541. Representations and descriptions. Rule: A misrepresentation of material facts concerning the thing to be insured will free the insurance company from its obligations to indemnify the insured.

The insurer is entitled to have a full, true and accurate description of the property and all that pertains to, or in any way affects, the risk. If the replies to the usual interrogatories be false the company may avoid the policy. There is a distinction between representations and descriptions which are made simply for the purpose of determining the nature of the risk. In the former, if there be slight variations it will not affect the policy, but in the latter the validity of the policy rests on the truths of the descriptions. An entirely erroneous description as to the place where personal property is situated, or a failure to mention buildings situated near the insured property, in answer to interrogatories, makes the policy void. Where a building was described as a dwelling-house, but was used partly for a billiard saloon and partly for a restaurant, the policy is void. So it is where the description was that the building was occupied as a storehouse, whereas a part of it was used for hacking hemp and spinning it into rope yarn. But where goods were described as in the dwelling-house of the insured, and it turned out that the insured had only one room as a lodger, and the goods insured were in this room; it was held that they were correctly described, as complying with a condition in the policy that, "the houses, buildings and other places where goods are deposited shall be truly and accurately described," since such a condition related to the contruction of the house, and not to the interest of the parties in it.

542. Alterations and repairs. Rule: Alterations and repairs do not in themselves change the risk. But if the alterations be such that a higher rate of premium would have been demanded it will void the policy.

If property be insured as a private dwelling, and afterwards the building be extensively altered for the purpose of running a boarding-house, and it be thus used, the policy not prohibiting the keeping of such a house, does not vitiate the policy, unless

the rate on a boarding-house is greater than that on a dwellinghouse.

Rule: If personal property be removed without the consent of the insurer from the building in which it was at the time it was insured, it will release the insurer.

However, it is not necessary that an automobile should be in any particular place in order to make the insurance valid since insurance on such machines is valid at any place.

543. Assignment of policy. Provisions in a policy that it cannot be assigned without the consent of the insurer are valid. But after a loss has occurred the insured may assign the policy, and the assignment will be valid, even though there be a provision in the policy which declares that such an assignment shall be void.

544. Sale of property. Rule: If the property insured be sold it will work a forfeiture of the policy.

The purchaser would have no right to be indemnified for any loss in case of fire, neither would the seller have any right to be indemnified, even though the policy be in his name, because, having sold the property, he sustains no loss by its destruction. If property, when bought, be insured, the purchaser should at once obtain the consent of the insurer and have the policy transferred.

545. Loss must be by fire. Rule: The loss must be occasioned by fire in order to give the insured a claim for damages.

Where the register of a sugar-house was kept closed by mistake and caused the sugar to overheat and spoil, it was held not to be a loss by fire, but by mismanagement. A policy against fire covers losses by water or chemicals used in extinguishing the fire, or loss from smoke, or from theft while the goods are being removed to a place of safety, but it does not cover loss by lightning unless there be ignition.

546. Performance of condition. A party desiring insurance is usually required to fill out a form of application for insurance which contains many interrogatories concerning the location and description of the property. All of the representations made in the application for insurance are incorporated into the

policy by reference in the policy that the said interrogatories and answers contained in the application are made a part of the contract of insurance. Every condition and provision inserted in the policy and in the application must be strictly and literally observed. When a provision, which requires that in the event of loss an account of the particulars of it is to be rendered by the insured, is inserted in a policy, no action can be maintained until this provision has been complied with. In some instances its delivery within a specified time is a condition precedent to the right of recovery.

547. Insurer's right to replace loss. In order to deter evildisposed persons from willfully setting their own property on fire for the purpose of obtaining the insurance money, the insurer inserts a provision in the policy which gives him the right to repair, to rebuild or to pay the amount of the loss. This gives the insurer the right to elect which he shall do. Where the damage is slight the insurance companies usually repair instead of paying the money. A's dwelling-house, insured for $3,000, was damaged $500 by fire. The insurance company believes the property was set on fire by A for the purpose of obtaining the insurance money. The company may, instead of paying the loss, expend the money in repairing the building.

