CHARLESTON.

#### Tona Addia *v.*The Globe & Rutgers Fire Insurance Co.

Submitted October 21, 1924.

Decided October 28, 1924.

*Insurance*— No *Waiver hy Insurer as*to- *Vacancy of Property Beyond Period Expressly Provided in Policy; No Recovery on Policy Surrendered Because Property Unoccupied Beyond Stipulated*Period, *Though Unearned Premium, Not Refunded.*

Where an insurance agent issues a fire insurance policy on a building which he knows is vacant at the time, but attaches a rider thereto as a pant thereof extending the time in which the building may be vacant or unoccupied without forfeiture to thirty days beyond the period of ten days provided in the policy, as a privilege accorded to the assured, there is río waiver of .the stipulation against vacancy or unoccupancy beyond the forty days; and if the building remains vacant for more than forty days after the issuance of the policy and continues to be vacant or unoccupied to the time of the destruction by fire a month later, there can be no recovery for the loss. And especially is this true wherei the insurance company, upon discovery that the building remains unoccupied has requested surrender and cancellation of the policy for that cause, and the assured has actually surrendered the policy under a stipulation that at the time of its surrender the unearned premium would be immediately ' *444refunded, although it had not been refunded hefo-re the fire occurred.

Litz, Judge, absent.

Error to Circuit Court, Kanawha County.

Action by Tona Addia against the Globe & Rutgers Fire Insurance Company. Judgment for plaintiff, and defendant brings error.

*Verdict set aside; judgment reversed; new trial.*

*John T. Simms*and *Morton, Mohler é Peters,*for plaintiff in error.

*G. L. Hai'tley*and *P. J. Pettigrew,*for defendant in error.

Lively, Judge:

Plaintiff, Tona Addia, recovered judgment against defendant, The Globe & Rutgers Fire Insurance Company, for $4,147.00, on March 15, 1924, on a fire insurance policy dated October 1, 1922, insuring against direct loss and damage by fire his house on the west side of Industrial Street, in Dunbar, Kanawha County, for a period of one year. The policy was issued by Dunbar Insurance Agency, owned and conducted in that name by W. E. Griffith, agent for defendant Company, and the premium therefor was $186.00, of which $93.00 was paid in cash and the remainder to be paid on time. The house was totally destroyed by fire on December 30, 1922.

The first story of the building insured was designed for store-house purposes and the second story for dwelling purposes ; and was totally unoccupied at the time the policy was issued and continued to be wholly unoccupied until it was burned. The policy contained this provision, “Unless otherwise provided by agreement in writing added hereto, this Company shall not be liable for loss or damage occurring . . . . (f) while a described building, whether intended for occupancy by owner or tenant is vacant or unoccupied beyond a period of ten days”. By a rider, or paper attached thereto, certain privileges were granted to the assured, among which was the following: “To be vacant or unoccupied for *445a period not exceeding thirty (30) consecutive days in any one policy year after the period permitted by the policy conditions”. As to a waiver of any of the provisions and conditions the policy contained the following: “No one shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of an agreement added thereto', nor shall any provision or condition of this policy or any forfeiture be held to be waived by any requirements, act or proceeding on the part of this company relating to appraisal, or to any examination herein provided for; nor shall any privilege or permission affecting the insurance hereinunder exist or be claimed by the insured unless granted herein or by rider added hereto.” These provisions of the policy were duly pleaded by defendant as statements of defense numbered 1 and 2. Plaintiff replied to these defenses by replication under oath to the effect that they were not available to it because, defendant ‘ ‘ at the time of issuing the said policy, and at all times thereafter, well knew that the said property was unoccupied, and with full knowledge and notice thereof issued said policy and permitted same to remain in full force and effect at all times thereafter.” Exception to this replication in which the plaintiff relies upon waiver and estoppel, was taken on the ground that the affidavit thereto did not say that the matter of reply therein stated would be supported by evidence at the trial, as required by Section 65, of Chapter 125 of the Code. Objection and exception was overruled and the replication allowed to be filed. We do not deem it necessary to pass upon this technical objection, for reasons which will hereinafter appear.

