MOTORS INSURANCE CORPORATION v. FREEMAN

MOTORS INSURANCE CORPORATION v. FREEMAN
1956 OK 247
304 P.2d 328
Case Number: 37011
Decided: 09/18/1956
Supreme Court of Oklahoma

MOTORS INSURANCE CORPORATION, A CORPORATION, PLAINTIFF IN ERROR,
v.
MACK FREEMAN, DEFENDANT IN ERROR.

Syllabus by the Court

¶0 1. In the absence of fraud or collusion between the soliciting agent and the applicant, where the applicant answers questions contained in an application for a policy of insurance, fully and without withholding material facts, and the agent does not correctly write such information in answer to the questions propounded, such agent is acting for the insurance company and not as agent of the applicant.
2. Knowledge gained by an insurance agent, in preparing an application for insurance, is imputable to the insurance company, and the company cannot escape liability on a policy issued in such case by showing that its agent did not correctly disclose such knowledge to the company and that the agent, in concealing the information, was serving some personal interest of his own adverse to the company, in the absence of proof that the applicant knew, or should have known, that the company was being deceived.

Appeal from Superior Court of Seminole County, Bob Aubrey, Judge.

Action by Mack Freeman against Motors Insurance Corporation to recover under a fire insurance policy for loss by fire of an automobile covered by the policy. Judgment for plaintiff, and defendant appeals. Affirmed.

McClelland, Bailey & McClelland, Oklahoma City, W.B. Edwards, Seminole, for plaintiff in error.

Frank Seay, Seminole, for defendant in error.

JACKSON, Justice.

¶1 This action was brought by plaintiff, Mack Freeman, against defendant, Motors Insurance Corporation, to recover under a fire insurance policy for the loss by fire of a Buick automobile which was covered by the policy.

¶2 Trial to the court resulted in a judgment for plaintiff, and defendant appeals.

¶3 As grounds for reversal, it is first urged by defendant that, under the evidence, the defendant is relieved of liability on the policy because of plaintiff's failure to disclose the existence of a chattel mortgage against the automobile in violation of express terms of the policy which provided that the policy would not be in force while the automobile was subject to any mortgage not specifically declared and described in the policy.

¶4 It is admitted herein that defendant's agent had full information concerning the mortgage involved and the decisive question raised by defendant's contention is whether the knowledge of the agent is imputed to the defendant.

¶5 The material facts touching upon this issue are not in dispute. Plaintiff purchased the insured property from Frank Harber Buick, Inc., an automobile dealer, and in payment therefore traded in another automobile as a down payment and executed two promissory notes, one for $1,817.76 and the other for $1,260. Each note was secured by a separate chattel mortgage to the dealer.

¶6 The evidence further showed that one W.S. Easterling was soliciting agent for the defendant insurance company, and at the same time was employed by Frank Harber Buick, Inc. as its office manager. As office manager for the automobile dealer, Easterling had drawn the mortgage papers involved in this transaction and knew all the details concerning the purchase of the automobile, including the amount of the down payment, the promissory notes and the chattel mortgages. As agent for the defendant insurance company, Easterling had prepared, upon the company's printed form, the application for insurance upon which the policy was issued. The application as filled out by the agent showed only one mortgage in the amount of $1,817.76. It did not show that there was another mortgage in the amount of $1,260.

 
¶7 A witness for defendant testified that he was an underwriter for the defendant company and among his duties was that of passing upon applications for insurance; that the application for insurance involved here was examined and accepted by the witness; that he would not have approved the application, at least without further investigation, if the application had disclosed the truth about the $1,260 mortgage.

¶8 There was no evidence tending to prove that the plaintiff had concealed any information from Easterling; that he had colluded with Easterling, or that he had any reason to believe that Easterling would not disclose the required information to his principal.

¶9 It is conceded by defendant that, under the general rule, knowledge of an agent obtained within the scope of his authority is ordinarily imputed to his principal. But it is argued that the evidence in this case shows that Easterling, in concealing material information about the mortgage, was acting in his own interest and in the interest of Frank Harber Buick, Inc. to promote the sale of the automobile and was acting adversely to the interest of this defendant. Therefore, it is concluded, this case comes within a recognized exception to the general rule to the effect that, "The knowledge of an agent is not imputed to his principal if the circumstances are such as to raise a presumption that the agent would not communicate such knowledge to the principal."

¶10 In support of its contention, defendant invites our attention to the cases of Aetna Casualty & Surety Co. v. Local Bldg. & Loan Ass'n, 162 Okl. 141, 19 P.2d 612, 613, 86 A.L.R. 526; and Allen & Scott, Inc., v. Stahl, 181 Okl. 527, 72 P.2d 204.

¶11 A review of the cited cases reveals that they are not in point with the facts in the instant case and the rules therein announced are not controlling here.

¶12 The rule which is controlling under the facts in this case was announced by this court in the case of National Life & Accident Ins. Co. v. Hearn, 205 Okl. 661, 240 P.2d 83, wherein the court said in the first paragraph of the syllabus:

"In the absence of fraud or collusion between the
soliciting agent and the applicant, where the
applicant answers questions contained in an
application for a policy of insurance, fully and
without withholding material facts, and the agent
does not correctly write such information in answer
to the questions propounded, such agent is acting for
the insurance company and not as agent of the
applicant. Knowledge of material facts gained by the
insurance company's soliciting agent is imputable to
the company, and it is bound thereby."

