Alker v. Rhoads — 73 A.D. 158

Majority

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Alphonse H. Alker and Others, Respondents, v. Benjamin T. Rhoads, Junior, as General Manager and as Attorney in Fact, Representing All of the Underwriters at the People’s Fire Lloyds, Appellant.

Headnote

Lloyds reinsurance — amendment of a complaint substituting the defendant in his representative, for him in his individual, capacity—Statute of Limitations — limit imposed by the policy, not applicable wheie a rider thereto embraces substantially the agreement — net premiums — scope of the words ‘ ‘ commissions paid ” — extent of liability on reinsurance.

Where an association of fire underwriters, known as the New York and Boston Lloyds, brings an action to recover upon a policy of reinsurance issued by a. similar association, known as the People’s Fire Lloyds, against the attorney in fact and general manager of the underwriters of the latter association

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individually, the court at Special Term has power, under section 723 of the Code of Civil Procedure, to allow the summons and complaint to he amended before trial so as to designate that the defendant is sued in his representative capacity and not in his individual capacity.

Semble, that assuming that a new and different party was brought in by the amendment, the only effect thereof would be that the action, for the purpose of the Statute of Limitations, would be deemed to have been commenced when the amendment was made.

Where it appears that the contract of reinsurance consisted of a policy in the ordinary form, together with a rider attached thereto, and that the substantial part of the agreement was embraced in the rider, a provision contained in the policy itself, requiring actions thereon to be brought within one year after the fire took place, is inapplicable to the contract of reinsurance.

By the contract of reinsurance the People’s Fire Lloyds agreed to indemnify the New York and Boston Lloyds against any loss that they might sustain on certain policies issued by them in excess of fifty per cent of the net premiums received by them during the term of such policy to an amount not exceeding §5,000. The policy provided that such net premiums were to be determined by deducting from the gross premiums “ commissions paid,” return premiums upon policies canceled and premiums upon reinsurance, and that “ the underwriters hereon” should “make good to the underwriters at New York & Boston Lloyds their proportion of such excess loss.” Then followed the words “§15,000 September 15th, 1895, to January 1st, 1896, without the right of cancellation by either party hereto."

In presenting its claim under the policy of reinsurance, the New York and Boston Lloyds fixed the amount of excess losses over fifty per cent of the net premiums at §10,578.94, stating, “There being an implied agreement to carry a total insurance concurrent with your form of policy of §15,000, the adjustment is to be made as though such §15,000 insurance were in force. Your proportion of such excess of loss, therefore, is one-third, or §3,526.31.” It subsequently presented another proof, stating that the excess of loss over fifty per cent of the net premiums was §10,695.50, and that there was §10,000 insurance thereon, and that the People’s Fire Lloyds was, therefore, liable for the entire amount of the policy of reinsurance.

Held, that, in determining the net premiums, the plaintiffs were justified in deducting the entire compensation allowed to their attorneys in fact, as the term “commissions paid” included such compensation, and was not limited to the compensation paid to outside agents;

That, from the language of the policy and from the construction placed thereon when the first proof of loss was served, it was evidently the intention of the parties to have reinsurance to the extent of §15,000. and that the defendant was liable to the plaintiffs for only one-third of the loss.

Appeal by the defendant, Benjamin T. Rhoads, Junior, as general manager and as attorney in fact, representing all of the underwriters at the People’s Fire Lloyds, from a judgment of the

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Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of New York on the 10th day of March, 1902, upon the decision of the court rendered after a trial at the New York Trial Term, a jury having been waived.

