Court Opinion

ID: 4938073
Source: CourtListenerOpinion
Date Created: 2021-09-24 01:21:05.015882+00
Date Added: 2024-06-11T08:14:45.793945
License: Public Domain

Cornish, J.
Dissenting.
I am unable to concur in this opinion so far as it relates to the question of cancellation. The precise question involved is this: Can a mortgagor who has taken out a policy of insurance upon his own property, in his own name, but payable, in case of loss, to a mortgagee as his interest may appear, and who has paid the premium, cancel the policy upon request made to the company without the assent of the mortgagee. The opinion holds that he has not this power and that notwithstanding his request the company has no right to cancel the policy without the consent of the mortgagee. This seems to me a forced construction of the plain and unambiguous words of a contract made by the parties, and sanctioned by the legislature.
The provision relating to cancellation, which has been a part of the Statutes of our State since the adoption of the standard policy in 1895, reads as follows:
“This policy may be cancelled at any time at the request of the insured, who shall thereupon be entitled to the return of the portion of the above premium remaining, after deducting the customary monthly short rates, for the time said policy shall have been in force. The company also reserves the right, after giving written notice to the insured, and to any mortgagee to whom this policy is made payable, and tendering to the insured a ratable proportion of the premium, to cancel this policy as to all risks subsequent to the expiration of ten days from such notice, and no mortgagee shall then have the right to recover as to such risks.” R. S., Chap. 49, Sec. 4, par. VII. The first part of this provision covers voluntary cancellation by the insured, the second, voluntary cancellation by the company. We are concerned with the first part only. The words are direct and simple. The power of cancellation is given to “the insured.” Who then is meant by “the insured,” as the term is used in this contract? No room is left for conjecture. It is the party who effects the insurance and pays the premium which is the consideration of the contract in this case ,Frank T. Spear the mortgagor. The policy at its very inception so specifies: “In consideration of twelve dollars to it paid by the insured hereinafter named, the receipt whereof is hereby acknowledged, does insure Frank T. Spear and his legal *538representatives” etc. The policy itself therefore clearly defines the term, and wherever the words recur throughout the policy they have the same meaning and refer to the same person. It is true, as the opinion holds, that the mortgagee has certain rights under the standard policy given him by another provision which we shall discuss later, and in a certain sense his interest may be deemed to be protected or insured, but he is not the party insured designated by the statute as having the right to cancel the policy at any time at his own request. To make him such or to place him beside ‘ ‘the insured” and say that the policy cannot be cancelled without his assent is in effect to give to the statute an interpretation antagonistic to its express language, and to couple with the visible and expressed mortgagor, an invisible and unexpressed mortgagee. Such a result may be equitable and desirable, and therefore a matter for the consideration of the law making branch of the government, but it requires a severe wrenching of the statute to accomplish such a result without legislative amendment.
Further study of this cancellation section confirms our view. “The insured” is the party designated as entitled to a return of the unearned premium reckoned in the manner prescribed. To return is to give back to the party making the original payment. That party is entitled to the return and can sue the Company and recover if the Company should decline to pay. The statute gives him that right and makes the unearned premium a debt which he and he alone can recover. What rights has the mortgagee in that unearned premium? He has paid no part of it. Can he maintain an action for it? Certainly not. What stumbling block can he put in the way of the mortgagor who seeks to recover it? None whatever, because the contract says the insured is “entitled” to it. But if the mortgagee can prevent the cancellation by withholding his assent, he most effectually debars the mortgagor from receiving what is his legal due. For it scarcely could be contended that the mortgagor could receive his premium which was the consideration of the policy, and yet the policy would remain alive and valid as to the mortgagee. If so, at whose expense would it be running? Not at the mortgagor’s because his premium has been returned. Not at the mortgagee’s, because it is not claimed that he is in any way liable therefor. We should then have the dilemma of a policy existing and in force at no one’s expense. Such a situation is impossible. The power of can*539cellation and the right to the return of the unearned premium are inseparable, and they belong to one and the same person, and that person is he who effected the insurance.
