"There was a time when all insurance, and especially of life, was looked upon with suspicion and disfavor, but it was only because regarded as a species of wagering contract. That times has long gone by. And with the intelligent study of political economy bringing the recognition of the fact that even the most apparently disconnected and sporadic occurrences are subject to at least an approximate law of averages, the insurance against loss from any such occurrence has been recognized as a legitimate subject of protection to the individual by a guaranty of indemnity from some party undertaking to distribute and divide the loss among a number of others for a premium giving them a prospect of profit." 5

A legal contract of insurance is not made void by an incidental violation of the highway law.

§ 1794. "Covering note" as insurance. Sometimes for the purpose of effecting immediate insurance a covering note or binding slip is issued to the insured by the insurer providing insurance for a short time, generally subject to the terms set forth in the policy forms of the insurer. When such covering note is properly executed it amounts to a contract of present insurance, although no policy may ever be issued."

"The cover note was so signed, and the fact that it was not delivered until after the accident is immaterial. It purports to take effect prior to the date of that occurrence, and the evidence establishes that it is the memorial of a prior oral contract for such a cover note agreed to in its essentials, and which the parties intended should take effect as stated in the note.

18

"The words printed across the face of the contract, 'This covering memo must be returned with the application,' do not make its meaning in the least obscure. The sentence is merely a direction what shall be done with the 'covering note' if an application shall be made for a policy to take its place. To say that these words would con

a contract in a foreign state with a foreign insurance company which had authority to make liability insurance, whereby such alien company engaged to reinsure a portion of the liability risks of such foreign company incurred in this state. Such contract of reinsurance was not authorized by any law of this state, but was prohibited by section 665, General Code, which forbids such contracts unless the law requiring such deposit has been complied with. State ex rel. v. Tomlinson, 101 Ohio St. 459, 129 N. E. 684.

5 Gould v. Brock, 221 Pa. St. 38, 69 Atl. 1122 (1908). This case recognizes and upholds the validity of automobile indemnity insurance.

6 Messersmith v. American Fidelity Co., 187 App. Div. 35, 175 N. Y. Supp. 169 (1919), rev'g 101 Misc. 598, 167 N. Y. Supp. 579.

Effect of other insurance.-Under a statute binding insurance companies by the knowledge of their agents, a policy containing a provision that it shall be void if any other insurance shall be made on the same property without the written consent of the company is not avoided by subsequent insurance without the consent of the company, when the same person acts as agent for both companies and issues both policies. Bradbury v. Insurance Co., 119 Me. 417, 111 Atl. 609 (1920).

7 Law v. Northern Assur. Co., 165 Cal. 394, 132 Pac. 590; Kerr v. Union Marine Ins. Co., 124 Fed. 837; Ellis v. Albany Co., 50 N. Y. 402, 10 Am. Rep.

495.

8 Jones v. International Indemnity Co., 39 Cal. App. 706, 179 Pac. 692 (1919).

vert the writing into a mere application for insurance or that they might reasonably be so interpreted seems to us entirely illogical. The contract was one of the present insurance. By it the defendant does not merely promise to insure, but by its very terms it 'hereby' in the present 'secures' the plaintiffs from loss by fire. It has long been established that such a 'covering note' is itself a contract of present insurance."9

§ 1795. Oral contract of insurance. Oral contracts of automobile insurance have been held valid.1 10

"It must now be considered as the well-settled doctrine by the nearly universal concurrence of the authorities that oral agreements of insurance are enforceable. The principle underlying these doctrines is this: That the right to make contracts of insurance, like any other right of contracting, exists as at common law, unless prohibited by statute; that the contract of insurance having its origin in mercantile law and usage, the distinction which denies the power to enter into such a contract, except in particular modes and forms, is without foundation and repugnant to, and inconsistent with, the general capacity of contracting which the common law concedes to every person ordinarily competent to enter into binding engagements; that the provisions of a charter of a company that they shall have the right to make contracts of insurance by the signature of a president, etc., are regarded by the courts as merely enabling and not restrictive of the general power to effect contracts in any other mode not unlawful, dictated by convenience; and that the distinction between a contract to insure or to issue a policy of insurance, and the policy itself, is obvious and constantly recognized by the courts." 11

9 Law v. Northern Assur. Co., 165 Cal. 394, 132 Pac. 590.

10 Home Ins. Co. v. Evans, Ky. 257 S. W. 22 (1923); Park & Pollard Co. v. Agricultural Ins. Co, 238 Mass 187, 130 N. E. 208 (1921); Sheridan v. Massachusetts F. & M. Ins. Co., 233 Mass. 479, 124 N. E. 249 (1919); Cass v. Lord, 236 Mass. 430, 128 N. E. 716 (1920); Johnson v. Yorkshire Ins. Co., 224 Mich. 493, 195 N. W. 45 (1923); Koivisto v. Bankers & M. F. Ins. Co., 148 Minn. 255, 181 N. W. 580.

