Citizens' Trust & Guaranty Co. of West Virginia v. Globe & Rutgers Fire Ins. Co.

• Citation: 229 F. 326
• Decision Date: 10 December 1915
• Docket Number: 1336.
• Parties: CITIZENS' TRUST & GUARANTY CO. OF WEST VIRGINIA v. GLOBE & RUTGERS FIRE INS. CO.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

229 F. 326

CITIZENS' TRUST & GUARANTY CO. OF WEST VIRGINIA v. GLOBE & RUTGERS FIRE INS. CO.

No. 1336.

United States Court of Appeals, Fourth Circuit.

December 10, 1915

B. M Ambler, of Parkersburg, W.Va. (Van Winkle & Ambler, of Parkersburg, W. Va., on the brief), for plaintiff in error.

H. W Hayward, of New York City (Reese Blizzard, of Parkersburg, W Va., on the brief), for defendant in error.

Before KNAPP and WOODS, Circuit Judges, and ROSE, District Judge.

WOODS Circuit Judge.

This action was on two surety bonds given to the Globe & Rutgers Fire Insurance Company by the Citizens' Guaranty Company in behalf of a corporate agency of the insurance company, first called General Southern Agency, and retaining its identity through several changes of name. The first bond for $10,000, covering the period from June 7, 1906, to June 7, 1907, was extended to June 7, 1908; the second, for $5,000, covered the period from July 15, 1908, to July 15, 1909. The District Judge instructed a verdict for $5,000 and interest, aggregating $6,400, for defaults secured by both bonds under the terms of the second bond. In giving this instruction the court held, first, that under the report of the commissioner appointed to state the account between the fire insurance company and its agent and the evidence taken in open court there was no real dispute that the default under both bonds, recoverable under the terms of the second bond, after allowing all credits, was more than the $5,000; and, second, 'that because defendant company, after notification and knowledge of the relations existing between plaintiff and its agent, demanded statements of the accounts and proofs of loss, and based its refusal to pay solely on the ground that Fowler & Co. were claiming credits and sets-off, it is estopped from denying its obligations upon its bonds for other reasons than account of such sets-off. ' The insurance company accepts the verdict, and does not assign error in the denial of a larger recovery.

The evidence supports the conclusion of the District Judge that there was a waiver of the condition that, 'upon the discovery by the employer that a loss has been sustained, or of facts indicating that a loss has probably been sustained, the employer shall immediately so notify the company in writing, at its principal office in the city of Parkersburg. ' The letter of the insurance company of October 16, 1908, notifying the surety company of the balances claimed against the agency, gave the information that balances had been several months overdue, and that there had been delay in giving notice under the policy on account of long and persistent efforts to obtain a settlement with the agent. The surety company in reply made no allusion to the delay in giving notice, and in a somewhat protracted correspondence sought to bring the insurance company and its agency to an agreement as to the amount due. This correspondence indicates clearly that the surety company intended to proceed in the matter of ascertaining its liability on the theory that the letter of October 16, 1908, was due notice of the alleged default, and it shows an effort by the assured to comply with the requests made of it. On this point the case, therefore, falls within the rule that any course of action which leads the assured to believe that by conforming thereto the condition of immediate notice will not be insisted on, followed by labor or expense in the effort to conform, will operate as waiver or estoppel. Insurance Co. v. Norton, 96 U.S. 234, 24 L.Ed. 689; Hartford Co. v. Unsell, 144 U.S. 439, 12 Sup.Ct. 671, 36 L.Ed. 496; Northern Assurance Co. v. Grand View Building Association, 183 U.S. 308, 22 Sup.Ct. 133, 46 L.Ed. 213. It is true that later, on November 13th, the defendant wrote to the insurance company:

'We beg to say again that we cannot consider this claim until a settlement is reached with Fowler & Co., or (if settlement cannot be had) until your claim is established by process of law. Then, if we are liable, we will pay; otherwise we cannot do so. * * * Fowler & Co. dispute your claim. * * * We understand that Fowler & Co. are ready to pay any balance which they may owe you, whenever the same may be ascertained by a proper settlement or by a court of competent jurisdiction. * * * It appears that they have asked you for a settlement of the contingent commission account, which has not been furnished. It seems to us that Fowler & Co. are entitled to a detailed statement of the account; and if it were furnished it would certainly put an end to excuses for delay on that ground. We suggest that you render a detailed statement setting forth fully your contention (just as if you would have to do if you were proving your claim in court), and we fully believe that you would have no trouble in reaching a settlement with them.

But this letter could not avail to recall the waiver on which the insurance company had acted in trying to comply with the surety company's demand that it come to an agreement with the agent as to the amount due.

It is argued, however, that the correspondence could not operate as a waiver, because the bond provides:

'Fourteenth. None of the conditions or provisions contained in this bond shall be deemed to have been waived by or on behalf of the company, unless the waiver be clearly expressed in writing over the signature of its president or vice president, and its seal be thereto affixed, duly attested.'

There can be no doubt that the same authority that issues a bond may waive any of its conditions. The provision quoted is valid in denying to any agent of the company the power to waive any of the conditions or provisions of the policy, unless the waiver should be under the signature of the president or vice president, and under the seal of the company. But it cannot mean that the company itself cannot waive or otherwise contract with reference to the insurance in any way it should see fit. The letters which expressed the intention to waive the requirement as to notice were sent from the general office of the company, and they were signed by the secretary, presumably under the authority of the company. Hence the waiver was by the company itself. Insurance v. Norton, supra.

The bonds expressly limit liability to such pecuniary loss as may be sustained 'by reason of the fraud or dishonesty of the employe,' and expressly exclude 'any loss occasioned by accident, mistake, negligence, error of judgment on the part of, or breach of contract by, the employe. ' There is nothing in the evidence showing that the surety company intended to extend its obligation to cover a liability not expressed in the bonds, or to admit that the employe had been guilty of fraud or dishonesty. On the contrary, the correspondence indicates the confidence of the surety company that the agency had acted in good faith. Taken together, the letters might well be regarded as importing refusal of the surety company to consider whether any default fell under its obligation until the amount of the default had been ascertained by proof or agreement.

Still we think the evidence did not make a serious issue of fact as to...