Case Name: Edward C. Moore Company, Respondent, v. The American Credit Indemnity Company of New York, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1915-12-30
Citations: 170 A.D. 660
Docket Number: 
Parties: Edward C. Moore Company, Respondent, v. The American Credit Indemnity Company of New York, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 170
Pages: 660–665

Head Matter:
Edward C. Moore Company, Respondent, v. The American Credit Indemnity Company of New York, Appellant.
First Department,
December 30, 1915.
Insurance — credit indemnity — breach of warranty respecting outstanding claims of assured — when no question for jury — principal and agent — provision that policy cannot be modified except by specified officers of insurer — unauthorized representations by agent — estoppel — examination of books of assured.
Where the applicant for a credit indemnity policy expressly warranted, first, that the outstanding claims of the applicant were a certain sum; second, that a “ small proportion ” of said outstandings were past due, and, third, that there were no outstandings under extension, there can be no recovery on the policy when the undisputed evidence shows that the outstandings were $40,000 more than the warranty and two-thirds of the outstandings were past due and more than one-half were under extension.
Such facts being undisputed, there was no question which could properly • be submitted to the jury, there being a breach of warranty as a matter of law.
Where the policy provided that no person other than the president or secretary of the insurer could alter the terms of the bond or waive the rights of the insurer, etc., the latter is not bound by the statement of its soliciting agent to the effect that the written application was a mere matter of form, nor does such testimony raise any question for the jury as to the nature of the warranty.
The insurer is not estopped from claiming a breach of warranty because its auditor examined the books of the assured after the policy was granted where it appears that the examination was not made in reference to the present policy but with respect to one issued for the preceding year. Smith and Dowedxu, JJ., dissented, with opinion.
Appeal by the defendant, The American Credit Indemnity Company of New York, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 3d day of April, 1915, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 5th day of April, 1915, denying defendant’s motion for a new trial made upon the minutes.
Walter J. Rosenstein, for the appellant.
Don R. Almy, for the respondent.

Opinion:
Laughlin, J.:
I am unable to agree with the views expressed by Mr. Justice Smith, with respect to the construction of the provisions of the application, which by the terms of the policy were made warranties, and with respect to the effect of some of the evidence, and I think the judgment and order should be reversed.
In the first place the uncontroverted evidence shows that the word "outstandings" embraces not only accounts unpaid, but bills receivable including notes for -unpaid accounts. The plaintiff represented that the amount of its outstandings was about $325,000. The evidence shows that there were about $365,000, or $40,000 more than represented. The court, however, instructed the jury as matter of law that this was not a misrepresentation, but the correctness of that ruling is not presented for decision. The court ruled that the evidence presented a question of fact as to whether there was a breach of warranty with respect to the amount of outstandings past due and the amount of outstandings under extension. I am of opinion that as matter of law the evidence showed a breach of each' of these warranties. The outstandings represented in the application to be about $325,000, but which were in fact about $365,000, included $46,055.45 in open accounts which were past due, and notes for $191,357.22 which were either renewal notes or renewals of renewal notes for unpaid accounts, all of which accounts were past due, but the notes were not due, and they clearly represented outstandings under extension. It thus appears that about two-thirds of the outstandings were past due and more than one-half were under extension. There was no evidence, therefore, I think, requiring the submission of the case to the jury, for upon no theory would a jury be warranted in saying that two-thirds is only a small proportion of three-thirds, or that there were no outstandings under extension when more than one-half were under extension. I am of opinion that the warranty with respect to outstandings under extension related to the same outstandings covered by the first warranty, in which the total amount thereof was called for, and not to the outstanding open accounts past due. The construction of these provisions of the warranty cannot be extended by the testimony of the defendant's solicit- rag agent, for it was provided in the policy that " No person other than the President or Secretary of the Company has authority or power to change or alter or modify any of the terms or provisions of this Bond, or to waive any right of the Company thereunder, and no such change, alteration,. modification or waiver shall be valid or effective, unless it is made in writing over the signature of the President or Secretary. Nor shall knowledge on the part of, or notice to any agent or any representative other than the President or Secretary, whether before or after the execution of this Bond, estop or debar the Company from enforcing any of the provisions of this Bond, or be held to be a waiver thereof." I am of opinion that there is no basis in the evidence for the contention that the defendant was estopped from claiming a breach of these warranties. That was predicated upon evidence tending to show that the defendant's soliciting agent represented that the filling out of the blanks in this written application was a mere matter of form, which was, I think, erroneously submitted to the jury. It is further contended now that the defendant was estopped owing to the fact that its auditor examined the books of the plaintiff some two months after the application was made and thereby was afforded an opportunity to discover the manner in which the plaintiff was doing business and the extent to which its accounts and bills receivable were outstanding; but it appears that that examination was not made with reference to this policy, but with respect to a policy issued for the preceding year. The auditor testified that he did not examine the condition of the outstanding accounts, and, therefore, it cannot be said that the defendant, with knowledge of the breaches of the warranties, ratified the policy.
The judgment and order should, therefore, be reversed and a verdict directed in favor of the defendant, on its motion for a direction of a verdict at the close of the evidence, to the denial of which an exception was duly taken.
Ingraham, P. J., and Clarke, J., concurred; Smith and Dowling, JJ., dissented.