Case Name: L. R. BRIGGS v. LIFE INSURANCE COMPANY OF VIRGINIA
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1911-04-26
Citations: 155 N.C. 73
Docket Number: 
Parties: L. R. BRIGGS v. LIFE INSURANCE COMPANY OF VIRGINIA.
Judges: 
Reporter: North Carolina Reports
Volume: 155
Pages: 73–78

Head Matter:
L. R. BRIGGS v. LIFE INSURANCE COMPANY OF VIRGINIA.
(Filed 26 April, 1911.)
1. Insurance — Contracts — Procurement—Ignorance—Misrepresentations — Fraud.
It is fraud in law for an agent of an insurance company to induce an illiterate and ignorant old man, trusting in his honesty, to take a policy of insurance by falsely representing that the policy provided for the repayment with interest of all the premiums paid thereon after the expiration of a ten years’ period of insurance; and the fraud is not waived because the insured requested the agent to read the policy to him, confiding in the fair dealing of the agent, when the policy was falsely read to him.
2. Same — Equality of Knowledge.
An illiterate and ignorant old man dealing with an insurance agent for a policy of insurance is not deemed to have equal knowledge with the agent as to the meaning of the stipulations contained in a policy, and an action to set aside the contract for fraud and deceit will lie when the insured was induced by false and material representations to take out the policy.
3. Insurance — Principal and Agent — Respondeat Superior.
The fraudulent misrepresentations of an agent of an insurance company, which would be sufficient if made directly by the principal to set aside a policy thereby procured, binds the company, and the doctrine of respondeat superior applies. Peebles v. Quano Oo., 77 N. 0., 233, approved; Medicine Oo. v. Misiell, 148 N. C., 383, cited and distinguished.
4. Insurance — Contracts—Fraud—Measure of Damages.
When an insurance policy has been cancelled for fraud in its procurement by the company, the measure of damages is the amount of the premiums paid, with interest.
Appeal from Lyon, J., at the October Term, 1910, of DURHAM.
The facts are sufficiently stated in the opinion by Mr. Justice Waller.
Branham & Bromley and Manning & Everett for plaintiff.
Bryant & Brogden for defendant.

Opinion:
Walker, I.
This action was brought to recover damages for fraud and deceit practised upon the plaintiff, by which he was induced to accept certain policies of insurance from the defendant upon the lives of his children, the false representation being that the company had issued the policies with a provision that at the end of the insurance period, which was ten years, the plaintiff would be entitled to receive the total amount of premiums paid by him with four cent interest. The plaintiff alleged that this representation was made, that it was false and intended and calculated to deceive him, and that he relied upon it, believing it to be true, and was induced thereby to accept the insurance and pay the premiums thereon from time to time, as they matured; that he demanded payment of the money, according to the stipulation, and it was refused, and he prosecutes this action to recover it. Issues were submitted to the jury and they found the facts to be as alleged by the plaintiff, and assessed the damages at $101.37. The court entered judgment upon the verdict, and the defendant, upon its exceptions to the rulings of the court, brought the case here for review.
There was evidence sufficient to carry the case to the jury upon the issues formulated for their consideration. It appears therefrom that the plaintiff could not read or write and had to rely upon the reading and representation of the defendant's agent, who negotiated the insurance, for his understanding of its terms, and especially did he have to rely upon him to give correct information as to its contents with reference to the stipulation for a return of the premiums and interest, and he thought the policy contained this provision when he received it from him, relying upon his honesty and integrity in all his dealings with him. It turned out that the paper was falsely read and explained to him. This is, in law, a fraud. It was an advantage taken of plaintiff's illiteracy in order to induce tbe making of tbe contract. As tbe plaintiff was unable to read and understand tbe terms of tbe policies, it will not be imputed to bim as a negligent act that be requested tbe agent to read it to bim and afterwards acted in reliance irpon wbat be said. He-was not bound to deal witb bim as if be were a rascal and unworthy of bis trust, and by confiding in bim be bas not waived any of his rights. Tbe act of tbe agent is none tbe less a fraud because this old and ignorant man trusted in bis honor and sense of fair dealing. McArthur v. Johnson, 61 N. C., 317; Hayes v. R. R., 143 N. C., 125.
We are unable to distinguish this case from those of a like kind which have been so recently decided by this Court. Caldwell v. Insurance Co., 140 N. C., 100; Sykes v. Insurance Co., 148 N. C., 13; Stroud v. Insurance Co., 148 N. C., 54; Whitehurst v. Insurance Co.,. 149 N. C., 273; Jones v. Insurance Co., 151 N. C., 54; Jones v. Insurance Co., 153 N. C., 388. As said in Caldwell v. Insurance Co., supra: "She could not read tbe policies, and it is no serious reflection upon her intelligence to surmise that, if she could have done so, she would not have been very much wiser." Tbe plaintiff, as tbe evidence tends to show, was not only illiterate, but below tbe average in intelligence and incapable of coping witb a man who bad full knowledge of all tbe intricacies of life insurance, and was trained by habit and experience to catch tbe unwary. He bad a decided advantage-of tbe plaintiff, who was not by any means at arms' length witb bim, and be forgot bis duty in an over-zealous effort to advance-tbe interests of bis company, when be availed himself of bis greater superiority and thus procured tbe contract. "He (tbe plaintiff) was an easy mark for tbe false and fraudulent practices of tbe defendant's agent, who was evidently a man of much superior intelligence. There was some evidence to tbe contrary, but wbat was tbe fact in this conflict of testimony was a question for tbe jury. Tbe agent, it seems, took advantage of tbe plaintiff's ignorance and misled bim as to tbe true nature of tbe contract. Tbe policy was so worded as to leave some room for doubt and uncertainty as to wbat or bow much tbe plaintiff would receive at tbe end of tbe insurance period, and wbat tbe agent said in explanation of it was fairly calculated to mislead an ignorant man." Sykes v. Insurance Co., 148 N. C., 13. This case is much like Jones v. Insurance Co., 151 N. C., 54, except that the evidence now before us is much stronger to show fraud than was the evidence in that case. What is there said, though, is strictly applicable to the facts now under consideration.
