Lattan v. Royal Insurance

| N.J. | Nov 15, 1883

The opinion of the court was delivered by

Depue, J.

The plaintiffs cannot recover the balance of the adjusted loss on the promise of the defendant contained in the agreement of June 12th, 1875. That promise to pay was made to Righter’s administrators, and was conditional upon their failure to recover a verdict in the suit they had brought against the Hibernia company; and it was an implied condition that that suit should be prosecuted to a verdict one way •or the other. The suit was not so prosecuted. It was non grossed for'the failure to file a declaration. The result of this suit must be determined on questions of law, independent of the agreement of June 12th, 1875.

The clause in the defendant’s policy with respect to other insurance was part of its contract of insurance. It was one of the terms of the agreement between the parties that in case there should be other insurance upon the property, the company should pay only its ratable proportion of the damages sustained by reason of the fire. The Hibernia policy had been taken out before the defendant’s policy was issued. It was taken out for a term of insurance that covered the time when the fire occurred. If that policy was in force when the fire happened, it was other insurance, within the meaning of the defendant’s policy, and in that event the defendant is liable only for a ratable proportion of the loss.

The assured was put under no obligation to the defendants to keep up the Hibernia policy. He might consent to or submit to the cancellation of the Hibernia policy before a loss •occurred, without affecting his rights under the defendant’s policy. Hand v. Williamsburgh Ins. Co., 57 N. Y. 41, 47. The condition of things to which the clause in the defendant’s policy had reference was the existence, in fact, of other insurance on the property at the time of the fire. The case hinges, therefore, on the question whether, as between the Hibernia company and the parties interested in its contract of insurance, its policy had been terminated in accordance with its condition of insurance.

The Hibernia company resolved to terminate its policy on the 4th of February, 1874, and the principal question certified is whether the company did what was necessary to be done, under the terms of its policy, in order to effectuate that purpose, before the fire occurred. The question relates to the form of the notice that was prepared, and the mode of service, and the refunding of a ratable proportion of the premium for the unexpired term — whether these things were done in compliance with the conditions on which the company reserved the power to cancel its policy.

First. The notice, we think, was sufficient in form. The notice in Van Valkenburgh v. Lenox, 51 N. Y. 465, was somewhat equivocal in its terms, and yet we do not understand from the opinion of the court that the case was decided and the cancellation declared ineffectual upon the insufficiency of the notice in form. It is reasonable that the underwriter should give the assured a reasonable time to obtain new insurance before enforcing a cancellation of its policy under such a condition. The notice in this case is unequivocal in its import. It notified the assured that on and after the 4th of February, 1874, the company will consider the policy as canceled and of no further force or effect-. The assured upon whom such a notice was served, would be left in no doubt of the purpose of the company. He could not fail to understand that it was notice of the cancellation of his policy to take effect on the 4th of February, 1874.

Seeond. The proof of service of this notice on Righter in due season is slight. The secretary of the company testified that he prepared it and handed it to Nugent, an agent of the company, on the 3d of February, 1874, with directions to serve it on Righter immediately. Nugent and Righter were both dead at the time of the trial. Righter died in the fall of 1874. One of his administrators testified that he found the notice among the effects of the deceased after his death. There is no other testimony on the subject. The testimony of Righter’s administrator is proof that the notice was served upon Righter, but there is no evidence whatever that it was served upon him before the fire occurred. The proof on this subject, we think, is insufficient. A party who seeks the advantage of the termination of a continuing contract before the period limited for its duration, in compliance with a power to terminate contained in the contract, must show by proof that he complied with the conditions on which the power was exercisable, and that he did so at a period before his liability under the contract was incurred. The burden of making such proof, with respect to the termination of the policy issued by the Hibernia company, rested upon the plaintiffs. They can recover the proportion of the loss in controversy only by showing that they have no right to recover it under the policy issued by the Hibernia company, by reason of the policy issued by the latter having been canceled before the loss.

