Court Opinion

ID: 9442641
Source: CourtListenerOpinion
Date Created: 2023-08-03 18:54:38.924766+00
Date Added: 2024-06-11T17:29:10.286193
License: Public Domain

PICKETT, Circuit Judge
(dissenting).
The trial court found that the plaintiff’s agent Carr, solicited business on behalf of the plaintiff, classified insurance risks, countersigned and delivered policies, collected premiums, investigated claims, and was paid on a commission basis; that in the negotiations between Ogden and Carr, Ogden stated that he desired a policy which would cover all of his operations at the store; that Carr advised him that the type of policy which he proposed would give such complete coverage; that at the time of these negotiations Carr had full knowledge of all the operations conducted by Ogden at his store including the fact that butane was handled there; that Carr was fully aware of the procedure by which empty gas cylinders were left at the store by customers and were brought back when filled; that Carr and Ogden intended that the policy should cover the risk of these operations; that pursuant to this understanding, Ogden agreed to purchase the policy; that Carr forwarded to the plaintiff’s office in Salt Lake City, Utah, a memorandum setting forth the type of policy to be issued including the classification of the risk upon which the premium rate was based; that the classification of risk was selected by Carr from the company’s manual of rate and risk classifications upon ¡his own initiative and with full knowledge of the business conducted .by Ogden; that such classification was without the knowledge of or consultation with Ogden; that Carr requested the company to issue an Owners’, *449Landlords’ and Tenants’ liability policy to Ogden describing the risk as “Approx. 25 x 100 Retail NOC. 135,”; that plaintiff accepted Carr’s classification of the risk and issued the policy which was countersigned by Carr and delivered to Ogden. These findings are supported by the evidence.
It is a general rule that when a policy of insurance is issued the terms set forth in the policy constitute the contract between the parties. Ordinarily parol evidence will not be admitted to vary the terms of the policy. Lumber Underwriters v. Rife, 237 U. S. 605, 609, 35 S.Ct. 717, 59 L.Ed. 1140; Northern Assurance Co. v. Grand View Building Association, 183 U.S. 308, 321, 22 S.Ct. 133, 46 L.Ed. 213; Field v. Missouri State Life Insurance Co., 77 Utah 45, 290 P. 979, 982. Neither is there any doubt that the coverage of any policy cannot be extended by waiver or estoppel. Carnes & Co. v. Employers’ Liability Assurance Corp., 5 Cir., 101 F.2d 739, 742; Carew, Shaw & Bernasconi v. General Casualty Co., 189 Wash. 329, 65 P.2d 689, 692. It seems to me, however, that we have a different situation in this case than in those cited above and others relied upon by the plaintiff. Here the insurance contract negotiated and purchased was not the one delivered to the purchaser. It is without dispute that Ogden desired a policy that would cover his entire operations at his store and that Carr, representing the company, intended to deliver a policy for such coverage. The actual contract intended was for such coverage. The company’s agent and the insured thought that this had been accomplished. Carr requested the company to “write OL&T for the above 50/100/50 — approx. 25 x 100 retail. NOC. 135 — $19.55” 1 and “represented to him that 'he was getting complete coverage on all his operations.” The record does not disclose where the company obtained the description of hazard shown on the policy as “Stores — Clothing or Wearing Apparel — Retail (135).” The delivered policy, if construed as claimed by the company, was not the contract negotiated; and to permit the company, after a loss had been incurred, to avoid liability would constitute a constructive fraud or at least inequitable conduct.
Where parties to an instrument intend to accomplish a particular object, and because of mutual mistake or misunderstanding such purpose is not accomplished, equity may reform the instrument to effectuate the intention.2 In such cases courts of equity will not alter the terms of a written instrument unless required to do so by clear and convincing evidence. Columbian National Life Ins. Co. v. Black, supra; Shell Pet. Corp. v. Corn, supra. That strict requirement is met here as the evidence is uncontradicted as to what the company’s agent and Ogden intended. The fact that the coverage claimed would carry a higher premium would not prevent reformation in the absence of collusion or fraud. Plaintiff’s agent had a rate book; the rates were exclusively within his knowledge; he knew what the risk was and made the selection which fixed the rate and he advised the insured that the policy covered the business and that the company had accepted the premiums. In Ohio Casualty Ins. Co. v. Callaway, 10 Cir., 134 F.2d 788, 790, this court said: “Knie was a policy writing ■agent, and as such was authorized to enter into insurance contracts for and on behalf of the appellant, and his statements and conduct in connection therewith are binding upon his principal. Commercial Casualty Ins. Company v. Connellee, 156 Okl. 170, 9 P.2d 952; Home Insurance Company of New York v. Sullivan Machinery Company, 10 Cir., 64 F.2d 765; Westchester Fire Insurance