#### Waukau Milling Company and another, Respondents, vs. Citizens’ Mutual Fire Insurance Company of Janesville, Wisconsin, Appellant. Same, Respondents, vs. Bower City Mutual Fire Insurance Company of Janesville, Wisconsin, Appellant. Same, Respondents, vs. Central Manufacturers’ Mutual Insurance Company of Van Wert, Ohio, Appellant.

*November 7*

December 4, *1906.*

*Fire insurance: Forfeiture: Breach of promissory warranty: Suspension of business: “Cease to be operated:’’ Application: Admissibility: Statutes: Foreign and domestic insurance companies.*

1. Policies of insurance of the Wisconsin, standard form provided, among other things, that the entire policy, unless otherwise provided by agreement indorsed thereon or added thereto, should be void if the subject of insurance were a manufacturing establishment and it ceased to be operated for more than ten consecutive days. The risk covered a flouring mill operated by water power. By reason of severe weather the water in the mill race froze, and the insured was therefore unable to operate the mill for more than ten consecutive days, but was operating it when the loss occurred. The agent, when soliciting the insurance, knew the mill was operated by water power, and that in severe weather the race might freeze and thereby prevent its *48operation. The mill was not in operation when the agent examined the premises. *Held:*

(1) The specified clause in the policies must be given a reasonable construction in the light of the conditions attending the subject matter of the contract and within the contemplation of the parties when the contracts were made.

(2) The cessation of operation covered by the policies had no reference to such cessation as occurred in the usual course of the business of the insured or as arose from causes beyond its control.

(3) The fact that the mill could not be operated in severe weather on account of lack of power was an existing fact and known to the insurance companies at the time of issuing the policies, and therefore the policy provision respecting nonoperation did not apply.

2. Secs. 1941 — 1 to 1941 — 13 and 1945a, Stats. 1898, respecting “mutual companies in cities and villages,” have reference to insurance companies organized under the laws of Wisconsin only, and. have no reference to foreign mutual fire insurance companies.

3. Sec. 1945a, Stats. 1898 (requiring that all fire insurance corporations shall, upon the issue or renewal of any policy, attach to such policy or indorse thereon a true copy of any application which by the terms of such policy is made a part thereof or of the contract of insurance or referred to therein, or which may in any manner affect the validity of such policy), excepts from-its operation, among other insurance corporations, mutual companies in cities and villages. Plaintiff signed an application, addressed to an Ohio mutual insurance company, requesting. $4,000 of insurance on its flouring mill and represented that when the mill was not in operation it maintained therein a watchman. The agent, on receipt of such application, placed' $2,000 of the insurance in the Ohio company, and $1,000 each in Wisconsin city mutual companies. In an action to recover for a loss under such policies the defendants offered proof of the application and its falsity. The applicatipn was not attached to the Wisconsin policies or referred to therein. The testimony was ruled out. *Held:*

(1) The ruling was proper as to the Ohio company, since it was not within the exceptions of sec. 1945a.

(2) The ruling was also proper as to the domestic companies,, since they were not parties to the application addressed exclusively to the Ohio company.

Appeal from a judgment of tbe circuit court for Winnebago county: Geo. W. BueNell, Circuit Judge.

*Affirmed.*

*49The plaintiff *■Wauhau Milling Company*obtained insurance upon its mill and machinery under three separate policies with the defendants, one for $2,000 in the *Central Manufacturers’ Mutual Insurance*Company, of Van Wert, Ohio, and a policy in each of the other two defendant companies for $1,000 each. A loss occurred by fire, in consequence of which separate actions were commenced against each company. These actions were afterwards consolidated. The plaintiff *B. H. Hacketi*joined as mortgagee of the insured premises. Several defenses were raised in the answers, but were finally reduced to two, namely: (1) That the policies were avoided, because the mill ceased to be operated for more than ten consecutive days, contrary to the stipulations in the policies. (2) That the plaintiff failed to keep a watchman on the premises at all times when the mill was not in operation. The case was tried by the court and a jury and the following verdict returned:

“(1) Did Lorenze at the time he made application for insurance state to Brownell in substance that he expected that, during a part of the time in the following winter, the mill would not run on account of the weather? *A.*Yes. (2) Did the mill run after the 29th of ÜSTovember, 1904, at all times when it was practicable to do so with the water which they then had? A. Yes. (3) Was the lack of water power during the winter due to any want of ordinary care and prudence on the part of the plaintiff or its officers and agents ? *A.*Mo.”

