East Texas Fire Insurance v. Kempner

The East Texas Fire Insurance Company issued to H. Kempner, upon a brick storehouse, a policy of insurance which contained the following clauses:

"Article 2. This policy shall become void unless consent in writing is indorsed by the company hereon in each of the following cases: Sec. 3. If the risk be increased by any change in the occupation of the building or premises herein described, or by the erection or occupation of adjoining buildings, or by any means whatever within the knowledge of the assured. Sec. 4. It is a rule of this company not to insure any vacant or unoccupied building, and if any building herein described be or become vacant or unoccupied for the purposes indicated in this contract, without the consent of the company indorsed thereon, this policy shall at once become null and void, and any unearned premium on the same will be refunded to the assured on the surrender of this policy."

The house was leased by Kempner to one Northrup for two years, who, without Kempner's consent, sublet it to another for a part of the term. The subtenant moved out of the building on Saturday, and on the succeeding Wednesday another tenant moved into it, it being again sublet by Northrup, without the consent or knowledge of Kempner, who lived at Galveston. Sometime afterwards, and during this last occupancy, the house was destroyed by fire. Kempner did not know that the house was vacant. Kempner sued upon the policy, and the insurance company pleaded, among other things not necessary to notice, that the policy was rendered void by the house becoming vacant and not having the consent of the company.

Judgment was given for plaintiff below for the amount of the policy, which was affirmed by the Court of Civil Appeals.

The plaintiff in error presents the case to this court upon a number of objections to the judgment of the Court of Civil Appeals, all of which have been disposed of satisfactorily by that court, except the third, which is as follows: "The court erred in holding that the policy was not vitiated by the insured premises becoming vacant, the terms of the policy being, that if the property insured be or become vacant, the policy should at once become null and void."

The Court of Civil Appeals held that a temporary vacancy would not render the policy void, and that the vacancy in this instance was of that character.

The rule for construing a policy of insurance is, that the language used in it "must be liberally construed in favor of the assured, so as not to defeat, without a plain necessity, his claim to indemnity, which, in making the insurance, it was his object to secure. When the words are, without violence, susceptible of two interpretations, that which will sustain his claim and cover the loss must in preference be adopted." 1 May on Ins., sec. 176. It is equally well settled, that where the language is plain and unambiguous courts must enforce the contract as made by the parties, and can not make a new contract for them, nor change that which they have made, under the guise of construction. As parties bind themselves, so they must be held to be bound. Ins. Co. v. Long, 51 Tex. 92; Morrison v. Ins. Co., 69 Tex. 359.

In numerous cases it has been held that temporary absence from a dwelling house, while the household goods remain, does not render the house vacant within the meaning of such clauses in policies of insurance. This line of authority is fairly represented by Insurance Company v. Kepler, 95 Pennsylvania State, 492.

It is also held in many cases, that where the tenant has moved out and the owner or another tenant has moved into the house a part of the household goods, and is preparing to take possession, a vacancy does not occur. Eddy v. Ins. Co.,70 Iowa 472.

A policy of insurance was issued upon a manufacturing establishment, containing a condition that in case the property became vacant or ceased to be operated the policy should become void. On account of an epidemic of yellow fever the owners ceased for a time to operate the mill, and it was held that the condition of the policy was not broken. Poss v. Ins. Co., 7 Lea (Tenn.), 704; Whitney v. Ins. Co., 72 N.Y. 118.

In Ridge v. Insurance Company, 9 Lea (Tenn.), 507, the policy provided that in case the house should become vacant the policy would be void. The tenant moved out, and in a few days the house burned. It was held that the company was not liable. In that case, however, the court said that if the house had been reoccupied before the fire it would have held that the language meant that the policy was to be void only during the vacancy.

In the case before the court the policy is exceptionally explicit and apt in the statement of the terms of liability. It is first stated, that the company will not insure vacant houses; and to enforce the rule with certainty, it is provided that if the house should become vacant or unoccupied without the consent of the company the policy shall at once become null and void. The words "at once" clearly and unmistakably express the intention that the fact of becoming vacant annulled the policy. It was not to be void for an indefinite time, nor to become void in the future, but now and forever.

This intention is rendered still more certain by the further provision that the unearned premium should, upon the surrender of the policy, be returned to the assured. The relation of assured and assurer was then and there to terminate; the business was to be closed up at once.

All business houses when vacant are so temporarily in the contemplation of the owner, who either intends to occupy himself or to rent to some other person as soon as he can do so. If a court can say that a condition like that contained in this policy does not include temporary vacancies, then what period will be inserted into each contract, by construction, during which the policy shall remain in force? If we can say three days, why not a month, three months, or even six months, according to the opinion of the court? Plaintiff was required to know the terms of his policy, the contract that he made, and to know the condition of his property and to provide for its protection. This was not a duty of the insurance company.

It was lawful for the parties to make the contract embraced in this policy, and it was not unreasonable on the part of the insurance company to stipulate for exemption from liability in case of the vacancy of the building. The language used was not calculated to mislead the plaintiff; by proper attention to his affairs he would know what security the policy afforded him. The language indicates that the intention was to exclude judicial construction by making the terms unambiguous, and the court must enforce the contract as made.

The District Court and Court of Civil Appeals erred in holding that the policy did not become null upon the happening of the contingency, the vacation of the premises; reoccupancy did not revive the policy, unless the forfeiture was waived. Moore v. Ins. Co., 62 N.H. 240. The judgments of the District Court and Court of Civil Appeals are reversed, and the cause is remanded to the District Court for trial in accordance with this opinion.

Reversed and remanded.

Delivered June 21, 1894.

Motion for rehearing overruled October, 1894.