FIRE INSURANCE LAW

(Including Standard Policy)

PART III

ANALYSIS OF INSURANCE FORMS*

In all policies whether standard or not, in addition to the standard riders or clauses, it is permissible to add such language as may be necessary to accurately describe the property and the risk assumed. There is a blank space left in the policy where the description of the property may be written, but it is customary to use a printed form as a matter of convenience and for the further purpose, where more than one company is interested in the risk, of insuring absolute accuracy and uniformity in the description of the property on the different policies.

Authority for Use. In the State of New York the permission to add this matter to the policy is given in the following words in Section 121 of the insurance law:

"Printed or written forms of description and specification or schedules of the property covered by any particular policy, and any other matter necessary to clearly express all the facts and conditions of insurance on a particular risk not inconsistent with, or a waiver of, any of the conditions or provisions of the Standard Policy herein provided for."

Preparation of Forms. In the writing of forms there has been a general tendency to multiply words unnecessarily. This is perhaps a human failing, and besides the ordinary increase from this fact, still other additions may be necessary because a competitor who has examined a form already drafted may point out deficiencies in the application of the form to the specific hazard which is assumed. The

*The writer acknowledges his indebtedness for material in this book to C. G. Hine, who was one of the earliest writers on the subject of Forms, and whose work is still standard; also to W. N. Bament for the "Company's Viewpoint" on the subject of Forms; to Julius Lucas, Jr., for the "Broker's Viewpoint" on the subject of Forms, and to C. E. Novarre, of England.

disposition in such cases is to have any certain phrase which has once been introduced into the form of one company introduced into all forms, lest there be criticism that certain valuable privileges which might have been secured by the insured's representative have not been secured. These privileges, as a matter of fact, are not generally of the slightest moment, and the property may have been as fully protected under the original form as under the new one.

Rules. In drafting a form the rules are simple-in fact, so simple that they are often missed and may be stated as follows:

(1) General language should be used wherever possible. General rather than specific language is advisable for the insured at least, because it does not tie him down quite so closely. There is always the danger where specific language is used to rule against the party who uses the specific phrase, the general assumption being that the party could have used clear language and failed to do so. If the form were furnished by the company the company would be ruled against, but if furnished by the insured or his representative, then the tendency would be to rule against him.

(2) Those items in the policy which require specific mention should be so mentioned. The standard policy requires that certain articles shall be mentioned specifically if liability is assumed thereon. These articles are: Awnings, bullion, casts, curiosities, drawings, dies, implements, jewels, manuscripts, medals, models, patterns, pictures, scientific apparatus, signs, store or office furniture or fixtures, sculpture, and tools or property held on storage or for repair. A great many of these things are generally assumed without any question, but others are regarded as not desirable for insurance and would be avoided wherever possible. The best opinion today is that general language is not to be relied upon to cover this class of property by insurance, but that there must at all times be a specific mention of any of the items enumerated.

(3) As few words as possible should be used. Just as a multitude of counselors may darken wisdom, so in drafting a legal instrument any multiplicity of words may make, not for clearness, but for the reverse. Therefore, avoid an overuse of words; be as concise as possible; use sufficient words to clearly express the intent, but no

more.

Prepared Forms to Be Used with Judgment. A variety of examples of different forms in ordinary use will be shown later in this book, but one should be cautioned against relying too much on already prepared forms. Whoever is charged with the duty of drafting a form for the insured or for the company, must learn to look at each piece of property, so far as possible, as an individual risk. It by no means follows that a risk is just like its fellow because it looks like it; it may have individual factors which ought to be given careful consideration and no doubt left as to the property being wholly protected. It is the overlooking of this individuality of risks which leads to the attempt to shorten labor by devising forms which may be applied anywhere and everywhere. Avoid this danger. The printed form may furnish only a basis for drafting the real form that may be needed by any risk. A client may be introducing some slightly new process for carrying some small side line to his main business which ought to be carefully covered by the insurance policy to prevent the defeat of his claim in the event of a loss. Do not rely on the kindness of the company or its desire for business to settle the loss under a bad policy. Be sure that the policy and form are right in the beginning. Trouble taken in advance will generally save trouble in the future.

Concurrency of Policies. All policies on the same risk should be concurrent, i.e., should read the same way. If a farmer owns corn, oats, and wheat and has three policies covering the property and each policy covers corn, oats, and wheat and are alike in every other particular, the policies are called concurrent, as they agree, the one with the other. If, however, one policy covers corn, another oats, and the third wheat, the policies are non-concurrent. Each covers a specific kind of grain and the loss under the policy can only be collected for the specific kind of grain covered by the policy. Again, policies may be non-concurrent by being written as follows: the first covering corn, wheat, and oats; the second corn and wheat; and the third wheat and oats. In this case no two policies will be alike and the result of endeavoring to apportion the loss may be, as in the previous non-concurrent instance, that the insured, while having insurance equal to the total value of his property, may fail to collect all of his loss because the insurance is distributed so unequally or because all of it is not available for the loss as it occurred. The major troubles in the settlement of losses in fire

insurance have grown out of the non-concurrency of the policies. Some of the problems connected with the rules for apportioning loss where policies are non-concurrent have never yet been settled to the satisfaction of perhaps either the insured or the insurer. In fact, the courts themselves have not agreed as to the method of settling losses in certain non-concurrent conditions, thus proving that the only safe rule is to be positive that the policies are right in the beginning.

Policy Writing.* "I. Clearness, conciseness and completeness should characterize every Policy written. There should be no uncertain meanings-no useless phrases, nor omissions of vital points. Say what you mean, and say it in words that will be easily understood; avoid such general terms as "stock in trade", "property", "live stock". If the Policy covers dry goods, or groceries, or druggists' merchandise, or household furniture, or horses, call the property by name, so that it may be certainly known WHAT is covered and what is not.

etc., &c. These terms or expressions must be peremptorily disregarded by the prudent Policy writer. A check for "five hundred dollars, etc.", would call for nothing but $500; but a Policy on "household furniture, etc." or "drugs, &c.", would probably be held to cover everything on the premises.

"II. State the ownership distinctly, use the words “owned by”, or "owned and occupied by", or "belonging to", or begin the written form "On his (her or their)". If the insurance is on some other interest than that of owner, write the Policy "On his (her or their) interest", as mortgagee, tenant for life, or as the case may be. In any event, let there be no uncertainty as to WHO is insured.

"III. Always give both in the Policy and in your report of it, the CONSTRUCTION, brick, frame or stone-the ROOF, slate, metal, tile, shingle or composition—the NUMBER OF STORIES— the LOCATION, by street, lot or number-the occupancy-and (if a Mill) the POWER, water, steam or animals.

"IV. Write a specific amount on each subject; do not cover two or more items in one sum. It is better not to do business than to do it under Blanket Policies, unless the equities can be

*From "Book of Forms," by C. C. Hine.