CHAPTER XIII.

STANDARD FIRE POLICY-CONTINUED.

§ 147. Alienation Clause.-Or if any change other than by the death of an insured take place in the interest, title, or possession of the subject of insurance (except change of occupants without increase of hazard), whether by legal process or judgment, or by voluntary act of the insured or otherwise.

This clause is perhaps not altogether free from ambiguity. It is known as the alienation clause, of which fifty different forms are collected in the last edition of May on Insurance (pp. 552-556), most of which provide for the case of a sale, transfer, conveyance, or alienation of the property under divers forms of prohibitory stipulations. In the earlier policies, like the present Massachusetts standard form, the declaration generally was, that a sale or alienation without written assent should avoid the policy. Under that form of prohibition it was held in many cases that to effect an avoidance of the policy there must be a sale or transfer of the entire interest.

The New York court said: "So long as the insured retains such an interest that he may be a sufferer by the loss, the policy remains valid to protect that interest."1

To avoid the effect of such adjudications, which really nullified the clause altogether, some policies were modified so as to prohibit any sale or transfer or change of title or possession, in whole or in part, without written consent. Under such a clause the rule is, that while there cannot be a conveyance of title, or parting with possession in whole or in part, yet an incidental change relating to the title or interest, if it does not alter the character of the interest or ownership of the insured, will not avoid the policy. For instance, giving a real estate

1 Hitchcock v. North-western Ins. Co., 26 N. Y. 68. Locke v. North Am. Ins. Co., 13 Mass. 61.

mortgage is not a cause of avoidance under such a form of alienation clause,' or giving a chattel mortgage, or placing or incurring other liens upon the property.3

A contract to sell is not a sale under a clause prohibiting alienation; and, although the new phraseology of this important clause in the standard policy is unfortunately indefinite, the rule understood and acted upon by the companies and the legal profession generally is that a contract to sell unaccompanied by delivery of possession is not "a change of interest." Consequently, until the deed of conveyance passes the legal title, it is not customary to alter the policies of insurance in such a case.5

If the prohibition were simply against a sale, a sale in foreclosure before being consummated by the delivery of the deed would not avoid; but a transfer or assignment in bankruptcy or insolvency, whether voluntary or involuntary, is a change of interest, and unless consented to by the insurer will vitiate the policy.7

8

A deed, though absolute in form, if given only as collateral security, is regarded only as a mortgage under this clause of the policy, and consequently does not avoid it, though given without any written permission of the insurers. But except as the standard policy provides otherwise, the death of the insured would operate as a change of interest. And a devise by will is also a change of interest or title.10

1 Conover v. Mutual Ins. Co., 1 Clinton v. Hope Ins. Co., 45 N. Y. Comst. 290. Jackson v. Mass. Mut. 454. F. Ins. Co., 23 Pick. 418; s. c., 34 Am. Dec. 69. Phillips v. Merrimack Mut. Fire Ins. Co., 10 Cushing, 350. Judge v. Conn. Fire Ins. Co., 132 Mass. 521.

2 Hennessey v. Manhattan Fire Ins. Co., 28 Hun, 98. Rice v. Tower, 1 Gray, 426.

* Baley v. Homestead Fire Ins. Co., 80 N. Y. 21; 36 Am. Rep. 570. Hosford v. Hartford Fire Ins. Co., 127 U. S. 404.

Browning v. Home Ins. Co., 71 N. Y. 508; 27 Am. Rep. 86. Pitney v. Glens Falls Ins. Co., 65 N. Y. 6.

"Ayres v. Hartford Fire Ins. Co., 17 Iowa, 176. Hill v. Cumberland Valley M. P. Co., 59 Pa. St. 474. Washington Ins. Co. v. Kelley, 32 Md. 421. Haight v. Continental Ins. Co., 92 N. Y. 51.

6

The phrase "change of title" has been many times construed, and cannot be held to cover the giving of a mortgage.1

But in the New York standard policy two very broad words are used in conjunction with each other, "change of interest." It has been said that these words mean 66 every con ceivable change of title or interest." And, also, in another case it was said that these words were broader than the phrase "sold or conveyed," and must be held to cover a contract to sell which had been partly performed, though the legal title had not passed from the insured. A somewhat similar distinction was made in several other cases. And a standard author, in construing the meaning of the alienation clause, says: “But it must be remembered that this depends entirely upon the language of the policy. If the policy stipulates against any change of title, or alteration therein, or against an alienation in whole or in part, a mortgage is held within the prohibition."5

3

It will be found, however, upon an examination of the forms of the policies in respect to which the opinions just cited were given, that they contained nothing which by implication indicated that the disclosure of mortgages was not required; whereas, taking the New York standard policy in its entirety, the rule must be considered clear, that the giving of a mortgage or other incumbrances which are not by terms forbidden, will not avoid the policy though no written consent be indorsed thereon."

