The Appraisal Clause of the Standard Fire Policy.-In the settlement of losses it frequently occurs that the insurer and insured cannot agree as to the amount that should be paid. The insurance company naturally wishes to reduce its loss as much as possible and the insured, on the other hand, is apt to claim an excessive sum. As middleman between these two parties, the adjuster of losses will strive to effect a fair and mutually satisfactory settlement. Yet, owing to differences of opinion as to the value of buildings or merchandise, or to the absence of inventories, invoices, and other records, cases extremely difficult for settlement often arise. To make possible the speedy solution of such cases, and to avoid unnecessary litigation, it is desirable that every fire-insurance policy should provide in advance against such contingencies by setting forth a definite line of procedure. In the standard policy this is done by the following agreement: "In the event of disagreement as to the amount of loss the same shall, as above provided, be ascertained by two competent and disinterested appraisers, the insured and this company each selecting one, and the two so chosen shall first select a competent and disinterested umpire; the appraisers together shall then estimate and appraise the loss, stating separately sound value and damage, and, failing to agree, shall submit their differences to the umpire; and the award in writing of any two shall determine the amount of such loss; the parties thereto shall pay the appraiser respectively selected by them, and shall bear equally the expenses of the appraisal and umpire.

"This company shall not be held to have waived any provision or condition of this policy or any forfeiture thereof by any requirement, act, or proceeding on its part relating to the appraisal or to any examination herein provided for; and the loss shall not become payable until sixty days after the notice, ascertainment, estimate, and satisfactory proof of the loss herein required have been received by this company, in

cluding an award by appraisers when appraisal has been required."

In interpreting this appraisal clause it should be borne in mind that the award of the appraisers is regarded as final and binding, unless it can be shown that their action involves fraud or misconduct. This is true even though the board of appraisers have not found the actual cash value of the property. The presumption is that the arbitrators must act in good faith, and while doing so errors of judgment will not invalidate the award. It is true, however, that the appraisers should limit their inquiry to the subjects submitted to them, and the award will not be sustained in case matters are considered which were not referred to them. As long as they confine themselves to the subject matter referred to them and act in good faith, they may decide questions of law as well as fact; in fact, they constitute a sort of court which has been created by the parties of the contract to settle their disagreement.

It should here be noted that while this clause is given full force in all the states of the Union, the supreme court of the state of Pennsylvania has thus far considered the appraisal clause as revokable at will by either party. The general rule in this country is that either party to the contract may insist on arbitration. In Pennsylvania, however, this is not the case. As Justice Sharwood states in his opinion given in the case of Mentz vs. The Armenia Fire Insurance Co. (79 Pa., 478): "There can be no doubt that if this case stood upon a general arbitration clause in the policy alone, it would fall within the principle settled by this court, conformably to all the previous English authorities, that it is not in the power of the parties to a contract to oust the courts of their jurisdiction. The cases in which the certificate or approbation of any particular person-as the engineer of a railroad company-to the amount of a claim is made a condition precedent to an action, rest upon entirely

different principles. He is not created a judge or arbitrator of law and facts, but simply an appraiser of work done. That is irrevocable. That which is before us, is a mere agreement to refer to arbitrators to be chosen at a future time.

"Such an agreement, like any other agreement of reference, is revocable, though the party may subject himself to an action of damages for the revocation. It is not in the power of the parties thus to oust the courts of their general jurisdiction, any more than they have to add to a personal covenant, that they are not to be responsible for a breach of it."

CHAPTER XIII

SPECIAL AGREEMENTS INDORSED ON THE POLICY

OF necessity, the standard fire-insurance policy was prepared with reference to a general situation. Yet many situations will arise where special circumstances make a modification or elimination of existing policy provisions highly desirable, or require the incorporation of new agreements not suggested in the printed portion of the policy. Such agreements take the form of printed or written indorsements on the policy, sometimes called "clauses" or "riders." When attached to the policy such indorsements take precedence over any provisions in the policy, although they may be in conflict with the same, since, being of an even or later date than the policy, they are assumed to represent the latest meeting of the minds, and thus constitute the last agreement of the parties to the contract.

Such special agreements by indorsement on the policy may, roughly speaking, be divided into two classes, viz.: (1) those especially suggested by the policy; and (2) that large variety of clauses which may be agreed upon by the parties to the contract, but which are not mentioned in the policy itself.

INDORSEMENTS SUGGESTED BY THE POLICY

Concerning the first class, the standard fire policy contains the following very important provision (lines 11 to 30, inclusive):

"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 covered in whole or in part by this policy; or if the subject of insurance be a manufacturing establishment and it be operated in whole or in part at night later than 10 o'clock, or if it cease to be operated for more than ten consecutive days; or if the hazard be increased by any means within the control or knowledge of the insured; or if mechanics be employed in building, altering, or repairing the withindescribed premises for more than fifteen days at any one time; or if the interest of the insured be other than unconditional and sole ownership; or if the subject of insurance be a building on ground not owned by the insured in fee-simple; or if the subject of insurance be personal property and be or become incumbered by a chattel mortgage; or if, with the knowledge of the insured, foreclosure proceedings be commenced or notice given of sale of any property covered by this policy by virtue of any mortgage or trust deed; or if any change, other than by the death of an insured, take place in the interest, title, or possession of the subject of insurance (except change of occupants without increase of hazard), whether by legal process or judgment or by voluntary act of the insured, or otherwise; or if this policy be assigned before a loss; or if illuminating gas or vapor be generated in the described building (or adjacent thereto) for use therein; or if (any usage or custom of trade or manufacture to the contrary notwithstanding) there be kept, used, or allowed on the above-described premises, benzine, benzole, dynamite, ether, fireworks, gasoline, greek fire, gunpowder exceeding twenty-five pounds in quantity, naphtha, nitroglycerin or other explosives, phosphorus, or petroleum or any of its products of greater inflammability than kerosene oil of the United States standard (which last may be used for lights and kept for sale according to law, but in quantities not exceeding five barrels, provided it be drawn and lamps filled by daylight or at a distance not less than ten feet from artificial light); or if a building herein described, whether intended for occupancy by owner or tenant, be or become vacant or unoccupied and so remain for ten days.'

The foregoing policy provision enumerates various important privileges, which, if the insured wishes to enjoy them, must be indorsed on the policy. Many of these privileges require no elucidation, while that pertaining to