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OAKLEY GRAIN & SUPPLY CO. v. INDEMNITY INSURANCE CO.

United States District Court, Southern District of Illinois, S.D


April 21, 1959

OAKLEY GRAIN & SUPPLY COMPANY, A CORPORATION, PLAINTIFF,
v.
INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, A CORPORATION, DEFENDANT.

The opinion of the court was delivered by: Poos, District Judge.

The plaintiff sues for recovery of loss under a policy of fidelity insurance. Two of the conditions and limitations clauses of the policy are as follows:

    (1) "Loss shall be covered only if discovered while
  this insurance is in force or within two years after
  its termination. The assured shall notify the Company
  in writing of any loss within fifteen days after
  discovery thereof, and such notice shall set forth
  the position of the Employee and his last known
  address; and the assured shall file with the Company
  a sworn itemized proof of loss within 90 days after
  the date of discovery of the loss. No suit, action or
  proceeding shall be brought in respect of such claim
  after the termination of twelve (12) months after the
  filing of the proof. Should any of the foregoing
  limitations be void under any applicable law any
  period of limitations so voided shall be extended to
  the period stipulated in such law."

    (3-C) "Upon discovery by the assured of any
  dishonest, fraudulent or criminal act of the
  Employee."

The defendant moves to strike the complaint on the ground that the plaintiff failed to give the sworn proof of loss required within the 90 day period.

The allegations of the complaint in reference to these basic provisions of the policy are found in Paragraphs 5, 6, 7, 8, 9 and 10 of the amended complaint wherein the following allegations of facts are found, viz.:

    "(5) That between June 1, 1955 and December 7,
  1956, plaintiff sustained a loss of money and other
  property belonging to it in the value of more than
  $5,415.27 by and through the acts of larceny, theft,
  embezzlement, forgery, misappropriation, wrongful
  abstraction, wilful misapplication or other
  fraudulent, criminal or dishonest acts of said
  employee while in the performance of his aforesaid
  duties as such.

    "(6) That on or about the 28th day of August, 1956,
  the plaintiff notified the defendant in writing of
  the loss due to the acts of the aforesaid Hubert
  Glenn Holcomb.

    "(7) That on December 26, 1956, the plaintiff filed
  with the defendant an itemized proof of loss due to
  the acts of Hubert Glenn Holcomb.

    "(8) That the defendant received and retained the
  aforesaid notices sent to it by the plaintiff without
  objection thereto or complaint thereof.

    "(9) That the defendant, during the months of
  October and November, 1957, repeatedly informed the
  plaintiff that the defendant denied all liability
  under the aforesaid fidelity bond, and assigned as
  their reason for so doing, the insufficiency of the
  evidence pointing to a loss by the plaintiff, due to
  any of the acts enumerated in said Fidelity Bond.

    "(10) That having failed to object to the notices
  theretofore given defendant by the plaintiff but on
  the contrary having denied any and all liability
  under said Fidelity Bond as aforesaid, the defendant
  has waived any errors or defects in the notices of
  loss or proof of loss required to be given defendant
  by the terms of said Fidelity Bond."

Thus under the allegations above set forth defendant, on August 28, 1956, at which time liability under the policy ceased under the provisions of 3-C of the conditions and limitations of the Fidelity Bond, was notified of the loss and proof of loss was filed on December 26, 1956, which was more than 90 days after loss, and thus the plaintiff recognizes that the above quoted provisions of the Fidelity Bond have not been complied with, but seeks to avoid the requirement of sworn proof of loss by the allegations of Paragraph 10 wherein plaintiff pleads a waiver of this provision. Thus it must be determined whether or not the allegations of the complaint show a factual situation that amounts to a waiver. A summarization of all the allegations of the complaint show that between June 1, 1955 and December 7, 1956, plaintiff sustained a loss by theft, larceny, embezzlement, or dishonest acts of the employee; that on August 28, 1956, plaintiff notified the defendant in writing of the loss; that on December 26, 1956, plaintiff filed with defendant an itemized proof of loss; that defendant received the notice and proof of loss without objection; that defendant repeatedly informed the plaintiff that defendant denied all liability under the Fidelity Bond and assigned as the reason for so doing the insufficiency of the evidence pointing to a loss due to any of the acts enumerated in the Fidelity Bond; that defendant having failed to object to the notice or proof of loss and having denied all liability, the defendant waived any errors or defects in the notice or proof of loss required by the terms of the Fidelity Bond.

The plaintiff, relying on a waiver, must plead and prove the waiver. In order to have a waiver there must be some affirmative act on the part of defendant that amounts to a waiver of the requirement and the burden is on the plaintiff to allege and prove the waiver. There is no allegation of fact in the complaint that sets out any affirmative act of waiver, but plaintiff seeks to rely on a waiver by nonaction of the defendant and by its general denial of any and all liability under the bond.

