Bartholomew v. Merchants' Insurance

Dillon, Oh. J. 1áppiicatí?nf: Statement cnmKnce™' I. The numerous errors assigned relate to the rulings of the court in the reception and rejection evidence on the trial, and to instructions given, refused and modified. It would be prolix to allude to these in detail. They present, in various forms, the same questions, and these questions are, in substance: What, as respect the plaintiff, were the powers of the agent, Stevens ? Were the company affected by the alleged verbal communication of knowledge of the incumbrances to Stevens, he having failed to insert a truthful answer in this respect in the application? Were the company bound, by the verbal statement of Stevens, at the time of receiving the application, that the assured would be allowed to keep a twenty-five pound keg of powder ? On these subjects, the court, at plaintiff’s instance, instructed the jury as follows: “ 9. If the agent was notified of the incumbrance by plaintiff, and the agent, through neglect or oversight, or from any cause like these, omitted to note the incumbrance in the application, then the existence of the incumbrance is no defense to this suit.” Other instructions, varying in language, but asserting the same principle, were likewise given. Instructions asked by the defendant, embodying the idea, that if there was an incumbrance not named in the application, the policy based upon such application was void, and that notice to — 514 — the soliciting agent would not bind the company, were refused. This subject was somewhat considered by this court in Ayres v. The Hartford Ins. Co., 17 Iowa, 176. It was there stated, if not held, that, whether the company was bound by the failure of the agent, in writing the application, to take down statements made by the applicant, or by his taking them down incorrectly, depended upon the powers of the agent; that, if he had simply power to receive and forward applications, the company would not be bound; but if he had greater powers, either in fact or as regards the public or the assured, the rule would be different. The instructions of the court, upon this branch of the case, made the defendant bound by notice of the incumbrance to Stevens, even though the latter was known by the plaintiff to be a special agent with limited powers, to wit, with power simply to receive and forward applications. The application was signed by the plaintiff, and it expressly stated, “ the foregoing is a correct description of the property to be insured, on which the insurance will be predicated, and a warranty on the part of the assured.” The facts in the present case are somewhat different from those of the Ayres case, just cited, and the instructions to the jury should have had reference to this difference. It is our opinion, in view of the facts of the present case, that the court in the 9th instruction above quoted, and in others of the same purport, stated the effect of knowledge on the part of Stevens of the incumbrance, and of his failure to note it in the application, too broadly. On this point the jury should, in substance, have been thus instructed: If the plaintiff knew of the provision in the application which stated “ that the foregoing is a correct description of the property to be insured, and — 515 — on Which the insurance would be predicated, and a warrantee on his part,” and if he knew or had reason to know that Stevens had simply power to take and forward applications, and if he knew that the application which he signed was to be forwarded to the company and would be submitted to it as the sole basis on which it or its directors would act in accepting or rejecting the risk, in such case, he must see that its statements and representations are not essentially untrue. But if, on the other hand, the agent of the company furnished and undertook to fill up the application, and if in so doing he was correctly informed respecting the incumbrance, and if the piaintiff was misled by the acts and conduct of the agent into supposing that the agent had taken down his answers truly, and. that the application was correct, and if through the fault of the agent he did not know the contrary, then the company, having received the premium, cannot successfully set up the existence of the incumbrance as a defense to an action on the policy. These instructions proceed upon the idea that Stevens, in taking and filling up the application, was not the agent of the applicant, but the agent of the company. This is not the view taken by the Supreme Court of Massachusetts, which holds that the agent of the insurrance company, in receiving and filling- up applications, becomes the agent of the applicant. See cases cited, 17 Iowa, 191. But this view has recently received the sanction of the Court of Appeals of New York (Rowley v. Empire Ins. Co., 36 N. Y. 550, 1867); and this court, upon mature deliberation, regards it, with the limitations herein indicated, as the sounder and better rule. See, also, Anson v. Winneskiek Ins. Co., at present term. The reasons for this view are many. 1. The companies send out agents to take applications, — 516 — and furnish them with blanks for that purpose. In the case at bar there is in the record a book of instructions from the defendant to its agents, containing over two closely-printed pages of “ instructions for filling applications.” 2. The companies know how important it is to have these applications correctly made out; and, as a rule, they expect their agents to fill them up. In practice, we are satisfied this is generally done by the agents. 3. To comply with all the many requirements of the companies in relation to filling up applications is difficult for the mass of insurers; and if the applicant truly answers the questions asked, and the agent does not truly take down the answers, but deceives and misleads (even though not designedly) the applicant into the belief that his application is all right, and it is signed by the applicant under the belief thus superinduced by the agent of the company, the latter must, except under special circumstances, impute the blame to their agent, and not to the applicant. é. Companies wishing to do a straightforward and legitimate business cannot reasonably object to this rule, because it will make it to their interest to appoint competent and honest agents who will not mislead them or the public. In this case, Stevens may purposely have omitted to state the incumbrance in the application, lest the risk should, in consequence, be rejected by the company, and he lose his commission; and the same motive would operate to induce him to deceive the applicant as respects the