Franklin v. Atlantic Fire Insurance

Holmes, Judge, delivered the opinion of the court. The plaintiff sues upon a policy of insurance issued by the Atlantic Eire Insurance Company of Brooklyn, New York, through its agent at St. Louis. The insurance was upon household furniture, against loss by fire. [459] It does not appear that any written application for insurance wras required. The policy contained a condition that, “ if any person effecting insurance in this company shall make any misrepresentation or concealment touching the risk to be assured,” the policy should be void; and also another, that “if the interest of the assured in the property be any other than the entire, unconditional, and .sole ownership of the property, for the use and benefit of the ■assured, it must be so represented to the company and so expressed in the written part of this policy, otherwise the policy shall be void.” The defendant offered evidence tending to prove that, at the date of the policy, the plaintiff owned only an undivided interest of one-half in the property insured, and that there were two encumbrances on the property by deeds of trust executed by the plaintiff’s grantor. In rebuttal, the plaintiff proposed to show that after the policy had been made out, but before it was delivered or the premium paid, the plaintiff had informed the agent of the company that he was only a part owner of the property, and that the same was encumbered as aforesaid, and that the agent then said “ it would make no difference; it was all right,” or words to that effect. This evidence was excluded, and the plaintiff took a non-suit. The only material question in the case is, whether this evidence was admissible. By the general law of insurance, the interest of the assured in the property is not required to be specifically described in the policy. This matter was not in itself of the nature of a misrepresentation touching the risk to be assumed. It did not regard the situation or character of the property. It became important only by virtue of the condition which required that, if the interest were any other than the entire, unconditional, and sole ownership, it should be so represented to the company and so expressed in the policy. The object of this clause was, doubtless, to protect the company against the danger of taking risks on the property insured for so large an amount in proportion to its value, or the value of the interest of the assured, as to [460] furnish a temptation to fraudulent conduct. This evidence would show that the fact was truly represented, and then there would be no misrepresentation in respect of that matter. It was further required that it should be so expressed in the written part of the policy; and this was not done. If it had been done it would have amounted to an express warranty; and it was provided that if it, were not so done the policy should be void. Now, it was plainly the duty of .the agent to have this thing done. It was his business to receive the application and draw up the policy in proper form. He was placed by the company in the office of the agency at St. Louis, with full authority to receive applications and issue policies in the name of the company; and the defendant must beheld bound by all his acts and doings within the scope of his authority. The actual state of the case, then, is that the agent receives a, verbal application for insurance, and, before the policy takes effect, by delivery, the interest of the assured in the property is truly stated to his satisfaction, by which his attention is called to the circumstance that the specific character and extent of the interest ought to be expressed in the written instrument, and he answers ‘ ‘ it will make no difference; it is all right, ” receives the-premium and delivers the policy. The policy is accepted and the premium is paid on the faith of this assurance. The party insured goes away relying upon its validity to protect him against loss during the time specified. He acts upon a state of things-represented to him by the agent to be sufficient, and it would work a fraud upon him if the company should now be allowed to avail itself of this defense. If no disclosure of the nature of his title and interest had been made, or if he had fraudulently concealed it and then accepted this policy, the misrepresentation being of a matter material to the risk which the company had intended to assume, it would have amounted to a clear breach of warranty. This would have been a fraud upon the company, and the policy would have been void. Upon the facts which the plaintiff proposed to prove, such would not be the case, but the fraud would lie with the other party, and we think the matter would come within the principle of the authorities on the doctrine of [461] estoppel in pais. It would amount to a waiver of tbe condition requiring this matter to be inserted in the policy prior to tbe completion of tbe contract. This principle was applied in Horwitz v. The Equitable Ins. Co., 40 Mo. 557, upon a similar state of facts. In that case, it is true, tbe action of tbe agent was directly made known to tbe officers of tbe company, who made no objection; but that only made tbe waiver and authority of tbe 'agent more clear. In this case tbe agent was acting within tbe scope of bis general authority, and tbe company must be held equally bound by bis action without any immediate knowledge of tbe transaction. They were responsible for his acts in tbe premises. Tbe same doctrine was applied in Rowley v. The Empire Ins. Co., 36 N. Y. 550, in which an analogous state of things was presented. There was a policy containing a valid contract of insurance; tbe agent bad surveyed tbe property for himself, and induced tbe applicant to sign a written application which he had drawn up and represented to be correct, but which was materially erroneous in reference to tbe position of tbe buildings insured; and the company was held to be estopped from showing a breach of warranty in respect of that matter. Tbe agent had authority to take applications and issue policies, and the company was not allowed to set up the errors of its own agent to defeat the contract. There is manifest justice in the application of the principle to a case like this. These foreign insurance companies may justly be held bound, to the fullest extent the law will allow, for tbe acts of their agents appointed to represent them in these agencies abroad. Parties dealing with them are induced to rely upon them as baying competent authority for tbe transaction of tbe whole business which they undertake. If tbe agent abuses tbe confidence reposed in him by bis employers, they must look to tbe agent. Tbe law will protect tbe companies against frauds, misrepresentations, and breaches of warranty., but it will not lend its aid to' support defenses founded upon their own errors or omissions,^ when they have received tbe premium, delivered a complete and valid policy, and lain by without objection until a loss [462] has happened; it will not help them to accomplish a fraud upon the assured. For these reasons we think the evidence should have been admitted. Some points were made, also, upon the right of the plaintiff to sue upon the policy, but we have not found any other error in the action of the court below. Judgment reversed and the cause remanded. The other judges concur.