Case Name: EASTBURN HASTINGS and MARIA LOUISA HASTINGS, as Surviving Trustees, etc., of GEORGE HASTINGS, Deceased, Plaintiffs, v. WESTCHESTER FIRE INSURANCE COMPANY, Defendant
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1877-11
Citations: 19 N.Y. Sup. Ct. 416
Docket Number: 
Parties: EASTBURN HASTINGS and MARIA LOUISA HASTINGS, as Surviving Trustees, etc., of GEORGE HASTINGS, Deceased, Plaintiffs, v. WESTCHESTER FIRE INSURANCE COMPANY, Defendant.
Judges: Barnard, P. J., concurred.
Reporter: Supreme Court Reports (Hun)
Volume: 19
Pages: 416–425

Head Matter:
EASTBURN HASTINGS and MARIA LOUISA HASTINGS, as Surviving Trustees, etc., of GEORGE HASTINGS, Deceased, Plaintiffs, v. WESTCHESTER FIRE INSURANCE COMPANY, Defendant.
Policy of insurance — agreement to pay loss to mortgagee — condition for contribution— effect of, on rights of mortgagee.
The ninth condition of a policy of insurance of $10,000 issued by the defendant to the owner of a house and lot, provided that “in case of any other insurance upon the property hereby insured * * * the assured shall be entitled to recover of this company no greater proportion of the loss sustained than the sum hereby insured bears to the whole amount insured thereon.” Subsequently the defendants, at the request of the plaintiffs, who held an over-due mortgage for $14,000 upon the premises insured, wrote upon the policy: “Loss, if any, payable to * * * (the plaintiffs) trustees and mortgagees,” and annexed a stipulation by which it was agreed “ that this insurance, as to the interest of the mortgagee only therein, shall not be invalidated by any act oi negleet of the mortgagor or owner of the property insured; * * * that whenever the company shall pay the mortgagee any sum for loss under this policy, and shall claim that, as to the mortgagor or owner, no liability therefor existed, said company shall at once be legally subrogated to all the rights of the . mortgagee * * * to the extent of such payment.” After the building had been destroyed by fire, it was discovered that the mortgagor had another insurance of $4,000 upon the premises payable to herself, of which the defendants were ignorant. In an action by the plaintiffs upon the policy the company claimed that they were only liable for ten-fourteenths of the loss.
Held, that, the two policies covered separate and distinct interests, that of the owner and that of the mortgagee, and that it was not a case of double insur-’ anee; that the term “assured,” as used in the policy, only applied to the owner of the property, and not to the interest of the plaintiffs as mortgagees; ti.?t the terms of the conditional agreement made with the plaintiffs were directly repugnant to any interpretation which would bring them within the aforesaid ninth condition; that the plaintiffs were entitled to recover the full amount of the loss sustained. (Dykman, J., dissenting.)
Controversy submitted without process, in pursuance of sections 1279, 1280 and 1281 of the Code of Civil Procedure.
The plaintiffs were, on May 8, 1875, the owners of a bond and mortgage for $14,000, then past due. On that day the defendants issued to one Sarah C. Stout a policy of insurance upon the mortgaged premises for $10,000, “other insurance permitted.” The ninth condition of the policy was as follows:
“ In case of any other insurance upon the property hereby insured, whether made prior or subsequent to the date of this policy, the assured shall be entitled to recover of this company no greater proportion of the loss sustained than the sum hereby insured bears to the whole amount insured thereon, whether such other insurance be by specific or by general or by floating policies.”
On September 1, 1876, with the consent of said Sarah C. Stout, and at 'the request of the plaintiffs, the defendant indorsed upon said policy the following words:
“ Loss, if any, payable to Maria L. and Eastburn Hastings, trustees and mortgagees,” and at the same time annexed to said policy the following clause known as the mortgage clause:
“ It is hereby specially agreed that this insurance, as to the interest of the mortgagee only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the property insured, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy.
“It is also provided and agreed that the mortgagee shall notify the company of any change of ownership or increase of hazard, not permitted by this policy to the mortgagor or owner, as soon as the same shall come to his or her knowledge; and shall, on reasonable demand, pay the additional charge for the same, according to the established scale of rates, for the time such increased hazard may be or shall have been assumed by this company during the continuance of this insurance.”
