Smith v. Niagara Fire Insurance

The opinion of the court was delivered by Taut, J. I. The defendant objected to an inquiry of a witness upon the subject of damages. Conceding the question to have been improper, the exceptions do not show that it was answered. To avail the defendant, it must so appear, and that the answer was prejudicial to it. Carpenter v. Corinth, 58 Vt. 214. II. The assured warranted that there was no incumbrance upon the property. There was then upon record, an. undischarged mortgage for eight' hundred dollars, with accrued annual interest for sixteen years. The plaintiffs claimed that the presumption of payment applied, fifteen years having then elapsed since the date of the note and mortgage. The note' matured in July, 1875, and it was at the latter date that the fifteen years began to run, so as to afford a presumption of payment from lapse of time. The fifteen years have not yet expired, the presumption, therefore, did not arise.- — 689 — III. Was the undischarged mortgage an incumbrance within the meaning of an insurance contract ? It has sometimes been so held,— Warner v. Middlesex Mut. Ass. Co. 21 Conn. 444; Muma v. Niagara, etc., Ins. Co. 22 U. Can. (Q. B.) 214, — but we think the doctrine generally prevails, that if the mortgage debt has been paid, the undischarged mortgage is not an incumbrance, — Merrill v. Agri’l Ins. Co. 73 N. Y. 452; Hawkes v. Dodge Co. M. Ins. Co. 11 Wis. 188, as cited in Bates Dig. Fire Ins. Dec. 256, and we so hold. IY. The assured warranted that they, at the time of the contract, had "not omitted to state to the' company any information material to the risk.” The undischarged mortgage was •held by Mrs. Eames, and she had prior to that time, secretly and voluntarily destroyed the note, but the assured had not been informed of that fact, so that they must have believed that the mortgage debt was then a valid subsisting lien upon the property. No payment had been made on either the principal or interest. The more important question in respect to the mortgage is, whether the failure to state to the company that they believed the property was mortgaged was not an omission to state information material to the risk. Statements as to incumbrances are material; they are made so by the policy ; they have regard to the risk. The object of inquiry in respect thereto, is to ascertain the interest of the applicant in the property, so that the insurer can take into consideration the interest the applicant has in its preservation. He may have none, so that fire may occur from his neglect, or his active participation in its origin. The value of the property burned as found by the jury was eight hundred and thirty-seven dollars ; it was insured for thirteen hundred and fifty, nine hundred upon the buildings, the remainder upon their contents. The real estate was mortgaged for more than sixteen hundred dollars, as the plaintiffs then believed. Had the mortgage .debt still existed, the statute barred any recovery upon the notes, and the policy was not payable to the mortgagee in case of loss. If the buildings did not burn, the property would be — 690 — held by the mortgagee ; if they did, the assured would receive their value as the avails of the policy would belong to them. The moral hazard was exactly the same if they believed the property mortgaged, as it would have been, had the mortgage in fact existed. We think that when they failed to state the fact that they believed the property was mortgaged, they omitted to state information material to the risk, at least their failure was evidence from which that fact might have been found. We have no occasion to pass upon the point of whether this was a question for the court or jury. If it was a question of law, the court should have complied with the second request; if of fact, it should have submitted it to the jury with proper instructions. The question under the claim of the defendant and the evidence, was in the case, should have been disposed of either as one of law or fact, and was saved by the exception to the charge raised by the second request. V. By paragraph .three of the sixth condition of the policy it was the duty of the assured in case of loss, to furnish the defendant, within thirty days, a statement of the loss, signed and sworn to. It is conceded that no statement was furnished. It was a condition precedent to a recovery, as it was so provided by the terms of the policy. Donahue v. Ins. Co. 56 Vt. 374. That the proofs of loss may be waived by the company is unquestioned. Findeison v. Metropole Ins. Co. 57 Vt. 520. The plaintiffs claimed upon trial that the proofs of loss were waived; the jury so found. The evidence upon which this finding was based was the testimony of the plaintiffs, as to the declarations of Turner and Cudworth, who, as the plaintiffs claim, -were acting as the agents of the defendant. Turner was the general agent of the defendant, having supervision of all its affairs, and its adjustor of losses; and unless restricted in his authority, the plaintiffs having notice thereof, we think had all the power of the company, in the settlement of a loss, to waive any of the conditions of the policy. YI. Cudworth was the local agent of the company with — 691 — power to receive proposals for insurance, fix rates of premiums, and issue policies. It does not appear that he was ever held out by the defendant as possessing any other authority or ever acted in the settlement of losses. We think he had no authority to waive that condition of the policy requiring a sworn statement in the settlement of a loss, although he might unless restricted, waive conditions concerning the issuance of a policy, or anything apparently within the scope of his authority, in the business committed to him. We recognize the full force of the rule as to the liability of the principal for the acts of an agent, as stated in Ins. Co. v. Wilkinson, 13 Wall. 222, “ that the powers of an agent are prima facie, co-extensive with the business instrusted to his care, and will not be narrowed by limitations not communicated to the person with whom he deals.” The settlement of losses was no part of the business of Cudworth; he was not for that purpose the defendant’s agent. Bowlin v. Hekla Fire Ins. Co. (Minn.) 16 Ins. L. J. 305; Kyle v. Commercial Un. Ass. Co. (Mass.) ibid, 330. The jury were at liberty under the charge, to find a waiver from the declarations of either Turner or Cudworth. If they found it from those of the latter, it was error, as he possessed no authority to waive a' sworn statement; and as