Summary
In Albert v. Home Fire Marine Ins. Co. of California, 275 Wis. 280, 81 N.W.2d 549, 553 (1957), the Court held that "the local agent's oral misinterpretation of unambiguous provisions as to coverage can not work a modification of the contract by estoppel or otherwise."
Summary of this case from Dallas Glass, Etc. v. Bituminous F. M. Ins. Co.Opinion
February 7, 1957 —
March 5, 1957.
APPEAL from a judgment of the circuit court for Milwaukee county WM. F. SHAUGHNESSY, Circuit Judge. Affirmed.
For the appellants there were briefs and oral argument by A. L. Skolnik of Milwaukee.
For the respondents there was a brief by Bert Cotton of New York, N.Y., and Wolfe, O'Leary Kenney of Milwaukee, and oral argument by Mr. Cotton and Mr. H. O. Wolfe.
Mark H. Albert and Theodore Albert, partners, doing business as Northwestern Products Company, commenced action November 29, 1954, against Home Fire Marine Insurance Company of California, The Phoenix Insurance Company, and American Equitable Assurance Company of New York. Plaintiffs sought to recover a total of $125,000 for loss by fire. Plaintiffs appeal from judgment in their favor for a total of $68,039.85 plus interest and costs.
On October 28, 1953, each respondent issued a fire insurance policy to appellants. They were standard policies with an indorsement entitled "Multiple Location Reporting Form A Monthly Average with Premium Adjustment." This form of endorsement was approved by the commissioner of insurance May 1, 1953, for use in Wisconsin. Each endorsement provided that the limit of liability for all contributing insurance was $125,000. The Home policy was for 25 per cent of the total contributing insurance; the Phoenix 50 per cent, and the American Equitable 25 per cent. The provisional premium for the three policies was $785.26. Each indorsement contained, among others, the following clauses:
"1. PROVISIONAL-AMOUNT CLAUSE — The amount of insurance provided for hereunder is provisional and is the amount on which the deposit premium is based, it being the intent of this insurance to insure hereunder the total actual cash value of the property described herein, subject to the limits of liability and provisions for other insurance herein provided. Any loss in excess of the limits stated in this policy shall be borne by the insured or by such other insurance to the extent of such excess, notwithstanding the requirement that premium is to be adjusted on the basis of full values reported.
"11. VALUE-REPORTING CLAUSE — It is a condition of this policy that the insured shall report in writing to this company not later than thirty (30) days after the last day of each calendar month, the exact location of all property covered hereunder, the total actual cash value of such property at each location and all specific insurance in force at each of such locations on the last day of each calendar month. At the time of any loss, if the insured has failed to file with this company reports of values as above required, this policy, subject otherwise to all its terms and conditions, shall cover only at the locations and for not more than the amounts included in the last report of values less the amount of specific insurance reported, if any, filed prior to the loss, and further, if such delinquent report is the first report of values herein required to be filed, this policy shall cover only at the respective locations specifically named herein and for not exceeding 75 per cent of the applicable limit of liability of this company specified in the limit-of-liability clause.
"12. FULL-REPORTING CLAUSE — Liability under this policy shall not in any case exceed that proportion of any loss hereunder (meaning the loss at the location involved after deducting the liability of specific insurance, if any), which the last-reported value filed prior to the loss, less the amount of specific insurance reported, if any, at the location where any loss occurs bears to the actual cash value less the amount of specific insurance, if any, at that location on the date for which report is made. Liability for loss hereunder, occurring at any location acquired since filing the last report (except as provided by the value-reporting clause), shall be apportioned in a like manner except that the proportion used shall be the relation that values reported at all locations less the amount of reported specific insurance, if any, bear to the actual cash values less the amount of specific insurance, if any, at all locations on the date for which report is made.
"13. PREMIUM-ADJUSTMENT CLAUSE — The premium named in this policy is provisional only. The actual premium consideration for the liability assumed hereunder shall be determined, at the expiration of this policy, by application of the following formula:
"`A' After deducting the amount of specific insurance, if any (not exceeding, however, the amount of value reported), at each location, an average of the total remaining values reported at each location shall be made, and if the premium on such average values at the rate applying at each location herein provided or in the case of locations acquired (see limit of liability clause), the rate used shall be the rate that is applicable to each such location at the time the location was first reported, exceeds the provisional premium, the insured shall pay to the insurer the additional premium for such excess; and, if such premium is less than the provisional premium, the insurer shall refund to the insured any excess paid.
"`B' It is a further condition of this policy, anything to the contrary notwithstanding, that the final adjusted premium as provided in this clause shall in no event be less than one hundred dollars ($100) per annum.
"14. VERIFICATION OF VALUES — This company or its duly appointed representative, shall be permitted at all reasonable times during the term of this policy, or within a year after its expiration, to inspect the property covered hereunder and to examine the insured's books, records, and such policies as relate to any property covered hereunder. This inspection or examination shall not waive or in any manner affect any of the terms or conditions of this policy."
