This action was commenced on November 2, 1951, by Emmco Insurance Company to recover from the defendant, Palatine Insurance Company, one half of the sum paid by plaintiff on account of an automobile fire loss sustained by one Paul Frese.

In June, 1950, Frese was the owner of an unincumbered Cadillac covered by a comprehensive insurance policy issued by defendant company. He traded it in on another Cadillac and a few days thereafter telephoned defendant's agent, one Cundy, and requested the transfer of the policy so as to cover the new Cadillac. Cundy then issued a new policy of the defendant company. In such policy there was a blank in which it was the duty of the agent writing the policy to insert the amount of any mortgage or other incumbrance. Without making any inquiry of Frese, or anyone else, Cundy inserted the word "None" in said blank. After issuance the policy was mailed to Frese and Frese testified he did not examine the policy except to probably look at the outside of it before he put it away.

The automobile which was traded in on the Cadillac by Frese had been unincumbered. Cundy therefore "took it for granted there was no incumbrance on this one [the newly acquired Cadillac]."

The policy contained the following exclusion clause:

"This policy does not apply: . . .

"(b) Under any of the coverages, while the automobile is subject to any bailment lease, conditional sale, mortgage or other incumbrance not specifically declared and described in this policy;"

In order to finance the purchase of the new Cadillac, Frese placed a chattel mortgage thereon with the Associated Discount Corporation, and in connection with such financing, another insurance policy, which also afforded protection from loss by fire, and contained a loss-payable, clause in favor of the finance company, was placed upon the car written in the plaintiff company. Apparently Frese did not realize that his arrangements with the finance company included this coverage, because the coverage afforded against loss from fire under both plaintiff's and defendant's policies constituted a duplication of coverage for such a loss.

On October 15, 1950, the insured vehicle was badly damaged by fire and the plaintiff insurance company paid the loss to Frese and the mortgagee, which, after credit for salvage, reduced the actual loss to $1,475. In making such settlement, plaintiff obtained a subrogation receipt from Frese under which plaintiff became subrogated to Frese's rights against the defendant. The plaintiff's action to recover one half of said sum from the defendant, or $737.50, is based upon the following clause of plaintiff's insurance policy:

"Other insurance. If the insured has other insurance against a loss covered by this policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss."

The action was tried to the court without a jury (the jury having been waived), and the trial court filed a memorandum opinion in which he held that the plaintiff could not recover because of the incumbrance-exclusion clause of defendant's policy. Judgment dismissing the plaintiff's complaint was entered May 5, 1952, and the plaintiff has appealed therefrom.

CURRIE, J.

As found in the trial court's findings of fact, the plaintiff insurance company, by payment of the entire loss to Frese, became subrogated to any rights Frese then had against the defendant insurance company upon the policy issued by the latter. Therefore, the issues presented on this appeal must be determined on the same basis as if the insured himself had brought suit on the policy to recover for his loss.

In this case we have a situation in which the defendant insurance company seeks to avoid its policy by showing that a statement written into the policy by its own agent, without any investigation of the facts and without making any inquiry of the insured, was false and by reason thereof there was no coverage. The authorities almost unanimously hold that where an agent of an insurance company writes a statement of fact into an application for a policy without making inquiry of the insured, or relying on any information supplied by the insured, the company is precluded on the theory of either waiver or estoppel from showing the falsity of such statement in order to avoid liability upon the policy. The fact that in the instant case the statement was written into the policy itself, instead of an application for a policy, would not differentiate the case at bar so as to make the principle announced by such authorities inapplicable.

The general principle of law applicable to such a state of facts as we have in the instant case is well stated in 29 Am.Jur., Insurance, p. 641, sec. 844, as follows:

"In a number of cases it has been held that an insurer cannot rely upon the falsity of answers in an application where such answers were inserted by an agent of the insurer engaged in preparing the application, entirely on his own motion and without the knowledge of or the direction of an inquiry to the insured. An insurer is accordingly estopped to assert the falsity of answers where the application is made out by the agent from sources of information other than the insured or an examination of the property, and where he assures the applicant that it has been prepared according to the rules and regulations of the insurer."

To like effect is 45 C. J. S., Insurance, p. 733, sec. 728:

"The agent of an insurance company must act in good faith toward his principal, and do nothing to militate against its interest, giving to his principal such information with respect to the hazards as by honest industry he can procure, and as a general rule insurer will not be permitted to avoid the policy by taking advantage of any misstatement, misrepresentation, or concealment, of a fact material to the risk, which is due to the mistake, fraud, negligence, or other fault of his agent and not to fraud or bad faith on the part of insured; and this is so although the company would not have issued the policy had truthful statements been made. The rule applies where the agent himself makes or fills in the application, without the authority of insured, with information obtained from a source other than insured, or without propounding any questions to insured." (Emphasis supplied.)