correctness of the application. Or the agent may have honestly supposed, in view of the amount of the incumbrance, the reputation of the assured, etc., that it was not worth while to mention it. In either case his fraud or his ignorance should fall upon the company, and not upon the assured, acting in good faith. — 517 — 5. This view prevents palpable injustice. The company received the plaintiff’s money, paid as the price for the risk professed to be taken by it. This money the company still retains. For what did the company receive it? In consideration of insuring the plaintiff’s property. With respect to the incumbrance, it now sets up a defense which, if sound, makes the policy void from the beginning —• a defense which shows that in fact it never assumed any risk or incurred any liability whatever. If the company and its agents were blameless, and this result had been brought about by the plaintiff’s fault or fraud, it would be all right. Not so, however, if the plaintiff is without fault, and the only fault is shown to be in the agent of the company. s. - — power agent. II. The defendant asked the court to charge, that, “if the agent had no authority other than to solicit, procure and forward applications subject to the approval or rejection of the company, as to issuing a policy of insurance, defendant is not bound by information given to such agent hy plaintiff not reduced to writing, nor communicated by such agent to the defendant before the policy issued.” This the court modified by a reference to the 11th and 13th instructions given for the plaintiff. So in relation to the powder, the defendant asked the court to charge, that, “ if the plaintiff at any time during the policy, without the consent, in writing, of the defendant, had on deposit, or kept, or used, in the house insured, an explosive substance in amount capable, in case of explosion, to increase the hazard, defendant is released from liability.” This was given as modified by the 11th and'13th of plaintiff’s instructions. The defendant also asked the court to charge, that, “ if Stevens was only a special agent to solicit applications — 518 — and forward them to defendant to be approved or rejected by defendant, no parol contract between him and plaintiff could bind the defendant to let plaintiff use an explosive substance in the premises insured, unless such agreement was brought home to the knowledge of the defendant before the policy issued.” This was given as modified by the 11th and 13th of plaintiff’s instructions. Other material instructions were expressly modified by the aforesaid 11th and 13th instructions. This makes it necessary to quote these: — The 11th given for plaintiff is as follows: “ Where the agent is limited in his authority, but the agency is private, or not public, and not known to the insured, and the agent holds himself out as a general agent or purposely conceals his limited agency, and the company permits his acts and his conduct so to appear to others and the insured, so that the insured acts with the agent as if possessed of general powers, then the acts of the agent and notices to him, are the acts of the company, and the special or limited agency, not known to the plaintiff, is no defense.” The 13th instruction given for plaintiff is as follows: “A company is liable for the acts of a special agent outside of his strict powers, where a company knows of the exercise of them and does not object.” Now, the 11th and 13th instructions above, may, as abstract propositions, be correct. But in the case in which they were given they are erroneous, because, as we read the record, they were not warranted by the evidence. Stevens is the agent referred to in these instructions. The notice referred to, is notice of the incumbrance. The acts referred to must, to be pertinent, be his alleged statement to the assured that he might keep one keg of powder. We see no evidence in the record that Stevens held himself out to the plaintiff as a general agent, or that — 519 — he purposely concealed his limited agency; much less do we see any evidence, that the company permitted his acts and conduct so to appear to others and to the insured that the latter might properly act with the agent as if possessed of general powers. On the contrary, Stevens did not, as it seems, claim to have power to issue policies, but simply received the application to be fowarded; and afterward, he delivered the policy to the plaintiff. The plaintiff nowhere swears that Stevens claimed to be a general agent — nowhere swears or proves that the company knew of his acts outside of his powers and did not object to them. For these reasons the judgment of the District Court must be reversed. We only add concerning the powers of Stevens, that they might, as respects the plaintiff, be greater than they were in fact; that his powers are to be measured by his general employment and the general nature of his duties, and not by the contract between him and his employer, or private instructions, whether written or printed, as to the manner of executing his agency. It is not deemed necessary to examine more at large the questions made as to the powers of the agent, because, on the retrial, the evidence may not be the same, and because the views of the court on the general subject involved are given in other opinions filed at the present term. 3 _ estoppel. III. It is due to the learned counsel who have twice argued this cause, that we should notice one other question urged by the counsel for the company. The plaintiff sues at law on the policy. Defendant answers, alleging that the plaintiff violated the fifth, sixth and eighth conditions of the policy. In the nature' of a reply (for our statute, Eevision section — 520 — 2917, allows no formal reply, but puts in a reply for the party) the plaintiff relies upon matter which'he claims will estop the defendant to insist upon these defenses. The company insists, that this matter of estoppel is not allowable to the plaintiff, who, as he sues upon the contract, alleging performance, must recover upon it as it stands. Our view is this: the matters of .the incumbrance and of the powder are defenses set up and to be proved by the company. The section of the Revision just cited (§ 2917) allows the plaintiff to meet these defenses by “ denial or avoidance as the ease may require.” Without expressing any opinion upon the merits of the matters urged by the plaintiff by way of estoppel, it is our judgment that it is competent in this action for the plaintiff to avoid, if he can, by the way ’ of estoppel, the defenses set up by the company. Rowley v. The Empire Ins. Co., 36 N. Y. 550. Reversed.