erty, or where the loss exceeds the total amount carried on all the policies, no difficulty arises. However, very considerable difficulty arises in a case like this: Suppose the insured is a retail store keeper. He has one policy on the building and contents, one policy on the contents in general, and one policy on dry goods alone; and there is a partial loss on the dry goods alone. There is much difficulty as a matter of mathematics in adjusting the loss under these circumstances so as to comply with the proportionate clause of the policy, and the courts have worked out the case in various ways. Questions of this kind, however, are generally settled by adjusters for the various companies between themselves (26).

§ 150. Subrogation to tort rights. The doctrine of subrogation is a very important one in both marine and fire insurance. It may be most easily explained by an illustration. Suppose A owns a house worth $10,000, insured for its full value. Suppose the house is burned by the negligent act of X, a third person. Clearly A can say to the insurance company: "My property has been destroyed by fire; you insured me against that kind of loss, and that loss has occurred; your obligation now is to pay." And clearly the company must pay. Suppose, now, after A has collected from the company, he sues X for the wrong done in wrongfully burning the house. Clearly A can obtain judgment against X for $10,000, and, if X is solvent, recover that amount from him. If that is done, the total effect of the transaction is that A has lost a $10,000 house,

(26) See at length on this point, Griswold's Fire Underwriters' Text Book (1st ed.), pp. 630-685, 706-746.

but has collected $20,000, so that in the long run, so far from the destruction of the house being a loss to him, it has been an actual profit. It is equally clear that, just as soon as A recovers the $10,000 from the insurance company, the one who was really damaged by the wrongful act of X was not A, who has now been made whole, but the insurance company, who was obliged to make him whole. Further than this, it would obviously be bad public policy to allow A to keep the whole $20,000, for, if that were the law, it would be for his advantage not to safeguard his property but to neglect it. For these reasons, an English case over a hundred and fifty years ago (27) laid down the law that, when the company pays under these circumstances, it is entitled to stand in the shoes of the insured and to pursue against the wrong doer all rights that the insured acquired against him by the act which has brought about the loss. Or, as the doctrine is technically put, the insurance company, on payment of the amount of the policy, is subrogated to the rights of the insured. This is also well-established law in this country.

§ 151. Same: Independent of order of procedure. So salutary a rule as the foregoing should not and does not depend on the order of procedure. The insured may, if he wishes, proceed against the company, and then it, after paying, proceed against the tort feasor; or, the insured may, if he pleases, proceed against the tort feasor, in which case he can not proceed against the company. For the same reason, if the insured releases his claim against the

(27) Randal v. Cockran, 1 Ves. Sr. 98.

tort feasor, so that the company on paying the policy and attempting to enforce the claim against the tort feasor would be met by the release, then the insured loses his right of recovery against the company to the extent that he has prejudiced it by his release of the tort feasor (28). Another and different illustration of this same principle of subrogation is the following case: A was a farmer who took out an insurance policy on his hay, which was burned by a railroad. A collected his claim from the railroad and then presented his claim on the policy to the insurance company. The insurance company paid him and then, attempting to sue the railroad, found that A had already collected from it. Under these circumstances, the insurance company was allowed to recover from A the amount that had been paid him on the policy (29). On the other hand, if the wrong doer settles with the insured, knowing at the time that the latter has already collected from the insurance company so that the company is already in equity the owner of the claim for damages, the release acquired by the tort feasor from the insured will be no defense to an action by the company; for the reason that, at the time the tort feasor bought his release from the insured, he knew that the insured had no right to the claim (30).

Policies nowadays very frequently provide in so many words that the company shall be subrogated to the rights of the insured against the wrong doer, and also frequently further require the insured to assign to the company any

(28) Insurance Co. v. Storrow, 5 Paige (N. Y.) 285.

(29)

Insurance Co. v. Weller, 98 Iowa, 731.

(30)

Hart v. Railroad Co., 13 Metc. (Mass.) 99.

claim that he may have against the wrong doer arising out of the act causing the injury to the property insured (31). This language would seem to add little or nothing to the substantial rights of the company.

The general

§ 152. Subrogation against carriers. principles of subrogation apply as well against common carriers as elsewhere. Hence, where the insured ships goods by a railroad and they are burned, so that the railroad becomes liable therefor, and he then collects from the insurance company, the company can in turn sue the railroad (32). To meet this situation, the railroad companies at an early date began to insert this clause in the bills of lading: "The railroad shall have the benefit of any insurance that may be taken out upon the goods covered by this bill of lading." Now it must be noticed that, while, as already said, the insurance company is subrogated to the rights that the insured has, it gets no larger rights than he had. Consequently, if at the very moment of the wrong complained of, the right of the insured was limited by a contract between himself and the wrong doer, the insurance company on payment can get only this limited right. Hence, in this case, if the company after paying the insured tries to sue the railroad company, it finds itself met by the fact that the insured has put himself by contract in such a position that, if he had collected from the company, he could not sue the railroad, and consequently the company can get no larger right. This principle is perfectly well established as a matter of decision,

(31) App. E, 1. 207.

(32) Hall v. Railroad Co., 13 Wall. (U. S.) 367.

and it is immaterial whether the policy was taken out be. fore the bill of lading (33) or vice versa (34). In other words, the effect of this clause in the bill of lading is to make the insurance taken out by the insured operate; first, for his benefit; and secondly for the benefit of the railroad, so that the loss falls ultimately on the shoulders of the insurance company, and it has no method of shifting it upon the railroad.

To meet this situation various clauses have in turn been adopted by the insurance companies. Thus, in one case, A, the shipper, took out an insurance policy which provided as follows: "In case of any agreement or act whereby any right of recovery is released or lost, which would on payment of loss by this company belong to it, except for such agreement or act, or in case this insurance is made for the carrier of the property, the company shall not be bound to pay the loss" (35). In another case a policy had this clause: "Warranted that this insurance shall not enure to the benefit of any carrier" (36). The result of course of these clauses is to prevent the insured from recovering against the insurance company, if his bill of lading contains a clause such as that noted above, since, by the very terms of the policy, the validity of the policy is conditioned on there being no such agreement. On the other hand, of course, the insured still has his right of recovery against the carrier (37).

(33) Inman v. Railway Co., 129 U. S. 128.

(34) Insurance Co. v. Transportation Co., 117 U. S. 312.

(35)

Fayerweather v. Insurance Co., 118 N. Y. 324.

(36) Insurance Co. v. Easton, 73 Tex. 167.

(37) Inman v. Railway Co., 129 U. S. 128.