Arkansas Mut. Fire Ins. Co. v. Witham

• Decision Date: 25 March 1907
• Citation: 101 S.W. 721
• Parties: ARKANSAS MUT. FIRE INS. CO. v. WITHAM.
• Court: Arkansas Supreme Court

101 S.W. 721

ARKANSAS MUT. FIRE INS. CO. v. WITHAM.

Supreme Court of Arkansas.

March 25, 1907.

Appeal from Mississippi Chancery Court; Edward D. Robertson, Chancellor.

Action by J. L. Witham against Arkansas Mutual Fire Insurance Company. From a decree for plaintiff, defendant appeals. Affirmed.

Appellant, in consideration of the sum of $16.50 paid by appellee as premium, issued its policy of fire insurance to appellee, insuring his dwelling house in the town of Leachville, Ark., "against all direct loss or damage by fire, lightning, tornadoes and cyclones." The policy was in a sum not exceeding $1,000, and of date December 5, 1903. Appellee sued appellant on this policy, alleging "that on the 25th of March, 1904, said dwelling house was completely detroyed by a cyclone or tornado." Other facts were duly set up in the complaint stating a cause of action at law. Appellant set up as defenses (1) that appellee was only insured against loss by fire, and that the provision in the policy insuring appellee against loss by cyclones was inserted through mistake; (2) that appellee failed to comply with the requirements of the policy as to proof of loss. Appellant prayed to have the policy reformed, and on its motion the cause was transferred to the chancery court. The decree of that court shows that "the cause was heard on the policy of said company and deposition of J. L. Witham and exhibits thereto, Mattie Vaughan and W. Satterthwait for plaintiff, and upon the depositions of J. F. Elrod, J. H. Manning, George Danaher, A. K. Collins, J. Carl, R. L. Smith, and exhibits thereto, and C. S. Collins with exhibits thereto, for the defendant."

The testimony for appellant on the question of the mistake in policy was substantially as follows:

J. T. Elrod was the agent of the appellant at the time he took appellee's application for insurance. No one was present when the application was taken except himself and appellee. Appellee wanted $1,000 insurance on his dwelling house. Witness took his rate book out of his pocket, and gave appellee the farmer's rate; told appellee that for fire, lightning, cyclone, and tornado it would cost $21.50 and for fire only $16.50; that appellee remarked, as well as witness could remember, "that they never had any storms in that country," and that he (appellee) "did not care but for fire insurance." Witness would not "be plumb positive about" appellee's remark. Witness examined the application and erased the words "lightning, tornadoes, and cyclones" at the top. This was in appellee's presence. Witness was of the impression that appellee did not read the application but very little, only possibly the written part. Witness made the indorsement on the application with an indelible pencil that night at the hotel. He did not notice the words "lightning and cyclones" in the indorsement until after the disaster. After the disaster witness received a letter from appellee asking witness to come over at once. Witness wrote appellee, stating that witness was sorry for appellee's loss, "but sorrier that" witness "had only written" appellee "for fire insurance." Appellee never replied, but returned witness' letter. Witness kept a daybook of applications, and, when an application was for fire only, he initialed it that way. He did that in order to keep up with his work and account with the company. Among other entries in his daybook was that of "Leach & Witham $30.00, $6.00." It was probably made at that time or a month later. About a month later he insured Leach & Witham's store for $1,000. About one week before the expiration of 90 days after the fire witness met appellee in Jonesboro, possibly in front of Watson's store. Appellee said the company had not settled. Witness told appellee the rates made him. Appellee then said: "You made me $13.50 and $16.50 rates for fire, lightning, and cyclone." This brought up a dispute. Witness asked appellee if he did not remember witness drawing rate book and showing appellee the rate at the time, and appellee said, "Yes"; and asked witness if he had one of the rate books with him. Witness showed appellee rate book. He looked through it, and said possibly he was mistaken; but his loss was so great and the company making such a blunder he thought he ought to have it, and that witness should help him get it. Witness told him he could not lean away from the truth to help him, and appellee said he could not blame witness. Manning was eight or ten feet away when this conversation took place. Witness Manning corroborated this witness as to the conversation between him and appellee at Jonesboro.

