Home Ins. v. Koob

Opinion of the court by JUDGE O’REAR Affirming. Appellee Koob owned a double frame house on Lombard street, Louisville. He mortgaged it in 1894 to the Kentucky Citizens’ Building & Loan Association to secure a — 364 — loan of $700, payable' in monthly installments, on the familiar building association plan.' At the same time he contracted with appellant for an insurance against loss or damage by fire to the building to the extent of $800. The policy was indorsed, “Loss, if any, payable to the Kentucky Citizens’ 'Building & Loan Association, mortgagee, as its interest may appear,” etc. The bond from Koob and wife to the building association contained this Stipulation: “Now, if we pay promptly the monthly interest on said sum of $700, and the monthly premiums of $3.50 offered by us for said loan, and the monthly payments on said shares of stock, and any fines assessed under the rule •of said association, and the faxes accruing on the lot of land described in the mortgage securing this obligation, and the premiums necessary to keep the improvements on said lot insured in such sum as said association may require (not exceeding $700) until the said stock becomes fully paid in and of the value of $100 per share, then it is understood that upon the surrender of said stock to said association this note shall be deemed fully paid and canceled.” In March, 1899, the policy of insurance above named expired. In the meantime the building association had made a deed of assignment to appellee AY. R. Logan in trust for all its creditors; transferring to him under the deed the note and mortgage executed by Koob. Logan notified Koob of the expiration of the policy, and requested reinsurance. To this notice Koob failed to respond, and Logan, as assignee of the mortgagee, and without the knowledge of Koob, effected an insurance with the appellee Agricultural Insurance Company, insuring the mortgagee’s interest against loss or damage to this property by fire in the sum of $500. The premium for this insurance wras paid by Logan, assignee, and charged to — 365 — Koob. About tlie same time, at the instance of appellant’s local agent, Lang, Koob took this insurance on the property in a policy for $1,100. This was done without the knowledge of Logan. Neither insurance company knew of or consented to the other’s insurance. The property was damaged by lire during the existence of these policies, and the loss fixed by the appraisers at $549.68^ Koob has sued ,’the appellant insurance company on the policy issued to him, and Logan, assignee, has also sued appellant (and Koob), attaching the sum that may be owing Koob under the policy. The defenses interposed were: (1) It was claimed by appellant that under certain terms of its policy, hereinafter particularly noticed, the existence of the Agricultural Company's policy on this property, without appellant’s consent; voided the policy sued on; (2) that Koob falsely and fraudulently misrepresented to appellant the extent of the mortgage lien upon the property, which misrepresentations are claimed to have been material to the risk: (3) that, in any event, if liable on the policy at all, under a certain clause of the contract its liability was limited to a sum represented by the ratio borne by its policy to the whole of the insurance in existence upon the building. A preliminary question was made by appellant that Koob had not sufficiently complied with the terms of his policy in furnishing proofs of loss as required. In a letter to Koob from appellant’s adjuster, dated January 26, 1900, before the suit, it was stated: “The Home Insurance Company hereby gives notice that any and all liability for said loss is denied.” In the answer of appellant it likewise denies all liability for the loss. These constituted a waiver by the insurer of proofs of loss. Insurance Co. v. Monroe, 101 Ky., 12 (19 R., 204) 39 S. W., 434; — 366 — Insurance Co. v. Spiers, 87 Ky., 285 (10 R., 254) 8 S. W., 453; Insurance Co. v. Clark, 109 Ky., 285 (10 R., 1066) 59 S. W., 863; Insurance Co. v. Gibbons (28 R., 1130) 64 S. W., 909. One of the conditions of the policy sued on was that, “If now or hereafter there be other insurance on any property hereby insured, this policy shall be void, unless otherwise provided by agreement indorsed hereon.” Do the two policies constitute what is termed “other insurance?” The manifest purpose of this and similar provisions in the policies of insurance, as well as of the law in favoring them, is to prevent the temptations arising out of overinsurance, — temptation to the insured to either burn his building for the gain or to neglect its care. If the interest of the insured be a life estate in the property, it could not matter to him, — certainly could not profit him — whether the remainder-men were or not insured, if he had not ample insurance to indemnify his individual loss. Insurance Co. v. Drake, 2 B. Mon., 47. Therefore it was held in the Kentucky case just cited that, where the insurance was independently effected upon distinctive interests, it did not constitute “double insurance,” within the meaning of such clauses. ETere, though, it is said that the insurance effected by the mortgagee was indirectly for the owner’s benefit; for, in event of loss of the building by fire, the mortgagee’s insurance would, if sufficient, extinguish the mortgagor’s debt. That might or might not be true. But in this case it may be accepted as true. 