Geo. Washington Fire Ins. Co. v. Adams ( 1928 )

It is a conceded fact in this case that, upon a stock of goods and fixtures, sworn by the insured to have been of the value of $3,654.89 (mark the exact figures in dollars and cents), the insured was carrying insurance to the amount of $7,500.

It is also a conceded fact that, in the proofs of loss relating to the particular policy in question, the insured made an affidavit, in order to collect the $3,000, "that the total insurance covering, at the time of said fire, in whole or in part, on any of the within described and insured property, including the above and all other policies, binders and/or other agreements to insure, whether valid, or invalid, was $3,000and no more.

It is also a conceded fact that, upon the representation made by the insured in the proofs of loss, the company paid him $2,824.27.

It is also a conceded fact that, in addition to the $2,824.27 paid by the plaintiff company, the insured collected from other companies, with which he held the other policies covering the same property, $3,125.20, making a total collection of insurance, upon property which he under oath and with apparent exactness, valued at $3,654.89, amounting to $5,949.27.

It is also a conceded fact that the policy here involved contained a provision that: "Unless otherwise provided by agreement in writing added hereto this company shall not be liable for loss or damage occurring. Other Insurance. (a) While the insured shall have any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy."

In this action brought by the insurance company to recover the amount paid by it upon the policy in question, upon the ground of the false representation by the insured that he had no other insurance upon the property than the policy then being adjusted, the only defense that the defendant sets up is that he acquainted the agent of the company, at the time of the settlement, with the fact that he had other insurance upon the property; and from that fact claims that the company has waived the express condition in the policy above set forth.

Of course the burden is upon the defendant to establish the facts upon which he relies as a waiver. Upon that issue it is correctly and pertinently stated in the opinion of Mr. Justice Stabler: "The testimony is not as full and as clear on the point in question as it should be * * * It does not appear, however, with positive certainty, whether the conversation took place before or after the check was delivered. * * * While the record, as we have said, is not absolutely clear on this point. * * *

It is pertinent therefore to examine the evidence, and see just what did transpire between the insured and Douglass, the agent of the company, and at the same time cashier of the bank at Cheraw.

After the proofs of loss were submitted, the company sent a check for the amount at which the loss was adjusted, $2,824.27, to the agent Douglass, for delivery to Adams. He was notified, and went to the bank, of which Douglass was cashier, for the check. It was offered to him by Edens, an employee of the bank; he then proceeded to have a settlement with Douglass, the cashier; at that time Adams owed a note at the bank, and it was agreed that Douglass should deduct the amount of his indebtedness from the insurance check and give him a cashier's check for the difference. Adams endorsed the check and handed it to Douglass. He testified that, while the cashier's check was being made out for the difference between the insurance check and the note Adams owed the bank, Douglass (of course as cashier of the bank) wanted to deduct also a note which was due to the bank by a son of Adams. It was at this time, after Adams had endorsed the check and handed it to Douglass to perfect the settlement between him and the bank, and while the cashier's check was being made out, that Adams declined to allow his son's note to be deducted, and as he testified: "He asked me to pay the debt of my son, my son owed, and I told him to wait until I got my other insurance and I would pay it."

It seems to me perfectly clear that, if this can be considered notice to Douglass that his affidavit, to the effect that he had no other insurance upon the property, was untrue, and that he did have such other insurance (which, owing to its vagueness, is not at all certain), it was notice to Douglass as cashier of the bank, and not as the agent of the company. The transaction, so far as the company was concerned, was closed at the time the check was endorsed by Adams and delivered by him to Douglass for a settlement with the bank. The insurance company had no interest in that settlement, and no rights to be protected. If as a fact, at that time, Adams had made a full disclosure of the true facts, Douglass, having delivered the check and Adams having indorsed it and handed it back to Douglass for the settlement with the bank, could not, as the representative of the company, have recaptured and held the check. It was Adams' property as soon as it was delivered, indorsed, and handed back to Douglass for the settlement; the transaction between Adams and Douglass, as agent of the company, was at an end; what transpired thereafter was a transaction between Adams and Douglass, as cashier of the bank, in no manner binding upon the company.

It is very significant that when Adams filed his answer he did not at all rely upon any such alleged notice to Douglass. His answer originally contained a general allegation that the company had notice of the outstanding other policies when the settlement was made. Upon motion of the plaintiff for an order requiring him to make his answer definite and certain, by alleging "in what manner and to what agent or representative of plaintiff company information was communicated of the issuance of the other fire insurance upon the property of the defendant," the motion was granted, and an amended answer was filed which contained the allegation "that this defendant does not remember the name of the agent to whom he talked in reference to the policy of insurance in this action, and therefore he cannot give the name of such person." In his testimony he admits that he knew Douglass well; he manifestly was not the agent to whom he referred in his answer. It transpired that one Harrison, adjuster for the other companies, was the man to whom notice of other insurance was given. "It is necessary that the knowledge of an agent, in order to bind the company, should have been obtained by him in the course of his employment. If obtained while doing an act in no way connected with his agency, the company is not bound." 2 Joyce, Ins. (2d. Ed.), § 544.

In Satterfield v. Malone (C.C.), 35 F., 445, 1 L.R.A., 35, it was held "that, in order to so affect the principal it must be affirmatively shown that such knowledge was acquired by the agent in the course of the business in which he was employed for his principal."

In Distilled Spirits (Harrington v. United States), 11 Wall. 356, 20 L.Ed., 167, it was held that the principal "is not bound by knowledge communicated to his agent, unless it is present to the agent's mind at the time of effecting the purchase," and that of this there should be "clear and satisfactory proof."

Applied to the case at bar, the notice to Douglass, that there was other insurance, must be shown by "clear and satisfactory proof" to have been received before he delivered the check. On the contrary, it appears by the defendant's own testimony that it was received, weak as it is, after the check had been delivered and endorsed. See, also, Blowersv. Southern Ry., 74 S.C. 221, 54 S.E., 368; Bacot v. SouthCarolina Loan Trust Co., 132 S.C. 340, 127 S.E., 562 (and cases cited therein).

The agency of Douglass comprised the simple act of delivering the check for the insurance and taking up the policy for remission to the company. He performed this office by delivering the check to the defendant, and, I assume, taking up the policy. Up to that time there had been no notice given to him. Thereafter he was acting in an entirely different capacity.

This case has been treated as if it were an action by the insured upon the policy, the defendant setting up a forfeiture, and the plaintiff countering with a claim of waiver. It is not of that character; it is an action to recover money received under a misrepresentation of a material fact. Even if Douglass had received notice of the other insurance before he delivered the check, his agency, simply to deliver the check, would not imply the right to waive the company's claim on account of the misrepresentation.