Standard Auto Ins. Ass'n v. Henson

• Decision Date: 04 December 1923
• Citation: 201 Ky. 230,256 S.W. 414
• Parties: STANDARD AUTO INS. ASS'N v. HENSON.
• Court: Kentucky Court of Appeals

256 S.W. 414

201 Ky. 230

STANDARD AUTO INS. ASS'N v. HENSON.

Court of Appeals of Kentucky.

December 4, 1923

Appeal from Circuit Court, McCracken County.

Action by Jack Henson against the Standard Auto Insurance Association. Judgment for plaintiff, and defendant appeals. Reversed and remanded.

Eaton &amp Boyd, of Paducah, for appellant.

Mocquot Berry & Reed, of Paducah, for appellee.

McCANDLESS J.

Appellant is a reciprocal insurance association, and the Bainan-Phillipi Company is its attorney in fact. Its agent at Paducah at the time of the transaction herein was Jack Shepherd.

In February, 1921, through the above agent, appellant issued to appellee, Henson, a 12-month policy for the sum of $700 on a second hand Studebaker automobile. This machine was destroyed by fire in the month of May of that year, and, the company declining to pay the policy, Henson brought suit thereon.

The defense was that Henson in the written application for insurance falsely and fraudulently stated that the machine was a 1916 model, the motor number 80256 and that its actual secondhand cost in October, 1920, was $700; that in fact and truth the model year was 1915, motor number 30256, and the cost to plaintiff the sum of $450, and that, if it had known those facts, or any of them, it would not have issued the policy; that by its terms such representations were warranties, and voided the policy.

The reply pleaded an estoppel to the forfeiture. The defendant assumed the burden, and at the conclusion of all the evidence asked for a peremptory instruction in its favor, which was refused. A verdict was rendered in favor of plaintiff for $660, and defendant appeals, insisting that the verdict was excessive, that it is not sustained by sufficient evidence that the court erred in the admission and exclusion of evidence, that the instructions were erroneous, and that it erred in not peremptorily instructing the jury to find for it.

The evidence of appellant's officers is to the effect that the policy was issued on the faith of the representations made in the application; that a stolen auto is traced by the motor number, and it would not issue a policy at all if it had reason to believe that the motor number was incorrectly stated; that the model year shows the age and largely regulates the price of secondhand machines, and is to be considered in determining their condition; that in no event does it insure a secondhand machine for more than it cost; and that it would not have issued the policy if these facts or any of them had been truthfully stated in the application.

The plaintiff testified that he purchased the machine in October, 1920, paying therefor $450, that he stored it in the C. & G. Garage, which was operated by Jack Shepherd, who was agent for defendant; that Shepherd on a number of occasions solicited him to take a policy of insurance on the car, and that he finally applied for same; that Shepherd filled out the written application from his own knowledge, and that he signed it; that he (plaintiff) did not know the motor number, and Shepherd took a searchlight and went into the garage where the machine was stored and examined it, and in that way secured the information and wrote the number in the application; he did not know the model year, but Shepherd was familiar with the make of the machine, and could tell the model year from the motor number; that he bought it for a 1916 model, and so told Shepherd, but relied on him to state the year correctly, and that Shepherd wrote the same in, and did not ask him, and he did not tell him, the cost of the car, but that Shepherd told him that he could give him $700 insurance, and that he told him that "was plenty," and that Shepherd then wrote it up, and he signed it and paid the premium to Shepherd, who sent the application off, and the policy came back. Shepherd was not introduced as a witness, and the evidence for the plaintiff was undenied, and there is nothing to indicate that he practiced any deception.

It is insisted that all prior agreements and understandings were merged in the written application and policy, and the two writings formed the contract between the parties; that the terms of neither can be varied by parol evidence, and therefore this evidence was inadmissible. This is a sound rule, but in a majority of the courts it is held that, where a condition provides a forfeiture for its violation, a waiver of the forfeiture or an estoppel to rely on such may be proven by parol evidence.

The conditions are that if certain material representations are untrue the policy will be void, or if untrue and fraudulent the same result will follow, regardless of their materiality. The insurer is not presumed to have sufficient information in reference to the article upon which the insurance is sought to enable it to determine if it is a suitable risk; therefore it is eminently proper for it to secure such information from the insured and to rely on the representations he makes, and if untrue and material or fraudulent he should be held accountable therefor, even to the extent of avoiding the policy.

But if the insurer is fully cognizant of all the facts, we cannot say as a matter of law that it relies on the statements in the application; in other words, if with full knowledge of all the essential facts it accepts the premium and treats the insured as a policy holder before a loss, it will be presumed to have waived the forfeiture provisions, and therefore will not be heard to say that the policy is void on that ground, if the insured acted in good faith, even though in some material respects the statements in the application were untrue.

In determining this...