pening of certain specified contingencies. In fire and marine insurance the principle is entirely that of indemnity. In no circumstances may the insured recover more, and he may recover less, than what he has actually lost. Since the value of a life cannot ordinarily be exactly ascertained, the doctrine of indemnity is not applied to life insurance.

§ 3. Kinds of policies. There are several kinds of policies. The most common form of fire policy is the open policy. In this the sum mentioned on the face of the policy merely fixes the maximum amount, beyond which the company is under no circumstances liable and in the event of a loss it is open to the company to show that the damage was in fact less than the amount stated in the policy. In the valued policy, on the other hand, the value of the property insured is conclusively agreed to by the parties and in the event of loss no question can be raised as to its value; the only question is: Did the loss occur? Marine policies are generally, and life and accident policies practically always, valued. The mere fact that the total sum mentioned in the policy is apportioned among several items does not render the policy valued. Thus, where the policy was for $8500 on one brick and two wooden houses, and opposite the first item was placed the sum of $6700 and opposite the latter item the sum of $1800, the policy was held not to be valued but merely to show the maximum amount of recovery which could be had with respect to each item (2). A floating policy is one issued to cover goods in a definite place, but where the goods are constantly changing so

(2) Wallace v. Insurance Company, 4 La. 289.

that the exact articles insured cannot be definitely described. This is frequently used in case of articles in warehouses and stores. This form of policy is also called a blanket policy.

A regular life policy is where the insurer, in consideration of certain premiums, agrees to pay a stated sum at the death of the person insured to whomever is designated in the policy. An endowment policy is where the premiums are paid for a certain number of years, generally ten or twenty. If the insured dies during that time, the face of the policy is paid to the designated person. If the insured lives to the end of the specified period, the face of the policy is paid to him.

§ 4. Meaning of terms used. Some of the more commonly used phrases in insurance law are the following: The person or corporation promising the indemnity is the insurer. The person taking out the policy and with whom the contract is made is properly designated as the insured (3), although the term is sometimes applied to the person to whom the policy is made payable, who of course may or may not be identical with the person taking out the policy. The person to whom the insurance is made payable is more properly designated as the beneficiary. A policy may under certain circumstances be transferred to a third person, who is then called the assignee.

SECTION 2. PARTIES AND FORMS OF CONTRACT.

§ 5. Who may be an insurer? At common law any per(3) Sanford v. Insurance Company, 12 Cush. (Mass.) 541.

son could become an insurer. Today practically all of the business of underwriting insurance is done by corporations, and in some states, by statute, only corporations can issue insurance policies. These insurance companies are usually corporations organized for that purpose as a business for profit. There are several so-called fraternal orders or mutual benefit companies. These proceed in somewhat different ways, and in some respects vary from regular insurance companies, but the law that governs them is substantially the same as that with regard to regular insurance companies.

§ 6. Who may be insured? As far as the capacity of the insured is concerned there is no difference (with one important qualification mentioned below) between an insurance contract and any other contract. Since all contracts by an infant, save for necessaries, are voidable, an insurance contract taken out by an infant may be avoided at his option. If he avoids, however, he cannot, according to the better law, recover the premiums that he has already paid, unless the premiums will more than pay for the insurance that he has actually received (4). A policy taken out by an insane person is void if he was insane at the time of taking out the policy. Subsequent insanity will not avoid the policy, unless it prevents the performance of conditions necessary to keep the policy alive (5).

§ 7. Must contract be in writing? Although the contract of insurance is generally in writing, it is not essen

(4) Johnson v. Insurance Co., 56 Minn. 365.
(5) Klein v. Insurance Company, 104 U. S. 88.

tial that it should be so. It is sufficient if the terms are definitely agreed upon and the risk assumed by the insurer. Nor need the premium actually be paid first, unless that is made a condition of the policy (6). Generally however the contract of insurance is in writing, and then it becomes effective only upon delivery (7).

§ 8. Form of policy. In many states the form of fire insurance policy has been fixed by statute, and all policies written in the state must be in that form. The form of policy that is most commonly required by these statutes is that which was established by the New York law and is known as the New York standard policy. It is this form which is used throughout this article as illustrating the various principles of fire insurance, and it is printed at length in the appendix. There are no legally established standard forms for the other branches of insurance.

SECTION 3. INSURABLE INTEREST.

§ 9. In general. If a person who had no interest in the property insured could take out a policy upon it, since under those circumstance he would, in return for the payment of a comparatively small premium, stand to win a very much larger amount by the destruction of the property, it is clear it would be for his interest that the property should be lost within the terms of the policy. To avoid this contingency it is obvious that, as a matter of public policy and protection of property, the right to insure must be limited to those persons who are so related to the property, that, if it were not for taking out

(6) Ruggles v. Insurance Co., 114 N. Y. 418; Insurance Co. v. Adler, 71 Ala. 516.

(7) Insurance Co. v. Babcock, 104 Ga. 67.

the policy, they would suffer a pecuniary loss by the destruction of it. This has occasioned the doctrine of requiring an insurable interest by the insured in the subject matter of the insurance. A person has been said to have an insurable interest in property "when he is so situated with reference to it, that, by its destruction, he will suffer an actual loss of money or legal right, or incur a liability" (8).

§ 10. Fire insurance. The general principle as thus stated is obviously reasonable. A few concrete examples may make the application of the rule clearer. The following are illustrations of what constitutes an insurable interest. The owner of property, even though it is mortgaged, and even though the mortgage is foreclosed, if he still has the right to redeem (9); a mortgagee (10); or a lienor; has an insurable interest. So a person who has a binding contract to purchase property has an insurable interest in that property. The interest need not be so direct as in the above cases in order to justify the taking out of a policy. Thus, a shareholder in a corporation has an insurable interest in the property owned by the corporation, since his right to profits may be affected by the destruction of the property (11). So a person engaged for a long term as superintendent of a factory has an insurable interest in the factory. But it must be a legal right. A mere hope or expectation does not constitute an insurable interest. Thus, an heir, even though it is morally certain

(8) Vance, Law of Insurance, p. 106.

(9) Savings Bank v. Insurance Co., 57 Conn. 335.

(10) Jerdee v. Insurance Co., 75 Wis. 345.

(11) Riggs v. Insurance Co., 125 N. Y. 7.