Motions were made by both sides for judgment, and motions to set the verdict aside and for a new trial were made on behalf of defendants. Judgment was ordered and entered for plaintiffs upon the verdict for $1,058.75 against each of defendants *Citizens’ Mutual Fire Insurance Company*and *Bower City Insurance*Company, of Janesville, and against the *Central Manufacturers’ Mutual Insurance Company*for $2,077.23. The judgment further provided that, at the time of issuing the policies and since, the plaintiff *B. H. Hacketi*had an interest in the insured property as mortgagee, and at *50the time of trial this interest amounted to $2,500 with interest at sis per cent, from October 8, 1904, and that there he paid to him as such mortgagee $2,500 and interest. From this judgment defendants appealed.

*John M.*Whitehead, for the appellant *Citizens’ Mutual Fire Insurance Company.*

*Thos. 8.*Nolan, for the appellant *Bower City Mutual Fire Insurance Company.*

*Myron II. Beach,*for the appellant *Central Manufacturers’ Mutual Insurance Company.*

For the respondents there was a brief by *Barbers & Beg-*linger, and oral argument by *Charles Barber*and *Fred Beg-linger.*

Kerwin, J.

The property covered by the policies in question consisted of a three-story water-power flour and feed mill building with equipments. It was located in Waukau, a •small village in Winnebago county, Wisconsin, near a small creek which is fed by Rush lake. For several years prior to the date of'the policies in suit the mill had been run only by water power, and during the winter, when water power was not available, it was not operated. The insurance was solicited by an agent of the companies named Brownell, who visited and examined the property November 9, 1904, accompanied by Mr. Lorenze, president of plaintiff *Waukau Milling Company.*Brownell knew that the mill was a water-power mill and the conditions and situation of the water power, and that in severe weather the race which, carried the water from the pond to the mill would freeze and thereby prevent the operation of the mill. After examination of the property the agent took a written application from Mr. Lorenze for $4,000 of insurance on the property in the defendant *Central Manufacturers’ Insurance Company,*of Van Wert, Ohio, the application being addressed to that company only, and forwarded the same to H. J. Cunningham,' agent of the three companies, at Janesville, Wisconsin. Cunningham, instead *51of putting tbe insurance in tbe *Central Manufacturers’ Insurance Company,*in accordance witb tbe application, split •it up, putting $2,000 in tbe Obio company and $1,000 in each of tbe other companies, and tbe three policies were forwarded to plaintiff *Waukau Milling Company.*Tbe policies were all of tbe Wisconsin standard form and none of them in any way referred to tbe application. This application was offered in evidence by defendants on tbe trial and ruled out. At tbe time tbe agent, Brownell, examined tbe premises tbe mill was not in operation, and did not commence to run until about three weeks thereafter. Erom November 29, 1904, to January 1, 1905, tbe mill was operated, but during tbe fore part of January, 1905, tbe weather became so severe that tbe water in tbe race froze, and, owing to the severity of tbe winter, plaintiffs were unable to operate tbe mill until about March 24,1905, at wbicb time they resumed operation. Tbe policies were issued November 10, 1904. In March, 1905, Mr. Lorenze obtained from tbe defendants permission to make alterations and repairs and install additional machinery in' tbe mill. This permission was granted in tbe form of a rider, wbicb was attached to each policy, dated March 13, 1905. On March 30, 1905, the.fire wbicb destroyed tbe property occurred. Tbe application for insurance to. tbe *Central Manufacturers’ Insurance*Company, of Van Wert, Obio, heretofore referred to, contained question and answer to tbe effect that tbe plaintiff *Waukau Milling Company*kept a watchman on tbe premises at all times when tbe mill was not in operation.

