Travelers Ins. Co. v. California Ins. Co.
| Decision Date | 06 May 1890 |
| Docket Number | 6731 |
| Court | North Dakota Supreme Court |
APPEAL from district court, Cass county; Hon. WM. B. MCCONNELL Judge.
Action by mortgagee on a policy of insurance issued to mortgagor loss, if any, payable to mortgagee, by defendant California Insurance company. Complaint alleged that the risk of the California Company was reinsured and assumed by defendant Phenix Company. Defendants demurred (but not separately) on ground that complaint stated no cause of action. Demurrer overruled; the ruling was excepted to and the defendants answered admitting that the Phenix Company reinsured and assumed the risk. Verdict and judgment for plaintiff.
Judgment of the district court reversed, and a new trial ordered.
W. L Wilder and Messrs. Miller, Cleland & Cleland for appellants, argued: That the complaint failed to show any liability on the part of the Phenix Company. Johannes v. Phenix Co., 15 Ins. Law Jour. 449; Doyle v. Phenix Co., 44 Cal. 264; Johnson v. Home Ins. Co., 6 P. 727, and other cases. That action was barred by the limitation contained in the policy. Riddlesberger v. Hartford Ins. Co., 7 Wallace, 386; Arthur v. Homestead Ins. Co., 78 N.Y. 462; Laughlin v. Union Central Life Ins. Co., 11 F. 280; Garretson v. Hawkeye Ins. Co., 65 Iowa 468; Ripley v. AEtna Ins. Co., 30 N.Y. 164.
Alf E. Boyesen, for the respondent, argued: That time for beginning action does not begin to run until sixty days after proofs of loss are furnished; citing, Ellis v. Council Bluffs Ins. Co., 20 N.W. 782; Frienzen v. Allemania Ins. Co., 30 F. 353; Mix v. Andes Ins. Co., 9 Hun, 397; Major v. Hamilton Ins. Co., 16 W.Va. 658; Steen v. Niagara Ins. Co., 89 N.Y. 315; Spare v. Home Mutual Ins. Co., 17 F. 569; Longhurst v. Star Ins. Co. 19 Iowa 364.
CORLISS, C. J. WALLIN, J., did not sit in the case; TEMPLETON, J., of the first judicial district, taking his place.
The alleged liability of the defendant, the California Insurance Company of San Francisco, rests upon a fire insurance policy issued by it covering buildings owned by one E. C. Sprague; and the other defendant, the Phenix Insurance Company, is sought to be held by virtue of a contract between it and its co-defendant whereby it reinsured the risk, and assumed the same. If this contract were strictly one of reinsurance, there would be no such privity between the original insured and the reinsurer as would create a liability on the part of the latter to the former. Strong v. Insurance Co., 62 Mo. 289; Insurance Co. v. Cashow, 41 Md. 59; Herckenrath v. Insurance Co., 3 Barb. Ch. 63; Com. Mut. Ins. Co. v. Detroit F. & M. Ins. Co., 38 Ohio St. 11; Gantt v. Insurance Co. 68 Mo. 503. This doctrine has been embodied in our Code. § 4186 Comp. Laws. But this contract appears to have been more than one of reinsurance. The Phenix Company assumed the risk, and there is respectable authority holding that under such an agreement the original insured may sue directly the company that assumes the loss. Johannes v. Insurance Co., (Wis.) 66 Wis. 50, 27 N.W. 414; Glen v. Insurance Co., 56 N.Y. 379; Fischer v. Insurance Co., 69 N.Y. 161. No question having been made in the court as to the liability of the Phenix Company directly to the insured we will not discuss the point any further.
