McCullough v. Home Ins. Co.

• Decision Date: 09 March 1907
• Citation: 100 S.W. 104,118 Tenn. 263
• Parties: MCCULLOUGH ET AL. v. HOME INS. CO.
• Court: Tennessee Supreme Court

100 S.W. 104

118 Tenn. 263

MCCULLOUGH ET AL. v. HOME INS. CO.

Supreme Court of Tennessee.

March 9, 1907

Appeal from Chancery Court, Davidson County; John Allison Chancellor.

Action by C. R. McCullough and others against the Home Insurance Company. Judgment for complainants, and defendant appeals. Reversed.

Marshall & Armstrong and Vertrees & Vertrees, for appellant.

Smithson & Armstrong, for appellees.

SHIELDS J.

Complainants bring this bill to recover $404, loss and damage caused by fire to property covered by a policy issued to them by the defendant. Issuance of the policy, loss by fire to the extent claimed, and that proper notice was given and proof furnished, are conceded.

The controversy is whether, under a provision in the policy that the company should not be held for any loss accruing while any part of the premium was due and unpaid, the policy was suspended by the failure of the complainants to pay a certain installment of a premium note made by them, and past due when the property was destroyed. The determination of this question depends upon the proper construction of the contract made by the parties, in relation to which they differ widely.

Complainants applied to the defendant February 24, 1902, for two policies covering the property damaged by fire, in the sum of $1,050 each, one to indemnify them against loss by fire and the other by tornado, for a period of five years, the premium upon the first to be $60, and upon the latter $10.50 one-fifth of each to be paid in cash, and the remainder in four annual installments, due upon the 1st day of January of each succeeding year. The application was accepted, the policies issued as of March 19, 1902, the cash payments made and a note executed for the deferred payments upon both policies, in the sum of $56.10. When the loss occurred, January 24, 1905, the installment of $14.10 due January 1, 1905, was unpaid. This is the default which the defendant claims suspended the operation of the policy.

Complainants' contention is that the contract was for insurance by the year, and each installment of the note covered the premium for a particular year, payment of which was all that was required to keep the policy in force for that year, and that the installment for the year in which the loss occurred had been paid, and failure to promptly pay the premium for the succeeding year did not suspend the policy for the year in which this loss occurred.

The defendant insists that the contract was for an entire term of five years, for a gross premium of $60, credit for four-fifths of which was given, payable as provided in the note made, and that a failure to pay any installment immediately suspended the policy.

The application for the insurance, the policy issued, and the note executed all appear in the record, and the terms of the contract can best be seen by reference to them.

The application, after providing that a note shall be made for the deferred payments of the premium, contains this statement:

"If any installment of premium for the policy that may be issued upon this application shall not be paid at maturity, or if any single payment of promissory note (acknowledged as cash or otherwise), given for the whole or any portion of the premium for the policy that may be issued upon this application, shall not be paid promptly when due, then said policy shall be suspended, inoperative, and of no force or effect until such installment or promissory note is paid. The company shall not be bound by any act done or statement made by or to any agent or other person which is not contained in this my application."

The provisions of the policy upon which the defense rests are these:

"In consideration of $12 paid, and the payment of installments when due on an installment note of $48 due as follows: $12 on the 1st days each of January, 1903, 1904, 1905, 1906, and the warranties made in the assured's application for indemnity in said company, does insure," etc.

"* * * But it is expressly agreed that this company shall not be liable for any loss or damage that may occur to the property herein mentioned while any installment of the installment note given for premium upon this policy remains past due and unpaid, or while any single payment or promissory note (acknowledged as cash or otherwise), given for the whole or any portion of the premium, remains past due and unpaid. Payment of notes and installments thereof must be made to the Home Insurance Company, at its Western Farm Department office, in Chicago, Illinois, or to a person or persons specially authorized to collect the same for said company. * * *

* * * And it is hereby understood and agreed by and between the company and the assured, that this policy is made in reference to the foregoing terms and conditions, which are hereby declared to be a part of this contract, and are to be used and resorted to in order to determine the rights and obligations of the parties hereto in all cases not herein specifically provided in writing."

The note of complainants is in these words:

"For value received in Policy No. F. J. 145, 880, B. 110, 427 dated the _____ day of _____, 19--, issued by the Home Insurance Company of New York, we promise to pay to said company, or order (by mail if requested, at the office of its Western Farm Department in Chicago, Illinois, $56.40, in installments as follows: $14.10 upon the 1st day of January, 1903, $14.10 upon the 1st day of January, 1904, $14.10 upon the 1st day of January, 1905, $14.10 upon the 1st day of January, 1906, without interest. And it is hereby agreed that in case any of the installments herein named shall not be paid at maturity, or if any single payment, promissory note acknowledged as cash or otherwise, given for the whole or any portion of the premium for said policy, shall not be paid...