Mirunczak v. Michigan Farmers Mutual Fire Ins.

Plaintiffs sued defendant to recover on an insurance policy. From judgment for defendant, plaintiffs appeal, claiming the trial court erred in directing a verdict for defendant.

Defendant contends the suit is barred by the statute and bylaws of the company requiring it to be commenced within 12 months next after the date of loss, and that plaintiffs were never members of the company.

In Becker v. Farmers' Mutual Fire Ins. Co., 48 Mich. 610, it was said:

"Existing bylaws are in such cases of mutual insurance very properly regarded as entering into the contract and binding the members and open therefore to inquiry. But a contract once made with a member cannot differ in its essence from one made with any one else, and he cannot without his consent be brought into changed responsibilities, which import new terms into the agreement itself."

In Kamm Schellinger Brewing Co. v. St. Joseph CountyVillage Fire Ins. Co., 168 Mich. 606, 616, 618, 620, the court discussed the relative rights of parties in a mutual insurance company. It was held:

"Each member contracts to be liable for the pro rata payment of all such losses, as well as to receive compensation for losses which he may sustain. Only the property of its members is insured. The members of the company under the charter consist of all persons holding policies of insurance and who subscribe their names to the copy of the charter and the bylaws of the company. * * * The contract must be mutual, and the plaintiff must be equally liable for the losses of other members of the company before it can claim that the other members of the company shall be assessed to pay its losses. * * * The principle which lies at the foundation of mutual insurance and gives it its name is mutuality; in other words, the intervention of each person insured in the management of the affairs of the company and the participation of each member in the profits and losses of the business in proportion to his interest."

In that case, a question arose as to the liability under a policy which it was claimed had been assigned. It was said:

"Simply assigning the policy did not revive it. A further thing was necessary to be done, namely, to present the policy thus assigned to the secretary, make application to become a member of the company, and get the consent of the secretary indorsed thereon."

In Harper v. Michigan Mutual Tornado, Cyclone WindstormIns. Co., 173 Mich. 459, after the loss of plaintiff's property occurred he sent the premium to the company. The court said:

"Baldly stated, plaintiff's proposition is this: That, after his building was destroyed, he could effect an insurance upon it through the wrongful act of the secretary. This is not a case of waiver, and is not governed by the rules laid down in the many cases cited by plaintiff. It is a case where, if plaintiff's contention could prevail, defendant's secretary would be permitted to take $1,500 from the members of this defendant organization and present it to plaintiff. This is not insurance. It is vicarious philanthropy. * * *

"As well might it be claimed that, after a building had been destroyed by fire, the owner thereof could, after acquainting the agent with the fact, secure a policy which would cover his loss, upon the theory that the insurance company had waived the existence of the building because the agent knew it was already burned."

In Brink v. State Mutual Rodded Fire Ins. Co., 270 Mich. 49, it was said:

"The Brinks were members and liable to assessments. An assessment was levied, notice given to the Brinks, they did not pay and the policy was suspended and notice of suspension given before the fire. The Carpenters were never members of the company, nor were they liable for the assessment and were not entitled, as of right, to notice of the assessment or of suspension of the policy for nonpayment of the assessment. * * *

"At the time of the fire the Brinks were not insured. The insurance, being suspended as to the Brinks, it could not, by estoppel, waiver or subsequent reformation, be held payable to the Carpenters, as their vendors' interest might appear."

In Crank v. State Mutual Rodded Fire Ins. Co., 239 Mich. 642, it was held:

"The opinion of Mr. Justice STONE in the Kamm Case (168 Mich. 606) is applicable to this, and leaves nothing further to be said on the subject. In the Kamm Case there was an assignment of the policy to the purchaser, but no approval by the secretary. In the case at bar there was no assignment of the policy, and, of course, without it, no approval by the secretary."

In McNatt v. Patrons' Mutual Fire Ins. Co., 210 Mich. 610, it was held the plaintiff could not become a member of the defendant company until the membership fee was paid, nor could she carry insurance without being a member.

In Leonard v. Farmers' Mutual Fire Ins. Co., 192 Mich. 230, it was held the charter and bylaws of a mutual fire insurance company are parts of a contract of insurance, and that the officers of the company cannot waive any of the provisions of the charter or the bylaws.

The charter and bylaws of the company required the suit to be instituted upon the policy within one year from the date of the loss. Such suit was not commenced within that time. The important question in this case is whether or not the institution of such suit was waived by the company.

"An agent who is required to write policies, and is authorized to settle the terms of insurance and investigate losses, is a general agent, with authority to waive preliminary proofs of loss. So agents are general agents, where they fully represent the company within a certain district, are authorized to solicit insurance, receive moneys and premiums, issue and renew policies, appoint subagents, and adjust losses." 1 Joyce, The Law of Insurance (2d Ed.), p. 1039, § 395.

