for the breach of contract occasioned thereby though the conductor called upon to correct the mistake was not the one who had made it.

The court, in expressing its opinion on this question, said: "But outside of all authority, it seems to us that in accordance with the general principles of law the appellant should recover. It is too plain for argument that only the right to sue for the recovery of the fare or a portion of the fare received by the company will be totally inadequate, and, through the plain, everyday law governing agency, the company is responsible for the acts of its agent and for his mistakes. This mistake it was the duty of the company to correct. It must necessarily correct it through its agents. It makes no difference, in reason, that the agent who was called upon to correct the mistake was another and different agent from the one who made the mistake. They were both agents of the company, and the act of the first conductor was in effect the act of the second conductor, because the acts of both were the acts of the company; the company having, for its own convenience, intrusted its business to two agents instead of one. The contract was made when the passenger paid the fare, and it was a contract not with any particular agent of the company, but with the company through its agents. The first conductor, who made the mistake, was not the agent of the passenger, but was the agent of the company, and his mistake was therefore the mistake of the company. If any other rule prevailed, the result would be that the company would be allowed to deprive the passenger of part of the benefit of his contract on account of the mistake made by the company, and for which he was in no wise to blame, for he had a right to assume that the conductor furnished him with the transportation for which he asked and for which he paid; it being absolutely impracticable for passengers to make technical examination of the transfer slips which they receive. And he ought to have redress for the company's violation of the obligation which it

assumed."

There is an irreconcilable conflict of authority on this particular question, but the latest and best reasoned cases support the position taken by the Washington case: Hafford v. Railroad Co., 64 Mich. 631, 31 N. W. Rep. 544, 8 Am. St. Rep. 859; Railway Co. v. Copeland (Tex. Civ. App.), 42 S. W. Rep. 239; O'Rourke v. Railway Co. (Tenn.), 52 S. W. Rep. 872, 46 L. R. A. 614, 76 Am. St. Rep. 639. In the last case cited it was held that a passenger who was ejected from a street car to which he had transferred from another car, because his transfer checks were improperly punched by the conductor of the first car, can recover therefor, where, on the refusal of the second conductor to accept the transfer checks, and before he was ejected, he made a statement to the conductor showing that the fault in the tickets was due to the negligence of the first conductor. In this case the authorities are collated on both

sides of the proposition, a great majority being cited in favor of sustaining the right of recovery; and the court, in the course of its remarks, very pertinently said: "We concur in the latter view, and hold that a person who makes a valid contract is entitled to passage according to its terms, though the face of the ticket furnished him may not in any true sense express the contract. It is the contract and not the ticket, that gives the right to transportation. The ticket is but an evidence of the contract, made out and furnished by the carrier; and, if it fail to disclose the true contract, the fault is with the carrier, and it is reponsible for the natural consequences of the variance."

Insurance against loss resulting from injury to property is a contract of indemnity. There can be no indemnity without first a loss, and a loss implies necessarily an interest. A policy without interest is, therefore, not an insurance, but a wager. The amount of recovery under the insurance contract is, from the very nature of the contract, limited to the interest of the insured in the subject-matter of the insurance, for the object of insurance is not to make a positive gain, but to avert a possible loss, to the insured. Public policy forbids that one should have a greater interest in negligently or criminally destroying property than in preserving it.

ance.

By the early common law, wager policies were forbidden in life, fire and marine insurBut subsequently to the Revolution of 1688, a line of English decisions grew up sustaining life and marine policies, even though merely wagers. The law continued in this unsatisfactory state until the year 1746, when Parliament passed an act,1 entitled, "an act to regulate insurance on ships belonging to the subjects of Great Britian and on merchandise or effects laden thereon." From the calamities so graphically detailed in the preamble, such an act was certainly opportune. But, as the title indicates, the act was limited to marine policies. As to life policies, the law continued unchanged until, in 1774, by an act of Parliament, such policies were declared void in the absence of an insurable interest.

119 Geo. 2, Ch. 37.

2 14 Geo. 3, Ch. 48.

