Planters' Mutual Insurance v. Deford

Robinson, J., delivered the opinion of the Court. This action was brought on a policy issued by the appellant on the 6th of May, 1871, insuring the property of the appellees, known as the Bottle Bun Tannery, against loss by fire, to the amount of eight thousand dollars, distributed as follows: Cl On tannery with additions.............$3000 Hides and leather tanned, and in pro- cess of tanning — 200 — .Bark ins heds...... 3000" On the 30th of June, 1871, the tannery building was entirely destroyed by fire, and the stock of hides in part destroyed and in part injured. The loss on the building was estimated at twelve thousand dollars, and on the stock of hides and leather, $18,507.05, thus making the entire loss $30,507.55. — 396 — The building was insured in different companies, including a policy of $4000 in favor of Deford & Appold, trustees, to the amount of $10,500, and the stock of hides and leather $18,500, making altogether $29,000. The policy of the defendant, provided that any subsequent insurance of the property by the appellees, should render it null and void. At the trial, a policy of $5000 on the stock of hides and leather issued by the Union Eire Insurance Company of Baltimore, on the 2nd of May, 1871, was offered in evidence, upon which was the following endorsement: “ 1871, June 3rd, after this .date, this policy covers $2500 on stock, and $2500 on building.” This endorsement by which $2500 of the $5000 was transferred to the tannery building, being subsequent to the date of the defendant’s policy, the plaintiffs offered to prove by Thomas Deford, a member of their firm, and also by Otis Spear, agent and actuary of the Union Eire Insurance Company, that he, Deford, just before the issuing of the policy applied to the Union Insurance Company for a policy of $2500 on the building and $2500 on the stock of hides and leather, but by a mistake of the clerk of said Company, the policy was filled up for $5000 on stock, that this error was not discovered by the plaintiffs until about the 3rd of June, following, when upon their application the Company made the endorsement of June 3rd, as it now appears on the face of the policy, in order to correct the mistake thus made, and for the purpose of making the policy conform to the original contract of insurance made on the 2nd of May, the day it was issued. This evidence is objected to on the ground, that the effect of it is to contradict or vary the terms of the policy issued by the Union Insurance Company on the 2nd of May, 1871. Although a policy of insurance may be reformed in a Court of Equity, where, by a mistake it does not express the contract between the parties, it is very clear — 397 — that in an action at law, upon the policy between the parties thereto, parol evidence is inadmissible to contradict or vary the terms of the same. But the evidence offered here does not contradict or vary the policy upon which this suit is brought, but is offered to prove an independent and collateral J'act, namely, that the plaintiffs had not insured the property subsequent to the issuing of the defendant’s policy. The latter denied its liability on the ground of a subsequent insurance, to prove which it relied on an endorsement made upon the policy of another Company. On the other hand, the plaintiffs offered to prove not only by themselves, but also, by the agent of the Union Eire Insurance Company, being the two parties to the contract, that the endorsement thus relied on by the defendant was made for the purpose of correcting a mistake of the clerk in filling up the policy, and that the original contract of insurance was as it now appears by said endorsement; under such circumstances, we take the law to be, thatwbere the writing itself does not constitute the cause of action or contract between the parties, but is offered in evidence to prove a distinct collateral fact; parol evidence is admissible in respect of such fact, although it may contradict or be inconsistent with the written evidence. There may be exceptions to this rule, in cases of deeds and mortgages, or other instruments which are required by law to be recorded in order that the public may have notice of their contents, and in regard to which the parties thereto, in a suit with strangers, will not be permitted to contradict the same by parol evidence. Such are the cases relied on by the appellant. In Henderson vs. Mayhew, 2 Gill, 393, an action was brought to recover for supplies furnished a master of the ship, and it was held that the grantees of an absolute bill of sale could not prove by parol evidence, that it was intended as a mortgage, and that by mistake it was drawn as an absolute bill of sale. The Court say; — 398 — <cThe appellants, after obtaining an absolute deed, and authorizing the community to regard them as owners of the vessel, cannot now, for their own benefit, be permitted to allege that their bill of sale is a mortgage.” The effect of the evidence here offered not being to contradict or vary the terms of the policy upon which the suit was brought, but to prove a collateral fact, we are of opinion that it was admissible. II. The by-laws of the defendant provide in case of loss by fire, the insured shall give notice of the same within thirty days, and, shall deliver to the Secretary a particular account of such loss, verified by affidavit of the insured, or his agent, &c. The proof of loss was made out and verified by three disinterested persons, an employe of the plaintiffs, and two farmers living in the neighborhood, and is objected to on tbe ground, that it is not verified by the plaintiffs or their agent. Preliminary proofs are furnished for the benefit solely of the insurer, and if they are defective in any respect, good faith and fair