Summary
holding an insurer committed equitable fraud and plaintiff was entitled to reformation when, without proper notice to plaintiff, the insurer renewed but changed the policy-contract in a way that reduced the plaintiff's coverage and advantaged the insurer
Summary of this case from Osberg v. Foot Locker, Inc.Opinion
Argued April 7, 1879
Decided May 20, 1879
Osborn E. Bright, for appellant. Charles A. Davison, for respondent.
This is an action to reform a policy of insurance, by striking out the following clause: "13. In all cases of loss, the assured shall assign to this company, all his right to receive satisfaction therefor, from any other person or persons, town or corporation, with a power of attorney, to sue for and recover the same, at the expense of this company. When insured as a mortgagee, the loss shall not be payable until payment of such portion of the debt shall have been enforced, as can be collected out of the original security, to which this policy may be held as collateral, and this company shall then only be liable to pay such sum, not exceeding the amount insured, as cannot be collected out of such primary security," and to recover upon the policy as reformed.
The plaintiff had a previous insurance of her interest as mortgagee, to the extent of $2,500, the amount of her mortgage upon the mortgaged premises, situate in Westchester county. That policy did not contain the clause in question. A few months afterwards, the plaintiff loaned to the mortgagors $500, in addition, and took another mortgage to secure the payment thereof, and applied to the defendant for a renewal of the first policy at $3,000, which was agreed to, and a new policy issued with the foregoing clause inserted; and the same was renewed several times by renewal receipts, until the fire took place. Neither the plaintiff nor her agent discovered the change in the policy until after the fire. Both mortgages contained the usual insurance clause, and it was agreed that the mortgagors should pay the premiums, and have the benefit of the policy, in reduction of the debt. These facts are distinctly found by the trial judge, and we think that they justify the conclusion of law that the plaintiff is entitled to judgment, and we concur with the opinions at General and Special Term.
It is insisted in behalf of the defendant, that the evidence did not justify the finding that there was any agreement to issue a new policy like the old one, except in amount.
An agreement to renew a policy, implies that the terms of the existing policy are to be continued, and this would be so of any instrument, in the absence of evidence, that a change was intended. The plaintiff's husband and agent, testified, "I made application to the Star Fire Insurance Company to have another policy made for $3,000, renewal of the old policy, and increase it to $3,000. The company made a minute of the application, and said they would consider it, insure it for $3,000, in place of $2,500." The president of the defendant corroborates this evidence. He states that Mr. Hay applied for a renewal of the policy, saying that he had loaned $500, and wanted the policy made for $3,000, instead of $2,500, and that the following entry was made in two hand writings: "Mrs. I. Hay, Mount Vernon, N.Y., renewed, 1019 June 1, a a $3,000." From this evidence the court was justified in finding an agreement to renew the policy. True Mr. Hay says that the company said that it would consider the application, but the entry made by different officers indicates that it was accepted, and that the policy was to be "renewed." But if the application was not accepted at that time, the subsequent delivery of a policy as a renewal, in ostensible compliance with the application would have the same effect, in the absence of notice or explanation that the terms of the policy had been altered. The two policies were materially unlike.
The first contained no provision for subrogation, and as the mortgagors paid the premium, and especially with the agreement that the insurance was to be taken for their benefit, the amount received on the policy would apply to reduce the mortgage debt. ( Kernochan v. Bowery Fire Ins. Co., 17 N.Y., 428; Excelsior Ins. Co. v. Royal Ins. Co., 55 id., 343.) The clause inserted in the last policy makes the defendant a mere guarantor of the collection of the mortgage, and an insurer of the debt, a contract practically of no benefit either to the insured or the mortgagors. It was an insurance which the plaintiff under the arrangement with the mortgagors had no right to accept, and one which in Excelsior Co. v. Royal Ins. Co., supra, it is more than intimated the defendant had no right to make. It was bad faith on the part of the defendant to change so radically the terms of the policy, and deliver it as a policy simply renewing the old one, without notice of the change. A party, whose duty it is to prepare a written contract, in pursuance of a previous agreement, to prepare one materially changing the terms of such previous agreement, and deliver it as in accordance therewith, commits a fraud which entitles the other party to relief according to the circumstances presented. Equity will reform a written instrument in cases of mutual mistake, and also in cases of fraud, and also where there is a mistake on one side, and fraud on the other. ( Welles v. Yates, 44 N.Y., 525; Rider v. Rowell, 28 id., 310, and cases cited.) The negligence of the plaintiff in not discovering the change and laches, in not sooner seeking relief, are questions which make the propriety of granting relief in a given case, discretionary. The court below upon the findings of fact we think properly exercised its discretion in this case in granting relief. Policies of fire insurance are rarely examined by the insured. The same degree of vigilance and critical examination would not be expected or demanded as in the case of some other instruments. It is found that the plaintiff did not in fact examine the policy until after the fire, when for the first time, he was informed of the peculiar terms of this provision.
An effort was made on the part of the defendant to show that the original agreement before the first policy was made was for such an insurance as was made by the last policy, or at least that such an insurance might have been made under that agreement. There was a refusal to find this, and the evidence on that subject is ambiguous, and it is very doubtful, to say the least, whether that evidence would have justified such a provision as this. The defendant certainly made no mistake in inserting the provision contained in the first policy, and even if it might have inserted a different one, it is bound by the contract which it actually made. Considering the arrangement between the plaintiff and the mortgagors, and the terms of the first policy, it must be assumed that the contract made was in accordance with the intention of both parties, and it is not material whether the plaintiff actually read the first policy or not. He was entitled to the benefit of it, and when the defendant agreed to deliver a policy renewing it, and delivered it as such, it had no right to change its terms without the consent of the plaintiff.