The secretary was the general agent of the company. The charter provided:

"The secretary shall be secretary ex-officio of all such meeting (meetings?) when present, but in his absence a secretary pro tem may be elected from among the members present. The secretary shall keep all the necessary books and accounts of said company and issue all policies as provided by the board of directors and act as agent of said company during his term of office. He may also appoint sub-agents. Such subagents shall give a bond of not less than ten hundred dollars, running to the secretary, to be approved by the board of directors, for the faithful accounting and payment to the secretary of all moneys that shall come into their hands as such subagents.

"Before entering upon the duties of his office, the secretary and treasurer shall each give a bond in such amount as shall be determined by the board of directors. * * *

"The insurance of any member shall cease upon the sale of his or her property insured. * * *

"In all actions or suits at law in which this company may be a party, either as plaintiff or defendant, the secretary shall act for and represent the interests of this company."

In Friedberg v. Insurance Company of North America, 257 Mich. 291, there were negotiations in relation to the payment of the policy, and it was said:

"The negotiations prior to denial of liability were clearly of a character to induce the plaintiff to abstain from suit * * * and operated as a waiver of the limitation to that extent at least.

"The rule in this State is that, where negotiations for settlement are broken off by the insurer before the expiration of the period of limitation fixed by the policy, and a reasonable time remains for bringing suit before the termination of that period, the insurer may assert the limitation period as a defense. * * * In Dahrooge v. RochesterGerman Ins. Co., 177 Mich. 442 (48 L.R.A. [N. S.] 906), 'over two months' remained of the limitation period of one year when negotiations were finally broken off, held, a reasonable time and that the limitation was a defense. Our attention is called to no case in which we have approved a period shorter than 'about two months' * * * as reasonable. There is abundant discussion of what is and what is not a reasonable time, and we need not add to it."

The property was destroyed by fire November 7, 1930. Suit was not instituted until June 25, 1932. Plaintiffs' son frequently accompanied his father and mother to Yale for the purpose of interviewing the secretary of the company in relation to the payment of this money. He testified that at the time he went there he was told by the insurance company the insurance was not ready, and that the last time he visited the secretary of the insurance company was about two or three weeks before the last time his father and mother went. Mrs. Mirunczak testified substantially that she went there sometime in May, 1932, and that shortly after that she visited Mr. Lippman, her attorney, who instituted suit. There is testimony the company promised to pay.

An insurer, by negotiating with insured and inducing him to believe that a settlement or adjustment will be effected, waives the provision in the policy. So a promise to pay the amount of the loss constitutes a waiver. And where the parties by negotiations and promises of payment induce the party to believe a settlement may be effected beyond the statutory period, such defense may not be set up in an action brought within the time limited. Where, by the acts and conduct of the secretary, a hope or expectation of the insured appears that the loss will be adjusted, a company cannot raise the question of the period of the statute of limitations having expired. See 26 C. J. p. 481; Voorheis v. People's Mutual Benefit Society,91 Mich. 469; Mastenbrook v. United States Accident Ass'n,154 Mich. 16; Westchester Fire Ins. Co. v. Dodge, 44 Mich. 420; Thompson v. Phenix Ins. Co., 136 U.S. 287 (10 Sup. Ct. 1019); Friedberg v. Insurance Company of North America, supra.

There is testimony indicating that defendant promised to pay, that plaintiffs were told that the insurance money was not ready. After repeated attempts to procure its payment, they were told that the company denied liability, after the expiration of the year in question. This was a waiver of the terms of the policy.

It is claimed that by reason of the transactions between plaintiffs and their predecessors in title to the property plaintiffs did not become members of the company and are not entitled to recover upon the policy. Plaintiff Victoria Mirunczak testified they bought the farm of Frank Danielak, that he assigned the policy, that she took the policy of insurance to the secretary of the company, told him they had purchased the property from Danielak, and that the secretary said this would be all right but that she was to pay $6, which was paid. She testified that subsequently the farm was put in her name and that she went to see the secretary of the company, advised him of the transaction, that he read the policy and said it was all right; that prior to the time of the loss in question she received notice of assessment and paid $22.15 or $22.16 to the company in payment of this assessment, and that she received a receipt therefor. Subsequently Mrs. Mirunczak transferred the property to the Smith boys and took back a contract to purchase the farm. There is testimony that Mrs. Mirunczak and her son went to the secretary of the company, that she told him about the deal, showed the secretary of the company the contract and the insurance policy, and the secretary of the insurance company said the policy was all right; that after the loss, plaintiffs went to see the secretary of the company at the office in Yale, showed him the policy, and he made out a paper, a proof of loss, for them to sign and told them they would get the money because they signed the paper. Mrs. Mirunczak testified that frequently after that she was in the office but was informed the money was not ready; that the last time she was there, more than a year after the loss, she was told the money would not be paid. Then she went directly to Mr. Lippman and suit was instituted shortly thereafter. We think this testimony sufficient to carry the case to the jury.

Judgment should be reversed, with costs, and cause remanded.

BUSHNELL, C.J., and CHANDLER and McALLISTER, JJ., concurred with POTTER, J.