A FARMERS’ MUTUAL FIRE INSURANCE COMPANY. 13 
LIABILITY OF THE COMPANY AND OF THE INSURED. 
Even large legal-reserve companies find it necessary in their con- 
tracts to exempt themselves from lability for losses due to such 
catastrophes as invasion, insurrection, riot, or civil war. A local 
mutual is, of course, even less capable of assuming liability for loss 
caused by such disasters, in which the destruction of property may 
surpass all expectations or estimates for which an insurance company 
can reasonably make provision. Since the destruction by windstorm 
of a building in which hght and heat are used involves the proba- 
bility of fire resulting from the fall, it is proper for the company to 
arrange for exemption from lability in the case of such fire loss. The 
insured should rely upon windstorm insurance for indemnity against 
loss primarily due to the windstorm hazard. 
A few farmers’ mutuals limit their hability for indemnity in case 
of all losses, whether total or partial, to three-fourths of the value of 
the property. Where the insurance written is limited to three- 
fourths of the actual value of each risk, as is here advocated, the 
member suffering a total loss bears one-fourth of the loss himself. 
A part of a partial joss can be borne by the insured with even less 
hardship. Prevailing practice requires full indemnity in the case 
of partial losses, however, up to the amount of the insurance carried, 
and this practice has been recognized in the accompanying by-laws. 
The main reason for not embodying in the accompanying by-laws 
the more logical practice of three-fourths indemnity in all cases is 
the danger that unfair competition might result. In spite of its 
reasonableness, the practice offers an opportunity for agents of com- 
peting companies to allenate members who have suffered partial loss, 
by pointing out to them the greater indemnity that would have been 
paid by another company. A recent loser is likely to overlook the les- 
sened cost of insurance resulting from the three-fourths provision, in 
his contemplation of the greater indemnity that he would have re- 
ceived under the full indemnity plan for partial losses which another 
company offers. He is not reminded, and may himself forget, that 
as a total loser he would be required to bear part of his own loss in 
either company. Hence, until insurance companies in general agree 
to adopt a better practice, it may be disadvantageous for a local 
mutual to adopt the three-fourths plan. Where a company already 
has adopted such a plan, however, and where the members under- 
stand and appreciate the closer approach to justice given thereby, it 
should be continued. 
The liability of the insured is either limited or unlimited. Un- 
limited liability in this case means that a member binds himself to pay 
his pro rata share of all losses and legitimate expenses of the com- 
pany. Many persons have objected to this unlimited liability feature 
