Sands v. Bankers' Fire Ins. Co.

• Decision Date: 10 June 1937
• Citation: 168 Va. 645
• Parties: ALEXANDER H. SANDS, JR., ADMINISTRATOR, ETC. v. BANKERS' FIRE INSURANCE COMPANY.
• Court: Virginia Supreme Court

Page 645

168 Va. 645

ALEXANDER H. SANDS, JR., ADMINISTRATOR, ETC. v. BANKERS' FIRE INSURANCE COMPANY.

Supreme Court of Virginia, Wythebille.

June 10, 1937.

UPON PETITION FOR REHEARING, Staunton, September 23, 1937.

Present, All the Justices.

1. INSURANCE — Presumptions and Burden of Proof — Misstatements Inducing Issuance of Policy. — Where an insurance company defends liability on the ground that the policy was issued on the basis of material misstatements or misinformation, the burden is on the company to prove such misstatements or misinformation. The defense is an affirmative one.

2. FIRE INSURANCE — Misrepresentation or Concealment — Existence of Chattel Mortgages — Effect of Indorsement Making Loss Payable to Mortgagees — Case at Bar. — In the instant case, an action on a fire insurance policy on a cotton gin, defendant company denied liability on the ground that assured had made false and material statements, on the basis of which the policy was issued, and had concealed from defendant matters which should have been disclosed. Defendant company contended that since assured was not the owner in fee simple of the land on which the gin was located, two mortgages thereon conveyed only the building and gin as personal property, and hence amounted to chattel mortgages and should have been stated as such in applying for the policy. The policy carried indorsements making the loss thereunder payable to two named persons, as first and second mortgagees, as their respective interests might appear.

Held: That whatever might be the nature of the mortgages, the policy itself carried actual knowledge of their existence in the mortgage clause attached to the policy, in which it was stated that the loss was payable to the mortgagees, as their interests might appear, and defendant company could not have been misled by something stated on the face of the policy.

3. FIRE INSURANCE — Misrepresentation or Concealment — Knowledge of Agent Imputed to Company — Estoppel of Company to Rely on Misstatements or Lack of Information — Case at Bar. — In the instant case, an action on a fire insurance policy on a cotton gin, defendant company denied liability on the ground that assured had made false and material statements, on the basis of which the policy was issued, and had concealed from defendant matters which should have been disclosed, in that there had been a breach of the warranty in the policy that assured was the sole and undisputed owner in fee simple of the land on which the gin stood, that assured had concealed from defendant company the fact that there was docketed against him a judgment which was a lien on the property, and that at the time the policy was secured, and contrary to its terms, the property described therein was encumbered by two chattel mortgages. Assured procured the policy through an agent who testified that assured disclosed to him that title to the land stood in the name of the father of assured, who had made an oral gift thereof to assured and had written his will devising the property to assured. The agent also testified that he knew of the judgment against assured. The policy itself carried indorsements making the loss thereunder payable to two named persons, as first and second mortgagees, as their respective interests might appear.

Held: That the agent had full knowledge of every matter which the defendant company claimed was misstated to, or concealed from it, and if he was the agent of the company, such knowledge as he had was imputed to it and, in the absence of fraud on the part of assured, defendant company was estopped to rely upon such misstatements or lack of information.

4. INSURANCE — Agents — Validity of Statute Making Certain Persons Company's Agents. — Statutes making any person who solicits insurance, or takes applications therefor, or receives or delivers policies, or inspects risks, or receives or collects premiums, or does any other act in the making or consummation of any contract of insurance, an agent of the company, are constitutional.

5. INSURANCE — Agents — Effect of Statute Making Certain Persons Company's Agents — Agent's Knowledge Imputed to Company — Case at Bar. — In the instant case, an action on a fire insurance policy on a cotton gin located in Mississippi, defendant company denied liability on the ground that assured had made material and false statements, on the basis of which the policy was issued, and had concealed other material matters which should have been disclosed. Assured procured the policy through an agent who dealt with brokers in New York, defendant company having no agent in Mississippi authorized to sign policies for it. The agent through whom the policy was procured had full knowledge of every matter which the company claimed was misstated to, or concealed from it, but the company contended that in procuring the policy the agent was not its agent. A Mississippi statute provides that any person who solicits insurance, or receives or delivers policies, or receives or collects premiums, or does any other act in the making or consummation of any contract of insurance, shall be held to be the agent of the company for which the act is done.

