Court Opinion

ID: 3591562
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:40:06.540448+00
Date Added: 2024-06-11T07:42:10.569710
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 450 
The defendant testified: "I gave Mr. Nichols part of the insurance." Nichols placed half of it with the American Underwriters' Fire Insurance Company of Monroe county and the other half with another company. Whilst Nichols solicted the business he did it as the ordinary insurance broker on his own account and not as the representative of a particular company. The defendant employed him to place the insurance, i e., to select the companies, instructing him to select old line, not assessment companies. It is established then beyond dispute from the lips of the defendant himself that in selecting the companies Nichols acted as his agent and in making the selection departed from his instructions. The case involves the ordinary transaction between an insurance broker and his customer. The customer instructed the broker to place the insurance with old line companies; the broker, departing from his instructions, procured and delivered policies of co-operative companies. The customer took the policies, paid the premiums, and for months had the protection of the insurance. The question is whether he can escape the liability assumed on the acceptance of the policy on the ground that his agent departed from his instructions in selecting a co-operative *Page 451 
instead of an old line company to write the insurance. In my opinion an affirmative answer to that question will establish a dangerous rule.
It may be that Nichols represented the company in delivering the policy. But there is no claim of any misrepresentation as to the terms of the policy itself. The policy was the New York standard form of policy, precisely such a policy as would have been issued by an old line company. The defendant's liability to an assessment arose not from the terms of the policy but from the character of the company selected by Nichols and was imposed by section 268 of the Insurance Law (Laws of 1909, chapter 33). There was no suppression or misrepresentation by Nichols of any of the terms of the policy, and no such "inequitable, unfair or deceptive conduct" on his part as takes the place of positive fraud within the meaning of the cases cited by my brother CUDDEBACK. Nichols did not understand that the obligation of a member of a co-operative company was governed by said section of the Insurance Law. In that respect he made a mistake of law and that mistake of law led him to depart from his customer's instructions in the performance of an act done for the customer.
There was no failure of the minds of the contracting parties to meet. The defendant knew that he had accepted a policy from the American Underwriters' Fire Insurance Company of Monroe county. Even if he had in fact been ignorant of the name of the company, as I have no doubt frequently happens, he would have been chargeable with the knowledge of his agent. That company intended to issue a policy to the defendant. The policy was in terms precisely such a policy as the company intended to issue and the defendant intended to receive, namely, a standard policy insuring the defendant against loss by fire to an amount not exceeding $500.00 on the property described in consideration of the stipulated premium of $17.50. It was such a policy as the company was authorized to write. *Page 452 
Said section of the Insurance Law provides for the classification of the property or buildings insured and the issuance of policies "under different rates according to the risks from fire to which they may be subject," but it also provides that in case the amount of any loss or damage exceeds in amount the cash on hand, the directors or executive committee may borrow the money or "make an assessment upon all the property insured, pro rata,
according to the classification or according to the amount insured, as may be provided in the by-laws sufficient to pay what the cash in hand falls short of paying, or for the whole loss or damages, as the directors or executive committee may decide to be for the best interests of the corporation." The by-laws of the company were printed on the back of the policy, and plainly disclosed that the company was a co-operative company and that it and its members were subject to the provisions of article IX of the Insurance Law. If the defendant mistook the character of the company his mistake was due either to his own carelessness or to the act of his own agent. Surely a party cannot avoid a contract on the ground that he was deceived by his own agent. The defendant may have supposed that the American Underwriters' Fire Insurance Company of Monroe County was an old line company, none the less he intended to accept a policy from that company. A misunderstanding as to the character of the company or a mistake of law as to the obligation imposed by statute on its members does not present a case of the failure of the minds of the parties to meet on the terms of the contract.
In the last analysis then the case involves simply a mistake of law made by the insured and his broker, not even as to the terms of the contract, but only as to the obligation imposed by statute on a party who accepts a policy from, and thus becomes a member of, a co-operative company. If that obligation may thus be avoided, the enforcement of it will always be involved in grave uncertainty, *Page 453 
with the resultant uncertainty in the ability of co-operative companies to meet their obligations.
The attempted cancellation of the policy was too late, and not sufficient, to avoid liability under the assessment. But it is significant as showing that even then the defendant did not seek to rescind the contract. Nichols, as his broker, not as the agent of the company, came to him and said that "he wanted that policy and he was going to cancel it, and he would give me [the defendant] another policy in place of it." The defendant delivered the policy to Nichols and "did not ask him the whys or wherefores." In other words, he did as he had done at the start, as many men do who have confidence in their brokers, he intrusted the business to the broker. But he did not ask to rescind the old contract. The unearned premium was computed and applied on another policy which was issued. Certainly in doing that business the broker did not represent the company which had issued the original policy.
The judgment should be affirmed, with costs.