On December 24, 1953, appellants' insured merchandise was damaged by fire in the amount of $139,481.97.
On December 11, 1953, appellants had made reports under the policies on forms provided by the respondents showing "total actual cash value" of the insured goods as of October 30, 1953, at $63,000. This figure was not in fact the value of the goods as of October 30th, but was the value as of September 30th. The actual value as of October 30th was $129,150.26. On December 27, 1953, appellants filed reports showing the value of merchandise on hand as of November 30th at $175,000, but it was stipulated at the trial that this was in error and the actual cash value on that date was $150,136.73.
One of the respondents subsequently canceled the insurance but the other two maintained it in force for a full year. The final premium determined in each case was based upon the average of all values reported while the particular policy was in force. The difference between the provisional premium and the final premium was refunded to appellants.
Appellants made two offers of proof by question and answer. Objections were sustained. Richard Kaufman testified that he had solicited the insurance business of appellants in 1953 and had signed the policies as agent for respondents. Early in December he telephoned Mark Albert about submitting the monthly reports of value. He explained that it was necessary for appellants to furnish the companies with "their last fiscal inventory." He was referred to Theodore Albert, and explained that Theodore had a monthly reporting form of insurance; that it was necessary for him to furnish a complete inventory every month. Theodore said he did not know much about the report and Kaufman acknowledged that this form of policy was new to him; that he wanted appellants to send "their last fiscal inventory;" that he understood he was asking them "to use the figure of the inventory at the end of their fiscal period;" Theodore did not tell him when that fiscal period ended.
Theodore Albert testified concerning the same conversation and to the same effect. The figure of $63,000 which he used was the value as of September 30th which was the close of appellants' fiscal year. A large increase of stock on hand during the month of October is normal in appellants' business. He knew when he wrote out the report forms that $63,000 was not a correct figure for October 30th.
The report forms filled out by Theodore Albert were entitled "Monthly Report of Values." He wrote the date in a space so that it read: "Report of values as of Oct. 30, 1953." The amount $63,000 was written in a space beneath the words "Total actual cash value." He signed the form immediately below the following: "The undersigned has read the explanatory Guide for Reporting Values printed on the back of this form, and pursuant to the terms and conditions of the above-numbered policy the foregoing constitutes our report of values as of close of business on the date set forth above." The guide is printed both on the back of the report form and on the cover of the pad in which the forms are furnished. At the top is a box in which there appears in boldface, capital letters, the following: "Within the limits set forth in the policy you will be fully covered on the property insured (A) If you report values fully and (B) If you report on time. The obligation to comply with the reporting provisions of the policy is one for which you have the responsibility." Paragraph 2 of the guide begins: "You should report the actual cash value of all property insured at each location." The paragraph gives further instructions how to determine value and ends: "If the values reported are less than the values at risk as of the date of the report you will be underinsured."
Respondents conceded liability in the amount of $68,039.85 determined as provided in the indorsements. Appellants asserted (I) that the reporting-form indorsements violate sec. 203.22, Stats., and (2) that in any event the instructions given by respondents' agent estopped them from using the December 11th report in determining liability pursuant to the Indorsements. The circuit court concluded the indorsements do not violate the statutes and excluded as immaterial the testimony as to the instructions given by the agent. The conclusion set forth the applicable formula for determining liability as follows:
$63,000 (Value reported as of 10/30/54) ------------ X $139,481.97 = $68,039.85 $129,150.26 (Actual (Amount of loss) (Aggregate value liability of 10/30/54) insurers) Judgment was entered accordingly.Appellants assert that the circuit court should have received the testimony of Kaufman and Theodore Albert concerning the instructions orally given by Kaufman. Appellants apparently concede that an oral waiver would be ineffective under the terms of the policy, but urge that Kaufman's instructions set up an estoppel in pais.
Kaufman's instructions were vague. He said to use the "last fiscal inventory." There was no discussion as to when appellants' "fiscal period" ended. On the other hand, it is clear from the terms of the policy that the actual cash value on the last day of the calendar month is to be reported and that the accuracy and timeliness of the report will affect the amount of insurance in force. Appellants interpreted Kaufman's words as meaning that they should use a September 30th figure in reporting a value as of October 30th. Giving that effect to what Kaufman said would alter the unambiguous provisions of the contract. But the local agent's oral misinterpretation of unambiguous provisions as to coverage cannot work a modification of the contract by estoppel or otherwise. Cullen v. Travelers Ins. Co. 214 Wis. 467, 253 N.W. 382; Colvin's Baking Co. v. Northwestern Nat. Ins. Co. 215 Wis. 475, 480, 255 N.W. 268. Appellants cite Spohn v. National Fire Ins. Co. 190 Wis. 446, 209 N.W. 725, but the doctrine of estoppel was invoked in that case to prevent a forfeiture and not to alter the provisions of the policy as to coverage. The agent had authority to validate an assignment and had possession of the policy for that purpose, delivered the policy to the assignee, and told the assignee he was "protected," but failed to validate the assignment in writing.
