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general jurisdiction, any more than they have to add to a personal covenant, that they are not to be responsible for a breach of it."

Time of Loss Payment and Subrogation.—These subjects are covered by two separate policy provisions. One stipulates that the company will pay the claim within sixty days following the receipt of proof as provided in the policy and the ascertainment of said loss by mutual agreement in writing or by appraisal. The other provides that the company, following payment of a loss, shall to that extent be entitled to subrogation from the insured by way of assignment of all right of recovery against any party. The two clauses read as follows:

1. The amount of loss or damage for which this Company may be liable shall be payable sixty days after proof of loss, as herein provided, is received by this Company and ascertainment of the loss or damage is made either by agreement between the insured and this Company expressed in writing or by the filing with this Company of an award as herein provided.

2. This Company may require from the insured an assignment of all right of recovery against any party for loss or damage to the extent that payment therefor is made by this Company.

CHAPTER XII

COINSURANCE

Meaning of Coinsurance.-Under the so-called "coinsurance clause" (also referred to as the "average clause," the "reduced rate average clause," and the "percentage value clause'),1 the property owner has any loss paid only in the proportion that the amount of insurance he takes bears to the amount of insurance that the company requires him to carry. The insured is free to buy as little or as much insurance as he deems necessary, but whatever the amount may be, it is arranged that he shall recover losses from the company only in the proportion that he is willing to insure his property and pay his just share of premiums.

1 (1) The several clauses referred to present but little variation in the wording, and usually read as follows:

COINSURANCE CLAUSE

"It is hereby agreed that the assured shall maintain insurance during the life of this policy upon the property hereby insured to the extent of at least per cent of the actual cash value at the time of the fire; and that failing so to do, the assured shall to the extent of such deficit bear his proportion of any loss.”’

AVERAGE CLAUSE

"This Company shall not be liable for a greater proportion of any loss or damage to the property described herein than the sum hereby insured bears to per cent of the actual cash value of such property at the time such loss shall happen."

REDUCED RATE AVERAGE CLAUSE

"In consideration of the reduced rate at which this policy is written, it is expressly stipulated that, in event of loss, this Company shall be liable for no greater proportion thereof than the amount hereby insured bears to per cent of the actual cash value

In some instances a further provision, the so-called "5 per cent waiver clause," is used in connection with the coinsurance clause. It usually reads to the following effect: "In the event that the aggregate claim for any loss is less than ($10,000) ten thousand dollars (provided, however, such amount does not exceed five per cent (5%) of the total amount of insurance upon the property described herein, and in force at the time such loss occurs) no special inventory or appraisement of the undamaged property shall be required. If this policy be divided into two or more items, the foregoing conditions shall apply to each item separately." This clause, it should be noted, merely waives the special inventory or appraisal of the undamaged property, and in no sense waives the operation of the coinsurance clause itself. When very large values are covered under an insurance policy, the companies recognize the hardship to which the insured would be put, in the event of small losses, if required in all cases to furnish an inventory of the undamaged and damaged property.

The Application of Coinsurance Illustrated. It is apparent from the wording of the coinsurance clause that the company designates the amount of insurance, expressed in the form of a percentage of the value of the property, which it desires the insured to carry. Thus under a "full coinsurance clause," or for 100 per cent, the com

of the property described herein at the time when such loss shall happen, nor for more than the proportion which this policy bears to the total insurance thereon."

PERCENTAGE VALUE CLAUSE

"If at the time of fire the whole amount of insurance on the property covered by this policy shall be less than

per cent

of the actual cash value thereof, this Company shall in case of loss or damage be liable for only such portion of such loss or damage as the amount insured by this policy shall bear to the said

per cent of the actual cash value of such property."

pany agrees to indemnify any loss only in the proportion that the insurance actually taken bears to the full value (100%) of the property. In most instances, however, the companies require the owner to insure his property to only 80 per cent of its value. The percentage required is intended to represent that proportion of the insured property which is subject to destruction by fire, and will, therefore, depend upon the character of the property under consideration. If the 80 per cent coinsurance clause is used, the company considers itself liable for only that portion of any loss resulting from fire which is represented by the proportion that the actual insurance purchased bears to the required 80 per cent. Thus if we assume the value of a building to be $20,000, then, under the 80 per cent coinsurance clause, the company will require the insured to take a policy for at least $16,000. If this is done the company agrees to pay in full any loss, not exceeding the face value of the policy. Suppose, however, that the insured decides to take only $8,000 of insurance, or one-half of the required amount, and that a loss of $4,000 takes place. Under these circumstances, the coinsurance clause prevents the insured from collecting his claim in full, as he otherwise would, by providing that this $4,000 loss is to be paid only in the proportion that the insurance actually carried ($8,000) bears to the 80 per cent insurance required ($16,000), i.e., one-half of $4,000, or $2,000. Since the insured elected to take only 50 per cent insurance, he became, as far as any losses are concerned, coinsurer for the other half. If $10,000 of insurance had been taken, instead of $8,000, the $4,000 loss would have been paid in the proportion that $10,000 bears to $16,000, i.e., five-eighths of $4,000, or $2,500. If, on the other hand, a 100 per cent, or full coinsurance clause, had been used, and only $8,000 of insurance taken, the property owner would have had his loss paid in the proportion that $8,000 bears to $20,000

(the full value of the property) i.e., to the extent of twofifths of $4,000, or $1,600.

Assuming the use of an 80 per cent coinsurance clause, it is important to bear in mind the following six points:

(1) If the insured fails to take insurance to at least 80 per cent of the value of the property, he is regarded in effect as a coinsurer (a self-insurer) for the balance, hence the name "coinsurance." If $8,000 of insurance is required, because that amount constitutes 80 per cent of the value of the property, and only $4,000 is taken, the insured is regarded as having two policies on his property, one with the company for $4,000 and another for an equal amount in his own self-insurance fund. Fire policies provide that "the Company shall not be liable for a greater proportion of any loss or damage than the amount hereby insured shall bear to the whole insurance covering the property, whether valid or not and whether collectible or not.' Accordingly, the company pays a loss, let us say of $2,000, in the proportion that its $4,000 policy bears to the total insurance of $8,000 (its own $4,000 policy plus the insured's self-insurance of $4,000), or to the extent of one-half, or $1,000.

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(2) The valuation of the property to which the 80 per cent applies is the insured's valuation. The owner, if any one, should know the approximate value of his property. Much expense is avoided if the owner's value is accepted in all cases and if an investigation by the insurer is limited to those comparatively few cases, out of the total number of existing properties, where a loss actually occurs. The value of property, moreover, changes from time to time, and the insured should, therefore, adjust his insurance to meet the requirements of the coinsurance clause. The importance of this factor is indicated by the fact that during recent years insurance companies publicly advertised the enormous appreciation of property values and cautioned.

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