Hartford Fire Insurance v. Keating

Page, J., delivered the opinion of the Court. This is an action on a policy of insurance issued by the appellant, insuring the property of one Frank W. Draper against loss by fire. The policy was issued to Draper, and on the 2nd day of October, 1894, at the request of Draper, by proper endorsement, the loss was made payable to the appellees “as their interest may appear.” The property insured was a two-story frame building on a lot situated in the town of Centreville. The whole property, prior to the accrual of Draper’s title, had belonged to a Mrs. Sparks, who held a policy of insurance on the house, issued by the — 143 — appellant This policy was cancelled on the ioth or January, 1893, the same day on which the policy sued on in this case was issued. In September, 1892, the appellees, as attorneys, in a mortgage from ¿Mrs. Sparks to Eliza Wilkinson, sold the lot and improvements to Draper. The sale was reported to the Court, and ratified nisi, on the 27th of September. Draper complied with the terms of sale, by making a cash payment of $732.55, and executing with sureties, and delivering to the appellees two notes for $597.76 and $565.73, respectively, and thereupon entered into the possession of the property. One of the appellees then demanded of Draper that he should insure the house and transfer the policy to them, and it was in pursuance of this that the policy was issued and the loss afterwards made payable to the appellees as attorneys. It was issued by Frank Keating, who was then the agent of the company, intrusted by it with the possession of blank policies, authorized to sign and issue them, receive the premiums and account for them ; and moreover was the company’s only agent in Centreville. It is admitted that when the policy was issued, he was fully cognizant of the character of Draper’s title, the nature of the appellees’ interest in the matter, and the understanding between Draper and the appellees under and by which the insurance was applied for. Keating besides being the agent of the company was also a clerk in the law office of the appellees, and,as such had drawn all the papers connected with the sale of the property (except the order of final ratification), and therefore knew all the facts and circumstances of the case. In October, 1893, he ceased to be the agent of the company, and Thomas J. Keating, Jr., was appointed in his stead. A small fire having injured the property in January, 1894, the company paid in February the loss on account thereof to Draper. Shortly after this, the appellees ascertained that in consequence of a neglect of Frank Keating, the policy had not been transferred to them, as it was agreed should be done. Accordingly they took steps to have this effected, and on the 2nd — 144 — October, 1894, the endorsement was made on the policy by Thomas J. Keating, Jr., the agent, and by him on the same day forwarded to the company, who received it on the fifth of October. At that time this agent knew the exact state of Draper’s title and of the interest of the appellees, but did not notify the company further than appeared in the policy and his daily report, neither of which make mention of any incumbrances. Subsequently Draper having made default in the payment of his notes, the appellees on the third of December obtained a final order for a resale of the property at his risk, but before a sale was had, on the fifth of January, the building was totally destroyed by fire. Upon this state of facts the appellants contend : 1st. That Draper’s interest was “ other than unconditional and sole ownership,” and therefore the policy by its terms is void; and 2nd. That the appellees had no insurable interest in the property. The policy contains the condition, that “if the interest of the insured be other than unconditional and sole ownership,” it shall be void, “ unless otherwise provided by agreement endorsed ” thereon or added thereto. This is a part of the contract of insurance; it is binding on both parties, and must be construed by the same rule as other contracts. “ The Court must give to the language used its just sense, and search for the precise meaning and one íequisite to give due and fair effect to the contract, without adopting either the rule of a rigid or of an indulgent construction.” Wash. F. Ins. Co. v. Kelly, 32 Md. 446. In the case just cited, this Court has stated the general purpose for the insertion of conditions like the one now under consideration in insurance policies. It is there said, “They were doubtless originally directed against wagering policies, and were intended to protect underwriters from paying losses to those who in fact had not sustained them, who really had nothing at hazard, and whose interest, therefore, was that the event should happen.” The nature and extent of the interest of the insured, are matters largely influential with underwriters in taking or — 145 — rejecting risks and estimating premiums, and for that reason any condition respecting them in the contracts is material, and must be construed so as to effectuate the purposes of the parties. But while this must be done, the law assumes that the parties understood the words they have used, and therefore unless there are potential reasons to the contrary, they are bound by the legitimate and usual meaning of the phrases