Dibbrell v. Georgia Home Insurance

MERRIMON, C. J., dissenting. The defendant rested its defense solely upon the stipulation contained in the policy that no suit brought for the recovery of any loss and founded upon the policy should be sustainable in any court unless instituted "within twelve calendar months next after the loss shall have accrued."

The policy contained, also, another stipulation, which is as follows:

"If required, the assured shall produce books of account, and other papers and vouchers, and exhibit the same for examination either at the office of the company or such other place as may be named by its agent, and permit extracts and copies thereof to be made, and shall also furnish the original or properly certified duplicate invoices of all property hereby insured, whether damaged or not damaged."

It is admitted that the plaintiffs paid all the premiums that were due up to the time when the building, together with "the stock of leaf tobacco (their own or on commission, or held in trust for others), contained in the four-story brick building" insured by the policy, were destroyed by fire on 31 July, 1888. It is also now agreed that the plaintiffs are entitled to recover, as the value of the tobacco burned, $1,000, if their right of recovery has not been forfeited under the conditions of the policy. (195)

ISSUES

1. Did the plaintiffs make proper proof of the loss in accordance with the terms of the policy? Ans.: Yes.

2. Was plaintiffs' action commenced within the time limited in the policy? Ans.: No.

3. Has the defendant duly waived the limitation clause of the policy? Ans.: Yes.

4. Is plaintiffs' action barred by their failure to commence their action within the period specified in the insurance policy? Ans.: No.

5. Was the failure to commence action by plaintiffs against defendant within the time specified caused by the inducements, actions, or promises of defendant? Ans.: Yes.

Thereupon, judgment was entered for plaintiffs, and defendant appealed. In his first interview with the plaintiffs, soon after the fire, which occurred 31 July, 1888, the adjuster of the defendant told them that their "books were not straight, but he would give them time to straighten them, and would (then) adjust the loss." Inside of the sixty days limit fixed in the policy the plaintiffs forwarded proofs of loss, which seem now to have been sufficient, as no further objection is urged to them. After waiting for an acknowledgment of the receipt of proof of loss, or for some further statement of the objection to their books, until May, 1889, the plaintiffs seem to have determined upon aggressive action for the recovery of their demand against defendant. Meantime Spencer, the adjuster, says that he made no objection to the proof of loss because it was not incumbent on him to do so.

So soon as the plaintiffs began to move, first, by insisting upon knowing the adjuster's objection to a settlement, and then, on 10 May, 1889, by demanding, through their attorneys, of the president of the company the immediate payment of $1,000, with interest from 1 October, 1888, the adjuster seemed to feel it incumbent on him to meet them with counter demands for duplicate bills of all of the tobacco received at the warehouse in January, 1887. When the plaintiffs had sent for these bills and met Spencer again, they were informed that he insisted, according to the stipulations in the policy, that he should have for examination duplicate bills of all tobacco received at the warehouse from 1 January, 1887, till 31 July, 1888. As the policy covered tobacco in the warehouse that was owned absolutely by plaintiffs, as well as that consigned to them to sell on commission, he contended that he had the right to compare the books and the duplicate bills. When told by the plaintiffs on 1 June, 1889 (eleven months after the loss was sustained), that it would then take them six months to comply with his new demand for duplicate bills for eighteen months instead of for the months of January, 1887, only Spencer replied that plaintiffs must do the best they could and inform him when they (203) should get the bills, and he would adjust the loss. The plaintiffs, taking him at his word, began to get up duplicate bills; but, according to the uncontradicted testimony of R. L. Dibbrell, found it impossible to finish the work before 1 January, 1890. When they did inform the adjuster of their readiness to comply with his demands, they could not induce him to answer even a registered letter communicating the fact. He then claimed that while the plaintiffs were engaged in the vain effort to comply with a demand performed in accordance with one stipulation of the policy, they had forfeited their right of action under another stipulation, which restricted them in its exercise to twelve calendar months after the loss occurred. The adjuster had felt it incumbent on himself to warn them of the Scylla of defective proofs, but had carefully refrained from suggesting that, in avoiding that, they would be stranded on the Charybdis of delay in initiating suit. If they had brought their action when their counsel proposed to issue summons on 12 May, 1889, the defendant would have resisted their recovery, upon the ground that they had failed when "required" to "furnish original or properly certified invoices of all property insured." The original bills of tobacco bought by them or sent by customers for sale were destroyed, and duplicates could not be gotten in less than six months.

