Insurance

627. Nature. Insurance is a contract by which one person, for a certain price, obligates himself to compensating damages which another has suffered from a fortuitous event.

a. He who undertakes the obligation of compensation upon himself is called the insurer; but he who can require compensation is called the insured.

b. Insurance is an aleatory contract because its obligation for the insurer depends on an uncertain event; but it differs from other aleatory contracts in this, that its object consists in uncertain danger.

c. The contract of insurance can be entered validly orally; writing or the instrument of insurance is required not for perfecting the contract, but only for proving its existence. Therefore the mutual obligations of the contracting parties already exist before the instrument has been signed, unless the contracting parties have agreed otherwise.

d. De Lugo reduces the contract of insurance to sale, because the undertaking of danger which threatens another's thing is sold for a price. The undertaking of danger is of so much greater value, the greater the value of the thing insured is and the greater the probability of detriment or destruction of the same insured thing is.

e. Because the danger of any thing, provided it is estimable by price, can be the matter of insurance, therefore according to the diversity of the thing insured there are diverse contracts of insurance. Commonly buildings are insured against the danger of fire, crops against the danger of hail or flood, merchandise against the danger of shipwreck or carriage, and life against the danger of death (Lebensversicherung).

628. Justice of the contract. In order that the contract of insurance be just, these conditions are especially required:

1. That the price of insurance be proportioned to the quantity of the danger which is undertaken.

The quantity of the danger must be determined not from the event, but from the probability of detriment which in the judgment of prudent men is had at that time at which the contract is made.

2. That the danger of the insured thing be declared integrally and not increased after the insurance.

a. From those things which have been established concerning sale, it follows that the contract of insurance is void if in declaring the danger of the insured thing a notable circumstance is passed over in silence, so that the insurer would not have made the contract if he had known the circumstance: for substantial error occurs concerning the matter of the contract. But if the circumstance passed over in silence is not notable, so that the insurer would nevertheless have made the contract, but would have demanded a greater price, the contract is valid unless it is made void by the sentence of the judge; but the price must be increased according to the measure of the danger.

b. The same must be said if, after the contract has been entered, the danger of the thing is increased; namely, if it is notably increased, the contract becomes void; if it is increased only lightly, the price must be increased according to the quantity of the danger.¹

3. That the insurer have the means from which he can compensate the damages which he promised that he would compensate: for he acquires the right to the price only insofar as he can in reality furnish the security promised.

a. Therefore he can undertake as many obligations as he can fulfill according to probable foresight; but if he has undertaken more than he himself can fulfill, he cannot retain the price of insurance as to those which exceed his powers, even if the insured have suffered no damage.

b. If the insurer is equal to compensating not the whole damage but only part of it, some judge that the contract is invalid and the whole accepted price must be restored, because the insured does not consent to partial security; but others, on the contrary, think that he can retain the part of the price which corresponds to the quantity of security which he actually furnished, because the insured intends to obligate him to furnishing the security which he can furnish. But all agree in obligating the insurer to compensating the whole damage if the insured thing has perished, because by unjust fraud he impeded the insured from seeking true and full security elsewhere.

¹ Genicot I, n. 657.

629. Obligations of the contracting parties. They are bound to observe the conditions of the contract, which have been established either by private agreement or by public law, provided they are just. Concerning conditions which are customarily attached to this contract, these things must be noted.

1. The insurer is not bound to compensate damages which have arisen from grave fault of the insured or of his relatives, who are named in the document of insurance.

a. If damage was caused from light theological fault or from merely juridical fault of the insured or of his relatives, he can require and accept compensation, unless by the sentence of the judge he is deprived of this right.

b. If damage occurs from the malice of other men, the insurer is bound to compensate the damage, unless otherwise established; but the damager is bound to restitution toward the insurer. He is not indeed the efficacious cause of the damage which the insurer suffers, but only the occasional cause; nevertheless from the statute of insurance the insurer succeeds into all the rights of the insured in relation to the damager.

2. The insurer is bound to compensate only the damage which the insured actually suffered; this damage is determined according to the value which the consumed thing had at that time at which it perished.

If arbitrators establish a greater compensation than the value of the consumed thing requires, the insured can accept it; but he himself cannot require a greater one without injustice.

THERE are three different types of this contract—marine, fire, and life insurance. Marine and fire insurance are contracts of indemnity by which the insurer undertakes to make good any loss suffered by the insured through the happening of some accident, in consideration of the payment of a fixed sum at once or at periodical intervals. On the other hand, in a contract of life insurance the insurer undertakes to pay a given sum to another upon the happening of a particular event contingent upon the duration of human life in consideration of the immediate payment of a smaller sum or certain equivalent periodical payments. The particulars of the contract are set forth in a formal document called the policy, but the contract is made so as to bind the parties on the payment by the insured of the premium—i.e., the money charged or an instalment thereof.

Usually insurance business is conducted by companies which frequently effect reinsurance with other companies, so that losses are spread over greater numbers and are more easily borne. In marine insurance individuals called underwriters frequently contract to indemnify the insured by subscribing the policy and putting opposite to their name the amount to which they will be personally liable in case of loss.

A man may effect an insurance with many companies, but as marine and fire insurance are contracts of indemnity, the insurer cannot get more than is sufficient to cover the loss, and if one company has paid the whole of this, it will be able to recover proportionate sums from the other companies with which the party was insured. Any person may insure his own life to any amount he thinks fit by paying proportionate premiums, but no one can insure the life of another unless he have a pecuniary interest in that life, and only to the extent of that interest. A wife has such an interest in her husband’s life, and may effect an insurance on it for her own benefit.

Marine and life insurance policies may be assigned to others, but notice of assignment must be given to the party bound by the policy.

Contracts of insurance are uberrimae fidei, and therefore require that all circumstances that are material to the contract should be made known to the insurer in order to enable him to come to a sound judgement as to the risks and the merits of the case. Questions are proposed to one who desires to effect an insurance, to which truthful answers must be given. Warranties and conditions, express and implied, are also part of the agreement. If the questions in the proposal are answered falsely, or if the warranties or conditions are not fulfilled, or if any material circumstance is not disclosed when it should be to the insurer, the latter may void the contract. It is difficult to say when, according to law, the contract is null and void so as to confer no rights in the foregoing circumstances even before the insurer has used his right to avoid the contract. In conscience it would seem that we may adopt the distinction here between what theologians call substantial and accidental mistake. That will be substantial to the contract which would have prevented the insurance being effected at all if it had been known; if it would not have prevented the insurance being effected but only varied its terms, it will be accidental. A substantial defect in the contract will make it null and void so as to transfer no rights at all; accidental defects will leave the contract valid, but there may be an obligation to supply the defect, as, e.g., by paying a larger premium corresponding to the greater risk or more advanced age. A usual condition is that the policy of life insurance is avoided if the insured should die by his own hand. The purpose of this condition is to prevent a man gaining advantage by his own felonious act. So that if no advantage would accrue to the party, the policy may be saved in the absence of express condition to the contrary, as also if the insured committed suicide while of unsound mind.

If the premiums are not regularly paid at the proper time, the policy lapses, and the paid-up premiums are forfeited to the insurer. In such cases the policy may sometimes be revived on comparatively easy terms.

I. Notion. Insurance is a contract by which someone, the insurer, for a certain price obliges himself to compensate someone, the insured, for an uncertain damage or ceasing profit. It is said uncertain, that is, for each party.

II. Form. The form of the contract is to be drawn from the civil code; likewise those things which are required for proof of the contract.

III. Just price. The just price is that which is proportioned both to the value of the things and to their danger. Today, because of competition among diverse companies, the price can commonly be held as just.

IV. Obligations of the insured. The insured is bound: 1° not to insure a thing which he knows has already perished; 2° to manifest the true value and danger, or to leave them to be investigated; 3° to take care that, in view of the insurance, he not watch over the thing more negligently; 4° not to ask compensation for damage for which, with attention paid to the conditions tacitly or explicitly admitted, compensation is not owed; nor compensation greater than just. Nevertheless, provided that he is free from fraud, he can accept a greater compensation if arbitrators, to whose judgment the parties submitted themselves, have established it, because there is an aleatory agreement; likewise that which the agents of the company, after the matter has been investigated, bring, because it can be held as a liberal donation; for it is in the interest of the company to show itself liberal.

V. Obligations of the insurer. These are for the most part clear from the nature of the thing and the terms of the contract. He is especially bound to compensate damage insofar as that damage is the object of the insurance. Hence he is also bound, unless it was otherwise agreed, to compensation if the damage has occurred from the fault, even theological fault, of a third party; but not if it has occurred from the theological fault of the insured. In the former case, however, the insurer succeeds to the rights of the insured against the one causing the damage.

If part of the insured thing has perished, the insurer is bound only to compensate part of the damage in proportion to the insured value; except if they agreed about compensating the whole damage.

VI. Species of insurance. Insurance can be extended to things of any kind, for example insurance against fires, against damage to crops, against damages that will follow from the death of someone, against dangers of the sea, of carriage, etc. Concerning insurance against damages arising from the death of someone, or life insurance, certain things must be noted.

1. Life insurance can be accomplished in a twofold way, namely: 1° so that after the death of the one whose life is insured, for example a husband, the insurer pays a certain sum to a third party, for example the wife; 2° so that the insurer pays a certain sum after some person has reached a certain age; but if he dies before that age, the insurer is held to nothing or only to part of the sum.

2. The insured, when questioned about diseases and defects, is bound to respond if he wishes to enter into the contract; if he is not questioned, he is not bound to manifest them, because it is permissible to presume that the company either compensates itself by a greater premium, or acts thus for this end, that it may attract men.

Question. What is to be said both about the validity of the contract and about the obligation of the insured, if the latter did not manifest the things which he ought to have manifested?

Response 1. If there is question of concealing a matter of lesser moment, the contract is valid; but the insured is bound, if the matter concealed is worthy of note, to supplement the premium that was paid at less than the just amount.

Response 2. If there is question of concealing a grave matter, it is disputed. Some hold the contract as valid, because the object of the insurer's consent and the object of the present contract differ only qualitatively, for example a healthy body and a sickly body; otherwise than if there were question of a man who was already not living but dead; in a word, there is no substantial error. Nevertheless, the contract seems invalid, because the object of consent, at least morally speaking, seems diverse from the object of the present contract (n. 837). Whatever the case may be, if the contract is held as valid, the insured is nevertheless bound to supplement the premium that was paid at less than the just amount.

