Shoaf v. Palatine Ins. Co

• Decision Date: 11 December 1900
• Citation: Shoaf v. Palatine Ins. Co, 127 N.C. 308, 37 S.E. 451 (N.C. 1900)
• Court: North Carolina Supreme Court
• Parties: SHOAF et al. v. PALATINE INS. CO.

127 N.C. 308

37 S.E. 451

SHOAF et al.

v.PALATINE INS. CO.

Supreme Court of North Carolina.

Dec. 11, 1900.

INSURANCE—POLICY HOLDER'S RIGHT TO SUE REINSURER.

An insurance company contracted for reinsurance with another company, by which the reinsurer expressly assumed all liabilities under outstanding policies, but agreed to pay the reinsured company only after claims had been duly proved in an action against it.The reinsurer also agreed, in the event of such litigation, to defend the same, and pay all costs and expenses incident thereto.Held, that plaintiff, who held a policy in the reinsured company when the contract of reinsurance was made, was not required to sue the reinsured company before he could maintain a suit against the reinsurer on the contract of reinsurance to recover a loss on his property covered by his policy, though he was not a party to, nor in privity with, the contract of reinsurance.

Appeal from superior court, Forsyth county; Robinson, Judge.

Action by C. J. Shoaf & Co. against the Palatine Insurance Company.From a judgment for plaintiffs, defendant appeals.Affirmed.

Glenn & Manly and Burwell, Walker & Cansler, for appellant.

Watson, Buxton & Watson, for appellees.

FAIRCLOTH, C. J.Prior to October, 1898, the Merchants' & Manufacturers' Fire Insurance Company of Baltimore City, in the state of Maryland, Issued its policies of insurance on the property of the plaintiffs in the town of Salem, N. C, with the usual stipulations and conditions, and received the premiums therefor from the plaintiffs.During the life of said policies, to wit on October 4, 1898, the said Merchants' Company and the Palatine Fire Insurance Company of Manchester, England, doing business in this state, entered into a written contract of reinsurance, in which the Palatine Company agreed to reinsure all outstanding risks of the Merchants' Company for loss or damage by fire, etc., on any property located in the United States and Canada, and assumed all liability under any outstanding policies or risks theretofore written by said Merchants' Company, and on any policy or risk that might be written by the Merchants' Company before November 1, 1898, the latter business to be for the benefit of, and under the direction of, the Palatine Company, which company assumed all expenses and taxes connected therewith, and all said risks and policies are reinsured by the Palatine Company.In consideration of such reinsurance, the Merchants' Company agreed to pay one-half of the unearned gross pro rata premiums on all policies In force on October 1 1898, to furnish complete schedules of all policies, to retire from business, and to transfer and deliver its good will, right, title, and interest in its business, daily reports, indorsements, registers, and books of record to the Palatine Company, except office fixtures, furniture, etc., with a provision of release on failure to perform the obligations of said contract.The tenth article of said reinsuring contract provides that it shall only be effective as between the parties thereto; that no holder of a policy in the Merchants' Company shall be entitled to enforce this contract against the Palatine Company; that the holders of such policies shall prosecute against the Merchants' Company any claim arising under said policies; and the Palatine Company"agrees to pay all such claims legally arising and duly proved; and, further, in case of any contest arising in connection with, or suit being brought for or on, any such claim, said Palatine Company agrees to defend the same, and pay all costs and expenses incident thereto."This agreement was signed by the two companies, and the plaintiffs were not parties thereto.Subsequently the insured property was destroyed by fire, and the plaintiffs, having performed the conditions of their policy, instituted this action against the Palatine Company alone.

The question is, can the plaintiffs, upon these facts, maintain their action?This question has not until now been before this court There is some diversity of opinion in the decisions of the courts in our sister states and the general authorities.There is no question raised as to the validity of the insuring and reinsuring contracts, each being in due form, and supported by a valuable consideration.A policy of fire insurance is a contract of indemnity (Darrell v. Tibbitts, 5 Q. B....