions whether the mis-
representations increased the risk of loss or were made with intent
to deceive or defraud, but they depend upon the nature of the
disease to which the alleged misrepresentations or false statements
relate, the burden of proof rests upon assurer in such case.13 So
in Massachusetts it is held that if the statute provides that false
answers in an application for insurance must, in order to avoid the
policy, be made with intent to deceive, unless they increase the
risk,14 it is necessary for the insurer, in order to avoid a policy
conditioned to be void in case of false answers in the application,
to show, if the risk has not been increased, that the answers were
made with intent to deceive.15 In an action on a life policy
if the falsity of the statements in the application are relied upon
8 Christian v. Connecticut Mutual 12 Keller v. Home Life Tns. Co.
Tate Ins. Co. 143 Mo. 460, 45 S. W. 198 Mo. 440, 95 S. W. 903; Rev.
268, 27 Ins. L. J. 968; Rev. Stat. Stat. 1899, sec. 7890.
1889, sec. 5849. 13 Price v. Standard Life & Aeei-
9 Kern v. Supreme Council Ameri- dent Ins. Co. 90 Minn. 264, 95 N. W.
can Lotion of Honor, 167 Mo. 471, 1118; Laws 1895, p. 400, c. 175, sec.
67 S. W. 252; Rev. Stat. 1889, sees. 2a.
5949,5950. 14Mass. Stats. 1887, c. 214, sec.
10 Jennings v. National American, 21. See Massachusetts decisions at
— Mo. App. — , 170 S. W. 789; Rev. beginning of this section.
Stat. 1909, sec. 7024. 15 LeVie v. Metropolitan Life Ins.
11 .Etna Accident & Liability Co. Co. 163 Mass. 117, 39 N. E. 792.
v. White, — Tex. Civ. App. — , 177 Examine Montejean v. Metropoli-
S. W. 162; Vernon's Sayles' Ann. tan Life Ins. Co. 208 Mass. 1, 94 N.
Civ. Stat. 1914, art. 4947. E. 302.
3142
REPRESENTATIONS AND MISREPRESENTATIONS § 1910
as a defense under the statute making them representations and
not warranties, where the policy is issued without previous exami-
nation, the burden is upon insurer to show that such statements
are as provided by said statute "Wilfully false, fraudulent, or
misleading." 16
(s) Statements under statutes: court or jury. In California
the rule that by inquiry the answer is made material is held to
be modified by the code provisions of that state, nevertheless it is
decided under the statute that the question of materiality is one
of law for the court.17 In Tennessee whether a misrepresentation,
when found to be false by the jury, be material, increasing the
risk, is by statute, as it had been before one of law for the court.18
So in Texas the question of materiality of misrepresentations is one
of law for the court upon the findings of the jury or upon the
uncontroverted facts.19 In Georgia the truth and materiality of
representations are questions of fact as a rule; if, however, every
reasonable inference but one is excluded by testimony relating to
questions of fact the issue becomes one of law for the court. The
language of the statute in that state, however, distinctly differs from
those in other states as to materiality of representations.1 In
Minnesota whether a misrepresentation is material; or made with
intent to deceive or defraud ; or the matter misrepresented increases
the risk of loss, are usually questions of fact for the jury but may
be for the court, as where" the record concedes that insured made
an untrue statement in his application which might have been
found fraudulently made and material and the court left the
question whether he did, to the jury, it was held error.2 In Penn-
16 Continental Casualty Co. v. Ga. App. 647, 82 S. E. 62; Civ. Code
Owen, 38 Okla. 107, 131 Pac. 1084; 1910, sees. 2479-2481.
Comp. Laws 1909, see. 3784. See As to the point whether court or
Owen v. United States Surety Co. 38 jury are to decide whether any van-
Okla. 123, 131 Pac. 1091 (same stat- ation by which the nature or extent
ute as last case). or character of the risk is so changed
17 McEwen v. New York Life Ins. bY a misrepresentation as to avoid
Co. 23 Cal. App. 694, 139 Pac. 242, the policy; also as to instructions,
43 Ins. L. J. 546; under Civ. Code request to charge, etc., m this con-
sees. 2565, 2573, 2581. nection, where the claimed misrepre-
1R ,,r ' , T .„ T ~ ts., ,, sentation is as to applications made
"Mutual Life Ins Co v Dibrell, d -ections b^other in8urers
- Tenn. -, 194 = S W. 580; ^Shan- ^ Prudential Ins. Co. v. Moore, 231
non's Code sec. 3306 (acts 189o) c. LT g 56Q> 5g L ed 36^ 34 gup Ct
160, sec. 22. 191 43 Ing L j 321; ^tna Life
19 Supreme Ruling of Fraternal Ing Co v Moore, 231 TJ. S. 543, 58
Mystic Circle v. Hansen, — Tex. L> ed> 356) 34 Sup. Ct. 186, 43 Ins.
Civ. App. — , 153 S. W. 351; Rev. l, j. 311 ; un(jer Ga. Code, sees.
Civ. Stat. 1911, art. 4834. 2479, 2480.
1 Empire Life Ins. Co. v. Jones, 14 2 Johnson v. National Life Ins.
3143
§ 1916 JOYCE ON INSURANCE
sylvania where questions are claimed to have been incorrectly
answered and their materiality is clearly manifest, the court should
direct the jurj to find for insurer if they believe the evidence;
if, however, upon the evidence it is doubtful whether false state-
ments are material the question is for the jury.3 Under the
Massachusetts enactments which provide that misrepresentations
which increase the risk of loss will defeat the policy though made
without intent to deceive, and also that the policy shall be void
if any material fact or circumstance stated in writing has not
been fairly represented by the assured, it has been held error for
the court to instruct the jury that it is for them to decide whether
the alleged false representations are material to the risk and false
in fact, and if so whether they were made innocently and by
mistake.4 But under a later decision in that state the questions
of materiality and whether statements were made with intent to
deceive are for the jury.5 So the falsity of a certain statement or
warranty under an accident policy, and whether it increased the
risk, were held properly submitted to the jury when the evidence
was uncertain.6 Under a Kentucky decision if the evidence is
such that the court is unable to determine as a matter of law
whether or not it was the custom of insurer to reject risks of the
character in question, and whether or not it would have refused
the risk had it known the exact truth, 'the question of materiality
of misrepresentations under the statute is a question for the jury.7
In Oklahoma the question whether answers are false and insured's
intent in making them, is for the jury or for court sitting as a
Co. 123 Minn. 453, 144 N. W. 218; 4 Ring v. Phoenix Assur. Co. 145
Laws 1007, c. 220, sec. 5, par. 4; Mass. 426, 14 N. E. 525, under Pub.
Rev. Laws Supp. 1009, see. 1695, Stats. Mass. c. 119, sees. 139, 181.
par. 4, subd. 6. See Price v. See nets Mass. 1887, c. 214, sec. 21.
Standard Life & Accident Ins. Co. 5 Montjean v. Metropolitan Life
90 Minn. 264, 95 N\ W. 1118; Laws Ins. Co. 208 Mass. 1, 94 N. E. 303;
l$9$, \k 400, c. 175, sec. 20 (ordi- Rev. Laws c. lis. sec 21.
narilv for jury). 6 Everson v. General Fire & Life
3Ri<rl»v 'v. Metropolitan Life Ins. Assur. Corp. 202 Mass. 169, 88 N.
Co. 240 Pa. 332, 87 Atl. 428, 42 Ins. E. 658, 38 Ins. L. J. 923; Stat. 1907,
L. J. 1235 (no statutory point was c. 576, sec. 21. See also Coug-hlin v.
raised.) See March v. Metropolitan Metropolitan Life Ins. Co. 189
Life Ins. Co. 186 Pa. 629, 65 Am. Mass. 538, 76 N. E. 192; Barker v.
St. Rep. 687. 40 Atl. L100, 28 Ins. L. Metropolitan Life Ins. Co. 198 Mass.
J. 30; Pa. Stat. 1885, Pub. L. 134 375, 84 N. E. 490, 37 Ins. L. J. 439,
I manifestly material, etc., for court) ; s. c. 188 Mass. 542, 74 N. E. 945, 34
Miller v. Maryland Casualty Co. 193 Ins. L. J. 961.
Fed. 343, 113 C. C. A. 267, 41 Ins. 7 United States Casualty Co. v.
L. J. 990 (materiality for jury); Campbell, 148 Ky. 554, 146 S. W.
Pa. act June 23, 1885; Pub. L. 134. 1121; Ky. Stat. sec. 639.
3144
REPRESENTATIONS AND MISREPRESENTATIONS § 1917
jury.8 In Maryland ordinarily the question of falsity or material-
ity of a representation is for the jury and the burden is upon
assurer to satisfy the jury of the truth of such defenses. But if
the bad faith of the applicant and the falsity and materiality of
the misrepresentation is shown by clear and uncontradicted evi-
dence the court may so rule as a matter of law, if, however, the
evidence is conflicting and doubtful said questions should be sub-
mitted to the jury.9 The Missouri statute expressly provides that
whether the matter contributed in any case to the contingency or
event on which the policy becomes due and payable, shall be a
question for the jury; but it is interpreted as making a jury ques-
tion of every issue of misrepresentation unless there is no room for
doubt that said misrepresentations were material and actually con-
tributed to the contingency on which the policy is due and payable.1
And the question of false and fraudulent misrepresentations and
whether the matter misstated contributed to assured's death is for
the jury.2 So whether a false representation is material and induced
the insurer to issue an automobile policy is held a question for
the jury.3
§ 1917. Promissory representations: statement of proposition. —
The question has been much discussed whether a representation
not expressly or impliedly embodied in the contract can be promis-
sory, or, in other words, whether one can be bound by a positive
statement relating to a future fact or by a positive statement that a
certain material fact shall or will thereafter exist, so that the policy
will be avoided by the falsity thereof without regard to actual fraud,
as much so as in the case of a positive representation of a past or
existing material fact. Another point is also involved whether the
8 Shawnee Life Ins. Co. v. Wat- in every ease) ; Lynch v. Prudential
kins, — Okla. — , 156 Pae. 181; Ins. Co. of America, 150 Mo. App.
Continental Casualty Co. v. Owen, 461, 131 S. W. 145 ; Rev. Stat. 1809,
38 Okla. 107, 131 Pac. 1084; Cornp. sec. 7890; Ann. Stat. 1906, p. 3746
Laws 1909, sec. 3784 (question of (whether matter misrepresented con-
falsity of statements in life or acci- tributed to event etc., is for jury) ;
dent policy generally for the jury). Christian v. Connecticut Mutual Life
9 iEtna Life Ins. Co. v. Millar, 113 Ins. Co. 143 Mo. 460, 45 S. W. 268,
Md. 687, 78 Atl. 488, 40 Ins. L. J. 27 Ins. L. J. 968; Rev. Stat. 1889,
556; Code of Pub. Gen. Laws 1904, sec. 5849.
art. 23, sec. 196. 2 Keller v. Home Life Ins. Co. 198
1 Conner v. Life & Annuity Assoc. Mo. 440, 95 S. W. 903; Rev. Stat.
171 Mo. App. 364, 157 S. W. 814, 1899, sec. 7890 (also so by this stat-
42 Ins. L. J. 1274, 1277; Rev. Stat. ute).
1909, sec. 6937. Roedel v. John Han- 3 Farber v. American Automobile
cock Mutual Life Ins. Co. 176 Mo. Ins. Co. 191 Mo. App. 307, 177 S. W.
App. 584, 160 S. W. 44; Rev. Stat. 675, 46 Ins. L. J. 327.
1909, sec. 6937 (is question for jury
3145
§ 1918
JOYCE ()X INSURANCE
statement is actually incorporated into and made a part of the
policy by apt and proper word.< of reference or otherwise.
§ 1918. Opinions of text-writers as to promissory representa-
tions.— The text-writers have as a rule divided positive representa-
tions into affirmative and promissory. Mr. A mould makes this
division, although lie says the distinction "is one more of form than
substance; as in fact most positive representations, even when in
terms affirmative in effect, are promissory," and after a review of
the cases, he concludes that it may "safely he laid down, as the
conclusion to be derived from all the authorities, that the positive
representations of a future fact material to the risks will, if false,
avoid the policy, though it may not be actually fraudulent," and
this is not changed in Mr. Maclachlan's edition of 1887 of Mr.
Arnould's work.4 The same division is made in the last edition
thereof, although it is there concluded that the effect of the marine
insurance act of 1906, has been to do away with whatever distinc-
tion existed before that act came into force.5 Mr. Duer also makes
41 Arnould on Marine Ins. (Per- policy;'' and it is further declared
kins' ed. 1850) 506-11, *502-08, sec.
191; Id. (Maclachlan's ed. 1887)
521-24.
5 It is there declared that unless
Dennistoun v. Lillie, 3 Bligh, 202, re-
lied upon by Mr. Arnould and Judge
Duer, as putting the matter beyond
doubt "is a sufficiently clear author-
ity to establish the doctrine of prom-
issory representations in relation to
marine insurance the question is one
which must be considered an open
one" apart from any argument to be
derived from the provisions of the
Marine Insurance Act. The relation
to the general law as to representa-
tions of future facts and the dif-
ference in some respects as to
misrepresentations in the law of
marine insurance is considered, and
it is said that the doctrine of the gen-
eral law that representations of fu-
ture facts, if anything, constitutes
a contract or promise, and that "re-
garded as a promise, a representa-
tion that something will be done
seems to be an express term of the
contract in the nature of a warranty,
which ought therefore to be in writ-
ing, and either included in or in-
corporated by reference into the
3140
that "some weight must be given to
the fact that for the greater part of
a century the rule embodied in them
has been recognized by most, if not
all, textwriters of authority. From
the nature of the contract and the
circumstances under which it is ef-
fected, the representations made to
the underwriter have necessarily a
special importance. This may be the
reason for upholding the rule that
when a representation relates to a
future event within the control of
the assured, there is an implied con-
dition that the representation shall
be substantially satisfied," and it is
concluded that inasmuch as the clas-
sification of representations in the
Marine Insurance Act, which was
apparently intended to be exhaustive,
ignores promissory representations
and that that doctrine "whatever
foundation there may have been for
it before the Act, has ceased to exist
since the Act came into force" and
that the doctrine of the general law
applies. 1 Arnould on Marine Ins.
(8th ed. Hart & Simey) sees. 538-
544, pp. 700-70!), relying as to the
genera] law upon Jorderi v. Monev
(1854) 5 II. L. Cas. 185. The ma-
REPRESENTATIONS AND MISREPRESENTATIONS § 1918
the same division, and says the distinction was first made in terms
by Mr. Marshall, and is clearly deducible from the cases that the
majority of representations are promissory, and even though "af-
firmative in their terms, are promissory in spirit and intent; that
is, while they assert the present existence of the facts they embrace,
they imply a stipulation that the same facts shall continue to exist
during the continuance of the risks." He reviews the cases and
criticises the exhaustive opinion of Chancellor Walworth, in Alston
v. Mechanics' Mutual Insurance Company,6 and denies that it ex-
presses the existing law : 7 Mr. May makes the same division, but
concludes that "only those promissory representations are avail-
able . . . which are reduced to writing and made part of the
contract" and in effect warranties:8 Mr. Biddle says: "Kepre-
sentations have been divided into two classes: affirmative and
promissory. The former aver the actual existence of a fact, the
latter that such fact shall thereafter exist. This distinction is how-
ever rather one of form than of substance, as in a large number of
cases positive representations are in effect promissory:"9 Mr.
Parsons, who considers the question somewhat at length, says the
whole subject "is involved in some obscurity," although he adds
that there are numerous cases both in England and this country
where "definite statements concerning future facts made by the
assured by way of representation are binding upon him ; " beyond
this he seems to be in doubt: 10 Mr. Phillips says: "It is singular
that this question respecting a promissory representation being ob-
ligatory should ever have been raised, since administrative juris-
prudence abounds with instances of the deliberate recognition of
the obligation imposed by such a representation. . . . The
representation is construed to be of the existing facts, and also of
the continuance of them as far as this depends on the assured."
rine insurance act 1906 (6 Edw. VII. faith." The same distinction is made
c. 41) sec. 20, 2 Butterworth's Twen- as to the law prior to the English
tieth Cent. Statutes (1900-1909) pp. statute, and the same conclusion as
403-4, sec. 20, provides: "(3) A to the effect thereof is reached in 17
representation may be either a rep- Earl of Halsbury's Laws of England,
resentation as to a matter of fact sec. 808, p. 413. See also 20 Id.
or as to a matter of expectation or sees. 1618 et seq., pp. 661 et seq., title
belief. (4) A representation as to "Misrepresentations and Fraud."
a matter of fact is true, if it be sub- 6 4 Hill (N. Y.) 329.
stantially correct, that is to say, if 71 Duer on Marine Ins. (ed. 1845)
the difference between what is rep- 647 et seq., 749-69.
resented and what is actually correct 81 May on Ins. (3d ed.) sec. 182;
would not be considered material by Id. (4th ed.) sec. 182.
a prudent insurer. (5) A rep- 9 1 Biddle on Ins. (ed. 1893) 533.
resentation as to a matter of expecta- 10 1 Parsons on Marine Ins. (ed.
tion or belief is true if made in good 1868) 445-48 et seq.
3147
§ 1919 JOYCE ON INSURANCE
And that the doctrine sanctioned by the weight of authority is
"that a positive, affirmative representation of material facts in re-
specl to the future is. in effect, a stipulation thai they shall be sub-
stantially as stated, and that a nonfulfillment of such representa-
tion will defeal the policy: " u Mr. Bliss briefly reviews the ques-
tion, says it is involved in doubt, but that it is an implied condi-
tion that the contract is free from misrepresentation: 12 Mr. Wood
says that oral statements or representations as to future facts are
inadmissible to alter or vary the contract or control its application
or effect, unless they are proven fraudulent, or are made to induce
the assurer to assume the risk or to lower the premium: 13 Mr.
Bacon considers the question, and concludes that "it is eminently
reasonable, as well as consistent with authority, that promissory
representations when false should avoid the contract only when
they are either made under such circumstances that their breach
substantially amounts to a fraud upon the insurer, or else when
they are incorporated into the policy in such a way as to become
virtually warranties." 14
§ 1919. Same subject: cases and opinions. — A statement in the
application that a force pump and an abundance of water constitute
tho facilities for extinguishing fire is held not to import a continu-
ing guarantee that they shall be kept in good order for use, but
only that such were the facilities at the time the insurance was
effected.15 And where one under an accident risk represented that
he was a switchman, and the policy did not provide that he should
not change his occupation, it was held immaterial that he was
killed while acting as a brakeman, such answer not amounting to
a contract that the insured would not change his occupation.16
So where the application declared that the applicant did not then
and would not practice any pernicious habits to shorten life, it was
held, in the absence of a stipulation that the practice of such a
11 1 Phillips on Ins. (3d ed.) 299- "Gilliat v. Pawtucket Mutual Fire
303. ser. 553. Ins. Co. 8 R. I. 282, 91 Am. Dec.
12 Bliss on Life Ins. (ed. 1872) 66- 229; Daniels v. Hudson River Fire
8, see. 49. Ins. Co. 12 Cush. (66 Mass.) 416.
13 1 Wood on Fire Ins. (2d ed.) le Provident Life Ins. Co. v. Fen-
550 et seq., sec. 227, relying upon nel, 49 111. 180; Valton v. National
Kimball v. iEtna Ins. Co. 9 Allen Fund Life Assur. Co. 17 Abb. Pr.
(9J Mass.) 542, 85 Am. Dec. 786, per (N. Y.) 268.
Gray, J. As to time covered by provision
14 Bacon on Benefit Soc. and Life or representation with respect to
Ins. (ed. 1888) 274-78, sec. 208. Mr. the habits or occupation of insured,
George M. Sharp, in his Lectures on see note in 5 L.R.A. (N.S.) 283.
Fire and Life Insurance, divides rep-
resentation into affirmative and
promissory.
3148
REPRESENTATIONS AND MISREPRESENTATIONS § 1919
habit should avoid the policy, that it did not amount to a covenant
or warranty on his part that he would not do so in the future, but
merely referred to a then existing state of facts, and as to the future,
that it was a mere matter of intention which did not avoid the
policy, and this even though the policy stipulated that if any of
the statements or declarations made in the application should be
found untrue in any respect, the policy should be void.17 And
where it was falsely but not fraudulently represented that the ship
would only take as cargo a certain quantity of rock salt, which
would put her in light ballast trim, and she sailed with over three
times the quantity "stated, the same constituting a full and very
heavy cargo, a distinction was made between an affirmative and
promissory representation, the jury being instructed in effect to
find for the defendant if the statement amounted to an affirmative,
material representation ; otherwise for the plaintiff.18 Again, where
an application was made for a policy on "an occupied dwelling
house," it was held that while it might amount to a false repre-
sentation if the property was unoccupied at the time, it was not an
assertion that it should be occupied during the risk.19 The leading
case wherein it is deemed that a distinction exists between an affirm-
ative and promissory warranty is Alston v. Mechanics' Mutual In-
surance Company,20 wherein Chancellor Walworth exhaustively
considers the question and reviews carefully the authorities. He
says in substance that he has been unable to find any case wherein
the court has adopted such a distinction ; that he has examined all
the writers both here and in other countries ; that Ellis is the only
law-writer who has considered a representation as a contract between
the parties ; 1 that Lord Mansfield clearly repudiates the idea of a
promissory representation.2 He then reviews several cases3 and
17Knecht v. Mutual Life Ins. Co. (Perkins' ed. 1850) 507-59, *503-
90 Pa. St. 118, 120, 35 Am. Rep. 05; Id. (Maclachlan's ed. 1887) 522,
641. But see Schultz v. Mutual Ins. 523. See also 1 Duer on Marine Ins.
Co. 6 Fed. 672, and examine Jeffries (ed. 1845) 741, 742, 747, 749.
v. Life Ins. Co. 22 Wall. (89 U. S.) 19 Cumberland Vallev Mutual Pro-
47, 22 L. ed. 833 ; Bilbrough v. tection Co. v. Douglas, 58 Pa. St. 419,
Metropolis Ins. Co. 5 Duer (N. Y.) g8 Am> Dec 298. See § 2101 here-
587.
in.
18 Flinn v. Headlam, 9 Barn. & C. 'zo ^ jj-jj /^ y ) 309 334
693 694, pei' Lord Tenterden ; Flinn , d ^ ' Mr.Duer so con-
v. Tobm, 1 Moody & M. 367. In this .fl .
case the jury were instructed that , ^ y ^ ed
fraudulent misrepresentation must . f
be fraud, per Lord Tenterden. Mr. m 1 P^ <m Lis. 20^ 3f' xw
Arnould savs of the distinction above 8 Umtod States. -Baxter v. iSew
made that it is unfounded in prin- England Ins Co. 3 Mason (U. b. C
ciple and not supported by the au- C.) 96, Fed. Cas. No. 1M[-
thorities: 1 Arnould on Marine Ins. Louisiana.— Curell v. Mississippi
3149
§ 1919 JOYCE OX INSURANCE
deduces the conclusion thai they show that such representations as
relate to future facts are those which relate merely to matters of
expectation or intention honestly made and not actually fraudulent,
and not to collateral contracts or promissory representations, and
thai in the case before him the referees erred in receiving parol
evidence of such an agreement to defeat the policy. On a Line with
this decision is the opinion of the court in a Massachusetts case,4
who says: "A representation that a fact now exists may be either
oral or written, for if it does not exist, there is nothing to which
the contract can apply, hut an' oral representation as to a future
fact, honestly made, can have no effect; for if it is a mere statement
of an expectation, subsequent disappointment will not prove that it
was untrue, and if it is a promise that a certain state of facts shall
exist or continue during the term of the policy, it ought to he em-
bodied in the written contract." This judgment is cited with ap-
proval in a Federal case as deciding "that an actual promise, if oral,
cannot be given in evidence to defeat a policy that has once at-
tached;" 5 and the following extract from the opinion of the court
in this last decision is pertinent. The case was one where the appli-
cation was oral, and it is said: "It is impossible to reconcile the
decisions upon this question of continuing warranty. When an un-
derwriter asks about the particulars of a risk, he probably takes for
granted that things will remain as they are; but when the courts
are asked to convert this impression into a covenant, and make
words in the present tense operate as a stipulation for the future,
thero is difficulty, and the authorities are doubtful and divided.
The result, as far as I can gather it, is that when the fact appears
to the courts to be a very important one, such as employment of a
watchman, a majority of them have said that this ought to be con-
sidered apart of a continuing engagement. When the fact does not
appear to be so important, as that a dwelling house is occupied, or
that a clerk sleeps in a store, it is not of that character. There is
unit objection to these continuing warranties when they are con-
ventional, or made up from words which do not purport a future
warranty, because, if the attention of the assured had been called to
Marino & Fire Ins. Co. 3 La. (0. S.) England. — Macdowell v. Frazer,
353, 9 La. 163, 29 Am. Dec. 439. 1 Dou^. 260; Dennistoun v. Lillie,
Maryland. — Allegre's Adrnrs. v. 3 Bligh, 202; Flinn v. Tobin, 1 Moo-
Maryland Ins. Co. 2 Gill & J. (Md.) dv & M. 36.9.
131, 136, 20 Am. Deo. 424. 4 Kimball v. 2Etna Ins. Co. 9 Allen
Massachusetts. — Whitney v. Hav- (91 Mass.) 540, 85 Am. Dec. 786,
en, 13 Mass. 172; Bryant v. Ocean facts noted above under this section.
Ins. Co. 22 Pick. (39 Mass.) 200; 5 Albion Lead Works v. Williams-
Rice v. New England Marine Ins. Co. burgh City Fire Ins. Co. 2 Fed. 479.
4 Pick. (21 Mass.) 439.
3150
REPRESENTATIONS AND MISREPRESENTATIONS § 1919
them as continuing covenants, they might have been qualified.
Thus, in the important case of Ripley v. iEtna Insurance Com-
pany,6 which is in accordance with the weight of authority . . .
there was an oral statement that a watchman was at the mill day
and night, and there was an oral description of a force pump.
These statements were true at that time, and true at each renewal of
the policy, and therefore it is of no consequence whether they are
called warranties or representations. I have seen no case which
holds that an oral statement of a fact could be construed into a
continuing warranty or promise when the contract is in writing.
. . . That covenants cannot be imported into or taken out of a
written contract by parol is an elementary rule applicable to con-
tracts for insurance as to others." 7 But where the vessel insured
was represented to be American, it was held an implied condition
that she should carry the documents necessary to show her neutral
character, and when she was condemned for want of the necessary
documents a recovery was denied.8 In another case, the repre-
sentation being that the ship would sail on a certain day, and she
had already sailed, it was held a representation of a material fact
and not of an expectation, and that the policy was avoided by the
misrepresentation.9 So it is held that a representation that the prop-
erty is examined thirty minutes after work, necessitates an ex-
amination after extra as well as after ordinary working hours, and
that so far as representations are executory and regard the future,
6 30 N. Y. 136, 86 Am. Dee. 362. anee Co. v. iEtna Life Ins. Co. 52
7 See Abbott v. Shawmut Mutual Conn. 576.
Fire Ins. Co. 3 Allen (85 Mass.) Illinois. — Commercial Accident
213 ; Schmidt v. Peoria Mutual Ins. Ins. Co. v. Bates, 176 111. 194, 54. N.
Co. 41 111. 295; Higginson v. Dall, E. 49 {cited as to future representa-
13 Mass. 96; Kimball v. ./Etna Ins. tions in Stannard v. Aurora, Elgin &
Co. 9 Allen (91 Mass.) 540, 85 Am. Chicago Ry. Co. 220 111. 469, 7rt N.
Dec. 786. E. 254); Peoria Marine & Fire Ins.
8 Steel v. Lacy, 3 Taunt. 285 ; Van- Co. v. Lewis, 18 111. 553.
denheuvell v. Church, 2 Johns. Cas. Massachusetts. — Kimball v. Spring-
(N. Y.) 451, 1 Am. Dec, 180; Mur- field Fire & Marine Ins. Co. 9 Allen
ray v. Alsop, 3 Johns. Cas, (N. Y.) (91 Mass.) 540, 85 Am. Dec. 786;
47. But see § 1903 herein. Houghton v. Manufacturers' Mutual
9Dennistoun v. Lillie, 3 Bligh, P. Fire Co. 8 Met, (49 Mass.) 114, 120,
C. 202. 41 Am. Dec. 489.
See next chapter. See also in con- Rhode Island. — Gilliat v. Paw-
nection with this point of promissory tucket Ins. Co. 8 R. I. 282, 91 Am.
representations : Dec. 229.
United States. — Prudential Assur- England. — Driscol v. Passmore, 1
ance Co. v. iEtna Life Ins. Co. 23 Bos. & P. 200, 4 R. R. 782; Feise v.
Blatchf. (U. S. C. C.) 223, 23 Fed. Parkinson, 4 Taunt, 640, 14 Eng.
438. Rul. Cas. 530; Edwards v. Footner,
Connecticut. — Prudential Assur- 1 Camp. 530.
3151
§ 1920 JOYCE ON INSURANCE
it is sufficient if they are substantially complied with.10 And
statements in an application for fire insurance, as to conditions
and precautions, arc warranties or representations that the same
shall be maintained.11 It is held accordingly that the use of
lamps in the picking room avoided the policy where the repre-
sentation was "no lamp- used in the picking room'' and that
parol evidence was admissible in an action by the assignees to
-how thai such representation was actually made by assured.12
So a statemenl by the applicant that he will not engage in a cer-
tain business is held a pi- issorv representation.18 Again, the
doctrine of promissory representations and warranties is declared
not to have been abolished by the Texas statute requiring untrue
or false answers or statements or misrepresentations to be material
to the risk in order to avoid the contract.14 In another case it is
held that oral statements made by the assured are merely represen-
tations, which if not fraudulent and material to the risk do not
avoid the policy.15 So it is held that the slip or application for
insurance is inadmissible in evidence, in a court of law, to show
the intention of the parties. Jt is proper evidence only to show
a misrepresentation.16
§ 1920. Same subject: conclusion. — Excluding such cases as come
within the terms of some statutory provisions establishing some
definite rule, the authorities, as will be seen from what is above
stated, are clearly in conflict, nor shall we attempt, in view of
these conflicting authorities to formulate any certain rule other
than that which appears from the following statement. We would
suggest, however, that the cases show three classes of representa-
tions: 1. Those which distinctly relate to the future; 2. Those
of facts which exist at the time the risk was taken, and upon
10 Iloucrhton v. Manufacturers' 15 Wytheville Ins. Co. v. Stultz,
Mutual Fire bis. Co. 8 Mete. (49 87 Va. 629, 636, 15 Va. L. J. 328,
Mass.) 114, 41 Am. Dec. 4S9. 13 S. E. 77.
11 Clark v. Manufacturers' Ins. Col I6Dow v. Whetten, 8 Wend. (N.
8 Bow. (4!) f. S.) 235, 12 L. ed. Y.) 160. The California code pro-
1061. Citedin Kelley v. Mutual Life vides that "a representation as to
Ins. Co. 75 Fed. 637, 640; Blumer the future is to he deemed a promise
v. Phoenix Ins. Co. 45 Wis. (122, 629. unless it appears that it was merely
12 Clark v. Manufact urers' Ins. Co. a statement of belief or expecta-
8 How. (49 U. S.) 235, 12 L. ed. tion:" Cal. Civ. Code sec. 2574. But
1061. it is also provided that "a representa-
18 Zepp v. Grand Lodge, 69 Mo. tion cannot be allowed to qualify an
App. 487. express provision in a contract of
14 Gross v. Colonial Assur. Co. 56 insurance, but it may qualify an
Tex. Civ. App. 627, 121 S. W. 517; implied warranty." California Civ.
Tex. Rev. Stat. 1895, art. 3096aa, Code, sec. 2575.
added by acts 28th Leg. 1903, c. 69,
sec. 1, p. 94.
3152
REPRESENTATIONS AND MISREPRESENTATIONS § 1920
which the insurer has sought to ingraft a promise that they shall
so exist during the continuance of the risk; and 3. Those state-
ments that are incorporated in the contract by clear words of refer-
ence or otherwise. In the first class of cases fraud, deceit, or
misrepresentation may exist; in the second, the question of fraud.
deceit, and misrepresentation may be eliminated by the fact that
the representation was true when made and at the time the in-
surance was effected; while in the third class the stipulations of
the contract determine largely the construction which should be
given the words used and the effect of the statements made. In
marine risks a certain fact may be not only clearly material to
the risk in itself, but the insurer may without doubt have been
induced to assume the contract or to lower the rate of premium
because of the representation. In such case, although the state-
ment may in terms refer to the future, yet it may be fairly said
to actually relate back to the time of the commencement of the
risk, so that it will avoid the contract either because it is fraudu-
lent or materially false or calculated to deceive, and by reason
of the fraud or material misrepresentation evidence of the actual
representation would be deemed admissible. It is not evidence
to vary a written contract, for the fraud and material misrepre-
sentation vitiated the contract in its inception. Thus, where the
vessel wTas represented as provided with a French license to trade,
and it merely had a French pass which did not give the right
to trade, the false statement was held to avoid the policy in its
inception.17 But if the representation be clearly of a future fact,
as where the vessel is to sail in company with two armed ships
and carry ten guns and twenty-five men,18 this being material is
clearly an implied condition, and if it is one upon which the risk
was assumed, it must be observed, otherwise the minds of the par-
ties have not met. If the ship sails alone or with less men, then
the risk is not the one assumed, but another which the underwriter
never agreed to run. The representation once made is binding,
or the life of the contract is gone. It is not a question in such
case of altering or varying the contract by parol, and it can be
clearly deduced from the language of Lord Ellenborough in charg-
ing the jury in the last case that the representation, although
relating to the future, must be held to refer back to the time
when it was made, and if untrue then and not altered or with-
drawn, it must be substantially complied with. If the fact rep-
resented actually exists as stated at the time the contract is made,
if there is then no deceit, fraud, or misrepresentation, to seek
17 Fiese v. Parkinson, 4 Taunt. 18 Edwards v. Footner, 1 Camp.
640, 14 En<?. Rul. Cas. 530. 530.
Jovce Ins. Vol. III.— 198. 3153
§ 1920 JOYCE ON INSURANCE
afterward to import into the written contract by parol evidence
an agreement that the fact shall continue to exist as stated, when
the parties have not seen fit to embody the same therein, would
seem to conflict with established rules of law; but even then if
the insurer was actually induced by the representation to enter
into the contract or to lower I lie rate of premium, and the risk
would be materially changed or increased if the facts represented
did not continue to exist as they were when the insurance was
effected, then the contract could perhaps be reasonably assumed
not to be the actual contract entered into between the parties.
If the representation be made in bad faith and with intent to
mislead or deceive, of necessity the element of fraud vitiates the
contract, but can it not be held to be a constructive fraud to in-
duce the insurer to assume a risk, relying on the existence of
facts material to the risk, and then when the contract is effected
to increase the hazard by neglecting or refusing to continue the
existence of the relied-upon facts? In such case are they made
under such circumstances that the breach could reasonably be
held to amount to a fraud upon the assurer? In many cases such
reasoning would apply, but in numerous other cases, such as those
of use and occupation hereafter noted, it is clearly evident from
the character of the risk and the contract that a promissory war-
ranty was not intended, and that a change will not avoid the
contract unless it be shown that the risk is materially increased.
In addition to what is first above at the beginning of this discus-
sion there is also a class of cases where representations, although
incorporated in the policy and which even use the word war-
ranty, are not warranties but representations only according to the
intent of the parties ; where the statement is, not only that a
certain material fact exists, but both parties clearly understand
that should it cease to exist the contract ceases, or is voidable, such
a case evidences not only an assertion of an existing fact but an
assertion of its continuance as necessary to the continued existence
of the insurance, and inasmuch as the representation is made a
part of the contract the question of parol evidence is eliminated so
far as importing any new matter into the contract is concerned. 18a
Those cases are also to be considered where the statute either in
effect does away wTith warranties or by force of which statements
are in the absence of fraud to be deemed representations and not
warranties and here also they are a part of the contract.18b
18a As to fidelity and other guaran- As to particular representations
ty contracts, see § 2002a herein. and warranties, see §§ 1987-2112
As to affirmative and promissory herein,
warranties, see §§ 1940 et seq. here- 18b As to statutes, see § 1916 herein.
in.
3154
REPRESENTATIONS AND MISREPRESENTATIONS § 1021
§ 1921. To what time the representation refers. — A positive rep-
resentation that a certain state of facts does or does not exist and
which is material will ordinarily refer to the time when the con-
tract is completed, and it becomes binding at that time.19 So,
where an application for insurance was made in writing on a
named ship at and from Gibraltar, "where she now is," to a port
in the Mediterranean, and the application was marked binding
on the twelfth of the month, but on the fifteenth of the same
month, and before the policy was delivered or notes sent for the
premium, it was learned by both parties that before the applica-
tion was made the ship was destroyed by fire at Gibraltar, it was
held that the statement "where she now is" being untrue at the
time the agreement was made "binding" there could be no re-
covery.20 And if the policy has been issued and delivered, a
subsequent misstatement by assured made in good faith at assurer's
request in relation to the risk or subject-matter, will not bind
assured when not based on any further or other consideration
than that which induced the original contract, and without change
of conditions or warning that such misstatements may be availed
of to defeat recovery.1 And matters material to the risk occurring
and becoming known to assured between the time of making the
application and the final completion of the contract and con-
cerning which inquiries had been made, must be disclosed,2 but
it is otherwise after the application is approved and a policy
issued.3 So a representation in an application as to the existence
19 See Michigan Fire & Marine 1 JEtna Accident & Liability Co. v.
Ins. Co. v. Wich, 8 Colo. App. 409, White, — Tex. Civ. App. — , 177 S.
46 Pac. 687; Carleton v. Patrons' W. 162.
Androscoggin Mutual Fire Ins. Co. 2 Harris v. Security Mutual Life
109 Me. 79, 39 L.R,A.(N.S.) 951, Ins. Co. 130 Tenn. 325, L.R.A.1915C,
82 Atl. 649, 41 Ins. L. J. 1067; 153, 170 S. W. 474.
Levie v. Metropolitan Life Ins. Co. As to duty to notify insurer of
163 Mass. 117, 39 N. E. 792. As to' facts which develop after the submis-
time when marine insurance contract sion of application but before de-
concluded in England, see § 1933 livery of policy or certificate, see
herein notes in 8 L.R.A.(N.S.) 983; 39
Under the Cal. Civ. Code, sec. L.R.A.(N.S.) 951; and 43 L.R.A..
2572, a representation may be made (N.S.) 431.
at the same time with issuing the As to effect of stipulation in ap-
policy or before it. Under Cal. Civ. plication or policy of life insurance
Code, sec. 2577, the completion of that it shall not become binding un-
the contract of insurance is the time less delivered to assured while in
to which the representation must be good health, see notes in 17 L.R.A.
presumed to refer. (N.S.) 1144; 43 L.R.A.(N.S.) 725;
20Callaghan v. Atlantic Ins. Co. 45 L.R.A. (N.S.) 743; and L.R.A.
1 Edw. Ch. (N. Y.) 64. See next 1916F, 171.
section. 3 Merriman v. Grand Lodge Degree
3155
§ 1922, 1023 JOYCE OX INSURANCE
of other insurance on the property must be true when the applica-
tion is accepted, to comply with a requirement that all facts
<t;iti'd in the application must he true under penalty of avoiding
the mntrart, and if untrue at that time, its truthfulness when
made is immaterial.4 Bui where the statute so provides, state-
ments by assured concerning his health are not limited to the time
of issuing the policy, where the same is procured through fraud or
deceit.5
Although the representation relates to a future fact, it is dis-
tinctly held by Lord Ellenborough that such statement must be
referred to the time when made, and must.be substantially true
by relation to that time, and if not altered or withdrawn before
the policy is delivered, it hinds the assured.6 And when a refusal
of one assurer to continue the applicant's insurance, comes to his
knowledge before his contract with another company is concluded,
the failure to disclose the fact constitutes a ground for avoiding
the policy.7
The point, however, whether statements, which relate to future
facts musl be referred to the time the contract was completed or
to the truth of the representations when made is so far dependent
upon the question as to the existence and effect of promissory
representations, that we must refer the reader to the discussion of
that question.8
§ 1922. Representation falsified in the future does not operate
retroactively.— The following rule is given by Mr. Duer: "When
the policy has attached and the representation is falsified by a sub-
sequent event the breach does not by a retroactive force, render
the policy void in its origin. It discharges the insurer from the
time that it occurs, and does not release him from his liability \'ov
antecedenl Losses." 9 This rule is, however, based upon the propo-
sition as to the existence of continuing promissory representations
jusl discussed.10
§ 1923. Representations true when made, but untrue when con-
tract completed. — Itis held in Wisconsin that if material repre-
sentations upon which the contract is based are true when made,
ij Honor, Ancient United Workmen, 31 Ins. L. J. 735, under Iowa Code,
77 NTeb. 544, 8 L.R.A.(N.S.) 983, see. 1812.
124 Am. St. Rep. 867. 1 in \'. W. 6Edwards v. Footner, 1 Camp.
302; Gordon v. United States Casual- 530.
ty Co. — Tenn. Ch. — , 54 S. W. 98. 'Yager v. Guardian Assur. Co.
' «Carleton v. Patrons' A.ndroscog- 108 I,. T. (X. S.) 38, 20 T. L. R. 53.
gin Mutual Fire Ins. Co. 109 Me. 8 See S§ 1917-20 herein.
79, 39 L.R.A.(N.S.) 951n, 82 Atl. 9 2 Duer on Marine Ins. (ed. 1845)
649. 696.
5 Welch v. Union Central Life Ins. 10 See §§ 1917-1920 herein.
Co. 117 Iowa, 394, 90 N. W. 828,
3156
REPRESENTATIONS AND MISREPRESENTATIONS § 1923
but have ceased to be true when the policy is delivered, the con-
tract is avoided, especially when it is stipulated in the application
that false representations shall avoid the insurance and the answer-
are made warranties.11 As long as the contract is not completed
such a rule would be true, but if the contract is actually completed
the fact that they have ceased to be true brings the discussion
again within the question concerning promissory representations,
unless the positive representation relates solely to the past or
present existence of the facts relied on, in which case the repre-
sentation must be referred to the time of the completion of the
contract.12 And in England after the slip has been initialed a
representation made after that time and before the policy is
drawn up and executed does not bind the insured.13 Since the
marine insurance act of 1906 went into effect, however, the pro-
vision therein as to the time when the contract is concluded
governs.14 And in life risks under the law in that country a
declaration is deemed to be continued up to time of completion
of contract, and any intermediate change of circumstances render-
ing it untrue must be communicated.15 So in this country a
representation once made during the negotiations continues in
force unless something occurs before the contract is completed
to show that it is altered or withdrawn16 and "negotiations" means
the entire transaction of applying for and finally issuing the com-
pleted contract,17 And it is also decided that if the contract is
completed, neither the failure thereafter of the health of the person
insured,18 nor a subsequently occurring loss,19 nor the happening
11 Blumer v. Phoenix Ins. Co. 45 certiorari denied in 194 U. S. 635,
Wis. 622. See Carleton v. Patrons' 48 L. ed. 1160, 24 Sup. Ct. 854.
Androscoggin Mutual Fire Ins. Co. Representations may be changed,
109 Me. 79, 39 L.R.A.(N.S.) 951, 82 etc., see § 1933 herein.
Atl. 649, 41 Ins. L. J. 1067. See § 17 Everson v. General Fire & Life
1933 herein. Assur. Corp. Ltd. 202 Mass. 169. 88
12 See preceding sections. N. E. 658, 38 Ins. L. J. 923. Inter-
13 1 Arnould on Marine Ins. (Mac- pretation of word as used in Mass.
lachlan's ed. 1887) 515, citing 30 Stat. 1907, c. 576, sec. 21, p. 854,
Vict. c. 23; Ionides v. Pacific Fire as to "warranty made in negotiation
& Marine Ins. Co. L. R. 6 Q. B. of contract."
674, 7 Q. B. 517, 13 Eng. Rul. Cas. " Fried v. Royal Ins. Co. 50 N. Y.
471. See 1 Marshall on Ins. (ed. 243, s. c. 47 Barb. (N. Y.) 127.
1810) *452, as to former rule ; Daw- 19 Franklin Ins. Co. v. Colt, 20
son v. Atty, 7 East, 367. Wall. (87 U. S.) 560, 22 L. ed. 423;
14 See § 1933 herein. Perkins v. Washington Ins. Co. 4
15 Earl of Halsbury's Laws of Eng. Cow. (N. Y.) 645, rev'g 6 Johns. Cas.
sec. 1104, p. 553, "Life Insurance." (N. Y.) 485; JEtna Accident & Lia-
16 Kerr v. Union Marine Ins. Co. bilitv Co. v. White, — Tex. Civ
130 Fed. 415, 64 C. C. A. 617, App. --, 177 S. W. 162.
3157
§ 1924 JOYCE ON INSURANCE
of an accident20 can defeat the contract, even though the policy
has not been delivered, and also that after the contract is com-
pleted no obligation rests upon the assured to inform the insurers
of a subsequently occurring loss before receiving the policy.1
§ 1924. Representation must be substantially true. — What is
materia] to the risk must be truly represented.2 It is also held
that the positive representation of an existing fact is in the nature
of a warranty,8 and it is also decided in Massachusetts that a posi-
tive representation of a material existing fact in marine insurance
must be literally true.4 But the general rule is that material
representation- made in good faith and without intent to deceive
need not be true in every possible respect irrespective of materiality,
or literally accurate, even as to material matters. It is sufficient
if they are substantially true and correct as to existing circum-
stances, or, as it is sometimes expressed, they need be only ma-
terially true, for they will not vitiate the policy even though they
be in some degree erroneous. So far as they may be held executory
or promissory, it is sufficient if they are substantially complied
with. Subject to the above qualifications representations of ma-
terial facts must be just, true, and full, otherwise the company
is not bound, and if they are made with an intent to deceive, or
are fraudulent, or are materially different from the truth in a way
that increases the risk, the company is released.5 In other words
20 Rhodes v. Railway Passengers' L. J. 87; Insurance Co. of North
Ins. Co. 5 Lans. (N. Y.) 71; Gordon America v. McDowell, 50 111. 120, 99
v. United States Casualty Co. — Am. Dec. 497; National Union v.
Tenn. Ch. — , 54 S. W. 98. Arnhorse, 74 111. App. 482.
1 Whitaker v. Farmers' Union Ins. Indiana. — Catholic Order of For-
Co. 29 Barb. (N. Y.) 312. See §§ esters v. Collins, 51 Ind. App. 285,
1327, 1370 herein. 99 N. E. 745.
8 Marshall v. Columbian Mutual Iowa. — Bartholomew v. Mer-
Fire Ins. Co. 27 N. H. 157. chants' Ins. Co. 25 Iowa, 507, 96
3 Herri ck v. Union Mutual Fire Am. Dec. 65.
Ins. Co. 48 Me. 558, 77 Am. Dec. 244. Kansas. — Washington Life Ins.
4 Sawyer v. Coasters' Mutual Ins. Co. v. Haney, 10 Kan. 525.
Co. 6 Gray (72 Mass.) 221. Kentucky.— Kentucky & Louisville
5 United Stales. — Nicoll v. Ameri- Ins. Co. v. Southard, 8 B. Mon.
can Ins. Co. 3 Wood. & M. (U. S. (Kv.) 634.
C. C.) 529, F.d. ('as. No. 10,259. Maine— Lycoming Ins. Co. v.
Arkansas. — National Annuity As- Mitchell, 48 Me. 367.
soc. v. Carter, 96 Ark. 495, 132 S. Massachusetts. — Lee v. Howard
W. 633, 90 Ins. L. J. 205. Mutual Fire Ins. Co. 11 Cush. (65
Connecticut. — Grlendale Woolen Mass.) 324; Houghton v. Manufac-
Co. v. Protection Ins. Co. 21 Conn, turers' Ins. Co. 8 Met. (49 Mass.)
19, 51 Am. Dec. 309. 114, 41 Am. Dec. 489.
Illinois. — Spence v. Central Ac- Mississippi. — Citizens National
cident Ins. Co. 236 111. 444, 19 L.R.A. Life Ins. (n. v. Swords, 109 Miss.
(N.S.) 88n, 86 N. E. 104, 38 Ins. 635, 68 So. 920.
3158
REPRESENTATIONS AND MISREPRESENTATIONS § 1924
the expression, substantially true, means true without qualification
in all respects material to the risk, not somewhat true, partially
true, nor true in every possible or immaterial respect,6 and these
words true without qualification do not of course apply to those
cases where representations are expressly or impliedly qualified in
the contract.7
So it is declared that the description in the application may
vary considerably from the actual state of the property at the time
Montana. — Pelican v. Mutual Life erroneous, if it be fairly and sub-
Ins. Co. of N. Y. 44 Mont. 277, 119 stantially true, and does not prej-
Pac. 778, 41 Ins. L. J. 327. udice the insurers:" Hammond on
Nebraska. — Royal Neighbors of Fire Ins. (ed. 1840) 89. The de-
America v. Wallace, 66 Neb. 53, 92 fense of misrepresentation must be
N. W. 897, s. c. 73 Neb. 409, 102 N. clearly made out. A representation,
W. 1020, 34 Ins. L. J. 450, s. c. 64 honestly made, must be materially
Neb. 330, 89 N. W. 758, 31 Ins. L. and substantially incorrect to vitiate,
J. 447. but if made with intent to deceive.
New York. — Irvin v. Lea Ins. Co. the fact that it is trivial or immate-
22 Wend. (N. Y.) 380; Higbee v. rial will not avail insured. So a ves-
Guardian Mutual Life Ins. Co. 66 sel was an old one, but had been
Barb. (N. Y.) 462; Callaghan v. repaired, given a new name and reg-
Atlantic Ins. Co. 1 Edw. (N. Y.) ister, but some of the old material
164; Farmers' Ins. Co. v. Snyder, 16 and the original engine, boiler, and
Wend. (N. Y.) 481, 30 Am. Dec. machinery remained, and she was
118. represented as built in 1890. The
Ohio. — Hartford Protection Ins. policy was held vitiated by the mis-
Co. v. Harmer, 2 Ohio St. 452, 59 representation, and this without re-
Am. Dec. 684. gard to the intent to deceive: Nova
Oregon. — Chrisman v. State Ins. Scotia Ins. Co. v. Stevenson, 23 Supr.
Co. 16 Or. 283, 18 Pac. 466; Buford C. R. (Can. 1) 37, Taschereau, J.,
v. New York Life Ins. Co. 5 Or. 334. dissenting. "It is a first principle
Texas. — Kansas City Life Ins. Co. of the law of insurance on all oc-
v. Blackstone, — Tex. Civ. App. — , casions, that where a representation
143 S. W. 202, 41 Ins. L. J. 683 is material, it must be complied with;
(statements treated as warranties al- if immaterial, that immateriality
though rule that need be only sub- must be inquired into and shown, but
stantially true was applied). if there is a warranty, it is part of
Washington. — Poultry Producers the contract that the matter is such
Union v. Williams, 58 Wash. 64, 137 as it is represented to be, therefore
Am. St. Rep. 1041, 107 Pac. 1040. the materiality or immateriality signi-
England. — Edwards v. Footner, 1 ties nothing:'' Porter's Law of Ins.
Camp. 530; MacDowall v. Frazer, 1 (2d ed.) 144. In England where the
Doug. 260 ; Pawson v. Watson, Cowp. utmost good faith is required in fire
785, 1 Doug, lln, 13 Eng. Rul. Cas. risks, a representation must be sub-
540. stantially true. 17 Earl of Hals-
Answers of an applicant for in- bury's Law of England, sees. 1059,
surance ought to be construed liberal- 1063, pp. 532, 534, "fire insurance."
ly in his favor: Brown v. Metro- 6 Jeffrey v. United Order of Golden
politan Life Ins. Co. 65 Mich. 306, Cross, 97 Me. 176, 53 Atl. 1102, 32
8 Am. St. Rep. 894, 32 N. W. 610. Ins. L. J; 697— Savage, J.
A representation "not embodied in 7 See §§ 1915a, 1915b herein,
the policy will not vitiate it, although
3159
;. L924 JUYCK O.N 1NSI KAXCE
of the loss, but if the variance was not fraudulently intended, and
does in a in fact affecl the rate of insurance or change the actual
risk, the policy will not be avoided.8
A representation is also satisfied where buildings are declared to
be "finished" and they are substantially completed,8 and a state-
ment as to occupancy need only be true so far as material to the
risk.10 80 a representation that the ship had been metaled is
substantially true where it appears that she had been metaled
where needed.11 A statemenl thai the ship is at a certain port is
satisfied although she is not at the town, but at another place which
is legally within the port, although several miles distant,18 and a
representation that the ship will sail in ballast need only be sub-
stantially complied with; as where she -ailed with only one trunk
of merchandise and ten barrels of gunpowder.18 In marine risks,
however, there may be said to be degrees of strictness with wdiich
representations must be complied with. Thus, if the time of the
-1 lip's sailing be material to the risk, this is almost in effect a war-
ranty, and must he correspondingly complied with; that is, nearly
as strictly or literally as if a warranty,14 unless the risk as assumed
by the underwriter has not been materially altered.15
In eases where the stipulations of the policy make the repre-
sentation- in the nature of warranties, a stricter rule exists, since
the materiality of the fact is held not then a subject of inquiry.16
It is held, however, immaterial whether statements or answers
he considered representations or warranties, for if held to be only
technical representations, still they must, if material, be sub-
stantially true or the policy may be avoided.17 So where inquiries
are made and the application and survey are made a part of the
policy, it is held that a representation as to a watchman being
kept is material to the risk, but need only be substantially per-
8 Jefferson Ins. Co. v. Cotheal, 7 Cas. (N. Y.) 47; Chaurand v. Anger-
Wend. (X. Y.) 72, 22 Am. Dec. 567. stein, Peake N. P. 43.
9 Delonguemare v. Tradesman's As to concealment; time of sailing,
Ins. Co. 2 Hall (N. Y.) 58. see §§ 1803-1805 herein.
10 Boardman v. New Hampshire As to sailing; representatives and
Mutual Fire Ins. Co. 20 X. It. 551. warranties, see §§ 2082-2087 herein.
11 Alexander v. Campbell, 41 L. J. 16Bize v. Fletcher, 1 Dong. 12n, 4.
Ch. 478, 27 L. T. 25. "Mutual Benefit Life Ins. Co.
12 Bell v. Marine Ins. Co. 8 Serg. v. Miller, 39 Ind. 475.
& R. (Pa.) 98. 17 Jeffrey v. United Order of Gold-
"Suckley v. Delafield, 2 Caines en Cross, 97 Me. 176, 53 Atl. 1102,
(X. Y.) 222. See Flinn v. Tobin, 1 32 Ins. L. J. 697. See also Kansas
Moody & M. 366; Flinn v. Headlam, City Life Ins. Co. v. Blackstone, —
9 Barn. & C. 694. Tex. Civ. App. — , 143 S. W. 202,
"Kirby v. Smith, 1 Barn. & Aid. 41 Ins. L. J. 683.
672, 674; Murray v. Alsop, 3 Johns.
3160
REPRESENTATIONS AND MISREPRESENTATIONS §§ 1925, li.26
formed.18 If the representation is one which may be implied from
the terms of the policy, and is one not expressly made when the
policy was effected, and it was known by the assured when the
policy was effected that it was false, the underwriter is not bound.19
§ 1925. Loss need not be connected with misrepresentation to
avoid contract. — Although a false representation of something out-
side and independent of the property insured, which has not in
any degree contributed to the loss, will not avoid the contract,20
nevertheless if there be actual fraud or the misrepresentation be
of a material fact, the question whether the statement has con-
tributed to the loss or whether the loss is dependent thereon in any
way is precluded.1
§ 1926. Misrepresentations to other insurers. — In England, in
cases of insurances effected at Lloyds where successive underwriters
initial the slip, it seems to be settled law that a misrepresentation
made to the first underwriter infects the whole policy, and is con-
sidered a misrepresentation made to every underwriter ; the ground
of this being that where the name of a reputable underwriter ap-
pears first on the policy or slip, the rest subscribe upon reliance
thereon.2 This rule, however, does not cover immaterial repre-
sentations, nor those which ought to have put the first underwriter
"Sheldon v. Hartford Fire Ins. also 1 Arnould on Marine Ins.
Co. 22 Conn. 335, 58 Am. Dee. 420. (Perkins' ed. 1850) 505, *501; Id.
19 Reid v. Harvey, 4 Dow. 97. (Maclaehlan's ed. 1887) 520; 3
20 Howard Fire & Marine Ins. Co. Kent's Commentaries (5th ed.) 282.
v. Cornick, 24 111. 455. 2 The eases on the point are
*Mr. Marshall says: "A repre- Forrester v. Pigou, 1 Maule & S. 13,
sentation may be untrue either wil- 3 Comp. 380; Marsden v. Reid, 3
fully and fraudulently, or inadvert- East, 572; Robertson v. Majoribanks,
ently and innocently,' and in either 2 Starkie, 573, 803; Pawson v. Wat-
case, if it be a material representa- son, 2 Cowp. 785, 13 Eng. Rul. Cas.
tion, it will avoid the policy. A wil- 540, per Lord Mansfield; Sibbald
ful misrepresentation or 'allegation v. Hill, 2 Dow, 2(53 ; Bell v. Carstairs,
false in anv fact or circumstance 2 Camp. 544, 14 East, 374, 14 Eng.
material to the risk is a fraud that Rul. Cas. 319; Barber v. Fletcher,
will always avoid the contract, ... 1 Doug. 306, 13 Eng. Rul. Cas. 532;
and such misrepresentation so com- Elting v. Scott, 2 Johns. (N. Y.) 157;
pletelv vitiates the policy, that the Himely v. South Carolina Ins. Co.
insured can never recover upon it, 1 Mills' Const. (S. C.) 154, 12 Am.
even from a loss arising from a cause Dee. 623. See also 1 Marshall on
unconnected with the fact or circum- Ins. (ed. 1810) * 455; 1 Arnould on
stance misrepresented, as if the in- Marine Ins. (Perkins' ed. 1850) 53o-
sured represent that the ship or 39, *532-36, sec. 198; Id. (Maclach-
goods insured are neutral property, lan's ed. 1887) 544 et seq.; 2 _Duer
he shall not recover, even for a loss on Marine Ins. (ed. 1846) 6<3 et
occasioned by shipwreck:" 1 seq.; 3 Kent's Commentaries (5th
Marshall on Ins. (ed. 1810) *453, ed.) 284; 1 Phillips on Ins. (3d ed.)
citing Skin. 327, per Holt, C. J. See 303 et seq., sees. 554, 555.
3161
, L927 JOYCE OX INSURANCE
on inquiry, nor those made to other than the first underwriter,
nor to underwriters on different policies, nor to cases other than
those where the other underwriters are induced thereby to Lower
the premium.8 The English courts, however, have been inclined
to limit the rule even in the cases not within the exceptions,4 al-
though Mr. Duer favors strict adherence thereto.3 In this country
the rule is that a representation to one insurer cannot he evidence
of a like representation to another insurer, on a different policy,
on the same ship and risks.0
§ 1927. Representation must not be evasive. — A positive repre-
sentation of a material fact must be full and true, and if it is
evasive and not full and complete, and materially untrue, the pol-
icy is avoided; as where the insured, in response to an inquiry
whether any company had refused to accept the risk, replied that
he had been and still was corresponding with another company,
when in fact eight companies had refused the risk and several
proposals for insurance were then pending, the policy was held
void.7 It is held that if a representation by an applicant as to
the nature of his occupation is evasive, in that his answer includes
a prohibited occupation, it avoids the contract. This has been
applied where the applicant stated that his occupation was a mer-
chant when he was in the saloon business, buying merchandise
in the way of liquors, etc., and selling the same for profit, as the
society's constitution prohibited applications being received from
persons in said husiness and the application provided among other
things that any "evasion of facts contained" therein should render
i he certificate void.8 Inasmuch, however, as it is held thai the
term "merchant" embraces all who buy and sell any species of
movable goods for gain or profit,9 and as it is also expressly de-
cided that the words "merchants and tradesmen" include one
whose only business is that of saloonkeeper,10 it is ditlicult to
understand why the answTer was necessarily, and as of course,
3 This is substantially the division quent underwriter, when it proved to
made by Mr. Arnould and Mr. Duer, be false, might on this ground avoid
and see authorities in last note: the insurance for it has been pre-
Brine v. Featherstone, 4 Taunt. 869. sumed that the subsequent insurers
4 Brine v. Featherstone, 4 Taunt, subscribed the policy upon the faith
869; Forrester v. Pigou, 1 Maule & reposed by them in the skill and
S. 13. judgment of the first. The propriety
Representations to several under- of this rule has, however, been
writers: Bute questioned: England, strongly questioned by judges of
— "where there are several under- great eminence. It is submitted that
writers to the same policy a repre- the view which will probably be
sen!; ;it ion to the first has been con- adopted on this subject is that there
sidered virtually a representation to are two questions of fact to be de-
all, with the result that each subse- cided — first, whether in any partic-
3162
REPRESENTATIONS AND MISREPRESENTATIONS §§1928,1!>2:»
evasive or even untrue so as to avoid the contract in the absence
cf a showing that it was intended to be so. It might also be very
well assumed that the answer was made in the utmost good faith
by the applicant and that it was true in accordance with the legal
interpretation of the term, but if such interpretation be conceded
not applicable so that the meaning of the term is left in doubt
then by reason of the very comprehensiveness of the word "mer-
chant" as that word is commonly understood and accepted it
would seem that the society ought to have made further and specific
inquiry then, if it really desired at that time to learn what was
intended by the use of said term — to ascertain to what class of
merchants applicant belonged.11
§ 1928. Statements volunteered and irrelevant: irresponsive
answers. — Where inquiries are made and the answer is complete
thereto, and additional facts are volunteered which are irrelevant
and irresponsive, the insurer cannot avail himself of the same in
defense of an action on the policy, although if the facts stated are
* material the rule, would be otherwise.12 An answer which is not
responsive to the inquiry is not fatal unless it appears that the
information sought was material to the risk, and this must he
proven by the insurer.13
§ 1929. Ambiguous or doubtful representations. — If the represen-
tations are ambiguous or doubtful, the insurer should make fur-
ther inquiry if it intends to bind the assured, otherwise the assured
is not affected by the ambiguous or doubtful statement. This
rule should, however, be taken with the qualification that the rep-
resentation must not be intentionally ambiguous, but only refers
to those cases where the statement is so doubtful and obscure upon
its face that a prudent and intelligent underwriter would have
naturally asked for further information, or be deemed by his
neglect so to do to have waived the ambiguity or its incomplete-
ular case the subsequent underwriter Ins. Co. 72 N. Y. 590, 28 Am. Rep.
reasonably relied upon the judgment 186, s. e. 16 N. Y. Sup. Ct. 121. See
of the first underwriter, and second- Cleavinger v. Franklin Fire Ins. Co.
lv. whether the latter was misled by 47 W. Va. 595, 35 S. E. 998.
the representation." 17 Earl of 7 General Provincial Life Assur.
Halsburv's Laws of England, see. Co. In re (Daintree, Ex parte) 18
814, p. 415. Week. Rep. 396. See also Yo>c v.
5 2 Duer on Marine Ins. (ed. 1846) Eagle Life & Health Ins. Co. 6 Cush.
676. (60 Mass.) 42.
6 Elting v. Scott, 2 Johns. (N. Y.) On effect of false representation
157; Nicoll v. American Ins. Co. 3 as to previous applications for m-
YVoodb. & M. (U. S. C. C.) 529, Fed. surance, see note in 55 L.R.A. 122.
Cas. No. 10,259; Harmony Fire & 8 Smith v. Chapter General of
Marine Ins. Co. v. Hazlehurst, 30 America, Knights of St. John &
Md. 380; Vilas v. New York Central Malta. 128 N. Y. Supp. 28S, 143
3163
§ 1929a JOYCE ON INSURANCE
ii.--.14 A representation which does not fully and completely
state the facts with relation to connected buildings doc- not avoid
the policy, unless the partial misrepresentation is of a fact which
increases the risk.15
§ 1929a. Answer illegible or ambiguous in original application
but plain in attached copy. — Even if a statement in an application
is so far illegible as to make it ambiguous, nevertheless, if assurer
by attaching a copy thereof to the policy makes the answer plain
and so places an interpretation thereon, the assured by accepting
and retaining without objection the policy with said copy attached,
is bound by assurer's construction of the answer and if it is false
and material as so interpreted, recovery is precluded.16
A PP. Div. 532, reargument denied 13 Tex. Civ. App. 280, 35 S. W. 676;
L28 N. Y. Supp. 1146, 144 App. Higgins v. Phoenix Mutual Life Ins.
Div. 908. Co. 74 N. Y. 6 (answer did not affirm
9Rosenbnnm v. Newbern, 118 N. or profess to state any fact: ease of
Car. 83, 92, 32 L.R.A. 123, 24 S. E. warranty however).
1. See also H. H. Kohisat & Co. 13 Daniels v. Hudson River Fire
v. O'Connell, 255 111. 271, 273, 99 N. Ins. Co. 12 Cush. (66 Mass.) 416,
E. 689; Commonwealth v. Payne 59 Am. Dec. 192.
Medicine Co. 138 Kv. 164, 127 S. W. "Livingston v. Maryland Ins. Co.
760; Carr v. Riley, L98 Mass. 70, 75, 7 Craneh (11 U. S.) 506, 535, 3 L.
84 X. K. 426, 428; Webster's New ed. 421 (holding that there must be
International Diet.; Bouvier's L. an affirmation or denial of same fact,
Diet. (Rawle's Rev.) p. 399; Words a statement on which some conclu-
& Phrases, pp. 4482 et seq., also Id. sion may be based) ; Elliott v.
X. S. p. 373. Hamilton Mutual Ins. Co. 13 Gray
10 Sherwood, In re (U. S. D. C.) (79 Mass.) 139; Nichols v. Fayette
Fed. (as. No. 12,773. Ins. Co. 1 Allen (83 Mass.) 63;
11 See § 1929 herein. Sexton v. Montgomery County Mutu-
12 Buell v. Connecticut Mutual Life al Ins. Co. 9 Barb. (N. Y.) 191;
Ins. Co. 2 Flip. (U. S.) 9, Fed. Cas. L. Black Co. v. London Guarantee
No. 2,104, 5 Ins. L. J. 274; Com- & Accident Co. Ltd. 144 N. Y. Supp.
menial Mutual Accident Ins. Co. v. 424, 159 App. Div. 186, 43 Ins. L.
Bates, 176 111. 194, 52 N. E. 49 J. 301; Brine v. Featherstone, 4
("whatever assured may have an- Taunt. 869; Gouinlock v. Manufac-
swered in addition to making full turers' & Merchants' Mutual Ins. Co.
and complete answer in I he inter- 43 U. C. Q. B. 563; Freeland V.
rogatory propounded was mere sur- Glover, 7 East, 462; Davis v. Scott-
plusage which cannot be availed of ish Provincial Assur. Co. 16 U. C.
bv the company for the purpose of C. P. 17(i; 1 Arnould on Marine Ins.
defeating the ' policy,"— Craig, J., (Perkins' ed. 1850) 531, *528; Id.
and irresponsive answers no ground ( Madachlan's ed. 1S87) 540.
for forfeiture). See Perine v. Grand 15 Stetson v. Massachusetts Mutual
Lodge Ancient Order United Work- Fire Ins. Co. 4 Mass. 330, 3 Am.
men, 51 Minn. 224, 53 X. W. 367 Dec. 217.
(answer even if untrue may be so 16 Reynolds v. Atlas Accident Ins.
irresponsive as to be immaterial or Co. 69 Minn. 93, 71 N. W. 831, 26
leave question wholly unanswered); Ins. L. J. 778.
Thies v. Mutual Life Ins. Co. of Kv.
"3164
REPRESENTATIONS AND MISREPRESENTATIONS §§ 1930, 1931
§ 1930. Answers to ambiguous or doubtful questions. — If the
assured in good faith answers questions which are ambiguou.-,
doubtful, or obscure, the representations will be construed in favor
of the assured and against the assurer.17 And if, the inquiry is
so framed (hat it does not clearly inform assured of its meaning,
and she may have been honestly mistaken as to what was intended
and her answer by fair and reasonable construction may be con-
sidered a true one in response to the question as she understood
it, such interpretation will be given and a forfeiture precluded.18
§ 1931. Representations false as to part of the property: entire
or severable contract. — In view of the fact that a greater propor-
tion of insurance contracts are not limited to one item of property,
this question whether the contract is entire or divisible and whether
by reason of statements or warranties as to a part of the property
the contract is void in its entirety or only as to part thereof, has
been and is of such practical importance that it has been before
the courts in numerous instances with a result that there is a
conflict of authority, and whether it be called an apparent conflict
or otherwise, it is clear that no common ground exists, in so far
as the decisions themselves are concerned, upon which to base a
rule governing all cases, or even those resting upon either similar
conditions or facts or both; and as to those states which have
followed a certain line of decisions, the law as enunciated therein
and upon which contract rights have been based will undoubtedly
stand as it has been therein so declared and settled. The force and
effect of statutes cannot, of course, be ignored in construing con-
tracts.
(a) Rules of construction generally applicable. It may be stated
as preliminary to a presentation of this question that primarily
its determination rests upon the question of intention deducible
from the stipulations of the contract and the rules of construction
governing for the ascertainment of that intention. Other general
rules applicable are: ( 1 ) The intent is to be first obtained from
the language of the entire policy in connection with the nature
of the risk or subject-matter; 19 (2) Construction must be reason-
able;20 (3) The contract should be given effect if possible;1 (4)
Courts cannot extend or enlarge by construction or thereby import
into the contract, as made, conditions, or a meaning contrary to
its express terms, and by interpretation make a new agreement
17 Wilson v. Hampden Fire Ins. 19See §§ 209, 210 herein.
Co. 4 R. I. 159. See § 1934a herein. 20 See § 211 herein.
18 Erickson v. Ladies of the Macea- 1 See § 212 herein,
bees of the World, 25 S. Dak. 183.
126 N. W. 259.
3165
§ 1931 JOYCE ON INSURANCE
which was never contemplated, but it is their duty to enforce and
carry out the one already made;2 (5) Forfeitures are not favored,
and in cases where construction is necessary the policy should be
liberally construed in favor of assured and indemnity; nor can the
rule requiring good faith be ignored.8 Accordingly it is held that
whether a contract is entire or severable is a question of intention
to be determined from the language employed by the parties in
the light of all the circumstances surrounding them at the time
they contraeted ; and in case of any uncertainty or ambiguity the
contract should be most strongly interpreted against insurer.4
Again, if a policy of fire insurance covers several items, and there is
a breach of a condition subsequent as to one of them, it does not
necessarily follow that the policy is avoided as to all. The nature
and character of the condition and the purpose to be accomplished,
as well as the equity of the case, are to be considered. If nothing
but injustice can be accomplished by the enforcement of such
condition it cannot be presumed that the parties contracted with
that intention as to that particular item insured.5
(b) Effect of policy stipulations as evidencing intent that risk
be indivisible. Under a Maryland decision it was stipulated that
"this policy shall become null and void, and such failure shall
constitute a perpetual bar to any recovery thereon," and this, in
conjunction with the fact that the consideration was entire, was
deemed an important factor in determining that a contract was
indivisible when the policy was on stock and fixtures so that a
failure to comply with a stipulation as to the stock voided the policy
in its entirety.6 If furniture is insured for a certain sum and it
is avoided as to part by breach of conditions as to title and encum-
brances on the property, and false swearing respecting them under
a provision that "this entire policy shall be void" under certain
conditions including those of encumbrances on the property, or
lack of sole ownership, or false swearing by the insured.7 In
Ohio if a policy is issued insuring for an entire sum several articles,
but for a separate valuation in each class, with a condition that "this
2 See § 21 n herein. 6 Joffe & Mankowitz v. Niagara
3 See §§ 220 et seq., 222e herein. Fire his. Co. 116 Md. 155, 51 L.R.A.
4Goorberg v. Western Assur. Co. (N.S.) 1047n, 81 Atl. 281, 41 Ins.
150 Cal. 510, 10 L.R.A. (N.S.) 876, L. J. 108.
119 Am. St. Rep. 24C, 11 Ann. Cas. 7 Dumas v. Northwestern National
801, 89 Pac. 130. Ins. Co. 12 App. D. C. 245, 40
See also Farmers' & Merchants' L.R.A. 358.
Ins. Co. v. Dabney, 62 Neb. 213, 86 See Hall v. Western Underwriters
N. W. 1070. Assoc. 106 Mo. App. 476, 81 S. W.
5 Hanover Fire Ins. Co. v. Craw- 227, noted with others under subd.
ford, 121 Ala. 258, 77 Am. St. Rep. (f) this section.
55, 25 So. 912.
3166
REPRESENTATIONS AND .M I Si; KIM," KSK STATIONS § 1931
entire policy shall be void if the insured has concealed or mis-
represented," etc., "any material fael or circumstance concerning
this insurance or the subject thereof" and insured's interest as to
one of such articles is not truly stated the policy is wholly void.8
In a California case where the contract was held indivisible by
reason of the risk on both classes of property being entire, in
view of the moral hazard and identity of risk, or of the effect on
the whole property of an increase of risk in any one part, the
court expressly disclaims any consideration of the policy stipula-
tions that "this entire policy shall be void if," etc.9
Under an Oklahoma decision a policy on a building and the
furniture, fixtures, counters, etc., and a stock of merchandise there-
in, which describes the building and its contents separately, and
apportions the insurance between the building, the fixtures, and
the merchandise, specifying a certain amount for each, is not
avoided as to the insurance on the building and fixtures by a breach
of a condition in the policy requiring the insured to take an
inventory of the stock at stated intervals, to keep a set of books,
and to keep such inventory and books in a fireproof safe when the
building is not open for business or in some place not exposed
to fire which would ignite or destroy the building, and providing
that the entire policy shall become null and void for failure to
comply therewith.10 Tn Missouri, it is held that a breach of
condition as to part of the property which is subject to a policy
of insurance by a change in the title thereto does nol avoid the
whole policy, though it contains a condition that the entire policy
shall become void if any change takes place in the interest, title,
or possession of the subject of insurance.11 So in New York the
rule in that state that property is severable, as stated below, is not
changed even though the premium for the aggregate amount is
paid in gross, and notwithstanding the provision that the entire
policy shall be void in case of a breach.12 Under a Texas decision
a policy of insurance on a building and various articles of personal
property therein, separately valued, is not forfeited as to the per-
sonal property by virtue of a lack of title to the land, under a
8 Oermania Fire Ins. Co. v. Sehild, u Trabue v. Dwelling House Ins.
69 Ohio St. 136, 100 Am. St. Rep. Co. 121 Mo. 75, 23 L.R.A. 719, 42
663, 68 N. E. 706, 33 Ins. L. J. 60. Am. St. Rep. 523, 25 S. W. S48.
9 Goorbero; v. Western Assur. Co. 12 Donley v. Glens Falls Ins. Co.
150 Cal. 510, 10 L.R.A.(N.S.) 876, 184 N. Y. 107, 6 Ann. Cas. 8, ft
119 Am. St. Rep. 246, 11 Ann. Cas. N. E. 914. 35 Ins. L. J. 232. rev'g
801, 89 Pac. 130, 37 Ins. L. J. 738. 91 N. Y. Supp. 302, 100 App. Div.
10 Miller v. Delaware Ins. Co. 14 69, considered under subd. (1) this
Okla. 81, 65 L.R.A. 173, 75 Pae. section.
1121.
3167
§ 1931 JOYCE OX INSURANCE
provision that the entire policy shall be void if the "subject of
insurance be a building on ground not owned by the insured in
fee simple," since the building is not alone the subject of insur-
ance.13 It is decided in Wesl Virginia that where an insurance
policy is issued covering different classes of property, each insured
for a stated amount, and there is a breach of a condition or war-
ranty respecting one class not affecting the risk as to others, the
contracl should not be considered as entire, but as severable, and
a recovery allowed on account of the property not affected by the
breach, aotwithstanding the policy stipulates thai it shall he void,
and no action brought on it when any one of its conditions or
warranties are broken, provided the insured has committed no
fraud and no act prohibited by public policy is involved.14
(c) Law of place. Another point involved is that of the law of
place; and it is held that if a case is merely brought into the
courts of a state for the purposes of suit and the contract is made
in a foreign state and the loss occurs there the question of divisi-
bility of the contract, and the construction of the iron safe clause
in connection therewith, must depend upon the laws of the foreign
state, holding such contracts not to be divisible, contrary to the
decisions of the courts of the state wherein the suit has been
brought.15
(d) Controlling statutes. Another controlling factor is that of
the effect of statutes, for, as we stated at the outset, the force and
effect of statutes cannot be ignored. Accordingly under a North
Dakota decision whatever may have been the law prior thereto
a special statute makes the contract in certain cases divisible by
providing that: "The procurement of any other contract of
insurance upon or the incumbrance of one or more of the several
distinct things insured by one policy does not render void any
insurance upon the things not covered by such other contract of
13 Bills v. Hibernia Ins. Co. 87 L.R.A.(N.S.) 471, 44 So. 162, 36
Tex. 547, 29 L.R.A. 700, 29 S. W. Ins. L. J. 936, wherein one of the
1063. policies was held not invalidated as
14 Fisher v. Sim Ins. Co. of Lon- to that part of it which covered fix-
don, 74 W. Va. 694, L.R.A.1915C, tures in a store, but only to the ex-
619, 83 S. E. 729. tent that it covered the stock of
15iEtna Ins. Co. v. Mount, 90 goods; a case also of breach of iron-
Miss. 642, 15 L.R.A.(N.S.) 471, 45 safe and bookkeeping clause, and
So. 835, 37 Ins. L. J. 382 (referring stipulation for return of unearned
to Si. Landry Wholesale Mercantile premium. See §§ 225 et seq., 1916
Co. v. New Hampshire Fire Ins. Co. (c), 1916 (d) herein.
114 La. 146, 38 So. 87) sustaining As to iron-safe, etc., clause, see
suggestion of error on this point §§ 2063 et seq. herein.
upon reconsideration of 2Etna Ins. Premium returnable when risk di-
Co. v. Mount, 90 Miss. 642, 15 visible, see § 1421 herein.
3168
REPRESENTATIONS AND MISREPRESENTATIONS § 1931
insurance or incumbrance; but in case of Loss or damage such an
amount shall be deducted from the insurance as the value of the
property so encumbered or doubly insured bears to the value of
all the property covered by the policy. Any agreemenl made to
waive the provisions of this or the preceding sections shall be void."
This statute is applied to policies in the standard form covering
insured's banking building and its contents stipulating among
other things to the effecl thai the policies should be void it' addi-
tional insurance was effected upon the property without insurer's
consi nt endorsed upon the policy or if the hazard be increased, etc. ;
and it was held that the policy musl be treated as two separate
and distinct policies, one on the building and the other on the
personal property and fixtures, and a breach of condition- subse-
quenl which rendered the insurance void as to one did not affed
the other. There was. however, another obstacle which independ-
ently of the above consideration prevented plaintiffs' recovery for
the personal property loss.16 In a Delaware case where a valued
policy statute is confined to realty a forfeiture for placing subse-
quent insurance of a higher value upon the property, the placing
upon personalty of separate insurance in a specified amount, does
not forfeit a policy covering both realty and personalty. This
case, however, although bearing upon the point of severability is
not a clean cut authority further than as above stated for the real
decision was as to the applicability of the statute rather than the
question of divisibility of the contract. It might, however, be
argued that in applying the statute the court recognized that the
contract was separable.17 In Missouri, under a three-fourths value
statute, where different kinds of personal property are insured at
a gross premium for a lump sum, but divided according to said
classes of property, the contract is divisible and the three-fourths
value is applicable to each class with reference to the value in thai
particular class.18 But a policy covering a building and contents
has been held void in its entirety by fraudulent misrepresentations
as to value of the personalty in proofs of loss, contrary to statutory
provisions.19 And the limited powers of the insurer under its
16 First National Bank of Nome v. 18 Crossan v. Pennsylvania Fire
German American Ins. Co. 23 N. Ins. Co. 133 Mo. App. 537, 113 S.
Dak. 139, 131 N. W. 873, 11 Ins. L. W. 701; Rev. Stat. 7979; Ann. Stat.
J. 899; Rev. Code 1905, sec. 5909. 190(5, p. 3791.
As to misrepresentations and war- As to valued policy laws: three-
ranties under statutes generally, see fourths value, see § 163b herein.
§ 1916 herein. 19 Harris v. Waterloo Mutual Fire
17 Thurber v. Roval Ins. Co. 1 Ins. Co. 10 Out. Rep. 718.
Marv. (Del.) 251, 40 Atl. 1111; Del.
act March 29. 1889.
Jovce Ins. Vol. III.— 199. 3169
§ 1931 JOYCE ON INSURANCE
statute of incorporation has been unsuccessfully urged against the
severability of a contract insuring both real and personal property.20
( c ) llcnlty and persoiwlty: different classes: generally. In cer-
tain cases of insurance upon different classes of property, such as
real and personal, the risk has been held entire, and it has been
decided that a representation which is false as to part of the prop-
erty avoids the entire contract, even though there be a separate
valuation.1 So it is held in Alabama that an insurance on per-
sonal property is avoided where the policy is void, as to the build-
ing in which the personal property is situated, on account of mis-
representations.2 Under a Wisconsin decision a policy upon a
quantity of cranberries insured for a gross sum is indivisible; and
a breach of a condition against change of possession, as to part of
the cranberries, will void the policy as to the whole.3
Under a Federal Supreme Court decision a policy which insured
separately a building and a stock in trade contained therein, for
distinct and different amounts is not avoided as respects the insur-
ance on the building by a change in the ownership of such stock
in trade without notice to the insurance company, although the
policy provides that it shall cease to be in force as to any property
thereby insured which shall pass from the insured to any other
person otherwise than by due operation of law, unless notice thereof
be given to the company.4 In a case in the appellate court of Indi-
ana a policy insuring a house for four hundred and fifty dollars,
and the contents thereof for one hundred and fifty dollars, is
held to be a divisible contract.5 Under a Missouri decision the
separation of property into distinct classes insuring each in a speci-
fied amount makes the contract divisible; that is, each class con-
stitutes a separate contract the breach of which as to that class
does not necessarily avoid the insurance as to the others. Such
separate valuations cannot be ignored by considering the insurance
as upon all the property as a unit.6 In another case in that state
it is held that a breach of condition as to part of the property,
which is a subject of insurance, by a change in the title thereto
20 Kins: v. Tioga County Patrons' 8 Carey v. German American Ins.
Fire Relief Assoc. 54 N. Y. Supp. Co. 84 Wis. 80, 20 L.R.A. 267, 36
1057, 35 App. Div. 58. Am. St. Rep. 907, 54 N. W. 18.
1 Schumitsch v. American Ins. Co. 4 Roval Ins Co. Martin, 192 U. S.
48 Wis. 26; Smith v. Empire Ins. 149, 48 L. ed. 385, 24 Sup. Ct. 247.
Co. 25 Barb. (N. Y.) 497; overrul- * Continental Ins. Co. v. Chew, 11
ing Trench v. Chinango County Mut. Ind. App. 330, 54 Am. St. Rep. 506,
Ins. Co. 7 Hill (N. Y.) 1225. See 38 N. E. 417.
contra, N. Y. cases noted below. 6 Fager v. Commercial Ins. Co. 189
2 Western Assurance Co. v. Stod- Mo. App. 464, 176 S. W. 1064.
dard, 88 Ala. 606, 7 So. 379.
3170
REPRESENTATIONS AND MISREPRESENTATIONS § 1031
does not avoid the whole policy.7 It is decided in Nebraska thai
when an insurance policy covers a dwelling and various classes of
personal property, describing them separately, and specifies separate
and different amounts on the dwelling and each kind of personalty ,
the execution of a mortgage on the real estate, in violation of a
condition against subsequent encumbrance on any of the property
insured, is no defense to an action for the loss of the personalty
not encumbered.8 Under an Ohio decision a policy for $200
on a storehouse and $3,800 on goods therein, is so (;w severable
that a forfeiture as to the building by breach of a condition as
to the title to the land will not defeat the insurance on the goods.9
Again, in North Carolina, when a policy of insurance classifies
and specifies numerous items of property and the sums of money
for which they are severally insured, the contract is not single,
and the insured may sue and recover for loss or damage to any
of the several items, although he alleges a total loss of the properly
of the insured.10 In Virginia, it is held that when a policy of
lire insurance covering sixteen tenement houses, with a separate
valuation on each, provides that if the premises remain unoccupied
for twenty days without the consent of the insurer, the policy shall
he void, no recovery can be had, in case of a total loss, for such
of the houses as have remained vacant beyond twenty days without
the insurer's consent after the insurance has attached; nor is the
condition waived by the insurer because its issuance was at the
time when the entire premises were unoccupied.11
But even in these cases there are other elements which must
be considered, as in Wisconsin where a breach of conditions of a
policy, covering different classes of personal property, as to subse-
quent encumbrances on pari thereof invalidates the whole contract
where insured claims payment for loss of mortgaged property.12
(f) Effect of insurer being induced to assume t ither or both risks:
fraud, illegality, public policy, etc., as factors. In Michigan, it is
held that a policy upon real and personal property is not a divisible
contract, part of which may remain in force though the rest be
invalid, where it is not perfectly clear that the insurer would not
7Trabue v. Dwelling-house Ins. 10 Pioneer Manufacturing Co. v.
Co 121 Mo 75, 42 Am. St. Rep. Phoenix Assurance Co. 110 N. Car.
523, 23 L.R.A. 719, 25 S. W. 848. 176, 28 Am. St. Rep. 673, 14 S. E.
8 German Ins. Co. v. Fairbank, 32 731. .„.,.„
Neb. 750, 29 Am. St. Rep. 459, 49 u Connecticut I ire Ins. Co. v.Til-
jj \ yn ley, 88 Va. 1024, 29 Am. St. Rep.
9 Coleman v. New Orleans Ins. Co. 770, 14 S. E. 851, 21 Ins. L. J. 558.
49 Ohio St. 310, 16 L.R.A. 174, 31 » Schumitsch v. American Ins.
N E 979 Co. 48 Wis. 26, 3 N. W. 95.
3171
§ 1931 JOYCE ON INSURANCE
have assumed both risks separately.13 So under an Ohio decision
a contracl of insurance of two or more kinds of property, which
are specifically appraised and valued in the policy, will be deemed
severable and not entire, unless there is something in the terms
or nature of the particular contract, or in the circumstances of
the case, or in the nature of the different subjects of insurance,
from which it may be inferred that the insurer would not have
been likely to have assumed the risk on one of several of them,
unless induced by the advantage and profit of having a risk at all.
Accordingly, although there may have been some conduct of the
insured as to some of the property not evil in itself, but working
a breach of a condition in its letter, as is instanced by an innocent
and unintentional concealment regarding the title by which the
insured holds his land, the effect of that" breach may be confined
to the insurance upon that property, and the contract as to that
held void, and as to the other subjects held valid.14 It is also held
in Missouri that assured can recover the value of personalty insured
though there was a false warranty as to encumbrances on the realty
covered by the same policy, which was therefore void as to the realty
where .the personalty was separately valued and appraised, and there
was nothing to show that the representation as to encumbrances
on the realty formed any inducement to the execution of the policy
covering the personalty.15 In Oklahoma where a policy is issued
and different classes of property insured, each class being separated
from the others and insured for a specific amount, and there is a
breach of the condition of the contract as to one class of the prop-
erty insured, the contract should be considered not as one entire
in itself, hut as one which is severable and in which the separate
amounts specified may be distinguished, and a recovery had for one
or more without regard to the other items, provided that the con-
tract is not affected by any question of fraud, act condemned by
public policy, or any increase in the risk of the property insured.16
Under a Mississippi decision if a policy of insurance covers a stock
of goods, us well as store fixtures and furniture, separately valued,
13^]tna Ins. Co. v. Resh, 44 Mich. 16 Arkansas Ins. Co. v. Cox, 21
55, 38 Am. Rep. 228, G N. W. 14. Okla. 873, 20 L.R.A.(N.S.) 775, 129
See also Brown v. People's Mutual Am St. Rep. 808, 98 Pac. 5;)2, 38
Ins. Co. 11 Cush. (G5 Mass.) 280. Ins. L. J. 205, following Miller v.
14 Coleman v. New Orleans Ins. Delaware Ins. Co. 14 Okla. 81, ()•>
Co. 49 Ohio St. 310, 16 L.R.A. 174, L.R.A. 173, 75 Pac. 1121, 33 Ins. L.
:;i Am. St. Rep. 565, 31 N. E. 279. J. 503.
15 Koontz v. Hannibal Savings & See Fisher v. Sun Ins. Office, Ltd.
Ins Co. 42 Mo. 126, 97 Am. Dee. 74 W. Va. 694, LR.A.1915C, 619,
325 ; Loehner v. Home Mutual Ins. 83 S. E. 729, considered under subd.
Co. 17 Mo. 247. (b) this section.
3172
REPRESENTATIONS AND MISREPRESENTATIONS § 193]
an "iron safe" clause which requires the books of accounl and lasl
inventory of the business to be kepi in a fireproof safe does no1
apply to the furniture and fixtures, but has reference only to such
articles of merchandise as constitute the stock in trade. Such a
contract is therefore divisible, and, in the absence of fraud, is
good as to the furniture and -fixtures, although it may be avoided
as to the goods by failure to observe such clause. A case of this
character differs from those in which any recovery for any pari
of the sum insured has been precluded because of misrepresentations
or fraud <>f insured." In Kentucky, where a house and goods are
insured for separate sums, though the insurance on the house may
be void, an incorrect description of the interest of the insured will
not vitiate the insurance on the goods in the absence of proof thai
the house was insured for a fraudulent purpose, or that the incor-
rect description of the interesl of the insured in the house induced
the insurer to insure the goods.18
But a policy which is founded upon any illegality in which one
of the owners participates is void as to all. for the contract is
not in this respect divisible so as to be good in pari and had in
part.19 So wilful fraud and wilful false swearing will preclude
any reliance upon the right of recovery even though the contract
is divisible.20
(g) Subs( '/"< nt contract as to personalty as part of realty policy :
contract severable. If real property is insured and thereafter a
separate contract which is really an independent insurance of
personalty is evidenced by paper attached to the original policy,
a breach of condition as to sole ownership of the realty will not
invalidate the contract as to the personal property.21
(10 Preliminary statement concerning rules as to entirety of
premium and entirety of risk. The different rules asserted in the
Nebraska, Arkansas, and Indiana decisions, as followed respectively
in other jurisdictions, and which were slated in the first edition
of this treatise, and are restated here, remain unchanged except
to the extent of controlling statutes, and the conflict of authority
is still irreconcilable. These rules are: (1) that the contract is
divisible even though the premium is in gross or entire: (2)
"Mitchell v. Mississippi Home 20 Hall v. Western Underwriters
Ins. Co. 72 Miss. 53, 48 Am. St. Rep. Assoc 106 Mo. App. 476. 81 S. W.
535, 18 So. 86. 227. See Fowler v. Phoenix Ins. Co.
"Phoenix Ins. Co. v. Lawrence. I 35 Oreg. 559, 57 Pae. 421; Home
Met. (lit Kv.) 9, 81 Am Dec. 521. Ins. Co. v. Connelly, 104 Tenn. 93,
19 Clark v. Protection Ins. Co. 1 •">(> S. W. 828.
Story (U. S. C. C.) 109, Fed. Cas. "Continental Ins. Co. v. Cardner,
No. 2.s:r_\ See §§ 2253-56 herein, 23 Ky. L. Rep. 335, 62 S. W. S86.
"Alienation."
3173
§ 1931 JOYCE ON INSURANCE
decisions contra; and (3) the rule under which the contract is
entire, (a) if both the consideration and the risk are indivisible,
(b) where the risks are so interdependent that the risk on one
cannot be affected without affecting all the property, and (c) contra,
where the risks arc not so interdependent. These respective rules
appear more fully below.
(i) Rule in Nebraska: gross premium paid: contract divisible.
In Nebraska, a fire insurance policy for which a gross premium
is paid and which covers real estate and various classes of personal
property, the latter not specifically named, is not entire;1 and
defenses set up with regard to incumbrances upon the real estate
and those upon the personalty must be considered separately.2
So a policy on all the personal property of the assured, without
specifically naming it, is avoided by a transfer of the legal title
to the insured property by mortgage or sale, so far only as that
particular property is concerned, during the existence of the title
in the mortgagee, and not as to property which had been mortgaged
during the existence of the policy, which mortgage had been paid
before the fire.3 Again, where a separate valuation was put upon
the dwelling-house, household furniture, and barn, and another
on live stock, the contract was held severable and not entire.4
(j) Other jurisdictions asserting same rule. In Alabama if a
policy of fire insurance is issued for a single gross premium on a
store building, stock of merchandise, and store and office furniture
and fixtures, in separate and distinct sums, and provides that
the insured shall take an inventory of stock at stated times, and
keep his books and such inventory in an iron safe, or in some
place not exposed to fire likely to destroy the building insured,
and that a failure to observe this condition shall avoid the policy,
such condition does not apply to the building and fixtures so that
a bicach of it detents a recovery for their loss, in case the whole of
the property is destroyed by fire.5 In Florida, where an insurance
policy covers a stated amount of insurance on merchandise in a
certain building and another stated amount on the building, the
contract may be divisible, even though the premium is paid in
gross, and the policy provides that in case of breach by the insured
the entire policy shall be void, where the breach by the insured
1 State Ins. Co. v. Schreek, 27 Neb. 4 Phenix Ins. Co. v. Grimes, 33
V_>7, 6 L.R.A. 524, 20 Am. St Rep. Neb. 340, 50 N. W. 168.
696, 43 N. W. 340. 5 Hanover Fire Ins. Co. v. Craw-
2 Johansen v. Home Fire Ins. Co. ford, 121 Ala. 258, 77 Am. St. Rep.
54 Neb. 548, 74 N. W. 866, 27 Ins. 55, 25 So. 912, 28 Ins. L. J. 945.
L- J. 610. As to iron-safe, etc., clause, see
3 State Ins. Co. v. Schreek, 27 Neb. §§ 2563 et seq. berein.
527, 6 L.R.A. 524, 43 N. W. 340.
3174
REPRESENTATIONS AND UIKKKI'KKSENTATIONS § 1931
does not involve fraud or misrepresentation. The court per Whit-
field, C.J., said: "While there is a diversity of judicial opinion
as to the divisibility of policies of insurance, the doctrine seems to
be that, in the absence of misrepresentations and fraud where a fire
insurance policy covers different classes of property, each of which
is separately valued and is insured for a distinct amount, the con-
tract is severable, and a breach of the contract of insurance that
relates to and directly a fleets only one of the classes of the property
insured, does not invalidate the policy as to the other class of
property, unless it appears that such was the intention of the parties ;
and an intent that the policy shall be indivisible is not shown by
the facts that the premium for all the classes of property insured
is payable or paid in gross, and the policy provides that the entire
policy shall be void if the contract is violated in any one of
several stated particulars by the insured."6 The above language
of the court is approved and the rule stated therein is followed
in another case in that state where the consideration or premium
was entire and the insurance was for a gross sum upon four
separate buildings each specified as insured for a certain sum, and
the contract wras held divisible and a judgment for the plaintiff
was affirmed.7 In Kansas, if insurance is effected upon real and
personal property by a policy showing the amount for which each
is insured, and that the premium is a gross sum, the contract is
divisible, so that mortgaging the personal property contrary to the
policy stipulations does not avoid the policy as to the real estate.8
In a Michigan case the premium paid was one sum not divided as
to real estate or personal and the property covered was a farm,
dwelling-house and other buildings such as barns, etc., without
regard to their distance from each other, household furniture, live
stock and other personalty contained in the respective buildings in
accordance with a schedule specifying each kind of property cov-
ered with a specified sum on each with an added total amount of
the several items. The live stock wTas also insured against loss
or damage by fire or lightning while anywhere within certain
counties. It was held that the contract was divisible and was
not avoided as to the personalty not in the buildings by encumber-
ing the real estate nor by false representations as to chimneys.9
6 Hartford Fire Ins. Co. v. Hollis, Kan. 488, 30 Am. St. Rep. 313, 29
64 Fla. 89, 59 So. 785, 41 Ins. L. J. Pac. 586, 21 Ins. L. J. 206.
1861, s. c. 58 Fla. 268, 50 So. 985. 9 Benham v. Farmers' Mutual Fire
7 National Union Fire Ins. Co. v. Ins. Co. 165 Mich. 406, L.R.A.1915D,
Cubberlv, 68 Fla. 253, 67 So. 133, 736, 87 Ann. Cas. 1912C, 983, 131
45 Ins. L. J. 471. N. YV. 87, 40 Ins. L. J. 1450.
8 German Ins. Co. v. York, 48
3175
§ 1931 JOYCE ON INSURANCE
Under a Montana decision a policy covering several kinds of prop-
erty, apportioning a specific sum to each kind, and conditioned to
bo \(ii«l if a specified class be or become mortgage, is not invalidated
as to other property covered by the policy by a mortgage upon
property of the class designated.10 In Ohio, where a policy insured
goods and a storehouse for specified sums each, it was decided that
the contract was severable.11 In Texas, if a building and certain
articles of personalty therein are separately valued and insured for
specific sums, and the premium paid for the insurance is a gross
sum, the policy is divisible.12 Under a Wisconsin decision a con-
tract of insurance on houses several miles apart, which insures
each house for a specified sum, is divisible, although the premium
is stated as a gross sum, where there is nothing to show any
dill'erencc between the houses in class or rates. A transfer of
one without the consent of the insurer, avoiding the policy as to
that, does not make it void as to the other.13 It is also decided
in that state that a clause making the "entire policy void in case
of breach of condition in any respect" will not make the policy
indivisible so as to preclude any recovery on it, although but one
premium is paid, in case it is, for convenience, made to cover differ-
ent kinds of property which are separately valued, and a condition
is broken as to one kind.14
(k) Other jurisdictions asserting contrary rule, that contract
entire. In Arkansas, the rule is applied to insurance policies that
10 "Wright v. London Fire Ins. thins: in the terms or nature of the
Assoc. 12 Mont. 474, 19 L.R.A. 211, particular contract, or in the circum-
31 Pac. 87. stances of the case, or in the nature
11 Coleman v. New Orleans Ins. of the different subjects of insurance
Co. 49 Ohio St. 310, 34 Am. St. Rep. from which it may be inferred that
565, 16 L.R.A. 174, 31 N. E. 279. the insurer would not have been likely
And it was declared in this case that to have assumed the risk on one of
the principle by winch the courts several of them, unless induced by
arc governed when they declare that the advantage and profit of having
a contract about several things, but <i risk on all. Hence the effect of
with a single consideration in gross, that breach may be confined to the
is entire and not severable, is that insurance upon that property, and
it is impossible to affirm that the the contract as to that held void, and
party making the contract would as to the other subjects held valid.
have consented to do so, unless he 12 Bills v. Hibernia Tns. Co. 87
had supposed that the rights to be Tex. 547, 47 Am. St. Rep. 121, 29
acquired thereunder would extend L.R.A. 706, 29 S. W. 1063.
to all the things in question, and that 13 Loomis v. Rockford Ins. Co. 77
a contract of insurance of two or Wis. 87, 8 L.R.A. 834, 45 N. W. 813.
more kinds of property, which are 14 Trabue v. Dwelling House Ins.
specifically appraised and valued in Co. 121 Mo. 75, 23 L.R.A. 719, 25
the policy, will be deemed severable S. W. 848. See subd. (b) this sec-
and not entire, unless there is some- tion.
3176
REPRESENTATIONS AND MISKFI'KKSKNTA'I 1< >NS S 1931
where the amounl of insurance is apportioned to distinct items, bul
the premium paid is gross, the contracl is entire." So in another
case in thai state the insurance was for a lump sum premium with
specific amounts each, on merchandise and household goods. In-
sured occupied the same building in which the goods were con-
tained; there was also an iron-safe, inventory clause. The court
instructed the jury that the insurance was divisible, but it was
held thai "conceding that the contracl of insurance was indivisible
under the doctrine announced" in prior decisions the instruction
was not prejudicial as there was no breach of the iron-safe clause
condition. This case, therefore, is only valuable upon the point
under consideration to the extent only of what is implied in the
above quotation from the opinion thereon and the reference to
prior decisions with whatever weight said reference carries.16 Under
15 McQueeny v. Phoenix Ins. Co.
52 Ark. 257, 5 L.H.A. 744, 20 Am.
St. Rep. 179. In this case the court,
per Hemingway, J., cites as holding
generally that a contract is entire
when a gross sum is paid for the
premium.
Illinois. — Peoria Marine & Fire
Ins. Co. v. Anapow, 51 111. 283.
Kentucky. — Phoenix Ins. Co. v.
Lawrence, 4 Met. (61 Ky.) 9, 81 Am.
Dec. 521.
Maine. — Day v. Charter Oak Ins.
Co. 51 Me. 91*; Richardson v. Marine
Ins. Co. 46 Me. 394, 74 Am. Dec.
459; Lovejoy v. Augusta, 45 Me.
472.
Maryland. — Bowman v. Franklin
Ins. Co. 40 Md. 620; Associated
Firemen's Ins. Co. v. Assum, 5 Md.
165.
Massachusetts. — Friesmuth v. Aga-
wam Mutual Fire Ins. Co. 10 Cusb.
(64 Mass.) 587; Kimball v. Howard
Ins. Co. 8 Gray (74 Mass.) 33; Miner
v. Bradley, 22 Pick. (39 Mass.) 457.
Michigan.— iEtna Ins. Co. v. lush,
1 1 Mich. 55, 38 Am. Rep. 228, 6 N.
W. 114.
Minnesota. — Platb v. Minnesota
Farmers' Mutual Fire Ins. Co. 23
Minn. 479. 23 Am. Rep. 697.
Missouri. Koontz v. Hannibal
Savings & Ins. Co. 42 Mo. 126, 97
Am. Dec. 325 ; Loehner v. Home Mu-
tual Ins. Co. 19 Mo. 628.
31
Nebraska. — State Ins. Co. of Des
Moines v. Schreck, 27 Neb. 527, 6
L.R.A. 524, 20 Am. St. Rep. 696, 13
N. W. 340.
New Hampshire. — Baldwin v.
Hart ton! Fire Ins. Co. 60 N. II. 422,
49 Am. Rep. 324.
New York. — Smith v. Empire Ins.
Co. 25 Barb. (N. Y.) 497; contra,
Merrill v. Agricultural Ins. Co. 73
N. Y. 462, 29 Am. Rep. 184.
Pennsylvania. McClurg v. Priei .
59 Pa. St. 420, 98 Am.' Dec. 356;
Gottsman v. Pennsylvania Ins. Co.
56 Pa. St. 210, 94 Am. Dec. 55; Fire
Assoc, v. Williams, m. 26 Pa. St. L96.
Vermont. — McGowen v. People's
Mutual Fire Ins. Co. 54 Vt. 211, 41
Am. Rep. 843.
Virginia. — Moore v. Virginia Fire
Ins. Co. 28 Gratt. (Va.) 508,26 Am.
Rep. 373.
West Yirqinia. — Bryan v. Peabody
Ins. Co. s W. Va. 605.
Wisconsin.- Schumitsch v. Ameri-
can Ins. Co. of Chicago, 48 Wis. 26;
Hininan V. Hartford Ins. Co. 36 Wis.
L59.
England. — Johnson v. Johnson. 3
Bos. & P. 162.
Citing also 2 Parsons on Con-
tracts, 519; May on Ins. sees. 189,
277; 1 Wood on Ins. 384.
16 Capital Fire Ins. Co. v. Kauf-
man, 91 Ark. 310, 121 S. W. 289, 38
Ins. L. J. 1058, citing Planter's Ins.
77
§ 1931 JOYCE ON INSURANCE
a California decision a breach of warranty of title in an insurance
policy with respect to the building will avoid the insurance on the
contents, although the building and contents were insured for sepa-
rate amounts for an entire premium; but this case turned upon
the point that the risk upon both items is entire, and it was expressly-
disclosed that the mere fact that the premium was entire could
affect the contract ; we shall, however, consider this case more fully
Later on under this section.17 Under a decision in Connecticut a
policy which mentions a gross sum for which the buildings and
their contents are insured, and specifies separately the amount of
each, is based on a single consideration, showing an agreement only
to insure property belonging to one person, or of one interest; and
therefore the owner of the property cannot recover, after the rendi-
tion of a decree of strict foreclosure against him on a mortgage
given on the premises, and after the expiration of the period of
redemption, for personalty contained in the buildings on the prop-
erty.18 In Georgia it is also held that a policy, the consideration
for which is a premium payable in a gross sum entire and indi-
visible, though different classes of property are insured in separate
amounts by the contract, and this applies where a building and
merchandise therein are covered so that a breach of an inventory
avoids both the insurance on the building and on said goods.19
Under a Maine decision a policy is void as to goods as well as store,
where it is upon a store and goods, and the property was repre-
sented to be unencumbered, when in fact a mortgage existed on
the store ; the contract being entire, and the encumbrance affecting
the lien for the premium given.20 So where a policy in a mutual
company was issued for a gross sum premium note for a certain
amount upon a building and contents, which is void as to building
because of existence of additional insurance contrary to its pro-
visions, is void also as to the contents.1 In Maryland a policy on
stock and fixtures is indivisible, so that if it is rendered void as
to the stock by the failure to keep the books in a place not exposed
Co. v. Llovd, 71 Ark. 292, 75 S. W. Fire Ins. Co. 57 Conn. .135, 4 L.R.A.
725; McQueenv v. Phoenix Ins. Co. 759, 17 Atl. 324.
52 Ark. 257, 5 L.R.A. 744, 20 Am. 19 Southern Fire Ins. Co. v.
St. Rep. 179, 12 S. W. 498. Knight, 111 Ga. 622, 52 L.R.A. 70,
See Phoenix Ins. Co. v. Public 36 S. E. 821.
Parks Amusement Co. 63 Ark. 187, As to entirety of contract and ver-
37 S. W. 959. diet, see Georgia Co-operative Fire
17 Goorberg v. Western Assur. Co. Assoc, v. Harris, 124 Ga. 114, 52 S.
150 Cat. 510, 10 L.R.A. (N.S.) 876, E. 88.
110 Am. St. Rep. 246. 11 Ann. Cas. 20 Gould v. Mutual Fire Ins. Co.
801, 89 Pac. 130, 37 Ins. L. J. 738. 47 Me. 403, 74 Am. Rep. 697.
See subd. (m) under this section. 1 Carleton v. Patrons Androscog-
18 Essex Savings Bank v. Meriden gin Mutual Fire Ins. Co. 109 Me. 70,
3178
REPRESENTATIONS AND MISREPRESENTATIONS § 1931
to fire which might destroy the stock, it is void as to the fixtures
also. In this case the consideration was not only entire but the
stipulation as to the forfeiture was an entirety: "This policy
shall become null and void, and such failure shall constitute a
perpetual bar to any recovery thereon." 2 It is also decided in
Massachusetts that a policy of insurance against loss by fire of
buildings described as a dwelling-house and a -tabic situate near it,
for which but one premium is paid, though the amount for which
each building is insured is separately stated, is an entirety, and
if void in part is void altogether. Accordingly, if the house is not a
dwelling, but a hotel, and the insurance of it is void on that ground,
the policy is also void as to the stable.3 It is also held in Minnesota
that when the consideration for a policy of insurance against fire is
single, and the amount assured a gross sum, the contract is entire,
although the sum assured is apportioned among several specific
items of the property covered; and therefore a breach of the con-
ditions of the policy as to one item avoids the whole policy.4 In a
North Carolina case, to the fact that the premium was entire the
court added the fact of identity of risk and held that the contract
was indivisible where the property covered was a storehouse and
goods, so that a failure to comply with the iron-safe clause voided
the whole contract.6 In North Dakota the court favors the con-
struction that the contract is indivisible where the policy covers a
building, furniture, and fixtures contained therein for a lump
consideration as premium, although the amount of insurance on
each class is separately stated, so that anything rendering the
policy void as to the building would also render it void in its
entirety. But, as above stated under this section, a special statute
settles the question to the contrary.6 In Wisconsin a policy of
39 L.R.A.(N.S.) 951, 82 Atl. 649, Assur. Co. 162 Mass. 29, 44 Am. St.
41 Ins. L. J. 1067 (there was no dis- Rep. 323, 37 N. E. 672.
cussion but court said that it was 4 Plath v. Minnesota Farmers'
"familiar law that such a contract Mutual Fire Ins. Assoc. 23 Minn,
of insurance is entire"). 479, 23 Am. Rep. 6f)<. See Gould
2Joffe & Mankowitz v. Niagara v. Mutual Fire Ins. Co. 4, Mo. 403,
Fire Ins. Co. 116 Md. 155, 51 L.R.A. 74 Am. Dec. 494; Lovejoy v.
(N.S.) 1047n, 81 Atl. 281, 41 Ins. Augusta Mutual Fire Ins. Co. 45 M. .
L. J. 108, relying upon Bowman v. 472.
Franklin Fire Ins. Co. 40 Md. 620 ; 5 Coggina v. ^tna Ins. Co. 144 X.
Associated Firemen's Ins. Co. v. Car. 7, 119 Am. St. Rep. 924. 8
Assum, 5 Md. 165, and citing Norris L.R.A. (N.S.) 838, 56 S. E. 506, 36
Connecticut Fire Ins. Co. 115 Md. Ins. L. J. 354.
174, 80 Atl. 960; Agricultural Ins. 6 First National Bank of Nome v.
Co. v. Hamilton, 82 Md. 88, 30 German American Ins. Co. 23 X.
L.R.A. 633, 51 Am. St. Rep. 457, 33 Dak. 139, 42 L.R.A.(N.S.) 575, 134
Atl. 429. N. W. 873, 41 Ins. L. J. 899.
3 Thomas v. Commercial Union
3179
§ 1931 JOYCE (>X INSURANCE
insurance covering several lots of personal property in the same
building and distributing the risk to each item, but providing for
the paymenl of a gross sum as premium, creates an entire, indivisible
contract.7 It' three houses, and their contents, situate on different
farms, are insured, each for a separate amount, by a policy slating
a premium as a gross sum, the contract is divisible, so that if there
is a breach of condition as to one of the houses, by its conveyance
without the assent of the insurer, the policy is not thereby avoided
as to the other houses. A recovery could be bad in all those cases
where the contract is divisible and the different properties are
insured for separate sums, and the risk upon some of the property
is noi affected by the cause which rendered the policy void in part.8
(1) New York rale. The rule declared in New York is this,
that if specific amounts or separate valuations are, by the same
policy, insured on separate items or different classes of property
the contract is severable,8 even if the premium for the aggregate
amount is paid in gross, and notwithstanding the provision that
the entire policy shall be void in case of a breach ; for the contract
being severable it constitutes in effect as many policies as there
are separately valued classes of property and the breach in ques-
tion is limited respectively thereto.10 But if real or personal prop-
7 Burr v. German Ins. Co. 84 Wis. each separately valued, are insured
76, 36 Am. St. Rep. 905, 54 N. W. for distinct amounts, even if the pre-
22. mium for the ag»i-e»ate amount is
8 Loomis v. Rockford, 77 Wis. 87, paid in gross, the contract is sever-
s L.R.A. 834, 20 Am. St. Rep. 98, ahle, and a breach of warranty as
45 X. W. 813. to one subject of insurance only does
9 Schuster v. Dutchess Countv Ins. not affect the policy as to the others,
Co. 102 N. Y. 260, 6 N. E. 406; unless it clearly appears that such
Herrman v. Adriatic Fire lus. Co. was the intention : Knowles v. Amer-
85 N. Y. 162; Merrill v. Agricultural ican Ins. Co. 66 Hun, 220; Pratl
Ins. Co. 73 N. Y. 452, 29 Am. Hep. v. Dwelling House Mutual Fire Ins.
184; Woodward v. Republic Fire Co. 130 N. Y. 206, 221; Schuster v.
tns. Co. 32 Hun (N. Y.) 365; Trench Dutchess County Ins. Co. 102 N. Y.
v. Chenango Mutual Ins. Co. 7 Hill 260; Herrman v. Adriatic Fire Ins.
(N. V.) L22. See also Baldwin v. Co. 85 N. Y. 162; Men-ill v. Agri-
Hartford Fire Tns. Co. 60 N. II. 422, cultural Tns. Co. 73 N. Y. 452; Deid-
49 Am. Rep. .324, all riled in Smith ericks v. Commercial Ins. Co. 10
v. Agricultural Ins. Co. 118 N. Y. Johns. 234; Trench v. Chenango
522, 23 N. E. 883, per Follett, C. J. County Mutual Ins. Co. 7 Hill, 122.
10 Donley v. Glens Falls Ins. Co. Some early cases holding the con-
184 N. Y. 107, 6 Ann. (as. Si, 76 X. Irary doctrine are no longer followed
E. 914, 35 Ins. [>. .1. 232, rev'- 91 in this state, and Smith v. Agricul-
N. Y. Supp. 3(12. Hid App. Div. (19. tural Ins. Co. US N. V. .".IS, relied
The court, per Vann, J., said: upon by the defendant, was dis-
"Whatever our views might be if tinguished in the Knowles Case,
the question were new, we regard it supra, because the contract provided
as settled that where, by the same that the 'entire policy and every part
policy, different classes of property, thereof should be void if the property
'3180
REPRESENTATIONS AND MISREPRESENTATIONS § 1931
erty is insured, and il clearly appears from the stipulations of the
policy thai the entire contracl and every pari of it shall be void it'
certain material fads relating to the real or persona] property or
any part of it are ool stated as required) or are misrepresented,
then the contract is entire. Tims, where the contracl stipulates
that if the real or personal property or any pari of it is encumbered,
it must be so represented, otherwise the insurance will be void, tin-
contract is not severable, and a misrepresentation of the situation
of one of the subjects will invalidate the insurance on all other
property.11 Under another decision in thai state a violation of a
stipulation as to encumbrances by affecting a chattel mortgage does
not invalidate the policy as to the property not so encumbered
where the insurance is upon the different kinds of property each
separately valued, even though the premium is entire and the
amount of the policy aggregates the sum of the different valuations :
and in such case the contract is severable.1 And where realty and
personalty are insured for one sum but are separately valued and
there is but one premium the policy is not avoided as to the per-
sonalty by a breach of warranty as to the real property.2 Under
still another decision a policy insuring a stock of goods and store
fixtures in separate amounts is a divisible contract.3 Again, under
a policy upon several distinct species of property, " each of which
insured or any part thereof was in- Moreover, the application now before
cumbered. In the Knowles Case, as us provides that the warranties there-
in the ease before us, the provision in shall be 'the same as if written on
was simply that the entire policy the face of the policy,' which indi-
should be void in case of a breach, cates an intention that they should
and the recent cases hold that this have the same effect only."
means the entire policy, so far as it u Smith v. Agricultural Ins. Co.
relates to the subject of insurance 118 N. Y. 518, 522, 29 N. Y. St. Rep.
affected by the breach, because a 810, 23 N. E. 883. The court dis-
severable policy is equivalent to as tinguishes cases of the character
many policies as there are classes of cited under the last note,
property separately valued. In other x Kiernan v. Dutchess County Mn-
words, the breach' avoids the entire tual Ins. Co. 150 N. Y. 190, 44 N. E.
policy relating to the risk to which 698.
the warranty applies. The claim of 2 King v. Tioga County Patron-'
the defendant that the warranties in Eire Relief Assoc. 54 N. Y. Supp.
the application have a different effect 1057, 3.") App. Div. 58.
from those in the body of the policy 3 Adler v. Germania Fire Ins. Co.
is not sustained by the authorities, 39 N. Y. Supp. 1070, — App. Div.
for in the Pratt Case, supra, as the — , 17 Misc. 347. See Driggs v.
appeal book shows, the application Albany Ins. Co. 10 Barb. (N. Y.)
containing the warranty broken was 440; German Ins. Co. v. Fairbank,
referred to in the policy and made 32 Neb. 750, 29 Am. St. Rep. 159,
a part thereof; yet a recovery al- 49 N. W. 711 ; Clark v. New England
though denied as to the building, was Mutual Fire Ins. Co. 0 Cush. (00
allowed as to the personal property. Mass.) 342.
"3181
§ 1931 JOYCE ON INSURANCE
is separately valued and the sum total of the valuations insured
on payment of a premium in gross, the contract is severable, and
a breach avoiding the policy as to one of the items does not affect
it as to the others, at least where there are no grounds for inferring
that the insurer would not have assumed the risk on one or several
of the subjects of insurance unless induced by the advantage of
having a risk upon all.4 So a policy upon a house for a certain
amount and upon the contents of the house for another specified
sum is a divisible contract.5
(in) Where both consideration and risk are indivisible; where
risks are interdependent; moral hazard. In Indiana, where prop-
erty covered by insurance, although consisting of separate items,
constitutes substantially one risk and is necessarily subject to
destruction by the same fire, then, even though separate amounts
of insurance are apportioned to each separate item or class of
property, if the consideration of the contract and the risk are both
indivisible, the contract must be treated as entire, and any breach
of a stipulation which renders the policy void as to a part affects
the other items in the same manner.6 Although it is also decided
in the same state that where property insured is so situated that
the risk on one item cannot be affected without affecting the risk
on the other items, the policy is to be regarded as entire and indi-
visible; but where the property is so situated that the risk on each
item is separate and distinct from the others, so that what affects
the risk on one item does not affect the risk on the others, the policy
is to be regarded as several and divisible.7 If property insured
• (Moists of several distinct items, and is so situated that the risk
on one item cannot be affected wuthout affecting the risk on the
other items, or if the various items are necessarily subject to destruc-
tion by the same conflagration and the consideration is entire, the
contract is indivisible, and the loss cannot be apportioned. The
rule is otherwise if the property is so situated that the risk on each
item is separate and distinct from the others.8 In a Federal case
4 Merrill v. Agricultural Ins. Co. 7 Pho?nix Ins. Co. v. Piekel, 119
73 N. Y. 452, 29 Am. Rep. 184. See Ind. 155, 291, 12 Am. St. Rep. 393,
als,( Pratt v. Dwelling House Mutual 21 N. E. 898. But see Phoenix Ins.
Fire Ins. Co. 130 N. Y. 206, 29 N. E. Co. v. Lorenz — Ind. App. — , 29
177, 41 N. Y. St. Rep. 303, 21 Ins. N. E. 604.
L. J. 146, rev'g 6 N. Y. Supp. 78. 8 Manchester Fire Assur. Co. v.
5 Kiernan v. Agricultural Ins. Co. Glenn, 13 Ind. App. 365, 55 Am. St.
81 Hun (N. Y.) 373, 30 N. Y. Supp. Rep. 225, 40 N. E. 926, 41 N. E.
892, 63 N. Y. St. Rep. 146. 847.
6Geiss v. Franklin Ins. Co. 123
Ind. 172, 18 Am. St. Rep. 324, 24
N. E. 99.
3182
REPKKSKNTATIONS AND MISKKI'KKSKNTATIUNS § 1931
where the insurance was for a specific sum, part of which was upon
the house and part upon the household furniture therein, the policy
was held avoided by tin- execution and delivery of a chattel mort-
gage upon the furniture on the ground that increasing the hazard
as to the furniture of necessity increased it as to the dwelling-house
for the entire property was insured as one risk and was so directly
and closely connected that a destruction of part by fire would
almost inevitably result in the destruction of the whole; that the
rule " 'void in part, void in toto' " applied; and that where the
insurance is distributed to the differenl items of insured property
the contract is indivisible if the breach of the contract as to an
item of property affects, or may be reasonably supposed to affect,
the other items, by increasing the risk thereof.9 In California a
breach of warranty of title in an insurance policy with respect to
the building, will avoid the insurance on the contents, although
building and contents were insured for separate amounts for an
entire premium, where the risk upon both classes of property is
entire. In the case so holding, stress was placed upon the point
of entirety of risk and the moral hazard, and it was expressly
declared that the mere fact that the premium was entire should
not affect the conclusion. It was also said per Sloss, J., "In the
foregoing discussion we have laid no stress on the fact that the
language of the policy is that 'this entire policy should be void
if,' etc. In most of the cases" considered in the opinion "the word
'entire' did not appear in the policy in this connection. ... In
view of our conclusion that the policy in question is, for other
reasons, an entire contract, it is not necessary in this case to express
any opinion as to the effect of the use of the word 'entire' in a
policy which in the absence of such word would be treated as
divisible." The court also considers the rules above stated to
divisibility or entirety of contract as dependent upon entirety of
the provision and also the Indiana rule given under this sub-
division.10 Entirety of premium in a policy insuring a dwelling
house and live stock as separate items, with a specified amount on
each, will not prevent the policy from being severable; but a re-
covery may be had for loss on the house, although the policy has
been avoided as to the live stock by placing encumbrance thereon,
where the property is so situated that both classes are not exposed
to the same risks.11 Although a policy placing separate valuations
upon separate subjects of insurance is ordinarily severable, it is
9MeKernan v. North River Ins. 150 Cal. 510, 10 L.R.A.(N.S.) 876,
Co. (U. S. D. C.) 206 Fed. 984, 42 119 Am. St. Rep. 240, 11 Ann. Cas.
Ins. L. J. 1617. 801, S9 Pac. 130, 37 Ins. L. J. 73S.
10 Goorberg v. Western Assur. So. " Tavlor v. Anchor Mutual Fire
31S3
§ lii.n JOYCE OX INSURANCE
ii. >i so unless the risk intended to be excluded by a violated con-
dition does not affect the item of property for the destruction of
which a recovery is sought,12 A contract of lire insurance is entire,
ami the increase of moral hazard due to the fact that the insured
does not own the land upon which the insured building stands,
affects not only the building, but the entire property, in case of
its destruction by tire.13 Where the premium paid is entire, and
every risk which can attend the one class of property also attends
the other, the same rule must be applied to both, and the breach
of condition as to one class of property precluding a recovery for
its loss also precludes a recovery on account of the property of the
other class; and this applies to a failure to comply with the iron-
sale clause.14 A policy covering a shingle mill and dry kiln,
divisible as to amounts of indemnity upon each building, is made
entirely void by the shutting down of the mill without permission,
contrary to the provisions of the policy, although shingles are still
transferred into and out of the kiln, where it is situated in such
close proximity to the mill that the shutting down of the mill
affects the risk upon the kiln.15 Though insurance is distributed
to the different items of insured property, the contract is indivisible
if its breach as to one item of the property affects, or may reasonably
be supposed to affect, the other items by increasing the risk
thereon.16
(n) Marine risks. It is held that where it does not appear that.
the various lots of goods under a marine policy were separately
insured there is no ground for the contention that a free from
particular average clause should be separately applied to each of
said lots ; that is, that there can be no recovery for a total loss of
part of the goods not separately insured.17 The valuation of lemons
in boxes at so much per box, insured as the cargo of a ship by a
Ins. Co. 116 Iowa, 625, 57 L.R.A. 15 Brehm Lumber Co. v. Svea Ins.
328, 93 Am. St. Rep. 261, 88 N. W. Co. 36 Wash. 520, 68 L.R.A. 109,
807. 79 Pac. 34.
12 Republic Countv Mutual Fire 16 Loomis v. Rockford Ins. Co. 77
Ins. Co. v. Johnson, 69 Kan. 146, Wis. 87, 8 L.R.A. 834, 20 Am. St.
105 Am. St. Rep. 157, 76 Pae. 419. Rep. 96, 45 N. W. 813.
13 Parsons, Rich & Co. v. Lane 17 California Canneries Co. v. Can-
(Lane v. Parsons, Rich & Co.; Re ton Ins. Office, Ltd. 25 Cal. App.
Millers' & Manufacturers' Ins. Co.) 303, 143 Pac. 549. 44 Ins. L. J. 685.
97 Minn. 98, 4 L.R.A. (N.S.) 231, See Woodside v. Carston Ins. Of-
106 N. W. 485. fice, Ltd. (U. S. D. C.) 84 Fed. 283,
14 Coggins v. iEtna Ins. Co. 144 modified 90 Fed. 301.
N. Car. 7, 119 Am. St. Rep. 924, 8 See §§ 2705 et seq. herein.
L.R.A. (N.S.) 839, 56 S. E. 506, 36
Ins. L. J. 354.
3184
BE PRESENTATIONS AND MISREPRESENTATIONS §§ L932, L933
single contract on the whole, doe- not make the insurance an insur-
ance on each box.18
§ 1932. Representations of third parties: parties referred to. —
It is held thai the representations of third parties cannot bind the
assured, oven though relied upoo by the insurer, where they are
nnt furnished by the assured or the party to whom the policy is
payable, and the application is not based thereon. Such answers
of third parties are no1 warranties.18 Bu1 where the insured refers
to a medical attendant to answer inquiries concerning his health,
he is responsible for the truth of his answers.20 The insured is
not bound by the oral statements of the clerk of the broker who
procured the insurance made to the agent of the company where
the application is in writing,1 and the fad that the insured has
referred to another does not excuse the material falsity of the
assured's answers, nor his neglect to make a full and true dis-
closure of material facts,2 although it is held that the assured in
such cases does not become responsible for the fraudulent misrep-
resentations of the party to whom the reference is made in the
absence of stipulations to the contrary.8
§ 1933. Representations may be changed, modified, altered or
withdrawn. — The assured may change, modify, alter or withdraw
a representation made by him at any time before the policy is
subscribed or before the contract is completed, provided in the
first case that the contract is not completed before the policy is
signed, and this change may be expressly made or impliedly arise
from a subsequent statement qualifying or controlling the first
statement; provided, however, that in those cases where the con-
tract is completed and the commencement of the risk depends upon
the present or past existence of facts stated, such facts being vital
to the risk, the contract is avoided by the substantial falsity of the
representations.4 The rule above stated differs from that of Mr.
"Hernandez v. Sun Mutual Ins. Life Assur. Co. 10 Shaw & D. (Ct.
Co. 6 Blatehf. (U. S. C. C.) 317, of Sess.) 451.
Fed. Cas. No. 6,41."). 3 Wheelton v. Hardesty, S El. & B.
"Rawls v. American Life Ins. Co. 232. 2(5 L. J. Q. B. 265.
27 X. Y. 282, 36 Barb. (N. Y.) * Edwards v. Footner, 1 Camp.
357. 530, where Lord Ellenborough says:
20 Abbott v. Howard, Hayes (Ir.) "It a representation is once made, it
381; Smith v. JEtna Life Ins. Co. 49 is to be considered as binding, unless
\. y. 211. there is evidence of its being after-
1 Dolliver v. St. Joseph Fire & ward altered or withdrawn:" Daw-
Marine Ins. Co. 131 Mass. 39. son v. Atty. 7 Fast. 36*3 : Carter v.
2 Everett v. Desborough, 5 Bins. Boehm, 3 Burr. L905, 1 W. Black.
f.n:;. :; Moore ,v l\ 190, 7 L. J. C. 593, 13 Eng. Rul. Cas. 501. "A rep-
P. 223. See Forbes v. Edinburgh resentation may be altered or with-
Joyce Ins. Vol. III.— 200. 3185
§ 1934 JOYCE ON INSURANCE
Arnould, who makes the period of withdrawal or alteration any
tin it- before the policy is signed.5 But in England, as already
noted, it was only by act of 30 Victoria, chapter 23, passed in
1867, that the slip was admissible in evidence even to show the
intentions of the parties, and therefore the reason for Mr. Arnould's
opinion is easily seen, and although Mr. Maclachlan says the
contract is so far completed when the slip is initialed that repre-
sentations made after their con in ion consent has been thus ascer-
tained and expressed, are of no effect on a policy made in accordance
with the slip, nevertheless he also says the representations of the as-
sured may be altered or withdrawn at any time before the policy is
signed; 6 the reasons probably being that there are certain additions
requisite to the actual validity of the contract after the slip is
initialed. But the reason of the rule does not obtain here.7 Under
the marine insurance act of 1906 "a representation may be with-
drawn or corrected before the contract is concluded." 8 And under
the same act "a contract of marine insurance is deemed to be con-
cluded when the proposal of the assured is accepted by the insurer,
whether the policy be then issued or not; and for the purpose of
showing when the proposal was accepted, reference may be made
to the slip or covering note or other customary memorandum of
the contract although it be unstamped." 9
§ 1934. Construction of representation. — If ^the policy refers to
the application only in stipulating that the warranties therein con-
stitute the consideration, the statement of what the insured's un-
derstanding "will extend to" is not a statement of fact, but one
of law, and does not control the legal construction of the policy.10
The express warranties of the policy are not limited or defeated by
the stipulation in the contract that the application is a part there-
of, and that any false or untrue answers or statements will, so
drawn before the insurance is ef- 1909) p. 404. As to meaning of
feeted, but not afterwards :" Cal. "negotiation" on connection with com-
Civ. Code sec. 2576. pletion of contract. See § 1923 here-
6 1 Arnould on Marine Ins. (Per- in.
kins' ed. 1850) 528, *524. 10 Accident Ins. Co. v. Crandal,
6 1 Arnould on Marine Ins. (Mac- 120 U. S. 527, 30 L. ed. 740, 7 Sup.
lachlan's ed. 1887) 515, 538, 543. Ct. 685. As to statement being one
See Id. (8th ed. Hart & Simey) sec. of law, see Erickson v. Ladies of
561, p. 701. the Maccabees of the World, 25 S.
7 See § 1923 herein. Dak. 183, 126 N. W. 259; Fitzgerald
8 6 Edw. VII. c. 41, sec. 20, sub. v. Supreme Council of Catholic
(6) ; Rutterworth's Twentieth Cent. Mutual Benefit Assoc. 56 N. Y. Supp.
Statutes (1900-1909) pp. 403-4. 1005, 39 App. Div. 251. See as to
9 Marine ins. act 1906 (6 Edw. questions of law and fact, § 1898
VII. c. 41) sec. 20; Butterworth's herein.
Twentieth Century Statutes (1900-
3186
REPRESENTATIONS AND MISREPKFSKXTATIONS § 1034
far as material to the risk, avoid the policy.11 It' the words used
have a plain and obvious meaning, it will govern.18 Words will
sometimes be given a meaning by relation to other matters; as
where goods arc held to be neutral by reason of the representa-
tion by the owner that they are his own goods, he being a resident
of a neutral country.13 It is also held thai representations are
to be construed with reference to the requirements of the under-
writers, and a mere literal conformity therewith is no1 necessarily
sufficient.14 If one part of the contracl expressly stipulates a war-
ranty and another part, namely, "the policy characterizes the
statements as representations," the terms of the policy control as
against the application; that is, that construction prevails which
protects the insured againsl the obligations of a warranty.15
In guaranty insurance the rule as to representations seems from
the nature of the contract not to be so strictly enforced as in
marine risks.16
Again, it is universally held that in no class of insurance risks
will warranties be held to be created or extended by construction,
nor will a warranty of the truth of representations be extended
beyond what it was evidently intended by the parties to embrace.11
So in case of inconsistency and doubt statements will be con-
strued as representations, rather than warranties,18 and the reason
11 Chrissman v. State Ins. Co. 16 372; Continental Life Ins. Co. v.
Or. 283, 18 Pae. 466. Rogers, 119 111. 474, 10 N. E. 242.
On failure to attach copy of ap- See §§ 1890, 1915 heroin,
plication to policy as affecting right On when statements may he re-
nt' insurer to rely on representations garded as representations although
or warranties incorporated in the expressly denominated in policj as
policy itself, see note in 19 L.R.A. warranties, see note in 11 L.R.A.
(N.S.) 102. (N.S.) 981.
12 Sibbald v. Hill, 2 Dowl. Pr. 263, "Towle v. National Guardian
per Lord Eldon; Livingston v. Mary- Assur. Soe. 7 Jur. (N. S.) 1009,
land Ins. Co. 7 Craneh (11 U. S.) 5 L. T. 193, 30 L. J. Ch. 900; Ben-
506, 535, 3 L. ed. 421. ham v. United Guarantee & Life
13 Vandenheuvel v. United Ins. Co. Assur. Co. 7 Exch. 744, 21 L. J.
2 Johns. Cas. (N. Y.) 451, 1 Am. Ex. 317; Hamilton v. Watson, 12
Dec. 180. Clark & F. 109; Lee v. Jones, 14
14 Houghton v. Manufacturers' Com. B. (N. S.) 386. But see Bonar
Mutual Fire Ins. Co. 8 Met. (49 v. MacDonald, 3 H. of L Cas 226
Mass.) 114, 41 Am. Dec. 489. 14 Jur. 1077.
15 Mouler v. American Life Ins. « See Howard Fire & Ma rim* Ins
Co. Ill U. S. 335, 342, 343, 28 L. Co. v. Cornick, 24 111. 455; Mutual
ed. 447, 4 Sup. Ct. 466, per Har- Benefit Life Ins. Co. v. Robertson,
Ian, J., cited in Weil v. New York 59 111. 123. 14 Am. Rep. 8; National
Life Ins. Co. 47 La. Ann. pt. 2, 1405, Bank v. Insurance Co. (First Xa-
1418. 17 So. 853, per Watkins. J. tional Bank v. Hart lord Fire Ins.
See Fitch v. American Popular Life Co.) 95 U. S. 673, 24 L. ed. 563
Ins. Co. 59 N. Y. 557,. 17 Am. Rep. "Alabama Gold Life Ins Co v
3187
§ 1934
JOYCE UN INSURANCE
and justice of such a rule, as well as the rule which favors a liberal
construction in behalf of the assured, is apparent when it is con-
sidered that a warranty must, as a rule, be literally fulfilled in its.
terms, and a breach thereof, however slight, determines the con-
tract. It may, therefore, be reasonably assumed that the insured
never meant to bind himself by a stipulation thus rigid in its
exactions, except it clearly appears thai such was the intent, and
that the words used plainly, if not necessarily, exclude the theory
that a representation only was intended. Courts do not favor
warranties, and will incline against a construction which imposes
upon the assured so strict an obligation as a warranty imposes, or,
in other words, a warranty will not he implied by construction
alone, but must be expressed.19 Clauses in a policy may be gen-
eral, however, so that one does not control the other.20
Johnson, 80 Ala. 407, 60 Am. Rep.
112, 2 So. 125; iEtna Ins. Co. v.
Simmons, 49 Neb. 811, 69 N. W. 125.
See citations under next following
note.
Indiana. — Catholic Order of
Foresters v. Collins, 51 Ind. App.
285, 99 N. E. 745.
Louisiana. — Mutual Life Ins. Co.
of N. Y. v. New, 125 La. 431, 51 So.
l»United States.- -National Bank 61, 136 Am. St. Rep. 326, 27 L.R.A.
v. Insurance Co. (First National (N.S.) 431.
Bank- v. Hartford Fire Ins. Co.) 95 Maryland. — Supreme Council
I '. s. ii7.!, 678, 24 L. ed. 5(1:5; Jeffries Roval Arcanum v. Brashears, 89 Md.
v. Economical Mutual Life Ins. Co. 624, 73 Am. St. Rep. 244, 43 Atl.
22 Wall. (89 U. S.) 47, 22 L. ed. 866.
833; Gotfredson v. German Commer- Massachusetts. — Campbell v. New
cial Accident Co. L.R.A.1915D, 312, England Mutual Life Ins. Co. 98
218 Fed. 5S2, 134 C. C. A. 310/45 Mass. 389.
Ins. L. J. 525; Fidelity Mutual Life Michigan. — Brown v. Metropolitan
Ins. Co. v. Jeffords, 53 L.R.A. 193, Life Ins. Co. 65 Mich. 306, 8 Am. St.
107 Fed. 402, 46 C. C. A. 377. Rep. 894, 32 N. W. 610.
Alabama. — Exchange Underwriter's Nebraska. — Goff v. Supreme Lodge
Agency of Royal Exch. Assur. of Royal Achates, 90 Neb. 578, 37
London v. Bates, 195 Ala. 161, 69 L.R.A. (N.S.) 1191, 134 N. W. 239;
So. 956; Alabama Gold Life Ins. Co. Modern Woodmen Accident Assoc v.
. Garner, 77 Ala. 215. Shryock, 54 Neb. 250, 39 L.R.A. 826,
Connecticut. — Petello v. Teutonia 74 N. W. 607.
Fire Ins. Co. 89 Conn. 175, L.R.A. New Jersey. — American Popular
1915D, 812, 93 Atl. 137, 45 Ins. L. Life Ins. Co. v. Day, 39 N. J. L. 89,
.]. 590; Glendale Woolen Co. v. Pro- 23 Am. Rep. 198.
tection Ins. Co. 21 Conn. 19, 54 Am. New York. — Woodruff v. Imperial
Dec. 309. Fire Ins. Co. 83 N. Y. L33; Jefferson
Illinois. — Spence v. Central Acci- v. Cotheal, 7 Wend. (N. Y.) 72, 22
denl Ins. Co. 236 111. 444. 19 L.R.A. Am. Doc. 571; Duncan v. Sun Fire
(N.S.) 88, 86 N. E. 104; Mutual Ins. Co. 6 Wend. (N. Y.) 488, 194,
it Life Ins. Co. v. Robertson, 22 Am. Dec. 539; L. Black Co. v.
59 III. 123. 14 Am. Rep. 8; Price v. London Guarantee & Accident Co.
Phoenix Mutual Lite Ins. Co. 17 111. Ltd. 1 11 N. Y. Supp. 124, 159 App.
497, 10 Am. Rep. 166; Kidder v. Diy. 186, 43 Ins. L. J. 301.
Supreme Assembly of American Oregon. — Chrisman v. State Ins.
Stars of Equity, 154 111. App. 189. Co. 16 Or. 283, 18 Pac. 466.
31S8
RKPRKSKXTATIOXS AND MISREPRESENTATIONS §§ L934a, L935
§ 1934a. Construction of questions. — The language of a question
in an application for insurance is to be read in its plain, ordinary
an<l natural signification, ;m<l if there be any ambiguity, such
ambiguity is to be resolved againsl the insurer who framed the
question and in favor of the applicant.1
§ 1935. Rules as to representations apply to modification of con-
tract.— There is oo doubl bul t lt.it the same general rules which
govern representations under the original contracl would apply to
a modification <>r alteration thereof, and it is so expressly pro-
vided by some statutes.2
Texas.— Mutual Life Ins. Co. v. Montreal Coal & Towing Co. 1 B.
Kurd. — Tex. Civ. App. — 130 S. K. C. 298, 35 Can. 8. C. 266, 25
W. 769. Canadian Law Times, Oce. X. 4. See
England. — Pawson v. Watson. § 1930 herein.
Cowp. 785, 13 Eng. Rul. Cas. 540. 8"The provisions of this article
See Cal. Civ. Code, sec 2573, and apply as well to a modification of
under chap, on Construction, see a contract of insurance, as to its
§^ 209b, 219 et seq. herein. original formation:" Cal. Civ. Code,
20 Mutual Life Ins. Co. v. New. sec. 2582.
125 La. 41, 27 L.R.A.(N.S.) 431. 136 As to misrepresentations and stat-
Am. St. Rep. 326, 51 So. 61. utes, see § 1916 herein.