The enforcement of both conditions of the policy at the same time was not possible, and the question, therefore, naturally arises whether, by demanding compliance with the one stipulation, the agent of the company did not waive the right to insist upon the performance of any other, the enforcement of which was inconsistent with his own demand. It seems to us that if the adjuster had a right to insist upon the production of the vouchers, or to waive such proof as he deemed best for the company, such power necessarily involved the authority also to waive the requirement that the action should be brought before such papers could be obtained. Wherever a company empowers (204) an agent specially to do, or the scope of his agency permits him to do, any act inconsistent with the idea that the company will insist upon a forfeiture under a given condition in the policy, then such act when done by him must be construed as a waiver of the right to demand its enforcement. 2 May Ins., secs. 505 and 497. This principle has been distinctly recognized by this and other courts of the country so often that it ought not to be deemed necessary to cite authority in support of it. InGrubbs v. Insurance Co., 108 N.C. 477, this Court held that where an adjuster required the insured to furnish invoices of goods destroyed, proofs of loss, or plans and specifications of buildings burned, or to appear for examination, such act amounted to a waiver of the right to insist upon a forfeiture for failure to comply with a condition of the policy relieving the company from the contract in case of subsequent insurance of the same property without the written consent of the company endorsed on the policy. This view is sustained by the decisions of other courts, some of which have emanated from the most eminent jurists of the country. Insurance Co. v.Kittle, 39 Mich. 52; Titus v. Insurance Co., 81 N.Y. 410; Connor v.Insurance Co., 53 Wis. 585; Webster v. Insurance Co., 26 Wis. 57. In Grubbs' case the adjuster made the demand, as in this case, for duplicate invoices in place of those destroyed by the fire, and the ruling of the court rested on the very substantial reason that if the adjuster, acting in the scope of his authority, insisted that the insured should incur the expense of collecting these invoices, such a demand was inconsistent with the idea that the policy was forfeited. A persistent demand for proofs, with full notice that they could not be gotten till six months after the expiration of the limit of twelve calendar months (and then by incurring expense and performing much labor), was an act in the scope of the adjuster's authority, but utterly (205) inconsistent with the present contention of the company that the right of action was forfeited by failure to issue a summons before 31 July, 1889. Speaking through its adjuster, the corporation said, in effect, at the end of eleven months after the fire, "If you sue now, the company will resist recovery on the ground that you have failed to furnish duplicate invoices on the demand of its authorized agent, in accordance with the conditions of the policy." Ind. Insurance Co. v. Capehart,108 Ind. 270. When by this shrewd device the insured, who has paid the premiums and complied with his contract, is induced to engage in the laborious and expensive work of collecting duplicate invoices of tobacco received for eighteen months before the fire, and to allow twelve calendar months to elapse while so occupied, without instituting suit, the adjuster having played his part, is relegated to the background, and the company, by its counsel, comes into court and says: "It is true, the adjuster had the right to insist upon further proofs of loss under the condition of the policy, but, in fact, sufficient proof had already been furnished him by the insured, though it was not incumbent on him to admit it, and he had a right to insist, as he did, upon the insufficiency of the proof sent on 25 September, 1888; but the adjuster was only a special agent as to the stipulation limiting the time bringing the action." By the terms of the policy the insured was bound to furnish proofs of loss within sixty days after the fire occurred, and it was not on argument, and we suppose will not now be, denied that the adjuster or other agent of a company entrusted with the duty of receiving and passing upon the statement of the loss, has, by implication arising out of the authority given him, the power to extend the time for furnishing the proofs. Insurance Co. v. Schollen-burger, 44 Penn. St., 259.

So it is well settled that if, instead of extending the time for filing proofs of loss, the adjuster, who is charged with the duty of examining them, informs the assured before the expiration of the sixty days that he denies the justice of this claim and will not pay it, (206) such conduct, by implication, renders it unnecessary to make out a statement of loss, and is held to be a waiver of the requirement to furnish it, as well as of the condition that suit shall not be brought within that time. Insurance Co. v. Jacobs, 66 Tex. 366 [66 Tex. 366]; 2 May, sec. 504. As a general rule, if the insurer, through the conduct of any agent acting within the scope of his authority, lead the insured into an infraction of one of the conditions of a policy by insisting upon the performance of a duty enjoined by another clause of the policy, and inconsistent with the observance of such condition, the insurer will be estopped from insisting upon a forfeiture. 2 May, p. 1144 and notes 2 and 3, secs. 497, 499. And it has been expressly held that "Statements by a local insurance agent that the plaintiff's loss was all right," and that the company would pay the amount, constitutes a waiver by the company of the clause in the policy requiring formal proof of loss, and also "the one barring suits not brought within one year." Ide v. Insurance Co., 2 Burr., 235; 2 May, sec. 504. The authorities cited, and many others, recognize the power of even a local agent, while acting within the scope of his authority, to waive the forfeiture prescribed for the infraction of a given condition in a policy by leading him into the reasonable belief that it will not be insisted on, and they also lay down the principle that the company is estopped in such cases from taking advantage of the breach of the condition, because it would be fraudulent to do so. In Muse v.Assurance Co., 108 N.C. 242, it is declared that such stipulations, operating as forfeitures, are construed strictly, and comparatively slight evidences of waiver have been held sufficient to prevent their enforcement.Ripey v. Insurance Co., 29 Barb., 552; Ames v. Insurance Co.,14 N.Y. 253.