Forms of Contract.—The chief forms of contract are the following:

(a) gratuitous contracts, which are those that confer advantage on only one of the contractants, or those in which no payment or compensation for his acts or goods is made to one party by the other party. They include unilateral contracts, which produce obligation on one side only (e.g., a promise, gift, testament), and bilateral contracts, which produce obligation on both sides. The bilateral contracts are also known as bailments, or understandings whereby a thing or business is transferred from one person to another in trust, on condition that a return will be made to the owner, They include the following contracts: loans, in which return must be made of the identical things borrowed (commodatum), or of a thing similar in kind (mutuum); deposit, in which a thing must be returned after safekeeping (depositum); an agency, in which one conducts the business of another with the obligation of making returns, either from express contract (mandatum) or from imputed agreement (negotiorum gestio). In commodatum and mutuum the advantage is had by the bailee, in the other three by the bailor;

(b) onerous contracts of certain event, which are those that confer an advantage on both parties, and in which the thing agreed on is certain and definite. They include contracts in which one party transfers ownership to the other (e.g., buying and selling, barter, loan at interest, contracts for annuities, stocks and bonds) or useful dominion (e.g., lease of property, contractor’s agreement, hire of labor), and contracts in which both parties transfer rights to a moral person of which they are the members (partnership);

(c) onerous contracts of uncertain event, which are those that confer advantage on both parties, but in which the thing agreed on is contingent and uncertain. Examples are insurance, wager, gaming contracts, lottery, and stock market speculation;

(d) subsidiary contracts, which are those that are made in order to give security to principal contracts to which they are annexed or for whose sake they are made. Such are guaranty and surety, pledge and pawn, and mortgage.

What is common ownership of goods? Common ownership of goods is indeed distinguished from the contract of partnership, yet it implicitly contains in itself some contract of partnership, whatever may have been the origin of the beginning of this common ownership. Moreover, common ownership of goods is the co-ownership of two or more persons as regards one and the same thing, as, e.g., if several persons possess one and the same house. C. A. 361, 639, 825; C. H. 392; C. B. 741; C. He. 646-654; C. L. 2175 ff. Cf. here 1121 seq.

What is wagering? Wagering is a contract in which two or more, contending about the truth or event of some thing, mutually pledge something to themselves, so that it belongs to him who has attained the truth. C. A. 1270; L. 869; Lugo d. 31, n. 73.

Whether wagering is licit? - Wagering furnished with due conditions is of itself licit. For it contains nothing dishonorable, nor is it prohibited by any positive law. The required conditions are: 1. That it not be concerning illicit things; no obligation is given against morals. 2. That it be about a thing doubtful as regards each wagerer; otherwise chance is lacking, and equality is not given, unless one certain about the thing warns the other, and nevertheless the latter wishes to commit himself; for then a donation is presumed as in gaming. C. A. 1270, 1272. 3. That there be equality between the thing which is pledged and the uncertainty of the event, namely that he for whom the greater probability stands promise more, but he for whom the lesser probability stands promise less. 4. That each accept the thing in the same sense; otherwise they would by no means agree upon one thing. L. 869, 870, 878, 879; Lugo d. 31, n. 82, 83.

Whether wagering obliges? - Wagering obliges in conscience by natural law, as any other licit contract. C. I. 1892; C. G. 1965; C. H. 1799; C. B. 762; C. L. 1543: the same is established for wagering as for gaming. Cf. 1247. C. A. 1271: a wager made in good faith and otherwise licit obliges, insofar as not only a price was promised, but also handed over or deposited. But it cannot be sought judicially. Through the Bull of Pius IV In eligendis, wagers concerning the doubtful election of the Pontiff, or concerning his life and death, are prohibited. Gregory XIV, through the Bull Cogit nos, extended this to the election of Cardinals, with excommunication latae sententiae added as regards the election of the Pontiff, and reserved even outside the time of the vacant See. And because wagers of this kind are declared invalid, no obligation arises from them. L. 869.

What is gaming, and how many kinds are there? Gaming is a contract by which players agree among themselves concerning some certain thing or concerning a certain price that will fall to the victor. - There are three kinds: 1. Industrial, which is chiefly governed by the industry of the players. 2. Aleatory, which principally depends on chance. 3. Mixed, which partly depends on industry and partly on chance. L. 871; St. Thomas, 2. 2, q. 168, a. 2.

Whether gaming is licit and valid? - A contract of this kind, considered according to the law of nature, and if the due conditions are present, is valid and licit. The reason is that any owner of his own thing, just as he can dispose of it by giving it absolutely, so can hand the same over to another under some condition, whether that condition is fortuitous or depends on industry. L. 871. Moreover, that gaming, insofar as it is a simple relaxation of the mind, is licit is beyond all controversy. For as the body needs rest, lest it be weakened too much by labor, so the soul also needs rest, lest it be too much wearied by continuous meditation. St. Thomas, 2. 2, q. 167, a. 2. Considered according to the law of nature. For games of mere chance are prohibited by Canon Law. Dist. 35, can. 1. Yet as regards laymen, they say that Canon Law has already been derogated by custom. But as regards clerics, it is disgraceful for clerics to play dice. C. 15, de Vit. et honest. cler. Cf. V. 2, n. 179. By Roman Law certain games, namely of dice and fortune, were prohibited. L. 1, 3, C. de Aleatoribus et alearum usu. By the same Law those who had been beaten in forbidden games could not be sued so that they should pay, and if they had paid, they had an action of recovery. Wherefore the payment made by the loser was not invalid, but was to be invalidated by the judge. But because these laws were penal, or were held as penal, by use and custom, hence, with attention to Roman Law, it is most probable that laymen playing would not sin even venially. L. 883-885; Lugo d. 31, n. 8. According to C. L. 1541 seq., gaming as a means for making profit is not permitted. What someone has gained in gaming he cannot seek judicially. If nevertheless he has paid it, he cannot recover it, except in the case of fraud or deceit on the part of the victor, and of a game of mere chance, commonly di azzardo. And what is lent in the act of this game of mere chance likewise cannot be recovered. According to C. A. 1272, what has been established for wagering is applied to games. Cf. 1244. But all games of chance are held as illicit, and it is declared that they bring forth no obligation. Nevertheless an action of recovery of what has been paid is denied.

According to C. I. 1802-1804 and C. G. 1965, 1967, there is no prohibition of any game. Nevertheless it is established that the law gives no action for exacting payment of that which is owed because of gaming or wagering. Games which contribute to exercise of the body are excepted, such as handling of arms, racing either on foot or on horseback, ball games, etc.; for these an action is granted. Yet it is within the power of the judge even in these to deny the action if the sum deposited for the game or wager has been exorbitant. But if the loser freely paid, he cannot recover what was paid, provided fraud or deceit of the victor was absent, and the loser is not a minor, or interdicted, or declared incapable. According to C. H. 1798-1801, games of mere chance are prohibited, and no action for them is granted to the victor; nevertheless no action is granted to the loser to reclaim what was paid, unless deceit intervened, or he is a minor or made incapable. And the same is established for wagering. Wagers which have analogy to these games are prohibited. Games which contribute to exercise of the body are permitted, as in C. I. and C. G.; and for these games and analogous wagering an action is granted; nevertheless the judge can reject the petition, or reduce the sum owed, if it is excessive. According to C. B. 762, gaming and wagering produce no obligation. But what has been paid cannot be recovered.

If the due conditions are present, which as regards validity are: 1. That the things exposed to the game are proper to the player, and in his ownership, and in his free faculty of disposing; otherwise the contract will be either null, or rescindable, or at least the payment made by the loser will be invalidable. 2. That all force and fraud be absent; hence it is necessary that the players concur freely, and indeed that there be moral equality among them in hope of gaining and in danger of losing. - But for liceity it is required: 1. That nothing dishonorable be mixed in by words or deeds. 2. That there not be present from it proximate danger of sinning, for instance of breaking out into blasphemies, or harm to neighbor, for instance of neglecting care of domestic affairs, of making oneself unable to pay debts or to feed a family, etc. 3. "That it be suited to the person, time, and place, and be duly ordered according to the other circumstances." St. Thomas, 2. 2, q. 168, aa. 2, 3, 4; L. 882;

Lugo n. 28.

Resolutions: If someone gains by exposing stolen money to gaming, apart from which he has nothing else that he might hand over, then he is bound to restore what he has gained, because the contract was null, since he exposed money which the co-player could not acquire. But if he has other money, it makes no difference at all that he stole the money from the one playing with him or from another. Since he was equal in solvency, he will indeed be able to retain the profit, for it is the fruit of his own industry; but the obligation always remains of rendering to another what was taken from him by theft. - L. 875.

Whether someone is bound to restore what he has gained from a son of a family in gaming? - Resp. Negatively, if the sum lost by the son of the family is from his own goods, of which he has perfect ownership. Affirmatively, if the sum lost is from the father's goods, or from his own goods of which he himself has only direct ownership. Except unless the sum is of small moment, in which the consent of the father is presumed, who would not wish to deny honest recreation to the son, or unless it is some moderate part deducted from the food which the father supplies to him. "Nevertheless it is probable that in that case, if the son of the family does not wish to pay what was lost in the game, he can licitly oppose the exception and is not bound to pay, reserving something from his food." L. 876, 871-873.

Whether a victor who is much more skilled in a game, so that he certainly foreknows that he will be victor, is bound to restore? - Resp. Affirmatively, much more probably, because the equality required among players is lacking, and therefore justice is injured. Hence one notably more skilled must withdraw from the game, or remit something of advantage to the adversary. Thus the more common opinion, against some. Yet in practice restitution should not be urged if the matter concerned a thing of lesser moment; or even when the adversary, sufficiently warned, nevertheless stubbornly wished to play. Then no deception would have intervened. - According to C. A. 1270, 1272, in wagering and in gaming, if the defeated party was previously conscious of the event, donation is presumed. But it is otherwise in public games. For in these the prize is promised to him who excels the others. L. 881.

Whether, according to the law of Roman Law, a victor in a prohibited game is bound to restitution, or the loser is bound to pay in the same game?

Resp. To the 1st: Negatively before the sentence of the judge, because by positive law the contract is not declared invalid, but only illicit, and an action to recover is given to the loser. Resp. To the 2nd: The first very probable opinion affirms. The reason is that by natural law the contract was valid, and therefore the loser is bound to stand by it until he judicially opposes an exception or seeks restitution. The second and more probable opinion denies. The reason is that the law, by giving to the loser a right to defend himself by exception or by recovery of what has been paid, also gives an absolute right not to pay. For to what purpose is someone bound to pay, if he can immediately recover what was paid? According to more Recent Laws also the victor is not bound to restitution, and the loser is bound of himself to pay, since the game is not prohibited by the aforesaid laws nor declared invalid, unless force or deceit intervened. But if the game is prohibited by the same laws, it can perhaps be sustained not improbably that the laws implicitly removed the obligation of paying, since the judge could not urge it by his own sentence. - L. 887-894. Cf. here 1247.

