RULE 13. Rents as element of damage.

14. Effect of refusal by insured to permit repairs or rebuilding.

15. Repairing or rebuilding in compliance with city ordi

nances.

16. Expense less than amount of insurance.

17. Court of equity will not interfere - Remedy at law. 18. Exercise of option does not depend upon written evidence.

19. Effect of statute fixing amount of loss.

20. Exercise of option as waiver.

21. Waiver of appraisal.

22. Effect of appraisal agreement.
23. Waiver by appraisal.

RULE 1.

Option to Repair, Rebuild, or Replace as Imposed by Contract.

The insurance company has the option to repair, rebuild, or replace the property lost or damaged with other of like kind and quality, within a reasonable time, on giving notice within thirty days after the receipt of proof of loss required of its intention to do so; but there can be no abandonment by the assured.

This rule is imposed by above terms in the standard form of policy prescribed in:

* See note to "Duty to Save and Preserve Property," Rule 1,

page 2.

provides that "within sixty days after the insured shall have submitted the statement required, the company shall either pay the amount for which liable, or replace the property with other of the same kind and goodness, or it may, within fifteen days

after such statement, notify the insured of its intention to rebuild or repair the premises, or any portion thereof separately insured by the policy and shall thereupon enter upon said premises and proceed to rebuild or repair the same with reasonable expedition; there can be no abandonment."

The standard form of policy prescribed in

New Hampshire

provides same as preceding, except that ten days' notice of intention must be given after submission of statement, and also as follows: "If the company decides to rebuild or repair the property destroyed or injured, it shall begin to do so within twenty days after adjusting the loss, and shall prosecute the work with reasonable diligence until it is completed.

If the company neglects to adjust the loss within fifteen days after receiving notice of it, or to begin to rebuild or repair the property destroyed or damaged within twenty days after the adjustment of the loss, the insured may proceed to rebuild or repair at the expense of the company who shall be liable for the reasonable expenses incurred in so doing and for the loss sustained by its neglect, not exceeding the amount insured; or the insured may commence an action upon the policy.

* * *

The South Dakota form provides: "The Company within sixty days after the insured shall have submitted the statement as hereinbefore provided shall either pay or shall replace the property with other of the same kind and quality (except in case of total loss of buildings where amount of loss is fixed) or it may within fifteen days after such statement is submitted notify the insured of its intention to repair the premises or any portion thereof separately insured by this policy, and shall thereupon enter upon said premises and proceed to repair the same with reasonable expedition. It is moreover understood that there can be no abandonment of the property insured to the company.

In the States where no standard form is prescribed and other than those above named, the New York standard form is in general use.

The condition is inoperative in Missouri by statute. Branigan v. Jefferson Ins. Co., 102 Mo. App. 70, 76 S. W. Rep. 643. See "Statutory Provisions."

RULE 2.

Right of Insured to Repair.

The assured is not precluded from making necessary repairs during the prescribed period for exercise of the option by the insurance company, when done in good faith and to prevent further damage;1 but he should not do so in willful disregard of company's known intention to repair or rebuild;2 and where he desires to act, should give reasonable notice to the insurance company.3

1. Eliot Savings Bank v. Commercial Union Assur. Co., 142 Mass. 145.

2. Beals v. Home Ins. Co., 36 Barb. 614, affd., 36 N. Y. 522. 3. Davis v. Grand Rapids Ins. Co., 15 Misc. 263, 36 N. Y. Supp. 792, affd. without opinion, 157 N. Y. 685.

RULE 3.

Notice.

Effect of Removal or Disposition of Property by Insured While the assured cannot be enjoined from removing or disposing of his property during the period of time reserved by the company for exercise of its option, his doing so may be evidence of bad faith or fraud in his statement or claim for loss; but when the assured gives notice of disposition or sale and the company does not indicate any objection or wish to avail itself of the option, assured is not in fault.2 Insured cannot dispose of damaged property in face of an objection or protest of the insurance company.

1. New York Ins. Co. v. Delevan, 8 Paige, 419. And see Beals v. Home Ins. Co., 36 N. Y. 522.

2. Davis v. Grand Rapids Ins. Co., 15 Misc. 263, 36 N. Y. Supp. 792, affd. without opinion, 157 N. Y. 685.

3. Astrich v. German-American Ins. Co., 131 Fed. Rep. 13, C. C. A. , affg. 128 Fed. Rep. 477.

RULE 4.

Assignment Subject to Right of Company.

Assignment of claim under the policy after a loss is taken subject to right of company to replace or rebuild. Tolman v. Manufacturers' Ins. Co., 1 Cush. (Mass.) 73.

RULE 5.

Power of Adjuster.

An adjuster authorized to settle an alleged loss has the power to determine its amount, and how, when, and where it shall be paid, and hence he necessarily has the authority to determine whether it shall be paid in money or by the reconstruction of the damaged building, and the power to exercise the option of the company for that purpose.

Lancashire Ins. Co. v. Barnard, 111 Fed. Rep. 702, 49 C. C. A. 559.

RULE 6.

Option as Affected by Time.

The company's right of election to rebuild expires thirty days after service of the statement or proof of loss; the time does not run from the ascertainment of the loss by an appraisal. Where the company claims such right after the expiration of the thirty days, and actually rebuilds, the assured is not estopped by his mere silence, without some affirmative act calculated to mislead the company, from insisting upon money payment for the loss,' but where it is necessary to amend or complete the statement or proof of loss, which is defective in substance as first furnished, the time commences to run from the service of the amended and completed statement.2 Must be exercised within sixty days from the date of a waiver of proof of loss.3

1. McAllaster v. Niagara Ins. Co., 156 N. Y. 80, 50 N. E. Rep. 502, affg. 84 Hun, 322, 32 N. Y. Supp. 353; Maryland Home Ins. Co. v. Kimmel, 89 Md. 437, 43 Atl. Rep. 764, 28 Ins. L. J. 729. And see Insurance Co. of N. A. v. Hope, 58 Ill. 75. 2. Kelly v. Sun Fire Office, 141 Pa. St. 10, 21 Atl. Rep. 447; German-American Ins. Co. v. Hocking, 115 Pa. St. 398.

3. Farmers & Merchants' Ins. Co. v. Warner, Nebr. " 98 N. W. Rep. 48.

RULE 7.

Must be in Limited Time.

The option to replace or rebuild may be exercised at any time after the loss, and before the expiration of the time limited in the policy.

Lancashire Ins. Co. v. Barnard, 111 Fed. Rep. 702, 49 C. C. A. 559. And see Insurance Co. of N. A. v. Hope, 58 Ill. 75.

RULE 8.

No Money Demand Until After Expiration of Time. Claim does not ripen into a money demand until after expiration of period prescribed for exercising option.

Westchester Ins. Co. v. Dodge, 44 Mich. 420.

RULE 9.

Effect of Exercise of Option — Building Contract.

The exercise by the insurance company of its option to repair or rebuild converts the insurance contract into a building contract, which can only be discharged by performance. Defects in the original building will not excuse performance;1 payment in money can no longer be required; for a breach of the building contract the measure of damage is the cost of repairing or rebuilding, where there has been a total failure, or the difference between the work as done and its value if done, or the amount necessary to complete the building, according to the standard of that existing before the fire;3 and the insurance company may be liable for damages caused through the negligence of those employed by it