Court Opinion

ID: 6602734
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:09:12.101532+00
Date Added: 2024-06-11T15:58:04.545506
License: Public Domain

A motion by the appellant for a rehearing was denied at the January term, 1879, and the following opinion filed:
RyaN, C. J.
If the crafty conditions with which fire insurance companies fence in the rights of the assured, and the subtle arguments which their counsel found upon them, were always to prevail, these corporations would be reduced almost to the single function of receiving premiums for little or no risk.
Forfeitures are not encouraged in the law. When forfeitures of insurance policies rest on substantial grounds, going to the risk, this court will uphold them. Fuller v. Ins. Co., 36 Wis., 599. But when forfeitures are alleged on purely technical grounds, not going to the risk, the rule is universal, that the contract of insurance is to be upheld, if it can be without violation of any principle of law.
Here the forfeiture claimed rests upon an assignment of the insured in bankruptcy of the chattels insured and of the policy. Under the circumstances of this case, the claim is purely technical, having no bearing whatever on the risk.
There are highly respectable authorities holding that an assignment in bankruptcy violates such a clause as that relied on in the policy before the court. But it may still be matter of grave doubt, whether such a clause is not void, as against public policy. It operates as a restraint upon the freedom of judicial procedure, and in restraint of judicial jurisdiction. It operates to extinguish an essential right of property by obedience to judicial decree. It operates to defeat the custody of the law of valuable things in action. It is in conflict with the policy of the law. The court is not prepared to pass upon this question here, and there are other grounds quite sufficient to defeat the forfeiture claimed.
This policy is not a contract between the insurer and the insured only. There is a third party to it, with beneficial interest in it from the beginning; in the circumstances, with the chief or only beneficial interest. The policy makes the loss, if any, payable to the coplaintiffs of the insured, as their mortgage interest might appear. This is not the case of a *33loss made generally payable to a third person. The insurance was upon chattels. And the policy recognizes that the chattels were mortgaged; that the 'legal title was in the mortgagee; and that the mortgagor had only an equity of redemption. The rights of both parties were insurable interests. And the thing, the body of the chattels, was insured for the benefit of both. The policy operated to cover the mortgagee’s interest, through and under the mortgagor, to the extent of the policy. The mortgage debt exceeded the value of the thing insured. And the policy is susceptible of no other honest construction.
It is now contended that nothing was insured except the mortgagor’s nominal equity of redemption. The body of the chattels was insured for the benefit of both mortgagor and mortgagee; the loss payable to them according to their relative rights as mortgagor and mortgagee; the legal title of the mortgagee, and the equity of redemption of the mortgagor. The premium was paid for this insurance of these interests, in this order; not for a policy of delusion, virtually insuring nothing. And no party should be tolerated in forcing such a construction of bad faith upon his own contract.
If the mortgagor had power to forfeit the policy, and had forfeited it, it might be that the insurance company had waived the forfeiture, as against the mortgagee. It is well settled in this court, that upon such forfeitures the policy becomes voidable at the election of the insurance company, not void. And an insurance company cannot sleep upon its intention to avoid the policy, to the prejudice of the insured. The forfeiture may be waived by laches of the insurance company, misleading persons interested in the policy, to their prejudice. Miner v. Ins. Co., 27 Wis., 693; Webster v. Ins. Co., 36 Wis., 67; N. W. M. L. Ins. Co. v. G. Fire Ins. Co., 40 Wis., 446; Gans v. Ins. Co., 43 Wis., 108; Palmer v. Ins. Co., 44 Wis., 201. In this case, if the insurance company had intended to rely upon the alleged forfeiture, good faith would have *34required it to notify the mortgagee, to give him an opportunity of protecting himself by other insurance.
But the mortgagor did nothing to violate any of the conditions of the policy, or to forfeit it; perhaps could do nothing. As it is above stated, and is very clearly shown in the opinion on the hearing, the legal title of the chattels insured was in the mortgagee. The policy recognizes this upon its face, by recognizing the mortgage. So far, therefore, as the thing insured is concerned, the mortgagor could transfer no title. He might indeed assign his equity of redemption; but that is not what the policy prohibits. The'policy prohibits the sale or transfer of the title or possession of the body of the property insured.
And so it is with the policy also. The legal title of the policy vested, upon its execution, in the mortgagee, as fully as if it had been subsequently assigned to him. Grosvenor v. Ins. Co., 5 Duer, 517; S. C., 17 N. Y., 391; Ennis v. Ins. Co., 3 Bosworth, 516. This is not precisely the view taken in Massachusetts, but is not essentially different. Barrett v. Fire Ins. Co., 7 Cush., 175; Lowell v. Fire Ins. Co., 8 Cush., 127; Fogg v. Fire Ins. Co., 10 Cush., 337; Hale v. Fire Ins. Co., 6 Gray, 169; Loring v. Ins. Co., 8 Gray, 28.
So that, when the policy was delivered to the insured, there was no title, either to the thing insured or to the policy insuring it, which the mortgagor could assign in violation of the restraining clause, which the restraining clause could operate upon. He might perhaps have violated the restraining clause in reference to the possession; but of that there is no question here. His assignment in bankruptcy operated to violate nothing in the policy. The legal title of the thing insured, and of the policy, being in the mortgagee, the restraining clause, so far as it is here in question, could operate upon him only. And he does not appear to have done anything in violation of it.
By the Court.— The motion for rehearing is overruled.