This is an appeal from a judgment for $9,327.26 in favor of respondent, Glens Falls Insurance Company, a corporation, against appellant, Founders' Insurance Company, a corporation. The cause was tried by the court without a jury. Four witnesses were presented at the trial, to wit: Raffaela Dorothea Brucato, hereinafter referred to as Mrs. Brucato, Francis Freitas, Edgar Peterson, and Ernest Vedovi, all of whom testified by way of depositions taken before trial.
Mrs. Brucato was the owner of an apartment house on Avila Street in San Francisco. The said building was covered by fire insurance with the respondent, Glens Falls, in the total sum of $38,000, represented by four different policies in varying amounts each of which was for a term of three years. Two of the policies bore expiration dates of January 9, 1953; one expired on September 19, 1953; and the other on May 17, 1954. One of these policies provided for additional coverage in the sum of $2,000 for fire insurance on furniture and contents. A Mr. Vedovi was the insurance broker on these policies. Mrs. Brucato also carried an insurance policy with the respondent company on another piece of property. In 1951 a claim was presented by Mrs. Brucato to the respondent under the latter policy. The adjustment of the claim was entrusted by the respondent to a Mr. Frost who was an independent adjuster. Several discussions were had between Frost and Mrs. Brucato concerning the claim. Frost finally told Mrs. Brucato at her home that the respondent would not honor the claim, whereupon Mrs. Brucato told him "`... I shall call up and cancel all of these policies as of now.'" (On the day previous she had stated to him "`... I will cancel every policy with that company, if that is the way they take care of a small claim....'") She then, in the presence
Several months after the aforesaid telephone conversation and, as Mrs. Brucato testified, "nothing was still done," she enlisted the aid of a Mr. Freitas, who was an insurance broker. (Freitas testified that he undertook to attempt to bring about a settlement of the claim early in 1952.) She stated, on examination, that until she sought the aid of Freitas she allowed more time to see what Glens Falls was going to do, stating, "I still allowed more time to adjust it." Mrs. Brucato testified that when Freitas told her he was unsuccessful in settling the claim she told him that she "was going to cancel every policy with Glens Falls"; "I told him to cancel the policies and keep me covered." She testified further that she told him she wanted "the same amount that I had," stating that it was her intention to have the property insured for the said sum of $38,000, and not twice that amount, i.e., $76,000, and that it was her intention that the new policy which Freitas would place on the Avila Street property would be the only insurance she would have on said property. Upon reexamination by counsel for respondent the following questions were directed to Mrs. Brucato, and she gave the following answers: "Q. Anyway, you did tell Mr. Freitas that you wanted to cancel all of the policies with the Glens Falls Insurance Company on the building? A. If they didn't pay the claim. Q. And you told Freitas that you wanted them cancelled; isn't that correct? A. I was going to cancel them if they didn't pay the claim. Q. And you told Mr. Freitas that you wanted the Glens Falls Insurance to be replaced with another company? A. To cover the property with insurance. Q. For the $38,000? A. To keep me covered. Q. That was in the amount of $38,000. A. $38,000 was our intention."
Mrs. Brucato testified that she had no further dealings with Vedovi after she consulted Freitas. She further testified that she herself did not personally act or do anything toward the cancellation of the Glens Falls policies or about seeking any
Freitas testified that Mrs. Brucato first came to him in the early part of 1952; that after he had not been able to adjust the disputed claim, Mrs. Brucato "asked me to cancel all of her insurance out and to replace it"; that these instructions were oral and had reference to all the insurance that was carried with Mr. Vedovi and Glens Falls; that he attempted to dissuade her from so doing because she would recover only a "short rate premium" refund rather than a pro-rated one if she cancelled the policies, it being to her advantage to allow the policies to continue to their expiration period; and that she was adamant, telling him that if he "didn't want to write the business on her terms, she would get herself another broker." He testified further that there was no question in his mind that she wanted to cancel the policies and replace them. Freitas testified also that in March or April of 1952 he visited Mrs. Brucato at her beauty salon and told her that Glens Falls definitely would not entertain her claim, whereupon she then telephoned the Glens Falls office in his presence. He described the conversation as follows: "And she notified the Glens Falls that if the claim were not paid, as she understood it was not going to be, that she did not want anything more to do with Glens Falls and she wanted all of her contracts cancelled and she hung up." Freitas testified further that he himself had told "someone" at Glens Falls, in addition to telling Mr. Frost, that unless the claim was paid the policies would be cancelled. He stated on examination, however, that during his conversations with representatives of Glens Falls he did not tell them he was authorized to cancel the policies or that the policies were then and there cancelled because he was not so authorized. He testified, moreover, that they told him that they couldn't talk to him as a broker because Mr. Vedovi was the broker of record, and that at most all he told them was that Mrs. Brucato would likely cancel at some future date. Freitas did nothing further about cancelling the Glens Falls policies nor did he get in touch with said company again to tell them that Mrs. Brucato wanted the policies cancelled. His explanation was that "It was very definite that if we did not have the claim paid, she was going to cancel."
