Case ID: ohio-st_38/html/0110-01.html
Source: Caselaw Access Project
Author: {"author": "Johnson, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Little v. Insurance Company.
    A policy of insurance, having one year to run, was delivered to the insured, without payment of the premium agreed on. In a few days, the note of the insured at sixty days was accepted for the premium, which was not paid at maturity, and remained in the hands of the insurer. After this, and within a reasonable time before the loss, the insurer canceled the policy, and notified the parties interested therein of such cancellation, and credited on the note, a sum less than the pro rata proportion of the unearned premium.
    The condition of the policy provided, that it was hot to be binding until actual payment of the premium, and that the insurance should be terminated at the request of the insured, in which case the company was to retain only the customary short rates for the time the policy was in force, also that the company might, at its option, terminate the insurance upon giving notice to that effect, and tendering a pro rata proportion of the premium for the unexpired term. Held, 1. That by delivering the policy without actual payment of the premium, and by taking a note of the assured for the same, the company waived the condition that the policy was not binding unless the premium was actually paid. 2. On failure of the assured to pay the note, the company might, on giving reasonable notice thereof before the loss, exercise its option to cancel the policy. 3. As the note was past due and in the hands of the company at the time of such cancellation, it was not necessary to tender back the pro rata proportion of the unearned premium in cash, nor to Credit the same on the note. The note was thereafter subject to such credit.
    Error to the Superior Court of Cincinnati.
    The action was brought by Otis B. Little to recover under a policy of insurance, made in the name of Little, Carson & Bro., for a loss by fire — “ loss, if any, payable to the Charter Oak Life Insurance Company, of Hartford,” to whose rights the plaintiff claimed to be subrogated.
    The conclusion reached by the court upon one of tlie many questions presented, is fatal to a recovery; therefore, such only of the facts as present this question will be stated:
    May IT, 1869, the defendant, the Eureka Fire and Marine misurance Company, in consideration of a premium of $112.50, insured certain property, for Little, Carson & Bro., for one year, loss if any, payable to the Charter Oak Life Insurance Co.
    The premium not being paid at the time, a note was taken on the 26th of May following by defendant for the amount, payable in sixty days from date.
    This note was not paid at maturity, and remained unpaid in the hands of the defendant at the commencement of the action, and was treated as worthless. The makers were shortly after it fell due adjudged bankrupts, and were at the time of its maturity insolvent. No offer to pay this note was ever made.
    Among the conditions of the policy are these: — “5. No insurance, whether original or continued, shall be considered binding until the actual payment of the premium.”
    (The words 1 actual payment ’ are italicised in the policy.)
    “ 6. The insurance may be terminated at any time' at the request of the insured, in which ease the company shall retain only the customary short rates, for the time this policy has been in force, and the same may at any time be terminated at the option of the company on giving notice to that effect, and tendering a pro rata proportion of the premium for the unexpired term thereof.”
    The note became due July 28, 1869, and on the 9th of September following, the defendant, in a letter to Little, Carson & Bro., called their attention to the 5th condition above, and notified them that it was in force, and on the same day canceled the policy and credited $75.00 on the note, as the pro rata share of the unearned premium for the remainder of the year. This credit is some two or three dollars less than the pro rata proportion of the unearned premium, if the fractions o£ the months of May and September be not counted as a month.
    Yerbal notice of this cancellation was also given to all the parties interested in this policy, and in the property insured, in a short time thereafter, and some two months before the loss.
    Upon this state of facts, the court charged the jury : “ That, if, after the said insurance was effected, the said William and Robert Carson, instead of paying the premium due therefor, gave their promissory note, payable in sixty days, which was received by the said defendants for and on account of said premium, and was held by them until after it became due, and is now held by them, and was never in any way used by them, and is now brought here into court, and if, after the said note became due, the said William and Robert Carson, and the other parties interested in the said insurance, had notice that the said note had not been paid, and neglected to pay the same, and thereupon, and within a reasonable time before the fire, the defendants elected to cancel the same, and gave the said parties reasonable notice before the fire, that the policy was canceled, then the plaintiff cannot recover.”
    Also, that “ in case of non-payment of said note, or for any other reason, defendant elected to end the risk and did so, nothing more was required of them, than to notify the insured within a reasonable time before the fire.”
    To reverse a judgment for defendant on the foregoing facts and instructions, is the object of the present petition in error.
    It is assumed, for the purposes of this case, that the plaintiff is entitled to be subrogated to the Charter Oak Insurance Company and to recover on this policy, if the same was not legally terminated before the loss.
    
