Sawyer v. Dodge County Mutual Insurance , 37 Wis. 503 ( 1875 )

RYAN, C. J.

The eminent gentleman who represented the respondent on the motion for rehearing and on the rehearing of this appeal, seems unreconciled to our construction of his client’s policy. Though the question was not left open on the rehearing, we have, in deference to his persistent dissent, again looked into the policy; and we do not see how we could have given it a different construction, without disregai’ding old rules of construction or inventing new ones for the exigencies of the case. And, after all, it seems to us that his complaint should go to his client rather than to the court, for the gist of it is more that the policy ought not to read as we read it, than that it does not. The policy defines its own limits, which we could not change because they are said to be inconvenient. If insurance companies would exercise like skill in the manuscript of their policies as — perhaps not always fairly (Ins. Co. v. Slaughter, 12 Wall., 404; Fuller v. Ins. Co., 36 Wis., 599)— in the printed conditions, they might avoid such occasions of scolding courts for reading their risks as they write them.

We ordered a rehearing of the appeal, in order to hear discussed at the bar a difficulty first suggested on the motion: that the policy, as we construe it, is a wager policy and void. We suppose that insurance companies have a right to make that objection to their policies, at the risk perhaps- — -if successful— of quo warranto. And we shall consider the proposition, without regard to its good faith. It is grave and difficult. As LyoN, J., said in grafting the rehearing: “ The practice of issuing policies of insurance for long time and upon property not in esse, has become very common; and our determination of this question may be far reaching in its results.”

The appellant is a farmer, cultivating his own land. After he took his policy, which is an open' one, he purchased in the same town, but not adjoining his former land, another small piece which he also cultivated, and on which he raised and stacked the grain lost by fire. And it is claimed, that because he did not own this land at the date of the policy, he had not insurable interest in the grain; and that the policy, applying to it, is gaming insurance and void. The question was argued with great learning and ability. It is not one of conflicting authorities. It turns rather on the proper application of admitted principles. The cases cited will appear in the report of the argument; and we propose to consider the principles and their application rather than the cases in detail.

A radical difficulty, perhaps, which has led to more or less confusion in distinguishing what are gaming policies, is that insurance is essentially a* wager; upheld for indemnity, avoided for gaming, bat always a wager; so plainly recognized in our law. R. S.,' cb. 169, secs. 16-18.

There bas long been an effort at distinction between wbat are called interest policies and wager policies, which has not always been very happy. For policies have been upheld which look like mere wagers; and policies have been held for wagers, which would go only to indemnify the assured. The rule of distinction was, perhaps, too arbitrary, and did not always operate justly. And it is, perhaps, to this cause, as well as to change in the usages of business, that later relaxation of older rules is to be attributed.

“ An interest policy is one which shows by its form that the assured has a real, substantial interest; in other words, that the contract of insurance, embodied by the policy, is a contract of indemnity, and not a wager. A wager policy is one which shows on the face of it that the contract it embodies is really not an insurance, but a wager; a pretended insurance founded on an ideal risk, where the assured has no interest in the thing insured.” Arn. Ins., 17.

In marine insurance, there was long disregard of the gaming character of the contract; and policies, interest or no interest, were tolerated. But in fire insurance, there was always a policy to limit the gaming character of the contract and to confine it to indemnity, by requiring an interest or property in the thing insured, at the time of insurance and at the time of loss. Sadlers’ Co. v. Badcock, 2 Atkyns, 554.

It will be perceived at once that this rule is not a very happy one for its object. For it avoids policies strictly for indemnity, when title happens to follow insurance in order of time ; and it sanctions insurance on interest in anything; soon held to include things in posse, mere expectancies, little distinguishable from pure wagers.

This rule has never been wholly abandoned. Indeed, it is still constantly asserted, while its application is often relaxed and sometimes evaded. The extent, variety and intricacy - of business into which insurance enters, in late times, has so greatly modified the convenience of the latter, that what is now insurable interest has became too vague and too subtle for definition by such jurists as Judge Story and Mr. Phillips, as cited by the respondent’s counsel. The truth is, that the present practice of insurance, to a great extent, has outgrown and is not consistent with the broad principle of property or interest in the thing insured at the time of insurance.

