Berry v. American Central Insurance Co. of St. Louis, Mo.

Majority

p. 400

Herman Berry, Resp’t, v. The American Central Ins. Co. of St. Louis, Mo., App’lt.^[1]

(Court of Appeals, Second Division,

Filed March 8, 1892.)

Headnote

3. Insurance (fire)—Settlement by adjuster—Fraud.

A policy of insurance provided that it was to be void unless the interest of the assured was the entire, unconditional and sole ownership, or if the building stood on ground not owned in fee simple by the assured; that no notice to, consent or agreement by any agent should bind the company unless the same was indorsed in writing upon the policy, and signed by such agent; also, that no agent had power to waive any condition of the policy. The legal title was in plaintiff’s son, who had made a verbal agreement with his father that the latter was to occupy the property during life, and to keep it insured, in repair, and pay taxes. This was known to the insuring agent, but a loss having occurred, defendant’s adjuster represented to the plaintiff that the policy was void by reason of the breach of conditions as to title, and persuaded him to accept $400 in settlement, and to receive.a draft for that amount and cancel his policy. Thereafter, plaintiff offered to return the draft and demanded full payment of his loss. In an action thereon, Held, that the knowledge of the agent was imputable to the company, and the statement by the adjuster that the policy was void for the reasons mentioned was fraudulent in law and deceitful, and plaintiff was entitled to recover.

2. Same—Tender.

Plaintiff offered in his complaint to deliver up the draft, and upon the trial produced it in court, and by the decree it was to be deposited with the clerk and delivered to the defendant or its agent. Held, a sufficient tender and surrender.

3. Same—Insurable interest.

Under the contract with his son plaintiff had agreed, among other things, to. keep the property insured, and this agreement gave Mm a right to insure the buildings in his own name to their full value.

p. 401

4. Same—Waiver oe conditions in policy.

Plaintiff informed the agent who issued the policy that his son, who-lived in Chicago, had bought the property for him, and he was to have it. as a home as long as he lived, and that he was to insure, etc. Reid, that, this fairly gave notice to the agent that he was not the owner, and that for its use he had agreed to insure it, and justified the finding that the conditions of the policy as to title were waived.

5. Same.

The agents who issued the policy were general agents having authority to make contracts without reference to the home office, and their power to- ■ waive conditions in the policy was co-existent with that of the company itself.

Appeal from a, judgment of the general term of the fourth, judicial department affirming a judgment of the special term.

Action to set aside a compromise settlement and a cancellation of a policy of insurance against fire and a release thereof and to-recover upon the policy.

The policy insured the plaintiff to the amount of $875 on buildings and $225 on personal property. Defendant was to make-good all loss or damage, etc., not exceeding the above named amounts “ nor the interest of the assured in the property,” etc. The policy provided that it should be void if without notice to this company and permission therefor in writing endorsed thereon the interest of the assured be other than the entire, unconditional and sole ownership; or if the property insured be a building standing on ground not owned by the assured in fee simple.”

It further provided that “ no agent has any power to waive any condition of this policy.” “No notice to and no consent of or agreement by any agent of this company shall be binding on this-company until such notice, consent or agreement as the case may be is clearly expressed and endorsed in writing hereon and signed by such agent.

The legal title to the real property was in the plaintiff’s son,, and the plaintiff was in possession under a verbal agreement,, whereby he was to occupy the property during his life, and in. consideration thereof was to keep it insured, in repair, and pay the taxes thereon.

There was a total loss by fire of the buildings within the lifetime of the policy and a loss on personal property of $128.20.

Subsequent to the service of proofs of loss, plaintiff, upon the-representations of defendant’s adjuster that the policy was void by reason of the breach of the conditions as to title, agreed to accept $400 in settlement of his claims, and thereupon received from such adjuster a draft, signed by the general agent, upon the defendant for such sum, payable to his order and attached to a blank ieceipt, and which provided “ that it would not be paid if detached from the receipt therein referred to.”

Upon receiving this draft plaintiff executed a paper cancelling said policy and delivered it to the agent.

Thereafter, being advised that his policy was not void, he offered by letter to return the draft and demanded full payment, of Ms loss, which being refused he brought the present action-

p. 402

Further material facts appear in the opinion.

