INSURANCE 315 more or less common among merchants centu- ries before it was recognized by the law. It is, at all events, no older than the late part of the middle ages ; and it must be regarded as prom- inent among the many illustrations of that ten- dency to association which is at once the effect and the cause of our advancing civilization. By means of insurance the resources of many are aggregated for the protection of each. Merchants become members of what is often called, and by the universal practice of insu- rance becomes, the mercantile community. Each one pays over a part of his profits, so small as not to inconvenience him, and thus obtains protection against a loss which would crush him; and what he pays helps to form the fund that indemnifies others. Hence, commerce is promoted and developed to an extent far beyond what would otherwise he possible, because enterprises become not only possible but prudent by means of insurance, which without it would be so rash that only the reckless would undertake them. The law of insurance may be learned from the purpose of insurance. Thus, it is easy to say, as some do, that insurers should not be strict in their re- quirements, nor rest upon technical defences and the letter of the law. But all the losses paid by insurers must be paid out of premiums, or the business of insurance would stop ; and these pre- miums must grow higher as the risk increases ; and when they get so high as to be much beyond the actual risk incurred by prudent and sub- stantial men who take care that their ships are what they should be, such men will no longer insure. Then the business of insurance will fall into the hands of the careless and the un- principled, and then premiums must rise still further, and the mischief in this way confirm and enlarge itself. Instead of being a snpport to commerce, insurance will then only derange it, and be little better than legalized gambling. Similar principles will be seen, as we proceed, to be applicable to every part of the law of in- surance ; because the whole effort of the law is to make the business of insurance prudent and satisfactory, for merchants who transact a legitimate business honestly and carefully. Formerly much business was done by individ- ual insurers, or underwriters as they are often termed from their subscribing the policies. Now, however, nearly if not quite all policies of insurance, in this country, are made by incorporated companies. These are of two kinds : 1, stock companies, where the stock is owned by persons who receive the profits (that is, the excess of premiums over losses) by way of dividends ; 2, mutual companies, where the profits (deducting only the expense of transact- ing the business) are divided among the in- sured, or so applied to reduce the premiums that each insured pays only the equivalent of his actual risk. Some companies which oper- ate on the mutual principle have also a certain amount of capital stock as a basis. Large vol- umes are written about the law of insurance. In this article we shall endeavor to exhibit only a brief and condensed statement of its leading principles. The contract of insurance ought always to be in writing ; but it may be binding if only oral, unless the insurers are an incorporated company, forbidden by their char- ter to insure otherwise than in writing. An agreement to insure, entered and subscribed in the usual way in the books of the insurers, would generally be held to be a contract bind- ing both parties to the terms usual in the com- mon policies of those insurers. And it seems to be the settled law of the United States that a contract is made by letter, when either party, receiving a letter of proposals, puts into the mail an answer of acceptance, without having previously received a letter from the proposing party retracting his proposals. A policy is a very ancient instrument, and is substantially the same everywhere, but with special varia- tions. It is subscribed only by the insurers, but the bargain binds also the insured if he accepts the policy and puts his property at risk under it. A policy may insure A specifically, or A " for whom it may concern," or use other equiv- alent words ; and the effect of these words is to bring within the scope and benefit of the insurance every person interested in the prop- erty who authorized the insurance, and who was contemplated by A as being insured ; or who, being so interested and contemplated, afterward in good faith adopts and ratifies the insurance. Sometimes the policy defines and exactly describes the property insured ; some- times it leaves this undetermined, but requires that it shall afterward be defined, in writing on the policy, as such or such property aboard of such or such a ship ; the latter is called an open or running policy. Alterations made by agreement are valid, and are in practice often made and in- dorsed upon the policy. But a material alter- ation by the insured, without the assent of the insurer, destroys all claim against the insurer, and is said to have this effect although made in good faith, and with the expectation of ob- taining his consent. An alteration by the in- surers without the consent of the insured has no effect whatever. If there be a material mistake in the policy, courts having equity powers will sometimes amend it. A policy of insurance is not negotiable ; yet, if transferred for value in good faith, the transfer may be so far valid (if not prohibited in the policy itself) as to give the assignee a right to sue in the name of the insured, or, in some states, in his own name, but always subject to any equitable defences which could be made against the in- sured. But an assignment or transfer of the property insured, before a loss, without a cor- responding transfer of the policy with the con- sent of the insurers, destroys the claim of the insured, and gives none whatever to the as- signee. If a loss has occurred, and a claim to indemnity vested in the insured, he may now transfer this claim. And if the bankruptcy of the insured transfers his property and with it
