Smith v. Germania Fire Ins. Co. of New York

• Citation: 102 Or. 569,202 P. 1088
• Parties: SMITH v. GERMANIA FIRE INS. CO. OF NEW YORK.
• Decision Date: 10 January 1922
• Court: Oregon Supreme Court

202 P. 1088

102 Or. 569

SMITH v. GERMANIA FIRE INS. CO. OF NEW YORK.

Supreme Court of Oregon

January 10, 1922

Department No. 2.

Appeal from Circuit Court, Yamhill County; H.H. Belt, Judge.

Action by Arthur N. Smith against the Germania Fire Insurance Company of New York. From a judgment for plaintiff, defendant appeals. Reversed and remanded.

This is an action at law instituted by Arthur N. Smith, as payee named in a fire insurance policy, against Germania Fire Insurance Company of New York.

One Arthur White was the owner of a two-story mansard-roofed frame building situate on the northwest corner of Third and J streets, in McMinnville, Or., which building he occupied for drayage and feed stable purposes. Smith, plaintiff herein was the owner and holder of a certain mortgage deed upon the above-described premises in the amount of $1,000, duly executed by Arthur White and his wife to secure a loan for like amount. Pursuant to agreement contained in the mortgage on the 30th day of August, 1917. White caused the property to be insured by the Germania Fire Insurance Company against loss or damage by fire, for a period to and inclusive of the 30th day of August, 1918, and paid the insurance company the required premium of $30, in consideration of which the company issued to him its policy of insurance containing the following loss payable clause:

"Loss if any, subject, however, to all the terms and conditions of this policy, payable to Arthur N. Smith mortgagee."

The policy contained a number of paragraphs declaring that it would be void upon the happening of either one of a great number of conditions.

On June 7, 1918, the property insured was totally destroyed by fire and the resultant loss, as adjusted by White and the lawful representatives of the insurance company, was $1,317.78. The proportion of the loss to be borne by the defendant company under its policy was $872.50. The company refused to pay the plaintiff the amount of the loss and denied liability therefor, and for a first further and separate answer and defense alleged that Arthur White, the owner of the property insured, had willfully and intentionally caused the premises to be burned for the purpose of obtaining the insurance thereon and defrauding the defendant. For a second further and separate answer and defense, the company alleged:

"That the said Arthur White did, for the purpose of inducing this defendant to pay under the said policy of insurance the amount of loss and damage to the said premises by the fire, * * * sign, swear to, and deliver to this defendant a statement in writing wherein and whereby the said Arthur White stated and swore that the origin of the said fire was unknown to him; that at said time the said Arthur White well knew that he himself had willfully and intentionally caused the said premises to be burned. * * * "

For a third separate answer and defense, the defendant averred:

"That in and by the policy of insurance issued by defendant to the said Arthur White * * * it is provided that this company shall not be liable under said policy for a greater proportion of any loss on the described property than the amount insured by said policy shall bear to the whole insurance, whether valid or not; * * * that at the time said fire occurred the said Arthur White held another policy of insurance in another company * * * in the sum of $500. * * * "

Plaintiff demurred to these three separate defenses made by the answer. The court sustained the demurrer as to the first and the second separate answer and defense set up by defendant, and overruled it as to the third.

On May 10, 1920, trial was had without jury. On October 18, 1920, the court made and filed its findings of fact and conclusions of law, based upon which it ordered and adjudged that plaintiff have and recover of and from the defendant Germania Fire Insurance Company the sum of $872.50, with interest thereon at the rate of 6 per cent. per annum from June 12, 1918, and costs.

From this judgment the defendant appeals, assigning error as follows:

"Error of the court:

"In sustaining plaintiff's demurrer to the first separate answer and defense set up in defendant's answer.

"In sustaining plaintiff's demurrer to the second separate answer and defense set up in defendant's answer.

"In rendering judgment against defendant for $872.50, or any sum.

"In rendering judgment * * * for interest. * * * "

J.C. Veazie, of Portland (Veazie & Veazie, of Portland, on the brief), for appellant.

Walter L. Tooze, Jr., and W.T. Vinton, both of McMinnville (Vinton & Tooze, of McMinnville, on the brief), for respondent.

BROWN, J. (after stating the facts as above).

We are called upon to determine whether the court erred in sustaining plaintiff's demurrer to defendant's first and second causes of defense stated in its answer. This presents two vital questions: First, by reason of the willful burning of his property, did the assured cause a forfeiture of his policy? Second, if we answer the first question in the affirmative and declare a forfeiture of the policy, does this defeat the right of the mortgagee to recover in this action?

The policy in the case at bar provides, among other things, that--

"Germania Fire Insurance Company of New York, in consideration of the stipulations herein named and of $30 premium, does insure Arthur C. White for the term of one year from the 30th day of August, 1917, at noon, to the 30th day of August, 1918, at noon, against all direct loss or damage by fire, except as hereinafter provided, to an amount not exceeding $1,000, to the following described property. * * * "

White was the insured, notwithstanding that the loss payable clause designated Arthur N. Smith, mortgagee, as the person to whom any loss was payable. This policy was made by the insurance company and accepted by the assured, subject to agreements and provisions not in conflict with law or contrary to public policy.

If the matter stated in defendant's first further and separate answer is true, White, the assured, has no claim upon the Germania Fire Insurance Company. Public policy will not permit a recovery by one who seeks to profit through his own crime. Schreiner v. High Court, 35 Ill.App. 576; Knights of Honor v. Menkhausen, 209 Ill. 277, 70 N.E. 567; Supreme Lodge v. Kutscher, 72 Ill.App. 462; Collins v. Metropolitan Life Ins. Co., 232 Ill. 37, 83 N.E. 542, 14 L.R.A. (N.S.) 356, 122 Am.St.Rep. 54, 13 Ann.Cas. 129.

In Burt v. Union Cent. L. Ins. Co., 187 U.S. 362, 23 Sup.Ct. 139, 47 L.Ed. 216, the same being a life insurance case, the court said:

"It cannot be that one of the risks covered by a contract of insurance is the crime of the insured. There is an implied obligation on his part to do nothing to wrongfully accelerate the maturity of the policy. Public policy forbids the insertion in a contract of a condition which would tend to induce crime, and as it forbids the introduction of such a stipulation it also forbids the enforcement of a contract under circumstances which cannot be lawfully stipulated for."

The crime of the assured forfeits the policy as to himself, but not necessarily as to the interest of the mortgagee in the policy. The forfeiture of the mortgagee's interest depends upon the terms and provisions in the contract of insurance, unless in collusion with the wrongdoer.

Hence the second question involves the construction to be placed upon the standard mortgage clause contained in the policy, reading:

"If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached, or appended hereto"

--and the loss payable clause, providing:

"Loss, if any, subject, however, to all the terms and conditions of this policy, payable to Arthur N. Smith, mortgagee."

Without the mortgage clause herein referred to, under a policy making the loss payable to a third person, the payee is not a party to the contract, but only an appointee whose rights are dependent upon the rights of the insured, and a violation by the latter of the conditions of the policy will forfeit the rights of such appointee.

"But it has been held that where a policy provides that if any interest thereunder shall exist in favor of a mortgagee, or of any person having an interest other than insured, the conditions...