Artificial Ice Co. v. Reciprocal Exch.

• Citation: 184 N.W. 756,192 Iowa 1133
• Decision Date: 25 October 1921
• Docket Number: No. 34236.,34236.
• Parties: ARTIFICIAL ICE CO. v. RECIPROCAL EXCHANGE.
• Court: United States State Supreme Court of Iowa

192 Iowa 1133

184 N.W. 756

ARTIFICIAL ICE CO.

v.RECIPROCAL EXCHANGE.

No. 34236.

Supreme Court of Iowa.

Oct. 25, 1921.

Appeal from District Court, Woodbury County; C. C. Hamilton, Judge.

Action at law to recover upon policies of insurance. There was a trial to the court without a jury. Judgment for the defendant, and plaintiff appeals. Reversed.Sears, Snyder & Gleysteen, Vail E. Purdy, and H. C. Harper, all of Sioux City, for appellant.

D. V. Howell, of Kansas City, Mo., and Henderson, Fribourg & Hatfield, of Sioux City, for appellee.

WEAVER, J.

The plaintiff is the owner of an extensive ice plant at Sioux City, Iowa. The Reciprocal Exchange, named as defendant herein, is a voluntary association of insurers organized under the terms of chapter 180, Laws of the 37th G. A. of Iowa. On June 30th defendant issued its policy of insurance to the plaintiff on said ice plant and property for the sum of $11,000 for the term of one year from said date. Later, on July 31, 1918, defendant issued to plaintiff another policy of like character upon the same property for $13,000 for the term of one year from that date. Each policy contained a provision reading as follows:

“In consideration of the acceptance by the insured of a reduction in premiums from the established rate of ______ per cent. to 1.1222 per cent., it is agreed that the insured shall maintain insurance during the life of this policy upon the property insured to the extent of at least 90 per cent. of the actual cash value thereof at the time of the loss; and that, failing to do so, the insured shall be a coinsurer to the extent of such deficit.”

Each policy also contained another clause, as follows:

“ Cancellation of Policy.--This policy shall be canceled at any time at the request of the insured, in which case one-fourth of the deposit may be retained by the attorney for the expense of making this contract, and the unused portion of the paid deposit, when ascertained, shall, upon demand and the surrender of this policy, or last renewal, be returned to the insured. This policy may be canceled at any time by the attorney by giving to the insured a five days' written notice of cancellation with or without tender of the unused paid deposit, which unused paid deposit, if not tendered, shall, when ascertained, be refunded on demand. Notice of cancellation shall state that said unused paid deposit (if not tendered) will, when ascertained, be refunded on demand.”

In addition to this insurance, plaintiff was carrying policies in several other companies. A fire occurred on October 17, 1918, injuring or destroying the insured property to the extent of $30,443.77, and this action was begun by plaintiff to recover the amount or proportion of such loss or damage which is alleged to be properly chargeable to defendant. Defendant does not deny the issuance of the policies, but rests its defense upon the proposition that such insurance had been canceled before the loss occurred. In support of its plea of cancellation of the policies the defendant produced evidence substantially as follows:

After the issuance of these policies and prior to September 11, 1918, a representative of the defendant company visited Sioux City, and after inspection of the insured property advised or recommended certain changes or improvements to decrease the fire hazard, and upon his report defendant requested or demanded that the specified improvements be made. This not meeting with a satisfactory response, the following correspondence ensued. Under date last named, defendant wrote plaintiff, as follows:

“Artificial Ice Company, Sioux City, Iowa--Gentlemen: We are still holding our files open for reply to our letter regarding the fire-extinguishing facilities in your plant. Kindly let us have a reply on the bottom of this sheet, and oblige. Yours very truly, Bruce Dodson, Manager.”

On September 30, 1918, plaintiff returned said letter to the defendant, writing or indorsing thereon its answer, as follows:

“We have decided to add no equipment or changes to our plant at the present time. Artificial Ice Co. Signed. J. E. Hathaway, Pres. If this does not meet your approval let us know so we can replace our insurance.”

Thereafter, under date of October 8, 1918, defendant addressed a letter to the plaintiff as follows:

“Artificial Ice Company, Sioux City, Iowa--Gentlemen: This is notice of the cancellation of the following policies, according to their terms and this notice; Policy No. 73932, covering $11,000, written to expire June 30th. Policy No. 74292, covering $13,000, written to expire July 31st. We regret the necessity of this action, but inasmuch as your plant was not found in satisfactory physical condition, and you decline to make necessary improvements, our action as indicated above becomes imperative. Very truly yours, Bruce Dodson, Manager.”

