Co. Lane v. Parsons, Rich & Co. (In re Millers)

• Decision Date: 12 January 1906
• Parties: In re MILLERS' & MANUFACTURERS' INS. CO. LANE et al. v. PARSONS, RICH & CO.
• Court: Minnesota Supreme Court

97 Minn. 98

106 N.W. 485

In re MILLERS' & MANUFACTURERS' INS. CO.LANE et al.

v.PARSONS, RICH & CO.

Supreme Court of Minnesota.

Jan. 12, 1906.

Appeal from District Court, Hennepin County; David F. Simpson, Judge.

In the matter of the receivership of the Millers' & Manufacturers' Insurance Company; Freeman P. Lane and Hugh V. Mercer, receivers. From an order disallowing the claim of Parsons, Rich & Co., they appeal. Affirmed.

Syllabus by the Court

A fire insurance policy for $3,000 issued January 21, 1903, for a gross premium, was apportioned upon a building, stock, office supplies, etc. Neither written application nor oral representation was made by the applicant, and no inquiries were made by the company. The policy, as delivered and retained, provided: ‘This policy * * * shall be void * * * if the interest of the insured be other than unconditional and sole ownership, or if the subject of the insurance be a building on ground not owned by the insurer in fee simple.’

The building stood on leased ground. A fire occurred August 21, 1903, and the loss was apportioned upon the building, stock, machinery, boiler, and engine house. The company first learned that the building stood on leased ground on September 16, 1903, and never offered or refused to return the premium which had been paid. The company became insolvent, and, in an action against the receivers the trial court denied the plaintiff any relief, but directed the receivers to return the premium.

Held (1) That the provision with reference to ownership and title applied to the existing conditions, and not to future changes in title.

It was incumbent upon the applicant to disclose the nature of his title.

The insured, by accepting the policy in question, is charged with notice of its contents, and is bound by its conditions. McFarland v. St. Paul etc., Ins. Co., 49 N. W. 253, 46 Minn. 519.

The company, by issuing the policy without inquiry, did not waive the conditions as to title and ownership. Collins v. St. Paul, etc., Ins. Co., 46 N. W. 906, 44 Minn. 440.

An insurance company cannot take advantage of a condition in its policy to avoid payment of a loss, when the facts which by its terms invalidate the policy were known to it or its agent when it issued the policy. But this rule has no application when the facts were not known. What is not known cannot be waived.

When a policy of insurance never attaches, and no risk is assumed, the insured may recover back the premiums, unless he has been guilty of fraud, or the contract is illegal and he is in pari delicto. But the insurer is not obliged to return, or offer to return, the premiums which have been paid voluntarily before notice of the fact that the policy is not in force, as a condition precedent to availing itself of its defense to an action on the policy.

The contract is entire, and the increase of moral hazard, caused by the condition of the title to the land upon which the building stood, affected the entire property which was destroyed. Brown & Kerr, for appellant.

H. V. Mercer, for respondents.

ELLIOTT, J.

This is an appeal from an order of the district court approving and confirming the action of the receivers of the Millers' & Manufacturers' Insurance Company in disallowing the claim of Parsons, Rich & Co. against the insolvent corporation. The facts upon which the claim against the company arose are practically agreed upon by the parties. The policy was issued June 21, 1903, and by its terms insured the firm of Parsons, Rich & Co. against loss or damage by fire upon the property described therein in the sum of $1,000 from the date thereof until May 20, 1904. On February 20, 1904, the insurance company became insolvent, and Freeman P. Lane and Hugh V. Mercer were appointed receivers. A fire occurred on August 21, 1903, and the property covered by the policy was partially destroyed. A claim was duly made and filed with and disallowed by the receivers. It is conceded that if there is any liability on the part of the company or the receivers it is for the sum of $830.

