Phenix Insurance v. Munger

Opinion by Green, C.: This was an action brought by Prank N. Munger against the Phenix Insurance Company of Brooklyn, on a policy of insurance for $1,000, issued by the latter on a barn and carriage house belonging to the former. The insured property was destroyed by fire on the 24th day of November, 1887. The plaintiff’s petition contained the following allegations as to the performance of all conditions precedent and notice to the company of the loss: “That after said loss plaintiff performed each and all of — 188 — the matters and things required of him to be done by the terms of said policy of insurance, and has and did perform all the conditions precedent on his part, except that he did not within 30 days after the loss make and forward to said company a verified statement of said loss as provided for in said policy; but plaintiff says that within 10 days after the said fire, and after said company had been duly notified of said loss, plaintiff applied to W. H. Bell, the agent for the company at Belleville, Kas., and who made said contract of insurance with said plaintiff, and who was their authorized agent to issue policies of insurance for said company and consummate the contract, who informed the plaintiff that it was of no use to make a verified statement of the loss by said fire* that said company did not insist on those provisions in their policy, and that the company would pay said loss in. a few days; that plaintiff, relying on what said Bell told him, did not make out a verified statement of said loss within 30 days after said loss, but thereafter, and in the month of March, 1888, he learned that the said company claimed that proof of loss, duly verified, with the certificate of a magistrate and of a builder, should have been sent, notwithstanding the waiver of the same by said W. H. Bell; and said Munger then, and on or about the 16th of March, 1888, made out and forwarded by mail to said company’s western department office at Chicago a duly-verified proof of loss, with certificate of a magistrate and of a builder thereto attached, as required by said policy, and the same was received by said company* that if the said Bell did not have the authority to waive the requirements of said policy relative to proof of loss, plaintiff did not know it, but on the contrary supposed he had such authority.” The insurance company answered, and set up six defenses. The first and second defenses alleged that Munger misrepresented the facts as to the ownership of the land upon which the insured property stood. The third defense was, that Munger had failed to comply with the conditions of the policy,, which required him within 30 days after the loss to make-proof and submit it to the defendant company, and that by reason of such failure the policy became void. The fourth defense averred that “W. H. Bell was not their authorized agent to adjust or settle losses, and that he never had any authority delegated to him by said company defendant to adjust — 189 — or settle the loss claimed by plaintiff, or to waive the terms or conditions of said contract, as provided by condition 6 in said policy,” which reads as follows: “6. . . . It is understood and agreed, that agents of this company have no authority, in any manner, or by any act or omission whatsoever, either before or after making this contract, to waive, alter, modify, strike from this policy, or otherwise to change any of its conditions or restrictions, except by distinct specific agreement clearly expressed and indorsed hereupon and signed by the agent making it. Nor shall silence upon receipt of notice of breach of any condition or restriction herein, or failure to declare this policy forfeited thereby, or the issuance of any renewal or new policy, or the acceptance of any premium or other money, or any other act or omission whatever, by any agent of this company, whether with or without the knowledge of such breach, or whether before or after the making of this contract, work any waiver of any such conditions or restrictions, or effect any estoppel against this company, or deprive it of any forfeiture or defense, either in law or in equity, to any action upon this policy.” The plaintiff’s amended reply alleged that he requested W. H. Bell to write to the defendant and ask it to give his loss attention and adjust the same, and that the general agent of the defendant wrote Bell, within 30 days after the loss, that the plaintiff’s loss would have attention and be adjusted, which letter was shown to the plaintiff, and he relied on the promise of the general agent, as well as its local agent, so made to him, as he had alleged in his petition, notwithstanding the verified proof of loss was not sent to the company within 30 days after the fire. The case was tried by the court, and resulted in a judgment for the plaintiff for the amount of the policy and interest. The insurance company brings the case here. The controlling question in this case is, whether or not the insurance company waived any of the written