Northrup v. Piza

This action is upon a policy of insurance issued by the defendant and his associates, who were underwriters engaged in the business of insuring property against loss by fire under the name of the South & North American Lloyds, transacted for them by Whipple & Co., of New York, their attorneys. The policy was issued and delivered to the plaintiffs on the 4th of April, 1894, by which it in terms insured the plaintiffs to the amount of $20,000 for the term of three )rears from the 4th day of April, 1894, at noon, to the 4th day of April, 1897, at noon, against loss by fire to the following described property, to wit:

“$2,000 on the brick building situate on the east side of Genesee street and 100 feet northerly from Clinton Place, located on lot 371 Genesee street. $2,000 on the brick building adjoining above-described building, and located on lot 371 Genesee street. $2,000 on the brick building adjoining last-mentioned building, and located on 309 and 371 Genesee street. $2,000 on the brick building adjoining last-mentioned building, and located on lot No. 369 Genesee street. $2,000 on the brick building adjoining last-mentioned building, and located on lot No. 369 Genesee street, all in Utica, N. Y. Privileges for dwelling occupation only, for alteration and repairs, for all mechanics’ work to complete said building, and to effect other insurance hereon. It is understood that entire division walls extend to roofs between each of the above-described buildings. $10,000 on personal property particularly described in the policy.”

The policy provided that, “In any matter relating to the insurance, no person, unless duly authorized in writing, shall be deemed .the agent of the underwriters.” The policy was procured for the plaintiffs by Porter & Armstrong, insurance agents and brokers, of New York City, to whom the policy was delivered by Whipple & Co., defendants’ attorneys, and by Porter & Armstrong delivered to plaintiffs, who paid the premium to Porter & Armstrong, who paid the same, less their commission, to Whipple & Co. On or about the 15th day of May, 1895, upon application of the plaintiffs, the insurers put

“On and after this date this policy to cover as below, and not as heretofore.

“The Genesee.

“Northrup & Latcher.

“$2,000 on the brick building situate on the easterly side of Genesee street, near Clinton Place, and located on lot No. 371 Genesee street, Utica, N. Y. $2,000 on the brick building adjoining above-described building, and located on lot No. 371 Genesee street, Utica; N. Y. $2,000 on the brick building adjoining the building last mentioned, and located on lots Nos. 371 and 369 Genesee street, Utica, N. Y. $2,000 on brick building adjoining last-mentioned building, and located on lot 369 Genesee street, Utica, N. Y. $2,000 on the brick building adjoining last-mentioned building, and located on lot No. 369 Genesee street, Utica, N. Y.,—all known as ‘The Genesee.’ It is understood that the insurance on the buildings shall cover and apply to the foundations, and cover all fixtures of the nature of elevators, platforms, and all permanent fixtures for heating and lighting, and for the general use and occupation of the buildings. $10,000 on personal property, as in the policy.”

The property was totally destroyed by fire on the 3d of March, 1896. Notice of the fire was given, and due proofs of loss were served. It appeared from the evidence adduced that there were not five distinct buildings, separated by entire division walls. This fact was brought out by way of defense, and in reply thereto, and for the purpose of showing a waiver of the warranty that the buildings were distinct, and separated by entire division walls, the plaintiffs gave evidence to the effect that Porter, of the firm of Porter & Armstrong, the insurance agents through whom the plaintiffs effected the insurance, had, before the original policy was issued, been through and examined the buildings, and at the time the policy was issued had knowledge that the division walls were not entire, and that the buildings were not separate and distinct. The plaintiffs claimed .that Porter was the agent of the insurers, and that his knowledge was their knowledge, and hence this defense was waived. The court held, granting the defendants’ motion for a nonsuit, that there was a breach of the warranty, and that it had not been waived.