A case directly in point is the very recent one of Flanagan v. Sunshine Mut. Ins. Co. (1950), 00 S.D. 000, 41 N.W.2d 761. The plaintiff in such case sought to recover under an automobile policy of insurance for damages occasioned by accidental upset. Plaintiff had financed the purchase of the insured car by means of a conditional sales contract held by a finance company. The assistant manager of such finance company telephoned one Holm, agent for the defendant insurance company, and requested a policy of insurance on the car. Holm filled in a written application for the policy which was not signed by either the plaintiff or by a representative of the finance company. Item 6 inquired as to the sole ownership of the car, Item 7 as to the amount of any lien, mortgage, or incumbrance, and Item 8 as to whether any automobile insurance of the insured had been canceled during the previous year. The blank spaces in Items 6, 7, and 8 were left blank when Holm mailed the unsigned application to the defendant company. The company then issued the policy, the first page of which was a copy of the application, but as issued the word "None" had been typed in the blank spaces in Items 6, 7, and 8. The South Dakota supreme court affirmed a judgment for plaintiff and declared ( 41 N.W.2d at p. 763):

"The fact that insurance company inserted the word 'None' in the blank spaces of the application as it appears in the policy shows that the company considered the questions asked in Items 6, 7, and 8 of the original application as unanswered. The insurance company failed to make any further inquiry in regard to ownership, incumbrances, or the previous cancellation of other insurance on the car, and this amounted to a waiver of the conditions of the policy relating to these subjects."

In another very recent case, that of Charlton v. Wakimoto (1950), 70 Idaho, 276, 282, 216 P.2d 370, the Idaho court stated:

"Where the answers in an application are inserted by the agent of the company of his own motion, and without knowledge, inquiry, or direction of the insured, the company cannot thereafter rely on such false statements in avoidance of the policy. 29 Am. Jur. p. 641, par. 844; Yoch v. Home Mutual Insurance Co. 111 Cal. 503, 44 P. 189, 34 L.R.A. 857; Roe v. National Life Insurance Association, 137 Iowa, 696, 115 N.W. 500, 17 L.R.A., N.S., 1144; Donahue v. Mutual Life Ins. Co. of New York, 37 N.D. 203, 164 N.W. 50, L.R.A. 1918A, 300, 4 Couch on Insurance, par. 842K, p. 2756."

The Wisconsin case which most nearly approaches the fact situation in the instant case is that of Collum v. National Fire Ins. Co. (1923), 181 Wis. 425, 426, 195 N.W. 333. That case involved an insurance policy on a motor truck. The printed form of the policy contained this provision, "The automobile described is fully paid for by the insured and is not mortgaged or otherwise incumbered, except as follows." In a blank space following this recital was written in, by a typewriter, the words "No exceptions." The insured made no written application for the insurance and at no time represented to the agent that there was no incumbrance upon the truck. The truck was burned during the life of the policy. The company refused to pay the amount of the insurance because of a breach of the warranty as to the vehicle being unincumbered. This court held that the insured was entitled to recover and in the opinion quoted from Vankirk v. Citizens' Ins. Co. (1891), 79 Wis. 627, 630, 48 N.W. 798, as follows:

"Collier [the insured] not having been questioned concerning incumbrances on the property, and it having been found by the court on sufficient evidence that he did not intentionally or fraudulently suppress the fact, it must be held on the authority of Alkan v. N. H. Ins. Co. 53 Wis. 136 [10 N.W. 91], that his failure to disclose the existence of the mortgage does not invalidate the policy. The rule there adopted, and which is applicable here, is thus stated in Wood on Insurance, 388: 'When no, inquiries are made, the intention of the assured becomes material, and to avoid the policy it must be found, not only that the matter was material, but also that it was intentionally and fraudulently concealed.'"

It is urged in the dissenting opinion that liability against the defendant insurance company in the instant case cannot be predicated upon waiver because of the following policy provision, ". . . nor shall the terms of this policy be waived or changed, except by indorsement issued to form a part of this policy," which is part of the standard policy provision prescribed by sec. 203.01, Stats. A plain reading, however, of such policy provision would seem to lead to the inescapable conclusion that the "waiver" which such clause had reference to is a waiver after the policy has become effective.

In the case of Hessler v. North River Ins. Co. (1925), 211 App. Div. 595, 598, 207 N.Y. Supp. 529, the appellate division of the New York supreme court construed a similar policy provision and stated:

"The clause in the policy which provides that the local agent cannot waive any provision thereof unless in writing indorsed upon or attached to the policy has no application. That applies to the policy only after it is issued and not to waiver or estoppel before the policy becomes effective."

