This process is termed reinsurance. The entire business of an insurance company may be absorbed in this way by a competitor. Where the same property is insured against fire in several different companies, the rule of contribution applies, i. e., each insurer must contribute ratably toward the loss without regard to the dates of the several policies. In this respect co-insurers have the same rights against one another that co-sureties have. For example, the insured may recover his loss in full against any one of the co-insurers up to the amount of his policy; and the insurers thereafter are left to apportion the loss by contribution amongst themselves. To cast this burden on the insured, the companies often insert a pro rata clause. 245. Subrogation.-Another peculiar feature of insurance contracts, growing out of the doctrine of indemnity, is that of subrogation. The insurer who pays a loss is subrogated to the rights and remedies which the insured may have against third persons primarily liable to him. This rule is the outgrowth of the doctrine that insurance is a contract designed to protect the insured from loss only, and not to be the occasion of gain. If this rule were not enforced, the insured might recover from the wrong-doer who occasioned his loss and also from the insurer, thus gaining a profit equal to the value of the damaged property. It will be seen, therefore, that the insured cannot release the wrong-doer without the consent of the insurer. If, however, the insurers pay the policy after the wrongdoer has reimbursed the owner for the loss sustained to his property, the wrong-doer will have no further liability, and any amount received by the insured from the wrong-doer before payment is made under the pol icy, will be applied in discharge of the policy. A wrong-doer who reimburses the insured for his loss, knowing at the time that the insured has been indemnified by the insurer will still be liable under the doctrine of subrogation to the insurer. 246. Insurable interest.—Insurance contracts are in a sense speculative, and to save them from the taint of illegality that attaches to all wagers, the law requires that the person to be indemnified must have some insurable interest in the subject of the insurance. In fire insurance, it has been held that insurance may be procured on property to which some right is held by owners, trustees and cestuis que trust, executors and administrators, co-partners, factors, agents, consignees, mortgagors and mortgagees, lienors, vendors and vendees, lessors and lessees, sureties, endorsers, common-carriers, pledgors, stockholders, sheriffs and creditors. In life insurance, the principle of insurable interest may be broadly stated as follows: Every person has an insurable interest in his own life and health, and in the life and health of any person on whom he depends for education or support, or of any person under a legal obligation to pay him money, or of any person upon whose life an estate or interest vested in him depends. A partner may insure the life of his co-partner, a creditor may insure the lives of his debtors, an employé may insure the life of his employer. While ties of affection or kinship alone do not constitute an insurable interest, certain relationships are so apt to involve a legal claim to support or to pecuniary obligation or advantage, that their existence establishes an insurable interest. Thus, a woman has an insurable interest in the life of her fiancé, a husband in the life of his wife, a father in the life of his children and children in the lives of their parents. In fire and marine insurance, the insurable interest must exist at the time of loss as well as at the commencement of the risk, but in life insurance it may cease to exist at any time after the contract is made. 247. Assignment of insurance contracts.-A transfer of the title of insured property does not transfer the contract of insurance. It is important, therefore, that when property is sold or conveyed that the purchaser procure from the insurer a consent to the transfer of the policy. This rule applies only in the case of fire insurance, and even here a policy may be assigned after a loss has occurred without the consent of the insurer. In the case of marine and life insurance, the rule is that a policy may be assigned without the consent of the insurer before loss. Policies of life insurance, however, frequently provide that written notice of an assignment must be given to the company. Where one insures his own life for the benefit of another, the right of the beneficiary becomes vested and cannot be assigned or transferred by the insured without the consent of the beneficiary, unless the insured acquires that right through some provision in the policy itself, in the regulations of the company, or in the law. Upon the death of the beneficiary the insured ordinarily may nominate a new beneficiary. This is the rule in most jurisdictions, which also hold that if any nomination is made the policy will be paid upon the death of the insured to the representatives of the beneficiary and not to the representatives of the insured. 248. Consummation of insurance contract.-The contract of insurance is usually embodied in a policy, a more or less intricate and complex document regulating the rights and liabilities of the parties. The dignity and formality of this instrument will be appreciated when it is learned that our present day policies are direct descendants of the old "Lloyds' Policy" adopted in 1779, which began with the solemn declaration, “In the name of God Amen." This old policy with a few changes, has been the subject of so many legal decisions, and has been so well interpreted by the courts, that insurance companies and legislatures are reluctant to make radical changes. Most of the state legislatures, however, have adopted a standard form of fire insurance, and the larger life insurance companies have selected a few forms of life policies which have been adopted as standards. In the case of fire and marine insurance, it is often necessary that property be protected before a formal policy can be executed. This is accomplished by means of what is known as a binding slip, which contemplates the issuance of a standard form as soon as it can be properly executed. Indeed an oral contract to issue a policy is valid, if the names or descriptions of the parties, the rate of premium, the property or life to be insured, the risks insured against and the term or duration of the insurance is understood. 249. Avoidance of contract through misrepresentations or concealments.-The contract of insurance requires the highest good faith between the parties. A person desiring insurance is bound to make a frank disclosure of all the circumstances that are likely to influence the insurer in accepting the risk. He is bound to communicate all material facts of which he has knowledge. The test of materiality is based on the immediate influence which the misrepresented fact has on the insurer's judgment at the time of effecting the contract. If a material fact is concealed, though in no way connected with the loss, the policy will be void, for the reason that the insurer might not have accepted the risk at all, or might have demanded a higher premium. Most jurisdictions in this country hold that in the case of life or fire insurance, the policy is not avoided unless the concealment was intentional. Usually, however, when the insurer makes special inquiries, for example, requiring answers on a form of application, it may be assumed that no other information is required. This rule, however, has its limitations. EXAMPLE 264. A procures insurance on his house from the B Insurance Company and upon request executes an application provided by the company. No information is required as to the surroundings of A's property, but the insurance company is unacquainted with the fact that the adjacent property is used as a sulphur factory, and A does not volunteer the information. The policy would probably be void for concealment. A material misrepresentation by the insured or his agent, even though innocent and unintentional, avoids the policy. Representations must be substantially complied with. EXAMPLE A procures insurance on his ship and goods, and represents that it is to sail from C to D. The ship sails from C to E and is lost en route. A cannot recover. Representations as to future conduct, in order to be binding on the insurer, should be incorporated into the written contract. Representations as to opinion or be |