Swan v. Watertown Fire Ins.

Mr. Justice Trunkey

delivered the opinion of .the court, November 15th 1880.

The application and policy constitute the contract, unless some matter was fraudulently or mistakenly inserted or omitted, changing it to something else than was agreed upon. Each party pretends not fully to have known the contents before the burning of the property insured; the company asserts it had not seen the application and had no knowledge of Smullen’s agency, and Warren says he never read the policy and that the application was altered after he had signed and delivered it' to the agent. Yet both claim they made an agreement'; one that it is evidenced by the policy and application together, the other that the policy alone is the contract. At the trial the 'defendant withdrew the testimony given on its part, and the cause was submitted upon the plaintiff's; whereupon the court instructed the jury to find for the defendant. Hence, in determining whether the instruction was erroneous, the testimony must be treated as true, with inferences which the jury could properly have drawn in favor of the plaintiff.

Brown was agent for the company doing business in the counties of Clarion, Jefferson, Indiana and Armstrong, with numerous persons employed under him. If such applications as Warren’s were forwarded to the company it had notice of the sub-agency — if Brown retained them and issued the policies thereon, then the notice to him was notice to the company. When a general agent in the due prosecution of the business of his principal, employs another in a branch of the business, the acts of the sub-agent have the same effect as if done by the general agent. In such case the sub-agent becomes the agent and direct representative of the principal : Massachusetts Life Ins. Co. v. Eshelman, 30 Ohio St. 647. At the foot of the application appear these words: “ I fully recommend the applicant and risk. H. S. Smullen, agent.” Then follow “remarks of agent” where he answers interrogatories. This is the part of the contract signed by Warren and retained by the company.' Smullen solicited and made out the application, received the premium, forwarded the same to Brown, and the policy was sent to the applicant. It is a natural inference that he was the company’s agent. It may be, as alleged, that in so acting he rendered himself liable to a penalty for violating the statute relating to foreign insurance companies. These companies doing "business in this state without having complied with the provisions of the statute, for that reason, may not enforce their contracts; but cannot set up their turpitude to defeat actions on their contracts brought by innocent persons. Their agents may neglect to procure the prescribed certificates, but that shall not avail the principals to avoid their contracts for insurance. The statute does not impose upon the insured the duty of seeing that the insurer and its agents have complied with the statutory requirements. That a company soliciting and receiving the consideration for insurance, may avoid its obligation on the ground that either itself or its agent has violated the law, is a proposition repugnant to familiar elements of the law.

After the application was signed by Warren and taken by the agent, it was changed by inserting the sewing-machine and the answers to three interrogatories respecting title, encumbrance and value of the land. This was done by the agent without the knowledge of either party to the contract. But if the fraudulent act was within the apparent limits of the agent’s employment, although not within the actual authority conferred upon him, the principal will be liable. The company invited the public to deal with its agent in relation to a branch of its business, and so long as he is within the apparent scope of the employment intrusted to him, the law will hold the principal liable for his acts, and charge it with his knowledge, whether the fraud is upon itself or third persons to the extent the tort affects third persons. This is but a practical application of the well recognised rule, that where one of two parties must suffer loss by reason of the fraud of an unfaithful agent it must be the company and not the innocent assured : Massachusetts Life Ins. Co. v. Eshelman, supra. We think the plaintiff’s first and second points sound, but they do not determine the case in his favor.

Warren received the policy in due time, and no misrepresentations, concealments, or forgery of its contents are in the way of its enforcement, taken by itself. It contains these stipulations: “ If the interest of the insured in the property be any other than the entire, unconditional and sole ownership of the property for the use and benefit of the assured, or if the same or any part thereof shall be encumbered by mortgage, judgment or otherwise, and be not stated to the company, and so expressed in the written portion of the policy, then and in every such case, and in either of said events, this policy shall be null and void.” These are stipulations in the policy, as binding upon the assured as if he had made no written application. He is not held to the warranties of representations in the application because of the fraud upon him ; but that fraud does not affect the terms of the policy independent of the application. When he accepted the policy he accepted its terms. He was not the sole owner of part of the property insured, and part was encumbered by judgment, neither of which facts was expressed in the written portion of the policy. This was plain and he could readily see that his policy was void. To say that he did not read the policy and, therefore, is not bound by its terms, sounds as ill in him as in the company to say it did not know Smullen was its agent. Warren held the policy more than two months before the fire. Not a circumstance is proved tending to induce him not to read it; but instead, he says the application was not finished when he signed it, that he was not satisfied about the sewing-machine being put in, and that he instructed Smullen to fill it up. Then he knew facts to incite him to read the policy. After the lapse of a reasonable time, without objection, he is presumed to have accepted it. There is no evidence which ought to overcome that presumption. The learned judge of the Common Pleas ruled that he accepted it by retaining it so long, and that was not error. He well remarks that the policy might have been returned and premium demanded, if not satisfactory. Although Warren was not prejudiced by anything wrongfully written in the application by the company’s agent, he was bound by what he held in his own hand. In this case there is no difficulty about, the facts and it must be presumed that the assured assented to the policy as written.

It was urged by the plaintiff’s counsel that whether the assured is bound to the terms of the policy by having kept it an unreasonable time is a question of fact for the jury. Where the facts are not clearly established, or where the question of time depends on other controverted facts, or where the motives of the party enter into the question, perhaps the whole must necessarily be submitted to the jury. But what is a reasonable time is a question of law, and where the facts are clearly established, must be determined by the court. It has been settled that where no time is specified for the performance of a contract, that the law implies that it shall be performed within a reasonable time; also that a reasonable time is a question of law: 2 Parsons on Cont. 535, 661, and cases cited in notes. The reasons are quite as strong that the law implies that if the assured does not return the policy within a reasonable time he accepts, and that the court must determine what is a reasonable time. We are of opinion that it was not error to direct a verdict for defendant.

Judgment affirmed.

Justices Merour and Sterrett dissented from that part of the opinion which imputes legal negligence to the act of retaining the policy, also from the judgment.