Parsons, Rich & Co. v. Lane

• Decision Date: 12 January 1906
• Docket Number: Nos. 14,646 - (99).,s. 14,646 - (99).
• Parties: PARSONS, RICH & COMPANY v. FREEMAN P. LANE and Another.<SMALL><SUP>1</SUP></SMALL>
• Court: Minnesota Supreme Court

97 Minn. 98

PARSONS, RICH & COMPANY v. FREEMAN P. LANE and Another.¹

Nos. 14,646 - (99).

Supreme Court of Minnesota.

January 12, 1906.

Appeal by claimant, Parsons, Rich & Co., from an order of the district court for Hennepin county, Simpson, J., confirming the action of defendants as receivers of Millers & Manufacturers Insurance Co., insolvent, in disallowing its claim against the insolvent company upon a policy of fire insurance. Affirmed.

W. A. Kerr and Brown & Kerr, for appellant.

H. V. Mercer, for respondents.

ELLIOTT, J.

This is an appeal from an order of the district court approving and confirming the action of the receivers of the Millers & Manufacturers Insurance Company in disallowing the claim of Parsons, Rich & Co. against the insolvent corporation. The facts upon which the claim against the company arose are practically agreed upon by the parties. The policy was issued June 21, 1903, and by its terms insured the firm of Parsons, Rich & Co. against loss or damage by fire upon the property described therein in the sum of $1,000 from the date thereof until May 20, 1904. On February 20, 1904, the insurance company became insolvent, and Freeman P. Lane and Hugh V. Mercer were appointed receivers. A fire occurred on August 21, 1903, and the property covered by the policy was partially destroyed. A claim was duly made and filed with and disallowed by the receivers. It is conceded that if there is any liability on the part of the company or the receivers it is for the sum of $830.

The policy in question covered a brick and frame building and additions thereto, located upon certain lots in Newton, Iowa, and used by the insured in connection with its manufacturing business. It also covered the stock and machinery described in detail in the policy. The policy contained the following provisions:

This entire policy shall be void if the insured has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property be not truly stated herein; or in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after a loss. This entire policy, unless otherwise provided by agreement indorsed hereon, or added hereto, shall be void * * * if the interest of the insured be other than unconditional and sole ownership or if the subject of insurance be a building on ground not owned by the insured in fee simple. * * * This policy is made and accepted subject to the foregoing stipulations and conditions together with such other provisions, agreements or conditions as may be indorsed hereon, or added hereto, and no officer, agent or other representative of this company shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of agreement indorsed hereon or added hereto, and as to such provisions and conditions no officer, agent or representative shall have such power or be deemed or held to have waived such provisions or conditions unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached.

No written application was made for the insurance, and no written or oral representations of any kind or character were made by the applicant. When the policy was issued, and until the time of the trial, the title to the lots upon which the insured building was situated was not in Parsons, Rich & Co., but was in George W. Parsons. This fact was not known to the insurance company or to any of its agents or representatives until after the loss. The fire occurred August 21, 1903, and it appears from a letter written by the adjuster of the company that the actual condition of the title was known to the company on September 16, 1903. The company and the receivers refused to pay the loss, but never returned, or offered to return, or expressed a willingness to return or account for, the amount of the premiums which had been paid by the claimant. On appeal to the district court the action of the receivers was approved and confirmed, but the court directed that the receivers return to the claimant the amount which the company had received as premium under the contract.

The appellant contends: (1) That, in the absence of any inquiry or application or representation, the condition in the policy as to title and ownership did not apply to the then existing condition of the title, but referred only to subsequent changes in the title. (2) That under the circumstances the insurer should be held to have known of the actual condition of the title, and to have waived the provisions in the policy with reference to sole title and ownership at the time of the issuance of the policy. (3) That the policy was at the most only voidable at the option of the insurer, and if it elected to declare it void the declaration must relate back to the inception of the contract and be accompanied by a return or tender of the premium which had been received; that by failing to promptly tender back the premium upon learning the condition of the title the insurance company waived its right to insist upon the condition. (4) That the condition is ambiguous and not applicable to a policy which covers both stock and buildings.