Whether the present scope of fire insurance tends to public good or evil, may be doubted. In Fuller v. Ins. Co., decided early in this term, we had occasion to remark that: “ It is little to say that the very general habit of insurance against fire has led to great carelessness. The destruction of property by fire and the consequent loss to the commonwealth have been probably increased largely by insurance.” But we have no power to reform it. We can only apply to it, as it is, as well as we can, the principles governing it which we find in the books.

Whether it might be wise or unwise to recur to the strict rule of property or interest in the thing insured at the time of insurance, need not be considered. The current of judicial decision has run too long and too strongly in favor of distinctions and evasions devised to accommodate modern usages of business, to leave that possible, as was frankly admitted by the learned counsel of the respondent.

And we are not willing, as we were invited, to apply the general principle arbitrarily to every policy, not taken out of it by some particular adjudication; blindly enforcing the rule and refusing to enforce it, in cases not distinguishable in principle. We must find, if we can, the grounds on which the exceptions rest, in order to determine whether the policy in this case be under the rule or within the exceptions.

We do not know where the rule and the reason of it are better stated than by Sewall, J., in Stetson v. Ins. Co., 4 Mass., 330: “ It is a maxim of public policy, important to good morals and for the prevention of frauds in contracts of this nature, that gaming insurances, insurances without interest, are unlawful and of no validity. It is incumbent, therefore, on a party claiming a loss upon a policy of insurance, to show interest in the subject of it; and his demand must appear to be for an indemnity, and not for a wager, become successful, as in this instance, by a public calamity.”

It may be worth notice, in passing, that in his statement of the reason of the rule, the learned judge rests it on the presence or absence of interest, not on the time of acquiring interest ; not that he did not understand the importance of time in the rule, but that it did not suggest itself to his mind in giving the logic of the rule.

And when we consider what is now held for insurable interest, we see at once how the practice of insurance upheld by the courts has outgrown the strictness of the rule of property or interest in the thing insured at the time of insurance, held in Sadlers' Co. v. Badcock, and the earlier cases. Says LAWRENCE, J., in Lucena v. Craufurd, 5 Bos. & Pull., 269 : “ Interest does not necessarily imply a right to the whole or a part of the thing, nor necessarily and exclusively that which may be the subject of privation, but the having some relation to or concern in the subject of the insurance.” Says Phillips, sec. 173 : “It is not requisite, however, that the thing to which the insurance relates, or the interest of the assured, should be a species of property, subject to possession or tradition, or that the interest should be that of absolute ownership, or that the subject should be such as to have a value or price, or be capable of being assigned.” Says Story, J., in Hancox v. Ins. Co., 3 Sumner, 132: “ I am not aware that any decision has been made, by which it has been established that an interest ceases to be insurable in the progress of a voyage, simply because it is subject to contingencies, or has not at the moment anything corporeal or tangible to which it is attached. What, indeed, upon such an interpretation, would become of insurance upon profits or commissions or freight, which are in the course of being earned? One difficulty of the argument is in likening an insurable interest to any other interest in property. The truth is that an insurable interest is sui generis, and peculiar in its texture and operation. It sometimes exists where there is not any present property or jus in re or jus adrern.”

When insurable interest is held not to imply right in the thing insured or jus in re or jus ad rem, to be sui geríeris and unlike any other interest in property, to be not necessarily of value or assignable, it needs little consideration to perceive that the latitude of interest emasculates the rule.

Still some of the conditions might be restricted to actual things, subsisting property; the insurable interest in posse, but the subject in esse. But that limit is also rejected. Says Judge Story, ubi supra: “ Inchoate rights founded on subsisting titles, are insurable.” Says Arnould, 280: “An expectancy, coupled with a present existing title to that out of which the expectancy arises, is an insurable interest.”

When it appears that the subject of insurance, once called the thing insured, may be inchoate rights, expectancies, incapable of possession or tradition, not corporeal or tangible, of no value, the question suggests itself, what does' the latitude of insurable interest and the latitude of the subject of insurance, leave of the rule of interest in the thing insured at the time of insurance, or of the reason of the rule? For it appears that interest in one thing in esse will "support insurance of another thing in posse, an expectancy from the thing in esse. There cannot be present title in nonentity. One thing may produce another; and the owner of the former become the owner of the latter, when produced and not before. Yet insurable interest, interest in the thing insured at the time of insurance, may be interest in posse, in a thing in posse, when the expectancy is founded on interest in another thing.