In another respect, the service of notice is insufficient to answer present purposes. Righter was the owner of the premises insured. The plaintiffs were mortgagees. Both policies contained the provision that the loss, if any, should be payable to the plaintiffs. In the Hibernia policy it was to be payable to the. plaintiffs as mortgagees. A mortgagee under such a policy takes the contract of insurance subject to the conditions of the policy, and under a liability to have his rights defeated by a breach of the conditions of insurance by the assured ; but, nevertheless, he takes under a contract with' the insurer to pay him according to the terms of the policy. State Ins. Co. v. Maackens, 9 Vroom 564. The contract with the mortgagee is for insurance for the full term for which the policy is issued. The condition in question does not specify* to whom notice shall be given, and on the plainest principles of justice, the insurer, under such a stipulation, cannot terminate the contract of insurance by withdrawing it before the expiration of the term specified in the contract, without notice to the mortgagee. So far as the interest of the mortgagee is concerned, cancellation of the policy without notice to him would be unavailing.

Third.' The refunding by the company of a ratable proportion of the premium for the unexpired term of the policy, is made a condition precedent to the cancellation of the policy.

The policy having been taken out by Righter, the owner of the premises, and in his name, and the premium, which was the consideration for the insurance, having been paid by him, the repayment to him of the ratable proportion thereof for the unexpired term, would be a compliance with this condition. Although the mortgagees, to whom the loss was made payable, as security for the mortgage money, would be ■entitled to notice of cancellation, they had no claim, legal or •equitable, on the proportion of the premium to be returned.

But the obligation of the insurer to repay, or tender, the ratable proportion of the premium, is an essential part of the •condition to be performed and a prerequisite to the termination of the policy. Notice without repayment, or an actual tender of payment, is no compliance with the condition; and unless there be a waiver of repayment, notice and actual cancellation of the policy by the insurer will amount to nothing. Van Valkenburgh v. Lenox, 51 N. Y. 465 ; Hathorn v. German Ins. Co , 55 Barb. 28; Peoria Ins. Co. v. Botto, 47 Ill. 516; Wood on Ins., § 106.

Neither payment nor a tender of payment of the unearned premium was made. The secretary calculated the pro rata premium for the unexpired term at $19.37. Righter owed ■the company $22.50 for unpaid premiums on other policies. 'The secretary made out a bill of these unpaid premiums, on ■which he stated a credit of the premium on this policy of $19.37. This bill was handed to Nugent with the notice for service on Righter. No other proof of service was given, except that the bill was found among Righter’s effects after his death. The policy was also found among his effects, and there is no evidence that he consented to accept this credit in lieu of actual repayment of the pro rata premium to be repaid on the cancellation of the policy. It was insisted that this •credit was a sufficient repayment, and Bergson v. Builders’ Ins. Co., 38 Cal. 541, was cited. In that case the policy had been issued on a credit of part of the premium, and when the notice of cancellation was given, the payment that had been made by the assured on account of the premium was not sufficient to cover, pro rata, the time that had run on the policy. The court held that inasmuch as no part of the premium was repayable, nothing was due to the assured, and no money was to be returned to him, and consequently no tender was required. In this case Righter was entitled to have $19.50 of the $45 he had paid as a premium on this policy refunded to him. It was not repaid or tendered, and there is no evidence-that he waived repayment or consented to the company’s-credit of it on other demands it had against him. In the absence of such evidence, it does not appear that the policy was-lawfully canceled.

Fourth. The plaintiffs offered testimony tending to show that the premises insured were vacant and unoccupied at the time of the fire, and had been so for some time previous. The-Hibernia policy contains a provision that if the premises insured shall become vacant and unoccupied, from thenceforth' the policy should be void and of no force or effect. The policy issued by the defendant contains no such provision. This evidence was competent for the purpose of showing that at the time of the loss there was not, under the Hibernia, policy, any “ insurance * * * extending to the property * * * insured,” which was the condition on which the defendant stipulated that it should be liable to pay only its-ratable proportion of the damage. If the premises insured became vacant and unoccupied, from thenceforth the Hibernia-policy became void, and ceased to be an insurance “ extending to the property,” (Sonneborn v. Ins. Co., 15 Vroom 220,) and the plaintiffs took their rights in the Hibernia policy subject to be defeated by a breach of its conditions of insurance. State Ins. Co. v. Maackens, supra; Warbasse v. Sussex Ins. Co., 13 Vroom 203.

It does not appear that the court below found for the plaintiffs on this ground, and the certificate does not ask the advisory opinion of this court on matters of fact depending on the weight or effect of the evidence. We can only say that if it appeared to the Circuit Court that the Hibernia policy had been avoided on this ground, that would be a complete answer-to the defendant’s defence.

A certificate will be made in accordance with this opinion.