Hawkeye Cas. Co. v. Holcomb

• Decision Date: 08 September 1942
• Docket Number: No. 36.,36.
• Citation: 5 N.W.2d 477,302 Mich. 591
• Parties: HAWKEYE CASUALTY CO. v. HOLCOMB et ux.
• Court: Michigan Supreme Court

302 Mich. 591

5 N.W.2d 477

HAWKEYE CASUALTY CO.

v.HOLCOMB et ux.

No. 36.

Supreme Court of Michigan.

Sept. 8, 1942.

Action in chancery by Hawkeye Casualty Company against Dr. Clayton E. Holcomb and wife to cancel an automobile insurance policy. From a decree denying relief sought and dismissing the bill of complaint, plaintiff appeals.

Affirmed.

Appeal from Superior Court of Grand Rapids, in Chancery; Thaddeus B. Taylor, Judge.

Before the Entire Bench, except WIEST, J.

Linsey, Shivel, Phelps & Vander Wal, of Grand Rapids (Knight & Panzer, of Detroit, of counsel), for appellant.

O'Hara & Montgomery, of Detroit (Benjamin W. Jayne, of Detroit, and Earl W. Munshaw, of Grand Rapids, of counsel), for appellees.

STARR, Justice.

In July, 1938, the United Automobile Insurance Company began the present chancery action to cancel an automobile insurance policy issued to defendants on April 2, 1938, on the ground that defendants had obtained such policy by fraud and misrepresentation. In February, 1939, the United company, with the approval of the State commissioner of insurance, sold its property and assets to the Hawkeye Casualty Company, and an order was subsequently entered substituting the Hawkeye company as plaintiff in the present case. For sake of brevity we will refer to both the United company and the Hawkeye company as plaintiff.

The case was tried in October, 1941, and on February 25, 1942, the trial court entered decree denying plaintiff the relief sought and dismissing its bill of complaint. Plaintiff appeals from such decree. This being a chancery case, we consider the same de novo.

There is no serious conflict in the testimony. For a proper consideration of the questions of law presented on this appeal, the facts and circumstances relating to the issuance of the insurance policy in question must be narrated in some detail.

Defendant Holcomb and his wife were residents of Detroit. Plaintiff (United company) had its principal office in Grand Rapids. For several years prior to April 2, 1938, the Citizens Mutual Automobile Insurance Company of Howell, Michigan, had issued and carried automobile insurance policies for defendants. One Morton Hambly, an insurance solicitor for the Dorr W. Frisbee Agency of Detroit, had from year to year handled the renewal of defendants' policies in the Citizens Mutual company, the last renewal policy being issued February 11, 1938. During the preceding two years defendants had been involved in several automobile accidents resulting in claims for loss under their insurance policies. In the latter part of February or in March, 1938, Dr. Holcomb had another accident, and Solicitor Hambly was instructed to, and did, ‘pick up’ the defendants' policy for cancellation. Hambly testified:

‘Q. And then what happened after that? A. In the latter part of February, or the first part of March, he (Dr. Holcomb) had another accident out near Drayton Plains. * * *

‘* * * And Mr. Woodham (vice-president of the Citizens Mutual company) considered that it would be advisable that we pick up the policy and cancel same, which I did.

‘Q. Was the policy cancelled? A. I picked it up and cancelled it the latter part of March (1938). * * *

‘Q. When you picked up Dr. Holcomb's policy with the Citizens Mutual, did you tell him why they were cancelling the policy? A. Well, we talked about it, and I said they didn't want to stay in the risk any more, and the only thing we could do was to pick up the policy.

‘Q. Well, did you tell him why they didn't want to stay on the risk? * * * A. I told him that the company did not want to stay in the risk any longer, after the accident out in Drayton Plains, and the only thing I could do was to pick up the policy, or else they would mail him a registered cancellation notice. * * *

‘Q. And the policy with the Citizens Mutual Automobile Insurance Company was actually cancelled? A. Yes, it was actually cancelled.

‘Q. Because of the frequency of accidents? A. Yes, sir.'