1 Metropolitan Life Ins. Co. v.
3189
CHAPTER LVII.
WARRANTIES.
§ 1942. "Warranties: general statement.
§ L943. Division of warranties.
§ 1944. Express warranty defined.
§ 194."). Implied warranty defined.
§ 1946. Affirmative warranty defined.
§ 1947. Promissory warranty defined.
§ 1948. Warranty of intention: the ease of Bilbrough v. Metropolitan
Insurance Company.
§ 1949. Form of warranty: distinctions: construction.
§ 1930. In cases of doubt construction against warranty: intention of
parties.
§ 1951. Warranty in effect condition precedent.
§ 1951a. Same subject : other views : special distinctions, etc.
§ 1952. Condition precedent continued: loss occurring prior to breach
of promissory warranty: whether contract ab initio void.
§ 1953. Same subject: decisions on which proposition based.
§ 1954. Same subject : additional authorities.
§ 1955. Same subject : conclusion.
§ 1956. Express warranty must appear on face of policy or be made a
part of contract.
§ 1956a. Material or immaterial statements made warranties by stipulation.
§ 1956b. Same subject: such stipulations reasonable.
§1957. Warranties: statements in application.
§ 1958. Applications and other papers: what constitutes a sufficient ref-
erence: marginal writings on policy, etc.
§ 1959. Reference to application, plan, survey, etc., continued.
§ 1960. Same subject : cautionary suggestions.
§ 1961. Whether stipulation on face of policy as to preservation of prop-
erty after loss is warranty.
§ 1962. Warranty not necessarily material: its materiality not subject of
inquiry.
§ 1963. Materiality of fact to the risk may in certain cases be subject of
inquiry.
§ 1964. Warranty: mistake: want of knowledge of untruth : fraud: good
or bad faith.
3190
WARRANTIES §§ 1942, 1943
§ 1965. Warranty may be qualified by other words in the contract.
§ 1966. When matters of description or facts relating to property are
warranties.
§ 1966a. Time to which warranty refers.
§ 1966b. Warranties subsequent to completion of contract.
§ 1967. Where time to which affirmative warranty relates is specified.
§ 1968. Where time to which affirmative warranty in life risk relates is
indefinite.
§ 1969. Partial answers.
§ 1970. Breach : warranty must be strictly true and exactly and literally
fulfilled.
§ 1971. Is there a tendency to relax the above rule?
§ 1972. Exceptions to above rule: what excuses compliance with warranty.
§ 1973. What excuses compliance: waiver and estoppel.
§ 1973a. Same subject : when no waiver or estoppel.
§ 1974. Neglect to read or have application read, no excuse.
§ 1975. Breach of warranty avoids though not cause of loss.
§ 1976. Policy avoided by breach of warranty is not revived by subsequent
compliance.
§ 1976a. Warranties by infant : recovery by beneficiary.
§ 1977. Burden of proof: express warranties.
§ 1942. Warranties: general statement. — In discussing warran-
ties the rules relating strictly thereto are embodied in the follow-
ing chapter, but the question of what constitutes a warranty and
whether there has been a breach is closely connected with the
questions of concealment, representations, and misrepresentations,
and throughout the arguments of courts in numerous cases on
any one of these subjects some of the principles underlying war-
ranties are fully considered,- so that the cases under the preceding
chapters concerning concealment, representations, and misrepre-
sentations may be advantageously consulted. In addition those
statutory provisions must be considered which modify or abrogate
the distinctions between warranties and representations or other-
wise affect the same.2*-
§ 1943. Division of warranties. — Warranties are express or im-
plied; they are also affirmative and promissory. There may be
several warranties, and warranties of each cla.ss in one policy.3
2a See § 1916 herein. Co. v. Goodman, 10 Ala. App. 446,
3 United States.— Cadv v. Imperial 65 So. 449.
Fire Ins. Co. 4 Cliff. (U. S. C. C.) 107?u'fl--^10ut_0v\Clt-v/ire4"s- Co'
203, 209, Fed. Cas. No. 2,283, per 12 Iowa, 3.1, 79 Am. Dec. o39.
Louisiana. — iToieoecnea v. Louisi-
Clifford, J. ana ins. Co. 6 Mart. (La.) N. S. 51,
Alabama. — Metropolitan Life Ins. 17 Am. Dec. 175.
3191
§ 1944
JOYCE OX IXSIWAXCE
§ 1944. Express warranty defined. — An express warranty is a
particular stipulation inserted on the face of the policy or clearly
embodied therein as a pari thereof by proper words of reference,
whereby the assured agrees thai certain tads are or shall be true,
or that certain acts have been or shall lie done, and upon the
literal truth or exacl fulfilment of which stipulation concerning
the same the validity of the contracl depends. The stipulation will
be effective, within the meaning of this definition, whether it be
written on the margin or transversely, or on an attached or sub-
joined paper clearly referred to as a part of the contract. A
warranty may relate to the past, present, or future, or each or all.4
New York.— O'Xeil v. Buffalo Fire
Ins. Co. 3 X. Y. (3 Const.) 122.
Washington. — Miller v. Com-
mercial Union Assur. Co. Ltd. 69
Wash. 529, 125 Pac. 782, 41 Ins. L.
J. 1599.
Mr. Angell mentions affirmative
ami promissory warranties, but adds
that the distinction between them
■•lias been considered to he one of
form rather than of substance; many
warranties that are in form affirma-
tive being in fact also promissory:"
Angell en Fire and Life Ins. (ed.
L855) 100-93, sec. 145. "When,
however, there is any doubt as to
whether the warranty is intended to
refer only to the date of the policy,
or to a continued state of facts, the
doubt will he always resolved in
favor of the insured. Promissory
warranties must be as strictly per-
formed as affirmative warranties:"
1 Biddle on Ins. (ed. 1843) 566, 567.
A distinction is made between af-
firmative and promissory warranties
in Hammond on Fire Ins. (ed. 1840)
82, to this extent: "If it be affirma-
tive, it must be literally true; if
promissory, it must be strictly per-
formed. The breach of a warranty,
therefore, consists either in the false-
hood of an affirmative, or the non-
performance of an executory, stipu-
lation. See Cal. Civ. Code, sec.
2603. "A warranty may lie express
or implied." .Marine ins. acl L906
(6 Edw. VII. c. 41 ) sec. 33, sub. (2) ;
2 Butterworth's Twentieth Cent. Stat.
(1900-1909) p. 407. "An express
warranty does not include an implied
warranty unless it be inconsistent
therewith." Id. sec. 35, subd. (3)
p. 407.
4 United States— Mutual Life Ins.
Co. of N. Y. v. Hilton-Green, 211
Fed. 31, 127 C. C. A. 467, 43 Ins. L.
J. 685, 687.— Grubb, C. J. Rev'd on
another point in 241 U. S. 613, 60 L.
ed. 1202, 30 Sup. Ct. Rep. 676 (con-
sidered under S 20/5 herein). .Etna
Life Ins. Co. of Hfd. v. Outlaw, 194
Fed. 862, 864, 114 C. C. A. 608; Rice
v. Fidelitv & Deposit Co. of Md.
103 Fed. 427, 43 C. C. A. 270, 273.
Alabama. — Metropolitan Life Ins.
Co. v. Goodman, 10 Ala. App. 446,
65 So. 449.
Connecticut. — "Wood v. Hartford
Fire Ins. Co. 13 Conn. 533, 35 Am.
Dec. 92.
Delaware. — Baltimore Life Ins. Co.
v. Floyd, 5 Bovce (28 Del.) 201, 91
Atl. 653, s. e. 5 Bovce (28 Del.) 431,
94 Atl. 515.
Iowa. — Stout v. City Fire Ins. Co.
12 Iowa, 371, 79 Am. Dec. 539.
Massachusetts. — Everson v. Gen-
eral Fire & Life Assur. Corp. Ltd.
202 Mass. 169, 88 N. E. 658, 38 Ins.
L. J. 923, 927.— Rugg, J.
Nebraska. — .SDtna Ins. Co. v. Sim-
mons, 49 Neb. 811, 69 N. W. 125.
New York. — Ripley v. iEtna Fire
Tns. Co. 30 N. Y. 136, 86 Am. Dec.
362; Jefferson Ins. Co. v. Cotheal,
7 Wend. (N. Y.) 72, 22 Am. Dec.
567 ; Duncan v. Sun Fire Ins. Co. 6
Wend. (N. Y.) 488. 22 Am. Dec. 437.
Ohio. — Hartford Protection Ins.
Co. v. Harmer, 2 Ohio St. 452, 59
Am. Dec. 684.
3192
WARRANTIES § 1945
§ 1945. Implied warranty defined. — Tn marine policies there are
certain stipulations which from the very nature of the contracl are
necessarily embodied therein as a part thereof, and which bind
the assured with the same force as if actually expressed in the
contract. These arc called "implied warranties."6 ThuSj i\ is
an implied warranty in every marine risk thai the ship shall be
seaworthy and competent to perform the voyage.8 And if the
property is described as belonging to the subject of a neutral state,
or is represented as neutral, this is equivalent to an express war-
ranty of neutrality.7 So it has been held that if a vessel is de-
scribed in the policy as an American ship3 it is an implied warranty
Oklahoma.— Orient Ins. Co. v. (N. Y.) 184; Warrant v. United Ins.
Van Zandt-Bruce Drug Co. — Okla. Co. 2 Johns. Cas. (X. Y.) 231, 1
— , 151 Pac. 323, 46 Ins. L. J. 621, Am. Dec. 164. See Greenock Steam-
623. ship Co. v. Maritime Ins. Co. [1903]
England.— Pawson v. Watson, 2 2 K. B. 657, 73 L. J. K. B. 868, 89
Cowp. 785, 13 Ens. Rul. Cas. 540, L. T. 200, 5 W. R. 186, 9 Coml. Cas.
per Lord Mansfield; Lothian v. 41, 9 Asp. 463; Marine insurance art
Henderson, 3 Bos. & P. 499, 515, per 1906 (6 Edw. VII. c. 41) sec. 38, 2
Lawrence, J.; Robertson v. French, Butterworth's Twentieth Century
4 East, 130, 14 Eng. Rul. Cas. 1. Stat. (1900-1909) p. 408. See §§
For other definitions see Vols. 7 2151 et seq. herein,
and 8, Words & Phrases. 7 Lothian v. Henderson, 3 Bos. &
De Hahn v. Hartley, 1 Term Rep. P. 499; Walton v. Bethune, 2 Brev.
343, 346, 14 Eng. Rul. Cas. 171, (S. C.) 453, 4 Am. Dec. 597. See
per Lord Mansfield. "A warranty §§ 2122 et seq. herein,
may relate to the past, the present, 8 Goix v. Low, 2 Johns. Cas. ( N.
the' future, or to any or all of these:" Y.) 480, rev'g 1 Johns. Cas. (N. Y.)
Cal. Civ. Code, sec. 2606. "A state- 337. See Lewis v. Thatcher, 15
ment in a policy of a matter relat- Mass. 431; Murray v. United Ins.
ing to a person or thing insured, or Co. 2 Johns. Cas. (N. Y.) 168;
to the risk as a fact, is an express Vandenheuvel v. United Ins. Co. 2
warranty thereof:" Cal. Civ. Code, Johns. Cas. 127, 451; Francis v.
sec. 2607. "An express warranty Ocean Ins. Co. 6 Cow. (N. Y.) 404;
does not exclude an implied war- Lothian v. Henderson, 3 Bos. & P.
ranty unless it be inconsistent there- 499 ; Baring v. Claggett, 3 Bos. & P.
with." Marine insurance act 1906 ( 6 201, 5 East, 398, 14 Eng. Rul. Cas.
Edw. VII. c. 41) sec. 35, subd. (3) ; 155. But see Mackie v. Pleasants,
2 Butterworth's Twentieth Century 2 Binn. (Pa.) 363, noted § 1956
Statutes (1900-1909), p. 407. herein; Le Mesurier v. Vaughan, 6
51 Marshall on Ins. (ed. 1810) East, 382, 2 Smith, 492; Clapham v.
*347a; McArthur on Marine Ins. Cologan, 3 Camp. 382. No implied
(ed. 1890) 4, 13. warranty of nationality or that it
6 Hoxie v. Home Ins. Co. 32 Conn, shall not be changed during risk :
21, 85 Am. Dec. 240; Dupeyre v. Marine insurance act 1906 (6 Edw.
Western Marine & Fire Ins. Co. 2 VII. c. 1) sec. 37; 2 Butterworth's*
Rob. (La.) 457, 38 Am. Dec. 218 Twentieth Cent. Stat. (1900-1909,
(except under time policies in Eng- p. 408. See §§ 2122 et seq. herein,
land) ; Silva v. Low 1 Johns. Cas.
3193
§§ 1946, 1D47
JOYCE ON INSURANCE
thai -lie is American.8 So also that goods will not be stowed in
such an unusual manner as to expose them to extra danger.9
§ 1946. Affirmative warranty defined. — An affirmative warranty-
is whore the assured undertakes for the truth of some positive
allegation; that is, he stipulates that certain facts are true, he
affirms or denies their existence.10 A warranty may, however, he
both affirmative and promissory; as in case of a warranty of
neutrality.
§ 1947. Promissory warranty defined. — Promissory warranties
which are not infrequently called "executory," are those where
the assured undertakes to perform some executory stipulation; as
that certain acts shall or will be done, or that certain facts shall
or will continue to exist,11 As a general rule the courts hesitate
to construe a warranty as promissory and continuing, and will
refuse so to do if any other reasonable construction can be given.12
9 Leiteh v. Atlantic Mutual Ins.
Co. 66 N. Y. 100.
10 Indiana. — Baker v. German Fire
Ins. Co. 124 Ind. 490, 24 N. E. 1041.
Iowa. — Stout v. City Fire Ins. Co.
12 Iowa, 371, 79 Am. Dec. 539.
Michigan. — Rathman v. New
Amsterdam Casualty Co. 186 Mich.
115. L.R.A.1915E, 980, 152 N. W.
983, 46 Ins. L. J. 373.
New York.— O'Neil v. Buffalo Fire
Ins. Co. 3 N. Y. 122; Dilleber v.
Home Life Ins. Co. 69 N. Y. 256, 25
Am. Rep. 182.
Oklahoma. — Orient Ins. Co. v.
Van Zandt-Bruce Drug Co. — Okla.
— , 151 Pac. 323, 46 Ins. L. J. 621,
623.
Vermont. — "Wilson v. Commercial
Union Assur. Co. Ltd. — Vt. — , 96
Atl. 540.
Washington. — Miller v. Com-
mercial Union Assur. Co. Ltd. 69
Wash. 529, 125 Pac. 782, 41 Ins.
L. J. 1599.
See also Marshall on Ins. (ed
1810) *346. As to time to which af-
firmative warranty relates, see §§
1966a-1968 herein.
11 United States.— Smith v. Dela-
ware Ins. Co. 3 Wash. (U. S. C. C.)
127, Fed. Cas. No. 13,035.
Iouri. — Stout v. Citv Fire Ins. Co.
12 Iowa, 371, 79 Am.' Dec. 539.
3194
Massachusetts. — Cleveland v. Un-
ion Ins. Co. 8 Mass. 308.
New York.— O'Neil v. Buffalo Fire
Ins. Co. 3 N. Y. (3 Comst.) 122. See
Hygienic Ice & Refriueral in»' Co. v.
Philadelphia Casualty Co. 1 17 N. Y.
Supp. 754, 162 App. Div. 190.
Oklahoma. — Orient ins. Co. v. Van
Zandt-Bruce Drug Co. -- Okla.
151 Pac. 323, 46 Ins. L. J. 621. 623.
Texas. — Scottish Union & National
Ins. Co. v. Wade, — Tex. Civ. App.
— , 127 S. W. 1186.
Washington. — Miller v. Commer-
cial Union Assur. Co. Ltd. 69 Wash.
529, 125 Pac. 782, 41 Ins. L. J. 1599.
See also 1 Marshall on Ins. (ed.
1810) *346. See § 1966a herein.
12 Virginia Fire & Marine Ins. Co.
v. Buck, 88 Va. 517, 13 S. E. 973.
See § 1950 herein.
Oral Statement Not Continuing
Warranty. In a Federal decision the
court says: "I have seen no ease
which holds that an oral statement
of fact could be construed into a
continuing warranty or promise
when the contract is in writing.
Clark v. Manufacturers' Insurance
Company, 2 Woodb. & M. (U. S. C.
C.) 472, Fed. Cas. No. 2,829, s. c. 8
How. (49 U. S.) 235, 12 L. ed. 1061,
merely decides that parol evidence
might be introduced to identify the
WARRANTIES § 1948
In Texas the doctrine of promissory warranties has not been
abolished by the statute, requiring untrue or false answers, or
statements, or misrepresentations, to be' material to the risk in
order to avoid the contract, and a fire insurance policy clause pro-
hibiting other insurance, unless permitted, is a promissory war-
ranty.13 But it is also decided in that state that a statement which
relates only to conditions existing at the time does not constitute
a promissory warranty, no additional insurance having been pro-
cured prior to issuing the policies.14 Tt is important to note the
marine insurance act of 1906 of England which declares the
nature of a warranty as follows: "A warranty, in the following
sections relating to warranties, means a promissory warranty, that
is to say, a warranty by which the assured undertakes that some
particular thing shall or shall not be done, or that some condition
shall be fulfilled, or whereby he affirms or negatives the existence
of a particular state of facts." 15
§ 1948. Warranty of intention: the case of Bilbrough v. Metro-
politan Insurance Company. — In this case the property insured was
located in a certain cotton-mill, and the assured, in answer to an in-
quiry, stated, "We only intend," to run the factory nights "until
we get more cards etc., which are making; shall not run nights over
four months." In the sentence preceding, and which was a part
of the same answer, he said: "We run the cards, picker, drawing-
frames, and speeder day and night; the rest twelve hours daily."
This statement was strictly construed as a warranty that the mill
would not be run nights over four months at the limit, and would
written application referred to in Court ease, Clark v. Manufacturers'
the policy. "That covenants cannot Ins. Co. 8 How. (49 U. S.) 235. 12
be imported into or taken out of a L. ed. 1061, that reference having
written contract by parol is an el- been had to the application it could
ementary rule applicable to contracts be proved by parol evidence that the
for insurance as to others." See representations alleged to have been
Abbott v. Shawmut Mutual Fire Ins. made by the insured were actually so
Co. 3 Allen (85 Mass.) 213; Schmidt made by him. As to parol evidence,
v. Peoria Mutual Ins. Co. 41 111. 295; see §§ 3806 et seq. herein.
Hio-^inson v. Dall, 13 Mass. 96; 13 Gross v. Colonial Assur. Co. 56
Kimbal v. JEtna Ins. Co. 9 Allen Tex. Civ. App. 627, 121 S. W. 517,
(91 Mass.) 540, 85 Am. Dec. 786. Rev. Stat. 1895, art, 3096aa, added
The judgment in the case last cited by acts 28 Leg. 1903, c. 69, sec. 1,
reviews the authorities, and decides p. 94.
that an actual promise, if oral, can- 14 Scottish Union National Ins. Co.
not be given in evidence to defeat a v. Wade, 59 Tex. Civ. App. 631, 127
policy, which has once attached. S. W. 1186.
Albion Lead Works v. Williams- 15 Marine insurance act 1906 (6
burgh City Fire Ins. Co. 2 Fed. 479, Edw. VII. c. 41) sec. 33. subs. (1) ;
4S6, per Lowell, C. J. It was held, 2 Butterworth's Twentieth Century
however, in the Federal Supreme Statutes (1900-1909) p. 407.
3195
§ 1049 JOYCE "\ [NSURANCE
running if the cards should be obtained before the four
months elapsed.16 Tt will be observed that the statement used the
words we "intend," and the question may fairly arise whether the
court did not raise a warranty by construction, and whether the
language did not clearly imporl an intention to do a certain thing,
as distinguished from a positive statement thai the act should be
done. We have already stated the rule governing representations
of intention merely as distinguished from a positive statement
that an event shall or will take place," and we arc inclined to the
opinion that the above case ought to come within the principles
embodied in that ride and evidenced by the cases relied on as
supporting it. In this connection we will note a rule of Mr. Duer's,
which is substantially this: In certain cases, if the assured after
declaring his intention to do a certain act should, at once the
policy is effected, proceed contrary thereto to do other acts ma-
terially enhancing the risk, this would be evidence of an intent to
deceive, which, if not rebutted by proof justifying such immediate
change, would probably vitiate the contract, for the inference
would reasonably exist that the declared intention never existed.18
The Civil Code of California provides that "a statement in a policy
which imports that it is intended to do or not to do a thing which
materially affects the risk is a warranty that such act or omission
shall take place."19 The effect of this provision is to aid the
assurer, since upon proof that a statement of intention is in; terial
to the risk a warranty would be created, but only a qualified war-
ranty, qualified by its materiality, and not an absolute warranty
in the first instance, differing herein from a warranty as gener-
ally known and understood outside of this enactment.
§ 1949. Form of warranty: distinctions: construction. — The form
of words used is not important. The language of a written in-
strument will generally be assumed by the courts to import that
meaning and to have that effect determined by judicial decisions,
reference being had to the nature and requirements of the con-
tract, the subject-matter, and the whole instrument. : id while
warranties are noi favored by construction, yet if the words by
sound rules of interpretation clearly evidence a warranty, it will
be so construed; nor are the words "warranty" or "warranted"
i --< ntial.20 So it is declared that the term "warranted" adds noth-
16 Bilbrough v. Metropolitan Ins. Ins. Co. 14 R. T. 109, 110, 51 Am.
Co. 5 Duer (N. Y.) 587. Rep. 364; L^enyon v. Berthan, 1
17 § 1904 herein. Doug. 12.
18 2 Duer on Marine Ins. (ed. 184.3) The paiLieular word "warranty"
708. need not necessarily be used, since a
19 Cal. Civ. Code, see. 2(508. policy might be SO trained ;is to im-
20 Lvons v. Providence-Washington pose upon assured all the obligations
3196
WARRANTIES § 1949
ing to the force of a stipulation in an insurance contract. The
expression of the word "warranty" does not necessarily constitute
a warranty; there ma}- be warranties without the use of the word.
and there may not be warranties when the word is used.1 Bui
a statement under a general heading "warranties" will be a war-
ranty when taken in connection with the general character of the
statement itself as constituting a warranty.2
So representations are not regarded as warranties unless inserted
in the policy,3 and herein lies the principal distinction between a
warranty and a representation; for the former precedes the con-
tract as a part of the preliminary proceedings and is never in terms
inserted in the policy, while the latter is a part of the completed
contract.4 The above statement is subject to such qualification,
of a warranty, vet if the word is not ^e^ Fire & Marine Ins. Co. 59 Wash,
used, it will not be without signifi- 501> 28 L.R.A.(N.S.) 596, 140 Am.
canee in determining whether there is St. Rep. 863, 110 Pae. 36, 39 Ins.
or is not a warranty in any partieu- L. J. 1447, s. c. 56 Wash. 681, 28
lar ease: Moulor v. American Life L.R.A.(N.S.) 593, 106 Pac. 194, 39
Ins. Co. Ill U. S. 335, 342, 343, 28 ins. L. J. 352.
L. ed. 447, 4 Sup. Ct. 466, per Har- 2 Everson v. General Fire & Life
Ian, J.; cited in Weil v. New York Assur. Corp. Ltd. 202 Mass. 169, 88
Life Ins. Co. 47 La. Ann. pt. 2, 1405, N. E. 658, 38 Ins. L. J. 923.
1418, 17 So. 853, per Watkins, J. 3 Kentucky & Louisville Mutual
"Warranty" and "guaranty" have Ins. Co. v. Southard, 8 B. Mon. (Ky.)
distinct meanings. Masons' Union 634; Williams v. New England Mu-
Life Assoc, v. Brockman, 20 Ind. tual Fire Ins. Co. 31 Me. 219. See
App. 206, 50 N. E. 493. §§ 1887 et seq., 1956 herein.
"An express warranty may be in * Arkansas. — Metropolitan Life
any form of words from which the in- Ins. Co. v. Johnson, 105 Ark. 101, 150
tention to warrant may be inferred S. W. 393, 42 Ins. L. J. 73; National
The word 'warranty' or 'warranted,' Annuity Assoc, v. Carter, 96 Ark.
for instance, is in no case necessary. 495, 132 S. W. 633, 40 Ins. L. J. 205.
. . . But it is sometimes a ques- California. — Wheaton v. North
tion, especially in time policies effect- British & M. Ins. Co. 76 Cal. 415, 9
ed with mutual assurance associa- Am. St. Rep. 216, 18 Pac. 758.
tions, whether a clause which pur- Connecticut. — Glc-ndale Woolen Co.
ports to be a warranty should not be v. Protection Ins. Co. 21 Conn. 19,
held to be an exception and not a 54 Am. Dec. 30.
warrantv." 17 Earl of Halsburv's Delate are. — Baltimore Life Ins. Co.
Laws of England, sec. 821, p. 418, v. Floyd, 5 Boyce (28 Del.) 201, 91
title "Marine Insurance." Marine ins. Atl. 653, s. c. 5 Boyce (28 Del.) 431,
act 1906 (6 Edw. VII. c. 41) sec. 35, 94 Atl. 515.
subd. (1) ; 2 Butterworth's Twentieth Illinois. — Spence v. Central Acci-
Century Statutes (1900-1909) p. 407. dent Ins. Co. 236 111. 444, 19 L.R.A.
Construction of warranty: life in- (N.S.) 88n, 86 N. E. 104, 38 Ins. L.
surance: England. See 17 Earl of J. 87.
Halsburv's Laws of England, sec. Massachusetts. — Everson v. Gen-
1102, p.*552. eral Fire & Life Assur. CoiV. 202
As to statutes, see § 1916 herein. Mass. 169, 88 N. E. 658, 38 Ins. L.
xPort Blakely Mill Co. v. Spring- J. 923.
3197
§ 1949 JOYCE ON INSURANCE
however, as exist where the representation is incorporated by
reference into the policy, or where it is made material by stipula-
tion as a part of the contract.6
It is also a rule thai in determining whether a statement in a
policy of insurance is a warranty od the part of the assured, the
entire policy musl be considered, and if from the whole il appears
that such statemenl was doI intended as a warranty, it will not
be so construed.6 And where a circumstance is sought to be
included by implication in the warranty, it never can he supposed
that the parties intended to include it, unless it he manifestly
materia] to the risk,7 nor will a warranty be extended or enlarged
Missouri. — Zepp v. Grand Lodge correct; it differs from an express
Ancient Order United Workmen, 69 warranty, as the warranty makes part
Mo. App. 4S7. of the policy, ana must be strictly and
Montana. — Pelican v. Mutual Life literally performed. Hazard v. New
Ins. Co. of N. Y. 44 Mont. 277, 119 England Marine Ins. Co. 8 Pet. (33
Pae. 778, 41 Ins. L. J. 327. I. S.) 557, S L. ed. 1043. Cited in
New Jersei). — Dewees v. Manhat- Hartford Protection Ins. Co. v. Har-
tan Ins. Co. 34 X. J. L. 244. mer, 2 Ohio St. 464, 59 Am. Dec.
New York. — Richards v. Kins;, 57 084.
Misc. 177, 107 N. Y. Supp. 720. 6 See §§ 1800, 1912 herein.
Oklahoma. — Mutual Life Ins. Co. On what reference in policy to ap-
of X. V. v. M organ, 39 Okla. 205, 135 plication will make it part of policy,
Pac. 2/9. see notes in 19 L.R.A.(N.S.) 88, and
Texas. — American National Ins. 33 L.R.A.(N.S.) 676.
Co. v. Anderson, — Tex. Civ. App. 6 National Bank of D. O. Wills &
— , 179 S. W. 66. Co. v. Union Ins. Co. 88 CaL 197,
England. — Goram v. Sweeting, 2 22 Am. St. Rep. 324, 20 Pac. 509;
Saund. 202; Pawson v. Barnevelt, 1 Hunter v. United States Fidelity &
Doug. 12n. Guaranty Co. 129 Tenn. 572, 107 S.
Sec also the following cases: Trav- W. 092: Port Blakelev Mill Co. v.
elers' Ins. Co. v. McConkev, 127 U. S. Springfield Fire & Marine Ins. Co
661, 666, 32 L. ed. 308, 8 Sup. Ct. 59 Wash. 501, 140 Am. St. Rep. 863,
1360. and cases cited; Moulor v. 28 L.R.A.(N.S.) 596n, 110 Pac 36,
American Ins. Co. Ill U. S. 335, 39 Ins. L. J. 1447, s. c. 56 Wash. 681,
341, 28 L. ed. 447, 4 Sup. Ct. 466; 28 L.R.A.(N.S.) 593n, 106 Pac. 194,
craoooV'o^TnT Ion ?°c 109 £■ 39 Ins- L- J- 352- Compare L. Black
?n- ?; 57A^ 92' 3 SuP- Ct & Co. v. London Guarantee & Acci-
20/; United States Fire & Marine dent Co Ud 144 N y g ,
Ins^ Co v. Kimberly 34 Md 224, 15g A „. lg6 4 j
6 Am. Rep. 235; Dillebar v. Home ^ M, , , ' , :
Life Ins. Co. 69 X. Y. 256, 25 Am. °? 1when statements may be re-
Rep. 182; Jefferson Ins. Co. v. Coth- -'"',|'"1 ;IS ^presentations although
eal, 7 Wend. (N. Y.) 72 22 Am. exPressly denominated in policj as
Dec. 567. See §§1882, 1880~et seq.', warranties, see note in 11 L.R.A.
1950 herein. (X-s-> 981.
A representation, whether it be 7 O'Neil v. Buffalo Fire Ins. Co. 3
made in writing or by parol, is col- N. Y. (3 Comst.) 122. See Hoeland
lateral to the policy; and. as it must v- Western Union Life Ins. Co. 58
always influence the judgment of the Wash. 100, 107 Pac. 866; Day v.
underwriter, must be substantially Home Ins. Co. 177 Ala. 600, 40
3198
WARRANTIES § 1949
by construction.8 Again, in construing warranties not only is
the intention of the parties essential, but reference must be had
to the condition of the subject insured, the situation of the parties,
and what was said and done at the time of effecting the policy,
so far as such evidence is admissible.9 So in construing a con-
tract of insurance in a fraternal benefit association, for the purpose
of determining whether the statements made in the written ap-
plication therefor were intended to be representations or war-
ranties, the court will take into consideration the situation of the
parties, the subject-matter, and the language employed, and will
construe a statement made therein to be a warranty only when it
clearly appears that such was the intention of the contracting
parties, and that the mind of each party consciously intended
and consented that such should be the interpretation of his state-
ments.10 And in determining wThether or not a certain statement
or stipulation in an insurance contract constitutes a warranty,
other parts of the contract may be considered; and where other
statements and stipulations are coupled with an express and spe-
cific provision that a violation thereof shall work a forfeiture, it is
evidence showing that the parties did not intend the same result
from the violation of the statement or stipulation not containing
such provision for a forfeiture.11 A warranty that a ship shall
not load more than her "registered tonnage" will be construed
to mean the vessel's carrying capacity set forth in the ship's papers
under which she was sailing at the date of the policy. Such
carrying capacity cannot be determined by the law of measurement
existing under the acts of Congress where the ship sails under a
foreign registry, nor can such carrying capacity be ascertained
by a law of the foreign country enacted after the ship was lost.12
An express warranty cannot, .as a general rule, be qualified by
a representation, since by embodying the warranty in the contract
L.R.A.(N.S.) 652, 58 So. 549, 41 10 Goff v. Supreme Lodge Royal
Ins. L. J. 1187. Achates, 90 Neb. 578, 37 L.R.A.
8 Catholic Order of Foresters v. (N.S.) 1191, 134 N. W. 239.
Collins, 51 Ind. App. 285, 99 N. E. » Port Blakely Mill Co. v. Spring-
745; JEtna Ins. Co. v. Simmons, 49 field Fire & Marine Ins. Co. 59 Wash.
Neb. 811, 69 N. W. 125; L. Black & 501, 28 L.R.A.(N.S.) 596n, 140 Am.
Co. v. London Guarantee & Accident St. Rep. 863, 110 Pac. 36, 39 Ins.
Co. Ltd. 144 N. Y. Supp. 424, 159 L. J. 1447, s. c. 56 Wash. 681, 28
App. Div. 186, 43 Ins. L. J. 301. See L.R.A. (N.S.) 593n, 106 Pac. 194, 39
§§ 209b, 219 herein. Ins. L. J. 352.
9 Hoose v. Prescott Ins. Co. 84 12 Reck v. Phcenix Ins. Co. 130 N.
Mich. 309, 11 L.R.A. 340, 47 N. W. Y. 160, 29 N. E. 137, 43 Alb. L. J.
587, 32 Cent. L. J. 226; JEtna Ins. 155, 41 N. Y. St. Rep. 250.
Co. v. Simmons, 49 Neb. 811, 69 N.
W. 125.
3199
§ 1950 JOYCE ON INSURANCE
it will supersede the representation,13 although an implied war-
ranty or condition not expressed in the policy may be qualified or
superseded by a verbal or written representation.14
In addition, in construing a warranty the language used must
iverned by mercantile usage; thai is, it must be construed with
reference to the usage of trade, the commercial sense, according
to the general understanding of merchants, superseding the ordi-
nary meaning of the terms employed.15 And we would add that
in determining whether a warranty arises from the terms of the
policy or by reference t<» other documents those certain cardinal
rules of construction which should be resorted to and strictly
applied are briefly these: 1. The court will carefully examine
every pari of the contract to discover the intention of the parties,
which when ascertained will govern; 2. Reference must be had
to the nature and requirements of the risi and the subject-matter;
3. The construction musl be reasonable; I. The contract must
be upheld if possible, for forfeitures are not favored: 5. Warranties
are do1 favored by construction; 6. Courts will not create, extend,
or enlarge by construction; 7. Construction should he strictly
againsl the assurer and liberally in favor of the assured; 8. The
written controls the printed part of the policy; 9. Words are to
be construed in their ordinary and popular sense, subject to such
exceptions as arise in case of usage — technical, etc., words.16
§ 1950. In cases of doubt construction against warranty: inten-
tion of parties. — If there is any doubt whether a statement is an
express warranty, the court should lean against that construction
which imposes a warranty on assured.17 bo also if an insurance
18 Vandervoort v. Smith, 2 Caines "A warranty, like every other part
(N. Y.j 155; Redman v. London, 3 of the contract, is to be construed ac-
Camp. 503; Atherton v. Brown, 14 cording to the understanding of mer-
Mass. 152; Deering's Annot. Civ. chants, and does not bind the assured
e Cal. sec. 2575." beyond the commercial import of the
"An express warranty does not ex- words:" 1 Marshall on Ins. (ed.
dude an implied warranty unless it 1810) *347a. As to usage; construe-
be inconsistent therewith." .Marine tion. see >;>? 231 et seq. herein,
ins. act 1906 (6 Edw. VII. c. 41) 16 See chaps. VIII. SS 205 et seq.,
sec. 35, subd. (3); 2 Butterworth's and IX. §§ 237 et seq. herein.
Twentieth Century Statutes (1000- " United States.— McClain v. Prov-
1909), p. 107. ident Savings Life Assur. Sue. 110
14 Park- v. General Interesl kssur. Fed. 80, 49 C. C. A. 131, certiorari
Co. 5 Pick. (22 Mass.) 34, 37, per denied Providence Savings Life
Wilde, -).; Walden v. Fire Ins. Co. Assur. Soc. v. McClain, 184 U. S.
12 Johns. (X. V.) 128, 13G, per 699, 46 L. ed. 765, 23 Sup. Ct. 938;
Piatt, J. ; Deering's Annot. Civ. Code Fidelity Mutual Life Assoc, v. Jef-
Cal sec. 2575. Eords, 53 L.R.A. 193, 107 Fed. 402,
"Lethulier's Case. 2 Salk. 443; 46 C. C. A. 3m.
Ion v. Morley, 2 Strange, 1265;
Urquhart v. Barnard, 1 Taunt. 450.
3200
WARRANTIES
1 !!.-,!
policy contains contradictory terms, or is so framed as to leave
room for construction rendering it doubtful whether the parties
intended the exact truth of the applicant's statements to be a
condition precedent to any binding contract, it should he con-
strued so as not to impose an obligation of a warranty upon the
assured.18 Although under the Civil Code of California a state-
ment in a policy of a matter relating to a person or thing insured,
or to the risk as a fact, is an express warranty, yet if taking the
entire policy in all its terms and language it can be seen thai
such was not the intention of the parties, the statement of fact
will not be deemed an express warranty.19
§ 1951. Warranty in effect condition precedent. — A warranty,
whether express or implied, affirmative or promissory, is in effect
a condition precedent to a recovery, the terms of which must lie
strictly fulfilled by the assured, for upon its nonperformance the
contract is avoided.20 This rule is, however, subject to such ex-
California. — National Bank of D. West Virginia. — Tucker v. Colo-
0. Mills & Co. v. Union Ins. Co. 88 nial Fire Ins. Co. 58 W. Va. 30, 51
Cal. 497, 22 Am. St. Rep. 324, 26 S. E. 86.
Pae. 509. See also substantially same point
Illinois. — Spenee .v. Central Acci- under § 1934 herein, and under ehap.
dent Ins. Co. 236 111. 444, 19 L.R.A. VIII. on construction, see §§ 209b et
(N.S.) 88n, 86 N. E. 104. seq. herein. Examine Day v. Home
Indiana. — Catholic Order of For- Ins. Co. 5 Ala. App. 1, 58 So. 549, 41
esters v. Collins, 51 Ind. App. 285, 99 Ins. L. J. 1187.
N. E. 745; Masons' Union Life Ins. As to statutes, see § 1916 herein.
Assoc, v. Brockman, 20 Ind. App. 18 Noone v. Transatlantic Fire Ins.
206, 50 N. E. 493. Co. 88 Cal. 152, 26 Pac. 103.
Nebraska. — Modern Woodmen Ac- 19 National Bank of D. O. Mills &
cident Assoc, v. Shryack, 54 Neb. 250, Co. v. Union Ins. Co. 88 Cal. 497, 22
39 L.R.A. 826, 74 N. W. 207, 27 Ins. Am. St. Rep. 324, 26 Pac. 509; Deer-
L. J. 772; Kettenbaeh v. Omaha Life in^'s Annot. Civ. Code Cal. sec. 2607.
Assoc. 49 Neb. 842, 69 N. W. 135, 70 20 United States.— Rice v. Fidelity
N. W. 392. & Deposit Co. 103 Fed. 427, 43 C. C.
New Jersey. — Owen v. Metropoli- A. 270.
tan Life Ins. Co. 74 N. J. L. 770, 122 California. — Wolverine Brass
Am. St. Rep. 413, 67 Atl. 251. • Works v. Pacific Coast Casualty Co.
Tennessee.— Hunter v. United 26 Cal. App. 183, 146 Pac. 184, 45
States Fidelity & Guaranty Co. 129 Ins. L. J. 551.
Tenn. 572, 167 S. W. 692, 694. Indiana.— Baker v. German Fire
Vermont.— Wilson v. Commercial Ins. Co. 124 Ind. 490, 24 N. E. 1041.
Union Assur. Co. — Vt. — , 96 Atl. Louisiana. — Goieoechea v. Louisi-
540. ana Ins. Co. 6 Mart. N. S. (La.) 51,
Washington. — Port Blakely Mill 17 Am. Dec. 175.
Co. v. Springfield Fire & Marine Ins. Massachusetts. — McLoon v. Com-
Co. 59 Wash. 501, 28 L.R.A.(N.S.) mercial Mutual Ins. Co. 100 Mass.
596n, 140 Am. St. Rep. 863, 110 Pac. 472, 1 Am. Rep. 129.
36, 39 Ins. L. J. 1447, s. e. 56 Wash. Missouri.— Salts v. Prudential [ns.
681, 106 Pac. 194, 39 Ins. L. J. 352, Co. 140 Mo. App. 142, 120 S. W.
28 L.R.A.(N.S.) 593n. 714, 38 Ins. L. J. 943.
Joyce Ins. Vol. III.— 201. 3201
§ 1951a JOYCE ON INSURANCE
captions, distinctions or qualifications as appear under the next
following section and also to such exceptions as relate to the
burden of proof.1
§ 1951a. Same subject: other views: special distinctions, etc. —
Notwithstanding the genera] rule last above stated a distinction
is made between a warranty and a condition precedent in that the
former does nol suspend or defeat the operation of the contract
but a breach affords cither the remedy expressly provided in the
contracl or that furnished by law while the latter is one without
the performance of which the contract although in form executed
by the parties and delivered does not spring into life.2 So a dis-
tinction is made between an affirmative warranty and a condition
in discussing the effect of a provision that the policy should be
void if insured had done certain acts prior to the date of the pol-
icy and the court, per Thomas, J., said: "Our conclusion is that it
is a warranty — in the nature of a condition, it is true, but not
technically speaking a condition, since a technical condition (that
is one nnt predicated upon a warranty) must, in order to be valid
a- such, relate t<» the future and not to the past. In insurance law
the terms 'warranty' and 'condition' are often inaptly used as
synonymous terms. ... It thus appears that conditions tech-
nically such, that is. those not grounded upon warranties, must
have reference to and be based upon future events, acts or states
of things, that is, on something that is to occur or take place, and
not (in j iast acts, events or states of things, or something that has
occurred or taken place. On the other hand, an affirmative war-
ranty, while in the nature of a condition — a condition precedent
to the vesting of the right under the contract — is not, technically
-peaking, a condition, since it relates to past acts, events, or con-
Mo)Ua»a.—Fe\ican v. Mutual Life Dec. 460; O'Neil v. Buffalo Fire Ins.
Ins. Co. 44 Mont. 277, 119 Pae. 778, Co. 3 N. Y. (3 Comst.) 122.
11 I us. L. J. 327, 332, Brantly, C.J. Vermont. — Wilson v. Commercial
X, w Jersey. — Dimick v. Metropol- Union Assur. Co. — Vt. — , 90 Atl.
itan Life Ins. Co. 67 N. J. L. 367, 51 540.
Ail. 692, s. c. 69 N. J. L. 384, 62 England,— Be Halm v. Hartley, 1
L.R.A. 774, 55 Atl. 291. Term Rep. 345, 340, 14 Eng. Rul.
New York. — Allen v. German Cas. 171, per Lord Mansfield; Hib-
A-ineriean Ins. Co. 123 N. Y. 6, 25 bert v. Pigon, 3 Doug. 224, reported
X. E. 309; Pierce v. Empire Ins. Co. in 1 Marshall on Ins. (ed. 1810) *369,
(i2 Barb. (X. Y.) (>3(>; Fanners' Ins. *370a, per Lord .Mansfield.
Co. v. Snyder, 16 Wend. (X. Y.) 1 See §§ L951a, 1977 herein.
IS1, 30 Aiii. Dec 118; Jefferson Ins. As to statutes, see § 1916 herein.
Co. v. Cotheal, 7 Wend. (N. Y.) 72, 2 Everson v. General Fire & Life
73, 22 Am. Dec. 567; Duncan v. Sun Assur. Corp. Ltd. 202 Mass. 169, 88
Fire Ins. Co. 6 Wend. (X. Y.) 488, N. E. 658, 38 Ins. L. J. 923, 927,
22 Am. Dec. 539; Fowler \. ZEtna Rugg, J.
[ns. Co. 6 Cow. (X. Y.) 673,16 Am.
3202
WARRANTIES § 1951a
ditions of things, and consists in the assertion of n pasl or existing
fact, upon the truth or accuracy of which the validity of the con-
tract is made to depend."8 Again, it is decided that a promissory
warranty that due diligence be used that the automatic sprinkler
system shall at all times be maintained in good working order,
is a condition subsequent, the performance of which need not be
pleaded and proved by the plaintiff, and that after the policy
has attached the defendant has the burden of proving a breach,
and that such warranty is not a condition precedent under a stat-
ute which has reference only to condition- precedent or necessary
to the creation of the contract or to the perfecting of the right of
action. The court, per Crow, J., said: "In a limited sense, it might
be contended that practically every stipulation in a policy of in-
surance, without regard to whether it is a promissory warranty or
not, is a condition precedent to assured's right of recovery, since
the breach of most any of its provisions will prevent such recovery.
. . . Conditions to be performed by the assured after the policy
has become a valid contract are conditions subsequent, being in
the nature of conditions of defeasance, nonperformance of which
may release the insurer from liability." 4 And the failure to take
an inventory under the iron-safe clause warranty is held to be a
condition subsequent preventing recovery if relied on by defend-
ant.5 So it is decided that if an insured person contracts and war-
rants that if the representations made by him in his application
for insurance are not true the policy shall be null and void, such
representations are not conditions precedent but rather in the
nature of a defeasance. In the case so holding, the policy pro-
vided that the application was made a part thereof and that if any
fraudulent misrepresentation or statement should be made in the
application, the policy should be null and void and the application
warranted the answers to be true, full and fair. It was contended
that if any of the answers were false, the policy would be void ab
initio and therefore they were conditions precedent, but it was
held, however, that they were rather in the nature of a defeasance.
The court, per Mitchell, J., said: "For the purposes of this case it
8 Metropolitan Life Ins. Co. v. 36, 39 Ins. L. J. 1447, s. e. 56 Wash.
Goodman, 10 Ala. App. 446, 65 So. 681, 28 L.R.A.(N.S.) 593n, 106 Pae.
449. 104, 30 Ins. L. J. 352.
4 Port Blakely Mill Co. v. Hartford 5 Royal Ins. Co. Ltd. v. Kline
Fire Ins. Co. 50 Wash. 657, 97 Pae. Brothers & Co. 198 Fed. 46S. 117 C.
781. As to the construction of the C. A. 228, 41 Ins. L. J. 1590. The
same provision, see Port Blakely Mill court, however, quotes from a ease
Co. v. Springfield Fire & Marine Ins. (Imperial Fire Ins. Co. v. Coos
Co. 59 Wash. 501, 140 Am. St. Rep. County, 151 U. S. 452. 462. 38 L. ed.
863, 28 L.R.A.(N.S.) 596n, 110 Pae. 231, 14 Sup. Ct. 279) in the Federal
3203
- L951a JOYCE ON INSURANCE
i> immaterial whether these answers arc to be deemed warranties
or mere representations, for the rule of pleading and proof would
be the same in either case. Hence we shall assume, most favorably
to the defendant, that the answers are warranties. A condition
precedent, as known in the law, is one which is to be performed
before the agreement of the parties becomes operative. A con-
dition precedent calls for the performance of some act or the hap-
pening of some event after the contract is entered into, and upon
the performance of happening of which its obligation is made to
depend. In the' case of a mere warranty, the contract takes effect
and becomes operative immediately. It is true that, where a policy
of insurance so provides, if there is a breach of a warranty, the
policy is void ah initio. But this does not change the warranty
into a condition precedent, as understood in the law. It lacks
the essential element of a condition precedent, in that it contains
no stipulation that an event shall happen or an act shall be per-
formed in the future, before the policy shall become effectual. It
is more in the nature of a defeasance, where the insured contract.-,
that, if the representations made by him are not true, the policy
-hall he defeated and avoided. But, even if these warranties are
to be deemed conditions precedent, it has become settled in in-
surance law, for practical reasons, that the burden is on the insurer
to plead and prove the breach of the warranties."6 There is an-
other class of cases which have been cited in connection with the
discussion of this question as sustaining the distinction under con-
sideration, as where it is stipulated substantially or in terms that
no obligation is assumed by assurer prior to the date of the con-
tract, nor unless on said date assured shall be alive and in sound
health, and where no question arises npon a representation or
warranty made by assured. In such cases, however, the existence
of life and sound health is clearly a condition precedent to assum-
ing the risk.7 But these decisions differ widely from those where
Supreme Court wherein it is declared Examine Ilennessy v. Metropolitan
that ;i compliance with the terms of Life Ins. Co. 74 Conn. 699, ■">'_! All.
the contract is a condition precedent 49°; Leonard v. State Mutual lute
to recovery. See also Tillis v. Lou- Assur. Co. 24 R. I. 7, 96 Am. St. Rep.
don & Liverpool & Globe Ins. Co. 46 698> 51 Atl. 1049, s. c. 27 R. I. 121,
Pla. 268, 35 So. 171, 33 Ins. L. J. ^1 Atl. 52, 34 Ins. L. J. 8o0, and see
28Q § 19// herein.
Ao + ;~~ „„*„ „ i- 11 7 Packard v. Metropolitan Life Ins.
A. to ron-safe, inventory, book- -, N H ^ £
keeping clauses, see §§ 2063 et seq. Bark(,,. v Metropolitan Life Ins. Co.
herein. lgg ^^ -^ -^ _, ^ R Q^
6 Chambers v. Northwestern Mu- Substantially the same decision is
tual Life Ins. Co. 61 .Mum. t95, 197, rendered in Longstaff v. Metropolitan
58 Am. St. Rep. 549, 67 N. \Y. 367. Life Ins. Co. 69 N. J. Law, 54, 54
3204
WARRANTIES § 1952
a representation is made prior to the risk attaching, as to the exist-
ence or non-existence, (»[' a fact, which statement is an inducement
to entering into the contract or fixing the premium and which
may or may not be a part of the contract according to the intent,
of the parties, expressed or implied, and the falsity of which, if
material, will avoid the contract, or ;i breach of wlrich if a war-
ranty, will render it null regardless of it.- materiality.8
But it is also declared that "the terms 'warranty' and 'condition
precedent' are used interchangeably in insurance law.
The frequent identity of the two terms for all purposes of de-
termining Liability on n policy in ;i given case is assumed in
numerous treatises and decisions; the assumption being sometime-
tacitly applied, and at other times a warranty is spoken of as a
condition precedent or vice versa."9
In conclusion: Although some of the cases are to the contrary
the general rule prevails under which a warranty is in effeel a
condition precedent to recovery, and the rule hereinafter stated
as to the burden of proof does not change the nature or character
of a warranty from that above stated as it is a qualification or
exception to the rules of evidence resting upon convenience rather
than upon any reason in or logic of the law.10
§ 1952. Condition precedent continued: loss occurring prior to
breach of promissory warranty: whether contract ab initio void. —
Some question has arisen upon the point whether the insurer is
exonerated merely from the time a breach of a promissory war-
ranty occurs or whether such breach avoids the contract ab initio.
Mr. Marshall, Mr. Arnould, and Mr. Maclachlan are all of the
opinion that an executory warranty is a condition precedent, and
Atl. 518; Carmic-hacl v. John Han- special distinction has generally been
cock Mutual Life Ins. Co. 101 N. Y. made between warranties and con-
Supp. G02, 116 App. Div. 291 ; ditions precedent by the courts such
Stringham v. Mutual Ins. Co. 41 as was attempted in this case. The
Greg. 447, 75 Pac. S22 ; Metropolitan latter is simply treated as a larger
Life Ins. Co. v. Betz. 44 Tex. Civ. class which includes the former, and
App. 557, 99 S. W. 1140. Compare hence one of the familiar definitions
Salts v. Prudential Ins. Co. 140 Mo. of a warrantv is that it is a con-
App. 142, 120 S. W. 714, 38 Ins. dition precedent to the risk or to the
L. J. 943. See §§ 97a et seq. herein, creation of a liability. If the war-
8 This latter class is so clearly evi- ranty relates to facts existing at the
denced by the numerous decisions un- inception of the risk the latter never
der these chapters on representations attaches, and no contract is existent
and warranties that citations here are in case of violation. If the war-
unnecessary, ranty relates to the future the risk
9 Goode, J., in Salts v. Prudential attaches, but terminates, and the con-
Ins. Co. 140 Mo. App. 142, 120 S. tract ceases upon its violation."
W. 714, 38 Ins. L. J. 943, and note 10 See § 1977 herein,
bv the editor where it is said : "No
3205
§ 1953 JOYCE OX INSURANCE
that its subsequent breach avoids the policy ab initio, the substance
of tlic argumenl being thai the very basis of the contract rests upon
the agreement to observe strictly and literally, and at all events,
the conditions imposed; that the warranty makes the contract
hypothetical, binding only it the warranty is complied with, and
that the only 'question is, Has the evenl taken place or not? If
it has not, then there is uo contract, and thai nothing will excuse
compliance with an express warranty, unless possibly in cases
where the state of things contemplated by the warranty shall
cease or a subsequent Law makes compliance illegal.11
§ 1953. Same subject: decisions on which proposition based. —
The only authority for the lasl above stated proposition rests upon
the declarations of that eminent and learned jurist, Lord Mans-
field, on two occasions, who says: "There are hypothetical con-
tracts and conditional contracts. In the former, the contract de-
pend- on an evenl taking place. There is no latitude, no equity : the
only question is, Has that evenl happened?" And again, "The
warranty is a contract of insurance, is a condition or a contingency,
and. unless that he performed, there is no contract."12 The lan-
guage used must, however, he construed with reference to the facts
of the case and in neither of these cases from which the language
is taken did the loss occur until after the breach of the warranty.
That Lord Mansfield did not intend by the language used to
establish the rule above claimed is evident from other decisions
made by him. Thus, in another case, where there was a warranty
to have .-ailed on or before a certain day. he says: "The question
then is. Had she or had she not sailed on or before the day? No
matter what prevented her. if she had not sailed. . . . the
policy would have been void, . . . there would have been no
contracl between the parties, . . . there would have been an
end of the policy." 13 The act 38 Geo. III. c. 76, sec. 1, provides
that in case of sailing without convoy, the insurance on the ship
shall be void, and the premium not returnable. Tin* certainly
would not he sufficient in itself to -how that Lord Mansfield only
considered the contracl at an end from the time of the breach only,
but, in connection with the following cases, it is clearly evident
that he did not consider the contract void ab initio for a breach
of an executory warranty. Thus, in Stevenson v. Snow, the ship
was insured "at and from London to Halifax,, warranted to depart
11 1 Marshal] en Ins. (ed. 1810) * 370a; Park on Ins. (ed. 1796) 339;
*348, *349; 1 Arnould on Marine Ins. De Halm v. Hartley, 1 Term Rep.
(Perkins' ed. L850) 586, '583; hi. 345, 346, II Eng. h'ul. Cas. 171.
(Maclachlan's ed. 1887) 604. 18Bond v. Nutt, Cowp. 601, per
12 Ilililnit v. Pigou, reported in 1 Lord Mansfield.
Marshal] on Ins. (ed. 1810) *369,
3206
WARRANT! KS § 1953
with convoy from Portsmouth for the voyage." Before the ship
reached Portsmouth, the convoy had gone, bul ;i proportionate re-
turn of the premium was granted, and Lord Mansfield placed this
decision upon the fact that where there was a enntin^eney in the
voyage, the risk might be divided; that is, that the fact of not
sailing with convoy from Portsmouth reduced the contract in fact
to a voyage from London to Portsmouth, for which the risk had
been run.14 And if more were needed to show what this eminent
jurist meant by the language relied on by the text-writers above
noted, he refers in a subsequent decision to the case last noted
herein, and says: "In that case, the intention of the parties, the
nature of the contract, the consequences of it, spoke manifestly of
the insurances, and a division between them. The first object of
the insurance was from London to Halifax. But if the ship did
not depart from Portsmouth with the convoy specified, then there
was to be no contract from Portsmouth to Halifax. The parties
then have said: 'We make a contract from London to Halifax;
but on a certain contingency it shall only be a contract from Lon-
don to Portsmouth.' That contingency not happening reduces
it, in fact, to a contract from London to Portsmouth only. The
whole argument turned upon that distinction, and all the judges,
in delivering their opinions, laid the stress upon the contract coin-
prising two distinct conditions, and considering the voyage as
being in fact two voyages; ... a case of general practice was
put by Mr. Dunning, where the words of the policy are 'at and
from, provided the ship sails on or before the first day of August/
and Mr. Wallace considers in that case that the whole policy would
depend upon the ship's sailing before the stated day. I do not
think so. On the contrary, I think with Mr. Dunning that cannot
be. A loss in port before the day appointed for the ship's de-
parture can never be coupled with a contingency after the day.
But if a question were to arise about it, as at present advised, I
should incline to be of opinion that it would fall within the reason-
ing of Stevenson v. Snow, above noted, and that there were two
parts or contracts of insurance with distinct conditions: The first
is, 'I insure the ship in port against loss before the 1st of August/
and secondly, Tf she should not be lost in port, I insure her then,
during her voyage from the 1st of August till she reach the port
specified in the policy.' The loss in port must happen before the
risk upon the voyage could commence, and, vice versa, the risk
in port must cease the moment the risk upon the voyage began." 15
14 Stevenson v. Snow, 3 Burr. 1237, 15 Tyrie v. Fletcher, Cowp. 668, 14
1 W. Black. 315, 318, per Lord Mans- Ens:. Rul. Cas. 502, per Lord Mans-
field, field. See Taylor v. Lowell, 3 Mass.
3207
§ L954 JOYCE ON INSURANCE
In another case, where the warranty was to depart with convoy,
on or before a certain date, the warranty not being fulfilled, the
underwriters were discharged i'mm the remaining risk, but no re-
turn of premium was allowed for the risk run up to the time of
breacli.16 It is therefore evident that Lord Mansfield never in-
tended thai his language, relied upon as stated in the beginning
of this section, should mean that where a warranty is executory,
it must be held a condition precedent to recovery, avoiding the
policy ab initio in case of its breach.
§ 1954. Same subject: additional authorities. — In Baines v. Hol-
land,17 the policy was "at and from" New York to Quebec, war-
ranted to sail on or before November Lst. On that day she was
,M sea safely proceeding to Quebec, and consequently did not arrive
in time to sail as warranted, and she was thereafter lost. The
time of the year was not such as to enable her to fulfill her war-
ranty, and il was held thai the policy must be so construed as to
effecl the evident intention of the parties, and that the warranty
me.int that she was to sail for Quebec on or before November lst,
if she arrived there by that time, otherwise there would be no in-
surance on the vessel between New York and Quebec, and that the
underwriters were liable for a loss after November Lsl and before
she reached Quebec, on the ground that the warranty only related
to the voyage following her arrival at Quebec. It is true that
prima facie proof is required of compliance with the express
warranties of a policy.18 bul there is nothing in this requirement
to conflict with the view above taken. In a New York case an
insurance was effected "at and from," with a warranty to sail be-
tween specified dates. The ship did not sail until the time had
passed, and it was held that the warranty related to the voyage
;md not to the risk in port, and therefore the risk attached on the
vessel in port, and there could be no return of premium.19 Mr.
Phillips armies from the fact that the premium was not returned
in this case, that there must have been a valid subsisting contract
;it some time, and that a recovery could be had fora loss occurring
prior to the breach of a warranty which relates to a circumstance
necessarily subsequent to the commencement of the risk,20 and
331, 3 Am. Dec. 141, per Parsons, 18 Areansrelo v. Thompson, 2
Ch. J., and Sewall, J. Camp. 620; Watson v. King, 4
"Long v. Allen, 4 Doug. 276, 14 Camp. 272, 275, 1 Stark. 121. See
Eng. Bul. <'as. 517. So also in §§ 3784, 3785 herein.
Gale v. .Miu-kill, reported in 1 Mar- 19 Hendricks v. Commercial Ins.
shall en Ins. (ed. L810) 659, and see Co. 8 Johns. (N. Y.) 1.
Meyer \. Qregson, reported in 1 .Mar- 20 1 Phillips on Ins. (3d ed.) 425,
shall en Ins. 658. sec. 771.
17 10 Exeh. 801, 24 L. J. Ex. 204.
3208
WARRANTIES S§ 1955, L956
Mr. Parsons states substantially the same rule.1 The Code of
California provides thai a breach of warranty without fraud merely
exonerates the insurer from the time it occurs.2*
§ 1955. Same subject: conclusion. — Wo conclude that the weight
of authority is that a warranty thai a given thing shall take place
subsequently to the commencement of the risk is not a condition
precedent to the recovery of a loss occurring prior to the time fixed
for the performance of the warranty and during the existence of
a risk which has commenced, and is so far valid up to the time of
the loss that the insurer is entitled to retain the premium paid
therefor,3 and this rule precludes the idea that a subsequent breach
of such a promissory warranty relates back prior to the antecedent
loss, and renders the policy void ab initio. Fraud, however, would
necessarily constitute an exception to the rule. So in the last
edition of 1914, of Mr. Arnould's treatise, it is declared that: "A
breach of warranty, however, whether express or implied, only dis-
charges the insurer from liability as from the date of the breach,
without prejudice to any liability incurred by him before that
date," that is, that a breach of warranty is no defense to a claim
for a loss before the breach.4
This class of cases should be distinguished from those where the
policy is ab initio void by reason of a false statement or warranty
as to their existing facts made to induce assurer to issue a policy
when it is reasonable to assume that it would not have done so
had it known the actual facts as they then existed.5
§ 1956. Express warranty must appear on face of policy or be
made a part of contract. — It is a well-settled rule that an express
warranty must appear upon the face of the policy, or be clearly
incorporated therein and made a part thereof by explicit reference
or by words clearly evidencing such intention.6 So it is declared in
1 1 Parsons on Marine Ins. (ed. view of the law, as now declared, as
1868) 341. a more reasonable one in the 7th ed.
2 Deering's Annot. Civ. Code Cal. of said treatise (p. 634) and it was
see. 2612. added that this appears to have al-
8 See § 1973 herein. ways been the law as regards implied
4 2 Arnould on Marine Ins. (9th warranties,
ed. Hart & Simey) sees. 632, 634, pp. 5 See Wolverine Brass Works, Inc
813, 815, citing marine insurance act v. Pacific Coast Casualty Co. 26 Cal.
1906 (6 Edw. VII. c. 41) sec. 33, App. 183, 146 Pac. 1S4, 45 Ins. L.
subd. (3), and stating that "this pro- J. 551.
vision determines a point which be- As to statutes, see § 1916 herein,
fore the act was an open one and as 6 United States. — Missouri K. & T.
to which there were conflicting Trust Co. v. German National Bk.
opinions" and that the editors, Mr. 77 Fed. 117, 23 C. C. A. 65, 40 U.
Hart & Mr. Simev, had favored the S. App. 710 (fidelity guaranty).
3209
JOiVK ON ENST RANCE
a New York case thai qo statemenl made to an insurance company
as the basis of a contract of insurance can be regarded as a war-
ranty, unless the paper in which it is made is by necessary infer-
ence made a paxl of the contract, and if a paper aol made a part
4rfcawsas.— Metropolitan Life Ins.
. Johnson, 105 Ark. 101, 150 S.
W. 393, 12 tns. L. J. 73.
Connecticut. — Glendale Woolen Co.
v. Protection Ins. Co. 21 Conn. 19,
.".1 Am. Dec. 309.
Illinois. Spence v. Centra] A.cci-
denl [ns. Co. 236 III. HI. L9 L.R.A.
(N.S.) 88n, 86 N. K. mi. 38 Ins. L.
J. 87; Mutual Benefit Life Ins. Co.
v. Robertson, 59 111. 123, 14 Am. Rep.
8.
bulimia. Presbyterian Mutual As-
surance Fund v. Allen, 106 Ind. 593,
7 X. E. -'117; Mutual Benefil Life Ins.
Co. v. Miller, 39 lnd. 475; Catholic
Order of Foresters v. Collins, 51 Ind.
App. 285, 99 X. E. 745.
Kentucky. — Kentucky & Louisville
Mutual Ins. Co. v. Sunt hard, 8 B.
Mon. (Ky.) 634.
Maine.^Williams v. New England
Mutual Fire Ins. Co. 31 Me. 219.
Massachusetts. — Clapp v. Massa-
Ohio. Hartford Protection Ins.
Co. V. Manner, 2 Ohio St. 452, 59
Am. Dee. 684.
Oklahoma. Mutual Life [ns. Co.
of X. Y. v. Morgan, 39 Okla. 205,
135 Pac. 279.
Texas. Goddard v. Easl Texas
Fire Ins. Co. 67 Tex. 69, 60 Am.
Rep. 1, 1 S. W. 906; Pawson v.
Watson, Coup. 785, L3 Eng. Rul.
( 'as. 5 lit. per Lord Mansfield.
Washington. — Hoeland v. Western
Union Life Ins. Co. 58 Wash. 100,
107 Pac. 866.
England. — Wood v. Worsley, 2 H.
Black. 574; Macdowell v. Frazer, 1
Doug. 260; Pittegrew v. Pringle, 3
Barn. & Adol. 514; Cornfoote v.
Fowke, G Mees. & w. 358, per L'< rd
Abinger.
"It is immaterial whether an ex-
press warranty is inserted in the
body, margin, or at the foot, but it
chusetts Mutual Benefit Assoc. 146 must appear somewhere upon the face
Mass. 519, Ki N. K. 433; Daniels v.
Hudson River Fire Ins. Co. 12 Cash.
(66 Mass.) llfi, 59 Am. Dec. 192;
Vose \. Eagle Life & Health Ins. Co.
6 Cush. ((it) Mass.) 42.
Missouri. — Salts v. Prudential Ins.
Co. 1 10 Mo. App. 142. 120 S. W.
714, 38 Ins. L. J. 943.
of the policy :" McArthur on Marine
Ins. (ed. 1890) 5. "An express war-
ranty being in the nature of a con-
dition precedent, it must appear on
the face of the policy; therefore, in-
structions in writing for effecting the
policy, unless inserted in the instru-
ment itself, do not amount to a war-
Montana. — Pelican v. Mutual Life ranty: Pawson v. Barnevelt, 1 Doug.
Tns. Co. of N. Y. 44 Mont. 277, 119 T2n; but only to a representation up-
Pac. 778, 41 Ins. L. J. 327.
New Jersey. — Dewees v. Manhat-
tan Ins. Co. 34 N. J. L. 244.
New York. — Stebbins v. (Jlobelns.
Co. 2 Hall (N. Y.) 632; Linzee v.
Frankfort General Ins. Co. 147 XT. Y.
Supp. 606, 162 App. Div. 282, 41
Ins. L. J. 83. See Moore v. Pruden-
on which the doctrine differs:" Ham-
mond on Fire Ins. (ed. 1840) 82,
85. "Warranties are not necessary
in fire policies, inasmuch as the rep-
resentations, which niu.-t be true in
all particulars material to the risk,
are entirely adequate to protect the
interests of the insurers. I *> u 1 it has
tial Casualty Co. 45fi N. Y. Supp. become quite usual to convert repre-
892, 170 App. Div. 849, 47 Ins. L. J. sentations into stipulations of war-
313, 315, 316, a* to state of law in ranty by some reference or condition
this respect prior to statutes. in the policy \ representa-
3210
WARRANTIES § 1956
of the policy by anything in the policy itself contains certain state-
ments, they cannot by construction be enlarged and made war-
ranties so that the insurer may insisl upon a forfeiture.7 And
the rule is that a warranty must be strictly construed ; it cannot be
created or extended by construction, nor can it include by con-
struction anything not necessarily implied in its terms.8 ami it
must be clearly and unequivocally expressed that a warranty was
intended, or it must result necessarily from the nature of the
contract.9 Thus, while a specified fact, quality, or circumstance
may relate to the risk and so constitute a warranty, yet it may only
be used to identify the subject of insurance or be used merely by
way of recital and description, and not have the force ami effect of a
warranty.10 As a general rule the greater part of the printed and
tion inserted in the policy becomes a thereof to policy, see notes in 63
warranty, and a representation, when L.R.A. 867; 23 L.RA.(X.Sj 982;
referred to in the policy as forming a and 52 L.R.A. (N.S) 285.
part of it, has the same effect as 8 United States. — Sayles v. North-
though it was written in the body of western Ins. Co. 2 Curt. (U. S. C. C.)
it; that is, the representation becomes 610, Fed. Cas. No. 12.422.
a warranty. But a mere reference to Illinois. — Mutual Benefit Life Ins.
another paper as a survey or appli- Co. v. Robertson, 59 111. 123, 14 Am.
cation does not make it a part of the Rep. 8; Howard Fire & Marine Ins.
policy, nor bind the insured by its Co. v. McCormick, 24 111. 455.
contents as a warranty :" Flanders on Indiana. — Catholic Order of For-
Fire Ins. (2d ed.) 232, 233. A war- esters v. Collins, 51 Ind. App. 285,
ranty must appear upon the face of 99 N. E. 745.
the policy, or be incorporated therein Massachusetts. — Martin v. Fishing
by apt and proper words of reference Ins. Co. 20 Pick. (37 Mass.) 389, 32
as a part thereof: Moulor v. Ameri- Am. Dec. 220.
can Life Ins. Co. Ill U. S. 335, 342, Nebraska. — iEtna Life Ins. Co. v.
343, 28 L. ed. 447, 4 Sup. Ct. 466, Simmons, 49 Neb. 811, 69 N. W. 125.
per Harlan, J., cited in Weil v. New New York. — L. Black & Co. v.
York Life Ins. Co. 47 La. Ann. pt. London Guarantee & Accident Co.
2, 1405, 1418, 17 So. 853, per Wat- Ltd. 144 N. Y. Supp. 424. 159 App.
kins, J. Div. 186, 43 Ins. L. J. 301.
"An express warranty must be in- England. — Hyde v. Bruce, 3 Doug,
eluded in, or written upon, the policy 213.
or must be contained in some docu- See §§ 209b, 219 herein,
ment incorporated by reference into 9 United States Fire & Marine Ins.
the policv." Marine'ins. act 1906 (6 Co. v. Kimberlv, 34 Md. 224, 6 Am.
Edw. VII. e. 41) sec. 35, subd. (2); Rep. 325; Alabama Gold Life Ins.
2 Butterworth's Twentieth Century Co. v. Johnson, 80 Ala. 467, 59 Am.
Stat. (1900-1909) p. 407. Rep. 816, 2 So. 125; Jefferson Ins.
7Boehm v. Commercial Alliance Co. v. Cotheal, 7 Wend. (N. Y.) 72,
Life Ins. Co. 62 N. Y. St. Rep. 211 22 Am. Dec. 567; Metropolitan Life
(N. Y. Supr. Ct! Spec. Term), af- Ins. Co. v. Johnson, 105 Ark. 101,
firmed without opinion, 86 Hun (N. 150 S. W. 393, 42 Ins. L. J. 73.
Y.) 617. 10Wood v. Hartford Fire Ins. Co.
On conflict of laws as to necessity 13 Conn. 533, 35 Am. Dec. 92.
of attaching application or copy
3211
§ L956a JOYCE ON INSURANCE
written conditions and stipulations in policies is in the nature of a
warranty, and any statemenl or description, printed or written, on
the face of the policy in fire or marine insurances which relate- to
the risk is substantially a warranty.11 but Dot necessarily so as the
intent of the parties, deduced from a construction of the entire
contrad musl govern in cases where there is room for construction,12
and an exception also exists under certain statutory, previsions
as we have elsewhere stated. A Pennsylvania ease is sometimes
cited as holding that the fact that the statement appears on the
face of the policy does not make it a warranty where it is clearly
evident from the terms of the contract that such statement is of a
tad which can have no possible relation to the risk, and that it
could not have influenced the underwriter in assuming the risk.
The case,, however, cannot be held to support the hroad principle
which it seemingly warrants as thus stated, since it appeared in
e\ idence that by the custom of Philadelphia special warranties were
inserted in a special clause, and this claimed warranty of nationali-
ty was not set forth in the regular clause, and the court construed
the whole contract together, and gave this fact great weight as
evidencing the intent that such warranty was not contemplated by
the parties, so that the case may in reality he held to sustain the
principles that the courts will not create or extend a warranty by
construction, and will so construe the entire contract as to ascertain
and effectuate the intention of the parties, and in this view no legal
objection can be had to the decision, and, at the most, that the
statement was intended as a mere recital of a fact was evident from
the contract.18
§ 1956a. Material or immaterial statements made warranties by
stipulation. — It is undoubted that parties may. within legal limita-
tions, stipulate thai statements whether material or immaterial
shall constitute warranties, and when so made they will if untrue
or false avoid the contract; but they must he properly made, by
reference or otherwise, a, part of the policy, and it must clearly
appear that it was the intent of the parties that such statements
11 Kelsey v. Universal Life Ins. Co. son, 3 Bos. & P. 499, 515, per Law-
35 Conn. 225; Eversoa v. General rence, J.; Hopkins on Ins. 174, 181,
Fire & Life Assur. Corp. 202 Mass. 182, 195. "Warranties in charter
169, ss X. E. 658, 38 his. L. J. 923; parties being homologous in nature
Miles \. Connectieul Mutual Ins. Co. with those contained in policies of in-
3 Gray ((ill Mass.) 580; Wall v. Easl surance are quoted in cases arising on
River Ins. Co. 7 N. Y. (Seld.) 370. the latter for precedent : Hopkins on
Sec ('renin v. Fire Assoc, of I'hila. Ins. 181."
L23 Mich. 277, 82 N. W. 45, 20 Ins. 12 See §§ 1890, 1912, 1949 herein.
L. J. .">li4: Mead v. Northwestern Ins. 13 Mackie v. Pleasants," 2 Binn.
Co. 7 N. Y. 530; Lothian v. Hender- (Pa.) 303.
3212
WARRANTIES § 1956a
wore to be made warranties, or to have the effect thereof, and i
eases of doubt they will not be so held.14
So statements in the application which are copied into the
policy and upon renewals thereof are expressly made a part of
the policy and warranted to be true and which are material to the
risk are affirmative warranties and this applies to accident as well
14 United States.— Doll v. Equitable N. W. 52; Nelson v. Nederland Life
Life Assur. Soe. 138 Fed. 705, 71 Ins. Co. 110 Iowa, 600, 81 N. W. 807.
C. C. A. 121; Farrell v. Security Mu- Kansas. — Green v. National An-
tual Life Ins. Co. 125 Fed. 684, 60 nuity Assoc. 90 Kan. 523, L35 Pac.
C. C. A. 374, 33 Ins. L. J. 679 (but 586; Hoover v. Royal Neighbors of
held policy avoided by any substan- America, 65 Kan. 615, 70 Pac. 595.
tial omission or' misstatement. An- See Metropolitan Life Ins. Co. \.
swers as to health, etc., were positive- Brubaker, 78 Kan. 146, 18 L.R.A.
ly untrue); Standard Life & Acci- (N.S.) 362, 130 Am. St. Rep. 356,
dent Ins. Co. v. Sale, 121 Fed. 664, 57 16 Ann. Cas. 267, 96 Pac. 62.
C. C. A. 418, 61 L.R.xV. 337; Hub- Louisiana.— Germier v. Springfield
bard v. Mutual Reserve Fund Life Fire & Marine Ins. Co. 109 La. 341,
Assoc. 100 Fed. 719, 40 C. C. A. 665, 33 So. 361 ; Petitpain v. Mutual Re-
29 Ins. L. J. 577; American Credit serve Fund Life Assoc. 52 La. Ann.
Indemnity Co. v. Carrolton Furniture 503, 27 So. 113, 29 Ins. L. J. 269.
Co. 95 Fed. Ill, 36 C. C. A. 671, Michigan.— Bonewell v. North
28 Ins. L. J. 849. American Accident Ins. Co. 167 Mich.
Alabama.— Alabama Gold Life Ins. 274, 132 N. W. 1067, 41 Ins. L. J.
Co. v. Johnston, 80 Ala. 467, 59 Am. 150, Ann. Cas. 1913A, 847. Cited in
Rep. 816, 2 So. 125; Kellv v. Life Rathman v. New Amsterdam Casu-
Insurance Clearing Co. 113*Ala. 453, altv Co. 186 Mich. 115, L.R-.A.1915K,
21 So. 361, 26 Ins, L. J. 892. 980, 152 N. W. 983, 46 Ins. L. J. 373,
Arkansas. — Providence Life Assur. 379.
Soc. v. Rentlinger, 58 Ark. 528, 25 Minnesota. — Cerys v. State Ins. Co.
S. W. 835. 71 Minn. 338, 73 N. W. 849; Stens-
Colorado.— -Webb v. Bankers' Life gaard v. St. Paul Real Estate Title
Ins. Co. 19 Colo. App. 456, 76 Pac. Ins. Co. 50 Minn. 429, 17 L.R.A.
738. 575, 52 N. W. 910.
Idaho.— Rasicot v. Roval Neigh- New Jersey.— Silcox v. Grand Fra-
bors of America, 18 Idaho, 85, 29 ternity, 79 N. J. Law, 502, 76 Atl.
L.R.A.(N.S.) 433, 108 Pac. 1048. 1018; Dimick v. Metropolitan Life
Illinois.— Karaffa v. Supreme Or- Ins- Co- 69 N- J- Law> 3S4> 62 L.R.A.
der of Foresters, 159 111. App. 498, ' lA> 'J'J Atl 291 33 Ins. L. J 3.
41 Natl. Corp. Rep. 798; Cessna v. _ New York.— Eobmson v. Supreme
United States Life Endowment Co. Commandery United Order of the
-iro tii a cm T\r n xt Golden ( ross of the World, 38 .Misc.
152 Bl App &53; McGreevy v^Na- __ N 111; King v.
tional Union, 152 IE L App 62; Peck- T[' Coymty Pa*£ns, Fh.e ReRef
ham v. Modern Woodmen of America, Agsoe 54 N_ y gupp ia-- ;1- App
151 111. App. 9o. Div 58< Emmine Foiev v. Rovai Ar_
Indiana.— See Supreme Lodge of eanum, 151 N. Y. 196, 56 Am. St.
Modern American Fraternal Order v. Rep- $oi, 45 N. E. 456 (avoid, if
Miller, 60 Ind. App. 269, 110 N. E. knowingly false).
556. Oklahoma. — Eminent Household of
Iowa. — Sargent v. Modern Brother- Columbian Woodmen v. Prater. 2 I
hood of America, 148 Iowa, 600, 127 Okla. 214, 103 Pac. 558.
3213
A
§ 1956a JOYCE ON INSURANCE
as to life policies.16 And an untrue statemenl concerning a matter
of fact thai is, or oughl to he. within the personal knowledge of
an applicant for life insurance, constitutes a breach of warranty,
and renders the policy void, where the policy makes the answers
and statements contained in the application warranties, and con-
stitutes them a part of the contract.16 So the materiality of rep-
resentations made in an application for lire insurance becomes
unimportant where, by the express terms of the application, it is
made a part of the contract of insurance, and the representations
contained therein are warranted by the applicant, and it is pro-
vided that the policy shall be void if any of the representations
are not true. for. under such stipulations, in a suit to recover loss
occasioned by the destruction by lire of the property insured, the
insurance company is relieved from showing, and the insured is
estopped from denying-, thai they were material to the contract.17
And where insured has made the truth of the statements contained
in his application the basis of his contract of insurance, the ques-
tion whether or not a false statement is actually material- to the
risk is unimportant, as is also the question whether or not the
falsehood was intentional. To avoid liability on the policy, it is
sufficient for defendant to show that a statement was actually un-
true.18
Rhode Island. — Sweeney v. Metro- England. — See Earl of Halsbury's
politan Life Ins. Co. 19 R. I. 171, 38 Laws of England, sec. 1063, p. 53
L.R.A. 297, 36 Atl. 9. (fire insurance). See §§ 1890, 1912,
Texas. — Kansas Mutual Life Ins. 1960 herein.
Co. v. Pinson, 94 Tex. 553, 63 S. W. As to stipulations contrary to stat-
531. Examine Mutual Life Ins. Co. ute, see SS 176b, 194 (g), (p. 529),
V. Simpson, 88 Tex. 333, 53 Am. St. 1916 (f) herein.
Rep. 757, 28 L.R.A. 765, 31 S. W. As to statutes affecting warranties
501. See National Fraternity v. and representations, see § 1916 here-
Karnes, 24 Tex. Civ. A pp. 607, 60 in.
S. \Y. 576; Kansas Mutual Life Ins. 15Rathman v. New Amsterdam
Co. v. Conison, 22 Tex. Civ. App. Casualty Co. 186 Mich. 115, L.R.A.
64, 54 S. W. 388 (statements in life 1915E, 980, 152 N. W. 983, 46 Ins.
insurance applications are warran- L. J. 373.
ties). Compare Guarantee Life Ins. ie Dimick v. Metropolitan Life Ins.
Co. v. Evert, — Tex. Civ. App. — , Co. 69 N. J. Law, 384, 62 L.R.A.
178 S. W. 643 (in case of conflict be- 774. 55 All. 291.
tween policy and application imma- w Deming Investment Co. v. Shaw-
terial matters nol warranties). nee Fire Ins. Co. 16 Okla. 1, 4
Vermont.— S< sld's Admx. v. Met- L.K.A.(N.S.) 607, 83 Pac. 918.
ropolitan Life Ins. Co. 79 Vt. 161, 64 "Cobb v. Covenant Mutual Bene-
Atl. 1 107. fit Assoc. 153 Mass. 176, 10 L.R.A.
Washington.— Poultry Producers' C>66, 26 N. E. 230.
Union v. Williams, 58 Wash. 64, 137
Am. St. Rep. 1041, 107 Pac. 1040.
3214
WARRANTIES §§ 1956b, 1957
§ 1956b. Same subject: such stipulations reasonable. — Tn an
application for fire insurance, made for the purpose of informing
the insurance company of the fads with reference to the property
sought to 1)0 insured, and to furnish it information upon which it
is to ad in accepting or refusing the risk, and wherein the applicanl
warrants his answers to be true, a stipulation in an application and
policy that, if any of the statements made in the application by the
applicant are untrue, the policy shall be void, is a reasonable stip-
ulation.19
§ 1957. Warranties: statements in application. — Statements in
an application, though declared to be warranties, will not be given
effect as such if qualified by other stipulations which show that the
parties did not so regard them.20
So in Kansas, although an application may provide that all
statements therein are warranted to be true, yet if the policy simply
refers to the answers in the application as statements and not as
warranties, it is held that courts will not construe them as war-
ranties, but as statements, merely requiring of the insured that he
shall exercise good faith and answer all questions truthfully so far
as he is able so to do. And in case of any omission by the insured
to state any facts which he may honestly deem immaterial, such
omission will not avoid the policy.1 Again, it is declared in a
Federal case that if the policy does not make the application a part
thereof, or any of the statements in the application warranties, a
recovery cannot be defeated unless such statements, or some of
them, are found to be material and untrue.2 But in a California
case the plaintiffs held the goods of a corporation, in which they
were stockholders, as security for advances to said corporation,
19 Deming Investment Co. v. Shaw- Delairare. — Baltimore Life Ins. Co.
nee Fire Ins. Co. 16 Okla. 1, 4 L.R.A. v. Floyd, 5 Boyce (28 Del.) 201. 91
(N.S.) 607, 83 Pac. 918. Atl. 653, s. c. 5 Boyce (28 Del.) 431,
20 United States.— MeClain v. 94 Atl. 515.
Provident Savings Life Assur. Soe. Illinois. — JEtna Life Ins. Co. v.
110 Fed. 80, 49 C. C. A. 31, 30 Ins. King, 84 111. App. 171.
L. J. 1027, rev'g 105 Fed. 834, 30 Nebraska. — Kettenberg v. Omaha
Ins. L. J. 438, certiorari denied 184 Life Assoc. 49 Neb. 842, 69 X. W.
IT. S. 699, 46 L. ed. 765, 23 Sup. Ct. 185, 70 X. W. 392.
938. Texas. — Delaware Ins. Co. v. Har-
Califomia.— YTheaton v. North ris, 26 Tex. Civ. App. 537, 64 S". W.
British & Mercantile Ins. Co. 76 Cal. 867.
415, 9 Am. St. Rep. 216, 18 Pac. Washington.— Port Blakely Mill
758 Co. v. Springfield Fire & Marine Ins.
Colorado.— Northwestern Life As- Co. 59 Wash. 501, 2S L.R.A. (N.S.)
sur. Co. v. Tietze, 16 Colo. App. 205, 596n. 140 Am. St. Rep. 863, 110 Pac.
64 Pac. 773. 36, 39 Ins. L. J. 1447, s. c. 56 Wash.
3215
§ 1958 JOYCE ON INSURANCE
and a fire policy was effected thereon in which the property was
described by the plaintiffs as their own. and this was held to avoid
the insurance under a provision in the policy making the state-
ments in the application warranties, and stipulating that if assured
ua- not the sole, absolute, and unconditional owner of the prop-
erty, and such interesl were not truly stated in the policy, it should
be void; nor are the insurers in such case estopped to deny tjie in-
validity of the policy for failure to assert it immediately after loss,
when they discovered the true nature of plaintiffs' interest.3 An-
swers are no1 made warranties by the agent's act in writing them
into the application after it is signed.4 And it is only by express
agreemenl thai an applicant for life insurance can be held to have
warranted that the answers given by him as true were correctly
written down and reported.6
§ 1958. Applications and other papers: what constitutes a suffi-
cient reference: marginal writings on policy, etc. — In order to make
the statements contained in the application or in printed or written
proposals and the like, warranties, they should be so referred to as
constituting a part of the contract as to clearly evidence an inten-
tion that the parties deemed them a part of the policy and war-
ranties; that is, the words of reference should be clear and explicit.
A genera] reference to the statement or paper containing the same is
not sufficient.6 Thus, a general reference to description of the in-
681, 28 L.R,A.(N.S.) 593n, 106 Par. 2 Fidelity & Casualty Co. v. Al-
194, 3!) Ins. L. J. 352. See Poultry pert, 67 Fed. 460, 14 C. C. A. 474.
Producers Union v. Williams, 58 3 McCormick v. Springfield Fire &
Wash. 04. 137 Am. St. Rep. 1041, 107 Marine Ins. Co. 66 Cal. 361, 5 Pac.
Pac 1040 617; MeCormiek v. Orient Ins. Co.
See note 11 L.R.A.(N.S.) 982. 86 Cal. 260, 261, 263, 24 Pac. 1003.
See §§ 1890, 1912, 1916 herein. 4Maloney v. North American
1 Northwestern Mutual Life Ins. Union, 143 111. App. 615. As to
Co. v. Woods, 54 Kan. 663, 39 Pac. powers of agents concerning applica-
189. In a case in the appellate court tion; misrepresentations; warranties,
of Missouri, it is held that if the see c. XXIV. SS 472 et seq. herein,
statements in an application for in- 5 Equitable Life Ins. Co. v. Hazle-
surance upon a house are made war- wood, 75 Tex. 338, 7 L.R.A.. 217, 16
ranties, and the insured slates therein Am. St. Rep. 803, 12 S. W. 621.
thai the house is situated upon a piece 6 Georgia. — Southern Life Ins. Co.
of land owned by him and of a cer- v. Wilkinson. 53 Ga. 535.
tain number of acres in size, it is held Illinois. Spence v. Central Acci-
that this statement will, it' untrue, dent Ins. Co. 236 111. 444, 19 L.R.A.
avoid the policy. Maddox v. Dwell- (N.S.) 88n, 86 N. E. 104, 38 Ins. L.
ing-House Ins. Co. 56 Mo. App. 343. J. 87.
On conflict of laws as to effect of Iowa.— Miller v. Mutual Benefit
misrepresentations in application, Life Ins. Co. 31 Iowa, 216, 7 Am.
see notes in 63' L.R.A. 864; 23 Rep. 122.
L.R.A. (N.S.) 981; and 52 L.R.A. Massachusetts.— Campbell v. New
(X S ) 284. England Life Ins. Co. 08 Mass. 381;
3216
WARRANTIES
§ 1958
sured property on file in the office of the insurers does not make it
a part of the contract and a warranty,7 nor do (lie words as "per
application" constitute a sufficient reference,8 and a written paper
of instructions wrapped up in a policy does not become a warranty.9
Statements contained in a paper annexed to the policy, but not
referred to therein, are not warranties,10 and the same is true of a
paper watered to the [xilicy.11 And the mere fact itself that an
application for insurance may be annexed to and made part of
the policy of insurance does not carry with it necessarily, as a
consequence, that all the statement- and declarations contained
therein shall be held to be "warranties," though the failure so to
annex the application and make it a part of the policy would Leave
chem to be dealt with as "representations." 12 But an entry on the
margin of or across the policy, or on a separate paper referred to
in the policy and relating to the risk, is construed as a warranty.13
And if the policy expressly refers to the application "as forming
a part of the policy," li or a copy of the application is attached to
Daniels v. Hudson River Fire Ins.
Co. 12 Cush. (66 Mass.) 416, 59 Am.
Dee. 192.
New York. — Jefferson Ins. Co. v.
Cotheal, 7 Wend. (N. Y.) 72, 22 Am.
Dee. 567; Stebbins v. Globe Ins. Co.
2 Hall (N. Y.) 632. See Moore v.
Prudential Casualty Co. 156 N. Y.
Supp. 892, 170 App. Div. 849, 47 Ins.
L. J. 313, 316, per Woodward, J., as
to state of law in this respect prior
to statutes, citing Burritt v. Saratoga
County Mutual Fire Ins. Co. 5 Hill
(N. Y.) 198; King v. Tioga County
Patrons' Relief Assoc. 54 N. Y. Supp.
1057, 35 App. Div. 58.
Texas. — Goddard v. East Texas
Fire Ins. Co. 67 Tex. 69, 60 Am. Rep.
1, 1 S. W. 906.
West Virginia. — Bowver v. Conti-
nental Casualty Co. 72 *W. Va. 333,
78 S. E. 1000, 42 Ins. L. J. 1565 (ref-
erence bere would have been sufficient
under common law principles but
was not sufficient under statute).
As to construction, application,
etc., as part of policy, see c. VII.
§§ 185 et seq. herein.
On what reference in policy to ap-
plication will make it part of policy,
see notes in 19 L.R.A.(N.S.) 88, and
33 L.R.A.(N.S.) 676
Joyce Ins. Vol. Ill— 202. 3217
On what must be attached in order
to satisfy requirement that applica-
tion be attached to policy, see note
in 18 L.R.A.(N.S.) 1190.
On failure to attach copy of ap-
plication to policy, as affecting
right of insurer to rely upon repre-
sentations or warranties incorpo-
rated in the policy itself, see note in
19 L.R,A.(N.S.) 102.
7 Stebbins v. Globe Ins. Co. 2 Hall
(N. Y.) 632.
8 Vilas v. New York Central Ins.
Co. 72 N. Y. 590, 28 Am. Rep. 186.
9 Pawson v. Barnevelt, 1 Doug.
12n.
10 Goddard v. East Texas Fire Ins.
Co. 67 Tex. 69, 60 Am. Rep. 1, 1 S.
W. 906.
Marine insurance: "Survey" de-
fined in connection with representa-
tions, see Macatawa Transportation
Co. v. Firemen's Fund Ins. Co. 179
Mich. 443, 146 N. W. 396.
nBize v. Fletcher, 1 Doug. 12,
13n.
12 P>ris:nac v. Pacific Mutual Life
Ins. Co. 112 La. 574, 66 L.R.A. 322,
36 So. 595.
13 Wood v. Hartford Ins. Co. 13
Conn. 533. 35 Am. Dec. 92.
14 Burritt v. Saratoga County Mu-
§ 1958 JOYCE ON INSURANCE
the policy,18 or the words used arc "reference heine; had to the ap-
plication of said .1. for a inuir particular description, and the con-
ditions annexed as forming a pari of this policy," 16 or the words
"thi' application and -nrvcv made hv the assured is hcrehy made a
part of this policy and a warranty.""17 or provides that the insur-
ance is made "in consideration of the representations made in the
application for the same, which is hereby made a part of the pol-
icy," and that the policy should be void "if the representations
made in the application for this policy, and upon the faith of which
this policy is issued," should be found in any respect untrue,18 the
statements made are warranties.19 So there is a class of cases where
a stipulation in the policy makes the answers contained in the ap-
plication the basis of the contract, and further provides that the
policy shall be avoided if the statements are found untrue, or cases
where the policy contains some like agreement; it is held that such
stipulations are warranties, especially where the statements relate
to i lie situation or use of the property, or describe the same.20 And
the same is held in cases of like stipulations and agreements con-
tained in the application.1 unless other qualifying words are used.8
So statements in a prior application may he adopted by proper
reference and made warranties as to matter- then stated, but this
does noi include statements or conditions thereafter made or exist-
ing.8 And a schedule of warranties attached to the policy by a
rider make- the statements therein warranties,4 although in case of
dial Ins. Co. 5 Hill (X. Y.) 188, 40 pressly provided. As to standard
Am. Dec. 345. policy and what is part of contract,
16 Columbian Exposition Salvage see §§ 190a et seq. herein.
Co. v. Union Casualty & Surety Co. 18 Higbee v. Guardian Mutual Life
L23 111. App. 2 1.3, aff'd 220 111.' 172, Ins. Co. 66 Barb. (N. Y.) 462.
77 N. E. 128. 19 See also Connecticut Mutual
16 Jennings v. Chenango Mutual Life Ins. Co. v. Pyle, II Ohio St. 19,
Ins. ('... 2 Denio (N. Y.) 75. 58 Am. Rep. 781," 4 N. E. 465.
17 Slate Ins. Co. v. Jordan. 24 Neb. 20 Jennings v. Chenango County
358, 38 X. W. 839; Thomas v. Fame Mutual Ins. Co. 2 Denio (N. Y. ) 75;
[ns. Co. 108 111. 91; Tebbetts v. Hani- Kelsey v. Universal Life Ins. Co.. 35
ilton Mutual Ins. Co. 1 Allen (83 Conn. 225. Sec Studwell v. Mutual
Mass.) 305, /it Am. Dec. 740; Pierce Benefit Life Assoc, of America, 16
v. Empire Ins. Co. 62 Barb. (N. Y.) N. Y. St. Rep. 902, 61 N. V. Su r.
636. Under New York standard pol- Ct. 287, 19 N. Y. Supp. 709. Sec
icy if an application, survey plan, or §§ 1890, 1912, 1956a herein.
description of property be referred l Chrisman v. State Ins. Co. 16 Or.
to in the policy it is a part of the 283, is Pac. 166 (annotated case),
contract and a warranty by assured, 2 Garcelon v. Hampton Fire Ins.
and as we have noted elsewhere there Co. 50 Me. ">80.
are a number 6f slates which have 3 Fletcher v. Hankers' Life Ins. Co.
followed the New York form. This, 119 N. Y. Supp. 801, L35 App. Div.
however, is in effect the same as if 295.
it were by force of a statute so ex- 4 Everson v. General Fire & Life
3218
WARRANTIES § 1959
an employer's liability policy certain schedules of warranties on
the backs of the policies are not signed by either party, nevertheless
they are a part of the contracl where the schedule is made a part
of the policy by express provision therein, and the contract is duly
signed by assured and received and accepted by assured.6 But
where the contract was induced in pari by an agreement to make
certain repairs within a reasonable time and to protect the prop-
erty from danger by fire and the purpose thereof was to reduce the
risk and said agreement was incorporated in the policy by refer-
ence to the written application of which it formed a part and said
agreement was violated it was held immaterial whether it was a
promissory warranty or a representation.6
Those statutes which require that the application or by-laws, or
a copy thereof, shall be annexed to or contained in the policy, and
which go to the admissibility of such application in evidence, are
important to be noted in connection herewith.7
§ 1959. Reference to application, plan, survey, etc., continued. —
As is a] (parent from the last section, a mere reference in the pol-
icy to a survey, application, or other paper does not ordinarily make
it so far a part of the contract as to constitute the representations
therein technical warranties, so as to bind the assured to the strict
observance thereof required in case of warranties, although it is
held to be otherwise where the application is referred to as "form-
ing a part" of the policy, or wdiere it refers to such survey and also
makes it a part of the policy.8 So answers to questions in an ap-
plication for insurance not required by the conditions of the policy
are mere material representations, and not warranties ; nor are thev
incorporated into the contract or made part of the conditions upon
which it is founded by being contained in a paper called a "survey,"
to which the policy refers in wrords, "For a more particular de-
scription of said premises, see survey No. 74, furnished by the
insured, which is hereby made a part of this policy," nor by a con-
Assur. Corp. 202 Mass. 169, 88 N. E. 8 Glen dale Woolen Co. v. Protec-
658, 38 Ins. L. J. 923. tion Ins. Co. 21 Conn. 19, 54 Am.
5 Frankfort Marine, Accident & Dec. 309; First National Bank of
Plate Glass Co. v. California Artis- Ballston v. North America Ins. Co
tie Metal & Wire Co. 28 Cal. App. 50 N. Y. 45; Burritt v. Saratoga
74, 151 Pae. 176, 46 Ins. L. J. 655. County Mutual Ins. Co. 5 Hill (N.
6Mendenhall v. Farmers' Ins. Co. Y.) 188, 40 Am. Dec. 345; Farmers'
183 Ind. 694, 110 N. E. 60, 47 Ins. L. Ins. Co. v. Snyder, 16 Wend. ( X. Y)
J. 55. 481, 30 Am. Dee. 118, affg 13 Wend.
7 When application, etc., part of (N. Y.) 92: Wall v. Boward Ins. Co.
policy, see §§ 186 et seq. herein, and 14 Barb. (X. Y.) 383. As to con-
as to statutes relating to representa- struction, application, etc., as part of
tions and warranties, see § 1916 policy, see e. VII. §§ L86 et seq. here-
herein. in.
3219
§ 1960 JOYCE ON INSURANCE
ditioD in the policy that a survey and description shall be deemed
a part of the policy and warranty on the part of the assured.9
Ami where the application and survey furnished by the assured
himself stated thai thick stone partitions ran lengthwise through
tin' building to the roof, and the statements in the application were
not warranted, it was held that the fact that the stone partition ran
no higher than the garrel floor did no1 avoid the policy, unless the
fad that it did not run to the roof increased the risk in the opinion
of tin- jury.10 If the policy refers to the survey and makes it a
warranty in terms, then it is so.11 The fad that the statement is
promissory, rather than affirmative, doc- no1 alter the rights and
duties of ih«' parties; for if the promise is not kept the insurer is
not bound by the policy.12 So if the policy provides thai all the
statements contained in the application "shall be taken to be war-
ranties/' they are so.13 If the assured is required to apply to the
company's agent or make the survey himself strictly according
to certain requirements, and the agent makes the survey upon
application of the assured, the Latter is nol bound by its accuracy.14
If the application and survey are referred to and made a pari of
tho policy and warranty by the assured, the fact that they were not
furnished until after the delivery of the policy and were written
on blanks of another company defeats the obligations of the con-
tract.16
§ 1960. Same subject: cautionary suggestions. — Tt is evident that
there are many arbitrary decisions upholding warranties which are
far from being justified by the rules of law relating to the con-
struction of policies. Such decisions ought not to be relied on as
precedents of weight. The strictness which prevailed in the earlier
:ases of marine insurance has been applied by many judges, not-
withstanding the constantly growing tendency of courts toward
9 Hartford Protection Ins. Co. v. 50 Conn. 420. See §§ 1890, 1912,
Harmer, 2 Ohio St. 452, 59 Am. Dec 1956a herein.
684. Sec liui'll v. Connecticut Mu- 14 Patten v. Merchants' & Farmers'
tual Life Ins. Co. 2 Flip. (U. S. C. Mutual Fire Ins. Co. 40 N. H. 375;
C.) 9, 5 Ins. L. J. 27 1, Fed. Cas. No. Hartford Protection Ins. Co. v. Bar-
2,104. mer, 2 Ohio St. 452, 59 Am. Dec 684.
10 Farmers' Ins. & Lean Soc. v. See Nicoll v. American Ins. Co. 3
Snyder, L6 Wen. I. (N. V.) 481, 30 Woodb. & M 529, Fed. Cas. No.
Am. Dec. lis. aff'g L3 Wend. (N. Y.) 10,259.
92. 15 Rankin v. Amazon Ins. Co. 89
"Glendale Woolen Co. v. Protec- Cal. 203, 23 Am. St. Rep. 460, 26
t?on Ins. Co. 21 C.mn. 19, 51 Am. Pae. 872. See Albion Lead Works
Dec. 309; Ripley v. iEtna Ins. Co. v. Williamsburg City Fire Ins. Co.
30 X. Y. 136, 86 Am. Dec. 302. 2 Fed. 479, 483, 484, for a full con-
12 Ripley v. .Etna Ins. Co. 30 N. sideration of what constitutes a "sur-
Y. 136, 86 Am. Dec. 362. vey" and when it is a warranty.
13 Bennett v. Agricultural Ins. Co.
3220
WARRANTIES § L!
a more liberal construction than formerly obtained, and also to
require that only the clearesl and mosl unequivocal Language will
create a warranty. It is not every reference to (he statements in
an application as constituting pari of the policy which thereby
makes them a warranty. It may be referred to as a part of the
policy merely to fix a standard of comparison, or merely to identify
the description and condition of the property at the time, and not
for the purpose of creating or evidencing a covenant or warranty
on the part of the assured.16
So in a case in the supreme court of the United States the court
says: "In the contract before us the answers in the application
are nowhere called warranties or made pari of the contract. In
the policy those answers and the concluding paragraph of the ap-
plication are referred to only as "the declarations or statements
upon the faith of which this policy is issued,' and in the conclud-
ing paragraph of the application the answers are declared to be
'fair and true answers to the foregoing questions,' and to 'form
the basis of the contract for insurance.' They must, therefore.
be considered, not as warranties which are part of the contract, but
as representations collateral to the contract and on which it is
based." «
The cases may be multiplied which illustrate the tendency of
the courts to exclude warranties where from the whole contract
construed together a doubt is raised whether a warranty was in-
tended. If a warranty was not intended, it ought not to be forced
upon the assured, and it may be fairly presumed that the assured
has not intended to bind himself to the exact and literal fulfill-
ment which a warranty requires unless the language used clearly
and unequivocally evidences that intent. Take the single instance
of a misdescription in fire policies; the cases are numerous where
the error is clearly that of the insurer's authorized agent, upon
whom the assured was justified in relying in preparing the ap-
plication.18 And there is every reason for construing such descrip-
tive matters as representations, rather than warranties, unless, as
above stated, the terms of the contract are such as to exclude1 all
grounds for doubt whether a warranty was intended : although in
all cases the fair import of the words used, when unqualified by
other terms of the policy, should be considered, especially so where
it is evident that both parties clearly understood their meaning
16 Kentucky & Louisville Mutual 18 See chaps, on agency, §§ 472 et
Ins. Co. v. Southard, 8 B. Mon. seq. herein, and see Cumberland Val-
(Ky.) 634, per Marshall, C. J. lev Mutual Protection Co. v. Schell,
» Phoenix Life Ins. Co. v. Raddin, 29 Pa. St. 31.
120 U. S. 183, 30 L. ed. 644, 7 Sup.
Ct. 500, per Grav, J.
3221
§ L960 JOYCE OX INSURANCE
an,! the character of the risk, and the subject-matter is such that
the language employed would be meaningless unless used as a
warranty, and even then it is decided in New York that the words
"detached one hundred feet" musl be held to mean detached one
hundred feet from any other building of such a size and character
as i" constitute an exposure and increase the risk, and that the
words were a warranty to this extenl only, and that the warranty
was not broken by the fact thai there was a small frame building
standing seventy-five feel from the subject of insurance which was
i'mmd no1 to be an exposure and not to affect the risk.19
We would therefore suggest that too much care and caution
cannot be exercised in determining whether the statements in the
application, etc., arc intended to be made a warranty or not by
,|l(l parties. Arbitrary decisions based upon the strict rules of
construction in early marine cases, while they may declare an
abstract principle of law correctly, frequently overlook the mani-
fest intentions of the parties in the particular case. It is as much
for the interest of the assurer as the assured that the contract of
insurance should continue to rest upon that good faith upon which
it was founded, and which is still supposed to underlie the dealings
between the parties. The entire contract in each case should be
fairly tested by such rules of construction as are applicable,20 for
the purpose of ascertaining and effectuating the intention of the
parties, having in view the nature and subject matter of the in-
surance.1
19 Burleieh v. Gebhard Fire Ins. certiorari denied 184 U. S. 699, 46
Co. 90 X. Y. 220, one judge dissent- L. ed. 765, 23 Sup. Ct. 938; Sayles
in°" Noone v Transatlantic Ins. Co. v. Northwestern Ins. Co. 2 Curt. (U.
88°Cal. 152, 26 Pac. 103. But see S. C. C.) 610, 616, Fed. Can. No.
Frosl v. Saratoga Mutual Ins. Co. 5 12,422; De Armand v. Home Ins.
Denio (N. Y.) 154, 49 Am. Dec. 134; Co. 28 Fed. 603; Albion Lead Works
Day v. Conway Ins. Co. 52 Me. 60. v. Williamsburgh City Ins. Co. 2
20 See § L949 herein, and c. VIII. Fed. 479; Rumsey v. Phoenix Ins.
§§ 205 et seq.; c. IX. §§ 237 et seq. Co. 2 Fed. 429, 1 Fed. 396, and cases
herein. cited.
^■United States.— Canton Ins. Of- Alabama.— Empire Life Ins. Co.
fice, Ltd. v. [independent Transporta- v. Gee, 178 Ala. 492, 60 So. 90.
tion Co. L.R.A.1915C, 408, 217 Fed. Illinois.— Rockford Ins. Co. v. Nel-
213, L33 C. C. A. 207, 45 Ins. L. J. son, 65 111. 415; Schmidt v. Peoria
206; Phoenix Life Ins. Co. v. Rad- Mutual Ins. Co. 41 111. 296; North-
din, L20 1'. S. IS.:. 30 L. ed. 644. 7 western Benevolent & Mutual Aid
Sup. Ct. 500, per Gray, J.; Monlor Assoc v. Cain, 21 111. App. 471.
v American Ins. Co. ill U. S. 335, Indiana.— Catholic Order of For-
339, 28 L. ed. 117, 1 Sup. Ct. 466; esters v. Collins, 51 Ind. App. 285,
MeClain v. Provident Savings Life 99 N. E. 745.
\--ur Soc. 110 Fed. 80, 49 C. C. Iowa.— Lang v. Hawkeye Ins. Co.
A. L31, 30 Ins. L. J. L027, rev'g 74 Iowa, 673, 39 N. W. 86.
105 Fed. 834, 30 Ins. L. J. 438, Massachusetts. — Mullauey v. Na-
3222
WARRANTIES §§ 1961, 1962
§ 1961. Whether stipulation on face of policy as to preservation
of property after loss is warranty. — It is held that a condition on
the face of the policy which requires the assured after loss to use
his best efforts to protect the property and prevent further loss is
not a warranty, the breach of which vitiates the contract.2 And
the clause, "In case of loss or misfortune it shall he the duty of the
parties insured ... to use all reasonable and proper means
for the security, preservation, relief, and recovery of the property
insured," is held not a warranty to be strictly observed, but an
agreement to use such a reasonable and proper means for the stip-
ulated purpose as a competent person would have been expected
to use under the circumstances.3
§ 1962. Warranty not necessarily material: its materiality not
subject of inquiry. — Where it clearly appears by the express terms
of the policy or from the entire contract that a warranty was in-
tended, the materiality of the fact, matter, or circumstance war-
ranted is not a subject of inquiry in aid of the assured; for the
latter in such case will be held strictly to his contract, however im-
tional Ins. Co. 118 Mass. 393; Camp- Sup. Ct. (Ohio) 87. See Ellsworth
bell v. New England Mutual Life v. .Etna Ins. Co. 89 N. Y. 186. The
Ins. Co. 98 Mass. 381; Eastern R. R. New York standard policy provides
Co. v. Relief Fire Ins. Co. 98 Mass. that if property is so endangered by
420, 105 Mass. 570. fire as to require removal to a place
Missouri. — Still v. Connecticut Fire of safety and is so removed, the in-
Ins. Co. of Hfd. 185 Mo. App. 550, surers are liable in a certain propor-
172 S. W. 625. tion, etc.
New York. — Clinton v. Hope Ins. See also the following cases:
Co. 45 N. Y. 454; Rawls v. National United States. — Biays v. Chesa-
Mutual Life Ins. Co. 27 N. Y. 282, peake Ins. Co. 7 Cranch (11 U. S.)
84 Am. Dec. 280; Ripley v. Astor 415, 3 L. ed. 389; Gloucester Ins. Co.
Ins. Co. 17 How. Pr. (N. Y.) 444; v. Younger, 2 Curt. (U. S. C. C.)
Delonguemere v. Tradesman's Ins. 322, Fed. Cas. No. 5.4S7.
Co. 2 Hall (N. Y.) 589. Louisiana. — Balestracci v. Fire-
North Carolina). — Crowell v. Mary- men's Ins. Co. 34 La. Ann. 844.
land Motor Car Ins. Co. 189 N. Car. Maine.— White v. Republic Fire
35, 85 S. E. 37, 46 Ins. L. J. 82; Cot- Ins. Co. 57 Me. 91, 2 Am. Rep. 22.
tino-ham v. Marvland Motor Car Ins. Massachusetts. — Corv v. Bovlston
Co. 168 N. Car. 259, L.R.A.1915D, Ins. Co. 107 Mass. 140, 9 Am. Rep.
344, 84 S. E. 274, 45 Ins. L. J. 491, 14.
497. North Carolina. — Whitehurst v.
Ohio. — Hartford Protection Ins. Favetteville Mutual Ins. Co. 6 Jones
Co. v. Harmer, 2 Ohio St. 452, 59 (51 N. C.) 352.
Am. Dec. 684. Wisconsin. — Siemers v. Meeme Mu-
Pennsylvania. — Girard Fire & Ma- tual Home Protection Ins. Co. 143
rine Ins. Co. v. Stephenson, 37 Pa. Wis. 114, 126 N. W. 669, 39 Ins. L.
St. 293, 73 Am. Dee. 423. J. 1138.
2 Cincinnati & Firemen's Mutual England. — Stanley v. Western Ins.
Ins. Co. v. May, 20 Ohio, 211, 229. Co. L. R, 3 Ex. 7l See §§ 2S11 et
3 Franklin Ins. Co. v. Cobb, 2 Cin. seq. herein.
3223
§1962 JOYCE ON [NSURANCE
material the matter warranted may be, so that a breach of the
warrant v may be availed of, the policy be avoided, and assurer be
thereby discharged from liability whether the warranty be material
to the risk or not,4 for the warranty being so made a part of the
* United States. — Mutual Benefit Minnesota. — Cerys v. State [ns.
Life Ins. Co. v. Robison, 58 Fed. 723, Co. of Des Moines, 71 Minn. 348, 73
7 C. C. A. 111. L9 (J. S. App. 266, N. W. 849, 27 Ins. L. J. 258; Sten-
22 L.R.A. 325. gaard v. St. Paul Real Estate Title
Alabama.— Metropolitan Life Ins. Ins. Co. 50 Minn. 429, 7 L.R.A. 575,
Co. v. Goodman, 10 Ala. App. 446, 52 \". W. 910; Price v. Phoenix Mu-
65 So. 449 (so prior to code). tual Life Ins. Co. 17 Minn. 49/, 10
California.— Bavley v. Employers' Am. Rep. 166.
Liability Assur. Corp. 6 Cal. Unrep. Mississippi. — Citizens National
254 56 Pac. 638. Life Ins. Co. v. Swords, 109 Miss.
Colorado.— National Mutual Fire 635, 68 So. 920.
Ins Co v. Duncan, 44 Colo. 472, 20 Missouri.— Pacific Mutual Life Ins.
LRA.(N.S.) 340, 98 Pac. 634, 38 Co. v. Glaser, 2 45 Mo. 377, 45 L.R.A.
Ins. L. J. 184, 189; Prudential Ins. (N.S.) 222, 150 S. W. 552; Aloe v.
Co v. Hummer, 36 Colo. 208, 84 Pac. Mutual Reserve Fund Life Assoc.
(il 147 Mo. 561, 49 S. W. 553, 28 Ins.
Connecticut. — Wood v. Hart ford L. J. 293.
Ins Co. 13 Conn. 533, 35 Am. Dec. Montana.— Pelican v. Mutual Life
92. Ins. Co. of N. Y. 44 Mont, 277, 119
Delaware. — Baltimore Life Ins. Pac. 778. 41 Ins. L. J. 327.
Co. v. Floyd, 5 Boyce (28 Del.) 201, Nebraska.— Aetna Ins. Co. v. Sim-
91 Atl. 653, s. c. 5 Boyce (28 Del.) mons, 49 Neb. 811, 69 N. W. 125.
431 94 Atl. 515. ATew Jersey. — Greenwich Ins. Co.
Illinois.— Thomas v. Fame Ins. Co. v. Dougherty, 64 N. J. L. 716, 42 Atl.
108 111. 91. 485.
Indiana.— Mutual Benefit Life Ins. New York. — Fitch v. American
Co. v. Cannon, 48 Ind. 264; Mutual Popular Life Ins. Co. 59 N. Y. o57,
Benefit Life Ins. Co. v. Miller, 39 17 Am. Rep. 372; Duncan v. Sun
In.! 475; Catholic Order of Forest- Fire Ins. Co. 6 Wend. (N. Y.) 488,
(ms v. Collins, 51 Ind. App. 285, 99 22 Am. Dec. 539; O'Neil v. Buffalo
N. E. 7 15. Fire Ins. Co. 3 N. Y. (3 Comst.) 122;
Iowa. St. ait v. City Fire Ins. Co. Fowler v. JEtna Fire Ins. Co. 6 Cow.
12 Iowa, 371, 7!) A.m. Dec. 539. (N. Y.) 673, 16 Am. Dee. 460; Clem-
Kansas. — Johnson v. Massachusetts cuts v. Connecticut Indemnity Co. 51
Benefit Assoc. 9 Kan. App. 238, 5!) N. Y. Supp. 442, 2!) App. Div. 131.
Pac 669, 29 Ins. L. J. 180. Sec Moore v. Prudential Casualty Co.
Louisiana— Goff v. Mutual Life 156 N. Y. Supp. 892, 170 App. Div.
Ins. Co. of N. Y. 131 La. 98, 59 So. 849, 47 Ins. L. J. 313, 316, per A\ ood-
28, 41 Ins. L. J. 1415. See also Ger- ward, J., as to effect of statute upon
mier v. Springfield Fire & Marine question of materiality and change
his. Co. 10!) La. 341, 33 So. 361. made in this respect.
Maine- Johnson v. Maine & New North Dakota.— Johnson v. Dako-
Brunswick Ins. Co. 83 Me. 182, 22 ta Fire & Marine Ins. Co. 1 N. Dak.
Ail. 107. 107, 45 N. W. 799.
Massachusetts.— Camphell v. New Ohio. — Connecticut Mutual Ins.
England Mutual Life Ins. Co. 98 Co. v. Pyle, 44 Ohio St. 19, 58 Am.
Mass. 381; Mihs v. Connecticut Mu- Rep. 781, 4 N. E. 465.
tual Ins. Co. 3 Gray (69 Mass.) 580. OkWwma. — Deming Investment
3224
WARRANTIES § 1962
contract makes the matter materia] and its falsity precludes re-
covery.5 And the rule is the same whether the condition relates to
matters precedent or subsequent.6 So where a policy of insurance
provides thai any untrue answer to questions contained in the ap-
plication shall avoid the policy, the answers amount, in effect, to a
warranty, and the matter of their materiality is not open.7 So evi-
dence to show the falsity of the matters warranted, as in case of en-
cumbrances and the distance away of other buildings, is improper-
ly stricken out.8 And where a statement as to the use of a building
is a warranty, it is immaterial that the use of the building, to which
the property insured is removed, does not increase the risk.9 .
The California code, however, imports the question of materiality
into a warranty in two distinct sections; as where it provides that
either party may rescind for "the violation of a material warranty
Co v Shawnee Fire Ins. Co. 16 Okla. Co. v. Farmers' National Bank, 169
1, 83 Pac. 918, 35 Ins. L. J. 241, 4 Fed. 737, 95 C. C. A. 169.
L.R.A.(N.S.) 607n. Alabama. — Hunt v. Preferred Ae-
' Pennsylvania. — Smith v. North- cident Ins. Co. 172 Ala. 442, 55 So.
western Mutual Life Ins. Co. 196 Pa. 201.
314, 46 Atl. 426, 30 Ins. L. J. 61; Louisiana. — Petitpain v. Mutual
State Mutual Fire Ins. Co. v. Arthur, Reserve Fund Life Assoc. 52 La.
30 Pa. 315. Ann- 503> 27 So- 113> 29 Ins- L- J-
Texas.— Mutual Life Ins. Co. v. 269.
Simpson, 88 Tex. 333, 53 Am. St. Montana— Pelican v. Mutual Life
Rep. 757, 28 L.R.A. 765, 31 S. W. Ins. Co. 44 Mont. 277, 119 Pac. 7/8,
501: Kansas City Life Ins. Co. v. 41Jns- L. J. 327, Brantly, C. J
Blaekstone,-Tex.Civ.App.-,143 f ^'!% r^'^^f Jvo £
S. W. 702; 41 Ins. L. J. 683; Kan- ^ £*» Ins' Co' '2 N' PL °'2> 58
sas Mutual Life Ins Co v Coalson, WasMngton.-Koel^nd v. Western
22 Tex. Civ. App. 64, 54 S. W. 388; Uni(m L£ Ins Co< 58 Wash< 1QQf
Washington.— Miller v. Commer- 107 pa(? 866- gee also cases eited in
cial Union Assur. Co. Ltd. 69 Wash. jas|. preceding note.
529, 125 Pac. 782, 41 Ins. L. J. 1599, a warranty need not be material
1603, 1604. , to the risk, since the very obligation
England. — Cazenove v. British imported by a warranty is that it is
Equitable Assur. Co. Mutual Bene- material: Weil v. New York Life
fit, 29 L. J. C. P. 160, 17 Earl of Tns. Co. 47 La. Ann. pt. 2, 1405, 17
Halsbury's Laws of England, sec. So. 853.
1062 ("fire insurance") ; Marine in- 6 Duncan v. Sun Fire Ins. Co. 6
surance act 1906 (6 Edw. VII. c. 41) Wend. 48S, 22 Am. Dec. 539.
sec. 33, sub. (3) ; 2 Butterworth's i Stensgaard v. St. Paul Keal-Es-
Twentieth Century Stat. (1900-1909) tate Title Ins. Co. 50 Minn. 429, 7
p. 407. L.R.A. 575, 52 N. W. 910.
But see Mackie v. Pleasants, 2 8 State Ins. Co. v. Jordan, 24 Neb.
Binn. (Pa.) 363. The effect of stat- 358, 38 N. W. 839.
utes in various states is considered 9 Greenwich Ins. Co. v. Dougherty
elsewhere herein. (Dougherty v. Greenwich Ins. Co.)
As to statutes, see § 1916 herein. 64 NT J. Law, 716, 42 Atl. 485, 46
6 United States. — Aetna Indemnity Atl. 1099.
3225
§ 1963 JOYCE ON INSURANCE
or ether material provision of the policy," and again that the breach
of an immaterial provision does not avoid the policy except the
policv declares "that a violation of a specified provision thereof
shall avoid it.'"10
§ 1963. Materiality of fact to the risk may in certain cases be
subject of inquiry. — Although evidence of the materiality of the
matters stated may not be shown for the purpose of defense in cast'-
of the character above stated, vol it may be admitted for the purpose
of showing to what the warranty refers, or whether certain mailers
claimed to he within the warranty are so included or not. Thus, in
a New York case, although the question whether the evidence was
admissible or not did not arise in the appeal decision, yet the court
decided upon the evidence and the facts found by the trial court
that a certain building was of such a size and character that it was
not an exposure all'ecting the risk, although it was within the pre-
scribed limits under the warranty that the building within which
the insured property was located was "detached at least one hun-
dred feet," n And it is also held that the question as to the ma-
teriality of the statements in an application and the knowledge of
the applicant is properly one for the jury, whether such statements
are deemed warranties limited in their character or mere repre-
sentations.12 So in cases of slight attacks of sickness and the like
materiality is by some courts permitted to be a matter of evidence,
probably not for the purpose of impeaching the warranty, but to
show to what the warranty relates and what it covers, and to pre-
vent including by implication more than the warranty clearly and
unequivocally imports. Thus, in a New York case the statements
in the application were warranted true, and the insured stated
that he had never had any illness or local disease, and had never
been attended by a physician, and that he was a traveling agent.
Some years prior thereto he had had a slight disease of the eyes,
known as "conjunctivitis," and had been professionally attended
by a physician nearly a month, and had also been a painter by
trade, and it was held a question for the jury whether this was
material and should have been stated.13 And it is held that
10 Deering's Annot. Giv. Code Cal. 13 Fitch v. American Popular Life
sees. 2610, 2611. See §§ 1916, 1948 Ins. Co. 59 N. Y. 557, 17 Am. Rep.
herein. ■ 372, rev'g 2 N. Y. Sup. Ct. 247. See
11 Burleigh v. Gebhard Fire Ins. Moore v. Prudential Casualty Co.
Co. 90 N. Y. 220. 156 N. Y. Supp. 892, 110 App. Div.
On misrepresentation as to dimen- 849, 47 Ins. L. J. 313, 316, per Wood-
sions of insured building, see note in ward, J., as to effect of statutes up-
20 L.R.A. (N.S.) 310. on question of materiality and
12 Gareelon v. Hampden Ins. Co. changes thereby made.
50 Me. 580. See §§ 1898, 1916,
3710a herein.
3226
WARRANTIES § 1964
where there was a warranty, by insured under an accident policy,
that he had never made any claim, nor received any indemnity,
for any accident, the fact that he had been indemnified for an
injury to his knee did not, as a matter of law, show such a material
and prejudicial misrepresentation as would prevent recovery on the
policy for his death by falling from a ship at sea, and that at the
most it was a question for the jury.14 In another case where it
was warranted that assured had not omitted to state any fact ma-
terial to the risk, it was held, that the omission must be of some
lad, material to the risk, whether said omission constituted a breach
of warranty or amounted merely to a misrepresentation.15
§ 1964. Warranty: mistake: want of knowledge of untruth:
fraud: good or bad faith. — Where it clearly appears from the ex-
press terms of the policy or from the entire contract that a warranty
was intended, evidence is inadmissible to show that the matter
warranted, which is untrue in fact, was made through mistake.16
and its falsity avoids the contract irrespective of the insured's in-
dention in making the statements.17 And this is so even though
there is no fraud, although in such case the premium is return-
able.18 So an intent to defraud is not a constituent element of a
defense to an action on a life insurance policy based upon a breach
of a warranty of the truth of representation ; 19 for the rule is set-
tled that if an affirmative warranty is false the contract is avoided,
and the assured is not aided by the fact that there was no fraudu-
lent intent on his part, or that it was not wilfully but innocently
made ; 20 and so it is immaterial whether the assured acted in good
14Rathman v. New Amsterdam Rep. 619, 10 L.R.A. 666, 26 N. E.
Casualty Co. 186 Mich. 115, L.R.A. 230.
1915E, 980, 152 N. W. 983, 46 Ins. As to statutes, see § 1916 herein.
L. J. 373. 18 Connecticut Mutual Life Ins. Co.
16 Davis v. Aetna Mutual Life Ins. v. Pvle, 44 Ohio St. 19, 58 Am. Rep.
Co. 67 N. H. 335, 39 Atl. 902, 27 Ins. 781 ,4 N. E. 465.
L. J. 549. 19 Sullivan v. Metropolitan Life
16 Cooper v. Farmers' Mutual Fire Ins. Co. (C. P.) 36 N. Y. St. Rep.
Ins. Co. 50 Pa. St. 299, 88 Am. Dec. 38, 12 N. Y. Supp. 923; Leonard v.
544; Glutting v. Metropolitan Life State Mutual Life Assur. Co. 24 R.
Ins. Co. 21 Vroom (50 N. J. L.) 287, I. 7. 96 Am. St. Rep. 698, 51 Atl.
13 Atl. 4. 1049, 31 Ins. L. J. 584.
"It is no avail to plead inability, 20 Georgia. — Supreme Conclave
accident, or even operation of a peril Knights of Damon v. Wood, 120 Ga.
insured against as an excuse for non- 328, 47 S. E. 940; Morris v. Im-
compliance with an express warran- perial Ins. Co. Ltd. 106 Ga. 461, 32
ty:" McArthur on Marine Ins. (ed. S. E. 595, 28 Ins. L. J. 402.
1890) 37. Illinois. — Cessna v. United Life
17 Cobb v. Covenant Mutual Bene- Endowment Co. 152 111. App. 653.
fit Assoc. 153 Mass. 176, 25 Am. St. Indiana. — Supreme Lodge of Mod-
3227
§ L964 JOYCE ON INSURANCE
or bad faith,1 or whether he knew the statements to be untrue or
not.2 or whether the answers were intentionally false or in accord-
ance with his belief,8 or whether he believed them true or not.4
And where answers are expressly warranted to be true their truth
is thereby made a condition precedent to the validity of the con-
tracl even it' assured is ignorant of the facts but state? them as he
believes them to exist.8 On this last point of belief, however, the
rule is subject to some qualification.8 So in life insurance, it is
laid thai the nature of the matter concerning which the warranty
is made may be such thai only the opinion, judgment or honest
heliel' nf insured can be stated, and as so stated it is the truth as in
era American Fraternal Order v. Illinois. — National Union v. Am-
Miller, 60 Ind. App. 209, 110 N. E. herst, 74 111. App. 482.
556. Pennsylvania). — Commonwealth
Minnesota. — Stensgaard v. St. Mutual Fire Ins. Co. v. Iluntzinger,
Paul Real Estate Title Co. 50 Minn. 98 Pa. St. 41.
. 17 L.R.A. 575, 52 N. W. 910. Texas. — Modern Woodmen of
Missouri. — Holloway v. Dwelling- America v. Owens, — Tex. Civ. App.
house Ins. Co. 48 Mo. App. 1, 21 Ins. — , 130 S. W. 858; Gross v. Colonial
L. J. 379. Assur. Co. 56 Tex. Civ. App. 627,
New York. — Clemens v. Supreme 121 S. W. 517.
Assembly Roval Society of Good 2 National Annuity Assoc, v. Mc-
Fellows, 131 N. Y. 485, 43 N. Y. St. Call, L03 Ark. 201, 146 S. W. 125,
Rep. 571, 16 L.RA. 33, 30 N. E. 496; 48 L.R.A.(N.S-) 418 (but whether
Linzee v. Frankfort General Ins. Co. rule is not too strictly applied in this
147 N. Y. Supp. 606, 162 App. Div. case, see § 2003 herein); Mutual
282, 44 Ins. L. J. 83 ("excludes all Benefit Life Ins. Co. v. Cannon. 48
argument as to reasonableness or Ind. 264; Mutual Benefit Life Ins.
probable intent." — Putnam, J.). Co. v. Miller, 39 Ind. 475; Carmi-
Uln.de Island.- Leonard v. State chael v. John Hancock Mutual Life
Mutual Life Ins. Co. 24 R. I. 7, 96 Ins. Co. 48 Misc. 386, 95 X. Y. Supp.
Am. St. Rep. 698, 51 Atl. 1049, 31 587. Compare Chicago Guaranty
Ins. L. J. 584, Fund Lite Soc. v. Ford, 104 Tenn.
England.— Compare Joel v. Law 533, 58 S. W. 239, 29 Ins. L. J. 953.
m & Crown Ins. Co. [1908] 2 K. 3 Vose v. Fade Life & Health Ins.
B. L. R. 431% Co. 6 Cush. (60 Mass.) 42.
1 United States. — Standard Life & * Wolverine Brass Works v. Pacific
Accident Ins. Co. v. Sale, 121 Fed. Coast Casualty Co. 26 Cal. App. 18:5,
664, 57 C. C. A. 418, 61 L.R.A. 367. 146 Pac. 184/45 Ins. L.,J. 553 ; Liv-
Arkansas. — Metropolitan Life Ins. erpool & London & Globe Ins. Co.
Co. v. Johnson, L05 Ark. 101, 150 v. Cochran, 77 Miss. 34S. 26 So. 932,
S. W. 303, 42 Ins. L. J. 73. 2!) Ins. L. J. 374; Commonwealth
California. — Wolverine Brass Mutual Fire Ins. Co. v. Huntzinger,
Works Inc. v. Pacific Coast Casual- 98 Pa. St. 41; Johnson v. Maine &
ty Co. 26 Cal. App. 1S3, 146 Pac. New Brunswick Ins. Co. 83 Me. 182,
is I. 15 Ins. L. J. 551. 22 All. 11)7.
Georgia. — Supreme Conclave 5 Supreme Killing of Fraternal
Knights of Damon v. Wood, 12(1 (5a. Mystic Circle v. Hansen, — Tex. Civ.
328, 47 S. E. 940; Morris v. Imper- App. — , 153 S. W. 351.
ial Ins. Co. Ltd. 106 (ia. 161, 32 S. 6 Rasicol v. Royal Neighbors of
E. 595, 28 Ins. L. J. 402. America, 18 Idaho, 85, 29 L.R.A.
322S
WARRANTIES § 1964
cases of pregnancy,7 latent disease, etc. These questions are, how-
ever, considered elsewhere herein.8 So an unintentional misstate-
ment by an insured will no1 be treated as a breach of warranty,
rendering his policy void, when the policy itself declares that fraud,
false swearing, misstatement or concealment of a material fact by
the assured shall render the policy void.9 A distinction isalso made
between an absolute and qualified warranty in this respect, that
where the truth of a matter is affirmed and warranted, it is thereby
made material and the knowledge of the affirming party is imma-
terial, but if the warranty is expressly qualified or limited to the
extent of said party's knowledge, as where the affirmation is made
so far as assured, or the affirming party, has knowledge, then it
must appear that insured knew or ought to have known of the
truth of the matters so affirmed, and especially would this be so
where such qualification is aided by the terms of the policy or con-
tract.10 And it is held in New York that if in an application for
life insurance, the applicant purports to warrant the truthfulness
of statements therein, and a certificate issued to him purports to be
upon condition that the statements made in such application are
a part of the contract, such statements become a part of such con-
tract, and, if knowingly false, avoid it.11
In marine risks it is immaterial whether a breach of warranty
arise from fraud, negligence, misinformation, or any other cause;
(N.S.) 433, 108 Pac. 1048; Globe v. Union Ins. Co. 88 Cat. 497, 22 Am.
Mutual Life Assoc, v. Wagner, 188 St. Rep. 324, 26 Pac. 509.
111. 133, 52 L.R.A. 649, 58 N. E. 970; 10 Aetna Indemnity Co. v. Farm-
Fitch v. American Popular Life Ins. ers' National Bank, 169 Fed. 737, 95
Co. 59 N. Y. 557, 17 Am. Rep. 372, C. C. A. 169; Collins v. Catholic
rev'g 2 X. Y. Sup. Ct. 247; Dilleber Order of Foresters, 43 Ind. App. 549,
v. Home Life Ins. Co. 69 N. Y. 256, 88 N. E. 87; Daniel v. Modern Wood-
25 Am. Rep. 182; § 1848 herein; men of America, 53 Tex. Civ. App.
Suravitz v. Prudential Ins. Co. of 570, 118 S. W. 211. See Providence
America, 244 Pa. 582, L.R.A.1915A, Savings Life Assur. Soc. v. Pruett,
273, 91 Atl. 495. See § 1971 herein. 141 Ala. 688, 37 So. 700 (considered
7 Rasicot v. Royal Neighbors of under § 1965 herein); Suravitz v.
America, 18 Idaho, 85, 29 L.R.A. Prudential Ins. Co. of America, 244
(N.S.) 433, 108 Pac. 1048. Pa. 582, L.RA.1915A, 273, 91 Atl.
8 See §§ 1848, 1849, 2003 et seq. 495.
herein. On effect of qualifying- statement^
On. innocent misrepresentation as or warranties by words "to best of
to health, see note in 53 L.R.A. 193. my knowledge and belief" or words
As to effect of honest mistake in of like import, see note in 43 L.R.A.
answer as to health of insured war- (N.S.) 431.
ranted by him to be true, see note in u Foley v. Royal Arcanum, 151 N.
15 L.R.A.(N.S.) 1277. Y. 196, 56 Am. St. Rep. 621, 45 N.
9 National Bank of D. O. Mills Co. E. 456.
3229
§ 1965
JOYCE ON INSURANCE
the effect is the same in avoiding a marine policy.12 And war-
ranties by an applicant for life insurance will lie strictly applied,
and misstatements made innocently, by mistake, inadvertence, or
from false information afforded hv others, arc fatal to the contract,
bu1 such warranties will be strictly applied and limited to the pre-
cise undertaking of the party making it.13 This rule is, however,
subject to certain exceptions or qualifications which are considered
elsevt here herein.14
§ 1965. Warranty may be qualified by other words in the con-
tract.— Although a matter may be expressly warranted, yet the war-
ranty may be qualified by other words in the contract, in which
case it is not absolute, but the contract will be governed by the
qualifying words, or the matter will become in effect a representa-
tion merely; as where the policy made certain statements as to the
condition of the house a warranty, but the application qualified
the same by the words "material to the risk." it was held that unless
the promise was "material'' its breach would not avoid the policy.16
So where the affirmation is expressly qualified by the words; so far
as the assured or the affirmative party has knowledge and this
qualification is aided by the terms of the policy or contract, it must
appear that the affirming party knew or ought to have known the
truth of the matter affirmed.16 And a warranty may, by reason of
qualifications in other parts of a life insurance contract, constitute
only a warranty of assured's honest belief as to the truth of the
matters warranted.17
12 Fowler v. JEtna Fire Ins. Co. 6
Cow. 673, 16 Am. Dec. 460.
13 Equitable Life Ins. Co. v. Hazle-
w 1. 7.~> Tex. 338, 7 L.R.A. 217n, 16
Am. St. Etep. 893,12 S. W. 621; Car-
miehael v. John Hancock Mutual Life
Ins. Co. 48 .Misc. 386, 95 N. Y. Supp.
587; Leonard v. State Mutual Life
Assur. (n. 24 R. I. 7, 96 Am. St.
Rep. 608, 51 All. 1049, .11 Ins. L. J.
See 17 Earl of Halsbury's Laws
England, sec. 1102, p. 552, "Life
arance."
14 Sec §§ ISIS. 1849, 2003 el seq.
herein, and sec Aetna indemnity ' '<>.
v. Farmers National Bank, Hi!) Fed.
737, above considered under this sec-
15 Waterbury v. Dakota fire Ins.
6 Dak. 468, 13 X. W. 697; Red-
v. Hartford Fire Ins. Co. 47
Wis. 89, 32 Am. Rep. 751, 1 N. W.
393; Fitch v. American Popular Lin
Ins. Co. 59 N. Y. 557, 17 Am. Bep.
372.
As to statutes, see § 1916 herein.
16 Aetna [ndemnity Co. v. Farm-
ers' National Bank, 169 Fed. 737, 95
C. C. A. 169.
17 Providence Savings Life Assur.
Soc. v. Pruett, 111 Ala. 688, 37 So.
700. See Aetna [ndemnity Co. v.
Farmers' National Lank, 160 Fed.
7.17, 95 C ('. A. 169 (considered un-
der S 196 I herein).
A statemenl may he qualified by a
person, as where he states in his dec-
laration that he believes or is in-
formed that a certain fact is true.
A warranty only ext< in]^ to the stale;
of his belief, information or knowl-
edge, and not to facts of which he is
bona fide unaware. 17 Earl of llals-
bury's Laws of Eng. sec. 1102, p.
552, "Life Insurance."
32.30
WARRANTIES § 1966
§ 1966. When matters of description or facts relating to property-
are warranties. — As already stated, matters of description or facts
relating to property are held in certain cases to constitute repre-
sentations merely,18 but as will be noted from the following deci-
sions such matters and facts are frequently held to be warranties.
Thus, if it appears that the property was insured as described at
special rates, it is a warranty thai the property is and will continue
to be of the character specified,19 and if a descriptive statement was
intended to be a substantive part of the contract, it will ordinarily
be held a warranty.20 So if the description of the property is in
express terms of the policy made a warranty, it is, as a general
rule, a condition precedent to recovery and a warranty,1 and if the
warranty be in such case in futuro, it is immaterial that the in-
surer had knowledge that the facts did not exist as stated at the
time the policy was issued.2 It is declared in New York that the
rule holds in fire as well as in marine insurance that the description
of the property in the policy is a warranty by the insured,3 and as
a rule a description of a vessel in a marine policy is a warranty.4
And a statement as to the use of property is held a warranty.6
80 a statement as to the kind of materials entering into the con-
struction of a building is a warranty ; as that the house in which the
goods insured were contained was a "two-story frame house filled
in with brick." 6 And where a written clause describes the location
of the building, the materials of which it is constructed, and the
purposes for which it is used, this constitutes a warranty in prae-
senti, but not a continuing warranty.7 And when the description
of location is a warranty the policy will be void for a misdescrip-
tion of location.8 But a warranty that the description and state-
ment of the condition, situation, value, occupancy, and title of the
property is true does not warrant that a statement as to the dimen-
18 See § 1911 herein. Y.) 480, rev'g 1 Johns. Cas. (N. Y.)
As to statutes, see § 1916 herein. 33/ ; Baring v. Claggett, 3 Bos. &
19 Wood v. Hartford Fire Ins. Co. P. 201, 5 East, 398.
13 Conn. 533, 35 Am. Dec. 92. 5 Lennox v. Greenwich Ins. Co. 9
20 Hopkins on Ins. 181. Pa. Super. Ct. 171, 29 Pitts. L. J.
1 Continental Ins. Co. v. Kasey, 25 N. S. 279, 43 Wkly. N. C. 398.
Gratt. -(Va.) 268, 18 Am. Rep. 681. 6 Fowler v. iEtna Fire Ins. Co. 6
2 Michigan Shingle Co. v. London Cow. (N. Y.) 673, 16 Am. Dec. 460.
& Liverpool Fire Ins. Co. 91 Mich. 7 United States Fire & Marine Ins.
441, 51 N. W. 1111. Co. v. Kimberly, 34 Md. 224, 6 Am.
3 Fowler v. iEtna Ins. Co. 6 Cow. Rep. 325. As to particular represen-
(N. Y.) 673, 16 Am. Dec. 460. tations and warranties; location, see
4 Lewis v. Thatcher, 15 Mass. 431 ; § 2068 herein.
Fowler v. ^Etna Ins. Co. 6 Cow. (N. 8 Greenwich Ins. Co. v. Dougherty
Y.) 673, 16 Am. Dec. 460; Francis (Dousjhertv v. Greenwich Ins. Co. of
v. Ocean Ins. Co. 6 Cow. (N. Y.) N. Y.) 64 N. J. Law, 716, 42 Atl.
404; Goix v. Low, 2 Johns. Cas. (N. t85, 16 Atl. 1099.
