195 A.D. 174 | N.Y. App. Div. | 1921
The point presented for decision by this submission is, whether the parties to a fire insurance contract are prohibited by chapter 440 of the Laws of 1917, adding section 121 to the Insurance Law, and the standard fire insurance policy thereby adopted, from agreeing, in consideration of a reduced rate of insurance to the assured, that an eighty per cent average or coinsurance clause shall be attached to the standard form of policy, by which, in the event that the assured does not carry insurance to the extent of eighty per cent or more of the value of the property insured, the insurer shall not be hable for a greater proportion of any loss or damage to the property than the sum insured bears to eighty per cent of the actual cash value of the property at the time of the loss. The standard form of policy in. use when the insurance policy to which this insurance relates was issued contains in lines 101
Chapter 488 of the Laws of 1886 provided, "among other things, for the preparation and filing in the office of the Secretary of State by the New York board of fire underwriters on or before October fifteenth, or in default thereof, by the Superintendent of Insurance on or before November fifteenth of that year, a form of fire insurance policy “ together with such provisions, agreements or conditions as may be indorsed thereon or added thereto and form a part of such contract or policy,” and that such form of policy should become the' “ Standard Fire Insurance Policy of the State of New York.” Counsel for the defendant states in the points that coinsurance clauses, in effect the same as the one presented by the submission, were so filed pursuant to that statute. That fact is not stipulated, but counsel quotes the clauses and they sustain his claim and if necessary, doubtless, we could take judicial notice of the fact since they become part of the standard policy.
By section 121 of the Insurance Law of 1892 (Gen. Laws, chap. 38; Laws of 1892, chap. 690) it was provided that the printed blank form of a contract or policy of fire insurance “ with such provisions, agreements or conditions as may be
Section 121 of the Insurance Law, as amended by chapter 513 of the Laws of 1901, provided in part as follows:
“ Standard fire insurance policy to be prescribed and used.— The printed blank form of a contract or policy of fire insurance, with such provisions, agreements or conditions as may be indorsed thereon or added thereto and form a part of such contract or policy, heretofore filed in the office of the Secretary of State by the Superintendent of Insurance or by the New York board of fire underwriters, pursuant to the provisions of chapter four hundred and eighty-eight of the laws of eighteen hundred and eighty-six shall be transferred by the Secretary of State to the office of the Superintendent of Insurance and, together with such provisions, agreements or conditions as may previous to the thirty-first day of December, ilineteen hundred and one, be filed by the New York board «of fire underwriters in the office -of the Superintendent-of Insurance and approved by him, which provisions, agreements or conditions shall be void if they are inconsistent with the standard fire insurance policy heretofore filed in the office of the Secretary of State, shall be known and designated as the ' standard fire insurance policy of the State of New York.’ No fire insurance corporation, its officers or agents, shall make, issue or deliver for use, any fire insurance policy or the renewal of any such policy on property in this State, other than such as shall conform in all particulars as to blanks, size of type, context, provisions, agreements and conditions with such printed blank form of contract or policy; and no other or different provision, agreement, condition or clause shall be in any manner made a part of such contract or policy or indorsed thereon or. delivered therewith, except as follows, ■ to wit: * * * Second. Printed or written forms of description and specifica*178 tion, or schedules of the property covered by any particular policy, and any other matter necessary to clearly express all the facts and conditions of insurance on any particular risk not inconsistent with or a waiver of any of the conditions 'or provisions of the standard policy herein provided for.”
These provisions were re-enacted without change, with the exception of slight changes in punctuation not materially affecting the construction, by the amendment made to section 121 by chapter 106 of the Laws of 1903, and by section 121 of the present Insurance Law (Consol. Laws, chap. 28; Laws of 1909, chap: 33), as amended by chapter 240 of the Laws of 1909, and by chapters 168, 638 and 668 of the Laws of 1910; and they were also re-enacted in the amendment made by chapter 181 of the Laws of 1913, but the words “previous to the thirty-first day of December, nineteen hundred and one,” •were omitted. That omission, however, has no material bearing on the point presented for decision by this submission.