To convey the property and take back a mortgage amounts to a sale and a change of interest."

This clause must be construed in connection with the character of the property insured, and has no application to a fluctuating stock of goods in a store or factory, which it must be presumed is intended to be sold and replaced from time to

time, but the policy usually attaches only to such property as is in the designated locality at the time of loss 1

1

Where the insured are joint owners of the property or jointly interested in it, as, for example, in the case of partners or trustees, a transfer from one to another without the introduction of any new person has been held to be no violation of the prohibition of the alienation clause which was formerly in use. This conclusion was put upon the ground that the company having exhibited its willingness to grant insurance to those named in the policy, a mere shifting of interest among them would not be objectionable to the company. The reason for this rule would seem to admit of its application to the case where the parties named in the policy are not joint owners but only jointly insured.2

Whether, under the alienation clause of the New York standard policy, the permission of this rule is applicable at all, or is confined to a case where joint ownership or joint interest exists, or whether it is applicable as between part owners or tenants in common, who have not, strictly speaking, a joint ownership, is not altogether clear, and especially since the recent case of Walton v. Agricultural Ins. Co., 116 N. Y. 326. In that case the policy was issued to Walton and his wife upon a barn the title to which was in Walton at the time of the issuance of the policy, but which Walton told the soliciting agent of the company he was about to convey to his wife. Subsequently, without the written consent of the company, which the terms of this clause of the policy required, Walton conveyed the title through a third person, as a conduit, to his wife. It was held by the Second Division of the Court of Appeals, four justices to three, that the policy was void, on the ground that there had been a breach of "the warranty against a conveyance of the property without the written consent of the company." It is, perhaps, a misfortune that the majority of the court, in their concise opinion, do not state the grounds

1 Wolfe v. Security Fire Ins. Co., 39 Peck v. New London Co. Mut. Ins. N. Y. 49. Co., 22 Conn. 575. Lockwood v. Middlesex Mut. Assur. Co., 47 Conn. 553. Walton v. Agricultural Ins. Co., 116 N. Y. 326. Allemania Fire Ins. Co. v. Peck, 133 Ill. 220.

Hoffman v. Etna Fire Ins. Co., 32 N. Y. 405; s. c., 88 Am. Dec. 337. Powers v. Guardian Fire & Life Ins. Co., 136 Mass. 108; 49 Am. Rep. 20.

of their decision with as great particularity as is exhibited by the dissenting opinion of Mr. Justice Bradley. Whether the court based their conclusion upon the words, "if the interest of the parties therein be changed in any manner," or upon the fact that there was no joint interest between the vendor and the vendee, or upon the fact that an intermediary was called in to effectuate the transfer between husband and wife, is not made clear by the prevailing opinion. The change introduced into this clause by the phraseology of the New York standard policy certainly does not tend to the elucidation of this particular question.

A leading author is of the opinion that when the policy provides that any "change of interest" shall void the policy, a sale even by one co-partner or other joint owner to another, will produce a forfeiture.1 But the ruling was otherwise by the Alabama court. Another court was of opinion that a division on petition for partition, by one co-tenant against another, was a change in the title, though not strictly an alienation.

A careful reading of the New York standard policy in its entirety would seem to indicate that there was no intention of restricting the liability of the insurers by the phraseology adopted for this particular clause of the policy; and a distinction may be made between those policies in which the words. "change of interest" are added to the ordinary alienation clause, for the purpose of enlarging its meaning, and the case of the New York standard policy, in which the one word "interest" is used as a brief and appropriate substitute for the longer phrases which had previously been employed.

Whatever may be the rule in the case of different part owners, who are not joint owners but are insured jointly, there is no doubt, of course, that the introduction of a new interest or person without permit voids the policy under this clause.1

After the loss has occurred, and the risk has terminated, the

1 Wood on Fire Ins., sec. 357.

'Malley v. Atlantic F. & M. Ins.

? Burnett v. Eufaula Home Ins. Co., Co., 51 Conn. 222.

46 Ala. 11; 7 Am. Rep. 581.

Barnes v. Union Mut. Fire Ins. Co., 51 Maine, 110; s. c., 81 Am. Dec. 562.

Savage v. How.