Commercial Fire Ins. Co. v. Capital City Ins. Co.

• Decision Date: 01 December 1886
• Citation: 81 Ala. 320,8 So. 222
• Parties: COMMERCIAL FIRE INS. CO. v. CAPITAL CITY INS. CO. [1]
• Court: Alabama Supreme Court

8 So. 222

81 Ala. 320

COMMERCIAL FIRE INS. CO. v. CAPITAL CITY INS. CO. ^[1]

Supreme Court of Alabama

December, 1886

Appeal from circuit court, Montgomery county; JOHN P. HUBBARD Judge.

Troy, Tompkins & London, for appellant.

Sayre &amp Graves, for appellee.

STONE C.J.

It cannot be questioned that to maintain an action such as the present one, there must have been, when the policy was taken out, and when the loss occurred, such ownership or right as amounts to an insurable interest, and the plaintiff must show himself entitled to assert that interest. Lynch v Dalzell, 4 Brown, Parl. Cas. 431; Sadlers' Co. v. Badcock, 2 Atk. 554; Wilson v. Hill, 3 Metc. (Mass.) 66; 1 Phil. Ins. 59; May, Ins. §§ 115, 116. Form 16, p. 704, Code 1876, is framed for a suit on a policy of insurance. It contains no averment of property, or insurable interest in the plaintiff. In section 2979 of the Code it is provided that "any pleading which conforms substantially to the schedule of forms attached to this part is sufficient." Form 16 is one of said forms. It must be inferred that the legislature treated the averment that the policy was issued by the insurance company, as the equivalent, prima facie, of an averment that the assured owned an insurable interest in the property. Each count in the complaint is sufficient, and the demurrer to it was rightly overruled. 2 Brick. Dig. 344, 345.

On May 26, 1884, T. J. Holt, a builder and contractor, entered into a written agreement with Mrs. Barrett, by which he bound himself to furnish the materials and build a house for her, according to certain plans and specifications, the house to be completed by October 1, 1884, with stipulated forfeiture in case the house was not finished by the agreed time. Mrs. Barrett promised and agreed to pay Holt, for so building the house, "two thousand and sixty-five dollars, which payments are to be made in installments as the work progresses, but she shall reserve at least three hundred dollars of said money until after the full completion of said house." On August 11, 1884, the building being in progress, Holt, the contractor, took out a policy in the Commercial Fire Insurance Company, insuring the building against damage by fire in the sum of $2,000, and for two months, extending to October 10, 1884. The policy, by its terms, insures Holt, his representatives and assigns, "against loss or damage by fire, to the amount of two thousand dollars, builders' risk, on the frame store-house and dwelling, now in process of erection," describing its locality. The house was nearing completion, and Mrs. Barrett had paid Holt near $1,900 on his contract, when, on September 15, 1884, it was totally destroyed by fire. On August 30, 1884, after Mrs. Barrett had so made the advance payments to Holt, she took out a policy from the Capital City Insurance Company, insuring said House to her, for the term of 12 months, "against loss or damage by fire to the amount of two thousand dollars, permission granted to complete the construction of said building and fences. Loss, if any, payable to the Home Building & Loan Association, as its interest may appear." The house, when destroyed, was still in the possession of the contractor, not having been delivered up to Mrs. Barrett. On the foregoing facts, it is contended for appellant that Holt had no insurable interest in the property, and that this action cannot be maintained. After the fire, the policy issued by the Commercial Fire Insurance Company was assigned and transferred by Holt to Mrs. Barrett, and by her to the Capital City Insurance Company. The latter company brings this suit on said policy. We are not informed on what consideration these assignments were made. Possibly, Holt's transfer was made in exoneration of an asserted liability resting on him to rebuild the house, the first not having been completed and delivered to Mrs. Barrett. Possibly, the Capital City Insurance Company paid the loss to Mrs. Barrett, or to her appointee, and she, in consideration thereof, transferred to it the policy sued on in this action. If these surmises be true, this is but a contest between the two insurance companies as to which shall bear the ultimate loss.