3231
§ 196 JOYCE ON INSURANCE
sions of the building is true.9 And descriptive words in the policy
are not within a provision thai a reference in the policy to the ap-
plication, survey, plan or description of the property makes them
a warranty.10 If an insurance is effected upon a vessel in a port
other than thai to which she belongs, and descriptive words are
used, they will be construed with reference to the meaning attached
to those words by the usage of the porl to which the ship belongs,
and not of that where the policy is effected; for the underwriters
are assumed to have knowledge of the usages of the port to which
the vessel belongs, and the assured is not presumed to know those
of the porl where she is insured. This is so held where the vessel
was described as "newly coppered," the term "coppered ship'1 not
having the same meaning in both ports.11 But this rule must be
held subject to such exception as the nature of the usage and the
relation thereof to the subjeel matter of insurance necessitates.12
So in matters of description made a warranty by the terms of the
policy, the nature of the warranty and the subjeel matter musl not
infrequently be a material factor in determining what compliance
therewith is necessitated. Thus, where it was stated thai a certain
building'was to be removed to a certain distance away from another,
,i reasonable time must be allowed for compliance, and whal con-
stitutes a reasonable time is a question for the jury.18 Other matters
of description relating to use and occupation, location, etc., are con-
sidered herein under other heads.14
§ 1966a. Time to which warranty refers. — We have given the
definitions of affirmative and promissory warranties.15 and although,
subjeel to such exceptions as exist under English law.16 a promis-
sory warranty doc- not relate to past matters but is executory in its
nature, and false representations or statements which. only relate
to then existing conditions or facts are not promissory warranties,17
still it may he stated here that it is held that a warranty speaks as
9 National Mutual Fire Ins. Co. v. Wright v. Sun Mutual Tns. Co. Fed.
Duncan, it Colo. 472, 20 L.R.A. Cas. No. 18,095, 6 Am. L. Reg. 187.
(\ S ) 340, 98 Pac. 634, 38 3ns. L. 12 See 2 Duer on Marine Ins. (ed.
.1. L84. 1846) litis.
On effect of misrepresentation as " Lindsey v. Union Mutual Fire
to dimensions of insured building, Ins. Co. 3 R. I. 1>< .
see note in 20 L.R.A. (N.S.) 340. 14 See §§ 2068, 2101 el seq. herein.
10King Brick Manufacturing Co. 16 See §§ 1946, 194; herein,
v. Phoenix Ins. Co. Hit Mass. 291, 41 16 See § 1947 herein.
^ E. 277. "Scottish Union National Ins. Co.
' "Hazard v. New England Marine v. Wade, 59 Tex. Civ. App. 631, 127
Ins Co. 8 Pet. (33 U. S.) 557, 8 L. S. W. 1186. Compare Gross v. Colo-
t,l L043, rev'g 1 Sum. (U. S. C. C.) nial Assur. Co. 56 Tex. Civ. App.
218, Fed. Cas. No. 6,282. Cited in 573, 121 S. W. 577.
3232
WARRANTIES
§§ 1966b-1969
of the date of the policy and this is applied to a warranty that
rrnoneTof the automobiles herein described are rented to others."18
~ § 1966b. Warranties subsequent to completion of contract. —
Warranties as well as representations made after completion of the
contract, or after delivery of the policy, cannot be availed of as a
defense.19
§ 1967. Where time to which affirmative warranty relates is
specified. — If the warranty relates to a specific period of the time, it
cannot be extended by construction beyond that period; as where
it was warranted that the insured had "no chronic disease at the
time it was made.'' in such case the evidence must clearly show, in
order to avoid the policy, thai the disease relied on as proving the
warranty false existed when the insurance was effected.20
§ 1968. Where time to which affirmative warranty in life risk
relates is indefinite. — Where in a life risk the inquiry, upon the
answer to which the warranty is based, is not definite as to time, it
cannot by construction be held to extend over the whole period of
the life insured.1
§ 1969. Partial answers. — If partial answers are made, the war-
ranty will not be extended beyond the answer or beyond what the
answer fairly imports within the ascertained intent of the parties.2
/ 18 Mayor, Lane & Co. v. Commer- or representation with respect to the
/ cial Casualty Ins. Co. 150 N. Y. habits or occupation of insured, see
/ Supp. 624, 45 Ins. L. J. 428 {citing note in 5 L.R.A.(N.S.) 283.
/ Smith v. Mechanics & Traders Fire On time covered by question or
Ins. Co. 32 N. Y. 399), s. e. 155 N. Y. representation as to consultation with
I Supp. 75, 169 App. Div. 772. physician, see note in 45 L.R.A.
V 19 Michigan Fire & Marine Ins. Co. (N.S.) 162.
^~ v. Wieh, 8 Colo. App. 469, 46 Pac. 1 World Mutual Life Ins. Co. v.
687. See also Cable v. United States Schultz, 73 111. 586, 5 Ins. L. J. 34.
Life Ins. Co. Ill Fed. 19, 49 C. C. Upon appeal, the court said: "The
A. 216. But decree that policy be de- question was not whether he had been
livered up and canceled rev'd in 191 subject to a disease, but whether or
U. S. 288, 48 L. ed. 188, 24 Sup. Ct. not he is subject to said disease. Most
74; Rankin v. Amazon Ins. Co. 89 certainly, the jury were justified in
Cal. 203, 23 Am. St. Rep. 460, 26 finding- that there was no breach of
Pac. 872. See §§ 1909, 1921 herein, warranty." We are of the opinion
20 Murphy v. Mutual Benefit Life that the question was not sufficiently
& Fire Ins. Co. 6 La. Ann. 51S. definite and specific as regards time
"There is not sufficient evidence that to warrant the finding of a breach of
the disease existed at the time the warranty.
life was insured. It is true that the 2 Dilleber v. Home Life Ins. Co.
opinion is expressed, from the post 69 N. Y. 256, 25 Am. Rep. 182 ; Penn-
mortem examination, that the disease sylvania Mutual Life Ins. Co. v.
was of long standing. These are in- Wiler, 100 Ind. 92, 50 Am. Rep. 769.
definite terms, and do not necessarily See Marston v. Kennebec Mutual
show that it existed when the policy Life Ins. Co. 89 Me. 266, 56 Am. St.
was granted." Rep. 412, 36 Atl. 389.
As to time covered by provision
Joyce Ins. Vol. III.— 203. 3233
§ 1970 JOYCE ON INSURANCE
Ami neither affirmation nor negation can be predicated upon omis-
sions 1" fill out by written answers blank spaces left therefor in a
schedule of warranties or questions.8 Nor can a breach of warranty
be based upon unfilled and unsigned blanks on the back of the
policy.4 This point as to Lmperfecl or partial answers is. however,
more fully discussed under the chapter on "representations," to
which the reader is referred.5
§ 1970. Breach: warranty must be strictly true and exactly and
literally fulfilled. — A warranty in a contract of insurance must, if
affirmative, be strictly and exactly true, and if promissory, must
be literally fulfilled: the validity of the entire contract depends
thereon, otherwise it becomes void. No departure can be allowed
in the slightesl particular in any matter warranted. The very pur-
pose and meaning of a warranty is to preclude all questions for
what purpose it was made, or whether it was made for any purpose
at all by the insured. Once it is inserted in the policy or made a
part thereof by proper reference, it hinds the assured as made, it
matters not whether the breach proceeds from fraud, negligence,
misinformation, or to what- cause noncompliance is attributable.
[f it be an affirmative warranty and is false, there is a breach; if
it be promissory and is not strictly performed, the contract is viti-
ated.58 As to the latter there is, says Lord Mansfield, no latitude, no
equity. The only question is, Has the event happened? If not,
there is no contract.6 And this rule, above stated, emphasizes
3 Everson v. General Fire & Life modified by statute), s. c. 89 Ark.
Assur. Corp. 202 .Mass. 169, 88 N. E. 346, 116 S. W. 894.
658, 38 Ins. L. J. 923. As to waiver California. — Roberts v. iEtna Ins.
by issuing policy where answer in- Co. 58 Cal. 83; Wolverine Brass
complete. See Fidelity Mutual Life Works Inc. v. Pacific Coast Casualty
Ins. Co. v. Beck, 81 Ark. 57, 104 S. Co. 26 Cal. App. 183, 146 Pac. 184,
W. 533, 1102. 45 Ins. L. J. 551.
4Frankel v. United States Casual- Colorado. — National Mutual Fire
ty Co. 115 N. Y. Supp. 631. Ins. Co. v. Duncan, 44 Colo. 472, 20
5 See SS 1914b, 1927 et seq. herein. L.R.A.(N.S.) 340, 38 Ins. L. J. 184.
6a As to statutes, see § 1916 here- Connecticut. — Kelsey v. Universal
in. Life Ins. Co. 35 Conn. 225 ; Glendale
6 United States. — Nicoll v. Ameri- Woolen Co. v. Protection Ins. Co. 21
can Ins. Co. 3 Wood. & M. (U. S. C. Conn. 19, 54 Am. Dec. 309.
C.) 529, Fed. Cas. No. 10,259; Sayles Delaware. — Baltimore Life Ins.
v. Northwestern Ins. Co. 2 Curt. (U. Co. v. Flovd, 5 Bovce (28 Del.) 201,
S. ('. C.) 610, Fed. Cas. No. 12.422. 91 Atl. 653, s. c. 5 Horn- (28 Del.)
Alabama. -- Alabama Gold Life 431, 94 Atl. 515.
Ins. Co. v. Johnson, 80 Ala. 467, 59 District of Columbia. — Duma.s v.
Am. Rep. 816, 2 So. 125. Northwestern National Ins. Co. 12
Arkansas.— Capital Fire Ins. Co. App. D. C. 245, 40 L.R.A. 358.
v. King, 82 Ark. 400, 403, 102 S. W. Illinois— S pence v. Central Acci-
194, 30 Ins. L. J. 655, 657 (but rule dent Ins. Co. 236 111. 444, 19 L.R.A.
3234
WARRANTIES § 1070
clearly the broad distinction as to their legal effect between a war-
ranty and a representation, in that the latter need only be substan-
tially true and a misrepresentation or false representation must be
(N.S.) 88n, 86 N. E. 104, 38 Ins. L. tion as a finality and excludes all
J. 87; Cessna v. United States Life argument as to reasonableness or
Endowment Co. 152 111. App. 653; probable intent of the parties," Put-
Peckham v. Modern Woodmen of nam, J.).
America, 151 111. App. 95. North Carolina. — Mizell v. Bur-
Indiana — Catholic Order of For- nett, 4 Jones (49 N. C.) 249, 69 Am.
esters v. Collins, 51 Ind. App. 285, Dec. 744.
99 N. E. 745. Ohio. — Hartford Protection Ins.
Louisiana. — Petitpain v. Mutual Co. v. Harmer, 2 Ohio St. 452, 59
Reserve Fund Life Assoc. 52 La. Am. Dec. 684.
Ann. 503, 27 So. 113, 29 Ins. L. J. Oregon.— Buford v. New York Life
269. Ins. Co. 5 Or. 334.
Maine. — Witherell v. Maine Ins. Pennsylvania. — Lvcoming Ins. Co.
Co. 49 Me. 200. v. Mitchell, 48 Pa. 367; State Mutual
Massachusetts. — Daniels v. Hudson Fire Ins. Co. v. Arthur, 30 Pa. St.
River Fire Ins. Co. 12 Cush. (66 315.
Mass.) 416, 59 Am. Dec. 192; Vose Texas. — Phoenix Assur. Co. v.
v. Eagle Life & Health Ins. Co. 6 Munger Improved Cotton Machine
Cush. (60 Mass.) 42. Mfg. Co. 92 Tex. 297, 49 S. W. 222,
Mississippi. — Citizens National 2S Ins. L. J. 248, aff'g -- Tex. Civ.
Life Ins. Co. v. Swords, 109 Miss. App. — , 49 S. W. 271 ("susceptible
635, 68 So. 920. of no construction other than that the
Missouri. — Kribs v. United Order parties mutually intended that the
of Foresters, 191 Mo. App. 524, 177 policy should not be binding unless
S. W. 766; Pacific Mutual Life Ins. such statement be literally true,"
Co. v. Glaser, 245 Mo. 377, 45 L.R.A. Denman, J.) ; Equitable Life Ins. Co.
(N.S.) 222, 150 S. W. 552; Salts v. v. Hazlewood, 75 Tex. 338, 16 Am.
Prudential Ins. Co. 140 Mo. App. St. Rep. 893, 7 L.R.A. 217, 12 S. W.
142, 120 S. W. 714, 38 Ins. L. J. 943 621 ; Modern Woodmen of America
(but effect of untrue warranties con- v. Owens, 60 Tex. Civ. App. 398, 130
trolled by statute). S. W. 858. But compare Kansas
Montana. — Pelican v. Mutual Life City Life Ins. Co. v. Blackstone, —
Ins. Co. 44 Mont, 277, 119 Pac. 778, Tex. Civ. App. — , 143 S. W. 702,
41 Ins. L. J. 327. 41 Ins. L. J. 683 (need not be liter-
Nebraska. — Aetna Ins. Co. v. Sim- ally but only substantially true),
mons, 49 Neb. 811, 69 N. W. 125. Virginia. — Prudential Fire Ins.
New York.— Wheeler v. Connecti- Co. v. Alley, 104 Va. 356, 51 S. E.
cut Mutual Life Ins. Co. 82 N. Y. 812.
543, 544, 37 Am. Rep. 594; Higbee Washington. — Miller v. Commer-
v. Guardian Life Ins. Co. 53 K Y. eial Union Assur. Co. Ltd. 69 Wash.
603, s. c. 66 Barb. (N. Y.) 462; Fow- 529, 125 Pac. 782, 41 Ins. L. J. 1599;
ler v. iEtna Fire Ins. Co. 6 Cow. (N. Poultry Producers' Union v. Will-
Y.) 673, 16 Am. Dec. 460; Jennings iams, 58 Wash. 64, 137 Am. St. Rep.
v. Chenango County Mutual Ins. Co. 1041, 107 Pac. 1040; Hoeland v.
2 Denio (N. Y.) 75. See Linzee v. Western Union Life Ins. Co. 58
Frankfort General Ins. Co. 147 N. Wash. 100, 107 Pac. 866.
Y. Supp. 606, 162 App. Div. 282, 44 England.— Bond v. Nutt, Cowp.
Ins. L. J. 83 ("by way of particular 601, per Lord Mansfield; Bettini v.
description, condition or otherwise it Gye, 1 Q. B. D. 183, 45 L. J. Q. B.
states the agreed limits of the obliga- 209 ; Poussard v. Spiers, 1 Q. B. D.
3235
1970 JOYCE ON INSURANCE
of material matters,7 although, as we have stated, facts may be ren-
dered material by stipulation 8
The assuror is also released by a breach of warranty in a policy
.it' insurance, whether the breach diminished or increased the risk,
or was committed for good or bad reasons, or with or without the
consent of the insured,9 or that the act was done by a tenant of the
insured without his knowledge or authority.10 So in case of a war-
ranty to sail, on a day certain, and the -hip was ready to .-ail. and
would have sailed, but being restrained by order of the government
it sailed alter the day named and was captured, the detention was
410, 45 L. J. Q. B. 621; Hore v. Altheimer, 58 Ark. 565, 25 S. W.
Whitmore, Cowp. 784; Lothian v. 1067. "A warranty, as above defined,
Henderson, 3 Bos. & P. 499, per is a condition which must he exactly
Lawrence, .1.; Bibberl v. Pi^on, re- complied with, whether it be material
ported in 1 Marshall on In-, (ed. to the risk or not. If it be not so
1810) *370, *370a, per Lord Mans- complied with, then, subject to any
jj(.l,l_ express provision in the policy, the
See also 1 Marshall on Ins. (ed. insurer is discharged from liability
1810) :317, *348. "No cause, how- as from the date of the breach of
ever sufficient, no motive however warranty, but without prejudice to
good, no necessity however irre- any liability incurred by him before
sistible, will excuse noncompliance that date." Marine insurance acl
with an express warranty. If it be 1906 (6 Edw. VII. c. 41) sec. 33,
not in fact complied with, though for subd. (3); 2 Butterworth's Twen-
the best reasons, the policy is void:" tieth _Century Statutes (1900-1909)
1 Arnould on Ins. (Perkins' ed. p. 407.
L850) 5S7, *584; Id. (Maclachlan's As to statutes, see § 1916 herein.
ed. 1887) 604. "The meaning of a 'Mutual Benefit Life Ins. Co. v.
warranty precludes all question Robison, 58 Fed. 723, 7 C. C. A. 444,
whether it has been substantially 19 U. S. App. 266, 22 L.B.A. 325;
complied with or not:" Hammond Spence v. Central Accident Ins. Co.
on Fire Ins. (ed. 1840) 82. If 236 111. 444, 19 L.R.A.(N.S-) 88n, 86
a statement is referred to and in- N. E. 104, 38 Ins. L. J. 87, and cases
corporated in a policy it is a war- cited in last note, and see also §§
ranty and must be strictly and lit- 1893 et seq. 1924 herein.
erally true and must be complied 8 See §§ 1912, 1956a herein.
with exactly whether material to risk 9 Wood v. Hartford Fire Ins. Co.
or not. 17 Earl of Halsbury's Laws 13 Conn. 533, 35 Am. Dec. 92; Diehl
.4' England, sec. 1063, p. 531 ("fire v. Adams County Mutual Ins. Co. 58
insurance"). A warranty must be Pa. St. 443, 98 Am. Dec. 302. See §
strictly complied with and literally 1975 herein.
fulfilled: Weil v. New York Life Ins. 10 Diehl v. Adams County Mutual
Co. 47 La. Ann. pt. 2, 1405, 17 So. Ins. Co. 58 Pa. St. 443, 98 Am. Dec.
S53. "A warranty must be strictly 302.
or literally complied with, for the On effect upon insurance policy
very meaning of the words precludes of breach of condition by tenant, see
all questions as to substantial com- note in 12 L.R.A.(N.S.) 485.
pliance:" 1 Biddle on Ins. (ed. On effect on vacancy clause of ten-
1893) 557. A strict rather than a ant's removal without owner's know4-
substantial compliance with warran- edge, see note in 3 L.R.A.(N.S.) 966.
ties required: Western Assur. Co. v.
3236
WARRANTIES § 1970
held no excuse for breach of the warranty, even though the policy
contained the clause against "restraints and detainments of kings,
princes, and people" expressly within the protection of the policy.11
And so although the warranty be afterward and before the loss
complied with, the policy is vitiated for noncompliance when the
risk commences.12 And if a matter is warranted to be of a particu-
lar nature or description, it must conform exactly to the terms of
the warranty.13 So that an express condition that a policy shall be
void if the insurer is not the sole and unconditional owner of the
property, or if it is mortgaged, will render it void if the conditions
are broken, even if the insured made no representations as to the
property or any fraudulent concealment of the facts.14 In a Kan-
sas case assured agreed that the answers and statements including
those made to the medical examiner should be the basis of the con-
tract, that such statements and answers were full and true, and
that any false, incorrect or untrue answer or suppression, or con-
cealment of facts, in any answer, should render the policy null and
void. It was also stipulated in the policy that it was issued in con-
sideration of the answers and statements contained in the applica-
tion and that all of such answers and statements were made war-
ranties and a part of the contract, and that if any answer or state-
ment were not true, the policy should be void, and that the contract
was completely set forth in the policy and application taken
together. It was decided that the liability of the insurer depended
upon the truthfulness of the answers and it was declared that: "The
court is not disposed to distinguish between the literal truth and
the truth unqualified of an answer which must be Yes or No."15
In applying the rule above stated care should be taken to dis-
tinguish those cases where exact truth and literal compliance is
11 Hore v. Whitmore, Cowp. 784. 16 Ann. Cas. 267, 96 Pac. 62, Burch,
See Bond v. Nutt, Cowp. 601, per J. Citing:
Lord Mansfield. United States. — Jeffries v. Life Ins.
12 Rich v. Parker, 7 Term Rep. Co. 89 U. S. 47, 22 L. ed. 833;
705, 14 Eng. Rul. Cas. 149. Hubbard v. Mutual Reserve Fund
13 Newcastle Fire Ins. Co. v. Mar- Life Assoc, 100 Fed. 719, 40 C. C.
morran, 3 Dow. (Scot.) 255, per A. 665.
Lord Eldon. Arizona. — Mutual Life Ins. Co. v,
14 Durnas v. Northwestern National Arhelger, 4 Ariz. 271, 36 Pac. 895.
Ins. Co. 12 App. D. C. 245, 40 L.R.A. Arkansas. — Providence Life As-
358. surance Soc. v. Rentlinger, 58 Ark.
15 Metropolitan Life Ins. Co. v. 528, 25 S. W. 835.
Brubaker, 78 Kan. 146, 18 L.R.A. Illinois. — Connecticut Mutual Life
(N.S.) 362 (annotated on what con- Ins. Co. v. Young, 77 111. App. 440.
statutes a consultation with or at- Ioica. — Nelson v. Nederland Life
tendance by a physician within the Ins. Co. 110 Iowa, 600, 81 N. W. 804.
meaning of an application for life Massachusetts. — Cobb v. Covenant
insurance), 130 Am. St. Rep. 356, Mutual Benefit Assoc. 153 Mass. 176,
3237
§ 1971 JOYCE ON INSURANCE
necessary and those where it is sought by construction to exten 1
the warranty beyond what it clearly imports; for while the assun I
i- held strictly to what he has agreed, he is held only to what h •
has warranted, and nothing more. A strict compliance with a war-
ranty ought to operate as well in favor of as against the assure I
whenever he can bring himself within its terms.16 Thus, in a case
already noted of a warranty that a ship shall carry twenty guns,
if that number of guns are carried the warranty is fulfilled; she is
not obligated to carry the full complement of men to work them.17
§ 1971. Is there a tendency to relax the above rule? — As bearing
upon the question whether there is a tendency to relax the above
rule in regard to warranties, the words of McCormick, C.J., in a
Federal case18 are important. They are: ''Where insurance is
effected as marine insurance formerly was and generally is still
written, the situation of the parties require the exercise of the ut-
most good faith. In enforcing this requirement against unfaith-
ful parties rules were advanced and followed which conditions then
existing demanded, but by reason of the gradual and great develop-
ment of a change in relation to the parties to these contracts these
rules, though once wholesome and necessary, have become severe,
and with the well-known tendency toward the growing weight
of precedent have often been applied to cases and in a manner
not within Lord Mansfield's reasonings. He says, with his pe-
culiar force: 'A warranty in a policy of insurance is a condition
or ;i contingency, and unless that be performed there is no con-
tract.' 19 Out of the business of marine insurance, or superinduced
thereby, the business of fire and life insurance has sprung and
grown till it fills all the land, and its cases overflow the courts and
their reports. The relations of the parties are reversed. The poli-
cies in current use arc travesties on the common-sense form in use
10 L.R.A. 6G6, 25 Am. St. Rep. 619, Pennsylvania. — United Brethren
2G N. E. 230. Mutual Aid Soc. of Lebanon Pa. v.
Minnesota.— Price v. Phoenix Mu- O'Hara, 120 Pa. St. 256, 13 All. 932.
lu.il Life Ins. Co. 17 Minn. 197, 10 16 See Kemble v. Rhinelander, 3
Am. Rep. 166. Johns. Ch. (N. Y.) 134. per Kent. .1.
Missouri. — McDermott v. Modern 17 Hyde v. Bruce, 3 Doug. 213, re-
\Y< odmen of America, 97 Mo. App. ported 1 Marshall on Ins. (ed. 1810)
636, 7! S. \V. 833. *347a. See also Burleigh v. Gebhard
New Jersey. — Dimick v. Metropol- Ins. Co. 90 N. Y. 220.
itan I. ilr Ins. Co. 69 N. J. Law, 384, 18 Western Assurance Co. v. Red-
62 L.R.A. 774, 55 Atl. 291; Metro- ding, 68 Fed. 708, 15 C. C. A. 619,
1 mln an Life Ins. Co. v. McTague, 49 623.
N. J. Law, 587, 60 Am. Rep. 661, 9 As to statutes, see § 1916 herein.
Atl. 766. 19De Halm v. Hartley. 1 Term
Xrw York. — Roche v. Supreme Rep. 343, 14 Eng. Rul. Cas. 171.
Lodsje Knights of Honor, 17 X. Y.
Supp. 774, 21 App. Div. 599.
3238
WARRANTIES § 1972
in marine insurance, and while the distinctions? and construction
announced in Pawson v. Watson 20 and in De Hahn v. Hartley l
are too well settled to be disturbed by judicial action, there has long
been a marked and growing judicial sense that the application of
these and later cases'in line with them should not be carried beyond
the boundaries of controlling precedents; that common honesty
and common sense are safe guides in the construction of even these
wonderfully devised contracts. While, therefore, it is certainly the
law that a precedent condition warranted to exisl must in fact exist
exactly as stated or there will be no contract, because the minds meet
only on all the stipulated conditions, a promissory warranty is
often, if not always, necessarily a condition subsequent, and courts
should and do, and will, apply to these the doctrines that obtain in
adjudging forfeitures." So in Indiana it is decided that in order
to avoid a policy on account of breach of warranty as to the value
of the property insured, there must be a substantial breach.2 But
representations as to value may be considered as an exception to,
rather than a relaxation of, the rule and generally, if substantially
true, and there is not a gross or fraudulent overvaluation, the war-
ranty of value will be complied with.3 It is also decided in Texas
that a warranty need not be literally true, but the better rule is
that it is complied with if substantially true although the materi-
ality of the fact cannot be inquired into.4 And although statements
are warranted true and it is stipulated that they constitute the basis
of the contract, the policy is not avoided by applicant's statements
that none of his brothers are dead unless he knew it to be so.5
Such statutes also should be considered as operate to mitigate
the effect of the rule above given.6 We have, however, fully con-
sidered under proper headings the effect of statutes relating to the
subject of representations and warranties.
§ 1972. Exceptions to above rule: what excuses compliance with
warranty. — We have already noted decisions which hold that a
failure, the insured acting in good faith, to disclose a slight illness
does not constitute a breach of warranty relating to past sickness,
20Cowp. 785, 1 Dougl. lln, 13 Ins. Co. v. Howell, 21 Ky. L. Rep.
Eng. Rul. Cas. 540. L2 1."), 54 S. W. 852, 29 Ins. L. J. 356.
*1 Term Rep. 343, 14 Eng. Rul. See § 2111a herein.
Cas. 171. 4 Kansas City Life Ins. Co. v.
2 Phoenix Ins. v. Pickel, 119 Ind. Blackstone, — Tex. Civ. App. — , 143
155, 12 Am. St. Rep. 393, 21 N. E. S. W. 702, 41 Ins. L. J. 683.
546. 6 Glove Mutual Life Ins. Co. v.
3 National Mutual Fire Ins. Co. v. Warner, 188 111. 133, 52 L.R.A. 649,
Duncan, 44 Colo. 472, 20 L.R.A. 58 N. E. 970.
(N.S.) 340, 98 Pac. 634; Teutonia 6 Everson v. General Fire & Life
3239
§ L972 JOYCE ON INSURANCE
disease, etc.7 And in a Federal case the cargo was warranted Amer-
ican. The ship coming from a French port was compelled to take
aboard some French invalid soldiers, together with their baggage
and some household furniture, and it was decided that although
such furniture was generally considered a part of the cargo and not
baggage, yel there was no breach of warranty under the peculiar
circumstances of the case.8 So where the policy expressly stipulated
that "ashes are kepi al all times in brick/5 it was held a sufficient
compliance if they were kept in some other equally safe way. We
would suggest, however, that this ease could well support the prin-
ciple that what is intended by the warranty should first he clearly
ascertained, and it should theu he strictly complied with accord-
ing to the intent of the parties.9 So in an [llinois case it was stip-
ulated that a- certain number of buckets 'Tilled with water" should
be kept on the first floor and others in the basement "ready for use
at all times in rase of fire." bu1 the court held that this was merely
an agreement not requiring a Literal compliance which might be
impossible, as in the winter season when no fires were allowed in
the building, and that it was sufficient if the required number of
buckets were kept at the specified places in a g 1 and serviceable
condition ready for instant use. In other words, it is apparent that
the court was satisfied thai ;i strict warranty was not intended by
the parties, and that a substantial compliance satisfied the stipu-
lation. This case could also he well decided to support the prin-
ciple stated as underlying the last case.10 And in case of a warranty
to sail with convoy the insurers are not discharged if the vessel sails
with convoy but is separated therefrom by stress of weather and
does all in her power to rejoin the convoy, although convoy for the
voyage is intended by the usual warranty.11
Assur. Corp. Ltd. 202 Mass. 169, 88 As to statutes, see § 1916 herein.
X. K. 658, 38 Ins. L. J. 923, 927. 8 Vasse v. Ball, 2 Dall. (2 U. S.)
See § 1916 herein. 270, 1 L. ed. 377.
7 See §§ 1848, 1849, 2003 et seq. 9 Underbill v. Agawam ! iitual
herein; Dilleber v. Home Life Ins. Fire Ins. Co. 6 Cush. (60 Mass.) 440.
Co. 69 N. Y. 256. See Daniels v. Hudson River Fire
"Non-compliance with a warranty Ins. Co. 12 Cush. (00 Mass.) 41ti. 59
is excused when, by reason of a Am. Dee. 492, where the court held
change of circumstances the warran- similar statements as representations
1 v ceases to be applicable to the cir- to save a forfeiture.
cumstances of the contract or when 10 Aurora Fire Ins. Co. v. Eddy,
compliance with the warranty is ren- 49 111. 106.
dered unlawful bv any subsequent n Jefferves v. Le^endra, 3 Lev.
law." Marine insurance act 1906 (6 320, 329, 2 Salk. 443, 1 Show. 320, 4
Edw. VII. c. 41) sec. 34, subd. (1); Mod. 48; 1 Marshall on Ins. (ed.
2 Butterworth's Twentieth Century 1810) *376, *378. See Audley v.
Statutes (1900-1909) p. 407. Duff, 2 Bos. & P. 111.
3240
WAR KANT IKS § 1972
So if the reason of the rule ceases, it would seem that the rule
would cease; as where the warranty is that a ship shall sail with
convoy, this has reference to a stale of war, and if peace should in-
tervene before the time for performance of the warranty, com-
pliance ought to be excused.12
The rule requiring strict compliance must he held to refer to
warranties clearly and understanding^- made, for if the as.-ured i~.
by reason of the express declaration-; and explanations contained
in the papers prepared by the insurer and made a part of the con-
tract, thrown off his guard and induced by reliance thereon to enter
into a warranty, such declarations and explanations must, if pos-
sible, be construed together with the warranty, and if the construc-
tion raises a doubt, the assured will be excused from a strict com-
pliance with the warranty, and he held only to compliance there-
with as qualified by the inducing declarations. Thus, where said
statements of the company are that only dishonesty or inexcusable
carelessness will jeopardize the insurance, and that fraud or inten-
tional misrepresentation violates the policy, and the payment
will be contested only in case of fraud, such declarations are in-
consistent with the legal effect of a warranty, and strict compli-
ance is excused.13
A valid warranty may by a subsequent legislative enactment
become illegal, and compliance therewith will thereafter be excused.
This follows by analogy from the law applicable to other contracts.14
although if such statute be afterward repealed before the time for
compliance, the obligation would by analogy with a Massachusetts
case, be suspended during the existence of the law, and would re-
vive on appeal.15
12 2 Duer on Marine Ins. (ed. Presbyterian Church v. New York, 5
1846) 702. "The only legitimate Cow. ' ( X. Y.) 538, per Savage,_J.;
grounds for noncompliance are, eith- Esposito v. Bowden, 7 El. & B. 763,
er such a change of circumstances as 783, 24 Eng. Rul. Cas. 399; Gray v.
to render the warranty inapplicable, Sims. 3 Wash. (C. C.) 276, Fed. Cas.
as in the case of a vessel 'warranted No. 5,729; centra, Brason v. Dean,
to sail with convoy' if peace were ','> Mod. 39.
proclaimed before the ship sailed, or On effect of passage before expira-
the making of a law rendering its tion of time for performance of eon-
fulfillment illegal subsequent to the tract of statute rendering perform-
asreement to insert a warranty being ance impossible, see notes in 10
entered into and prior to the time for L.R,A.(N.S.) 41.")-, 41 L.R.A.(N.S.)
its execution:" McArthur on Marine 559; and L.R.A.1916F, 66.
Ins. (ed. 1890) 37. 15 Baylies v. Fettyplace, 7 Mass.
13 Fitch v. American Popular Life 325. But see c. XL §§ 281 et seq.
Ins. Co. 59 N. Y. 557, 17 Am. Rep. herein. The California code provides
372. that "when before the time arrives
" Brewster v. Kitchell, 1 Salk. 198, for performance of a warranty re-
Ld. Rayru. 317, 321, cited in Brick lating to the future, . . . per-
3241
§ 1973 JOYCE ON INSURANCE
§ 1973. What excuses compliance: waiver and estoppel. — The
breach of a warranty may be waived by the insurer; as where a
while lying at Rotterdam, a port north of Antwerp, was in-
sured in January under a warranty not to use ports in Europe north
of Antwerp between November and March.16 So where there was
a warranty as to the size, age, and condition of the building and
the [lumber of the stovepipes therein, and the company were in-
formed soon after the loss of the falsity of the warranty, hut did
not claim a forfeiture therefor and allowed successive proofs of loss
to be made, objecting only to the form of the proofs, it was held
that there was a waiver of the breach.17 Assurer's words or acts
may also evidence an intention to waive a breach of warranty:18
and if assurer after learning of a breach fails to repudiate the con-
tract hut by various acts recognizes the policy as of force, such as
demanding proofs of loss, arbitration, etc., there is a waiver; 19 so, a
waiver may arise from non-repudiation by assurer of acts constitut-
ing a breach, and by demanding certain rights under the policy : 20
and there is a waiver of the requirement as to keeping books of ac-
count where assurer continues the policy in force after knowledge of
the breach of the warranty ; l so assurer is estopped to set up a breach
of warranty by retaining assessments paid and by non-cancelation of
the policy after it has knowledge of assured's physical condition;2
and where the policy is issued with knowledge of the facts as to
title there is a waiver ; 3 and the law may, under the facts, impute
such knowledge as to the condition of assured's title as to constitute
f ormance becomes unlawful, the omis- 18 Kiernan v. Dutchess County Mu-
sion to fulfill the warranty does not tual Jus. Co. loO N. Y. 190, 44 N. E.
avoid the policy:'' Deering's Annot G98.
Civ Code Cal. sec. 2601). 19 Home Fire Ins. Co. v. Kennedy,
« Reck v. Phoenix Ins. Co. 130 N. 47 Neb. 138, 66 N. W. 278.
Y 160, 29 N. E. 137. But see §§ 489, 20 Baker v. New York Life Ins. Co.
Hill |, ,'mn. -A breach of warranty (U. S. C. C.) 71 Fed. 550, afE'd 83
may be waived by the insurer." Ma- Fed. 647, 27 C. C. A. 658.
rine insurance act 1906 (6 Edw. VII. 1 Hanover Fire Ins. Co. v. Dole, 20
c. 41) sec. 34, subd. (3); 2 Butter- Ind. App. 353, 50 N. E. 772.
worth's Twentieth Century Statutes 2 Kidder v. Supreme Assembly of
(1! liioii) p. 107. American Stars of Equity, 154 111.
"(lorman Ins. Co. v. Gibson, 53 App. 489.
Ark 194, II S. W. 072. See Eddv On waiver of stipulation m policy
v. Eawkeye Ins. Co. 70 Iowa, 472, 59 that it shall not become binding un-
Am. Rep." 444, 30 N. W. 808. less delivered to assured while in
On whether failure of the insurer good health, see notes in 17 L.R.A.
to speak or act after notice of breach (N.S.) 1149; 43 L.R,A.(N.S.) 727;
o!' policy constitutes a waiver there- and L.R.A.1916F, 171.
of, see notes in 25 L.R.A.(N.S.) 1, 'Merchants' Mutual Fire Ins. Co.
and 51 L.R.A.(N.S.) 261. v. Harris, 51 Colo. 95, 116 Pac. 143.
3242
WARRANTIES § 1973
a waiver.4 A condition as to sole and unconditional ownership is
also waived by a rider making the loss payable to assured "as inter-
est may appear" ; 6 and a breach is waived by accepting the premium
and delivering the policy with full knowledge of the facts of
changed conditions under a strike insurance policy ; 6 so there is
a waiver or estoppel where a committee of assurer investigates the
truth of the applicant's statements as to his occupation and assurer
has knowledge thereof through the proposal; 7 and a warranty that
buildings are occupied is waived by issuing the policy while they
are being constructed and giving insured permission to complete
them; 8 assurer may also be estopped or there may be a waiver by
reason of its agent's knowledge or acts, notwithstanding provisions
in the policy as to the only manner in which conditions may be
waived by the agent.9 And an adjustment of the loss by assurer's
4 German Fire Ins. Co. v. Herbers- 127 N. W. 52 (agent was informed
ton, 49 Colo. 217, 112 Pac. 690. by assured of fact as to attendance
6 Bakhaus v. Caledonian Ins. Co. of physician).
112 Md. 676, 77 Atl. 310, 39 Ins. L. Kentucky. — Wilson v. Germania
J. 1431. Fire Ins. Co. 140 Ky. 642, 131 S. W.
6 Buffalo Forge Co. v. Mutual Se- 785 (title).
curity Co. 83 Conn. 393, 76 Atl. 995. Maryland. — Bakhaus v. Caledonian
See also Padrnos v. Century Fire Ins. Ins. Co. 112 Md. 676, 77 Atl. 310, 39
Co. 142 Iowa, 199, 119 N. W. 133, 38 Ins. L. J. 1431.
Ins. L. J. 357. Missouri. — Shook v. Retail Hard-
7 Lessnau v. Catholic Order of ware Mutual Fire Ins. Co. 154 Mo.
Foresters, 163 Mich. Ill, 17 Det. L. App. 361, 134 S. W. 588 (iron-safe
News, 887, 128 N. W. 201. clause) ; Cayle v. Chillicothe Town
8 Bakhaus v. Caledonian Ins. Co. Mutual Fire Ins. Co. 78 Mo. App.
112 Md. 676, 77 Atl. 310, 39 Ins. L. 431, 2 Mo. App. Repr. 259.
J. 1431. New York. — Carmichael v. John
On vacancy permit as waiver of Hancock Mutual Life Ins. Co.
previous vacancy, see note in 47 48 Misc. 386, 95 N. Y. Supp.
L.R.A.(N.S-) 619. 587.
9 Arkansas. — Queen of Arkansas Texas. — Old Colony Ins. Co. v.
Ins. Co. v. Laster, 108 Ark. 261, 156 Starr-Mayfield Co. — Tex. Civ. App.
S. W. 848 (encumbrances) ; Mer , 135 S. W. 252 (iron-safe clause) ;
chants Fire Ins. Co. v. McAdams, 88 German Fire Ins. Co. v. Gibbs, Wil-
Ark. 550, 115 S. W. 175 (other in- son & Co. 42 Tex. Civ. App. 407, 92
surance) ; Security Mutual Ins. Co. S. W. 1068, 96 S. W. 760 ; American
v. Woodson, 79 Ark. 266, 95 S. W. Central Ins. Co. v. Nunn, — Tex.
481 (title). Civ. App. — , 79 S. W. 88 (keeping
Colorado. — Merchants Mutual Fire books and fireproof safe clause).
Ins. Co. v. Harris, 51 Colo. 951, 116 See c. XXIII. §§ 432 et seq.; \\\
Pac. 143. et seq.; and §§ 515 et seq., 532 et
Indiana. — New Amsterdam Casual- seq. herein.
ty Co. v. New Palestine Bank, 59 On effect of nonwaiver agreement
Ind. App. 69, 107 N. E. 554, 45 Ins. on conditions existing at inception of
L. J. 401. policy, see note in 13 L.R.A.(N.S.)
Iowa. — Sargent v. Modern Broth- 826.
erhood of America, 148 Iowa, 600, On power of agent to bind in-
3243
§ L973a JOYCE ON INSURANCE
agenl with full knowledge of a breach of the iron safe clause waives
the forfeiture.10
§ 1973a. Same subject: when no waiver or estoppel. — A life in-
surance company cannol be estopped from setting up a breach of
warranty that all statements in the application for insurance are
true, unless it has waived its righl to take advantage of it.11 So it
is held thai knowledge concerning -nine of the misstatements does
not waive a forfeiture for falsity of other warranties; 12 and the re-
tention of the premium after knowledge of a breach of a promis-
sory warranty is held not a waiver; 13 nor is ;i false warranty waived
by tlif levy and collection df an assessment without knowledge of
the falsity:14 and where assurer had no knowledge of a false war-
ranty as to health and habits at the time of making a tender of a
proportional amount of the policy, such lender constitutes no waiv-
er.15 Again, an acceptance, after arrival of cargo, of premiums on
risks not properly reported, under an open marine policy of in-
surance containing a warranty that all risks shall be reported to
the insurer as soon as known to the insured, is not a waiver of the
warranty so as to estop the insurer from forfeiting the policy on a
loss on the ground of previous failure to report risks promptly.16
In certain cases, where the insurer's agenl is held to he assured a
agent, no waiver or estoppel arise- to set up assured's breaches of
warranty.17 And in an Oklahoma case which arose when that state
surer by oral waiver or estoppel in li Finch v. Modern Woodmen of
pais as to forfeitures occurring after America, 113 Mich. 646, 71 N. W.
issuance of policy and before loss, 1104. 27 Ins. L. J. 37."). Compare
where policy of insurance requires Kidder v. Supreme Assembly Amer-
consenl or waiver to lie in writing, ican Stars of Equity, 154 111. App.
see net., in 10 L.R.A.(N.S.) 1064. 489.
10Ti!lis v. Liverpool & Louden & 15 Kellv v. United States Health &
Globe Ins. Co. 46 Fla. 268, 35 So. Accident Ins. Co. S4 S. C. 95, 65 S.
171. See also German Fire Ins. Co. F. 949.
v. Gibbs, Wilson & Co. 1- Tex. Civ. 16 Camors v. Union Marine Ins.
App. Ki7. 92 S. W. 1068, 96 S. W. Co. 104 La. 349, Si Am. St. Rep.
760. 128, 28 So. 926.
On waiver of provision in (ire 17 Travelers' Ins. Co. v. Thome, 38
policy requiring the keeping of books L.R.A.(N.S.) 626, 180 Vv>\. 82, 103
and vouchers in a safe place, see C. C. A. 436 (a case of fal e stale-
notes in 51 L.R.A. 713, and L.R.A. ments as to health, etc., pari of which
1915F, 759. were qualified); O'Rourke v. John
11 Ward v. Metropolitan Life Tns. Hancock Mutual Life Ins. Co. 23 R.
Co. 6(i Conn. 227, 50 Am. St. Rep. I. 457, 57 L.R.A. 196, 91 Am. St.
so. 33 Atl. !Ki2. Rep. 643, 50 Atl. 834, 31 Tns. L. J.
12 Moore v. Mutual Reserve land 230. As to waiver hv agents, see c.
Lite Assoc. 133 Mich. 526, 10 Det. XXIII. *S 132 el seq.; c. XXIV. §§
L. News, 263, if". X. VY. .".7:5. Ill el seq.; and §§ 515 et seq.. 532
18 Madley v. German Alliance Ins. et seq. herein.
Co. 55 W. Va. 342, 47 S. E. 101. On effect of insurance broker's
3244
WARRANTIES § 1974
was a territory, the agent's actual and full knowledge of the facts
and his aid in preparing the application were held not binding
upon assurer under the decisions of the Federal court.-:18 so even
though assurer's agent, who inspects the risk, has knowledge of
the existence of certain defects in the condition of the property
affecting the risk, still if assured in Ids application promises to
remedy said defects and so reduce the risk, but does not do so, such
knowledge will nol operate as an estoppel against assurer unless it is
shown that it knew of such failure to keep the promise and this is
so whether it is a promissory warranty or a representation.19
§ 1974. Neglect to read or have application read no excuse. — It
is no excuse for breach of warranty that the assured is an illiterate
person and that the company's agent omitted to read over the ap-
plication to him.20 nor will one who can read he heard, in the
absence of fraud or mistake, to say he was ignorant of the contents,
as an excuse for noncompliance with a warranty.1 It is also decided
that the fact that assured had never seen his policy, nor read it,
cannot help him, when no adequate reason is shown why he could
not have seen it, had he desired to do so.2 In Missouri in the
absence of fraud or deceit, the assured is presumed to have read the
application before signing it, and to be acquainted with its con but-.
and a party who signs without reading cannot have the instrument
set aside because it turns out to contain provisions contrary to his
intentions or contains a mistake.3 So under a New York decision
the legal presumption is, in the absence of fraud, that insured read.
or had read to him, the application before signing it.4 Again, it is
knowledge of misstatements in ap- 20 Pierce v. Empire Ins. Co. 62
plication, see note in 3 L.R.A. Barb. (N. Y.) 636.
(N.S.) 634. ^uthbertson v. North Carolina
On effect of knowledge of agent Home Ins. Co. 96 N. C. 480, 2 S. E.
acting in two capacities, see note in 258. See also Metropolitan Life Ins.
3 L.R.A. (N.S.) 444. Co. v. Goodman, 10 Ala. App. 446, 65
18 State Mutual Ins. Co. v. Craig, So. 449; Bakhaus v. Caledonia Ins.
27 Okla. 90, 111 Pac, 325. See also Co. 112 Md. 676, 77 Atl. 310, 39 Ins.
Home Ins. Co. of N. Y. v. Ballard, L. J. 1431 ; Overton v. American Cen-
32 Okla. 723, 124 Pac. 316, 41 Ins. L tral Ins. Co. 79 Mo. App. 1, 2 Mo.
J. 1468. App. Rep. 327.
19 Mcndenhall v. Farmers' Ins. Co. 2 Cleaver v. Traders' Ins. Co. 71
183 Ind. 694, 110 N. E. 60, 47 Ins. Mich. 414, 15 Am. St. Rep. 275, 39
L. J. 55. X. YV. 571.
On effect of insurance agent's mis- 3 School District v. State Ins. Co.
take in designating location of prop- 61 Mo. App. 597.
erty, see note in 2 L.R.A. (N.S.) 548. 4 Russell v. Prudential Ins. Co.
On provisions of insurance policy 176 N. Y. 178, 98 Am. St. Rep. 656,
in respect to vacancy as affected by 68 N. E. 252.
agent's representations or knowledge,
see note in 4 L.R.A. (N.S.) 758.
3245
§ L975 JOYCE ON INSURANCE
determined thai it is assured's duty to know that the contents of
;m application se1 oul in the policy arc true.5 Ami in Texas it is
held that the holder of a policy who has opportunity to inspect it
before acceptance is chargeable with knowledge of its contents.6
But it is held that assured is not precluded from availing himself
of the benefit of a waiver or of a right to have the policy reformed
ly because he did not read it at once or within a short time
after its delivery.7
§ 1975. Breach of warranty avoids though not cause of loss. — Tn
marine risks a breach of warranty avoids the contract without re-
gard to the fact whether such breach was not the cause of condem-
nation and loss; it is immaterial that the breach was in no manner
whatsoever connected with or that it did not at all occasion the
loss, for the warranty is a condition on which the validity of the
contract rests, which failing, the contract fails, and the same rule
applies in other risks.8 Thus, in case of a life policy the fact that
the disease of which the insured died was in no way connected with
the breach of warranty will not aid the party in seeking a recovery.9
So where the stipulation was that a specified number of pails of
water should be kept in designated places in the building and it
was not complied with, the policy was held avoided, even though
the noncompliance did not catise or affect the loss,10 although this
rule does not apply to those cases where it is sought to include by
implication matter not strictly within the terms of the warranty,
especially where the warranty relates to a specific disease.11 It is
also held that where the holder of an accident policy, who war-
ranted that he had never made any claim, nor received any indem-
nity for any accident, had received indemnity for injury to his
knee, such fact does not, as a matter of law, show such a material
5 Bonowell v. North American Ac- Fidelitv Mutual Life Ins. Co. v.
eident Ins. Co. 167 Mich. 274, Am. Beck, 84 Ark. 57, 104 S. W. 533,
& Eng. Ann. Cas. 1913A, 132 N. W. 1102. See Hazard v. New England
L067, 11 Ins. L. J. 150. Marine Ins. Co. 8 Pet. (33 U. S.)
6Morrison v. Insurance Co. of 557, 8 L. ed. 1043.
North Ann lira, (ill Tex. 353, 5 Am. As to statutes, see § 1916 herein.
St. Rep. 63, ti S. W. 605. 9Maynard v. Rhodes, 1 Car. & P.
'Medley v. German Alliance Ins. 360; Fidelity Mutual Life Ins. Co.
Co. 55 W. \ a. 342, 17 S. E. 101. v. Beck, 84 Ark. 57, 104 S. W. 533;
8 Goicoechea v. Louisiana Ins. Co. Valleroy v. Knights of Columbus,
6 Mart. (La.) N. S. 51, 17 Am. Dee. 135 Mo. App. 574, 116 S. W. 1130.
L75; Lothian v. Henderson, 3 Bos. & 10 Garrett v. Provincial Ins. Co. 20
P. 499, per Lawrence. .!.; Mead v. U. C. Q. B. 200.
North West Ins. Co. 7 N. Y. (3 "Ross v. Bradshaw, 1 W. Black.
Seld.) 530; Hibbert v. Pigon, report- 312; Price v. Phoenix Mutual Life
ed in 1 Marshall on Ins. (ed. 1810) Ins. Co. 17 Minn. 497, 10 Am. Rep.
*309-70a; Jennings v. Chenango 166. See also §§ 1298, 1299, L303
Mutual Ins. Co. 2 Denio (N. Y.) 75; herein.
3246
WARRANTIES §§ 1976, 1976a
and prejudicial misrepresentation as will prevent recovery on the
policy as it has no relation to the cause of his death by falling
from a ship at sea. At most it is a question for the jury.12 And
assurer cannot, after assured's death, repudiate its obligation on
the ground that the fact of pregnancy had been concealed wheD
it was unknown to the applicanl and in no way increased the risk
nor contributed to the cause of death, and assurer had continuously
collected dues for nearly five years from assured.13
§ 1976. Policy avoided by breach of warranty is not revived by
subsequent compliance. — [fa policy is avoided by a breach of a war-
ranty, it will not ordinarily be revived by a subsequent compliance.14
§ 1976a. Warranties by infant: recovery by beneficiary. — War-
ranties and representations by an infant are not binding upon
him during his infancy as he is not liable upon and may disaffirm
his contracts, and it is held in Vermont that while as a general
rule the defense of infancy is a personal privilege, still if the con-
tract purports to have been made with the minor, a beneficiary who
has made no statements and did not procure the policy with knowl-
edge of the falsity of the matters warranted, is not precluded or
12Rathman v. New Amsterdam act 1906 (6 Edw. VII. c. 41) sec.
Casualty Co. 186 Mich. 115, L.R.A. 34, subd. (2) ; 2 Butterworth's Twen-
1915E/9S0, 152 N. W. 983, 46 Ins. tieth Century Statutes (1900-1909)
L. J. 373. p. 407.
13 Rasicot v. Royal Neighbors of On effect of temporary conditions
America, 18 Idaho, 85, 29 L.R.A. 433, which ceased before loss under gen-
108 Pac. 1048. See § 3350 herein. eral provisions against increase of
14 Bottomley v. Metropolitan Life risk or specific provision against
Ins. Co. 170 Mass. 274, 49 N. E. 438. certain conditions, see notes in 10
27 Ins. L. J. 557; Mead v. North L.R.A. (N.S.) 736; 28 L.R.A. (N.S.)
West. Ins. Co. 7 N. Y. (3 Seld.) 593; 32 L.R.A.(N.S) 240; and 48
530; De Hahn v. Hartley, 1 Term L.R.A. (N.S.) 1221.
Rep. 343, 14 Eng. Rul. Cas. 171; On temporary pursuit of other
Agricultural Savings & L. Co. v. Liv- activities or change of occupation
erpool & London & Globe Ins. Co. 32 within meaning of accident insurance
Ont. 369. Compare Port Blakely policy, see note in 24 L.R.A. (N.S.)
Mill Co. v. Springfield Fire & Marine 1174.
Ins. Co. 59 Wash. 501, 28 L.R.A. On effect of temporary violation
(X.S.) 596n, 140 Am. St. Rep. 863, of condition as to occupation in pol-
110 Pac. 36. 39 Ins. L. J. 1447, s. c. icv of life insurance ceasing before
56 Wash. 681, 28 L.R.A. (N.S.) 593n, loss, see note in 50 L.R.A.(N.S.)
106 Pac. 194, 39 Ins. L. J. 352. Ex- 592.
amine § 2239 herein, where a sub- On provision for forfeiture or re-
st antially similar point in regard to duction of benefits in event of in-
conditions is discussed. jury while engaged in more haz-
"Where a warranty is broken, the ardous occupation or variations of
assured cannot avail himself of the that provision as applied to ocea-
defense that the breach has been rem- sional or temporary acts, see note in
edied. and the warranty complied L.R.A.1915D, 312.
with before loss." Marine insurance
3247
§ 1976a JOYCE ON INSURANCE
estopped from recovering on the policy upon the minor's death.15
Notwithstanding this decision we fail to comprehend why a war-
ranty by a minor constitutes, when false, no defense to an action
by the beneficiary to recover upon the policy in a case of the above
character; and as to the proposition, stated in the argument in the
opinion, that if it were an endowmenl policy maturing before as-
surers majority he could recover thereon without being bound by
his warranties, we dissent therefrom. While a warranty must be a
part of the contract, -till it is only a part thereof and uot the con-
tract in itself. It is an instance of a contract which the warranty
aided in inducing and the truth of which i.- essential, so that it is
difficult to understand how it can be separated from the contract,
deleted as it were, because not binding upon the infant, hut never-
theless Leave as an enforceable part so much as is beneficial to the
infant. In other words the contract cannot he affirmed and en-
forced a- to so much as favor- the infant and he disaffirmed and
rejected as to that part which does not favor said infant, and if
this is true as to the infant it must be true as to those claiming under
his contract. Again: generally, affirmance of an infant's contrad
validates it from its inception.16 and its disaffirmance avoids the
contract ah initio.17 He must upon disaffirmance make his con-
tract wholly void so that it will no Longer protect him in the reten-
tion of the consideration,18 and he cannot he permitted to retain
the benefits of a contract which he has repudiated.19 And unless la;
has disposed of or lost or wasted the same during his infancy he
must refund, or offer to refund, the consideration obtained by
fraudulent representations inducing a contract if he seeks to avail
himself of his infancy to avoid the contract or to have it set aside ""
go
15 ( rh'omke v. John Hancock Mu- 19 Kitchen v. Lee, 11 Paige (N.
tual Life Ins. Co. 23 K. I. 457, 57 Y.) 107, 42 Am. Dec 101.
L.K'.A. 196, 91 Am. St. Rep. 643, 50 20 Alabama.— American Freehold
Ail. 834, 31 Ins. L. -I. 230. Land Mortgage Co. v. Dykes. Ill
As to parties: infants, see §§ 307 Ala. 178, 56 Am. St. Rep. 38, 13
e\ seq. herein. So. 202; Eureka Co. v. Edwards, 71
On issuance on life minor, see note Ala. 248, 46 Am. Rep. 3] 1.
in 57 LR A. 496. Florida. — Putnal v. Walker, (it
"Whitney v. Dutch, M Mass. 157, Fla. 720, 35 L.R.A.(N.S.) 33, 55 So.
7 Am. Dec. 229; Minock v. Short- 844.
ridge ''1 Mich 304. Illinois. — Wuller v. Chuse Grocery
"Rice v. Bover, 108 Ind. 472, 58 Co. 241 111. 398, 28 L.R.A.(N.S.)
Am. Rep. 53, 9 N. E. 420; Shrock 128n, 16 Am. & Eng. Ann. Cas. 522,
v. Cowl, 83 Ind. 243; Grissoin v. 132 Am. St. Rep. 216, 89 N. E.
Beidleman, 3:. Okla. 343, 44 L.R.A. 796.
(N.S.) Ill, 129 Pac. 853. Massachusetts.— Chandler v. Sim-
18 Chandler v. Simmons, 97 Mass. mons, 97 Mass. 508, 93 Am. Dec. 117.
508, 93 Am. Dec. 117. Nebraska.— Bloomer v. Nolan, 36
3248
WAR KANT IKS
§ 1976a
So an infant's contract must bo affirmed or rejected as an entirety
it cannot be partially ratified and partially rejected, the non-bene-
ficial part cannot be rejected and that which is beneficial be affirmed
or adopted.1 And finally, support in insurance law for what wo
have stated, is found in a Kansas case which holds that a beneficiary
cannot disaffirm a warranty on the ground that the applicant was a
minor, and nevertheless enforce the policy.2
Neb. 51, 38 Am. St. Rep. 690, 53 N. 496, 91 Am. St. Hep. 643, 50 Atl.
W. 1039. 834, the court held a minor is not
New Hampshire. — Carr v. Clough, bound by the warranties contained
26 N. H. 280, 59 Am. Dee. 345. in a contract for life insurance, but
New York. — Green v. Green, 69 N. that the policy is nevertheless en-
Y. 553, 25 Am. Rep. 233. forceable against the insurer. In
Oklahoma. — International Land this state a minor is bound not only
Co. v. Marshall, 22 Okla. 693, 19 by contracts for necessaries but also
L.R.A. 1056, 98 Pac. 951. by all other contracts, unless he dis-
Vermont. — Price v. Furman, 27 affirms them within a reasonable time
Vt. 268, 65 Am. Dec. 194; Farr v. after he attains his majority. If
Sumner, 12 Vt. 28, 36 Am. Dec. he disaffirms he must restore to the
327. other party all money or property
Virginia. — Mustard v. Wolford, 15 received by him by virtue of the
Graft (Va.) 329, 76 Am. Dec. 209. contract and remaining in his con-
But compare Simpson v. Pruden- trol. (Gen. Stat. 1901, sec. 4183).
tial Ins. Co. 184 Mass. 348, 100 Am. This contract was not disaffirmed by
St. Rep. 560, 63 L.R.A. 741, 68 N. the minor. It is binding upon him
E. 673; Dube v. Beaudry, 150 Mass. until disaffirmed, and the court
448, 6 L.R.A. 146, 15 Am. St. Rep. knows of no one who can exercise
228, 23 N. E. 673. the right to disaffirm except the mi-
On necessity of returning con- nor. But if the plaintiff be allowed
sideration in order to disaffirm in- to represent the minor the same con-
fant's contract, see note in 26 L.R.A. sequences must follow as if the minor
177. had acted. The contract of insur-
1 Hobbs v. Nashville C. & St. L. ance is an entirety, and the statute
Ry. Co. 122 Ala. 602, 82 Am. St. gives the minor no right to dis-
Rep. 103, 26 So. 139; American affirm provisions which he finds bur-
Freehold Land Mortgage Co. v. densome, and to enforce those which
Dykes, 111 Ala. 178, 56 Am. St. are to his advantage. If any material
Rep. 38, 18 So. 292; Peers v. Me- portion of the contract be disaf-
Laughlin, 88 Cal. 294, 22 Am. St. firmed, unexecuted provisions fall.
Rep. 306, 26 Pac. 119; State (ex rel. The warranty is an integral part of
Stempel) v. City of New Orleans, the contract. It is an indispensable
105 La. 768, 30 So. 97. condition of liability on the part of
2 Metropolitan Life Ins. Co. v. the insurer. If the warranty be dis-
Brubaker, 78 Kan. 146, 18 L.R.A. affirmed, liability on the contract
(N.S.) 362, 130 Am. St. Rep. 356, must necessarily be destroyed. The
16 Am. & Eng. Ann. Cas. 267, 96 contract cannot be disaffirmed and
Pac. 62. The court per Burch, J., then money be taken from the corn-
said: "The insured was a minor pany by virtue of the contract when
when the contract was made and at the return of such money, if it were
the time of his death. In the case of in the minor's bands would be a
O'Rourke v. John Hancock Mutual necessary element of disaffirmance.
Life Ins. Co. 23 R. I. 457, 57 L.R.A.
Joyce Ins. Vol. III.— 204. 3249
1977
JOYCE ON INSURANCE
§ 1977. Burden of proof: express warranties. — Since an express
warranty is a conditioD precedent, the burden of proving per-
formance is held in certain jurisdictions to rest upon assured, but
that prima facie proof is only requisite in the first instance until
rebutted.8 So in Rhode Island it is declared that the rule has been
long settled in thai state that the burden of proof in such eases is
upon the plaintiff.4 It is held, however, by the evident weight of
authority, that the burden of proof rests upon the insurer to show
i Learly the breach where payment is resisted on account of the mis-
representation, or falsity of warranty.5 But, as has been properly
the Rhode Island case is disap-
proved." Id. 153.
tions and burden of proof seaworthi-
ness, see §§ 3786 et seq. herein. As
8McLoon v. Commercial Mutual to proof of matters in defense: ma-
Ins. Co. 100 Mass. 472, 97 Am. Dec. rine, see § 3779 herein.
116, per Gray, J. In this ease the 4 Leonard v. State Mutual Life
court said: "Nature and form of Assur. Co. 24 R. I. 7, 96 Am. St.
warranty may affect the amount of Rep. 698, 51 Atl. 1049, 31 Ins. L.
evidence to be required, but whether J. 584; O'Rourke v. John Hancock
the terms used are affirmative or neg- Mutual Life Ins. Co. 23 R. I. 457,
ative, the warranty is equally a con- 91 Am. St. Rep. 643, 57 L.R.A. 496,
dition precedent, performance of 50 Atl. 834; Sweeney v. Metropoli-
which must be proven by the plain- tan Life Ins. Co. 19 R. I. 171, 61
tiff to maintain an action on the pol- Am. St. Rep. 751, 38 L.R.A. 297,
icy: Arcangelo v. Thompson, 2 36 Atl. 9. See also Fell v. John
Camp. 620. See Roach v. Kentucky Hancock Mutual Life Ins. Co. 76
Security Fund Co. 28 S. Car. 431, 6 Conn. 494, 51 Atl. 75. Hut compare
S-. F. 286. See §§ 154-156, 1951, Wiley v. London & Lancashire Fire
1951a herein. Ins. Co. 89 Conn. 35, 92 Atl. 678;
"Arnould (2d ed. p. 1310) stated Benanti v. Delaware Ins. Co. 86
that a compliance by the plaintiff Conn. 15, 84 Atl. 109.
with all express warranties 'being 6 United States. — Piedmont & Ar-
conditions precedent to the policy's lington Life Ins. Co. v. Ewing, 92
attaching' must be proved by him as U. S. 377, 23 L. ed. 610; Nome
part of his case. This is probably Beach Lighterage & Transportation
true, though it is not correct to speak Co. v. Munich Assur. Co. (U. S. C.
nl all warranties as 'conditions prece- C.) 123 Fed. 820 (unseaworthiness),
dent to the policy's attaching.' " Cit- Arkansas.— Atlas Fire & Tornado
inn here marine insurance act 1906 Ins. Co. v. Malone, 99 Ark. 928,
(6 Edw. VII. c. 41) sec. 3, subd. 138 S. W. 962, 40 Ins. L. J. 1911.
(3). "It is clear, however, that the California. — Lyon v. .United Mod-
onus of proving unseaworthiness is erns, 148 Cal. 470, 4 L.R.A. (N.S.)
upon the underwriter and it is not 247, 83 Pac. 804.
clear why in this respect there should Florida. — Tillis v. Liverpool &
be a distinction between warranties London & Globe Ins. Co. 46 Fla.
express and implied." 2 Arnould on 268, 35 So. 171, 33 Ins. L. J. 289
Marine Ins. (8th ed. Hart & Simey) (on ground that promissory warranty
sec. 1277, p. 1548. is condition subsequent).
As to burden of proof : warranties: Georgia. — Morris v. Imperial Ins.
fire, see also § 3784 herein. As to Co. of London, 106 Ga. 461, 32 S. E.
burden of proof: warranties: marine, 595; O'Connell v. Supreme Conclave
see § 3785 herein. As to presump- Knights of Damon, 102 Ga. 143, 66
3250
WARRANTIES § 1077
and forcibly declared in a frequently cited and much considered
case, a rule of evidence which permits a prima facie case to be made
out by presumption until something is shown to rebut it, is merely
a rule of convenience to facilitate the trial of causes and to prevent
undue hardship, as in cases where some of the answers or statements
in the application are not in dispute or relate to matters peculiarly
within the knowledge of a deceased applicant.6 It is, however,
decided in Michigan that where assurer makes out a prima facie
case, showing the breach, the burden is shifted to assured to over-
come such prima facie breach.7 If statements, whether oral or in
writing, are referred to in the policy, parol evidence is admissible
to prove them.8
Am. Rep. 159. 28 S. E. 282; Gate Co.) 55 N. Y. Supp. 775, 37 App.
City Fire Ins. Co. v. Thornton, 5 Ga. Div. 152.
App. 585, 63 S. E. 638, 38 Ins. L. Oklahoma. — Capital Fire Ins. Co.
J. 529. v. Carroll, 26 Okla. 286, 109 Pac.
Illinois.— Globe Mutual Fire Assoc. 535, 39 Ins. L. J. 1258.
v. Ahern, 191 111. 167, 60 N. E. 806; Pennsylvania.— Cobb v. Metropoli-
Monahan v. Metropolitan Life Ins. tan Life Ins. Co. 19 Pa. Super. Ct.
Co. 180 111. App. 390. 228.
Indiana. — Farmers' Live Stock Ins. Texas. — First National Bank v.
Co. v. Rundell, 7 Ind. App. 426, 34 Cleland, 36 Tex. Civ. App. 478, 82
N. E. 588. S. W. 337.
Ioiva. — Sargent v. Modern Broth- Washington. — Port Blakely Mill
erhood of America, 148 Iowa, 600, Co. v. Hartford Fire Ins. Co. 50
127 N. W.'52. Wash. 657, 97 Pac. 781.
Kentucky. — St. Paul Fire & Ma- England. — Davies v. National Ma-
rine Ins. Co. v. Kendle, 163 Ky. rine Ins. Co. of New Zealand (H. of
146, 176 S. W. 368; Supreme Lodere L. P. C. App. Eng. 1891) App. Cas.
Knights of Pythias v. Bradley, 141 L. R. 485, 60 L. J. P. C. 73, 65 L.
Ky. 334, 132 S. W. 541. T. 560.
Maryland. — Maryland Casualty 6 Sweeney v. Metropolitan Life
Co. v. Gehrmann, 96 Md. 634, 54 Ins. Co. 19 R. I. 171, 38 L.R.A. 297,
Atl. 678; Supreme Council Royal 61 Am. St. Rep. 751, 36 Atl. 9;
Arcanum v. Brashears, 89 Md. 624, O'Rourke v. Jobn Hancock Mutual
73 Am. St. Rep. 244, 43 Atl. 866. Life Ins. Co. 23 R. I. 457, 57 L.R.A.
Massachusetts. — Barker v. Metro- 496, 91 Am. St. Rep. 643, 50 Atl.
politan Life Ins. Co. 198 Mass. 375, 834.
84 N. E. 490, 37 Ins. L. J. 439. 7 Bullock v. Mutual Life Ins. Co.
Missouri.— Winn v. Modern Wood- of N. Y. 166 Mich. 240, 131 N. YY.
men of America, 157 Mo. App. 1, 574, 40 Ins. L. J. 1529.
137 S. W. 292; Adams v. Modern 8 Clark v. Manufacturers', Mer-
Woodmen of America, 145 Mo. App. chants & Farmers' Ins. Co. 2 Wood
207, 130 S. W. 113. & M. (C. C.) 472, Fed. Cas. No.
New York.— Carmichael v. John 2.829 ( aff'd 8 How. (49 U. S.) 235,
Hancock Mutual Life Ins. Co. 48 12 L. ed. 1061. See Campbell v.
Misc. 386, 95 N. Y. Supp. 587; Mutual Life Ins. Co. 98 Mass. 381.
Breese v. Metropolitan Life Ins. Co. And examine Boggs v. American Ins.
(Corbett v. Metropolitan Life Ins. Co. 30 Mo. 63.
3251
CHAPTER LVIII.
PARTICULAR REPRESENTATIONS AND WARRANTIES.
§ 1987. General statement.
8 1987a. "Abortions:" inquiry concerning.
§ 1988. Account of stock: not continuing warranty.
§ 1!)S!>. .Merchandise accounts: inventory.
§ L990. Accounts settled monthly: guarantee against embezzlement.
^ 1991. Age and character of building.
§ 1991a. Age and tonnage of vessel.
§ 1991b. Age of automobile: "year model:" "year of manufacture."
§ 1992. Age of insured: age of relatives: life risk.
§ L992a. Same subject: good or had faith, intention, mistake.
§ 1992b. Same subject: statements qualified: best of assured's knowledge
and belief.
§ 1992c. Same subject: statutes.
§ 1992d. Same subject: waiver and estoppel.
§ 1992e. Same subject: mistake or knowledge of assurer's agent.
§ 1992f. Same subject: when recovery may be based on amount premium
would have purchased.
§ 1992g. Age of beneficiary: "double indemnity insurance."
§ 1993. Anchorage ground: marine risk.
§ 1994. Armament of ship: warranty.
§ 1995. Ashes.
>< L995a. Automatic sprinkler system.
§ 1996. Bodily or mental infirmities: life and accident policy.
§ 1!)!)?. Books of account: keeping hooks in safe.
§ 1997a. Books and accounts: burglary insurance.
§ 1997b. Building: dimensions and material of.
§ 1998. Cargo of ship: warranty.
§ 1998a. Carrier: warranty thai insurance shall not insure to benefit of.
§ 1998b. Clear space clause: warranty.
§ 1998c. Same subject : waiver.
§ 1999. Convoy: warranty to sail or depart with.
§ 2000. "Depart," warranty to, in marine risk.
§ 2000a. Dividends earned : misrepresentations as to.
3252
PARTICULAR REPRESENTATIONS, ETC.
§ 2001. Examination of property after work: representation.
§ 2001a. Explosives: warranty that none used: indemnity policy.
§ 2002. Fires: heating: stoves: continuing warranty.
§ 2002a. Guaranty insurance.
*j 2003. Health: disease: life risk.
§ 2004. Health: "good health:" "sound health:" "sound body:" "perfect
health," etc.
§ 2005. Same subject: renewal of policy: reinstatement.
§ 2006. Same subject : refusal of assured to accept renewal receipt con-
ditioned as to good health.
§ 2007. Health of assured need not be disclosed at time of renewal except
on inquiry.
§ 2008. Health: "spitting of blood:" consumption.
§ 2009. Health : previous sickness or disease.
§ 2010. Health: assured's knowledge: latent disease.
§ 2011. Health : parents : relations.
§ 2012. Health : rupture : hernia : wearing truss.
§ 2013. "In port," as relating to commencement of risk : marine policy :
warranty.
§ 2014. Incendiarism: fire risk.
§2015. Encumbrances: disclosure of title not necessary unless asked or
otherwise required : fire risk.
§ 2016. Encumbrances : generally.
§ 2017. Encumbrances on property by verbal agreement.
§ 2018. Encumbrances made after the policy.
§ 2019. Encumbrances: judgments: execution.
§ 2020. Encumbrances : lien : mechanic's lien : judgment lien, etc.
§ 2021. Encumbrance : lien for taxes : delinquent taxes.
§ 2022. Encumbrances: mortgage.
§. 2023. Encumbrance : mortgage : knowledge of insurer or his agent.
§ 2024. Encumbrance: mortgage obtained by fraud.
§ 2025. Encumbrance; pending litigation.
§ 2026. Interest and title : no disclosure necessary where no inquiry.
§ 2027. Interest and title: generally.
§ 2028. Interest and title: title which will enable assured to transfer by
abandonment : marine risk.
§ 2029. Interest and title: assignee's policy.
§ 2030. Interest and title: as interest may appear for account of.
§ 2031. Interest and title: bill of sale.
§ 2032. Interest and title : collateral.
§ 2033. Interest and title : contract of purchase.
§ 2034. Interest and title : conditional sale.
§ 2035. Interest and title : deed as related to title.
§ 2036. Interest and title : devisee : charge created by will.
3253
§§ 1987, 1987a JOYCE OX INSURANCE
§ 2037. Interest and title: dower right.
> 20,'JS. Interest and title: easement m property.
§ 2039. Interest and title: equitable interest.
^ 2040. Interest and title: fraudulent as against creditors.
§ 20 11. Interest and title: homestead.
§ 20 12. Interest and title: joint owners: undivided interest.
^ I'D 13. Interest and title: judgment creditor: execution sale: foreclosure
sale: sheriff's sale.
^ 20 11. Interest and title: leasehold interest: building on leased ground.
^ "JUl."). Interest and title: lien.
^ 2046. Interest and title: minor child's interest.
^ 2047. Interest and title: mortgage: mortgagor and mortgagee.
>; 2048. Interest and title: ownership: property.
$ 2049. Interest and title: partnership interest: exclusive ownership.
§ 2050. Interest and title: pending litigation.
§ 2051. Interest and title: possession.
>; 2052. Interest and title: trust deed: parol trust.
§ 2053. Interest and title: in trust or on commission.
§ 2054. Interest and title: stored property.
$ 2055. Interest and title: tenant by the curtesy: joint occupancy.
§ 2056. Interest and title: tenant for life: tenant in tail.
>} 2057. Interest and title : united interests of assured.
§ 2058. Interest and title: vendee under contract for purchase: bond for
deed.
§ 2059. Interest and title: wife's property.
§ 2060. Intention to navigate: marine risk.
^ 2061. Insanity: life risk.
§ 2062. Insurance beyond specified amount contrary to agreement.
§ 1987. General statement. — This chapter relates to those cases
wherein the courts have determined the effect of certain statements
made by the assured in particular matters. They are for the greater
part illustrative of the principles set forth in the two preceding
chapters.
§ 1987a. "Abortions:" inquiry concerning.9 — An answer is liter-
ally true, and the contract will not be avoided by the answer "No"
to the question, "Have you suffered abortions?" where the ap-
plicant had suffered only one abortion, as such question did not
<•<> in prebend a single case of abortion, and the court will not aid a
forfeiture by construction, if, upon any reasonable theory the con-
tract can be upheld.10
9 See § 1987 herein. York v. Crenshaw, — Tex. Civ. App.
10 Mutual Life Ins. Co. of New — , 116 S. W. 375.
3254
PARTICULAR REPRESENTATIONS, ETC. §§ 1988-1991
§ 1988. Account of stock: not continuing warranty.11
§ 1989. Merchandise accounts: inventory.12
§ 1990. Accounts settled monthly: guaranty against embezzle-
ment.13
§ 1991. Age and character of building.14 — A statement as to the
age of the building will be construed as a representation, rather
than as a warranty, although the policy provides that the statements
in the application are warranties, and that the contract is based on
the representations in the application.15 And as a representation,
although false, does not avoid a policy of fire insurance, where there
has been no moral fraud, unless it is material to the risk, a mis-
representation as to the age of a mill insured, does not avoid the
policy, where the representation is not material, as where it had
been so practically rebuilt within the period stated as covering its
age, that it does not appear that as so rebuilt its value was materially
less than it would have been if newly built in its entirety within
said period.16 And a statement that the building was "built" in a
certain year will not be construed to mean that it was constructed
of new materials; the fact that it was constructed in part from
materials which had been used in an old building will not make
the statement a misrepresentation.17 So where the building was
described as composed of brick, but at the time of making the state-
ment the insured declared that he was uncertain as to its being
correct, arid the matter was left open in order that the insured might
furnish plans, which he did, showing the true character of thef
building, it was held that such facts being in evidence established a
prima facie case for the jury.18 Where the property insured was
described as the "Hotel Central, a two-story metal roof building,"
and it appeared that a part of the building was only of one story,
it was held that this fact did not avoid the policy where it also ap-
peared that the property was insured as a whole, and that it was the
intention of both parties to insure such building.19 An offer, in an
action on a policy of fire insurance, to prove that the age of a build-
ing is material to the risk, is properly refused, where there is no
11 This section in first edition Phcenix Ins. Co. v. Picket, 3 Ind.
transferred to §§ 2063c et seq. here- App. 332, 29 N. E. 432.
in. 16 Manufacturers' & Merchants'
12 This section in first edition, Mutual Ins. Co. v. Zeitinger, 168
transferred to §§ 2063 et seq. herein. 111. 286, 61 Am. St. Rep. 105, 48
13 This section in first edition N. E. 179.
transferred to § 2002a herein. 17 Lamb v. Council Bluffs Ins. Co.
14 See §§ 1987, 1997b herein. 70 Iowa, 238, 30 N. W. 297.
15 Rogers v. Phcenix Ins. Co. 121 18 Woods v. Atlantic Mutual Ins.
Ind. 570, 23 N. E. 498; Eddy v. Co. 50 Mo. 112.
Hawkeye Ins. Co. 70 Iowa, 472, 59 19 Hartford Fire Ins. Co. v. Moore
Am. Rep. 444, 30 N. W. 808. See 13 Tex. C. C. A. 644, 36 S. W. 146.
3255
§§ l'.HUa, 1991b
,!()V('K ON 1NSI KAXCE
proof, or offer of proof, that the risk has been changed, or in-
creased by a misrepresentation as to the age of the building.20
§ 1991a. Age and tonnage of vessel. — A misrepresentation of the
age ;ind tonnage of the vessel, which induced the underwriters to
agree to a high valuation, if it constitutes any defense ;ii all to an
action on a valued policy, it must he taken at law, ami cannot be
the basis of an injunction against the judgment at law.1
§ 1991b. Age of automobile: "year model:" "year of manufac-
ture."— Inasmuch as the hazard increases a- a car grows older, and
the chances of ignition become greater on account of the wear ami
\ il rat ion necessitating the use of a greater quantity of gasolene, the
ago of a car or the year model2 becomes material, especially so,
where assurer is influenced thereby in determining whether or not
he will accept the risk or at what premium,3 and where the evidence
-hows that the rate increases with the age of the car. Therefore,
when assured warrants that an automobile is a model of a certain
specified year, and such warranty is false, the policy is avoided
irrespective of the question whether or not such misrepresentation
was made innocently, or in good or bad faith, or was the result of
accident, or ignorance, and this also applies whether assured so
misrepresented or stated that he bought the car for a model of that
year.4 And in such case the misrepresentation is held material a- a
matter of law,5 although the question is also held to be one for the
jury.6 So where a statement that a car is new is an affirmative
warranty and is, false, a policy of fire insurance thereon is avoided,7
20 Manufacturers' & Merchants'
Mutual Ids. ('«». v. Zeitinger," 168 111.
286, 61 Am. St. Hep. 105, 48 N. E.
L79.
1 Marine Ins. Co. v. Hodgson, 7
< 'rand, (11 l\ S.) 332, 3 L. ed. 362.
Cited in Phoenix 1ns. Co. v. MeLoon,
KM) Mass. 17."), 476; Milwaukee Me-
chanics Ins. Co. v. Russell, <>•"> Ohio
St. 230, 258, 56 L.R.A. 161, 62 N.
E. 338.
2 As to distinction between "year
model'' and "year of manufacture"
in American and foreign cars, see
Locke v. Royal Ins. Co. Ltd. 220
Mass. 202, 107 N. E. 911, 45 Ins.
L. .1. 603.
3 Sec as to (his point, §§ 1846,
1867, 1868, 1892 herein.
4 Smith v. American Automobile
Ins. Co. 118 Mo. App. 297, 175 S.
W. 113, 45 Ins. L. J. 726. See also
Reed v. St. Paul Eire & Marine Ins.
Co. 151 N. Y. Supp. 274, 165 App.
Div. 660, 45 Ins. L. J. 360; Harris
v. St. Paul Fire & Marine Ins. Co.
126 N. Y. Supp. 118. See as to
the point of good faith, etc., §§ 1902
et seq., 1964 herein.
As to statutes, see § 1916 (k)
herein.
5 Smith v. American Automobile
Ins. Co. 188 Mo. App. 297, 175 S.
YV. L13, 45 Ins. L. J. 726. See Har-
ris v. St. Paul Fire & Marine Ins.
Co. 126 N. Y. Supp. 118.
6 Locke v. Royal Ins. Co. Ltd. 220
Mass. 202, 107 N. E. 911, 45 Ins.
L. .1. 603.
7 Miller v. Commercial Union As-
sur. Co. Ltd. 6!) Wash. 529, 125 Pac.
782, 41 Ins. L. J. 1599.
3256
PARTICULAR REPRESENTATIONS, ETC. § 1992
and neither the fact that assurer's agent prepared the application
nor that lie inspected the car will constitute a waiver.8
§ 1992. Age of insured: age of relatives: life risk.9 — If the policy
provides that it shall be void if any statements in the application
are in any respect untrue, the declarations of the assured as to his
age are treated as warranties in effect.10 So where it is stipulated
that the application shall form the basis of the contract and the
statements strict warranties, and in case of any untrue statements
that the insurer's liability shall be limited, and the rules of a vol-
untary association limit the age within which persons may become
members, a misrepresentation by an applicant as to his age so as to
enable him to come within the limit avoids the policy, and it is so
far invalid that the act of the treasurer in thereafter receiving
assessments with knowledge of the misrepresentation does not give
life to the contract, nor is it validated by the act of other members
in voluntarily paying the assessments to meet the amount of his
insurance after his decease, nor by the fact that a new corporation
was formed after the admission of such member, which voted that
all members of the voluntary association should become associate
members.11 Such statements are, however, not warranties, but only
representations if not properly made a part of the contract.12
Another general rule undoubtedly is that a misrepresentation as
to age is so far material that it bars the right of recovery upon the'
policy.13 And age is held so material to the risk that a misrepre-
sentation as to the same is such an imposition on assurer as to avoid
the contract.14 So misrepresentations as to age and health com-
bined are material and avoid the contract.15 It has been also held
that a statement by the applicant that he is a year younger than
he in fact really is will avoid a policy.16
8 Miller v. Commercial Union As- 13 United Brethern Mutual Aid Soe.
sur. Co. Ltd. 69 Wash. 529, 125 Pae. v. White, 100 Pa. St. 12, 12 Wkly.
782, 41 Ins. L. J. 1599. See Smith Not. Cas. 147; Cazenove v. British
v. American' Automobile Ins. Co. Equitable Ins. Co. 29 L. J. C. P.
188 Mo. App. 297, 175 S. W. 113, 160, 6 Jur. N. S. 826, 1 L. T. 824;
45 Ins. L. J. 726. Hunt v. Supreme Council Chosen
9 See §§ 1916, 1992c, 1987 herein. Friends, 64 Mich. 671, 8 Am. St.
10Linz v. Massachusetts Mutual Rep. 855, 31 N. W. 576.
Life Ins. Co. 8 Mo. App. 363. 14 Logia Suprema De La Alianza
11 Swett v. Citizens' Mutual Relief Hispano- Americano v. De Aguirre,
Soc. 78 Me. 541, 7 Atl. 394. 14 Ariz. 390, 129 Pac. 503, 42 Ins.
12 Spence v. Central Accident Ii\s. L. J. 498.
Co. 236 111. 444, 19 L.R,A.(N.S.) 15 Maddox v. Southern Mutual Life
88n, 86 N. E. 104, 38 Ins. L. J. Ins. Assoc. 6 Ga. App. 681, 65 S. E.
87, rev's: Central Accident Ins. Co. 789.
v. Spence, — 111. App. — , 38 Chic. 16 Schmitt v. National Life Assoc.
Leg. N. 316. See §§ 1887 et seq. 84 Hun (N. Y.) 128, 65 N. Y. St.
1956 herein. Rep. 737, 32 N. Y. Supp. 513.
3257
§ 1992 JOYCE ON INSURANCE
A false statement of his age made by an applicant for member-
ship in a benefil insurance society, is also a fraud upon it, and
vitiates the contract of insurance." And if the by-laws of a benefit
insurance company prohibil it from receiving a member above a
certain age, the society is not bound by a certificate of insurance
issued to a member over thai age, whose application contained a
false statemenl as to his age.18 So a misstatemenl as to age where
insured was over the insurable age of admission to a society, will
constitute a defense irrespective of the question whether such false
statement he held a representation or warranty.19 And if an age
limit for admission is prescribed by the laws of a fraternal order, it
is eon-trued as governing solely the original admission and not a
readmission after suspension, where, under the laws of the order,
it is unnecessary to issue another certificate, and even though one
be issued in such case it relates hack to and revives the original and
recovery is based thereon.20 Again, forfeiture for untrue statements
according to the terms of the contract occurs where the age of the
applicant for membership in a mutual benefit society was, without
the knowledge of the applicant, falsely stated in the certificate after
he had stated his true age, where he knew that, to secure admis-
sion, the age must be stated falsely, or some other fraud perpetrated
on the society.1 And assured may be expelled from an association
where it is proven that she misrepresented her age in order to ob-
tain admission, and she is given a full opportunity to be heard in
the matter.2 Although a misstatement of age where insured is over
the insurable age of admission to a society, constitutes a defense,
nevertheless upon repudiation of the contract by the society after
assured's membership of about twenty years, a tender or offer
to return assessments and dues paid with interest, is a prerequisite
to the enforcement of any right to rescind upon that ground, and
if this is not done, a directed verdict for assurer will he set aside
and judgment rendered for a recovery of the policy amount in full.3
But in the absence of fraud where the assessments and dues col*
17 Steele v. Fraternal Tribunes, 215 x Elliott v. Knights of Modern
111. 190, 106 Am. St. Rep. 160, 74 Maccabees, 46 Wash. 320, 13 L.R.A.
X. E. 121. (N.S.) 856, 89 Pac. 929.
18 Steele v. Fraternal Tribunes, 215 2 Murray v. Supreme Hive Ladies
111. 190, 106 Am. St. Rep. 160, 74 of Maccabees of the World, 112
X. K. 121. Term. 664, 80 S. W. 827.
19 Waltz v. Workmen's Sick & 3 Waltz v. Workmen's Sick &
Death P.enelit Fund of the U. S. of Death Benefit Fund of the U. S. of
America, 78 Misc. 499, 139 N. Y. America, 78 Misc. 499, 139 X. Y.
Supp. 1016. Supp. 1016, under Code Civ. Proc.
20 MfcRaith v. Grand Lodge An- see. 1185.
eienl Order United Workmen, 149
Iowa, 148, 126 N. W. 321.
3258
PARTICULAR REPRESENTATIONS, ETC. § 1992a
lectible are the same for the true age as for that misstated, the policy
is not avoided.4
Again, where insured, in her proposal had understated her age,
and the policy provided for payment of the insurance money upon
assured's death, or upon her attaining the age of sixty, and assurer,
after discovery of the mistake as to age, accepted two annual pre-
miums, it was held that, even though it subsequently declined to
receive any more, it had affirmed the contract as it stood and could
not forfeit the policy, unless such statement was designedly or wil-
fully untrue, and, therefore, it was liable to pay the policy moneys
upon the assured's actually attaining the age of sixty years and
could not postpone payment until assured should attain said age
upon the assumption of her age at the date of the proposal having
been as therein stated.5
A misrepresentation as to the age of applicant's sisters, there being
a difference as to the age of four sisters of between three and four
years respectively, and as to the age of another sister of about nine
years, avoids the policy.6
The declarations of the assured as to his age made several months
before the policy was issued and other statements of like character
made by him subsequently to the issue of the policy are not admis-
sible to prove misrepresentation as to age.7
§ 1992a. Same subject: good or bad faith, intention, mistake. —
If the stipulations in the applications have the effect of a warranty
as to statements of age, a misstatement thereof constitutes a breach
irrespective of the question whether it was wilfully or intentionally
false or not.8 And it is immaterial that the misrepresentation was
unintentional where by the terms of the policy the statement is
made a warranty.9 So where the application is made a part of the
contract and the representations are also stipulated to be a part of
the consideration and are material and false, the policy will be
avoided and the question of good faith, intention or mistake are
unimportant.10 But it is held that avoidance of the contract may
4Sueverts v. National Benefit St. 363, 50 Atl. 999. See §§ 1916,
Assoc. 95 Tenn. 710, 64 N. W. 671. 1992c herein.
5 Hemmings v. Sceptre Life Assoc. 9 Murphy v. Harris, Batty (Irish)
Ltd. [1905] 1 Ch. 965, 74 L. J. Ch. 206.
231, 92 L. T. 221, 21 L. T. R. 207. 10 Germania Ins. Co. v. Klein, 25
6 Kansas Mutual Life Ins. Co. v. Colo. App. 326, 137 Pac. 73. See
Pinson, — Tex. Civ. App. — , 64 S. Johnson v. American National Life
W. 818, s. c. 94 Tex. 553, 63 S. W. Ins. Co. 134 Ga. 800, 68 S. E. 731,
531. 39 Ins. L. J. 1410, under Code 1895,
7 Valley Mutual Life Assoc, v. sec. 2099; Kansas Mutual Life Ins.
Teewalt, 79 Va. 421. Co. v. Pinson, 94 Tex. 553, 63 S. W.
8 Dinan v. »Supreme Council Cath- 531, s. c. — Tex. Civ. App. — , 64
olic Mutual Benefit Assoc. 201 Pa. S. W. 818.
3259
§§ 10021., 1002c JOYCE ON INSURANCE
be prevented by a showing thai the statement, as to age was made
in good faith and withoul any intent to deceive.11 It is also decided
thai a statement by the assured thai he was born in L817 when lie
was bom in L816 is immaterial if made in good faith, and dues not
avoid the policy.12
§ 1992b. Same subject: statements qualified: best of assured's
knowledge and belief. — Wherethe statemenl as to age is qualified
as true to the besl of assured's knowledge and belief, and there is
only a discrepancy of three or four years, such knowledge and be-
lief or fraud must he shown to avoid the policy.18 And if an ap-
plication for insurance in a mutual benefit society, which is made
a pari of the benefit certificate, states thai the applicant was fifty-
four years of age at his lasl birthday, to the best of his "knowledge
and belief," and suit is brought upon the policy, it is material
whether the applicant knew his statement to be false, and a recovery
cannol be defeated without showing that the applicant knew, or
had reason to believe, that he was over fifty-four years old when the
application was made.14
§ 1992c. Same subject: statutes. — A statutory requirement that
the application he made a part of the policy does not preclude as-
surer from showing that the policy was void because of fraud and
misrepresentation as to age. even though the application may be
excluded in evidence for noncompliance with the statute.15 lint
policy provisions that assured's actual age may be required to be
stated in the proofs of death and that the policy amount payable
may be adjusted upon the basis of the purchasing power of the pre-
mium at the true age, cannot be enforced when they are incon-
sistent with and violative of an. express statutory provision making
misrepresentations immaterial unless they contributed to assured's
death and this applies notwithstanding assured has incorrectly
stated his age, for assurer cannot thereby substitute a new contract.16
11 Dillon v. Mutual Reserve Fund or warranties or words "to best of
Life Assoc. (Ont.) 23 Canadian L. my knowledge and belief," or words
T. 26. Compare, however, as to -rood of like import, see note in 43 L.W.A.
faith, §§ L902 el seq., L964 herein. (N.S.) 431.
12 (leniuinia Ins. Co. v. Rudwig, 80 15 Johnson v. American National
Kv. 223. Life Ins. Co. 134 Ga. 800, 68 S. E.
18Egan v. Supreme Council Cath- 731. 3!) Ins. L. J. 1410.
olic Benevolent he-ion, 52 N. V. ^Metropolitan Life Ins. Co. of
Supp. 978. 32 App. Div. 215, al'l'd N. Y. C. v. Stiewing, 173 Mo. App.
161 N. Y. 650, 57 X. E. 1109. See 108, 155 S. W. 900, under Rev. Stat.
§ 1915a herein. 1909, sec. 693/; Burns v. Metropoli-
"O'Connell v. Supreme Conclave, tan Life Ins. Co. 141 Mo. App. 212,
102 Ga. 143, 66 Am. St. Rep. 159, 124 S. W. 539, Rev. Stat. 1899, sec.
28 S. E. 282. 7890; Ann. Stat. 1906, p. 3746.
On effect of qualifying statements
3260
PARTICULAR REPRESENTATIONS, ETC. § 1992d
A statute precluding the issuance of a certificate by certain frater-
nal societies to persons not within certain age limits, is not retro-
active so as to include a certificate issued prior to its enactment.17
§ 1992d. Same subject: waiver and estoppel. — Notwithstanding
a statement as to age is a warranty and thereby precludes the ques-
tion of materiality, such warranty may be waived by accepting and
retaining premiums after knowledge of the breach and of all the
facts,18 especially so where assurer has also investigated the state-
ments and proofs of loss and declined payment upon other grounds,
upon the contention that assured was not totally disabled, and it
appears that the error as to age was through no fault of assured.19
So it is held in Indiana that an estoppel arises against the insurer
where, after proof of death and knowledge of the true age, the com-
pany allows eighteen months to elapse and an action to be brought
thereon and determined without offering to rescind or refund the
premiums paid.20 But no waiver of the right to reduce the amount
of insurance, as stipulated in the policy, is shown by evidence that
assurer's agent, upon being told by the beneficiary that she did not
know assured's age when he died, and that said agent filled out
proofs of death stating the age therein so that it appeared therefrom
that the latter had misstated the same in the application and direct-
ed said beneficiary, who could neither read nor write, to acknowledge
the same before a notary, which was done, stating that it was a
mere matter of form and the beneficiary relied thereon believing
that the policy amount would be paid in full.1 Nor is there a waiver
17 Palmer v. Loval Mystic Legion (4) as added by L. 1906, c. 326, as
of America, 86 Neb. 596, 126 N. W. amd. by L. 1907, c. 714, as added by
285; Cobbey's Ann. Stat. 1909, sec. L. 1909, c. 301, as amd. by L. 1911,
6(538, Comp. Stat. 1909, c. 43, sec. c. 369.
94. As to age misstatements under Ohio.— 2 Gen. Code 1910, p. 2031,
statutes, see also: sec. 9420, subd. (5).
Colorado.— Rev. Stat. 1908, p. Texas.— Supp. Sayles's Civ. Stat,
843, sec. 3123, subd. (4) (c. 70, see. (1908-1910 Herron) p. 242, tit. 58,
37, as amd. by Sess. L. 1913, p. 351, sec. 22.
c. 99 sec. 43). 18 Johnson v. Massachusetts Mu-
' Illinois.— Hurd's Rev. Stat. 1912, tual Benefit Assoc. 9 Kan. App. 238,
p. 1358, sec. 208u, subd. (4). 59 Pac. 669, 29 Ins. L. J. 180. See
Indiana.— Acts 1909, p. 251, subd. Weiberg v. Minnesota Scandinavian
(4). Relief Assoc. 73 Minn. 297, 76 N.
Minnesota.— Rev. L. 1905, sec. W. 37, 27 Ins. L. J. 906.
4(323. 19 Johnson v. Massachusetts Mu-
Mississippi,— Code 1906, p. 797, tual Benefit Assoc. 9 Kan. App. 238,
c. 69, sec. 2676; Coplin v. Woodmen 59 Pac. 669, 29 Ins. L. J. 180.
of the World, 105 Miss. 115, 62 So. 20 Gray v. National Benefit Assoc.
7 (same code). Ill Ind. 531, 11 N. E. 477. See
New Jersey.— Comp. Stat. (1709- Epes v. Arlington Ins. Co. — Va. — ,
1910) p. 2869. 8 Ins. L. J. 342.
New York.— Ins. L. sec. 101, subd. 1 Metropolitan Life Ins. Co. v.
3261
§§ 1992e, 1992f JOYCE OX INSURANCE
where, upon suggestion of the lodge made after knowledge of the
facts, an attorney is employed to carry on negotiations in the mat-
ter, nor is any estoppel created to claim that a beneficiary certificate
obtained by understatement of the age of the applicant is void, by
the requesl of the association, that the beneficiary name someone
with whom it can negotiate with reference to the claim,2 nor is it
sufficient to constitute a waiver of a false statement as to age, that
assurer has knowledge of facts which would put a person of ordi-
nary prudence on inquiry which would have resulted in actual
knowledge.3
§ 1992e. Same subject: mistake or knowledge of assurer's agent. —
Assured is not responsible and the policy cannot be forfeited for a
mistake of assurer's agent in inserting assured's age in his applica-
tion.4 And the knowledge of assurer's agent, when he obtained the
insurance, that assured was over the prescribed age, will preclude a
defense of misstatement in the absence of knowledge on assured's
part that said agent was unauthorized to act.5
§ 1992f. Same subject: when recovery may be based on amount
premium would have purchased. — In Colorado a misrepresentation
as to age only avoids the contract pro tanto, in that recovery will be
limited to and based upon the purchasing power of the premium
paid.8 If an equitable adjustment of the policy or certificate
amount is stipulated for in the policy or contract in. case of misstate-
ment as to age, such adjustment will be made by payment of such
sum to the beneficiary as the premiums paid would have purchased
upon the basis of insured's true age.7 So where the policy provides
for an equitable adjustment of benefits upon ascertaining that as-
sured has misstated his age, and there is also an incontestable clause,
and the statute precludes declaring a policy nugatory if it can be
avoided, the beneficiary's right to recover, after the prescriptive
limit of the incontestable clause has elapsed is not defeated and this
clause should be enforced as it does not avoid the equitable adjust-
ment clause.8 But although it is stipulated that if the age is in-
Lennox, 103 Tex. 133, 124 S. W. 6 Travelers' Ins. Co. v. Crawford's
023. Admr. 32 Ky. L. Rep. 517, 100 S.
2 Taylor v. Grand Lodge Ancient W. 290.
Order United Workmen, 90 Minn. 6 Germania Life Ins. Co. qf N. Y.
441, 3 L.R.A.(N.S.) 114, 105 N. W. v. Klein, 25 Colo. App. 320, 137 Pac.
408. 73.
3 Brotherhood of Railroad Train- 7 Keenan v. Mutual Life Ins. Co.
men v. Roberts, 48 Tex. Civ. App. 77 N. J. L. 04, 71 Atl. 37.
325, 107 S. W. 020. 8 Mutual Life Ins. Co. of N. Y.
4 Fidelity & Casualty Co. v. Meyer, v. New, 125 La. 41, 27 L.R.A.(N.S.)
100 Ark. 91, 44 L.R,A.(N.S.) 493, 431, 130 Am. St. Rep. 320, 51 So.
152 S. W. 995. 01. See §§ 3733a et seq. herein.
3202
PARTICULAR REPRESENTATIONS, ETC. § 1992g
correctly stated, the amount payable shall be that which the actual
premiums would have purchased at the true age of insured, still if
insured was so far advanced in age that no rate thereon is given and
he was uninsurable a recovery is precluded on the ground of fraud
and misrepresentation where assured had understated his age by
a number of years.9
Where the discrepancy between the amount of insurance- purchas-
able at insured's true age and that stated is adjusted by the payment
of the proper assessment and the deficiency, a new contract is there-
by made and a forfeiture is precluded even though the correct rate
is not collected by insurer after said deficiency is paid.10 ]{', how-
ever the by-laws of a society provide for nonforfeiture of a certifi-
cate where it is satisfactorily shown to the board of trustees that
a statement as to age wras made in good faith, even though the age
was understated, and that upon such showing the policy amount
could be recovered upon the basis of such sum as the rate paid by
assured would purchase had the actual age been stated, such by-lawTs
relate back to the original application and prescribe a rule of waiver
in cases where the policy was sued upon after the adoption of said
by-laws.11 If a new contract is made by adjustment of the discrep-
ancy between the amount of insurance purchasable at insured's
true age and that misstated, by payment of the proper assessment
and the deficiency, the premium cannot thereafter be based upon
the age shown by the original application instead of upon the
records so as to reduce insurer's liability to the amount which the
premium would have purchased at the correct age, for although a
statute permits this to be done, where the mistake is that of assured,
still it does not apply to a mistake of assurer in this respect, and
this applies where another corporation has assumed liability under
the contracts for a new contract having been made by such adjust-
ment the original one cannot be revived on the .basis of the read-
justment therein without notice to assured.12
§ 1992g. Age of beneficiary: "double indemnity insurance." —
In a Georgia case a contract designated as a "double indemnity in-
surance" guaranteed the payment of a certain sum of money to a
named beneficiary, or if assured survive him then to pay insurer's
executors, etc. Certain sums were also to be paid, dependent as to
amount, upon death by accident or other causes or upon disability.
9 Johnson v. American National n Erickson v. Ladies of the Mac-
Life Ins. Co. 134 Ga. 800, 68 S. E. cabees of the World, 25 S. Dak. 183,
731, 39 Ins. L. J. 1410. 126 N. W. 259.
10 Lowenstein v. Old Colony Life 12 Lowenstein v. Old Colonv Life
Ins. Co. 179 Mo. App. 364, 166 S. Ins. Co. 179 Mo. App. 364, 166 S,
W. 889. W. 889.
3263
§§1993-1995 JOYCE ON [NSURANCE
The policy was, however, in subsequent clauses conditioned that if
the beneficiary named was between the age of twenty-one and sixty
year.-, and his death resulted from specified accident-, etc., assurer
would pay the policy amount to assured. It was held that a demur-
rer to the petition, wherein it appeared that the beneficiary was
sixty-seven years of age when the policy was issued and thai his
death was caused by paralysis, which was not covered by the policy,
would be sustained, notwithstanding the claim that the policy on its
face guaranteed unconditionally in the first clauses the payment by
insurer of the sum specified in the event of the beneficiary's death,
and that as the condition as to age in the subsequent clauses, did
not refer by its terms to the face of the policy, or vice versa, it could
not relate to the beneficiary, and therefore the prior unconditional
clause governed. It was also decided that the cause of the bene-
ficiary's death was immaterial, as the condition as to age in the
subsequent clause should be construed together with the first clause
and there could be no recovery.18
§ 1993. Anchorage ground: marine risk.14 — If at the time of ef-
fecting a marine policy a letter is exhibited to the underwriter in
which the writer states that he has seen the place of anchorage and
considers it good, safe, and sheltered, this is not a statement of an
absolute fact, hut of opinion.15
§ 1994. Armament of ship: warranty.16 — If a statement relating
to the ship's armament at the time of sailing he written in the
policy, it is not a mere representation of the state of the ship before
-he -ails and antecedent to the voyage insured, but a warranty that
the vessel had sailed with the number of men, arms, and guns
specified, and if not true the policy is void, and if the money has
been paid over to the insured before learning of the breach it may
he recovered hack by the underwriter.17
§ 1995. Ashes.18 — A policy was effected upon a schoolhouse and
the application provided that "if ashes are allowed to remain in
wood the insurers will not assume the risk." This provision was
made a part of the policy. It was represented that the ashes were
taken up in metallic vessels; that these were not allowed to stand,
with ashes in them, on wood, and that if ashes were deposited in or
near the building they were placed in brick or stone vaults. There
were no such vaults and the ashes were deposited on the ground,
13 Marbut v. Empire Life Ins. Co. 16 See § 1987 herein.
143 Ga. 654, 85 S. E. 834, 46 Ins. 17 De Hahn v. Hartlev, 1 Terra
L. J. 503. Eep. 343, 14 EnS. Rul. Cas. 171,
14 See § 1987 herein. aff'd 2 Term Rep. 186; reported in
"Anderson v. Pacific Fire & Ma- 1 Marshall on Ins. (ed. 1810) *348.
rine Ins. Co. 7 L. R. C. P. 65, 26 18 See § 1987 herein. .
L. T. 130.
3264
PARTICULAR REPRESENTATIONS, ETC. § 1995a
and shortly before the fire were placed in wooden barrels. The con-
tract was held to be avoided.19 In the same state, however, in which
this decision was rendered it was decided that a stipulation that
ashes were at all times kept in brick was complied with if they were
kept in some equally safe mode.20 So it is held in Ohio that a rep-
resentation in an application that ashes are "thrown out," even if
construed as a warranty, must be considered as an affirmation of a
previous habit of disposing of the ashes, and that leaving some of
them in the building occasionally for special or extraordinary pur-
poses, or accidentally, would not avoid the policy.1
§ 1995a. Automatic sprinkler system. — It is held that the auto-
matic sprinkler clause, under which it is warranted by assured that
due diligence be used that the automatic sprinkler system shall at
all times be maintained in good working order, should be given
its ordinary signification, where it is not intended that it should
constitute a warranty, and that it does not constitute a warranty the
breach of which at any time will forfeit the insurance, notwith-
standing the fact that the breach in no way contributed to the loss.2
But in a Federal case involving the same policy, the clause is con-
sidered as a warranty, although the point is not discussed.3 And it
is also held that said clause is a condition subsequent, casting the
burden of proof on assurer.4 And where the rider does not contain
the word "warrant" or "warranty" but only contains the word "con-
dition" and in the body of the policy are other "conditions" none
of which are technical warranties, and while said rider requires due)
diligence to maintain the system in complete working order, it does
not expressly state that the use of such diligence shall be a warranty
or condition precedent, or a condition differing from other con-
ditions so called in the policy, it will not be held that it was in-
tended that the rider should be a warranty or a condition precedent
to recovery, but merely a condition similar to those expressed, a
breach of which might constitute a defense if proven, so that such a
stipulation as to keeping the sprinkler in good working order is not
a warranty.5 Such a clause by fair construction contemplates that
"Worcester v. Worcester Mutual 28 L.R.A.(N.S.) 593, 106 Pac. 194,
Fire Ins. Co. 9 Gray (75 Mass.) 27. 39 Ins. L. J. 352. See also Fire-
20 Underbill v. Agawam Mutual men's Ins. Co. v. Appleton Paper &
Fire Ins. Co. 6 Cush. (60 Mass.) 446. Pulp Co. 161 111. 9, 43 N. E. 713, 53
1 Hartford Protection Ins. Co. v. 111. App. 511.
Harmer, 2 Ohio St. 452, 59 Am. Dec. 3 Port Blakely Mill Co. v. Royal
684. Ins. Co. 186 Fed. 716, 108 C. C. A.
2 Port Blakely Mill Co. v. Spring- 586, 40 Ins. L. J. 1610.
field Fire & Marine Ins. Co. 59 Wash. 4 Port Blakely Mill Co. v. Hart-
501, 28 L.R,A.(N.S.) 596n, 140 Am. ford Fire Ins. Co. 50 Wash. 657, 97
St. Rep. 863, 110 Pac. 36, 39 Ins. Pac. 781.
L. J. 447, overruling 56 Wash. 681, 5 Fuller v. New York Fire Ins. Co.
Joyce Ins. Vol. III.— 205. 3265
§ 1996 JOYCE ON INSURANCE
the system may nol continue in complete working order at all
times and therefore due diligence to restore n to its normal efficiency
[P required of assured in order to meet such a contingency and
where such system, owing to freezing of exposed parts, becomes in-
operative and assured proceeds to do everything reasonably possible
to restore it to working order and employs watchmen during the
time ii is out of order, he has exercised at Least the due diligence
required.8
Again, where there is a warranty by assured thai due diligence
be used that the automatic sprinkler system shall at all times be
maintained in good working order, and the privilege is given to
make additions, alterations, and repairs, and to deplete without
limit of time, it follows thai if in the exercise of said privilege it
becomes necessary to move or disconnect the sprinkler system, it
cannot, during such period of temporary suspension for such pur-
pose, be kept in good working order and therefore it cannot under
such circumstances, be at "all time.-" maintained in "good working
order," so that only due diligence need then be used to fulfil said
warranty; and whether such due diligence has been used is a ques-
tion for the jury and a verdict can be directed in such ease only
when it can be fairly said that all reasonable men must draw the
same conclusion from the evidence.7 And in another decision in-
volving the same question it is held that conceding that the clause
was a warranty, it was no warranty that assured should at all times
maintain the automatic- sprinkler system, hut a representation only
that assured should use "due diligence" in maintaining the same,
and that a violation of the condition only suspended the insurance
during such violation and did not preclude a recovery, where at the
time of loss the sprinkler system was in good working order.8
§ 1996. Bodily or mental infirmities: life and accident policy.9 —
If there he a warranty in an accident policy that the insured never
had and had not then any "bodily or mental infirmity," the fact
that he was subject to erysipelas does not constitute a bread).10 Nor
(Fuller v. Insurance Companies) 184 Insurance Companies) 184 Mass. 12,
.Mass. L2, 67 N. E. 879, 32 Ins. L. 67 N. E. 879, 32 Ins. L. J. 783.
.1. 783. 8Port Blakely Mill Co. v. Spring-
6 Cummer Lumber Co. v. Associ- field Fire iV. Marine Ins. Co. 59 Wash.
ated Manufacturers Mutual Fire Ins. 501, 28 L.R.A.(N.S.) 596n, L40 Am.
Corp. 73 X. Y. Supp. 668, 67 App. St. Rep. 863, 110 Pa.-. 36, 30 Ins.
Div. 151, 31 Ins. L. J. 87, aff'd L. J. 1447. overruling 56 Wash. 681,
(mem.) 173 X. Y. 633, 66 N. E. 28 L.R.A.(N.S.) 593, 106 Pac. 194,
110(1. 39 Ins. L. J. 352.
'Port Blakely Mill Co. v. Roval 9 See §§ 1987, 2003 c\ seq. herein.
Ins. Co. 186 Fed. 716. 108 C. C. A. 10 Bernavs v. United States Mutual
586, 40 Ins. L. J. 1610; Fuller v. Accident Assoc (U. S. C. C.) 45 Fed.
New York Fire Ins. Co. (Fuller v. 455. See p. 3332 herein.
3266
PARTICULAR REPRESENTATIONS, ETC. §§ 1997-1997b
is nearsightedness a breach of such a warrant v. especially where at
the time of effecting the insurance the assured wore eyeglasses,
which fact the company's authorized agent knew;11 nor does the
fact that the assured is deaf constitute a breach of the stipulation
when the agent at the time had full knowledge thereof.12
§ 1997. Books of account: keeping books in safe.13
§ 1997a. Books and accounts: burglary insurance. — Tn burglary
insurance, the books of account are for the purpose of determin-
ing the amount of loss and to protect insurer againsl an excessive
claim, and the clause is not available to defeat a claim the amount
of which is not in dispute, especially so where assured kept a check
book and sales book, which were exhibited for examination after the
burglary, although the books and invoices were destroyed by fire,
as the law does not require strict but only fair and reasonable com-
pliance.14 But where it is stipulated in a burglary insurance policy
that insurer is released from liability if assured's books and accounts
are not so kept that the actual loss may be accurately determined
therefrom, and unless the loss shall have been established by com-
petent and conclusive evidence, there can be no recovery where some
books were produced by assured, but it was impossible to determine
from such books what goods were on hand on any particular day.15
§ 1997b. Building: dimensions and material of.15a — A statement
in an application regarding dimensions of a building, is not war-
ranted correct by a warranty that the d&scription and statement of
the condition, situation, value, occupancy, and title of the prop-
erty are true, nor is such statement within a stipulation that the
policy shall be void for misrepresentation of any material fact,
where it is not shown that such statement as to dimensions influ-
enced issuing the policy.16 If it does not appear that answers as to
the dimensions and material of a building induced insurer to
enter into a contract more favorable to insured that it otherwise
would have done, or that they had a tendency to do so, they cannot
11 Cotten v. Fidelity & Casualty tional Surety Co. of N. Y. 136 N.
Co. (U. S. C. C.) 41 Fed. 506. Y. Supp. 793, 152 App. Div. 14,
12Follette v. United States Mu- 41 Ins. L. J. 1677. See Schwartz
tual Accident Assoc. 110 N. C. 37/, v. Metropolitan Surety Co. 113 N.
28 Am. St. Rep. 693, 15 L.R.A. Y. Supp. 66.
668, 14 S. E. 923. 15a See § 1987 herein.
13 This section in first edition trans- 16 Duncan v. National Mutual Fire
ferred. See §§ 2063 et seq. herein. Ins. Co. 44 Colo. 472, 20 L.R.A.
14Leiman v. Metropolitan Surety (N.S.) 340, and note on misrepre-
Co. Ill N. Y. Supp. 536. sentation as to dimensions of insured
15 Pearlman v. Metropolitan Surety building, 98 Pac. 634. See § 1991
Co. Ill N. Y. Supp. 882, 127 App. herein.
Div. 539, cited in Wolo witch v. Na-
3267
§§ 1998-1998b JOYCE ON INSURANCE
be regarded as false and fraudulent or material misrepresentations,
although the question of materiality would I).' one for the .jury.17
§ 1998. Cargo of ship: warranty.18— It is held by Lord Ellen-
borough thai an insurance "on the cargo," followed by a specific
designation thereof, does not constitute a warranty that the entire
cargo on board the ship shall consisl of only the g 1- specified.
The word "cargo" does not mean the whole cargo, bul only, in con-
nection with the descriptive words following, designates upon what
g Is the risk attaches. There is no warranty that no other goods
shall be taken on hoard, where the risk is not thereby increased.19
§ 1998a. Carrier: warranty that insurance shall not inure to
benefit of.— A warranty that the insurance shall not inure to the
benefil of any carrier is not void as in restraint of trade or contrary
to public policy, and such a warranty is avoided and ceases to be
operative if, during the time specified for its continuance, the in-
sured contracts to give a carrier any right to benefit under the pol-
icv. But a certificate of insurance to convert all the rights of the
original policy holder to a purchaser of the insured property, issued
after his agents had delivered the property to carriers under a bill
of lading providing that the carriers should have the benefit of any
insurance upon the property, confers no right on the carrier, where
the original policy contained a warranty that the insurance should
not inure to the benefit of any carrier, and the certificate was is-
sued without notice of the provisions of the hill of lading, although
I he carrier had no notice of that warranty in the policy.20
§ 1998b. Clear space clause: warranty. — The warranty contained
in the clear space clause is a reasonable and competent provision to
insert in or attach to a policy.1 And it is declared as to this clause
that its very object is to avoid any question between the parties re-
specting its terms or its obligation and therefore the court is not
at all concerned with its materiality or its importance to insurer, and
that "it is not a contract to be construed, and its length and breadth
measured and determined, and there is no question of hardship or
equity. It is a naked matter of agreement by which if it be in force
the assured is himself bound, and if he has violated it he may not
recover on his contract," 2 It is decided in Minnesota, however,
"Landes v. Safety Mutual Fire * Liverpool & London & Globe Ins.
Ins. Co. 190 Pa. 536, 42 Atl. 961, Co. v. T. M. Richardson Lumber Co.
26 Ins. L. J. 568. See §§ 1898, 3710a 11 Okla. 585, 69 Pac. 938, 31 Ins.
et seq. herein. L. J. 997, 1031, Haines, J., s. c. 11
"See § 1987 .herein. Okla. 579, 69 Pac. 936, 31 Ins. L.
"Muller v. Thompson, 2 Camp. J. 993.
610, 12 R. R. 753. 2 Merchants Ins. Co. v. New Mex-
2° Insurance Co. of North Amer- ico Lumber Co. 10 Colo. App. 223,
ica v. Easton, 73 Tex. 167, 3 L.R.A. 51 Pac. 174, 26 Ins. L. J. 969, 976,
424, 11 S. W. 180. Bissell, J.
3268
PARTICULAR REPRESENTATIONS, ETC. § 1998c
that where the statute contains the only terms and conditions which
can be incorporated in a contract of fire insurance, a space clause
attached by a rider is void so far as the warranty is concerned, but,
inasmuch as the statute permits the use of forms of description and
specification of the property insured, the general descriptive lan-
guage may be limited by said space clause, and a judgment for as-
sured was affirmed, although the property burned was located with-
in the limits specified as clear space.3
Where tramways were excepted from the operation of the clear
space clause and lumber was piled upon certain nearby platforms,
claimed to bo tramways, it was decided that they must be shown to
have been understood to have such meaning at the time the con-
tract was made or they would not come within the exception.4 So
a warranty of a continuous clear space is broken, where, although
it is satisfied by the existence of the stipulated clear space in certain
directions, still in other directions there are structures or buildings
within the specified limits which reduce the clear space, and by
reason of their location and character naturally increase the risk.
And there is none the less a violation because of the fact that said
structures are not the means of communicating the fire.5 So where,
in violation of the warranty, lumber is piled within the limits of
the specified clear space warranted to be maintained between the
insured property and any woodworking or manufacturing estab-
lishment, said breach avoids the policy and the measurements may
be taken from what is really any part of the establishment attached
thereto or connected therewith and not necessarily from a perma-
nent corner thereof.6
§ 1998c. Same subject: waiver. — It is held in a Federal Supreme
Court Case, that, where waivers are required to be written upon or
attached to the policy, a breach of warranty of a continuous clear
space clause is not waived nor the insurer estopped by a report of its
inspector, pending an earlier policy of which the one in suit was a
renewal, showing that in certain directions the clear space had been
reduced by permanent structures within the specified limits. It was
also decided that in such case parol evidence was inadmissible to
show that insurer had obtained knowledge of the actual conditions
from said inspector's report, and that assured was bound to know
3 Wild Rice Lumber Co. v. Roval other point (waiver) in Lumber Un-
Ins. Co. of Liverpool, 99 Minn. 190, derwriters of N. Y. v. Rife, 237 U. S.
108 N. W. 871, 35 Ins. L. J. 824. 605, 59 L. ed. 1140, 35 Sup. Ct.
4 Gough v. Jewett, 52 N. Y. Supp. 717, 46 Ins. L. J. 298.
707, 32 App. Div. 79. 6 Merchants Ins. Co. v. New Mex-
6 Rife v. Lumber Underwriters of ico Lumber Co. 10 Colo. App. 223,
N. Y. 204 Fed. 32, 122 C. C. A. 51 Pac. 174, 26 Ins. L. J. 169.
346, 42 Ins. L. J. 1042, rev'd on an-
3269
§ 1999 JOYCE ON INSURANCE
the contents of his policy and that he knew better than the insur-
er.- the condition of his premises, even if tliey had been notified of
the facts, and that he could not in a court of law ask to have his
contracl enforced otherwise than according to its terms.7 In a
Michigan case, where the policy contained what was really a con-
dition precedent to the attachmenl of the risk, it was provided that
brush and logs be cleared one hundred feet from the barn, this was
only partially done, but if was accepted as satisfactory by the agent
of insurer, and an assessmenl was made by insurer and paid, and it
was held that there was a waiver.8 And where the question whether
the agent had knowledge that there was a breach of the clear space
clause was left to the jury, and a verdict was given for assured, it
was held that it would not be disturbed.9
§ 1999. Convoy: warranty to sail or depart with. — The warranty
in English policies in times of war that the ship will sail or depart
with convoy must be strictly performed, and nothing excuses the
assured from complying with such warranty. The rules governing
this warranty are as follows: 10 The convoy must be a regular convoy
appointed by the government, and no other.11 The sailing must be
from the place of rendezvous appointed by the government.12 The
convoy must be for the voyage, as a rule,13 although if the govern-
ment does not appoint a convoy for the whole voyage, this consti-
tutes an exception.14 So there may be separate convoys for differ-
ent parts of the voyage, and the rule may be governed by usage.15
And a sailing to the general place of rendezvous is sailing with con-
7 Lumber Underwriters of N. Y. v. Post, 25 Tex. Civ. App. 428, 02
v. Rife, 237 U. S. 605, 59 L. ed. S. W. 140.
1140, 35 Sup. Ct. 717, 40 Ins. L. J. 8 Duby v. Farmers Mutual Fire
298, rev'g Rife v. Lumber Under- Ins. Co. 133 Midi. 661, 10 Det. Leg.
writers of N. Y. 204 Fed. 32, 122 N. 313, 95 N. W. 720, 32 Ins. L. J.
C. C. A. 340, 42 Ins. L. J. 1042. 1015.
See also Liverpool & London & Globe 9 Collins v. North British & Mer-
Ins. Co. v. T. M. Richardson Lumber eantile Ins. Co. 118 Mich. 281, 5 Det.
Co. 11 Okla. 585, 09 Pac. 938, 31 L. News, 509, 76 N. W. 487.
Ins. L. J. 997, s. c. 11 Okla. 579, 10 Taken together with authorities
69 Pac. 936, 31 Ins. L. J. 993. As cited from 1 Marshall on Ins. (ed.
to what is not a waiver by acts, etc., 1810) *360-84a.
of agent, see also Merchants Ins. Co. n Smith v. Keadshaw, reported in
v. New Mexico Lumber Co. 10 Colo. Park on Insurance, 349; Hibbert v.
App. 223, 51 Pac. 174, 26 Ins. L. J. Pigon, reported in 1 Marshall on Ins.
969. See also as to point of obliga- (ed. 1810) *3G9.
tion of assured to know contents of 12 Lethulier's Case, 2 Salk. 443;
policy in respect to clause, Liverpool Gordon v. Morley, 2 Strange,
& London & Globe Ins. Co. v. T. M. 12(15.
Richardson Lumber Co. 11 Okla. 579, 13 Lilly v. Ewer, 1 Doug. 72.
69 Pac. 936, 31 Ins. L. J. 993, s. c. 14 D'Eguino v. Bewieke, 2 H.
11 Okla. 585, 69 Pac. 938, 31 Ins. Black. 551, 3 R. R. 503.
L. J. 997; Hartford Fire Ins. Co. 15 Manning v. Gist, 3 Dougl. 84,
3270
PARTICULAR REPRESENTATIONS, ETC: §§ 2000-2001
voy for the voyage.16 It is also essential thai the ship insured shall
have sailing instructions under this warranty, although there are
exceptions in certain cases.17 The ship must also depart and con-
tinue with convoy till the end of the voyage, unless separated by
necessity.18
§ 2000. "Depart," warranty to, in marine risk. — A warranty in a
marine risk that the ship will "depart" on or before a specified day
is not satisfied although the ship, being in perfect readiness for sea,
has broken ground and has proceeded to sea on the insured voyage,
but is beaten back to anchor within the harbor by stress of weather ;
she must not only have "sailed," but must be out of port and at
sea on the day named.19 But under a time policy a vessel was held
"at sea" on the day named although she had not obtained her clear-
ance and was prevented by head winds and* heavy seas from imme-
diately proceeding to sea.20
§ 2000a. Dividends earned: misrepresentations as to. — Where
dividends of a certain stock are insured against loss by fire, a state-
ment in the policy as to the amount of dividends understood to have
been earned for the three years last preceding is not of a prom-
issory nature and is not material within a statute providing that
false statements must be material to the risk to be available as a de-
fense; and where assurer's agents had knowledge at the time the
policy was issued that said statement was false assurer is estopped
to assert that the policy is invalid.1
§ 2001. Examination of property after work: representation.2 —
A representation by the assured that the property is examined
reported in 1 Marshall on Ins. (ed. Metcalf v. Parry, 4 Camp. 125;
1810) *367; De Garray v. Claggett, Thornton v. Lanee, 4 Camp. 231;
reported in 1 Park on Ins. 349, 2 Gordon v. Morley, 2 Strange, 1265;
Park, Ins. (8th ed.) 708. D'Angilar v. Tobin, Holt, N. P. 185,
16 Audley v. Duff, 2 Bos. & P. 111. 2 Marsh, 265; Morriee v. Dillon, 2
17Hibbe'rt v. Pigon, reported in 1 Selw. N. P. 942; Campbell v. Bor-
Marshall on Ins. (ed. 1810) *371; deu, 2 Str. 1265.
Webb v. Thomson, 1 Bos. & P. 5; 19 Moir v. Royal Exchange Assur.
Victoria v. Cleeve, 2 Str. 1250; An- Co. 4 Camp. 84, per Lord Ellen-
derson v. Pitcher, 2 Bos. & P. 164, borough; 3 Maule & S. 461, 6 Taunt.
3 Esp. 124. 240; "Despatched from," substanti-
18Tavlor v. Woodnen and Walt- ally the same decision in Sharp v.
ham v.* Thomson, both reported in 1 Gibbs, 1 Hurl. & N. 801.
Marshall on Ins. (ed. 1810) *376; 20 Union Ins. Co. v. Tyson, 3 Hill
Jefferyes v. Legendra, 3 Lev. 320, 2 (N. Y.) 118, citing Bowen v. Hope
Salk. 443, 1 Show. 320; Long v. Duff Ins. Co. 20 Pick. (37 Mass.) 275, 32
and Long v. Bolton, 2 Bos. & P. 209. Am. Dec. 213.
See also, for other authorities con- * Liverpool & London & Globe Ins.
cerning convoy, Bond v. Gonsales, 2 Co. v. Lester, — Tex. Civ. App. — ,
Salk. 445; La'ing v. Glover, 5 Taunt. 176 S. W. 602; Rev. Stat. see. 4947.
49; Warwick v. Scott, 4 Camp. 62; 2 See § 1987 herein.
Carstairs v. Allnutt, 3 Camp. 497;
3271
§§ 2001a, 2002 JOYCE ON INSURANCE
thirty minutes after work necessitates an examination after extra.
as well as after ordinary, working hours.8
§ 2001a. Explosives: warranty that none used: indemnity policy.
A statute which provides in substance that no condition in any
policy of insurance shall he taken or construed as other than a
mere representation unless it is material to the risk insured against,
does not apply so as to enable insurer to recover where dynamite
is temporarily stored in a building contrary to a policy stipulation,
even though by reason of its removal during the lire it does not
contribute to the loss, for it is a breach of a condition material to
the risk and the statute will not he held to mean that no condition
in any policy shall be taken or construed as other than a mere
representation unless it contributed to the loss-.8* So where in
answer to a question, in an application for indemnity insurance,
whether explosives are used, the answer is no, ''except as herein
stated," it constitutes a warranty when made so by the policy, and if
false it avoids the contract, notwithstanding the contention that the
application contemplated the use of explosives by assured in
prosecuting his work.4
§ 2002. Fires: heating: stoves: continuing warranty.5 — A rep-
representation that there is "no fire in or about" the insured build-
ing '"except one under a kettle securely embedded in masonry,
used for heating water, and made perfectly secure against accident,"
refers only to the time of effecting the policy, and is not a con-
tinuing warranty, nor does it imply that no other fires shall be
used than the one mentioned. Courts in such cases will not give
a. forced construction in aid of a forfeiture, especially where the
words of the claimed warranty are in the present tense.6 If in an
application the neighboring buildings, one of which was a car-
penter-shop, are properly located and described, and the purposes
for which they are used stated in response to inquiries, it is neither
a fraudulent concealment of material facts nor a breach of the
covenants of the assured to omit to state that such carpenter-shop
is heated by stoves, or to say what provisions are made for warm-
ing, unless perhaps the heating is effected in an unusual and
extraordinary manner.7 And a warranty that no stoves are used,
where the language is in the present and not the future tense, is
3 Houghton v. Manufacturers' Mu- Co. v. Union Casualty & Surety Co.
tual Fire Ins. Co. 8 Met. (49 Mass.) 220 111. 172, 77 N. E. 128.
1 If). 11 Am. Doc. 489. 5 See § 1987 herein.
3,1 Kenefick v. Norwich Union Fire 6 Schmidt v. Peoria Marine & Fire
Ins. Soc. 205 Mo. 294, 103 S. W. Ins. Co. 41 111. 296.
957, 36 Ins. L. J. 817; Civ. Stat. 7 Girard Ins. Co. v. Stephenson, 37
1899, sec. 7973. See § 1916 herein. Pa. St. 293, 78 Am. Dec. 423.
4 Columbian Exposition Salvage
3272
PARTICULAR REPRESENTATIONS, ETC. § 2002a
not a continuing warranty that stoves will not be thereafter used.8
And where there is no continuing warranty that stoves shall be
kept in a safe condition for use, the insurer is liable, notwith-
standing a fire is built in the stove while in an unsafe condition,
by the assured's servant contrary to express direction of the as-
sured.9 Although if by making fires in the stove it was used
recklessly and in a grossly negligent manner, such use mighi
reasonably be regarded as increasing the risk, but the evidence
should clearly establish such reckless or negligent use.10 A war-
ranty may, however, be of such a character as that a future com-
pliance may be necessitated. Thus, where it was stated that the
stovepipe passed through the window, but it was added, "there
will, however, be a stone chimney built, and the pipe will pass
into it at the side," this constitutes a warranty necessitating com-
pliance within a reasonable time, otherwise the policy will be
avoided, and this even though consent of the company's secretary
is given that the "within policy remains good" notwithstanding
tho stove has been removed.11 The insurer is not released by the
fact that a fire was carelessly kindled by the assured's wife in a
stove during a time when the pipe had been partially removed.12
§ 2002a. Guaranty insurance. — In the determination of the ques-
tion whether statements are representations or warranties in this
class of insurance, not only should the rules be considered which
we have stated under prior chapters concerning what constitutes
a representation or a warranty and the effect thereof,13 but reference
should also be had to such statutes as provide against forfeitures in
case of misrepresentations or warranties, unless the same be ma-
terial to the risk, or are made with intent to deceive, or the matter
misrepresented increases the risk, etc., and which, as we have seen,
apply to fidelity guaranty insurance,14 so that the parties thereto
must ordinarily be presumed to have contracted with reference to
said statutes and to have agreed to the construction placed thereon
when applied to the purpose of the contract.15 So in case of a
statutory requirement as to the giving of bonds conditioned for
the honest and faithful discharge of their duties by officers of
8 Aurora Fire Ins. Co. v. Eddy, 13 See c. LVI. (§§ 1882 et seq.):
49 111. 106, 55 111. 213. c. LVII. (§§ 1942 et seq.) herein.
9 Loud v. Citizens' Mutual Ins. Co. 14 See § 1916, subd. (j) herein.
2 Gray (68 Mass.) 221. 15 American Bonding Co. v. Bal-
10 Aurora Fire Ins. Co. v. Eddv, lard County Bank's Assignee, 165
49 111. 106, per Waller, J., s. c. 55 Ky. 63, 176 S. W. 368; Ky. Stat.
111. 213. sec. 639. See also § 1916, subd.
11 Murdoek v. Chenango County (e) herein.
Mutual Fire Ins. Co. 2 N. Y. 210.
12 Mickev v. Burlington Ins. Co.
35 Iowa, 174, 14 Am. Rep. 494.
3273
§ 2002a JOYCE ON INSURANCE
state banks, the statute governs the conditions of said bonds which
must conform thereto; nor have the surety companies any power to
change the character or Legal effect thereof; and the provisions of
the statute requiring the bond enter into and become part of the
bond whether written in it or not. and constitute the contract upon
which both the rights and the liabilities of the surety are to be
determined.16
(a) Rules of construction applicable. As pertinent to the ques-
tion whether statements in this class of insurance contracts are
representations or warranties we will state here that in contracts of
fidelity guaranty insurance the rule of construction applies that in
arriving at the intent of the parties, or in determining the meaning
of any particular clause, the entire contract must be construed to-
gether.17 So in an action against a surety company to recover on
the bond of a defaulting bank president, statements and repre-
sentations in writing, made by the assistant cashier of the bank,
relative to the conduct, duties, employment, and accounts of the
president, which by the terms of the bond are made a part of the
bond itself, form part of the contract, and upon the construction
of the statements and bond as a whole the rights and liabilities of
the parties thereto must depend.18 And a provision in a surety
bond as to the frequency with which the principal's books shall be
inspected, supersedes a statement in the application as to the fre-
quency with which it shall be done.19 Again, the rule applies to
these bonds that forfeitures are not favored by construction,20 and
the contract should also be liberally construed in favor of assured
and of indemnity where it is reasonably susceptible of two con-
structions.1
16 United States Fidelity & Guar- suring fidelity of officer or employee
anty Co. v. Poetker, 180 Ind. 255, to repudiate authority of person who
L.R.A.1917B, 984, 102 N. E. 372, made the representation in reliance
42 Ins. L. J. 1394. See §§ 339-339b upon which the bond was issued, see
heroin. note in 7 L.R,A.(N.S.) 549.
On effect of insertion of unau- 19 United American Fire Ins. Co.
thorized provision in a bond required v. American Bonding Co. 140 Wis.
by statute, see note in L.R.A.1917B, 573, 40 L.R.A.(N.S.) 661, 131 N. W.
990. 994.
17 Legler v. United States Fidelity Annotated on admissibility against
& Guaranty Co. 88 Ohio St. 336, 103 sureties on bond of statements by
X. F. 897. See §§ 206c, 209 herein, principal after expiration of term of
18 Willoughby v. Fidelity & Be- employment.
liu.it Co. 16 "Okla. 546, 7 L.R.A. 80 See § 220b herein.
(N.S.) 548, 85 Pac. 713, aff'd in l Carstairs v. American Bonding &
Cherry v. Fidelity & Beposit Co. Trust Co. 116 Fed. 449, 54 C. C. A.
(mem*.) 205 U. S. 537, 51 L. ed. 920, 85, 32 Ins. L. J. 22, 27, certiorari
27 Sup. Ct. 790. denied 187 U. S. 644, 47 L. ed. 346,
On right of beneficiary in bond in- 23 Sup. Ct. 844, — Gray, C. J. ; Amer-
3274
PARTICULAR REPRESENTATIONS, ETC. § 2002a
(b) Meaning of "misrepresentation," "material misstatement or
suppression of fact." In a Kentucky case where the statute pro-
vided that no misrepresentation unless material or fraudulent
should avoid the policy and the stipulation in the bond was that
"any material misstatement or suppression of fact by the employer
in any statement or declaration to the company" should render the
bond void from the beginning, the terms "misrepresentation" and
"suppression of fact by the employer" mean the same thing, "mis-
representation," however, is used in said clause in a more restricted
sense than ordinarily, and refers to misstatements which are known
to be untrue, or which are positively stated as true without actual
knowledge by insured, and made under circumstances which call
for such knowledge as might be based upon reasonable care pre-
viously exercised. It is akin to the expression "suppression of fact
by the employer," which is a species of misrepresentation, as it
leads the inquirer to believe what is apparently true, by concealing
a fact which shows it to be untrue. One is the active and the
other the passive phase of the same thing ; one is the false state-
ment, the other is the suppression of the truth, each intending to
mislead as a matter material to the risk. The terms are used cor-
rectively in said clause of the bond.2 In addition to the interpre-
tation of the terms above noted, we will briefly state here as perti-
nent thereto, although we have elsewhere considered the question
of concealment,3 that if the contract is completed but not issued or
delivered the point of insured's knowledge or ignorance of a de-
falcation of the employee is immaterial at that time and in no way
affects the contract, and his failure to then disclose the fact of loss
does not constitute fraud.4 So concealment by an applicant for
can Bonding Co. of Bait. v. Ballard Bonding Co. 162 N. Car. 384, 78
County Bank's Assignee, 165 Ky. S. E. 430. See §§ 225 et seq. herein.
63, 176 S. W. 368. See also § 221b See also as to what law governs,
herein. See Dominion Trust Co. v. Grand Lodge Ancient Ord. U. W.
National Surety Co. 221 Fed. 618, v. Massachusetts Bonding & Ins. Co.
137 C. C. A. 342; United States 38 R. I. 276, 94 Atl. 859, 46 Ins.
Fidelity & Guaranty Co. v. Poetker, L. J. 551.
180 Ind. 255, L.R.A.1917B, 984, 102 2 Fidelity & Guaranty Co. of N. Y.
N. E. 372, 42 Ins. L. J. 1394 (case v. Western Bank, 29 Ky. L. Rep.
of bond of state bank cashier under 639, 94 S. W. 3, 35 Ins. L. J. 693,
Burns' Ann. Stat. 1908, sees. 1278, 695,— O'Rear, J.
3331, 5728); Louisville & Nashville 3 As to concealment in other than
R. Co. v. United States Fidelity & marine risks, see c. LV. (§§ 1844 et
Guaranty Co. 125 Tenn. 658, 148 seq.) herein.
S. W. 671. 4 Roark v. City Trust, Safe De-
As to law of place; when immate- posit & Surety Co. 130 Mo. App. 40,
rial whether there had been a breach 110 S. W. 1.
of bond under law of foreign state,
see Dixie Fire Ins. Co. v. American
3275
§ 2002a JOYCE ON INSURANCE
the insurance, of embezzlements by him which are not inquired
about by insurer, will not. unless fraudulent, avoid the policy, al-
though the fact of embezzlement may he material to the risk.6
(c) Object or intent of inquiries in fidelity guarant)/ contracts.
The object or intent of inquiries in fidelity insurance contracts is
generally to obtain such knowledge in relation to the employee's
past, the nature of the duties committed to his charge, the degree of
his responsibility, and such other relevant and material facts as
will enable the insurer to determine whether or not he will assume
the risk, and if so upon what basis and terms.6 In this connection
the court, per O'Rear, J., in a Kentucky case says: "The bond and
application, read together, manifest to us that the information
sought of the employer was twofold; First the means it had taken
to acquaint itself with the employee's past conduct; what was
learned as a result of that means, and what was known or believed
by the employer on that subject otherwise."7
(d) Whether statements in fidelity guaranty insurance are rep-
resentations, conditions subsequent or warranties. Generally stat-
ed, the effect of statements as to an employee in cases of fidelity
bonds, must depend upon whether such statements are representa-
tions or warranties. If they are representations merely they must
be only substantially true and material to the risk. If they con-
stitute a warranty, then the rule that the statements must be strictly
true will govern.8
If the bond contains no provision making the application a part
thereof, statements in the latter as to the amount of a bank teller's
indebtedness to the bank are not warranties.9 And where it is
claimed that statements in an "employer's declaration" are a part
of the bond and a warranty, such claim will not be sustained where
5 Penn Mutual Life Ins. Co. v. 6 See cases throughout this see-
Mechanics' Savings Bank & Trust tion, also §§ 1892, 1914, also § 18G8
Co. 72 Fed. 413, 38 L.R.A. 33, 19 herein.
C. C. A. 286, 37 U. S. App. 692, 7 Fidelity & Guaranty Co. of N. Y.
73 Fed. 653, 38 L.R.A. 33, 19 C. C. v. Western Bank, 29 Kv. L. Rep.
A. 316, 43 U. S. App. 76, 38 L.R.A. 639, 94 S. W. 3, 35 Ins. L. J. 692.
33. See Citizens TrUst & Guaranty 8 Poultry Producers' Union v. AVil-
Co. v. Globe & Rutgers Fire Ins. Co. liams, 58 Wash. 64, 127 Am. St. Rep.
229 Fed. 326, 143 C. C. A. 446; 1041, 107 Pac. 1040. As to general
Herbert v. Lee, 118 Tenn. 133, 12 rule, see §§ 1894 et seq. (representa-
L.R.A.(N.S.) 1217 (annotated on tions) ;§ 1916 (statutes) ;§§ 1970 et
duty of obligee in fidelity bond to seq. (warranties) herein.
disclose prior defalcation to sureties 9 Missouri, Kansas & Texas Trust
in the absence of any inquiry in re- Co. v. German National Bank, 77
gard thereto) 121 Am. St. Rep. 989, Fed. 117, 23 C. C. A. 65, 40 U. S.
101 S. W. 175 (conside-rcl under § App. 710.
1844 herein).