The Michigan supreme court in Crouse v. Hartford Fire Ins. Co. (1890), 79 Mich. 249, 254, 44 N.W. 496, had before it a policy provision which provided that no agent "shall be held to have waived any of the terms and conditions of this policy, unless such waiver shall be indorsed hereon in writing." The court in construing such provision stated:

"The restriction upon the agent, being in the policy, and not in the application, cannot be construed to refer to the acts or knowledge of the agent prior to the delivery of the policy."

This court had such standard policy provision as to waiver before it in Spohn v. National Fire Ins. Co. (1926), 190 Wis. 446, 209 N.W. 725; Stillman v. North River Ins. Co. (1927), 192 Wis. 204, 212 N.W. 67; and Frozine v. St. Paul F. M. Ins. Co. (1928), 195 Wis. 494, 218 N.W. 845. However, in all of those cases alleged waiver on the part of the insurance company's agent was based on acts or knowledge of the agent occurring after the issuance of the policy. No Wisconsin case has been brought to our attention where we have held that such policy provision related to acts of the agent in negotiating or writing a policy. In the instant case the act of the agent in writing the word "None" into the policy in the blank space, which was provided in the policy for inserting the amount of any incumbrance, did not waive the provision of the policy with respect to there being no coverage if there were incumbrances other than those listed in the policy, but constituted a waiver of the truth of the answer so inserted. The company therefore is bound by such answer.

Regardless of whether the defendant insurance company can be held liable on the theory of waiver there would seem to be no question but that it should be held under the facts of this case to be estopped from asserting the falsity of the answer "None," inserted by its own agent, without investigation and without contacting the insured. Under such estoppel the defendant is prevented from showing that there was an existing incumbrance but is bound by the insertion made by its own agent in the policy that there was no incumbrance. It has been suggested that the failure of Frese, the insured, to read his policy and to discover that a false answer had been inserted by the defendant's agent in the blank with respect to incumbrances constitutes negligence which bars him from invoking the doctrine of estoppel. However, under the decisions of this court, failure to read the policy does not constitute such lack of diligence or negligence as to bar the insured from invoking the principle of estoppel against the defendant insurance company. The cases of Collum v. National Fire Ins. Co., supra, and Taluc v. Fall Creek Farmers Mut. F. Ins. Co. (1931), 203 Wis. 319, 234 N.W. 364, are decisive on this point.

In Collum v. National Fire Ins. Co., supra, Mr. Justice OWEN, in his opinion stated (p. 427):

"It is claimed by the defendant that the insured was required to know the terms of his policy and that his retention thereof with such warranty therein binds him thereto.

"There is a spirited conflict among the authorities as to whether an insured may recover under such circumstances. The question is exhaustively considered by the Minnesota supreme court in Parsons, Rich Co. v. Lane, 97 Minn. 98, 106 N.W. 485, 4 L.R.A., N.S., 231, where it is held that the plaintiff may not recover. It is also quite as thoroughly considered by the Indiana supreme court in Glens Falls Ins. Co. v. Michael, 167 Ind. 659, 74 N.E. 964, 8 L.R.A., N. S., 708, where it is held that the plaintiff may recover. A perusal of these two cases will supply the investigator with the reasons and authorities upon which the conflicting conclusions rest. The question would be an interesting albeit perhaps a troublesome one were we permitted or required to consider it as an original proposition in this court. . . .

"It seems to be firmly entrenched in the jurisprudence of this state and aligns this court with those holding that an insured may recover on an insurance policy under circumstances here presented. We perceive neither justification nor excuse for re-examination of the question, and must hold that the plaintiff is entitled to recover in view of the fact that the finding of the trial court exonerated plaintiff from any fraudulent or intentional concealment of the conditional nature of his title to the truck.

"It is urged that the rule of Bostwick v. Mutual L. Ins. Co. 116 Wis. 392, 89 N.W. 538, 92 N.W. 246, where knowledge of the contents of a life insurance policy was imputed to the insured when he attempted to repudiate the same several months after its receipt, should be here invoked to defeat plaintiff's recovery. It must be remembered that in that case the plaintiff was attempting to repudiate the policy and not to collect thereon."

The case of Taluc v. Fall Creek Farmers Mut. F. Ins. Co., supra, involved an attempt of a fire insurance company to avoid payment of loss on a policy on the ground that there were false statements of fact in the application. The application for the policy was made out in the handwriting of the insurance company's agent and was signed by the plaintiff insured without reading it. The agent made no inquiry as to the particular facts inserted therein which proved to be incorrect. The defendant contended that the plaintiff could not show that the misstatements in the application were due to the fault of the agent because the plaintiff had not read the application. This court in an opinion by Mr. Justice FAIRCHILD stated (p. 321):

"Every-day experience underlies the rule that it is not necessarily negligence for the applicant for insurance to fail to read the application or the policy and that misstatements inserted in the application by the agent without the knowledge of the assured do not become misrepresentations of the insured by reason of the fact that he signed the application. Ordinarily persons making contracts of insurance do not read carefully the application, and a very small per cent, in all probability, of those securing insurance ever read or understand the contents of the policy. Because of this fact the law has placed restrictions of an unusual nature, considering contracts as they are generally treated, upon the parties seeking to avoid the terms of a policy of insurance."

