Opinion
The presentation of a false claim of loss by an insured is a fraud upon the insurer within the meaning of a provision of the contract that the policy shall be void in case of any fraud or false swearing by the insured touching any matter relating to the insurance or the subject thereof, and voids the contract. The fraud or false swearing after a loss which will bar recovery is the intentionally made false and fraudulent statements or the intentionally false swearing. Proof of injury is no part of a defense upon this ground; the defense is established if the statements are shown to be relevant, material and intentionally false. An insured who entrusts the settlement of a loss and the making up of the proofs of loss to its agent is responsible for the fraud of that agent within the scope of his agency, though ignorant of it.
Argued November 1st, 1928
Decided March 7th, 1929.
ACTION upon a policy of fire insurance issued by the defendant to the plaintiff, brought to the Superior Court in Fairfield County and tried to the court, Baldwin, J.; judgment rendered for the defendant, from which the plaintiff appealed. No error.
All of the facts in the companion action by the plaintiff against the defendant were incorporated in a common finding and made equally applicable to the present action by the plaintiff against the defendant herein. In addition the court found the following facts applicable solely to the action against the defendant: Scofield was advised that it would be necessary for plaintiff to prepare an inventory of its stock on hand as of the date of the fire; he thereupon prepared an inventory of stock on hand amounting to $24,585.82. The plaintiff was further advised that it would be necessary to prepare an inventory based upon the books of plaintiff and one of plaintiff's stockholders prepared such book inventory showing stock on hand at the time of the fire amounting to $26,251.15, made up from the monthly inventory reports submitted to R. G. Davis Sons, Inc., as referred to in the statement in the companion case, and from the books of account of the plaintiff. Scofield and Davis, in behalf of plaintiff, subsequently claimed to defendant that the total loss was in excess of $20,000, the total amount of the insurance, and in support of this claim submitted these physical and book inventories. The physical inventory so presented was $14,000 and the book inventory $16,000 in excess of the amount of stock on hand at the time of the fire. Both inventories were false and fraudulent as well as the claim made that plaintiff had sustained a loss in excess of $20,000. The plaintiff, by Scofield, presented these inventories and this claim knowing they were false and for the purpose of defrauding the defendant and to cover Scofield's embezzlements from the plaintiff. The insurers subsequently found that the stock then on hand amounted to $10,000 and the loss to plaintiff amounted to $6,891.15. Thereafter the defendant met Scofield, Harvey and Davis acting in behalf of plaintiff, and they then admitted the falsity of plaintiff's claim of loss and of the inventories, and thereupon a nonwaiver agreement was entered into between the plaintiff and defendant by which it was agreed the stock at the time of the fire amounted to $10,000, and the loss to the stock as a result of the fire amounted to $6,891.15. Subsequently the plaintiff, by Davis, made and delivered to defendant sworn proofs of loss as required by the policy in which it stated that no attempt had been made to deceive the defendant as to the extent of the loss. The plaintiff by its agent, Scofield, attempted to deceive the defendant with respect to the extent of the loss through the claim of loss and the inventories. Neither of the Messrs. Davis (the officers of plaintiff) at any time attempted to deceive the defendant in regard to the loss. They were ignorant of Scofield's falsification of the books, of his embezzlement, and of his attempts to burn plaintiff's plant until shortly after the insurers made their discoveries.
Philip Pond and Joseph B. Morse, for the appellant (plaintiff). Abraham Wofsey, with whom was Michael Wofsey and, on the brief, Samuel Gordon, for the appellee (defendant).
The policy upon which the action is based contains the following provision: "This entire policy shall be void . . . in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after a loss."
The plaintiff makes, by reference, the same argument and cites the same authorities presented in the companion case upon the alleged fraudulent concealment of the plaintiff through its agent, Scofield, as to the claim of the defendant of the false swearing of plaintiff in the proofs of loss. The conclusions reached in the companion case are determinative, in the principles there applied, of this case. The presentation of a false claim of loss by an insured is a fraud upon the insurer, within the terms and meaning of this provision of the contract of insurance, and voids the contract. This provision is a part of the standard form of a fire insurance policy. General Statutes, § 4075. The fraud or false swearing by an assured after a loss which will bar recovery for the loss is the intentionally made false and fraudulent statements or the intentionally false swearing. Where the false swearing was not intentionally false, or the false statement not intentionally so, but made through mistake or an opinion honestly entertained, neither falls within the term "fraud or false swearing" as used in this provision. New York has the same standard form of fire insurance policy and has so held. Domagalski v. Springfield F. M. Ins. Co., 218 N.Y.S. 164, 166; Dolloff v. Insurance Co., 82 Me. 266, 19 A. 396. The fraud and false swearing by Scofield are expressly found to have been intentional. The defendant has not as yet been injured, having made discovery of the violation of this provision before it had made payment of the loss. Proof of such injury was no part of defendant's defense. "When the insurance company establishes that the statements made [by the insured] were relevant, material, and intentionally false, it has established its defense." Domagalski v. Springfield F. M. Ins. Co., supra. The false proofs of loss and the false inventories were manifestly material facts.
The plaintiff cannot escape responsibility for the fraud of its agent Scofield by showing its ignorance of his fraud. It entrusted the settlement of this loss and the making up of the proofs of loss to its agent; it cannot be permitted to deny its responsibility for his acts when done within the scope of his agency. It cannot sustain its action upon the policy without adopting the fraud of Scofield and this the law will not sanction. Mullin v. Vermont Mutual Fire Ins. Co., 58 Vt. 113, 4 A. 817; Mick v. Corporation of Royal Exchange, 187 N.J.L. 607, 618, 91 A. 102, and cases cited in companion case.