Northwestern Mutual Insurance Company, a Corporation v. Milton Michaelson, Yetta Michaelson and Niagara Fire Insurance Company, a Corporation

The Michaelsons owned a building in Culver City, California. It burned up on July 17, 1959. It was stipulated by all the parties that the loss was $16,000. It is fair to say the risk was a poor one. A few years before, Travelers Insurance Co. had paid a fire loss there and decided it wanted no more of the risk. Apparently Northwestern was the next company to carry the risk, issuing a policy in the amount of $19,000.

Some days before the fire, Northwestern notified its agent, Ernest Peters, that it wanted off the risk and desired to cancel the policy. The Michaelsons were customers of Peters, who was also an agent for the appellee Niagara. After receipt of the advice (but still before the fire), and with the Michaelsons’ consent, Peters issued what in the trade is called a “binder” for $19,000 of insurance with Niagara. For short, a binder may be described as “temporary insurance.” On July 16, 1963, Niagara wrote Peters that it would accept the risk only for $9,500. The notice was not received until after the fire.

. The trial court has determined that each company had insurance in the amount of $19,000 in effect and that the loss should be borne equally by Niagara and…