Whether gaming is valid if a large sum of money is exposed at one time? Resp. The first opinion denies. The reason is that because of prodigality the game is base. The second opinion affirms, of itself, more probably, if the players are able freely and fully to dispose of their goods without detriment to family and creditors, because the players then freely dispose of their own goods, and knowingly and willingly undergo danger equally; and therefore there is no injustice. Nor does the reason of prodigality press; for it is also base to play from the greed of profit alone, although this greed, as that prodigality, of itself is only light. Yet who would say that a game is invalid because the players are moved by desire for profit? Moreover profit can well be illicit without being invalid. Yet, practically speaking, they do not seem to be disturbed in the tribunal of penance who would not wish to pay a large sum which they had lost. And this either by reason of good faith, not to be disturbed, or because by positive Law the judge can reject the petition when the matter concerns games approved by the law itself, but the sum agreed for the game is excessive. Cf. 1247; C. I. 1803; C. G. 1966; C. H. 1801; C. B. 762; L. 735; Gousset 889.

Whether one who uses fraud while playing is bound to restitution? "He is not bound to restore who uses those clever tactics which the rules of the game and received custom allow, since each knows that such tactics are customary, and thus tacitly and freely consents to them; e.g., 1. If, having stronger cards and being sure of victory, he increases the wager, or simulates fear, so that the adversary increases it. 2. If, knowing that he has lower cards, he dissembles and increases the wager, so that what had been placed may thus be left to him. 3. If he looks at the cards of another from that one's negligence alone and without fraud; otherwise, if he places himself so that he can see, or appoints another by whom he may be warned. 4. If while playing he learns to know cards from the back, which he had not previously marked nor known. But he who uses frauds not customarily employed, or unknown to the co-player, e.g., steals cards, or marks them with signs on the back, or uses marked cards, or those which he knew beforehand while the partner is ignorant, or by some art arranges them, etc., is bound to restore not only the profit, but also as much as the hope of gaining, indeed even of playing with him, was worth to the other." L. 882, 877.

Whether, if someone injuriously compels another to play, he can afterward retain what he gains? "The first opinion denies, because damage following from an injury must altogether be restored.... But the second opinion affirms that he can retain it, because then not the coercion or the game, but rather chance or the skill of the one coercing was the cause of the damage.... This opinion, speaking of itself, is more probable to me, unless the co-player who coerced surpassed the one coerced in skill at playing; for in that case I think he is bound to restitution of at least part of what was gained, according to the measure of skill by which he excelled the other. The reason is that that contract, notwithstanding the injury of fear inflicted, was sufficiently voluntary on each side, and valid, according to the more common opinion reported.... I said, speaking of itself, for if the one who suffered fear seeks restitution of the money lost, Lessius rightly teaches that the one inflicting fear is bound to restore what was gained." L. 880; St. Thomas, 2. 2, q. 32, a. 7, ad 2, etc.

But what if someone compels only by importunate requests? - "Sanchez, etc., still hold that he cannot retain it. But Lessius, etc., far more probably contradict, because requests do not remove the voluntary, just as threats do not; as Busenbaum asserts from the common opinion with Bannes and Molina." L. 880.

What is a lottery? It is a contract by which, several persons paying money toward a certain thing or toward a certain sum of money placed in the middle, a right of drawing lots is acquired; whence, once the drawing has been made, some have the whole proposed prize, some a part, some nothing.

Whether a lottery is licit? Resp. Affirmatively of itself. For a lottery can be regarded as the sale and purchase of hope and of the right to a certain prize to be acquired by drawing lots. But as it is licit to bargain concerning the danger of some thing, so also it is licit to buy hope and the right to some thing. It is said of itself; for accidentally from extrinsic circumstances it can become illicit, e.g., if from it a family were to be thrown into misery. C. A. 1267, 1269. According to C. B. 763, a lottery does not induce obligation unless it has been approved by the State; otherwise, the dispositions established for gaming and wagering are applied to it. Cf. 1247.

What conditions must be observed in a lottery, lest it become illicit? The first condition is that there be no fraud in drawing the tickets, nor in paying the prize which has fallen. The second condition is that proportion be preserved between the smallness of the price and the greatness of the uncertainty of the hope, and at the same time with the greatness of the prize, and, in a public lottery which is constantly repeated, with the greatness of the danger to which the owner of the lottery is exposed, so that he can always satisfy future victors. There are some who add a third condition, namely that the profit in the lottery not exceed that which would be had in honest business if the money were spent in it. But this condition is established by no reason, since then the profit received in any aleatory contract, and generally the profit received in gaming, would be illicit. For this is proper to these contracts, that uncertain chance intervene, to which the contracting parties voluntarily subject themselves; and, when chance favors, it often happens that someone receives in a short time a profit which even in a long time his own industry would not produce.

C. A. 1273, 1274.

What are stock-exchange games? Stock-exchange games are commonly called certain business and mercantile operations which are ordinarily made in the money market through intermediaries, who are called exchange agents. They are called games because titles of public revenues are sold and bought, which, according to various circumstances of society and governments, have varying value; whence the aforesaid operations are aleatory, and a certain wager intervenes concerning the variety of values of this kind, namely concerning their increased or diminished price. But they are called stock-exchange games from the public place, or money market, which is called the stock exchange.

Whether stock-exchange games are licit? - Various stock-exchange games, more or less complex, are reduced to the following simple mercantile and business contracts. 1. Someone buys a title, e.g., of 1000 lire, at the current price, and with counted money of 900 lire. The annual revenue of the title is 50 lire, namely at the rate of 5 per 100. Through days, through months, through a year, through several years, the buyer receives the aforesaid revenue. Certainly nothing illicit is present in this matter, for it is a certain simple purchase, or a simple consignative census, or a simple constitution of revenue. But if the buyer, when a good occasion is offered and seized because the price of public revenues has increased, sells the title of that annual revenue of 50 lire, at the current price and for counted money, for 1100 lire, he indeed receives a great profit, but again there is nothing illicit in this matter; for it is a certain simple sale, and the profit is owed from the changed price of titles in the market. And if someone, intending this profit, buys several titles of annual revenues at the current price and for counted money when the price is lowest, so that he may resell them for counted money when the price is highest, business properly is had, which of itself has nothing illicit.

2. If someone again buys a title of annual revenue of 50 lire at the current price of 900 lire, not for counted money, but on credit to a term, e.g., for fifteen days, for a month, then either the title is immediately given, or only when the term arrives, or the fixed day, which day is called the day of liquidation: the first, the fifteenth of the month. If the first occurs, nothing is had except a certain purchase made on credit, by which the buyer can profit if on the appointed day the value of the title increases, or on the contrary the seller can profit if on the appointed day the value of the title decreases. Nothing indeed illicit is in this matter. But if meanwhile the seller demands the legal interest of the money until the price is paid, he can do this by right, since it is not equitable that the buyer retain the thing and the price for himself and enjoy the utility of both. Then sale and purchase and mutuum intervene at the same time, or a simple mutuum.

If the second is verified, then the danger of detriment is equal for buyer and seller, and likewise the hope of profit is equal for both; for meanwhile the value of the title can increase and can decrease. Therefore when the day arrives on which the seller must hand over the title and the buyer the price, if the value of the title has increased, the profit will belong to the buyer; if the value of the title has decreased, on the contrary the profit will belong to the seller. Therefore, since equality of both is preserved, nothing illicit is had here of itself.

3. The seller and buyer likewise make a contract to a term or to a day, but the seller does not hand over the title to the buyer in the present, nor does he oblige himself to hand over the title to the buyer when the day arrives. Similarly the buyer neither hands over the price to the seller in the present, nor obliges himself to hand over the price of the title to the seller when the day, or the constituted term of the contract, arrives. Therefore the seller and buyer oblige themselves, when the day arrives, only to hand over the difference of the value or price of the title in the present, or today, and of the value or price of the same title on the constituted day. It is therefore a certain wager concerning the increase or decrease of the price, in which again equal danger and equal hope exist for seller and buyer. For if, when the day arrives, the value or price of the title has increased, the buyer gains this difference of value, to be handed over to him only by the seller without the title. But if the value of the title has decreased, then the seller gains that difference of value, which the buyer alone must hand over to him, without the remaining price of the title, namely the excess of the former price constituted on the day of the contract over that lower price which the title obtains on the established day. Wherefore neither is anything illicit of itself had here, just as nothing illicit would be had in the simple contract of wagering concerning an increase of the value of the title on the part of the buyer, who hopes that it is to be increased, and therefore buys; and concerning the diminution of the value of the title on the part of the seller, who fears it, and therefore sells. But this contract would be illicit if someone certainly knew, by private knowledge, that the value of the titles was soon to be increased. For then by the contract someone would give nothing to the other; he would not give the right to profit if the price were diminished, which would be altogether fictitious. And although the other is ignorant of this, that false and empty right does not for that reason cease to be such, since the price is certainly to be increased and the other certainly knows this.

4. The buyer, buying a title, with only part of its price immediately paid, to a term or to a day, reserves to himself the right, when the day arrives, either of demanding execution of the contract, or of withdrawing from the contract, leaving to the seller that price already given. Since the right which the seller grants to the buyer is appreciable by a price, this contract is just if the price is proportionate. The proportion of this price depends on various circumstances and on the varying concurrence of sellers and buyers. The right of rescinding the contract is sometimes conceded to the seller himself, with a premium left to the buyer. This conditioned purchase and sale is called operation with premium; the two preceding ones are called operations to a term.

5. A mercantile relation, or reportus, is a certain species of retro-sale. It consists first in selling for a lower current price, immediately paid, any titles which are sold in the money market, and immediately redeeming the same at a price to be paid at a term, or on a day, but higher. C. I. Comm. 73. Here also no illicitness of itself appears; for there is a double sale of the same thing, or the sale of a thing with its immediate retro-sale, and if due equality of price is preserved, certainly there is no injustice. In the second sale, or in that immediate retro-sale, the thing indeed is sold at a term for more than it was bought. But this arises from the fact that within a short time the price of these titles is changed according to common estimation. But from the fact that the thing will probably be worth a certain amount on the constituted day, the seller can take the norm of the price. Wherefore this second sale, or retro-sale, is an aleatory contract by which both the seller and the buyer can profit, namely if the price of the title, on the constituted day, has grown or decreased still more than the price foreseen by the seller and to be paid by the buyer. Gur. Cas. 946-950. According to C. B. 764, the contract of paying by the loser to the gainer the difference between the agreed price of merchandise or of a monetary title and the price at the time of delivery is considered as a game. Cf. 1247.

What is insurance? "A contract of insurance is that by which someone takes upon himself the danger of another's thing, obliging himself either gratuitously or for a certain price to compensate it if it perishes. But if this is done gratuitously, it is a gratuitous promise; if for a price, it is as it were a purchase, by which the insurer sells his obligation of furnishing to another his thing unharmed. For its justice it is required that the event of the thing be uncertain to each, at least as regards the knowledge which they have concerning it, because otherwise equality is not preserved." L. 911. For the same reason it is likewise required that the insurer be equal to paying what he promised if the thing perishes, and that on the part of the insured the price be proportioned to the danger.