But the defendant contends that what the agent said was not binding upon his principal, the defendant, as no authority in him is shown to make the fraudulent representations. We can well answer this contention by stating what was said in regard to a similar one in Peebles v. Guano Co., 77 N. C., 233: "There is no reason that occurs to us why a different rule should be applicable to cases of deceit from what applies to other torts. A corporation can only act through its agents, and must be responsible for their acts. It is of the greatest public importance that it should be so. If a manufacturing and trading corporation is not responsible for the false and fraudulent representations of its agents, those who deal with it will be practically without redress and the corporation can commit fraud with impunity." So in Mfg. Co. v. Davis, 147 N. C., 267, the present Chief Justice says: "The plaintiff company is liable for the fraudulent representations of its salesman and agent which were made to defendant to induce the trade and acted upon by defendant to his injury. This would be so whether the agency of Guy were general or special. Hunter v. Matthias, 90 N. C., 105; Peebles v. Patapsco Co., 77 N. C., 233; 1 A. & E. Enc. (2d Ed.), 1143." Yan.ce, in his treatise on Insurance, at page 341, speaking of clauses in policies relieving the companies of liability for any stipulation or representation made by an agent and not contained in the policy, and forbidding him to change the terms of the contract as written in the policy, says: "Closely related in principle to the attempted limitations just discussed, and usually contained in the same term of the policy or application, are those agreements whereby the insurer seeks to escape responsibility for fraud perpetrated by the agent in the course of the transaction looking to the procurement of the policy. It is a fundamental principle that one shall not be allowed to exempt himself by contract from liability by reason of the fraud of his servants or agents. It would seem, therefore, necessarily to follow that any agreement contained in the policy, by which the insurer is relieved from the consequences of his agent's fraud in making the contract of insurance, is necessarily without effect." In our case, the plaintiff seeks to recover damages for the deceit practiced upon him by the agent or to have the contract rescinded because of the fraud and recover the premiums paid by him, and the verdict is sufficient to entitle him to this relief. In this connection, what is said in Caldwell v. Insurance Co., 140 N. C., at page 105, is applicable: "The court correctly announced the law which gives relief, the jury upon ample evidence have found the facts as testified by the plaintiff. It is admitted that the policies do not entitle her to receive the amount paid in or any other amount at the end of ten years; that on the contrary, she forfeits all that she has paid. Upon the verdict the law declares that as she cannot have what was promised to her, she must have her money back with interest. If the defendant has been compelled to carry the risk during the life of the policies without compensation, it must look to its accredited agent, whom the jury finds made the false representation. This Court has uniformly held that in such cases the measure of relief is the amount paid with interest." What the rate of interest should be under the circumstances is not a question in the case. In Floars v. Insurance Co., 144 N. C., 232, the plaintiff sought to reform the policy and recover accordingly, and the question of the agent's authority to make the reformed contract became material in order to ascertain whether there had been any mistake on the part of the company through its agent, or whether it had delivered the very policy intended by it, for in order to a reformation or correction of the instrument, a material mistake of both the parties must have been shown, and not merely the mistake of one of them. So in Sykes v. Insurance Co., 148 N. C., 13, no point as to the agent's authority was involved. We were dealing merely with a verdict which found that "the defendant, through its agent," had made the false representation, and the question was whether the verdict was sufficient in its findings to entitle tbe plaintiff to a reformation of tbe policy, and to recover tbe premiums paid witb tbe stipulated interest. We held- tbat be was, though we also intimated tbat be might have recovered damages for the- deceit, when we said: "It would seem tbat when a plaintiff sues to recover damages for deceit be should be recompensed in damages to tbe extent of placing him in as good a position as be would have occupied if tbe contract bad been as represented. In Heddon v. Griffen, 136 Mass., at page 232, where it appeared tbat a fraudulent representation bad been made as to a policy of insurance, tbe Court said: 'We are of tbe opinion tbat under tbe circumstances be (tbe plaintiff) has a right to recover damages of tbe defendant to an amount which will put him in tbe same position as if tbe fraud bad not been practiced on him.' Our case is stronger than this one, for there tbe contract was still executory, but here tbe full insurance period bad elapsed. Tbe plaintiff bad received tbe insurance which it was represented be would receive, and is now suing for tbe balance due, if tbe defendant is required to make good its deceitful representation."
Tbe question in Medicine Co. v. Mizell, 148 N. C., 385, which case is relied on by tbe defendant, is quite different from tbe one in this case. There evidence of tbe verbal declarations or statements of an agent, without authority to make them, was admitted to vary tbe terms of a written contract, and we beld, in accordance witb tbe well settled rule, tbat it was incompetent and should have been excluded. There was no question of fraud in tbat case. Tbe defendant could read and signed tbe contract, well knowing what it contained, and thereby freely assented to tbe provision tbat there was "no agreement, verbal or otherwise, affecting tbe terms of tbe order (for tbe goods) other than specified therein." Tbat is not like our case.
We find no error, and it must be so declared.
No error.