1. It is claimed on tbe part of tbe defense that each policy became void because tbe mill ceased to be operated, contrary to tbe provisions of tbe policy. Each policy provides:

> “This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void ... if tbe subject of insurance be a manufacturing establishment and . . i if it cease to be operated for more than ten consecutive days.”

*52The question, therefore, arises under this head, whether the failure to operate the mill for more thau ten consecutive days because of lack of water power occasioned by the severe weather rendered the policies void. The clause in the policy referred to must have a reasonable construction in the light of the conditions attending the subject matter of the contract and within the contemplation of the parties at the time the-contract was made. It will he admitted that the provision is-not an arbitrary one which will be enforced' according to its-letter and under all circumstances, regardless of whether the-cause of such failure to operate is beyond the control of the-assured, or whether the nonoperátion he such as may fairly be said to have been within the contemplation of the parties-when the contract was made as attending the use of the insured property. So it has often been held that a mere temporary cessation of operation due to natural causes is not a violation of a clause similar to the one under consideration. *Ladd v. Ætna Ins. Co. 147*N. Y. 478, 42 N. E. 197; *Whitney v. Black River Ins. Co.*72 N. Y. 117; *Bellevue R. M. Co. v. London & L. F. Ins. Co.*4 Idaho, 307, 39 Pac. 196. Where, as in the case at bax*, it was known to the insurance-company at the time of issuing the policy that the insured' mill might, by reason of lack of power during the term covered by the policy, be forced to cease operation for a part of' the season, it must follow that the period of such cessation must have been contemplated by the parties to the contract as not falling within the clause against cessation of operation. The cessation of operation covered by the policy manifestly has. no reference to such as occurs in the usual course-of the business, or such as ai’ises from causes beyond the control of the insured. Here the evidence shows, and the jury-found, that the defendants knew at the time the policies were-issued that during the ensuing winter the mill might not run on account of weather conditions causing failure, of waterpower, and that the mill did in fact run at all times practicable when it had' power, and that the lack of power during-*53the times it was not operated was not due to any want of ordinary care on the part of the milling company. So it seems clear that the parties contracted with reference to the existing conditions of the business, and contemplated that the mill might not be operated during part of the season on account of lack of power, and that such failure to operate would not come within the clause of the policies in question. 'Such clause cannot work a forfeiture because of failure to operate on account of conditions which múst have been in contemplation of the parties when the contract of insurance was made. We think the great weight of authority supports the doctrine that the failure to operate under the circumstances in this case was not such a cessation of operation as is contemplated by the clause >in the policies in question. *Ladd v. Ætna Ins. Co.*147 N. Y. 478, 42 N. E. 197; *Whitney v. Black River Ins. Co.*72 N. Y. 117; *Bellevue R. M. Co. v. London & L. F. Ins. Co.*4 Idaho, 307, 39 Pac. 196; *Rosencrans v. N. A. Ins. Co.*66 Mo. App. 352; *American*F. *Ins. Co. v. Brighton C. Mfg. Co.*125 Ill. 131, 17 N. E. 771; *City P. & S. M. Co. v. Merchants’, M. & C. M. F. Ins. Co.*72 Mich. 654, 40 N. W. 777; *Poss v. Western A. Co.*7 Lea, 704; *May v. Buckeye M. Ins. Co.*25 Wis. 291.

In *Ladd v. Ætna Ins. Co.*147 N. Y. 478, 42 N. E. 197, the policy covered a water-power sawmill building and machinery, and contained a stipulation similar to the one in •question here. Operation ceased for about a month, owing to the illness of the sawyer. It was claimed that the policy was rendered void because the mill ceased to be operated for more than ten consecutive days, contrary to the provisions of the policy. The court held that the temporary shutting down of the mill on account of sickness of the operator did not constitute a violation of the policy. At page 484 (42 N. E. 198) the court said:

> “We are unable to agree with the defendant’s contention that this clause of the policy is too clear for argument, and that any temporary cessation of the operation of the ma*54chinery in a manufacturing establishment by reason of sickness, breakdown, low water, or other unavoidable cause, although it is not the intent of the insured to cease operating or to allow the premises to become vacant or unoccupied, is a clear violation of its provisions.”

