Hanover Fire Ins. Co. v. Wood ( 1923 )

The chief defenses asserted against plaintiff's (appellee's) right to recover on the fire insurance policy declared on were (a) that the policy had been canceled prior to the loss of the property insured; and (b) that breach or violation of the "iron safe clause" in this policy avoided the insurer's liability in the premises.

The fire insurance policy sued on contained, among others, these provisions:

"This policy shall be canceled at any time at the request of the insured; or by the company by giving five days' notice of such cancellation. If this policy shall be canceled as hereinbefore provided, * * * the premium having been actually paid, the unearned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate, except that when this policy is canceled by this company by giving notice it shall retain only the pro rata premium."

The terms, conditions, duties, and obligations of a contract of insurance will be liberally construed in favor of the insured. 8 Mich. Ala. Dig. pp. 813, 814, § 44 (2 and 3). Under the quoted provisions of this policy, cancellation by the company could not be effected unless and until the company returned to the insured the unearned pro rata of the premium actually paid, the compensation retained being at the "customary short rate." Buckley v. Citizens' Ins. Co.,188 N.Y. 399, 81 N.E. 165, 13 L.R.A. (N.S.) 889, annotated. The phrase "actually paid," as employed in the quotation from this policy, does not stipulate, for the purpose of cancellation, that the premium's payment shall have been made to the company, the insurer, by the insured either directly and immediately or in person. Such actual payment as is stipulated might be efficiently made by another for the insured. The essence of the stipulation "actually paid" is that the insurer should have received the policy's premium; cancellation on the insurer's initiation being dependent for accomplishment upon restoration to the insured of the appropriate unearned pro rata of the policy's premium received by the insurer. To read the stipulation in question as exacting direct, immediate payment in person by the insured is to interpolate terms in the policy not there found. If, however, the stipulation in question was ambiguous, the stated rule of construction requires strict interpretation against the insurer and a liberal interpretation in favor of the insured; and the application of this rule of construction in the present instance is especially invited by the fact that the insurer is undertaking to assert and enforce a right, particularly defined in the policy, to terminate the contract and to extinguish liability thereunder during the period it was in force unless sooner canceled.

The undisputed evidence went to show that the insurer's agent, Kendrick-Houseal Real Estate Insurance Company, had, in September, 1919, paid the insurer the full premium for one year from June 27, 1919, on the policy sued on. Miss Bennett testified:

"At the time I received this money [i. e. the money plaintiff paid to her on December 5, 1919] we had already paid the premium to the Hanover Insurance Company. We paid to the Hanover Insurance Company in September the premium on the policy issued to Mr. Wood [the plaintiff]."

The witness Houseal also testified, in reference to the premium on this policy:

"In this particular case the policy was written in June, 1919, and in September we paid to the company in a lump sum or all the business that was written in the month of June."

The premium on this policy for one year from June 27, 1919, having been paid to the insurer by the Kendrick-Houseal Company, the insured thereupon became indebted and legally liable to the Kendrick-Houseal Company for the amount of the premium so paid. The obligation thus created was between the insured and the Kendrick-Houseal Company; the insurance company's demand for the whole annual premium having been satisfied by the payment stated. Buckley v. Citizens' Ins. Co.,188 N.Y. 399, 81 N.E. 165, 13 L.R.A. (N.S.) 889, 892. The Buckley Case, supra, is in point. The fact that there the insured gave his note for the premium in question (with others) the agents subsequently paid to the insurer does not discriminate that cause from the present contest. Upon the payment of the premium, the quoted stipulation of this policy exacted the return to the insured of the unearned portion of the premium as a condition precedent to the effectual cancellation of the policy. There was no premium return of any kind made by the insurance company to the insured. Obviously this condition precedent to cancellation of the policy by the insurer could not be afforded by a return of premium to the Kendrick-Houseal Company. No cancellation of the policy under its terms having been accomplished before the destruction of the insured's property by fire, the only meritorious defense remaining and asserted was the breach of the "iron safe clause." The matters arising out of the payment, on December 5, 1919, by Wood to Kendrick, or to Miss Bennett, clerk in the Kendrick-Houseal Company's office, of the amount of the annual premium were and are wholly immaterial to the issues in the cause; no cancellation having been effected because no return of unearned premium to the insured was made by the insurer in accordance with the prescriptions of the policy. In paying $41.80 to Kendrick or to Miss Bennett on December 5, 1919, Wood was simply and effectually discharging his obligation to the Kendrick-Houseal Company, that had, in September, 1919, paid the insurance company the premium on this policy. There is in the case no real issue or waiver by any one of a forfeiture effected through cancellation by the insurer.

The writer, therefore, is unable to concur in a reversal of the judgment attained without regard to the fact that no cancellation of the policy, under its terms, was effected before the loss by fire.

Replication C, interposed to pleas asserting plaintiff's breach of the "iron safe clause," reads:

"C. For further replication to said pleas, the plaintiff says that the defendant company, acting by and through its duly authorized agents who were acting in the line and scope of their employment and authority, with a full knowledge that plaintiff did not have on his premises or in his store an iron safe, and that he had been relieved by the defendant's agent, acting in the line and scope of his authority, of the duty to comply with the terms of the said policy, pleaded as aforesaid, did receive, accept and keep the sum of, to wit, $41.80, the amount of the premium due on said policy for the term of one year."

In the writer's opinion, replication C was not subject to the demurrer. The criticisms of replication C, taken in the majority opinion as expressed in grounds 20 and 22 of the demurrer, are that it does not answer the plea's allegation of failure to keep insured's books and inventories in some place not exposed to fire, which would destroy the building, or to produce his set of books and inventory. These criticisms but contradict material averment of replication C viz. that insured "had been relieved by the defendant's" authorized agent "of the duty to comply with the terms of the policy pleaded as aforesaid," meaning the terms of the policy set up in the pleas whereby defendant sought to conclude plaintiff's right to recover because of his failure to produce the books and inventory, as well as his failure to preserve them from the hazards of fire. The material issues, aside from ineffectual cancellation, were contested in the evidence.

The judgment should, in the writer's opinion, be affirmed.