McCoy v. Continental Ins. Co., 67

• Citation: 40 N.W.2d 146,326 Mich. 261
• Decision Date: 07 December 1949
• Docket Number: No. 67,67
• Parties: McCOY et al. v. CONTINENTAL INS. CO. et al.
• Court: Michigan Supreme Court

Page 146

40 N.W.2d 146

326 Mich. 261

McCOY et al. v. CONTINENTAL INS. CO. et al.

No. 67.

Supreme Court of Michigan.

Dec. 7, 1949.

Before the Entire Bench.

Thomas R. McAllister, Bad Axe, attorney for plaintiffs and appellees.

Smith & Smith, Grand Rapids (Laurence D. Smith, Grand Rapids, of counsel), attorneys for The Continental Insurance Company, defendant and appellant.

Cashan P. Head, Detroit, attorney for defendants and appellees, Detroit Fire & Marine Insurance Company and Hartford Fire Insurance Company.

DETHMERS, Justice.

Plaintiffs filed a bill of complaint alleging that they had entered into a contract to purchase a house and lot from defendants, the Pollacks; that the house was at that time insured by defendant The Continental Insurance Company, hereinafter called Continental, under a $5,500 insurance policy previously issued to Pollacks whom the plaintiffs thereupon reimbursed in the the amount of the unearned premium thereon; that the land contract required plaintiffs, as vendees, to keep said house insured against loss by fire in the name of the vendors and provided that upon plaintiffs' failure to do so the vendors might have the house insured, pay the premium and add the amount thereof to the balance due on the contract; that when said policy expired about two years later Continental issued a renewal policy in the name of Pollacks as the insured; that after execution of the land contract plaintiffs procured a $3,500 fire insurance policy from defendant Detroit Fire and Marine Insurance Company and one for $1,500 from defendant Hartford Fire Insurance Company covering said house, both policies containing loss payable clauses in favor of the Pollacks as vendors; that while the three policies last above mentioned were in force the house was destroyed by fire, occasioning a $6,500 loss; that the Detroit and the Hartford companies admitted partial liability to plaintiffs, but contended that the three insurance companies should bear the loss of Pollacks and plaintiffs ratably in proportion to the face amounts of their respective policies, that Continental denied that plaintiffs were entitled to benefit under its policy and that thereupon it paid Pollacks the balance due them from plaintiffs on the land contract, viz., $5,127.04 and took from Pollacks an assignment of the contract, in accord with a subrogation clause contained in the Continental policy, and thereafter, as holder of the vendors' interest, demanded that plaintiffs continue payments on the contract to Continental without any credit thereon on account of the Continental insurance policy; that plaintiffs were, under the terms of the contract, liable for the premiums on all three policies and that each should contribute to payment of plaintiffs' loss. Plaintiffs' bill concluded with a prayer that the court determine the respective rights and liabilities of all the parties to each other, that Continental be required to credit plaintiffs on the contract with its pro rata share of the loss under its policy and that plaintiffs have such other and further relief as may be agreeable to equity.

Plaintiffs' suit was commenced within the 12 month period after liability accrued limited by statute, C.L.1929, § 12572, Stat.Ann. § 24.422, and the provisions of the Continental policy. The trial, however, began some 21 months after liability accrued. Plaintiffs offered proofs to show that the original Continental policy had been endorsed to disclose and protect plaintiffs' vendees' interest. During the trial plaintiffs sought to amend their bill of complaint to conform to proofs to the effect that Pollacks had instructed Continental's local agent to obtain such an endorsement on the renewal policy and that the agent had sent Continental a written application therefor prior to the fire, and that it had been intended by Pollacks and Continental's agent thereby to extend coverage of the policy to plaintiff's interest. The trial court permitted the amendment, which included a prayer that Continental's renewal policy be reformed to make plaintiffs the insured therein with a loss payable clause in favor of the Pollacks. From decree for plaintiffs in effect reforming Continental's renewal policy and requiring the three insurance companies to bear the $6,500 loss pro rata and requiring Continental to credit its pro rate share of the loss upon the land contract, Continental appeals.

In their original bill plaintiffs clearly relied upon Continental's renewal policy as written, with the Pollacks named therein as the assured, with the plaintiffs' interest not mentioned therein, and with a subrogation clause in favor of the insurer. Plaintiffs admit that they did not know of the existence of said policy prior to the fire. The original bill alleges no express agreement between Pollacks and plaintiffs concerning this particular policy. Plaintiffs' brief intimates that under Continental's renewal policy as written, with no mention of plaintiffs' interest, plaintiffs would not have been liable for the premium thereon, and suggests that Pollacks' instructions to Continental's agent to endorse the policy to cover plaintiffs' interest were given for the sole purpose of making plaintiffs liable for the premium.

In Pendleton v. Elliott, 67 Mich. 496, 35 N.W. 97, a policy taken out by a mortgagee was held to inure to the benefit of the mortgagor because of an express finding of facts that the policy contained no subrogation clause, that the mortgagee's application for the policy had stated in his own handwriting that the premiums were to be paid by the mortgagor, that some of the premiums had been paid by the mortgagor, that the insurance company had accepted payment of other premiums from the mortgagee knowing that they were made for the mortgagor, and that there had been an understanding from the beginning between the mortgagor and mortgagee, with knowledge of the insurance company, that the policy was to cover the mortgagor's interest as well as the mortgagee's. Such are not the facts before us. In the Pendleton case this court said, however:

'The law is well settled that if the mortgagee obtain insurance on his own account, and the premium is not paid by or charged to the mortgagor, he cannot claim the benefit of a payment of the insurance. Concord Union Mut. Fire Insurance Co. v. Woodbury, 45 Me. 447; White v. Brown, 2 Cush. [Mass.] 412; Stinchfield v. Milliken, 71 Me. 567.'

Then, in consideration of its findings of facts as above noted, which facts do not exist in the instant case, this court went on to say:

'If, however, the policy contains no stipulation for subrogation in case of payment to the mortgagee, and there is any arrangement between the mortgagor and mortgagee, either verbal or written, by which the mortgagor becomes liable to pay for the insurance, he is entitled to the benefit thereof, and to have it applied in liquidation of the mortgage debt pro tanto, and his right in this respect does not depend upon the fact that he had paid for the insurance, nor whether the mortgagee procured the insurance, intending to look to the mortgagor for reimbursement of the premium; but it depends upon whether he is liable to the mortgagee therefor under any agreement, express or implied. And in such case, if the insurer receives the premium knowing it is paid by the mortgagor, or for him, he will not, in the absence of a stipulation therefor in the policy, be entitled to be substituted to the rights of the mortgagee against the mortgagor. Kernochan v. New York Bowery Fire Insurance Co., 17 N.Y. 428, 441; Cone v. Niagara Fire Insurance Co., 60 N.Y. 619, 624.'

The quoted language is persuasive of the conclusion that had the facts in the Pendleton case been as in the case at bar decision would have been contrary to...