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SHORT RATE TABLE ADOPTED BY THE "WESTERN UNION" FOR TERM RISKS

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CHAPTER X

OTHER INSURANCE

With reference to "other insurance" (the terms "double insurance," "overinsurance," and "multiple insurance" are also often used to indicate the procuring of more than one policy upon the same interest in a property) the standard fire policy contains the following provision (lines 11 to 13): "This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the insured now has, or shall hereafter, make or procure any other contract of insurance, whether valid or not, on property insured in whole or in part by this policy." This clause, or one very similar to it in wording, is found in every modern fire-insurance policy. Its object is not to prevent different persons from insuring their respective interests in a given property, but simply to make impossible the taking out of more than one policy on a single interest, except with the knowledge and sanction of the insurer. Writers on this phase of the fire-insurance business all emphasize the importance of using as much caution in restricting the total amount of insurance written on a property under a number of policies as when all the insurance is carried in one policy. The clause has been declared reasonable and valid. It is important to the company, in that it makes overinsurance difficult, and greatly lessens the moral hazard. Because of its general use, incendiarism is lessened, and the public is benefited by a decrease in the loss resulting from carelessness on the part of property owners who know that their property is fully or more than fully insured.

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The History of this Clause.—The development of the "other insurance" clause in fire insurance is an interesting one, and may be divided into three stages. Originally no provision was made in the policy against the taking of other insurance, and the policy-holder could procure as much insurance as he desired. Then in case of loss he could exercise the option of collecting his insurance from any one or more of these insurers. The insurer thus selected would in turn seek reimbursement from the other underwriters on the risk. The principle, however, was strictly adhered to that fire insurance is indemnity, and that the insurers were never liable for more than the actual loss. Later, when "other insurance" clauses first came into use, they were worded so as to exempt the insurer from liability in case no notice was given of prior insurance. Subsequent insurance, however, would not invalidate the policy, and in determining the priority or subsequence of different policies, fractions of a day were considered.

When insurance became more general, and the necessity for carefully restricting other insurance was more apparent, the "other insurance" clause was so worded as to prohibit the procuring of additional insurance, except when permitted, whether it was "prior, concurrent, or subsequent." This clause apparently would seem to cover all contingencies, yet it was not long before three distinct lines of court decisions developed in the different states. In one group of states, like Massachusetts and Pennsylvania, the supreme courts held that the prior insurance was valid on the ground that the subsequent insurance policy never really had an existence, because of the provision against other insurance which it contained. Since the subsequent policy could not come into existence, it therefore followed that the prior policy was not invalidated. Another group of courts took the view that the subsequent policy, whether it could be enforced or not, did invalidate the prior policy. And, lastly, a middie view was taken in the state of Iowa, according to which the validity of the prior policy depended upon whether or not the subsequent policy was recognized as valid by the company which wrote it. If the subsequent policy was declared by the insurer to be valid, the prior policy would be invalid because its provision against other insurance was violated by the taking of the subsequent insurance. On the contrary, if the insurer did not recognize the subsequent policy, the prior policy was declared to be valid, because no other policy existed to violate its stipulation against other insurance.

Whatever might be thought of the wisdom or correctness of these conflicting views, it is certain that the companies could not afford to leave the meaning of this important provision of the policy in doubt. To remove all ambiguity the "other insurance" clause of the standard policy was especially worded so as to overcome the conflicting decisions of the courts. It will be noted that the clause provides that the entire policy shall be void if the insured '' now has or shall hereafter make or procure " any other contract of insurance '' whether valid or not," As it now stands, the clause has, with a very few exceptions, been given full force by the courts. If the insured cannot conveniently comply with the clause by giving the proper notice, he may make arrangements with the company whereby it will indorse on his policy a clause to the effect that "$ other insurance,

concurrent herewith, permitted."

Other Insurance Covering a Part of the Property.—It is the general rule that where the policy is declared to be entire, the taking out of other insurance upon any part of the property insured will work a forfeiture of the entire policy. As an illustration, let us assume that the owner of a building and its contents has both items insured under one policy, and later takes out another policy on the contents, without obtaining the permission of the companies involved. By this act both policies are forfeited, because in law the procuring of insurance- on one of the items, the contents in this case, will also render void the insurance on the building. In a previous chapter it was stated that where the premium is one the policy is also one, i.e., must be considered in its entirety, and the violation of the other insurance clause as regards one of the items will bring about a forfeiture of the policy on all the items. To this general rule, however, the law of Pennsylvania is an exception. A case in point is that of Clark vs. Western Assurance Company; 146 Pa. St., 561. According to the facts of this case "A" took out a policy of insurance in the "B" company upon electric lamps, shades, and all other electric fixtures, while contained in a certain hotel. The policy contained a provision that the company should not be liable for a greater proportion of any loss on the described property than the amount insured under the policy bore to all the insurance on the property. "A" held another policy for $5,000 in the "C" company on the household goods and fixtures of every kind while contained in the hotel. The property insured by the "B" company was destroyed by fire, and in an action against "B" on its policy the lower court held that the two policies were on the same property, and that "A" was accordingly entitled to recover only in the proportion that "B's" policy bore to the total insurance, including "C's" policy. The case, however, was reversed by the Supreme Court on the ground that the policies did not legally cover the same property.

A brief explanation should also be given here of the relation of "other insurance" to the renewal and substitution of policies. If other insurance has been permitted, and the additional policy is later renewed without the consent and knowledge of the company it is generally considered not a violation of the other insurance clause, although in a few states a contrary opinion prevails. Likewise, if the addi

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