Case Name: Taylor v. Insurance Co. of North America
Court: Oklahoma Supreme Court
Jurisdiction: Oklahoma
Decision Date: 1909-11-09
Citations: 25 Okla. 92
Docket Number: No. 901
Parties: Taylor v. Insurance Co. of North America.
Judges: Kane, C. J., and Turner, J., concur.
Reporter: Oklahoma Reports
Volume: 25
Pages: 92–125

Head Matter:
Taylor v. Insurance Co. of North America.
No. 901.
Opinion Filed November 9, 1909.
(105 Pac. 354.)
1. INSURANCE — Policy—Construction in Favor of Insured. If a policy of insurance is susceptible of two constructions, that one is to be adopted which is more favorable to the assured.
INSURANCE — Policy—Cancellation by Insurer — Return of Unearned Premium. The return of the unearned premium is essential to a cancellation by the company, where the policy, among other things, provides, “when this policy is canceled by 2. this company by giving notice, it shall retain only the pro rata premium.”
3. INSURANCE — Poljcy—Cancellation by Insurer — Return of Unearned Premium — Waivei—Acquiescence in Cancellation. When a local agent for an insurance company, under instructions thereto, gives the assured notice of the cancellation of the policy, without tendering, or offering to tender, the unearned premium, and neither being authorized to make such tender nor seeking a waiver thereof, or being authorized thereto, the fact that the assured does not protest against such cancellation does neither amount to a waiver of tender nor consent to such cancellation.
(a) The local agent being in possession of the policy as bailee for the assured, his marking the same “Canceled” and returning same to the company, without the consent or knowledge of the assured, does neither constitute a waiver or estoppel nor a consent or acquiescence.
4. TRIAL — Conflict in Evidence — Questions for Jury. Where there is a reasonable conflict in the evidence, the issue must be submitted to the jury for determination.
Dunn and Hayes, JJ., dissenting.
(Sjdlabus by the Court.)
Error from, the United States Court for the Northern District of the Indian 'Territory; L. F. Parker, Judge.
Action by William Taylor against the Insurance Company of North America. Judgment for defendant, and plaintiff brings error.
Reversed and remanded.
Dennis II. Wilson, Preston S. Davis, and T. L. Brown, for plaintiff in error.
Citing: Poor v. Hudson Ins. Co., 2 Fed. 432; Mohr & Mohr v. Ohio Ins. Co., 13 Fed. 74; Runkle v. Insurance Co., 6 Fed. 143; Bingham v. Insurance Co., 74 Wis. 498; Insurance Co. v. Williams et al. (Ark.) 35 S. W. 1102; American Express Co. v. Triumph Express Co., 17 Ohio St. 51; Royal v. Anlt-man-Taylor Co., 2 L. R. A. 526; May on Insurance, vol. 1, p. 124; 19 Cye. 643, 644.
Fulton, Stringer & Grant and Burwell, Crockett & Johnson, for defendant in error.
Citing: Tisdell v. N. II. Fire Ins. Co. (dissenting opinion) 155 N. Y. 163; Schwarzschild & Sulzberger v. Phoenix Ins. Co. of Hartford, 124 Fed. 52; 16 A. & E. Ene. L. 875; Davidson v. Ins. Co. (N. J.) 65 Atl. 996; George Hotel Co. v. Liverpool, L. & O. his. Co.,, 106 N. Y. Supp. 732; Hillock i>. Insurance Co. (Mich.) 20 N. W. 574; Miller v. Insurance Co. (AY. Ya.) 46 S. E. 181; Insurance Co. v. McKinnon & Call, 59 Tex. 507; Phoenix Mutual Fire Ins. Co. v. Brecheisen, 50 Ohio St. 542; Ins. Co. -v. Hammons, 11 Ill. App. 230; Grace v. Ins. Go., 16 Blatchf. 43'3; Ins. Co. v. Collerd, 38 N. J. Law, 486; Wood v. Ins. Co., 126 Mass. 219; Ins. Co.- v. Reynolds, 36 Mich. 506; Hathorn v. Ins. Co., 55 Barb. 28; Hollingsworth v. Ins. Co., 45 Ga. 294; May on Insurance (3d Ed.) sec. 67, J.; Bichards on Insurance, sec. 167; Backus v. Ins. Co., 26 N. Y. App. 91, 49 N. Y. Supp. 677; Walthen v. Ins. Co., 2 N. Y. App. 328, 37 N. Y. Supp. 857; Arnfield v. Ins. Co., 172 Pa. St. 605, 34 Atl. 580.

