Bush v. Hartford Fire Insurance , 222 Pa. 419 ( 1909 )

Opinion by

Mr. Justice Mestrezat,

It is well settled that an insurance company may waive a compliance with any condition of a policy to be performed and observed by the insured except, as it has been held, when the insured by the act loses his insurable interest. The condition is inserted in the policy for the benefit of the insurer, and hence there is nothing to prevent the company from waiving it whenever it may desire. This may be done expressly or by implication; and in either case the company thereafter cannot insist upon a performance of the condition. The law will not permit it to mislead or deceive the holder of its policy by any act or conduct on its part, and thereafter, to his detriment, insist upon full performance of a condition which it has waived. As said by Chief Justice Church in Brink v. Hanover Fire Insurance Company, 80 N. Y. 108: “Every consideration of public policy demands that insurance companies should be required to deal with their customers with entire frankness. They may refuse to pay without specifying any ground, and insist upon any available ground; but, if they plant themselves upon a specified defense, and so notify the assured, they should not be permitted to retract after the latter has acted upon their position as announced, and incurred expenses in consequence of it.”

In Freedman v. Fire Association, 168 Pa. 249, this court, in an opinion by our Brother Fell, said (p. 254): “The trend of our decisions has been to hold insurance companies to good faith and frankness in not concealing the ground of defense and thus misleading the insured to his disadvantage. They may remain silent except when it is their duty to speak and the failure to do so would operate as an estoppel; but having specified a ground of defense, very slight evidence has been held sufficient to establish a waiver as to other grounds.”

It is also settled law that an insurance company may waive a condition in a policy by parol although it contains a stipulation that there shall be no waiver of any condition except by an express agreement indorsed on the policy. This rule is stated as follows in 16 Am. & Eng. Ency. of Law (2d ed.), 935, with a citation of authorities sustaining it: “This rule (permitting the waiver of a condition by parol) applies notwithstanding stipulations in the policy that nothing less than an express agreement indorsed on the policy shall be effectual for that purpose, since such a stipulation is itself a condition and is as capable of being waived or dispensed with as any other condition of the instrument, and since parties to contracts cannot so tie their wills as to be unable thereafter to do by consent what the law allows.” And in 19 Cyclopedia of Law & Procedure, 777, it is said: “Even a stipulation that the conditions of a policy cannot be waived, or if waived at all only in a certain manner, may itself be waived.” Nor can an insurance company after alleging or setting up a certain breach of the policy as a forfeiture be permitted subsequently to defend an action on the policy on the ground of different or other breaches of the contract. It has been generally held that if the insurer after a loss has occurred claims a forfeiture for noncompliance with certain conditions of the policy, it cannot be heard afterward to assert further or different breaches as a defense: 19 Cyclopedia of Law & Procedure, 793'; Western, etc., Pipe Lines v. Home Insurance Company, 145 Pa. 346.

Another well-settled principle, applicable to the case in hand, is that when the insured in good faith transmits to the insurer what he terms sufficient proofs of loss within the time required in the policy, it is the duty of the insurer, if such proofs for any reason are unsatisfactory, to promptly notify the insured, setting forth wherein the proofs do not comply with the conditions of the policy, and thereby give the insured an opportunity to rectify his mistake. Silence on the part of the insurer for any considerable time after the receipt of such proofs of loss, will be taken to be a waiver of the necessity for any further proof of loss, and such proofs, furnished by the insured, will be held to be a compliance with the condition of the policy. In Gould v. Dwelling-House Insurance Company, 134 Pa. 570, the present chief justice, delivering the opinion, formulates the rule from our decisions on this subject as follows (p. 588): “ If the insured, in good faith, and within the stipulated time, does what he plainly intends as a compliance with the requirements of his policy, good faith equally requires that the company shall promptly notify him of their objections, so as to give him the opportunity to obviate them; and mere silence may so mislead him to his disadvantage, to suppose the company satisfied, as to be of itself sufficient evidence of waiver by estoppel.” This rule has since been approved and enforced in many cases, the more recent of which are Welsh v. London Assurance Corporation, 151 Pa. 607; Moyer v. Sun Insurance Office, 176 Pa. 579.

