Central Granaries Co. v. Nebraska Lumbermen's Mutual Insurance

Rose, J. This is an .action on a fire insurance policy, issued to plaintiff by defendant September 15, 1917, to recover the loss of a warehouse and its contents which were destroyed by fire August 6, 1918. Plaintiff’s claim is composed of two items, one for $614.20 on the warehouse and the other for $828.76 on the contents. The loss by fire and the' amounts claimed are not controverted, but defendant pleads that the property destroyed was not covered by the policy in suit. From a judgment on a verdict in favor of plaintiff for the full amount of its claim, defendant has appealed. It is-argued by defendant that the trial court erred in [82] overruling a motion to direct a verdict in favor of defendant on the ground that plaintiff failed to make a ease. Plaintiff is a dealer in lumber and other building materials at Adams. Its lumber yard is on lots 4, 5, 6 and 7, and its warehouse and office are on the adjoining right of way of the Chicago, Burlington & Quincy Railroad. The application and the policy describe the lots as the location of the insured property, but make no mention of the adjoining right of way on which the warehouse was situated. Plaintiff pleads that the failure to include the right of way in the description of the land on which part of the insured property was situated was a mutual mistake and demands relief according to the policy correctly reduced to writing. Defendant contends, among other things, that the evidence is insufficient to prove the mutual mistake pleaded; that the policy as written states correctly the terms of the only contract made, and that defendant is a mutual insurance corporation having no authority to make an oral contract of insurance. The verdict of the jury was in favor of plaintiff. It follows that in determining the sufficiency of the evidence to prove the mutual mistake the testimony tending to support the affirmative of that plea must be accepted as the truth, though in some respects it is contradicted by other testimony. What, then, are the established facts and the proper deductions? The negotiations for the insurance began between E. W. Taylor, treasurer of plaintiff, and E. E. Hall, secretary of defendant, both acting within their authority and both having offices in the Terminal Building in Lincoln. A few days before the policy was issued Taylor called on Hall and inquired about insurance on plaintiff’s plant at Adams, consisting of lumber sheds, warehouse and office, the lumber sheds being on lots 4, 5, 6 and part of lot 7, and the warehouse and office being on the adjoining right of way of the Chicago, Burlington & Quincy Railroad. Taylor asked about the' amount of insurance obtainable on the [83] plant, and was told by Hall that the maximum was $5,000. The day this conversation took place, or the next day, Hall called át Taylor’s office and pursued the negotiations. On a plat or blue print Taylor pointed out to Hall the lumber sheds on the lots and the warehouse and the office on the adjoining right of way. A pencil line made at the time, showing where the warehouse leaned against an elevator on the right of way, is still on the plat. Taylor then told Hall that plaintiff wanted insurance on plaintiff’s lumber yard, office, warehouse and contents at Adams. Hall said he could have it to the extent of $5,000. Without further conversation L. J. Thurn, secretary of plaintiff, who had taken no part in the negotiations, received a blank application for insurance, perhaps from Hall. Knowing that 'the warehouse, part of the lumber plant, was on the right of way, Thurn, through an oversight, failed to mention the right of way in describing the location of part of the insured property, but took the description alone from the deed to plaintiff’s adjoining lots. The policy, repeating the mistake in the application, came back to Thurn, who handed it to a clerk to be filed in plaintiff’s office. Plaintiff paid the membership fee and the subsequent assessments. In the written policy defendant could have covered the warehouse just as well as not. Hall said so after the fire, and without requiring any additional compensation, or exacting any increase in the cost of the insurance, changed the policy in suit to cover the warehouse, and likewise corrected other policies covering risks of plaintiff at other yards without demanding any change to lessen the hazards. The purpose in applying for and in procuring insurance on the lumber sheds was no different from the purpose to apply for and to procure a like protection for the warehouse on the right of way. Plaintiff had no other insurance on the warehouse. The facts and conclusions narrated are proper deductions from the evidence, though there is a conflict of testimony in some respects. The evidence shows clearly that [84] the minds of the parties never met on an insuránce contract excluding the warehouse. The inference is equally clear that both parties understood the right of way was to be included in the description of the land on which insured’s property was situated. The omission of the right of way in drawing the policy was obviously a repetition of the mistake in the application. That the mistake was mutual is the logical and reasonable conclusion to be drawn from all the circumstances surrounding the negotiations, conditions and acts of the parties. The verdict is not only sustained by the evidence, but the evidence shows that the jury reached the correct conclusion. Not only that, the evidence showing the mistake and how-it occurred was properly admitted. The power of a court to correct a mutual mistake implies the admissibility of competent and necessary proof of such mistake. There is no occasion for' a separate suit in equity to correct a mutual mistake like that described and for a subsequent action at law on the reformed policy. Without the delay and the expense incident to two actions, equity and justice can be administered in a single suit. Considered as an action at law on the insurance contract actually made, the issue of mutual mistake was correctly determined by the jury in favor of plaintiff. Considered as a suit in equity to correct the mistake and to recover the insurance, the finding of the court should be the same as the verdict of the jury in favor of plaintiff, but the trial judge had authority, in the exercise of equity jurisdiction, to submit questions of fact to the jury. There was therefore no error in the overruling of the motion for a directed verdict in favor of defendant on the issue of a mutual mistake. Another reason urged for a nonsuit is that the parties mutually construed the policy to exclude the warehouse as insured property. This point seems to be based on the fact that the written policy, after the fire, was changed, with the consent of both parties, to include the right of [85] way as a part of the land on which insured property, including the warehouse, was situated. The real import of this fact is that the change related to the policy as it was erroneously reduced to writing, and not to the contract upon which the minds of the parties had met — a contract needing no construction but insuring plaintiff’s warehouse. Defendant invokes the doctrine that the contract of a mutual fire insurance company consists of the statute authorizing its creation, the articles of incorporation, the by-laws, the application for membership and the policy issued. In this connection it is argued that such an insurer can make no oral contract of insurance. If this is the law, a question not decided, it does not prevent oral negotiations for insurance, nor an oral understanding of the terms to be inserted in the. application and in the written policy, nor prevent the parties from making an amicable correction of a mutual mistake in reducing those terms to writing, nor .prevent the court from correcting such a mutual mistake, where one of the parties, though retaining the consideration for the contract actually made but not correctly reduced to writing, tries to take advantage of the mutual mistake. In these respects a mutual insurance company is governed by the same rules of equity and the same principles of law as all other corporations or individuals having the power to make contracts. Another argument is directed to the proposition that the insurance is defeated by misstatements in the application. The evidence shows conclusively that plaintiff made no misstatement contributing to the loss or deceiving defendant to its injury. It follows that under the laws of this state plaintiff did not lose its insurance on account of misrepresentations. Rev. St. 1913, sec. 3187. In view of the conclusions reached on the questions discussed, there is no prejudicial error in the giving or in the refusing of instructions, or elsewhere in the record. Flansbukg, J., not sitting. Affirmed.