Instead of paying cash premiums in advance, the insured gives a bond
or note well secured that he will pay in cash whenever a call is made
on him to cover the losses that have been incurred at the end of the
year or other period. This method is in vogue in some sections,
because still less money is required to keep property insured. Of
course besides the money to pay losses another sum is required to pay
the expense of management. It will be seen that the mutual plan is
purely for protection against loss and no profit in the way of
dividends is forthcoming, for the companies have no capital. It is
true that some companies, instead of returning the unexpended premiums
for losses retain them or a part of them and by so doing accumulate a
surplus. Many companies, however, return all the contributions not
expended for management or losses and have no surplus, or only a very
small one.
Stock insurance companies proceed on a different principle. They are
organized to make money, a capital is subscribed, the rates of
insurance or premiums are fixed and after paying the expense of
management and loss, the balance is paid to the stockholders in the
way of dividends. The business is one of unusual hazard, and only a
rich person, who can afford to lose his money, ought to invest in the
stock of such companies. Their profits and losses vary greatly from
year to year; and failures have been frequent. Nevertheless some
companies have a fine record, enough to tempt them to continue
notwithstanding their trying reverses.
As the contract of insurance is for an indemnity, the insured must
have some interest in the property insured, otherwise the contract is
a mere wager, which the law condemns. Moreover the interest must
continue and exist at the time of the loss. Who, therefore, has an
insurable interest? A bailee, a carrier of goods, a consignee who has
authority to sell them, a factor, pledgee, warehouseman, an assignee
for the benefit of creditors, an executor or administrator, an
attachment creditor, but not a general creditor, a landlord, tenant,
mortgagee of real or personal property, a lienor, for example, the
holder of a mechanic's lien, a receiver, residuary legatee or devisee,
a trustee, vendees and vendors of real and personal property, the
owner of stock in a corporation, any agent who has the care and
management of his principal's property, besides many others. But a
fire insurance policy may be assigned as collateral security with the
company's consent, and continue valid though the assignee has no
interest in the property. This rule therefore is fundamental, and if
the interest of the insured in the property has been extinguished
after making his contract and prior to its loss by fire, he can get
nothing from the company. Likewise the property must have been in
existence at the time of making the contract, if it was not, the
policy is void. Many stories are told of insuring ships after learning
of their loss; such conduct is a palpable fraud.
An insurance policy is a contract, of which the policy is evidence. A
standard policy has been prescribed in several states by statute: in
other states the parties are still free to make such terms as they
please. It is usual for companies to execute blank policies in due
form to be filled out and delivered by their agents. Such policies are
not valid until countersigned, unless the countersigning is waived.
When does the policy become valid or binding on the insured? Says a
competent authority: "Where a policy has been duly executed in
compliance with an application on the part of the insured, so that the
minds of the parties have fully met as to the terms and conditions of
the contract, a manual delivery of the policy to the insured is not
essential to render it binding on the company. If the contract has
become binding by the issuance of the policy and the placing it in the
hands of an agent for delivery, then the fact that such delivery is
not actually made to the insured until after the loss has occurred,
will not defeat recovery by the insured."
The premium usually must be paid at the time of issuing the policy,
unless a different agreement is made concerning it. Credit may be
given, and an agent generally has authority to do this. A valid
payment may also be made in other means than money; a check or note
may be given for it.
An insurance policy may be assigned, though it usually contains a
clause that the consent of the insurer is needful. When the policy
contains this clause and the insurer without valid reason refuses to
consent to an assignment, "the assignee acquires the same right as
though consent had been given."
Consent to an assignment may be given by the president of the company,
without formal vote by the directors. It may also be given by the
secretary or by any other agent duly authorized.
When can a policy be canceled? Unless this right is reserved in the
contract, or given by statute, the insurer cannot cancel the contract
without the consent of the insured. It often is reserved, and if
exercised, this must be done before a loss occurs, and a cancellation
made afterwards, though without knowledge of it, is void. The motive
for making it is not important. If, as a condition of cancellation,
the unearned portion of the premium is to be returned, the failure to
return it renders the cancellation worthless. Nor is this effective
until notice has been given to the insured.
A court of equity will reform a contract of insurance on the ground of
accident, fraud, and mistake. Oral evidence is admissible to prove the
fraud or mistake; it must, however, be clear before a court will grant
relief. If mistake is the ground for asking relief, the insured must
not have been guilty in causing it, and must act promptly after his
discovery. This rule does not prevent him from seeking relief when the
agent of the insurer has been negligent. Furthermore it may be granted
even after the happening of a loss.
