Allen v. Phoenix Assurance Co.

AILSHIE, J.

This case was taken from the jury on a motion for nonsuit on the submission of the plaintiffs’ case. The appeal is from the judgment and from an order denying arnew trial. The action was commenced for the recovery of the amount of loss sustained by the plaintiffs under a fire insurance policy issued by the defendant on certain of plaintiffs’ property. On the trial the plaintiffs proved the issuance of the policy and introduced the same in evidence, and the payment of the premium thereunder and the loss of the property. Plaintiffs had alleged in their complaint a waiver by the defendant of the formal written proofs and inventory of loss as provided for and required in the policy. On the trial they proved that immediately after the fire they called up the defendant’s local agent and notified him of the loss, and that soon thereafter defendant sent its adjuster, J. H. McKowan, from Spokane, Washington, to examine the conditions and adjust the loss. The adjuster went to the premises, questioned and examined the parties insured, and took some memoranda of the property lost and the dimensions and conditions of the building, and it seems that there was no difference between them as to the amount of the loss except as to the extent of damage done to an engine and boiler. When the adjuster got ready to leave the premises he demanded of the insured the policy, whereupon they informed him that it was in the office of John P. Vollmer at Lewiston. He inquired the reasons why it was there, and they informed *660 him. that they had been owing Mr. Vollmer $300 for some time, and when the same became dne they were unable to pay it, and that they went to see Mr. Vollmer and asked him to give them an extension of about six weeks, and that they gave him the policy as collateral security. Upon delivering the policy to Mr. Vollmer they indorsed their written assignment to him. It is alleged by the complaint that at the time of making this assignment it was understood and agreed between them and Mr. Vollmer that he should submit the assignment to the agent of the insurance company for the company’s approval. Proof of this allegation does not appear from the evidence, and there seems to have arisen some controversy on the trial as to the admissibility of the evidence tending to show the transaction between the plaintiffs and Mr. Vollmer, and the court refused to allow plaintiffs to testify that they were the owners in fact and that they had been all the time the owners of the policy. Upon learning that the policy was in the possession of Mr. Vollmer, the adjuster seems to have assumed an air of independence, and informed the plaintiffs that he would have no further business with them. They requested him, however, to meet them the following day at Lewiston. They went to Lewiston the next day and Mr. Vollmer delivered them the policy. In the meanwhile the adjuster had been to Mr. Vollmer’s, and seems to have examined the policy and also the assignment thereon, and when they saw him he told them he had seen the policy and found that they had assigned it, and that they had no further claim on it and that he could not pay them anything. He also told them as he was leaving the city, that since they had put their matter in the hands of an attorney he had no further business with it, and that they would have to settle with the company; and he appears to have also made further remarks to them with a view, apparently, of getting them to submit some offer of compromise. The plaintiffs’ attorney seems to have thereafter written the head office in New York City concerning the matter, and in reply thereto received two letters from the office in San Francisco informing him that the *661 matter was still in the hands of their agent and adjuster, Mr. McKowan, of Spokane, and that they had written him on the subject of this loss. This is the substance of the evidence produced by the plaintiffs. The defendant had denied the material allegations of the complaint, admitting the issuance of the policy, but denying that it ever went into force or effect or became a valid policy of insurance, and as a defense to the action set up some nine separate defenses, in each of which it was alleged that the insured had violated some clause, provision or restriction contained in the policy, and that as a consequence of such violation the policy had lapsed and the defendant was relieved from liability for the loss.

On cross-examination of plaintiffs’ witnesses by defendant’s counsel, evidence was brought out which showed, or at least tended to show, that at the time of the issuance of the policy and thenceforth until the loss by fire, the property insured was situated on a homestead claim owned by one of the plaintiffs, the title to which was at all times in the United States government, and that final proof was not made until in the summer after the fire. This, it is claimed, avoided liability by the insurer under the following clause contained in the policy: ‘ ‘ This entire policy, unless otherwise provided by agreement indorsed hereon or added thereto, shall be void .... if the interest of the insured be other than unconditional and sole ownership, or if the subject of insurance be a building on ground not owned by the insured in fee simple, or if the subject of insurance be personal property and be or become encumbered by chattel mortgage, .... or if this policy be assigned before loss. ’ ’