Under the facts, as they appeared at the trial, and the law applicable thereto, it was a question for the jury to determine whether the defendant company had by its action and conduct waived any further proofs of loss than those furnished by the plaintiff. It is apparent throughout the case that the plaintiff acted with the utmost good faith towards the defendant company in regard to his loss. Immediately after the fire, he notified the local agent who countersigned the policy of the loss, and at the plaintiff’s suggestion the agent at once notified the company. This notice was on a form furnished by the company for that purpose; and hence was in due form and conveyed to the company the necessary, information concerning the fire. The company evidently acted upon this notice because within a few days thereafter its own special agent, Chapman, with the adjuster of the American Fire Insurance Company, which also had an insurance of $2,000 on the same property, appeared at the scene of the fire. Shortly thereafter, on the same day, these agents of the companies had an interview with the plaintiff in a local hotel. The company’s local agent at Apollo testified that on this occasion Chapman “admitted that it was a total loss; he talked very reasonably about it, and I supposed that there would be nothing else to do but to pay it unless something else turned up.” From the testimony, it is apparent that the loss would have been adjusted then and there had it not been for an incidental remark of the plaintiff that he still owed $2,000 on the goods which had been consumed by the fire. The plaintiff testifies that when the adjusters learned this fact, they declined to proceed further with the adjustment until they had a copy of the contract between the plaintiff and Beighley, from whom he had procured the goods, and that they then said they would “ come back and complete the adjustment.” So far as appears from the evidence, nothing was said at this interview about the proofs of loss or that any would be demanded. The plaintiff, however, in about a month thereafter, had prepared an inventory or statement in detail of the goods destroyed, verified by the affidavits of himself and the clerk who assisted him in making the inventory, and then handed it to the local agent of the defendant company by whom it was, on the same day, sent to one of the adjusters at Pittsburg, where Chapman, the special agent of the defendant company, saw and had access to it. The company failed to notify the plaintiff of any objection to this proof of loss, or in any way to intimate to him that it was not satisfactory and in conformity with the requirements of his policy. So far as he knew, therefore, he had complied with the condition of his contract requiring him to furnish proofs of loss and had no reason to believe that the proofs furnished were in any respect objectionable to the defendant. Again, and within sixty days from the time of the fire, the plaintiff with a friend, at the request of Chapman, met him and Strobel, the adjuster of the American Fire Insurance Company, at the latter’s office in Pittsburg “for the purpose (as stated by Chapman) of ascertaining if Bush would agree to an offer of compromise settlement.” The conversation at this interview related entirely to the plaintiff’s loss and offer of compromise by Chapman. Not a word was said by either of the adjusters in regard to the proofs of loss or that they were insufficient or did not comply with the conditions of the policy. A compromise was suggested on the part of the adjusters on the basis of the satisfaction of the claim on payment of one-half of the amount of the insurance. The plaintiff at once declined to accept the proposition and insisted upon the payment of the full amount of the policy.

On April 24, 1907, Bush’s attorney wrote the defendant company stating that his client held their policy for |2,000 on his goods; that they had been totally destroyed by fire; that proofs of loss had been furnished; that its agent had visited Paulton several weeks prior thereto to adjust the loss, that the matter had not been adjusted, and concluding: “If you desire any further information or additional proofs of loss kindly advise me and the same will be furnished.” The company’s general agent replied on April 29, acknowledging receipt of the letter and saying he had written to Pittsburg for further information and would advise further. The next day, the general agent again wrote in reply that the claim had been put in W. D. Strobel’s hands for answer. No objection to the proofs of loss was made in the replies of the company’s agent nor an intimation of any defense to the claim.

If these several facts were established, of which there was ample proof to go to the jury, the jury was fully justified in finding that the defendant company did not intend to insist upon further proofs of loss than those furnished by the plaintiff. It is manifest, we think, that the loss would have been adjusted at the first interview on February 13, if nothing had been said about the indebtedness of the plaintiff to Beighley and the contract under which he held the goods. A further consideration of the adjustment, if the evidence is believed, was postponed by the adjusters simply because of the doubt arising in their minds of the right of the plaintiff to recover by reason of his not being the sole owner of the goods which were insured. The same objection to the claim, although manifestly not regarded by them as substantial, was in the minds of the adjusters when the plaintiff subsequently met them at their request in Pittsburg to attempt a compromise. At that time the plaintiff had sent his proofs of loss and they were in the possession of the company. He had received no notice from the company of any objections to the proofs nor that they were not in due form and in strict compliance with the policy. The Pittsburg interview also passed off without any intimation on the part of the company or its agent that the proofs were not sufficient. The jury was therefore fully justified in finding that the silence of the company until the bringing of the suit was, under the circumstances, a waiver of the right to demand other or further proofs of loss. Under the authorities cited, the testimony clearly made the question one of fact for the jury, and the court properly submitted it.

