premiums. But the insurance company must be consistent. If it claims that the contract is not in force, it must not expressly nor impliedly recognize it as effective. If the insured demands the return of what he has paid as premiums, it must comply with the demand if it claims that the risk never attached. If it refuses to return the money it places itself in a position which is inconsistent with an honest intention to avail itself of the breach of condition, and recognizes the contract as in force just as effectively as it would by accepting and retaining assessments or premiums after it has acquired knowledge that there had been a forfeiture. Having thus made its election, it will be held to have subjected itself to all the liabilities which attach thereto. Even when knowledge of the breach of a condition is acquired before a loss occurs, the company is not, under our decisions, required to do any affirmative act. There is even stronger reason for holding that this is the rule when the insured does not learn of the breach of conditions until after a loss. The rights of the parties have then been determined and fixed by the occurrence of the event insured against. It is essentially a matter of intention; and when the only proof of that intention rests in what a party does or forbears to do his acts or omission to act relied upon should be so manifestly consistent with and indicative of an intention to voluntarily relinquish a then known particular right or benefit that no other reasonable explanation of his conduct is The court here adds: "In Johnson v. American Ins. Co., 41 Minn. 396, 43 N. W. 59, where the insured procured other insurance in violation of a condition which provided that the policy should be void if other insurance was obtained 'without notice to and consent of this company in writing thereon,' the court, through Justice Dickinson, said: 'By the plain terms of the policy, other insurance without the consent of this company would ipso facto void the contract; and in the case of a contract thus avoided it would not be obligatory upon the insurer to repay any of the unearned premium, nor would he be required to give notice that he should insist upon and avail himself of the proper legal effect of the agreement. It required no affirmative act of election on the part of the company to make operative the clause avoiding the contract whenever the specified conditions should occur. Its obligations ceased, unless, being informed of the fact, it consented to the additional insurance, or in some manner waived the forfeiture.' To the same effect is Betcher v. Capital Fire Ins. Co., 78 Minn. 240, 80 N. W. 971." 7 Berman v. Accident Association, 107 Me. 368, 373, 78 Atl. 462. possible. Unless one is shown to have full knowledge of all the material facts that establish his right he cannot be held to have waived it." § 758. No affirmative action on the part of the insurer is generally necessary in order to avoid a policy for breach of condition. Even though the insured has no right to recover any portion of the premium if the policy is avoided for breach of condition, it is, nevertheless, held or assumed by some courts that affirmative action on the part of the insurer is necessary in order to terminate the rights of the insured under the contract. The supposed analogy of a lease or other deed granting a conditional estate in land, has probably contributed to this idea. A lease either for life or for years creates an estate in land. When the estate has once been created, it cannot be terminated except by reëntry. This is an inheritance of the modern law illustrating the importance which possession of tangible property had, and still has in the law. 9 The obligation of an insurer, however, does not create an estate which exists until it is determined, nor a general obligation to "insure" which the insurer might on certain contingencies take away from the insured. From the outset there was merely a conditional promise imposing on the promisor only such liability as its conditional terms indicate. It is true that a policy of insurance may give in terms to the insurer a right to cancel it in a certain event, or at the option of the company, and to take advantage of its right the insurer must take active steps; 10 but such a provision is not, strictly speaking, a condition qualifying the insurer's promise, and any attempt to give a similar construction to warranties and conditions generally is an error. It should be observed, however, that even after breach of condition, the contract still exists, but it exists as a conditional contract. Even though the condition can no longer be performed, the situation is not the same as if no contract Smith's L. Cas. (8th Am. ed.) 102. 