Royal Ins. Co v. Poole

• Decision Date: 16 June 1927
• Citation: 138 S.E. 487
• Parties: ROYAL INS. CO., Limited. v. POOLE et al.
• Court: Virginia Supreme Court

138 S.E. 487

ROYAL INS. CO., Limited.

v.POOLE et al.

Supreme Court of Appeals of Virginia.

June 16, 1927.

Error to Circuit Court, Nottoway County.

Proceeding by notice of motion by Susie Poole and another against the Royal in urance Company, Limited. Judgment for plaintiffs, and defendant brings error. Reversed and rendered.

Sands, Williams & Lightfoot, of Richmond, and Henry E. Lee, of Crewe, for plaintiff in error.

H. H. Watson, of Crewe, and Wm. M. Tuck, of South Boston, for defendants in error.

CHICHESTER, J. This is a proceeding by notice of motion instituted by Susie Poole and J. W. Poole, hereafter called "insured, " to recover $5,500 with interest from October 16, 1924, under a policy of insurance issued to them by the Royal Insurance Company, Limited, hereafter called "company." Of the $5,500 insurance, $4,000 was on a frame dwelling house situate on a farm of 131 acres in Nottoway county, and $1,500 was on household furniture located in the building. The policy was of a special form issued by the form department of the company, which provided for insurance for five years, with premiums payable annually.

This form of policy was not held in stock subject to delivery by the local agent as fire policies ordinarily are, but was only issued from the home office of the company after the local agent had inspected the property and sent in an application, signed by the applicant for insurance, containing numerous and various questions to be answered bearing upon the risk involved, in relation to the title to the property, condition as to encumbrances, other insurance, past history of the insured in reference to previous fires, etc. It was after such an application, signed by insured, had been received and passed upon by the company, that the policy, at the election of the company, was issued.

In this application the following questions and answers, among others, appear:

"Q. Is there any other insurance on the property? If so, give name of company and attach copy of written form of policy.

"A. No. $5,000.00 Pol. on dwelling expires April 15, 1924.

"Q. Is any of your real estate under mortgage, lien or incumbrance? If so, state how, what amount and when due?

"To which the applicant answered: 'None.'

"Q. Have you any fear that your property is in danger from incendiary, or have you enemies that have made threats?

"A. No."

All of which answers were admittedly

false.

The application concludes as follows:

"The foregoing is my own agreement and statement, and is a correct description of the property on which indemnity is asked, and I hereby agree that insurance shall be predicated on such statement, agreement and description, if this application is approved, and that theforegoing shall be deemed and taken as an agreement on my part, running during the entire life of said policy. This company shall not be bound by any act done or statement made by or to any agent, or other person, which is not contained in this, my application. This application must be filled and signed with ink, not pencil.

"N. B.—This application in all cases to be signed by the applicant or some person duly authorized by him or her. In no case by the agent. ——, Applicant."

The signatures of the assured were duly appended. The policy contained this provision, "Special reference is hereby made to assured's application, which is made an agreement and part hereof, " and it also contained the provisions that, if the property was mortgaged the entire policy should be void, and that, unless otherwise provided by the agreement indorsed on the policy or added to it, it should be void if the insured had any other contract of insurance, whether valid or not, on property covered in whole or in part by the policy.

The defendant relied upon the general issue, and set up as its grounds of defense that the insurance in question was procured by fraud on the part of the plaintiffs; that the application for insurance contained sundry false and misleading representations, such as the assertion that there was no mortgage or lien, whereas, in fact, there was a deed of trust upon the property for $3,800; that the plaintiff stated that there was no other insurance upon the property in question, whereas there were two additional policies, one with the Farmers' Mutual for $2,500, and another with the Home Insurance Company of New York for $3,000; that the plaintiff had stated that the risk had not been rejected, whereas the risk had within a few months previous been refused.