¶13 See also Atlas Life Ins. Co. v. Sullivan, 172 Okl. 595, 52 P.2d 28.

¶14 We hold that information obtained by the agent of the company when writing the application for insurance is imputable to the company, and it is bound thereby, and an insurance company cannot escape liability on a policy in such case by showing that its agent did not correctly disclose such information, even though the agent, in the concealment, may have been serving some personal interest of his own, in the absence of proof that the applicant knew, or should have known, that the company was being deceived.

¶15 A further proposition urged by defendant involves an issue of fact concerning the defense of wilful destruction of the insured property. There was conflicting testimony regarding defendant's claim that plaintiff had wilfully burned the automobile. We have examined the record and find that the judgment of the court resolving this issue in favor of plaintiff is amply supported by the evidence and it will not, therefore, be disturbed on appeal.

¶16 Judgment affirmed.

¶17 JOHNSON, C.J., WILLIAMS, V.C.J., and CORN, DAVISON and BLACKBIRD, JJ., concur.

¶18 HALLEY, J., dissents.

HALLEY, Justice (dissenting).

¶1 The evidence in this case is overwhelming that the plaintiff deliberately burned his automobile in order to collect the insurance over and above the mortgages on the car.

¶2 The majority opinion has overlooked both the law and the facts applicable to this case. This man, Easterling, not only was acting in a dual capacity but he represented three interested parties in this matter. He was office manager for the Frank Harber Buick, Inc. He was the agent for Mack Freeman. He wrote insurance for the defendant. I quote from Mack Freeman's testimony on cross-examination:

"Q. You say you have never seen that policy? A. No.

"Q. Where has that policy been since it was
executed? Did Mr. Harber have it - Harber Buick
Company? Or Mr. Easterling? A. I imagine it was with
my papers.

"Q. The only time you have ever seen the policy, it
was in the possession of Mr. Easterling, or Harber
Buick Company? A. Yes.

"Q. Are you acting here for them in bringing this
lawsuit or are you acting for yourself? A. I am
acting for myself.

"Q. You are acting for them to the extent of these
two mortgages, aren't you? A. It's included.

"Q. That's included. You say you never saw the
application? A. No, sir.

"Q. You did understand, however, that you would
have insurance on your automobile? A. Well, they said
it would be covered. I didn't know with who, or how,
or under what conditions. They said it would be
covered.

"Q. That was part of the deal you made there with
them, that you would have insurance? A. That was
their protection.

"Q. It is their protection, Yes, I grant you that.
That's one of the points I have in this lawsuit; but
it was part of your deal that you were to have
insurance, and it would be charged into the deal and
you'd pay for it? A. Yes, sir.

"Q. Under those circumstances, it was all right
with you for Mr. Easterling to sign your name to this
application here? A. Sure.

"Q. You say, `Sure, that was all right.' He
represented you, then, and acted for you in making
this application and obtaining the insurance?

"Q. Is that correct? A. To cover the car.

"Q. He was acting for you in making this
application to obtain this insurance. A. Yes, sir."

(Objections, exceptions and colloquy between counsel and court and counsel have been omitted)

¶3 Easterling represented two entities whose interests to that of the insurance company were adverse. Certainly Frank Harber Buick, Inc. was interested in having the car mortgaged for at least the amount of their mortgages and Easterling knew that if he revealed the fact that there were two mortgages on the car which totaled more than three thousand dollars the insurance company would not accept the application. Easterling was Freeman's agent in signing Freeman's name to the application.

¶4 The law is well settled that as a general rule the same person cannot act as agent for the insurer and the insured without knowledge and consent of both and in cases where dual agency is permitted the agent cannot represent conflicting interests unless he acts in entire good faith and with due authority from both principals.

¶5 This Court said in the case of Great American Ins. Co. v. Farmers' Warehouse Co., 91 Okl. 118, 217 P. 208:

"A man cannot be the agent of both parties to a
transaction; and, where the agent of an insurance
company writes a fire policy covering property of a
corporation in which he is a stockholder, director,
and secretary and treasurer, without the knowledge or
consent of the insurance company, such policy is void
under the rule that a man cannot serve two masters."

¶6 There is nothing in this action to make it an exception to the general rule. We cannot imagine a case which illustrates more forcibly why one should not be permitted to represent adverse interests than this one which arises in the highly competitive automobile business. Easterling naturally was greatly concerned in consummating the sale to Freeman for the automobile company's profit. The rule is as it is in these cases because the weakness of human nature has been taken cognizance of. Here Easterling in his desire to help the automobile firm failed to reveal to the insurance company, as he was honor bound to do, that there were two mortgages on the car. He was also acting for the insured when he signed Freeman's name to the application and making it possible for Freeman to get insurance and in an amount which he would not have gotten had Easterling told the truth.

¶7 This case is distinguishable from that of Home Insurance Co. of New York v. Southern Motor Coach Corp., 171 Okl. 94, 41 P.2d 870, because Easterling had a direct pecuniary interest in the subject matter and occupied a position of fiduciary relationship. The automobile company had the greatest interest as between the plaintiff and it. Their risk was the greatest and Easterling saw that it was being protected. Attention is called to 44 C.J.S., Insurance, §§ 141 and 156; the authorities cited thereunder; 29 Am.Jur., Insurance, section 92 and Ramspeck v. Pattillo, 104 Ga. 772, 30 S.E. 962, 42 L.R.A. 197.

¶8 I submit that it would be shocking to permit recovery in cases of this kind. There is too much likelihood for fraud. I cannot but dissent.