Case Name: Transit Lumber Company, Plaintiff, v. International Indemnity Company, Appellant, and Nelson Motor Company, Incorporated, Respondent
Court: Washington Supreme Court
Jurisdiction: Washington
Decision Date: 1929-08-28
Citations: 153 Wash. 594
Docket Number: No. 21831
Parties: Transit Lumber Company, Plaintiff, v. International Indemnity Company, Appellant, and Nelson Motor Company, Incorporated, Respondent.
Judges: 
Reporter: Washington Reports
Volume: 153
Pages: 594–598

Head Matter:
[No. 21831.
Department Two.
August 28, 1929.]
Transit Lumber Company, Plaintiff, v. International Indemnity Company, Appellant, and Nelson Motor Company, Incorporated, Respondent.
Danson, Lowe & Danson, for appellant.
James A. Brown, for respondent.
Reported in 280 Pac. 13.

Opinion:
French, J.
Some time prior to August, 1927, the Transit Lumber Company had purchased, under conditional sales contract, from the Nelson Motor Company, a motor truck, which motor truck was destroyed by fire on August 30,1927. There was still due the Nelson Motor Company, on the motor truck, more than twelve hundred dollars at the time of the fire. A fire insurance policy for twelve hundred dollars had been written covering the truck, the premium for which had been paid by the Transit Lumber Company, and a loss payable clause attached, which provided, in substance, that the loss should be payable to the Nelson Motor Company and the Transit Lumber Company as their interests appear. On August 24, the Pacific Mortgage Company, as the authorized agent of the insurance company, wrote the following letter to the Nelson Motor Company:
"In consideration of a return premium of five dollars ($5.00) hereby allowed assured, the amount of insurance hereunder is reduced to six hundred dollars.
"This indorsement to take effect on the 24th day of August, 1927, at noon.
"Nothing herein contained shall be held to vary, waive, alter or extend any of the terms, conditions, agreements or warranties of the undermentioned policy, other than as above stated. . . .
"Countersigned at Spokane, Washington, this 24th day of August, 1927. Pacific Mortgage Co.
' ' Authorized Agent. ' '
When this letter was received by the Nelson Motor Company, does not clearly appear from the record, the only testimony on the subject being: "Q. It was only a few days before the fire that you got this notice? A. Just three or four days, as I recall it."
The appellant, at all times, admitted liability to the extent of six hundred dollars. The Transit Lumber Company, however, after having made proper proof of loss, brought action to recover the twelve hundred dollars, joining as parties defendant the insurance company and the Nelson Motor Company. The cause was tried before the lower court without a jury, and a judgment rendered against the insurance company for the full amount of the policy, twelve hundred dollars, which amount was to be paid to the Nelson Motor Company because of its interest in tbe truck. Tbis appeal follows.
The entire question in tbis case resolves itself around tbe construction to be placed upon, and tbe effect of, tbe letter of August 24, above quoted. It is tbe claim of tbe insurance company that tbe policy of insurance was reduced to six hundred dollars, and it is tbe claim of tbe other parties to tbe action that tbe policy still remained in full force.
Section 7154, Rem. Comp. Stat., provides:
"Any fire insurance policy may be canceled at any time by tbe insurer giving tbe insured or bis representative in charge of tbe property insured, and tbe mortgagee, if tbe insurance is for tbe benefit of tbe mortgagee, five days' notice of such cancellation, and if tbe premium has been actually paid, by paying in cash or mailing by registered letter with proper postage affixed thereto, addressed to tbe insured at bis usual or last known postoffice address, a postoffice or express company money order or bank draft for tbe return premium computed at pro rata rate for tbe time tbe insurance has yet to run, or customary short rate where tbe insurance is canceled by tbe insurer, or, where tbe premium has not been paid, by the insured giving tbe insurer or its agents or agency, who issued tbe policy notice of such cancellation and paying tbe premium for tbe time tbe insurance has been in force computed at tbe customary short rate: . . ."
It is admitted in tbis case that no notice of tbe attempted cancellation, or reduction, whichever it may be called, was ever given to tbe Transit Lumber Company. Appellant's argument, however, proceeds on tbe theory that, when tbe policy is payable to a third party as his interests may appear, be is tbe only person who has any rights thereunder, citing a great many cases which bold that a policy of insurance inures to tbe benefit of tbe mortgagee, whether tbe policy, by its terms, requires tbe mortgagor to insure for tbe benefit of tbe mortgagee or not, and arguing that, because of the fact that the Nelson Motor Company was the only party to whom the loss could be paid in case of a loss, it was therefore the only party to whom notice need be given in case of a reduction in the amount of the policy or cancellation thereof. But appellant's argument entirely overlooks the fact that, while this money could only have been paid to the Nelson Motor Company, it was paid for the benefit of the Transit Lumber Company, and reduced the indebtedness of the Transit Lumber Company by that exact amount. The Transit Lumber Company was as vitally interested in having this truck insured as was the Nelson Motor Company, and, in order to effectually cancel any portion of the insurance, it was necessary that notice be served upon all of the parties interested. Bache v. Great Lakes Ins. Co., 151 Wash. 494, 276 Pac. 549.
There is also no proof that appellant repaid, or offered to repay the prorated amount of the premium upon the policy, and in order to effectually cancel that was necessary. Snavely v. London Assurance Corp. of London, 128 Wash. 47, 221 Pac. 611. Also, as heretofore pointed out, it does not appear from the record that this notice was served more than five days before the fire. Under the express terms of the statute, this must be done.
Appellant argues that the notice given is not a cancellation, but is only a modification agreement. We cannot so construe the notice. It abundantly appears in the record that the truck was worth more than the amount for which it was insured, and it was the intent and purpose of the parties to maintain at least twelve hundred dollars of insurance. After having written insurance in the full amount of twelve hundred dollars, any attempt to reduce this amount was in legal effect a cancellation of the policy and a rewriting thereof for a lesser amount. This can be done only by notifying all of the parties interested and returning the excess premium.
We think this is a situation that clearly comes under the terms of the statute above quoted.
Judgment affirmed.
Millard, Main, Tolman, and Parker, JJ., concur.