Prom the evidence it appears that Griffith, about 'the first of November, 1922, sold his agency to Roy Reed, who continued the agency- after that time. When the policy was received at the office of the state agent of defendant in Roanoke, Virginia, the state agent began to make inquiry as to whether the house was occupied or vacant, and the fact that it was vacant seems to have been ascertained by him on November 24, 1922, when the defendant requested its local agent to cancel the policy for that cause. Plaintiff Addia lived in the City of Charleston, and had an agent, one Amos Reed, *446who resided in Dunbar, and who was looking after his property and who had procured the policy of insurance. Griffith immediately took up the matter of cancellation of the policy with Amos Reed, Addia’s agent, and suggested that a policy be written on the property in another company represented by him, namely, the Netheiiands Company, which he said would raise no question about the property being unoccupied; and accordingly a policy was issued for the same amount at the same premium in the Netherlands Company, and the premium paid to defendant Company was transferred to the Netherlands account and so remained at the time of the fire. But Amos Reed, the agent, did not agree to accept a new policy until he could confer with his principal, Addia. After a short delay Griffith and Amos Reed went to Charleston and conferred with Addia about the surrender of the policy and the taking out of a similar policy with the Netherlands Company. Griffith had the Netherlands policy ready for delivery and tendered it to Addia, requesting a surrender of the old policy, for the reason that the house was unoccupied. It appears that Addia did not desire further insurance because he was getting no income from the property, and refused to accept the Netherlands policy and refused at that time to deliver to Griffith the old policy, saying he would mail it to his agent, and in a few days afterwards mailed it to his agent, Amos Reed, at Dunbar for delivery; and it was delivered by Amos Reed to Griffith.on the streets of that city, when Griffith says he informed Reed he would take the policy over to Roy Reed who had succeeded him as agent, and he could there get the return premium'. The policy was delivered to Roy Reed who marked upon it “cancelled” and immediately sent it to Charleston where it passed through the stamping office, an office mSaintained by the insurance companies through which all cancelled policies were returned and record made thereof, and from there was sent to the state agent, Stockdell, at Roanoke, reaching him on the 22nd day of December, 1922, where he endorsed upon it “can-celled flat” (meaning, as he explained, that no premium had been charged or collected on it); and it was sentí to the home office at New York, where it has since remained. It appears that the $93.00 premium paid was never returned to *447plaintiff, nor any part thereof, and is still in tbe bands of tbe agent. Plaintiff contends tbat be frequently demanded or requested the return of tbe premium from Griffith; and on tbe day of tbe fire while tbe building was being burned be requested from Roy Reed tbe return of Addia’s premium. There is a denial on the part of Roy Reed tbat such demands or requests bad been made, and Griffith says no demand was made when tbe policy was surrendered to him, but after-wards Amos Reed requested tbe money, and be referred him to Roy Reed, tbe agent who succeeded him, for payment. Tbe Netherlands policy bad never been delivered, and was duty cancelled by tbat company, as it bad not been accepted by tbe assured.

Plaintiff contends that tbe policy sued on was delivered with tbe understanding tbat the defendant would refund tbe unearned premium; and tbat tbe unearned premium never having been returned tbe policy was in full force and effect at tbe time of tbe fire.

Thus it will be observed there are two main issues between tbe parties: (1) tbat because tbe agent knew at tbe time tbe policy was issued tbat tbe bouse was unoccupied, there was a waiver of tbe condition of tbe policy tbat no recovery for loss could be asserted against tbe company if tbe house remained vacant for a period of forty days; and tbat tbe defendant is thereby estopped from retying upon tbat condition of the policy; and (2) tbat tbe policy was never surrendered nor cancelled so far as plaintiff was concerned because tbe condition of its surrender and cancellation, namely, repayment of tbe unearned premium bad not been complied with.