3276
PARTICULAR REPRESENTATIONS, ETC. § 2002a
there is no provision in the bond or in said declaration making the
statements or any provisions in the bond a warranty, nor will the
court in such case construe into the contract any language import-
ing a warranty; and the general rule applies that a statement in
an application is a representation rather than a warranty, unless it
is made a warranty by express terms, or by such language that it
cannot be construed otherwise; nor in such case is there a warranty
although the bond states that the representations in the declar.i-
tion shall constitute a part of the basis of the contract.10 A state-
ment is also immaterial when it is made in an application which
has no relation to the bond issued, in that said bond is not based
thereon and contains no reference thereto.11 So when, in an a] 'pli-
cation for renewal, a statement that the books of the cashier had
been examined and found correct is not made one of the conditions
for renewal, and is not a part of the bond nor referred to therein,
it is not a warranty ; such a case is not within the rule as to misrep-
resentations of a material fact by the employee whose fidelity is"
guaranteed.12 The case so holding was, however, reversed and it
was decided that even though representations be dehors the policy,
still where they are material to the risk and the contract is made
upon the faith thereof it is an implied condition that they are true
and it is sufficient to plead a breach of such condition.13
Under a Tennessee decision the statements in a continuation
certificate were that the books of the cashier, whose fidelity, etc.,
was guaranteed, were examined in the regular course of business,
from time to time, and found correct in every respect, and that all
moneys or property in his control or custody were accounted for
with proper securities and funds on hand to balance his accounts
and that he was not then in default. It was determined that said
certificate with respect to the examination and correctness of ac-
counts only constituted a statement that those facts were as set
forth, and did not constitute a warranty, and as to the latter part
of the statement concerning the employee not being then in de-
fault it only expressed the result of said examinations, was not
independent of what preceded, nor a substantive and distinct war-
10 Title Guaranty & Suretv Co. v. 12 Stapleton National Bank v.
Bank of Fulton, 89 Ark. *471, 33 United States Fidelity & Guaranty
L.R.A.(N.S.) 676, 117 S. W. 537, Co. 113 N. Y. Supp. 25, 60 Misc.
38 Ins. L. J. 722. See §§ 1891 et 206.
seq., 1915b herein ; and that courts 13 Stapleton National Bank v. Unit-
cannot extend or enlarge by construe- ed States Fidelity & Guaranty Co.
tions. See § 219 herein. 115 N. Y. Supp. 372, 131 App. Div.
11 National Surety Co. v. Western 157.
Pacific Ry. Co. 200 Fed. 678, 119 C.
C. A. 91.
3277
§ 2002a JOYCE ON [NSURANCB
ranty.14 And under a Washington decision a bond was renewed
upon assurer's certificate that the employee's accounts had been ex-
amined, found correct in every re-peel and the moneys accounted
for. It further appeared that regular monthly examinations had
been made during the prior term of the hood, and the last one pre-
eeded the renewal only ;i few days, there was. however, a defalca-
tion at the time, but assured had no knowledge or suspicion thereof
and no means, outside of expert aid. of ascertaining the employee's
default. The statements in said certificate were held representa-
tions of the facts as set forth therein and not warranties.15 So
where the integrity of a certain person was insured and it was rep-
resented that his accounts would be examined every fortnight, it
was held a mere representation of intention and that a recovery
could be had, although the loss was occasioned by neglect to ex-
amine said accounts as stated.16 And a statement in the applica-
tion that the directors will make monthly examination- of the
cashier's books to verify lii- accounts, are not warranties but rep-
resentations within the intent of the Kentucky Statute.17 So a
statement is held a mere promissory representation and not a war-
ranty nor fraudulent and material under said statute when the
employer represents that the position of the employee is only that
of bookkeeper and that the largest amount of money likely to be
in his custody would lie only a few dollars.18 Again, although the
bank's statements as to the cashier's accounts are made warranties,
such provision will not include the cashier's statements as to the
examination of his accounts made to obtain the bond.19
The materiality of the misrepresentations or false answers may
be such as to render unnecessary the prior determination of the
question whether they are warranties or representations, and this
has been applied in a case where an "employee's statement" stipu-
lated ''that the above answers are to be taken as condition- pre-
cedent, and as the basis of the same bond applied for," and the
bond expressly recited that it was made, issued, and accepted upon
the condition inter alia, that all the representations made hy the
employer, his or its officers, to the surety company were warranted
14 Hunter v. United States Fidelity Kv. 776, 147 S. W. 406, Kv. Stat.
& Guaranty Co. 129 Tenn. 572, 107 sec. L639.
S. \V. (i!>2. 18 Champion Ice Manufacturing &
16 Remington v. Fidelity & Deposit Cold Storage Co. v. American Bond-
Co. 27 Wash. 42!), (17 Pac. 989. ing & Trust Co. 25 Ky. Law Rep.
"Benham v. United Guarantee & 239, 75 S. W. 197.
Life Assur. Co. 7 Exch. 744, 21 L. J. 19 Equitable Surety Co. v. Bank
Ex. 317. of Ilazen, 121 Ark. 422, 181 S. W.
"United States Fidelity & Guar- 279.
anty Co. v. Foster Deposit Bank, 14S
3278
PARTICULAR REPRESENTATIONS, ETC. § 2002a
to he true, and the statements were that the employee's accounts
had been examined and were at that time in every respect correct,
that there never had been any shortage, and that he was not in-
debted to the employer, etc., all of which was untrue.20
In a Federal case, there were certain questions and suggestions
which witli the answers thereto covered the receiving of remittances
from customers by the cashier, the frequency with which state-
ments of balances would be rendered customers, and by whom, and
these were held not warranties that the said acts should be done in
a particular manner, but that it was sufficient if they were done
in accordance with the customary business practice of the corpora-
tion; said suggestions and answers also covered certain practices as
to depositing all moneys and checks, and the manner of making
disbursements, indorsements for deposit, etc., and it was held in
respect to these latter statements that they -were not absolute war-
ranties requiring literal, exact compliance contrary to the business
practice and regulations of insured, under which reasonable dili-
gence wyas exercised.1
Under a Wisconsin decision the provisions in a fidelity bond
that the employer shall observe all due and customary supervi-
sion of the employee for the prevention of default; and that there
shall be a careful inspection of the accounts and books of said
employee at least once in every twelve months from the date of
the bond, are conditions subsequent.2
In a Federal case it is held that a written statement made by
an employer to the obligor in a bond of indemnity against the
dishonest acts of their employee, to the effect that they will in-
variably apply certain checks to his action, wdiich the parties ex-
pressly agree by the statement itself and by the bond shall be the
basis of the latter, and a condition precedent to a recovery upon
it, is of the nature of a warranty, and not of a representation, and
a failure to comply with the promise it contains is fatal to an action
upon the bond, and therefore a covenant by the employers that
they will invariably require the counter signature of their book-
keeper on all checks of the guaranteed employee against their ac-
count, must be fulfilled and if broken no recovery can be had.3
20 American Bonding & Trust Co. v. American Bonding Co. 146 Wis.
of Bait. v. Burke, 36 Colo. 49, 85 573, 40 L.R,A.(N.S.) 661 (anno-
Pac. 692, 35 Ins. L. J. 642. tated on admissibility against sure-
1 Phenix Ins. Co. of Brooklyn N. ties on bond of statements by prin-
Y. v. Guarantee Co. of North Ameri- cipal after expiration of term of
ca, 115 Fed. 964, 53 C. C. A. 360, emplovment) 131 N. W. 994, 40 Ins.
certiorari denied 187 U. S. 640, 47 L. J. 1805.
L. ed. 345, 23 Sup. Ct. 841. 3 Rice v. Fidelity & Deposit Co.
2 United American Fire Ins. Co. 103 Fed. 427, 43 C. C. A. 270.
3279
§ 2002a JOYCE ON INSURANCE
So under a Nebraska decision a statement that accounts have been
examined and found correct, etc., is held to be in the nature of a
warranty the falsity of which is a material matter, which, if it in-
duces the insurer to execute the contract, precludes recovery for a
loss.4
It is decided in Ohio that statements which constitute the in-
ducement to a fidelity insurance contract and which relate to the
honesty and past conduct of employee's, are material and warranties
which will avoid the insurance if false in any material par-
ticular.8 It is also held in a Washington case that a statement
by an employer in applying for indemnity insurance that the em-
ployee's hooks have been examined and found to balance is a
warranty of a material fact,6 So under a Rhode Island decision
where the bond was issued to a United Workman's order, insuring
certain officers, including its Grand Recorder, a written statement
and answers certifying to the correctness of his accounts and other
matters were held a warranty, a breach of which avoided the con-
tract, where the application stipulated that these answers should
be warranties and constitute the basis of the contract and form a
part of the bond, or any statements in continuation thereof, and
said statements were also by the bond made one of its considera-
tions which further stipulated that they "were material to the risk,
and had influenced insurer to execute the bond and accept the same,
and that all the matters so stated were warranted to be true.7
Under the California Code, a statement that assured would him-
self examine the books, etc., is a warranty.8 So under another de-
cision in that state, an application was made by a cashier for a
fidelity guaranty or indemnity bond, and the employer, in answer
to inquiries in a letter sent by insurer, stated that said cashier had
never been in arrears; that he knew of no reason why the bond
should not be issued; and that he was not then indebted to him.
Jt was stipulated in the policy that said statements and answers
were warranties and a part of the contract of insurance, and they
were so held. It was also determined that as said warranties were
false the policy issued in reliance thereon was void ab initio; also
4 Sunderland Roofing & Supply liams, 58 Wash. 64, 137 Am. St. Rep.
Co. v. United States Fidelity & Guar- 1041, 107 Pae. 1040.
anty Co. 84 Neb. 791, 122 N. W. 25. 7 Grand Lodge, Ancient Order
See also United States Fidelity & United Workmen v. Massachusetts
Guaranty Co. v. Ridgely, 70 Neb. Bonding & Ins. Co. 38 R. I. 270,
072, 97 N. W. 836. 94 Atl. 859, 46 Ins. L. J. 551.
5 Livingston v. Fidelity & Deposit 8 Young v. Pacific Surety Co. 137
Co. of Md. 76 Ohio St. 253, 81 N. E. Cal. 596, 70 Pac. 060; Civ. Code,
330. sec. 2608.
6 Poultry Producers' Union v. Wil-
3280
PARTICULAR REPRESENTATIONS, ETC. § 2002a
that this was so under the Code. In brief the strict rule as to war-
ranties was applied.9
(e) Whether statements in other guaranty insurance contracts
are representations or warranties. In an application for insurance
of title to real estate, a question ; What was the "last price paid?" —
calls for the actual, and not merely a nominal, price, — the price in
money or money's worth ; and it was decided that where a policy
of title insurance provides that any untrue answer to questions
contained in the application shall avoid the policy, that the answers
in etfect amount to a warranty and the rule which precludes in-
quiry in such case into their materiality applies.10
In an English credit guaranty case, notwithstanding the strict
rule of construction which obtains in that country, the nondis-
closure of certain facts as to a loan and rate of interest was held
to constitute no defense to an action on a policy guarantying a per-
son's solvency, as it did not appear that such facts were material to
the risk.11
In view of the above decision the rule of construction in this
country against the insurer, and also that forfeitures are not favored,
which likewise applies to credit guaranty insurance,12 are import-
ant considerations in determining whether statements in this class
of contracts are representations or warranties, or whether the strict
rule of construction of warranties will be relaxed and the material-
ity of the representations be permitted to be made the ground of
inquiry.13 Again, where, by statute, answers are made representa-
tions the rule of materiality and substantial truth applies so that
where a rider was attached to a previously issued credit indemnity
bond covering losses by sales to a particular firm but limited as to
amount and stipulating for the remaining in full force of all other
policy conditions, such stipulation only refers to matters which are
pertinent to the specified risk, and representations in the original
as to gross sales and losses are not thereby made material to said
9 Wolverine Brass Works v. Pa- 12 Philadelphia Casualty Co. v.
•cine Coast Casualty Co. 26 Cal. App. Fechheirner, 220 Fed. 401, 136 C.
183, 146 Pae. 184, 45 Ins. L. J. 551; C. A. 25; Paskusz v. Philadelphia
Civ. Code, see. 2612 (rehearing de- Casualty Co. 213 N. Y. 22, 106 N. E.
nied by Supreme Court Feb. 8, 1915). 749. See §§ 220, 220b, 221b herein.
That warranty must be strictly 13 See §§ 1970 et seq. herein,
true and exactly and literally ful- As to materiality of representa-
filled, and exceptions to rule, see §§ tions, test of materiality, and that
1970 et seq. herein. false representations in regard to
10 Stensgaard v. St. Paul Real Es- material matters avoid the contract,
tate Title Ins. Co. 50 Minn. 429, see §§ 1892 et seq. herein.
17 L.R.A. 575, 52 N. W. 910. As to concealment and what con-
11 Seaton v. Bernard (Bernard v. stitutes a material fact, see §§ 1S07,
Seaton) [1900] L. R. App. Cas. 195. 1868 herein.
Joyce Ins. Vol. III.— 206. 3281
§ 2002a JOYCE ON INSURANCE
particular risk. The case so holding, however, turned upon estop-
pel against insurer to claim that the policy was avoided.14 But it
is also decided that, in cases of credil guaranty where, by the stipu-
lations of the application, the statements therein are made a part
of the contract and warranties, that they will be so construed and
under the rule governing warranties they must be strictly true and
literally fulfilled.15
In a recent New York case it appeared thai the statemenl of loss-
es did not include a loss occasioned to assured by reason of the in-
solvency of a debtor from whom a large sum was due. A defense
of breach of warranty was set up, based upon this failure to in-
clude in the said statement of losses the loss resulting upon this
account. Several months before making his application for in-
surance the insolvent debtor had by deed of trust transferred all
his property to assured with power to continue said debtor's business,
sell his property and apply the proceeds thereof to the satisfaction
of the transferee's claim and also of that of other creditors of
whom there were a number, although the indebtedness to assured
was the largesl part of the amount. The property so conveyed was
wholly insufficient to satisfy all claims against the insolvent, but
the debtor was discharged by all the creditors, so that it was ap-
parent that at the time when assured made his application for
insurance he would sustain a loss by reason of the facts as above
stated, although the amount was not definite. It was held that the
term "losses" as used in said application could not he limited to
claims against insolvent debtors whose estates had been finally
settled, and. therefore, there was a loss within the meaning of that
word as ordinarily used in an application for credit insurance, and
that it followed that there was a breach of warranty by assured.
The court, per Seabury, J., said: "The question is presented
whether the Edward's account was a loss within the meaning of the
woid dosses' as used in the application for the policy. The ap-
plication and the terms used in it are 'not to be interpreted techni-
cally, hut the language must be held to mean what the words im-
port to the commercial world.' 16 The word 'losses' as understood
in its ordinary sense when used in an application for credit in-
14 Carrollton Furniture Manufac- 15 American Credit Indemnity Co.
taring Co. v. American Credit Indem- v. Carrollton Furniture Co. 95 Fed.
mtv Co. 124 Fed. 25, 59 C. C. A. Ill, 36 C. C. A. 671, 28 Ins. L. J.
545 (aff'p 115 Fed. 77, 52 C. C. A. 84!).
671), certiorari denied 192 U. S. 605, le Citing People v. Mercantile
48 L. ed. 58, 24 Sup. Ct. 849. Credit Guarantee Co. 166 N. Y. 416,
As to statements under statutory 420, 60 N. E. 24.
provisions and effect thereof, see §
1916 herein.
3282
PARTICULAR REPRESENTATIONS, ETC. § 2002a
surance includes, we think, such an account as that of Edwards.
The word 'loss' as used in this connection contemplates the loss
which at the time the application is signed the applicant has sus-
tained without regard to any possibility that may exist that the
applicant may be able to recover his loss from the administration
of the estate of an insolvent debtor. The word 'losses' in the ap-
plication does not refer to 'probable loss' or 'loss beyond recovery.'
It includes such acts as in the ordinary and usual course of busi-
ness a business man would regard as representing a loss. In the
usual and ordinary course of business Edwards could not pay his
debts and the assignment of his property would as against him be
considered as conclusive evidence of his insolvency.17 It indicated
to his creditors his insolvency and that loss would result to them
upon the accounts due from him to them.18 The respondent eon-
tends that the word 'losses' refers only to the losses which at the
time the application is signed appear upon the books of the appli-
cant. Whether or not there was a loss greater than that which the
applicant stated is a question of fact and does not depend upon
whether the entries in the applicant's books are in accord with the
facts. The successful conduct of the business of credit insurance
necessarily depends upon the insurer receiving correct informa-
tion from the insured as to his losses. There are, we think, few
business men who would not regard an account of an insolvent
debtor as representing to some extent a loss, even though that
debtor had made an assignment of his property for the benefit of
his creditors. The statement in the application as to the 'losses'
which the applicant had sustained cannot be limited to claims
against insolvent debtors whose estates had been finally settled.
The assignment by Edwards and the agreement of his creditors
including the plaintiff to release him from liability and to look to
his property for the pro rata payment of their debts was a 'loss'
within the ordinary meaning of that term as used in an applica-
tion for credit insurance. It is claimed on behalf of the respondent
that the st liking out of the printed application before signature of
a clause which was designed to permit the applicant to state any-
thing that he knew detrimental to the credit or standing of any
customer, brings this case within the rule that a breach of war-
ranty cannot be predicated upon the mere failure to answer a
question. The fallacy in this argument lies in the fact that no at-
tempt is made to base the claim of breach of warranty upon the
failure of the respondent to answer a question, but rests entirely
17 Citing Morewood v. Hollister, 6 Credit Guarantee Co. 166 N. Y. 416,
N. Y. 309, 322. 423, 60 N. E. 24.
18 Citing People v. Mercantile
3283
§ 2002a JOYCE OX INSURANCE
upon the fact thai the applicant's answer to the question in rela-
tion to its losses was not true. While the failure to answer a ques-
tion will not of itself justify a claim of breach of warranty it does
not excuse the making of false answer. I think that it plainly
appears from this record that at the time the plaintiff made the
statement as to its losses, which made no reference to the Ed-
ward-' account, the plaintiff had in fact sustained a loss upon that
account." 19
19 L. Black Co. v. London Guar- has anything more than its usual
antce & Accidenl Co. Ltd. 216 N. Y. meaning as it is used in the appli-
560, 111 X. E. 241. rev'g 144 N. Y. cation for insurance. There is no
Supp. 424, 159 App. Div. 186, 43 reference in the application to the
Ins. L. J. 301. In the reversed de- definition of losses or insolvency as
eision the court, per Robson, J., they are contained in the policy
said: "It is apparent that it is the itself. While the policy refers to
loss, adjusted as the policy provides, the application as a pari of it,
that the defendant thereby insured the application does not in terms
plaintiff against, for the policy pro- refer to the form of the policy to
vides for insurance only as 'against be issued for an explanation or
actual loss, . . . such loss to oc- definition of its terms. Applying
cur through the insolvency of debtors the usual rules for the interpretation
as herein defined . . . and to be and construction of such contracts,
proven under the terms, conditions it would appear that the amount of
and limitations of this policy.' Even losses, which plaintiff was required
in the policy itself, therefore, the to state, were those which it has
term 'loss' is not the equivalent of, actually to its knowledge sustained
lur is it lixed in amount by, the during the specified periods. Of
actual indebtedness of a debtor of course plaintiff warranted the truth
the insured at the time the insol- of the statement made. But, while a
vency occurs. The word 'loss,' there- warranty must be strictly true, its
fore," within the terms of the policy scope will not be extended beyond
itself, would seem to mean the net the fair import of its language."
loss due to insolvency of the debtor And in concluding the court also de-
,itu r application on the claim of such clared that "In support of the judg-
salvage as had been made thereon ment we may assume that the court
up to the date of adjustment of loss, found that this statement was made
In this view of the meaning of the by plaintiff in good faith and with-
unnl 'loss,' as used in the applica- out attempt to evade, conceal, or
lion, it would be incumbent upon de- mislead. There is no evidence of
Cendant, in establishing its defense any such purpose; nor can any such
of breach of warranty, to show that inference be properly drawn. That
plaintiff should have known that there the form of application was prepared
would probably be an ultimate loss by defendant with a view of differ-
upon the Edwards' account at the entiating the required statement of
time of making its application for actual losses incurred by the appli-
insurance. cant from probable losses from doubt-
"But even conceding that an in- ful accounts appears in the form it-
solvency of a debtor is synonymous self."
with a loss covered by the policy as Reliance was also placed by the
the words are used therein, it by no court in said reversed case upon the
means follows that the word 'losses' point of questions unanswered or
3284
PARTICULAR REPRESENTATIONS, ETC. § 2002a
Under another New York decision three warranties were made
in the application the firsl of which was thai the "outstandings"
amounted to aboul a certain sum, when in fad they were aboul
one eighth more than the amounl so specified. The courl instruct-
ed the jury, as a matter of law, that this was not a misrepresenta-
tion and the correctness of that ruling was ool contested on appeal.
The second warranty was that the amount of outstandings pasl due
amounted to a small proportion; and the third warranty was that
there were no outstandings under extension. As to said last war-
ranties it was claimed thai they were untrue and. therefore, there
was a breach. It appeared that the total outstandings, which as
above stated were about one eighth more than represented, in-
cluded open accounts, which were past due, and notes which were
either renewal notes or renewals of renewal notes for unpaid ac-
counts, all of which accounts were pass due, but the notes were not
due; that is. as deduced by the court, about two thirds of the out-
standings were pasl due and more than one half were under ex-
tension. The court below ruled that the evidence presented a
question of fact upon the point whether or not there was a breach of
warranty with respect to the amount of outstandings past due. and
the amount of outstandings under extension. It was held, however,
reversing the lower court, that, as a matter of law, there was a
breach of these warranties and accordingly a verdict was ordered
directed for defendant. It was further decided that a claim that de-
fendant was estopped to assert a breach of said warranties, by reason
of its agent's act-, would not be sustained.20 We will conclude the
presentation of this point by the consideration of a Federal ca<e
partially answered, see upon these paid accounts, which accounts were
points, §§ 1870, 1969 et seq. herein, past due, hut the notes were not due.
'Ihut failure to state that petition The above was the deduction made
filed for dissolution of partnership as to the tacts by the opinion, but
debtor is not such a fraud as to in- under the dissenting opinion ••The
n .'( wal credit guaranty bills receivable amounted to $270,000.
bond. Sec American Credit Indem- Although many of these were renew-
nity Co. v. Wimpfheimer, 43 X. Y. als of former notes, none of them
Supp. 909, 11 A.pp. Div. 498. were due at the time of the applica-
20 Edward C. Moore Co. v. Ameri- tion. The accounts receivable
can Credit Indemnity Co. 156 N. Y. amounted to $95,000. Of these $58,-
Supp. 737, 170 App. Div. 660, 47 000 were past due at the time the
Ins. L. J. 330. Two judges dissented, application was made. The court
The "outstandings'' were represented properly left to the jury to say
to be about $325,000. They were whether, within the meaning of the
about $365,000. They included $46,- application, $58,000 was more than a
055.45 in open accounts which were small proportion of $365,000 actually
past due. and notes for $191,357. 22 outstanding." — Smith. .).. dissenting
which were either renewal notes or and Dowling, J., concurring therein,
renewals of renewal notes for un-
3285
§ 2002a JOYCE ON INSURANCE
which has beeD sometimes cited as determinative of the question
whether a statemenl as to losses constitutes a representation or a
warranty. The entire decision in said case covered the points
thai such a bond was a contrad of insurance and nol one of surety-
ship and was to be construed againsl insurer in case of ambiguity;
and this rule of interpretation was applied to the policy clause:
"This contrad is issued on the hasis lli.it the yearly sales and <\i'-
liveries of the indemnified are between $1.X00.0<><> and $2,500,000,
construed in connection with insurer's agreemenl to purchase from
insured "an amounl not exceeding fifteen thousand dollars of un-
collectable debts owing for merchandise -old and delivered in the
regular course of business" during the term of one year "on the
total gross -ales and deliveries made during -aid period in excess of
one half of one per cent.-'' Accordingly it was declared and held
that, under the rule above stated as to construction, the ambiguous
sentence was to he given the meaning which insurer had reason
to suppose insured would attach to it : and that was. such a meaning
as would not operate to contradict or modify to his disadvantage
the precise and unambiguous promise that the initial loss should
be one half of one per cenl of the total gross -ale- and deliveries
for the policy term. or. as was expressed in the application the in-
demnified stood one half of one per cent ; also that said clause did
not mean that the uross sales as the hasis of computation of one
half of one per cent must amount to $1,800,000, for if such acon-
struction was given it would follow that the business done should
not exceed $2,500,000, which would construe into the policy a most
extraordinary agreement. Ensured was therefore held entitled to
recover its losses, not in exec-- of the limited sum of $15,000, in
excess of one half of one per cent on their actual total -ales and
deliveries during the policy term. In the course of discussion the
court stated that "The representations of the insured as to what his
pasl sales and losses had been were already made a material part
of the contract, by a general condition providing that 'fraud, con-
cealment, or misrepresentation in obtaining this contract .
shall render this contrad absolutely void:'" hut this was only in
connection with the claim of defendant that assured had stipulated
that his total gross sales and deliveries for the policy term should
lie al least $1,800,000, and thai the one half of one per cent of
initial loss should he calculated at least on that sum. Beyond this
point the clause as to fraud, misrepresentation, etc., was not dis-
cussed other than as we have above stated.1
1 Tebbetts v. Mercantile Credit (mem.) 89 Fed. 1018, 32 C. C. A.
Guarantee Co. 73 Fed. 95, 19 C. 609.
C. A. 281, 38 U. S. App. 451, aff'd
32SG
PA UTICULAR REPRESENTATIONS, ETC. § 2002a
(f) Examination <>i accounts, etc.: what is sufficient compliance.
An examination and reporl by experl accountants are aol required
by a stipulation thai the books and accounts of the employee shall
be examined from time to time in the regular course of business ;a
Dor does a provision in the application for a cashier's bond thai his
accounts shall be examined monthly by the auditing committee
of the bank directors call for an examination by a committee of ex-
pert accountants.8 [nsurer is also charged with knowledge of the
intelligence and business capacity of the officers of an insured bank
in applying the requiremenl thai the books and accounts of as-
sured's cashier shall be examined from time to time in the regular
course of business by the bank's officers and cannot, therefore, re-
quire an examination and report by expert accountants.4 So ques-
tions and answers as to monthly examinations, auditing monthly
balances, and careful scrutiny of accounts, in case where the fidelity
is insured of a bookkeeper having charge of daily cash receipts, do
nut mean such an exhaustive examination as would discover the
existence of the slightest discrepancies or irregularities, however
cunningly concealed, but it is sufficienl if there is a general su-
pervision by insured's officers, such as is usual and customary, over
the business of the bookkeeper and that a watch is kept on him as in
case of other employees and also that there is a monthly examina-
tion of the hooks and accounts and that reports are made by the
latter; 5 nor is literal compliance with a statement which is merely
a promissory representation required, especially so where assurer
had knowledge at the time that an expert examination of the
cashier's accounts could not he made; and this applies to a
where it was represented that account would be made twice a year
to a hank examiner and four times a year to a board of directors.6
So statements as to the employee, a cashier receiving remittances
from customers and the frequency with which statements of bal-
ances are rendered customers are complied with where such required
acts are done by another employee, as suggested in the application
for the bond, and the required statements are sent, in the manner in
which and according to which the corporation's business is cus-
2 United Slates Fidelity & Guar- Simpson Co. 30 Okla. 116, 120 Par.
anty Co. v. Boley Bank & Trust Co. 936. See also Guarantee Co. of
4i! okla. 819, 144 Pae. 615. North America v. Mechanics Savings
3 American Bonding Co. v. Mor- Bank & Trust Co. 80 Fed. 7(ili. 26
row, 80 Ark. 49, 117 Am. St. Rep. C. C. A. 14(i. 4- V . S. A.pp. 91,
72, 96 S. W. 613. rehearing denied 82 Fed. 545, 2i
'* United States Fidelity & Guar- C. C. A. 373.
anty Co. v. Boley, 43 Okla. 819, 144 6 United States Fidelity & Guar-
l>a)". (J15 anty Co. v. Citizens National Bank,
6 Southern Surety Co. v. Tyler & 147 Ky. 285, 143 S. W. 997.
3287
§ 2002a JOYCE ON INSURANCE
tomarily transacted. There is also a sufficient compliance with
other suggestions, questions and answers as to following certain
practices regarding the deposit of moneys and checks, the making
(if disbursements, and indorsements for deposits where the era-
ployer's regulations are followed and reasonable diligence is exer-
cised in the premises.7 Nor does the fact that a thorough and criti-
cal examination would uncover the wrongdoing of an employee
aid assurer where such discovery would not have resulted from an
ordinarily careful examination.8 So, where an "employer's state-
ment" warranted that the books of a bookkeeper authorized to
handle daily cash receipts of a mercantile establishment, would
be balanced monthly and the accounts watched and looked after,
compliance therewith is sufficient where there is a monthly ex-
amination of the statements, reports, and books by insured's of-
ficers even though there was not a complete and thorough check
or audit of the books which would have disclosed a defalcation;
and in such case there is no such failure in the performance of in-
sured's obligation as releases the assurer.9 If an examination of a
cashier's books is required to be made monthly and it is also stipu-
lated as to funds and securities that there shall be a daily and
monthly accounting, there is a sufficient compliance where said
1 looks are examined monthly, even though it does not appear that
such examination was made on the first day of each month, and
it is also shown that the receipts, ledger, and hanking account were
subjected to a daily examination, and that assured had required the
cashier to submit once a month a complete statement of its financial
condition, and the proof further shows that no discrepancies were
ever found.10 And a representation that accounts would be ex-
amined monthly by directors is not a warranty but a representa-
tion under the Kentucky statute so that only a substantial com-
pliance is required although literal compliance would be necessary
in case of warranties; and only ordinary care is required; and the
fact that the bank is a country bank must be considered.11 So in
determining whether assured has used due care in discovering pecu-
lations of its cashier, it has been held that the facts will be con-
7 Plienix Ins. Co. of Brooklyn, N. Simpson Co. 30 Okla. 116, 120 Pac.
Y. v. Guarantee Co. of North Ameri- 936.
ca, 115 Fed. 964, 53 C. C. A. 360, 10Prosser Power Co. v. United
certiorari denied 187 U. S. 640, 47 States Fidelity & Guaranty Co. 73
L. ed. 345, 23 Sup. Ct. 841. Wash. 304, 132 Pac. 48.
* First National Bank v. United n United Stales Fidelity & Guar-
States Fidelity & Guaranty Co. 150 anty Co. v. Foster Deposit Bank,
Wis. 601, 137 N. W. 742, 41 Ins. 148 Ky. 776, 147 S. W. 406; Ky.
L. J. 1803. Stat. sec. 639.
9 Southern Surety Co. v. Tyler &
3288
PARTICULAR REPRESENTATIONS. 1 . 1 • . § 2002a
sidered that those in charge of the insured bank were country bank
oflicials with but little, if any, experience in banking.12
(g) Where insurer's agent verifies statements. Where insurer
without relying upon the employee's statements, made in answer
to questions in the applications, issued the bond only after Its agent,
employed by it for that purpose, had verified said statements as to
examination and correctness of the accounts, and the correctne>- of
the list of certain securities in possession of the employee, it was
held that recovery was not precluded by defalcations of the em-
ployee after the policy was issuedj even though the answers were
untrue, for they did not increase the risk or contribute to the loss,
and were not made with intent to deceive, by reason of its agents
verification of said statements.18
(h) Examination of accounts, etc.: what is not sufficient com-
pliance. It is incumbent upon an applicant for a fidelity
guaranty policy to ascertain whether the hooks and accounts
of its employee are correct, and if he falsely represents the
true condition of the accounts and said fact is material, the
contract is avoided.14 Nor can there be any recovery where a
proper examination would have shown that the facts were untrue in
a statement by the employer that the employee's accounts had
been examined and found correct ; 15 and if only a slight degree of
care would have discovered the falsity of the statements, and no
personal investigation is made, but reliance is placed upon the
employee's statements, a fraud is perpetrated upon insurer whereby
the policy is avoided.16 So where, if any examination whatever
had heen made of the employee's books, the employer's answers to
specific questions would have been found to be untrue, as said books
upon their face showed the defalcations, there can he no recovery
where the statements are of matters material to the risk.17 Under
another decision where no effort was made to comply with a war-
ranty to check up at stated periods remittances of a hank em-
12 Employer's Liability Assur. Williams, 58 Wash. 64, 137 Am. St.
Corp. v. Stanley Deposit 'Bank, 140 Rep. 1041, 107 Pac. 1040.
Kv. 735, 14!) S. W. 1025, 41 Ins. 15 Glidden v. United States Fidelity
L. J. 1901; i 'ni ted States Fidelity & & Guaranty Co. L98 Mass. 10
Guaranty Co. v. Foster Deposit N. E. 144, 38 Ins. L. J. lo.">. See
Bank, 148 Kv. 776, 147 S. W. 406. Guarantee Co. of North America v.
13 Whinfield v. Massachusetts Firsl National Bank, 95 Va. 480, 28
Bonding Ins. Co. 162 Wis. 1, 154 S. E. 900.
X. W. 032; Stat. 1913, sec. 4202m. "Bank of Hardensburg & Trusl
But compare Edward C. Moore Co. Co. v. American Bonding Co. of Bait.
v. American Credit Indemnity Co. 153 Ky. 579, 156 S. W. 394.
156 X. V. Supp. 737. 170 App. Div. "American Bonding & Trust Co.
660, 47 Ins. L. J. 330. of Bait. v. Burke, 36 Colo. 49, 85
14 Poultry Producers' Union v. Pac. 092, 35 Ins. L. J. 642.
:i2.sii
§ 2002a JOYCE OX INSURANCE
ployee, engaged as time check buyer, or to ascertain in whose pos-
session money was. which was delivered to said employee to buy
checks, or whether it was on hand or not, and it also appears that
had said employee been required to account, no loss would have
occurred, there can be no recovery.18 And the failure to make only
a cursory examination or investigation, or to properly verify ac-
counts of a treasurer of a miner's union as required by the stipula-
tions of the bond, releases an insurer from liability.19 So where
n appears that no examination at all was made of the books and
accounts, and that a certificate that it had been made was not justi-
fied, there is such a clear and absolute noncompliance with the re-
quiremenl that such examination be made that a recovery on the
bond is precluded, especially so where the said certificate was made
by express stipulation "to constitute an essential part and basis of
the contract."20
Again, there i- a noncompliance witli conditions and statements
as to comparison and verification of a salesman's accounts at speci-
fied time.- where no requirements as to times of accounting are im-
posed upon the employee by the assured, and no attempt made by
the Latter to compare or verify the former's accounts at any time.
and recovery is, therefore, precluded.1 So a failure to check up a
salesman's accounts and to require daily reports and statements in
accordance with assured's statements, avoids the policy in the ab-
sence of waiver.8 If an application for an officer's fidelity bond
contains a statement that his accounts shall he examined and veri-
lied by his employer quarterly, and that such statement shall be
considered as a warranty, and the bond provides that the guarantor
shall he notified immediately upon discovering any fraud or dis-
honesty on the part of such officer, the verification of such officer's
accounts as required by his bond is not satisfied by accepting as
true; the amount which he has in bank, as shown by his deposit
hook, without any investigation to ascertain from the hank whether
such hook represents the true state of his account, and in case of
the officer's defalcation the guarantor is not Liable on the hond.3
18 United States Fidelity & Guar- & Trust Co. of Bait. 116 Fed. 449,
anty Co. v. Bank of Batesville, 87 54 C. C. A. 85, 32 Ins. L. J. 22,
Ark. 348, 112 S. W. !>57. certiorari denied 187 V. S. 644, 47
19 Cited States Fidelity & Guar- L. ed. 346, 23 Sup. Ct. 844.
anty <'<>. v. Downey, 38 Colo. 414, 1Weiderv. Union Surety & Guar-
lil L.R.A.(N.S.) 323 (annotated on anty Co. 8(i N. Y. Supp. 105, 42
what constitutes ;i verification of ac- Misc. 4!)!'.
counts as required by fidelity bond 2 Marion Iron & Brass Bed Co.
or contract) L20 Am'. Si. Rep. L28, v. Empire Stale Surety Co. 52 Ind.
88 Bar. 451, 36 Ins. L. J. 279. App. 480, 100 N. E. 882.
20 Carstairs v. American Bonding 3 United States Fidelity & Guar-
3290
PARTICULAR RFPKFSFXTATinNS, KTC. § 2002a
And the surety is released and certificates for renewals stating that
n bookkeeper's accounts had been examined and found correct arc
falsified where effective audits or a proper examination and scrutiny
would have discovered said employee's fraudulenl practices and er-
rors.4 Again, where an employer has aotice thai the books of his
employee show that he ha- deposited in hank more money than
has been taken in. the employer is charged with the duty of ascer-
taining the true state of the I ks, before making a statement in
his application for indemnity insurance thai on a certain date they
were found correct.5 In another case where an insurance company
issued a policy wherein it guaranteed an employer against embez-
zlenient by one of its servants, and the application stated thai the
servant's accounts would he settled monthly; and account- would
he -cut direct to customers every three months, and by the ~i i] >u-
Lations of the policy said statements were made the basis of the
contract, it was held that a failure to comply with the representa-
tions as stipulated prevented a recovery under the policy.6
(i) Other instances where recovery precluded. — In a case of a
policy of fidelity insurance, false representations which induced the
contract wen1 made as to the amount of moneys intrusted to the
care of the party whose fidelity was guaranteed and also as to the
length of time moneys paid into his hands were retained and the
frequency of accounting, and the falsity of the representation- were
held to avoid the contract.7 So a statement, known by the assist-
ant cashier of a hank to he untrue when he made it. that the presi-
dent, whose fidelity was insured was not indebted to the hank,
avoids the policy.8 Recovery on a bond is also precluded by false
statements in an application therefor as to a sale-man and collie-
tor's salary and weekly statements made to customers.9 80 in an-
nul v Co. v. Downey, 38 Colo. 414, 10 482, 34 L. J. C. P. 131; Small v.
L.R.A.(N.S.) 323, L20 Am. St. Rep. Currie, 5 De G. & G. 141. 23 1.. .1.
12S. SS I'ac 451, 30 Ins. L. J. 27!). Ch. ,40; Hamilton v. Watson, 12
* National Bank of Tarentum v. Clark & F. 109.
Equitable Trust Co. 223 Pa. 328, 72 ' Towle v. National Guardian
Ail 7iH Assur. Co. 30 L. J. Ch. 900, 5 1.. I\
5 Poultry Producers' Union v. Wil- R. 3. 10 W. R. 40.
liaius, 58 Wash. 04, 137 Am. St. Rep. 8 Willoughby v. Fidelity cv_ Deposit
1H41. ie7 l'ac 1040. Co. of M.l. 10 Okla. 540. i L.R.A.
BHaworth & Co. v. Sickness & (N.S.) 548. 85 Pac. 713, aff'd in
Ac.-i.lent Assur. Assn., Lim. 28 Sc. Cherry v. Fidelity & Deposit Co.
L. R. (Sc. Ct. Sess. p. 563), 394. (mem.) 205 V. S. 537, 51 L. ed. 020.
Towle v. National Guardian Assur. 27 Sup. Ct. 790.
Soc. 7 Jur. N. S. Hot). 30 L. 1. 9 Krey Packing Co. v. United
Ch 0011. See Lee v. Jones, 14 Com. States Fidelity & Guaranty Co. 189
B. N. S. 3S0, aff'd 17 C. B. (N. S.) Mo. App. 591, 175 S. W. 322.
3291
§ 2002a JOYCE ON INSURANCE
other case at the time the bond insuring the honesty of a clerk
was issued he was short in his accounts, but the tact was unknown-
to assured. The latter had, shortly prior to issuing said bond,
made certain statements in writing including the statement that
the employee's accounts had been found correct in every respect
and that he was not in arrears, and a proper examination of his
accounts would have disclosed the defalcation. It was held thai as
said bond was issued upon the faith of said representations and
they were material a verdict was rightly ordered in favor of the
defendant.10 If, under a contract of employment, the employee
agrees to report each week, the full amounl of all business trans-
acted by him, a surety on his bond to the effect that he will faith-
fully perform his duties is released by the fact that the employer
relieves him from making weekly reports.*1
(j) Extent to ivhich assured under fidelity bonds is bound by
shit, ments, etc., of its officers or agents: extent of power to bind. —
Under a Pennsylvania decision the cashier's act in making state-
ments in a certificate for renewal, that the accounts of a bank's
bookkeeper had been examined and found correct, etc., is binding
upon the principal, especially so where the additional facts ap-
peared that said cashier had, in behalf of the bank, presented its
claim for loss, occasioned by the bookkeeper's defalcation, to the
surety; and the directors had. through long usage, permitted said
cashier to act without their express authority in matters in which
they might lawfully authorize him to act.12 It is also decided in
Oklahoma that a receiver of a bank cannot he heard, in an action
against a surety company on the bond of the defaulting presidenl
of the bank, to repudiate or question the authority of the assistant
cashier to hind the bank by his statements and representations
concerning the conduct, duties, employment, and accounts of the
president, where the bond was issued by the surety company and
accepted by the bank upon the faith of such statements and repre-
sentations.13 The Federal Supreme Court has likewise decided
that a bank is chargeable with and responsible for the representa-
tions of its president, that he has not known or heard anything
10Glidden v. United States Fidel- (N.S.) 548 (annotated en right of
ity & Guaranty Co. 198 Mass. 109, beneficiary in bead insuring fidelity
84 N. E. 144, 38 Ins. L. J. 105. of officer or employee to repudiate
11 Singer Manufacturing Co. v. authority of person who made the
Boyette, 71 Ark. 600, L09 Am. St. representations upon which the bond
Hop. nil. 86 S. W. 673. was issued) 85 Pac. 713, aff'd in
12 National Bank of Tarentum v. Cherry v. Fidelity & Deposit Co. 205
Equitable Trust Co. of Pittsburg, U. S. 537, 51 L. ed. 920, 27 Sup.
223 I'a. 328, 72 Atl. 794. Ct. 79 (which also affirmed the next
l8Willoughby v. Fidelity & De- two cases under this subdivision, viz.
posit Co. 16 Okla. 546, 7 L.R.A. —183 U. S. 402, and 180 U. S. 342).
3292
PARTICULAR REPRESENTATIONS, ETC. § 2002a
unfavorable to its employee's habits, etc., when said statement is
untrue in that the president lias knowledge that the employee is
speculating and also knows that insurer regards such act as unfav-
orable habits.14 In another case in the same court an action was
brought by a receiver of a national bank upon an indemnity bond.
The main question involved was, whether notice by the receiver of
default of a bank officer whose fidelity was insured, was given with-
in a sufficiently reasonable time. In so far, however, as the case
is relevant to the question here under consideration it may be stated
that said bank officer was first vice president and subsequently
president. Before renewing the bond the cashier in a letter said in
answer to one written to the bank by the insurer that said bank of-
ficial had up to that time performed his duties in an acceptable and
satisfactory manner and that the writer knew of no reason why the
bond should not be renewed. Both said letters were offered in evi-
dence but were excluded, and this was claimed to be error on the
ground that the evidence failed to show that the said cashier had any
authority in the premises to write the letter containing such state-
ments. It was further contended that the court committed error
in refusing to admit circumstantial evidence showing that the
board of directors had selected the insurer, paid the premium and
that the cashier's acts were for the bank's benefit and were approved
by the said board. This contention was not sustained, but on the
contrary it was declared by the court that it was a reasonable pre-
sumption that the letter addressed to the bank was received by it
and that the cashier's reply thereto was authorized; that the cer-
tificate was made in the ordinary course of the bank's business by
an agent dealing in its behalf with the surety company and was
therefore an official act of the principal which it ought not to be
heard to deny while seeking to avail itself of the benefit of the
stipulations agreed to be performed by the surety. While, how-
ever, the error in excluding the evidence was pointed out, it was
held nonprejudicial in that the very question which the jury would
have been called upon to determine if the evidence had been re-
ceived, was fully submitted to them and was negatived by their
verdict.15 The same point was also involved in a decision in the
Federal Circuit Court of Appeals. It appeared therein that the
14 Guarantee Co. of North America America v. Mechanics Savings Bank
v. Mechanics Savings Bank & Trust & Trust Co. 80 Fed. 766, 26 C. C. A.
Co. 183 U. S. 402, 46 L. ed. 253, 146, 47 U. S. App. 91, rehearing
22 Sup. Ct. 124, rev'g 100 Fed. 559, denied 82 Fed. 545, 27 C. C. A. 3/3.
40 C. C. A. 542. See Warren De- 15 Fidelitv & Deposit Co. v. Court-
posit Bank v. Fidelity & Deposit ney, 186 U. S. 342, 40 L. ed. 1193,
Co. of Md. 116 Ky. 50, 74 S. W. 111. 22 Sup. Ct. 833.
Compare Guarantee Co. of North
3293
§ 2002a JOYCE ON INSURANCE
business of a foreign corporation was in charge of a general mana-
ger, and that the board of trustees by resolution directed that said
manager and an assistant treasurer procure bonds at the com-
pany's expense. The policy was procured and the premiums paid
by its authority. The hond was i--ucd upOn the statements made
by the manager. Renewals were issued upon statements signed by
the auditor that the accounts of the employee had been audited and
found correel and that at thai date he was qoI in default. Both
the original statements of the manager and that of the auditor were
signed in the aame and on behalf of the corporation. The auditor's
statemenl was furnished, upon request, by insured. Upon a ques-
tion of admissibility of evidence of the last statement it was held
properly admitted, and also that the corporation was hound there-
by.16
In another ease, however, a bank cashier applied for a bond and
his application was accompanied by a. statement over the signature
of the bank's president. It did not appear that any special author-
ity was vested in said officer to make said statement, nor that any
of the directors had any actual or implied knowledge thereof, until
after suit was brought on the bond. The bond contained no refer-
ence to the written application or the employer's statement. It was
deeided that said statement was unauthorized and constituted no
defense.17 Again, it is held that a, hond for the fidelity of a bank
cashier is not void by reason of fraudulent representations and con-
cealment of the president of the hank where the latter has not
authorized said officer to give and has no knowledge that he has
given any certificate as to the efficiency, fidelity or integrity of said
cashier; nor is such president entitled by virtue of his office to
sign or give any such certificate or to make any representations in
the matter, where it is incumbent upon the employee to obtain an
acceptable bond and it is no part of the bank's duty, nor that of
its president without the latter's authority to procure the bond.18
It is further decided that where by statute the hoard of trustees is
the controlling and governing body of the corporation, it must,
in order that the alleged knowledge of the president as to defalca-
tions or knowledge of the falsity of statements as to arrears he im-
puted to the corporation, affirmatively appear that it was coiu-
16Issaquah Coal Co. v. United 170 U. S. 133, 42 L. ed. 977, 18
States Fidelity & Guaranty Co. 126 Sup. Ct. 552, 2!) las. L. J. 3, fol-
Fed. 89, 61 C. C. A. 145, 33 Ins. lowed in United States Fidelity &
L. J. 389. Guaranty Co. v. Muir, 115 Fed. 264,
"United States Fidelity & Guar- 53 C. C. A. 5(i, both cases are , V
anty Co. v. Muir, 115 Fed. 264, 53 tinguished in Israquah Coal Co. v.
C. C. A. 56. United States Fidelity & Guaranty
"American Surety Co. v. Paulv, Co. 126 Fed. 89, 61 C. C. A. 145,
3294
PARTICULAR REPRESENTATIONS, ETC. § 2002a
municated or brought home to said board; but a judgment for
plaintiff below was affirmed against assurer.19
(k) Effect of knowledge of assured or its officers: misrepresen-
tations, etc. — While knowledge of assured or of its officers, as to the
existence of facts which would render their statement- untrue is
important, nevertheless the effect of such knowledge depends upon
whether or not the statement is a representation and material, or
whether it is an absolute or qualified warranty. Therefore: (a) If
such statements upon renewal are material and false to the knowl-
edge of said officers recovery is precluded: (b) If, however, said
officers had knowledge of acts which would tend to falsify their
statements, and if such statements were based upon an honest
belief then said acts were mere errors of judgment and not dis-
honest, as in fact they subsequently proved to be, and such belief
is evidenced by the retention of said employee, then the statements
will not be held to have been such knowingly and fraudulently
made misrepresentations as will avoid the policy: (c) If said
representations are warranties, then the rule that if the warranty
is falsified the contract is avoided will apply and it is material and
the point of knowledge is immaterial : (d) If the warranty is quali-
fied by the words "so far as the employer has knowledge7' the ques-
tion whether the officers, whose knowledge of dishonest acts of the
employee was required by the bond in order to avoid it had that
knowledge, or ought to have had it under the circumstances is for
the jury: and (e) it must be shown that they had such knowledge
when the bond was executed: (f) the above applies to statements
33 Ins. L. J. 389, which is ruled by a matter of law, and, unless restricted
the decision in Fidelity & Deposit or enlarged they and they only can
Co. v. Courtney, 186 U. S. 342, 40 be performed by him by virtue of his
L. ed. 1193, 22 Sup. Ct. 833, even appointment. Under the circum-
though said case differed as to cer- stances of this case it is plain thai it
tain facts. The Pauly case is also could not be properly held that the
cited in Taylor v. Commercial Bank, defendant's cashier was acting with-
174 N. Y. 181, 185, 62 L.R.A. 785, in the scope of his employment in
95 Am. St. Rep. 564, 66 N. E. 726, making the representation complained
where the court, per Maden, J., says: of." This case, however, was one
"The duties of a cashier are strictly where it was held that the cashier
executive. He is properly the execu- of a bank had no authority by vir-
tive agent of the board of directors, tue of his office to bind it by rep-
as such to carry out what it de- resentations as to the solvency of
vises as to the management of the customers.
business of the bank. There are 19 American Bonding Co. of Bait,
certain functions which by long and v. Spokane Building & Loan Assoc,
universal usage, have come to be re- 130 Fed. 737, 65 C. C. A. 121, 33
cognized as belonging to the office Ins. L. J. 835; 1 Bal. Ann. Code &
of cashier. They are declared to be Stat. sec. 4255.
inherent in the office or position as
3295
§ 2002a JOYCE ON INSURANCE
thai the employee was honest, had faithfully and satisfactorily
performed his dirties, had given satisfaction in his personal con-
dud and had kepi and rendered his accounts correctly and with-
out default,20
(1) Qualified statements: knowledge and belief: misrepresenta-
tions, etc. — An employer's knowledge as to previous defalcations
is essentia] to the avoidance of a bond stipulating that it is issued
on the express understanding that the employee has not, within
the knowledge of the employer, at any former time been a de-
faulter; and this applies even though it is also provided by a pre-
ceding clause that if the employer's within statements "heretofore
referred to shall he found in any respect untrue this bond shall be
void."1 And where the president states that there has been an
examination of the cashier's accounts, that they have been found
correel in every respect and that to the former's knowledge said
cashier was not in arrears or default, recovery is not precluded
by. reason of arrears of which the president had no knowledge,
even though the bond makes such statements warranties.2
mi) Representations, etc.: good faith: fraud: mistake, ignor-
ance,, or negligi nee. — If assured, after making the usual and cus-
tomary examination of its bookkeeper's books, fails to discover
any defalcation, and so answers in good faith that there is not and
has not been any shortage, the surety is not discharged, where no
false representation or warranty has been made and said state-
ment is accepted by insurer without request for further or more
definite information.3 So where assured at the time of making
his certificate as to examination of accounts had no knowledge or
suspicion of an existing defalcation of the employee, and had no
20 ."Etna Indemnity Co. v. Farm- When the stipulated materiality of
ers' National Bank of Boyertown, Pa. statements is qualified; warranties
169 Fed. 737, 95 C. C. A. 1G9. thereby construed as representations,
1Legler v. United States Fidelity see § 1915 herein.
& Guaranty Co. 88 Ohio St. 336, 103 8 Equitable Surely Co. v. Bank of
N. E. 897. See also American Bond- Hazen, 121 Ark. 361, 181 S. W. 279.
ing Co. v. Spokane Building & Loan 3 Southern Surety Co. v. Tyler &
Soc. L30 K«d. 737, 65 C. C. A. 121, Simpson Co. 30 Okla. 116, 120 Pae.
33 Ins. L. J. 835. See United States 936.
Fidelity & Guaranty Co. v. Blackly, As to inquiries, see §§ 1869 et seq.
Burst & Co. 117 Ky. 127, 77 S. W. (concealment); § lull (representa-
709. tions) ; § 1960 (warranties; partial
As to qualified statements or rep- answers) herein.
resent a l ions; best of assured's knowl- As to representations through mis-
edge and belief; other qualifications; take, ignorance or negligence, etc.,
see VS 1915 et seq. herein. see §§ 1902, 1903 herein.
That warranty may he qualified As to warranty; mistake; want of
by other words in contract, see § knowledge of untruth; fraud; good
1965 herein. or bad faith, see § 1964 herein.
3296
PARTICULAR REPRESENTATIONS, ETC. § 2002a
means of discovering the same except by experts, and the certificate
appears to have been made in good faith and without any fault
on assured's part, he will not be held to the obligation imposed by
a warranty, but his statements will be held representations only.4
Again, if the employer before making his answers uses proper care
to acquaint himself with facts inquired about and. believing in
good faith what he says, furnishes all the knowledge or informa-
tion in his possession bearing upon the subject inquired about, he
thereby satisfies what is required of him, for his position is not
that of insuring the insurer against the latter's own undertaking,
nor is he insuring his employee, but is merely seeking indemnity
against certain acts of his employee as specified in the contract of
guaranty.5 And even though the bond states that the represen-
tations in an "Employers' declaration" shall constitute the basis
of the contract, they will not be considered warranties where said
bond does not also state that they are warranties: and where they
are made in good faith and there is an honest basis for making
them, still they are not only not warranties, but even though
found to be incorrect will not be held to be of such a material and
essential nature that a forfeiture will result from their being in-
correct; and this covers statements in said declaration represent-
ing the condition and the character and accounts as then under-
stood and the character and habits of its employee.6
But it is also decided that if, under the statute and the stipula-
tions of the bond statements of the employer in reply to specific
inquiries concerning arrears, indebtedness, etc., of the employee
are held to constitute warranties voiding the contract ab initio
when false, it is immaterial whether or not the insured's answers
were made in good faith under an honest belief that they were
true and without any negligence ; for where such statements are
warranties the rule as to strict compliance must govern.7 Nor
will the claim be sustained that all requirements are satislied if the
examination of the books and accounts was such as insured was
in the habit of making, and was made in good faith, and the cer-
tificate signed in good faith, where it appears that no examination
at all was made of said books and accounts and that there was a
clear and absolute noncompliance with the requirements as to
4 Remington v. Fidelity & Deposit L.R.A.(N.S.) 676, 117 S. W. 537,
Co. 27 Wash. 429, 67 Pae. 989. 38 Ins. L. J. 722.
5 Employers' Liability Assur. 7 Wolverine Brass Works v. Pa-
Corp. v. Stanley Deposit Bank, 149 cine Coast Casualty Co. 26 Cal. App.
Ky. 735, 149 S. W. 1025, 41 Ins. 183, 146 Pac. 184, 45 Ins. L. J. 551;
L. J. 1901. Cal. Civ. Code, see. 2612. See §§
6 Title Guaranty & Surety Co. v. 1970 et seq. herein.
Bank of Fulton/ 89 Ark. ' 471, 33
Joyce Ins. Vol. III.— 207. 3297
§ 2002a JOYCE ON INSURANCE
said examination. It was declared, however, in the case so hold-
in- thai it' an examination has been made of said employee's ac-
counts the employer would probably not have been bound to do
more than act in this regard with reasonable diligence and good
faith.8
It is held in Arkansas that in case a statement is incorrect
through nicrc mistake it does not constitute a warranty, and the
contract is not avoided although a clause in the bond requires a
statement from the employer us to the habits and accounts of the
employee whose fidelity is to be insured, and provide thai said
mint shall constitute part of, and the basis and consideration
of the contract.9 But it is also declared that if statements of the
employer in writing induced issuing the bond and arc material
to the risk, in thai they bear directly upon its nature and extern.
and they are in fact false, so thai the risk is increased, a recovery
is precluded, and in such case, even though assured is ignoranl in
the matter of accounts, neither his lack of education and defi-
ciencies as a bookkeeper, nor the fad thai his false statements
were innocently made, or he was honestly mistaken, will aid him
where, notwithstanding his statement that he had examined his
employee's accounts and found them correct, etc., a proper or even
a cursory examination would have discovered the wrongful acts of
said employee.10
Under a Rhode Island decision the action was upon a bond
issued to a United Workman's order insuring or guarantying the
honesty, etc., of certain officers, including its < rrand Recorder. I Ipon
application for renewal representations were made that his ac-
counts had been examined and found correct in every respect;
that he had always faithfully and punctually accounted for all
moneys and property; that he had always had proper securities
and funds on hand to balance his accounts; that there was no
shortage due; that he never had been short in his accounts; and
thai his books and accounts would be audited and verified with
funds in hand or in hank at least every two months. As a fact
said recorder's defalcations had extended over a number of years
and at the time these statements were made they had reached a
large amount, pari of which was within the period covered by the
bond. The application made the answers warranties and stipu-
lated thai they should form the basis of and form a part of the
8 Carstairs v. American Bonding Bank of Fulton, 89 Ark. 471, 33
& Trust Co. of Bait. L16 Fed. 44!), L.R.A.(N.S.) 67Gn, 117 S. W 537.
54 C. C. A. 86, :52 Ins. L. J. 22, » Glidden v. United States Fidelity
orari denied 181 V. S. G44, 47 & Guaranty Co. L98 Mass. L09, 84
J., ed. 346, 23 Sup. Ct. 844. X. E. 143,* 38 Ins. L. J. 105.
9 Tide Guaranty & Surety Co. v.
:?2!I8
PARTICULAR REPRESENTATIONS, ETC. § 2002a
bond or any continuation thereof. Said statements were by said
bond made one of its considerations, and they were also therein
warranted to be true. It was held that such statements were war-
ranties, that there was a breach thereof and that a verdict for
insurer should be sustained notwithstanding the contention thai
the said false statements did not arise from any intentional fraud
or deceit but simply from insured's neglect to make a sufficiently
careful and thorough examination of the recorder's books and
accounts.11 Unless, however, negligence of assured resulting in
loss is such that it amounts to fraud or bad faith it constitutes no
defense in an action on a surety corporation bond; and especially
is such defense not available where it is sought to avoid the insur-
ance on the ground that monthly examinations of the insured
bank would be made by its officials, and none were made, but such
examinations are not required by the bond and the question is not
properly before the court by the pleadings or otherwise.12
(n) Representations, etc., as to duties or position. — Under a
Colorado decision a statement by an employer as to the duties of
an employee will be construed as a representation and not as a
guarantee that in the future they will continue to remain the same
and that in case of a change of duties the bond will be invalidated ;
that is, they are to be taken as representations and not warranties
unless the written contract of indemnity itself expressly or In-
appropriate references makes them warranties; and this applies
where the application of the employee, the original statement of
the employer, and its annual certificate thereafter with the answers
show conclusively that such was not the intention of the employer
and could not have been so understood by the insurer, and the
same do not provide that the employee's duties were to be limited
to one particular line, but, on the contrary it appears that the
insurer was thereby advised that they were varied; and where
renewals were made of the bond for several years insurer cannot
avoid liability in the absence of a showing that the additional
duties were the cause of the defalcation of said employee or led
thereto.13 And where an employee's fidelity was insured in his
then position or in any other position to which he might be called,
the employer's representations that the largest amount of money
likely to be in the hands of the employee would only be a few
dollars constituted under the state statute a mere promissory repre-
11 Grand Lodge Ancient Order States Fidelity & Guaranty Co. 150
United Workmen v. Massachusetts Wis. 601, 137 N. W. 742.
Bonding & Ins. Co. 38 R. I. 276, 94 13 Fidelity & Deposit Co. v. Colo-
Atl 859, 46 Ins. L. J. 551. rado lee & Storage Co. 45 Colo. 443.
12 First National Bank v. United 103 Pae. 383, 38 Ins. L. J. 1094.
3299
§ 2002a JOYCE <>\ ENSUE \WK
sentation and not a warranty, and as a representation would be
held not fraudulent or material under the rule of construction fav-
oring assured, especially so where there was uo averment that as-
surer was in any way misled or deceived by said statement. A Like
decision was also made as to the statement that the employee's posi-
tion would be simply thai of bookkeeper.14 Again, a statement
in an application for a cashier's bond thai he is not "engaged in
other business or employment than the hank's service," which is
made a warranty by the terms of the bond, will he deemed to refer
In important and material occupations calculated to affect the risk,
not to unimportant ones that have no effect or bearing on the
risk.15
Under an Ontario decision, however, in a ease of a policy guar-
antying the fidelity of a manager, it was agreed that the answers
of the presidenl were to be taken as the basis of the contract, but
t lie stipulation was expressly Limited to such statements as were
material to the contract, and said statements and declarations of
the presidenl set forth the duties and remuneration of the em-
ployee and the checks to he kepi on his account, and it was held
that the statements were a part of the policy; that the checks by
audit or otherwise stated in the employer's declaration in the case
of an employee already in the service and requiring a new surety,
oughl not to be regarded as mere statements of intention, but as
representations of an existing course of husiness embracing both
the past and the future, which if materially untrue should beheld
to vitiate the contract; "that any other conclusion would be mani-
festly unjust to the guarantor who was not in a position to other-
wise ascertain the facts so obviously material to be made known to
him in order to estimate the risk about to be undertaken. And it
is or ought to be no hardship upon an employer to hold him im-
plicitly to the statements so made, which from the circumstances
lie must have known, even if he had not been told, as he was, in
the contract in question, will form the basis of the contract; " also
thai the statements were materially untrue when made, that is,
they related hack to that time and the policy was avoided. This
ease was distinguished from one where the employee was just enter-
ing upon his duties when the application was made and where the
statements as to the mode of husiness and the various checks to
deled dishonesty mentioned in an employer's statement could not
14 Champion !<•(■ Manufacturing & 16 American Bonding Co. v. Mor-
Cold Storage Co, \. American Bend- row, HO Ark. 49, 117 Am. St. Rep.
Lng & Trust Co. 115 Kv. 863, 103 72, 96 S. W. 613.
Am. St. Rep. 356, 75 S. W. 197, 32
Ins. L. .1. 80S.
3300
PARTICULAR REPRESENTATIONS, ETC. § 2002a
be said to have been untrue when made, bul were merely in the
nature of the declaration of intention, especially so where there
was a change of employment.16 It is also held in a North Carolina
case that where the business duties and responsibilities of [lie em-
ployee are increased, the legal effect is to release insurer from the
obligation of the bond where the statemenl as to -aid dutie
made the basis of the contract, and the claim in defense was thai
the employee's new contract changing his duties canceled Hie old
one on which the guaranty contract was based, which claim was
sustained. There was a dissenting opinion, however, on the ground
that the object of the bond was to indemnify; thai the variation
was immaterial; that the insurer had received a substantial con-
sideration; that the nature of the employee's duties was nol changed
by a mere change in the title given his position, which was that of
assistant superintendent of a "thrift department" and it was
changed to that of district agent; that his responsibility was not
necessarily affected by a* new contract as to his compensation; and
that the guaranty was not of any particular contract but only of
the faithful performance of his duties as agent.17
(o) Renewals. — Inasmuch as the question of representations
and warranties and the effect thereof in renewal guarantee con-
tracts has been involved in the preceding discussion it has neces-
sarily been considered to some extent under other subdivisions of
this section where governing principles have been deemed applic-
able alike to renewal as well as to original bonds.
Again, a material and relevant point in connection with repre-
sentations, etc., affecting renewal guaranty contracts, is the deter-
mination of whether or not said renewals are separate and distinct
contracts or are to be construed with the original as one contract
only, continuing the same liability and embodying the same stipu-
lations as to representations or warranties. In Missouri the renewal
of a guaranty bond insuring the fidelity of an employee and stat-
ing that he was then paid on commission, constitutes a separate
and distinct contract made on a new consideration and upon a
specific representation, statement or disclosure.18 Other decisions
16 Elgin Loan & Savings Co. v. On effect upon bond conditioned
London Guarantee & Accident Co. 11 for fidelity of employee or agent of
Ont. L. Rep. 330, s. c. 9 Ont. L. a change in the tatter's field of opera-
Rep. 569, 8 Ont. L. Rep. 117, dis- tion on the nature of his duties, sec
tinguishing Hav v. Employers Lia- notes in 28 L.K.A.fN.S.) 4G3, 36
bility Assur. Corp. 6 Ont. W. R. L.R,A.(N.S.) 1152.
459, — Garner, J. A. 18 Long Bros. Grocery Co. v. Unit-
17 Sun Life Ins. Co. v. Fidelity & ed States Fidelity & Guaranty Co.
Guaranty Co. 130 N. Car. 129, 40 130 Mo. App. 121* 110 S. W. 29.
S. E. 975, 31 Ins. L. J. 444.
3301
§ 2003 JOYCE ON INSURANCE
holding such renewals to be separate and distincl contracts,19 or
only a continuation of the original and so constituting one con-
trad, arc relevant rather to the points of notice, liability, or extent
of recovery, than 1" the effecl if representations, or they rest upon
controlling stipulations in the contract.20 It may be stated, how-
ever, that these decisions have a general, although indirect bear-
ing upon tlic question of representations, etc.. to the extent that
they further establish the rule,-, which we have elsewhere stated,
thai the express stipulations of the contract musl govern or in
case of doubl they will he construed in favor of indemnity and
assured.
An untrue statement in renewal of a fidelity guaranty bond as
to the employee's honesty, faithful accounting and not being in
defaull releases insurer whether the statement is deemed a repre-
sentation or warranty,1 where such statement is false as to matters
material to the risk:2 and a breach of warranty in these respects
precludes recovery on the bond.3 But where a greater part of the
loss occurred during the currency of renewal bonds, and renewals
were issued upon the employer's certificate made in good faith,
that prior thereto the hooks and accounts of the employee were
examined and found correct in every respect and all moneys ac-
counted for, such certificate is not a warranty, so that the mere
fad that the examination, if made by a reasonably competent
person, failed to discover discrepancies, covered up by false entries
or other bookkeeping devices, would not defeat the renewal.4 And
if a renewal is issued upon a hank's application, the facts that
the cashier had embezzled the bank's funds and that the renewal
19 Alex Campbell Milk Co. v. Unit- tract or continuation of original, see
ed States Fidelity & Guaranty Co. 1470a herein.
140 N. Y. Supn. 92, 101 App. Div. As to renewals generally, see §§
you 145!) et seq. herein.
' on i i /-.i i n 7i7ii. t As to risks and losses, see §§ 2700,
2°,<>in ( mrc i Co. v. TLtna In- error i • i t
i -i n to n a oor> en 2/80 herein; and as to recovery, see
demnity Co. 13 Ga. App. 826, 80 „ 3454b ])(,ivm
S. E. L093; United States Fidelity & < , ,,;ix , winkler Brokerage Co. v.
Guaranty Co. v. Citizens National Fidelity & Deposit Co. of Md. 119
Bank, 147 Ky. 285, 143 S. W. 997. , ., 73^ 44 g£_ 449
See Philadelphia Casualty Co. v. 2 United States Fidelity & Guar-
Fechheimer, 220 Fed. 401, 136 C. anty Co. v. First National Bank, 233
C. A. 25 (credit guaranty; renewal) ; m. 475, 84 N. E. 070.
United States Fidelity & Guaranty 3 flrand Lodge Ancient Order Unit-
Co. v. First National Bank, 233 III. ed Workmen v. Massachusetts Bond-
475, 84 N. E. 070; Rankin v. I'nited ing & Ins. Co. 38 R. I. 270, 94 Atl.
States Fidelity & Guaranty Co. 80 859, 40 Ins. L. J. 551.
Ohio St. 207, 99 N. E. 314. * Title Guaranty & Surely Co. v.
As to renewal; fidelity guaranty; Nichols, 224 U. S. 346, 56 L. ed. 795,
credit guaranty; whether new con- 32 Sup. Ct. 475, 41 Ins. L. J. 1120.
3302
PARTICULAR REPRESENTATIONS, ETC. § 2002a
was based upon a statement that an examination had been made
of said employee's accounts, that they had been found correct and
that his duties had been performed in an acceptable manner, do
not invalidate the bond when by the evidence neither the bank's
examination nor that of the auditor had discovered said embezzle-
ment, and in addition, said statement is not a guaranty that the
cashier's accounts were correct; and, in such case of compliance as
to examinations, questions are immaterial, except upon the point
of good faith, which go to the fidelity and diligence of the auditor
and the failure to discover the defalcations where there is no issue
as to the auditor's competency.5 Again, when an application for
renewal of a cashier's bond stipulates that his accounts shall be
audited monthly, the examination need not be made on precisely
the same date of each month, but only at some time during each
month.6 So where the answers as to the employee's duties were,
as to the custody of cash, that they embraced daily collections
which were reported and paid to the cashier every even i ug, to
whom he accounted daily, the policy is not avoided, where it also
appears that although the details of the system are not followed
in exactly the manner stated, still it is substantially earned out,
in that reports are daily made and are checked up by the cashier,
especially so where the defalcation occurs after several renewal
bonds.7
A forfeiture upon a renewal bond consequent upon assured's
failure to require the employee to render daily reports, to check
up his accounts, etc., is not waived by assurer's request that the
employee be prosecuted even though the loss occurred after date
of said renewal and assurer was notified thereof, but it does not
appear that assured was misled by assurer's acts.8 But where a
bank fidelity indemnity bond has been continued in force from j|ear
to year upon insured's representation that its cashier's accounts were
examined from time to time in the regular course of business and
found correct, assurer is estopped to deny liability by reason of
said examinations being made at periods more extended than
those stipulated for in the original application for the bond.9
5 Title Guaranty & Surety Co. v. 7 Fidelity & Deposit Co. v. Colo-
Nichols, 12 Ariz. '405, 100 Pac. 825. rado Ice & Storage Co. 45 Colo. 443,
See also Guarantee Co. of North 103 Pac. 383, 38 Ins. L. J. 1094.
America v. Mechanics Savings Bank 8 Marion Iron & Brass Bed Co.
& Trust Co. 80 Fed. 766, 26 C. C. A. v. Empire State Surety Co. 52 Ind.
146, 47 U. S. App. 91, rehearing App. 480, 100 N. E. 882.
denied 82 Fed. 545, 27 C. C. A. 373. 9 United States Fidelity & Guar-
6 American Bonding Co. v. Mor- antv Co. v. Bolev Bank & Trust Co.
row, 80 Ark. 49, 117 Am. St. Rep. 43 Okla. 819, 144 Pac. 615.
72, 96 S. W. 613.
3303
§ 2002a JOYCE ON INSURANCE
I f there is nothing in the application or renewal of a bond which
ired to be at all times fully advised as to his em-
ployee's habits, or to require continued diligence in making inves-
tigations as to said employee's habits and character during the
entire period he is bonded, evidence thereof under the facts is im-
material, and no Mich obligation is imposed upon the employer,
especially so where the very object or purpose of such bonds is to
avoid loss in case the employer's habits shall become such as to
se hi- def ilcations.10
(p) Questions for court or jury: pleading and proof. — Whether
or not a representation as to monthly examination of an employee's
en complied with is for the jury.11 So the question
her the guaranteed employee was engaged in any gambling
or speculation which increased the risk should be submitted to the
jury under proper instructions.12 And whether <»r not reasonably
proper monthly examinations were made is for the jury where the
defaulting cashier made monthly reports which were -one over
regularly by the hank's officers, and his cadi and securities were
counted and examined and his reporl verified from the book entries
made by the bank's bookkeeper, and this is so although expert
evidence showed that a discrepancy in the cashier's accounts might
have been discovered notwithstanding the cashier's cleverness in
concealing his acts.13 Again, where the directors and hank ex-
aminers had failed to discover a cashier's fraudulent practices and
it was stated that hooks had been examined from time to time in
the regular course of business and found correct and a renewal
bond was issued, hut the officers of the bank knew that said cashier
was in the habit of overdrawing his account, said renewal bond is
not invalidated as a matter of law, hut the question of reasonable
care on the part of the hank'.- officers and whether they had rea-
son to suspect the evil intent in making such overdrafts is a ques-
tion for the jury.14 If in case of a guaranty fidelity bond exe-
10 Fidelity & Deposit Co. of Md. the obligation, see note in L.R.A.
v. Colorado lee & Storage Co. 45 L916D, 715.
Colo. 443, 103 Pac. 383, 38 Ins. "United States Fidelity & Guar-
L. .1. L094. anty Co. v. Foster Deposit Bank, 14S
On liability of surety under ti.lel- Ky. 77(i. L47 S. W. 406.
ity bond for defalcation subsequent 12 United Stales Fidelity & Quar-
to a reappointment of the officer or anty Co. v. Blackly, Hurst & Co.
employee made before the expira- 117 Ky. 127, 7, S. W. 709.
tioD of the original term or during 13 Title Guaranty & Surety Co. v.
an indefinite Lejrm, see note in 118 Nichols, 224 I". S. 346, 56 1,. ed.
L.R.A.(N.S.) 493; on discharge of 795, 32 Sup. Ct. 475, 41 Ins. L. J.
surety by failure of employee to dis- 1120.
cover delinquency or to notify surety 14 United States Fidelity & Guar-
thereof within the time specified in anty Co. v. Citizens' National Bank,
33(14
PARTICULAR REPRESENTATIONS, ETC. § 2002a
cuted to an unincorporated lodge or fraternal order for the faith-
ful accounting of all moneys by its treasurer an application for
renewal of the bond certifies that her books and accounts had been
examined and found correct and all money in her custody had
been accounted for and the evidence also showed that the lodge
and its members believed in good faith that the statements so made
by them were true, it is a question for the jury whether the exami-
nations of her books and papers evidenced ordinary care on the
part of the lodge to know whether the statements were true.15 And
although it would seem from the record that bank officials might
by using any sort of diligence and care, have discovered the wrong-
doing of the cashier, still where said officials have all testified that
they did use care and were diligent in examining the books and
that they did not discover it, the question is one for the jury and
its finding in favor of insured under proper instructions will be
sustained and the bond be enforced.16
But it is error to submit the question of insured's good faith in
an action on a fidelity insurance contract, where there is no evi-
dence of fraud.17 And while the question whether a misrepresen-
tation is substantially true is for the jury, still if the parties have
made a statement a warranty the materiality is thereby made a
matter of law.18 In a Massachusetts ease where the court directed
a verdict for the defendant and plaintiff excepted the exception
was overruled on the ground that the verdict was rightly ordered.19
Again, although there is evidence from which knowledge of kit-
ing checks by the cashier might have been found by the court,
but the officers of the bank denied such knowledge, and the find-
ing of the court negatives knowledge on their part it will be sus-
tained.20
147 Ky. 285, 143 S. W. 997. See turing Co. v. American Credit In-
also Aetna Indemnity Co. v. Farm- demnity Co. 124 Fed. 25, 59 C. C. A.
ers' National Bank, 169 Fed. 787, 95 545 (aff'g 115 Fed. 77, 52 C. C. A.
C. C. A. 169; Hunter v. United States 671) certiorari denied 192 U. S. 605,
Fidelity & Guaranty Co. 129 Tenn. 48 L. ed. 58, 24 Sup. Ct. 849.
572, 167 S. W. 692. 19 Glidden v. United States Fidelity
15 United States Fidelity & Guar- & Guaranty Co. 198 Mass. 109, 84
anty Co. v. Shepherds Home Lodge, N. E. 144, 38 Ins. L. J. 105. See
163 Ky. 706, 174 S. W. 487. Carstairs v. American Bonding &
16 Employers' Liability Assur. Co. Trust Co. of Bait, 116 Fed. 449, 54
v. Stanley Deposit Bank, 149 Ky. C. C. A. 85, 32 Ins. L. J. 22, certi-
735, 149 "S. W. 1025, 41 Ins. L. J. orari denied 187 U. S. 644, 47 L.
1901. ed. 346, 23 Sup. Ct. 844; Edward C.
"United States Fidelity & Guar- Moore Co. v. American Credit In-
antee Co. v. Foster Deposit Bank, demnity Co. 156 N. Y. Supp. 737,
148 Ky. 776, 147 S. W. 406; Kv. 170 App. Div. 660, 47 Ins. L. J.
Stat. sec. 639. 330.
18Carrollton Furniture Manufac- 20 First National Bank v. United
3305
JOYCE ON [NSURANCE
Assurer musl plead, and the burden is upon it to show, insuffi-
cient compliance, or noncompliance, with a condition or represen-
tation thai the books will he examined monthly, since if such a
reqniremenl is not complied with it constitutes a defense.1 So
conci tions as to supervision being exercised over an employee and
as i" inspection of accounts and books at specified periods of time
are held conditions subsequenl which must ho pleaded and proved
as :i part, of the defense it relied on.2 And where noncompliance
with a representation in a fidelity insurance application as to
monthly examination of the books i- rdicd on as a defense, the
burden of proof to establish the -nine rests upon insurer.8
§ 2003. Health: disease: life risk. — In the determination of
the effect of the very numerous statements as to health, illness,
disease, etc., generally required in life insurance, the principle con-
sideration is whether under the terms of the contract, they are
representations or warranties expressly or by construction; and
there is also involved the effect of statutes intended to modify or
make more certain ami definite, and. as in case of some enactments,
to abolish in some decree the distinction between warranties and
representations. These points, however, as well as the principles
governing them have been fully considered elsewhere, and will be
restated here only so far as necessary, while the decisions considered
here show the application of the general rules heretofore given and
also their qualifications and exceptions.4 Among other important
considerations involved are these: the meaning of such terms as
"disease," "illness," "serious illness," "ailment" and other words
and phrases; also the extent to which assured may be presumed to
be with or without knowledge of said meaning; and of the exist-
ence of latent disease. Some, or all of which as the case may be,
must he predetermined in order to decide whether or not a repre-
sentation is untrue, material or fraudulent, or a warranty breached.
These points will be presented under this and the following sec-
tions.
States Fidelity & Guaranty Co. 150 3 United States Fidelity & Casu-
Wis. 601, 137 N. W. 742, 41 Ins. altv Co. v. Foster Deposit Bank, 148
L. J. 1893. Ky. 776, 147 S. W. 406; Ky. Stat.
1 Title Guaranty & Surety Co. v. (iik
Nichols, 224 U. S.^346, 56 L. ed. 705, 4 See e. LV. (concealment, §§ 1844
32 Sup. Ct. 475, 11 Ins. L. J. 1120; et seq.) ; c. LVI. (representations, §§
United States Fidelity & Guaranty 1882 et seq..) ; c. LVII. (warranties,
Co. v. Foster Deposit Bank, 148 Ky. §§ 1942 et seq.) herein.
776, 147 S. W. 406. As to effect of statutes concerning
2 United American Fire Tns. Co. representations and warranties, see
v. American Bonding Co. 146 Wis. S 1916 herein.
573, 40 L.R.A.(N.S.) 661n, 131 N.
W. 994, 40 Ins. L. J. 1805.
3306
PARTICULAR REPRESENTATIONS, ETC. § 2003
If the policy stipulates that the answers in relation to the
health and condition of the assured are the basis of the contract,
and that if the same are not absolutely full, true, and correct the
contract will be void, or if words of like meaning arc used,
in such case untruthful or incorrect answers to specific questions
avoid the policy, though in relation to immaterial matters. There
is, however, a difference between answers to specific questions and
the failure to make full answers, for by the inquiry the matter
is made material.5 So a policy is avoided by false answers of
insured as to his freedom from specific diseases, without reference
to their materiality as to the risk, as answers respecting specific
ailments are warranties, whether material to the risk or not.6 A
distinction is also made between a statement in answer to an inquiry
as to specific diseases which cover matters peculiarly within as-
sured's knowledge, and which constitute warranties, and other
matters which only warrant assured's belief and honest opinion.7
And if the policy stipulates that it is issued only on the condition
that the statements of the assured concerning his health made
to the medical examiner and set forth in the application are strictly
true, and if untrue the contract will be void, the right to recover
is dependent upon the truth of the representations so made, and
the word "essentially" in a charge to the jury in such case is
synonymous with "strictly." 8 But if the answers as to applicant's
health are untrue, the insurer's medical attendant testifying that
the life was uninsurable, and the policy is stipulated to be void
5 Swiek v. Home Life Ins. Co. 2 health, able to earn a livelihood, and
Dill (U. S. C. C.) 160, Fed. Cas. had never had a serious illness. It
No. 13,692; Westphall v. Metropoli- was in evidence that during1 a period
tan Life Ins. Co. 27 Cal. App. 731, including the time of the application
151 Pac. 160, 46 Ins. L. J. 579 ; he had received sick benefits for per-
Price v. Phoenix Mutual Life Ins. manent disability, and had, by reason
Co. 17 Minn. 497, 10 Am. Rep. 166; of his health, changed his employ-
Anderson v. Fitzgerald, 4 H. L. Cas. ment to an easier one, and had gone
484; Mutual Benefit Life Ins. Co. v. to certain springs for his health.
Wise, 34 Md. 582. And there was in addition other like
As to inquiries, see §§ 1914 et seq. evidence in behalf of defendant. Op-
herein. posed to this showing, however, was
6 Mutual Life Ins. Co. v. Simp- the testimony of the company's offi-
son, 88 Tex. 333, 28 L.R.A. 765, 53 cial physician, of the assured's wife,
Am. St. Rep. 757, 31 ,S. W. 501. and that of a number of the society
7 Collins v. Catholic Order of For- well acquainted with assured's physi-
esters, 43 Ind. App. 549, 88 N. E. cal condition for a long time, all in
87. favor of the assured's good health.
8 Hoffman v. Supreme Council of And the jury found for the plaintiff.
American Legion of Honor, 35 Fed. The testimony being conflicting, the
252 (annotated case). Tn this case, court refused to set aside the ver-
however, the assured had represented diet. And see Watson v. Mainwar-
that he had no disease, was in good ing, 4 Taunt. 763.
3307
§ 2003
JOYCE i>\ [NSURANCE
for misrepresentations to the medical examiner, the policy is void
ab initio.9
[f the statements or answers as to health, illness, disease, free-
dom therefrom, attendance by or consultation with a physician,
etc., etc., or answers to questions in respeel thereto are clearly
and expressly made warranties, or the intent evidenced by the
contract justifies their being construed as warranties, the strict
rule governing warranties will apply, and upon a breach th
the policy will be avoided, in the absence of some statute to the
contrary; or mile— there be a waiver or estoppel.10 So in Texas
9 Vernier v. Sun Life Ins. Co. 17 Lodge Knights of Pythias v. Brad-
Supr. Ct. R. (Can.) 394. ley, 14] Ky. 334, L32 S. W. 547.
lQUnited States. — Lynch v. Trav- Louisiana. — Haninore v. Metropol-
elers' Ins. Co. 200 Fed. 193, 118 itan Life Ins. Co. 137 La. 137, 68
C C. A. 379, 42 Ins. L. J. 453 So. 385, 46 Ens. L. J. 8 (act 1908,
(same case as 180 Fed. 82 below); p- L39, No. 97, lias no application);
Travelers' Ins. Co. v. Thome, 180 Petitpain v. Mutual Reserve Fund
Fed. 82, 103 C. C. A. 436, 38 L.R.A. Life Assoc. 52 Fa. Ann. 503, 27 So.
(N.S.) 626, 39 Ins. L. J. 1638 (same 113, 129 Ins. L. .7. 269.
case as 200 Fed. 193, above); Equi- Michigan. — Rathman v. New Am-
table Life Assur. Soc. of F. S. v. sterdam Casualty Co. L86 .Mich 115,
Keiper, L65 Fed 595, 91 C. C. A. L.R.A.1915E, 980, 152 X. W. 983,
433 (notwithstanding Fa. act June ^(1 Lis. L. J. 573 (accident policy
23, 1SS5, P. L. 134). although the statements thai assured
Arkansas. — Brotherhood of Ameri- was in sound health, etc, were held
can Yeomen v. Fordham, 120 Ark. warranties, the principal point was.
605, 180 S. W. 206. however, that disease was the proxi-
Colorado. — Knights & Ladies of mate cause of death, and recovery
Security v. Considine, — Colo. — . was denied) ; Perry v. John Eancock
158 Pac. 282. .Mutual Life [ns. Co. L43 Mich. 290,
Illinois.— Hermann v. Court of 106 X. W. 260, 35 Ins. L. J. 432
Eonor, 193 111. App. 366 (statements (warranty falsified as to heart dis-
were warranties and contracl void: ease).
also declared thai even if they had Missouri— -Francis v. Supreme
been representations only they were Lodge Ancient Ord. F. W. 150 Mo.
material and voided the contract); App. 3F, L30 S. W. 500. See Hill
Cessna v. United States Life Endow- v- Business Men's Assoc, — Mo.
ment Co. 152 111. App. 653. Al'l>- ~ 189 S- W- 58' (policy de-
Tndiana.— Iowa Life Ins. Co. - feated h-v breaeh of warranty m case
of assessment plan association with-
out regard to materiality; contra,
under statute in case of regular old
/„„.„ Sargent y. Modern Brother- ]ine France S(,(.
Haughton, 46 Ind. App. 467. 85 N.
E. 127.
hood of America, 1 18 [owa, 600, 127
\\ W. 52.
Kansas. — Modern Woodmen of
America v. Van Wald, 0 Kan. App.
231, 49 Pac. 782.
Kentucky. — Aetna Fife Ins. Co. v.
Cn.htree, 146 Ky. 368, 142 S. W. Accident Assur. Corp. 110 X. Y.
690, 41 Ins. L. J. 555; Supremo Supp. 678, 125 App. Div. 591; Trud-
3308
varicose veins
under list of specilic diseases, etc., at
end of § 2004 herein).
New ./rise//. — LippinCOtt V. Su-
preme Council Royal Arcanum, 64
X. .1. F. 30:1. 45 All. 774.
New York. — Colaneri v. General
PARTICULAR REPRESENTATIONS, ETC. § 2003
it is held that if an applicant for insurance, in reply to certain
questions as to whether he has had certain enumerated diseases or
ailments, gives a false answer or answers, and these answers are
by the terms of the contract made warranties, the policy will be
avoided, though the disease or ailment may doI be material, unless
it also appears that the ailment was merely temporary and not
inherent, and due to some unusual and extraordinary cause or
causes, such as excessive work or heat.11 And if answers as to
health are untrue and they are warranted to be true in the appli-
cation it constitutes a breach of the warranty, whether the insured
knew of their untruth or not.12
Again, a misrepresentation as to the health or symptoms of a
serious disease in answer to specific questions, the statements being
made a part of the policy, stipulated to he true and the basis of
the contract, binds the assured to correct answers, otherwise the
policy will be void, even though the statements be inadvertently
or innocently made and whether designedly untrue or undesignedly
so.13 And this has been so held even though the examining physi-
den v. Metropolitan Life Ins. Co. 64 514, 152 N. W. 169; Boyle v. North-
N. Y. Supp. 183, 50 App. Div. 473; western Mutual Relief Assoc. 95 Wis.
Hanna v. Mutual Life Assoc. 42 N. 819, 70 N. W. 351.
Y. Supp. 228, 11 App. Div. 215. Ontario. — Smith v. Grand Orange
North Dakota,. — Satterlee v. Mod- Lodge of British America, 24 Cana-
ern Brotherhood of America, 15 N. dian L. T. 16.
Dak. 92, 106 N. W. 561 (and the See Baker v. New York Life Ins.
statute does not change effect of falsi- Co. (U. S. C. C.) 77 Fed. 550 (hold-
fying warranty; Rev. Codes 1899, ing breach of warranty as to serious
sec. 4485). illness does not make policy void,
Oklahoma. — Eminent Household of but voidable), affd 83 Fed. 647, 27
American Woodmen v. Prater, 24 C. C. A. 658.
Okla. 214, 23 L.R.A. (N.S.) 917, 103 » Mutual Life Ins. Co. v. Simpson,
Pac. 558. 88 Tex. 333, 28 L.R.A. 765, 53 Am.
Texas.— Supreme Lodge Knights & St. Rep. 757, 2 L.R.A. 765, 31 S. W.
Ladies of Honor v. Pavne, 101 Tex. 501, reversing (Tex. Civ. App.) 28
449, 15 L.R.A. (N.S.) 1227, 108 S. W. S. W. 837. Compare Kansas City
1160, 37 Ins. L. J. 324; Mutual Life Life Ins. Co. v. Blackstone, — Tex.
Ins. Co. v. Simpson, 88 Tex. 333, 28 Civ. App. — , 143 S. W. 702, 41
L.R.A. 765, 53 -Am. St. Rep. 757, 31 Ins. L. J. 683.
S. W. 501; Modern Woodmen of 12 National Annuitv Assoc, v. Mc-
America v. Owens, 60 Tex. Civ. App. Call, 103 Ark. 201, 48 L.R.A. (N.S.)
398, 130 S. W. 858. 418, 146 S. W. 125.
Virginia. — Metropolitan Life Ins. On effect of honest mistake in
Co. v. Rutherford, 98 Va. 195, 5 Va. answer as to health of insured war-
L. Reg. 842, 35 S. E. 361, 29 Ins. ranted by him to be true, see note in
L. J. 365 ; Metropolitan Life Ins. Co. 15 L.R.A. (N.S.) 1277; on innocent
v. Rutherford, 95 Va. 773, 30 S. E. misrepresentation as to health by
383. insured who has undiscovered dis-
Wisconsin. — McKnelly v. Brother- ease, see note in 53 L.R.A. 193.
hood of American Yeomen, 160 Wis. 13 United States. — ^Etna Life Ins.
3309
§ 2003 JCN CE ON LNSURANCE
ciau of the company reports favorably as to the risk after examina-
tion.14 This general rule is, however, particularly applicable where
the symptoms of the disease are so far developed or manifest that
they materially derange for a time the functions of a vital organ
or which are so well dt lined and marked, as thai they ought to
induce a reasonable belief that the disease exists;15 or in
insured has a chronic disease or trouble which is so apparenl thai
his statements to the contrary are false upon their lace;16 or
where there have been prior attacks of the same disease of an
alarming character;17 or if assured has had a disease for a year
and dies therefrom in less than two months after the policy is
Co. v. Prance, 91 U. S. 5.10, 23 L. v. Williams, 4 Tyrw. 240, 2 Cromp.
rd. 101; Goueher v. Northwestern & M. 348, 2 Tyr. 240.
Traveling News Assoc. 20 Fed. 596. But sec discussion under §§ 1848,
Arkansas. — National Americans v. 1849 herein.
Rich, 121 Ark. lsr>. L80 S. W. 488. As to facts rendered material by
Colorado. — Germania Life Ins. Co. stipulation; statements stipulated to
v. Klein, 25 Colo. App. 326, 37 Pac. be true and basis of contract, see §
73. 1912 herein.
Illinois. — Walsh v. John Hancock 14 Smith v. iEtna Life Ins. Co. 5
Mutual Life Ins. Co. — 111. App. — , Lans. (N. Y.) 545, aff'd 49 X. V. 211.
42 Nat. Corp. Rep. 656. 15 United States. — Connecticut Mu-
Indiana. — Continental Life Ins. tual Life Ins. Co. v. Union Trust Co.
Co. v. Yung, 113 Ind. 159, 3 Am. St. 112 U. S. 250, 28 L. ed. 708, 5 Sup.
Rep. 630, 15 N. E. 220. Ct. 119; Hubbard v. Mutual Reserve
Iowa.— Nelson v. Nederland Life Fund Life Assoc. 100 Fed. 719, 40
Co. 110 Iowa. 600, 8] X. W. 807. C. C. A. 665, 29 Ins. L. J. 577, s. c.
Maine.— Jeffrey v. United Order of 80 Fed. 87, 27 Ins. L. J. 202.
Golden Cross, 97 Me. 176, 53 Atl. Indiana.— Continental Life Ins. Co.
11(12, 32 Ins. L. J. 097. v. Yung, 113 Ind. 159, 3 Am. St.
Maryland. Metropolitan Life Ins. Hop. 030, 15 N. E. 220.
Co. v. Dempsey, 72 Md. 2S8, 19 Atl. Massachusetts. - - Vose v. Eagle
642; Mutual Benefit Life Ins. Co. v. Life & Health Ins. Co. 6 Cush. (60
Cannon, 48 Md. 264, 267. Mass.) 42.
New York. — Barteau v. Phcenix Missouri.— Stephens v. Metropoli-
Mutual Life Tns. Co. 67 Barb. (N. tan Life Ins. Co. 190 Mo. App. 673,
Y.) 354, 1 Hun (N. Y.) 430, 3 176 S. W. 253, 46 Ins. L. J. 126.
Thomp. & C. (N. Y.) 576; Neill England.— V<m Lindenau v. Des-
v. American Popular Life Ins. Co. brough, 3 Car. & P. 353, 8 Barn. & C.
42 X. V. Super. Ct. 259; Cushman v. 586, 3 Moody & R. 45.
United States Ins. Co. 70 N. Y. 72. 16Westphall v. Metropolitan Life
North Carolina. — Alexander v. Ins- Co. 27 Cal. App. 734, 151 Pac.
Metropolitan Life Ins. Co. 150 N. 160, 46 Ins. L. J. 579.
Car. 536, 64 S. E. 432 (notwithstand- 17 Barteau v. Phoenix Mutual Life
ing llev. Stat. 1905, sec. 4808; and Ins. Co. 1 Hun (N. Y.) 430, 67 Barb.
this is so regardless of whether the (N. Y.) 354; Foot v. .Etna Life Ins.
ment was fraudulently made). Co. 4 Daly (N. Y.) 285; Baker v.
England.— Sceales v. Scanlan, 6 Ir. Home Life Ins. Co. 2 Hun (N. Y.)
L. L. 367; Scanlan v. Scealer, 13 Ir. 402; Smith v. iEtna Life Ins. Co. 49
1.. 71, rev'g 5 Ir. L. 139; Duckett N. Y. 211.
3310
PARTICULAR REPRESENTATIONS, ETC.
§ 2003
issued ; 18 or where assured has suffered from attacks of the specified
disease and has been treated therefor ; 19 or if the circumstances
clearly evidence the fact that the statements relied on by the
insurer must have been known by the assured to be false, or rather
where they are of such a character as clearly proves.a misrepresenta-
tion; 20 as where he is an epileptic and states that he is not subject
to fits or convulsions ; l or in case he has been operated upon for
18 Holloway v. Metropolitan Life politan Life Ins. Co. 64 N. Y. Supp.
Ins. Co. 154 N. Y. Supp. 194, 46 Ins. 183, 50 App. Div. 473.
L. J. 274. North Carolina. — Schas v. Equi-
19 United States. — Hubbard v. Mu- table Life Assur. Cos. 166 N. Car.
tual Reserve Fund Life Assoc. 100 55, 81 S. E. 1014 (appeal from judg-
Fed. 719, 40 C. C. A. 665, 29 Ins. ment for plaintiff, reversed and new
L. J. 577. trial granted, upon new trial there
Delaware.— Grand Fraternity v. was judgment for plaintiff ; appealed;
Keatley, 27 Del. (4 Bovce) 308, 88 held no error. Schas v. Equitable
Atl. 553, 42 Ins. L. J. 1715; Keatley Life Assur. Soc. 170 N. Car. 420, 87
v. Grand Fraternity, 25 Del. (2 S. E. 222, 47 Ins. L. J. 151) ; Alex-
Boyce) 267, 78 Atl. 874, s. c. 25 ander v. Metropolitan Life Ins. Co.
Del. (2 Boyce) 511, 82 Atl. 294, s. c. 150 N. Car. 536, 64 S. E. 432 (not-
(U. S. D. C.) 198 Fed. 264, 41 Ins. withstanding Rev. Stat. 1905, sec.
L. J. 1776, s. c. (U. S. D. C.) 198 4808).
Fed. 272, 41 Ins. L. 1784. England.— Morrisson v. Muspratt,
Kentucky. — Supreme Lodge 4 Bing. 60, 5 L. J. (O. S.) C. P.
Kni°hts of Pythias v. Bradley, 141 63; Maynard v. Rhodes, 1 Car. &
Ky.^334, 132 S. W. 547, 40 Ins. L. J. P. 360, 5 D. & R. 266, 3 L. J. K. B.
209, granting, rehearing, withdraw- 64
ing opinion, and rev'g — Ky.
S. W. 275.
-, 117 Ontario. — Smith v. Grand Orange
Lodge of British America, 24 Canadi-
Massachusett%. — Campbell v. New an L. T. 16
England Mutual Life Ins. Co.
Mass. 381.
98 20 Delaware. — Grand Fraternity v.
Keatley, 27 Del. (4 Boyce) 308, 88
Mississippi. — Mutual Reserve Fund Atl. 553, 42 Ins. L. J. 1715 (not-
Life Assoc, v. Opp, — Miss. — , 30 withstanding statute). For other
So. 69.
Missouri. — Stephens v. Metropoli-
tan Life Ins. Co. 190 Mo. App.
673, 176 S. W. 253, 46 Ins. L. J.
126.
New Jersey. — Lippincott v. Su-
citations of this ease, see note 19
above.
Iowa. — Smith v. Supreme Lodge
Knights & Ladies of Golden Precept,
123 Iowa, 676, 99 N. W. 553.
Louisiana. — Petitpain v. Mutual
preme Council Royal Arcanum, 64 Reserve Fund Life Assoc. 52 La
1 (treatment Ann 5^ 27 go 113j 29 Ins. L. J
269.
here continued until death).
New York. — Holloway v. Metro-
politan Life Ins. Co. 154 N. Y. Supp.
194, 46 Ins. L. J. 274; Kaspryzk v.
Metropolitan Life Ins. Co. 140 N. Y.
Supp. 211, 79 Misc. 263, 42 Ins.
New York. — Breeze v. Metropoli-
tan Life Ins. Co. 48 N. Y. Supp. 753,
24 App. Div. 377.
England. — Everett v. Desbrough,
L. J. 607; Hoffman v. Metropolitan & Bing. 503, 3 Moore & P. 190, 30
Life Ins. Co. 131 N. Y. Supp. 588, R. R- 709.
41 Ins. L. J. 84; Trudden v. Metro- * Westphall v. Metropolitan Life
3311
,03 JOYCE ON [NSUEANCE
,, physical trouble or disease which he states he hag not had;2
,,,. where he enters a hospital and dies from certain diseases within
two weeks after making application for insurance;3 or has been
warned by a physician as to the existence of a certain disease;4
or has been told by the latter thai he was suspicious of its existence
even though a1 said time no such disease could be discovered, not-
withstanding there were certain symptoms or evidences that it
mighl exist, and assured died of said disease.6
But even in applying what LS above stated reference should he
had, as predeterminative factors, to the nature, intent, and reason-
able construction of questions and answers, such as good health,
serious illness, etc.; and consideration should also undoubtedly
he given iii all cases to the character of the question asked by
the insurers. Language intended to convey, and which does convey
by the ordinary rules of construction, a certain meaning should
n,,t by a forced construction be held to import more than is clearly
warranted. Thus, the word- "severe illness" should by reasonable
construction be held to mean such an illness as has a permanent
detrimental effect on the physical system.8 Another point, in this
connection, is this, that insured is not entitled to claim the benefit
of statutory provisions, where his false and material statements
or misrepresentations are clearly not within the intent or purpose
of the statute.7 it is also a qualifying rule that courts will not
force a construction that necessitates a forfeiture, preferring to hold
the assured's statements as representations, rather than warranties
30 far as the terms of the contract will permit.8 And negative
i
Ins. Co. 27 Cal. App. 734, 151 Pac. As to "illness," "serious illness,"
Kill, 4li Ins. L. J. 570. "serious disease," and similar terms,
2 Grand Fraternity v. Keatley, 27 see § 2004 herein.
Del. (4 Boyee) 308, 88 Atl. 553, 42 7 Grand Fraternity v. Keatley, 27
Ins. L. J. 1715. See note 10 above. Del. (4 Boyce) 308, 88 Atl. 553, 42
3 Stephens v. Metropolitan Life Ins. L. J. 1715 (decided under Pa.
Ins. Co. L90 Mo. App. 673, 176 S. act .June 23, 1SS.V, P. L. 134, for
W. 253. 4fi his. L. J. 126 (and tins other citations of this case, see note
is so notwithstanding Rev. Stat. No. t9 above). Sec § L916 herein.
1!)!)!), sec. 6986, as to material mis- 8 United Stairs— Moulor v. Ameri-
representations). See Petitpain v. can Life Ins. Co. Ill U. S. 335, 28
Mutual Reserve Fund Life Assoc. 52 L. ed. 447, 4 Sup. Ct. 466. See
L;1 Ann 503, 27 So. 113. 20 Ins. Langdon v. Union Mutual Life Ins.
L. J. 200. Co. 14 Fed. 272.
* British Equitable Ins. Co. v. Alabama. — Alabama Gold L. Ins.
Great Western Ry. Co. 38 L. J. Ch. Co. v. .Johnson, 80 Ala. 467, 59 Am.
314, 20 L. T. 422, 17 W. R. 561. St. Rep. 810. 2 So. 125.
5 Smith v. Supreme Lodge, Knights Illinois. — Minnesota Mutual Life
& Ladies of Golden Precept, 123 Ins. Co. v. Link, 230 111. 273, 82
Iowa, 676, 0!) N. W. 553. X. E. 637; Enright v. National Coun-
6 Goucber V. Nortbwestern Travel- cil Knights & Ladies of Security, 161
ing News Assn. 20 Fed. 596. 111. App. 365, 42 Nat. Corp. Rep.
3312
PARTICULAR REPRESENTATIONS, ETC. § 2003
answers to the numerous questions propounded which cover in
these applications almost if not all conceivable ills, ailments, etc.,
will be construed as representations rather than warranties which
would forfeit the policy, even though the application and the policy
of which it is a part both declare them warranties and assured
agrees thereto, irrespective of the question of good faith, etc., and
they are stipulated to avoid the policy if untrue in any respect.9
It is also held that untrue statements as to insured's physical con-
dition, and which relate to immaterial matters although warranted
to be true do not avoid the policy where it is not expressly so stipu-
lated, unless they are fraudulently made.10 It is further decided
that if statements as to health, etc., are construed as representations
and not warranties they must be material and must be known to
be false when made.11 But a material false statement avoids the
policy even though taken out by a husband on his wife's life and
he signed the application in the names of both without her knowl-
edge.12
It has been held that if the policy stipulates that all statements
made by assured shall be deemed representations and not war-
ranties, then it must appear that they were untrue and known to be
so by insured; that they were material to the risk, and induced
insurer to issue the policy in reliance thereupon and without knowl-
edge of their falsity, when otherwise the risk might have been re-
fused; and also that under such a provision the policy could be
avoided because of false representations, only when they were
fraudulently made, with knowledge actual or imputed upon as-
378, s. c. 253 111. 460, 97 N. E. 681. S. E. 615, 27 Ins. L. J. 657. See
(But statement was held material to also Metropolitan Life Ins. Co. v.
the risk and being false recovery was Larson, 85 111. App. 143. Examine
precluded under by-laws which pre- Royal Neighbors of America v. Wal-
cluded recovery in case of false repre- lace, 64 Neb. 330, 89 N. W. 758, 31
sentations.) • Ins. L. J. 447, s. c. 66 Neb. 543,
Kentucky.— Germania Ins. Co. v. 92 N. W. 897, s. c. 73 Neb. 409,
Rudwig, 80 Ky. 223, 235. 102 N. W. 1020, 34 Ins. L. J. 450.
Utah. — Bednarck v. Brotherhood ll Minnesota Mutual Life Ins. Co.
of American Yeomen, — Utah, — , v. Link, 230 111. 273, 82 N. E. 637.
157 Pac. 884, — McCarty, J. See also Prudential Ins. Co. of Amer-
On when statements may be re- ica v. Sellers, 54 Ind. App. 326, 102
garded as representations although N. E. 894, 42 Ins. L. J. 1692. Corn-
expressly denominated in policy as pare Kansas City Life Ins. Co. v.
warranties, see note in 17 L.R.A. Blackstone, — Tex. Civ. App. — ,
(N.S.) 981. 143 S. W. 702, 41 Ins. L. J. 683,
9 Kettenbach v. Omaha Life Assoc, rev'd Blackstone v. Kansas City Life
49 Neb. 842, 69 N. W. 135, s. c. 50 Ins. Co. — Tex. — , 174 S. W. 921.
Neb. 846, 70 N. W. 392. 12 March v. Metropolitan Life Ins.
10 German American Mutual Life Co. 186 Pa. 629, 65 Am. St. Rep.
Assoc, v. Farley, 102 Ga. 720, 29 887, 40 Atl. 1100, 28 Ins. L. J. 30.
Joyce Ins. Vol. III.— 206. 3313
§ 2003 JOYCE ON [NSUltANCE
sured's part thai they were false when made; whore said statements
are false within said rules the policy will be avoided in the absence
of waiver or estoppel; hut the case so holding was reversed on the
ground that where statements in the application arc material, and
known by assured to he untrue when made, the policy is invali-
dated; also thai in such case the policy will he avoided without
further proof of actual conscious design to defraud.13
There are many difficulties attendant upon any attempt to define
t|u. term "disciiM'." It is asserted by eminent medical authority14
that the term "transcends definition," and that it is first necessary
to understand what constitutes health. In life insurances, however,
one can be guided to a certain extent by the fact that the contract
is one of good faith, and is based upon certain computations, one
element of which is the probable expectancy or duration of human
life, and that the controlling factor in the construction of the
contract is the intent of the parties. It would seem, therefore, upon
principle and by fair construction of the decided cases that the
Legal meaning of the term "disease," as used in connection with
insurance contracts, indicates an inherent or permanent vice, some
derangement of the vital functions which so far affects the physical
condition that it may reasonably be held to form a material factor
in estimating the possible duration of the particular life and conse-
quent safety of the risk. A more definite rule cannot he given.
A slight attack may yield readily to ordinary medical treatment
and in no way permanently injure the physical system, and may
lend in no way to shorten life; or it may be even more trifling in
character, in no way sensibly affect the health or interfere with
the assured's usual avocations. In neither of these cases ought
it to be held that such attack constitutes "disease" such as the
contract of insurance contemplates. But an attack of the same
character may, under certain other conditions, become so serious
as to he followed by results permanently injurious, in the sense
that, it tends to shorten life, and' therefore may well be held to
constitute "disease." 15 It is declared in a Federal case that mere
13 Mutual Life Ins. Co. of N. Y. 15 United States. — Connecticut Mu-
v Bilton-Green, 211 Fed. 31, 127 tual Life Ins. .Co. v. Union Trust Co.
C. C. A. 467, 43 Ins. L. J. 035, rev'd 112 U. S. 250, 28 L. ed. 708, 5 Sup.
241 U. S. 613, 60 L. ed. 1202, 30 Ct. 119; Knickerbocker Life Ins. Co.
Sup. Ct. 676 (considered under v. Trefz, 104 U. S. 197, 26 L. ed.
§ 2075 subd. [q] herein). See 708; Drier v. Continental Life Ins.
Kasprzyk v. Metropolitan Life Ins. Co. 24 Fed. 670. See Manhattan
Co. 140 N. Y. Supp. 211, 79 Misc. Life Ins. Co. v. Francisco, 17 Wall.
263, 42 Ins. L. J. 007. (84 U. S.) 672, 21 L. ed. 698; Hollo-
14 1 Hartshorne's Reynolds' System man v. Life Ins. Co. 1 Wood (U. S.
of Medicine, 17. See also medical C. C.) 674, Fed. Cas. No. 6,623.
authorities cited at end of next note. Alabama. — Alabama Gold Life
3314
PARTICULAR REPRESENTATIONS, ETC. § 2003
temporary ailments or affections, not of a serious or dangerous
character, which pass away and are likely to be forgotten because
Ins. Co. v. Johnson, 80 Ala. 467, 59 following definitions : "If we regard
Am. Rep. 816, 2 So. 125. disease in the 'abstract,' we have to
Georgia. — Southern Life Ins. Co. deal with that which changes, fetters,
v. "Wilkinson, 53 Ga. 535. renders painful, shortens, or puts an
Illinois. — Illinois Masons' Benevo- end to life, and from this point of
lent Soc. v. Winthrop, 85 111. 537. view disease may be defined to be
Indiana. — Northwestern Mutual any condition of the organism which
Life Ins. Co. v. Heimann, 93 Ind. 24. limits life in either its powers, enjoy-
jowa. — Nelson v. Nederland Life ments, or duration:" 1 Hartshorne's
Ins. Co. Ltd. 110 Iowa, 600, 81 N. W. Reynolds' System of Medicine, 17.
807. "An opposite state to that of health
Louisiana. — Murphy v. Mutual consisting in a change either in the
Benefit Life & Fire Ins. Co. 6 La. position and structure of parts, or
Ann. 518. in the exercise of one or more of
Maryland. — Mutual Benefit Life their functions or in both. By some,
Ins. Co. v. Wise, 3 Md. 582, 599. disease is applied to structural change
Michigan.— Puditzky v. Knights of while disorder is restricted to func-
Honor, 76 Mich. 428, 43 N. W. 373. tional derangement:" Dungleson's
Mississippi. — Co-operative Life Medical Dictionary, (Rev. ed.) tit.
Assoc, v. Leflore, 53 Miss. 1. "Disease." "Any departure from,
New Jersey. — Metropolitan Life failure in, or perversion of, normal
Ins. Co. v. McTague, 49 N. J. L. physiological action in the material
587, 60 Am. Rep. 661, 9 Atl. 766. constitution or functional integrity
New York. — Cushman v. United of the living organism:" 2 Foster's
States Life Ins. Co. 70 N. Y. 72; Encyclopedia and Medical Dictionary,
Barteau v. Phoenix Mutual Life Ins. tit. "Disease." "Any disturbance of
Co. ■ 67 N. Y. 595 ; Boos v. World the normal relations of the individ-
Mutual Life Ins. Co. 64 N. Y. 236; ual members of the body to each
Horn v. American Mutual Life Ins. other, or of a ' group of visceral or
Co. 64 Barb. (N. Y.) 81; Fitch v. other associated organs to the system
American Popular Life Ins. Co. 59 at large, at once destroys the equilib-
N. Y. 557, 17 Am. Rep. 372; Higbee rium of the natural process of the
v. Guardian Mutual Life Ins. Co. 53 body, be of such character or located
N. Y. 603. in such a part as to cause the devel-
Oklahoma. — National Council opment of different physical and phy-
Knights & Ladies of Security v. siological relations, which we are
Owen, — Okla. — , 161 Pac. 178. accustomed to group under the gen-
England. — Fowkes v. Manchester eric term 'disease.' Disease may,
& London Life Ins. Co. 3 Fost. & F. therefore, be of grave or trifling im-
440 ; Wratson v. Mainwaring, 4 Taunt, portance accordingly as the interf er-
763, per Chambers, J.; Chattock v. ence with the ordinary and natural
Shawe, 1 Moody & R. 498. functions of the body, be of such
See also Taylor's Medical Juris- character or located in such a part
prudence, 738 " et seq. ; 1 Chitty's as to cause serious and continued de-
Medical Jurisprudence, 235; Ander- viation from the usual and unimpeded
son's Dictionary of Law, tit. "Dis- course of phenomena in organs vital
ease;" cases under §§ 1848, 1849, to health; or as it may be confined
2007, 2008 herein. It is evident that to tissues of either lower structural
the above definition is more limited value or of mechanical or sensory
than that given by eminent medical function:" Wood's Reference Hand-
authorities, as will be seen by the book of the Medical Sciences, 528,
3315
§ 2003 JOYCE ON INSU; ANVK
they leave no trace in the constitution, are not to be regarded as
diseases within the meaning of a life insurance policy;16 and
this is also in conformity to and with what we have stated in the
aexl section as to good health." Again, the word "disease" may
include, and is often used to designate ailments more or less trivial;
and an insurance company may, if it elects, inquire about any ail-
ment, and take a warranty concerning it, lesl it may affect the
risk, although it cannot be known that it will.18
An inquiry as to a specified disease does not justify avoiding
the policy in a case where the disease relied on as constituting a
breach of the stipulation has no connection whatever with the speci-
fied disease inquired about.19 A specifically named disease may
also of itself be of such a character as to necessarily convey the
meaning that information only is sought concerning whether or
not assured is habitually or constitutionally subject thereto, and
in this case such a construction should be given.20 And a dis-
tinction has been made between the statement of the fact that
the assured has not been attacked by the disease and where his
declaration is that he has not been habitually or constitutionally
subject thereto.1 So a local affection is not a local disease within
the meaning of a warranty in a policy of insurance, unless such
affection has sufficiently developed to have some bearing on the
general health.2 And, as already noted, certain other exceptions
are shown by the cases to have been held to exist in matters of
slight or temporary illness.3
The fact that insured had been treated by a physician when
unconscious by reason of an attempt to commit suicide by taking
article by Albert N. Blodgett, M. D. Fed. 653, 19 C. C. A. 316, 43 U. S.
"Disease: Any disturbance of an or- App. 75, 38 L.R.A. 33.
ganism causing an abnormal varia- 17 See § 2004 herein,
tion in function or anatomical struc- "Mutual Life Ins. Co. v. Simpson,
ture." Billings Nat. Med. Diet. p. 88 Tex. 333, 28 L.R.A. 765, 53 Am.
102. "Disease." "Morbus, illness, St. Rep. 757, 31 S. W. 501.
sickness, an interruption or perver- 19 Price v. Plxenix Mutual Life Ins.
sion of function of any of the or- Co. 17 Minn. 407, 10 Am. Rep. 166.
trans; a morbid change in any of the 80 Cushman v. United States Ins.
tissues, or an abnormal state of the Co. 70 N. Y. 72; Chattock v. Shawe,
body as a whole, continuing for a 1 Moody & R. 498; Eisner v. Guardi-
longer or shorter period." Stedman's an Life Ins. Co. U. S. 5 Ins. L. J.
Medical Diet. (2.1 ed.) p. 254. See (il3; AVatson v. Mainwaring, 4 Taunt,
cases throughout tins section also in- 763.
stances of specific ailments, diseases, : Bunyon on Life Ins. 47.
etc., at end of § 2004 herein. 2 Cady v. Fidelity & Casualty Co.
16IVn» Mutual Life Ins. Co. v. 134 Wis. 322, 17 L.R.A.(N.S.) 260,
Mechanics' Savings Bank & Trust Co. 113 N. W. 967.
72 Fed. 413, 38 L.R.A. 33, 19 C. 3 See §§ 1298, 1299, 2004 herein.
C. A. 286, 37 U. S. App. 692, 73
3316
PARTICULAR REPRESENTATIONS, ETC. § 2003
chloroform does not falsify negative answers to questions whether
he had ever had any local diseases, illness or nervous disease or
infirmity, or ever had any disease, weakness of the head, throat,
heart, lungs, stomach, kidneys, bladder, or any disease or infirmity
whatever, where his health was not permanently affected by taking
said chloroform.4 But where assurer makes an inquiry concerning
what diseases, illnesses or accidents assured had "had since child-
hood ; name of disease, number of attacks, date, duration, severity,
results" an answer "Typhoid pneumonia, one, 1891, two months,
severe, complete recovery" is not substantially true where he had
thereafter been struck by a mule, had one rib fractured, causing
spitting of purulent matter, and totally disabling him for a period
of nearly four months, followed by a partial disability for a longer
period, "substantially true," does not mean somewhat true, partially
true, on the one hand, nor does it mean true in every possible
and immaterial respect on the other. It means without qualifica-
tion in all respects material to the risk.5
Even though assured is bound by material statements as to dis-
eases, still he is not under any obligation to state every slight ail-
ment or temporary illness, or temporary functional derangement
which has not impaired his general health or constitution; he
is only required to state in good faith the facts known by him.6
But if diseases are not disclosed in response to inquiries an avoid-
ance of the policy by reason of such non-disclosure is not prevented
by showing that said diseases resulted from certain facts or causes,
such as "sprees" which were admitted. "It was material to the
insurance company to know what 'diseases Bullock had had, regard-
less of the causes which may have superinduced the diseases.
Whether one disease had resulted from, or been followed by,
another, or was produced by accident or misconduct, it is plain
that it was highly important to the insurance company to be
informed that the appellant had had the disease, and it had the
right to be so informed upon inquiry." 7 An applicant to an
insurer need not give information to it, imparted, concerning
his diseases, by the examining physician of another insurer, unless
4 Mutual Reserve Fund Life Assoc. Mass. 381; Jeffries v. United Order
v. Farmer, G5 Ark. 581, 47 S. W. 850. Golden Cross, 97 Me. 176, 53 Atl.
5MeEwen v. New York Life Ins. 1102. See §S 1855, 1924 herein.
Co. 23 Cal. App. 694, 139 Pac. 242, 6 Fidelity Mutual Life Assoc, v.
43 Ins. L. J. 546— Shaw, J., citing Miller, 92 Fed. 63, 34 C. C. A. 211.
France v. Aetna Life Ins. Co. Fed. 7 Life Insurance Clearing Co. v.
Cas. -No. 5,027; Campbell v. New Bullock, 91 Fed. 487, 33 C. C. A.
England Mutual Life Ins. Co. 98 365.
3317
§ 2003
JOYCE ON INSURANCE
he believes the latter, in which case the.fact is so material that
the policy is avoided by the intentional concealment.8
Although we have elsewhere considered the question of good
faith, knowledge, etc., of assured we will stale here that a repre-
sentation by the applicant thai he is in sound condition mentally
and physically, and had never had any mental or bodily infirmity
"excepl as herein stated" constitutes a warranty when SO stipu-
lated and if false there is a hreaeh irrespective of assured's good
faith in so stating.9 But it is also decided that where ^>eeific
inquiries as to diseases of certain organs are made they do not
necessarily constitute a stricl warranty hut only necessitate answers
based upon assured's knowledge or belief, and his good faith, hon-
esty and fairness.10 So a statement fraudulently made as to a
8 United States Life Ins. Co. v. being true in fact, not according to
Peak. L22 Ark. 58, L82 S. W. 565. belief, etc.).
9 Standard Lite & Accident Ins. Maryland.— JEtna Life Ins. Co. v.
Co. v. Sale, 121 Fed. (Kid, 57 C. C. Millar, 113 Md. 686, 78 Atl. 483
A. 418, til L.R.A. 337. See §§ 1004, (as to temporary ailments, good faith
L915a, L964 herein. should be considered).
As to health; assured's knowledge; Michigan.— Perry v. John Hancock
latent disease, see § 2010 herein. Mutual Life Ins. Co. 143 Mich. 290,
"Ames v. Manhattan Life Ins. Co. 106 N. W. 260, 35 Ins. L. J. 432
58 N. Y. Supp. 244, 40 App. Div. (good faith will not save warranty
465.
See further the following cases :
that no heart disease, etc.).
Minnesota. — Ranta v. Supreme
United States.— MeClain v. Provi- Tent Knights of Maccabees of the
dent Savings Life Assur. Soc. 110 World, 97 Minn. 454, 107 N. W. 156
Fed. 80, 49 C. C. A. 31 (finding (only bona tide belief and good judg-
of jury that answers made in good meat warranted, not that assured's
faith, 'etc., and were not material, opinion warranted actual fact),
not disturbed, although answers were Nebraska.— Modern Woodmen of
warranted to be true, etc.), s. c. 184 America v. Wilson, 76 Neb. 344, 107
U. S. 699, 46 L. ed. 765, 23 Sup. Ct. N. W. 568, 35 ins. L J. 582 (suffi-
938< cient thai insured answered in good
Indiana.— Iowa Life Ins. Co. v. faith and truthfully as he understood
Houghl 46 I ii*l. App. 467, 87 N. question, and without intention to
E. 702 (warranty only bona fide be- misrepresent): Royal Neighbors of
lief and opinion). America v. Wallace, (id Neb. 330, 89
Louisiana.— Cole v. Mutual Life N. W. 758, 31 Ins. L. J. 447, s. c.
Ins. Co. of N. Y. 129 La. 704, 56 66 Neb. 543, 92 N. W. 897, s. c.
S. E. 645, 47 Ins. L. J. 227 (if 73 Neb. 409, 102 N. W. 1020, 34 Ins.
answer intended to be only to best L. J. 450 (matters of opinion and
of insured's knowledge and belief an- judgment if made in good faith and
swer as to condition of health con- not intentionally made to deceive do
struct favorably to insured). not avoid, but if untrue to assured's
Maine.— Benjon v. Fraternities knowledge there can be no recovery).
Il.alth & Accident Assoc. 107 Me. Ohio.— Ohio Mutual Life Assoc, v.
368, 78 Atl. 462, 40 Ins. L. J. 566 Draddy, 8 Ohio N. P. 140, 10 Ohio
(requirement that answers be full, S. & C. P. Dec. 591 (knowledge and
true and complete necessitates their belief: judgment for plaintiff).
3318
PARTICULAR REPRESENTATIONS, ETC. § 2003
material matter is a warranty, but if the insured believed the
misstatement true and made it innocently the policy is not avoided,
where it must, in order to forfeit the insurance have been made will-
fully with an intent to deceive and the insurer must have relied
thereon. If, however, insured has been told by a physician that
he had a certain disease, his misrepresentation does not arise from
ignorance and if it is material to the risk the policy cannot be
enforced where death results from said disease.11 If the statute
requires the utmost good faith and also that a misrepresentation
must be material to the risk, and assured states that he is in sound
health and has no disease or ailment, but he had been treated by
physicians and symptoms existed which might have been Bright'a
disease and he died therefrom, a judgment for assured will be
reversed though the jury could have found from the evidence
that assured did not have Bright's disease at the time the policy
was issued, and even though it might have developed thereafter
from causes which did not then exist, since that would not be the
exclusive test of materiality of the representation.12 Under the
Kentucky statute, although answers that will defeat the policy
must be both material and untrue, still if they are material and
untrue the good faith or honest intention of the applicant will
not avail him to defeat the defense and save his case. But in
the case so holding, the court, per Carroll, J., refused to be "com-
mitted by any previous decision to the doctrine that, if the appli-
cant should honestly make an untrue answer to a question as to
whether or not lie had ever had a certain disease, the answer would
defeat the collection of the policy, although there might be no
evidence that the applicant ever knew or had any information
that he had such a disease. There is a wide difference between the
meaning and effect that should be given to an answer to a question
concerning an act, thing, or transaction that the applicant had
kowledge or information of at some time, or that he must be
presumed from his relation to it to have had knowledge of, and
an answer to a question that he never, at any time, had any
knowledge or information concerning it. In one instance it
might well be said that a person cannot shield himself from the
effects of a false answer to an act, thing, or transaction that he
had at some time personal knowledge of, while in the other instance
See as to reinstatement : knowledge u American National Ins. Co. v.
and belief, see § 2005 herein. Anderson, — Tex. Civ. App. — , 179
On effect of qualifying statements S. W. 66; Rev. Stat. 1911, art. 4741,
or warranties by words to "best of subd. 4, art. 4947.
my knowledge and belief" or words 12 iEtna Life Ins. Co. v. Conway,
of like import, see note in 43 L.R.A. 11 Ga. App. 557, 75 S. E. 915, 41
(N.S.) 431. Ins. L. J. 1802.
3319
§ 2003 JOYCE ON INSURANCE
it could l»c said with as much propriety that he should not be
bound in all events by the very terms of his answer when it
concerned a transaction or thing that he never did have any kind
of information about." In the ease, however, before the court
there was evidence that assured at some time did have knowledge
and information that he had certain diseases material to the risk,
although he answered that he never had such diseases and a
judgment for defendant was accordingly affirmed.18 Again, if
the representations as to sound health, etc., concern matter vital
to the risk, the policy is avoided whether the applicant knew of
their falsity or not, and it is not necessary to show actual fraud,
although the policy and statute provide that all statements by
assured shall in the absence of fraud be deemed representations
and not warranties. A distinction is also made as to misrepresenta-
tions of such a character as go to the vitality of the contract and
those which are practically immaterial, or where its bearing is only
technical or remote, in this that, while in the former case what
is above said applies, in the latter insured's good faith is entitled
to consideration.14 A man who procures his wife to insure her
life for his benefit, cannot take advantage of her ignorance of a
fatal malady, making her uninsurable, of which he knows, to
justify answers in the application, when common honesty required
him to inform her of the existence of such malady, and when said
facts if stated by her would have made the policy void.15 So the
fact that an untrue statement as to pregnancy is made in good
faith and without intent to deceive does not aid assured where
the fact stated is a warranty.16
Another factor is whether or not the misrepresentation was of an
ailment or disease which contributed to assurcd's death. Under a
Kansas decision the withholding of misrepresentations of facts
in an application for life insurance will not defeat the contract
unless the facts withheld or misrepresented, pertain in some degree
to the malady which occasions insured's death; following the
13Blenke v. Citizens" Life Tns. Co. a' representation innocently made by
145 Kv. 332, 140 S. W. 561, 41 Ins. insured), 75 N. E. 788, 41 Ins. L. J.
L. J. 94 : Kv. Stat. sec. 639 ( Russell's 170.:.
Stat. sec. 4286). 16 Satterlee v. Modern Brotherhood
"Kaspryzk v. Metropolitan Life of America, 15 N. Dak. 92, 106 N.
Ins. Co. 1*40 N. Y. Siipp. 211, 70 W. 561; Rev. Code 1899, sec. 4485.
Misc. 263, 42 Ins. L. J. 607. But compare Schwartz v. Royal
15 Gamble v. Metropolitan Life Ins. Neighbors of America, 12 Cal. App.
Co. 92 S. Car. 451, 41 L.R.A.(N.S.) 505, 108 Pac. 51; Rasicot v. Royal
1199 (annotated, on effect of bene- Neighbors of America, 18 Idaho, 85,
ficiary's knowledge of the falsitv of 29 L.R.A.(^.S.) 433, 108 Pac. 1048.
3320
PARTICULAR REPRESENTATIONS, ETC. § 2003
statute,17 so insured is held to be in good health where his ailment
was a temporary indisposition which did not weaken or undermine
his constitution, and was one which is not necessarily dangerous
and seldom or never fatal, and such indisposition was not the cause
of assured's death, even though it might have rendered him
more susceptible to the attack which resulted in said death.18
Under a Missouri decision a policy is not avoided by assured's mis-
representation as to good health unless he was then suffering from
an infirmity which actually contributed to his death.19 And mis-
representations as to health and diseases must under the North
Carolina statute materially contribute to the loss or be fraudulently
intended in order to prevent recovery.20 Under a Texas decision,
however, a false statement regarding a practically incurable disease
avoids the policy where it so stipulates although assured's death
resulted from another disease ; and it is material to the risk assumed
under a statute relating to benefit certificates in fraternal associa-
tions and defenses.1
As to fraud in cases of this character: It is held in Mississippi
that where statements by assured as to her physical condition do
not fraudulently conceal any material facts and no fraud is charged
the policy is not avoided where it stipulates that all statement?
shall, in the absence of fraud, be deemed representations and no{
warranties and that it contains the entire contract.2 In another
case assured stated to insured's medical examiner that he had
kidney trouble and that every physician in town had turned him
down. The physician's report negatived fraud, and there was no
positive evidence showing it, nor any evidence from which it
could be inferred other than the fact that assured signed the appli-
cation and the agent's statement to assured that he had gotten a
17 Newton v. New York Life Ins. Leg. called Sess. e. 22, sec. 1. See
Co. 95 Kan. 427, 148 Pac. 619 ; Genl. Fidelity Mutual Life Ins. Co. v. Beck,
Stat. 1909, sec. 4200. 84 Ark. 57, 104 S. W. 533 (warranty
18 Manhattan Life Ins. Co. v. Car- material even though death resulted
der, 82 Fed. 986, 27 C. C. A. 344. from cause entirely disconnected ) ;
19 Roedel v. John Hancock Mutual Salts v. Prudential Ins. Co. 140 Mo.
Life Ins. Co. 176 Mo. App. 584, 160 App. 142, 120 S. W. 714, 38 Ins.
S. W. 44; Rev. Stat. 1909, sec. 6937. L. J. 943 (policy not avoided; Ann.
See also Dodt v. Prudential Ins. Co. Stat. 1906, p. 3746) ; Valleroy v.
of America, 186 Mo. App. 168, 171 Knights of Columbus, 135 Mo. App.
S. W. 655. 574, 116 S. W. 1130 (policy avoided;
20 Albert v. Mutual Ins. Co. 122 Rev. Stat. 1899, sec. 1408. Ann. Stat.
N. Car. 92, 30 S. E. 327; Laws 1893, 1906, p. 1111) ; Ashford v. Metropoli-
c. 299, sees. 8, 9. tan Life Ins. Co. 98 Mo. App. 505,
1 United Benevolent Assoc, v. Ba- 72 S. W. 712 (no defense; Rev. Stat.
ker, — Tex. Civ. App. — , 141 S. W. 1899, sec. 7890). See § 1916 herein.
541; Acts 31st Leg. 182, called Sess. 2 Citizens' Mutual Life Ins. Co. v.
c. 22, sec. 1, as am'd by acts 31st Sword, 109 Miss. 635, 68 So. 920.
3321
§ 2003 JOYCE ON INSURANCE
similar case through. It was held that the question of assured's
conscious fraud was for the jury, but that even if the agent was
actuated by fraudulenl intent the principal was bound if his acts
were within the scope of his authority and also that said agent's
knowledge might he imputed to the principal even though assured
had knowledge that the agent's acts were adverse to the interests
of his principal, unless in such case assured fraudulently partici-
pated in said acts.8 In Alabama while the insurer may not rely
upon a breach of warranty as to certain diseases in the application
where it is not incorporated in the body of the policy or attached
thereto still fraudulent representations in the application may be
pleaded as fraud is not within the statute.4
If a policy of insurance provides that it is absolutely incontestable
from the date of its delivery and acceptance, except for nonpay-
ment of premium or misstatements of age, it cannot be avoided
on account of misstatements of the assured respecting his health,
or of the grounds upon which he had made an application for a
pension.6 And there is a waiver of falsity of answers where it is
provided that all statements shall in the absence of fraud be deemed
representations and not warranties, especially where there is also
an incontestable clause, and this applies to a defense of fraudulent
misrepresentations as to health and habits of assured; although the
issue of good health was settled by the verdict.6 In a New York
3 Huestess v. South Atlantic Life would not be inclined to adopt a
Ins. Co. 88 S. Car. 31, 70 S. E. 403. construction of the statute which in
4 Em | lire Life Ins. Co. v. Gee, 171 some, though rare, cases would
Ala. 435, 55 So. 166, 40 Ins. L. J. amount to a practical foreclosure of
L38 I, Ala. Code 1907, sec 4579. The all remedy for fraud. Albro v. Man-
court, per Sayre, J., said: "The in- hattan Life Ins. Co. (C. C.) 119 Fed.
surer may not sustain a plea that the 635. Fraud vitiates everything, and
insured lias breached the contract by it is not ordinarily the policy of the
giving in evidence the warranties of law to put difficulties in the way of
an application for the policy, not proving it.''
incorporated in the body of the pol- 5 Patterson v. Natural Premium
icy, or not so attached as to serve Mutual Life Ins. Co. 100 Wis. 118,
the purpose of the statute. ... 42 L.R.A. 253, 69 Am. St. Rep. 899,
In some of the states the statutes 75 N. W. 980.
forbid the introduction in evidence of As to incontestability; fraud, false
applications nol attached to policies ; and fraudulent misrepresentations,
but in the statute of this state there see §§ 3733a et seq. herein.
is no inhibition against the proof of . On effect of incontestable clause
representations made in the applica- where insured is in poor health when
tion to the extent that they may be policy is delivered, see note in 6
relevant and material to a plea of L.R.A.(N.S.) 1064.
fraud in the procurement of the pol- 6 Tennessee Life Ins. Co. v. Nolen,
icy, and. in absence of language 108 Ark. 511, 158 S. W. 775, 42 Ins.
clearlv mandatory to that effect, we L. J. 1463.
3322
PARTICULAR REPRESENTATIONS, ETC.
2003
case it is held that a stipulation in a certificate of life insurance
"that no question as to the validity of the application or certificate
of membership shall be raised, unless such question be raised
within the first two years after the date of such certificate of
membership and during the life of the member therein named,"
is valid, and excludes the defenses that the decedent and the benefi-
ciary falsely represented that the decedent was not then suffering,
and never had suffered, from certain diseases which in fact had
seriously impaired his health, and the beneficiary had no insurable
interest in the life of the insured.7
Whether or not insured has falsified in his statements as to
disease, illness, attendance by a physician, etc., are ordinarily ques-
tions for the jury where the evidence is conflicting, or even where
the evidence is close, although in certain cases the question has
been held one of law, or it has been decided that a verdict has
been properly directed.8 In a case in Utah the court, per Straup,
7 Wright v. Mutual Benefit Life 41 Ins. L. J. 1776, s. c. (U. S. D. C.)
Assoc. 118 N. Y. 237, 6 L.R.A. 731, 198 Fed. 272, 41 Ins. L. J. 1784.
16 Am. St. Rep. 749, 23 N. E. 186. Indiana.— Prudential Ins. Co. of
8 In the following cases the ques- America v. Sellers, 54 Ind. App. 326,
tion stated in connection with the 102 N. E. 894, 42 Ins. L. J. 1693
citation was, except where otherwise (attendance by physician; whether
indicated, held one for the jury : representation as to, is substantially
United States. — Miller v. Maryland true) ; Collins v. Catholic Order of
Casualty Co. 193 Fed. 343, 113 C. Foresters, 43 Ind. App. 549, 88 N. E.
C. A. 267, 41 Ins. L. J. 990 (ques- 87, 38 Ins. L. J. 737 (question of as-
tions of good faith and materiality) ; sured's knowledge of falsity of state-
Life Association of America v. Ed- ment as to seeking medical advice;
wards, 159 Fed. 53, 86 C. C. A. 243 also whether a cold, biliousness, or
* (error to deny motion of insurer to indigestion constitute a "serious ill-
direct verdict in its favor). ness").
Arkansas. — National Americans v. Iowa. — Peterson v. Des Moines
Ritch, 121 Ark. 185, 180 S. W. 488 Life Assoc. 115 Iowa, 668, 87 N. W.
(cannot be said as matter of law 397 (whether answers were untrue
that assured did not have an "ail- and fraudulent).
ment" when examining physician tes- Kentucky. — Little v. Security Mu-
tified that she had "chronic rheuma- tual Life Ins. Co. 150 Ky. 35, 149
tism") ; Fidelity Mutual Life Ins. Co. S. W. 1112 (whether representations
v. Beck, 84 Ark. 57, 104 S. W. 533 as to health, true or false and fraud-
breach of warranty that never been ulent; but jury not supposed to have
sick). knowledge whether or not a disease
Delaware. — Grand Fraternitv v. is serious); Brisou v. Metropolitan
Keatley, 27 Del. (4 Boyce) 308, 88 Life Ins. Co. — Ky. — , 115 S. W.
Atl. 553, 42 Ins. L. J. 1715 (dis- 785 (verdict directed for defendant
cussion upon point of submission of insurer; cancer or tumor; confined in
case to jury, and when matter for hospital).
court). Keatley v. Grand Fraternitv, Maryland. — Aetna Life Ins. Co. v.
25 Del. (2 Boyce) 267, 78 Atl. 874, Millar, 113 Md. 686, 78 Atl. 483
s. c. 25 Del. (2 Boyce) 511, 82 Atl. (whether mastoiditis was consequent
294, s. c. (U. S. D. C.) 198 Fed. 264, upon prior trouble or a reinfection;
3323
§ 2003 JOYCE ON INSURANCE
(\J.. said: "We are nut prepared to say thai the deceased's failure
to state that he, seven months prior to obtaining the certificate,
also whether assured stated that he Mactavish, L33 Mich. 68, 10 Det. L.
was in good health; arc questions for N. 109, 94 N. W. 599 (construction is
jury, [f, however, evidence clear and for court where stipulation is that if
uncontradicted court may pass upon any statements are untrue in any par-
same as matter of law) -/.Mutual Life ticular that would have led to rejec-
1ns. Co. v. Rain, ins Md. 353, 70 tion if truly stated).
Atl. 87, 37 Ins. L. J. 845 (question Minnesota. — Gruher v. German
of misrepresentation; good health Roman Catholic Aid Assoc. 113 Minn.
when policy delivered; tuberculosis 340, 129 N. W. 581, 40 Ins. L. J.
of lun<js and other diseases; rule 423 (whether application failed to
stated concerning when question one disclose prior serious or permanent
of law ami when for jury). illness; properly submitted though
Massachusetts. — Kelly v. Mutual question close one on the evidence) ;
Life Ins. Co. 207 Mass. 398, 93 N. Ranta v. Supreme Tent Knights of
E. 695 (whether disease acute or Maccabees of the World, 97 Minn,
chronic in form, also increase of risk 454, 107 N. W. 156 (entitled to con-
it' the former; Bright's disease) ; Kid- sider admissions of officers of lodge
der v. Supreme Commandery United as to cause of death).
Order of the Golden Cross, 192 Mass. Mississippi — Fidelity Mutual Life
326, 78 N. E. 469, 35 Ins. L. J. 778 Ins. Co. v. Miazza, 93 Miss. 422, 48
(failure to disclose disease, which is So. 1017 (whether misrepresentation
serious but not so recognized, ques- induced issuing policy; case of fail-
tion of increase of risk is for jury, ure to disclose all the facts as to
but where seriousness of disease disease and its nature), s. c. 93 Miss,
recognized, increase of risk may be 18, 46 So. 817, 37 Ins. L. J. 810.
matter of law) ; Brown v. Greenfield Missouri. — Roedel v. John Han-
Life Assoc. 172 Mass. 498, 53 N. E. cock Mutual Life Ins. Co. 176 Mo.
129, 28 Ins. L. J. 321 (misrepresen- App. 584, 160 S. W. 44 (assured
tation as to consumption increases stated that he was in good health;
risk, as matter of law; under statute where statute requires that question
relating to subject). ' whether matter misrepresented con-*
Michigan. — Sowiczki v. Modern tributed to event on which policy
Woodmen of America, 192 Mich. 965, payable, it must he so submitted in
158 N. W. 891 (as a general rule every case regardless of question of
question whether person is in sound conflict of evidence: Rev. Stat. 1909,
or good health at a particular time is sec. 693"i ) ; Adams v. Modern Wood-
one for the jury, if evidence at all men of America, 145 Mo. App. 207,
conflicting, and' this applies to the 130 S. W. 113 (question whether
point whether on a particular date warranties were false as to condition
insured believed himself in good of health ; evidence as to consumption
health where it cannot he held as mat - contradictory).
ter of law that there was no issue of Nebraska.— Modern W Imen of
fact on said point). Clark v. North America v. Wilson, /(> Neb. 80, 107
American Union, 189 Mich. 589, 155 N. W. 568, 35 Ins. L. J. 582 (whether
N. W. 584, 47 Ins. L. J. 238, s. c. assured answered in good faith and
17!) Mich. 131, 146 N. W. 336 (in did not intend to misrepresent).
case of doubt ujpon evidence of exam- New Jersey. — Manning v. Metro-
ining physician whether controlling politan Life Ins. Co. 80 N. J. L. 72,
question as to pregnancy was asked; 76 Atl. 334 (whether assured had
submitted to jury although insured pulmonary disease at date of policy) ;
signed blanks): New Era Assoc, v. Ford v. Metropolitan Life Ins. Co.
