and certain terms must be definitely settled upon, viz.: the property insured, the title or interest of the insured, the risk insured against, the rate of premium, and the term of duration of the insurance.

An oral contract of insurance made with an agent representing two companies, the company assuming the risk not being specified, is unenforceable. An oral contract of insurance must possess all the requisites of a contract. In this case the agent not having designated which of his two principals he intended to bind, neither is bound, as there could be no "meeting of the minds."

The contract is binding and in force as soon as the agreement is completed, although the written policy may not have been actually delivered, nor in fact ever have been issued.

Taylor made a valid oral contract for insurance with the Franklin Fire Ins. Co. Before a policy was issued the property was destroyed by fire. It was held that a court of equity would compel the issuance and delivery of a policy even after the loss, and enforce payment thereon.

·Taylor v. Franklin Fire Ins. Co., 52 Miss. 441.

Effect of Fraud. Any concealment of a material fact inquired into by the insurer will, if made intentionally by the insured, avoid the policy. Still neither party is bound to volunteer information regarding matters of which the other has knowledge or of which in the exercise of ordinary care he ought to have knowledge. But the insured must not withhold information which would affect the judgment of the insurer.

One of the questions in the application for insurance was, "What is the distance, occupation, and material of all buildings within 150 feet?" No answer was made to this question and the company sought to avoid the policy on that ground. Held, that they might have refused to issue the policy or have sought further information, but that by issuing it they waived the answer to this question. — Paul v. Armenia Ins. Co., 91 Pa. State 520.

Representation. A representation in connection with this subject is said to be a statement of fact made at the time of, or before, the contract relating to the proposed adventure, and upon the good faith of which the contract is made. A material misrepresentation of fact, whether innocent or fraudulent, avoids the contract.

Warranty. A warranty is a statement of fact or promise of performance relating to the subject of insurance or to the risk,

inserted in the policy itself or expressly made a part of it, which, if not literally true or strictly complied with, will avoid the contract. It differs from a representation, which, as we have seen, is a collateral inducement outside of the contract and need be only substantially complied with, whereas the warranty must be contained in the policy and must be strictly performed.

Any statement or description on the part of the insured on the face of the policy which relates to the risk is an express warranty, and such a warranty must be strictly complied with or the insurance is void.

-Wood v. Insurance Co., 13 Conn. 533.

If questions in the application are not answered or if the answers are incomplete but not false, there is no breach of warranty, provided the insurer accepts the application without objection.

Although the breach of warranty or misrepresentation of a material fact may not contribute to or cause the loss, nevertheless the policy is avoided, for the risk is different from that which the insurer undertook to assume.

The application contained a statement that the factory insured was operated for the account of the owner and that it was immediately superintended by one of the owners. This statement was untrue. It was held that the misrepresentation avoided the policy whether they were material to the loss or not. Wilson v. Conway Ins. Co., 4 R. I. 141.

QUESTIONS

1. On what principle is insurance based?

2. What is the source of this protection known as insurance?

3. How is fire insurance defined?

4. What is an insurable interest? Give three examples.

5. What are the requirements in insurance contracts?

6. What must the policy contain?

7. Is an oral contract of insurance binding? Explain.

8. What is the effect of fraud practiced in obtaining insurance?

9. How will a material misrepresentation of fact affect the contract?

10. What is a warranty as applied to insurance contracts?

11. What is the effect of not answering questions asked by the insurer?

3. FIRE INSURANCE POLICY

Standard Form of Policy. - Statutes have been passed in several states adopting a standard form of fire insurance policy,

the object being to establish a uniformity of contract and to avoid conflict between different companies insuring the same property.

Policies may be either open or valued. In an open policy the amount in case of loss is not fixed by the policy. It simply states within what limits the company will be liable. A valued policy fixes definitely the amount payable in case of total loss. When a fire occurs the company pays the actual loss up to the amount named in the policy.

Loss by Fire. Loss by fire includes loss which is caused by the burning of the property insured or which is the result of fire in close proximity, the heat from which damages the property insured. It also includes the loss or damage by the water from the fire engines or from the exposure or theft of the goods during their removal to a place of safety at the time of a fire.

It was held that the damage and expense caused by removing, with a reasonable degree of care suited to the occasion, insured goods from apparent immediate destruction by fire, are covered by a policy insuring the goods against "loss and damage by fire," although the building in which they were insured and from which they were removed was not, in fact, burned. White v. Insurance Co., 57 Maine 91.