Counsel for defendant seem to have overlooked the fact that (207) the plaintiffs are not insisting that the defendant company, by the conduct or the words not reduced to writing of its authorized agents, could extend the operation of a statute of limitations, but that it could by language uttered and acts done by such agents, while in the line of duty, waive the exaction of a forfeiture, which is not favored by the court. Says Judge Christiancy, in Insurance Co. v. Hall, 8 Cooley (Mich.), 211, in referring to a stipulation similar to that under consideration: "If valid at all, it was valid as a contract, not as a statute. A limitation fixed by statute is arbitrary and peremptory, admitting of no excuse for delay, beyond the period fixed, unless such excuse be recognized by the statute itself. But a limitation by contract (if valid) must, upon the principle governing contracts, be moreflexible in its nature, and liable to be defeated or extended by any act of the defendant which has prevented the plaintiff from bringing his action within the prescribed period." In that case it was held that the condition was waived by furnishing no opportunity to plaintiff to serve process just before the expiration of the twelve months. A case directly in point is Ames v. Insurance Co., supra, wherein, discussing the waiver of a similar condition that suit must be brought within six months, the court said: "The defendants had it in their power, by objecting to the proofs of loss and neglecting or refusing to file them, to extend the time in which they were required to pay beyond the period of six months after the occurrence of the loss, and in such case clearly it could not be pretended that the insured had stipulated away his right of action, but the defendants would be deemed to have waived the twelfth condition. In this case the proofs of loss were delivered to the defendant some nine days after the fire. They were retained without objection eighty-fivedays, or within five days of the time when the loss was due and payable by the ninth condition. It was then first suggested by the secretary (208) that the proofs were incomplete in not setting forth, as required, whether or not the insured property was encumbered. Seven days thereafter, and on 14 October, the plaintiff transmitted an affidavit to the company supplying the alleged defect. No further objection was heard from the defendants, but they had secured all that was probably desired — an extension of time for ninety days from 14 October, and put it out of the power of the plaintiff to successfully maintain an action commenced within six months after the loss occurred. He was told, in effect, that the defendant would insist on the terms of the ninth condition (which provided that suit could not be brought for ninety days after filing proof of loss) as to the time when the loss was due and payable, and that, if he commenced an action to avoid the bar prescribed by the twelfth condition, they should interpose the defense that by the contract the insurance money was not yet due and payable. It cannot be doubted that the defendants intended to and did waive the limitation stipulated by the twelfth condition." This opinion is cited with approval by leading text-writers and many of the courts. Says May (vol. 2, sec. 505), "Thus the insured is estopped to object to a failure to bring suit within the time limited by an offer to pay the loss afterwards or when such failure is induced by the conduct of the insurer" — citing Ames' case to sustain the position.

