Great Southern Fire Insurance Company v. Burns & Billington

• Citation: 175 S.W. 1161,118 Ark. 22
• Decision Date: 29 March 1915
• Docket Number: 283
• Parties: GREAT SOUTHERN FIRE INSURANCE COMPANY v. BURNS & BILLINGTON
• Court: Supreme Court of Arkansas

175 S.W. 1161

118 Ark. 22

GREAT SOUTHERN FIRE INSURANCE COMPANY v. BURNS & BILLINGTON

No. 283

Supreme Court of Arkansas

March 29, 1915

Appeal from Craighead Circuit Court, Jonesboro District; J. F Gautney, Judge; affirmed.

Judgment affirmed.

Allen Hughes and W. W. Hughes, for appellant.

1. There was a chattel mortgage on the rice insured, which the proof of loss admits. No agreement with respect to the mortgage was indorsed upon the policy, hence, under the provision in the contract, the policy was void, even if the mortgage had been satisfied before the loss. 62 Ark. 348.

2. The same result follows where the mortgage covers an undivided interest only. 71 Ia. 119; 32 N.W. 20; 88 Mich. 94; 50 N.W 100; 19 Cyc. 758; I May on Insurance, § 291a.

3. It is the duty of the insured to know what his contract is, and he will be held to a knowledge of the conditions of his policy. The fact of his not having seen the policy will not excuse a want of such knowledge, in the absence of proof of an adequate reason for not seeing it. 71 Mich. 414 39 N.W. 571; 15 Am. St. Rep. 275; 89 Tex. 404; 34 S.W. 915; 31 S.W. 566.

The law presumes that the parties contemplated insurance in usual form, under the standard policy, conraining such conditions and limitations as are usual in such cases. 56 Pa.St. 256; 94 Am. Dec. 65; 76 Ia. 609; 41 N.W. 373; 94 U.S. 621; 50 O. St. 549; 22 L. R. A. 768; 35 N.E. 1060; 32 Minn. 458; 21 N.W. 552; 121 N.Y. 454; 8 L. R. A. 719; 24 N.E. 699; 106 Ala. 522; 17 So. 708.

4. There was no waiver. Where no inquiry is made and the insured says nothing, the acceptance of the policy carrying the standard stipulation as to incumbrances binds the parties. 2 Clement on Insurance, 155, 199; Ostrander on Insurance, § 26; May on Insurance, § 294C; 63 Ark. 187; 13 Am. & Eng. Enc. of L. (2 ed.), 228; 68 Ill.App. 637; 168 Ill. 309; 106 N.W. 485; 71 N.W. 755; 89 Tex. 404; 40 L. R. A. 358; 105 Ia. 379; 31 S.W. 566; 85 Wis. 193; 59 S.E. 369; 86 Ala. 189; 55 Md. 233; 10 F. 232; 65 F. 165; 68 Mo. 127; 79 Mo.App. 1; 98 Ga. 464; 37 S.W. 1013; 82 Miss. 674; 136 Ala. 670; 32 Conn. 21; 115 N.Y. 279; 3 L. R. A. 638; 64 Ia. 101; 100 Ga. 97; 96 Ala. 508; 22 N.E. 229; 136 Ia. 674; 105 Ia. 379; 162 F. 447.

5. It was erroneous to adjudge a penalty and attorney's fee against appellant. On the day the judgment was rendered, plaintiffs, having originally sued for $ 4,500, amended the complaints reducing the demands to $ 3,413.34, and averring that more had never been demanded, which avermerit the face of the pleadings shows is untrue. There was no basis for the allowance of penalty and attorney fee. 92 Ark. 378; 93 Ark. 84.

Hawthorne & Hawthorne, N. F. Lamb and Archer Wheatley, for appellee.

1. Under the facts and circumstances shown in this record, achattel mortgage existing at the time the policy is issued will not avoid the policy. If no inquiry is made by the agent of the insurer, and no misrepresentation made by the insured, any provision of the policy with reference to existing mortgages will be deemed to have been waived. The decided weight of authority sustains this view. 5 L. R. A. 430; 80 N.W. 807; 48 N.W. 798; 10 W.Va. 507; 22 Graft. 854; 30 N.W. 31; 82 P. 166; 57 P. 62; 62 N.W. 857; 100 N.W. 130; 12 Mont. 474; 62 N.W. 913; 47 N.W. 536; 39 N.E. 534; 10 N.W. 91; 18 A. 397; 67 N.W. 775; 17 N.W. 726; 71 N.W. 463; 59 N.E. 309; 74 N.E. 964; 79 N.E. 905; 94 N.E. 779; 101 N.E. 843; 147 N.W. 618; 20 S.W. 900; 13 S.E. 77; 24 S.E. 393; 43 N.J.L. 300; 69 P. 253; 127 U.S. 399, 32 L.Ed. 196; 8 How. 235, 12 L.E. 1061; 89 F. 932; 23 So. 183; 78 P. 392; 44 S.E. 896; 74 N.W. 269; Id. 270; 90 N.Y. 16; 107 P. 292; 141 P. 243; 19 A. 77; 47 N.W. 587; 53 N.W. 727.

