Columbia Insurance v. Cooper

The opinion of the court was delivered, by

Woodward, C. J.

The insurance company objected to the testimony of Theodore W. Herr, their own agent, not on the ground of incompetency of the witness, but because his testimony tendea to contradict and impair what they are pleased to call the covenant of the assured in respect to encumbrances. The policy was for $1000 on Cooper’s machinery for the manufacture of cotton and woollen goods contained in a stone building, known as the “ Georgetown Factory.” In negotiating for the policy, Herr, as the agent of the company, presented the questions he was instructed to propound, one of which was, “ What encumbrances on the property ?” The answer he received and transmitted to the company was, “ None. The building and machinery is leased to J. Hughes, of Philadelphia.”

This answer the company insisted upon treating, not as a representation which is open to explanation, but as a covenant of the policy which precludes all explanation, and a breach of which works instant forfeiture of the policy. Most of the errors assigned relate to this point, and the language of the judge who delivered the opinion of this court in Arthur’s Case, 6 Casey 331, and the ruling in Birmingham v. The Insurance Company, 42 Barbour, are relied upon to support the position.

The policy in Arthur’s Case purported to have been made and accepted in reference to the written application, and the conditions thereto annexed, both of which were declared in the body of the policy to be a part thereof, and the assured covenanted and engaged that the representations given in the application for the insurance was a warranty on his part, and from the note we have of the case in Barbour, we infer the policy in that case was to the same effect.

It is very material to. observe that nothing of the’kind is found in the policy now before us. This policy refers itself to the application for a more full description of the subject-matter of the insurance, but unlike that in Arthur’s Case, it contains no express covenant of the assured, that makes- his answers a warranty. It does, however, subject the assured to “ conditions” that are four times as voluminous as the policy itself, and which, if strictly construed, take back nearly all the policy grants, and leaves the assured about as empty-handed as he began. One of these conditions very properly stipulates that “ any misrepresentation or concealment, fraud or false swearing,” shall cause a forfeiture of all rights under the policy; but another of them is very cunning: “If any agent of this company, in the transaction of their business, shall assume to violate these conditions, such violation shall be construed to be the act of the insured, and shall render void this policy.”

The company employed and paid Herr as an agent. He was advertised as such to the world, and was furnished with blank applications. When Cooper called on him, the answers were given verbally to the written and printed questions, and were written down by the agent. He says, “ When I asked Mr. Cooper about encumbrances, his first answer was that there were none; then he said directly, there are judgments against the real estate, but he supposed they were not liens upon the property insured, as that was personal. property. I agreed with him, and was of the opinion that it was personal property, and the liens did not ■attach to it. This conversation took place before I wrote the answer relating'to encumbrances.”

We think the court committed no error in admitting this evjdenee. We have already said that there was no covenant against encumbrances, and whether there Avas any misrepresentation was fairly submitted to the jury. Informed that there were judgments, the attention of the agent was called directly to the question whether they were encumbrances upon the machinery insured ? The doubt expressed by Cooper attracted Herr’s attention to the subject, and he concurred in opinion that they Avere not encumbrances, and so Avrote down the word “None.” Now, as the verdict acquits Cooper of a wilful misrepresentation, is the mistake of judgment fairly chargeable upon him ?

. When judgments are liens or encumbrances, is often a very nice question. They lose their lien in five years from their date ; they are not liens on real estate acquired by the debtor subsequent to their entry ; theyare not liens upon his personalty. But whether a particular piece of real estate is subject to the lien of judgments, and whether chattels are so connected AAjith that real estate as to be part of the freehold, are questions which Cooper did not profess to be able to answer, and which if the company wanted answered, they should have sent a competent agent to investigate them. Cooper was bound to answer in good faith; and he did so. But notwithstanding the above-cited condition, he was -not responsible for the blunders of the agent. If the agent returned that there were no encumbrances, when he had been informed there were judgments and a lease to Hughes, he may have violated the “ conditions” ; but no company has a right to select and send out agents to solicit patronage and business for its benefit, and then to saddle their blunders upon its customers. If the assured combine with the agent to cheat the company, we protect the company ; Smith v. The Ins. Company, 12 Harris 320; but if the assured have covenanted for nothing, and has been guilty of no misrepresentation, concealment, or fraud, the company had better pay his loss, than to attempt to make him responsible for the blunders of their OAvn agent.

But it was argued that Cooper became a member of the company by virtue of his insurance, and therefore the agent AYas his agent. The charters of these mutual companies do make the assured members, but I take it, membership does not begin till the contract is complete, and the policy issued. As to all preliminary negotiations, the agent acts only on behalf of the company, and the distinction between the agent and the assured is distinctly marked by the company itself in its regulations and conditions. In the company’s attempt to charge all the transgressions of its agents to the account of the assured, there is a very striking recognition of the relations of the parties.

The answer of the court as to Thornton’s OAvnership of part of the machinery, was all that the occasion called for. Cooper, the admitted oAvner of most of the machinery, and the landlord of the factory, disclosed the facts of a tenancy in Hughes, and proved that the machinery consumed greatly exceeded the policy, besides that granted by another company for $3000. He was entitled to seize all the machinery Thornton had on the premises for his rent, and it could not be severed from the freehold to his prejudice. He had therefore an insurable interest in all the machinery, and there was no fraud in not disclosing Thornton’s interest.

The court put the cause to the jury upon the true ground, that of good faith and fair dealing. It was not a case depending on the covenants of the assured, but on his honesty and truthfulness, and we see nothing in the rulings to correct.

The judgment is affirmed.