FIRE INSURANCE. 644 FIRE INSURANCE. tures, if the term may be used. To group them in classes at all it is necessary to overlook many minor points which may still have some influ- ence on the degree of risk. Even when this is done, the necessary number of classes is very great. The Home Insurance Company, which has kept a careful record of its fire experience dur- ing an existence of nearly fifty years, has found it necessary to make more than 150 classes of risks. The process of arranging risks in groups according to the chance of loss to which they are exposed is known as the classification of risks. It is a matter of great importance that this classification should be as accurate as possible. It is of importance to the companies, because a general underestimating of risks must result in loss to them ; it is of importance to the insured, because imperfect classification means an unjust distribution of the burden of insurance. If any kind of property is put in a more hazardous class than it properly belongs in. the owners of that property contribute more than their share to the cost of insurance. Farmers, as a class, for ex- ample, believe that farm property is thus un- justly classified by the large insurance companies, and that rates on such property are higher than they should be. It is that belief which is partly responsible for the spread of small mutual com- panies among them. The fire experience of these mutual companies lends some support to this claim. The Policy. The terms of the insurance con- tract are set forth in the policy. In the early days of fire underwriting there was great diver- sity in the forms of policies, and considerable uncertainty in consequence as to their provisions. Underwriters' associations began early to urge the adoption of a common form of policy for fire insurance, and more recently the legislatures of the various States have taken the matter under consideration. Fifteen States now have laws de- scribing the form of policy to be used in writing fire insurance within their borders. Massachu- setts adopted a standard form in 1873, New Hampshire in 1885, New York in 1886. The other twelve States have since adopted the New York form, sometimes with minor variations. Moreover, the large companies have introduced the New York standard policy into many States where its use is not compulsory, so that a uni- form policy is now written by them in nearly all parts of the United States. This policy con- tains, among other things, very clear and precise statements as to the limit:, tion of the liability of the insurer, as to acts of the insured which will cause the policy to become void, and as to the necessary procedure by the insured in prov- ing a claim to indemnity in case of loss. To give some degree of flexibility to the policy, a series of riders has been prepared, which the com- panies are in many States authorized to attach to the policy, and which thus become a part of the coni ract. Termination of the Policy. A fire-insurance contract may lie terminated in any one .if four ways, II may be made void by I he failure of the insured to live up to the conditions contained in the policy; the time for which the insurance is granted may expire, when all liability of the insurer ceases; the policy may he canceled at ih. request of either insurer or insured; or. final- ly, the insured property may be destroyed by tire ami the payment of the indemnity by the in- surer to the insured terminate the contractual relations bet ween them. The first three methods are simple, and need no comment. Trouble arises only in the settlement of claims for indemnity. Not to speak of the somewhat elaborate formali- ties to be observed by the insured in proving amount of loss he lias suffered, disputes often arise as to the amount of the liability of the company. In States where there is no legal regulation prohibiting such an arrangement, the policy usually provides that the liability of the company shall be limited to the actual value of the property destroyed, liven in ease of total loss the insurer cannot recover the total aim unit named in the face of his policy unless he can prove that his property at the time of the fire was worth that amount. Valued-Policy Laws. Partly on account of the injustice involved in collecting premiums on a larger amount of insurance than the company is ready to pay even for a total loss, and partly because of the tendency to laxness in appraising property for insurance under this system, sev- eral States have passed so-called 'valued-policy' laws. These laws do not apply to movable prop- erty, for reasons easily discerned. In the case of fixed or immovable property, valued-policy laws provide that, in the absence of fraud on the part of the insured, the company must pay the full amount of the face of the policy in case of total loss. In some States, however, allowance may be made for depreciation in the value of the property between the time of insurance and the time of loss ; while in others allowance is made for any change in the property during that time of such a char- acter as to increase the risk. Wisconsin was the first State to pass a valued-policy law. which it did in ls74. Nineteen other States and Terri- tories have since passed similar laws. Several other legislatures have also passed them, only to have them vetoed by the governors. Of the eight bills passed during the years 1899-1901, no less than five were' vetoed. Insurance companies have opposed the passage of such laws, and re- sisted them when passed, so far as possible. In the case of the Missouri law, they went to the United State- Supreme Court on the question of its constitutionality. The court declared it con- stitutional. In the absence of legislation, when the same property is insured in several com- panies, the insured can recover only the actual value of the property destroyed. The various companies pay such a part of the indemnity as the insurance they are carrying constitutes i f the total amount of insurance on the property. In most States having valued-policy laws, how- ever, the amount of insurance stated in the face nf each policy must be paid in the ease of total loss of immovable property. SURPLUS INSURANCE. A special form of insur- ance known as surplus insurance is sometimes written. This is sold under the condition that the company granting it does nut become lia- ble fur indemnity in ease of fire, unless I he loss of property is so greaf that the entire amount of regular insurance fails to cover it. Such surplus insurance is furnished at ratel below those charged for regular insurance, since in most ease, of partial loss the regular insur- ance is enough to cover the loss, and the company furnishing surplus insurance escape- liability. Coinsurance. large proportion of fires re- sult in only partial losses to insured property. In the absence of any stipulation to the eon-
