moved from a burning house and before a guard can
be placed over it, some valuable pieces are stolen.
The owner is entitled to recover the value of the
stolen property on the insurance policy. If, how-
ever, the property is left in the street unprotected for
an unreasonable time, and loss occurs, no insurance
can be recovered.
Lightning clause. - - The standard policy does not
insure against loss which occurs through lightning
where ignition does not result. If lightning strikes
a building and sets fire to it, the damage can be re-
covered without a special lightning clause, but if it
merely damages the property without setting fire to
it, no insurance can be recovered. There is some-
194 INDEMNITY CONTRACTS
times added a lightning clause which provides that
loss by lightning may be recovered.
Pro rata clause. - -The standard policy contains
the pro rata clause which provides that where more
than one company is carrying insurance on a piece
of property, each will pay such a part of the loss as
his insurance is of the whole insurance at the time of
the fire. It should be stated, however, that the
standard policy further provides that additional
insurance with other companies may not be taken
out without the consent of the first company. This
is to prevent overinsurance. It is against public
policy to permit owners to insure their property for
all or more than it is worth. Overinsurance tends
to make people careless with their property and may
also encourage dishonest persons to destroy it for
the insurance.
Vacancy clause. It is usually provided that if
the property remains vacant and unoccupied for a
certain length of time, usually ten days, the policy
shall become void. This does not apply to tempo-
rary absence on a visit, but, if an owner is to be away
from his property for a considerable length of time,
he should go to his agent and secure a vacancy per-
mit which will be granted to him and which may be
attached to his policy.
Alienation and cancellation clause. Another clause
provides that if there is any change in interest, title,
or possession, the policy becomes void unless the
company assents to such change. It is better, how-
FIRE INSURANCE 195
ever, to have the policy canceled under the can-
cellation clause which provides that the insured may
request the cancellation of a policy at any time upon
giving the company notice, and the company may
also cancel the policy at any time upon giving notice.
When a policy is canceled under the cancellation
clause, the insured is entitled to a refund of such part
of the premium as has not been earned.
Rebuilding clause. - It is usually provided that
in case of total destruction of the property the
insurance company shall have the right to re-
build, and under this clause the company may re-
build instead of making payment in money for
the loss.
102. Renewal. - When the term of insurance has
expired, it is customary to renew the policy by having
a brief renewal receipt attached to the old policy
giving it effect for a new term. This does away
with the necessity of writing a new policy covering
the same property.
103. Proof of Loss. Immediately after loss has
occurred it is necessary for the owner to file his
claim, together with proof of loss, with the company
through their agent. In important cases the com-
pany will send an adjuster whose business it is to
ascertain the exact extent of the loss and report his
finding as a basis for settlement. It should be em-
phasized that, no matter how much insurance is
carried on the property, nothing can be recovered
196 INDEMNITY CONTRACTS
beyond the amount of loss which can be actually
proved. In view of this fact, it is very desirable that
one having property insured, particularly personal
property, should prepare and keep on file an inven-
tory showing exactly the amount and value of the
property. When this is done, it is a comparatively
easy matter to prove the entire loss, otherwise many
items may be forgotten and only partial loss be re-
covered.
104. Summary. In fire insurance the one seek-
ing insurance should know the agent and the com-
pany, and he should thoroughly understand his
policy in accordance with the terms of which settle-
ment will be made in case of loss.
LESSON LII
LIFE INSURANCE
105. DEFINITION AND EXPLANATION.
106. PARTIES AND THE CONTRACT.
107. INSURABLE INTEREST.
108. APPLICATION FOR INSURANCE.
105. Definition and Explanation. Life insurance
is an indemnity against loss occurring through the
death of a person. A company agrees to assume the
risk of loss upon payment of a certain amount, called
a premium, and the amount of insurance may be paid
LIFE INSURANCE 197
in one sum upon the death of the insured, or in in-
stallments which may continue for a stated length of
time. There are a great many different forms of in-
surance, and the cost depends upon the risk involved,
and the plan according to which the insurance is to be
paid.
