Attorney General ex rel. Michigan Lubricator Co. v. Commissioner of Insurance

Ostbandeb, J. (after stating the facts). There is nothing in the standard form of policy prohibiting the contract in question. In the absence of other provisions, the sixth exception found in the act of 1905 is broad enough in terms to permit it. Quinn v. Fire Ass’n, 180 Mass. 560. But there is another provision. The words employed in the said sixth exception, if literally construed and applied, would permit the standard form of policy to be used as a mere frame upon which to affix riders embodying the contract of the parties. We assume that the essential purpose of the legislation was to provide a standard policy, and that the exceptions mentioned are to be given a meaning, if that is possible, in harmony with this purpose. It is not to this sixth exception, but to the clause of the policy which permits the extent of the contribution to be made by the company in case of loss to be provided for by agreement, that we must look, other legislation aside, for permission to make the contract in question. This clause covers the subject, and is not enlarged by the exception referred to. That this clause was, under the law of 1881, modified by the act of 1895, is admitted. If the act of 1895 is alive, it modifies the same clause in the policy of 1905. The act of 1895 applies to all policies issued by all companies doing business in the State. The commissioner of insurance and apparently the insurance companies have regarded it as in force. No good reason is shown for regarding it repealed. See Vorous v. Insurance Co., 102 Wis. 76. The question is: Shall it have the application which is contended for by relator ? Assuming the law to be valid, and no attack is made upon it, the case presented is not literally within its terms. The contract in question [574] does not provide in terms that the liability of the company shall be limited or restricted by reason of the failure of the insured to insure the property for any certain amount or proportion of the cash value thereof. The liability of the company is fixed whether the insured does or does not procure any other insurance. The contract, so far as-the point in question is concerned, is to pay such proportion of any loss as the amount of the policy bears to 80 per cent, of the cash value of the property insured. But in effect the contract made by a rider in the statute form and the one made by a rider in the form used in this case is precisely the same. By this is meant that if the contract in the case presented was one requiring the insured to carry insurance equal to 80 per cent, of the value of the property, in default of which he should be regarded as a co-insurer to the extent'of the deficit, the result to the insured in case of loss would be the same. No one disputes this conclusion. The contract in one case as well as in the other provides, in fact, that the liability of the company to the insured — that is, the sum for which the policy is issued— shall be restricted if the insured does not insure the property for a certain proportion of' the actual cash value thereof. If - no distinction can be made between the method employed here and the literal statute method, if co-insurance was, as seems to be admitted, aimed at by the legislature, it would be a narrow construction which would regard the statute as applying to one case and not to the other, as a law to be evaded by mere phraseology. Although the statute imposes penalties for disobedience, it may be also regarded as a remedial statute aimed at a real or a supposed mischief. Counsel have pointed out no substantial distinction between co-insurance effected in one way ánd in the other, and have given no convincing reason for a construction which shall regard only the letter of the law of 1895. In many States there was in the years from 1893 to 1899 similar legislation, some of it more specific than our own, directed to preventing, or regulating, co-insurance. In many of these States the law [575] has since been modified. For example, it is now the law of Wisconsin— “No such company shall require the use of any such so-called co-insurance clause or rider to be attached or made a part of any policy except at the option of the insured, and every such company shall give to every applicant for insurance the rate of premium demanded with and without such clause or rider.” 1 Wis. Stat. § 1943a. The necessity for a blanket policy of insurance which shall cover all of the property of large institutions, some of which have many buildings, with personal property moving constantly from one to the other and receiving an added value in each, is evident. No fluctuating rate of premium which is fair can be arranged for such a risk. Unless a contract may be made proportioning liability upon any policy by the actual value of all the property at risk, the premium must be fixed by the extreme hazard. The construction which the commissioner of insurance has given to the law of 1895 has permitted the use of such policies in certain cases, and has met the demand for the right to make such contracts of insurance. Such contracts are neither vicious in purpose nor fraudulent in effect so long as they are understood, and so long as the insured may choose them or the ordinary policies. But by the terms of the Michigan standard policy, if the extent of the contribution by the insurer in case of loss may be arranged by agreement, it may also be imposed as a condition. If it is lawful to impose such a condition, it may be imposed in all cases. The construction of the law contended for, if agreed to, leaves it entirely in the power of insurance companies to tender no other form of contract. I think the legislature intended to prevent such a condition of things, and, as it has not provided an alternative, the court may recognize none. It must be held that the contract in question was in violation of the act of 1895. I dismiss the proposition that this construction of the law imposes an unconstitutional limitation upon the right to make contracts by saying that the power, which is not [576] denied, to make a standard form of policy for use in the State involves the power, to make all of the terms of the policy. Examples of legislation similar in character are the valued policy laws of various States. It is stated in the brief of the attorney general that inasmuch as the construction of the law made by the commissioner of insurance has been in good faith followed by insurance companies, including the Concordia Company, it is not insisted that there shall be an immediate issue of a peremptory writ of mandamus. As all matters connected with the enforcement of the law are by the law itself placed in the control of the commissioner and the attorney general, it is sufficient for the court to state a conclusion in the premises. McAlvay, O. J., and Carpenter, Grant, and Blair, JJ., concurred.