Forward v. Continental Insurance

The judgment in this case was recovered upon a policy of insurance, issued April 23, 1891, at one year, upon a store and the goods therein, which were owned by the plaintiff. By the terms of the policy the risk was distributed as follows: Upon the store a sum not exceeding $1,000, the goods a sum not exceeding $1,200, and the furniture and safe a sum not exceeding $100. The entire property was destroyed by fire on the 27th of September, 1891. The complaint alleges and the answer admits that the loss was adjusted and determined between the plaintiff and a general agent of the defendant on the 6th of October following at $1,950, and the recovery was for this sum and interest. The only defense interposed by the answer or urged upon the argument of the appeal in this court was a breach on the part of the plaintiff of one or perhaps two of the conditions contained in the following clause of the policy:

"This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * * if the interest of the insured be other than unconditional, sole ownership, * * * or if the subject of insurance be personal property, and be or become incumbered by a chattel mortgage. * * * In any matter relating to this insurance, no person, unless duly authorized in writing, shall be deemed the agent of this company. * * * This policy is made and accepted subject to the foregoing stipulations and conditions, together with such other provisions, agreements or conditions as may be indorsed hereon or added hereto, and no officer, agent or other representative of this company shall have power to waive any provision or condition of this policy, except such as, by the terms of this policy, may be the subject of agreement, indorsed hereon or added hereto; and, as to such provisions and conditions, no officer, agent or other representative of this company shall have such power, or be deemed or held to have waived such provisions or conditions, unless such waiver, if any, shall be written upon or attached hereto. Nor shall any privilege or permission affecting the insurance under the policy exist or be claimed by the insured unless so written or attached."

It was shown at the trial that the plaintiff, about two months before the policy had been issued to him, had executed and delivered to his brother an instrument in the form of a bill of sale upon the stock of goods, furniture and fixtures in the store, which, on March 3, 1891, was filed in the town clerk's office. This instrument purports, in consideration of $500, to transfer the plaintiff's interest in the property absolutely to his brother. The proof at the trial tended to show that there was in fact no consideration for the transfer. That it was colorable merely and made between the two brothers with reference to some litigations pending or threatened against the plaintiff. The brother never in fact paid anything as a consideration for the transfer, and no debt was due or owing to him by the plaintiff. He never in fact claimed any title to the property or any right to its possession, which always remained in the plaintiff. There was also proof that the existence of this bill of sale, its true consideration, character and purpose were disclosed to the defendant's agent before the policy was issued or delivered. The court submitted two questions to the jury: (1) Whether the defendant, notwithstanding the condition of the policy, had knowledge of all the facts respecting the existence, nature and purpose of the bill of sale, instructing them that the knowledge of the agent was the knowledge of the company, and that if they found that the defendant had knowledge of the facts the policy was not avoided. (2) Whether a statement contained in the proofs of loss to the effect that there was no incumbrance on the property at the time was willfully false and known to be so by the plaintiff when he made the proofs, and was made for the purpose of defrauding the defendant, instructing them that if it was not then it did not amount to false swearing within the intent and meaning of a condition in the policy. The verdict was in favor of the plaintiff, and hence all the disputed facts material to the questions of law must be deemed to be established in the plaintiff's favor. It was said by Judge ANDREWS in Walsh v. Hartford Fire Insurance Co. (73 N.Y. 11), upon the authority of many cases, that "conditions for the pre-payment of premium and the like, which enter into the validity of a contract of insurance at its inception, may be waived by agents, and are waived if so intended, although they remain in the policy when delivered, and that a contract for renewal is for the purpose to be treated as the original contract." It has uniformly been held by this court that a condition of this character in a contract of insurance will not operate to avoid it after a loss, providing the company, before delivering the policy, had knowledge of the fact that the insured, notwithstanding the warranty, or the statement and the condition, was not the sole owner or that it was incumbered. In such cases the company is deemed to have waived the condition, or by the delivery of the policy with the condition avoiding it in case the insured is not the sole owner, or that the property is incumbered, and accepting the premium, is held estopped from setting up the condition as a defense. It was never supposed that such a condition was intended to apply to a state of facts in regard to which the company had been fully informed when it accepted the risk. The cases on this point are numerous, and it is impossible to make any distinction in principle between the conditions considered and that involved in the case at bar. (VanSchoick v. Niagara Falls Ins. Co., 68 N.Y. 434; Whited v.Germania Ins. Co., 76 id. 415; Woodruff v Imperial Ins.Co., 83 id. 134; Short v. Home Ins. Co., 90 id. 16;McNally v. Phœnix Ins. Co., 137 id. 389; Carpenter v.German Ins. Co., 135 id. 298; Cross v. National Fire Ins.Co., 132 id. 133; Berry v. American Central Ins. Co., Id. 49.)