The plaintiffs .made a sufficient case to go to the jury, and whatever evidence was disclosed to defeat plaintiffs’ right of recovery or avoid the liability of the insurer was brought out on the cross-examination, and without considering or passing upon the proposition as to whether or not this was proper cross-examination, it is nevertheles true that all the evidence brought out on cross-examination was matter in support of *662 the separate defenses pleaded by the company. All of these matters were of such a nature and character that they might have been waived by the company, and the plaintiffs were entitled to the opportunity of offering evidence in rebuttal thereof, or tending to show a waiver of the conditions and obligations pleaded as defenses. (Pearlstine v. Westchester Fire Ins. Co., 70 S. C. 75, 49 S. E. 4 , and cases cited.) On the other hand, it would be a somewhat novel practice to require a plaintiff, in making his case in chief, to rebut evidence brought out by the defendant on cross-examination which tended to support the separate defenses. The defendant recognized in this case what we conceive to be the correct rule of practice in preparing and filing its answer; namely, that where the insurer relies for its defense upon breach of condition enumerated in the policy, it must plead the condition, and its violation in defense of the action. (American Cent. Ins. Co. v. Murphy (Tex. Civ. App.), 61 S. W. 956 ; 19 Cyc. 926.) This is especially true of all conditions subsequent. On the other hand, the plaintiff must prove conditions precedent. (11 Ency. of Pl. & Pr. 422, 423.) In this case the plaintiffs had alleged a waiver of proofs of loss, and we think the evidence in support of that allegation was sufficient to entitle them to go to the jury. The defendant’s adjuster went upon the grounds, and examined the condi-’ tions and made notes and took memoranda and questioned the insured, and finally left them by telling them that he could not pay them anything, and placed the refusal to pay solely upon the ground that they had assigned the policy. When plaintiffs ’ attorney wrote to the home office, he received notice from them that the matter was still in the hands of their adjuster. The adjuster, on the other hand, appears to have declined to further communicate or deal with them in any respect whatever. While the contract does not make it the duty of the insurer to furnish the insured with blanks for making proof of loss, it is nevertheless the uniform practice of insurance companies to do so, and yet neither the adjuster nor the company appear to have ever furnished the insured with *663 any blanks for making proof of loss. It is true that this fact is not a matter that would constitute a waiver, yet it is a circumstance taken in connection with the action, conduct and statements of the adjuster as well as the home office of the company, that bears upon the apparent aims and purposes of the company. The insurer must be fair, and when relying on printed restrictions among the numerous limitations found in its policies must not so act with reference to one restriction as to mislead the insured as to its attitude or reliance on another. The evidence submitted by plaintiffs was sufficient to make a prima facie case of waiver of proofs of loss and to take the case to the jury. As touching the general principle, see Searle v. Dwelling-house Ins. Co., 152 Mass. 263 , 25 N. E. 290 ; California Ins. Co. v. Gracey, 15 Colo. 70 , 22 Am. St. Rep. 276 , 24 Pac. 577 ; Cobb v. Insurance Co., 11 Kan. 93 ; Exchange Bank of Webb City v. Thuringia Ins. Co., 109 Mo. App. 654 , 83 S. W. 534 ; 13 Am. & Eng. Ency. of Law, 2d ed., 344. In Farnum v. Insurance Co., 83 Cal. 246 , 17 Am. St. Rep. 233 , 23 Pac. 874 , the supreme court of California, in discussing waiver by insurer, said: “It is well settled by a long line of authorities that the denial of all liability upon other grounds is a waiver even of the condition requiring proofs of loss,” and in support of this statement that court cites the following authorities: Continental Ins. Co. v. Buckman, 127 Ill. 364 , 11 Am. St. Rep. 121 , 20 N. E. 77 ; Phoenix Ins. Co. v. Spiers, 87 Ky. 259 , 8 S. W. 453 ; Norwich etc. Transp. Co. v. Western etc. Ins. Co., 34 Conn. 561 , Fed. Cas. No. 10,363; McBride v. Insurance Co., 30 Wis. 562 ; Donahue v. Insurance Co., 56 Vt. 382 ; Lebanon Mut. Ins. Co. v. Erb, 112 Pa. St. 149, 4 Atl. 8 ; Zielke v. Assurance Corp., 64 Wis. 442 , 25 N. W. 436 ; O’Brien v. Insurance Co., 52 Mich. 131 , 17 N. W. 726 ; Ball etc. Wagon Co. v. Aurora etc. Ins. Co., 20 Fed. 232 ; Carroll v. Insurance Co., 72 Cal. 297 , 13 Pac. 863 .

It was held to the same effect in Cobb v. Insurance Co., supra. Respondent contends, however, that since the evidence of plaintiffs themselves shows that the property insured *664 was situated upon a government homestead, the title to which was in the United States, they have shown a breach of the conditions as to the title, and that plaintiffs were not entitled to recover. Now, in the first place, if this is held to be such a failure of title as to defeat the recovery, the plaintiffs would still be entitled to recover if that failure were not specially pleaded by the defendants and relied on as a defense ; and since it must be pleaded as a defense, it is deemed denied under section 4217, Revised Statutes. Plaintiffs would therefore be entitled to the opportunity to rebut any evidence tending to establish such a defense or to show that the insurer had waived the condition, or was estopped from relying thereon. We do not think, however, that the fact of this property being situated on a government homestead, the legal title to which still rests in the government, is a failure of title such as contemplated by the stipulation in the policy relied on by the insurer. The purpose of the insurer inserting such a stipulation in the contract is to enable it to ascertain who is the real owner of the property and on whom the loss would fall in case of destruction of the property. Here no other person, either individual or corporate, has any interest whatever in the real estate. The plaintiffs had located and filed upon the property in compliance with the law, and had apparently taken all the steps necessary to acquire the legal title from the United States. The destruction of the property was no loss to the government. The sole and entire loss fell upon the insured (the homesteader). This clause is found in the policies of most companies, and has been employed by insurance companies for many years. We have examined a great many authorities wherein the courts have considered the purpose and effect of this clause requiring unconditional or fee simple title in the insured, and while insurance companies have been writing policies on property situated on government homesteads for nearly half a century, still our attention has not been called to a single case where an insurer has successfully pleaded such condition as constituting a breach of contract so as to defeat the recovery of the *665 loss insured against. We have examined, however, several eases which by analogy and parity of reasoning sustain us in the view here expressed. (Phoenix Ins. Co. v. Bawdre, 67 Miss. 620 , 19 Am. St. Rep. 326 , 7 South. 596 ; Smith v. Phoenix Ins. Co., 91 Cal. 323 , 25 Am. St. Rep. 191 , 27 Pac. 738 , 13 L. R. A. 475; Capital City Ins. Co. v. Caldwell Bros., 95 Ala. 79 , 10 South. 355 ; 13 Am. & Eng. Ency. of Law, 2d ed., 231-233.)