It includes loss by fire caused by lightning, but does not include loss caused by lightning unless a lightning clause is inserted; therefore it is customary to include such a clause.

If the fire is caused by the act of an incendiary, or by the acts of the insured while insane, or by the careless acts of a third person, the insurance company is liable.

Location. The standard policy contains a statement of the location of the property insured; and, if it is removed to another or different place without the consent of the insurer, the policy is no longer in effect. So if a party insures his household furniture while living on a certain street, and then moves to another street, the insurance ceases to be in force. The reason

for this rule is plain, for the risk is likely to vary in different locations, and whether it does or not, the insurer has the right to know what risk he is assuming.

A policy of insurance against fire was issued on furniture described as contained in a house on McMillen Street, Providence, R. I. The insured, without the knowledge of the insurer, moved the articles to a house on

another street, in which they were burned. Held, that the insured could not recover. The statement of the location of the goods is a continuing warranty. Lyons v. Insurance Co., 14 R. I. 109.

Amount Recoverable.

The market or cash value of the property at the time of the fire is the amount that can be recovered of the insurance company if this sum does not exceed the amount of the policy. If the property is only partially destroyed, the amount that may be recovered is the difference in the value of the property before and after the fire. The insurer generally reserves the right to replace the property, and in case he elects so to do, this takes the place of money damages.

Additional Insurance. The standard policy of insurance contains a clause which provides that the policy shall be void in case the insured now has, or shall hereafter make or procure, any other contract of insurance, whether valid or not, on property covered. in whole or in part by this policy, without an agreement indorsed or added thereon, allowing such additional insurance. The reason for this provision is that the companies do not wish to have the property insured for more than its value, and they also desire to know whether any other insurance is carried on the property, so that in case of loss, if insured in several companies, each need contribute only its proportionate share.

Alienation Clause. The standard policy also contains a clause known as the alienation clause, which renders the policy void if any change other than the death of the insured takes place in the interest, title, or possession of the subject insured (except change of occupants without increase of hazard), whether by legal process or judgment, or by the voluntary act of the insured. This section means any parting with or sale of the premises, and does not include the giving of a mortgage upon the insured premises.

Assignment. A fire insurance policy is not assignable, and if assigned without the consent of the insurer it is void.

A corporation was insured under a policy containing a provision that it should not be assigned without the consent of the insurer. The corporation transferred all its property, including the policy, to the Miles Lamp Chimney Co., a corporation having the same stockholders as the original corporation, but the consent of the insurer was not obtained. Held that the Miles Lamp Chimney Co. acquired no rights under the policy.

-Miles Lamp Chimney Co., v. Erie Fire Ins. Co., 164 Ind. 181.

If with the consent of the company the property insured as well as the policy is assigned, a new contract is formed which will not be affected by any act of the assignor.

Unoccupied Dwelling. The standard form of policy also provides that if the property is a dwelling and remains vacant or unoccupied without the consent of the company for the period of ten days the insurance is of no effect. This clause is held to be a reasonable restriction, as the insurer is entitled to know that the premises are receiving ordinary supervision. It means that the dwelling must have some one living in it.

The policy insured a "dwelling house" and provided that it should be void if the premises were unoccupied for more than ten days. At the date of the policy and for more than ten days thereafter, the house was unoccupied, but Thomas's servants had been in the house for two days before the fire, cleaning and preparing it to be occupied. Held, the policy was void because of breach of condition. The presence of the servants did not constitute occupancy within the policy.

Thomas v. Hartford Fire Ins. Co., 21 Ky. Law Rep. 914 (53 S. W. 297).

Factory Buildings. — There is a further provision rendering the policy void if the subject insured is a factory building and is operated after 10 o'clock at night or some other given hour, or is not operated for ten consecutive days or some other specific length of time.

The policy of insurance on a flour mill contained the provision that if the mill were shut down 20 days without notice to the company, the policy would be suspended from the expiration of that time until the mill resumed work. Held, that the stoppage of the mill for more than 20 days without the required notice suspended the policy, though the mill was stopped for necessary repairs. Day v. Insurance Co., 70 Iowa 710.

Renewals. The policy is often renewed by a short form of receipt which obviates the necessity of a new policy. This renewal, which may be either in writing or by parol, in substance creates a new contract on the same terms and conditions as those agreed upon in the old policy.

Cancellation. The standard form of policy contains a stipulation that the policy may be canceled at any time by the company, or at the request of the insured upon giving five days' notice of such cancellation. And in case of such cancellation the unearned premiums paid shall be returned to the insured.

Mortgaged Property. When the property insured is mort