Overland Southern Motor Co. v. Maryland Casualty Co.

Atkinson, J. In substance the plea alleged, that the defendant’s president applied for a policy of liability insurance, the premium for which would be a stated fixed amount, and which would cover specified risks; that the agent of the insurer, on delivering the policy, stated that it conformed to the terms of the application; but that the statements of the agent were untrue in that the policy, purported to cover broader risks than those contemplated in the contract, and contained, different provisions with respect to the amount of the premium; so that instead of there being a fixed premium in amount as agreed upon, there was an additional amount to be arrived at upon the basis of a percentage of all the wages and salaries paid to the various officers and employees of defendant, thereby making a very much greater premium. There can be no question about the materiality of the difference between the contract as alleged and that expressed by the terms of the policy. The plea seeks to reform the contract expressed in the policy, so as to make it conform to the contract between the defendant’s president and the agent of the insurance company, and as it was represented to be by the defendant’s agent at the time of the delivery of the policy, and, upon the basis of the contract as reformed, to deny liability to the plaintiff. The basis of the plea is fraud upon the part of the agent of the defendant in preparing a policy different from that contracted for, and misstating its contents to the defendant’s president at the time of delivering it, coupled with ignorance of the defendant’s president as to the real contents of the policy at the time it was received. As a general rule, where there is no confidential or fiduciary relation existing between the parties, equity will not reform a written contract between them on account of mistake as to the contents of the writing on the part of the complaining party, and fraud of the other party which consists only in making false representations as to such contents on which the complaining party relied, where the complaining party has no sufficient excuse for failing to read the contract. Weaver v. Roberson, 134 Ga. 149 (67.S. E. 662), and citations. The element of inability on the part of defendant’s president to read does not enter into the case. The pivotal question is whether there is sufficient reason for his failure to read the policy. Contracts of insurance differ from contracts of the character mentioned in the case cited above (a contract for .the lease of a hotel), [67] and contracts of a similar nature, in which both parties sign. The case of Niagara Fire Insurance Co. v. Jordan, 134 Ga. 667 (68 S. E. 611, 20 Ann. Cas. 363), involved the reformation of a contract of insurance, and in principle is very similar to the case under consideration. It was there held: “Where, on oral application for a policy of insurance to indemnify the applicant-against loss by fire for the period of one year, the proper agent of the insurer agrees to issue to the applicant a policy of insurance as contracted for, but by mistake of the insurer’s agent another’s name is inadvertently inserted therein as the insured, and the policy is delivered to the applicant by the insurer, who collects the premium, and the applicant retains the policy without discovering the mistake until after sustaining a loss by fu;e nearly three months thereafter, equity will reform the policy so as to make it accord with the oral agreement between the parties.” In that case the controlling question was whether the insured was guilty of laches in failing to read the policy; or, in other words, was there any excuse for failure to read it and discover that it was different from the preliminary agreement ? The policy had been in the possession of the insured for nearly three months, and the mistake was not discovered until after there was a loss. In the course of the opinion, it was said by Evans, P. J.: “The trend of authority is that a mere failure of the insured to read his policy does not amount to such laches as will debar him from having such policy reformed for mistake therein. . . A policy of insurance is issued by the insurer and signed by him or his agent; it is not contemplated that the insured shall sign it. In the insurer’s promise to deliver an accurate policy, according to his oral agreement with the insured, the insured has a just expectation that there will be no designed variance. A man should not be permitted for his pecuniary advantage to impute it to another as gross negligence that the other trusted to his fidelity to his promise. . . The case is quite different from those instances where a man who has negligently signed a contract endeavors to be relieved of its obligation by setting up his own negligence. The fact that the policy as actually made out was in the plaintiff’s hands for nearly three months,' and until after the fire occurred,- is a circumstance to be weighed by the jury as bearing on the truth of the allegation that the policy did not pursue the oral contract.” In