I agree with the opinion of Judge FINCH. The question first to be determined is, what did Bond No. 2 with its rider cover? This rider provides: "1. That the attached bond [Bond No. 2] shall be construed to cover, subject to its terms, conditions and limitations, any loss or losses under the prior bond [Bond No. 1] which shall be discovered after the expiration of the time limited therein for the discovery of loss thereunder [November 3, 1931] and before the expiration of the time limited in the attached bond for discovery of loss thereunder, and which would have been recoverable under the prior bond had it continued in force."
Bond No. 2 covered losses occurring subsequent to its issuance and also by the rider covered losses occurring during the time of Bond No. 1 which could not be recovered under the provisions of Bond No. 1. In other words, Bond No. 2 covered losses sustained between November 3, 1930, and November 3, 1932 (the period when Bond No. 2 was in force) if discovered prior to November 3, 1933 (when the cut-off period of Bond No. 2 ended). Bond No. 2 also covered losses sustained between November 3, 1928, and November 3, 1930 (period of Bond No. 1), if discovered subsequent to November 3, 1931 (cut-off period of Bond *Page 149 No. 1), but prior to November 3, 1933, the termination of the cut-off period of Bond No. 2.
From this we readily see that the insured was covered for losses occasioned during the periods stated and discovered any time prior to November 3, 1933. The Commercial Casualty Insurance Company issued the policies and sought from the defendants reinsurance. Group A of the reinsurers took the risk of losses under Bond No. 2, which included those covered by the rider or, in other words, losses under Bond No. 1 as extended by the rider. As we saw, this rider extended the period of discovery up to November 3, 1933.
Group A reinsurers canceled their reinsurance August 25, 1931, but this did not cancel their liabilities. They were still liable for losses which had occurred on Bond No. 1 and were discovered prior to September 25, 1932. Why do we fix this date of September 25, 1932? Because of the standard form of reinsurance agreement binding upon these parties. It reads, so far as applicable here:
"12. If the reinsurance hereunder shall be cancelled as provided herein before the termination of the Bond, the Reinsurer shall not be liable on account of any losses which occurred before the effective date of such cancellation, but which were unknown to the Reinsured at that date, unless notification thereof shall be received by the Reinsured within a period beginning on the effective date of such cancellation and continuing for a term equal to that of the cut-off period [one year], plus the notification period, defined in the bond * * *." (Thirty days, making the time of notification of loss after cancellation run in this case from August 25, 1931, to September 25, 1932.)
The reinsurance agreement further provides: "If reinsurance hereunder supersedes, in whole or in part, any cancelled reinsurance, the Reinsurer hereby assumes liability wholly or inpro rata part, as the case may be, for losses which occurred before the effective date of the cancellation of such superseded reinsurance, but notification *Page 150 of which was not received by the Reinsured before the expiration of the period specified in the first paragraph of this section."
The loss under Bond No. 1 was discovered in April, 1932. This brought it within the reinsurance liability of Group A which did not expire, as I have stated, until September 25, 1932. Group B of the reinsurers come under the last clause above quoted. This specifically provides that they assume liability only for those losses which occur before the effective date of cancellation but notification of which was not received by the reinsuredbefore the expiration of the period specified in the first paragraph of this section (September 25, 1932). In other words, Group B are liable for losses occurring prior to cancellation provided the notification of the loss is not made until after September 25, 1932.
I do not see in view of these provisions how the defendants in this case are liable for the loss occurring under Bond No. 1 before cancellation, notification of which was given in April of 1932 before and not after September 25, 1932.
For these reasons I believe the judgment should be reversed, or at least modified, as stated by Judge FINCH.
LEHMAN, O'BRIEN, HUBBS, CROUCH and LOUGHRAN, JJ., concur with FINCH, J.; CRANE, Ch. J., concurs in separate opinion in which all concur.
Judgment accordingly. *Page 151