While this letter is dated October 8, 1918, it is shown quite conclusively, and the trial court finds, that it was not mailed until October 15th and was received by plaintiff on October 16, 1918. On October 15th defendant wrote another letter as follows:

“Artificial Ice Company, Sioux City, Iowa--Gentlemen: In order that there may be no misunderstanding, we beg to confirm our letter of October 8th that policy No. 73932, for $11,000 insurance, written to expire June 30, 1919, and policy No. 74292, for $13,000, written to expire July 31, 1919, are now canceled and void, in accordance with their terms and notice given. Kindly see that the canceled policies are returned to us. Very truly yours, Bruce Dodson, Manager.”

The foregoing communication was not received by plaintiff until October 17, 1918, the date upon which the loss occurred. On October 16th, after the receipt of the letter purporting to have been written on October 8th, the plaintiff's president phoned a message to their insurance agents in Sioux City ordering insurance upon the ice plant to the amount of $24,000, and received answer that the policies therefor would be issued. At the same time the agents, in accordance with the admitted custom or usual manner of transacting such business, issued so-called “binders,” or “binding slips,' by virtue of which plaintiff obtained temporary insurance for the amount named to cover the period required for preparation of the policies. At the fire occurred on the following day, the policies thus ordered do not appear to have been delivered before the loss was suffered, but, so far as appears, none of said companies contested their liability to contribute to the indemnity. At the date of the loss plaintiff held (including those issued by defendant) 13 policies or binders issued by 12 different insurers, aggregating a total of $60,500 of insurance; or (excluding the defendant's policies) the undisputed insurance was $36,500. The value of the property immediately before the fire, as adjusted with the insurers, other than the defendant, was $47,294.29, and the loss by the fire was $30,443.77. Within a very short time after the fire representatives of the insurers, 11 in number, not including the defendant, met in Sioux City, and, after negotiating with plaintiff and having estimated the loss as above stated, undertook the preparation of a schedule of apportionment of such loss to the several companies. The defendant, insisting that its policies had been duly canceled before the fire, denied all liability for the loss and took no part in the conferences or negotiations between the plaintiff and the other insurers. The first schedule prepared included the policies issued by defendant, estimating the contribution due from that company upon its two policies at $12,076.85. To this the plaintiff's president objected because, in view of defendants' action in giving notice of a cancellation and denying all liability, plaintiff was uncertain as to its rights, and if it should finally be determined that defendant was not liable, the proposed schedule would throw upon plaintiff a loss in excess of its proper proportion as a coinsurer. This question was finally settled between the conferees as follows: A schedule was made apportioning the loss between the 11 insurers and plaintiff, as a coinsurer, and in consideration thereof plaintiff executed a written agreement with each of said insurers to the effect that, if the plaintiff should succeed in enforcing his claim against the defendant, he would pay to each of said insurers a sum representing the difference between the amount of the apportioned liability to such insurer without contribution by defendant and the proper amount of such apportionment on the basis of the validity of the disputed policies. Under the adjustment thus made, the damage or loss sustained by the plaintiff was taken at $30,443.77, of which plaintiff, as a coinsurer, bore $4,105.01, while the other insurers (not including defendant) contributed $26,338.76. By an amendment to his petition plaintiff sets out said adjustment and alleges that he is suing in this case in the interest of his coinsurers as well as his own.

In pleading and in argument the appellee rests its defense, not only upon the right of cancellation reserved in the insurance contract--a right which it claims to have exercised--but insists also that, as the plaintiff had acted upon the notice of cancellation and at once procured other insurance upon the property, its action constitutes a waiver of its right to the contract or statutory period of five days and a consent to immediate cancellation. It also pleads a tender made to the plaintiff one year after this action was begun of the sum of $243.30 as the unearned premium upon the policies it claims to have canceled.

[1] On hearing the evidence, the trial court made its findings of fact and conclusions of law in favor of defendant, making the result to turn upon the proposition that plaintiff obtained the new insurance on October 16, 1918, as a replacement for defendant's policies, and that by such action he waived the...