Follette v. United States Mutual Accident Ass'n

Avery, J. after stating the facts: It was competent to prove by the agent of the defendant, on his examination as a witness, that he knew, or had had abundant opportunity *244 and good reason to know the extent of plaintiff’s deafness when he solicited him to take out a policy, or subsequently, and before the application was signed. Actual knowledge of the plaintiff’s defective hearing on the part of the agent was constructive notice of it to his principal, and, hence, the latter is deemed to have waived the objection that the deafness of the former was a bodily infirmity, notwithstanding the fact that it was provided in the policy that the agents of the company should have no power to waive its conditions. Hornthal v. Insurance Company, 88 N. C., 73; Dupree v. Insurance Company, 93 N. C., 240; ibid., 92 N. C., 422; Collins v. Insurance Company, 79 N. C., 284; Insurance Company v. Wilkerson, 13 Wall, 222; Insurance Company v. Garfield, 60 Ill, 124; Witherill v. Insurance Company, 49 Me., 200; Insurance Company v. McVea, 8 Lea, 513; Woon on Insurance, § 496: Morrison v. Insurance Company, 59 Wis., 162; Shafer v. Insurance Company, 53 Wis., 361; Insurance Company v. Earle, 33 Mich., 143. An application for insurance constitutes a part of the contract between the insurer and the insured, and the representations contained in it are presumptively inducements to the former to enter into it. But ivhen it appears that an agent, through whom a corporation acts, himself examined and valued, or had opportunity to estimate by examination actually made by him, the value of property insured against fire, or frequently conversed with a man partially deaf, had opportunity to test the extent of his infirmity, and after-wards solicited, or forwarded with favorable .recommendation, his application for insurance against accident, the insured will not be absolutely precluded from showing the fads as evidence that the corporation assented to what subsequently appeared to be an over-valuation in ihe one case, or had knowledge of the defective hearing, and waived objection to the risk on account of it, in the other. *245 It was material that the jury, in passing upon and finding the facts upon which the liability of the defendant depended, should hear any testimony that would aid them in determining whether the defendant company was induced, or might reasonably have been induced, by the false representation contained in the application, to enter into the contract, when it-would not have done so had its agents had full knowledge of the facts. The representation in the application must be, in contemplation of law, falsely and fraudulently made, in order to prevent a recovery in case of loss; but, in the absence of any proof of knowledge of the misrepresentation complained of, or waiver of objection on account of it by the agents of the insurer, a false statement constituting an apparent inducement to the contract will be deemed to have been made with fraudulent intent. Mace v. Insurance Company, 101 N. C., 133. The Courts of this country have differed widely as to the admissibility of testimony in cases like that before us. Some have held that'parol testimony was not competent in a case to show a waiver of the requirements in the conditions of a policy, or of the warranty arising out of the application, while others have limited the power of agents to waive its requirements, in the face of a prohibitory provision in the policy, to matters not constituting essential and material portions of the contract, such as the stipulations as to proof of loss. There is a very general concurrence, of course, in the view that where the execution of a contract has been procured by the fraud of an agent of the insurer, it may be declared void upon showing the acts of the agent inducing its execution. This case is distinguishable from that of Bobbitt v. Insurance Co., 66 N. C., 70, in that in the latter the plaintiff not only made a false statement, which was an apparent inducement to the defendant to issue the policy, but failed to rebut the presumption of fraudulent purpose by showing any *246 actual knowledge of the true value of the properly on the part of the corporation acting through its agent. In Dupree v. Insurance Co., 93 N. C., 240, Chief Justice Smith, delivering the opinion of the Court, said: “It was certainly competent to show this source of information possessed by the agency firm, in regard to the property included in both policies when they issued the last, as tending to rebut the charge that it was solely brought about by the fraudulent statements contained in the plaintiff’s application.” The evidence referred to tended to show that a sub-agent of a general insurance agent had, the year before, inspected the same property for another company for which the general agent was acting, and had issued a policy upon the valuation then declared just by the sub-agent, and the general agent had, the next year, sent the insured the policy sued on, which was issued in the name of another company upon the property destroyed by fire, but based upon the same valuation. Under the principle laid down, it was eqaálly competent and material to show that Mackey, the agent of the defendant company, knew and could have informed his principal, that the plaintiff was partially deaf, and, from the very nature of the case, could have communicated the extent of the infirmity. Being presumably in possession of the information acquired by its agent, the company is not deemed to have been induced to take the risk by the representation in the 'application that the plaintiff was not subject to any “bodily infirmity.” The principles announced by this Court in the cases 'already cited, are supported by reason and sustained by authority. May on Insurance, §§ 131 and 132; 1 Phil, on Ins., § 904. In Hornthal v. Insurance Co., supra, the Court say that the policy “ was issued and delivered to the plaintiff, with actual knowledge, on the part of the agent, and constructive *247 knowledge of bis principal, and must be deemed to bave been done with tbe full assent to tbe proposed increase.” See, also, Collins v. Insurance Co., 79 N. C., 279; Argall v. Insurance Co., 84 N. C., 355; Dupree v. Insurance Co., 92 N. C., 417. “Tbe powers of the agent are prima facie co-extensive with the business entrusted to his care, and will not be narrowed by the limitations not communicated to the person with whom he deals.” Insurance Co. v. Wilkinson, 13 Wallace, 222. So, in the case of Cuthbertson v. Insurance Co., 96 N. C., 480 (cited by the defendant), the insured made a false representation as to the title of the property destroyed by fire, and offered no testimony to trace any actual knowledge of the facts to the defendant, or to rebut the presumption of a fraudulent intent by a waiver. Justice Davis, in Mace v. Insurance Co., 101 N. C., 133, says: “A false statement made in the application, when the application constitutes a part of the contract, will render the policy void, pu l so will any representation of a material fact by which the company is misled, if falsely and fraudulently made.” But where there is a waiver, as in the cases of Hornthal v. Insurance Co. and Dupree v. Insurance Co., supra, though the false statement be made in the application itself, it does not mislead, and it cannot be considered an inducement to the contract. There was error, for which a new trial must be granted. Error.