The insured admitted on the trial that the insured property was mortgaged, that there was other insurance not agreed to by the company and not indorsed on the policy, and that the answers contained in the questionnaire in respect to these matters were not true, but they sought to avoid the effect of the answers given by testifying that the application was signed in blank, and that the answers were subsequently filled in by the agent of the company R. M. Williams, and that he was responsible for the answers as given. There was a direct conflict of evidence on this point, but, under the instructions given by the court, one of which submitted this question of alleged fraud to the jury, a verdict of $3,225 in favor of the plaintiffs (insured) was returned, and judgment was entered on this verdict.

There were sundry objections and exceptions to instructions given for the insured and exceptions to the action of the court In refusing instructions tendered by the company. The usual motion was made to set aside the verdict of the jury and enter judgment for the defendant and exception taken to the action of the court in refusing the motion.

There are three assignments of error which we do not consider it necessary to discuss in order, because exceptions to instructions and the motion to set aside the verdict raise the question as to whether, as a matter of law, under the facts of this case, assuming that the agent of the company did fill in the answers to the questions in the application after the applicants for insurance had signed it, and was responsible for their falsity, the policy was valid and binding upon the company.

The trial court took the position that under such circumstances insured were entitled to recover and so instructed the jury, and the jury found for the plaintiffs.

We think, under the circumstances, insured was not entitled to recover. An insurance company has a right to limit the authority of its agent, and that, when an insured has notice of the limitation of authority of such an agent, then the knowledge of its agent that material warranties have been breached or are untrue is not to be imputed to the company, and the company will not be deemed to have waived the condition or be estopped to declare the policy void; or, to state it differently, we think it may fairly be said that the weight of the most recent adjudications is to the effect that, not only may an insurer limit the authority of an agent, but that, when such limitations are brought to the actual knowledge of the insured, then he is bound thereby, and though the agent exercises functions which might have otherwise entitled him to be regarded as a general agent, he cannot, contrary to the terms of the contract, waive conditions or forfeitures, unless it is shown that such waiver was known to the insurer.

The leading case holding this view is that of New York Life Insurance Co. v. Fletcher, 117 U. S. page 519, 6 S. Ct. 837, 29 L. Ed. 934. This case presented to the United States Supreme Court the Identical questions presented to this court in the instant case. It was conceded by counsel for insured that this case is not distinguishable from the Fletcher Case, but it was contended that the trend of decision in Virginia is against the rule laid down in that case, and North River Insurance Co. v. Lewis, 137 Va. 322, 119 S. E. 43, and Va. Fire & Marine Ins. Co. v. Richmond Mica Co., 102 Va. 439, 46 S. E. 463, 102 Am. St. Rep. 846, are cited as holding a contrary view. We quite agree with counsel that the Fletcher Case is not distinguishable from the case we are considering, but we do not agree that any Virginia decision has held a contrary view, as will be shown later. In the Fletcher Case, the application wasfor life insurance, was signed by the assured, and contained false answers as to the state of the applicant's health. The company defended on this ground. This defense was met by the plaintiff with the assertion that, while his intestate signed the application for insurance, he did not read it, that he gave the company's agent the correct answers to the questions set out therein, but the agent inserted false answers without his knowledge. The application for insurance set out the limitation upon the agent's authority, just as the application in the instant case does, it was made a part of the policy, as here, and the policy contained a clause which made it void if the condition of the applicant's health was not as stated in the application. Under these circumstances the contention was that the plaintiff was not estopped from recovering.

Mr. Justice Field, speaking for the court, said:

"It is conceded that the statements and representations contained in the answers, as written, of the assured, to the questions propounded to him in his application, respecting his past and present health, were material to the risk to be assumed by the company, and that the insurance was made upon the faith of them, and upon his agreement accompanying them that, if they were false in any respect, the policy to be issued upon them should be void. It is sought to meet and overcome the force of this conceded fact by proof that he never made the statements and representations to which his name is signed; that he truthfully answered those questions; that false answers written by an agent of the company were inserted in place of those actually given, and were forwarded with the application to the home office; and it is contended that,...