Ladd v. Ætna Insurance — 53 N.Y. St. Rep. 744

Majority

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Eugene H. Ladd et al., App’lts, v. The Ætna Insurance Co., Resp’t.

(Supreme Court, General Term, Third Department,

Filed July 8, 1893.)

Headnote

1. Insurance (fire)—Effect of contract to sell insured property.

Subsequent to procuring a policy of insurance upon their saw mill, plaintiffs executed a contract of sale of the mill to It. & T., and notified defendant’s agent thereof, who indorsed on the policy a statement that the title was in K. & T., and that the loss, if any, was payable to plaintiffs, as their interest may appear. Held, that plaintiffs remained the legal owners of the property with an insurable interest therein, and their policy did not. become invalid in consequence of said contract.

2. Same — Suspension of operation of manufacturing establishment.

The suspension of work in a mill or other manufacturing establishment that will avoid a policy must be-either permanent or something more than a suspension of work from some temporary cause. A < essation of work in a saw mill for one month, caused by the illness of the sawyer, is not such a suspension as to avoid the policy.

Appeal from a judgment in favor of defendant, entered upon a verdict directed bv the court at the close of the evidence on the

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trial at the circuit, and from an order denying plaintiffs’ motion for a new trial.

The action was brought by plaintiffs to recover $2,500 on a policy issued by defendant upon a water power saw mill and machinery therein.

On February 26, 1891, the defendant through Samuel B. Skinner, its agent at Malone, who, it is admitted, had full power from defendant to enter into contracts relating to insurance, in consideration of $125 paid, issued to plaintiffs its policy of insurance for $2,500, as follows: “ $1,000 on their frame water power saw mill and additions connected, occupied as a water power saw mill, and $1,500 on machinery fixed and movable therein.” Plaintiffs were then the owners in fee of the premises. On June 29, 1891, plaintiffs sold the property to King & Trushaw under contract of purchase and conveyance, and they immediately entered into possession thereof and continued in possession and occupancy until the time of the fire, which occurred on January 9, 1892.

By the terms of the contract of purchase King & Trushaw were to pay $2,200 for the property, $500 down and the balance in five equal annual payments. For the first payment they gave Ladd & Smallman Mr. Gibson’s note for $300, which was received on the contract, and two notes of another party, one for $100 and one for $75, which were to be applied when paid. These two notes had not been paid at the time of the trial, leaving due plaintiffs $1,900 and interest from June 29,1891.

Immediately after selling the property to King & Trushaw, Mr. Smallman took the policy and went to Mr..Skinner, the agent, and told him just what trade he had made and for what price he had sold the property, and asked him to make the necessary indorsement on the policy providing that the loss, if any, be payable to them as their interest might appear, and Mr. Skinner agreed to do so. He made an indorsement on the policy, stating that the title was in King & Trushaw, but provided that the loss if any be payable to Ladd & Smallman as their interest might appear, and returned the policy by mail to Ladd & Smallman.

After King & Trushaw purchased the property they made extensive repairs upon the mill and run it, working together in it until their stock was pretty well cut out late in the fall. King lived near the mill and Trushaw lived some ten miles away towards Malone. Trushaw went home to attend some other work, and King with an assistant continued to run the mill until about December 11th, when he was taken sick, and because of this sickness was unable to run it. King had a Mr. Fullerton assisting him, and expecting an early recovery Fullerton worked at other work. When King was taken sick there were logs and lumber at the mill, belts all on, mill in first class repair, and he and Fullerton were going to begin to get out a bill of building lumber the next morning for a Malone party, but he was taken sick that night and was unable to go to work the next morning. Hot recovering, he sent for Trushaw and explained to him his condition and the of out the lumber he was

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about to get out when taken sick, and Trushaw and men were going to begin to saw the following Monday. During King’s sickness and before the fire he engaged logs and logs were being drawn to the mill and lumber away, and everything was going on as usual, except that no sawing was done in the mill for a few days. And Trushaw about three days before the fire run the mill about half a day sawing and planing lumber and was to begin the following Monday to run it to saw the lumber King had undertaken to get out. It was a custom mill. Before suit King _ & Trushaw assigned their interest in the loss to Ladd & Smallman. Proofs of loss were furnished in due time, and no question was-raised by defendant as to proofs of loss or agency of Skinner. The court, at the close of the evidence, on motion of defendant, held the mill was a manufacturing establishment and ceased to be operated for a period of ten days, and hence the policy was void and directed a verdict for defendant.

