Funke v. Minnesota Farmers' Mutual Fire Insurance

Dickinson, JY* This action is to recover upon a policy of insurance issued by the defendant in June, 1874, whereby the defendant insured the dwelling-house and furniture of the plaintiff against loss by fire for a period of seven years. The fire causing the injury complained of occurred in March, 1880. The policy contained these conditions: “If the insured shall have, or shall hereafter make, any insurance in any other company on the property hereby insured, or any part thereof, without obtaining the consent of the secretary of [351] this associátion, * * * the insured shall not be entitled to recover from the association any loss or damage which may occur in or to the property hereby insured, or any part or portion thereof. ” In February, 1879, while this policy was still in force, the plaintiff made application to the American Insurance Company, of Illinois, for insurance upon the same property, representing in such application that he had no other insurance upon it. Thereupon, and upon a sufficient consideration, the latter company issued its policy of insurance upon said property for the period' of five years, which policy was, however, by its terms rendered “void” by reason of the prior ■and undisclosed contract of insurance witli this defendant, although upon its face it was a valid contract of insurance. The plaintiff held the policy of the American Insurance Company, and after the loss in March, 1880, made proofs of loss, and claimed payment from that’ company. The company, however, learning of the prior insurance with this defendant, refused to pay, denying its obligation. No notice was given to the defendant of the subsequent insurance in the American Insurance Company. The court below considered that the plaintiff had not been guilty of actual fr^ud in the premises, and, upon the facts here briefly stated, plaintiff was held entitled to recover. The liability of the defendant depends upon the proper legal construction of the written contract of insurance. In the policy is expressed the agreement of the parties, in terms which must be regarded as having been deliberately chosen by themselves, and which we must presume they both understood and consented to. If the condition respecting other insurance was violated, not in its letter, but within the intent and meaning of the parties, by the making of a subsquent contract of insurance, valid upon its face, but void or voidable in fact by reason of misrepresentation (not actually fraudulent) on the part of the assured, then the liability of the defendant was terminated. Otherwise it was not. We have, then, to consider the meaning and force of that stipulation in the contract. The courts have often been called upon to construe similar provisions in policies of insurance, and, in the American courts, it has generally been held that policies containing conditions similar to [352] that in this case were not avoided by the making of other contracts of insurance which were in fact void or voidable by reason of the breach of some condition therein, or by reason of misrepresentation. These decisions proceed upon a construction of the contract which makes the condition against other insurance to mean only other valid insurance, or a valid and enforceable contract of insurance; and hence it is held that other contracts of insurance, void or voidable at the election of the insurer, by reason of the breach of some condition therein, or even, as some of the courts hold, by reason of the actual fraud of the insured, are not within the condition construed, and do not operate to avoid the policy. We cannot yield assent to such a construction of the contract. It involves, in our judgment, a disregard of the plain objects contemplated by the parties to the contract when it was made, and to accomplish which the condition against other insurance was adopted. It is a matter of common knowledge, which wre may not ignore in construing.this contract, that it is a settled policy of insurers against loss by fire to protect themselves against incendi-arism and negligence, by compelling the insured to bear some part of the risk, so that, if the property shall be destroyed, he will suffer loss, notwithstanding his insurance. To this end the insurer limits the amount of his own insurance upon the property to a sum less than its value, and guards against other insurance being effected upon the same property, without his consent, by stipulations to that effect, which are ordinarily, as in this case, embodied in the written contract of insurance. Such provisions are for the benefit of the insurer, and can have no other object or purpose than to place the insured in such a position respecting the property that, from considerations of self-interest, he not only will not wilfully burn it, but will be watchful and careful in guarding against fire. In the case before us it distinctly appears that what we have' spoken of as a custom in the business of insurance was not departed from. The policy provided that the insured shall not be entitled to recover more than two-thirds of the value of the property at the time when loss should occur, and that any misrepresentation or overvaluation in the application should avoid the policy; and, in the same-connection, is the condition respecting other insurance, already353 quoted. It has never been claimed, to our knowledge, that the object of incorporating in contracts of insurance conditions like that under consideration was or could possibly have been other than that which is above indicated. Considering now the purpose