Blackstone v. Allemania Fire Insurance , 4 Daly 299 ( 1872 )

By the Court.^*—Bobihsoh, J.

—The contract of reinsurance in question is, in all its main features, similar in its obligations to that passed upon in the case of Hone v. Mutual Safety Insurance Co. (1 Sandf. Ch. 137; affirmed, 2 Coms. 235), except that it provides that “ the loss, if any, shall be payable pro rata and at the same time with the reinsured.”

Tho loss against which the Horth American- had insured, to the extent of $5,000, occurred in October, 1871, and amounted to $4,407 62, which became payable in 60 days after service of proof of loss, made on the 18th of Hovember, 1871. This reinsurance, to the amount of $2,500, was effected in August, 1871, and subsisted at the time of the loss, but the Horth American subsequently becamé insolvent, and was dissolved by a decree of the Supreme Court, the plaintiff’s receivership and right to collect its assets being continued.

Upon such loss of $4,407 62, the plaintiff has paid a dividend of 40 per cent, and declared a further dividend of 4 per cent., which is all that can be realized or paid out of the assets of the company. Ho objection was ever made to the proof of loss served on the defendants, and the only substantial question presented is upon the construction of the terms in the policy of reinsurance above quoted. It is not questioned but that the defendants were liable for- one-half of so much of the loss as has been paid; but they contend they are not responsible for any portion thereof which has not been paid or which that company or its receiver are wholly unable to pay. The policy of reinsurance had express reference to the original policy of the Horth American (Ho. 4,985) and to its obligations, and the question presented is, whether the defendants are bound to pay this proportion (one-half) of the loss sustained by the H orth Am erican, which they became liable to pay in 60 days after service of proof of loss, or only of such sum as the latter company have actually paid. Was the time so fixed for payment by the defendants to be cotemporaneous with that presented in the obligation of the reinsured, or when actual payment had been made by them to the party they had insured; or, in other words, did it refer to the time when the original insurance called for payment, or to the ci/raumsta/nee of actual payment of the loss? In the former case, the contract was but one of indemnity; in the latter, it was necessarily one to provide the reinsured with means to protect themselves against their liability to the parties they had insured.

No privity of contract existed between the parties originally insured and the reinsurers, even in case of the insolvency of the original insurers (Herckenrath v. Am. Mut. Fire Ins. Co. 3 Barb. Ch. 63). Under the ordinary construction of contracts of reinsurance, they impose upon the reinsured no obligation to pay the insured or to prove actual payment of the loss before he can call upon his reinsurer (3 Kent Com. 279, and cases cited in note s; Hone v. Mut. Safety Ins. Co. supra ; 1 Pars. on Mar. Ins. 300). “ When the loss has happened and been duly ascertained, the reinsurer must pay to the first insurer the amount of the loss within the policy, notwithstanding the first insurer has become insolvent, and can only pay in part. He must pay the entire sum reinsured, and has no concern with any arrangement between the first insured and his creditors ” (2 Kent Com. 279, note e). This contract of reinsurance having been made with express reference to the original policy of insurance, prescribing the time for payment of the loss thereby insured against, must be construed as merely fixing a like titne for payment of the pro rata loss to the reinsured. Such is its natural construction as a mere contract of reinsurance: the loss against which it insures is “ payable ” at the same time with the reinsured—not when the reinsured have actually made payment. Whatever ambiguity or uncertainty, if any, exists, is upon well recognized principles of construction, to be held the most strongly against the defendants as the contracting party. The terms used do not indicate with any plainness of intention, as against the rules of law above stated, that the payment to be made under it should be deferred until the reinsured had made actual payment of the whole loss. And, in my opinion, the clause in question has reference to the time which, by the original insurance, the North American were required to make payment of the loss, rather than to the circumstance that they had made such payment.

Judgment should be given accordingly on the case submitted. Judgment for plaintiff.

* Present, Daly, Oh. J,, Robinson and Loew, JJ.