Farmers' Mut. Ins. Ass'n of Alabama v. Tankersley

• Decision Date: 30 June 1915
• Docket Number: 141
• Citation: 69 So. 410,13 Ala.App. 524
• Court: Alabama Court of Appeals
• Parties: FARMERS' MUT. INS. ASS'N OF ALABAMA v. TANKERSLEY.

69 So. 410

13 Ala.App. 524

FARMERS' MUT. INS. ASS'N OF ALABAMA v. TANKERSLEY.

No. 141

Court of Appeals of Alabama

June 30, 1915

Rehearing Denied July 19, 1915

Appeal from Circuit Court, Coosa County, S.L. Brewer, Judge.

Action by J.W. Tankersley against the Farmers' Mutual Insurance Association of Alabama. From a judgment for plaintiff defendant appeals. Affirmed.

Strother & Nolen, of Goodwater, for appellant.

Geo. A Sorrell, of Alexander City, for appellee.

BROWN J.

This is an action on policy of fire insurance issued by the defendant to the plaintiff insuring the plaintiff's dwelling and articles therein against loss by fire. The complaint contains but one count, which is in Code form. To this count the defendant interposed the general issue and ten special pleas setting up in varying form and phraseology (1) That the policy was canceled by the defendant at the plaintiff's request before the loss occurred; (2) representations made by the plaintiff that the unincumbered title to the property was in the plaintiff, when in fact there was a mortgage on it held by the Alexander City Bank; and (3) failure of the insured to file proof of loss in accordance with the terms of the policy. The plaintiff by special replication to the pleas setting up the cancellation of the policy, and in avoidance of that defense, set up that after the plaintiff had returned the policy direct to the defendant, requesting its cancellation, one Walton, a special agent of the defendant, came to the plaintiff about said policy and "persuaded him to keep his policy, which he agreed to do provided the policy was returned at once" that thereafter the defendant returned the policy accompanied by a letter in these words:

"We take pleasure in returning the above-numbered policy as per request of our special agent Mr. Walton, who advises that you have decided to retain same. We wish to thank you for decision to keep your insurance, and assure you that you have made no mistake; and should an accident occur to your property we will give you just and honorable treatment."

This letter was dated March 20, 1913, and was received by the plaintiff on March 22, 1913, but on March 21st, as shown by the replication, before the plaintiff received this letter returning the policy, he sent the defendant another letter, demanding the cancellation of the policy and requesting the return to him of the unearned premiums, and his unpaid notes not yet due, which was mailed to the defendant at its home office, Memphis, Tenn., postage prepaid, on March 21, 1913; that after receiving the policy with letter above quoted he notified Walton in person that he would retain the policy; that the defendant did not reply to the letter of March 21, 1913; that it retained the premiums and the notes given for premiums, and gave no notice of cancellation of the policy.

The clause of the policy relied on as the defendant's authority to cancel the policy on plaintiff's request is this:

"This contract may be terminated at the request of the member in all cases where the premium or note given for premium has been paid, in which case the association shall retain the expense of writing the risk, and the customary short rates from the date of the contract up to the time it is terminated. The association may terminate this contract at any time by giving notice to that effect, and in such event it shall return the unearned premiums."

The notes given for the premiums not having been paid by the plaintiff, the plaintiff had no right under this clause to demand the cancellation of the policy, and could not cancel it without an express agreement with the insurer. The insurer had a right to ignore, as it apparently did, the demand of the insured to cancel the policy.

The plaintiff not having the right to demand the cancellation of the policy, because of the fact that the notes given for the premium were not paid, the cancellation under these conditions could only be effected by special agreement of the parties, and such special agreement could not arise or be inferred from the failure of the defendant to respond to the demand of the plaintiff. To effect such special agreement required that the proposition of the plaintiff to cancel be accepted and the unearned premiums and notes returned as embodied in the proposition. Lakeside Co. v. Dromgoole, 89 Ala. 505, 7 So. 444; Hart v. Bray, 50 Ala. 446; Chambliss v. Smith, 30 Ala. 366; Sanford v. Howard, 29 Ala. 684, 68 Am.Dec. 101: Hedges v. Sublett, 91 Ala. 588, 8 So. 800; Hammond v. Winchester, 82 Ala. 470, 2 So. 892.

Under this clause in the policy the insurer could not cancel the policy without notice to the insured and a return of the unearned premiums and premium notes. Insurance Co. v. Raden, 87 Ala. 311, 5 So. 876, 13 Am.St.Rep. 36; Savage v. Phoenix Ins. Co., 12 Mont. 458; Farhum v. Phoenix Ins. Co., 83 Cal. 246, 23 P. 869, 17 Am.St.Rep. 233; Taylor v. Ins. Co., 25 Okl. 92, 105 P. 354, 138 Am.St.Rep. 906.

While it was essential to a good plea setting up cancellation that it state facts showing the right of the insured to cancel the policy, or a special contract between the parties founded on sufficient consideration, or the right of the insurer to cancel and a return of the unearned premiums, yet the defendant has no ground to complain, after demurrer overruled, that a correct issue is presented by replication. There was no prejudicial error in overruling the demurrer to the third special replication.

To the defendant's pleas setting up misrepresentations of the plaintiff in the application for the insurance as to the character of his title to the property insured, the plaintiff replied in the sixth replication that, after he received the policy and noticed the clause avoiding the policy if the property was incumbered, he returned the policy to the defendant with the ordinary "loss payable clause" providing that the insurance in case of loss be paid to the Alexander City Bank, as mortgagee, as its interest might appear, and requested the defendant to make the necessary entry in compliance with the facts stated therein; that the defendant unpinned the mortgage clause and returned the same with the policy, without comment. And, in the eleventh replication it is averred that the defendant's agent Walton, who solicited the insurance, filled out the application; that at the time the application was filled out plaintiff stated to the defendant's said agent that the Alexander City Bank had a mortgage on the property for $1,500, and, notwithstanding this information given by the plaintiff to said agent in response to the question as to incumbrances on the property, he inserted the answer, "No"; and that when plaintiff signed said application he did not know but that the answer was written as given by him to said agent, the said Walton stating that he had filled out the application according to the information given.

If, as averred in the sixth replication, actual notice was given the insurer that the property was mortgaged before the loss occurred and the policy delivered to it for insertion of the proper mortgage clause, it had the option to insert this clause as requested by the insured or cancel the policy and return the unearned premiums, but it could not return the policy to the insured and continue it in force and retain the benefits resulting from premiums earned, and yet in case of loss insist upon the misrepresentation as to the incumbrance as a defense. By its conduct in returning the policy without cancellation or change, it is estopped from making this defense, as by this act it impliedly at least elected...