"It may be said generally," says May in his work on Insurance, (section 76,) speaking of what will constitute an insurable interest, "that, while the earlier cases show a disposition to restrict it to a clear, substantial, vested, pecuniary interest, and to deny its application to a mere expectancy without any vested right, the tendency of modern decisions is to relax the stringency of the earlier cases, and to admit to the protection of the contract whatever act, event, or property bears such a relation to the person seeking insurance that it can be said with a reasonable degree of probability to have a bearing upon his prospective pecuniary condition. *** Yet such a connection must be established between the subject-matter insured, and the party in whose behalf the insurance has been effected, as may be sufficient for the purpose of deducing the existence of a loss to him from the occurrence of an injury to it." And, in section 80, the same author says: "Whoever may fairly be said to have a reasonable expectation of deriving pecuniary advantage from the preservation of the subject-matter of insurance, whether that advantage inures to him personally or as the representative of the rights or interests of another, has an insurable interest. *** That the person may suffer loss is a sufficient foundation for his claim to an insurable interest." Wherever property, either by force of law, or by the contract of the parties, is so charged, pledged, or hypothecated that it stands as a security for the payment of a debt, or the performance of a legal duty, each of the parties, the owner of the lien, and the person against whose property it exists, has an insurable interest in the property. The one, that the security shall remain sufficient; the other, that it may be kept unimpaired, and the property restored to his use or enjoyment in whole or in part, after the incumbrance is relieved. And each may insure his separate interest at one and the same time, without incurring the imputation of double insurance, provided the applications and policies are the individual and separate acts of each. May, Ins. §§ 80-87, inclusive; 1 Arn. Ins. *229 et seq.; Fland. Ins. 342 et seq.; Insurance Co. v. Lawrence, 2 Pet. 25; Insurance Co. v. Stinson, 103 U.S. 25; 4 Field, Briefs, 282 et seq.; Insurance Co. v. Robert, 9 Wend. 404; Tyler v. Insurance Co., 12 Wend. 507; Cone v. Insurance Co., 60 N.Y. 619; Sturm v. Insurance Co., 63 N.Y. 77; Harvey v. Cherry, 76 N.Y. 436; Cumberland Bone Co. v. Andes Ins. Co., 64 Me. 466; Hough v. Insurance Co., 36 Md. 400; Insurance Co. v. Coates, 14 Md. 285; Insurance Co. v. Hall, 15 B. Mon. 411; Insurance Co. v. Clancey, 9 Ill.App. 137; Carter v. Insurance Co., 12 Iowa, 287. In the last case it was said: "Any interest is insurable, if the peril against which insurance is made would bring upon the insured, by its immediate and direct effect, a pecuniary loss." There are cases in the books where persons having only a lien on property to secure the payment of money due them, have, with their own means and in their own names, taken insurance on such property, the lienor having no participation or agency in procuring the insurance, and not being in any manner provided for in the policy. Property insurance being only a contract of indemnity personal to the assured, it is held that destruction of the property and payment of the loss does not inure to the benefit of the debtor who has pledged the security. It leaves the debt still subsisting, unaffected by the payment of the loss. The reasons assigned are that the debtor paid nothing for the insurance, did not solicit it, and the policy makes no provision for his indemnification. In such cases the debt remains in full force and collectible the same as if nothing had been paid on the policy. White v. Brown, 2 Cush. 412; King v. Insurance Co., 7 Cush. 1; Insurance Co. v. Boyden, 9 Allen, 123; Cushing v. Thompson, 34 Me. 496; Insurance Co. v. Woodbury, 45 Me. 447; Hadley v. Insurance Co., 55 N.H. 110; Steele v. Insurance Co., 17 Pa. St. 290; Ely v. Ely, 80 Ill. 532: Althorf v. Wolfe, 22 N.Y. 355; Hammer v. Johnson, 44 Ill. 192. See, also, Insurance Co. v. Mazange, 22 Ala. 168; Alliance Mar. Assur. Co. v. Louisiana St. Ins. Co., 8 La. 1; King v. Preston, 11 La. Ann. 95; Clinton v. Insurance Co., 45 N.Y. 454; Henson v. Blackwell, 4 Hare, 434. It cannot be denied, however, that in cases of this character the creditor realizes double satisfaction,-a result somewhat opposed to sound commercial morality.

Another principle, however, is gaining foothold, which may be considered the natural outgrowth of the seeming hardship of the double satisfaction mentioned above. It recognizes the fact that the two interests, such as that of mortgagor or lienor on the one side, and mortgagee or lienee on the other and all kindred relations, are each separately insurable. It treats the insurance obtained on property thus held, when there are no stipulations to the contrary, as simply an insurance of the interest of the party who obtains the policy, and in no broader sense an insurance of the property. Hence, when one holding property in mortgage, pledge, or hypothecation, as security merely, obtains insurance upon it, he simply strengthens his security, and obtains indemnity against its impairment by the casualty insured against. The insurer in such case is held to be a guarantor, or indemnifier of the insured, that the debt or duty shall not become lost or forfeited by the destruction of the security or pledge. If the debt be paid, or duty performed, then even a destruction...