“In consideration of the acceptance by the insured of a reduction in premiums from the established rate of .... percent to 1.1222 per cent, it is agreed that the insured shall maintain insurance during the life of this policy upon the property insured to the extent of at least ninety per cent of the actual cash value thereof at the time of the loss and that failing to do so the insured shall be a co-insurer to the extent of such deficit.”
Each policy also contained another clause, as follows:
“Cancellation of Policy. This policy shall be canceled at any time at the request of the insured, in which case one fourth of the deposit may be retained by the attorney for the expense of making this contract, and the unused portion of the paid deposit, when ascertained, shall, upon demand and surrender of
In addition to this insurance, plaintiff was carrying- policies in several other companies. A fire occurred on October 17, 1918, injuring or destroying the insured property to the extent of $30,443.77, and this action was begun by plaintiff to recover the amount or proportion of such loss or damage which is alleged to be properly chargeable to defendant.
Defendant does not deny the issuance of the policies, but rests its defense upon the proposition that such, insurance had been canceled before the loss occurred. In support of its plea of cancellation of the policies, the defendant produced evidence substantially as follows: After the issuance of these policies, and prior to September 11, 1918, a representative of the defendant company visited Sioux City and, after inspection of the insured property, advised or recommended certain changes or improvements, to decrease the fire hazard; and upon his report, defendant requested or demanded that the specified improvements be made. This .not meeting with a satisfactory response, the following correspondence ensued. Under date last named, defendant wrote plaintiff as follows:
“Artificial Ice Company,
“Sioux City, Iowa.
‘ ‘ Gentlemen:
“We are still holding our files open for reply to our letter regarding the fire extinguishing facilities in your plant. Kindly let us have a reply on the bottom of this sheet, and oblige,
“Yours very truly,
“Bruce Dodson, Manager.”
On September 30, 1918, plaintiff returned said letter to the defendant, writing or indorsing thereon its answer, as follows:
“Artificial Ice Co.
“ [Sgd.] J. E. Hathaway, Pres.
“If this does not meet your approval let us know so we can replace our insurance.”
Thereafter, under date of October 8, 1918, defendant addressed a letter to the plaintiff as follows:
“Artificial Ice Company,
“Sioux City, Iowa.
‘ ‘ Gentlemen:
“This is notice of the cancellation of the following policies, according to their terms and this notice; Policy No. 73932 covering $11,000 written to expire June 30th. Policy No. 74292 covering $13,000 written to expire July 31st. We regret the necessity of this action, but inasmuch as your plant was not found in satisfactory physical condition, and you decline to make necessary improvements, our action as indicated above becomes imperative.
“Very truly yours,
“Bruce Dodson, Manager.”
While this letter is dated October 8, 1918, it is shown quite conclusively, and the trial court finds, that it was not mailed until October 15th and was received by plaintiff on October 16, 1918. On October 15th, defendant wrote- another letter, as follows:
“Artificial Ice Company,
“Sioux City, Iowa.
“Gentlemen:
“In order that there may be no misunderstanding, we beg to confirm our letter of October 8th that Policy No. 73932 for $11,000 insurance written to expire June 30, 1919, and Policy No. 74292 for $13,000, written to expire July 31, 1919, are now canceled and void, in accordance with their terms and notice given. Kindly see that the canceled policies are returned to us.
“Very truly yours,
“Bruce Dodson, Manager.”
In pleading and in argument, the appellee not only rests its defense upon the right of cancellation reserved in the insurance contract, a right which it claims to have exercised, but insists also that, as the plaintiff had acted upon the notice of cancellation and at once procured other insurance upon the property, its action constitutes a waiver of its right to the contract or statutory period of five days, and a consent to immediate cancellation. It also pleads a tender made to the plaintiff one year after this action was begun, of the sum of $243.30 as the unearned premium upon the policies it claims to have canceled.