'Still we must construe appellant’s liability on the terms of its contract, or by the manifest “justice” of the case. If the latter be invoked, then it seems a sufficient response that Koob and Logan were each ignorant of the insurance effected by the other; neither had the legal right to control the act of the other, nor to prevent the issuance — 367 — of the respective policies to the other.' Therefore the idea which lies at the bottom of the doctrine disfavoring double insurance, to-wit, to prevent the overbalancing self; interest in the insured to destroy or neglect his building, is wanting in this case; for, unless he knew of the other insurance, and contemplated its possible advantage to him, it could not have influenced his action. But the terms of the policy are, after all, the safest, as they are the legal method of determining the insurer’s liability. The contract provides, “If now or hereafter there be other insurance on any property hereby insured, this policy shall be void.” It is too well settled to require either argument or citation of authority that an insurance effected by one having an insurable interest in the property will not inure to others having also an interest in the property, and not named in the contract, whether they be joint tenants, remainder-meu, tenants, or lessors. It therefore follows that the thing insured is not the property, but the interest or estate, of the insured therein. We must, then construe the term in the policy, “any property hereby insured,” to mean the insured’s interest or title in the property described. 3 Joyce, Ins., section 2470, thus states the rule: “The general rule that different persons, each having a different interest in property, may insure that interest, also prevails where different policies are effected by the mortgagor and mortgagee upon the property. The mortgagor may insure the property to cover his interest, and the mortgagee may likewise insure his interest in the property, and it will not be within the meaning of the clause as to other insurance.” It is further argued that in this case the mortgagor, Koob, authorized his mortgagee, the building association, to effect the insurance, and therefore the act of the' mortgagee was the act of the mort — 368 — gagor in procuring' the Agricultural Company policy. The agreement of the mortgagor was that he would keep the premises insured to the extent, at least, of the mortgage1 debt. In addition to the language already quoted from Koob’s bond, is this statement found therein: “But if we fail to pay promptly when due and payable the said taxes and insurance premiums, . . . then, at the option of the said association, the whole indebtedness evidenced by this obligation (including any taxes and insurance premiums due or paid by said association) - shall at once become and be due and collectible.” No express authority is here given the association to contract for insurance upon this property. It may be inferred, though, that upon default by the mortgagor to keep the premises insured to at least the. balance of the mortgage debt, with a clause protecting the mortgage therein, the mortgagee was authorized to effect such insurance on the owner’s behalf, that is, an insurance of the owner’s title and property to the amount of $700 (the sum required by the bond) — with loss payable to the mortgagee as its interest might appear. But the mortgagee did not do this. On the contrary, it procured an indemnity to itself from loss by fire on its interest in this property. That its assignee charged or attempted to hold the mortgagor liable for the premium for this insurance is not material. The insurance effected by the mortgagee was exactly what he had the right to do without a contract with or the consent of the owner. It was independent of that part of the agreement with the owner quoted above. It shows on its face that it was, and the assignee so testified. We conclude. that there was not “other insurance on the property” of appellee Koob within the meaning of that term as construed in law. — 369 — The case of Insurance Office v. Varble, 103 Ky., 758 (20 E., 556) (46 S. W., 486, 41 L. R. A., 792) is relied on by appellant as sustaining a contrary view. In that case it must be noted that the language of the policy is materially different from the one at bar. In the Varble case it was: “In case of any other insurance upon the property hereby insured, then this company shall not be liable under this policy for a