dated in the latter state and made payable there and the loan was incomplete until approved and accepted by insurer at its home. office, the collateral note is a contract of the state where it was ac cepted and approved, and the parties rights are to be determined by reference thereto where the law of the foreign state in such matters is before the court, although in the absence of proof it will be presumed to be the same as the law of the former.15 Where a note secured by a policy on the life of its maker was signed in one state but was sent together with the policy to the maker's wife in another state to be endorsed by her, which was done and the papers returned by mail, and no place of payment was fixed in the note and the wife had no personal transactions with the payee, it was decided that the wife's contract was that of the latter state.16 The validity of a capital stock note, given to a mutual fire insurance company, is determined by the laws of the state wherein it is executed and made payable.17

§ 232. Lex loci: assignment.—It is held that the validity of an assignment of a policy of insurance is governed by the law of the place of contract.18 In this connection it may be stated that the contract between assured and the insurer, and an assignment thereof constitute separate distinct contracts.19 It is also held that even though it is stipulated that a certain state shall be the place of contract, still the validity of an assignment made in another state is governed by the laws of the latter state.20 But it is decided that where a policy was issued under the laws of New York relating to insurances on lives for the benefit of married women, the contract being made in that state and assigned by the wife to secure her husband's debt, and the assignment was executed in New York and sent by mail to Maryland, to a creditor there, the validity of the assignment must be determined by the laws of New York, the

15 Tennent v. Union Central Life Ins. Co. 133 Mo. App. 345, 112 S. W. 754.

16 Troendle v. Higleyman (1908) Ky., 113 S. W. 812.

17 Equitable Mutual Fire Ins. Corp's Receiver v. Murray, 131 Ky. 740, 115 S. W. 816.

858; 23 L.R.A. (N.S.) 978; and 52 L.R.A. (N.S.) 281, on conflict of laws as to assignment of policy.

19 Succession of Miller v. Manhattan Life Ins. Co. 110 La. 652, 34 So. 723, 32 Ins. L. J. 865; Manhattan Life Ins. Co. v. Cohen (1911) Tex. Civ. App. —, 139 S. W. 51, 40 Ins. L. J. 1685. See §§ 2304, 2308 herein.

--

18 Pratt v. Globe Mut. Life Ins. Co. 3 Tenn. Cas. 174, 17 S. W. 352; Succession of Miller v. Manhattan 20 Russell v. Grigsby, 168 Fed. 577, Life Ins. Co. 110 La. 652, 34 So. 723, 94 C. C. A. 61, case rev'd Grigsby v. 32 Ins. L. J. 865; Manhattan Life Russell, 222 U. S. 149, 56 L. ed. 133, Ins. Co. v. Cohen (1911) Tex. 32 Sup. Ct. 58, 36 L.R.A. (N.S.) 642, Civ. App. —, 139 S. W. 51, 40 Ins. 41 Ins. L. 301, upon point of insurL. J. 1685. See notes in 63 L.R.A. able interest.

action being brought there. The laws of Maryland govern the rights of parties in that state under an assignment of a life policy issued by a New York corporation to a citizen of Maryland on an application made to an agent of the company in Baltimore. So where a policy of insurance was applied for in Maryland by a resident thereof, and the corporation issuing the policy was a resident of another state, and an assignment was subsequently made by a citizen of the first-named state, any controversy afterward arising between the assignee and the heirs or personal representatives of the assignor will be controlled by the laws of the state in which the policy was applied for, and which the assignee and the representatives of the assignor are residents, rather than by the laws of the state whose corporation issued the policy.2

§ 232a. Lex loci: substituted policy.-If a substituted policy is issued by a society of one state to a citizen of another and the change is made at the home office of the society, the contract is governed by the laws of the state where such change is made, and is not affected by the laws of the foreign state subsequently enacted even though the insurer has become amenable thereto.3

1 Barry v. Equitable Life Assur. 82 Fed. 508, 27 C. C. A. 212, 54 U. Soc. 59 N. Y. 587. S. App. 290.

2 Robinson v. Hurst, 78 Md. 59, 20 L.R.A. 761, 44 Am. St. Rep. 266, 26 Atl. 956.

Assignment by wife in State foreign to that in which insurer was organized and conducted business. See Mutual Reserve Fund Life 3 Belknap v. Johnson, 114 Iowa, Assoc. v. Cleveland Woolen Mills, 265, 86 N. W. 267.

624

CHAPTER IX.

CONSTRUCTION-USAGE.