That the legislature regarded “the insured” as distinct from the mortgagee, and used the term advisedly in designating him as the party having the power of cancellation is also apparent from the second part of the cancellation provision, permitting cancellation by the company. Here the rights of the mortgagee are recognized and expressly reserved in contradistinction to those of the mortgagor, because the Company can cancel only “after giving written notice to the insured, and to any mortgagee to whom this policy is payable” etc. Here the distinction between the two is sharply drawn. “The insured” is the mortgagor, as distinct from the mortgagee. Written notice must be given to both, but in the next clause it is provided that the Company must at the same time tender “to the insured a ratable proportion of the premium” etc. Notice must be given to both, but payment or tender made only to one. We cannot conceive how the English language could have been used with keener discrimination in specifying the rights of both the insured and the mortgagee, and yet the opinion holds that while the contract provides that “the policy may be cancelled at any time at the request of the insured,” yet the company has no right to cancel it, notwithstanding this request, except by mutual consent of the insured and the mortgagee. The legislature might have so enacted but clearly it did not. It recognized the rights of the mortgagee in cancellation by the company but not in cancellation by the insured. The line of cleavage is well defined.
Passing now from the particular cancellation clause to the entire policy, and applying the familiar rule as to the force of the context, our construction is further confirmed. The words “the insured” occur twenty-one times in the policy, and confessedly in the other twenty instances they refer to the party effecting the insurance, the mortgagor. On what ground can it be made to apply to another and unnamed party, the mortgagee, in the twenty-first?
The Massachusetts Court, in construing the words “the insured” in connection with the proofs of loss and the provisions for arbitration in a standard policy like our own, note the distinction between “the insured” and the mortgagee in these words:
*540“It is quite certain that the party referred to as ‘the insured’ in these provisions is the mortgagor. The contract calls for but one such statement, and if .the duty of furnishing it is upon the mortgagee when the loss is payable to him then there is no such duty upon the mortgagor. The paper must be ‘signed and sworn to by the insured,,’ it must set forth the ‘interest of the insured therein,’ and various other stipulated facts which are peculiarly within the knowledge of the mortgagor ‘so far as known to the insured' The mortgagee is referred to in the policy in contradistinction to the insured, in different parts of the policy. The mortgagee, to secure his rights in that capacity, must pay on demand ‘for any increase of risks not paid for by the insured.’ The Company reserves the right to cancel-the policy ‘after giving written notice to the insured and to any mortgagee, etc. In the clause reciting the consideration the company ‘does insure’ .... the mortgagor.” Union Inst. for Sav. v. Ins. Co., 196 Mass., 230-233. To the same effect is Collinsville Savings Soc. v. Ins. Co., 17 Conn., 676, where the Court say: “On the other hand it is not easy to discover upon what theory it can reasonably be claimed that a person who has not come into contractual relations with the insurer, who has obtained no insurance protection, and who is only an appointee of the owner as respects whatever may become due under the contract of insurance, to which he is a stranger, acquires the right, even by indirection, to assume the title of ‘the insured.’ If we look for other provisions which may serve, by way of implication or otherwise, to give him a standing in the adjustment of a loss, we find only that the word “insured” whenever used in the policy should be construed to include the legal representatives of the insured and nothing more. It appears therefore that the right to participate in an adjustment of a loss under this policy and indorsement, has by the parties to the contract been limited to the insurer, the property owner and his legal representatives.”
For the reasons thus set forth I am of opinion that the language of the cancellation clause is unambiguous, and the rights thereby conferred upon the insured are not to be challenged unless we judicially amend it by inserting after the words “the insured” the words “with the consent of the mortgagee,” so that said clause as amended shall read, “This policy may be cancelled at any time at the request of the insured with the consent of the mortgagee” etc. This I am reluctant to do.