3324
PARTICULAR REPRESENTATIONS, ETC. § 2003
was visited by a physician for a sprained knee, or his failure to
state such injury, or the other injuries, was, as matter of law, of
such materiality as to avoid the contract, or that such injuries
or withholding of them substantially increased the chances of loss
79 N. J. Law, 00, 74 Atl. 253 not be disturbed) ; Barnes v. Fidelity
(whether representations fraudu- Mutual Life Ins. Co. 191 Pa. 618, 45
lently made; physician was consult- L.R.A. 264, 43 Atl. 341, 28 Ins. L. J.
ed and diagnosed case as syphilis but 666 (question of "good health"; cold
did not tell assured). developed into pneumonia which
New Mexico. — Perea v. State Life proved fatal in two days) ; Keatley
Ins. Co. 15 N. Mex. 399, 110 Pac. v. Travelers' Ins. Co. 187 Pa. 197,
559 (evidence insufficient to go to 42 Wkly. N. C. 371, 40 Atl. 808
jury; indigestion or dyspepsia; judg- (evidence conflicting as to assured's
ment for assured). having been told nature of his illness;
New York. — Davitt v. National and whether statement by him that
Life Assoc. 56 N. Y. Supp. 839, 36 he had never had apoplexy was true
App. Div. 632 (whether insured was or he believed it to be true) ; Smith
"well") ; Davis v. Supreme Lodge v. Metropolitan Life Ins. Co. 183 Pa.
Knights of Honor, 54 N. Y. Supp. St. 504, 38 Atl. 1038 (question of
1023, 35 App. Div. 354 (whether in- concealment and bad faith as to con-
sured had misrepresented condition as suiting physician),
to sound health and recovery from South Carolina.— Gamble v. Metro-
grip; there was some evidence of politan Life Ins. Co. 92 S. Car. 451,
incipient stage of consumption). 41 L.R.A. (N.S.) 1199, 75 S. E. 788,
North Carolina.— Schas v. Equi- 41 Ins. L. J. 1703 (right of jury to
table Life Assur. Soc. 170 N. Car. infer agency of husband for wife sa
420, 87 S. E. 422, 47 Ins. L. J. 151 as to impute to her his knowledge of
(evidence conflicting; whether self- her fatal disease).
pollution constituted serious illness; South Dafcota— Erickson v. Ladies
properlv submitted) s. c. 166 N. Car. of the Maccabees of the World, 25 S.
55, 81 S. E. 1014. Dak. 183, 126 N. W. 259 (question
Oklahoma.— Continental Casualty of intent to act honestly and not
Co. v. Owen, 38 Okla. 107, 131 Pac. misrepresent as to cause of father's
1084 (whether assured was suffering death).
from a "defect in the body." There Texas.— Knights of Maccabees of
was a sharp conflict in evidence upon the World v. Hunter, 103 Tex. 612,
point whether he had acute or chronic 132 S. W. 116 (held error to refuse
nephritis a short time prior to issu- to instruct jury to find for insurer) ;
ance of policy: death resulted from Mutual Reserve Fund Life Assoc, v.
gunshot wound accidentally inflicted Bozeman, 21 Tex. Civ. App. 490, 52
shortly after policy issued; also suf- S. W. 94 (whether fatal attack was
fered'from acute nephritis, but re- connected with former attack of
covered). bilious fever).
Pennsylvania.— Murphv v. Pru- Virginia.— Greenwood v. Royal
dential Ins. Co. of America, 205 Pa. Neighbors of America, 118 Va. 329,
447, 453, 55 Atl. 19, .23 (duty of 87 S. E. 581 (warranty of "good
court in all cases to pronounce an- health;" whether falsified; remstate-
swer material to risk,— Mestrezat, J., ment; death from heart disease),
quoted in Delaware case above in this Washington. — Hoeland v. Western
note) ; Wall v. Roval Society of Good Union Life Ins. Co. 58 Wash. 100,
Fellows, 192 Pa. St. 577, 44 Atl. 248 107 Pac. 866 (whether headaches a
(whether answers false; verdict will disease).
3325
§ 2004 JOYCE ON INSURANCE
insured against.9 We think such matters were of fact and not
of law. to be, as they were, submitted to the jury. The judgment
is therefore affirmed with costs."10 And while acute appendicitis
is an "illness" chronic appendicitis is not necessarily described
as an "illness" and whether an operation for the latter and conse-
quent confinement is an "illness*' is a question for the jury where
assured in his application had warranted thai he had never received
indemnity for any accident or illness except a certain sum for a
sprained ankle.11 And although the answers are made warranties
the question of their falsity in fact or of intentional omission or
concealment are for the jury.12 Where sunstroke was not included
in the list of enumerated diseases, but it did include diseases of the
brain, it was proper for the court to submit to the jury the ques-
tions whether an attack which the insured had had, called sun-
stroke, was such in reality, and whether such attack, whether
sunstroke or not, was a disease of the brain.13
§ 2004. Health: "good health:" "sound health:" "sound body:"
"perfect health," etc.14 — (a) The term "good health" does not mean
absolute perfection; but is comparative. The insured need not be
entirely free from infirmity or from all the ills to which the
flesh is heir. If he enjoys such health and strength as to justify
the reasonable belief that he is free from derangement of organic
functions, or free from symptoms calculated to cause a reasonable
apprehension of such derangement, and to ordinary observation
and to outward appearance his health is reasonably such that he
may with ordinary safety be insured and upon ordinary terms, the
requirement of good health is satisfied. Slight troubles, temporary
and light illnesses, infrequent and light attacks of sickness not
of such a character as to produce bodily infirmity or serious impair-
ment or derangement of vital organs, do not disprove the warranty
of good health.15 In other words the term "good health" when
9 Citing Penn Mutual Life Ins. Co. Kansas Mutual Life Ins. Co. (U. S.
v. Mechanics' Savings Bank & Trust C. C.) 108 Fed. 487; Manhattan Lite
Co. 73 Fed. 653, 19 C. C. A. 316, 38 Ins. Co. v. Carder, 82 Fed. 986, 2"i
L.R.A. 33, 70. ' C. C. A. 344; Penn Mutual Life Ins.
10 Witliorow v. Mvstic Toilers, — Co. v. Mechanics' Savings Bank &
Qtah, — , 161 Pac. 1126. Trust Co. 72 Fed. 413, 19 C. C. A.
» Miller v. Maryland Casualty Co. 286, 37 U. S. A.pp. 692, 73 Fed. 653,
193 Fed. 343, 113 C. C. A. 267. 19 C. C. A. 316, 43 U. S. App. 75,
12Mc(iowan v. Supreme Court of 38 L.R.A. 33; Hoffman v. Supreme
Independent Order of Foresters, 104 Council of American Legion of
Wis. 173, 80 N. W. 603. Honor (U. S. C. C.) 35 Fed. 252;
13 Knickerbocker Life Ins. Co. v. Goucher v. Northwestern Traveling
Trefz, 104 U. S. 197, 26 L. ed. 708. Men's Assoc. 20 Fed. 596 ; Conver v.
14 See § 1987, also § 1916 herein. Phoenix Ins. Co. 3 Dill. (U. S. C. C.)
16 United States.— Caruthers v. 225, 226 Fed. Cas. No. 3,143.
3326
PARTICULAR REPRESENTATIONS, ETC. § 2004
used in a policy of life insurance, means that the applicant has
no grave, important, or serious disease, and is free from any
ailment that seriously affects the general soundness and healthful-
ness of the system. A mere temporary indisposition which does not
tend to weaken or undermine the constitution at the time of
effecting insurance or taking membership does not render a policy
void.16
Arkansas. — Des Moines Life Ins. Pennsylvania. — Barnes v. Fidelity
Co. v. Clay, 89 Ark. 230, 116 S. W. Mutual Life Assoc. 191 Pa. St. 618,
232. 45 L.R.A. 264, 43 Atl. 341, 28 Ins.
California. — Poole v. Grand Circle L. J. 666, 667, 668; Csizik v. Ver-
Women of Woodcraft, 17 Cal. App. hovay Sick Benefit Assoc. 60 Pa.
229, 123 Pac. 349, 41 Ins. L. J. 1148. Sup. Ct. 466. See also Gordon v.
Illinois. — Johnson v. Modern Wood- Prudential Ins. Co. of America, 231
men of America, — 111. App. — , 42 Pa. 404, 80 Atl. 882, 40 Ins. L. J.
Nat. Corp. Rep. 122; Cessna v. Unit- 1838 (rule approved but as case not
ed States Life Endowment Co. 152 within rule policy was held avoided) ;
111. App. 653. Baldi v. Metropolitan Ins. Co. 18
Indiana. — Prudential Ins. Co. of Pa. Super. Ct. 599.
America v. Sellers, 54 Ind. App. 326, Virginia. — Greenwood v. Royal
102 N. E. 894, 42 Ins. L. J. 1692. Neighbors of America, 118 Va. 329,
Kentucky. — Galbraith v. Arlington 87 S. E. 581 (quoted from under §
Mutual Life Ins. Co. 12 Bush (75 2010 herein).
Ky.) 29. Wisconsin. — Morrison v. Wiscon-
Maine. — Jeffrey v. United Order of sin Odd Fellows' Mutual Life Ins.
Golden Cross, 97 Me. 176, 53 Atl. Co. 59 Wis. 162, 18 N. W. 13.
1102, 32 Ins. L. J. 697. England.— Hutchinson v. National
Maryland. — Aetna Life Ins. Co. v. Loan Assoc. 7 Ct. Sess. (Scot.) 2
Millar, 113 Md. 686, 78 Atl. 483. Ses. 467, 2 Big. L. & A. Ins. Cas.
Michigan. — Hann v. National 444; Ross v.1 Bradshaw, 1 W. Black.
Union, 97 Mich. 513, 37 Am. St. Rep. 312.
365, 56 N. W. 834. See Co-operative Assoc, v. Leflore,
Minnesota. — Gruber v. German 53 Miss. 1. See § 2003 herein. "A
Roman Catholic Aid Assoc. 113 Minn, warranty that the person whose life
340, 129 N. W. 581, 40 Ins. L. J. 423. is to be insured 'is in good health at
Missouri. — McDermott v. Modern the time of making the policy' is to
Woodmen of America, 97 Mo. App. be construed in a liberal sense as re-
636, 71 S. W. 833. gards the assured, and is not to be
New York. — Grattan v. Metropoli- understood as a warranty that the
tan Life Ins. Co. 92 N. Y. 274, 28 person is perfectly free from the
Hun, 430, 44 Am. Rep. 372; Peacock seeds of disorder. Though the per-
v. New York Life Ins. Co. 20 N. Y. son may by accident be afflicted with
293, 1 Bosw. 338. a particular infirmity, if his life be
Ohio. — Ohio Mutual Life Assoc, v. in fact a good one, and he be in a
Druddy, 8 Ohio N. P. 140, 10 Ohio reasonably good state of health, so
S. & C. P. Dec. 591. that his life may be insured on the
Oklahoma. — Sovereign Camp common terms for his age and con-
Woodmen of the World v. Jackson, dition, the party insuring will have
— Okla. — , L.R.A.1916F, 166, 157 a right to recover:" Ellis on Fire
Pac. 92; Mutual Life Ins. Co. of N. and Life Ins. and Annuities (ed.
Y. v. Morgan, 39 Okla. 205, 135 Pac. 1834) p. 62, *106.
279. 16 Hann v. National Union, 97
3327
I 2004
JOYCE OX INSIWAXCE
Tt is accordingly declared in Oklahoma that "the fact that an
applicant for life insurance is temporarily indisposed at the time
of making the application will not avoid the policy if the illness
is not of a character to permanently att'ect his health or render
him more susceptible to the attack of disease, although he repre-
sents in the application thai he is in good health at the time." "
It is also held that the representation in an answer for life insur-
ance that the applicant is in good health or that he has not been
subject to illness, means that he has not suffered illness of a
-cnous nature tending to undermine his constitution, and that
his state of health is free from disease that affects the general
soundness or healthiness of the system.18 One case states a rule
which is of a somewhat negative character, as follows: If the life
would not be taken at the ordinary rates, it is not a "healthy
life." 19 If a benefit certificate is granted upon the express condition
that the statements in the application therefor are true, hut the
applicant, while affirming himself to be in good health, also makes
a general declaration as to the statements subscribed by him that
they are true to the best of his knowledge and belief, the effect
of this qualification is that recovery upon the certificate can only
be defeated by showing that he knew or had reason to believe
thai he was not in good health at the time the application was
made.20
Midi. 513, 37 Am. St. Rep. 365, 50 "Health" is also defined as 1.
X W. 834; Barnes v. Fidelity Mutual "That state of living organism in
Life Ins. Co. 191 Pa., St. 618, 45 which the parts are sound, well
L.R.A. 264, 43 Atl. 341,' 28 Ins. L. J. organized and disposed, and in which
(liiti, 667, 668. See also Girdon v. all the organs perform their natural
Prudential Ins. Co. 231 Pa. 404, 80 functions without pain or disease;
Atl. 882, 40 Ins. L. J. 1838. See soundness of body. Health is some-
citations'in last preceding note ante, tiling different from strength; it is
also citations to "disease" under § universal good condition."— Hunger.
2003 herein, and instances of specific 2. "Moral or intellectual soundness;
ailments, illnesses, disease, etc., at natural vigor of the faculties."
end of this section. Webster's Universal Dictionary (ed.
Eealth: "Physical soundness: 1911). "Healthful" "Full, of or in
freedom from disease or min." 1 Bil- the enjoyment of health; free from
lings' National Medical Diet. p. 624. disease; characterized by or resulting
Health: A normal condition, whole- from health; healthy." Id.
ness or soundness of body and mind. "National Council Knights &
The opposite of disease. 3 Foster's Ladies of Security v. Owen, — Okla.
Ency. Medical Diet. (1892) p. 1827. — , 161 Pac. 178.
Relative health: A condition in 18 Bluinenthal v. Berkshire Life
which there is a deviation from the Ins. Co. 134 Mich. 216, 104 Am. St.
healthy standard, and vet it is im- Rep. 604, 96 X. W. 17.
possible to name or define any disease ™ Brealey v. Collins, 1 Younge,
which may he present. This is often 317.
the method of attack of constitution- 20Hann v. National Union, 97
al diseases and degenerations. Id. Mich. 519, 37 Am. St. Rep. 365, 56
3328
PARTICULAR REPRESENTATIONS, ETC. § 2004
(b) In accord with and to a substantially like effect as the
meaning above given to "good health" are decisions construing
the term "sound health." x So it is declared that "sound health"
does not mean perfect health, it means a state of health free from
any disease or ailment that affects the general soundness and health-
fulness of the system seriously " 'a mere temporary indisposition or
ailment would not ordinarily be regarded as rendering the health
unsound within the meaning of these words when used in an
insurance contract, speaking generally they mean the absence of
any vice in the constitution, and of any disease of a serious nature
that has a direct tendency to shorten life; the absence of a con-
dition of health that is commonly regarded as disease in contra-
diction to a temporary ailment or indisposition.' " 2 It is also
said in a Michigan case that "the 'sound health' evidently meant
in the application is a state of health free from any disease or ail-
ment which affects the general soundness and healthfulness of the
system seriously, not a mere temporary indisposition which does
not tend to weaken or undermine the constitution of the assured." 3
Under the Georgia code the important inquiry is, Was the conceal-
ment wilful? Did it relate to a matter material to the risk?
And an unequivocal statement by assured that he was in sound
health if untrue and he was in fact suffering from a serious' dis-
order which made him an undesirable risk avoids the policy.4
So the falsity of statements made in a health certificate which an
applicant for an increase of benefit insurance was required to
furnish is available to defeat recovery of the insurance, where the
applicant agreed in the health certificate that it and his applica-
tion, together with the laws of the order, should constitute the
contract.5
N. W. 834. See "good faith, knowl- sured was in sound health, etc. There
edge, etc.," under § 2003 herein. was no point made as to representa-
1 Metropolitan Life Ins. Co. v. tion or Avarranty in the application).
Howie, 62 Ohio St. 204, 5G N. E. 908, 3 Brown v. Metropolitan Life Ins.
29 Ins. L. J. 756; Ohio Mutual Life Co. 65 Mich. 306, 314, 32 N. W. 610,
Assoc, v. Draddy, 8 Ohio N. P. 140., per Morse, J.
10 Ohio S. & C.'P. Dec. 591. 4 Aetna Life Ins. Co. v. Conney,
2 French v. Fidelity & Casualty Co. 11 Ga. App. 557, 75 S. E. 915; Civ.
135 Wis. 259, 17 L.R.A.(N.S.) 1011, Code 1910, sees. 2479-2481, 2483.
115 N. W. 869, 37 Ins. L. J. 385, 5 Knights of Maccabees v. Shields,
per Bashford, J., quoting with ap- 156 Kv. 270, 49 L.R.A.(N.S.) 853,
proval from Packard v. Metropolitan 100 S. W. 1043.
Life Ins. Co. 72 N. H. 1, 54 Atl. On admissions or -statements by
287, 32 Ins. L. J. 742 (decided in insured outside of his application
1903. The question arose under a as evidence against beneficiary, see
provision that insurer assumed no notes in 11 L.R.A.(N.S.) 92; 49
obligation unless on policy date in- L.R.A.(N.S.) 853.
Joyce Ins. Vol. III.— 209. 3329
§ 2004 JOYCE ON ENSURANCE
An applicant for life insurance may be required to warrant
himself sound in health.6 And the fact thai an applicant is not
ed as (o a particular disease with which she is afflicted, or
as to i li«' physician who attended her, will not permit enforcement
of the policy, although she died of such disease, where she allirmed
in the application that .-he was in sound health, and had never
been seriously ill. and the policy and application both provide
thai no liability shall he incurred hy.thc company unless the policy
is delivered while assured is in good health.7 But if the requirement
as to sound health is a condition precedent to attachment of the
risk, the assurer, in order to escape liability on that ground, must
show that assured was not in sound health when the policy was
issued.8 So in Kentucky it must he shown in order to avoid a
policy, conditioned to be void if insured was not in sound health
when the policy was issued that the disease relied upon as a defense
developed between the completion of the contract by delivery
of the policy, and only the statements in the application must be
rdicd upon to sustain said defense and prevent recovery.9 Again,
a stipulation or warranty that insured shall be in sound health at
the time the policy is delivered, is within the Missouri statute
so that even if it is false the policy is not avoided unless assured's
death was contributed to or occasioned by the matter so misrepre-
6 Standard Life & Accident Ins. he had fits but not that they were of
Co. v. Sale, 121 Fed. 664, 57 C. C. A. epileptic nature).
418, (il L.R.A. 337. Ohio.— Metropolitan Life Ins. Co.
7Haapa v. Metropolitan Life Lis. v. Howie, 62 Ohio St. 204, 56 N. E.
Co. 150 .Mich. 467, 16 L.R.A.(N.S.) 908, 29 Ins. L. J. 756.
1165, 114 N. W. 380. Examine Life Texas.— Modern Woodmen of
Ins. Clearing Co. v. Altshulen, 55 America v. Owens, 60 Tex. Civ. App.
Neb. 341, 75 N. W. 862, s. c. 53 Neb 398> 130 S- W- 858 (Pohc.v returned
481, 73 X. W. 942, 27 Ins. L. J. 262 fol\ «>"ection; insured developed
(case of such a condition and typW fever; policy delivered after
waiver). See §§ 97a et seq. herein. death ; statement a continuing war-
In the following eases recovery was ' /-»' '«• t. c *• i t- i-
... & ' On effect of stipulation m appli-
]'n''.' TT , cation or policy of life insurance thai
Michigan.— B.a&pa, v. Metropolitan j, shall not become binding unless
Life Ins. Co. 150 Mich. 467, 16 L.R.A. delivered to assured while in good
(N.S.) 1165, 114 N. W. 380 (verdict health, see notes in 17 L.R.A.(N.S.)
directed for insurer). 144; 43 L.R.A.(N.S.) 725; L.K.A.
Minnesota. — Murphy v. Metropoli- 1916F, 171.
tan Life Ins. Co. 106 Minn. 112, 118 8 Healy v. Metropolitan Life Ins.
X. \\\ 355 (verdict directed for in- Co. — Dist. Col. — , 39 Wash. L.
surer). Rep. 406.
New York. — Thompson v. Metro- 8 Modern Woodmen of America v.
politan Life Ins. Co. 99 N. Y. Supp. Atkinson, 153 Ky. 527, 155 S. W.
1006 (ag-ent informed by assured that 1135.
3330
PARTICULAR HEFK'KSKXTATIOXS, ETC. § 2004
sented.10 And where a condition requires assured to be alive
and in sound health at the date of delivery of the policy in order
to bind assurer, it may appear in order to be available to defeat
the insurance, that insured was suffering at the date of or at the
time of the delivery of the policy, as the case may be, with a
disease or diseases which contributed to his death, that is that
his death was occasioned as a result of a malady from which he
was then at said time, suffering. Such a condition is interpreted
and enforced in view of a statute that no misrepresentations made
in obtaining or securing a life policy shall be deemed material
or render the policy void, unless the matter or event shall have
actually contributed to the contingency or event on which the
policy is to become payable.11
(c) A sound condition physically means the same as sound
health. It signifies an absence of bodily infirmity. It means
that one has no settled disease, ailment or disorder that would
probably result in the impairment of physical health and vigor in
some degree. It does not mean that a person has had no temporary
ailments, or disorders arising from some sudden or unexpected
derangement of the system, and from which attack there has been
a full recovery without leaving any perceptible effect upon the
10 Salts v. Prudential Ins. Co. 140 dent to the policy becoming operative
Mo. App. 142, 120 S. W. 714, 38 Ins. under a statute that misrepresenta-
L. J. 043 ; Rev. St. 1899, Ann. Stat, tions to be material must have aetual-
1906, p. 3746. ly contributed to the contingency or
11 Stephens v. Metropolitan Life event on which the policy becomes
Ins. Co. 190 Mo. App. 673, 176 S. due. Welsh v. Metropolitan Life Ins.
W. 253, 46 Ins. L. J. 126; Rev. Stat. Co. of N. Y. 165 Mo. App. 233, 147
1909, sec. 6986. See American Na- S. W. 17; Rev. Stat. 1909, sec. 6937.
tional Ins. Co. v. Anderson, — Tex. A. warranty in the policy that policy
Civ. App. — , 179 S. W. 66; Rev. is not to take effect when issued un-
Stat. 1911. art. 4741, subd. 4. less insured is then in sound health
The following decisions clearly evi- is within the statute so that the insur-
dence the law upon this point in ance is not void unless the disease
Missouri: A condition requiring concerning which the misrepresenta-
insured to he in sound health at the tion was made contributed to or
policy date, is within a statute so as occasioned assured's death. Lynch y.
to preclude defeating the policy for Prudential Ins. Co. of America. 150
misrepresentn tions as "to health unless Mo. App. 461, 131 S. W. 145; Rev.
assured's condition of health was Stat. 1899, sec, 7890; Ann. Stat.
such at the time the policy was issued 1906, p. 3746. And where the policy
as to contribute to his death. Dodt stipulates for sound health of as-
v. Prudential Ins. Co. of America, sured when it is issued, the statute
386 Mo. App. 168, 171 S. W. 655; applies to preclude a recovery for
Rev. Stat. 1909, sec. 6937. A policy false statements by him as to a
stipulation that no liability is as- disease which resulted in his death,
sumed unless assured is in sound Benson v. Metropolitan Life Ins. Co.
health on the policy date, need not 161 Mo. App. 480, 144 S. W. 122;
be complied with as a condition prece- Rev. Stat, 1909, sec. 6937.
3331
§ 2004 JOYCE ON INSURANCE
system.18 And it is held 'that where the assured answer? in perfect
good faith that he is of "sound body,'' the policy will not be
avoided although he has a fatal disease at the lime.13
( <!) Where assured make- a statement under an accident policy
that he never had any bodily infirmity, it cannot be assumed that
it was intended by the parties that during the period of a long
Life he had never suffered from any of the ills to which flesh is
heir, on the contrary there cannot reasonably be included in said
words or warranty temporary ailment- from which assured has
fully recovered and which leave no perceptible effect. Bodily
infirmity means, therefore, a settled disease, an ailment which
would probably result to some degree in the general impairment
of physical health and vigor. It only includes an ailment or
disorder of a somewhat settled or established character and not
merely a temporary disorder arising from a sudden and unexpected
derangement of the system.14 In another case, which was one of
bodily deformity, the agent did not regularly represent the insurer
and the application was written by the agent and signed by him
as "broker, solicitor, agent or subagent;" preceded by the state-
ment: "I personally solicit and recommend this risk." All the
representations were expressly made warranties. The application
was personally presented to insurer at its office by said agent
to whom the policy was delivered and the commissions paid and
he delivered the same to insured. It was held that the policy
was avoided by false representations in the application and that
assured was not estopped by reason of agency as the agent repre-
sented insured.16
12 French v. Fidelity & Casualty As to "severe illness or injury" or
Co. 135 Wis. 259, 17 L.R.A.(N.S-) surgical operation and answer thai
Hill. 11.", X. W. 869, 37 Ins. L. J. "first finger index right hand" lost,
385 (substance of what is declared see Collins v. Catholic Order of
and applied in said case, per Bash- Foresters, 43 I ml. A pp. 549, 88 N.
ford, J.). E. 87, 38 Ins. L. J. 737.
13 Schwarsbaeh v. Ohio Valley Pro- As to "malformation" see this word
teetive Qnion, 25 \V. Va. 622, 52 Am. under subd. (i) of this section.
Rep. 12li7. as to "sound body, mind 15 Lynch v. Fraternal Ins. Co. 200
and health." See Clover v. Modern Fed. 193, 118 C. C. A. 379, 42 Ins.
Woodmen of America, 142 111. App. L. J. 453; Travelers' Ins. Co. v.
276. Tlmnic, 180 Fed. 82, 103 C. C. A.
"French v. Fidelity & Casualty 436, 38 L.R.A.(N.S.) 626, 39 Ins. L.
Co. of X. Y. L35 \V,s. 259, 17 L.R.A. J. 1638.
(N.S.) 1011, 115 X. W. 869, 37 Ins. On conflict of laws as to effect of
L. J. 3S5 (claim was that there was misrepresentations in application, see
a breach of warranty in that assured notes in 63 L.R.A. 864; 23 L.R.A.
was suffering at the time from bron- (N.S.) 981; 52 L.R.A.(N.S.) 284.
chit is and other diseases). See § 1996
herein.
3332
PARTICULAR REPRESENTATIONS, ETC. § 2004
(e) It is held that a statement that the assured is in perfect
health, or language which so imports, must be strictly true.16
But it is also decided that alleged false representations as to perfect
health when assured knew that he had heart disease, must be
shown to have been material, without intent to deceive, and that
reliance was placed thereon by assurer.17 In determining this point,
however, as well as other of like tenor, consideration should be given
to the terms of the contract and also to other controlling factors,
such as those stated at the outset in this discussion.18
(f) "Illness" is defined as "disease, indisposition, sickness," and
its synonyms are "disease, disorder, distemper, indisposition, mala-
dy, sickness, ailment." 19 But by the use of the term "illness" in
insurance contracts, not every indisposition, sickness, disorder, or
ailment, no matter however slight, is regarded as intended. There
must be some derangement of the vital functions, something where-
by the general soundness and health of the system is affected or
impaired as distinguished from that which is merely slight and
temporary; the physical condition ought to be affected to some
degree reasonably sufficient to constitute a factor in estimating
the duration and safety of the risk. A slight temporary attack
which does not sensibly affect the health, or tend to weaken or
^undermine the constitution, should not be held to constitute an
j"illness," especially so if it does not seriously interfere with one in
the pursuit of his ordinary or daily avocation.20 And in accord
16 Forbes v. Edinburgh Life Assur. in, see also "good health," at begin-
Co. 10 Shaw & D. 451, 4 Scot. Jur. ning of this section.
385; Borthwick v. Langmuir, 15 Dun- "A mere tenijoorary indisposition,
lap & Bell, 1306. not serious in its nature
17 Empire Life Ins. Co. v. Gee, 178 cannot be coonsidered an illness.
Ala. 492, 60 So. 90, compare< Mutual . . . 'Illness' as used, means a
Life Ins. Co. v. Allen, 174 Ala. 511, disease or ailment of such a character
56 So. 568, 41 Ins. L. J. 221, s. c. as to affect the general soundness and
166 Ala. 159, 51 So. 877. healthfulness of the system serious-
18 See § 2003 herein. ly, and not a mere temporary indis-
19 Webster's Universal Diet. (ed. position which does not tend to
1911). In "common acceptation ill- undermine and weaken the constitu-
ness is ordinarily associated with dis- tion of the insured." Billings v.
ease, with sickness, with ill health. Metropolitan Life Ins. Co. 70 Vt.
In Supreme Lodge Knights of Honor 477, 482, 41 Atl. 518, per Thompson,
v. Lapp's Admx. 25 Ky. L. Rep. 74, J. (decided in 1898). Same definition
74 S. W. 656. 'Illness is defined as in Miller v. Maryland Casualty Co.
a disorder of health or sickness.' " 193 Fed. 343, 113 C. C. A. 267, 41
Miller v. Maryland Casualty Co. 193 Ins. L. J. 990 ; Prudential Ins. Co. of
Fed. 343, 349, 113 C. C. A. 267, 41 America v. Sellers, 54 Ind. App. 326,
Ins. L. J. 990, 996, per Buffington, 102 N. E. 894, 42 Ins. L. J. 1692,
C. J. 1698, also quoted in Poole v. Grand
20 See "disease," under § 2003 here- Circle Women of Woodcraft, 18 Cal.
3333
§ 2004 JOYCE ON [NSURANCE
with the above it is declared thai illness "relates to matters which
have .1 sensible, appreciable form" and applies ordinarily to matters
of a substantial character," and not to a slight and temporary
indisposition, speedily forgotten.1 And where insured is required
to give i'nll particulars of any illness had since childhood "it would
be absurd to suppose that to properly answer" such question
•'within the true intent of the inquiry, the insured must enumerate*'
all the "aches and ills, however slight, transitory and harmless,
which he had had since his childhood to the date of the applica-
tion. Clearly such was not the scope of the inquiry." 2
(g) '•Ailment'" likewise means something whereby health is
seriously impaired, the vital organic functions affected or deranged,
and the constitution substantially weakened.8 And the fact that
assured has for a long period suffered from an ailment does not
avoid the policy where his constitution is not affected therein-
and there is no bad faith on his part.4 And where questions and
answers as to consulting a physician, having had appendicitis and
"any illness, ailment or injury" were made warranties, it was
declared per MeCarty. J.: "We think the better reasoned
decisions in this class of case-, and those more in accord with our
ideas of justice, are to the effect that where the false statements
relate to mere temporary ailment, or to a slight indisposition, that
in no way tended to impair or in any way prejudicially intluence
the health or longevity of the insured, such statements will not
render the policv or certificate void;" and it was accordingly so
held.5
(h) Inasmuch as "illness" as above stated, means some derange-
ment of the vital functions, something which affects or impairs
the general soundness and health of the system as distinguished
from that which is merely slight and temporary, it reasonably
and logically follows that "serious illness" does not import any-
thing of less degree. The word "serious" of itself means "impor-
tant; weighty; not trifling; attended with danger;"6 and these
wmds may properly he applied separately or collectively in deter-
mining what constitutes "serious illness," for an illness is impor-
App. 151, 123 Pae. 349, 41 Ins. L. J. 4 La Compagnie D'Assurance La
1 1 Is. Canadienne v. Telesphore Pilot, Rap.
1 Hubbard v. Mutual Reserve Fund Jud. Queb. 5 B. R. 521.
Life Assoc. 100 Fed. 711), 723, 40 6Bednarek v. Brotherhood of
C. C. A. 665. American Yeomen, — Utah, — , 157
2 Hillings v. Metropolitan Life Ins. Pac. 884.
Go. 7(1 Vt. 477, 482, 41 Atl. 518, 6 Webster's Universal Diet. (ed.
per Thompson, J. 1911).
3 Nat i< mat Americans v. Ritch, 121
Ark. 185, 180 S. W. 488.
3334
PARTICULAR REPRESENTATIONS, ETC. § 2004
tant in an insurance sense in that it may directly affect the result,
or directly and proximately cause the contingency or event to
happen upon which the policy becomes payable. It may be
weighty, in that it is of such a character that were it known to
insurer it would be adapted to turn the balance against issuing
the policy. It may also be attended with danger, and while a
serious illness is, by all the authorities, "not trifling" still, with
this exception, while the above definition of "serious" applied to
the word "illness" technically and strictly defines "serious illness,"
it does not meet all the requirements of these words as used in and
applicable to life insurance contracts in determining whether or
not the policy is avoided, for what is alleged to be a "serious ill-
ness" may have been some temporary disturbance of assured's
organism from which, although seemingly or apparently "attended
with danger," he had completely recovered without his health,
vitality, system or constitution having become by reason thereof
materially weakened or impaired. The test therefore, seems to
be whether or not the said disturbance was temporary and its
effect only that above stated, it being assumed that the only object
or purpose of assurer's inquiry is, in good faith to determine
whether or not the risk is then, at the time, the insurance is
sought, a safe insurable one. It is also a relevant and important
consideration whether or not there has been a permanent, actual
recovery in such case, or a continuous, patent, or traceable illness.
Again, another pertinent point is that there are certain diseases
which may reasonably be conceded to be within the term "serious
illness." What is above stated is supported by the authorities
which appear throughout the sections herein where this subject
is discussed and also by the instances in specific cases which appear
at the end of this section.7 Accordingly it is asserted that a repre-
7 See §§ 2003-2012, 2070-2072 nently or materially to impair the
herein. health of the applicant.' After stat-
"Severe illness," see Collins v. ing in effect that in that case whether
Catholic Order of Foresters, 43 Inch the illness of the deceased was a
App. 549, 88 N. E. 87, 38 Ins. L. J. serious illness was a question for the
737. jury, Justice Hayes continues: 'Not
In an Oklahoma case, Continental every illness is serious. An illness
Casualty Co. v. Owen, 38 Okla. 107, may be alarming at the time, or
131 Pac. 1084, the court, per Kane^ thought to be serious by the one
J., said : "In Woodmen v. Prater, afflicted, and yet not to be serious
24 Okla. 214, 23 L.R.A.(N.S.) 917_, in the sense of that term as used
20 Ann. Cas. 287, 103 Pac. 558, it in insurance contract. An illness
was held that 'the term "serious ill- that is temporary in its duration and
ness," as used in an application for entirely passes away and is not at-
a life insurance policy, means such tended, nor likely to be attended by
an illness as permanently or mate- a permanent or material impairment
rially impairs, or is likely perma- of the health or constitution, is not
3335
§ 2004 JOYCE ON INSURANCE
sentatioD by insured in his application thai he had no "serious
illness" meant more than an illness temporary in duration, and
not attended or likely to be attended by permanent or material
impairment of health.8 So it is declared, that serious illness
a serious illness. It is not sufficient insignificance in its effect, yet of
that the illness was thought serious possible seriousness, which the appel-
at the time it occurred, or that it lant, without careful scrutiny and
might have resulted in permanently accurate recollections of his past lite,
impairing the health.'" has overlooked to mention. Emi-
8 Schas v. Equitable Life Assur. nent Household of Columbian Wood-
Soc. of U. S. 170 N. Car. 420, 87 men v. Prater, 24 Ok la. 214, 103 Pac.
S. E. 222, 17 Ins. L. J. 151 (s. c. 558, 23 L.R.A.(N.S.) 917, 20 Ann.
166 N. Car. 55, 81 S. E. 1014). In Cas. 287, and notes. It has been
this case the court, per Walker, J., held that, if the affliction is of a
said: "Not every illness is serious, permanent character, it must cer-
An illness may be alarming at the tainly be a serious one; and if it is
time, or thought to be serious by merely temporary, and to pass away
one afflicted, and yet not be 'serious' without serious result it cannot well
in the sense of that term as used in be said to render the person unsound
insurance contracts. An illness that in his general health. The word *se-
is temporary in its duration, and rious' is not generally used to signify
entirely passes away, and is not at- a dangerous condition, but rather to
tended, nor likely to be attended, by define a grave, important, or weighty
a permanent or material impairment trouble. Brown v. Metropolitan Life
of the health or constitution, is not Ins. Co. 65 Mich. 306, 8 Am. St. Rep.
a serious illness. It is not sufficient 894, 32 N. W. 610. Serious or se-
that the illness was thought to be vcre illness does not include the ordi-
serious at the time it occurred, or nary diseases of the country, which
thai it might have resulted in perma- yield readily to medical treatment,
nently impairing the health. Union and, when ended, leave no permanent
Mutual Ins. Co. v. Wilkinson, 13 injury to the physical system, but
Wall. (80 U. S.) 222, 20 L. ed. 617. refers to those severe attacks which
A cold may be, and sometimes is, often leave a permanent injury and
followed by pneumonia, pleurisy, ah- fend to shorten life. Bolloman v.
scess of the lungs, and consumption. Life Ins. Co. 1 Woods, (174. 12 Fed.
hut to hold that because a cold may Cas. Xo. 6,623. In Webster's Dic-
be attended or followed by such con- tionary the word 'serious' is defined
sequences it is a serious illness, and as something 'giving rise to appre-
t!:.it a failure to mention such in hension; attendant with dangers; as
response to an inquiry in an appli- a serious injury or condition; inmor-
catioD for insurance as to the nature tant, weighty, not trifling; grave;'
and character of any serious illness and we find substantially the same
the applicanl has suffered, would definitions given in other dictiona-
result in invalidating almost all con- ries. The court, in Carruthers v.
1 i-acts of insurance the covenants of Kansas Mutual Life Ins. Co. (C. C.)
which are based upon the statements 108 Fed. 487, gives the same meaning
in the application as warranties; for to those words, and states that, as
if a careful investigation should be the company saw lit to use the*word
made into the lives of persons in- 'serious,' it should not complain that
sured, in almost every life there the applicant failed to mention, in
would he found some incident of ill- reply to its questions as to whether
ness of such ordinary occurrence and he had ever been ill, every slight
3336
PARTICULAR REPRESENTATIONS, ETC.
§ 2004
means such an illness as permanently impairs health.9 An instance
of the distinction between the meaning of these words under con-
sideration and the application thereof to the particular facts is
ailment. It was held in Illinois Mu- Knights of Damon, 61 S. Car. 338,
tual Benefit Society v. Winthrop, 85 39 S. E. 523.
111. 542, that a statement in an ap- In a Kentucky case, Metropolitan
plication for life insurance that the Life Ins. Co. v. Little, 149 Ky. 717,
applicant has had no serious illness 149 S. W. 998, 41 Ins. L. J. 1798,
will be construed to mean that he the court, per Winn, J., said: "We
has never been so ill as to perma- find ourselves unprepared to give any
nently impair his constitution and exact definition of a 'serious disease.'
render the risk unusually hazardous. The record presents no testimony
Justice Walker, for the court, said from any physician to show how se-
in that case at page 542 of 85 rious might be the effect *of, or how
HI. ; — lasting might be the consequences of,
" 'What is to be understood by the illnesses for which she had been
"serious illness." If any sickness treated shortly before the issual of
which may terminate in death, then the policy. The Century Dictionary
it must embrace almost every dis- defines a serious illness as 'one at-
temper in the entire catalogue of tended by danger, giving rise to ap-
diseases. To give such an interpre- prehensions.' In Brown v. Metropol-
tation to this expression would, we itan Life Ins. Co. 65 Mich. 306, 8
have no doubt, defeat a recovery in Am. St. Rep. 894, 32 S. W. 610, a
a large majority of the certificates serious illness is said to be 'a grave,
issued by the society. The true con- important, weighty trouble.' In
struction of the language must be Drakeford v. Supreme Conclave
that the applicant has never been so Knights of Damon, 61 S. Car. 338,
seriously ill as to permanently im- 39 S. E. 523, it is said that a sick-
pair his constitution, and render the ness may be very bad and very sad,
risk unusually hazardous. It seems and yet not serious ; that any perma-
to us this is the only reasonable con- nent or material impairment of
struction that can be given to the health is a serious illness. Certainly
language. It is reasonable, and is the idea is not to be tolerated that
fair to both parties, and works no mere temporary disorders of func-
harclship or injustice to any one, tional disturbances, having no effect
whether the answers are warranted upon the general health or duration
to be true, or only as a fair state- of life, should, within even the strict
ment of facts, honestly and truly terms of the contract, be considered
given as understood by the appli- serious illnesses. Upon the other
cant.' See also French v. Fidelity hand, there are certain diseases, such
& Casualty Co. 135 Wis. 250, 1*7 as consumption, that the ordinary
L.R.A.(N.S.) 1011, 115 N. W. 869; mind, untrained in medicine, knows
Drakeford v. Knights of Damon, 61 beyond question to be serious. Be-
S. Car. 338, 39 S. E. 523; Eminent tween these extremes there is a broad
Household of Columbian Woodmen line of ills of varying natures, the
v. Prater, 24 Okla. 214, 23 L.R.A. seriousness of which can only be told
(N.S.) 917,' 20 Ann. Cas. 287, 103 with any degree of exactitude by
Pac. 558; jHockaday v. Jones, 8 those who are trained in the study
Okla. 156, 56 Pac. 1054; Daniel v. of the human body and of the effect
Modern Woodmen, 53 Tex. Civ. App. of the various diseases and illnesses
570, 118 S. W. 211; Union Mutual upon it. We incline to agree with
Ins. Co. v. Wilkinson, supra." the South Carolina court's view that
9 Drakeford v. Supreme Conclave a serious illness in insurance termi-
3337
1004 JOYCE OX INSURANCE
evidenced by a Federal case wherein the jury was instructed that:
"The term 'serious illness' in an application for a life policy is
such an illness as is likely to impair permanently the constitution
and render the risk more hazardous. Did these troubles which
he had impair permanently his constitution and render the risk
more hazardous?" and this point as to being temporary or perma-
nent was applied to the facts; and the charge continued: "The
court has also said that the term 'serious illness,5 as used in an
application for a life policy, as to the question whether the appli-
cant ever had any serious illness, means a grave, important and
weighty trouble. In the Century Dictionary the word- mtious
illness' are defined a- attended with dangers giving rise to appre-
hension. Were the illnesses or was any illness from which he suf-
fered dangerous, giving rise to apprehension? and again, it lias been
-aid thai the term 'serious illness,' as used in an application for
life insurance means an illness that permanently impairs the health
of the applicant and does not mean an insignificant illness. The
term does not include every sickness which may terminate in
death, as such an interpretation would cause it to embrace almost
every distemper in the entire category of diseases." There was a
verdicl for the plaintiff, and a motion of defendant for judgment
notwithstanding verdict was overruled and a new trial refused
the court declaring that the "True construction of the language
111114, he that the applicant has never been so seriously ill as to
permanently impair his constitution and render the risk unusually
hazardous." 10 This decision was. however,, reversed and it was held
that there was a "serious illness" and a breach of warranty, also
that under the statute there was a material misrepresentation, where
he had had attacks of indigestion and neuralgia of the stomach,
and one severe attack which the attending physician diagnosed as
hemorrhagic pancreatitis and he was in a state of collapse from
acute pains in the abdomen; death was also expected. But al-
i hough lie recovered in a few weeks, chronic stomach trouble fol-
lowed with occasional attacks. Under the statement of facts in
die opinion in the lower court, however, there was a complete recov-
ery, and the insurer's examining physician found him in perfect
health and so reported, although it appeared that he had what
was called a lazy stomach which wdien overtaxed caused him a
great deal of pain and suffering.11 The seriousness of. an illness
nology must be one entailing some Soc. of U. S. (U. S. C. C.) 159 Fed.
permanent or material impairment of 206, 37 Ins. L. J. 408.
bealth." n Equitable Life Assurance Soc.
10 Keiper v. Equitable Life Assur. of U. S. v. Keiper, 165 Fed. 595, 91
3338
PARTICULAR REPRESENTATIONS, ETC. § 2004
is a question of fact, and where, upon an application for insur-
ance, the correctness of the answers in which is affirmed to be true
to the best of the applicant's knowledge and belief, the applicant
in good faith states that he has had no serious illness or disease,
when in fact he has had three attacks of pneumonia, of one of
which he informs the medical examiner for the insurance company
at the time of his examination, there is no ground for a forfeiture
of the policy.12
(i) The following cases will show the views taken by the courts
as to specific ailments, diseases, etc., and the application of the
principles and rules, with their exceptions or qualifications; stated
under this and the preceding section.
"Ailment" does not as a matter of law include chronic rheuma-
tism.13 And it cannot be judicially affirmed that every disease
of the aorta increases the risk of loss; that it so increases the
risk should be properly averred.14 Where assured had appen-
dicitis and had stated that he had no local or constitutional
disease, recovery is not precluded unless the statement was
materially false and induced insurer to issue the policy.15 So
a slight bilious attack does not falsify a representation of good
health, etc., especially so where the medical examiner knew of
such attack.16 But where insured was bom without fingers on
his right hand there is a breach of warranty that he was in a
sound condition mentally and physically and that he never had
and was not then suffering from or subject to any bodily or
mental infirmity or deformity, and there can be no recovery on
the policy.17 Where in an application for life insurance, the
C. C. A. 433; Pa. Act June 23, 1885; "Mutual Reserve Fund Life
P. L. 134. Assoc, v. Ogletree, 77 Miss. 7, 25
12 Smith v. Prudential Ins. Co. 83 So. 869. See Collins v. Catholic Or-
N. J. Law, 719, 43 L.R,A.(N.S.) 431 der of Foresters, 43 Ind. App. 549,
(annotated on effect of qualifying 88 N. E. 87, 38 Ins. L. J. 737 (wheth-
statements or warranties by words er attacks of biliousness and indi-
"to best of my knowledge and belief' gestion a severe illness is for jury) ;
or words of like import), 85 Atl. 190. Provident Savings Life Assur. Soc.
13 National Americans v. Ritch, 121 of N. Y. — Tex. Civ. App. — , 53
Ark. 185, 180 S. W. 488. See "chron- S. W. 594 (biliousness) ; Mutual Re-
ic rheumatism," and "rheumatism" serve Fund Life Assoc, v. Bozeman,
noted below. 21 Tex. Civ. App. 490, 52 S. W. 94
14 Empire Life Ins. Co. v. Gee, (whether fatal attack connected with
171 Ala. 435, 55 So. 166, 40 Ins. previous attack).
L. J. 1384; Code 1907, §§ 4572, 4579. 17 Lynch v. Travelers Ins. Co. 200
See "heart disease" noted below. Fed. 193, 118 C. C. A. 379, 42 Ins.
"Aetna Life Ins. Co. v. Howell, L. J. 453, s. c. 180 Fed. 82, 103
32 Kv. L. Rep. 935, 707 S. W. 294. C. C. A. 436, 38 L.R.A.(N.S.) 626,
See Miller v. Maryland Casualty Co. 39 Ins. L. J. 1638.
193 Fed. 343, 113 C. C. A. 267.
3339
§ 2004 JOYCE ON INSURANCE
applicant, a foreigner unfamiliar with the English language, in
answer to inquiries as to whether he had had certain disease-.
including brain diseases, made answer "never sick/' it must be
taken to mean only that he never had had any of the enumerated
diseases so as to constitute an attack of sickness.18 A certificate
of continuing good health is not avoided by the fact that assured
was suffering from incipient brain fever or brain tumor of which
lie had no knowledge when there was no intent to deceive, thereby
bringing the case within the statute.19 But treatment for acute
kidney disease prior to the application precludes recovery where
assured died from Brighfs disease contributed to by uremia pul-
monary (edema.20 Where, however, the question was, "Is said
life now in sound health?" and the answer was, "Yes," and there
was evidence tending to prove the existence of Bright's disease, it-
was hold no error to charge the jury that in order to find the
answer false' they must find that the assured had some disease of
a serious nature and not a temporary ailment.1 The fact of a
slight illness or that assured once broke his leg does not constitute
""any serious constitutional or surgical operation."2 So materially
false answers as to bronchitis are no defense where assurer's physi-
cian had examined the applicant and recommended postponement
of a prior application which was referred in the application on
18 Knickerbocker Life Ins. Co. v. ranted by him to be true, see note in
Trefz, 104 U. S. 197, 26 L. ed. 708 15 L.R.A. (N.S.) 1277.
(whether a case of sunstroke or dis- 20 Trudden v. Metropolitan Life
ease of the brain). Cited in Black Ins. Co. 04 N. Y. Supp. 183, 50 App.
v. Travelers' Ins. Co. 121 Fed. 734, Div. 473. See Kelly v. Mutual Life
58 C. C. A. 16, 61 L.R.A. 502; Mc- Ins. Co. 207 Mass. 398, 93 X. E. 695
Clain v. Provident Savings Life (whether Bright's disease acute or
Assur. Soc. 110 Fed. 94, 49 C. C. A. chronic). See "kidney disease" also
4(i; Supreme Lodge Knights of Py- "nephritis" noted below in this see-
thias v. Foster, 26 Ind. App. 343, tion.
59 N. E. 877. Distinguished in Provi- 1 Brown v. Metropolitan Life Ins.
deuce Life Assur. Soc. v. Reutlinger, Co. 65 Mich. 306, 8 Am. St. Rep.
58 Ark. 541, 25 S. W. 835; Mutual 894, 32 N. W. 610. See Gamble v.
Life Ins. Co. v. Simpson, 88 Tex. Metropolitan Life Ins. Co. 92 S. Car.
338, 2S I,K. A. 768, 53 Am. St. Rep. 451, 41 L.R.A.(N.S.) 1199, 75 S. E.
757, 31 S. W. 501. 788, 41 Ins. L. J. 1703 (case of
19 Massachusetts Mutual Life Ins. organic heart disease and Bright's
Co. v. Crenshaw, 195 Ala. 263, 70 disease considered below under "heart
So. 768; Code 1907, § 4572. See disease;" (Mutual Life Ins. Co. v.
s. c. 186 Ala. 460, 65 So. 65. Robinson, 115 Md. 408, 80 Atl. 1085,
On innocent misrepresentation as 40 Ins. L. J. 1967 (Bright's disease
to health by insured who has undis- material).
covered disease, see note in 53 L.R.A. 2 Carruthers v. Kansas Mutual
193; on effect of lowest mistake in Life Ins. Co. (U. S. C. C.) 108 Fed.
answer as to health of insured war- 487.
3340
PARTICULAR REPRESENTATIONS, ETC. § 2004
which the policy was issued,3 and while "bronchitis" is defined
as "inflammation, acute or chronic, of the bronchial tubes or any
part of them," it will not be assumed that the parties, even in
providing that statements are warranties, intended by said term
that its broader meaning should be given where it would lead
to unreasonable if not absurd results, and it will therefore, adopt-
ing the rule of construction in favor of assured, be construed in
a more limited sense, and will not be held to mean an acute attack
therefrom suffered by assured, and from which he had fully
recovered at the time the insurance was effected, but that it covers
only a chronic disease which will not readily yield to treatment,
and tends to impair insured's health, strength and vigor.4 A nega-
tive answer as to cancer is falsified by evidence of an operation
therefor.5 So also where assured suffered from cancer and repre-
sented that she was in sound health.6 And catarrh of the throat
together with prior and subsequent treatment therefor continuing
until assured's death by consumption, precludes recovery where
assured states that he has no injury or disease which would tend
to shorten life and that he was then in good and sound health,
and he also answers specifically that he has never been afflicted with
catarrh.7 So chronic constipation accompanying dyspepsia to such
an extent as to require a resort to artificial means for years to
obtain relief, although it did not prevent attending to ordinary
duties, such as house work, receiving visitors, being a club member,
etc., precludes recovery when taken in connection with evidence
that assured had had chronic dyspepsia extending over a number
of years, but had stated in answer to specific questions that she
had had dyspepsia only in a slight form.8 But where a question
as to having chronic cough and bronchitis, among a list of about
sixty questions, was answered "no," it was held a representation
3 Rhode v. Metropolitan Life Ins. 6 Maddox v. Southern Mutual Life
Co. 132 Mich. 503, 93 N. W. 1076, Ins. Assoc. 6 Ga. App. 681, 65 So.
9 Det. L. News, 682, 32 Ins. L. J. 789. See Proctor v. Metropolitan
473, s. c. 129 Mich. 112, 8 Det. L. Life Ins. Co. 20 Pa. Super. Ct. 523
N. 888, 88 N. W. 249, 31 Ins.'L. J. (under act June 23, 1885; P. L.
249. 134).
4 French v. Fidelitv & Casualty 7 Lippincott v. Supreme Council
Co. of N. Y. 135 Wis. *259, 17 L.R.A. Roval Arcanum, 64 N. J. Law, 309,
(N.S.) 1011, 115 N. W. 869. 37 Ins. 45 Atl. 774.
L. J. 385 (quoting Webster's defini- 8 Jeffrey v. United Order of Gold-
nition). en Cross, 97 Me. 176, 53 Atl. 1102.
5 Brisou v. Metropolitan Life Ins. 32 Ins. L. J. 697. As to indigestion
Co. — Ky. ■ — , 115 S.. W. 785. Ex- see cases cited in note to "fainting
amine Union Central Life Ins. Co. spell produced by indigestion" con-
v. Chever, 36 Ohio St. 201, 38 Am. sidered below.
Rep. 573 (considered under § 2009
herein ) .
3341
§ 20iil JOYCE ON INSURANCE
and it was also held that, in order to defeal recovery, it must be
shown thai the answers were material and must have been known
by assured to have been false when made.9 In a Louisiana case
where the evidence clearly showed thai assured had Keen suffering
from a chronic persistent cough for several years antedating the
policy and that she had at the time either bronchitis or consump-
tion, and her answer denying such fact is nntrne. the policy is
avoided under a stipulation in the application avoiding the policy
for untrue answers or statements. The court, per Land, J., declared
thai "the answer was material, and, had it been otherwise, the
resull would he the same," and also remarked that radical changes
had been made by the statute in the laws governing life insur-
ance.10 Chronic rheumatism is not an "ailment." u But where
assured was suffering from cirrhosis of the liver, and myocarditis,
and died within two weeks after making application for insurance,
there is such a material misrepresentation as to sound health as
precludes recovery.12 A man who has a cold, on account of which
he is in bed, may be nevertheless "in good health," within the
meaning of a clause in a life policy which requires the premium
to be paid while lie is in good health, although pneumonia sets
in a day or two after the premium is paid, and proves fatal.13
Ensured is also in good health although he has a slight cold at the
time of the delivery of the certificate, but it afterwards develops
into pneumonia and causes death, and recovery is not defeated
9 Minnesota Mutual Life Ins. Co. In an application for life insur-
v. Link, 230 111. 273, 82 N. E. 637. anee the words "chronic or persist-
As to bronchitis see also Henn v. ent" do not differ materially from
Metropolitan Life Ins. Co. 67 N. J. "chronic and persistent." Blumen-
L 310, 51 Atl. 689. thai v. Berkshire Ins. Co. 134 Mich.
10Bertrand v. Franklin Life Ins. 216, 104 Am. St. Rep. 604, 96 N. \Y.
Co. 119 La. 423, 44 So. 186, 36 Ins. 17.
L J. 957. The syllabus by the court u National Americans v. Witch. 121
reads: "Where, in an application Ark. 185, 180 S. W. 488. See "rheu-
for life insurance, the assured ex- mat ism" noted below,
pressly warrants the truth of the 18 Stephens v. Metropolitan Life
answers made to the medical exam- Ins. Co. 190 Mo. App. 673, 176 S.
iner, and it is further stipulated thai W. 253, 46 Ins. L. J. 126 (so held
the policy shall be avoided if any notwithstanding Kev. Stat. 1909, sec.
answer be untrue, the contract is the 6986. Policy was issued alter as-
law of the case, and the policy will sured entered hospital). See Mutual
be declared forfeited,, where it is Life Ins. Co. v. Mullen, 10"J Md. 457,
alleged and proved that the assured 69 Atl. 385, 3< Ins. L. J. 507.
answered untruly, that she had never See "liver disease" noted below.
had a 'chronic or persistent cough.' 1S Barnes v. Fidelity Mutual Life
Ah Xo. 52, p. 86, of 1906, is noted Assoc. 191 Pa. 618, 45 L.R.A. 264,
as making radical changes in the 43 Atl. 341.
laws governing life insurance poli-
cies made or delivered in this state."
3342
PARTICULAR REPRESENTATIONS, ETC. § 2004
under a stipulation that assured be in good health when the policy
is delivered to him.14 And inasmuch as the phrase "in good
health" is a comparative term, and the fact that deceased was
suffering with a slight cold at the time the benefit certificate was
delivered to him, which afterwards developed into pneumonia and
caused his death, will not defeat a recovery upon the benefit certifi-
cate under the stipulation that the insured be "in good health"
when the policy is delivered to him.15 Nor does a cold preclude
a recovery where it does not prevent assured from working and he
does not seek medical aid, even though he has represented that
he is in good health and of sound constitution and a serious diffi-
culty is discovered some weeks after signing the certificate.16 So
where it was alleged that assured's answers were false in that she
had stated that she had not been confined to her house since
childhood, it was held that the policy was not avoided by the
fact that about two years prior to making the application assured
had been confined to her bed suffering from an acute cold causing
a temporary difficulty during the menstrual period, and that shortly
thereafter she called upon her physician, who found everything
normal, except that the womb was a trifle small and slightly sore,
due to congestion resulting from said cold. The maxim applies
in such case that the law disregards trifles.17 Nor does a cold
falsify a statement as to not being under a physician's care.18
And a cold does not impart absolute freedom from any bodily ail-
ment, but only from such ailments as constitute disease.19 Confine-
ment in childbirth is not a personal ailment within the meaning
of the question as to consulting a physician.20 In a Maine case
the insured was confined by childbirth in November, and was
sick of typhoid fever in January of the following year, from
which she got up some time in March. She applied for insurance
the first day of that month, was examined by the company about
six weeks thereafter, and her application approved in a few days.
14 Sovereign Camp, "Woodmen of Larsen, 85 111. App. 143. Examine
the World v. Jackson, — Okla. — , Cessna v. United States Life Endow-
157 Pac. 92, L.R.A.1916F, 166. ment Co. 152 111. App. 653.
15 Sovereign Camp Woodmen of 19 MetrojDolitan Life Ins. Co. v.
the World v. Jackson, — Okla. — , McTague, 49 N. J. L. 587, 60 Am.
L.R.A.1916F, 166, 157 Pac. 92. Rep. 661, 9 Atl. 766. See Collins
16 Sieverts v. National Benevolent v. Catholic Order of Foresters, 43
Assoc. 95 Iowa, 710, 64 N. W. 671. Ind. App. 549, 88 N. E. 87, 38 Ins.
17 Poole v. Grand Circle Women of L. J. 737.
Woodcraft, 18 Cal. App. 451, 123 20Rasicot v. Royal Neighbors of
Pac. 349, 41 Ins. L J. 1148; Civ. America, 18 Idaho, 85, 29 L.R.A.
Code, sec. 3533, declaring above max- (N.S.) 433, 108 Pac. 1048. See §
im. 2070 herein.
18 Metropolitan Life Ins. Co. v.
3343
§ 2004 JOYCE ON INSURANCE
N.ar the middle of the next month her physician found her weak,
coughing, and sick with consumption, which caused her deatli in
a little over two months. In her application she stated thai she
thru was in -nod health and that she had usually had good health,
and in a suit to cancel the policy the jury found she believed
her statements to be true, but the court held that such finding
was noi supported by the evidence, and ordered the policy annulled.1
And where assured had had cystitis, supposed to he of tubercular
origin, and had been unable to work by reason thereof and had
been treated therefor, his statemenl that he was in good health
and his negative answer to a question, following the enumeration
of specific complaints or diseases, whether he had had any other
illness, is falsified, so that recovery is precluded where as-ured;s
answers as to other diseases and matters are also untrue and
material.2 A treatment for diabetes falsifies a material statement
to the contrary.3 So where assured had diabetes it- falsified a state-
ment that he had had no serious illness or disease;4 and where
assured died of diabetes within a month and half of the time when
the policy was issued, and had been treated therefor during a
year prior to her death she is not in "sound health" and recovery
is precluded.5 If assured has suffered from and received medical
treatment by reason of a disability arising from an abscess in the
middle ear with mastoditis it falsifies his negative answer to ques-
tions made warranties with the answers, covering diseases, mental
and physical infirmities, etc., and recovery for disability benefits
is precluded even though there is no statement about the ear in
either application or policy.6 A question as to "material defect
of the eyesight' is material to the risk and the policy is void if
the answer is untrue; 'nut the falsity must be shown if relied on as a
1 Maine Benevolent Assoc, v. Del. (2 Boyce) 511, 82 Atl. 294, s. c.
Parks, SI Me. 79, 10 Am. St. Rep. (U. S. I). C.) 198 Fed. 264, 41 Ins.
240, 1G Atl. 339. L. J. 1770, s. c. (U. S. D. C.) 198
2 Supreme Lodge Knights of Py- Fed. 272, 41 Ins. L. J. 1784.
Unas v. Bradley, 141 Ky. 334, 132 4Hews v. Equitable Life Assoc.
S. YV. 547, 40 Ins. L. J. 209, granting Soe. of U. S. 143 Fed. 850, 853,
rehearing, withdrawing opinion in, 74 C. C. A. (i7(i. Sec Little v. Se-
an.1 rev'g — Ky. — , 117 S. W. Li:.") eurity Mutual Life Ins. Co. 150 Ky.
(assured in this case had also falsified 35. 119 S. W. 11!'_\
about tuberculosis and other mat- 5 Ilolloway v. Metropolitan Life
See "tuberculosis noted be- Ins. Co. 154 N. Y. Supp. 194, 46
low. Ins. L. J. 274.
3 Grand Fraternity v. Kcatlev, 27 6 Colaneri v. General Accident
Del. (1 Boyce) 308, 88 Atl. 553, 42 Assur. ^Corp. 110 N. Y. Supp. 678,
Ins. L. J. 1715 (construed under the 125 Ap*p. Div. 591. See Aetna Life
law ami decisions of Pennsylvania); Ins. Co. v. Millar, 113 Md. 686, 78
Keatley v. (Irani! Fraternity, 25 Del. Atl. 483. See "hearing" noted below
(2 Bovce) 267, 78 Atl. 874, s. c. 25 in this subdiv. (i).
::::ii
PARTICULAR REPRESENTATIONS, ETC.
2004
defense.7 But a fainting spell produced by indigestion or lack
of proper food, which is a mere temporary disturbance or enfeeble-
ment, is not a "disease and bodily infirmity'' within the meaning
of an insurance policy.8 A warranty as to good health and never
having had any illness, disease, or ailment is falsified where assured
was subject to fits, and recovery is precluded, especially so when,
in addition, assured's statements as to other matters are false.9
But a slight gastric irritation of the intestinal canal does not make
untrue a statement of good health since it is an indisposition which
is seldom or never fatal, and did not cause insured's death, even
though it may have rendered him more subject to his fatal attack.10
"Where insured suffered from gunshot wounds together with other
ailments or diseases, all of which falsify his statements, there can
be no recovery.11 Temporary headaches need not be disclosed
even where inquiry is made as to habitual headaches.12 But a
breach of warranty that the insured has never had "headaches,
severe, protracted, or frequent," is established by proving that he
7 National Protective Legion v. All- then in sound health and had no
phin, 141 Ky. 777, 133 S. W. 788. physical defect or infirmity of any
As to diseases of the eyes, see Porter kind). See Emerson v. Metropolitan
v. General Accident Fire & Life Life Ins. Co. 185 Mass. 318, 70 N. E.
Assur. Corp. 30 Cal. App. 198, 157 200, 33 Ins. L. J. 539 (jury found
Pac. 825; Civ. Code, sees. 2607, 2612. assured not subject to epileptic fits) ;
8 Manufacturers' Accident Indem- Henn v. Metropolitan Life Ins. Co.
nitv Co. v. Dorgan, 58 Fed. 945, 7 67 N. J. L. 310, 51 Atl. 689 ; Thomp-
C. *C. A. 581, 16 U. S. App. 290. son v. Metropolitan Life Ins. Co. 99
As to indigestion, see Keiper v. N. Y. Supp. 1006 (insured informed
Equitable Life Assur. Soc. of U. S. agent that he had fits but not that
(U. S. C. C.) 159 Fed. 206, 37 they were epileptic in nature).
Ins. L. J. 408, rev'd Equitable Life 10 Manhattan Life Ins. Co. v. Card-
Assur. Soc. of U. S. v. Keiper, 165 er, 82 Fed. 986, 27 C. C. A. 344.
Fed. 595, 91 C. C. A. 433 ; McClain " Petitpain v. Mutual Reserve
v. Provident Savings Life Assur. Soc. Fund Life Assoc. 52 La. Ann. 503,
110 Fed. 80, 49 C. C. A. 31, s. c. 27 So. 113, 29 Ins. L. J. 269 (see
184 U. S. 699, 46 L. ed. 765, 23 "wounds" below under this section).
Sup. Ct. 93S; Collins v. Catholic See Continental Casualtv Co. v.
Order of Foresters, 43 Ind. App. Owen, 38 Okla. 107, 131 Pac. 1084
549, 88 N. E. 87, 38 Ins. L. J. 737; (assured died from gunshot wound
Perea v. State Life Ins. Co. 15 N. in two daj-s after it was inflicted;
Mex. 399, 110 Pac. 559. See "chron- case, however, turned upon whether
ic dyspepsia" noted above. he had suffered acute or chronic ne-
9 Petitpain v. Mutual Reseiwe phritis; judgment for plaintiff was
Fund Life Assoc. 52 La. Ann. 503, affirmed) : case fully considered be-
27 So. 113, 29 Ins. L. J. 269; West- low under "nephritis").
phall v. Metropolitan Life Ins. Co. 12 Sargent v. Modern Brotherhood
27 Cal. App. 734, 151 Pac. 160, 46 of America, 148 Iowa, 600, 127 N.
Ins. L. J. 579. (In this case assured W. 52. See Holland v. Western Un-
stated in answer to a specific ques- ion Life Ins. Co. 58 Wash. 100, 107
tion that he had never had fits or Pac. 866.
convulsions, and also that he was
Joyce Ins. Vol. III.— 210. 3345
§ 2004 JOYCE OX INSURANCE
had had frequent sick headaches for many months prior to the
contract, at irregular intervals, being accompanied by vomitings
and pain in the region of the chest, and Lasting Prom six to eighteen
hours, although these headaches did not indicate a vice in Ids
constitution or have any hearinu on his general health or continu-
ance of life.13 A question as to "material defect" of "hearing"
must be answered truthfully as it is material to the risk; but falsity
of statements must be shown if relied on as a defense.14 It is
held that heart diseast is a serious disease avoiding the policy for
a negative answer where assured knew she had been treated there-
for;15 and where insured died of heart disease and had been told
by a physician thai he suspected that trouble although he could
not then discover it, hut there were certain symptoms showing a
tendency thereto, and assured died of that disease there was a
breach of warranty:16 so it is held that if one has heart disease
he answers at his peril, and that neither his belief that his answer
is true nor his ignorance thai it is untrue will make the contract
valid when the answer is incorrect.17 Again, knowledge by assured
that .-he has heart disease renders untrue her statement that she
is in sound health and forfeits the policy,18 and where insured's
husband was beneficiary, signed the application, paid the premium
and took a receipt therefor, and is his wife's" agent, his knowledge
that she had organic heart disease and Bright's disease will be
imputed to her when she stated in her application that she was in
sound health.19 I>ut where assured died from valvular heart
disease and there was a claim of breach of warranty, in an appli-
cation for reinstatement, as to good health, and it did not appear
that she had any knowledge of the existence of said disease, it was
held that there was no breach and judgment was rendered for
13 Mutual Life Ins. Co. v. Simp- v. John Hancock Mutual Life Ins.
son, 88 Tex. 333, 28 L.R.A. 765, 53 Co. 143 Midi. 290, 106 N. W. 260,
Am. St. Rep. 757, 31 S. W. 501. 35 Ins. L. J. 432. Compare Suravitz
Cure reverses, — Tex. Civ. App. — , v. Prudential Ins. Co. of America,
28 S. \Y. 837. 244 Pa. 582, L.R.A.1915A, 273, 91
14 National Protective Legion v. Atl. 405. See S 2010 herein.
Allphin, 141 Kv. 777, 133 S. YV. 18 Haapa v. Metropolitan Life Ins.
788. See "ear" noted below under Co. 150 Mich. 467, 16 L.R.A. ( N.S. )
this subdiv. (i). 11(15, 114 N. \V. 380. See also "eirr-
15Ripl> v. Metropolitan Life Ins. hosis of the liver and myocarditis,"
Co. 58 N. Y. Supp. 954. See "aorta" above noted.
noted above. 19 (ramble v. Metropolitan Life Ins.
I l.an disease: reinstatement, see Co. 92 S. Car. 451, 41 L.R.A.(N.S.)
§ 2005 herein. 1199 (annotated on effect of bene-
16 Smith v. Supreme Lodge, flciary's knowledge of the falsity of
Knights & Ladies of Golden Precept, a representation innoeently made by
L23 [owa, 676, 99 X. W. 553. insured), 75 S. E. 788, 41 Ins. L. J.
17 Powers v. Northeastern Mutual 1703.
Life Assoc 50 Vt. 630. See Perry
3346
PARTICULAR REPRESENTATIONS, ETC. § 2004
plaintiff.80 If, however, it is alleged that assured knew that he
had heart disease but misrepresented that he was in perfect health,
it must be shown that such statement was material, made with intent
to deceive, and was relied on ; * and the evidence must establish a
breach of warranty as to heart disease.2 A policy is avoided by a
false statement as to being an inmate of an infirmary, sanitarium,
or hospital;3 and where answers to questions are warranties and
are required to be full, true, and complete, the answer no to a
question whether the applicant had ever been an inmate of any
infirmary, sanitarium, institution, asylum or hospital, avoids the
policy where said answer is untrue and the contention that the
word "inmate" is equivocal or ambiguous does not aid assured as
he might have left the question unanswered or have answered
it fully or have stated that he did not know whether he had been
an inmate or not, nor does it aid insured that he was only tempo-
rarily in a hospital as the private patient of his physician and
was removed there for rheumatism at the latter's suggestion for
greater convenience, better care, and better environment and com-
fort and at less expense.4 So a negative answer as to treatment
in any dispensary or hospital when false precludes recovery.5 De-
nial in an application for life insurance of intimate association with
anyone suffering from any transmissible disease within a year
avoids the policy if the applicant had within that time nursed
members of his family ill with typhoid fever.6 And a false answer
as to kidney disease avoids the policy.7 A false statement, made a
20 Greenwood v. Royal Neighbors azzi, 93 Miss. 422, 48 So. 1017 (con-
of America, 118 Va. 329, 87 S. E. flnement in sanitorium: judgment
581. Compare Packard v. Metro- for beneficiary), s. c. 93 Miss. 18,
politan Ins. Co. 72 N. H. 1, 58 Atl. 46 So. 817, 37 Ins. L. J. 810.
287, 32 Ins. L. J. 742 (where boy * Farrell v. Security Mutual Life
of ten had heart disease indiscover- Ins. Co. 125 Fed. 684, 60 C. C. A.
able except by physician, where ver- 374, 33 Ins. L. J. 679.
diet for defendant was sustained). 5 Brisou v. Metropolitan Life Ins.
As to latent disease, see § 2010 Co. — Ky. — , 115 S. W. 785.
herein. 6 Gardner v. North State Life Ins.
1 Empire Life Ins. Co. v. Gee, 178 Co. 163 N. Car. 367, 48 L.R.A.(N.S.)
Ala. 492, 60 So. 90. Compare Mu- 714 (annotated on scope and effect
tual Life Ins. Co. v. Allen, 174 Ala. of questions or provisions as to con-
511, 56 So. 568, 41 Ins. L. J. 221, tact with transmissible disease), 79 S.
s. c. 166 Ala. 159, 51 So. 877. See E. 806, 43 Ins. L. J. 25. See Na-
Henn v. Metropolitan Life Ins. Co. tional Protective Legion v. Allphin,
67 N. J. L. 310, 51 Atl. 689. 141 Ky. 777. 133 S. W. 788, con-
2 Metzradt v. Modern Brotherhood sidered under "tuberculosis," below
of America, 112 Iowa, 522, 84 N. W. in this subdiv. (i).
498. 7 Alexander v. Metropolitan Life
3Petitpain v. Mutual Reserve Ins. Co. 150 N. Car. 536, 64 S. E.
Fund Life Assoc. 52 La. Ann. 503, 432 (notwithstanding Rev. Stat.
27 So. 113, 29 Ins. L. J. 269. See 1905, sec. 4808); Hoffman v. Metro-
Fidelity Mutual Life Ins. Co. v. Mi- politan Life Ins. Co. 131 N. Y. Supp.
3347
§ 2004 JOYCE ON INSURANCE
condition precedent, thai assured aever had had la grippe also
avoids the policy even though m>t the predisposing cause of his
death or uot connected with said cause;8 and a false warranty by
assured that she had never had liver disease avoids the policy
without regard to materiality of the statement;9 the question:
■ \iv you subjeel to or afflicted with any disease, malformation, or
weakness" is of matter material to the risk, and requires a truth-
ful answer; but the falsity of statements musl l^' shown if relied
upon in defense.10 Where it was claimed that assured was addicted
to iiiii.s-tnrli'itio-n or oixniixin to such an extent as to falsify his
statement thai he had not had any serious illness, and a judgmenl
«;i- rendered againsl insurer, upou the verdict of the jury, it was
held no error.11 Where assured is interrogated as to miscarriages
and answers truth fully, in that while her answer appeared as No,
she had soughl to have it corrected, and she is also asked whether
she had had a serious illness within a certain time, the twTo questions
arc separate and distinct and the second one does not include
the illness resulting from miscarriage, and if her answer to the
latter question as an independent one is true there is no defense.18
In an Oklahoma ease the testimony was undisputed that assured
sull'ered from nephritis immediately prior to the issuance of the
policy, and there was a sharp conflict upon the point whether the
disease was chronic or acute, hut he responded readily to treatment
and fully recovered according to the testimony of the attending
physician. It further appeared that he thereafter injured his left
foot by the accidental discharge of a shot gun and died therefrom
588, 147 App. T)iv. 893, 41 Ins. L. J. As to bodily infirmity, see subdiv.
84. See Huestess v. South Atlantic (d) of this section.
Life Ins. Co. 93 S. Car. 148, 70 S. E. u Schas v. Equitable Life Assur.
403. See "Bright's disease" noted Soc. 170 N. Car. 420, 87 S. E. 222,
above "nephritis," also "renal colic" 47 Ins. L. J. 151.
noted below. 12 Thomas v. Modern Brotherhood
8 Beard v. Roval Neighbors of of America, 25 S. Dak. (i.'52, 127 N.
America. 53 Ore- 11)2, 19 L.R.A. W. 572, 39 Ins. L. J. 1539.
(N.S.) 798, 99 Pac. 83. See Ranta As to miscarriages where there was
v. Supreme Tent Knights of the also a defense as to pregnancy, and
Maccabees of the "World, 97 Minn, judgment was rendered for plain-
4;14. 1H7 \. W. 156; Davis v. Su- till', see Schwartz v. Royal Neijyh-
preme Lodge Knights of Honor. 54 bors of America, 12 Cat. App. 595,
\. V. Supp. 1023, 35 App. Div. 354. 108 Pae. 51 (in both the above cases
9 Flippen v. State Life Ins. Co. 30 the agent wrote down the answer was
Tex. Civ. App. 362, 70 S. W. 787. as "No" in the first case, and "None"
Compare Connecticut Mutual Life in the other).
[ns. Co. v. I'nion Trust Co. 112 U. As to abortion or intentional mis-
S. 250, 28 L. ed. 708. 5 Sup. Ct. carriage, see Flory v. Supreme Tribe
119 (considered under § 2009 here- of Ben Eur, 98 Neb. 160, 152 X. \Y.
in). See "cirrhosis of the liver," 295. See § 1987a herein.
above noted.
10 National Protective Legion v.
Ailplnn. 141 Kv. 777, 133 S. W. 7>s.
3348
PARTICULAR REPRESENTATIONS, ETC. § 2004
r
two days later. The policy stipulated in a schedule of warranties
that insured had no "defect in . . . body" and while it was
declared that since acute nephritis was an incurable disease it
would constitute such defect in body. The question was held
properly submitted to the jury and a judgment for plaintiff was
affirmed. A statute, however, was involved in which statements
were construed as representations and not warranties and in order
to enable assurer to avail himself of misrepresentations as a defense
it was required to show that they were wilfully false and fraudu-
lently misleading.13 Undergoing an operation for a disease and
the consequent confinement and treatment avoid the policy.14 In
an Illinois case "The defense was that certain statements in the
application were warranties and were untrue. The proof showed
without dispute that this Hermann had pneumonia and that there-
after in 1908 she had a serious disorder of the ovaries and Fallopian
tubes, and finally it became necessary to take her to a hospital and
to remove said organs by a major surgical operation. The appli-
cation upon which this certificate was based did not reveal the
existence of any of these disorders, but denied them. These state-
ments were made warranties by the language of the application,
but even if they had been representations only, they were material
to the risk and their untruth made the certificate void from the
first." 15 But slight attacks of piles do not falsify so as to avoid
the policy a representation by assured that he had never had
any disease or infirmity ; 16 so a statement of assured to the effect
that he had never had any disease or infirmity is not materially
false within the statutory intent, even though he had suffered
from an ailment or disease, if it could be called a disease, as in
case of piles, which was of so slight a character that insurer's offi-
cers, acting as careful and intelligent men, would not have refused
to issue the policy nor have demanded a higher rate of premium.17
But no recovery can be had where assured stated that he had
never been subject to piles when in fact he had been operated
13 Continental Casualty Co. v. index finger, see Collins v. Catholic
Owen, 38 Okla. 107, 131 Pae. 1084; Order of Foresters, 43 Ind. App. 549,
Rev. Laws 1910, sec. 6685, Comp. L. 88 N. E. 87, 38 Ins. L. J. 737.
1909, sec. 3784. See "Bright's dis- 15 Hermann v. Court of Honor, 193
ease," also "kidney disease" above 111. App. 366, per Dibell, J.
noted. See § 1916 herein. 16 United States Health & Acei-
14 Brisou v. Metropolitan Life Ins. dent Ins. Co. v. Bennett's Admr. 32
Co. — Ky. — , 115 S. W. 785. See Ky. L. Rep. 235, 105 S. W. 433. 37
also Grand Fraternitv v. Keatlev, 27 Ins. L. J. 200 (a representation onlv
Del. (4 Boyce) 308/88 Atl. 553, 42 under Ky. Stat. 1903, sec. 639).
Ins. L. J. 1715. As to "operation," 17 United States Health & Accident
see the words "broke his leg," "can- Ins. Co. v. Bennett's Admr. 32 Ky.
cer" above noted, also "piles" noted L. Rep. 235. 105 S. W. 433, 37
below. See also § 2070 herein. Ins. L. J. 200; Ky. Stat. 1903, sec.
As to "surgical operation :" loss of 639.
3349
§ 2004 JOYCE OX INSURANCE
on for that trouble.18 Where assured'* statement that he had never
had pleurisy is sustained by the attending physician's diagnosis
that he had had only the Rrsl symptoms thereof and also by the
jury's finding, the policy is not avoided.19 And the fact that
a post mortem examination of an insured who died suddenly
eight days after the issuance of the policy showed a blood clot in
the heart and evidence of pleurisy does not show breach of a
warranty that applicant was to the best of his Knowledge and
belief in sound health and physical condition, that his answers to
questions were literally true, that an untrue statement or conceal-
ment of facts intentional or otherwise would avoid the policy,
and that lie had never had pleurisy, pneumonia, or disease of the
heart, in the absence of anything to show thai applicant knew
of Mich conditions.20 If there is no interrogatory in the applica-
tion intended to elicit information as to pneumonia recovery is
not precluded by assured's failure to disclose information concern-
ing said disease given her by her physician.1 An agreement or
stipulation in a contract of fraternal insurance with a married
woman, that the policy shall not take effect unless delivered to her,
"while in sound health." is not violated by reason of the applicant
being pregnant at the time of the delivery of the policy.2 So
under a California decision where the insured warranted that she
was not then pregnant and a breach of said warranty was claimed,
it appeared from the evidence that she could not at that time have
had any definite knowledge of her condition, and that she died
aboul three month- later, the fetus being about half horn, a finding
was proper that she was not pregnant at the time the policy was
18 Grand Fraternity v. Keatlev, 27 (considered under § 2010 herein).
Del. (4 Boyce) 308, 88 Atl. 563, See "pulmonary ;" "tuberculosis" not-
42 Ins. L. J. 1715 (so hold notwith- ed below under this subdiv. (i); and
standing statute); Keatlev v. Grand as to spitting of blood, hemorrhages
Fraternity, 25 Del. (2 Boyce) 267, and consumption, see § 2008 herein.
7s Atl. 874, s. c. 25 Del. (2 Bov«-e) 8 Rasicot v. Royal Neighbors of
511, 82 Atl. 294, s. e. (U. S. D. ('.) America, 18 Idaho, 85. 29 L.R.A.
ins Fed. 264, 41 Ins. L. J. 1776, s.| (N.S.) 433, 108 Pac. 1048.
c. (U. S. I). ('.) 198 Ved. 2r2, 41 As to exception of liability where
Ins. L. J. 1784. death results from pregnancy, effect
19 Lyon v. United Moderns, 148 of a waiver of benefits clause, estop-
Cal. 470, 4 L.R.A. (N.S.) 247, 83 pel against assurer, and judgment in
Pae. 804. favor of association, see Knights &
20 Laka v. Modern Brotherhood, Ladies of Honor v. Shoaf, 166 Ind.
163 low;., L59, 49 L.R.A.(N.S.) 9(12, :i<i7, 77 X. E. 738; Stegner v. Modern
143 N. W. 513. Brotherhood of America, 24 S. Dak.
ilowa Life Ins. Co. v. Zehr, 91 371, 123 N. W. 842 (verdict for asso-
111. App. 93. K.ramine Finn v. Met- ciation).
ropolitan Life Ins. Co. 70* N. J. L. "Confinement due to pregnancy. "
255, 57 Atl. 438, 33 Ins. L. J. 472. defined in Rose v. Commonwealth
Sec rule in I lean v. .Mel ropolitan Life Benevolent Assoc. 4 Boyce (Del)
Ins. Co. 67 N. J. L. 310, 51 Atl. 689 144, 86 Atl. 673.
:a.o
PARTICULAR REPRESENTATIONS, ETC. § 2004
delivered.3 And if an applicant for insurance states that she is
not pregnant, the policy is not avoided, although the answer ia
made a warranty, where it appears that she did not know of her
condition at thai time, that her answer was in good faith and
honestly made, and that her pregnancy at the time of the issuance
of the policy in no way contributed to the ultimate cause of death,
nor increased the risk.4 So where a statute provides that the
matter misrepresented must have actually contributed to the event
upon which the policy becomes payable, a misrepresentation as
to pregnancy is immaterial where the direct cause of her death
was pneumonia which followed puerperal septicaemia which de-
veloped after her confinement, but from which she nearly recovered
before pneumonia developed.5 In a Texas case, however, judg-
ment was rendered for the association, on the ground that insured's
statement that she was not pregnant was a breach of warranty even
though she and the medical examiner were both deceived as to
her condition, there being no intentional mistatement, no fraud,
and her death resulted from other causes.6 So in North Dakota
a false statement as to pregnancy is a material representation and
where it is made a warranty no recovery can be had on the policy
for the effect of a false warranty is not changed by the statute;
and this applies even though there was no intent to deceive.7 If
an application for insurance by a married woman is approved and
a policy issued, there is no duty imposed on her as the holder
thereof to notify the insurer of any subsequently discovered evi-
dence of pregnancy; nor does the discovery of such fact prevent
her from signing a certificate while in that condition, stating
that she is in sound bodily health and if she is then to all appear-
ances robust and healthy, there is no such misrepresentation as
avoids the policy.8 So where the examining physician's testimony
makes it doubtful whether he actually asked a question relative
to pregnancy, or whether the applicant fraudulently and untruth-
3 Schwartz v. Royal Neighbors of 7 Satterlee v. Modern Brotherhood
America, 12 Cal. App. 595, 108 Pac. of America, 15 N. Dak. 92, 106 N.
51. W. 561; Rev. Code 1899, sec. 4485.
4 Rasicot v. Royal Neighbors of 8 Merriman v. Grand Lodge Degree
America, 18 Idaho, 85, 29 L.R.A. of Honor, Ancient Order United
(N.S.) 433, 108 Pac. 1048. Workmen, 77 Neb. 844, 8 L.R.A.
5 Thompson v. Roval Neighbors of (N.S.) 983, 124 Am. St. Rep. 867,
America, 154 Mo. App. 109, 133 S. 110 N. W. 302, 36 Ins. L. J. 340.
W. 146; Rev. Stat. 1909, sec. 6937. On duty to notify insurer of facts
6 Supreme Lodge Knights & Ladies which develop after submission of
of Honor v. Payne, 101 Tex. 449, 15 application, but before delivery of
L.R.A. (N.S.) i277 (annotated on policy or certificate, see notes in 8
effect of honest mistake in answer as L.R.A.(N.S.) 983; 39 L.R.A.(N.S.)
to health of insured warranted bv 951.
him to be true), 108 S. W. 1160, 37
Ins. L. J. 324.
3351
§ 2004 JOYCE ON INSURANCE
fully answered it if asked, and the case was properly submitted to
the jury, a judgmenl for plaintiff will be affirmed.9 Again, a
fraternal benefil society which issues a certificate to an applicant,
and thereafter continuously collects dues from her for nearly five
j i ,ii-. cannot, after her death, repudiate the contract on the ground
thai the certificate never went into effect, because the applicant
ha«l warranted that -he was Do! pregnant at the time of her appli-
cation, when in fact .-he was. although such fact wa- nnt known to
her, and in no wise contributed to the cause of death, nor increased
the risk, where such condition would not have avoided the policy
-i- been a breach of the contract had it occurred after the contract
became effective.10 Where assured has complained of suffering
from priapism and has been treated therefor there can he no
recovery.11 If the evidence shows that insurer had a medical exam-
ination made of assured before the policy was issued, and it also
appears that- the applicant had tuberculosis ami pulmonary disease
prior to -aid examination, hut that the examining physician failed
to discover the presence of the disease, a warranty making the
policy void if insured had any pulmonary disease before the policy
date will he enforced and a statute has no application which pro-
vides that insurer waives it.- right to claim forfeiture for mis-
representation, etc.. where it issues a policy without a medical
examination by a physician.12 Bu1 quinsy is not a disease.13 An
applicant who ha- answered "No" to an inquiry whether or not
he had ever had renal colic is hound, under penalty of forfeiting
his policy, to notify the insurer in case he subsequently has such
an attack before the policy is issued.14 A statement by an applicant
for a benefit certificate made in response to an inquiry, that he had
only suffered once with rheumatism, without stating that it was
inflammatory, and assured's death is remotely caused thereby,
avoids the policy.15 Failure, however, to mention the spraining of
9 Clark v. North American Union, Ins. Co. 137 La. 137, G8 So. 385,
189 Mich. 589, 155 N. W. 580, 47 46 Ins. L. J. 8; act, 1908, p. 139,
Ins. L. J. 238, s. c. 179 Mich. 131, No. 97. See "pneumonia" noted
146 X. W. 336. above: "tuberculosis" noted below un-
10 Rasicot v. Royal Neighbors of der this subdv., also § 2008 herein.
America, 18 Idaho, 85, 29 L.R.A. 13 Sargent v. Modern Brotherhood
i N.S.i 433, 108 Pac. 1048. That of America, 148 Iowa, 600, L27 N.
misstatement as to pregnancy is \Y. 52.
waived by continued receipt of pre- 14 Harris v. Security Mutual Life
niiums, etc., see also Chicago Guar- Ins. Co. 130 Tenn. .'{25, L.K..\ .1915C,
anty Fund Lite Assoc. \. Ford, 104 153, 170 S. YV. 474. See YYeintraub
Tenn. 533, 58 S. YV. 239, 29 Ins. v. Metropolitan Life Ins. Co. 58 N.
L. J. 953. Y. Supp. 295, 27 Misc. 540. (There
11 Hubbard v. Mutual Reserve was evidence of prior renal colic,
Fund Lite Assoc. LOO Fed. 71!), 4o also of gallstone; no recovery.) See
C. C. A 665, 29 Ins. L. J. 577. "kidney disease" noted above.
12 Hanmore v. Metropolitan Life 15 Loehr v. Supreme Assembly of
3352
PARTICULAR REPRESENTATIONS, ETC.
§ 2004
an ankle several years prior to making the application for a policy is
not a misrepresentation.16 Temporary stomach trouble is not a
disease;17 although it is held that treatment for stomach trouble
complicated with other diseases precludes recovery.18 So a then
existing stricture falsifies a warranty by assured that he had never
had any local infirmity or disease.19 But unless attention is called
to a question as to swisttoke, a negative answer must be shown
to have been falsely made.20 It is held that a presumption attaches
that a false statement knowingly made by assured is intended to
deceive, so that concealment or misrepresentation as to the existence
of syphilis is material and his misstatements are warranties.1 Ton-
silitis is not a disease.2 If insured was suffering from tuberculosis
of the bowels and lungs at the time of making his application
wherein he had stated that he had never been afflicted with con-
sumption or disease of the lungs, etc., the policy is avoided.3 So
where insured died of tuberculosis of the lungs and cystitis, sup-
posed to be of tubercular origin, and had been treated therefor
some time before he made his application and had been advised
by his physician that he was in a bad condition of health and that
it was advisable for him to go to a warmer climate, and it also
appeared that his sister died of tuberculosis, a warranty or state-
ment that he was in good health and had not been afflicted with
Equitable Fraternal Union, 132 Wis.
436, 112 N. W. 441. See chronic
rheumatism noted above.
16 Tvler v. Ideal Benefit Assoc. 172
Mass. "336, 32 N. E. 1083, 28 Ins.
L. J. 477 (under Stat. 1895, c. 281,
as to misrepresentations).
As to sprained knee, see Witherow
v. Mystic Toilers, — Utah, — , 161
Pac. 1126 (considered near end of
§ 2003 herein).
17 Sargent v. Modern Brotherhood
of America, 148 Iowa, 600, 127 N.
W. 52. Examine Equitable Life
Assur. Soc. of U. S. v. Keiper, 165
Fed. 595, 91 C. C. A. 433, rev'g
Keiper v. Equitable Life Assur. Soc.
of U. S. (U. S. C. C.) 159 Fed. 206,
37 Ins. L. J. 408 (considered under
subdv. (h) this section). See "chron-
ic dyspepsia," noted above.
18 Grand Fraternitv v. Keatley, 27
Del. (4 Boyee) 308, '88 Atl. 553, 42
Ins. L. J. 1715. For other citations
of this case, see note 18 above.
19 Hanna v. Mutual Life Ins.
Assoc. 42 N. Y. Supp. 228, 11 App.
Div. 245.
20 Supreme Lodge Order Mutual
Protection v. Gebke, 100 111. App.
190. See Knickerbocker Life Ins.
Co. v. Trefz, 104 U. S. 197, 26 L.
ed. 708 (question here was whether
insured had sunstroke or disease of
the brain ; considered under "brain
disease" above).
1 Quinn v. Mutual Life Ins. Co.
of N. Y. 91 Wash. 543, 158 Pac.
82; Ins. Code 1911, sec. 34; Laws
1911, p. 197. Compare Metropoli-
tan Life Ins. Co. v. Goodman, 10
Ala. App. 446, 65 So. 449; Code
1907, sec. 4572 (as to same disease
increasing risk). See Ashford v.
Metropolitan Life Ins. Co. 98 Mo.
App. 505, 72 S. W. 712; Ford v.
Metropolitan Life Ins. Co. 79 N. J.
L. 60, 74 Atl. 253.
2 Sargent v. Modern Brotherhood
of America, 148 Iowa, 600, 127 N.
W. 52.
3 Knights of Maccabees of the
World v. Hunter, 103 Tex. 612, 132
S. W. 116.
As to pulmonary tuberculosis : eon-
sumption, see § 2008 herein, and as to
3353
ui4 JOYCE ON IXSl RANCE
said disease is false, the matter is material and there can be no
recovery.4 In another case the question was a- to "former illnesses"
of the applicant, assured had Itch treated for throal trouble and
was advised to make a change of climate which he did, remain-
ing away several months and on his return his physician pro-
nounced him cured, all this occurred prior to assured's making
said application at which time assured's medical examiner pro-
nounced him sound and healthy disclosing no evidence of disease
or infirmity, nearly two years after date of his membership he
was taken ill and died of tubercular laryngitis. The case was
submitted to the jury and verdict was returned for plaintiff ami it
was held that the evidence sustained the verdict.5 And where the
questions were: "How recently have you been associated with a
person who had tuberculosis? How recently have you occupied
apartments that ljave been occupied by one who had tuberculosis?
the answers are material to (he risk, and where they are in the
negative and untrue the policy cannot be enforced; but. in such
case if assurer fails to prove the falsity, recovery is not precluded.
This applies where, although assured had lived with a person
Buffering with an abscess of the hip which was claimed to he tuber-
cular, still the evidence was insufficient to sustain such a defense
and plaintiff accordingly recovered judgment.6 But in another
case where assured had tuberculosis of the lungs and of the hones
and wrist joints and subsequently he underwent an amputation of
his arm just above the wrist, it was declared that : 'if the evi-
dence should prove, however, that he had consulted reputable
physicians as to his condition, and that he had been told by them
that he was suffering from such an insidious and dangerous disease
as tuberculosis at the time of making the application as to rebut
a i id repel the idea of forgetfulness and good faith on his part, the
concealment of such a fact, so material to the risk, and one that,
if known, his application would have been rejected, would avoid
the contract." 7 Again, it is not error to refuse hearsay evidence
upon the point whether or not insured's mother died of consump-
tion, nor is evidence admissible that he was engaged in work
conducive to tuberculosis; nor that he was subject or liable to
''pneumonia:" "pulmonary," see these 6 National Protective Legion v. All-
words under this suhdiv. (i) herein, phin, 141 Ky. 777, 133 S. W. 788.
4 Supreme Lodge Knights of Py- See Gardner v. North State Life Ins.
thias v. Bradlev, 141 Kv. 334, 132 Co. 163 N. Car. 367, 48 L.R.A.(N.S-)
S. W. 547, 40 Ins. L. J. 209, grant- 714, 79 S. E. 806, 43 Ins. L. J. 25,
ing rehearing, withdrawing opinion considered under "intimate associa-
in and rev'g Ky. — , 117 S. W. tion," etc, ante, this subdiv. (ii.
27."). See S 2008 herein. 7 Bryant v. Modern Woodmen of
5 Gruber v. German Roman Catho- America, 86 Neb. 372, 27 L.R.A.
lie Aid Assoc. 113 Minn. 340, 129 (N.S.) 326, 125 N. W. 621, per Let-
N. W. 581, 40 Ins. L. J. 423. ton, J.
3354
PARTICULAR REPRESENTATIONS, ETC. § 2004
contract such a disease; nor that he was in a weak debilitated con-
dition after the policy was issued, unless connected by proof or
offer to prove that such a condition existed at the time the applica-
tion was made and that it had continued.8 But t;/plio><l \< vei
avoids a policy where there is a representation of good health:9
and no recovery can be had where assured, shortly before making
his application, had had typhoid fever and he had stated that he
had never had any serious illness; and this is so held even accord-
ing to opinion evidence that typhoid fever is not a serious illness.10
So where in response to an inquiry concerning what illness* -
diseases, and accidents assured had had, he answers, "typhoid
pneumonia!' and such statement is not full, or substantially true, a
judgment for assured will be reversed.11 A disease of the urinary
organs caused by disease of the kidneys prevents recovery when
insured makes negative answers to questions as to having diseases
of the urinary organs, etc., even though he excepts from said
negative answer disease of the kidneys; 12 so false answer of appli-
cant to the question whether he had ever had difficult, excessive
or scanty urination avoids the policy.13 The fact, however, of
substitution by the applicant of another's urine for her own for
examination, is not of itself sufficient to invalidate the policy, but
the question is one of materiality as affecting the issue of the policy,
and where the only evidence upon this point is that it could -not
have been issued had the deception been known the court should
assume the fact of its materiality.14 A statement by assured that
he had not been successfully vaccinated does not avoid the policy
although it is stipulated that his answers are warranties and he has
agreed to waive all claims in case of death from smallpox prior
to successful vaccination, even though he dies from smallpox.15
But where it was claimed that assured was afflicted with varicose
veins in his leg when the policy was issued, thereby falsifying his
8 Mutual Life Ins. Co. of N. Y. swer, based upon assured's knowl-
v. Witte, 190 Ala. 327, 67 So. 263, edge or on what he has reason to
45 Ins. L. J. 437. believe is required where question is
9 Maine Benefit Assoc, v. Parks, general as to diseases of the urinary
81 Me. 79, 10 Am. St. Rep. 240, or genital organs) aff'd 167 N. Y.
16 Atl. 339. 584, 60 N. E. 1100). See "renal
10 Mvers v. Modern "Woodmen of colic" noted above under this subd.
the World, 193 Pa. St. 470, 44 Atl. (i).
563. 13 Metropolitan Life Ins. Co. v.
11 MeEwen v. New York Life Ins. Schmidt, 29 Ky. L. Rep. 255, 93 S.
Co. 23 Cal. App. 694, 139 Pac. 242, W. 1055.
43 Ins. L. J. 546. 14 Mutual Life Ins. Co. of N. Y.
12 Metropolitan Life Ins. Co. v. v. Crenshaw, — Tex. Civ. App. — ,
Rutherford, 95 Va. 773, 30 S. E. 116 S. W. 375.
383. See Ames v. Manhattan Life 15 Sovereign Camp Woodmen of
Ins. Co. 53 N. Y. Supp. 244, 40 App. the World v. Gray, 26 Tex. Civ. App.
Div. 465 (only fair and honest an- 457, 64 S. W. 801.
3355
g 2005 JOYCE ON INSURANCE
warranty, it was held that while such a warranty under the statute
even though false would qoI affect assured's righl in regular old
line insurance unless material to the risk, still where the insurance
is what is known as on the assessment plan, the policy will be
defeated by said warranty if false without regard to its materiality;
and a judgmenl below fur the plaintiff was reversed.16 So a state-
ment thai there is no impairment of vision, when false precludes
recovery." The words "hurt'' and "wound," in a question asked
of an applicant for life insurance, as to any "wound, hurt, or serious
bodily injury" received by him, mean an injury to the body caus-
ing an impairment of health or strength, or rendering the person
more liable to contract disease, or Less able to resist its effects.18
§ 2005. Same subject: renewal of policy: reinstatement.19 — The
rule first stated under the last section applies in case a policy is
renewed after forfeiture on condition that the assured is "now in
good health." 80
Assured does not warrant that his health is absolutely perfect by
a statement that he is in good health, made in an application for
reinstatement after lapse of the policy; the term should be con-
strued to mean only that his health was practically the same as
when the policy was issued.1 And the acceptance of a renewal
accident policy with representations copied from the original policy
and which are true when made, that he was in sound mental and
physical condition, does not constitute a warranty under the renewal
contract, and even though they are not then true it cannot avail
insurer, there being only a formal renewal without any signed
application and only an answer that the conditions were the same
as in the previous year.2 Nor is a guaranty of good health implied
by the acceptance of a renewal receipt in payment of an overdue
premium by a provision printed on the back of said receipt making
a guaranty of good health binding upon insured and his benefi-
16 Hill v. Business Men's Accident 120 N. Y. 14, 8 L.R.A. 68, 23 N. E.
Assoc — Mo. App. — , 18!) S. W. !»!), (sec "gunshot wound" above, un-
587. See Honn v. Metropolitan Life der this section).
Ins. Co. 67 N. J. L. 310, 51 Atl. 689. 19 See § 1987, also § 1916 herein.
17 Travelers' Ins. Co. v. Thome, ISO As to renewal and reinstatement,
Fed. 82, L03 C. C. A. 436, 38 L.R.A. see §§ 1276 et seq., 1458 et seq. here-
i N.S.i 626, 39 Ins. L. J. 1638, s. c. in.
Lynch v. Travelers' Ins. Co. 200 Fed. 80 Peacock v. New York Life Ins.
L93, 118 C. C. A. 379, 42 Ins. L. J. Co. 20 N. Y. 293, s. c. 1 Bosw. (N.
453. Y.) 338. See also Ohio Mutual Life
That evidence admissible of condi- Assoc, v. Draddy, 8 Ohio X. P. 140,
tion and iacial expression under 10 Ohio S. & C. P. Dec. 591.
.■I.him of false statement that vision a Massadmsrl Is Benefit Life Assoc.
unimpaired, see United States Health v. Robinson, 104 Ga. 256, 46 L.R.A.
& Accidenl Co. v. dark, 41 Ind. 261, 27 Ins. L. J. 1003, 1031.
At. |>. :<45, 83 N. E. 760. 2 Aetna Life Ins. Co. v. Rustin,
18 Bancroft v. Home Benefit Assoc. 152 Ky. 42, 153 S. W. 14.
3356
I
X
PARTICULAR REPRESENTATIONS, ETC. § 2005
ciaries in case of new insurance or revival of the policy, for under
the rule of construction against insurer said provision was held a
mere direction by insurer to its agents as to requiring such a
guaranty.3 And if a life policy is in force, but insured, under a
mistaken belief that it is not, makes a false statement as to his
health in order to have the policy reinstated, this does not avoid
the contract.4 Again, where the policy has been forfeited and an
application is made for reinstatement, the premium paid, the
agent's receipt given therefor, and the assured gives the agent his
certificate of health and certificate of examination signed by the
company's physician, which the agent forwards to the home office,
and the renewal receipt is several days thereafter forwarded to the
assured from the home office and delivered to him by the agent
without inquiry concerning his then state of health, the representa-
tions of the assured as to his health will be restricted to the time
of applying for reinstatement and paying the premiums and are
not continuous down to the day of delivery of the renewal receipt.5 r\
A statement in an application for reinstatement whereby assured
warranted that to the best of his knowledge and belief he was in
sound health and free from any symptoms of disease and that there
was then no condition of his person or occupation tending to
impair his health, injure his constitution or shorten his life, and
tl.3i'e is nothing to impugn assured's honesty and good faith in
so stating, the entire statement in all its assertions is qualified by
the words to the "best" of his "knowledge and belief" and uncon-
scious misrepresentations afford no defense to an action on the
policy, for the warranty is only of assured's honest belief based
upon the extent of his knowledge.6 It is also decided that if
assured's statement in an application for reinstatement is that he
is in good health, but only according to the best of his knowledge
and belief the policy is not invalidated by a failure to state that
he had suffered with a more or less serious stomach trouble where
it is not shown that he had knowledge obtained from his physicians
or otherwise of the serious nature of such trouble, but it does appear
it did not interfere with the pursuit of his ordinary avocation or
3 Aetna Life Ins. Co. v. Smith, 620, s. e. 124 Fed. 1017; Wasey v.
88 Fed. 440, 31 C. C. A. 575. See Travelers' Ins. Co. 126 Mich. 119,
§ 1470 herein. 126, 85 N. W. 459.
4 Bridge v. National Life Assoc. 6 Stanvan v. Securitv Mutual Life
(N. Y. S. C. 1895) 67 N. Y. St. Ins. Co. *— Vt. — , L.R.A.1917C, 350,
Rep. 297, 33 N. Y. Supp. 553. 99 Atl. 417.
5 Mutual Benefit Life Ins. Co. v. On effect of qualifying statements
Higginbotham, 95 U. S. 380, 24 L. or warranties by words to "best of
ed. 499. See Homer v. Guardian my knowledge and belief" or words
Mutual Life Ins. Co. 67 N. Y. 478. of similar import, see note in 43
Cited Kerr v. Union Mutual Ins. Co. L.RA.(N.S.) 431.
130 Fed. 415, 418. 64 C. C. A. 617,
3357
§ 2006 JOYCE ON INSURANCE
duties and did not confine him to hi- bed.7 So a representation in
assured's application for reinstatemenl thai his health ha.- hoen
good and has remained unimpaired since lasl examination, mean-
ing that for the origina] policy, and that he ratifies and continue
all the statements made in the original application, and the ques-
tions therein are based upon assured's knowledge and belief, said
affirmation of presenl good health is not a warranty but only a
representation.8
But it is held that warranties in an accident policy as to sound
health and medical attendance od which the original policy is
based, attach to the renewal thereof and relate to the time when
made, where uo additional application is made or questions asked.9
It is also decided that it is a good defense, even under the statute,
that assured was suffering from heart disease which increased the
risk where assured had in his application tor reinstatemenl mis-
represented that his health was good and unimpaired and it need
not be shown that there was an actual intent to deceive.10 So in
case insured learns from a physician thai symptoms of a malady
existed which would involve actual impairment of his health a
warranty of good health in an application for reinstatement pre-
clude^ recovery by hi- beneficiary.11 And the certificate of the
attending physician as part of the proofs of death showing treat
ment for chronic pulmonary tuberculosis, is competent evidence
to disprove a representation as to sound health made in an applica-
tion for reinstatement.12
Giving a renewal receipt conditioned that assured then was and
had been for twelve months in continuous good health waives a
requirement in the by-laws of satisfactory evidence of good health
as a prerequisite to reinstatement.18
§ 2006. Same subject: refusal of assured to accept renewal re-
ceipt conditioned as to good health.14 — If the company relies upon
tact that a renewal receipt was given after a Lapse of the policy
conditioned that the insured was in good health, such evidence
may he met hy proof that the assured at the time was in a critical
7 Ohio Mutual Life Assoc, v. Drad- v Allen, 174 Ala. 511, 56 So. 568,
dy, 8 Ohio X. P. 140, 10 Ohio S. & 41 Ids. L. .1. 1221. See Empire Life
C. P. Dec. 5(11. Ins. Co. v. Gee, 176 Ala. 492, 60 So.
8 Cole v. Mutual Life Ins. Co. of 90.
\. V. 12!i La. 704, 5(1 X. F. 645, " New York Life Ins. Co. v.
41 Ins. L. J. 227: act L906, p. 86, Franklin, 1 US Ya. 418, 87 S. E. 584.
Act 52. See also Ohio Mutual Life 12 Donnelly v. Metropolitan Life
Assoc, v. Drad.lv. s Ohio N. I'. 140, Ins. Co. 86 N. Y. Supp. 790, 4:< Misc.
10 Ohio S. & C. P. Dec. 591. S7.
9 Fidelity & Casualtv Co. v. Mover, 13 Mutual Reserve Fund Life
106 Ark. 91, 44 L.h'.A.tN.S.) 4!);?. Assoc v. Bozeman, 21 Tex. Civ. App.
152 S. VY. 995. 190, 52 S. W. 94.
10 Mutual Life Ins. Co. of N. Y. u See § 1987, also § 1916 herein.
3358
PARTICULAR REPRESENTATIONS, ETC. §§ 2007, 2008
condition and did not learn of the fact until afterwards, when he
at once returned the same with a demand for his money or the
customary receipt without such a condition.15
§ 2007. Health of assured need not be disclosed at time of re-
newal except on inquiry.16 — The tact that the policy has lapsed does
not of itself obligate the assured to disclose his condition as to
health, to make a renewal receipt valid, unless inquiry be made,17
except perhaps a custom of the company known to the assured
import such a condition into the renewal receipt.18
§ 2008. Health: "spitting of blood:" consumption. — Where the
assured declares in answer to a question that he had not had "spit-
ting of blood," and this is untrue, such answer is held material
and a warranty, and the policy is avoided ; 19 that is, if the evi-
dence shows that the warranty as to spitting of blood was false the
policy is avoided.20 It is also held that if an applicant for a life
policy warrants, in his application, that the representations and
answers made by him therein are true, agreeing that any untrue
answers shall render the policy void, and the policy makes the
answers and statements in the application a part of the contract
of insurance, the applicant's answer, relative to hemorrhages and
the extent of his use of intoxicating liquors, are warranties.1 So
where the answer "No," to a question as to spitting of blood is a
warranty, if false it avoids the policy without distinction between
15 Rockwell v. Mutual Life Ins. Co. 549, 88 N. E. 87, 38 Ins. L. J. 737
27 Wis. 372. ("spitting of blood:" "habitual
16 See § 1987, also § 1916 herein, coughing:" are warranties : but judg-
As to renewal and reinstatement, ment against insurer) ; Van Pelt v.
see §§ 1276 et seq., 1458 et seq. Chapter General of America, K. of
herein. St. J. & M. 61 N. Y. Supp. 1010,
17 Rockwell v. Mutual Life Ins. Co. 47 App. Div. 636 (judgment for
27 Wis. 372. See National Mutual plaintiff) ; Murphv v. Prudential Ins.
Benefit Assoc, v. Miller, 85 Kv. 88, Co. of America, 205 Pa. 444, 55 Atl.
2 S. W. 900, 8 Ky. L. Rep. 731. 191, 33 Ins. L. J. 136 (if statement
As to concealment: no inquiries false, policy avoided); Smith v.
or limited inquiries, etc., see §§ 1870 Northwestern Mutual Life Ins. Co.
et seq. herein. 196 Pa. St. 314, 46 Atl. 426, 30 Ins.
As to representations where no in- L. J. 61 (judgment for insurer).
quiries made, see § 1914c herein. See "pulmonary disease" also "tu-
As to warranties: partial answers, berculosis" noted under list of spe-
see § 1969 herein. cific diseases, etc., § 2004, subdv. (i)
18 Lewis v. Phoenix Mutual Life herein.
Ins. Co. 44 Conn. 72, 73. 20 Lif e Association of America v.
19 Mutual Benefit Life Ins. Co. v. Edwards, 159 Fed. 53, 86 C. C. A.
Miller, 39 Ind. 475; Mutual Benefit 243.
Life Ins. Co. v. Wager, 27 Barb. 1 Sweenev v. Metropolitan Life
(N. Y.) 354. See Vose v. Eagle Ins. Co. 19 R. I. 171, 38 L.R.A.
Life & Health Ins. Co. 6 Cush. (60 297, 61 Am. St. Rep. 751, 36 Atl.
Mass.) 42. Examine Collins v. Cath- 9.
olic Order of Foresters, 43 Ind. App.
3359
§ 2008 JOYCE ON INSURANCE
hemorrhages and other spitting of blood.2 Again, the phrase
"spitting or coughing of blood/' as used in a question propounded
by a medical examiner to an applicant concerning whether she
ever had "spitting or coughing of blood," means the disorder so
cillcil. whether the blood comes from the Lungs or from the
stomach.3 So a negative answer to the question whether assured
has ever spit blood, must be deemed false if he has had an expectora-
tion amounting to a hemorrhage.4 And where the assured had
raised blood for two years and a half prior to his death, and had
died of pleura-pneumonia shortly after the insurance was effe< ted,
the policy was held avoided.5
As we have elsewhere stated, however, a distinction is made
between questions which call for an answer as to facts of which
assured must have special knowledge, and questions which call for
an expression of opinion, or for the statement of a conclusion of
facts, of the truth of which assurer has equal means with assured
of ascertaining. There are also other questions concerning which
it cannot be presumed that insurer will rely upon what is stated
by the applicant. The above applies where the question relates
to hemorrhages, and if the answer relating thereto is false in that
assured shortly before had had an attack of hemorrhage of the
lungs there can be no recovery, for the matter is one especially
within the knowledge of the sufferer who must necessarily have
been aware of such attack.6
It is held that although the mere fact of spitting blood will not
of itself avoid the contract, yet the fact should be stated to enable
the assurer to determine whether he had the disease called "spitting
of blood;" but in this case the assured had exhibited symptoms of
consumption.7 If the question is so worded that it may fairly be
implied that only a categorical answer is required whether the
assured has had the disease or complaint generally known and
designated as "spitting or raising of blood," then the policy is not
avoided by a failure to disclose a single instance of blood spitting.
but the rule would be otherwise where the question is so specifically
worded that it is clear that information is sought whether the
assured has had single instances of spitting of blood or any spitting
2 March v. Metropolitan Life Ins. 6 Smith v. iEtna Life Ins. Co. 49
Co. 186 Pa. 629, 65 Am. St. Rep. N. Y. 211.
887, 40 Atl. 1100, 28 Ins. L. J. 30. 6 Roval Neighbors of America v.
8Eminent Household of Columbi- Wallace, 73 Neb. 409, 102 N. W.
an Woodmen vj Prater, 24 Okla. 214, 1020, 34 Ins. L. J. 450, s. c. 66
23 IJ.'.A.iN.S.) 917 (annotated on Neb. 543, 92 N» W. 897, s. c. 64 Neb.
wli.it i stitutes "spitting or cough- 330, 89 N. W. 758, .'51 Ins. L. J. 447.
ing blood"), L03 Pac. 558. 7 (leach v. Ingall, 14 Mees. & W.
4 March v. Metropolitan Lite Ins. 95, 15 L. J. Ex. 37, 9 Jur. 691.
Co. isii Pa. St. 629, (i."» Am. St. Hep.
887, 41) Atl. 1100, 28 Ins. L. J. 30.
3360
PARTICULAR REPRESENTATIONS, ETC. § 2008
of blood, or symptoms thereof.8 It is also declared that "the mere
raising of a small quantity of blood in a single instance is not
necessarily indicative of disease, nor a material circumstance so
that such an occurrence, however slight, at any time during the
previous life of the applicant would make his answer such a mis-
representation as to require that the court should so declare as a
matter of law." 9 Again a slight blow on the throat while engaged
in fencing, which causes a person to raise a little blood, in conse-
quence of which he is confined to his bed and attended by a phy-
sician for the greater part of three days, with no further hemorrhage
from the day he was struck to the date of his death, a year and a
half thereafter, does not constitute "any wound, hurt or serious
bodily injury," within the meaning of a question in an application
for life insurance.10
Consumption falsifies a statement of good health and avoids the
policy.11 And where assured had had consumption for a year prior
to the policy being issued and died from that disease and said .facts
falsify his statements there can be no recovery.12 So in case an
applicant for insurance is asked whether he is afflicted with con-
sumption and answers "No," his answer must be regarded as ma-
terial and false if he is afflicted with that disease, if the circum-
stances show that the insured could not have been ignorant of the
presence of the disease.13 Assured's misrepresentation as to con-
sumption is also of a matter which increases the risk of loss within
the intent of statute relating to that subject and there can be no
recovery irrespective of the question whether he died of that
disease.14
Under the Georgia statute, statements negativing consumption
do not invalidate the policy where assured answers in good faith
without wilful misstatements or omissions even though the untruth
of the same are due to his ignorance or failure to recollect.15 So
8 Dreier v. Continental Life Ins. 12 Murphy v. Prudential Ins Co
Co. (U. S. C. C.) 24 Fed. 670; of America, 205 Pa. 444, 55 Atl. 191.'
Pudritzky v. Knights of Honor, 76 13 March v. Metropolitan Life Ins
Mich. 428, 43 N. W. 373. Co. 186 Pa. St. 629, 65 Am. St. Rep.
9 Campbell v. New England Mu- 887, 40 Atl. 1100, 28 Ins. L. J. 30.
tual Life Ins. Co. 98 Mass. 381. See 14 Brown v. Greenfield Life Assoc.
Tucker v. United States Life & Acci- 172 Mass. 498, 53 N. E. 129, 28 Ins
dent Assoc. 133 N. Y. 548, 21 Iris. L. J. 321; Stat. 1894, c. 522, sec
L. J. 569, 30 N. E. 723; Taylor's 21; Stat. 1887, c. 214. See § 1916
Medical Jurisprudence (ed. 1866) herein.
760. "Fidelity Mutual Life Ins. Co.
10 Bancroft v. Home Benefit Assoc, v. Jeffords, 107 Fed. 402, 53 L.R A
120 N. Y. 14, 8 L.R.A. 68, 23 N. E. 193, 46 C. C. A. 377, Ga. Code 1895,
997. sees. 2097, 2099, 2101.
11 Maine Benefit Assoc, v. Parks,
81 Me. 79, 10 Am. St. Rep. 240, 16
Atl. 339.
Joyce Ins. Vol. III.— 211. 3361
§ 2009 JOYCE ON INSURANCE
where untrue statements as to consumption or phthisis are repre-
sentations only, the right to recover depends upon whether they
were made in good faith or not, or were knowingly or wilfully
made with intent to deceive;16 and the burden of proof rests
upon insurer to show that pulmonary disease or consumption
existed prior to issuing the policy where it relies upon such fact
as a defense.17 In another case assured apparently died of
tuberculosis pulmonalis and the policy required that assured
be in sound health at the date of the delivery of the policy. There
was medical evidence of the existence in the sputum of the germs of
tuberculosis, but the testimony was also contradictory as to certain
matters and was submitted to the jury. A judgment below for
plaintiff was affirmed.18
The mere fact that insured died of consumption does not prove
that he had the disease when insured, and pleas which are wanting
in certainty in failing to state wherein an alleged misrepresenta-
tion of good health is false, are demurrable.19 But it is held that
the attending physicians' certificate given in compliance with a
requirement of a city charter is competent evidence to show that
a — ured died with consumption, and therefore a breach of war-
ranty.20
§ 2009. Health: previous sickness or disease.1 — The rule hereto-
fore stated as to "serious illness*' applies to a question as to "former
illnesses"2 and a statement in the present tense is held not a war-
ranty as to previous diseases or injuries as where the answer is "I
. . . have no injury or disease which will tend to shorten life;
16 Metropolitan Life Ins. Co. v. N. Y. Supp. 1010, 47 App. Div. 636
Johnson, 105 Ark. 101, 150 S. W. (judgment for plaintiff); Smith v.
393, 42 Ins. L. J. 73. Grand Orange Lodge of British
17 Bathe v. Metropolitan Life Ins. America (Ont.) 24 Canadian L. T.
Co. 152 Mo. App. 87, 132 S. W. 743. 16 (judgment for insurer).
"Mutual Life Ins. Co. v. Rain, 2 See §§ 1848, 1849, 1916, 1987,
108 Md. 353, 70 Atl. 87, 37 Ins. L. J. 2003-2008, 2010-2012 herein.
845. See list of specific instances of ail-
19 Mutual Life Ins. Co. of N. Y. v. ments, diseases, etc., § 2004, subdiv.
Witte, 190 Ala. 485, 67 So. 273, 45 (i) herein, see also questions for jury
Ins. L. J. 437. at end of § 2003 herein.
20 Ohmeyer v. Supreme Forest As to medical attendant, prior con-
Woodmen Circle, 91 Mo. App. 189. sultation with physicians, etc., see §§
For other instances of consump- 2070-2072 herein,
tion, see the following cases: Met- As to habits: opium: temperate:
ropolitan Life Ins. Co. v. Mitchell, use of liquors: tobacco, see §§ 2076,
17:. 111. 322, 51 N. E. 637 (judgment 2096, 2097 herein.
against insurer); Donovan v. Colo- 2 Gruber v. German Roman Cath-
nial Life Ins. Co. of America, 119 olic Aid Assoc, of America, 113
N. Y. Supp. 1078 (judgment for in- Minn. 340, 129 N. W. 581, 40 Ins.
surer) ; Van Pelt v. Chapter General L. J. 423. See § 2004 herein, "se-
of America, K. of St. J. & M. 61 rious illness."
3362
PAKTICULAR REPRESENTATIONS, ETC. § 2000
am now in good health." 3 Whore, however, matters clearly relal ing
to the past are material to the risk recovery is precluded where the
answers are untrue or false, even though not warranties.4
On application of husband and wife the husband's life was
insured for the wife's benefit. In the application the insured stated
that he had had no disease or sickness in the last seven years. The
policy was conditioned to be void if the statements in the applica-
tion were not in all respects true. In an action by the wife on the
policy it was held that declarations by the insured prior to the
application to the effect that he had been cured of a cancer about
a year before was incompetent.5 So an answer to the question
whether the assured had had "diseases of the brain," or the answer
to another question that he was "never sick," it is held must be
taken to mean that he had never had such diseases so as to con-
stitute an attack of sickness.6 In case of a warranty that the
answers contained in the application were full, correct, and true,
the insured, in answer to a question whether he had had any disease
within ten years, and if so to give name of physician, stated that
he had had an attack of fever nine years before, and gave the
name of the attending physician. It was held that the fact that
he had had other sicknesses and physicians did not constitute a
breach of warranty.7 Again, if the assured warrants in his applica-
tion that he has usually enjoyed good health and has not had any
severe disease for seven years, and within three years thereafter he
dies of nervous apoplexy, it is error to refuse to admit evidence
that death was the result of some disease of long standing.8 And
where the assured answers "No," to the question whether he had
ever had "affection of liver," his answer may nevertheless be a
"fair and true" one, although he has had slight temporary disorders
of the liver resulting in permanent injury or prolonged suffering.9
3Maloney v. North American Un- v. Union Trust Co. 112 U. S. 250,
ion, 143 111. App. 615. 28 L. ed. 708, 5 Sup. Ct. 119. Cited
4 Supreme Lodge of Modern Amer- in :
iean Fraternal Order v. Miller, 60 United States. — Preferred Acci- '
Ind. App. 269, 110 N. E. 556. Com- dent Ins. Co. v. Muir, 126 Fed. 926,
pare Collins v. Catholic Order of 929, 61 C. C. A. 459; McClain v.
Foresters, 43 Ind. App. 549, 88 N. E. Provident Savings Life Ins. Soc. 110
87, 38 Ins. L. J. 737. Fed. 80, 94, 49 C. C. A. 46; Hub-
5 Union Central Life Ins. Co. v. bard v. Mutual Reserve Fund Life
Chever, 36 Ohio St. 201, 38 Am. Assoc. 100 Fed. 719, 723, 40 C. C. A.
Rep. 573. 668; Fidelity Mutual Life Assoc, v.
6 Knickerbocker Life Ins. Co. v. Miller, 92 Fed. 63, 76, 34 C. C. A.
Trefz, 104 U. S. 197, 26 L. ed. 708. 224, 63 U. S. App. 717; Manhattan
7 Dilleber v. Home Life Ins. Co. Life Ins. Co. v. Carder, 82 Fed. 986,
69 N. Y. 256, 25 Am. Rep. 182. 989, 27 C. C. A. 346, 42 U. S. App.
8 Edington v. iEtna Life Ins. Co. 659 ; Penn Mutual Life Ins. Co. v.
77 N. Y. 564. Mechanics Savings Bank & Trust Co.
9 Connecticut Mutual Life Ins. Co. 72 Fed. 419, 432, 19 C. C. A. 306,
3363
§ 2010
JOYCE ON INSURANCE
So the statement that the assured had not been sick is not Falsified
by the fad of his having had a slight cold.10 It has been held that
if a person in an application for insurance, in answer to a question
as to whether he has headache, answers "No," the fact thai ho has
headaches when overworked will not avoid the policy, hut this
decision was reversed.11
§ 2010. Health: assurred's knowledge: latent disease.— We have
elsewhere considered to some extent the questions of assured's
knowledge and latent disease18 and what is there said applies here,
50 thai it is only necessary to present under this section certain
instances or decisions in point.
Where the answers are warranties and the policy is defended on
the ground that the risk was increased by a disease, the existence
of which is denied by such answers, the assured's knowledge as to
their truthfulness is held immaterial.14 So it is decided that a
37 U. S. APP. 692, 38 L.R.A. 33; Tenn. 28, 29, 41 S. W. 340; Rand
Mutual Benefit Life Ins. Co. v. Robi- v. Provident Savings Life Assurance
sen. 58 I'Yd. 723, 731, 7 C. C. A. Soe. 97 Ten. 291, 296, 37 S. W. 7.
444, 470, 19 U. S. App. 266, 22 Texas.— Mat mil Lite ins. Co. v.
I. R A. 331; Dreier v. Continental Simpson, 88 Tex. 333, 338, 28 L.R.A.
Life Ins. Co. 24 Fed. (570, 671. 768, 53 Am. St. Rep. 757, 31 S. \\ .
Arkansas. — Providence Life Assur- 501.
ance Soe. v. Reutlinger, 58 Ark. 528, Virginia.— Metropolitan Life Ins
535, 25 S. W. 835.
Illinois. — Illinois Life Ins. Co. v.
Lindley, 110 111. App. 161, 164.
Indiana. — Continental Life Ins.
Co. v. Yung, 113 Ind. 159, 162, 3
Co. v. Rutherford, 95 Va. 773, 782,
30 S. E. 383.
10 Metropolitan Life Ins. Co. v.
McTague, 46 N. J. 587, 60 Am. Rep.
661, 9 Atl. 766. See Life Ins. Co. v.
\m. St. Rep. 630, 15 N. E. 220; Francisco, 17 Wall. (84 U. S.) 672,
Fidelity .Mutual Life Assoc, v. Mc- 21 L. ed. 698; Higbee v. Guardian
Daniel, 25 Ind. App. 608, 615, 57 Mutual Life Ins. Co. 53 N..Y. 603.
N. E. 645. u Mutual Life Ins. Co. v. Simpson,
' Jo wa.— Peterson v. Dos Moines — Tex. Civ. App. — , 28 S. VY. 837,
Life Assoc. 115 Iowa, 668, 673, 87 rev'd 88 Tex. 333, 28 L.R.A. 765, 53
N. \yr. 397. Am. st- ReP- 7:,~- ;il s- W: ")(l1
Michigan.— Blumenthal v. Berk- (considered under "heada.-l.es" in list
shire Life Ins. Co. 134 Mich. 216, of specific diseases at end of § 2004
21S, 104 Am. St. Rep. 604, 96 X. \Y. herein
13 SS 1848, 1849 herein.
"Mutual Benefit Life Ins. Co. v.
Cannon, 48 Ind. 264; Maver v. Equi-
table Reserve Fund Life Assoc. 2
17.
Missouri. — McDermott v. Modern
Woodmen of America, 97 Mo. App.
636, 650, 71 S. W. 833.
Neiv Jersey— Henn v. Metropoli- N. Y. St. Rep. 79 (annotated case),
tan Life Ins. Co. 67 N. J. Law, 310, See Armour v. Transatlantic Fire
315, 51 Atl. 689. Ins. Co. 90 N. Y. 450, 455. See
New York.— Meyer v. Standard "good faith, knowledge" under § 2003
Life & Accident Ins. Co. 40 N. Y. herein.
Supp. 419, 8 App. Div. 77. On innocent misrepresentation as
Tennessee. — Endowment Rank to health by insured who has undis-
Knights of Pythias v. Cogbill, 99 covered disease, see note in 53 L.R.A.
3364
PARTICULAR REPRESENTATIONS, ETC. § 2010
statement that the assured has not a certain disease is not the less
untrue because he has no knowledge of the existence of said
disease.15 In a New Hampshire case a boy of ten had heart disease,
but not discoverable except by physicians as there was nothing in
his appearance to indicate it, the father died of consumption and
there was evidence that the boy died of both diseases. No represen-
tation or warranty was made but the contract provided that no
obligation was assumed unless on the policy date insured was alive
and in sound health. The mother who made the application had
no knowledge that insured had any such disease. It was held that
a finding that the boy was not in sound health at date of the policy
was justified. The court, per Chase, J., said: "The fact that the
plaintiff was not aware of the nature of the disease, and that its
nature was undiscoverable except by a physician, did not prevent
it from rendering the boy's health unsound," the point being that
he had a disease of a serious nature.16 It is also held that it is not
necessary in order to defeat recovery on a benefit certificate by
reason of the falsity of the applicant's statements material to the
risk, that he was in good health, and not diseased, that the applicant
should have known that he was in fact diseased.17 And even
though there are no physical signs evidencing an undeveloped
disease, still if assured knows of its existence and conceals the fact
there can be no recovery.18
Notwithstanding the preceding decisions, it is determined that
warranties do not include ailments of the existence of which the
applicant has no knowledge, and concerning which no inquiries
are made.19 And under a Pennsylvania decision if assured was
afflicted with an entirely occult ailment, altogether unknown to
her, her failure to communicate it to assurer would not be a fraud
upon it.20 So in another case in that state it is declared that the
i
193; on effect of honest mistake in 17 Knights of Maccabees v. Shields,
answer as to health of insured war- 156 Ky. 270, 49 L.R.A. (N.S.) 853,
ranted by him to be true, s*ee note 160 S. W. 1043.
in 15 L.R.A. (N.S.) 1273. 18 Smith v. Grand Lodge of British
15Duekett v. Williams, 4 Tyrw. America (Ont.) 24 Canadian L T.
240, 2 Cromp. & M. 348. See 'also 16.
Von Lindenau v. Desborough, 3 Car. 19 Ames v. Manhattan Life Ins. Co
& P. 353, 8 Barn. & C. 586; Conti- 58 N. Y. Supp. 244, 40 App. Div.
nental Life Ins. Co. v. Yung, 113 Ind. 465, aff'd 167 N. Y. 584, 60 N E
159, 3 Am. St. Rep. 630, 15 N. E. 1100. See also Breeze v. Metropoli-
220; Cazenove v. British Equitable tan Life Ins. Co. 48 N. Y. Supp 753
Assur. Co. 6 Com. B. N. S. 437, 24 App. Div. 377.
aff'd 29 L. J. C. P. 160. *° March v. Metropolitan Life Ins.
16 Packard v. Metropolitan Ins. Co. 386 Pa. 629, 65 Am. St Rep
Co. 72 N. H. 1, 54 Atl. 287, 32 Ins. S87, 40 Atl. 1100, 28 Ins. L. J. 30,
L. J. 742. 34 (but judgment was rendered in
3365
§ 2010 JOYCE OX l.\S( l.'.WVi;
question is whether or not assured knew thai she was suffering
with organic heart trouble, if she did know and answered falsely
the policy would be avoided if the jury so found, but if she did
nut know of her own knowledge or from symptoms which manifest
themselves in diseases of the heart or from consulting a physician
thai she was suffering from latent organic heart trouble and
honestly answered that she was in good health it was for the jury
to pass thereon and determine whether the applicant was in good
health to the best of her knowledge and belief when she answered
1 1 1 « ■ questions. In other words, insured is not bound to know at
his peril of the existence of a disease which experience teaches may
exist in latent form and concerning which one may not, in the
very nature of things have exact knowledge. But a distinction
was made in this case between warranties and representations, in
thai the rule in the former is more exacting than in the latter, and
in this particular instance it was stipulated in the application that
statements were to he deemed representations and not warranties.1
It is further held that the answer that the assured has no disease
and is in good health does not import a warranty beyond the as-
sured's knowledge, good faith, and reasonable belief, and not a
warranty that he has not a latent disease only discoverable by post
mortem examination.2 And even though germs of a serious disease
may have been in one's system, as in case of typhoid fever, a state-
ment that he had not had it and was then free from disease is true
within the intent of the parties. The case so holding was, however,
decided in favor of the society upon other grounds.3 So statements
as to consul ta! ion with a physician and as to organic diseases are
not falsified where insured did not know that he was suffering
from an incipient disease but believed he was only suffering from
a slight cold, and his physician did not inform him to the con-
trary.4 And it is declared in a Virginia ease that: "The phrase
'good health' as used in its common and ordinary sense by a
person speaking of his own condition, undoubtedly implies a state
of health unimpaired by any serious malady of wdiich the person
himself is conscious. When one says he is in good health, he does
favor of defendant upon other 6 Car. & P. 1. See Swift v. Massa-
points). chusetts Mutual Life Ins. Co. 2 X. V.
1 Suravitz v. Prudential Ins. Co. Sup. Ct. 302.
of America, 244 Pa. 582, L.R.A. 3 Modern Woodmen of America v.
L915A, 273, 91 Atl. 495. Owens, 60 Tex. Civ. App. 398, 130
2 Hutchinson v. National Loan S. W. 858.
.Win-. Soc. 7 C. C. S. 467, 17 Scot. 4 Blackmail v. United States Casu-
Jur. 253; Schwarzbach v. Ohio Val- altv Co. 117 Tenn. 578, 103 S. W.
I<\ Protective Union, 25 W. V.i. 622, 784.
52 Am. Rep! 227; Swete v. Fairlie.
3366
PARTICULAR REPRESENTATIONS, ETC. § 2010
not mean and nobody understands him to mean, that he may not
have a latent disease of which he is wholly unconscious. It is doubt-
less competent for a life insurance company in its policy, to take
the expression 'good health' out of its common meaning and make
it exclude every disease, whether latent or not (assuming that any
person would ever accept a policy of that kind) but it must do so
in distinct and unmistakable language. The mere statement of a
party that he fully warrants himself to be in good health is not
sufficient." 6 So where a policy insures against hernia such as
would require a surgical operation for its cure, and it is claimed
that there is a breach of warranty because insured was suffering
therefrom when he made his application, and he had then stated
that he was free from any "functional or organic disease, mental
or physical disorder, defect," etc., such claim will not be sustained
where hernia was not then in existence, although there may have
been incipient hernia or a predisposition thereto, and even though
by violent physical exertion, prior to the policy being issued, the
inguinal, ring was weakened causing the hernia to subsequently
develop. In this case, however, one of the factors was that the
insurance was held to be against actual or complete hernia.6 Again,
if the applicant is suffering from a disease or disorder of which he
is ignorant and insurer's examining physicians fail to discover its
existence the policy would not necessarily be void, where the appli-
cant has acted in the utmost good faith and has fairly and fully
disclosed all his information as to his condition of health and the
desirability of the risk especially where the Code provides for the
exercise of the utmost good faith in such matters.7 And where a
certificate of continued good health is required to be furnished
before delivery of the policy, and such certificate is under the
statute only a representation and is not made with an actual intent
to deceive, the statement of good health will not avoid the policy
even though at the time the certificate was made insured was
troubled with incipient brain tumor. In such cases of latent
disease the insurers provide to such extent as they can by examina-
tions by experts, and assured who is unconscious or unaware of
such latent disease may truthfully state that he is in good health in
so far as such incipient disease is concerned and of which he is
ignorant.8 So, under another decision, the existence of a disease
6 Greenwood v. Royal Neighbors of On hernia, as breach of condition
America, 118 Va. 329, 87 S. E. 581. or warranty as to health or bodily
See further as to meaning of "good condition, see note in L.R.A.1917B,
health," § 2004 herein. 747.
6 Hill v. United States Casualty 7 Aetna Life Ins. Co. v. Conway,
Co. 176 Mo. App. 635, 159 S. W. 11 Ga. App. 557, 75 S. E. 915.
771, 42 Ins. L. J. 1788. 8 Massachusetts Mutual Life Ins.
3367
§ 2011 JOYCE ON INSURANCE
in applicant at the time of taking out a life policy, which is so
undeveloped that he is entirely unconscious of its existence, will
not avoid the policy, although in his application he denies having
disease, and agrees that any untrue statement shall render the
policy void, especially so where the statute provides that representa-
tions in the application arc covenanted i'> be true, and that "wilful
concealment" will avoid the policy.9 And it is declared in a New
Jersey case that if a question relates to matter which insurer should
know that assured could not have the knowledge to fully answer, a
warranty will not be held to be more than a warranty in the fair
sense of the question, namely, to the belief of insured.10 Again.
as relevanl hereto a distinction is made between actual and imagi-
nary diseases as where a belief on the part of assured exists that
she has a serious physical trouble but a physician's diagnosis proves
such a belief to he groundless. Another distinction also exists as
where a disease is serious but assured is ignorant of its existence
or his or her physican has not informed him or her thereof, and
on the other hand the disease may be one of such grave importance,
as having a tendency to shorten life, that its character is generally
known or recognized. Another factor in cases such as those above
instanced is the effeel of statutory provisions making representa-
tions material only when made with intent to deceive or unless
the matter misrepresented increases the risk.11 The conclusion,
therefore, would seem reasonably to follow that insured cannot
make a representation with intent to deceive concerning a com-
plaint or disease which is so latent that he has, and could have no
knowledge of its existence, especially so where physicians fail upon
examination to discover it.12
§ 2011. Health: parents: relations.13 — It is decided that the rule
of liberal construction in favor of assured applies in cases of the
character under consideration, and it will not be held that state-
Co. v. Crenshaw, 195 Ala. 263, 70 Mass. 326, 17 L.R.A.(N.S.) 1235,
So. 768, Ala. Code L907, sec. 4572. 78 N. E. 469, 35 Ins. L. J. 778;
See s. e. 186 Ala. 460, 65 So. 65 Stat. 1894, p. 684, c. 522, sec. 1,
(where it was held that the mere as am'd by stat. 1895, c. 2d, Rev.
allegation that a false statement was L. C. 118, sec. 21.
knowingly made does not necessarily 12 See §§ 1848, 1849, 1916 herein.
imparl an "actual intent to deceive" 13 See § 1987. As to concealment
within the meaning of the statute), see §§ 1844 et seq.; as to representa-
9 Fidelity Mutual Life Assoc, v. tions and misrepresentations see §
Jeffords, L07 Fed. 402, 46 C. C. A. 1882 et seq.; as to warranties, see §§
377, 53 L.R.A. 193. 1942 et seq.; and as to statements
10 Ilenn v. Metropolitan Life Ins. under statutes see § 1916 herein.
Co. 67 N. J. L. 310, 51 Atl. 689. See also preliminary statement §
11 Kidder v. Supreme Commandery 2003 herein.
United Order of Golden Cross, 199
3368
PARTICULAR RKI'UKSKXTATlONS, ETC. § 2011
merits as to family history are warranties; and if insured believes
thai what he has stated is true the certificate is not necessarily
vitiated by the falsity thereof, although the truth of said statements
is stipulated to be a condition precedent to recovery.14 It is also
held that statements as to family history are not material to the
risk as a matter of law.15 So where untrue statements as to the
health of the mother, brothers or sisters, or other immediate mem-
bers of insured's family, are representations only, the right to
recover depends upon whether they were made in good faith or
not, or were knowingly and wilfully made with intent to deceive.16
And assured's statement that his father had been in good health
for several years before he died does not mean perfect health nor
that he had suffered no serious illness but only that he had been
in reasonably good health.17 And in a Kentucky case, when it
was stated that the father died of old age at ninety-three, which
was untrue, he having died of apoplexy, aged eighty-two, and also
that the mother died of old age at seventy-two, which was untrue,
she having died of paralysis, aged sixty-five, it was held that the
answers being made in good faith, they were not so far material
as to avoid the contract,18 So only the bona fide belief and opinion
of assured is called for by inquiry as to the cause of the father's
death, and not a definite statement of fact.19 Again, if assured is
asked whether his parents have been afflicted with specified diseases,
and the clause is followed by the words "or other hereditary
disease," the whole inquiry is thereby qualified, and confined to
these cases in which the designated diseases are hereditary in
character, and although one of the diseases named is insanity,
and- the parent about whom the inquiry is made has had attacks
of insanity from accidental and not hereditary causes, and an
uncle died insane more than twenty years prior to issuing the
policy, it not being proven hereditary, this does not vitiate the
policy, although a negative answer has been given.20 Nor is
14 Loasch v. Supreme Tribe of Ben 18 Germania Ins. Co. v. Rudwig,
Hur, — Tex. Civ. App. — , 190 S. 80 Ky. 223.
W. 506. 19 Grilroy v. Supreme Court Ind.
On statements respecting family Order Foresters, 75 X. J. 584, 14
history, see note in L.R.A.1917C, L.R.A.(N.S.) 632, 67 Atl. 1037.
