Snell v. Insurance Company

APPEAL from the Circuit Court of the United States for the Northern District of Illinois.

This was a suit in equity instituted by Thomas Snell, Samuel L. Keith, and Abner Taylor, partners under the firm name of Snell, Taylor, & Co., to reform a certain policy issued by the Atlantic Fire and Marine Insurance Company of Providence, insuring Samuel L. Keith, from Dec. 6, 1865, at noon, to Jan. 7, 1866, at noon, against loss or damage by fire, on two hundred and twenty bales of cotton, described as 'stored in open shed at West Point, Miss.; loss, if any, payable to Messrs. Keith, Snell, & Taylor.'

The material allegations in the bill are as follows: That said firm, on Dec. 6, 1865, were the owners of two hundred and twenty bales of cotton, worth more than $50,000, stored at West Point, Miss., awaiting transportation to some northern market; that Keith applied in behalf of his firm to Holmes & Bro., general insurance agents at Chicago, representing several companies, including the defendant, to procure insurance upon all the cotton, for the benefit of the firm, in the sum of $49,500, during such time as it remained at West Point, which time was uncertain, in view of the difficulties of transportation; that Holmes & Bro., the duly accredited and authorized agents, among others, of the defendant, did agree with Keith, acting for and in behalf of his firm, to make, grant, and secure insurance in the companies by them represented on this cotton in the sum of $49,500, while it was stored at West Point and until shipped to a northern market, and to receive a premium of one per cent on the total amount insured, to wit, $495, which sum Keith agreed to pay Holmes & Bro., provided the time for the insurance did not exceed one month, but to have a decreased rate if the time exceeded one month, the agreed rate to be paid by Keith when the cotton was removed from West Point, when the extent of the insurance could be definitely fixed; that on Dec. 6, 1865, Holmes & Bro., with intent to carry this agreement into effect, caused to be made several policies in different companies, among them the policy sued on, making an aggregate insurance of $49,500, and after the loss occurred notified Keith to pay, and he did pay, the sum of $495, the premium on the whole amount insured, $80 of which was paid to and received by the defendant for and on account of his firm and in pursuance of the agreement with Holmes & Bro.; that the policy sued on remained in the possession of Holmes & Bro. until some time after the loss; that after the loss, and before any application to adjust the same was made, Holmes & Bro., with the intent to carry out the agreement that the cotton should be insured until its shipment from West Point, filled up the policy so that by the terms thereof the insurance extended from Dec. 6, 1865, until Jan. 7, 1866, at noon; that Keith was assured by Holmes & Bro., when the insurance was taken, that it was not necessary that the policy should state in terms that the insurance was for and on account of Snell, Taylor, & Co., and that the firm would be as fully protected, and the loss would be as promptly paid, as if the policy had expressly stated that the insurance was for and on its account; that relying upon those assurances, and ignorant that, by the terms and legal effect of the terms employed, no other interest in the cotton was insured except his, Keith took the policy into his possession in the full belief that it covered the entire interest of the firm; that soon thereafter, upon being advised to the contrary by his attorney, he demanded of the insurance agents that the policy be corrected so as to conform to the real contract and agreement, but Holmes & Bro. refused to correct or alter the same in any way.

The prayer of the bill is that the company be decreed and ordered to correct and reform the policy by inserting therein the stipulation that the insurance was made for the benefit or for the account of Snell, Taylor, & Co., and that the firm have a decree for the sum so intended to be insured on the cotton.

The company filed an answer traversing the allegations of the bill, and setting up sundry matters in defence. The court, upon a final hearing on the pleadings and proofs, dismissed the bill, and the complainants appealed to this court.

Mr. Leonard Swett, for the appellants, contended that the error committed by inserting the name of Keith instead of that of the firm as the party assured, when the contract was reduced to writing, would not defeat their rights; but that the policy would be reformed so as to effectuate the intention of the parties, and be enforced by a court of equity. Ellis v. Towsley, 1 Paige (N. Y.), 278, 279; Franklin Fire Insurance Co. v. Hewitt, 3 B. Mon. (Ky.) 231; Harris v. The Columbian Insurance Co., 18 Ohio, 121; New York Ice Co. v. Northwestern Insurance Co., 23 N. Y. 359; Woodbury Savings Bank v. Charter Oak Insurance Co., 31 Conn. 526; The Malleable Iron Works v. Phoenix Insurance Co., 25 id. 465.

No counsel appeared for the appellee.

A., a member of the firm of A., B., & Co., who were the owners of cotton, communicated the facts touching its ownership, situation, value, and risk, so far as he knew them, to C., a duly accredited agent of an insurance company; and thereupon the company, through C., entered into a verbal agreement with A., acting for and on behalf of the firm, to insure for a certain period the cotton for its whole value against loss by fire, at a premium which was subsequently paid to the company. A. assented that the insurance should be made in his name, upon the representation and agreement of C. that the entire interest of the firm in the cotton would be thereby fully protected. The cotton was burnt within the specified period. The policy was then issued and delivered to A., who, being at once advised by his attorneys that it in terms covered his interest, but not that of the firm, forthwith requested the company to correct it, so that it should conform to the agreement. The company having declined to do so, A., B., & Co. filed against it this bill, praying that the policy be reformed, and that the value of the cotton be awarded to them. Held, 1. That the acceptance of the policy was not such as waived any right of A., B., & Co. under the agreement covering their interest in the cotton, which A. in their behalf had made with the company, and that they are entitled to the relief prayed for. 2. That a mere mistake of law does not, in the absence of other circumstances, constitute any ground for the reformation of a written contract.

MR. JUSTICE HARLAN delivered the opinion of the court.