Duluth Nat. Bank v. Knoxville Fire Ins. Co.

• Decision Date: 30 October 1886
• Citation: 1 S.W. 689,85 Tenn. 76
• Parties: DULUTH NAT. BANK v. KNOXVILLE FIRE INS. CO.
• Court: Tennessee Supreme Court

1 S.W. 689

85 Tenn. 76

DULUTH NAT. BANK v. KNOXVILLE FIRE INS. CO.

Supreme Court of Tennessee.

October 30, 1886

Appeal from chancery court, Knox county.

Webb & McClung, for complainant. Washburn & Templeton, for respondent.

LURTON J.

The bill in this cause was filed by the Duluth National Bank against the Knoxville Fire Insurance Company on a policy for a thousand dollars issued by said insurance company to the Oneota Lumber Company, of Oneota, Minnesota. The policy, upon its face, is made payable, in case of loss, "to the Duluth National Bank, as their interest may appear." The insurance was upon lumber, and the property insured was destroyed by fire, and this action is to recover under the policy for said loss. The Oneota Lumber Company, the party assured, is not before the court, either as complainant or defendant. Complainants sue upon the express agreement to pay the loss to it, to the extent of its interest. This interest both from the face of the bill and from the proof, appears to be the whole amount of the loss; the policy being held by complainant as collateral security for a debt due from the lumber company much larger than the face of the policy. The defendant, in its answer, denies that it ever contracted to pay the loss to the Duluth National Bank; says that said bank is unknown to it, and that the words, "loss, if any payable to the Duluth National Bank, as their interest may appear," were not in the policy when issued or delivered, and that the same have been fraudulently interpolated since delivery.

The facts necessary to the determination of the issue thus presented are as follows:

The Oneota Lumber Company, being largely indebted to the Duluth National Bank, was called upon by said bank to insure the stock of lumber in their yard for their benefit against loss by fire. This they agreed to do, and they accordingly applied to the firm of Mendenhall & Haines, who were insurance agents at Duluth, Minnesota, for $5,000 of insurance, stating to them that they wanted the policies made payable, in case of loss, to complainant, as its interest might appear. The president of the creditor bank was the Mendenhall of the firm of insurance agents, and the member of the firm who received the order for insurance, and acted in the matter throughout. This witness says that his firm was unable to place the insurance in any company represented by them, or in any other company represented at Duluth. In this dilemma he wrote to the firm of Crawford, Craig & Co., insurance brokers at Chicago, Illinois, to obtain the needed insurance instructing them that the loss, if any, was to be made payable to the Duluth National Bank. Crawford, Craig & Co. were, in their turn, unable to place this insurance with any company represented by them. This latter firm thereupon applied to one Mrs. M. R. Smith, an insurance broker doing business in Chicago, to place with the Knoxville Fire Insurance Company a policy for them. Mrs. Smith did forward to said company, at their chief office in Knoxville Tennessee, an application for a policy of insurance in favor of said Oneota Lumber Company to the amount of $1,000. In the application to Mrs. Smith by Crawford, Craig & Co. nothing was said about making the loss payable to complainant; and hence, in her application to the defendant corporation, nothing was said as to the loss clause desired. The application was granted; and a policy for the desired amount, properly signed by the president and secretary, and countersigned by the local agent at Knoxville, was sent to Mrs. Smith for delivery. This policy was received by Mrs. Smith, and was duly delivered by her to Crawford, Craig & Co. for the Oneota Lumber Company. After its receipt by Crawford, Craig & Co., they discovered that the loss was not made payable to the Duluth National Bank, and they thereupon returned it to Mrs. Smith's office, with request that the policy should be changed so as to be made payable as desired by the assured. This request, we are satisfied, was not made to Mrs. Smith personally, nor was she at any time requested to have the loss made payable to complainant. The circumstances seem to show that a clerk in her office was handed the policy, and requested to have the desired clause inserted. On the same day, or very shortly afterwards, says Crawford, the policy was returned to Crawford, Craig & Co., with the words "loss, if any, payable to the Duluth National Bank, as their interest may appear," written upon the face of the policy. The proof shows satisfactorily that these words were not inserted by Mrs. Smith, or by her direction, and we are entirely satisfied that she never saw the policy after her original delivery of it to Crawford, Craig & Co., or even heard of the application for the insertion of the loss clause. The only proof in the record tending to show by whom these words were interpolated, is proof of Crawford and his clerk that the handwriting of the disputed words is that of one Maloney, a clerk at the time in the office of Mrs. Smith. It is also clear that no application for this change in the policy was ever made to the home office of the insurer. Crawford, Craig & Co., after the return of the policy to them, forwarded it to Mendenhall & Haines, at Duluth, and the latter firm delivered it to the Oneota Lumber Company, and by them it was left with the complainant to secure a pre-existing debt.

Mrs Smith was what is called by the witness an insurance broker. The proof shows that she had no express authority to enter into a contract of insurance. Her business was to forward to the Knoxville Fire Insurance Company, or any other company with whom she had business relations, on application for the insurance she should be requested to obtain or place. The company reserved the right to grant or refuse such application; and, if granted, a policy properly filled up and signed was forwarded to her for delivery to the applicant, and collection of the premium. She was paid by a commission reserved by her out of the premiums thus collected, and the balance was to be forwarded by her to the company. No express authority was ever given to her to alter a contract of insurance by changing the payee in case of loss. If such a change was desired by assured, she could only return the policy to the company, with a request that such change should be made; and, if granted by the company, the policy, with the loss clause inclosed, was returned to her for delivery to assured. The business, as thus managed by Mrs. Smith, constitutes an insurance brokerage business, and in many material respects differs from the ordinary local agencies of insurance companies. If she is to be regarded as the agent of the Knoxville Fire Insurance Company in any legal sense, her agency was limited and special, and would be confined to the receiving and forwarding of applications for insurance, the receiving and delivery of the signed and completed policies, and the collection of the premium...