Nuffer v. Insurance Co. of North America

• Decision Date: 05 August 1965
• Citation: Nuffer v. Insurance Co. of North America, 236 Cal.App.2d 349, 45 Cal.Rptr. 918 (Cal. App. 1965)
• Court: California Court of Appeals
• Parties: Allen NUFFER, as Executor of the Last Will and Testament of John Brunner, deceased, Plaintiff and Respondent, v. INSURANCE COMPANY OF NORTH AMERICA, a corporation, Liverpool & London & Globe Insurance Co., Ltd., a corporation, Pennsylvania Insurance Company, a corporation, et al., Defendants and Appellants. Civ. 7451.

Page 918

45 Cal.Rptr. 918

236 Cal.App.2d 349

Allen NUFFER, as Executor of the Last Will and Testament of John Brunner, deceased, Plaintiff and Respondent, v.INSURANCE COMPANY OF NORTH AMERICA, a corporation, Liverpool & London & Globe Insurance Co., Ltd., a corporation, Pennsylvania Insurance Company, a corporation, et al., Defendants and Appellants.

Civ. 7451.

District Court of Appeal, Fourth District, California.

Aug. 5, 1965.

Rehearing Denied Aug. 24, 1965.

Hearing Denied Sept. 29, 1965.

Bert W. Levit, Herbert Z. Ehrmann, and Long & Levit, Los Angeles, for defendants and appellants.

C. F. Sturdevant, Jr., and D. M. Campbell, El Centro, for plaintiff and respondent.

COUGHLIN, Justice.

In this action, seeking recovery on behalf of an insured under fire insurance policies, the trial court granted plaintiff's motion for a directed verdict following presentation of the plaintiff's case, and an opening statement by the defendant insurance companies setting forth their defense.The sufficiency of plaintiff's case was not contested.Defendants appeal, contending their statement of facts supported legal defenses to recovery upon the policies and the conclusion of the trial court to the contrary, which resulted in the directed verdict, was error.

John Brunner, owner of the Barbara Worth Hotel and Annex in El Centro, California, designated his nephew, Joseph Komenda, his agent and manager under a general power of attorney.As such agent Komenda obtained issuance of fire insurance policies by defendants in favor of Brunner, as the insured, covering the hotel and annex.Subsequently, a fire starting in the basement destroyed the hotel and substantially damaged the annex.The agreed loss was $569,341.03.Komenda, having been appointed conservator of the estate of Brunner, brought this action as such conservator to recover under the fire policies.Thereafter, Brunner died and the executor of his last will and testament was substituted as plaintiff.The defendant insurance companies contested liability upon the grounds (1) that the fire was set by Komenda acting as agent for Brunner; (2) that a substantial part of the loss sustained was caused by the wilful acts of Brunner and of Komenda, as agent for Brunner, in failing to install an automatic sprinkler system in the basement of the hotel; and (3) that Komenda, as Brunner's agent, wilfully gave false testimony on material matters upon his examination under oath by the insurers pursuant to policy provisions authorizing such.At the close of plaintiff's case defendants stated the facts they intended to prove in support of the foregoing defenses which would preclude recovery under the policies.Following such statement plaintiff moved for a directed verdict upon the ground that the facts stated, as a matter of law, did not establish the defenses upon which defendants relied.The court granted the motion.The question on appeal is whether this constituted error, and requires a determination whether or not the facts relied upon by defendants constituted defenses to liability under the policies.

ARSON BY AGENT

The statement of facts supports the conclusion that the fire was of incendiary origin; that it was set by Komenda who, at the time, was general manager of the hotel acting under 'a very broad and complete power of attorney, giving him full authority to do, in effect, anything he saw fit'; that the hotel had been operating at a loss; that the purpose of setting the fire was to recover upon the insurance policies; and that Brunner neither participated in, through guilty knowledge, nor ratified the arson by Komenda.

Defendants contend that an insured may not recover under a policy of fire insurance for a loss caused by arson of the insured's agent appointed under a general power of attorney.This contention is premised upon the provisions of Section 533 of the Insurance Code that, 'An insurer is not liable for a loss caused by the wilful act of the insured'; upon the general rule that the act of an agent for purposes within the scope of his authority is the act of the principal (Civ.Code § 2330); and upon the claim that an agent, acting under a general power of attorney, in wilfully causing a loss covered by insurance represents his principal.

The provisions of Section 533 of the Insurance Code, heretofore noted, are a codification of 'the general rule that an insurance policy indemnifying the insured against liability due to his own wilful wrong in void as against public policy.'(Arenson v. National Automobile & Cas.Ins. Co., 45 Cal.2d 81, 84, 286 P.2d 816, 818.)

