Ward v. Queen City Fire Ins. Co. of Sioux Falls, S.D.

• Decision Date: 17 February 1914
• Parties: WARD v. QUEEN CITY FIRE INS. CO. OF SIOUX FALLS, S. D.
• Court: Oregon Supreme Court

138 P. 1067

69 Or. 347

WARD v. QUEEN CITY FIRE INS. CO. OF SIOUX FALLS, S. D.

Supreme Court of Oregon

February 17, 1914

Department 2.

Appeal from Circuit Court, Multnomah County; Henry E. McGinn, Judge.

Action by E. M. Ward against the Queen City Fire Insurance Company of Sioux Falls, South Dakota. From a judgment for plaintiff defendant appeals. Affirmed.

S. C Spencer, of Portland (Wilbur, Spencer & Dibble of Portland, and U.S. G. Cherry, of Sioux Falls, S. D., on the brief), for appellant. Dan J. Malarkey, of Portland (Malarkey, Seabrook & Stott, of Portland, on the brief), for respondent.

McNARY J.

Plaintiff recovered a verdict for $3,578 in the circuit court for Multnomah county upon a policy of insurance on a stock of merchandise and office furniture located in a building known as "The Woolen Mills," in North Bend, Coos county. The complaint embraces allegations usual in an action of that character. The defenses relied upon are: (1) That the fire was incendiary in its origin; (2) false swearing with respect to making of the proof of loss; (3) that defendant's liability, if at all, is modified by reason of concurrent insurance. The reply contains two separate defenses: (1) That defendant should be estopped from asserting that plaintiff made a false statement with respect to the proof of loss, for the reason that the same was made in the manner prescribed by and under the directions of an accredited agent of defendant, after a full disclosure by plaintiff of all the circumstances surrounding the destruction of the property; (2) that defendant should be estopped from prosecuting the second defense, because defendant, with full knowledge of every fact surrounding the loss of property by fire, notified the plaintiff of its denial of liability upon the ground of a transgression by plaintiff of a provision in the policy which inhibited the storage of gasoline, and that plaintiff, relying upon such statement, employed attorneys and instituted this action.

The destruction of the property by fire occurred late in the night, and in the absence of one Mr. Carnick and son, who usually slept in the building. In the proof of loss plaintiff stated the value of the stock of merchandise destroyed by the fire was $15,475.89. The contract of insurance contains a provision that any false swearing in the proof of loss will render the policy void. The fire occurred on July 20, 1908. On August 8, 1908, the proof of loss was made, and on October 27th following Grant B. Dimick, who was the acknowledged attorney for defendant, forwarded to plaintiff a letter stating that defendant declined to pay the loss, because of an increased hazard produced by the act of plaintiff in storing a quantity of gasoline in the building, contrary to one of the conditions of the policy.

Enforced by much authority, counsel for defendant insist that the court committed error in giving this admonition to the jury: "Gentlemen of the Jury: It is admitted in this case that on the 27th day of October, 1908, G. B. Dimick, as the attorney for the Queen City Insurance Company, wrote a letter to the plaintiff, E. M. Ward, at North Bend, in Coos county, in this state, in the name of his company, in which he declined to pay this policy of insurance No. 64,676, which was issued by this defendant company, on the 24th day of August, 1907, and which was to run for a year upon the ground that the risk of the company had been increased by the renting of a portion of this property to the Bevier Manufacturing Company, and the declination of the company to pay that amount of loss, under that policy, was placed on the ground, and upon that ground alone, that the increase in that risk avoided the policy, under the terms and conditions of it. If, in this case you find that at the time Mr. Dimick wrote this letter, on the 27th of October, 1908, this company knew all the facts and circumstances which it knew when it filed its second substituted answer in this case, then, gentlemen of the jury, your verdict should be for the plaintiff, subject to such other instructions as I shall give you, because, when they know all of the facts, and they undertake to assign the reason why they do not fulfill their contract, knowing all the facts, they must state all the facts, and, if they failed to state all the facts, they can only be heard in that event in regard to the facts which they have alleged. This, of course, is provided the plaintiff in this case, relying on that letter, has hired an attorney and has paid the costs to bring an action in a court of justice, relying upon the statements that are made. Persons in good faith must usually give all the reasons for refusing to pay, or ever thereafter hold their peace as to those things they do not know. Therefore, as to the defense of increased hazard, if you find these facts were all known at the time this letter of October 27th was written, your verdict must be for the plaintiff in this case. If, however, you find that, after Mr. Dimick wrote this letter, the facts that are alleged in the second substituted answer, those facts came to the defendant company, and they were not in the possession of these facts at the time that Mr. Dimick wrote that letter, then they are entitled to make this defense in this case. As I told you before, if they knew these matters when they wrote that letter of the 27th of October, 1908, by Mr. Grant Dimick, but did not base their refusal on that ground, you will not consider it. But if you find they came in possession of that knowledge after they wrote that letter, and did not have that knowledge at that time, you are to consider this defense. And these defenses, gentlemen, I have submitted to you as I have upon the theory that the defendant company acquired this knowledge concerning these facts after the time that this letter was written by Mr. Grant Dimick to the plaintiff. Of course, if they were in possession of that knowledge at the time this letter was written by Mr. Dimick to the plaintiff, these defenses will not be considered by you. They are only to be considered by you if you find that the company came in possession of these facts after Mr. Grant Dimick wrote this letter to the plaintiff on the 27th day of October, 1908." We quote this instruction in its fullness.

We quite agree with counsel that policies of insurance become void in case of fraud or false swearing by the insured touching any matter relating to the insurance, or the subject thereof, whether before or after loss. Though it must be added that mere falsity is not sufficient to annul a policy, the false swearing which vitiates the contract of insurance must be done willfully and knowingly; the effect being to defraud the company. This doctrine was effectively stated by Mr. Justice EAKIN in the late case of Richard Willis and E. R. Willis, Doing Business as Willis Furniture Co. v. Horticultural Fire Relief of Oregon, 137 P. 761, in this language: "The terms 'fraud' and 'false swearing,' being used together, must have the same application, and the false swearing must have been knowingly and willfully false; its effect being to deceive or mislead."

Whether in this case there was false swearing upon the part of plaintiff was conclusively sealed by the verdict of the jury, though, commingled with that consideration, was the other, that the jurors were told to disregard any matters pertaining to false swearing in the proof of loss, if they believed defendant was in full possession of all the facts and circumstances relating to the fire at the time plaintiff received the Dimick letter.

On this point, Mr. Chief Justice Moore, in Wyatt v Henderson, 31 Or. 48, 48...