Appleton Iron Co. v. British Am. Assurance Co.

• Decision Date: 04 March 1879
• Citation: 46 Wis. 23,1 N.W. 9
• Parties: THE APPLETON IRON COMPANY ET AL., RESPONDENTS, v. THE BRITISH AMERICAN ASSURANCE COMPANY, APPELLANT.
• Court: Wisconsin Supreme Court

46 Wis. 23

1 N.W. 9

THE APPLETON IRON COMPANY ET AL., RESPONDENTS,

v.THE BRITISH AMERICAN ASSURANCE COMPANY, APPELLANT.

Supreme Court of Wisconsin.

Filed March 4, 1879.

Motion for re-hearing.

RYAN, C. J.

--If the crafty conditions, with which fire insurance companies fence in the rights of the assured, and the subtle arguments which their counsel found upon them, were always to prevail, these corporations would be reduced almost to the single function of receiving premiums for little or no risk.

Forfeitures are not encouraged in the law. When forfeitures of insurance policies rest on substantial grounds, going to the risk, this court will uphold them. Fuller v. Ins. Co., 36 Wis. 599. But when forfeitures are alleged on purely technical grounds, not going to the risk, the rule is universal, that the contract of insurance is to be upheld, if it can be without violation of any principle of law.

Here the forfeiture claimed rests upon an assignment of the insured in bankrupcy of the chattels insured and of the policy. Under the circumstances of this case, the claim is purely technical, having no bearing whatever on the risk.

There are highly respectable authorities holding that an assignment in bankruptcy, violates such a clause as that relied on in the policy before the court. But it may still be matter of grave doubt, whether such a clause is not void, as against public policy. It operates as a restraint upon the freedom of judicial procduere, and in restraint of judicial jurisdiction. It operates to extinguish an essential right of property by obedience to judicial decree. It operates to defeat the custody of the law of valuable things in action. It is in conflict with the policy of the law. The court is not prepared to pass upon this question here, and there are other grounds quite sufficient to defeat the forfeiture claimed.

This policy is not a contract between the insurer and the insured only. There is a third party to it, with beneficial interest in it from the beginning; in the circumstances, with the chief or only beneficial interest. The policy makes the loss, if any, payable to the co-plaintiffs of the insured, as their mortgage interest might appear. This is not the case of a loss made generally payable to a third person. The insurance was upon chattels. And the policy recognizes that the chattels were mortgaged; that the legal title was in the mortgagee; and that the mortgagor had only an equity of redemption. The rights of both parties, were insurable interests. And the thing, the body of the chattels, was insured for the benefit of both. The policy operated to cover the mortgagee's interest, through and under the mortgagor, to the extent of the policy. The mortgage debt exceeded the value of the thing insured. And the policy is susceptible of no other honest construction.

It is now contended that nothing was insured, except the mortgagor's nominal equity of redemption. The body of the chattels was insured for the benefit of both mortgagor and mortgagee; the loss payable to them according to their relative right as mortgagor and mortgagee; the legal title of the mortgagee, and the equity of redemption of the mortgagor. The premium was paid for this insurance of these interests, in this order; not for a policy of delusion, virtually insuring nothing. And no party should be tolerated in forcing such a construction of bad faith upon his own contract.

If the mortgagor had power to forfeit the policy and, had forfeited it, it might be that the insurance company had waived the forfeiture, as...