In Buysse v. Connecticut Fire Insurance Co., 240 Ill. App. 324, a quite similar factual allegation was relied upon as amounting to a waiver. The Court said:

    "An offer of compromise and settlement by the
  company, where it has been rejected by the insured,
  does not constitute a waiver. (Hill v. Commercial
  Union Ins. Co., 164 Mass. 406, [41 N.E. 657].) Nor do
  the letters, denying all liability on account of the
  existence of said chattel mortgage, waive the
  provision of the policy requiring proofs of loss.
  According to the terms of the policy, proofs of loss
  should have been furnished not later than October 31,
  1922. The first of these letters was dated November 9
  thereafter and informed Mrs. Buysse that it had been
  discovered the automobile was under mortgage at the
  time the policy was issued. Appellant now seeks to
  construe this letter as being intended merely to
  notify her of the discovery, and to offer her an
  opportunity to make some explanation. We do not think
  the letter is subject to such interpretation and it
  is obvious that the company did not so interpret it,
  because, on January 30, 1923, it wrote a letter to
  the attorneys of Mrs. Buysse, in which it referred to
  its letter of November 9, and again called attention
  to the chattel mortgage. The letter concluded as
  follows: `Accordingly we see no reason why this claim
  merits any further attention on our part.' There is
  no doubt that the company intended both letters to be
  absolute denials of liability. But do these refusals
  to pay, based on an alleged violation of the mortgage
  clause of the policy, estop the company from urging
  any other matter of defense? The rule, that an
  insurance company which has claimed a forfeiture for
  noncompliance with certain specified conditions of
  the policy, cannot be afterward heard to assert
  different matters in defense, has no application to a
  case where it is sought to show a waiver of proofs of
  loss by a denial of liability made after the time
  for furnishing such proofs has expired. The
  doctrines of waiver and estoppel are fundamentally
  equitable doctrines and are based upon the principle
  that it would be wrong to permit an insurer to insist
  upon a forfeiture after it has induced the insurer to
  alter his position to his prejudice, or to do or omit
  to do anything which he would otherwise

  have omitted or done. It is evident that the letters
  of the company denying liability because of the
  mortgage could not have caused Mrs. Buysse to omit
  furnishing proofs of loss. They were not written
  until after proofs of loss were past due and
  therefore could not furnish any reason for the
  application of the doctrine of waiver or of
  estoppel. (Hensel v. Capital Live Stock Ins. Co.,
  219 Ill. App. 77, 83.) While it is true that if an
  insurer, during the time allowed the insured for
  submitting proofs of loss, denied all liability or by
  its conduct leads the insured to believe he need not
  submit such proofs, the requirement for them is
  waived; but in the absence of such circumstances and
  after the time for submitting proofs has expired, an
  insurance company may rely on a failure to furnish
  proofs of loss although it may have denied liability
  on some other ground. It will not then be restricted
  to a single defense simply because it has specified
  but one in a letter or statement refusing or denying
  liability. In Weston v. State Mut. Life Assur. Co.,
  234 Ill. 492 [84 N.E. 1073], the action was on a life
  insurance policy. It was contended that the insurance
  company was estopped from claiming a forfeiture on
  account of non-payment of premiums, because it had
  denied all liability on another ground. But the court
  held that an insurance company is not restricted in
  its defense, in an action on a policy, to the reason
  assigned in its refusal to pay, if it does not appear
  that the plaintiff has been misled to his injury by
  the omission or failure to set forth other reasons.
  To the same effect are Peckham v. M.W.A.,
  151 Ill. App.? 95; American [Terra Cotta & Ceramic] Co. v.
  Bankers Surety Co., 199 Ill. App. 545; Woodlawn Farm
  Co. [for Use of Platt & Musser] v. Farmers & Breeders
  L. Ins. Co., 227 Ill. App. 577." See also Cox v. Aetna
  Casualty & Surety Co., 248 Ill. App. 209, at pages
  213, 214 and 215.

Plaintiff relies upon Phenix Ins. Co. v. Belt Ry. Co., 182 Ill. 33, at page 37, 54 N.E. 1046, at page 1048, wherein the court says:

    "It is next insisted that proofs of loss were not
  furnished within 30 days after the fire, as required
  by the policy. Where proofs of loss are served on an
  insurance company, and retained without objection,
  and the company refuses to pay the loss, denying all
  liability under the policy on grounds, other than
  defects in the proofs of loss any further performance
  on the condition in regard to proofs is waived.
  Continental Ins. Co. v. Ruckman, 127 Ill. 364,
  20 N.E. 77. There were here five distinct losses. As to
  proof of losses 4 and 5 no question is made. As to
  the other losses evidence was introduced tending to
  prove that proofs of loss were furnished within the
  time required, and also that the insurance company
  repudiated all liability within 30 days of each of
  the losses, and thus waived proofs of loss. Whether
  proofs of loss were served on the company or were
  waived was a question of fact which the appellate
  court found against appellant and the judgment of the
  appellate court is conclusive of the question."

Such is not the status here. Plaintiff, by his allegations of waiver, concedes that proof was not made within the 90 day period, yet plaintiff fails to allege any affirmative act of defendant upon which to base an act of waiver. In the case relied upon it was judicially determined that proof of loss was given within the 30 day period as provided in the policy. This is a case where admittedly the proof of loss, or even a defective proof was not given within the time limited, and consequently the case has no application.

In the case of Lewis v. Fire Association of Philadelphia, 7 Cir., 183 F.2d 647. an adjuster after personal investigation, contacted two roofers for estimates of the damage and afterwards made two offers of settlement without requiring formal proof of loss. There is no such feature in the present case and it is not authority in support of plaintiff.

Accordingly the motion to dismiss is sustained.

19590421

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