Acting on the provisions of the section, as amended by said chapter 513 of the Laws of 1901, the blank form average clause, to which reference has been made, was filed in the office of the Superintendent of Insurance, and from the time it was so filed down to the present time it has been in use in the precise form in which it is found on the policy in question, as a rider in connection with the standard policy. After the amendment made by chapter 440 of the Laws of 1917,- this blank form was refiled under the provisions of said amendment in precisely the same form, and approved by the Superintendent of Insuriance on December 31, 1917.
The standard form in use prior to the amendment of' 1917, exclusive of any authorized rider that might be agreed upon, contained in the body of the policy 112 numbered lines; and it was provided in lines 96 to 100, inclusive, as follows: “ This company shall not be liable under this policy for a greater proportion of any loss on the described property, or for loss by and expense of removal from premises endangered by fire, than the amount hereby insured shall bear to the whole insurance, whether valid or not, or by solvent or insolvent insurers, covering such property, and the extent of the application of the insurance under this policy or of the contribution to be made by this company in case of loss, may be provided
And it was further provided in line 113, as follows: “ This policy is made and accepted subject to the foregoing stipulations and conditions, together with such other provisions, agreements, or conditions as may be endorsed hereon or added hereto.”
It is to be borne in mind that during all the period from 1886 down to the time the form of the policy was changed by the amendment of 1917, the statute prohibited the indorsing on or adding to the standard form of policy of any provision, agreement or condition inconsistent with the provisions of the standard form of policy; and yet throughout that period said blank form of rider, specified thereon as such average clause but better known and generally referred to as a coinsurance clause, was in use.
By section 2 of chapter 440 of the Laws of 1917 section 121 of the Insurance Law, as theretofore amended, was repealed, and by section 3 thereof a new section 121 was added to take effect January 1, 1918, so as to provide with respect to the standard policy and clauses that may be added thereto as follows:
“ The printed blank form of a contract or policy of fire insurance adopted by the National Convention of Insurance Commissioners at its meeting held in the city of New York on the twelfth day of December, nineteen hundred and sixteen, shall be filed by the Superintendent of Insurance in his office' on the first day of January, nineteen hundred and eighteen, with the date of such filing indorsed thereon by him and shall be known and designated as the ‘ Standard fire insurance policy of the.State of New York,’ * * * and no other' or different provision, agreement, condition or clause shall be in any manner made a part of such contract or policy or indorsed thereon or added thereto or delivered ■ therewith, except as follows, to wit: * * *
“ Third. There may be printed in the space indicated by the words ‘ space for description of property,’ or added to the policy at such space by agreement in writing thereon or by rider attached thereto the following * * * 2. The extent of the application of insurance under the policy; 3.*180 The extent of the contribution to be made under the policy in case of loss or damage; 4. Any other matter necessary clearly to express all the facts and conditions of insurance on any particular risk. Provided, however, that no such agreement or rider shall be inconsistent with or a waiver of any of the conditions or provisions of the standard fire insurance policy hereby established, * * *. Forms of riders, indorsements, clauses, permits, forms or other' memoranda to be attached to and made a part of fire insurance contracts relating to property located in this State may be presented for filing in the office'of the Superintendent of Insurance by any corporation, association or bureau maintained for the purpose of suggesting, approving or making rates to be used by more than one underwriter for insurances on property located in this State, and, when approved and filed by such Superintendent of Insurance, shall thereupon become standard forms of riders, indorsements, clauses, permits, forms or other memoranda and their use shall be required, as hereinbefore provided.”
The policy described in the submission was the standard form, referred to in the last amendment to the statute, and by it the numbered lines are transferred from the body to the back of the policy with some changes and are renumbered. By the policy, in so far as here material, the defendant insured the plaintiff to the extent of the actual cash value of the property therein described to an amount not exceeding $100,000 from all direct loss or damage by fire. In the paragraph next to the last in the body of the policy it was provided that it was made and accepted subject to the preceding stipulations and conditions, “ and to the stipulations and conditions printed on the back hereof, which are hereby made a part of this policy, together with such other provisions, stipulations and conditions as may be endorsed hereon or added hereto as herein provided.” The conditions printed on the back of the policy are printed in fine print and the fines thereof are numbered consecutively from 1 to 200. Lines 72 to 77, inclusive, are as follows:
“Added Clauses. The extent of the application of insurance under this policy , and of the contribution to be made by this Company in case of loss or damage, and any other agreement not inconsistent with or a waiver of any of the conditions or*181 provisions of this policy, may be provided for by agreement in writing'added hereto.”