“And it is further agreed that whenever the company shall pay the mortgagee any sum for loss under this policy, and shall claim that, as to the mortgagor or owner, no liability therefor existed, said company shall at once be legally subrogated to all the rights of the mortgagee under all the securities held as collateral to the mortgage debt to the extent of such payment, but such subrogation shall not impair the right of the mortgagee to recover the full amount of his claim, or at its option said company may pay to the mortgagee the whole principal due or to grow due on the mortgage with the interest then accrued, and shall, thereupon, receive a full assignment and transfer of the mortgage and all other securities held as collateral to the mortgage debt.
“GEO. R. CRAWFORD,”
“ Secretary.'”
Thereafter defendant delivered said policy to the plaintiffs, who have since been and now are, the holders and owners of said policy.
After a loss had occurred it appeared that the owner had, without the knowledge or consent of the defendant, procured another policy of insurance upon the building for $4,000, payable to herself. The defendants insisted that they were only liable for ten-fourteenths of the loss.
L. H. Fowan, for the plaintiffs.
G. Frost, for the defendant.
Decided July term, 1877.

Opinion:
Gilbert, J.:
We have little hesitation in determining the intention of the parties in making the contract between them. The plaintiffs sought, and the defendants intended to give them, an effective indemnity against the whole amount of the loss. The plaintiffs cannot be propely dealt with as assignees of Mrs. Stout the assured, merely. Such relation is incompatible with the facts of the transaction. The policy was issued to Mrs. Stout in May, 1875. The plaintiffs then held a mortgage on the premises insured for $14,000., which had been due for more than three years. On the first of September, 1876, the defendants, at the request of the plaintiffs, and with the consent of Mrs. Stout, wrote upon the policy these words: " Loss, if any, payable to Maria L. and East- burn Hastings (tbe plaintiffs), trustees and mortgagees," and at the same time annexed to said policy, a printed stipulation, known as the " mortgage clause," in the following words: " It is hereby specially agreed, that this insurance, as to the interest of the mortgagee only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the property insured nor by the occupation of the premises for purposes more hazardous than are permitted by this policy. It is also provided and agreed that the mortgagee shall notify the company of any change of ownership and increase of hazard not permitted by this policy to the mortgagor or owner, as soon as the same shall come to his or her knowledge, and shall, on reasonable demand, pay the additional charge for the same, according to the established scale of rates, for the time such increased hazard may be or shall have been assumed by this company, during the continuance of this insurance — and it is further agreed, that whenever the company shall pay the mortgagee any sum for loss under this policy, and shall claim that, as to the mortgagor or owner, no liability therefor existed, said company shall at once be legally subrogated to all the rights of the mortgagee under all the securities held as collateral to the mortgage debt, to the extent of such payment, but such subrogation shall not impair the right of the mortgagee to recover the full amount of his claim, or at its option said company may pay to the mortgagee the whole principal due or to grow due on the mortgage, with the interest then accrued, and shall thereupon receive a full assignment and transfer of the mortgage and all other securities, held as collateral to the mortgage debt." The policy when thus altered was delivered to the plaintiffs.
The legal effect of the " mortgage clause," we think, clearly is to protect the plaintiffs against the application to them of the ninth condition in the policy, which provides that, in case of any other insurance upon the property insured, the assured shall be entitled to recover only a ratable proportion of the aggregate insurance. The defendant insured Mrs. Stout as owner, and the plaintiffs as mortgagees. This insurance embraces distinct and separate contracts. (Springfield, etc., Ins. Co. v. Allen, 43 N. Y., 392 ; Excelsior Ins. Co. v. Royal Ins. Co., 55 id., 343.)
