Wilson v. the Conway Fire Insurance Company

Ames, C. J. The decision of this motion turns upon the legal effect of a very few facts, the simple statement of which is the best argument that can be made'of the questions which it involves. Searle, the agent of the defendants, through whom the plaintiff effected his policy with them, was not, according to the proof, the agent of the defendants to make contracts of insurance binding upon' them, but had only the limited power, to issue blank forms of applications for insurance, to receive them from the applicants when filled up with the answers to the questions proposed in the applications, to transmit applications for insurance in this shape to the office of the company at Conway ; and if the board of directors chose, upon the basis of an application thus received, to fix a rate of premium for the risk proposed and to make out a policy to cover it, to receive the policy, and, upon receipt of the premium, to deliver it to the assured. In the case at bar, it being admitted that the answers to two questions in the application, relating to the person on whose account the plaintiff’s mill was run, and who superintended it, were false, through error or mistake of some one, the question upon the testimony was, whether the mistake was made by Alexander S. Hopldns, the agent of the plaintiff and applicant to procure the insurance, or by Searle, the agent of the defendant insurance company through whom it was effected with them. Both were witnesses in the cause on the part of their respec *150 tive principals, and each threw the mistake in question upon the other. The testimony of Searle, in substance, was, that Hopkins and himself sat down together in his, the agent’s, office, at Providence, and taking an old application upon which a prior insurance for $5,000 had been effected at this office, by the former proprietor of the mill, altered it to a request for $2,500 insurance, the former amount of $5,000 to be divided between this and the Hampden office, of which the witness was also agent; that they corrected this old application also as to the amount of incumbrances specified, and to suit the known change of property, and, having concluded that it was then right, Hopkins, as the agent of the plaintiff, directed him to send it to the company, as Wilson’s application for insurance, although he did not, in words, authorize him to sign it for Wilson. The application, thus made out, was signed by him, Searle, for Wilson, was sent by him to the company, and the policy sued was issued upon the basis of it, no other application to that office for the plaintiff having been proposed, or by him received or transmitted to the defendants. He also swore that Hopkins did not inform him that he, Hopkins, had rented the mill, and was running and superintending it on his own account ; but that, on the contrary, although he knew that the plaintiff had been a farmer, he supposed, as the application represented, that the plaintiff occupied, run, and superintended his mill himself. Hopkins, on the other hand, as a witness for the plaintiff, swore, that although there was a proposition made to him by Searle to correct and alter the old application for the new purpose, upon his explaining to Searle his tenancy, superintendency, and the like, it was agreed that this old application would not answer at all; that thereupon, Searle, having no Conway Company blanks, handed him three Hampden Company blanks, for Wilson to fill up ; that he took them out to Wilson, and one of them was filled up by Wilson and himself as an application to the Hampden Company for $2,500 insurance on the same machinery, upon which Searle afterwards handed to the plaintiff the policy effected thereon with that company; and that when he, the witness, brought back to Searle the application filled up *151 for insurance by the Hampden Company, it was agreed between him 'and Searle, that he, Searle, should, copying the Hampden application, fill up from the answers contained in it a blank application of the Conway Company, and send it to the Conway office for the other $2,500 insurance upon the machinery in the mill, which it had been proposed should be taken by that company. Upon this state of the proof, omitting particulars unimportant to the first ground for a new tidal set forth in the motion, the judge presiding at the trial, in substance, instructed the jury, that whether they believed the testimony of Hopkins or of Searle, the latter, in what he did in relation to this application, was to be deemed, though the agent of the defendants for some purposes, as the agent of the plaintiff; and that though the jury believed that the falsity of the application was caused by the fault or error of Searle, it could not affect the defence of the company, who were not to suffer from the errors of their agent, when employed by and acting in the proper business of the plaintiff. Upon familiar principles of the law of agency, we are all satisfied that the distinction, here alluded to and applied by the judge, is well settled by authority, and indeed is the necessary result of proper deductions from those principles. The plaintiff was contracting, through his agent, with the defendants, through their agent; and well knew, as the course of the whole transaction showed, that the latter had no general power from the defendants to make contracts of insurance which should be binding upon them, but only the power to receive written and printed applications from those wishing to procure insurance, transmit them to the home board, and