profits and commissions, are used to meet the special need of the situation. In fact, the adoption of a standard form is just as difficult here as was noted in connection with use and occupancy insurance. The form referred to in this Chapter limits the company's liability to "its pro rata share of any ascertained loss of profits or commissions on the described merchandise which may result from such fire, not exceeding, however, its pro rata share of .............. per cent of the damage sustained by such merchandise, which damage shall be determined by the final outcome of the adjustment of the loss on merchandise by companies insuring same, including results of any salvage handling operations, whether completed before or after such adjustment; or, if there be no insurance on said merchandise, then by such ascertainment and estimate by the parties hereto as is provided for in the printed portion of this policy."

Other forms, however, limit the recovery to a stated percentage of the selling price or to some other basis. But it will be observed that the insured's recovery is not reckoned, as in the case of use and occupancy insurance, upon a per diem basis. Sometimes also the insured covenants to keep complete accounts, to protect such records in a fireproof safe during non-business hours, and in the profits and/or commissions on such merchandise which may result from such fire, not exceeding, however, its pro rata share of per cent of the damage sustained by such merchandise, which damage shall be determined by the final outcome of the adjustment of the loss on merchandise by companies insuring same, including results of any salvage handling operations, whether completed before or after such adjustment; or, if there be no insurance on said merchandise, then by such ascertainment and estimate by the parties hereto as is provided for in the printed portion of this policy.

It is understood and agreed that the words, "the property described" and "the actual cash value of said property, in the average clause hereto attached are to be interpreted as meaning per cent of the actual cash value of the merchandise described.

(Add usual clauses).

event of loss, to produce the same, with the understanding that a failure in any of these respects will nullify the policy and preclude any suit or action at law to recover a loss.

Rent, Rental Value, and Leasehold Insurance.+-Nature of service performed.-This form of insurance renders to properties that are or may be rented the same general service that is performed by use and occupancy insurance to manufacturing and mercantile establishments. When a rented property is partially or totally destroyed the owner loses more than the property itself. He also loses the rental until the building is restored to an inhabitable condition. During the period of reconditioning he is also obliged to pay taxes, and perhaps interest on a mortgage. Managers of estates and trust funds, invested in rent producing buildings, it should be stated, are finding rent insurance extremely useful. Even where the building is occupied by

The following is illustrative of the rental value form, whether the premises are rented or vacant:

'$.

RENT FORM
(Rented or Vacant)

On rents of the

....

building situate

It is hereby understood and agreed that if the said building, or any part thereof, whether rented at the time or not, shall be rendered untenantable by fire or lightning, this Company shall be liable for the rental value of such untenantable portions, loss to be computed from date of fire or lightning damage until such time as the building could, with reasonable diligence and despatch, be rendered again tenantable.

If the insured occupies any portion of said building, a fair rental value of the portion so occupied shall be considered as a part of the rents insured.

In consideration of the reduced rate at which this policy is written, it is agreed that this Company shall not be liable under this policy for any greater proportion of any loss than the sum hereby insured bears to the full annual rental value of the said premises."

Note: Instead of "full annual rental value" the following clause is sometimes used:

"Bears to the full rental value of the said building for the time that would reasonably be required to rebuild and restore it to a tenantable condition if it were totally destroyed.''

(Attach usual clauses).

the owner, account must be taken of the loss of its use to him.

Meaning of the several types of coverage.-It is necessary to recognize the distinction between "rent" and "rental value" as used in connection with this type of insurance. "Rent" represents the sum paid by the tenant for the use of the property under consideration, and rent insurance protects the owner against loss through the discontinuance of such rental owing to a fire. "Rental value," on the contrary, "is a term used when the owner occupies the building, and represents the sum for which he could rent it; or the sum he would have to pay for the use of a building the same size and its equal in every way."5 Rental value insurance, therefore, protects the insured against the building he occupies becoming untenantable.

Leasehold insurance" protects the lessee of a building against the loss of leasehold profit or leasehold value. When obtaining a property under lease, the lessee will seek to do

Definition in "Rent, Rental Value and Leasehold Insurance, a pamphlet published by the Insurance Company of North America, 1920, page 4.