Nor indeed according to C. I., C. H., C. G. can someone insure the same thing for its whole value with several insurers. Nor can he insure it for a quantity exceeding the value of the same thing. According to C. H. 1795, this agreement is ineffective for such a part. Lugo d. 31, n. 97; C. I. Comm. 417, 426, 429, 430, 431, 433; C. A. 1288, 1289, 1291; C. H. 1791, 1792, 1795, 1797; C. G. Comm. 346, 348, 357, 359; C. L. 1538, 1540. Insurance is treated in the Italian Commercial Code, for it is considered as the object of commerce; whence nothing about it is in the Civil Code.

According to C. I. Comm. 417, insurance is a contract by which the insurer obliges himself, by means of a price or premium, to repair detriments and damages which can come to the insured from certain fortuitous events, or from superior force, namely that which cannot be resisted, or to pay a sum of money according to the duration or events of the life of one or several persons. Hence all immovable and movable goods and life itself can be insured. - The contract of insurance must be made in writings, C. G. Comm. 332; C. H. 1793, 1794; C. I. 420. Insurance of life is entirely different from a life census. For it is a contract by which someone obliges himself to pay each year, during his life, a certain determined pension, and another obliges himself to pay a certain determined sum, after his death, to his heirs.

Resolutions: If the insurer is certain that the thing is already safe, he unjustly seeks the price and is bound to restore. If the insured certainly knows that the thing has already perished, he cannot make a pact concerning its insurance. Likewise, if he himself was the cause that the thing perished in order to obtain the premium of insurance, he is bound to restitution. L. 911; C. I. Comm. l.c.; C. G. Comm. 348; C. A. 1290, 1291; C. H. 1797.

What are the obligations of the insurer? - 1. The insurer must be solvent, C. I. Comm. 433; C. G. Comm. 346. But the insurer can cause another to insure his pledge. C. I. Comm. 422; C. G. Comm. 342.

2. The insurer must furnish compensation for detriments and damages which happen to insured things from fortuitous events or from superior force. But he by no means must furnish compensation for detriments and damages which arise from a defect inhering in the thing which was not declared, nor those which are owed to the action or fault of the insured, or of those acting in his name, or of agnates or cognates who are named in the instrument; nor furnish compensation for damages produced from war or from popular tumult, unless a contrary agreement existed. C. I. Comm. 434. Cf. C. G. Comm. 350 ff.; C. A. 1290.

3. Insurance against fire embraces all damages inflicted by fire, from whatever cause it was produced, except what has come from grave fault personally imputable to the insured himself, and except the case of war or popular tumult. C. I. Comm. 441.

4. The insurer is freed from the obligation of paying when by an act of the insured the dangers are changed or aggravated, by the change of some essential circumstance, so that the insurer would not have given consent if it had existed from the beginning. C. I. Comm. 432.

5. If a third party inflicted damage, the insurer who repaired the damage has an action against him. According to C. I. Comm. 438, the insurer who repaired the damage is substituted into the rights and actions of the insured. But the latter is held concerning every detriment brought by him to rights of this kind. But, setting aside this law according to which the contract of insurance is understood, although, speaking of itself, the insured has been made indemnified by the insurer, for that reason the damager is not freed from the grave obligation of repairing the damage of the one damaged. Nor does he satisfy this obligation by distributing the sum to be restored among the poor, or by spending it on pious causes; for thus the right injured by him is not repaired. Neither the poor nor pious causes were damaged by him. But what the insured receives by force of the contract of insurance, and of the price paid for it, does not exclude the right by force of the real injury inflicted on him from the damaging. The titles and rights are quite diverse. Speaking of itself; for by force of the preceding law and of the contract of insurance, understood according to its norm, it suffices that the damager compensate only the insurer for the damages; and consequently what the damaged person has received from the damager he is bound to hand over to the insurer.

940. • They are of various kinds: insurance, wager, lottery, or raffle, and game. They are called aleatory because they are liable to the vicissitudes of lot.

Insurance is a contract by which one takes upon himself the risk of some thing, and the other obliges himself to a price for a risk of this kind having been undertaken. Thus in various cities there exist societies which insure, for example, houses against fire, ships against shipwrecks, etc.

941. Questions. - Q. 1. Whether the contract of insurance is lawful?

Resp. Affirmatively. For equality is preserved when the due conditions concur, as the Theologians commonly confess, and daily practice confirms.

Q. 2. What are the conditions required for insurance?

Resp. They are the following: 1. that the price be proportioned to the risk; 2. that the risk be true and equally known to each party; 3. that the insured observe all the conditions of the contract; 4. that the insurer have that from which he can pay. - St. Lig. n. 911. - See Cases, n. 1012.

915. 1. Notion, origin, and liceity. (A) Insurance is a contract by which one person, for a certain price, obliges himself to compensate damages which another can suffer from an involuntary case. - He who takes upon himself the obligation of compensating damage is called the insuring party or insurer; but the other is called the insured.

¹ Lugo, disp. XXXI, n. 93-103; Carriere, III, n. 951-1011; Lehmk., n. 1131-1135; Ball. P., n. 933-937; Genicot, n. 656-658; - for French civil law: Alauzet, Traite general des Assurances, Paris, 1844; Agnel and de Corny, Manuel general des Assurances, Paris, 1900; - for America: J. W. May, The Law of Insurance, 4th ed. revised by Gould, Boston, 1900.

The matter of this contract can be whatever, on the one hand, is estimable by price, and, on the other hand, is subject to some danger. Thus ships and goods are customarily insured against the danger of shipwreck, buildings or movables against the danger of fire, crops against the danger of hail, fragile things against the danger of breakage, the integrity of members against mutilation, life against the danger of death, etc.

(B) A contract of this sort, almost unknown to the ancients, was instituted in modern times, and today among all cultivated nations has especially prevailed. In the fourteenth century, it was first introduced with respect to goods to be carried over the sea, namely when maritime commerce had already begun to flourish. In the seventeenth century, the first society of insurance against fires was founded in London (1684); in the eighteenth century, a society of the same kind was instituted in France;² in the nineteenth century, almost countless societies of this sort appeared everywhere and with respect to dangers of every kind.

² Sicard, L'ancien Clerge, t. I, p. 475-476, describes how Bishops in France instituted a certain kind of insurance, by prescribing collections in churches for bringing help to those who had suffered some damage from fire.

916. (C) In antiquity some theologians doubted concerning the liceity of this contract, because they feared lest it bear before itself something usurious; but today, its nature having been better inspected, its legitimacy is acknowledged by all, provided that the rules to be set forth below are observed. - Indeed there is no one who does not see its social utility. For it concerns the public good that damages which can occur from a fortuitous case be foreseen and forestalled; otherwise industry and commerce would often be retarded in their progress, and often also masters and workers would be led to the extreme of poverty and want; now, for forestalling damages of this sort, nothing simpler and more efficacious has hitherto been devised than that contract by force of which, by means of a modest price paid each year, a fund is instituted for compensating all damages fortuitously occurring. - Thus besides, the foresight and thrift of individuals is promoted, joined with the greatest security.

917. 2. Principles. In a general way one must stand by the laws and special statutes by which the mutual offices of the insurer and the insured are determined. Yet it helps to set forth certain general principles, by whose help the difficulties more commonly occurring can be solved.

(A) On the price to be paid. The price of insurance ought to be proportioned to the quantity and probability of the danger, according to the estimation of prudent persons. For the equality of this contract is placed in this, that, all things having been diligently weighed, there be a fair proportion between the probability and extension of the danger and the price which is paid by the insured, so that, from things commonly occurring, the insurance society, after all damages have been compensated, may receive some moderate gain. - But this proportion is determined according to statistics which today are sufficiently accurate; and, since besides there are many societies, not only national but also international, which freely compete in this matter, commonly the current price is legitimate. For, if the gain is immoderate, soon other societies will be stirred up which will furnish insurance against the same danger for a lower price.¹ But it would have to be said otherwise if all or most societies agreed together not to diminish the price. - Besides, when the price seems excessive, nothing prohibits mutual societies from being instituted, in which the insured themselves have a part in the gain received.²

¹ Wherefore that which Lehmkuhl says (n. 1135) rarely occurs: "For if those who have a part in the insurance society, after all expenses of administration have been deducted, are accustomed each year to have excessive gain, e.g., as it is sometimes said to happen, 20 percent and beyond, for the sum which they handed over for the sake of caution: this seems to me to exceed the limits of justice." - Besides, before a thing is declared unjust, it must be weighed whether these gains do not proceed from the great number of insured persons, from the skill of administrators, who wisely apply the money received to fruitful uses, and especially whether there is danger of losing all these gains, when a common calamity occurs, e.g., a fire in which the greatest part of a city is destroyed. Cf. Ball. P., n. 935.

² Astresse, Traite general des assurances mutuelles, Paris, 1901; Agnel and Corny, op. cit., n. 177-198.

918. (B) On the offices of the insured. The insured ought honestly and sincerely to declare the true value of the thing insured and all the dangers to which it is exposed. Otherwise there will not be proportion between the price which is demanded by the society and the danger which it takes upon itself.

(a) Wherefore, by natural right, the contract is void if, in declaring the danger of the thing insured, a notable circumstance is voluntarily kept silent, which, if known, would have prevented the contract from being entered; but if the circumstance is not notable, so that the contract would nevertheless have been entered, the contract is valid, but the insured is held to increase the price by reason of the danger. Hence also, if, after the thing has already been insured, the danger is increased, this ought to be candidly declared. - But often by civil law, or from special statutes contained in the agreement itself, the contract is declared void even when a circumstance of little note has been kept silent, or at least rescindable at the will of the insurer, and indeed in such a way that he can retain the price already paid, although he is not held to compensate the damage. Yet this, as being less consonant with natural right, does not oblige except after the sentence of a judge.

Thus, when the matter concerns life insurance (assurance sur la vie, life insurance), not a few of the insured deceive concerning their age, so that the price to be paid is diminished; then the price ought to be increased, so that the premium may be licitly received.¹ But if a disease has been kept silent, from which the danger of death is greatly increased, the error is substantial, and he who knowingly deceived the insurers not only loses the right to the money already paid, but also ought to compensate the damages which the society underwent from this. This indeed is true even when the insured has subjected himself to medical investigation, as is the custom: for he ought sincerely to set forth diseases known to himself, and candidly to respond to legitimate questions proposed by the physician.² - Yet, if, as the years pass, the health of the insured grows strong beyond expectation, the contract is made valid, because the contract is implicitly renewed as often as the price is paid and accepted.

¹ According to the statutes of certain societies, the insured can make a new declaration without losing his rights, provided he increases the price; but according to the statutes of others, he loses all his rights as soon as the fraud has been recognized. - For France, see Maire and Gellie, Manuel theorique et pratique de l'Assurance sur la vie, Paris, 1898; Agnel and Corny, op. cit., n. 258-468.

² Yet, in Germany and certain other regions, many societies declare in their statutes that they renounce the right of attacking the contract on account of false declarations, after it has already endured for five years; but not so in France (Agnel and de Corny, n. 360-376). As to Germany, see Ph. Huppert, Der Lebensversicherungsvertrag, Mainz, 1896.

