applied the most modern and approved apparatus for extinguishing fires. Moreover, when a factory comes into their membership they not only see to it that in all respects its condition is brought up to their requirements, but by frequent inspection they secure the constant maintenance of such conditions. They are, indeed, hardly to be called insurance companies at all, but rather associations of manufacturers with experienced inspectors and engineers, whose work it is to eliminate the possibility of loss or serious damage by fire. The insurance feature only comes into play when, despite their precautions, a damage is incurred. It will be realized that, though the number of fires and the loss resulting therefrom has been very greatly reduced, by these methods a large expenditure is necessary to construct, arrange, and equip a factory in such a way as to bring it up to the standard of their requirements." The endeavors of factory mutuals along the lines suggested have reduced the fire waste among factories from proportions that were appalling to reasonable figures, and have brought about changes that the stock companies have been compelled in self-defense to adopt. The method of premium payments consists in charging a cash premium according to the nature of the hazard involved, and which is expected to be sufficient for the payment of all losses likely to happen; and then to provide for unforeseen contingencies by reserving the right to assess its members to the extent of say five times the cash premium. Unlike the experience of other mutuals, however, the factory mutuals have had no occasion to exercise the assessment feature. Since 1850, it is said that not a single New England factory mutual has found it necessary to collect an assessment. Instead, the cash premiums have much more than met all losses and expenses, and in nearly all instances have left a large surplus to be divided as dividends among the members. Lloyds Organizations.-The third and least important class of organizations which do a fire-insurance business are the so-called Lloyds associations of one kind or another, named after the famous Lloyd's of London. These organiza tions have existed in large numbers since 1890, but in many instances were only short-lived. The total amount of insurance written was never very great, their proportion of the country's total fire insurance in the year 1908 amounting to only 2 per cent. Comparatively few of these so-called Lloyds can furnish reliable insurance, and while in some instances these organizations have been in business for a considerable period and have an honorable and successful record behind them, in too many instances the term Lloyd's has been used to imply the financial strength of the London organization, whereas in reality there is little financial responsibility back of the project, and its real purpose is the collection of premiums so long as these exceed the claims for losses. Lloyds organizations may be defined as voluntary partnerships of groups of men, in which each member agrees to hold himself individually liable for the payment of losses up to a specified amount. In most cases, therefore, the value of the insurance contract depends upon the financial strength of the members in the partnership, though in some instances greater security is offered in the form of a guarantee fund which is available for the payment of losses. In too many cases, also, the policy contracts issued by these organizations contain a provision which protects the underwriters by providing that in case of a conflagration each partner can be held liable only to a certain fixed amount on all outstandir contracts, a provision which makes the insurance of ver doubtful value to the owners of property in the congested sections of large cities. The organization of Lloyd's may be illustrated by the following statement of the "Assurance Lloyds of America" required by the insurance commissioner of New York and published in his annual report: Victor A. Harder, 128-132 White Street, New York City... $5,000 5,000 5,000 5,000 Charles T. Dotter, 30-32 Barclay Street, New York City. 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000, 5,000 (Here follows the financial statement.) Owing partly to the fact that these organizations lack all the qualities which are regarded as constituting the financial strength of the stock fire-insurance companies, and partly to their very unsatisfactory record, many states have enacted special legislation for the protection of their patrons. In Pennsylvania these organizations are prohibited, and in some ten states they are required to make a cash deposit as security for the protection of policy-holders. Especially is this desirable, since the policies of these partnerships are insured by agents who represent all the partners and are not acquainted with the financial resources and business affairs of the several individuals. In the remaining states there is either no law at all governing this form of underwriting, or it is subject to the same requirements that apply to other insurance companies. CHAPTER VI AGENCY IN FIRE INSURANCE ONE of the most vital subjects in fire insurance is that of agency. In this day when insurance is written almost exclusively by corporations, in most instances transacting business in many states, the agent is a necessary factor in the successful prosecution of the business. To govern his relations with the company there was to begin with the general law of agency. But there has since developed a large body of law dealing with insurance agents in particular, and it is from this law that we are able to comprehend the status of the fire-insurance agent. As the term is generally understood, a fire-insurance agent is one who is engaged by a company to negotiate for and place contracts of insurance, to collect premiums therefor, and generally to aid in any manner in transacting the business of the company. There is a provision in the standard fire policy to the effect that "in any matter relating to this insurance, no person unless duly authorized in writing, shall be deemed the agent of this company." This provision makes a written contract the sole evidence of agency, and may be regarded as notice to the insured that it is not safe to have business dealings with an agent who cannot show his written authority. Ordinarily the company gives its agents a written commission defining their authority. But a provision in the policy, such as just quoted, does not relieve the company of responsibility for the conduct of those who are in reality its agents but who may not have written authority. To hold otherwise would enable the insurer at any time to avoid all responsibility for the misconduct or errors of its agents by simply sending them into the field without written authority. Agency is a fact depending on circumstances independent of this provision in the policy, and in numerous cases where the question has come up for adjudication, the courts have outlined the evidence that may be considered as proof of the fact and character of the agency. It may consist of an express contract between the principal and agent, or a recognition by the principal that a certain party is his agent. Again, the fact and character of the agency may be shown by the possession of papers such, for example, as policies executed in blank, or by the evidence of facts from which agency can be inferred as a matter of law. It is important to note, however, that the existence of the agency relationship cannot be presumed. It must be based on some real tangible evidence, and a person dealing with an agent is put on inquiry as to the extent of the agent's authority. Statutory Regulations of Fire-Insurance Agents.-Formerly it was the practice of some companies to send their agents out without written agreements, or to provide in the policy that, as regards all matters pertaining to the application, the person soliciting the insurance is expressly agreed to be the agent of the insured. Then, when trouble arose through the occurrence of a loss, the company could avoid the claim by placing the responsibility for the agent's misconduct or error on the insured. The injustice of this mode of procedure is evident, and many states were not long in enacting statutes defining the powers and duties of agents, and the character of the policies they could write. Where such statutes exist they control the situation and overcome the evils formerly associated with the practice, already referred to, of inserting stipulations in the application or policy which would relieve the company from responsibility for the acts of its agents as interpreted by the courts. |