Cottingham v. Maryland Motor Car Ins. Co.

• Decision Date: 17 February 1915
• Docket Number: 435.
• Parties: L.R.A. 1915D,344, 168 N.C. 259, Am.Ann.Cas. 1917B,1237 v. MARYLAND MOTOR CAR INS. CO. COTTINGHAM
• Court: North Carolina Supreme Court

84 S.E. 274

L.R.A. 1915D,344, 168 N.C. 259, Am.Ann.Cas. 1917B,1237

COTTINGHAM v. MARYLAND MOTOR CAR INS. CO.

No. 435.

Supreme Court of North Carolina

February 17, 1915

Appeal from Superior Court, Mecklenburg County; Shaw, Judge.

Action by L. T. Cottingham against the Maryland Motor Car Insurance Company. From a judgment for defendant on demurrer, plaintiff appeals. Reversed.

Under policy of insurance prohibiting incumbrances or changes in title or interest, chattel mortgage held merely to suspend insurance, which, therefore, revived upon payment and cancellation of the mortgage.

Stewart & McRae, of Charlotte, for appellant.

Cameron Morrison and J. H. McLain, both of Charlotte, for appellee.

CLARK C.J.

On June 11, 1913, the defendant insured the automobile of the plaintiff against loss by fire for the term of one year, and the plaintiff paid the premium of $25 therefor. On September 19, 1913, the plaintiff executed a deed of trust on a number of horses, wagons, and other property, including the automobile. Three days thereafter the deed of trust was paid off and canceled of record on September 22d, only three days after its execution. On September 26th, four days thereafter the automobile was destroyed by fire. The defendant filed an answer, but when the case was called for trial demurred to the complaint on the ground that the policy contained this provision:

"This policy, unless otherwise provided by agreement, indorsed hereon in writing by an authorized agent of the company shall be void if the interest of the assured be other than unconditional and sole ownership; or if the property hereby insured be or become incumbered by a chattel mortgage; or if any change, other than by death of the assured, take place in the interest or title of the property hereby insured, whether by legal process or judgment or by voluntary act of the assured or otherwise."

The court sustained the demurrer, and the plaintiff appealed. The loss occurred as above stated, after the deed of trust was paid off and canceled.

2 Cooley, Ins. 1780, citing many cases, says:

"The general rule that a breach of the condition against incumbrance is ground for forfeiture must be modified where the incumbrance is merely temporary, and is not in existence at the time of the loss. It may be regarded as settled by the weight of authority that the effect of the incumbrance is merely to suspend the risk, and on cancellation or discharge of the incumbrance the policy is revived."

Elliott, Ins. § 205, collating the authorities also says:

"The weight of authority seems to support the view that a violation of a condition that works a forfeiture of the policy merely suspends the insurance during the violation, and if the violation is discontinued during the life of the policy, and does not exist at the time of the loss, the policy revives, and the company is liable, although it had never consented to the violation of the policy, and the violation was such that the company could, had it known of it at the time, have declared a forfeiture therefor."

To same purport Phillips on Insurance, § 975, and 1 May, Insurance (3d Ed.) § 101; 2 A. & E. 288, and note.

A case almost exactly in point is Strause v. Insurance Co., 128 N.C. 64, 38 S.E. 256, where the defendant set up a defense that the mill was operated at night, contrary to the provisions of the policy, and this court said:

"The fire occurred more than three months thereafter, and was in no wise traceable, so far as the evidence shows, to the working at night, which had long ceased."

Revisal 4806, provides:

"All contracts of insurance on property, lives or interests in this state shall be deemed to be made therein; and all contracts of insurance, the application for which is taken within this state, shall be deemed to have been made within this state and shall be subject to the laws thereof."

Revisal 4808, is as follows:

"All statements or descriptions in any application for a policy of insurance, or in the policy itself, shall be deemed and held representations and not warranties; nor shall any representation, unless material or fraudulent, prevent a recovery on the policy." The purpose of Revisal 4808, was to prevent insurance companies from escaping the payment of honest losses upon technicalities and strict construction of contracts.

In construing these sections in McCarty v. Insurance Co., 126 N.C. 820, 36 S.E. 284, where at the time of issuance of policy there was a deed in trust to secure a debt of which the insurance company did not have notice, and where the policy provided that it should be void if the interests of the insured be not truly stated, this court quoted with approval from Albert v. Insurance Co., 122 N.C. 92, 30 S.E. 327, 65 Am. St. Rep. 693, as follows:

"This law applies to all policies of insurance, both of fire and life; and unless such misrepresentations materially contribute to the loss, or fraudulently evade the payment of the increased premium, they do not vitiate the policy. Ordinarily, these are questions of fact for the jury, and not for the court."

