Gilman v. Commonwealth Insurance

Haley, J.

An action of assumpsit, upon a policy of insurance, of the Maine Standard form, issued by the defendant to Frank T. Spear, October 15,1909, whereby the defendant insured the one and one-half story dwelling house situated in Scarboro for the term of three years, against loss or damage by fire to the amount of $800. _ There was an endorsement upon the policy as follows: “Payable in case of loss to George F. Gilman, mortgagee, as his interest may appear.”

When the policy was issued Mr. Spear was in possession of the insured premises, and remained in possession for about one and one-half years, when George F. Gilman, who held a mortgage of the premises to secure a debt of $900, took possession as mortgagee and evicted Mr. Spear. On April 11th Mr. Spear requested the Insurance Company to cancel the policy. On April 15th of that year they gave him written notice that they had cancelled the policy, as requested. September 26th, 1911, the buildings were destroyed by fire. Soon after the fire Mr. Gilman learned that Mr. Spear and the Insurance Company claimed to have cancelled the policy without his, Gilman’s, consent. Mr. Spear neglected to furnish the Insurance Company a proof of loss, as called for by the policy, and October 19th, 1911, Mr. Gilman sent to the defendant a proof of loss. Afterwards he served *530notice upon the defendant in writing that he desired to have the amount of the loss settled by arbitration. The defendant paid 'no attention to either the proof of loss or the request for arbitration.

Shortly after the request to the Insurance Company to submit the question to arbitration, Mr. Gilman died and the plaintiff -was appointed administrator of his estate and brought this suit upon the policy. The case was tried at the January term in Cumberland County, the verdict was for the plaintiff for the sum of $900.93, and the case is before this Court on a motion for a new trial as against law and evidence.

The defendant urges two reasons in support of its motion:

First, — Because the policy had, before the loss, been cancelled at the request of Mr. Spear.

Second, — Because the risk was increased by changes and alterations made to the buildings without the consent of the defendant.

First: The form of the Maine Standard Insurance policy, now contained in Sec. 4, Chap. 49, Bevised Statutes, was prescribed by the legislature of 1895, before which it was held that an endorsement upon the policy of words making it payable in case of loss to a mortgagee, as his interest might appear, was not an insurance of the mortgagee’s interest in the property, or an assignment of the policy to the mortgagee; that it was merely a contingent order, a stipulation assented to by the Insurance Company for the payment of the loss to the assured, if any, to the mortgagee; that it gave the mortgagee the same right to recover that the insured would have had if no such clause had been inserted in the policy; that any violation of the stipulations of the policy which would defeat the right of the insured to recover upon it would defeat the right of the mortgagee; that it was simply an order on the company to pay the amount of the loss to the mortgagee; that the insurance was upon the property of the mortgagor and not upon the interest of the mortgagee. Savings Institution v. Insurance Company, 68 Maine, 313; Bank v. Insurance Company, 81 Maine, 570.

The policy in suit is of the Maine Standard form and contains the agreements specified by Chap. 49 to be inserted in a fire insurance policy, among which are the following, spoken of in the opinions as the mortgagee clause, the union clause and the loss payable clause: “If this policy shall be made payable to a mortgagee of the insured real estate, no act or default of any person other than such mortgagee *531or his agents, or those claiming under him, shall affect such mortgagee’s right to recover in case of loss on such real estate; provided, that the mortgagee shall, on demand, pay according to the established scale of rates for any increase of risk not paid for by the insured; and whenever this company shall be hable to the mortgagee for any sum for loss under this policy, for which no liability exists as to the mortgagor, or owner, and this company shall elect by itself or with others to pay the mortgagee the full amount secured by such mortgage, then the mortgagee shall assign and transfer to the companies interested, upon such payment, the said mortgage together with the note and debt thereby secured.”

It is further provided in the policy that, “This policy may be can-celled at any time at the request of the insured, who shall thereupon be entitled to the return of the portion of the above premium remaining, after deducting the customary monthly short rates for the insured for the time this policy shall have been in force. The company also reserves the right, after giving written notice to the insured, and to any mortgagee to whom this policy is made payable, and tendering to the insured a ratable proportion of the premium, to cancel this policy as to all risks subsequent to the expiration of ten days from such notice, and no mortgagee shall then have the right to recover as to such risks.”

The above mortgage clause is the same as the mortgage clause in the Massachusetts Standard Insurance Policy, and the same as was set forth in the policy in the case of Whiting v. Burkhardt et als., 178 Mass., 535, which also contains the usual provisions that is should be void “if, without the assent of the company in writing or print, the said property shall be sold, or the policy assigned.” One of the owners of the property conveyed his interest before the fire, and the suit was brought upon the policy by the mortgagee, and the Court say, page 539: ‘ ‘A conveyance by Guptil of his interest in the building insured did not affect the right of the plaintiff to recover in case of loss; it is provided in the policy that, ‘if the policy shall be made payable to a mortgagee of the insured real estate, no act or default of any person other than such mortgagee or his agents, or those claiming under him, shall affect such mortgagee’s right to recover in case of loss on such real estate.’ ” The Court held that, although the conveyance by the owner of his interest would defeat his right to recover, *532that it was no defense to a suit by the mortgagee named in the policy, because the policy contained a mortgage clause the same as the mortgage clause in the policy in suit.