In Peters v. Great American Ins. Co. (4th Cir.), 177 F.2d 773, a reporting type of policy was involved. The insured claimed he had been misled by an agent's erroneous instructions as to computing the value of inventory. The court stated that coverage rather than forfeiture was involved and held there was neither waiver nor estoppel.
We conclude that the circuit court properly excluded the offers of proof.
Appellants also assert that the provisions of the reporting form violate sec. 203.22, Stats., reading in part as follows:
"203.22 COINSURANCE CLAUSES. Except as otherwise provided by law, no fire insurance company shall issue any policy in this state containing any provision limiting the amount to be paid in case of loss below the actual cash value of the property, if within the amount for which the premium is paid, unless, at the option of the insured, a reduced rate shall be given for the use of a coinsurance clause made a part of the policy."
Appellants point out that the $68,039.85 awarded them by the circuit court is less than the actual cash value of the property lost and less than the agreed $125,000 limitation. They point out that when the final premium was calculated, the $63,000 value reported as of October 30th and the $175,000 value reported as of November 30th were both included in the average. Therefore they say they paid a premium for an average of $119,000 of coverage up to the time of the fire and that no limitation below that amount is valid. The report of $175,000 as of November 30th was made after the fire and was in fact an overstatement by about $25,000.
Thus we reach the question whether the provisions of the reporting form are forbidden by sec. 203.22, Stats. This statute was considered in Newton v. Theresa Village Mut. Fire Ins. Co. 125 Wis. 289, 104 N.W. 107, and in Bloch v. American Ins. Co. 132 Wis. 150, 112 N.W. 45. These cases dealt with versions of a different type of clause, and are helpful only as the general purposes of the statute were discussed. In the Newton Case, this court said (p. 297)
"This provision is not as clear in its meaning as could be wished, but the evident intent is to guaranty that the insured shall, tinder the circumstances named, receive the full benefit of the amount of the insurance for which he pays."
In the Bloch Case, two years later, it was said (p. 164)
"It is to have application only to cases in which the insurer attempts by stipulation in the policy, or with the policy, without consent of the insured and without reduction of premium, to limit its liability thereon below the amount or face of the policy upon which or for which the insured has paid full premium, and where the value of the goods destroyed is within the amount of such insurance carried on the property.
Under the reporting form, there is nothing to prevent the insured from maintaining full coverage for the value of his stock on hand, if be reports the value as of the close of each month accurately and within the thirty days allowed. Understatement will leave him with less coverage, than the full value of his stock, but will also reduce his premium. Overstatement will result in his paying more premium than required, but, as in the case of understatement, it is his own act which gets him into the difficulty. It does not seem reasonable to conclude that the legislature intended to prohibit an insurer from writing a policy which imposes upon the insured the type of consequences of his own failure to determine and report the true value of his own goods which are imposed by the reporting form.
The reporting form has been considered by several appellate courts. Its purpose was well described in Peters v. Great American Ins. Co. (4th Cir.), 177 F.2d 7731, 774, as follows:
"Monthly reporting insurance is a device whereby the amount of insurance under the policy fluctuates with the value of the changing stock of merchandise in a going business. It is designed to afford complete coverage and at the same time to avoid the maintenance of insurance in excess of the value of the property insured, so that the amount of the insurance, and the amount of the premium to be paid, are in direct proportion to the value of the goods on hand. Such a policy is obviously more favorable to the insured than a policy for a specified amount where the premium is calculated on the amount of insurance named in the policy although the amount of the risk may be materially less from time to time during the life of the contract."
At page 776 it was said:
"It will be perceived that, within the maximum set by the policy, the amount of the insurance carried, the amount of the premium to be paid, and the extent of the liability of the company under a policy of this kind are controlled by the policyholder."
In Camilla Feed Mills v. St. Paul Fire Marine Ins. Co. (5th Cir.), 177 F.2d 746, 749, the insured claimed that a reporting-form policy violated a Georgia statute which provided:
"`All insurance companies shall pay the full amount of loss sustained upon the property insured by them: Provided, said amount of loss does not exceed the amount of insurance expressed in the policy; and all stipulations in such policies to the contrary shall be null and void. . . .'"
The court of appeals distinguished between the provisions in the reporting form and "a provision that arbitrarily prevents the insured from recovering the full amount of his loss up to the amount of his policy, the policy being one under which the insurer purports to assume the entire risk of loss."
We are of the opinion that the use of this reporting-form policy is not forbidden by sec. 203.22, Stats., and that the circuit court correctly limited appellants' recovery in accordance with the provisions of the policy, using the incorrect October 30th value reported by appellants in the calculation.
By the Court. — Judgment affirmed.