548. Amount to be covered. It is the prevailing opinion among many persons that no matter what the property is worth the insurer is obliged to pay the amount stipulated in the policy. This is erroneous. The amount stated in the policy only represents the maximum amount for which the company is willing to become liable, and not necessarily the amount that the insurance company agrees to pay. If a party insure his property for more than it is worth he can recover only its real value; but the amount insured is the base on which to calculate the premium. So that in such a case the insured is the loser to the extent of the premium he has to pay on the over-valuation of his property.

A insures his house, valued at $8,000 for $5,000. A loss occurs by fire and water amounting to $2,000; the loss is fully covered, and A is entitled to $2,000. Suppose the building were completely destroyed, then the loss is not fully insured, and A could only recover the amount of the policy.

But if A had insured the property for $10,000, when it was worth only $8,000, then in case the property is destroyed by fire, he could recover only his actual loss, $8,000, and not the amount stipulated in the policy.

549. Policies in several companies. Insurance companies prefer many and small risks to few and large ones, because in case of a fire the loss does not cause uneasiness among the policyholders. Thus, a manufacturing company owns a plant valued at $50,000, which they decide to have fully insured. No one company would insure it for its full value, because in case of its destruction the loss might seriously affect the insurance company. It will be necessary for the owners of the property, if they desire to be fully protected, to take out policies in several companies; then, in case of loss, each company, provided there were ten of them and each insured for $5,000, would only have to pay $5,000, thus dividing the loss among the ten companies. If there were only a partial destruction of the property each company would pay that proportion of the loss which the amount of the policy bears to the whole amount insured. Suppose, in the above illustration, the property were damaged to the extent of $3,000; this being 6 per cent of $50,000 the total amount insured, each company would be required to pay 6 per cent of its policy, which would just make good the loss. This rule is not affected by the relative dates upon which the policies were issued. If one policy had been in force for a year and another one for only a day, the liability of the companies would not be varied by that fact.

QUESTIONS

1. Define insurance.

2. What is fire insurance?

3. What is meant by the policy of insurance?

4. Define premium.

5. What should a policy of insurance contain?

6. What is an insurable interest?

7. Who may take out a policy of fire insurance?

8. Are the verbal representations of an agent binding on the company? 9. What is the effect of a misrepresentation of a material fact on the validity of a policy?

10. Give an illustration of what would be a misrepresentation of a material fact in an application for fire insurance.

11. What is the effect on the validity of a fire insurance policy if the insured should alter or repair the building without the consent of the company?

12. Has the insured the right to move personal property from one building to another without the consent of the company?

13. Has the insured the right to assign a policy of fire insurance? 14. What is the effect on a policy of insurance if the property is sold? 15. Does a policy of fire insurance protect a purchaser of the property without an assignment of the policy to such purchaser?

16. Is the consent of the company necessary to an assignment of the policy?

17. How strictly are the provisions of a fire insurance policy to be observed?

18. Why should the insurer have the right to replace the property instead of paying damages in money?

19. In case of a loss by fire to what extent is the company liable?

20. Where property is insured in several companies what proportion of the loss should be paid by each company?

21. Is it usual to insure in more than one company?

22. Do the relative dates on which the policies are taken out affect the liability of the different companies in any way?

CASES

(GIVE REASONS FOR YOUR ANSWERS)

1. Plaintiff took out a policy of insurance on a two-story frame building and a stock of groceries. Plaintiff was and had been for several years in possession of the premises. About a year previous to the fire and before he took out his insurance policy he had bought the lot on which the buildings were erected, and entered into a written contract with the vendor by which he agreed to pay $5,000 for the property in five equal installments, with interest, the title not to be conveyed until all the installments were paid. The company refused to pay the policy on the ground that the plaintiff had no insurable interest in the property. Is the plaintiff entitled to recover?

2. A desired insurance on his property, but at that particular time was unable to pay the premium. Therefore, B had the property insured in his own name. The property was destroyed. What are B's rights?

3. A borrowed of B $2,000, and gave as security a mortgage on his warehouse, which was valued at $15,000. B had the warehouse insured for $10,000. The property was totally destroyed by fire. Is the insurance company liable to B? If so, to what extent?