In the present case the deed of trust given by the plaintiff embraced horses, wagons, and other property besides the automobile. This mortgage was paid off before the loss, and was not material to the risk or fraudulent. The title of the plaintiff at the time of the loss was the same as at the time of the delivery of the policy. The deed in trust in no wise contributed to the loss or in any way affected the risk. Weddington v. Insurance Co., 141 N.C. 244, 54 S.E. 271, 8 Ann. Cas. 497, Watson v. Insurance Co., 159 N.C. 638, 75 S.E. 1105, and Roper v. Insurance Co., 161 N.C. 151, 76 S.E. 869, differ from this case vitally in that in them the breach of the condition existed at the time of the loss. The law laid down in those cases had reference to the facts therein, and has no bearing on this case.

In Born v. Insurance Co., 110 Iowa, 379, 81 N.W. 676, 80 Am. St. Rep. 300, it is held that giving a mortgage under the circumstances of the present case is a temporary breach of the policy, and when the breach was removed the policy was revived. In that case the mortgage given on the property was paid off, and the fire occurred afterwards, and the court said:

"The theory upon which an existing mortgage is held to be a violation of a clause in the policy against an increase of risk is that it does increase the risk. * * * At the time of the loss the personal property in question was in the possession and ownership of the plaintiff, free from the incumbrances of the mortgages, and covered by his valid policy of insurance. Therefore he is entitled to recover for the loss thereof"--citing Wilkins v. Insurance Co., 30 Ohio St. 317, 27 Am. Rep. 455.

On the rehearing of Born v. Insurance Co., 120 Iowa, 299, 94 N.W. 849, the court reaffirmed its former ruling. The Born Case is reported 80 Am. St. Rep. 300, with full annotations, and the editor reaches this conclusion:

"The general rule to be deduced from the weight of authority is that the violation of a condition in a policy of insurance which works a forfeiture thereof merely suspends the insurance during the violation, and that if such violation is discontinued during the life of the policy, and is nonexistent at the time of loss, the policy revives, the insurance is restored, and the insurer is liable, although he has never consented to a violation of the conditions in the policy, and such violation has been such that the insurer could, had he known of it at the time, have declared a forfeiture therefor."

Insurance Co. v. Toney, 1 Ga.App. 492, 57 S.E. 1013, holds that a breach of condition suspends the policy during the existence of the breach, and the removal of the breach revives the policy. In that case the policy contains this provision:

"This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void, * * * if a building herein described, whether intended for occupancy by owner or tenant, be or become vacant or unoccupied and so remain for ten days."

The house did become vacant, but was reoccupied before the loss occurred.

It is thus declared by Cooley on Insurance, Elliott on Insurance, and the notes to the 80 Am. St. Rep. at page 305, that the "weight of authority" is as above stated, and an examination of the authorities sustain that view, though Vance on Insurance, 433, says that the weight of authority is otherwise.

Among many cases, besides the above sustaining the proposition that the removal of the breach revives the policy, when it is removed previous to the loss and has in no wise contributed to it, are Lounsbury v. Insurance Co., 8 Conn. 459, 21 Am. Dec. 686; Insurance Co. v. Lawrence, 4 Metc. (Ky.) 9, 81 Am. Dec. 521; Joyce v. Insurance Co., 45 Me. 168, 71 Am. Dec. 536; Insurance Co. v. Kimberly, 34 Md. 234, 6 Am. Rep. 325; Garrison v. Insurance Co., 56 N. J. Law, 235, 28 A. 8; Insurance Co. v. Shoe Factory, 80 Pa. 407; Hinckley v. Insurance Co., 140 Mass. 47, 1 N.E. 737, 54 Am. Rep. 445; McKibban v. Insurance Co., 114 Iowa, 41, 86 N.W. 38; Warehouse Co. v. Insurance Co., 163 Ill. 256.

The contrary view in Vance on Insurance, supra, is largely based upon Insurance Co. v. Coos County, 151 U.S. 452, 14 S.Ct. 379, 38 L.Ed. 231; but that case has no application here. There the policy contained a provision that it should become void if without notice and permission "mechanics are employed in building, altering, or repairing the premises." It was found that such building and repairing increased the risk, and though the work was completed before the fire occurred, and in no wise contributed to the fire yet the alterations were very material, and were in existence at the time of the fire. In that...