On the first proposition tbe decisions are quite at variance. Some of them hold tbat if tbe property is insured with knowledge tbat it is vacant or unoccupied tbe insurer can not insist on that condition of tbe policy to defeat payment after loss because tbe premises were vacant or unoccupied and so continued until the time of the loss; even though tbe policy should contain a condition tbat it should be void if tbe property become vacant beyond a specified time. *Milwaukee Mechanic’s Insurance Co.*v. *Brown,*3 Kan. App. 225; *448*Rochester Loan & Banking Co.*v. *Liberty Ins. Co.,*44 Neb. 537; *Cross*v. *National Fire Insurance Company,*132 N. Y. 133; *Devine*v. *Home Ins. Co.,*32 Wisconsin 471. The Devine case, last cited, seems to- have be'en overruled by *England*v. *Westchester Fire Insurance Co.,*81 Wisconsin 583, wherein it is said that, “Waiver of a condition against a building’ continuing vacant for ten days will not be presumed from the mere fact that it was vacant when the insurance was effected, when nothing whatever occurred or took place between the parties upon this subject at. the time, or thereafter, before the loss. ’ ’ On the other hand there are other decisions holding’ that where premises are insured with knowledge that they are vacant or unoccupied, this will not waive a condition making the policy unenforceable if the premises be or become vacant or unoccupied and so remain for a specified period. *Pottsville Fire Ins. Co.*v. *Fromm,*100 Pa. 347; *Queen Insurance Co.*v. *Chadwick,*13 Tex. Civ. App. 318; *Moore*v. *Niagara Fire Ins. Co.,*199 Pa. 49; *May*v. *Globe*c§ *Rutgers Fire Insurance Company,*23 Ga. App. 798, 99 S. E. 631; *Thomas*v. *Hartford Insurance Co.,*53 S. W. 297 and 56 S. W. 264; and *Conn. Fire Insurance Company*v. *Tilley,*88 Va. 1024. In the last case cited the Virginia court held that the fact that at the time of the issuing .of the policy the premises were vacant did not waive the condition in the policy to the effect that if the premises became and remained vacant for ten days without the company's assent the policy should be void. It will be observed that the policy under consideration provided that if the premises became vacant or unoccupied beyond a period of ten days then the insurer • should not be liable for loss or damage, unless provided by agreement in writing added to the policy; by a rider attached thereto this date of unoccu-pancy or vacancy was extended for thirty days after the period permitted by the condition in the policy; and this was *¡W*privilege granted to the insured. It is undisputed that the agent knew the property was vacant at the time the policy was issued and that it remained so until the fire occurred, a period of nearly three months. At the time the company requested the cancellation of the policy because *449of the vacancy, more than forty days had passed and the property remained vacant. The- breach of the condition in the policy then occurred; and it was because of this breach, and because the Insurance Company did not insure unoccupied houses that it requested a return and cancellation of the policy. The cause for this action was clearly understood by both. Addia and his agent, Amlos Reed. - The company was standing upon that condition in the policy, which appears to be of standard form. Clearly there was no waiver of this condition at the time its breach was discovered by the company; on the contrary, it was insisting that the policy be surrendered and cancelled for that cause. It was held in Harris v. *North American Insurance Company,*190 Mass. 361, that the terms of the policy making it void in case the building insured become and remained vacant for a specified time were not changed by implied waiver because the agent knew the building was unoccupied, since the provision refers to a possible future, and not to a present use of the property, citing *Batchelder*v. *Queen Insurance Company,*135 Mass. 449. The fact that the property was not occupied was unknown to the company, but Was well known to the agent, and it may be that he has power to waive the clause in the policy regarding vacancy for the period of ten days. *Lynchburg Fire Insurance Co.*v. *West,*76 Va. 579; *Mutual Fire Insurance Co.*v. *Ward,*95 Va. 231. But the rider prepared by the agent and attached to the policy, by which the provision in the policy was modified in favor of the assured, must be given some effect. If knowledge of the vacancy of the property at the time of the issuance of the policy waived its future occupancy during the time the policy was in force, the rider would be meaningless and have no significance or effect. The agent and assured would have done a vain and useless act. Moreover, as soon as the vacancy became known to the company it took steps immediately to cancel the policy on that ground alone. There was no continuing waiver. Long before the fire, plaintiff was fully advised that the company was insisting upon the provision contained in the rider against unoccupancy. It was under these facts that he surrendered the policy, refusing to carry other insurance *450because the property was unproductive. Whether the policy was surrendered conditionally or unconditionally, it was voluntary and because the property remained vacant. No doubt it was agreed that the unearned premium should be refunded; and plaintiff says that frequent demands were made upon Griffith after the policy was surrendered, even up to the time of the fire. There was no claim that the policy was in force, or demand made for its return. This course of dealing with full knowledge on the part of both parties that the vacancy of the house was the moving cause does not constitute a waiver of a breach of the condition of the rider in respect to vacancy, and would not lead the assured to regal'd himself as still protected by the surrendered policy. It cannot be said that he was lulled into a sense of security. He did not expect to pay the remainder of the premium; all he required or expected was the return of the unearned premium. Neither of the parties regarded the policy as in force after its surrender. *Hopkins v. Insurcmce Company,*78 Iowa 844. An insurance company cannot arbitrarily cancel a policy without compliance with the statute Section 67 Chapter 34 of the Code. The assured must be given at least five days’ notice in writing of the intention to cancel, and the unearned premium must be returned. The statute thus affords the assured time to procure insurance elsewhere and be protected against fire; and if he does not assent to the cancellation and a fire occurs before the expiration of the five days and return of the unearned premium, the policy is in full force. But cancellation may be effected by mutual agreement, like any other contract. The burden of showing that the assured agreed to cancellation is upon the insurance company if a cancellation by agreement is relied upon. *Kelley*v. *Insurance Company,*75 W. Va. 637. That there was an agreement for surrender and cancellation is beyond controversy; the • terms of that agreement are the ground of contention. Plaintiff’s evidence taken in its strongest light is that the policy was surrendered to-Griffith with the understanding that the unearned premium was to be paid on delivery. Amos Reed, plaintiff’s agent, in answer to the question, “Under what circumstances *451was tbe policy delivered Mr. Reed?” answered: “Tbe policy was delivered witb tbe understanding that they would refund on tbe delivery of tbe unearned premium that was paid on tbe policy.” Griffith says that when tbe policy was surrendered on tbe street, be told Amos Reed that be would take tbe policy to Roy Reed who succeeded him as agent who would pay the unearned premium. There is little controversy over tbe agreement. Amos Reed says be demanded payment of tbe money several times even up to tbe time of tbe fire; and Griffith says that demand was made on him by Amos Reed and be told him to go to- Roy Reed and get tbe money. Roy Reed says no request was made to him; and be always bad tbe money on band for payment. Upon tbe surrender of tbe policy under tbe agreement and understanding tbe relation of creditor and debtor was created and recognized as sueb by plaintiff as evidenced by bis continuing request for payment of tbe money. Tbe return of tbe policy was not demanded. Tbe actions of tbe parties clearly indicate tbeir assent to tbe terms and tbeir interpretation of tbe agreement of cancellation. What tbe parties do under an agreement is a potent factor in arriving at tbe intent. Tbe agreement is interpreted and construed by wbat tbe parties do under it, unless contrary to tbe positive terms or in contravention of law.

