Continental Insurance v. Reynolds

Burke, J., delivered the opinion of the Court. Frank M. Reynolds sued the Continental Insurance Company, a corporation, in the Superior Court of Baltimore City, and from the judgment entered against it in that action, it has prosecuted this appeal. The suit was in assumpsit, and the declaration contained the six common counts, and one special count, which alleged that on the 16th day of January, 1906, the defendant by its contract, commonly called an insurance policy agreed to insure the plaintiff in the sum of $1,000 against loss by fire to certain property located at Level, in Harford. County; and that a fire occurred on February 20th, 1906, and destroyed said property, and caused a loss of $908.08- 8-9 to - the plaintiff for which he has duly submitted his proof of loss, and the plaintiff has demanded payment, and has been and still is refused payment.

The suit was instituted on the nth day of May, 1906, and on the 23rd of that month the defendant filed the two general issue pleas, upon which issue was joined. One question raised upon the record relates to the premature bringing of the suit, and it is admitted that if this contention of the defendant is well founded no recovery can be had on the policy, as by its terms no suit can be maintained upon it after the lapse of twelve months from the date of the fire. ■ Suit was brought under the Speedy Judgment Act in force in Baltimore City, and the policy sued on was attached to the declaration. Nothing further was done until the 13th day of February, 1907 when the defendant filed four additional pleas numbered 3, 4, 5 and 6. The 3rd, 4th- and 5th pleas were ⁹⁸ based upon a clause in the policy known as “The.

Iron Safe Clause” and set out the failure of the plaintiff to comply with the requirements of that clause. The plaintiff in its replication traversed these pleas, and issue was joined thereon. The defendant’s sixth plea alleged that by the terms and conditions of the policy sued on the plaintiff was entitled to take out another policy of insurance of fifteen hundred dollars in addition to the thousand dollars mentioned in said policy without notice until required, and that after the policy sued on was delivered to the plaintiff, the plaintiff without notice to or consent of the defendant did take out additional insurance to an extent greater than the fifteen hundred dollars allowed by the terms of said policy, to wit: the sum of thirty five hundred dollars additional, and that by reason thereof said policy became null and void. This plea was traversed by the plaintiff and issue was joined thereon; The defendant then interposed a seventh plea which alleged that after the delivery of the policy sued on the same was altered in a material respect without the consent of the defendant and without notice to the defendant, to wit: the words “1,500 other” which were on the said policy when the same was issued, were changed as follows : The figures $1,500 were stricken out in red ink, and the letter o was changed in red ink to the letter O. This plea was likewise traversed by the plaintiff.

The plaintiff then filed a second replication to the defendant’s sixth and seventh pleas which averred that at the time of the issuing of the policy sued on the defendant had notice that the plaintiff had applied for additional insurance in other companies to the aggregate amount of $3,500, and that his application therefor had been accepted, and that the policies for said additional insurance had either been issued to the plaintiff, or would be issued to him within two or three days-from th? date of the issue of the policy sued on in this case. T.o this replication the defendant filed two rejoinders. The .first was a traverse of its allegations, and the second was in these wbrds: “The defendant for a second rejoinder to the plaintiff's replication to the defendant’s sixth - and seventh pleas, ⁹⁹ say's that the policy sued on contains the following conditions, viz: This policy is made and accepted subject to the foregoing stipulations and conditions together with such other provisions, agreements or conditions as may be endorsed hereon or added hereto, and no officer, agent or other representative of this company shall have power to waive any provision or condition of this policy, except such as by the terms of this policy may be the subject of agreement endorsed hereon or added hereto, and as to such provisions and conditions no officer, agent or representative shall have such power or be deemed or held-to have waived such provision or conditions unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached. And the defendant in fact says that the said alleged privilege or permission for the additional insurance mentioned in said replication never was endorsed upon the policy sued on, nor written or attached thereto — as will appear upon inspection of said policy filed with the declaration.” This rejoinder was demurred to by the plaintiff, and the demurrer was sustained.

