Elberton Cotton Mills, Inc. v. Indemnity Ins. Co. of North America

• Decision Date: 02 March 1929
• Court: Connecticut Supreme Court
• Parties: ELBERTON COTTON MILLS, INC., v. INDEMNITY INS. CO. OF NORTH AMERICA.

145 A. 33

108 Conn. 707

ELBERTON COTTON MILLS, INC., v. INDEMNITY INS. CO. OF NORTH AMERICA.

Supreme Court of Errors of Connecticut.

March 2, 1929

Appeal from Superior Court, Hartford County; Edward M. Yeomans and L. P. Waldo Marvin, Judges.

Action by Elberton Cotton Mills, Inc., against the Indemnity Insurance Company of North America, on a fidelity insurance contract covering loss through misappropriation of plaintiff's property by one of its employees. Defendant's demurrer to complaint was sustained and judgment was rendered for defendant, and plaintiff appeals. Error, and cause remanded, with direction.

Fidelity insurer held not entitled to claim forfeiture where insured gave prompt notice of claim and prepared proof of loss as expeditiously as practicable.

The complaint alleged that the defendant, an indemnity insurance corporation admitted to do business in Connecticut, executed and delivered to the plaintiff an instrument, made part of the complaint as Exhibit A, whereby it bound itself to pay to the plaintiff such pecuniary loss, not exceeding $10,000, as the plaintiff should sustain " by any act or acts of fraud, dishonesty, forgery, theft, embezzlement, unlawful abstraction or willful misapplication" committed by one Van Ness while in the service of the plaintiff as its employee. During the period from April 14, 1927, until July 1, 1927, Van Ness appropriated money and other property of the plaintiff to his own use. As soon as possible after becoming aware of these acts of its employee, to wit, on July 15, 1927, the plaintiff gave notice to the defendant of the general nature of these acts and that it would claim reimbursement for the loss occasioned thereby. The books accounts, and files of the plaintiff corporation were kept under the supervision of Van Ness, in such an inaccurate misleading, false, and incompetent manner that it took the plaintiff until April, 1928, to put the same sufficiently in order so that it could ascertain accurately what losses had been suffered by it and prepare a formal itemized claim of loss. Such claim was completed and mailed on April 16, 1928, but was summarily returned by the defendant, unaccepted. From the date of the notice, July 15, 1927, the books, records, and files of the plaintiff were at all times open to the defendant, and it was invited, several times, to join the plaintiff in investigating the facts, but refused to do so. The defendant has not paid and will not pay the loss.

Exhibit A, in addition to the general provisions already mentioned, and others of no significance in the present inquiry, contained the following clauses: " The employer shall give notice by registered letter to the surety at its Home Office, Philadelphia, Pennsylvania, as soon as possible after becoming aware of any act committed by the employee which may be made the basis of a claim hereunder; and within ninety (90) days after date of said notice file with the surety its itemized claim hereunder, duly sworn to and if required by the surety shall produce in support thereof at the office of the employer all books, vouchers, and other evidence in the employer's possession." " No action or proceeding at law or in equity shall be brought to recover any sum hereunder unless commenced and process served on the surety within a period of fifteen (15) months next after notice of claim shall have been given as hereinbefore provided; and there shall be no liability under this bond for any act or acts of the employee committed after the employer shall have become aware of any act which may be the basis of any claim hereunder."

The ground of demurrer was that it was not alleged in the complaint that the plaintiff, within 90 days after the date of notice alleged to have been given on July 15, 1927, filed with the surety its itemized claim, but it does appear that on April 14, 1928, an alleged proof of loss was filed, more than 90 days from the date upon which the notice was given.

Wallace W. Brown, of Hartford, for appellant.

Cyril Coleman and Joseph F. Berry, both of Hartford, for appellee.

Argued before WHEELER, C.J., and MALTBIE, HAINES, HINMAN, and BANKS, JJ.

HINMAN, J. (after stating the facts as above).

The question presented by the demurrer and upon this appeal is whether, upon the facts alleged in the complaint and exhibits annexed, the failure of the plaintiff to file its itemized claim of loss within 90 days after the notice of July 15, 1927, works a forfeiture of its right to recover. The contention of the defendant is that the provisions of the policy agreement must be construed as compelling such a result in every case where the filing of the claim is deferred beyond the 90-day period, whatever the length of the delay or the circumstances of the case. " That such a view would be a harsh one to take goes without saying." Clark v. London Assurance Corp., 44 Nev. 359, 363, 195 P. 809, 810.

The general disfavor with which forfeitures by implication or by construction not compelled by express requirements are regarded is generally recognized, as is the principle that provisions of doubtful meaning, in an insurance policy, are to be given that construction which is most favorable to the insured. Lee v. Casualty Co., 90 Conn. 202, 208, 96 A 952; Komroff v. Maryland Casualty Co., 105 Conn. 402, 405, 135 A. 388, 54 A.L.R. 463. Unless the intent and effect is express, plain, and unambiguous, the rigid enforcement of a forfeiture for failure to make strict compliance with a requirement that proof of claim or loss be filed within a specified time, no matter how unusual or compelling the circumstances occasioning the delay, would be to make the provision " a pitfall or snare to the unwary," for which purpose it is not intended. Munz v. Standard Life & Acc. Ins. Co., 26 Utah, 69, 72, 72 P. 182, 183 (62 L.R.A. 485, 99 Am.St.Rep. 830).

Graphic illustration of the hardship and unreason of such a construction and effect is suggested by the facts alleged in the instant case. If the dishonesty of the employee protection against loss from which is the purpose of fidelity insurance, extends to such an adroit and successful obscuring or concealment of the details and extent of the loss that no definite or intelligible statement of such loss be obtainable by the insured within the time limited for filing such claim, the result would be that the very delinquencies insured against would avail to deprive the insured of the right to reimbursement...