· CHAPTER XII

PROVISIONS OF THE POLICY WHICH APPLY AFTER A LOSS HAS OCCURRED

THE provisions of the fire-insurance policy fall into two general classes, separated by the fact of the loss. While all provisions of the policy are to be considered as binding upon the parties to the contract, they are not, for purposes of legal interpretation, treated as equally important. In fact, nearly one fourth of the standard fire policy consists of provisions which concern matters that are required to be done by the insured after the main fact—a loss--has taken place. In the main the courts have regarded these provisions more leniently than those which concern matters required to be done before a loss has occurred. Where doubt as to the meaning exists, the provisions are usually construed favorably to the insured, and the courts are also more easily satisfied as to the existence of a waiver. The provisions which apply after a loss has taken place may be grouped under three distinct heads, viz.: (1) those defining "notice of loss" and "proof of loss"; (2) those providing for the exhibition of records and the examination of the insured; and (3) those relating to the appraisal of the loss in case of disagreement.

Notice of Loss and Proofs of Loss.-The provisions of the standard policy relating to the giving of notice of the loss and the furnishing of the proof is the following:

"If fire occur, the insured shall give immediate notice of any loss thereby in writing to this company, protect the property from further damage, forthwith separate the damaged and undamaged personal property, put it in the best

possible order, make a complete inventory of the same, stating the quantity and cost of each article, and the amount claimed thereon; and, within sixty days after the fire, unless such time is extended in writing by this company, shall render a statement to this company, signed and sworn to by said insured, stating the knowledge and belief of the insured as to the time and origin of the fire; the interest of the insured and of all others in the property; the cash value of each item thereof and the amount of the loss thereon; all incumbrances thereon; all other insurance, whether valid or not, covering any of said property; and a copy of all the descriptions and schedules in all policies; and changes in the title, use, occupation, location, possession, or exposures of said property since the issuing of this policy; by whom and for what purpose any building herein described and the several parts thereof were occupied at the time of fire; and shall furnish, if required, verified plans and specifications of any building, fixtures, or machinery destroyed or damaged; and shall also, if required, furnish a certificate of the magistrate or notary public (not interested in the claim as a creditor or otherwise, nor related to the insured) living nearest the place of fire, stating that he has examined the circumstances and believes the insured has honestly sustained loss to the amount that such magistrate or notary public shall certify."

Almost without exception, it is a requirement of insurance policies that, when a loss occurs, the insured shall give "immediate" notice in writing. Some policies specify a definite time within which notice must be given, as five days or ten days, and in such cases, if the insured neglects to comply with the terms of the condition, he will be doing so at his peril. The courts have recognized the reasonableness of requiring the insured to give "immediate" notice of a loss to the insurer. Prompt notice enables the company take effective measures toward lessening the loss by properly protecting against further injury such merchandise or other

to

property as may have been partly destroyed or left exposed. Immediate notice of the loss will also enable the company to learn the essential facts which surround the origin of the fire, thus preventing the removal or concealment of evidence which would tend to show fraud.

The expression "immediate notice of loss," however, has been given a reasonable construction by the courts. In many cases where immediate notice of loss could not be furnished at once because of good reasons, the courts have protected the insured. Thus, in the case of Kentzler vs. American Mutual Accident Association (88 Wis., 589), the court said: "A contract should not be construed so as to forfeit or render nugatory the rights of one of the parties to it, unless the language employed imperatively requires such construction. In other words, an interpretation which gives effect is preferred to one which makes void. "Immediately" cannot be given the meaning of instantly, but to make good the deeds and interests of parties, it shall be construed 'such convenient time as is reasonably requisite for doing the thing."" A great many other cases have been rendered to the same effect, in some cases it being held that thirty days' delay is not too long because of a good excuse, whereas in other cases a delay of six or seven days was regarded as too long because no good reason for the delay could be offered.

Also as regards the furnishing of proofs of loss the courts have upheld the provisions of the policy, where they could be easily complied with; but where this could not be done, have refused to construe the same strictly. Proofs of loss are necessary to enable the company to determine the extent of the loss, and to ascertain whether the insured complied with the terms of the policy. Yet there are many circumstances which the courts have accepted as sufficient to excuse the policy-holder from submitting the proofs of loss in the form or within the time required by the policy. Nor do the courts regard proofs of loss, although sworn to, as conclu

sive against the insured. If the insured is acting in good faith, and desires to show that the real value of the property destroyed exceeds the amount stated in the proofs, he may recover upon the higher valuation (see Lebanon Mutual Insurance Co. vs. Kepler, 106 Pa., 28).

Certificate of a Notary Public as Part of the Proofs of Loss.-That portion of the clause which provides that the insured shall furnish as part of his proofs of loss, a certificate from a magistrate or notary public that he believes the claim to be honest, has always been regarded as valid and obligatory. As is explained in many legal treatises, this provision has in slightly differing form always constituted a part of the proofs of loss. Originally the policy usually designated that such certificates were to be made by clergymen or church wardens, presumably because they possessed the intelligence, power of judgment, and moral character to qualify them to form reliable opinions. With the ascendency of civil authority, as contrasted with the ecclesiastical, the policy substituted the local magistrate or notary públic. The same reasons which led to the introduction of this clause in early policies are present to an even greater extent to-day. Under the widely extended agency system the insurance company is practically unable to know its patrons personally, and consequently in case of loss is dependent upon the information as regards the origin of the fire and the good faith of the insured as furnished by the best citizens in the immediate locality in which the property was situated. As stated by Mr. Ostrander, "the purpose of this requirement has been to protect the insurer against wrong-doing by direct appeal to the candor and fair-mindedness of some reputable person who is acquainted with the claimant, but not interested in the loss, and who can with little trouble inquire into the circumstances of the fire, or if the claim be without merit then the provision will operate to defeat fraud and save the insurer from becoming the victim of the crime."

The Exhibition of Property and Records and the Examination of the Property Owner.-With reference to this feature the standard fire policy contains the following provision: "The insured, as often as required, shall exhibit to any person designated by this company all that remains of any property herein described, and submit to examinations under oath by any person named by this company, and subscribe the same; and, as often as required, shall produce for examination all books of account, bills, invoices, and other vouchers, or certified copies thereof, if originals be lost, at such reasonable place as may be designated by this company or its representative, and shall permit extracts and copies thereof to be made.

In this connection it only remains to be said that the provision has always been upheld by the courts, and that the examination must be made at the place of the fire, unless the parties by common agreement choose some other place. To give better effect to this clause a so-called "iron-safe clause" is frequently indorsed on the policy with a view to protecting books of account and other records against loss. The clause usually provides that "the assured under this policy hereby covenants and agrees to keep a set of books showing a complete record of business transacted, including all purchases and sales both for credit and cash, together with last inventory of said business, and further covenants and agrees to keep such books and inventory securely locked in a fireproof safe at night, and at all times when the store mentioned in the within policy is not actually open for business, or in some secure place not exposed to a fire which would destroy the house where such business is carried on, and in case of loss, the assured agrees and covenants to produce such books and inventory, and in the event of failure to produce the same, this policy shall be deemed null and void, and no suit or action at law shall be maintained thereon for any such loss."