Court Opinion

ID: 8853010
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:21:25.31293+00
Date Added: 2024-06-11T17:05:34.098128
License: Public Domain

SANBOBN, Circuit Judge
(dissenting). Does the statement of the insured that he intends to increase his insurance to a fixed amount, *79made in the parol negotiations that eventuate in a subsequent written policy, which contains a written consent to all the concurrent insurance in existence at its date, but which also contains the usual provision that the company shall consent to any subsequent increase of the insurance above the amount stipulated, or the policy shall be void, estop the company from enforcing the latter provision, or waive, in advance of the execution of the policy, the contract right the policy purports to secure by this provision? The majority of the court answer this question in the affirmative. With great respect for their opinion, I find myself unable to concur in that view. I think the proposition they maintain is unsound for two reasons: First, because it deprives parties of the right to make a contract that is neither immoral, illegal, nor in contravention of public policy; and, second, because it contravenes the settled rule that writien contracts shall prevail over the previous oral negotiations from which they result. Such a statement of intention to obtain, even an agreement, made in the previous parol negotiations, to allow, concurrent insurance, is merged in the subsequent written contract evidenced by the policy, and is not available to the insured in an action on the policy, either as a representation, an agreement, an estoppel, or a waiver. Havens v. Insurance Co., 111 Ind. 90, 12 N. E. 137; Laclede Fire-Brick Manuf’g Co. v. Hartford Steam-Boiler Inspection & Ins. Co., 9 C. C. A. 1, 60 Fed. 352, 358; Insurance Co. v. Mowry, 96 U. S. 544, 547, 549; Insurance Co. v. Lyman, 15 Wall. 664, 669; Thompson v. Insurance Co., 104 U. S. 252, 259; Lewis v. Insurance Co., 39 Conn. 100; Pearson v. Carson, 69 Mo. 550; Tracy v. Iron-Works Co., 104 Mo. 193, 16 S. W. 203; Insurance Co. v. Neiberger, 74 Mo. 167; White v. Ashton, 51 N. Y. 280; White v. Walker, 31 Ill. 422; Faxton v. Faxon, 28 Mich. 159.
The policies in suit expressly allowed the existence of $27,500 of insurance concurrent with each of them. The amount of concurrent insurance which the insured had when these policies were issued, including the four policies issued at that time, did not exceed $27,500, and the policies were valid in their inception. The insured subsequently increased their insurance concurrent with each of these policies to $34,800, so that their total insurance was $38,300; but they never notified the companies or their agent of this increase until after the fire. There is no charge in the pleading, and no proof in the record, that the insured were induced not to read these policies or to enter into the contracts they evidence by any misrepresentation, deceit, or fraud of the companies or their agent. The entire plea on this subject that the insured make is:
“Those plaintiffs allego and show to the court that they contracted with the agent of the defendant, authorized by defendants so to contract, for said insurance, under a statement and agreement made at the time, and concurrent with said contract and a part thereof, that the total insurance, including the policy issued by defendant, upon the property insured of the plaintiffs, should amount in the aggregate to the sum of forty thousand dollars, and that the policy of the defendant to be issued to the plaintiffs should contain an agreement for such additional and concurrent insurance as that the policy to be Issued by the defendant would amount in the aggregate to forty thousand dollars, and that thereafter, and upon receipt of said policy, the plaintiffs, rely-*80trig upon said contract and agreement so made as aforesaid, received and accepted said policy from trie defendant upon trie belief that said agreement had been fully carried out, and that said policy permitted concurrent and additional insurance so as aforesaid agreed upon, and, so relying upon such contract'and agreement, trie plaintiffs wholly failed and neglected to read said policy until after trie occurrence of trie fire which destroyed the property covered thereby. That, by reason thereof and of trie .facts aforesaid, the defendant ought not now to be permitted to assert as a defense in this action the facts set forth in trie fourth defense contained in said answer, for it is estopped to deny its liabilities on trie grounds and for trie reasons therein stated.”
