Armstrong v. Agricultural Ins. Co. of Watertown

• Decision Date: 26 January 1892
• Citation: 29 N.E. 991,130 N.Y. 560
• Parties: ARMSTRONG v. AGRICULTURAL INS. CO. OF WATERTOWN.
• Court: New York Court of Appeals Court of Appeals

130 N.Y. 560

29 N.E. 991

ARMSTRONG

v.AGRICULTURAL INS. CO. OF WATERTOWN.

Court of Appeals of New York, Second Division.

Jan. 26, 1892.

Appeal from supreme court, general term, second department.

Action by Alexander Armstrong against the Agricultural Insurance Company of Watertown, N. Y. From a judgment of the general term affirming a judgment for plaintiff, defendant appeals. Reversed.

A. H. Sawyer, for appellant.

Calvin Frost, for respondent.

BROWN, J.

This action is upon a policy of insurance against fire, issued by the defendant to Daniel Brown, owner. The loss, by an indorsement upon the policy, was made payable to the plaintiff as mortgagee, and was to be paid ‘within sixty days after due notice and proof of the same made by the assured.’ One of the conditions of the policy was that, ‘if proceedings shall be commenced to foreclose any mortgage upon the insured property, * * * then this entire policy, and every part thereof, shall be null and void, unless the written consent of the company at the New York office is obtained.’ On January 6, 1888, the plaintiff commenced an action to foreclose his mortgage, without having obtained the company's consent, and by so doing the condition quoted was broken, and the policy was, by its express terms, from that date ‘null and void.’ Titus v. Insurance Co., 81 N. Y. 410;Devens v. Insurance Co., 83 N. Y. 168. The respondent claims, however, that the breach of this condition was waived, and the trial court and the general term so determined. It appeared that on February 2, 1888, the plaintiff caused a letter to be written and mailed to the defendant at its New York office, which was delivered in due course of mail, notifying it of said foreclosure action, and that it had been commenced without discovering the clause against it in the policy, and asking consent to continue the action, to which letter no reply was ever made. On February 4th judgment of foreclosure and sale was entered, and on February 10th the buildings were burned. Daniel Brown, the owner of the property, refnsed to make proof of loss under the policy, and thereupon such proofs were made by the plaintiff, and sent to the defendant; whereupon, on March 24th, it notified plaintiff by letter that it declined ‘to accept or receive such papers as a proof of loss under said policy upon the ground that they are not executed by the assured mentioned in the policy, as required by the conditions of the policy.’ Upon receiving such notice. plaintiff again solicited said Brown to make proofs of loss, but he declined, and an affidavit of such request and declination was sent to the defendant, whereupon it replied that it ‘did not see how these affidavits obviated the objection already made.’ The finding that there was a waiver of the forfeiture was based upon the failure of the defendant to reply to the letter of February 2d, and upon the demand, implied from the letter of March 24th, that plaintiff should furnish it with proof of loss, made and sworn to by the owner of the property. One of the questions considered in Titus v. Insurance Co., supra, was similar to the one presented in this case, and it was there said that a waiver cannot be inferred from silence; that ‘the company is not obliged to do or say anything to make a forfeiture effectual.’ Within the rule there stated, the defendant was under no obligation to reply to the plaintiff's letter informing it that the foreclosure suit had been commenced. And I am unable to see how, under any rule, any legal obligation rested upon the defendant to reply, or how it could be inferred from the failure to reply that it intended to waive the enforcement of that condition of the policy. The commencement of the suit rendered the policy from that time void. The plaintiff must be presumed to have known of that fact. He deliberately violated the condition and destroyed his contract, and then informed the defendant of his act. It would require some affirmative action on defendant's part, under such circumstances, to indicate that it intended to waive the result of the plaintiff's breach. We have at this term of the court considered the failure to respond to an application of insurance in its effect upon a contract, and held that a contract could not be presumed under such circumstances, (More v. Insurance Co., 29 N. E. Rep. 757,) and no substantial distinction exists in principle between that case and this. The failure to reply to the plaintiff's letter, or, as was said by the general term, ‘the neglect to refuse the consent as promptly as the occasion demanded,’ raised no inference that the defendant consented to the foreclosure action. Walsh v. Insurance Co., 73 N. Y. 5. The rule is now established, however, that if, in any negotiation or transaction with the assured afterknowledge of the forfeiture, it recognizes the continued validity of the policy, or does acts based thereon, or requires the insured to do some act, or incur some trouble or expense, the forfeiture is waived. Titus v. Insurance Co., supra; Roby v. Insurance Co., 120 N. Y. 510, 24 N. E. Rep. 808; Pratt v. Insurance Co., (N. Y. App.) 29 N. E. Rep. 117. While the later decisions all hold that such waiver need not be based upon a technical estoppel, in all the cases where this question is presented, where there has been no express waiver, the fact is recognized that there exist the elements of an estoppel. Brink v. Insurance Co., 80 N. Y. 108-112;Goodwin v. Insurance Co., 73 N. Y. 480;Prentice v. Insurance Co., 77 N. Y. 483. In the cases cited the plaintiffs were misled by the action of the defendants, and their acts were the cause of the omission to comply with the condition of the policy, the breach of which was alleged as a defense; and, under these circumstances, the defendants were held to be estopped from asserting the objections. In Titus v. Insurance Co., supra, the defendant required the insured to appear before a person appointed for that purpose, and submit to an examination. Roby v. Insurance Co. was of a like character. In those cases the defendant exercised a right which it had only by virtue of the policy, and it was held that exercising a right after knowledge of a breach of one of the conditions of the policy by the assured was a recognition of its validity, and hence a waiver of the forfeiture. It will be observed, however, none of the things required of the insured in the cases cited were the ordinary contract stipulations, but were to be performed only when requested by the insurer. They were not essential to his cause of action, but were in the nature of an examination into the loss by the assured after service of the formal proofs, and this element points the distinction between those cases and the case at bar.

The condition requiring service of proofs of loss is one wholly for the benefit of the insurer. The assured contracts to perform it, and until he does so he has no legal claim against the insurer, and no cause of action. The proofs thus provided for are the legal evidence of the loss. The performance of the condition is not a thing to be done at the request of the insurer. The company may remain silent, and, until proofs are furnished, it cannot be called upon to pay the loss. But the law does require of it entire good faith and fair dealing in its transactions with the assured in reference to the proofs, and hence it is bound to point out any defects of a formal character therein, that the assured may have an opportunity to correct them; and, if it accepts those served within the time named in the policy, it will be deemed to have waived defects, and to receive them in performance of the condition of the contract. I do not think a waiver by the defendant can be inferred from its letter respecting the proofs served. It there made no demand upon the plaintiff. It pointed out to him the fact that in its interpretation of the contract he was not the assured, and the implication was that that term applied to the owner of the property, and proofs must be made by him to fullfill the condition of the contract. That this was an act of entire good faith towards the plaintiff is apparent. It required no action from him, and put upon him no trouble or expense, but left him free to stand upon his interpretation of the contract if he chose, and it gave him the opportunity, if he desired, and could do so, to remove a possible objection to his claim. But it is said that the defendant should then have asserted the forfeiture of the policy, and, failing to do so, it waived it. But, if it had placed its refusal to pay upon that ground, it would not have been permitted thereafter to set up and rely upon defective proofs. A denial of liability, and a refusal to pay, on the ground that there was no contract, would have been equivalent to a declaration that it would not pay though the proofs be furnished. Tayloe...