*541The other section of the policy upon which the reasoning of the opinion rests, if I understand it correctly, is as follows: “If this policy shall be made payable to a mortgagee of the insured real estate, no act or default of any person other than such mortgagee or his agents, or those claiming under him, shall affect such mortgagee’s right to recover in case of loss on such real estate, provided that the mortgagee shall, on demand, pay according to the established scale of rates for any increase of risk not paid for by the insured;” etc. The rights of the mortgagee under this clause are protected, as the opinion holds, and no act or default of the mortgagor or of any other person than the mortgagee, either before or after the loss, can abridge or destroy them. That however does not refer to the cancellation of a policy which is expressly permitted under another section. A cancelled policy is one thing, a broken policy quite another. The “act or default” intended by this provision concerns such acts or defaults as would work a breach of the policy as to the mortgagor. It may be some positive act, an act of commission on the part of the mortgagor, as the sale of the premises, or procuring additional insurance, or even the voluntary destruction of the property; or it may be his failure to do something, an act of omission on his part, as the neglect to furnish proof of loss after fire has occurred. All these and similar instances come within the scope of this “act or default” clause, and under one class or the other falls every case cited in the opinion. Thus the conveyance of the property by the mortgagor in Eliot Sav. Bank v. Ins. Co., 142 Mass., 142; Palmer Sav. Bank v. Ins. Co., 166 Mass., 189; Whiting v. Burkhardt, 178 Mass., 535; Union Inst. for Savings v. Ins. Co., 196 Mass., 230; and Phoenix Ins. Co. v. Omaha Loan & Tr. Co., (Neb.) 25 L. R. A., 679; the foreclosure of a later mortgage working a change in the title, Morey v. Ins. Co., 208 Mass., 378; the procuring of additional insurance by the mortgagor, Hardy v. Ins. Co., 166 Mass., 210; Hastings v. Ins. Co., 73 N. Y., 141; Eddy v. Ins. Co., 143 N. Y., 311; Hartford Fire Ins. Co. v. Olcott, 97 Ill., 439; incorrect description of interest or misrepresentations, Bacot v. Phoenix Ins. Co., (Miss.) 25 L. R. A., N. S., 1226; the voluntary destruction of the premises by the mortgagor, Hartford Fire Ins. Co., v. Williams, 63 Fed., 925; and his failure to furnish proof of loss, Union Inst. for Savings v. Ins. Co., 196 Mass., 230. This covers every citation in the opinion on this branch of the case except the Editor’s note to Bretch v. Law *542Union & Crown Ins. Co., 18 L. R. A., N. S., 197, and that, like the others, refers only to the ' 'effect or breach of policy of insurance by mortgagor on rights of the mortgagee.” From none of these decisions do we dissent; with all of them we agree; but we fail to see their application to the case at bar.
They all refer to the effect on the mortgagee of the breach of the conditions of the policy by the mortgagor, not to the cancellation of a policy, and the gulf between the two is not bridged. The purpose of this “act or default” clause is apparent. Prior to its adoption the Courts held that the clause “payable in case of loss to a mortgagee as his interest may appear” merely constituted the mortgagee an appointee to receive the insurance in case of loss, and a violation of any of the terms of the policy by the mortgagor, such as transfer of title, procuring additional insurance, fraud in proof of loss, etc., avoided the policy not only as to the mortgagor, but also as to the mortgagee. The rights of the mortgagee fell with those of the mortgagor. This Court had so held. Brunswick Savings Inst. v. Ins. Co., 68 Maine, 313; Biddeford Savings Bk. v. Ins. Co., 81 Maine, 570. To prevent this result, and to remedy this apparent injustice, the “act or default” clause was inserted in the standard policy, and thereby the interest of the mortgagee is protected, notwithstanding the conduct of the mortgagor may have been such as to forfeit his own. No longer can the mortgagor’s wrong doing imperil the rights of the mortgagee. In this sense the mortgagee’s interest is covered by the policy, but in no other, and all the cases cited in the opinion are but illustrations of the various phases in which this single question has been presented to the Courts. In discussing the scope of this protection the Courts have sometimes used broad language, as the quotations in the opinion show, but in each instance it was used with reference to the “act or default” clause then under consideration, and in no way involved the rights of the parties under the independent clause governing cancellation. No cited case, and no other that we have been able to find, has declared the doctrine sought to be established in the opinion.
If the logic of the opinion on this branch of the case is that no act of the mortgagor can affect the mortgagee’s right of recovery, and that the request for cancellation was such an act, the fallacy of the argument is obvious. The act of the mortgagor contemplated by the clause is, as we have seen, such as would constitute a breach of *543the contract on his part, a prohibited act, an unauthorized act. But the request for cancellation is a contract right, expressly reserved to the insured by another provision when the policy is issued. It is a statutory right, an authorized privilege of which he cannot be deprived. Under what rule of construction can an act expressly authorized under one provision of a contract be converted into a prohibited act under another provision? How can a contract-authorized act be transformed into a contract-breaking act? Such a position is manifestly untenable.
Our conclusion therefore is, that however desirable it might be to couple the power of cancellation on the part of the mortgagor, with the consent of the mortgagee, the legislature, thus far, has failed to do so, but has left the power in the hands of the mortgagor alone, and his request for cancellation is a contract right which, when exercised by him, ipso facto works a cancellation of the policy. Lipman v. Ins. Co., 121 N. Y., 454; Crown Point Co. v. Ins. Co., 127 N. Y., 608; Ins. Com’r. v. Ins. Co., 68 N. H., 51; Parsons v. Ins. Co., 133 Iowa, 532, (110 N. W., 907); Richards Ins., Sec. 287.