Johnson v. Prudential Life Ins. Co.

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The insured, Loyst W. Johnson, died August 10, 1923. The amended complaint was filed on April 29, 1924. The statute, section 6355, Or. L., prescribes that whenever any suit or action is brought in any courts of this state upon any policy of insurance of any kind and nature, the plaintiff, in addition to the amount which he may recover, shall be allowed such sum as the court or jury may adjudge to be reasonable attorney's fee in such suit or action; provided, that settlement is not made within eight months from the date proof of loss is filed with the company. Proof of loss in this case was filed August 15, 1923, more than eight months prior to the date the amended complaint was filed. The motion to strike paragraph six was on the ground that the same is irrelevant and immaterial. No objection was made to allowing the complaint to be amended so as to include the allegation for attorney's fee. That allegation should have been introduced by supplemental plea, but inasmuch as that question was not raised in the Circuit Court it will be ignored here. It is a matter purely of form, not of substance: Walker v.Fireman's Fund Ins. Co., 114 Or. 545, 573 (234 P. 542).

The testimony objected to was to the effect that Mr. Wilson, superintendent at Portland of defendant company, had knowledge of the alleged extension of credit by the agent Seydel. It was contended by the defendant that Mr. Wilson knew nothing of the alleged extension of credit and that Seydel had no authority to extend credit. In the conversation testified to the plaintiff said that Mr. Wilson read to him a letter or part of a letter which he had written to the defendant company from which it could be inferred that Mr. Wilson had knowledge of the extension of credit. That point was directly in issue and the conversation was admissible as tending to support the contention of plaintiff in that regard. A general agent may waive prepayment of the premium:Harrison v. Birrell, 58 Or. 410, 418 (115 P. 141);Francis v. Mutual Life Ins. Co., 55 Or. 280 (106 P. 323);American Employers' Liability Ins. Co. v. Fordyce,62 Ark. 562 (36 S.W. 1051, 54 Am. St. Rep. 305-308); Virginia Fire Marine Ins. Co. v. Richmond Mica Co., 102 Va. 429 (46 S.E. 463, 102 Am. St. Rep. 846 et seq.), and other authorities cited below; 32 C.J. 1135, § 242; Joyce on Insurance (2 ed.), 308, § 86.

Mr. Wilson represented the defendant in this state. The defendant is a corporation having its principal office and place of business in Newark, New Jersey The policy involved was written at the office of the company in Newark. The opinion in Hinkson v. Kansas Life Ins. Co., 93 Or. 473 (183 P. 24), criticises the former opinion of this court expressed in Cranston v. WestCoast Life Ins. Co., 72 Or. 116, 130 (142 P. 762), as follows:

"* * if the officers of the company had an opportunity to inform themselves of the facts and circumstances of the delivery of the policy and the arrangement as to the premium, and failed to do so, it would be equivalent to such knowledge: Reinhard, Agency, § 140."

The opinion in Hinkson v. Kansas Life Ins. Co., above, discussed at length the question under consideration and cited with approval Sykes v. Sperow, 91 Or. 568, 583 (179 P. 488); 1 Mechem on Agency, § 404, 93 Or. 473, 490 (183 P. 24,30):

"At the same time, however, the principal cannot be justified in willfully closing his eyes to knowledge. He cannot remain ignorant where he can do so only through intentional obtuseness. He cannot refuse to follow leads, where his failure to do so can only be explained upon the theory that he preferred not to know what an investigation would have disclosed. He cannot shut his eyes where he knows that irregularities have occurred. In such a case, he will either be charged with knowledge, or with a voluntary ratification with all the knowledge which he cared to have."

In the instant case the plaintiff had applied for and received two policies of insurance upon the life of two of his minor sons. At the time application was made for the policies, he requested that one of the policies be dated a month later than the other and asked for a month's credit in which to pay the first premium. This request was granted by the agent who solicited the insurance. The policy dated in June was delivered and the first premium paid for by the plaintiff in July at the same time the second policy was delivered. Mr. Wilson, the superintendent and manager of the defendant's office in Portland, under the facts in this case, must be charged with knowledge of the conduct of his agent who solicited the insurance. The rules of the company required weekly reports from its agents. The soliciting agent reported to the cashier in the office and under the control of Mr. Wilson. What she knew he must be charged with knowing. The very purpose of having the soliciting agent report to the cashier every week was to keep the superintendent and manager informed of the business transacted and the condition of the business. All of the information necessary to charge the defendants's manager was in his office and at his command. He cannot, therefore, be heard to say that he did not know that credit had been extended to the plaintiff as the jury found.