866. * 20 Peaseley v. Safety Deposit Life
15Bagly v. Court of Honor, 151 Ins. Co. 15 Hun (N. Y.) 227; Grid-
Ill App. 371 ley v. Northwestern Ins. Co. 14
16 Metropolitan Life Ins. Co. v. Blatehf. (U. S. C. C.) 107, Fed. Cas.
Johnson, 105 Ark. 101, 150 S. W. No. 5,808; Insurance Co. v. Gridley,
393, 42 Ins. L. J. 73. 100 U. S. 614, 25 L. ed. 746. See
' 17 Provident Savings Life Assoc, v. Newton v. Mutual Benefit Life Ins.
Beyer, 23 Ky. L. Rep. 2460, 67 S. W. Co. 15 Hun (N. Y.) 595. See South
827. Atlantic Life Ins. Co. v. Hurt's
3369
§ 2011 JOYCE ON INSURANCE
assured's statement that his father had never had consumption
falsified by evidence that the latter had spoken of spitting of blood.1
\ statement by an applicant that none of his brothers are dead,
will ii"t. although false, avoid the policy, unless he knew it to be
so, under a polity warranting the statements to be true and that
they shall form the basis of any contract entered into.2 And a
representation by assured that his sister enjoyed good health will
not be presumed to be a material representation, even though she
died of consumption, where he did not live in her family and was
over forty years of age and it also appears that he would have been
deemed an acceptable risk by other companies.3 Nor is it error
to refuse to charge the jury that, if any misstatement material to
the risk was made as to the cause of death of a brother of insured,
it would invalidate the policy, whether made wilfully or in good
faith, since the cause of death of a person is often a matter of
opinion merely, about which even physicians differ.4 So a state-
ment in a medical examination by an applicant, that none of his
brothers are dead, is a representation and not a warranty, and if
proved to be false, does not vitiate the policy, in the absence of
proof of fraud or intentional misstatement on the part of the
insured.5
It is decided, however, that false representations as to the disease
of which the assured's parents died will generally avoid the policy
under a stipulation that it shall be avoided if any of the state-
ments in the application respecting the family are untrue.6 And
where statements in the proofs of loss show that death of the
father was caused by fistula and the application stated that it was
cholera morbus the falsity of such answer is shown prima facie;
and when no effort is made to rebut such showing there can be no
recovery where said answer is a warranty.7 Again, it is held that
Admx. 115 Va. 398, 79 S. E. 401, 3 New Era Assoc, v. Mactavish, 133
42 Ins. L. J. 1583 (failure to dis- Mich. 68, 10 Det. L. W. 109, 94 N.
close hereditary insanity of uncfe: W. 599.
assurod's knowledge not shown nor 4 Lodge Knights of Honor v. Dick-
willful falsity: fraud: construction son, 102 Tenn. 255, 52 S. W. 862.
of question as to hereditary insanity 5 Globe Mutual Life Ins. Assoc.
of uncles and aunts: question as to v. Wagner, 188 111. 133, 52 L.R.A.
consumption in immediate household, 649, 80 Am. St. Rep. 169, 58 N. E.
intimate association with, etc.: judg- 970.
menl for plaintiff affirmed). 6 Hartford Life & Annuity Ins.
1 Provident Savings Life Assoc, v. Co. v. Gray, 91 111. 159.
Beyer, 23 Ky. L. Rep. 2460, 67 S. 7 Metropolitan Life Ins. Co. v.
\\\ S27. Rutherford, 98 Va. 195, 5 Va. L.
2 Globe Mutual Life Ins. Assoc, v. Reg. 842, 35 S. E. 361, 29 Ins. L. J.
Wagner, 188 111. 133, 52 L.R.A. 649, 365.
-58 N. E. 970.
3370
PARTICULAR REPRESENTATIONS, ETC. § 2011
if the fact appears that the insured's parents, brothers, or sisters
have died of consumption and he has not truly stated in his applica-
tion the cause of their death, but has given some other cause, and
the company would not have assumed the risk if the true cause
of death had been known, or would only have assumed it at a
materially higher premium, this will avoid the policy, regardless
of the fact whether such statements are considered as warranties
or representations.8
8 Bloomington Benevolent Life New York. — Kasprzyk v. Metro-
Assoc. v. Cummins, 53 111. App. 530; politan Life Ins. Co. 140 N. Y. Supp.
Jerrett v. John Hancock Mutual Life 211, 79 Misc. 263, 42 Ins. L. J. 607
Ins. Co. 18 R. I. 754, 30 Atl. 793. (misrepresentations on vital points,
For other instances see the follow- including statement as to cause of
ing cases: death of brothers and sisters, held
Illinois. — Enright v. National material and policy void whether
Council Knights & Ladies of Secur- insured knew falsity or not; and so
ity, 253 111. 365, 97 N. E. 681 (as- also notwithstanding statute and al-
sured knew that brother and cousin though stipulated in policy that state-
died of consumption; avoided) s. c. ments representations not warranties.
161 111. App. 365, 42 Nat. Corp. Rep. See §§ 1892 et seq. herein) ; Dono-
378. van v. Colonial Ins. Co. of America,
Kentucky. — Supreme Lodge 119 N. Y. Supp. 1078 (statements
Knights of Pythias v. Bradley, 141 that parents had not died of con-
Ky. 334, 132 S. W. 547, 40 Ins. L. J. sumption ; exclusion of nonexpert
20*9 (statement that none of a list testimony of sister as to cause of
of ancestors, including sister, had mother's death held error; judgment
died with consumption or afflicted for insurer) ; Beglin v. Metropolitan
with tuberculosis, or with any of a Life Ins. Co. 66 N. Y. Supp. 206
long list of diseases; no recovery). (mother died of phithisis pulmonatis;
Mississippi. — Citizens National warranty breached) ; Davis v. Su-
Ins. Co. v. Swords, 109 Miss. 635, preme Lodge Knights of Honor, 54
68 So. 920 (statements relating to N. Y. Supp. 1023, 35 App. Div. 354
family history of relatives; distinc- (question calling only for knowledge
tion made between warranty and rep- whether parents, grandparents or
resentartons; held representations; their descendants had died of con-
no fraudulent concealment; policy sumption, answer must be known by
not avoided) ; Coplin v. Woodmen of assured to be untrue; judgment for
the World, 105 Miss. 115, 62 So. 7 plaintiff), aff'd 165 N. Y. 159, 58
(insured by reason of long absence N. E. 891.
knew little of family history and South Dakota. — Erickson v. Ladies
there was no intent to deceive; mis- of the Maccabees of the World, 25
statement as to number of brothers S. Dak. 183, 126 N. W. 259 (cause
and sisters living and dead; not of father's death; judgment for
avoided). plaintiff; question for jury; reversed
New Jersey. — Hoagland v. Su- in favor of insurer) .
preme Council Royal Arcanum, 70 Texas. — Loesch v. Supreme Tribe
N. J. Eq. 607, 61 Atl. 982 (false of Ben Hur, — Tex. Civ. App. — ,
answer as to cause of mothers death 190 S. W. 506 (society put on in-
who died of consumption; avoided, quiry by statement that one sister
whether considered representation or dead; evidence insufficient to estab-
warranty). lish willful concealment of knowl-
3371
s< 2012, 2013 JOYCE ON INSURANCE
Registration or board of health records of causes of death, or
copies of such records arc competent prima facie evidence when
the statute or ordinance so provides, so that a board of health
record showing that the death of insured's mother was caused by
phthisis pulmonalis is prima facie competent to show a breach of
warranty by assured who had stated to the contrary.9
§ 2012. Health: rupture: hernia: wearing truss. — In a recent
Massachusetts case it is held that the question in an application for
life insurance, "Are you ruptured? And if so, do you wear a
well-fitting truss?" is held to relate to the time of the application,
and therefore where it appears that the applicant had suffered from
hernia a year previous to the application, but had recovered prior
to the time of the application, it is for the jury to determine whether
he was ruptured at the time he applied for insurance.10 A war-
ranty that assured is free from any "functional or organic disease,
mental or physical disorder, defect.'' etc., is not breached by the
fact that insured may have had incipient hernia or a predisposition
thereto, even though by violent physical exertion, prior to issuance
of the policy the inguinal ring may have been weakened causing
the hernia to subsequently develop.11
§ 2013. "In port," as relating to commencement of risk: marine
policy: warranty.12 — The effect of a warranty that the ship is in
port at a specified day must he construed with reference to the
intent of the parties, evidenced by the contract under the rules
of construction applicable to the given case. If it is clear that it
was the intent that the vessel should be in a specified porl on a
certain day as a condition precedent to the attachment of the risk,
the ship must be in that port on that day. If a time policy is
clearly contemplated, the place where the vessel then is, not being
such a condition precedent to the commencement of the risk, and
edge as to said death, or to show Co. 66 N. Y. Supp. 206; Laws X. Y.
cause of mother's death, or to estah- 1885, ch. 270. Id. eh. 297. Compare
lish materiality); Kansas City Life Keefe v. Supreme Council Mutual
Ins. Co. v. Blackstone, — Tex. Civ. Ben. Assoc. 64 N. Y. Supp. 1012,
App. — , 143 S. W. 702, 41 Ins. 52 App. Div. 616.
I.. J. 683 (statement that three broth- 10 Levie v. Metropolitan Life Ins.
ers and two sisters living and a broth- Co. 163 Mass. 117, 39 N. E. 792.
er but no sister dead: deceased had u Hill v. United States Casualty
two brothers of the whole and five Co. 176 Mo. App. 635, 159 S. W.
brothers of half blood living and 771, 42 Ins. L. J. 1788. See § 2010
brother of whole blood dead, also two herein.
sisters of the whole blood living and <>n hernia, as breach of condition
one sister of half blood dead; judg- or warranty as to health or bodily
ment below for plaintiff reversed, condition, see note in L.R.A.1917B,
bnl court said rule requiring reversal 747.
was unreasonable). 12 See § 1987, also § 1916 herein.
9 Berlin v. Metropolitan Life Ins.
3372
PARTICULAR REPRESENTATIONS, ETC. § 2014
the intent is not to exclude every other port or place than the one
named, then the fact that on the day named the vessel is in good
safety at sea does not prevent the policy from attaching, and usage
or the particular trade in which the ship is engaged may be an
important determining factor.13
§ 2014. Incendiarism: fire risk.14 — Where the applicant stated
that he did not fear, and had no reason to fear, an incendiary fire,
which was untrue, it was held error to submit to the jury the ques-
tion whether an attempt to fire the building was material to the
risk, it being material as a matter of law.15 In a California case
the application contained the quest ion. ''Is there any incendiary
danger apprehended or threatened?" and the answer was "No."
it was alleged in the answer that this representation was false and
fraudulent in this, that incendiary danger was apprehended by
the applicant. A demurrer to the answer was overruled, and the
court instructed the jury in effect that if the fact averred was
proved, they should find for defendant, which was held no error.16
And insured is held not aided by a statement of his fear of in-
cendiarism to an agent where said agent states in the application
that no incendiary danger is threatened, and assured does not
read over his application.17 So in case assured's statement that
he had no reason to fear incendiarism is an express warranty
evidence which tends to show the falsity thereof is improperly
excluded as where evidence is not admitted that assured had stated
that numerous fires on other farms belonging to his wife were of
incendiary origin and were set on account of a grudge against
him on account of certain transactions.18
13 Kenyon v. Berthen, 1 Doug, then, but with regard to the employ-
12n; Manly v. United Fire Marine ment in which she was engaged."
Ins. Co. 9 Mass. 85, 6 Am. Dec. 40 ; 14 See § 1987, also § 1916 herein.
Colbv v. Hunter, 1 Moody & M. 81, 15 North American Ins. Co. v.
3 Car. & P. 7; Martin v. Fishing Throop, 22 Mich. 146, 7 Am. Rep.
Ins. Co. 20 Pick. (37 Mass.) 389; 638. See also § 1862 herein.
citing Manly v. United Fire & Marine On indications that building may
Ins. Co. 9 Mass. 88, 6 Am. Dec. 40, be intentionally set on fire as an in-
where Sewall, J., said: "The intent crease of risk, see note in 31 L.R.A.
was to commence the risk on a cer- (N.S.) 603.
tain day, and the intent to insure 16 Roberts v. iEtna Ins. Co. 58 Cal.
at B was not exclusive of any other 83.
place. It is a material fact in this 17 Kniseley v. British-America
case that when the policy was made Assur. Co. (Can.) 32 Ont. 376. See
neither party knew when the vessel §§ 472 et seq., 489 herein,
sailed from the port named, and it 18 Donlev v. Glens Falls Fire Ins.
was the clear intent of the parties Co. 184 N. Y. 107, 76 N. E. 914, 6
to insure on time without regard to Ann. Cas. 81, 35 Ins. L. J. 232.
the place where the vessel might be
3373
§ 2015 JOYCE OX INSURANCE
§ 2015. Encumbrances: disclosure of title not necessary unless
asked or otherwise required: fire risk.19 — It is a general rule that
encumbrances or the particulars or state of the assured's title, or
th»- nature or extent of his interest, need not be disclosed unless
tlir assured is inquired of concerning the same, or unless there be
some condition clearly requiring such disclosure. The policy is
not avoided in such case where there is no fraudulent concealment
or actual misrepresentation.20 Nor is the policy invalidated by
19 See § 1987, also § 1916 herein. Ins. Assoc. 12 Mont. 474, 19 L.R.A.
80 Arkansas.— Great Southern Eire 211, 31 Pae. 87.
Ins. Co. v. Burns & Billington, 118 Nebraska. — Seal v. Farmers' &
Ark. 22, L.R.A.1916B, 1252, 175 S. Merchants Ins. Co. 59 Neb. 253, 80
W. 1161, 46 Ins. L. J. 30. N. W. 807, 29 Ins. L. J. 177; Han-
California. — Raulet v. Northwest- over Fire Ins. Co. v. Bohn, 48 Neb.
ern National Ins. Co. 157 Cal. 213, 743, 67 N. W. 774.
107 Pac. 292, 39 Ins. L. J. 742. North Carolina.— Roper v. Nation-
Colorado. — Connecticut Fire Ins. al Fire Ins. Co. 161 N. Car. 151, 76
Co. v. Colorado Leasing, Mining & S. E. 869.
Milling Co. 50 Colo. 424, 116 Pac. Oregon. — Arthur v. Palatine Ins.
154, 40 Ins. L. J. 1717. Co. 35 Oreg. 27, 57 Pac. 62, 28 Ins.
Kansas. — Humble v. German Al- L. J. 545 (especially so where agent
liance Ins. Co. 92 Kan. 486, 141 Pac. familiar with facts) ; Sproul v. West-
243, 44 Ins. L. J. 171, aff'g on rehear- ern Assur. Co. 33 Oreg. 98, 54 Pac.
ing 91 Kan. 307, 137 Pac. 980, s. c. 180, 28 Ins. L. J. 118; Koshland v.
85 Kan. 140, 116 Pac. 472, 40 Ins. Hartford Fire Ins. Co. 31 Oreg. 402,
L. J. 1783. 49 Pac. 466.
Kentucky. — Queen Ins. Co. v. Tennessee. — Delahanv v. Memphis
Kline, 17 Ky. L. Rep. 619, 32 S. Ins. Co. 8 Humph. (Tenn.) 684.
W. 214 (mortgage existed on prop- Virginia. — Union Assur. Soc. v.
erty) ; Lancashire Ins. Co. v. Monroe, Nails, 101 Va. 613, 99 Am. St. Rep.
101 Ky. 12, 19 Ky. L. Rep. 204, 39 923, 44 S. E. 896; Wvtheville Ins.
S. W. 434. Co. v. Stulz, 87 Va. 629, 15 L. J.
Maine.— Buck v. Phoenix Ins. Co. 328, 13 S. E. 77.
76 Me. 586. See § 2026 herein.
Massachusetts. — Bart let v. Walter, That failure to make inquiries, etc.,
13 Miss. 267, 7 Am. Dec. 143; Locke does not waive condition as to en-
v. North American Ins. Co. 13 Mass. cumbrances, etc. See Aetna Ins. Co.
61; Curry v. Commonwealth Ins. Co. v. Holcomb, 89 Tex. 404, 34 S. W.
10 Pick. (27 Mass.) 535; Bixly v. 915; Hickey v. Dwelling House Ins.
Franklin Ins. Co. 8 Pick. (25 Mass.) Co. 20 Ohio Cir. Ct. R. 385, 11 O. C.
86. D. 135 (or where insured made no
Michigan. — O'Brien v. Ohio Ins. representations); Virginia Fire &
Co. 52 Mich. 131, 17 N. W. 726; Ken- Marine Ins. Co. v. J. I. Case Thresh-
nedy v. London & Lanchashire Fire ing Machine Co. 107 Va. 588, 59 S. E.
Ins." Co. 157 Mich. 411, 122 N. W. 369.
134. As to statute providing that the
Missouri. — Bersche v. St. Louis, nature or amount of insured's inter-
etc, Ins. Co. 31 Mo. 555; Morrison est need not be stated, etc., see Hard-
v. Tennessee Marine & Fire Ins. Co. ing v. Norwich Union Fire Ins. Co.
18 Mo. 262, 59 Am. Dec. 299. 10 S. Dak. 26, 71 N. W. 755, 26 Ins.
Montana. — Wright v. London Fire
3374
PARTICULAR REPRESENTATIONS, ETC. § 2015
the existence of encumbrances if insured is not questioned respect-
ing the same, or concerning other facts material to the insurance,
and does not intentionally conceal them.1
So the failure to inform insurer upon an oral application, of the
existence of liens and encumbrances on the property, where no
inquiries in reference thereto were made, does not render a policy
invalid under a provision that it shall be void if the insured has
concealed or misrepresented any material fact or condition, unless
such failure was intentional and with the design to defraud.2 And
if a policy is issued by insurer without a written application and
without inquiry as to encumbrances, and assured make no state-
ments or stipulations in reference thereto and has no knowledge
that such information is material or that the risk would have been
rejected had insurer known the facts, a stipulation that the policy
shall be void if the property is encumbered by chattel mortgage
is waived.3 So where no inquiry is made the policy is not vitiated
by a statement by the insured that the house is his property, with-
out disclosing that it has been mortgaged and the equity of redemp-
tion taken under execution.4 And if a general question as to
encumbrances is answered truly, but no inquiry is made as to the
nature and amount thereof other than mortgages, the insurers
cannot object that no information concerning the same was given,
although the policy requires that the insured shall disclose his
interest if it is other than the entire ownership of the property, or
if encumbered by any lien.5 In another case a mortgagor of
property procured a policy thereon in the mortgagee's name, in
pursuance of an agreement to furnish further security. No state-
L. J. 901 (considered under § 2022 Co. 62 N. Y. Supp. 199, 47 App.
herein). Div. 204, aff'd 168 N. Y. 655,. 61
As to disclosure of insured's inter- N. E. 1132.
est, see also §§ 900, 1857 et seq. here- 3 Great Southern Fire Ins. Co. v.
in. Burns & Billington, 118 Ark. 22,
As to disclosure of interest by L.R.A.1916B, 1252, 175 S. W. 1161,
mortgagee, see § 1043 herein. 46 Ins. L. J. 30. See Continental
As to disclosure of interest in Ins. Co. v. Ford, 140 Ky. 406, 131
wife's property, see § 1050 herein. S. W. 189, 39 Ins. L. J. 1760; Sproul
As to inquiries, see §§ 1869 et seq. v. Western Assur. Co. 33 Oreg. 98,
(concealment) ; §§ 1914 et seq. (rep- 54 Pac. 180, 28 Ins. L. J. 118.
resentations) ; § 1969 (partial an- 4 Strong v. Manufacturers' Ins. Co.
swers, warranties) herein. 10 Pick. (27 Mass.) 40, 20 Am. Dec.
1 Dooly v. Hanover Fire Ins. Co. 507. See Alkan v. New Hampshire
16 Wash. 155, 58 Am. St. Rep. 26, Life Ins. Co. 53 Wis. 136, 10 N. W.
47 Pac. 507. 91.
2 Arthur v. Palatine Ins. Co. 35 5 Hosford v. Germania Fire Ins.
Oreg. 27, 76 Am. St. Rep. 450, 57 Co. 127 U. S. 399, 404, 8 Sup. Ct.
Pac. 62. See Parker v. Otsego Coun- 1199. 32 L. ed. 196.
ty Farmers' Co-operative Fire Ins.
3375
§ J015 JOYCE ON INSURANCE
mi-Hi was requested, at the time of effecting the insurance, as to
the interesl of the assured in the property, but the policy stipu-
lated that the company should not be liable "for loss of property
owned by any other party unless the interest of such party be
stated in the policy." The mortgagor paid the premium and
afterward paid the debt. In an action on the policy for the loss
it was held that the mortgagor could recover in the name of the
mortgagee, and that the assured was not bound by the policy to
disclose the nature and extent of his interest.6 Again, a policy is
not avoided on the ground of violation of a by-law of the company
requiring the tine title of the insured in the property to be ex-
pressed in the application for insurance where the insured is a
mortgagee in possession and the application is for insurance "on
dwelling-house," and states in reply to a question as to encum-
brances, "First mortgage to M. W. [the name of the applicant]
entered October, L885," and in reply to a question whether the
property is insured states, "Not on first mortgagee's interest," and
the application contains no direct question as to the title of the
applicant; for there is no misstatement of the applicant's interest,
and it is the duty of the company to require fuller statements in
this regard if the answers given are not sufficiently full.7 But if
a mortgagee insures a special interest, he must disclose the fact that
he holds prior mortgages on the property, for by insuring a limited
interest without disclosing facts which might affect its apparent
solidity he induces the company to take the risk on terms which
would otherwise have been declined. The insurer, in such case,
is not bound to inquire as to the existence of prior encumbrances
on the property from the mere fact that the mortgage includes land
which could not be consumed. This is not a suspicious circum-
stance, for the ground might be insufficient to secure the mortgage,
and thus render insurance on the consumable property mortgaged
advisable.8 A general statement as to the amount of encumbrances
may, however, be a sufficient compliance with a like by-law.9
But knowledge of the existence of an encumbrance and failure
to disclose the same will be fraudulent where an ordinarily pru-
dent person would know under the circumstances that it is material
to the risk. On the other hand a policy will only be avoided when
the undisclosed encumbrance is material and no inquiries or volun-
tary statements have been made, and a test of materiality is that
6 Norwich Fire Ins. Co. v. Broom- 8 Smith v. Columbia Ins. Co. 17
er, 52 111. 442, 4 Am. Rep. 618. Pa. St. 253, 56 Am. Dec 546.
'Wyman v. People's Equity Ins. 9 Buffum v. Boyditeh Mutual Fire
Co. 1 Allen (83 Mass.) 301, 79 Am. Ins. Co. 10 Cush. (64 Mass.) 540.
Dec. 737.
3376
PARTICULAR REPRESENTATIONS, ETC. § 2016
insurer would not have issued the policy had he known the facts.10
If there is no warranty against encumbrances, it may bo submitted
to the jury whether the concealment of a mortgage, judgment
liens, and mechanics' liens is wilful and fraudulent, and the court
may properly refuse an instruction that the nondisclosure avoids
the policy as a matter of law.11 A fire insurance company, by
issuing a policy without inquiry, does not waive a condition against
encumbrances unless it or its agent has notice of their existence.12
§ 2016. Encumbrances: generally.13 — (a) A policy provision that
it shall be void if the property is in any manner encumbered, "and
such fact be not stated in this policy or the assured's application
for insurance," is a stipulation against encumbrances existing when
the contract is made, but not against future encumbrances.14
(b) The insurer may validly stipulate against existing encum-
brances,13 and a false statement as to encumbrance^ or the amount
of the same vitiates the policy when made a part thereof and a
warranty, or where made material by stipulation or by special
inquiry.16
10 Niagara Fire Ins. Co. v. Layne, Iowa, 226, 40 L.R.A. 465, 76 X. W.
162 Ivy. 665, 172 S. W. 1090. *See 676.
also Continental Ins. Co. v. Ford, That conditions as to alienation,
140 Ky. 406, 131 S. W. 189, 39 Ins. change of title, etc., valid, see § 2246a
L. J. 1760. herein.
11 Cumberland Valley Mutual Pro- 16 United States. — Connecticut Fire
ted ion Co. v. Mitchell, 48 Pa. St. Ins. Co. v. Manning, 160 Fed. 382, 87
374. C. C. A. 334, 37 Ins. L. J. 883 (so
12 Virginia Fire & Marine Ins. Co. held irrespective of statute ; Rev.
v. J. I. Case Threshing Machine Co. Stat. Mo. 1889, sees. 7973-7975;
107 Va. 588, 122 Am. St. Rep. 875, Rev. Stat. 1899 (Ann. Stat. 1906,
59 S. E. 309. pp. 3791-2).
13 Soo § 1!)87, also § 1916 herein. Iowa. — Lane v. Hawkeve Ins. Co.
14 Collins v. Merchants' & Bankers' 74 Iowa, 673, 39 N. W. 86.
Mutual Ins. Co. 95 Iowa, 540, 58 Massachusetts. — Eayward v. New
Am. St. Rep. 438, 64 N. W. 602. England Fire & Marine Ins. Co. 10
15 Hartford Fire Ins. Co. v. Wright, Cush. (64 Mass.) 444; Clark v. New
58 Tex. Civ. App. 237, 125 S. W. England Fire & Marine Ins. Co. 6
363, 39 Ins. L. J. 478. See also Cush. (60 Mass.) 342, 53 Am. Dec.
Dumas v. Northwestern National 44; Davenport v. New England Mu-
Ins. Co. 12 App. D. C. 245, 40 L.R.A. tual Fire Ins. Co. 6 Cush. (60 Mass.)
358, 26 Wash. L. Rep. 213; Shaeffer 340.
v. Milwaukee Mechanics Ins. Co. 17 Nebraska. — State Ins. Co. v. Jor-
Ind. App. 204, 46 N. E. 557; Wed- dan, 24 Neb. 358, 38 N. W. 839.
dington v. Piedmont Fire Ins. Co. New York. — Smith v. Agricultural
141 N. Car. 234, 54 S. E. 271; Sul- Ins. Co. 118 N. Y. 522, 23 N. E. 883;
phur Mines Co. v. Phenix Ins. Co. Shoemaker v. Glens Falls Ins. Co.
94 Va. 353, 26 S. E. 856. See 60 Barb. (N. Y.) 84.
Phoenix Ins. Co. v. Overman, 21 Ind. South Dakota. — McXamara v. Da-
App. 516, 52 N. E. 771; Smith v. kota Fire & Marine Ins. Co. 1 S.
St. Paul Fire & Marine Ins. Co. 106 Dak. 342, 47 N. W. 288.
Joyce Ins. Vol. III.— 212. 3377
§ 2016 JOYCE ON INSURANCE
So also does a materia] misrepresentation to a mutual company
as i" encumbrances avoid the contract, although the company, is
established by the Laws of another state, and may not in conse-
quence have a lien on the property.17 The general rule likewise
applies although the policy has beeD assigned, the loss not having
occurred.18 And if the amount of encumbrance as represented is
less than the actual sum so as to constitute a material variance and
a substantial misrepresentation the policy is avoided.19 So verbal
notice of an encumbrance will not be a compliance with a stipula-
tion requiring; the same to he expressed in the policy.20 although
it is held otherwise in another case.1 It is also decided in Wis-
consin that a representation concerning encumbrances contained
in an application for insurance upon property is regarded as a war-
ranty, and, if untrue, avoids the policy.8
(c) A fire policy is not avoided by misrepresentations as to
encumbrances on the property where the applicant made no rep-
resentations upon the subject, hut the statement was inserted by
the company's agent without knowledge of the applicant, and he
signed the application without reading it,3 Nor docs the fact that,
the exact nature of the encumbrance is not stated avoid the
policy where insurer has notice from the application of the existence
of an encumbrance.4 It is also held where the inquiry was, "Is
your property encumbered?" the word "none" in answer does not
import a warranty that the property is not encumbered.5 So where
the application which is made out wholly by the applicant, states
that the premises are not encumbered by mortgage or otherwise,
7/™^.— Southern Mutual Ins. 20 Smith v. Farmers' Mutual Fire
Co. v. Yates, 28 Gratt. (Va.) 585. Ins. Co. 19 Ohio St. 287.
Wisconsin.— Sabotta v. St. Paul blasters v. Madison Comity Mu-
Fire & Marine Ins. Co. 54 Wis. 687, tual Ins. Co. 11 Bart). (N. \.) 624.
12 N W. 18 381. 2 Stevens v. Queen Ins. Co. 81 Y\ is.
"Davenport v.' New England Fire 335, 29 Am. St. Rep. 905, 5] N. W.
& Marine Ins. Co. 6 Cash, ((it) Mass.) 555. See also Baxter v State Ins.
340. See Koontz v. Eannibal Sav- Co. 65 Mo. App. 255, 2 Mo. App.
ings & Ins. Co. 42 Mo. 126, 97 Am. Repr. 1222.
t> ooc t i ti^I T\/r„f„ni 3 Continental hire Ins. Co. v. \\ liit-
Dee. 325; Loehnerv. Home Mutual ](1 , ,, A
Ins. Co. 17 Mo. 247; Clark v. New °^> w J]q
England Fire & Marine Ins. Co. 6 ' 4 pavj- y "pioneer Furniture Co.
Cush. (60 Mass.) 342, 53 Am. Dee. -,,,,_, wig .,,,,_ ?g x w -,1(; See
44. aiso Home Ins. Co. of N. V. v. Koob,
"Sabotta v. St. Paul Fire & Ma- 1];> Kv ;>,;,, 58 L.R.A. 58, 68 S. W.
rine Ins. Co. 54 Wis. 687, J 2 X. \Y. 453,
18. 5 Kockford Ins. Co. v. Nelson, 65
19Cerys v. State Ins. Co. of Des 111. 415. But see Southern Mutual
Moines, 71 Minn. 348, 73 N. W. 849, Ins. Co. v. Yates, 28 Gratt. (Va.)
27 Ins. L. J. 258. 585.
337S
PARTICULAR REPRESENTATIONS, ETC. § '2016
"to exceed the sum of $— " insurer is given notice of an existing
encumbrance to some amount.6 And if the policy provides I
only such false statements as are material to the risk will avoid
the contract, a misrepresentation as to the amount of the encum-
brances which is not material will not invalidate the policy.7 Nor
does the fact of additional encumbrances constitute a breach of a
condition against them, where the total amount of all such encum-
brances at no time exceeded the amount represented by assured.8
(d) A false statement as to the existence of an encumbrance
made with intent to deceive voids the policy within that clause of
the Washington statute so providing and the other clauses have no
application.9 And under a Texas decision a warranty in a fire
policy against encumbrance existing at the time upon the prop-
erty insured, is valid and its violation renders the policy void and
it is not necessary to plead or prove that it is material. to the risk
where there is no representation of any kind whatever, made in
either the application or policy, for the statute has no application
to such a case.10 In Kentucky the insuring of property against
fire does not amount to a representation that it is unencumbered
so as to make applicable a statute that all statements are representa-
tions and not warranties and that only fraudulent misrepresen-
tations shall preclude recovery.11 It is also held that a statute
requiring that misrepresentations must be material to the risk to
avoid the policy, does not apply to a clause "be or become encum-
bered" as there is no representation by assured.12 But under a
Tennessee statute misrepresentations as to encumbrances do not
increase the risk, so as to avoid a policy of insurance on the prop-
erty, where the statute provides that misrepresentations shall not
avoid the policy, unless they increase the risk, or are made with
intent to deceive.13
6 Parker v. Otsego County Farmers' 363, 39 Ins. L. J. 478; art. 3096aa,
Co-operative Fire Ins. Co'. 62 N. Y. e. 5 (Genl. L. 1903, p. 94) added by
Supp. 199, 47 App. Div. 204, aff'd act March 27, 1903, aind'g Tit. 58.
168 N. Y. 655, 61 N. E. 1132. Rev. Stat. 1895.
7 Eddv v. Hawkeve Ins. Co. 70 " Niagara Fire Ins. Co. v. Layne,
Iowa, 472, 59 Am. Rep. 444, 30 N. 162 Ky. 665, 17 S. W. 1090; Ky.
"W 808. Stat. Sec. 639.
»Kister v. Lebanon Mutual Ins. 18 Hartford Fire Ins. Co. v. Wright,
Co. 128 Pa. 553, 5 L.R.A. 646, 18 58 Tex. Civ. App. 237, 125 S. W.
At]. 447. 363, 39 Ins. L. J. 478 (case of war-
9 Woods v Insurance Co. of State ranty against encumbrance) ; Rev.
of Penn. 82 Wash. 563, 144 Pac. 650 ; Stat. 1895, art. 3096aa, added by
Laws 1911, p. 197, sec. 34. See § Genl. L. 1903, p. 94.
1916 herein. 13 Continental Fire Ins. Co. v.
10 Hartford Fire Ins. Co. v. Wright, Whitaker, 112 Tenn. 151, 64 L.R.A.
58 Tex. Civ. App. 237, 125 S. W. 451, 79 S. W. 119.
3379
§ 2016 JOYCE <>N [NSURANCE
(e) II' a policy includes real property, and also personal prop-
erty in the buildings thereon, the risk being distributed; that is to
say, certain sums on the building and certain other sums on the
>nal property therein, a misrepresentation in respect to the
buildings, and which avoids the insurance thereon, also avoids it
the persona] property. The contract of insurance in such
i- entire, and there can be no recovery on personal property
if there has been a material misrepresentation as to the buildings.14
(f) An insurer is deemed to have waived conditions of a policy
making a misstatement as to encumbrances upon the property to
avoid the insurance, where it had knowledge a1 the time of the
application that the property was encumbered.16 Where the in-
sured, when applying for insurance informs the insurer of the
amount of encumbrances then existing upon the properly, and
the latter issues the policy with knowledge of such encumbrances,
the condition againsl encumbrances is not violated if their amount
>■ exceeds the amount stated.16 Again, if a policy contains a
condition of forfeiture for misrepresentation as to encumbrances
and makes the statements of the insured as they appear in the
policy a warranty of their truth, and the applicant gives correct
answers respecting encumbrances to the general agent of the com-
pany, who fails to mention them in the policy, and procures the
signature of the assured, accepts the premium, and issues the policy,
the insurance company will be deemed to have waived the Gon-
dii ion, and he held liable on the policy in case of loss.17 And
although property may become encumbered so as to operate as a
breach of a condition against encumbrances, yel such violation of
the policy stipulation may be waived after loss by the acts of the
company or its authorized agent.18 Parol evidence is admissible
to show waiver by acts in pais of insurer, notwithstanding a stipu-
lation in the policy that nothing less than an express agreemenl
indorsed on the policy shall be construed as a waiver of any of its
condition- or restrictions. But if the policy contains a condition
that it shall he void if the property insured be encumbered at its
14 Stevens v. Queen Tns. Co. 81 16 Gould v. Dwelling House Ins.
Wis. 335, 29 Am. St. Rep. 905, 53 Co. 134 Pa. St. 570, t9 Am. St. Rep.
V W. r^r,. See Hartford Vn-<> Ins. 717, 1!) All. 793.
Co. v. Walker, — Tex. Civ. App. — , "German Ins. Co. v. Gray, 43
60 S. W. 820. Kan. 497, 19 Am. St. Rep. 150, 8
Representations false as to part of L.R.A. 70, 23 Pac. G37.
property; entire or severable con- l8McGonigle v. Agricultural Ins.
tract, see § 1931 herein. Co. 167 Pa. St. 364, :il Atl. 626, s. c.
"Wilson v. Minnesota Farmers' 168 Pa. St. 1, 31 Atl. 868.
Mutual Fire Ins. Assoc. 36 Minn.
L12, 1 Am. St. Rep. 659, 3D X. W.
10]
:>,:ssi>
PARTICULAR REPRESENTATIONS, ETC. §§ 2017, 2018
date, or afterward become so, without notice to the insurer, it will
be the duty of the insured to establish the parol waiver by a clear
preponderance of evidence.19
§ 2017. Encumbrances on property by verbal agreement.20 — The
policy is not defeated where the assured states that there is an
encumbrance on the same, and as a fact the encumbrance exists
merely by virtue of a verbal agreement.1
§ 2018. Encumbrances made after the policy.2 — If the encum-
brance is made after the policy is effected it does not affect it in the
absence of some condition to that effect.3
An honest and excusable mistake in computing the amount of
19 McFarland v. Kittaning Ins. Co. On the parol evidence rule as to
134 Pa. St. 590, 19 Am. St. Rep. varying or contradicting written con-
723, 19 Atl. 796. tracts as affected by the doctrine of
See further as to waiver the fol- waiver or estoppel as applied to pol-
lowing cases: icies of insurance, see note in 16
Arkansas. — Queen of Arkansas L.R.A.(N.S.) ll(i">.
Ins. Co. v. Laster, 108 Ark. 261, 156 20 See § 1987, also § 1916 herein.
S. W. 848 (agent notified of en- 1 Mutual Mill Ins. Co. v. Gordon,
cumbrance when application made; 20 111. App. 559.
is waived) ; Phoenix Ins. Co. v. Pub- 2 See § 1987, also § 1916 herein.
lie Parks Amusement Co. 63 Ark. That additional encumbrances not
187, 37 S. W. 959 (agent may waive a breach of condition, see Kister v.
verbally notwithstanding policy stipu- Lebanon Mutual Ins. Co. 128 Pa.
lation contra; encumbrances). 553, 5 L.R.A. 646, 18 Atl. 447.
Kentucky. — Continental Ins. Co. v. 3 Dutton v. New England Mutual
Eord, 140 Ky. 406, 131 S. W. 189, Fire Ins. Co. 29 N. H. 153. In this
39 Ins. L. J. 1760 (agent inserted case, where one lien of three hundred
answers not asked; insured not re- dollars, which was upon the prop-
sponsible). erty at the time the application for
New York. — Skinner v. Sun Eire insurance Avas made, and had been
Office (Skinner v. Norman) 165 N. so stated by the insured in his ap-
Y. 565, 59 N. E. 309 (policy issued plication and been discharged by him
upon statement of agent that he did before the issuance of the policy, but
not know whether property encum- a new mortgage had been executed
bered; no inquiry of owner; policy prior to the issuance of the policy,
not void though property eneum- the court said: "The assured stated
bered; three judges dissenting) rev'g his title to the property duly. The
46 N. Y. Supp. 65, 18 App. Div. 609. only encumbrance at the time of the
Oregon. — Arthur v. Palatine Ins. application was the three hundred
Co. 35 Oreg. 27, 57 Pac. 62, 28 Ins. dollars' lien. The new mortgage was
L. J. 545 (agent familiar with facts; not executed until six days after the
oral application; insurer estopped), application. It was no fault of the
Texas. — Phoenix Ins. Co. v. Dunn, applicant that the policy was not
— Tex. Civ. App. — , 41 S. W. 109 issued immediately after the applica-
(knowledge of agent; no waiver). tion was made."
As to agent's authority; waiver; As to conditions as to alienation,
encumbrances, see §§ 563 et seq. change of title, and encumbrances
herein. thereunder, etc., see c. LXIV. (§§
As to notice to and knowledge of 2246 et seq) herein,
agents, see §§ 515 et seq. herein.
33S1
§ 2019 JOYCE <>x l\si RANCE
an encumbrance in order to secure a renewal will not vitiate the
policy.4
§ 2019. Encumbrances: judgments: execution.5 — A warranty
igainsl encumbrances is nol broken by the fact that unsatisfied
;ments exisl of record againsl the insured property, where as
a fad the judgment debtor holds receipts for the .satisfaction of the
same, and the others have been satisfied prior to making the appli-
cation.6 And a limited judgment which is not a lien within the
intent of thf question asked concerning encumbrances, and which
does not extend to the property insured, does not vitiate the
policy;7 nor doc- an involuntary judgment invalidate the insur-
ance within a stipulation that the policy shall be void if there he
a mortgage, bill of sale or other Lien upon the property,8 hut where
the judgmenl has been entered and constitutes a lien, it is a breach
of the warranty, although the applicant informs the agent that
lie had given a note but did not know whether judgment had been
entered up or not, and permits said agent to write in the applica-
tion that there are no encumbrances.9 So it is a good defense to
an action on the policy that there are several judgment liens
; hereon.10 And this is so where there is an entry of a judgment
on a judgment note, even though the creditor had agreed not to
enter judgment and the fact of entry was unknown to the assured
till after Loss.11 So the policy is vitiated by the levy of an execu-
tion undisclosed, such liens existing down to the time of loss with-
out notice thereof to the company.12 Although where the goods
insured were at the time of making the application under a sheriff's
Levy, but had not been taken from the possession of the insured,
nid there is nothing in the policy to indicate to the assured that
such act of the sheriff constitutes an increase of risk, the failure to
4 Bowlus v. Phoenix Ins. Co. 133 9 Blooming Grove Mutual Fire Ins.
Tnd. 106, 20 L.K.A. 400, 32 X. E. Co. v. McAnerney, 102 Pa. St. 335,
319. 48 Am. Rep. 12<><). See White v. Iron
5 See § 1987, also § 1916 herein. City Mutual Fire Ins. Co. 6 Pa. Dist.
6 Lang v. Hawkeye Ins. Co. 74 R. 655.
town, (iT.'i. 39 X. VY. 86. Examine 10 Leonard v. American Ins. Co. 97
Lodge v. Capital Ins. Co. 91 Iowa, Ind. 299; Bowman v. Franklin Fire
L03, 58 X. W. L089. Ins. Co. 40 ,U<1. 620; Egan v. Mutual
On judgment as violation of pro- Ins. Co. 5 Denio (X. Y.) 326.
vision requiring sole and uneondi- "Heneh v. Agricultural Ins. Co.
tional ownership, sec note in 50 122 Pa. 128, 9 Am. St. Pep. 74, 15
L.R.A.(N.S-) 1164. Atl. 671. Examine Pennsylvania Mu-
7 Somerset Ins. Co. v. McAnallv, tual Fire Ins. Co. v. Schmidt, 119 Pa.
16 Pa. St. 41. Examine Collins v. St. 419, 13 Atl. 317.
London Assur. Co. 165 Pa. St. 298, ^Pennsylvania Ins. Co. v. Gott-
30 Atl. 924. man, 48 Pa. St. 151.
8 Georgia Home Ins. Co. v. Schield,
73 Miss. 128, 19 So. 94.
3382
PARTICULAR REPRESENTATIONS, ETC. § 2020
disclose the same is not a breach which will avoid the contract.13
In a West Virginia case it is held that a policy of insurance, which
provides that it shall be void if the subject of insurance shall be
encumbered by judgment or otherwise, is not avoided by a judg-
ment in invitum against the insured before the loss occurs and
during the life of the policy.14
§ 2020. Encumbrances: lien: mechanic's lien: judgment lien, etc.15
— A provision voiding the policy for false representations or war-
ranties by the insured in references to liens or encumbrances
on the insured property includes liens created by operation of
law as well as those created by contract.16 And a subsisting lien
of a mechanic or materialman constitutes an encumbrance on the
property insured where the petition has been filed,17 although if no
inquiries are made as to such liens the policy is not void where it
is issued on an oral application, unless the failure to mention
their existence was intentional and made with design to defraud.18
If the policy is stipulated to be void if the answers are untrue,
and the amount of liens on the property are stated, in answer to
inquiries, to be much less than they are in fact, the contract is
vitiated.19 And if from the whole contract taken together it fairly
appears that the property is subject to a lien for the purchase money
in favor of the vendor, it will be so construed, although single
answers may, taken by themselves, not show the encumbrance.20
Again in the case of a purchase of personal property, such as a
steam cotton-gin, where notes have been given for the purchase
money, and the purchaser obtains insurance on the property before
it is all paid for, a recorded vendor's lien for the amount unpaid
is, in effect, an encumbrance in the nature of a chattel mortgage,
13 Niagara Fire Ins. Co. v. Miller, 105 Ala. 269, 53 Am. St. Rep. 121,
120 Pa. St. 504, 6 Am. St. Rep. 726, 17 So. 326.
14 Atl 385. 17 Redmon v. Phoenix Fire Ins. Co.
14 Gerling v. Agricultural Ins. Co. 51 Wis. 292, 37 Am. Rep. 830. See
39 W. Va. 689, 20 S. E. 691, 24 Ins. Smith v. St. Paul Fire & Marine Ins.
L j 385 Co. 106 Iowa, 22o, 78 N. W. 6*6;
'i<i*o q mc- i s -mifi u™«»-„ Greenlee v. Hanover Fire Ins. Co.
"See § 198. also § 1916 herein ^ N w m50
As to interest and title; sole and 18 Arthur y/ palatine Ins. Co. 35
unconditional ownership; hens, see fe Q 2? 2g j L j 545 57 pac
2045 herein. 62
Meaning of clause "encumbrance "i9 Pennsylvania Ins. Co. v. Gott-
in any way:" liens created by opera- man> 48 pa gt 151
tion of law: alienation or change of 20 Lorillard Fire Ins. Co. v. Mc-
title, etc., see § 2257 herein. Cullough, 21 Ohio St. 176, 8 Am.
As to judgment liens; mechanics' Rep. 52.
liens ; alienation, etc., see § 2274 On' vendor's lien as affecting sole
herein. and unconditional ownership, see
16 Capital Citv Ins. Co. v. Autrey. note in 7 L.R.A.(N.S-) 627.
3383
§ 2020 JOYCE <>N [NSURANCE
and vio] ipulation in the policy againsl encumbrances.1 So
the existence of a lien for the price of the Lot od which the insured
building was erected is a matter material to the risk and a mis-
representation thai there is qo encumbrance on the property avoids
the policy in such case.2 So where a vessel is warranted free from
all liens, the policy being effected on account of A. loss payable
to B, and the Latter held a mortgage of the ship subjeel to other
mortgages, there is a broach of warranty for A"- interest.8 A
judgment lien duly recorded against property before making appli-
cation for the issuance of a policy of insurance thereon constitutes
a breach of warranty on the part of the assured that there are no
liens or encumbrances on the property and that his ownership is
absolute, unqualified, and undivided, and is such a misrepresenta-
tion as vitiates the policy containing a condition that it shall be
void if the exact interesl of the insured is not truly stated therein.4
But the fact that the existence of a former policy and the lien
created thereby i- not disclosed will not. as a matter of law. vitiate
the contract where it appears thai the policy was declared void
by reason of an increase of risk, such increase of risk having
occurred prior to the issue of the second policy.5 So under an
agreemenl that the representative of judgment creditors is to collect
the rents arising from the property of the judgmenl debtor, and
apply them in satisfaction of the judgment, his receipt of rents
sufficient to satisfy it releases the property of one who has ent
himself as replevin bail upon the judgment from the lien thereof,
although the judgmenl is not marked satisfied; and a policy of
insurance subsequently issued on the property of the replevin bail
cannot be avoided because of the apparent existence of the encum-
brance.6 An illegal assessment upon spirits produced in a distil-
lery and the seizure of the insured property is not such a lien
as to vitiate the policy requiring all liens to be disclosed. "Legal
process" in the policy means a valid legal process, and the invalid-
ity of the assessment may be shown by a collateral attack in such
case.7 And where insurer before loss has notice of the existence
^Lancaster v. Southern Ins. Co. 4 Capital City Ins. Co. v. Aut-
15:} X. Car. 285, 38 Am. St. Rep. rey, 105 Ala. 269, 53 Am. St. Rep.
. 69 S. E. 214. See § 2022 here- 121, 17 So. 326.
in. 6 Jaekson v. Farmers' Mutual
2 Queen Ins. Co. v. Mav, — Tex. Fire Ins. Co. 5 Gray (71 .Mass.)
Civ. App. — , 35 S. W. 829. See 52.
also Curlee v. Texas Home Fire 6 Continental Ins. Co. v. Van-
Co. - Tex. Civ. App. — , 73 hie, 12G Irid. 410, 10 L.R.A. 843,
S. W. 831. • 26 N. E. 119.
8Bidwell v. Northwestern Ins. 7Runkle v. Citizens' Ins. Co. 6
Co. 19 X. Y. 179. Fed. 143-48.
:;:;si
PARTICULAR REPRESENTATIONS, ETC. §§ 2021.
of lion a defense is precluded where it had continued the policy in
force.8
§ 2021. Encumbrance: lien for taxes: delinquent taxes.9 — A
statement that the property is unencumbered will avoid the con-
tract where it appears that it has been sold for nonpayment of
taxes, the purchaser acquiring thereby a lien for the price paid
with interest and costs;10 nor is the case of the assured aided by
the fact that a right of redemption existed in him at the time of
effecting the policy, that he had no knowledge of the falsity of the
statement, and had no intent to deceive, or that it occurred through
mistake.11
But encumbrances created by law, although they are under the
statute a lien on the premises, as in the case of due and unpaid
back taxes, are not within a warranty against "encumbrann
all kinds," and a failure to disclose their existence will not avoid
the policy; the term "encumbrances" in such case relates to those
created only by the act or consent of the parties.12 And the omis-
sion, in the absence of inquiry as to encumbrances, to volunteer a
disclosure of the existence of the liens does not invalidate the
policy.13 So where an application for insurance does not ask the
nature and the amount of encumbrances other than mortgages,
an omission to state that the property was encumbered otherwise
than by mortgage, as by a tax lien, is not breach of warranty.14
It is held, however, that the fact that where there are outstanding
certificates of sales of the land for taxes the application, to be safe,
should state all the facts relating thereto.15
The question whether insurer had notice of the existence of
tax liens and whether there is waiver may be for the jury.16
§ 2022. Encumbrances: mortgage.17 — (a) A statement, in answer
to an inquiry in an application made by stipulation a part of the
8 Phcenix Assur. Co. v. Coffman, 14 Hosford v. Hartford Fire Ins.
10 Tex. Civ. App. 631. Co. 127 U. S. 404, 32 L. ed. 198, 8
9 See § 1987, also § 1916 herein. Sup. Ct. 1202.
As to title and liens, see § 2045 is Hinman v. Hartford Fire Ins.
lierein. Co. 36 Wis. 159.
10 Wilbur v. Bowditch Mutual 16 Martin v. Fidelity Ins. Co. 119
Fire Ins. Co. 10 Cusb. (64 Mass.) jowa< 570< 93 y yr 552.
44?;TO..„ t, ,.., „ ' , 17 See § 19S7, also § 1916 herein.
"Wilbur v. Bowditeh Mutual Ag to interegt and tiU mort_
Fire Ins. Co. 10 Cush. (64 Mass.) go]e ^ uncondi_
446: Cooper v. Farmers' Ins. Co. f. & ' , . s nnA-
50 Pa. St. 299, 88 Am. Dec. 544. 10nal ownership, etc., see § 204^
12Hosford v. Hartford Fire Ins. herein.
Co. 127 U. S. 404, 32 L. ed. 198, 8 A* to validity of conditions
Sup. Ct. 1202. against existing encumbrances, see
13Alkan v. New Hampshire Ins. § 2016 herein at beginning.
Co. 53 Wis. 136, 10 N. W. 91. As to alienation; change of title;
3385
2022 JoVCE OX INSURANCE
policy, but which partially discloses the truth as to the amounl of
mortgages or the character of the same, and which is calcula ed
to induce the belief that the entire truth has been told concerning
the same, when as a fact it lias not and there are other mortgages
or mortgages to a larger amount than stated, will avoid the policy.18
And the policy is avoided where there is an existing mortgage on
the property, it being represented free from encumbrances, such
statement being made a warranty, or if made material by stipu-
lation or specific inquiry, <>r by express reference made a part
thereof:19 and this is so held even though no questions are asked
mid assured makes no representations concerning the encum-
brance.80
mortgages, see c. LXIV. (§§ 2246 Ins. Co. v. Olmstead, 68 111. App.
el seq.) herein. 111.
18 Connecticut. — Treadway v. Iowa. — Baldwin v. German Ins.
Hamilton Mutual Ins. Co. 29 Conn. Co. 105 Iowa, 379, 75 X. W. 326, 8
68. Am. & Eng. Ann. Cas. N. S. 654;
Iowa. — Glade v. Germania Fire Cery's v. State Ins. Co. 71 Minn.
Ins. Co. 56 towa, lot). 9 X. W. 320. 238, 73 N. W. 849, 27 Ins. L. J.
Massachusetts. — Brown v. 258.
People's Mutual Ins. Co. 11 Cush. Massachusetts. — Fitchburg Sav-
(65 Mass.) 280; Hayward v. New ings Bank v. Amazon Ins. Co. 125
England Mutual Fire Ins. Co. 10 Mass. 431; Draper v. Charter Oak
Cush. (64 Mass.) 444; Kibbe v. Fire Ins. Co. 2 Allen (84 Mass.)
Hamilton Mutual Ins. Co. 11 Gray 569.
(77 Mass.) 163; Bowditch Mutual Michigan. — Van Buren v. St.
Fire Ins. Co. v. Winslow, 8 Gray Joseph's Countv Village Co. 28
(74 Mass.) 38, s. e. 3 Gray (69 Mich. 398.
Mass.) 415; Falis v. Conwav Ins. Missouri. — Casde v. Chillieothe
Co. 7 Allen (89 Mass.) 46. Town Mutual Fire Ins. Co. 78 Mo.
Minnesota. — Cerys v. State Ins. App. 215, 2 Mo. A.pp. Repr. 185.
Co. 71 Minn. 338," 73 N. W. 849, Nebraska.— State Ins. Co. v. Jor-
27 Ins. L. J. 258. dan, 24 Neb. 358, 38 N. W. 839.
New Hampshire. — Marshall v. New Hampshire. — Gahagan v.
Columbian Mutual Fire Ins. Co. 7 Union Mutual Fire Ins. Co., 43 X.
Fost. (27 N. H.) 157. H. 176; Patten v. Merchants' &
New York. — Smith v. Agricul- Fanners' Mutual Fire Ins. Co. 38
tural Ins. Co. 118 N. Y. 522, 23 X. X. H. 338.
E. 883. Ohio.— Hickey v. Dwelling House
Ohio.— Beyers v. Farmers' Ins. Ins. Co. 20 Ohio Cir. Ct. R. 385, 11
Co. 35 Ohio St. 606, 35 Am. Rep. O. C. D. 135.
623. Texas. — Hanover Fire Ins. Co.
19 Arkansas. — Rhea v. Planters v. National Exchange Bk. — Tex.
Mutual Ins. Co. 77 Ark. 57, 90 S. Civ. App. — , 34 S. W. 333.
W. 850. 20 Hi. lev v. Dwelling House Ins.
Illinois. — Crikelain v. Citizens Co. 20 Oliio Cir. Ct. R. 385, 11 O.
Ins. Co. 168 111. 309, 48 N. E. 167, C. D. 135; Slope Mine Coal Co. v.
aff'g 68 111. App. 637; Kingston Quaker City Mutual Fire Ins. Co.
Mutual County Fire & Lightning of Phila. 13 Pa. Super. Ct. 626.
3386
PARTICULAR REPRESENTATIONS, ETC. § 2022
(L) The above rule also obtains where the charter of the com-
pany requires encumbrances to be stated, and that otherwise none
but fee simple unencumbered property shall be insured.1 And the
contract is avoided by the existence of a mortgage on the part of
the property insured where the applicant represents that it is
unencumbered and the policy, provides that any concealment of
the condition or character of the property will make the policy void.2
80 a mortgage upon property, conditioned to secure the mainte-
nance of the mortgagee during his life, which provides that it
shall be null and void in case the maintenance is regularly fur-
nished, but that upon default it may be foreclosed, is an encum-
brance within the meaning of an insurance policy providing that
encumbrances upon the insured property shall avoid the policy;
and such policy thereon will be avoided by such- mortgage, although
the mortgagor was free from fault at the time he received the policy
and at the time the loss occurred.3 An unrecorded mortgage is
also an encumbrance which must be disclosed on inquiry.4 It is
declared in a Vermont case that failure of the insured to state
that he believed property was mortgaged is an omission to state
information material to the risk, although the mortgagee had
within insured's knowledge previously voluntarily destroyed the
note secured by the mortgage, the insured having at the time
of the contract of insurance warranted that he had not omitted
to state to the company any information material to the risk.
At least such failure is evidence from wdrich that fact might be
found, and if it was a question of law, the court should direct
a verdict for the defendant, or, if it was a question of fact, it
should be submitted to the jury with proper instructions.5
(c) But where assured gave his grantor a mortgage back, the
latter agreeing to pay off an existing mortgage for a less amount,
it was held that the failure to disclose the amount of the lesser
mortgage did not vitiate the policy, as he could deduct the amount
of said mortgage from that due under the larger one.6 So if
1 Battles v. York County Mutual of title or interest in insured prop-
Fire Ins. Co. 41 Me. 208; Addison erty, see note in 38 L.R.A.(N.S.)
v. Kentucky Ins. Co. 7 B. Mon. 562.
(Ky.) 470; Ingrams v. Mutual As- 3 Continental Ins. Co. v. Vanlue,
sur. Soe. 1 Rob. (Va.) 661; Warner 126 Ind. 410, 10 L.R.A. 843, 26 N.
v. Middlesex Mutual Assur. Co. 21 E. 119.
Conn. 444. 4 Hutchins v. Cleveland Mutual
2 Gould v. Mutual Fire Ins. Co. Ins. Co. 11 Ohio St. 477.
47 Me. 403, 74 Am. Dec. 494. See 5 Smith v. Niagara Fire Ins. Co.
Cagle v. Chillicothe Town Mutual 60 Vt. 682, 6 Am. St. Rep. 144, 1
Fire Ins. Co. 78 Mo. App. 215, 2 L.R.A. 216, 15 Atl. 353.
Mo. App. Repr. 185. 6 Ring v. Windsor County Mu-
ge tu
3387
-2 JOYCE ON INSURANCE
the .iiiintinf stated as due thereon by mortgage is the amount for
which the mortgagees have agreed to hold the insured property
liable they relying upon oilier property for the balance of the
debt, the policy is nol avoided, although the whole amount due
on the mortgage is not represented.' Nor is a mortgage an cn-
cumbrance even though it is recorded, where n is not based on
any indebtedness, is never delivered and is executed to a fictitious
person for the purpose of security against any misconducl on the
part of a partner.8 Again, if the mortgage has been paid, it is
not an encumbrance,9 even though it has not been discharged of
record.10 Nor is there any breach of warranty where the amount
of the mortgage was greater than thai represented but it had
been paid down to the sum stated.11 And if there is no consider-
able difference between the amount due on a mortgage as stated
by insured and the actual balance thereon and no fraudulent motive
appears a judgment for plaintiff will be affirmed.18 So an answer
stating the principal amount due on the mortgage satisfies a require-
ment that the amount of the mortgage be stated.13 Nor will a mis-
statement of the amount due on a loan association mortgage on
the property, avoid' the policy, where assured was unable, and
did not pretend to give accurate information, and there was an
entire absence of fraudulent motive.14
(d) A police containing a condition that it shall be void if
the building "be or become encumbered by a chattel mortgage"
must be construed as meaning and guarding against only common
ordinary chattel mortgages and instruments of that general nature,
7 Mutual Mill Ins. Co. v. Gor- K Y. 597, 58 N. F. 10S9. See Smith
don, 121 III. 366, 12 N. E. 747. v. Niagara Fire Ins. Co., (50 Vt.-682,
8 Kilcliner v. Fidelity Mutual 1 L.R. A. 216, 15 Atl. 353 (considered
Fire Assoc. 103 Iowa, 276, 68 N. W. above under this section).
7KI, 26 Ins. L. J. 326, aff'd 103 "Dougherty v. German Ameri-
Iowa. 276, 72 N. W. 530. can Ins. Co. 67 Mo. App. 526.
9 Lvcoming Fire Ins. Co. v. Jack- 12 Home Ins. Co. of N. Y. v.
son, 83 III. 302, 25 Am. Rep. 386. Koob, 113 Ky. 360, 68 S. W. 453,
See Miller v. Insurance Co. of 58 L.R.A. 58 (amount of insurance
North America. 38 Pa. Co. Ct. 571. was $1,100; statement of amount due
But compare Insurance Co. of was that it was possibly, $400; true
North America v. Wicker, — Tex. amount due was $582.) See also
Civ. App. — , 54 S. AY. 300, all'M Davis v. Pioneer Furniture Co. 1(12
93 Tex. 300, 55 S. W. 740. Wis. 304, 78 N. W. 596.
10 Merrill v. Agricultural Ins. Co. 13 Hosford v. Germania Fire Ins.
73 N. Y. 452, 2!) Am. Rep. 184; Co. 127 U. S. 399, 8 Sup. Ct. 1199,
Hawks v. Dodge County Mutual 32 L. ed. 196.
Ins. Co. 11 Wis. 188. See also 14 Home Ins. Co. v. Koob, 113
Laird v. Littlefield, 53 N. Y. Supp. Ky. 360, 58 L.R.A. 58, 68 S. W.
1082, 31 App. Div. 43, affd 104 453.
3388
PARTICULAR REPRESENTATIONS, ETC. § 2022
use, and purpose;15 and the clause relates strictly to personalty.16
And a mortgage is not a chattel mortgage, under a policy provision
voiding it in case the personal property "be or become encumbered
by a chattel mortgage," where the property covered is certain
machinery "boilers, engines, shafting," etc., all part of a manu-
facturing plant, and the entire building in which they were located,
or to which they were appurtenant was all devoted to the work in
which the insured company was engaged, and they were all attached
to the real estate, either by being set in concrete or brick founda-
tions, or by being attached to the floor. In other words, personal
property, necessary and appurtenant to a manufacturing concern,
and which is so attached to the realty as to lose its character of
personalty is not the subject of a chattel mortgage so as to con-
stitute a mortgage thereon an avoidance of a policy condition
against encumbrances by chattel mortgages.17 But the term "chat-
tel mortgage.'"'* in the usual policy clause as to encumbrances on per-
sonal property is properly applied to a mortgage on a vessel,
for a vessel is a chattel ; and such a mortgage constitutes a "present
encumbrance" when given for a debt of the mortgagor and voids
the policy while the debt remains even though it is not in default.18
(e) The condition that the policy shall be void if the property
be or become encumbered by a chattel mortgage is not applicable to
the delivery and record of a bill of sale absolute in form, but
intended as security, without change of possession, as such bill
of sale does not have the legal effect of a chattel mortgage, even
though as between the parties, such a transaction is one to which
equity might give the effect of a mortgage. "The term 'chattel
mortgage' is a term of art, and is to be construed as it was doubt-
less intended to be understood, as referring to that particular kind
of encumbrance having the known and legal effect of a chattel
mortgage." 19 In another case where the stipulation was that
the policy should be void if the property was encumbered by a
chattel mortgage, a chattel mortgage was defined as a bill of sale
with a defeasance clause. Therefore where the insured property
was a sawmill and lumber and there was a contract in writing
that all the lumber sawed should be the property of a creditor and
15 Caplis v. American Fire Ins. Phenix Ins. Co. 170 Fed. 270, 95
Co. 60 Minn. 370, 51 Am. St. Rep. C. C. A. 475.
535 62 N W. 441). 19Petello v. Teutonia Fire Ins.
^Jacoby v. Washing Fire Ins. Co. 89 Conn. 175, 93 Atl. 137, 45
Co. (Pa.) 11 York Leg. Rec. 153. Ins. L. J. 590, L.R.A.1915D, 812
"Humboldt Fire Ins. Co. v. W. (annotated on mortgage or instru-
H. Ashley Silk Co. 185 Fed. 54, ment given as security as breach of
107 C. C. A. 274, 40 Ins. L. J. 757. condition as to sole and uncondition-
18 Gilchrist Transportation Co. v. al ownership).
3389
§ 2022 JOYCE ON INSURANCE
shipped in his name and there was also an agreement that as a
certain party desired to purchase the Lumber he might purchase
it (in condition that the title remain in the creditor until the debt
paid, it was held that said agreement was not a chattel mortgage
within the meaning of the policy stipulation, and judgment for
plaintiff was affirmed.20
(f) A mortgage or deed of trust given to secure an obligation
not effective when the loss occurs is not an encumbrance by chattel
mortgage; nor will an unexecuted contract to pledge such obliga-
tion as collateral for a pre-existing debt constitute such an encum-
brance as to avoid the policy as something more than an agreement
to pledge or an intent to pledge is required.1
(g) A covenant in a lease providing that the lessor shall at all
times have a first lien upon all buildings for any unpaid rental
or taxes, does not create a chattel mortgage, within the meaning
of a condition in a policy of insurance on such buildings that it
.-hall he void if the buildings "be or become encumbered by a
chattel mortgage."8 The decision so holding is cited as an author-
ity controlling its decision in a California case where the instru-
ment under discussion was declared to he of no greater dignity
than the lease above ruled upon. In this case there was in fact a
chattel mortgage to secure the payment of rent. It was an instru-
ment in the form of a bond to become effective on the nonpayment
of rent, and created a lien on personal property for such rent.
It was held not to be a chattel mortgage within the meaning of
the policy which provided that it should he void if the subjed
of insurance be personal property and "be or become encumbered
with a chattel mortgage: " and also that the property so subject to
lien and which was worth many times the amount of the insurance
was not encumbered within the meaning of said policy clause
where no rent was due or unpaid at any time, and furthermore
that the so-called chattel mortgage did not increase the risk. Ac-
cordingly a judgment helowT for plaintiff was affirmed. In such
cases the court is entitled to look at the circumstances surrounding
the execution of the instrument and the situation of the parties,
and at what was done under it in order to determine its true
character; and the court is not concluded by the fact that the
20 Mononcrnliela Ins. Co. v. Bat- 2 Caplis v. American Fire Ins.
son, 111 Ark. L67, L63 S. W. 510. Co., 00 Minn. 376, .".1 Am. St. Rep.
As to bill of sale; encumbrance, 535, 62 N. W. 440.
see >; 2031 herein. As to chattel mortgage under
1 Down v v. National Fire \u<. alienation clause, see § 2208 herein.
Co. — W. Va. — , 87 S. E. 4s7.
As to interest and title; collateral,
see § 2032 herein.
3390
PARTICULAR REPRESENTATIONS, ETC. § 2022
instrument is called a "chattel mortgage" or is in the form usual
to chattel mortgages. The evils against which the contract was
intended to guard should also be considered; that is, the general
objects and legitimate conditions prescribed by insurers should be
considered in preference to a strict technical interpretation. An-
other point is that the mere existence of a chattel mortgage is
not prohibited by the policy clause but the prohibition is that the
property should be encumbered therewith; and it was upon these
considerations that the decision was based.3 And it may also be
stated here as bearing upon the point under consideration that
a lease of a building in which an insured stock of goods is situ-
ated, existing at the time the insurance is placed, is not an encum-
brance within a condition in the policy rendering it void if with-
out written consent indorsed thereon, the property is encumbered
by future mortgage or lien.4 But a lease subject to distress for
rent reserved is an encumbrance even though no rent was due
when the policy was issued, where such lease is in effect a mortgage
under a statute.5
(h) The insurer may validly stipulate that if "the subject of
insurance be personal property and be or become encumbered by
chattel mortgage" it shall be void, and the provision will be enforced
and in the absence of waiver or estoppel, the policy be subject to
forfeiture where the property is so encumbered without assurer's
knowledge or consent,6 So where at the time the policy is issued
and at the time of the fire there is an undisclosed chattel mortgage
upon a part of the property the insurance is void, in the absence
of a waiver or estoppel.7 And although a chattel mortgage is
recorded in compliance with a statute assured must disclose its
existence or the policy will be avoided, where it is so stipulated, in
case assured has concealed or misrepresented any material fact or
sRanlet v. Northwestern Na- Repr. 605, 52 N. E. 771; Shaeffer
tional Ins. Co. 157 Cal. 213, 107 v. Milwaukee Mechanics Ins. Co. 17
Pac. 292, 39 Ins. L. J. 742— Mel- Ind. App. 204, 46 N. E. 557.
y[n j 7 So held in Moloney v. Germania
4Read v. State Ins. Co. 103 Fire Ins. Co. 168 Mich. 269, 134
Iowa, 307, 64 Am. St. Rep. 180, N. W. 6, 41 Ins. L. J. 461 (In this
72 N. W. 665. ease the principal point was waiver
As to lease of insured property; and it was held there was none, but
alienation or transfer, see § 2258 judgment below for plaintiff was
herein, reversed, said mortgage was not
5Pe'tt v. Dakota Eire & Marine filed at the place where the prop-
Ins. Co. 7 S. Dak. 410, 64 N. W. erty was situate but at another
206; Dakota Conrp. L. sec. 4346. where insurer had its agency, al-
6 Weddin^ton v. Piedmont Fire though this fact was not discussed
Ins. Co., 141 N. Car. 234, 54 S. E. in the opinion, merely being
271. See also Phoenix Ins. Co. v. stated).
Overman, 21 Ind. App. 516, 1
3391
§ 2022 JOYCE ON INSURANCE
circumstance concerning the insurance or the subject thereof, or
if his interesl be aot truly stated.8 Again, concealment by the
applicant for insurance on a stock of goods, of the existence of an
outstanding unfiled chattel mortgage thereon, by answering in
the negative the question whether the property was mortgaged or
encumbered, constitutes concealment of a fact material to the risk,
within the meaning of a policy providing that it shall be void
if the insured has concealed or misrepresented any material fact
or circumstance concerning the insurance or the subject thereof,
and avoids the policy.9 The insurance is also avoided if there was
an undisclosed recorded chattel mortgage upon the property at the
time the policy was issued, where ii is stipulated thai unless other-
wise provided by agreement indorsed upon or added thereto the
policy shall he void if assured's interest be other than sole and
unconditional or the property he or become encumbered by a chat-
mi mortgage.10 And insurer is not hound by constructive notice,
so as to preclude a defense, by the filing and depositing a chattel
mortgage in conformity with a statute where said enactment is
only intended to protect subsccpient purchasers, creditors, etc.11
So even an outstanding unfiled chattel mortgage stipulated not to be
valid until and unless tiled, given on a stock of goods as security for
a guaranty of ;i debt of the mortgagor, constitutes an encumbrance
within the meaning of a policy insuring such goods against tire,
which provides that it shall he void if the subject of the insurance
be or become encumbered by a chattel mortgage, or if any material
fact or circumstance has been concealed or misrepresented.12 And
where there is no dispute that at the time the policy was issued
there was a mortgage upon the personal property the fact that the
encumbrance was discharged the next day does not relieve assured
from the forfeiture incurred as the court has no authority to rein-
Mate the insurance and restore the policy. The legal effect of
the breach of condition is not altered.18 The policy is also forfeited
where the claim of insured was that a chattel mortgage was intended
8 Fireman's Fund Ins. Co. v. "iEtna Ins. Co. v. Holcomb, 89
Barker, 6 Colo. A pp. 535, 41 Par. Tex. 404, 34 S. W. 915.
513 See also Shaffer v. Milwaukee 12 Madsen v. Farmers' & Mer-
Mechanics Ins. Co. 17 Ind. App. chants' Ins. Co. 87 Neb. 107, 29
•204. 46 N. E. 557. L.R,A.(N.S.) 97, 126 N. W. 1086.
9Madsen v. Farmers & Mer- 13 Insurance Co. of Nortli Amer-
chants Ins. Co. 87 Neb. 107. 29 iea v. Wicker, 93 Tex. 300, 55 S.
L.B A.(N.S.) 07, 126 N. W. 1086. W. 740, 29 Ins. L. J. 790, affg. —
lOShoueair v. North British & Tex. Civ. App. — 54 S. W. 300.
Mercantile Ins. Co. of Lond. 16 N.
Mex. 503, 120 Pac. 328, 41 Ins. L.
J. 507.
3392
PARTICULAR REPRESENTATIONS, ETC. § 2022
to be ineffective upon certain conditions, but the evidence showed
the contrary and that it became of force and effect at the time it
was executed.14 In Canada, giving a chattel mortgage is held
an encumbrance.15
If, however, a chattel mortgage is without consideration and
there never was any debt secured thereby the policy is not invali-
dated even though it was registered in the county.16 And even
though an instrument is in the form of a chattel mortgage yet
if it is never delivered the policy is not avoided as for an encum-
brance.17 Nor is a policy in the statutory form avoided by a
mortgage or deed of trust which secures an obligation not effective
when the loss occurs and it does not constitute an encumbrance
of personal property by chattel mortgage.18 And if a chattel mort-
gage has been paid even though not discharged of record when the
policy was issued it is not forfeited.19
(i) Although under a statute a chattel mortgage merely creates
a lien and does not transfer the title, and although it neither
increases the risk nor diminishes the owner's insurable interest,
still its existence is a fact peculiarly within insured's knowledge and
should be communicated to insurer notwithstanding it is also pro-
vided by statute that information of the nature or amount of in-
sured's interest need not be communicated, unless in answer to
inquiries, except that the policy must specify insured's interest in
the property insured, if he is not the absolute owner thereof, for said
statute does not relate to chattel mortgages. It constitutes error
therefore to charge the jury that such an encumbrance does not
avoid the policy if insurer failed to make any inquiries.20 And
even though the policy stipulates that it shall be absolutely void
in case any lien exists upon the property other than as stated in
14Thorne v. ^tna Ins. Co., 102 19 Laird v. Littlefield, 53 N. Y.
Wis. 593, 78 N. W. 920. Supp. 1082, 31 App. Div. 43, affd
15 Citizens' Ins. Co. v. Salterio, 164 N. Y. 594, 58 N. E. 1089. See
23 Sup. Ct. Rep. (Can.) 155. this same point as to mortgages
16 Insurance Co. of North Amer- under subdiv. (c) this section.
ica v. Wicker, 93 Tex. 390, 55 S. W. 20 Harding v. Norwich Union Fire
740, 29 Ins. L. J. 790, aff'g, — Tex. Ins. Co. 10 S. Dak. 26, 71 N. W.
Civ. App. — , 54 S. W. 300. See 755, 26 Ins. L. J. 901; Comp. L.
also Phoenix Ins. Co. v. Overman, sees. 4126, 4142, 4330. (In this case,
21 Ind. App. 516, 1 Repr. 605, 52 however, there was a condition
N. E. 771. voiding the policy, if the property
17 Clifton Coal Co. v. Scottish "be or become encumbered by a
Union & National Ins. Co. 102 chattel mortgage," but the decision
Iowa, 300, 71 N. W. 433, 26 Ins. turned upon the point stated in the
L. J. 1007. above text).
18 Downey v. National Fire Ins. As to representations, etc., under
Co. — W. Va. — , 87 S. E. 487. statutes, see § 1916 herein.
Joyce Ins. Vol. III.— 213. 3393
§ 2023 JOYCE ON INSURANCE
writing therein, an unintentional, innocent omission, without fraud,
to mention the existence of a mortgage will not avoid the policy
under a statute as to mistakes, misrepresentations, etc.1
(j) Under a stipulation that the entire policy, and each and
every part thereof, shall hecome void if the subject of insurance
lie personalty, and he or become encumbered, a forfeiture cannot
be claimed because one item of personal property insured by said
policy, separately sel out and separately valued therein, was encum-
bered by mortgage, where the subject of insurance was partly real
and partly personal property.8 And the words "subject of insur-
ance'" in such a clause should not be construed as meaning less
than all the property covered, and. therefore, although a part of
the property is mortgaged, the policy is not void where a greater
portion thereof was not encumbered in any way.3
§ 2023. Encumbrance: mortgage: knowledge of insurer or his
agent.4 — The knowledge of the insurer or his authorized agent at
the time of effecting the policy as to the existence of a mortgage,
there being no fraud, will prevent the policy being avoided by
the claimed concealment or representation,5 although it is held that
1 Perrv v. Dwelling House Ins. Ins. Co. v. Olmstead, 68 111. App.
Co. (17 \\ H. 291, 33 All. 731, 26 111 (is waived by retaining assess-
Ins. L. J. 120; N. H. Genl. L. c. ments with full knowledge).
172. Iowa. — E. C. Winson & Son v.
2 Sullivan v. Mercantile Town Mutual Fire & Tornado Assoc. 170
Mutual Ins. Co. 20 Okla. 460, 129 Iowa, 521, 153 N. W. 97 (chattel
Am. St. Rep. 761, 94 Pac. 676. mortgage); Hueskinveld Bruins v.
Rut compare Home Fire Ins. Co. St. Paul Fire & Marine Ins. Co. 106
v. Bernstein, 55 Neb. 260, 75 N. W. Iowa, 229, 76 _N. W. 696 (agent
839, 28 Ins. L. J. 73. was fully advised of mortgage) ;
\\ 'here representations false as Anson v. "Winnesheik Ins. Co. 23
to part of property; entire or sev- Iowa, 84.
erable contract, see § 1931 herein. Kentucky. — Manchester Assur.
3 Mecca Fire Ins. Co. of Waco v. Co. v. Dowell, 25 Ky. L. Rep. 2240,
Wilderspin, — Tex. Civ. App. — , 80 S. W. 207 (under Ky. Stat. sec.
118 S. W. 1131, 38 Ins. L. J. 810. 639).
See North British & Mercantile Massachusetts. — Nickerson v. Mas-
Ins. Co. v. Freeman, — Tex. Civ. sachusetts Title Ins. Co. 178 Mass.
App. — , 33 S. W. 1091. 308, 59 N. E. 814 (title insurance).
4 See sec. 1987, also § 1916 here- Michigan. — Rediker v. Queen Ins.
in. Co. 1(17 Mich. 224, 2 Det. L. N. 655,
5 United States.— McElroy v. Brit- 65 N. W. 105 (chattel mortgage).
isli America Assur. Co. 94 Fed. 990, Mississijjpi. — Southern Ins. Co. v.
36 C. C. A. 615, 28 Ins. L. J. 776, Stewart, — Miss. — , 30 So. 755.
s. c. 175 U. S. 728, 44 L. ed. 340, 20 Missouri. — Flournov v. Traders'
Sup. Ct. 1024j Ins. Co. 80 Mo. App." 655, 2 Mo.
llli)iois. — Firemen's Ins. Co. v. App. Rep. 663.
Horton, 17(1 111. 258, 48 N. E. 955, Nebraska.— Farmers' & Merchants'
nil- (iS 111. App. 497; Kingston Ins. Co. v. Wizard, 59 Neb. 451, 81
Mutual County Fire & Lightning N. W. 312, 29 Ins. L. J. 465.
3394
PARTICULAR REPRESENTATIONS, ETC. § 2023
no officer or agent of the company can waive the provisions of the
charter or policy in matters of this character.6 But issuing a
New York. — Owen v. Farmers las Reduction Co. v. New Zealand
Joint Stock Ins. Co. 57 Barb. (N. Y.) Ins. Co. (U. S. C. C.) 121 Fed. 929.
518, s. c. 10 Abb. Pr. N. S. (N. Y.) Michigan, — Moloney V. Germania
166n; Bidwell v. Nortb Western Ins. Fire Ins. Co. 168 Mich. 269, 134 N.
Co. 24 N. Y. 302. W. 6, 41 Ins. L. J. 461 (chattel mort-
O Mo — Hartford Protection Ins. gage; assured not prejudiced by any
Co. v. Harmer, 2 Ohio St. 452, 59 statement or conduct of its agent).
Am. Dec. 684. Missouri. — Cayle v. Chillieothe
Oklahoma.— Springfield Fire Ma- Town Mutual Fire Ins. Co. 78 Mo.
rine Ins. Co. v. Halsey, — Okla. — , App. 215, 2 Mo. App. Rep. 185 (but
153 Pac. 145 (full knowledge of local assured had knowledge of agents
agent that property incumbent). limited authority).
Oregon. — Sproul v. Western As- North Carolina, — Weddington v.
sur. Co. 33 Oreg. 98, 54 Pac. 180, 28 Piedmont Fire Ins. Co. 141 N. Car.
Ins. L. J. 118 (chattel mortgage; no 234, 54 S. E. 271 (nothing implying
inquiry or statement made). assent to mortgage, nor any estop-
Pennsijlvania, — Miller v. Insurance pel).
Co. of North America, 38 Pa. Co. Ct. Ohio.— Hammel v. Insurance Co.
571 (mortgage). of Pa. 24 Ohio Cir. Ct. R. 101 (held
Texas. — German Ins. Co. v. Ever- that facts involved no question of
ett, 18 Tex. Civ. App. 514, 46 S. W. waiver).
95 (agent charged with knowledge of Oklahoma. — Sullivan v. Mercantile
encumbrances) ; Alamo Fire Ins. Co. Town Mutual Ins. Co. 20 Okla. 460,
v. Brooks, — Tex. Civ. App. — 32 94 Pac. 676.
S. W. 714. Texas. — Ins. Co. of North Amer-
Vermont— Mascott v. First Na- ica v. Wicker, — Tex. Civ. App. — ,
tional Fire Ins. Co. 69 Vt. 116, 37 54 S. W. 300, aff'd 93 Tex. 390, 56
Atl. 255 (mortgage; not material as S. W. 740, 29 Ins. L. J. 790.
matter of law; no inquiry, no written Virginia. — Virginia Fire & M. Ins.
application). Co. v. J. I. Case Threshing Machine
Virginia.— Southern Mutual Ins. Co. 107 Va. 588, 59 S. E. 369.
Co. v. Yates, 28 Gratt. (Va.) 585. As to agents authority; encum-
Wisconsin. — Hobkirk v. Phcenix brances; when no waiver, see § 564
Ins. Co. 102 Wis. 13, 78 N. W. 160 herein.
(knowledge of local agent; loss oc- On effect of insurance brokers
curred before statute of 1895, c. knowledge as to encumbrances, see
387); McDonald v. Fire Assoc. 93 note in 38 L.R,A.(N.S.) 637.
Wis. 348, 67 S. W. 719. 6 Leonard v. American Ins. Co. 97
As to notice to and knowledge of Ind. 299; Murphy v. People's Equi-
agent generally, see §§ 515 et seq. table Mutual Fire Ins. Co. 7 Allen
herein. (89 Mass.) 239.
As to agents authority; encum- That agent may waive notwith-
brances^ waiver, see §§ 563 et seq. standing policy inhibitions. See Mc-
herein. Elroy v. British American Assur. Co.
When no waiver; encumbrances, 94 Fed. 990, 36 C. C. A. 615, 28 Ins.
see the following cases : L. J. 226 ; Flournoy v. Traders Ins.
United States. — Mulrooney v. Rov- Co. 80 Mo. App. 655, 2 Mo. App.
al Ins. Co. 163 Fed. 833, 90 C. C. A. Rep. 663; Springfield Fire & Marine
317 (agent no power to consent to Ins. Co. v. Halsey, — Okla. — , 153
chattel mortgage encumbrance) ; At- Pac. 145. See also § 439 herein.
3395
§ 20:23 JOYCE ON INSURANCE
policy with knowledge of the existence of a mortgage thereon waives
the right to defeat a recovery upon it based on the ground that,
the property was mortgaged and insured's Lnteresl thereon was
less than sole and absolute owner.7 The failure to state in a written
application for insurance that certain shelving included in the
insurance was subject to a mortgage cannot avoid the insurance
if the agent taking the application was fully informed of all the
facts, and the omission to refer to the mortgage in the application
was due to the belief that the shelving was personal property and
therefore not covered hy the real estate mortgage.8
(a) Although we have considered elsewhere the general rule
as to inquiries9 it may be stated here in connection with the
question of waiver that consent as effectual as though in writing,
as required by a condition of a policy that it shall be void if
the property he or become mortgaged without consent of the com-
pany in writing indorsed on the policy, is given as to a recorded
mortgage existing al the time of the insurance by issuing and receiv-
ing the consideration for the policy without inquiry as to the
existence of a mortgage.10 So in Nebraska if an application for
lire insurance is oral and no inquiries are made by the agent of
the insurer as to the condition of the title to the property, and
the insured say- nothing about the existence of a mortgage thereon,
but does not keep silent from any sinister motive, or with the
intention on his part to deceive or mislead the insurer, then the
fact that when the policy was issued there existed a mortgage upon
the insured property, will not invalidate the policy, notwithstand-
ing the fact that the policy provides that it should be void if there
existed an encumbrance, by mortgage or otherwise, against the
insured property.11 And under a Virginia decision if an insur-
ance company elects to issue its policy without any application,
or without any representation by the insured as to the title to the
property to be insured, it cannot complain after loss has ensued,
thai the interest of the insured was not correctly stated, or that
an existing encumbrance was not disclosed, although the policy
provides that if the subject of insurance is personal property, the
policy shall become void, if the property be or become encumbered
by a chattel mortgage.12 Again, if policies, providing that they
7 German Fire Ins. Co. v. Green- Assoc. 12 Mont. 474, 19 L.R'.A. 211,
wald, 51 Ind. App. 469, 99 N. E. 31 Pae. 87.
1011, 42 Ins. L. J. 248. » Hanover Fire Ins. Co. v. Bohn,
8 Crittenden v. Springfield Fire & 48 Neb. 743, 58 Am. St. Rep. 719, 67
Marine Ins. Co. 85 Iowa, 652, 39 Am. N. W. 774.
St. Rep. 321, 52 N. W. 548. 12 Union Assur. Soc. v. Nails, 101
9 See § 2015 herein. Va. 613, 99 Am. St. Rep. 923, 44 S.
10 Wright v. London Fire Ins. E. 896. See also Lancaster Ins. Co.
3396
PARTICULAR REPRESENTATIONS, ETC. § 2023
shall be "void if the property is or becomes encumbered by a
chattel mortgage," are issued upon an oral application and no
inquiries concerning liens or encumbrances are made and no stipu-
lations or statements in reference thereto are made by assured and
they have no knowledge that such information is material or that
the policies would contain any such provisions, or that the risk
would have been declined had insurer had knowledge that a mort-
gage had been given, the insurer must be held to have waived
the condition as to encumbrances by chattel mortgage.13 And
almost identically the same decision is made in Oregon.14 So
an insurer issuing a standard policy upon a parol application in
which no reference is made to encumbrances upon the property,
waives a provision printed on the back of the policy making it
void if the property is encumbered by a chattel mortgage.15 An
insurer will also be conclusively presumed to have waived a pro-
vision in a policy, rendering it void, if there is a mortgage or
other encumbrance on the property, whether inquired about G^r
not, unless it is so notified to the company and so expressed in
the policy, if the value of the property exceeds the encumbrance
so that insured had an insurable interest therein, although the
agent had no actual knowledge of the encumbrance, where no
inquiries were made of the insured respecting the character or
condition of his title, and he made no false representations respect-
ing the same, and did not intentionally conceal the existence of
the encumbrance, and the insurer accepted and retained the pre-
mium.16
But it is also decided that even though there is no written appli-
cation nor any representation made, the encumbrance clause is
v. Monroe, 101 Ky. 12, 19 Ky. L. it void if such a mortgage existed, the
Rep. 204, 39 S. W. 434. company is deemed by its action to
13 Great Southern Fire Ins. Co. v. have consented to assume the risk of
Burns & Billington, 118 Ark. 22, such mortgage, and to have waived
L.R.A.1916B, 1252, 175 S. W. 1161, the provision in the policy that it
46 Ins. L. J. 30. shall be void if #the property is so en-
14 Where an insurance policy is is- cumbered.
sued upon an oral application, with- Arthur v. Palatine Ins. Co. 35
out any inquiry on the part of the Oreg. 27, 76 Am. St. Rep. 450, 57
company as to chattel mortgages Pac. 62.
upon the property, and without any 15 Great Southern Fire Ins. Co. v.
statement by the assured in reference Burns, 118 Ark. 22, L.R.A.1916B,
thereto, and where it does not appear 1252, 175 S. W. 11(51.
that the assured knew that the com- 16 Phenix Ins. Co. v. Fuller, 53
pany would refuse to take the risk if Neb. 811, 40 L.R.A. 408, 74 N. W,
a mortgage existed, or that it would 269.
insert in the policy a clause making
3397
§§ 2024-2026 JOYCE ON INSURANCE
violated by the existence of an undisclosed chattel mortgage, of
which assurer had no knowledge.17
§ 2024. Encumbrance: mortgage obtained by fraud. — A mort-
gage which is obtained by fraud has not such a valid legal existence
as to constitute an encumbrance and avoid the policy by reason of
its nondisclosure.18
§ 2025. Encumbrance pending litigation. — Pending litigation af-
fecting the property insured does not by its nondisclosure vitiate
the policy.19
§ 2026. Interest and title: no disclosure necessary where no
inquiry.20 — The assured is not obligated, as a role, to disclose the
exact state of his title to or in the property in the absence of
inquiry or of some stipulation in the policy or charter provision
requiring it;1 and an exception also exists where it appears that
17 Crikelain v. Citizens Ins. Co. 68 As to disclosure of interest in
111. App. 637, affd 168 111. 309, 48 wife's property, see § 1050 herein.
N. E. 167. As to inquiries, see §§ 1869 et seq.
18 Lycoming Fire Ins. Co. v. Jack- (concealment); 1914 et seq. (repre-
son. 83 111. 302, 25 Am. Rep. 3S6. sentations) ; 1969 (partial answers,
19 Hill v. Lafayette Ins. Co. 2 Mich, warranties) herein.
476. Here it was not shown that x United States. — Manchester Fire
there had heen any question by the Assur. Co. v. Abrams, 89 Fed. 932,
insured in the application in regard 32 C. C. A. 426, 61 U. S. App. 426.
to pending litigation, and the court California. — Raulet v. Northwest-
said: "We are persuaded that in ern National Ins. Co. 157 Cal. 213,
many eases litigation in which the 107 Pac. 292, 39 Ins. L. J. 742, 752.
property is at the time involved Colorado. — German Fire Ins. Co.
might present a temptation to the in- of Peoria v. Herbertson, 49 Colo,
sured to burn it, and yet . . . 217, 112 Pac. 690, 40 Ins. L. J. 477.
we should admit the validity of this Indiana. — Glens Falls Ins. Co. v.
as a defense with much hesitation Michael, 167 Ind. 659, 8 L.R.A.
since it would operate as a snare to (N.S.) 708, 74 N. E. 964, 34 Ins. L.
the assured. If it is true that litiga- J. 904, petition for rehearing over-
tion increases the risk, why, among ruled 79 N. E. 905, 36 Ins. L. J. 308.
the many questions asked the insured, Massachusetts. — Strong v. Manu-
was this not included? If litigation facturers' Ins. Co. 10 Pick. (27
increased the insurer's risk, it should Mass) 40, 20 Am. Dec. 507.
not he left for him to take advantage Michigan. — Kennedy v. London &
of it as they might scV proper under Lancashire Fire Ins. Co. 157 Mich.
the generaf obligation imposed bv the 411, 122 N. W. 134; Brunswick-
law, but they should make it a sub- Balke-Collander Co. v. Northern
ject of distinct inquiry of the in- Assur. Co. 142 Mich. 29, 105 N. W.
sured." See § 2045 post. 76.
20 See § 1987, also § 1916 herein. Missouri,— Morrison v. Tennessee
As to disclosure of assured's inter- Marine & Fire Ins. Co. 18 Mo. 262,
est. see S§ 900, 1857 et seq. herein. 59 Am. Dec. 299.
As to disclosure of interest; encum- Nebraska.— Farmers & Merchants
brances, sec § 2015 herein. Ins. Co. v. Mickel, 72 Neb. 122, 100
As to disclosure of interest by N. W. 130; German Ins. & Savings
mortgagee, see § 1043 herein.
3398
PARTICULAR REPRESENTATIONS, ETC. § 2026
the concealment or misrepresentation is fraudulent, intentional,
material and to the prejudice of insurer.2 So an applicant for
insurance may properly describe the property to be insured as
belonging to him if he has an insurable interest therein, unless
some inquiry is made by the insurer which will render such answer
a false warranty or a misrepresentation, or unless the title thereto
is made' material by securing deferred premium or deposit notes
thereon, or otherwise.3 And if no questions are asked and no
representations made as to the title of insured to the buildings
covered by the insurance it is unimportant that there was a material
difference* between the property as represented and as it really
existed, it appearing that insured had an insurable interest in the
property and had practised no fraud nor made any fraudulent
representations as to title.4 And although a policy contains a
condition declaring it to be void if the interest of the insured
be other than unconditional or sole ownership, it cannot be avoided
on the ground that the insured did not own the legal title, he
having purchased the property and paid therefor without having
received a conveyance, if no written application was made by him
for the policy, and no questions were asked of him concerning his
title.5 So where the fact was not disclosed that the building stood
on land of another under a verbal agreement terminable at six
months' notice, and no inquiry was made as to the title, it was
held no material concealment.6 Again, if no inquiry is made as
to the title, but questions are asked as to the encumbrances, and
the policy stipulates that it shall be void "unless the true title
of the assured be expressed in his application," and the questions
Institution v. Kline, 44 Neb. 395, 62 Ins. Co. 153 Mass. 335, 11 L.R.A.
N. W. 857. 598, 26 N. E. 877.
Vermont.— Hall v. Niagara Fire 4 Fadden v. Insurance Co. of North
Ins. Co. 60 Vt. 682, 6 Am. St. Rep. America, 77 N. H. 392, 92 Atl. 335.
144, 18 L.R.A. 135, 53 N. W. 727. 5 Dooly v. Hanover Fire Ins. Co.
Wisconsin.— Kludt, v. German Mu- 16 Wash. 155, 58 Am. St. Rep. 26,
tual Fire Ins. Co. 152 Wis. 637. 45 47 Pac. 507.
L.R.A. (N.S.) 1131, 140 N. W. 321. On vendee under executory con-
As to nondisclosure of interest; tract as own«r where vendor holds
statute, see Harding v. Norwich legal title, see note in 20 L.R.A.
Union Fire Ins. Co. 10 S. Dak. 26, 77 (N.S.) 773; on failure to record
N. W. 755, 26 Ins. L. J. 901 {con- conveyance to insured as affecting
sidered under § 2022 herein). his sole and unconditional ownership,
As to records of title, see § 2027 note in 22 L.R.A. (N.S.) 732.
herein. 6 Fletcher v. Commonwealth Ins.
2 Connecticut Fire Ins. Co. v. Colo- Co. 18 Pick. (35 Mass.) 419.
rado Leasing, Mining & Milling Co. On want of title to land where m-
50 Colo. 424, 116 Pac. 154, 40 Ins. L. sured is sole and absolute owner of
J. 1717. building, see note in 38 L.R.A. (N.S.)
3Wainer v. Milford Mutual Fire 427.
3399
§ 2027 JOYCE ON INSURANCE
and answers as to encumbrances fully apprise the assurer that the
assured is doI the absolute owner in fee simple," the stipulation is
complied with.7
The authorities are nol in harmony, however, upon this point
and it is decided thai ii is incumbent upon an applicanl for insur-
ance to disclose the nature of his title, and (he fact that the policy
is issued without inquiry does aol constitute a waiver of cdnditions
as to title and ownership.8 So it is held that the very condition
of itself as to sole and unconditional ownership is a direel inquiry
requiring thai the interest of assured be stated:9 and even though
do inquiry or representation is made, and there is no fraudulent
concealmenl of fact-, -till if it is expressly provided that the policy
shall be void if insured is nol the sole and unconditional owner
of the property or it is mortgaged the policy is void where part
of the insured property is held under rental contract,- and part
i- coven d by chattel mortgage.10
§ 2027. Interest and title: generally.11 — (a) A stipulation in the
policy requiring that anything less than an absolute ownership
in the property or a title in fee simple to the land on which
the huildinu' stands must be expre— ed in the policy is valid and
binding upon the assured, there being no fraud, and this is so
oven though the assured is ignorant of the existence of such a
clause, and notwithstanding the fact that he does not consider it
essential.12 So policy clauses which, although they vary in phrase-
ology, stipulate in substance .and effect, if not in exact words, that
it shall he void unless insurer consent thereto: (1) if assured is
not the unconditional sole owner: or (2) if the subject of insur-
ance he a building on ground not owned by assured, have been
repeatedly decided to he material, reasonable, valid and enforee-
able, and a breach of such a provision prevent- recovery in the
absence of waiver or estoppel. This rule applies where it is stipu-
lated that "This entire policy, unless otherwise provided by agree-
7 Wvman v. People's Equity Ins. Ins. Co. 12 App. D. C. 245. 40 L.R.A.
Co. 1 Allen (83 Mass.) 301, 79 Am. 358, 26 Wash. L. Rep. 213. See
Doc. 737. Harding v. Norwich Union Fire Ins.
8 Re Millers' & Merchants' Ins. Co. Co. 10 S. Dak. 2(i, 71 N. W. 755, 26
(Parsons, Rich & Co. v. Lane) 97 Ins. L. J. 901.
Minn. 98, 4 L.R.A.(N.S.) 231, 106 "See § 1987, also §§ 1916, 2048
X. \Y. 4S5. Sec also Syndicate Ins. herein.
Co. v. Bohn, 65 Fed. 165, 12 C. C. A. As to change in possession, title
531, 27 U. S. App. 564, 27 L.R.A. or interest, see § 2238 herein.
614; Phenix Ins. Co. v. Searles, 100 12Hartford Fire Ins. Co. v. Hass,
Ga. 97, 27 S. K. 779. 87 Ky. 531, 10 Ky. L. Rep. 573, 2
9 Rosenstock v. Mississippi Home L.R.A. 64, 9 S. W. 720; Barnard v.
Ins. Co. 82 Miss. 674, 35 So. 309. National Fire Ins. Co. 27 Mo. App.
10 Dumas v. Northwestern National 26.
3400
PARTICULAR REPRESENTATIONS, ETC. § 2027
ment indorsed hereon and added hereto shall be void," etc., "if
the interest of the insured be other than unconditional and sole
ownership, or if the subject of the insurance be a building on
ground not owned by the insured in fee simple." 13 Said rule
likewise applies to a provision that if the interest of insured be
other than the sole and unconditional ownership; 14 also to a stipu-
lation that if the interest of assured in the property be other than
unconditional and exclusive ownership it must be so notified to
the company, and be expressed in the written part of the policy; 15
or where the clause reads: if the title or interest of assured is less
than the entire, absolute, unconditional, unencumbered, fee-simple
ownership ; 16 or in case the requirement is that fee-simple title
to the land be evidenced by deed.17 And a false statement as to
the ownership of the property made in the application will vitiate
the contract.18 So in case assured expressly covenants that his
representations shall be warranties he is bound thereby and this
applies to statements as to ownership and the question whether
they were made in good faith or were willful is immaterial; but
the burden of proof to establish the defense of nonownership
rests in such case upon assurer.19 And in this connection it is
pertinent to state that a stipulation in a policy against alienation,
by sale or otherwise, of the title of the insured without the knowl-
edge and consent of the insurer will be enforced in Nebraska when
no reason to the contrary is shown to exist, and this applies to a
case of false representation as to title to the property.20
It is decided, however, that a provision that the policy shall
be void if the interest of the assured is other than unconditional
13 Bacot v. Phenix Ins. Co. of 17 Merchants & Bankers Fire Un-
Bklvn. 96 Miss. 223, 25 L.R.A.(N.S.) derwriters v. Williams, — Tex. Civ.
1226, 39 Ins. L. J. 214; Groce v. App. — , 181 S. W. 859.
Phoenix Ins. Co. 94 Miss. 201, 22 18 Mullin v. Mutual Fire Ins. Co.
L.R.A. (N.S.) 732, 48 So. 298. See 54 Vt. 223; Burn v. Grove District
also Insurance Co. of North America Mutual Ins. Co. 10 U. C. Q. B. 353;
v. Erickson, 50 Fla. 419, 2 L.R.A. Cuthbertson v. North Carolina Home
(N.S.) 512, (annotated on effect of Mutual Co. 96 N. C. 480, 2 S. E. 258;
bond for title to defeat uncondition- Walroth v. St. Lawrence County Mu-
al and sole ownership) 111 Am. St. tual Ins. Co. 10 U. C. Q. B. 525.
Rep. 121, 39 So. 495. 19 Morris v. Imperial Ins. Co. Ltd.
14 French v. Delaware Ins. Co. 167 (Imperial Ins. Co. Ltd. v. Morris)
Kv. 170, 180 S. W. 85, 47 Ins. L. J. 106 Ga. 461, 3° So. 595, 28 Ins. L.
180. J. 402.
15 Phamix Ins. Co. v. Public Parks 20 Ehrsam Machine Co. v. Phamix
Amusement Co. 63 Ark. 187, 37 S. Ins. Co. 43 Neb. 554, 61 N. W. 722.
W. 959. As to alienation, change of interest,
16 Tvree v. Virginia Fire & Marine etc., see c. LXIV. (§§ 2216 et seq.)
Ins. Co. 55 W. Va. 63, 66 L.R.A. herein.
657, 46 S. E. 706.
3401
§ 2027 JOYCE ON INSURANCE
and sole ownership moans "voidable;" and to avoid the policy the
insurer must, upon Learning of the defecl of title, with reasonable
promptness notify the assured of its intention to do so, and tender
the unearned premium which it has received.1 And if it does not
appear that a statement that insured was the sole owner should be
construed as a warranty requiring strict and literal compliance
such a construction will not lie given but only representations will
be held to have been intended which must be true in material
matters, even though by the application and the policy assured's
answers are warranted to lie true.2 Again, if from the whole appli-
cation it appears that the assured is not the owner in fee, and
it is a part of the policy, the insurance is not void.3
(b) A distinction is made between an insurable interest in
property and a contract calling for a sole and unconditional inter-
esl in the property insured, for the reason that while insurer might
be unwilling to issue a policy on any interest which assured might
have in the property it might be willing to insure the sole owner
and. therefore, the contract made must be enforced as the court
cannot substitute another and different one contrary to its terms as
agreed upon by the parties. In brief there is a distinction between
an insurable interest and having the only insurable interest,4 upon
which the loss must fall, having in view the principle of indemnity.6
(c) It is held that insurer is not bound by the state of record
concerning title to the property insured, but may rely upon the
representations of the assured with reference thereto.6 But it is
declared in Indiana, however, that ''as the public records usually
give information in reference to such matters, he" assured, ''may
assume that the insurer knew of any existing encumbrances, or
deemed it immaterial whether or not the property was unencum-
bered." 7
1 Glens Falls Ins. Co. v. Michael, 6 See Raulet v. Northwestern Na-
Ki7 Ind. 659, 8 L.R.A.(N.S.) 708, 74 tional Ins. Co. 157 Cal. 213, 107 Pac.
N. E. 964, 34 Ins. L. J. 904, petition 292, 39 Ins. L. J. 742, 752 (con-
fer rehearing overruled 79 N. E. 905, sidered under S 2042 herein). See
36 Ins. L. J. 308. also § 2048 herein.
2 Phoenix Ins. Co. v. Munger Im- 8 Mutual Fire Ins. Co. v. Deale, 18
proved Cotton-Mach, Manufacturing Md. 26, 79 Am. Dec. 673.
Co. 92 Tex. 297, 49 S. W. 222, 28 Ins. 'Continental Ins. Co. v. Mnnns,
L. J. 24S, j,irg — Tex. Civ. App. 120 Ind. 30, 5 L.R.A. 430, 22 N. E.
— . 4!) S. W. 271. 78, quoted and (ij>/>lii'<l in Glens Falls
3 Lamb v. Council Bluffs Ins. Co. Ins. Co. v. Michael, 7!) X. E. 005, 36
70 Iowa, 238, 30 N. W. 207. Ins. L. J. 308, 313,— Jordan, J. (a
4 Bacot v. Phenix Ins. Co. of case of a standard policy stipulating
Bklyn. 96 Miss. 223, 25 L.R.A.(N.S.) for sole and unconditional owner-
1226, 50 So. 729, 39 Ins. L. J. 214, ship). Overrulin«; petition for re-
220,— Mayes, J. hearing, 167 Ind. 659, 8 L.R.A.
3402
PARTICULAR REPRESENTATIONS, ETC. § 2027
(d) In insurances made by mutual insurance companies' the
title of the assured to the property becomes an important con-
sideration of the contract when that instrument declares that the
premium notes shall be a lien upon the real property insured, and
a material misrepresentation or concealment in relation to it will
avoid the policy.8
(e) Under a policy stipulation for unconditional and sole owner-
ship the entire policy is held void where the contract is indivisible
and it is void as to a part of the property.9 But whether or not
a representation as to ownership of a house avoids a policy cover-
ing a house and its contents is held determined by the clause itself,
which, by providing that the entire policy shall be void if there
be either concealment or misrepresentation, fixes the materiality
of such statement as to ownership and the character of the war-
ranty; accordingly the policy is held vitiated as to both house
and contents by a misrepresentation of ownership of the house.10
It is decided, however, that as to an insurance on a dwelling house
and personal property, even though the policy was void as to part
because insured were not the sole owners, the policy was separable
and valid as to the personalty.11
(f) As to waiver: if application for insurance is made to an
agent authorized to issue policies of fire insurance to whom the
applicant fully and truly states his interest in the property, and
the agent, being fully informed, drew and turned over the policy
to the applicant, it cannot be avoided on the ground that he was
not the unconditional and sole owner of the property, and that
his interest therein was not correctly stated in his application,
though the policy contains a condition that it shall be void if the
interest of the assured is, other than the unconditional and sole
ownership of the property insured.12 So where insurer issues
the policy with a full knowledge of the facts as to ownership and
insured has truthfully and correctly represented the nature and
(N.S.) 708, 74 N. E. 964, 34 Ins. L. " Oatman v. Bankers' & Merchants'
J. 904. Mutual Fire Relief Assoc. 66 Oreg.
8 Mutual Fire Ins. Co. v. Deale, 18 388, 133 Pac. 1183, 42 Ins. L. J.
Md. 26, 79 Am. Dec. 673. 1535. See also Arkansas Ins. Co. v.
9 Phoenix Ins. Co. v. Puhlic Parks Cox, 21 Okla. 873, 20 L.R.A.(N.S.)
Amusement, 63 Ark. 187, 37 S. W. 775, 38 Ins. L. J. 205.
959. See also Elliott v. Teutonia Ins. 12 Creed v Sun Fire Office, 101 Ala.
Co. 20 Pa. Super. Ct. 359. 522, 46 Am. St. Rep. 134, 23 L.R.A.
Where representations false as to 177, 14 So. 323.
part of property; entire or divisible As to notice to and knowledge of
contract, see § 1931 herein. agent, see §§ 515 et seq. herein. See
10 Germier v. Springfield Fire & also §§ 563 et seq. herein.
Marine Ins. Co. 109 La. 341, 33 So.
361. See § 1931 herein.
3403
§ 2027
JOiCE OX INSURANCE
condition of his title in making his application he is not pre-
cluded from recovery after loss by a different title being stated
in the policy.13 Nor can misrepresentation as to the state of title
be charged against the applicant for fire insurance where he states
the title correctly, and it is erroneously written in the application
without his knowledge by the agenl of the insurer.14 And if at
the time a policy was written the secretary of the insurer knew
thai the title to property insured in the name of a widow stood
in her children, subject to her rights of dower and homestead,
a provision that all property must be insured in the names of all
the owners will be deemed to have been waived.15 In Iowa, it is
decided that if goods are sent to a consignee to be returned to
the consignor if not sold, bul if sold to be paid for by the consignee,
the latter may insure such goods, and may recover their full
value where the agent who issues the policy knows the consignee's
interest in the goods and writes the policy for the purpose of
insuring the full value of the consignment and this though the
policy limits the insurer's liability to an amount not exceeding
the interest of the applicant,16
13 Arkansas Ins. Co. v. Cox, 21 not refuse payment because policy
Okla. 873, 20 L.R.A.(N.S.) 775, 98 requires some different title or inter-
Pac. 552, 38 Ins. L. J. 205. Sec also est than that disclosed to agent: slip-
Allen v. Phoenix Assur. Co. 12 [daho, ulated that agent had no power to
653, 8 L.R.A.(N.S.) 903 (annotated waive; judgment against insurer),
on title for purpose of insurance of Arkansas. — People's Fire Ins. Co.
house on government land under v. Goyne, 79 Ark. 315, 1G L.R.A.
homestead entry as within sole and (N.S.) 1180, (Ml S. \Y. 305 (insurer
unconditional ownership clause in in- estopped: agent saw property, ex-
surance policy), 88 Pac. 245, s. c. 14 amined deeds and made out applica-
I da I io, 728, 95 Pac. 829. tion: stipulated that agent could
14 Continental Fire Ins. Co. v. not waive and representations made
Whitaker, 112 Tenn. 151, 64 L.R.A. warranties); Security Mutual Ins.
451, 71) S. W. 119. ('... v. Woodson & Co. 79 Ark. 266,
On effect of agents insertion in the 95 S. W. 481 (insurer estopped; in-
application of false answers to ques- sured stated that he had absolute
tions correctly answered by the in- title, by reason of agent's instruc-
sured, see notes in 4 L.R.A. (N.S.) tions); State Mutual Ins. Co. v. La-
607; L.R.A.1915A, 273. tourette, 71 Ark. 242, 74 S. W. 300
15 Siemers v. Meeme Mutual Home (local agent informed as to title;
Protection Ins. Co. 143 Wis. 114. 139 waived).
Am. St. Rep. 1083, 120 X. W. 669. California. — Sharp v. Scottish
16 Fox v. Capital City Tns. Co. 93 Union & Mutual Ins. Co. 136 Cal.
Iowa, 7, (il N. W. 211, 24 Ins. L. J. 542, 69 Pac. 253 (insured not sole
203. owner; policy written by agent; held
For other instances of waiver see not avoided),
the following cases : Colorado. — German Fire Ins. Co.
Alabama. — Pope v. Glens Falls of Peoria v. Herbertson, 49 Colo.
Ins. Co. 130 Ala. 350, 30 So. 496 217, 112 Pac. 690, 40 Ins. L. J. 477
(agent fully informed; assurer can- (building was on leased ground; no
3404
PARTICULAR REPRESENTATIONS, ETC. § 2027
But it is held that a mere soliciting agent's knowledge and
representations do not operate as a waiver of a requirement of
inquiry, etc. ; waived); Duncan v. title waived where answer "deed" put
National .Mutual Eire Ins. Co. 44 insurer on inquiry: insured was ten-
Colo. 472, 20 L.R.A.(N.S.) 340, 98 ant by entirety); Miotke v. Milwau-
Pac. (534 (application slated title to kee Mechanics Ins. Co. .113 Mich,
land on which building situate was a 166, 4 Det. L. N. 275, 71 N. W. 463,
lease; not avoided by condition as to 26 Ins. L. J. 910 (foreigner unable
fee simple); American Central Ins. to write or speak English: agent too
Co. v. Donlon, 16 Colo. App. 416, 66 ignorant of English to till out report
Pae. 249 (agent informed that in- to insurer: wife had equal interest:
sured held by quit claim deed from waived); Hamilton v. Dwelling
one without title to land but only to House Ins. Co. 98 Mich. 535, 22
building waived). L.R.A. 527, 57 N. W. 735 (agent
Georgia. — Atlanta Home Ins. Co. knew that assured had made contract
v. Smith, 136 Ga. 592, 71 S. E. 902 of sale: estoppel),
(agent had knowledge that plant, Mississippi. — Mechanics & Traders
fixtures, etc., on leased ground; in- Ins. Co. v. Smith, 79 Miss. 142, 30
surer estopped); Athens Mutual So. 362 (sole, etc., ownership: fix-
Ins. Co. v. O'Keefe, 133 Ga. 792, tures: special agent and adjuster
66 S. E. 1093 (agent's knowledge had knowledge: premium retained:
of existence of bond for title, also waived).
that possession held by one not a Missouri. — O'Brien v. Greenwich
tenant under warranty of occupa- Ins. Co. 95 Mo. App. 301, 68 S. W.
tion; insurer bound); Springfield 976 (agent's knowledge that assured
Fire & Marine Ins. Co. v. Price, 132 not unconditional owner and accept -
Ga. 687, 64 S. E. 1074 (agent in- ance of premiums waived) ; Wood-
formed that property on leased land : bridge v. German Ins. Co. 69 Mo.
failure to read policy does not defeat App. 413 (warranty: title in wife:
recovery by destroying estoppel). assurer estopped by terms of appli-
Kansas. — Hartford Fire Ins. Co. cation requiring husband's signature
v. McCarthy, 69 Kan. 555, 77 Pac. and relative positions thereon in
90 (agent had full knowledge of en- which husband and wife signed),
cumbrances: and title waived). . Nebraska. — Slobodiskv v. Phenix
Kentucky.— Wilson v. Germania Ins. Co. 53 Neb. 816, 74' N. W. 258
Fire Ins. Co. 140 Ky. 642, 131 S. W. (title not absolute and unencum-
785 (insured believed she was owner, bered : insured had insurable inter-
but only had lien and title was in est: no inquiries or representations:
another; agent had knowledge: es- premium accepted: waived); Phenix
topped: recovery to extent of inter- Ins. Co. v. Fuller, 53 Neb. 84, 40
est) ; London & Lancashire Ins. Co. L.R.A. 408, 74 N. W. 269 (same rule
v. Gerteisen, 106 Ky. 815, 51 S. W. as last case).
617 (facts known to agent: insurer North Dakota. — Leisen v. St. Paul
cannot rely on condition voiding Fire & Marine Ins. Co. 20 N. Dak.
policy as to absolute title, etc.) ; Mu- 316, 30 L.R.A. (N.S.) 539, 127 N. W.
tual Fire Ins. Co. v. Hammond, 106 837 (insured held sheriff's certificate
Ky. 386, 20 Ky. L. Rep. 1945, 50 S. under mortgage foreclosure sale:
W. 545 (knowledge of agent as to agent informed of fact: estoppel),
title estops). New York. — Wisotskey v. Niagara
Michigan. — Clawson v. Citizens' Fire Ins. Co. 98 N. Y. Supp. 760,
Mutual Fire Ins. Co. 121 Mich. 591, 112 App. Div. 599 (insurer estopped:
80 Am. St. Rep. 538, 80 N. W. 573, agent knew fully about title, that in-
29 Ins. L. J. 167 (conditions as to sured not absolute owner, etc., and
3405
§ 2028 JOYCE OX INSURANCE
sole and unconditional ownership.17 And it also decided that
insurer by issuing a policy without inquiry docs not waive its
conditions as to title and ownership.18
§ 2028. Interest and title: title which will enable assured to
transfer by abandonment: marine risk.19 — It is held that the as-
that another had furnished money name : sole, etc., ownership waived) ;
for purchase; concealment, repre- Virginia Fire & Marine Ins. Co. v.
sentation, etc., clause) aff'd 189 X. Richmond Mica Co. 102 Va. 429, 46
Y. 532, 82 N. E. 1134; Brooks v. S. E. 463 (agent informed of contract
Fric Fire Ins. Co. 78 X. Y. Supp. to sell, of possession of vendee, etc.:
~, 18, 76 Ap|>. Div. 275 (vendee in estopped).
possession: agent informed of in- Wisconsin. — Siemers v. Meeme
sured's interest: conditional, etc., Mutual Home Protection Ins. Co. 143
owner, and fee simple clauses: Wis. 114, 126 X. W. 669, 39 Ins. L.
waived), aff'd 177 X. Y. 572, 69 X. J. 1138 (names of each owner re-
E. 1120. quired to be stated: agent knew in
North Carolina. — Grabbs v. Farm- whom title was: statement of title
ers Mutual Fire Assoc. 125 X. Car. waived); Schultz v. Caledonian Ins.
389, 34 S. E. 503 (insurance in in- Co. 94 Wis. 42, 68 X. W. 414 (in-
sured's agent's name: assurer's agent surer knew that title less than fee
fully informed as to ownership: simple: stipulation waived requiring
waived). indorsement, etc.: waived).
Pennsylvania. — Damms v. Hum- 17 Sharman v. Continental Ins. Co.
boldt Fire Ins. Co. 226 Pa. 358, 75 167 Cal. 117, 52 L.R.A. (X.K.) 670n,
At I. 607 (property sold as unseated 138 Pac. 708, 43 Ins. L. J. 476. See
land for taxes arid conveyed to as- Home Ins. Co. of X. Y. v. Ballard,
sured : manager at insurer's office was 32 Okla. 723, 124 Pac. 316, 42 Ins.
shown deed: estopped). L. J. 1468 (agent informed of lien:
South Carolina.— Scott v. Liver- as to all policies issued prior to state-
pool & London & Globe Ins. Co. 102 hood notice to agent not notice to in-
S. C. 115, 86 S. E. 484 (insured surer: no waiver) ; Oatman v. Bank-
owned only one-sixth interest in ers' & Merchants' Mutual Fire Relief
ground on which building situate: Assoc. 66 Oreg. 388, 134 Pac. 1033
waived by failure to return unearned (condition in standard form as to
premium after leaving subsequent to ownership in fee simple cannot be
loss of defect in title). waived otherwise than as provided
Tennessee.— Home Ins. Co. v. Han- by statute : mere knowledge of agent
cock, 106 Tenn. 513, 52 L.R.A. 665, does not aid assured: L. 1911, pp.
62 S. W. 145 (insured had only life 279, 280). See §§ 515b, 515h, 563 et
estate : agent knew true state of title : seq. herein,
policy not avoided). "Re Millers' & Merchants' Ins.
Texas.— Shawnee Fire Ins. Co. v. Co. (Parsons, Rich & Co. v. Lane)
Chapman, — Tex. Civ. App. —, 132 97 Minn. 98, 4 L.R.A. (X.S.) 231,
S. W. 854 (executor had manage- 106 X. W. 485; Phenix Ins. Co. v.
ment of estate and held it as such, of Searles, 100 Ga. 97, 27 S. E. 779
which agent had knowledge: estopped (no inquiries as to ownership: build-
to claim sole ownership), ing on ground not owned in fee
Virginia. — Xational Union Fire simple but owned by another: in-
Ins. Co. v. Burkholder, 116 Va. 942, surer not liable). Compare § 2026
83 S. E. 404, 45 Ins. L. J. 60 (where herein.
agents had or could easily have had 19 See § 1987, also § 1916 herein,
knowledge that property in husband's
3406
PARTICULAR REPRESENTATIONS, ETC. §§ 2029, 2030
sured under a marine policy should have such a title as will enable
him to transfer by abandonment.20
§ 2029. Interest and title: assignee's policy.1 — Where an assignee
effects an insurance the company is put on inquiry as to his owner-
ship and the conditions attending the same, and if it neglects to
make further inquiry the presumption arises that it is satisfied
with the statements made, in the absence of fraud or such mate-
rial concealment as amounts to deception.2
§ 2030. Interest and title: as interest may appear for account
of. — If the property is insured to an amount not exceeding the
applicant's interest therein, a stipulation that the insurance shall
be void if assured is not the "sole and individual owner" does not
vitiate the contract, although the assured is not such owner, if he
has truly described his actual interest in a verbal application.3
So the clause "as interest may appear" does not necessitate proof
of ownership. It is sufficient for the assured, in case of loss, to
prove what his interest is, and if he. had an insurable interest he
may recover, although the policy is conditioned to be void if the
assured's interest is not truly stated.4 "And when a policy of insur-
ance on personal property has been issued to A B, providing that
the loss should be payable to C D as his interest may appear,
extrinsic evidence is admissible to prove that C D was the owner
of the property, but that it was in possession of A B at the time
he effected the insurance thereon, who was interested in the preser-
vation of the property, for the reason that he was in possession
as superintendent of C D, and entitled to profits resulting from
the use of the property in the business in which he was employed.5
The insertion of such a clause operates as a waiver of the specific
statement of the interest, and this is so although the policy
requires that if the assured is not the sole owner, or if the build-
ing stand on leased ground, it must be so expressed.6 But in
another case, where the property was described as "her household
furniture," it was held that the clause making the loss payable
to others "as their interests may appear" was not inconsistent with
the requirement that the interest of the assured must be truly
stated if other than the "entire, unconditional, and sole owner-
ship," etc., otherwise the policy would be void, and that said
clause was not equivalent to notice of title in others to whom
20 Locke v. North American Ins. 4 Dakin v. Liverpool & London &
Co. 13 Mass. 61. Globe Ins. Co. 77 N. Y. 600.
1 See § 1987, also § 1916 herein. 5 Graham v. Fire Ins. 48 S. Car.
2 Siblev v. Prescott Ins. Co. 57 195, 59 Am. St. Rep. 707, 26 S. E.
Mich. 14, 23 N. W. 473. 323, 26 Ins. L. J. 744.
3 Hoose v. Prescott Ins. Co. 84 6 De Wolf v. Capital City Ins. Co.
Mich. 309, 47 N. W. 587, 11 L.R.A. 16 Huu (N. Y.) 116.
340, 32 Cent. L. J. 226.
3407
§ 2031 JOYCE ON [NSURANCE
it was so payable, and, therefore, since assured only held under a
contracl of purchase from them, the title only to become vested
,,n payment of the purchase price, the contracl was void.7 Although
if the policy states the insurance to he for account of A, it is
equivalent to a representation thai A is the owner.8 And where
a policy of marine insurance was effected upon cargo, and it
appened from the letter on which the insurance was predicated,
from the inducement thereon, and from a prior application and
state of the political world, and the nature of such transactions,
that the interests of others than the actual insured were intended
to be protected, the words "as interest may appear" will cover the
interest of others to the extent thereof, and the fact that the insured
represented in the letter itself that he was the owner of the cargo
is not such a misrepresentation as will avoid the contract.9 The
defense that the insured was not the sole and unconditional owner
of the property cannot he made where it appears that the agent
of the insurer was informed that the true ownership of the prop-
erty was in another at the time the insurance was effected, and
thereupon issued the policy payable to the insured instead of to
the owner as his interest may appear.10
§ 2031. Interest and title: bill of sale.11 — One is the owner of
personal property within a warranty as to title, although he has
made a hill of sale thereof, where he has not delivered the same
and has taken in return only a promissory note secured by mort-
gage thereon.12 And the execution, either prior or subsequent
to the issue of the policy, of a hill of sale to a third party on
personal property to secure money advanced, the assured retaining
possession of the property, is not a breach of a stipulation that
"any other than the entire, unconditional, and sole ownership of
the property for the use and benefit of the assured" must be repre-
sented to the company and expressed in the policy.13 So a person
in whom the entire legal title to property is vested, at the time
7 Lasher v. St. Joseph Fire & Ma- When bill of sale not a chattel
rine Ins. Co. 86 N. Y. 423 (two mortgage, see § 2022 herein,
judges dissenting); Lasher v. North- As to bill of sale: alienation, etc.
western National Ins. Co. 57 N. Y. see § 2284d herein.
222, 18 How. (X. Y.) 98. 12 Vogel v. People's Mutual Fire
8 Kemble v. Khinelander, 3 Johns. Ins. Co. 9 Gray (75 Mass.) 23. Com-
C. (N. Y.) 130. pare Pt. Gratiot Sand & Gravel Co.
9 Buck v. Chesapeake Ins. Co. 1 v. Hartford Fire Ins. Co. 136 N. Y.
Pet. 151 (26 U. S.) 7 L. ed. 90. Supp. 877, 77 Misc. 221, 41 Ins. L.
10 Graham v. Fire Ins. Co. 48 S. C. J. 1637 (considered under § 2033
195, 59 Am. St. Rep. 707, 26 S. E. herein).
323, 26 Ins. L. J. 744. 13 Kronk v. Birmingham Fire Ins.
11 See § 1987, also § 1916 herein. Co. 9.1 Pa. St. 300, cited as exactly
3408
PARTICULAR REPRESENTATIONS, ETC. § 2032
an insurance thereon is effected, as the sole and unconditional
owner thereof within the meaning of the policy notwithstanding
the insured had made a lease or bill of sale of the property, reserv-
ing title until full payment of the full consideration; and the
insurer has no standing to assert that the transaction was a legal
fraud. The insured may recover from the company the full amount
named in the policy upon the destruction of the property by fire,
although the lessee had partly paid therefor, as such payment did
not transfer to him the title pro tanto.14 Again, one in possession
and having legal title to personal property under a conveyance
by bill of sale absolute on its face, but in fact as security for debts
past due, is, although such bill of sale as between the vendor
and vendee is a mortgage, the sole and unconditional owner of
such property, within the meaning of a contract exempting the
insurer from liability unless the assured is such owner.15 So a
bill of sale of chattels to secure money advanced to pay the pur-
chase price is not a violation of a condition in a policy on the
property that it shall be void if the interest of the insured is
other than unconditional and sole ownership.16 The burden of
proof is upon assurer to show that assured was not the owner of
the insured goods where the defense is that he had misrepresented
the ownership when the policies were issued and did not own them
at the time of the fire; and it is a question for the jury whether
certain bills of sale covered any of the goods insured where there
is evidence contra.17
§ 2032. Interest and title: collateral.18 — If the policy stipulates
that property held in trust, including that held as collateral, must
be insured as such, the assured is under such clause obligated to
disclose such interest as comes within the terms, and where the
assured received a deed of land, absolute in form, to secure him
in point, in Petello v. Teutonia Fire Am. Rep. 325; Johannes v. Fire
Ins. Co. 89 Conn. 175, L.R.A.1915D, Office, 70 Wis. 196, 5 Am. St. Rep.
812, 93 Atl. 137, 45 Ins. L. J. 590, 159, 35 N. W. 298 ; Imperial Fire Ins.
593. Co. v. Dunham, 117 Pa. St. 460, 2
On mortgage or instrument given Am. St. Rep. 686, 12 Atl. 668.
as security as breach of condition as 16 Petello v. Teutonia Fire Ins. Co.
to sole and unconditional ownership, 89 Conn. 175, L.R.A.1915D, 812n,
see note in L.R.A.1915D, 812. 93 Atl. 137.
14 Burson v. Fire Assoc, of Phila. 17 Samaha v. Farmers' Fire Ins.
136 Pa. St. 267, 20 Am. St. Rep. 919, Co. of N. Y. 84 N. J. L. 731, 87 Atl.
20 Atl. 401. 442.
15 Carey v. Liverpool London & 18 See § 1987, also § 1916 herein.
Globe Ins. Co. 92 Wis. 538, 66 N. As to sale of property as collater-
W. 693 ; citing May on Ins. sees. 286, al : alienation, change of title, etc.,
286c ; Hubbard &' Spencer v. Hart- see § 2259 herein.
ford Fire Ins. Co. 33 Iowa, 325, 11
Joyce Ins. Vol. III.— 214. 3409
§ 2033 JOYCE ON INSURANCE
against loss for liabilities assumed or to bo assumed for the grantor,
and gives said grantor an agreement in writing to reconvey when
he should be indemnified, such land is held as collateral security
within the meaning of those words so used, and the nature of
the interest must be disclosed.19 So corporation property held by
;i stockholder as security for advances, and insured by him as his
own. constitutes a breach of a stipulation that the interest must
be stated if the assured is not the absolute owner.20 And if
property is simply held as collateral security for a debt, such fact
will not support findings of absolute ownership under a condition
requiring an "entire, unconditional, and sole ownership" for the
use and benefit of assured;1 nor is assured the sole and uncondi-
tional owner where his only interest and title in and to a land
contract is that he holds it as pledge, by assignment absolute in
form to secure him for money advanced the assignor, but without
any right to possession, the latter retaining and being in exclu-
sive possession at all times and holding the same as vendee of
another, said assignor being the real owner of the contract with
a right which could not be extinguished except by failure to pay,
and by proper proceedings to bar her said right, title and interest.
The policy was therefore void at its inception.2
But one has the ''sole and unconditional ownership" of prop-
erty under an agreement whereby he furnishes another with money
t<t purchase the same, and holds it as security for such advances,
although the other party is to bear one half the expenses of storage,
handling insurance, etc., and the profits and losses are to be
equally borne.3 And where assured retains possession of the
property although he has assigned it as collateral security, said
assignment is not of itself sufficient evidence to preclude recovery.4
§ 2033. Interest and title: contract of purchase. — Where the
policy provides that it shall be void if the interest of the insured
is other than the entire, unconditional, and sole ownership, the
fact thai the insured has no deed of the land, but holds the same
under a contract, and that there is a certain amount due upon
the land, is not inconsistent with such provision.5 But in a case
19 Day v. Charter Oak Fire & Ma- 3 Welch v. Franklin Ins. Co. 23 W.
rine Ins. Co. 51 Me. 91. Va. 288.
20 McCormick v. Springfield Fire 4 Greiner v. Safetv Mutual Fire
& Marine Ins. Co. 06 Cal. 3(51, 5 Pae. Ins. Co. 25 Lancaster L. Rev. 338.
617. 5 Boulden v. Phoenix Ins. Co. 112
1 Henriing v. Western Assur. Co. 77 Ala. 422, 20 So. 587.
Iowa, 319, 42 N. W. 308. On vendee under executory con-
2 Gettelman v. Commercial Union tract as owner where vendor holds
Assur. Co. 97 Wis. 237, 72 N. W. legal title, see note in 20 L.R.A.
627, 27 Ins. L. J. 160. (N.S.) 755.
3410
PARTICULAR REPRESENTATIONS, ETC. § 2034
of personalty, insured's title was required by the policy to be truly
stated therein, otherwise it would be void. The insurance was
to be issued in the name of insured, loss payable to plaintiff.
It appeared, however, that the property had been purchased of
plaintiff by the insured, who gave his notes for some deferred
payments. These notes provided that "delivery of said personal
property is made to the maker hereof, upon the express condition
that the title to the said personal property shall remain in the
payees hereof . . . until this note is paid in full, together with
all the costs of collection." Said notes were unpaid at the time
of loss, and it was held that insured's nondisclosure of his true
title amounted to a false representation avoiding the policy.6 These
questions are, however, more fully considered elsewhere herein.7
§ 2034. Interest and title: conditional sale. — An omission to men-
tion a conditional sale of personal property remaining in the
vendor's possession is not a breach of covenant to state if the
ownership is other than "entire, conditional, and sole ownership;" 8
but if the assured holds such property under a conditional sale,
the provisions of which are not all complied with, he cannot
recover, even though he is described as lessee or bailee, instead of
the conditional owner.9 So a purchaser of property on the instal-
ment plan, with a reservation of title in the seller is not the sole
and unconditional owner thereof.10 And this applies to a policy
on household furniture, which is void as a whole, if a part there-
of is held by insured on the instalment plan.11 Although where
the conveyance is not void, but merely voidable at the election
of the vendor, provided the right to disaffirm is exercised within
a reasonable time, insurer cannot set up a fraud committed on
third parties in order to escape its obligations. It is sufficient
that insured is the legal owner and that his title, so far as the
insurer is concerned, is not conditional.12
As to executory sale: conditional On outstanding contract for sale
sale: option to purchase, etc., see §§ of property as defeating sole and un-
2284 et seq. herein. conditional ownership by vendor, see
6 Ehrsam Machine Co. v. Phoenix note in 52 L.R.A.(N.S.) 670.
Ins. Co. 43 Neb. 554, Gl N. W. 722, "Dumas v. Northwestern Nation-
24 Ins. L. J. 310. al Ins. Co. 12 App. D. C. 245, 40
7 See §§ 2034, 2058 herein. L.R.A. 358, 26 Wash. L. Rep. 213.
8 Carrigan v. Lycoming Fire Ins. n Dow v. National Assur. Co. 26
Co. 53 Vt. 418, 38 Am. Rep. 687. R. I. 379, 67 L.R.A. 479, 106 Am.
As to executory contract of sale: St. Rep. 728, 58 Atl. 999. See § 1931
conditional sale: option contract, herein.
etc.: alienation. See §§ 2284 et seq. 12 Phomix Ins. Co. v. Mitchell, 67
herein. HI. 43.
9 Westchester Fire Ins. Co. v.
Weaver, 70 Md. 539, 5 L.R.A. 478, 17
Atl. 401, 18 Atl. 1034.
3411
§ 2035 JOYCE ON INSURANCE
Again, in case of an oral application the exact condition of the
titel need oot be stated in the absence of a request therefor, and
unless there is some fraudulent, intentional and misleading act
on the part of the applicant recovery is not precluded by his
failure to specifically disclose the nature of his ownership. So that
where insured sold the property with a reservation of titte until
the goods "are fully paid for" he has, within the policy intent,
ilic Legal title and ownership, subject to the right of his conditional
vendee to acquire title by performance of the contract of sale.13
ll i< decided, however, where the vendee is in possession under
a contract of sale with the title reserved to the vendor until satis-
faction of the purchase price, and large payments have been made
on the purchase price, that said conditional vendor is not the sole
and unconditional owner, even though he holds the legal title;
also that the stipulation as to sole, etc., ownership constitutes of
itself a specific inquiry.14
§ 2035. Interest and title: deed as related to title.15— A cove-
nant that the title is by warranty deed does not necessarily import
that it is a title in fee, since it may pass only an estate for years
or a life estate, and where the question was whether the title was
a warranty deed or bond, and the answer was "W. D.," it was
held that this did not imply that insured had a warranty deed.16
So the answer "deed" to the question, "What is your title to or
interest '•> the property?" is not a warranty of a grant in fee of
a freehold estate, but is consistent with any interest originating in
a deed.17 Nor is insured's right to recover defeated by the fact
that his deed, which had been delivered to him, was not recorded.18
And a stipulation as to "sole and unconditional ownership" is not
broken by the fact that the deed of the property is not received
by the assured until after the fire. The assured is none the less
the owner in such case where it appears that the deed was delivered
to another to deliver to him.19 Nor is a representation that assured
13 Brunswick-Balke-Collender Co. Clawson v. Citizens Mutual Fire Ins.
v. Northern Assur. Co. 142 Mich. 29, Co. 121 Mich. 591, 80 Am. St. Rep.
105 N. W. 71 i. 538, 80 N. W. 573, 29 Tns. L. J. 167.
On failure to record conveyance to 18 Baker v. German American Ins.
insured as affecting his sole 'and un- Co. 117 N. Y. Supp. 1104, 133 App.
conditional ownership, see note in 22 Div. 496, 38 Ins. L. J. 1013. See also
L.R.A.fN.S.) 732. Breedlove v. Norwich Union Fire Ins.
"Rosenstock v. Mississippi Home Soc. 124 Cal. 164, 56 Pac. 770, 28
Ins. Co. 82 Misc. 674, :>,:> So. 309. Ins. L. J. 447, aff'g — Cal. — , 54
15 See § 1987, also $ 1916 herein. Pac. 93, 28 Ins. L. J. 86.
16Rockford Ins. Co. v. Nelson, 65 As to records of title, see § 2027
111. 415. See § 204S herein. herein.
"Merrill v. Agricultural Ins. Co. 19 Mattocks v. Des Moines Ins. Co.
73 N. Y. 452, 29 Am. Rep. 184. See 74 Iowa, 233, 37 N. W. 174.
3412
PARTICULAR REPRESENTATIONS, ETC. § 2035
owns the property in fee simple falsified by the fact that there
is no evidence that a deed or other writing transferring the title
was given assured, where there is direct evidence that the land was
acquired by trade by one of the assured and another, and that
upon dissolution of the partnership the latter's interest had been
purchased.20
But a stipulation requiring that any interest other than the
"entire, unconditional, and sole ownership" of the property must
be disclosed, avoids the policy where the ownership is described
by the assured as "his frame dwelling-house" and his only title
is a quitclaim deed from the second mortgagee of the property.1
If, however, the title is derived by quitclaim deed from one not
the owner of the land, and under said deed assured takes posses-
sion and erects an additional building thereon believing that he
is acquiring complete ownership of the buildings, although he
knew that under said deed possession only could be given, and
he continues in use and in possession of the premises up to and
at the time of the fire, he has an insurable interest therein and
the policy is not void by reason of a requirement therein that the
building be on land owned by assured in fee simple; and even
though there is any breach of the condition as to sole, etc., owner-
ship it is waived where the policy was issued in such case with
the agent's full knowledge of the facts.2 Again, an incorrect
description in the deed which is subsequently corrected by a quit-
claim deed operates as a breach of a stipulation that the policy
shall be void if the interest of assured is or shall be "any other
or less than a perfect, legal, and equitable title." 3
Real estate may be sold by parol and the title is good between
the parties, so that the statute of frauds cannot be invoked to
defeat recovery, under the sole and unconditional ownership and
fee simple clauses of a policy, by a claim that insured's property
was not conveyed to him in writing as such a claim can only
be raised and relied on as a defense between the parties to the
sale, and strangers cannot avail themselves of the statute.4
20 Capital City Ins. Co. v. Cald- 3 Diehlman v. Dwelling House Ins.
well, 95 Ala. 77, 10 So. 355. Co. 78 Mich. 141, 43 N. W. 1045.
1 Southwick v. Atlantic Fire & Ma- 4 Cowell v. Phoenix Ins. Co. 126 N.
rine Ins. Co. 133 Mass. 457. Car. 684, 36 So. 184.
2 American Central Ins. Co. v. That statute of frauds is personal
Donlon, 16 Colo. App. 416, 66 Pac. and cannot be availed of by third
249. person, see generally Purdom Naval
On want of title to land where in- Stores Co. v. Western Union Tele-
sured is sole and absolute owner of graph Co. (U. S. C. C.) 153 Fed.
building, see note in 38 L.R.A. (N.S.) 327; Cannon v. Castleman, 164 Ind.
427. 343, 73 N. E. 689.
3413
§§ 2036 2038 JOYCE ON INSURANCE
If assured under a title guaranty insurance conceals facts of
which he has knowledge and which tend to show the invalidity
of his deed, and it is certain that insurance was obtained by him
because he knew that there was at least doubt as to the validity
of his deed, such concealment of facts within assured's knowledge,
when assurer had a right to assume upon issuing the policy that
assured's deed was genuine, is as fraudulent as affirmative mis-
statements, and his conduct is equivalent to a representation
that-, so far as he knew, the deed presented by him was genuine.
It constitutes error, therefore, to direct a verdict for assured in a
suit on the policy.6
§ 2036. Interest and title: devisee: charge created by will. — If
a devisee takes property under a will at a stipulated price from
the other heirs, paying therefor in annual instalments, it is held
a charge created by will upon the land, and an encumbrance upon
the property within the meaning of a clause in the policy against
encumbrances.6
§ 2037. Interest and title: dower right.7 — An inchoate right of
dower may be said to be a title by "deed," the husband's interest
having been acquired by deed.8 And the answer being "fee simple"
to a question as to the title, there is no breach of warranty from
the fact that a contingent right of dower in the premises exists
in the wife of a former owTner, who is still alive, and if the appli-
cation in such case is not a warranty, the policy is not avoided
by a nondisclosure of such contingent dower interest.9
§ 2038. Interest and title: easement in property. — The fact that
an adjoining owner has an easement in the insured property does
not make the interest other than the "entire, unconditional, and
sole ownership." 10 And a mere reference to a party wall will
not preclude recovery where the entire interest in the building
and land was owned by assured exclusive of any other interest
and the building stood on his own land.11 So the easement of
support which an owner of one half of a party wall has in the
6 Vaughan v. United States Title 7 See § 1987, also § 1916 heroin.
Guaranty & Indemnity Co. 122 N. Y. 8 Dacoy v. Agricultural Ins. Co. 21
Supp. 393, 137 App.'Div. 623. Hun (N. Y.) 83.
6 So held in Ronninger v. Dwelling 9 Southern Mutual Ins. Co. v.
House Ins. Co. 168 Pa. St. 352, 31 Kloeber, 31 Gratt. (Va.) 739; Vir-
Atl. 1083. ginia Fire & Marine Ins. Co. v.
As to community property: widow Kloeber, 31 Gratt. (Va.) 749.
sole devisee and legatee in possession 10 Commercial Fire Ins. Co. v. Al-
as executrix, see Raulet v. North- len, 80 Ala. 571, 1 So. 202.
western National Ins. Co. 157 Cal. n Campbell v. Germania Ins. Co.
