Hartford Fire Ins. Co. v. Clark , 154 Miss. 418 ( 1929 )

In addition to the provisions of the policy and the application set out in the majority opinion, I desire to call attention to the provision of the policy limiting to the general agent or superintendent of the Southern Farm Department, of Atlanta, Ga., alone, the power to waive or alter the terms and conditions of the policy. This clause reads as follows: "But this policy or any endorsements thereon, or attached thereto, of any kind, shall not be valid until countersigned by the general agent or superintendent of the Southern Farm Department at Atlanta, Georgia, who alone shall have power or authority to waive or alter any of the terms or conditions of this policy, or to make or attach endorsements hereon."

The policy also contains this provision: "This entire policy shall be void if the insurer has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property be not truly stated herein; or in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after a loss."

As shown by the majority opinion, the application for the insurance propounded directly to the applicants the question as to whether they were sole and absolute owners of the property to be insured, to which they answered "Yes." When asked, "Is the title to land on which buildings are situated in your name?" they answered, "Yes."

The application for insurance, immediately before the signatures of the applicants, J.A. Allman and A.J. Clark, contains this provision: "N.B. — This Application in all cases to be signed only by the applicant or some person duly authorized by him or her. In no case by the agent."

The application also contains the following statement:

"The foregoing is my own agreement and statement, and is a correct description of the property on which indemnity is asked, and I hereby agree that insurance shall be predicated on such statement, agreement and description, if this application is approved, and that the foregoing shall be deemed and taken to be promissory warranties running during entire life of said policy."

I think these provisions in the application for insurance, and the insurance policy, show conclusively that the insurance company reserved to its office in Atlanta the sole power of accepting the risks and issuing policies on farm property; and that these agents, to-wit, the Southern Farm Department, wrote the policy solely upon the statements contained in the application, and any knowledge possessed by the local agent cannot be imputed to the company.

It is difficult to see how the business of insurance can be successfully carried on, unless the insurance companies can establish agencies satisfactory to themselves, for the purpose of passing upon such risks, and of providing by its contracts that the insurance is written upon the representations made to the company in the application for insurance alone.

In New York Life Ins. Co. v. O'Dom, 100 Miss. 219, 56 So. 379, Ann. Cas. 1914A, 583, it was held that a corporation can provide or stipulate in its policy that its provisions can be varied only by notice or representation brought to the actual knowledge of one of its principal officers.

It was also held that a stipulation in the policy of insurance that an agent has no power to alter the terms of the contract or waive its conditions is notice to the insured of the agent's limited authority in these respects, and, under such stipulation, the insured cannot rely upon any action of the agent as constituting a modification or waiver.

In other words, this case holds that the insurance company may do what was done in the policy now before us; that is to say, the company can select agents for a particular purpose and limit their power to that purpose, and can confide to itself or to such of its officers or agents as it may select, the power to pass upon the risks of insurance, and to make the application and representations therein contained the basis of writing the insurance and making it a valid contract.

This court also held, in Liverpool London Globe Ins. Co. v. Van Os, 63 Miss. 431, 56 Am. Dec. 810, that the authority of the agent in that case seemed to be limited to receiving and forwarding applications for insurance, delivering the policies transmitted to him by the agent at Vicksburg, and receiving and remitting the premiums paid; and that notice to such an agent is not notice to the company, citing Hanover Fire Ins. Co. v.Sorsby, 60 Miss. 302.

In the case of Big Creek Drug Co. v. Stuyvesant, 115 Miss. 333, 75 So. 768, the court held that knowledge to the agent of the conditions there in litigation was knowledge to the company, but based its holding upon the fact that he was the only agent who inspected the risk and with whom the insured dealt.

The court there distinguished between that case and theLiverpool L. G. Ins. Co. v. Van Os, 63 Miss. 431, 56 Am. Rep. 810, and the Sorsby case, 60 Miss. 302, but did not overrule them. The court said: "We believe there is a distinction between this case and that of Liverpool L. G. Ins. Co. v.Van Os, 63 Miss. 431, 56 Am. Rep. 810. It is different also from the Sorsby case, 60 Miss. 302. The notice to the agent in the latter case was in reference to something to be done in the future and which might never in fact be done. Certain it is that the instant case cannot be differentiated from the cases ofMitchell v. Insurance Co., 72 Miss. 53, 18 So. 86, 48 Am. St. Rep. 535, and Ins. Co. v. Randle, 81 Miss. 720, 33 So. 500."

