Smith v. Grange Mut. Fire Ins. Co. of Mich.

• Court: Michigan Supreme Court
• Writing for the Court: SHARPE
• Citation: Smith v. Grange Mut. Fire Ins. Co. of Mich., 234 Mich. 119, 208 N.W. 145 (Mich. 1926)
• Decision Date: 20 March 1926
• Docket Number: No. 88.,88.
• Parties: SMITH v. GRANGE MUT. FIRE INS. CO. OF MICHIGAN, Limited.

234 Mich. 119

208 N.W. 145

SMITH

v.GRANGE MUT. FIRE INS. CO. OF MICHIGAN, Limited.

No. 88.

Supreme Court of Michigan.

March 20, 1926.

Error to Circuit Court, Isabella County; Fred S. Lamb, Judge.

Action by Evelyn S. Smith against the Grange Mutual Fire Insurance Company of Michigan, Limited. Judgment for plaintiff, and defendant brings error. Judgment affirmed.

Argued before BIRD, C. J., and SHARPE, STEERE, FELLOWS, WIEST, CLARK, and McDONALD, JJ. William T. Yeo, of West Branch, for appellant.

Kinnane & Leibrand, of Bay City (Frank H. Dusenbury, of Mt. Pleasant, of counsel), for appellee.

SHARPE, J.

On May 1, 1922, plaintiff applied to a local agent, Anderson A. Miner, the secretary of the Luther Grange, for insurance in the defendant company on the buildings on her farm property in Osceola county, in the sum of $3,350, on a blank provided by defendant for that purpose. The requisite fees were paid. The application and fees were sent to W. M. Coon at Roscommon, the secretary of the defendant company. A policy was issued by Mr. Coon on May 5th, and mailed to E. B. Follett, the president of the company, at Hale, for his signature thereto. The policy was afterwards received by plaintiff, the signature of the president appearing thereon as follows: ‘E. B. Follett, President, E. F.’ A part of the property insured was destroyed by fire on the night of May 21, 1922. Secretary Coon, on being notified, visited the premises, and made some investigation as to the cause thereof. The attention of the state fire marshal's department was called to the fire, and, after investigation, a complaint was made and warrant issued, charging plaintiff with the burning of the buildings with intent to defraud the insurance company. On trial in the circuit court, she was acquitted by the jury by direction of the court. Much of the evidence submitted and the ruling of the court in that case were put in in this case and appear in the record. Proofs of loss were furnished by plaintiff. There were efforts at adjustment and arbitration, pursuant to the terms of the policy, an award made which was set aside in a suit brought for that purpose, and, finally, this action was brought in August, 1924, to recover on the policy. Defendant requested a verdict, which was denied. The plaintiff had verdict and judgment for $3,196.66. Defendant's motion for a new trial, thereafter made, was overruled, and the case is now before us on writ of error.

1. On the trial of the criminal case, counsel for the accused insisted that the prosecution had failed to show the issuance of a legal policy of insurance, in that it did not appear that the president of the company had signed the policy. The lack of such proof was one of the reasons stated by the trial court for directing the acquittal of the accused.

It is now urged by defendant, and its request for a directed verdict was based thereon, that plaintiff is estopped by the contention of her counsel and the ruling of the court in the criminal case from claiming that the policy was legally issued and the defendant liable thereon. The criminal trial ended on September 25, 1922. Five days thereafter, Secretary Coon, in answer to a request for payment, wrote plaintiff's attorney that he was not ‘able to agree as to what she should have from this company on account of the burning of her buildings.’ Plaintiff's counsel thereupon wrote him: ‘I presume the next step is the appointment of an adjusting board.’ The secretary replied, naming the company's adjuster. An adjustment was had, and an appeal taken to the arbitration board provided for in the policy. As before stated, the award made was set aside. It does not appear that in any if these proceedings any claim was made by the defendant that the policy was not legally issued. They were taken on the assumption that a valid policy had been issued to plaintiff. The only dispute was as to the liability of the defendant thereon. Had the defendant taken the position at the close of the criminal trial that no enforceable policy had been issued by it, a different question would be presented.

This court has many times held, and it must be accepted as the settled law of this state, that, when a loss under an insurance policy has occurred and payment refused for reasons stated, good faith requires that the company shall fully apprise the insured of all the defenses it intends to rely upon, and its failure to do so is, in legal effect, a waiver, and estops it from maintaining any defenses to an action on the policy other than those of which it has thus given notice. Castner v. Ins. Co., 15 N. W. 452, 50 Mich. 273;Richards v. Ins. Co., 27 N. W. 586, 60 Mich. 420;Towle v. Ins. Co., 51 N. W. 987, 91 Mich. 219;Douville v. Ins. Co., 71 N. W. 517, 113 Mich. 158;Reimold v. Ins. Co., 127 N. W. 17, 162 Mich. 69.

It does not appear that the defendant ever questioned the validity of the policy until it filed its plea and notice in this case. The majority of the adjusting board denied liability for the reason: ‘The circumstances render the company not liable for loss.’ The appeal board concluded that ‘the preponderance of evidence shows that the said company is not liable on the policy of insurance issued to her’ (plaintiff) ‘by said company, and we hereby so decide and determine.’

In our opinion, the trial court was clearly right in instructing the jury that the policy constituted ‘a contract binding upon both parties notwithstanding the action in the criminal case.’

2. On January 13, 1914, plaintiff and her then husband executed a mortgage on the term for $800, payable in 5 years. She sought, unsuccessfully, to obtain a loan in 1921 to pay this mortgage. On April 21, 1922, foreclosure by publication was begun; the notice being published in the Luther Observer. Sale was made to Esther Weiss, the mortgagee, for the amount then due, and on October 2, 1923, she became the owner of the premises. The court instructed the jury:

‘You will disregard the proof of the mortgage foreclosure unless you are satisfied that the plaintiff had knowledge of the fact at the time of the application or issuance of the policy of insurance. * * * If notice of the matter of the foreclosure of this mortgage was not called to the attention of the plaintiff at the time this insurance was taken or at the time the loss occurred, then the defendant would be in no position to raise that question now.’

There was a colloquy between the court and counsel during the charge as to the effect of plaintiff's knowledge that foreclosure had been begun on the validity of the policy, and counsel for defendant then expressed the opinion that the materiality of such proceedings rested on defendant's claim that, as plaintiff had been deprived of title thereby, and was not the owner of the buildings at the time suit was begun, she could not recover for the loss.

Plaintiff had an insurable interest in the property at the time that policy was issued and the foreclosure proceeding begun. Her right to collect the insurance inured as soon as the fire occurred. The interest of the mortgagee in the policy ceased to exist when the property sold for the amount due her. She was not a party in interest at the time the suit was brought. We discover no error in the charge relative to the mortgage or the foreclosure proceedings thereunder.

3. The principal defense was that plaintiff herself set the fire which burned the...