occupancy value of the property may be specifically excluded from the insurance. But it is highly important that the property intended to be covered should not be described so vaguely, with reference to location, as to possibly include properties that were neither known nor contemplated by the company at the time of the issuance of the insurance.

To explain definitely the precise application of use and occupancy, nearly every form specifies the meaning of "building" "machinery," etc. Thus, the manufacturing form usually stipulates that "this policy applies only to buildings and machinery that contribute to the completion of the work of this plant, and all storehouses and contents are excluded unless specifically provided for herein." Further provision is usually made to the effect that "surplus machinery or duplicate parts thereof, equipment or supplies, which may be owned, controlled or used by the insured shall, in the event of loss, be used in placing the property in condition for operation." It is also stipulated as a rule that "the production of goods for or by the insured elsewhere than in the above described building ....., because of and during such suspension shall be considered the same as goods manufactured therein, except that liability hereunder shall extend to the necessary decrease in profits thereon."

Company's liability under use and occupancy insurance. -Subject to all the definitions and conditions contained in the policy, the company's limit of liability is defined on a per diem basis. For concerns which do not operate Sundays and holidays the year is usually assumed to comprise 300 days, and the month 25 days. Where, however, the business involves "constant and continuous earnings," as in the case of power plants, hotels, etc., the year or month. is usually assumed to contain 365 and 30 days respectively. Accordingly, the company's limit of loss per day

for total suspension of business is usually 1/300th (or 1/365th) of the amount of the policy. On the basis of this daily limit of liability and the prescribed number of working days in the year, it is clear that the company's liability cannot exceed the amount of the annual policy.

In the event of total suspension, assuming a manufacturing risk and a year of 300 days, the policy usually states that the company's liability "shall not exceed one threehundredth (1/300th) part of the amount of this policy for each working day." During the time of a partial suspension, however, liability under the policy is usually defined as "not exceeding that proportion of the per diem liability for a total suspension of manufacturing which the daily average decrease in the production of goods bears to the daily average production for a period of three hundred (300) days' time made prior to such suspension." The word "day" or "working day" is declared by the policy to cover a period of 24 hours. In the case of seasonal risks, a three months' risk, for example, the company's per diem liability is adjusted accordingly, i.e., is defined as 1/75th or 10th of the amount of the policy for each working day. Again, where the results of the business vary greatly according to the time of the year, the policy may specify "that this insurance shall pay the sum stated below for each day of total prevention during each month specified." Thus, for the month of January the payment per day may be arranged at $5,000 and the total payment for the month at $130,000, for February $4,000 per day and $104,000 for the month, etc.

Other leading provisions and endorsements.-Since use and occupancy insurance is written under a special form attached to the standard policy, the endorsements required are usually those which would be attached to a fire policy covering the same property. The same may also be said of profits and commissions insurance. To avoid any mis

understanding, however, the use and occupancy form usually has incorporated within it a contribution clause and an appraisal clause. The first specifies that the use and occupancy liability of the company "shall not exceed the amount of insurance by this policy nor a greater proportion of any loss than the insurance thereunder shall bear to all insurance, whether valid or not, covering in any manner the loss insured against by this policy." The appraisal clause makes direct reference to the fire policy to which the use and occupancy form is attached and provides that "in case the insured and this company are unable to agree as to any question affecting the amount of loss under this policy, the same shall be determined by appraisers in the manner provided by the policy hereto attached, the provisions of which policy shall govern in all matters pertaining to this insurance except as herein otherwise provided." The lightning hazard is also usually assumed. Under separate policies, it should also be stated, companies often assume liability for loss of use and occupancy, profits and commissions, occasioned by explosion, windstorm, riot and sprinkler leakage.

Limitation of the company's per diem liability to 1/300th or 1/385th of the amount of the policy, it should be observed, fulfills the purpose of full coinsurance. Accordingly, it is not usual to find a coinsurance provision in the use and occupancy form. Under the arrangement the insured may take insurance for only a part of what he regards the full value of the use and occupancy of his premises. But whatever proportion of this value he elects to insure, it is clearly stated in the policy that he is entitled to receive from the company only 1/300th or 1/365th of the amount of insurance thus actually taken. The amount of the per diem recovery is, in other words, reduced in the exact proportion that the insured fails to insure the full value of his use and occupancy. Where, however, as in profits and commissions

insurance on finished stock or merchandise for sale, no provision is made for a per diem liability, insurance companies usually follow the practice of attaching a coinsurance clause.

Profits and Commissions Insurance.--Leading differences between profits insurance and use and occupancy insurance.-Profits and commissions insurance differs from use and occupancy insurance in two very essential respects. Whereas use and occupancy insurance involves recovery of the loss of profits, maintenance expenses and fixed charges, profits insurance, unless some special arrangement to the contrary has been entered into, covers only against the loss of net earnings obtained from the use and occupancy of the insured property. Again, profits and commissions insurance usually covers finished stock and merchandise for sale, while use and occupancy insurance, as already explained, relates to buildings, machinery and equipment, and contemplates recovery for loss arising out of the inability to use the insured premises.

Nature of the protection under profits insurance.-Under this form of insurance the owner of goods held for sale, or if already sold, held for shipment, may insure himself against the loss of profits resulting from the destruction of the merchandise by fire. Various plans may be used to determine the measure of recovery under the policy. One method consists of making the profit contemplated under the contract equal to the difference between cost of production and selling price, making due allowance for any customary discount. Or the recovery may be defined as a fixed percentage of the selling price. Under still another method the recovery is placed at a fixed percentage of the amount of stock actually lost, making due allowance for any profit derived from the sale of the salvaged portion.

Nature of the protection under commissions insurance.Various persons, besides the owner, may have an insurable

interest in merchandise in the form of an expected profit or commission that may be lost should the goods be destroyed. Such profits or commissions it is the function of commissions insurance to indemnify. Commission merchants are thus enabled to protect their profits or commissions on the goods of others which they are holding for sale on their own or other premises, or which if already sold are being held for delivery. Such interest in prospective commissions may even be extended to instances of inability on the part of a manufacturer to deliver goods, as per contract, owing to the partial or complete suspension of his plant through fire. In that event the commission merchant may be promised protection to the extent of a stipulated percentage of the cost or sales price of the merchandise that would have been delivered under normal conditions. Again, a given business may be dependent for its own operation upon the regular delivery of definite amounts of merchandise at definite contract prices. Yet suspension of the plant that produces the goods promised under the contract might necessitate the purchase of similar merchandise elsewhere at probably much higher prices. To meet such a contingency, insurance may be effected that will entitle the insured to recover the loss represented by the difference between the contract price and that actually paid.

Policy provisions under profits and commissions insurance. A great variety of forms, extending insurance to

The following represents one of the forms used in connection with profits and commissions insurance:

PROFITS AND/OR COMMISSIONS FORM

On the profits and/or commissions of the insured on merchandise, sold or unsold, contained in

If during the term of this policy such merchandise, or any portion thereof, shall be destroyed or damaged by fire, this company shall be liable for its pro rata share of any ascertained loss of