213, 107 Pac. 292, 39 Ins. L. J. 742, — Mo. App. — , 180 S. W. 389.
752 (considered under § 2042 here-
in).
3414
PARTICULAR REPRESENTATIONS, ETC. § 2039
other half, is covered by a policy of insurance covering his build-
ing supported by such wall, together with its foundations and
his half interest in the wall, and the insurer is therefore liable
for injury to such easement of support by fire in the adjoining
building, although the policy provides that it shall be void if
the interest of the insured is other than unconditional and sole
ownership, or if the subject of insurance be a building on ground
not owned by the insured in fee simple.12
§ 2039. Interest and title: equitable interest.13 — A representa-
tion of ownership is satisfied where there is an equitable title or
estate ; 14 and an equitable owner is an entire and sole owner
under the sole, etc., ownership clause,15 or under said clause and
the requirement that he shall have title in fee simple, where he has
possession and is entitled to the legal title.16 So also, where the
persons composing an insured unincorporated concern have an
absolute equitable ownership free from all claims and conditions,
notwithstanding assured has no corporate or other existence enabling
it to take a conveyance.17 Nor is a representation false, that an
applicant for insurance is the "owner" of premises to be insured,
if he is the equitable owner, although he has no legal title.18
So where assured is entitled equitably to immediate and absolute
ownership it is sufficient, for he need not be vested with the legal
title to constitute an unconditional sole owner ; 19 and although
there is an outstanding legal title in another, still if assured has
the equitable title, the entire beneficial ownership and is in undis-
puted possession he has the sole and unconditional ownership ; 20
12 Nelson v. Continental Ins. Co. On vendee under executory con-
182 Fed. 783, 105 C. C. A. 215, 31 tract as owner when vendor holds
L.R.A. (N.S.) 598. legal title, see note in 20 L.R.A.
When answer as to location of (N.S.) 775; on vendor's lien as affect-
walls and openings therein, not a ing sole and unconditional owner-
warranty, see Phoenix Ins. Co. v. ship, note in 7 L.R.A. (N.S.) 627.
Padgitt, — Tex. Civ. App. — , 42 S. 15 Modlin v. Atlantic Fire Ins. Co.
W. 800. 151 N. Car. 35, 65 S. E. 605.
When rider does not abrogate war- 16 Arkansas Ins. Co. v. McManus,
ranty as to division walls, see North- 86 Ark. 115, 110 S. W. 797.
rup v. Pisa, 60 N. Y. Supp. 363, 43 n Missouri Savings Assoc, v. Ger-
App. Div. 284, aff'd 167 N. Y. 578, man-American Ins. Co. 73 Mo. App.
60 N. E. 1117. 158, 1 Mo. App. Rep. 90.
13 See § 1987, also § 1916 herein. 18 Wainer v. Milford Mutual Fire
Whether equitable title must be Ins. Co. 153 Mass. 335, 11 L.R.A.
disclosed, see § 1859 herein. 598, 26 N. E. 877.
As to transfer of equitable title; 19 Exchange Underwriters Agency
alienation or change of title, see of the Royal Exchange Assur. of
§ 2275b herein. Lond. v. Bates, 195 Ala. 161, 69 So.
14 Pennebaker v. Tomlinson, 1 956.
Tenn. Ch. 598. 20 Hankins v. Williamsburg City
3415
§ 2040 JOYCE ON INSURANCE
nor does assured misrepresent his title as equitable although he
has pledged his contract for the land as security for a debt; l and
a husband's interest in property bought partly with money advanced
by his wife's father satisfies a representation of ownership.2 Again,
even though the entire consideration, under a contract of purchase
of real estate has not been paid, yet if assured has the equitable
title and has been in possession for more than twenty-one years
he has an insurable interest in the buildings situate on -aid land
notwithstanding the sole. etc.. ownership clause and the stipula-
tion as to buildings on land not owned by assured in fee simple.3
Nor does a mere contract to convey land at a future time upon
the performance of certain acts by the purchaser create an equitable
title in him and render the title of the proposed vendor less than
a sole and unconditional ownership within the meaning of a lire
insurance policy.4
But where the condition is that any interest other than the
'"'entire, unconditional ownership" must be represented and ex-
pressed in the policy, and the answer to the question is not full
and complete, and tends to mislead, and assured has only an
equitable interest and possession, the policy is void. The question
in this case was. "Is your title to the property absolute?" and
cd answered, "My deceased wife held the deed.'* The appli-
cation was made a warranty, and it was stated that assured had
disclosed all the facts in relation to the property so far as known.5
§ 2040. Interest and title: fraudulent as against creditors.6 —
The fact that the title in the property i- fraudulent and void as
against creditors does not constitute a defense of misrepresentation
whereby the company may evade liability.7 Nor, under the uncon-
ditional, sole ownership clause, can assurer successfully defend
on the ground that the insured premises have been conveyed to
the insured without consideration, and for the fraudulent purpose
of placing them beyond the reach of the grantor's creditors.8
Fire Ins. Co. 96 Kan. 706. 153 Pac. of property as defeating sole and un-
491. conditional ownership by vendor, see
aBom v. Home Ins. Co. 120 Iowa, note in 52 L.R.A. I N.S.'i 670.
299. 94 N. W. 849, 32 Ins. L. J. 737. BKohrbach v. Germania Fire Ins.
2 Farmers' Mutual Fire Ins. Co. v. Co. 62 N. Y. 47. 20 Am. Rep. 451.
Foreman, 35 Mich. 481. 6 See § 1.-S7. also § 1916 herein.
3 Little v. Southwestern National 7 Burson v. Fire Assoc. 136 Pa. St.
Ins. Co. 20 Ohio Dec. 315, 85 Ohio 267, 20 Am. St. Rep. 919, 20 Atl.
L. Bull. 315 (new trial granted plain- 401. 26 Week. Not. Cas. 408.
tiff). 8 Rochester Loan & Banking Co. v.
4 National Fire Ins. Co. v. Three Liberty Ins. Co. 44 Neb. 537, 48 Am.
States Lumher Co. 217 111. 115, 107 St. Rep. 745. 62 N. W. 877. See also
Am. St. Rep. 239. 75 N. E. 450. Groce v. Phoenix Ins. Co. 94 Miss.
On outstanding contract for sale 201, 22 L.R.A. (N.S.) 733n, 48 So.
3416
PARTICULAR REPRESENTATIONS, ETC. §§ 2041, 2042
§ 2041. Interest and title: homestead.9 — If an inquiry as to title
is answered "homestead," this is not a warranty of an "absolute
title in fee," and will not avoid the policy, although at the time
the title was still vested in the government, as insurer knew.10
Nor, under the unconditional, sole ownership and ground owned
in fee simple clauses, is there such failure of title as to defeat
recovery where the property insured is situated upon a govern-
ment homestead owned and claimed by the insured, in which
the legal title remains in the United States government, and on
which final proof is not made until after the loss by fire, since
in case of loss the entire loss falls upon the homesteader, and the
government has no interest in the property destroyed.11 And
notice of the actual facts as to the title and that it was a home-
stead entry and not an ownership in fee may be imputed to insurer
and operate as an estoppel against it, by reason of information
given its agent by assured and also by the fact that the application
showed the nature of the title.12
But the fact that assured may have an insurable interest in a
homestead will not aid him where he has not the sole and uncon-
ditional ownership called for by that clause in the policy, for
the court will not substitute a different contract in such case and
make a new agreement contrary to the terms agreed upon.13
Accordingly, a husband cannot insure as sole and unconditional
owner of the homestead, title to which is in his wife, and when loss
occurs abandon the contract and recover on the theory that he
had an insurable interest in the property.14
§ 2042. Interest and title: joint owner: undivided interest.15 —
(a) If a policy of insurance is underwritten on the entirety of a
298, 38 Ins. L. J. 476; Baker v. Ger- n Allen v. Phoenix Assurance Co.
man-American Ins. Co. 117 N. Y. 12 Idaho, 653, 8 L.R.A.(N.S.) 903,
Supp. 1144, 133 App. Div. 496, 38 88 Pac. 245.
Ins. L. J. 1013; Insurance Co. of 12 Queen of Arkansas Ins. Co. v.
Tennessee v. Waller, 116 Tenn. 1, Taylor, 100 Ark. 9, 138 S. W. 990.
95o ?f Wo' ?}h 4^ In;KL- J' 83°- See Martin v. Fidelity Ins. Co. 119
See § 1987, also § 1916 herein. Iowa> 570) 93 N w ggo
As to homestead : property trans- u Bacot v> phenix Ins. Co 96 Mi
ferred to wife: alienation, etc., see 223> 25 L.RA>(KS>) 1226> 50 So.
As to ti3£ for purpose of insur- 72^9 Ijf L' J" 214< 22°, nr „
ance, of house on government land " B*f0^ y- Pll8mx Ins- Co- 96 Miss-
under homestead entry, as within sole *23> 2o L-R-A.(N.S.) 1226. 50 So.
and unconditional ownership clause ' ' ^9 Ins. L. J. 214.
in policy, see note in 8 L.R.A.(N.S.) 15 See § 1987, also § 1916 herein.
903. How far undivided interest in
10 St. Paul Fire Marine Ins. Co. property is complete or full owner-
v. Neidecken, 6 Dak. 494, 43 N. W. ship, see note in 18 L.R.A. 481.
696« As to partition of insured prop-
3417
§ 2042 JOYCE ON INSURANCE
ship, evidence of a sole ownership is held inadmissible to contra-
dict the ship's papers which show a joint ownership, nor may it be
proven that they are wrong and founded on mistake.16 And if a
policy is effected by one on property as his own, which in fact
belongs to him with others, it is such a fraud as avoids the
contract." So a statement that his interest is absolute, made by
the assured, avoids the policy where the interest is held by him-
self and his wife under the same deed, and the estate would on
his death go to his wife by survivorship; the warranty in this
case was that the assured would not omit to state any material
fact.18 The insurance is also void where the owner of an undi-
vided one-half interest in a building states in his written applica-
tion for insurance that he is the sole and unconditional owner
of the building, even though such applicant is sincere in making
such misstatement, as his co-owner has verbally promised to convey
to him upon the payment of a certain sum.19 And an undivided
interest in the property is not an ownership in fee of the land.20
Again, a stipulation voiding the policy if assured's interest is*
other than sole and unconditional ownership or if the subject
of insurance is a building on ground not owned by assured in fee
simple does not as to its second part apply to a dwelling house
constituting real estate as where it is built on a farm for farm
purposes for such latter condition refers to land tenure; and as
to the first part of the stipulation an owner of an undivided five-
sixths interest in the land on which said dwelling house is situate
is not such sole owner unless it is intended to stipulate about a
land title; and where he has no legal or equitable rights, at the
time the policy is issued, to have the land on which the building
is located, alloted to him, a subsequent allotment thereof does not
aid him as to the forfeiture where he also had knowledge of the
extent of his interest. In such case, however, if the forfeiture
is waived recovery may be had under the policy.1 So in case a
crty; alienation or change of title, J. 374. See also Palatine Ins. Co.
see" § 2283 herein. Ltd. v. Diekerson, 116 Ga. 794, 43
16Ohl v. Eagle Ins. Co. 4 Mason S. E. 52; Sisk v. Citizens Ins. Co. 16
(U. S. C. C.) 172, 390, Fed. Cas. No. Ind. App. 565, 43 N. E. 804, 26 Ins.
10,472. L. J. 369; Virginia Fire & Marine
17 Monaghan v. Agricultural Fire Ins. Co. v. Cummings, — Tex. Civ.
Ins. Co. 53 Mich. 238, 18 N. W. 797. App. — , 78 S. W. 716; Fire Assoc.
18 JFAnn Ins. Co. v. Resh, 40 Mich, of Phila. v. Calhoun, 28 Tex. Civ.
241, 44 Mich. 55, 38 Am. Rep. 228, App. 409, 67 S. W. 153.
6 N. W. 114. See Bakhaus v. Cale- 20 Scottish Union & National Ins.
donian Ins. Co. 112 Md. 676, 77 Atl. Co. v. Petty, 21 Fla. 39!).
310. 39 Ins. L. J. 1431 (waived). J Scott v. Liverpool & London &
19 Liverpool & London & Globe Ins. Globe Ins. Co. 102 S. Car. 115, 86 S.
Co. v. Cochran, 77 Miss. 348, 78 Am. E. 484.
St. Rep. 524, 26 So. 932, 29 Ins. L.
3418
PARTICULAR REPRESENTATIONS, ETC. § 2042
policy provides that it shall be void unless the exact interest of
the insured is truly stated, a statement by him that he is the
absolute, unqualified, and undivided owner of the property insured
vitiates the policy, when there are others interested in such prop-
erty to the extent that they are to perform certain services in
relation thereto, and participate in the proceeds of the sale thereof.2
If the policy in conformity with a statutory requirement provides
that it shall be void unless otherwise provided by agreement indorsed
thereon or added thereto if the interest of assured be other than
unconditional and sole ownership, or if the subject of insurance
be a building on ground not owned by assured in fee simple and
insured's interest is less than sole ownership or less than fee simple
the policy is void unless the same be indorsed, etc., upon the policy;
and this applies where the land upon which the insured house
is situate is vested in others in part.3
(b) If, however, assured is the sole and absolute owner of the
building insured there is no breach of a warranty that he is the
"sole and undisputed owner of the property to be insured" even
though he owned only an undivided half interest in the lot upon
which the building was situate.4 Nor is a man devested of the
"sole and unconditional" ownership of property by a decree of
divorce awarding possession thereof temporarily to his wife and
reserving the question of division for future determination.5 So
the owner of an undivided fourth of land, who is merely a life
tenant of the rest, to which his claim of ownership in fee is then
in litigation, does not, by stating that he is the unconditional
owner of the land, make a material misrepresentation which will
avoid a policy providing that the application must disclose the
true character of the title and the fact of any litigation concerning
it, where the building insured wras remodeled from a worthless one
at his owrn expense, and he would therefore, in partition, be entitled
to it without estimating its value, and to the ground on which it
stood; and where it is provided by statute that neither misrepre-
sentations nor warranties shall affect the right to recover unless
material to the risk, or fraudulent.6
2 Capital Citv Ins. Co. v. Autrey, 31 Okla. 208, 38 L.R.A.(N.S.) 426
105 Ala. 269, 53 Am. St. Rep. 121, (annotated on want of title to land
17 So. 326. where insured is sole and absolute
3 Oatman v. Bankers' & Merchants' owner of building) 120 Pac. 948, 41
Mutual Fire Relief Assoc. 66 Oreg. Ins. L. J. 753.
388. 133 Pac. 1183, 42 Ins. L. J. 5 Hix v. Sun Ins. Co. 94 Ark. 485,
1535, 134 Pac. 1033; L. 1907 (L. O. 140 Am. St. Rep. 138, 127 S. W. 737.
L. sec. 4666), as am'd by L. 1911, 6 Kenton Ins. Co. v. Wigginton, 89
pp. 279-284. Ky. 330, 7 L.R.A. 81, 12 S. W. 668.
4 Nance v. Oklahoma Fire Ins. Co.
3419
§ 2042
JOYCE ON INSURANCE
(c) In case of community property where insured was in posses-
sion as executrix of her husband's estate and she was also the
sole devisee and legatee under his will, she is the sole and uncon-
ditional owner as she is really vested with the title and the entire
loss is home by her, and this is so held even though at the time
of the lire there had been no distribution of the estate although
the time In present claims had expired, but thereafter all the prop-
erty of the estate was distributed to her.7 Bui where property was
insured by two persons and one of them, who was a eoexeeutor of
his father's estate, purchased as trustee with funds of the estate
a half interest in said property without consulting either his co-
executor or the widow his interest is less than the sole and uncon-
ditional ownership, and recovery cannot.be had by him where the
widow has under the will an equal title to the corpus of the
estate with the exenitors and by the terms of said will could only
be deprived thereof by her own act,8
(d) In ease of a tenant by the entirety while insured's answer
"deed'' to an inquiry concerning his title did not meet the require-
ments of the policy condition as to sole, absolute ownership, still
insurer was put on inquiry as to the nature of his title so that it
7Kanlet v. Northwestern National
Ins. Co. 157 Cal. 213, 107 Pac. 203.
39 Ins. L. J. 742, 752. The cour1:,
per Melvin, J., said: "Here the
plaintiff was individually the owner
of the property subject simply to her
right and duty as executrix to hold
temporary possession for the pur-
poses of administration. As a mat-
ter of fact she had the only insurable
interest and her title was never dis-
turbed, as is conclusively shown by
the decree of distribution afterward
made. In the light of subsequent
events, it is clear that, if it could be
said that technically she was not the
sole and unconditional owner of the
property because of her right to its
temporary possession as executrix,
she had the insurable interest in it,
and no one else had any title to it
and defendant suffered no prejudice
by her representation as to owner-
ship. It is well established in this
state that title to property vests in
the heir or devisee from the moment
of the death. of the ancestor or tes-
tator. ... In that respect there
is no difference under our law be-
tween personal and real property.
. . . Here the entire loss was sus-
tained by the plaintiff, and it seems
to be a narrow view that would de-
feat the claim on the ground that
within the contemplation of the pol-
icy she was not 'the sole and uncon-
ditional owner.' ... In the case
at bar there was no actual nor con-
structive fraud, no intentional mis-
representation nor concealment, no
inquiry on the part of the insurance
company. The plaintiff was really
vested with the title, the entire loss
was sustained by her, and it cannot
be held that the policy was void by
virtue of the sole and unconditional
ownership clause."
8 Howard v. Horticultural Fire
Relief, 77 Ore. 349, 357, 150 Pac.
270, 151 Pac. 476 ; sec. 4666, L. O. L.
as am'd by L. 1911, p. 279; Howard
v. German-American Ins. Co. 77
Oreg. 359, 151 Pac. 477; Howard v.
Hartford Ins. Co. 77 Oreg. 360, 151
Pac. 477. See Rochester German Ins.
Co. v. Schmidt, 1(52 Fed. 447, 89 C.
C. A. 333, s. c. 175 Fed. 720, 722.
3420
PARTICULAR REPRESENTATIONS, ETC. § 2043
will be assumed that the policy insured whatever insurable interest
he had so that his right to recover will not be defeated on the
ground that he had no inheritable title and that his wife had a
right of survivorship of which he could not devest her and might
become sole owner in fee at his death. The reverse of this last
proposition would also be true for assured's estate might ripen into
a fee.9
§ 2043. Interest and title: judgment creditor: execution sale:
foreclosure sale: sheriff's sale.10 — A judgment creditor to whom
the real estate .has been set off on execution may truly represent
the title as in himself, although the time limited for redemption
by the debtor is unexpired.11 Although it is held in another case
that if property has been sold on execution sale under a judgment,
the nondisclosure thereof avoids the policy under a requirement
that any interest other than the "entire, unconditional, and sole
ownership" of property must be expressed in the policy.12 So the
assured is the absolute owner where his title rests upon a certificate
of purchase under a foreclosure sale, although the time allowed
by law for redemption has not elapsed and the final deed in fee
is not received till after the loss. The deed in such case relates
back to the date of sale and the certificate, and vests the full
legal title from that time, which in this case was anterior to the
date of the policy. The condition in the policy was as follows:
''If the interest in the property to be insured be a leasehold, trustee,
mortgagee, or reversionary interest, or other interest not absolute,
it must be represented to the company, and expressed in the policy
in writing, otherwise the insurance shall be void." 13 If, how-
ever, the grantee of a deed of property subject to a mortgage does
not record her conveyance until after foreclosure proceedings are
commenced, and after sale under the judgment but before the
time limit for redemption expires she obtains insurance upon the
property which is destroyed before the time within which she
was entitled to redeem, and she never redeems, she is not the sole
and unconditional owner, such a requirement as to ownership may,
9 Clawson v. Citizens Mutual Fire 12 Reaper City Ins. Co. v. Bren-
Ins. Co. 121 Mich. 591, 80 Am. St. nan, 58 111. 158, 11 Am. Rep. 54.
Rep. 53S, 80 N. W. 573, 29 Ins. L. J. 13 Gaylor v. Lamar Fire Ins. Co.
167. 40 Mo. 13, 93 Am. Dec. 289. See
10 See § 1987, also § 1916 herein. Phenix Ins. Co. v. Smith, 9 Kan.
As to execution sale: foreclosure App. 828, 61 Pac. 501 (policy not
sale, etc.: alienation, change of title, forfeited). Examine Perry v. Lon-
etc, see §§ 2270 et seq., 2277 et seq. don Assur. Corp. 167 Fed. 902, 93
herein. C. C. A. 302 (policies held avoided).
11 Clapp v. Union Ins. Co. 7 Fost.
(27 N. H.) 143.
3421
§ 2044 JOYCE ON INSURANCE
however, be waived, and assured has an insurable interest which
will support" an action.14 In another case where the company's
charter provided for a lien againsl all buildings insured to the
amount of the deposit note, and the insured disclosed the property
as hi- own. when in fact his title was under a tax -ale coupled
with a foreclosure title, and it appeared that there was an out-
standing part interest in the mortgage with which the holder had
oever parted, the poliey was held void.15 But a purchaser at
sheriff's sale may truly declare himself to he the owner of the
property, although the sheriff's deed has not at the time of such
declaration been acknowledged.16 The assured, however, has not
mi "absolute interest" in the property where it has been bought
by another for a company at a sale under mechanic's lien pro-
ceedings, which are void, nor is the assured aided by the fact
that the property stands in his name, and that the first purchaser
afterward acquires title under an execution sale.17 Where the
insured had recently purchased the property at a judicial sale,
and this was known to the insurer when the poliey was assigned
to the insured, and the sale was afterward confirmed, a clause
requiring the assured to have sole and unconditional ownership is
not violated;18 although one who has purchased property at a
judicial sale, hut whose bid has not been ratified, nor the sale
confirmed by the court, has not an unconditional and sole interest
therein.19
§ 2044. Interest and title: leasehold interest: building on leased
ground.20 — A warranty of an "entire, unconditional, and sole owner-
14 Breedlove v. Norwich Union Fire Ins. Co. 20 N. Dak. 316, 30 L.R.A.
Ins. Soc. 124 Cal. 164, 56 Pae. 770, (N.S.) 539 (insured held under sher-
28 Ins. L. J. 447, aff'g — Cal. — , 54 itT's certificate under mortgage fore-
Pae. 93, 28 Ins. L. J. 86 (where it closure sale: case where insurer held
v. as held that she was sole and uncon- estopped by agent's knowledge).
ditional owner during the period 17 Porter v. A\\ na Ins. Co. 2 Flip.
within which she had a right to re- (U. S. C. C.) 100, Fed. Cas. No.
deem). 11,286.
15 Pinkham v. Morang, 40 Me. 587. . 18 Morotock Ins. Co. v. Pankey, 91
See American Ins. Co. v. Danne- Va, 259, 21 S. E. 487.
hower, 89 Ark. Ill, 115 S. W. 950, 19 Hartford Fire Ins. Co. v. Keat-
38 Ins. L. J. 506 (evidence to estab- ing, 86 Md. 130, 63 Am. St. Rep.
lish tax sale held insufficient) ; 499, 38 Atl. 40.
Minims v. Humboldt Fire Ins. Co. 20 See § 1987, also § 1916 herein.
226 Pa. 358, 75 Atl. 607 (property Lease as encumbrance: when lease
sold as unseated land by county treas- not a chattel mortgage, see § 2022
urer for taxes; case where assurer herein.
estopped). As to lease of insured property:
16 Susquehanna Mutual Fire Ins. alienation, change of title, etc., see
Co. v. Staats, 102 Pa. St. 529. See § 2258 herein.
Leisen v. St. Paul Fire & Marine
3422
PARTICULAR REPRESENTATIONS, ETC. § 2044
ship" is not complied with, and the policy is void, where assured
is only a lessee or bailee and does not disclose such interest; * and
so whether the concealment is by design or mistake.2 And a
lease with the lessee's option to purchase does not vest him with
the fee simple title to the land on which the insured building
stood: and where no agreement to the contrary is indorsed upon
the policy or added thereto in compliance with a statutory require-
ment the policy is void.3 So, although if the assured declares that
the title in fee to the land on which the building stands is in
him. and it stands on leased ground, the warranty of the truth
of the statement is broken,4 especially so if there is a provision
that if the property stands on leased ground it must be so described,
otherwise it will not be considered insured.5 Again, acceptance,
without reading it, of a fire insurance policy issued upon parol ap-
plication, without any representation as to title, which contains a
provision that, except in case of an. agreement indorsed on or
added to the policy it shall be void if the subject of insurance
be a building on ground not owned by the insured, is binding
upon the applicant ; and he cannot recover for a loss if the build-
ing is on leased property, which fact was not known to the insurer
or its agent.6
But where under a like provision as the above, and the addi-
tional condition avoiding the policy in case of any change in
title or possession, the fact that the assured had leased the prop-
erty for a term of years, without stating the same in the policy.
does not avoid it,7 And if only a leasehold interest is insured,
the provision that the policy shall be void if the insured is not
the sole owner of the property does not apply.8 So where the
lessee for a term agreed to keep the property insured for the lessor's
benefit, and described the building as "his," loss payable, if any.
1 Mount Leonard Milling Co. v. 5 Kibbe v. Hamilton Mutual Ins.
Liverpool & London & Globe Ins. Co. Co. 11 Gray (77 Mass.) 163.
25 Mo. App. 259; Brown v. Com- 6 Wvandotte Brewing Co. v. Hart-
mereial Fire Ins. Co. 86 Ala. 189, 5 ford Fire Ins. Co. 144 Mich. 440, 6
S. R, 500; Mutual Assurance Co. v. L.R.A.(N.S.) 852, 108 N. W. 393.
Mahon, 5 Call. (Va.) 517: Mers v. 'Lycoming Fire Ins. Co. v. Ha-
Franklin Ins. Co. 68 Mo. 127. vens, 95 U. S. 242, 24 L. ed. 473;
2 Mutual Assurance Co. v. Mahon, Duncan v. National Mutual Fire Ins.
5 Call. (Va.) 517. Co. 44 Colo. 472, 20 L.R.A.(N.S.)
3Finlon v. National Union Fire 340, 98 Pac. 634; Dolliver v. St.
Ins. Co. 65 Oreg. 493, 132 Pac. 712, Joseph Ins. Co. 128 Mass. 315, 35
42 Ins. L. J. 1141; L. 1907 (L. O. L. Am. Rep. 378.
sec. 4666), as am'd by L. 1911, pp. 8 Philadelphia Tool Co. v. British
279-284 American Assur. Co. 132 Pa. St. 236,
4 Cuthbertson v. North Carolina 19 Am. St. Rep. 596, 19 Atl. 77, 25
Home Ins. Co. 96 N. C. 480, 2 S. E. Week. Not. Cas. 370.
258.
3423
§ 2044 JOYCE ON INSURANCE
to the lessors, it was held that there was no warranty of title, and
recovery could he had l»y the lessors.9 The burden of proving that
the insurer had knowledge that the building insured was upon
leased premises must also he assumed by the assured where the
policy's conditions make it void if the subject insured is upon
premises on which the assured has not title in fee simple.10 If the
buildings, although standing on leased ground, are the property of
insured, and he has a right to remove them at the end of the
I, Tm. such interest need not he disclosed, as it is not a leasehold
interest, under a provision that if the interest he a leasehold or
other interest not absolute it must be expressed in the policy.11
A policy of insurance on a building was conditioned to be void
unless "the interest of the assured, whether as owner, lessee, or
otherwise, in the property shall he truly stated in the policy." The
building was built by the assured upon land leased by them for
a term of years, and under a provision that at the expiration of
their lease the building should be delivered up to the lessor. The
policy described the building as "their two-story brick building,
situated on leased land," and in the proof of loss which was sworn
to they stated that the building belonged to them, and that no
one else had any interest in it. It was held that the policy was
not avoided for insufficient description of interest.12 Where an
agent when taking an application for insurance is informed that
the building to be insured belongs to the assured but is situated
on leased property, and subsequently issues and delivers the policy,
the insurer is estopped from relying on a condition therein that
it, unless otherwise provided by agreement indorsed thereon or
added thereto, shall be void, if the subject of insurance he a build-
ing on the ground not owned by the insurer in fee simple, although
the policy further provides that no officer, agent, or other repre-
sentative shall have power to waive any provision or condition
therein except such as by the terms of the policy may be the sub-
ject of an agreement, indorsed thereon or added thereto, and as
1o such provisions and conditions, no officer, agent or representative
shall have power or be deemed to have waived such provision or
condition unless such waiver shall be in writing upon or attached
thereto, nor shall any provision or permission affecting insurance
under this policy exist or be claimed by the insured unless so
written or attached.13
9 Lawrence v. St. Mark's Ins. Co. n Hope Mutual Ins. Co. v. Bro-
43 Barb. (N. Y.) 47!). laskey, 35 Pa. St. 282.
10 Wyandotte Brewing Co. v. Hart- 12 Fowle v. Springfield Tns. Co. 122
ford Firo Ins. Co. 144 Mich. 440, G Mass. 191, 23 Am. Rep. 308.
L.R.A.(N.S.) 852, il5 Am. St. Rep. "Johnson v. iEtna Ins. Co. 123
458, 108 N. W. 393. Ga. 404, 107 Am. St. Rep. 92, 51 S.
3424
PARTICULAR REPRESENTATIONS, ETC. § 2045
§ 2045. Interest and title: lien.14 — An omission to mention a lien
is not a breach of a covenant to slate if the ownership is other
than an "entire, unconditional, and sole ownership." 15 So one
holding real estate under a conveyance in fee is sole and uncon-
ditional owner, within the meaning of a fire insurance policy,
notwithstanding he owes a portion of the purchase price, for
which the statute gives a vendor's lien,16 nor under the same cove-
nant is there a breach when the assured is a buyer of goods under
a bill of sale reserving to the seller a lien for a portion of the
purchase money.17 So a condition that any interest in the property
insured, "not absolute or less than a perfect title," must be repre-
sented and expressed in the policy, is not broken by the existence
of a lien for purchase money reserved in the deed of the premises.18
E. 339. See §§ 439, 515 et seq., 563 14 See § 1987, also § 1916 herein,
et seq. herein. As to encumbrances: liens, see §§
See further the following cases: 2020, 2021 herein.
German Fire Ins. Co. v. Herbertson, As to clause "encumbrance in any
49 Colo. 217, 112 Pac. 690, 40 Ins. way:" liens created by operation of
L. J. 477 (waiver: judgment for law: alienation or change of title,
plaintiff) ; National Mutual Fire Ins. etc., see § 2257 herein.
Co. v. Duncan, 44 Colo. 472, 20 As to judgments : mechanic's lien :
L.R.A.(N.S.) 340, 98 Pac. 634, 38 judgment lien: alienation, etc., see
Ins. L. J. 189 (insured's title was § 2274 herein.
ninety-nine year lease: waived) ; At- 15 Planters Mutual Ins. Co. v.
lanta Home Ins. Co. v. Smith, 136 Hamilton, 77 Ark. 27, 90 S. W. 283
Ga. 592, 71 S. E. 902 (location of (vendor's lien); Connecticut Fire
buildings on leased ground: waived) ; Ins. Co. v. Colorado Leasing, Mining
Springfield Fire & Marine Ins. Co. & Milling Co. 50 Colo. 428, 116 Pac.
v. Price, 132 Ga. 687, 64 N. E. 1074 164, 40 Ins. L. J. 717 (lien for
(waived) ; Wyandotte Brewing Co. taxes) ; Kennedy v. London & Lan-
v. Hartford Fire Ins. Co. 144 "Mich, cashire Fire Ins. Co. 157 Mich. 411,
440, 115 Am. St. Rep. 458, 6 L.R.A. 122 N. W. 134 (tax liens) ; Insurance
(N.S.) 852, 108 N. W. 393, 35 Ins. Co. of North America v. Pitts, 88
L. J. 798 (application oral: judg- Miss. 587, 7 L.R.A. (N.S.) 627, 41
ment for insurer : no waiver) ; Cowell So. 5; Phoenix Ins. Co. v. Swann,
v. Phoenix Ins. Co. 126 N. Car. 684, — Tex. Civ. App. — , 41 S. W. 519
36 S. E. 184 (insurer estopped) ; (vendor's and mechanic's lien) ; Car-
Bush v. Hartford Fire Ins. Co. 222 rigan v. Lycoming Fire Ins. Co. 53
Pa. 419, 71 Atl. 916, 38 Ins. L. J. Vt. 418, 38 Am. Rep. 687. See §
511 (insured goods held under lease, 2047 (after note 7) herein,
with possession for two years, with 16 Insurance Co. of North America
privilege of retaining them five years v. Pitts, 88 Miss. 587, 7 L.R.A. (N.S.)
longer with right to sell, pay or re- 627 (annotated on vendor's lien as
turn: held, assured sole, etc., owner) ; affecting sole and unconditional own-
Fosmark v. Equitable Fire Assoc. 23 ershirj), 41 So. 5.
S. Dak. 102, 120 N. W. 777 (agent "Manhattan Ins. Co. v. Barker, 7
informed that building on leased Heisk. (54 Tenn.) 503.
ground, also that there was chattel 18 Wooddy v. Old Dominion Ins.
mortgage: judgment for insured; in- Co. 31 Gratt. (Va.) 362, 31 Am. Rep.
sured estopped). 732.
Joyce Ins. Vol. III.— 215. 3425
§ 2046 JOYCE OX INSURANCE
Nor does the existence of an undisclosed vendor's Lien upon insured
property and the commencement of proceedings, with the knowl-
edge of the insured, to enforce it. avoid a policy stipulating that
"this entire policy shall be void if the interest of the insured be
other than unconditional or sole ownership, or if the subject of
insurance be a building on ground not owned by the insured in
fee simple, or if, with the knowledge of the insured, foreclosure
proceedings be commenced with notice given of sale of any prop-
erty covered by the policy by virtue of any mortgage or trust
deed."19
In an Oklahoma case, however, where there was a claim that
the unconditional, sole ownership clause was violated in that there
was a lien against the property when it was insured, and a waiver
was claimed by insured, a judgment for plaintiff below was reversed
and the case remanded for a new trial.20
§ 2046. Interest and title: minor child's interest.1 — Where one
insures the property as his, and does not disclose the fact that seven-
eighths of the land is owned by his minor child, of whom he is the
natural tutor, such omission is a breach of the covenant to state if
the ownership is other than the "entire, unconditional, and sole
ownership" for the use and benefit of assured.2 So, where it was
represented that C, the widow of D., was the owner, and the policy
was issued to her. loss payable to the mortgagee, and the name was
changed, by reason of a mistake, from C. to E., a minor child
three years old, without any general guardian, but at the time
of making the alteration the same statement as to ownership was
made, it was held such a misrepresentation as avoided the policy,
notwithstanding a provision therein that it should not be invali-
dated, as to the mortgagee's interest, by any act of the mortgagor
or owner.3 Where a widow insures property belonging to the minor
hoii's of her deceased husband, making the application in their
behalf, they having no guardian, wherein she states that 1 hex-
own the property in fee simple and that it is unencumbered, the
onlv claim against the property being her dower interest, his
knowledge is the knowledge of the company, and binding upon it,
and it cannot repudiate the contract after a loss occurs; nor is such
policy forfeited by the fact that she subsequently insures her dower
19 Insurance Cos. v. Estes, 106 (vendor's lien : policy void: condition
'['etui. 472, 82 Am. St. Rep. 892, <>J was: "entire, unconditional, unen-
5. \Y. 14!). cumbered, and sole ownership").
20 Home Ins. Co. v. Ballard, 32 x See § 1987, also § 1910 herein.
Okla. 723, 124 Pac. 31(i, 41 Ins. L. 2 Adema v. Lafayette Fire Ins. Co.
J. 1468. See also Wrigh1 v. Hart- 36 La. Ann. 660.
ford Fire Ins. Co. 54 Tex. Civ. App. 3 Graham v. Fireman's Ins. Co. 87
6, 118 S. W. 191, 38 Ins. L. J. 710 N. Y. 69, 41 Am. Rep. 348.
3426
PARTICULAR REPRESENTATIONS, ETC.
§ 2047
interest in the properly in another company. Tn order to assert
a forfeiture of an insurance policy on the ground of double insur-
ance, the second policy must have been made to the same persons
mentioned in the first policy, and on the same interest in the same
policy.4
§ 2047. Interest and title: mortgage: mortgagor and mortgagee.5
— As a general rule, a warranty of ownership or of sole, entire, and
absolute ownership, or of absolute interest in the property, is not
broken by the failure of a mortgagor to mention the fact that an
undisclosed mortgage exists, unless there be specific inquiry ; 6 nor
is a chattel mortgage a breach of a condition that the policy shall
be void if the assured is not the "sole and unconditional owner,"
and does not disclose such fact, although by statute the legal title is
in the mortgagee.7 So it is declared in a Connecticut case that it
is generally held that outstanding mortgages and liens do not con-
4Haire v. Ohio Farmers' Ins. Co. lie Fire Ins. Co. 32 Hun (N. Y.)
93 Mich. 481, 32 Am. St. Rep. 516, 365.
53 N. W. 623. Texas. — Burlington Fire Ins. Co.
5 See § 1987, also § 1916 herein. v. Coffman, 13 Tex. Civ. App. 499,
As to disclosure of interest by 35 S. W. 406.
mortgagee, see § 1043 herein. Vermont. — Carrigan v. Lycoming
As to encumbrances: mortgage Fire Ins. Co. 53 Vt. 418, 38 Am.
and chattel mortgage, see § 2022 Rep. 618.
herein. Virginia. — Union Assur. Soc. of
As to bill of sale and chattel mort- London v. Nails, 101 Va. 613, 99
gage, see § 2031 herein. Am. St. Rep. 923, 44 S. E. 896;
" As to alienation, change of inter- Morotock Ins. Co. v. Rodefer, 92 Va.
est; mortgages, etc., see c. LXIV. 747, 24 S. E. 393. 2 Va. L. Reg.
(§§ 2216 et seq.) herein
6 United States. — Ellis v. Insur
ance Co. of North America (U. S. C
C.) 32 Fed. 646
196; Manhattan Fire Ins. Co. v.
Weill, 28 Gratt. (Va.) 389, 26 Am.
Rep. 364.
West Virginia. — Quarrier v. Pea-
Maryland — Citizens Mutual Fire body Ins. Co. 10 W. Va. 507, 27 Am.
Ins. Co. v. Conowingo Bridge Co. Rep. 582. See Teter v. Franklin Fire
113 Md. 430, 77 Atl. 378; Clay Fire Ins. Co. 74 W. Va. 344, 82 S. E. 40.
& Marine Stock Ins. Co. v. Beck, 43 A stipulation that the policy shall
Md. 358 ; Bowman v. Franklin Ins. not be valid if the property is rnort-
Co. 40 Md. 620 ; Washington Fire gaged does not contravene any public
Ins. Co. v. Kelly, 32 Md. 421, 3 Am. poliey. Dumas v. Northwestern Na-
Rep. 149. tional Ins. Co. 12 App. D. C. 245,
Massachusetts.— Dolliver v. St. 40 L.R.A. 358, 26 Wash. L. Rep. 213.
Joseph Fire & Marine Ins. Co. 128 See citations at beginning of § 2016
Mass. 315, 35 Am. Rep. 378. herein. See also as to alienation
Minnesota.— Caplis v. American clause, § 2246a herein.
Fire Ins. Co. 60 Minn. 376, 51 Am. 7 Hubbard v. Hartford Fire Ins.
St. Rep. 535, 62 N. W. 440. Co. 33 Iowa, 325, 11 Am. Rep. 125,
New Jersey.— Carson v. Jersev Miller, J., dissenting. (This case de-
City Fire Ins. Co. 43 N. J. L. 300, nied in Funk v. Minnesota Fanners'
39 Am. Rep. 584. Mutual Fire Ins. Assoc. 29 Mum.
New York.— Woodward v. Repub- 347, 43 Am. Rep. 220, 13 N. W.
3427
§ 2047 JOYCE ON INSURANCE
stitute a breach of condition in a fire policy that the interest of as-
sured is that of sole and unconditional ownership, and that this
applies qoI only in slates where the effect of a mortgage is merely
in create a lion but also in slates where the mortgage is treated as
a conveyance of the title.8 In cases of the character above con-
sidered, which hold that the mortgagor is the unconditional, sole
owner, the mortgagor's debt is not discharged hy destruction of the
insured property, for in case of loss be would be deprived of bis
property so destroyed and still be obligated to pay the mortgage
debt. In other words the happening of the contingency or event.
against which the mortgagor has sought indemnity by insurance,
casts the whole loss upon him notwithstanding the outstanding
mortgage.9
The stipulation requiring disclosure of any interest other than
the "entire, sole, and absolute ownership," and that the same be
expressed in the policy, refers to the character and quality of the
title, whether that of fee simple or leasehold or otherwise, and not
to encumbrances.10 So the rule applies under such a stipulation
as the last although the policy is further conditioned to be void
if the interest of the assured is not truly stated.11
An applicant for. insurance is not bound to disclose the existence
of a paid mortgage, or one fraudulently obtained.12 And a mort-
gagor against whom a strict decree of foreclosure has been rendered
still has, before the expiration of his right to redeem such an in-
L64) ; Boulware v. Farmers' & Labor- tire loss falling upon assured, under
ers' Co-operative Ins. Co. 77 Mo. § 2048 herein.
App. 639, 2 Mo. App. Repr. 128; 10 Ellis v. Insurance Co. of North
Omaha Fire Ins. Co. v. Thompson, America (U. S. C. C.) 32 Fed. 646.
50 Neb. 580, 70 N. W. 30. See Du- See also Caplis v. American Fire
mas v. Northwestern National Ins. Ins. Co. 60 Minn. 370, 51 Am. St.
Co. 12 App. Cas. D. C. 245, 40 Rep. 535, 62 N. W. 440; Insurance
L..R.A. 358, 26 Wash. L. Rep. 213. Co. of North America v. Pitts, 88
As to chattel mortgage as encum- Miss. 587, 7 L.R.A.(N.S.) 627, 117
brance, see § 2022 herein. Am. St. Rep. 756, 9 Ann. Cas. 54,
What is not chattel mortgage: 41 So. 5; Hanover Fire Ins. Co. v.
lease: bill of sale, see § 2022 heroin. Bohn, 48 Neb. 743, 58 Am. St. Rep.
On mortgage or instrument given 719, 67 N. W. 774; Rochester Grer-
as security as breach of condition as man Ins. Co. v. Monumental Savings
to sole and unconditional ownership, Assoc. 107 Va. 701, 60 S. E. 93;
see note in L.R.A.1915D, 812. Moretock Ins. Co. v. Redefer, 92 Va.
8 Petello v. Teutonia Ins. Co. 89 747, 53 Am. St. Rep. 846, 24 S. E.
Conn. 175, L.R.A.1915D, 812, 93 Atl. 393.
137, 45 Ins. L. J. 590,— Beach, J. " Dolliver v. St. Joseph Fire &
9 Standard Leather Co. v. Mercan- Marine Ins. Co. 128 Mass. 315, 35
tile Town Mutual Ins. Co. 131 Mo. Am. Rep. 378.
App. 701, 111 S. W. 1131. See also 12 Lycoming Fire Ins. Co. v. Jack-
Petello Case cited in last preceding son, 83 111. 302, 25 Am. Rep. 386.
note, and cases cited to point of en- »
3428
PARTICULAR REPRESENTATIONS, ETC. § 2047
surable interest in the land as precludes the avoidance of the policy
by his mere omission to make known the decree provided there is
no fraud.13 So a statement by a minor son that he owned the
property is true and recovery is not precluded by the fact that the
property is mortgaged, where it appears that a deed was originally
delivered to said minor but, in order to enable him to obtain a
mortgage thereon, the vendor redeeded the same to the father,
who paid no part of the consideration, and executed said mort-
gage. In such case the latter holds the title in trust for his son
and said title became vested by delivery of the original deed and
could only be devested by deed voluntarily from him during his
life.14
In case the mortgagor retains possession of the property the giv-
ing of a chattel mortgage thereon, where it does not cover the kind
or species of property authorized by law to be so mortgaged, does
not affect assured's title.15 So a lien on furniture only which is
given, under a lease of the premises, as security for rent, where
the only remedy would have been by a suit in equity to enforce
said lien, does not constitute a chattel mortgage and does not avoid
the policy under the unconditional sole ownership clause.16 Nor
is any warranty, of the exact amount of a mortgage, made by a
statement by the owner of an animal insured by a live-stock policy
that it was mortgaged for "about" a certain sum.17 And if the
chattel mortgage covers only a part of the property the condition
as to sole, etc., ownership and encumbrance is not broken.18
It is held, however, that the existence of a mortgage must be dis-
closed where a stipulation in the policy requires the assured to
truly state his interest, if he is not the sole and unconditional
owner, or if his interest is that of owner, trustee, agent, mortgagee,
or lessee, and also warrants that the assured has not omitted to
state any information material to the risk.19 It is also decided
13 Essex Savings Bank v. Meriden 17 Johnston v. Northwestern Live
Fire Ins. Co. 57 Conn. 335, 4 L.R.A. Stock Ins. Co. 94 Wis. 117, 68 N. W.
759, 17 Atl. 930, 18 Atl. 324 (mort- 868.
gagor's insurable interest ends, how- 18 Merchants Mutual Fire Ins. Co.
ever, after the period of redemption v. Harris, 51 Colo. 95, 116 Pac. 148.
expires. See also § 1030a herein). As to representations as to part of
14 Cummings v. Dirigo Mutual the property: entirety of contract,
Fire Ins. Co. 112 Me. 379, 92 Atl. see § 1931 herein.
298. 19 Westchester Fire Ins. Co. v.
15 Miller v. Manufacturers' & Mer- Weaver, 70 Md. 536, 5 L.R.A. 478;
chants' Mutual Fire Ins. Co. 38 Pa. 17 Atl. 401, 18 Atl. 1034 (two judges
Co. Ct. 14, 68 Leg. Int. 348. dissenting). As will be noted, how-
16 Phoenix Ins. Co. v. Fleenor, 104 ever, this case not only departs from
Ark. 119, 148 S. W. 650, 41 Ins. the general rule, but the fact that the
L. J. 1488. word "mortgagor" is omitted from
3429
§ 2047 JOYCE ON [NSURANCE
thai a false warranty that the property is not mortgaged avoids the
policy, especially so where a second mortgage i- placed (hereon
after the policy is issued.20 And even though a fee simple deed
was only intended to secure a debt, the assured is not aided and
the policy is void where it requires assured's interest to he truly
stated therein and also thai said interest be an unconditional sole
ownership.1 Nor is the grantee of mortgaged property, which is
insured alter foreclosure and sale and shortly before the right to
redeem expires, the sole, etc., owner.2
[f assured has only a mortgagee's interest, it must he disclosed;
otherwise, under a stipulation requiring thai any other than the
'■unconditional ownership," etc.. must be expressed in the policy,
the insurance is void.3 Although, under a like stipulation as to
the ''entire, unconditional, and sole ownership." it is sufficient
that the interest of a mortgagee is insured by calling him "mort-
gagee." 4 Again, under the mortgagee clause of the standard
policy, the insurance may be valid as to the mortgagee although
void as to the mortgagor for breach of warranty of unconditional,
etc.. ownership.5 Nor is a mortgagee, to whom the loss is payable
"as his interest may appear," affected by the unconditional sole
ownership clause, for his is a separate distinct interest from that
insured.6 And an unrecorded deed executed by the mortgagor
without the mortgagee's knowledge does not so falsify as to pre-
clude recovery a statement that the former is the owner of the
insured property, made in a policy procured by the mortgagee
independently of the mortgagor.7 Nor does an alleged misrepre-
sentation as to ownership constitute any defense, to a policy applied
the clause providing who shall dis- * Williams v. Roger Williams Ins.
close their interest ought to have Co. 107 Mass. 377, 9 Am. Rep. 41.
some weight. Sec Wyman v. People's Equity Ins.
20 Ramer v. American Central Ins. Co. 1 Allen (83 Mass.) 301, 79 Am.
Co. 70 Mo. App. 47. Dec. 737.
1 Orient Ins. Co. v. Williamson, 98 5 Reed v. Firemen's Ins. Co. 81 N.
Ga. 464, 25 S. E. 560. J. L. 523, 35 L.R,A.(N.S.) 343, 80
On parol evidence that a written Atl. 462. See § 2795 herein.
instrument which on its face imports 6 Burrows v. MeCallev, 17 Wash.
a complete transfer of a legal and 269, 49 Pac. 508.
equitable estate or interest in prop- That mortgagor and mortgagee
erty was intended as a mortgage, see have each an independent insurable
note in L.R.A.1916B, 18. interest, see § 1026 herein.
2 Breedlove v. Norwich Union Fire As to mortgagor's and mortgagee's
Ins. Soc. 124 Cal. 164, 56 Pac. 770, rights generally: and as to mortgage
28 Ins. L. J. 447, aff'g — Cal. — , clause, see §§ 2794a-2795b, herein
54 Pac. 93, 28 Ins. L. J. 86. 7 Liverpool & London & Globe Ins.
3 Waller v. Northern Assur. Co. 64 Co. v. Davis, 56 Neb. 684, 77 X. W
Iowa, 101, 19 N. W. 865. 66.
3430
PARTICULAR REPRESENTATIONS, ETC. § 2048
for by the mortgagee but issued to the mortgagor, whore the latter
without the knowledge of the former had transferred the title.8
A misrepresentation of absolute ownership and that there is no
lien or mortgage upon the property is waived where insurer's agent
had knowledge of the facts.9 So where the chattel mortgage is
upon part of the property and it is satisfied before loss, and in-
surer's agent knew the facts there is a waiver of the requirements
as to title and encumbrances.10
§ 2048. Interest and title: ownership: property.11 — (a) Where
the validity of insurance is made to depend upon the assured being
the absolute and unconditional owner of the true title to the prop-
erty insured, a failure to set forth the true title with substantial
accuracy renders the policy void not only as to the property, the
title to which is not truly represented, but as to all other property
covered by the same policy and subject to the same risk ; and this
even though the owner had no intention to deceive.12
(b) A condition avoiding a policy "if the interest of the insured
be other than an absolute fee simple" means only that he shall
not have a limited interest, but shall claim and hold under a con-
veyance purporting to invest him with an estate in fee; but an
applicant for insurance is not called upon to settle questions of
title with very great precision, and the fact that there is a naked
legal title outstanding will not avoid the policy if assured is the
entire beneficial owner of the premises.13 The legal title is not
referred to but assured's interest, as where a conditional sale is
8 Liverpool & London & Globe Ins. Ind. 172, 18 Am. St. Rep. 324, 24 N.
Co. v. Davis, 56 Neb. 684, 77 N. W. E. 99. See § 1931 herein.
66. 13 Phoenix Ins. Co. v. Bowdr,e, 67
9 Queen Ins. Co. v. May, — Tex. Miss. 620, 19 Am. St. Rep. 326, 7
Civ. App. — , 43 S. W. 73. So. 596. See also Exchange Under-
10 Merchants Mutual Fire Ins. Co. writers Agencv of Royal Exch.
v. Harris, 51 Colo. 95, 116 Pac. 148. Assoc, of London v. Bates, 195 Ala.
See further as to waiver: Breed- 161, 69 So. 956 (sufficient if insured
love v. Norwich Union Fire Ins. Soc. entitled to immediate absolute legal
124 Cal. 164, 56 Pac. 770, 28 Ins. L. ownership : need not be vested with
J. 447, aff'g 6 Cal. Unrep. 94, 54 Pac. legal title) ; McCov v. Iowa State
93, 28 Ins. L. J. 86 (mortgage fore- Ins. Co. 107 Iowa, 80, 77 N. W. 529,
closed and property sold: right to 28 Ins. L. J. 162; Hankins v. Wil-
redeem only few days to run : evi- liamsburg City Fire Ins. Co. 96 Kan.
dence would have supported waiver 706, L.R.A. — , — , 153 Pac. 491.
or nonwaiver: but verdict for plain- On vendee under executory con-
tiff was not disturbed) ; Mechanics' tract as owner where vendor holds
& Traders' Ins. Co. v. Smith, 79 Miss, legal title, see note in 20 L.R.A.
142,30 So. 362 (Mortgage: premium (X.S.) 775; on effect of bond for
retained with knowledge: waived). title to defeat unconditional and sole
11 See § 1987, also § 1916 herein. ownership, note in 2 L.R.A. (N.S.)
12Geiss v. Franklin Ins. Co. 123 512.
3431
§ 2048 JOYCE ON INSURANCE
made or an option given or encumbrances placed on the property,
hut notwithstanding their existence insured still sustains the risk
of tlu> loss.14 S.i a condition in a policy that it shall be void in
case ilic interest of the assured be other than unconditional and
sole ownership, has reference only to the quality of the estate or
interest, and is not avoided by any sort of encumbrance.16 Again,
it is hold that the clause avoiding the policy if the "interest of the
assured in the policy" is not truly stated, must be construed as
referring to the substantial ownership, and not the bare legal title.16
So a condition as to the ownership of the property insured is to
be understood, not in its technical sense, but as requiring that the
insured shall be the actual and substantial owner.17 It is also
decided thai such a clause relates to the legal character of the title,
and where one is in possession under a deed although subject to
a vendor's lien he is a sole, etc., owner.18
(c) In clauses of this nature, as in other policy conditions, the
intent of the parties is the material issue; if "interest" only is
clearly intended then it will not be construed to mean "title" for
these terms have a separate meaning in this connection. The par-
ties may stipulate as to the condition of the interest,' either legal
or equitable, or they may contract with reference to the title; so
where the stipulation is: "If the interest of the insured be other
than unconditional and sole ownership" the policy shall be void,
unless otherwise provided by agreement indorsed, etc., "interest"
and not title is meant; and an "unconditional and sole" interest
must be one which is completely vested in assured, for the words
of themselves exclude that which is conditional or contingent, or
owner-hip of another in the same property, especially if absolute,
or an estate for life, or for years, or in common, and the like, and
require that assured shall, in accordance with the terms of his
policy, sustain the entire loss, if any, whether the title be legal
14 Rochester-German Ins. Co. v. 16 De Armand v. Home Ins. Co. 28
Monumental Savings Assoc. 107 Va. Fed. 603.
701, (JO S. E. 93. 1T Yost v. Dwelling House Ins. Co.
On outstanding contract for sale 179 Pa. St. 381, 57 Am. St. Rep. 604,
of property as defeating sole and 36 Atl. 317.
unconditional ownership l>v vendor, 18 Insurance Co. of North Amer-
see note in 52 L.R.A.(N.S.*) 670. ica v. Pitts, 88 Miss. 587, 7 L.R.A.
15 Caplis v. American Fire Ins. Co. (N.S.) 627 (annotated on vendor's
fin Minn. 376, 51 Am. St. Rep. 535, lien as affecting sole and uneondition-
62 N. W. 440. al ownership) 117 Am. St. Rep. 756,
On mortgage or instrument given 9 Ann. Cas. 54, 41 So. 5.
as security as breach of condition as As to possession, see § 2051 herein,
to sole and unconditional ownership,
see note in L.R.A.1915D, 812.
3432
PARTICULAR REPRESENTATIONS, ETC. § 2048
or equitable.19 That the words "interest" and "title" are not
synonymous, is also instanced where a mortgagee's interest is in-
sured under a clause providing that it shall be void if the interest
of insured is not the entire, unconditional and sole ownership. In
such case said clause does not mean that he must be the owner of
the legal title, but that the interest insured, namely, the mortgage
lien, shall be, and is, an unconditional interest belonging to the
mortgagee, and not a conditional or speculative one.20 So by fair
construction and intendment the "unconditional and sole owner-
ship" of property for the purposes of insurance is in those upon
whom the loss insured against would certainly fall, not as a mat-
ter of mere contract obligation, but as the result of real bona fide
rights in the property insured.1 The following is likewise perti-
nent: "The appellees are the real owners of the premises, they
are the sole owners asserting title and they must bear the total loss
involved in the destruction of the building, unless we shall hold
the company liable." 2 So where the loss would fall directly upon
insured's vendees under an executory contract, he cannot recover
for his or their loss where he has broken the stipulation as to
sole and unconditional ownership by nondisclosure of his inter-
est.3 And in case of a mortgagor his debt is not discharged by
the loss of the property, but he sustains the whole loss by its de-
struction.4
19 This rule embodies the substance Fla. 590, 138 Am. St. Rep. 171, 52
of what is asserted in the following So. 799.
cases : 2 Phoenix Ins. Co. v. Bow.dre, 67
United States.— Rochester German Miss. 629, 19 Am. St. Rep. 326, 7
Ins. Co. v. Schmidt, 162 Fed. 447, 89 So. 596, quoted from, per Fletcher,
C. C. A. 333. J., with approval, and applied in
Connecticut. — Petello v. Teutonia Groce v. Phoenix Ins. Co. 94 Miss.
Ins. Co. 89 Conn. 175, L.R.A.1915D, 201, 22 L.R.A.(N.S.) 732 (annotated
812. 03 Atl. 139, 45 Ins. L. J. 590. on failure to record conveyance to
Florida. — Phenix Ins. Co. v. Hil- insured as affecting his sole and un-
liard, 59 Fla. 590, 138 Am. St. Rep. conditional ownership), 48 So. 29S,
171, 52 So. 799. 38 Ins. L. J. 476; also quoting from
Maryland. — Hartford Fire Ins. Co. Imperial Fire Ins. Co. v. Dun-
v. Keating, 86 Md. 139, 63 Am. St. ham, 117 Pa. 460, 2 Am. St. Rep.
Rep. 499, 38 Atl. 29, 27 Ins. L. J. 686, 12 Atl. 668, as follows: "But
406. where the entire loss, if the property
Mississippi. — Bacot v. Phenix Ins. is destroyed by fire, must fall upon
Co. of Brooklyn, 96 Miss. 223, 25 the party injured, the reason and
L.R.A.(N.S.) 1226, Ann. Cas. 1912B, purpose of this provision does not
262, 50 So. 729, 39 Ins. L. J. 219. seem to exist."
20 Hanover Fire Ins. Co. v. Bohn, 3 French v. Delaware. Ins. Co. 167
48 Neb. 743, 58 Am. St. Rep. 719, 67 Ky. 176, 180 S. W. 85, 47 Ins. L. J.
N. W. 774. 180.
1 Phenix Ins. Co. v. Hilliard, 59 4 Standard Leather Co. v. Mercan-
3433
§ 2048 JOYCE ON INSURANCE
(d) The purpose of these clauses requiring unconditional and
sole ownership, etc., is said to be founded upon the rule against
wagering policies with the intent to protect insurers from paying
losses to those whose sole interest was that the contingency or event
should happen against which the insurance was effected.5 An-
other reason for the insertion of said provision is to take away
the incentive to perpetrate fraud and crime.6 Accordingly it is
declared that the reason of the rule which makes void the policy
in cases of this character "is obvious" for if insured who has a
comparatively small interest in the insured property, the vendees
having paid a greater part of the consideration to him were "per-
mitted to recover on this policy, he would have received not only
the consideration paid by his vendees, but the amount of the insur-
ance in addition thereto, which would greatly exceed the value of
the property. It is not difficult to see under these conditions the
incentive which the insured would have to destroy the property to
tile Town Mutual Ins. Co. 131 Mo. be a reason for upholding and en-
App. 701, 111 S. W. 631. forcing this stipulation, and the rea-
6 Hartford Fire Ins. Co. v. Keat- son lies very near the surface. It is
ing, 86 Md. 139, 63 Am. St. Rep. clearly and succinctly put by the
499, 38 Atl. 29, 27 Ins. L. J. 406, Pennsylvania court in the following
408, per Page, J. That interest language : 'The purpose of this pro-
must not be a speculative one, see vision is to prevent a party who
Hanover Fire Ins. Co. v. Bohn, 48 holds an undivided or contingent, but
Neb. 743, 58 Am. St. Rep. 719, 67 insurable, interest in property from
\. \V. 774 (noted above under this appropriating to his own use the pro-
section), eeeds of a policy taken upon the
It is not only held, as we have valuation of the entire and uncondi-
heretofbre stated, that the just and tional title as if he were the sole
reasonable purpose of insurance poli- owner, and to remove from him the
cies in requiring the insured to have temptation to perpetrate fraud and
the "unconditional and sole owner- crime; for, without this, a person
ship" of the property insured is to might thus be enabled to exceed the
give protection to only those upon measure of an actual indemnity. But
whom the loss insured against would where the entire loss, if the property
mcvital.lv tail hut for the insurance, is destroyed by fire, must fall upon
hut also' that the intent is to avoid the party insured, the reason and
taking risks for those whose lack of purpose of this provision does not
interest or whose contingent interest seem to exist.'" Imperial Fire Ins.
in the property insured might tend Co. v. Dunham, 11 1 Pa. 460, 2 Am.
to encourage carelessness or wrong- St. Rep. 686, 12 Atl. 668.
doing in the use or preservation of "This view of the purpose of the
tin' property. Wager policies are not clause must be kept in mind in giv-
approved, 'ami should be avoided, ing effect to its provisions, and in
Phenix Ins. Co. v. Hilliard, 59 Fla. applying it to any given state of
590, 138 Am. St. Rep. 171, 52 So. facts." Groce v. Phoenix Ins. Co. 94
7<H). Miss. 201, 22 L.R.A.(N.S.) 732, 48
6 li is said in a Mississippi case, So. 298, 38 Ins. L. J. 478.
per Fletcher, J., that: "There must
3434
PARTICULAR REPRESENTATIONS, ETC. § 2048
procure the insurance, and it is this moral risk which the com-
pany has contracted against. . . . 'The importance of disclos-
ing the nature of the interest of assured in the subject-matter in-
sured cannot be overlooked.' " 7
(e) The conditions: "if the interest of the assured be other
than the unconditional and sole ownership" or if the building be
on ground not owned by assured in fee simple relate to the owner-
ship at the date of the policy, or of its being issued, and not at
the date of the fire.8 So a stipulation requiring a fee simple title
to be evidenced by deed is also held a condition precedent to the
risk attaching.9 Nor is the unconditional, etc., ownership clause
violated by an encumbrance existing on the property when the
insurance was effected.10 Nor does the fee simple condition relate
to future changes in title.11 These clauses should also be distin-
guished from those which relate to changes taking place after
issuing the policy.12 And this applies even though the policy pro-
vides that it shall be void if the assured is not the sole and uncon-
ditional owner of the property insured, or if the interest of the
owner is not truly stated in the policy, or if any change take place
in the title, interest, location, or possession of the property, with-
out consent of the company indorsed on the policy, for such pro-
visions apply only to such changes as arise after the delivery of
the policy in the ownership of the property, and not to an existing
state or condition of the property at the time the policy was issued,
except so far as material facts were misstated or concealed.13 Again,
a condition avoiding the policy unless consent in writing is en-
dorsed thereon by the company, if the insured is not the sole and
unconditional owner of the property, relates only to changes aris-
7 French v. Delaware Ins. Co. 167 aff'd 174 N. Y. 489, 67 N. E. 57;
Ky. 176, 180 S. W. 85, 47 Ins. L. J. Merchants' & Bankers' Fire Under-
180, per Turner, J., quoting the last writers v. Williams, — Tex. Civ.
clause above from Hartford Ins. Co. App. — , 181 S. W. 859.
v. Hass, 87 Ky. 531, 2 L.R.A. 64, 9 10 Morotock Ins. Co. v. Redefer, 92
S. W. 720. Va. 747, 53 Am. St. Rep. 846, 24 S.
8 Collins v. London Assur. Co. 165 E. 393.
Pa. St. 298, 30 Atl. 921. See also "Parsons, Rich & Co. v. Lane
Downs v. German Alliance Ins. Co. (Lane v. Parsons, Rich & Co.; Re
(Del. Super. Ct. 1906) 38 Ins. L. J. Millers' & Manufacturers' Ins. Co.)
764; Parsons, Rich & Co. v. Lane 97 Minn. 98, 4 L.R.A. (N.S.) 231,
(Lane v. Parsons, Rich & Co.; Re 106 N. W. 485.
Millers' & Manufacturers' Ins. Co.) 12 Steinmever v. Steinmeyer, 64 S.
97 Minn 98, 4 L.R.A. (N.S.) 231, 106 Car. 413, 92 Am. St. Rep. 809, 59
N. W. 485; Fidelity-Phenix Ins. Co. L.R.A. 319, 42 S. E. 184.
v. O'Bannon, — Tex. Civ. App. — , 13 Hoose v. Prescott Ins. Co. 84
178 S. W. 731. Mich. 309, 11 L.R.A. 340, 47 N. W.
9 Matthie v. Globe Fire Ins. 74 N. 587.
Y. Supp. 177, 68 App. Div. 239,
3435
§ 2048 JOYCE ON INSURANCE
ing after the execution and acceptance of the policy, and does not
apply to an existing state or condition of the property at the time
when the policy was issued.14 An application for a policy of in-
surance in Minnesota, on property located in Washington, which
is delivered by the company on a certain day in the latter state,
will be held to have been before a transfer of the property, which
took place two days before the policy was delivered, for the purpose
of determining the truthfulness of a statem< nt as to the title of
the property.15
(f) The policy is avoided by a false statement to the agent,
that such applicant is sole and absolute owner of the house, the
agent not knowing to the contrary.16 And generally stated recov-
ery is precluded where the stipulation requiring unconditional, etc.,
ownership is violated; 17 or where there is anything less than such
required ownership ; 18 or in case assured has no title to the land
on which the building is situate.19 So where the title is in others
and assured has no legal or equitable title the policy is void under
the unconditional, etc., ownership and fee simple clauses.20 And
where insured falsely states that he is the owner when he has no
title it is held that the policy is void in the absence of waiver
even though he honestly makes said statement.1 And a state-
ment by an insured that he was the sole owner of the property,
though the property was not in his name, when in fact he was
neither the legal nor equitable owner of the property, is not suffi-
cient notice to put the insurance company on inquiry by Avhich
it could have learned the facts, and does not prevent it from claim-
ing a forfeiture of the policy because such answer is untrue.2
Again, the insured building and the land upon which it stood
was purchased by insured as agent of the assignee of the policy
for said as.-ignee at an execution sale and a deed was executed
14 Hall v. Niagara Fire Ins. Co. 93 19Matthie v. Globe Fire Ins. Co.
Mich. 184, 18 L.R.A. 135, 32 Am. 74 N. Y. Supp. 177. 68 App. Div.
St. Rep. 497, 53 N. W. 727. 239, affd 174 N. Y. 4S9, 67 N. E.
15 Pioneer Savings & Loan Co. v. 57.
Providence Washington Ins. Co. 17 On effect of want of title to land
Wash. 175, 38 L.R.A. 397, 49 Pac. where insured is sole and absolute
231. owner of building, see note in 38
16Tvree v. Virginia Fire & Marine L.R.A.(N.S.) 427.
Ins. Co. 55 W. Va. 657, 66 L.R.A. 20MrIntnsli v. North State Fire
657, 46 S. E. 706. Ins. Co. 152 N. Car. 50, 67 S. E. 45.
17 Simonds v. Firemen's Fund Ins. 1 Wilson v. Germania Fire Ins.
Co. — Tex. Civ. App. — 35 S. W. Co. 140 Kv. 642, 131 S. W. 785, 40
300. Ins. L. J. 55.
18 Prussian National Ins. Co. v. 2 Planters' Mutual Ins. Co. v.
Empire Catering Co. 113 111. App. Lloyd, 67 Ark. 584, 77 Am. St. Rep.
67. 136, 56 S. W. 44.
3436
PARTICULAR REPRESENTATIONS, ETC. § 2048
to insured conveying the title, and the said assignment was made
after the loss by fire, and it was held that it was impossible for
both assured and his assignee to have had the sole and uncondi-
tional ownership of the property when the policy was issued and
that the assured had no interest other than as holder of the naked
legal title for the benefit of the policy assignee who was the real
owner; that is, that the holder of a naked legal title to property,
without any beneficial use or interest therein, has not the uncon-
ditional and sole ownership.3 So a statement of absolute owner-
ship of an automobile obviates the necessity of further inquiry.4
And where the want of title is concealed the policy is held avoided.5
Under a California decision a representation of absolute ownership
in property which is not true prevents recovery on the policy, where
it is conditioned therein that any interest not absolute must lie
represented as such.6 And if the policy is stipulated to be void
for any false representation as to the condition, situation, or occu-
pancy of the property or a failure to state every fact material to
the risk, it is avoided by an affirmative answer as to ownership
of land on which the building is situate when both agent and in-
sured had knowledge that the house was located within a public
highway.7 A conveyance in fee simple prior to the issuance of
the policy also avoids it where there is no clause of defeasance in
said deed.8 And if assured in response to an inquiry states that
he owns the property, and the insured house is by statute deemed
affixed to the land and a part of the real estate, his statement is a
material false representation which avoids the policy where said
house is situate upon a patented mining claim of another, and as-
sured has neither a lease nor a contract with such party by which
he is authorized to either retain possession of or remove said build-
ing, and there is an absence of any act or declaration on the part
of the claim owner by which he could be equitably estopped from
asserting his rights to the building.9 So where one enters land
3 Des Moines Ins. Co. v. Moon, 33 Paul Fire & Marine Ins. Co. 67 Minn.
Okla. 437, 126 Pae. 753, 41 Ins. L. J. 514, 70 N. W. 805, 27 Ins. L. J. 222.
1855. 8 Williamson v. Orient Ins. Co. 100
4 Hamilton v. Firemens' Fund Ins. Ga. 791, 28 S. E. 914, 27 Ins. L. J.
Co. — Tex. Civ. App. — , 177 S. W. 590 (not aided by Ga. Civ. Code.
173. sec. 2771).
5 Roner v. National Fire Ins. Co. 9 Milison v. Mutual Cash Guaranty
161 N. Car. 151, 76 S. E. 869. Fire Ins. Co. 24 S. Dak. 2S5, 140 Am.
6 MeCormick v. Orient Ins. Co. 86 St. Rep. 783, 123 N. W. 839, 39 Ins.
Cal. 260, 24 Pac. 1003. L. J. 249 (granting new trial as a
7 Norwich Union Fire Ins. Co. v. Le different state of facts might be
Bell, 29 Can. Sup. Ct. 470, 19 Can. shown entitling assured to recover).
L. T. 239. Examine Harder v. St.
3437
§ 2048 JOYCE ON INSURANCE
as a placer mining claim, which entry is approved by the local
land officers, and a policy of insurance issues to the claimant, who
has a building on the land, upon an application for insurance in
which it is stated that the title of the insured is "good," hut the
policy contains a stipulation that it shall he void if the building
stands on land to which the insured has not a perfect title, the
insurance company is not liable for a loss by fire, occurring nearly
eighteen months after such entry was cancelled by the secretary
of the interior, for the reason that the land was agricultural, and
not subject to entry as mineral land; and where no notice of a
failure of title had been given to the company, such cancellation
avoided the claimant's title ab initio, and presented the very con-
dition which the parties had agreed should forfeit the policy.1*
In an action upon a policy, where it appeared that the policy was
issued upon the representation that the owner of the goods was a
business man, who personally conducted the business, when in fact
the property belonged to a woman, who exercised no personal
supervision over the business, it was held that the policy was void.11
Nor have sole owners of the capital stock of a corporation the sole
and unconditional ownership of the corporate property, within the
meaning of an insurance policy, which is void unless they have
such ownership.12 In an Alabama case a policy was held avoided
by the assured stating that his title in certain hay was absolute
and undivided, when others were interested to the extent that they
were to perform certain services upon it and participate in the
proceeds.13 Where it is stipulated that the "entire policy shall be
void" in various contingencies, including those of encumbrances
on the property, or lack of sole ownership, or false swearing by
assured the failure to read an affidavit which is short, plain, and
simple, will not relieve the affiant from the effect of false swear-
ing as to the title and lack of encumbrance-^ on property, to avoid
insurance thereon, although the affidavit was prepared by the
insurance agent.14 But all the cargo put on hoard the ship on
which the policy is to attach is included in the warranty; it is
understood that the assured are owners of the cargo, but the valua-
tion of freight and profits thereby agreed to will be binding,
10 Gorman Ins. Co. v. Hayden, 21 Phoenix Assur. Co. v. Davenport, 16
Colo. 127, 52 Am. St. Rep. 206, 40 Tex. Civ. A pp. 283, 41 S. VY. 399.
Pae. 453. "Capital City Ins. Co. v. Autrey,
11 Freedman v. Fire Assoc, of 105 Ala. 2(39, 53 Am. St. Rep. 121,
Philadelphia, 168 Pa. St. 249, 32 Atl. 17 So. 320.
30. 14 Dumas v. Northwestern National
12 Syndicate Ins. Co. v. Bohn, 65 Ins. Co. 12 App. D. C. 245, 40
Fed. 165, 12 C. C. A. 531, 27 U. S. L.R.A. 358, 6 Wash. L. Rep. 213.
App. 504, 27 L.R.A. 614. Examine.
3438
PARTICULAR REPRESENTATIONS, ETC. § 2048
whether the lading of the vessel is the property of the assured or of
others, or whether at the time of the loss there shall be any cargo
on board or not.15
(g) If the assured describes the property as "my house," he
does not thereby warrant his title to the realty to be an unencum-
bered fee simple title.16 Nor does the fact that a party wall sepa-
rates the insured buildings avoid the policy as for want of entire
ownership.17 And a policy insuring a building to an amount not
exceeding the applicant's interest thereon, which is truly described
in a verbal application, is not avoided by the fact that he is not
the sole and unconditional owner, by reason of a clause declaring
it void in such case.18 So where the public has no right, title or
interest in a public street upon which a building stands in part,
there is no violation of the sole, etc., ownership condition.19 In
case the insurance is upon assnred's interest in lumber in an ele-
vator while on the premises it being understood that the build-
ing is in the process of demolition, the property insured is not part
of the real estate but the lumber in the building, and a clause of
the policy which provides that it is avoided if the subject of insur-
ance be a building on ground not owned by assured in fee simple,
has no application although the fee simple to the land on which
the building was situate was not in insured.20 One holding real
estate under a conveyance in fee is sole and unconditional owner,
within the meaning of a fire policy, notwithstanding he owes a
portion of the purchase price, for which the statute gives a ven-
dor's lien.1 And where land owned by a corporation is conveyed
by warranty deed executed by the owner of substantially all its
capital stock the grantee is the sole, absolute and unconditional
owner.2 So a grantee under a warranty deed from the widow and
15 Bayard v. Massachusetts Fire & Bell, 29 Can. Sup. Ct. 470, 19 Can.
Marine Ins. Co. 4 Mason (U. S. C. L. T. 239.
C.) 256, Fed. Cas. No. 1,133. 20 Ensel v. Lumber Ins. Co. of X.
16 Mutual Fire Ins. Co. v. Deale, Y. 88 Ohio, 2G9, 102 N. E. 955, 43
18 Md. 26, 79 Am. Dee. 673. See Ins. L. J. 60.
-Etna Fire Ins. Co. v. Tvler, 16 x Insurance Co. of North America
Wend. (N. Y.) 385, 30 Am. Dec. 90. v. Pitts, 88 Miss. 587, 7 L.R.A.i N.s. t
17 Des Moines Ins. Co. v. Niagara 62/ (annotated, on vendor's lien as
Fire Ins. Co. 99 Iowa, 193, 68 N. W. affecting sole and unconditional own-
600, 26 Ins. L. J. 378. ership), 117 Am. St. Rep. 756, 9
18Hoose v. Preseott Ins. Co. 84 Ann. Cas. 54, 41 So. 5.
Mich. 309, 11 L.K.A. 340, 47 N. W. 2 Phoenix Assur. Co. v. Davenport,
587. 16 Tex. Civ. App. 283, 41 S. W. 399.
19 Haider v. St. Paul Fire & Ma- Examine Syndicate Ins. Co. v. Bohn,
rine Ins. Co. 67 Minn. 514, 70 X. W. 65 Fed. 165, 27 L.E.A. 614, 12 ('. C.
805, 27 Ins. L. J. 222. Examine A. 531, 27 U. S. App. 564, 27 L.R.A.
Norwich Union Fire Ins. Co. v. Le (514.
3439
§ 2048 JOYCE OX INSURANCE
heirs of a former owner, which deed acknowledges receipt of the
entire consideration, and conveys the estate conditionally but war-
rants the I iilc is the sole and unconditional owner, where he claims
i h and is in undisputed possession.8 Again, though the prop-
erty insured may at the time insurance is effected thereon be mort-
gaged, yet the interesl of the mortgagor is an "unconditional and
sole ownership."4 And where an application for insurance is
oral, and no inquiries arc made by the agent of the insurer as to
the condition of the title to the property, and the insured says
nothing about the existence of a mortgage thereon, but does not
keep silent from any sinister motive with the intention on his
part to deceive or mislead the insurer, then the fact that when the
policy was issued there existed a mortgage upon the insured prop-
erty will not invalidate the policy, notwithstanding the fact that
the policy provided that it should be void if there existed any en-
cumbrance, by mortgage or otherwise, against the insured prop-
erty.5 Assured has also an "entire, unconditional, and sole owner-
ship," within the conditions in a policy, although the possession
of the realty on which the building and insured property are situ-
ate is held by him under an agreement for its purchase, and the
balance due thereon is unpaid at the time the policy is issued, said
policy being held by the agenl until the land is paid for, and the
deed given the plaintiff, after which the loss occurs.6 Nor is the
condition, that if the insured has not the unconditional and sole
owner-hip it shall be void, broken by the fact that he holds under
a voluntary conveyance from his grantor which the latter's credi-
tors have been adjudged to have the right to avoid to the extent
of selling the property so far as may be necessary to discharge their
obligations.7 A person in whom the entire legal title in property
is vested at the time an insurance thereon is effected is also the
sole and unconditional owner thereof within the meaning of the
policy, notwithstanding insured had made a lease or bill of sale
of the property, reserving title until full payment of the consid-
eration, and the insurer has no standing to assert that the trans-
action was a legal fraud. The insured may recover from the com-
pany the full amount named in the policy upon the destruction
of the properly by fire, although the lessee had partly paid there-
3 Atlas Fire & Tornado Ins. Co. v. Rodefer, 92 Va. 747, 53 Am. St. Rep.
Malone, 99 Ark. 428, 138 S. W. 962. S4(i, 24 S. E. 393.
4 Morotoch Ins. Co. v. Rodefer, 92 6 Johannes v. Standard Fire Office,
Va. 747, 53 Am. St. Rep. 84(j, 24 S. 70 Wis. 196, 5 Am. Si. Rep. 15!). 135
lv 393. N. W. 298. See § 2058 herein.
6 Hanover Fire Tns. Co. v. Bohn, 7 Stcinmever v. Steinmeyer, 64 S.
48 Neb. 743, 58 Am. St. Rep. 719, C. 413, 92' Am. St. Rep. 809, 59
67 X. W. 774; Morotoch Ins. Co. v. L.R.A. 319, 42 S. E. 184.
3440
PARTICULAR REPRESENTATIONS, ETC. § 2048
for, as such payment does not transfer to him the title pro tanto.8
So a statement thai property has been sold is not a misrepresenta-
tion or concealment when made upon misinformation, as where
assured had deeded property to another upon a real estate agent's
representations that said grantee was a purchase]- when in fact he
had not agreed to buy the property. And in such case the rules
of interpretation favor the assured rather than a forfeiture.9 Each
of two persons owning in severalty respective shares of personal
property insured is also the "absolute owner" of the property, with-
in the meaning of a question and answer in an application for
insurance thereon.10 So a farm owner is a sole and unconditional
owner of hay obtained thereon at his expense under a contract on
shares of a certain portion of said produce; said farm owner to
have an absolute ownership of a specified proportion.11 In a
Minnesota case the purchaser of a horse who had given his notes
for one thousand dollars, the purchase price, and had secured the
vendor by a chattel mortgage, effected an insurance for five hun-
dred dollars upon the horse, "loss payable to the vendor as his
interest might appear." The contract of purchase provided that
if the horse died within a certain time, the vendor should take
the five hundred dollars and give up the notes. Tt was held in an
action on the policy that this was not a breach of the warranty in
the policy; that the vendee was the ''sole, absolute, and uncondi-
tional owner" of the horse.12 If the policy only purports to cover
lumber owned by assured and not all the lumber on the land at
the place where the fire occurred and the value of the insured lum-
ber was considerably in excess of the total amount of the insur-
ance and there is no question of misrepresentation, fraud, or con-
cealment, and it also appears that insurer's agent examined the
property owned by assured which is conceded to be in value largely
in excess of the insurance, it constitutes no defense that a com-
paratively small amount of lumber was alleged to have been taken
by trespass upon state lands and intermingled with assured's prop-
erty, and assured is none the less by reason thereof the sole and
8 Burson v. Fire Assoc. 136 Pa. On how far an undivided interest
St. 267, 20 Am. St. Rep. 219, 20 in property is a complete or full own-
Atl. 401. ership for the purpose of insurance.
9 Camden Fire Ins. Co. v. Bomar, see note in 18 L.R.A. 481.
— Tex. Civ. App. — , 176 S. W. 156. n Manchester Eire Assur. Co. v.
That forfeitures not favored and Abrams, 89 Fed. 932, 32 C. C. A.
construction against insurer, see §§ 426, 61 U. S. App. 276.
220 et seq. herein. 12 Kells v. Northwestern Life Ins.
10Beebe v. Ohio Farmers' Ins. Co. Co. 64 Minn. 390. 58 Am. St. Rep.
93 Mich. 514, 18 L.R.A. 481, 53 N. 541, 67 N. W. 215, 71 N. W. 5.
W. 818.
Joyce Ins. Vol. III.— 216. 3441
§ 2048 JOYCE OX INSURANCE
unconditional owner, especially so where there does not appear
to be any evidence to substantiate said claim, and assured had no
uotice or knowledge of the claimed mixture or confusion of prop-
erty.13 !N or does any representation that insured owns a building
arise by implication from a statement that one desires insurance
on household goods while contained in a specified building into
which they are shortly to be moved.14 So where a person builds
n] ion the right of way of a railroad company upon condition that
the company shall not be liable for the loss of the building by
lire, the builder still has an insurable interest in the building, and
an insurance company which has issued a policy thereon, and has
paid for its loss, cannot recover the money paid, upon the ground
that the insured misrepresented his title, that the insurer was in
ignorance of such condition, and that it paid the insurance under
a mistake of fact.15
(h) One who has contracted to sell real estate to another, who
makes a payment under the contract and is let into possession, is
not the unconditional and sole owner of the property within the
meaning of an insurance policy, although the contract is not re-
corded, and the record title is still in his name.16 So in case it is
stipulated that the entire policy, unless otherwise provided by agree-
ment indorsed thereon or added thereto, shall be void if the interest
of the insured is other than unconditional and sole ownership, such
an agreement is necessary to prevent the insurance being avoided
where insured has given a bond for title to a third person, unquali-
fiedly binding himself, his heirs, executors, and administrators to
convey the property insured to a third person on payment of a speci-
fied amount which the other has bound himself to pay. Such ven-
dor merely holds the legal title in trust for the vendee as security
•
13 First National Bank of Sault (annotated on outstanding contract
Ste. Marie v. zEtna Ins. Co. 188 for sale of property as affecting sole
Mich. 251, 153 N. W. 1063, 46 Ins. and unconditional ownership by vend-
I.. .1. 712; First National Bk. of or) 138 Pac. 708. See also French v.
Sault Ste. Marie v. Caledonian Ins. Delaware Ins. Co. 167 Ky. 176, 180
Co. 188 Mich. 254, 153 N. W. 1004, S. W. 85, 47 Ins. L. J. 180 (contract
46 Ins. L. J. 715. to sell on instalment plan) ; Ambrose
14 Omaha Fire Ins. Co. v. Crighton, v. First National Fire Ins. Co. 19 Pa.
50 Neb. 314, 69 N. W. 766, 26 Ins. Super. 117. Compare Fuhrman v.
L. J. 791. Sun Fire Office of London, 180 Mich.
15 Greenwich Ins. Co. v. Louisville 439, 147 N. W. 618 ; Brunswick-
& N. Ry. Co. 112 Ky. 598, 56 L.R.A. Balke-Collender Co. v. Northern
477, 9!)' Am. St. Rep. 313, 66 S. W. Assur. Co. 150 Mich. 311, 113 N. W.
411, 67 S. W. 16. 1113.
16 Sharman v. Continental Ins. Co. As to vendee under contract of
167 Cal. 117, 52 L.R.A. (N.S.) 670 purchase, see § 2058 herein.
3442
PARTICULAR REPRESENTATIONS, ETC. § 2048
for payment of the purchase price.17 It is also decided that when
insured enters into a contract in writing with another whereby the
latter agrees to purchase the property under which a certain amount
is to be paid down, the balance in instalments, and said purchaser
enters into possession and continues in possession until the fire loss
and said contract of sale is never recorded, the insured is not the
sole unconditional owner.18 Nor is a vendor of merchandise, who
places the vendee in possession with authority to sell at retail, the
sole and unconditional owner and the policy is void even though
under the contract of sale the title is not to fully pass until the notes
given for the purchase price are paid and under another provision
the vendee is required to render periodical statements of sale to the
vendor.19 And a vendor under an existing contract of sale has not
the "sole and unconditional ownership" of a building which is de-
scribed as "his dwelling," within the meaning of an insurance
policy.20 And the facts that the vendor has executed a bond to
convey the premises on performance of certain conditions, and that
the obligee has a subsisting equitable right under the bond by rea-
son of a waiver by the vendor of performance, the time of per-
formance having elapsed, constitute an encumbrance or falsification
of a statement that the property was the vendor's.1 Under a New
York decision there was a contract of sale of a tug, based upon a
certain paid consideration and a note payable on a specified date,
whereby possession was given to the purchaser with an agreement
to give a clear bill of sale upon payment of the note, which was
extended. At the time of the fire there was an unpaid balance on
the notes. The vendee thereby became the equitable owner of the
property and insured had only a general vendor's lien thereon for
any unpaid balance of the purchase price with the record title in
him, as no evidence of the purchaser's title had been delivered. It
was held that insured was not an unconditional and sole owner.2
But the condition as to unconditional, sole ownership is not broken
if the agreement for sale remains unconsummated or unperformed
when the loss occurs.3 Again, if the owner's obligation under con-
17 Insurance Co. of North America 20 Hamilton v. Dwelling House Ins.
v. Erickson, 50 Fla. 419, 2 L.R.A. Co. 98 Mich. 535, 22 L.R.A. 527, 57
(N.S.) 512, 39 So. 495. N. W. 535.
On effect of bond for title to defeat x Newhall v. Union Mutual Fire
unconditional and sole ownership, Ins. Co. 52 Me. 180.
see note in 2 L.R.A. (N.S.) 512. 2 Pt, Gratiot Sand & Gravel Co. v.
18 Sharman v. Continental Ins. Co. Hartford Fire Ins. Co. 136 N. Y.
167 Cal. 117, 52 L.R.A. (N.S.) 670n, Supp. 877, 77 Misc. 221, 41 Ins. L.
138 Pac. 708, 43 Ins. L. J. 476. J. 1637. But see § 2031 herein.
19 Phenix Ins. Co. v. Quinette Mer- 3 National Fire Ins. Co. v. Three.
cantile Fire & Marine Ins. Co. 36 States Lumber Co. 217 111. 115, 108
Okla. 384, 128 Pac. 722. Am. St. Rep. 239, 75 N. E. 450.
3443
8 2048
JOYCE ON INSURANCE
trad of purchase is irrevocable, bu1 he cannot, however, compel the
purchaser to exercise his option to accept the property and thereby
sustain the loss; but the latter may abandon the contract, said
owner's interest is that of unconditional, sole ownership.4 And if
the conditional sale made, or option given, cannot be specifically
enforced by insured he still remains the unconditional, sole owner.5
(i) In an action upon a burglary policy it constitutes no defense
that assured falsely stated the ownership of the safe unless, as pro-
vided by statute, such statements were material to the risk or con-
tributed to the loss.6
(j) Where insurer accepts and retains the premium and issues
its policy without requiring a written application, or without mak-
ing inquiry into the condition of the title to the land on which the
insured property stands, and insured is guilty of no fraud or con-
cealment, it is conclusively presumed that the company waived that
condition of the policy providing for a forfeiture if the building
insured stands on land not owned by the insured in fee simple.7
*Phenix Ins. Co. of Brooklyn v. Ins. Co. v. Mutual Real Estate &
Kerr, 129 Fed. 723, G4 C. C. A. 251, Building Assoc. 98 Ga. 262, 25 S. E.
66 L.R.A. 569. 457 (agent knew that insured's only
5 Rochester-German Ins. Co. v. interest that of contractor: waived).
Monumental Saving Assoc. 107 Va. Illinois. — Lumberman's Mutual
701, 60 S. E. 93. Ins. Co. v. Bell, 63 111. App. 67, aifd
6 .Etna Accident & Liability Co. v. 166 111. 400, 57 Am. St. Rep. 140, 4y
White, — Tex. Civ. App. — , 177 S. N. E. 130 (policy issued in decedent's
\V. 162; Vernon's Sayles' Ann. Civ. name instead of name of estate by
Stat. Art. 4947, see § 1916 herein. agents instructions: waived).
On burglary and theft insurance, New York.— Wisotsky v. Niagara
see notes in 46 L.R.A.(N.S.) 562; 47 Fire Ins. Co. 98 N. Y. Supp. 760,
L.R.A.(N.S.) 296. 112 App. Div. 599, aff'd 189 N. Y.
7Milison v. Mutual Cash Guaran- 532, 82 N. E. 1134 (agent had knowl-
tee Fire Ins. Co. 24 S. Dak. 285, 140 edge that assured not absolute owner
Am. St. Rep. 788, 123 N. W. 839. of lumber insured: estopped); Mat-
Sec also Hanover Fire Ins. Co. v. thie v. Globe Fire Ins. Co. 74 N. Y.
Bohn, 48 Neb. 743, 58 Am. St. Rep. Supp. 177, 68 App. Div. 239, aff'd
718, 67 N. W. 774, see §§ 2015, 2026 174 N. Y. 489, 67 N. E. 57 (insured
herein. no title to land on which building
See further as to waiver the fol- situate; not waived).
Lowing cases: Oklahoma. — Des Moines Ins. Co.
Arkansas.— State Mutual Ins. Co. v. Moon, 33 Okla. 437, 126 Pac. 753,
v. Latourette, 71 Ark. 242, 74 S. W. 41 Ins. L. J. 1855 (not waived by
300 (agent informed that title in an- agent's knowledge that insured not
oilier: waived). sole owner, nor by indorsement of
Colm-ado. — American Central Ins. vacancy permit).
Co. v. Donlon, 10 Colo. App. 416, 66 South Dakota.— Milison v. Mutual
Pac. 249 (agenl informed that prop- Cash Guaranty Fire Ins. Co. 24 S.
erty held by quit-claim deed from Dak. 285, 140 Am. St. Rep. 783, 123
owner only of building: waived). S. W. 839, 39 Ins. L. J. 249 (building
Georgia. — Mechanics' & Traders' situate on patented mining claim of
:;il!
i'[. QLAB REPRESENTATIONS, ETC.
2049
When payment of a loss, under a policy of fire insurance, is resisted
on the ground thai the insured was not the sole and unconditional
owner of the land on which the house stood, as provided in the
policy, and the evidence as to whether he was or was not such owner
is conflicting, the question must be determined by the jury, and a
finding that he was such owner will not be disturbed on appeal.8
§ 2049. Interest and title: partnership interest: exclusive owner-
ship.9— There is a certain class of words which although they may
seem to imply the assertion by the assured of an exclusive owner-
ship, nevertheless they arc only intended to describe the property,
rather than to stipulate concerning the assured's interest. Of this
character are the words "his stock of tobacco," which arc not falsi-
fied by the fact that assured has only a partnership interest.10 If
assured insures his property under a firm name it does not, in the
absence of fraud or deceit, violate a requirement of the policy that
the assured's interest must be truly stated.11 And where goods are
insured and assured's interest in the storehouse containing them is
incorrectly described as belonging to the firm, when it is the property
of one of its members, it does not avoid the contract in the absence
of fraud.12 Assured is also sole owner within the meaning of those
words where the stock insured is purchased and replenished from
his individual funds, although the business is conducted under a
another : waiver of forfeiture claimed Chattel mortgage by partner :
but not sustained). change of interest, see § 2269 herein.
Texas. — iEtna Accident & Liabili- As to effect of dissolution of part-
ty Co. v. "White, — Tex. Civ. App. nership : alienation or change of title,
177 S. W. 162 (false statement
in burglary policy as to ownership
of safe, etc. ; any breach of warranty
held waived by acts of adiuster after
loss, notwithstanding policy inhibi-
tion) ; Shawnee Fire Ins. Co. v.
Chapman, — Tex. Civ. App. — , 132
S. W. 854 (insurer estopped by
knowledge that insured executor only property is a complete or full owner-
etc, see § 2280 herein.
As to sale by partner: alienation,
assignment, change of title, etc., see
§§ 2293 et seq. herein.
10 Hartford Protection Ins. Co. v.
Harmer, 2 Ohio St. 452, 59 Am. Dec.
684.
On how far partnership interest in
had management of estate) ; Conti-
nental Ens. Co. v. Cummings, 98 Tex.
115, SI S. W. 805, 33 Ins. L. J. 733
(knowledge of agent that insured
had only a half-interest in corpora-
tion to which property belonged:
waived) revg. — Tex. Civ. App. — ,
78 S. W. 378, but see s. c. (1906)
— Tex. Civ. App. — .
8 Whitmore v. Dwelling House Ins.
Co. 148 Pa. 405, 33 Am. St. Kep.
838, 23 Atl. 1131.
9 See § 1987, also § 1916 herein.
3445
ship for the purposes of insurance,
see note in 18 L.R.A. 482.
11 Clark v. German Mutual Fire
Tns. Co. 7 Mo. App. 77; Bonnet v.
Merchants Ins. Co. — Tex. Civ. App.
— , 42 S. W. 316. See Gould v. York
County Mutual Fire Ins. Co. 47 Me.
403, 74 Am. Dec. 494.
12 Phoenix Ins. Co. v. Lawrence, 4
Met. (Ky.) 9, 81 Am. Dec. 521. See
American Central Ins. Co. v. Heath,
29 Tex. Civ. App. 445, 69 S. W. 235.
§ 2049 JOYCE ON [NSURANCE
firm name of A & Bro., and it appears thai assured's brother con-
ducted the business, receiving for his services one half the net prof-
it and thai he is responsible for one half the losses from bad debts,
and the proofs of loss show that the property belongs to A and B,
doing business under the said name and style.13 And insured is
nevertheless a sole owner although the "company" is another person,
where it appears that the Latter bad no real interest whatever in the
concern, hut merely loaned the use of his name to better insured's
credit.14 Again, assured's ownership of property insured in his
name is not for the '-use and benefit" of another, so as to avoid
the contract, where such other is to have one fourth the net profits
from the sale of said property on consideration that he give his
time in the business of buying and selling the same, and in which
he is interested with the assured.15 Nor docs the fact that a member
of a partnership had transferred his interest therein to a third per-
son before a policy of insurance issued affect the unconditional and
sole ownership of the firm in its real estate, nor does it avoid a
policy conditioned that it shall be void if the interest of the assured
be other than an unconditional and sole ownership, or if any
change takes place in the interest, title, or possession of the sub-
ject of the insurance.16 And the fact that the legal title to a build-
ing owned by a partnership composed of several members and the
administrator of a deceased member, and used in the firm busi-
ness, is in such members and the heir of the deceased member, is no
violation of a clause in an insurance policy taken out by. such
partnership, without making any statement as to title, that "if the
interests of the assured in the property be not truly stated therein
or if the interests of the assured be other than uncondi-
tional and sole ownership," the policy shall be void.17 Where in-
sured is only one member of the firm he is not the unconditional,
sole owner.18 And a covenant, requiring that any interest other
13 Pittsburgh Ins. Co. v. Frazee, 149 N. Y. 382, 52 Am. St. Rep. 733,
107 Pa. St. 521. 44 N. E. 80.
14 VMicenix Ins. Co. v. MeKcrnan As to alienation, see §§ 2280, 2293
(Milwaukee Mechanics' Ins. Co. v. et seq. herein.
McKernan: JEtna Ins. Co. v. Me- 17 Scott v. Dixie Fire Ins. Co. 70
Kernan) 20 Kv. L. Rep. 337, 46 S. W. Va. 533, 40 L.R.A.(N.S.) 152, 74
W. Hi. 698, 27 "Ins. L. J. 870. S. E. 059, 41 Ins. L. J. 1039.
15 Boutelle v. Westchester Fire Ins. On insurance in name of partner-
Co. 51 Vt. 4, 31 Am. Rep. <>(>(>. See ship of property the legal title to
as to sharing profits, Traders Ins. which is in the name of individuals,
Co v Pacaud, 150 111. 245, 41 Am. see note in 40 L.R.A.(N.S.) 152.
St. Rep. 355, 37 N. E. 460; Erh v. "McGrath v. Home Ins. Co. 84
Fidelity Ins. Co. 90 Iowa, 787, 69 N. N. Y. Supp. 374, 88 App. Div. 153.
W. 261.
16 Wood v. American Fire Ins. Co.
3446
PARTICULAR REPRESENTATIONS, ETC. § 2050
than the "entire, unconditional, and sole ownership" must be ex-
pressed in the policy, is not complied with, and assured is not the
sole owner, by reason of the fact that he is the surviving partner,
and has paid out more in the settlement of the firm and individual
indebtedness and attendant expenses than the amount of the de-
ceased partner's interest, and more than the firm's indebtedness to
the latter's estate.19 Nor is a like clause complied with where the
partnership insures property as theirs which, although put in as
part of the firm's capital, has never been conveyed to it, nor to any
person in trust for it; such a policy is void ab initio not only as
to the insured, but also as to an assignee, although the insurer has
consented to an assignment, for such consent gives no force or
validity to a policy in the assignor's hands.20 Where a stock of
merchandise is insured and a full statement as to ownership is re-
quired by the policy which is accepted, insured is bound and his
misrepresentations in reference thereto are material ; and as perti-
nent thereto insurer has a right to know who comprises the insured
partnership owning said property. The moral hazard involved in
the contract and the materiality to insurer of the personnel of such
copartnership constitute one of the essentials of the risk, and this
is especially so where inquiry is made concerning such member-
ship. In such case although the knowledge of its local agent with
authority in the premises will be imputed to insurer still where,
under all the circumstances, no waiver or estoppel appears it will
be so held ; and the question of concealment and fraudulent repre-
sentations as to said personnel of the copartnership is properly
submitted to the jury where there is a sharp conflict in the evidence,
and this is so even though the effect of the representations might
be a question of law.1 In case of a misrepresentation of absolute
title where part of the goods is the individual property of one of
the partners, insurer will be estopped to defend on that ground
where such false statement was the result of instructions by the
agent and superinduced by him with knowledge of the facts.2
§ 2050. Interest and title: pending litigation.3 — The insured is
none the less the "sole and undisputed owner'' of the property by
As to insurance in own name by 19 Crescent Ins. Co. v. Camp, 71
member of corporation who owns Tex. 503, 9 S. ^ . 473.
only half-interest, where claim was J™1™™ AFir% %rn°' V" '
., J. ,. „ „ ./ , , , , ,, . ,35 Md. 89, 6 Am. Rep. 360.
that policy forfeited but held waived, x Jacohs'v Queen Ins. ( • , of Amer.
see Continental Ins. Co. v. Cummmgs, j lg3 Mk.h 512 150 x. W. 147,
98 Tex. 115, 81 S. W. 805, 33 Ins. L. 45 Tns. L. J. 1 73.
J. 733, rev'g — Tex. Civ. App. — , 78 2 Security Mutual Ins. Co. v.
S. W. 378, s. c. (1906) 8 Tex. Ct. Woodson, 79 Ark. 266, 95 S. W. 481.
Rep. 881. 3 See § 1987, also § 1916 herein.
3447
§ 2051 JOYCE ON INSURANCE
,, of the fact thai an action is ponding by a judgment creditor
of a former owner to enforce judgment against the property, the
assured's ownership not being thereby disputed under any allega-
tion in said action.4 And a stipulation that the policy shall be-
come void if the title or possession of the property insured he in-
volved in litigation, relates to a litigation over the title or pos-
session of the assured and not to a proceeding instituted to oust a
tenant from the property.8
§ 2051. Interest and title: possession.6 — If one is in possession of
the premises, and has an interest therein, a description of the same
as "his two buildings'.' does not constitute a warranty of ownership
nor a material misrepresentation; such a description sufficiently in-
dicates the property to be insured.7 So it is prima facie evidence
of title in fee that assured is in possession, claiming and occupying
as owner.8 A presumption of ownership of personal property is
likewise created by possession thereof, and the burden of proof to
show the contrary rests upon assurer where it has insured such
property as being owned by assured.9 So where the property in-
sured was two storehouses and a stock of goods, possession was held
prima facie evidence of title.10 Again, one who has been in pos-
session of the entire property, claiming under a warranty deed, as
sole owner from the time of his purchase and conveyance to him,
the receipt of the whole consideration being acknowledged, is the
unconditional, sole owner, even though there is a recital in the deed
thai the grantors are the widow and heirs of the former owner, hut
the warranty is to defend the title against all claims and to procure
a deed from the remaining heir at law as soon as she reaches ma-
jority.11 And if assured has a freehold in the land, and the ex-
clusive righl of occupation and disposal of the house, a representa-
tion that it is his own is not a misrepresentation avoiding the policy,
4Lan"- v. Hawkeye Ins. Co. 74 8 Franklin Fire Ins. Co. v. ( ihicago
Iowa, 673, 39 N. W. 86. See § 1433 Ice Co. 36 Rid. 102, 11 Am. Rep.
herein. . 469; 1 Phillips on Evidence, 646n.
5 Ball v. Niagara Ins. Co. 93 Mich. 9 Tate City Fire Ins. Co. v. Thorn-
- !. 32 Am. St. Rep. 497, 18 L.R.A. ton, 5 (la. App. 585, (33 S. E. 638.
L35, 53 \". \Y. 727. See also Liverpool & London & Globe
6 See § 1987, also * 1916 herein. [ns. Co. v. Nations, 24 Tex. Civ. App.
As to change in possession: alien- 562, 59 S. W. 817.
change of title, etc., see § 2202 10 Kansas Ins. Co. v. Berry-, 8 Kan.
herein. 159.
to possession by vendee under u Atlas Fire & Tornado Ins. Co.
contract for purchase, see § 2058 v. Malone, 99 Ark. 928, 138 S. W.
herein, also § 2048 subdiv. (h) here- 902, 40 Ins. L. J. 1911.
in.
7Rohrbach v. Germania Fire Ins.
Co. 02 N. Y. 47, 20 Am. Rep. 451.
3448
PARTICULAR REPRESENTATIONS, ETC. § 2052
in the absence of an intent to deceive, there being no overestimate
of the value of the house.12 So assured is the unconditional, sole
owner, where he is in possession under a deed although subject to
vendor's lien, especially so where there is no written a] (plication,
the insurance having been effected by telephone.13 And inas-
much as the stipulation requiring insured's interest to be uncondi-
tional and sole, refers to title and not to possession, the policy is
not avoided by a temporary possession given insured's wife under
a decree of divorce, but which requires her to vacate the property
upon remarriage or upon subsequent order of the court.14
But if insured has transferred his property to another, who has
paid part of the purchase money and 'is in possession, the provision
as to unconditional, etc., ownership is broken and the policy void.15
So where assured has neither a lease nor a contract with the owner
of a patented mining claim by which he is authorized to either re-
tain possession of a dwelling house thereon or to remove it there-
from, a representation that he is the owner constitutes a materially
false statement avoiding the policy, where by statute the house is
part of the realty, and the owner of the mining claim who has the
legal title to, and the right to possession of the building has not by
act or declaration become equitably estopped from asserting his
rights to said building.16
§ 2052. Interest and title: trust deed: parol trust.17 — The con-
dition requiring that any interest other than the "entire, uncondi-
tional, and sole ownership" of the property, etc., must be expressed
in the policy is not a warranty against liens and encumbrances,
and is not broken by the fact that assured has given a deed of trust
of the property to secure a debt, and has not disclosed the same,
nor is the cestui que trust a joint owner.18 And if a policy is issued
to one who holds the legal title to real estate, without inquiry by in-
surer concerning whether any other person is interested in such
12 Currv v. Commonwealth Ins. Co. 140 Am. St. Rep. 783, 123 N. W.
10 Pick. (37 Mass.) 535, 20 Am. Rep. 839, 39 Ins. L. J. 249 (granting a
547. new trial as a different state of facts
13 Insurance Co. of North America might be shown enabling assured to
v. Pitts, 88 Miss. 587, 7 L.R.A. recover). See German Ins. Co. v.
(N.S.) 627 (annotated on vendor's Hayden, 21 Colo. 127, 52 Am. St.
lien as affecting sole and uncondi- Rep, 206, 40 Pac. 453.
tional ownership) 9 Ann. Cas. 54, 117 17 See § 1987, also § 1916 herein.
Am. St. Rep. 756, 41 So. 5. 18 Manhattan Fire Ins. Co. v. Wall,
14 Hix v. Sun Ins. Co. 94 Ark. 485, 28 Graft. (Va.) 389, 26 Am. Dec.
127 S. W. 737. 364; Wclpert v. Northern Assur. Co.
15 Rathmell v. Aurora Fire Ins. Co. 44 W. Va. 734, 29 S. E. 734; Quaer-
(Pa.) 38 Wkly. N. C. 356. ter v. Peabodv Ins. Co. 10 W. Va.
16 Milison v. Mutual Cash Guar- 507, 27 Am. Rep. 582.
anty Fire Ins. Co. 24 S. Dak. 285,
3449
§ 2053 JOYCE OX INSURANCE
property, and no representations arc made by the insured further
than that he is the owner of the property, it is uo defense to an
action on the policy that the insured, though holding the legal title,
is a mere trustee for an undisclosed beneficiary.19 Nor is a state-
ment that assured's title is a warranty deed falsified by the fact that
the land is charged with a parol trust, even it' it could he enforced,
such statemenl being in fact literally true and responsive to the
inquiry made.20 So a deed of trusl on insured personal property
is ii"! an estate in or title to property, within the meaning of a
provision voiding the policy, it' the interest of insured be other
than an unconditional or sole ownership. Such trust deed consti-
tutes a mere lien upon the property, which may he discharged at
any time by the payment of the amount secured thereby.21 And
it' assured is the absolute owner, a dry trust in another of the legal
title will not avoid the policy.82
But a deed of trust must he disclosed under a charter provision
that the policy will he void if any encumbrance on the premises is
not stated.1 Again, a stipulation requiring unconditional and
sole ownership and the nonexistence of any chattel mortgage on the
property is broken where certain trust deeds thereof had been
executed previous to the execution of the policy, to seeure payment
of money, whose legal effect is practically the same as that of a
chattel mortgage with power of sale.2
§ 2053. Interest and title: in trust or on commission.3 — All prop-
erty in which the assured has a qualified interest by possession, the
ownership being in a third person, is within the meaning of a
provision requiring that property held in trust or on commis-iou
must be insured as such.4 And where the assured owns property
in common with others, and insures it as "his own or held in trust
for others," the property is covered, notwithstanding the provision
that any interest is not covered of which assured is not the "sole,
absolute, and unconditional owner." for this provision is not ap-
plicable to such a ease.5 Again, there is no violation of a policy
condition in regard to ownership of the property where the property
19 Rochester Loan & Banking Co. 22 Watertown Fire Ins. Co. v.
\. Liberty Ins. Co. 44 Neb. 537, 48 Simons, 96 Pa. St. 520.
Am. St. Rep. 74.1. (12 X. \V. 877. : Loehner v. Home Mutual Ins. Co.
20Pavcy v. American Ins. Co. 56 17 Mo. 247, s. c. 19 Mo. 628.
Wis. 221, 13 N. W. H2.-.. 2 Hunt v. Springfield Fire & Ma-
21 Union Assurance Soc. v. Nails, rine Ins. Co. 196 U. S. 47, 49 L ed
101 Va. 613, 99 Am. St. Rep. 923, 381, 25 Sup. Ct. 179.
44 S. E. 896. See also Teter v. 3 See § L987. also § 1916 herein.
Franklin Fire Ins. Co. 74 \V. Va. 4 Turner v. Stetts. 28 Ala. 420.
344, 82 S. E. 40. See McCnrtv v. 6 Grandin v. Rochester German
! tint Ins. Co. 126 X. Car. 820, Ins. Co. 107 Pa. St. 26.
36 S. E. 284, under act 1893, c. 299,
sees. 8, 9. See §§ 1916, 2017 herein.
3450
PARTICULAR REPRESENTATIONS, ETC. §§ 2054, 2055
was insured as "their own or held by them in trust or on commis-
sion or sold and not delivered" and assured had not parted with
their interest in or title to any portion of the property covered at
the time of the fire, for, in such case the insurance is not limited
to property of which assured is the sole and unconditional owner,
especially so where the above-quoted clause is in writing which
must prevail over the printed stipulations contra.6 But property
put into another's hand to defraud creditors is not held in trusl or
on commission.7
§ 2054. Interest and title: stored property.8 — If the policy re-
quires that "sole ownership" shall be expressed in the policy, and
the reference is to the goods as stored in a certain warehouse and
also that "said goods are not the property of assured," the policy is
void.9 But where the real and only interest which assured had in
the goods insured was a certificate of a storage company and a bill
of sale, to secure him for indorsing a note, and all the facts were
known to assurer's agent when the application wTas made, insurer
is estopped to defend on the ground that assured was not the sole,
unconditional owner.10
§ 2055. Interest and title: tenant by the curtesy: joint occu-
pancy.11— If one describes himself as owner of the property, and his
estate is only that of tenant by the curtesy, the contract will be
void, under a stipulation that an estate less than that of fee simple
must be expressed in the policy.12 A married woman holding the
fee to land on which the building insured stands, said title having
been acquired before coverture, has an "absolute ownership" within
the intent of the policy, although her husband is entitled to a joint
occupancy and a contingent estate therein by the curtesy, and she
need not disclose the existence of the marriage relation.13 If a
life tenant effects insurance without written application, and with-
out inquiry as to the state of title, and no representations are made
by assured upon that question, and he pays the premium and ac-
cepts the policy without notice of a provision therein voiding it,
if assured's interest is other than unconditional and sole owner-
ship, such provision is waived.14
6 West Branch Lumberman's Ex- Co. 189 Pa. 465, 42 Atl. 184, 28 Ins.
change v. American Central Ins. Co. L. J. 159.
183 Pa. 366, 42 Wkly. N. C. 6, 38 " See § 1987, also § 1916 herein.
Atl. 1087, 27 Ins. L. J. 305. 12 Leathers v. Farmers' Mutual
7 Ayers v. Hartford Fire Ins. Co. Fire Ins. Co. 24 N. H. 259.
17 Iowa, 176, 85 Am. Dec. 553. 13 Commercial Ins. Co. v. Spank-
8 See § 1987, also § 1916 herein. neble, 52 111. 53, 4 Am. Rep. 582. The
9 Fuller v. Phoenix Ins. Co. 61 tenancy was acquired before the act
Iowa, 350, 16 N. W. 273. of 1861.
10 Bateman v. Lumbermen's Ins. u Glens Falls Ins. Co. v. Michael,
3451
§§ :2<)56-2058 JOYCE OX INSURANCE
§ 2056. Interest and title: tenant for life: tenant in tail.15 —
One who holds only a life estate is nol the "sole and undisputed
owner" of the land and property,16 nor has he an "absolute in-
terest," 17 nor an "absolute and sole owner-hip." 18
Bui assured is the sole and unconditional owner in fee simple.
even though the property is impressed with a trust which she may
be compelled to execute, where she is the executrix under the will
of the property, consisting of real estate on which the insured
buildings are situate, and is entitled by the terms of the will to the
exclusive use and enjoyment thereof during her natural life, al-
though by consent of all interested the management of said estate
is transferred to a trust company.19 And a tenant in tail may rep-
resent the land as his property.20
§ 2057. Interest and title: united interests of assured.1 — Where
the policy requires that the title of assured be expressed in the
policy, if it is a leasehold or that of mortgage, or any other interest
not in fee simple, or not absolute, in case of personal property such
stipulation is held to refer to cases where the united interests of
assured are less than absolute.2
§ 2058. Interest and title: vendee under contract for purchase:
bond for deed. — A vendee in possession under a contract of pur-
chase is the real owner within the meaning of the condition as to
the "entire, unconditional, and sole ownership"' of the insured
property,3 where the contract to sell is absolute and upon definite
terms, and the agreement to purchase is unqualified, so that the
lf>7 Ind. 659, 8 L.R.A.(N.S.) 708, 74 C. C. A. 251, 06 L.R.A. 569 (pur-
X. E. 964. See §§ 2015, 2026 herein, chase of elevator: insured -in posses-
15 See § 1987, also § 1916 herein, sion and not in default on purchase
18 Garver v. Hawkeve Ins. Co. (if) money); Rumsey v. Phoenix Ins. Co.
Cowa, 202, 28 X. W. 555 (one judge 1 Fed. 396, 2 Fed. 129. | In this case
dissenting). the court says: "There is no mis-
17 Davis v. Iowa State Ins. Co. 67 representation, because an intent to
Iowa, 494, 25 X. \V. 745. deceive cannot he inferred. There is
18 Collins v. St. Paul Fire & Ma- no breach of warranty because the
rine Ins. Co. 44 Minn. 440, 46 X. W. representation is true in substance.
906. But see Kenton Ins. Co. v. . . . He communicated all that
inton, 89 Ky. 330, 12 S. YY. was material to the risk, and was not
(ills, 7 L.R.A. 81, 11 Ky. L. Rep. 53!). hound to specify the precise extent
19 Security Ins. Co. v. Kuhn, 207 or nature of his interest." Such
111. 166, 69 X. E. 822. vendee is the equitable owner).
20 Carry v. Com nwealth Ins. Co. Alabama. — Loventhal v. Home Ins.
10 Pick. (27 Mass.) 535, 20 Am. Co. 112 Ala. 108, 33 L.R.A. 258, 57
Dec. 547. Am. St. Rep. 17. 20 So. 4 pi.
1 See S 1987, also S l!'l(i herein. Arkansas. — Planters' Mutual Ins.
2 Rankin v. Andes Ins. Co. 47 Vt. Assoc, v. Hamilton, 77 Ark. 27, 7
144, 1 H. Ann. Cas. 55n, 90 S. W. 283.
^United States. — Phenix Ins. Co. California. — McCullough v. Home
of Bklyn. v. Kerr, 129 Fed. 723, 64 Ins. Co. of N. Y. 155 Cal. 659, 18
3452
PARTICULAR REPRESENTATIONS, ETC. § 2058
vendee is obligated and may be compelled to pay, and the loss, if
any, of the property will fall upon him.4 And one who is in any
condition to enforce specific performance of such contract of pur-
Ann. Cas. 862n, 102 Pae. 814, 38 Ins. Oregon.— Baker v. State Ins. Co.
L. J. 1003. 31 Oreg. 41, 65 Am. St. Rep. 807, 48
Colorado. — Connecticut Fire Ins. Pac. 699 (and may state that title is
Co. v. Colorado Leasing, Mining & in his name, where she has performed
Milling Co. 50 Colo. 424, 116 Pac. all conditions on her part to be per-
154, 40 Ins. L. J. 1717. formed).
Connecticut. — Hough v. City Eire Pennsylvania. — Elliott v. Ashland
Ins. Co. 29 Conn. 10, 76 Am. Dec. Mutual Fire Ins. Co. 117 Pa. St. 548,
581. 2 Am. St. Rep. 703, 12 Atl. 676;
Florida. — Phenix Ins. Co. v. Hil- Imperial Fire Ins. Co. v. Dunham,
liard, 59 Fla. 590, 138 Am. St. Rep. 117 Pa. St. 460, 2 Am. St. Rep. 686,
171, 52 So. 799 ; Insurance Co. of 12 Atl. 668.
North America v. Erickson, 50 Fla. Tennessee. — Southern Ins. Co. v.
419, 111 Am. St. Rep. 121, 7 Ann. Estes, 106 Tenn. 472, 52 L.R.A. 915,
Cas. 495n, 39 So. 495, 2 L.R.A.(N.S.) 82 Am. St. Rep. 892, 62 S. W. 149;
512 and n. Light v. Greenwich Ins. Co. 105
Massachusetts. — Davis v. Quincey Tenn. 480, 58 S. W. 85.
Mutual Fire Ins. Co. 10 Allen (92 Wisconsin. — Evans v. Crawford
Mass.) 113; Strong v. Massachusetts County Farmers' Mutual Fire Ins.
Ins. Co. 10 Pick. (27 Mass.) 40, 20 Co. 130 Wis. 189, 9 L.R.A. (N.S.)
Am. Dec. 507. 598, 118 Am. St. Rep. 1009, 109 N.
Michigan. — Dupreau v. Hibernia W. 952; Davis v. Pioneer Furniture
Ins. Co. 76 Mich. 615, 5 L.R.A. 671, Co. 102 Wis. 394, 78 N. W. 596;
43 N. W. 585. Cooper v. Ins. Co. of Pa. 96 Wis.
Mississippi. — Insurance Co. of 362, 71 N. W. 606, 26 Ins. L. J. 985 ;
North America v. Pitts, 88 Miss. 587, Johannes v. Standard Fire Office, 70
117 Am. St. Rep. 756, 7 L.R.A. Wis. 196, 5 Am. St. Rep. 159, 35 N.
(N.S.) 627, 9 Ann. Cas. 54, 41 So. W. 298.
5. Canada. — Laidlow v. Liverpool
New Jersey. — Martin v. State Ins. London & Globe Ins. Co. 13 Grant
Co. of Jersey City, 44 N. J. L. 273; (U. C.) 377.
Franklin Fire Ins. Co. v. Martin, 40 As to executory contract of sale,
N. J. L. 568, 29 Am. Rep. 271. etc. : alienation, see §§ 2284 et seq.
New York. — Brooks v. Erie Fire herein.
Ins. Co. 78 N. Y. Supp. 748, 76 App. As to vendor, see § 2048 subdiv.
Div. 275, affd 177 N. Y. 572, 69 N. E. (h) herein.
1120; ^Etna Fire Ins. Co. v. Tyler, 4 Phenix Ins. Co. of Brooklvn v.
16 Wend. (N. Y.) 385, 30 Am. Dec. Kerr, 129 Fed. 723, 64 C. C. A. 251,
90; Dohn v. Farmers' Mutual Ins. 66 L.R.A. 569. Phenix Ins. Co. v.
Co. 5 Lans. (N. Y.) 275; Neblo v. Hilliard, 59 Fla. 590, 138 Am. St.
Ins. Co. of N. A. 1 Sandf. (N. Y.) Rep. 171, 52 So. 799; Insurance Co.
551. of North America v. Erickson, 50
North Carolina,— Jordan v. Han- Fla. 419, 2 L.R.A. (N.S.) 512, 111
over Fire Ins. Co. 151 N. Car. 341, Am. St. Rep. 121, 7 Ann. Cas. 495n,
66 S. E. 206, 39 Ins. L. J. 80 (is un- 39 So. 495.
conditional sole owner in fee simple). On vendee under executory con-
Oklahoma. — Arkansas Ins. Co. v. tract as owner where vendor holds
Cox, 21 Okla. 873, 20 L.R.A. (N.S.) lesjal title, see note in 20 L.R.A.
775 and n, 129 Am. St. Rep. 808, 98 (N.S.) 775.
Pac. 552, 38 Ins. L. J. 205.
3453
§ 2058 JOYCE OX INSURANCE
chase may represent himself as owner in fee simple.5 So a vendee
of land under an executory contracl on which a part of the pur-
chase money lias been paid, and who is in possession, exercising
acts of ownership, and holding (he bond of the vendor to make title
upon full payment of the purchase money, lias an unconditional,
sole, and fee simple ownership and is entitled to recover in case of
loss by the peril insured against.6
The above rule applies: to a vendee in possession under a parol
agreement to purchase and pay;7 where the property is held under
a parol agreement for purchase at a fixed price, and valuable im-
provements have been made;8 where one is in possession under a
land contract and has made valuable improvements on the land,
and is not in default;9 where the vendee has no deed, and pari of
the purchase money is due; 10 if such vendee is in actual possession
and has paid quite a sum of money on the purchase price and has
agreed to pay the balance and keep the buildings insured; n where
the full purchase price has been paid by the vendee; 12 in case he
has paid thejull purchase price, but has not yet received the deed : 13
and even though the vendor has a lien for the purchase money: "
and where he has paid part of the purchase price, the remainder
being paid after the issuance of the policy, but before its delivery
to him, and the improvements on the land are of greater value than
the amount of insurance, and no specific inquiries are made.15 So
the holder of a contract of purchase, who is in possession using and
improving the property and exercising all acts of full ownership,
who has paid a part of the purchase price, is absolutely bound to
6 East Texas Fire Ins. Co. v. Dv- 10 Boulden v. Phoenix Ins. Co. 112
dies. 56 Tex. 5G5. Ala. 422, 20 So. 587.
6Loventhal v. Home Ins. Co. 112 u Dupreau v. Hibernia Ins. Co.
Ala. 108, 33 L.R.A. 258, 20 So. 41!). 7(5 Mich. 015, 5 L.R.A. 671, 43 N. W.
And this is declared to be the settled 585.
law of Alabama in Pennsylvania 12 Dooly v. Hanover Fire Ins. Co.
Fire Ins. Co. v. Hughes, 108 Fed. 16 Wash. 155, 47 Par. 507.
497, 47 C. C. A. 459. 1S Lewis v. New England Fire Ins.
On effect of bond for title to defeat Co. 29 Fed. 496.
unconditional and sole ownership, li Connecticut Fire Ins. Co. v.
see note in 2 L.R.A.(N.S.) 512. Colorado Leasing, Mining & Milling
'Milwaukee Mechanics Ins. Co. v. Co. 50 Colo. 424, 116 Pac. 154, 40
Rhea, 123 Fed. 9, 60 C. C. A. 103. Ins. L. J. 1717. See O'Neill v.
8 Hough v. City Fire Ins. Co. 29 Northern Assur. Co. 155 Mich. 564,
Conn. 10, 76 Am.'Dec. 581. See also 15 Det. L. N. 1121, 119 N. W. 911.
Jordan v. Hanover Fire Ins. Co. 151 15 Johannes v. Standard Fire Of-
N. Car. 341, 66 S. E. 206, 39 Ins. L. fice, 70 Wis. 196, 5 Am. St. Rep. 159,
J. 80. 35 N. W. 298; Millville Mutual Eire
9 Evans v. Crawford County Farm- Ins. Co. v. Wilgus, 88 Pa. St. 107.
ers' Mutual Fire Ins. Co. 130 Wis. See Chandler v. Commerce Fire Ins.
189, 9 L.R.A.(N.S.) 485, 109 N. W. Co. 88 Pa. St. 223.
952, 36 Ins. L. J. 207.
3454
PARTICULAR REPRESENTATIONS, ETC. § 2058
pay the balance and is not in default, is the owner in fee simple
by an equitable title, the legal title being held in trust for him
by the vendor. Such a person is, therefore, an unconditional and
sole owner within the meaning of that clause in a policy.16 A de-
scription of the house as "my house" is also sufficient where the
applicant is in possession under a valid contract to purchase, and
has paid part of the purchase money.17 The rule also applies to
an agreement which, on its face, is a lease but is a contract of sale
as matter of law.18 Insured is likewise an unconditional, sole own-
er where he is equitably entitled to absolute legal ownership.19
And the fact that no written application nor any representation was
made is a factor.20 If specific questions are put calculated to ob-
tain information as to the. nature of assured's interest, and from
all the answers of the application taken together it appears that as-
sured holds under such a contract of purchase, and so holds the
equitable title in fee with a right to enforce a conveyance, there is
no misrepresentation or breach of warranty as to ownership. Thus :
Question. "Is the property owned and operated by the applicant?"
Answer. "Yes." Question. "Is any other person interested in the
property?" Answer. "No." Question. "Encumbrance, is there
any on the property?" Answer. "Held by contract." These
answers were declared to be substantially true, and the policy was
held not avoided for false representations.1 In a New York case
under the standard policy clause the loss was payable to the mort-
gagee as his interest might appear, the premium being paid by as-
sured sometime before the fire. Insured entered into a contract
with a third party to sell the farm, upon which the insured dwel-
ling house was situate, to him. He paid a part of the purchase
price and under the contract was to pay the balance and receive
his deed on a date prior to that upon which the fire occurred, and
thereafter he completed his purchase, paid the balance of the pur-
16 Connecticut Fire Ins. Co. v. 19 Exchange Underwriters Agency
Colorado Leasing, Mining & Milling of Royal Exch. Assoc, of London v.
Co. 50 Colo. 424, 116 Pac. 154, 40 Bates,' 195 Ala. 161, 69 So. 956.
Ins. L. J. 1717. See also Standard 20 Dooly v. Hanover Fire Ins. Co.
Leather Co. v. Mercantile Town Mu- 16 Wash. 155, 17 Pac. 507.
tual Ins. Co. 131 Mo. App. 701, 111 * Lorillard Fire Ins. Co. v. McCul-
S. W. 631. lough, 21 Ohio St. 176, 8 Am. Rep.
17iEfna Fire Ins. Co. v. Tvler, 16 52; Hinman v. Hartford Fire Ins.
Wend. (N. Y.) 385, 30 Am. Dec. 90. Co. 36 Wis. 159; Sprague v. Holland
See Mutual Fire Ins. Co. v. Deale, Purchase Ins. Co. 69 N. Y. 128; Mc-
18 Md. 26, 79 Am. Dec. 673. Cullock v. Norwood, 58 N. Y. 562,
18 McCullough v. Home Ins. Co. of 563, 4 Jones & S. (N. Y.) 180.
N. Y. 155 Cal. 659, 18 Ann. Cas.
652n, 102 Pac. 814, 38 Ins. L. J.
1003.
3455
§ 2058 JOYCE ON INSURANCE
chase price and received his deed. Insured, however, retained pos-
session and the title until that time. The action was not brought
i,, recover for the loss of the mortgaged property, but only for the
personal property. From a judgment in favor of the mortgagee,
insurer appealed and the judgment was affirmed. It appears,
therefore, thai the policy was not avoided by said contract of sale.2
Where the assured has only a title bond to the property, and pay-
ments are due thereon, this is not such a nondisclosure as avoids
the contract under a stipulation requiring an "entire, unconditional,
and sole ownership," where such fact is in do way material to the
risk.3 And the same is true although it appear- thai the assured
had in fact purchased the title in fee to the land, and held a bond
for a conveyance, but his vendor's title was defective as to one-
seventh of the remainder after his life estate, and a suit to perfect
the title was pending, and there was also an outstanding purchase
money note, which, however, assured owned.4
It is held, however, that if insured states in his application that
he owns the property in fee and has a clear title thereto, when in
fact his only righl therein is under an executory contract of pur-
chase, this is such a misrepresentation as will avoid the policy.6
ll is also decided that one who occupies under articles of agreement
to purchase and has no deed must disclose the fact, although he has
made a payment under said agreement; 6 and also that an executory
contract for purchase does not constitute a "sole and unconditional
ownership."7 Again, one holding only under a bond for a deed
and insuring in a mutual company must disclose the fact,8 And
this is true under a stipulation requiring any interest not absolute
to be stated,9 nor does one in possession hold as vendee where his
agreement for acquiring ownership is in effect a contract of agency
2 O'Xeil v. Franklin Ins. Co. 145 Fire & Marine Ins. Co. v. Huron Salt
X. V. Supp. 432, 159 App. Div. 313, & Lumber Manufacturing Co. 31
43 Ins. L. J. 388. Mich. 346; Cuthbertson v. North
3 Franklin Fire Ins. Co. v. Crock- Carolina Home Ins. Co. 90 N. C. 480,
ett, 7 Lea (75 Tenn.) 725. 2 S. E. 258.
* Williams v. Buffalo German Ins. 8 Merrill v. Farmers' Mutual Ins.
Co. 17 Fed. 03. Co. 48 Me. 285. See Jenkins v.
5 Wooliver v. Boylston Ins. Co. 104 Quineey Mutual Fire Ins. Co. 7 Gray
Midi. 132, 62 X. W. 149, 24 Ins. L. (73 Mass.) 370; Smith v. Bowditch
.1.793. Sec Quellette v. La Jacques Mutual Fire Ins. Co. 0 Cush. (60
Carticr. <c). K. 31 S. C. 29. Mass.) 448; Brown v. Williams, 28
6 Reynolds v. State Mutual Ins. Me. 253.
Ins. Co. 2 Grant Cas. (Pa.) 326. 9 Ayres v. Home Ins. Co. 21 Iowa,
'Brown v. Commercial Fire Ins. 185, 193. See Lowell v. Middlesex
Co. 80 Ala. ISO, 5 So. 500; Wooliver Mutual Fire Ins. Co. 8 Cush. (62
v. Boylston Ins. Co. 104 Mich. 132, Mass.) 127, where policy was held
02 WW. 1 10, '21 Ins. L. J. 703; Clav avoided.
3450
PARTICULAR REPRESENTATIONS, ETC. § 2058
until consummated and it is unconsummated when the fire oc-
curs.10
Both the vendor's and vendee's interest are also insured where
the policy, by describing the property as purchased on contract?,
notifies insured that something more must be done by the purchaser
to complete his agreement and the contract of purchase also gives
a vendor's lien and requires such vendee to keep the property in-
sured.11
Again, unless the parties have otherwise stipulated, personal
property which passes by delivery is with equal or greater reason
within the rule.12 So a vendee in possession under a binding con-
tract of purchase with title reserved to the vendor and who has
given his notes for the purchase money, but has not paid in full, is
the unconditional sole owner. The court per Hoke, J. said: "It
was originally held in the case of these conditional sales of personal
property that, if the property was destroyed by fire or other ad-
ventitious cause, the loss must fall on the vendor who had retained
the title in himself, and this position still maintains in many of
the states.13 In North Carolina, however, it is established in a case
like the present that when a bargainor sells goods, taking notes for
the purchase price, retaining title as security for the purchase
money, and delivers possession, that if the goods are destroyed by
fire, the obligation to pay the notes is absolute and the loss must
fall on the vendee." 14 Insured also takes absolute title where he
pays a part of the purchase price for personal property and takes
possession under an agreement to resell and reconvey, therefore the
risk falls upon him and he becomes liable to sustain the loss, and
is the unconditional, sole owner entitled to recover.15 And if the
purchaser of an animal on credit gives his notes and a chattel
mortgage to secure the purchase price, and then insures the life of
the animal for the benefit of the vendor as his interest may appear,
a provision in the contract of purchase, that if the animal shall
die, the vendor shall take the insurance and give up the notes does
10 National Fire Ins. Co. v. Three u Lancaster v. Southern Ins. Co.
States Lumber Co. 217 111. 115, 108 153 N. C. 285, 138 Am. St. Rep. 665,
Am. St. Rep. 239, 75 N. E. 450. 69 S. E. 214, 39 Ins. L. J. 1748.
11 O'Neill v. Northern Assur. Co. Citing Tufts v. Griffin, 107 N. Car.
155 Mich. 564, 15 Det. L. N. 1121, 47, 10 L.R.A. 526, 22 Am. St. Rep.
119 N. W. 911. See Clapp v. Farm- 863, 12 S. E. 868.
ers' Mutual Fire Ins. Assoc. 126 N. 15 Stowell v. Clark, 62 N. Y. Supp.
C. 388, 35 S. E. 617, 29 Ins. L. J. 155, 47 App. Div. 626, aff'd 171 N.
463. Y. 673, 64 N. E. 1125. Compare
12 Pennsylvania Fire Ins. Co. v. Farmers' & Merchants' Ins. Co. v.
Hughes, 108 Fed. 497, 47 C. C. A. Halm, 1 Neb. (Unof.) 510, 96 N. TV.
459. 255.
13 Citing Tiffany on Sales, p. 91.
Joyce Ins. Vol. III.— 217. 3457
•059 JOYCE ON INSURANCE
not constitute a breach of warranty by the vendee that he is the
"sole, absolute, and unconditional owner of the animal insured." 16
Nor does leaving snoods bought at auction with the auctioneer for
sale, part of the proceeds to be paid to the vendor for purchase
money, constitute an encumbrance within a provision that, if the
interesl of the assured in the property is not absolute it must be so
expressed in the policy, otherwise the insurance shall be void.17 On
the other hand, and in conformity with what is declared to be the
general rule, il is held that a purchaser of personal property under
an agreement that the title shall not vest in him until the terms of
sale are complied with, is not, until such compliance, the uncondi-
tional owner, within the meaning of a policy of fire insurance, al-
though the agreement binds him to pay full value for the property
in case of loss by fire.18 So a policy on the furniture of a house is
void in toto if a large part of the furniture has been purchased on
the installment plan and is not paid for and the policy provides
that it shall be void if the interest of the assured is other than un-
conditional and sole ownership.19 And a vendee in possession of
personal property purchased on the installment plan with title re-
served in the seller is not an unconditional sole owner.20 So it is
decided that the necessity of stating that the property is held under
conditional sale is not obviated by a clause making the loss payable
to a mortgagee, where the nature of the ownership is required to
be expressed in the policy.1
It is undoubted, that even in cases of the character considered
herein, which hold that the policy is avoided, the conditions of the
policy, as in ease of other stipulations, may be waived or insurer
may be estopped by the knowledge of acts of it or its authorized
agents.2
§ 2059. Interest and title: wife's property.3 — Where the fee was
in the wife, and the husband insured the property in his name in a
16 Rolls v. Northwestern Live Ins. Co. 12 App. D. C. 245, 40 L.R.A.
Stock Ins. Co. 64 Minn. 390, 58 Am. 358, 26 Wash. L. Rep. 213.
St. Rep. 541, 67 N. W. 215, 71 N. W. 1 Phenix Ins. Co. v. Public Parks
5. Amusement Co. 63 Ark. 187, 37 S.
17 Franklin Fire Ins. Co. v. Vaugh- W. 959.
an, 92 U. S. 516, 23 L. ed. 740. 2 Athens Mutual Ins. Co. v.
Cited in Carson v. Jersey City Ins. O'Keefe, 133 Ga. 792, 66 S. E. 1003;
Co. 43 X. J. L. 305, 39 Am. Rep. Fuhrman v. Sun Fire Office of Lon-
584. don, 180 Mich. 439, 147 N. W. 618;
18 Westchester Fire Ins. Co. v. Virginia Fire & Marine Ins. Co. v.
Weaver, 70 M<1. 536, 5 L.R.A. 478, Richmond Mica Co. 102 Va. 429, 46
17 At I. 401. S. E. 403.
19 Dow v. National Ins. Co. 26 R, 3 See § 1987, also § 1916 herein.
I. 370, 67 L.R.A. 479, 58 Atl. 999. As to husband's insurable interest
20 Dumas v. Northwestern National or right to insure property of his
3458
PARTICULAR REPRESENTATIONS, ETC. § 2059
mutual company, the contract was declared void, since the insurer
could have no lien upon the property.4 So where the policy is
effected by the husband on property belonging to his wife, without
disclosing that fact, and the contract is conditioned to be void if the
interest of the assured is not stated, the wife cannot recover for a
loss, there being no case for reformation for fraud or mistake.5
And the policy is avoided in the absence of mistake constituting
ground for reformation of the policy, where the legal title is in
insured's wife and her minor children, even though he had im-
proved the house at his own expense.6 Again if the husband has
no insurable interest in his wife's property under the state law, and
he would lose nothing in case of destruction of the property, and
the deed of the land is in her, but all the interest in fee simple title
upon which the insured dwelling house is situate is in a number of
heirs not beneficiaries under the policy, no insurance can be re-
covered, especially so where the statutory requirement as to indorse-
ment on the policy in case the interest of assured is other than
unconditional and sole, is not complied with.7 Nor can the wife
recover in her own name for the loss when the policy provides that
it shall be void if the interest of the insured is not truly stated there-
in, and it is taken out upon her property in the name of her hus-
band, without notice to insurer of her ownership; nor is evidence
admissible, in such case, to show that the husband was acting as her
agent when he procured the insurance, in the absence of an offer
to reform the policy or to show that the insurer knew of the agency.8
So where the husband states that he is the owner in fee in an appli-
cation made by him as his wife's agent she cannot recover on the
policy issued on her property.9 The policy is also forfeited where
insured states in his application that he is the sole owner of prop-
erty, when in fact it is owmed by his wife, and it is stipulated that
if his answer is untrue, or his interest any other than a perfect
wife, or held in her name, or her sep- 22; Solms v. Rutgers Fire Ins. Co. 8
urate estate, or in which she other- Bosw. (N. Y.) 578.
wise has an interest, see §§ 1047 et 6 Mcintosh v. North State Fire
seq. herein. Ins. Co. 152 N. C. 50, 67 S. E. 45.
As to disclosure of interest in 7 Oatman v. Bankers' & Merchants'
wife's property, see § 1050 herein. Mutual Fire Relief Assoc. 66 Oreg.
On insurable interest of husband 388, 133 Pac. 1183, 134 Pac. 1033,
in wife's property or that in which 42 Ins. L. J. 1535; L.O.L. sec. 4666,
she has an interest, see notes in 66 as am'd bv L. 1911, pp. 279-284.
L.R.A.657, and45L.R.A.(N.S.) 1131. 8 Diffenbaugh v. Union Fire Ins.
4 Eminence Mutual Ins. Co. v. Co. 150 Pa. St. 270, 30 Am. St. Rep.
Jesse, 1 Met. (58 Ky.) 523. 805. 24 Atl. 745.
5 Diffenbaugh v. Union Fire Ins. 9 Pelican Ins. Co. v. Smith, 107
Co. 150 Pa. 270, 30 Am. St. Rep. Ala. 313, 18 So. 105.
805, 24 Atl. 745, 25 Chic. Leg. News,
3459
§ 2059
JOYCE ON INSURANCE
legal and equitable ownership, the policy should be void. The de-
fense, however, in such case is the falsity of the statement and not
thai assured did not have the legal title.10 Nor can there be any
recovery by the wife under a policy requiremenl of unconditional,
sole ownership, where the insured building is the wife's sole prop-
erty and it was insured as the property of both.11
Forfeiture of die policy in cases of this character may be, how-
ever, waived or an estoppel may be created by knowledge and acts
of assurer or its authorized agents.12 And if no inquiry nor any
representation as to the title is made and there is no fraudulent con-
cealment and the husband has an insurable interest in a dwelling
house occupied by him and his family, recovery may he had al-
though the title is vested in her.13
It is held, however, that a husband may insure as his own in a
stock company a house which he has built and enlarged on land
owned by his wife and her sister, and which he occupies in severalty
with them.1'1 And if the husband without any consideration being
paid, conveys to his wife through a third person in order to defraud
creditors, and she reconveys to her husband without any considera-
tion being paid, but her name does not appear in the operative pari
of the deed, although it is signed and acknowledged by her. his
10 Planters' Mutual Ins. Co. v.
Loyd, 67 Ark. 5S4. 77 Am. St. Rep.
