Home Insurance v. Continental Insurance

McLaughlin, J.: This action was brought upon a policy of reinsurance issued by the appellant, the Continental Insurance Company, to the respondents, the Home Insurance Company of New York and the Phcenix Insurance Company of Hartford, The plaintiffs had a judgment for the amount claimed, from which the defendant has appealed. The facts as to which there is no dispute are as follows: On the 13th of June, 1895, the plaintiffs issued a joint policy insuring certain property of one Heilner, for the term of one year, in the sum of $10,000 against all direct loss or damage by lire, and on the sixteenth of July following the defendant issued to the plaintiffs a policy for $5,000, reinsuring their risk “ against all direct loss or damage by fire, except as hereinafter provided.” The policy issued by the defendant contained this clause: “ This policy is subject to the same risks, conditions, valuations, endorsements and assignments as are or may be assumed or adopted by the Home Insurance Company of New York and the Phcenix Insurance Company of Hart [64] ford, Conn., and the loss, if any, payable pro rata at the same time and in the same manner as by said Companies.” On the 12th of August, 1895, a fire occurred and some of the property insured was damaged to the" extent of $3,000. Intermediate the issuance "of the defendant’s policy and the fire,-at the request of Heilner and without notice to the defendant, the plaintiffs had reduced Heilner’s insurance from $10,000 to $2,000, which was the amount he had upon the property when the fire occurred. On the 8th of October, 1895, the plaintiffs paid to Heilner the sum of $2,000, the loss sustained, together with $14.10, the reasonable and necessary expenses incident to the adjustment of the loss, which sum it requested the defendant to pay. The defendant refused to make such payment, at the same time tendering to the plaintiffs the sum of. $1,007.05, .one-half of the amount which they had paid and which it claimed was the total" amount for which it was liable. The referee held that .the defendant, under its policy, was liable as already indicated, for' the full amount paid by the plaintiffs to Heilner. In reaching this conclusion we are of the opinion that the referee erred. By the terms of the policy of reinsurance the defendant was only liable to pay one-half of the loss sustained by the plaintiffs. Its policy so provides. The language is “ the loss, if any, payable pro ratoj at the same time and in the same manner as by said Companies.” This clearly and unmistakably contemplates that the defendant is not bound to pay the full amount reinsured, but only such a proportion of the amount of the loss as is in the ratio of the amount of the reinsurance to the amount originally insured, a contract of indemnity to this extent and nothing more. To give the policy of reinsurance the construction put upon it by the learned' referee is to make a new contract for the parties, or else to eliminate the words quoted from the one which they made. The legal effect of this clause was to fix the defendant’s liability in case of loss to just what the plaintiffs’ liability was. This was the purpose of the contract, and this is what the words used accomplished. (Blackstone v. Alemannia Fire Ins. Co., 56 N. Y. 104; Consolidated Real Estate & Fire Ins. Co. v. Cashow, 41 Md. 59 ; Illinois Mutual Fire Ins. Co. v. Andes Ins. Co., 67 Ill. 362; Imperial Fire Ins. Co. v. Home Ins. Co., 68 Fed. Hep. 698.) Blackstone v. Alemannia Fire Ins. Co. (supra) is directly in point. There, the policy of reinsurance provided that [65] the “ loss, if any, payable pro rata, and at the same time with the re-insured.” The reinsurance was for half the amount originally insured. A loss occurred which was less than the amount of the original insurance and it was held that the defendant, by virtue of such clause, was bound to pay only one-half of the actual loss sustained. Judge Johnson, delivering the opinion of the court, referring to the clause of the policy quoted, said: “ By virtue of the first part of this manse the defendant is not bound to pay the full amount re-insured by its policy, but only such a proportion of the amount of the loss as is in the ratio of the amount of the re-insurance to the amount originally insured. Thus, the defendant’s re-insurance being for half the amount of the original insurance, the defendant is to pay half the loss.” In Consolidated Real Estate & Fire Ins. Co. v. Cashow (supra) a company issued its policy for $10,000, and reinsured its risk to the extent of $5,000 with the Consolidated Insurance Company. The property insured was destroyed and a loss sustained to the extent of $9,000. The plaintiff Cashow, as an assignee of the claim against the reinsurer, brought an action upon the policy of reinsurance which contained a clause similar to the one here under consideration. The court there held, following the decision in Blackstone v. Alemannia Fire Ins. Co., that the reinsurer became liable only for that proportion of the loss which the amount of reinsurance bore to the amount of original insurance. In Illinois Mutual Fire Ins. Co. v. Andes Ins. Co. (supra) the original policy was for $6,000. The policy of reinsurance issued by the defendant was for $2,000. A fire occurred and the amount paid was $600. It was there held that inasmuch as the reinsuring policy was only one-third of the amount of the original policy, that under the pro rating clause the reinsurer was only liable to pay one-third of the loss. (See, also, Imperial Fire Ins. Co. v. Home Ins. Co., supra, where the Blaekstone case is cited with approval.) In the case at bar the original insurance, as we have already said, was for $10,000. The amount of reinsurance was for $5,000, or one-half of the original insurance. Upon principle, as well as under the authorities cited, it seems to us that the proper construction of the clause in defendant’s policy, providing that the loss, if any, [66] should be “payable joro rata” made the defendant liable to the plaintiffs for fifty per cent of the loss which they sustained under their policy, and no more. The judgment, therefore, must be reversed and a new trial ordered before another referee, with costs to the appellant to abide the event. O’Brien, Ingraham, Hatch and Laughlin, JJ., concurred. Judgment reversed, new trial ordered before another referee, 'with costs to appellant to abide event. . '