Eckert v. Century Fire Insurance

Sherwin, J. On the 15th day of February, 1904, the plaintiffs as copartners bought and took possession of a livery stock in the town of Walnut, Iowa. On the same day they executed a chattel mortgage on 'the same stock for the sum of $1,600, and said mortgage was duly recorded on the 16th of February, 1904. On March 3, 1904, the firm made written application to the defendant for insurance on said stock, and on the 7th of March, 1904, the defendant issued a policy insuring the same. On — 509 — the 11th day of August, 1906, the plaintiffs suffered the loss for which they seek recovery in this action. The written application was signed by one of the plaintiffs for the firm, and it was provided therein, among other things, that it contained a full and “complete statement and exposition of all facts in regard to the conditions, . . . and risk of the property to be insured, and warrants the same to be correct and true, whether written by said applicant in ink or not. No liability of the company shall attach until approved by the home office. And the undersigned applicant to the proposed insurance hereby agrees to accept the policy issued upon this application, or to return the same at once to said company if not in accordance with his statements; and if any untrue statement has been made herein, or untrue answer given to any of the foregoing questions, then this instruction to be void and the policy of no effect.” The application contained the .inquiry: “Is any of the property to be insured incumbered?” and the question was answered, ‘No.’ in writing. The application was made a part of the policy, and the policy itself provided* that, ‘if the subject of insurance, or any part thereof, be or become incumbered by mortgage, ... it should be void.’ ” i. Evidence: when not sufficient to create a conflict. The facts necessary to an understanding of the case were as' follows: The plaintiffs had given a chattel mortgage on the stock to secure a part of the money used in the purchase thereof. They wanted to insure, and talked with M. L. Spangler, the _ ... defendant s local agent, about insuring m «aid company. One J. E. Elynn was a special agent of the defendant, and Spangler took him to the plaintiffs for the purpose of securing the risk. Elynn took the application, filling the blanks therein himself, and it was signed by Eckert for the firm without reading it. Spangler knew of the mortgage on the stock, and he testified that he told Elynn before the application was — 510 — taken that the 'stock was mortgaged. Eckert testified that, when Flynn was filling out the application, he asked the question whether the property was incumbered; that he answered that it was; that he did not see the answer that Flynn wrote to the question,-or knew that he had written a negative answer thereto, until after the fire. Flynn testified but did not deny that Spangler and Eckert had informed him of the mortgage. He did testify, however, that he had no recollection of their so informing him, and that, as far as -he could remember, his first knowledge of the mortgage was received through a letter from the president of the company after the loss. We think the testimony of Flynn did not raise a conflict in the evidence on that point. The fact that he did not remember the conversations with Spangler and Eckert would not necessarily tend to create such conflict. Nor would his further statement that, as far as he could remember, he did not know of the mortgage until after the fire. The latter statement was but a reiteration that he had no recollection of the conversations testified to by Spangler and Eckert, for there was no claim that he had received information as to the mortgage from any other source. So far then as the fact of the notice is concerned, the trial court properly directed a verdict. application: negligence: estoppel We have held that the insured is not negligent because he does not read the application for insurance which he signs. Chismore v. Anchor Ins. Co., 131 Iowa, 180; Fitchner v. Fidelity Mut. Ass’n, 103 Iowa, 276. And the knowledge of Flynn and ° ° Spangler, who were both engaged in securing the plaintiffs’ application, was the knowledge of the defendant company, and would estop it from insisting upon the invalidity of the policy when issued because of the statement in the application that the property was not' incumbered. Padrnos v. Century Fire Ins. — 511 — Co., 142 Iowa, 199; Chismore v. Insurance Co., supra; Wensel v. Insurance Co., 129 Iowa, 295. 3. Same: breach of condition: forfeiture: estoppel. This rule is conceded by the appellant, but it is insisted that the clause in the application and in the policy' whereby the applicant for insurance agreed to accept the policy issued upon the application, or return the same at once to said company if not in accordance with his statements, takes the case out of the above class, and that the rule governing therein is not applicable here. It is' said that the agreement to accept the policy or return it at once if not in accordance with the applicant’s statements constituted a preliminary contract between the plaintiffs and the defendant which was carried ’into and became a part of the policy; that it was a distinct and independent undertaking on the part of the assured in no way relating to the subject of insurance; that the assured is bound to know his express independent agreements; that he neglects to do so at his peril; that whether he has or has not made true statements, and whether the soliciting agent has or has not correctly written his answers and statements, have nothing whatever to do with the independent contract to read his policy and return it if not correct. The substance -of the appellant’s contention - is that the assured agreed to read the policy and the application attached thereto, and that the policy should be returned if it was found that untrue answers appeared in the application.. In other words, it is claimed that the assured undertook to protect the defendant against any waiver or estoppel which he might himself otherwise urge on account of the knowledge of the defendant’s agents. Or, to put it in a still different form, the plaintiff agreed to protect the insurer against the mistakes or rascality of its own agents. Corporations can do business only through officers or agents, and any notice or knowledge imparted to an officer or agent authorized to receive the same is actually — 512 — imparted to the corporation. The contract relied upon makes no distinction between the “actual” and what the appellant terms the “constructive” knowledge of the defendant, and, if held enforceable, it would require the assured to examine his policy to protect the corporation against the errors of its own officers and agents, no matter what the position held by • them. It would also require the assured to protect himself against such fraud and error without the right to waive the reading for his own protection. It is undoubtedly true that parties should ordinarily be permitted to make their own contracts, and we are not ! disposed at this time to pass on the validity of the one in question, for reasons which we shall state in this connection. If it be conceded to be valid, a failure to comply therewith does not render the contract of insurance void. The untrue statements or answers which would make the policy void are evidently the untrue statements and answers of the applicant, and not of the defendant or its agent. It is possible that the assured might be estopped from claiming that the answers were not correctly recorded by the agent; but an estoppel must be pleaded to be. relied upon, ’ and there is nothing of the kind here. •We need not now determine what the defendant’s rights may be in the case of failure to comply with the agreement under consideration. What we now decide is that a failure to comply therewith does not render the contract of insurance void or forfeit the plaintiffs’ rights thereunder. We find no reversible error in the ruling on the introduction of testimony. The judgment is right, and it is affirmed.