I cannot agree with Mr. Justice Toy.
We will pass the claims of defendant that the policy was in full force at the time of the accident, because of failure of plaintiff to file notice of termination with the department,Hamberger v. Wolfe-Smith Co., 205 App. Div. 739
(200 N.Y. Supp. 803); or to give notice of termination to defendant; or by reason of estoppel; or otherwise. We will accept the expiration date as July 19, 1930. But acceptance does not mean holding that all contractual liability of plaintiff for compensation of defendant's employees ceased at the expiration date and then was remitted to defendant. Its liability must be found from the whole contract.
The action is for "money paid" by plaintiff, under compulsion of law, for the use and benefit of defendant. There having been no promise by defendant to reimburse plaintiff, the theory of the action is that the law implies a promise because, in equity and good conscience, defendant ought to repay plaintiff. It is in effect a suit in assumpsit on an equitable cause of action.
It is held that an insurer may recover from the employer money paid by it on an award, where the employer has violated a policy provision for notice to the insurer of the accident (Wisconsin Michigan Power Co. v. General Casualty Surety Co.,
252 Mich. 331 [76 A.L.R. 1]; Lumbermen's Mutual Casualty Co. v.Bissell, 220 Mich. 352 [28 A.L.R. 874]), or breached an agreement that explosives shall not be kept on the premises (Janes Contracting Co. v. Home Life Accident Co. [Tex. Civ. App.], 245 S.W. 1004), or disregarded a clause that no person under legal age shall be employed (Gise v. Fidelity CasualtyCo. of New York, 188 Cal. 429 [206 P. 624, 22 A.L.R. 1476]). These cases, however, are not in point because, in them, the theory of recovery was breach of contract.
In United States Fidelity Guaranty Co. v. Taylor,132 Md. 511 (104 A. 171), the insurer recovered in an action for money paid. The policy, as understood by the parties, covered only employees engaged in transporting mail and passengers. The employer engaged also in road construction work and both he and the insurer understood that the policy did not cover his employees therein. In fact, plaintiff's agent urged defendant to take a policy covering the road employees, but he refused to do so. However, the industrial accident commission, under the policy and statute, made an award for an accident to a road employee, running against and binding upon both employer and insurer. The court held, as a matter of law, that the policy did not cover the road employees and permitted recovery for money paid under compulsion. It will be noted that the insurer was compelled to pay a claim which was wholly foreign to its contract with the employer and that the blame for the situation was that of the employer and not of the insurer.
The instant case presents a wholly different situation and no decisions in point have been found.
The gist of the case is in the language of the policy:
"(f) That it will file with the industrial accident board,* at Lansing, Michigan, at least ten days before the taking effect of any termination or cancellation of this contract or policy, a notice giving the date at which it is proposed to terminate or cancel this contract or policy; and that any termination of this policy shall not be effective as far as the employees of the insured covered thereby are concerned until ten days after such notice of such proposed termination or cancellation is received by the said industrial accident board.*"
The statute does not impose this provision on the parties independently of their contract. It requires them to make it a part of the policy. Consequently, it is a contractual provision upon which they have voluntarily agreed.
There is ground for the argument that the liability of the insurer under this provision is an integral part of the insurance for which the insured has paid the premium and is as much a part of the liability assumed by the insurer for the benefit of the employer as any other obligation in the policy. However, we do not rest decision on that ground.
The action for money paid does not lie in all cases where one pays the debt of another. There must be a relationship out of which one is required to pay a debt which the other ought to pay. So a volunteer may not recover. 2 R. C. L. p. 776. And the circumstances must be such as to raise controlling equities in favor of the payor or against the real debtor. While one may have a right of action if he is required to pay by reason of the fault of the other (Van Santen v. Standard Oil Co., 81 N.Y. 171), it is held he may not recover if his liability to pay arises
out of his own negligence or misconduct and without fault of the other (Hungerford v. Scott, 37 Wis. 341; Harris v.Champion, 4 N.J. Law, 152), but negligence will not always bar recovery (Treat v. Craig, 135 Cal. 91 [67 P. 7]; Rees v.Eames, 20 Ill. 282 [71 Am. Dec. 267]; 41 C. J. p. 13).
In balancing the equities, account must be taken of the difference in relationships. A compensated insurer, which assumes and agrees to pay the debt of another without reimbursement, does not occupy the same position as a noncompensated surety, whose obligation is secondary, or one who has no contractual obligation to pay but is caught in the web of circumstances through the fault of another.