If this plea is good, any party to a written contract may rely upon the oral statements made in the preliminary negotiations to it, fail to read his contract, and the previous oral negotiations will always prevail over the written agreement.
The proof is weaker than the plea. It is that the agent of the companies applied to the insured for the privilege of writing insurance upon their stock; that, in answer to a question by the agent, one of the insured said that they were going to carry $10,000 insurance; and that, after the latter had indulged in a conversation with an- ■ other agent at another place, he went to the office of the agent of these companies, and told him that he would let him carry $10,000 on their stock. The provision which contained the consent of the companies to the $27,500 other insurance was written upon slips attached to the policies. Some days after the preliminary conversation just referred to, the policies were delivered to one of the insured. He testified:
“I looked at trie face of the policies, and saw trie amount, and put them in trie safe. Q. What do you mean by trie face of trie policies? A. Trie written portion. Q. On trie inside or outside? A. On the outside. Q. When did you for trie first time ever learn that these policies limited trie concurrent insurance to twenty-seven thousand five hundred? A.-I think it was a day or so -after trie fire.”
, There is no doubt that there are cases where one party to a writ- . ten-contract has been so imposed upon by the fraudulent representa-tions of its contents, or by some artifice or' deceit of the other party, •.which prevents him from reading it, that he may be-excused for ignorance of its contents. But I cannot subscribe to the proposition that-a mere statement or agreement as to the terms of the proposed contract, made in the preliminary oral negotiations which result in the subsequent written contract, will excuse either party from reading the contract when it is delivered, or will reverse the settled rule that the written contract must prevail over the preliminary negotiations. It is the duty of every party to a contract to read it and to know its contents when he has an opportunity to examine it before he accepts it, and in the absence of fraud, concealment, or misrepresentation as to its contents he must be conclusively presumed to have knowledge of them. Contracts for insurance furnish no exception to this rule. Morrison v. Insurance Co., 69 Tex. 353, 359, 6 S. W. 605; Quinlan v. Insurance Co., 133 N. Y. 356, 365, 31 N. E, 31; Wilcox v. Insurance Co. (Wis.) 55 N. W. 188; Fuller v. Insurance Co., 36 Wis. 599, 604; Herbst v. Lowe, 65 Wis. 321, 26 N. W. 751, 751; Hankins v. Insurance Co., 70 Wis. 1, 2, 35 N. W. 34; Herndon v. Triple Alliance, 45 Mo. App. 426, 432; Palmer v. Insurance Co., 31 *81Mo. App. 467, 472; Insurance Co. v. Yates, 28 Grat. 585, 593, 594; Ryan v. Insurance Co., 41 Conn. 168, 172; Barrett v. Insurance Co., 7 Cush. 175, 181, 182; Holmes v. Insurance Co., 10 Metc. (Mass.) 211, 216; Insurance Co. v. Swank, 12 Ins. Law J. 625, (527; Insurance Co. v. Hodgkins, 66 Me. 109, 112, 113; Insurance Co. v. Neiberger, 74 Mo. 167, 173; Beach, Ins. § 414 and cases cited. The entire plea and all the evidence in the record that it: is claimed tends to show the fraudulent misrepresentation that excused the insured from reading their policies is set forth above. This evidence', does not show that ilie agent of the companies promised or represented that the policies would contain a provision that would allow the insured to carry 840,000 insurance, and, even if he liad made such a promise, it would not have constituted a fraudulent representation that: would avoid the provision on that subject actually inserted in the policy, or that would excuse the insured from reading it. Fraud cannot be predicated of such a jiromise or prophecy. Railway Co. v. Barnes, 12 C. C. A. 48, 50, 64 Fed. 80; Kerr, Fraud & M. p. 85, note 3; Bawyer v. Prickett, 19 Wall. 14(5, 163. It is not the misrepresentation of an existing fact. It is not calculated to impose upon the insured, or to prevent them from reading their policy and learning' whether or not the promise is performed. If, when the policy is delivered, they do not read it, it is their own negligence, and not the previous promise of the agent, that is the proximate, cause of their ignorance of its contents, and they cannot be relieved from the effect of their carelessness on the ground of alleged fraud, because none exists. Thus it appears that there was neither allegation nor proof that the insured were induced to fail to read these policies by any deceit or fraudulent misrepresentations of (he companies or their agent as to their contents, and this case presents the naked question whether or not a statement, of an intention to increase insurance, made by the insured in the preliminary negotiations which result in a written policy, will estop the insurance company from making or enforcing the usual provision that it shall have notice of and consent to any increase after the policy is issued, or the policy shall be void.