In Muse v. Assurance Co., Supra, this Court, following the current of authority, held that the stipulation that there should be a forfeiture unless suit should be brought within twelve months after the loss operated as a contract which might be waived, and not as a statute of limitations. Indeed, in that case it was declared that plaintiff might have submitted to judgment of nonsuit and brought a new action within a year after such judgment, though after the expiration of twelve months from the fire, if the limit had been imposed by a statute instead of by contract. When the rights of Muse were declared lost because the principles applicable to the statute of limitations did (209) not apply to a contract, we are at a loss to understand how counsel can contend that in the case under consideration the plaintiffs have lost their right of action, because the bar of the statute of limitations cannot be extended except by an agreement in writing and upon consideration, or at any rate a direct promise not to plead it. Neither Joyner v. Massey, 97 N.C. 148, nor any of the class of cases to which it belongs apply to that at bar. We might concede the law in its application to statutes of limitation to be just what counsel insisted that it was, and still the plaintiffs would be protected by the well-established principle that contracts providing for forfeitures are more "flexible" than statutes of limitation, and may be waived by very slight circumstances. Muse v. Assurance Co., supra; Insurance Co. v.Hall, supra; Ames' case, supra; 2 May, sec. 505. The usual stipulation in a policy that no agent of the company is authorized to change its terms or conditions, and that they shall not be waived except in writing endorsed on the policy, does not apply to conditions to be performed after the loss is incurred, nor invariably even to the warranties of the contract if any fraud be practiced. Carson v. Insurance Co., 43 N.J. 300;Whitted v. Insurance Co., 76 N.Y. 421; Insurance Co. v. Capehart,108 Ind. 270; Fishbeck v. Insurance Co., 54 Cal. 422; Day v.Insurance Co., 81 Me. 244; Insurance Co. v. Weiss, 106 Pa. St., 20;Hornthal v. Insurance Co., 88 N.C. 71; Depree v. Insurance Co.,92 N.C. 422; ibid., 93 N.C. 240; Grubbs v. Insurance Co., supra; Follettev. Insurance Co., 107 N.C. 240; Lamberton v. Insurance Co., 39 N.W. 76. Where, as in our case, the insured is led by the conduct of an agent of the company, acting within the scope of his authority, to believe that the stipulation will not be insisted on, or such agent insists upon another stipulation inconsistent with its enforcement, the condition is deemed waived without the endorsement on the policy. (210)

The plaintiffs' counsel, on 10 May, 1889, demanded a settlement of the president, and the secretary replied, referring them to the adjuster, who had "the matter in hand" and would treat with them, thus waiving directly their right to arrange the matters in controversy, if such authority would otherwise have been exclusively in them, and holding the adjuster out to the plaintiffs as armed with full power to represent the company and treat with the plaintiffs or their attorneys in their stead (see letter of the secretary) as fully as they or either of them could do. The facts in our case, therefore, present a peculiar aspect, in that the adjuster is expressly clothed with plenary power in the conduct of the settlement, as far as the president and the secretary of the company could confer such authority. Considering Spencer then, as the representative of the president, and so held out by his letter, he had authority, either directly or by implication, as a general agent of the company, in the language ofChief Justice Smith, in Hornthal v. Insurance Co., supra, "to waive a forfeiture and dispense with what would otherwise cause it."

We are aware that it is possible to find authority in support of a different view of this case from that taken by us, but we prefer, as between conflicting opinions, to follow that line of authorities that does not leave an ignorant individual who has made an honest effort to perform his contract at the mercy of shrewd agents of corporations because of stipulations with which he has been bound hand and foot. We have no sympathy with any construction of contracts which would leave the courts powerless in the presence of an acknowledged fraud, though it be perpetrated by hedging one about with restrictive conditions and forfeitures, so that, pursue what course he will, he runs counter to a stipulation which, if strictly enforced, is fatal to his recovery of the money justly due to him in consideration of the fact that he has paid his premiums and comes before the court with clean hands. Under such circumstances technical defenses should be disregarded upon (211) slight evidence of a waiver of rights under them, in order to do substantial justice.

We think, for the reasons given, that there was no error in the charge of the court below of which the defendant had just cause of complaint. His Honor put upon the plaintiffs the burden of showing that the adjuster made the promise to pay for the purpose of inducing delay, and then taking advantage of it under the limitation stipulation, though we consider the demand of the adjuster for the performance of any condition that he had a right to insist on and which was inconsistent with the bringing of the action within the limited time a waiver of that stipulation. Ames v.Insurance Co., supra. It seems to us, also, that the judge might have told the jury that if the stipulation was waived by the conduct and language of the adjuster, then the plaintiffs were left free from any restriction as to the time of bringing suit except such as was imposed by the statute of limitations. The waiver, which the jury found was made by the adjuster, grew out of his insisting upon proofs which it required an indefinite time to procure and furnish, and it must be construed to have been absolute and unconditional, not an extension of its operation while the proofs were being produced. If the right to demand the forfeiture was waived at all, it was by such conduct on the part of the adjuster as made it inequitable for the company to insist upon the stipulation, or, in other words, it was because the defendant was estopped by its conduct from enforcing that clause of the contract then or afterwards. 2 May, sec. 505, and other authorities cited supra. If the defendant was estopped from enforcing the forfeiture by matter in pais, such as the conduct of its agent, inconsistent with the right to demand a compliance with it, it is difficult to understand how the estoppel could operate to defer the enforcement instead of destroying the right to insist upon it entirely.