Craig v. National Farmers Union Auto. & Cas. Co.

• Decision Date: 21 September 1956
• Docket Number: No. 9547,9547
• Citation: 76 S.D. 349,78 N.W.2d 464
• Parties: Paul E. CRAIG, individually, and as Special Administrator of the Estate of Anne S. Craig, deceased, Plaintiff and Respondent, v. The NATIONAL FARMERS UNION AUTOMOBILE AND CASUALTY COMPANY, a corporation, Defendant and Appellant.
• Court: South Dakota Supreme Court

Page 464

78 N.W.2d 464

76 S.D. 349

Paul E. CRAIG, individually, and as Special Administrator of the Estate of Anne S. Craig, deceased, Plaintiff and Respondent, v. The NATIONAL FARMERS UNION AUTOMOBILE AND CASUALTY COMPANY a corporation, Defendant and Appellant.

No. 9547.

Supreme Court of South Dakota.

Sept. 21, 1956.

Davenport, Evans, Hurwitz & Smith, Sioux Falls, for defendant and appellant.

Donald J. Porter, Chamberlain, Fred J. Nichol, Hitchcock, Nichol & Lassegard, Mitchell, for plaintiff and respondent.

HANSON, Judge.

The plaintiff, Paul E. Craig, was injured and his wife, Anne S. Craig, died as the result of injuries sustained in an automobile collision near Reliance, South Dakota, on July 1, 1951. The other car involved was a 1946 Pontiac driven by Gordon Jensen, a son of the owner, James W. Jensen, Sr. Action was brought against Gordon Jensen and on May 27, 1952 judgment was entered in favor of plaintiff, Paul E. Craig, individually, and as Special Administrator of the Estate of Anne S. Craig, in the amount of $23,770.79, together with $123.66 costs. Executions on the judgment were returned unsatisfied.

The present action is brought by plaintiff as an unsatisfied creditor to recover the amount of his judgment from the defendant insurance company. The plaintiff contends defendant's liability Policy No. 45467 issued to James W. Jensen, Sr., was in force and insured the 1946 Pontiac, and its driver, Gordon Jensen, on July 1, 1951. The defendant denies liability and asks for reformation of the policy. The defendant appeals from the judgment entered in favor of plaintiff.

The facts are determinative of the issues. Summarized as briefly as possible they show that in 1949 James W. Jensen, Sr., was a farmer near Lyman, South Dakota. He owned a 1946 Pontiac insured under defendant's Policy No. 45467. The limitations of liability against bodily injury were $25,000 each person, $50,000 each accident, $5,000 property damage, and $1,000 medical payments. The policy period was from August 7, 1949 to August 7, 1950.

Jensen, Sr., had two boys, James, Jr., and Gordon, who owned a Jeep. The Jeep was insured by defendant's Policy No. 48376 in the name of James W. Jensen, Jr. The effective period of this policy was from October 10, 1949, to October 10, 1950. Applications for the policies were written by a cousin, Jerome V. Jensen, a farmer who wrote insurance for defendant as a side line.

On August 7, 1950 Jensen allowed the Pontiac policy to lapse. Shortly thereafter he purchased a new 1950 Chevrolet. On September 23, 1950 Jensen informed defendant's agent he wanted liability insurance on the new Chevrolet. An application requesting a new policy (Exhibit O) on the Chevrolet was prepared by the agent and signed by Jensen, Sr. Jensen also informed the agent he wanted liability insurance on his 1946 Pontiac for one year and collision insurance on the Pontiac for a term of six months only because of a lien. The agent expressed some doubt as to whether or not a policy of that nature could be written. Jensen did not orally request, or consent to, a lesser liability term than one year. The agent prepared an application for a new policy (Exhibit N) on the Pontiac for a term of six months only asking for bodily injury liability coverage in the amounts of $10,000 each person and $20,000 each accident. The application was signed but not read by Jensen. At the same time the Jensens wanted credit on the Pontiac policy for the remaining insurance on the Jeep. Accordingly, the agent prepared Exhibit M, a car transfer application, referring to Policy No. 48376, which was signed by James W. Jensen, Jr. The agent forwarded the applications to the defendant's State Office with a letter requesting that 'the insurance on the Jeep (Policy No. 48376) be applied (dividend and remaining value till due date) to the insurance on the Pontiac'.

In October 1950 the company mailed the insured a 'Renewal Premium Receipt' (Exhibit E) and a Notice (Exhibit D). These instruments informed the insured his 1946 Pontiac was insured by Policy No. 45467 for a period of one year commencing September 27, 1950. He relied on these instruments as affording the insurance he requested.

Exhibits E and D, as a matter of fact, were inadvertently issued by defendant's employees in processing Jensen's applications. Instead of issuing new policies on the Pontiac and Chevrolet, in accordance with the applications, the defendant proceeded to effect coverage on the two cars by a series of changes and transfers on their records. These changes and transfers were as follows:

(1) Lapsed Policy No. 45467 was reinstated and the 1950 Chevrolet substituted for the 1946 Pontiac. The limits of liability were reduced and the policy period was made effective from September 27, 1950 to September 27, 1951, and

(2) The 1946 Pontiac was substituted for the Jeep in Policy No. 48376. A $50 deductible collision coverage was added and the policy was made effective until April 10, 1951.

After this series of changes the Pontiac was mistakenly insured in the name of James W. Jensen, Jr. The changes and transfers were reflected in a number of notices which were eventually sent to the agent for delivery. Before they were delivered Exhibits D and E, above mentioned, had been received by Jensen. The agent delivered the various endorsements on November 3, 1950. Mrs. Jensen was home alone and the agent placed the notices and endorsements with the old policies which were kept in a cupboard. The agent did not explain their meaning or significance. he did, however, collect $6.90 from Mrs. Jensen for the balance due on the premium.

On April 20, 1951, Policy No. 48376 was marked 'lapsed' on defendant's records for nonpayment of premiums. Prior thereto the company had sent two 'premium due' notices to James W. Jensen, Jr.

In May, 1951 the Jensens had the agent check their automobile insurance. He did not then, or at any time, explain the mistake in the issuance of Exhibits E and D. Nor did he explain, or inform the insured the Pontiac policy had lapsed. Instead he informed Mrs. Jensen the insurance on the Pontiac was 'Okay'. Following the accident the agent called the State Office to determine the status of the Pontiac insurance. Jensen was not advised until after the accident that Exhibits E and D had been issued in error and the company denied liability on the Pontiac policy.

The defendant seeks to be relieved of the effect of Premium Renewal Receipt (Exhibit E) by having it reformed to show the 1950 Chevrolet instead of the 1946 Pontiac therein. 'Reformation' is described as 'that remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties when some error or mistake has been committed.' 79 C.J.S., Reformation of Instruments, § 1, p. 327. The person seeking...