Hamilton Ridge Lumber Corp. v. Boston Ins. Co.

• Decision Date: 08 December 1925
• Docket Number: 11457.
• Citation: 131 S.E. 22,133 S.C. 472
• Parties: HAMILTON RIDGE LUMBER CORPORATION ET AL v. BOSTON INS. CO.
• Court: South Carolina Supreme Court

131 S.E. 22

133 S.C. 472

HAMILTON RIDGE LUMBER CORPORATION ET AL v. BOSTON INS. CO.

No. 11457.

Supreme Court of South Carolina

December 8, 1925

Appeal from Common Pleas Circuit Court of Hampton County; Thos. S Sease, Judge.

Action by the Hamilton Ridge Lumber Corporation and another against the Boston Insurance Company. From a judgment for plaintiffs defendant appeals. Affirmed.

Purdy A. A. J., Gary, C.J., Watts, J., and Featherstone, Circuit Judge, dissenting.

George Bryan, of Richmond, Va., and Douglas McKay, of Columbia, for appellant.

Chas. J. Katzenstein, of New York City, and George Warren, of Hampton, for respondents.

COTHRAN J.

The action is upon a policy of fire insurance upon the lumber plant of the plaintiff lumber corporation for $31,500, dated November 30, 1920, expiring one year thereafter, which plant was destroyed by fire on September 8, 1921. The insurance was made payable in event of loss to the plaintiff American Trust Company, mortgagee, as its interest might appear.

The defense of the insurance company was that prior to the fire the policy had been canceled in conformity with the provisions thereof relating to that subject.

At the close of the testimony the defendant moved for a directed verdict in its favor, which was refused. Upon motion of the plaintiff a verdict was directed by the circuit judge in its favor for the full amount claimed. The defendant has appealed, assigning error in the refusal of its motion and in the granting of that of the plaintiff.

The facts of the case, as to which the parties are in substantial accord, are as follows:

In July, 1921, the lumber corporation had outstanding and of force four policies of insurance with the defendant company, aggregating $90,000, covering certain parts of the plant; the policy in this action being, as stated above, for $31,500 upon the planing mill, lumber, etc.

On July 15, 1921, the lumber corporation found it necessary to make certain repairs upon machinery, and made application for a "cease operations" permit for a period of 60 days. A controversy arose as to the payment of additional premiums on account of such permit; the agent of the insurance company demanding $705 therefor. The lumber corporation, refusing to accede to this demand, received notice that, if that amount was not paid by August 15th, all policies would be canceled. Accordingly, about August 26th, the general agent of the insurance company instructed one Dana, representative of the company at Columbia, to cancel the policies, and on that day Dana, by registered letters, mailed to the lumber corporation and to the American Trust Company, mortgagee, notices that the policies would "absolutely cease at noon, August 31, 1921." The letters were mailed on the afternoon of the 26th, and were received by the addressees, as evidenced by the return registry receipts, on August 27th.

Accompanying the letter to the lumber corporation was the check of Dana on a Columbia Bank for $139.57, "representing the return premiums (on the four policies proposed to be canceled) due you, with deductions for premium charges for 43 days of the 60 days' permit for 'cease operations,' issued on July 19, 1921, on two policies." The amount of the check, $139.57, was arrived at in this way:

Return premium on policy No. 40 ..	$ 64 58
Return premium on policy No. 41 ....	68 74
Return premium on policy No. 42 ....	75 00
Return premium on policy No. 43 ....	65 62
	-------
	$273 94
	-------

Against this sum was charged:

Premium earned on "cease operation" permit, dated July 19, 1921, 43 days on policy No. 40 ...............................................	$ 66 65
Premium earned on "cease operation" permit, dated July 19, 1921, 43 days on policy No. 43 .................................................	67 72
Check to balance .......................................................	139 57
	-------
	$273 94
	-------

The policies were numbered in figures of more than 2,000,000. For convenience, the numbers given above are the last two figures. Instead of 2,332,640, the number is indicated as 40, and so on. No. 43 is the policy sued upon in this case.