Kellas & Munsill (John P. Kellas, of counsel), for app'lts; A. H. Sawyer, for resp’t.

It is not claimed that the policy of insurance on which this action was brought, when issued, was invalid. Plaintiffs were the owners of the property insured, and received the policy from the duly authorized agent of defendant.

But it is urged that the policy became void in consequence of the contract executed, after the issuing thereof, to King & Trushaw, which transferred to the latter the equitable title to the mill, and by the alleged erroneous indorsement on said policy that the title was vested in them.

Notwithstanding the contract plaintiffs remained the legal owners of the property, and could insure it, probably for the whole value, but certainly to the extent of their interest in it. Ins. Co. v. Updegraff, 21 Pa. St., 513 ; Tollman v. Atlantic Fire & Marine Ins. Co., 4 Abb. Ct. App. Dec., 345 ; Wood v. The Northwestern Ins. Co., 46 N. Y. 421 .

Plaintiffs remaining the legal owners of the property and with an insurable interest therein, their valid policy did not become invalid, in consequence of the contract, if they correctly represented to defendant’s agent the facts as to such transfer. There was evidence on the trial from which the jury could have found that defendant’s agent was notified that the sale to King & Trushaw was by contract, and hence, a nonsuit having been granted, we must now assume that the agent was truly informed as to the said contract. Under such circumstances we understand it is well settled that the mistake of the agent in making the indorsement will not avoid the policy. Mowry v. Agricultural Ins., 64 Hun, 144 ; 45 St. Rep., 70 ; Van Schoick v. Niagara Fire Ins. Co., 68 N. Y., 434 ; Berry v. American Central Ins. Co., 132 id., 49; 43 St. Rep., 400 .

We do not regard the cases cited by respondent, Quinlan v. P. W. Ins. Co., 133 N. Y., 356 -364; 45 St. Rep., 200 ; Allen v. G.

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under consideration. These are not cases where a valid policy was issued to the insured, and by a mistake of the agent of the insurers the proper indorsement of a transfer was not placed upon the policy of insurance, the agent being duly and properly notified of such transfer.

The indorsement made was as follows:

“ End’t made on policy No. 9932, fiStna Ins. Co., June 30» 1891.

“ It is hereby understood that the title of this property is now vested in P. King and N. Trushaw, and loss, if any, is payable to Ladd & Smallman as interest may appear,

“ S. B. Skinner, Agent.”

It has been decided that the company by the words “ as interest may appear ” insured the plaintiffs for any insurable interest which they might have in the insured -property, and waived the condition requiring a specific statement of such interest in the policy. De Wolf v. Capital City Ins. Co., 16 Hun, 116 ; Burk et al. v. Niagara Fire Ins. Co., 34 St. Rep., 702 , 703.

We have assumed that in making the indorsement above set out the agent incorrectly stated that the title to said insured property was in King & Trushaw. The latter, however, under the contract, were the equitable owners of the property, and there are authorities holding that such vendees who have taken possession under a contract have the title, and may insure as the owners. Pelton v. Westchester Fire Ins. Co., 13 Hun, 23 ; 77 N. Y., 605 .

We, therefore, conclude that the policy was not avoided in consequence of the contract to King & Trushaw.

The court below granted the nonsuit on the ground that the insured property ,being a" manufacturing establishment, ceased to be operated as such, for at least ten days, at some time prior to the fire, and hence under the conditions in the policy it became void. The conditions referred to provide that if the subject insured be a manufacturing establishment, and ceases to be operated for more than ten consecutive days, or if the building therein described, whether intended for occupancy by the owner or a tenant, be and become vacant dr unoccupied, and so remain for ten days, that the policy shall be void.

