Inventasch v. Superior Fire Ins. Co.

• Decision Date: 22 June 1927
• Docket Number: No. 6382.,6382.
• Citation: 138 A. 39
• Parties: INVENTASCH v. SUPERIOR FIRE INS. CO.
• Court: Rhode Island Supreme Court

138 A. 39

INVENTASCH

v. SUPERIOR FIRE INS. CO.

No. 6382.

Supreme Court of Rhode Island.

June 22, 1927.

[Copyrighted material omitted.]

Exceptions from Superior Court, Providence and Bristol Counties; J. Jerome Hahn, Judge.

Action by Irving Inventasch against the Superior Fire Insurance Company. Verdict for defendant, and plaintiff brings exceptions. Exceptions overruled, and case remitted for judgment.

Judah C. Semonoff, of Providence, for plaintiff.

Sherwood, Heltzen & Clifford, of Providence, for defendant.

BARROWS, J. This case is heard on exceptions of plaintiff to a decision for defendant after trial by the superior court sitting without a jury.

The parties have discussed briefly whether the written decision impliedly found disputed facts in favor of defendant. We shall not determine this because the legal questions upon which the decision rested are controlling, even if the facts asserted by plaintiff be accepted.

The action was on a standard form of fire insurance policy covering personal property. G. L. 1923, c. 258. It contained the condition:

"This entire policy unless otherwise provided by agreement indorsed hereon or added hereto shall be void * * * if the subject of the insurance be personal property and be or become incumbered by a chattel mortgage; no agent * * * shall have power to waive any condition of this policy except such * * * as may be subject to agreement indorsed hereon,"

—and, further, that no privileges or permissions affecting the insurance shall be claimed unless written upon or attached to the policy. In legal contemplation, knowledge of such terms is possessed by the insured (Parsons v. Lane, 97 Minn. 98, 106 N. W. 485, 4 L. R. A. (N. S.) 231, 7 Ann. Cas. 1144; Northern Assur. Co. v. Grand View Bldg. Ass'n, 183 U. S. 308, 361, 22 S. Ct. 133, 46 L. Ed. 213), even though he be illiterate (Urbaniak v. Firemen's Ins. Co., 227 Mass. 132, 116 N. E. 413). See, also, 26 C. J. 291.

After issuance of the policy in February, 1925, it always remained in plaintiff's possession and no request ever was made for permission to mortgage the property. A chattel mortgage was placed July 22, 1925, without the knowledge of the company. July 30 the company, learning of said mortgage, notified its Boston agent, who wrote to Fuller, its agent in Rhode Island, that information had been received that a chattel mortgage had been filed, and, if so, ordering an immediate cancellation of the policy. Fuller on August 3 wrote plaintiff as. follows:

"We have received a letter from our insurance company requesting cancellation—because of the fact that they have information that a chattel mortgage has been placed. On this account they ask to be relieved of this risk and wish their policy canceled. * * *

"* * * Insurance companies do not like to insure stock covered by chattel mortgages, but if you will write us the circumstances for which the money is to be used and when and how it is to be paid up, we will advise the company and they may allow the insurance to remain in force.

"Kindly let us hear from you at once and in case this company cancels the policy after giving them this information, we may be able to place it in another company."

To this communication plaintiff, an unlettered man, made no reply. Some time in August, in response to a 'phone call from Fuller, plaintiff says he got his brother to write a letter giving Fuller the information "why the mortgage was taken out, how payable, and how much was paid already." The contents of this letter were proved by the recollection of plaintiff's brother. Fuller denied the receipt of any such letter, and plaintiff admitted he had kept no copy of it. The brother of plaintiff also testified that two weeks after writing the alleged letter he saw Fuller and asked him how he made out on plaintiff's policy, to which Fuller replied:

"You needn't worry about that. Everything is well taken care of."

This conversation Fuller denied. Plaintiff did nothing to have the policy validated and prior to loss did not again communicate with Fuller.

November 9, 1925, a fire occurred, and, later, defendant offered to return the full premium, claiming misrepresentation in procuring the policy as well as its avoidance by reason of the chattel mortgage. Fuller's commission shows that his authority was to effect insurance and renew policies, consent to assignments and transfers, and collect premiums. He was more than a mere local agent or solicitor of insurance. He was the general agent through whose hands defendant's Rhode Island business passed.

Plaintiff's contentions are (1) that the policy was voidable, not void; (2) that the company waived the right to insist that the giving of the chattel mortgage avoided the policy; and (3) that, irrespective of the alleged waiver, the company was estopped to assert invalidity of the policy.