In these cases it was held, either that the company had waived the condition, or was estopped by the delivery of the policy and the receipt of the premium, since, under such circumstances, it could not be supposed that it intended to deliver to the insured a policy which it knew to be void. When the underwriter, before the inception of the contract, is informed by the owner that the property is incumbered, but still delivers the policy with the condition embodied in it, then, as it seems to me, it is not so much a question of waiver or estoppel as a question whether the condition ever attached or operated upon the facts thus disclosed. It can, of course, operate in the future upon transfers or incumbrances as the facts arise, and then the question is one of waiver. But when the facts are all known before any contract is made, a condition against a state of things known by all the parties to exist cannot be deemed to be within their intention or purpose. This case cannot be taken out of the rule by any possible distinction unless it be the character and powers of the agent of the defendant, to whom, upon the finding of the jury, the facts were communicated. It is urged that the cases cited do not apply for the reason that the waiver there was by a general agent. That may be true with respect to the four cases last cited. But it does not seem to me to be so much a question of power or authority in an agent to waive a condition in the contract as of knowledge by the company through its agent of the real facts. In theCarpenter Case (supra) the information as to the true state of the title was given to a mere clerk of the general agent, and we held that such knowledge was imputable to the company, through the general agent, for whom the clerk acted in soliciting the insurance, and that a condition of this character remaining in the policy did not avoid it. Now, the powers of the agent in this case were certainly much broader than those of the clerk in the case referred to. In this case the person to whom the information was communicated was certainly an agent appointed by the defendant itself, while in that the person had no authority directly from the company, but was a mere servant or clerk acting for and solely under the authority of the agent. The agent in this case and the clerk in the other were engaged in precisely the same duty and performing the same service when they acquired the knowledge as to the condition of the property and the state of the title. They were both soliciting insurance and ascertaining the character and condition of the property upon which the risk was about to be taken, and I am unable to suggest any reason for imputing knowledge in the one case and not in the other. Moreover, the record is entirely silent as to any facts tending to show that in this case the agent was acting in pursuance of a special or limited power. On the face of the policy he appears to be the duly authorized agent of the defendant and actually did grant special permits and waive conditions in the policy. He certainly had power to waive conditions, providing it was done in the manner stipulated in the policy, that is to say, in writing. He had power to solicit insurance, collect premiums and deliver policies. There is no proof in the record that the plaintiff ever made any formal application for this policy, written or otherwise, or that he touched the company at any point or in any form except through this agent. The fair inference from the proof is, that the defendant furnished the agent with policies duly executed, which he filled up and delivered at his discretion, reporting the facts to the company. There is nothing on the face of the policy and nothing was communicated to the plaintiff to lead him to believe that the powers of the agent were special or restricted. Insurance companies doing business by agencies at a distance from their principal place of business, are responsible for the acts of the agent, within the general scope of the business intrusted to his care, and no limitations of his authority will be binding on parties with whom he deals which are not brought to their knowledge. (Insurance Co. v. Wilkinson, 13 Wall. 222;Merserau v. Phœnix Mutual Life Ins. Co., 66 N.Y. 278;Bodine v. Exchange Fire Ins. Co., 51 id. 117; Arff v. StarFire Ins. Co., 125 id. 57.)

It was held in the case of Ellis v. Albany Fire Ins. Co. (50 N.Y. 402) that an agent with precisely such powers as I have supposed the agent in this case possessed, could bind the company by a parol contract of insurance, while an application for a policy was pending, but none delivered till after a loss. I am unable to discover in the record any basis for the contention that the knowledge of the agent as to the existence and purpose of the bill of sale is not the knowledge of the defendant. On the contrary, his knowledge of the facts is, I think, imputable to his principal. So far as appears, the plaintiff dealt with him as the representative of the company. If there were in fact any limitations or restrictions on his powers as an ordinary agent it was for the defendant to show it. His commission was not put in evidence nor any proof given tending to show that he was not what he was described in the complaint, the defendant's duly authorized manager or agent at the place where the contract was made. There were no other means of communication between the plaintiff and the defendant employed. So far as appears he made this contract for his principal, and the knowledge that he obtained in the course of the business was the knowledge of the defendant.

There is another view of the question that deserves some notice. Conditions in contracts of insurance against liability when the property is incumbered or where the title is not absolute in the insured are inserted for the purpose of guarding against the moral hazard involved. When the transfer or incumbrance is merely colorable or nominal and not real or effective the reasons that induced the stipulation do not apply. Was there any real sale or transfer of this property within the meaning of the policy? Nothing was done except to execute and file a paper. There was no intention in fact to transfer the title or vest any beneficial interest in the nominal vendee. There was no debt to be enforced, no consideration passed, and the use and possession remained unchanged. The filing of the paper added nothing to its validity. It was not a mortgage nor intended as security for any debt. It was a mere paper transfer without consideration and without delivery of possession, and while it had the form it had none of the legal elements necessary, even between the parties, to constitute a valid contract of sale. In legal effect it was, I think, the same as an unexecuted gift. The worst that can be said of it is that it was intended to defraud creditors, but if that be true the moral hazard which was the basis of the condition of the policy would still be absent, since the plaintiff's interest in the property at the time of the insurance was in fact the same as before the paper was executed. There is no legal ground upon which this court can properly disturb the verdict, and the judgment should, therefore, be affirmed.

FINCH and PECKHAM, JJ., concur.

ANDREWS, Ch. J., and BARTLETT, J., concur on last ground mentioned in opinion.

EARL, J., dissents on first ground and concurs on last ground.

GRAY, J., dissents.

Judgment affirmed.