Court Opinion

ID: 9658827
Source: CourtListenerOpinion
Date Created: 2023-08-23 21:16:56.377696+00
Date Added: 2024-06-11T18:14:00.228564
License: Public Domain

Hallows, J.
{dissenting). We cannot agree with the reasoning of the majority opinion. In late years it has been a common custom for insureds to borrow from a bank to finance the payment of insurance premiums and to give as security an assignment of the return and unearned premiums and certain losses which may become due to the insured under the policies. It is common knowledge that fire and auto insurance covering single risks are written on a fixed predetermined premium basis. Insurance like workmen’s compensation, general liability, public liability, some fire policies, and other policies are written on a retrospective basis, which means that the premium paid at the time of issuance may not be sufficient to cover the risk throughout the entire term. Such policies generally provide that the total premium due on the risk will be determined by a retrospective audit and the original premium adjusted accordingly.
The “Stevens Plan” note and similar notes do not lend themselves to the financing of such policies because the losses payable thereunder are frequently not payable to the insured and the return or unearned premium may be very small, at least less than the amount loaned by the bank, *460and in some cases will cease to exist and an additional premium developed. To properly use a note to finance insurance premiums the amount of the loan must be less than any return premium or unearned premium at all times or the security is not adequate for the loan. Whether the result is reached in any given situation depends upon the amount of the loan, its provisions for payment, and the type of insurance policy involved.
The evidence shows that the plaintiff bank had knowledge that workmen’s compensation insurance was retrospectively rated and that the “Stevens Plan” note was not adapted to policies written on a retrospective basis. The plaintiff was in the business of financing insurance policy premiums and ought to have known the nature of the insurance policies which were the subject matter of its security. If it did not, it had the duty to inspect the policies which were available. The defendant Insurance Company was authorized in the note, which also constituted an assignment, to pay to the plaintiff any return premium and any unearned premium “which may become due under the policy” and to include the name of the bank with the insured in any check for certain losses. The notice to the Insurance Company of the financing of the premiums requested of the Insurance Company as follows:
“If the above-mentioned policy(ies) and/or bond(s) issued by you or your agents to the maker of the foregoing note differ in any way from the above description thereof, will you kindly advise us as promptly as possible.”
The policies issued by the defendant were correctly described in the note as to number, premium, insurance company, kind of coverage, date, term, and expiration.
Under these facts the majority opinion implied a promise on the part of the defendant to the effect that the total *461annual premiums due the defendant on the three policies were the amounts stated in the note. We find no basis for an implied promise in fact or in law that the premiums were any different than stated in relation to the kind of coverage described. The effect of this implied promise is to change the terms of the insurance contracts between the defendant and its insured and in effect make the defendant the guarantor of the note. After creating an implied promise the majority decision then estops the defendant from offering proof of the terms of the policy on the equitable theory that the plaintiff was induced by the failure of the Insurance Company to state in the acknowledgment that the premiums might vary from the figures stated in the note.
The plaintiff having actual knowledge that workmen’s compensation insurance is written on a retrospective basis, and knowing that other types of insurance are written on such a basis, and the “Stevens Plan” note should not be used in connection with such policies, and having failed to inspect the policies which were available, did not act with due diligence in making the loan and is in no position to assert an equitable estoppel against the Insurance Company. Wussow v. Badger State Bank (1931), 204 Wis. 467, 234 N. W. 720. We do not consider it the duty of the defendant to instruct the plaintiff bank in its business of financing.
Since the policies did not differ in any way from the description thereof in the note, the defendant was under no duty to inform the bank of the various terms of the policies. There is no basis for assuming that the amount and kind of premium was different than expressly stated in the note for the kind of coverage provided in the policy described. The misuse of the “Stevens Plan” note and the ignorance of the bank ought not to be charged to the defendant Insurance Company, which had no notice of the bank’s misuse or of such ignorance.
*462For the foregoing reasons we believe the case was correctly decided by the trial court and its decision should be affirmed.
I am authorized to state that Mr. Justice Fairchild joins in this dissent.