"A valid oral contract for fire insurance binding the company before the issuance of a policy undoubtedly can be entered into as pointed out in the recent cases of McQuade v. Etna Insurance Co., 226 Mass. 281, 115 N. E. 428, and Mowles v. Boston Insurance Co., 226 Mass. 426, 115 N. E. 666, and an insurance agent can bind himself by parol to procure insurance, and if there is a breach of the contract he is liable in damages. Sargent v. National Fire

Ins. Co., 86 N. Y. 626; Everett v. O'Leary, 90 Minn. 154, 95 N. W. 901. But to be valid and enforceable the contract must be mutually binding and supported by a consideration." Cass v. Lord, 236 Mass. 430, 128 N. E. 716 (1920).

An agent empowered to countersign and issue policies may, as incidental to his authority, make oral contracts for temporary protection of the owner in case of fire. Unless the person insured has some notice of limitation on the authority of the agent, he may rely upon an implied authority in such an agent to make such contract. Park & Pollard Co. v. Agricultural Ins. Co., 238 Mass. 187, 130 N. E. 208 (1921).

By statute, in Oregon, required to be in writing. Salquist v. Oregon Fire Relief Ass'n, 100 Oreg. 416, 197 Pac. 312.

11 King v. Phoenix Ins. Co., 195 Mo. 290, 303, 92 S. W. 892, 113 Am. St. Rep. 678, 6 Ann. Cas. 618, and authorities there cited.

§ 1796. Knowledge or wrongful act of agent in taking application. Notice to the agent, at the time of the application for the insurance, of facts material to the risk, is notice to the insurer, and will prevent it from insisting upon a forfeiture for causes within the knowledge of the agent.12

66

When a canvassing agent of an insurance company is fully informed of prior insurance on the same property and of a mortgage thereon, but prepares the application so as to make it show there is no insurance or mortgage and the insured signs the application and a policy is issued thereon, the company is estopped from showing in defense to an action on the policy that there was other insurance or that the property was mortgaged." 13

Knowledge of the insurer's agent who took the application for the policy that he personally held a mortgage on the car, has been held not to be knowledge of the insurer, and not to constitute a waiver of the warranty against mortgages.14

Where the agent of the insurance company incorrectly fills out an application from facts given him by an applicant who can read and the insured signs the application without reading it, after being given to understand that it was properly filled out, relying upon the statement of the insurance agent, the defendant is estopped from showing any breach of warranty, as to such incorrectly filled in matter, if such application was prepared by its agent with full knowledge of the facts.15

"There seems to be little doubt that by the weight of authority, in the absence of deceit and fraud of the assured, where there is no application, or if the answers are written by the agent on his own knowledge or authority without questioning the applicant, the company is generally held estopped from relying upon a forfeiture, either because of the falsity of such answers as are written by its own agent, or because of the failure to answer questions material to the risk which have never been asked."' 16

Where the answer sets up misrepresentations, or breach of warranty in that the information furnished by insured was false, waiver or estoppel should be specially pleaded in order to be available to the plaintiff.

Where insured made true answers to questions material to the risk covered, and the company's agent wrote misstatements in the application, insured is not thereby precluded from recovery under the policy.17

§ 1797. "Issue" of policy. Ordinarily by the "issue" of an insurance policy is meant its delivery and acceptance whereby it comes

into full effect and operation as a binding mutual obligation.18 Sometimes it is used in the sense of the preparation and signing of the instrument by the officers, as distinguished from its delivery to the insured.19

§ 1798. Transfer of policy from one car to another as new contract-Compliance with rules of association. The rules of an automobile insurance association provided that, if a member desired to have the policy cover a substituted car, he should give notice to the association's attorney in fact and pay a fee. Appellants owned a Buick car, which was covered by insurance, and which they sold, purchasing, in its stead a Chandler. They then mailed the association a letter asking for a transfer of the policy and inclosing the fee. The Chandler car was stolen after the letter was mailed, but before it was received. The association, upon receipt of the letter, transferred the policy as requested, in ignorance that the car had been stolen. It was held that as the application for the transfer was in law an application for a new contract of insurance, not effective until validity accepted, and as appellants had no absolute right to a transfer, the car was not covered when stolen, hence there was no liability on the part of the association.20

§ 1799. Insuring car after disposing of same. A policy of automobile insurance issued to one after he has disposed of his interest in the car is void. Hence, it cannot be assigned to the owner of the car.21

18 Coleman v. New England Mut. L. Ins. Co., 236 Mass. 552, 129 N. E. 288; Homestead Ins. Co. v. Ison, 110 Va. 18, 23, 65 S. E. 463; Logsdon v. Supreme Lodge, 34 Wash. 666, 76 Pac. 292.