It: is conceded that there is much reason and authority for the rule that where, at the time of the issue of a policy, concurrent insurance exists, to an amount in excess of the amount allowed by the policy, and that fact is known to the agent when he issues it, and also where, after the issue of the policy, the concurrent insurance is increased above the amount: permitted, and notice of that fact is given to the agent, and, by his verbal agreement to indorse the permission, or by like action, he leads the insured to believe that the company consents to the increase, the company is estopped to enforce the provision that the policy is A'oid for lack of its consent, or will be held to have waiA'ed the provision. There is reason and justice in this rule. It is founded on the proposition that it is a fraud for an insurance agent to issue a policy that he knows to be void in its inception. This rule, however, is radically different from the proposition that when, in the parol negotiations preliminary to a written contract, one party announces his intention to do an act *82in the future that is material to the contract, the other party is estopped to contract with him that he shall have notice of and consent to this act when done, or his contract shall thereafter cease to he binding. This is the vital proposition on which the decision of this case turns. It is far-reaching in its effect, and if successfully maintained will, in my opinion, strike down the provisions of thousands of leases and agreements that attempt to fix by contract the rights of parties when contemplated acts shall be done. An examination of the authorities cited in the opinion of the majority which treat of either of these propositions will disclose the fact that Pechner v. Insurance Co., 65 N. Y. 195; Short v. Insurance Co., 90 N. Y. 16; Morrison v. Insurance Co., 69 Tex. 353, 6 S. W. 605; Bennett v. Insurance Co., 70 Iowa, 600, 31 N. W. 948; West Coast Lumber Co. v. State Inv. & Ins. Co. (Cal.) 33 Pac. 260; Insurance Co. v. Earle, 33 Mich. 143; Insurance Co. v. Luttrell, 89 Ill. 314; Viele v. Insurance Co., 26 Iowa, 9; and May, Ins..§§ 369, 370,—go no further than to sustain the former proposition, and do not discuss the latter. Carrugi v. Insurance Co., 40 Ga. 135, and Planters’ Mut. Ins. Co. v. Lyons, 38 Tex. 253, hold that where, after the policy is issued and delivered, the insured applies to the agent for consent to take additional insurance, and the agent consents, but fails to write the indorsement on the policy, and thereupon the insured obtains the additional insurance, the company thereby waives the provision in question. But this is a very different holding from the proposition that a notice of intention to take subsequent insurance, given in the negotiations preliminary to the contract, estops the company from making a written contract that it shall have notice of the insurance when taken, and the option then to cancel its policy or to consent to the insurance. Suppose that the companies in the Carrugi and Planters’ Insurance Company Cases had notified the insured in writing that they would not consent, and that their policies would be canceled, unless they were informed when and what amount of additional insurance was actually taken, would they then have waived the provision? In the case at bar the companies did more than that. They made the notice of the fact that the subsequent insurance was taken, and their consent to it, a condition of the continuance of their liability by the very terms of their original contract. Havens v. Insurance Co., 111 Ind. 90, 12 N. E. 137, the only other case cited in the opinion of the majority which discusses either of the propositions, affirms a decision which sustained a demurrer to a, complaint upon a policy which allowed no concurrent insurance where the insured had subsequently taken $1,000 additional insurance without notice to the company, although the complaint contained the following allegation:
“The plaintiff further avers that it was expressly agreed and understood that said plaintiff was to have permission, to take out an additional insurance of one thousand dollars on said building in any other company, and at any other time she desired, and said company agreed to insert said condition in said policy, which it wholly failed to do. And plaintiff says that, relying upon said promise, and in pursuance of said contract and agreement, she had effected an insurance on said building in the sum of one thousand dollars in the *83Phoenix Insurance Company of Brooklyn, New York, as permitted by the express agreement aforesaid.”