919. (b) When error concerns the value of the thing, these things can be established, with attention to natural right alone: if each contracting party has erred in good faith, the contract remains valid, but, the error having been discovered, the value of the thing insured and the price to be paid ought to be diminished; if each knowingly and willingly agreed concerning the excess of value, the convention assumes the nature of a wager (gageure), concerning which we shall speak below; if the insured deceived the insurer, the contract is indeed invalid as to the excess of value, but it stands as to the true value of the thing, which therefore ought to be compensated, in the case in which the thing perishes: for the error is not substantial, and therefore does not void the whole contract. - If anything contrary is declared in the statutes, it does not oblige in the forum of conscience except after the sentence of a judge.

But the value ought to be declared as it is commonly estimated at the time the contract was entered; but if it has been diminished at the time when the thing perished, the insurance society commonly does not compensate damages except proportionately to the value then had, according to the estimation of arbitrators.

Wherefore if movables which had been insured have for the most part been sold, this ought to be declared so that the price and the owed compensation may be proportionately diminished. But if this declaration was not made, and therefore the price was not diminished, one must distinguish: if this was done fraudulently, restitution of all things is not owed, but only of those things which truly perished; but if this was done in good faith, the insured can retain whatever the society paid: for damage is not unjustly and voluntarily inflicted on it, since the same price had been paid each year.

N.B. From the things said above, where we treated the unjust damager, n. 477, he who voluntarily destroys an insured thing not only does not obtain a right to compensation, but ought to repair all damages unjustly inflicted. - But he who, in the case of a fortuitous fire, in no way tries to restrain the conflagration, is likewise guilty of injustice; for he ought to use ordinary diligence for protecting his own things; he is guilty a fortiori who prohibits others from extinguishing the flames.

920. (C) On the offices of the insurer. (a) The insurer ought to be equal to compensating all damages concerning which he is held: for to this he explicitly obliges himself. For this, however, it is not necessary that he possess a sum of money equal to all the goods whose danger he has taken upon himself, but only that he have as much as is probably required for compensating the damages which, from things commonly occurring, can happen: for it is plainly improbable that all the goods whose danger he has taken upon himself will perish at the same time.

Therefore societies act unjustly which take upon themselves more dangers than they can probably compensate, unless however they immediately reduce the danger to just limits by having recourse to societies of reinsurance, which, by means of some price, consent to undergo a proportionate part of the danger.

If the insurer is unequal to repairing the whole damage, the insured can rescind the contract and seek back the price paid, because he had not consented to the contract except for obtaining perfect security. - Hence also, if, after he has paid the price, the insured thing has perished, he has the right of pursuing full reparation of the damage by all legitimate means.

921. (b) The insurer ought to repair the whole damage truly inflicted on the thing insured, according to the conditions determined in the contract itself, and indeed as soon as morally possible after the thing has perished or has become worse: for he does not make his own the price paid by the insured, except by obliging himself to repair damages.

But what compensation is owed must be defined both from law and from the statutes expressed in the agreement. As to the time at which compensation ought to be furnished, the insurer can indeed wait until it is morally established that the damage was inflicted by a fortuitous case, but not by the fault itself of the insured or of his family; but he would act unjustly who, when this is established, under one or another pretext, deferred compensation, or compelled the insured without reason to present himself before a tribunal.

But when the damage has been inflicted from the grave fault of the insured,¹ or of his relatives - namely of those who are designated in the statutes of insurance - the insurer is not held to compensate it. But if it has occurred from the malice of others, the insurer ought to repair it, unless it has been established otherwise, yet with his recourse preserved against the unjust damager: for then the insurer succeeds to all the rights of the insured with respect to the author of the damage.

¹ If the fault is light or only juridical, the insured licitly accepts compensation, unless he is deprived of this right by the sentence of a judge, from the things said n. 475.

Notion. I. Insurance is an aleatory contract by which someone, for a certain price, obligates himself to answer to another for certain cases of chance or of prevailing force.

The printed formula which is usually employed in entering upon this agreement is called in Italian polizza, in French police d'assurances; the money to be paid after stated intervals for insurance is called premio, prime.

II. It is distinguished: 1. from the very varied event for which security is promised: for the case of fire, hail, plague, shipwreck, theft, misfortune, old age, sickness, death, or even life up to a certain age.

2. From the object insured, there is real insurance, whether of things or animals, and personal insurance, or insurance of persons.

3. Personal insurance is made, some individually, some collectively; some in the name of the person insofar as he is such, some insofar as he belongs to this or that social class: this is called social; thus there is more than one insurance of workmen.

Especially to be remembered is life insurance, which, from the Italian banker Tonti, of the seventeenth century, its inventor, is sometimes called a tontine, although by this word a certain form of this insurance is more properly designated. Life insurance properly looks to this, that the insurer, for certain annual payments, obligates himself, upon the occurrence of someone's death, to pay a definite sum either to the heirs (whose need is thus provided for) or to another designated person. Sometimes an agreement is made by the contrary reason, so that the insurer owes a sum if a definite person has reached an age, for example, of 18 years; and not rarely each manner is mixed: mixed insurance. Lesser insurances also are frequent, by which merely funeral expenses are promised.

Of the same kind are insurances against sicknesses. And rather than an agreement being made with outsiders, several societies exercise mutual insurance, so that the same persons who are insured are the insurers (Società di mutuo soccorso, Mutualità contre l'incendio, etc.).

Under the name of reinsurance comes, as it were, a second insurance, by which either the insurance societies themselves, by federation or by a greater society, guard themselves from the necessity of giving an excessive amount of money for great misfortunes, for example shipwrecks, or they favor their insured members with greater protection promised by federated societies. Thus, for example, a society of mutual assistance pays sick workmen for some days a daily wage or a quota part of it. But if sickness perseveres beyond a certain time, the federation of societies is accustomed to provide for the same persons. Reinsurance, therefore, is another insurance either of societies or of persons who are insured.

Norms. 1. The justice of the contract requires: a) an uncertain event, or at least one unknown to each party; b) a just price, so that the premium to be paid corresponds to the danger, with account taken of expenses. The price is assessed by laws, morals, and the judgment of prudent men.

Where there is no legal monopoly, it will be difficult to establish that the price was excessive. But by well-constituted mutual societies, not moderate expenses are spared.

2. One must abstain from unjust frauds. a) If the insurer is not solvent, he will not be able to retain the price except according to the proportion of the part which he made secure. - b) The insured ought to declare the whole danger, which afterwards he is forbidden to increase. Otherwise, according as fraud gave cause to the contract itself or merely to its conditions, the contract will be null by natural law, or will have to be reduced to equity, so that for the increased danger the price is increased and the obligation of compensation is diminished. The more severe sanction of positive law will bind at least after the sentence of the judge. - c) Nor can he demand compensation beyond the damage which he has suffered or outside the cases promised. Yet he can accept a greater amount than the insurer freely offers (sometimes in order to attract) or than arbitrators establish. Damages which arise from grave fault of the insured or of connected persons are customarily excluded; which grave fault, before the sentence of the judge, seems able to be taken as theological. And perhaps the agreement made is understood in such a way that the insurer ought to demonstrate the fault.

Can the same thing be fully insured twice? Of itself, certainly. But positive laws and often the stipulations of the contract themselves stand in the way. Similarly, unless the insurer himself has consented expressly or tacitly to the fiction, insurance of a quantity or value greater than that which is in truth present is valid at most only for the true quantity or estimation. If, after insurance has been made, the amount of insured things has been diminished, you will judge from the express or tacit agreements what right follows from this.

You should observe, in the partial destruction of a thing, that only the proportional part of the promised sum is paid, even if it were unequal to repairing the damage.

He who insures life ought to declare diseases insofar as this is required by the insurer. He who has unjustly concealed a hidden disease from which he was certainly going to die shortly has made the contract null and can receive nothing. He who has unjustly concealed other diseases will not be able to retain anything except what, the disease being known, he would have obtained for the premium paid. If however, contrary to expectation, he has lived longer, the defect of the contract is healed, "because the contract is implicitly renewed as often as the price is paid and accepted," Tanquerey, III, 918. On these cases, well and broadly, Gopfert, Moraltheologie, 482, n. 19.

On account of insurances which often protect the insurer himself, it is not so easily established what society has suffered damage from unjust fraud, for example from voluntary fire. The matter can be committed to those managing the society. There are also those, thus Lehmk. I, 1359, who think restitution can be made to the poor, because rather innumerable and uncertain shareholders sustain the damage, since the premium has been increased for them from foreseen frauds. Yet the Sacred Penitentiary solved the matter otherwise, ordering that restitution be made to the society.

The contract of insurance gives occasion to frauds which cannot be numbered. Indeed, insurances on the lives of infants have prepared crimes which had to be met by social laws. Let us inculcate more honorable morals, according to our powers, and rather recommend mutual insurances, as was done in Holland among the clergy themselves. For mutual insurance contains no industrial business.

Present-day laws of many regions not only have procured social insurances but have also commanded them, bringing it about that workmen especially, by money subtracted as if automatically from salaries, or even gratis from the treasury, are insured. Institutions of this kind, otherwise perhaps necessary, nevertheless labor under this not slight inconvenience: that they weaken in great part personal providence, which is accustomed to stimulate talent and industriousness at the same time and to prepare greater joys, and they multiply fiscal officials beyond measure.

314. Notion. Insurance²⁰¹ is a contract by which someone assumes the risk of another's thing or person for a determinate premium, or, in other words, "it is a contract by which one person, for a certain price, obliges himself to compensate the damages which another can suffer from an involuntary event."²⁰² The object of this contract, therefore, is the risk assumed, which can occur in diverse things, e.g., the danger of fire, shipwreck, hail, death, etc. Today there exist very many kinds of insurance, which indeed are most useful if they are just. For through them the frequent ruin especially of men of moderate fortune is forestalled; and the things themselves are better guarded because of the supervision of the insurance company.

Requisites for just insurance. A contract of insurance is just:

1. If the insuring company truly pays those things which it ought to pay from the contract, and if the premium to be paid annually morally corresponds to the gravity of the risk in which the insured thing is placed;

2. if the insured sincerely declares the value of the thing and the dangers to which the thing is exposed, and does not bring the thing into danger through gravely culpable negligence;

3. if those things established by positive law or by particular stipulations justly entered into are faithfully observed.

In our days injustice can rarely arise from an excessively large insurance premium. For so many insurance companies exist that competition among them is great, and each one strives to reduce the premium as much as it can. Moreover, each person is ordinarily free to leave one company and enter another.

On the part of the insured, however, frauds and injustices are not rarely committed. For if the thing to be insured is not declared as it truly is, or if it is badly guarded with grave negligence or from direct intention, so that it perishes, or if changes are made in it which increase the danger of loss, etc., in these and similar cases injustice is committed, and a grave obligation of restitution is present if there is question of grave damage caused. (How restitution is to be made in these cases, however, see above, n. 231.)

