transfer set aside as fraudulent. Though this decision has been criticized 52 on the ground that it is a piece of judicial legislation, it has been followed in several states. If the debtor is not insolvent when he effects the insurance, but later becomes insolvent, the position of the creditor is not so strong, and must be determined in the light of the general rules which have been established in connection with the statute of 13 Elizabeth in regard to fraudulent conveyances. 50. Same subject-Creditor as the insured.— When the creditor procures insurance on the life of the debtor, shall the creditor be permitted to keep all of the insurance, even though the debt has been paid in full? 54 If we adopt the theory that life insurance is a matter of investment as well as a matter of indemnity, there appears to be no objection to allowing the creditor to retain all the proceeds from the insurance. This rule has been adopted by many courts.53 Other courts have reached a contrary opinion and allow only indemnity, particularly where the debtor has taken out insurance in favor of his creditor as beneficiary.55 In such cases they allow the creditor only indemnity and give the surplus, if any, to the debtor's estate. But cases in which the debtor is the insured may be distinguished readily from those in which the creditor himself takes out the insurance and 52 25 American Law Review, 185. 53 Amick v. Butler, 111 Ind. 578, 12 N. E. 518, LEADING ILLUSTRATIVE CASES. 54 Goldbaum v. Blum, 79 Tex. 638, 15 S. W. 564. 55 Crotty v. Union Mut. Life Ins. Co., 144 U. S. 621. bears the expense. In this case, to allow the debtor's estate to have the surplus is to give property to persons who would have difficulty in proving their moral right to it. It would be equally just to allow the insurer to retain it. 51. Same subject-Statutory exemption.-Very sweeping statutory provisions exist, in many states, either for the exemption of all beneficiaries of life insurance, or, at least, the wife and children of the insured. These statutes might suggest to an unscrupulous and insolvent person the desirability of investing all his belongings in a very short-term endowment policy in favor of his wife. Thus, in a few years, by the grace of his wife, he would be enabled to enjoy his belongings free from the pressure of his creditors. However, a Nebraska court has declared endowment insurance to be a loan rather than a case of insurance and regards the insurance in such a contract as a mere incident and insufficient to exempt the rights of the beneficiary from the claims of the husband's creditors.5 56 In another case, the proceeds of life insurance were exempted, by statute, from the debts of the decedent. In the insured's last illness, X nursed him. Later, Y buried him. It was held that Y's but not X's claim should be satisfied out of the insurance money. Y's claim for funeral expenses had never been a debt against the insured, but only against his estate.57 56 Tolcott v. Field, 34 Neb. 611, 52 N. W. 400. PART III THE SEVERAL FORMS OF INSURANCE CHAPTER IX. FIRE INSURANCE. 52. The fire insurance business.-Approximately nine-tenths of all the fire insurance business in the United States is in the hands of ordinary corporations or stock companies. Their combined assets amount to more than a half billion dollars. Two other forms of organization are known. There are over a thousand organizations doing business on the mutual basis; that is, without the intervention of stockholders and without any other liability upon which to rely except that of the organization's members, all of whom are insured in the "mutual." This form has been particularly successful in the case of the "factory mutuals," organized for the mutual protection of factory owners, and very active in fire protection. This form is also much used by farmers. The last form to be noticed is the "Lloyd's Association," a kind of partnership concern, named and modeled after the successful British organization. 53. Form of policy.-In most states the form in which a fire insurance policy shall be drawn is left to the agreement of the parties, subject only to minor regulations by statute. However, in about onethird of the states the legislature has prescribed a certain form, known as a standard form of policy, to which all fire insurance policies issued within the state must conform. These forms vary considerably. At the same time there are clauses and expressions which are about the same in most of them. The more important of these, as construed by the courts, will be considered in this chapter. 54. Effect of breach.-It is customary to provide that the entire policy shall be void if, for example, the insured is not the sole owner of the property insured, or if he allows benzine on the premises. Since the word "entire" is used it has been held that where a man insured, under the same policy, beds and furniture which he did own, and a piano which he did not own, he could not recover anything because he was not the sole owner of the property insured.59 If the term "void" is construed strictly in the insurer's favor, a man cannot recover his insurance if he has allowed benzine on the premises for a few minutes several years before the fire occurred, but not afterwards. Accordingly, many, though not all, courts have held that a temporary breach, as in the case assumed, merely suspends the insurance while the benzine is on the premises. 55. Location. The policy generally insures the 58 Connecticut, Iowa, Louisiana, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Dakota, West Virginia and Wisconsin. 59 McWilliams v. Cascade Fire & M. Ins. Co., 7 Wash. 48, 34 Pac. 140. property only while it is located and contained as described in the policy and not elsewhere. If this clause is to be construed literally and strictly, one could not recover his insurance on his clothes when described as located within a house, if they burned while drying on the clothes line in the back yard. There is a decision to this effect. Courts, however, have been more liberal, particularly when the words "and not elsewhere" are omitted, and hold, where the use of the goods is not customary without a temporary removal, that such removal does not relieve the company from liability, even if the goods are destroyed in their temporary resting place."1 56. Ownership and change of ownership. It is generally requisite that the interest of the insured be that of "sole and unconditional ownership," and if the subject of insurance be personal property, and be or become incumbered by a chattel mortgage, or if, with knowledge of the insured, foreclosure proceedings be commenced, or notice given of sale, by virtue of any mortgage or trust deed, the policy shall be or become void. The courts have been very liberal in regard to ownership on the part of the insured. A mere leasehold on the land on which the building insured is situated is insufficient because of an express provision in most policies. But if the layman, as distinguished from the professional lawyer, would regard the insured as the owner of the property and the loss by fire would fall on him, the courts are inclined 60 Leventhal v. Home Ins. Co., 66 N. Y. Supp. 502, 32 Misc. 685. 61 Niagara Fire Ins. Co. v. Elliott, 85 Va. 962, 9 S. E. 694. |