The principle of these cases was not extended to fire insurance, and, as to that class of contracts, the common law has always required that the insured shall have an insurable interest in the subject-matter of the contract; and such is the law in this country independently of statutory enactments to that

effect.

What constitutes an insurable interest has been the subject of much learned judicial discussion. In some of the earlier cases it Iwas held that one could have an insurable interest in that property only to which he had a legal or an equitable title. By the weight of modern authority, however, the requirement of an insurable interest is satisfied when the interest of the assured, in the subjectmatter of the insurance, is such that any damage to such property will directly affect the pecuniary interest of the assured. If, by the loss, the holder of the interest is deprived of the possession, enjoyment or profits of the property, or a security, or a lien, or other certain benefits growing out of it, or depending on it, such an interest is insurable.1

3 Lynch v. Dalzell, 3 Bro. P. C. 497; Sadler's Company v. Babcock, 2 Atk. 554.

41 Biddle on Insurance, sec. 156: It is difficult to define accurately in what an insurable interest consists. The insured need not be interested in the whole of the property insured; nor is it necessary that he have a legal interest, but an equitable interest is sufficient. The title of the insured may be defective, or even bad, provided he has possession and use. Nor need the title be even a strictly valid equitable title or interest, but it is sufficient that the insured have a direct pecuniary interest in its preservation. But it must not be understood that a bare possibility that a right to property might thereafter arise would be sufficient to give an insurable interest. 1 Parsons on Insurance, p. 161: The question then occurs. What is the interest in the property which is the subject-matter of the insurance, which shall make the contract valid? We think the best definition to be, any such interest as shall make the loss of that property a pecuniary damage to the insured. Richards on Insurance, sec. 26: Every interest in property or in relation thereto, or liability in respect thereof, of such a nature that a contemplated peril might directly damnify the insured, is an insurable interest. 1 Phillips on Insurance, sec. 175: In order to constitute an insurable interest against any peril, or render a subject insurable against any peril, it must be such an interest or subject that the peril may have direct effect npon it, instead of a remote, circuitous, consequential effect. That is to say, the interest must be a direct one, in reference to the perils insured against. Ostrander on Fire Insurance (2d Ed.), sec. 85: Any one may insure who has such interest in, or such relations to, the property that its destruction by fire will occasion him loss. 1 May on Insurance, sec. 80: Whoever may fairly be said to have a reasonable expectation of deriving pecuniary advantage from the preser

Whether the interest of a stockholder in the property of a corporation is insurable, seems to have arisen in none of the early cases, due perhaps to the infrequency of private corporations organized, in the earlier history of the law, for purposes of pecuniary profit.

The first judicial expression that I have been able to find (but that was only a dictum), is in the case of Philips, Beckel & Co. v. The Knox County Mutual Insurance Co.,5 20 Ohio, 174 (1851). In that case, certain stockholders had insured the corporate property, but in their application had represented that the fee-simple thereof was in themselves. In an action to recover on the policy, the real question presented and decided was, whether there was a breach of warranty. The court held that there was, and gave judgment for the defendant. Hitchcock, C. J., in concluding his opinion, said: "In fact, these plaintiffs had no insurable interest in this property whatever. The fee was in another person-a corporation."

But

In Patterson v. Harris, 1 Best & Smith, 336 (1861), an English case, the plaintiff was the Owner of one share in the Atlantic

vation of the subject-matter of insurance, whether that advantage inures to him personally or as the representative of the rights or interests of another, has an insurable interest. Kerr on Insurance, sec. 122: Any one has an insurable interest in property when he is so situated in respect to it, or has such a relation to, or concern in it, or liability in connection with it, that he is directly and pecuniarly interested in, and benefited by, its preservation, and would be directly and pecuniarly prejudiced and damaged in respect to it by the happening or occurrence of the loss, damage, peril or event insured against. Elliott on Insurance, sec. 42: Every interest in property, or in relation thereto, or liability in respect thereof, of such a nature that a contemplated peril may directly damnify the insured is an insurable interest. 2 Joyce on Insurance, sec. 887: An insurable interest in property is any right, benefit, or advantage arising out of, or dependent thereon, or any liability in respect thereof, or any relation to, or concern therein, of such a nature that it might be so affected by the contemplated peril as to directly damnify the insured. 1 Wood on Insurance (2d Ed.), sec. 263: The contract being one of indemnity, it follows, as a matter of course, that the person insured must have an interest in the property, and be so situated in reference to it, that an injury thereto, or its destruction, would result in pecuniary loss to him. An immediate pecuniary interest need not exist, it is sufficient if there is a reasonable expectation that the assured will derive a pecuniary advantage therefrom.