they employ. Now it must be observed that it is not title, but interest that is spoken of in the clause. Title and interest are entirely different things. It was undoubtedly competent for the parties to have contracted as to the title, as was done in Wineland v. The Security Ins. Co., 53 Md. 283; but in this case they have chosen to limit the provisions of the clause to the condition of the interest, either legal or equitable. The question therefore presented to us now is, was the “interest” (legal or equitable) of Draper, “ unconditional and sole ?” As to the meaning of these words when used in the present connection, there seems to be a concurrence of authority. To be “ unconditional and sole ’ ’ the interest must be completely vested in the assured,, not contingent or conditional, nor for years or life, only, nor in common, but of such a nature that the insured must sustain the entire loss if the property is destroyed; and this is so whether the title is legal or equitable. Imperial F. Ins. Co. v. Dunham, 117 Pa. St. 475; Pa. F Ins. Co. v. Dougherty, 102 Pa. St. 572; Rumsey v. The Phoenix Ins. Co., 17 Blatchford, 529; Dupreau v. The Hibernia Ins. Co., 76 Mich. 615; Aetna F. Ins. Co. v. Tyler, 16 Wendall, 396; Oshkosh Co. v. Germania F. I. Co., 71 Wis. 455; Wash. Ins. Co. v. Kelley, 32 Md. 421; Clay Ins. Co. v. Beck, 43 Md. 358; Westchester F. Ins. Co. v. Weaver, 70 Md. 540. We have been referred to cases, where it is held that when the insured is in possession under a contract of purchase and the legal title has not passed by a conveyance, the ownership is not unconditional until the purchase money has been wholly paid. Ins. Co. v. Curry, 13 Bush. 312. But it may be doubted whether such cases are in line with — 146 — the current of authority. We are not concerned, however, with that question; for at the time the policy was issued, Draper was not in the position of a purchaser, but that of a bidder only for the property. His offer of purchase had not then been ratified by the Court, and until it was, the contract was not complete, and his interest in the property was dependent upon the subsequent action of the Court. Prior to the final ratification his interest was only an inchoate right. Lannay v. Wilson, 30 Md. 551. The effect of final ratification, it is true, was rétroactive, so that he became invested with the title from the day of the sale; but at the time the policy was issued, his interest was entirely conditional, depending, as it did, upon the final order of the Court. The appellees however insist the appellant is estopped from setting up this defence, because their agents knew all the facts, both at the time the policy was issued, and when the endorsement was made to the appellees. The policy was issued through Frank Keating, and from all the evidence before us we think he must be regarded, while so acting, as b e agent of the company. The proof shows that he was supplied with policies in blank, was authorized to issue them, signed them and delivered them to the parties who desired insurance, received the premiums and accounted for them to the company. Such .authority constituted him a general agent o'f the company within the territory assigned him, in the matter of soliciting and accepting risks, and agreeing' upon the terms and contract of insurance. Cont. Ins. Co. v. Ruckman, 127 Ill. 372; Ins. Co. v. Wilkinson, 13 Wall. (U. S.) 222; 2 Wood on F. Ins., sec. 409; Cone v. Niagara F. Ins. Co., 60 N. Y. 619; Hotchkiss v. Germania F. Ins. Co., 5 Hun. 90. If such an agent has knowledge of the facts at the time he issues the policy, the company will be estopped from relying upon them as a cause of forfeiture. This principle is well sustained by authority; it rests upon considerations of common honesty, that an insurer with full knowledge of the facts or charge — 147 — able with such knowledge shall not enter into a contract of insurance, receive the premiums thereon and then be permitted to set up those facts to evade the liabilities the contract imposes on him. Nor does the clause providing that “no officer, agent or other representative of this company shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be endorsed hereon or added hereto,” See., affect the question. It does not apply to the making of the contract, but to the provisions of the contract itself, after it has gone into effect, so as to prevent agents from modifying the terms of the policy after it has been issued. The general doctrine is well stated in Wood v. The Am. F. Ins. Co., 149 N. Y. 384. The Court then said: “That the general agents of an insurance company may waive stipulations and provisions contained in the policy with respect to the conditions upon which it shall have inception and go into operation as a contract between the parties, by delivering it with knowledge of all the facts and receiving the premium, has long been settled. It is so obviously just, that a party to a written contract should be precluded from defeating it by asserting conditions and stipulations contained in it, which would prevent its inception, and which he knew at the time he delivered it and accepted the benefits were contravened by the actual facts, that any statement upon which the rule rests is no longer necessary. The restrictions inserted in the contract upon the power of the agent to waive any