Webster v. United States Fidelity & Guaranty Co

Citation169 Miss. 472,153 So. 159
Decision Date12 March 1934
Docket Number31047
PartiesWEBSTER v. UNITED STATES FIDELITY & GUARANTY CO
CourtMississippi Supreme Court

Division A

1. INSURANCE. Subsequent fidelity bond held intended to cover losses occurring during period of prior bond only if they would have been recoverable under prior bond if it had continued in force, and hence did not cover alleged dishonest acts of bank president not discovered until more than year after subsequent bond expired.

Prior fidelity bond provided that it covered losses discovered during term of such bond or within six months thereafter, or within six months from death or dismissal or retirement of employee from service of bank within period of bond whichever event should first happen; and subsequent bond had no provision limiting time within which losses thereunder must be discovered, but rider provided that subsequent bond should cover losses under prior bond discovered before expiration of time limited in subsequent bond for discovery of loss thereunder, "and which would have been recoverable under prior bond had it continued in force," and that nothing therein contained should be construed to increase time for discovering or making claim for loss under prior bond beyond what would have been the time had it continued in force.

2 INSURANCE. Provision in fidelity bond limiting liability to losses discovered within certain period held not invalid as changing statutory limitation period for bringing suit (Code 1930, section 2294).

Provision was not invalid, since it did not attempt to change or limit limitation period for bringing suit, but was rather a provision stating what class of losses was covered thereby and limiting liability thereunder to losses discovered within time fixed.

3. INSURANCE. As respects losses occurring during term of subsequent fidelity bond, rider to such bond, which rider provided that subsequent bond was continuation of prior bond, held not to incorporate in subsequent bond limitation in first bond respecting discovery of losses within fixed time.

Only purpose of provisions of rider, when considered together, was to continue prior bond for purpose of permitting recovery under subsequent bond for any losses recoverable under terms of prior bond.

4 INSURANCE.

Recovery under fidelity bond covering bank officers held limited to sum fixed by bond schedule for particular officer involved.

HON. JAS. A. FINLEY, Chancellor.

APPEAL from chancery court of Alcorn county, HON. JAS. A. FINLEY, Chancellor.

Bill by E. M. Webster, receiver of the First National Bank of Corinth, Mississippi, against the United States Fidelity & Guaranty Company. From a decree sustaining general and special demurrers to the bill, complainant appeals. Reversed and remanded.

Reversed and remanded.

Chester L. Sumners, of Corinth, and Fred B. Smith, of Ripley, for appellant.

The office of a demurrer is to submit to the court the sufficiency of the facts charged to support the legal conclusions essential to the complainant's right of action.

Tennent v. Bardsdale, 3 So. 80; Griffith's Chancery Practice, p. 287.

There is no limitation in the bond as to the time in which any loss was to be discovered, notice given or proof made; and if there is any such limitation, it is void, as being violative of section 2294 of the Mississippi Code of 1930.

When you construe the old bond in connection with the terms and provisions of the rider dated May 14, 1928, it becomes apparent that even the losses accruing prior to the time of the bond were not required to be discovered within any limited period of time.

While we cannot see where there is any ambiguity in the bond relative to this matter, still if the terms of an insurance or indemnity contract are ambiguous they must be construed most favorably to the insured and against the insurer.

Georgia Casualty Co. v. Cotton Products Co., 132 So. 73; U. S. F. & G. Co. v. Citizens State Bank, 116 So. 605; Home Ins. Co. v. Moore & Rawls, 117 So. 524; Murray v. Metropolitan Life Ins. Co., 145 Miss. 266, 110 So. 660; Boyd v. Home Ins. Co., 21 So. 708; Shivers v. Farmers Mutual Fire Ins. Co., 55 So. 965; New York Life Ins. Co. v. Blalock, 110 So. 432; 25 C. J. 1091.

It is apparent from the plain provisions and stipulations of the bond itself, especially in view of the foregoing legal conclusions, that the court was in error in sustaining the general demurrer.

It is a settled rule of law that the court of a state will not inforce and sustain the terms and provisions of a contract which are contrary to or in violation of the Constitution or statutes of the state.

13 C. J. 255; Ivey v. Lalland, 42 Miss. 444; Mitchell v. Wells, 37 Miss. 235; Dodson v. Telegraph Co., 97 Miss. 105; Assurance Co. v. Walker, 99 Miss. 404.

Any attempt direct or indirect, to limit the time in which a suit might be brought contrary to the limitation imposed by our general statute are void and any condition attempting to limit the time within which notice of loss must be given is an attempt to limit the time in which the action may be brought and therefore void.

I. C. R. R. v. Jordan, 108 Miss. 140; Standard Accident Ins. Co. v. Broom, 111 Miss. 409; Sovereign Camp v. Miller, 125 Miss. 502; Stuyvesant Ins. Co. v. Smith Motor Sales Co., 99 So. 575; National Casualty Co. v. Mitchell, 138 So. 808; Hartford Accident & Indemnity Co. v. Delta & Pine Land Co., 150 So. 205.

