
    Blakeslee, Perrin & Darling, Plaintiff, v. Ocean Accident and Guarantee Corporation, Limited, Defendant.
    Fourth Department,
    March 3, 1915.
    Insurance — policy guaranteeing credit of customers — contract construed— amount of initial loss to be borne by insured.
    Action upon a contract whereby the defendant insured the credit of the plaintiff’s customers. The policy guaranteed the plaintiff against loss, to an amount not exceeding $5,000 on accounts covered thereby in excess of an initial loss to be borne by the plaintiff of one-half of one per cent, but in no event to be less than $750 on the gross aggregate amount of guaranteed sales up to $200,000, and a smaller percentage if in excess of $200,000. It was provided that no account against any one debtor should be covered for more than $2,000, while a “rider” attached to the policy provided that in the event of the insolvency of an individual debtor coming within the terms of the contract who owed the plaintiff in excess of the $2,000 limit, such excess not exceeding $1,000 (thereby increasing the single account limit to $3,000) shall be taken into calculation of losses under the contract subject to all other terms of the contract, in such event, however, the initial loss of not less than $750 to be paid by the plaintiff to be “increased by such sum as will equal one-half of the difference between the original single account limit as above specified and the largest single account reported in excess thereof, within the limit above specified.” Contract construed, and
    
      Held, that the rider merely increased the defendant’s liability upon each single account from $2,000 to $3,000;
    That construing the contract and “rider” together, where the plaintiff suffered a loss of over $3,000 on a single customer, the deduction by way of initial loss to be borne by the plaintiff should be made, not from the $3,000 limiting the defendant’s liability, but from the amount of loss sustained by the plaintiff on a single account, and that the defendant should be held liable for the balance, up to the sum of $3,000;
    That the additional initial loss to be paid by the plaintiff as provided in the rider is one-half the difference between the original single account limit specified in the rider, which was $2,000, and the largest single account reported in excess thereof within the limits specified in the rider, which was $3,000, which amounts to $500.
    Submission of a controversy upon an agreed statement of facts, pursuant to section 1279 of the Code of Oivil Procedure.
    
      H. D. Blakeslee, Jr., for the plaintiff.
    
      William Burnet Wright, Jr., for the defendant.
   Lambert, J.:

This action is brought upon a contract for so-called credit insurance. The plaintiff is engaged in the hardwood lumber business at Buffalo, If. Y., and the defendant, so far as appears, is engaged in the business of insuring credits.

On October 6, 1911, in consideration of $275 premium paid by the plaintiff the defendant issued to plaintiff its certain insurance policy whereby, among other things, it guaranteed the plaintiff: “Against actual loss toan amount not exceeding Five Thousand Dollars on such covered accounts as may be proved under the terms, conditions and limitations of this contract, which the guaranteed may lose on bona fide sales, shipments and deliveries of merchandise * * * made in the usual course of the guaranteed’s business of hardwood lumber, between the 1st day of December, 1911, and the 30th day of November, 1912, both days inclusive, in excess of an initial or own loss to be borne by the guaranteed, being one-half of one per cent, but in no event to be less than Seven Hundred and Fifty Dollars on the gross aggregate amount of all the guaranteed sales and shipments up to Two Hundred Thousand Dollars and 9/20 of 1 per cent on gross sales and shipments, if in excess of Two Hundred Thousand Dollars during that period.” The contract further provided that the amount of loss to be claimed by the guaranteed under the contract should be limited by the conditions and requirements of the contract.

Under the heading “ Coverage of Accounts ” it was stipulated “ but no account against any one debtor shall be covered for more than Two Thousand Dollars. These limits shall apply to the amount which the debtor owes the guaranteed at the time of insolvency.”

There are many further requirements and conditions in this contract relating to the class of accounts covered by the policy, and the manner of applying salvage upon such accounts between insurer and the assured. A scheme is presented for the prorating of such salvage and the ascertainment of the real net loss, and then follows this provision: “From the net loss thus ascertained is to be deducted the initial or own loss to be borne by the guaranteed, and the remainder, if any, not exceeding the limit of the guarantee, is to be the amount due the guaranteed under this contract.”

To such contract there were affixed some three several riders, but this controversy presents questions only as to rider No. 2. The conditions of this rider are as follows: “In the event of the insolvency of any individual debtors coming within the terms and conditions of this contract, owing the Guaranteed at the date of insolvency in excess of $2,000.00 single account limit mentioned in the body of this contract, such excess, not exceeding $1,000.00 (thereby increasing the single account limit to $3,000.00), shall also be taken into calculation of losses under this contract, subject to the stipulated percentage of capital rating and all other terms and conditions of the contract; in that event, however, the Guaranteed’s initial or own loss of % of 1 per cent not being less than $750.00, as provided for in the body of this contract, shall be increased by such sum as will equal one-half of the difference between the original single account limit as above specified and the largest single account reported in excess thereof, within the limit above specified.