condition, unless done in a particular manner cannot be deemed to apply to those conditions which relate to the inception of the contract, when it appears that the agent has delivered it and received the premiums with full knowledge of the actual situation.” Continental Ins. Co. v. Ruckman, 127 Ill. 364; Franklin Fire Ins. Co. v. Chicago Ice Co., 36 Md. 102; Maryland Ins. Co. v. Gusdorf, 43 Md. 514; The Am. L. Ins. Co. v. Mahone, 21 Wall. 152; Ins. Co. v. Wilkinson, 13 Wall. 222; Ben. Franklin Ins. Co. v. Giltett, 54 Md. 218. — 148 — There is no evidence in the cause that tends to prove that Frank Keating was the agent of the appellees in any respect touching the matter of insurance. It is clear, however, that at the time the policy was issued he was fully informed of the state of Draper’s title, and that .the policy was desired to cover also the interest of the appellees. It follows from what precedes, we find no error in the rejection of the appellant’s fourth and fifth prayers. The second and third prayers of the defendant raise a question as to whether the appellees had an insurable interest in the property. The contract of insurance, being one of indemnity, the insured must have such an interest in the property as that its destruction will result in pecuniary loss to him. But it is not necessary he shall have a title, provided his interest, whatever it may be, is such that it would be impaired or injured by its destruction. Franklin F. Ins. Co. v. Coates, 14 Md. 297. Nor is it is requisite, that the interest be personal: If the insured has an interest in the property as agent, trustee, &c., or hold such relation to the property, that its destruction will involve pecuniary loss to him or to those for whom he acts. For this reason it has been held, that an administrator where the personalty was insufficient to pay the debts, had an insurable interest in the real estate. Clinton v. Hope Ins. Co., 45 N. Y. 454. And so of a judgment creditor (Rohrback v. Germania F. Ins. Co., 62 N. Y. 47), and of a surety responsible for a mortgage debt. Ins. Co. v. Thompson, 95 U. S. 547. In the case at bar, the assignment is to the appellees’ “attorneys, as their interest may appear;” that is, the indemnity secured by the policy shall extend to and include such interest in the property as the appellees might hold as attorneys. When the assignment was made, the sale had been reported and finally ratified. At the time of the. fire, a large part of the purchase money being then unpaid, the attorneys had obtained from the Court an order for a resale at the risk of Draper. It is not difficult to perceive how — 149 — the attorneys, for themselves and those whom they represented, were interested in the property to the full extent of the unpaid purchase money, and how its destruction would affect them. These remarks dispose of the appellant’s second and third prayers, which were properly rejected. It is further contended there can be no recovery, because of the failure of the appellees to furnish the proofs of loss within sixty days after the fire. The policy provides this shall be done, unless the time is extended in writing, and further, that the loss shall not be payable until sixty days after the proofs of loss have been received by the company. It was argued on the part of the appellees, that “ the sole penalty” under the terms of this policy, of a failure to promptly file proofs of loss is to suspend the right of action until such proofs are filed. There are some authorities that seem to sustain this contention. The general doctrine, however (and without deciding how far it is applicable to a policy like the one in this case), maintained by the great weight of authority and by our own decisions, is, that conditions like this form parts of the contract of insurance and are binding on both parties and must be complied with. Spring Garden Ins. Co. v. Evans, 9 Md. 13; Ins. Co. v. Doll, 35 Md. 89; 2 Wood on F. Ins., sec. 439 et seq. But all the authorities agree that this condition may be waived, either expressly or by acts and conduct of the insurer himself, or of his agent, having real or apparent authority ; and the waiver may be inferred from such acts and conduct as are inconsistent with an intention to insist upon a strict performance. Rokes v. Amazon Ins. Co., 51 Md. 512. And the reason for this rule obviously is, that an insurer whose conduct is such as to induce the insured to rest under a well-founded belief that strict performance of such a condition will not be insisted on, cannot in good faith afterwards set it up as a bar to a recovery. If, therefore, there was such conduct of the appellant or of its agent (with competent authority) as induced the appellees reasonably to believe — 150 — that proofs of loss would not be demanded and they did so believe, and by reason thereof they failed to make and file them with the company within the prescribed time, it would offend every principle of natural justice to permit the insurer to take advantage of it. 2 Wood on F. Ins. Co., 470 et seq., and authorities there cited, especially the case of Ripley v. Aetna Ins. Co., 30 N. Y. 136; Georgia Home Ins. Co. v. Kinnier, 28 Gratt. 