The court erred in sustaining the special demurrer which excluded all losses prior to 1928 and limited the recovery to ten thousand dollars.

Fourth and First Bank & Trust Co. v. Fidelity & Deposit Co., 281 S.W. 785, 45 A. L. R. 610.

W. C. Sweat, W. H. Kier, Ely B. Mitchell and B. F. Worsham, all of Corinth, for appellee.

Our first proposition is that the court properly sustained the general demurrer for the reason that the bill shows on its face that there is no liability under the terms and conditions of the bond, that the discovery must have been made by the appellant within six months from the retirement of Mr. Hazard from the bank, and it is shown on the face of the bill that the discovery was not so made.

1 Couch on Insurance, sec. 183; Rabok Mfg. Co. v. Scottish U. & N. Ins. Co., 236 S.W. 918; Krohnberg v. Federal Ins. Co., 171 N.Y.S. 169; Home Ins. Co. v. Currie, 54 F.2d 203.

Discovery of loss in accordance with the terms of the policy is a condition of liability and not a limitation on the right to sue.

U. S. F. & G. Co. v. Mims Williams, 96 Miss. 10, 49 So. 742; Berry v. Lamar Life Ins. Co., 165 Miss. 405, 142 So. 445; New York Life Ins. Co. v. Alexander, 122 Miss. 813, 85 So. 93, 15 A. L. R. 314; Wheeler v. Conn. Mutual Ins. Co., 82 N.Y. 550, 37 Am. Rep. 597.

A fidelity guaranty bond may, without contravening public policy, limit the liability of the insurer, or such losses occurring and discovered within a specified term, where such guaranty does not attempt to fix the period within which suit shall be brought, and such a provision does not amount to a limitation as to time of bringing suit.

5 Couch on Insurance Law, sec. 1199 V; Colony State Bank v. Watson, 104 Kan. 3, 177 P. 544; Ballard County Bank v. U. S. F. & G., 150 Ky. 236, 150 S.W. 1; Ladies of Modern Maccabees v. Illinois Security Co., 196 Mich. 27, 163 N.W. 7; First National Bank v. National Surety Co., 228 N.Y. 469, 127 N.E. 479; City Bank v. Bankers L. N. Cas. Co., 206 Wis. 1, 238 N.W. 819.

Under a fidelity bond, which limits the risk to a loss sustained and discovered during the continuance of the bond, and within six months from the time the employee ceases to be in the service, the bonding company is not liable for any loss discovered more than six months after the termination of the continuance of the bond, whether the employee has quitted the service or not.

5 Couch on Insurance, sec. 1199U; Union C. L. Ins. Co. v. Prigge, 90 Minn. 376, 96 N.W. 917; Guaranty Co. of North America v. Mechanics S. B. & T. R. Co., 26 C. C. A. 146, 80 F. 766; Chico Bank v. U. S. F. & G. Co., 161 S.C. 33, 159 S.E. 454, 77 A. L. R. 857; 14 R. C. L. 1268; Ballard County Banks, Assignee, v. U. S. F. & G. Co., 150 Ky. 236, 150 S.W. 1, 2 Ann. Cas. 1914; 25 C. J. 1096; De Jernette v. Co., 98 Ky. 558, 33 S.W. 828; Mayor of the City of Brunswick v. Harvey, 114 Ga. 733, 40 S.E. 754; Ladies v. Illinois Co., 196 Mich. 27, 163 N.W. 7; Thompson v. American Surety Co., 42 F.2d 953; A. S. Co. v. Pauly, 170 U.S. 133, 42 L.Ed. 977.

It is clear from the provision that losses under the prior bond could not be recovered on this bond or on the prior bond, unless the same had been discovered within six months from the termination of the prior bond, which was not done.

U. S. F. & G. Co. v. Williams, 96 Miss. 10, 49 So. 792.

The insured is bound to discover the loss during the prescribed period, and if he fails to do so the insurance company is not liable.

14 R. C. L. 1268, sec. 443; 43 R. C. L. 995; Colony State Bank v. Watson, 104 Kan. 3, 177 P. 544; Ballard County Bank v. U. S. F. & G. Co., 150 Ky. 236, 150 S.W. 1, Ann. Cas. 1914C, 1205; Phillips-Jones v. Fidelity & Deposit Co., 200 A.D. 629, 193 N.Y.S. 642; Guaranty Co. of N. A. v. Mechanic Savings Bank & Trust Co., 26 C. C. A. 146, 47 U. S. R. P. 91, 80 F. 766; Mitchell Grain & Supply Co. v. Maryland Casualty Co. of Baltimore, 108 Kan. 379, 16 A. L. R. 1488.

Argued orally by C. L. Sumners, for appellant.

OPINION

Cook, J.

This is an appeal from a decree of the chancery court of Alcorn county sustaining both general and special demurrers to an original bill of complaint filed by E. M. Webster, receiver of the First National Bank of Corinth, Mississippi, against the United States Fidelity & Guaranty Company, seeking to recover against defendant surety company on...

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