Lines 101 to 105, inclusive, are as follows:
“ Pro Rata Liability. This Company shall not be liable for a greater proportion of any loss or damage than the amount hereby insured shall bear to the whole insurance covering the property, whether valid or not and whether collectible or not.”
It will be observed that the provisions contained in lines 101 to 105, inclusive, and the first three lines of the paragraph relating to “ added clauses ” of the new standard policy, are substantially the same as those theretofore contained in a single sentence in the former policy in lines 96 to 100, inclusive. The remaining provisions of the “ added clauses ” contained in lines 74 to 77, inclusive, to wit, “ and any other agreement not inconsistent with or a waiver of any of the conditions or provisions of this policy, may be provided for by agreement in writing added hereto,” are the same, in substance, as the provisions of the former standard policy in line 113 herein quoted, with the additional provisions that any such further agreement to be added to the policy shall not be inconsistent with or a waiver of any of the conditions or provisions of the policy. Although the former standard policy contained no such provision on the subject of inconsistent agreements, it will be observed that at all times from the enactment of chapter 488 of the Laws of 1886 to the amendment of section 121 in 1917, the statute itself forbade the making of any special agreement inconsistent with the provisions of the standard policy. It is also to be noted that by the changes made in the standard policy in 1917, the provisions with respect to the pro rata liability of the insurer where there is more than one policy on the property, and the provisions relating to the extent of the application of insurance under the policy and the contribution to be made by the insurance company in case of loss or damage, which were embodied in the. same sentence in the former standard policy, have been separated and the pro rata provisions are now preceded by the heading “ Pro Rata Liability,” and the others are preceded by-the heading “Added Clauses,” and they precede the provisions relating to pro rata liability. This change has a significant bearing on the point
*184 “ The general conclusions we reach with regard to the coinsurance clause are these: that the principle upon which it is founded, namely, that rates should be based upon the percentage of insurance carried, is not only sound but is absolutely requisite if the equities of the insured are to be preserved; second, that the coinsurance clause rightly recognizes that as a practical matter the responsibility for maintaining a given percentage of insurance must rest with the insured; third, that the operation of the agreement is automatic and fair.
" The objections that can be urged to the coinsurance clause are not on theoretical. but on practical grounds and are entirely due to the fact that it is in use where it is not understood. It is perfectly true that the coinsurance clause is a dangerous thing for a person who does not understand it and for a person who does not keep close watch of his values,— not dangerous in the sense that the insured will not get what he ought to get, but in the sense that he will not get what he thinks he is going to get. But, should the government undertake to shield those who enter into a contract which they do not understand if this must be done at the expense of the real equities of the mass of the insured ?
“ The very purpose of the coinsurance clause is to place upon the insured the responsibility for ascertaining the value of his property, and for keeping it properly insured; and it goes without saying that, having assumed this responsibility, he must live up to it or he will be caught at a disadvantage.
“ All that the insured needs to know, as a practical matter, is that in signing, say, an 80 per cent, coinsurance clause he agrees to keep at least 80 per cent, of the value of his property covered by insurance, and that in failing to do so he makes himself liable to the loss of part of his indemnity.” (N. Y. Assembly Documents, 134th Session, 1911, vol. 20, No. 30, pt. 1, pp. 89, 90.)
It thus appears by practical construction that for a period of some thirty years prior to 1917, it was deemed by the Legislature, by the Superintendent of Insurance, by insurance companies, by those desiring the lower rate obtainable by coinsurance, and by the courts,. that coinsurance clauses were authorized; and since they could be valid only on the theory that they were not inconsistent with the provisions of the
It follows that the-defendant is entitled to judgment on the submission but, pursuant to the stipulation, without costs.
Clarke, P. J., Smith and Merrell, JJ., concur; Pace, J., dissents.
Judgment ordered for defendant, without costs. Settle order on notice.