Life insurance, which is also called a life annuity, is especially to be noted among the diverse kinds of insurance, both because of its frequency and because of the difficulties which it can cause in conscience. Life insurance can be effected in many and diverse ways. Difficulties can arise for the confessor only if the insured has employed frauds in the so-called "declarations," or if by illicit means he has violated the statutes of insurance, or if the physician has described too favorably the state of health of the person to be insured. Sometimes civil laws establish that, after a determinate time has elapsed, e.g., five years, the insurance company can no longer challenge the contract of insurance. These laws indeed seem just and useful, since they avoid very many lawsuits and render insurance companies more attentive. In practice, unless the fraud is most evident and an efficacious cause of grave damage, the confessor ought not readily to declare the contract of insurance null or oblige the insured to restitution. The reasons are: 1. because insurance companies are most cautious, so that they are very rarely led into grave error; 2. because civil laws favor the validity of the contract unless fraud truly substantial and manifest was present; 3. because it is often most difficult to determine from what disease death occurred, and whether the proximate cause of death had already existed long before. Therefore a positive doubt remains whether the fraud employed was truly an efficacious cause of grave damage. In doubt, however, an obligation of restitution is not to be imposed.

²⁰¹ There are some who are unwilling to number the contract of insurance among aleatory contracts, e.g., Koch, Moraltheol. § 149, because in aleatory contracts the danger of loss ought to arise solely from the contract itself. On the contrary, even before the contract of insurance there is already danger for him who seeks insurance, e.g., the danger of fire. This distinction seems to be of little moment and of no utility. Hence authors commonly number insurance among aleatory contracts, e.g., Lehmkuhl, Tanquerey, Noldin, Moran, etc.; because the chance of loss is not only on the part of the insurer, but also on the part of the insured, who perhaps pays the premium for many years without any emolument.

²⁰² Tanquerey, l.c. n. 915.

1161. DEFINITION. Insurance is a contract by which someone takes upon himself the peril of another's thing or person, obliging himself, for a certain price (prime), to compensate it if it perishes or suffers damage.

DIVISION. Insurance, by reason of the different peril, can become manifold. Thus there are given insurances against shipwrecks, fire, hail; indeed there is given insurance of life, that is, for support to be paid to children or heirs, if such a person dies beforehand.

Note. 1. In our times, by the help of statistical art, the likelihood of peril could be determined much more accurately, from which it has happened that insurance has become less aleatory. 2. Although this contract is of itself consensual, nevertheless it is not rendered altogether firm except after the acceptance of the written document subscribed by the society (police). 3. The insurer in no way intends to compensate that damage which the insured (or his family) has brought upon the thing.

1162. PRINCIPLES. I. The contract of insurance is null and unjust if, on the part of the insured thing, probable peril is lacking. This is plain from the definition (III, 911).

Hence: 1. If the insurer is certain that the thing is safe, for example a ship in port, he asks a price inequitably, and he is held to restore what has been accepted. 2. If someone has sold an insured thing, and before the fire it has already been handed over to the buyer, the insured cannot receive the whole compensation (Lehmkuhl, I, 1356). See also the civil laws.⁰²

II. The contract of insurance is unjust if, on the part of the insured manifesting the perils, there is present an efficaciously damaging error. The reason is that it belongs to the essence of insurance that the price be proportioned to the peril. For the price and compensation are determined in proportion to the peril. Therefore sincerity in declaring the peril belongs to the essence of the contract.

We have said: 1. If an error is present. Error, although admitted in good faith, does not confer validity on the contract; error committed in bad faith (provided, as we shall soon say, that it is concerning a notable thing) obliges also to repairing damages.

2. An efficaciously damaging error, that is, having for its object a notable defect, from which it happens that the peril of the thing or person is truly increased.

But it is the same whether this defect already existed at that time when the contract was perfected, or only supervened afterward.

As regards errors concerning defects of lesser moment, we do not judge that the contract by that very fact becomes null if the insured was silent about them, provided the proportion between peril, price, and compensation, notwithstanding malicious reticence, still morally endures.⁰³ This is to be affirmed the more because Authors are not lacking who think that even then the contract is valid and just if in good faith a notable defect was not manifested (provided the insured of himself increases what he owes, or accepts less); and that to insurers there is conferred only the faculty of not paying the premiums (Lehmkuhl, I, 1355). When the insurer protests, certainly one must stand by the sentence of the judge.

III. The contract of insurance is unjust if the insurer is unequal to paying the promised compensation. This is required from the nature of the contract. Therefore the insuring society cannot retain prices if the number of the insured becomes so great that, if the peril suddenly rushes in, it cannot pay.

But if it is able to compensate only part of the damage, some say the contract is invalid by that very fact; others think that the society can retain the part of the price which corresponds to the quantity of security which in reality it furnished.

IV. Officials of an insuring society are subject to the same laws to which mandataries are subject (cf. 1090). It is plain of itself, whatever some insuring societies may say. Therefore those things which officials do bind the society itself, provided they have acted within the limits of their mandate.

Note. An insuring society of itself, by force of the statutes, is held to compensate damages which proceed from the malice of outsiders. From this it follows that unjust damaging persons must repair this compensation to the society, because the society succeeds into the rights of the insured when it pays the compensation. Concerning the mode of restoring, see n. 1015.

For practice it must be noted that in certain regions the insuring society, foreseeing that it will suffer damages maliciously from many insured persons, increases the prices to be paid by all so much that, in the better way in which it can be done, it renders itself unharmed. Some think that in these circumstances malevolent damaging persons are held to no restitution. Yet this does not seem proven to us. For, granted that the contract is firm from the beginning, the damaging person is always held toward the society, yet with those things subtracted in which the society has been made richer beyond what is equitable, by demanding greater prices.

Insurance is a contract by which one takes upon himself the peril of some thing (fire of a house, shipwreck of a ship, etc.), and the other obliges himself to a price for peril of this kind undertaken. The instrument by which the contract is written is called "the policy": the insurer, "the underwriter."

1038. Questions. - Query 1° Whether the contract of insurance is licit?

Resp. Affirmatively. For equality is preserved when the due conditions concur, as Theologians commonly confess, and daily practice confirms.

Query 2° What are the conditions required for insurance?

Resp. They are the following: 1° that the price be proportioned to the peril, or established by an incorporated society according to the Charter of incorporation; 2° that the peril be true, and equally known to each party; 3° that the insured observe all conditions of the contract; 4° that the insurer have whence he can pay.¹

1039. • You will resolve. 1° He who accepts money by loan, with which he may buy merchandise to load a ship (to buy a cargo), in the contract which is called "bottomry" (n. 1036), is guilty of usury if he himself also furnishes insurance of the ship; for the peril of the money is removed, on account of which the great usury was promised. - But he who in this case gives money by loan, if he furnishes one security concerning the value of the ship and merchandise to be paid in the case in which the ship perishes, can receive both a premium for the security, and an increase by reason of the peril. "Although respondentia and bottomry are of themselves a species of insurance, yet the lender has an insurable interest in his securities, and therefore may protect himself from the sea-risk by insuring them. However, a policy on bottomry or respondentia cannot be subscribed by the borrower of the money; for if he were to become an insurer, this would be no longer a loan upon bottomry, but a cloak for usury."²

1040. • 2° They sin most gravely who burn their own houses so that they may receive from the insurance society money beyond their value, or, when a fire happens by chance or by the malice of another, exact money greater than their damage. But in what manner restitution is to be made in this case is in practice very often difficult to define, since very often it is not clear whether it is to be transmitted to the treasury of the insurance society, with the officials unjustly retaining it for themselves. But what some think, that it is impossible for restitution to arrive certainly to the true owners, and to each of them for the part due to himself, if it is to be made to so-called mutual insurance societies, or at least to those whose associates (stockholders) are many, on the ground that, after the damage brought on the society and before restitution, very many associates perhaps will have left it, and it is unknown who they are and by what portion they were associates, is trifling, and is valid only for the case of the dissolution of the society; for to associates who leave the society, others succeed with a right to the credits and an obligation to the debts of the society. But in the case in which it is clear that the restitution will not be transmitted to the treasury of the society, or distributed to the individual associates according to their pro rata part, it must be made to pious causes. Resolve the same, on account of parity of reason, concerning any restitution to be made to some society.

3° A shipmaster sins who by his negligence gives cause for the shipwreck of an insured ship, or deliberately directs it toward the shore where it is to perish, or conceals those things which, if they became known, would deprive the owner of the ship or merchandise of the right of insurance.

1041. • 4° The contract of life insurance is licit, by which, on account of a premium given once, or on account of money paid yearly, some society or some private person obliges himself to pay a certain sum of money when it happens that someone dies, provided a) account is had of age, health, and other circumstances, and b) the price to be paid by each contracting party is fair. For on each side there is a risk, and the lot of loss, as also of profit, is uncertain. But they sin who conceal those things which would have impeded insurance, for example a hidden grave infirmity, a more advanced age, etc., or those things which would have impeded payment of the insured price, for example suicide committed by the insured; likewise those who kill the insured so that they may obtain the price.

594. Insurance (assurance; verzekering) is the taking upon oneself of another's danger; whence the contract of insurance is that by which someone takes upon himself the danger of another's thing or person, obliging himself, for a determined price, to compensate it if by chance it should perish. Hence it can be defined: a real aleatory contract by which one, for a certain price paid, obliges himself to compensate damages which another can suffer on account of a fortuitous event or a superior force.¹

¹ Cf. Belgian law 11 June 1874 in the Commercial Code, l. 1, tit. X.

Hence: a) the object of this contract is the danger of damage, taken upon oneself and estimable by price; whence b) the matter about which it turns is whatever, whether a thing or a person, is subject to danger and at the same time is estimable by price. Thus ships and goods are customarily insured against the danger of the sea, buildings and movables against the danger of fire, crops against the danger of hail, fragile things against the danger of breakage, precious things against robbers, even persons against death, military service, infirmity, etc., either singly or collectively, either as they come under such a name, or insofar as they pertain to this or that social order. c) But the danger is estimated by a determined price: for although insurance can be made gratuitously, nevertheless someone is not accustomed to take upon himself the danger and compensation of a thing, and thus to furnish to another something estimable by price, except for an equivalent price. Hence the contract is of itself onerous, and is reduced to sale.

In antiquity almost unknown, in modern times this contract has widely prevailed among all nations. It is related that in the fourteenth century it was first introduced as regards goods to be carried over the sea; in the seventeenth century the first society of insurance against fires was founded at London; in the nineteenth century innumerable societies of this kind already appeared as regards things of every kind, whence it is a contract of great moment. It certainly is not lacking in social utility: for it pertains to the public and private good that damages arising from fortuitous event and the ruin of men of moderate fortune be foreseen and guarded against; otherwise a) industry and commerce would often be retarded; b) owners and workmen also would often be brought to the extreme of want and poverty; c) but now the providence and thrift of individuals is promoted for their greater security.

