State Mutual Fire Insurance Company v. Roberts

• Decision Date: 01 January 1858
• Citation: 31 Pa. 438
• Parties: State Mutual Fire Insurance Company v. Roberts.
• Court: Pennsylvania Supreme Court

Page 438

31 Pa. 438

State Mutual Fire Insurance Company v. Roberts.

Supreme Court of Pennsylvania.

ERROR to the District Court of Allegheny county.

Loomis, for the plaintiffs in error, cited Carpenter v. Washington Insurance Co., 16 Pet. 502; Perrin v. Protection Insurance Co., 11 Ohio 171; Angell on Fire and Life Insurance 214; Grosvenor v. Atlantic Fire Insurance Co., 3 Smith (N. Y.) 391.

A. H. Miller, for the defendant in error, cited Mowry v. Todd, 12 Mass. 284; Wilson v. Hill, 3 Met. 69; Carroll v. Boston Insurance Co., 8 Mass. 515; Fuller v. Boston Mutual Insurance Co., 4 Met. 208-9; Phillips v. Merrimack Mutual Insurance Co., 10 Cush. 351, 353; Traders' Insurance Co. v. Robert, 9 Wend. 404; Tillou v. Kingston Mutual Insurance Co., 7 Barb. 570; s. c., 1 Seld. 405; Charleston Insurance Co. v. Neve, 2 McMullan 257; 16 Shep. 337; Angell on Ins. 104; Phillips on Ins. 61, 62; 2 Duer on Ins. § 35.

The opinion of the court was delivered by STRONG, J.

There is but a single question in this case. It is raised by the answer given in the court below to the first point propounded by the defendants.

The policy contained the usual provision that it should not be assignable, unless the assignee should, before any loss, give notice of the assignment in pursuance of the by-laws of the company, and have the same endorsed on or annexed to the policy. One of the by-laws designated the mode in which assignments should be made, and required that they should be approved by a director.

Another provision of the policy, also an usual one, was that if the insured or his assigns should thereafter effect any other insurance on the same property, and should not with all reasonable diligence give notice thereof to the secretary, and have the same endorsed on the policy, or otherwise acknowledged in writing, the policy should cease and be of no further effect; and that in all cases of other insurance on the property, whether prior or subsequent to the date of the policy, in case of loss or damage by fire, the insured should not be entitled to demand or recover on the policy any greater portion of the loss or damage sustained than the amount thereby insured should bear to the whole amount insured on said property. Both these provisions were material parts of the contract, and both designed for the protection of the underwriters. They cannot be deprived of these stipulated defences without their consent. The safety of the insurer is dependent much upon the character of the assured, not alone upon his integrity and good faith, but upon his habits of carefulness, of prudence, and vigilance. It is obvious that the danger of fire may be much less when the assured is a man watchful and provident than where he is heedless and negligent, as well as dishonest. The provision, therefore, which requires assignments of a policy to be made with the consent of the insurers, and to be approved by them, is not unmeaning. Nor is its purpose to stipulate for a new contract with the assignee. It is designed rather to afford substantial protection to the underwriters, by enabling them to preserve, during the continuance of the risk, the safeguards which existed at its origin; those found in the honesty and watchfulness of the assured. It was for this reason that it was early laid down that a fire policy could not be assigned pending the risk, so as to give to the assignee any interest in it whatsoever, either legal or equitable: Lord Chancellor KING, Lynch v. Dalzell, 4 Bro. P. C. 431. Such a policy has indeed in some of the later cases been held assignable in equity, with the subject itself, when it contained no provision to the contrary, and it is on that account that the prohibition to assign has been generally introduced.

The other provision in this policy which has been referred to is even more substantial; so important indeed that without it, the business of insurance could hardly exist. The contract of insurance is pre-eminently one in which good faith is demanded. But experience has shown that some other reliance than that upon good faith is necessary. Accordingly, it is generally made the interest of the assured to preserve the property from fire. His interest is made to concur with that of the insurers. It was so in this case. The subject was valued at $4500, but the sum insured was only $2500. Thus the assured remained his own insurer for $2000, and had a direct personal interest in the preservation of the property beyond the indemnity promised in the policy. Had he been permitted to insure the same buildings in other companies until the entire value was covered, the protection which the insurers had, in his prudent regard for his own interest, would have been lost. Not only would temptations to dishonesty have been multiplied, but the common inducements to care and watchfulness on his part would have been taken away. It was for this reason that the stipulation was introduced, that other insurance, without notice to these underwriters and approval by them, should avoid the policy. It is for similar reasons, that the same provision is found in almost every policy of insurance. And even where double insurance has been made by consent, the assured, in case of a loss, is only allowed to recover rateably.

The risk in this case was upon the interest of the owner in a dwelling-house. The contract was made with him, and the policy was taken out in his name. With the consent of the insurers, he then assigned the policy to Blackburn, to whom he had given a mortgage upon the property insured, and also upon other property. The mortgagee assigned the policy to Scott, the equitable plaintiff, also with the assent of the defendants. Afterwards Roberts, the party assured, effected another insurance upon the same building with a different company, and gave no notice thereof to the defendants, nor had it endorsed upon the policy issued by them. The naked question is, whether the second insurance, having been made by Roberts without notice to the defendants, after the assignment of the first policy, avoided it.

It is not denied that in the hands of Roberts, the original assured, the policy would be utterly worthless; but it is insisted that in the hands of Scott, who holds under an assignment with the consent of the defendants, it is still available. A policy of insurance is not a negotiable instrument. It is assignable only in equity. Consequently, the assignee takes it subject to all the equities which existed between the original parties at the time of the assignment. He takes it, however, burdened with no other equities than those which existed at the time of the assignment and notice thereof. But it does not follow from this, that by the assignment and notice the underwriters are deprived of the continued protection of the stipulations of their contract. These are not equities. They are legal rights, which are cut off by no transfer of the instrument. While subsequently accruing secret equities between the original parties, and those which may arise outside of the contract, cannot affect the assignee, yet he takes the instrument as it is, bound by all its expressed provisions. The assignment does not change the contract. It simply converts one of the parties into a trustee for a third person. Every condition precedent, upon which the liability to pay is made to depend, remains as before. Were it not so, it would not be an assignment, but a new contract. Now, by the express terms of this policy the defendants were to become liable to pay, in case of a loss, only upon condition that neither Roberts, nor any person to whom he might assign it, should effect a second insurance without giving notice to them and having the same endorsed on this policy, or otherwise acknowledged in writing. To strike out the condition would make the liability absolute; an obligation which they never assumed. It is...