Word v. Southern Mutual Insurance

Fish, J. Frank Word sued the Southern Mutual Insurance Company for the sum of $4,000, the value of his dwelling-house, which was totally destroyed by fire while he held a policy of insurance upon it, for that amount, issued to him by the defendant company. The policy sued upon was issued to the plaintiff by the defendant-on the 28th of March, 1894, and was renewed, upon the payment of the premium required, year by year. The premises insured were destroyed by fire on the 16th of April, 1899. The loss plaintiff sustained by the destruction of his dwelling-house was appraised at-$4,000, and this appraisement was acquiesced in by both parties to-the contract of insurance. The only dispute between them was as to the amount for which the insurancé company was liable to the plaintiff; he churning that it was liable for the full amount of the loss sustained by him, and the defendant claiming that it was hable for only three fourths of this amount. The case was, by consent of parties, submitted to the judge below upon an agreed statement of facts. He found in favor of the contention of the defendant, and rendered judgment accordingly; to which judgment the plaintiff excepted. Under the policy the defendant insured the plaintiff “ against loss or damage by fire to the amount of four thousand dollars,” for the term of one year from the date of the policy, upon his brick dwelling-house, the policy stipulating “ that the funds of said company are bound and made subject to indemnify the said assured . . for all immediate loss or damage which may happen to said property by fire, within the term aforesaid, not exceeding the amount above named, and not exceeding three fourths the actual value of said property when the loss occurs.” This “ three-fourths ” clause was printed in larger and more conspicuous type than the rest of the policy. The plaintiff’s contention is, that, as his loss did not exceed the amount-of insurance named in the policy, the insurance company is liable to587 him for the full amount thereof, notwithstanding the presence in the policy of the clause by which the company sought to limit its liability to three fourths of the actual cash value of the property at the time when a loss should occur. On the other hand, the position of the defendant is, that, by reason of the presence of this clause in the policy, it is hable to the plaintiff for only three fourths of the actual cash value of the property at the time that it was destroyed. In support of his contention, the plaintiff relies upon the provisions of section 2110 of the Civil Code, which are taken from the act of November 23,1895. These provisions are as follows: “Allinsurance companies shall pay the full amount of loss sustained upon the property insured by them: Provided, said amount of loss does not exceed the amount of insurance expressed in the policy; and all stipulations in such policies to the contrary shall be null and void.” The defendant concedes that if the provisions of this section of the Civil Code apply to the present case, the plaintiff is entitled to recover the amount which he claims, but contends that they are not applicable. 1. The defendant is a mutual insurance company, and one of its contentions is, that this section of the Civil Code is not applicable to contracts of fire-insurance made by and with a mutual insurance company. In our opinion, this contention is not sound. The language of the section is too broad and sweeping for such a construction to be placed upon it; it embraces “ all insurance companies.” No exemption is made in favor of mutual insurance companies. At the time that the act of 1895 was passed, the defendant company was in existence as a mutual insurance company, and carrying on its business in Georgia; under a charter granted by this State in 1847. It is not at all probable, and is scarcely conceivable, that the General Assembly intended that this old and well-established mutual fire-insurance company, or any other mutual fire-insurance company, should be exempt from the provisions of an act in express terms applicable to “ all insurance companies,” when no provision for such exemption was made. The language employed by the legislature, and subsequently incorporated in the Civil Code, precludes the idea that there was any intention that contracts for fire-insurance made by mutual insurance companies should not be affected by the provisions of the statute. It is well settled that, unless expressly exempted by statute, mutual insur — 588 — anee companies are included under a general law which, in its terms, applies tp all insurance companies. 16 Am. & Eng. Enc. L. 24; McConnell v. Iowa Mut. Aid Assn., 79 Iowa, 757; State v. Miller, 66 Ib. 26; Sherman v. Commonwealth, 82 Ky. 102; State v. Nichols, 78 Iowa, 747; Farmer v. State, 69 Tex. 561; Order of International Fraternal Alliance v. State, 77 Md. 547; Rockhold v. Canton Masonic Benev. Soc., 129 Ill. 440. 