This action was brought by the plaintiffs, who compose the association known as New York and Boston Lloyds, to recover upon a policy of reinsurance executed by the defendant, who is attorney in fact of the association known as People’s Fire Lloyds, on September 15, 1895, whereby it was agreed to indemnify the plaintiffs from the date of the policy to January 1, 1896, against any loss they might sustain on certain policies issued by them in excess of fifty per cent of the net premiums received by them during the term of such policy to an amount not exceeding $5,000. The policy of reinsurance provided that such net premiums were to be determined by deducting from the gross premiums “ commissions paid,” return premiums upon policies canceled and premiums upon reinsurance, and that “ the underwriters hereon ” should “ make good to the underwriters at New York & Boston Lloyds their proportion of such excess loss * * Then follow the words “ $15,000 September 15th, 1895, to January 1st, 1896, without the right of cancellation by either party hereto.”

Losses having occurred within the period, the plaintiffs gave notice thereof on January 3, 1896, and presented proof on February 11, 1896, that the amount of excess losses over fifty per cent of net premiums was $10,578.94, stating : “ There being an implied agreement to carry a total insurance concurrent with your form of policy of $15,000, the adjustments to be made as though such $15,000 insurance were in force. Your proportion of such excess of loss, therefore, is one-third or $3,526.31.” Subsequently on April 13, 1896, plaintiffs presented a proof of loss showing excess of losses over fifty per cent of net premiums to be $10,695.57, with $10,000 insurance in force of which the maximum of the People’s Fire Lloyds was $5,000, wherefore $5,000 was demanded. Such demand being refused, this action was brought to recover the same by service of summons and complaint on the defendant individually on November 13, 1896, and the supplemental amended summons and complaint were served on him as representing the People’s Fire Lloyds on February 10, 1899.

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The court found in favor of the plaintiffs for the full amount demanded, and from judgment so entered the defendant appeals.

G. 3. Gravoford, for the appellant.

William P. Burr, for certain underwriters.

William B. Bllison, for the respondents.

Three objections are urged against the validity of the judgment, the first being that the court never obtained jurisdiction of the defendant. This objection arose out of the fact that Benjamin T. Rhoads, Jr., was originally sued as an individual, but the plaintiffs having under decisions ascertained the fact to be that an action must in the first instance be against the manager and attorney in fact and not against the underwriters individually, moved before trial to amend the summons and complaint at Special Term, which was granted, and the question presented is whether under section 723 of the Code of Civil Procedure the court liad power to so amend the complaint.

The decisions upon the extent to which the court’s power may be exercised in granting such amendments are not uniform and cannot be in all respects reconciled. That such power is not unlimited we know, and the case of New York State Monitor Milk Pan, Assn. v. Remington Ag. Works ( 89 N. Y. 22 ) is one relied upon by the appellants as against the amendment here allowed. There the action was commenced against a corporation as sole defendant, and the amendment sought was the insertion of the names of other persons individually as defendants. It was held therein that the effect of such an amendment was to continue the action against other and different parties from these named, thus substituting a cause of action against other and different defendants. In the opinion rendered at the General Term ( 25 Hun, 475 ) in that case we find all the authorities collated and discussed in which the question of the right of amendment has been presented. One of the cases cited is that of Tighe v. Pope ( 16 Hun, 180 ) where an action was brought against the defendant describing her as administratrix and asking judgment against her as such, and where the motion was to strike out the words

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“ as administratrix,” and the court held that it should be granted, remarking that whether the amendment was allowed or not, the same person would be defendant.

That case upon its facts is clearly distinguishable, but it recognizes, as do the other cases, the power with its limitations which permits the court to grant an amendment in the description or designation of the person who is sued and is an authority for holding that although an entirely new and different person cannot be substituted, it is competent for the court, where there has been either a misdescription of the person or a mistake in the name, to permit the amendment.

