Fireman's Fund Ins. Co. v. Shapiro

• Decision Date: 04 June 1934
• Citation: 190 N.E. 741,286 Mass. 577
• Parties: FIREMAN'S FUND INS. CO. v. SHAPIRO et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

286 Mass. 577

190 N.E. 741

FIREMAN'S FUND INS. CO.

v.SHAPIRO et al.

Supreme Judicial Court of Massachusetts, Suffolk.

June 4, 1934.

Appeal from Superior Court, Suffolk County; Dillon, Judge.

Suit in equity in the superior court by the Fireman's Fund Insurance Company against Bessie Shapiro and others. From a final decree for defendants entered by order of the judge, plaintiff appeals.

Reversed and rendered.

C. F. Albert and R. J. Walsh, both of Boston, for appellant.

J. W. Tushins, of Boston, for appellees.

FIELD, Justice.

This is a suit in equity brought by an insurance company against the owner of a building in Boston and the first and second mortgagees thereof to reform a fire insurance policy on such building by adding thereto a so called ‘80% Reduced Rate Clause’ providing, in substance, that the plaintiff shall be liable for no greater proportion of any loss than the amount of the policy bears to eighty per cent. of the actual value of insured property at the time of the loss. The parties agreed that a fire occurred on the premises on July 21, 1931, that under the insurance policy the plaintiff was liable for loss, that if the policy should contain the ‘80% Reduced Rate Clause’ the full amount of the plaintiff's liability is $3,184.96, but if it should not contain that clause its liability is $4,505.63, and that payment by the plaintiff of the sum of $3,184.96 to persons entitled thereto under the policy should be without prejudice to the plaintiff's rights to have the policy reformed by adding thereto the clause in question. The judge who heard the case made findings of fact and entered a decree that there was due to the defendant owner of the premises from the plaintiff the sum of $1,320.67-the difference between $4,505.63 and $3,184.96-with interest, and that the bill be dismissed with costs to be paid by the plaintiff; the plaintiff appealed. The evidence is reported.

The judge found properly on the evidence the following facts: The order for the policy was given in behalf of the owner by an insurance broker. He requested the agents of the plaintiff to issue a policy covering the property for the term of five years ‘at the low rate.’ The established rates for the risk insured were eighty-four cents per $100 for the term of five years provided the so called ‘80% Reduced Rate Clause’ was made a part of the policy, and $1.20 per $100 insurance, or the ‘flat rate,’ if said clause was not made a part thereof. After the application was received it was turned over to the ‘policy writer’ in the office of the plaintiff's agent. A policy was issued May 13, 1930. It was written and sent to the first mortgagee without the so called ‘80% Reduced Rate Clause,’ but the premium was computed at the rate of eighty-four cents per $100 insurance and the owner was charged by the plaintiff and paid the premium at that rate. The owner never saw the policy. After the policy was delivered a report that it had been issued was sent to the Fire Insurance Stamping Office for the Metropolitan District, an organization with certain duties including the duty of discovering errors in rates. The failure to include the ‘80% Reduced Rate Clause’ was discovered May 20, 1930, and the plaintiff's agents notified. Thereafter, some time before the fire, an indorsement of such a clause on the policy was ordered by the plaintiff's agents and copies of such a clause were mailed-one to the stamping office and one to the insurance broker. No copy was ever received by the defendant owner, or seen by her. She received no information of the error until after the fire had occurred. She had no knowledge of the insurance rate or the rate at which the policy had been written, except so far as the knowledge of the broker might be imputed to her as matter of law. The plaintiff never intended to issue the policy for the amount of the premium paid without the ‘80% Reduced Rate Clause.’ But no act of the defendant owner induced the plaintiff to issue and deliver the policy in the manner described.

The judge further found that there ‘was no stipulation that the policy should contain a so-called ‘80% reduced Rate Clause’ or that the premium for said policy should be at the rate of eighty-four cents (84c) per one hundred dollars of insurance or at nay other stipulated rate,' that there was no agreement that the terms of the policy should include the so called ‘80% Reduced Rate Clause,’ and that the ‘policy was issued without said ‘80% Reduced Rate Clause’ affixed as a result of a mistake made by the agents of the [plaintiff]. * * * The mistake was that of the insurer and not of the insured. The mistake was not mutual.' The judge ruled that ‘the * * * [plaintiff] is not entitled to the relief prayed for, to wit, that said policy be reformed by adding thereto the said ‘80% reduced Rate Clause.”

The findings that there was no ‘stipulation’ or ‘agreement’ that the policy should contain an ‘80% Reduced Rate Clause’ were proper so far as the mean that there was no such ‘stipulation’ to ‘agreement’ in terms. But on the warranted findings, considered in connection with the evidence, the policy contemplated by the parties would have included such a clause, and the policy as issued, therefore, did not express the mutual understanding of the parties as to the terms of the proposed bargain.

The contract between the parties was made by the application of the owner through her broker for insurance and the issuance by the plaintiff of a policy purporting to be in accordance with the terms of the application. American Mutual Liability Ins. Co. v. Condon, 280 Mass. 517, 524, 183 N. E. 106. In view of the agreement of the parties that the plaintiff was liable under the policy the plaintiff is precluded from contending that, because of variance between the application and the policy, no contract of insurance was made when the policy was issued. See Hayes v. Penn Mutual Life Ins. Co., 222...