1 that in such a case the insured should be allowed to maintain an action for a reformation of the contract. In a case involving the precise facts we assumed, the court permitted the reformation of the contract and declared "the plaintiffs could not be regarded as guilty of laches in not examining the policy and applying earlier for its correction." CANCELLATION OF THE POLICY The Right of Cancellation and Reasons For.-Unless reserved, the right of cancellation does not exist, except by mutual consent. Under the provisions of the Standard Policy, however, both parties to the contract may cancel, lines 51 to 55 of the policy providing that "this policy shall be cancelled at any time at the request of the insured; or by the company by giving five days' notice of such cancellation. If this policy shall be cancelled as herein before provided, or become void or cease, the premium having been actually paid, the unearned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate; except that when this policy is cancelled by this company by giving notice, it shall retain only the pro-rata premium." In several states, like Massachusetts, Minnesota, and New Hampshire, the company is required to give ten days' notice of cancellation, and in Wisconsin, although five days' notice on the part of the company is sufficient under ordinary circumstances, provision is made for sixty days' notice during times in which the hazard shall be increased solely by the act of God. In any case, the right of cancellation reserved by the company cannot be exercised under circumstances which would operate as a fraud on the insured, where, for example, the company would serve notice of cancellation at a time when the property is threatened by an approaching conflagration. 1Palmer vs. Hartford Fire Insurance Company, 54 Conn., 488. Many reasons exist why the company should reserve the right to cancel the policy after giving due and timely notice. The company, subsequent to the issuance of the policy, may discover an undesirable moral hazard, or may become aware of a great increase in the physical hazard not considered in the original policy, such as changes in construction or processes of manufacture, or where a property is left vacant or in an unprotected condition. The company may desire to cancel a policy because it has been burned, lost, or mislaid, or because of non-payment of the premium by the policyholder. After a suspicious partial loss, the company may wish to relieve itself from further liability under the policy before a final settlement of the loss can be made; and in many cases where the adjustment of a loss, which does not involve all the property covered by the policy, is delayed, companies consider it important that, pending the settlement, they should promptly relieve themselves from further liability on the remaining property described in the policy. Or the company may decide to retire from business and desire to cancel all its policies. But whatever the reason for the cancellation of the policy, it is a well-established principle that neither the insured nor the company need offer any explanation for their decision to cancel. Tender of the Unearned Premium.—To legally effect a cancellation of the policy on the part of the company, there must be an actual tender without conditions of the unearned premium for the unexpired term. It is true that the cancellation clause of the standard policy was purposely so worded as to make cancellation possible without tendering the unearned premium. But the courts have variously construed this clause, holding, in most instances, that a full tender of the premium is still necessary under the standard 'Lisdell vs. New Hampshire Fire Insurance Company, 155 N. Y., 163. policy. To avoid litigation such tender is invariably made to the insured. The cancellation notice1 usually takes some such form as shown in Fig. 6. Short Rate Tables.-As already observed the standard policy provides that, in case the company cancels the policy the unearned portion of the premium shall be returned in full. In case, however, the insured cancels the policy, the company may retain the customary "short rate." To do otherwise would enable a property owner to evade the proper charges for short risks, since, if he could receive back all premiums on the pro-rata basis, he could take a policy for a year and cancel it when no longer wanted. As examples of the short rates which fire-insurance companies are in the habit of retaining when policies are cancelled by the insured, the following tables are given, the first being that adopted by the New York Fire Insurance Ex 1 1In view of Supreme Court decisions, the following note is frequently attached to the cancellation notice for the guidance of the company's agents: CANCELLATION NOTICE. NOTE. Serve this form of notice personally, if practicable, or by registered letter, keeping memorandum on this stub, so that positive proof of service on the insured can be made. The date of terminating policy should be at least five days after service or receipt by the insured of notice. In cases when quick and positive cancellation is desired, as when ordered by Company, etc., and when premium has been paid, make a tender of the unearned premium with service of notice and erase last three lines of notice and add "The pro rata unearned return premium is herewith tendered." The courts hold that such tender is required for a legal cancellation. If loss is payable to a third party, mortgagee, or otherwise, notice should be served on such party. If risk came through broker, or other agents, give notice also to them. SECURE THE POLICY AT THE END OF THE FIVE DAYS. change for one-year policies, and the second a table adopted by the "Western Union, ""designed for policies running longer than one year. Except in the case of policies on contents of listed storage stores and grain elevators, which can be cancelled for less than one month at short rates for the fractional This is to notify you that in accordance with the conditions of said policy (see in particular lines 51 to 55 of policy), said Company elects to cancel and terminate its liability under same at noon of the.. .day of... 191.., and by virtue of said conditions and this notice thereunder, such liability will cease and terminate at that date. The pro rata unearned premium, if the premium has actually been paid, is held subject to your order on surrender of said policy to the undersigned Agent of said Company. part of a month, all policies written for a month or more are subject to the rule "that fractional parts of a month shall be charged the full month's premium; no return to be made on a policy written for a period of less than one month.” 1 day. 2 days.. 3 days. Annual rate. 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 110 1 2 2 2 2 3 3 3 3 2 2 6 1 month. 5 2 months. 3 months. 4 months. 5 months.. 6 months. 7 months. 8 months. 9 months. 10 months. 11 months. 8 9 10 11 12 13 14 15 16 17 18 19 8 9 11 12 14 15 17 18 20 21 23 24 26 27 29 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 13 15 18 20 23 25 28 30 33 35 38 40 43 45 48 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 18 21 25 28 32 35 39 42 46 49 53 56 60 63 67 19 23 26 30 34 38 41 45 49 53 56 60 64 68 71 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 22 26 30 34 38 43 47 51 55 60 64 68 72 77 81 23 27 32 36 41 45 50 54 59 63 68 72 77 81 86 24 29 33 38 43 45 52 57 62 67 71 76 81 86 90 20 22 30 33 40 44 50 55 60 66 70 77 75 83 80 88 85 94 90 99 95 105 Annual rate.... 125 150 175 200 225 250 275 300 325 350 375 400 450 500 3 4 4 5 5 6 6 7 7 8 8 9 10 1 day.. 2 days. 3 days. 4 days. 5 days. 10 days. 15 days. 20 days. 1 month. 2 months. 3 months. 4 months. 5 months.. 6 months. 7 months. 8 months. 9 months. 10 months. 11 months. 6 7 8 9 10 11 12 13 14 15 16 18 20 8 9 10 11 11 13 15 16 18 19 20 23 25 9 11 12 14 15 17 18 20 21 23 24 27 30 10 12 13 15 17 18 20 22 23 25 27 30 33 13 15 18 20 23 25 28 30 33 35 38 40 45 50 17 20 23 27 30 33 37 40 43 47 50 53 60 67 21 25 29 33 38 42 46 50 54 58 63 67 75 83 25 30 35 40 45 50 55 60 65 70 75 80 90 100 38 45 53 60 68 75 83 90 98 105 113 120 135 150 50 60 70 80 90 100 110 120 130 140 150 160 180 200 63 75 88 100 113 125 138 150 163 175 188 200 225 250 75 90 105 122 135 150 165 180 195 210 225 240 270 300 88 105 123 140 158 175 193 210 228 245 263 280 315 350 94 113 131 150 169 188 206 225 244 263 281 300 338 375 100 120 140 160 180 200 220 240 260 280 300 320 360 400 106 128 149 170 191 213 234 255 276 298 319 340 383 425 113 135 158 180 203 225 248 270 293 315 338 360 405 450 119 143 166 190 214 238 261 285 309 333 356 380 428 475 Cents Cents |