
    Hugo Jaeckel, Respondent, v. The American Credit Indemnity Company of New York, Appellant.
    
      Gredit insurance policy -^notice of a loss included in the sum to he home hy the indemnified—payments-made on an indebtedness after final proof of loss and within the period, allowed the company to adjust the loss — obscure provision not , given effect.
    
    In the adjustment of the amount payable under a policy of credit insurance, hy the terms of which the first losses, up to a certain sum, are to he borne by the party indemnified before any claim can he made against the company, and “proof of loss must he made * * * within twenty (30) days after knowledge of the insolvency of any debtor shall have been received by the indemnified, * * * otherwise such claims shall be barred,” the company is entitled to notice of a loss, although such loss be included in the sum which must be borne hy the party indemnified, and if such notice be not given, a claim therefor cannot be considered in the settlement of the company’s liability.
    Under a provision of such a policy that “ final proof of loss shall be forwarded to the central office of this company * * * and the amount due by this company under final proof of loss shall he adjusted and paid within sixty (60) days after receipt by the company of such final proof of loss,” the company is not entitled to deduct from the amount to he paid by it payments made by the debtors within the sixty days on account of indebtednesses included in such final proof of loss, especially where the policy contains a condition that “no loss can be proven after the expiration of this bond.”
    Where the amount of the initial loss to he borne hy the indemnified is plainly fixed hy one provision of the policy at a certain sum, such amount will not he increased under another condition thereof framed in obscure language and scarcely to he understood from its words.
    Ingraham and McLaughlin, JJ., dissented.
    Appeal by the defendant, The American Credit Indemnity Company of New York, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 14th day of April, 1898, upon the report of a referee.
    This action is brought upon a policy of credit insurance, which guarantees “ the said Indemnified against loss to the extent of and not exceeding Fifteen thousand dollars resulting from insolvency of debtors over and above a net loss of $3,750, Thirty-seven hundred fifty dollars, first to be borne by the said Indemnified on total gross sales and deliveries of goods, wares or merchandise amounting to $1,000,000 or less, said sales and deliveries to be made . * A. * between the .first day of July, 1893, and the thirtieth day of June, 1894, both days inclusive.” The premium was paid by the plaintiff • on Jiily 21, 1893. The policy expired June 3.0, 1894, and proof of loss was sent July thirty-first. The policy provided that the company is allowed sixty days thereafter in. which to investigate claims and to make adjustment. The stim for which suit was brought was $2,874.39, obtained by adding losses incurred as follows.’: By' failure of McNamara Dry Goods Company, $691.20; of Tally & Collins, $1,212.72; of 'Conrad & Sons, ,$642.40 ; of Abel & Sons, $683.73 ; and of Knable & Cooper, $3,394.34; and by deducting therefrom the initial loss of $3,750 to be borne by the indemnified, .
    The referee disallowed the claim by failure of McNamara Dry Goods Company because, although the policy dates from July first. • this, loss occurred July eighteenth, before the premium was paid on July twenty-first, and a condition of the policy requires .payment of • . ♦ premium before any loss can. be considered.' The referee further deducted $61.86, an amount paid by Knable & Cooper subsequent to their failure, which amount, by condition 12b of the policy, should be credited to the defendant as salvage on claims exceeding those which. made up the initial, loss. Lastly, the ' referee deducted $217.34, an amount paid by Tally & Collins subsequent to their failure, but - before the policy . had expired. He thus rendered a decision for $1,903.99 in favor of the plaintiff.
    With regard to the claim of Tally & Collins, it appears that condition • 4 of the policy requires a notice of loss to be sent to' the company within twenty days after knowledge thereof, and that the plaintiff received knowledge of the failure of that firm on November twenty-seventh, but sent no notice until December twenty-first. The referee held that, as this loss was part of the initial loss to be borne by the plaintiff, the condition" requiring twenty days’ notice did not apply to it. In considering the claim made for’ loss by failure of Abel & Sons, the referee made no deduction for a .payment of $373.63 made September twelfth,, after final proof of loss had been sent, but before final adjustment by the', defendant, holding that the claims against the defendant accrued June thirtieth, and that its liability mtist be determined by the conditions existing when the final proofs of loss were submitted, namely,, on: July thirty hirst. The referee also held that no deduction should be made for payments subsequently received from Abel & Sons and from Conrad & Sons, on the ground that the defendant’s liability had become fixed, and that, as the loss arising from the failure of these firms was a part of the initial loss, such subsequent payments belonged to the plaintiff. In arriving at his conclusions, the referee discarded as obscure and unintelligible condition 12a of the policy, by which the defendant claimed that the initial loss of the indemnified, stated in the policy at $3,150, was increased to $5,000.
    From the judgment entered on the referee’s decision the defendant appeals.
    