Opinion:
AYilliaMS J.
The agent of the company, in whose possession insured left the policy upon which this action was based, was named Comer. On September 26, 1904, Comer met Taylor on the streets of Olaremore and said to him: "The insurance company has canceled your policy on your hay." .Taylor asked him on what ground, and the agent said: "They did not state." Tajdor then said: "Where is my money?" or "How about my money I have paid them, if they have canceled it? How about my money?" And the agent said: "They did not say anything about it." Taylor rejoined: '"1 guess I can get my money then, if they have canceled it." The agent, Comer, testified that he canceled the policy on September 26, 1904, and on that day returned the same to the company.
It is the contention of counsel for plaintiff in error that the company, under the terms of this policy, could not cancel it except that it at some time tendered or returned to him the unearned premium in accordance with what lie argues are its terms, and on account of the fact that this unearned premium was neither returned nor tendered prior to October 9,' 1904, that this had the effect of keeping alive the policy and rendering the company liable for the loss. The paragraph of the policy relating to cancellation is what is commonly known as the "New York standard form," and reads as follows:
"This policy shall be canceled at any time at the request of the insured, or by the company by giving five days' notice of such cancellation. If this policy shall be canceled as hereinbefore provided, or become void or cease, the premium having been actually paid, the unearned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate, except that, when this policy is canceled by this company by giving notice, it shall.retain only the pro raia premium."
The construction of this contract is necessary in order to determine whether or not the policy is canceled. If the construction contended for by the defendant in error is correct, the clause was intended to read as follows:
"1'f this policy shall be canceled as hereinbefore provided, or become void or cease, the premium having been actually paid, the unearned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate, except that, Avlien this policy is canceled by this company by giving notice (on surrender of this policy), it shall retain only the pro rata premium."
Without the interpolation of the words "on surrender of this policy" in the last clause, there is an ambiguity, and there is equal reason for the following interpretation:
"If this policy shall be canceled (at any time at the request of the insured), or become void or cease, the premium having been actually paid, the unearned portion- shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate, except that, when this policy is canceled by this company by giving notice, it shall retain only the pro rata premium."
When the policy is canceled by giving "five days' notice of such cancellation," the company retaining "only the pro rata premium," this cannot be accomplished without a tender, unless the words "on surrender of the policy" are read into said clause; and if that was the intention, why repeat the words "by giving notice"? If that contention is correct, it should have been stated as follows:
"This policy shall be canceled at any time at the request of the insured, or by the company by giving five days' notice of such cancellation. If this policy shall be canceled as hereinbefore provided, or become void or cease, the premium having been actually paid, the unearned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate, except that, when this policy is canceled by this compam', it shall retain only the pro rata premium."
To say the least, the cancellation clause is ambiguous, and . when we consider that the insurer was skilled, not only in the framing, but also the interpretation, of such contracts, and that the insured had no part in the framing thereof, as well as being unskilled in such interpretation, such construction should be adopted as is more favorable to the insured; and especially is this true when the construction contended for by the insurer is not only inequitable, but also unjust.
