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and offering protection against the acts or neglect of the
owner. Although the policies provided for the apportion-
ment of the loss in case other insurance existed, the mortgage
clause itself did not contain any agreement as to contribu-
tion. A loss of $9,000 occurred and the Lycoming Company,
in accordance with the terms of its policy, which provided
for the payment of any loss in the proportion that its policy
bore to all the insurance on the property, promptly settled
for $2,571.43, or four-fourteenths of the $9,000 loss, i.e.,
in the proportion that its policy of $4,000 bore to the total
insurance of $14,000. The Westchester Company, whose pol-
icy also contained the same apportionment clause, insisted
on paying only the balance of the loss, or ten-fourteenths.
To this, however, the mortgagee objected on the ground that
if this were permitted, his interest under the mortgage clause
would suffer.
In deciding this case the court expressly declared that the
mortgage clause, when indorsed on the policy, constituted an
independent contragt between the mortgagee and the West-
chester Company. The mortgagee had a right to feel that his
interest was protected under this independent agreement,
especially since he had no interest in the Lycoming policy.
The court therefore ordered payment of the loss to the mort-
gagee in the same manner as would have been the case if
there had been no second policy. -
In view of such rulings as the above, it is customary to-
day, if the company wishes to retain the privilege of appor-
tioning its loss among all the policies on a given property,

to obviate all legal complications by inserting a “contribu#.o. clause. In this case the clause is usually called the “Mortgage Clause with full Contribution.” It reads the same as the clause already given, with the exception that there is added another paragraph to the effect that “in case of any other insurance upon the within

described property, this company shall not be liable under this policy for a greater proportion of any loss or damage sustained than the sum hereby insured bears to the whole amount of insurance on said property, issued to or held by any party or parties, having an insurable interest therein, whether as owner, mortgagee, or otherwise.” Although the wording of this “contribution clause” would seem to be sufficiently definite to preclude a misunderstanding, there have been conflicting decisions as to the effectiveness of this clause where the mortgagor, after protecting the mortgagee under a mortgage clause providing for full contribution, takes out subsequent insurance, of which the mortgagee may have no knowledge. In the case of Eddy vs. London Assurance Corporation (143 N. Y., 311) the owner of the property had taken out insurance for the protection of the mortgagee. The mortgage clause protected the mortgagee against the acts of the owner, and contained the contribution clause as quoted above. Subsequently, and for his sole benefit, and without the mortgagee's consent or knowledge, the owner procured other insurance which was not made payable to the mortgagee. Then a loss occurred, and the companies issuing the policies made payable to the mortgagee insisted on the right of paying only that portion of the loss represented by their pro-rata share of all the insurance on the property, even though taken out subsequent to the issuance of the mortgage clause and for the sole benefit of the owner. The court argued that in this particular case the “full contribution clause” in the mortgage clause was inconsistent with the other section in the same clause which protects the mortgagee against the acts of the owner, and that this last agreement must take precedence over the provision for contribution. Since the last policies were taken out by the owner for his own benefit and without the knowledge of the mortgagee, the court argued that “the act of obtaining this additional insurance was the act of the owner, and it was unknown to the mortgagee, and, of course, not consented to by him. The additional insurance could by no possibility benefit him, as it was not upon any interest of his in the property. He could not, therefore, resort to any of these additional policies for his indemnity. It is not a case of contribution in any sense, but simply one on the insurer's theory of the diminution of their liability, caused by the act of the owner, and unknown, and with no possible corresponding benefits, to the mortgagee.” While legal textbook writers recognize the force of this reasoning,” it should be stated that in other cases the courts have sought to enforce this important provision of the policy as regards subsequent insurance, by declaring that the section of the mortgage clause protecting the mortgagee against the acts of the owner, is qualified by the agreement relating to contribution.”

* Page 325.

* See Ostrander’s “Law of Fire Insurance,” p. 348.

*See Hartford Fire Insurance Co. vs. Williams, 11 C. C. A., 503; 63 Fed., 925, described by Ostrander on pp. 348, 349.



Types of Companies.—The fire-insurance business of the country is transacted by three different classes of insurers. Named in the order of their importance they ard"stock COmpanies, futual companies,ond so-called Lloyd’s organizations. Concerning mutual companies a further convenient classification may be made, viz., “county and town mutuals,” “state mutuals,” and “factory mutuals.”

State Statutes Governing the Incorporation, Organization, and Operation of Fire-Insurance Companies.—The laws of the several States relating to the incorporation and organization of fire-insurance companies differ greatly in their details, but resemble each other in the principles involved and the objects to be attained. In outlining the method of incorporating and organizing companies, therefore, the law of Pennsylvania will be used as a basis, for aside from details such as numbers, amounts, and time, the law of this State will serve as a typical illustration of the underlying principles and methods elsewhere in use.

According to the law of Pennsylvania,(fire and marine insurance companies may not do a life-insurance business. Any ten or more persons, who are citizens of the State, may associate themselves and form an incorporated company for the purpose of issuing fire and marine insurance. Such persons, according to the law, must associate themselves by articles of agreement in writing, which agreement must specify (1) the name by which the corporation is to be known; (2) the class of insurance for which the company is to be constituted; (3) the plan or principle according to which the business is to be conducted, and the domicile of the company; (4) the amount of the capital stock, if any; and (5) the general object of the company, and the powers it proposes to have and exercise. The name of the company must clearly designate the object and purposes of the company, and in case the associated persons wish to form a mutual company, the word “mutual” must appear in the title. The articles of agreement must next be acknowledged by the subscribers before some person who is empowered to receive acknowledgment of deeds, and must then be forwarded to the insurance commissioner. If the insurance commissioner approves of the same, the articles of agreement must next be submitted to the attorney-general for examination. If the attorney-general finds them to be in accordance with the law of the State, he certifies the same to the governor, with his approval indorsed thereon. Following this, the subscribers to the articles of agreement choose a president, a secretary, a treasurer, and directors. In case the company is a joint stock company, the subscribers must next open books for the subscription of stock in the company, and such books must be kept open until the full amount of stock specified in the certificate is subscribed. Where a mutual company is to be organized, the subscribers to the articles of agreement must open books to receive applications for insurance until such applications have been obtained in sufficient number to comply with the law. The capital stock of a joint stock fire-insurance company may not be divided into shares of less than $10 each. Ten per cent on each share must be paid in at the time of subscribing, the remaining 90 per cent may be paid in as the company may direct, but must, according to the law, be all

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