On hearing the evidence, the trial court made its findings of fact and conclusions of law in favor of defendant, making the result to turn upon the proposition that plaintiff obtained the new insurance on October 16, 1918, as a replacement for defendant’s policies, and that by such action it waived the time it would otherwise have been entitled to, and consented to the immediate cancellation of the insurance.
As the action is at law, the findings of fact- by the trial court, in so far as they have any substantial support in the evidence, are to be given the effect of a jury verdict. But like a jury verdict, such findings are not immune against review on
I. The issuance of the policies being admitted, and the loss occurring within the term covered by the contract, the burden of establishing an effective cancellation before the loss is upon the defendant. Except as such right is provided for by statute or reserved in the contract, neither the insurer nor the insured can declare or effect a cancellation without the consent of the other. Such right is quite generally provided for, upon prescribed terms and conditions, in practically all insurance contracts; but the rule is quite universal that such cancellation at the will or demand of one of the parties, without the consent of the other, can be effected only by a strict compliance with such terms and conditions. As said by Marshall, J., in Davis Lbr. Co. v. Hartford F. Ins. Co., 95 Wis. 226:
“The right of cancellation does not exist at all, except by contract, and a clause in that regard is in the nature of a condition precedent, which must be strictly complied with in order to make an effort to cancel effective to accomplish its purpose.”
See, also, Van Valkenburgh v. Lenox F. Ins. Co., 51 N. Y. 465; Quong tue Sing v. Anglo-Nev. Assur. Corp., 86 Cal. 566; Bennett v. City Ins. Co., 115 Mass. 241; German Union F. Ins. Co. v. Clarice, 116 Md. 622; Barbour v. St. Paul F. & M. Ins. Co., 101 Wash. 46 (171 Pac. 1030); Bragg v. Royal Ins. Co., 115 Me. 196 (98 Atl. 632).
In the case before us, the contract provides in explicit terms for the manner in which the insurer can cancel the insurance and relieve itself from further liability under its policy, “by giving to the insured five days’ written notice of cancellation with or without tender of the unused paid deposit, which unused paid deposit, if not tendered, shall when ascertained, be refunded on demand. Notice of cancellation shall state that said unused paid deposit (if not tendered) will, when ascertained, be refunded on demand.” (The italics are ours.) With
“It appears to the court that there is only one question in the case, and that is whether or not, when this additional insurance was taken out, after the notice of cancellation had been received, whether or not this insurance was additional insurance, or whether it was taken out to replace or as a substitute for the insurance of the defendant company. This is a question of fact, I think is determining in this case.”
After an outline of the evidence, the court then adds:
“Now there is just the question of fact as to where the preponderance of evidence lies as to whether or not this was new and additional insurance, to replace the insurance issued by the defendant company. * * * It seems to me the preponderance of the evidence shows this insurance was taken out to replace or substitute the insurance of the defendant company, and «there will be a judgment in favor of defendant.”
In so far as said finding involves any material controverted allegation of fact, it may be accepted as conclusive upon this appeal, but with the conclusion of law which the court below and counsel for appellee in this court draw therefrom, we cannot concur. To fairly estimate the effect of plaintiff’s action * in taking out new or other insurance, it is necessary for us to get a clear view of the situation in which plaintiff was placed. The policies in suit are not of the more familiar or ordinary kind. They not only contain no provision by which the property owner may not take out additional insurance without the company’s consent, or by which the taking of additional insurance will work
The situation in which the plaintiff was placed is fairly illustrated in the testimony given by Mr. Hathaway, its president and manager. While some correspondence had taken place between the parties concerning the fire-extinguishing facilities with which the property was furnished, and plaintiff, as early as September 30th, had declined to make the requested changes, no further word had been received from the defendant until the afternoon of October 16th. The paper bore date of October 8th, and contained a peremptory notice of the “cancellation of the following policies [describing them by number] according* to their terms and this notice.” On receipt of this notice, Mr. Hathaway penciled a memorandum on its margin, of the names of the local insurance agents with whom he had dealings, and opposite their names the amounts of new insurance for which
‘ ‘ The occasion of making this memorandum was the receipt on the 16th of this notice dated October 8th; and I did not know where we stood on this insurance, and therefore called up the agents and placed some insurance with them. I was on the fence. I did not know what to think or do, the date of that being so far back from the time we received it. I did not take out the policies shown in the memorandum with intent to waive any time that I might have as to when the Reciprocal policies should terminate. I could not determine for myself whether the Reciprocal policies were still in force or not. * * * I never returned or attempted to return defendant’s policies.”
