Court Opinion

ID: 7102031
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:16:45.813571+00
Date Added: 2024-06-11T16:13:26.409297
License: Public Domain

Beck, J.,
dissenting. — In my opinion, the defendant in this case cannot set up, as a defense to the action brought by tho assignee of the policy, the fact that the property insured was incumbered by mortgage executed by the assignor of the policy, — the party originally insured. I base my conclusion upon these grounds:
I. It is a rule, supported by authority, that the assignment of a policy creates between the underwriter and assignee a new contract, which is not affected prejudicially by acts of the party to whom the policy was issued. Under this rule, the acts of such party do not forfeit the conditions of the policy in the hands of an assignee, when such acts would have that effect had the policy not been assigned. Ellis v. Council Bluffs Ins. Co., 64 Iowa, 507; Foster v. Insurance Co., 2 Gray, 216; City Fire Ins. Co. v. Mark, 45 Ill., 482. Counsel for defendant cite, in opposition to the rule, Ellis v. State Ins. Co., 61 Iowa, 577. They insist that, because the opinion in that case shows that the policy was assigned, and yet holds that evidence of an incumbrance put upon the property by the assignor, the original assured, was erroneously excluded, the decision is in conflict with the rule. But this point was not in the case, and the rule was not brought in question or referred to in the opinion. It seems that the evidence was objected to only uy>on the ground that the conditions of the policy provided against the transfer or change of the title of *585the property, and that the mortgage sought to be introduced in evidence did not incumber the title, but was nothing more than a lien upon the property. The rule under consideration is not questioned or referred to in the opinion. The decision cannot be cited as in conflict with it.
The rule is supported by the following cogent reasons: The assignee, being ignorant of the existence of the ground of forfeiture, perpetrated no fraud upon the underwriter, and practiced no deceit or concealment. He sought indemnity against loss by fire, which it is the business of the insurance company to give. He could have caused the policy to be canceled, and a new one to be issued, the return premiu m being paid by the company. In order to avoid labor and inconvenience to the company, this course was not pursued, but the policy was assigned, from which the assignee expected to obtain the indemnity sought. He was ignorant of any ground upon which the policy could be invalidated. It may be that the underwriter was also ignorant; but he had it in his power to discover the existence of anything which "would defeat the policy. Without pursuing a course of inquiry which would have resulted in disclosing the ground of invalidity of the policy, he treated it as valid, and by his action induced the assignee to rely upon it as indemnity. But it may be said that the assignee, as well as the underwriter, could have made the inquiry as to the-validity of the policy. That is true, but there is no reason why he should have pursued such inquiries after finding that the underwriter treated the policy as valid.
It must be remembered that an assignment is not valid except tlio assent thereto of the company issuing the policy is given through its agent or otherwise. When such assent is given, the policy becomes a contract with the assignee. He is authorized to believe that the insurance company, in thus entering into a contract with him by virtue of the assignment, binds itself to afford the indemnity he seeks. It cannot, therefore, set up as a„.defense to the policy any cause of inva*586lidity existing before tbe assignment, in the absence of fraud, deceit or concealment on the part of the assignee.
II. It becomes necessary to inquire whether the fact that neither the defendant nor its agent had knowledge of the incumbrance existing at the time of the assignment of the policy takes the case from the operation of this rule. It may be remarked, preliminary to the consideration of this question, that, as the plaintiff,- the assignee of the policy, had no knowledge of the incumbrance, the case would not be withdrawn from the rule on the ground of fraud on the part of plaintiff, if it otherwise is applicable to the case. The rule recognizes the assignment of a policy as creating a new contract. By this is meant that a new contract of insurance arises upon the execution of the assignment. The company contracts with a new party. The underwriter is the same in the new as in the old contract, but the insured in the two contracts is not the same. The subject of the insurance — the property covered by the policy — is the same in both contracts; and it is very plain that the terms of the two contracts are the same, being expressed in each case by the policy. We think upon these points there can be no doubt.
It.cannot be doubted that a violation of the conditions of the policy which would render it void in the hands of the party originally insured would not defeat the new contract— the new policy, for it may be so called — which arises upon the assignment of the instrument. The assignment creates a new contract. It would be absurd to say that such new contract is rendered void by an act done before it was made. If that were so, it would never exist as a contract; the instant the assignment would be made the new contract would be destroyed. Lt would be still-born; indeed, it would never have an embryo existence. But the law contemplates that the company, by assenting to the assignment, revives the policy which has been avoided by prior acts; or, more properly, it enters into a new contract, which is expressed by the language of the old and void policy. The old contract, being *587void, passed away; the new one is called into existence, and clothed with the drapery of words formed for the old one. In plainer language, the parties, in entering into the new contract, adopted the language of the old. Strictly, there was no waiver of forfeiture of the policy by the assignment. It may be regarded as void, as between the original parties. As between the company and assignee, it was used to express the new contract.
I will now proceed to apply these doctrines to the facts of the case before me. The incumbrance fell upon the property after tbe policy was originally executed. Under the condition of the instrument it became void. That condition is in this language: “ If the title of the property is transferred, incumbered or changed,” the policy shall be void. Under this condition, the policy, when the incumbrance was put upon the property, became void. It will be observed that this condition is not against prior or existing incumbrances. It is against future incumbrances. The new contract of insurance between the company and the assignee would not be avoided by an existing incumbrance. Only an incumbrance that should fall on the property after the assignment creating the new contract would have such effect. It therefore clearly appears that the contract of insurance existing between defendant and the plaintiff is not affected by the incumbrances.
III. It does not appear from the record that the application for insurance by the assignor of the policy contained any representation as to the non-existence of incumbrances. We need not, therefore, inquire what effect such representations would have upon the contract with the assignee. It would seem, however, that if there were such representations by the assignor, they could not affect'the new contract of insurance with the assignee for at least two reasons: (1) The representations, if made, were true, for the incumbrance fell on the property after the policy was originally executed; (2) the assignee, in entering into the new contract, made no representations of the *588non-existence of incumbrances. The covenant against existing incumbrances was not violated by the assignor, and was not entered into by the assignee. If there was, in fact, such a covenant in the application, it does not affect the policy in the hands of the assignee.
The foregoing considerations lead me to the conclusion that the judgment of the circuit court ought to be affirmed.
Reed, J., concurs in this dissent.