Lawver v. Globe Mut. Ins. Co.

• Decision Date: 04 June 1910
• Citation: 127 N.W. 615,25 S.D. 549
• Parties: J. C. LAWYER, Plaintiff and respondent, v. GLOBE MUTUAL INSURANCE COMPANY, Defendant and appellant.
• Court: South Dakota Supreme Court

25 S.D. 549, 127 N.W. 615 (1910)

J. C. LAWYER, Plaintiff and respondent v GLOBE MUTUAL INSURANCE COMPANY, Defendant and appellant South Dakota Supreme Court Appeal from Circuit Court, McCook .County, SD Hon. Joseph W. Jones, Judge Affirmed Null & Royhl Attorneys for appellant. E. H. Wilson, A. C. Biernatzki Attorneys for respondent. Opinion filed June 4, 1910

SMITH, J.

Appeal from the circuit court of McCook county. Action on a fire insurance policy to recover the sum of $1,000 insurance on the plaintiff's two-story frame building located in the village of Spencer. The property was totally destroyed by fire on the 6th day of August, 1908. Proofs of loss were furnished the company, and, upon refusal to pay the insurance, this action was instituted.

The policy is in the standard form required by chapter 126, Sess. Laws 1905, and is set out in full in the complaint. The policy contains the following clause: "$1625.00 other insurance concurrent herewith only, permitted." The plaintiff alleges that said clause was inserted in the policy by mutual mistake and inadvertence, and that there should have been inserted in lieu thereof, $6,400, other insurance concurrent herewith only permitted, and prays that the policy be reformed by striking out the clause first above quoted and inserting the latter clause in lieu thereof. The defendant puts in issue these allegations of the complaint, but admits the issuance and delivery of the policy, and alleges as a defense that at the time of the issuance of the policy there was other existing insurance on the property in three other companies aggregating the sum of $4,400, and says that at the time of the delivery of the policy in suit the defendant had no knowledge or notice of the existence of said additional insurance, and was not advised thereof until after the loss. The defendant further alleges that in violation of the terms and stipulations of the policy, and without the knowledge, or consent of the defendant, plaintiff on or about the 17th day of July, 1908, executed and delivered to the Farmers' & Merchants' State Bank of Spencer, S. D., a mortgage on the insured property in the amount of $2,000, and that at the time of the loss by fire said mortgage was unpaid and in full force and effect. It is contended that by reason of the insurance in excess of the $1,625 concurrent insurance permitted by the policy, and by reason of the giving of the mortgage as alleged, the policy of insurance became wholly void.

The issues were tried to a jury, resulting in a verdict for plaintiff for the full amount of the policy. On the trial, plaintiff having failed to substantiate the allegations of the complaint as to the alleged mutual mistake in inserting $1,625 in lieu of $6,400 concurrent insurance, the court took from the jury the issues as to the reformation of the policy, and for the purposes of this appeal the policy stands as originally written. Upon the record it is undisputed that there was $4,400 of existing insurance on the property at the time of the issuance of the policy in suit, and that the plaintiff did execute and deliver the mortgage alleged in the defendant's answer.

The policy contains a provision that:

"This policy shall be void, ... if the insured now has or shall hereafter obtain any other insurance on said property without the assent of the company ... or if without such assent, the situation or conditions affecting the insured property shall be altered so as to materially increase the hazard, if such increase in hazard be occasioned by the act or agency of the insured."

To avoid the effect of the violation of the first of these conditions of the policy, the plaintiff sought to show by oral evidence that at the time of the issuance of the policy one Mr. Nugent, who was the agent of the company, and solicited and procured the policy in suit, was fully advised when this policy issued of the existence of the $4,400 insurance already on the property. The testimony of plaintiff that he so advised the said agent of the company was received and stands undisputed on the record. To avoid the effect of the execution and delivery of the mortgage referred to, plaintiff sought to show that the defendant company, was given notice of the giving of the mortgage, and at the trial the plaintiff was admitted to testify that immediately upon the execution of the mortgage he wrote a letter advising defendant thereof, which was duly sealed and addressed to defendant at Huron, the home office and, with the postage thereon prepaid, was deposited in the United States post office. W. M. Farmer, secretary of the defendant company, was called as a witness for the defense, and testified that the mail at the home office passed through his hands, and that no such letter was ever received by the company; that he had made careful search among the files of the home office; that all letters received by the company are preserved; and that no such letter is among the files in the office. He further testifies that he first learned after the fire that the amount of insurance upon the property destroyed exceeded the amount specified as concurrent insurance in the policy, and that the company had no knowledge of the existence of the additional insurance prior to the time of the destruction of the property. Appellant in its brief says: "Defendant depends on three propositions: First, the overinsurance; second, the Mortgage; third, the amount of defendant's liabilities." No other questions are discussed in appellant's brief, and therefore no others will be considered upon this appeal.

