Ralli v. White.

where one of two innocent persons must suffer by the misconduct of a third person, that party shall suffer who by his act and conduct has enabled such third person by giving him credit to practice a fraud or imposition on the other party." Story on Agency, § 56; Dreher v. Connolly, 16 Daly, 106; S. C., 30 St. R. 674. So if an insurance company holds out to persons insured an officer or agent to represent it in respect to losses, and to speak for it at its office in negotiations for the settlement and appraisement of losses, it cannot afterwards question his power to bind the company. Solomon v. Metropolitan Ins. Co., 42 N. Y. Superior Ct. (J. & S.) 24; Van Allen v. Farmer's Joint Stock Ins. Co., 10 Hun, 397; aff'd, 72 N. Y. 604. As to innocent third persons the agent's authority is determined by the nature of the business intrusted to him and the situation in which he is placed. If he is put in possession of an office, he is enabled to do whatever business his principal has represented will be done there. 4 Wait's Act & Def. 28.

Upon equitable principles, therefore, the notice of loss. to and service of the preliminary proofs on Edwards & Co., were properly given and made, and satisfy all the requirements of the policy. The contract is one uberrima fidei, demanding from the insured a disclosure of all material facts affecting the risk and in case of loss a responding obligation respecting payment ought to be imposed upon the insurer, that the rights of each contracting party may to this extent at least be reciprocal.

In the primitive days of insurance, when the underwriters met at Lloyd's coffee house on Lombard street, London, and passed around the proposed policy of the applicant among the members, so that each could underwrite and subscribe his name for such portion of the required amount as he wished to undertake, until by successive subscriptions the entire amount was covered (Rich. Ins. 2d ed. 9, 10; 1 Arn. Ins., Perk. ed. 4, 82), it was sufficient to call the contract a Lloyd's policy, because made at Lloyd's. But since these associations of underwriters

Ralli v. White.
บ.

are now numerous bodies, each independent of the other, some distinctive name and place of meeting are necessary to determine one enterprise from another and prevent confusion. 6 Waits Act & Def. 25. The present policy, therefore, recites that it was made "at Metropolitan Lloyds of New York City," meaning at its meeting place at the offices in Cedar street, the same premises in which Edwards & Co. continued the association's business from January 24, 1895.

These associations of underwriters of common law origin became popular in London, and were so favored in this State that those which on October 1, 1892, were lawfully engaged in the business of insurance were granted certain privileges and exempted from supervision by the insurance department, and not required to report thereto, "notwithstanding any change made therein by death, retirement or withdrawal of any such underwriters, or by the admission of others to said association." L. 1892, c. 690, p. 1958; L. 1894, c. 684. The privileges conferred upon such Lloyd's companies, and not before specially referred to are described as consisting" of an exemption from the conditions and prohibitions prescribed and provided by Section 54 of said Chapter 690, Laws of 1892, whereby they may transact the business of fire insurance and issue policies in the State of New York without being possessed of the capital required of a fire insurance corporation doing business in this State and invested in the same manner, and without a certificate to the effect that they have complied with all the provisions which a fire insurance corporation doing business in this State is required to observe, and that the business of insurance specified therein may be safely intrusted to them." See complaint drawn by attorney general in the People of the State of New York v. Edward V. Loew, et al., N. Y. Supreme Court, First Dept., May 6, 1896.* Associations

* Reported, 19 Misc. 248.

Ralli v. White.

possessing such exemptions and privileges should in other respects he held to the same liability that insurance corporations are to the persons with whom they hold contractual relations.

These associations are anomalous institutions-not corporations or joint stock companies, though in some respects resembling both, but a combination of individuals acting concretely as insurers. The members are not partners, for they do not bind themselves jointly, but severally in a specified amount until the sum insured for is made up. In England, where these institutions originated, they have been alternately called clubs, societies, associations and individual underwriters. There the contract has been held legal where the members bound themselves severally for specified amounts, but void as contrary to the insurance laws of that country when the underwriters undertook a joint liability on joint capital. Lees v. Smith, 7 T. R. 338; Strong v. Harvey, 3 Bing. 104; 11 Moore, 72; Harrison v. Miller, 2 Esp. 513; 7 T. R. 340, note; Bromley v. Williams, 32 Beav. 177; 32 L. J. Ch. 176.

