§ 228. Nature of the Contract The contract of fire insurance is a speculative one; that is to say, the event on the happening of which the payment is to be made, namely, the fire, may never happen. The person insuring the building must himself have some actual financial interest in the property insured, otherwise it would amount merely to a bet on his part as to whether the building would be destroyed by fire or not, and would be a gambling contract and illegal. Also if the insured had no interest in the building, and the building were destroyed by fire, it would be to his profit, and such an inducement might lead to crime. Note: I. The exact interest of the person insured in the property should always be made a part of the policy, to show that the contract is legal. § 229. Agents Most insurance is taken out through agents. These may be of two kinds: those who are paid by the company and are the agents of the company, and those who act merely as brokers and solicit insurance for various companies. Agents acting for the company bind the company by their agreements if they have the power to close contracts of insurance. If the contract is required to be sent first to the company for its approval, any agreement of the agent will not bind the company. Sometimes, by means of a short written agreement called a binder, or even by an oral contract, an agent may bind his company for a certain limited or contingent period, as for instance, until the policy is made out or while the company is investigating the risk. The laws of the various states are very strict with regard to insurance agents. In most of them an agent must receive a license from the state superintendent of insurance, or what ever officer exercises corresponding duties, in order to be permitted to act. Notes: I. In dealing with an insurance agent, always find out 2. If you wish to act as an insurance agent, look up § 230. The Policy Policies may be either open or valued. Most fire insurance policies are open. In an open policy the amount payable in case of loss is not fixed by the policy but merely the limit up to which the company will be liable. Then when a fire occurs the company pays the actual value of the loss up to the amount named in the policy. A valued policy, on the other hand, specifies the amount payable in the event of a total loss. Life insurance policies are valued. It is a legal maxim that "to include is to exclude" and the insurance policy covers only what is stated therein. Some states allow oral agreements with, or representations made by, agents to be proved in order to alter the policy, but others do not. If it is desired to make other agreements not included in the policy form, they may be made in written form and made a part of the policy by referring to them in the policy. Standard Forms of Policies. New York, Massachusetts, and some other states have a standard form of policy, which by law must be used by all insurance companies. Massachusetts adopted this form in 1881; New York in 1887. The Massachusetts form provides that a building must not be left unoccupied for thirty days or the insurance will lapse. In New York it must not be left for over ten days. In addition, the New York form contains certain stipulations, including the following: The company may replace or repair the property instead of paying the loss and may take damaged property by paying the full appraised value for it. It does not hold itself liable under certain circumstances, such as war or riot, usurped power, or destruction by order of civil or military authority; likewise it is released by the neglect of the insured to use all reasonable means to save his property when it is menaced by neighboring flames. It is not liable if the insured made any false representations or practiced any kind of fraud in procuring the contract. The policy does not cover such things as deeds, book accounts, and shares of stock, etc., which merely represent obligations to the insured, nor does it cover money. It does not cover a building after it or part of it has fallen from any cause other than fire. These provisions may not be altered. If a building is left vacant for ten days, or a factory runs after ten o'clock at night or is shut down for more than ten consecutive days, the policy becomes of no effect, unless the policyholder shall have obtained a permit from the insurance company. This permit must be in proper form and must be attached to the policy. Any changes in the use or occupation of a building, or the installation of such things as electrical wires, gasoline stoves, etc., must be consented to by the company or the policy is void. In the absence of a provision to that effect, a policy is not nullified by the erection. of neighboring buildings that increase the risk. A common clause, known as "builder's risk" provides that mechanics such as gasfitters, plumbers, etc., may not be engaged to work upon a building without the consent of the company. For the use or storage of inflammable or explosive substances, such as paint and gunpowder, in an insured building, a special permit is necessary. The policy does not cover certain enumerated articles, such as jewelry, curios, office furniture, architects' plans, etc., unless they are expressly mentioned in the policy. What the Policy Should Include. Every policy of fire insurance should include as full and accurate a description of the property covered as possible. It should also include the amount for which the insurance is taken out, the term for which the policy is to last, the rate of premiums and at what time payable, and any other conditions which the parties wish to make a part of the agreement. Personal property must be described as located at such and such a place; and if it is moved, a new policy must be taken out or the original policy extended to cover it, as the character of the building in which it is kept affects the risk very materially. Cancellation. A fire insurance policy may be cancelled by either party upon five days' notice; a proportionate amount of the premium paid being returned to the insured when the company makes such cancellation. Notes: 1. Everything you want included in the agreement should be put in writing and incorporated in the policy. 2. If the policy is a standard policy and the company's permission is obtained to make any changes in it, these should be in writing and made a part of the policy by a reference in it to the changes. $231. Premiums The premiums are the consideration the insured pays for the agreement to insure his property. They are based on a certain percentage of the amount for which the property is insured and are payable periodically, generally either annually or semiannually. A failure to pay a premium when it is due causes the policy to lapse and be forfeited, but the company may consent to an extension of the time for its payment or may agree to take notes for the payment of premiums. Note: I. If an extension of time is procured for the payment of a premium, it is safest to have it in writing. Make your application for the extension by letter, retain copy, and enclose postage for a reply. The company's letter will be your protection. § 232. The Property Insured The property insured may be either real or personal. A policy may cover both, as for instance a dwelling-house and furniture. A policy made out to cover "merchandise" or "household goods" will cover such as may be acquired later as well as those which the insured owns at the time of taking out the policy. Insurable Interest. The party who insures a property must have what is known as an insurable interest in it. He may either own the property outright, or have some claim upon it, such as a lien or mortgage. The standard form of policy in New York provides that the insured must be the sole and absolute owner of the property, free from any claims of anyone else, but anyone who is not the sole and absolute owner may insure his interest with the company's consent. If a mortgagee or trustee wishes to take out a policy, a clause must be inserted that the loss shall be payable “as his interest may appear." The company's consent must also be obtained to a chattel mortgage, or the policy will be void. A man who insures another's property has an insurable interest therein and may protect himself by reinsuring it. |