I. N. Ames, for app’lt; Hannibal Smith, for resp’t.

There was in this case no misrepresentation as to ;any fact which was material to the plaintiff’s right to recover upon the policy. Indeed there is no evidence but that the adjuster personally acted in entire good faith, and having no knowledge of the information received' by the agents as to the title when the insurance was effected doubtless believed that the policy was void, but any knowledge or information which any of the defendant’s agents received during the transaction with the plaintiff is by law imputed to it, and assuming that the plaintiff at the time of effect- ' ing the insurance stated correctly the facts as to the title, the statements made by the adjuster, that the policy was void by reason of its conditions and the fact that the plaintiff’s son was the owner, were, as emanating from the defendant, fraudulent in law and •deceitful.

The court found in substance that the settlement and the cancellation of the policy was procured by the statement made to the plaintiff that the policy was void, and that, relying upon such, plaintiff was led into a mistake as to his legal rights thereunder.

The evidence on the subject was that the adjuster read to the plaintiff the clause in the policy declaring that it should be void if the interest of the assured was other than thát of sole and unconditional ownership, and told him that he was well acquainted with the law of insurance, and, because the property belonged to his son, plaintiff had no right to insure it in his own name, and the policy was for that reason void and nothing could be collected upon it.

The plaintiff was a man of little business experience, although-he had education enough to understand the transaction and read the papers which he signed, and he made the settlement voluntarily, without any coercion upon him, but relied upon the representation as to the law governing his case which the defendant falsely made to him.

There is no question of course but that a court of equity cannot grant relief solely upon a mistake of law. But there was here more than a mistake. There was a surrender of legal rights intentionally induced and procured by a false representation as to the law governing the case. The defendant must be presumed to have known that it was liable for the whole loss, and by falsely representing that under the law. applicable to the case the policy was void when in fact it was valid, it induced the plaintiff to rely upon the superior knowledge that it possessed upon the subject and to surrender to it his claim.

This clearly constituted fraud, and there would be manifest injustice in upholding a settlement under such circumstances. We think the case falls within well settled rules of equitable jurisdiction, and that the decision of the special term was right. 2 Pom. Eq. Juris., §§ 847, 848, 849; Willard’s Equity, 68, 69; Busch v. Busch, 12 Dalv, 476; Wheeler v. Smith, 9 How., U. S., 55; Cooke v. Nathan, 16 Barb., 342 ; Boyd v. De La Montagnie, 73 N. Y., 498 ;

p. 403

Jordan v. Stevens, 51 Me., 78 ; Ins. Co. v. Bowes, 42 Mich., 19 ; Freeman v. Curtis, 51 Me., 140 .

The appellant does not, however, question the power of the-court to grant relief in such a case, and the only point seriously urged upon us in this connection is that the plaintiff made no-proper or sufficient tender of the draft to the defendant before bringing suit The plaintiff offered in his complaint to deliver-up the draft, and upon the trial produced it in court, and by the decree it was to be deposited with the clerk and delivered to the. defendant or its agent

It was unnecessary for the plaintiff to do more than he did. In fact he had received nothing from the defendant. Between parties the note of one of them is not property, but a mere promise to pay which is avoided by rescission of the contract The draft which plaintiff held was drawn upon defendant by its own agent. It was of no greater force or value than the defendant’s note would have been, and in such a case a tender and surrender upon trial was all that was essential to the plaintiff’s right to the relief sought Thurston v. Blanchard, 22 Pick., 18 ; Nichols v. Michael, 23 N. Y., 264 ; Gould v. Cayuga C. N. Bank, 86 id., 75-82.

But in an equity action to rescind a settlement the rule invoked by defendant has no application. If the plaintiff had 'failed on the trial the settlement would have stood and he would have-been entitled to retain and use the draft. And it is sufficient in such an action for the plaintiff to offer in his complaint to restore-what he has received, and the rights of the parties are then regulated and protected in the judgment. Allerton v. Allerton, 50 N. Y., 670 ; Vail v. Reynolds, 118 id., 297; 28 St. Rep., 707 .

We come, therefore to the question whether a recovery upon the policy "can be upheld.

The first contention of the defendant is that the plaintiff had no insurable interest in the buildings.

The rule is well settled that it is not necessary to support an insurance that the assured should have an interest legal or equitable in the property destroyed. It is enough if he is so situated with reference to it that he would be liable to loss if it is destroyed or injured by the peril insured against.

In brief, a person may insure against his liability with reference to a certain property as well as his interest therein. Insurance Co. v. Chase, 5 Wallace, 509-513; Nat. Filtering Oil Co. v. Citizens' Ins. Co., 106 N. Y., 535 —541; 11 St. Rep., 4 ; 3 Kent’s Com., 6th ed., 276.

