HARTFORD FIRE INS CO v. WILSON AND LARNER(1903)
Statement by Mr. Justice Brewer:
This case was commenced in the supreme court of the District of Columbia by Albert A. Wilson and John B. Larner, trustees, against the Hartford Fire Insurance Company to recover upon two policies of insurance, charged to have been executed and delivered by the company to the plaintiffs on April 17, 1895, and insuring certain property of the Ivy City Brick Company, for the benefit of the trustees, the plaintiffs. The declaration alleged the destruction by fire of the property on May 17, 1895, notice of the loss to the company, and its refusal to pay. After the pleadings had been completed the case was submitted to the court upon an agreed statement of facts. The facts agreed upon, so far as they are pertinent to the question presented, are as follows:
The policies, which are alike, contained the following provisions:
No. 20,229. $1,000.
By this policy of insurance the Hartford Fire Insurance Company, of the city of Hartford, in the state of Connecticut, in consideration of the stipulations herein named and of seventeen and 50-100 dollars premium, does insure Ivy City Brick Company for the term of one year from the 17th day of April, 1895, at noon, to the 17th day of April, 1896, at noon, against all direct loss or damage by fire, except as hereinafter provided, to an amount not exceeding one thousand dollars, to the following described property, while located and contained as described herein, and not elsewhere, to wit: Ivy City Brick Company. $1,000. On machinery of every description, dryers, cars, apparatus, equipments, and tools, contained in their one-story brick and frame structure with metal roof ( about 118x165 feet) and one-story frame and brick addition with metal roof. Situate on their tract known as 'Ivy City,' about one mile northeast of Washington, D. C. Other concurrent insurance permitted without notice until required. Loss, if any, payable as interest may appear to Albert A. Wilson and John B. Larner, trustees. (Mortgagees' clause with full contribution attached.) [187 U.S. 467, 472] Attached to and made a part of policy No. 20,229 of the N. Y. Underwriters' agency.
Thos. F. Barrett, Agent.
This policy shall be canceled at any time at the request of the insured, or by the company, by giving five days' notice of such cancelation. If this policy shall be canceled as hereinbefore provided, or become void or cease, the premium having been actually paid, the unearned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate; except that when this policy is canceled by this company by giving notice it shall retain only the pro rata premium.
This policy is made and accepted subject to the foregoing stipulations and conditions together with such other provisions, agreements, or conditions as may be indorsed hereon or added hereto, and no officer, agent, or other representative of this company shall have the power to waive any provision or condition of this policy except such as by the terms of this policy may be subject of agreement indorsed hereon or added hereto, and as to such provisions and conditions no officer, agent, or representative shall have such power or be deemed or held to have waived such provisions or conditions unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached.
In witness whereof, this company has executed and attested these presents this seventeenth day of April, 1895.
This policy shall not be valid until countersigned by the duly authorized agent of the company at Washington, D. C.
Geo. L. Chase, President.
P. C. Royce, Secretary.
Chas. E. Chase,
2d Ass't Secretary.
Thos. F. Barrett, Agent. [187 U.S. 467, 473] Upon these facts, judgment was, on December 13, 1899, entered in favor of the defendant. This judgment was taken on appeal to the court of appeals of the District and by that court on June 12, 1900, reversed, and the case remanded with directions to enter judgment for the plaintiffs. 17 D. C. App. 14. Thereupon the case was brought here upon certiorari. 181 U.S. 617 , 45 L. ed. 1030, 22 Sup. Ct. Rep. 945.
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Mr. Justice Brewer delivered the opinion of the court:
The question is whether at the time of the fire there was a valid and subsisting contract of insurance. The negotiations in respect to the policies were not between the insurer and the insured directly, but between agents of each. As shown by paragraphs 2 and 3 of the agreed statement of facts, the agent of the insurer delivered the policies to the agent of the insured upon a condition, which was agreed to by both. That condition failed, notice of which was given by the former to the latter, accepted by the latter as putting an end to the policies, and the former notified to come and get the policies. Several times the former went to the office of the latter to receive the policies, but failed to obtain them owing to the absence of the latter from his office. Both agents treated the policies as dead, and no charge for premiums was presented on the one hand or asked for on the other. Unintentionally the policies were on the day before the fire handed in a package with other papers to the treasurer of the Ivy City Brick Company.
In view of these facts thus agreed upon, the question, broadly stated above, narrows itself to one whether there can be a conditional delivery of a policy of insurance. If there can be, then (as there is no question of estoppel and as there was a failure of the condition) these policies had no binding force at [187 U.S. 467, 474] the time of the fire. That as to contracts generally there can be a conditional delivery, and that the failure of the condition prevents the contract from taking effect is not doubted. In this court the question is at rest. Burke v. Dulaney, 153 U.S. 228, 238 , 38 S. L. ed. 698, 701, 14 Sup. Ct. Rep. 816, 820. That was an action brought on a promissory note executed and delivered by the defendant to the plaintiff, and it was held, reversing the trial court, competent to show a parol agreement between the parties made at the time of the delivery of the note that it should not become operative as a note until the maker could examine the property for which it was given and determine whether he would purchase it. Mr. Justice Harlan, delivering the opinion, reviewed several authorities and summed up by stating that, 'according to the evidence so offered and excluded, the writing in question never became, as between Burke and Dulaney, the absolute obligation of the former, but was delivered and accepted only as a memorandum of what Burke was to pay in the event of his electing to become interested in the property, and from the time he so elected, or could be deemed to have so elected, it was to take effect as his promissory note, payable according to its terms. His election, within a reasonable time, to take such interest, was made a condition precedent to his liability to pay the stipulated price. The minds of the parties never met upon any other basis, and a refusal to give effect to their oral agreement would make for them a contract which they did not choose to make for themselves.' See also Quebec Bank v. Hellman, 110 U.S. 178 , 28 L. ed. 111, 4 Sup. Ct. Rep. 76.
