Crown Point Iron Co. v. Ætna Insurance — 25 N.Y. St. Rep. 728

Majority

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Crown Point Iron Company, Resp’t, v. Ætna Insurance Company, App’lt.

(Supreme Court, General Term, Third Department,

Filed July 6, 1889.)

Headnote

Insurance (fire)—Cancellation of policy—When effectual—Effect OF DELIVERY TO AGENT.

Plaintiff's agent returned the policies in suit to defendant’s agent for cancellation. In the letter accompanying their return it was requested that plaintiff should be allowed for the unexpired time they had to run pro rata on amount paid. No condition was attached to the surrender. Subsequently a fire occurred, and plaintiff’s agent requested the company’s agent to return the policies, which was done. Held, that the policies were effectually surrendered up, and that the subsequent re-delivery after the fire did not have the effect of reviving them. Held, also, that it was not necessary that to effect the cancellation, the insurance company should accept the policy or repay the premium.

This is an action on a policy of fire insurance. The sole question is whether, before the fire, the plaintiff, the insured, had, by its own voluntary and intentional act, surrendered up to defendant and had thus cancelled the policy.

This policy, with eleven other policies, in other companies (five of which are involved in litigations similar to the present) was upon charcoal of the plaintiff. One Page,

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at Crown Point, was defendant’s agent. As such he had issued the policy in question. He had authority to accept policies of insurance for cancellation and to terminate insurance at the request of- the insured in accordance with the terms of their policies. Plaintiff’s policy contained this clause: “ This insurance may be terminated at any time at the request of the assured, in which case the company shall retain only the customary short rates for the time the policy has been in force.”

Mr. Inman was the general manager of plaintiff and of another company, and lived at Plattsburgh. Mr. Reed had for three or four years been assistant general manager, and had charge of certain matters at Crown Point. Mr. In-man looked after the matter of insurance. Inman & Reed having previously visited the mines, and had learned that the stock of charcoal was greatly reduced.

About the 25th or 26th of July, 1886, Reed informed Inman that they had more insurance than they had coal. Inman then told him that if the companies would cancel them pro rata, he would cancel them all. If not, they felt obligated to cancel some, Reed telling him that they had $12,000 to $15,000 insurance, and there was not half that amount of charcoal. According to the testimony of one witness, Inman directed Reed to return for cancellation all the policies on charcoal. The referee finds that Inman directed Reed to cancel some of them.

In pursuance of that direction, and under such authority as he possessed, Reed, on the twenty-eighth day of July, wrote a letter to Page. The letter was written on paper bearing the name of the plaintiff and of its several officers, among them Reed himself as assistant general manager. The letter is as follows,'omitting the caption just mentioned:

“ Crown Point, July 28, 1886.

“ George Page, Agent.

“ Dear Sir :—Herewith I send you insurance policies on charcoal for cancellation. Our stock is nearly used up. We should be allowed for the unexpired time pro rata- on amount paid. The following are the policies :

“(Here follow the names and amounts, etc., of the nine policies, including the JEtna.)

“ Please attend to it at once.

• “Yours,

“H. L. REED,

“ Ass’t Gen’l Manager.”

Reed inclosed the policies in the envelope with the letter, and sent the package to Page at Crown Point. It should be mentioned here that although Page was not the agent of the companies, other than the JEtna, yet the policies had been received through him from Little, the agent at

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Glens Falls of those companies, and that Page had, as insurance "broker and agent of plaintiff, procured the other eight policies.

It is to be noticed also that,. on returning these nine policies, there still remained three policies of the charcoal, viz., in the American Central Company, the Orient Company and the Star Company, to the total amount of §2,833.34. The total amount before returning the policies was $14,000.

Page received the letter and the nine policies July 29, at 1.30 p. M., and took out and retained the ¿Etna policy, making at that time, so far as appears, no reply to the plaintiff. Page had authority from the ¿Etna to cancel policies.

On the evening of July 29, at 10.30, the charcoal was destroyed by fire. The next morning, the 30th, between 8 and 9 o’clock, Reed called on Page, both of them haviug knowledge of the fire, to obtain a return of the policies. On the 31st day of July, Page returned the ¿Etna policy to Reed.

On the next day, or the second thereafter, Page saw Reed at plaintiff’s office, and requested him to return the ¿Etna policy. Reed did so. Page thereupon entered on his registry the word “cancelled,” opposite the entry of this policy, and returned the policy to the company defendant, with his next monthly report.

