Esch Bros. v. Home Insurance, 78 Iowa 334

Esch Bros. v. Home Insurance

78 Iowa 334 | Iowa | 1889

Given, C. J.

* action at law: amendment I. Following the order pursued in the argument, we first notice appellee’s contention that plaintiffs, having made sworn proofs of loss, and proceeded at law upon the policy, cann°l now maintain this action m equity to reform the policy, and are estopped to deny the correctness of the contract as sued upon. Numerous authorities are cited to the effect that, where *340a party has two inconsistent remedies, he is called upon to elect which he will pursue, and, having elected, he cannot, after defeat, pursue'the other remedy. Such is not this case. The plaintiffs have but one remedy, and that is for the reformation of the policy. They have no remedy upon the policy as written. Their petition at law alleged the errors in the policy substantially as alleged in their petition in equity. This case seems to be exactly within the ruling in Barnes v. Insurance Co., 75 Iowa, 11. In that case the action was commenced at law, and a recovery sought on the policy. The defendant pleaded that the policy contained a provision against additional insurance, and that defendant had procured additional insurance. The plaintiff amended, alleging that at the time the contract of insurance was entered into it was agreed that the plaintiff should have the right to take out additional insurance ; that such an agreement was omitted from the policy by mistake, •oversight, or through the fault of the defendant, and asked a reformation, of the policy. The defendant denied the allegation of the amended petition, and also pleaded that plaintiff, having knowledge of the matters pleaded, was estopped from setting the same up, because he had elected to prosecute an action at law on the policy, and, having made an election of remedies, he was bound thereby. The court says: “Conceding that plaintiff had knowledge of the fact that the defendant asserted it would rely on the defenses it did, still, we think he could bring an action at law on the policy, and ascertain certainly whether the defendant would plead such defense or not, before resorting to equity. He could not know what the defense would be before it was pleaded. Under the statute in relation to amendments, we have no hesitation in holding that the party is not estopped by bringing an action at law from amending his pleading's before the case has finally been submitted to the court, so as to change it into an' action in equity. We feel confident the universal practice is in accord with this view.” We think this case fully answers appellee’s first contention, and the further claim *341that the “amendment, as made by the second substituted petition, is a substantial change in the original cause oí action, and not authorized by the Code of Iowa.”