There was no contention on the part of Dana that the charge for the "cease operations" permit was applicable to other policies than Nos. 40 and 43. Hence in lumping the return premiums and the deduction there was not enough in the $139.57 check to pay the conceded amounts due for return premiums on Nos. 41 and 42:

Return premium on No. 41 ...	$68 74
Return premium on No. 42 ....	75 00
	-------
	$143 74
Amount of check ............	139 57
	-------
Deficiency .................	$ 4 17

--which had to be made up out of the return premium on Nos. 40 and 43, for which there was no warrant.

The deduction charged to No. 40 was ...................................	$ 66 65
The return premium was ..................................................	64 58
	-------
Leaving No. 40 in debt .................................................	$ 2 07
The deduction charged to No. 43 (the present policy) was ..............	$ 67 72
The return premium was ..................................................	65 62
	-------
Leaving No. 43 in debt .................................................	$ 2 10
	-------
Those two debit items ..................................................	$ 2 07
And ......................................................................	2 10
	-------
Make up the deficiency above stated in premiums due on Nos. 41 and 42 ..	$ 4 17

Now, a further complication arises: The agent, Dana, who transmitted the notices of cancellation, testified, and counsel for the insurance company conceded, that instead of $139.57 he should have remitted $390.43, a difference of $250.86, upon all four policies. Particularly, as to No. 43, that amount of the return premium should have been $98.09 instead of $65.62, a deficiency of $32.47; and that the charge of $67.72 for the "cease operations" permit should not have been entered at all. "The policy also had a clause permitting 'cease operations' without any further charge. The charge I made in the policy in suit for 43 days, $67.72 for 'cease operations,' was in error." Adding together the deficiency in return premium $32.47, and the illegal charge of $67.72 for the permit, we have a total inadequacy of the tender as to No. 43 of $100.19. Instead, therefore, of tendering this amount as the amount the insured was entitled to on policy No. 43, the tender actually made was a debit item, as above shown, of $2.10, to be made up out of the return premium credited to Nos. 41 and 42, this statement of which $68.74 and $75 should have been $103.12 and $112.50, a deficiency of $71.88.

In other words, the statement in effect declares:

We owe you on No. 41 .......................	$68 74
We owe you on No. 42 ........................	75 00
	$143 74
	-----------------------
You owe us on No. 40, $2.07, and on No. 43, $2.10 .....	4 17
	-------
Here is check to balance ...........................	$139 57

The appeal of the insurance company is based upon two exceptions, which practically raise the single point that, under the provisions of the cancellation clause, the payment or tender of the "excess of paid premium above the pro rata premium for the expired time" (which for convenience will be referred to as the "unearned premium") was not made a condition precedent, nor in any way vital to the right of cancellation, but that the extension of the requisite notice was of itself sufficient to terminate the obligation of the insurance company.

No question is made as to the waiver by the insured or of a partial tender being a sufficient compliance with the cancellation clause. As will be seen later, upon a cancellation of the policy by the insurance company, the insured became entitled to the difference in cash between the amount of the premium paid for the entire term and the pro rata portion of it for the time the policy had been running.

The contention of the insurance company is that it was not necessary, in order to effectuate the cancellation, that it should have tendered or paid this unearned portion of the premium at the time the notice of cancellation was given, but that the cancellation was effected simply by the extension of the notice.

In view of the admitted fact that the insurance company did not tender or pay the amount of the unearned premium, to which the insured was entitled upon policy No. 43, at the time the notice was extended, or at any other time, it is manifest that the above position is the only one which the insurance company could have taken, except the inconsistent one that it was its duty to make such tender or payment, but that the insured had waived its right to urge that objection to the form of the attempted cancellation.

Nowhere in its pleadings or exceptions is the question of the waiver of the insured raised by the insurance company. Nowhere does it concede its duty to have made such tender or payment. It plants its defense upon the ground that the cancellation clause did not impose that duty upon it; and upon that contention it must stand or fall.

The question must, of course, be determined by a construction of the cancellation clause in the policy. I have not been able to find a single case in which a cancellation clause identical with that in the case at bar has been construed. Cases abound involving the construction of what...