Gazzam v. German Union Fire Insurance

AlleN, J., after stating the case. The policy declared on is what is known as the standard policy, and contains the provision approved by the statute, that “in the matter relating to this insurance, no person, unless duly authorized in writing, shall be deemed the agent of this company.” We do not think it was the purpose of the statute to say that no recovery could be had on a policy of insurance containing stipulations not provided for in the statute, or that the stipulation under consideration imposes on the insured the duty of showing that the agent who issues the policy had written authority to do so. If such construction should be adopted, fire insurance would be a delusion and a snare. The company could insert a new provision in the policy and render it void, or it could appoint its agents by parol, and, if the standard policy was issued, fhe inability of the insured to produce written authority of the agent would prevent a recovery. The standard policy has been very generally adopted, and many of its terms have been considered by the courts. The reasons for its adoption are well stated in Quinlan v. Ins. Co., 133 N. Y, 365, in which the Court says: “The act (chapter 486, Laws 1886) providing for a uniform policy known as the standard policy, and which makes its use compulsory upon *337 insurance companies, marks a most important and useful advance in legislation relating to contracts of insurance. Tbe practice which prevailed before this enactment, whereby each company prescribed the form of its contract, led to great diversity in the provisions and conditions of insurance policies, and frequently to great abuse. Parties taking insurance were often misled by unusual clauses or obscure phrases concealed in a mass of verbiage, and often so printed as almost to elude discovery. Unconscionable defenses, based upon such conditions, were not infrequent, and courts seem sometimes to have been embarrassed in the attempt to reconcile the claims of justice with the law of contracts. Under the law of 1886, companies are not permitted to insert conditions in policies at their will. The policies they now issue must be uniform in their provisions, arrangement and type. Persons seeking insurance will come to understand to a greater extent than heretofore the contract into which they enter. Now, as heretofore, it is competent for the parties to a contract of insurance, by agreement in writing or by parol, to modify the contract after the policy has been issued, or to waive conditions or forfeitures. The power of agents, as expressed in the policy, may be enlarged by usage of the company, its course of business, or by its consent, express or implied. The principle that courts lean against forfeitures is unimpaired, and in weighing evidence tending to show a waiver of conditions or forfeitures the court may take into consideration the nature of the particular condition in question, whether a condition precedent to any liability, or one relating to the remedy merely, after a loss has been incurred. But where the restrictions upon an agent’s authority appear in the policy, and there is no evidence tending to show that his powers have been enlarged, there seems to be no good reason why the authority expressed should not be regarded as the measure of his power; nor is there any reason why courts should refuse to enforce forfeitures plainly incurred, which have not been expressly or impliedly waived by the company.” Also, in Armstrong v. Ins. Co., 95 Mich., 139 : “In construing this statute we must consider the purpose which the Legislature had-in view. It was not to subserve any public policy. Con *338 tracts of insurance, so far as the public are concerned, stand upon no different basis than other contracts. The object was to protect policy-holders and to provide a policy fair to the insured and the insurer, and avoid litigation. It was undoubtedly well known to the legislature that policy-holders do not usually examine and scrutinize their policies with the same care that they do other contracts which they make, involving their ordinary business transactions. The statute imposes a penalty upon an insurance company for issuing such a policy, but imposes none upon the insured. In using the word Void/ the Legislature certainly did not contemplate that an insurance company might insert a clause not ¡provided for in the standard jooliey, receive premiums year after year upon it, and when loss occurs, say to the insured, ‘Tour policy is void, because we inserted a clause in it contrary to the law of Michigan.’ Such a result would be a reproach upon the legislature and the law. The law, so construed, instead of operating to protect the insured, would afford the surest means to oppress and defraud them, and thus defeat the very object the Legislature had in view.” It is also generally held that stipulations contained in the policy, upon which it shall have its inception and become operative as a contract, may be waived. The Court says, in Wood v. Ins. Co., 149 N. Y., 385, that this doctrine “has long been settled.” Nor has the rule that doubtful terms are to receive the construction favorable to the insured been changed. Yance on Insurance, p. 430, states the doctrine as follows: “While many of the unfair features of the earlier policies have been eliminated from the modern standard policy, the courts still apply to this instrument the same rule of construction as the considerations just mentioned led them to apply to the old forms. Any doubtful terms are always construed in favor of the insured. It has been contended that inasmuch as the law compels the use of the standard policy, and will not allow any variance from it, excepting in certain limited particulars, the insurer cannot be regarded as selecting the terms of the contract and subjected to an unfavorable rule of construction on tha't account. This contention, however, has been held to be without merit, for