Sanford v. California Farmers' Mutual Fire Insurance

McKee J. The only question in the case is whether the non-payment of an assessment levied against a member of a mutual insurance company for his proportion of losses and exjDenses incurred by the company, on the plan of insurance upon which the policy was issued, operates to forfeit or suspend the policy.

It is said in Lycoming Fire Insurance Company v. Rought, 97 Pa. St. 415 : “If a member of a mutual insurance company is in default in the payment of an assessment on his policy after due notice, according to the by-laws and rules of the company, the protecting power of the policy is suspended until the assessment is paid. Ko recovery can be had for a loss sustained during; the continuance of such default.”

[549]But in that case the contract was made with reference to a by-law of the company which provided that whenever an assessment shall have been made upon the premium notes, and the same is not paid within thirty days after having been demanded by the company, .... the policy of insurance given upon such notes shall be null and void until said assessment shall be paid. The time for payment was, therefore, fixed by the contract, and by notice of the assessment and the demand for payment, and the contract itself provided for a forfeiture or suspension of the policy until payment.

The case in hand differs from that in this: there was no time fixed for the payment of the assessment, either by the by-laws of the company or in the notice of the assessment and demand of payment. The liability of the plaintiff to pay the assessment was therefore the result of an obligation arising from an independent contract, which was enforcible against him according to law, and there was nothing in the terms of the policy which declared a forfeiture or suspension of the policy in case of nonpayment. On the contrary, while the policy provided that “all persons insuring shall be ratably assessed, and are bound to pay their proportion of all losses and expenses happening to and accruing in or to said association,” it also provided for the cancellation of the policy by the secretary of the company whenever he deemed advisable .... for non-conformance to the rules and regulations of the association. That discretion was never exercised. There is no claim that, the policy was ever cancelled for non-payment of the assessment.

The court found “that no notification or intimation was at any time given by defendant to plaintiff that the assessment was to be paid by or within any particular time; and that the plaintiff has never, at any time, refused to pay it.”