Schaeffer v. Farmers' Mutual Fire Insurance

McSherry J. delivered the opinion of the Court. The appellant’s tannery, bark-mill and stock in trade, which, with other property owned by him, were insured under one and the same policy issued by the appellee, were destroyed by fire on February the twenty-seventh, 1892. — 570 — Due preliminary proof of loss was made, and subsequently suit was brought upon the policy to recover the amount of insurance written on that portion of the property which had been burned. During the progress of the trial in the Circuit Court for Carroll County, five exceptions were taken. The second one of these, though it appears in the reeord, was not signed by the Judge. It cannot, therefore, be considered by us beyond its recitals of facts. These, by reason of the unsigned bill of exceptions being connected with the succeeding one, form part of the latter. Cooper v. Holmes, 71 Md. 20. The first, third and fourth bills of exception relate to questions of evidence, and the fifth to the several prayers presented by both parties. The verdict and judgment were against the plaintiff and he has appealed. It will obviate much unnecessary discussion if we proceed at once to an examination of .the fundamental and controlling questions involved in the controversy, instead of considering separately the several exceptions in the order in which they appear in the record. The defendant resists the claim of the plaintiff on the ground that the unauthorized use by the plaintiff of a steam engine located about fifty feet away from the bark mill, but connected with the machinery in the latter by a leather band, worked a forfeiture of the policy under the terms and conditions set forth therein and endorsed thereon. And it relies in support of this position on the recent case of The Farmers' Mut. Fire Ins. Co. v. Hull, 77 Md. 498. On the other hand the plaintiff insists, first, that the use of the steam engine for the purpose of grinding bark did not cause a forfeiture; and, secondly, that even if a forfeiture did occur, the defendant unequivocally waived it. It can scarcely be necessary to reaffirm what has been so often and so uniformly decided, that forfeitures by mere implication are never favored in the law. A company which resists, on the ground of forfeiture, the payment of a loss against which it has insured, must show both that its policy or written contract contains, either in express terms or by — 571 — clear implication, some provision forfeiting the policy in specified contingencies; and also that the insured has brought himself within the scope and conditions of that provision. The policy is a contract between the insurer and the.insured, and as they have written it, and not otherwise, so Courts must construe and enforce it. To the policy, then, and to all that forms a part of it, must resort be had to ascertain not only whether a forfeiture is .in fact provided for, but the conditions and circumstances under which it becomes applicable and effective. In the body of the policy now before us there are two' causes of forfeiture; and in the conditions of insurance thereto annexed and in the by-laws, made a part thereof by reference, there are three more. Those first alluded to relate, the one to the taking out by the insured, without notice to’ the insurer, additional insurance on the same property in a different company; and the other, first, to alterations of the premises, and secondly, to their use for the purpose of carrying on therein any trade or business “ which, according to the by-laws and conditions, class of hazards or rates hereto annexed, would increase the hazard,” unless by the consent of the insurer endorsed upon the policy. Those set forth in the- conditions are, first, alterations made in any building which increases the risk; secondly, the omission for thirty days after demand to pay any assessment levied on the assured’s premium note ; and thirdly, the sixteenth condition, which* without qualification, prohibits the use of “ any steam engine temporarily employed for the purpose of threshing out crops of any kind.” Under the policy sued on, which was issued in February, 1887, and covered a period of seven years, the appellant’s dwelling-house, household furniture, tenant-house, wagon-shed, barn, hay-shed, and other farm buildings and farming implements, together with his tan-shop, bark-shed, bark-mill house, stock in trade, consisting of bark, hides, leather, finished and unfinished, were all insured. The engine used on the premises the day of the fire was not located at the — 572 — barn or employed for the purpose of threshing out crops of any kind, but was stationed between fifty and sixty feet away from the bark-mill house and was, and for more than a year and a-half previously had been used once a month to furnish the motive power for grinding bark for the plaintiff’s tannery. On the day of the fire the engine was in use for grinding bark, and whilst the employes were at dinner and the engine was not running and its fires were banked, a fire broke out in the bark-mill house and consumed the tannery buildings and stock in trade. When first discovered the fire was within the building, whose sides towards the engine were tightly weatherboarded and stripped. Earlier on the same day a slight fire. broke out about the same spot, but was promptly extinguished. There was evidence tending to show that the first fire was produced by the friction of the machinery, but there is no evidence whatever in the record to show what caused the second and destructive fire. It is not pretended that the first of the two causes of forfeiture set forth in the body of the policy, and the second of those contained in the conditions and by-laws, have any relation to the case at bar. There was other insurance in a different company, but it was taken out only after notice had been given to, and a written permit had been procured from, the general agent of the defendant. The third of the causes of forfeiture contained in the conditions, being the one numbered sixteen, was the one under consideration in Hull’s case. Hull stationed a portable engine within thirty feet of his barn, and connected it by a strap and pulley with machinery in the barn, and used it there in chopping and threshing his grain. The barn was destroyed by fire whilst the engine was so used, and we held that the policy, which was identical in terms with the policy in this case, and was issued