In this» state of the law, well might the supreme court of Massachusetts ■ exclaim, that the line where interest ends and expectation begins is almost shadowy. Putnam v. Ins. Co., 5 Metc., 386.

It would be waste of time to discuss tbe extent of this effectual evasion of tbe principle of Sadlers’ Co. v. Badcock and Stetson v. Ins. Co.

But so far, a subsisting interest of some kind, in something, is required; and tbe appellant could have valid insurance on bis expectancy of crop from land owned at tbe time of insurance, but not from land acquired pending the policy. It is easy to understand how insurance of his future crop, ungathered, un-grown, unsown, should be held a wager policy. But when the law has made his expectancy of crop insurable interest, it is more difficult to understand how the date of his title to the land from which the crop is to come can make his insurance more or less gaming. In the ordinary sense of gaming, it is in the chance, and the chance is in the crop. And when interest is made the test of wager policies, it is interest in the thing insured: interest in the crop,.which is purely speculative: equally speculative, whether title to the land come before or after policy issued, or come at all. For interest in the crop attaches only when the crop is raised, and attaches equally whenever and however the land is acquired from which it is raised. But be that as it may, if the relaxation of the rule stopped where we left it, the appellant's policy, as applicable to his loss, would be, within the authorities, a wager policy and void.

But great as is the latitude so far considered in the application of the rule of insurable.interest at the time of insurance, it is manifest that it still falls short of supporting large classes of policies in the present practice of insurance. The goods of merchants, manufacturers, warehousemen and the like, often insured against fire, are necessarily and constantly changing pending the policies upon them; and the interest of the assured in them accrues only upon purchase or possession. The insured have no title in the source from which the goods pro-eeed; not even a naked expectancy of the goods in specie, which may not be in esse at the date of insurance. ■ And the insurance, at its date, is of a naked probability, resting on no title or interest, direct or indirect, immediate or remote, inchoate or contingent. And such insurance would be clearly void under the general rule. May Ins., sec. 78.

And yet, notwithstanding the dictum, that “ the bare possibility that a right to property might hereafter arise cannot be considered an insurable interest” (McCarty v. Ins. Co., 17 La., O. S., 365), the convenience of business requires such insurance, and open policies of that character are constantly upheld to cover subsequent purchases of goods. Phill. Ins., § 491; Angell Ins., § 203; Lane v. Ins. Co., 12 Me., 44; Cushman v. Ins. Co., 34 id., 487; Hooper v. Ins. Co., 17 N. Y., 424; Hoffman v. Ins. Co., 32 id., 405; Wolfe v. Ins. Co., 39 id., 49; Bonner v. Ins. Co., 13 Wis., 677; Keeler v. Ins. Co., 16 id., 523; Pupke v. Ins. Co., 17 id., 378; Fitzsimmons v. Ins. Co., 18 id., 234.

It is not a little remarkable that this great change in the law of insurance seems to have come about with little struggle or attention. Courts seem to have fallen in, without hesitation, with thé changed necessities of trade, and took little trouble to discuss the grounds of so great a departure from the old rule. A weak attempt was sometimes made to reconcile the rule and the exception, by the suggestion that goods added to a stock are proceeds of goods sold from it. We take it that this is not always true in fact; and as it is not required to be pleaded or proved, the change of rule cannot rest on it The cases are a departure from the old rule, forced upon the courts by the changing usages of life, and for which the subtle evasions of the rule in previous adjudications had well prepared the way.

These cases wholly dispense with insurable interest in the goods insured at the time of insurance, and plainly stand beyond “ the very borders of the line, which may be deemed almost shadowy, where interest ends and expectation begins,” fulfilling tbe foreboding that, so far and in that sense of wager policies, “ tbe difference between wager policies and those coupled with an interest must cease.” Putnam v. Ins. Co., supra. For tbe same thing may come successively under several contemporaneous policies, wholly independent of interest at the time of insurance. Wheat, for example, may be covered by tbe insurance of the farmer who raises it, of tbe produce man who buys it, of tbe miller who grinds it, of tbe merchant who sends the flour to market, of tbe dealer who retails it, and of tbe consumer till be eats it; and all their policies may precede tbe sowing of tbe crop.

