State ex rel. Schaefer v. Minnesota Title Insurance & Trust Co.

BROWN, J. The facts in this case, as disclosed by a stipulation of the parties,are as follows: The Minnesota Title Insurance & Trust Company was organized under the laws of -the state for the purpose, among other things, of insuring titles to real property and issuing policies therefor. In February, 1907, claimant applied to the company for a policy insuring the title to certain property it then owned, upon which, after due investigation, a policy was issued in due form insuring the title for the period of twenty five years from its date, and claimant paid the premium charged therefor, amounting to $45. Thereafter, on March 26, 1907, about two months after the issuance of the policy, the insurance company, in proceedings instituted by the attorney general, was duly adjudged insolvent, and a receiver appointed to wind up its affairs. In June, 1907, claimant filed with the receiver, as a demand against the company a claim for the return of the premium so paid. The question whether the claim should be allowed came up for hearing before the court below, where judgment was ordered for claimant for the unearned part of the premium less ten dollars, which the court held the company was entitled to retain for services render [453] ed in the examination of the title preparatory to the issuance of the policy. Both parties appealed. We have found no case involving the right of a policy holder in an insurance company like the one before us, an insurer of title to real property, to a return of the unearned part of the premium, where before the expiration of the policy the insurance company became insolvent and retired from business. The question is entirely new and one of first impressions. We discover no reason, however, for not applying the rule applicable to the, in a measure, analogous case of a fire insurance company. It has been held in respect to such companies that the adjudication of insolvency and the appointment of a receiver to close the affairs of the company in effect annul the policy and entitle the holder thereof to a return of the unearned premium. Taylor v. North Star Mut. Ins. Co., 46 Minn. 198, 48 N. W. 772; In re Minneapolis Mut. Fire Ins. Co., 49 Minn. 291, 51 N. W. 921; Smith v. National Credit Ins. Co., 65 Minn. 283, 68 N. W. 28, 33 L. R. A. 511; McCallum v. National Credit Ins. Co., 84 Minn. 134, 86 N. W. 892. In the case of fire, hail, storm, or other like insurance, the indemnity is against loss which may occur at some time in the future during the life of the policy, and the contract serves as a protection to the policy holder during that time. In the title insurance the situation is the same, save that the loss suffered must arise from some defect in the title existing at the time of or before the policy was issued, and is subsequently successfully asserted to the damage of the policy holder. So that, substantially, the indemnity in either- case is against future loss or damage; the loss arising in the one case from the happening of a future event, and in the other from a loss subsequent to the date of the policy by reason of the successful assertion of an adverse title or interest in the land insured which existed at the time or before the contract was made. That a loss of this kind might arise in the future, though the chances in this class of insurance are strongly against such a result, brings the case, by analogy, within the rule applicable to other insurance contracts, and the trial court was corrects in applying it. The difference in probable or possible loss in the two classes' of insurance is practically one of degree only; the prob [454] ability of loss in this class being materially less than in the case of fire insurance. We are also of opinion, and so hold, that the court adopted the correct rule of damages. The court held that the claimant was entitled to the return of the premium less a proportionate ■ amount, which it may be said the company earned up to the time of its insolvency, and the sum of ten dollars, allowed for the examination of the title before issuing the policy. ' The allowance of this item is fully justified by the terms of the contract, by which claimant agreed to pay for the insurance the sum of forty five dollars, with the understanding that ten dollars thereof, which was paid at the time of the application, should be retained by the company, whether the policy was issued, or not, as compensation for services rendered in the investigation of the title. The company fully performed this service. If a policy had not been issued, the applicant could not demand its return; and if under such circumstances it could be retained by the company, the fact that It issued the policy should not forfeit its right to retain it for the same service. The court adopted the rule of time in measuring the earned portion of the premium. It is urged that this was incorrect, and that some other more equitable rule should have been applied. We are unable to concur in this contention. While it is true that the risk of loss under a contract of this kind, unlike other insurance diminishes with the lapse of time, and as the end of the period covered by the policy approaches there is less and less likelihood of loss, yet to attempt to say from this basis what proportion of the premium has been earned would involve the matter in arbitrary speculation and bring up at an exceedingly unsatisfactory result, since no certain or definite rule could be evolved from that process of reasoning; whereas, on the other hand, to apportion the time during which the policy was in force to that of the unexpired period leaves no room for speculation or conjecture, does not involve an effort to measure the value of the possibility or probability of a loss, and fixes a rule which, if not wholly satisfactory, is at least definite and certain. Our conclusions, therefore, are in harmony with those reached by the learned trial judge and his order in the premises, is affirmed. Affirmed.