1. It is true that this court has often referred to insurance policies as "void" when conditions have been broken. But in no case was the court construing the legal meaning to be given to the word "void." The great weight of authority is that the word "void" is to be read as voidable when the condition is for the advantage of one party only (Williston on Contracts, § 746; 32 C. J. 1317; 14 R. C. L. 1155); that the condition against incumbrances and other conditions in the same group are for the benefit of the insurer, with the consequent right to elect, after knowledge of the breach of condition, whether to treat the policy as of no effect or as still in force (Insurance Co. v. Norton, 96 U. S. 234, 24 L. Ed. 689; Northern Assur. Co. v. Grand View Bldg. Ass'n, 183 U. S. 308, 22 S. Ct. 133, 46 L. Ed. 213, supra). Williston on Contracts, § 758, says:

"Even after breach of condition the contract still exists, but it exists as a conditional contract; * * * the situation is not the same as if no contract existed."

A holding that the policy has not become an absolute nullity is advantageous to the insured, who by his voluntary act, without knowledge of the insurer, has placed himself outside the terms of the policy. This construction enables the insured to seek reinstatement of the policy without new consideration. Viele v. Germania Ins. Co., 26 Iowa, 9, 96 Am. Dec. 83. The terms of the policy make plain how the insured may procure a reinstatement, viz., by securing the company's consent, in writing, to the chattel mortgage. He must act in accordance with these terms, particularly when the policy remains in his possession. Tompkins v. Hartford Fire Ins. Co., 22 App. Div. 380, 49 N. Y. S. 184 (chattel mortgage).

We therefore conclude that the policy by the placing of the chattel mortgage was not void beyond the possibility of reinstatement without new consideration. The placing of the chattel mortgage rendered the policy voidable at the option of the insurer.

2. Did the insurer waive plaintiff's breach of condition? No contention is made that it did so in writing. The policy's terms concerning the method of waiving the rights of the insurer are not ambiguous. Such waiver must be written and attached to the policy. We recognize the existence of, but cannot agree with, authorities holding that an oral waiver of the conditions of an insurance policy against incumbrances may be made by a general agent in spite of the explicit terms of the policy to the contrary. Rediker v. Queens Ins. Co., 107 Mich. 224, 65 N. W. 105. Numerous courts so holding treat waiver and estoppel as synonymous, and it is important to note this. Phenix Ins. Co. v. Grove, 215 Ill. 299, 74 N. E. 141, 25 L. R. A. (N. S.) 1. Waiver is used in many senses. Williston on Contracts, § 679; 18 H. L. R. 364. Northern Assur. Co. v. Grand View Bldg. Ass'n, 183 U. S. 308, at page 357, 22 S. Ct. 133, 151 (46 L. Ed. 213), thus asserts the identity with estoppel:

"The doctrine of waiver, as asserted against insurance companies to avoid the strict enforcement of conditions contained in their policies, is only another name for the doctrine of estoppel."

When so used, it is sometimes called implied waiver because it lacks the element of intention. See note in 25 L. R. A. (N. S.) 1.

In Rhode Island, however, as applying to insurance policies, waiver and estoppel have been differentiated. In Metcalf v. Phenix Ins. Co., 21 R. I. 307, 43 A. 541, followed by Gilbert v. Hayward, 37 R. I. 321, 92 A. 625, waiver is defined as the intentional relinquishment of a known right. See, to the same effect, 7 Cooley, Briefs on Ins., p. 907; 26 C. J. 280. It "does not imply any conduct or dealing with another by which that other is induced to act or to forbear to act to his disadvantage; while an estoppel necessarily presupposes some such conduct or dealing with another." Metcalf v. Phenix Ins. Co., supra, at page 309, 43 A. 542. Estoppel, therefore, in the present case, would arise from conduct or dealings with the plaintiff, as a result of which the defendant should not be permitted to deny liability under the policy. Humes Construction Co. v. Philadelphia Casualty Co., 32 R. I. 246, 252, 79 A. 3, holding that courts of law in considering estoppel act upon broad equitable principles, said:

"A person with full knowledge of the facts shall not be permitted to act in a manner inconsistent with his former position or conduct, to the injury of another."

This legal principle does not depend on misrepresentation.

By the terms of the policy, which is a contract made by and binding upon the parties (Imperial Fire Ins. Co. v. Coos County, 151 U. S. 452, 14 S. Ct. 379, 38 L. Ed. 231; Egan v. Westchester Ins. Co., 28 Or. 289, 42 P. 611 [chattel mortgage]), insurer and insured have agreed that no agent or officer of the company may waive the conditions except in writing attached to the policy. Such provision is valid and binding apart from statute (Gladding v. California Ins. Co., 66 Cal. 6, 4 P. 764; Atlas Reduction Co. v. New Zealand Ins. Co. [C. C. A.] 138 F. 497, 9 L. R. A. [N. S.] 433), but when fixed...