Arkansas Mutual Fire Insurance v. Claiborne

Riddick, J., (after stating the facts.) This is an appeal by an insurance company from a judgment rendered against it on a policy of insurance against fire issued by it. The first contention of the defendant company is that Claiborne, who was an insurance agent, perpetrated a fraud upon the insurance company in his application for the policy by pretending that the building on which he applied for insurance was a dwelling house when in fact it was a hotel. But in the application, which by the terms of the policy is made a part thereof, Claiborne described the property as a combined rooming and frame dwelling house, having two stories and containing twenty-four rooms. This description shows that Claiborne did not represent the building to be an ordinary dwelling, and the testimony shows that at the time he made the application the house was not used as a hotel but as a home for his family and for persons to whom he rented rooms, some of whom boarded with his family. Shortly before Claiborne’s death the house had been changed to a hotel. The evidence tends to show that, so far as insurance rates are concerned, there is no material difference betwn a rooming house containing as many as twenty-four rooms and a hotel; and if the rates on which this policy was issued were too low, the company itself was to blame, as the application gave substantially a correct description of the house. But this matter is immaterial now for another reason. After Claiborne died one of his sons. W. L. Claiborne, went to the home office of the company, and had some negotiations with the company in reference to a change in the policy affecting among other things the description of the building. The company made an amendment to the policy and mailed it along with the policy to W. L. Claiborne, who was acting for his mother, who was in fact the owner of the property. This amendment contains the following language: “It is understood that the property insured hereunder covers the three-story shingle-roofed frame building and its contents as above described.” Now, the amendment shows that the company had been informed that another story had been added to the building, and that it amended the policy so as to cover the building in its altered shape. The application for insurance made before the alteration showed that the building had twenty-four rooms, and with another story added the company must have known that it then probably contained several more rooms. It did in fact after the alteration contain forty rooms, and the company either knew this or could have learned it by making inquiry. Having been put on inquiry by the information that another story had been added to the building, we must presume that the company knew the number of rooms it 'contained. Now, the application of Claiborne for insurance stated among other things that his total wealth was less than $15,000. It would be such an unusual thing for a man owning no more than that to build a house of forty rooms exclusively for a dwelling house that we cannot conclude that this comapny at the time they made this amendment to the policy believed that it was insuring a building used for a dwelling house only. We should reach this conclusion, even if W. L,. Claiborne had not testified that at the time he asked for the amendment to the policy he informed the officers of the company of the extensive alterations that had been made on the building, and told them that it had been changed from a rooming house to a hotel. With this information they made the amendment referred to, and thus recognized and treated the policy as still valid, and can not now claim a forfeiture on that ground. These same reasons dispose of the contention that the policy was avoided because a provision of the policy that it should become void “if mechanics be employed in building, altering or repairing the within-described premises for more than fifteen days at any one time.” Theré is no direct proof that this provision of the policy was violated, but from the extensive repairs and alterations made we think it quite probable that mechanics were engaged for more than fifteen days in making these alterations. But,'as the company was informed of the alterations, it must have known or had reasonable grounds to believe that workmen had been engaged in the building for more than fifteen days. But, though the company must have known this, it treated the policy as valid by returning the policy amended so as to cover the building in its altered form, and thus led the insured to believe that the policy was still in force. It is too late now to change front and assert to the contrary. We will next consider the question as to whether there was a forfeiture of the policy by reason' of the fact that the insured took out more concurrent insurance than was permitted by the stipulations in the policy. The policy permitted $3,000 concurrent insurance, including the amount named in the policy. The evidence showed that the insured, Claiborne, after making the alterations in the building, took out $4,000 insurance on the building in other companies. This was in December, 1904. After his death his wife, Mrs. M. A. Claiborne,-took out additional insurance to the extent of $500. The date of this policy is not shown, but the evidence shows that these policies were issued by the following companies, the Germania, Ozark, Caledonian and German of Freeport, and we infer from the evidence that it was issued soon after Claiborne’s death, and before the negotiations which took place between W. L. Claiborne and certain officers of the company. W. D. Claiborne says that he first went to the home office of the company on the 17th of January, 1905; that he met the auditor and ex-officio vice-president of the company, told him that his mother was the owner of the property, and explained to him the amendments of the policy which he desired to have made, and that the vice-president replied that the matter would be attended to; that a few days later he (Claiborne) received the policy with the