2. Appellees were entitled to the penalty imposed by the court. The only demand ever made of appellant before suit was filed or afterwards, was for the amounts mentioned in the amendments to the complaints, and for these amounts judgment was rendered. 102 Ark. 675.

OPINION

HART, J.

J. L. Burns and M. F. Billington, partners, as Burns & Billington, instituted this action against the Great Southern Fire Insurance Company to recover on two policies of fire insurance. The policies covered certain rice belonging to the insured, and no question is raised as to the amount recovered. At the time the contract of insurance was made, there was a chattel mortgage on the rice which was executed by Billington. Doctor Burns procured the policies of insurance sued upon. An application was made to Freeze & Cole, insurance agents, who occupied offices in the same building adjoining those of the insured. The policies were issued upon the oral application of Doctor Burns, and no inquiry was made by the insurance agents as to the condition of the title of the property, or as to whether or not there was any mortgage upon it. The insurance agents selected the company in which the insurance was to be written, and kept the policies in their safe until after the fire occurred. The insured paid the premiums at the time the policies were issued, and it was only when they were making out the proof of loss that the insurance scrap any ascertained that there was a chattel mortgage on the property insured, and upon that ground they refused payment. The policies were in the standard form and contained a provision that they were made and accepted subject to conditions and stipulations printed on the back thereof. Among the provisions printed on the back is the following:

"This entire policy, unless otherwise provided by agreement endorsed hereon, or added hereto, shall be void, * * * if the subject of insurance be personal property, and be or become encumbered by chattel mortgage."

It is admitted that Doctor Burns knew there was a chattel mortgage on the rice at the time he applied for the insurance, and that he did not make any disclosures concerning it because he was not asked about it, and did not know that it was material to the risk. He never read the policies after they were issued, and neither he nor his partner knew that the policies contained the clause above quoted until after the loss had occurred.

Defendant requested the court to instruct the jury to return a verdict in its favor. This the court declined to do, and, over the objections of the defendant, instructed the jury to return a verdict in favor of the plaintiffs. From the judgment rendered, the defendant has duly prosecuted an appeal to this court.

Counsel for the defendant contends that the plaintiffs by accepting the policies of fire insurance containing the clause providing that they "shall be void if the property is or becomes encumbered by a chattel mortgage," are charged with notice of the condition, and are bound thereby; on the other hand it is contended by counsel for the plaintiffs that where a policy is issued by an insurance company without a written application, the company must be held to have waived the condition of the policy as to encumbrances by chattel mortgages.

The precise issue raised by the appeal has never been decided by this court. In the case of Rhea v. Planters' Mutual Ins. Co., 77 Ark. 57, 90 S.W. 850, and that of the Home Insurance Company v. Driver, 87 Ark. 171, 112 S.W. 200, and other cases, this court has held that where there is a warranty against encumbrances, the insurer is protected by a condition against encumbrances inserted in the policy.

So, too, in the case of German American Insurance Co. v. Humphrey, 62 Ark. 348, 35 S.W. 428, the court held that where a policy of fire insurance provides that it shall be void if the property insured afterward becomes encumbered by a mortgage, the giving of a mortgage on the property renders the policy void. In that case, however, the court said that there is a marked difference between a waiver of conditions made before and those made after the issuance of the policies.

In the case of Phoenix Insurance Co. v. Public Parks Amusement Co., 63 Ark. 187, 37 S.W. 959, the court held that a condition against encumbrances is waived by the acts of the agents of the insurer who, having authority to waive conditions, and knowing that the property was encumbered, attached to the policy permits for additional concurrent insurance upon which additional policies were issued.

The decisions of the courts of last resort of the various States are in irreconcilable conflict upon the question of whether, under the circumstances detailed above, the policy was invalid from the beginning because of the anti-mortgage clause. It is insisted by counsel for the defendant that the policies sued on were the standard form now in common use, and that the insured was required To disclose the nature and extent of his interest in the property because this was a matter which would largely influence the insurance company in taking or rejecting the risk and estimating the premium; that the clause in question was inserted in the policies by the insurance company, and that the insured was bound by the terms of the policies when they accepted them; that under the facts disclosed by the record, there could be no waiver of the conditions of the policies; and that the conditions inserted in the policies were just as binding on the insured as would have been conditions inserted in any other contract.

A leading case sustaining their contention is that of Parsons, Rich. & Co. v. Freeman P. Lane, 97 Minn. 98, 7 Ann. Cas. 1144. In that case the court cites and discusses many of the cases on both sides of the question.

Glens Falls Insurance Co. v. Michael (Ind.), 167 Ind 659, 74 N.E. 964, 8 L. R. A. (N. S.) 708, is a leading case sustaining the position assumed by the plaintiffs, that where the insurer issues a policy upon an oral application without making any inquiries as to the nature of the title of...