Same case reported in 36 L. J. Exch. 78, 16 L. T 669, 15 W. R. 435, 12 Eng. Rul. Cas. 299.

Telegraph Company. To protect himself from any damage resulting from the loss of, or injury to, the Atlantic cable, which the company purposed to lay, he procured a policy of insurance from the defendant. The project failed because of the improper insulation of the wire, and an action was brought on the policy, the plaintiff's only interest being that he was a shareholder in the company. Chief Justice Cockburn, in the course of his opinion, observed that, "This was an action on a policy of insurance of a novel and somewhat remarkable character." He did not discuss whether the plaintiff's interest was insurable, but evidently the opinion proceeded upon the theory that it was.

Wilson v. Jones, L. R. 1 Exch. 193, L. R. 2 Exch. 139 (1867), involved a similar state of facts. There the plaintiff, who was the owner of twenty shares of stock in the Atlantic Telegraph Company, a joint stock company, caused himself to be insured with the defendant against the risk of loss by certain perils in the laying of the cable by the Great Eastern between Ireland and Newfoundland, "the risk to commence at the laying of the cable on board the vessel, and to continue until the cable be laid down in one continuous length between the points named, and until one hundred words shall have been transmitted from Ireland to Newfoundland and vice versa." The Great Eastern proceeded proceeded upon her trip from Valentia, Ireland, but the vessel finally returned to port without having completed the laying of the cable, the failure of the enterprise resulting in a complete loss to the invest

ors.

The court, in an action on the policy, construed the insurance to be, not upon the cable, but upon the plaintiff's interest in the adventure. Willes, J., said: "It was an enterprise involving great risk and uncertainty, and the value of the shares in the company depended upon its success, and were affected by the same risk. The plaintiff had shares in the company; and it is material to observe the character of his interest depending upon his ownership of these shares. Without referring further to authority, or reasoning over again what has been decided by the highest authority, it may be stated that the plaintiff had, in respect of his shares, no direct interest in the cable. As a shareholder he had an interest in the profits to be

6

made by the concern, but he had none in the property of the concern itself." In his concurring opinion, Blackburn, J., said: “As to the argument that this policy would, on the plaintiff's construction, be a wager, I apprehend that the distinction between a policy and a wager is this: a policy is, properly speaking, a contract to idemnify the insured in respect of some interest which he has against the perils which he contemplates it will be liable to; and I know no better definition of an interest in an event than that indicated by Lawrence, J., in Barclay v. Cousins, and more fully stated by him in Lucena v. Craufurd, that if the event happens, the party will gain an advantage, if it is frustrated, he will suffer a loss. Now, we must see whether the plaintiff was in this position. He was interested in a company which was about to lay down a cable across the Atlantic. If that event happened, there can be no doubt that the owner of shares in the company would be better off if it did not happen, then, there can be no doubt his position would be worse. It follows then, equally without doubt, that if by proper words the parties have entered into a contract of insurance for that interest, the policy is good.”

The rule in the English courts would seem therefore to be, that the stockholder has not such an interest in the property of the corporation as would entitle him to insurance thereon, but he must limit his insurance to the profits which he expects to derive from the enterprise.

But the American courts have gone a step beyond this, and held that, in the tangible, real and personal property of the corporation, the stockholder has an insurable interest, because of the profit dependent upon the success of the enterprise, whereby the value of his stock is enhanced, his dividends thereon increased, and a greater fund accumulated for final distribution among the stock

holders.