The statutory form of policy contains the following provision:

"A person who solicits insurance or issues policies of insurance, or procures applications therefor, shall be held to be and considered the general agent of the insurer issuing the policy or making a renewal thereof, except as to proof of loss and adjustment thereof."

It is to be borne in mind throughout that this form of policy constitutes, not only the contract between the parties, but also the law governing the rights of both. It is unnecessary, therefore, to cite decisions discussing the authority of soliciting agents. This court, however, in the case of Vessey v. Commercial Union Ins. Co., 18 S.D. 632, 101 N.W. 1074, says:

"It is insisted, however, by the respondent that, inasmuch as all the facts connected with the mortgages and foreclosure of the same were fully known to the agent, the knowledge of the agent was the knowledge of the principal. We are inclined to take the view that the contention of the respondent is correct and is fully sustained by the weight of authority"

--citing Harding v. Norwich Union Fire Ins. Society, 10 S.D. 64, 71 N.W. 755 (1897).

In Fosmark v. Equitable Fire Association, 23 S.D. 102, 120 N.W. 777, this

court held that, where the general agent of the insurer knew at the time of the application for insurance that the building stood on leased property and was subject to a chattel mortgage, it was the knowledge of the insurer, reaffirming the decision of this court in Vessey v. Commercial Union Ins. Co., supra. That Nugent the soliciting agent of defendant was informed by plaintiff at the time of the issuance of this policy of the existence of $4,400 insurance then on the property is undisputed in the record. Under these decisions and the provisions of the policy, the knowledge of the agent, Nugent, was the knowledge of the defendant, and the company therefore stands charged with knowledge of the existing insurance on the property. It is entirely clear that, if no disclosure of this insurance had been made to the insurer or its agent at the time of the issuance of the policy in suit, such concealment would have rendered the policy absolutely void, and would prevent a recovery in this action unless waived by the insurer.

But the policy contains also the following provision:

"It shall be the duty of the insurer in order to avail himself of any provision in this policy, rendering it void, to promptly cancel the policy as provided herein upon having or obtaining notice or knowledge of the existence of any facts or circumstances which would, according to the terms of the policy, render it void; otherwise it will be deemed to have waived such provision or provisions voiding the policy."

It is clear, therefore, that under the decisions of this court and this provision of the policy the defendant has conclusively waived its right to declare the policy void on account of this $4,400 existing insurance by its failure to cancel the policy, or issuing it with knowledge of existing facts which would render it void. Parson Rich & Co. v. Lane, 97 Minn. 98, 106 N.W. 485; Gurnett v. Atlas Mut. Ins. Co., 124 Iowa 547, 100 N.W. 542; Welsh v. Fire Ass'n, 120 Wis. 456, 98 N.W. 227; Slobodisky v. Phoenix Ins. Co., 52 Neb. 395, 72 N.W. 483; Erb v. Fidelity Ins. Co., 99 Iowa 727, 69 N.W. 261; Power v. Monitor Ins. Co., 121 Mich. 364, 80 N.W. 111; Liv. L. & G. Ins. Co. v. Ende, 65 Tex. 118; Walsh v. Hartford Fire Ins. Co., 73 N.Y. 5.

The question presented by the mortgage is one of greater difficulty. The policy contains no provision relating specifically to incumbrances. The general rule as to ordinary policies is that, when the contract is silent in regard to incumbrances, their existence is held to be immaterial. The reason for this rule seems to be that, as the language of the contract is usually that of the insurer, any omissions, ambiguities, or uncertainty, of meaning will be construed favorably to the insured. Ostrander on Fire Insurance, 252, par. 79. The legislative assembly of this state, however, by chapter 126, Laws 1905, have prescribed a form of insurance contract known as a "standard form" of fire insurance policy, and its use by all insurance companies doing business in this state is made obligatory under heavy penalties. The...