It may well be admitted that the counsel for the plaintiff made a mistake when he advised his client to sign the nonwaiver agreement. There was absolutely no necessity for this agreement, if the company intended to carry out in good faith its contract with the plaintiff. The agreement was signed by the plaintiff when the adjusters came to the scene of the fire on February 13, at least fifty days before the expiration of the sixty days within which propfs of loss were required to be filed. The interim was amply sufficient for the company to investigate the cause of the fire and ascertain the amount of loss, and to affirm or deny its liability. There was, therefore, no necessity for an agreement “to preserve the rights of all parties,” and the only effect of such an agreement was to supply the company with evidence to defeat the plaintiff's allegation of waiver.

But the agreement does not necessarily defeat the plaintiff's right to recover in this action. It was simply a part of the evidence which was submitted to the jury to determine whether the defendant company had waived its right to insist upon other and more formal proofs of loss. As pointed out above, aside from this agreement, the evidence was ample to justify the jury in finding that there had been a waiver of the proofs of loss. The nonwaiver agreement was signed by the plaintiff on February 13. It was subsequent to that date and within sixty days of the fire, that he furnished the proofs of loss to the company through the local agent. By its conduct on the various occasions referred to in the evidence, did the defendant intend to waive its rights under the policy to require other proofs of loss, and was the evidence sufficient to warrant the jury in so finding? If this agreement had been inserted in the policy in the first instance, instead of being made part of it by subsequent agreement, the defendant company could undoubtedly have waived all its rights thereunder. This proposition is clearly supported by the authorities we have cited above. The parties to this contract were the parties to the policy, and as either party could waive his rights under the policy, he certainly could do so under the contract. Those who make a contract of insurance can, unless prevented by law, unmake or avoid it, and either party may decline to insist upon the performance of stipulations made for his benefit. We therefore think the learned judge was right, in submitting it as a part of the evidence to the jury to determine the question whether the defendant company had waived its rights to insist upon more formal proofs of loss.

The other defense interposed by the defendant company to the plaintiff’s action is that he was not the sole owner of the property insured. The policy provides that it shall be void “if the interest of the insured shall be other than unconditional and sole ownership.” The plaintiff held this property by a contract with one Beighley. By the terms of that agreement, Beighley leased to Bush the store and also the goods contained in it. The policy involved in this litigation covered the goods. The goods were delivered by Beighley to Bush for a term of two years with the privilege to the latter of retaining them for five years longer or purchasing them if he desired. At the expiration of the lease, Bush was to pay Beighley the difference in the invoices taken at the time he received them and when they were redelivered to Beighley. In the meantime, Bush had sole possession of the goods and the right to sell any or all of them, the difference between the value of the goods in the store at the time he took possession and when he relinquished possession to Beighley, at the end of the lease, being the price he had to pay. Bush, therefore, by this contract between him and Beighley, obtained possession of the goods with the right to sell them, and was required to replace them or pay Beighley for them at the time specified in the agreement. He was required to pay at the end of his lease for the goods which the invoice, then taken, showed to have been sold by the plaintiff, whether it was all or a part of the goods. As testified by Bush: “Mr. Beighley turned the goods over to me and I was to pay for the goods in goods or in cash, it didn’t matter which.” While the goods were in the possession of the plaintiff under the contract, Béighley had no control whatever over them and had no right to repossess himself of them. They were absolutely in the possession and control of the plaintiff and he had the right to dispose of them at any price or any way he saw fit. At the time of issuing the policy insuring the goods and until they were destroyed by fire, it is manifest, we think, that under the contract with Beighley, the plaintiff’s interest in the goods was an “unconditional and sole ownership” within contemplation of the policy. The learned judge was therefore right in so construing the contract.

We may appropriately conclude this opinion by quoting from a letter of the defendant’s general agent to one of the adjusters on May 2, 1907, which shows the interpretation put upon this contract by the defendant company, and further, that if his advice had been taken the company would not now be attempting to defeat an honest claim by the baldest technicality. The letter reads: “ I have read very carefully the copy of the contract between Mr. Bush and the owner, Mr. J. H. Beighley. It strikes me after reading the agreement that it is no more or less than the renting of the store. . . . We should feel that if this matter had to go into court Mr. Bush would be declared owner of the property. Certainly if he has from $6,000.00 to $8,000.00 involved in this business, and under this contract as between him and the owner of the real estate, there is a rental of only $25.00, I don’t think a jury would consider the question a minute. They would simply say he owns the stock — pay the loss. ... I don’t think we have a ghost of a show in court unless you have something else to stand on aside from the contract between these parties. I should advise going on to the ground and settling the loss in some way.”

The judgment is affirmed.