American Central Insurance v. Antram

Truly, J., delivered the opinion of the court. The third instruction for the appellees is as follows: “The court further instructs the jury that even though they may believe from the evidence that Antram made false statements, and by such false statements secured the policy in this case, and that the same would not have been issued without such false statements, they will still find for the plaintiff if they further believe from the evidence that after the fire the defendant’s local agent, Eggleston, accepted the premium for the company after its adjuster, Dillingham, had investigated the fire and loss and had full knowledge of all the facts in the case.” Under the facts disclosed by this record, the granting of this instruction was fatal error. If the assured made false state [229] ments to the agent of appellant, and thereby secured the issuance of a policy which, had the truth been stated, would not have been issued, the contract of assurance was never entered into, being absolutely vitiated by the fraud. If the insurance policy was obtained by fraud, no contract between the parties ever existed. Contracts of assurance are governed in this regard by the same general legal principle applicable to other contracts. The cases cited and relied upon by appellees as sustaining the proposition that the acceptance of the premium after knowledge of the facts constitutes a waiver of all defenses are all predicated of the existence of a legal contract between the parties, and simply hold that the insurance company, by accepting and retaining the premium after knowledge, waives the benefit of such defects, and they cannot be availed of in an attempt to avoid the policy. But the rule has no application to the state of facts set forth in the instruction now under review, for the reason that, if the policy was in truth procured by fraudulent representations, the contract of assurance apparently set forth therein is not merely voidable, but is legally nonexistent. A second objection to the instruction is that the record is barren of any proof tending to show that the adjuster of the insurance company, at the time he made the inspection of the loss, had any knowledge of the alleged false and fraudulent representations by which it is contended Antram procured the issuance of the policy. It is true that the adjuster, according to Antram’s testimony, was at that time fully advised as to the true state of the title to the house which was destroyed and of the interest which Antram owned therein. But this falls far short of proof that the adjuster was advised that the policy had been procured by false representations, fraudulently made, and it is upon this ground that appellant mainly relies. In the nature of things it was improbable that the inspector should have been so advised, for the all-sufficient reason that Antram, from whom he obtained all his information, emphat [230] ically denies that he ever made such false statements to the agent of the company. Another error in the instruction is that it ignores the direct and positive statement of the agent of the company that he did not receive the premium on the policy for the company after the adjuster had investigated the fire. There is nothing in the record as now presented to cast doubt upon the truth of the statement made by the agent that he had previously remitted to the company the premium due on the policy with his monthly remittances, and that at the date of the acceptance by him of the premium it was received in liquidation of an individual 'indebtedness due by Antram to him personally. If this be true, the acceptance by the agent of the payment of a private indebtedness due to him as an individual could not, by operation of law or by force of any adjudication of this court, constitute a waiver on the part of the company, even conceding that at the time of such payment both the adjuster and the agent had full knowledge of all the facts of the case and of all the circumstances surrounding the fire and the representations by which the 'issuance of the policy was procured. Such a doctrine would be to place a premium on fraud, and to encourage unscrupulous persons to procure by corrupt practices the issuance of policies, and then, should loss occur before their fraud became known, to protect themselves by inducing the agent then to accept the premium. We in no wise purpose to vary or abridge the rule that any and all defects known to exist in a contract of insurance by which a policy may be avoided will be waived by the acceptance by the company, through its agents, of the premium after full knowledge of the defects; but, while we do not modify that rule, neither will we extend it so as to enforce payment of policies of insurance procured by false representations as to material matters, made with fraudulent intent. We are deeply impressed by the force of the argument made by counsel for appellant as to the opportunity presented for [231] fraud in eases where a builder’s risk is concerned and where the contractor procures a policy of insurance for more than his interest in the building, but nevertheless we are constrained by the language of the statute to hold that such policy is governed by our valued policy law, and we must perforce remit the alleged evil and the remedy therefor, if one be found necessary, to the legislative department of the government. For the error indicated in granting the third instruction for the appellees, the cause is reversed and remanded.