Connecticut Fire Insurance Co. v. Fox
F.2d 1 (1966) (1966)
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Rule of Law:
An insurer waives a policy's timely proof of loss requirement, despite a non-waiver agreement, when its adjuster engages in a course of conduct that extends beyond mere investigation into the loss and creates a reasonable belief in the insured that the requirement is either unnecessary or has been extended.
Facts:
- A. H. Fox and Edith Fox were the proprietors of the Fire-bird Motor Hotel, which was insured by Connecticut Fire Insurance Company.
- On March 25, 1964, a substantial portion of the motel was damaged or destroyed by a fire that was determined to be the result of arson.
- The next day, March 26, the Foxes signed a 'non-waiver agreement' at the request of P. C. Foster, an adjuster for the General Adjustment Bureau (G.A.B.), who was handling the claim for the insurer.
- Foster instructed the Foxes on managing the property post-fire, provided inventory sheets, engaged in discussions about repair bids, and told them to keep a file of their expenses for inclusion in the settlement, but did not mention the 60-day proof of loss requirement.
- After the 60-day period for filing a proof of loss had expired, on June 3, Foster gave Mr. Fox a letter on behalf of the insurer explicitly extending the deadline to file the proof of loss to July 3.
- The Foxes completed and sent the proof of loss to the insurer on June 6.
- G.A.B. adjuster McMaster, acting for the insurer, had previously filled out a proof of loss form for a motel guest whose property was damaged, and the insurer paid that claim for $100.
Procedural Posture:
- A. H. Fox and Edith Fox sued Connecticut Fire Insurance Company for breach of contract and General Adjustment Bureau, Inc. (G.A.B.) for negligence in a federal trial court.
- The jury returned a verdict of $92,000 in favor of the Foxes against both defendants.
- The jury, answering special interrogatories, found that the Foxes did not cause the fire and that the time for filing the proof of loss was extended by G.A.B. agents with the insurer's approval.
- Connecticut Fire Insurance Company (appellant) and G.A.B. (appellant) appealed the judgment to the United States Court of Appeals for the Tenth Circuit.
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Issue:
Does an insurer waive a policy's timely proof of loss requirement, despite a non-waiver agreement, through the actions of its adjuster that go beyond mere investigation and indicate the requirement is unnecessary or has been extended?
Opinions:
Majority - Hill, J.
Yes. An insurer waives the timely proof of loss requirement when its adjuster's actions cannot be considered protected under a non-waiver agreement because they go far beyond a mere investigation. The court reasoned that non-waiver agreements, which benefit the insurer, must be strictly construed and only protect actions related to investigating the cause and amount of loss. Here, the adjuster's conduct—instructing the Foxes on property management, providing inventory forms, engaging in settlement discussions, and telling them certain expenses would be included in the settlement—went beyond mere investigation. This course of conduct led the Foxes to reasonably believe that no further action was needed to perfect their claim. Furthermore, the adjuster's explicit written extension of the deadline, even after it had passed, and the insurer's payment of a guest's claim without issue, confirmed the waiver. The insurer cannot rely on an agent to secure a non-waiver agreement and then repudiate that same agent's authority to waive a policy condition.
Analysis:
This case illustrates that a non-waiver agreement does not provide an insurer with absolute immunity from its agents' actions. It establishes that an insurer can be estopped from enforcing a technical policy condition, like a proof of loss deadline, when its adjuster's conduct misleads the insured. The decision reinforces the principle of waiver by conduct and highlights that an agent's apparent authority can bind the insurer, even when a contract attempts to limit that authority. This precedent cautions insurers that they cannot allow their adjusters to take control of a claim and engage in settlement-like activities while simultaneously reserving the right to deny the claim on a technicality the adjuster's actions obscured.