2 fibe insurgagee“?ntérrefomiauon: estoppel. II. The next and most important question is whether the plaintiffs have shown themselves entitled have the policy of insurance so reformed as mabe it a contract insuring them to' tbe extent of their interest, not exceeding four hundred dollars, instead of Bridget Donegan. It is well éstablished by the admissions in the pleadings and by the proofs that the title to the property insured was as alleged by the plaintiffs, both at the time the policy was issued and at the time of the loss; that Bridget Donegan omitted to keep the property insured; that J. R. Stillman was agent of defendant, with power to contract insurance of property, take risks, collect premiums, a,nd issue policies ; that plaintiffs applied to said agent to have their interest in said property insured in the defendant company, and explained to him fully what their interest 'was ; that Stillman, as such agent, agreed to insure the plaintiffs in the defendant company on their interest in said property to the amount of four hundred dollars for one year, for the consideration of twenty dollars, which was then paid by the plaintiffs ; that it was left with Still-man to write the policy accordingly, and that the policy was written as set out by Stillman, and forwarded to and received by the plaintiffs, with the uhderstanding and belief on the part of said Stillman, and the plaintiffs, that the policy so written did insure the plaintiffs, as it was agreed it should. There is no pretense that Bridget Donegan ever sought, desired, knew of-or paid for the insurance. The case is almost identical in its facts with Bailey v. Insurance Co., 13 Fed. Rep. 250, and Williams v. Insurance Co., 24.Fed. Rep. 625. In the former case, McCrary, J., held: “Where a mortgagee applies to the agent of an insurance company, and states plainly he wishes to obtain insurance alone upon his interest as mortgagee, requests the agent *342to write the policy so as to effect this purpose, and relies upon him to determine as to what form is necessary under the law of insurance for that purpose, this court holds that the agent is bound to write a policy which shall insure the mortgagee’s interest in his own name. I regard it as well settled by authority, and well supported by reason, that if the applicant correctly states his interests, and distinctly asks for an insurance thereon, and the agent of the insurer agrees to comply with his requests, and assumes to decide upon the form of the policy to be written for that purpose, and by mistake of law adopts the wrong form, a court of equity will reform the instrument so as to make it insurance upon the interests named. Such a determination is eminently just and equitable, since the insurance company always prepares the contracts and inserts therein its own terms.” In the latter case, Justice Miller announced the rule to be thgit “where an instrument fails to represent what both parties intended to have it represent, and one party has drawn up the instrument and the other party merely accepted it, and the fault was on the part of the party drawing up the instrument, it can be reformed. It would be a harsh rule if a person applying to .an insurance agent, who is supposed to know the legal value of the language used in such policies, which he is drawing up every day, and who is supposed to know exactly what is desired, if that' agent fails to do that which was intended, it would be harsh to say that the instrument shall not be reformed, and that chancery shall not give relief.” The right of .the plaintiffs to a reformation of the policy upon the facts is fully supported in Fink v. Insurance Co., 24 Fed. Rep. 318, and in Longhurst v. Insurance Co., 19 Iowa, 364, and many other authorities that might be cited. It is urged that the rules of the defendant company forbid the issuing of policies to mortgagees, but require their issue to mortgagors. That the plaintiffs had an insurable interest is not questioned; nor that the company could contract to insure such interest. The agent Stillman had general authority to contract insurance, *343and did contract to insure the plaintiffs’ interest, and receive the consideration therefor, which passed to, and is still held by, his principal. We think the defendant should not be heard to question the authority of its agents under these circumstances. We are of the opinion from the facts that the contract was to insure the plaintiffs, and not Bridget'Donegan, and that by a mistake of law on the part of the defendant’s agent the policy was made to insure Bridget Donegan instead of the plaintiffs, and should bé so reformed as to run to the plaintiffs as the insured to the extent of their interest at the time the policy was issued, not exceeding four hundred dollars.

8.-: interest of assured increased: no forfeiture. III. It remains to be determined whether the policy, as reformed, has been broken by reason of the change in title, resulting from Bridget Donegan’s failure to redeem. This was not a diminution of the interests of the assured, but an increase, and hence not a breach of the policy. See Bailey v. Insurance Co., supra, and authorities cited therein.

4_. chacea ’ "Ses.°¿Yn™t increased. IY. It appears by the testimony that at the time the policy was issued the premises were occupied as a restaurant and dwelling, and at the time °í l°ss it was being occupied as a wagon and paint shop. The policy provides that “in case use or occupation of the above-mentioned premises at any time during the period for which this policy would otherwise continue in force shall be so changed as to increase the risk thereon, except as may be hereinafter agreed to by this corporation, in writing upon this policy, from thenceforth, so long as the same shall be so used, this policy shall be of no force or effect.” This provision is against changes that “increase the risk.” Mr. Stillman, who was entirely familiar with both occupations, and with the classifications of risks, testifies :. “The occupation of this building was changed, after the policy was issued and before the fire, from restaurant to wagon and paint shop. But I did not think the change increased the risk enough to *344increase tbe rate. The rate was high in the first place. I did not think the change here did increase the hazard. It was kept as a low dive before. I think the risk was improved. Without regard to moral hazard, a wagon and paint shop is a greater risk; but, because of a moral hazard, I did not think the risk was increased. ’ ’

V. It appears that the loss was total, and that the plaintiffs were damaged thereby, to the fullest amount of their insurance, four hundred dollars, which became due and payable to them on the fifth day of April, 1885. The judgment of the district court-dismissing the plaintiffs’ petition is reversed, and decree will be entered in this court reforming the policy of insurance as prayed for, with judgment in favor of the plaintiffs for four hundred dollars, with six per cent, interest from the fifth day of April, 1885, and for costs.

Reversed.