Aetna Insurance v. Smith

Holden, J., delivered the opinion of the court. Smith, McKinnon & Son, appellees, recovered a judgment for one thousand five hundred dollars against the appellant, -¿Etna Insurance Co., on a policy of fire insurance issued March 27, 1914, covering a building which was destroyed by fire February 2, 1915. The insurance company appeals,, and assigns several errors of the lower court upon which it asks for reversal; but we think only two contentions deserve notice, which are: That the appellant should have — 334 — been granted a peremptory instruction by the lower court, because, first, the policy of insurance sued on was void at the time of the fire on account of the insured having assigned the policy to J. A. Sander-son, a creditor of the insured, before loss occurred, without the consent of the company; and, second, because the insured procured five hundred dollars additional insurance on the property in violation of the terms of the policy. The policy of insurance sued on was written in the regular form, and provided that the policy should be void if assigned before a.loss, or if additional insurance in' excess of the one thousand five hundred dollars be procured, without the consent of the company. On the back of the policy was the following indorsement: “In case of fire, pay the amount of this policy to J. A. Sanderson, French Camp, Miss. [Signed] Smith, McKinnon & Son, May 5, 1914.” This assignment was executed about a month after the policy was issued and several months before the loss occurred. It appears, further, from this record, that the • assignee, J. A. Sanderson, was a creditor of Smith, McKinnon & Son, and held a mortgage on the store building and lot upon which the building covered by the insurance stood. The policy was assigned to Sanderson by the insured as collateral security for the indebtedness due by insured appellees to Sanderson and covered by the said mortgage, and this assignment of the policy as collateral security was made and executed for the purpose of furnishing additional security to Sanderson for the said debt due by appellees, Smith, McKinnon & Son, to Sanderson. This policy, after assignment as collateral security, was delivered to Sanderson and held by him until after the fire occurred. February 2, 1915. After the fire Sanderson demanded payment on the policy, which was refused by the insurance company. The — 335 — policy was then returned to the appellees, who filed this snit and recovered judgment for one thousand live hundred dollars thereon. The proof offered hy the appellees in the lower •court shows that at the time the policy of one thousand five hundred dollars here sued on was issued to the insured, appellees, hy Mr.. McWhorter, agent of the -appellant insurance company, the appellees were carrying total concurrent insurance in the sum of two thousand dollars consisting of the one thousand five hundred dollar policy and a five hundred dollar policy on the property, all issued by the agent, ‘McWhorter. The agent, McWhorter, knew that the additional insurance -of five hundred dollars was being carried on this property,- for he had himself, while agent of- appellant, issued this total concurrent insurance in the two policies to the extent of two thousand dollars. When the policy for one thousand five hundred dollars now sued on was issued to the appellees, the additional insurance of five hundred dollars issued by McWhorter ■to appellees then existed and was in force. After-wards, when this five hundred dollar policy expired, Mr. McWhorter renewed it and sent the new policy to 'the appellees, which they returned to him, stating "to Agent McWhorter that they wished to take this five hundred dollar policy with another agent, for personal reasons, which they did. So the additional five hundred dollars insurance, now complained of hy the appellant insurance company,- was procured in another insurance agency, and the appellant contends that the procurement of this additional five hundred dollars insurance invalidated the policy sued on herein. The record further shows that the agent, McWhorter, had authority to act for the appellant, and' had issued to the appellees total concurrent insurance in the amount of two thousand dollars on the •same property in the same' way for several years — 336 — prior to the time -when the policy now in suit was issued. As to the first contention made by appellant, that the assignment of the policy before loss occurred, without the consent of the company, invalidated the policy, we find, after an exténsive and careful investigation of the authorities on that question, that the weight of authority and the better rule is that the assignment of an insurance policy as collateral security foi" a debt is not such an assignment as will invalidate the policy, and is not a violation of the terms of the-insurance contract, which prohibits an assignment of the policy before loss without the consent of the insurance company. The stipulation in the policy, providing that it shall be void if assigned before loss without the consent of the company, contemplates a general or complete unconditional assignment of the-ownership of the policy, and is not intended to work a forfeiture of the rights of the insured, where the-policy is assigned pnerely as collateral security for a debt and its real ownership remains in the insured. Therefore the assignment in this case did not invalidate the policy. The proof in the record shows-that the insured had never ceased to be the real owners of the policy, and that the only interest of the-assignee was merely such an interest as the holder of collateral security acquires in the thing given as a security — a mere equity. The legal title and ownership of the policy still remained in the insured. Consequently, when a strict and proper construction is-placed upon the terms and stipulations of the policy, as should be done in favor of the insured and against the insurer, where forfeiture is claimed, it becomes plain, and reasonably follows, that the assignment in this case did not constitute an assignment in violation of the stipulation contained in the policy. Griffey v. New York Central Ins. Co., 100 N. Y. 417, 3 N. E. 309, 53 Am. Rep. 202; Ellis v. Kreutsinger, 27 Mo. — 337 — 311, 72 Am. Dec. 270; Insurance Co. v. Kelly, 32 Md. 421, 3 Am. Rep. 149; Key v. Continental Ins. Co., 101 Mo. App. 344, 74 S. W. 162; Mahr v. Norwich F. Ins. Soc., 7 N. Y. Supp. 143; Dickey v. Pocomoke City Nat. Bank, 89 Md. 282, 43 Atl. 33; True v. Manhattan F. Ins. Co. (C. C.), 26 Fed. 83; Allen v. Phoenix Assurance Co., 12 Idaho, 653, 88 Pac. 245, 8 L. R. A. (N. S.) 903, 10 Ann. Cas. 328 ; 2 May, Ins., section 379; Cooley’s Briefs on Insurance, vol. 2, p. 1865. Bnt ■ it is further contended that .the assignment must be viewed and construed solely as it is written, and that oral testimony showing that it • was an assignment merely as collateral security for a debt was not admissible. We' cannot agree with counsel for appellant in this contention, for the reason ' that the ’ authorities seem to be uniform that oral testimony, which does not contradict the written assignment, is admissible to show the real purpose aiid character of the assignment. 