Posner v. U.S. Fidelity & Guaranty Co.

• Decision Date: 14 February 1962
• Citation: 226 N.Y.S.2d 1011,33 Misc.2d 653
• Parties: Edith POSNER and Ed-Saul Operating Corporation, Plaintiffs, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Olive Co-operative Fire Insurance Association, Otsego Mutual Fire Insurance Company and New York Mutual Underwriters, Defendants.
• Court: New York Supreme Court

Page 1011

226 N.Y.S.2d 1011

33 Misc.2d 653

Edith POSNER and Ed-Saul Operating Corporation, Plaintiffs, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Olive Co-operative Fire Insurance Association, Otsego Mutual Fire Insurance Company and New York Mutual Underwriters, Defendants.

Supreme Court, Special Term, Sullivan County.

Feb. 14, 1962.

Joseph Greenhill and Ira J. Greenhill, New York City (Joseph Greenhill, New York City, of counsel), for defendants, in support of application.

Sidney Appelbaum, Liberty (Bertram Eisenberg, Liberty, of counsel), for plaintiffs, in opposition.

LAWRENCE H. COOKE, Justice.

Defendants move for summary judgment in favor of defendant New York Mutual Underwriters. The second cause of action in the complaint is asserted against defendant New York Mutual Underwriters (hereinafter referred to as the defendant) and is based on a certain fire insurance policy allegedly issued by it.

Without attempting to recite all items of proof or contentions, it appears, among other things, that on the face of the policy and beneath the number thereof is a trade-mark or design and around the same are the words in block type 'New York Mutual Underwriters', that to the right in smaller type but clearly visible are listed four insurance companies, viz.: The Co-operative Fire Insurance Company of Catskill, New York, Security Mutual Fire Insurance Company, Sterling Fire Insurance Company and Tompkins Cooperative Fire Insurance Company; that the policy was signed by said four companies and also by Edw. F. Curren as Managing Agent, said Edward F. Curren being the manager of the defendant; that the policy provides: 'Assignment of this policy shall not be valid except with the written consent of this company', and that beneath the signatures is an assignment of interest by insured form which is blank but which includes the words 'subject to the consent of the NEW YORK MUTUAL UNDERWRITERS', without reference to the said four companies; that beneath said form is another blank form entitled 'CONSENT BY COMPANY TO ASSIGNMENT OF INTEREST' which starts with the words 'The NEW YORK MUTUAL UNDERWRITERS hereby consents'; that the words 'this Company' appear frequently in the policy although above said signatures the words 'these several Companies have executed and attested these presents' appear; that an installment premium endorsement is attached to the policy which has a blank line at the end of which was printed 'Insurance Company' and 'New York Mutual Underwriters' was inserted and typed in on said line and said endorsement sets forth the words 'the Company' twice; that said policy also has a blank cancellation form to the right of which the words 'Give Information Applying to Replacing Policy Covering Same Property', beneath which there is printed the word 'Company' to the right of which has been inserted and typed on a line 'New York Mutual Underwriters'; that following the fire in question plaintiff Posner received a letter from the General Adjustment Bureau, Inc. at Monticello, New York stating among other things: 'the New York Mutual Underwriters, under its policy #A21718' and 'the said insurance company' and that said letter was signed 'NEW YORK MUTUAL UNDERWRITERS By: General Adjustment Bureau, Inc. Monticello, New York'; that a proof of loss form was enclosed with said letter and that said form is claimed by plaintiffs to have been filled in by the General Adjustment Bureau so as to be directed 'To the New York Mutual Underwriters'; that the original policy is claimed by plaintiffs to have been sent to a mortgagee and that the certificate supplied to plaintiff Posner did not set forth the signatures of the four companies; that this action against defendant was started prior to the expiration of one year from the date of the fire but that this motion was made after said year had expired.

Proof also has been given that New York Mutual Underwriters is not a corporation and not an insurance company licensed to do business in the State of New York but that the four companies aforesaid are licensed advanced premium co-operative fire insurance companies. The moving parties contend that it is a service organization and that it does not engage in liability under said policy but that the listed companies do.

The first and most serious question presented is whether defendant, not being an insurance company licensed to do business in the State of New York, can enter into an incurance contract that is enforcible by an insured. Subdivision 1 of section 40 of the Insurance Law provides: 'No person, firm, association, corporation or joint-stock company shall do an insurance business in this state unless authorized so to do by a license issued and in force pursuant to the provisions of this chapter, or unless exempted by the provisions of this chapter from the requirement of having a license to do business'. Under subdivision 3 of section 41 of said law the term 'doing an insurance business' includes 'the making, as insurer, or proposing to make as insurer, of any insurance contract.' See sections 5 and 43 of the Insurance Law, the former providing that a violation of said Law shall, unless same constitutes a felony, be a misdemeanor.