88; Little v. Phoenix Ins. Co., 123 Mass. 380; Eastern R. R. Co. v. Relief Ins., &c., 105 Mass. 570. The proof shows that shortly after the fire, Catanach, a special agent of the appellants, went to Centreville to view the ruins of the property, and investigate all the circumstances attending the loss. While there he had a conversation with Thomas J. Keating, one of the appellees. After some general talk about the fire, the latter said to him, “ When you send the money for the loss of this property, I want you to send us a separate check for our interest in the matterCatanach replied, “ No, I cannot do thatKeating asked, “ What will you dothe reply was “ send a joint check to you gentlemen as attorneys and to Mr. Draper.” Keating then explained to him, he was afraid he would have trouble with Draper about getting him to sign a joint check. Later on Keating, Jr., the agent, wrote to Catanach that Draper was enquiring about his loss and that he (the agent) simply tells him it is “ in the hands of the company ;” and two days later, on the 20th of February, he again writes to Catanach, this time to say, “ the attorneys for the mortgagee in the Draper matter have requested me to write and ask you to send a proof of loss, so that they could make it out and get Draper to make oath to it. I told them that you usually attended to the making out of the proof, but that I would write you about it.” On the 23rd February, 1895, Catanach replies; he writes: “Inasmuch as we have notice of attachment proceedings at Baltimore in regard to this loss, it is important that great care should be exercised in the matter on this account; while I have at times made up proofs of loss, it is not customary to do so, — 151 — and in all cases of litigation I decline to do so, or allow the agent to take any part in furnishing or making up proofs of loss, but that no obstacle may be thrown in the way of the assured,” he directs the agent to inform him where printed blanks can be had, &c. There was evidence tending to show that the request for “ the proof” of loss “ to be made out,” was made by Palmer Keating, who did not have charge of the business and had no knowledge of the previous conversations of Catanach with his brother Thomas, who testified that after his conversation with Catanach, he did not think it was necessary to file proofs of loss, but that afterwards he had done so because he thought it would do no harm and Catanach had desired it to to be done. In the first prayer of the appellees the jury were required to find as one of the conditions of the right of the plaintiffs to recover: that after the fire, “Catanach went to Centreville, examined into the circumstances of said fire, and the value of said dwelling, and that after having done so had a conversation with Thomas J. Keating, one of the plaintiffs, in which he stated that the dwelling was a total loss, and in answer to a request of the said plaintiff that the check for the plaintiffs’ interest in said loss should be payable to the plaintiffs’ order, stated that the said check could not be made payable to the plaintiffs’ order, but would be made payable to the order of Frank W. Draper, and the plaintiffs jointly ; and further find that from such conversation the said plaintiffs believed that the defendant’s agent had waived formal proofs of loss and that the said Catanach did intend thereby to waive such proofs of loss, &c.” Now if Catanach stated to the appellees that he would send a joint check, it was a recognition of the liability of the company, and wholly inconsistent with an intention to contest the plaintiffs’ right of recovery. And if the jury found the appellees so understood it, and Catanach so intended it, and the acts of the plaintiffs were thereby influenced by it, the legal conclusion of the Court, that the facts so put to the jury, constituted a waiver, was entirely warranted. In reply to the objection that there is no proof — 152 — of Catanach’s power or authority to waive this condition, all we have to say is, it was at least within the scope of his apparent authority. He was a special agent of the company sent by it to view the ruins, investigate the loss and find out as much about it as he could. Mr. Keating, the agent, when asked about the policy and when it will be paid, consults Mr. Catanach, who replies authoritively in his letter of 23rd of February. And when finally proofs of loss are made, they pass to Mr. Bond, an agent, who testifies he sent them to Catanach, and the matter was then turned over to him for such action as he should see proper in the premises. (Decided June 23rd, 1897). These facts, we think, clearly show that he held the actual or at least the apparent authority to examine into and adjust the circumstances of the loss and the liability of the company. We think the defendant’s 7th, 9th, 10th and nth prayers ought not to have been granted. The defendant’s sixth prayer was properly rejected because there was no evidence of a change in the title of possession. Washington F. Ins. v. Kelly (supra). Of the defendant’s eighth prayer it is only necessary to say there is no condition in the policy against encumbrances. Bowman v. Franklin Ins. Co., 40 Md. 620. There were other points raised and discussed at the argument, but inasmuch as what has been said practically disposes of all the questions in the case, we will not prolong this opinion by adverting to them. We find no error in any of the rulings of the Court and the judgment will therefore be affirmed. Judgment affirmed.