In the present case the application was not taken by the local agent and the policy issued and delivered by him, but the application was sent to the Atlanta office for acceptance or rejection. It was represented in that application that the application was that of Clark and Allman, and that the agent had no authority to sign it — and the company issued the policy upon the information contained in that application. It had a right to rely upon the statements of the applicants for insurance that the representations therein were theirs, and that they were true, and should constitute the basis of the contract.

There is nothing in the law of this state prohibiting the making of such a contract, and it is familiar doctrine that, where parties consent that a written contract is the basis of its agreement, and that no representations have been made to the contrary, and that they cannot be varied by parol evidence, the parties have a right to stand upon the contract so made, and that it embodies the entire agreement of the parties. J.B. Colt Co. v. Odom, 136 Miss. 651, 101 So. 853.

In Continental Casualty Co. v. Hall, 118 Miss. 871, 80 So. 335, it was held that an insurance contract, like any other contract, when perfectly plain and unambiguous, should be construed as written. It was also held that a soliciting agent for an insurance company is merely a special agent, without authority to write policies or to bind the company by its terms or to alter them; his authority is entirely different from that of fire insurance agents, who write policies for their companies. There is, of course, no difference in the powers of a life insurance company and of a fire insurance company to limit the authority of their agent. The difference grows out of the general practice of the fire insurance companies of permitting their local agents to execute and deliver policies at the local office. In such cases they are the general agents of the company, and knowledge to them is knowledge to the company. But, when they expressly limit the power of their agent to soliciting and forwarding applications, and reserve to the general officers of the company or any other general agencies the right to pass upon the risks, then they have the right to limit their contract to the statements contained in the applications and in the policies. And, where the local agent has no authority to act as a general agent, knowledge to him not pertaining to his agency is not knowledge of the company.

In Stewart v. Coleman Co., 120 Miss. 28, 81 So. 653, it is held that authority of an agent to issue policies for a company does not necessarily authorize him to cancel them, and, as I understand the decision in that case, the statute, section 5873, Hemingway's Code 1927 (section 2615, Code 1906), makes the agent the agent of the company only for the purposes covered by his agency, and does not make him the general agent of the company.

I am therefore of the opinion that the court below was in error in permitting a recovery at all, because of the misstatements contained in the application for the insurance, and especially as to the ownership of the property. It is manifest that no insurance company, in a case like this, would write a policy for the full value of property, or in excess of the interest owned by the insured, and it is quite likely that the company would not have issued a policy at all had the true state of the title been disclosed to its general agents having the right and authority to pass upon the risk. I think the authorities of this state amply sustain my view of this phase of the case.

I do not think the insured should have been permitted to recover the full amount of the policy, even if it be the law that an insured, misrepresenting the ownership of property in a written application, made a part of the contract, can recover, because the local agent, having nothing to do with passing upon the risk, happens to know (conceding that he did, in fact, know) that the ownership was different, but should have been limited to the value of the interest which he actually owned, which in this case was far less than the amount of recovery in the policy.

It is stated in the majority opinion that there was no evidence offered as to the value of the interest of the insured in the property. The deed of sale was introduced in evidence, and it recites a consideration for the property, including the timber on one hundred sixty acres of land, of five hundred dollars. The recitals of the deed are prima-facie evidence of the value of the property, and, while not conclusive, should govern in the absence of other proof. The interest of the insured in the building was simply a right of occupancy for less than five years. This property was situated in the rural sections, and had but little value apart from the land; in other words, the rental value of the property was exceedingly small. However, it was the duty of the plaintiff to prove the real value of his interest, where he had misrepresented the nature and character of the interest, if he is to be permitted to recover at all, and thus profit by his own fraud and wrong. Of course, I do not think he should be allowed to profit by his own fraud and wrong, but, if the court is to permit him to recover the value of whatever interest he had under the clause "as his interest may appear" contained in the policy, it was incumbent on the plaintiff, where his interest was different from that disclosed in the application, to show the interest and the value thereof.