We think the position of appellants correct that ordinarily the term “occupy ” as applied to such a saw-mill must be deemed synonymous with “operate.” It is held “that to constitute occupancy of a building used for manufacturing purposes there must be some practical use or employment of the property. ” Halpin v. Phenix Ins. Co., 118 N. Y. 174 ; 28 St. Rep., 788 .

A condition of the kind above set out is to be construed in view of the circumstances and character of the property insured and in view of the contingency as to its use within the reasonable contemplation of the parties. Caraher v. Royal Ins. Co., 63 Hun, 93 ; 44 St. Rep., 141 .

The property insured was a saw-mill run by water power. It

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was destroyed by fire on January 9, 1892. The mill was kept running up to December 9th, when King, the'sawyer, was taken ill, and work was suspended until three days before the fire, when the witness Trushaw sawed two logs. He testified he was intending to go to the mill the following Monday to saw the logs there. When King became ill, he had arranged to saw out a bill of lumber the next day. There was quite a quantity of logs at the mill to be sawed, and arrangements had been made to have others drawn, and logs were drawn there during King’s illness, and up to the time of the fire, and lumber taken away. He stopped work on account of the illness.

If an insurance policy on a saw-mill run by water power is vitiated by a temporary suspension of the operation of the mill •in consequence of the illness of the sawyer, absence of logs, low .water, or any circumstances which must necessarily cause such suspension from time to time, such a policy would have but little value.

In Whitney v. Black River Ins. Co., 72 N. Y., 117 ; 9 Hun, 37 , a case of insurance upon a saw-mill, at the time of the fire no sawing had been done for sixteen or eighteen days, but there were logs in the yard which the plaintiff intended to saw; lumber piled in the yard and in the mill from which sales were made from time to time before the fire. It will be seen that the facts were similar to those in this case.

In that case it is said; “ Delays and interruptions incident to the business of conducting a saw mill, although involving a temporary discontinuance of the active use of the mill for sawing purposes, would not, we think, make the mill “ vacant ” and “ unoccupied ” within the meaning of the policy. Take the case of the insurance of a church building, or school-house, or cider-mill. Would the fact that the church was closed for six days consecutively each week be a violation of the condition in question, or would the school-house in vacation time, or the cider-mill when no apples were to be had, be without the protection of the policy ? These illustrations serve to show that the condition against vacancy and non-occupation is to be construed and applied in view of the subject matter of the contract, and of the ordinary incidents attending the use of the insured property.”

In Poss v. Western Assurance Co., 40 Am., 68, it was held that a clause similar to the one in question in an insurance policy is not avoided by a temporary cessation of work caused by an epidemic. In Albion Lead Works v. Williamsburg City Fire Ins. Co., 2 Fed. Rep., 480 , it is determined that such a clause is not violated by a temporary suspension of work at the mill.

We think the above cited cases place the proper construction on such a provision in a policy. The suspension of work that would avoid a policy in such a case must be either permanent or something more than a suspension of work from some temporary cause. The distinction between this case and such oases as Halgin v. Phenix Ins. Co., 118 N. Y., 165 ; 28 St. Rep., 788 , is apparent. In the latter case the insured property had been occu

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pied as a morocco factory, but the tenant had left and the building was locked up and in the hands of the agent to rent, and it remained in that position for months. It had ceased to be operated at all until another tenant could be found. The suspension of work in the case cited was very different from the temporary suspension in the case under consideration, which was only continued during the illness of the sawyer.

We conclude that the policy of insurance in question was not rendered void by the brief suspension of the operations of the mill in consequence of King’s illness, and that the court erred in taking the case from the jury, and in granting the motion for a nonsuit, and hence, without considering the other questions raised in the case, the judgment should be reversed, a new trial granted, costs to abide the event.

Mayhah, P. J., and Herrick, J., concur.

Cases cited

Wood v. North Western Insurance 46 N. Y. 421 N.Y. 1871-11-10 p. 746