Keistler Co. v. Aetna Ins. Co. , 124 S.C. 32 ( 1923 )

Action upon an insurance policy for $2,500 upon plaintiff's stock of goods contained in a one-story brick building at Great Falls, S.C. The policy was issued December 21, 1921, insuring the plaintiff against "all direct loss or damage by fire." The stock of goods was totally destroyed by fire on January 26, 1921.

The fire occurred under the following circumstances: On the day named above, during a heavy snow and sleet storm, seven inches of snow and sleet accumulated upon the roof of the store building. About 8:30 p. m. the roof collapsed from the weight of the snow and sleet. Practically the entire wall on one side of the building gave way, precipitating the shelving and goods on that side out upon the ground. A few minutes after the collapse of the roof the fire broke out and totally destroyed the building and stock of goods.

The insurance company denied liability under the policy for the damages resulting from the fire under the above circumstances, and defended under a provision in the policy which reads as follows:

"If a building or any material part thereof fall, except as a result of fire, all insurance by this policy on such building or its contents shall immediately cease."

The plaintiff countered with the contention that the company had waived, by its conduct after the fire, the immunity claimed by it under the foregoing provision.

It appears beyond controversy, from the evidence submitted upon the part of the plaintiff, that the fire originated after the collapse of the roof, which could not therefore have occurred as a result of the fire. It is entirely immaterial to inquire whether the collapse of the roof caused the fire or not; under the provision in the policy quoted above, the collapse of the roof eo instante terminated the insurance on the stock of goods; and if the fire originated after the collapse whether as a result of it or not, the provision meets a condition, a risk, not covered by the policy, and protects the company from liability. See the authorities cited in the argument of the appellant's attorney, which are clear and full to the point. This, however, is not conclusive of the rights of the insured, for the question of waiver by the company of the foregoing provision remains to be considered. It is contended by the plaintiff that there was sufficient testimony upon this issue to require its submission to the jury.

The evidence of waiver claimed by the plaintiff consisted of the following facts:

Quoting from the respondent's argument:

"The morning after the fire Mr. Mullican (the local agent of the company) was sent for and was told of the caving in of the roof and of all the circumstances of the fire. He looked over the destroyed property, satisfied himself that the loss was total, and told Mr. Keistler to go ahead; that the company would settle; that it would be all right to go ahead and clean up and get ready to rebuild. Mr. Keistler acted upon the advice of Mr. Mullican. Mr. Mullican was the regular agent of defendant. He made policies, signed them, delivered them, and collected the premiums."

Again quoting from the same source, and referring to the conduct of the adjuster of the company:

"About three weeks after the fire Mr. Wallace, the adjuster for the defendant company, called to see Mr. Keistler. He said he had come to investigate the loss. He was shown the premises and told how the fire occurred. He asked for the policies and for a statement of assets. A statement was furnished by the bookkeeper, who got it up from the books, and the adjuster took the statement. This statement was gotten up and delivered to Mr. Wallace while Mr. Mullican was coming from the bank to Mr. Keistler's warehouse. After Mr. Wallace had secured the statement which included the purchases and sales up to the time of the fire he called attention to a certain clause in the policy which he said would probably interfere with collecting the insurance, and that he would have to have a nonwaiver. Mr. Wallace suggested that Mr. Mullican be sent for after nonwaiver had been mentioned. He wanted Mr. Keistler to talk over with Mr. Mullican the matter of signing nonwaiver. The statement was made up while Mr. Mullican was on the way. The signing of the nonwaiver was the last thing done. It took ten or fifteen minutes to make the statement. The nonwaiver was signed after Mr. Mullican came. He was one of the witnesses to it."

A further ground of waiver claimed by the plaintiff was the alleged failure of the company to tender a return of the premium, or a proportionate part of it, after the fire. Upon this point the plaintiff's representative testified that, four or five weeks after the visit of the adjuster referred to above, he came again to Great Falls and called him over the 'phone, and asked him to come to the bank; that he went to the bank, and that he and the adjuster went back into the directors' room; that the adjuster said he had been sent there to tender the unearned part of the premium, "but in a kind of smiling way, he said, `I don't believe you are going to take it'"; that he did not tender the money, and that the witness did not tell him whether he would take it or not. Upon cross-examination of this witness he was asked by the defendant's counsel: "If the premium had been offered you you would not have accepted it?" Upon objection by plaintiff's counsel, as a hypothetical question, the answer was excluded. Error is assigned in this ruling.

At the close of all of the evidence the defendant moved for a directed verdict upon the grounds below stated, which, repeated in the exceptions, present the issues of law to be determined:

(1) That the fire did not occur until after the collapse of the roof, and that the quoted provision protected the company from liability under the policy.

