Court Opinion

ID: 6838234
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:10:34.834377+00
Date Added: 2024-06-11T08:48:19.868776
License: Public Domain

STONE, Circuit Judge
(dissenting).
It is obvious, from the portions of the policy quoted in the majority opinion, that a true statement of the insurable interest in the crops was a condition precedent to liability on the policy. The statement of the insured therein was that he owned 100 per cent, of the crops. Therefore no recovery can be had if the evidence clearly shows that the insured’s interest was not as stated, unless the insurer is estopped to insist upon these requirements of the policy. There is a serious contention between the parties as to whether the evidence does or does not show the ownership stated. The trial court concluded that it did. However, if the claim of estoppel is well taken, we need not determine such ownership, but may, for the purpose of determining the es-toppel, take it that such statement was inaccurate.
I. The insurer contends that there can be no waiver nor estoppel because its agent had no authority to make any waiver nor to do anything which would have the effect of creating an estoppel to any provision of the policy. It is true that the policy contained the standard provisions as to waiver and I think these are sufficient to deprive the agent of all power to waive any provisions of the policy. However, these provisions, nor any others, are sufficient to protect the insurer from avoiding some character of acts of its agent which are acted upon by the insured in good faith.
The form of application for an insurance policy and the policy itself are usually, as-in this ease, instruments very carefully prepared by the insurer who chooses the expressions set forth therein. It may employ terms which are ambiguous in meaning. Such ambiguity may exist in . the words-themselves or it may arise from the application of such words to particular risks offered for insurance. Where the ambiguity exists in the words themselves, the law construes such words in favor of the insured' to mean what he did and might reasonably have believed they meant. This is a rule of construction applied in general to contracts drawn by one party -and is not peculiar to insurance contracts. Where the ambiguity arises from applying words of a. policy (fairly clear in themselves) to some-particular state of facts involved in a contemplated risk, the representative of the insurer in that transaction may bind the insurer by an holiest construction of meaning which is honestly accepted by and acted, iipon by the insured. This does not mean-that the agent can change a word of thepoliey from its clear meaning or that an insured would be heard to contend that he-accepted and acted upon a meaning which, was clearly foreign to the words used. It. means that where there is room for and there exists a reasonable doubt as to the application of such words to a set of facts-the judgment of the insurer’s .representative-thereon may in that transaction be safely,, if honestly, accepted and acted upon by the-insured. To hold otherwise would be a. fraud upon the insured. Usually, the insured is unversed in insurance matters.. They come into his affairs infrequently. On. the other hand, the agent of the insurer is-experienced in and familiar with such matters and particularly with the contracts in-which he is dealing. The above rule is stated in McMaster v. N. Y. Life Ins. Co., 183 U. S. 25, 38, 22 S. Ct. 10, 46 L. Ed. 64;. Continental Life Ins. Co. v. Chamberlain,. 132 U. S. 304, 10 S. Ct. 87, 33 L. Ed. 341;. Eames v. Home Ins. Co., 94 U. S. 621, 629,. 24 L. Ed. 298; American L. Ins. Co. v. Mahone, 21 Wall. 152, 155, 156, 22 L. Ed. 593; Pac. Mut. Life Ins. Co. v. Snowden,. 58 F. 342 (this court); Maryland Casualty Co. v. Eddy, 239 F. 477, 480-1 (C. C. A. 6) and Mutual Life Ins. Co. of N. Y. v. Powell, 217 F. 565, 568 (C. C. A. 5); Conn. Fire Ins. Co. v. Buchanan, 141 F. 877, 892, 894, 4. L. R. A. (N. S.) 758 (this court); Carrollton F. Mfg. Co. v. Credit Indem. Co., 115 F. 77 and 124 F. 25 (C. C. A. 2); Fidelity & C. Co. v. Phoenix Mfg. Co., 100 F. 604, 607,. *279608 (C. C. A. 7); Glover v. Ins. Co., 85 F. 125 (C. C. A. 4); Phœnix Ins. Co. v. Warttemberg, 79 F. 245 (C. C. A. 9); Standard L. & A. Ins. Co. v. Fraser, 76 F. 705, 708 (C. C. A. 9); Mutual Benefit Life Ins. Co. v. Robison (C. C.) 54 F. 580, 588-597; Sawyer v. Ins. Co. (C. C.) 42 F. 30, 34. In the recent ease of Compania de Navegacion, Int., v. Fireman’s Fund Ins. Co., 277 U. S. 66, 48 S. Ct. 459, 72 L. Ed. 787 (May 14, 1928), the court said:
