of the clauses in the policy shall be used to the disadvantage of the insured. He must be paid, and the dispute, if any, settled among the underwriters.1 Lord Mansfield said: "In no case must the contribution clause be construed in such a manner as to throw loss upon the insured, against which he would have been fully protected had the policies been free from that clause." 2 In an interesting apportionment by the arbitration committee of the New York Board of Fire Underwriters, growing out of a recent fire in the Rossiter stores in New York City, the arbitrators laid down three principles which they considered fundamental. “(1) That the insured shall not suffer by non-concurrence of policies, if the aggregate of the insurance exceeds the loss. (2) That a co-insurance clause serves its purpose if it is a guaranty that at least the benefits of full insurance are secured. (3) That a floating policy, with condition that it shall not attach until all specific insurance is exhausted, cannot be held by reason of non-concurrence of specific policies, save for the excess of the aggregate amount covered by all such non-concurrent policies." 3 But to constitute double insurance it is not necessary that the persons insured under the different policies should be named by the same description. For example, if a warehouseman takes out insurance upon the goods stored with him as a bailee, not only for his own benefit but on account of whom it may concern, or by any designation for the benefit of others interested in the same property, provided such other persons have either given original authority for the procuring of the insurance or have subsequently ratified it, the policy covers their interest as well as the interest of the warehouseman, it being shown that such other persons were within the contemplation of the parties to the contract at the time when it was 'Lucas v. Jefferson Ins. Co., 6 Cow. Mercantile Ins. Co. v. L., L. & G. Ins. 635. Co., 5 Ch. Div. 569. Ill. Mut. Ins. 2 Godin v. London Assurance Co., 1 Co. v. Hoffman, 132 Ill. 522. Balto. Burr. 489. * Ogden v. East River Ins. Co., 50 N. Y. 388; s. c., 10 Am. Rep. 492. Lowell Mfg. Co. v. Safeguard Fire Ins. Co., 88 N. Y. 591. North British & Fire Ins. Co. v. Loney, 20 Md. 20. Haley v. Dorchester Mut. F. Ins. Co., 12 Gray, 545. Sloat v. Royal Ins. Co., 49 Pa. State, 14; s. c., 88 Am. Dec. 477. made; and in that case a policy by the owners or the other persons in interest will constitute other or double insurance.1 § 165. Reinsurance.-Liability for reinsurance shall be as specifically agreed hereon. When an insurer finds it prudent or convenient to protect himself from loss by reason of any liability he has assumed under a policy, he may contract with another company to relieve him from that liability by a policy of reinsurance. Except as to the matter of premium, which may be more or less than that paid on the original policy, the insurer takes upon himself the rights, duties, and obligations of the original insurer. A company sometimes has all its risks reinsured by another company or other companies. A preliminary contract is generally exchanged providing that the policy of insurance shall issue on a certain date, and meanwhile a schedule of the risks is prepared which is to be attached to the policy of reinsurWith the exception of this schedule, which may cover in brief form thousands of policies, the policy of reinsurance is generally like an ordinary policy of insurance. It constitutes a new contract, and is to be governed by the law of the place where it is made; but it is based upon the representations made at the time of the original insurance.2 ance. The original insurers are governed by the ordinary rules relating to concealment, and must make a fair disclosure to the reinsurers of material facts concerning the risk.3 The statute of frauds is not applicable to the contract of reinsurance, nor is it an agreement to answer for the debt of another.1 The contract of reinsurance is an indemnity against liability for loss, and consequently, as soon as the liability of the first insurer has actually accrued, it may bring suit against the reinsurer before an actual payment of the loss. And so also the reinsurer may be obliged to pay the original insurer the amount of its liability, although the latter may have become 1 Home Ins. Co. v. Baltimore Ware Co., 107 U. S. 485. N. Y. Bowery house Co., 93 U. S. 527. Fire Ins. Co. v. N. Y. Fire Ins. Co., Cohen v. Cont'l Life Ins. Co., 69 17 Wend. 359. N. Y. 300. Bartlett v. Fireman's Fund Ins. 'Sun Mut. Ins. Co. v. Ocean Ins. Co., 77 Iowa, 155. insolvent, and although it may ultimately be unable to pay. its indebtedness to the insured.1 But if, before having recourse to the reinsurer, the first insurer pays or adjusts its loss, or compromises it so as to fix its amount, this amount will limit its right of recovery against the reinsurer.2 If the original insurer through mistake pays to the insured a larger amount than it was bound to pay, the liability of the reinsurer will not be thereby increased unless the form of the contract of reinsurance permits it, or unless the amount paid was fixed by a judgment. The original insured cannot bring suit against the reinsurer unless the contract of reinsurance stipulates that he may, for otherwise no privity exists between the original insured and the reinsurer. Any defense which is available to the original insurer may also be raised by the reinsuring company. The provision of the policy in respect to 3 other insurance is held to mean other reinsurance.5 Sometimes policies of reinsurance cover risks as existing on a certain date, and in other policies the reinsurers are not careful to insert such a limitation. The difference between these two forms of contracts may be very important. For under the first form, if the original insurers or their agents change the risk, as frequently happens, by an express or constructive consent, for example, to a removal of the property to a new locality, or a change of partners, or an assignment of the policy, the reinsurers will be discharged from liability. Whereas without such limitation the reinsurers would be liable, notwithstanding such waivers or privileges as the original insurers might see fit to extend to the insured under the policies. The practice is for the original insurer, if sued by the in 1 Mutual Safety Ins. Co. v. Hone, 2 Comst. 