10 Patterson v. Equitable Life Assur. Soc., 112 Ark. 171, 165 S. W. 454, 457; Lockwood v. Middlesex Mut. Assur. Co., 47 Conn. 553; Hansell-Elcock Co. v. Frankfort &c. Ins. Co., 177 Ill. App. 500. existed. A new insurance contract cannot arise merely by virtue of a promissory estoppel, but prior to loss under the policy most, if not all courts would admit the possibility of a waiver of a broken condition thereby making the contract effective, because of such an estoppel. There is no doubt that if the insurer should in terms inform the insured that he need take out no new policy but that his old policy would remain in force, such a statement, if relied upon, would on ordinary principles of waiver preclude the insurer from setting up the breach of condition after a loss had occurred. Any conduct of the insurer which bears the same meaning to a reasonable man as an express verbal permission would have the same effect. It seems probable that under some circumstances silence would convey such an impression to a reasonable man.11 If a letter were sent to the insurer giving notice, of the breach and inquiring whether it were fatal, it may well be that a reasonable man would infer from the insurer's silence that the breach would not be insisted upon; 12 but that a reasonable man holding an insurance policy would draw any such inference from the fact that an insurance agent had acquired, by chance, information of facts constituting a breach, cannot be admitted. To establish a waiver it is essential to make out that the insured reasonably supposed that his breach of condition was excused and that relying on that belief he failed to obtain other insurance. His belief, the reasonableness of it, and his reliance upon it, are all questions of fact which he must establish. 13 In 11 Compare with the question whether silence may amount to a representation or permission on which to base an estoppel the question whether silence may amount to an acceptance of an offer, supra, § 91. 12 Rauch v. Michigan Millers' Mut. F. Ins. Co., 131 Mich. 281, 91 N. W. 160. But see Armstrong v. Agricultural Ins. Co., 130 N. Y. 560, 29 N. E. 991. 13 See in support of this view-Iowa Life Ins. Co. v. Lewis, 187 U. S. 335, 47 L. Ed. 204, 23 S. Ct. 126; Petit v. German Ins. Co., 98 Fed. 800; Kentucky, etc., Co. v. Norwich, etc., Ins. Co., 146 Fed. 695, 77 C. C. A. 121; the numerous decisions holding on the contrary that affirmative action by the insurer is essential, if he wishes to take advantage of a breach of condition, known before loss has occurred, the theory discussed in the preceding section, that an unearned portion of the premium must be returned in order to terminate the insurance, the theory that apart from such a necessity a policy of insurance is like a lease and continues until affirmative action is taken, and the theory that the insurer's conduct though negative has deceived the insured to his injury, are mingled often in various degrees. 14 § 759. Necessity of written modification or waiver of conditions in policy. In order to avoid doubtful claims made after loss that provisions of the policy have previously been changed by agreement with an agent of the company, 15 it has become customary 75 Neb. 680, 106 N. W. 771; Weddington . Piedmont F. Ins. Co., 141 N. C. 234, 54 S. E. 271; Davison v. London, etc., Ins. Co., 189 Pa. 132, 42 Atl. 2; Moore v. Niagara F. Ins. Co., 199 Pa. 49, 48 Atl. 869, 85 Am. St. Rep. 771; East Texas F. Ins. Co. v. Perkey, 89 Tex. 604, 35 S. W. 1050; Foreman v. German Alliance Ins. Assoc., 104 Va. 694, 52 S. E. 337, 3 L. R. A. (N. S.) 444, 113 Am. St. Rep. 1071; Keith v. Royal Ins. Co., 117 Wis. 531, 94 N. W. 295; Woodard v. German-American Ins. Co., 128 Wis. 1, 106 N. W. 681, 116 Am. St. Rep. 17. 