The policy contained this provision: "12. It is furthermore hereby expressly provided and mutually agreed, that no suit or action against this company for the recovery of any claim by virtue of this policy shall be sustainable in any court of law or chancery until after an award shall have been obtained fixing the amount of such claim in the manner above provided, nor unless such suit or action shall be commenced within twelve months next after the loss shall occur; and should any suit or action be commenced against the company after the expiration of the aforesaid twelve months, the lapse of time shall be taken and deemed as conclusive evidence against the validity of such claim, any statute of limitation to the contrary notwithstanding."
It is objected, that the limitation of twelve months after the loss occurred, had expired, before the action was commenced, and that the action is barred. There are several answers to this objection. 1st. It is at least doubtful whether in strictness the limitation applies except in case an award is made fixing the amount of the claim. 2d. The clause sought to be struck out, is entirely inconsistent with the limitation of twelve months after the loss occurred, as a compliance with that clause would ordinarily occupy the whole or the greater part of that period, and hence it cannot be supposed that the parties intended the limitation to apply to such a case. 3d. The action is not for a "claim by virtue of this policy," but to compel the defendant to give a policy according to the agreement of the parties. This point is the same as though no policy had been given, and the action was for a specific performance of the agreement to insure. The limitation does not apply. The defendant cannot take advantage of a condition, the performance of which, it has prevented. ( Ames v. N.Y. Union Ins. Co., 14 N.Y., 253-264.) The limitation clause was not contained in the first policy. 4th. I am of opinion that the limitation should be construed to commence when the loss was due and payable, and not from the time of the physical burning of the property.
A contract of insurance is to be construed with reference to all its provisions, and in accordance with the rules which prevail for the construction of statutes and other contracts. A material condition of this policy is that proofs of loss are to be furnished as soon as possible after the fire, which means within a reasonable time. Such time is necessarily indefinite, depending upon a variety of circumstances, and after being furnished may be objected to as defective, and amended proofs required. This may occupy several weeks, or several months. In this case the fire occurred in October, and proofs of loss were not perfected until April after, and no question of laches was made. The delay may have been mutual, or unavoidable. The policy provides that the loss shall be paid "sixty days after due notice and satisfactory proofs of the same shall have been made by the assured." So that eight months of the twelve claimed as the period of limitation had expired without fault on the part of the plaintiff before the right to bring an action accrued, and it might often happen, that the whole period would elapse before such right accrued. It seems to me absurd to suppose that the parties intended to fix a limitation of time for bringing an action, so that by a compliance with other conditions of the policy, the whole time might elapse, and thus result in depriving the party of the right to bring any action. The error of the position is in supposing that courts are bound to apply the words "after the loss shall occur," to the time the property was actually destroyed. It is far more reasonable to refer it to the time when the loss has become a fixed demand against the company, and the assured has a right to bring an action for it. The loss should be deemed to occur when the company pays it, or is lawfully called upon to pay it. The loss then, and not until then practically occurs to it. These words may in some clauses refer to the destruction of the property, but it does not necessarily follow that they do in this. One of the most familiar rules is, that written instruments should be construed with reference to the subject-matter. The subject-matter was the limitation of time for bringing an action, and the provisions of law on that subject may be presumed to have been in the minds of the parties. Among the various statutes of limitation, fixing a specified period within which any class of actions must be brought not one permits the time to commence running until the right to bring the action exists, and the time does not commence running in some until the parties have knowledge of the facts entitling them to bring the action, and it is never permitted to run against a party who is under a disability to bring the action.
The parties intended to shorten the time for commencing an action, but an intent to violate the universal rule, applicable to this subject, founded alike in principle and practice before referred to, ought not to be imputed. Such a construction would in all cases restrict the time fixed for an indefinite period, and in some cases deprive a party of a right to bring an action at all, which is absurd, and an absurd result should never be reached by construction. By construing these words with reference to other clauses, there is no difficulty in reaching a reasonable result.
It is a maxim of the law that "he who considers merely the letter of an instrument, goes but skin-deep into its meaning." (Broom's Maxims, 657.) There is no authority for giving a cold literal meaning to isolated words, disconnected from the subject matter, and from other provisions of the instrument.
The reasoning in the case of Ames v. New York Union Insurance Company, supra, sustains the construction here indicated, and in Mayor v. Hamilton Fire Insurance Company ( 39 N.Y., 46), the point was substantially decided. The condition there was "unless such suit or claim shall be commenced within the term of six months after any loss or damage shall accrue." The court say, that "the words `loss or damage' are not used with legal precision. Within six months after the right of action shall have accrued, was no doubt what the parties intended," and it was held that the six months commenced to run from the time the right to bring an action existed. We regard that case as decisive upon this point. The court very properly characterize the condition thus: "It is in derogation of the rights of the assured, as given by the statute of limitations of the State. It is often not known, or not considered by the assured, and should only be permitted to prevent a recovery, when its just and honest application would produce that result."
In this case the loss became payable June 6th, and the action was commenced in January after, or within seven months.
Upon the other points, we concur with the court below.
The judgment should be affirmed.
All concur except EARL, J. dissenting.
Judgment affirmed.