For reversal -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor and Hall. For affirmance -- None. The opinion of the court was delivered by Proctor, J.
This appeal concerns the rights of a loss payee under a theft insurance policy.
In October 1960 the plaintiff, Highway Trailer Company (Highway), sold a trailer to Donna Motor Lines, Inc. (Donna) for $14,430.86. Donna made a small down payment and Highway retained a security interest in the trailer through a conditional sale contract. The balance due was to be paid in monthly installments. Before delivery to Donna, Mount Vernon Fire Insurance Company (Mount Vernon), the defendant, issued a fire and theft policy covering the trailer. This policy named Donna as the insured and also contained the following provision: "Loss Payee: Any loss hereunder is payable as interest may appear to the insured and Highway Trailer." In early December, before the first installment payment had been made by Donna, the trailer disappeared from a parking lot in Chicago. Highway did not receive any further payments from Donna and on June 26, 1961, brought an action against Donna for the balance due under the conditional sale contract and against Mount Vernon upon its policy covering the theft of the trailer. Judgment against Donna was entered by default. Highway's claim against Mount Vernon was tried in the Law Division without a jury. The trial judge found that the trailer was stolen. However, he also found that Donna, the named insured, had failed to file a proof of loss as required by the policy*fn1 and that compliance
with this requirement had not been waived by Mount Vernon. He held that Highway, as a loss payee, had no greater rights than the insured and, since Donna had committed a breach of the policy which would preclude its recovery against Mount Vernon, Highway was similarly barred. Highway appealed and the judgment of the trial court was affirmed by the Appellate Division. We granted Highway's petition for certification. 45 N.J. 590 (1965).
The trial judge made detailed findings of fact which are not disputed by either of the parties on this appeal. In late November 1960 Donna's trailer made its first run, hauling cargo from Jersey City to Chicago. It arrived in Chicago on Friday, November 30, and was unloaded by the driver and left in a parking lot for the weekend. On Monday, December 3, the driver discovered that the trailer was missing from the lot and he immediately notified the police and the Federal Bureau of Investigation. The value of the trailer at the time of the theft was $13,000, an amount less than Donna's outstanding debt to Highway under the conditional sale contract. No part of Highway's default judgment against Donna has been satisfied.
On December 16, 1960 Lawrence Charron, the president of Donna, personally reported the loss to Frank Walsh, the general agent of Mount Vernon.*fn2 At about the same time Charron also notified James O'Shea, the sales manager of Highway,
that the trailer had been stolen. Sometime before Christmas 1960, O'Shea telephoned Walsh to discuss the loss. In that conversation Walsh asked O'Shea for a copy of the sales order and the conditional sale contract, both of which were subsequently sent to Walsh's office. During that same conversation O'Shea inquired if all the conditions of the policy had been met. Walsh replied that everything as of that time was in order.
The trial court further found that about January 1, 1961, Charron telephoned Walsh to inquire about the status of the claim. Walsh informed him that he was going to Chicago to personally investigate the theft. Early in January Walsh spent four days in Chicago checking into the facts surrounding the disappearance of the trailer, and as a result of his investigation he became suspicious of the legitimacy of the loss. Because of his suspicion he decided to take no further action on the claim, in his own words to "stand pat."*fn3 However, the trial court specifically found that at no time before the trial did Walsh ever indicate to O'Shea or any other representative of Highway that he suspected the genuineness of the theft.
Between January and May of 1961 O'Shea had several conversations with Walsh in which he attempted to find out why there was a delay in settling Highway's claim. In each instance Walsh told him that the matter was still under investigation. During these conversations Walsh also discussed with O'Shea the price of a replacement for the missing trailer. At the last conversation Walsh inquired if Mount Vernon would receive a price reduction if a replacement trailer were purchased from Highway. He stated that otherwise
he could probably obtain a trailer equivalent to the missing one from another company at a lower price. O'Shea said that Highway would not reduce its price and that ...