In *Whitney v. Black River Ins. Co.*72 N. Y. 117, the policy contained the provision rendering it void in case the premises, should become “vacant and unoccupied.” In this case the mill was operated by water power, and it was held that delays and interruptions incident to the business, such as low water, diminished custom, or derangement of machinery causing a temporary discontinuance of the use of the mill, did not constitute a breach of the condition, or render the mill “vacant and unoccupied” within the meaning of the policy. At page 120 the court said:

> “The description in the policy shows that the defendant knew that the mill was operated by water power, and as it was a sawmill the insurer must be presumed to have known that sawmills are or may be used as well for custom work as for sawing the logs of the owner, and, as machinery was used for the operation of the mill, the fact that it was liable to break down and need repairs must also have been within the contemplation of the parties when the policy was issuedl The interruptions of the business and the discontinuance of the active use of the sawmill by reason of low water, diminished custom, or derangement of the machinery, if held to be a violation of the condition and to create a vacancy and non-occupation of the building within the true meaning of the condition, would greatly impair the value of the contract as a contract of indemnity, and the result would be that the contract would be deemed forfeited by the happening of events which might reasonably have been anticipated, and which were among the common incidents of the business carried on on the insured premises.”

In *Bellevue R. M. Co. v. London & L. F. Ins. Co.*4 Idaho, 307, 39 Pac. 196, the clause in the policy was identical with those in the policies before us. The mill ceased to be operated because the mill race froze up in the winter, as it had *55for several years prior to the writing of the policy, which fact was known to the agent of the company before issuing the policy. It was held that the period of nonoperation was incident to the use of the mill and taken into consideration by the insurance company when it issued the policy. In *American F. Ins. Co. v. Brighton C. Mfg. Co.*125 Ill. 131, *17*N. E. *771,*the policy contained a clause providing that, if the subject of insurance be a manufacturing establishment and ceased to be operated without agreement indorsed upon the policy, the insurance should cease. The property covered was a cotton-mill building and the plant necessary to run it. Operations were suspended, so far as running the mill was concerned, for about eight days before the fire because of difficulty in securing the proper quality of cotton. It was claimed that such suspension of operation was a ceasing to operate within the clause of the policy and avoided the insurance, but it was held that there was no cessation of operation within the meaning of the policy, but simply a temporary suspension of business. In *City P. & S. M. Co. v. Merchants’, M. & C. M. F. Ins. Co. 72*Mich. 654, 40 N. W. *777,*the policy provided that if the mill should cease to be operated, unless shut down for repairs, without a notice to or consent of the company, the policy should become void. The mill was a shingle mill and was operated in connection with a planing mill. The shingle mill had not been operated from July 29 to September 10, 1886, at which latter date it was burned. The mill was not operated because the stock of logs had been exhausted, and a new supply was expected from day to day, but their delivery was delayed on account of a low stage of water. It was held that the ceasing to operate was a mere temporary suspension, and that such suspension could not be regarded as a “ceasing to operate” within the meaning of the policy. In *Poss v. Western A. Co. 7*Lea, 704, the factory shut down by reason of an epidemic of yellow fever, and was not in operation at the time of the fire. It was *56claimed that there was a ceasing to operate which rendered the policy void. It was held that the clause in the policy referred to a permanent and not-a temporary cessation of operation of the establishment, and that snch failure to operate occasioned by the epidemic was not a permanent cessation of operation, and therefore did not avoid the policy. Referring to this clause the court said:

> “It could never have been intended to apply to a ceasing to operate occasioned by the usual incidents to the business, among which would be the impossibility of procuring operatives temporarily for any cause.”

The doctrine of the foregoing cases is in harmony with the rule laid down by this court in *May v. Buckeye M. Ins. Co.*25 Wis. 291.

