Court Opinion

ID: 9628245
Source: CourtListenerOpinion
Date Created: 2023-08-22 09:13:58.847641+00
Date Added: 2024-06-11T18:07:01.516117
License: Public Domain

MOISE, Justice (dissenting). I find myself unable to agree with the opinion of the majority. In order to understand the basis for my disagreement certain additional facts must be set forth. These facts are: (1) The work sheet which was part and parcel of the application and is denominated “Application for Insurance” and which was signed by appellants stated, “This policy becomes effective in twenty-four hours after signing.” (2) At the same time the “application” referred to in (1) above was signed, another instrument denominated “Application for Insurance and Policy Insurance” was signed in blank. (3) The instrument referred to in (2) above is in form an application for membership in the company and hail insurance on growing crops “for the crop season of 19 — ,” and- stated, “Upon payment of the premium herein provided and upon acceptance hereof by the association this policy shall be in full force and effect.” (4) The application for the Ketchem policy was signed and premium paid at 8:00 a. m. on April 19, 1957, and accepted by the company at 2:00 p. m. on May 6, 1957. (5) The application for the Hackey policy was signed and premium paid at 4:00 p. m. on April 30, 1957, and accepted! by the company on May 14, 1957. (6) The application for the Porter policy was signed and premium paid at 4:00-p. m. on April 30, 1957, and accepted by the company on May 14, 1957. (7) The application for the Snowder policy was signed and premium paid at. 6:00 p. m. on May 6, 1957, and accepted by the company on May 14, 1957. As I understand appellants’ theory it is-based on the fact that the policies became-effective 24 hours after being signed, and that thereafter the company could not. change the terms by shortening the time for which coverage was granted, and if it. did so this would be constructive fraud. Concerning the argument that the policies were in effect in 24 hours, I think there can be little doubt. To say the least, there-was a conflict between the statement in the application that it was “effective twenty-four hours after signing” and the statement in the “Application and Policy” that it would be in full force and effect “upon-payment of the premium herein provided' and upon acceptance hereof * * * Except as to plaintiff Snowder whose policy was not applied for until May 6, if a hail loss had occurred before May 5, there-is no question in my mind we would have-upheld a recovery of up to 10% of the face-value of the policies being the amount provided for losses occurring before that date„ and if loss had occurred on May 5, a recovery of up to 50% of the face value as provided in the policies would have been sustained — even though the policies had not been issued, but were issued on a later date. Douglass v. Mutual Benefit Health & Accident Ass’n, 42 N.M. 190, 76 P.2d 453. If this is true, and the policies were in effect for this purpose, how can it be asserted or argued that at a later date they were still open for changing of terms and conditions therein? To my mind it was a contract 24 hours after signature and the company should be bound. Appellants should prevail for another reason. They applied for insurance for the crop year 1957, and the attempt to limit the coverage to prior to October 1st, without specifically calling it to the attention of the named insureds is constructively fraudulent, or to say the least, such an ambiguity was injected as to require construction by the court and in so doing the policies should be construed strictly against the company. Gendron v. Calvert Fire Ins. Co., 47 N.M. 348, 143 P.2d 462, 149 A.L.R. 1310; National Mut. Savings & Doan Ass’n v. Hanover Fire Ins. Co., 40 N.M. 44, 53 P.2d 641. Admittedly, the crop season extended past October 1, and by inserting this date the ambiguity resulted. It is interesting to note that the expiration date was added even though there was no blank space provided in the form for this purpose. It was merely crowded in. This fact in itself is proof amply clear and satisfactory to support a finding of fraud under the rule in Lumpkins v. McPhee, 59 N.M. 442, 286 P.2d 299, and Mosely v. National Bankers Life Ins. Co., 66 N.M. 330, 347 P.2d 755. I do not see where the agreement in the application and policy that the association by-laws shall be part of the contract of insurance, or the part of the by-laws quoted by the majority in any way lends support to the idea that “crop season” could be unilaterally given an earlier termination date after the policy was effective and without specifically calling it to the attention of the insured. It is probably true as stated in the majority opinion that the application does not ordinarily make a contract, and that the same is merely an offer which must be accepted by the company at which time the company may attach conditions and limitations thereon. However, these policies were to be effective 24 hours after applicant signed and were to be for the “crop season” — so as I see it the rule should not apply. I do not agree that there is no ambiguity as to the expiration date, as indicated by the majority. Neither do I think Gendron v. Calvert Fire Ins. Co., supra, is authority on this phase of the case. An examination of that case will demonstrate that the address for notice as contained in the original policy was correct. The only question was whether or not the plain and unambiguous provisions of the policy as to notice and change were binding or were to be ignored as constructively fraudulent. That the result reached in that case was correct is evident. However, it does not follow that the change made by the company in the policy here should be binding. It should be noted that the case of Metzger v. Aetna Ins. Co., 227 N.Y. 411, 125 N.E. 814, is cited in the Gendron case as authority for the proposition that if the insured had an opportunity to examine the policy he cannot be heard to complain of its contents. From an examination of that case it is seen that the court there recognized that there are exceptions to the rule, citing McMaster v. New York Life Ins. Co., 183 U.S. 25, 22 S.Ct. 10, 46 L.Ed. 64; Hay v. Star Fire Ins. Co., 77 N.Y. 235, 33 Am.Rep. 607; Flickinger v. Farmers’ Mut. Fire & Lightning Ins. Ass’n, 136 Iowa 258, 113 N.W. 824; Salmon v. Farm Property Mut. Ins. Ass’n, 168 Iowa 521, 150 N.W. 680. An examination of these cases discloses they are much closer on their facts to the instant case than either Gendron or Metzger. The McMaster case is, in my opinion, very close to the instant case on its facts, involving a question as to date of