the New York standard policy provides as follows: "This policy shall be cancelled at any time at the request of the insured; or by the company by giving five days' notice of such cancellation. If this policy shall be cancelled as hereinbefore provided, or become void or cease, the premium having been actually paid, the unearned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate; except that when this policy is cancelled by this company by giving notice, it shall retain only the pro rata premium."

The right of cancellation has given rise to much litigation. It is frequently the case that either the insured or the insurer desires to cancel the policy. On the one hand, the insured may become doubtful as to the solvency of his insurer, or he may desire to raise money by mortgaging his property to someone who will insist that the property be insured with a certain company with which he is not then insured, or the insured may sell his property and find that the easiest way to get rid of his insurance is to cancel his policy and permit the purchaser to obtain a new one.

On the other hand, the insurer may feel that the decreased water supply of the town in which the property is situated is insufficient to justify the low rate in the policy, or information may come to light as to the bad character of the insured. The small amount returned in such cases bears but little resemblance to the surrender value of a life insurance policy. The latter sum frequently exceeds half of the total amount payable in case of death. Unless

the right to cancel is reserved in the policy, it does not exist. But even though provision for cancellation is made, it probably does not prevent the parties, by mutual consent, from agreeing upon cancellation in some other mode than that which has been specified in the policy.8

9

When the right to cancel is provided for, the right is absolute. The adverse party cannot question the motives of the one who demands cancellation. However, if, by mistake, the cancellation is made after the loss occurs and in ignorance of the loss, the cancellation will be rescinded in equity. Moreover, cancellation must be demanded in good faith. This is illustrated by an Illinois case, in which it was held that an insurer had no right to cancel a policy upon learning that a forest fire was approaching the property insured.10

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Form and sufficiency of notice. It is not required that the notice of cancellation be reduced to writing. Notice over the telephone is sufficient. The notice must be clear and unequivocal. A mere expression of a desire to cancel is insufficient. No cancellation of part only of the contract can be made. This is probably not a surprise to the student who has already been impressed with the rigid common law rules against splitting up a cause of action. Thus where the insurer had insured for $10,000 and gave notice of cancellation as to half of the insurance,

7 Rothschild v. Amer. Cent. Ins. Co., 70 Mo. 41, 41 Am. Rep. 303.

8 Boland v. Whitman, 33 Ind. 64.

• Duncan v. N. Y. Mut. Ins. Co., 18 N. Y. Supp. 863.

10 Home Ins. Co. v. Heck, 65 Ill. 111.

11 Manchester Fire Assur. Co. v. Ins. Co. of Ill., 91 Ill. App. 609.

the notice was held to be of no consequence.12 A mere mailing of the notice is not sufficient.13 It must be received.

Repayment. If the insurer gives notice of cancellation, when must the return of unearned premium be made? Must it be returned when the notice is given, or, as the policy provides, "on surrender of this policy"? Though there is a conflict of authority, it is interesting to note that the New York Court of Appeals, in a four to two decision, held that it is insufficient for the insurer to give notice that the unearned premium will be returned and then to hold the amount subject to the call of the insured, but that the premium must be returned as a condition of cancelling the policy.14

Though it may be difficult to defend this decision, in view of the express provision of the policy, it is well to bear in mind that many a person whose home is insured, is doing business on an extremely narrow margin of capital, and that he may not be able to get other insurance until the premium is actually in his hand. However, this is rather an argument in favor of a change by the legislature of the standard form, than a reason for the construction adopted in the Tisdell case.

Surrender of the policy. By the express provision in the policy, the insured apparently has no right to demand the return of unearned premium until he surrenders the policy. What will he do if he has lost it?

12 Van Tassel v. Greenwich Ins. Co., 151 N. Y. 130, 45 N. E. 365.

13 Crown Point Iron Co. v. Aetna Ins. Co., 127 N. Y. 608, 28 N. E. 653. 14 Tisdell v. N. H. Fire Ins. Co., 155 N. Y. 163, 40 L. R. A. 765.

It must be noticed that the cancellation may be complete before the right to demand the return of unearned premium arises. No doubt the cancellation may be effective even though the return of unearned premium is not even demanded. This question would be of great importance if other insurance is obtained, subject to the condition that it shall be void, if the insured has insurance in force at the time the second is effected. If the policy is lost, unearned premium might be recovered in proceedings analogous to those which may be resorted to when a negotiable instrument or similar papers have disappeared. In all such cases, no doubt, the amount of premium which must be returned depends on the time of cancellation, not on the return of the policy.

73. Measure of damages. In addition to the various principles already noted in reference to the limits of recovery against the insurer,15 the following must be observed:

Though the appended rule doubtless applies in the absence of any express provision in the policy, the New York standard policy provides that the company "shall not be liable beyond the actual cash value of the property at the time any loss or damage occurs."

The policy then provides for an estimate of loss by appraisers. The nature and effect of provisions in regard to appraisement is a subject of considerable intricacy. All that can be given here is a key to the problem. If the appraisal is provided for merely to ascertain the amount of the loss, or is made a condi

tion precedent to any liability on the part of the insurer, it is valid and enforcible. If, however, it is agreed that the appraisers are to determine whether or not the insurer is liable, it is unenforcible, because it is an attempt to oust the jurisdiction of the court. In the absence of a valued policy law, to be noted hereafter, the policy fixes the maximum but not the minimum recovery against the insurer. In theory, the insurer may show that the property was worthless when the fire occurred and thus entirely escape liability, though the insured cannot recover more than the amount stated in the policy.

In order to discourage insurance companies from contesting the rights of insured persons too frequently, certain state legislatures allow the insured, if a successful litigant, to recover his attorney's fees and a percentage of the amount of the policy in addition to the full amount of the policy.16/

74. Same subject-Option to rebuild.-The New York standard policy provides that it shall be optional with the insurer "to take all, or any part, of the articles at such ascertained or appraised value, and also to repair, rebuild, or replace the property lost or damaged with other of like kind or quality within a reasonable time on giving notice, within thirty days after the receipt of the proof, herein required, of its intention so to do."

The essential purpose of this provision must be explained. No doubt, it has frequently happened that appraisers have estimated a loss at a figure so high as to be out of all proportion to the value of the

16 Farmers' & Merchants' Ins. Co. v. Dobney, 189 U. S. 301, 47 L. Ed. 821.