Opinion ID: 199312
Heading Depth: 4
Heading Rank: 1

Heading: Invest Almaz's Faithless-Agent Defense

Text: 48 Invest Almaz's argument that a principal is not chargeable with knowledge obtained by a faithless agent relies on Boucouvalas v. John Hancock Mut. Life Ins. Co., 5 A.2d 721 (N.H. 1939). In Boucouvalas, the defendant insurer sought to be relieved of its obligations under a life insurance policy procured through the fraud of its agent. The agent, in completing paperwork for an illiterate applicant, had deliberately omitted information the applicant provided concerning a serious illness. When the applicant died shortly thereafter from the same illness, the insurer argued that it was not chargeable with knowledge of the plaintiff's illness and therefore not bound by the policy. 49 The New Hampshire Supreme Court ruled for the defendant, reversing an earlier decision, Domocaris v. Ins. Co., 123 A. 220 (N.H. 1923), which had held that an insurer was chargeable with knowledge of a deceitful agent. In its decision, the Boucouvalas court cited back to pre-Domocaris precedent holding that the principal is not charged with the knowledge of his agent when the latter is engaged in committing an independent, fraudulent act on his own account, and the facts to be imputed relate to this fraudulent act. Brookhouse v. Union Publ'g Co., 62 A. 219, 222 (N.H. 1905); see also Warren v. Hayes, 68 A. 193, 194 (N.H. 1907) (The test, therefore, to determine whether an agent's knowledge is to be imputed to his principal is to inquire whether or not the agent was acting for the principal when he did that in respect to which is sought to charge the principal with his knowledge.). The court acknowledged that there was no evidence of wrongdoing by the applicant, but nonetheless concluded that he (or, in this case, his beneficiary) was entitled to no more than a refund of premiums paid. SeeBoucouvalas, 5 A.2d at 724. 50 Although Boucouvalas has never been overruled, and has been followed on at least one occasion, see LeClerc v. Prudential Ins. Co. of Am., 39 A.2d 763 (N.H. 1944), we harbor some doubt concerning its vitality and applicability to this case. In the majority of jurisdictions, the law has evolved towards a recognition that information given to even a fraudulent agent should normally be imputed to the principal, unless the third party providing the information has notice that the agent is acting adversely or otherwise colludes with the faithless agent. See B. H. Glenn, Insured's Responsibility for False Answers Inserted by Insurer's Agent in Application Following Correct Answers by Insured, or Incorrect Answers Suggested by Agent, 26 A.L.R.3d 6, 33-45 (1969 & Supp. 2000) (showing state courts to be virtually unanimous in holding that knowledge of an insurance agent will be imputed to insurer, despite fraud of agent, unless the applicant has notice of the fraud); see also Restatement (Second) of Agency § 282, cmt. d (adopting the same position as a general principle of agency law). While the New Hampshire Supreme Court has not yet formally adopted this view, it has expressed clear misgivings about Boucouvalas. See Mut. Benefit Life Ins. v. Gruette, 529 A.2d 870, 872-73 (N.H. 1987) (conceding that the Boucouvalas rule acts harshly as to [those] who fall prey to devious agents and noting public policy reasons supporting its reversal, but concluding that factual circumstances of the case -- including evidence of collusion between the applicant and agent -- [did] not furnish an appropriate basis for returning to the rule of Domocaris); seealso Perkins v. John Hancock Mut. Life Ins. Co., 128 A.2d 207, 208 (N.H. 1956) (questioning whether, in light of Boucouvalas, New Hampshire insurance law permits the issuance of a policy to bind the insurer to the extent that reasonable person in the position of the insured would understand that it did but concluding that the problem was more properly resolved by the legislature); Taylor v. Metro. Life Ins. Co., 214 A.2d 109, 113 (N.H. 1965) (same). It also appears that Boucouvalas has been limited to its facts by the New Hampshire Supreme Court: although the pre-Domocaris cases to which Boucouvalas refers involved a range of factual circumstances, we find no subsequent case applying the rule except in the context of duplicitous insurance agents. 51 Nonetheless, given our obligation in diversity cases to determine the rule that the state Supreme Court would probably follow, Moores v. Greenberg, 834 F.2d 1105, 1107 n.3 (1st Cir. 1987) (internal punctuation marks omitted), we find these doubts to be insufficient grounds for ruling that Boucouvalas is either invalid or inapplicable. The New Hampshire Supreme Court has not seen fit to overrule Boucouvalas, and we cannot reasonably assume that it would do so now, if it faced the issue directly. In addition, we find support for Boucouvalas' holding and its applicability to the present facts in New Hampshire's Uniform Partnership Act (UPA), which states, in pertinent part: 52 Notice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting in the particular matter, acquired while a partner . . . operates as notice to or knowledge of the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner. 53 N.H. Rev. Stat. Ann. § 304-A:12 (emphasis added). 21 The New Hampshire Supreme Court looks to state partnership law in deciding cases involving joint ventures. Miami Subs Corp. v. Murray Family Trust, 703 A.2d 1366, 1370 (N.H. 1997). Although this provision of the UPA has not been given an authoritative reading by the New Hampshire Supreme Court, we find its plain language sufficiently persuasive to outweigh our doubts concerning the applicability of the rule of Boucouvalas. 54 Having accepted that Invest Almaz's faithless agent defense is available as a matter of New Hampshire law, we still must determine whether there is sufficient evidence that Pathex was engaged in a fraud against Invest Almaz to justify its application here. Unlike Invest Almaz, we do not consider the issue free from dispute. While the Pathex former president, Charles Kosa, admitted that information regarding the plant was not conveyed to Invest Almaz, Kosa suggested that this occurred because Pathex believed the joint venture agreement assigned it primary responsibility for selecting, purchasing and preparing a suitable plant. Nonetheless, we think enough evidence was introduced to permit a reasonable jury to find that Pathex intentionally withheld the information as part of an effort to conceal from Invest Almaz the condition and value of the facility. Therefore, for purposes of Temple-Inland's motion for judgment as a matter of law, Invest Almaz should not have been charged with knowledge of information that was never revealed to it by Pathex. 55