§ 237. Usage generally.

§ 238. Usage part of the common law.

§ 239. Presumption as to knowledge of usage.

§ 240. Usage must be general.

§ 241. Usage must be well established and notorious.

§ 242. Usage may be of recent origin.

§ 243. Usage must be reasonable.

§ 244. Usage must be uniform.

§ 245. Parties may by express contract include or waive usage.

§ 246. Usage admissible where contract ambiguous or obscure.

§ 247. Usage inadmissible to contradict or substantially vary the plain terms of the policy.

§ 248. Same subject: cases and authorities.

§ 249. Whether usage controls the plain and legal import of words of the policy.

§ 250. Same subject: opinions and cases.

§ 251. Same subject: conclusion.

§ 252. Usage cannot legalize an illegal act.

§ 253. General usage may be controlled by evidence of a different usage. § 254. Usage controls implied limitations.

§ 255. Usage of another similar trade or place or of another company.

§ 256. Evidence of usage: liberal construction.

§ 257. What is sufficient evidence of usage.

§ 258. Evidence of usage, when admissible: cases.

§ 259. Evidence of usage, when inadmissible: cases.

§ 237. Usage generally.-Evidence of general usage was formerly admitted to determine the construction of policies of insurance for the reason that they were so loosely drawn, and because the contract depended so greatly upon commercial usage, and there were so few adjudications or rules of positive law to aid in its interpretation. So Lord Mansfield had recourse in a large measure to the usage of merchants and commercial law in ascertaining those principles which underlie his decisions in cases of insurance, and which have now to so large an extent become of controlling force 625

Joyce Ins. Vol. I.-40.

6

in the construction of insurance contracts. Buller, J., in Brough v. Whitmore, says that insurance "is founded on usage, and must be governed and construed by usage," and Mr. Duer asserts that the true purpose of a usage is "to discover in order to effectuate the intentions of the parties," and usage is received to ascertain the sense of the parties with reference to such usage.7

10

§ 238. Usage part of the common law.-In England, where so few positive laws have been enacted, and where the first act concerning insurances was not passed until 1601,8 the practice of insuring was dependent upon the common law, of which the law of merchants was considered a branch, and also upon the general principles and usages of trade. It is declared in an English case that "the custom of merchants or law of merchants is the law of the kingdom, and is part of the common law." These customs acquire the force of law, because as they must be ancient, uniform, and reasonable, they must have been generally received, known, and approved.11

See § I., preliminary chapter. Remarks of Lord Kenyon in Brough v. Whitmore, 4 Term Rep. 208, that Lombard St. had given a construction to policies of insurance, and that the practice of merchants and underwriters had rendered them intelligible.

54 Term Rep. 210.

61 Duer on Ins. (ed. 1845) 253. 7 Renner v. Bank of Columbia, 9 Wheat. (22 U. S.) 581, 6 L. ed. 166, per the court. See Destrehan v. Louisiana Cypress Lumber Co. 45 La. Ann. 920, 13 So. 230, 40 Am. St. Rep. 265.

When custom or usage is presumed to enter into intention of parties. See London Assur. Corp. v. Thompson, 170 N. Y. 94, 62 N. E. 1066, 31 Ins. L. J. 351, 354.

man, 20 Oreg. 108, 10 L.R.A. 785, 25 Pac. 366.

Distinction between custom and usage, see Byrd v. Beall, 150 Ala. 122, 124 Am. St. Rep. 60, 43 So. 749; Wilmington City Ry. Co. v. White, 6 Pen. (Del.) 363, 66 Atl. 1009. Examine Kent v. Town of Patterson, 141 N. Y. Supp. 932, 80 Misc. 560.

843 Eliz. c. 12.

See § I., preliminary chapter; 1 Marshall on Ins. (ed. 1810) 21.

10 Edie v. East India Co. 2 Burr. 1226, 4 Eng. Rul. Cas. 344.

11 McGregor v. Insurance Co. of Pa. 1 Wash. (U. S. C. C.) 39, Fed. Cas. No. 8811, per Washington, J. See § 1 herein. "The whole business of insurance and all the instruments by which it is carried on, and all their language and provisions, rest on the Usage as part of contract. See usage of merchants; and nearly all Union Ins. Co. v. American Fire Ins. the law of insurance is but the usage Co. 107 Cal. 327, 48 Am. St. Rep. of merchants, adopted and sane140, 40 Pac. 431, 28 L.R.A. 692; tioned by courts." 1 Parsons on MaConnelly v. Masonic Mutual Benefit rine Ins. (ed. 1868) 82. "With reAssoc. 58 Conn. 552, 9 L.R.A. 428, spect to usage, it is a sort of natural 20 Atl. 671, 18 Am. St. Rep. 296n; law formed out of our habits, our Savage v. Salem Mills Co. 48 Oreg. interests, and the universal consent 1, 10 Am. & Eng. Ann. Cas. 1065, of all mankind. In all maritime mat85 Pac. 69; MacCulsky v. Kloster- ters it is regarded as the surest in