We shall not extend this opinion by a review of the numerous cases cited to our attention by counsel for defendants, but may say in passing that they have received careful attention. Many of them rest upon the doctrine that evidence of parol agreements at or prior to the time of issuing the policy, or evidence of waiver of conditions as to future conduct respecting the subject matter of the insurance contrary to the provisions of the policy, is not admissible. Other cases cited recognize the distinction between agreements respecting waiver of conditions as to future conduct and knowledge of existing conditions respecting the property insured. In *Sowers v. Mutual F. Ins. Co.*113 Iowa, 551, 553, 85 N. W. 764, the court said:

> “While an insurance company may be bound by knowledge of its soliciting agent regarding past or present conditions, such an agent has no power to waive future conditions.”

In *Stone v. Howard Ins. Co.*153 Mass. 475, at page 480 (27 N. E. 6), the court said:

> “Where an existing fact is at variance with a clause of an insurance policy, and is known by the company to be so, *57there may he an implication that the clause is not insisted on. *Newmarket Sav. Bank v. Royal Ins. Co.*150 Mass. 374, 23 N. E. 210. Bnt a clause which makes express provision for the future cannot he thus done away with.”

In *McNierney v. Agricultural Ins. Co.*48 Hun, 239, at page 243, the court said:

> “It is now well settled that knowledge of an existing fact that would avoid the policy from its date will estop an insurer from insisting upon such fact as a breach of a warranty. *Van Schoick v. Niagara F. Ins. Co.*68 N. Y. 434; *Woodruff v. Imperial F. Ins. Co.*83 N. Y. 133; *Short v. Home Ins. Co.*90 N. Y. 16.”

The point was considered by this court in *Welch v. Fire Asso.*120 Wis. 456, 461, 98 N. W. 227, where it is said:

> “In *Roberts v. Continental Ins. Co.*41 Wis. 321, after citing a long line of decisions in this court, it was said, in effect, that if, when the agent of an insurance company delivers a policy of insurance, he has knowledge of facts as regards the subject of the insurance inconsistent with the terms of the policy, the assurer, by accepting the premium, is es-topped from declaring the policy void because the terms thereof were not so changed in writing as to conform to the facts,” .and citing a long line of decisions to that effect.

The fact that the mill could not be operated in severe winter weather 'on account of lack of power was an existing fact and known to the companies at the time of issuing the policies. The provision, therefore, respecting nonoperation had no reference to temporary cessation of operation occasioned by lack of power.

2. The defense that no watchman Was kept in the mill turns upon whether the application to the defendant Ohio company was admissible and binding upon the plaintiff. Hone of the policies refer to this application or require the keeping of a watchman, so, unless the application is a part of the contract, there was no requirement for a watchman, and hence no violation of the policy for failure to, keep one in the *58mill. Tbe application was addressed to tbe Ohio company and made no reference to tbe other companies or tbe Janes-ville agency. It called for $4,000 insurance in tbe Obio> company for five years, and contained tbe following provision :

> “And tbe applicant hereinbefore named, by accepting this policy bearing even number and date herewith, becomes a member of this company and agrees to pay it the premium annually during tbe life of this policy, and, in addition thereto, such sum or sums, in no event to exceed in tbe aggregate five times tbe amount of said annual premium, at such time or times, in such manner, and by such instalments as tbe directors of said company shall assess or order, pursuant to its charter and by-laws and tbe laws of tbe state of Ohio. ■ And warrants tbe answers to tbe above questions to be full, true, and material to tbe risk and shall be continuing warranties during tbe life of said policy; and this application is made tbe basis upon which said policy is issued and becomes a part of same.”

Tbe application was excluded by tbe court below, and tbe ruling in that regard is complained of. It is claimed that tbe application was admissible as to tbe Ohio company because it was a “mutual company in cities and villages” within tbe meaning of sec. 1945a, Stats. 1898. Tbe statute provides :

> “All fire insurance corporations except town insurance corporations, millers’ and manufacturers’, mutual companies in cities and villages, druggists’ mutual companies, church insurance corporations and retail lumber dealers’ insurance associations shall, upon tbe issue or renewal of any policy, attach to such policy or indorse thereon a true copy of any application or representations of tbe assured which by the terms of such policy are made a part thereof or of the contract of insurance or referred to therein, or which may in any manner affect tbe validity of such policy. Tbe omission so to do shall not render the policy invalid, but if any corporation neglect to comply with tbe requirements of this section it shall forever be precluded from pleading, alleging or pro-v-*59ing such application or representations, or any part thereof,, or the falsity thereof or any part thereof in any action upon such policy; and the plaintiff in any such action shall not be required in order to recover either to plead or prove such application or representations, but may do so at his option.”

