Brief Fact Summary. A clause in an insurance policy required a party with a security interest in the policy to pay the premiums if the individual benefited by the policy failed to pay the premiums.
Synopsis of Rule of Law. "Where words or other manifestations of intention bear more than one reasonable meaning an interpretation is preferred which operates more strongly against the party from whom they proceed, unless their use by him is prescribed by law."
Any provision of any contract or agreement, express or implied, stipulating for notice or demand other than such as may be provided by law, as a condition precedent to establish any claim, demand, or liability, shall be null and void.View Full Point of Law
Issue. "[W]hether the language in the loss payable clause 'provided, also, that in case the Lessee, Mortgagor or Owner shall neglect to pay any premium due under such policy the Lienholder shall, on demand, pay the same' is a condition or a covenant."
Held. The court concludes that the language is a covenant and affirms the trial court's judgment. The court observes that the Restatement provides "[w]here words or other manifestations of intention bear more than one reasonable meaning an interpretation is preferred which operates more strongly against the party from whom they proceed, unless their use by him is prescribed by law." The court then cites another Restatement section which says the above rule is oft applied to insurance companies, which regularly prepare the policy the language stems from. The court concluded that the clause was a condition. As a condition, the Plaintiff must pay "the premium on the insurance involved from and after the date of the demand if plaintiff desires to keep the insurance in force." Also, the parties stipulated that the insurance policy was in full force when the collision occurred and that the demand by the Defendant for payment did not occur until after the losses from the collision occurred and the policy was cancelled.
Discussion. This case demonstrates the tools courts use when construing whether certain language is a condition or a covenant.