Royal Ins. Co. v. Vanderbilt Ins. Co.

• Decision Date: 29 April 1899
• Citation: 52 S.W. 168,102 Tenn. 264
• Parties: ROYAL INS. CO. v. VANDERBILT INS. CO.
• Court: Tennessee Supreme Court

52 S.W. 168

102 Tenn. 264

ROYAL INS. CO. v. VANDERBILT INS. CO.

Supreme Court of Tennessee.

April 29, 1899

Appeal from chancery court, Shelby county.

Action by the Royal Insurance Company against the Vanderbilt Insurance Company. From a decree dismissing the bill complainant appeals. Reversed.

Carroll & McKellar, for appellant.

Smith & Trezevant, for appellee.

BEARD J.

This is a suit on a policy of insurance. The complainant company carrying a risk on cotton in a compress at Greenville, Tex secured from the defendant a policy of insurance by which it undertook to underwrite the complainant to the extent of one-half its risk. The cotton covered by the original policy was destroyed by fire on the 14th of November, 1887, and proofs of loss were immediately furnished to the Royal Insurance Company, which company also notified the Vanderbilt Insurance Company. Controversy as to liability having arisen litigation between the insured and the Royal Insurance Company ensued, and a final settlement with the owners of the cotton--the assured in the original policy--was not made until the year 1895. After the settlement, the insured was called upon by the complainant to make good its contract of indemnity by paying the pro rata of the loss sustained, and, declining to do so, the present bill was filed. Recovery was resisted in the court below, and is now resisted, upon these grounds: First, the statute of limitations of six years; second, the contract of limitation of 12 months; and, third, that proof of loss had not been furnished in time. The chancellor, upon the hearing of the cause, dismissed the bill, and complainant has appealed.

The original policy of insurance issued by the reinsurer was lost or mislaid, but a copy of it was properly proven, and constitutes a part of the record. The form used for the purpose of this insurance was one that was primarily intended for the insurance of property to be issued to its owners, and an inspection of the instrument shows that none of the printed stipulations or conditions save one could apply to a contract of reinsurance. In order to give it application to such a contract, and to give the complainant the indemnity it sought, as is shown by the testimony of the secretary of the defendant, a slip was pasted upon the face of the policy, on which it was provided that the intention was to cover the complainant company's liability in its policy already issued on the cotton in question, followed by this clause "It being hereby understood and agreed that such insurance is a pro rata part of each and every item insured by the policy of the reinsured company, and subject to the same risks, valuations, conditions, and mode of settlement as may be taken or assumed by said company; it being expressly agreed, however, that notice of any change in the risk, or additional privileges granted, shall be at once given to this company. Loss, if any, payable at the same time, in the same manner, and pro rata with the amount paid by said company." The stipulation in the policy on which the defendant relies for defense as a contract limitation is as follows: "(13) It is furthermore hereby expressly provided that no suit for the recovery of any claim by virtue of this policy shall be sustainable unless such suit shall be commenced within twelve months next after the loss shall occur." A contract of reinsurance is peculiar in its character, and differs from the ordinary policy of insurance. It creates no privity between the reinsurer and the party originally insured. Gantt v. Insurance Co., 68 Mo. 533. It is simply an agreement to indemnify the assured, partially or altogether, against a risk assumed by the latter in a policy issued to a third party. Commercial Mut. Ins. Co. v. Detroit Fire & Marine Ins. Co., 38 Ohio St. 16. In such a case "the assured is not the owner of the property at risk," and has "no relation to it except as insurer under the original policy." But in that relation the party issuing the original policy has an insurable interest, which will support a contract intended to indemnify him against the hazard he has assumed. "But manifestly,"as is said in Manufacturers' Fire & Marine Ins. Co. v. Western Assur. Co., 145 Mass. 419, 14 N.E. 632, "many provisions appropriate to an ordinary agreement with the owner of property for the insurance of it could have no proper application to a contract such as the one in question." In the course of the opinion in that case it is further said: "Whenever words are found in a contract which can have no proper application to the subject to which it relates they cannot be regarded, and not infrequently the careless use of printed blanks compels recognition of this rule." The policy sued on in that case was one of reinsurance to a company which had issued its policy on mortgaged property. It contained a stipulation making void the policy if, without the written contract of the company, the property insured should be sold or transferred, or there should be any change of title. The mortgage or trust deed was foreclosed, and the property was bought by a third party, to whom, by the consent of the...