Boston Ins. Co. v. Read
| Decision Date | 05 March 1948 |
| Docket Number | No. 3543.,3543. |
| Parties | BOSTON INS. CO. et al. v. READ et al. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Walter D. Hanson, of Oklahoma City, Okl. (F. A. Rittenhouse, John F. Webster, and Olive R. Rittenhouse all of Oklahoma City, Okl., on the brief), for appellants.
Gerald B. Klein, of Tulsa, Okl. (Wesley E. Disney and Joe B. Houston, both of Tulsa, Okl., L. Keith Smith, of Jay, Okl., and John C. Martin, Jr., of Tulsa, Okl., on the brief), for appellees.
Before PHILLIPS, BRATTON, and HUXMAN, Circuit Judges.
George R. Read owned certain lots and a building thereon in Rainbow Park Addition to Spavinaw, Oklahoma. The premises were sometimes known as Fisherman's Inn and sometimes as Rainbow Club. Delaware County Bank of Jay, Oklahoma, held a mortgage covering the premises. Boston Insurance Company, Fidelity-Phoenix Insurance Company, Michigan Fire and Marine Insurance Company, and Great American Insurance Company issued their separate policies insuring the building against loss or damage by fire. Each policy contained a standard mortgage clause, and each provided among other things that the company would not be liable for loss occurring while the hazard was increased by any means within the control or knowledge of the insured. The building was burned, and the companies brought this action against Read and the bank for a declaratory judgment. The cause of action pleaded in the complaint was that after the issuance of the policies the hazard was increased in that the use of the premises was changed from that of a restaurant or cafe and dance hall to a saloon where intoxicating liquor was sold in violation of law; that the insured burned the building or caused it to be burned; that the policies became null and void; that the defendants were threatening to bring separate suits upon the policies; and that unless the defendants were restrained from doing so, the companies would be required to defend a multitude of suits with the attending danger of conflict and confusion of outcome. Great American Insurance Company further pleaded that its original policy was cancelled and a new policy for a smaller amount issued and delivered prior to the time of the fire. The relief sought was an adjudication that the companies were not liable under their respective policies, and that the defendants be restrained from instituting or prosecuting suit or suits upon them. The defendants joined issue and by cross-complaint sought to recover upon the policies. Judgment was entered for the defendants on their cross-complaints, and plaintiffs appealed.
It is urged that the court erred in finding that there was no increase in hazard brought about by the sale of intoxicating liquor in the premises which relieved the companies of liability under their respective policies. One of the policies referred to the premises as a cold drink stand, one as a cold drink stand and lunch counter, and two as a cafe. Some time after the issuance of the policies, the insured began to sell or permit the sale of intoxicating liquor within the building; and the sale of intoxicating liquor is a violation of law in Oklahoma. Where the direct purpose of a policy of insurance is to promote, encourage, or effect a violation of law, the policy is against public policy and therefore the insured cannot recover upon it. And an illegal use of insured premises which is specifically prohibited by the express terms of a policy will preclude recovery upon the policy. But where the policy does not promote or encourage a violation of law, a mere illegal use of the premises not expressly prohibited by the terms of the policy and not causing or contributing to the cause of the fire does not necessarily bar recovery. These policies were not necessary or essential to the business of selling intoxicating liquor within the building, in violation of law. They did not advance the interest of Read in the illegal sale of intoxicants within the building. Neither did they promote the unlawful business otherwise. Read could have conducted the unlawful business or permitted it to be conducted as well without the insurance as with it. The only effect of the policies was that in case his property was...
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