Hartford Fire Ins. Co. v. Keating
| Decision Date | 23 June 1897 |
| Parties | HARTFORD FIRE INS. CO. OF HARTFORD, CONN., v. KEATING et al. |
| Court | Maryland Court of Appeals |
Appeal from Baltimore city court.
Action by Thomas J. Keating and another against the Hartford Fire Insurance Company of Hartford, Conn. Judgment for plaintiffs. Defendant appeals. Affirmed.
G Morris Bond and E. P. Keech, Jr., for appellant. Rich & Bryan, for appellees.
Argued before McSHERRY, C.J., and BRYAN, FOWLER, ROBERTS, PAGE, and BOYD, JJ.
This is an action on a policy of insurance issued by the appellant insuring the property of one Frank W. Draper against loss by fire. The policy was issued to Draper, and on the 2d day of October, 1894, at the request of Draper, by proper indorsement, the loss was made payable to the appellees "as their interest may appear." The property insured was a two-story frame building on a lot situate in the town of Centerville. The whole property, prior to the accrual of Draper's title, had belonged to a Mrs. Sparks who held a policy of insurance on the house, issued by the appellant. This policy was canceled on the 10th of January, 1893,--the same day on which the policy sued on in this case was issued. In September, 1892, the appellees, as attorneys in a mortgage from Mrs. Sparks to Eliza Wilkinson, sold the lot and improvements to Draper. The sale was reported to the court, and ratified nisi on the 27th of September. Draper complied with the terms of sale by making a cash payment of $732.55, and executing, with sureties, and delivering to the appellees, two notes, for $597.76 and $565.73, respectively, and thereupon entered into the possession of the property. One of the appellees then demanded of Draper that he should insure the house and transfer the policy to them, and it was in pursuance of this that the policy was issued, and the loss afterwards made payable to the appellees as attorneys. It was issued by Frank Keating, who was then the agent of the company, intrusted by it with the possession of blank policies, authorized to sign and issue them, receive the premiums and account for them, and moreover was the company's only agent in Centerville. It is admitted that when the policy was issued he was fully cognizant of the character of Draper's title, the nature of the appellees' interest in the matter, and the understanding between Draper and the appellees under and by which the insurance was applied for. Keating, besides being the agent of the company, was also a clerk in the law office of the appellees, and as such had drawn all the papers connected with the sale of the property, except the order of final ratification, and therefore knew all the facts and circumstances of the case. In October, 1893, he ceased to be the agent of the company, and Thomas J. Keating, Jr., was appointed in his stead. A small fire having injured the property in January, 1894, the company paid in February the loss on account thereof to Draper. Shortly after this the appellees ascertained that in consequence of a neglect of Frank Keating the policy had not been transferred to them, as it was agreed should be done. Accordingly they took steps to have this effected, and on the 2d October, 1894, the indorsement was made on the policy by Thomas J. Keating, Jr., the agent, and by him on the same day forwarded to the company, who received it on the 5th of October. At that time this agent knew the exact state of Draper's title, and of the interest of the appellees, but did not notify the company further than appeared in the policy and his daily report, neither of which make mention of any incumbrance. Subsequently, Draper having made default in the payment of his notes, the appellees, on the 3d of December, obtained a final order for a resale of the property at his risk; but before a sale was had, on the 5th of January, the building was totally destroyed by fire. Upon this state of facts the appellant contends (1) that Draper's interest was "other than unconditional and sole ownership," and therefore the policy, by its terms, is void; and (2) that the appellees had no insurable interest in the property.
