Smith v. Germania Fire Insurance

BROWN, J. We are called upon to determine whether the court erred in sustaining plaintiff’s demurrer to defendant’s first and second causes of defense stated in its answer. This presents two vital questions: First, by reason of the willful burning of his property, did the assured cause a forfeiture of his policy? Second, if we answer the first question in the affirmative and declare a forfeiture of the policy, does this defeat the right of the mortgagee to recover in this action? The policy in the case at bar provides, among other things, that: “Germania Fire Insurance Company of New York, in consideration of the stipulations herein named and of $30 premium, does insure Arthur C. White for the term of one year from the thirtieth day of August, 1917, at noon, to the thirtieth day of August, 1918, at noon, against all direct loss or damage by fire, except o as hereinafter provided, to an amount not exceeding' One Thousand Dollars, to the following described property # * .” — 574 — White was the insured, notwithstanding that the loss payable clause designated Arthur N. Smith, mortgagee, as the person to whom any loss was payable. This policy was made by the insurance company and accepted by the. assured, subject to agreements and provisions not in conflict with law or contrary to public policy. 1. If the matter stated in defendant’s first further and separate answer is true, White, the assured, has no claim upon the Germania Fire Insurance Company. Public policy will not permit a recovery by one who seeks to profit through his own crime: Schreiner v. High Court, 35 Ill. App. 576; Knights of Honor v. Menkhausen, 209 Ill. 277 (70 N. E. 567); Supreme Lodge v. Kutscher, 72 Ill. App. 462; Collins v. Metropolitan Life Ins. Co., 232 Ill. 37 (83 N. E. 542, 122 Am. St. Rep. 54, 13 Ann. Cas. 129, 14 L. R. A. (N. S.) 356). In Burt v. Union Cent. L. Ins. Co., 187 U. S. 362 (47 L. Ed. 216, 23 Sup. Ct. Rep. 139), the same being a life insurance case, the court said: “It cannot be that one of the risks covered by a contract of insurance is the crime of the insured. There is an implied obligation on his part to do nothing to wrongfully accelerate the maturity of the policy, Public policy forbids the insertion in a contract of a condition which would tend to induce crime, and as it forbids the introduction of such a stipulation it also forbids the enforcement of a contract under circumstances which cannot be lawfully stipulated for.” 2. The crime of the assured forfeits the policy as to himself, but not necessarily as to the interest of ' the mortgagee in the policy. The forfeiture of the mortgagee’s interest depends upon the terms and — 575 — provisions in the contract of insurance, unless in collusion with the wrongdoer. Hence, the second question involves the construction to be placed upon the standard mortgage clause contained in the policy, reading-: “If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached or appended hereto.” And the loss payable clause, providing: “Loss, if any, subject, however, to all the terms and conditions of this policy, payable to Arthur N. Smith, mortgagee.” 3. Without the mortgage clause herein referred to, under a policy making the loss payable to a third person the payee is not a party to the contract, but only an appointee whose rights are dependent upon the rights of the insured, and a violation by the latter of the conditions of the policy will forfeit the rights of such appointee. “But it has been held that where a policy provides that if any interest thereunder shall exist in favor of a mortgagee, or of any person having an interest other than insured, the conditions ‘hereinbefore contained’ shall apply in the manner expressed in such conditions relating to such interest ‘as shall be written upon, attached or appended hereto,’ a violation of the conditions by insured will not affect the rights of the person for whose benefit a loss payable clause is attached or indorsed on the policy unless such indorsed or attached clause also contains or refers to the conditions mentioned in the body of the policy.” — 576 — 26 C. J., § 344. Citing Oakland Home Ins. Co. v. Bank of Commerce, 47 Neb. 717 (66 N. W. 646, 58 Am. St. Rep. 663, 36 L. R. A. 673); Welch v. British American Assur. Co., 148 Cal. 223 (82 Pac. 964, 113 Am. St. Rep. 223, 7 Ann. Cas. 396); Queen Ins. Co. v. Dearborn Sav. etc. Assn., 175 Ill. 115 (51 N. E. 717); Northern Assur. Co. v. Chicago Mut. Bldg. etc. Assn., 98 Ill. App. 152; Christenson v. Fidelity Ins. Co., 117 Iowa, 77 (90 N. W. 495, 94 Am. St. Rep. 286); Stamey v. Royal Exch. Assur. Co., 93 Kan. 707. 96 Kan. 99 (150 Pac. 227); East v. New Orleans Ins. Assn., 76 Miss. 697 (26 South. 