Case ID: misc_35/html/0040-01.html
Source: Caselaw Access Project
Author: {"author": "Clarke, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Harry Hoffman, Respondent, v. The North British and Mercantile Insurance Co. of Edinburgh and London, Appellant.
    (Supreme Court, Appellate Term,
    May, 1901.)
    Fire insurance — Temporary agreement to reinsure risks — Failure of consideration as affecting the insured — Privity.
    A temporary agreement, to be replaced by a final one “ of like terms and conditions ” when the balance of the consideration shall be determined and paid and to be void unless it is paid, by the terms-of which the risks of one fire insurance company are assumed by another, makes the latter at most a reinsurer; and, therefore, where the consideration as determined is not paid in time by the company discontinuing business, and the temporary agreement is therefore declared abandoned by the reinsurer, and the final one is never executed, neither a policyholder of the discontinuing company, nor his assignee, can recover of the reinsurer a loss which occurred before the rein-surer abandoned, as there is no privity of contract between it and him under the temporary agreement and the consideration for the final agreement has failed.
    Appeal from a judgment of the Municipal Court, first district, borough of Manhattan, in favor of plaintiff and against the defendant. Action by the plaintiff as assignee of one Morris Rosier to recover of the defendant $204.93, the proportionate amount of loss and damage to Resler’s stock of goods caused by a fire which occurred on July 28, 1900. The plaintiff seeks to recover on the ground that, under the contract stated in the opinion, the defendant assumed a direct liability to the insured.
    Bowers & Sands, for appellant.
    Leo Levy, for respondent.
   Clarke, J.

On the 24th of April, 1900, plaintiff’s assignor took out a policy of insurance against fire in the Traders Insurance Company of New York in the sum of $1,000 on his stock of goods, and paid therefor a premium of $20.

On the 27th of April, 1900, the Traders Insurance Company and the North British & Mercantile Insurance Company of Edinburgh and London made an agreement in writing whereby, upon the payment of $10,000, before twelve o’clock, noon, on April twenty-eighth, the latter company — the defendant — agreed “ to assume the fire risks of the Traders Fire Insurance Company of New York from six o’clock p. m. April 27, 1900, not otherwise reinsured, a further payment on account of $25,000 to be paid on or before May 1st and the balance due, namely, the net unearned premiums on outstanding policies less 15 per cent commission thereon to be paid upon completion of schedules and at least within thirty days from date thereof — This contract to be null and void unless payments as above stated are duly made. This temporary agreement to be replaced by a final contract of like terms and conditions when the total amount due thereunder is determined as per schedule.”

It is quite evident from this contract, and from the proceedings ensuing thereon and thereunder, that the transaction between the two companies was" intended to be of the same character as that described in Fischer v. Hope Mutual Life Ins. Co., 69 N. Y. 161: “One life insurance company was about to discontinue its business, and cease to carry out its contracts with its policyholders. Another life insurance company, in consideration of a transfer to it of nearly all the assets of the former, was about to agree to take upon itself the liability of the former to its policyholders.” If the “final contract of like terms and conditions ” alluded to in the agreement of April twenty-seventh had been executed and the consideration paid, there can be no doubt but that the facts would have been on all fours with those set forth in Glen v. Hope Mutual Life Ins. Co., 56 N. Y. 379, and the doctrine of that case — “it is the settled law that the plaintiffs (policy holders) might maintain this, action against the defendant on the policies which by the agreement it had assumed ” — would govern. But the difficulty is that the final contract never was entered into between the two insurance companies. After several extensions by mutual consent, the Traders Company, not having paid the sums due at the day finally fixed, defendant wrote to it, August third: “You will please take notice that you have made default in the contract entered into by and between your company and the North British & Mercantile Company of London and Edinburgh bearing date the 27th of April, 1900, we hereby declare said contract to be null and void.” The said payments were conditions precedent. The said contract on its face stated it was a “ temporary agreement.” It expressly provided: “ This contract to be null and void unless payments as above stated are duly made.” The consideration for the permanent contract having failed, it was not made, and the temporary agreement .or option became and was declared to be null and void. Hnder such circumstances, during the period in which the temporary arrangement was in force, the defendant company was at best a reinsurer of the policies of the Traders Company, and as there was no privity of contract with plaintiff’s assignor, he has no cause of action.

In the Glen case, the contract had been executed and completed, and it provided in terms that the company taking over the business “ hereby agrees to assume all such policies and to pay the holders thereof all such sums as the party of the second part may by force of such policies become liable to pay.” Under the facts in this case, no such final contract was ever made, though in contemplation, by reason of the failure of consideration. Said the Court of Appeals in Dunning v. Leavitt, 85 N. Y. 30: But I know of no authority to support the proposition that a person not a party to the promise, but for whose benefit the promise is made, can maintain an action to enforce the promise, where the promise is void as between the promisor and promisee, for fraud, or want of consideration, or failure of consideration.”

Judgment reversed and new trial ordered, with costs to appellant to abide the event.

Bischoff, P. J., and Leventritt, J., concur.

Judgment reversed and new trial ordered, with costs to appellant to abide event.