Smith v. Mutual Cash Guaranty Fire Ins. Co.

• Decision Date: 29 August 1907
• Citation: 21 S.D. 433,113 N.W. 94
• Parties: E. D. SMITH, Plaintiff and respondent, v. MUTUAL CASH GUARANTY FIRE INSURANCE COMPANY, Defendant and appellant.
• Court: South Dakota Supreme Court

21 S.D. 433

113 N.W. 94

E. D. SMITH, Plaintiff and respondent, v. MUTUAL CASH GUARANTY FIRE INSURANCE COMPANY,

Defendant and appellant.

South Dakota Supreme Court

Appeal from Circuit Court, Faulk County, SD

Hon. Loring E. Gaffey, Judge

Affirmed

Boyce & Warren

Attorneys for appellant.

J. H. Bottum

Attorneys for respondent.

Opinion filed August 29, 1907

FULLER, P. J.

The only defense pleaded to this action on an insurance policy, covering a stock of general merchandise, store building, and fixtures, is that the fire by which the building was destroyed originated through the fraud, connivance, and procurement of respondent after he had surreptitiously removed substantially all the goods and merchandise therefrom, and that such building was worth not to exceed $850, instead of $2,500, as alleged in the complaint. It is undisputed that the stock of goods was insured by appellant on the 13th day of May, 1904, for $1,500, the building for $850, and the fixtures for $150, and that the fire, resulting in a total loss, .occurred the night of November 1st of that year, while respondent was in Redfield, 60 miles away. Two or three days before this policy for $2,500 was issued, John C. Fox, now a special agent: of another fire insurance company, secured the application by calling upon respondent at his store in the village of Seneca, where he was then, and for more than seven years had been engaged in the retail mercantile business, carrying a general stock that would probably invoice something in excess of $4,500, and upon which $1,500 concurrent insurance was permitted. As respondent’s application for the insurance solicited and obtained by Mr. Fox was transmitted to and accepted and retained by appellant, together with the premium of $40 for the policy, which was promptly issued thereon, the presumption is that he was duly authorized to transact the business. Though not controverted by the answer, it was shown by the unchallenged facts and circumstances that the policy was thus issued by appellant upon an application authoritatively taken, and in charging the jury it was the duty of the court to recognize the existence of the agency and entirely proper to determine from the undisputed evidence the powers and limitations of the agent. South Bend Toy Mfg. Co. v. Dakota Fire & Marine Ins. Co., 52 NW 866.

The theory of the defense was that the fire was set by or originated through the instrumentality of respondent, and, while no fraud in the inception of the policy was alleged, appellant was allowed to show, as bearing upon the question of motive, that the building, valued in the application for insurance at $2,500, was worth, in the opinion of certain witnesses, but $850. Consequently it was not erroneous to allow respondent to testify in rebuttal as follows:

“Well, the gentlemen came in and asked me if I wanted to take out any insurance upon the building. First I asked him whom he represented. He told me. Then he asked me if I had time to go on and attend to the business at that time, and I told him I hadn’t, so then he asked me if he could use my place to write. He said he would do some writing; that after I got through and had time we could arrange things; and during the time he was writing he wrote up this application. Then he came to me and wanted to know the amount that I wanted to place in the policy, and I told him. It was upon the goods that we were talking about at the time. I told him that I would take $1,500 upon the stock of goods. He had this $2,500 insurance already written in there at that time. He asked me if I couldn’t take $1,000 upon the building, and I told him. ‘No sir.’ I thought it is too near the actual value of the building. ‘Well,’ he says, ‘we can fix that all right by taking about $850 on the buildings, and the balance on fixtures. Of course, your fixtures,’ he says, ‘will make up the balance of the $1,000, your fixtures here.’ I told him I had thought of the fixtures, and as he wrote up the amount he placed it in that shape, so he left it $2,500 in the application. I had to stand at that. There was nothing said between us about the amount more than I told him. It was more than the value of the buildings, but he said it didn’t make any difference. It wouldn’t cut any figure in the insurance as long as the building wasn’t insured past its value.

Q. On that representation you were induced to let it stand?

A. I was; yes sir.

Q. He took the application.

A. Yes, sir; and I afterwards received the policy.”

These insurance companies, stimulated to intense exertion by competition and profitable results, provide their agents with persuasive literature, and send them out to solicit business clothed with power to do in their behalf all that is necessary with reference to the duty of obtaining and forwarding applications to the home office or to some agent or officer authorized to issue and deliver policies. Persons dealing with such agents, appointed by the company presumptively on account of their integrity, have the right to rely upon their suggestions as to what is material or what constitutes a satisfactory answer to any question contained in the application, and when, as in this case, such representative is upon the ground and in possession of abundant means of knowing all facts material to the risk, his statements, contained in the application which he assumptively fills out, although they may be erroneous, are binding upon the company after the premium has been paid, the policy issued, and the property destroyed.

