1. A policy of insurance contained the usual covenant that if
the property was sold the insurance ceased unless the consent of
the insurer was given in writing to the sale.
Held, that an endorsement on the policy by the assured
"Payable in case of loss to E. C. Bates" (the plaintiff ), and
under this, the endorsement by the insurer that "Consent is hereby
given to the above endorsement," did not imply either a knowledge
or consent to the sale of the goods insured.
2. Such endorsements are entirely consistent with the property
in the goods remaining in the assured, and mean no more than that
the loss of the assured shall be paid to the third party.
3. If such third party had really purchased the goods before the
loss, then the party assured sustained no loss and the policy
covered none, and no action could be sustained on it.
Page 77 U. S. 34
W. D. Philbrick, being the owner of certain goods, got them
insured by the Equitable Insurance Company of Providence. The
policy contained a clause that if the property insured should be
sold or conveyed or if the policy should be assigned without the
consent of the company, the risk should cease and the policy become
void. It contained also provisions such as are cited below:
"And this company agree, that if the assured shall sell the
aforesaid property, or any part thereof, before the expiration of
this policy, a proportion of the premium received shall be repaid
upon receiving notice of such sale before a loss happens, . . .
or this policy may be continued for the benefit of such
purchaser, if this company give their consent thereto, to be
evidenced by a certificate of the fact or by endorsement on this
policy."
Philbrick, the party insured, sold the goods during the life of
the policy to one Edward C. Bates, and endorsed on the policy,
"
Payable in case of loss to E. C. Bates."
"W. D. PHILBRICK"
The policy, with this endorsement, was sent by a policy broker
to the insurance company, and one Frederick W. Arnold, the
secretary of the company, placed under the above endorsement these
words:
"
Consent is hereby given to the above endorsement.
EQUITABLE INSURANCE COMPANY."
"FRED. W. ARNOLD, Secretary"
The goods having been destroyed by fire after the sale and the
endorsement by Arnold in behalf of the company, Bates, the owner of
them, brought assumpsit on the policy. The company refused to pay
on the ground that Philbrick had ceased to be owner before the loss
occurred, and that the company had never consented to any change of
ownership
Page 77 U. S. 35
in the property. And the question was whether on the facts, this
defense ought to be sustained.
Arnold, the secretary of the company, swore that he had no
knowledge of the sale, nor was there any evidence that any officer
of the company had notice of it, unless it was to be implied from
the request to give their consent to the endorsement made by
Philbrick, and the consent so given.
The court below was of the opinion that on the case stated, the
plaintiff could not recover, and judgment having been entered
accordingly, the record was brought here.
MR. JUSTICE MILLER delivered the opinion of the Court.
One of the conditions of the policy was that if the property
insured should be sold or conveyed, the risk assumed ceased
Page 77 U. S. 36
and the policy became void, and there can be no doubt that,
looking to both the provisions of a policy such as this one
contained and which are cited in the statement of the case, it
ceases to be binding when the assured parts with his interest in
the property insured unless the company be notified of the sale.
When this is done before a loss happens, the company is bound to
refund a part of the prepaid premium, to be apportioned in
reference to the unexpired time for which the policy was given.
If, however, the purchaser and assured ask it and the company
consent to it, the policy may continue for the benefit of the
purchaser. This latter proposition is founded upon the knowledge of
the sale and upon the consent of the company to accept the
purchaser as the party whose interest is insured instead of the
vendor who was originally insured.
As there is no evidence, outside of the two endorsements already
quoted from the policy [
Footnote
1] that there was any consent to accept Bates, the purchaser,
as the party whose interest was insured, and as the presumption, if
there is one arising from those endorsements of a notice of sale,
is not supported by anything else, it becomes important to
determine what those endorsements imply on those two points.
If Philbrick could not in law or in fact have directed the
payment of the loss, if one should occur to him, as owner of the
property, to another party, with the consent of the company, then
it would be a reasonable inference that the endorsement made by him
implied a sale of his interest. But if he could make, with the
consent of the company, a valid appointment that any loss covered
by the policy should be paid to a third person, though he remained
the owner of the goods, and the loss was his loss, then the
endorsement of Philbrick does not necessarily convey the idea of a
sale nor the consent of the company imply a consent to a sale.
Now it is a well known and frequent thing in insurance business
for a person to insure his life or his property and either in the
policy itself or by endorsement at the time it
Page 77 U. S. 37
is made, or by subsequent endorsement, to which the consent of
the company is generally required, to direct the loss to be paid to
some third party. And this is done in language similar if not
identical with that used in this case. It is a mode of appointing
that the loss of the party insured shall be paid by the company to
such third person. This transaction is a very common mode of
furnishing a species of security by a debtor to his creditor, who
may be willing to trust to the debtor's honesty, his skill and
success in trade, but who requires indemnity against such accidents
as loss by fire, or the perils of navigation. The property of the
debtor at risk, being thus insured for the benefit of the creditor,
gives him this indemnity.
In the face of this frequent use of the two endorsements on the
policy, it cannot be held that they imply of themselves a knowledge
of the sale or a consent to insure the purchaser.
If it could be shown that it had been the course of dealing
between these particular parties to recognize the endorsement of
the party first assured as evidence of a sale, and the endorsement
of the company as a consent to the sale, or if it could be shown
that by custom and usage in any particular place these endorsements
were so treated, the case might be different; but in the absence of
such usage or custom, we can see in these endorsement nothing more
than the direction of Philbrick and the consent of the company that
any loss sustained by Philbrick, covered by that policy, should be
paid to Bates. As Philbrick did not have any interest in the goods
when the fire occurred, he sustained no loss, and the policy
covered none.
The analogy of the effect of such endorsements on promissory
notes in assigning the notes to the endorser is very imperfect. In
such case, the sum mentioned in the note is payable absolutely and
without regard to the interest of the original payee in any other
matter. It is all contained in the note whose contents, to use the
language of the Judiciary Act, are thus made payable to the
endorsee, and the endorser necessarily parts with his interest in
the subject matter of the contract.
Page 77 U. S. 38
These view are well supported by recently adjudged cases in this
county. [
Footnote 2]
Judgment affirmed.
[
Footnote 1]
Supra, p.
77 U. S. 34 --
REP.
[
Footnote 2]
Fogg v. Middlesex Manufacturing Co., 10 Cushing 346;
Hale v. M. & F. Ins. Co., 6 Gray 169;
Young v.
Eagle Ins. Co., 14
id. 153;
Grosvenor v. Atlantic
Ins. Co., 17 N.Y. 391;
State Mutual Fire Ins. Co. v.
Roberts, 31 Pa.St. 438.