2. The defendant further contends, that even if the law of this section of the Civil Code applies to mutual fire-insurance companies, it can not apply to its fire-insurance contracts, because it “is protected by its charter against the application of the act of 1895.” In other words, it claims that in its charter there is a contract between the State and itself, which gives it the right, when insuring property — no matter what may be the amount of insurance named in the policy — to limit its liability under the contract of insurance to three fourths of the value of the property insured, and that the provisions of the act of 1895 can not be applied to its fire-insurance contracts without violating that provision of the constitution of the United States which prohibits any State from passing a law impairing the obligation of a contract. One reply of the plaintiff to this position of the defendant is, that by the act of November 23, 1866, it was granted a new charter, and that this new charter, being granted subsequently to the adoption of the Code of 1863, was, by reason of the provisions of section 1682 of that Code (now contained in section 1880 of the Civil Code) subject to alteration or amendment by the General Assembly. This reply of the plaintiff is without merit, for the act of November 23, 1866, was not the granting of a new charter to the insurance company, and really did not make any material or substantial amendment in the original charter. It simply amended the first section of the original, act of incorporation, by providing that the company should keep its principal office in the town of Athens, in this State, unless otherwise determined by a majority of the votes of the company. 3. The provision of its charter upon which the defendant relies is found in section 3 of the act of incorporation, which provides “ That said corporation may insure, for any term not exceeding ten years, any [property] against any damage or loss from fire, . . and, to any amount not exceeding three fourths of the value of the property insured, and not exceeding ten thousand dollars on any — 589 — one block of buildings, or stock of goods.” The defendant contends that it was here given the right, when insuring property, to limit its liability to three fourths of the value of the property when a loss occurs, no matter what may be the amount of insurance named in the policy. We do not so understand this provision of the charter. Clearly, it simply limits the extent to which the company can insure property to three fourths of the value of the property insured, and does not confer upon the company the right to insure property in any sum that it pleases, and yet limit its liability to three fourths of the value of such property. To limit the power of an insurance company to insure .property to three fourths of the value of the property is one thing, and to confer upon the company the right to limit its liability, under any contract that it may see fit to make, to three fourths of the value of the property insured, is another and a very different thing. In the one case the hmitation is upon the corporate power of the company, and is made by the State; in the other the limitation is upon the liability of the company, and is made by the company. By applying the provisions of the act of 1895 to fire-insurance contracts made by the defendant company, the “three-fourths” clause in its charter is not affected in the slightest degree, for the company’s power to insure property is neither diminished nor increased, and no right granted to the company is affected at all. There is no conflict between the act of 1895 and the charter of this insurance company. If the company will only insure property to the extent that it is authorized by its charter, it can never be made hable for more than three fourths of the value of the property which it insures. If it be said, as contended in this case, that the property insured may depreciate in value between the time when the contract of insurance is entered into and the time when a loss thereunder occurs, the reply is, that the three-fourths value limitation in the charter evidently has reference to the value of the property at the time the contract of insurance is entered into. For, in any case, it would be the value of the property at the time the company exercised its power to insure which would be taken into consideration in determining whether or not the company then exceeded this power. The provisions, in section five of the charter, for ascertaining and determining, after a loss has been sustained by the insured, whether, the company is hable at all to the insured, and, if hable, in what amount, — 590 — are not inconsistent with this view. The company has no power to insure property to an amount exceeding three fourths of its value; and if it insures property to an amount not exceeding three fourths of its value at the time the insurance is effected, it does not follow that the entire amount named in the policy must necessarily be paid, if a loss occurs. The property may so depreciate in value between the date of the issuance of the policy and the date of the loss as to render the loss sustained by the insured less than the amount of insurance named in the policy; or the loss may be only a partial one, and less in amount than the amount of insurance specified in the policy. In either of these events,.the company could not be required to pay more than the actual loss sustained. In estimating the loss and the amount of the liability of the company therefor, the actual value of the property destroyed should be taken into consideration; but in determining whether or not the company has exceeded the power granted to it in its charter, by insuring property to an amount exceeding three fourths of its value, necessarily it is the value of the property at the time the company issues the policy which must be taken into consideration. If the amount of insurance named in the policy is no more than three fourths of the value of the property when the insurance is effected, the company has not exceeded its power; if the amount designated in the policy is more than this, the company has exceeded its power. We are of opinion that there is neither literally nor in substance, in the charter under consideration, any contract between the State and the company which