It is claimed by counsel for the Ohio company that “mutual companies in cities and villages” within the meaning of this statute includés the defendant Ohio company organized under the laws of Ohio, and hence that it could prove the application and the falsity thereof, although not attached to the policy or referred to therein. A careful examination of the statutes respecting mutual fire insurance companies in this state and the history of such legislation convinces us that secs. 1941 — 1 to 1941 — 13, respecting “mutual companies in cities and villages,” have reference to companies organized under the laws of this state only, and that “mutual companies in cities and villages” mentioned in sec. 1945a refer to' such companies organized under the laws of this state. These several mutual fire insurance companies excepted from the operation of sec. 1945a (“town insurance corporations, millers’ and manufacturers’, mutual companies in cities and villages, druggists’ mutual companies, church insurance corporations and retail lumber dealers’ insurance associations”) manifestly have reference to local companies and associations within the limits of the state and authorized to organize under the laws of the state for mutual protection. Their powers are defined by statute. They are obviously intended to provide for classes of persons having, by reason of location, occupation, or association, a mutual interest in fire protection. Sec. 1941 — 1, Stats. 1898, provides, in effect, that any number of persons, not less than twenty-five, residing in any city or cities, village or villages in the same county, who shall own collectively insurable property of not less than $25,000 in value -which they desire to have insured, may form themselves into a corporation for mutual insurance by complying with the conditions named, which include the *60•signing of articles of organization, reciting that they are resi•dents of a certain city or cifies or villages in some county in the state of Wisconsin; and sec. 1941—5 provides, substantially, that no such corporation shall insure any property out -of the city or village in which it is located, unless a resolution be adopted by a majority of the members authorizing the directors to insure property in other villages and cities than that in which the corporation is located, and in cities and villages of counties adjoining such county. It is plain that these “mutual companies in cities and villages,” restricted in their scope and powers as they are, were intended by the legislature to refer to mutual companies organized in cities and villages in this state, and have no reference to foreign mutual fire insurance companies. There is nothing in the statute to indicate that it was the intention of the legislature that secs. 1941-1 to 1941—13 should apply to corporations organized outside of the limits of the state of Wisconsin, and hence we must presmne that these statutes have no operation beyond the territorial limits of the state and apply only to persons and things in this state. 23 Am. & Eng. Ency. of Law (1st ed.) 346 (bottom); *Butterfield v.*Ogborn, 1 Disney (Ohio) 550; Story, Confl. of Laws, §§ 18, 19, 20; *Chappell v.*Purday, 14 M. & W. 303. In *Farnurn v. Blackstone Canal Corp.*1 Sumn. 46, Story, J., says:

> “Every legislature, however broad may be its enactments, is supposed to confine them to cases or persons within the reach of its sovereignty.”

Nespecting the Janesville companies organized under the laws of this state, the application was not made to them. They cannot be said to be parties in any sense to the application made exclusively to the Ohio company, and therefore it was properly excluded as to them. The policies issued by the Janesville companies were for $1,000 each for the term of one year. They in no way referred to the application, which was made to the Ohio company for $4,000 insurance for five *61years. It cannot be said, that tbe Janesville policies were issued upon tbe application to tbe Ohio company or that snob application was an application to tbe Janesville companies. Tbe plaintiff *Waukau Milling Company,*therefore, did not. contract with tbe Janesville companies that it would keep a< watchman in tbe mill. *Vilas v. N.*Y. *C. Ins. Co.*72 N. Y. 590.

We therefore bold that there was no proof that tbe plaintiff *Waukau Milling Company*agreed to keep a watchman in tbe premises, and that there was no breach of tbe provision in tbe policies respecting cessation of operation. It follows, therefore, that tbe judgment of tbe court below must be affirmed.

*By the Court.*— Tbe judgment is affirmed.