It will be remembered that, in writing to defendant on September 30th, Mr. Hathaway had declined to make any change in the ice plant, and added:
“If this does not meet your approval let us know so we can replace our insurance.”
Referring to this fact in cross-examination, he says:
“I meant by that, to give us due time to cover the insurance in other companies. I intended the insurance company should notify me whether they would continue the policies, so if they told me they would not, I could replace the insurance elsewhere. It was my intention to replace it if they canceled the policies. Immediately after getting the letter October 16th, advising us the policies were canceled, we telephoned, and took more insurance in the same amount. I did not know where we were in regard to these policies, and therefore, as we were figuring on taking more insurance anyway, to make us up to 100 per cent, I telephoned friends in the insurance business, and took out the same amount.”
His statement that plaintiff had been contemplating an increase of. its insurance is corroborated by two witnesses in the insurance business, who tell of prior conferences with Hathaway on the subject. If the situation was such that plaintiff could not, consistently with its insurance contract with defendant, acquire other valid insurance without releasing the defendant, then, of course, the taking out of the new policies after receiving the alleged notice of cancellation might, perhaps, tend to
“Surely,” says the court, “it would be most unequitable for the assured to so speak and act as to induce defendant’s agent to believe that plaintiffs regarded the policy as canceled, and, thus leading them into a feeling of security, induce them not to make a formal tender of the unearned premium, and demand the policy, with proper writing of cancellation indorsed thereon. They are now estopped to set up the nonpayment of the unearned premium, after having induced the belief of defendant’s agent that cancellation was recognized by them without such payment."
By no amount of ingenuity can anything be found in the present record calling for an application of the principles of estoppel against the plaintiff. In the Parsons case, the insured had voluntarily surrendered and returned his policy to the company and requested its cancellation, and of course it was held that he could not recover insurance under such circum
Appellee’s argument mistakenly interprets the case of Scheel v. German-Am. Ins. Co., 228 Pa. 44 (76 Atl. 507), as holding that if, on insufficient notice of cancellation, the policyholder at once takes out other insurance as a substitute for the policy sought to be canceled, “then defendant is relieved of liability on its policy.” We do not so read the decision. On the contrary, the cited ease, which is a near parallel of our own, clearly and quite emphatically negatives that proposition. The material facts in that case are that the plaintiff held two policies of $2,500 each on certain property. On November 7, 1908, the defendant insurance company, which had issued one of these 'policies for $2,500, gave plaintiff written notice of its intention to cancel the policy, and that, at the end of five days, all liability of the company under said policy would cease. Immediately upon the giving of such notice, plaintiff took out other insurance in the Hartford Company for like amount, thereby increasing its insurance (if the policy in question be counted) to a total of $7,500. On November 11, 1908, there was a total destruction of the property by fire, the loss so sustained being $5,508.51, As in this case also, the Hartford company had issued its binder on November 10th for $2,500, and the plaintiff collected from it its pro rata share of the loss. The defendant company, refusing to contribute, was sued upon its policy, and the defense pleaded to the demand was practically identical with the main defense here relied upon. The answer or affidavit of defense alleged the giving of the notice of cancellation, and that, after the giving of such notice and before the loss, plaintiff took out the Hartford policy, “with the intent that it should be a substitute for the defendant’s policy, and was not for the purpose of increasing his insurance beyond $5,000, and as a result of such action, defendant’s policy thereby became canceled, and the risk at an end."