will be violated by applying to the policies issued by the company the provisions of the act of 1895. The question whether or not the contract is ultra vires is not made in this case. It is true that one of the pleas of the defendant was that “it is restricted in the payment of losses sustained by its policy-holders to an amount not exceeding three fourths of the value of the property insured.” But this was evidently not intended to be a plea that the contract, either in whole or in part, is ultra vires; for the argument in behalf of the defendant in error has not proceeded upon that theory, but has been as heretofore indicated. The company seeks not to repudiate its- contract, either wholly or partially, but contends that, giving effect to the contract just as it is written, it is only liable for three fourths of the value •of the insured property at the time that the loss occurred. Even — 591 — interpreting this plea in the light of its language alone, the company pleads, not a want of power to insure property for more than three fourths of its value, but that it “is restricted in the payment of losses sustained by its policy-holders to an amount not exceeding three fourths of the value of the property insured.” The charter, as we have seen, limits the power of the company to insure property, not the liability of the company to pay losses sustained by the insured. The company, having insured property to its full value, by this plea questions, not the validity of the contract which it made with the insured, but the right of the State to subject that contract to the provisions of the law which requires all insurance companies to pay the full amount named in the policy, if the loss sustained by the insured amounts to so much. The defense of ultra vires to an action on a contract, the benefits of which the defendant has enjoyed, is not considered a gracious one, is not favored by the courts, and must be clearly pleaded, to be considered. Certainly a court will not construe a plea of doubtful meaning to be a plea of ultra vires when the defendant has not placed that construction upon it. It is, therefore, unnecessary to determine whether or not the company, after having received and enjoyed the full benefits of the contract, could maintain such a defense. 4. Another defense set up was, that at the first annual meeting of the policy-holders of the defendant company held after the passage of the act of November 23, 1895, a resolution was unanimously passed that, in case it should be held that this company came within the operation of that act, the members of the company waived and renounced all benefits, if any, which they might have under said act, and authorized and instructed the officers and directors of the company “to adhere to the time-honored rule prescribed by the charter and inserted in the policies issued by the company, namely, of indemnifying the assured to an amount not exceeding that named in the policy and not exceeding three fourths of the cash value of said property when the loss occurs.” The act of 1895 declared a public policy with reference to fire-insurance contracts, and, as- we have seen, it was operative upon purely mutual insurance companies, as well as all others. It is too clear for argument, therefore, that the members of a mutual fire-insurance company could no more resolve the company out of the operation — 592 — of this act than the stockholders in any other fire-insurance company could, by a simple resolution, nullify the act of the General Assembly so far as it affected their particular corporation. The act being intended to apply to mutual fire-insurance companies, such companies could not escape its force and effect by any action that their members or policy-holders might take. 5. Nor is there any merit in the defense that the plaintiff was “ estopped from repudiating said three-quarter clause and refusing to he bound by the same when it [was] sought to be enforced against him,” because he had been from March 28,1879, to the date when the loss sued for occurred, continuously, a policy-holder in the defendant company, during all of which time he had “received the benefit of the enforcement of said three-quarter clause against the policy-holders who . . sustained losses covered by their policies in defendant company, in the increased dividends paid in each year since he became a member of said company.” If a policy-holder in a mutual fire-insurance company could, under any circumstances, be estopped from insisting upon the invalidity of a clause in his policy which the law declares shall be null and void in every fire-insurance policy where it may occur, it is very clear that the plaintiff in the present case is not estopped because, in the language of counsel for the defendant company, “he has taken since 1895 the benefit arising from the non-application of the act in the cases of all the other policy-holders who have sustained losses, in the increased dividends he has received each year.” It is evident that the acceptance hy him, after the passage of the act of 1895, and before the issuance of the policy now under consideration, of dividends upon policies held by him, had nothing to do with the making of the present contract. He did not, by accepting these dividends, induce the company to make this contract. The company would, in all probability, have made the same contract with bim if he had never previously held a policy issued hy it. He did no act and made no representation to the company by which it was misled or deceived, and upon which it acted, when it issued to him the policy sued upon. Judgment reversed. All the Justices concurring, except