The first case in this country in which this question was directly presented and decided is that of Warren v. The Davenport Fire Insurance Company, 31 Iowa, '464 (1871). In that case, Goodale and Hosford, who were stockholders in the Dubuque Lumber Company, a corporation, procured a policy

62 East, 544, 6 R. R. 505. 7 2 B. & P. (N. R.) at 301.

of insurance upon their interest in the corporate property, which consisted of a sawmill, to the amount of $2,500, representing their interests therein in excess of the amount of insurance procured by the corporation itself upon the property. The property was destroyed by the peril contemplated, and an action was brought on the policy by the plaintiffs, creditors of Goodale and Hosford, who held the certificates for a considerable amount of the stock of the corporation as security for the payment of the money due them. It was insisted that neither the plaintiffs nor Goodale and Hosford had an' insurable interest in the property destroyed, or in the policy. But the court took a different view of the matter, and said: "The property destroyed belonged to the corporation. The insurance was upon the interest which the insured had in the property by virtue of the capital stock therein owned by them. The object of the insurance was to indemnify the insured against loss to them in the event of a destruction of the property by fire. Could or would they sustain loss in such event? How would their interest be affected? It seems to us to be beyond controversy, that, in case of the destruction of the corporate property by fire the stockholders would sustain loss to a greater or less extent, dependent on the particular circumstances."

The court then likened the case to those cases in which the mortgagee of real property has been held to have an insurable interest in the property mortgaged, notwithstanding the mortgage is a mere security for the debt, saying: "A mortgagee of real property has an insurable interest in the mortgaged premises, based upon the interest he has in the preservation of the same as security for a debt. He has a legal right to contract for indemnity against injury to the value of his security. Upon precisely the same principle, a stockholder may contract for indemnity against injury to the value of his stock, for he also has an interest in the preservation of the corporate property for destruction by fire; and in its destruction he sustains loss in so far as the value of his stock is depreciated thereby, or his dividends cut off."8

8 In Glover v. Wells, 40 Ill. App. 350 (1890), the Appellate Court of Illinois held, construing the law of Iowa, that a stockholder in a corporation organized for pecuniary profit, has, by reason of such owner

Seaman v. Enterprise Fire Insurance Company, 18 Fed. Rep. 250 (1883), was the next case in which the question arose. There the plaintiff, Seaman, who was the holder of threesixteenths of the stock of a corporation whose principal property was a steamboat, took a policy of insurance upon his interest in the corporate property, to the amount of four thousand dollars. The boat was destroyed in a manner contemplated by the policy, and, in an action to recover thereon, the court, following the Warren case, said: "The cases in which the question as to what is an insurable interest has been discussed are numerous, and I do not propose to cite or comment upon them here. It is sufficient to say that the tendency of the modern adjudications on the subject is in the direction of holding an insurance company responsible in every case where the insured has any such interest in the subject-matter of the insurance as would subject him to pecuniary damage or loss in the event of its destruction. It is not necessary that the party who takes out the policy should have any title to the property insured; it is sufficient if he has such an interest in it as that, by its destruction, he would suffer pecuniary loss. It only remains, then, to determine whether a stockholder in a corporation may have such an interest as I have indicated. We are very clearly of the opinion that he may. It is true that the title to the property is in the corporation; that the beneficial interest is in the stockholders of the corporation. The stock of a corporation represents its property, and is evidence of the right of the stockholder to receive the profits and increase of the corporate property. It is a very plain proposition, in our judgment, that the destruction of the corporate property may entail pecuniary loss upon the stockholder, and, therefore, that he has a right to insure his interest as such stockholder." In his opinion overruling a motion for a new trial of the above cause (Seaman v. Enterprise, etc., Co., 21 Fed.

ship of stock, an insurable interest in the corporate interest in the property of the corporaton. And that the holder of such stock as collateral, has such an interest in the corporate property that he may recover upon the policy so assigned to him in case of injury to or destruction of the property insured, to the extent of his interest. See 140 Ill. 102, 105 (1892), affirming the appellate court, recognizing this doctrine, but putting the decision upon another ground.

