Fidelity & Guaranty Fire Corporation v. Bilquist

• Decision Date: 26 October 1938
• Docket Number: No. 8835.,8835.
• Parties: FIDELITY & GUARANTY FIRE CORPORATION OF BALTIMORE v. BILQUIST et al.
• Court: U.S. Court of Appeals — Ninth Circuit

99 F.2d 333 (1938)

FIDELITY & GUARANTY FIRE CORPORATION OF BALTIMORE v. BILQUIST et al.

No. 8835.

Circuit Court of Appeals, Ninth Circuit.

October 26, 1938.

Davis & Groff, William Hatch Davis, and Guy B. Groff, all of Seattle, Wash., for appellant.

Ray R. Greenwood, of Bremerton, Wash., and H. Sylvester Garvin, of Seattle, Wash., for appellees.

Before HANEY and STEPHENS, Circuit Judges, and NETERER, District Judge.

HANEY, Circuit Judge.

An insurer has appealed from a judgment rendered against it as recovery upon a fire insurance policy issued by it on a building known as the Manchester Inn at Manchester, Kitsap County, Washington.

Sometime prior to July 23, 1935, appellee John Myhre and appellee Bilquist decided to buy real property at Manchester, Kitsap County, Washington, consisting of four lots with a building thereon, known as the Manchester Inn. On July 23, 1935, appellees executed a note to the Kitsap County Bank for $1500 which was used as part of the purchase price. A mortgage on the property was executed to the bank. Frank E. Langer was president of the bank, and also an agent of appellant for solicitation of insurance. He asked Myhre for permission to write the insurance, which was given. Langer had known for several years that the property in question had not been used exclusively as a dwelling place, but had been used as an inn. He asked no information, but filled out a form which was sent to Seattle, and the policy in question was prepared and sent to him. Langer signed the policy as resident agent, and placed it with the note and mortgage, then in the bank's possession.

The policy, effective for three years from August 10, 1935, insured in the amount of $2500 "the two story, shingle roof, frame building and additions in contract therewith while occupied only for dwelling house purposes" and insured in the amount of $1500 the "household furnishings and personal effects * * * all only while contained in the above described dwelling house building". It was provided that the policy was subject to conditions therein stated, and that "* * * 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 endorsed hereon or added hereto, and as to such provisions and conditions no officer, agent, or representative 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 this Policy exist or be claimed by the insured unless so written or attached." It was further provided: "This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * * if the hazard be increased by any means within the control or knowledge of the insured * * *" There was no rider or agreement added to the policy providing otherwise.

Prior to April 1, 1936, one Moen proposed installation of a bar in one corner of the building, the room being about twelve feet wide and fourteen feet long. A small back bar and mirror were installed, with refrigerating equipment, beer taps and six stools. There was no stove or electrical apparatus and no oil or combustibles kept in the barroom. After about April 1, 1936, beer and wine were served.

On the morning of September 12, 1936, a fire destroyed the property. The fire did not start in the bar room. Upon failure of the company to pay the loss, this cause was commenced by appellees in a Washington court, and removed by appellant to the court below.

The complaint alleged execution of the policy, the loss by fire of the building and personal property, failure of appellant to pay the loss, and that Langer knew "the true situation relative to said property" and "the use thereof". Appellees prayed for judgment in the sum of $4,000. Two issues raised by the pleadings were: (1) Whether or not the policy covered the loss because the building was not "occupied only for dwelling house purposes"; (2) whether or not the hazard was increased by installation and use of the bar, thus voiding the policy.

The cause was tried by a jury. At the close of the evidence, appellant moved for a directed verdict which was denied. The jury found for appellees. Appellant then moved for judgment notwithstanding the verdict. The motion was denied, and judgment was entered for appellees, from which this appeal was taken.

Appellants contend that the policy did not cover the loss, because it insured the building only when occupied for dwelling house purposes, and insured the "household furnishings and personal effects" only while contained in the dwelling house building. Appellees contend that since the agent had knowledge of the actual facts, appellant is estopped to deny liability under the policy.

Both parties concede that the law of Washington prevails. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487. It has been held in Washington that "while an insurer may be estopped, by its conduct or its knowledge or by statute, from insisting upon a forfeiture of a policy, yet, under no conditions, can the coverage or restrictions on the coverage be extended by the doctrine of waiver or estoppel." Carew, Shaw & Bernasconi v. General Casualty Co., 189 Wash. 329, 65 P. 2d 689, 692.

Thus where the insurer seeks to avoid liability on the ground that a warranty or condition in the policy has been...