Security Mutual Life Insurance Company, Respondent, v. The Ætna Indemnity Company, Appellant

Security Mutual Life Insurance Company, Respondent, v. The Ætna Indemnity Company, Appellant. Third Department, January 8, 1908. Insurance — evidence — action on indemnity bond — statement of insured— right to contradict adverse witness. A'statement of loss filed under a bond indemnifying against the acts of an agent amounting to embezzlement or larceny is. “based upon the books of the employer ” and “ prima facie evidence ” of the loss as provided in the bond, to the extent that it reflects information contained in the books and records of the employer kept in the regular and ordinary course of business. In an action by an insurance company to recover on an indemnity bond for losses due to the.embezzlements or larcenies of an agency director, when the plaintiff’s auditor admits that the proof of loss furnished the indemnity company was based on a cash book made by the cashier of the agency director from check stubs and such data as he was able to find, no regular accounts being kept, and gives his version of conversations .with the cashier concerning the same, it is reversible error to exclude the cashier’s version when offered by the defendant. - Appeal by the defendant, The ¿Etna Indemnity Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Broome on the 19th day of January, 1907, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 18th day of January, 1907, denying the defendant’s motion for a new trial made upon the minutes. ' T. Tileston Wells and Martin A. Schenclc, for the appellant. Jay Lamont Gregory and JJredrio William Jenkins, for the respondent. [MAJORITY — Cochrane, J.:] Cochrane, J.: Plaintiff is a domestic life insurance corporation having its principal office and place of business in the city of Binghamton in this State. It brings this action on a bond given by the • defendant to indemnify it against acts of Theodore F. Lake amounting to embezzlement or larceny. Lake was the agency director of the plaintiff for the State of Michigan with headquarters at the city of Detroit in said State. His transactions as such agency director covered by said bond extended from June to December in the year 1904 when he made default in payments of premiums collected on policies delivered by him and absconded. The books and records at the home office of course disclosed what policies had been sent to Lake. Equipped with a transcript of such policies plaintiff’s auditor, Mr. Jacobs, proceeded to Detroit to make an investigation. Pie found there no books in the office of the company except what has been termed a cash book .and which was prépared by one Williams, a cashier in the employ of Lake, from check stubs and such data as he was able to find. Ho regular accounts were kept. The situation was confused and chaotic. Jacobs as a witness for plaintiff at the trial detailed the situation and hiq conversations with Williams concerning the same. He was there about a week conferring with Williams, with the various sub-agents of Lake and with- different policyholders. On his return, he prepared, verified and delivered to the defendant in accordance with the requirements of the bond a written statement of the alleged embezzlements or Par ceníes of Lake, which statement constituted what is characterized in said bond as a “ proof of loss.” He testified on direct examination that the statement was based on the books and accounts of the company “ and data .secured .in Michigan, in Detroit.” Such statement was then received in evidence under a provision in said bond as follows : “It being understood that a written statement of such loss certified by the duly authorized representative of the"employer.and based upon the accounts of the employer shall be prima faoie evidence thereof.” . Jacobs further • testified that the information which enabled him to make up such statement came from Williams and agents who had paid money to Lake and from policyholders; that he “merely had Mr. Williams’ word and Mr. Williams’ written statement for the.fact that these premiums had been paid;” that he did not know how Williams prepared the statement or what his' information was when lie prepared it but that he knew there were no records and that it was not prepared from records kept by Lake. That a statement of loss properly prepared and “ based upon the accounts of the employer ” is prima faoie evidence under a provision in a bond like (he one above quoted was decided by the Supreme Court of the Dnited States in American Surety Co. v. Pauly, No. 2 (170 U. S. 160). This statement nr question to. the extent that it reflected information contained", in the books and records of plain tiff kept in the regular an d ordinary course of it's business was doubtless based on “ the accounts of the employer ” within the meaning of the bond and prima facie evidence in plaintiff’s favor. Whether there is comprehended in the phrase “ accounts of the employer” information.gleaned as in this case by Jacobs from hearsay declarations of third parties interested to have it appear that they had paid their obligations to Lake is a question which was not raised at the trial by an ajipropriate exception and need not now be decided. But when plaintiff rested its case defendant called Williams as a witness and sought to’ give his version of liis conversations with Jacobs. He testified as did Jacobs that they had several conversations. He was then asked' to give the first one. This had been specifically detailed by Jacobs on his direct examination and was the source of his information as to the condition of affairs in Lake’s office. An objection to the question was sustained over defendant’s exception. Defendant’s counsel stated among other things that he wished to prove how Jacobs made np his statement. After the first conversation had been excluded it would have been futile for counsel to persist in offering evidence of the subsequent conversations. That this ruling constituted an error of such a far-reaching and vital nature-as to demand a new trial cannot be gainsaid. By the method adopted by plaintiff it had succeeded in getting before the jury Jacobs’ version of his conversations and transactions with Williams and a statement based partly on “data secured” from him. Confessedly'the statement of loss introduced in evidence was fortified and corroborated by information which Jacobs -claimed- to have procured from Williams and it was manifestly erroneous to receive in evidence Jacobs’ version of his conversations with Williams and exclude Williams’ version of the same conversations. There are other rulings of a doubtful nature in the exclusion of evidence and in the charge of the court to the jury, hut as they probably will not occur again we refrain from discussing them. The judgment and order must be reversed and a new trial granted, with costs to the appellant to- abide the event. All concurred. Judgment and order reversed and new trial granted, with costs to appellant to abide event.