expiration of the coverage. Hay v. Star Fire Ins. Co., supra, holds that it was bad faith for the company to change terms of a renewal policy from those of the original without notice, and that the negligence of insured in not discovering the change until after a loss had occurred did not as a matter of law foreclose right of recovery, but made the same discretionary with the court which acted properly in granting relief. The following language is pertinent: “The negligence .of the plaintiff in not discovering the change, and laches in not sooner seeking relief, are questions which make the propriety of granting relief in a given case discretionary. The court below upon the findings of fact we think properly exercised its discretion in this case in granting relief. Policies of fire insurance are rarely examined by the insured. The same degree of vigilance and critical examination would not be expected or demanded as in the case of some other instruments. It is found that plaintiff did not in fact examine the policy until after the fire, when, for the first time, he was informed of the peculiar terms of this provision.” (633 Am.Rep. 607, 610). Flickinger v. Farmers’ Mut. Fire & Lightning Ins. Ass’n, supra, is close on its facts, involving as it does the reformation of an insurance policy to make it show the expiration date agreed upon. Headnote 1 to Salmon v. Farm Property Mut. Ins. Ass’n, supra, supports right to agreed terms even though plaintiff had never seen the application. The best'case on the proposition is Kansas Amusement Co. v. Maryland Cas. Co., 1927, 122 Kan. 800, 253 P. 405. This case followed German American Ins. Co. of New York v. Darrin, 80 Kan. 578, 103 P. 87, which is very similar to our case, and Pfiester v. Missouri State Life Ins. Co., 85 Kan. 97, 116 P. 245, which is also helpful ■on question of negligence of insured in not reading the policy when it differs from the application. Kansas is not the only stare having such a rule. Appelman in Vol. 12 of his work on Insurance Law and Practice, at page 219, .says: “Until informed to the contrary, the insured had the right to assume that the policies issued were based on the application as made. Several states have held, therefore, that the fact that the insured did not read such policy and discover those changes would not excuse the insurer.” 'This statement is supported by McElroy v. British America Assur. Co. of Toronto, Canada, 9 Cir., 94 F. 990, and California Reclamation Co. v. New Zealand Ins. Co., 23 Cal.App. 611, 138 P. 960, in addition to the cases from Kansas, cited supra. In addition, the same conclusion is reached in Ames v. Employers Cas. Co., 16 Cal.App.2d 255, 60 P.2d 347, and the recent case of Lewis v. Hinman-Ball & Bonner, 154 Cal.App.2d 710, 316 P.2d 673, 677, from which is quoted the following being directly in point in the instant case where nonsuit was granted at the close of plaintiffs’ case: “Appellants assign error in the order granting a nonsuit as to the second cause of action. That count is based upon the claim that Argonaut issued a workmen’s compensation policy covering appellants as to all their operations in the state, which remained in effect when Watkins was injured on the San Francisco job, and that Argonaut was therefore obligated to discharge Watkins’ claim. There was some evidence possibly warranting the inference that the endorsement limiting the Argonaut policy to the Los Angeles job was added after issuance of the policy. Also, appellant Queen did testify that he had asked for, and Hinman had agreed to furnish, coverage of appellants’ operations statewide. In view of the evidence as to the relationships of Hinman and Argonaut, it could be argued, as against the motion for nonsuit, that appellants had the right to rely upon the presumption that the policy issued was that which they ordered. California Reclamation Co. v. New Zealand Ins. Co., 23 Cal.App. 611, 138 P. 960. Disregarding all conflicting evidence, and indulging all inferences in favor of plaintiffs, as required upon motion for non-suit, either of these items was enough to require denial of the motion * * ijc ff That there is a “more stringent doctrine” must be recognized. 12 Appelman, Insurance Law & Practice, § 7155, page 220. Plowever, in my opinion, the better rule is to not require of an insured something we know as a practical matter is not ordinarily done, namely, that he read and understand the terms of his policy. To my mind, the cases cited above set forth a proper rule. To hold otherwise puts every insured at the mercy of the company in its fine print, and sets an unrealistic standard of conduct. I venture the opinion that before long the court will be faced with trying to distinguish later arising cases on their facts as it seems to me the Gendron case, supra, requires here. The majority cites National Fire Ins. Co. of Hartford v. McCoy, 205 Old. 511, 239 P. 2d 428, and Del Monte v. Travelers Ins. Co., Sup., 17 N.Y.S.2d 555, in support of their position that the insureds were duty bound to read the policies when delivered or be estopped from denying knowledge of their terms. The first of these cases is easily distinguishable on its facts from the instant case, as there one of the co-owners of the airplane covered by the insurance had actually read the policy and knew its contents, and in addition there had been no contrary understanding between the insureds and the agent and no ambiguities were present. Any or all of these differences would be sufficient to give rise to a different rule. The report of the second case does not recite the facts but states that the policy had been accepted as issued. Plow this was accomplished is not clear. Also Metzger v. Aetna Ins. Co., supra, is cited as authority for the holding. This case has already been discussed and distinguished above. In any event, in my view, neither of these cases is strong support for the rule adopted by the majority under the facts of the instant case. Plaintiff Snowder testified that he knew of the October 1 expiration date and had some discussion with the soliciting agent as to the possibilities of getting it changed. This fact might justify a different result as to Snowder because it can be argued that his retention of the policy was an acceptance under the rule announced by the majority. However, the ambiguity was still present and in my opinion this plaintiff as well as the others had made a prima facie showing sufficient to withstand a motion at the close of their case. Lewis v. HinmanBall & Bonner, supra. The trial court’s action in sustaining the motion was error and' the cause should be reversed. The majority having determined otherwise, I respectfully dissent.