Waynesville Sec. Bank v. Stuyvesant Ins. Co.

• Decision Date: 30 August 1973
• Docket Number: No. 9329,9329
• Parties: WAYNESVILLE SECURITY BANK, Plaintiff-Respondent, v. STUYVESANT INSURANCE COMPANY, Defendant-Appellant.
• Court: Missouri Court of Appeals

Page 218

499 S.W.2d 218

60 A.L.R.3d 157

WAYNESVILLE SECURITY BANK, Plaintiff-Respondent, v. STUYVESANT INSURANCE COMPANY, Defendant-Appellant.

No. 9329.

Missouri Court of Appeals, Springfield District.

Aug. 30, 1973.

Charles T. Smallwood, Northern, Williams & Smallwood, Rolla, for defendant appellant.

Arthur B. Cohn, Waynesville, for plaintiff respondent.

HOGAN, Judge.

Plaintiff Waynesville Security Bank, mortgagee of a 'mobile home' owned by one Roy Randolph, brought this action for breach of contract as loss payee in a fire insurance policy issued by defendant Stuyvesant Insurance Company. The loss occurred after the policy had expired; the breach of contract alleged was failure to give the loss payee notice of the expiration of the policy and an opportunity to renew it. The cause was tried to the court on stipulated facts. The court found for the plaintiff and the defendant appeals. Our duty is to determine whether the trial court's judgment represents the proper legal conclusion on the facts stipulated. Jewel Tea Co. v. City of Carthage, 257 Mo. 383, 388, 165 S.W. 743, 744 (1914); Bartlett v. Nat'l Fin. Corp., 228 Mo.App. 789, 799, 73 S.W.2d 451, 457(11) (1934).

From the stipulation of fact, it appears that the policy sued on is a fire insurance policy issued to Mr. Randolph on December 9, 1969. It covers loss or damage to a trailer, or 'mobile home', by fire and other specified perils. The policy was endorsed to cover a different trailer in September 1970, but that endorsement is not material to the issues here presented. The term of the policy is typed clearly on its face. The policy contains no provision requiring notice of expiration on the expiration date. The loss payable clause, added by endorsement when the policy was amended, is a 'standard' or 'union' clause. It provides that the plaintiff's interest 'shall not be invalidated by any act or neglect of the . . . Mortgagor or Owner', and further states that 'in case the Mortgagor or Owner shall neglect to pay any premium due under (the) policy the Lienholder shall, on demand, pay the same.' The insurer reserves the right to cancel the policy upon notice to the lienholder, but the loss payable clause makes no provision for notice of the expiration of the policy, does not mention renewal, and concludes with the provision that '(n)othing herein contained shall be held to vary, alter, waiver or extend any of the terms, conditions, agreements or limitations of such policy, other than as above stated.' (Emphasis added.)

It is stipulated that the policy expired on December 9, 1970, and that it was not thereafter renewed or reinstated. It is further stipulated that no notice of the expiration of the policy was given to the insured or to the plaintiff. The trailer was completely destroyed by fire on December 13, 1970, after the policy had expired. In this court, the defendant claims it was under no obligation to notify the loss payee of the expiration of the policy or afford it an opportunity to renew. The plaintiff claims that the loss payable clause is an independent contract binding the defendant to give notice of the expiration or cancellation of the policy for nonpayment of the premium. Plaintiff emphasizes that the loss payable clause insulates it from the consequences of 'any act or neglect of the . . . Mortgagor or Owner', and further maintains that the provision giving it the right to pay any premium due is ambiguous to the extent that it could reasonably be interpreted to require notice of expiration or the insurer's intention not to renew the policy.

Plaintiff's arguments are cleverly contrived but unsound. True, a standard or union mortgage clause operates as an independent contract of insurance between the mortgagee and the insurer which cannot be defeated by a breach of the conditions of the policy on the part of the mortgagor or solely by his act, General Motors Accept. Corp. v. Western Fire Ins. Co., 457 S.W.2d 234, 236 (Mo.App.1970), but because the loss payable clause is endorsed subject to the 'terms, conditions, agreements or limitations' of the policy, the insurer's obligation to the plaintiff is no broader than its obligation to the insured, except as specifically stated in the endorsement. Ford v. Iowa State Ins. Co., 317 Mo. 1144, 1153--1156, 298 S.W. 741, 745--746, 56 A.L.R. 842, 848--850 (1927); General Motors Accept. Corp. v. Western Fire Ins. Co., supra, 457 S.W.2d at 236--237(1)(2); 43 Am.Jur.2d Insurance § 770, pp. 754--755 (1969).

Plaintiff tacitly concedes as much, but asserts that by the terms of the endorsement, it was entitled to notice of cancellation of the policy for nonpayment of the premium. The difficulty with this argument is, in the first place, that the policy was not cancelled during its term. This policy was not a continuing policy, contingent upon payment of premiums as they became due periodically, as were the policies construed in Mitchell v. Farmers Ins. Exchange, 396 S.W.2d 647, 650(1) (Mo.1965), and in M.F.A. Mut. Ins. Co. v. Quinn, 259 S.W.2d 854, 859(5) (Mo.App.1953). The policy period was '12 Months' from '12/9/69' to '12/9/70' with no mention of renewal or of any grace or extension period. This policy was not 'cancelled'. Plaintiff, in its brief, treats the terms 'cancellation' and 'termination' as synonyms, but they are not. 'Cancellation,' as used in insurance law, means termination of a policy prior to the expiration of the policy period by act of one or all of the parties; 'termination' refers to the expiration of the policy by lapse of the policy period. Beha v. Breger, 130 Misc. 235, 223 N.Y.S. 726, 731(7) (1927); U.S.F. & G. Co. v. Security F. & I. Co., 248 S.C. 307, 149 S.E.2d 647, 650(8) (1966). In this case, the policy 'terminated' or 'expired' by lapse of the policy period. Plaintiff's argument that it did not receive notice of cancellation is therefore wholly without merit.

It is further argued by the plaintiff that the provision in the loss payable clause providing that plaintiff's interest shall not be invalidated by any act or neglect of the mortgagor, and the provision that should the mortgagor neglect to pay any premium due, the mortgagee shall, on demand, pay the premium, are ambiguous and create an inference that the mortgagee will be given notice of the expiration of the policy. This argument is strained and tenuous. The standard or union loss payable clause protects the mortgagee's interest against the mortgagor's breach of the conditions of the policy, General Motors Accept. Corp. v. Western Fire Ins. Co., supra, 457 S.W.2d at 236 (emphasis added), but here there is no provision in the policy requiring the insured to renew it, and the disconnected sentence giving the plaintiff, as mortgagee, the right to pay any premium due if the mortgagor fails to do so is but declarative of the general law. See 55 Am.Jur.2d Mortgages § 268, p. 359 (1971). We do not perceive the ambiguity contended for, and we are not authorized to enlarge the policy by judicial construction. Universal Towing Co. v. Hartford Fire Ins. Co., 421 F.2d 379, 381(4) (8th Cir. 1970).

This brings us to the meritorious question presented: Was plaintiff, as an insured under an independent contract incorporating the policy provisions, entitled to notice of the expiration of the policy and an opportunity to renew it, even though no policy provision required such notice? We think not.

We are aware that in some jurisdictions, statutes have been enacted which contemplate special consideration of the interests of property owners who are exposed to a high degree of risk but are unable to...