National Surety Co. v. Petersen , 155 Wash. 113 ( 1930 )

In their affirmative answer, appellants alleged that, at the time they purchased the automobile from Sands Motor Company,they entered into a contract with respondent whereby respondentagreed, in the event the automobile should be confiscated, respondent would pay to Sands Motor Company the balance due on the note and mortgage mentioned in paragraph IV of the complaint; that thereafter the automobile was seized and confiscated by the United States of America; that when the car was seized and confiscated by the United States, respondent then, under theterms of its contract with appellants, became bound to pay to the Sands Motor Company the balance due on the note and mortgage; and that thereafter respondent, under the terms of the contract so alleged, did pay the balance due on the note and mortgage. It was further alleged that Sands Motor Company accepted from respondent the money paid in full payment of the note and mortgage; that, under the terms of its contract with appellants, respondent wasobligated to pay Sands Motor Company the money so paid withoutany recourse on appellants (All italics mine). It is further alleged that, at the time the assignment was made to respondent, the note and mortgage were paid and discharged by the payment of the balance due on the note in accordance with the terms of the contract alleged in the answer; that respondent knew that the note and mortgage were paid when they were assigned to it.

The allegation of the affirmative answer that the automobile was seized and confiscated by the United States of America was admitted by the reply of respondent and all the other allegations denied. As to all those affirmative allegations made by appellants and not admitted, the burden of proof was certainly upon appellants. Appellants introduced no evidence. If the car was confiscated by the United States without fault of theirs, the burden was certainly upon them to prove it, which they did not attempt. The presumption therefore is contrary to what the majority say; and is that it was because of the criminal act of one of them.

There is no evidence in support of the affirmative answer that the insurance item of $139.44 was paid for confiscation insurance rather than for the fire, collision and theft insurance required by the mortgage.

The question here is not answered by the principles involved in cases cited in the majority opinion. No decision found up to now precisely answers this important question. The question here involved is whether one may be protected by a policy of indemnity taken out by another, even at the expense of the insured, against financial loss incurred by the insured in the use of the property in presumptively criminal activities by reason of which the property is confiscated.

It is true that insurance policies are in general to be construed strictly against the companies which issued them; but the rule is not so broad as to compel a construction which would force such companies to save harmless those of their policy holders who suffer financial loss on account of having committed crimes, even though the policy does not except criminal acts; for such an exception, even though expressed, would be contrary to good public policy and void. A contrary holding would permit such an insurance policy holder, not only to take advantage of his own wrong, but to profit financially from his own criminal act.Messersmith v. American Fidelity Co., 101 Misc. Rep. 598,167 N Y Supp. 579.

There the court held that a policy without any exception to indemnify insured against loss from use of his automobile, did not furnish security for loss incurred by insured where his automobile was operated with his consent by a minor under eighteen in violation of the state law.

If such an infraction of law as was involved in that case would void a policy as to the insured, how much more should it void a policy as to the insured, even conceding that appellant in this case was the insured and paid for the insurance, where he, himself, so violated the law with the automobile while it was in his possession and control as to cause or permit it to be confiscated by the United States?

The court of appeals of New York has also recently held inOcean Accident Guarantee Corporation v. HookerElectro-Chemical Co., 240 N.Y. 37, 147 N.E. 351, that an insurer who pays claims against the insured for damages caused by default or wrongdoing of a third party is entitled to be subrogated to the rights of the insured against such third party; that the principle of subrogation ought to be liberally applied for the protection of those who are its natural beneficiaries; that an insurer, as subrogee of the insured, acquires rights against third persons causing loss, which, as between insurer and insured, are beyond the power of cancellation and destruction by the insured.

While there is not a third party constituting a wrongdoer in this case, but the wrongdoer was the insured himself, it seems that the principles applied by the court in that case should apply with much greater force in a case where the insured himself is the wrongdoer.

It is also generally accepted as the law that

"One who has indemnified another in pursuance of his obligation so to do succeeds to, and is entitled to, a cession of all the means of redress held by the party indemnified against the party who has occasioned the loss." 25 R.C.L. 1372, § 55.

The supreme court of Oregon has also held in American Cent.Ins. Co. v. Weller, 106 Ore. 494, 212 P. 803, that on payment of a loss an insurer, as a general rule, acquires the legal right to be subrogated pro tanto to any right of action which the insured may have against any third person whose wrongful act or neglect caused the loss.

The supreme court of Kansas has held in First National Bankof Elk City v. Springfield Fire Marine Ins. Co., 104 Kan. 278,178 P. 413, that, in an action on an insurance policy, the insurer, upon satisfaction of a judgment against it in favor of a mortgagee under a loss payable clause of the policy, is entitled to subrogation to the claims of the mortgagee, where it has a valid defense as against the insured.

The test should be, could appellant maintain an action against respondent upon such policy for the value of the car at the time it was confiscated, appellant himself having brought about the confiscation, presumably by his own criminal act? Equity, good morals and good law, emphatically say not.

Confiscation bonds do not contravene public policy, are not forbidden by law, and they do not undertake to indemnify the assured against damages resulting to him because of his violation of the law, or by anyone else with his knowledge or permission.They are intended for the protection of the vendor. Fidelity Deposit Co. of Maryland v. Moore, 3 F.2d 652.

The judgment should be affirmed.

For the foregoing reasons, I dissent.

MITCHELL, C.J., FULLERTON, and MAIN, JJ., concur with HOLCOMB, J.