The contract is lawful, provided:

1. Each of the contracting parties is uncertain concerning the danger of the thing; otherwise there would be malice. Hence the contract would be null if someone wished to insure a ship which he certainly knows already to have perished or already to be in port;

2. The price is just according to the value of the things and the gravity of the danger: for there must be equality of price and danger;

3. The insurer is capable of paying what he promised, and the insured observes all the conditions and does nothing by which the danger is greater or the hope less than the insurer ought to have expected, considering the agreement, custom, or circumstances.

595. Moral principles which rule insurance and the obligations arising from it. The obligations pertaining to the contract of insurance are customarily determined by laws and by the special statutes of societies; these must be stood by, unless they are manifestly unjust. Now some obligations are common to each contracting party, namely, as regards the just price; but others are special to the insured or to the insurer.

I. Common obligations concerning the just price. The price of insurance ought to correspond to the service furnished, and therefore to be proportioned to the gravity and probability of the danger or hope, account being taken of expenses; this is to be determined not from the event, but from the danger at the time the contract was entered into, by the judgment of prudent men. In this, namely, is situated the equality of justice in this contract: that, all things having been carefully weighed, there be an equal proportion between the probability and extension of the danger and the price which is to be paid by the insured, so that, from those things which commonly happen, the insuring society, after all damages have been compensated, may receive some moderate gain for its labor and expenses and for the utility procured.

The proportion today is customarily determined according to statistical computations, which now are made sufficiently accurately; whence the contract is now less aleatory. But since there are many competing societies, even international ones, generally the current price is legitimate: for if it were immoderate, soon other societies would arise, or would be instituted by the insured themselves, which would furnish insurance of the same danger at a lower price; unless, however, almost all societies were to constitute a monopoly and agree not to diminish the price.

Nevertheless gain, from the fact that it is rather great, must not immediately be held as unjust: for it must first be examined whether it does not proceed from a great number of insured persons, or from the skill of administrators who prudently employed the money received for fruitful uses, and whether there is not danger of losing all gains if a common calamity occurs.

II. Special obligations of the insured. He is held from justice:

1. To declare sincerely the true value of the thing and the gravity of the danger;

2. Not to neglect the conservation of the insured thing;

3. To manifest defects of the thing or person, if he is questioned, and not to conceal them deceitfully.

Hence:

a) The contract is invalid if, in declaring the danger of the insured thing, a notable circumstance is kept silent, which, if known, the contract would not have been entered into: for the danger is the very object of the contract; whence a notable error in it is substantial. But if the circumstance is not notable, so that the contract would nevertheless have been entered into, but at another price, it is valid, but the insured is held to increase the price by reason of the danger; likewise, if, when insurance has already been entered into, the danger is increased, this certainly must be declared.

Thus Belgian law, in art. 9, invalidates the contract whenever something is kept silent or falsely declared, even without bad faith, which diminishes the estimation of the danger or changes its object, so that the insurer, if he had known these things, would not have contracted in the same circumstances.

But by civil law or by special stipulations of the pact itself, sometimes because of a rather non-notable circumstance kept silent the contract is declared void, or at least rescindable at the will of the insurer; or it is even further added that the insurer can retain the price already paid, although he is not held to compensate the damage. Yet these things which are added to natural law do not oblige except after the sentence of a judge. But if the insurer does not rescind the contract but demands a greater price, then equality will have to be restored and the greater price paid.

b) When the error turns upon the value of the thing, one must distinguish: if the value of the thing was exaggerated, the contract is indeed invalid as regards the excess of value, but remains valid for the true value of the thing, which therefore must be compensated: for then the error is not substantial and therefore does not void the whole contract. On the contrary, if the value of the thing was too much diminished, the insurer must compensate only according to the proportionate part of the price paid, for in this case the insured himself is held as insurer for the remaining part. But if the value of the thing was diminished at the time when the thing perished, the insurer is held only to compensate the damage truly suffered (a. 20, Belgian law).

Yet it could happen that each contracting party knowingly and willingly agreed concerning the excess of value: then, however, the contract assumes another nature, namely, that of wagering, concerning which it will be said below, n. 601.

c) Fraud is committed: 1. if the thing to be insured is not declared as it is; 2. if from grave negligence or direct purpose it is guarded badly so that it perishes; 3. if changes are made in it which increase the danger of damage. This per se obliges to restitution, and indeed under grave obligation if grave damage was caused.

Hence he commits open injustice: a) who burns his own thing or certainly exposes it to destruction, in order that he may receive compensation for the thing; b) who asks and receives compensation for damage which he did not undergo, or for greater damage than he underwent, or for that whose compensation is excluded in the contract; c) who demands compensation which surpasses the price of the thing or the insured value. But not if he asks greater compensation with this intention alone, that by settlement he may obtain repair of the true damage; or if, having used no fraud, he accepts an excessive compensation spontaneously offered or established by arbiters.

d) He must restore: 1. who voluntarily destroyed the insured thing, and moreover repair all damages unjustly inflicted; 2. who by frauds obtained compensation to which he has no right; 3. who, in the fortuitous event of a fire, deliberately does not try to restrain the conflagration or rescue the things, for by ordinary diligence he ought to protect his own things, and this also from positive law (a. 17); 4. a fortiori, who prohibits others from extinguishing the fire.

III. Special obligations of the insurer. He ought from justice:

1. To be capable of compensating all damages concerning which he is held, or for whose compensation he obligated himself. For this it is by no means necessary that he possess money equal to all the goods whose danger he has taken upon himself, but only that he have as much as is probably required for compensating the damages which are accustomed to happen from those things which commonly occur: for it is improbable that all goods whose danger he has undertaken will perish at the same time. But those societies act unjustly which take upon themselves more dangers than they can probably compensate, unless they reduce the danger to just limits by reinsurance, or a second insurance, by which, through a federation entered into among themselves or through a new society, they divide greater dangers among themselves.

In the case in which the insurer is unequal to repairing the whole damage:

1. The insured can rescind the contract and demand back the price paid, because he had not consented to the contract except for obtaining perfect security;

2. If the insured does not demand back the price, the insurer must restore the price at least partially, retaining the part corresponding to the value for which he truly furnished security;

3. If after the price has been paid the insured thing perishes, the insured has the right of pursuing by all legitimate means the complete repair of the damage: for the insurer is held partly from the contract, partly from fraud.

2. He is held to repair the whole damage truly inflicted on the insured thing, and indeed: a) according to the conditions explicitly or implicitly stipulated in the contract itself; b) as soon as morally possible after the thing has perished by fortuitous event or has become worse, and this is sufficiently established; otherwise he is held concerning damages; c) according to the value of the consumed thing at the time at which it perished (a. 20, Belgian law).

For repairing the damage, both civil law and the very tenor of the contract must be observed (a. 2). According to our civil law, the insurer is not held to compensate damage caused by grave fault of the insured, or of his relatives (a. 16); and, unless an express contrary agreement is made, he is not held to compensate damages arising from war or popular tumult (a. 19), indeed from an intrinsic defect of the thing (a. 18); yet for fire it must be clear that the defect was known at the moment the contract was entered into (a. 35).

If grave moral fault was present, the insured can in conscience demand back or accept nothing; on the contrary, if there was only juridical fault, not except after the sentence of a judge.

596. Insurance of workers merits special attention.² This tends to this: that workers be insured both against accidents which cause bodily injury, and against any cases whatever in which their powers for working are rendered invalid, as in sickness or old age; so that then the workers, or the wife or surviving children, may receive a certain subsidy or periodical revenues.

² Cf. Lehmkuhl, Th. M. I, n. 1365-66; Noldin-Schmitt, Th. M. II, n. 631.

As regards accidents caused on the occasion of labor and damages arising therefrom, insurance is to be furnished by employers; this will be done more conveniently if, united in associations, with an annual contribution made by each, they have money sufficient for the cases which occur. This also could be prescribed by civil law, and sometimes is prescribed. As regards other cases, various associations have been instituted, whose money is collected partly from a tax imposed on workers, partly from a tax to be paid by employers, or even from a contribution of the public treasury; once their tax has been paid, the workers acquire a right to the insured sum. Concerning these things it is to be noted:

1. An annual pension is paid only to those to whom an accident happens in the exercise of work; yet this seems able to be understood broadly, so that what happens in an action which in some way is connected with the exercise of work is judged to have happened thus, as in access to the place of labor, or during a meal which is taken in the place of labor, or during leisure which is taken there, unless, however, the law or statute positively excludes this.

2. Workers ought not to receive compensation if the accident happens by their fault; this fault is to be understood as grave, so that the accident was caused deliberately or from great negligence. Indeed, in certain regions, as in Belgium and in France, only an accident deliberately and deceitfully caused is excluded by law.

3. He who unjustly received compensation or an annual subsidy, for example, by falsely narrating the cause of the accident or by bringing in false witnesses, is held to restore the sum received, nor can he receive further payment. But if he cannot restore to the society or revoke the matter without graver danger, let him restore to the poor.

597. Life insurance can present special difficulties.³ Invented in the seventeenth century by the Italian banker Tonti, it properly tends to this: that the insurer, for certain annual payments or premiums, obliges himself, upon the death of someone occurring, to pay a determined sum of money to heirs or to a third person. But now it is also entered into in the contrary way, so that the insurer must pay the sum to the insured himself or to a third person, if he reaches a certain age, for example, 20 years or 65; indeed each way can be mixed, in which case there is mixed insurance.

³ Cf. Huppert, Der Lebensversicherungsvertrag; Lehmkuhl, Th. M. I, n. 1360 sq.; Genicot-Salsmans, Th. M. I, 658, VIII; Noldin, Th. M. II, n. 630-631.

In this contract the danger for the insurers is that they must pay back a sum which exceeds the premiums received; to guard against this, they are accustomed to take precautions by questions or examinations. There are, however, societies which, with the price increased, demand no declaration or medical examination; but ordinarily many questions are customarily proposed by insurers to clients, in order to discern with probability how much duration of life the insured can hope for. If these are answered incorrectly from error, fraud, or malice, or by a too favorable declaration of the physician, doubt sometimes arises concerning the value of the contract.

Those contracts are called aleatory which are subject to the vicissitudes of fortune, either wholly or only in part. Several are numbered, but the principal are insurance, wagering, lottery, and gaming. A few things will be said concerning each one.

Insurance is a contract by which one of the contracting parties takes upon himself the danger of some thing, and the other obliges himself to a certain determinate price for this kind of danger taken up. Thus, for example, life is insured against death, a house against fire, a ship against shipwreck, etc.

