money to C.78 However, if F has absconded, which of the two innocent parties, R or C, should bear the loss if both were free from negligence? On principle, the loss should fall on C, who had but an equitable right of subrogation, which was cut off by the release of R. After payment by the insurer. Upon fully indemnifying the insured for his loss, it is clear that C is entitled to subrogation to the rights of F against R. Assume that after C thus settles with F, R purchases a release from all liability from F. If the release is purchased by R with full knowledge of C's rights, it in no way affects the right of C against R by virtue of subrogation.79 But if the release is purchased without the knowledge of the rights of C, the rights of C against R are destroyed. This is true because R is then in the position of a bona fide purchaser of a release of a legal right against himself from F who holds the claim in trust for C, C being in the position of a cestui que trust whose equitable interest has been cut off as against an innocent purchaser.80 23. Same subject-Amount of recovery.-The right of subrogation is limited to the amount which the insurer is compelled to pay. It would be as unjust and as dangerous to allow insurance companies to profit by fires as it would be to allow such a gain to be made by the insured. In many, if not in most, cases the property is insured for less than its full value. It is then merely a matter of procedure to arrange for an action in which 78 Chickasaw, etc., Ins. Co. v. Weller, 98 Iowa 731, 68 N. W. 443. 79 Hart v. Western Ry., 13 Metc. 99 (Mass.), 46 Am. Dec. 719. 80 Same case, at page 106. the three parties shall be fully represented. If the insured is unwilling to sue the third party, the insurer has no difficulty, today, in being permitted to sue either in his own name, or at least in the name of the insured for the benefit of the insurer. Assume that, by statute, a railroad is liable for treble damages if grossly negligent in causing a fire, and that insured property has been destroyed in this manner. Here someone is going to get a windfall. Shall it be the insurance company or the insured? The court in Maine felt that it should be the insurance company after it has indemnified the insured.81 24. Life insurance.-A creditor has insured his debtor's life for $1,000 and the amount of the debt is also $1,000. Then the debtor dies and the insurer pays the insurance to the creditor. Shall the insurer be subrogated to the creditor's right to collect $1,000 from the debtor's estate? From what we have already learned in this chapter as to the subrogation of an insurer to the rights of a mortgagee, one might conclude that subrogation would be allowed here. However, it is unanimously agreed that the doctrine of subrogation has no application to life insurance.s 82 Both satisfactory and unsatisfactory reasons for this rule have been offered. First, it has been said that where a life insurance company seeks subrogation to the right of the insured's personal representative or next of kin to recover damages for death by wrongful act, the right to damages is purely statutory and at common law 81 Rockingham, etc., Insurance Co. v. Bosher, 39 Me. 253, 63 Am. Dec. 618. 82 Conn. Mut. Life Ins. Co. v. N. Y., N. H. & H. R. R. Co., 25 Conn, 265, LEADING ILLUSTRATIVE CASES. it did not exist because the cause of action died with the person. However, in a multitude of cases of property insurance, subrogation is allowed though the right against the third party is statutory; for example, where a railroad is made absolutely liable for fires caused by its engines even though it has not been negligent. Another argument advanced is that even by statute no right in the insured exists to recover for death by wrongful act, and that the right is given only to members of his family or his kin. Though this is true as to most of these statutes, a few of them provide that the cause of action shall survive and be handled as if the deceased were alive. Thus they allow a recovery by the administrator for the pain of the deceased.83 In such a case the right of action might be regarded as residing in the insured or as part of his estate. A further argument is this, that life insurance is a matter of investment and not indemnity. However, in the case of a creditor insuring his debtor's life for a term of years, the element of indemnity is practically the sole feature. There would, however, be this practical difficulty in allowing subrogation. It would be necessary to determine the exact value of a human life. This might prove embarrassing to the family of a worthless person, but not more so than such a controversy in an action for death by wrongful act. 25. Accident insurance.-F has his right leg insured for $1,000. He loses it in a railroad wreck and then recovers $1,000 from the railroad company. 83 Quinn v. Johnson Forge Co., 9 Houst. 338 (Del.), 32 Atl. 858. Shall we allow him to recover $1,000 from the insurer as well as from the tort-feasor? Would this be unjust enrichment? Regardless of what one's opinion may be, it has been decided that there can be no subrogation in accident insurance.84 The court reasoned that so far as subrogation is concerned, accident insurance resembles life rather than property insurance. But that was the very question for the court to decide. Is it true that, in general, accident insurance resembles life rather than fire insurance? We might argue just the other way. A man must die, but his house need never burn. There is no necessity for losing one's legs. Most men do not. But even if subrogation is allowed, the insurance company might have difficulty in asserting the right to any advantage, because the insured is really never fully indemnified for the loss of a part of his body or for an injury. The insurance company might contend that the judgment in an action by the insured against the tort-feasor conclusively determines the amount of the injury. However, the rule is the other way. Such a judgment is, at most, but evidence in the insurer's favor.85 26. Indemnity insurance.-Indemnity insurance is but a commercialized form of suretyship, and it was in the law of suretyship that the doctrine of subrogation arose and developed. Hence there is no question but that an indemnity insurance company on indemnifying a creditor may assert subrogation to the creditor's rights against the debtor. 84 Aetna Life Ins. Co. v. Parker & Co., 96 Tex. 287, 72 S. W. 168. 85 Aetna Insurance Co. v. Confer, 158 Pa. St. 598, 28 Atl. 153. CHAPTER V. WAIVER AND ESTOPPEL. 27. Waiver and estoppel distinguished.-Though closely allied it is possible in most cases to distinguish waiver from estoppel. Take a case in agency. A merchant has in his employ an agent to collect bills each month from certain customers. Suddenly the agent is discharged, but the merchant does not give his customers notice of the discharge. The customers, in ignorance of the discharge, pay the discharged agent, as usual, the next month. The agent then absconds. The loss falls on the merchant. Have we here a case of waiver or estoppel? Shall we say that the merchant had a right to give notice to the customers, but that by failing to do this he waived his right to cut off the agent's ostensible authority? Or shall we say that the merchant, by his failure to give notice, has misled the customers and is now estopped to deny the authority of the agent? The latter statement is the customary one, for the former would have a strange sound in the ears of a lawyer. Waiver. By waiver we mean the relinquishment of a right. For example, the policy may provide that if the insured keeps dynamite on the premises, the policy shall be void. The insurance company, after the issuance of the policy, may tell the insured |