“A contract of maritime insurance is usually not different from any other contract, except that the words and phrases used may have a technical nautical meaning, to be understood by the parties and enforced accordingly. We have seen, however, from the eases, that the phrase ‘seaworthiness ’ varies with the circumstances and the exceptional features of the risk known to both parties. The view of the Circuit Court of Appeals that perils of the sea has an absolute meaning and may not be varied by the knowledge of the parties as to the circumstances and must be maintained stiffly in favor of the insurance companies and against the insured, is not necessary or reasonable. The variation in the ■ significance of ‘seaworthy,’ as shown by the above authorities, when caused by exceptional circumstances known to both parties, applies as well to the meaning of perils of the sea as to that of seaworthiness. The two terms in such cases are correlative terms. Klein v. Globe & Rutgers Insurance Co. (C. C. A.) 2 F.(2d) 137, 139, 140.
“The Circuit Court of Appeals distinguished Klein v. Globe & Rutgers Insurance Company, Farmers’ Feed Company v. Insurance Company [166 F. Ill], and The-baud v. Great Western Insurance Company [155 N. Y. 516, 50 N. E. 284], and 4 Joyce •on Insurance, § 2159, as follows:
“ ‘Recovery was allowed in each of those cases on the actual contract, which was held to be different from the contract evidenced by the insurance policy. It was merely held that effect should be given to the actual contract. The facts in this case ■do not warrant the conclusion that appellant bound itself by its conduct, or by any agreement, to accept the risk of unseaworthiness. ’
“We find ourselves unable to follow this ■distinction. In all these cases the recovery was on the contract, and the question was of the construction of the contract. Its construction was affected necessarily by the special circumstances surrounding the -contract known to both parties and acted on by them in charging and paying an increased compensation for the risk run. The circumstances in this case are very like those shown in the' cases cited. They certainly justify the conclusion to which we have come. ’ ’
Assuming, for the purposes of this point of estoppel, that the interest of the insured was not 100 per cent., as stated in the application, the findings must be examined to ascertain whether the question thus answered in the application, when considered in connection with the circumstances of ownership here involved, was reasonably susceptible of doubt as to its meaning and whether the insured and the agent of the insurer, in good faith, interpreted that question and answered it in accordance with that interpretation and with their view of the facts.
The facts as to ownership were as follows: Insured held the legal title to this farm. At the time of the application he had verbal contracts with several persons as to making the crops and a written contract with one E. D. Anthony as to an interest in the farm. The arrangement with the “croppers” was that they were to live on the farm with their families, though not upon the particular parts of the farm apportioned to each for cultivation. The insured paid for their transportation to the farm, directed what crops should be planted, furnished the seed, teams, implements, and all means • of cultivation. He guaranteed and every 30 days paid the grocery and necessity bills required for these men and their families to live during the cultivation of the crop. The arrangement with them was that they were to cultivate and harvest the crop under his supervision and direction; that he was to have free control of the sale of the crops; that after payment of the expenses of the crop, including the advances he had made on their account, the net proceeds were to be divided by him and one-half paid to them. If any one of them failed to complete his contract, he was to leave the farm without any claim to shjire in the proceeds. Under this arrangement, it was not only possible for these men to forfeit all right to any part of the proceeds, but one of them actually did and was put off of the farm before the loss occurred under this policy. As the crop had not been harvested, at the time of the loss, there was, up to that time, a situation where all of them might have forfeited their rights and none of them been entitled to any of the proceeds.