14 See Robinson v. Western Assurance Co., 211 Fed. 747; Alabama State Mutual Assur. Co. v. Long, etc., Co., 123 Ala. 667, 26 So. 655; Traders' Ins. Co. v. Letcher, 143 Ala. 400, 39 So. 271; Southern States F. Ins. Co. v. Kronenberg (Ala.), 74 So. 63; Continental Ins. Co. v. Rosenberg, 7 Pennew. (Del.) 174, 74 Atl. 1073; Clay v. Phoenix Ins. Co., 97 Ga. 44, 25 S. E. 417; Kelley v. People's Nat. F. Ins. Co., 262 Ill. 158, 104 N. E. 188; Hanover F. Ins. Co. v. Dole, 20 Ind. App. 333, 50 N. E. 772; York v. Sun Ins. Office (Ind. App.), 113 N. E. 1021; Glasscock v. DesMoines Ins. Co., 125 Ia. 170, 100 N. W. 503; Swedish American Ins. Co. v. Knutson, 67 Kans. 71, 72 Pac. 526, 10 Am. St. Rep. 382; Continental Ins. Co. v. Coons, 14 Ky. L. Rep. 136; Pollock v. German F. Ins. Co., 127 Mich. 460, 86 N. W. 1017; McIntyre v. Liverpool, etc., Ins. Co., 131 Mo. App. 88, 110 S. W. 604; Home F. Ins. Co. v. Kuhlman, 58 Neb. 488, 78 N. W. 936, 76 Am. St. Rep. 111; Agricultural Ins. Co. v. Potts, 55 N. J. L. 158, 26 Atl. 27, 537, 39 Am. St. Rep. 637; Horton v. Home Ins. Co., 122 N. C. 498, 29 S. E. 944, 64 Am. St. Rep. 717; Mutual L. Ins. Co. v. French, 30 Ohio St. 240, 27 Am. Rep. 443; Schmurr v. State Ins. Co., 30 Oreg. 29, 46 Pac. 363; Kalmutz v. Northern Mut. Ins. Co., 186 Pa. 571, 40 Atl. 816; Norris v. Hartford F. Ins. Co., 57 S. Car. 358, 35 S. E. 572; American Central Ins. Co. v. McCrea, 8 Lea, 513, 41 Am. Rep. 647; Crescent Ins. Co. v. Griffin, 59 Tex. 509; Wakefield v. Orient Ins. Co., 50 Wis. 532, 7 N. W. 647. 15 In any event the agent must have to provide in policies of insurance that a written indorsement on the policy is essential to the validity of a modification of the contract or a waiver of condition. The mere fact that a contract provides that its terms shall not be altered except by a writing, is ineffectual to produce the desired effect because the provision requiring a writing may itself be abrogated by subsequent parol agreement.16 But an insurer is ordinarily a corporation and, therefore, can act only by agents having actual or apparent authority. A provision that modifications of the policy must be written on the policy implies that the actual authority of an agent to vary the contract is limited to variations indorsed on the policy, and as this limitation is expressed in the written contract, the possibility of apparent authority in excess of actual authority seems excluded. It should be observed, however, that waiver of a condition may occur without modification of the contract, 17 and therefore a provision in a policy which forbids merely alteration or modification of the contract without written indorsement does not exclude the possibility of parol waiver. 18 To meet this difficulty a stronger limitation of power has been inserted in policies to the effect that no modification or waiver of any term of the policy shall be binding except in writing indorsed upon the policy. By such a provision authority of an agent not only to modify had sufficient actual or apparent authority to bind the company. The numerous decisions on what constitutes such authority cannot be here considered. 16 Insurance Company of N. America v. Williams (Ala.), 77 So. 159. And see infra, § 1828. 17 See supra, § 595. 18 Mutual Reserve &c. Assoc. v. Cleveland Woolen Mills, 82 Fed. 508, 27 C. C. A. 212; Continental Fire Ins. Co. v. Brooks, 131 Ala. 614, 30 So. 876; Carrugi v. Atlantic Fire Ins. Co., 40 Ga. 135, 2 Am. St. Rep. 567; Illinois Fire Ins. Co. v. Stanton, 57 Ill. 354; Farmers' & Mech. Life Assoc. v. Caine, 224 Ill. 599, 70 N. E. 956; Viele v. Germania Ins. Co., 26 Ia. 9, 96 Am. Dec. 83; New Orleans Ins. Co. v. O'Brian, 8 Ky. L. Rep. 785; Liverpool, etc., Ins. Co. v. Sheffy, 71 Miss. 919, 16 So. 307; Dilleber v. Knickerbocker L. Ins. Co., 76 N. Y. 567; Grubbs v. North Carolina Home Ins. Co., 108 N. C. 472, 13 S. E. 236, 23 Am. St. Rep. 62; Mentz v. Lancaster Fire Ins. Co., 79 Pa. 475; Crescent Ins. Co. v. Griffin, 59 Tex. 509; Palmer v. St. Paul F. & M. Ins. Co., 44 Wis. 201. But see Kyte v. Commercial Union Assur. Co., 144 Mass. 43, 10 N. E. 518; Parker v. Rochester Ins. Co., 162 Mass. 479, 39 N. E. 179. Not all the cases in this note were rested on any distinction between a policy requiring consent merely to modifications of the contract and decisions requiring consent to waivers also, but their facts seem to make such distinction possible. |