1. The policy provides that

This entire policy * * * shall be void * * * if the interest of the insured be other than unconditional and sole ownership, or if the subject of insurance be a building on ground not owned by the insured in fee simple.

There are some authorities which hold that this provision refers only to subsequent changes in the title, but they rest upon an unnatural construction of the language of the policy. The words used refer to the present and not to the future, and the conditions relate to facts as they exist at the date of the policy. Rosenstock v. Mississippi, 82 Miss. 674, 678, 35 South. 309; Liverpool v. Cochran, 77 Miss. 348, 26 South. 932, 78 Am. St. Rep. 524; Manhattan v. Weill, 28 Gratt. 389, 26 Am. Rep. 364; Collins v. London, 165 Pa. St. 298, 30 Atl. 924.

The entire policy is not set out in the record, but we presume that it contains the usual provisions with reference to the effect of alienation and change of title. The contract was made in Iowa, and the form commonly in use in that state provides that it "shall be void if any change or diminution other than by the death of the insured take place in the interest, title, or possession of the subject of the insurance." The legal effect of future changes in the title is provided for by this provision, and the provisions relating to title and ownership refer to conditions at the time of the inception of the contract. It will be noted that in Hoose v. Prescott, 84 Mich. 309, 47 N. W. 587, 11 L. R. A. 340, cited by appellant, the condition was that the policy should be void "if any change takes place in the title," etc. The court held that the language of the policy itself referred the condition to matters arising after the insurance went into effect.

2. The form of policy now in common use requires the insured to disclose the extent and nature of his interest in the property, as it is a matter which largely influences underwriters in taking or rejecting risks and estimating and figuring premiums. There is no doubt but what a provision to the effect that the policy shall be void if the insured is not the sole and unconditional owner of the property is reasonable and will be given full force and effect, unless it is waived by some act on the part of the insurer. Phœnix v. Public Parks, 63 Ark. 187, 37 S. W. 959; East Texas v. Brown, 82 Tex. 631, 18 S. W. 713; Dow v. National, 26 R. I. 379, 58 Atl. 999, 67 L. R. A. 479. But it is contended that, where the policy is issued by an insurance company without a written application, the company must be held to have waived the condition of the policy as to title and ownership. This does not appear to be an open question in this jurisdiction, as we have in two instances held contrary to the appellant's contention.

In McFarland v. St. Paul F. & M. Ins. Co., 46 Minn. 519, 49 N. W. 253, the policy was issued without a written application, and without inquiry by the agent of the insurance company or representations by the insured. It contained a provision to the effect that, if the insured should keep or use gasoline upon the premises without the written permission of the insurer, the policy should be void. It was contended that, when an insurance company issues a fire policy without inquiry or without application or representations, it waives knowledge as to any existing use of the property which it could have ascertained by reasonable investigation although by the terms of the policy such a use is expressly prohibited, and there is nothing about the description of the property which necessarily implies or indicates that it may be used in a prohibited way. But the court said: "The defendant insured the plaintiff's dwelling house upon an express condition that the use of gasoline should terminate the contract. * * * The general rule is well stated to be that where there is no application the insured is bound by the conditions found in the policy, which he has accepted and retained without objection. Swan v. Watertown Ins. Co., 96 Pa. St. 37; May, Ins. § 167. Exceptions may be found to this rule, but there are none which can be of service to appellant; for the policy alone, unmodified by representations or in any other manner, was the contract existing between the parties. The conclusive effect of a condition in an insurance policy under like circumstances was in fact determined in the recently decided case of Collins v. St. Paul F. & M. Ins. Co., 44 Minn. 440, 46 N. W. 906."

In the case cited, the...