We held (Northrup v. Porter, 17 App. Div. 80 , 44 N. Y. Supp. 814 ), in an action arising upon another policy on the same property, containing a similar clause descriptive of the buildings, that the misdescription was material to the risk, and that the plaintiffs were not entitled to recover, unless the jury found that the defendant became an underwriter on the policy, with knowledge of the manner in which the building was constructed. The question here is whether there was a waiver of the warranty that the division walls were without openings. Porter & Armstrong, as insurance agents, ha.d, prior to April 4,1894, the date of the issuing of the policy in suit, insured the buildings of the plaintiffs in large amounts, in companies of which they, Porter & Armstrong, were agents. A short time prior to April 4, 1894, one of the plaintiffs (Latcher) was in New York, and applied to Porter, at the office of Porter & Armstrong, and said to him:

“ ‘We want to get $40,000 or $50,000 worth of insurance.’ He (Porter) said, “The old-line companies won’t cut your rate in the Utica any more; but we are

agents for the best two Lloyds insurance companies that there are.’ He says, ‘All our leading merchants are insuring in those,’ and he took and showed me a list and the size of the policies of these various ones that had insured in those. There was perhaps 75 names on that list, and among the number was Macy’s, I remember. And he says, T will guaranty that if you have a loss under this Lloyds insurance that you will be paid just as promptly as you would in the old-line companies.’ I said I didn’t know anything about the Lloyds insurance; it was new to me; that all we had was old-line companies. ‘Well,’ said he, ‘we are agents for them.’ He said that they were agents for two of the best, and I think he mentioned the South and North America and the Columbia. He says, ‘They can do business a great deal cheaper than the old-line companies, because we are limited to 25 per cent, to do business, and we will make the rate what we agreed upon.’ I think it was 50c. a hundred. X said he could write $40,000, and I went back home that day, or the next, and within two or three days we got two or three policies from them.”

It appears from the testimony of David E. Casey, of the firm of .Whipple & Co., called as a witness by the plaintiffs, that Armstrong, of the firm of Porter & Armstrong, brought the application for the policy in suit to the office of Whipple & Co., and reported it as an A1 apartment or dwelling risk, informing Whipple & Co. that there were five separate and distinct dwellings, each one separated by a partition; and that, relying upon that statement, Whipple & Co. accepted the risk, and issued the policy. Casey testified in regard to the dealings of his firm with Porter & Armstrong as follows:

“Porter & Armstrong, at the time they brought this risk to us, were a leading fire insurance firm in New York. They were fire insurance brokers. . They had had dealings with us when this organization started. They transacted a brokerage business with us. They came into our office, and presented their risks over the counter, and, if we liked the risk, and were satisfied with it, we wrote the policy. Day in and day out, they were in the same block with us, and in the same line of business. If we didn’t like their risk, we rejected it. Very often they brought us risks we didn’t accept.” Redirect examination by Mr. Jones: “Prior to the issuance of this policy in 1894, I have often taken, through Porter & Armstrong, and issued, policies, as many as ten a day, and then a week might elapse that we did not take a risk from them. Ordinarily, every month, prior to the issuance of this policy in April, 1894, we might have taken as high as fifty risks a month from them. I think the number of policies that we issued through Porter & Armstrong increased, because we got better known, and were doing a better business. On all of the business that we did with Porter & Armstrong, and the policies issued both before and after the issuance of this policy, a commission of 15 per cent, was allowed in the adjustment of our accounts monthly upon all of the premiums paid for the respective policies. That was the method of compensation and the fixed amount between us.” Recross-examination by Mr. Wells: “We allowed that same compensation to every other broker who brought us business.”

Both upon principle and authority we think it must be held that in obtaining and issuing this policy Porter & Armstrong were not the agents of the insurers, or authorized to represent them in matters pertaining to the acceptance of the risk. Their statement that they were agents did not, of course, make them such; and it does not appear from what occurred between Batcher and Porter at the office of Porter & Armstrong that they did anything there as agents of these underwriters. It seems that Porter took the application from Batcher, who left it with him to procure the policy and send it to the plaintiffs. His firm did nothing more than to apply to the attorneys of the insurers, making the representations which it appears were made, and get an acceptance of the risk,—a mere act of broker

“What is understood under the designation of an ‘insurance broker’ is one who acts as a middleman between the insured and the company, and who solicits insurance from the public under no employment from any special company, but, having secured an order, he either places the insurance with the company selected by the insurer, or, in absence of any selection by him, then with the company selected by such broker.”

The fact that insurance brokers receive commissions from the companies for such risks as they procure does not constitute them agents of the companies. Andrews, J., in Devens v. Insurance Co., 83 N. Y. 171 .