(2) That the acts of waiver upon which the plaintiff relies occurred after the fire, and that, the contract of insurance having ceased and determined before the fire, such acts could not revive and make it a vital contract at the time of the fire.

(3) That the acts relied upon by the plaintiff as evidence of waiver do not in law amount to such evidence.

As to the first point:

This had been adverted to above, and as indicated, should be sustained unless there was sufficient evidence of a waiver of the provision in question to require a submission of that issue to the jury.

As to the second point:

The precise question involved is this: May an insurance policy which by its terms does not cover a particular loss be extended by the conduct of the insurer after the loss, upon the principal of waiver or estoppel, to cover such loss? It will be noted that the provision in the policy quoted above contains an express limitation of the insurer's liability, excluding it in case of loss by fire after the collapse of the building; at the time of the fire, therefore, which occurred after the collapse, there was no contract of insurance covering that loss. It is apparent, therefore, that, if the conduct of the insurer after the fire may upon the principal of waiver or estoppel be held to have fixed liability upon the insurer for this particular loss, it must be, not upon the principle of a waiver of a forfeiture, but by the creation of a contract liability which did not theretofore exist. In insurance cases a forfeiture of the insured's right to indemnity presupposes the existence at one time of that right; and a waiver by the insurer of its right to claim the forfeiture leaves the insured's contract right to indemnity unimpaired and enforceable. In other words, every case of waiver presupposes a ground of forfeiture, and every forfeiture presupposes an existing contract right. It seems clear, therefore, that there being primarily no contract right, the insured cannot be waived into an obligation which it did not assume in the contract, but expressly and specifically declined to assume. This marks the distinction between the two classes of cases: If by the contract the insured assumed a stated risk primarily, and provided for a forfeiture upon the happening of certain conditions, its right to claim such forfeiture may be waived; but where it expressly and specifically declined to assume such risk, it cannot by its conduct be held to have waived itself into making a contract which had not been entered into.

All of the many cases in this State in which the principle of waiver has been applied may be explained by the recognition of this distinction. They are, without exception, so far as we have observed, cases of a primary assumption of the stated risk, the forfeiture of which was claimed by the insurer, and a waiver of that forfeiture claimed by the insured.

"There can be no waiver where the insured by the act loses his insurable interest, or where he never had an insurable interest. After the termination of the contract of insurance there can be no waiver of any of the provisions thereof." 26 C.J., 279.

This Court has declared in the case of McBryde v. Ins.Co., 55 S.C. 589; 33 S.E., 729; 74 Am. St. Rep., 769:

"In that case [Joye v. S.C. Mutual Ins. Co.] the plaintiff failed to pay the assessments ordered on the ______________ day of December, 1896, and on the 27th of January, 1897; she was notified on the 27th of February, 1897, that her policy was suspended for failure to pay the said assessments; the property was destroyed by fire on the 13th of March, 1897, and she did not forward the money to pay the assessments until after the fire. The nineteenth By-Law was as follows: `All assessments must be paid within thirty days after written notice is mailed. If not paid, the policy shall be suspended, and be liable to assessment until the policy is properly canceled. Suspended policies may be reinstated without extra cost by the assured paying back assessment, provided the property be in the same condition as when suspended.' In that case the active energy of the policy had ceased to exist by the operation of law, in pursuance of the express language of the contract, and the destruction of the property by fire made it impossible for the plaintiff to be reinstated to membership, in so far as that property was concerned. All the testimony as to waiver related to facts occurring after the property had been destroyed. Under these circumstances there was no foundation upon which waiver could be predicated."

In McCoy v. Northwestern Ass'n, 92 Wis. 577;66 N.W., 697; 47 L.R.A., 681, the certificate provided against liability in case of death by suicide. It was held that it could not be broadened out by the application of the law of waiver or estoppel so as to cover a case of death by suicide which was excluded from the certificate by its terms.

The Court said:

"What is insisted upon is not really the waiver of a forfeiture, or an equitable estoppel against insisting upon a condition of the policy, the violation of which would otherwise work a forfeiture. It is a misuse of the term to so speak of the loss of benefits under the certificate in question. What is here sought is not to prevent a forfeiture, but to make a new contract; to radically change the terms of the certificate so as to cover death by suicide, when by its terms that is expressly excluded from the contract. We do not understand that the doctrine of estoppel or waiver goes that far. After a loss accrues an insurance company may, by its conduct, waive a forfeiture; or by some act before such loss it may induce the insured to do or not to do some act contrary to the stipulations of the policy, and thereby be estopped from setting up such violation as a forfeiture; but such conduct, though in conflict with the terms of the contract of insurance and with the knowledge of the insured, and relied upon by him, will not have the effect to broaden out such contract so as to cover additional objects of insurance or causes of loss. To illustrate the principle here laid down, a policy of insurance against loss by fire cannot have ingrafted upon or added to it, by way of estoppel or waiver, provisions for insurance against loss by any other cause; and no more can a policy of life insurance, expressly limited to payment of a sum of money in the event of death from causes other than suicide or self-destruction, be broadened out by the application of the law of waiver or estoppel so as to cover the cause excluded under the contract. While a forfeiture of benefits contracted for may be waived, the doctrine of waiver or estoppel cannot be successfully invoked to create a liability for benefits not contracted for at all."