Company v. Federal Na*450tional Bank, 135 Okl. 47, 273 P. 889, 891; Commercial Casualty Insurance Company v. Varner, 160 Okl. 141, 16 P.2d 118; United States Fire Insurance Company of New York v. Rayburn, 183 Okl. 271, 81 P.2d 313. He knew the type and the kind of risk to be insured; ¡he also knew that with the attached endorsement, the insured would not have full coverage, and he had, according to the testimony,.agreed to write a policy covering every accident, every fire, and ■every damage. The insured relied upon his representations by accepting the policy and paying the premiums thereon, and having the same delivered to the bank along with the fire insurance policy. True, if the insured had read the policy, he would have found that it did not cover every accident and every damage, but in these circumstances we think the insured’s failure to read the policy did not- amount to negligence barring reformation.”
Ogden has relied upon the defense of. estoppel; Courts of equity are within their rights to see that equity is done, whether it is called waiver, estoppel, constructive fraud or inequitable conduct. Here, the pleadings, the evidence and the court’s findings show that the policy did not contain the actual agreement between the parties. The judgment is correct upon the real contract; the fact that reformation was not sought would not warrant a reversal as the judgment upon reformation would be the same. Pacific Nat. Fire Ins. Co. v. Smith Bros. Drilling Co., 196 Okl. 74, 162 P.2d 871, 874.
I am also satisfied, that the company is not in position to complain about the classification. The agent had full knowledge of the- business of insured and represented to him that the policy in all respects covered this business. The insured paid for the policy relying on the agent to properly describe his business and classify the risk. The company should be bound by the terms of the contract as it was entered into and understood between the agent and the insured. To hold otherwise would require every insured to examine his policy then make a study of the company’s rate structure and methods of classification of risks, which he knows nothing about, and in most cases consult an attorney or other expert, or request information from the company’s home office, to determine 'his coverage regardless of what he ordered or what the agent represented to him. Arneberg v. Continental Casualty Co., 178 Wis. 428, 190 N.W. 97, 29 A.L.R. 93; cases collected 29 A.L.R. 99; Bryan v. Travelers Ins. Co. 32 Wash.2d 289, 201 P.2d 502, 8 A.L.R.2d 467, cases collected 8 A.L.R.2d 500. The-policy described the risk as “Stores — Clothing or Wearing Apparel — Retail. (135) (a) 2500 .446 .12 12.40 7.55". I doubt if reading this technically worded policy would have been much help to the insured-The description does refer to “clothing and wearing apparel.” It also refers to “stores” and numbers which have no meaning except possibly to the company. There is a familiar rule of construction of insurance contracts that if there is any ambiguity it shall be construed against the insurer who prepared it. Cases collected 8 A.L.R.2d 493. The clothing and wearing apparel business of the insured was limited to sport jackets and shirts and composed a small portion of his business. I do not believe that the liability of the insurance company should be limited to the selling of shirts or sport jackets. I find nothing in the Utah law or decisions contrary to the above views. Kelly v. Richards, 95 Utah 560, 83 P.2d 731, 129 A.L.R. 164; Sullivan v. Beneficial Life Ins. Co., 91 Utah 405, 64 P.2d 351; Bednarek v. Brotherhood of American Yoemen, 48 Utah 67, 157 P. 884; Ellerbeck v. Continental Casualty Co., 63 Utah 530, 227 P. 805; Field v. Missouri State Life Ins. Co. (Utah), supra; Loftis v. Pac. Mutual Life Ins. Co., 38 Utah 532, 114 P. 134; Osborne v. Phenix Ins. Co., 23 Utah 428, 64 P. 1103; Parker v. California State Life Ins. Co., 85 Utah 595, 40 P.2d 175; West v. Norwich Union Fire Soc., 10 Utah 442, 37 P. 685.
In Osborne v. Phenix Ins. Co., supra [23 Utah 428, 64 P. 1104], it is said: “In regard to the second ground, it is alleged in the complaint that at the time the policy in this case was executed the agent who acted for the company was informed that there was another policy on the property. If that were so, and the jury must have so *451found, the company is estopped from denying, notwithstanding the provisions of the policy respecting other policies, its liability, on the ground that there was another policy on the property at the time the one in question was issued.”
I would affirm the judgment as it fixed liability on the plaintiff.

. NOC meaning “Not Otherwise Classified” and referred to stores selling miscellaneous items which couldn’t be classified under any one heading.

. Restatement, Contracts, Sec. 504; Williston on Contracts, Vol. 3, Sec. 1585; Philippine Sugar Estates Development Co. v. Government of the Phil. Islands, 247 U.S. 385, 389, 38 S.Ct. 513, 62 L. Ed. 1177; Griswold v. Hazard, 141 U.S. 260, 283, 11 S.Ct. 972, 35 L.Ed. 678; Shell Pet. Corp. v. Corn, 10 Cir., 54 F.2d 766, 769; Columbian Nat. Life Ins. Co. v. Black, 10 Cir., 35 F.2d 571, 573, 71 A.L.R. 128; Russell v. Shell Pet. Corp., 10 Cir., 66 F.2d 864, 866; Dietrich v. Retailers’ Fire Ins. Co., 137 Kan. 533, 21 P.2d 800, 904.