In Morey v. Reliance Insurance Company, 208 Mass., 378, the Court held: ‘ ‘Because of the foreclosure of a later mortgage covering both estates worked a change in the title, all the policies became void in the hands of the original insurer, and the claim of the plaintiffs, as mortgagees under their earlier mortgage, rests upon the clause in the policy under our Massachusetts standard form, which protects the rights of the mortgagees in such cases.” The Court held that the mortgagees could recover.

In Hardy v. Lancashire Insurance Company, 166 Mass., 210, the Court say: “The history of the provisions in the standard policy in favor of a mortgagee is well known. These provisions, in their present form are intended to afford to the mortgagee full indemnity to the extent of the insurance under his interest in the property, unless the policy is avoided by some act of his, or of his agents, or of those claiming under him, and the mortgagee in certain events comes under obligations to the insurance company to pay for any increase of risk and to assign to it his mortgage.” .... “The policy of the Commonwealth, that such insurance shall not be avoided so as to affect the mortgagee’s interest by the act of the mortgagor, is shown by the adoption of a standard form containing such a provision, and this is the form which mortgagees usually demand.”

In Eliot Five Cent Savings Bank v. Insurance Company, 142 Mass., 142, the policy contained the same clause that is contained in the policy in suit; and the insured conveyed the property before the fire, without the assent of the company, and the Court said: “If we assume, as contended by the defendant, that the conveyance by George B. Taylor to Addie E. Taylor, without the assent of the company, avoided the policy as to them, yet, under the first clause (mortgage clause) above cited, it would not affect the right of the mortgagee to recover.”

In Union Institute v. Phenix Insurance Co., 196 Mass., 230, the mortgagor obtained insurance upon buildings, and there were endorsements making the loss payable to the mortgagee as his interest might appear. The policy was in the standard form, as the policy in this case. The mortgagee did not know of the insurance until after the fire, and the Court say: ‘ ‘The first question is whether the *533plaintiff can avail itself of the contract thus made for its benefit? We think it plain that this question should be answered in the affirmative. Surbridge acted in part for himself and in part as an agent and representative of the plaintiff in procuring the policy. He must be held to have acted in same double capacity in receiving and holding it. This policy contained a contract between the defendant and Surbridge, and a somewhat different contract between the defendant and the plaintiff. . Both the mortgagor and the mortgagee were protected in their rights under their several contracts contained in the single paper signed by it. Palmer Savings Bank v. Insurance Company, 166 Mass., 194; Hastings v. Westchester Ins. Co., 73 N. Y., 141; Hartford Ins. Co. v. Olcutt, 97 Ill., 439.”

In Eddy v. L. A. Corporation, 143 N. Y., 311, Peckham, J., says: ‘ ‘The effect of the mortgage clause hereinbefore set forth is to make an entirely separate insurance of the mortgagee’s interest, and he takes the same benefit from his insurance as if he had received a separate policy from the company, free from the conditions imposed upon the owners. The plain and obvious meaning of the language is that the insurance of the mortgagee shall not be affected or in anywise impaired or lessened by any act or neglect of the owner, although in the same policy issued to the owner, yet the insurer and the mortgagee were entering into a perfectly separate contract of insurance, by which the mortgagee’s interest alone was to be insured, and it would be most natural to provide that no act or neglect of the owner should invalidate, that is, impair any portion of the insurance thus separately secured.”

' In Hartford Fire Ins. Co. v. Williams, C. C. A. 63, Fed., 925, it was held that, under the provision in the mortgage clause of a fire policy, the insurance as to the interest of the mortgagee should not be invalidated by any act or neglect of the mortgagor or owner, voluntary destruction by the owner would not prevent a recovery by the mortgagee.

In Phenix Ins. Co. v. Omaha Loan & Trust Company, 25 L. R. A., 679, the policy contained the following clause: ‘ ‘And if the property be sold or transferred in whole or in part without written permission in this policy, then, and in every such case, this policy is void.”

It is also provided, in substance, as the Maine Standard form, as follows: “It is hereby agreed that this insurance, as to the interest *534of the mortgagor only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the property insured.”

The insured conveyed his interest in the property, and the Court held that the mortgagee was entitled to recover upon the policy; that the contract with the trust company (mortgagee) was a separate and independent contract, and the right of the mortgagee to enforce it did not depend upon whether the owner had kept his engagements with the insurance company or not.

The case also cites several opinions holding the same doctrine.