if they chose to issue policies upon them, to deliver the policies to, and receive the premiums from, the persons for whom the policies were intended. If, under such circumstances, the plaintiff chose to employ the agent of the insurers to do a duty which was incumbent on himself under the contract, and thus to make him for the performance of that duty his agent, he is not to be released or excused from consequences resulting from the carelessness or want of skill of the person thus employed by him, because that *152 person is also employed by the other contracting party in another portion of the same transaction. Without burdening our opinion with the many decided cases, cited by the learned counsel on either side, as bearing upon this point, none of which will, we believe, when critically examined, be found to impugn this familiar legal notion, we are quite satisfied with the terse expression of it by the able and learned chief justice of Massachusetts, when applying it, as the organ of his court, to the case of a fire policy, the erroneous application for which had been drawn up for the assured by a director and agent of the company insuring. Shaw, C. J., Lowell v. Middlesex Fire Ins. Co. 8 Cush. 127, 133. At the same time we are also satisfied that the judge who tried this cause, from a misconception of the legal bearing of the testimony of Hopkins upon it, erroneously applied the distinction just spoken of, and misdirected the jury as to the effect of that testimony. It is true, that had the mistake in the application actually occurred, either from its being made jointly by Searle and Hopkins when employed in drawing it up, as sworn to by the former, or by Searle alone, when engaged in the act of copying another application for the purpose of sending it to the company at the request of the plaintiff or his agent, as it was agreed to be done, according to the testimony of the latter, (which was evidently the conception which labored in the mind of the judge,) the instruction thus given by him would have been perfectly correct. But, as a matter of fact, what Hopkins swore was agreed to be done was not done ; and the mistake did not occur by an erroneous copying of the Hampden application. According to the testimony of this witness, Searle had no authority for sending to the defendants, as he did send, the application for a former insurance effected at their office only partially corrected to suit the new circumstances, but was to have waited until the application to the Hampden Company had come back to him filled up by Wilson, the plaintiff, and then to have copied and sent that as the plaintiff’s application for insurance to the defendant company. When, therefore, he sent to the defendants the application upon which they issued this policy, he derived, if we believe the testimony of Hopkins, no *153 authority from the plaintiff to do the act which has caused this mischief. He had agreed to act as the agent of the plaintiff, in copying for transmission to this company, the, plaintiff’s application for insurance to the Hampden company, and broke his undertaking in that respect, if this testimony be true, with the plaintiff; but this, so far from proving his authority from the plaintiff for sending to the defendants the application that he 5id send, is the very fact relied on to prove that he was acting ultra vires in so doing. Now Searle was the agent of the defendants, it is agreed, for receiving and transmitting to them written and printed applications for insurance ; and if, as Hopkins swore, he, by mistake, sent this erroneous application to the defendants without authority from the plaintiff, he committed the error in the performance of a duty for which they had employed him solely as their agent; and hence they must bear the consequences of his mistake or carelessness. The case in this respect may be likened to the case of a misdelivery by a carrier’s servant; for which the carrier is always held responsible. A case more resembling this than any that was cited at the hearing of this motion, was the case of Wing v. Harvey, 27 Eng. L. & Eq. 140, decided in 1854 by the lords justices of the court of appeal, in chancery. That was a claim by Wing, the plaintiff, as assignee of life policies originally issued to one Bennett, his creditor, for the payment of money insured by the Norwich Union Life Insurance Company upon Bennett’s life. The defence was, under a condition of forfeiture contained in the policy, that Bennett had gone to Canada in 1835, and continued to reside there until his death in 1849, without the license of the directors of the insurance society. It being proved that the agent of the society, through whom Bennett had effected his policies, had applied to Wing, the assignee, for premiums due upon the policies after Wing had advised him of Bennett’s departure for Canada, and had advised Wing that it would be safe for him, notwithstanding, to pay the premiums, and that Wing had regularly thereafter paid them to that agent and a succeeding agent of the society, who transmitted them to the head office of the society at Norwich, the lords justices held, that inasmuch as the agents *154 were agents for the pu/rpose of receiving premiums upon subsisting policies, their receipts of the premiums from Wing after knowledge imparted to them of Bennett’s departure and residence in Canada, was a waiver of the condition of forfeiture; and that whether they communicated the facts to the directors of the society or not, the society was bound and estopped by the knowledge, acts, acquiescence, and