the common-law principles of insurance have been apparent to the unlearned legislator, and have been sufficient to induce him to apply, without regard to the serious consequences that may ensue, such superficial remedies, by sweeping enactments, as may have suggested themselves either to him or to his even less knowing constituents. It is admitted by all persons having any adequate knowledge of the nature of insurance that it is one of the most beneficial inventions of society, and it is peculiarly unfortunate that it should have excited such pernicious activity, on the part of legislative bodies, in the effort to regulate the administration and conduct of companies engaging in insurance. In many cases, however, these legislative regulations have been wisely conceived, and do really remedy deficiencies of the common law, tending to promote justice and prevent the perpetration of fraud upon the public. These statutes are always aimed at the insurer, and intended for the benefit of the insured. In accomplishing this desired end, the statutes may be said to have four general purposes: (1) To insure the solvency of the companies granting insurance; (2) to prevent the insured from being trapped by conditions of forfeiture set forth in the contract that might escape his attention; 28 (3) the control of litigation against the insurer, in order to make the remedy of the insured under his contract speedy and efficient; and (4) a general control of the business of the insurers, in order to prevent any unfairness in the administration of their affairs, either to the public or to the policy. holders, and for their proper and speedy winding up in case of insolvency. A fifth general aim to be easily observed is found in the regulations intended for revenue only. The insurance company, with its extensive business and large invested assets, offers a tempting subject for taxation, and this temptation legislatures are by no means inclined to resist. It is probable that the insurance business is taxed more grievously, and bears a larger proportionate share of the burden of maintaining the government, than any other kind of legitimate business.27

The unhealthy influence exerted by the rapid growth of insurance business shortly after the close of the Civil War resulted in the establishing of a large number of unsafe companies, which, after more or less extended struggles for existence, suffered the collapse that might have been expected from their reckless methods. The occurrence of such frequent failures on the part of insurance companies had the double result of entailing very considerable loss upon numerous innocent policy holders, and also of exciting a deep public

26 See the severe arraignment of insurance companies on this account by Doe, J., in De Lancey v. Insurance Co., 52 N. H. 581.

27 See Elements of Life Insurance, by M. M. Dawson.

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distrust in the integrity of the management of all insurance companies. From this condition the step to government inspection and supervision was a short one. Practically all the states of the Union have passed laws empowering an officer of the state, either specially created for the purpose, and called "Insurance Commissioner," or one of the already existing state officers, to require all insurance companies doing business in their respective states to make annual sworn reports as to the condition of their business, and allowing such officers the privilege of examining the books of the companies at pleasure, and also authorizing them to proceed to wind up any insurance companies which upon inspection are found to be insolvent. Statutes are also to be found in all of the states requiring that each foreign company doing business in the state shall deposit in the state. treasury a sufficient sum to secure to the policy holders in that state the performance of all contracts made with them. The funds so deposited in the treasury of the state are required to be a certain. per cent. of the capital and assets of the company, and are held subject to a lien in favor of the resident policy holders. In some states companies are not allowed to carry on the business of insurance unless they possess a certain amount of capital specified in the statute, and are prohibited from accepting a single risk exceeding a specified percentage of that capital.28 These regulations, being intended to make certain the solvency of all insurers, and to prevent the reckless and unsound conduct of insurance, commend themselves more highly to reason than any other statutes affecting this subject. And yet statistics show that there are more numerous failures among the extensively regulated companies in the United States than among the British companies, which are almost unmolested.

In the early stages of the business, the conduct of insurance companies towards their policy holders was so illiberal and unwise, and so many real hardships were imposed upon unwary policy holders, that it is not surprising that we find upon the statute books of the various states many laws intended to shield those buying insurance from the supposed wrong intentions and harsh practices of the insurer. However well justified and even beneficial these regulations were at the time they were passed, many of them now operate merely to vex and harass the insurance companies in carrying out the more liberal policies which experience and reflection have shown to be wisest and best. The provisions intended to protect the insured against the consequences of carelessness or ignorance in making the contract of insurance are very great in number and of almost

28 For an example, see Acts Va. 1895-96, p. 452, c. 421. Any attempt to cite accurately the statutes of all the states on these subjects would be useless, and might prove misleading, since they shift like the sands of the sea.

endless variety, and only those most general and important can be noticed. It is a well-recognized rule of law that any contractor accepting an instrument known to contain the terms of his contract is conclusively bound by all of the terms written therein; yet such was the character of the policies formerly issued by insurance companies that, on account of their great length, fine type, long lines, and involved statement, the ordinary contractor found it not only exceedingly inconvenient and burdensome to read over the verbose stipulations, but also, when read, they were practically meaningless. to him, unless he chanced to be a man of unusual intellectual powers and legal attainments. The result was that upon the happening of the contingency insured against the policy holder frequently learned. for the first time that all rights under the policy had been forfeited by reason of "some condition crouched unseen in the jungle of printed matter with which a modern policy is overgrown." 29 In order to prevent such forfeitures, which were regarded with the utmost disfavor by the public, statutes have been passed providing that no condition in the application or other paper referred to in the policy shall be valid unless set forth in the policy itself; that no condition or term in a policy shall be enforceable unless printed in type as large as long primer 1 or other specified size. In some states it is enacted that the insurer may avail himself of no charter or statute stipulation unless it be printed on the policy, although, of course, the failure so to print such a provision on the policy will not prevent the insured from claiming any right given thereby. In many states it is enacted that no policy shall be forfeited by reason of a failure to pay any premium or other dues, unless the insurer shall give reasonable notice of the fact that such payment is due. New York, followed by some other states, has even gone so far as to enact that after the third year a life policy may not be forfeited by failure to pay any premium or dues, but that the reserved value of the policy at the time of such failure shall be used in extending the insurance.33 The rule of law absolutely avoiding insurance policies in the event of a breach of warranty, however immaterial such warranty might be, has often worked great hardship upon careless policy holders, and as a result of this fact a large number of the states have enacted

31

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29 VAN SCHOICK v. INSURANCE CO., 68 N. Y. 434; Richards' Cases, 362.