Can there be any question that tbe policy was surrendered for cancellation, was cancelled, and so understood by both parties? We think there can be none.

In view of tbe rider extending tbe period of unoecupancy or vacancy as a privilege to tbe assured for thirty days beyond tbe period of ten days contained in tbe body of tbe policy, we are constrained to bold that there was no waiver of vacancy because tbe agent knew that tbe premises were unoccupied at tbe time of tbe policy contract; buttressed by tbe fact that when tbe breach of tbe condition was discovered, and tbe premises found to be vacant, tbe company through its general agent, directed a return of tbe policy for cancellation, and neither claimed nor received any premium whatever, making a “flat” cancellation before tbe fire occurred. Tbe breach of tbe condition respecting vacancy as set out in *452the rider, -unoccupan'ey after forty days expired from the date of the policy, would prevent recovery,' even thoug'h no part of the premium had been refunded.

The policy contract did not contemplate that the property w.ould continue to be vacant for the entire term'. It is distinguishable from policies issued on vacant and unoccupied property, expected to remain vacant; and where, with that knowledge and expectation the policy is issued the clause against vacancy is waived. *Backhaus*v. *Caledonian Ins. Co.,*112 Md. 676. A waiver of the ten-day clause in the policy is negatived by the rider which extends the privilege of unoceupaney for thirty days longer. See *May*v. *Globe Ins. Co.,*23 Ga. App. 798, 99 S. E. 631; *Thomas*v. *Hartford Fire Ins. Co.,*21 Ky. L. 914, 53 S. W. 297 and 56 S. W. 264; *Harris*v. *North American Ins. Co.,*190 Mass. 361, 4 L R. A. (N. S.) 1137.

On the second proposition, namely, surrender of the policy for cancellation by agreement, we think the evidence clearly establishes that there was such agreement and that both parties understood and agreed that the unearned premium should be paid upon its surrender, that such surrender was made for cancellation, thus creating the relation of debtor and creditor as to the unearned premiums, and extinguishing the relation of insured and insurer. The peremptory instruction to find for defendant should have been given.. There are many points of error assigned relating to the action of the court in overruling the demurrer to the declaration, to the pleadings, introduction and - refusal of evidence, and refusal to give instructions, which are unimportant in view of our conclusions, and are therefore unnecessary to- be discussed. The verdict is set aside, the judgment reversed, and a new trial awarded.

*Verdict set aside; judgment reversed; new trial.*