§ 239. Presumption as to knowledge of usage.-Underwriters are bound to inform themselves and to know the general usages of the trade in which they insure,12 for it is presumed that the custom of merchants is known to them,13 and the insurer and insured must be supposed to be fully apprised and conusant of a notorious usage, as to a course of a voyage, and to know the nature and peculiar circumstances of that branch of trade to which the policy relates, and that whether it is recently established or not.14 The insurers are also presumed to know the customs of the place where they do business, and are assumed in law to know them.15 It is also presumed that a person dealing in a particular market has knowledge of its customs in relation to his transactions therein.16 So they are presumed to be acquainted with the nature and peculiar circumstances of the branch of trade to which the risk relates.17 So in a policy

terpreter of the law. In ques- Ga. 408, 12 S. E. 678, 22 Am. St. tions of insurance established usages Rep. 471. must in all cases be adhered to, and in doubtful cases they are the safest guide one can follow." 1 Marshall on Ins. (ed. 1810) 707a.

12 Noble v. Kennoway, 2 Doug. pt. 2, 3d ed. 513, per Lord Mansfield.

See also the following cases: Maryland.-Maryland & Phoenix Ins. Co. v. Bathhurst, 5 Gill & J. (Md.) 159.

New York.-London Assur. Corp. v. Thompson, 170 N. Y. 94, 62 N. E. 1066, 31 Ins. L. J. 351, 354; Wall v. Howard Ins. Co. 14 Barb. (N. Y.) 383; Cook v. Loew, 69 N. Y. Supp. 614, 34 Misc. 276.

Pennsylvania.-Norris v. Insurance Co. of North America, 3 Yeates (Pa.) 84, 2 Am. Dec. 360.

South Carolina.-Cox, Maitland & Co. v. Charleston Fire & Marine Ins. Co. 3 Rich. (S. C.) 331, 45 Am. Dec. 771.

England. Salvador v. Hopkins, 3 Burr, 1707, 1712, 1714; Vallance v. Dewar, 1 Camp. 503.

Illinois.-Union Stock Yards & Transit Co. v. Mallory, Son & Zimmerman Co. 157 Ill. 554, 48 Am. St. Rep. 341, 41 N. E. 888; First National Bank v. Fiske, 133 Pa. St. 241, 7 L.R.A. 209, 19 Am. St. Rep. 635, 19 Atl. 554.

Minnesota.-Baxter v. Sherman, 73 Minn. 434, 72 Am. St. Rep. 631, 76 N. W. 211.

Virginia.-Bowles v. Rice, 107 Va. 51, 57 S. E. 575.

13

McGregor v. Insurance Co. 1 Wash. (C. C.) 39, Fed. Cas. No. 8811, per Washington, J. See, generally, Austrian v. Springer, 34 Mich. 343, 34 Am. St. Rep. 350.

14 Salvador v. Hopkins, 3 Burr. 1707, 1714; Wadsworth v. Pacific Ins. Co. 4 Wend. (N. Y.) 33. 15 Hartshorne V. Union Ins. Co. 36 N. Y. 172.

Mutual

16 William R. Smith & Son V. Bloom, 159 Iowa, 592, 141 N. W. 32, citing Cotham v. Ellis, 107 Ill. 413; Bailey v. Bensley, 87 Ill. 556; Long v. Armsley Co. 43 Mo. App. 25, Jones on Ev. (pocket ed.) sec. 57.

See 1 Duer on Ins. (ed. 1845) 196. As to general rule, see also: United States.-New Roads Oil- 17 Grant v. Lexington Fire Life & mill & Manufacturing Co. v. Kline, Marine Ins. Co. 5 Ind. 23, 61 Am. Wilson & Co. 154 Fed. 296, 83 C. C. Dec. 74. See also Capital Fire Ins. A. 1. Co. v. Kaufman, 91 Ark. 310, 121 S. Georgia. Horan v. Strachan, 86 W. 289, 38 Ins. L. J. 1058.