On the 2d of September, 1886, Page gave his check of twenty-four dollars to Reed, for the annual premium, payable on return of the' policy. Reed kept the check till Oct. 5, when he returned it to Page, with a letter, declining to accept it.

These are the material facts as to the ¿Etna policy. But it may be convenient to state the additional facts affecting the other five policies:

On receiving the nine policies, Page wrote to Little a letter, July 29th, as follows:

“Crown Point, N. Y., July 29, 1886.

“M. B. Little, Esq.:

“Dear Sir—I inclose the following policies for cancellation, as the stock of charcoal is used up. (Here follow the name's and amounts of the eight policies). Make the rebate as high as you can. * * * Please make out a bill, stating the amount that you can allow on each policy, for me to show Mr. Reed, as agent of the Crown Point Company.

“Yours, etc.,

“ GEORGE PAGE.”

This letter, containing the eight policies, was mailed by Page to Little that afternoon.

On the next morning, the thirtieth, between eight and

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nine o’clock, Page, having then been notified by Reed of the fire, at his request, telegraphed to Little to return all policies sent him the night before.

It is Little’s impression that about nine o’clock in the evening of the twenty-ninth, he went to the post-office at Glens Palls, opened his drawer there; saw the package sent by Page, opened it and saw the policies; replaced it in the drawer and went home. About nine o’clock on the morning of the thirtieth he took the package from the post-office to his own office; read the letter of Page and laid it, with other letters, to be answered. About an hour or two after that he received Page’s telegram. He then took the eight policies, enclosed them with the telegram (to save the trouble of writing a letter), and sent them by mail to Page, who received them July thirty-first, and delivered them with the ¿Etna policy to Reed.

Little had authority to cancel policies of these companies. At the time when he received the telegram and sent the policies back to Page, Little had no knowledge of the fire.

The other five policies have clauses relative to cancellation similar to that of the .¿Etna above stated. The loss by fire on the charcoal proved to be over $4,600.

After the fire, Page notified the .¿Etna of the loss, and in the proofs stated that the loss was $2,000.

This action, and the actions against five other companies, whose policies were among the eight sent by Page to Little, as above stated, were referred to a referee, who reported in favor of the plaintiff. From his report the several defendants appeal.

A. H. Sawyer, for app’lt; B. L. Hand and Waldo & McLaughlin, for resp’t.

It is evident that the examination by Inman and Reed satisfied them that the plaintiff had more insurance than was needed on the charcoal, and made In-man decide to reduce it largely or to give it up altogether. The total amount was $14,000, and there is some indication that about $3,000 was considered to be sufficient. Certainly Inman testifies that they had to cancel some, and would cancel all, if they could do so on a full pro rata return. We cannot see then why Reed’s act was not fully authorized, even without reference to such authority as he may have had to act himself.

He did not return all the policies. There were twelve and he returned nine. Inman does not state that he gave any direction how many should be cancelled. It must, therefore, have been left to Reed’s judgment, who with Inman had examined the amount of charcoal remaining. And there is nothing in Inman’s testimony which indicates that if a part only of the policies were to be cancelled, this must be done on a fullero rata return. In saying this we do not mean to imply that Reed’s act would not have been

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binding on the plaintiff, even if he had returned all the policies in his letter to Page. He had been held out to the world as assistant general manager. He had procured policies for the plaintiff. He had general charge of business in the absence of Inman. And, though it may have been in the power of Inman to direct Reed as to what insurance to procure, yet the evidence shows that the business as to the insurance companies was done by Reed.

Taking then Reed’s acts as the acts of the plaintiff in this respect, we come to his letter to Page: “I send you insurance polices on charcoal for cancellation. Our stock is nearly used up.” Here we have a direct request that the policies be cancelled, with the reason therefor, viz., that the plaintiff had not as much property, as the insurance. They, therefore, wished to save something of the premium which they had paid. This was then a request for something which would benefit plaintiff. The next sentence is not a condition of the surrender; but is an asking for good terms. “We should be allowed for the unexpired time pro rata on amount paid.” That is the plaintiff thinks it should be allowed pro rata. It appears that on cancelling policies there is sometimes allowed, a “short rate,” and sometimes “a ratable proportion.” By the condition in defendant’s policy, when the insurance is terminated at the request of the insured the company retains short rates for the time the policy has been in force, when by the company, it refunds ratably.

The meaning seems to be that if the insured terminates the policy he pays for the time he has been insured, at the rate usual for that short time. The plaintiff only desired to pay only pro rata. Still that was not made a condition of- the surrender. That had been decided upon by plaintiff, and the decision had been acted upon by Reed in sending the policies.

