also give full particulars and aid the insurer in every way, but is not allowed to assume liability nor to give assistance other than "first aid" without written permission from the insurer. Fulfillment of these requirements demands a "reasonable" compliance with their terms-the courts will not allow the insurer to escape liability on purely technical grounds.

Warranties.-Certain statements made by the insured and incorporated in the contract are declared to be warranties except where it is specifically stated that they are estimates. Under the legal definition of a warranty proof that any such statement is not literally true causes avoidance of the contract. Most states now have laws, however, which provide that all statements in a policy shall be regarded as representations, even though they appear in the form of warranties. In the absence of fraud it is necessary to prove that a representation is both material and untrue in order to void the contract. To be material a statement must be such as would affect the acceptance of the risk or the amount of the premium.

Miscellaneous.-Other clauses are usually inserted providing that no assignment shall be valid without the written consent of the insurer; that if insurance is carried with other carriers, liability for payment of claims shall be limited to the same proportion of the claim as the sum insured under the terms of the particular policy bears to the total insurance carried; that the insurer shall be subrogated to the rights of the insured to recover damages from third parties;

See "Declarations" in policy form, Appendix C.

that changes shall not be made except by endorsement signed by certain officers of the company; and that state statutes dealing with the serving of notices or the institution of legal proceedings supersede policy provisions which are inconsistent with them. Such provisions are common to many forms of insurance and have no peculiar significance in liability insur

ance.

WORKMEN'S COMPENSATION CONTRACT

The Obligation Assumed.-The workmen's compensation insurance contract differs fundamentally from the employers' liability contract. It is an agreement made with the employer to pay indemnity to his workmen or to their dependents according to the terms of a compensation act which is considered a part of the policy contract. All employees whose remuneration is declared by the employer are covered and there are no limitations on the amount payable or the locations covered, other than those expressed in the statute. Such an agreement is usually required by state law, but it is the practice of insurers to write all contracts on much the same basis, some having standardized contracts which are used in all states, the compensation law of a particular state being cited by endorsement.

Provision similar to that contained in the employers' liability contract is made for service to the insured, for defense of suits, and for payment of expenses, with the addition of specific agreements to suggest means of accident prevention to the employer,

and to furnish medical and surgical aid and supplies, or pay funeral expenses as required in the law.

Premium Adjustment.—An advance premium is paid on the estimated payroll which is adjusted to actual payroll at the end of the policy period. Clauses are often inserted to provide for changes in manual rates, for schedule and experience rating modifications, and for an adjustment of rates to conform to a change in the hazard due to court decisions holding the compensation law unconstitutional in whole or in part.

Notice. That notice of the occurrence of an accident to the insured employer shall be considered notice to the insurer is required by the laws of many states and is accordingly a contract provision in those states. Cancellation.-Cancellation may be effected by either party on ten days' notice in most states, though a longer notice is required in some. Four states require that notice of cancellation must be sent to the administrative body.

In other respects the compensation contract is similar to the liability form.

Approval of the Contract.-Certain states require that forms of contract must be submitted to a state official for approval and in some other states policy forms are regulated under the power of the administrative officials to reject an unsatisfactory form as being unacceptable as evidence of insurance.

7

The differences between the employers' liability and

Connecticut, Indiana, Kentucky, Louisiana, Maryland, and Massachusetts. New York and Maryland prescribe standard policy forms to be used by all insurers.

the workmen's compensation contract are expressive of the relative status of the insurance carrier under the two régimes. Under the old system of employers' liability the carrier existed merely as a convenient business device through which an employer might protect himself from the danger of heavy losses in damages to workmen and to which he could shift the trouble and expense of handling claims. The interests of employees were not considered.

Workmen's compensation being primarily for the benefit of the employee, it is essential that emphasis be placed on security and fairness of payment to him. The insurance carrier is now an important administrative unit engaged in carrying out the broad social purposes of the law as well as a necessary protection and agent of the employer.

REFERENCES

RHODES, J. E. 2d. "The Liability Contract." Liability and Compensation Lectures, Insurance Institute of Hartford. Hartford (1913).

Elliott on Insurance, pp. 14-163, 451-458. Bobbs-Merrill, Indianapolis (1907).

Richards on Insurance Law, pp. 27-220, 664-678. Banks Law Publishing Co. New York (1909).

DE LEON, E. W. Manual of Liability Insurance. Spectator Co. New York (1909).

CHAPTER XVII

MANUAL PREMIUM RATES

The premium, in insurance, is the price which the insurance carrier receives for assuming risk and for rendering services incidental thereto. An ideal premium rate is an exact measure of the risk assumed, plus a proportionate part of the expenses of conducting the insurance business, and is levied on the basis of a unit of exposure to the risk. In employers' liability and compensation insurance the unit of exposure is one hundred dollars of yearly payroll and the premium to be paid by any given employer is as many times the quoted rate as one hundred dollars is contained in his yearly payroll.

Employers' Liability Rates.-In quoting rates for employers' liability insurance the companies have been hampered by a lack of statistical experience and by unregulated competition. These rates have reflected relative hazard between states, industries, and plants only in a very general way. Such experience as has been accumulated has been of small value because of the fluctuating nature of the hazard, and rates have been quoted largely on the basis of "underwriting judgment," a method which involves too much of the human element to be entirely trustworthy. Rates have been further influenced by the practical necessity of