L36, 56 s. W. 44, 29 Ins. L. J. 603.
11 So held in Leaman v. Lancaster
County Mutual Ins. Co. (Pa.) 27
Lancaster L. Rev. 98.
12 California. ■ — Sharp v. Scottish
Union & National Ins. Co. 136 Cal.
542, 69 Pac. 253 (agent acted on own
information: poliey nol voided).
Illinois. — Danvers Mutual Fire
Ins. Co. v. Schertz, 95 111. App. 656
(too late after loss to take advantage
of warranty of title where agent was
informed of facts).
lov. ii.— Funk v. Anchor Fire Ins.
Co. 171 Iowa, 331, 153 N. W. 1048
(agent knew title in wife, and that
husband had only a homestead inter-
est, and agent also negotiated loan
secured by mortgage: policy not
avoided under sole, etc., ownership
clause).
Michigan. — Clauson v. Citizens
Mutual Fire Ins. Co. 121 Mich. 591,
80 Am. St. Rep. 538, 80 1ST. \V. 573,
29 Ins. L. J. 167 (policy issued with
knowledge that answer as to title of
husband incomplete: policy not de-
feated).
Missouri. — Wooldridge v. German
Ins. Co. 69 Mo. App. 413 (insurer
estopped to insist on breach of war-
rarity on ground that title solely in
wife where poliey signatures show-
otherwise).
Oregon. — Oatman v. Bankers' &
Merchants' .Mutual Fire Relief Assoc.
66 Ore. 388, 133 Pac. 1183, 34 Pac.
1033, 42 Ins. L. J. 1535 (even though
agent knew facts as to title and in-
sured acted in good faith, but statute
nevertheless declares policy void it
will be so held: L.O.L. sec. 4666, as
am'd by L. 1911, pp. 279-284).
13Kludt v. German Mutual Fire
Ins. Co. L52 Wis. 637, 45 L.Pt.A.
(N.S.) 1131, 140 N. W. 321, 42 Ins.
L. J. 725. See §§ 1050, 2015, 2020
herein.
As to insurable interest, see §§
1047 et seq. herein.
14 Curry v. Commonwealth Ins. Co.
10 Pick. (27 Mass.) 535, 20 Am. Dec.
547.
:m<;o
PARTICULAR REPRESENTATIONS, ETC. § 2060
title is not so affected as to preclude his recovery under the uncon-
ditional, sole ownership, fee simple clauses.15 Nor does a statute,
avoiding a transfer of land from wife to husband, as against third
persons, unless it is recorded, render the husband's title void, so as
to entitle one insuring the property at his request to avoid the
policy because he asserted that the title was in himself, the insur-
ance company not being a third person within the meaning of the
statute.16 So a husband may be sole, etc., owner by reason of his
interest in household furniture owned by his wife prior to mar-
riage.17 And it is held as to the fee simple requirement clause that
it is not violated where the fee simple is in her alone under a policy
issued to both husband and wife.18 Again, a policy of insurance
issued to a husband and wife cannot be avoided on the ground that
the real property described therein was wholly hers and the person-
al property wholly his, while in the application it was represented
as theirs jointly. By the use of this word they did not necessarily
affirm that they were tenants in common, but merely that they
together owned the property, and that no other person was in-
terested in it, it being in their joint possession and use as husband
and wife.19 In case a woman, after abandonment by her husband
for years, erects out of her earnings a building on a lot of which
she has no deed, although purchased by her, she is an uncondition-
al, sole owner.20 And if a policy issued to the wife is clearly in-
tended to cover all the household furniture, wearing apparel, etc.,
in a boarding house, irrespective of the fact whether or not it be-
longed to assured or any member of her family, the claim will not
be sustained that, because insured's husband had an interest in the
property, she was not the sole and unconditional owner.1
§ 2060. Intention to navigate: marine risk.2 — If a time policy is
effected upon a vessel "now lying" at a certain place, "intended to
15 Insurance Co. of Tennessee v. n Georgia Home Ins. Co. v. Brady,
Waller, 116 Tenn. 1, 95 S. W. 811, 35 — Tex. Civ. App. — , 41 S. W. 513.
Ins. L. J. 830. See § 2040 herein. 18 Maseott v. First National Fire
16 Groee v. Phenix Ins. Co. 94 Miss. Ins. Co. 69 Vt. 116, 37 Atl. 255.
201, 22 L.R.A.(N.S.) 732n, 48 So. 19 Webster v. Dwelling-house Ins.
298. Co. 53 Ohio St. 558, 53 Am. St. Rep.
" On failure to record conveyance to 658, 30 L.R.A. 719, 42 N. E. 546.
insured as affecting his sole and un- 20 Queen Ins. Co. v. May, — Tex.
conditional ownership, see note in 22 Civ. App. — , 35 S. W. 829.
L.R.A.(N.S.) 732. * North River Ins. Co. v. Dyche,
As to husband's sole and uncondi- 163 Kv. 271, 173 S. W. 784, 45 Ins.
tional ownership in fee simple where L. J. 599. See German Union Fire
deed of propertv is given assured by Ins. Co. of Baltimore v. Cohen, 114
his wife and validity of such convey- Md. 130, 78 Atl. 911, 40 Ins. L. J.
ance under Ga. Civ. Code 1895, sec. 810.
2490. See American Ins. Co. v. Bag- 2 See § 1987, also § 1916 herein,
ley, 6 Ga. App. 736, 65 S. E. 787.
3461
§ 2061 JOYCE ON INSIKANCK
Davigate" certain waters, there is no warranty that she will navi-
gate the waters specified, and recovery may be had for a loss oc-
curring eleven months after the insurance is taken out, even
though theboal has never left the dock.3
§ 2061. Insanity: life risk.4 — One who has received an injury on
the head in childhood, resulting in hardening of the brain and a
weakening of the mental powers in mature age, continuing and
increasing till death, and necessitating confinement in an asylum
for quiet and treatment, is not afflicted with insanity, within the
meaning of an application for life insurance, it appearing that he
knew what was imino; on, and it not appearing that he was subject
to delusions or acted irrationally.6 And insanity is held to refer not
to a temporary mental disturbance consequent upon a weakened
condition from typhoid, but to a disordered mind caused by a
diseased or defective brain.6 in a New York case plaintiff's dece-
dent, a canvasser for a life insurance company, under instructions
from the president to be cautious and not insure insane persons,
subsequently made application for a policy on his own life, stat-
ing that there were no circumstances which rendered him pe-
culiarly liable to accident, but omitting to state that he had' been
previously afflicted with insanity, from which he had apparently
been cured. It was held that if he did not conceal any fact which
in his own mind was material in making the application, the policy
was not void.7 In a Federal case there were certain defenses relating
to his misrepresentations as to health, medical attendance, etc., and
it appeared that insured had been in a sanitarium under treatment
for nervous trouble and that he was removed to an insane asylum
from which he was discharged as cured but he was again commit-
ted to said asylum and died there, the type of, insanity was testified
to a- maniacal depressive insanity, there was other testimony, but
judgment for plaintiffs was affirmed.8 So proof that the assured
was insane some twenty years before the policy was issued, which
fact was not inserted therein or mentioned to the company, is im-
3 Grant v. TEtna Ins. Co. 15 Moore answers to questions by medical e\-
P. C. 516, 8 Jur. (N.S.) 705, 6 L. T. aminer do not form part of basis of
T.'M. contract; nondisclosure of material
4 See S 1987, also § 101 fi herein. fact not proven, see Joel v. Law
5 Newton v. Mutual Benefit Life Union & Crown Ins. Co. 77 L. J. K.
Ins. Co. 70 N. Y. 426, 32 Am. Rep. B. 1108 [1008] 2 K. B. 803, 99 L. T.
335. 712, 24 T. L. R. 898.
6 Iowa Life Ins. Co. v. Haughton, 8 New York Life Ins. Co. v. Moats,
40 Ind. A|»|». 4117, 87 N. E. 702. 207 Fed. 481, 125 C. C. A. 143, 42
7 Mallory v. Travelers' Ins. Co. 47 Ins. L. J. 1071. See Life Ins. Clear-
N. Y. 52, 7 Am. Rep. 410, and note ing Co. v. Bullock, 91 Fed. 487, 33
414. C. C. A. 305.
"Mental derangement:" when
3402
PARTICULAR REPRESENTATIONS, ETC. § 2062
material and will not justify a forfeiture of the policy on the
ground of concealment, if it appears that the company's agent filled
out the body of the policy without questioning the assured in regard
thereto, and that the only question talked over was as to the amount
of the policy.9 In Dr. Hamilton's Manual of Medical Jurispru-
dence 10 he notices a case in which the assured became insane after
the policy was effected, but the defense was that the insured at the
time of applying for insurance was aware of his malady, and the
jury were charged that the concealment was material if the mental
disease had a tendency to shorten life.11 In connection with this
case we notice that another eminent authority 12 is of the opinion
that insanity has a tendency to shorten life.13 Where the appli-
cant has been confined as insane the opinions of physicians who saw
him during said confinement and also the judgment of the court
finding him insane are held competent evidence.14
§ 2062. Insurance beyond specified amount contrary to agree-
ment.— It is held in Pennsylvania that a policy is forfeited by a
breach of a covenant not to insure beyond two-thirds of the estimat-
ed value of the property.15
9 Blackstone v. Standard Life •& As to waiver of physicians privi-
Aceident Ins. Co. 74 Mich. 592, 3 lege under statute as to matters com-
L.R.A. 48G, 42 N. W. 156. municated by patient, see Metropoli-
10 (Ed. 1883) 122. tan Life Ins. Co. v. Willis, 37 Ind.
11 Reported Annates d' Hygiene App. 48, 76 N. E. 560. Under
Publique, Ixxvi. p. 152. Burns's Ann. Stat. sec. 505 (a case
12 Taylor's Medical Jurisprudence also of waiver by agent's knowledge
(Ed. 1866) 752. of insured's confinement in insane
13 See further as to insanity, sec- hospital, etc.).
tions herein, "Suicide," c. 56. 15 Mitchell v. Lycoming Fire Ins.
14 Jefferson v. Supreme Tent of Co. 51 Pa. St. 402.
Knights of Maccabees of the World,
152 111. App. 242.
3463
CHAPTER LIX.
PARTICULAR REPRESENTATIONS AND WARRANTIES, CON-
TINUED—IRON-SAFE, INVENTORY, BOOKKEEPING CLAUSES
§ 2063. Iron-safe clause reasonable, valid and enforceable.
§ 2063a. Object or purpose of iron-safe clause: to what applicable.
§ 2063b. Nature of iron-safe clause: whether representation, warranty, etc.
§ 20G3c. Iron-safe clause: account of stock: not continuing warranty.
§ 2063d. Construction of iron-safe clause.
§ 2063e. Iron-safe clause : whether contract divisible or entire : effect of
breach.
§ 2063f. Whether strict or substantial compliance with clause required.
§ 2063g. Iron-safe clause: custom of place: customary business methods.
§ 2063h. Iron-safe clause: effect of assured's negligence or inadvertence as
to compliance.
§ 2063i. Iron-safe clause: effect of statutes: generally.
§ 2063j. Iron-safe clause: inventory generally.
§ 2063k. Iron-safe clause: inventory defined.
§ 20631. Iron-safe clause : "last preceding inventory" defined.
§ 2063m. Iron-safe clause: "complete" "itemized" inventory defined.
§ 2063n. Iron-safe clause: "inventory" and "invoice" distinguished.
§ 2063o. Invoice not a substitute for inventory.
§ 2063p. Same subject : whether new store with new goods constitutes ex-
ception or qualification.
§ 20G3q. Inventory: compliance with reference to location of property.
§ 2063r. Iron-safe clause: what constitutes substantial or sufficient com-
pliance as to inventory: instances.
§ 2063s. Iron-safe clause : what does not constitute substantial or sufficient
compliance as to inventory : instances.
§ 2063t. Bookkeeping clause: ordinary intelligence as test of compliance.
§ 2063u. Bookkeeping clause: what constitutes substantial or sufficient
compliance: instances.
§ 2063v. Bookkeeping clause: what does not constitute a substantial or suf-
ficient compliance : instances.
>; 2063w. Computation of time: inventory and bookkeeping clauses.
§ 2063x. Iron safe: keeping of books, etc., in.
§ 2063y. What constitutes a fireproof safe.
§ 2063z. Keeping books, etc., in safe "or in some secure place:" "some
place not exposed to a fire."
3464
PARTICULAR REPRESENTATIONS, ETC. § 2063
§ 2063aa. Removal of inventories, etc.: emergency created by threatened
fire.
§ 2063bb. Demand by assurer for production of books, etc.
§ 2064. Iron-safe: keeping books, etc., in: waiver and estoppel.
§ 2064a. Same subject: agent's knowledge, etc.
§ 2064b. Same subject: agent's knowledge, etc.: when no waiver.
§ 2063. Iron-safe clause reasonable, valid and enforceable. — "What
is known as the iron-safe clause which requires assured to make
an inventory at certain times, to keep books of account, to preserve
and keep the same at prescribed times in an iron-safe or fireproof
safe, or in some other place secure from the danger of fire, that he
shall produce the same for insurer's inspection, and that a failure
to comply with said requirements shall render the policy null and
void, is not illegal nor opposed to public policy, but is a reasonable
and valid stipulation, and binds insured in the absence of fraud
or unless waived,1 or unless there is some statutory provision modi-
1 Alabama. — Day v. Home Ins. Co. Co. of North America, 16 Okla. 59,
177 Ala. 500, 40 L.R.A.(N.S.) 652, 13 L.R.A.(N.S.) 826n, 87 Pac. 869.
58 So. 549, 41 Ins. L. J. 1187. Pennsylvania. — See Seibel v. Le-
Arkansas. — Capital Fire Ins. Co. banon Mutual Ins. Co. 16 Lane. L.
v. Kaufman, 91 Ark. 310, 121 S. W. Rev. 356.
289, 38 Ins. L. J. 1058; Germania Virginia.— Hartford Fire Ins. Co.
Ins. Co. v. Brownell, 62 Ark. 43, 34 v. Farris, 116 Va. 880, 83 S. E. 377,
S. W. 83. 45 Ins. L. J. 54, 59— Cardwell, J.;
Delaware. — Continental Ins. Co. Scottish Union & National Ins. Co. v.
v. Rosenberg, 7 PennewilPs (Del.) Virginia Shirt Co. 110 Va. 353, 74
174, 74 Atl. 1073, 39 Ins. L. J. 392, S. E. 228, 41 Ins. L. J. 948 ; Phomix
399 (clause reasonable, not illegal Ins. Co. v. Sherman, 110 Va. 435, 66
or opposed to public policy). S. E. 81, 39 Ins. L. J. 69 ("there is
Illinois. — Farmers' Fire Ins. Co. v. nothing unreasonable in the require-
Bates, 65 111. App. 37. ments of the iron-safe clause quoted
Iowa. — Sowers v. Mutual Fire Ins. in Houff & Holler v. German-Ameri-
Co. 113 Iowa, 551, 85 N. W. 763. can Ins. Co. 110 Va. 585, 66 S. E.
Maryland. — Reynolds v. German- 831, 39 Ins. L. J. 3/3).
American Ins. Co. 107 Md. 110, 15 West Virginia. — Maupin v. Scott-
L.R.A.(N.S.) 345, 68 Atl. 262, 37 ish Union & National Ins. Co. 53
Ins. L. J. 277, 281. W. Va. 557, 45 S. E. 1003.
North Carolina. — Coggins v. As to keeping, preserving and pro-
iEtna Life Ins. Co. 144 N. Car. 7, ducing books and papers, etc., see
8 L.R.A.(N.S.) 839, 119 Am. St. notes in 28 L.R.A.(N.S.) 337, and
Rep. 924, 56 S. E. 506, 36 Ins. L. J. 15 L.R.A.(N.S.) 471.
354. On condition in fire policy as to
Oklahoma. — Springfield Fire & keeping, producing, and preserving
Marine Ins. Co. v. Halsey, 34 Okla. books and papers, see note in 51
383, 126 Pac. 237, 41 Ins. L. J. 1747; L.R.A. 698.
Shawnee Fire Ins. Co. v. Thompson On what books and inventories
& Rowell, 30 Okla. 466, 119 Pac. 985, must be kept in a safe to comply with
41 Ins. L. J. 445; Gish v. Insurance the requirements of the iron -safe
3465
§ 2063
JOYCE ON INSURANCE
fying the rule2 And it is not only reasonable and binding, but it is
desirable, beneficial and fair to both assured and assurer in enabling
the amount of Loss to be ascertained and the extent of liability to be
determined.8 The iron-safe clause is also upheld as a reasonable
contract of limitation on the risk which should he properly borne
by insurer.4 Assured is therefore hound by such covenants even
though he fails to acquaint himself with the terms of his policy the
validity of which is not impeached.5 80 where, by assured's own
evidence, it clearly appears that he has not complied with the re-
quirements of the iron-safe clause, a nonsuit may properly be grant-
ed.6 And the nature of the stock or character of the risk does not as
a matter of law excuse compliance with this requirement.7 But
it is not ;. prerequisite to availing itself of a defense that there has
been a breach of t lie bookkeeping-inventory clause, that assurer
elect to cancel the policy.8 It has. however, been held that such a
requirement is without consideration.9
Assurer cannot in the policy impose conditions as to the iron-
safe clause which do not conform with the application, as assured
has the right to assume that the policy will conform with that
agreed upon in the application, and assurer is not relieved of his
obligation in this respect by failure of assured to read his policy.
And where the policy issued has changed the iron-safe clause and
clause, see note in 15 L.R.A.(N.S.)
471.
On loss or destruction of books, in-
ventories, etc., as excusing their pro-
duction as required by policy, see
notein28L.R.A.(N.S.) 337.
2 In the absence of any statutory
prohibition the iron-safe clause is a
valid provision, a breach of which
will defeat recovery. Rundell &
Hough v. Anchor Fire Ins. Co. 128
Iowa, 575, 25 L.R.A.(N.S.) 20, and
note, 105 N. W. 112.
3 Rcvnolds v. German-American
Ins. Co. 107 Md. 110, 15 L.R.A.
(X.S.) 345, 68 Atl. 262, 37 Ins. L.
.1. 277, 281; Springfield Fire &
Marine Ins. Co. v. Halsey, 34 Okla.
:{S.'{. 126 P;ic 237, 41 Ins. L. J. 1747;
Scottish Union & National Ins. Co.
v. Virginia Shirt Co. 110 Va. 353,
74 S. E. 228, 41 Ins. L. J. 048.
4 Coggins v. iEtna Ins. Co. 144 N.
Car. 7, 8 L.R.A.(N.S.) 839, 119 Am.
St. Hep. 924, 56 S. E. 506, 36 Ins.
L. J. 354.
5 Miller v. Home Ins. Co. of N. Y.
127 Md. 140, 96 Atl. 267.
6 Hester v. Scottish Union &
National Ins. Co. 115 Ga. 454, 41 S.
E. 552.
7 Sowers v. Mutual Fire Ins. Co.
113 Iowa, 551, 85 N. W. 763.
8 Northern Assurance Co. of
London v. Carpenter, — Ind. App.
— , 92 N. E. 1042.
9 Mechanics & Traders' Ins. Co. v.
Floyd, 20 Kv. L. Rep. 1538, 49 S.
W. 543, 28 Ins. L. J. 335; Phenix
Ins. Co. v. Angel, 18 Kv. L. Rep.
1034, 38 S. W. 1067, 26 Ins. L. J.
722, criticised as based upon neither
reason nor authority in Scottish
Union National Ins. Co. v. Virginia
Shirt Co. 110 Va. 353, 74 S. E. 228,
41 Ins. L. J. 948, 956, Cardwell, J.
See Germania Ins. Co. v. Ashby, 112
Ky. 303, 99 Am. St. Rep. 295, 65 S.
W. 611, considered under § 2064b
herein.
3466
PARTICULAR REPRESENTATIONS, ETC. § 2063a
assured has neither authorized nor assented to such change, and
has complied with the condition as it originally stood and which
he undertook to perform, he cannot be defeated because he failed
to comply with a condition in the policy which he did not undertake
to perform, and in such case he is entitled to have the policy re-
formed.10
§ 2063a. Object or purpose of iron-safe clause: to what ap-
plicable.— The object or purpose of the requirement as to making
inventories, keeping books, and that such inventories and books
be preserved or kept in an iron or fireproof safe, or other place
secure from fire and be produced for inspection, is to furnish such
a record as will facilitate ascertainment of the loss and enable
assurer to arrive more accurately, than he would otherwise be able
to without such records, at the exact amount of the loss. It is in-
tended to furnish him the best means and most reliable sources for
ascertaining, with reasonable certainty, the amount and value of
goods damaged or destroyed and the extent of his liability, to pro-
vide a business method whereby the rights of the parties may be
determined and adjusted, and also to afford assurer protection
against misrepresentation, deceit or fraud.11 The object of having
10 German American Ins. Co. v. the value of the stock of goods de-
Darrin, 80 Kan. 578, 103 Pac. 87, 38 stroyed by fire).
Ins. L. J. 1008. See §§ 66g et seq. Indiana. — Hanover Fire Ins. Co.
herein. v. Dole, 20 Ind. App. 333, 50 N. E.
11 United States. — Liverpool & 772.
London & Globe Ins. Co. v. Kearney, Kansas. — Shawnee Fire Ins. Co. v.
180 U. S. 132, 45 L. ed. 460, 21 Sup. Knerr, 72 Kan. 385, 83 Pac. 611, 35
Ct. 326. Ins. L. J. 283 (inserted in policy so
Alabama. — Chamberlain v. Shaw- that if a fire did occur assurer would
nee Fire Ins. Co. 177 Ala. 516, 58 have some data from which it might
So. 267, 41 Ins. L. J. 1194; Georgia approximate the actual value of
Home Ins. Co. v. Allen, 119 Ala. 436, stock destroyed, Greene, J.)
24 So. 399, 28 Ins. L. J. 199, 204, Nebraska— Hamann v. Nebraska
s. c. 128 Ala. 451, 30 So. 837, 31 Ins. Underwriters Ins. Co. 82 Neb. 429,
L. J. 60. H8 N. W. 65.
Arkansas.— Queen of Arkansas North Carolina.— Arnold v. In-
Ins. Co. v. Malone, 111 Ark. 229, Janmty Fire Ins Co. of N. Y. 152
163 S. W. 771; Securitv Mutual Ins. f- TCaJ; 232' 6J US: ?\ 5T4' f In^
Co. v. Woodson, 79 Ark. 266, 116 J J 859, 863 (object is "to furnish
Am. St. Rep. 75, 95 S. W. 481, 36 ^ by which to ascertain the amount
T T j _ * _,_ ' or goods on hand at the time of the
Ins. L. J. od, t>0. fire and estimate witll reasonable cor-
Delaware.— Continental Ins. Co. v. reetness the amount of the loss)."
Rosenberg, 7 Pennewill's (Del.) 174, Oklahoma.— Miller v. Delaware
74 Atl. 1073, 39 Ins. L. J. 392, 400 Tns. Co. 14 Okla. 81, 65 L.R.A. 173,
(evident purpose of clause is to en- 75 pae. 1121, 33 Ins. L. J. 503, 505.
able assurer by means of accurate Texas. — Teutonia Ins. Co. v.
records of the assured's business to Tobias, — Tex. Civ. App. — , 145 S.
ascertain with substantial accuracv W. 251, 41 Ins. L. J. 1030.
3467
§ 2063a JOYCE ON INSURANCE
an inventory made, is not to ascertain the gross value of the prop-
erty, bu1 to determine the different articles which make up the
>iock so thai assurer may test the correctness of the claim, upon
the poinl whether the stock was composed of articles of the class
covered by the policy, and also whether the valuation attached to
the different items and the aggregate thereof was a reasonable one.12
It is clear from the decisions considered throughout the sections
herein which relate to this subject of the iron-safe clause that it
has been almost exclusively applied to stocks of merchandise used
in trade or business and the object and purpose of said clause being
as above stated it does not apply whore it would be useless and
where it was not intended that it should be applicable under the
contract. So that, where the property insured consists of oilice
furniture fixtures, etc., used in a job-printing office wherein no
stock of any kind is kept for use or sale and there is no necessity
for bookkeeping, etc., said clause can have no application.13 And
insurance upon a building, a stock of merchandise, and office fur-
niture and fixtures may be so far divisible that it is apparent that
it was never contemplated that the requirements of the iron-safe
clause, having in view its object or purpose, should have any refer-
ence to other than the stock of merchandise and that therefore said
office furniture and fixtures do not come within its provisions.14
Notwithstanding, however, that the policies do not cover a constant-
ly changing stock of merchandise, but only a list of furniture and
fixtures used in the restaurant business, still in such case, even
though by reason of an increase in business a corresponding change
is made in said property, a substantial compliance with the iron-
safe-inventory clauses may be required, although it is sufficient,
Virginia.— Scottish Union & Na- Forlines, 94 Ark. 227, 126 S. W. 710,
tional Ins. Co. v. Virginia Shirt Co. 39 Ins. L. J. 706 (purpose of requir-
110 Va. 353, 74 S. E. 228, 41 Ins. ing inventory, etc., is to obtain a
L. J. 948 (object is to prevent a complete record of the business and
check on fraud and to afford means to ascertain amount of goods on hand
of ascertaining with reasonable cer- at time of fire).
tain ty the amount of goods on hand). 13 Queen of Arkansas Ins. Co. v.
12 Dorroh-Kelly Mercantile Co. v. Dillard, 96 Ark. 37G, 131 S. W. 946,
Orient Ins. Co. i04 Tex. 199, 135 S. 41 Ins. L. J. 340.
W. 1165, 40 Ins. L. J. 1211, 1214, 14 Hanover Fire Ins. Co. v. Craw-
relying upon North British Mercan- ford, 121 Ala. 258, 77 Am. St. Rep.
tile Ins. Co, v. Kemendo, 94 Tex. 367, 55, 25 So. 912, 28 Ins. L. J. 945;
61 S. W. 1102, and aff'g Orient Ins. Miller v. Delaware Ins. Co. 14 Okla.
Co. v. Dorroh-Kelly Mercantile Co. 81, 65 L.R.A. 173, 75 Pac. 1121, 33
59 Tex. Civ. App. 289, 126 S. W. Ins. L. J. 503; Sun Mutual Ins. C i.
616. See also Western Assur. Co. v. Tufts, 20 Tex. Civ. App. 147, 50
v. Kemendo, 94 Tex. 367, 60 S. W. S. W. 180; F'sher v. Sun Ins. Office
661, 30 Ins. L. J. 402, 405, Brown, of London, 74 W. Va. 694, L.R.A.
J.; Queen of Arkansas Ins. Co. v. 1915C, 619, 83 S. E. 729.
3468
PARTICULAR REPRESENTATIONS, ETC. § 2063b
where the list produced is absolutely correct as to the items lost and
reasonably correct as to the items insured, the items lost and the
value thereof, especially so where the production of such an in-
ventory and its corrections is unquestioned.15
§ 2063b. Nature of iron-safe clause: whether representation,
warranty, etc. — The exact nature of the iron-safe clause or require-
ment is a question concerning which the courts are not in harmony,
as it has been variously held to be a representation, warranty, or
promissory warranty, condition precedent, condition subsequent,
and a stipulation merely for the better preservation of evidence.
The determination of this point is mainly of importance in decid-
ing whether there must be a strict and literal, or only a substantial
compliance to prevent the policy being avoided, or the sufficiency
of compliance to justify a recovery under the contract. Inasmuch,
however, as the principles underlying the determination of the
above questions have been considered under other chapters herein
on representations, warranties and conditions, we shall briefly state
here the conclusions upon the above points as presented by the
decisions.
In Delaware the iron-safe clause is held a promissory warranty,
where it is expressly made a warranty and a part of the policy, a
breach of which will prevent recovery.16 In Georgia a clause re-
quiring the insured to "keep a set of books which shall clearly and
plainly present a complete record of business transacted, including
all purchases, sales, and shipments both for cash and credit," is a
promissory warranty which must be complied with ; but, in deter-
mining what it requires, a fair and liberal construction should be
placed upon it so as to effectuate the contract of indemnity, rather
than defeat it.17 And in that state the requirement of an inventory
and keeping books is a warranty which if breached, absolutely
avoids the contract.18 In Oklahoma the clause is a promise >rv
warranty and a breach thereof precludes recovery.19 In another
case in that state, where the contract was executed prior to state-
hood, and was therefore an Arkansas contract, it is held that prior
to the statute of the latter state the iron-safe clause constituted a
promissory warranty and a strict compliance therewith was a pre-
15 Home Ins. Co. of N. Y. v. 18 Finleyson Bros. v. Liverpool &
Ballard, 32 Okla. 723, 124 Pac. 316, London &* Globe Ins. Co. 16 Ga. A pp.
41 Ins. L. J. 1453. 51, 84 S. E. 311.
16 Continental Ins. Co. v. Rosen- 19 Western Mutual Life Ins. Co. v.
berg, 7 Pennewill's (Del.) 174, 74 Williamson-Halsell-Frasier Co. 37
Atl. 1073. 39 Ins. L. J. 392, 396. Okla. 213, 131 Pac. 691; Shawnee
"^Stna Ins. Co. v. Johnson, 127 Fire Ins. Co. v. Thompson & Rowell,
Ga. 491, 9 L.R.A.(N.S.) 667, 56 S. 30 Okla. 466, 119 Pac. 985, 41 Ins.
E. 643. L. J. 445.
3469
§ 2063b
JOYCE ON INSURANCE
requisite to a recovery.20 So in Texas it is a promissory warranty,1
or a warranty, the breach of which will avoid the policy,2 and a
requirement •>!' an inventory is a promissory warranty and the
failure to comply therewith avoids the policy.8 In Virginia the
clause is a promissory warranty and must he strictly performed.4
And in that state the iron-safe, bookkeeping clause is not an applica-
tion within a statute requiring clear proof that answers were wil-
fully false or fraudulently made and the said clause is a warranty
to be strictly performed.5 So in West Virginia the iron-safe clause
requiring the keeping of books and making an inventory and pre-
serving the same, is a promissory warranty.6
The iron-safe clause must, however, bo properly made a part of
the policy in order to constitute a warranty, otherwise it will be
only a representation, and the method of attaching a slip of paper
to a policy and its position as attached with reference to other parts
and conditions of the policy may be such as that it is only a repre-
sentation, even though the words "warranted to be kept/' etc., are
used in said attached slip.7 So the answer "yes"' in an application in
reply to the question, "Do you agree to keep merchandise and cash
accounts? " is a mere representation and not a warranty, though
the application provides that the "applicant warrants . . .
that the foregoing is a full and true exposition of all the facts and
circumstances, conditions, situations, . . . and is offered as
20 German-American Ins. Co. v.
Fuller, 26 Okla. 722, 110 Pae. 763,
39 lns._L. J. 1622; Kirby's Dig. Ark.
sec. 4375a.
Roberts, Willis, Taylor & Co. v.
Sun Mutual Ins. Co. 19 Tex. Civ.
App. 338, 48 S. W. 55ft.
2 Standard Fire Ins. Co. v. Willock,
— Tex. Civ. AP1». — , 29 S. W. 218.
3 Orient Ins. Co. v. Dorroh-Kelly
Mercantile Co. 59 Tex. Civ. App. 289,
126 S. YV. 616, aff'd Dorroh-Kelly
Mercantile Co. v. Orient Ins. Co. 104
Tex. 199, 135 S. W. 1165, 40 Ins.
L. J. 1211; Royal Exchange Assnr.
of London v. Rosborough, — Tex.
Civ. App. — , 142 S. W. 70, 41 Ins.
I.. .1. 466.
4 i I art ford Fire Ins. Co. v. Farris,
116 Va. 880, 83 S. E. 377, 45 Ins.
L. J. 55.
5 Prudential Fire Ins. Co. v. Alley,
104 Va. 351 i, 365, 51 S. E. 812. But
compare Continental Fire Ins. Co.
34
v. VVhittaker & Dillard, 112 Tenn.
121, 105 Am. St. Rep. 916, 79 S. W.
119.
6 Maupin v. Scottish Union & Na-
tional Ins. Co. 53 W. Va. 557, 45
S. E. 1003.
7 Goddard v. East Texas Fire Ins.
Co. 67 Tex. 69, 60 Am. Re]). 1, 1 S.
W. 906, followed in Georgia Home
Ins. Co. v. McKinley, 14 Tex. Civ.
App. 7, 37 S. YV. 606, distinguished
in City Drug Store v. Scottish Union
& National Ins. Co. — Tex. Civ. App.
— , 44 S. \Y. 21. See §§ 1912, 1915,
1956 et seq. herein.
The first ease construing I his clause
is stated in Reynolds v. German
American Ins. Co. 107 Md. 110, 15
L.K.A.lWS.) 345, 68 Atl. 262, 37
Ins. L. J. 277, 280 {citing 13 Am. &
Eng. Ency. of Law, 355, note 9) to
have been Goddard v. East Texas
Fire Ins. Co. 67 Tex. 69, 60 Am.
Rep. 1, 1 S. W. 906.
70
PARTICULAR REPRESENTATIONS, ETC. § 20G3b
a basis of the insurance requested, and is made a special warranty.8
So where a piece of paper pasted to the policy contained a require-
ment that the assured should keep a record of sales "warranted to
be kept in an iron safe at night," it was held a representation, and
not a warranty.9 And no warranty that books of account shall be
kept or that they shall be ready to be exhibited when called for is
implied in the provision in a fire policy that the claim of loss shall
be sustained if required by the books of account and other vouchers
of the assured.10 But the iron-safe clause is properly made a war-
ranty and a part of the policy by attaching to the policy a slip of
paper containing said clause and other matters essential to the
existence of the contract and stating at the bottom thereof that it
is attached to and forms part of the policy.11 And where a policy
of fire insurance provided that it was accepted subject to such con-
ditions as might be "indorsed thereon or added thereto," and a
slip pasted on the policy, stating the amount of insurance, provided
that the policy was "subject to iron-safe clause . . . attached,"
and such clause was attached to the policy on another slip requir-
ing the insured to keep certain books, as to his business, secure from
fire, to be subject to inspection of insurer in case of loss, and pro-
viding that if the insured should fail to produce them the policy
should be void, it was held that compliance with the iron-safe
clause was necessary to recovery, since it was a warranty on the
part of the insured.12
In Kansas said clause is held a condition precedent to the right
to maintain an action.13 So under a New York decision if a bur-
glary insurance policy provides that assurer shall not be liable if
assured's books and accounts are not so kept that the actual loss
may be accurately determined therefrom, it is a condition precedent
where it is agreed that it shall be so construed, and a complaint
upon the policy for recovery will be dismissed, where such books
and accounts are not kept.14 It held, however, in South Carolina
8 ^tna Ins. Co. v. Norman, 12 Ind. Pennewill (Del.) 174, 74 Atl. 1073,
App. 652, 40 N. E. 1116, 24 Ins. L. 39 Ins. L. J. 392, 396.
J. 611. 12 Kelley-Goodfellow Shoe Co. v.
9 Goddard v. East Texas Fire Ins. Liberty Ins. Co. 8 Tex. Civ. App.
Co. 67 Tex. 69, 60 Am. Rep. 1, 1 S. 227, 28 S. W. 1027.
W. 906. 13 Shawnee Eire Ins. Co. v. Knerr,
10 Wightman v. Western Mutual 72 Kan. 385, 83 Pac. 611, 35 Ins. L.
Fire Ins. Co. 8 Rob. (La.) 442. J. 283.
11 Allred v. Hartford Fire Ins. Co. 14 Rosenberg v. People's Suretv Co.
— Tex. Civ. App. — , 37 S. W. 95 ; of N. Y. 125 N. Y. Supp. 257, 140
Continental Ins. Co. v. Rosenberg, 7 App. Div. 436, 40 Ins. L. J. 135.
3471
§ 2063b JOYCE OX IXSlKAXCi:
thai the production of an inventory is not a condition precedent
to recovery.15
lnder a Federal decision the requirement of an inventory and
preservation of the same under the iron-safe clause, is a condition
subsequent, a breach of which prevents recovery if relied on by
insurer.16 In Alabama the iron-safe clause is held a condition sub-
sequent, ;i breach of which precludes recovery.17 So a requirement :
that insured shall take an inventory at stated times, and keep his
books in an iron safe, or in some place not exposed to tire likely to
destroy the building insured, and thai a failure to observe this con-
dition avoids the policy, imposes a condition subsequent.18 The
accepted rule in Missouri is that such clause is in the nature of a
condition subsequent, and unless insurer so elects, a breach thereof
does nol constitute a forfeiture.19 But in another case in that state
it is held a promissory Warranty and that a failure to comply sub-
stantially therewith precludes recovery, but does not absolutely
avoid the contract.20 In Tennessee the clause is also a condition
subsequenl and is not construed strictly against the right of for-
feiture.1
In Kentucky, an entirely different view has been taken, in cer-
tain cases and it is held that a stipulation that an inventory and
books be kept in an iron proof safe only tends to the better pre-
sentation of the evidence to show the amount of the loss sustained
in ca<e of fire, and that a failure to comply with such a provision
does not work a forfeiture, as it does not decrease the risk and is
without consideration and that it is not competent to contract with
15 Kingman v. Lancashire Ins. Co. the latter was held not responsible
54 S. Car. 599, 32 S. E. 762. for consequent loss, etc.
16 Royai Ins. Co. Ltd. of Liverpool, "Chamberlain v. Shawnee Fire
En"- (London & Lancashire Fire Ins. Ins. Co. 177 Ala. 516, 58 So. 267, 41
Co.°) v. Kline Bros. & Co. 198 Fed. Ins. L. J. 1194.
468, 117 C. C. A. 224, 41 Ins. L. J. 18 Hanover Fire Ins. Co. v. Craw-
L590. The court, however, quotes ford, 121 Ala. 258, 77 Am. St. Rep.
from and relies on a case ( Imperial 55, 25 So. 912.
Fire Ins. Co. v. Coos, 151 U. S. 452, 19 Travis v. Continental Ins. Co. —
462, 38 L. ed. 23, 14 Sup. Ct. 379) Mo. App. — , !<!> S. W. 766, 47 Ins.
wherein it is stated that compliance L. J. 58. See also Pace v. American
of assured with the terms of the con- Central Ins. Co. 173 Mo. App. 485,
tract is a condition precedent to the 158 S. W. 892, 42 Ins. L. J. 150.
right of recovery. And said case 20 Johnson v. Mercantile Town
was one where there was a condition Mutual Fire Ins. Co. 120 Mo. App.
voiding the policy if mechanics were 80, 90 S. W. o'<)7.
employed in the building, altering x McNutt v. Virginia Fire &
or repairing without notice to and Marine Ins. Co. — Tenn. Ch. — , 45
permission granted bv assurer, and S. W. 61.
3472
PARTICULAR REPRESENTATIONS, ETC. §§ 20G3c, 2063d
sured for the presentation of evidence on behalf of either party.2
The case originally so holding is however, declared to have "made
a ruling sustained upon neither reason nor authority." 3
In conclusion, without relying solely upon the number of cases
for a determination of what constitutes the weight of. authority,
but upon the principles involved, and also recognizing the rule
stare decisis governing in certain jurisdictions, irrespective of what
has been decided in other jurisdictions, it would seem that the first
inquiry would be to ascertain the intent of the parties to the con-
tract as evidenced by the language employed, and if that intent is
clearly to make the clause a warranty and it is by apt terms of
reference or otherwise made a part thereof,311 then it is a warranty
coming properly within the definition of a promissory warranty.4
§ 2063c. Iron-safe clause: account of stock: not continuing war-
ranty.5— If the assured in answer to certain questions represents
when the account of stock was last taken, its amount and that it is
taken every three months, this does not amount to a warranty that
it will continue to be taken regularly at such periods during the
life of the policy.6
§ 2063d. Construction of iron-safe clause. — The iron-safe clause
must be construed most favorably to assured and substantial com-
pliance is sufficient.7 Said clause should also receive a reasonable
interpretation and only substantial compliance should be required.8
So the provision that an inventory be taken and an account of
purchases and sales be kept are not independent provisions but
should be construed together and the bookkeeping is intended to
supplement the inventory made so that both may be used in ascer-
taining the amount of stock on hand, or the extent of loss and
liability.9 But where the conjunctive "and" is used the iron-safe-
2 Phenix Ins. Co. v. Angel, 18 Ky. 7 Dorroh-Kellv Mercantile Co. v.
L. Rep. 1034, 38 S. W. 1067, 26 Orient Ins. Co.*104 Tex. 199, 135 S.
Ins. L. J. 722, followed in Mechanics' W. 1165, 40 Ins. L. J. 1211, aff'g
& Traders' Ins. Co. v. Floyd, 20 Ky. Orient Ins. Co. v. Dorroh-Kellv Mer-
L. Rep. 1538, 49 S. W. 543, 28 Ins. cantile Co. — Tex. Civ. App. — , 126
L. J. 335. S. W. 616. See §§ 220 et seq. here-
3 Scottish Union & National Ins. in.
Co. v. Virginia Shirt Co. 110 Va. 8 Coggins v. iEtna Ins. Co. 144 N.
353, 74 S. E. 228, 41 Ins. L. J. 948, Car. 7, 8 L.R.A.(N.S.) 839, 119 Am.
956, Cardwell, J. St. Rep. 924, 56 S. E. 506, 36 Ins.
3a See § 1956 herein. L. J. 354.
4 See § 1947 herein. 9 Hanover Fire Ins. Co. v. Dole,
5 See §§ 1917, 1947, 1987 herein. 20 Ind. App. 333, 50 N. E. 772. See
6 Wvnne v. Liverpool London & also Iiamann v. Nebraska Under-
Globe ' Ins. Co. 71 N. C. 121. See writers Ins. Co. 82 Neb. 429, 118 N.
Pelican Ins. Co. v. Wilkerson, 53 W. 65.
Ark. 353, 13 S. W. 1103.
Joyce Ins. Vol. III.— 218. 3473
§ o()G3e JOYCE ON INSURANCE
inventory-bookkeeping clauses should be construed together and,
where it' ia also provided that "failure to observe the above con-
ditions shall work a forfeiture" of all claim- under the policy, upon
a strict construction of the language, a failure to perform, not urn-.
bu1 all, the conditions is required to work a forfeiture.10 The word
"keep" as used in the iron-safe clause, has two meanings. In the
provision requiring assured to keep a set of books, it means to make
entries therein of the business transacted, and under the require-
ments that insured shall keep the books and inventory in a fire-
proof safe or in some place not exposed to lire, it means thai he
shall care for and preserve them, and his failure to both preserve
and produce them in compliance with tins provision operates to
defeat a recovery.11
§ 2063e. Iron-safe clause: whether contract divisible or entire:
effect of breach.— The contract may be so far divisible as that a
breach of the iron-safe clause as to one part will not avoid the con-
tract a- to the other part.12 And if the contract is divisible, a breach
of the iron-safe clause as to one part, avoids the policy only as to
that part.13 And a breach of the bookkeeping, inventory require-
ment, does not avoid the insurance on building and fixtures where
they and the merchandise are insured under a divisible contract.14
So a breach of the iron-safe clause in a policy covering a stock of
merchandise, fixtures, household furniture, and the building con-
taining them, each insured for a specified sum, avoids the policy
only in respect to the stock of merchandise, and does not prevent
a recovery on account of the property not affected by the breach.
notwithstanding that the policy stipulates that it shall be void and
no action brought on it when any one of its conditions or war-
ranties are broken, provided the insured has committed no fraud,
and no act prohibited by public policy is involved.15 But it, is also
held that when the premium is entire, and there is an identity of
risk the obligation is single and on breach of said clause all re-
covery is barred.16 The much discussed question, however, whether
10 Connecticut Fire Ins. Co. v. "Miller v. Delaware Ins. Co. 14
Jeary, 60 Neb. 338, 51 L.R.A. 698, Okla. 81, 65 L.R.A. 173, 75 Pae.
83 N. W. 78. H21; Sun Mutual Ins. Co. v. Tufts,
11 Hammond v. Niagara Fire Ins. 20 Tex. Civ. App. 147, 50 S. W. 180.
Co. 92 Kan. 851, 58 L.R.A.(N.S.) 15 Fisher v. Sun Ins. Office of
759n 14'' Pae 036 London, 74 W. Va. 694, L.R.A.
^Hanover Fire Ins. Co. v. Craw- 1915C, 610, 83 S. E. 720.
ford 1J1 Ala. 258, 77 Am. St. Rep. 16 Covins v. iEtna Ins. Co. 144
55 25 So 912, 28 Ins. L. J. 045. N. Car. 7, 8 L.R.A. (N.S.) 830, 110
13 Fisher v. Sun Ins. Office of Am. St. Rep. 024, 56 S. E. 506, 36
London, 74 W. Va. 694, 55 L.R.A. Ins. L. J. 354, 359.
L915C. (ilO, 83 S. E. 720.
3474
PARTICULAR REPRESENTATIONS, ETC. § 20631:
the contract is entire or divisible is fully considered elsewhere here-
in.164
§ 2063f. Whether strict or substantial compliance with clause
required. — If the iron-safe clause is a part of the contract and a
warranty, then, logically, inasmuch as the parties have made their
own contract, a literal and strict compliance should, in the absence
of some statute to the contrary, be required in conformity with the
rule in other cases of warranty.17 And what we have elsewhere said
as to a warranty being in effect a condition precedent to recovery
would also apply here.18 But whether or not said clause be con-
sidered a warranty, promissory warranty, a condition precedent or
subsequent, there must be at least a substantial compliance suffi-
cient to enable assurer to ascertain the quantity, kind and value
of goods destroyed and to determine therefrom with reasonable
certainty the amount of damage or loss and liability. So in Ala-
bama there must be at least a substantial compliance, and if from
the evidence the court is unable to say that assured has so complied
with the covenant as to keeping books, the contract is avoided.19
So in Kansas neglect to substantially comply avoids the policy.20
50 in Virginia, assured must show a substantial compliance.1
Another factor which enters largely into the determination of
the question, is the rule that forfeitures are not favored, and that
courts lean towards a liberal construction in favor of assured and
will rather uphold than destroy a contract of insurance.2 Again,
the object or purpose of the clause 3 should be considered, as it evi-
dences to some extent what was contemplated by the parties as to
compliance with the requirement, and from this standpoint the
nature and extent of the business, whether the stock insured is that
16a See § 1931 herein. 20 Shawnee Fire Ins. Co. v. Knerr,
17 See § 1970 herein. See also 72 Kan. 385, 83 Pac. 611, 35 Ins. L.
Phoenix Ins. Co. v. Dorsev, 102 Miss. J. 283, 284, Green, J.
81, 58 So. 778, 41 Ins. L. J. 1507, x Hartford Fire Ins. Co. v. Farris,
1510, Cook, J. (quoted from § 2003s 116 Va. 880, 83 S. E. 377, 45 Ins.
herein) ; Connecticut Fire Ins. Co. v. L. J. 54.
Jeary, 60 Neb. 338, 51 L.R.A. 698, 2 See Arnold v. Indemnity Fire
and note, 83 N. W. 78; German- Ins. Co. of N. Y. 152 N. Car. 232,
American Ins. Co. v. Fuller, 26 Okla. 67 S. E. 574, 39 Ins. L. J. 859, 867,
722, 110 Pac. 763; Hartford Fire Ins. Hoke. J.; Dorroh-Kelly Mercantile
Co. v. Farris, 116 Va. 880, 83 S. E. Co. v. Orient Ins. Co. 104 Tex. 199,
377, 45 Ins. L. J. 55; Prudential 135 S. W. 1165, 40 Ins. L. J. 1211.
Fire Ins. Co. v. Allev, 104 Va. 365, aff'g Orient Ins. Co. v. Dorroh-Kellv
51 S. E. 812. Mercantile Co. 59 Tex. Civ. App. 289,
18 See §§ 1951, 1951a herein. 126 S. W. 616. See also §§ 220 et
19 Georgia Home Ins. Co. v. Allen, seq. herein.
119 Ala. 436, 24 So. 399, 28 Ins. 3 See §§ 220 et seq. herein.
L. J. 199, s. c. 128 Ala. 451, 30 So.
537, 31 Ins. L. J. 60.
3475
< 2063f JOYCE ON INSURANCE
of a large department store with experl assistants, or merely the
stock of a small country store, should be considered, as should also
the custom of the place and the customary manner of doing busi-
ness, the times of opening and closing, etc.4 Having, therefore,
these and other considerations in view, the courts wherein this
question has arisen have shown a general tendency towards a relax-
ation «>f whatever rule may have existed as to strict construction and
literal compliance, and have favored a conclusion which exacts a
substantial hut, only a substantial compliance with the iron-safe
clause, and this conclusion certainly seems more in accord with
ili,. actual intent of the parties in view of the objects and purposes
of such clause and the rules of construction applicable, and with the
justice and reason of the law as to enforcing such actual intent,
than a construction requiring an exact and literal compliance.5
Accordingly it is held that a substantial compliance is suflieient.6
So in a Federal case it is held that substantial compliance is suffi-
cient under the ''iron-safe clause" requiring a set of books and an
inventory to be securely locked in a fireproof safe at night and at
all times when the store is not actually Open for business, or in
some secure place, and that in case of loss assured will produce said
books and inventory; such a clause is a condition subsequent only,
and a literal, exact fulfillment is unnecessary.7 Again, under a Vir-
ginia decision at least substantial compliance is necessary, not a
4 Those points are considered under it is declared that at least substan-
sections following herein. tial compliance is required).
5 Georgia Home Ins. Co. v. Allen, Missouri. — Carp v. Queen Ins. Co.
119 Ala. 436, 24 So. 390, 28 Ins. L. 110 Mo. App. 528, 92 S. W. 1137.
J. 199, 203, s. c. 128 Ala. 457, 30 So. North Carolina.— Arnold v. In-
537, 31 Ins. L. J. 60. demnity Fire Ins. Co. of N. Y. 152
6 Alabama.— Queen Insurance Co. N. Car. 232, 07 S. E. 574, 39 Ins.
of America v. Vines, 174 Ala. 508, L. J. 859.
57 s0 444 41 Ins. L. J. 751. Oklahoma. — Home Ins. Co. of N.
Arkansas.— Queen ' of Arkansas Y. v. Ballard, 32 Okla. 723, 124 Pae.
Ins. Co. v. Malone, 111 Ark. 229, 103 310, 41 Ins L. J. 1408
S. W. 771; Queen of Arkansas Ins. Texas— Continental lire Ins. Co.
Co. v. Forlines, 94 Ark. 227, 120 ^Cummm^ - lex. Civ. App. -,
S. W. 719, 39 Ins. L. J. 700 (stat- 78S. W. 3,8, 98 lex. 115, 81 S. * .
ate) ; Arkansas Ins. Co v McManus, ' s;e ^ pi ioM umkr the nexfc
80 Ark 115 110 S. W. 797, 37 Ins followi S(1(,lons.
L. J. 030 (statute) ; Security Mutual 7 Westcrn Assurance Co. v. Red-
Ins. Co. v. Woodson & Co. 79 Ark. din 15 v g_ c> c A 619) 68 Fe(j.
200, 95 S. W. 481 (statute: Kirby's 708) pardee, C. J., dissenting in i
Dig. sec. 4375a). well-considered opinion; Georgi.-
Delaware. — Continental Ins. Co. v. Home Ins. Co. v. Allen, 119 Ala. 430,
Rosenberg, 7 Pennewill's (Del.) 174, 24 So. 399, 28 Ins. L. J. 199, 203,
74 Atl. 1073, 39 Ins. L. J. 392, 397 s. c. 128 Ala. 457, 30 So. 537, 31
(although in another part of the- case Ins. L. J. 00.
3470
PARTICULAR REPRESENTATIONS, ETC. § 2063g
strict or literal, but only a reasonable compliance.8 And where the
failure to keep books and inventories in a fire-proof safe is alleged
as a defense, it is sufficient if the same, when produced, show a
substantial compliance with the clauses as to the same.9 80 an
averment of non-compliance with said clause, is met by a plea of
substantial compliance, and that the books had been kept substan-
tially as required.10 And if it can be approximately ascertained
from the assured's invoices of purchases, and his books and entries
of cash and credit sales, what the amount of goods in stock was at
the time of the loss, there is a substantial and sufficient compliance.11
§ 2063g. Iron-safe clause: custom of place: customary business
methods. — The custom of the place, as in case of a rural commu-
nity as to the mode of doing business, opening and the closing hours,
must be considered in determining whether the iron-safe clause and
keeping books and inventory therein, has been substantially com-
plied with.12 And if the policy stipulates that the books of account
shall be kept in a safe at night, this will be construed in accordance
with the ordinary requirements of the business and will not be held
to necessitate keeping them there otherwise than during the time
business has ceased, and not from sunrise to sunset.13 And where
the assured kept his books in accordance with the usual method
of country merchants, and assurer wras enabled therefrom to deter-
mine the amount of the loss and liability, there is a substantial
compliance, as where at the time of his application assured had
made a complete inventory of his purchases and sales, cash and
credits then appear from his accounts and books, and he continues
to keep an account of both cash and credit sales.14 So where books
are kept in accordance with the method customary among mer-
chants in that locality, it is sufficient compliance with the require-
ment, although cash sales are entered daily in bulk and the entry
does not show each item of merchandise sold for cash.15 But wThere
8 Scottish Union & National Ins. As to usage: construction, see §§
Co. v. Virginia Shirt Co. 110 Va. 237 et seq. herein.
353, 74 S. E. 225, 41 Ins. L. J. 948. 13 Jones v. Southern Ins. Co. (U.
9 Home Ins. Co. of N. Y. v. Bal- S. C. C.) 38 Fed. 19; Brown v. State
lard, 32 Okla. 723, 124 Pac. 316, 41 Ins. Co. 74 Iowa, 428, 7 Am. St. Rep.
Ins. L. J. 1468. 495, 38 N. W. 135, 18 Ins. L. J. 137 ;
10 Western Assurance Co. of Liverpool London & Globe Ins. Co.
Toronto v. McGlathery, 115 Ala. 213, v. Morris, 84 Ga. 759, 11 S. E. 895.
67 Am. St. Rep. 26, 22 So. 104. 14 Planters' Fire Ins. Co. v. Nichols,
11 American Central Ins. Co. v. 103 Ark. 387, 147 S. W. 68.
Hardin, — Tex. Civ. App. — , 151 15 Arkansas Mutual Fire Ins. Co.
S. W. 1152. v. Woolverton, 82 Ark. 476, 102 S.
12 Capital Fire Ins. Co. v. Kauf- W. 226, 36 Ins. L. J. 607.
man, 91 Ark. 310, 121 S. W. 289, 38
Ins. L. J. 1058.
3477
§ 2063h JOYCE ON ENSURANCE
precisely the same method of 1 kkeeping was used, it was held
thai the question whether it was sufficient was for the jury, and
that assurer musl show thai it was nol intelligible enough to enable
the amounl and value of the property and of the loss to be ascer-
tained. In this case, however, there was evidence in detail of the
amount of loss, of the amounl and value of goods according to the
lasl inventory, the amount of purchases and sales thereafter, the
average profits therein, and also of the amount of .-lock on hand at
the time of the fire.16 It is also held thai even though it is not tin'
custom nor practicable in a country store dealing in country
produce, to procure Mils or invoices from the sellers thereof, still
such fact does not excuse a breach of the clause requiring the tak-
ing of an inventory within a specified time.17
§ 2063h. Iron-safe clause: effect of assured's negligence or in-
advertence as to compliance. — The loss of inventories and books
does not preclude recovery, where assured has exercised the care of
a prudent man acting in good faith, and the loss was not occasioned
through negligence, fault, or design on Ins part.18 And this applies
to the loss of an inventory by theft from an unlocked safe while
the building in which such safe was located was open for business,
and insured used such care on the occasion of the theft as prudenl
men acting in good faith would have used.19 And the iron-ale
clause should not he construed literally so as to operate as a for-
feiture where it is not shown that the loss of assured's books and
inventory was caused by his wrongful, fraudulent or culpably
negligent acts.20 And if the inventory is taken and kept as re-
quired, hut is partially destroyed by lire without assured's fault or
negligence, the terms of the policy are complied with, as where the
inventory was entered in a hook hut the latter was taken out tempo-
rarily in order to post the same at a customary time and in the
manner customary in that place.1 And although insured's inven-
tory and current invoices are losl through his inadvertence in
leaving them out of the safe while preparing a new inventory, still
18 Arkansas Fire Ins. Co. v. (N.S.) 337, 10G Pac. 826, 39 Ins.
Stuckey, 85 Ark. 33, 10G S. W. 203, L. J. 48(5.
37 Ins. L. J. 126. 20 Liverpool & London & Globe
17 Fire Association of Phila. v. Ins. Co. v. Kearney, ISO U. S. 132,
Masterson, 25 Tex. Civ. App. 518, 45 L. ed. 460, 21 Sup. Ct. 326, 30 Ins.
61 S. W. 962. Examine Meyer v. L. J. 248, case affirms 94 Fed. 314,
Insurance Co. of North America, 72 36 C. C. A. 2(15, which affirms 2 Ind.
Mo. App. L66. Ty. 67, 46 S. W. 414, 27 Ins. L. J.
18 Western National Life Ins. Co. 873.
v. Williamson-Halselt-Frasier Co. 37 * Capital Fire Ins. Co. v. Kauf-
Okla. 213, 131 Pac. 691. man, !)1 Ark. 310, 121 S. W. 289, 38
19 German-Alliance Ins. Co. v. Ins. L. J. 1058.
Newbern, 25 Okla. 489, 28 L.R.A.
3478
PARTICULAR REPRESENTATIONS, ETC. § 2063h
if such loss is supplied by satisfactory proofs, such as duplicate in-
voices, showing the exact state of his accounts and what goods arc
destroyed, there is a substantial compliance.2 So the loss of a small
cash book, lost accidentally, or through inadvertence of assured,
is not a breach of the iron-safe clause, where the bank in which
assured deposited, supplied practically all the information covered
by said book and assured produced also a complete set of books and
inventories for inspection.3 Nor is a breach caused by a failure to
put in a safe a small book which contains a part of the inventory,
where the total appears in a ledger, the omission is merely acci-
dental and assurer's agent had inspected the stock only a few days
before.4
But neither the unintentional destruction of the books, nor his
negligence which renders their production impossible, will aid as-
sured where he has failed to comply with this requirement.5 And
if .assured fails to preserve and produce the required inventory and
it is not shown that its loss was occasioned without fault or negli-
gence on his part or of his servants, there can be no recovery, and
he is responsible for the negligence of his servants occasioning the
loss, such a case being one of the performance of a contract and
therefore it differs from that where a fire causing the loss, originates
through the negligence of assured or his servants.6 So leaving
account books in an exposed position in the store when locking and
leaving it for luncheon, with the intention of being absent a half
hour, violates a provision in a policy of insurance on stock and 1
fixtures requiring the books to be kept in an iron safe or in some
place not exposed to a fire which would destroy the property in-
sured, when the building is not actually open for business.7 And
where assured was in the habit of keeping his inventory, books,
and papers in the safe, and he thought the inventory was there,
but upon examination, after the fire, it was never found, and there
were no ashes or other evidence except as above stated that it had
been in said safe, it was held that there was a breach of said iron-
safe clause.8 It is also held that if the loss of a cash book showing
2 Mc-Nutt v. Virginia Fire & 6 Western Assur. Co. v. Kemendo,
Marine Ins. Co. — Tenn. Ch. — , 45 04 Tev. 3(37. (10 S. W. 661, 30 Ins.
S. W. 61. L. J. 402, rev'g Kemendo. v. AVestern
3 Niagara Fire Ins. Co. v. Heflin, Assur. Co. — Tex. Civ. App. — , 57
22 Ky. L. Rep. 1212, 60 S. W. 303. S. W. 293.
4 Merchants' National Ins. Co. v. 7 Joffe v. Niagara Fire Ins. Co. 116
Dunbar, 88 111. App. 574. Md. 155, 51 L.R.A.(N.S.) 1047, 81
5 Raives v. Fire Assoc, of Phila. Atl. 2S1.
— Tex. Civ. App. — , 77 S. W. 424. 8 Alfred v. Hartford Fire Ins. Co.
See Phoenix Ins. Co. v. Sherman, 110 — Tex. Civ. App. — , 37 S. W. 95.
Va. 435, 66 S. E. 81, 39 Ins. L. J.
69, 72.
3479
§§ 2063i, 2063j JOYCE OX INSURANCE
-. is caused by assured's own negligence in leaving it out of the
safe, there is a breach of the requirement as to preservation of
books, etc.9
§ 20631. Iron-safe clause: effect of statutes: generally. — The
policy is nol avoided by a breach of a provision to keep hooks in
;oi iron safe, under ;i statute which changes warranties to represen-
tations which do not avoid the policy unless material and fraud-
ulent.10 And a literal compliance cannot he required where under
the statute only a substantial compliance is necessary.11 Such iron-
safe clause is nol covered by statutory exceptions that any condition
or stipulation in an application, policy or contract of insurance
making the policy void before the loss occurs shall not prevent
recovery thereon by assured unless it he shown by the plaintiff that
such provision or violation thereof did not contrihutc to the loss.12
§ 2063 j. Iron-safe clause: inventory generally. — In determining
what constitutes such inventory as is required by the iron-safe
clause, all parts of such clause should l>e construed together.18 And
it is held that the meaning of the term inventory cannot he limited
by evidence of what other policies require.14 It is also held that a
breach of a clause, under which assured has "covenanted" to take
and preserve an inventory, does not of itself nullify it, or avoid the
policy, but only permits assurer to declare it void at its option.15
If a complete itemized inventory is required such requirement must
be complied with, at least so substantially or to such an extent that
assurer may be fairly and intelligently informed as to assured's
stock of merchandise, how far it has been depleted or added to, if
at all. the extent of the risk carried, and also in case of loss, to en-
able assurer to ascertain what has been damaged or destroyed and
fairly estimate its amount or value, or to appraise the loss.16 The
fact that a stock of merchandise has not been removed from the
stor< house, and that it is covered by the original invoices, does not
9 Fire Association of Philadelphia Co. 59 W. Va. 432, 115 Am. St. Rep.
v. Calhoun, 28 Tex. Civ. App. 409, 924, 53 S. W. 943, 35 Ins. L. J. 590.
(17 S. YV. 153. 14 Roberts, Willis, Taylor & Co. v.
10 Citizens' Ins. Co. v. Crist, 22 Sun Mutual Ins. Co. 19 Tex. Civ.
Ky. L. Rep. 47, 50 S. W. 658, 29 App. 338, 48 S. W. 559.
Ins. L. J. 765. See § 1916 herein. 15 Queen of Arkansas Ins. Co. v.
"Queen of Arkansas Ins. Co. v. Forlines, 94 Ark. 227, 126 S. AY. 719,
Malone, 111 Ark. 229, 163 S. AY. 39 Ins. L. J. 706.
771. 16 llouff & Holler v. Cerman-
12 Rundell & Hough v. Anchor Fire American Ins. Co. 110 Va. 585, 66
Ens. Co. 128 Iowa, 575, 25 L.R.A. S. E. 831, 39 Ins. L. J. 373; Phoenix
(X.S.) 120, and note, 105 N. AV. 112, Ins. Co. v. Sherman, 110 Va. 435, 66
34 Ins. L. J. 72. S. E. 81, 39 Ins. L. J. 69.
13 Ruffner Bros. v. Dutchess Ins.
3480
PARTICULAR REPRESENTATIONS, ETC. §§ 2063k-10C3m
make inapplicable a provision in a fire insurance policy requiring
an inventory.17
§ 2063k. Iron-safe clause: inventory defined. — An inventory
is an itemized, detailed list of articles, merchandise or stock in trade
of ^merchant, an insolvent, or an estate, ordinarily with valuations
but not necessarily so, but as evidenced by the decisions under the
requirements of the iron-safe clause it should include valuations.18
§ 20631. Iron-safe clause: "last preceding inventory" defined. —
The "last preceding inventory" means and is confined to, inven-
tories taken after the insurance is effected, or after the policy is
issued, and it does not include one taken before that time so as to
preclude a recovery, where through inadvertence the one antedating
the policy is not placed in the safe and is destroyed.19
§ 2063m. Iron-safe clause: "complete," "itemized" inventory
defined. — An itemized inventory is one that specifies the different
articles of which the insured stock is composed, and one which
enables assurer to ascertain that fact, and it is not "complete" and
"itemized" if it does not contain substantially all the articles con-
tained in the stock at the time.20
17 Day v. Home Ins. Co. 177 Ala. with the value of each item. Roberts,
600, 40 L.R.A.(N.S.) 652, 58 So. Willis, Tavlor & Co. v. Sun Mutual
549, 41 Ins. L. J. 1187. See Queen Ins. Co. 19 Tex. Civ. App. 338, 48
.Ins. Co. of North America v. Vines, S. W. 559. The inventory of a stock
174 Ala. 568, 57 So. 444, 41 Ins. L. of merchandise, required by an iron-
J. 751. safe clause, is a list of all the articles
18 An inventory is defined as "A in the stock, so itemized as to show
detailed and descriptive list of arti- the kinds and numbers or quantity
eles with or without valuation and thereof, with their values. Ruffner
including such special information Bros. v. Dutchess Ins. Co. 59 W. Va.
as may be deemed necessary: speci- 432, 115 Am. St. Kep. 924, 53 S. W.
fically, such a list of the goods of a 943, 35 Ins. L. J. 590, and see quota-
merchant, of an insolvent estate, or tion from opinion in this case under
of a deceased person," Webster's § 2063p herein. For other defini-
Universal Diet. (ed. 1910-11). tions of inventory see Miller v. Home
"Lexicographers say that 'an in- Ins. Co. of N. Y. 127 Md. 140, 96 Atl.
ventory is an itemized list of the var- 267; Arnold v. Indemnity Fire Ins.
ious articles constituting a collection, Co. of N. Y. 152 N. Car. 232, 67 S.
stock in trade, etc., with their values.' E. 574, 39 Ins. L. J. 859; Coggins
The ordinary and accepted meaning v. iEtna Life Ins. Co. 144 N. Car.
of the word '"inventory" is an item- 7, 8 L.R.A.(N.S.) 839, 119 Am. St.
ized list or enumeration of property, Rep. 924, 56 S. E. 506; Shawnee
article by article.' " Phoenix Ins. Fire Ins. Co. v. Thompson & Rowell,
Co. v. Sherman, 110 Va. 435, 66 S. 30 Okla. 466, 119 Pac. 985, 41 Ins.
E. 81, 39 Ins. L. J. 69, 72, quoting L. J. 445.
Fire Assoc, of Phila. v. Calhoun, 28 19 Arnold v. Indemnity Fire Ins.
Tex. Civ. App. 409, 67 S. W. 153. Co. 152 N. Car. 232, 67 S. E. 574,
The inventory required is one in 39 Ins. L. J. 859.
which the articles in stock are 20 Dorroh-Kelly Mercantile Co. v.
enumerated and itemized in detail Orient Ins. Co. 104 Tex. 199, 135 S.
34S1
§§ 2063n, 2063o
JOYCE OX 1XSIKAXCE
§ 2063n. Iron-safe clause: "inventory" and "invoice" distin-
guished.— An "inventory" means a lisl made by a merchant of the
goods in his store. An "invoice" is also a Lisl of goods, but it is
prepared by the consignor at the point of shipment. It does not
.-how that the goods therein listed have reached the consignee. ^Nor
i- it to be expected thai any one invoice should ever be the equiva-
lent of an inventory, although in exceptional eases invoices might
serve the purpose of an inventory.1
§ 2063o. Invoice not a substitute for inventory. — The require-
ment as to an inventory under the iron-safe clause is not satisfied by
an invoice of goods purchased.2 And statements called invoice- arc
not even a substantial compliance, where it is impossible to clearly
ascertain therefrom what goods had been purchased or received.
or to form any intelligent conclusion therefrom concerning the
business transacted or what stock of goods was destroyed by the
lire.3 Nor can the books of a merchant, together with the original
invoices of his stock, supply Hie requirements of a policy of in-
surance on the property requiring an inventory, where the policy
requires both inventory and hooks. "No case that we have seen goes
to the length of holding a series of separate invoices covering a
considerable period of time during which many transactions may
have been had, may, by assured, he made to do service for the item-
ized inventory demanded by the insurer as a condition of lmhility."4
So a collection of invoices of goods purchased, covering every
article of stock, is not a complete itemized inventory of stock re-
W. 1165, 40 Ins. L. J. 1211, 1215, 111 Ga. 622, 52 L.R.A. 70, 36 So. 821.
relying upon North British Mercan- An invoice of goods by which they
tile his. Co. v. Kemendo, 94 Tex. 367, were purchased is not an inventory.
61 S. W. 1102, and aff'g Orient Ins. Phoenix Ins. Co. v. Dorsey, 102 Miss.
Co. v. Dorroh-Kellv Mercantile Co. 81, 58 So. 778, 41 Ins. L. -I. 1507,
59 Tew Civ. App. 289, 126 S. W. 1511, relying upon Home Ins. Co. of
616. See also Western Assur. Co. v. N. Y. v. Delta Bank, 71 Miss, cos,
Kemendo, 94 Tex. 307, 00 S. W. 061, 614, 15 So. 932, 933. Compare Vir-
30 Ins. L. -I. 402, 405, Brown, J. ginia Fire & Marine Ins. Co. v. Cum-
1Dav v. Home Ins. Co. 177 Ala. mings, — Tex. Civ. App. — , 78 S.
600, 40 L.R.A. (N.S.) 652, 58 So. 599, W. 716 (considered under § 2003r
40 Ins. L. J. 1187 (citing on last herein).
poinl l.'ul'l'ner Bros. v. Dutchess Ins. 3 Hartford Fire Ins. Co. v. Farris,
Co. 59 W. Va. 432, 115 Am. St. Rep. 116 Va. 880, 83 S. E. 377, 45 Ins. L.
924, 8 Am. & Eng. Ann. Cas. 866, .1.54.
53 So. 543; Queen of Arkansas Ins. 4Day v. Home Ins. Co. 177 Ala.
(o. v. Porlines, 01 Ark. 227, 126 600, 40 L.R.A. (N.S.) 652, 58 So. 549,
S. W. 719). See also Queen Ins. Co. 40 Ins. L. J. 1187, Sayre, J. See
v. Vines, 171 Ala. 568, 57 So. 444, 41 Queen Ins. Co. of North America v.
In.. L. .1. 751. Vines, 174 Ala. 568, 57 So. 444, 41
2 Southern Fire Ins. Co. v. Knight, Tns. L. J. 751.
3 182
PARTICULAR REPRESENTATIONS, ETC. § 2063p
quired to be produced under the iron-safe clause.5 And invoices
cannot be substituted for inventories and mere statements which
show only dates and figures, some in the Hebrew and some in the
Syrian language, and which are in such a confused state that they
cannot be understood, and where although some of them are rea-
sonably clear in part, still they do not show the amount of pur-
chases, or the kind, or character, or quantity of the goods, there is
no sufficient compliance.6
§ 2063p. Same subject: whether new store with new goods con-
stitutes exception or qualification. — Whether an invoice can take
the place of an inventory in the case of a newly opened store with
a new stock of goods, must depend primarily upon the view taken
by the court as to the nature of the inventory clause, and whether
a strict and literal, or only a substantial compliance is required,
and in this connection what we have stated under prior sections
as to the object or purpose of the iron-safe clause and the rules of
construction applicable, ought to be of weight in the determination
of the question. It seems, however, from such decisions as have
been rendered that under the circumstances above stated an invoice
may reasonably be held to constitute an inventory where only
substantial compliance with the clause is exacted. It may be added
that if an invoice is substituted for an inventory it ought to meet
the same requirements as to sufficiency as would exist under the
circumstances had there had been an actual inventory. It is held
that the peculiar circumstances of the case may affect the applica-
tion of the term "inventory" as where a store is opened with an
entirely new stock of goods at or about the date of the issuance of
the policy, in such case invoices, giving the quantities of the goods,
with their cost prices, may, if preserved for that purpose, consti-
tute an inventory.7 And if insured has only been in business a
5 Southern Fire Ins. Co. v. Knight, insurance law. Most of the courts, in
111 Ga. 622, 52 L.R.A. 70, 78 Am. dealing with it, simply refer to the
St. Rep. 216, 36 S. E. 821, relied on legal definition of the term 'inven-
and quoted from, Roval Ins. Co. Ltd. tory.' This falls far short of in-
of Liverpool, Eng. (London & Lan- dicating what it is intended for, the
cashire Fire Ins. Co.) v. Kline Bros, function it performs between the par-
& Co. 198 Fed. 468, 470, 471, 117 C. ties. It seems to me perfectly plain
C. A. 228, 41 Ins. L. J. 1590, 1593. that the requirement is intended to se-
6 Hartford Fire Ins. Co. v. Farris, cure, in the interest of the insurance
116 Va. 880, 83 S. E. 377, 45 Ins. company, and possibly both parties,
L. J. 54, a basis, or starting point, upon which
'7 Ruffner Bros. v. Dutchess Ins. to found an estimate of the value of
Co. 59 W. Va. 432, 115 Am. St. Rep. the stock in ease of a loss. It, of
924, 53 S. E. 943, 35 Ins. L. J. 590. itself, indicates nothing except the
The court, per Poffenbarger, J., said : quantum and value of the stock at
"The purpose and object of an in- the time of the taking thereof. It
voice is not very clearly defined in does not indicate what they amount-
3483
i63p JOYCE <>\" ENSURANCE
shorl time the invoices of goods firsl purchased, the entries in his
books showing the total of each consignment of goods with the date
thereof, and the name of the sellers combined with the itemized
statements of these »oods obtained from the sellers, constitute a
substantial compliance with the requirement of an itemized in-
ventory.8 In a Virginia case, however, assured contended that in-
asmuch as he hail started business only aboul one month hefore
id In at any previous or Subsequent mate put upon them by an interested
date, nor the average stock. Itav- party, knowing thai the inventory
ing an inventory at a given date, was made for the purpose of i'onn-
>r, and the invoices for goods ing- the basis of a claim against the
subsequently put in, the determina- insurance company. I am utterly
tion of the aggregate value of all unable to see any force in that con-
the goods in the store at the date tention. Of course, the invoices
of the inventory, and those subse- would not constitute an inventory in
quently put in, is a mere matter of the case of a store which had been
addition. All insurance policies on running for a considerable time.
merchandise require the production They would not afford any basis upon
of the invoices as well as the inven- which to begin the estimate, hut in
tory. Another requirement which the case of a new store starting
goes with the inventory and the bills, simultaneously with the issuance of
as an ally, in working out the esti- the policy, or practically so, the first
mate, is the book in which the ac- hill constitutes as good a basis for
count of sales is kept. After ascer- the beginning of the estimate as an
taining, from the inventory and the inventory could possibly afford. It
bills tor the goods subsequently put has been suggested in one or two
in, the aggregate as above stated, the instances that, if the bills were
quantities and values of the goods pinned together and some indorse-
sold out of the store are deducted, ment made upon them, indicating an
and thus a fair and reasonable in- intention to treat them as an inven-
dication, as to the quantities and tory, they might, on the theory of
value of the goods at the date of substantial compliance, be deemed to
the fire is obtained. The three claus- constitute an inventory. In other
es of the iron-safe provision require words, they constitute an inventory
the inventory and keeping of the if they are indorsed 'inventory,' oth-
books and their protection by means erwise they do not. This, to my
of the iron safe. In determining mind, puts more merit into the name
what they mean, what more reason- of the thing than it is entitled to.
able view could be taken than that It sacrifices substance to mere form
they must all be construed together? and technicality. What is an in-
Some courts exclude the invoices and ventory is to be determined in view
deny to them the force and effect of of the peculiar circumstances of the
an inventory, upon the fanciful case. What would substantially corn-
ground that they are no index to the ply with the requirement in one case
value of the goods. What better evi- would not in another, in which the
deuce of the value of the goods could circumstances are wholly different."
there possibly he than the hills show- See Miller v. Home Ins. Co. of N. Y.
in- what they had cost.' They show 127 Md. 140, 96 Atl. 267.
the value as agreed upon between the 8 Queen of Arkansas Ins. Co. v.
owner of the store and a disinterested Forlines, 94 Ark. 227, 126 S. W.
third party, while an inventory would 719, 39 Ins. L. J. 706.
show the value according to an esti-
34S4
PARTICULAR REPRESENTATIONS, ETC. §§ 2063q, 2063r
the policy was issued, and that four months thereafter the fire,
causing a total loss, occurred, and as he had furnished assurer
certain books and duplicate bills of purchases, and as these had
been examined by assurer's agents, he had, therefore, substantially
complied with the requirements of the iron-safe clause, but the con-
tention was held to be without merit, since assured had contracted
to take, preserve, and produce a complete inventory and also books,
invoices and vouchers, and as he had substantially failed to do so,
there could be no recovery, and also that invoices could not be
substituted for inventories. The court — Cardwell, J., said: "It is
perhaps true that in the case of a store, opening with an entire new
stock of goods on or about the date of the issuance of the policy,
the invoices of the first lot of goods put into it, giving quantities
thereof by items, with the cost price, if preserved and kept for
production upon the demand of the insurer as and for an in-
ventory, would constitute such a list, and the insured would be
considered as having substantially complied with so much of the
policy as required the taking of an inventory ; but that ... is
not this case." 9
§ 2063q. Inventory: compliance with reference to location of
property. — Inasmuch as property is insured at the place named as
being that of the location of the property, the requirement of a
complete itemized inventory in the policy covering that property
must be complied with and confined to the existence of goods at the
place where they are insured, therefore an invoice, taken at the
main store of assured, of goods to be shipped to a branch store and
charged, is not a sufficient inventory of stock on hand at said
branch store, at least not a complete itemized inventory covering-
property there within the terms of the policy, especially so where
there is no proof, but it is only a matter of presumption, that the
goods reached their destination in the quantity, value and con-
dition as shown by said invoice. It was, however, conceded that
said invoice could have been made an inventory such as was called
for by the policy.10 And a duplicate of invoices of goods sent to
a branch store with a description of said goods, and the amount
charged for the same, is not an inventory of stock on hand.11
§ 2063r. Iron-safe clause: what constitutes substantial or suf-
ficient compliance as to inventory: instances. — Inventories are
9 Hartford Fire Ins. Co. v. Far- 144 N. Car. 7, 8 L.R.A.(N.S.) 839,
ris, 116 Va. 880, 83 S. E. 377, 45 119 Am. St. Rep. 924, 56 S. E. 506,
Ins. L. J. 54. 36 Ins. L. J. 354.
10 Phoenix Ins. Co. v. Dorsey, 102 u Fire Association of Philadelphia
Miss. 81, 58 So. 778, 41 Ins. L. J. v. Masterson, 25 Tex. Civ. App. 518,
1507. See Coggins v. ^tna Ins. Co. 61 S. W. 962.
3485
§ 2063r JOYCE UN INS CHANCE
substantially sufficient, even though not so full and particular as
mighl be desired, if assurer can determine therefrom with reason-
able certainty the kind, quantity and value of goods in stock.12
So there is a sufficient compliance although the record from the
inventories and books is not as full and complete as it should have
been if prepared by experts.13 And there is a substantial com-
pliance although a few sheets of an itemized inventory, kept on
separate sheets, are losl or misplaced after the fire, if the amount is
not materially affected thereby and the remaining sheets are de-
livered to the adjuster, who accept- them without objection, and
this is so, even if an inventory is thereafter lost, where the policy
did not require the preservation of the inventory until the trial
bu1 only until after the lire so that it could he examined by
assurer.14 If the inventory taken after the insurance was effected,
gives a detailed statement of a larger portion of the stock on hand
and a description in detail and an itemized valuation of the prin-
cipal articles in which assured was dealing, and he also kept a
ledger and daybook of business dealings, and a hank hook show-
ing additional cash sales, which are testified to by him as con-
taining the entire record of his business since the inventory, there
is a substantial compliance, even though in said inventory in two
instances, different goods are listed or grouped together and valued
at a lump sum.15 A stipulation that unless a complete itemized
inventory had been taken in detail within a year, one should be
taken in detail within thirty days, and also that the last preceding
one if taken should be kept in a fireproof safe, is complied with by
making a new inventory and preserving the same, although the
old one had not been kept because a part thereof had been lost or
destroyed.16 And where the amount of stock properly inventoried,
exceeds in value nearly twice the amount of recovery, and about
eight-ninths of the merchandise is put down item by item with
values set opposite, there is a substantial compliance, even though
the remainder is set down only in lots or groups and so not in a
proper form.17 So a complete inventory made on removal, to-
gether with a small memorandum book thereafter kept of cash and
12 Continental Tns. Co. v. Rosen- Co. of N. Y. 152 N. Car. 232, 67 S.
berg, 7 Pennewill's (Del.) 174, 74 E. 574, 39 Ins. L. J. 859.
Atl. 1073, 39 Ins. L. J. 392. "Arkansas Ins. Co. v. McManus,
"Queen Ins. Co. of North Amor- 8G Ark. 115, 110 S. W. 797, 37 Ins.
ica v. Vines, 174 Ala. 508, 57 So. L. J. C36. See Continental Fire Ins.
111. II Ins. L. J. 751. Co. v. Cummings, 34 Tex. Civ. App.
14 Arkansas Mutual Fire Ins. Co. 214, 78 S. W. 378, 98 Tex. 115, 81
v. Woolverton, 82 Ark. 476, 102 S. S. W. 705.
W. 226, 36 Ins. L. J. 607. 17 Hanover Fire Ins. Co. v. Eis-
15 Arnold v. Indemnity Fire Ins. man, 45 Okla. 639, 146 Pac. 214.
3486
PARTICULAR REPRESENTATIONS, ETC. § 20G3s
itemized credit sales, constitutes a compliance.18 Again, where the
insurance is not upon a constantly changing stock of merchandise,
but upon furniture and fixtures used by assured in his business,
an inventory showing a reasonably correct list of the items insured,
the items lost, and the value thereof, is sufficient, especially so
where the correctness of such list is unquestioned.19 And al-
though an inventory preceding the last, and certain invoices are
burned, still if from the books and invoices preserved it can be
ascertained what sales, purchases and shipments have been made,
there is a substantially sufficient compliance.20 So there is a com-
pliance with the inventory clause where a complete, detailed, and
itemized list, showing amounts and values, was made by assured,
a short time before the policy was issued, when he purchased the
stock which he insured.1 In a Georgia case the somewhat peculiar
objection was made that the required inventory was in Hebrew,
but the court held that there was no merit in the contention,
especially so when it did not appear from any statement from the
record or otherwise, that any part thereof was in that language.2
§ 2063s. Iron-safe clause: what does not constitute substantial
or sufficient compliance as to inventory: instances. — An inventory
which fails to fully show the character or kind of goods is not such
a complete itemized inventory as to be sufficient.3 Nor can sub-
stantial compliance with the provisions of an iron-safe clause which
requires an inventory, be found where nothing is- shown except
some unitemized bills, so that the insured himself states that he
does not know how much of the various classes of goods carried he
had.4 And if no inventory is taken which complies with the
requirements as to a complete itemized statement of stock, and as
to the time within which an inventory must be taken, the policy
is forfeited.5 Nor is there a compliance with said clause, where
18 Home Fire Ins. Co. v. Driver, Henry, — Tex. Civ. App. — , 74 S.
87 Ark. 171, 112 S. W. 200. AY. 792; case aff'd on another point,
19 Home Ins. Co. of N. Y. v. Bal- without passing upon the sufficiency
lard, 32 Okla. 723, 124 Pac. 316, 41 of the inventory in Momj-er & Henry
Ins. L. J. 1468. v. Delaware Ins. Co. 97 Tex. 362, 79
20 Virginia Fire & Marine Ins. S. W. 7, 33 Ins. L. JJ. 379.
Co. v. Cumniings, — Tex. Civ. App. 4 Coggins v. iEtna Ins. Co. 144
— , 78 S. W. 716. See § 2003o here- N. Car. 7, 8 L.R.A.(N.S.) 839, 119
in. Am. St. Rep. 924, 56 S. E. 506, 36
1 Miller v. Home Ins. Co. of N. Y. Ins. L. J. 354.
127 Md. 140, 96 Atl. 267. See Ruff- 5 Dorroh-Kelly Mercantile Co. v.
ner Bros. v. Dutchess Ins. Co. 59 W. Orient Ins. Co. 104 Tex. 199, 135 S.
Va. 432, 115 Am. St. Rep. 524, 53 W. 1165, 40 Ins. L. J. 1211, aff'g
S. E. 943, 35 Ins. L. J. 590. Orient Ins. Co. v. Dorroh-Kellv Mer-
2^Etna Ins. Co. v. Lipsitz, 130 cantile Co. 59 Tex. Civ. App. 289,
Ga. 170, 60 S. E. 531. 126 S. W. 616.
3 Delaware Ins. Co. v. Monger &
3487
§ 2063s JOYCE OX INSURANCE
no itemized inventory is produced, but the different classes of goods
on band are sel down in lump, which is only a summary showing
the total valuation of each class without itemizing the same or
showing where the items can be found.6 So a mere statement of
article- or entire bills put down in a lump sum or gross amount
without specification or detail as to said articles, their kind, quality
or cosl price, is nut a substantial compliance with the requirement
that a complete ami itemized inventory he kept.7 Nor is there a
sufficient or substantial compliance, where the inventory is such
thai it is impossible from the manner in which the items are given
to determine the quantity, the number of items included in a sum-
marized entry, the value per item, the reasonableness of the gross
valuation, and whether they are within the provision of the policy,
and in fact, where there is nothing upon which to base a calcula-
tion, and it also appears that such summarized items amount to
nearly half the amount of insurance called for by the policy.8
And even though small books show the actual weight of merchan-
dise received, and weekly reports sent to another office, taken from
another book which was destroyed, show the number of bales made
with their grades and brand-, and although at the time of the fire
all the merchandise received had been haled, but, except a small
part which had been sold, their weight was merely estimated,
still, conceding that only grades and brands and not values were
called for. if there was no inventory as required, the requirement
therefor is not complied with and there is a breach.9 So while
the omission of unimportant items of little value in the required
inventory or invoice, would be immaterial and not prevent re-
covery, still if there is intentionally omitted articles of three or
four thousand dollars value, and it does not appear that there was
any means by which such omitted articles could be established as
having existed in the stock at the time the policy was issued, and
insurer could not tell the class, kind or value of the different
articles omitted, there is no substantial compliance, and even though
such omission might have been an oversight, and the inventory
6 Arkansas Ins. Co. v. Luther, 85 Eng. (London & Lancashire Fire Ins.
Ark. 579, 109 S. W. 1022, 37 Ins. Co.) v. Kline Bros. & Co. 198 Fed.
L. J. 655. 468, 117 C. C. A. 228, 41 Ins. L. J.
'Phoenix Ins. Co. v. Sherman, 110 1590. The court, per Ward, C. J.,
Va. 435, 66 S. W. 81, 39 Ins. L. J. however, declared: "We think it an
69. See Houff & Holler v. German- inevitable conclusion, although a very
American Ins. Co. 110 Va. 585, 66 S. hard one, that the plaintiff cannot
E. 831, 39 Ins. L. J. 373. recover." The court also quotes from
8 Fire Association of Philadelphia Southern Fire Ins. Co. v. Knight, 111
v. Calhoun, 28 Tex. Civ. App. 409, Ga. 622. 52 L.R.A. 70, 78 Am. St.
67 S. W. 153. Rep. 216, 36 S. E. 821.
9 Royal Ins. Co. Ltd. of Liverpool
3488
PARTICULAR REPRESENTATIONS, ETC. § 20G3t
showed that the enumerated articles were of greater value than the
total amount of the insurance, and it would not have been of any
advantage to insurer to have had all said items upon the inventory,
nevertheless the court cannot vary the contract as made, and aid
assured, although it may work a hardship to them to have the
policy forfeited.10 Again, if an inventory is "loaded" or "padded"
by false entries of articles not on hand, it evidences an intent to
deceive or defraud and it will work a forfeiture of the policy, when
such entries cannot be explained on any reasonable theory of
honest mistake.11 And assurer is entitled to a production of the
required inventory so that secondary evidence of footings thereof
is insufficient.12 If the invoice or inventory does not substantially
contain a complete itemized statement of all the articles of the
stock on hand as required, no right of action exists.13
It is declared in a Mississippi case that "no mere proof that there
was some merchandise, or a large stock of merchandise, in situ
at the time of the fire, can be substituted for an inventory. No
amount of evidence, however, convincing, as to the value of the
goods lost, can suffice to abrogate the covenant and warranty.
The parties to the contract agreed to take an inventory, and this
inventory, taken according to the contract, is the only evidence
competent to prove any loss for which the company is liable, even
though it be conceded that the property described in the policy was
destroyed by fire. The courts will not attempt to limit the right
of contract, and no court can make a contract which was never
agreed to by the parties to the contract, Courts are not authorized
to modify, add to, or subtract from the terms of a valid contract,
and this contract providing for an inventory was entirely valid,
imposed no hardship, but provided a business method whereby the
rights of the parties could be ascertained and adjusted.'' u
§ 2063t. Bookkeeping clause: ordinary intelligence as test of
compliance. — In some jurisdictions there is a compliance if the
record of business transacted is so kept that a person of ordinary
intelligence, accustomed to accounts and acquainted with book-
10 Dorroh-Kelly Mercantile Co. v. 12 Gillum v. Fire Assoc, of Phila.
Orient Ins. Co. 104 Tex. 199, 135 106 Mo. App. 673, 80 S. W. 283.
S. W. 1165, 40 Ins. L. J. 1211, aff'g 13 Dorroh-Kelly Mercantile Co. v.
Orient Ins. Co. v. Dorroh-Kelly Mer- Orient Ins. Co. 104 Tex. 199, 135
cantile Co. 59 Tex. Civ. App. 289, S. W. 1165, 40 Ins. L. J. 1211, aff'g
126 S. W. 66. Orient Ins. Co. v. Dorroh-Kelly Mer-
11 Alfred Hiller Co. v. Insurance cantile Co. 59 Tex. Civ. App. 2S9,
Co. of North America, 125 La. 938, 126 S. W. 616.
32 L.R.A.(N.S.) 453 (annotated on "Phoenix Ins. Co. v. Dorsey, 102
effect of false swearing in proofs of Miss. 81, 58 So. 778, 41 Ins. L. J.
loss), 52 So. 104. 1507, 1510, Cook, J.
Joyce Ins. Vol. III. — 219. 34S9
§ 2063u JOYCE ox LXSI'KaXCE
ingj can understand the same, and there is nothing tending to
show that thr accounts arc kepi in a complicated, unintelligible
manner.16 So in the Federal Supreme Court, in regard to keeping
books, a distinction is made as to the extenl of business transacted,
as in case of a large department store where expert accountants
are employed, and smaller stores, as in the Latter case it is a sufli-
( itiit compliance if the books are so kept that a man of ordinary
intelligence could reasonably and fairly determine the amount
of purchases and sales for cash or credit.16
§ 2063u. Bookkeeping clause: what constitutes substantial or
sufficient compliance: instances. — It is not essential that the record
required be in hook form, although it is provided that a set of hook-
In- kept which shall clearly and plainly present a complete record
of purchases from the date of the inventory, for there is a sub-
stantial compliance if invoices are produced within a reasonable
lime covering all goods purchased since the date of the inventory.17
And a, requirement that an itemized account of daily cash sales
be kept is complied with by proof that daily cash .-ales were entered
upon the books, nor does the failure to keep a merchandise ac-
count in that particular form in hooks, avoid the policy, where the
accounts show the amount of sales and the inventory and the in-
voices, which are preserved, show the amount of goods purchased,
where the statute only requires substantial compliance with the
t< mis of the policy. It is sufficienl if the account is substantially
in such form that the amount of goods on hand may be reasonably
ascertained.18 An account of cash sales need not necessarily be
kept as such, as there is a, sufficient compliance if the amount
thereof can be ascertained by a deduction of credit sales from the
cash account, and assured also keeps inventories showing his pur-
chases, and books in which appear his bank deposits, credits, col-
15 American Central Ins. Co. v. C. C. A. 205, which affirmed 2 Inch
Ware, 65 Ark. 33(5, 40 S. W. 129, Ty. 67, 46 S. W. 414, 27 Ins. L.
27 Ins. L. J. 785; Connecticut Fire J. 873. Quoted from and adopted in
[ns. Co. v. Clark, 24 Ohio Cir. Ct. Prudential Fire Ins. Co. v. Alley, 104
R. 33; Springfield Fire & .Marine Va. 356, 367, 51 S. E. 812; so also
Ins. Co. v. Halsey, — Okla. — , 153 North British & Mercantile Ins. Co.
Pae. 115; Hanover Fire Ins. Co. v. v. Edmundson, 104 Va. 486, 52 S.
Eisman, 45 Okla. 639, 146 Pac. 214; E. 350, so also in Houff & Holler v.
German-American Ins. Co. v. Fuller, German-American Ins. Co. 110 Va.
26 Okla. 722, 110 Pac. 703, 39 Ins. 585, 00 S. E. 831, 39 Ins. L. J.
L. J. 1022. Examine Wadleigh v. 373.
Home Ins. Co. 38 Okla. 310, 132 Pac. "Continental Ins. Co. v. Kosen-
1111. ber«:, 7 Pennewill's (Del.) 174. 74
16 Liverpool & London & Globe Ins. Atl. 1073, 39 Ins. L. J. 392.
Co. v. Kearney, 180 U. S. 132, 45 "Arkansas Ins.' Co. v. McManus,
L. ed. 460, 21 Sup. Ct. 226, 30 80 Ark. 115, 110 S. W. 797, 37 Ins.
Ins. L. J. 248, aff'g 94 Fed. 314, 30 L. J. 030.
3490
PARTICULAR REPRESENTATIONS, ETC. § 2063u
lections and receipts.19 So there is a substantia] compliance where
assured kept a cash Look, wherein was entered all his sales, an
invoice book containing the original hills of purchase furnished
by the sellers, and he had completed his inventory the day of the
fire and had taken it and the cash hook home hut not the invoice
book, hut he obtained duplicates of the invoices from (lie sellers
of the goods.80 Said clause is also substantially complied with
where the account kept shows the amount of purchases and cash
sales,so that the latter deducted from the former shows the amount
of uoods lost, even though the invoice book was not in the safe
and was burned.1 And where substantial compliance is otherwise
shown, it is not a fatal defect that entries appear in the cash
account, of receipts of money on collections and deposit, together
with that received for sales.2 So there is a sufficient compliance
with the bookkeeping requirement, if the amount of purchases,
sales, cash and credit business can be ascertained with the assist-
ance of persons familiar with the system of bookkeeping employed.3
It is also sufficient if the books show how many goods were re-
ceived, and howT many were sold from the date of the issuance of
the policy up to the time of the fire, and it is reasonably clear
that all required information could have been obtained therefrom
and from the preceding inventory.4 So there is a substantial com-
pliance, where the books kept show the assured's daily cash sales
and also with substantial certainty the extent to which the stock
has been depleted and which enable assurer to determine there-
from, together with the last inventory and the books or invoices
showing all purchases thereafter, the amount and value of the stock
lost and the extent of liability.5 And where the invoice book
shows goods purchased, and the ledger and cash book contain
a complete record of all sales made, both cash and credit, there
is a substantially sufficient compliance, and although several day
books or blotters containing entries of daily sales, cash and credit,
were burned and several items of credit were not shown on the
ledger, the completeness of the record as to the value of the goods
19 Queen of Arkansas Ins. Co. v. 3 JEtna Ins. Co. v. Lipsitz, 130
Malone, 111 Ark. 229, 163 S. W. Ga. 170, 60 S. E. 531.
771. 4 Security Mutual Ins. Co. v.
2° Carp v. Queen Ins. Co. 116 Mo. Woodson, 79 Ark. 266, 116 Am. St.
App. 528, 92 S. W. 1137. Rep. 75, 95 S. W. 481, 36 Ins. L.
1 People's Fire Ins. Co. v. Dully, J. 53.
Gorham & Co. 79 Ark. 160, 95 S. W. 5 Continental Ins. Co. v. Rosen-
152, 35 Ins. L. J. 849 (statute re- berg, 7 Pennewill's (Del.) 174, 74
quired only substantial compliance). Atl. 10 1 3, 39 Ins. L. J. 392, 400.
2 McNutt v. Virginia Fire & .Ma-
rine Ins. Co. — Tenn. Cb. — , 45 S,
W. 61.
3491
§ 2063v JOYCE ON INSURANCE
is not affected.6 So the requirement is complied with, where
assured's business is transacted upon a cash basis for sales with
few exceptions, said sales being properly recorded and a record
was also made in the other cases or exceptions, and where there
were small balances not paid by a customer, they were entered
and treated as cash sale- and recorded as such, credit in these cases
was only for temporary accommodation and did not constitute
credit accounts and the total of all these entries was only a small
;. mount.7 And where the failure to comply docs not constitute a
substantial breach and is harmless, it will not avoid the policy,
as where there is an omission to make an entry at once of country
produce taken in exchange or purchased.8
§ 2063 v. Bookkeeping clause: what does not constitute a sub-
stantial or sufficient compliance: instances. — The iron-safe clause.
whereby assured agrees to keep a set of books showing a record of
all business transacted, including purchases and sales for cash and
credit, is not complied with where the books kept by the assured
do not convey any correct or satisfactory idea of the amount of
goods on hand and destroyed by the fire, and there is nothing from
which the insurers can verify the accounts furnished them and
thereby ascertain their accuracy.9 And where it is impossible, by
careful examination, to ascertain with reasonable certainty from
such hooks etc.. as are produced, of a large manufacturing business,
the kinds, quantities, and values of goods used in the different
classes manufactured, nor the amount of. and character of pur-
chases and shipments made, there is no substantial compliance.10
So where the hooks show only the gross amounts of weekly sales
and not the items thereof, there is no compliance with the book-
keeping clause.11 And where assured's hooks show only incom-
plete entries of substantially all his purchases and cash sales, and
he fails to produce any other equivalent record, or any record
except a partial and incomplete one. and no inventory was taken
until about live months prior to the lire, there can be no recovery.12
6 Scottish Union & National Ins. 9 Pelican Tns. Co. v. Wilkinson, 53
Co. v. Andrews cV Matthews, 40 Tex. Ark. 353, 13 S. W. 1103.
Civ. App. 181, 89 S. W. 419, 35 Ins. "Scottish Union & National Ins.
L. J. 37. Co. v. Virginia Shirt Co. 113 Va.
7 American Central Ins. Co. v. 353, 74 S. E. 228, 41 Ins. L. J.
Ware, 65 Ark. 336, 46 S. \V. 129, 27 948.
In-. L. J. 785. ll Fisher v. Sun Ins. Co. of Lon-
8Meyer v. Insurance Co. of North don, 74 W. Va. 694, L.R.A.1915C,
America. 7:; Mo. App. 166. Com- 619, 83 S. E. 729.
pare Fire Association of Phila. v. 12 German Ins. Co. v. Bevill, —
Masterson, 25 Tex. Civ. App. .".IS, Tex. Civ. App. — , 12G S. W. 31,
61 S. W. 962. 39 Ins. L. J. 714. See also Bevill
3492
PARTICULAR REPRESENTATIONS., ETC. . § 2063v
Nor is the clause complied with by merely keeping a daily cash-
book which only shows the amount of cash taken in at the end of
each day, and which doe- not indicate the source of the cash,
whether from cash sale-, the paymenl of pasl due bills, or otherwise :
and evidence establishing the fact of keeping such cash-book alone,
shows such a noncompliance with the requirement as prevents a
recovery on the policy.18 Nor is there a compliance where the
book produced showed merely the memorandum or totals of daily
cash sales and this was the only book kept m the safe after the
inventory was taken, although a hill register was kept with entries
therein of the date and amount of invoices of goods purchased
and the seller's name and when paid, but this register and the
invoices were not kept in the safe and were dot roved by the fire.14
And where the only record, for several months before the fire which
occasioned the loss, consisted of slips preserved from a cash register
for each day. showing the amount of money received daily upon
sales during said period, there is not a compliance with the book-
keeping clause, even though such slips supplement a continued
journal and ledger showing entries made from time to time by
averaging amounts for each day from the total of several days
of sales and also showing a few entries of credit sales.15 And an
inventory completed two or three days before the fire does not
supply an insufficiency arising from failure to keep the required
books showing cash sales.10 The facts may also call for the ap-
plication of a more stringent rule than that which only requires
a substantial compliance with the book-keeping clause, as where
sales are made daily for cash and credit. In such case the re-
quirement of said clause is not complied with where the entries do
not distinguish between cash and credit sales, or from wdiere the cash
is received ; nor is a complete record of the business transacted kept
by entries in a cash book made after daily sales and which covers
collections made from an old but destroyed ledger and also from
a new one, but from which entries it was a matter of impossibility
to form any intelligent conclusion as to the amount of business
transacted or what stock of goods was in store and destroyed by
fire.17 Again, keeping a merchandise account showing goods pur-
v. Merchants' Ins. Co. — Tex. Civ. Ins. Co. 97 Tex. 362, 79 S. W. 7,
App. — , 46 S. W. 914. 33 Ins. L. J. 379, aff'g Delaware Ins.
13 Everett-Ridley-Ragan Co. v. Co. v. Monger & Henry, — Tex.
Traders' Ins. Co." 121 Ga. 228, 104 Civ. App. — , 74 S. W. 792.
Am. St. Rep. 99, 48 S. E. 918. 16 Scottish Union & National Ins.
14 Sun Mutual Ins. Co. v. Dudlev, Co. v. Weeks Drug Co. 55 Tex. Civ.
65 Ark. 240, 45 S. W. 539, 28 Ins. App. 263, 118 S. W. 1086, 38 Ins.
L. J. 44. L. J. 804.
15 Monger & Henry v. Delaware 17 Phoenix Ins. Co. v. Sherman, 110
3493
§ 20G3v JOYCE ON INSURANCE
chased from time to time, some of the entries in which show the
character of the goods and their price3 while many others merely
state tlic oame of the person or firm from whom they were pur-
chased and the amount, is not a sufficient compliance with a re-
quirement in a policy of (ire insurance covering a stock of goods,
thai the insured shall keep a set of books showing all purchases,
.-ales, and shipments.18 And (lie fact, that balances from a set of
hooks containing an itemized statement of business transacted by
the insured during a portion of the term covered by the policy,
were carried forward into a new sel of hooks which were kept in
a fireproof safe, the old hooks being exposed to lire and lost, will
not satisfy the "iron-safe clause" requiring the preservation of
complete record of assured's business during the life of the policy.19
So where cotton in storage is insured, and there i> a failure to pro-
duce books showing "classification" of the cotton destroyed, and
the certificates covering said cotton are avoided, there is not a
sufficient compliance with a requirement as to keeping such hooks
even though assured kept and produced a book showing entries
of cotton transactions, which entries except as to "classification"
were in compliance with the terms of the stipulation.20 Nor is
there a substantial compliance where the failure to produce a
ledger leaves a period of over a month prior to the fire without any
record of business transacted, and only footings of the ledger
kept for said period are shown by a subsequent ledger.1 And
ledger entries of purchases and credit sales together with a bank
pa- 1 k in which the class of deposits is not stated separately
are not a sufficient compliance.2 And where assured produced only
his ledger, into which were transferred the totals of his last in-
ventory taken six months before the fire, together with a leaf from
a ledger of the bank where he deposited to show his cash sales,
Va. 435, GO S. E. 81, 39 Ins. L. J. So. 1(52, 45 So. 835, 36 Ins. L. J.
(it), citing Western Ins. Co. v. Me- 936.
Glattory, 11") Ala. 213, 67 Am. St. On what books and inventories
Rep. 26, 22 So. 104; Pelican Ins. Co. must be kept in a safe to comply
v. Wilkinson, 53 Ark. o\53, 13 S. W. with the requirements of the iron-
1103: Kverett-Rirtlev-Easj-an Co. v. safe clause, see note in 15 L.R.A.
Traders' Ins. Co. 121 Ga. 228, 104 (N.S.) 471.
Am. St. Rep. 100, 48 S. E. 918. 20 Royal Exchange Assur. of Lond.
Distinguishing Prudential Fire Ins. En<?. v. Rosborou^h, — Tex. Civ.
Co. v.' Alley, 104 Va. 356, 51 S. E. App. — , 142 S. W. 70, 41 Ins. L.
812. J. 466.
18iEtna Ins. Co. v. Johnson, 127 1 Chamberlain v. Shawnee Fire Ins.
Ga. 491, 9 L.R.A.(N.S.) 667, 56 S. Co. 177 Ala. 516, 58 So. 267, 41 Ins.
E. 643. L. J. 1194.
19 2Etna Ins. Co. v. Mount, 90 8 Gillum v. Fire Assoc, of Pbila.
Miss. 642, 15 L.R.A. (N.S.) 471n, 44 106 Mo. App. 673, 80 S. W. 283.
3494
PARTICULAR REPRESENTATIONS, ETC. § 2063w
and duplicate accounts from wholesalers of his purchases made
after taking his inventory, and also an atte'rapl to show the extent
of stock by witnesses, it. was held Lnsufficienl evidence of substan-
tial compliance.3 And where neither the entries in the blotter or
ledger or elsewhere, show the amount of goods or cash used out
of the store by assured, so that the adjuster is left to calculation
merely of these omitted items, there is not a substantial compliance
with the bookkeeping clause.4 Nor is there any substantial com-
pliance with the bookkeeping clause where the record of sales was
burned and only hills of goods purchased and inventories are
produced.5 Nor is a set of books made from memory after the fire
any compliance as they must be kept while the facts to be recorded
are transpiring;6 nor does it avail the assured thai a third party.
who has an interest in the insured property, but has nothing to
do with keeping such books, has a complete record of receipts and
shipments.7 And if no books are kept and necessarily, therefore,
cannot he produced after the fire, there is a breach of this clause.8
§ 2063 w. Computation of time: inventory and bookkeeping
clauses. — A warranty to make an inventory once a year is com-
plied with if it is made one year from the date of the policy.9 So
where an inventory is required to be taken within twelve months
there is a sufficient compliance if it appears that within said period
an inventory has been taken and that the articles not covered by
the policy were accounted for as if sold for cash.10 And the book-
keeping, supplements and begins only from the date of the in-
ventory which is required to be taken.11 So where the policy
contains an "iron-safe clause," which requires the insured to keep
a set of books, which shall include the sales, purchases, and last
inventory taken, and in fact a general record of the business, such
clause is complied with where the insured keeps an inventory
taken at the time of effecting the insurance and a set of books
commencing at that date.12 Again, as to the computation of time
3 German Alliance Ins. Co. v. Ful- Philadelphia, — Tex. Civ. App. — ,
ler, 26 Okla. 722, 110 Pac. 763, 39 77 S. W. 424.
Ins. L J. 1G22. 8 .Miller v. Home Ins. Co. of N. Y.
4 Georgia Home Ins. Co. v. Allen, 127 Md. 140, 96 Atl. 267.
119 Ala. 436, 24 So. 399, 28 Ins. L. 9 Citizens' Ins. Co. v. Sprague. 8
J. 199, s. c. 128 Ala. 451, 30 So. 537, Ind. App. 275. 35 N. E. 720. See
31 Ins. L. J. 60. chapter on proofs of loss as to ae-
5 Johnson v. Mercantile Town Mil- counts and particular accounts.
tual Fire Ins. Co. 120 Mo. App. 80, 10 Prudential Fire Ins. Co. v. Al-
96 S. W. 697. len, 104 Va. 356, 51 S. E. 812.
6 Hartford Fire Ins. Co. v. Far- "Hartford Fire Ins. Co. v. Far-
ris, 116 Va. 880, 83 S. E. 377, 45 ris, 116 Va. 880, 83 S. E. 377, 45
Ins. L. J. 54, 58. Ins. L. J. 54, 57.
7 Rives v. Fire Association of 12 Liverpool & London & Globe Ins.
3495
§ 2063w JOYCE ON INSURANCE
under the requirement that an inventory be taken at least once a
year during the life of the policy, the entire year from and after
the date of the policy musl be given within which to take said
inventory, even though the last inventory had been taken prior
to said date, as the provision that an inventory be taken and an
accounl of purchases and sales be kept, are not independent, pro-
visions, but should be construed together, and the bookkeeping is
intended to supplement the inventory made so that by reference,
to both or by an inspection thereof the amount of stock on hand
can be ascertained.13 An inventory musl also be taken within the
stipulated thirty days from the date of the policy, if none has heen
taken within twelve months prior to said policy date, even though
assured has been in business only a short time.14 And where the
occurred prior to the expiration of the thirty days after the
policy was issued, and within which time an inventory was re-
quired to be taken under the terms of the policy, there is no failure
to comply with the iron-safe clause requiring also the keeping of
hooks, as the latter provision is intended only to supplement the
taking of an inventory.15 A requirement that an inventory be
made is held not complied with by making one after the stipu-
lated time therefor, on the ground that assurer is entitled for its
protection to have an inventory in existence, where such is the
intent of the policy, during the entire term of the contract,16
And for the purpose of determining whether or not an inventory
is taken in time, the taking effect of an insurance contract is not
postponed until a clerical error in the policy as to the amount of
the insurance has been rectified, nor until the payment of the
premium, there being no provision in the policy that it shall not
be landing until the premium is actually paid.17 The iron-safe
clause in an insurance policy is not complied with, either literally or
substantially, by the taking of an inventory fourteen days after
the time limit for doing so has expired; and the policy, having
Co v Sheffv, 71 Miss. 919, 16 So. 14 Hartford Fire Ins. Co. v. Far-
307. ' ris, 116 Va. 880, 83 S. E. 377, 45
" Hanover Fire Ins. Co. v. Dole, Ins. L. J. 54.
^0 Ind App. 333, 50 N. E. 772. See 15 Continental Ins. Co. v. Waugh,
also as to time limit for taking in- 60 Neb. 348. 83 N. W. 81.
ventory and loss occurring before 16 Reynol v. German American
time limit expires. Howerton v. Iowa Ins. Co. 10/ Md. 110, 15 L.R.A.
State Ins, Co. 105 Mo. App. 575, (N.S.) 345, 68 Atl. 262, 37 Ins. L.
80 S. W. 27, and that clauses as to J. 277.
making inventory and keeping books n Reynolds v. German-American
etc. should be construed together. Ins. Co. 107 Md. 110, 15 L.R.A.
See also Ilamann v. Nebraska Un- (N.S.) 345, 68 Atl. 262, 38 Ins. L.
derwriters' Ins. Co. 82 Neb. 429, 118 J. 277.
N. Y. 65.
3496
PARTICULAR REPRESENTATIONS, ETC. § 20G3x
become void for that reason, is not revived thereby.18 Nor is it
sufficient to produce an inventory made shortly before the loss and
the account of cash sales kept thereafter until the fire, where the
covenant is to keep a set of books showing a complete record of all
business transactions, including all purchases and sales together
with the last inventory.19
The vendee of insured goods, who takes an assignment of the
policy with assured's assent, thereby effects a new insurance so that
the required thirty days commences from the assignment, and
said vendee and assignee can, therefore, recover for a loss occurring
within said period of time, even though he had not then made an
inventory or kept books, nor is such right of recovery defeated in
such case by the failure of the vendor and assignor to comply with
the requirement that an inventory be made.20
§ 2063x. Iron safe: keeping of books, etc., in. — A condition in a
policy of insurance upon a stock of goods that the books must be
kept in an iron safe at night means that they must be so kept
during the hours between closing business at night and before
opening in the morning. Thus, where it was customary in the
line of business in which the insured was engaged to keep open as
late as from nine to eleven o'clock at night, and a loss occurred at
nine o'clock while the insured was writing up the books, it was
held that the insurer was liable, as the condition could not be con-
strued to mean from sunset to sunrise.1 A failure to comply with
the requirement that books of account be kept in an iron-proof
safe precludes recovery.2 And if it is expressly stipulated that
books of account shall be kept and locked in a fireproof safe at
night, and that the same shall, in case of loss, be produced for
inspection by the adjuster, such a condition must be substantially
complied with as a condition precedent to a recovery.3 So where
such books, inventories etc., as assured kept, are left at night in
places in the building other than in the safe as required, and they
are destroyed, there can be no recovery.4 And although by reason
of rapid changes in the stock the inventory would have been but
of little value to. show the amount of loss, nevertheless the failure
18 Reynolds v. German-American 2 Mitchell v. Potomac Ins. Co. 16
Ins. Co. 107 Md. 110, 15 L.R.A. App. D. C. 241, aff'd on other points
(N.S.) 345, 68 Atl. 262. 183 U. S. 42, 46 L. ed. 74, 24 Sup.
19 Sun Mutual Ins. Co. v. Dud- Ct. 22, 31 Ins. L. J. 570.
ley, 65 Ark. 240, 45 S. W. 539, 28 s Pelican Ins. Co. v. Wilkerson, 53
Ins. L. J. 44. Ark. 353, 13 S. W. 1103.
20 Bayless v. Town Mutual Ins. 4 German-American Ins. Co. v.
Co. 106 Mo. App. 684, 80 S. W. 289. Fuller, 26 Okla. 722, 110 Pac. 763,
1 Jones v. Southern Ins. Co. 38 39 Ins. L. J. 1622.
Fed. 19.
3497
§§ 20G3y, 2063z JOYCE ON INSURANCE
to keep it iii a fire-proof safe will avoid the policy.5 But a failure
to preserve invoices of goods purchased after the inventory, does
no1 constitute a breach, where the policy does not require them to
be kepi in a safe but only that assured shall when required produce
them, or certified copies thereof if the originals were lost, and it
appears that amounts of purchases were entered in the merchan-
dise account, and no demand was ever made for production of
said invoice.-.6
§ 2063y. What constitutes a fireproof safe. — A fireproof safe is
one which is within the fair meaning of this clause if it is such as
i- commonly used and such as, in the judgmenl of prudent men
in the locality of the property insured, is sufficient, as it cannot
lie intended that an absolutely perfect safe shall he kept unless
so expressed.7 And there is no breach although the safe proves
to have been not absolutely fireproof, as there is a sufficient com-
pliance if it was of a kind understood and helieved to be fireproof.8
§ 2063z. Keeping books, etc., in safe "or in some secure place:"
"some place not exposed to a fire." — The words "or in some secure
place not exposed to a lire which would destroy" the building where
the business is carried on does not necessarily mean a place abso-
lutely secure against any fire, and if assured in selecting a place to
keep the books and inventories acts in good faith and with such
care as prudent men would exercise under like circumstances
such clause of the policy is not violated.9 And if a book, showing
cash sale-, is kept in some other safe place, as at home, although
not in a fireproof safe, it is a sufficient compliance with the alterna-
tive in the clause that it be kept in a fireproof safe or in some
secure place not exposed to fire which would destroy the insured
building.10 And although insured does not continue to keep an
inventory in an iron-proof safe as required, nevertheless, if it is
actually produced for inspection, under the warranty, it is suf-
5 Western Assur. Co. v. Kemendo, 8 Underwriters Fire Assoc, v. Pal-
94 Tex. 367, GO S. W. 6G1, 30 Ins. mer & Co. 32 Tex. Civ. App. 447, 74
L. J. 402, rev'g Kemendo v. West- S. W. 603.
era Assur. Co. — Tex. Civ. App. — , 9 Liverpool & London & Globe Ins.
57 S. W. 293. Co. v. Kearney, 180 U. S. 132, 45
6 Arkansas .Mutual Fire Ins. Co. v. L. ed. 460, 21 *Sup. Ct. 326, 30 Ins
Shu key, 85 Ark. 33, 106 S. W. 203, L. J. 248, case affirms 94 Fed. 314,
37 Ins. L. J. 126. 36 C. C. A. 265, which affirms 2 Ind.
7 Liverpool & London & Globe Ins. Ty. 67, 46 S. W. 414, 27 Ins. L. J.
Co. v. Kearney. ISO C. S. 1 :;•_>, 45 873. See Joffe v. Mankowitz v. Ni-
L. ed. 460, 21 Sup. Ct. 326, 30 Ins. agara Ins. Co. 116 Md. 155, 51 L.R.A.
L. J. 248, case affirms 94 Fed. 314, (N.S.) 1047, 81 Atl. 281.
36 C. C. A. 265, which affirms 2 Ind. 10 Podge v. Thomason, 94 Ark 21,
Ty. 67, 46 S. W. 414, 27 Ins. L. J. 125 S. W. 648.
873.
3498
PARTICULAR REPRESENTATIONS, ETC. §§ 2063aa-2064
flcient, as it is only necessary that it be safely kept and produced
if so desired where the policy also permits the inventory and books
to be kept "in some place not exposed to a fire which would de-
stroy"' the building.11
§ 2063aa. Removal of inventories, etc.: emergency created by
threatened fire. — The requirement, as to keeping books and in-
ventories in a fireproof safe at night, or in "some place not exposed
to a fire which would destroy the building, does not apply in case
of an emergency created by a lire raging in the vicinity which
threatens to consume the building, the same not being actually
shut up, and interrupts business operations and necessitates a sus-
pension of business. Under such circumstances, however, insured is
required to exercise reasonable diligence to preserve said books and
inventories.12 And assured is not required to leave his books and
inventory in the safe where it is provided that he keep them in a
fireproof safe or in some secure place not exposed to fire, but he
may, in case of threatened fire, remove them to what he believes
in good faith, is a safer place, even though the inventory is lost
during such removal and cannot, therefore, be produced.13
§ 2063bb. Demand by assurer for production of books, etc. — A
demand by assurer's authorized agent for all assured's books and
papers must be complied with in a reasonable time, and if said
agent is informed that those produced are all assured has, then
the agent need not inquire in detail whether other required ones
were kept.14 A statutory requirement for an examination of books
.etc., in the neighborhood of the fire, necessitates a demand therefor
in order to preclude a waiver of forfeiture for breach of the iron-
safe clause.15
§ 2064. Iron safe: keeping books, etc., in: waiver and estoppel. —
The "iron-safe clause" in a policy may be waived the same as other
clauses, warranties or conditions, and said clause is waived where
11 Continental Ins. Co. v. Rosen- of Liverpool, Eng. (London & Lan-
berg, 7 Pennewill's (Del.) 174, 74 cashire Fire Ins. Co.) v. Kline Bros.
Atl. 1073, 39 Ins. L. J. 392, 397. & Co. 198 Fed. 46S, 470, 471, 117
12 Phrenix Ins. Co. v. Schwartz, 115 C. C. A. 228, 41 Ins. L. J. 1590, 1593.
Ga. 112, 57 L.R.A. 752, 90 Am. St. 14 Continental Ins. Co. v. Rosen-
Rep. 98, 41 S. E. 240. berg, 7 Pennewill's (Del.) 174, 74
13 Liverpool & London & Globe Ark. 1073, 39 Ins. L. J. 392, 400.
Ins. Co. v. Kearnev, 180 U. S. 132. 15 Culver v. Williamsburgh City
45 L. ed. 460, 21 Sup. Ct. 226, 30 Fire Ins. Co. 140 Mo. App. 205, 124
Ins. L. J. 248, aff'g 94 Fed. 314, 36 S. W. 540, Am. Stat. 1906, p. 3792,
C. C. A. 265, which affd 2 Ind. Ty. Rev. Stat. 1899, see. 7976. See Carp
67, 46 S. W. 414, 27 Ins. L. J. 473. v. Queen Ins. Co. 116 Mo. App. 52S,
The Supreme Court case above cited 92 S. W. 1137, aff'g 104 Mo. App.
is quoted from on this point and also 502, 79 S. W. 757.
distinguished in Royal Ins. Co. Ltd.
3499
§ 2064 JOYCE ON INSURANCE
assurer with knowledge of a breach thereof voluntarily relin-
quishes its right to insisl thereon, or where it expressly or im-
pliedly recognizes the policy as valid and subsisting. Such waiver
may also arise from declarations or acts, or from a forbearance to
act on the pari of assurer, or its authorized agent; or an estoppel
may be created to assert said breach or a forfeiture, where, with
knowledge, assurer or its authorized agent by conduct or declara-
tions lead- assured to act in reliance thereon, and make expend-
itures or put himself to trouble under the justifiable belief that
insurer will not then insist upon the breach or forfeiture.16
The iron-safe clause covering the making of an inventory, keep-
ing of hooks, etc., is waived, where, after notice and knowledge
of the facts constituting the forfeiture assurer adjusts the loss and
promises, without restriction, to pay the policy amount, notwith-
standing a stipulation therein requiring indorsement thereon of
any waiver.17 So where with knowledge of a breach of said clause
and also that the books are burned in consequence, assurer re-
quires assured to furnish it with copies of such books and invoices
16 Alabama. — Georgia Home Ins. sured and caused him to incur ex-
Co. v. Allen, 119 Ala. 436, 24 So. pease).
399, 28 Ins. L. J. 199, 203, s. e. Assurer may waive the breach of
L28 Ala. 451, 30 So. 537, 31 Ins. the iron-safe clause without any new
L. J. 60. consideration therefor, and such
Arkansas.— Queen of Arkansas waiver or estoppel arises, or may lie
Ins. Co. v. Forlines, 94 Ark. 227, inferred, where assurer with knowl-
L26 S. W. 719, 39 Ins. L. J. 706. edge of the facts so conducts him-
Indiana. — Hanover Fire Ins. Co. self that assured is justified in believ-
v. Dole, 20 Ind. App. 333, 50 N. E. ing that a forfeiture will not be in-
772 (assurer estopped by continuing sisted upon or enforced and he is
policy in force after knowledge of therefore led to expend money or
breach, notwithstanding inhibition on effort in presenting his demand. Tra-
poliey as to waiver by agents). vis v. Continental Ins. Co. — Mo.
Iowa.— Henderson v. Standard App. — , 179 S. W. 766, 47 Ins. L.
Fire Ins. Co. 143 Iowa, 572, 121 N. J- 58.
W. 714 (adjuster requested assured A* to powers of agents waiver,
to make inventory and secure dupli- ftc.,_see §§ 424 et sen, o33 et sen,
, • • -. herein. As to notice to and knowl-
cate invoices). , „ es, c,c K1C
,,• ■ Tr . r, - -n edge of agent, see ss 515 et sen., 5-lb
Missouri. — Keet-hountree Dry ,6 ,to .' V° . ' ' r
n n n -M .-, rn m • et sen. herein. As to powers or
Goods Co. v. Mercantile town J\lu- . : ,, , r ts cr-e
i t n inn ixr a -„, -, agents concerning the loss, see §3 5/5
tual Ins. Co. 100 Mo. App. o04, /4 f i • &
s w ,fiq ll et seq. herein.
' " " - On waiver of provision in fire
South Carolina.— -Kingman v. Lan- poliey requiring the keeping of books
r-ashire Ins. Co. 04 S. Car. :j99, 32 .,„,, v„u,.|1(.rs in ., safe or safe place,
S. E. 762. see notes in 51 L.R.A. 713, and
Texas. — American Central Ins. Co. L.R.A.1916F, 759.
v. Nunn, — Tex. Civ. App. — , 79 S. 17 Tillis v. Liverpool & London &
W. SS (agent had knowledge and ad- Globe Ins. Co. 46 Fla. 268, 35 So.
juster with knowledge examined as- 171, 33 Ins. L. J. 289.
3500
PARTICULAR REPRESENTATIONS, ETC. § 2064
for their examination, and induces him to incur labor and expense
in procuring them, there is a waiver.18 And if any expense is
incurred by assured, or there is a loss of time in obtaining invoices,
bills and statements from banks upon request made by assurer or
its agents with knowledge of the breach, there is a waiver or
estoppel.19 And where assured can produce only a partial invoice
which does not show the cost price of goods, there is a waiver if
he obtains from the wholesale dealers and submits to assurer dupli-
cate bills from which the amount of loss can be adjusted, assured
having been induced to obtain the same by reason of the adjuster'.-
advice and assurance that the loss could and would thereupon be
adjusted.20 If the insured, having failed to comply with this
clause, is, after a loss, required by the company to produce bills
and vouchers for all goods which he has received for several years,
such action on the part of the company is held to be a waiver.1
So where assurer with full knowledge of the facts attending a loss,
and of the failure of the insured to keep their books and inventories
in a fireproof safe, as required by the policy, and which was made
a ground of forfeiture, accepts and retains the stipulated premium,
and requires insured to procure duplicate bills and invoices, it
will not thereafter be permitted to take advantage of the forfeiture.2
And, if it appears from the application that no iron safe was owned
by assured, there is a waiver.3 And a nonwaiver clause may itself
be waived.4
But no waiver or estoppel is created by a mere failure, after loss
and denial of liability because of a discovery of a breach of the
iron-safe clause, to return or offer to return the unearned part of
the premium paid when the policy was issued, no demand for such
return or offer to surrender the policy being made. A tender,
however, of said unearned premium accompanied in this case a
plea of forfeiture in the action to recover on the policy,5 nor is
18 Crown v. State Ins. Co. 74 Iowa, As to premiums etc. ; waiver and
428, 7 Am. St. Rep. 495, 38 N. W. estoppel, see §§ 1353 et seq. herein.
135. 3 Retail Merchants' Assoc. & Mu-
19 Pace v. American Central Ins. tual Fire Ins- Co- v- Cox> 13S IH.
Co. 173 Mo. App. 485, 158 S. W. APPi 14- 0i . 3 _ T
S92, 42 Ins. L. J. 1501. n Henderson v Standaxd Fire Ins.
■* Travis v. Continental Ins. Co. Co. 143 W 572, 121 N. W. ,14.
- Mo. App. -, 179 S. W. 760, 47 0n e^ct of n0^aiver. agreement
T _ T -Q on conditions existing at inception
Ins. L. J. o8. of policy, see note in 13 L.R. A. (N.S.)
1 Brown v. State Ins. Co. /4 Iowa, §2g
428, 7 Am. St. Rep. 495, 38 N. W. V^tna InS- Co_ V- Mount, 90 Miss.
135. 642, 15 L.R.A.(N.S.) 471n, 44 So.
2 Gish v. Insurance Co. of North 162, 45 So. 835, 36 Ins. L. J. 936.
America, 16 Okla. 59, 13 L.R. A. As to return of premiums and as-
(N.S.) 826, 87 Pac. 869. sessments, see §§ 1390 et seq. herein.
3501
§ 2064a JOYCE ON INSURANCE
said clause waived by refusing payment of the gross amount of
loss under a divisible contract.8
§ 2064a. Same subject: agent's knowledge, etc. — A soliciting
agent who collect- premiums, issues and countersigns policy has
power to waive the iron-safe clause.7 So assurer may be bound by
the acts of its authorized agent in the matter of waiver, notwith-
standing an inhibition in the policy, or it may be estopped to deny
its agent's authority.8
An insurance agent with power to make and issue policies has
apparent power In waive, prior to l<>->. a breach of an iron-safe
clause by him attached to the policy, resulting from the failure
df the insured to make an inventory of stock within a certain lime
from the date df the issuinc; of the policy.9 And where assured
states to assurer's agent that he is in doubt a.- to which one df two
dale- is that on which the last inventory was taken, and said agent
inserts one of said date- and it is erroneous, assurer is e-p.pped to
assert a hreach of the warranty.10 And there is a waiver of the
requirement of an inventory where the only inventory assured
ever had consisted of book entries of totals by dray loads and in-
voices of dray loads destroyed by the fire, and the adjuster witli
knowledge thereof told assured that duplicates of said invoices
would serve all purposes, and those were obtained by assured. Nor
is there any less a waiver in such case because of a stipulation
that assured shall produce for examination by assurer as often as
required all invoices etc., as such invoices relate only to those
covering goods purchased after making inventory.11 So the re-
quirement of an inventory may he modified by the fact that in-
surer's agent knew that goods were in original packages in the
6 Keet-Rountree Dry Goods Co. v. agent's authority and is bound by his
Mercantile Town Mutual Ins. Co. acts); Old Colony Ins. Co. v. Starr-
100 Mo. App. 504, 74 S. W. 169. Mayfield Co. — *Tex. Civ. App. — ,
7 Riley v. American Central Ins. L35 S. W. 252; German Fire Ins. Co.
Co. 117 Me. App. 229, 92 S. W. v. Gibbs, Wilson & Co. 43 Tex. Civ.
11 17. App. 407, 92 S. W. 1068, 96 S. W.
As to powers of agents, waiver, 760 (knowledge of adjuster and of
etc. see >:>; ti'l et seq., ">3.'5 et seq. local agent precludes assurer). See
herein. As t<> notice to and knowl- S 39 herein.
edge et' agent, see §§ 515 et seq., 5-16 9Richard v. Springfield Fire &
et- seq. herein. As t<> powers of Marine Ins. Co. 114 La. 794. 108
ts concerning the loss, see §§ 575 Am. St. Rep. 359, 38 So. 563, 60
el seq. herein. L.R.A. 27S.
8 (^neen of Arkansas Ins. Co. v. 10 1 J isslcr v. American Central Ins.
I'<. rimes, 94 Ark. 227. 120 S. W. Co. 150 Mo. 366, 51 S. W. 75."). 28
718, 39 Ins. L. J. 706 (waiver); Ins. L. J. 615.
Shook v. Retail Hardware Mutual xl Queen of Arkansas Ins. Co. v.
Kiic Ins. Co. 154 Mo. App. 394, 134 Forlines, 94 Ark. 227, 126 S. W. 719,
S. \V. 589 (assurer estopped to deny 'V.) Ins. L. J. 706.
3502
PARTICULAR REPRESENTATIONS, ETC. § 20G4a
warehouse, to cover which the policy Ii.nl lieen transferred, and that
he also knew that no inventory could or would be kept and raised
no objection.12 Again, a soliciting agent's knowledge that assured
had no safe and would not and did not comply with the iron-safe
clause operates as a waiver of the condition such knowledge having
been possessed by the agent prior and subsequent to the execution
of the contract.18 And where the agent who solicited the risk,
made a personal inspection and knew that assured kept no iron
safe, and did not intend to get one until some time later, the
assurer is hound both by waiver and estoppel.14 So the iron-safe
clause is waived and the insurer estopped where the agent is fully
informed as to the nature of insured's business, and is given the
reasons why he has no iron safe and the agent assures him that
ir is all right and the premium is paid and the policy issued by
the company.15 It is held in Kentucky that an agreement by
insured under a clause in his policy to keep an iron safe and to
keep his books therein is not binding, when the agent soliciting
the insurance knows that there is no such safe kept on the premises,
and there is no consideration shown for such agreement.16 A
breach of the iron-safe clause is also waived, where the adjuster,
with full knowledge thereof, directs assured to send in his proofs of
loss, which he does, and thereby incurs expense and trouble, and
this is so, even though said agent's knowledge was not obtained
directly from assured.17 And notwithstanding the non-waiver
12 Day v. Home Ins. Co. 177 Ala. Fund Mutual Fire Ins. Co. 120 Mo.
600, 40 L.R.A.(N.S.) 652, 58 So. App. 1, 96 S. W. 237.
549, 40 Ins. L. J. 1187, so decided 16 Germania Ins. Co. v. Ashby, 112
on rehearing of the first case as to Ky. 303, 99 Am. St. Rep. 295, 65
which the court per Sayre, J., in this S. W. 611. Compare § 2064b here-
case said: "I am unable to agree." in. See as to validity and con-
' Although this declaration is evidently sideration, Phoenix Ins. Co. v. An-
only an expression of the writer of gel, 18 Ky. L. Rep. 1034, 38 S. W.
the opinion. 1067, 26 Ins. L. J. 722, and criticism
13 Riley v. American Central Ins. thereon in note thereto under § 2063
Co. 117 Mo. App. 229, 92 S. W. herein.
1147; Citizens Ins. Co. v. Crist, 22 n Rundell & Hough v. Anchor Fire
Ky. L. Rep. 4/ 56 S. W 6.8, 29 Ins. Co. 128 Iowa" 575, 25 L.KA.
Ins L. J. 765 (assurer bound by (N.S.) 20n, 105 N. W. 112.
ao-ent s knowledge that assured had . , » , . .
no iron safe). But compare cases As ^ ™^ Y f & JUSt"
cited under § 2064b herein; Mitchell er> see *§ °,34 et secl" herem-
v. Mississippi Home Ins. Co. 72 0n whether failure of insured to
Miss. 53, IS Am. St. Rep. 535, 18 sPeak or Rct after notiee of breach
So. 86. of policy constitutes a waiver there-
14 Phoenix Ins. Co. v. Handle, 81 of, see notes in 25 L.R.A.(N.S.) 1,
Miss. 720, 33 So. 500, 32 Ins. L. J. and 51 L.R.A. (N.S.) 261.
472. . On furnishing blanks for proofs
15Rudd v. American Guarantee of loss or claim as a waiver of
3503
§ 2064b JOYCE ON INSURANCE
agreement, the iron-safe clause is waived by the acts of the a.^ent
and adjuster of the insurer in entering into an adjustment of the
loss with insured, after being informed of his non-compliance with
said clause, and offering to pay the amount of the loss.18 There
i- also a waiver where an agent of the insurer after the tire receives
tin- account hooks of the insured with knowledge of the fact that
the books were not in the safe at the time of the lire, and states to
(he insured at the time the hooks are delivered to him that it is
••all right." 19 The question of a waiver of the iron-safe clause by
the agenl may. however, be one for the jury.20
§ 2064b. Same subject: agent's knowledge, etc.: when no
waiver. — Although the agent has actual information and knowl-
edge as to the method of keeping books, but makes no objection,
no waiver or estoppel is thereby created.1 So knowledge of the
soliciting agent that insured does not intend to comply with the
rtM^uirement as to keeping books and preserving an inventory does
not estop assurer to avail itself of a non-compliance.2 Nor does
the agent's knowledge that assured had no safe nor the former's
statements that the stipulation was not enforced or insisted on in
such case-, constitute evidence of waiver or estoppel.3 And knowl-
edge of the agent when the policy was issued that assured had no
iron safe, said agent being also familiar with the store, building,
and stock, cannot be construed into a waiver of the requirement to
keep the books at night, and when the store was not open for busi-
ness, in some secure place not exposed to a lire that would destroy
the building in which the insured property was kept.4 So it is
held that insurer is not bound by any agreement with its agent,
before delivery of the policy, to the effect that it was unnecessary
to keep a safe or books.5 Nor is an examination of a.-su red's books
breaches of condition or forfeiture, 306 Ga. 461, 32 S. E. 595, 28 Ins.-
see note in L.H.A.1917A, 1065. L. J. 402.
18 Rudd v. American Guarantee 2 Sowers v. Mutual Fire Ins. Co.
Fund Mutual Fire Ins. Co. 120 Mo. 113 Iowa, 551, 85 X. W. 7G3.
App. 1, 96 S. \Y. 237. As to waiver 3 Berry v. Virginia State Ins. Co.
by acts of adjuster, see §§ 584 et 83 S. Car. 13, 64 S. E. 859; Ilan-
seq. herein. kinson v. Piedmont Mutual Ins. Co.
"Curnow v. Phoenix Ins. Co. 46 80 S. Car. 392, (il S. E, 905. But
S. Car. 79. 24 S. E. 74. See also compare cases cited under § 2064a
Brown v. Slate Ins. Co. 74 Iowa, 42S, herein.
7 Am. St. Rep. -195, 38 X. W. 135, 4 Shawnee Fire Ins. Co. v. Knerr,
noted above under preceding section. 72 Kan. 385, S3 Pac. 611, 35 Ins.
20 Travis v. Continental Ins. Co. L. J. 283, 286.
— Mo. App. — , 179 S. W. 766, !7 B Gillum v. Fire Assoc, of Phila.
Ins. L. -I. 58; Shook v. Retail Hard- 106 Mo. App. 673, 80 S. W. 283;
ware Mutual Fire Ins. Co. 154 Mo. Germania Ins. Co. v. Brownwell, 62
App. 394, L34 S. W. 589. Ark. A3, 34 S. W. 83 (not waived
1 Morris v. Imperial Ins. Co. Ltd. "by agent's stating that compliance
3504
PARTICULAR REPRESENTATIONS, ETC. § 2064b
after the fire of itself a waiver.6 So a non-waiver agreement may
preclude what mighl otherwise constitute a waiver of the iron-safe
clause.7 And the effect of a non-waiver agreemenl with the as-
sured as to the examination of certain evidence to supply evidence
destroyed by assured's breach of the iron-safe clause is not waived
and the insurer precluded from a defense by the agent's statements
that if said agreement is signed and the required documents pro-
duced the loss will he paid.8 JSTor is the right to a defense for breach
of said clause waived by acts of the adjuster in investigating the
fire and the damage sustained where there is a non-waiver agree-
ment.9 Nor is there a waiver of noncompliance with the bookkeep-
ing clause by merely requiring assured to submit to one exami-
nation or to several examinations under oath and to produce hook-.
etc., where the policy provides therefor and especially so where the
policy also contains a non-waiver stipulation.10
Again, it is held that where the iron-safe-bookkeeping inventory
clause is a warranty, and there is a breach thereof, the policy is
absolutely avoided beyond the power of any agent to revive it.11
unnecessary). Same ruling, North- That no waiver from investigation,
western National Ins. Co. v. Mize, — etc., under New York Standard Pol-
Tex. Civ. App. — , 34 S. W. 670. icy. See Alfred Hitler & Co. Ltd.
6 Fire Association of Philadelphia v. Insurance Co. of North America,
v. Masterson, 25 Tex. Civ. App. 518, 125 La. 938, 32 L.R.A.(N.S.) 453,
61 S. W. 962. 52 So. 104.
7 Dav v. Home Ins. Co. 177 Ala. As to waiver by acts of adjuster
600, 40 L.R.A.(N.S.) 654, 58 So. 549, see §§ 584 et seq. herein.
41 Ins. L. J. 1187. 10 American Central Ins. Co. v.
8 Phenix Ins. Co. v. Stahl, 72 Kan. Nunn, 98 Tex. 191, 68 L.R.A. 83,
578, 83 Pac. (ill, 35 Ins. L. J. 309. S2 S. W. 497; Scottish Union & Na-
9 Shawnee Fire Ins. Co. v. Knerr, tional Ins. Co. v. Weeks Drug Co. 55
72 Kan. 385, 83 Pac. 611, 35 Ins. L. Tex. Civ. App. 263, 118 S. W. 1086,
J. 283; Keet-Kountree Dry Goods 38 Ins. L. J. 804; City Drug Store
Co. v. Mercantile Town Mutual Ins. v. Scottish Union & National Ins.
Co. 100 Mo. App. 504. 74 S. W. Co. — Tex. Civ. App. — , 44 S. W.
469 (not waived by investigation 21.
stipulated to be made without preju- u Finleyson Bros. v. Liverpool &
dice to either party) ; Roberts, Wil- London & Globe Ins. Co. 16 Ga.
lis, Tavlor & Co. v. Sun Mutual Ins. App. 51, 84 S. E. 311.
Co. 19 Tex. Civ. App. 338, 48 S. W.
559.
Joyce Ins. Vol. III.— 220. 3505
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