The case presents no equities in favor of plaintiff for reimbursement. An insurance company writes its own policies, knows their contents and has the ability and organization to protect itself. For premiums accepted by it as full consideration, plaintiff agreed to pay the compensation claims of defendant's employees without reimbursement by defendant, arising during the term of the policy. In addition, it agreed to pay the claims of employees arising thereafter until it should file proper notice of termination. Its continued liability after the term was due to its own breach of express provision of the contract that it should file the notice. Also, it had the option to terminate its liability at any time by giving the notice. Its failure to terminate its liability was its own fault and in no way attributable to the defendant. The situation is very analogous to that of voluntary payment.
Nor do the equities run against defendant. While, legally, the policy may have terminated on July 19th, the conduct of the parties does not indicate definitely and certainly that they so understood it.
Plaintiff did not give the notice of termination which it doubtless would have given had it conceived the policy to be at an end. Defendant evidently thought the policy continued in force because it refused a policy in another company upon the ground it was satisfied with plaintiff's and it reported plaintiff as its insurer at the time of the accident. From our present detached position we can see where both made mistakes.
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I cannot agree with Mr. Justice Toy.
We will pass the claims of defendant that the policy was in full force at the time of the accident, because of failure of plaintiff to file notice of termination with the department,Hamberger v. Wolfe-Smith Co., 205 App. Div. 739
(200 N.Y. Supp. 803); or to give notice of termination to defendant; or by reason of estoppel; or otherwise. We will accept the expiration date as July 19, 1930. But acceptance does not mean holding that all contractual liability of plaintiff for compensation of defendant's employees ceased at the expiration date and then was remitted to defendant. Its liability must be found from the whole contract.
The action is for "money paid" by plaintiff, under compulsion of law, for the use and benefit of defendant. There having been no promise by defendant to reimburse plaintiff, the theory of the action is that the law implies a promise because, in equity and good conscience, defendant ought to repay plaintiff. It is in effect a suit in assumpsit on an equitable cause of action.
It is held that an insurer may recover from the employer money paid by it on an award, where the employer has violated a policy provision for notice to the insurer of the accident (Wisconsin Michigan Power Co. v. General Casualty Surety Co.,
252 Mich. 331 [76 A.L.R. 1]; Lumbermen's Mutual Casualty Co. v.Bissell, 220 Mich. 352 [28 A.L.R. 874]), or breached an agreement that explosives shall not be kept on the premises (Janes Contracting Co. v. Home Life Accident Co. [Tex. Civ. App.], 245 S.W. 1004), or disregarded a clause that no person under legal age shall be employed (Gise v. Fidelity CasualtyCo. of New York, 188 Cal. 429 [206 P. 624, 22 A.L.R. 1476]). These cases, however, are not in point because, in them, the theory of recovery was breach of contract.
In United States Fidelity Guaranty Co. v. Taylor,132 Md. 511 (104 A. 171), the insurer recovered in an action for money paid. The policy, as understood by the parties, covered only employees engaged in transporting mail and passengers. The employer engaged also in road construction work and both he and the insurer understood that the policy did not cover his employees therein. In fact, plaintiff's agent urged defendant to take a policy covering the road employees, but he refused to do so. However, the industrial accident commission, under the policy and statute, made an award for an accident to a road employee, running against and binding upon both employer and insurer. The court held, as a matter of law, that the policy did not cover the road employees and permitted recovery for money paid under compulsion. It will be noted that the insurer was compelled to pay a claim which was wholly foreign to its contract with the employer and that the blame for the situation was that of the employer and not of the insurer.
The instant case presents a wholly different situation and no decisions in point have been found.
The gist of the case is in the language of the policy:
"(f) That it will file with the industrial accident board,* at Lansing, Michigan, at least ten days before the taking effect of any termination or cancellation of this contract or policy, a notice giving the date at which it is proposed to terminate or cancel this contract or policy; and that any termination of this policy shall not be effective as far as the employees of the insured covered thereby are concerned until ten days after such notice of such proposed termination or cancellation is received by the said industrial accident board.*"
The statute does not impose this provision on the parties independently of their contract. It requires them to make it a part of the policy. Consequently, it is a contractual provision upon which they have voluntarily agreed.
