Clay v. Phœnix Insurance

Atkinson, Justice.

The official report states the facts.

1. Courts are not at liberty,to arbitrarily disregard reasonable limitations imposed upon the liability of insurance companies under policies of insurance, by stipulations and conditions therein expressed; but in the construction of such policies, and such conditions and stipulations, the courts will look through the whole contract to the real intention of the parties at the time of the execution of the instrument, and give to it such construction as will impute to them a reasonable intendment, and such construction as will relieve against forfeitures, if that construction be consistent with the general intent expressed in the policy. Courts will presume, when policies of insurance are issued by insurance companies and they accept premiums paid therefor, that such policies are issued in good faith and with the design, upon the consideration received, to afford to the assured reasonable immunity in case of loss. If the condition be so repugnant to the stating clause of insurance as that both cannot stand together, courts should disregard the condition, upon the idea that it will not be presumed that the insurance company issues a policy of insurance with an intention never to become liable thereon. If the condition impose upon the assured a duty with respect to the thing insured, that duty must be performed, however slightly material to the interest of the insurer its performance may appear to be. If the condition or stipulation impose duties which are wholly immaterial, or with respect to matters which are wholly irrelevant, the right of the assured would not be affected by a non-performance. There is no greater sanctity and no more mystery about 9. contract of insurance than any other. The same rules of construction apply to it as to other contracts, and the true rule for their interpretation may be stated to be, that stipulations and conditions in policies of insurance, like those in all other contracts, are to have a reasonable intendment, and are to be so construed, if possible, as to avoid forfeitures and to advance the beneficial purposes intended to be accomplished.

2. In the present case it appears from an inspection of the record, that the agent of the insurance company was likewise a real estate agent; that in his capacity as real estate agent, he had charge of the property of the assured. At the request of the assured, he caused a policy of insurance to be issued by the defendant company, of which he was then the agent, and which policy of insurance required that it be countersigned by the local agent before it should become valid. The policy was in fact countersigned by the local agent, who was likewise the real estate agent having in charge the property of this plaintiff. The policy contained a condition that if the property insured should become vacant and remain vacant and unoccupied for any length of time without notice to or the consent of the company indorsed in writing on the policy, the policy should become void. No written consent that the property may remain vacant and unoccupied appears on the policy. The question then is, did the company have notice that the property was vacant? It will be seen that it is not required that the notice of the vacancy should appear in writing indorsed on the policy, but only where the consent of the company is relied upon as excusing the vacancy of the premises is this required. The evidence demonstrates that the local agent of the company who issued this policy of insurance and who joined in the execution of the contract of insurance, was fully advised that tbe property was vacant. No notice by implication is necessary to bring home to him the substantive fact that the house was vacant. He had express knowledge of that fact. He was the agent of the company —its alter ego with respect to this insurance, and notice to him must be held, to be notice to the company. See 13 Wallace, 234-5. The policy of insurance remained in his custody — the assured being temporarily absent from the city — until after the loss. The premiums were duly paid by the assured and accepted by the company. With full knowledge that this property was vacant, they permitted the insurance to remain uncanceled, retained the premiums, and after loss, seek to be absolved from liability to the assured. The allowance of such a defense would be a gross fraud upon the assured. In such a case, the right of the insurance company is, upon notice of a breach of the condition, immediately to cancel the policy and terminate the contract of insurance. If, notwithstanding the breach of condition, it permit the policy of insurance to stand, and thereafter receive or retain premiums already received, it ■will be held to have waived the breach of condition. Such an interpretation is consistent with the principles of law consonant with the doctrines of sound morality, and gives to each of the parties the full benefit of the condition expressed in the policy.

3. There was likewise in the policy of insurance a condition to the effect “that if the property insured is mortgaged or otherwise incumbered, either prior or subsequent to the date thereof, without the consent of this company written thereon,” the same should be void. It appears that at the time the application for insurance was made, information was given to the clerk in the office of the local agent by and through whom the insurance was effected, that a mortgage actually existed upon the property. According to the testimony of the plaintiff, and this is not disputed, he was informed by the local agent that the particular clerk in question was the one who had charge of the insurance business. It was his duty to obtain the very information imparted to him by the assured, and with this information the •company, through its agent, issued the policy upon which this action was brought. To allow the company to defeat .a recovery by simply showing that a mortgage existed upon the property at the time the insurance was effected, would be to impute to it a deliberate purpose to defraud the .assured. It would be to permit the company to say to the .assured: we had no intention of insuring your property in the first instance; the policy of insurance is a false token, by means of which we have obtained your money in payment of premiums; we received and retain the money with no intention of affording to you the immunity from loss which you had a right to expect the policy would 'afford. Courts will not in such a case impute a fraudulent purpose to the insurance company in the execution of its contract of insurance, but will rather presume that the policy was issued in good faith and with an honest purpose to afford to the assured immunity against loss as stipulated the ein. It will be presumed conclusively, when, with knowledge that there was a mortgage upon the property, it nevertheless issued •the insurance and accepted the premium, that it intended to waive the condition in question, and which would have the ■effect, otherwise, to render the policy void. In such a case, if the company intend afterwards to insist that the condition is a valid one, it should refuse, in the first instance, to issue the policy, or, having issued it, it should exercise its right •of cancellation before a loss; and failing this, it is estopped to rely upon the breach of condition. It would have no right so to deal with the assured as to lead him to believe that his property was in fact insured, when the policy, according to its contention, was really void.

4. According to the view we take of the evidence submitted in this case, there was sufficient evidence to require its submission to a jury, and the court erred in granting a nonsuit.

Let the judgment of the court below be Reversed.