actually be in a position to benefit from fire. This is contrary to the very idea of "indemnity," because that term implies that the insured should be compensated for loss actually incurred, but should never find the insurance contract a source of profit.1

In the next place, it should be stated that the fire-insurance contract indemnifies only for actual destruction of material values, i.e., for the fair cash market value of the property. at the time of the loss. In other words, the company is not liable for sentimental values, such as are frequently associated with gifts, portraits, objects of art, documents, heirlooms, etc.

Furthermore liability under the fire-insurance policy is limited to loss or damage which is traceable directly to fire, i.e., where the damage accrues directly from fire as a destroying agency in contrast to the remoteness of fire as such an agency." There are many instances, for example, where fires of very small size cause enormous loss because of a peculiar chain of circumstances, such as a small fire reaching charged wires, or a spark coming in contact with explosives. The interesting question arises as to the extent of the insurer's liability for such losses. This can only be answered by determining whether or not the loss is directly traceable to fire. Is fire the real cause, and if so, is the sequence of events between the origin of the fire and the destruction of the property (the two may involve locations distantly separated from each other) an unbroken one, or has some outside force, such as an act of God, intervened to bring about or increase the loss? This question is of the greatest importance to both parties in innumerable cases, and will be discussed in greater detail in another chapter.2

'Will be discussed at greater length in the chapter on "The Risk Assumed."

2 See that part of the chapter on "The Risk Assumed" which deals with "The Doctrine of Proximate Cause."

The Rules Underlying the Interpretation of the Contract. -Referring to our definition of a fire-insurance contract, we find that "indemnity" as outlined above is promised only "in accordance with the restrictions expressed in the policy." Nearly all of the insurance contract consists of a large number of promissory and restrictive provisions which aim to govern the conduct of the insured in the safeguarding of the property, or to protect the company against the payment innecessary or dishonest losses. In considering these precisions, it should be borne in mind that the fireinsurance contract is general in its nature, and was drawn up to meet a general situation, and not with reference to a particular case. And yet there are scarcely two fires in which the circumstances are exactly alike. Innumerable cases arise which require a special application of the general terms of the contract in order to realize the purpose for which the contract was written, viz., to protect against loss.

There is scarcely a provision in the policy to-day which at some time or another was not the subject of interpretation by the courts, and there are few provisions concerning which, largely because of ambiguity in the wording, varying circumstances surrounding the loss, or statutory requirements, there are not conflicting opinions. The principles of fire insurance are but little understood by the general public. The interests of the insured often seem at variance with the interests of the insurer, and the attitude of state legislatures has too often been one of hostility. Nothing seems fairer, for example, than that the company should not pay more than the actual value of the property at the time of the fire. Yet this basic rule, which underlies the very idea of indemnity, is not appreciated or understood in many sections of the country. Its application has actually been prohibited by the legislatures in a large number of the states, and the courts have seen fit to uphold the law. Under these conditions, it is not astonishing to find that disputes should fre

quently occur as to the interpretation which shall be given to the general provisions of the policy when unexpected circumstances surround the particular loss. Forfeitures are viewed with disfavor by the courts, because the sums involved are usually large. Wherever possible, it is the desire of the court to consider the policy in the light of existing circumstances, and to enforce it for the benefit of the insured, unless, of course, such action would be contrary to the definitely expressed terms of the contract. "In their intention,' according to Judge Ostrander, "the courts are w Jut any infallible rule to guide them, and necessarily often differ in their judgment of the law, and thus there has come to exist a good deal of conflict among authorities." But, however great this conflict of authority has become, there are certain legal principles which underlie the application and interpretation of all fire-insurance contracts, and which are constantly kept in mind by the courts to assist them in their efforts to enforce the contract. Briefly summarized, these principles are the following:

1. When the wording of any provision in the policy lends itself to more than one construction, the court will give the benefit of the doubt to the insured, and will reject that construction which limits the liability of the company. In Liverpool Insurance Company vs. Kearney, 180 U. S., 132, the court explained this rule in the following words: "To the general rule there is an apparent exception in the case of contracts of insurance, namely, that where a policy of insurance is so framed as to leave room for two constructions, the words used should be interpreted most strongly against the insurer. This exception rests upon the ground that the company's attorneys, officers, or agents prepared the policy, and it is its language tha hust be interpreted."

Contending that this should be the general rule in all cases where the company is free to adopt the policy form, what shall be said of the application of this rule where the

policy form is prescribed by statute law and made compulsory for all companies writing insurance in the state? If the policy is a statute, should its terms not be equally binding upon both parties, or shall the insured still receive the benefit of the doubt? The question was decided favorably to the insured in the case of Matthews vs. American Central Ins. Co., 154 N. Y., 449. "The policy," the court declared, "although of the standard form, was prepared by the insurers, who are presumed to have had their own interests primarily in view, and hence, when the meaning is doubtful, it should be construed most favorably to the insured, who had nothing to do with the preparation thereof. Moreover, when a literal construction would lead to manifest injustice to the insured and a liberal but still reasonable construction would prevent injustice by not requiring an impossibility, the latter should be adopted because the parties presumed, when the language used by them permits, to have intended a reasonable and not an unreasonable result."

2. Since insurance policies are general in character and not prepared for particular cases, it follows that special or written agreements must frequently be endorsed on the policy with a view to modifying the original terms of the policy form. Whenever there is a difference in meaning between such indorsements and the policy form itself, it is a universally recognized principle that the superimposed parts of the contract, whether written or stamped or printed, control the regular provisions of the policy. This principle is based on the theory that anything indorsed on the policy must be later in date than the policy itself, and thus represents the latest agreement between the parties. If any ambiguity exists in the wording of any such indorsement, the insured must again be given the benefit of the doubt.

3. Every insurance policy must be regarded as an independent contract, the interpretation of which depends upon its own terms, and should not depend upon or be affected

by the terms of any policy which preceded it. This is an important principle in its application to the renewing of policies, and will be discussed at greater length under that subject.

4. By the weight of authority, a violation of the conditions of the policy will cause a forfeiture only during the time that the violation continues. If, after a violation, the conditions of the policy are again complied with, the policy revives, even though the company never consented to the violation. Unfortunately the courts of the various states have rendered conflicting opinions on this important question of the effect which a violation of its terms will have upon the life of a policy. Thus in New York and Pennsylvania, if a policy-holder vacates his building contrary to the policy and without the consent of the company, the act at once works a forfeiture during the period of vacancy, but if afterward the building is again occupied and a loss then occurs the company will be held liable, because the policy is considered to have revived when the violation was discontinued. In other states, however, such a violation nullifies the policy, and the policy once void will always remain so, unless the insurer consents to its restoration.

Development of the Standard Policy.-Having stated the general principles which govern the interpretation of fireinsurance contracts, let us now trace the evolution of the standard policy. At first fire insurance was written almost entirely by individual underwriters whose operations were few in number, and generally confined to risks with which they were personally acquainted. The policy was brief in its terms, and included merely the description of the property, the amount of insurance, the term, and the premium. Soon, however, individual underwriting proved inadequate for the needs of the business community. A prime requisite in insurance is the financial strength of the insurer; and, as business developed in size, larger and larger sums of capi