Scottish Court of Session Decisions

William M'Millan, builder and contractor, 73 Smith Street, Govanhill, Glasgow, brought an action against the Accident Insurance Company, Limited, for the sum of £218, 3s. 7 1 2d.

The following narrative is taken from the opinion of the Lord Ordinary ( Salvesen):

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—“The pursuer in this case sues on a policy of insurance effected by him with the defenders, under which they became liable to indemnify him as an employer of labour for any compensation becoming payable to workmen who received injuries while in his employment. The policy proceeds on the narrative that the insured has caused to be delivered ‘at the office of the defenders a proposal in writing, which he has agreed shall be the basis of the contract and be considered as incorporated therein.’ It contains conditions that if the policy has been obtained through any misrepresentation or concealment by or on behalf of the insured, the policy shall become absolutely void, and ‘the company shall not be held liable in respect of any knowledge of, or notice to, an agent which shall not have been communicated to and have been acknowledged in writing by the company at its registered office.’

The proposal form which was signed by the pursuer contains a number of printed questions, the answers to which are in manuscript. One of the questions, No. 8, is in these terms—‘Has any proposal for insurance of the risk, either under the Workmen's Compensation Act or the Employers' Liability Act, been previously declined or withdrawn? If so, state the name of the company.’ The pursuer's answer to this is ‘No,’ and he admits that that was not a true answer, because a proposal for insurance to the Royal Exchange Insurance Company had on 10th November 1904 been declined. If therefore the proposal had been filled up by the pursuer himself, I think there can be no doubt that the policy would have been void, and indeed the contrary was not seriously argued.

The pursuer, however, seeks to elide this result by the averments which he makes in cond. 3 and 4. Briefly stated these are to the effect that the defenders' agent J. W. Millen, who solicited the insurance on their behalf, knew of the previous proposal having been declined; that Robert Donald, an inspector in their employment, who actually filled up the proposal, was also informed before doing so of this fact, and that the pursuer supplied full and accurate information, which he relied on Donald acting upon in filling up the proposal form. He says that he himself did not read over the proposal form before he signed it, because he was led to believe that it was in accordance with the information which he had supplied. A general averment has now been added that Donald acted within the scope of his employment in what he did as narrated by the pursuer. There is no averment, however, that the directors of the company, or any of their superior officials, were ever informed of the mistake which had been made.”

On 22nd February 1906 the Lord Ordinary assoilzied the defenders from the conclusions of the summons.

Opinion. — [ After the narrative given above] — “The pursuer contended that the misrepresentation must be treated as immaterial in view of the fact that the true state of matters was disclosed to the defenders' servant and to their agent. He maintained that in writing out the proposal form Donald acted on behalf of the defenders, and that they cannot take advantage of Donald's breach of duty towards them to his prejudice. His contention was based upon two cases—one decided in Scotland and the other in England. In the case of Cruikshanks, 23 R. 147, where the insured in a similar proposal form had described a lameness from which he suffered as slight, while as matter of fact he was extremely lame, Lord Low held ‘that as the defenders' agent knew the extent of his lameness the defenders were not entitled to take advantage of any misdescription of the lameness in the proposal form, as the knowledge of their agent was their knowledge.’ The decision was affirmed on appeal, but I do not find that the opinion of the Lord Ordinary on this point was supported in the Inner House. The view there taken was that the statement could not be described as false. The Lord Justice-Clerk says—‘It is a question of interpretation. One man could truthfully use the word “slight” where another would use the word “great.” Taking the word by itself I see in it no ground for holding that it was a false ‘statement.’ On that assumption the judgment was plainly right, and I cannot see that it mattered whether the agent had seen the assured walk, and had observed the extent of his lameness, although that fact is also referred to in the Lord Justice-Clerk's opinion. Lord Young, in reaching the same result, expressly stated that if the conditions of the policy were not complied with the defence must prevail, notwithstanding the good faith of the deceased. In concluding his examination of the facts bearing on the question whether there was an untrue answer or not he says—‘Taking this as a written contract, the terms of which must be complied with, I think that so far the plea stated in defence to this action that the conditions of the contract were not complied with must fail.’ The decision of the Inner House was therefore to the effect that there had been no untrue statement in the proposal of such a kind as to void the policy.

The other case relied on— Bawden v. The London, Edinburgh, and Glasgow Assurance Company, 1892, 2 Q.B. 534—creates more difficulty. In that case a man who was blind of one eye had signed a proposal form which was filled up by the agent of the Insurance Company, in which it was stated for him that he had no physical infirmity. The statement was admittedly untrue, and was also material to the risk; but the agent (Quin), through whom the policy was effected, knew that the plaintiff had only one eye; and it was held that the knowledge of the defendant's agent must be imputed to them; and that the company were liable for an accident sustained to the plaintiff's other eye in consequence of which he became totally blind. The case was tried before a jury, but at the trial the company gave no evidence as to the extent of Quin's authority:

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and the Court seem to have drawn inferences which at first sight it is difficult to justify. Lord Esher says—‘For what purpose was he (Quin) agent? To negotiate the terms of a proposal for an insurance, and to induce the person who wished to insure to make the proposal. The agent could not make the contract of insurance; he was the agent of the company to obtain a proposal which the company would accept. He was not merely their agent to take the piece of paper containing the proposal to the company. The company could not alter the proposal : they must accept it or decline it. Quin then having authority to negotiate and settle the terms of the proposal, what happened? He went to a man who had only one eye, and pressed him to make a proposal to the company, which the company might then either accept or reject. He negotiated and settled the terms of the proposal. He saw that the man had only one eye. The proposal must be construed as having been negotiated and settled by the agent with a one-eyed man. In that sense the knowledge of the agent was the knowledge of the company.’ If the Court were right in their inference that Quin had authority to negotiate and settle the terms of the proposal, the judgment may be supported. Even in that view it humbly appears to me that the opinions overlook the fact that the contract sued on was a contract in writing. Apart from this, the policy in Bawden's case did not contain a clause such as we have here, ‘that the company shall not be held liable in respect of any knowledge of, or notice to, an agent, which shall not have been communicated to, and have been acknowledged in writing by, the company at its registered office.’ This clause seems to me to make the decision in Bawden's case inapplicable to the present case.