691); Senor v. Western Millers’ Mut. Fire Ins. Co., 181 Mo. 104 (79 S. W. 687); Farmers’ Nat. Bank v. Delaware Ins. Co., 83 Ohio St. 309 (94 N. E. 834); Central Trust etc. Co. v. Dubuque F. & M. Ins. Co., 34 Ohio C. C. 218; Edge v. St. Paul F. & M. Ins. Co., 20 S. D. 190 (105 N. W. 281); Boyd v. Thuringia Ins. Co., 25 Wash. 447 (65 Pac. 785, 55 L. R. A. 165); Royal Ins. Co. v. O. L. Walker Lbr. Co., 24 Wyo. 59 (155 Pac. 1101, Ann. Cas. 1917E, 1174). The writer agrees with the construction of the clauses in question taught by these cases. The contrary view, however, is supported by much respectable authority. The following cases appear in 26 C. J., Section 344, under note 80: Brecht v. Law etc. Ins. Co., 160 Fed. 399 (87 C. C. A. 351, 18 L. R. A. (N. S.) 197); Vancouver Nat. Bank v. Law Union etc. Ins. Co., 153 Fed. 440; Atlas Reduction Co. v. New Zealand Ins. Co., 138 Fed. 497 (71 C. C. A. 21, 9 L. R. A. (N. S.) 433); Delaware Ins. Co. v. Greer, 120 Fed. 916 (57 C. C. A. 188, 61 L. R. A. 137); Franklin Ins. Co. v. Wolff, 23 Ind. App. 549 (54 N. E. 772); McDowell v. St. Paul F. & M. Ins. Co., 207 N. Y. 482 (101 N. E. 457); Clover Crest Stock Farm v. Wyo. Valley F. Ins. Co., 108 Misc. Rep. 465 (177 N. Y. Supp. 771); Dumphy v. Commercial Union Assur. Co. (Tex. Civ. App.), 142 S. W. 116. — 577 — 4. The following is a fair example of the loss payable clauses as written in the policies involved in the two lines of cases referred to: “Loss, if any, payable to George D. Welch, as his interest may appear.” But in the case at bar, the loss payable clause has been enlarged until it holds within its embrace “all the terms and conditions of this policy.” The case of Burns v. Alliance Co-operative Ins. Co., 103 Kan. 803 (176 Pac. 985), is squarely in point. The mortgage clause in that policy is a duplicate of the mortgage clause in the policy involved in the instant case. The loss payable clause in that policy reads: “Loss, if any, on buildings, to be adjusted with the assured and made payable to C. A. Burns, mortgagee, or assigns, of Wichita postoffice, State of Kansas, as his interest may appear, subject, however, to all the terms and conditions of this policy and the by-laws of this company.” In that case, the court said concerning the mortgage clause under consideration: “By the great weight of authority its effect is to protect the mortgagee against any forfeiture resulting from a breach of the conditions of the policy by the mortgagor, unless such conditions are made a part of the loss payable clause or otherwise endorsed upon the policy or attached thereto: 14 R. C. L. 1086. There are a few cases to the contrary * * : 18 L. R. A. (N. S.) 207; but this court has already adopted the majority view: Stamey v. Assur. Co. (supra). The question to be here determined is whether the incorporating in the loss payable clause of the words, ‘subject, however, to all the terms and conditions of this policy,’ amounts to an endorsement or attachment of such terms and conditions, thereby — 578 — making them applicable to the mortgagee, as well as to the mortgagor. The very purpose of the language seems to be to make it clear that the mortgagee was not to be released from the restrictions laid upon the insured. We interpret it as adopting by reference all the provisions of the policy, and giving them the same force as though they had been again set out at length, thereby mailing them applicable to the mortgagee and preventing any exception or immunity in his favor.” The case of Welch v. British American etc. Co., supra, was cited in the Kansas case in behalf of plaintiff and was likewise cited and pressed upon our attention here. In the Welch case it was said, in the matter of making the terms and conditions of the policy apply to the mortgagee: “It would not be necessary to write them out in full upon the policy, which would be practically impossible. A few words making the provisions, or certain of them, as was desired, applicable to the other interest, could readily be inserted in the slip containing what is called the ‘loss payable’ clause attached to the policy.” The rider is a part of the policy. The insurance contract must be taken by its four corners and construed as a whole. The terms and conditions of the policy apply to plaintiff and mortgagor alike. “The law, it is said, abhors a forfeiture. This aversion has resulted in the rule that it may be prevented by construction as technical as that by which it is invoked.” Barber v. Hartford L. Ins. Co., 279 Mo. 316 (214 S. W. 207, 12 A. L. R. 758, 764). 5. The terms and conditions of the policy' under consideration are not vague, nor ambiguous, but are clear and definite. Therefore, this court cannot resort to construction, nor can we write a new contract of insurance as between the parties. It may be that — 579 — plaintiff’s acceptance of a fire insurance policy subject to forfeiture by reason of tbe acts of tbe mortgagor was due to lack of attention to Ms interests, or to want of understanding of the legal effect thereof. We will observe that ordinarily the mortgagee should have attached to his policy, as a rider, Standard Forms Bureau Form 371 (July, 1917), or its equivalent, whereby he is afforded the necessary protection and his policy is not invalidated by the acts or negligence of the mortgagor or owner. The affirmative defenses set up by defendant herein referred to were good, and error was committed by the court in sustaining demurrer thereto. Wherefore, the judgment in this cause is reversed and remanded to the Circrnt Court for further proceedings not inconsistent with this opinion. Reversed and Remanded. McBride, Bean and Rand, JJ., concur.