Defendant in its brief says:

"The Court, under proper instructions, submitted to the jury the question as to whether there was an unconditional delivery of the policy under an agreement to extend the time for payment of the premium, as claimed by plaintiff; or whether the policy was conditionally delivered for the purpose of inspection only, as testified by Seydel."

By its verdict the jury found that the policy was unconditionally delivered. Defendant's instructions to its agents contains the following:

"The policy by its terms constitutes the receipt for the first premium; THEREFORE, AN AGENT MUST NOT ALLOW A POLICY TO PASS INTO THE POSSESSION OF THE APPLICANT UNLESS THE FULL FIRST PREMIUM HAS BEEN PAID DURING THE GOOD HEALTH OF THE PERSON INSURED AND WITHIN THE TIME ALLOWED BY THE HOME OFFICE FOR DELIVERY, except that (when necessary) a policy may be left with an applicant for a few days for purposes of inspection, provided receipt on Form 1565 is obtained and filed in the District Office."

The receipt on form 1565 was not taken, nor was the substitute receipt which was materially different in form filed in the district office. The rules further make the agent personally liable for delivering a policy without collecting the first premium. The policy contains this language:

"Annual premium thirty-two and 57/100 dollars payable on the delivery of this policy the receipt of which premium is hereby acknowledged * *."

The great weight of authority is to the effect that where the policy itself constitutes a receipt for the first premium and the policy has been unconditionally delivered to the insured, the insurer cannot thereafter for the purpose of avoiding liability on the policy deny that the first premium has been paid:Britton v. Metropolitan Life Ins. Co., 165 N.C. 149 (80 S.E. 1072, Ann. Cas. 1915D, 363); Cranston v. West Coast Life Ins.Co., 63 Or. 427, 443 (128 P. 427), 72 Or. 116 (142 P. 762); 32 C.J. 1132-1139; Mutual Life Ins. Co. v. Vaughan, 125 Miss. 369, 378-386 (88 So. 11); 1 Joyce on Insurance, § 86.

We have carefully examined the authorities relied upon by defendant. The case of MacKelvie v. Mutual Life Ins. Co., 287 Fed. 666, is easily distinguished from the instant case. The case at bar is more nearly analogous to the case of Smith v.Provident Sav. Life Assur. Soc., 65 Fed. 765 (13 C.C.A. 284), distinguished in the MacKelvie case in pages 667, 668. There is much in the reasoning in the opinion in the MacKelvie case which supports the contention of the defendant but it is not applicable to the instant case. We decline to follow the cases of RelianceLife Ins. Co. v. Hightower, 148 Ga. 843 (98 S.E. 469), andRussell v. Prudential Life Ins. Co., 176 N.Y. 178 (68 N.E. 252, 98 Am. St. Rep. 656).

Defendant complains because the judge among others gave the following instruction:

"With regard to what is generally paid for such (attorneys') services you have a right to take into consideration the possibility of an appeal, but that goes with any case in a case of importance. Whenever these questions are involved the jury has the right to take into consideration what the labor has been in the past and what the possibilities are of an appeal, and take that all into consideration and then upon that to base your amount of what would reasonably compensate them for the services that they will have to perform in connection with this matter."

The statute provides that "Whenever any suit or action is brought in any courts of this state upon any policy of insurance * *, the plaintiff, in addition to the amount which he may recover, shall also be allowed and shall recover as part of saidjudgment such sum as the court or jury may adjudge to be reasonable as attorney's fees in said suit or action." Or. L., § 6355.

This court has held that an appeal is a separate procedure from the trial in the Circuit Court: Shirley v. Birch, 16 Or. 1 (18 P. 351, 8 Am. St. Rep. 273). The attorney's fee provided by the statute is to be allowed as part of the costs and expenses of the litigation: Title Guarantee Co. v. Wrenn, 35 Or. 62,70 (56 P. 271, 76 Am. St. Rep. 454). The Circuit Court cannot, in the absence of a statute authorizing it, allow or determine the costs and expenses of a trial in this court.

In the instant case the questions propounded to the witness for the plaintiff touching attorney's fee included the possibility of an appeal. No objection was made to the questions. The amount allowed by the jury is less than the amount testified to as being a reasonable fee by plaintiff's witness and more than the evidence in behalf of defendant fixed it. The amount allowed is not exorbitant. While we hold the instruction quoted above erroneous, we also hold it not sufficient to justify reversal. Finding no other error the judgment is affirmed. AFFIRMED.

McBRIDE, C.J., and BURNETT, J., concur.

RAND, J., dissents.