Michigan Mortgage-Investment Corp. v. American Employers' Insurance

Sharpe, J. On March 14, 1924, the defendant issued a policy wherein it agreed to indemnify plaintiff for one year in a sum not exceeding $5,000 for any loss occasioned by the embezzlement or misappropriation of its funds by any of the employees named therein, among whom was Gfretchen K. Colt. On March 14, 1925, it issued what is called a “continuation certificate,” reading as follows: “In consideration of the sum of eighty-five and no-100 dollars ($85.00) Schedule Bond F6, issued to Michigan Mortgage-Investment Gompany on the fidelity of the employees guaranteed as per schedule is hereby continued' in force from noon of the 14th day of. March, 1925, tp. noon of the 14th day of March, 1926, subject tb.all. the terms' and conditions in the aforesaid bond, “Provided, however,'that- the aggregate liability of the company from the effective date of said Schedule Bond-No. F6 to the .date of the expiration of-this certificate, for or on account of any act or acts of any one of the employees covered, shall not exceed the greatest amount for which the company shall have specifically guaranteed such employee since the effective date of said bond.” *74 The record discloses that plaintiff suffered a loss within the terms of the policy by the misappropriation of funds by Mrs. Colt in excess of $5,000 in each of those years. The question here presented is whether the proviso in the continuation certificate limits defendant’s liability under both the policy and the certificate to $5,000. Counsel for the plaintiff insists that the continuation certificate created a new contract, separate and distinct from that entered into the year before. There appears to be a conflict in the authorities as to the effect to be given to such a renewal certificate. They are reviewed at some length in a note to 42 A. L. R., at page 834 et seq. The law in this State was, we think, settled in Ladies of Maccabees v. Surety Co., 196 Mich. 27. It was there held that a renewal certificate in language quite similar to that before us created a new contract. The issue there presented was the right of plaintiff to recover under the bond first given. It appeared that the action had not been brought within one year after the termination of the period for which liability attached thereunder. The question here presented was not considered. But, assuming that by the issue of the continuation certificate- a new contract was entered into, extending the indemnity provided for in the old one, the liability under that first issued was limited by the provision therefor in the continuation certificate. It is therein expressly provided that the “aggregate liability” from the effective date of the bond — ........ 1 ‘ shall not exceed the greatest amount for which the company shall have specifically guaranteed such employee since the effective date of said bond” —and that amount was the sum of $5,000. The trial court so held, and with this conclusion we agree. To hold otherwise, this language would be’ meaningless. *75 A similar question was before tbe supreme court of Illinois in United States Fidelity & Guaranty Co. v. National Bank, 233 Ill. 475 (84 N. E. 670). The provision in the continuation certificate read as follows : ' “Provided the aggregate liability of the United States Fidelity & Guaranty Company from the date of the issuance of said schedule bond to the date of the expiration of this certificate, for or on account of any act or acts of any one of said persons, shall not exceed the sum written opposite that person’s name upon the attached schedule.” After discussing the claim of counsel for plaintiff that a new contract was created thereby, the court said: “Under the view we take of this case it is not necessary for us to decide which of these parties has made the better case, for the other. In our opinion the clause above quoted from the renewal certificate precludes appellee from recovering more than the face value of the original bond, together with the interest thereon.” The judgment is affirmed. Fead, C. J., and North, Wiest, McDonald, and Potter, JJ., concurred with Sharpe, J.