The contract of insurance here involved, known as the "New York standard policy," was framed by virtue of chapter 488, p. 720, of the Laws of New York of 1886, providing for a uniform contract of fire insurance to be used by fire underwriters within said state. The clause here under consideration was first before the Supreme Court of the state of New York in the case of Nitsch v. American Central Insurance Company, 83 Hun, 614, 31 N. Y. Supp. 1131, wherein a tender was construed to be necessary to the 'cancellation of the policy. The judgment of the Supreme Court was affirmed by the New York Court of Appeals on March 16, 1897 (152 N. Y. 635, 46 N. E. 1249). Afterward, on March 1, 1898, in the case of Tisdell v. New Hampshire Fire Insurance Company, 155 N. Y. 163, 49 N. E. 664, 40 L. R. A. 765 (see, also, Id., 11 Misc. Rep. 20, 32 N. Y. Supp. 166), it was again held that a tender was a condition precedent to the cancellation of such a policy — the opinion being delivered by Mr. Justice Bartlett, concurred in by Justices Haight, Martin, and Yann, Chief Justice Parker and Mr. Justice O'Brien dissenting, and Mr. Justice Gray being absent. Again, in the case of Buckley v. Insurance Co., 188 N. Y. 399, 81 N. E. 165, 13 L. R. A. (N. S.) 889 (see, also, Id., 112 App. Div. 451, 98 N. Y. Supp. 622), the Court of Appeals, following the Nitsch and Tisdell Cases, said:
"It is a question of vital importance to the insurer and the insured as to the precise meaning of the cancellation clause in the standard policy. The situation is not a complicated one, and the court desires to so construe the clause that its meaning may be made clear. If the insurance company desires to cancel, it must, as we have held in the cases cited, not only give the notice required, but accompany it by the payment or tender of the pro rata amount of the unearned premium. It cannot legally demand of the insured the surrender of the policy and-its cancellation until this is done."
The court was unanimous as to the foregoing conclusion. At that time Chief Justice Cullen, and Justices O'Brien, Haight, Hiscoek, Bartlett, Chase, and Vann comprised the court.
In the case of Philadelphia Linen Co. v. Manhattan Fire Insur. Co., 8 Pa. Dist. R. 261, that court, after referring to the Tisdell Case, said:
"The question which is now before us ivas then passed upon by the Supreme Court of New York upon a policy where the language was .identically the same as that which has been quoted from the defendant's policy. The majority of the court in that case decided that, upon cancellation of the policy by the company, it must return or tender the unearned premium in order to effect a cancellation. The same conclusion seems to have been arrived at by the same court in an earlier case, Nitsch v. American Cent. Ins. Co., reported in 152 N. Y. 635, 46 N. E. 1149. 'While these decisions aré not binding upon the courts of Pennsylvania, they are, of course, entitled to great respect. It is, no doubt, eminently proper to hold companies and corporations, such as insurance companies, to a strict construction of their rights as defined in formal contracts, which are prepared in their own interest and the terms of which the insured, as a rule, has little or no part in determining. This has been the policy of the courts, and has been found by experience to be necessary in order to guard the interests of those who are in many cases ignorant, and in all eases more or less at the mercy of such corporations. The courts of this state have been moved by the same policy, and it may.be, and we aré inclined to think, that the attitude which has been taken by our own Supreme Court with reference to provisions not identical with, but similar to, those in question, requires us to follow the ruling which has been made iii the state óf New York."