The following is an example of the leasehold interest form:

LEASEHOLD INTEREST FORM

on leasehold interest (term of rent from date (a)) building, situate

to (date (b)) in the It is understood and agreed that, if said building shall be totally destroyed by fire, occurring during the term and under the conditions of this policy, this Company shall pay the whole amount hereby insured, less a deduction of $... per month for the time that shall have elapsed between the date of (date (a)) and the date of occurrence of said fire. And in case of such damage by fire as shall, without total destruction, render said building untenantable, this Company shall pay at the rate of $......, per month, to be computed from the date of such fire to the date when, by due diligence, the said building could be repaired and rendered fit for occupancy; but in no case shall this Company be liable for a greater amount then the sum insured, nor for any loss other than that which may arise under said leasehold interest.

(Attach Lightning Clause, and other necessary clauses).

one of two things. He may sub-let the property at a higher rental, in which case the difference between the rental he pays and the one he receives represents a rental profit. Or he may occupy the property himself, in which case the difference between the rental he pays and the one he would be obliged to pay if deprived of the property represents a leasehold value. Under either circumstance insurance is justified, since destruction of the property in question would subject the lessee to a real loss. Attention may also be called to so-called "ground rent insurance," which has for its purpose the protection of the owner of land under lease against the loss of ground rent arising out of the destruction or impairment by fire of the building located on the land."

7

The following sample of ground rent form is reproduced from Robert P. Barbour's " Agent's Key to Fire Insurance,” p. 245:

GROUND RENT FORM

$1,363.64 on annual ground rent of $75, issuing out of lot and ground about 38 foot front by about 105 foot deep and improved by frame building situate Agreed value of ground rent $1,363.64.

It being understood and it is hereby agreed that if the security for the payment of the ground rents or annuities hereby insured or any of them shall be impaired or diminished by reason of the damage or destruction by fire of the buildings erected on the abovementioned lots or any of them, and the owner of the leasehold estate therein shall fail to repair or rebuild the same within six months from the happening of the fire, this Company shall pay to the insured or legal representatives, within thirty days after demand, the sum or sums hereby insured on the ground rents issuing out of such lots together with the ground rent accrued to date of said payment, not exceeding one year. This Company shall have the right, however, if it shall so elect, to pay unto the insured or its legal representatives the value of such ground rents as agreed upon above together with the ground rent accrued to date of payment, not exceeding one year, and on such payment the insured or legal representatives shall convey to the Company such lot or lots of ground and the ground rents incident thereto, clear of all encumbrances, save the leasehold estate therein and the unpaid taxes thereon. Reserving, however, to the insured the right to receive and collect and by legal process to recover

Different degrees of coverage obtainable under rent and rental value insurance.-Different types of policies, varying according to the degree of protection offered the insured, exist in the field of rent and rental value insurance. At least five degrees of liability on the part of the company should be mentioned, viz.:

(1) Where liability is based on the rent or rental value "for the time it takes to rebuild or restore the building to a tenantable condition" and irrespective of "whether the building is rented or vacant.”

(2) Where the form contains the same time limit as above, the liability of the company, however, being limited to "the rent or rental value of only the occupied portions of the building."

(3) Where liability is based "upon the full annual rent or rental value" and irrespective of "whether the building is rented or vacant.'

(4) Where liability is based "upon the full annual rent or rental value" but extends only to the rent or rental value of "the occupied portions of the building."

(5) Where liability is restricted to "the actual loss of rent or rental value sustained for a certain definite period in the year."

for

of one year.

own use all arrears of ground rent in excess

It is understood that this insurance shall not be affected or invalidated by any act or neglect of the owner or occupant of the abovementioned buildings, nor by any foreclosure or other proceedings or notice of sale relating thereto, nor by occupation of the premises for purposes more hazardous than are permitted by this policy, nor by the violation of any of the terms or conditions of this policy not affecting the fee simple interest. Lightning Clause attached.