      John Vernou Bouvier, Jr., for the appellant.
    
      Benjamin N. Cardoso, for the respondent.
   O’Brien, J. :

This appeal is brought upon disputed construction and' interpretation of the conditions of the policy, and not upon disputed facts.

The first construction called for is as to condition 4 of the policy, which states: “ Proof of loss must .be made * * * within twenty (20) days after knowledge of the insolvency of any debtor shall have been received by the Indemnified * * * otherwise such claims shall be .barred.” The appellant holds that, as such notice was not given of the - failure of Rally & Collins, the loss thereby incurred should be excluded from consideration in the settlement of liability. The respondent, although admitting the force of this contention, insists that this particular loss should not be included under this condition because of another condition in the policy. The other condition referred to is, that the first losses up to a certain sum should be borne by the indemnified, before any claim could be made against the company. The respondent’s position, allowed by the referee, is, therefore, that the loss by failure of Rally & Collins, being a first loss and less in amount than the initial loss agreed to be borne by the indemnified, was not a “claim” against the company, nor a “ loss ” for which the company was liable, and, therefore, is not included under condition 4 requiring notice of loss to be sent within twenty days. We are unable to agree with this holding of the'referee, for the reason that, as this loss had to be taken into'consideration in the final settlement, the company was. entitled by its agreement to. learn of it, as well as of all other losses within the time stipulated. Such seems to be the fair and reasonable construction and the one in accord with the spirit .of the agreement.. Otherwise,' the company, could not. insist upon knowledge of the failures making up the initial loss to be borne by the indemnified ■ excepting as they were subsequently proved as facts on the final, settlement. This construction would shut off the company from proper and timely inquiry into the failures and losses presented, and would open the door to fraud on the part of the indemnified There is nothing, moreover, in the language quoted from condition 4, or in any other part of the policy excluding from the time limitation losses or claims going-to make up the initial loss. We -think, therefore, that the company was entitled to receive the stipulated notice of the loss by the failure of Tally & Collins, as of all other losses, and it follows that if such notice was not given, this claim should be excluded in the settlement of the defendant’s liability.

A second question of construction is presented by the contention of the appellant that the payment by Abel & Sons of $373.63 made September twelfth, should be deducted from its liability because of condition 12c of the policy, which states: “ Final proof of loss shall be forwarded .to the central office of this company, * * '* and the amount due by this company under final proof of loss.shall be adjusted and paid within (60) sixty days after receipt by the company of such final proof of loss.” The defendant contends that the final proof of loss being sent July thirty-first, and sixty days thereafter being allowed to adjust the same, a payment made September twelfth, before such adjustment, should be deducted. This. contention cannot be sustained; for, as stated by the referee, the claim against the company had accrued, and we must hold that the sixty days for adjustment was given, as indicated by the company’s letter of August second, to give time “ to investigate claims ” filed, and not to give time for further payments to be made and thus better the condition of the company. If, as the defendant claims, this payment should be deducted from the liability, the company could.have demanded sixty days after final proof of its payment was accepted and in this way delayed final settlement. ■

It was, moreover, provided by condition 8 in the policy that no loss can be proven after the expiration of this bond,” and the defendant may not on the one hand receive benefit from subsequent payments and on the other suffer no increase of liability for losses during the period granted for adjustment. We must hold, therefore, that the referee was right in not deducting this payment.