      Hoadl/y, Johnson & Colston and Henry M. Cist, for plaintiff in error.
    As to the pretended cancellation, it amounted to nothing, for three reasons : 1. The written note of Townley, the secretary, is not a cancellation, or notice of cancellation. 2. No receipt for return premium or other evidence of credit on the notes, or notice of such credit, was given to anybody. 3. The amount credited was $75, which was less than thq pro rata proportion of premium. Policy, dated May 17; premium, $112.50 ; cancellation, Sept. 7; credit should have been, $77.95. Vanvalkenburg v. Lenox Fire Ins. Co., 51 N. Y. 465, 468. That the acceptance of the note and recital of payment of the premium in the policy, conclusively established the payment of the premium. Miller v. Life Ins. Co., 12 Wall. 285; Goit v. National Protection Ins. Co., 25 Barb. 189; Basch v. Humboldt Mutual Fire and Marine Ins. Co., 35 N. J. 429, and cases cited; Madison Ins. Co. v. Fellowes, 1 Dis. 217; The same v. The same, 2 Disney, 128; Consolidated Fire Ins. Co. v. Cashow, 41 Md. 59; Illinois Central Ins. Co. v. Wolf, 57 Ill. 354; Teutonia Life Ins. Co. v. Mueller, 77 Ill. 22; Teutonia Life Ins. Co. v. Anderson, 77 Ill. 382; Troy Fire Ins. Co. v. Carpenter, 4 Wisc. 20; Michael v. Mutual Ins. Co., 10 La. Ann. 737; Prince of Wales Life Ass. Co. v. Harding, Ellis, Bl. & Ellis, 183; Dalzell v. Muir, 1 Camp. 532; De Gaminde v. Pigou, 4 Taunt. 246; Anderson v. Thornton, 8 Exch. 425.
    The right of the insurance company was to sue on the note and recover its amount. Barnum v. Childs, 1 Sandf. 58; McCurtie v. Stevens, 13 Wend. 529.
    
      LAnoolm, Stephens c& Slattery, for defendant in error :
    I. The policy was rightfully canceled before the loss. Now, the premium never was actually paid and there can be none tendered back. So long as the note was not due, the policy was not void on that account, for a temporary credit .was given for the premium. ' But when it fell due and was not paid, and ■when all the parties interested knew it remainded unpaid, and that the policy was to be canceled if not paid, then the condition as to actual payment applies. The premium had not only never been actually paid, but its payment had been refused, and these defendants had the right to cancel the policy, which they did do at a reasonable time before the loss. Of this cancellation not only. Little, but ¥m. Carson & Bro. and Irwin had due notice. Judge Hoadly cites a long list of cases to show that the premium was actually paid. There is not one of them that touches this case ; they are all cases of waiver, or where the good faith of the transaction required that the party should be estopped from denying payment.
    II. The non-payment of premium is a cause of forfeiture, under the fifth condition, under the circumstances of this case. If delivering the policy was evidence of waiver of the immediate payment of the premium, certainly when the Carsons had notice that their waiver was withdrawn, they had no right to rely upon it afterwards. The note was given some days after the credit was given. It was, therefore, simply collateral security for the premium, and was no payment, unless the note itself was paid. The Carsons originally agreed to give a cash premium, and Mr. Young relied upon that promise when he issued the policy. It is quite apparent from the various cases, viz.: Sheldon v. Atlantic Ins. Co., 26 N. Y. 460; Wood v. Poughkeepsie Ins. Co., 32 N. Y. 619; Boehn v. Williamsburgh Ins. Co., 35 N. Y. 132; that the reason of holding the premiums waived when the policy is delivered, is to prevent fraud, but not to'enable a party to commit fra/ud. In this case the insured had no right to rely upon the giving the'note as a payment of the premium. • They had due notice that it was not paid. They were further notified that the insurance company would not waive the premium after September 7. On this subject of non-payment of premium see: Salvin v. James, 6 East, 571; Tarleton v. Stansforth, 5 Term, 695; Blanchard v. Atlantic Ins. Co., 33 N. H. 9; Bradley v. Potomac Ins. Co., 32 Md. 109; Reynolds v. Mutual Fire Ins. Co., 34 Md. 280.
    III. The cancellation of the policy under the privilege reserved in the sixth condition. This cancellation was not wantonly done or without good cause. It was a mutual privilege and to be construed fairly and not as a forfeiture. -Where no premium had been in fact paid, it was not necessary to tender anything back. Irwin v. National Ins. Co., 2 Dis. 68; Emmott v. The Slater Ins. Co., 7 R. I. 565; Fabyan v. U. M. F. Co., 33 N. H. 208; Bergen v. Builders' Building Ass., 38 Cal. 541. This cancellation was made in good faith and notice was given to all parties who could possibly be interested. This notice was given several months before the fire. The insured knew the defendants were not carrying the risk. They knew the defendants had received no premium and were likely to receive no premium. The mortgagees, by the terms of the mortgage, might have insured the property, and had the premium liens secured by the several mortgages.
    Upon the subject of the credit on the note, I desire to say what those familiar with insurance know, that when policies are canceled, the usage is not to divide the months, but where it had run say for three months and twelve days, it is treated as four months, and the jury in their finding probably acted upon this usage, for it is well known here. The court will take judicial notice of such usage. Greenleaf on Ev. § 5; Brown v. Piper, 91 U. S. (1 Otto) 43; Hoare v. Silverlock, 12 Ad. & El. 633; M. & H. Glue Co. v. Upton, 6 Cf. Gaz. 843; Needham v. Washburn, 4 Cliff. 259, 260.
   Johnson, J.