106. Parties and the Contract. - The person
whose life is insured is called the insured, and the
company who undertakes to pay the indemnity in
case of loss is called the insurer, and the one for whose
benefit the insurance is taken out, is called the bene-
ficiary: It is very important that persons who in-
sure their lives should understand that the policy
which is given them is a contract between the com-
pany and themselves, and that agents have no author-
ity to vary the terms of this contract in any partic-
ular. One who receives an insurance policy should
read it very carefully and be sure that he under-
stands all its terms.
107. Insurable Interest. An insurable interest
exists when one person would suffer a financial loss
upon the death of another person. A creditor may
insure the life of his debtor, or a son or daughter
may insure the life of a parent. No one who has no
insurable interest can insure the life of another.
Insurable interest must exist at the time the insurance
is taken out, but the insurance may be continued
even though the insurable interest has ceased to
exist. A debtor whose life has been insured by
198 INDEMNITY CONTRACTS
his creditor may pay his debt and in this way
extinguish the insurable interest of the creditor
in his life, but this does not prevent the creditor
from continuing the insurance in order that he
may ultimately receive back what the insurance
has cost him.
108. Application for Insurance. An application
for insurance is usually made on a blank form pro-
vided by the insurance company. Questions are asked
concerning the health of the applicant, the kind
of work in which he is engaged, his family history,
and all other matters which would tend to affect the
risk. An applicant must be very careful, in answer-
ing these questions, that he does not deviate in any
degree from the exact truth. The application is
made the basis for the insurance contract, and the
application is also made a part of the insurance policy.
Every answer given in the application is a warranty
and must be literally true. In case any answers are
incorrect, the policy will be void immediately. If
any of the questions contained in the application
blank are not answered, and the company issues the
policy without requiring answers to them, it is under-
stood that the company has waived its right to have
the questions answered, and the policy will not be
affected by the applicant's failure to answer. One
who is not in good health should not apply for in-
surance until fully restored to health, as it is quite
certain that any reliable company will reject his
application if evidence of poor health is found, and
LIFE INSURANCE 199
once having been rejected, it becomes more difficult
to secure insurance thereafter.
LESSON LIII
-LIFE INSURANCE CONTINUED
109. KINDS OF INSURANCE.
no. SURRENDER VALUE.
in. SUMMARY, AND CASUALTY INSURANCE.
109. Kinds of Insurance. - There are many dif-
ferent kinds of insurance policies, and in taking out
insurance, one should be very careful to understand
the nature of the policy which he is purchasing.
Any statements made by the agent regarding the
conditions or terms of insurance are of no effect, as
far as the company is concerned, if they are not in-
corporated in the policy that is issued by the com-
pany and accepted by the applicant. The life insur-
ance agent has much less authority than has the fire
insurance agent, and life insurance does not take effect
until the policy is issued and the premium paid or
arranged for in accordance with the rules of the
company. Among the more important kinds of life
insurance policies are the following :
Straight Life Policy. - - This policy provides for the
payment of a certain sum to the beneficiary upon
the death of the insured, providing premiums shall
be paid at stated intervals during the life of the in-
200 INDEMNITY CONTRACTS
sured, and the policy shall not be avoided for any
reason prior to the death of the insured.
Endowment Policy. - - The Endowment Policy is
one which provides for the payment of a certain sum
of money to the insured at the expiration of a given
time, or to a designated beneficiary, in case the in-
sured dies before the expiration of the endowment
period, provided the premiums have been paid in ac-
cordance with the terms of the contract. This kind of
insurance is more expensive than the other kind as it
is payable at the expiration of a given time rather than
at the death of the insured which may occur many
years after the endowment period has been passed.
Limited Payment Life Policy. - The Limited
Payment Life Policy is one which provides for the
payment of a certain sum, at the death of the insured,
to a designated beneficiary, upon condition that an-
nual premiums shall be paid each year for a specified
number of years, or until the death of the insured,
if he dies before the expiration of that time. For
example, a twenty-payment life policy is one in which
the insured pays an annual premium every year, for
twenty years, at the expiration of which time the
policy is paid up and no more premiums can be called
for. The beneficiary, however, does not . receive
any money from the company until the death of the
insured. The advantage of this form of insurance is
that the premiums are paid during the earlier years
of the insured's life and thus protection is secured for
his family before his earning capacity has become less.