The most serious question of construction arises on this appeal as to the agreement made regarding the exact amount of initial loss to be borne by the indemnified, the appellant contending that it should be greater than the $3,750 admitted by the referee. Subsidiary to this determination, and depending upon it, is the question of what understanding existed regarding salvage in the insolvent claims. It is stated in the policy that $3,750 is the initial loss to be borne by the indemnified, and, by a further condition, that claims going to make up such loss shall belong to the indemnified. This latter condition is 12b, which states: “ When claims shall be allowed by this company beyond the amount agreed to be borne by the indemnified, such claims shall at once be transferred to this company, and this company shall become the owner thereof to the extent of the amount paid on such claims; provided, however, that where the indemnified has a part interest in any one of such claims, the amounts realized therefrom, less cost of collection, shall be divided pro rata as the interest of each may appear.” The defendant, however, alleged that there was an agreement, namely, condition 12a of the policy, by which the company relinquished its right to salvage in claims on condition that the initial loss to be borne by the indemnified should be $5,000 instead of $3,750. This condition was discarded by the referee as obscure and unintelligible, and the case of American Credit Indemnity Co. v. Wood (73 Fed. Rep. 81) was cited in support of his ruling. The condition discarded by the referee and brought before us on this appeal states: To simplify adjustment and to avoid disputes it is agreed that such sum of gross loss shall be the limit to be borne by the indemnified, as less 25 per cent will equal the agreed amount of annual net loss, all claims making up such said sum of gross loss to remain the property of the indemnified, the company relinquishing its claims except as hereinbefore provided.”

If this condition. (12a) be disregarded,.then the referee is right in giving the plaintiff salvage, in claims máking up the initial loss in accordance with condition 12b. It is admitted that condition 12a is. framed in obscure language, but it. is claimed to be an agreement, that the claims shall be retained by the indemnified, the company relinquishing the title thereto on condition that a certain limit of loss-different from that previously stated in the policy shall be borne by the indemnified. The manner by which this limit is to be calculated is scarcely to be understood from .the words “ such sum of gross loss-shall be the limit to be borne by the indemnified, as less 25 percent will equal the agreed amount of annual net loss,” and primafacie the language is not intelligible. The only aid- given to its construction is to be found in the “ agreed statement of -facts ” in the-record, where it is stated : It is agreed that, mathematically considered, $5,000 is the ‘sum of gross loss’mentionedin condition 12a;.. ‘ as less twenty-five per cent will equal the agreed amount of annual, net loss.’ ” If we substitute in condition 12a, as here indicated, it will read, “it is agreed that $5,000 shall be the limit to be borne by the-Indemnified, as less 25 per cent will equal the agreed amount of annual net loss; all claims making, up such said $5,000 to remain the property of the Indemnified.” This substitution does not clear-the condition of ambiguity. In the condition, the words “sum of. gross loss ” seem to be used, first, in the sense of limit to be borne-by the indemnified ; and, secondly, in the sense of total loss. We are unable to determine whether the condition was intended to give salvage to the plaintiff on all claims or only on a part of them. We-cannot assume that, in consideration of having salvage in claims, amounting only to $5,000, the indemnified-intended to increase- his. initial loss to that sum, as the supplemented condition would indicate, nor, on the other hand, can we sáy that the sum of total loss is; agreed to be $5,000, for the determination of total loss is in issue on this appeal. We, therefore, hold that the condition is not sufficiently certain to be applied .and should be disregarded. The company being charged with the duty should make the conditions reasonably certain and clear, and it would be unjust and inequitable to permit-it -to receive the most favorable construction of a blind and obscure; condition.

