80 Ark. 49 | Ark. | 1906
(after stating the facts.) 1. The initial question for determination is as to the amount of appellant’s liability, if any, on the bond and the two renewal receipts— whether said writings constituted three separate obligations to indemnify the assured in the sum of $5,000 each against loss accruing during the respective years, or whether they constituted a single liability for the sum of $5,000 extending over the periods covered thereby, and indemnifying the assured against loss only to the extent of that sum for the whole period.
It is now well settled that the bond of a surety company, like any other insurance policy, is to be most strongly construed against the insurer. The language of the bond is that selected and employed by the insurer, and, when doubtful or ambiguous, must be given the strongest interpretation against the insurer which it will reasonably bear. Anderson v. Fitzgerald, 4 H. L,. Cas. 484; American Surety Co. v. Pauly, 170 U. S. 133; Guarantee Co. v. Mechanics’, etc., Co., 183 U. S. 402; Supreme Council etc., v. Fid. & Cas. Co., 63 Fed. 48; Remington v. Fid. & Dep. Co., 27 Wash. 429.
The language of these instruments is not susceptible of any reasonable interpretation other than that it was intended to extend the liability over the period of the renewal, but to limit the total liability fo.r the whole period of the renewal contract to the amount named. It is so expressly stipulated in the bond. There is no ambiguity about it. It is plainly stipulated that the bond shall not lapse at the end of the time if renewed, but that “the liability of the surety, however, shall not be cumulative.” What else can this stipulation mean? This construction is, strengthened when we consider all the other terms and conditions of the bond, and it is obvious that only a total liability of $5,000 was contracted. The Supreme Court of Tennessee placed this construction upon a similar bond. First Nat. Bank v. U. S. Fidelity & Guar. Co., 75 S. W. 1076. The learned chancellor held that the bond and renewal receipts constituted three separate bonds, covering three separate and distinct periods. In this he erred. "
2. Was there a breach, on the part of the bank, of any of the conditions of the bond which released the surety?
The application for the last renewal contained the following question and answer, viz.: “In case of applicant handling cash or securities, how often will the same be examined and compared with the books, accounts and vouchers, and by whom?” Answer. “The auditing committee, monthly.” It is claimed that this condition was not performed during the period covered by the renewal. We think the evidence is sufficient to sustain a finding' that the examinations were made by the auditing committee monthly during that period. It is not claimed by the members oí the committee that the examinations were made at precise intervals of one month. On the contrary, some of them state that it was deemed advisable to examine at irregular intervals, or rather upon irregular dates in each month. We do not think that the terms of the warranty, fairly and reasonably construed, required any more than that. Certainly it was not meant that an examination should be made on precisely the same date of each succeeding month, but that an examination should be made at some time during each month. We think this is shown to have been done during the last year.
It is argued that the examinations made by the auditing committee from time to time were not sufficiently searching and accurate to discover defalcations which ought to have been discovered, and that for this reason the surety company was released from liability. The members of the committee were not expert accountants, and appear to have made examinations in good f'aith with the purpose of fulfilling their duty to the bank. The terms of the bond and the alleged warranty in the application do not call for an examination to be made by-a committee of expert accountants. It was only provided that the examinations should be made by the auditing committee of the bank directors. This provision contemplated no moire than just what was done — an examination by a committee of men selected from the ordinary business avocations, reasonably capable of comprehending the condition of the accounts of the bank. It appears that the cashier, Strong, successfully secreted his defalcations from ’these men, notwithstanding the fact that 'they made a reasonably diligent investigation from month to month. The fact that he did succeed in thus hiding his wrongdoing for a time does not demonstrate that the members of the committee failed to perform their duty. If that process of reasoning should be followed out, it would necessarily defeat the objects of the bond. It was from just such a condition of affairs that the bank sought indemnity. As has been well said, “an employer would need no insurance against that close and relentless vigilance which makes stealing impossible.” Hammond, J., in Guarantee Co. v. Mechanics’ Bank, 80 Fed. 766.
It is shown by proof that, during the life of the bond and renewals, Strong acted as secretary of a building and loan association, and also that he was engaged in the fire insurance business, and this is put forth by appellant as grounds of forfeiture on account .of the negative answer to the question in the application whether the employee was “now or about to be engaged in other business or employment than the bank’s service.” The proof shows that he wrote a little fire insurance, and was secretary of the local board of directors of a Tittle Rock building and loan association doing business at DeVall’s Bluff, but that none of those engagements interfered with his work at the' bank — that he attended to that work before or after banking hours. The parties to an insurance or indemnity contract may, by express stipulation, declare warranties of things apparently trivial and unimportant to be material, but such things will not be deemed to be material unless made so by express stipulation. Unless otherwise expressly provided, warranties will be deemed to refer to important and .material matters calculated to affect the risk, not to unimportant ones which have no effect or bearing upon the risk. Franklin Life Ins. Co. v. Galligan, 71 Ark. 295; Providence Life Assurance Society v. Reutlinger, 58 Ark. 528; Home Mutual Life Assn. v. Gillespie, 110 Pa. St. 84; Cushman v. U. S. Life Ins. Co., 70 N. Y. 72; Wilkinson v. Connecticut Mutual Life Ins. Co., 30 Iowa, 119. The question propounded in the application manifestly had reference to some business or employment calculated to interfere with Strong’s duty to the bank or to increase the .risk. It had no reference to the trivial or incidental duties of some other business or employment which did not impose a tax upon the time due the bank or call for the investment of some capital. The other engagements of Strong were too trivial and unimportant to be deemed to have been in contemplation of the parties when the truth of the answers were warranted..
Upon consideration of the whole case, we are of the opinion that the proof does not establish any grounds of forfeiture or breach of warranties or conditions on the part of -the assured, and that the appellant is liable for the defalcation which occurred during the period of the last renewal, to the extent of the amount of penalty of the bond. Those occurring during the preceding periods need not be discussed.
The decree is therefore reversed, and a decree will be entered here against appellant for the sum of $5,000, with interest from August 21, 1903, together with the costs of the court below.
It is so ordered.