Should there be a conflict between the written and printed portions of
a policy, the written portion will be presumed to represent the intent
of the parties. If, therefore, the printed portion excludes certain
articles from the risk, and the written portion covers them, they are
included. Conditions also written or printed on the margin or back of
the policy are regarded as portions of it, and these too will control
the printed portions. Besides, the written application is usually
considered a part of the contract and the policy is construed or
interpreted in connection with it. This is especially so where the
proposals and conditions are attached to the policy. If the intent of
the policy is not clear from the language used, the surrounding
circumstances may be shown for the purpose of ascertaining the intent
of the parties. The known usage of trade may also be taken into
account in construing the language of a policy.
The language of the policy should be so construed as to cover the
property within the intention of the parties, and support, if
possible, the contract of indemnity. Mere clerical errors or mistakes
in describing it may be corrected even after it has been destroyed.
The location is an essential element, and the policy will not be
stretched to cover property not within the description. If a building
is described this does not include separate structures used in
connection with it, nor fixtures constituting no part of the
structure. Unless expressly excepted, however, insurance covers those
things which have been so annexed as to become a part of the realty
but none others. The term store fixtures covers fittings, fixtures,
furniture used in the course of trade, whether they are part of the
realty or not. Likewise the term "stock" used in a mercantile business
includes everything usually kept for sale, in that business, but
nothing more; while household furniture includes all articles
necessary and convenient for housekeeping. With respect to future
additions these are covered by the policy unless it is so drawn as to
show a clear intent to exclude them.
The risk usually begins with the date of the policy, unless it is
effected by a preliminary contract. In such a case the risk begins
from the date of the preliminary contract, and continues for the
period fixed in the policy, or, if none has been fixed, for a
reasonable time.
A misrepresentation voids a policy generally. It must not only be
false in fact, but the insured must have known that it was false when
making it in a substantial and material respect. The misstatement of
an agent of the insured will have the same effect. Indeed, any fraud
of the insured in procuring the policy has the effect of voiding it if
the insurer chooses to do so. Of course, the wrongful facts or acts of
the insured possess a varied character. His conduct in concealing
facts that ought to have been made known to the insurer may have that
effect. Thus to conceal a fact of which the insured had knowledge, and
which, if known by the insurer the risk probably would not have been
taken, is a fraud rightly available to the insurer.
The parties to an insurance contract may agree that the questions put
by the insurer and the answers given by the insured shall become a
warranty. This, as experience has shown, is a simpler way of effecting
a policy of insurance. When this is done a misrepresentation
constitutes a breach of warranty and the contract becomes void.
The modern policy provides that it shall be void if 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." If the insured effects other insurance he must
not forget to obtain consent of the insurer, and should he forget his
good intention will not preserve his policy. Nor can the insured
protect himself by canceling the prior policy if he breaks the
condition. Nor does its expiration revive the subsequent policy. An
overstatement of existing insurance under an express warranty will
also violate the policy. While forgetfulness or good intention will
not save the insured in such cases, insurance obtained by a third
person without the knowledge of the insured on the same property will
not endanger his rights under his policy.
If a fire occurs and a loss results, this may be total or partial. In
every case of loss fire must be the proximate cause of the loss. What
loss is covered by a policy has been the subject of frequent
controversy. Damage by water used to extinguish a fire is usually
covered; also damage to or loss of goods removed to prevent their
destruction from fire in the insured or another building. Likewise
the loss caused by blowing up a building to check a fire, likewise
damage from an explosion which is the direct result of a fire, "but an
explosion due to the ignition of a match or spark of an explosive
substance, no fire resulting, is not within the terms of an ordinary
fire policy." The standard policies contain a clause relieving the
insured from liability to pay for property stolen during the progress
of a fire, or during the removal of property necessitated by fire.
An exception of liability from lightning, unless followed by fire,
excludes recovery unless there is loss from burning, but it is quite
common to insure against loss from lightning as well as fire.
Unless there is a stipulation in the policy the insurer is not
relieved from liability by mere negligence or carelessness of the
insured or his servants though directly contributing to the loss; on
the other hand, the insured who does not take reasonable care to avoid
loss from his negligence or that of his servants may defeat recovery
under his policy. This rule is not easy of application, cases of
clearly proved negligence are numerous, also cases free from
negligence, a third class of a doubtful nature. The field of the law
is open in every direction to these.
For a total loss the insurer is liable for the entire value of the
property to the limit covered by the insurance. Thus the loss of a
building is total though some of the walls remain standing, but not
when the remnant can be restored. In some states the statutes provide
that in case of total loss the insurer shall be liable for the full
amount of insurance, and shall not be allowed to show that the
property was of less value than the amount insured.
When the loss is partial the insurer is liable only for the amount of
the loss, not exceeding the insurance. The policy may limit the amount
of recovery to the cost of restoring or replacing the property, and in
such cases this is often done instead of paying the loss in money. If
each of several classes or items is separately valued, thereby
separating the liability for them, the recovery for any one class or
item is limited to the damage to the same.
