Tbe application, bond, and Schedule A constitute tbe contract between tbe plaintiff and defendant, and it is a contract of insurance. Shakman v. Credit System Co., 92 Wis., 374.
Speaking of such contracts, Lacombe, Circuit Judge, says, in Tebbetts v. Guarantee Co., 73 Fed. Rep., 96: “Insurance against mercantile losses is a new branch of tbe business of underwriting and but few eases dealing with policies of that character have as yet found their way into tbe courts. Tbe necessarily nice adjustments of tbe respective proportions of loss *122to be borne by insurer and insured, the somewhat intricate provisions which are required in order to make such business successful, and the lack of experience in formulating the stipulations to be entered into by both the parties to such a contract, have naturally tended to make the forms of policy crude and difficult of interpretation,” and he quotes the rule of construction of ambiguous clauses laid down by him in Guar. Co. v. Wood, 68 Fed. Rep., 529: “As that contract is a voluminous document, prepared by the company, any ambiguity in its phraseology should be resolved against the draftsman. ... If the particular clause requiring interpretation cannot be brought into harmony with the rest of the contract, and the instrument considered as a whole is ambiguous touching the precise loss which the policy covers, that meaning is to be given to it which is most favorable to the insured.”
Frost on Guar. Ins., p. 572, also says, as to the rule of construction, that, “All conditions limiting liability are to be strictly construed. In the interpretation of conditions they are to be construed liberally in favor of the insured and strictly against the insurer. The policy should be interpreted in such a way as to accomplish the general purpose had in view, and at the same time give effect to all of its conditions, according to their fair and reasonable meaning.”
The contract before us is based on experience, not on rating,- and this means “the plaintiff’s experience with the several customers. In other words, the defendant was willing to insure the credit of each of plaintiff’s customers to an amount that plaintiff’s experience with such customers indicated would be a reasonably safe credit.” Steinwender v. Cas. Co., 126 N. Y. Sup., 271; Cas. Co. v. Cannon, 133 Ky., 748.
It is also expressly stipulated in the bond that Schedule A shall describe-the class of customers to be covered by the bond, and if we turn to Schedule A we find three classes of debtors, which may be termed old customers, new customers, and those who are solvent owing outstandings. ■ The fact that nothing is said in -this schedule about insolvency at the time of the execution of the bond, when defining old and new customers, and that it is expressly provided that as to outstandings only those of *123debtors wbo were solvent when the bond was. executed are insured, indicates clearly that it was the purpose of the defendant to insure the debts of old and new customers, created after the execution of the bond, although insolvent, provided the. credit extended was based on experience.
If we were to construe the proviso to paragraph 12 of subsection “b” as the defendant contends, and hold that claims against debtors who were insolvent at the time the bond was executed, although based on experience, are not protected by the bond, we would change the entire contract between the parties, and say that experience is not the basis of credit under the bond, but solvency.
It is argued that the construction contended for by the plaintiff is unreasonable, and that it cannot be supposed that the defendant would permit sales to insolvent persons, and insure them.
It would be sufficient answer to say that it has done so; but if the contract is examined, it will be found that the rights of the defendant are carefully safeguarded.
The plaintiff did not have an unlimited discretion in making sales. Claims against old customers were not insured beyond the highest amount paid by them on indebtedness created within twelve months prior to the execution of the bond, and in no event in excess of $2,000, and the indemnity as to the new customers does, not exceed 50 per cent of the first bill, which could not exceed $1,000, and after the first bill, new customers were classed as old customers.
The experience of wholesale and retail dealers has doubtless shown that it is reasonably safe to sell to men who' are not solvent, but who have good character and good habits, and who are accustomed to pay, and for this reason experience and not solvency has been adopted as the standard.
This being the plain purpose of the contract, if the proviso relied on by the defendant is repugnant to it, it would be our duty to reject it, but we do not think the repugnancy exists.
•Subsections (a) and (&) are provisos to the first stipulation or agreement in the bond, and subsection (a) provides that *124tbe debtors included in tbe bond are those covered by Schedule A, while subsection (&) enumerates the evidences of liability by the defendant.
Paragraph 12 of subsection (b) is obscure, and it is difficult to ascertain its meaning.
Some word is evidently omitted before the word “shall,” and the test of insolvency is to be applied to some claim.
It cannot be applied to the claims of $150 first mentioned in the paragraph, because it- says that, in addition to insolvency, one of the foregoing facts enumerated in subsection (b) must exist, and it is provided as to the claims first mentioned that it is' not necessary for any of the foregoing facts to exist, and it cannot be applied to all the claims covered by the bond, because that would give it an effect which would withdraw claims covered by Schedule A and would make solvency the test.
If we bear in mind the purpose of the contract, and that experience is the basis of credit; that the claims to be insured are those covered by Schedule A, and that subsection (fr) is intended to furnish the evidences of liability, and read paragraph 12 in the light of these facts, we think the purpose of the paragraph was to provide evidences of liability that would be satisfactory' for small claims that did not exceéd $150, and that these small claims are divided into three classes, and that the proviso applies only to those three months overdue, or such as had been placed in the hands of a mercantile agency prior to the execution of the bond. As thus construed, the paragraph reads as follows:
“(12) Where a claim does not exceed $150 and none of the above state of facts have arisen, but the designated mercantile agency, a collection agency, or a practicing attorney in or near the place where the debtor did business reports in writing as to each of such claims and such report is attached to the preliminary proof of loss, that the debtor has absconded, leaving no assets applicable to the payment of his debts, or that such claim is uncollectible and the issue of an execution would be useless, and that during a period of at least thirty days prior to the making of such report diligent efforts have been made to collect such claim or claims, they shall, so far as they are covered by *125this bond and riders attached hereto, be included in the calculation of loss, and also any such claim which is more than three months overdue prior to the commencement of this bond, or that has been placed in the hands of such mercantile agency, collection agency, or attorney prior to the execution of this bond, shall also be included, provided the insolvency and one of the foregoing facts from 1 to 11 inclusive, as enumerated in this subdivision (Z>), occurs between the date of the execution and the termination of this bond.”
In our opinion, there is no error.
Affirmed.