“The position of the defendant company, as stated in its brief, is that, when the plaintiff received notice of the intended cancellation of the policy, and promptly applied for and obtained a policy in the same amount in the Hartford Company, his purpose was not. to increase his line of insurance from $5,000 to $7,500, but to accept the cancellation, waive the full time limit of five days, and substitute in place of the defendant’s policy the Hartford Company’s policy as a reinsurance; and that, when he subsequently collected from the Hartford Company its pro rata of the loss by fire, which occurred within the five days, he could not, while thus accepting and receiving the benefit of that policy, hold the defendant company, for whose policy the Hartford Company’s policy was a substitute, also liable. We think the affidavit of defense is insufficient, and that the court below erred in not entering judgment against the defendant. A policy of fire insurance is a contract of indemnity, and unless it is canceled by mutual consent, or the policy provides that it may be terminated on the option of the parties, and is so terminated, it will continue in force for the term for which it was written. If the right to terminate is reserved in the policy, the conditions upon which it is to be exercised must be strictly complied with; and if a certain number of days is required to intervene before the notice to cancel is to take effect, the policy will still be in force, and cancellation will not become effective until the expiration of the time named in the notice. If the insurT anee company allege as a defense in an action on its policy that the assured has waived the five days’ notice, or that he has replaced the policy by another policy, and thereby relieved the company from liability, it is incumbent upon the company to aver in its affidavit of defense and prove on the trial, not only that such was the intention of the assured, but that his intention was carried out with his consent and by his agreement with the company. In other words, the mere procurement of another policy on the same property and for the same amount after the notice and within the five-day limit does not disclose an intention on the part of the assured to cancel the earlier policy or to relieve the company from liability thereon; and in order
The length of the foregoing quotation would be quite unpardonable, were it not so directly in point, and the law applicable thereto so aptly and clearly stated.
The case of Wicks Bros. v. Scottish U. & N. Ins. Co., 107 Wis. 606 (83 N. W. 781), though dissimilar in facts, involves principles applicable here. In that case, one McBean, agent for plaintiff, procured the issuance of a policy from the’ defendant, through the agency of the Rogers-Ruger Company. Shortly after the policy was issued, the defendant telegraphed to its agents to cancel the policy as undesirable, and this instruction was telephoned by the agents to Rogers-Ruger Company, who in turn wrote McBean of the demand for cancellation, and asked him to send them the policy, saying that they would try to get other insurance. McBean then sent them the policy, saying that, if insurance could not be procured, he did not think it right that the matter should be left in that way. The letter inclosing the policy was received by Rogers-Ruger Company, and on the same day the property was destroyed by fire. The defendant insisted that the act of McBean in returning the policy to the agents through whom it was procured was a waiver of time, and operated as a consent to immediate cancellation. The court refused to so hold, saying that the order of defendant to its agents to cancel the policy contained no suggestion of a cancellation in any other way or manner than was provided for in the contract, and that the act of McBean in returning the policy was entirely consistent with an expectation on his part that the cancellation would be made, if at all, in the regular way; and a judgment for the plaintiff was affirmed.
In American F. Ins. Co. v. Brooks, 83 Md. 22, the notice of cancellation was not received by the insured until one day before the loss, and it was held that receipt of such notice would not work a cancellation, but was “nugatory and void.”
