Mitchell v. Lycoming Mutual Ins. Co.

• Decision Date: 12 March 1866
• Citation: 51 Pa. 402
• Parties: Mitchell <I>et al.,</I> to use, <I>versus</I> The Lycoming Mutual Insurance Company.
• Court: Pennsylvania Supreme Court

51 Pa. 402

Mitchell et al., to use, versus The Lycoming Mutual Insurance Company.

Supreme Court of Pennsylvania.

March 12, 1866.

ERROR to the Court of Common Pleas of Indiana county, in which this was an action of covenant on a policy of insurance by John Mitchell and William C. Boyle, to the use of David Ellis and Conrad Hoffman, against the Lycoming Mutual Insurance Company.

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Foster and Stewart, for plaintiffs in error.—1. The stipulation in the policy against over-insurance was a covenant, not a condition. Courts incline against a construction which will destroy the contract, unless constrained by the clear and express terms of the contract: Paschall v. Passmore, 3 Harris 307; Inland Ins. and Deposit Co. v. Stauffer, 9 Casey 403; West Branch Co. v. Helfenstein, 4 Wright 298; 2 Am. L. C. 629. If the existence of the contract was to depend upon compliance with stipulations, apt words for that purpose should have been used. The policy has a proviso that in case of other insurance, the insured shall not recover a greater proportion of the loss than the amount insured by the policy shall bear to the whole amount insured. Taking the two clauses together no injury could accrue to the company as it would not be liable to pay more than its proportion of two-thirds of the value: Howard Ins. Co. v. Scribner, 5 Hill 298; Haley v. Dorchester Mutual Ins. Co., 1 Allen 536.

2. If there was no legal liability of other companies to pay on the policies creating the over-insurance, there was no over-insurance. The proposition applies to the insurance of the Pittsburgh companies: Stacey v. Franklin Fire Ins. Co., 2 W. & S. 544; Jackson v. Massachusetts Mutual Ins. Co., 23 Pick. 418; Clark v. New England Mutual Fire Ins. Co., 6 Cush. 342; Hardy v. Union Mutual Ins. Co., 4 Allen 217; Haley v. Dorchester Mutual Ins. Co., supra. The Pittsburgh companies' policies required consent to encumbrances and executions. Both existed, and these two policies were therefore void: Pennsylvania Ins. Co. v. Gattsman's Ex'r., 12 Wright 151. Nor were plaintiffs estopped because they had compromised with one of the companies: Hardy v. Union Mutual Fire Ins. Co., supra.

3. The court decided that the same property was insured in the Cumberland Valley and Lycoming policies. To create a double insurance the risk must be the same, and that is a question for the jury: Howard Ins. Co. v. Scribner, supra; Sloat v. Royal Ins. Co., Leg. Journ. October 31st 1864, per Read, J., in Sup. Court.

4. The over-insurance if it existed was waived by McCabe, the agent; this may be done by acts; Cumberland Valley Ins. Co. v. Hoffman, in Sup. Court, not reported; Coursin v. Pennsylvania Ins. Co., 10 Wright 323. The fact of waiver is for the jury. The agent endorsed and approved of the transfer reciting the existence of the Cumberland Valley Company's insurance, and took premium notes and payments with the knowledge of that insurance. The company not having made known the limitation of the power of their agents, are bound by their acts: Franklin Fire Ins. Co. v. Massey, 9 Casey 221; Sykes v. Perry County Mutual Ins. Co., 10 Id. 79; McEwen v. Montgomery Ins. Co., 5 Hill 105; Grant v. Howard Ins. Co., Id. 101.

T. & H. White and H. W. Weir, for defendants in error.—In this case, 12 Wright 373, this court has declared that over-insurance is a forfeiture. So in Lycoming Ins. Co. v. Slockbower, 2 Casey 199. Stipulations in policies must be literally fulfilled, or the policy becomes void: Williams v. New England Mutual Ins. Co., 31 Me. 219; Glendale Woollen Co. v. Protection Ins. Co., 21 Conn. 19; State Mutual v. Arthurs, 6 Casey 332.

No one is held to have waived his rights unless he acts with a knowledge of them. Knowledge of an agent cannot affect the company: Finley v. Lycoming Ins. Co., 6 Casey 314; Kennedy v. St. Lawrence, 10 Barb. 289; Sykes v. Perry Mutual, 10 Casey 81; Jennings v. Chenango Ins. Co., 2 Denio 79; also, Smith v. Insurance Company, 12 Harris 320.

The difference in description was merely the different manner of taking the agents of the respective companies. An insurance on the mill would include all its parts: Bigler v. N. Y. Central Ins. Co., 20 Barb. 635.

A policy whose validity depends upon compliance with something extrinsic is voidable only in case of non-compliance; as was ruled in this case in this court. Until avoided, it is a subsisting policy: Carpenter v. Providence Ins. Co., 10 Peters 509; Viole v. Genesee Mutual Ins. Co., 19 Barb. 440; David v. Hartford Ins. Co., Sup. Court of Iowa, April Term, 1862.

It would be an anomaly to try the validity of policies when the parties were not before the court, and to declare a policy void when the company had paid a large sum to be released from their liability on it.

The opinion of the court was delivered, March 12th 1866, by AGNEW, J.

We agree with the learned judge in the court below that this policy was only upon the mill, machinery, engine and fixtures, excluding the flour, barrels, &c., and the valuation therefore was $11,810. We also concur with him, that a breach of the covenant not to insure beyond two-thirds of the estimated value, was a forfeiture of the policy. This was our judgment when this case was here before (12 Wright 368), and the point had been decided in Lycoming Ins. Co. v. Slockbower, 2 Casey 199. We see no reason to retract. Good faith is the life-breath of insurance where a heavy risk is taken for a small premium. The right to insure ad libitum is detrimental to good faith, leading always to carelessness and often to fraud. The limitation of the insurance to two-thirds of the estimated value is therefore essential to secure fidelity, and to make the assured watchful over his own interest in the remainder. It is a fundamental condition in procuring the policy. Its violation runs back, therefore, to the issuing of the policy, and undermines the very ground on which its origin stands; and forfeiture is the necessary penalty and protection of the contract. The covenant against insurance over two-thirds has no relation to the pro rata clause, which refers to additional insurance when less than two-thirds. The...