Carpenter v. Providence Washington Insurance Company, 41 U.S. 495 (1842)
U.S. Supreme CourtCarpenter v. Providence Washington Insurance Company, 41 U.S. 16 Pet. 495 495 (1842)
Carpenter v. Providence Washington Insurance Company
41 U.S. (16 Pet.) 495
Action on a policy of insurance on the " Glenco Cotton Factory," against loss or damage by fire. The policy was dated 27 September, 1838, and was to endure for one year. The policy contained a clause by which it was stipulated by the assured that if any other insurance on the property had been made and had not been notified to the assurers and mentioned in or endorsed on the policy, the insurance should be void, and if afterwards any insurance should be made on the property and the assured should not give notice of the same to the assurers and have the same endorsed on the policy or otherwise acknowledged by the assured in writing, the policy should cease, and in case any other insurance on the property prior or subsequent to this policy should be made, the assured should not, in case of loss, be entitled to recover more than the portion of the loss should bear to the whole amount insured on the property, the interest of the assured in the property not to be assignable unless by consent of the assurers manifested in writing, and if any sale or transfer of the property without such consent is made, the policy to be void and of no effect. On all the policies of insurance made by the insurance company there was a printed notice of the conditions on which the insurance was made. The declaration alleged that Carpenter was the owner of the property insured and was interested in the same to the whole amount insured by the policy, and that the property had been destroyed by fire. The facts of the case showed that the property had been mortgaged for a part of the purchase money, and the policy of insurance was held for the benefit of the mortgagor. Another insurance was made by another insurance company, but this was not communicated in writing to the Providence Washington Insurance Company, nor was the same assented to by them, nor was a memorandum thereof made on the policy. By the Court:
No doubt can exist that the mortgagor and the mortgagee may each separately insure his own distinct interest in property against loss by fire. But there is this important distinction between the cases that where the mortgagee insures solely on his own account, it is but an insurance of his debt, and if his debt is afterwards paid or extinguished, the policy ceases from that time to have any operation, and even if the premises insured are subsequently destroyed by fire, he has no right to recover for the loss, for he sustains no damage thereby; neither can the mortgagor take advantage of the policy, for he has no interest whatsoever therein. On the other hand, if the premises are destroyed by fire before any payment or extinguishment of the mortgage, the underwriters are bound to pay the amount of the debt to the mortgagee if
it does not exceed the insurance. Upon such payment, the underwriters are entitled to an assignment of the debt from the mortgagee, and may recover the same from the mortgagor. The payment of the insurance is not a discharge of the debt, but only changes the creditor.
When the insurance is made by the mortgagor, he will, notwithstanding the mortgage or other encumbrance, be entitled to recover the full amount of his loss, not exceeding the insurance, since the whole loss is his own. The mortgagee can only insure to
the amount of his debt, whereas the mortgagor can insure to the full value of the property, notwithstanding any encumbrances thereon.
An assignment of a policy by the assured only covers such interest in the premises as he may have had at the time of the insurance and at the time of the loss. If a loss takes place after the policy has been assigned, the assignee alone is entitled to recover. The rights of the assignee under the policy cannot be more extensive than the rights of the assignor. Cited, Columbia Insurance Company v. Lawrence, 10 Pet. 507, 35 U. S. 512; 27 U. S. 2 Pet. 25, 27 U. S. 49.
Policies of insurance against fire are not deemed in their nature incidents to the property insured, but they are mere special agreements with the person insuring against such loss or damage as they may sustain, and not the loss or damage that any other person having an interest as grantee, or mortgagee, or creditor, or otherwise may sustain by reason of the subsequent destruction by fire.
The public has an interest in maintaining the validity of the clauses in a policy of insurance against fire. They have a tendency to keep premiums down to the lowest rates and to uphold institutions of this sort so essential to the present state of the country for the protection of the vast interests embarked in manufactures and on consignments of goods in warehouses.
Questions on a policy of insurance are of general commercial law, and depend upon the construction of a contract of insurance, which is by no means local in its character or regulated by any local policy or customs.
The circuit court charged the jury that at law, whatever might be the case in equity, mere parol notice of another insurance on the same property was not a compliance with the terms of the policy, and that it was necessary in the case of such prior policy that the same should not only be notified to the company, but should be mentioned in or endorsed on the policy; otherwise the insurance was to be void and of no effect. Held that this instruction of the circuit court was correct. It never can be properly said that the stipulation in the policy is complied with when there has been no such mention or endorsement as it positively requires, without which it declares that the policy shall be void and of no effect.