the waiver may have been found from the illegal testimony, there was error in this branch of the case, irrespective of the question of the authority of Turner. VII. Having held that Turner had authority to waive any condition of the policy, the question remains whether he could do so save in the manner provided by the contract. One condition of the policy is that no officer, agent or representative of the company should be held to have waived any of the conditions of the policy unless such waiver was indorsed on the policy. This provision was a valid one, binding upon the parties, and effect should be given to it. While the defendant could give its oral consent to a waiver of the statement, no officer, agent or representative could consent unless the consent was indorsed on the policy. This point we think well taken. In Carrigan — 692 — v. Ins. Co. 53 Vt. 418, the contract provided that no agent was empowered to waive any of its conditions without special authority, etc., and it was held that this term referred to local agents, not general ones, and the case notes the distinction between the two ; here the limitation is upon the authority of any officer, agent or representative. If Turner was not an officer, he was certainly a representative, and his want of authority to waive any condition unless by writing, indorsed on the policy was brought to the knowledge of the plaintiffs by the contract itself; and where an agent’s acts are in excess of such authority the principal is not bound. Ins. Co. v. Wilkinson, supra; Packard v. Dorchester M. F. Ins. Co. (Me.) 15 Ins. L. J. 475. Where an agent has apparent authority to do an act, his principal is bound, and if the latter claims that the act is in excess of the agent’s real authority he should show actual notice to the party with whom he deals. In the case at bar the law presumes notice ; it is a part of the contract, the plaintiffs agreed to it. Why should they be released from their agreement ? In Walsh v. Hartford Fire Ins. Co. 73 N. Y. 5, the court were called upon to meet a question similar- to the one- involved here, and they said : “ The company could itself dispense with this condition by oral consent as well as by writing, and Carpenter (the agent), unless specially restricted, would have possessed, in this respect, the power of the principal. But the policy contains the provision that no agent of the company shall be deeméd to have' waived any of the terms and conditions of the policy unless such waiver is indorsed on the policy in writing. This is a plain limitation upon the power of agents, and can'mean nothing less than that agents shall not have the power to waive conditions except in-one mode, viz., by an indorsement on the policy. The plaintiff is presumed to have known what the contract contained, and the proof tends to the conclusion that this provision was brought to his notice. He saw fit, however, to accept the assurance of the — 693 — agent that an entry in the register was sufficient. It is difficult to see how, upon the law of contracts and agency, the plaintiff can recover. The entry in the register was not an indorsement on the policy. The oral consent was an act in excess of the known authority of the agent. The provision was designed to protect the company against collusion and fraud, and the dangers and uncertainty of oral testimony. The case seems to be a hard one for the plaintiffs ; but courts cannot make. contracts for parties, nor can they dispense with their provisions.” The same court, in Marvin v. Universal Life Ins. Co. 85 N. Y. 278, in disposing of an analogous question, said : "Here the policy in plain terms denied to any agent, local or general, the power to waive conditions, reserved that authority solely to the ‘ head office,’ and some officer of the company there, and gave notice to the assured upon the face of his policy of the existence of this restriction. Henkle therefore had no power to waive payment.” The same rule has been followed in Massachusetts. Forbes v. Agawam M. F. Ins. Co. 9 Cush. 470. In Worcester Bank v. Hartford F. Ins. Co. 11 Cush. 265, under a like limitation, an agent took the policy, made a memorandum on a book,"and told the assured that it was the same as if indorsed on the policy; the court held that the policy was void. In Hale v. Mechanics’ M. F. Ins. Co. 6 Gray, 169, the policy prohibited previous insurance without the consent of the president in writing; it was held that the policy was invalid, although the jury found an oral consent by the president. The same question arose in the late case of Kyte v. Un. M. Ass. Com. supra. After discussing the question of the agent’s authority, the court said : ‘ ‘ Even if the agent had the fullest authority, could the conditions of the policy be waived other than in the manner in which they provide for such waiver. The company, which has seen fit to prescribe that the terms and conditions of its' policy shall only be waived by its written or printed assent, has prescribed only a reasonable rule to — 694 — guard against, tbe uncertainties of oral evidence, and by this the assured has assented to be bound.” If in this case Turner, by consenting orally to a waiver of the proofs of loss, can estop the defendant from raising this defence, then the clause of the contract requiring the waiver of a condition to be indorsed on the policy is rendered nugatory. No one can successfully, contend that the company has not the right to restrict the power of its agents ; and when such power is limited, is there any good reason why such limitation should not bind the assured? The plaintiffs cannot rely upon their ignorance of the terms of their contract; certainly not in the absence of fraud, and none is claimed in this case. In the late case of Cleaver v. Traders’ Ins. Co. 16 Ins. L. J. 744, the Supreme Court of Michigan conclude an opinion in a case involving the question, as follows: “When the policy of insurance, as in this case, contains an express limitation upon the power of the agent, such agent has no legal right to contract as agent of the company with the insured, so as to change the conditions of the policy, or to dispense with the performance of any essential requisite contained therein, either by parol, or writing; and the holder of the policy is estopped, by accepting the policy, from setting up or relying upon powers in the agent in opposition to limitations and restrictions in the policy.” To bind the defendant by a waiver of the proofs of loss, it should have been indorsed on the policy. Judgment reversed, and cause remanded.