amendment set out in the statement of facts, and which made the policy payable to Mrs. M. A. Claiborne as administratrix, and changed the description of the building from a two to a three-story building, but made no reference to the matter of concurrent insurance. According to Claiborne’s testimony, he again returned to Little Rock and called at the home office of the company with the policy about the 10th or 15th of February, 1905, and met the vice-president again, and again told him that his mother was now owner of the property, and that he desired to make her the assured in the policy, “and,” said the witness, “I told him at the time I asked for those amendments, one was for $5,500 on the house total concurrent on the house. and one was for $2,000 total concurrent on the furniture, making the sum total $7,500 on the building and contents; and I told him, enumerated over to him, the other insurance companies that carried additional insurance — the Ozark, the Caledonian, German of Freeport and the Germania, and I made a detailed statement to him of the amount of insurance we had, and who we wanted to make insured in the policv.” The witness further stated that the vice-president said that the president would be back next day, and that if witness would see him he would make all necessary amendments. The witness di<i not state whether he waited to see the president or not, but we infer that he did not. For he says that afterwards the policy was returned without the amendments, and that he returned to Tittle Rock the third time, and again requested the officers of the company to take action, and that he could not get either the unearned premium returned or the amendments made, but on the third visit he was again assued by the vice-president that the amendments would be made. But that, notwithstanding these assurances, the policy was returned a few days before the fire with no other amendment than the one first made. Now, the policy contained a stipulation that it might be cancelled at the request of the assurred or by the company giving notice of such cancellation. If further provided that if the policy should be cancelled, or if it became void or ceased by reason of violations of the contract on the part of the assured, the unearned portion of the premium should be returned on the surrender of the policy, the company retaining the customary short rate and expenses. The evidence showed that the assured and his wife had taken out $4,500 additional insurance in other companies, which with the three thousand in the Security Mutual and the Arkansas Mutual made $7,500 total insurance. We understand from the testimony of the witness, a part of which is quoted above, that he informed the vice-president fully of these facts, and requested him to have amendments made showing that the company consented to this concurrent insurance, telling him at the same time if the amendments could not be granted to return the unearned portion of the premium. It is true that this testimony was contradicted by witnesses for the company, but the verdict of the jury shows that they found against the company on that evidence, and we must now take the facts testified to by this witness as true. Assuming then that this witness gave the vice-president of the company a detailed statement of the other insurance taken out by the insured and requested an indorsement on the policy showing that the company consented thereto, it became the duty of the company to either comply with his request or to tell him frankly that it would not do so, but would treat the policy as void and return the unearned portion of the premium as required by the policy. It did not do this, but instead it made an amendment on the policy partially complying with his request, and returned it to him. When informed that this amendment was not sufficient, the vice-president of the company assured him that the amendment would be made, but .after keeping the policy a few days it returned it to him again making no further amendment, but without any notice to him that it considered the policy as void. In a recent case it was said that a waiver may be founded upon an estoppel, but it is not so necessarily. Though the conduct of the insurer may not have misled the insured to his prejudice or into an altered position, yet if, after knowledge of all the facts, its conduct has been such as to reasonably imply a purpose not to insist upon a forfeiture, the law, leaning against forfeitures, will apply the peculiar doctrine of waiver, invented probably to prevent them, and will hold the insurer irrevocably-bound by an election to treat the contract as if no cause of forfeiture had occurred. Alabama State Mut. Ins. Co. v. Long, 123 Ala. 667. If the jury believed the facts testified to by the witnesses for plaintiff, they were justified in finding that there was a waiver of all the forfeitures set up in the answer, and in finding a verdict for plaintiff. Counsel for defendant contends that, if the company charged the customary short term rates, there was under the facts of this case no unearned premium to return, but we consider that as not very material in this case. The insurance on this policy for a term of three years had been paid in advance. Not much over half of this time had expired at the time this additional assurance was taken out. If the company insisted on that as a forfeiture, it was not unreasonable that the insured should expect a part of this premium to be returned as unearned. The policy had been delivered to the company with a request that it make an indorsement thereon showing that it consented to the additional insurance. If' it intended to insist on the forfeiture, it was unnecessary to have returned the policy. And if it returned the policy, it should have .informed the insured of its intention to insist on the forfeiture, and given an explanation of -why no part of the premium was returned. As it sent .the policy to the insured without returning any part of the premium or making any explanation in reference thereto or making any claim that it considered the