However, subdivision 1 of section 143 of the Insurance Law provides: 'Except as otherwise specifically provided in this chapter any contract or policy of insurance or annuity contract delivered or issued for delivery in this state in violation of any of the provisions of this chapter shall be valid and binding upon the insurer making or issuing the same, but in all respects in which its provisions are in violation of the requirements or prohibitions of this chapter it shall be enforceable as if it conformed with such requirements or prohibitions.' See Insurance Law, § 392.

Even apart from this explicit statutory declaration there is authority to indicate that a contract or policy of insurance delivered in violation of statute is binding and valid as against the insurer making or issuing same. In Hopkins v. Connecticut Gen.L .Ins. Co., 225 N.Y. 76, at page 82, 121 N.E. 465, at page 467, the Court of Appeals held 'No corporation issuing a policy may escape liability because of its failure to obey the law'. In volume 19 of Insurance Law and Practice by Appleman it is stated at pages 224-225: 'The weight of recent authority is to the effect that the insurance company cannot, itself, rely either upon its own lack of authority or violation of law as a defense to an action upon an insurance contract or upon a lack of authority or violation of law by its agents'. In Law of Insurance by Cady we read at page 37: 'By the weight of authority, where the statute does not declare the policy void, the principle of (1) estoppel is raised against the insurer to prevent it from profiting by wrongfully receiving the premium. Or, (2) by the application of the doctrine of ultra vires, the insurer is held liable where it appears that the corporation has received some part of the consideration from on who is not in pari delictu; or (3) by construing the statute as not evidencing a legislative intent to prohibit the formation of the contract in a case where the penalty for violation is imposed solely on the corporation, the agent or the broker, the insurer is held'. In Restatement of the Law of Contracts, under section 601, the following illustration is given: '5. In a State where a standard form of fire insurance policy is prescribed by statute, A, an insurance company, issues to B a policy on his house varying from the standard form. B's house is destroyed by fire. A is under a duty to pay the insurance'. In Rosasco Creameries Inc. v . Cohen, 276 N.Y. 274, it was held at page 278, 11 N.E.2d 908, at page 909, 118 A.L.R. 641: 'Illeggal contracts are generally unenforcible. Where contracts which violate statutory provisions are merely malum prohibitum, the general rule does not always apply. If the statute does not provide expressly that its violation will deprive the parties of their right to sue on the contract, and the denial of relief is wholly out of proportion to the requirements of public policy or appropriate individual punishment, the right to recover will not be denied. See Williston on The Law of Contracts, vol. 3, § 1789; vol. 5 (2d Ed.) § 1630. Cf. American Law Institute, Restatement of the Law of Contracts, §§ 548, 600.' See: De Ville v . Continental Assurance Company, 10 A.D.2d 386, 199 N.Y.S.2d 876, affd. 8 N.Y.2d 1080, 207 N.Y.S.2d 453, 170 N.E.2d 457; Allick v. Columbian Protective Ass'n, 269 App.Div. 281, 55 N.Y.S.2d 438, affd. 295 N.Y. 603, 64 N.E.2d 350; Jackson v. Citizens Casualty Co., 277 N .Y. 385, 390, 392, 14 N.E.2d 446, 448; Sajor v. Ampol Inc., 275 N.Y. 125, 130-131, 9 N.E.2d 803, 806; Skenandoa Rayon Corp. v. Halifax Fire Ins. Co., 245 App.Div. 279, 281 N.Y.S. 193, affd. 272 N.Y. 457, 3 N.E.2d 867; Hinkle v. Globe and Rutgers Fire Ins. Co., 246 App.Div . 737, 283 N.Y.S. 870, affd. 271 N.Y. 585, 3 N.E.2d 197; Bakker v. Aetna Life Ins. Co., 264 N.Y. 150, 190 N.E. 327; Indemnity Ins. Co. of North America v. Rosner, 12 A.D.2d 916, 210 N.Y.S.2d 608; Bovino v. Berberian, 255 App.Div. 143, 5 N.Y.S.2d 300; Jewish Mental Health Soc. v. Vil. of Hastings-on-Hudson, 255 App.Div. 77, 79, 5 N.Y.S.2d 567, 569; Farber v John Aquino Sons Inc ., 253 App.Div. 600, 3 N.Y.S.2d 236; (American) Lumbermens Mut. Cas. Co. of Illinois v. Timms & Howard, 2 Cir., 108 F.2d 497, and note at page 502; Gerenstein v. Weiner, 9 Misc.2d 259, 164 N.Y.S.2d 122; Travelers' Insurance Co. v. Russo, 155 Misc. 589, 280 N.Y.S. 99; Searle v. Southern Surety Co., 138 Misc. 699, 702, 247 N.Y.S. 340, 343; Akers v. Mutual Life Ins. Co. of New York, 59 Misc. 273, 112 N.Y.S. 254; Payne v. Equitable Life Ass. Soc. of U. S., 14 A.D.2d 266, 220 N.Y.S.2d 493; Allstate Insurance Company v. Alford, 25 Misc .2d 707, 206 N.Y.S.2d 388; Zurich Insurance Company v. Martine, 24 Misc.2d 437, 201 N.Y.S.2d 810; Lusardo v. Harper,...