LIFE INSURANCE 201
In nearly all kinds of insurance the policy may pro-
vide for payment on the installment plan rather than
in a lump sum. An insured may designate that his
beneficiary be paid so much per year instead of being
paid a certain amount at his death, and when this
form of payment is contracted for by the insured, the
premiums are slightly smaller than when the pay-
ment is to be made at one time. In this way one
may secure a life income for those dependent on him
and guard against the possibility of loss through poor
investments of insurance money.
no. Surrender Values. In all policies written
by the best life insurance companies to-day, there
are surrender value tables given at the end of the
policy. In these tables it is provided that upon the
surrender of the policy any time after, two or three
years, a certain amount of cash can be received for
it from the company. This is known as the cash
surrender value. An equal amount of cash can be
borrowed from the company upon sending the policy
to them for indorsement. This is called the loan
value. This loan will draw a stated amount of in-
terest and can be paid off at any time at the option
of the insured. The table also provides that the in-
sured may surrender the policy at any time, and, in
its place, take a paid-up policy in which the company
agrees to pay a certain amount to the beneficiary, at
the death of the insured, without the payment of
further premiums. Another option provided for in
the table is what is known as extended insurance.
202 INDEMNITY CONTRACTS
Under this option, if the insured fails to pay the
premiums when they become due, the policy will be
carried without further payment for a certain length
of time specified in the table. If, for example, A
has paid twenty annual premiums on a life policy
and then ceases to pay any more premiums, the pol-
icy will be continued by the company, in full force,
for so long a time as the surrender value at the date
of default in the payment of premium will carry it.
It will be understood, from the study of this table,
that the policy does not cease to have value if the
premiums are not paid, as was the case before these
options were given.
One of the four options referred to above is auto-
matic, and it is important that a policy holder study
his policy carefully and ascertain which one of the
four is the automatic one. In some policies, if the
premium is not paid when due and no choice is in-
dicated by the insured, the company will immediately
consider the policy as being carried on the extended
insurance option. Other policies provide that when
no choice is made and the premiums are not paid,
the paid-jup policy is to be substituted for the one
which has been allowed to lapse. All modern policies
provide for a certain number of days in which to pay
the premium, without interest, and the provisions of
the policy, in this and all other matters, should be
thoroughly understood by the insured.
When the policy is made out in favor of the insured,
it is payable to his estate, upon his death, and may be
LIFE INSURANCE 203
attached the same as any other property for the
benefit of his creditors. If it is made out in favor of
another person as the beneficiary, the insured's credi-
tors cannot reach it, and the insurance money cannot
be paid to any person other than the one specified in
the policy. The beneficiary has a vested interest at
once, which he may assign and which is subject to
his debts, and, unless otherwise provided in the pol-
icy, it is necessary to secure his consent if the insured
desires to change the beneficiary. If the beneficiary
dies before the insured, and no other beneficiary is
substituted by the insured, the policy becomes pay-
able to the beneficiary's personal representative,
unless otherwise provided in the policy.
in. Summary, and Casualty Insurance. Before
buying insurance, decide whether you wish to buy for
protective or investment purposes, and then select the
kind of policy that will give you the maximum pro-
tection or investment return, according to your choice,
at the least cost consistent with safety. Select your
company with great care and analyze your policy
before accepting and paying for it, to satisfy your-
self that you are getting what you contracted for.
Casualty Insurance is a form which acts as an
indemnity against loss resulting from personal in-
jury, or from the destruction of certain kinds of
property, or from certain obligations which one may
have toward another.
Among the different kinds of casualty insurance
are the following :
204 INDEMNITY CONTRACTS
Accident Insurance. In this branch of insurance
the policy provides for the payment of a certain
amount upon the death of the insured by reason of an
accident. In case of accidental injury resulting in
loss of time and expense for medical service, the policy
usually provides for the payment of a certain weekly
indemnity and certain other amounts for surgical
operations, hospital expenses, etc.