The policy contains the condition that, "if the interest of the insured be other than unconditional and sole ownership," it shall be void, "unless otherwise provided by agreement indorsed" thereon or added thereto. This is a part of the contract of insurance. It is binding on both parties, and must be construed by the same rule as other contracts. "The court must give to the language used its just sense, and search for the precise meaning, and one requisite to give due and fair effect to the contract, without adopting either the rule of a rigid or of an indulgent construction." Insurance Co. v. Kelly, 32 Md. 446. In the case just cited this court has stated the general purpose for the insertion of conditions like the one now under consideration in insurance policies. It is there said, "They were doubtless originally directed against wagering policies, and were intended to protect underwriters from paying losses to those who in fact had not sustained them, who really had nothing at hazard, and whose interest, therefore, was that the event should happen." The nature and extent of the interest of the insured are matters largely influential with underwriters in taking or rejecting risks and estimating premiums, and for that reason any condition respecting them in the contract is material, and must be construed so as to effectuate the purposes of the parties. But, while this must be done, the law assumes that the parties understood the words they have used; and therefore, unless there are potential reasons to the contrary, they are bound by the legitimate and usual meaning of the phrases they employ. Now, it must be observed that it is not title, but interest, that is spoken of in the clause. Title and interest are entirely different things. It was undoubtedly competent for the parties to have contracted as to the title, as was done in Wine-land v. Insurance Co., 53 Md. 283; but in this case they have chosen to limit the provisions of the clause to the condition of the interest, either legal or equitable. The question therefore presented to us now is, was the interest (legal or equitable) of Draper "unconditional and sole"? As to the meaning of these words when used in the present connection, there seems to be a concurrence of authority. To be "unconditional and sole," the interest must be completely vested in the assured, not contingent or conditional, nor for years or life only, nor in common, but of such a nature that the insured must sustain the entire loss if the property is destroyed; and this is so whether the title is legal or equitable. Insurance Co. v. Dunham, 117 Pa. St. 475, 12 A. 668; Insurance Co. v. Dougherty, 102 Pa. St. 572; Rumsey v. Insurance Co., 17 Blatchf. 529, 1 F. 396; Dupreau v. Insurance Co., 76 Mich. 615, 43 N.W. 585; Insurance Co. v. Tyler, 16 Wend. 396; Oshkosh Gaslight Co. v. Germania Fire Ins. Co., 71 Wis. 455, 37 N.W. 819; Insurance Co. v. Kelly, 32 Md. 421; Insurance Co. v. Beck, 43 Md. 358; Insurance Co. v. Weaver, 70 Md. 540, 17 A. 401, and 18 A. 1034.
We have been referred to cases where it is held that when the insured is in possession under a contract of purchase, and the legal title has not passed by a conveyance, the ownership is not unconditional until the purchase money has been wholly paid. Insurance Co. v. Curry, 13 Bush, 312. But it may be doubted whether such cases are in line with the current of authority. But we are not concerned, however, with that question now; for at the time the policy was issued Draper was not in the position of a purchaser, but that of a bidder only for the property. His offer of purchase had not then been ratified by the court, and until it was the contract was not complete, and his interest in the property was dependent upon the subsequent action of the court. Prior to the final ratification his interest was only an inchoate right. Lannay v. Wilson, 30 Md. 551. The effect of final ratification, it is true, was retroactive, so that he became invested with the title from the day of the sale; but at the time the policy was issued his interest was entirely conditional, depending as it did upon the final order of the court.
The appellees, however, insist that the appellant is estopped from setting up this defense, because their agents knew all the facts both at the time the policy was issued and when the indorsement was made to the appellees. The policy was issued through Frank Keating, and, from all the evidence before us we think he must be regarded, while so acting, as the agent of the company. The proof shows that he was supplied with policies in blank, was authorized to issue them, signed them, and delivered them to the parties who desired insurance, received the premiums, and accounted for them to the company. Such authority constituted him a general agent of the company, within the territory assigned him, in the matter of soliciting and accepting risks and agreeing upon the terms and contract of insurance. Insurance Co. v. Ruckman, 127 Ill. 372, 20 N.E. 77; Insurance Co. v. Wilkinson, 13 Wall. 222; 2 Wood, Ins. § 409; Cone v. Insurance Co., 60 N.Y. 619; Hotchkiss v. Insurance Co., 5 Hun, 9. If such an agent has knowledge of the facts at the time he issues the policy, the company will be estopped from relying upon them as a cause of forfeiture. This principle is well sustained by authority. It rests upon considerations of common honesty that an insurer with full knowledge of the facts, or chargeable with such knowledge, shall not enter into a contract of insurance, receive the premiums thereon, and then be permitted to set up those facts to evade the liabilities the contract imposes on him. Nor does the...
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