MFA Mut. Ins. Co. v. Southwest Baptist College, Inc.
| Decision Date | 13 July 1964 |
| Docket Number | No. 50343,No. 1,50343,1 |
| Citation | 381 S.W.2d 797 |
| Parties | MFA MUTUAL INSURANCE COMPANY, Respondent, v. SOUTHWEST BAPTIST COLLEGE, INC., Appellant |
| Court | Missouri Supreme Court |
Elvin S. Douglas, Bolivar, Allen, Woolsey & Fisher, Harold J. Fisher, Springfield, for appellant.
Farrington & Curtis, E. C. Curtis, Thomas Strong, Springfield, for respondent.
HOUSER, Commissioner.
Action by MFA Mutual Insurance Company under The Declaratory Judgments Act, Sec. 527.010 et seq., V.A.M.S., for an adjudication and determination of the rights of the parties under an insurance policy issued by MFA to Southwest Baptist College with respect to a claim for a fire loss, and to adjudge that the policy was canceled and did not afford protection against the loss. Submitted on motion for summary judgment the circuit court adjudged that the insurance policy had been canceled by the action of the college, was void and afforded the college no protection, and that the insurance company was not obligated to pay the amount specified in the policy, $42,500, or any portion thereof. The college has appealed from the summary judgment.
We have jurisdiction. An amount in excess of $15,000 is in controversy, since the amount of the liability from which MFA seeks to be relieved is $42,500.
A previous administration at the college purchased a total of $79,500 insurance on Pike Auditorium, placing $42,500 of the insurance with MFA. The MFA policy contained an 80% co-insurance clause; a provision for cancellation by insured at any time at the request of insured; a provision for cancellation by MFA by giving insured 5 days' written notice of cancellation, but no provision prohibiting insured from procuring and carrying other or additional insurance or otherwise agreeing upon the effect upon the rights of the parties of carrying such other or additional insurance. A new administration took charge of the affairs of the college. The new business manager found a number of insurance policies in the vault. After looking at them he decided that the insurance program needed attention. Neither he nor the new president (or any other member of the college's staff, as far as the evidence shows) had any knowledge of the existence of the $42,500 MFA policy. The business manager sought the advice and counsel of a local insurance agent, who caused two state agents to make a survey of the buildings for the purpose of making recommendations as to the insurance needs. Their report indicated that the auditorium had a sound value of approximately $60,000 and an estimated insurable value of $57,691. They recommended insurance on the auditorium in the amount of $46,200. The board of trustees of the college, acting on a report of its sub-committees, adopted a general plan of 80% co-insurance on its buildings and contents and authorized the president and business manager to take the necessary steps to effect a complete new insurance program. It was the intention of the college officials to cancel all existing policies and to write a whole new program of insurance, purchasing the maximum insurance allowable on every building; to 'take all we could get on all of the buildings.' The president and business manager were given broad general authority to cancel all existing policies and purchase new insurance, according to their judgment. The president left the details to the business manager, who undertook to effect the new insurance. The intention was to carry a total of $55,000 on Pike Auditorium and no more, the officials apparently considering that this was the maximum obtainable. There was never any change of intention in respect of the amount, up to the time of the fire. Insurance was taken out on the auditorium for a total of $55,000, in three policies written by three different companies. MFA was not one of the companies sharing this risk. After all of the insurance on all of the buildings within the program had been written, the business manager then caused letters to be written canceling all of the policies of insurance known to the business manager. These letters, all identical in form, stated that the college had adopted a new insurance program and that consequently 'the above policy' (referred to by policy number, amount of insurance and expiration date) was enclosed for cancellation as of the date of the letter, and requesting refund of the amount of unearned premiums due on the unexpired term of this policy. For instance, MFA had issued a $2,000 policy on the contents of one of the buildings and, as a part of the cancellation program, MFA received a letter from the business manager stating that the college had adopted a new fire insurance program, and consequently the $2,000 policy was being enclosed for cancellation with a request for the return of the unearned premium. MFA acknowledged this letter and canceled that small policy. The correspondence between the college and MFA did not mention the $42,500 policy MFA had issued on the auditorium. If the college officials had known of its existence it 'probably would have been cancelled'; the fact that the business manager did not know about that policy was the 'only reason' that a cancellation letter was not written on that policy. It was the understanding of the business manager that all existing policies on the college buildings, including Pike Auditorium, had been canceled and as far as he knew, prior to his conversation with the agent after the fire, there was no MFA policy on the auditorium. The auditorium was completely destroyed by fire, during the term of the $42,500 policy. A day or two after the fire the local MFA insurance agent called the business manager and suggested that they get together and start the necessary procedure to adjust the loss. The business manager asked what he was talking about and for the first time learned from the agent that MFA had issued the $42,500 policy. In reporting to the board of trustees after the fire the president and business manager reported that the college had $55,000 worth of insurance on the auditorium. The business manager stated in writing: 'Fire insurance on Pike was increased last fall to a coverage of $55,000.' The college made claims against the three companies which had written the $55,000 policies. These claims were paid in full. After the fire MFA wrote the college that its local agent had brought to MFA's attention that the college had 'requested cancellation' of the $42,500 policy but that MFA had not remitted the unearned premium, and enclosed a check for $420 therefor. The college returned the check and made claim under the policy. MFA then brought this suit. After the taking and filing of depositions of various witnesses MFA filed a motion for summary judgment, alleging that it clearly appears from the pleadings and depositions that the college replaced the $42,500 policy with other insurance companies with the intent that the other insurance be substituted for the MFA policy; that the substituted insurance should constitute the only insurance on the building, and by reason thereof the MFA policy was canceled and annulled.
The college's sole point on appeal is that the court erred in finding that the $42,500 policy was canceled through the action of the college in securing new policies of insurance on property with the intention that the $42,500 policy be canceled because (1) the policy could be canceled only by mutual consent of the parties or by compliance with the policy provisions (request by the insured or 5 days' written notice by the insurer), and could not be canceled 'through a mere intent to cancel' on the part of the college, and (2) the policy had no provision voiding it if there was other insurance and there was no mutual agreement of the parties that the securing of other insurance with the intent that such other insurance be substituted therefor would effect a cancellation of the policy.
MFA's contention is that there was a cancellation under the doctrine of cancellation by substitution and replacement, which has been adopted in a number of jurisdictions. 1 MFA says that this question has never been directly considered by the appellate courts of this state, and urges that we now adopt and apply this doctrine in this case, and hold that the action of the college in procuring new insurance with the intention that it replace existing insurance and be substituted therefor, without any intention to acquire additional insurance, constituted in law an effective, voluntary cancellation of the existing insurance.
The policy provision for cancellation follows:
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