17 Cyc. 722; 10 R. C. L., sections 231, 234; Elliott on Contracts, section 1641. Now, coming to the second contention 1 of appellant, that the- policy was void because five hundred dollars additional insurance was procured without the ■ consent of the insurance company: On that proposition it will be observed that the proof in the record shows that, the appellees had been carrying two thousand dollars total concurrent insurance on the building here in question, through Agent McWhorter, for five or six years previous to the time when the policy sued on was issued. At the time the one thousand five hundred dollar policy sued on was issued by the agent, McWhor-ter, he had also issued to the appellees the said five hundred dollars additional insurance complained of. In other words, to state the matter plainly, the appellant’s agent, McWhorter, issued the policy of one thousand five hundred dollars here sued on at a time when he knew that the additional five hundred dollar policy was then in existence. In fact, he had issued — 338 — the policies for five hundred dollars and one thousand five hundred dollars, respectively, and of course knew that the total concurrent insurance of two thousand dollars was being carried on the building by the insured, appellees, in violation of the limit of one thousand five hundred dollars stipulated in the policy sued on in this case. Agent McWhorter had been knowingly violating the stipulation of the policy in reference to additional or excessive insurance for several years, and when he issued the one thousand five hundred dollar policy he knew that he was also carrying the additional five hundred dollars insurance, and by his action he impliedly, if not expressly, agreed to the overinsurance in violation of the stipulation in the one thousand five hundred dollar policy, which amounted to consent or waiver' of the •clause of the policy which prohibited the procurement of additional insurance in excess of the one thousand five hundred dollar policy sued on herein. We think this question was definitely settled by this court in the case of New Orleans Insurance Ass’n v. Holberg & Klaus, 64 Miss. 51, 8 So. 175. In that case the court held, in substance, that the cancellation of one policy and the taking out of another for the same amount did not increase the risk and did not in any manner violate the terms of the policy. And that is true in the case before us, because of the waiver by the agent. The ■difference between that case and the one here is that the consent or waiver was in writing there and here it was by the acts and knowledge of the agent of the insurance company. But in effect it is immaterial as to how the consent or waiver is brought about. The instant case is equally as conclusive against the insurance company as the Holberg Case, supra, for the reasons mentioned. Therefore, when we test the question out we find that the one thousand five hundred dollar policy here ■sued on was valid when issued, and the insured did — 339 — nothing' to invalidate it, except that which the appellant’s agent, McWhorter, had already permitted, and had been consenting to for several years prior to that time; that is, allowing, and issuing himself, concurrent additional insurance for - five hundred in excess, of the one thousand five hundred dollar policy sued on in this case. It could make no difference whether or not McWhorter hims.elf issued the additional insurance of five hundred dollars complained of here. So we are clearly of opinion that the excessive additional insurance of- five hundred dollars' in this case did not invalidate the policy, because the appellant, through its .agent, agreed to it by his previous acts, and thus waived the violation of the provision against the additional overinsurance. Able counsel for appellant take the further- position that-this case is controlled by the decision of this court in Palatine Ins. Co. v. Smith, McKinnon & Son, 115 Miss. 324, 75 So. 564, and that the judgment of the lower court should be reversed, if we follow that decision. We shall not discuss the difference between that case and the one now before us, because the difference may he easily seen by a careful reading of- the two cases, and we think it unnecessary to point it out. However, we may say that the principal distinction between the Palatine Case and the case before us is that in the Palatine Case there was no known excessive additional insurance in -existence at the time the policy sued on was issued, but subsequently additional overinsurance, in violation of the stipulation of the policy, was issued to the insured, by another agent, and without the knowledge or consent of the defendant insurance company. Here the insurance company, through its agent, Mc-Whorter, issued the policy for one thousand five hundred dollars sued on, at a time when he knew the additional overinsurance of five hundred dollars was ‘then in force and effect, which he had himself issued at — 340 — that time and for several years prior thereto. When the one thousand five hundred dollar policy was issued, it was certainly a valid policy because the agent of appellant had issued the five hundred dollars excessive-insurance, and knew it was in force at the very time the one thousand five hundred dollar policy was issued, and thus consented to total concurrent insurance of two thousand dollars on the property. A clear differentiation in other respects between the two cases may he pointed out, but we think the distinction indicated above is sufficient. The conclusions reached by us above are sustained by the following authorities: Haapa v. Metropolitan L. Ins. Co., 150 Mich. 467, 114 N. W. 380, 16 L. R. A. (N. S.) 1165, and note, 121 Am. St. Rep. 627; Anderson v. Manchester F. Ins. Co., 59 Minn. 182, 60 N. W. 1095, 63 N. W. 241, 28 L. R. A. 609, 50 Am. St. Rep. 400; Putnam v. Commonwealth Ins. Co. (C. C.), 4 Fed. 753; Phoenix Ins. Co. v. Grove, 215 Ill. 299, 74 N. E. 141, 25 L. R. A (N. S.) 1, and note; Rivara v. Queen’s Ins. Co., 62 Miss. 720; Western Assurrance Co. v. Phelps, 77 Miss. 625, 27 So. 745; Georgia Home Ins. Co. v. Stein, 72 Miss. 943, 18 So. 414; Miss. Home Ins. Co. v. Stevens, 93 Miss. 439, 46 So. 245; Phoenix Ins. Co. v. Randle, 81 Miss. 720, 33 So. 500. The judgment of the lower court is affirmed. Affirmed.