Columbia Ins. Co. v. Buckley

• Decision Date: 07 May 1877
• Citation: 83 Pa. 293
• Parties: Columbia Insurance Company <I>versus</I> Buckley <I>et al.</I>
• Court: Pennsylvania Supreme Court

Page 293

83 Pa. 293

Columbia Insurance Company versus Buckley et al.

Supreme Court of Pennsylvania.

January 17, 1877.

May 7, 1877.

January 17th 1877.

Before AGNEW, C. J., SHARSWOOD, MERCUR, GORDON, PAXSON and WOODWARD, JJ. WILLIAMS, J., absent

Error to the Court of Common Pleas, No. 3, of Philadelphia county: Of July Term 1876, No. 123.

Sharp & Alleman (with whom was J. H. Frueauff), for plaintiffs in error.—A member of a mutual insurance company cannot discharge himself from liability to pay subsequent assessments by his omission to pay a prior one: Huntley v. Perry, 38 Barb. 569.

The premium-notes of the members constitute the company's capital, on the faith of which those who afterwards insure make their contracts, and on which those who lose by fire depend for indemnity: New England Mut. Fire Ins. Co. v. Belknap, 9 Cush. 145, 146; Commonwealth v. Insurance Co., 112 Mass. 127.

The condition making the policy void for non-payment of assessments is for the exclusive benefit of the company: Hightower v. Thornton, 8 Ga. 487; Hyatt v. Wait, 37 Barb. 29, 33; Huntley v. Beecher, 30 Id. 580.

The policy is to be "void" only at the election of the company, or, in other words, it is voidable for non-payment of the assessment: Pearsol v. Chapin, 8 Wright 9, 13, 14, 16; Atlantic Ins. Co. v. Goodall, 35 N. H. 328, 332, 335, 336; Hyatt v. Wait, 37 Barb. 29, supra; Huntley v. Beecher, 30 Id. 580, supra; Ins. Co. v. Slockbower, 2 Casey 199; Hyde v. Watts, 12 M. & W. 254, 262, 263.

The note of defendants therefore continued in force for the purpose of enabling the company to make assessments: Huntley v. Perry, supra; Atlantic Ins. Co. v. Goodall, 35 N. H. 328, supra; May on Insurance, p. 691.

But conceding the policy and note to have become absolutely void by the non-payment of the first assessment, the second assessment of the company waived the forfeiture, and gave the insured the right to recover for a loss (if any there had been) occurring during the nullity of the policy: Washington Mut. Fire Ins. Co. v. Rosenberger, 3 Weekly Notes, pp. 16, 18; Insurance Co. v. Slockbower, 2 Casey 199, supra; Lycoming County Ins. Co. v. Schollenberger, 8 Wright 259.

Andrew Zane, Jr., and David C. Harrington, for defendants in error.

Mr. Justice MERCUR delivered the opinion of the court, May 7th 1877.

This was a case stated. The plaintiff is a mutual fire insurance company. The insurance was taken for five years from the 9th of September 1871. The claim was for two assessments on the premium-note. One was made on the 10th of May 1873, the other on the 12th of January 1874. Due notice of each assessment had immediately been given, and demand of payment made.

One of the conditions of the policy declared, "whenever an assessment has been made by the directors of this company, on the premium-notes of its members, if the amount assessed on the premium-note given on this policy is not paid within thirty days from the time the same is demanded by said company, then this policy shall be void. But the said company shall have a right to collect the amount due on said assessment." Section second of the act of incorporation provides that, "all persons who shall hereafter insure with the said corporation, and their executors, administrators and assigns, continuing to be insured therein, shall thereby become members thereof during the period they shall remain insured by said corporation and no longer."

The question now presented is whether the non-payment of the first assessment within thirty days after demand made the policy absolutely void as against the plaintiff, so that the second assessment could not be lawfully made on the premium-note.

In a mutual insurance company each person insured becomes a member of the body corporate. He is clothed with the rights and subject to the liabilities of a stockholder. He is both insurer and insured. The premium-notes usually constitute the principal fund or capital of the company. They are also a part of each contract of insurance. Every person who procures an insurance and gives his premium-note acquires a contingent interest in every other such note then held by the company, or which it obtains during the life of his policy. They are liable to assessment for the payment of losses. To secure a more prompt payment of the assessments, most companies have inserted a clause in their policies, declaring the same shall be void unless the assessment be paid within a specified time after notice.

The word void, in a contract, has often been held to mean voidable only, and at the election of the party wronged. The cases recognising and affirming this rule of interpretation as applied to contracts generally, are very fully collected by Mr. Chief Justice LOWRIE, in Pearsoll v. Chapin, 8 Wright 9.

Although a condition be attached to the policy declaring it shall be void on a failure to pay an assessment within a specified time, yet the policy does not thereby become ipso facto void. The company may at its option declare the policy cancelled, and notify the delinquent, or may waive its right of avoidance and continue to assess the premium-note. In the former case the premium-note is not liable to assessment for the payment of future losses. In the latter case the contract relation is not wholly dissolved, but the protection of the policy is suspended until the default of non-payment is removed. On the payment of the assessments the policy revives in its full vigor. The delinquent holder of the policy cannot sustain an action for a loss sustained while he is thus in default. It is said in May on Insurance, § 553, that the acts of policy-holders which may entitle the corporation to defend against claims for losses do not necessarily release such parties from liability to assessments as members. Although the policy may provide that the person becoming a member shall continue a member so long as he is insured and no longer, yet if it stipulates that in case of forfeiture by the act of the...