This policy was delivered and took effect May 17, and by its terms was good" for one year unless sooner terminated in accordance with its terms and conditions. On its face, the premium was payable in cash, and one of the conditions was, that, no insurance shall be considered binding, until the actualpa/y.ment of the premium.” By the delivery of the policy without such payment, and by taking a note of the insurer, nine days thereafter, payable in sixty days, this condition was waived, and the policy wás in force, notwithstanding this condition, until lawfully canceled, under this or some other condition contained therein, or under the option reserved in the sixth condition.

The note not being paid, and its makers being insolvent, the company, after waiting some forty-five days, canceled the policy, and notified the insured and the Charter Oak Co., and others ‘ interested, of the fact. This was in September. In December the loss occurred. This policy was good for one year, unless terminated lawfully. The sixth condition provided that the insured might terminate the insurance at any time on request, in which case the company should retain only the customary short rates for the time the policy had been in force. This is an unqualified right, reserved to the insured to terminate the policy at any time during the year for any cause. If the premium had been paid in cash, the insurer would have been compelled to refund the unearned premium after charging for the time the policy was in force at the customary short rates. As a note had been given, and was still in the hands of the payee, the insured could have terminated the policy, by paying or tendering the amount due, at short rates, and demanding a return of the note; but as no payment had been made, no money had to be returned by the insurer, under this clause. This right to terminate the policy, was mutual. The company reserved the option to at any time, put an end to the policy, “ on giving notice to that effect, and tendering a pro rata proportion of the premium for the unexpired term thereof.” In case the premium had been actually paid for the year, the pro rata share thereof from September 9, to the end of the year, must have been tendered back, before this option could be exercised. In the present case, no money had actually been paid. The company still held a past-due note, for the premium, on which there was due the amount earned to the date of cancellation. It was claimed, and the evidence tended strongly to support that claim, that this note was not Gollectible. The company credited $Y5 on the note, being the amount of the unearned premium, if the pro-rating is computed by months, and if the fraction of May, M days, and of September, 9 days, are counted as a month, but if the prorating is by days, that amount is too small by two or three dollars.

On this state of fact, the court in effect charged, that it was not necessary to tender back the cash, for the unearned premium, nor was the right to cancel defeated by a failure to credit the exact amount, or indeed any amount.

In this we concur. The effect of taking the note, was to give the policy life, notwithstanding the fifth condition, but it did not divest the company of its right reserved in the sixth condition to terminate the insurance at any time on giving notice, and, in case the premium had been paid, tendering back the unearned proportion thereof. As nothing had been paid, nothing was to be tendered back. The only duty imposed on the company, was, when the premium had not been paid, to give notice in reasonable time before the fire. This the jury found was done.

The contract of insurance is a contract of indemnity upon the terms and conditions specified in the policy. The insurer undertakes, for comparatively small premium, which good faith requires should be paid, to guaranty against loss or damage upon the terms and conditions agreed upon, and upon none other. He may, therefore, justly insist upon the fulfillment of those terms. We cannot make a new contract for the parties. Good faith is the life breath of the contract. The payment of the premiums is an essential element of the contract, to enable the -company to meet its obligations. Whatever may have been the right of the company before the maturity of the note to terminate the insurance for other causes, we think it clear, that after the note became due, and was not paid, this option might be exercised upon giving reasonable notice thereof, before the loss occurred.

Again, it is said, the amount credited on the note was too small. Concede this, the note was past due, and had not been negotiated. In any action brought thereafter for the earned premium, the correct credit could have been computed and allowed. This note was subject to such credit in whosever hands it should be found.

Judgment affirmed.