greater portion of any loss sustained thap the sum hereby insured bears to the whole amount of insurance on said property issued to or held by any party ■or parties having an insurable interest therein.” This court held that the “insurance companies had the right to place in their policies provisions defining and limiting their several liabilities;” that they, in that policy, “by express and unmistakable language, limited their liabilty so that they would not be required to pay a greater portion of any loss sustained than the sum they respectively insured bore to the whole amount on the, property.” The insurance held by any party having an insurable interest in the property was, therefore, under the terms óf the policy, required to be taken into account. To the same effect, and upon a similar policy to the one construed in the Varble case is Insurance Co. v. Williams, 11 C. C. A., 503, 63 Fed. 928. The case of Home Ins. Co. v. Baltimore Warehouse Co., 93 U. S., 527, 23 L. Ed., 868, was an instance where policies were taken out by the warehousemen “for their own and for the owner’s benefit.” Other policies were taken out on the same goods by the owners. It was held that the policies should bear ratably the loss. That case is not in conflict with the views herein expressed. The other cases cited by appellant (Insurance Co. v. Coons, 14 Ky. Law Rep., 110, and Baer v. Insurance Co., 4 Bush, 242) — 370 — were cases where all the policies were issued to the same party. Pending the negotiation between Koob and appellant’s agent'for this insurance, the fact of the mortgage on the property was discussed. Appellant charges — and upon that rests one of its defenses — that Koob fraudulently and falsely misrepresented the amount owing on the mortgage debt, and that the misrepresentation was material. The burden upon this plea- was, of course, on appellant. To sustain it, its local agent, Lang, was introduced us its witness. He lestiñed that Koob told him that “he was-paying off his mortgage;” that it was to some building-association; that it was then a balance of $100, $150 or $200. His testimony shows his memory to be very unsatis: factory as to what actually occurred, further than that Koob told him there was some balance, from $100 to $200, owing on the mortgage to the building association. Koob testified that he-told Lang of the mortgage; that he had been paying it off, but had stopped; that he thought he would be owing- the association $200 or $300 or $400 ballance, “with interest added.” His memory does not appear to be much better than Lang’s. His testimony indicates, him to be an illiterate, ignorant man. In fact, we may easily see that he did not know what balance he was owing on his mortgage. Ilis payment “on dues” amounted then to $195. He doubtless thought, as many persons, have,- that this sum was to be credited on his debt. If this had been so, the debt would have been $355. There is nothing to indicate that he intended to deceive the company’s agent as to the amount of this debt. In this State ■these and similar statements are not warranties, but are representations only. And under section 639, Kentucky Statutes, it is also provided: “Nor shall any misrepresentation, unless material or fraudulent, prevent a recovery — 371 — on tlio policy.” A comparison of the testimony of these two witnesses shows an entire absence of fraudulent motive. It also shows that Koob was admittedly unable to, and did not pretend to, give' accurately the amount owing on the mortgage. The very fact that he is alleged to have represented it as running from $100, $150, to $200 was notice to his auditor that he could not and did not pretend to give the exact amount of balance owing. Eut we are authorized in adopting the estimate of those two witnesses, placed upon them by their chancellor, which was under the rule as to burden, to accept appellee Koob’s statements, and the maximum sum stated by him is so near the true sum ($582.14) as that the difference, under the circumstances, can not be held to have been material to this risk. Light v. Insurance Co. (Tenn. Sup.), 58 S. W., 851. It follows from what has been said that, as there was not “other insurance,” within the meaning of the law, upon appellee Koob’s property, appellant was not entitled to prorate the loss with the policy issued to the mortgagee on his independent interest. Nor was appellant entitled! to maintain a cross petition against the Agricultural Insurance Company for contribution. In denying a similar attempt in Insurance Co. v. Turnbull, 86 Ky.,. 236 (9 R., 544) 5 S. W., 542, this court held that the utmost of that clause was a defense to the company-insuring against the pro rata of the loss represented by the other policies, “and whether they [the insured] ever recovered the pro rata due by the other companies was a matter about which the appellant had no concern, and it should not have been allowed to meddle with it.” Judgment affirmed, with damages.