19 Coleman v. New England Mut. L. Ins. Co., 236 Mass. 552, 129 N. E. 288; Dargan v. Equitable Life Ins. Co., 71 S. C. 356, 361, 51 S. E. 125; Life Ins. Co. v. Coalson, 22 Tex. Civ. App. 64, 73, 54 S. W. 388; Stringham v. Mutual Ins. Co., 44 Oreg. 447, 75 Pac. 822.

20 Palmer v. Bull Dog Auto Ins. Ass'n, 294 Ill. 287, 128 N. E. 499 (1920).

"This court has held that a renewal of a policy is, in effect, a new contract of assurance, being, unless otherwise expressed, on the same terms and conditions as were contained in the original policy. Hartford Fire Ins. Co. v. Walsh, 54 Ill. 164, 5 Am. Rep. 115; Hartford Fire Ins. Co. v. Webster, 69 Ill. 392. When they made the application for the transfer of the policy, appellants realized that their request required the acceptance of the attorney in fact of the association, for the letter closed with the statement, 'Kindly

acknowledge receipt and notify me of the changes.' 'Where a loss occurring before the risk attaches is known only to the applicant, and he obtains a policy without disclosing the fact of loss, the policy is void, even though the contract be given a date prior to the loss.' 1 Joyce on Insurance (2d Ed.) § 107. The risk could not have attached to the auto under this contract until the application had been accepted on August 8 by the attorney in fact, and that was after the auto had been stolen. Where an application for insurance provides that the policy shall take effect on the day the application may be approved, if it is not approved there is no contract of insurance. Baptist Church v. Brooklyn Fire Ins. Co., 28 N. Y. 153. An application for insurance is not itself a contract, but is a mere proposal, which requires acceptance by the insurer through some one actually or apparently authorized to accept the same, to give it effect as a contract. 1 Cooley's Briefs on Insurance, 413." Palmer v. Bull Dog Auto Ins. Ass'n, 294 Ill. 287, 128 N. E. 499 (1920).

21 Mowles v. Boston Ins. Co., 226 Mass. 426, 115 N. E. 666 (1917).

An

§ 1800. Character of company required to maintain reserve. insurance company empowered to write "all kinds of insurance on automobiles," was required to maintain a reserve required by a statute providing that such companies shall report, "The liabilities of the company, as follows: First, the amount due or to become due to banks or other creditors; second, losses" of all kinds; and, "fifth, premium reserved or amount required to safely reinsure all outstanding risks;" which statute includes fire policies, and the company in question was authorized to write such policies.22

§ 1801. Inter-indemnity contract as insurance. A contract made by the New Jersey Indemnity Company as so-called attorney in fact of certain "subscribers" to automobile insurance, whereby the company becomes the medium by which each subscriber fulfilled his obligation to indemnify each of his fellow subscribers who suffered a loss and received from each of his fellow subscribers the indemnity to which he was entitled, held to be a contract of insurance by the New Jersey Indemnity Company, acting not as agent for the subscribers, but as an insurance company; and it appearing that the company was thus doing a state-wide business with the public generally, it is held, also, that the company was engaged in the insurance business in violation of section 88 of the General Insurance Act. Further held, that the enforcement of the penalty provided for in section 89 of the act for a violation of section 88 does not violate the Fourteenth Amendment of the Constitution of the United States nor paragraph I of the Constitution of the state of New Jersey.23

§ 1802. By what law policies are governed. The general rule is that the law of the state in which an insurance company writes its policies govern the contracts.24

our own state one feature of reciprocal indemnity insurance was recognized by the Lloyds Act of 1915 (P. L. p. 370) under the provisions of which act an aggregation of persons could combine for the purpose of covering certain hazards, and, after obtaining the authority of the Commissioner of Banking and Insurance, could engage in that line of business, but section 12 of the act provides that nothing herein contained shall apply to inter-insurers or reciprocal underwriters.'" State v. New Jersey Indemnity Co., 95 N. J. L. 308, 113 Atl. 491 (1921).

In the case of State v. Revelle, 257 Mo. 529, 165 S. W. 1084, the contract

under consideration was very similar to the one under review in the case at bar. The court there said: "It is perfectly plain from the outline of the business which relator seeks to do as the agent or manager of all persons to whom relator shall issue policies, that it is a state-wide plan with no other requirements as to membership than that the applicant shall insure his property and give the 'manager' the power to do all things simply by using the name 'manager,' which the member could do himself. The plan provides no guaranty of solvency beyond what may be left of the 'funds payable by a single subscriber' after the subtraction therefrom, by the manager, of his stipulated per cent. and all the costs and expenses which the manager may be put to in carrying on the insurance business.''

See also, State v. Alley, 96 Miss. 720, 51 So. 467.

24 Automobile Ins. Co. v. Guaranty