In tlie case of Gosch v. Firemen's Insurance Co., 33 Pa. Super. Ct. 496, the court said:
"The plaintiffs, then, having paid the premium for the entire term, could the defendant, at its own pleasure, effect a complete extinguishment of the insurance contract, merely by giving notice of its determination to cancel, without at the same time returning or tendering the unearned portion of that premium? Where a contract with mutual undertakings has been entered into by two parties and fully performed by one of them, we may certainly say, speaking generally, that the other party could not successfully invoke the aid of any court in an effort to rescind until he had returned or tendered the return of any valuable thing he had received by reason of the contract. To permit him to retain the benefits and at the same time repudiate the burdens of his own agreement would be highly unconscionable and shocking to our sense of natural justice. It would be out of harmony with some of the fundamental principles on which our entire system of jurisprudence is built. Of course, where the right to cancel has been expressly reserved in the contract itself, then the extent of the right and the conditions upon which it may be exercised must be determined by a reference to the contract, rather than to principles of general law. Turning, then, to the language of the agreement, in which the parties have undertaken to state their respective rights and duties, if we find it susceptible of two constructions, one in harmony with, the other in opposition to, those general principles already referred to, a sound discretion would seem to invite us to accept the former and reject the latter, just as, in ascertaining the true meaning of a doubtful clause in a will, the courts incline to that construction which would vest the estate, rather than leave it contingent, which would give the inheritance to the heir rather than to a stranger. Taking up, then, the provision of the policy on this subject, and looking at it as a whole, we may confidently say that it contemplates a complete and effective destruction of the contractual relation at the instance of either party, and that to accomplish this end the party moving must do two distinct and separate things; the object in view undeniably being that, when the cancellation shall have been' completed, both parties will have been restored, as fai as possible, to the conditions existing before the contractual relation began. If the destruction of this relation be begun by the assured, he must give notice to the other party and surrender his policy, which proclaims the existence of the relation he would now destroy. If begun by the company, it must also give, notice and repay or tender payment of the unearned premium in its hands. The right reserved to each party is but a single one, viz., the right to cancel; and the cancellation contemplated is not a partial, but a complete, one. The obligation imposed on the party moving to cancel is, looking broadly at the entire contract provision, also single, viz., the restoration of the other party, as far as may be, to the situation occupied before the contractual relation began. True, this involves the performance or tender of performance of another act besides the giving of notice; but it does not necessarily follow that such performance or tender may be totally dissevered in time from, and thus rendered wholly independent of, the giving of the notice. Such a construction of the policy provision, although strongly urged on us by the learned counsel for appellant, is, at best, a doubtful one. More than this he can hardly claim for it, in the light of the fact that it has been deliberately rejected by the courts of last resort of most of our sister states. The argument supporting it, as he agrees, has been stated, as forcibly as it can be, in the dissenting opinion of Chief Justice Parker in Tisdell v. New Hampshire Fire Ins. Co., 155 N. Y. 163, 49 N. E. 664, 40 L. R. A. 765. An examination of this opinion seems to show that its conclusions are reached rather from a critical analysis of some of the language of the policy provision and the order in which its sentences are collated than from a broad view of the entire provision and a consideration of the nature of the object to be accomplished thereby. The following language from the majority opinion clearly indicates that the question must now be considered as settled in that jurisdiction: 'The question presented on this appeal is no longer an open one in this court. It was decided in Nitsch v. American Central Ins. Co., 152 N. Y. 635, 46 N. E. 1149, affirmed in this court without an opinion. In that case, as in this one, the question presented was whether the .provision of the New York standard policy of fire insurance relating to the cancellation of a policy at the instance of the company requires that, in addition to giving the five days5 notice, the company must return or tender the unearned premium in order to.effect a cancellation? The answer was in the affirmative.5 In an elaborate discussion of the whole subject, to be found in Cooley's Briefs of Insurance, wherein all cf the cases from the various jurisdictions are cited and considered, the general rule to be drawn from them is thus stated on page 2801: 'The general, rule is that under such- a provision, unless waived, the repayment of such proportion of the premium is essential to a valid cancellation, and notice without such repayment or a tender of the amount is ineffectual. There must be an actual repayment or tender ; a- mere promise to pay, a request to call for the amount due, or notice that the money is subject to insured's order, being insufficient.' "
