Joliffe v. Madison Mutual Insurance

LyoN, J. The application for the insurance upon the property covered by the policy in suit, signed by the plaintiff’s testator, contains the following condition, which is part of the — 115 — contract of insurance, viz: “‘Whenever a promissory note shall he taken for the cash premium, the policy in all such cases shall he issued upon the express condition that if said note is not paid within sixty days after the same shall become due, thereafter all obligations of the company to the insured shall be suspended until such time as the said note shall be fully paid.” The loss occurred while a portion of the cash premium, for which a note had been given, remained unpaid, and more than sixty days after such note became due. It occurred, therefore, at a time when, by the terms of the contract of insurance, the liability of the defendant company on the policy was suspended. This stipulation in the contract is not prohibited by statute, and is not against public policy. On the contrary, it is fair and reasonable that the insurer should be relieved from liability while the insured is in default in respect to payments of premiums, and like stipulations in insurance contracts have been enforced in numerous cases, among which are the following: Baker v. Union Mutual Life Ins. Co., 43 N. Y., 283; Pitt v. Berkshire Life Ins. Co., 100 Mass., 500; Wall v. Home Ins. Co., 36 N. Y., 167; Williams. v. Albany City Ins. Co., 19 Mich., 451; Beadle v. Chenango Co. Mut. Ins. Co., 3 Hill, 161. Other cases to the same effect will be found cited in Gorton v. Dodge Co. Mut. Ins. Co., decided herewith. Hence, there can be no recovery unless the defendant has waived the above condition. The condition was inserted in the contract for the benefit of the defendant, and manifestly it was competent for the defendant to waive it. Has it done so ? The only act of the defendant which is relied upon as such waiver, is the receij>t by it of the unpaid balance of the cash premium, after the loss. The precise question is, therefore, "Was the receipt of such balance by the defendant, after notice of the loss, a waiver of the condition of the contract by which the liability of the defendant on the policy was suspended when the loss occurred? Had the agreement been that in case of default the whole — 116 — cash premium should be considered earned, and that the liability of the insurer should be suspended, or the policy be void, until such premium, or the note given therefor, should be fully paid, we should have but little difficulty-with the question. In such case, the insurer, having earned the premium, would be entitled to receive it in any event. If paid during the life of the policy, it would revive the risk from the date of payment, as to all of the insured property remaining at that date; if not paid during the life of the policy, the insurer would be entitled to it, and might recover it by action. The premium would not, under such an agreement, cover any portion of the time during which the liability of the insurer was suspended. If the insurer accept the premium after default, such acceptance is not inconsistent with the claim that liabilty on the policy was suspended during default, and could not possibly mislead the insured to his prejudice. The insured pays and the insurer accepts just what the former is liable to pay and the latter is entitled to receive in any event, and the transaction lacks every essential element' of a waiver or of an estoppel mpads. See cases above cited, particularly Williams v. Ins. Co., 19 Mich., 451. But this is not such a case. The stipulation in the contract before us is not that upon default for sixty days in the payment of the note given for the cash premium, such premium shall be considered earned, and therefore payable absolutely; but it is merely that the liability of the defendant shall be suspended from sixty days after the note became due until the same should be fully paid. • The whole cash premium had not been earned when the defendant’s liability on the policy was suspended, but only a ¡pro rata portion of it. Neither did the premium run during the suspension; for risk and premium go hand in hand, and one ceasing, the other also ceases. A writer on this subject, speaking of the contract of insurance, says: “It is, moreover, a conditional contract; for when no risk attaches no premium is to be paid, or, if paid, — 117 — must, in tlie absence of fraud, be returned to the assured. In point of fact, tbe contract is to pay the premium on condition that the risk is run, and the refunding a premium is of frequent occurrence in maritime insurance; and that, too, in cases where it is entirely optional with the assured whether the property insured shall be put at hazard or not, as when the ship is never despatched by the owner on the projected voyage. The language of Lord Mansfield in Tyrie v. Fletcher, Cowp., 668, is explicit: ‘"When the risk has not been run, whether its not having been run was owing to the fault, pleasure or will of the insured, or to any other cause, the premium shall be returned.’ And this principle is alike applicable to all policies of insurance.” May on Insurance, § 4. Applying these principles to the present case, it necessarily results, that at the expiration of sixty days from the time the note given for cash premium became due, the liability of defendant on the policy ceased, and, without restoring such liability, the latter was entitled to receive on such note what the policy had earned while in force, and it could have refused to receive any sum in excess of what the policy had so earned. But the defendant received the whole cash premium for which the note was given. By so doing, it received compensation for the risk covering the time when the loss occurred, and we think that it cannot now be heard to allege that at the time of the loss it had no risk on the property insured. The acceptance of the full premium after notice of the loss is entirely inconsistent with the claim that the risk was suspended when the loss occurred. ~We conclude, therefore, in view of the peculiar terms of the contract, that the acceptance of the cash premium after default and notice of the loss, operated as a waiver of the suspension clause therein, and renders the defendant continuously liable on the policy the same as though the note for cash premium had been paid