Snell v. Insurance Company

• Decision Date: 01 October 1878
• Citation: 25 L.Ed. 52,98 U.S. 85
• Parties: SNELL v. INSURANCE COMPANY
• Court: U.S. Supreme Court

98 U.S. 85

25 L.Ed. 52

SNELL v. INSURANCE COMPANY.

October Term, 1878

APPEAL from the Circuit Court of the United States for the Northern District of Illinois.

This was a suit in equity instituted by Thomas Snell, Samuel L. Keith, and Abner Taylor, partners under the firm name of Snell, Taylor, & Co., to reform a certain policy issued by the Atlantic Fire and Marine Insurance Company of Providence, insuring Samuel L. Keith, from Dec. 6, 1865, at noon, to Jan. 7, 1866, at noon, against loss or damage by fire, on two hundred and twenty bales of cotton, described as 'stored in open shed at West Point, Miss.; loss, if any, payable to Messrs. Keith, Snell, & Taylor.'

The material allegations in the bill are as follows: That said firm, on Dec. 6, 1865, were the owners of two hundred and twenty bales of cotton, worth more than $50,000, stored at West Point, Miss., awaiting transportation to some northern market; that Keith applied in behalf of his firm to Holmes & Bro., general insurance agents at Chicago, representing several companies, including the defendant, to procure insurance upon all the cotton, for the benefit of the firm, in the sum of $49,500, during such time as it remained at West Point, which time was uncertain, in view of the difficulties of transportation; that Holmes & Bro., the duly accredited and authorized agents, among others, of the defendant, did agree with Keith, acting for and in behalf of his firm, to make, grant, and secure insurance in the companies by them represented on this cotton in the sum of $49,500, while it was stored at West Point and until shipped to a northern market, and to receive a premium of one per cent on the total amount insured, to wit, $495, which sum Keith agreed to pay Holmes & Bro., provided the time for the insurance did not exceed one month, but to have a decreased rate if the time exceeded one month, the agreed rate to be paid by Keith when the cotton was removed from West Point, when the extent of the insurance could be definitely fixed; that on Dec. 6, 1865, Holmes & Bro., with intent to carry this agreement into effect, caused to be made several policies in different companies, among them the policy sued on, making an aggregate insurance of $49,500, and after the loss occurred notified Keith to pay, and he did pay, the sum of $495, the premium on the whole amount insured, $80 of which was paid to and received by the defendant for and on account of his firm and in pursuance of the agreement with Holmes & Bro.; that the policy sued on remained in the possession of Holmes & Bro. until some time after the loss; that after the loss, and before any application to adjust the same was made, Holmes & Bro., with the intent to carry out the agreement that the cotton should be insured until its shipment from West Point, filled up the policy so that by the terms thereof the insurance extended from Dec. 6, 1865, until Jan. 7, 1866, at noon; that Keith was assured by Holmes & Bro., when the insurance was taken, that it was not necessary that the policy should state in terms that the insurance was for and on account of Snell, Taylor, & Co., and that the firm would be as fully protected, and the loss would be as promptly paid, as if the policy had expressly stated that the insurance was for and on its account; that relying upon those assurances, and ignorant that, by the terms and legal effect of the terms employed, no other interest in the cotton was insured except his, Keith took the policy into his possession in the full belief that it covered the entire interest of the firm; that soon thereafter, upon being advised to the contrary by his attorney, he demanded of the insurance agents that the policy be corrected so as to conform to the real contract and agreement, but Holmes & Bro. refused to correct or alter the same in any way.

The prayer of the bill is that the company be decreed and ordered to correct and reform the policy by inserting therein the stipulation that the insurance was made for the benefit or for the account of Snell, Taylor, & Co., and that the firm have a decree for the sum so intended to be insured on the cotton.

The company filed an answer traversing the allegations of the bill, and setting up sundry matters in defence. The court, upon a final hearing on the pleadings and proofs, dismissed the bill, and the complainants appealed to this court.