The case here cannot be distinguished from that of Allen v. Insurance Co., 123 N. Y. 6 , 25 N. E. 309 , where it was held that a mere insurance broker cannot be held to be an agent of an insurance company without evidence of some action on its part, or of facts from which a general authority to represent it may be fairly inferred. There one Noble was a fire insurance broker, resident during the summer months at Lake Placid, where was also the hotel property of the plaintiff. Noble applied to the plaintiff, Allen, to insure his hotel and personal property, and he agreed that Noble might procure such insurance; and the amount of §4,630 was placed with the defendant. This figure was the aggregate of sums apportioned upon various items of property. Noble wrote out upon a piece of paper the apportionment of the insurance, and added a clause giving to the assured certain privileges as to the use of oil, repairs, and for other insurance. This paper writing was then transmitted to the defendant’s office in New York City. The defendant afterwards sent to Noble a policy for the amount mentioned. Upon the face of the instrument was attached the paper forwarded by Noble, but with a change in that part of the writing which privileged the assured to make other insurance, limiting the amount. The office which Noble performed was to solicit the insurance, apply for the policy, deliver it, and receive the premium. Held, that the fact that Noble, at the time he delivered the policy, knew of other insurance by plaintiff exceeding the sum limited, did not constitute a waiver of the condition of the policy, or estop the defendant from claiming a forfeiture.

The point is urged upon us that the indorsement made upon the policy on the 15th of May, 1895, has the effect of doing away with the warranty as to division walls. We cannot so regard it. The indorsement is to be read into the policy, so that the policy as originally written and the indorsement may be read together as one in

ADAMS and McBENNAN, JJ., concur, HABDIN, P. J., not voting.

(dissenting). The original policy was issued April 4, 1894. It described five buildings, which were covered by it, each in the sum of $2,000. The policy restricted occupancy to dwelling only, permitted alterations and repairs, and the completion of the buildings, as they were unfinished at the time of the issuance of the policy; and then contained this clause: “It is understood that entire division walls extend to the roofs between each of the above-described buildings.” This was a material provision, and was untrue in fact, for a hallway led across the entire rear portion of the building, and open courts were left, into which windows opened from each adjacent apartment. In May; 1895, at the instance of the plaintiffs, the authorized agents of the defendant made and executed a written modification of this policy, which was attached to it. This was designed as a substitute for the original policy. The statement preceding the description of the property is as follows: “New

“There may be a waiver by express agreement or through estoppel, but neither is required to effect the result, as words or acts from which an intention to waive may reasonably be inferred are sufficient, at least when acted upon.”

It is a principle well settled in the construction of policies of insurance that, if the policy is forfeited, or rendered invalid, the recognition of it as a binding instrument, after knowledge of its nullity, precludes the insurance company from asserting the forfeiture. The act of recognition is deemed to be a waiver, and a new agreement is unnecessary to support it'. Titus v. Insurance Co., 81 N. Y. 410 ; Walker v. Insurance Co., 156 N. Y. 628 , 51 N. E. 392 . If at the time of the issuance of the policy, the authorized agents of the defendant knew that the buildings were not separated by continuous division walls, and understood how they were constructed, the defendant could not assert the misstatement as a defense. McNally v. Insurance Co., 137 N. Y. 389 -396, 33 N. E. 475 . If, later on, he learns of the misstatement, an'd consents to its erasure, he is in precisely the same situation. A waiver after forfeiture is certainly of no greater importance, and requires no greater circumstances to establish it, than a consent to strike out a provision in a policy which, at the election of the insurer, may ripen in a forfeiture. In the latter case the insured keeps alive a policy he might terminate on the assumption that his property is indemnified against loss. In the former case the loss has occurred, and he is at the mercy of the insurer. And yet courts, in seeking to preserve the insurance for the man who has paid for it, are alert to give effect to any conduct on the part of the insurer which, fairly considered, indicates a "purpose to waive a defense otherwise valid. Whipple & Co. were not bound to accede to the request of the plaintiffs to modify the policy. They could have declined to change the agreement of their principal. Had they taken that position, the plaintiffs would have known the warranty in their policy would be asserted as a defense. They would have understood they were carrying $20,000 of Insurance which was no indemnity to them whatever. They could have procured the cancellation of the policy, and obtained another. They would be entitled, in this event, to the repayment of the unearned premium. But the agents of the defendant did not take that position. They prepared and signed a modification, satisfactory to the insured, and the vitiating provision was stricken out. They stated to the plaintiffs, in effect, that they waived their right to assail the policy by reason of this misstatement. This conduct of

The judgment should he reversed, and a new trial ordered, with costs to the appellants to abide the event.