Sweeting v. Mutual Fire Insurance

McSherry, C. J., délivered the opinion of the Court. The Mutual Fire Insurance Company, of Harford County ■issued a policy of insurance against loss by fire to Mr. I. Thomas C. Hopkins in March, eighteen hundred and ninety-three. The insured premises were subsequently purchased by the appellant, Sweeting, and Mr. Hopkins assigned the policy to him. In October, eighteen hundred and ninety-four, additional insurance .was granted by ..the same underwriter to the appellant upon the same premises. .‘Amongst the terms and conditions annexed to and forming a,part of the policy was the following: “If any property insured by this company shall be already insured or shall be hereafter insured by any other company or companies 01-individual, or otherwise, such insurance or insurances must be made known to this company and endorsed on the policy ■or otherwise acknowledged in writing, or otherwise the .policy of this company shall be void.” In November, eighteen hundred and ninety-four, the appellant, without giving notice to or obtaining the. consent of the Harford Insurance Company, and without disclosing to the second insurer the existence of the first policy, procured a policy for the same amount .of insurance on the same property from the Farmers’ Fire Insurance Company of York, Pennsylvania.

In the policy issued by this last named company it is provided and declared: “ That this Company shall not be liable * * for loss if there is other prior or subsequent insurance whether valid or otherwise, without the written consent of the company.” It is further stipulated that “ said company shall in no case be deemed to have ⁶⁷ waived a full, literal and strict compliance with and performance of each and every of the terms, provisions, conditions and stipulations in this policy contained and hereto annexed, to be performed and preserved by and on the part of the insured * * unless such waiver be expressed and manifested in writing under the signatures of the president and secretary of said company.” On March the eleventh, eighteen hundred and ninety-five, the dwelling-house described in and covered by both the polices was destroyed by fire, and both of the underwriters refused to pay the loss ; the Harford Company because its policy was avoided according to its contention by the subsequent insurance procured without its consent; and the York Company because the omission of the assured to disclose the fact that he held a policy on the same property in the Harford Company invalidated the policy of the York Company issued in ignorance of the antecedent outstanding insurance in the Harford Company. Subsequently this suit was brought against the Harford Company to recover on the policy issued by it—that policy being the first in date and delivery. Upon the trial of the cause one exception was reserved which brings up for review the rulings of the trial Court upon the prayers for instructions to the jury. The verdict and judgment were entered for the defendant, the Harford Company, and the plaintiff has appealed.

All of the plaintiff’s prayers were rejected and all of the defendants were granted. Together they present but a single question, and that question, though one of much interest and importance, has not heretofore been raised in this Court for decision. It is this : Does the fact that a subsequent policy was procured without the consent of the first underwriter avoid the first policy under the above quoted conditions contained therein against other insurance, when the second policy explicitly declares that the company which issued it shall not be liable for loss if there is other prior insurance, whether valid or not, held on the same property without the written consent of the second insurer ? ⁶⁸ There is a wide diversity of opinion on this- question in the various Courts of this country. The doctrine laid down by the highest tribunals of Massachusetts, Pennsylvania and other States is, that the subsequent insurance being invalid at the time of loss, by reason of the breach of condition therein, the prior insurance is good and the first underwriter is liable on the policy issued by it.

Thomas v. Builders' Ins. Co., 119 Mass. 121 ; Allison v. Phœnix Ins. Co., 3 Dill. C. C. 480; Firemans' Ins.

Co. v. Holt, 35 Ohio St. 189 ; Knight v. Eureka Ins. Co., 26 Ohio St. 664 ; Stacey v. Franklin Ins. Co., 2 W. & S. 506 ; Jackson v. Mass. Fire Ins.

Co., 23 Pick. 418 ; Clark v. N. E. Fire Ins. Co., 6 Cush. 342 ; Hardy v. Union Ins. Co., 4 Allen, 217 ; Philbrook v. N. E. Fire Ins. Co., 37 Me. 137 ; Lindley v. Union Fire Ins.

Co., 65 Me. 368 ; Gale v. Ins. Co., 41 N. H. 170; Gee v. Cheshire Ins. Co., 55 N. H. 65 ; Jersey City Ins. Co. v. Nichol, 35 N. J. Eq. 291 ; Schenck v. Mercer County Ins.

Co., 4 Zab. 447 ; Rising Sun Ins. Co. v. Slaughter, 20 Ind. 520 ; May on Insurance, sec. 364. On the other hand, it has been held elsewhere, that a subsequent policy, whether legally enforceable or not, or whether voidable on its face or voidable for extrinsic matter, works a forfeiture of the prior policy. Carpenter v. Prov.

Ins. Co., 16 Peters, 495 ; Allen v. Merchants' Ins. Co., 30 La. An. 1386; Somerfield v. Ins.

Co., 8 Lea. 547 ; Funke v. Minn. Far. Ins. Co., 29 Min. 347 ; Lackey v. Georgia Home Ins.