sought to be accomplished by this condition, and which, if we have interpreted it aright, both the parties must be regarded as having understood as we understand it, the conclusion is unavoidable that in making a subsequent contract of insurance, for the purpose of securing other or further indemnity in case of loss by fire, the plaintiff did that which, by the terms of the contract, avoided it, although he could not enforce a recovery upon such subsequent contract. We assume that the plaintiff intended to secure indemnity by the second insurance. It is not consistent with human conduct that he should have paid a premium and incurred legal obligations knowing that he secured no right and no possibility of benefit in return. So far as concerned his conduct in the care or destruction of the property, it was not important in a legal sense whether in fact the second contract was enforceable by him or not. By the very means contemplated by the parties and referred to in the contract — that is, by contracting for other indemnity in case of loss by fire — he had removed from his mind all motives of self-interest in the preservation of the property, so far as “other insurance” could have that effect. Whatever increased hazard “other insurance” could cause, was effected, to the full extent, if, in fact, plaintiff supposed the second insurance valid and enforceable; and in a less degree, perhaps, if he knew it to be void at the election of the insurer, and that he could not recover upon it if the facts avoiding it should be discovered. In either event that purpose which the parties to this contract contemplated, and deemed so important that they made express conditions respecting it, was defeated. In the decisions which we have above referred to, it has been considered that a non-enforeeable contract for “other insurance” is not a breach of the condition, because, in fact, it is not insurance. The supreme court of New Hampshire expresses the idea in these words: “There is an intrinsic absurdity in holding that to be an insurance by which a party is bound to make good another’s loss only in caso he pleases to do it.” Gale v. Belknap County Ins. Co., 41 N. H. 170. [354] Such a construction of the contract is not at all necessary from a consideration of the proper and natural import of the word insurance; and we are unable to comprehend how it can be regarded as expressing the agreement in the minds of the parties, without disregarding what every one must understand to have been the purpose contemplated. Contracts are not to be so construed. The same construction would make a second insurance inoperative to terminate the liability of a prior insurer under conditions like that in this policy, if it should appear, after the loss had occurred, that the second insurer had been from the time of making the contract insolvent. The word insurance, in common speech and with propriety, is used quite as often in the sense of contract of insurance, or act of insuring, as in that expressing the abstract idea of indemnity or security against loss. In that sense the word was used 'in this contract. We are sustained in the interpretation of this contract, and in our conclusion, by the following authorities: Carpenter v. Providence Washington Ins. Co., 16 Pet. 495; Bigler v. N. Y. Cent. Ins. Co., 22 N. Y. 402; Lackey v. Georgia Home Ins. Co., 42 Ga. 456; Allen v. Merchants' Mut. Ins. Co., 30 La. Ann. 1386; Jacobs v. Equitable Ins. Co., 19 U. C. Q. B. 250; Ramsey Cloth Co. v. Mut. Fire Ins. Co., 11 U. C. Q. B. 516; Mason v. Andes Ins. Co., 23 U. C. C. P. 37. See also Plath v. Minn. Farmers' Mut. Fire Ins. Ass’n, 23 Minn. 479, in which, under a stipulation that if the insured should mortgage “the property ” insured it should avoid the policy, a mortgage of a part only of the property was held to have that effect. In that case the act of the insured did not violate the letter of the contract, but in that ease, as in this, it did violate its spirit, and tend to defeat the well-understood objects contemplated. In some courts, in cases like this, a distinction is made resting upon the action or election of the subsequent or “other” insurer. If such insurer avails himself of his legal right, and elects to treat his contract as invalid, it is held not to avoid the first contract; but if he waives the forfeiture, even after the loss by fire has occurred, and treats his contract as valid, then such “other insurance” is deemed to have been a violation of the condition. See David v. Hartford Ins. Co., 13 Iowa, 69; Hubbard v. Hartford Fire Ins. Co., 33 [355] Iowa, 325. Such a distinction cannot, in our opinion, be sustained. It malíes the validity of the contract between two parties to depend, not upon their own agreement, nor upon their own acts, but upon what another person, a stranger to the contract, may do, even after the liability upon the contract had become absolute by the destruction of the property, if, in fact, there was any obligation. This cannot be. The making of the second contract of insurance violated the terms of the former contract, if at all, at the time such second contract was made. The subsequent affirmance or disaffirmance of that contract by the insurer, as he might.' elect, could not affect the validity of the former contract between other parties. Most of the authorities so hold. See Dahlberg v. St. Louis Mut. Ins. Co., 6 Mo. App. 121, and cases cited. Order reversed. Footnotes [*] Mitchell and. Vanderburgh, JJ.. took no part in the decision of this case, the former because of illness, and the latter having tried the case in the court below.