The case of Bawden has not been overruled in England; but it does not seem to have been followed in either of the two recent cases which have raised the same question— Biggar, 1902, 1 K.B. 516, and Levy 17 T.L.R. 229. The former case is on all fours with the present. The proposal form was filled up by the agent, and the false answers it contained were inserted without the knowledge of the insured, who signed the proposal form without reading it. In these circumstances Mr Justice Wright, in a carefully considered judgment, held ( firstly) that it was the duty of the applicant to read the answers in the proposal before signing it, and he must be taken to have read and adopted them; and ( secondly) that in filling in the false answers in the proposal the agent was acting not as the agent of the Insurance Company but as the agent of the applicant; and that therefore the policy was void.’ As I agree entirely in his judgment and the grounds of it, I shall content myself by referring to it. The only distinction suggested between that case and the present was that here the person who filled up the proposal was not merely an agent but a paid servant of the company, who it is said acted within the scope of his authority. In my opinion the distinction is immaterial. It is not averred in terms that it was within Donald's authority to commit a fraud on the company for the benefit of the insured; and I would require more than a mere general averment in order to enable me to accept such a statement. Nor do I think that the insured is entitled to take benefit by this fraud when it could not have been committed but for his own negligence. The man who is the servant of another may nevertheless be an agent pro hac vice for somebody else; and I think the true view is that Donald was merely the hand whom the pursuer employed to save him the trouble of filling in the required answers.

Further, the most recent decision in Scotland, The Life and Health Assurance Association, Limited v. Yule, 6 F. 437, follows the case of Biggar rather than that of Bawden. The action was one of reduction of a policy at the instance of the Assurance Company; but the decision would obviously have been the same if the company had been resisting liability for a claim made under the policy. The material facts were almost identical with those in the present case, except that it was an agent and not a servant who filled up the proposal form. The decision of the Lord Ordinary, which contained a finding that the policy was reducible, was confirmed by the unanimous judgment of the Second Division. The Lord Justice-Clerk said—‘I hold that in filling up the paper for the defender at his request he (the agent) was acting for him. Further, I think that if the defender did not choose to see that there were no misrepresentations in the policy before he signed it he must be held responsible for it as being his.’ Lord Trayner in stating his opinion proceeded on the same lines, and expressly stated his concurrence in the views expressed by Mr Justice Wright in the case of Biggar.

I shall accordingly follow the two latest decisions and hold that the mis-statement in the proposal absolves the company from liability under the policy. I think it cannot be too strongly impressed on the minds of intending assurers that they must see to it that the proposal form is correctly filled up, and that no verbal statements made to the agents or servants of the company, who may have an interest of their own to serve by having the proposal accepted, are of any avail as correcting material mis-statements in the proposal itself, the truth of which is the basis of the whole contract. The result may be a hardship to the pursuer, whose good faith may be unquestionable, but for this his own carelessness is entirely to blame.

The pursuer reclaimed, and argued—He was entitled to a proof of his averments, which if substantiated established the company's liability. Donald was the company's agent; his knowledge was therefore their knowledge— Cruickshank v. Northern Accident Insurance Company, Limited, November 21, 1895, 23 R. 147, esp. Lord Low, 150. He had full information, and

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the pursuer was entitled to believe that he had used that information in the manner best suited to advance the company's interests. The Lord Ordinary's judgment had the curious result that the company were to take advantage of their own agent's fraud or mistake, to the loss of the pursuer. Bawden v. London, Edinburgh, and Glasgow Assurance Company, [1892] 2 QB 534. The case of Biggar v. Rock Life Assurance Company, [1902] 1 KB 516, was distinguishable, as there, inter alia, the candidate gave the agent no information, and in Life and Health Assurance Association, Limited v. Yule, February 20, 1904, 6 F. 437, 41 S.L.R. 316, it was more or less assumed that the party who filled up the form was acting as the candidate's agent.

Argued for the defenders—The pursuer's averments were irrelevant, and the defenders were entitled to be assoilzied de piano. It was an express condition of the policy that the company were not to be liable in respect of any knowledge of their agent not communicated to them and acknowledged in writing. It was not averred that the agent had communicated his knowledge to the company in writing or even verbally, so that upon this ground alone the pursuer's case failed. But further, Donald in filling in the form was acting not as their agent but as the agent of the pursuer, and there was no getting over the elementary and fundamental rule both of common sense and law, that a man must be held responsible for the accuracy of statements to which he appends his signature. The case was ruled by the following— Life and Health Assurance Association, Limited v. Yule; Biggar v. Rock Life Assurance, cit. supra, and New York Life Insurance Company v. Fletcher, (1886) 117 U. S. Rep. 519, was exactly parallel. See also Levy v. Scottish Employers' Insurance Company, (1901) 17 T.L.R. 229; Reid & Company, Limited v. Employers' Accident, &c., Insurance Company, Limited, June 28, 1899, 1 F. 1031. The case of Bawden, on which the pursuer founded, had not been followed in England (see Biggar), and could not be an authority in Scotland as against Yule—a later case. Moreover, in any event the facts in it were entirely different. The decision in Cruickshank in the Inner House proceeded on the view that the statement made was not in fact false.