Court Opinion

ID: 5238887
Source: CourtListenerOpinion
Date Created: 2022-01-06 17:20:48.156964+00
Date Added: 2024-06-11T08:27:46.579023
License: Public Domain

Smith, J. (dissenting):
This action is upon a credit indemnity policy. Plaintiff has recovered judgment for $15,000, the amount of the policy. *663Defendant challenges the judgment upon the ground that two warranties in the plaintiff’s application were breached.
Three warranties were made in the application: First, that the outstandings of the plaintiff amounted to about $325,000; second, that the amount of outstandings past due amounted to a small proportion; and third, that there were no outstandings under extension. The second and third of these representations, made warranties by the policy, are alleged to have been untrue.
The amount of outstandings, including accounts due and bills receivable, was about $365,000. The first representation, that they amounted to about $325,000 is not challenged. The bills receivable amounted to $270,000. Although many of these were renewals of former notes, none of them were due at the time of the application. The accounts receivable amounted to $95,000. Of these $58,000 were past due at the time the application was made. The court properly left to the jury to say whether within the meaning of the application $58,000 was more than a small proportion of $365,000 actually outstanding.
A more serious question arises in respect of the third representation, to the effect that there were no outstandings under extension. The application was taken by one Treat, who was a brother of the president of the defendant company and was named upon the defendant’s stationery as its general agent. The proof would seem to indicate, however, that his agency was limited; at least that he was not an agent with power to issue policies, but only to report applications to the company, which itself issued these policies. When these representations were made, Treat asked the plaintiff’s officers what was the amount of their outstandings, saying that it was a mere matter of form and that it need only be approximate, and they told him about $325,000. Treat then asked how much of the outstandings were. past due, and they stated a small proportion. Plaintiff’s testimony is that this phrase was at Treat’s suggestion. Treat then asked how many past dues had been extended; plaintiff asked what he meant, and he said, “How many of these past dues have been extended to some definite date for payment?” and plaintiff answered, “None.” This evidence is the evidence of Treat himself. The fact appears that of the $270,000 of bills *664receivable, many were renewal notes and renewals of renewals, some of them reaching back a number of years. If these renewal notes áre to be deemed outstandings under extension, it is clear that the plaintiff’s warranty has been broken. The question asked in the application as to the amount of “outstandings under extension” is in the phraseology of the defendant company, and if there be ambiguity in the meaning of this phrase by which the plaintiff has been misled in making its answer, the defendant is not fairly entitled to claim that the warranty has been broken by an incorrect answer. While by a technical interpretation a renewal note is an outstanding under extension, it cannot be said that the interpretation- of the question is entirely free from doubt, and when in addition the soliciting agent of the defendant in response to the plaintiff’s request as to what was meant by the expression, stated that it referred to “ these past dues [which] have been extended to some definite date,” the plaintiff was fairly justified in interpreting the expression as referring to the past dues which had been considered in the answer to the former question, that is, the $58,000 spoken of as a small proportion of the amount of outstandings. As to these the representation was true. That it was not understood by either party to refer to the renewal notes seems to me clear. In every business with outstandings amounting to $325,000, as was stated in answering the first question, some bills receivable must be renewal notes, and this fact must be deemed to have been so understood by the parties. When, therefore, the plaintiff answered that question and stated that there were no out-standings under extension, Treat must have known, and the company upon receiving the application must fairly be deemed to have known, that the renewal- notes were not understood to be included in this representation. This conclusion is further strengthened by the fact that within two months from the time this application was made the defendant’s auditor examined the plaintiff’s books and there found the exact situation. After.that examination no objection was made that the condition of the company had been falsely represented, and the defendant, with knowledge of the fact of the existence of these renewal notes at the time the application was made, treated *665the policy as a valid policy and advised with the plaintiff as to what course to pursue in reference to certain debtors who had gone into bankruptcy.
The question here is not whether an agent with full knowledge of a misrepresentation in an application may waive the effect of that misrepresentation, but whether a company is bound by the interpretation of an ambiguous clause in an application made to the applicant by an agent authorized to solicit that insurance. In our judgment the company is so bound, both by reason and authority. (Bennett v. North British, etc., Ins. Co., 81 N. Y. 273; Standard Life & Accident Ins. Co. v. Fraser, 76 Fed. Rep. 705.)
The judgment and order should be affirmed, with costs.
Dowling, J., concurred.
Judgment and order reversed, with costs, and verdict directed for defendant as stated in opinion.