84 S.E. 274 | N.C. | 1915
On 11 June, 1913, the defendant insured the automobile of the plaintiff against loss by fire for the term of one year, and the plaintiff paid the premium of $25 therefor.
On 19 September, 1913, the plaintiff executed a deed of trust on a number of horses, wagons, and other property, including the automobile. The deed of trust was paid off and canceled of record, on 22 September, only three days after its execution. On 26 September, four days thereafter, the automobile was destroyed by fire. The defendant filed an answer, but when the case was called for trial demurred to the complaint on the ground that the policy contained this provision: "This policy, unless otherwise provided by agreement indorsed hereon in (260) writing by an authorized agent of the company, shall be void if the interest of the assured be other than unconditional and sole ownership, or if the property hereby insured be or become encumbered by a chattel mortgage, or if any change, other than by death of the assured, take place in the interest or title of the property hereby insured, whether by legal process or judgment or by voluntary act of the assured or otherwise."
The court sustained the demurrer and the plaintiff appealed. The loss occurred as above stated, after the deed of trust was paid off and canceled.
2 Cooley Ins., 1780, citing many cases, says: "The general rule that a breach of the condition against encumbrance is ground for forfeiture must be modified where the encumbrance is merely temporary and is not in existence at the time of the loss. It may be regarded as settled by the weight of authority that the effect of the encumbrance is merely to suspend the risk, and on cancellation or discharge of the encumbrance the policy is revived."
Elliott on Insurance, sec. 205, collating the authorities, also says: *327 "The weight of authority seems to support the view that a violation of a condition that works a forfeiture of the policy merely suspends the insurance during the violation, and if the violation is discontinued during the life of the policy and does not exist at the time of the loss, the policy revives and the company is liable, although it had never consented to the violation of the policy, and the violation was such that the company could, had it known of it at the time, have declared a forfeiture therefor." To same purport, Phillips on Insurance, sec. 975, and 1 May Insurance (3 Ed.), sec. 101; 2 A. and E., 288, and note.
A case almost exactly in point is Strause v. Ins. Co.,
Revisal, 4806, provides: "All contracts of insurance on property, lives, or interests in this State shall be deemed to be made therein; and all contracts of insurance, the application for which is taken within this State, shall be deemed to have been made within this State and shall be subject to the laws thereof."
Revisal, 4808, is as follows: "All statements or descriptions in any application for a policy of insurance or in the policy itself shall be deemed and held representations and not warranties; nor shall any representation, unless material or fraudulent, prevent a recovery on the policy."
The purpose of Revisal, 4808, was to prevent insurance companies (261) from escaping the payment of honest losses upon technicalities and strict construction of contracts.
In construing these sections in McCarty v. Ins. Co.,
In the present case the deed of trust given by the plaintiff embraced horses, wagons, and other property besides the automobile. This mortgage was paid off before the loss and was not material to the risk or fraudulent. The title of the plaintiff at the time of the loss was the *328
same as at the time of the delivery of the policy. The deed in trust in no wise contributed to the loss or in any way affected the risk. Weddington v.Ins. Co.,
In Born v. Ins. Co.,
On the rehearing of Born v. Ins. Co.,
Ins. Co. v. Toney,
It is thus declared by Cooley on Insurance, Elliott on Insurance, and the notes to the 80 Am. St. Reports, at p. 305, that the "weight of authority" is as above stated, and an examination of the authorities *329 sustains that view, though Vance on Insurance, 433, says that the weight of authority is otherwise.
Among many cases, besides the above, sustaining the proposition that the removal of the breach revives the policy when it is removed previous to the loss and has in no wise contributed to it, are Lounsbury v. Ins. Co.,
The contrary view in Vance on Insurance, supra, is largely based uponIns. Co. v. Coos County,
There are many other cases which support those which we have already cited that when such temporary encumbrance was removed before the fire it did not invalidate the risk, as there was no mortgage outstanding at the time of the fire. In Ins. Co. v. Toney, supra, above cited, the Court, summing up the authorities, says: "The common people who insure should not be entrapped by a harsh construction (263) of a technical word. The insurance is revived by occupancy, though suspended during the vacancy. . . . So much for the authorities in support of the position announced by this Court. We are also very clear that this position is more in consonance with justice and sound reasoning. . . It would be a harsh and unjust rule to hold that a condition which in no wise contributes to the loss should work a forfeiture of the insurance. The principle of the old legal maxim,`Cessante ratione legis cessat ipsa lex,' would seem to be applicable. . . . No maxim of construction of contracts is better established or has been more generally approved than that of Lord Coke, `He who considers merely the letter of an instrument goes but skin deep into the meaning,' and too minute a stress should not be laid on the strict and precise signification of words, to the destruction of the intention of the *330 parties and the spirit of the contract." To this quotation of the Court from Lord Coke the counsel for the plaintiff in this case adds this citation from St. Paul: "The letter killeth, but the spirit giveth life." II Cor., ch. 3, v. 6.
