Brown v. Roger Williams Brown v. Hartford Ins.

5 R.I. 394

Opinion

Ames, C. J.

The first plea cannot be supported. The policy, as stated in the declaration, effected an insurance on the interest of Bourn & Brown in certain stock in their rubber works, which stock had been previously mortgaged to the plaintiff; and by the express terms of the policy, as declared, the loss was made payable to the plaintiff. In legal effect, this was an assignment of the policy, concurred in by the insurance company, to the plaintiff, as mortgagee; by virtue of which, he alone was entitled to receive the amount of the loss, as additional collateral security for his debt. The plaintiff has not only a right of action upon this policy as long as his mortgage debt remains unpaid, which is the state of things disclosed by these plead-^ ings, but a right of action without regard to the fact whether the debt be paid or not; that fact affecting only the account which he shall render to the mortgagees, of the proceeds of the action. King v. The State Mut. Fire Ins. Co. 7 Cush. (Mass.) R. 6, per Shaw, C. J.; Grosvenor v. The Atlantic Fire Ins. Co. 5 Duer, (N. Y.) R. 517, per Woodruff, J.; S. C. on appeal, U. S. Insurance Gazette, for October, 1858, p. 317, per Harris, J. As long as his debt remains unpaid, the mortgagee cannot be concluded as to the amount of the loss under such a policy by an award made under a submission of the mortgagors and the insurers, to which he was not a party, and to which, neither by prior authority or subsequent ratification, he had assented. In common justice, his interest in the policy required his assent to the adjustment of the loss, in order to make it binding upon him, whether the adjustment were made directly, or through the intervention of arbitrators appointed to make it. Arbitration is certainly a very proper mode of ascertaining the amount of a loss under a fire policy, and, as such, is contemplated by the instrument itself; but who must be parties to the submission to make the award binding in any particular case, unless the case be provided for in the policy, depends upon principles altogether independent of the policy; and which certainly do not allow the assignor of the policy substantially to affect the interest of the assignee therein, by a submission of this sort, made without the assent of the latter, subsequent to the assignment. As well might the mortgagor and his grantee of the equity conclude, by an award to which they alone had submitted, the amount due to the mortgagee upon his mortgage, as the mortgagor and the insurance company, by an award submitted to exclusively by them, bind him as to the amount due upon his policy. Mortgage and policy are both collateral securities for the mortgage debt; but the value of neither can, in general, be impaired by an act of this sort, done without the assent of the mortgagee.

The policy may indeed be subject, in the hands of the as-signee, to forfeiture for breach of a condition by the assignor of the policy, even though the breach happen after the assignment, which is the substance of the decision of the court of appeals of New York, in Grosvenor v. The Atlantic Fire Ins. Co. supra. However contrary to natural justice this may seem to be, it may be defended on the ground, that such is the contract; and that, subject to such liability to forfeiture for the future acts or neglects of the assignor, the assignee, knowingly, took the assignment. There is no clause, however, in this policy, as set forth in the declaration, which expressly, or by implication, gives to the insured, after he has assigned the policy, the power to submit the rights of the assignee under it, in case of loss, to arbitration. Even the common arbitration clause, to which reference has been made in the argument, is not stated in the declaration to be a part of this policy; and however probable it may be that it is a part of the policy sued, we cannot imply that it is, upon demurrer. This plea is no answer to the declaration, and must be overruled.

The second plea presents a question of more difficulty, and upon which there is some conflict of authority; Gray v. The Hartford Ins. Co. 1 Blatchf. (U. S. C. C.) R. 280, Ames v. New York Union Ins. Co. 4 Kern. (N. Y.) R. 264, Wilson v. Etna Ins. Co. 1 Williams, (Verm.) R. 99, Grant v. The Lexington, &c. Ins. Co. 5 Ind. (Porter) R. 23, being authorities more or less in support of the plea, and French v. The Lafayette Ins. Co. 5 McLean, (U. S. C. C.) R. 461, condemning it, as. setting up a stipulation of the policy which the decision declares to be void, because contrary to the policy of the statute of limitations. We cannot see the force of this objection to the condition in question; since the policy of the statute referred to is promptitude in the pursuit of remedies, so that they shall not be brought after the time limited, rather than that they shall be maintained, if brought within that time, contrary to a positive, condition inserted by the parties in their contract. One would think, that an agreement waiving the statute, which is good, would be far more obnoxious to its policy, than a condition of the sort we are considering. A covenant not to sue a cause of action is upheld as a release of it; and a covenant not to sue within a limited time, though not pleadable in bar of an action brought within the time, is nevertheless good as a covenant. Yet these stipulations quite as directly affect the remedy, and might as well be said to be contrary to the policy of the law of remedies, including the statute of limitations, as this condition with regard to the time within which a suit shall be brought upon a policy of insurance. They mould the legal rights of parties under a contract, and, in effect, make a new law for it; but it by no means necessarily follows, that this is contrary to the policy of the law. That must depend upon other considerations. The provision in the policy with regard to making preliminary proof of a loss within á limited time, is a condition imposed by the parties upon the right of the assured to recover for a loss ; and in derogation, as might be said, of the common-law right of a party, upon full and sufficient proof in court, to recover damages upon a contract entered into with him. Yet this is upheld, as necessary to protect insurers against imposition by the assured; and, for a like reason — applicable to the proofs, in court, of the cause, extent, or amount of the loss, as well as that they may early ascertain and provide for their losses — it seems reasonable that insurers should be at liberty to provide for promptitude on the part of the insured in the commencement of suits against them. The arbitration clause of a policy — construed as shutting the assured altogether out of the courts of law for his remedy — is exposed to a different objection from any bearing merely upon the time, within which, in order to recovery, the assured shall commence his action in those courts. This objection, even as appears from the highest authority, does not apply to a clause in the policy of a mutual office, requiring, as a condition precedent to the right of recovery for a loss, that the amount of it should be first ascertained by arbitration; the courts distinguishing between such a con dition, and one which excludes the assured from all means to ascertain and enforce his right of recovery, except by arbitration. Scott v. Avery, 36 Eng. Law & Eq. R. 1. The case just cited, which went to the House of Lords, indicates, that the rule of policy referred to is not to be carried farther than former decisions require; and certainly they do not embrace the question before us.

We deem this plea a good answer to the action, and judgment must therefore be entered for the defendants. 1

1 Since the above opinion was delivered, the Reporter has been obligingly-furnished by Horace Gray, Esq., Reporter of the decisions of the supreme court of Massachusetts, with notes of two cases decided by that learned court, coinciding with the above decision as to the validity of such a clause in a policy of fire insurance: — that of Amesbury & another v. Bowditch Mut. Fire Ins. Co.) a case of the policy of a mutual office, since published in 6 Gray, 596; and that of Fullam v. New York Union Ins. Co., a case of the policy of a stock company, since published in 7 Gray, 61. A similar clause in a fire policy was uphold by the supreme court of New Brunswick, in Trinity term, 1848, in the case of Ketchum v. Protection Ins. Co. 1 Allen, 136, 137.