Opinion ID: 1102044
Heading Depth: 1
Heading Rank: 2

Heading: the policy of national general insurance company

Text: The lower court erroneously held that National General Insurance Company was not liable to either the insureds or the mortgagee under its policy. As hereinbefore seen, when the original loan was made and the original fire insurance policy issued, the policy did not include coverage for contents of the residence and only covered loss in the amount of $16,000, even though the loan on the property was in the principal sum of $20,500. It is undisputed that on August 14, 1974, Mr. and Mrs. Tolar went to the office of Cavin. The doubtful question is whether or not Cavin, during the conversation, was acting for the mortgagee, the insurance company, or both. He did not say which hat he had on at that time. He admitted that in addition to discussing the past due mortgage payments, the Tolars made a definite request that the insurance policy be changed to give them complete coverage. This was refused by Cavin, who then admittedly told the Tolars that they were at liberty to secure this insurance elsewhere. They immediately proceeded to the office of Harrison, State Farm's local agent. Cavin testified that after the Harrison-Cavin conversation on March 14, he notified his company that the National General policy should be cancelled. Admittedly, no notice was given the Tolars. The policy was not cancelled until September 4, 1974, when it was delivered by transmittal letter from the office of Bankers Trust Savings & Loan Association. The premium had been paid and accepted. No notice was given the mortgagee of cancellation by National General. The required mortgage clause under Code section 83-13-9 provides that upon cancellation, [T]his policy shall continue in force for the benefit only of the mortgagee for ten (10) days after notice to the mortgagee of such cancellation and shall then cease and this company shall have the right on like notice to cancel this agreement. The fire occurred prior to the expiration of this ten-day period, and, admittedly, without cancellation notice to the mortgagee. It is clear, therefore, that at the time of the fire the mortgage clause provision of National General's policy was in full force and effect. The question arises as to whether or not National General's policy was in force as to the insureds, Mr. and Mrs. Tolar, at the time of the fire. We have heretofore seen that as to State Farm the Tolars clearly were guilty of fraudulent concealments and representations  which voided that policy as to them. The record is silent as to any fraud perpetrated by the Tolars as far as National General is concerned. Admittedly, they were trying to defraud the Small Business Administration by contending that the flood damage was total, when, in fact, it was minimal. No misrepresentations were made by the Tolars to National General. The National General policy had not been cancelled. Witness B.L. Nolen, vice president and general manager of National General, testified that his company was requested to terminate the policy by Bankers Trust Savings & Loan Association on September 4. On cross-examination, this witness was asked: Q. So you are telling me then that Bankers Trust had forwarded the escrow money for the policy premium to National General prior to the expiration of the policy to keep the policy in force? A. That is correct. Q. All right, so then when the letter of September 4 was written to you, the policy was still in force because you had the premium? A. That is correct. In addition to this witness, Cavin testified that after his conversation with Harrison he only assumed that the National General policy would be replaced. He further testified that after the conversation he did not even know how much insurance Harrison had written. National General contends that its policy was cancelled by operation of law upon Harrison issuing State Farm's binder on March 14. To substantiate this contention, National General relies on the case of Woolverine Insurance Co. v. Taylor, 312 So.2d 699 (Miss. 1975). That case is not applicable to National General's contention. There, Taylor, the insured, purchased a house trailer and financed it with the local bank. A policy of insurance was secured by Taylor. After the loan was fully paid, Taylor voluntarily requested that the policy be cancelled and he actually mailed the policy to the company several weeks before the trailer was destroyed by a wind storm. The facts were entirely different from the present case. The Taylor policy was cancelled when it was surrendered by Taylor. In the present case, the Tolars had no information whatsoever that National General's policy had been or was being cancelled. They had just had a conversation with the agent regarding the increase in coverage and the agent had agreed thereto. Admittedly, the policy was not cancelled until after the loss and then only by the mortgagee. There was no notice of cancellation after Cavin had agreed for the Tolars to secure other insurance, and he made no further contact with them after receiving notification from Harrison that this had been done. We hold, therefore, that the National General Insurance Company policy was in full force and effect as to both the insureds and the mortgagee at the time of the fire loss. The question remains as to the respective liability of the two insurance companies. At the outset we are faced with an error of the lower court in adding twenty percent to the amount owed the mortgagee as attorneys' fees. The only obligation for attorneys' fees is set out in the note signed by Mr. and Mrs. Tolar. There is no judgment being rendered against the Tolars by this Court under the terms of the note. The principal judgment is against the two insurance companies under the original complaint filed by Bankers Trust Savings & Loan Association. We hold, therefore, that the principal amount of indebtedness owed Bankers Trust Savings & Loan Association should be established as of the date of the final judgment and mandate of this Court, exclusive of attorneys' fees. Judgment then will be rendered here against State Farm Fire & Casualty Company and National General Insurance Company, each in a pro-rata amount as the total insurance of each bears to the balance of the debt owed on said date. This decision is required by the statutory mortgage clause in each policy which provides that, [I]n case of any other insurance upon the within described property, this company shall not be liable under this policy for a greater proportion of any loss or damage sustained than the sum hereby insured bears to the whole amount of insurance on said property issued to or held by any party or parties having insurable interest therein, whether as owner, mortgagee, or otherwise. It is obvious that the full amount of National General's policy will not be exhausted after paying its pro-rata share of the mortgagee's debt. We hold that this policy is primary coverage as to the Tolars, and as the insureds were allowed to recover thereon, that any amount remaining shall be paid to the insureds, Harold G. Tolar and Nell F. Tolar, up to the limit of National General's policy. We further hold that State Farm Fire & Casualty Company is entitled to subrogation of all amounts paid by it against any debt, claim or lien held by or owed Bankers Trust Savings & Loan Association pursuant to any security instruments including the original note and deed of trust executed by the Tolars. We hold that the original complainant, Bankers Trust Savings & Loan Association, is not legally entitled to attorneys' fees for the reason that the only attorneys' fees contracted for existed in the original note from the Tolars to Bankers Trust. Judgment is not being given under that instrument but only against the insurance companies under the policies of insurance by Bankers Trust as mortgagee. We find that under the original subordination agreement between Citizens Bank of Columbia and Bankers Trust, the latter owes the former $2,059.05, plus legal interest, as found by the lower court. Bankers Trust Savings & Loan Association shall be subrogated to the rights of Citizens Bank of Columbia under its note and deed of trust. It is necessary for computations of the amounts of the judgments consistent with this opinion be computed and there is not sufficient evidence in the record for this Court to make those computations. The cause is reversed and remanded to the lower court for additional hearing if necessary and the entering of final decrees consistent with this opinion. The lower court costs and the cost of this appeal are taxed in three equal parts against State Farm Fire & Casualty Company, National General Insurance Company, and Harold G. and Nell F. Tolar. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED. PATTERSON, C.J., SMITH, P.J., ROBERTSON, P.J., and SUGG, WALKER, LEE and COFER, JJ., concur. BROOM, J., took no part.