235. Blackstone v. Alemannia F. Ins. Co., 56 N. Y. 104. Gantt V. Amer. Cent. Ins. Co, 68 Mo. 503. 2 Insurance Co. v. Insurance Co., 38 Ohio State, 11; s. c., 43 Am. Rep. 413. Glen v. Hope Mut. Life Ins. Co., 56 N. Y. 379. Protection Ins. Co., 1 Story, 458. 'Mutual Safety Ins. Co. v. Hone, 2 Comst. 235. Manufacturers Fire & Marine Ins. Co. V. Western Assur. Co., 145 Mass. 419. Faneuil Hall Ins. Co. L., L. & Globe Ins. Co., 153 V. N. Y. State Marine Ins. Co. v. Mass. 63. sured, to give the reinsurer an opportunity to come in and defend the suit at the expense of the latter. If the reinsuring company declines to do this, it will be liable for the reasonable costs of the suit.1 The provision of the policy, requiring an appraisal and. limiting the time within which a suit may be brought, has been held to have no application to a contract of reinsurance." The Massachusetts policy is silent upon this subject. § 166. Subrogation.-Subrogation of rights to the extent of payment shall be assigned to the company. The common law right of subrogation has been already considered. It grows out of the principle of indemnity, and has an equitable basis in that the negligent person who caused the loss and who is primarily liable ought to be made ultimately responsible for the damage sustained.3 The insured in the first instance has his option between two forms of remedy. If he pursues his remedy against the wrongdoer and recovers compensation, the insurance company will escape. But if he chooses first to enforce his claim against the insurance company, the latter is entitled, by way of subrogation, to have recourse over against the guilty party for compensation.1 Consequently, the wise course for the insured to adopt ordinarily is to recover his insurance moneys in the first instance before instituting any suit against the wrong-doer. Inasmuch as the insurance company is entitled to the right of subrogation, the insured will not be permitted to defeat that right by releasing the wrong-doer or compromising with him to the prejudice of the insurance company without the consent of the latter.5 The provision of the policy requiring the insured to make a formal assignment pro tanto of any rights that he may have 1 N. Y. State Marine Ins. Co. v. Protection Ins. Co., 1 Story, 458. 2 Jackson v. St. Paul F. & M. Ins. Co., 99 N. Y. 124. Eagle Ins. Co. v. Lafayette Ins. Co., 9 Ind. 446. 'Liverpool & G. W. Steam Co. v. Phenix Ins. Co., 129 U. S. 397. 'Liverpool & G. W. Steam Co. v. Phenix Ins. Co., 129 U. S. 397. Insurance Co. of N. A. v. Fidelity, &c. Co., 123 Pa. State, 523; s. c., 10 Am. St. Rep. 546. Conn. Fire Ins. Co. v. Erie Ry. Co., 73 N. Y. 399; s. c., 29 Am. Rep. 171. against the negligent person or corporation enables the insurance company without any question, under the codes of procedure, to institute action against the wrong-doer in their own name. Insurance companies, however, having regard to the prejudice which juries are apt to exhibit towards corporations, sometimes make an arrangement with the insured whereby it is agreed that a suit shall be brought in the name of the insured against the wrong-doer for the whole amount of damage sustained, and that the proceeds of the suit and expenses shall be apportioned between the insured and the insurers under some stipulated arrangement. Sometimes the insurance money is paid before the suit, and sometimes not until after its termination. In such a case the insurance company does not take any assignment. It has been held that the wrong-doer who is sued for negligently causing the fire cannot make a defense out of the payment of the insurance money to the insured by the insurance company, because the policy is res inter alios acta.1 Except as varied by express agreement, the insurer has no rights against the wrong-doer other than those vested in the insured, and the company cannot enforce those until it has admitted its liability under the policy.2 The insurers can recover only what they have paid under the policy.3 Sometimes the insurers take an assignment of the whole amount of the claim for damages belonging to the insured, although this exceeds the amount paid on the policy. This is not equitable, and no company would be apt to insist upon such a form of assignment if the insured made objection to it. A common carrier may, by agreement with the owners, secure to himself the benefit of any insurance effected by the owner of the goods, and in the absence of fraud such an agree Weber v. Morris & Essex R. R. Co., 35 N. J. Law, 413; s. c., 10 Am. Rep. 253. 1 Conn. Fire Ins. Co. v. Erie Ry. Co., 73 N. Y. 399; s. c., 29 Am. Rep. 171. Monmouth Co. Mut. F. Ins. Co. v. Hutchinson, 21 N. J. Eq. 107. Harding v. Townshend, 43 Vt. 536; s. c., 5 Am. Rep. 304. Hayward v. Cain, 105 Mass. 213. Monticello v. Mollison, 17 How. 152. Clark v. Wilson, Holbrook v. U. S., 21 Ct. of Claims, Am. Rep. 532. 434. 103 Mass. 221; 4 2 Midland Ins. Co. v. Smith, 6 Q. B. D. 561. Phoenix Ins. Co. v. Erie & W. Tr. Co., 117 U. S. 312; s. c., 118 U. S. 210. |