Freitas subsequently placed a $38,000 fire policy on the said property with Founders, the effective date being March 19, 1952. This policy was issued with a loss payable clause
When Freitas delivered the Founders policy to Mrs. Brucato he advised her of the amount of the return premiums due on the Glens Falls policies and advised her to collect them from Mr. Vedovi. Mrs. Brucato made no effort to collect these return premiums from either Vedovi or Glens Falls, nor did she advise either of them that she was claiming them.
On August 4, 1952, the premises were damaged by a fire. Freitas advised Founders of the loss and the latter sent an adjuster to the scene. In the course of his investigation on the premises the adjuster came across copies of the Glens Falls policies. He queried Freitas about these. Freitas responded "`Well, those are only copies. The originals, I believe, were cancelled.'" (Freitas testified that from the time of the issuance of the Founders policy he had assumed that the latter coverage was the only one on the building.) Freitas, however, on the same day of the fire called Glens Falls and was informed "that these contracts were still in force." Freitas then made a formal report of the fire to Glens Falls and an adjuster was sent out by that company. The adjuster for Founders thereafter prepared proofs of loss against both Founders and Glens Falls. Mrs. Brucato signed these forms on the advice of Freitas who told her that both the Glens Falls and Founders policies were in effect. Accordingly she made a claim for one-half of the loss against each of the companies. Mrs. Brucato testified that she didn't know that she had policies in force with both companies until after the fire. Freitas testified that
Vedovi testified: that Freitas came to him on March 19, 1952, and advised him that he (Freitas) was taking over as Mrs. Brucato's broker; that Freitas told him Mrs. Brucato was insisting that the Glens Falls policies be cancelled and rewritten; that he (Freitas) had attempted to discourage her from so doing because of the loss incurred in short rate cancellation, but that she was very definite on removing all of her insurance from Vedovi as well as Glens Falls; that Freitas told him that Mrs. Brucato was going to cancel the Glens Falls policies; that she had instructed him to do so; and that it was Vedovi's understanding that something was going to be done in the future by either Freitas or Mrs. Brucato in connection with the cancellation. Vedovi testified further that he had no other conversations with Freitas until the time of the fire; that he did nothing in connection with the cancellation of the policies because he "felt that Mr. Freitas had taken everything over and that he would see to it that those policies would be cancelled as he was replacing them"; that Freitas did not request him to do anything in connection with the cancellation of the policies; that he had not spoken to or seen Mrs. Brucato since December of 1951; and that she had never given him instructions directly, orally, or in writing, to cancel the policies.
The fire loss amounted to $37,309.05. After numerous meetings and negotiations the respondent, Glens Falls, finally declined to pay any portion of the loss, taking the position that its policies had been cancelled. Glens Falls thereupon tendered the return premiums to Mrs. Brucato who refused to accept them. The respondent, Glens Falls, did, however, honor the proof of loss as to the $2,000 coverage on the furniture and contents. The contractor, Fred J. Early, Jr., Co., Incorporated, who performed the work of repairing the fire damage, instituted an action against the respondent, the appellant and Mrs. Brucato for the above amount. Although cross-complaints were filed by Glens Falls and Mrs. Brucato, and Vedovi and Freitas were brought in as parties, the action went to trial ultimately only as between Glens Falls and Founders. A stipulation was entered into whereby there was paid to Early and Brucato sums totaling $27,345.18 by Founders and $9,471.51 by Glens Falls, the trial court retaining jurisdiction for the purpose of determining whether Founders was liable to pay all or only one-half of the loss of
The trial court found that the Glens Falls policies were voluntarily and orally cancelled by Mrs. Brucato on or about March 19, 1952; that after said date it was the Founders belief and understanding that it carried the only fire insurance on said premises; that the Founders policy was substituted for the Glens Falls policies; and that on the date of the fire the Founders policy was the only policy of fire insurance covering Mrs. Brucato on said property. The trial court accordingly awarded judgment for $9,327.26 in favor of Glens Falls against Founders.
The vital question presented is whether the Glens Falls policies were cancelled by Mrs. Brucato prior to the occurrence of the fire. Founders contends on appeal that Glens Falls has not met the burden of establishing that the Glens Falls policies were cancelled either under the policy provisions, or at the request of Mrs. Brucato, or by mutual consent. The respondent asserts, on the other hand, that there was substantial evidence to support the court's finding that Mrs. Brucato orally cancelled the said policies, and contends further, that the acquisition of the Founders policy with intent to replace the Glens Falls policies constituted an effective voluntary cancellation of the latter policies. It is conceded by the parties that the Glens Falls policies are California standard fire insurance policies in the form prescribed by section 2071 of the California Insurance Code. The respondent asserts that it is not required that the policies be cancelled by mutual consent as long as they are cancelled by the insured. In this respect respondent urges that they were orally cancelled by Mrs. Brucato pursuant to the terms of the policies, the question of such cancellation being one of fact which finds substantial support in the evidence.
