APPEAL from a judgment of the Superior Court of the County of Maricopa. J. C. Niles, Judge. Judgment reversed and cause remanded, with directions.
Mr. Samuel White, for Appellant.
Messrs. Frazier & Perry, for Appellees.
ROSS, C. J.
The appellees, Phoenix Assurance Company, Ltd., and Insurance Company of North America, each issued a policy to William J. and Adah M. Fellows upon their dwelling-house, with mortgagee clause attached thereto, conditioned that [42 Ariz. 134] loss, if any, was payable to the appellant-mortgagee as his interests might appear. The mortgagors having defaulted in their payments, the appellant, on February 13, 1932, commenced proceedings of foreclosure. On March 7, 1932, the insured property was damaged by fire to the extent of $6,000. On May 2, 1932, the appellant filed an amended complaint in which he made the two insurance companies defendants and prayed for judgment against them. The latter answered, setting up as a defense that the mortgagee had commenced an action on February 13, 1932, to foreclose his mortgage against the insured property and had not notified the defendants of such proceeding, and that by reason of such failure to notify them his rights as mortgagee were terminated. This defense is predicated upon the terms of the mortgagee clauses attached to policies reading as follows:
"2. Any mortgagee . . . who shall have or acquire knowledge of the commencement of any foreclosure proceedings, or of any notice of sale of any of said property under any mortgage . . . shall forthwith notify this Company thereof and, (if the same be not permitted by this policy) shall cause the consent of the Company thereto to be noted thereon; and in the event of failure so to do, all rights, of such mortgagee hereunder shall forthwith terminate. The mortgagee hereby covenants and agrees on demand to pay the premium for said increased hazard for the term of the use thereof."
It is agreed that this clause "is not a part of the New York Standard form of mortgagee clause but is a part of the form adopted and prescribed by the Arizona Corporation Commission for use by insurance companies operating in Arizona." It is also agreed that the mortgagee gave the insurance companies no notice of the commencement of foreclosure proceedings. On the pleadings and stipulations, the [42 Ariz. 135] court entered judgment against the mortgagee, who has appealed upon the sole question of the power and right of the corporation commission to adopt and prescribe the above mortgagee clause.
The power of the legislature to require all fire insurance policies issued in this state to be in the form known as the "New York Standard" has been recognized and approved by this court. Scottish Union & Nat. Ins. Co. v. Phoenix Title & Trust Co., 28 Ariz. 22, 235 P. 137. The statute we considered in that case was paragraph 3440 of the Civil Code of 1913, the pertinent part of which reads as follows:
"No fire insurance company shall issue any fire insurance policy covering any property or interest therein in this state other than on the form known as the 'New York Standard' as now or may hereafter be constituted" -- and it was held to be a valid and constitutional law except as to the phrase "as now or may hereafter be constituted." This phrase was held unconstitutional for the obvious reason that it was an attempt by the legislature to delegate to another authority or body its powers to make laws. In the Code revision of 1928 the wording of said paragraph 3440, above quoted, was changed to read as follows (section 1826):
"No fire insurance
company shall issue any fire insurance policy covering any property or interest therein in this state other than on the form known as the 'New York Standard' with such changes and indorsements as the corporation commission may prescribe."
It is apparent that the only difference in paragraph 3440 and section 1826 is that the former undertakes to delegate to the New York legislature and the latter to the Arizona corporation commission legislative powers.
[42 Ariz. 136] The prescribing of the forms of insurance policies to be used in the state is in its nature legislative and is not delegable to any body or authority.Such has been the holding of all courts that have had the question before them. King v. Concordia Fire Ins. Co.,140 Mich. 258, 103 N.W. 616, 6 Ann. Cas. 87; Anderson v. Manchester Fire Assurance Co.,59 Minn. 182, 60 N.W. 1095, 63 N.W. 241, 50 Am. St. Rep. 400, 28 L.R.A. 609; O'Niel v. American Fire Ins. Co.,166 Pa. 72, 30 A. 943, 45 Am. St. Rep. 650, 26 L.R.A. ...