Lastly, in fixing the loss the distinction between open and valued
policies must be explained. A fire policy is generally written in such
a way that the liability of the insurer depends on the amount of the
loss to be determined after the loss has occurred. When this is done,
the valuation of the property in the application for a policy or in
the policy, does not fix the liability of the insurer, even though the
loss be total. This is called an open policy. On the other hand the
loss may be fixed by a stipulation in the policy, and which binds the
insurer to pay the whole sum insured in case of total loss. This is
called a valued policy. A policy is regarded as an open one, unless it
appears to have been the intention of the parties on a fair and
reasonable construction of its terms, to value the loss and so fix by
contract the amount that may be recovered.
=Fixtures.=--A fixture is something annexed to land either temporarily
or permanently. Different rules apply to persons in different
relations. The law favors removal by a tenant presuming that he does
not put in things for the landlord's benefit, unless there is an
agreement to that effect between them. On the other hand a different
rule applies between the seller and purchaser of real estate. As
between them the law presumes that the seller intended to keep the
things affixed to the house, especially ranges and the like. On the
other hand a somewhat different rule applies between mortgagor and
mortgagee. The former is favored, but not so much as the tenant.
Suppose the mortgagor was a nurseryman, and the land was taken for the
debt by the mortgagee, would it include the trees and shrubs that had
been planted for sale? The courts have given an affirmative answer.
The facts that are of special value in finding out whether a thing is
a fixture or not are: (1) the actual annexation of the article to the
realty; (2) the immediate object or purpose of the annexation; (3) the
adaptability for permanent or mere temporary use; (4) and whether the
article can be removed without material injury to the property to
which it is annexed. See _Lease_.
=Garage Keeper.=--The garage has been said to be the modern substitute
for the ancient livery stable. A garage man who receives the
automobile of another to keep or repair--a service for which the owner
is to pay a compensation--is a bailee for hire. While this relation of
bailor and bailee exists, the owner is not ordinarily responsible for
the negligence of the garageman or his servants in the care or
operation of the automobile.
A public garage is not a nuisance. Even the storage of gasoline in
suitable tanks set down in the earth is not a nuisance. Yet the
business may become a nuisance when conducted in some localities, or
in an improper manner. The operation of a public garage may therefore
be enjoined in a purely residential section within a short distance of
large churches, a parochial school and houses. Likewise the odors, the
noise, and the fire hazard, which are occasioned by the construction
and management of a garage, create a situation which justifies public
regulation.
A garage keeper is generally allowed a lien on an automobile for
storage and repairs. If no price has been fixed in advance, the garage
keeper is entitled to recover of the owner the reasonable value of the
services and materials furnished. When the automobile is brought to
the garage by a chauffeur, the garage keeper should assure himself of
the chauffeur's authority to order repairs, especially those of a
permanent nature.
The garage keeper when storing a car for another for compensation must
exercise reasonable care and prudence. If negligent he is liable for
the damage. It is said that the liability of a garage keeper for hire
is not affected by reason of the knowledge of the owner as to the
place where the property is kept. Its acceptance by the garageman
imposes on him the duty of exercising due care for its safety and
protection. But he is not an insurer of the property; and therefore is
not liable for loss by fire unless he has been negligent. Generally,
in such a case the burden of proof is on the owner of the machine to
show that the fire was caused by the negligence of the garageman.
Sometimes one keeps a car for another for accommodation, receiving no
compensation therefor. One who thus serves another is liable only for
gross negligence.
The garage keeper must protect the property from theft. If he permits
a machine to remain in an alley when it ought to have been inside his
garage, he is liable. In one case a motorcyclist left his machine with
a garage keeper to be kept over night, and also gave permission for
its inspection by any one whom he might send around. A person
appeared with a permit to inspect it who, under the permission, stole
it and rode away. The garage keeper was rightfully held not liable.
If a garage keeper or his servant negligently runs a machine left in
his custody for storage or repairs, the garageman is liable for the
damage resulting to the owner. At the expiration of the bailment he
must deliver the machine to the owner or person authorized by him to
receive it, and is liable if neglecting or refusing. He is also liable
if delaying unreasonably to make repairs, or for making them
unskillfully. Lastly, if the car is driven by the garageman's servant
while the bailment continues, the bailee, and not the owner, is
responsible for any injury done to a third person by the servant's
negligence. Of course, if the driver was acting outside the scope of
his authority, and was using the car for personal purposes, neither
the garageman nor the owner would be responsible for whatever
happened. See _Automobile: Chauffeur_.
