Winston-Salem Fire Fighters Club, Inc. v. State Farm Fire & Cas. Co., WINSTON-SALEM

• Decision Date: 14 June 1963
• Docket Number: No. 401,WINSTON-SALEM,401
• Citation: 131 S.E.2d 430,259 N.C. 582
• Parties: FIRE FIGHTERS CLUB, INC. v. STATE FARM FIRE AND CASUALTY COMPANY.
• Court: North Carolina Supreme Court

Page 430

131 S.E.2d 430

259 N.C. 582

WINSTON-SALEM FIRE FIGHTERS CLUB, INC. v. STATE FARM FIRE AND CASUALTY COMPANY.

No. 401

Supreme Court of North Carolina.

June 14, 1963

White & Crumpler by James G. White, Leslie G. Frye, and Harrell Powell, Jr., Winston-Salem, for plaintiff appellant.

Deal, Hutchins & Minor by Roy L. Deal, Winston-Salem, for defendant appellee.

RODMAN, Justice.

The policy as prescribed by statute, G.S. § 58-176, provided: 'Conditions suspending or restricting insurance. Unless otherwise provided in writing added hereto this Company shall not be liable for loss occurring (a) while the hazard is increased by any means within the control or knowledge of the insured, or (b) while a described building, whether intended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive days * * *. ' The endorsement 'DWELLING AND CONTENTS FORM (For Use in Writing Fire or Fire With Extended Coverage)', attached to the policy, granted permission '(a) For such use of premises as is usual or incidental to the described occupancy (emphasis supplied); (b) to be unoccupied for not exceeding 90 days at any one time (including 60 days allowed in policy), the term 'unoccupancy' being construed to mean a building that is entirely furnished but with personal habitants temporarily removed, provided premises are secured against intrusion during such period * * *'

The policy was delivered to plaintiff and the premium paid shortly after 19 July 1960, the effective date of the policy. Plaintiff retained the policy without suggesting a misdescription until it brought this suit. It alleged as a basis for reformation that when it applied for insurance it notified defendant's agent the building had been used as a dwelling, but plans were being made to change the building so as to adapt it to use as a club and with this information defendant's agent mistakenly described the building as a dwelling instead of a club house. It prayed that the policy be reformed so as to insure a club house instead of a dwelling.

Plaintiff does not allege fraud or mutual mistake; it merely alleges it gave defendant notice of an intent to remodel, at some future but not specified date, the building to fit it for service as a club house rather than as a private dwelling. There is neither allegation nor evidence to show what services the club would render its members. Would it provide quarters where members or guests could sleep? Would it serve meals? Would some member or employee of the club live there? Whatever the intent of the club might have been, the evidence discloses that nothing had been done to execute that intent when the fire occurred some ten months later. Plaintiff, when it received the policy, knew better than defendant whether the description of the building as a dwelling was then correct.

Plaintiff has neither alleged nor shown facts justifying a reformation of the policy sued on. Setzer v. Old Republic Life Ins. Co., 257 N.C. 396, 126 S.E.2d 135, and cases there cited. We do not understand plaintiff now contends it is entitled on its allegations and evidence to a reformation of the policy.

Plaintiff, by amendment to its complaint, pleaded a waiver of the policy provision which suspends the insurance if the property is continuously vacant or unoccupied for a period greater than that fixed by the policy or endorsement.

If an insurer, notwithstanding knowledge of facts then existing which by the language of the policy defeats the contract of insurance, nevertheless insures property, it will be held to have waived the policy provisions so far as they relate to the then existing conditions. Cato v. Hospital Care Assoc., 220 N.C. 479, 17 S.E.2d 671; Aldridge v. Greensboro Fire Ins. Co., 194 N.C. 683, 140 S.E. 706; Greene v. tan Ins. Co., 196 N.C. 335, 145 S.E. 616; Midkiff v. North Carolina Home Ins. Co., 197 N.C. 139, 147 S.E. 812; 29A Am.Jur. 193-194.

The contract provision relieving an insurer for liability for property destroyed by fire while 'vacant or unoccupied' is a reasonable and enforceable provision. Greene v. tan Ins. Co., supra; Alston v. Old North State Ins. Co., 80 N.C. 326, 29A Am.Jur. 109; 45 C.J.S. Insurance § 555, p. 298.

Historically, provisions protecting an insurer against the extra hazard created by vacancy have been incorporated in fire insurance policies for many years--first by contract without statutory sanction, Alston v. Old North State Ins. Co., supra, and later with statutory approval. The earliest statutory provisions rendered the policy void if vacant or unoccupied for more than ten days. See sec. 43, c. 54, P.L.1899, Rev. 1905, sec. 4760. The first modification in the statutory provisions was to change the provision from one voiding the policy to one suspending the insurance during the period of nonpermitted vacancy. C.S. 6437. Not until 1945 was the period of permissive vacancy extended from ten to sixty days as presently provided. See c. 378, S.L. 1945.

Policy provisions relating to vacancies which occur after the policy has issued cannot be waived by the issuing agent. Greene v. tna Ins. Co., supra; 29A Am. Jur. 197-198.

The courts are not in agreement in the interpretation and effect to be given to policy provisions and the waiver thereof when a vacancy exists to the knowledge of the insurer at the time the policy is issued. Some hold that a vacancy known to insurer when it issues the policy constitutes a waiver of the policy provision with respect to that vacancy. See Bledsoe v. Farm Bureau Mutual Ins. Co., Mo.App., 341 S.W.2d 626, 627. A few cases hold that a waiver created by knowledge of an existing vacancy is not limited to that vacancy but to any subsequent vacancy which may occur during the life of the policy. See McKinney v. Providence Washington Ins. Co., 144 W.Va. 559, 109 S.E.2d 480. Others, recognizing the recent change in policy provisions which merely suspend the insurance during a nonpermitted vacancy period hold that a vacancy existing at the time the insurance issues is not a waiver of the policy provisions. The insured has sixty days, or such other time as may be fixed by the policy and endorsements, in which to occupy the property. Old Colony Ins. Co. v. Garvey, 253 F.2d 299; Connelly v. Queen Ins. Co., 256 Ky. 602, 76 S.W.2d 906, 96 A.L.R. 1255, and annotations 1259 et seq.

Counsel has not called our attention to a decision by this Court, nor have we found any, applying the present policy provisions to a vacancy existing when the policy issues. The conclusion reached in Old Colony Ins. Co. v. Garvey, supra, accords with the interpretation given a policy provision by this Court in Johnson v. Rhode Island Ins. Co., 172 N.C. 142, 90 S.E. 124.

Plaintiff alleged, and it had the burden of proving, defendant issued the policy of insurance with knowledge that the building was not then occupied. Without such knowledge there could be no waiver of the policy provision. Swartzberg v. Reserve Life Ins. Co., 252 N.C. 150, 113 S.E.2d 270; Gouldin v. Inter-Ocean Ins. Co., 248 N.C. 161, 102 S.E.2d 846.

The evidence relating to occupancy when the policy issued comes from plaintiff's witness who purchased the insurance. He testified that he informed defendant's agent the property was purchased with the intent of converting the building into a club house. The building was occupied when plaintiff purchased in the latter part of 1959. The tenant had promised to surrender possession on 1 January 1960 but had not done so because of serious illness in her family. The witness further testified: 'I believe it was in the first part of February her son was in an accident, he was in a coma for several months, and we didn't feel like...