when due. II. It remains to determine whether the policy was for118 féited, and tbe liability of the defendant thereon terminated, by the steps taken to that end because of the nonpayment of the assessment on the premium note. It may be here observed, that the acceptance by the defendant of such premium after the loss, and even after the defendant had notice of the loss, is of no importance. Such assessment was due and payable absolutely, whether the policy was forfeited or not. Iowa State Ins. Co. v. Prossee, 11 Iowa, 115; Smith v. The Saratoga County Mut. F. Ins. Co., 3 Hill, 508. It is apparent, from what was said on the other branch of the case, that the defendant waived nothing by accepting that which, in any event, was its due. A by-law of the defendant provides that, “ Whenever any assessments shall have been made upon the premium notes, and the sum determined which each person shall pay upon his note, if such sum shall not be paid within thirty days after the same shall have been demanded by the company or their agent, the directors may, at their option, annul the policy of insurance given upon such note, and may retain such note and collect such sum so assessed.” The charter of the defendant (Laws of 1851, ch. 394, sec. 6) provides that policies and contracts may be signed and attested, “ and all other business of said corporation may be conducted and carried on, by committees or otherwise, without the presence of the board of directors, and shall be binding and obligatory on the said corporation, if the same be done under or in conformity to the by-laws and ordinances of said corporation.” The by-laws provide for the appointment of an executive committee, and prescribe the functions of that committee as follows: “ It shall be the duty of the executive committee to determine upon and audit all accounts presented against the company for payment, and generally to transact all business of the company, in the absence of the board of directors, not inconsistent with the by-laws.” The circuit judge denied the power of the executive com — 119 — mittee to declare a forfeiture of tbe policy, and held tbat tbe action of tbe board of directors of January 16, 1872, failed to work sucb forfeiture. Speaking for myself alone, I may be permitted to say, tbat I fully concur witb tbe learned judge of tbe court below. I think tbe by-law last quoted fails entirely to confer upon tbe executive committee tbe power to annul policies for nonpayment of assessments. Tbe power given is to audit accounts and generally to transact all business of tbe company, in tbe absence of tbe board of directors. Tbe meaning of tbe general words in tbe by-law should be ascertained by reference to tbe preceding S23ecial words therein, on tbe principle of noseiimr a soons, which is clearly applicable. Hence, tbe words “ all business,” as used in tbe by-law, mean all business pertaining to accounts and demands against tbe company. Morse v. The Buffalo F. & M. Ins. Co., 30 Wis., 534. Moreover, tbe law does not favor forfeitures, and I think it safe to assume tbat tbe power'to declare them cannot be taken by implication or inference, and tbat, unless expressly given, tbe power does not exist. As regards tbe resolution of tbe board of directors of January 16, 1872, approving certain minutes of the meetings of tbe executive committee, I fail to find in tbe record any satisfactory evidence tbat tbe board bad before it tbe minutes of tbe committee meeting of December 11, 1871, at which tbe resolution of conditional forfeiture was adopted. But upon these points my learned associates express no opinion, and tbe decision of tbe ease will be placed upon other grounds to which we all assent. As before observed, forfeitures are not favored in tbe law, and will not be sustained upon mere inferences. Where, upon breach by one party of a condition or stipulation in a contract, tbe other party thereto has tbe option to declare tbe contract forfeited and thus relieve himself from liability upon it, and seeks to exercise sucb option, be must do so unconditionally, and in plain, positive and unmistakable terms. He — 120 — cannot put an end to bis liability by saying to the other party, either before or after default, “ Unless you perform your part of the contract by a certain future day (naming it), I shall elect to consider myself relieved of its obligations.” This would be a mere notice or threat; not an effectual exercise of the option. The executive committee did nothing more than this in the present case; scarcely so much. They informed plaintiff’s testator that unless the class of policy holders to ■which he belonged paid their assessments by a specified future day, their policies would be annulled on that day. This was a mere threat, and the most that the board of directors did was to approve the threat. Such action of the committee and of the board might as well have been taken on the day the assessment was made, and before the insured was in default in respect thereto; and manifestly it. comes far short of being a declaration that policy No. 18,113, issued to JohnUglow, was forfeited and annulled for nonpayment of the assessment of January 19, 1871. We find nothing in the case which will prevent the defendant company from making further assessments on the premium note given by Uglow, for losses accruing after the attempted forfeiture of the policy. We conclude, therefore, that had the resolution of December 11, 1871, been passed by the board of directors at that time, instead of the executive committee, it would still fail to work a forfeiture of the policy in suit, because the forfeiture is declared conditionally, and because the resolution does not sufficiently specify the policies to be forfeited. There should be sufficient in the declaration of forfeiture to show that the board or committee acted specifically upon each policy sought to be annulled. The foregoing views dispose of the case. The defendant having waived the stipulation that the risk shotild be suspended on default being made for more than sixty days in payment of the note - given for the cash premium, and the policy not having been declared void or annulled for nonpay — 121 — ment of the assessment on the premium note, the circuit judge properly directed the jury to find for the plaintiff; and the judgment of the circuit court must be affirmed. By the Court. —Judgment affirmed.