In this case it does not definitely appear whether the insured made a written application for insurance or simply had a parol understanding with the agent who solicited the risk, If the title disclosed were held to be short of the requirement contained in the policy, still it would not defeat the right of recovery, if it could be shown that the insured, by their written application, truly and correctly represented the state and condition of the title to this property. In such case the insurer could not insert a contrary provision in the policy with knowledge of the true condition of the title, and thereby bind the insured and defeat his right of recovery in case of loss. (Nute v. Hartford Fire Ins. Co., 109 Mo. App. 585 , 83 S. W. 83 ; Syndicate Ins. Co. v. Bohn, 65 Fed. 165 , 12 C. C. A. 531 , 27 L. R. A. 614; In re Millers’ & Manufacturers’ Ins. Co. (Minn.), 106 N. W. 492 ; Davis v. Phoenix Ins. Co., 111 Cal. 409 , 43 Pac. 1115 ; Germania Fire Ins. Co. v. Hick, 125 Ill. 361 , 17 N. E. 792 .)

It is contended by the respondent that the insured had assigned their policy in violation of the stipulation therein against assignment, and that for that reason they could not recover. Upon the trial the plaintiffs were in possession of the policy and produced it in evidence. The possession of the policy by the party named therein as the insured is of itself prima facie evidence of ownership. Being the parties insured, and being in possession of the policy, they had a right to introduce any evidence they had, either written or parol, tending to explain the written assignment contained on the back of the policy, and to show that they were in fact the real owners of the policy, and had always been such. The *666 evidence they were permitted to introduce tended to show that they had never ceased to be the real owners of the policy, and that the only interest of the assignee therein named was merely such an interest as the holder of collateral security acquires in the thing given as security — a mere equity. The legal title remained in the insured. This would not constitute an assignment in violation of the stipulation contained in the policy. (Ellis v. Kreutzinger, 27 Mo. 311 , 72 Am. Dec. 270 ; True v. Manhattan Fire Ins. Co., 26 Fed. 83 ; 19 Cyc. 637; Griffey v. New York Cent. Ins. Co., 100 N. Y. 417 , 52 Am. Rep. 202 , 3 N. E. 309 ; 2 May on Insurance, sec. 379.)

There was disclosed on cross-examination some evidence tending to show that a part of the personal property covered by the insurance had been mortgaged prior to the application for insurance. The evidence, however, on this point is too vague, uncertain and indefinite to enable us to consider or discuss it. The plaintiffs will have a right to meet and rebut such evidence, and that after they have heard the defendant’s case. It is enough to say that it was not sufficient to defeat the plaintiffs’ right of recovery or to take the case from the jury. Upon that issue, when the defendant attempts to establish it, will arise the nature and character of the statements or representations made by the insured at the time of their application for insurance, and the character and extent of knowledge the insurers obtained on the subject prior to writing the policy; also the question of the character of the lien or encumbrance, and the validity and effect thereof, and kindred subjects which have been discussed in many cases bearing on that phase of the insurance law. (Allensina v. London & L. & G. Ins. Co., 45 Or. 441 , 78 Pac. 392 ; 13 Am. & Eng. Ency. of Law, 2d ed., 258.) A great many phases of the law that may become applicable to this case upon a retrial thereof have been very ably and exhaustively considered in respondent’s brief, as also in the brief of appellant. But the ease having come to this court on a judgment of nonsuit in the lower court, we are left by the record in such a position that we cannot consider or pass *667 upon many of these matters. Many of these questions must depend entirely for their application upon the particular facts disclosed. We have passed upon all the questions the record discloses, and the case will necessarily have to be remanded for a new trial. The judgment of the lower court is reversed and the cause remanded, with instruction to the trial court to grant a new trial and proceed in accordance with the views herein expressed. Costs awarded in favor of appellants.

(January 14, 1907.) Stoekslager, C. J., and Sullivan, J., concur.