=Homestead.=--A legal homestead is the home or residence of a family
land owner, and includes a specific area varying in the several
states. By the more general rule the land must be connected in a
single piece, though in some states the pieces may be distinct. Though
divided by a highway this does not effect a separation, as the land
therein belongs to the owner subject to the public rights to pass and
repass and also use to keep the highway in repair. The peculiarity
about a homestead is, it is protected by law from seizure by the
owner's creditors.
One of the most important questions relating to a homestead is, the
meaning of the head of a family. The term is not limited to a man
having a wife and children. It includes an unmarried man with whom
his widowed sister and children reside; or a man who supports his
mother; likewise an unmarried woman with whom the children of a
deceased sister are living. Nor need they live under the same roof,
the essential thing is the relation and dependence existing between
them. On the death of a husband owning a homestead the right survives
to the widow, and usually to the minor children. Some statutes give
her the absolute estate, others a life interest; in some states she
loses the homestead by a subsequent marriage. In most states the
rights of surviving children end on attaining their majority. In many
states the surviving husband is entitled to the homestead right, even
though there be no children. A husband does not lose his homestead
when his wife withdraws from the family under a decree of divorce.
Non-residents as a rule are not within the privilege of the homestead
laws.
On the dissolution of a marriage by divorce, as the wife ceases to be
a member of the husband's family, she loses her rights to the
homestead. The decree of divorce may, in the dissolution of the
marriage, reserve to her the right, and if she is the owner of the
homestead she may continue to occupy it as one. The mere desertion of
husband or wife by the other spouse will not, in itself, destroy the
character of the homestead although an entire dissolution of the
family will have that effect.
By the federal law every head of a family, or a person twenty-one
years old and a citizen, or intended citizen, of the United States, if
not the owner elsewhere in the United States of one hundred and sixty
acres of land and has not previously obtained a federal homestead, is
entitled to a quarter section or less of the public land. Three things
are necessary: (1) An affidavit showing that the applicant comes
under the law; (2) a formal application; (3) payment of the land
office charges. When these things are done, the certificate of entry
is delivered to the applicant and the entry is made. Then the entryman
must actually reside on and cultivate the land for three years, and at
the end of that period, he is entitled to a patent. The lands thus
acquired are not liable for any debts contracted prior to the issuing
of the patent.
The head of a family can sell or mortgage his homestead, whether he is
solvent or not, nor can his creditors prevent its sale since they have
no rights therein. And if he sells his homestead and with the proceeds
buys another, the second is as fully protected from creditors as the
other.
From liability for most debts a homesteader is exempt, but not for
all. Generally the homestead is not exempt from taxes, but not
everywhere from fines for public offenses or liability on official
bonds. Debts contracted prior to the acquisition of the homestead and
pre-existing liens in most states are enforceable against the
homestead. So are debts contracted in improving or preserving the
homestead. These include materials furnished, also the wages of
clerks, servants, laborers and mechanics.
=Husband and Wife.=--The law, while regarding marriage as a contract,
adds something more, for it cannot be terminated by the will or
consent of the parties; a contract on the other hand in most cases can
be. To constitute a marriage there must be an agreement or mutual
assent by the parties. This agreement must be made freely, seriously
and not as a joke. False representations of health, wealth, etc., do
not invalidate the agreement, yet these may be grave enough to have
that effect. Consent may be obtained by deceit or compulsion so gross
as to justify a court in declaring that the parties were never legally
married. A person may be too defective mentally to give an intelligent
assent. A subsequent mental weakening would be no ground for annulling
a marriage. An Illinois court recently remarked, it is a harsh rule
that would permit a married man whose wife later in life became insane
to put her away on account of her misfortune. If one were so
intoxicated that he did not act intelligently, he could avoid his
marriage.
A male at common law can marry at fourteen, a female at twelve. By
statute a later date, twenty-one for males and eighteen for females
has been fixed in many states. The right to disaffirm a marriage on
the ground of non-age, unlike the parties to a contract, applies to
both parties.
In this country marriage is regulated largely by the states, though a
movement has been started to make marriage and divorce a matter of
national regulation.
As marriages are of higher character than other contracts relating to
the ordinary dealings of men, even those that are prohibited by law
are for reasons of public policy not always void. They are therefore
not void, simply because the formalities prescribed by statute in
obtaining the license and solemnizing the marriage have not been
observed, when the parties afterward live together like other married
people.
A marriage ceremony is not void though performed by one outside his
jurisdiction, or not having a license obtained at the proper place.
Persons who improperly grant licenses and solemnize marriages may
themselves suffer legally, but their wrongful action cannot be
visited on others. The principle still prevails in most states that a
marriage which is good by the common law, though contrary to statutory
forms unless there is an express prohibition, is a valid marriage. In
a few states a common law marriage is invalid.