The test of insurable interest is whether an injury to the property or its destruction by the peril insured against would involve the assured in pecuniary loss. Wood on Fire Ins., § 282. Thus, a common carrier may insure goods intrusted to him to their full value without regard to his liability to the owner. Crowley v. Cohen, 3 B. & Ad., 478; London & N. W. R'wy Co. v. Glyn, 1 El. & El., 652. So may a warehouseman, although liable to the owner only for his own negligence. Waters v. Monarch Ins. Co., 5 Ell. & Black, 870; Stillwell v. Staples, 19 N. Y., 401 ; De Forest v. Fulton Ins. Co., 1 Hall, 84 . So may a charterer of a vessel who

p. 404

is liable to pay its value in case of loss, or has contracted to insure it against usual risks. Oliver v. Greene, 3 Mass., 133 ; Bartlett v. Walter, 13 id., 267 .

Insurers of a building have an insurable interest therein which they may re-insure. N. Y. Bowery F. Ins. Co. v. N. Y. F. Ins. Co, 17 Wend., 359 . And a tenant who has agreed verbally to keep the demised property insured is liable to the' lessor for a breach of that agreement and has an insurable interest in the property to the. extent of the amount agreed to be insured. Lawrence v. St. Mark's F. Ins. Co., 43 Barb., 479 . Other illustrations of this rule are to be found in Herkimer v. Rice, 27 N. Y., 163 ; Kline v. Q. I. Co., 7 Hun, 267 ; 69 N. Y., 614 ; Waring v. Indemnity F. Ins. Co., 45 N. Y., 606 ; May on Ins., chap. 6; Wood on Fire Ins., chap. 8. The principle upon which these cases all rest is that there is a possible liability arising out of the peril insured against •and that creates an insurable interest

Under the contract with his son the plaintiff had agreed among other things to keep the property insured, and this agreement gave him a right to insure the buildings in his own name to their full value. The defendant contends that as the contract with his ■son was by paroi and hence void the plaintiff had no interest in ■or liability towards the insured property. This proposition might have some weight if the insurance was upon the title or interest of the plaintiff as life tenant, or if there had been representations on the part of the plaintiff that such was the interest intended to be insured. But we think it has no application to the case made by the evidence. The plaintiff while in the unquestioned enjoyment and possession of the property could not deny bis liability under the contract with his son to insure, and under that agree- ' ment so far as is disclosed in this action he would have been liable for the loss of the buildings if he had failed to insure them.

The defendant, if it had notice of the relation which plaintiff bore to the property, cannot deny the legality of its contract, .although it may be that the plaintiff could not have enforced against his son his right to use the property for life had that been denied. The final question is whether the defendant had such notice of the facts as to the title to the property as justified the court in finding that it had waived the conditions heretofore ■quoted. The question of waiver was one of fact and we think the evidence was sufficient to support the conclusion reached.

There was evidence to the effect that plaintiff informed the .agent who issued the policy that his son, who lived in Chicago, had bought the property, for him and he was to have it as a home as long as he lived, and that he was to insure it, keep it in repair and pay the taxes. This statement fairly gave notice to the agent that the plaintiff was not the owner of the property and that as a part of the consideration for its use and possession he had agreed to insure it.

If the defendant desired further information as to the title it should have requested it, and not having' done so it must be assumed now to have had notice of such facts as it could with reasonable diligence then have ascertained.

p. 405

This evidence justified the finding that the conditions of the policy as to title were waived, and this conclusion was not weakened by the fact that in the policy delivered there was a condition that no agent had power to waive any of the conditions of the policy and no notice to or agreement by any agent would be binding on the defendant unless expressed in writing and endorsed upon the policy and signed by the agent. The agents who issued the policy were general agents having authority to make contracts without reference to the home office and their power to waive conditions in the policy was co-existent with that of the company itself. Trustees v. Brooklyn F. Ins. Co., 19 N. Y., 305 ; Walsh v. Hartford F. Ins. Co., 73 id., 5, 9.

Conditions which enter into the validity of a contract of insurance at its inception may be waived by agents and are waived if so intended although they remain in the policy when delivered. Van Schoick v. Niagara F. Ins. Co., 68 N. Y., 434 ; Bennett v. North British Ins. Co., 81 id., 273; Woodruff v. Imperial F. Ins. Co., 83 id., 133; Haight v. Continental Ins. Co., 92 id., 51.

The judgment must be affirmed.

Judgment affirmed, with costs.

All concur.