Employers' Liability Insurance. An employer
of men in a manufacturing business very often is
sued for damages by one of his employees who has
been injured while in his service. It is customary
for large employers of labor to insure against the
possibility of having to pay such damages. Such
insurance is called employers' liability insurance.
When an accident occurs in the factory of one carry-
ing such insurance, an action brought against the
employer for damages is defended by the insurance
company, and, if the employer is defeated, the in-
surance company pays the loss.
Fidelity Insurance. One who is employed in a
position of responsibility and trust is frequently re-
quired to furnish bonds to his employer as a guaranty
that he will perform his duties honestly. Formerly,
responsible individuals guaranteed the honesty of
the employee. At the present time, insurance com-
panies assume the risk, upon the payment of a certain
premium by the insured employee.
Credit Insurance. Experience shows that, in
nearly every business in which goods are sold on
LIFE INSURANCE 205
credit, a certain per cent of the goods are never paid
for, through the insolvency or dishonesty of some of
the debtors. To provide against this loss, it is cus-
tomary to pay an indemnity company to assume the
risk of such losses.
Title Insurance. It is often difficult to trace the
title to real property satisfactorily, and when this is
the case, the purchaser insists on having the title
to the property insured. The insurance company
makes a careful investigation, and if satisfied that
the title is clear, insures the property against liens
or incumbrances.
Elevator Insurance. It is customary for owners
of buildings in which passenger elevators are located
to insure against loss as a result of accident in the
use of the elevator. This includes loss as a result of
injury to persons riding in the elevator and also
damage to the elevator itself.
Marine Insurance. Owners of vessels, or of goods
shipped thereon, that are exposed to maritime perils,
usually insure themselves against loss therefrom.
Though known as " Marine " insurance, the contract
is frequently extended to cover risks on inland waters,
and covers, besides perils of the seas, war perils, loss
by pirates, thieves, captures, seizures, jettisons,
barratry, etc.
There are a great many other kinds of insurance,
and it may be stated that, wherever there is a possi-
bility of financial loss, the risk of such loss may be
covered by casualty insurance of one kind or another.
206 CASES ON INSURANCE
LESSON LIV
112. CASES ON INSURANCE
(1) Cross v. National Fire Insurance Co., 132
N. Y. 133. The plaintiff had a building conveyed to
him in trust, to sell it and distribute the proceeds,
after deducting his commission. He agreed to care
for the property, rent it, and keep it insured pending
a sale. The building was insured in the name of
" Sidney S. Cross, Trustee." The building burned
and the insurance company refused to pay the
amount of the policy on the ground of lack of in-
surable interest.
(2) Huber v. Manchester Fire Assurance Co., 92
Hun (N. Y.), 223. The plaintiff insured the fur-
niture in her house for $1500. The policy contained
a provision that the entire policy should be void if
the building described was or became vacant or un-
occupied and so remained for ten days. On the 24th
of August, the plaintiff went away on a visit, intend-
ing to be away five or six weeks. Before she left,
she arranged to have the house papered and painted,
and a friend of hers went to the house frequently
to see how things were. The house and furniture
burned on September i8th, and the plaintiff brought
suit on her policy.
(3) Germania Fire Insurance Co. v. Home Insur-
ance Co., 144 N. Y. 195. The defendant issued a
policy of insurance to one Verdier on his stock of
CASES ON INSURANCE 207
hardware, the policy containing a provision that if
the property was sold or transferred, or a change
took place in title or possession, the policy should be
void. During the life of the policy, Verdier formed
a partnership with one Brown, selling him a three-
tenths interest in the insured property. The hard-
ware was destroyed by fire, and the plaintiff sued on
the policy as assignee of Verdier.
(4) Kenniston v. Merrimac County Mutual Insur-
ance Co., 14 N. H. 341. The plaintiff insured his
house with the defendant, the terms of the policy
being to pay for any loss by fire caused by accident,
lightning, or any other means except design, invasion,
or insurrection. The house was struck by lightning,
different parts of it were materially injured, articles
of glass, china, etc., were broken, and at the place
where the lightning struck, the wood was discolored
and blackened as by fire. The defendant refused to
pay the loss, claiming that it was not covered by the
policy.
