Stephenson v. Germania Fire Insurance ( 1916 )

Letton, J.

Action to recover upon a fire insurance policy. A general demurrer to the answer was overruled. Plaintiff elected to stand on his demurrer, and judgment of dismissal was rendered. Plaintiff appeals.

The petition alleged, in substance, that the insured property was owned by one W. M. Rice; that about the 1st of August, 1913, the plaintiff commenced negotiations by mail with Rice who lived in Pueblo, Colorado, to purchase the property, and soon thereafter completed a contract of purchase. As a part of the consideration, Rice agreed to assign and deliver to him the policy of insurance. The deed and policy were sent to a bank at Wymore for delivery to plaintiff, but Rice failed to assign it in writing. Before the plaintiff could procure a written assignment, on the 31st day of August, a fire occurred which almost wholly destroyed the building. After the fire, Rice sent the plaintiff an assignment in writing. It is also alleged that the property was damaged more than the. indemnity provided for, and that no additional hazard was caused by the transfer of the property.

The defendant’s answer, in addition to certain admissions and denials, pleads (1) a provision of the policy that, if a change took place in the title or interest of the assured in the property, the policy should be void, and the fact that the title to the property had passed from Rice before the fire; (2) a provision of the policy that it should be void if assigned without the written consent of the insurance company indorsed thereon, and the fact that the attempted assignment was made after the fire and without its consent; (3) that it never entered into a contract with the plaintiff or knew he claimed any interest in the property until after the fire; .(4) that he is not the owner of the policy and the defendant company has never recognized him as such.

The general demurrer searched the record. The pleadings disclose that, after the title had passed from Rice and after a fire had practically destroyed the insured property, he undertook to assign the policy to plaintiff without defendant’s consent or approval. At this time defendant knew nothing about the change of title and had not consented to enter into an insurance contract with the plaintiff. By the terms of the policy the change of ownership avoided the contract. This is a reasonable provision for the protection of the insurer. An insurance company has the right to determine with whom it shall contract, and while in the great majority of instances its consent to an assignment may he, as plaintiff insists, merely a matter of course, it is so because of the fact that there is ordinarily no moral hazard, and therefore it is willing to enter into a contract. Instances do occur occasionally when insurance companies decline to enter into insurance contracts with individuals. This is their right and privilege, and it is not unreasonable that they reserve to themselves by their policy the right to determine with whom they will contract.

Plaintiff virtually concedes that this is the law, but insists that by the enactment of the new insurance code the law has been changed so as to allow the recovery. He relies upon the following language in section 3187, Rev. St. 1913: “The breach of a warranty or condition in any contract or policy of insurance shall not avoid the policy nor avail the insurer to avoid liability unless such breach shall exist at the time of the loss and contribute to the loss, anything in the policy or contract of insurance to the contrary notwithstanding.” At the time the contract was entered into with Rice no such provision was in the statutes; but, even if such a provision were in force, how can it apply to the facts pleaded? It is the entire absence of a contract relation between the plaintiff and defendant that is relied on as a defense. Plaintiff never owned a policy issued by the defendant, and hence the defendant is not an insurer of his property, and never has been. Farmers Mutual Ins. Co. v. Home Fire Ins. Co., 54 Neb. 740.

The petition shows that the policy would expire in about nineteen days after the fire. The plaintiff, who, it was said at the argument, is a man experienced as an insurance agent, accepted the title to the property when the policy which accompanied the deed expressly stated the necessity of the consent of the insurer to an assignment in writing in order to transfer the insurance. He could have declined to take title until the insurance was transferred, or he could have taken out new insurance, since the policy had such a short time to run; but, instead of following the safe course, he took the risk of a fire occurring in the interval of time it would take to again communicate with Rice. There is no privity between him and the defendant, and they have never had any contractual relations.

Moreover, a contract requires the meeting of minds. In New England Loan & Trust Co. v. Kenneally, 88 Neb. 895, it is said: “The general rule of law is, that a policy of fire insurance is a personal contract with the party insured and does not run with the land or pass to the purchasers by a sale of the premises or property insured, and any assignment of the policy must be with the knowledge and consent of the insurer. Ayres v. Hartford Fire Ins. Co., 17 Ia. 183, and cases cited; Simeral v. Dubuque Mutual Fire Ins. Co., 18 Ia. 319; Ætna Fire Ins. Co. v. Tyler, 30 Am. Dec. (N. Y.) 90; May, Insurance, sec. 6.” Each party has the right to determine for himself whether he will do business with the other. • In the case of an attempted assignment of a policy of insurance, there is no new contract until the insurer knowingly accepts the assignee in the place of the former as the person with whom it insured. The insurance company would have the same right to insist that an assignee of the policy, without his consent to and acceptance of the assignment, would become liable for any unpaid premiums, as an assignee, without the insurer’s knowledge or consent, has to insist upon payment of a loss.

There was no forfeiture as defendant insists. Rice had the right to surrender his policy at any time, receiving back the unearned premium at the customary short rates. When he parted with the title, he had no insurable interest left, and there was nothing to forfeit.

Plaintiff contends that there is a saving clause in the new statute which in some way aids his contention. This clause, however, merely provides: “All actions and proceedings which may be pending in any court under existing laws which this act in any way supersedes or repeals shall proceed without being in any manner affected by the passage of this act.” Rev. St. 1913, sec. 3321. This action was not pending when the insurance code took effect, and the saving clause has no application.

The judgment of the district court is

Affirmed.

Hamer, J., not sitting.