If an instrument containing an absolute promise to pay may be conditionally delivered it is difficult to perceive any good reason why an instrument containing a promise to pay upon a contingency may not likewise be conditioally delivered. If the failure of the condition in the one case prevents the instrument from becoming definitely operative, why not in the other? The rule as to conditional delivery and the effect of a failure of the condition has not been limited to promissory notes, but has often been applied to other instruments, as, for instance, a deed of land, Leppoc v. National Union Bank, 32 Md. 136; Clark v. Gifford, 10 Wend. 310; a [187 U.S. 467, 475] sight draft, Benton v. Martin, 52 N. Y. 570; a guaranty, Belleville Sav. Bank v. Bornman, 124 Ill. 200, 16 N. E. 210; Merchants' Exch. Bank v. Luckow, 37 Minn. 542, 35 N. W. 434.
But, coming closer to the case at bar, let us see what has been decided in respect to insurance policies. In Brown v. American Cent. Ins. Co. 70 Iowa, 390, 30 N. W. 647, the plaintiff applied to an agent of the defendant for a policy of fire insurance. The agent doubted his authority to insure the particular property, but executed a policy therefor, and, with the consent of the plaintiff, placed it, after receiving the premium, in the hands of a third party to hold until he could communicate with his principal and ascertain whether the risk would be accepted. The defendant refused to accept the risk. The property was destroyed by fire before the notice of its refusal had been received. The court held that there was no delivery of the policy save upon the condition that the insurance company accepted the risk, and that, as it did not accept it, the policy never became operative.
In Millville Mut. M. & F. Ins. Co. v. Collerd, 38 N. J. L. 480, Perrin, the lessee of Collerd, the owner of a mill, applied for fire insurance, as required by his lease. Three policies, each in a different company, were sent him by the insurance agent to whom he had applied. He retained the policies, paying the premium on two, and sent word to the agent to the effect that he would look into the standing of the other company, and if satisfied about that would pay the premium on its policy. The property having been destroyed by fire before any notice or other action by him, he went to the agent and offered to pay the premium, which the latter declined to accept. In an action on the policy it was held that the company was not liable. In the course of the opinion the court said (p. 483) that Perrin 'merely held the policy in his possession until he could examine it; or, to use his own expression, 'look into the standing of the company.' He distinctly refused to accept the policy and settle for it, until he was satisfied. This was, in effect, postponing the delivery, the acceptance, and the payment of the premium until a future time, and to this the company, by their agent, Buckley, assented. [187 U.S. 467, 476] The condition for prepayment remained, and the company was entitled to notice of acceptance and prepayment of the premium before the contract for insurance was complete. After Perrin had rejected the policy it remained in his hands, not as an executed contract of insurance, but as a proposal to insure which he must accept by payment of the premium, before the company would be bound.'
In Harnickell v. New York L. Ins. Co. 111 N. Y. 390, 2 L. R. A. 150, 18 N. E. 632, the plaintiff, who was the owner of several policies of life insurance issued by different companies, was applied to by the agent of the defendant to take out policies in his company. The result of the negotiations between the plaintiff and the agent was an agreement to take out policies in the defendant company, providing he could surrender the policies he already had to the companies issuing them and obtain satisfactory surrender values thereof. In pursuance of an application duly prepared by the agent and signed by the plaintiff, the defendant company issued two policies, and sent them to its agent. The latter, under the agreement, delivered them to the plaintiff, who gave two notes and a check in payment therefor, which were returned by the agent of the company. The plaintiff, having after some effort failed to make any satisfactory arrangement with the other companies, returned the policies to the defendant and demanded a surrender of his notes and the check. The company declining to make such surrender, this action was brought, and it was held that the policies were delivered only conditionally, that the condition had failed, and that, therefore, the plaintiff could rightfully surrender the policies and obtain a return of his notes and check. The opinion of the court in that case was delivered by Judge Peckham, now a justice of this court, and in it, after referring to the agreement, it was said (p. 398, L. R. A. p. 153, N. E. p. 635):
See also Nutting v. Minnesota F. Ins. Co. 98 Wis. 26, 73 N. W. 432. [187 U.S. 467, 477] In the case at bar the learned justice of the court of appeals, who delivered the opinion of the majority, after referring to other cases of conditional delivery (some of which we have notice in this opinion), stated as a reason for distinguishing this case:
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For these reasons we are of opinion that the facts found show that there was no final and absolute delivery of the policies; that the condition upon which they were deposited with the agent of the insured failed, and, therefore, that at the time of the fire there was no subsisting contract of indemnity between the company and the insured.
The judgment of the Court of Appeals is reversed, and the case remanded to that court with instructions to set aside its judgment and enter one affirming the judgment of the trial court.
Mr. Justice Brown concurred in the result.