In 33 Pa. Super. Ct. 50'5, the court further said:'
"But we cannot regard the question as an open one, because we believe it to have been ruled in the case of Baldwin v. Penna. Fire Ins. Co., 206 Pa. 248, 55 Atl. 970. In that case, the suit being on a policy similar to the one now under consideration, the company in its affidavits of defense set up 'that the policy in suit had been surrendered and returned for cancellation, and actually had been canceled on December 8, 1897.' We have not the record actually before us, but take this statement from the paper book of the appellant, which we have carefully examined. The trial court held that the contract of insurance had never been completed, and the policy had never gone into forcé, and on this ground nonsuited the plaintiff. This court affirmed the judgment for the same reason. But the Supreme Court held that the contract had been fully completed, and therefore the policy was in force at the time of the fire, unless it had been canceled meantime, as the company had alleged. As the case was sent back to be retried, the court could not well avoid disposing of this important defense, set up by the averment of the affidavit quoted,- and we think they did it in no uncertain manner. Speaking for the court, Mr. Justice Déan, after pointing out the character of evidence necessary to show a cancellation at the instance of the insured, turns to the question now before ús and says: 'The company gave no notice of its intention to cancel as required by the contract, nor did it return nor offer to return five-sixths of the premium, a preliminary to cancellation as the contract required. Wo can take no other view of the evidence than that the contract of indemnity was complete when Hatfield and the agent both agreed to it, and the agent, by consent of Hatfield, retained .for the company the unearned premium. Was the contract afterwards rescinded or canceled by the company, or by consent of Foster, the attorney (for the insured) F The company could cancel it just one way at any time. That was by five days' notice to the representative of the estate of its intention to do so and return of five-sixths of the premium. It gave no notice and offered to return no premium.' We are earnestly urged by the learned counsel for the appellant to regard this clear and emphatic statement of the law, upon the very point now under consideratipn, as merely dictum; but we are wholly unable to do so, in the light of the fact that the cancellation of the policy was a defense distinctly raised by the pleadings, and the further fact that in the judgment entered, in which the entire court concurred, we find the following: 'On a retrial it is directed that the law be announced as we have indicated,' etc."
In the case of Continental Ins. Co. v. Daniel, 78 S. W. 866, 25 Ky. Law Rep. 1501, the court said:
"The difference between the contentions of appellant and ap-pellee is this: The appellant contends that the notice and tender must be given and made five days preceding the cancellation, which takes effect immediately. The appellee contends that the act of cancellation should take place, and notice and tender be given and made, and five days after this the cancellation takes effect, and the policy is then no longer in force. The lower court took appellee's view of the matter, and we are not prepared to say that the court erred. This provision of the policy is somewhat ambiguous. This court has repeatedly decided in such eases that the policy should be construed most strongly against the company, as it prepared it. This language of the policy seems to support the construction contended for by appellee, to wit: 'This policy shall be canceled at anytime by the company by giving five, days'notice of such cancellation. * 1,! * ' This seems to irnplv that the act of cancellation precedes the notice; but the cancellation is not to take effect until five days after the giving of the notice of the cancellation and the tender of the premium."
In the ease of Chrisman & Sawyer Banking Co. v. Hartford Fire Insurance Co., 75 Mo. App. 310, that court said:
"In the rescission .of a contract by one party, it is a necessary condition precedent to such rescission to place the other party in statu quo — to restore to him whatever may belong to him by reason of bringing the contract to an end. This is the general rule, as applied to all cases of contract. And within this rule it has been repeatedly held that before an insurance company can make an effective cancellation it must return or tender the unearned premium. In this case no attempt was made to do so. No effort was made to ascertain what the unearned premium was, and. certainly it will not be pretended that the president of the woolen mill released his claim for that. But it is said that this particular policy provided that the unearned premium was to be returned 'on the surrender of the policy.' And, as the policy was not surrendered, it was not necessary to return the premium. We think the return of the premium and the surrender of the policy, under the terms of the contract, were concurrent acts; that neither could be demanded without the other. But, as defendant was the party seeking cancellation, it was its duty first to have tendered the unearned premium on a surrender of the policy. It then would have done all that the contract required it to do in order to place the assured in statu quo."