This ruling raises the most important question in the case, but one which we think has been settled by adjudged cases in this Court. The determination of this question in favor of the plaintiff, in the view we take of the case, will free it in many respects of all difficulty. The demurrer was properly sustained, because the facts therein alleged do not constitute either at law, or in equity an answer to the matters alleged in the replication. Assuming the truth of every fact alleged in this rejoinder, as we are required to do under the demurrer, it interposes no bar to the plaintiff’s right to recover under the issues made by the pleading.

In the National Fire Insurance Company v. Crane, 16 Md. 260 , which was a suit in •equity on a fire insurance policy which provided that if the assured had taken out any other insurance on the property, the policy should be void, unless he notified the same to the company, and caused the same to be endorsed upon the policy. ¹⁰⁰ the Court dealing with the effect of this provision upon the plaintiff’s right to recover under the facts in evidence, said: “Whatever effect the want of such an endorsement may have at law, in an action on a policy, we think it cannot be urged in a Court of equity, in a cause otherwise free from objection. The Judge below has correctly stated the law on the subject. The endorsement could only have been made by the company. If it be omitted, who is to blame ?

Certainly not the assured. These policies contain many stipulations — some of them operating as conditions precedent — for the benefit of the company, and few for that of the assured. It is too common for application to be met, an adjustment refused on frivolous and unjust pretenses, in order to defeat fair claims, on contracts of which good faith is the very essence, and we think it would promote the interest of insurance companies, and tend to a higher state of morals in business transactions, if they would exhibit more readiness to settle demands upon them, than, as we discover from numerous reported cases on the subject, appears to be usual with them. ' In this case the president, of the company dictated the application himself; the prior insurance was made known to him; the parties relied upon him; they never went to the office of the company, he came to the counting house of the complainant, seeking the risk, and after hearing all they had to say on the subject, he departed, ánd soon after sent the policy, and received the premium, his clerk saying that it was all right; the only defect, however, being that the company had omitted part of its own duty in not endorsing the-former insurance. In such a case we are called Upon to say that the party is without remedy; on the contrary, we think it would be a reproach to the jurisprudence of the State, if this company were discharged from their contract on such grounds.

There is-a distinction in the cases where the preparation of an instrument belongs to the party to become liable under it; he ought to be dealt with more strictly. 19 Ves. 257. Insurance contracts are within this principle, and equity will.interpose not only in cases of fraud, but also of mistake, where a policy is drawn up in form different from ¹⁰¹ the application, or anything is omitted which it is the duty- Qf the company to insert, or endorse on the instrument.” . ._ The principle of equitable estoppel announced in that case was applied at law in Maryland Fire Insurance Company v. Gusdorf, 43 Md. 506 . In this case the Court said that since the decision in Crane’s case: “The doctrine of equitable estoppel has, especially in insurance cases, been extended and applied at law as well as in equity, by adjudication of the Courts of last resort in many other States, and the current and weight of judicial precedent and authority in this country, have established the proposition that, in such cases, the estoppel is equally available in either tribunal. The Supreme Court in Wilkinson case, 13 Wallace, 222, has also in a very able opinion sustained this position.

That was an action at law on a life insurance policy, in which some of the answers to the written interrogatories in the application, made material to a risk, were proved to be untrue. Parol evidence was then introduced by the plaintiff, to show that his answers were in fact put in by the company’s agent, on his own judgment, based on information derived from other sources than the statement of the applicant who refused to answer in these particulars, saying he knew nothing of the matters inquired of. The Court held the evidence admissible, and that the company was estopped by these acts of the agent, who in thus filling up the application was to be regarded as their agent, notwithstanding the application was signed by the applicant, and the answers purported on the face of the instrument to be his answers. The Court in their opinion, whilst ascribing to the rule of evidence in its just importance, yet affixed to it the proper limitation that it ought not to become the instrument of the very fraud it was intended to prevent, and after adverting to the facts of the case say “it is in precisely such cases as this, that Courts of law in modern times have introduced the doctrine of equitable estoppel, or as it is sometimes called estoppel in