The policy in question covered a brick and frame building and additions thereto, located upon certain lots in Newton, Iowa, and used by the insured in connection with its manufacturing business. It also covered the stock and machinery described in detail in the policy. The policy contained the following provisions: ‘This entire policy shall be void if the insured has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property be not truly stated herein; or in case of fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after loss. * * * This entire policy, unless otherwise provided by agreement indorsed thereon, or added thereto, shall be void * * * if the interest of the insured be other than unconditional and sole ownership or if the subject of insurance be a building on ground not owned by the insured in fee simple. * * * This policy is made and accepted subject to the foregoing stipulations and conditions together with such other provisions, agreement or condition as may be inforsed thereon, or added thereto, and no officer or agent or other representative of this company shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of agreement indorsed hereon or added hereto, and as to such provisions and conditions no officer, agent or representative shall have such power or be deemed or held to have waived such provisions or conditions unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached.’

No written application was made for the insurance, and no written or oral representations of any kind or character were made by the applicant. When the policy was issued, and until the time of the trial, the title to the lots upon which the insured building was situated was not in Parsons, Rich & Co., but was in George W. Parsons. This fact was not known to the insurance company or to any of its agents or representatives until after the loss. The fire occurred August 21, 1903, and it appears from a letter written by the adjuster of the company that the actual condition of the title was known to the company on September 16, 1903. The company and the receivers refused to pay the loss, but never returned, or offered to return, or expressed a willingness to return or account for, the amount of the premiums which had been paid by the claimant. On appeal to the district court the action of the receivers was approved and confirmed, but the court directed that the receivers return to the claimant the amount which the company had received as premium under the contract.

The appellant contends: (1) That, in the absence of any inquiry or application or representation, the condition in the policy as to title and ownership did not apply to the then existing condition of the title, but referred only to subsequent changes in the title. (2) That under the circumstances the insurer should be held to have known of the actual condition of the title, and to have waived the provisions in the policy with reference to sole title and ownership at the time of the issuance of the policy. (3) That the policy was at the most only voidable at the option of the insurer, and if it elected to declare it void the declaration must relate back to the inception of the contract and be accompanied by a return or tender of the premium which had been received; that by failing to promptly tender back the premium upon learning the condition of the title the insurance company waived its right to insist upon the condition. (4) That the condition is ambiguous and not applicable to a policy which covers both stock and buildings.

1. The policy provides that ‘this entire policy * * * shall be void * * * if the interest of the insured be other than unconditional and sole ownership, or if the subject of insurance be a building on ground not owned by the insured in fee simple.’ There are some authorities which hold that this provision refers only to subsequent changes in the title, but they rest upon an unnatural construction of the language of the policy. The words used refer to the present and not to the future, and the conditions relate to facts as they exist at the date of the policy. Rosenstock v. Mississippi Home Ins. Co., 82 Miss. 678, 35 South. 309;Liverpool & London & G. Ins. Co. v. Cochran, 77 Miss. 348,26 South. 932,78 Am. St. Rep. 524;Manhattan Fire Ins. Co. v. Weill, 28 Grat. (Va.) 389, 26 Am. Rep. 364;Collins v. London Assur. Corp., 165 Pa. 298, 30 Atl. 924. The entire policy is not set out in the record, but we presume that it contains the usual provisions with reference to the effect of alienation and change of title. The contract was made in Iowa, and the form commonly in use in that state provides that it ‘shall be void if any change or diminution other than by the death of the insured take place in the interest, title, or possession of the subject of the insurance.’ The legal effect of future changes in the title is provided for by this provision, and the provisions relating to title and ownership refer to conditions at the time of the inception of the contract. It will be noted that in Hoose v. Prescott Ins. Co., 84 Mich 309, 47 N. W. 587,11 L. R. A. 340, cited by appellant, the condition was that the policy should be void ‘if any change take place in the title,’ etc. The court held that the language of the policy itself referred the condition to matters arising after the insurance went into effect.

2. The form of policy now in common use requires the insured to disclose the extent and nature of his interest in the property,...