In March, 1938, plaintiff appointed the Frisbee insurance agency as its agent with authority to countersign and issue its automobile policies, and it furnished such agency with policy forms. The formal agency contract between plaintiff and the Frisbee agency was not signed until April 9, 1938, but plaintiff admits that the Frisbee agency was authorized to act as its agent and to countersign and issue its policies, including its policy to defendants, prior to that date. On April 2, 1938, the Frisbee agency countersigned and issued to defendants the insurance policy of plaintiff company involved in this suit. Between the 10th and 15th of April, 1938, Solicitor Hambly of the Frisbee agency delivered such policy to defendants who accepted the same and paid the premium therefor to the agency. Defendants did not make written application for such policy and were not required to sign either an application or the policy. Solicitor Hambly testified:

‘Q. Well, after Dr. Holcomb's policy in the Citizens Mutual was cancelled, what if anything did you do about placing his insurance? A. I talked to Mr. Frisbee, Dorr Frisbee, regarding same, and we kind of felt that probably he just had a streak of bad luck, and that we would place same with the Builders & Manufacturers of Chicago. * * *

‘Q. Well, was the policy on Dr. Holcomb's automobile written with the Builders & Manufacturers Insurance Company? A. No. At that time there was a question of the insolvency of the Builders & Manufacturers Insurance Company that came up, and the policy was never written in the Builders & Manufacturers. * * *

‘Q. Well, was a policy on Dr. Holcomb's LaSalle automobile written with another automobile company? A. Yes, in the early part of April, 1938, with the United Automobile Insurance Company (plaintiff) of Grand Rapids. * * *

‘Q. Very well. Was a policy of automobile insurance, covering Dr. Holcomb's LaSalle automobile, actually written? A. I received the policy and delivered it (to defendants) in April, to the best of my knowledge. * * *

‘* * * I imagine it would be around between the 10th and 15th of the month, of April, 1938. * * *

‘Q. * * * Did you look at the policy and read it over before you delivered it? A. No, I did not. * * *

‘Q. Did you ever ask Dr. Holcomb to sign an application to the United (plaintiff)? A. No.

‘Q. Did you read him the policy? A. No. * * *

‘Q. And did you inform Mr. Frisbee,-or, did you discuss the cancellation of the policy Dr. Holcomb had in the Citizens Mutual? A. I did.

‘Q. What conversation did you have with him, other than that, relative to Dr. Holcomb's new policy? A. We discussed the cancellation of it, and kind of felt that Dr. Holcomb has a good practice, and he seems to be a very responsible doctor, and it may have been just a question of a little hard luck or the bad breaks of about two or three in a row that happened, and we considered he was still a good risk; nothing more than that.'

Mr. Frisbee of the Frisbee agency testified, in part:

‘Q. And did your agency write a policy with the United (plaintiff), for Dr. Holcomb and his wife? A. We did. * * *

‘Q. Well, at the time that this policy in question was written, were you familiar with the fact that on the face of the policy there was a schedule of warranties? A. Well, that was so long ago that I can't be sure, but I assume that I at least looked at the United policy before we issued them. There was a great state of confusion here at the time, due to the failure of one of the companies which we had previously represented. * * *

‘Q. The reason you took on the United, as agent for it, was because the Builders & Manufacturers (Casualty Co.) were going out of business, is that right? A. That is right. * * *

‘Q. Did you know that Dr. Holcomb had been cancelled out of the Citizens Mutual because of the frequency of accidents? A. I knew that he had been or was to be cancelled because of an unsatisfactory experience.'

On May 14, 1938, the Frisbee agency wrote plaintiff reporting the issuance of five policies, including the policy issued on April 2, 1938, to defendants. Frisbee testified that the delay in reporting the issuance of such policies was due to confusion in the Frisbee agency as a result of the failure of the Builders & Manufacturers Casualty Company, which it represented. Plaintiff's vice-president testified that the Frisbee agency's letter was received on May 17 and that within a few days thereafter plaintiff verified information previously furnished by an underwriters service association that the Citizens Mutual company had cancelled defendants' policy because of their record of accidents and losses.

On June 4, 1938, plaintiff's attorneys wrote defendants stating, in effect, that defendants had obtained the policy in question by fraud and in violation of a warranty provision thereof by failing to disclose that the Citizens Mutual company had cancelled its policy. Plaintiff's attorneys enclosed with their letter of June 4 check payable to defendants for $26, that being the full amount of the premium paid for the policy. On June 23, 1938, Dr. Holcomb wrote plaintiff as follows:

‘I am returning the check for $26 dated June 4th, which you sent to me, together with a letter from your attorneys, claiming policy No. 8205-M, issued by your company, is void.

‘The policy is not void. If you wish to cancel it, it is your privilege to do so, but until you do cancel it, the policy is in full force and effect.

‘Morton D. Hambly, who delivered the policy to me, and Dorr W. Frisbee, your agents, were acquainted with all of the facts in connection with the issuance of this policy and all that is necessary for you to do to get these facts is to ask them. They knew my policy with the Citizens Mutual Insurance Company was about to be cancelled and it was at their suggestion that I took out this policy in your company.

‘I never have made any representations to your company, or its agents, either verbally or in writing, to the effect that any...