McKinney v. Western Assur. Co.

• Decision Date: 11 May 1895
• Parties: McKINNEY et al. v. WESTERN ASSUR. CO. OF TORONTO, CANADA.
• Court: Kentucky Court of Appeals

30 S.W. 1004

97 Ky. 474

McKINNEY et al. v. WESTERN ASSUR. CO. OF TORONTO, CANADA.

Court of Appeals of Kentucky.

May 11, 1895

Appeal from circuit court, Montgomery county.

"To be officially reported."

Action by J. F. McKinney and John S. Parrish against Western Assurance Company of Toronto, Canada. From an overruling of demurrer to amended petition, plaintiffs appeal. Affirmed.

J. J Cornelison, C. C. Turner, and A. A. Hazelrigg, for appellants.

Tyler &amp Apperson, for appellee.

GRACE J.

On the 29th day of March, 1890, John S. Parrish effected an insurance on his dwelling house, situated on a tract of land of 100 acres, in Montgomery county, in the Western Assurance Company of Toronto, Canada, for $1,000, for the period of three years from said date, and paid $12.50, the agreed premium on same, taking a policy in the usual form. This policy, however, contained many stipulations and conditions limiting the liability of the defendant company, and, among others, this one, that is now relied upon by defendant "This entire policy, unless otherwise provided by agreement indorsed hereon, or added hereto, shall be void *** if, with the knowledge of the insured, foreclosure proceedings be commenced, or notice given of sale of any property covered by this policy, by virtue of any mortgage or trust deed, or if any change (other than by death of the insured) take place in the interest, title, or possession of the subject of insurance (except change of occupants without increase of risk), whether by legal process or judgment or by voluntary act of the insured or otherwise." On the 9th of January, 1891, Parrish borrowed of his co-plaintiff, McKinney, the sum of $3,000, and at the same time made to him a mortgage, in due form of law, on this 100-acre tract of land. This mortgage was made by and with the knowledge and consent of the insurance company, who at that time indorsed on the policy as follows: "Loss, if any, payable to J. F. McKinney, as his interest may appear. A. Hoffman, Agent. January 9, 1891." This mortgage debt not being paid, McKinney, in March, 1892, instituted suit to foreclose same on the land, and, at the May term of the Montgomery circuit court, judgment was rendered. The land was sold on the 16th day of May, 1892. and bought by McKinney for the amount of his debt, interest, and cost. This sale was duly reported to the Montgomery circuit court, at its September term, 1892, and the sale confirmed, and on the 5th day of October, 1892, a deed was made by the commissioner of court, duly approved, to said J. F. McKinney, the purchaser. On the 7th day of October, 1892, the house was destroyed by fire, without any fault on the part of McKinney. Application was duly made for the payment of the amount of the policy, $1,000, which being refused, and the right of McKinney or Parrish to this fund being denied, this suit was brought by them. A demurrer was filed and sustained to the petition. An amendment was filed, stating that after the maturity of McKinney's debt, and finding that Parrish would be unable to meet same promptly and while suit was pending, McKinney and Parrish made an agreement that the suit should proceed, that judgment should be rendered, and that McKinney should buy this property, and that if Parrish or his wife or any member of his family chose to do so, and was able, they should take up or secure this debt to McKinney, and take or keep the property, this agreement being oral only; and plaintiffs say that after the sale, and after the fire, Mrs. Parrish (who they say was always the beneficial and equitable owner) did make this arrangement in writing with McKinney, and that the policy of insurance was then for her use and benefit. A demurrer was likewise sustained to the petition as amended, same dismissed, and hence this appeal.

Every policy of insurance is issued upon the express understanding and agreement that the person insured is either the owner, legal or equitable, of the property insured, or, at least, that he has in some way a valuable and beneficial interest in same. This is of the essence or subject-matter of the contract, many provisions being usually inserted to guaranty to the company the truth of this title, claim, or insurable interest; and providing also that, in case same is parted with, or in any way ceases to exist, before any loss, then the policy should cease and determine. Such stipulations and provisions as these, being matters not of mere form, but of substance, and entering so clearly into the contract between the parties, the courts uniformly uphold them. And the stipulation before quoted in this policy, providing that if the assured, Parrish, should, in any way or manner, voluntarily part with the title to this property, or if same should be taken from him by judicial process, or by judgment of a court, before loss by fire, then the liability of the company should cease, is valid and binding on the parties to this contract.

It is furthermore held by the courts quite generally, and we think correctly, that the property must remain the property of the insured; that whether there be a mortgage on it at the time the policy is issued, and a clause then inserted in the policy that in case of loss the insurance is to be paid to the mortgage, or whether a mortgage be placed upon the property after the insurance is effected (with the consent of the insurance company), and an indorsement is then made by the company on the policy (as in this case), that "loss if any, is payable to the...