German-American Ins. Co. v. Humphrey

• Decision Date: 25 April 1896
• Citation: 35 S.W. 428
• Parties: GERMAN-AMERICAN INS. CO. v. HUMPHREY.
• Court: Arkansas Supreme Court

Page 428

35 S.W. 428

GERMAN-AMERICAN INS. CO. v. HUMPHREY.

Supreme Court of Arkansas.

April 25, 1896.

Appeal from circuit court, Jefferson county; A. B. Grace, Special Judge.

Action by J. H. Humphrey against the German-American Insurance Company on a policy of fire insurance. Judgment for plaintiff, and defendant appeals. Reversed.

Rose, Hemingway & Rose, for appellant. N. T. White and Bridges & Wooldridge, for appellee.

WOOD, J.

The plaintiff sued upon a fire insurance policy, for the loss of certain hotel furniture. The defense was based upon alleged noncompliance with the terms of the policy, which provided "that if the subject of the insurance be personal property, and be or become incumbered by a chattel mortgage," the policy should be void. The property covered by the policy was mortgaged after the issuance of the policy. But the plaintiff contends that the policy was only suspended during the continuance of the mortgage, and was revived by the discharge of the mortgage before the loss occurred. There was proof, though meager, to support the finding that the mortgage was canceled before the fire, although the record was not satisfied until after. The satisfaction of the record was not essential to the removal of the incumbrance. If the mortgage was paid off and canceled, it was sufficient. May, Ins. § 292; Hawkes v. Insurance Co., 11 Wis. 188; Smith v. Insurance Co., 60 Vt. 682, 15 Atl. 353; Merrill v. Insurance Co., 73 N. Y. 452. But the proposition that the incumbrance, while it existed, only suspended the policy, contravenes the unambiguous terms of the contract, which the parties themselves have made. The language of the clause quoted supra, in its plain, ordinary and popular sense, indicates a total extinction of the policy if the property be incumbered, and not a suspended animation thereof, subject to be revived upon payment of the mortgage debt. Courts, by interpretation, cannot ingraft upon insurance contracts, any more than upon any other, a meaning totally foreign to that which the plain terms employed by the parties themselves convey. It is undoubtedly true that where the contract, on account of any ambiguity in the language used, is reasonably susceptible of different constructions, that construction should be adopted most favorable to the insured. Imperial Fire Ins. Co. of London v. Coos Co., 151 U. S. 452, 14 Sup. Ct. 379; 1 May, Ins. §§ 175, 176, and authorities cited. The insurer has the right to contract against any possible risk of loss or embarrassment incident to incumbering the property insured. If it be said that, where the mortgage is paid off, there is no longer an incumbrance and increase of risk, still as to whether or not the mortgage had been paid off would be the question, and one that often could not be settled without expensive litigation. The insured mortgagor might enter into collusion with the mortgagee to defraud the insurance company after the loss occurred, by claiming that the mortgage had been paid off and discharged, when in fact it had not. Unfortunately, all men are not honest. Without some such provision in the policy, the unscrupulous would have an inviting opportunity, after a loss, to divide the spoils, at the expense of the insurer. Doubtless some such considerations as these prompted the clause in the policy under consideration. The clause is reasonable and clear, and the parties had the right to thus contract. The opinion in Imperial Fire Ins. Co. of London v. Coos Co., supra, and the numerous authorities there reviewed, leaves no doubt of the correctness of our ruling. Contra, counsel cite May on Fire Insurance, at page 589 (section 294), where he says, "An incumbrance in violation of the policy only suspends it, and, if paid before the loss, the policy revives." And the learned author cites Kimball v. Monarch Ins. Co., 70 Iowa, 513, 30 N. W. 862. An examination of that case will show that after the mortgage had been paid off the insured assigned the policy, and the company indorsed upon it its assent to the assignment. This was tantamount to the issuance of a new policy. It was a waiver of forfeiture. So the case cited does not support the text.

2. It is also contended by the appellee that, if there was a forfeiture, it was waived by an agreement of the plaintiff with John L. Mills, clerk of the local agent, to the effect that...