While the extent of the liability of each underwriter is specifically limited to his individual share of the loss, the rules of law applicable to insurers generally must in other respects determine when a liability under the policy arises, and to this end the principles of estoppel, adopted from motives of public policy, apply, when necessary to prevent fraud and injustice.

Another circumstance requires comment. The answer is defective in not squarely presenting the defense now urged as to parties defendant. It alleges "that the policy of insurance as aforesaid contains the express condition that the attorneys and managers shall be sued before any suit shall be brought against any of the underwriters upon said policy." This is in the nature of a plea in abatement, which should give the names of the parties omitted and show that they are alive and within the jurisdiction of the court and within reach of its process." "Where

Ralli v. White.

the omitted parties are executors, it should show that they qualified and are acting as such." 1 Enc. Pl. & Pr., 17, 18. Tested by this rule, the answer should have given the names of the attorneys in fact against whom the plaintiffs ought to have proceeded, and alleged that they qualified and were acting as such, so that the plaintiffs might have a better writ. The plaintiffs could not tell from this plea whether Beecher & Co., who issued the policy and are therein described as attorneys in fact, or Henry Edwards & Co., were referred to, and safely might, as they did, ignore both, neither being underwriters and being, consequently, unnecessary parties according to the adjudged cases. The plea should be full, clear and specific, to answer legal requirements. It could not have been reasonably suspected in this instance that hidden behind the technical plea in abatement interposed by the defendant were the prominent and responsible names of William C. Beecher and Arthur White as attorneys in fact, and yet this is the use the defendant sought for the first time at the trial, and more particularly on the appeal, to make of this plea, to the prejudice of the plaintiffs-a circumstance emphasizing the necessity of requiring technical precision in pleas of this character-that the adverse party, being fully advised of the objection, may in advance of the trial recant and mend his hold, or, at least, being intelligently forewarned, advisedly determine what course to pursue to overcome the obstacle presented.

In concluding, it is proper to call attention to the rule that in determining the liability of the defendant he is entitled to the benefits of the contract fairly construed, and can stand upon all of its stipulations. But when the liability has become fixed by the capital fact of a loss, within the range of the responsibility assumed in the contract, courts are reluctant to deprive the insured of the benefit of that liability by any narrow or technical construction of the conditions and stipulations which drescribe the formal requisites by means of which this accrued right is to be

Note on Actions on Lloyds' Policies.

made liable for his indemnification. A liberal and reasonable construction of the stipulations of the contract which prescribe the formal acts on the part of the insured, necessary to the recovery of the loss, is sanctioned and required. by the rules of law. McNally v. Phoenix Ins. Co., 137 N. Y. at p. 398; Wehle v. U. S. Mut. Accident Association, 11 Misc., p. 36; aff'd, 153 N. Y. 116.

Opinion by MCADAM, J. All concur.

Judgment affirmed, with costs.

E. H. Murphy (W. C. Beecher of counsel), for the defendant, appellant.

Charles Wehle, for the plaintiff, respondent.

NOTE ON ACTIONS ON LLOYDS' POLICIES.

The question involved in this case, as to whether or not a stipulation in a Lloyds' policy that no action shall be brought against the underwriters until the insured has first brought an action against the agents or attorneys of the association, is valid and binding on the insured, cannot be said to be satisfactorily settled. Some of the earlier as well as later cases have held that the clause was void where the agents or attorneys were not underwriters, and that the action against the underwriters could be maintained in the first instance. N. Y. Com. Pl. Gen. T., PRYOR, J., Knorr v. Bates, 14 Misc. 501; aff'g 12 Misc. 395; N. Y. City Ct. Gen. T., BISCHOFF, J., Biggert v. Hicks, 18 Misc. 593; Ralli v. White in text, aff'g 20 Misc. 635; N. Y. Supm. Ct. Special T. TRUAX, J., Farjeon v. Fogg, 3 N. Y. Ann. Cas. 120; S. C., 16 Misc. 219, where on demurrer to the answer it was held that, as it appeared that the attorneys were not underwriters, the clause under discussion was void as against public policy. See also Ralli v. Hillyer, 15 Misc. 692, following Knorr v. Bates (supra).

At about the same time that Knorr v. Bates (supra), and Farjeon v. Fogg (supra), were decided the question