waiver of their agents. Now, so far as the principle of equitable estoppel upon an insurance company in such a matter is concerned, it can make no difference whether the case be tried at law or in equity ; courts of law applying precisely the same rules of equitable waiver and estoppel in respect to things personal at least, and to contracts about them, as courts of equity. > Our conclusion is, that the judge should have left the case to the jury upon the testimony disclosed, with directions to them to find for the defendants if they believed the testimony of Searle, and for the plaintiff if they believed the testimony of Hopkins. On the ground of misdirection to the jury in matter of law in this particular, this motion must be allowed, and a new trial granted to the plaintiff. As the remaining grounds of the motion have been fully argued, they may as well be disposed of now for the direction of the parties, as well as of the judge who may preside at the new trial. The first of these, in substance is, that the defendants should, notwithstanding the statements of the written application to the contrary, be affected with knowledge of the facts verbally communicated to their agent, Searle, by Hopkins, as he swore, about his, Hopkins’s, tenancy of, and running and superintending the plaintiff’s mill. Had the question been one of fraudulent concealment or misrepresentation; had the agent been the general agent of the defendants to make contracts of insurance binding upon them, or even an agent of limited powers, but to receive and transmit verbal communications upon which the defendants were to insure, and the case were one of ordinary representation merely, leaving the question of materiality open, some ground for such a motion might be found in many of the cases cited by the counsel for the plaintiff. But in such a case *155 as this, where the power of the agent is limited to the mere receiving and transmitting a written application to a distant board of directors, upon the basis of which they are to decide whether they will enter into a contract of insurance with the applicant, and upon what terms, considering his description of the risk, and where all this, too, is known to the assured before he receives his policy, it would be violating every principle of law with regard to the admissibility of parol evidence to affect a written contract, and open a door for the practice of the grossest frauds upon insurers, to admit for a moment that such a case is a proper one for the application of the rule that notice to the agent is notice to the principal. In the first place, he is no agent for such a purpose ; and again, if he were, the written representation, supposed to be, and which ought to be deliberately made, according to the common principle, waives, repels, and merges all prior mere verbal statements, and establishes itself as the basis, and the only basis of the contract. Forfeiture for breach of condition subsequent stands upon a very different footing from such representations as to existing facts, made the very basis of the contract, where the agent has, by acts done with full knowledge in the course of and within the scope of his agency, waived the forfeiture. Without repeating the accurate criticism of the cases cited by the counsel for the defendants — made at the hearing of this motion by the counsel for the plaintiff — we are quite satisfied upon the point in question with the rulings made and the reasons given in Vose v. Eagle Life & Health Ins. Co. 6 Cush. 42, 49; Barrett v. Union Mut. Fire Ins. Co. 7 Cush. 175, 179, 180, 181; Lowell v. Middlesex Mut. Fire Ins. Co. 8 Cush. 127, 133; and Forbes v. Agawam Mut. Fire Ins. Co. 9 Cush. 470, 473. The last ground for new trial alleged in the motion is, that the judge ruled out evidence offered by the plaintiff to prove that the risk would be less hazardous if the mill or “ works ” were operated on account of, and superintended by, the tenant Hopkins, because of his greater knowledge and experience in the care of such property, than if operated and superintended by the plaintiff; the purpose of the evidence being to show that the falsity of the answers to questions 19 and 20 in the applica *156 tion, that is, the misrepresentations in these respects, were not material to the risk. At the hearing of this motion it seemed to be supposed by the counsel on both sides, that the admissibility of the testimony offéred might depend somewhat upon the question whether the false answers -in question were, technically, warranties or representations. Many cases were cited by the counsel for the defendants to show, that where applications or surveys were referred to and embraced in policies, every fact stated in them was a warranty. Certainly they would not be warranties, if termed or treated in the policy as representations, as shown by Catlin v. Springfield Fire Ins. Co. 1 Sumn. 435, 443 ; Houghton et al. v. Manufact. Mut. Ins. Co. 8 Metc. 114, 120; Jones Manufacturing Co. v. Manufact. Mut. Fire Ins. Co. 8 Cush. 82, 84. And where certain answers and certain plans, surveys, or descriptions in an application, as in the one in question, are expressly made warranties in one place, and the policy declared to be on that account void, if they are not correct, in another, the implication is strong that the application is, in other respects, to be deemed, not a warrmty, but a representation. If the insurers, by the language they employ in their policy, leave a matter of this sort doubtful, if they seem inclined to use ambiguous language upon such a subject, or