172 N.C. 142
N.C.
1916
AlleN, J.

The warehouse, covered by the policies of insurance, was not enclosed and under roof at the time the policies were issued, and the defendant bases its motion for judgment of nonsuit upon this fact, contending, as the policies provide that the company shall not be liable for any loss or damage to buildings in process of construction or reconstruction unless the same are entirely enclosed and under roof, that there is no liability on the defendant, although the warehouse was enclosed and under roof at the time of the loss.

The rule of construction prevails .almost universally that contracts of insurance are construed against the insurer and in favor of the insured, and this has not been changed by the adoption of a standard form of insurance. Wood v. Ins. Co., 149 N. Y., 385; Gazzam v. Ins. Co., 155 N. C., 338; Cottingham v. Ins. Co., 168 N. C., 265.

In the last case the Court says: “The terms of a policy of insurance are construed against the insurer and in favor of the insured, and this is true although a standard form of policy has been adopted under legislative enactment. Gazzam v. Ins. Co., 155 N. C., 330.”

It is also a rule of construction applicable to all contracts that if the language admits of two constructions, one of which is legal and binding and the other not, that the first will be adopted. 6 R. C. L., 839.

The courts also look with disfavor upon forfeitures (Skinner v. Thomas, 171 N. C., 98), and the trend of modern authority is that a stipulation in a policy which might avoid it does not have this effect if it in no way contributes to the loss, and if the conditions provided for in the stipulation do not exist at the time of the loss. Cottingham v. Ins. Co., 168 N. C., 264.

In this last ca.se a policy of insurance provided that the policy would be void if the property insured became encumbered by a chattel mort* gage, and it was held that the amount of the insurance could be collected *147 .from tbe company although, the insured had executed a chattel mortgage upon the property, which was, however, canceled before the loss.

If these principles are applied to the clause of the policy under consideration, it would seem that the proper interpretation is that the company was not to be liable until the warehouse was enclosed and under roof, and that when it was enclosed and under roof its liability would attach.

The clause indicates clearly that the company intended to insure a building in process of construction, and the language upon which the defendant seeks to escape liability was only intended to fix the time and the conditions when the defendant would be liable.

This construction gives some force and life to the policies and saves the defendant from the imputation of having issued a worthless policy. ■

If, however, the stipulation refers to conditions existing when the policy issued, the agent of the company who issued the policies and delivered them to the plaintiffs had full knowledge that the warehouse was not at that time enclosed and under roof, and this knowledge is imputed to the defendant company.

In Bergeron v. Ins. Co., 111 N. C., 47, the Court quotes with approval from May on Insurance, that “Facts material to the risk, made known to the agent (or a subagent intrusted with the business) before the policy is issued, are constructively known to the company, and cannot be set up to defeat a recovery on the policy”; and in Grabbs v. Ins. Co., 125 N. C., 395: “It is well known that as a general rule fire insurance policies are issued in a different way from those of life insurance companies. The latter are usually issued directly from the home office, while fire insurance policies are generally sent to the local agent in blank, and are filled up, signed, and issued by him. The blanks, while purporting to be signed by the higher officers of the company, usually have their names simply printed thereon in autographic facsimile. Under such circumstances, can it be doubted that the policy is issued by the agent, who, for all purposes connected with such insurance, is the alter ego of the insurer? That he is seems too well settled to need citation of authority, and therefore his knowledge is the knowledge of the company. We can only repeat what we have so recently said in Horton v. Ins. Co., 122 N. C., 498, 503: ‘It is well settled in this State that the knowledge of the local agent of an insurance company is in law the knowledge of the principal; that the conditions in a policy working a forfeiture are matters of contract and not of limitation, and may be waived by the insurer; and that such waiver may be presumed from the acts of the agent.’ ”

The same authorities also support the position that if the defendant issued the policy knowing the conditions existing at the time, it cannot now avoid responsibility on account of those conditions.

*148 Nor does tbe provision in tbe policy restricting tbe power of tbe agent-to waive conditions and stipulations affect tbe application of tbis rule, because those restrictions are"generally construed to apply to something that occurs after tbe policies have been issued, and not to conditions existing at tbe inception of tbe policy.

In Grabbs v. Ins. Co., supra, the Court approves tbe statement in Berry v. Ins. Co., 132 N. Y., 49, that “Conditions which enter into tbe validity of a contract of insurance at its inception may be waived by agents, and are waived if so intended, although they remain in tbe policy when delivered”; and in Wood v. Ins. Co., which is approved in Gazzam v. Ins. Co., 155 N. C., 336, tbe Court says: “Tbe restrictions inserted in tbe contract upon tbe power of tbe agent to waive any condition unless done in a particular manner cannot be deemed to apply to those conditions which relate to tbe inception of tbe contract when it appears that tbe agent has delivered it and received tbe premiums with full knowledge of tbe actual situation. Tbe principle is not a new one, and has not been shaken by any decisions of our Court since tbe adoption of tbe standard policy.”

And again, in Forwood v. Ins. Co., 142 N. Y., 387: “It could not be supposed that it intended to deliver to the insured a policy which it knew to be void.”

We are therefore of opinion that whether the clause in the policy refers to conditions existing .at the time it was issued or not, it was not necessarily fatal to tbe plaintiffs cause of action that tbe warehouse was not enclosed and under roof at tbe time tbe policies were issued, and that tbe motion for judgment of nonsuit was properly denied.

We are, however, further of opinion .that error was committed which entitles the defendant to a new trial.

The authorities in this State are all to the effect that the declarations .of the agent made after tbe event, and as mere narrative of a past occurrence, are not competent against the principal. Smith v. R. R., 68 N. C., 115; Rumbough v. Improvement Co., 112 N. C., 75.1; Morgan v. Benefit Society, 167 N. C., 265.

This evidence of tbe declarations of tbe agent would have been competent if tbe agent bad been first introduced and bad testified to the cancellation of the policies, as it would have had tbe effect of impeaching bis evidence, and it may be that the order of the introduction of the evidence would not be fatal; but it further appears that his Honor not only failed to restrict the effect of the evidence, but be gave it tbe force of substantive evidence in his charge, which, in this particular, is excepted to.

It wa.s also competent for the defendant to introduce the record made by tbe agent in corroboration of his evidence.

*149 ¥e call attention to tbe discussion of cancellation, which question will arise upon the new trial, which will be found in Mfg. Co. v. Assurance Co., 161 N. C., 98.

For the errors pointed out, a new trial is ordered.

New trial.