It is the general rule that one seeking to reform an instrument for mutual mistake must have exercised reasonable diligence. 76 C. J. S., Reformation of Instruments, p. 398, sec. 46. However, in Barly v. Public Fire Ins. Co. (1931), 203 Wis. 338, 234 N.W. 361, this court held that failure of an insured to read an automobile fire and theft insurance policy and to discover errors therein and advise the insurance company with respect thereto until after the insured vehicle had been stolen, did not bar the insured from his remedy of reformation of the policy to correct such errors. The rule in estoppel is the same as that in reformation, i. e., that the party seeking to invoke it must have acted with reasonable diligence. We cannot perceive why a stricter rule with respect to exercise of reasonable diligence should be required of one seeking to invoke estoppel against an insurance company for the wrongful act of its agent than one who seeks to reform a policy for mistake. Why should failure to read a policy and notify an insurance company of mistake therein be held to be negligence in the one case and not in the other?

Does our decision in Bradach v. New York Life Ins. Co. (1952), 260 Wis. 451, 51 N.W.2d 13, impliedly overrule our prior decisions in Collum v. National Fire Ins. Co., supra, and Taluc v. Fall Creek Farmers Mut. F. Ins. Co., supra? We think not. The Bradach Case did not involve any attempt to invoke estoppel against the defendant life insurance company. In that case the plaintiff was the owner-beneficiary of a life insurance policy issued upon the life of his partner and sought to recover on the policy after the death of the insured. At the trial the company proved conclusively that the answers to certain portions of the medical portion of the application were materially false. After the conclusion of the taking of evidence the plaintiff contended the defendant company had failed in its proof because it had offered no evidence that the purported signature of the insured to the application (which was attached to the policy) was genuine. We held that the burden of proving the genuineness of the signature to the application was not upon the defendant insurance company inasmuch as the insured had had the policy in his possession and it was his obligation to have read the policy and attached application and to have protested to the company if the signature were not genuine. We did not state in our opinion in the Bradach Case that it was negligence for the plaintiff not to have read the policy. Neither did we hold, that if the plaintiff had offered testimony that the purported signature of the insured to the application were a forgery, such failure of the owner beneficiary to read the policy would have precluded him from offering such evidence. However, in order that there may be no misunderstanding, we expressly declare that the holding of the Collum and Taluc Cases, with respect to the failure of an insured to read his policy, is still the law in Wisconsin regardless of anything which may have been stated or cited in our opinion in the Bradach Case inconsistent therewith.

The defendant in the instant case has placed great reliance on our decision in Moe v. Allemannia Fire Ins. Co. (1932), 209 Wis. 526, 527, 244 N.W. 593., as requiring that the case at bar be decided in its favor. In that case the defendant insurance company's agent made out an application for fire insurance on plaintiff's household furniture, which application made no mention of the existence of a chattel mortgage on such furniture which had been placed thereon two months previously. Neither the agent nor the plaintiff knew that the existence of a chattel mortgage was material so far as the making of the contract of insurance was concerned. The policy contained a provision that the company should not be liable for any loss to the insured property "while incumbered by a chattel mortgage." This court held that there was no question of warranty involved but only a question of coverage, and denied recovery to the plaintiff. No question of waiver or estoppel is discussed in the opinion and it therefore is not in point on such issue.

We are of the opinion that the fact that in the instant case Frese called the defendant's agent and told him to "transfer" the insurance from the first Cadillac to the second does not differentiate this case from one where the insured requests the writing of a new policy. To hold that Frese had the duty of first reading the fine-print exclusion clause in the existing policy, and, because of so reading it, to inform defendant's agent that the new car was mortgaged, does not seem to us to conform to realities and places the burden on the wrong party. The average owner, who acquires a new car in place of one previously owned, when he requests insurance coverage of his insurance agent does not know whether this can be accomplished by a rider to the old policy, or the writing of a new policy. Whichever way it is handled by the agent, the car owner depends on the agent to ask for whatever information is required by the insurance company for filling in blanks in the rider or the new policy. The insured should not be held to presume that the agent will fill in answers in such blanks without first making inquiry to ascertain the true facts.

The instant case is one in which a false answer was inserted in the policy through the sole fault of the defendant insurance company's agent. The principles of equity and fair dealing require that the company be not permitted to take advantage of the wrongful act of its own agent by showing that the fact as to incumbrances was other than as written into the policy by the agent.

By the Court. — Judgment reversed and cause remanded with directions to enter judgment for the plaintiff against the defendant in the amount prayed for in plaintiff's complaint.