On life insurance. There is certainly need of great prudence in entering upon and interpreting this contract. For some things concern the validity, and some only the liceity, of the contract. Here we regard the obligations and rights of the insured. 1st. The person examined ought to be the person insured. 2nd. There are certain diseases, certain degrees of diseases, whose existence precludes every contract. 3rd. There is a determined age below and above which the company does not make a pact. If all or one of these conditions are not observed, the contract is null. But there are 4th. other things which leave the contract valid, yet, if known, would have caused the companies to bring forward another pact; for example, if the true age is not given, but some age is given within the years generally required. There are 5th. other things of lesser moment which leave the pact as it lies. Finally 6th. companies often set down other annulling clauses which nevertheless we can regard as obliging in the forum of conscience to restitution only when the sentence of a judge has then been given. In entering upon these contracts the only method to be used is the sincere method. Therefore if some damage has been unjustly inflicted on the company, this certainly must be repaired. If someone substitutes another to be examined for himself, he does not have a right to the money concerning which agreement was made. If someone has a very advanced disease, with which existing the company would not have entered, but did enter because deceived, the contract is null. If someone, say, makes a pact above the age, the money is not his or his heirs'. This money must be returned, with the sum deducted which is equivalent to the annual premiums paid, unless the sentence of a judge has declared otherwise. If someone has given a false but insurable age, let the heirs compose the matter so that they retain for themselves that quantity of the handed-over money which would have been given if the true age had been designated. Yet we judge that in these adjuncts of lesser moment one must act more mildly if the ministers of the company themselves were in the cause and the insured acted as if deceived. Besides, several other circumstances here and there are taken up by the company to be investigated, and this must be said to pertain to it: thus the disease of grandparents, and other things; we do not judge that these things, concealed in good faith or exercising no influence on the death of the insured, are to be held as destructive of the pact. Let this be said in general. There are certain companies which set down a healing clause, by force of which, if after a time determined from the pact entered the company has not discovered and decided the matter, the contract is unassailable, for example, The New York Life Insurance Co.: according to this company, incontestability means: if the insured person is the examined person (i.e., if no substitution was made), if that person has truly died and the contract or policy, as it is commonly called, is in force at the time of death according to its terms, this contract will not be contested. "This policy shall be incontestable after one year from its date of issue except for non-payment of premium." (Studies in Practical Life Insurance, p. 154.) We judge also, as we have already indicated, that the company ought to answer for errors of the contract which are owed to its agents and not to the private persons themselves, who are easily deceived by them in good faith; otherwise the whole difficulty will fall upon innocent heirs. As to restitution itself, when its obligation is truly present, it is of itself to be made to the injured company. Yet, as in other matters, so in this cause great difficulties can arise. But if it is established that the company insured itself against these events, perhaps it can more easily be permitted that restitution be made either to pious causes or to the poor. - Cf. Lehmkuhl, nn. 1036 et seq. - Bulot, n. 830. - Huppert, Der Lebensversicherungsvertrag. - Genicot, n. 658, VIII. - Hudnut, Studies in Practical Life Insurance.

I say. The contract of insurance is licit; for when due conditions concur, equality of justice certainly is preserved in it, as theologians commonly admit and daily practice confirms. - But the required conditions are the following: 1st. that the price be proportioned to the danger; 2nd. that the danger be true and equally known to both parties; 3rd. that the insurer have that from which he can pay; 4th. that the insured observe the particular conditions of the contract. - Cf. St. Alphonsus, n. 911. - Kenrick, nn. 137 and 139.

Wagering is a contract by which several persons contending about the truth or event of some thing pledge something to one another, or deposit it with a third party, so that it may belong to him who has spoken the truth.

I say. The contract of wagering is licit, with those things posited which must be posited; for it presents nothing dishonorable in itself and is approved by the common practice of all peoples. - But the conditions are: 1st. that the thing be understood in the same sense by each party; 2nd. that there be the intention of obliging oneself and paying what is pledged; 3rd. that the event be uncertain to both. Cf. Kenrick, n. 154.

Lottery is a contract by which several persons deposit something in common so that they may have the right of drawing by lot the thing exhibited in the midst. Some have the whole, some a part, and finally some nothing.

I say. The contract of lottery is licit provided the required conditions are present. The reason is that lottery can be regarded as the purchase of an uncertain thing, or as a contract by which with money is bought the right of drawing by lot and acquiring that which has fallen by lot; but it is licit to buy an uncertain thing, just as to make a pact for the danger of some thing. Therefore . . . - But the required conditions are the following: 1st. that there be no fraud in drawing out the tickets, nor in paying the prize which has fallen; 2nd. that the owner of the lottery not exceed in profit, nor morally gain more than if by another licit contract he spent his money or distributed his goods; although nevertheless, if the lottery has been instituted for a good work or public utility, it is commonly admitted that the profit can be greater.

Gaming is a contract by which those playing make a pact among themselves that the stake which they have put up should fall to the victor. Game is distinguished threefold: 1st. industrial, which is governed especially by the skill of those playing; 2nd. aleatory, which depends chiefly on chance; 3rd. mixed, which depends partly on skill and partly also on chance, as, at least for the most part, is the game of cards.

I say. None of the three aforesaid games is of itself illicit, if the due conditions are observed. The reason is that gaming is repugnant neither to good morals, since it is of itself an act of honorable recreation, nor to commutative justice, since anyone can transfer the dominion of his goods to whom and in what way he wishes. I said of itself, because often from adjuncts gaming becomes a thing full of dangers, and unless due moderation, which very often is most difficult, is employed in its use, in a short time it turns aside into detestable abuse. But the required conditions are the following: 1st. that the player have free administration of the things which he exposes; 2nd. that fraud and deceit be absent from the game; 3rd. that on both sides the danger of losing be morally equal; 4th. that the game be honorable in itself and not prohibited by law; 5th. that an enormous sum not be exposed, so that the family and creditors could suffer damage from it.

Question. Whether the victor in a prohibited game is bound to restore or the one conquered is bound to pay in the same game?

Resp. The victor certainly is not bound to restore, because the contract is not always and everywhere declared void by law, but only prohibited; and if somewhere it were declared void, yet because by natural law it is valid, as is supposed, positive law cannot, at least according to the probable opinion, invalidate it in the internal forum. For this same reason the one conquered in a prohibited game is not to be obligated to pay in the forum of conscience; for the opinion which holds that the contract becomes void by force of positive law is probable. - Cf. St. Alphonsus, nn. 887 et seq. - Lugo, disp. 22, n. 300; and disp. 31, n. 60. - Lacroix, lib. 3, part. 2, n. 1086.

The Exchange is a place constituted by public authority for the exchange of values, to which negotiators and their Agents come together for dispatching business. Among us it is called the Stock Exchange, or exchange of values. The negotiations which are made there turn about securities, stocks, obligations, commodities. The rules of the diverse Exchanges form a certain system according to which negotiation concerning stocks or commodities is made either for investing capital or for the sake of speculation. Negotiations are exercised either with cash or with credited money. In the New York Exchange fictitious sales do not exist. In the hall itself stocks or obligations are not actually exchanged, but there are only made promises of delivering or receiving a determinate number of securities at a determinate price. The actual delivery itself, if the whole transaction is regular, must be made before a quarter past two in the afternoon of the day following the sale. But negotiation can be made so that delivery is placed on the same day or after three days, or there are even options of sellers and buyers for a space which is within sixty days. All sales in that Exchange are perfected for actual delivery and for full payment at the time of delivery.

Investment, insofar as it is distinguished from speculation, simply signifies the purchase of securities for the full price paid: then the securities are kept for the annual income. One example of speculation, for there are also others: The buyer gives an order to an Agent to buy a determinate number of stocks at a determinate price, or at the prevailing price, and at the same time deposits with the Agent a sum of money which is equivalent to ten percent of the whole value of the stocks. The Agent executes the order in the Exchange itself. Afterward, if the purchased titles are active, the business is sent to a special office, and if it is not eliminated by it, the Agent who sells must deliver the stocks before a quarter past two in the afternoon of the following day; the buying Agent must give a certified check for full payment. Then he takes the stock and obtains credit from the Bank on account of it. The client of the buying Agent can now give an order that he sell the stock when the price has increased, and his profit is the difference between the price of sale and of purchase after subtracting the price of the commission given to the Agent and the interest of the credit obtained from the Agent. In these and similar operations no special difficulty seems present. Yet there are such negotiations which are very dangerous: for the price is artificially diminished or increased by false rumors being spread; or by monopoly it grows beyond value, and they are entered into by those who here and there cannot pay the differences: in these cases justice is also violated. - Cf. Ball.-Palm., v. 3, p. 796. - Bulot, n. 838. - Genicot, n. 665. - The Work of Wall Street, Sereno S. Pratt. - The A. B. C. of Wall Street, S. A. Nelson. - Gury, Cas. Conscien. de Emptione, n. 17.

Titius, a dealer in furniture falsely represented as antique, insures his goods, which perhaps are worth one thousand pounds, upon the customary terms with an insurance company for ten thousand pounds. This company, however, reinsures half of the goods with another company and a fourth part with a third company. A little afterward the insured goods perish by fire, and Titius, congratulating himself, receives ten thousand pounds from the first company. Afterward, however, he doubted whether he had received it justly, for, although he had paid the premium, as it is called, proportioned to the sum received, nevertheless the latter exceeds the value of the goods. Hence he explained the doubt to a confessor in order that he might know his obligations. Hence it is asked:

1. What is a contract of insurance, and concerning what things is it ordinarily entered into?

2. What conditions are ordinarily annexed to this contract in England, either by the express consent of the parties, by law, or by custom?

3. What is to be said of the case?

1. What is a contract of insurance, and what is its ordinary subject-matter?

Marine, Life, and Fire insurance are the general types of this contract, but nowadays most risks can be made the matter of insurance. The contract of Fire insurance, with which we are here concerned, is one of indemnity in consideration of a premium paid by the insured, against loss, not wilful, caused by fire, to a given account, upon certain subjects.

2. What are the conditions ordinarily annexed to this contract in England, either by the express consent of the parties, by law, or by custom?

This contract is usually effected on the basis of a proposal containing a list of questions which must be truthfully answered by the insured. Everything that can enable the insurer to arrive at an estimate of the risk insured against must be disclosed. The property insured, its value, locality, and whether it is insured with other companies, must be indicated. If any change is made which increases the risk, it must be made known to the company. On any loss to the goods insured being incurred by fire, the insurer must make a particular statement of the details of his loss, with an estimate of the value, confirmed if required by a statutory declaration of the truth of the account.¹

1 Knight, Encyclopaedia, under the entry “Fire Insurance.”

3. The case. Titius, an old curiosity dealer, insured his goods for a sum ten times their value. In this he was guilty of fraud; the company had no intention of contracting with him to pay such a sum. He has no right to keep more than what covers his loss, and he must make restitution in some way to the company from which he obtained the money. This company will then be under the obligation of squaring accounts with the other companies which took part of the risk. Titius may deduct from the sum to be restored the difference between the premiums which he paid and those which he should have paid on the real value of the property insured.