Baxter v. Chelsea Mutual Fire Insurance

All but one of the questions raised here have been decided in the recent case of Brewer against these defendants, 14 Gray, 203. In that case it appeared that Gerrish had taken the same steps towards obtaining insurance that he has done in this case, and they were held to be insufficient. The plaintiff in that case was his mortgagee, to whom the policy was to be made payable in case of loss. It was there held that the president was but a special agent of the company, and could not by his agreements effect insurance on terms forbidden by the by-laws. He had in that case made the same agreement with Gerrish that he did in this case. But the plaintiff proved in the present case that she sent a person to the president to inquire about the matter; and the president, in reply to her agent, represented that Gerrish had obtained the insurance. It is contended that the defendants are estopped to deny the truth of this representation. But the obvious answer to this is, that the president could no more bind the company by his representations beyond the scope of his authority than by his agreements.

It is urged that such a decision will tend to embarrass the business of insurance, because much insurance is necessarily effected by agreements which are to take effect before policies can be made. The answér to this suggestion is, that mutual insurance is essentially different from stock insurance. Much of the litigation- that has grown out of this species of insurance has been owing to inattention to this difference. Its original *297design was to provide cheap insurance by means of local associations, the members of which should insure each other. Such associations are in their nature adapted only to local business, and great abuses have grown out of the undue extension of their business. They need many by-laws and conditions that are not required in stock companies; and it is necessary and equitable that each person who gets insured in them should become subject to the same obligations towards his associates tha> he requires from them towards himself. Before he has a right to hold them responsible, he must, of necessity, have his contract completed; and it is important, in this species of insurance, that he should make himself carefully acquainted with its terms. Parties who cannot attend to this should obtain insurance of stock companies, cr bear their own risks.

Judgment on the ™?rdicr