None of these cases appear to me to support the proposition on which the decision of this case must rest, and the case last cited expressly disaffirms it.
The evidence in this case does not support the plea that an agreement was made in the previous oral negotiations that a provision should be inserted in the policy allowing $37,500 concurrent insurance. It goes no further than to prove that one of the insured stated that he intended to take out $40,000 of insurance in all. Even if there had been such an agreement, it could not prevail over the written contract.
In Insurance Co. v. Lyman, 15 Wall. 064, 069, Mr. Justice Miller, in delivering the opinion of the supreme court, said:
“Undoubtedly, a valid verbal contract Cor insurance may be made, and when it is relied on, and is unembarrassed by any written contract for the same insurance, it can be proved, and become the foundation of a recovery, as in all other cases where contracts may be made either by parol or in writing. But it is also true that when there is a written contract of insurance it must have the same effect, as the adopted mode of expressing what tlie contract is, that it has in other classes of contracts and must have the same effect, of excluding parol testimony in its application to it, that other written instruments have. * * >s We think it equally clear that, the terms of tlie contract having been reduced to writing, signed by one party, and accepted by the other at tlie time the premium of insurance was paid, neither party can abandon that instrument as of no value in ascertaining what the contract was, and resort to the verbal negotiations which were preliminary to its execution, for that purpose.”
In Thompson v. Insurance Co., 104 U. S. 252, 259, the policy pro-tided that it should be void on the nonpayment of the note taken for the premium, and the supreme court held that a idea that a parol agreement was made at the lime of the giving and accepting of the note and policy that the policy should not become void for the nonpayment of the note, but should only be voidable at the election of the company, was bad. Mr. Justice Bradley, in delivering the opinion of the court, said:
“An insurance company may waive a' forfeiture, or may agree not to enforce a forfeiture; but a parol agreement, made at the time of issuing a policy, contradicting the terms of the policy itself, like any other parol agreement inconsistent with a written instrument made.contemporary therewith, is void, and cannot be set np to contradict the writing.”
In Insurance Co. v. Mowry, 90 U. S. 544, 547, the policy provided that it should be void and wholly forfeited if the premiums were not punctually paid. The agent who procured the policy agreed with the insured that the company should give notice 'when the premiums fell due, but this agreement was not contained in the policy. The; company failed to give the notice, and the insured failed to pa.y the premium. The agreement of the agent before the policy issued was claimed to he an estoppel of the company against insisting upon the forfeiture of the policy. Mr. Justice Field, in delivering the opinion of the court, said;
“All previous verbal arrangements were merged in the written agreement. The understanding of the parties as to tlie amount of the insurance, the conditions upon which it should be payable, and the premium to be paid, was *84there expressed, for the very purpose of avoiding any controversy or question respecting them. * * * An estoppel cannot arise from a promise as to future action with respect to a right to he acquired upon an agreement not yet made. * « * qipe doctrine has no place for application when the statement relates to rights depending upon contracts yet to he made, to which the person complaining is to he a party. He has it in his power in such cases to guard in advance against any consequences of a subsequent change of intention and conduct by the person with whom he is dealing. For compliance with arrangements respecting future transactions, parties must provide by stipulations in their agreements when reduced to writing. The doctrine, carried to the extent for which the assured contends in this case, would subvert the salutary rule that tlie written contract must prevail over previous verbal arrangements, and open the door to all the evils which that rule vms intended to prevent. White v. Ashton, 51 N. X. 280; Bigelow, Estop. 437, 441; White v. Walker, 31 Ill. 422; Eaxton v. Faxon, 2S Mich. 159.”
I concur in the views expressed in these opinions of the supreme court. I think that they are applicable to this case, and that the judgment should be reversed.