
    The National Conduit and Cable Company, Appellant, v. The Commercial Union Assurance Company, Respondent.
    First Department,
    December 17, 1909.
    Insurance — cancellation of- fire insurance — insufficient notice.
    A fire .insurance company having issued a policy for §20,000. cannot escape its proportionate share of .a-loss merely -because it ordered an insurance, broker "who had procured the policy for the insured to cancel it, and he precured policies in other companies aggregating §15,000, which had not been submitted to the insured for approval prior to the loss, if the only notice to the insured of the cancellation, was a letter written the day. before the fire and received on that day stating that the insurer intended to cancel the policy at the expiration of five days from date. This is true, -even though the insured subsequently approved the other policies and the companies issuing them paid their proportionate share of the loss.
    Appeal by the plaintiff, The Hational Conduit and Cable Company, from a judgment of the Supreme Court in favor of the défendant, entered in the office of the cleric of the county of Hew York on the 29th day of December, 1908, upon the report of a referee dismissing the complaint upon- the merits in an action'to recover upon a fire insitrance polic3r.
    
      Clarence G. Galston, for the appellant.
    
      Frederick B. Campbell of counsel [John F. Devlin with him on the brief], Butler, Notman & Mynderse, attorneys, for the respondent.
   Clarke, J.:

The plaintiff is a domestic manufacturing corporation. Its plant is located at. Hastings-on-Hudson, H. Y. The defendant, an insurance company, issued its policy by which it insured the plaintiff against loss to its property by fire for the term of one year from noon June 14, 1899, to June 14, 1900, in the sum of $20,000. The policy was a New York standard fire insurance policy, to which was attached the 100 per cent coinsurance clause.

On October 13, 1899, a fire occurred at the plaintiff’s plant causing a partial loss in the sum of $69,857.68. At the time of the fire the sound value of* the property insured was $421,455.26 and the plaintiff had in various fire insurance companies policies aggregating $415,000. The loss was duly ad justed and it was ascertained that the proportionate amount of loss payable by the defendant was the sum of $3,315.06 which the defendant has not paid, though it was given immediate notice of loss and was duly served with proof of loss on November 29, 1899. All the insurance companies except the defendant have paid their proportionate shares of the plaintiff’s loss as adjusted.

On- October 13, 1899, plaintiff received from the defendant notice of its intention to cancel the policy in suit at the expiration of five days from October 12,1899. On October eighteenth defendant wrote to plaintiff : “ In accordance with cancellation notice * * * your policy * -* * was canceled at noon on Oct. 17th, 1899. All liability of this company under said policy ceased on 17th inst. * * * We herewith tender you the unearned premium.” On November 9, 1899, the defendant returned to plaintiff the sum of $39.50 as return premium upon the policy in suit as canceled on October 17, 1899. On February 3,1900,.the defendant tendered to the plaintiff the sum of $829.61, the full amount of proportionate loss payable by it under the policy in suit and the plaintiff refused to accept the same.

The defense interposed is that on September 28,1899, the defendant notified the plaintiff that it did not desire to' continue the policy of insurance as written and requested that the policy be returned to it canceled ; that the plaintiff secured insurance from two other fire insurance companies for a total sum-of $ 15,000 in part replacement of its policy of $20,000; that thereby the liability of the defendant upon the policy in suit was $5,000, and that before the commencement of this action it had tendered to the plaintiff the sum of $829.61, the full amount of the proportionate loss payable by it with- interest.

The plaintiff conducted its insurance through the firm of Polhemus Brothers, regular insurance brokers in New York city. These brokers had instructions to keep an insurance of about $400,000 upon the property with a leeway of about $10,000. The usual course of business between the plaintiff, and Polhemus Brothers was that the latter, on-behalf of plaintiff, would apply to the several insuring companies for policies. The companies., upon acceptance, of the application, would deliver the policies to Polhemus Brothers who would deliver them to the plaintiff subject to its approval. If they were not satisfactory to the plaintiff they were returned to Polhemus Brothers. In the.event of the' cancellation of a policy the'unearned premium would be returned by the company to Polhemus Brothers by check to their order and they in turn would credit the plaintiff with the amount upon the account in their books.- On July first, prior to the fire, there was in effect insurance covering the plaintiff’s property a total of $405,000, of wliicli'$5,000 expired in the fore part of that month.' On August first-and' September twenty-eighth the amount of plaintiff’s insurance was exactly $400,000, including the policy in suit, which had been issued to, approved,, accepted and retained by the plaintiff.