Rep. 778), Brewer, J., said: "In the present case, the question was raised before my predecessor, upon the demurrer to the petition, and he decided that a stockholder had an insurable interest in the property of the corporation. Whether that concludes me or not, I agree with him; I think that a stockholder in a corporation does have an insurable interest. It is not necessary to create an insurable interest, that the fee-simple title be vested in the insured. It is enough that he has a direct, pecuniary interest which may be destroyed, and is entitled to protection.

In this case it appeared that the corporation owned a steamboat; that was substantially all its assets. Now, the destruction of that property certainly diminishes the value of the stock held by plaintiff. He had an interest in the preservation of that property, and he had an insurable interest. If the property was the entire property of the corporation, the destruction of the property practically wiped out the value of his stock. So that I think it is fair to say that a stockholder in a corporation has an insurable interest in the personal, tangible property of the corporation. The policy was taken by the plaintiff on his interest. The destruction of the property destroyed that interest, and he is entitled to recover."

The question seems next to have arisen in Riggs v. The Commercial Mutual Insurance Co., 51 N. Y. Super. Ct. 466 (1885), upon facts similar to those in the Seaman case. Stated briefly, one Tobias, a stockholder in the Merchants' Steamship Company, had insured his interest in the steamer, "Falcon," owned by the corporation. Subsequently he assigned his stock and the policy to the plaintiff Riggs, who, upon the vessel's being lost, brought an action on the policy. The court very summarily, in a "per curiam,” disposed of the case adversely to the plaintiff, on the ground that he had no insurable interest in the vessel. "It is not perceived," said the court, "that he (the plaintiff) had any interest in the vessel. He was not the legal or equitable owner of any part, nor of its earnings, nor any lien in respect to either." From this judgment of the Superior Court, the plaintiff appealed, and the Court of Appeals reversed the case, holding that the plaintiff's

9 Decided September 25, 1884.

interest in the vessel was an insurable one. In reversing the Superior Court, Andrews, J., speaking for the Court of Appeals, 10 said: "The stockholder in a corporation has no legal title to the corporate assets, nor any equitable title which he can convert into a legal title. The corporation itself is the legal owner and can deal with corporate property as owner, subject only to the restrictions of the charter. But stockholders in a corporation have equitable rights of a pecuniary nature growing out of their situation as stockholders, which may be prejudiced by the destruction of the corporate property. The object of business corporations is to make profits through the exercise of the corporate franchises, and gains so made are distributable among the stockholders according to their respective interests, although the time of the division is ordinarily in the discretion of the managing body. It is this right to share in the profits which constitutes the inducement to become stockholders. So, also, on the winding up of the corporation, the assets, after payment of debts, are divisible among the stockholders. It is very plain that both these rights of stockholders, viz., the right to dividends and the right to share in the final distribution of the corporate property may be prejudiced by its destruction. In this case the ships were the means by which profits were to be earned, and their loss would naturally, in the ordinary course of things, diminish the capacity of the corporation to pay dividends, and consequently impair the value of the stock. The same would be true in other cases which might be mentioned, as, for example, where buildings producing rent, owned by a corporation, should be burned. It is not necessary to constitute an insurable interest that the interest is such that the event insured against would necessarily subject the insured to loss. It is sufficient that it might do so, and that pecuniary injury would be the natural consequence."

11

10 Reggs v. The Commercial Mutual Insurance Co., 125 N. Y. 7 (1890).

11 Whether a stockholder has an insurable interest in the corporate property has been either discussed or referred in the text books upon the law of insurance, following: Kerr on Insurance, 278; Elliott on Insurance, 49; Ostrander on Fire Insurance, sec. 105, and also, 217; 2 Beach, Law of Insurance, note p. 301; 1 Biddle on Insurance, sec. 175; 2 Joyce on Insurance, sec. 935; 1 May on Insurance (4th Ed.), sec. 90; 1 Wood on Insurance (2d Ed.), sec. 287.