In German Union F. Ins. Co. v. Clarke, 116 Md. 622, this
Fairly in point, too, is Bradshaw Bros. v. Fire Ins. Co., 89 Minn. 334 (94 N. W. 866). There plaintiff, having notice or knowledge that the insurer contemplated a cancellation of his policy, placed it in the hands of Shove & Company, the agents through whom he procured i't, and gave them authority to surrender it for cancellation, in case such surrender and cancellation should be demanded by defendant, pursuant to the terms of the policy. The defendant gave no written notice of cancellation for the time provided by the policy, but one of its agents orally asked Shove & Company if they would accept service of notice, which they promised to do; but such service or written acceptance was not procured. Ten days later, Shove & Company delivered the policy to the defendant, and collected the unearned premium. This premium they credited to plaintiff upon their books, but did not inform him what they had done with reference to the cancellation until after a fire occurred, destroying the insured property. As in this case, the suit on the policy was tried to the court without a jury, and judgment was rendered for defendant. On appeal, the judgment was reversed. Says the court:
"A policy of insurance can only be canceled by one of the parties thereto by a strict compliance with its terms as to cancellation, unless such compliance is waived by the other party. Now the plaintiff never agreed, or authorized its agents to agree for it, to accept a cancellation of the policy unless it was made pursuant to the terms of the policy. ’ ’
Further reference to the authorities at this point is unnecessary. We hold to the rule which finds expression in the Scheel case, supra, and the many other, cases of that general character, as being both reasonable and just, and in accordance with established principles of law. It appearing without substantial dispute that there was no cancellation of the policies pursuant to their terms, the burden was upon appellee to establish such alleged cancellation by agreement or consent of the parties. To effect such an agreement or consent, there must be shown a meet
There is in this record no testimony, direct or indirect, that the cancellation of the policies, without observance of the conditions therein prescribed, was ever the subject of- any treafy or negotiation or understanding’ had between those parties. It is true that plaintiff knew that defendant was threatening to cancel, if certain changes in the ice plant were not made. It is true, also, that plaintiff had refused to accede to that demand, and had said to defendant, “if this does not meet your approval, let us know, so we can replace our insurance; ’ ’ but by no reasonable construction or interpretation can this correspondence be distorted into an agreement or consent or request by plaintiff that the cancellation might be effected without conforming to the conditions which the contract placed upon the exercise of that right. Plaintiff knew, of course, that the right of cancellation was reserved in the policies, and that it was within the power of the defendant to exercise it at any time upon conforming to the conditions, — the service of a five days’ notice in writing, which must also either tender a return of the unearned premium or expressly promise such return when the amount was ascertained. Upon the giving of such notice, it would become effective at the end of the stated period; but the protection afforded by the policies would continue in full force and effect until the last hour of the fifth day. This advantage plaintiff could, of course, forego, by express agreement or voluntary waiver, and accept as final a cancellation declared to take effect immediately, without written notice, without days of grace, and without return or promise to return the unearned premium; but to establish such extraordinary departure from the contract of insurance, — such unnecessary, not to say unreasonable and un-fa usinesslike, relinquishment of a valuable right, without consideration, — the agreement or waiver must have some substantial Support in the record. This, as we have said, is wholly wanting. The plaintiff not only denies any purpose or intent to consent
IV. We do not discuss the questions raised as to whether payment or tender back of tbe unearned premium is, in tbis case, essential to an effective cancellation. Were it necessary to a decision of tbis appeal, it is very likely that, under tbe terms of tbe policy, it would not be held a fatal objection. But tbe policy does provide for what may be called a substitute for such payment or tender, in that, in express terms, it declares tbat “the notice shall state tbat said unused paid deposit (if not tendered) will, when ascertained, be refunded on demand.” Tbis statement is made an essential part of tbe notice, and in tbe absence of waiver or consent, a notice lacking such essential is wholly void.
Without further extending tbis opinion, perhaps already unduly prolonged, we bold tbat tbe trial court erred in ruling that tbe act of the plaintiff in taking out new insurance after receiving the defendant’s notice, October 16, 1918, evidenced a waiver of tbe conditions upon which the reserved right of cancellation could be exercised, and further erred in bolding tbat tbe taking of new insurance as a replacement or substitute for tbe insurance sought to be canceled by tbe defendant operated as a consent to immediate cancellation, without regard to tbe conditions of the insurance contract. For the reasons above stated, tbe judgment below is reversed, and cause remanded for judgment in harmony with tbis opinion. — Reversed.