Held: That under this statute the agent was the agent of defendant company, and what knowledge he had was imputed to it.

6. AGENCY — Powers of Agent — To Perpetrate Fraud on Principal. — No agent has power to perpetrate a fraud upon his principal.

7. INSURANCE — Misrepresentation — Applicant's Knowledge of Material Misrepresentations. — If an applicant for insurance knows that there are misrepresentations in the answer as written and that they are material, there is fraud in the inducement when a policy is issued upon their faith.

8. INSURANCE — Misrepresentation — Failure of Agent to Correctly Impart Knowledge. — Where the assured makes a full and fair disclosure of all material facts to the agent, and the latter, either through ignorance, negligence, or fraud, fails to correctly impart this knowledge to the insurance company, and the assured is in no way at fault for the act of the agent in failing to correctly transmit the information, then the insurance company is estopped from claiming a forfeiture of the policy.

9. FRAUD AND DECEIT — Pleading — Fraud Must Be Expressly and Clearly Charged. — Fraud when relied upon must be expressly and clearly charged; and it cannot be the subject of trial unless it has been brought in issue by the pleadings.

10. INSURANCE — Agents — Agent's Knowledge Imputed to Company — No Evidence of Collusion between Agent and Assured — Case at Bar. — In the instant case, an action on a fire insurance policy on a cotton gin located in Mississippi, defendant company denied liability on the ground that assured had made material and false statements, on the basis of which the policy was issued, and had concealed other material matters which should have been disclosed. The agent through whom the policy was procured had full knowledge of every matter which the company claimed was misstated to, or concealed from it, but the company contended that even if the agent was its agent, yet his knowledge was not imputed to it because the agent and assured fraudulently colluded and conspired to conceal from the company the true status of the title to the land on which the property insured was located, the existence of a judgment against assured, and other material matters.

Held: That there was no proof of any such fraudulent collusion.

11. FRAUD AND DECEIT — Evidence — Must Be Clear and Convincing. — One who alleges fraud must prove the allegation by clear and convincing proof.

12. FIRE INSURANCE — Encumbrances — Fraudulent Conveyance — Necessity for Listing. — A fraudulent conveyance, being good between the parties, is an encumbrance which should be listed in applying for fire insurance.

13. FIRE INSURANCE — Encumbrances — Fraudulent Conveyance — Does Not Make Procurement of Policy Fraudulent Also — Case at Bar. — In the instant case, an action on a fire insurance policy on a cotton gin, the policy carried an indorsement making the loss payable to two named persons, as first and second mortgagees, as their respective interests might appear. Defendant company laid great stress on the conceded fact that there was no consideration to support the second mortgage and that it was a fraudulent conveyance to put assured's equity in the property beyond the reach of his wife, who had a pending claim for alimony against him, and contended that listing this mortgage as a lien on the property invalidated the policy.

Held: That it did not follow that because the transfer by assured of his property was fraudulent as to his wife, the procurement of the policy was likewise fraudulent as to defendant company.

14. FIRE INSURANCE — Encumbrances — Fraudulent Conveyance — Agent's Knowledge Imputed to Company — Case at Bar. — In the instant case, an action on a fire insurance policy on a cotton gin, the policy carried an indorsement making the loss payable to two named persons, as first and second mortgagees, as their respective interests might appear. Defendant company laid great stress on the conceded fact that there was no consideration to support the second mortgage and that it was a fraudulent conveyance to put assured's equity in the property beyond the reach of his wife, who had a pending claim for alimony against him, and contended that listing this mortgage as a lien on the property invalidated the policy.

Held: That the evidence showed that assured revealed the true situation to the agent through whom the policy was procured, and it was the fault of the latter if defendant company was misled.

15. FIRE INSURANCE — Proof of Loss — Meaning of "Interest" in Property — Judgment Creditor Not Included — Case at Bar. — In the instant case, an action on a fire insurance policy on a cotton gin, defendant company denied liability on the ground, among others, that subsequent to a fire destroying the...