The courts of all jurisdictions in the United States, save one, that have considered situations such as in the case at bench, have held that recovery upon a policy of fire insurance is not defeated by the fact that the loss for which recovery is sought resulted from the intentional burning by the insured's agent of the property covered by the policy.(Orient Ins. Co. v. Parkhill, 6 Cir., 170 F.2d 510;Firemen's Mut. Ins. Co. v. Aponaug Mfg. Co., 6 Cir., 149 F.2d 359, 361, 364;Plinsky v. Germania F. & M. Ins. Co., 6 Cir., 32 F. 47, 50;Hartford Fire Ins. Co. v. Clark, 258 Ala. 141, 61 So.2d 19, 28;Feibelman v. Manchester Fire Assur. Co., 108 Ala. 180, 19 So. 540, 548;Williams v. Fire Ass'n. of Philadelphia, La.App., 193 So. 202, 204;Austin v. Maine Farmers' Mutual Fire Ins. Co., 126 Me. 478, 139 A. 681;Rent-A-Car Co. v. Globe & Rutgers Fire Ins. Co., 159 Md. 169, 148 A. 252, 256;Miller & Dobrin Fur. Co. v. Camden Fire Ins. Co. Ass'n., 55 N.J.Super. 205, 150 A.2d 276, 283;Aetna Ins. Co. v. Carpenter, 170 Va. 312, 196 S.E. 641, 646-647;Hawkins v. Glens Falls Ins. Co., 115 W.Va. 618, 177 S.E. 442, 446;29A Am.Jur. 1304, p. 427;Contra, Sternberg v. Merchants' Fire Assur. Corporation, D.C., 6 F.Supp. 541), unless the insured personally participated in the arson or ratified the same (Id.), or the agent would benefit substantially from recovery upon the policy.(California Insurance Company v. Allen, 5 Cir., 235 F.2d 178, 179;Firemen's Mut. Ins. Co. v. Aponaug Mfg. Co., supra, 149 F.2d 359, 361;Kimball Ice Co. v. Hartford Fire Ins. Co., 4 Cir., 18 F.2d 563, 565-566, 52 A.L.R. 799;Meily Co. v. London & Lancashire Fire Ins. Co., 3 Cir., 148 F. 683;D. I. Felsenthal Co. v. Northern Assur. Co.(Ill.), 120 N.E. 268, 270;Miller & Dobrin Fur. Co. v. Camden Fire Ins. Co. Ass'n., supra, 55 N.J.Super. 205, 150 A.2d 276, 280, 283;Travelers Fire Insurance Co. v. Wright(Okl.), 322 P.2d 417, 422;Bellman v. Home Ins. Co., 178 Wis. 349, 189 N.W. 1028.)The basis for this holding is that a general power of attorney does not confer upon an agent authority to commit arson.(Williams v. Fire Ass'n. of Philadelphia, supra, La.App., 193 So. 202, 204;Hawkins v. Glens Falls Ins. Co., supra, 115 W.Va. 618, 177 S.E. 442, 446.)The liability of a third person contracting with a principal is affected by the conduct of the agent in relation to the contract subsequent to its making, absent elements of estoppel or ratification, only if such conduct is authorized.(Generally seeRest., Agency, § 300, p. 672.)In California, by statute, an agent has authority 'To do everything necessary or proper and usual, in the ordinary course of business, for effecting the purpose of his agency.'(Civ.Code § 2319, subd. 1.)The commission of arson may not be classified as a 'thing necessary or proper and usual' to effect the purpose of a general agency.Authority to do a criminal act will not be presumed.(People v. Green, 22 Cal.App. 45, 50, 133 P. 334;Rest., Agency, § 34, p. 86.)This concept conforms to the settled rule of law that a principal is not liable criminally for a criminal act of his agent unless he authorized, consented to, advised, aided or encouraged the specific act.(People v. Doble, 203 Cal. 510, 515, 265 p. 184.)

Defendants contend that the exclusionary provisions of Insurance Code § 533 apply to a loss arising from an act of arson by an agent because such an act is within the scope of a general agent's authority under the rules governing an application of the doctrine of respondeat superior; a principal is responsible to a third person for wrongful acts committed by his agent in and as a part of the transaction of the business of the agency, regardless of whether the wrong is authorized or ratified by him, and even where it is intentional and malicious (Civ.Code § 2338;Hudson v. Nixon, 57 Cal.2d 482, 484, 20 Cal.Rptr. 620, 370 P.2d 324;Mercado v. Hoefler, 190 Cal.App.2d 12, 17, 11 Cal.Rptr. 787); and under these rules an act of the agent may be within the scope of his authority even though it is not authorized (Deevy v. Tassi, 21 Cal.2d 109, 125, 130 P.2d 389), or is unlawful (e. g. seeHudson v. Nixon, supra, 57 Cal.2d 482, 484, 20 Cal.Rptr. 620, 370 P.2d 324;Carr v. Wm. C. Crowell Co., 28 Cal.2d 652, 171 P.2d 5.)However, the rules governing a determination of the scope of an agent's authority for the purpose of ascertaining the responsibility of his principal on account of wrongs committed by the agent in the transaction of the business of the agency do not control a determination of the scope of the agent's authority for other purposes.The case at bench does not concern the responsibility of a principal to a third person for a loss occasioned by wrongs committed by an agent.Instead, the case here concerns the responsibility of a third person under a contract of indemnity for a loss sustained by the principal as a result of an act of the agent.Stated otherwise, the case here concerns the coverage provided by the insurance policies.The provisions of Insurance Code § 533 are a part of those policies, equivalent to an exclusionary clause therein.(Maxon v. Security Ins. Co., 214 Cal.App.2d 603, 615, 29 Cal.Rptr. 586.)Exclusions are construed strictly against the insurer and liberally in favor of the insured.(Arenson v. Nat. Automobile & Cas. Co., supra, 45 Cal.2d 81, 83, 286 P.2d 816.)There is...