Webb ex rel. Webb v. Mutual Fire Insurance

Robinson, J., delivered the opinion of the Court. By section 11, of the Act of 1849, ch.'213, incorporating-the appellee, power was conferred on the company to pass by-laws excluding any member failing to pay the interest ²¹⁵ on his premium note according to the constitution and by-laws from all benefit of insurance; and providing also that such member should be liable to contribution for losses during the time of his default. In pursuance of this power, Article 11, of the by-laws, prescribed the form of the policy to be issued, and the policy itself contains a stipulation, that in default of 'the payment in advance of the annual interest on all the premium notes on or before the first day of March, in each and every year, the policy of such defaulting member shall be suspended, and not considered binding on the company until the payment of said interest be made, but that such member shall remain bound for any contribution that may in the meantime be assessed for losses. The adoption of a by-law prescribing the form of the policy, containing a stipulation in regard to the default of its members and the suspension of their policies, was an express exercise of the power conferred on the company by the 11th section of its charter.

The policy issued in this case and accepted by the appellant followed the by-law; and contained the stipulation, that upon the failure to pay the interest, on or before the 1st day of March in any year, the policy would be suspended, and no longer binding until payment made. It is the contract between the.parties, and by it their rights and liabilities are to be determined. The appellant on her part agreed to pay the interest on her premium note on or before the 1st of March in each and every year, and the appellee in consideration thereof agreed to indemnify her against loss by fire. And it was mutually agreed upon the failure to pay the interest at the time prescribed, the policy should be suspended and no longer binding on the company.

All this is declared in plain and explicit terms. Now it is admitted, the interest due from the appellant on the 1st of March, 1879, was not paid on or before that day, nor had any payment ²¹⁶ been made down to the occurrence of the fire in November, in the same year, a period of more than eight months. If then, the terms of the policy mean anything, it is clear the appellant was in default, and if so, the policy was suspended and no longer binding on the company. To hold otherwise, would be to disregard the plain and unambiguous terms of the policy, and defeat the very object for which the company was chartered.

An agreement between the insurer and the insured, that upon default in the payment of the annual premium within a time prescribed, the policy shall be suspended and no longer binding, cannot be construed to mean that the policy is to remain in force notwithstanding such default. If then, the liability of the appellee is to be determined by the policy itself, it is clear, this action cannot be maintained. But then it was argued, that the appellant was not in default by reason of the failure on the part of the appellee to give the customary notice as to the payment of the annual interest. Not that there was any obligation imposed on the company by its charter or by-laws to give such notice, but there was a custom, it was said, to do so.

This question was considered and decided in The Mutual Fire Ins. Co. of Cecil County vs. Miller Lodge, I. O. O. F., 58 Md. 463 . In that case as in this, the policy was issued by a