Applying that rule, therefore, to the case at bar, we think the court has undoubted power to grant this amendment, and the only benefit that the defendant could reap, if any, would be in the contention that the first action ended, and by the amendment it would be the commencement of a new action, as a defense to which the defendant might interpose the bar of the Statute of Limitations. Were this contention sustained, the defendant, we think, is in error in supposing that he would derive benefit therefrom. It may be conceded, for the sake of argument, that the amendment brought in an entirely new and different party, and that this would be controlling as to the time when the action was commenced and the Statute of Limitations began to run. The appellant’s position is that the one-year Statute of Limitations provided in the policy of insurance is controlling, which requires the action to be brought within one year after the fire took place. Were the short Statute of Limitations to apply here, there would be some foundation for the argument to rest upon. We think, however, it does not. Although the policy in form is the ordinary one issued by a company to insure against loss by fire, containing provisions as to time for filing proofs of loss, etc., it is conceded that this was not the ordinary policy insuring against loss by fire, but was a policy of reinsurance and that the substantial part of the agreement was in the “rider” attached to the form of policy. It is to be construed, therefore, as the parties intended it should be, as a policy of reinsurance, and to a claim thereunder the one-year provision would not apply. In the case of Jackson v. St. Paul Fire c& Marine Ins. Co. (99 IST. T. 124) the six-year Statute of Limitations was held applicable to reinsurance contracts, and not the clause in the policy

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limiting the right to commence an action upon the policy within the next twelve months after the fire.

The second question presented is whether the right principle was adopted in determining “ net premiums ” under the contract, which involves the question whether the plaintiffs were justified in deducting the entire compensation allowed to their attorneys in fact instead, as the plaintiffs insist, of limiting it in the words of the policy to “ commissions paid ” for business procured. To limit the words “ commissions paid ” merely to those paid to outside agents would be too narrow a construction. In our view, therefore, it was not improper in determining the “ net premiums ” to deduct the compensation allowed to the attorneys under their agency contract, thinking as we do that such payment was “ commission paid.”

The third question is whether or not the plaintiffs are co-insurers with the defendant on this risk by reason of an alleged agreement to maintain $15,000 insurance on it. This question arises upon the provision of the rider in the policy, which is in the following language: “ $15,000, September 15th, 1895, to January 1st, 1896, without the right of cancellation by either party hereto.” Unless we hold that there was no object intended in inserting that clause or unless it is meaningless, the construction given to it by the defendant should prevail. In construing a contract, however, it must be'assumed that the parties meant something by the language employed and that there was some purpose to be effectuated by it. It is significant in this connection that, upon the presentation of the first proof of loss which was prepared by the person who formulated -the rider in which this provision' appeared, we find this statement: “There being an implied agreement to carry a total insurance concurrent with your form of policy of $15,000 the adjustment is to be made as though such $15,000 insurance were in force. Tour proportion of such excess of loss, therefore, is one-third or $3,526.31.” That it was intended that there should be $15,000 of reinsurance obtained further appears from the fact that, in addition to the two actually taken out and existing for $5,000 each, there had been another policy for $5,000 taken out in a company, the name of which was not given ; and although this was returned after it had been issued and before defendant’s policy was written, it is significant of what the parties understood to be the agreement. Equally significant is

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the fact that, in speaking of the $15,000 in the clause from which we have quoted, it is said that plaintiffs had no “ right of cancellation,” which would seemingly indicate that they had agreed to secure and maintain the full amount of $15,000. Here, if the rule of construction is to be applied that it will be presumed that the parties intended to express something by the language used, and if the practical construction which the parties themselves have placed upon the contract is to govern, then it seems to us, that the view for which the defendant contends should prevail in. holding that it was the intention to have reinsurance to the extent of $15,000, and that under the defendant’s policy of $5,000 it was to be responsible in the proportion that the latter bore to the $15,000, viz., one-third of the loss. For this alone, therefore, the plaintiffs are entitled to judgment.

The judgment as entered should accordingly be modified to that extent and as so modified affirmed, without costs.

Patterson, Ingraham, McLaughlin and Hatch, JJ., concurred.

Judgment modified as directed in opinion and as modified affirmed, without costs.

Cases cited

New York State Monitor Milk Pan Ass'n v. Remington Agricultural Works 89 N. Y. 22 N.Y. 1882-04-18 p. 161