“All the terms and conditions of the contract to remain in force. ”

Within the term of this contract the assured suffered a total loss upon an account owing by one Gouveneur E. Smith & Co. to the amount of $3,869.08, upon which account there was no salvage. It is conceded that all the preliminary requirements on the part of the assured have been fully met, and the controversy presented is merely as to the amount which the defendant is liable to pay under this contract on account of such loss.

The parties agree that the first initial or own loss provided for in the contract amounts to the sum of $1,055.23. They differ as to the amount of additional or own loss provided for by rider No. 2 and further differ as to whether such total initial or own loss is to be deducted from the amount of the Smith claim, to wit, $3,869.08, or from the $3,000 limit of liability prescribed by rider No. 2. These two questions are all those presented by this record.

The general scheme of the contract of insurance does not admit of much doubt. Before the addition of rider No. 2 the company had apparently thereby agreed to pay such loss as the assured should suffer upon poor accounts of the prescribed character and rating up to the sum of $5,000, and limited only by the special provision relative to losses upon a single account, whereby it stipulated that it should not be liable upon any one account in excess of the sum of $2,000. In any event the assured obligated themselves to stand all loss arising in connection with their business, up to a specified percentage upon their total business and this the assured covenanted to bear before any liability arose against the defendant.

In so far as liability of the defendant is concerned, it seems equally clear that rider No. 2 merely increased defendant’s liability upon each single account from $2,000 to $3,000 and in that particular leaving the main contract otherwise unchanged.

Such conception of the structure of this contract is borne out by the express provision above quoted, that from the net loss was to be first deducted the initial or own loss, borne by the guaranteed,, and that the remainder, not exceeding the limit prescribed, was the amount of the liability of the defendant. It seems clear, therefore, that the deductions by way of initial or own loss, both under the main contract and under rider No. 2, are to be deducted not from the $3,000 limit of liability, but from the amount of loss sustained by the assured on the single account, and that the defendant is to be liable for the difference up to the sum of $3,000.

The more serious question arises as to the additional initial loss provided for in rider No. 2. It will be noticed that this additional initial loss is therein prescribed to be one-half the difference between the original “ single account limit as above specified, and the largest single account reported in excess thereof, within the limit above specified.” The construction of this phraseology turns upon the meaning of the two expressions “original single account limit” and “largest single account reported in excess thereof, within the limit above specified.”

The defendant contends that the expression “ original single account limit ” refers clearly to the $2,000 limit of liability prescribed under the original contract and in that connection calls attention to the fact that rider No. 2 deals exclusively with single account losses. It is further pointed out that in the same rider reference is made to the “ $2,000.00 single account limit mentioned in the body of this contract. ” It concludes that necessarily therefore, the original single account limit referred to is the $2,000 limit originally in the contract and again referred to in this rider. Defendant further contends that the reference to the largest single account reported within the limit above specified must necessarily refer to the $3,000 increased limit and that the largest account that could be reported within that limit would be $3,000, and the defendant assumes that the account in question having exceeded that limit the computation provided for by this rider as an additional initial loss must'necessarily be half of the difference between $2,000 upon the one hand and $3,000 upon the other, giving a result of $500 to be added to the first initial loss.

The plaintiff suggests the expression original single account limit ” does not refer to the $2,000 but refers to such an account as, after deducting the first initial loss, will leave the company liable for the full limit of $2,000. In other words, that in this instance the original single account limit would be the sum of $2,000 plus the first initial loss of $1,055.23, or $3,055.23.

The plaintiff upon the same reasoning construes the reference to the largest single account reported in excess thereof, within the limit above specified ” to refer not to the sum of $3,000, but to an account which will leave the company liable for just $3,000, after deducting the first initial loss to be borne by the assured. .Upon plaintiff’s construction of the latter provisions of rider No. 2, the additional initial loss to be borne by assured amounts to $406.93.

Again referring to rider No. 2, the initial or own loss, provided in the original contract, was increased by “ one-half of the difference between the original single account limit as above specified ($2,000) and the largest single account reported in excess thereof, within the limit above specified ($3,000).”

The italicizing and figures in parentheses are mine.

It seems to me reasonably clear that the added initial or own loss, to be deducted, if we give effect to the italicized words above quoted, must mean just what the rider reads, viz., the difference between the original single account limit in the rider specified, which certainly was $2,000, and the largest single account reported in excess thereof, within the limit specified in the rider, which was $3,000.

If I am right, the initial or own loss of nine-twentieths per cent on gross sales and shipments made by plaintiff during the year, which initial loss concededly amounted to $1,055.23, was by rider No. 2 increased by $500, that being one-half the difference between $2,000 and $3,000.

This view leads to the holding in this case that the additional initial loss provided for by rider No. 2 amounts to $500. This sum is to be added to the first initial loss of $1,055.23, making the sum of $1,555.23, total initial loss to be borne by the assured. This sum is to be deducted from the amount of the loss of $3,869.08, leaving the amount of liability of the defendant $2,313.85. This sum is within the liability limit of $3,000, and, hence, plaintiff should have judgment for that amount, with interest thereon from February 23, 1912, together with the costs of the submission.

All concurred; Foote, J., not sitting.

Judgment directed for the plaintiff upon the submission for the sum. of $2,313.85, with interest and with costs.  