The plaintiff sues as the mortgagee of the insured, whose debt exceeds the amount due under the policy. The policy makes the loss payable to the mortgagee as its interest may appear. It is not claimed that the mortgagee cannot maintain this action without joining with it the insured as a party plaintiff. That the mortgagee may sue alone, where his claim exceeds the amount of the insurance, has the support of several cases. Hammel v. Insurance Co., 50 Wis. 240, 6 N.W. 805; Cone v. Insurance Co., 60 N.Y. 619; Martin v. Insurance Co., 38 N.J.L. 140; Coates v. Insurance Co., 58 Md. 172. If the owner lays claim to any part of the insurance money, the company may protect itself by interpleader. But the better practice is for the mortgagor and mortgagee both to sue. See Winne v. Insurance Co., 91 N.Y. 185; Appleton Iron Co. v. British America Assur. Co., 46 Wis. 23, 50 N.W. 1100.
The defendants claim that the cause of action was destroyed by the lapse of time before the commencement of the action. The policy contains the usual limitation clause providing that no action shall be maintained upon the policy "unless commenced within twelve months next after the loss shall have occurred," and that the lapse of that time shall be taken as conclusive evidence against the validity of any claim under the policy. The loss occurred May 24, 1885, and this action was not brought until March 24, 1887. It is claimed by plaintiff, however, that proofs of loss were not furnished until April 1, 1886, and that the twelve-months limitation did not commence to run before that date, and therefore the action was brought in time. This presents the question of the construction of such limitation clauses, which has often vexed the courts. It is undoubtedly true that a majority of the adjudications so interpret these limitations as to allow the full time to sue after the right of action has accrued, although more than the limited time has elapsed since the loss occurred. We cannot assent to the doctrine of these cases. They rest upon the alleged necessity of harmonizing conflicting provisions. In these cases, as in this, the policies provided that the loss should not be payable until a specified number of days after the proofs of loss. There is no conflict between such a provision and another part of the same policy requiring the action to be brought in twelve months, or any other time, after loss shall have occurred, provided, of course, a reasonable time is left after the cause of action has become perfect in which to sue. The error which appears to this court to lie at the foundation of these decisions is the assumption that the insurance company intended to give the insured the full time specified, during every moment of which he might institute his action. What right has any tribunal to find hidden somewhere in the contract a privilege to have the full time to sue after the cause of action has accrued, when the policy gives it only from the time the loss occurs? There are two distinct provisions--one that the insured shall not sue before a certain time, and another that he shall not sue after a certain time. These do not clash. They merely necessitate the construction that the intention was to give the insured such period in which to maintain his action after he could sue as would be left after deducting from the time limited the time which must elapse before the right to sue could accrue.
But we find in these cases this extraordinary reasoning: They assert that this doctrine will often kill the action before it could have life. The answer is short and simple. Every limitation in a contract is void which does not leave the plaintiff a reasonable time in which to sue after his right to sue has become perfect. When an insurance company has declared that a suit must be brought within forty days after loss has occurred, and that no action shall be maintained until thirty days after proof of loss, the duty of the court is not to interpolate into the contract a provision that the limitation runs from the date the cause of action accrues in place of one expunged by the same process, to-wit: the provision that the time runs from the time the loss occurs, which is the date of the fire; but the court should invoke against the company the rule that a right of action shall not, in effect be destroyed by a limitation which leaves the plaintiff an unreasonably short time to sue after his cause of action has accrued, and declare the limitation clause void. If other provisions of the policy make it appear that in every case a reasonable time will not be left after the right to sue has become perfect, the limitation is void. If, acting in good faith, and with all proper diligence, it transpires in any particular case that other provisions of the policy to be complied with as conditions precedent to a right of action could not be performed in time to leave a reasonable time thereafter in which to sue, the limitation is inoperative in such a case; and, if the company has induced the insured to believe that the loss will be paid, or that the limitation will not be insisted on, until it is too late to sue, the limitation is waived. Thus the insured is fully protected by the application of known and established principles. The contract is construed as it is written, and the time when the limitations begin to run, if at all, is fixed, and not uncertain. In Johnson v. Insurance Co., 91 Ill. 92, the limitation provision required the action to be brought within twelve months after the "loss occurred," and it was declared that no action should be commenced until sixty days after proof of loss. Said the court: ...
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