Germania Fire Insurance v. Home Insurance

Headnote

Insurance (fire)—Change of interest—Partnership.

After insurance of the stock of goods of an individual under a policy providing that if the property was sold or transferred, “or any change takes place in title or pos=ession,” it should he void, the person insured entered into a partnership with another and transferred the goods insured to the firm without the knowledge of the insurer. Held, that this constituted a change of interest, within the meaning of the policy, rendering it void.

Appeal from a judgment rendered at a trial term without a jury on an agreed statement of facts.

On the 1st of May, 1873, John A. S. Verdier procured an insurance by the defendant company on his stock of hardware, tin, iron, stoves, and such other articles as are usually kept on sale by him as a hardware and yankee notion dealer ” contained in his store in Grand Rapids, Mich.

This insurance was for one year.

On the 1st of May, 1874, the same was renewed for another year, and $37.50 was paid and a renewal receipt taken.

On the 4th of May, 1874, the said Yerdier and one William A. Brown entered into a copartnership agreement, whereby Yerdier had an interest of seven-tenths and Brown an interest of three-tenths.

On the 4th of June, 1874, the stock was partially destroyed by lire, whereby a loss accrued to the amount of $6,818.20.

There was insurance in other companies to the amount of $7,744.31, as to which their contributory share is conceded by way of deduction.

On the 4th of November, 1874, the plaintiff, the Germania Company, paid its share of the loss and took a joint and several assignment by Yerdier & Brown of their claim against the-defendant.

It is conceded that the stock was transferred by Yerdier toYerdier & Brown without the knowledge of the defendant.

The following is the opinion of the court below:

McAdam, J.—Questions of forfeiture in consequence of transfer of interest have arisen in almost every conceivable shape, mainly for the reason that the phraseology of the so-called alienation clause is diverse in different policies. In May on Insurance (3d ed., vol. 1, pp. 552-556) are collected fifty variations of this clause,, and the reported decisions must be read in the light of the particular language employed in the policy construed. ■

In the present instance the condition of the policy is that “ if the property be sold or transferred, or any change talces place in title or possession, * * * the policy shall be void.”

Yerdier, the person insured, by taking in Brown as a partner, made the corpus of the effects joint property. Bach acquired a concurrent title in the whole, Story on Part. § 91, but neither had any exclusive rights to any part of the stock in trade, so as to-enable him to separate it from the common property and sell it as his own. Rogers v. Batchelor, 12 Pet., 221 . Indeed, Yerdier ceased to have any separate interest in the corpus, and the share of each partner could be thereafter determined only after the partnership debts were paid and accounts taken. Menagh v. Whit-well, 52 N. Y., 158 . See also Williams v. Whedon, 109 N. Y.,. 833 ; 15 St. Rep., 265 ; 5 Wait’s Act. & D., 119. Bach in effect became possessed of the whole property for all the purposes of the partnership until they were in. some mode accomplished. It would be solecism to hold that the formation of this partnership and the introduction of Brown as part owner did not work a. change of both title and possession of the property insured. True, Yerdier might have insured his interest as a copartner in the firm, and recovered any loss sustained in that character. But that is not the case. He did not do that; he insured as sole owner, under a condition that when he ceased to bear that relation to the property,the policy was to become void. That condition was a valid one, and however much the law abhors forfeitures, it is a material part of the contract, and must be respected and enforced. The rule is not unreasonable, for the risk assumed by the insurers

depends upon the character and circumstances of the insured. They have a right to know with whom they are contracting, and to whom they are to account, and no new party can be thrust upon them contrary to the terms of their contract, which is personal in its nature and does not pass with the title to the property. These conclusions accord with the authoritative decisions upon the subject. See Brennan v. London A. Co., 20 Fed. Rep., 657 ; Malley v. Aitantic Ins. Co., 51 Conn., 222 ; Biggs v. Ins. Co., 88 H. C., 141; Hathaway v. State Ins. Co., 64 Iowa, 229 ; Card v. Phoenix Ins. Co., 4 Mo. App., 424 . The earlier Iowa case of Cowan v. Ins. Co., 40 Iowa, 551 , holding that the portion of the property sold to the incoming partner would lose the benefit of the insurance, but that the policy would remain operative to protect the interest of the vendor still remaining in him, has been unfavorably criticised, Malley v. Atlantic Ins. Co., supra, and subsequently the Iowa court explained that the Cowan case was decided on the ground that the alienation clause was not pleaded as forbidding “ a change in title or possession,” but only as forbidding an entire sale or transfer. Hathaway v. State Ins. Co., supra ; and as to same distinction see Blackwell v. Ins. Co., 21 Ins. L. J., 97 . The Cowan case must be rejected as •authority here. The case of Hoffman v. AEtna Ins. Co., 32 N. Y., 405 , is not in conflict with the views expressed. There,.a a policy was issued to a firm, and one of the partners, upon retiring, transferred his interest to the remaining partners, and the court held that the effect of the usual proviso against sales, in policies of insurance, is not to interdict sales of the owners as between themselves, but only sales of proprietary interests by the parties insured to third persons. The court did not decide that a stranger could be introduced into the firm and made a party to the contract of insurance without the consent of the other contracting party. That question was not before the court, although it intimated strongly against the feasibility of any such scheme. In the case last cited the insurance company had accepted all three members of the firm as parties entirely satisfactory to entrust with possession and control. In the present case the company had no knowledge of the transfer to Brown until after the fire; had no opportunity of passing on his qualifications as custodian •of the property, and never assented to his introduction as a party to the contract. The company may have been willing to insure Verdier so long as he was the exclusive owner and custodian of the property, but when the change of interest occurred and possession was to be turned over to a copartner with equal power of •control, the company became so far affected by the transfer that the policy became void, unless it first assented to the change. Ho such consent having been given, neither Verdier nor his partner, nor the plaintiff as their assignee, have any right of action whatever in the policy.

It follows that the defendant is entitled to judgment, with costs.