Mr. Leonard Swett, for the appellants, contended that the error committed by inserting the name of Keith instead of that of the firm as the party assured, when the contract was reduced to writing, would not defeat their rights; but that the policy would be reformed so as to effectuate the intention of the parties, and be enforced by a court of equity. Ellis v. Towsley, 1 Paige (N. Y.), 278, 279; Franklin Fire Insurance Co. v. Hewitt, 3 B. Mon. (Ky.) 231; Harris v. The Columbian Insurance Co., 18 Ohio, 121; New York Ice Co. v. Northwestern Insurance Co., 23 N. Y. 359; Woodbury Savings Bank v. Charter Oak Insurance Co., 31 Conn. 526; The Malleable Iron Works v. Phoenix Insurance Co., 25 id. 465.

No counsel appeared for the appellee.

Page 87-Continued

A., a member of the firm of A., B., & Co., who were the owners of cotton, communicated the facts touching its ownership, situation, value, and risk, so far as he knew them, to C., a duly accredited agent of an insurance company; and thereupon the company, through C., entered into a verbal agreement with A., acting for and on behalf of the firm, to insure for a certain period the cotton for its whole value against loss by fire, at a premium which was subsequently paid to the company. A. assented that the insurance should be made in his name, upon the representation and agreement of C. that the entire interest of the firm in the cotton would be thereby fully protected. The cotton was burnt within the specified period. The policy was then issued and delivered to A., who, being at once advised by his attorneys that it in terms covered his interest, but not that of the firm, forthwith requested the company to correct it, so that it should conform to the agreement. The company having declined to do so, A., B., & Co. filed against it this bill, praying that the policy be reformed, and that the value of the cotton be awarded to them. Held, 1. That the acceptance of the policy was not such as waived any right of A., B., & Co. under the agreement covering their interest in the cotton, which A. in their behalf had made with the company, and that they are entitled to the relief prayed for. 2. That a mere mistake of law does not, in the absence of other circumstances, constitute any ground for the reformation of a written contract.

MR. JUSTICE HARLAN delivered the opinion of the court.

The elaborate answer of the insurance company comprehends, in the form of express denials and affirmative statements, almost every defence which the ingenuity and skill of able counsel could suggest. But in view of the points to which the evidence seems to have been mainly directed, it is only necessary to consider certain grounds of defence, which will sufficiently appear in this opinion.

We are satisfied that a valid contract of insurance was entered into, on the 6th of December, 1865, between Keith, representing Snell, Taylor, & Co., and Holmes & Bro., representing the defendant and other insurance companies, and we entertain no serious doubt as to its terms or scope. Although there is some conflict in the testimony as to what occurred at the time the contract was concluded, it is shown, to our entire satisfaction, not only that the agreed insurance covered the two hundred and twenty bales of cotton, but that Holmes & Bro., with knowledge or information that the cotton was owned by Snell, Taylor, & Co., and not by Keith individually, intended to insure, and, by direct statements, induced him to believe that they were insuring, in his name, the interest of the firm. He assented to the insurance being taken in his name, because of the distinct representation and agreement that the interest of the firm would be thereby fully protected against loss by fire so long as the cotton remained at West Point. But according to the technical import of the words used in the policy which the company subsequently issued and delivered, only Keith's interest in the cotton is insured. Such is the construction which the company now insists should be put upon the policy, if the court decides that there was a binding contract of insurance. The fundamental inquiry, therefore, is whether Snell, Taylor, & Co. are entitled to have the policy reformed so as to cover their interest.

We have before us a contract from which, by mistake, material stipulations have been omitted, whereby the true intent and meaning of the parties are not fully or accurately expressed. A definite, concluded agreement as to insurance, which, in point of time, preceded the preparation and delivery of the policy, is established by legal and exact evidence, which removes all doubt as to the understanding of the parties. In the attempt to reduce the contract to writing there has been a mutual mistake, caused chiefly by that party who now seeks to limit the insurance to an interest in the property less than that agreed to be insured. The written agreement did not effect that which the parties intended. That a court of equity can afford relief in such a case, is, we think, well settled by the authorities. In Simpson v. Vaughan (2 Atk. 33), Lord Hardwicke said that a mistake was 'a head of equity on which the court always relieves.' In Henkle v. Royal Exchange (1 Ves. Sen. 318), the bill sought to reform a written policy after loss had actually happened, upon the ground that it did not express the intent of the contracting parties. The same eminent judge said: 'No doubt but this court has jurisdiction to relieve in respect of a plain mistake in contracts in writing as well as against frauds in contracts, so that if reduced to writing...