dealing require that the insured should be notified of such defect within a reasonable time, in order that he may correct the same. If, however, instead of doing this, the Company puts its refusal to pay upon other distinct and independent grounds, it will be considered as having waived objections to such defects, and will not be permitted to rely upon the same as a defence to an action on the policy. The preliminary proof here, was furnished on the 15th of July, and in the correspondence extending from that time to October 24th, in regard to an adjustment of the loss, not a word is said about any defect in the proof; on the contrary, the refusal to pay, was placed upon other distinct and independent grounds, namely a subsequent insurance of the property, and over-estimate of the loss. Conceding then that the proof furnished in this case was defective, we are of opinion that the defendant has waived the right to object to it on that ground. — 399 — III. Appended to the proof of loss was a statement by the plaintiffs of the several insurances on the property, and also the following statement in regard to the value of the property: Machinery.....................................$1000 Stock in tannery, hides and leather. .$56,500 The defendant’s second prayer assumes that his statement refers exclusively to the hides and leather, and if the plaintiffs knowingly misrepresented the value of same, they are not entitled to recover, although the jury should find the loss equal to the amount of the insurance. On the other hand the plaintiffs contended, that the sum of $56,500, was intended to represent the value not only of the hides and leather, but also bark and other stock properly belonging to the tannery, and that this interpretation is warranted not only by the language used, but also by the circumstances under which the statement was made. The interpretation of a written instrument belongs no doubt as a general rule to the Court, and where parties have expressed their intention in clear and definite terms, the paper must be construed according to the true meaning of the words used. The question here is what did the plaintiff's mean by this statement : “Stock in tannery, hides and leather $56,500” appended to the proof of loss? Did they mean to value the hides and leather at $56,500? or did they include in addition thereto, bark and other stock in the tannery at the time of the fire ? Now if the language used be liable to the construction assumed in the defendant’s prayer, no one will question, hut what it is equally susceptible of the meaning placed upon it by the plaintiffs. Here then is a paper which upon its face is liable to more than one interpretation, and the prayer was therefore properly rejected. The question as to whether parol evidence was admissible to show what the plaintiffs meant, becomes unnecessary to decide. — 400 — IV. It appears the whole number of hides sent from Baltimore to Cumberland for the tannery was 3964, of which, 180 had been returned, and 625 had not reached the tannery, but were at Cumberland at the time of the fire. The actual number of hides at the tannery was therefore 3159, or what is equivalent 6318 sides, thus showing an error in the preliminary proof of 388J hides. At the time of the valuation, the hides and sides were classified in lots, and the damages to each lot valued separately. No addition was made at the time by the appraisers, nor subsequently by the plaintiffs, and the error was not discovered when the preliminary proof was furnished. The defendant in its third prayer assumes that if the proof of loss stated a greater number of hides to be at the tannery at the time of the fire than was actually there, that the plaintiffs believed such statement to-be true, but afterwards, and before writing the letter of September 30th, discovered the error and did correct the same, they are not entitled to recover. Now the letter of September 30th, was written in reply to one received from the defendant, in which the latter placed its refusal to pay upon two grounds. 1st, subsequent insurance, and 2nd. over-estimate of loss. Not one word about an error of 388J hides, or that any such error had been discovered ; on the contrary, the whole evidence shows that the defendant’s refusal to pay was based upon other grounds. And yet- if the plaintiffs inadvertently failed to correct this error in their letter of September 30, in which they denied a subsequent insurance, and averred their ability to prove the loss, they 'are not entitled to recover, and this too in the absence of fraud or bad faith on their part, and without the slightest pretence that the failure to correct said error, worked any injury to the defendant. The modification of the prayer by the Court, "Provided the plaintiffs did not make such correction of the number of hides or sides, knowing the number of — 401 — the hides or sides therein stated, and knowing the same to be incorrectly stated therein, with intent to defraud the defendant,” presented the law as favorably for the defendant as it had any right to expect. It was by fraud and false swearing that the plaintiffs forfeited the policy under the provisions of the by-laws, and not by inadvertently failing to correct an error which could not, and did not work any injury to the defendant. V. In their written application, the plaintiffs stated, “we propose an insurance of $3000 on the aforesaid property in addition to the $4000 on same in City Companies * * * “We propose an insurance of $1000 on bark in addition to the $500 now on same.” It appears there was an insurance at the time of $4000 on the property in the name of Deford & Appold, trustees, who had a lien on the same for unpaid purchase money, and also an insurance in their names of'$500 on the hark, but there