McCormick v. Orient Insurance

California Supreme Court Nov 3, 1890 No. No. 12836Published

Before: Hayne

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Holding. The court held that the plaintiffs were not entitled to a reformation of the insurance policy due to a lack of evidence of fraud or mistake, and that the insurer's request for the insured to perform contractual obligations did not constitute a waiver or estoppel of the insurer's defenses.

Issues

Whether the plaintiffs were entitled to a reformation of the insurance policy based on fraud or mistake.
Whether the insurer's post-loss conduct in requesting documentation and property inspection constituted a waiver or estoppel of its policy defenses.

Disposition. affirmed

Quotations verified verbatim against the opinion

“It is plain, therefore, that the plaintiffs made no case for a reformation of the policy.”

“An essential element of estoppel of this character is, that one party should have relied upon the conduct of the other, and been induced by it to put himself in such a position that he would be injured if the other should be allowed to repudiate”

“The plaintiffs were simply complying with their contract; and as their position was that the defendant was liable in an action at law for the full amount of the claim, it is manifest that they would have done the things, anyway.”

Synopsis

Insurance —• Ownership. — If a policy provides that any interest not absolute must be represented as such, and the interest of the insured is not absolute, but was not represented as such, but, on the contrary, was insured as the absolute ownership of the property, no recovery can be had on the policy.

Contract — Reformation — Ignorance of Contents.—The mere fact that the insured did not know that his policy contained a certain provision is not ground for reformation.

Estoppel—Reliance upon Conduct. —It is an essential element of estoppel by conduct that the party claiming the estoppel should have relied upon the conduct of the other, and was induced by it to do something which he would not otherwise have done.

Id.—Instance — Production of Books, etc.—If an insurance company has a valid defense to a claim upon a policy, but nevertheless requests the insured to produce their books, and the property which escaped damage, and the insured comply with the request, at considerable inconvenience and expense, there is no waiver of the defense or estoppel with respect to it, — it appearing that the contract provided for the taking of such steps, and that the insured would have taken them, anyway.

Hayne, C. The original complaint in this case was to recover two thousand dollars on a policy of insurance. After several years of litigation, the plaintiffs amended their complaint so as to seek a reformation of the policy, on the ground of fraud and mistake, and for a decree upon it as reformed. The trial court gave judgment for the defendant, and the plaintiffs appeal upon the judgment roll, without any bill of exceptions or statement.

The policy contained the following provision: “Any interest in property insured not absolute, or that is less than a perfect title, must be specifically represented to [261]the company, and expressed in this policy in writing.” There was no indication in the policy that the plaintiffs’ interest was not an absolute interest. On the contrary, it stated that the plaintiffs were insured “on their stock of manufactured manila paper,” etc., and the application (which, in our opinion, was made by the agent of the plaintiffs) stated the same thing. As a matter of fact, the plaintiffs were not the owners. They merely had the property for sale on commission, and the defendant did not “have any knowledge of the same, except in so far as the same was disclosed and stated in the said application for insurance and policy.” Upon these facts, it is plain that the plaintiffs could not recover in an action at law upon the policy; and it was so held on appeal in a companion case, the decision in which was, by stipulation, to control this case. (McCormick v. Insurance Co., 66 Cal. 362.)

After that decision, the plaintiffs here amended their complaint so as to make the suit for a reformation of the policy by the elimination of the clause as to ownership. The grounds upon which such reformation was sought were, in substance, that the plaintiffs did not know that the policy contained the provision as to ownership; that the defendant represented to them that the insurance was upon their interest as commission merchants, and prepared the policy in such a way as to mislead, and with the intention of misleading; and that plaintiffs did not read the policy, because of their reliance upon the good faith of the defendant and its agents. With the exception, however, of the plaintiff’s actual knowledge, which is immaterial when taken by itself, the truth of these allegations is completely negatived by the findings, which, as already stated, have not been attacked. It is plain, therefore, that the plaintiffs made no case for a reformation of the policy.

It is contended, however, that the defendant, by its conduct after the fire, waived the defense in question,

McCormick v. Orient Insurance

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