In Bacot v. Phenix Ins. Co., 25 L. R. A., (N. S.) 1226, it was held that, where a husband insured property as the owner when it was in fact owned by his wife, the policy as to him or his wife was void, but also held that, by reason of the mortgage clause attached to the insurance policy, under a statute providing that the insurance of the mortgage interest should not be invalidated by any act or neglect of the owner of the property, the mortgagee could recover upon the policy.

In the note to the case of Bretch v. Law Union & Crown Ins. Co., reported in 18 L. R. A., (N. S.) 197, the editor, after reviewing many cases, states that the principle that under such a clause as is contained in the policy in suit, the rights of a mortgagee cannot be affected by any act or neglect of the owner, the mortgagor, occurring after the issuing of the policy, and cites many cases to support it, and concludes by stating (page 206), “the only difference of opinion which arises as to the effect of such clause occurs when the act of the mortgagor, which is relied upon to avoid the policy as to the mortgagee is some misrepresentation or concealment at the time of the issuance of the policy. The weight of authority, however, would seem to support the conclusion that the rule is the same under such circumstances.”

An examination of the cases where the policies contained an endorsement making them payable in case of loss to the mortgagees, as their interests might appear, clearly shows that the rule of law declared in cases before the adoption of the Maine Standard form of policy does not apply to that form of policy, and that the policy in suit, by reason of the mortgage clause and by being made ‘ ‘payable in case of loss to George S. Gilman, mortgagee, as his interest may appear,” contained in addition to the contract with Frank T. Spear a separate and an independent contract whereby the mortgagee’s *535interest was insured, and the defendant had no right to cancel the policy except by mutual consent of the insured, Mr. Spear, and the mortgagee, or by giving to the insured and the mortgagee ten days notice in writing, as specified in the policy, and that the mortgagee’s right to recover for the loss was not affected by the act of the insured and the defendant in their attempted cancellation of the policy.

Second: That changes and alterations were made in and upon the building which were not permitted, and about which the defendant had no notice. Attached to the policy is a mechanic’s permit, dated October 15, 1909, giving permission for mechanics to work in and about the premises for two months from date, to make alterations and additions, or repairs. It was shown by the testimony that Mr. Gilman, the mortgagee, did work on the house after the time specified in the permit. He laid new floors, changed the stairs, put up studding in the second floor, etc.

The defendant relies upon Fire Insurance Co. v. Coos County, 151 U. S., 452, which held that, if mechanics were employed in building, altering or repairing the premises without a building permit, the insurer was relieved from responsibility, although the fire did not occur in consequence of the alterations or repairs. The policy in that case provided that, “This policy shall be void and of no effect if, without notice to this company and permission therefor in writing indorsed hereon . . . , the premises shall be used or occupied so as to increase the risk, ... or the risk be.increased by any means within the knowledge or control of the insured, ... or if mechanics are employed in building, altering, or repairing premises named therein, excepting in dwelling houses, except not exceeding five days in one year are allowed for repairs.” The Court say: “The condition of the policy should be void and of no effect, if ‘mechanics are employed in building, altering or repairing the premises named herein,’ without notice to or permission of the insurance company, being a separate and a valid stipulation of the parties, its violation by the assured terminated the contract of the insurer, and it could not be thereafter made hable on the contract, without having waived the condition, merely because in the opinion of the court and jury the alterations and repairs of the building did not, in fact, increase the risk.” The policy in suit does not contain the clause contained in the above mentioned policy that the policy should be void and of no effect if mechanics are employed in the building, *536altering or repairing the premises named herein; but it does provide that' ‘ ‘the policy shall be void if, without the assent of the insurer, the property shall be removed, except that if such removal shall be necessary for the preservation of the property from fire, this policy shall be valid without such assent after five days thereafter, or if, without such assent, the situation or circumstances affecting the risk shall, by or with the knowledge, advice, agency or consent of the insured be so altered as to cause an increase of such risk.”

The attaching to the policy of the permit above referred to gave to the assured the right to employ mechanics in and upon the premises as specified in the permit for the period named in the permit without increasing the risk to the extent that would avoid the policy, and the making of the changes and alterations testified to after the time limited in the mechanic’s permit, without the assent of the insurance company, left it a question of fact for the jury whether the changes and alterations constituted such a change of the situation or circumstances affecting the risk as to so alter the premises as to cause an increase of such risk. If it did not cause an increase of such risk, then it was not á forfeiture of the policy, and whether it was an increase of risk under the circumstances was a question of fact for the jury, and they were expressly instructed upon that branch of the case, and no exceptions were taken to such instruction, and we cannot say, from an examination of the evidence on this branph of the case, that they were not justified in finding that the alterations and repairs made by the mortgagee did not create an increase of the risk, but that they were such repairs and alterations as would ordinarily be expected to be made upon such premises, and that the Insurance Company so considered it when it issued the policy of insurance.

Motion overruled.