Boyd v. Thuringia Insurance

The opinion of the court was delivered by

Mount, J.

This appeal is from a judgment in favor of respondent, entered on the complaint and answer in an action against appellant on a lire insurance policy. Plaintiff sued as assignee of a mortgage on the premises upon which was situated a building covered by insurance. The complaint alleges, in substance, that one Andrew Raub was the owner of land upon which was situated a house; that he borrowed $400 from- one Minnie Wegner, and, as security therefor, executed a mortgage upon the premises, and agreed in said mortgage to keep said house insured in the sum of $300, loss, if any, payable to said Minnie Wegner, her heirs or assigns, until the said mortgage was fully paid; that subsequently, and on the date of said mortgage, insurance was procured of appellant upon said property in the sum of $300, loss, if any, payable to Minnie Wegner as her interest might appear, and said policy was thereupon delivered by said appellant to said Wegner; that subsequently Andrew Raub transferred his interest in the said property to one Edith Sheridan, without the knowledge of the mortgagee; that the house was thereafter totally destroyed by fire; and was of greater value than the insurance; that no payments have been made upon the said mortgage, and that proofs of loss were offered by said Wegner, but that appellant refused to accept such proofs and to pay the said loss; that said Wegner thereafter assigned her rights under said policy, as well as her mortgage, to plaintiff, who brought this suit praying for judgment for $300 and costs. The allegations of the complaint were not denied. The said policy of insurance, a copy of which is made a part of the complaint, contains among others, the following provisions: It names Andrew Eaub as the insured, and the limit of liability $300, “loss, if any, payable to Minnie Wegner, mortgagee, as interest may appear.”

“This entire policy, unless otherwise provided by agreement endorsed hereon or added hereto, shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on the property covered in whole or in part by this policy; or if any change other than by death of an insured take place in the interest, title or possession of the subject of insurance (except change of occupants without increase of hazard), whether by legal process or judgment, or by voluntary act of the insured, or otherwise. ... If with the consent of this company an interest under the policy shall exist in favor of a mortgagee or of any person or corporation having an interest in the subject of insurance, other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached or appended thereto. . . . This policy is made and accepted subject to the foregoing stipulations and conditions, together with such other provisions, agreements, or conditions as may be endorsed hereon or added hereto.”

An answer was filed, alleging, in substance, that the insurance company had not been notified, and had not consented to the transfer of the property by Eaub to Edith Sheridan; that said Edith Sheridan, in violation of the terms of the policy to Eaub, and without the knowledge or consent of defendant, had secured other insurance upon the building; that the latter policy provided that the insurer should be liable only for such proportion of the actual loss sustained as $800 would bear to the whole amount of insurance; that this policy of insurance was collected by said Edith Sheridan after the loss; that the said house did not exceed in value the sum of $800; and that the land upon which the house was situated greatly exceeds in value the amount of the mortgage. The demurrer to this answer was sustained, and judgment entered in favor of plaintiff.

The questions raised upon this appeal depend upon the question whether Andrew Raub was the insured under the policy of insurance, or whether Minnie Wegner was the insured. The determination of this question must depend upon the construction of the contract of insurance. The general rule is that where a mortgagor procures a policy of insurance to be issued to himself, loss, if any, payable to the mortgagee as interest may appear, the former is the •insured, and subsequent alienation avoids the policy. Grosvenor v. Atlantic Fire Ins. Co., 17 N. Y. 391; Continental Ins. Co. v. Hulman, 92 Ill. 145 (34 Am. Rep. 122); May, Insurance (4th ed.), § 452 D. But, where the mortgagee is the party intended to be insured by the policy of insurance, no subsequent acts of the mortgagor will invalidate the policy of insurance. Hastings v. Westchester Fire Ins. Co., 73 N. Y. 141; Syndicate Ins. Co. v. Bohn, 65 Fed. 165 (27 L. R. A. 614); City Five Cents Savings Bank v. Pennsylvania Fire Ins. Co., 122 Mass. 165; King v. State Mutual Fire Ins. Co., 54 Am. Dec. 683, and note; Pioneer Savings & Loan Co. v. Providence, etc., Ins. Co., 17 Wash. 175 (49 Rac. 231, 38 L. R. A. 397).