(5) Boruszweski v. Middlesex Mutual Assurance
Co., 186 Mass. 589. The plaintiff insured his house
and barn with the defendant, the policy being in the
usual form. The premises burned, but the company
did not pay the loss on demand. The plaintiff then
brought suit on the policy, without taking any other
steps to secure payment.
(6) Walker v. Larkin> 127 Ind. 100. Larkin in-
sured his life for $1000. The policy was an endow-
ment policy, payable in twenty years. Walker ob-
208 CASES ON INSURANCE
tained two judgments against Larkin, and Larkin
assigned the policy to him as security for the judg-
ments. Walker paid the premiums on the policy
and kept it alive until it matured, when Larkin dis-
puted his right to the proceeds of the policy on the
ground that Walker had no right to insure Larkin's
life. The insurance company paid the money into
court pending a decision.
(7) Potter v. Spilman, 117 Mass. 322. Plaintiff
took out a policy of insurance on his life, payable to
defendant, his sister. She knew nothing about the
matter, never had the policy, was not dependent on
her brother, nor was she a creditor, the policy being
intended purely as a gift. After some time the
plaintiff asked the defendant to consent to a change in
the beneficiary under the policy, which she refused
to do, and he then started a suit to compel such
consent.
(8) Robinson v. Duvall, 79 Ky. 83. One Crowfoot
insured his life for the benefit of his wife and. children
or their representatives. His wife and children
having all died, he assigned the policy to his niece,
Hattie Robinson. When he died, his executor, his
niece, and his only grandchild, a son of one of the
original beneficiaries of the policy, claimed the
proceeds.
(9) Fidelity Mutual Life Insurance Co. v. Becky
104 S. W. Rep. 533. Beck made written application
for insurance on his life, in which he warranted the
truth of every statement made. To a question re-
CASES ON INSURANCE 209
garding the duration of an attack of rheumatism, he
made no answer. The policy was issued, and Mrs.
Beck brought suit after Beck's death to recover the
proceeds.
LESSON LV
(1) Loehr v. Royal Arcanum, 46 N. J. Eq. 102 and
1 1 2 N. W. Rep. 441 . The plaintiff was a beneficiary
in a policy issued on Loehr's life. Loehr had made
a written application for insurance, warranting his
answers to the questions to be true. Among other
things he stated that he had once had rheumatism,
whereas in fact he had had inflammatory rheumatism
three times. He also stated that the beneficiary was
his cousin, whereas he was a creditor, and no relation
at all. Was the falsity of either of these answers a
defense to an action on the policy ?
(2) Kernochan v. Insurance Co., 5 Duer. (N. Y.)
I. Plaintiff held a mortgage on certain real prop-
erty including land and buildings. He procured
insurance on the buildings for- the amount of the
debt covered by the mortgage. The buildings were
totally destroyed by fire and this action was brought
to recover on the policy. It was shown that the
amount of the insurance was not in excess of the
face of the mortgage. It was also proven that the
land without the buildings which were destroyed was
ample security for the mortgage.
(3) Ellis v. Insurance Co., 50 N. Y. 402. Ellis
210 CASES ON INSURANCE
applied to an insurance agent for insurance upon
a quantity of cotton. The amount of insurance
and the premium were settled upon and the agent
agreed to insure as requested. Ellis left it with the
agent to select the companies in which he would in-
sure, and accordingly the agent decided to place
$6100 with defendant insurance company, entered
it upon his books, and credited the defendant com-
pany with the amount of the premium, which was
sent to defendant before the loss occurred. The
policy had not yet been issued, when the cotton
burned.
(4) Paul v. Armenia Insurance Co., 91 Pa. St.
520. Plaintiff took out insurance with the de-
fendant company, and in the application blank which
he filled out one of the questions was, " What is the
distance, occupation, and material of all buildings
within 1 50 feet?" Paul made no answer to this
question and the company issued the policy without