In Tompkins v. Ins. Co., 22 A.D. (N. Y.), 380, where the policy provided that it should be entirely void if the property became mortgaged, and where the property was mortgaged, but the mortgage was paid off before the loss, the New York Court says: "The defendant contends that the policy was voided by the giving of the first mortgage. The court below found and we have held that the second mortgage extinguished the first. Even if the policy would have been void and inoperative during the life of the first mortgage, it revived on the death of that mortgage. This principle is well settled in the analogous case of a marine policy, which contains a limit of the waters within which the vessel is insured. If the vessel leaves the limited waters and is lost, the insurer is not liable, but the liability reattaches on the return of the vessel to limits. Hennessee v. Ins. Co., 28 Hun. So here, although the policy was suspended during the existence of the first mortgage, it was revived when that mortgage ceased to exist, by the substitution of the second mortgage."
In Hinckley v. Ins. Co.,
It will be noted that this is the standard form of policy established by statute, and Phillips on Insurance, sec. 975, says: "After the policy has begun to run so the premium has become due it assuredly is but (264) equitable that a temporary noncompliance should have effect only during its continuance. To carry it further is to inflict a penalty on the assured and decree a gratuity to the insurer, who is thus permitted to retain the whole premium when he has merited but part of it."
In Warehouse Co. v. Ins. Co.,
The last line in the above quotation reiterates what is said above by Cooley, Phillips, May, and Elliott in their works on insurance, and is a correct statement.
Silver v. Assurance Corporation,
In Nebraska, where a policy contained a provision making it void if the property should be mortgaged, it was held that the payment of the mortgage revived the policy. Ins. Co. v. Schreck,
McClure v. Ins. Co., 88 Atl. (Penn.), 921, holds the same general principles as the authorities above cited. In that case the defense was that certain prohibited articles were kept upon the premises. The policy provided that it should be void if they were. The Court held that if they were removed before the fire and in no wise contributed to the loss, the policy was revived.
Independent of the overwhelming weight of authority, there can be no reason to release the insurance company from liability for a loss which accrued after the forbidden mortgage was canceled, the (265) mortgage having in no wise any connection with the loss.
The terms of a policy of insurance are construed against the insurer and in favor of the insured, and this is true although a standard form of policy has been adopted under legislative enactment. Gazzam v. Ins. Co.,
The stipulation that the policy shall be void if the property "be or become encumbered by chattel mortgage" was inserted for the benefit of the insurer upon the idea that if the owner of the property was permitted *332 to insure and then mortgage the property that it would be an inducement to him to destroy the property by fire, and if the stipulation is given effect so that this purpose and intent of the parties can be carried out, there is no reason for extending it further. In other words, it was the intent of the parties to prevent an increase of the risk to the insurer, and this can be amply protected by holding that the policy is only void if the mortgage is in force at the time of the loss. Instead of increasing the risk, this interpretation of the contract decreases it, because while the mortgage is in existence there is no liability on the part of the insurance company, and if a loss then ensues there can be no recovery, and when the mortgage is canceled the insurer assumes no responsibility that it was not liable for when the policy was first issued.
Nor is this construction against public policy as offering an inducement to the insured to destroy his property, because if destroyed while the mortgage is in force the total loss falls on him. See, also, 9 A. and E. Anno. Cases, 54, 11 A. and E. Anno. Cases, 780, and cases cited.
Our cases on the subject, which are collected in Roper v. Ins. Co.,supra, were decided correctly, because in them the stipulation was violated at the time of loss and it was properly decided that the policy was void.
Nor is this construction in conflict with the cases of Fishblate v.Fidelity Co.,
The demurrer should have been overruled.
Reversed.
Cited: Crowell v. Ins. Co.,
(266)