was no insurance of the plaintiffs’ interest, either on the building or hark. The defendant’s sixth prayer assumes, that the application by the terms of the policy became a warranty, and is to be construed as a representation by the plaintiffs that there was an insurance on their interest of $4000, and if the jury should find there was no insurance of their interest, the verdict must be for the defendant; and further that the insurance of the interest of Deford & Appold, trustees, was not such an interest as could be considered. On the other hand the application having been prepared by the agent of the defendant, evidence was offered to prove that lie was informed at the time that the insurance of $4000 was on 1he interest of the trustees, and the plaintiffs contend that if the paper does not state the facts truly, it was the fault of the agent, and the defendant is estopped from setting up the same as a representation by the plaintiffs — they also deny that it is made a warranty — 402 — by tbe terms of tbe policy, and if a warranty that it is liable to the interpretation put upon it by tbe defendant: they further contend, that evidence in regard to the insurance of the interest of the trustees was admissible and was to be considered, in determining whether the application referred to such insurance, or to an insurance of the plaintiffs’ interest. Whether the application in this case is to be construed as a warranty; or whether parol evidence is admissible to prove that the agent was informed at the time as to the nature and character of the insurance of $4000, and that the defendant is thereby estopped from relying on such a defence, are questions not necessary to be decided. Whatever conflict there may be in the decisions in regard to the latter question, it has been held in many well considered cases that such evidence is admissible, and whenever the breach of warranty or representation can be fairly attributed to the fault of the agent of the Company, the latter will not be allowed to set up such breach as a defence to an action on the policy. Union Mutual Ins. Co. vs. Wilkinson, 13 Wallace, 222 ; 2 Am. Leading Cases, 916; Hough vs. City Fire Ins. Co., 29 Conn., 10 ; North American Fire Ins. Co. vs. Throop, 22 Michigan, 146. But conceding for the purposes of this case that such evidence is not admissible, and further that the application is to be construed as a warranty, questions we are not to be understood as deciding, the prayer of the defendant was properly refused on other grounds. No principle is better settled, than that policies of insurance, like all other contracts, are to be construed with a view to ascertain and give effect to the intention of the parties. This intention it is true, is to be ascertained from the face of the policy itself, provided the language used is clear and unambiguous, and in such cases it is the duty of the Court to ascertain the true meaning of the words used, and when ascertained to subject them to the established rules of law. — 403 — Where, however, the language used is not clear and unambiguous, but is susceptible of two or more interpretations, extrinsic evidence is admissible upon the same principles and subject to the same rules, that are applicable to all other written contracts. And it may, and does sometimes happen, that upon the evidence thus offered, taken in connection with the language used in the contract, Courts give to the instrument an interpretation different from that which it would have received from the face of the paper itself. In such cases the extrinsic evidence is not offered, nor is the effect of it, to contradict the written terms of the contract, but to explain the meaning of the parties thereto, by pointing out and connecting it with the subject-matter to which it refers. The question here is, what did the plaintiffs mean by saying to the defendant, we want an insurance by you of $3000, in addition to the $4000 on the property now in City Companies? Is it to be interpreted as a declaration by them that there was such an insurance on their interest, and looking to the paper itself, does such an interpretation exclude all others; or are the terms used consistent with the meaning put upon it by the plaintiffs, namely, as a statement by them of the amount of insurance on the property at the time, without intending to designate the interest insured ? Now it must be conceded, they do not state in so many words it is their interest that is insured to the amount of $4000, and if the language used is liable to such an interpretation, it is also equally susceptible of the meaning put upon it by the plaintiffs. The application does state in explicit terms that there is an insurance q/'$4000 on the property, but it does not stale in clear and unambiguous language whether the insurance is on the interest of the plaintiffs, or of parties having liens on the property. Under such circumstances, it was clearly competent for the plaintiffs to prove that there was an insurance of $4000 on the building and $500 on — 404 — the hark in the name of the trustees, at the time the application was made, and such evidence was to he considered in determining whether it was the insurance meant by the plaintiffs in their application. Such evidence does not contradict, nor is it inconsistent .with • the written terms of the application, — the effect of it is to point out and identify the subject-matter referred to and thus enable the Court and the jury to ascertain the true meaning of the parties. (Decided 2nd July, 1873.) Erom what we have said it follows, the plaintiffs’ prayers were properly granted, and that no error was committed in the modification of the defendant’s third, and in the refusal of its sixth, seventh, eighth, ninth and tenth prayers. Judgment affirmed.