conditions of the policy requiring the assured to give notice of loss, and render an account of the same to the company within 30 — 190 — days after the fire. To establish a waiver, the plaintiff testified over the objection of the defendant that— “ Mr. Bell told me it was not necessary; that he never had made proofs of any losses that he had had in town, and that none of the companies doing business here ever made proofs that he knew of. He told me that he had notified the company of the loss, and that there would undoubtedly be an agent here in a very few days to attend to it. He also cited me to a building on the corner that he had a risk on; that they made no proof, and that the adjuster had been here and adjusted the loss. Told me it would be better to let it stand until the adjuster came, and then if he required proof I could make it, or he could ask me any questions he saw fit about the fire.” To further establish the fact of a waiver, the plaintiff placed W. H. Bell, the agent of the company, upon the witness-stand, who testified that his business was “real estate, farm loans, and insurance.” He designated four insurance companies for which he was agent: The Insurance Company of North America, the Farmers’, the Connecticut, and the Phenix of Brooklyn ; that he had never before had a loss under a policy issued by the latter company. The next witness called by the plaintiff was Geo. S. Simonds, who had been local or recording agent for different insurance companies for about 10 years. The witness was then asked if he was familiar with the practice and rules of insurance business in reference to losses, and the conduct of the business after a loss had occurred, in the vicinity of Belleville. Objection was made to this question, and the court asked counsel what he wanted to show by this question. The following appears in the record: “Mr. Kennett [Munger’s counsel]: We wish to show by this witness that the custom of insurance companies in this vicinity is to never require proofs of loss until an examination has been made by an adjuster, and that provision of the policy is never insisted upon. Objected to by defendant as being incompetent, irrelevant, and immaterial, which objection was by the court overruled, to which ruling the defendant excepted. “A. I do, so far as I have been connected with them, my companies, companies which I represent. — 191 — “Q,. You may state what the custom of insurance companies is, in this neighborhood, in reference to requiring proofs of loss, and whether such proofs are or are not required before examination is made by the adjuster? Objected to by defendant as being incompetent, irrelevant, and immaterial, which objection was by the court overruled, to which ruling the defendant excepted. “ A. I have never known of a case wherein it has been required until this case; never has one come to my knowledge. “ Q,. Have you been familiar with the facts and circumstances and the adjustment of insurance losses that have occurred in this vicinity since your residence here? A. I have, in several instances. “Mr. England: We object to the question because it is incompetent, irrelevant, and immaterial, and move to strike out the answer for the same reasons; which objection and motion were by the court overruled, to which ruling defendant excepted.” Other evidence of like import was admitted, over the defendant’s objections. We are clearly of the opinion that this evidence was incompetent, and prejudicial to the rights of the defendant. The plaintiff was attempting to establish a waiver of certain conditions imposed by an express contract entered into by him and the defendant. The evidence could not by any fair interpretation be made to extend beyond the custom of the party making the contract. In other words, the defendant could not be bound by the usage and custom of other companies doing business in the vicinity, where it had expressly contracted for the performance of a certain condition precedent before the plaintiff would be entitled to recover. We think evidence would be admissible as to the usage and custom of the defendant in the vicinity, in regard to the waiver of the proof of loss, but we know of no rule by which it could be bound by the practice and usage of other insurance companies in the same locality. In the case of Insurance Co. v. Norton, 96 U. S. 234, Mr. Justice Bradley, in speaking for a majority of the court, said: “As denoting the power given by an insurance company to a — 192 — local agent, evidence is admissible as to its practice in allowing him to extend the time for the payment of premium notes; and the jury, upon such evidence, may find whether he was authorized to make such an extension, and, if so, whether it was in fact made in the case on trial.” Where there is an express contract, we do not think it can be varied by the custom of other parties. In Graham v. Trimmer, 6 Kas. 237, it was said: “It is, however, to be remarked that evidence of the nature referred to will not have the effect of changing or affecting an express