Tillou v. Kingston Mutual Insurance

By the Court, Barculo, J.

The first question to be considered is the effect of the assignment of the policy of insurance to Ketcham to secure a mortgage of $2000.

This assignment was made with the express consent of the insurance company, endorsed on the policy. Ketcham, at that time, as assignee of the mortgage, had an insurable interest in the premises. The consent of the company must therefore be deemed in the nature of a contract with Ketcham, by which he became insured to the amount of $2000. Consequently, although Ketcham might perhaps work a forfeiture of his rights under the policy, by a violation of some of its conditions, and, although the original parties assured might also forfeit their rights to the residue of the amount insured, I apprehend that they could not by any violation of the terms of the policy, defeat the rights of Ketcham under the policy. If^therefore,it be conceded that, as between the original parties, the policy has become void, it would still sustain the recovery to the extent of the $2000.

But I am not prepared to say that there has been any forfeiture whatever. The position maintained by the defendants’ counsel, that the policy was avoided by the use of wood instead of coal in the kiln-drying machine, is clearly untenable. For there was no covenant or agreement on the part of the assured that the machine should be used with hard coal. It was a mere statement that the machine was designed “ for burning hard coal,” without binding the plaintiffs not to use other fuel, if it should become necessary; provided the risk was not thereby increased. In this case the jury do not find that the change increased the hazard, nor is it pretended that there was any fraud in the representation; and I think it would be going much too far to hold such a deviation from the representation sufficient to avoid the contract. (4 Hill, 329.)

A much graver question arises upon the conveyance by Crouse of his interest in the premises to the other two plaintiffs. It is claimed by the defendants’ counsel that this constituted an alienation, within the 7th section of the act, which avoids the policy. That section declares, “ that when any property insured with this corporation shall be alienated by sale or otherwise, the policy shall thereupon be void, and be surrendered to the directors of said company to be cancelled.” (Laws of 1835, p. 44.) Under this provision, if the parties had united in a conveyance to a stranger there would be no doubt of its avoiding the policy. If Crouse had conveyed his interest to a stranger the policy would cease to operate as to that share, at least. But it seems to me that the conveyance by Crouse to his copartners stands upon a different footing. It was not strictly speaking an alienation, i. e. a transfer from one to another. It was a change of interests among joint owners. No stranger is introduced—no addition to the number of the assured is made. One copartner retires from the concern and sells out his interest to the others. The company, therefore, run no risk of having careless or improvident persons substituted in the place of the original parties with whom they dealt, to guard against which it was a principal object of the statute. It is not, I apprehend, every transfer of title which is to be deemed an alienation. Suppose, for instance, that these three parties had been joint tenants, and Crouse had died, by which the whole estate would vest in the survivors, could it be pretended that this was an alienation 1 Or suppose that, being tenants in common, Crouse had died and his interest passed to his heirs, although new persons would be introduced, still I am much mistaken if this could be deemed an alienation within the act. Even if the estate should pass by will, instead of descent, I doubt whether it could be held to be such an alienation as would work a forfeiture.

It seems to me that our courts have gone quite far enough in giving a strict construction to clauses of forfeiture in these insuranee acts. A more liberal construction would, perhaps, promote the ends of justice quite as well. In this case I think the spirit of the law has not been violated; and that we are bound to say that the policy has not been rendered void by the transfer of Crouse’s interest to his copartners.

I am aware that some of the authorities seem to militate against these conclusions. Thus the case of Carpenter v. Washington Ins. Co. (16 Pet. 495,) may be considered an authority for saying that an assignment of the policy as collateral security does not place it beyond the reach of forfeiture by the misconduct of the assignor. But that case has never been law in this state. (The Traders' Ins. Co. v. Robert, 9 Wend. 404.)

Nor is the case of Howard v. The Albany Ins. Co. (3 Denio, 301,) a decisive authority to show that a conveyance by one joint owner to another avoids the policy. For that policy was not made under the act in relation to mutual insurance companies : nor is any opinion given in favor of the decision, but only a dissenting opinion by Justice Bronson. On the other hand, in the case of McMaster & Bruce v. The Westchester Mutual Ins. Co. (25 Wend. 379,) the learned circuit judge expressed the opinion that a conveyance by one' joint owner to another was not an alienation within the meaning of the act in question ; which doctrine was not repudiated by this court, although the case was decided upon other grounds.

There is another light in which this case may be viewed. The section in question provides that the grantee of any insured premises, “ having the policy assigned to him, may have the same ratified and confirmed to him for his own proper use and benefit, upon application to the directors, and with their consent, within thirty days next after such alienation,” <fcc. This shows that although the statute declares that an alienation shall render the policy void, it, in fact, merely renders it voidable at the election of the company, who may elect whether it shall cease to operate or be ratified and confirmed to the alienee. The act does not direct how the ratification and confirmation shall be made or evidenced. Now, in this case, Tillou & Doty are the grantees of Crouse : they may also be deemed the assignees of his interest in the policy, as the conveyance of the premises would ipso facto vest in them the right to the insurance moneys, as between them and Grouse. Tillou & Doty were therefore in a position to demand and obtain from the company such ratification and confirmation if it was necessary for them. Whether this was done or not does not distinctly appear. But it appears that on the 8th day of July, 1847, the company, by their secretary, gave to Tillou & Doty a certificate stating that “ due notice had that day been received from Messrs. Tillou & Doty of additional insurance having been effected for $1000 on their flouring mill,” &c. This looks very much like a recognition, on the part of the company, of Tillou & Doty as the owners of the premises ; and although it may not in itself amount to a ratification or confirmation within the statute, it is nevertheless an item of evidence from which a pretty strong inference may be drawn that such ratification or confirmation had been made. How far this may be a proper consideration upon this special verdict it is not necessary to inquire; as we prefer to rest our decision upon the broad ground that here has not been such an alienation as avoids the policy.

Judgment for the plaintiffs.