Aside from the condition in these policies, it is provided by section 3, chapter 110, Laws 1880, that any insurance company shall, at the request of the insured, cancel any policy, “ and shall return to said party, or his legal representatives, the amount of premium paid, less the customary short-rate premium for the expired time.” Therefore, on thus surrendering the policies, with the request for cancellation, the plaintiff, if payment was refused, would have a right of action for the premium paid, less the short rate for expired time. The plaintiff hoped that the defendant would do better than this, but the surrender of the .¿Etna policy was complete. Nothing remained to be done by plaintiff. The defendant owed the plaintiff the amount provided by statute, and might voluntarily pay more, but whether the defendant paid that or not, the plaintiff had done in respect to the .¿Etna Company all that was needed. It had given up its policy to a person authorized to cancel, and had requested cancellation. The policy was no longer

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in plaintiff’s possession. Train v. Holland Purch. Ins. Co., 62 N. Y., 508 .

The plaintiff urges that, in order to effect a cancellation, the insurance company must accept the policy and, perhaps, must repay the premium. But this cannot be so. The plaintiff had paid the premium. In consideration of that * payment the defendant had agreed to insure plaintiff for a certain time. Can it be that plaintiff could not, by some means or other, give up and surrender the benefit it had thus paid for ? Suppose, after a person had obtained liis policy, he should be satisfied that the company was insolvent, could he not give up or release this policy, so as to be able to procure one from a solvent company ? Or could the company, by refusing to accept his surrender, prevent his obtaining better insurance ? Certainly not. "Whether the company, without some condition in the policy or some statute, would be obliged to return anything, is a different question.

The plaintiff cites cases in which it has been held that if an insurance company would cancel a policy, they must not only give notice, but must return the premium or some proper part. Griffey v. N. Y. Central Insurance Company, 100 N. Y., 417 . But the position of the company is. ver^ different. It had bound itself to do certain acts for the insured, and has received the consideration. It can relieve itself from the liability only by actually refunding the amount provided for, and not by promising to do so. If it desires to take away something from the insured, it must perform the condition ; but the insured may give up what he possesses, even if the insurance company never pays back what it owes him therefor.

We think, then, that the plaintiff had effectually surrendered the ¿Etna policy on its receipt by Page, who had authority to cancel. Hence, no subsequent re-delivery by-Page to Reed after the fire, and with knowledge of the fire, could make the policy valid. Such re-delivery was a wrongful and fraudulent act towards the defendant. They could have hardly thought that it would change the rights of the plaintiff and the defendant, unless by its cancelling what had been actually done. There was no liability of the defendant on the policy at the time of the fire except to return the proper part of the premium, and there can be no recovery in this action against the ¿Etna Company.

The facts as to the other companies are similar. Whether we regard Page as the agent of plaintiff to send the policies to Little, or as Little’s agent to receive them, does not-seem to be very material. They were on their way in regular course of transmission by plaintiff’s order. The referee does not find whether they reached Little at nine o’clock on the evening of the 29th, or on the morning of the 30th. At any rate, between 9 and 10 a. m. of the 30th, Little received the package arid read the letter, and laid it

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aside to be answered. We think that the language of Page’s letter requesting a high rebate is not a condition of the surrender. The surrender was absolute. Page, considered as plaintiff’s agent (the most favorable view for plaintiff), mailed, by plaintiff's request, the package the afternoon of July 29th, and before the fire.

By that act plaintiff parted with control of the policies and did so for the purpose of obtaining its cancellation. That act was plaintiff’s surrender of the policies; because it was the decisive act which put the policies intentionally out of plaintiff’s possession. And even though they did not reach Little until after the fire, the surrender had taken effect before. Atlantic Insurance Company v. Goodall, 35 N. H., 328 . The plaintiff had decided that it wished these policies cancelled, and it at once did all it reasonably could to effect that result. It had the right to treat its act as a surrender of the policies; and so had the insurance companies.

If this be so, then clearly the return of these policies by Little to Page could not give them vitality. A fraud was practiced upon Little, and on the companies, through him, by asking the return of the policies and concealing the fact of the fire. The property which they were intended to insure had already been destroyed or partially destroyed. Even a new policy issued in ignorance of that fact would have been invalid; and in any case could have created no liability for such previous loss.

The judgment in favor of the plaintiff in the above-entitled action, and the similar judgments in the five other actions against other companies are reversed, new trials granted, referee discharged, costs to abide event.

Landon and Ingalls, JJ., concur.