Industrial Ins. Co. of N. J. v. First Nat. Bank of Miami

• Citation: 57 So.2d 23
• Parties: INDUSTRIAL INS. CO. OF NEW JERSEY v. FIRST NAT. BANK OF MIAMI et al.
• Decision Date: 22 February 1952
• Court: United States State Supreme Court of Florida

Page 23

57 So.2d 23

INDUSTRIAL INS. CO. OF NEW JERSEY v. FIRST NAT. BANK OF MIAMI et al.

Supreme Court of Florida, Division A.

Feb. 22, 1952.

Blackwell, Walker & Gray, Miami, and Whitfield, Musgrave, Selvy, Fillmore & Kelly, Des Moines, Iowa, for appellant.

Loftin, Anderson, Scott, McCarthy & Preston, Miami, for appellee.

THOMAS, Justice.

Insurance policies indemnifying property owners for loss from fire are usually written for one year for a stated amount, but there is an appreciable reduction in the total premium if the policies are taken for three or five-year periods. For illustration the cost of a policy for a three-year period is five-sixths as much as one taken for three separate years; the cost of a policy for a five-year period is the same as the total of four yearly premiums for the same policy if taken for four separate years. Many owners cannot afford the larger outlay in cash, so to take advantage of the discount, they borrow against the policies, profiting by the difference between the saving in premiums and the interest on the loans made to them. From the financing of policy holders in this situation by the First National Bank of Miami, and another bank later merged with it, this suit arose.

Lotspeich-Bush, Inc., evidently personified by J. B. Bush, was the authorized the legalized local agent for the appellant, Industrial Insurance Company, successor of National Fire and Marine Insurance Company. Thrall General Agency, Inc. was the state agent for appellant with reference to business transacted by Lotspeich-Bush, Inc.

From here on, in an attempt to simplify the transactions, we shall refer to the principal transactors as 'the bank,' 'Industrial,' 'Thrall,' all 'Bush.'

Hundreds of policies were written by Bush as agent of Industrial, and finance notes to cover the premium purportedly signed by the policy holders, were delivered by Bush to the bank.

In a typical policy loan transaction, the assured would pay one-fourth the premium in cash and sign a 'premium contract' reciting that in consideration of the bank's paying to Industrial the remaining three-fourths, the assured would pay the bank that amount in equal periodic installments. The assured assigned to the bank, as collateral, such part of any refunds, or proceeds in the event of loss, as would reimburse the bank. Also, in default of the payment of any installment, the bank was authorized to cancel the policy and apply the unearned premium to the debt.

Attached to the contract was the 'Agent's Statement' certifying that the policy was genuine, that the down payment had been received, and that an endorsement had been placed on the policy showing the bank's financing and its right under relevant circumstances to cancel the insurance contract. This endorsement contained the statement that 'Said agreement [of financing with the bank] assigns to the Bank all return premiums payable on this policy, and an amount out of the proceeds payable in the event of a loss, if the unearned premium be thereby reduced, as shall be required to pay all sums owing to the Bank under said agreement.' Also, in the statement, executed by Bush in behalf of his corporation, was the promise immediately to notify the bank of any cnange in the policy that would affect the security of the bank.

Immediately after execution of the note with attached statement, the bank would address a communication in Thrall advising of the financing of the policy and expressing a purpose to pay to Bush, or to Thrall, the amount of the premium as Thrall might direct 'on the enclosed duplicate' of the letter of notification. Then would appear the endorsement by Thrall, as agent for Industrial, directing the payment of the premiums 'to our above-named agent (the undersigned).' Following this, the bank would address a letter to Bush enclosing a check for three-fourths of the premium. It will be noted that the words in parentheses are not stricken, but this is unimportant because Thrall did not receive the proceeds and apparently did not object to the manner of remitting direct to Bush. These checks of the bank issued to Bush's corporation for the amounts of the loans were deposited in the personal account of Bush, who remitted monthly to Thrall against accounts stated by Thrall.

Many policies, thus financed by the bank, were canceled without the bank's knowledge, and although the unearned premiums should have been returned to the bank, they, were, instead, credited by Industrial to Thrall, and by Thrall to Bush. The bank was, therefore, circumvented to an extent not precisely known to it; so this suit was brought for an accounting, a discovery, and a decree for recovery of such sums as it had been deprived of by the triple play Industrial to Thrall to Bush. In few words, the premiums were not paid to the bank, but were credited to Bush's account.

The upshot of an inquiry, conducted by a master in chancery, which appears to have been quite thorough, was a decree in favor of the bank for about $50,000 against Industrial,...