policy as void, and without stating any objections to the additional insurance of which it had been informed, this conduct was calculated to mislead the insured and cause a belief that the company did not intend to insist on the forfeiture, and the case comes squarely within the recent decision in German-American Insurance Company v. Harper, 75 Ark. 98. Again, it is said that there was error in the instructions given to the jury. In the first and third instructions given at the request of the defendant the court told the jury that “if the defendant company knew that the plaintiff was carrying a larger amount of concurrent insurance than stipulated, but never objected thereto until after the fire, nor offered to cancel the policy, the defendant will be estopped to take advantage of such stipulation.” Now, this statement of the rule is rather too broad, and, abstractly considered, is not a correct statement of the law. It might happen that knowledge that additional insurance had been taken out by the insured should come incidentally to the insurance company in such a way and under such circumstances that the insurance company would not be required to take action. In other words, it cannot be said that mere silence or non-action on the part of the company after obtaining knowledge of a forfeiture will under all circumstances amount to a waiver. But where silence or failure to act is calculated to. mislead and does mislead the insured, then it will operate as a waiver. 'When a party is under a duty to speak, or where his failure to speak is inconsistent with honest dealings, and misleads another, then his silence may be deemed to be acquiescence. German-American Insurance Co. v. Harper, 75 Ark. 85; More v. New York B. F. Ins. Co., 130 N. Y. 537; 2 May on Ins. § 508. So, where the insured informs the company that he has taken out adidtional insurance in violation of the terms of the policy, and asks the company to give its consent to such additional insurance or return the unearned portion of the premium, the company cannot then be silent if it desires to insist on the forfeiture. It cannot under such circumstances “sleep upon its intention to avoid the policy” while waiting to see if a loss will ensue or not; for if it does, and a loss happens, it may be too late to claim a forfeiture. It was of such circumstances that the court was speaking in the case of German-American Insurance Company v. Harper, 75 Ark. 95. In that case the agent of the company, after having been informed of the additional insurance, collected the premium on the policy which it had issued to the insured, thus recognizing the validity of the policy. The facts are not very fully stated in the opinion, but the opinion shows that the circumstances in proof were such that the conduct of the company in making no objection to the additional insurance until after the loss misled the insured, and caused him to rest in the belief that the policy was valid, and that he was protected. It thus appears that the notice to the company of which the court was speaking in that case was not a mere incidental notice from outside sources, but was given under such circumstances that called for action on the part of the company. But, while it seems from the instructions . asked by the plaintiff and given by the circuit court in this case that there was a misconception to some extent of the decision of this court in the Harper case above referred to, yet we do not think that it was possible for those instructions to have misled the jury in this case. There was no evidence in this case of any notice to the company of the additional insurance except that given by plaintiff through her agents. There can be no question that, if given, this notice called for some action on the part of the company. The debatable question was not whether if this notice was given there was a waiver of the forfeiture, but whether any notice was in fact given. It was therefore not, under the facts of this case, prejudicial error -for the court to tell the jury that if the company had notice of the additional insurance, “but never objected thereto until after the fire, nor offered to cancel the policy,” it would be estopped from insisting on a forfeiture on that ground. The doctrine of waiver and estoppel, as applied to insurance contracts, is now too well established to require discussion. The courts apply these principles liberally to prevent injustice and fraud when the insured has been misled by the acts of the company or its agents. In this case, assuming that witnesses for plaintiff told the truth, it appears that the company was informed that the title to the property was in Mrs. Claiborne, that additions had been made to the building which greatly increased its value, and that other insurance had been taken. It made no objection, but on the contrary by its officers informed the insured that consent thereto would be indorsed on the policy. If it afterwards changed its intentions in that respect, honesty and fair dealing required that it should at once have informed the assured of that fact so she could have obtained other insurance. Its failure to object under such circumstances until after the loss must be taken as a waiver. The contention that under the rules of the company its policies were issued and forfeitures waived only on the recommendation of a board and that this board had no notice does not alter the matter, for notice to the vice-president was notice to the company, and it should have required the board to act. After due consideration thereof we find no prejudicial error in the instructions, and the judgment against defendant must be affirmed. As to the appeal by the plaintiff, she contends that the court should have taxed the defendant with 12 per cent, damages and attorney’s fees. But the policy was issued and the loss occurred before the passage of the statute permitting the court to add such penalty (Acts 1905, p. 308), and we agree with counsel for appellant that the amount for which the company was liable was not affected by the statute. Judgment affirmed.