The ninth condition of the policy is a limitation of the liability of tbe defendants to tbe assured, in Case of another insurance. That term "assured," until the contract with the plaintiffs was made, designated Mrs. Stout only. Confining the term to the ninth condition, it cannot, we think, be reasonably held to include the plaintiffs, or to affect the contract made with them. Such condition, when applied only to Mrs. Stout, is just and equitable, because she is entitled to the benefit of both insurances — -that of the defendant indirectly and of the other one directly ; whereas an application of it to the plaintiffs would operate most unjustly, for the reason that their indemnity depends solely upon their contract with the defendant. The framer of that condition, no doubt, had in mind merely the case of a double insurance, and in such a case to substitute proportional abatement for contribution. Here the interests insured are distinct and different. The interest of Mrs. Stout is that of an owner of the property — of the plaintiffs, that of holders of a lien, by way of mortgage thereon. The subsequent insurance effected by Mrs. Stout was of her interest only, and did not cover the interest of the plaintiffs. But to make the condition applicable to any particular case, not only must the property that is the subject of the insurance be the same, but the interests must be identical. (Howard Ins. Co. v. Scribner, 5 Hill, 298.) A doubt of this decision on one point is expressed in 1 Phillips on Insurance (3d ed.), 208, but the same author declares that there is no doubt of the general doctrine, that when each of two parties, having distinct interests in a subject to its full value, insures upon it to its full value, independently of the other, it is not a case of double insurance. (Id., 209.) And in a recent case in England a construction was given to a condition in a policy, similar to the condition under consideration, where insurances had been obtained upon different interests in the same property. The master of the rolls said: " The word ' property,' as used in several of the conditions, means not the actual chattel but the interest of the assured therein. What is the meaning of the words ' covering the same property ' in the ninth condition ? They cannot mean the actual chattel. The most absurd consequences would follow, if you read those words in that sense. I am satisfied that this condition was put in to apply to cases where it is the same property that is the subject-matter of the insurance and the interests are the same. It never could have been meant to apply, for example, to the cases of a tenant for life and remainder-man, or a first mortgagee and a second mortgagee, both insuring the same goods. You must read the condition in a sensible way, and not assume that these great companies intended to entrap their policyholders, and to destroy the value of the contract of indemnity." The same construction was adopted by the appellate court, and we unhesitatingly concur therein. (North British and Merc. Ins. Co. v. London, Liv. and Globe Ins. Co., L. R., 5 Ch., 569.) Moreover, the insertion of the provision in the " mortgage clause," for the subrogation of the defendant to the rights of the plaintiffs, in case of a payment to them of any sum in excess of its liability to Mrs. Stout, is a very palpable indication of the intention of the parties that the ninth condition of the policy should not be applicable to the plaintiffs, but that the defendant should rely for protection, against such an act as that of Mrs. Stout in procuring another insurance, upon such subrogation, for it cannot be supposed that the parties intended by that provision to furnish a protection to the defendant against loss, by reason of a payment to the plaintiffs, for which it was not liable. Such a provision, therefore, is a recognition of a contingency whereby a liability to the plaintiffs upon the contract with them might arise exceeding that upon the piolicy to Mrs. Stout. The reservation of the right of subrogation is general. It is applicable alike to every case when, for any cause, a payment has been made to the plaintiffs in discharge of the defendant's liability to them, and such payment exceeds the liability of the defendant to Mrs. Stout. Such right of subrogation, therefore, will belong to the defendant in the present case whenever it shall have discharged its liability to the plaintiff, and inasmuch as that right would not exist if the plaintiffs were affected by the ninth condition, the operation of that condition must necessarily be restricted to Mrs. Stout alone. Furthermore, we thinlc the language of the " mortgage clause " is directly repugnant to an interpretation which would bring the plaintiffs within said ninth condition. By the "mortgage clause" it was "specially agreed that this insurance, as to the interest of the mortgagees therein, should not be invalidated by any act of the mortgagor or owner of the property insured." The procuring of another insurance was the sole act of Mrs. Stout, the mortgagor and owner. To subject the plaintiffs to an abatement of the amount of their indemnity, in consequence of that act, would invalidate the insurance as to their interest pro tanto. That clearly would be in direct contravention of the " mortgage clause."
By the very words of the policy, the plaintiffs became entitled to' be paid at the end of sixty days after due notice and proof of the loss.
The plaintiffs must have judgment for the whole amount of the loss, with interest from January 14, 1877.
Barnard, P. J., concurred.