Metropolitan Mortg. & Securities Co. v. Reliable Ins. Co.

• Decision Date: 02 April 1964
• Docket Number: No. 36868
• Citation: Metropolitan Mortg. & Securities Co. v. Reliable Ins. Co., 390 P.2d 694, 64 Wn.2d 98 (Wash. 1964)
• Parties: METROPOLITAN MORTGAGE AND SECURITIES COMPANY, Inc., Respondent, v. RELIABLE INSURANCE COMPANY, Appellant.
• Court: Washington Supreme Court

Page 98

64 Wn.2d 98

390 P.2d 694

METROPOLITAN MORTGAGE AND SECURITIES COMPANY, Inc., Respondent, v.RELIABLE INSURANCE COMPANY, Appellant.

No. 36868.

Supreme Court of Washington, Department 1.

April 2, 1964.

Rehearing Denied June 2, 1964.

Clarke, Clarke, Albertson & Bovingdon, Seattle, for appellant.

Walter O. Knowles, Spokane, for respondent.

ROSELLINI, Judge.

The facts of this case are not in dispute.William and Mary Dargan, as contract purchasers of a parcel of land in Tacoma, bought from the appellant a fire insurance policy, which covered the dwelling situated on the property.The policy had a 'contract of sale' clause, which named Kirby Hickey as vendor and provided that, in the event of loss, as between vendor and vendee, proceeds of the policy should be paid first to the vendor, to an amount not exceeding the balance unpaid on the contract.

The policy also contained the following provision: 'Assignment of this policy shall not be valid except with the written consent of this Company.'

There was no provision restricting the right to alienate the vendor's interest without the approval of the company.

The expiration date of the policy was July 7, 1961.On January 30, 1961, the respondent purchased the vendor's interest in the property, and on February 10, 1961, it sent a written notice to the appellant, through the latter's agent who had sold the policy, that it was the owner of properties formerly owned by Hickey and should be substituted as insured for Hickey.This notice directed the agent to prepare an endorsement insuring the respondent on any properties in the Tacoma area owned by Hickey.Shortly thereafter the agent returned the notice to the respondent with a statement that it had no record of Hickey.

On June 20, 1961, the dwelling was completely destroyed by fire.The respondent notified the appellant immediately and demanded payment for its loss according to the terms of the policy.The appellant denied liability.

Upon these factsthe trial court held that the respondent succeeded to the rights of the vendor under the policy; that it gave the appellant sufficient notice of its acquisition of the vendor's interest and was entitled to recover.Judgment was entered accordingly.

It is contended by the appellant that the respondent had no interest in the policy, inasmuch as there was no privity of contract between it and the appellant.It relies upon the often-stated principle that a policy of fire insurance does not insure the property covered thereby, but is a personal contract indemnifying the insured against loss resulting from the destruction of, or damage to, his interest in that property.Authorities cited are 44 C.J.S.Insurance§§ 223-224, pp. 931-934; 1 Couch on Insurance (2d ed.) 33-35, § 1:7;Russell v Williams, 58 Cal.2d 487, 24 Cal.Rptr. 859, 374 P.2d 827;Fireman's Fund Ins. Co. v. Devonshire, 170 Wash. 207, 16 P.2d 202.

It is not necessary to quarrel with this concept in order to sustain the judgment.Conceding that the insurance policy was a personal contract between the Dargans and the appellant, the question remains, what does the contract provide?Clearly, it indemnifies the vendor of the property.He is given a right to the proceeds which takes priority over that of the purchasers of the policy.And there is in the policy no restriction on the right of the named vendor to alienate his interest.Insurance contracts are construed strictly against the insurer and liberally in favor of the insured.Jack v. Standard Marine Ins. Co., Ltd., 33 Wash.2d 265, 205 P.2d 351, 8 A.L.R.2d 1426.This court will not extend the language of the contract beyond its plain meaning.

The appellant did restrict the right of the purchasers to assign the policy, and it is conceivable that the insurer would be concerned about the identity of the purchasers, who had the right to possession and whose character might affect the risk.But the appellant evidently was not sufficiently concerned about the character of the vendor to require that it be given an opportunity to approve or disapprove a transfer of that interest.There is not even a requirement that the appellant be notified when the vendor's interest is transferred.Under general law, of course the appellant would not be liable to the respondent if it paid the vendor named in the policy before notice of the transfer; but we do not have that question here, since the appellant received notice through its agent.Yet it contends that under the policy it has no liability either to the respondent or the...