by the same company, though, of course, covering different property, was forfeited. The conduct of Hull was directly within the terms of the sixteenth condition endorsed on the policy, and there was no possible escape from the conclusion that his policy was forfeited thereby, and, hence, — 573 — the only contention in that case was whether the company had waived this forfeiture. Apart from other provisions of the policy now under examination, it is clear that an engine regularly employed in grinding bark for use in a tannery in the process of tanning leather, is not a “ steam engine temporarily employed for the purpose of threshing out crops of any kind,” and is not within the sixteenth condition, and is not, therefore, the cause of forfeiture specified therein. It is manifest that this provision was intended to prohibit the use of engines for the purpose of threshing out crops in the vicinity of barns and other equally inflamable farm buildings ; and, imposing as it does, a forfeiture for such a use, it must be strictly confined in its application to cases within its terms as written, and is not to be enlarged to include by implication another class of circumstances neither within its letter nor its evident design. In the vital particular that the use made of the engine by the appellant was not a use prohibited or at a place prohibited by the sixteenth condition on the policy, the case at bar is widely distinguishable from Hull’s case. That condition cannot control this case unless restrictions and inhibitions which are not there now are first imported into it by mere construction. That this view of the limited scope and effect of the sixteenth condition is the correct one, is made even more apparent, by other and different provisions embodied in the seventeenth condition, which was obviously framed to meet a class of cases not covered by the sixteenth condition. Whilst this latter condition provides without qualification of any sort that “ this company will not become responsible for any loss or damage by fire * * * * resulting from the use of any steam engine temporarily employed for the purpose of threshing out crops of any kind’,' the seventeenth condition distinctly and in terms recognizes the liability of the company for losses or damage by fire resulting from the use of other steam engines than those referred to in the sixteenth condition, and specifically prescribes what shall be done by — 574 — the company and by the insured when such other steam engines are employed; but it no where imposes a forfeiture. The seventeenth section or condition is in these words: “ That in the event of an engine being stationed on the premises, and in close proximity to the buildings insured by this company, then, in that event, the president of the company shall appoint a committee of three discreet men, who shall be members of this company, who shall proceed forthwith to said property to make a fair and impartial examination, in order to ascertain the amount of increased risk on account of said engine; and if they shall find that the risk is increased thereby, then they shall take an additional premium note for such increase, upon which the assured shall pay ten percentum at the time of the execution, and the said note to be subject to the same assessments as other notes of said company, to meet losses by fire happening to property insured by this company.” The plain meaning of this is, that if an engine other than those referred to in the sixteenth condition is stationed on the insured premises, ascertainment shall be made in the method pointed ' out, whether the risk has been increased 'thereby or not; and if it be found that the risk has been increased, then it is provided, not that the policy shall be forfeited, but that an additional premium note shall be given upon which ten per cent, must be paid; but if it be 'found that the risk has not been increased, then neither is the policy forfeited, nor is an additional premium note demandable. The employment, therefore, of such an engine as the seventeenth clause contemplates, does not result under its terms in a forfeiture of the policy or even necessarily in increasing the risk; but if the risk be increased by the use of such an engine, and loss by fire is occasioned thereby, then the insurer, in the event that no additional premium note has been given, will be released from liability under the policy unless it has neglected to appoint the committee and to make the examination provided for; but, if thus released, it would be upon altogether different principles. It would — 575 — be released, if released at all, because it is the settled law, even in the absence of an express provision on the subject in the policy, that when the erection by the insured of an adjacent building, and, of course, the use by him of an adjacent steam engine, has caused a material increase of risk by fire to the property insured, and when the loss was produced by such increase of risk, a recovery on the policy would be denied. Wash. Fire Ins. Co. v. Davison and Symington, 30 Md. 102. Under this seventeenth clause it becomes the imperative duty of the president of the company, when a steam engine has been stationed on the premises in close proximity to the buildings insured, to appoint a committee of three members of the company to examine forthwith whether there has been an increase of risk on account thereof. Good faith towards and frank dealing with the ■assured, no less than the explicit words of the provision itself, require that this duty should be discharged, if not “ forthwith,” upon the company being apprised of the existence of the conditions on which its performance depends, at least with due and proper diligence thereafter. Obviously a failure for an unreasonable time after notice to do that which it is the company’s plain duty to do forthwith, offers no defence to a plaintiff’s right to recover. The record shows that ten days before the fire the plaintiff notified the defendant’s general agent, whose duty it was to attend to all its business in his territory, that he, the plaintiff, was then using the engine for grinding bark, and that he was willing to do and to pay anything that might be necessary for the protection of the property in the event of fire, and that he wanted to be made safe in his insurance on the tan-yard. This was notice to the company. May on Insurance, sec. 152; Union Mut. Life Ins. Co. v. Wilkinson, 13 Wall. 