U.S. Fidelity & Guaranty Co. v. Haywood

• Decision Date: 30 November 1970
• Court: Virginia Supreme Court
• Parties: UNITED STATES FIDELITY AND GUARANTY COMPANY v. Fred W. HAYWOOD et al., etc.

Page 530

177 S.E.2d 530

211 Va. 394

UNITED STATES FIDELITY AND GUARANTY COMPANY v. Fred W. HAYWOOD et al., etc.

Supreme Court of Appeals of Virginia.

Nov. 30, 1970.

James F. Johnson, Roanoke (William B. Poff, Woods, Rogers, Muse, Walker & Thornton, Roanoke, on brief), for plaintiff in error.

William T. Wilson, Hale Collins, Covington (Collins & Wilson, Covington, on brief), for defendant in error.

Before SNEAD, C.J., and I'ANSON, CARRICO, GORDON, HARRISON, COCHRAN, and HARMAN, JJ.

CARRICO, Justice.

In a motion for declaratory judgment filed against Fred W. Haywood and Stephen N. Haywood, United States Fidelity and Guaranty Company sought to have declared void a fire insurance binder issued in the name of Stephen N. Haywood, trading as Covington Vending Service. The basis of the claim for relief was that Fred W. Haywood, in order to obtain insurance on vending machines owned by him, had wilfully misrepresented to USF&G's agent that he was Stephen N. Haywood. It was alleged that the misrepresentation was not discovered by USF&G until after the vending machines were destroyed by fire, and it was then learned that Stephen was Fred's minor son and that Fred had more than twenty unsatified judgments against him. It was further alleged that the insurance binder would not have been issued if the agent had known the true facts.

Fred and Stephen filed an answer denying the allegations of misrepresentation. Thereafter, there was submitted to a jury the question whether a misrepresentation was made by Fred. The jury found that Fred 'did wilfully misrepresent his identity' for the purpose of obtaining insurance. However, the trial court held that the misrepresentation 'was not material to the risks assumed' by USF&G and ruled that the binder issued in the name of Stephen constituted valid and subsisting insurance. Fred was dismissed as a party defendant. We granted USF&G a writ of error.

In the summer of 1967, Fred W. Haywood, then 42 years old and a resident of the Richmond area, decided to move to Covington and to establish there a vending machine business. While looking for a home in Covington, he met Robert B. McCaleb, a local real estate broker. He introduced himself to McCaleb as Stephen N. Haywood. McCaleb showed Haywood a house that was for sale and eventually secured a contract from him. Throughout the transaction, Haywood represented himself to McCaleb as Stephen N. Haywood. Even the contract on the house was signed is that name.

During discussions concerning the house, Haywood advised McCaleb of his plans to establish a vending machine business in Covington. McCaleb, who was USF& G's agent, told Haywood that he was in the insurance business and would like to be considered when Haywood 'got his operation going.'

Haywood rented a warehouse in Covington and moved in a quantity of vending machines. He then requested McCaleb to insure the machines. On September 14, 1967, McCaleb issued the binder in question providing fire insurance protection in the sum of $20,000 for thirty days on vending machines in storage in the warehouse. The binder was issued in the name of 'Stephen N. Haywood T/A Covington Vending Service' according to instructions given McCaleb by Haywood.

Upon issuance of the binder, McCaleb, following his usual practice, requested the credit bureau of Convington to furnish him a report on Stephen Haywood's background in Richmond. After some time, the bureau advised McCaleb that it 'couldn't find anything on this man.' McCaleb insisted that 'there's bound to be something' and asked the bureau to make a second check.

On September 22, 1967, eight days after issuance of the binder, an accidental fire occurred at the warehouse where the vending machines were stored. The machines were destroyed.

Following the fire, McCaleb received the credit bureau's report on Stephen. The report showed the subject to be single. This was contrary to McCaleb's understanding that the person with whom he had been dealing was 'a married man with three children.' The discrepancy in the report led McCaleb to investigate further. His investigation revealed that the person to whom he had issued the binder was not Stephen N. Haywood but was Fred W. Haywood. McCaleb also found that Stephen was Fred's minor son, 19 years of age, and that Fred had more than twenty unsatisfied judgments against him in the Richmond area.

When claim was made against USF&G for loss of the vending machines, it refused to pay, relying upon the misrepresentation perpetrated by Fred. The present litigation ensued.

To be entitled to the relief it sought--the voidance of the binder--USF&G had the burden of clearly proving that Fred Haywood falsely represented his identity and that the representation was material to the risk when assumed. Code § 38.1--336; Mutual of Omaha v. Echols' Adm'rs, 207 Va. 949, 952, 154 S.E.2d 169, 171 (1967). In a case like this, whether a representation is made and the terms on which it is made are questions of fact for the jury; but when a misrepresentation is proved, its materiality is a question of law for the court. Chitwood v. Prudential Ins. Co....