other courts this [68] line of reasoning has been applied in recent cases. In the case of McMaster v. New York Life Ins. Co., 183 U. S. 25 (22 Sup. Ct. 10, 46 L. ed. 64), the policy provided for the non-payment of annual premiums. The application, which was part of the policy, was dated December 12, 1893. After the application was filled out' and signed, and without McMaster’s knowledge or assent, the company’s agent inserted therein, “Please date policy same as application.” The policy was issued and dated December 18, and recited that the pecuniary consideration was the payment in advance of the first annual premium, “and of the payment of a like sum on the 12th day of December in every year thereafter during the continuance of this policy.” The policy was tendered to McMaster by the company’s agent on December 26. McMaster’s attention was not called to the terms of the recital just quoted, but, on the contrary, he asked the agent if the policy was as represented, and if they would insure him for a period of thirteen months; to which the agent replied that they did so insure him. Thereupon McMaster paid the agent the full first annual premium, and, without reading it, received the policy and placed it away. McMaster died on January 18, 1895; and he not having paid any further, premium, the company defended on the ground that the policy became forfeited on January 12, 1895, being twelve months from December 12, 1893, with the month of grace added. In deciding the case one question dealt with was whether the plaintiff was estopped to deny that McMaster requested that the policy should be in force from December 12, 1893. It was held that the plaintiff was not estopped from making such denial. In the course of the opinion it was said: “Bearing in mind that MeMaster had made no request of the company in respect of antedating the policies and was ignorant of the interpolation of the agent, and ignorant in fact, and not informed or notified in any way, of the insertion of December 12th as the date for subsequent payments, he had the right to suppose that the policies accorded with the applications as they had left his hands, and that they secured to him, on payment of the first annual premiums in advance, immunity from forfeiture for thirteen months; and the agent assured him that this was so. The situation being thus, we are unable to concur in the view that McMaster’s omission to read the policies, when delivered to him and payment of the premiums made, constituted such negligence as to estop plaintiff from deny [69] ing that MeMaster by accepting the policies agreed that the insurance might be forfeited within thirteen months from December 12, 1893. Knights of Pythias v. Withers, 177 U. S. 260 [20 Sup. Ct. 611, 44 L. ed. 762], and cases cited; Fitchner v. Fidelity Mut. Fire Assn., 103 Iowa, 276 [72 N. W. 530]; Hartford etc. Ins. Co. v. Cartier, 89 Mich. 41 [50 N. W. 747].” The doctrine of this case was applied in Summers v. Alexander, 30 Okla. 198 (120 Pac. 601, 38 L. R. A. (N. S.) 787), in which it was held: “One to Avhom a distinct and definite representation has been made is entitled to rely on such representation, and need not make further inquiry concerning the particular facts involved; and where the transaction involved the taking out of a particular kind of life-insurance policy, the holder had a right to rely upon the belief that the agent would carry out his agreement in conformity to the original contract; and the failure of the agent to do so, whether the result of a mistake or a deliberate fraud, can not operate to the prejudice of such holder in an action brought by the agent to enforce the collection of the premium notes.” The same question is dealt with in the case of Pfiester v. Missouri State Life Ins. Co., 85 Kan. 97 (116 Pac. 245). In the course of the opinion it was said: “If the insured or the plaintiff had discovered the omission from the application, and the error in the policy, it would have been his duty to call them to the attention of the company, and have the necessary corrections made. Delay would have indicated acquiescence, and, if sufficiently prolonged, might have affected the right to the equitable remedy of reformation; but there is no evidence that the mistakes were discovered until the policy had matured by the death of the insured. Meanwhile the plaintiff and the insured were not negligent in failing to examine the application or the policy, and were justified in supposing that they had been written as contemplated.” Other recent cases to the same effect are: Carlton Lumber Co. v. Lumber Ins. Co., 81 Or. 396 (158 Pac. 807, 159 Pac. 969); Salmon v. Farm Property Mut. Ins. Assn., 168 Iowa, 521 (150 N. W. 680). Applying the foregoing principles, it is readily seen that the defendant could not be held barred, as a matter of law, from failure of its president to read the policy and make an earlier discovery of the alleged fraud. It follows that it was erroneous to strike so much of the plea as set up the defense mentioned, and there must be a reversal of the judgment, Judgment reversed. All the Justices concur.