Minnie Wegner loaned Andrew Raub $400, and it was agreed in the mortgage that the building on the property mortgaged should be insured for a less sum, loss payable to her‘or her assigns. The policy in question was issued and delivered to her. The mortgagor then sold the property.' Loss occurred. The insurance company refused to comply ■with its contract, claiming forfeiture under the clause prohibiting alienation, and on account of insurance subsequently procured by the grantee of the mortgagor. This contract should he construed as any other contract, — in accordance with its purport and in connection with its surroundings. It ivas well understood at the time the policy was issued that until the mortgage debt was paid, Eaub had no interest in the policy. He was the owner of the property insured, but the mortgagee, who was the payee named in case of loss during the existence of the mortgage and the life of the policy, was, in case of loss, entitled to the whole of the insurance. The policy was delivered to and held by her, and, notwithstanding Eaub ivas named as the insured, she was the real beneficiary. Following the provison naming the clauses for which the policy was to he avoided was this provision:

“If with the consent of this company an interest under the policy shall exist in favor of a mortgagee or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached or appended thereto.”

It seems plain that when the company consented to the existence of the interest of Minnie Wegner by recognizing her as mortgagee and payee, and delivering the contract to her, and when it said “the conditions hereinbefore contained shall apply in the manner expressed in such provisions ... as shall he written upon, attached or appended thereto,” and when in the slip recognizing her as mortgagee and payee no provisions relating to forfeiture were contained, the effect of such action by the company ivas as though it had said, expressly, “This insurance shall not he invalidated by any act or neglect of the mortgagor of the -within described property, nor by any foreclosure, nor by any change in the title or ownership of the property, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy, nor by the owner procuring other insurance,” etc. When a person of ordinary intelligence read the provisions of the policy, and referred to the slip attached, recognizing him as having an interest, he would at once conclude that he was insured under the policy, and that the mortgagor could not by any subsequent act of liis, without the knowledge of the mortgagee, render the policy void as to the mortgagee. In the case of Oakland Home Ins. Co. v. Bank of Commerce, 47 Neb. 717 (66 N. W. 646, 36 L. R. A. 673, 58 Am. St. Rep. 663), the court, in construing the provision-in question here, uses the following language:

“If the language were ambiguous in its grammatical signification, we would be compelled to adopt that construction which would be more favorable to the insured. Insurance policies are not contracts deliberated upon, clause by clause, and effected after detailed negotiations between insured and insurer. The actual contract is for the most part entered into before the policy is delivered. The policy is proposed and tendered by the insurer on its own form. If it seeks to protect itself by a condition, it should clearly express that condition by the policy. If it resorts to ambiguous language, under familiar rules of construction, such language must be taken most strongly against the party proposing it and in favor of the other party. But we do not see any marked ambiguity in this policy. We repeat the clause, omitting words not essential to its construction on the feature before us. ‘If an interest . . . shall exist in favor of a mortgagee, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached, or appended hereto,’ ‘The conditions hereinbefore contained shall apply,’ not absolutely, but in a qualified way, fin the manner expressed in such provisions and conditions ... as shall he written upon, attached, or appended hereto;’ that is, in order to render the general conditions of the policy applicable to the interest of a mortgagee, there must he written upon, attached, or appended to the policy, relating to the interest of the mortgagee, some provisions or conditions expressing in what manner the conditions of the policy shall be so applicable. Neither in the fioss payable clause’ nor otherwise by writing upon, attached to, or appended to the policy was there any provision or condition carrying the conditions of the policy into such clause or rendering them in any manner applicable. The authorities cited by plaintiff in error are not opposed to this construction. In some cases the mortgage clause was not executed until after the policy had become voidable, and was then issued without new consideration while the insurer was ignorant of the facts avoiding the policy. In other cases the fioss payable clause’ stood alone without provision in the policy as to its meaning or extent. In this case, in view of the clause in the policy, the fioss payable clause’ must be taken as if it contained an express provision insuring the mortgagee without regard to the conditions imposed upon the owner in the body of the policy.”

We hold, therefore, that the plaintiff was the insured under the policy, was entitled to sue upon the policy, and that the subsequent acts of Raub did not affect the policy, so far as Minnie Wegner is concerned. The demurrer to the answer was properly sustained, and the judgment is affirmed.

Reavis, C. T., and IIadeey, Dunbab, White and Etjllerton, JJ., concur.