It is well settled that, where the agent fills up a blank application, and volunteers advice as to the character of the answer to be given to any material question contained therein, his act in so doing is the act of the company, and parol testimony is admissible to show the facts. Continental Life Ins. Co. v. Chamberlain, 10 SCt 87, 33 LEd 341; Kausal v. Minnesota Farmers Fire Ins. Ass’n, 31 Minn. 17, 47 AmRep 776; Key v. Des Moines Ins. Co., 77 Iowa, 174, 41 N.W. 614; Insurance Co. v. Wilkinson, 13 Wall. (US) 222; Smith v. Farmers’ Ins. Co., 89 Pa. 287; German Ins. Co. v. Frederick, 57 Neb. 538, 77 N.W. 1106; Continental Ins. Co. v. Pearce, 39 Kan. 396, 18 Pac. 291; Andes Ins. Co. v. Fish, 71 Ill. 620; Grattan v. Metropolitan Ins. Co., 80 NY 281; Williamson v. New Orleans Ins. Ass'n, 84 Ala. 106, 4 South. 36; Menk v. Home Ins. Co., 76 Cal. 50, 14 Pac. 837, 18 Pac. 117; Cagle v. Chillicothe Town Ins. Co., 78 Mo. App. 431; Deitz V. Ins. Co., 31 W. Va. 851, 8 S.E. 616; Dupree v. Virginia Home Ins. Co., 92 NC 417; Va. Fire & Marine Ins. Co. v. Goode & Co., 95 Va. 762, 30 S.E. 370; May v. Buckeye Ins. Co., 25 Wis. 291; Sussex County Mutual Ins. Co. v. Woodruff, 26 N. J. Law, 541; Rockford Ins. Co. v. Nelson, 65 Ill. 415; 7 Ency. of Evidence, 543; May on Insurance, §§ 120, 132, 142, 143. Where a soliciting agent employed by the general agent for a particular locality without the knowledge of the resident manager of a foreign insurance company, waived a condition in the policy against incumbrances, it was held in this jurisdiction that the company was bound. Lyon v. Ins. Co. of Dakota, 6 Dak. 67, 50 N.W. 483; Harding v. Norwich Union Fire Ins. Society, 71 NW 755; Vesey v. Commercial Union Assurance Co., 101 NW 1074.

The foregoing authorities fully justify the following instruction:

“Another reason the defendant contends the plaintiff cannot recover is the defendant says there was a mis-statement, that in making out the application for insurance the property was overvalued, and that thereby the policy became void when it was issued. If it should transpire that the property was overvalued on account of statements made by the plaintiff, and if the statements made by the plaintiff induced this company to issue a policy for more than the property was worth, if the property was overvalued to a large extent so as to induce the company to issue a policy upon it for any sum, then I say to you that would void the policy. You have heard the testimony in this case in regard to the manner in which this application was procured. You are the exclusive judges of the facts in this case, and, if you find from the testimony that this application was prepared by the person who solicited this insurance on behalf of the defendant company, and that the valuation was placed in the application by him, and if he was present at the property and saw and inspected it, then I say to you that the fact of the property being overvalued would not vitiate the policy or void the loss, or void the fact, if it exist, that the defendant would be liable for the loss in case of damage by fire.”

Situated on the lot where the store building and appurtenances stood before the fire, there was another frame structure, not covered by the policy, called the “bank building,” a portion of which respondent had always used as a wareroom for surplus goods which were taken therefrom and placed in the stock from time to time

[21 SD 411]

as the capacity of the store would permit, and thus the shelves and all available space under the counters were kept constantly filled with merchandise. Though the question was not at issue, as the answer in no manner referred to the subject, counsel for appellant, on cross-examination of respondent, inquired whether he was not making a $600 mortgage to C. Gotzain & Co., about two weeks before the fire, and the answer was that the mortgage referred to did not cover the insured building, but the bank building and the lot, and on re-direct examination he was properly allowed to make the following explanation: “The facts were that, when I gave the mortgage upon the banking building, the understanding was, between him and me, that it was upon the banking building and the lot. I didn’t suppose that it covered the store building.” The records in the office of the register of deeds show that the mortgage was given on the lot upon which both buildings were situated, without exempting...