the terms of these statutory policies were chosen with reference to the con- *339 struetion given by the precedent cases to similar terms in other policies, and therefore ought to be regarded as being used in the sense of their previorrs construction. It is also apparent from an examination of the instruments themselves, as well as the history of their adoption, that their terms were really chosen by the underwriters with particular reference to their own interests.” Again, he says, on page 493, with reference to the clause on which the defendant relies: “It may be stated here, however, that the condition in the standard policy stipulating that ‘no person shall be the agent of the insurer unless authorized in writing,’ has no contractual significance whatever. It does amount to notice to the insured, and, as such, is binding on him. if true; otherwise, not.” The decisions of our Court, in so far as the questions have been considered, are in accord with these views. In Floars v. Ins. Co., 144 N. C., 235, it was held “that the enactment of a statute which establishes a standard form for a policy, the statute being only affirmative in its terms, will not invalidate an oral contract”; and in Black v. Ins. Co., 148 N. C., 170, the provisions considered did not affect the validity of the contract in its inception. If, however, it should be held that the stipulation is contractual, the language used will reasonably lead to the conclusion that it relates to matters connected with the insurance after the policy has become a valid contract. It does not say, “in matters relating to this policy, no person, unless duly authorized in writing, shall be deemed the agent of this company,” but does say that “in matters relating to this insurance.” There is no “insurance” until a valid contract in one form or another has been entered into. We therefore conclude that the part of the policy quoted is not contractual, and that it does not relate to the acts of the agent in issuing the policy. Nor do we agree with the contention of the defendant that there is no consideration to support the contract. The surrender of the policy in the Ohio German Insurance Company and the relinquishment of the right to the return pre *340 mium thereon by the plaintiff furnished a consideration; and, in addition, while the defendant may not have received the full premium on this policy, it gained new business by its contract of reinsurance of the risks of the old company. The defendant, while admitting the force of this view, says it has no application to the facts appearing on the record. It says that the plaintiff admits that the defendant never received any consideration for the premium; that the firm of Alston, Rawls & Co. was the agent of the plaintiff, and that the evidence of the plaintiff shows that the policy was issued by virtue of an agreement between Nash and the agent of the plaintiff that the return premium should be used to liquidate an indebtedness existing between Nash and the agent, and it relies on Folb v. Ins. Co., 133 N. C., 180. The authority is decisive of the proposition that the insured cannot pay the premium on the policy by satisfying a private debt due him by the agent of the company, and might be controlling if it appeared that the firm of Alston, Rawls & Co. was the agent of the plaintiff, but this is not our interpretation of the evidence, and there is nothing in the record to show that the plaintiff knew anything of the transaction. It is true that a witness of the plaintiff spoke of the firm as the insurance agents of the plaintiff, but when this statement is considered in connection with the other evidence it means that the firm of Alston, Rawls & Co. was a local insurance agency, with whom the plaintiff insured. It is not unusual to hear the inquiry, “Who is your insurance agent ?” meaning, “With whom do you insure ?” The record discloses that Nash was the general agent of the Ohio German Insurance Company, and the firm of Alston, Rawls & Go. its local agent; that after the failure of this company Nash attempted to make a contract with the defendant, through Fowler & Co., to reinsure its risks; that Nash assured said firm he would take care of the policies of the old company, and gave him the policy in suit, to be sent to the plaintiff, which was done, and the plaintiff then returned the policy he had held in the Ohio German Company and released his right to the return premium thereon. *341 Tbe exceptions to evidence and to the refusal to give the special instructions requested, and to parts of the charge, were entered principally to preserve the exception as to the competency of parol evidence to prove the authority of the agent, and this question has already been considered; but the defendant also insists that the two letters were incompetent because they were declarations of an agent, and that the evidence as to the location of the office of Fowler & Co. was immaterial and prejudicial. The competency óf the declarations of an agent of a corporation rests upon the same principle as the declarations of an agent of an individual. If they are narrative of a past occurrence, as in Smith v. R. R., 68 N. C., 107, and Rumbough v. Improvement Co., 112 N. C., 752, they are incompetent; but if m,ade within the scope of the agency and while engaged in the very business about which the declaration is made, they are competent. McC omb v. R. R., 70 N. C., 180; Southerland v. R. R., 106 N. C., 105; Darlington v. Tel. Co., 127 N C., 450. The letters come within the last class. The evidence as to the location of the office was a slight circumstance on the question of agency, and, standing alone, would be entitled to little consideration, but we think it was not error to admit it. There was evidence fit to be considered by the jury on the issues submitted to them, and the motion for nonsuit was properly refused. We have considered all the exceptions appearing on the record and find no error. No Error.