choose to render the meaning of the policy uncertain with regard to it by inserting clauses contradictory or useless. except upon the idea that they are intended to distinguish in this respect between different parts of, or different answers in the application, it is certainly the duty of the court to construe the policy, with all its appendages, most strongly against them, and to hold the application, or so much of it as is not declared to be warranted, a representation merely. • See opinion of Lord St. Leonards in Anderson v. Fitzgerald, 24 Eng. L. & Eq. R. 11-16. In some aspects and for some purposes, such a distinction would be material; but we do not see its materiality in the case and to the question now before us; and we do not think it worth while to enter into a consideration of the different clauses of this policy, and of the conditions annexed to it, for the purpose of ascertaining whether the ruling of the judge who tried this cause was, in this respect, *157 correct. We are perfectly satisfied, considering that the questions falsely answered related to things in themselves material for an insurer to know, — that is,' who occupied, who operated this mill, and therefore whose interests were concerned in its safety, who superintended or took dare of it, — that the parties, by asking and answering questions of this character, are precluded afterwards from agitating their materiality, which they have thus settled for themselves. This rule should especially hold true with regard to so indefinite a matter as the qualifications of persons, not only from knowledge and skill, but from character for honesty and care, to be safe depositaries of the rights and interests of distant insurers, who must be, to a great extent, at the mercy of the assured under a fire policy, as to their causing or preventing losses, or as to honestly stating and settling for them when they have occurred. For many persons, no insurance office who knows them, would, upon any terms, take any risk whatsoever; and from others, they would require a higher or lower premium, graduated by their character for prudence, or even by the circumstances of their business condition, — in other words, by the presence or absence of temptation to make, or of inducements to guard against a loss. “ Upon the facts of this case,” to use the language of Mr. Justice Fletcher, in delivering the opinion of the supreme court of Massachusetts in Vose v. Eagle Life & Health Ins. Co., before cited, in relation to this very subject, “ it is not important whether the proposal or application is considered as a warranty or representation. As a warranty it was so manifestly untrue, and as a representation there was manifestly so material a misrepresentation, that in either view the policy is invalid.” 6 Cush. 48. In the late case of Anderson v. Fitzgerald, 24 Eng. L. & Eq. R. 1, which came before the house of lords, on error, from the exchequer chamber in Ireland, the precise question under a life policy was, (the policy making the answers to certain questions in the proposal warranties, but not as to questions 21 and 22,) whether the judge who tried the cause with a jury misdirected the jury, by instructing them that if they found the answers to questions 21 and 22 both false and material, they should find a verdict for the defendants, the insurers. The question was heard *158 in the house of lords before the lord chancellor (Lord Cranworth,) Lord Brougham, and Lord St. Leonards, assisted by four judges of the court of exchequer, with Baron Parke at their head, and by six judges from the courts of queen’s bench and common pleas. The unanimous opinion of these distinguished jurists was, and they held, reversing the decisions upon this question of the courts of exchequer and exchequer chamber in Ireland, that the direction of the judge to the jury was wrong; and that the questions which he ought to have left to the jury, were, first, were the answers to the questions false, and secondly, were they made in obtaining or effecting the policy. In the opinion of Baron Parke, who had requested time on behalf of the judges to consider, he says for them: “ The first questidn, then, submitted to us is, whether it was necessary for the plaintiff in error to prove on the trial that the above answers, or either of them, were or was material as well as false ? We are all of opinion that it was not. The question does not appear to us to turn upon the well-known distinction between warranties and representations laid down by Lord Mansfield, nor upon the point whether the declaration above mentioned was either a part of the contract binding between the parties irrespective of the policy, or meant to be referred to by it. The proviso is clearly part of the express contract between the parties, and, on non-compliance with the condition stated in the proviso, the policy is unquestionably void.” Higher authority, or more apposite to the question before us, could not be imagined. It will be remarked, too, that if the application in all its parts in this case were not made a warranty, it was made, as in'the case just quoted, by the express terms of the policy, “ a condition of the policy.” As no proof is necessary to prove a condition affixed by the parties to their contract to be material, since they have chosen to affix it, so none can be admitted on the other hand to prove it to be immaterial. This ground for new trial, therefore, totally fails. A new trial upon the first ground alleged in the motion is granted, the costs of this motion to abide the event of the suit.