clause. The theory of this ruling appears to be that the coinsurance clause is not a condition which may operate to affect an obligation already in being, but rather a definition of the obligation itself. That is to say, it becomes effective coincidently with and as a part of the obligation to insure, goes to its essence, and consequently is not affected by the mortgagee clause which was supposed to protect against breach of condition. A strong dissenting opinion criticizes the majority view from the standpoint both of logic and policy, and presents some arguments which are not easy to answer. Nevertheless, if the case at hand depended upon the standard mortgagee clause without more, I should feel that I ought to follow the earlier decision of this court in the case of Pennsylvania Company v. Aachen & Munich Fire Ins. Co., 257 F. 189, which reaches the same conclusion as the Savarese Case by slightly different reasoning.
The mortgagee clause in this policy, however, contains something in addition to the ordinary standard form. It reads as follows:
"New York and Pennsylvania Standard Mortgagee Clause
"Loss or damage, if any, under this policy, shall be payable to," etc. (Then follows the usual form.)
In my opinion the addition of the words "(Non-Contribution)" indicate an intention on the part of the parties to exclude the mortgagee from the operation of the coinsurance clause, and should be given that effect.
In determining the import of these words, two questions arise: First, do they refer to the coinsurance clause; second, if so, were they intended to be part of the contract between the mortgagee and insurance company and to affect their contractual relation?
As to the first question, it seems almost beyond doubt that these words have reference to the "contribution" created by the coinsurance clause because (a) that is the only clause of the policy which is specifically denominated a "Contribution" clause, and in fact is the only clause in the policy which uses the words "contribution" at all; and (b) the only other clause which could possibly be referred to is the pro rata liability clause which, under well-settled rules of law, was already excluded by the standard mortgagee clause itself, so that words of specific exclusion would be superfluous.
As to the second question, of course the words were put where they are to serve some purpose, and we may not assume that the parties were merely filling a blank space with a pattern of letters. The defendant accounts for their presence by the theory that they were intended not as having any effect upon the contract between the parties, but merely as a heading or description of it. The trouble with this view is that if we adopt it (having found that the words refer to the coinsurance clause) we must also conclude that the parties erroneously described the clause as something which it is not -- much as though a deed had been given headed "Special Warranty Deed" which contained instead a clause of general warranty. The law is clear that the standard mortgagee clause is not a "Non-Contribution" clause. On the contrary, if the standard form is used without more the mortgage is subject to the contribution enforced by the coinsurance clause. So, if the parties means only to give this clause a name, they chose the wrong words. Of course this is possible, but it is not a contruction which should be adopted if another which given a harmonious effect to the words and clause together can reasonably be found.
The view that these words were intended to be an effective part of the contract between the insurer and mortgagee, and, as such, to exclude the coinsurance clause is by far the most reasonable construction that can be put upon them.
When the parties came to attach the standard mortgagee clause to their policy, they must be presumed to have known what was the law; namely, that they were making a new contract and that the words, "this insurance * * * shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property, * * *" would protect the mortgagee's interest from impairment against most, but not all, of the mortgagor's acts. As to the coinsurance clause, the Savarese Case had not been decided when this policy was written, and the matter was certainly still open to construction in spite of the single decision of this court in the Aachen Case.It was perfectly competent for the parties to agree upon a construction by which the words quoted should operate to exclude the coinsurance clause also. As Judge Linn said in Trustee Building & Loan Association v. Liverpool & L. & G. Insurance Company, Ltd., of London, 93 Pa. Super. Ct. 242, they were making a contract "composed of the provisions in the clause and such of those in the policy as are essentially applicable to the mortgagee-clause and the mortgagee's interest." They had the right to decide for themselves what provisions were applicable and what not. They could do it by two words as well as by a whole paragraph, and when they wrote at the head of this clause the words "Non-Contribution" it was a plain declaration that for the purposes of the contract with this mortgagee the coinsurance clause of the policy should not affect the mortgagee's rights.
I therefore hold that in this case the coinsurance clause does not apply, and judgment may be entered for the plaintiff, with interest.
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