Co., 42 Ga. 456 ; Bigler v. N. Y. C. Ins. Co., 22 N. Y. 402 ; May on Insurance, sec. 364. There is still an intermediate view taken by the Supreme Court of Iowa in the case of Hubbard v. Hartford Fire Ins. Co., 33 Iowa, 325 ; to the effect that the question of the validity of the prior policy turns upon whether the subsequent policy has in fact been avoided.

If the second policy is recognized by the insurer issuing it to be a valid policy any breach of condition being waived, this makes it a valid insurance and avoids the' first policy; but if the subsequent policy has been rescinded for condition broken, there is no other in ⁶⁹ surance so as to invalidate the prior policy. The obvious and insuperable objection to this latter view lies in the fact that it makes the validity of the coritract between the parties under the first policy depend, not upon their own agreement, nor the effect of that agreement, nor upon their own acts, or the acts of either of them, but upon what another person—the second underwriter—a stranger to the first contract, may voluntarily do with respect to affirming or repudiating a totally different and distinct contract of insurance, without the slightest reference to any judicial inquiry as to the validity or invalidity of the second policy, or its resultant legal effect upon the first. Now, as the parties to the first policy of insurance have, by the unequivocal terms employed in their contract, declared that if the property insured should be thereafter insured by any other company, the first policy should be void, unless the second insurance were made known to the first insurer and were endorsed on the policy written by it, or were otherwise acknowledged and assented to by it in writing; and as the manifest object and design of such a provision was to guard against the dangers supposed to be incident to a double or an over-insurance, the natural and reasonable interpretation of this forfeiting condition would, aside from adjudged cases, seem to prohibit a second valid insurance and not a mere ineffectual attempt to procure additional insurance. The two things are not identical.

Other insurance does not mean a void policy which obviously affords no insurance at all; nor does it mean a policy which may, at the option of the underwriter, be can-celled, for that is at best but conditional insurance ; but it means a binding, available insurance, one upon which the insured can rely for protection in case of loss and which he can enforce by law, and which cannot be repudiated with impunity at the arbitrary election of the insurer. If the underwriter contemplated something else than a valid insurance under a second policy it should have been expressed in plain and unambiguous language, as was done by the ⁷⁰ York Company. Upon the face of the latter’s policy it was expressly declared that the policy would be void if other insurance existed or were procured, even though the other insurance were itself invalid. And such a provision has been recognized as effectual.

Liverpool, &c., Ins. Co. v. Verdier, 35 Mich.3 95 ; Bigler v. N. Y. Cent. Ins. Co., 22 N. Y. 96 .

A second policy, which, by its own terms, is void for any cause, is not an insurance at all, and this is equally true whether the invalidity is apparent on the face of the policy itself or is made to appear by evidence aliunde the policy. It is not the method by which the invalidity of the second policy may be shown that determines whether it does or does not create a liability on the part of the underwriter who issues it, and, therefore, does or does not constitute a breach of the condition in the first policy against further insurance ; but it is the fact that the second policy is valid and binding that alone fixes upon its underwriter a liability, and accordingly determines whether in this respect the condition against other insurance set forth in the first policy has been violated or not. Hence, the inquiry is, not as to how the invalidity of the second policy may be shown, but as to whether it is invalid. The parties to it themselves stipulate in it that it shall be void if there exists at the time of its issue undisclosed insurance in some other company, whether that prior insurance be valid or not.

If such insurance, valid or invalid, does exist, then, by the explicit terms of the contract, the second policy is void and not merely voidable. Such is the distinct agreement of the parties themselves, and such is the character or status which they themselves have given to the second policy. To ascribe to the second policy, which the parties, in direct terms, declare shall be void if prior undisclosed insurance exists, the effect of annulling an antecedent policy not only ignores the agreement that stamps it as invalid, but involves the incongruity of treating the second policy as, at one and the same time, a subsisting, binding contract for the purpose of avoiding the first policy, and a nugatory policy in respect ⁷¹ to indemnifying the assured. It cannot be both valid and invalid, nor can it be valid for one purpose and invalid for another.

If valid at all, it annuls the prior policy precisely because it is valid ; but to be valid for any purpose its explicit terms declaring it invalid must be deliberately disregarded. If, then, its provisions be given the effect which the parties to it intended they should have, it is void, and not merely voidable, the moment the condition arises upon the occurrence of which the parties have declared it shall be invalid. And if thus invalid, it obviously does not create other insurance within the prohibition contained in the first policy. It would then be nothing more than an attempt to secure other insurance.

An ineffectual attempt to -secure an insurance is confessedly no insurance, and a policy which, in terms, declares its own invalidity in the event of there being prior undisclosed insurance on the same property, is a policy, which, by the agreement of the parties to it, has never become binding if the prior insurance did exist, and consequently it grants no additional or other insurance whatever. And if it grants no additional or other insurance, and is, for the reason stated and by the stipulation of the parties, a mere nullity, its issue by the