*280The contract with Anthony was made, about three months before the application for the insurance and was for the sale of an undivided one-half interest in the land, payment therefor to be made by three promissory notes, the first one due in January, 1927, for $5,000. Under this contract, no deed to Anthony was to be made by the insured unless and until this first note was paid. This contract was placed in escrow until such payment. The contract provided that the parties should be tenants and co-owners of the property and should be “partners only to the extent that they may become liable for any debts incurred on account of the operation of said farm.” As to expenditures necessary in operating the farm “from and after” the date of the contract, Anthony became responsible for one-half and agreed to devote himself to the management and conduct of ‘ ‘ said business and farming operations” for which services he was to receive compensation at the rate of $100 per month “out of the net proceeds derived from the crops raised upon said farm, ’ ’ and was to share equally in the net proceeds therefrom. This contract was executed in February, 1926; the application for insurance was made and the policy delivered in May, 1926; the loss occurred June 12, 1926, and the crop would have been harvested before January, 1927, when the first purchase note was payable. Therefore, it was entirely possible for Anthony to default on such payment and to lose all right to any share in the proceeds of the crop.
When the matter of this insurance was broached and in connection with the.application .showing the per cent, interest in the crop, the agent asked the insured “if he was the legal owner of the crop, in order to know whether to put in, how to fill out that portion of the application which states the percentage of ownership.” The answer of the insured was that he was the legal owner of the property. The insured told the agent of his arrangement. with the “croppers” and of his contract with Anthony. The agent went to the bank where the contract was in escrow and the contract was handed to him. Whether he read it or not, is not clear, but there is no question that he had the opportunity to do so. With this information and this full disclosure the agent wrote in the application. ■
From the above statement of facts, I am convinced that there was a serious question as to what answer would have been accurate in the application. That the “croppers” and Anthony had contractual rights in connection with the crop at the time of the application, is certain, but those rights seem to attach only to proceeds derived therefrom after harvest and salé and even such rights were uncertain, inchoate and might never fully ripen. At the same time, the legal title to the land and to the crops was in the insured and he had complete direction and supervision over the cultivation, fanning, sale and disposition of any net proceeds. There is no room for question, in the evidence, of the good faith and fair dealing of either the insured or the agent.
I think the above- facts and circumstances bring this ease within the rule heretofore stated; that estoppel was fully pleaded; was shown by the evidence and the facts justifying such estoppel found by the court.
H: Plaintiff in error contends that the estoppel, pleaded in the reply, is a departure. This position is not well founded. N. J. Mut. Life Ins. Co. v. Baker, 94 U. S. 610, 612, 24 L. Ed. 268.
III. It is also objected that the judgment was erroneous in awarding full compensation on 100 per cent, interest in the crop insured because,, in the application, which was made part of the policy, it was provided “it being understood and agreed that the liability of this company shall in no event be held to exceed the actual proportionate interest of the insured in the crops described and insured hereunder.” This contention is not well founded because the quotation relied upon is an integral part of a sentence and paragraph which refers to other matters and is as follows: .
“On all crops other than vine, truck, vegetable, tobacco and fruit crops, total insurance for all interest on the crops described herein shall not exceed thirty-six (36) dollars per acre on irrigated land, and twenty-four (24) dollars per acre on unirri-gated land. However, in the event that the total insurance per acre exceeds this limit, this company shall be liable only for its pro rata part of such limit per acre, it being understood and agreed that the liability of this company shall in no event be held to exceed the actual proportionate interest of the insured in the crops described and insured hereunder. If the total insurance on this crop exceeds the maximum limits permitted hereunder, the company shall refund the premium on such excess. ’ ’
IY. It is contended that the court erred in not permitting evidence as to statements made by the insured as to Anthony’s in*281terest in the cotton crop. The interest of Anthony was set forth in a written contract which was introduced in evidence and which the insured testified contained all of the arrangements between them and as to which testimony there was no offer to prove the contrary. I can see no relevancy of the testimony excluded and think the court’s action was proper.
I think the judgment should be affirmed.