SECTION XI.

OF ADJUSTMENT AND LOSS.

INSURERS against fire are not held to pay for loss of profits, gains of business, or other indirect and remote consequences of a loss by fire. We do not know, however, why profits may not be specifically insured against fire, where it is not forbidden by, or inconsistent with, the charter of the insurers.

There is one wide difference between the principle of adjustment of a marine policy and of a fire policy. In the former, if a proportion only of the value is insured, the insured is considered as his own insurer for the residue, and only an equal proportion of the loss is paid. Thus, if, on a ship valued at $10,000, $5,000 be insured, and there is a loss of one half, the insurers pay only one half of the sum they insure, just as if some other insurer had insured the other $5,000. But in a fire policy, the insurers pay in all cases the whole amount which is lost by fire, provided only that it does not exceed the amount which they insure

It is said that general average clauses or provisions are inserted in fire policies in England; but they are not known here. Still, in one case, the principle of general average was partially applied. Blankets were used by the insured, with the consent of the insurers, to protect a building from a near fire; they did this effectually, but were themselves made worthless, and an action of the insured against the insurers for this loss was sustained by the court. But the owners of other buildings in the neighborhood, who might have been protected by the use of the blankets, were thought to be too remotely interested to be liable to contribution.

As a contract of fire insurance is an entire one, if the policy ever attaches, there should be no return of premium, although the property be destroyed the day after, and not by fire; as by demolition by whirlwind, or other similar accident. If, however, there were an insurance on goods believed to be at a certain place, at a certain time, and none of them were there, there might be an entire return of premium, because there was

never any insurance. But if a part were there, there should be no partial return; because the rule that, where a part only is insured, only a proportionate part is paid by the insurers in case of loss, applies only to marine policies, as stated above.

Most of the fire policies used in this country give the insurers the right of rebuilding or repairing premises destroyed or injured by fire, instead of paying the amount of the loss. If, under this power, the insurers rebuild the house insured, at a less cost than the amount they insure, this does not exhaust their liability; they are now insurers of the new building for the difference between its cost and the amount they have insured. And if the new building burns down, or is injured while the policy continues, the insured may claim so much as, added to the cost already incurred, shall equal the sum for which he was insured.

It may be important to add, that, under our common mutual policies, the insured will also be liable for assessments for losses after the destruction of his building by fire, during the whole term of the policy.

There is no rule in fire insurance similar to that which makes a deduction, in marine insurance, of one third, new for old. Still, the jury, to whom the whole question of damages is given, are to inquire into the greater value of a proposed new building, or of a repaired building, and assess only such damages as shall give the insured complete indemnity.

Where insurers had reserved a right to replace articles destroyed, and the insured refused to permit them to examine and inventory the goods that they might judge what it was expedient for them to do, Chancellor Walworth refused to aid the insurers in a court of equity; but such conduct on the part of the insured would be evidence to the jury of great weight, to prove an overstatement of loss.

If, after the adjustment and payment, there appears to have been fraud in the original contract, or in the adjustment, or material mistake of fact, it would seem that money paid may be recovered back; but not so if the mistake be of law.

If the policy contains a provision that any fraud in the claim, or any false swearing or affirmation in support of it, shall avoid the policy, (as is frequently the case in England,)

it would seem that it would be left to the jury to say whether there was any material and substantial fraud connected with the matter, and if so, to find for the insurers.

From the present state of the authorities, it may be stated, as a general rule, that the law allows no claims upon the proceeds of policies of fire insurance in favor of any third parties, unless there be a bargain or contract, or a trust, to that effect. Thus, a tenant cannot compel his landlord to expend money received from an insurance office, on the demised premises being burnt down, for rebuilding them, nor prevent the landlord from suing for the rent until the premises are rebuilt, if, by the terms of the lease, rent is due although the building is burned.

CHAPTER XXIII.

OF LIFE INSURANCE.

SECTION I.

OF THE PURPOSE AND METHOD OF LIFE INSURANCE.

IF A insures B a certain sum payable at B's death to B's representatives, we have only the insurer and insured, as in other cases of insurance. But if A insures B a sum payable to B or his representatives on the death of C, although C is often said to be insured, this is not quite accurate; more properly, B is the insured party and C is the life-insured.

Life insurance is usually effected in this country in a way quite similar to that of fire insurance by our mutual companies. That is, an application must be first made by the insured; and to this application queries are annexed by the insurers, which relate, with great minuteness and detail, to every topic which can affect the probability of life. These must be answered fully; and if the insurer be other than the life-insured, there are usually questions for each of them. There are also, in some cases, questions which should be answered by the physician of the life-insured, and others by his friends or relatives; or other means are provided to have the evidence of the physician and friends.

These questions are not, perhaps, precisely the same, in the forms given out by any two companies; and we do not speak of them in detail here. The rules as to the obligation of answering them, and as to the sufficiency of the answers, must be the same in life insurance that we have already stated in the chapters on Fire and Marine Insurance; or rather must rest upon the same principles. And the same rules and principles of construction therein set forth would doubtless be applied to the question whether a contract had been made, or at what time it went into effect.

SECTION II.

OF THE PREMIUM.

IF the insurance be for one year only, or less, the premium is usually paid in money, or by a note, at once. If for more than a year, it is usually payable annually. But it is common to provide or agree that the annual payment may be made quarterly, with interest from the day when the whole is due. Notes are usually given; but if not, the whole amount would be considered due. If A, whose premium of $100 is payable for 1856 on the 1st day of January, then pays $25, and is to pay the rest quarterly, but dies on the 1st of February, the $75 due, with interest from the 1st of January, would be deducted from the sum insured.

Provision is sometimes made that a part of the premium shall be paid in money, and a part in notes, which are not called in unless needed to pay losses. The greater the accommodation thus allowed, the more convenient it is, obviously, to the insured, but the less certain will he be of the ultimate payment of the policy, because, in the same degree, the fund for the payment consists only of such notes, and not of payments actually made and invested. There is a great diversity among the life insurance companies in this respect. But even the strictest, or those which require that all the premiums shall be paid in money, usually provide also that an amount may remain overdue, without prejudice, which does not exceed a certain proportion say one half or one third - of the money actually paid in on the policy. This is considered, under all ordinary circumstances, safe for the company, because every policy is worth as much as this to the company. Or, in other words, it would always be profitable for the company to obtain a discharge of its obligation on a policy, by repaying the insured so small a proportion of what has been received from him.