Austin v. Dixie Fire Ins. Co.

• Decision Date: 28 February 1919
• Citation: 122 N.E. 382,232 Mass. 214
• Parties: AUSTIN v. DIXIE FIRE INS. CO.; AUSTIN v. CALUMET INS. CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

232 Mass. 214

122 N.E. 382

AUSTIN

v.DIXIE FIRE INS. CO.;

AUSTIN

v.CALUMET INS. CO.

Supreme Judicial Court of Massachusetts, Hampden.

Feb. 28, 1919.

Case Reserved and Report from Superior Court, Hampden County; Henry A. King, Judge.

Actions by Michael F. Austin against the Dixie Fire Insurance Company and against the Calumet Insurance Company. On reservation and report, after finding of the facts as stated in an agreed statement of facts, to the Supreme Judicial Court. Judgement ordered against each defendant.

Harvey & Mulcare, of Springfield, for plaintiff.

Green & Bennett, of Springfield, for defendants.

RUGG, C. J.

These are actions upon policies of insurance to recover for loss occasioned by fire. Each of these policies covered the same property, including a mare named Betsy Tell. The defense is that the plaintiff had insured Betsy Tell alone under a Lloyd's policy, so called, and had collected without the knowledge or consent of the defendants on that policy by compromise the sum of $862.50, and had executed and delivered therefor a release under seal. The plaintiff's contention is that, notwithstanding this settlement, he is entitled to recover the full amount due under the policies of the defendants; while the defendants contend that the plaintiff has no right to withhold from them the advantage of the existence of the Lloyd's policy.

The validity of the Lloyd's policy becomes a material factor. The agreed facts respecting the place where it was issued are meagre, and there is no finding of fact upon this point. It is not necessary to decide whether the policy was issued in New York or in Massachusetts. If issued in New York there is nothing to cast suspicion upon its legality. Stone v. Old Colony Street Railway, 212 Mass. 459,90 N. E. 218. If the policy was issued within this commonwealth, it was binding upon the insurer. The insurers or underwriters of this policy had not complied with St. 1907, c. 576, § 84, so as to become authorized to do business within this commonwealth. The policy itself was not in conformity with section 60 of the same act, which prescribes a standard form. Nevertheless it is provided by St. 1907, c. 576, § 29, that--

‘An insurance company, association or agent that makes, issues or delivers a policy or contract of insurance in willful violation of the provisions of this act shall forfeit not less than fifty dollars, nor more than two hundred dollars, for each offense; but such policy shall be binding upon the company or association issuing the same.’

An important modification was introduced into our insurance law by this section. It had been provided by earlier acts that, although a policy was not issued in the standard form, the policy should be binding upon the company. St. 1881, c. 166, § 2; Pub. St. c. 119, § 140; St. 1887, c. 214, § 105; St. 1894, c. 522, § 105; R. L. c. 118, § 105. It also had been provided by St. 1854, c. 453, § 36, St. 1856, c. 252, § 49, Gen. St. c. 58, § 72, and Pub. St. c. 119, § 200, that the insurance should be valid although the company had failed to comply with the requirements of the insurance law. Under these statutes several cases arose. Provincial Insurance Co. v. Lapsley, 15 Gray, 262;National Mutual Fire Insurance Co. v. Pursell, 10 Allen, 231;Hartford Live Stock Insurance Co. v. Mattews, 102 Mass. 221. But by St. 1887, c. 214, §§ 77, 78, this latter provision was repealed. Thereafter several cases arose where such contracts issued by companies which had not complied with the insurance law were recognized as invalid and unenforceable. Reliance Mutual Insurance Co. v. Sawyer, 160 Mass. 413, 36 N. E. 59, where earlier decisions and statutes are reviewed; Claflin v. United States Credit System, 165 Mass. 501, 43 N. E. 293,52 Am. St. Rep. 528;Baldwin v. Connecticut Mutual Life Insurance Co., 182 Mass. 389, 65 N. E. 837. In the light of these preceding enactments the change wrought by the words of said section 29, to the effect that any policy issued in ‘violation of the provisions of this act’ shall be binding upon the company, cannot be thought merely verbal and without qualification of meaning. It is a substantial alteration of the structure of the statute and calls for a wider construction than that permitted by the phrase of the pre-existing act. There appears by the Legislature. By this change the natural significance of the language employed by the .legislature. By this change the Legislature not only continued the validity of policies not in the standard form issued by companies which had complied with the requirements of the insurance law and thus were authorized to do business in this commonwealth, a provision previously embodied in Rev. Laws, c. 118, § 105, but it combined with it the further new, exceedingly important provision that if the insurance was made ‘by any company without complying with the requisitions' of the insurance statutes, ‘the contract shall be valid.’ The natural import of these words is that no matter in what particular the insurance company shall have failed in its duty under the law, whether by not using the standard form of policy or by not having become admitted and authorized to do business here through not having conformed to the requirements of section 84, nevertheless the insured shall not lose his rights and the insurer shall not evade responsibility. Thus the Legislature remedied the omission made when St. 1887, c. 214, § 78, was enacted without any clause saving the validity of policies issued in violation of the law, which had existed under Pub. St. c. 119, § 200, and earlier statutes, an omission which made inevitable the decisions of Reliance Mutual Insurance Co. v. Sawyer, 160 Mass. 413, 36 N. E. 59, and the cases following it cited above. Those decisions of course are no longer pertinent to the present statute with its changed phraseology. Manifestly a policy of insurance issued by a company, which has not complied with section 84, in a form contrary to section 90 of the insurance law (St. 1907, c. 576), is in willful violation of the provisions of the insurance act. The result is that under said section 29 the company or association, not authorized to do business here, issuing a policy of insurance in this commonwealth, may be held by the insured to liability even though it is not in compliance with the requisitions of the law. It follows that the rights of the parties must be adjusted on the footing that the Lloyd's policy on Betsy Tell was binding on the insurer. In this connection it is of no consequence that the insurer or its agents may be subject to a penalty.

The defendants contend that they are entitled to be subrogated to the plaintiff's claim against the Lloyd's. This contention is founded on a clause in each policy here...