Detroit Fire & Marine Insurance v. Sargent

Respondent, Sargent, held two separate insurance policies for $10,000 and $30,000, respectively, covering fruit, packing-house supplies and packing-house equipment contained in his packing-house and warehouse. The warehouse burned and the equipment, buildings and apples stored therein were damaged and thereafter the insurance adjuster fixed the amount of the loss on the representation of respondent that at the time of the fire there were 19,010 boxes of first grade apples in the warehouse. An adjustment of the amount of the loss was made and subsequently paid by appellant, Detroit Fire and Marine Insurance Co. This action was instituted by appellant which alleged that the representations made by respondent as to the quantity and quality of the apples contained in the warehouse at the time of the fire were false, for the reason that at the time of the fire there were not more than 3,600 boxes of apples in the warehouse and they were not first grade apples.

At the close of the case appellant was required by the court to elect whether it would stand upon the cause of action founded upon the covenants of the policies and as to any implied contract for recovery, or as to a cause of action founded upon fraudulent misrepresentations, and appellant then elected to proceed upon the theory that it was seeking to recover damages sustained by reason of the false representations of the respondent and the case went to the jury upon this theory. The jury returned a verdict in favor of respondent, motion for new trial was denied, whereupon this appeal was taken.

Appellant urges as error the giving of instruction No. 8 which was as follows:

"And you are further instructed that after such adjustment and payment, the fact that the plaintiff had no knowledge of facts which, if known, might have been effectual to defeat the claim of the defendant under the policies of insurance, is of no avail, if the plaintiff might have known such facts upon diligent inquiry and it was not fraudulently prevented from learning such facts by the defendant, if there were any such facts."

This court has held that ordinary prudence and diligence do not require a person to test the truth of representations made to him by another as of his own knowledge, and with the intention that they shall be acted upon, if the facts are peculiarly within the other party's knowledge or means of knowledge, though they are not exclusively so, and though the party to whom the representations are made may have an opportunity of ascertaining the truth for himself. (Burger v.Calek, 37 Idaho 235, 215 P. 981.)

In the present case it is apparent that the number of apples and their grade was peculiarly within the knowledge of respondent and the loss was adjusted and the amount paid in reliance upon his representations. In such a case it is not necessary that diligent inquiry be made but the party has the right to rely upon such representations and is not bound to make an independent investigation. (Gridley v. Ross, 37 Idaho 693,217 P. 989.) Respondent urges that instructions Nos. 11 and 12 so qualified and controlled this instruction that it would amount to a practical recall of the instruction. A portion of instruction No. 11 was as follows:

"The Court instructs you that said statements were material and were directly connected with the subject of the insurance and that plaintiff had a right to rely upon said statements."

Instruction No. 8 in effect advised the jury that appellant must have made diligent inquiry as to the truth of respondent's representations in order to avail himself of this action of fraud, and instruction No. 11 advised the jury that appellant had a right to rely upon such statements. These two instructions are out of harmony and directly in conflict with each other; following the one instruction might lead to an entirely different verdict than if the other were followed. Where instructions are in irreconcilable conflict on a decisive or controlling question to be determined by the jury, and where no one can tell which instruction the jury followed, a reversal of the judgment must necessarily follow. (Portneuf-Marsh Valley etc. Co. v. Portneuf I. Co., 19 Idaho 483,114 P. 19; Holt v. Spokane Palouse Ry. Co., 3 Idaho 703,35 P. 39.) The jury among other conclusions may have decided that no false statements were made; then instruction No. 8 would have been immaterial. On the other hand they may have believed that, without attempting to prevent appellant from learning the truth, false statements were made by respondent, but that appellant had not made diligent inquiry, hence appellant was not entitled to recover, in which event appellant would have been prejudiced. This serves to illustrate the pertinency and prejudicial character of the error.

Because of the conclusions reached the assignment that the verdict of the jury is not sustained by the evidence will not be considered.

The judgment is reversed and the case remanded for a new trial. Costs awarded to appellant.

William A. Lee, C.J., and Wm. E. Lee, Budge and Taylor, JJ., concur.