There is ground for the argument that the liability of the insurer under this provision is an integral part of the insurance for which the insured has paid the premium and is as much a part of the liability assumed by the insurer for the benefit of the employer as any other obligation in the policy. However, we do not rest decision on that ground.
The action for money paid does not lie in all cases where one pays the debt of another. There must be a relationship out of which one is required to pay a debt which the other ought to pay. So a volunteer may not recover. 2 R. C. L. p. 776. And the circumstances must be such as to raise controlling equities in favor of the payor or against the real debtor. While one may have a right of action if he is required to pay by reason of the fault of the other (Van Santen v. Standard Oil Co., 81 N.Y. 171), it is held he may not recover if his liability to pay arises
out of his own negligence or misconduct and without fault of the other (Hungerford v. Scott, 37 Wis. 341; Harris v.Champion, 4 N.J. Law, 152), but negligence will not always bar recovery (Treat v. Craig, 135 Cal. 91 [67 P. 7]; Rees v.Eames, 20 Ill. 282 [71 Am. Dec. 267]; 41 C. J. p. 13).
In balancing the equities, account must be taken of the difference in relationships. A compensated insurer, which assumes and agrees to pay the debt of another without reimbursement, does not occupy the same position as a noncompensated surety, whose obligation is secondary, or one who has no contractual obligation to pay but is caught in the web of circumstances through the fault of another.
The case presents no equities in favor of plaintiff for reimbursement. An insurance company writes its own policies, knows their contents and has the ability and organization to protect itself. For premiums accepted by it as full consideration, plaintiff agreed to pay the compensation claims of defendant's employees without reimbursement by defendant, arising during the term of the policy. In addition, it agreed to pay the claims of employees arising thereafter until it should file proper notice of termination. Its continued liability after the term was due to its own breach of express provision of the contract that it should file the notice. Also, it had the option to terminate its liability at any time by giving the notice. Its failure to terminate its liability was its own fault and in no way attributable to the defendant. The situation is very analogous to that of voluntary payment.
Nor do the equities run against defendant. While, legally, the policy may have terminated on July 19th, the conduct of the parties does not indicate definitely and certainly that they so understood it.
Plaintiff did not give the notice of termination which it doubtless would have given had it conceived the policy to be at an end. Defendant evidently thought the policy continued in force because it refused a policy in another company upon the ground it was satisfied with plaintiff's and it reported plaintiff as its insurer at the time of the accident. From our present detached position we can see where both made mistakes. But it is the function of equity to relieve from mistakes under proper circumstances.
If plaintiff had performed its contract duty to notify the department of termination of the policy, the situation at bar could not have arisen. Plaintiff's obligation would have ceased. The department would have notified defendant, and it would have been compelled to obtain new insurance or make a showing of its own financial ability to carry the risk without insurance. It is fair to accept defendant's statement that it would have obtained a new policy because insurance had been its method of carrying compensation risks and insurance is the usual method. Few employers do or can carry their own compensation risks.
Consequently, plaintiff's performance of its own contract duty to give the notice would have resulted in defendant's obtaining other insurance and being relieved of the compensation liability by paying a premium. Defendant, therefore, has been unjustly enriched to the amount of such premium, not in the sum of the award.
It is conceivable that, under some circumstances, the compulsion of an insurer to pay may be so disassociated from its contract obligations to the insured as to raise a new relationship which would give it a claim for reimbursement. But, ordinarily, the fair conception would be that a continuance of
the obligations under a policy beyond its expiration date would be contemplated by the parties to be on the same terms as the original assumption of liability, i. e., the payment of premiums, and the insurer's recovery would be confined to premiums earned. But where the continuance of the obligation is due solely to the fault of the insurer and not at all to the fault of the insured, even the claim for premiums might be groundless.
If plaintiff were seeking to recover premiums to the time of notice to the department, it is possible that, upon consideration of all the circumstances of the case (which are not herein fully set out), it might be entitled to judgment therefor. But upon the cause of action presented, it is not entitled to recover, and judgment for plaintiff is reversed, with costs, and without new trial.
NORTH, C.J., and BUTZEL and BUSHNELL, JJ., concurred with FEAD, J. POTTER, J., took no part in this decision.
* The powers and duties of the industrial accident board have been transferred to the department of labor and industry and the board abolished. See 2 Comp. Laws 1929, § 8312. — REPORTER.