30 See the Pennsylvania Statute (Laws 1881, p. 20), set out in RITTER v. INSURANCE CO., 169 U. S. 139, 18 Sup. Ct. 300, 42 L. Ed. 693.

31 See Code Va. 1887, § 3252. There exists a legal presumption that the policy conforms to the requirements of the statute. Sulphur Mines Co. v. Phenix Ins. Co., 94 Va. 355, 26 S. E. 856.

32 See Cline v. Assurance Co., 101 Va. 496, 44 S. E. 700.

* See 3 Rev. St. (8th Ed.) p. 1688.

statutes declaring that no policy shall be forfeited by reason of a breach of warranty, unless the fact warranted was material or the statement fraudulent.31 In Missouri it has been enacted that a breach of warranty shall not avoid a policy, unless the subject of the warranty contributed to the happening of the event upon which the policy became payable.

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The same general purpose of guarding the insured against unfair advantages that may be taken by the insurer under the terms of the policy that he himself has written is subserved by a statute, to be found in many states, declaring that the agent who solicits the insurance and takes the application shall be deemed the agent of the insurer, and not of the insured, in spite of what the policy may provide; that the insurer shall be estopped to claim a forfeiture by reason of a false statement made by the insured, when such falsity was known to the agent of the insurer; prohibiting the insurer from setting up the suicide of the insured in defense of a claim under the policy, or from showing, in the case of a fire policy, that the real value of the property destroyed was less than the amount set forth on the face of the policy. Statutes containing this last provision, known as "the valued policy" acts, are the most vicious and shortsighted of all the unwise legislation devised for the regulation of insurance business. They are not only based upon a total misconception and perversion of the true principles of insurance, but are also contrary to public policy, inasmuch as they tend to encourage arson and other fraudulent practices, and, moreover, are opposed to the real interest of those who desire to insure their property. The purpose of insurance is indemnity, and indemnity only, and, whenever it is applied to any other purpose, such use is a perversion of the true principle, and introduces a wrongful and immoral element of speculation that promotes fraud and crime. If a person, by fraudulent collusion with an agent of the insurer, or by deceiving such agent, procures insurance upon his property greater than its value, he is under constant temptation to destroy his own property, and this temptation, which is all too frequently yielded to, not only is injurious to public morals, but greatly increases the average per cent. of loss in property insured, and necessarily results in the increasing of rates of insurance. Thus the inevitable result of such laws, whereunder a fire may cause not a loss, but operate as a means of a most

34 See Union Cent. Life Ins. Co. v. Pollard, 94 Va. 146, 26 S. E. 421, 36 L. R. A. 271, 64 Am. St. Rep. 715.

35 See Continental Life Ins. Co. v. Chamberlain, 132 U. S. 304, 10 Sup. Ct. 87, 33 L. Ed. 341; Bankers' Life Ins. Co. v. Robbins, 55 Neb. 117, 75 N. W. 585. See, also, Acts Va. 1887, p. 349, c. 271, § 5.

36 See the Missouri Statute set out in Knights Templars' & Masons' Life Indemnity Co. v. Jarman, 187 U. S. 197, 23 Sup. Ct. 108, 47 L. Ed. 139.

satisfactory cash sale of the property destroyed, is to shift upon the honest policy holders the burden of paying to the dishonest destroyer of his overinsured property the dishonest gains obtained by such overinsurance. It is thus seen that every consideration of public policy and the best interests of the insuring public should prevent the enactment of these valued policy statutes, yet so great is the prejudice in the mind of the ordinary legislator against any defense that may be made by an insurance company against payment under its policy that probably one-half of the states of the Union have passed such injurious acts.3

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In addition to these general acts looking to governmental supervision and control, referred to above, there are many others of a more desultory character that are found in the various states, limiting the powers of insurers or imposing conditions upon their business. Thus, there are found acts regulating the right retained by all companies of canceling fire policies, and still others that establish certain rules with regard to notice and proof of loss in case of fire policies, with which the terms of the policies themselves are required to comply. In New York, and many other states where the valued policy acts are not in force, the insurance company is required by statute, in case the value of the property in the event of loss is found to be less than the face of the policy, to return such proportion of the premium received as was in excess of the real risk borne. In an effort to prevent unfair discriminations among those taking policies, some of the states have enacted arbitrary prohibitions. against any discriminations in favor of any individuals of the same class, either in regard to premiums charged, dividends paid, or rebates given; others forbid discriminations between white persons and colored persons. The anti-trust crusades of recent years have also had their effect upon insurance regulations, and we find statutes in a large number of the states prohibiting insurance companies or their agents from combining together to fix the rates of insurance, or making any other agreements that would tend to restrain competition among companies bidding for insurance. These laws have often worked great injustice and hardship upon insurance companies, and have in some cases resulted in causing some of the best companies to withdraw entirely from the state attempting to enforce such vexatious regulations. This withdrawal from the state, of course, removes the better class of insurance companies, thus leaving the business to inferior companies, and making it easy for them. to raise the rates. Thus, it is probable that these anti-compact laws

37 The Supreme Court appears to consider such statutes not to be opposed to a sound public policy. See Orient Ins. Co. v. Daggs, 172 U. S. 557, 19 Sup. Ct. 281, 43 L. Ed. 552.