Fort Hill Federal Sav. and Loan Ass'n v. South Carolina Farm Bureau Ins. Co., 0142
| Decision Date | 01 February 1984 |
| Docket Number | No. 0142,0142 |
| Citation | 281 S.C. 532,316 S.E.2d 684 |
| Court | South Carolina Court of Appeals |
| Parties | FORT HILL FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff-Respondent, v. SOUTH CAROLINA FARM BUREAU INSURANCE COMPANY and Hartford Accident and Indemnity Company of whom Hartford Accident and Indemnity Company is also a Respondent, and South Carolina Farm Bureau Insurance Company is Appellant. Appeal of SOUTH CAROLINA FARM BUREAU INSURANCE COMPANY. . Heard |
Love, Thornton, Arnold & Thomason, Greenville, for appellant.
Olson, Lindsay & King, Clemson, for plaintiff-respondent.
Rainey, Britton, Gibbes & Clarkson, Greenville, for defendant-respondent.
Respondent Fort Hill Federal Savings and Loan Association seeks a declaratory judgment that appellant South Carolina Farm Bureau Insurance Company is liable to it on a fire insurance policy issued to a Mr. and Mrs. Johnston. The policy contained a standard mortgagee clause naming Fort Hill as loss-payee. The Johnstons gave a bad check for the premium and by separate action Farm Bureau was absolved of liability to the Johnstons. The appealed order held Farm Bureau liable to Fort Hill. We affirm.
Pertinent facts are: (1) upon receipt of the Johnston check, Farm Bureau, on October 5, 1979, issued the fire insurance policy, effective August 25, 1979; (2) the check bounced, was returned by Farm Bureau to the bank and bounced again and was returned to Farm Bureau after a fire destroyed the insured property on October 3, 1979; (3) the premium was never paid on the policy and Farm Bureau neither demanded payment of the policy premium from Fort Hill nor cancelled the policy as to Fort Hill prior to the fire; (4) in early November 1979, Farm Bureau mailed a notice of cancellation to the Johnstons cancelling the insurance as to the Johnstons as of August 25, 1979, the inception date of the policy; at the same time Farm Bureau mailed Fort Hill a cancellation notice cancelling the insurance as to Fort Hill effective November 14, 1979; (5) Hartford Accident and Indemnity Co., is a party to this action because it insured Fort Hill by an errors and omissions policy; (6) Pertinent parts of the policy are:
Loss, if any, under this policy, shall be payable to the aforesaid as mortgagee (or trustee) as interest may appear ... and this insurance, as to the interest of the mortgagee (or trustee) ... shall not be invalidated by any act or neglect of the mortgagor or owner ... provided, that in case the mortgagor or owner shall neglect to pay any premium due under this policy the mortgagee (or trustee) shall, on demand, pay the same. (Emphasis ours.)
* * *
This Company reserves the right to cancel this policy at any time as provided by its terms, but in such case this policy shall continue in force for the benefit only of the mortgagee (or trustee) for 10 days after notice to the mortgagee (or trustee) of such cancellation and shall then cease, and this Company shall have the right, on like notice, to cancel this agreement.
On appeal Farm Bureau contends that the trial court erred (1) in determining that an independent contract existed between Farm Bureau and Fort Hill where there was a total absence of consideration and (2) in determining that the mortgagee clause was viable, since, in the absence of consideration, there was no estoppel upon which Farm Bureau could be held liable.
Farm Bureau premises its case by the assertion that in this state a mortgagee named in the standard mortgagee clause of a fire insurance policy is simply a third party beneficiary of the contract between the insured and the insurer. From this premise, Farm Bureau asserts the contract was void ab initio as to Fort Hill because of the Johnstons' failure to pay the premium. We disagree. In the case of Prudential Insurance Co. v. Franklin Fire Insurance Co. of Philadelphia, 180 S.C. 250, 185 S.E. 537, the nonpayment of the premium by the insured was held not to vitiate the policy as to the mortgagee unless the mortgagee had failed to pay the premium after demand. Farm Bureau did not demand payment by Fort Hill. We hold the policy was not vitiated as to Fort Hill by the failure of the Johnstons to pay the premium.
Moreover, we find easily understood language in Farm Bureau's policy whereby Farm Bureau acknowledges that Fort Hill occupies a status with respect to the insurance independent of the insureds and their failure to pay the policy premiums. We quote If this Company shall claim that no liability existed as to the mortgagor or owner, it shall, to the extent of payment of loss to the mortgagee, be subrogated to all the mortgagee's rights of recovery, but without impairing mortgagee's right to sue; or it may pay off the mortgage debt and require an assignment thereof and of the mortgage. (Emphasis ours.)
This language is bolstered by the inclusion of separate cancellation clauses for the Johnstons and Fort Hill. They are:
Cancellation This policy shall be cancelled at
of policy. any time at the request of the insured
in which case this Company shall, upon
demand and surrender of this policy, refund the excess of paid
premium above the customary short rates for the expired time
This policy may be cancelled at any time by this Company by
giving to the insured a five days' written notice of cancellation
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with or without tender of the excess of paid premium above the
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pro rata premium for the expired time, which excess, if not
tendered, shall be refunded on demand. Notice of cancellation
shall state that said excess premium (if not tendered) will be
refunded on demand. (Emphasis ours.)
Mortgagee If loss hereunder is made payable
interest and in whole or in part, to a designated
obligations. mortgagee not named herein as the
insured, such interest in this policy may be cancelled by giving to
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such mortgagee a ten days' written notice of cancellation
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(Emphasis ours.)
Farm Bureau's actions were consistent with the true meaning of the two cancellation clauses. The company mailed a cancellation notice with two effective cancellation dates: the first cancelled the Johnston's coverage as of August 25, 1979, the other cancelled Fort Hill's coverage on November 14, 1979--long after the fire. Noted on the notice of cancellation under the word "reason" are the words "flat cancellation insufficient funds". Obviously Farm Bureau elected to forego demand of Fort Hill for payment of the premium and to cancel the policy as to Fort Hill and it had this right. The right, however, was subject to the mortgagee cancellation clause and, therefore, the cancellation date had to fall after the fire. All this reveals the separate status of a mortgagee under the contract. Even though the policy might be void ab initio as to the Johnstons because of nonpayment of the premium, it remained viable as to...
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