On September 28, 1899, the defendant wrote to Polhemus Brothers: Referring to our policy No. 4,345,448 in favor of the National Conduit & Cable Company we are obliged to ask'you to cancel same. After considering the matter further wé feel that the rate of 30$ is too low. We would not care to entertain it at . less than ■75$ and you will oblige us very much by returning the contract to this office cancelled.” On October 12, 1899, Polhemus Brothers wrote to the defendant: Replying to your favor of the 28th ultimo in reference to the cancellation of the above policy, would say that $15,000 of this line have been replaced as follows: 25,598, Philadelphia Underwriters, $10,000; 535, Magdeburg, $5,000.' The balance, $5,000, we believe has. been accepted by an agent at Yonkers and we are now waiting for the policy. - We have written him again today for same and as sOon as we receive it we will deliver the policies and return yours at once. Trusting that this will be satisfactory to you for the present, we remain.”

On October thirteenth, the date of the fire, there was, therefore, outstanding insurance upon the plaintiff’s property with these two new policies óf $415,000.

These two new policies had not at that time been submitted to, approved by or delivered to the plaintiff. It had in its possession the policy in suit and had not been notified of any intention or desire to have it surrendered or canceled, or that other policies be substituted therefor. The notice of cancellation within five days thereafter was received by the plaintiff on the day of the fire and subsequently thereto the return premium was sent by the defendant. calculated to October seventeenth, the date indicated for cancellation by it in its notice dated October twelfth. Subsequently the plaintiff approved of the two policies' in the Philadelphia Underwriters and the Magdeburg and said companies thereafter paid on such policies their proportionate shares of the loss.

The plaintiff claims that it was insured for the full amount of $415,000 and that it is entitled to recover from the defendant the proportional amount of the loss proved upon its uncanceled and unsurrehdered policy of $20,000. The defendant claims that it should receive credit upon its full amount of insurance of $20,000 for the $15,000 of insurance in these two other companies, while it admits that it is liable for $5,000 upon its policy.

I know of no principle at law or in equity which would permit of any such credit to be given to defendant upon.its existing contract obligation, because two other companies have assumed a contract obligation of $15,000 upon their part-.- The plaintiff had no knowledge at the time of any substitution of policies which would relieve in whole or in part the defendant from its contract obligation. Défendant" had the right at any time before the fire, upon giving the required notice and the return of the proportional share oE the premium, to cancel its contract and to end its obligation. It undertook to exercise such right, not at'the time that it notified Polhemns Brothers that it desired to be relieved of its obligations, but on the twelfth'day of October, the day before the fire, when it-was toó late, and it did not then indicate a desire to reduce its obligation to $5,000 because other insurance had been effected in other companies to the extent of $15,000, but served the five days’ notice of cancellation of the full amount. It is no concern of the defendant that at the time of the fire these new policies had not been submitted to and approved by the plaintiff or premiums paid thereon, nor is it in a position to claim that by the subsequent acceptanee of said policies' the benefit thereof should accrue to it by the proportional lessening of its obligation.' '

It is conceded that the sound value of the property insured was sufficient to warrant a total insurance of $415,000, and 1 do not see how the defendant can complain of the amount of insurance carried by the plaintiff, conceded to be -proper and- legal by the insurers to that extra amount.

The defendant concedes its liability of a valid existing insurance to the amount of $5,000. Its liability could only be predicated upon a valid, existing, uncanceled and unsurrendered policy of insurance. The only policy it had issued was for $20,000, and if it was liable at all it must be upon insurance for that amount. Its request to Polhemus Brothers was not to reduce the amount of its insurance but for a surrender of its entire policy. It concedes that this letter did not constitute a cancellation of its policy because it admits its liability for $5,000, and it followed this letter by a formal notice of cancellation on the twelfth of October. How a formal written contract of insurance, under seal, can be reduced from $20,000, to $5,000, under the facts-and circumstances disclosed in this record, we :are unable to perceive. ■

We think the plaintiff was entitled to recover the proportional amount of its loss based upon a valid existing insurance from the defendant in the sum of $20,000, and that, therefore, the judgment' appealed from should be reversed, and as facts are sufficiently found in the referee’s decision a-judgment should be entered for plaintiff for the sum of $3,315.06, with interest, together with the costs and disbursements of this action. •

Ingeaham, McLaughlin, Houghton and Scott, JJ., concurred.

Judgment reversed and judgment ordered for plaintiff as directed in opinion, with costs. Settle order on notice.  