Sherri v. Nat'l Sur. Co. of New York

• Decision Date: 09 July 1926
• Citation: 243 N.Y. 266,153 N.E. 70
• Parties: SHERRI v. NATIONAL SURETY CO. OF NEW YORK.
• Court: New York Court of Appeals Court of Appeals

243 N.Y. 266

153 N.E. 70

SHERRI

v.NATIONAL SURETY CO. OF NEW YORK.

Court of Appeals of New York.

July 9, 1926.

Action by Antoinette Sherri against the National Surety Company. Judgment for plaintiff (124 Misc. Rep. 450, 208 N. Y. S. 257) was unanimously affirmed by the Appellate Division (215 App. Div. 808, 213 N. Y. S. 909), and defendant appeals by permission.

Affirmed.

McLaughlin and Lehman, JJ., dissenting.

Appeal from Supreme Court, Appellate Division, First department.

Sidney J. Loeb and Leon M. Prince, both of New York City, for appellant.

William Otis Badger, Jr., and Paul D. Compton, both of New York City, for respondent.

CRANE, J.

After an unanimous affirmance by the Appellate Division, we allowed an appeal in this case, but a more thorough examination of the record and briefs convinces me that the case has been properly decided.

The plaintiff sought burglary insurance through her broker, L. T. Hollister & Co., Inc. In accordance with custom, a placer of that company made application on the risk to the National Surety Company, and received a binder insuring the plaintiff until a corrected policy should be issued. The binder contained the following clause:

‘We, the undersigned insurance companies, hereby agree to insure property as herein described for amounts subscribed.

‘This binder becomes void upon delivery of corrected policy to the office of L. T. Hollister, Inc.’

The term ‘corrected policy’ had this meaning and significance. At the time of the issuance of the binder insuring the property which is given immediately upon the application of the placer, the insurer knows little or nothing of the risk. Any and all investigation as to its natute and soundness has to be made thereafter. Should the risk prove to be hazardous,ardous, the company may cancel the insurance. When the policy is thereafter issued, it is accompanied by certain declarations annexed thereto which are supposed to be the answers to questions made by the insured. The fact is that the company issuing the policy writes in these answers as it understands the facts to be. After the receipt of the policy by the broker for the insured, if any of these answers are incorrect or inaccurate, the insurer is notified, and a corrected policy is issued.

The clause quoted, therefore, was to be binding until such a corrected policy was issued. The binder in this case was issued by the defendant on March 10, 1922. Four days thereafter the policy of insurance, with the proposed declarations attached, was executed and sent the plaintiff's broker, L. T. Hollister & Co., Inc. On the same day, the 14th of March, 1922, the National Surety Company received an unfavorable report on the plaintiff's risk, and so notified the broker. Notice was also given that the company canceled the risk and demanded the immediate return of the policy. This notice was not in writing, the information having been imparted by an employee of the defendant who called upon the brokers to procure the policy. The brokers refused to return the policy until they had insured the plaintiff elsewhere.

Mrs. Antoinette Sherri, the plaintiff, was not informed or aware of any of these proceedings. She had employed her brokers to insure her property.

[2] Some time about the 21st of March, 1922, the plaintiff's home was burglarized and her property stolen. She brought this action on the policy of insurance to recover her loss. At the trial it became a question whether the insurance was in effect by reason of the binder or the policy. The trial justice permitted an amendment of the pleadings, and the action was continued as upon the binder. The defendant complains of this amendment, but, as its counsel did not claim suprise or unpreparedness to meet the issue, his only objection being the power of the court, we find no error in this ruling. Struzewski v. Farmers' Fire Ins. Co., 226 N. Y. 338, 123 N. E. 661;Walrath v. Hanover Fire Ins. Co., 216 N. Y. 220, at page 226,110 N. E. 426. So far as we are concerned, therefore, the policy is eliminated from this case, except as it may become a part of the insurance contract effectuated by the binder.

These insurance binders, so called, have been before this court in decisions. In Lipman v. Niagara Fire Ins. Co., 121 N. Y. 454, 24 N. E. 699,8 L. R. A. 719, it was held that these binding slips are a present insurance in the amount specified; that they are a short method of issuing a temporary policy for the convenience of all parties in continue until the execution of the formal one. The obligations, however, of the parties, are ‘according to the terms of the policy in ordinary use by the company.’ See, also, Hicks v. British American Assurance Co., 162 N. Y. 284, 56 N. E. 743,48 L. R. A. 424. The policy issued by the defendant and the one customarily used contained this clause:

‘This policy may be canceled at any time by either of the parties upon written notice to the other party stating when thereafter cancellation shall be effective, and the date of cancellation shall then be the end of the policy period.’

The binder issued by the defendant insured the plaintiff's property under the obligations of the usual policy containing this cancellation clause. Unless there was something in the binder indicating a contrary intent, writtin notice was required to cancel the insurance before the delivery of a...