contract of the parties in regard to the subject-matter to which it is directed.” In Stout v. McLachlin, 38 Kas. 120, the rule is stated: “The proof of usage can only be received to show the intention or understanding of the parties in the absence of specific agreement or to explain the terms of a written contract.” In the case of Barnard v. Kellogg, 10 Wall. 390, Mr. Justice Davis said: “The proper office of a custom or usage in trade is to ascertain and explain the meaning and intention of the parties to a contract, whether written or in parol, which could not be done without the aid of this extrinsic evidence. It does not go beyond this, and is used as a mode of interpretation, on the theory that the parties knew of its existence, and contracted with reference to it. It is often employed to explain words or phrases in a contract of doubtful signification, or which may be understood in different senses, according to the subject-matter to which they are applied.” But if it be inconsistent with the contract, or expressly or by necessary implication contradicts it, it cannot be received in evidence to affect it. “Usage,” says Lord Lyndhurst, “may be admissible to explain what is doubtful; it is never admissible to contradict what is plain.” In the case of Summons v. Law, 3 Keys, 219, the court said: “A clear, certain and distinct contract is not subject to modification by proof of usage. Such a contract disposes of all customs by its own terms, and by its terms alone is the — 193 — -conduct of the parties to be regulated, and thus their liability to be determined.” The supreme court of Illinois held, in the case of Dixon v. Danham, 14 Ill. 324, that no usage or custom could be admitted in evidence to vary or control the express terms of a contract, but that evidence might be admitted to determine that which by the terms of the contract was left undetermined. In the case of Schooner Reeside, 2 Sumner C. C. R. 567, Mr. Justice Story stated the correct rule when he said: “The true and appropriate office of a usage or custom is to interpret the otherwise undeterminate intention of the parties, and to ascertain the nature and extent of their contracts, arising not from the express stipulations, but from meré implications and presumptions, and acts of a doubtful or equivocal character.” As sustaining this doctrine, see Clark’s Brown on Usage and Customs, 83, and authorities there cited; Lawson on Usages and Customs, 435; Partridge v. Insurance Company, 15 Wall. 375. i. Fire insuranee — proof of loss-tom ana usage. In this case there was a written contract, expressing what was to be done by the parties; and we do not think this agreement could be modified by the custom of other insuranee companies or their agents, in regard to dis- . .. n . pensing with proofs of loss. If it had been the custom and usage of the plaintiff in error not to require these proofs of loss, the evidence might be competent, for the purpose of indicating the power given by the company to its agents to waive such requirements, as stated in the case of Insurance Company v. Norton, supra; but beyond that we do not think the rule should be extended. As this case must go back to the district court for another trial, and the question of the authority of the agent of the plaintiff in error is one of the controlling questions in the case, it becomes necessary for us to determine the nature and extent of his authority. In speaking of such agents, Mr. Justice Brewer said, in the case of American Central Insurance Co. v. MaLanathan, 11 Kas. 549: “The bulk of the fire insurance business of this state is — 194 — done by eastern companies, which are represented here by agents. These agents are authorized to issue policies of insurance, and the entire consummation of the contract is intrusted to them. Blank policies, signed by the home officers of the company, to be filled up and issued, and to be binding when countersigned by the agent, are placed in their hands. It is a matter of no small moment, therefore, that the exact measure and limit of the powers of these agents be understood. All the assured knows about the company is generally through the agent. All the information as to the powers of and limitations upon the agent is received from him. Practically, the agent is the principal in the making of the contract. It seems to us, therefore, that the rule may be properly thus laid down, that an agent authorized to issue policies of insurance, and consummate the contract, binds his principal by any act, agreement, representation, or waiver, within the ordinary scope and limit of insurance business, which is not known by the assured to be beyond the authority granted to the agent.” In the case of Insurance Company v. Gray, 43 Kas. 497, this case was followed, and it was held in that case that— “An insurance company might, through its agents, by a parol contract, waive provisions stated in the policy with reference to the manner of altering or waiving its terms and conditions. In Insurance Company v. Earle, 33 Mich. 143, the court, in considering the question whether an agent of a company might change by parol the conditions of a policy wherein it was provided that it could only be done upon the consent of the company written thereon, held, that the written policy might be changed by parol, and stated that (a written bargain is of no higher legal degree than a parol one. Either may vary or discharge the other, and there can be no more force in an agreement in writing not to agree by parol, than in a parol agreement not to agree in writing. Every such agreement is ended by the new one which contradicts it.’ ” It is claimed that, by the sixth condition in the policy, agents of the company have no authority to make any changes except by distinct agreements in writing, indorsed on the policy, and signed by the agent making them. The answer to this contention is that a corporation can act only through — 195 — its agents. The limitation and restriction is too broad and sweeping. “Agents of this company have no authority in any manner or by any act or omission,” etc., is the language of the restrictive proviso. What agents or officer can change or modify the terms of a policy unless it be in writing and indorsed thereon? Not the president; he is but an agent, with extended powers; not the general agent, because he is only an agent with less power, perhaps, than the president. “A contracting party cannot so tie his own hands, so restrict his own legal capacity for future action, that he has not the power, even with the assent of the other party, to bind or obligate himself by his further action or agreement, contrary to the terms of the written contract.” (Lamberton v. Connecticut Fire Insurance Co., 39 Minn. 129.) “The fact that a policy is written does not prevent its change by subsequent parol agreement. Any written contract not within the statute of frauds may be changed by parol.” (Insurance Co. v. Earle, supra; Seamen v. O’Hara, 29 Mich. 66.) This rule has been applied to the enlargement and continuance of policies of insurance. (Kennebec Co. v. Augusta Insurance Co., 6 Gray, 209; Baptist Church v. Brooklyn Fire Insurance Co., 19 N. Y. 305.) Upon the question of the power of an agent to waive proof of loss, the rule is laid down in Wood on Eire Insurance, §419: 2. General agent -powers. “Where an agent is entrusted with policies signed in blank, and is authorized to issue them upon the application of parties seeking insurance, he is thereby clothed with apparent authority to bind the party in reference to any condition of the contract, whether precedent or subsequent, and may waive notice or proofs of loss, and may bind the company by his admissions in respect thereto.” Again, the same author says: “Although the policy specially provides that preliminary proof of loss shall be made in a particular mode, and within a certain limited time, yet the company may, through its agents, even, waive the benefits of the provisions, and a waiver may be implied from the manner in which the company or its — 196 — agents have dealt with the policy-holder subsequent to the loss; and where there is no dispute as to the facts, the question as to whether compliance with such preliminaries has been waived is one of law for the court.” (Section 447.) See, also, Bliss, Ins., § 296; Phenix Insurance Co. v. Bowdrie, 7 So. Rep. 597; Insurance Company v. Colt, 20 Wall. 560. We think the commission of W. H. Bell from the plaintiff in error constituted him a general agent of the company at Belleville, with full power to receive proposals for insurance against loss and damage by fire, to fix rates of premium, receive moneys, and countersign, issue and renew policies. As stated in the case of Insurance Company v. Gray, supra, he fully represented the company within a certain district. He was authorized to do business for the plaintiff in error at Belleville and vicinity. All the knowledge the insured had of the company at the time he obtained his policy and sustained the loss was through this agent. In the case of Rivara v. Insurance Company, 62 Miss. 728, it was said: “The powers of insurance agents to bind their companies are varied by the character of the functions they are employed to perform. Their powers in this respect may be limited by the companies, but parties dealing with them as to matters within the real or apparent scope of their agency are not affected by such limitations unless they had notice of the same. An insurance agent clothed with authority to make contracts of insurance, or to issue policies, stands in the stead of the company to the assured. His acts and declarations in reference to such business are the acts and declarations of the company. The company is bound, not only by notice to such agent, but by anything said or done by him in relation to the contract or risk, either before or after the contract is made.” The judgment of the district court should be reversed, and a new trial granted, upon the first assignment of error dis.cussed in this opinion. By the Court: It is so ordered. .All the Justices concurring.