222. We are not dealing with the question of the agent’s power or authority to waive or vary a condition of the policy, but only with the proposition that notice of the character we are considering given to the general agent of the company is notice to the company itself. And it was — 576 — notice to the company because it was the duty of the agent to communicate it to his principal. It can make no possible difference that the agent when so notified declined to give'a permit for the use of the engine, because under the seventeenth condition no permit was needed, but another method was provided. Whether the period that elapsed between the date of this notice and the subsequent fire was a reasonable time within which the company ought to have appointed the committee of three members under the seventeenth condition, was a question of fact for the jury to determine under all the attendant circumstances. Rokes v. Amazon Ins. Co. 51 Md. 519. Under this seventeenth clause, whilst there was mo forfeiture declared or even implied, there are two contingencies presentéd. There is the contingency that the use of the engine would increase the risk under which two different aspects are presented; and there is the opposite contingency that it would not. In the latter event the policy would in no way be affected, and the right to recover on it would not be impaired. In the event that the risk was materially increased and no additional premium note was given, then the right to recover was not defeated unless the loss occurred in whole or in part from that increased risk; and this is a question of fact for the jury to find. If, again, the risk was materially increased and notice was given to the company and no additional premium note was given, solely because of unreasonable delay on the part of the company in making an examination to ascertain the amount of the increased risk, and loss resulted by fire occasioned by such increased risk, still the company would be liable, because it would not be permitted to invoke in its defence the failure of the plaintiff to give an additional premium note when that failure was due exclusively to the company’s own omission or neglect to perform its precedent duty within a reasonable time. In no view, then, that can be taken of the sixteenth and seventeenth clauses, was there a forfeiture of the policy. The remaining causes of forfeiture stated in the policy and in the conditions thereto annexed, are those which — 577 — relate to alterations in the premises or buildings which increase the risk and to the use thereof for the purpose of carrying on therein any trade or business, which, according to the by-laws and conditions, class of hazards and rates annexed to the policy would increase the hazard. There is no evidence that there were alterations made in the premises or buildings after they were insured. When the policy was issued the buildings used in the tannery business were described in the policy, and distinctly insured as buildings pertaining to that occupation, and it is not intimated that they were used thereafter for the purpose of carrying on any different trade or business. Nothing, then, in the structures themselves, or in the business conducted therein, was changed or altered after the insurance had been granted; and unless placing and operating the engine fifty or sixty feet away from the bark-mill house amounted to an alteration in the insured premises, or to a use of them for carrying on a trade, which, according to the class of hazards and rates annexed to the policy, would increase the hazard, there is nothing in either of those provisions which has the slightest reference to the case at bar. That the engine so placed and so operated did not amount to an alteration in the insured premises in the sense in which the terms used in the policy are invariably interpreted can admit of no doubt. Those terms mean an alteration in the thing insured. Washington Fire Ins. Co. v. Davison and Symington, 30 Md. 102. That an engine employed as this one was, was not a use of the premises for carrying on a trade or business, which, according to the by-laws and conditions, class of hazards and rates annexed to the policy, would increase the hazard, is equally free from doubt, because the by-laws and conditions do not expressly or impliedly so declare, and because there is no class of hazards or rates annexed to the policy at all. There is consequently no standard as to what would increase the risk, furnished by any by-law, condition, class of hazards or rates. To avoid any misunderstanding, we repeat that if without notice to the insurer the use of — 578 — the engine as described did in fact materially increase the risk, and if the loss was occasioned by that increased risk, the insurer would be relieved from liability. But these are facts to be found by the jury. (Decided March 1st, 1895.) As there was no forfeiture of the policy, there could be no waiver of a forfeiture that never existed, and hence the_ evidence offered and objected to in the first, third and fourth exceptions tending to prove a waiver was irrelevant, and was for that reason properly excluded. The plaintiff’s first, second and third prayers, which were confined to the question of waiver, were also properly rejected, because there was no question of waiver involved, and there could be none where there had been no forfeiture. The fifth and sixth prayers were wrong and were properly rejected. As there was no forfeiture, there was no right in the company to cancel the policy, and a delay in an abortive cancellation was of no consequence one way or the other, as respects the plaintiff’s right to recover. The fourth and seventh prayers were right, and ought to have been granted. The fourth has relation to the knowledge of the agent being the knowledge of the company ; and the seventh refers to the insurance in a different company. All of the defendant’s prayers except the second were rejected, and that one ought to have been refused. Its vice is that it construes the policy to mean that the use of the engine under the circumstances stated of itself, forfeited the policy. We have already discussed that question and have reached a different conclusion. For the error in rejecting the plaintiff’s fourth and seventh prayers, and in granting the defendant’s second, the judgment must be reversed and a new trial will be awarded. Judgment reversed with costs above and below, and new trial awarded.