This class of cases proceeds, perhaps, on the authority of Rhind v. Wilkinson, 2 Taunt., 237, followed in this country by such cases as Haven v. Gray, 12 Mass., 71; Whitney v. Ins. Co., 3 Cowen, 210; Dow v. Ins. Co., 1 Hall, 166. The rule in Rhind v. Wilkinson goes upon what is there stated to be every day’s practice, to insure goods on a return voyage long before the goods are bought, and is, that it is enough if the interest of the assured accrue previous to the commencement of the risk. It is easy to apply this rule to new goods purchased by a dealer, in his course of business; the risk not attaching to the goods until they are brought under the policy.

Be that as it may, Rhind v. Wilkinson and the cases following it substitute interest at the time of the commencement of the risk for interest at the time of insurance. It is said that interest at a day previous to the commencement of the risk is immaterial. That was marine insurance. There the risk began with the voyage. In fire insurance, on movable goods, the risk begins when the goods are brought within the terms of the policy. And perhaps the cases upon fire policies of merchants, etc., go. no farther in principle, though they seem to rest on interest at the time of loss.

And whatever evils may possibly arise from these relaxations of the old rule, it is not seen how they admit what are called -wager policies as distinguished from interest policies; for the policies which they uphold go strictly to indemnity. And it may be doubted, after all, whether interest at the time of loss, without interest at the time of insurance, may not be as good a protection against gaming policies as both were under the old rule.

In the present case, the policy is for five years, covering grain in stacks and granary, for five successive crops. It is conceded, under the authorities cited, that he had insurable interest in the five years expectancy of grain in posse, to be raised on the land which he owned at the time of insurance; but it is claimed that so far as the policy covers grain °to be raised from land which he did not then own, it is pro tanto wager insurance, void as against public policy. It is easy to understand the distinction between expectancy founded on title and expectancy not founded on title; but it is more difficult to appreciate how the two relations of the policy, to land owned and land not owned at its date, differently affect public policy, or to understand how such an insurance is distinguishable in principle from a merchant’s or manufacturer’s.

Insurance on the stocks of merchants, mechanics and tbe like, is insurance on the material of their industry, and may in some sort be regarded as insurance on the industry itself. In that light, interest in the industry might be taken as insurable interest at the time of insurance, in the expectancy of the material, although actual interest in that coiné after. Whether that be so or not, we find it difficult to understand how or why the law of insurance should favor one industry more than another. It is a merchant’s business to buy and sell goods ; a manufacturer’s, to make fabrics from raw material; a farmer’s, to raise produce from the earth. The merchant may have valid insurance covering all goods he may have on hand from time to time during the life of his policy; the manufacturer, covering all the raw material he may have on hand and all the fabrics he may make from time to time during the life of his policy. These do not rest on interest in the goods at the time of insur-anee; but perhaps on the course of business. The merchant’s goods may not yet be manufactured, and the manufacturer’s raw material may be growing in forests or hidden in the bowels of mines to which he is a stranger. These policies being upheld, on what principle is an agriculturist excluded from the same protection of his industry, in his course of business ; from valid insurance on the grain which he may raise and have on hand from time to time during the life of his policy, without regard to his title at the time of insurance ? On what principle is his insurance on his productions to be limited by his title at time of insurance, and not the manufacturer’s or mechanic’s? We confess that we are unable to perceive how or why a policy in the one case should be held a wager policy, forbidden by law, and policies in the others upheld as proceeding on insurable interest.

There may be, and presumably are, mechanics and manufacturers without other capital than their skill. So there may be, and presumably are, farmers not owning land. On what principle can the former be upheld in insuring in advance, by open policies, the products of their industry, and not the latter ?

It is noticeable in the policy before us, that, contrary to common usage, there is no question asked or warranty given of title. Certainly, so far as it relates to grain, the insurance does not purport to rest on the appellant’s title to realty. We cannot hold it limited by the extrinsic fact of what realty the appellant was seized or not seized at the date of the policy. And we see no reason why it should not operate as valid insurance for indemnity of grain, the product of his industry, in the course of his business as a farmer. We must, in principle, uphold such policies, if we are to continue to uphold those of merchants and manufacturers. The truth is that the authorities have made the exceptions, practically, broader than the rule; and we are disposed to hold fire insurances on time, by open policies, of the future material production of the assured, in the course of his business, in his trade or calling, within ■ tbe exceptions, and valid contracts for indemnity, not wager policies.

By the Court. — The judgment of the court below is reversed, and the cause remanded for a new trial.