INSURANCE. 684 INSURANCE. the written application for tin- insurance policy, which is luiidc a part of the policy, is tilled in l)y the a^ent uf the insured, although signed by the applicant. If the agent does not correctly' tran- strihe the answers of the applicant for insur- ance, it is open to the insurer, in event of loss, to rely upon the untruth of the written answers as u hreach of warranty avoiding the policy. In. many States the courts have held that the insur- ance agent, although in fad duing an act ex- pected of and attrihuted to the injured, remains the agent of the insurer, and that the insurer, through his agent having notice by the answers of the insured of the matter relied upon hy the insurer as a breach of warranty, and having after such constructive notice issued the policy with full knowledge of the alleged breach of the writ- ten terms, is estop[H'd from relying on the breach as a defense to his liability on the contract of insurance. While the doctrine un<loubtedly works out substantial justice, it has been subject to severe criticism on the ground that it is not a true estoppel (see Estoppel), and that it violates the parole evidence rule (see KviuExc'E) in permitting the insured to contradict the writ- ten answer contained in his application. Life insurance policies are freely assignable, and if issued in good faith to one having an in- surable interest, the assignee need not have an insurable interest in the life insured. Policies of marine insurance are also freely assignable; but as the marine policy is purely one of indem- nity, it is necessary that the assignee should ac- quire the interest insured in order to recover on the policy. Fire insurance policies, owing to the importance of the personality of the insured, can only be assigned with the consent of the insurer. The policy contains precise statements as to the conditions under which the insurance will he forfeited, the conditions imder which the in- demnity becomes payable, and the procedure by which the insured is to prove loss and obtain the indemnity. Sound policy would seem to require that all these conilitinns should be of such a nature that they would put no unnecessary ob- stacles in the way of honest insurance, and set forth so clearly that the insured could have no excuse for misunderstanding the exact nature of the contract he has entered into. The better class of insurance companies have undoubtedly aimed to give the insured fair treatment. In too many cases, however, companies have shown a disposition to take advantage of obscurities or technicalities in the contract to avoid paying honest losses. So prevalent has this practice been that the legislatures of many of our States have considered it necessary to come to the pro- tection of the policy.holders. For example, the practice of printing some essential feature of the policy in very small type so that, it easily escaped the notice of the insured has been met by legislation prescribing the smallest size of type that m.ay be used : the requirement of for- malities in proving claims which in many cases the insured are unable to fulfill has been de- clared illegal and not binding. In interpreting all the claims of the insurance policy, it is a general rule that, inasmuch as the insurer in fact proposes the policy and fixes the terms, the terms of the policy will be construed most strongly against the insurer. Thus, a pol- icy which stipulates that the building insured is ■detached fifty feel,' in the absence of ex4)ress language to the contrary will be deemed to mean detached lilty feel Imm any buihling all'ecting the risk, and not from any building irre.si)ective of the character. U. Kl.NUS OK I.NSIKA.VCE COMPA.XIES AXD TUEIR (Jhakactekistics. I'ublic- and Frxvate Insur- ance. — Insurance companies may be classified in various ways according to the characteristics on which the classification is based. Thus with re- spect to the nature of the insuring body public insurance may be distinguished from private in- surance. Public insurance is Insurance issued by a body politic, whether nation, State, or a minor civil division; private insurance is insur- ance issued by a private jjcrson or by a group of private persons. Public insurance will be dis- cussed in the concluding part of this article. Hiilual and Juinl-Sluck Insurance. — Private insurance may l)e further subdivided into mutual insurance and insurance for gain, sometimes called commercial insurance. In its simplest form a mutual insurance company is based on an agreement entered into by each member to pay a share of the loss sustained by any otliiT member from certain siM-cified causes. The pro- portion to be paid by each member is based on the risks to which he himself subjects the com- pany. Mutual insurance is seldom found ex cept in the case of risks which are nearly iTii form in character, so that the degree of risk varies almost invariably with the amount of in- surance. Thus we find one class of nnilual fire insurance companies insuring cotton-mills, an- other insuring packing houses, a third insuring farm buildings, and a fourth confined to city dwellings. It is the comparative uniformity of the risks involved, which has been partly respon- sible for the general application of the mutual principle to life insurance. When the funds to reimburse losses are col- lected by assessment after the occurrence of the loss, the annual contribution of each member, that is, the cost of his insurance, is more fir less uncertain. As has already been pointed out, insurance in a mutual company collecting its funds in that way is the substitution of a smaller degree of uncertainty for a greater de- gree, of the prospect of making small annual pay nients varying within a comparatively slight range for a much smaller probability of a far greater loss. The more regular the loss from year to year, the less are the fluctuations in the assessments, and therefore the more advantage- ous the insurance on the mutual plan. The rela- tively great regularity of loss from year to year has made possible the application of the assess- ment principle to life insurance to a far greater extent than to other kinds. Very few mutual insurance companies are now run on the piire assessment principle. In nearlv all companies there is some accumulation of reserves which may be used to equalize the premiums in spite of considerable fluctuations in the amount of loss. Some of the older companies, especiall.v in fire insurance, have thus accumu- lated very large reserves, which enable them to return to the insured in the form of dividends a considerable part of the premiums collected. It is in life insurance that the mutual prin- ciple is applied most extensively. The practical difference between the old-line mutual companieo and the joint-stock companies is very slight.