In Ruddock v. Ins. Co., 209 Mich., 638; 177 N.W., 242, it is said:

"The cases where the doctrine of waiver, or estoppel, has been applied have largely been cases where the insurance companies have relied on a forfeiture of the contract, upon breaches of the warranties and conditions to work such forfeitures; and in many such cases this Court and other Courts of last resort have held that if companies have led the other party, to his prejudice, to his expense, to understand that such forfeitures, such breaches of warranties and conditions would not be insisted upon, then the companies would be estopped from asserting such defenses. But here the defendant makes no claim of forfeiture of the contract; on the contrary it is insisting upon the contract itself, and insisting that by its terms it did not insure the deceased when engaged in military services in time of war. To apply the doctrine of estoppel and waiver here would make this contract of insurance cover a loss it never covered by its terms, to create a liability not created by the contract and never assumed by the defendant under the terms of the policy. In other words, by invoking the doctrine of estoppel and waiver it is sought to bring into existence a contract not made by the parties, to create a liability contrary to the express provisions of the contract the parties did make."

In Wisecup v. Ins. Co., 186 Mo. App., 310;172 S.W., 73, the policy provided that it should be void in case the insured was not the sole and unconditional owner of the property. The property at the date of the policy and at the time of the fire belonged to the wife of the insured. The insured sought to prove a waiver. The Court held:

"The question arises as to whether the husband had any insurable interest in this property of his wife. If he had not the policy of insurance is void as against public policy, and the question of waiver, by reason of the agent's knowledge of the title being in the wife, cuts no figure. The defendant company could not be held to a contract on the principle of waiver which it could not make in the first instance."

In Lyford v. Ins. Co., 99 Me., 273; 58 Atl., 916, the insured had conveyed the property in violation of the terms of the policy. The Court held (quoting from the official syllabus):

"In such case all questions of breaches of conditions in the policy and all questions of waivers of such breaches after the destruction of the property, are immaterial, because the policy itself was terminated and no new contract was made to be a basis for such questions."

In Draper v. Fire Ass'n, 190 N.Y., 12; 82 N.E., 755, the policy provided that the insured should not be held liable for a loss resulting from an open fire built by the insured within fifty feet of the insured building. The fire resulted from such cause. The Court held that this provision was not a condition the breach of which would work a forfeiture, but that it was an exception from the risk assumed by the company, and that the question of waiver could not therefore arise. The Court said:

"The provision cited from the policy in this case, however, is not a condition the breach of which works any forfeiture. It is simply an exception from the risk insured against. In other words, the policy does not cover a loss arising from any of the causes specified in the By-Law; but nevertheless it remains in full force and effect until the subject-matter of the insurance is destroyed. During the burning of this bonfire, had the plaintiff's barn caught fire from any other cause, even from another bonfire more than fifty feet distant from the building, the plaintiffs would have been entitled to their insurance. Matson v. Farm BuildingsIns. Co., 73 N.Y., 310; 29 Am. Rep., 149. To recover in this case it was, therefore, necessary for the plaintiffs to establish, not that the defendant waived the breach of a condition of the policy, but that in some way the obligation of the defendant was so extended as to include loss from a bonfire situated within fifty feet of the insured buildings. There is no pretense that any oral contract between the parties included such a loss; and hence there can be no right to a reformation of the policy."

The case at bar presents the same insuperable obstacle to the plaintiff's recovery. The provision in the policy did not contain the elements of a forfeiture, but created an excepted risk, and there could be no liability upon the insurer, after the fire had destroyed the goods, in the absence of a new contract upon a valuable consideration by which the company agreed to assume a loss against which it had not contracted, a possibility that is inconceivable.

As to the third point:

In view of our conclusion as to the second point, it becomes necessary to consider this.

The judgment of this Court is that the judgment of the Circuit Court be reversed, and that the case be remanded to that Court with instructions to direct a verdict for the defendant under rule 27 (90 S.E., xii).

F.H. WESTON, Acting Associate Justice, concurs.