The California statutory standard form of fire insurance policy provided for in section 2071 of the Insurance Code contains the following language: "This policy shall be canceled
The respondent stretches our credulity when it urges that a cancellation took place at Mrs. Brucato's request, particularly when it did not itself consider that such a request was made. This is evidenced by the fact that when respondent was informed of the fire it believed that it was on the loss because its records indicated that the policies were still in full force and effect. That Glens Falls did not consider its policies cancelled is further evidenced by the fact that it did not request a surrender of the policies or tender the return premium until after the fire. While such surrender or return of the unearned premium is not essential to the cancellation of a policy, it is nevertheless a piece of evidence tending to show that the respondent did not deem the policy to be cancelled, particularly in the light of the burden placed upon the respondent to prove cancellation. (K.C. Working Chemical Co. v. Eureka-Security
The trial court did not find that the subject policies were cancelled by mutual consent, and the respondent concedes that they were not. The appellant contends, however, that this is fatal to the respondent's assertion that the policies were, in any event, cancelled by the procurement of the new insurance. This is so, urges the appellant, because cancellation by substitution of insurance is part of the legal theory of cancellation by mutual consent. Respondent, on the other hand, argues that mutual consent is not required for effective cancellation under the rule of insurance cancellation by substitution.
The rule relied upon by respondent is stated in 27 California Jurisprudence 2d, Insurance, section 293, as follows: "Generally, the procurement of new insurance with intent that it shall take the place of existing insurance, and with no intent to thereby acquire additional insurance, constitutes an effective voluntary cancellation of the existing insurance, in which case the insured may not recover under both policies, despite physical possession, by the insured or his agent, of the original policy, and though the premium return, due on cancellation of the original policy, has not been made at the time the loss occurs." (Citing cases.) Respondent relies on similar statements in 45 Corpus Juris Secundum, Insurance, section 458, and 6 Appleman, Insurance Law and Practice, sections 4196
There is no question, in the instant case, that Mrs. Brucato procured new insurance with Founders through her broker, Mr. Freitas, with the intent that it should take the place of the existing insurance with Glens Falls and with no intent thereby to acquire additional insurance. The question posed is whether such act with such intention worked ex proprio vigore an effective cancellation of the Glens Falls policies.
In Apparel Mfrs. Supply Co. the court stated that "[c]ancellation by mutual consent may occur where one policy is substituted for another." (P. 459, citing Strauss v. Dubuque
It would appear, therefore, that unless another method of cancellation has been evolved by decisional law as contended by respondent, i.e., cancellation by substituted insurance arising out of the unilateral intent of the insured uncommunicated to the company, an insurance contract cannot be terminated or extinguished except as provided by its terms or pursuant to the provisions of law which govern contracts generally and as implemented by other provisions of law.
We are fortified in our conclusion by the cases cited by respondent. The Strauss case states that "an insurance policy is in effect canceled when another policy is substituted for it" (p. 292), citing the Stevenson case as authority for the statement. The Stevenson case did not concern itself with the effect of the substituted insurance. There the company was advised prior to the loss that its policy "was cancelled" and the company indicated its assent to the cancellation. The court concluded that the rescission had been established by the mutual agreement of the parties and that it was complete and effectual notwithstanding that the policy was not formally and physically surrendered to the company prior to the loss. The Strauss case does not contain a narrative of the facts except such as appear in the quoted findings of the trial court. It appears, however, that the issue of policy substitution was resolved upon a conflict in the evidence which resulted in the specific finding "`that the policy of the defendants ... was canceled by consent of the parties prior to the time of the fire.'" (Finding No. XII, p. 290; emphasis added.)
In Bache the issue of mutual consent was not before the court because the cause proceeded on a stipulation that the procuring of new insurance by the assured or its agent would effect a cancellation. The specific issue there was whether the loss payee had authority to cancel the original policy on behalf of the insured after the insurance company had given notice of cancellation. White and Pagliero both involved a situation where the company had given notice of its intention to cancel the policy. In each the insured's broker thereafter and prior to the loss advised the company that he had contracted for new insurance to replace the old. The main question before the respective courts was whether the broker was authorized to substitute the insurance, and having concluded that he was, the court held that there was a complete substitution. A reading of these cases compels the conclusion that the court thereupon found that there was a mutual consent to the termination
In view of the conclusions herein reached that the Glens Falls policies were not cancelled we need not consider respondent's remaining contention that the $2,000 personal property coverage and the insurance on the real property were severable contracts.
The judgment is reversed. Accordingly and as provided in the stipulation of the parties, the appellant, Founders, shall have judgment against respondent, Glens Falls, for the sum of $9,327.26 together with all taxable costs incurred in this action, other than costs paid to Early and Brucato pursuant to said stipulation.
Bray, P.J., and Sullivan, J., concurred.
Respondent's petition for a hearing by the Supreme Court was denied December 26, 1962.