In my view, the case of Miss. Fire Ins. Co. v. Planters'Bank, 138 Miss. 275, 103 So. 84, does not authorize the recovery of the full value of the property where the insured owns less than the entire interest of the property, unless the interest of the insured is disclosed in the application or the policy. In that case, in stating the facts, the court said: "The policy was issued to K.I. Wells for one thousand five hundred dollars upon furniture, and one thousand dollars upon the residence which he occupied as a lessee. The policy of insurance recited that the dwelling house was occupied by the assured as lessee and stood upon leased premises."

The court then set forth the exact language of the policy in that case; and continued: "The controversy between the parties is only as to the payment of the one thousand dollars for the loss of the dwelling house; the appellant, insurance company, contending that it is not liable for the payment of the full amount of one thousand dollars named in the policy, notwithstanding the `valued policy law.'"

Here the court set out the substance of the statute, and also of the insurance contract; and then said: "These questions as to whether a lessee has an insurable interest in the leased building, and whether or not he is limited in his recovery to the value of his leasehold, and may not rely upon the valued policy statute, which provides that the insured shall recover the full amount named in the policy, are not new questions in our state. This court has several times held that the lessee has an insurable interest in a leased building and that the measure of his recovery for total loss by fire is the full amount named in the policy, providing, ofcourse, there be no fraud in securing the insurance." (Emphasis supplied.)

The court cited the various cases which supported its opinion. None of these cases have held that the insured may recover in excess of the actual value of his loss where there was fraud or misrepresentation in securing the insurance. In other words, in those cases the interest of the insured was disclosed to the company or to those representing it in writing the insurance, and the company had full opportunity to judge of the value of the property insured at the time it took the risk. That being true, the purpose of the valued policy law was to prevent the company from thereafter disputing that the property was, in fact, worth the amount agreed upon in writing the contract. It is familiar doctrine that fraud vitiates all contracts. In the case before us, there was the grossest kind of fraud practiced upon the insurance company. The insured represented that they were making the application, and the statements therein contained were their statements, and that the interest they owned in the property was full and unconditional ownership in fee, and that the title to the land upon which the building was situated, and to the building itself, was in themselves. This was not true. The fact was that they had previously sold the land and the building, reserving only a right of occupancy in the building during a limited period. It is familiar knowledge that a party will not be permitted to profit by his own wrong and fraud, and, where such wrong and fraud appears in the development of the plaintiff's case, he should be denied all relief in the courts.

It appears to me to be a monstrous thing to permit a person to make a misrepresentation in securing a policy of insurance, and, after procuring it, finding its provisions emphatically provide that it is void if the insured is not the owner in fee simple, to still recover the full amount of the policy — on the theory that an agent of the company who was merely a soliciting agent, if an agent at all for the purpose of procuring the insurance had knowledge of, and connived in, the fraud. It seems to me that this principle is fully established in Riverside DevelopmentCo. v. Hartford Fire Ins. Co., 105 Miss. 184, 62 So. 169, Ann. Cas. 1916D, 1274, where it was held that an agent authorized to issue tornado insurance cannot bind his principal by issuing a policy on property owned by him or in which he has an interest adverse to his principal, or on property owned by a corporation of which he is a stockholder, and in such cases it makes no difference that the rate of premium is fixed and that the agent acted in good faith in issuing the policy.

It was also held that the ratification of the invalid act of an agent is binding upon the principal only when the latter has full knowledge of the circumstances which rendered the act invalid.

The agent here denied the statement of the plaintiff that he had knowledge of the true conditions of the title to the property. He knew there had been some deal with reference to it, but his knowledge did not extend to the real character of the deal. The company issued the policy upon the faith of the statements contained in the application which the insured knew to be false, but which the insurance company believed to be true.

It will not do to permit a party who signs a written contract or instrument afterwards to assert that he did not know the contents of such document, unless he has been misled by the adverse party, by some misstatement or fraudulent conduct in reference thereto.

I am therefore of the opinion that the judgment of the court should be reversed, with judgment here for the appellant.

Chief Justice SMITH dissents, and concurs in most of what Justice ETHRIDGE has said.