In the ease of Hartford Fire Insurance Co. v. Cameron, 18 Tex. Civ. App. 237, 45 S. W. 158, the court said:
"We think that the cancellation clause, taken as a whole, means that, when the company elects to cancel the policjq it must, upon giving notice of such intention, at the same time return or tender to the insured or his agent the unearned portion of the premium. The latter part of the clause, by providing that the company, in such cases, 'shall retain only the pro rata premium,' clearly implies that the other portion shall be returned; and, while it does not in turn declare when the return shall be made, .it would be unreasonable and unjust to allow it to cancel its obligation and retain the consideration upon .which it was based. It would be equally as unjust and inequitable to require the insured 'to dance attendance at the place of business of an insurance company, and await their pleasure,' and probably be put to his action to recover the little sum due him, the cost of which might be greater than the sum due."
In the case of Hartford Fire Ins. Co. v. McKenzie, 70 Ill. App. 615, the court for the Second district, in construing an identical contract, said:
"Where the company seeks to cancel the contract under such stipulation as is above set out, the insured does not have to tender his policy, in order to entitle him' to receive back the unearned premium; but it is for the company desiring cancellation to seek the assured and tender the money to him, and till it does so the cancellation has not been effected." , :
See, also, Peterson v. Hartford Fire Ins. Co., 87 Ill. App. 567; Hartford Fire Ins. Co. v. Tewes, 132 Ill. App. 321; Williamson v. Warfield-Pratt-Howell Co., 136 Ill App. 168; Mississippi Valley Ins. Co. v. Bermond, 45 Ill. App. 22; Hamburg-Bremen Fire Ins. Co. v. Browning, 103 Va. 890, 48 S. E. 2; 2 Clement on Insurance, p. 405.
In the case of Mississippi Fire Ass'n v. Dobbins, 81 Miss. 630, 33 South. 506, the same character of contract is construed, and the court, going further, holds that, even in case the contract becomes void, before the company can defend, it must tender and pay over to the insured the unearned portion of the premium.
The authorities holding to the contrary are as follows: Schwarzchild & Sulzberger Company v. Phoenix Insurance Company of Hartford, 124 Fed. 52, 59 C. C. A. 572; Id. (C. C.) 115 Fed. 653; El Paso Reduction Company v. Hartford Insurance Company (C. C.) 121 Fed. 937; Davidson v. German Insurance Company, 74 N. J. Law, 487, 65 Atl. 996, 13 L. R. A. (N. S.) 884; Insurance Company v. Brecheisen, 50 Ohio St. 543, 35 N. E. 53; Newark Fire Insurance Company v. Sammons et al., 11 Ill. App. 230.
Such policy being framed by virtue of the laws of New York, and the highest court of that state having interpreted same, such construction should be of most persuasive influence, if .not binding with us, especially when supported by the weight of authority. Equitable Life Assur. Soc. v. Brown, 213 U. S. 25, 29 Sup. Ct. 404, 53 L. Ed. 682. Hence we hold that the policy was not canceled; no tender having been timely made.
3. It is .further insisted that the assured consented as a matter of law that the contract of insurance should be canceled. We do not so conclude from the evidence. Hartford Fire Ins. Co. v. Tewes, 132 Ill. App. 321.
3. As to the question of forfeiture on account of the alleged incumbrance, that was a question for the jury; there being a conflict in the evidence thereon. The fact that a mortgage may have been made thereon and filed of record, and not canceled of record, was not conclusive. It was competent to show the mortgage security had been changed or substituted, or that the debt had been extinguished by renewal and taking other security or payment. All these questions were for the determination of the jury.
The case is reversed and remanded, with instructions to grant a new trial.
Kane, C. J., and Turner, J., concur.