Witness Smith, an agent for the appellant, testified as follows: "In January, 1904, I wrote insurance on the plaintiff's household goods for fire only. The application was for fire, lightning, tornadoes, and cyclones; but he only wanted fire, and I scratched out the cyclone and tornado clause in the application. He told me he already had insurance in the Arkansas on his house, and I made him rates for fire, lightning, and cyclone, and he told me I was charging too much. Then I gave him the rate for fire only. I don't think he stated as to the character of his policy in the other company. He said he was not much afraid of windstorms, and just preferred the fire. This was only a short while after he insured the house. I was expecting to get the house, but Elrod got ahead of me. I examined the application in this case. The erasures made by me in my application were like this [indicating]; only heavier than they. They appear to have been written with a fountain pen."

George Danaher testified as follows: "I was in employ at the time of defendant as policy clerk. On the face of the application the words `lightning, tornadoes, and cyclones' were scratched out. I wrote the policy from the back of the application where it was not scratched out; hence, by mistake, inserted lightning, tornadoes, and cyclones, which I always do with a rubber stamp. I am not now in the employ of defendant."

A. K. Collins, cashier and assistant secretary of appellant, testified as follows: "The first thing that attracted my attention was a photograph of the house, which came with the application. It was unusual. The inside had `lightning, tornadoes, and cyclones' erased. The indorsement — not a part of the application proper — had these words not erased, and the rate $16.50, being the correct rate for fire only. It was approved for fire and turned over to the policy clerk, Mr. Danaher. Our policies are issued in every case for fire only, unless the application calls for fire, lightning, tornadoes, and cyclones, in which case an additional charge is required. Mr. Danaher in writing the policy had taken the description from the face and had folded preparatory to filing it, and, discovering on the back the words `lightning,' etc., were not erased, and, I presume, without opening to verify the facts, stamped on the face of the policy the words `lightning, tornadoes, and cyclones.' When we received the notice of the loss, that was examined, and we thought Mr. Witham must be in error, because the application did not call for cyclone. The error was not discovered until C. S. Collins called on Witham in person. I don't undertake to say I can remember every application, but I do know that we are particular about rates, and, if Mr. Witham attempted to get insurance for fire, lightning, and cyclones for the fire rate only, the application would have been turned down, or Mr. Witham called on for additional charges. The application was filed as it reached the office, and was not opened until after Mr. Witham notified us of his misfortune."

Frank Carl, the president and chairman of committee to examine the applications sent in by agents, testified: "On December 5, 1904, I passed on and approved this application. The circumstances of this particular case were fixed on my memory by the unusual circumstance that it was accompanied by a photo of the house. Mr. Witham's application is before me. It is in the same condition as when I approved it, when it came by mail to my office. The words `lightning, tornadoes, and cyclones' are erased with a pen, and the amount indorsed on the back as premium is correct according to the rate book. If the clerk prepared it otherwise, it was a mistake."

C. S. Collins' testimony tended to show that the application of appellee for insurance was for fire insurance only. He explains how this was; shows that it was the universal custom to erase the words "lightning, tornadoes, and cyclones" where only fire insurance is wanted, as was done in this instance; shows that the rate charged in this case was $16.50, and that, if the erasures mentioned had not been made, the application would have been rejected because the rate for lightning, tornadoes, and cyclone, as well as fire, was $21.50 per $1,000 of insurance, instead of $16.50. This witness explains the various steps he took in the way of writing letters to appellee and visiting him for the purpose of ascertaining whether a mistake had actually been made in writing the policy. He explains the various steps taken to ascertain the facts under a nonwaiver agreement, and, as a conclusion of the whole matter, testifies that having decided...