a personal one. The person insured was entitled to the benefit of having his or her loss or damage by fire repaired and made good to him or her. The insurance was not on the buildings or goods themselves but a personal indemnity to the owner, to him or to her. Moreover it is stated, "if any person insured removes his or her habitation he or she must give notice and have his or her policy changed at the office". Note the words "person insured". It was the person

who was insured, not the goods. I venture to insist upon the personal nature of the fire insurance contract even at the risk of being tedious-since it is fundamental and the ignorance of this first principle of fire insurance on the part of the public causes much of the misunderstanding which sometimes arises. A marine insurance contract, though also to some extent personal, is not mainly so. The insurance there is upon a ship or upon a cargo and follows the ship over the world and clings to the cargo whatever may be the hands through which it passes up to the ultimate destination and termination of the insurance. The two contracts differ in their essence and the difference is due to the altogether different circumstances to which the contracts relate. Property on land and property at sea are essentially different: I have already indicated the main reasons why this should be.

THE LIABILITY OF FIRE INSURANCE COMPANIES.

When once a firm grip is secured upon the principles of fire insurance the rest follows easily and naturally.

As a fire insurance contract-except in the special cases at Lloyd's already described-is a policy of indemnity the liability of a company is fixed by the market value of the material destroyed at the time of a fire. The insured not being entitled to make anything out of a fire the moral hazard of the insurance company is reduced by the inconvenience caused by genuine losses by fire. In estimating the value of the property destroyed no heed is taken, in theory, of the actual cost of that property, though in assessing a loss in practice some regard has to be paid to cost. In the case of buildings the state of repair and the condition at the time of the loss must be taken into consideration and allowance duly made for ordinary depreciation. This, I may remark, is not done in Lloyd's valued policies. A fire insurance company is not liable to replace a hovel by a palace. Where reinstatement involves expenses which were not incident to the original buildings-suppose, for example, the new house to replace the one burnt has to be set back further from the road in order to comply with the building regulations of the district, or if it is a class of building which may not be replaced at all-then the insurance company is not liable for the additional costs of the change. A fire may have brought many liabilities upon the owner of a building for which it is not the duty of the insurance company to compensate him. In cases such as this the sweet simplicity of a valued policy no doubt appeals to the average man. He would sooner have a fixed sum of money thrown to him to do with as he pleased rather than have to

prove his actual loss. But it is not in the public interest to make the occurrence of fires agreeable to those who incur them. In practice, however, the convenience of the insured is considered as far as possible and a company which unreasonably insisted upon an inconvenient reinstatement would be justly condemned and would suffer in business.

At a very early stage in the history of fire insurance the companies claimed the right of reinstatement of buildings, and this right was confirmed by the Act of 4 Geo. III., cap. 14, in 1763 and afterwards enlarged by 14 Geo. III., cap. 78, and 28 & 29 Vict., cap. 90. These Acts gave an insurance company power, if it so pleased, or upon the request of any person or persons interested in a building, to expend the insurance money as far as it would go in rebuilding, reinstating or repairing. In electing to reinstate a building a fire office is entitled to make use of standing materials, but it becomes responsible for the mistakes or bad workmanship of the architect or builders whom it employs. It is within the limits of the sum insured liable to replace a destroyed building by one which is equally good; it would not be entitled to put up a new building on an old foundation or on old walls if the new work caused the old structure to display signs of weakness. If also the insured wanted to replace his burnt house by one upon a more desirable site the company would be liable only for the money which would have been sufficient to rebuild the old house on the old site. All this follows logically from the idea of a personal indemnity for actual loss and I need not

elaborate the point. As regards goods, a marine insurance company pays the admitted value and makes what it can out of salvage, but a fire insurance company takes salvage into account in arriving at the loss sustained. It does not pay any admitted value and the value has to be determined "according to the prices which articles burnt shall bear in the market on the day of the fire, so far as the sum assured shall extend; and in the case of old machinery or old household goods the office is liable to pay the actual value only on the day of the fire without any regard to what such property may have cost when new That is a main principle of fire insurance so far as it is a contract of indemnity, and it has the support of the common law of the country.

CHAPTER II.

THE DISTRIBUTION OF LOSS.

In my previous chapter I endeavoured to explain the essential nature of the fire insurance contract and the manner in which it differs from other contracts of insurance. We shall in the course of this book discuss the contract in detail as it is used in modern business and the conditions under which it is granted. For the moment we have to turn our attention to the main purpose of fire insurance, that of the distribution of loss over the whole community and among the various companies and other agencies by whose means insurance is carried on.

The essential aim and object of all insurance is the distribution of loss over as wide an area as possible, and, what is more, the equitable distribution of loss so that owners of property may pay as nearly as can be ascertained the precise amount which in their case is necessary in order to provide for insurance protection. In the early days of fire insurance the companies regarded it as their duty to prevent fires as well as to provide compensation for losses, and this duty they undertook because there were at the time no other agencies which were de