This view is clearly expressed in the case of' American Credit Indemnity Co. v. Wood (73 Fed. Rep. 88) where the learned judge, referring to this condition 12a, says: “If, by the introduction of a subsequent and obscure clause, difficult to understand, or requiring expert knowledge for its comprehension, the preceding' clauses, plainly and unequivocally expressed, by which the initial loss of the indemnified is fixed, are nullified, the subsequent clause must be ignored. It cannot be permitted to operate as a snare to the unwary.” In the present case there was a clear understanding of an initial liability of $3,750; and the condition 12a is not clear, even with the substitution ■ of “ $5,000” for the words “sum of gross loss.” There remains an uncertainty as to the real intent and meaning of the condition, and it cannot, therefore, be permitted to operate to change the clearly-stated initial loss to the injury of the indemnified. If, in fact, we adopt the defendant’s interpretation of this condition it only grants the indemnified an option to increase his initial liability. But no facts are made to appear which show that the plaintiff chose to- exercise such an option, and) therefore, the defendant has no ground for contending that the condition should be taken into consideration.

The referee was, therefore, right in following the terms of condition 12b in disposing of payments made by creditors subsequent to their failure and after the expiration of the policy.

It follows, from the construction thus given to the several conditions of the policy, that the judgment confirming the referee’s report should be modified by striking out the claim of Daily & Collins, amounting to $995.38, leaving $908.61, with interest from October 1, 1894, and costs in the court below, due from the defendant. As so modified, the judgment should be affirmed, without costs of this appeal.

Van Brunt, P. J., and Patterson, J., concurred; Ingraham and McLaughlin, JJ., dissented.

Ingraham, J. (dissenting) :

I concur with Mr. Justice O’Brien as to-the disposition made'of the claim.against the defendant on account of the loss by the failure of Dally & Collins, but I do not agree that the clause 12a annexed to the policy is so uncertain as to its real intent that it cannot operate as a term -of the policy. By the policy the defendant agreed to indemnify the plaintiff against loss “to the extent of and not exceeding fifteen thousand dollars, resulting from insolvency of debtors, over apd above a net loss of $3750, thirty-seven hundred fifty dollars, first to be borne by the said Indemnified.” By clause 12a, which by the terms" of the policy'itself was made a part of the' contract as fully as if it were recited at length therein, it is provided : “ To simplify adjustment and to avoid disputes, it is agreed that such sum of gross loss shall be the limit to be borne by the Indemnified, as less 25 per cent will equal the agreed amount of annual net loss.” It is admitted in the agreed statement of facts that the sum of $5,000, less twenty-five per cent, will equal the agreed amount of annual net loss, viz., $3,750. In order to provide a method by which such net loss could be ascertained, it was agreed that, a gross loss of $5,000 would produce a net loss of $3,750, or, in other words, that by the agreement in the case of debtors owing $5,000, an amount should be fixed which would result in a net loss to the creditor of $3,750, and there should, therefore, be no claim . against the defendant until there was a gross loss of $5,000; it being ' assumed that where debtor's of the insured failed, owing $5,000, the insured would receive as dividends or part payment of such $5,000 indebtedness twentyrfive per cent, and that to enable the insured to obtain that sum of twenty-five per cent it was agreed that the claim going to make up this sum of $5,000 should not pass to the defendant, but should remain the property of the insured who would be entitled to receive any dividend or payments made thereon. I fail to see where there is any difficulty in construing this condition annexed to the policy. Where a loss is incurred in consequence of the failure of a debtor, the' gross loss would be the amount owing by the debtor at the time of the failure.. The'net loss would be the amount that' the creditor would lose after all dividends uj>on the debtor’s estate, or all partial payments that would be received by the creditor on account of the indebtedness after the failure. It was the net loss of $3,750 that the assured was to sustain before there was a liability. under the policy, and in order to ascertain what that net loss should be the parties agreed that it was to be considered that the gross loss or the amount that the debtor owed when he failed would be reduced by twenty-five per cent by dividends received from the debtor’s estate. The parties have made. their contract, which seems .to. me to be reasonably clear- and capable of enforcement, and I can see no reason why it should not be enforced. I think, therefore, that the defendant was liable only where the loss sustained by the plaintiff by the failure of his debtors exceeded the gross sum of $5,000, and as there is no evidence that such a gross sum was exceeded, the defendant was entitled to judgment. For that reason I think the judgment should be reversed.

McLaughlin,- J., concurred.

Judgment modified as directed in opinion and as modified affirmed, ■without costs of appeal.  