Plaintiff owned and let for hire automobiles and trucks and held policies of insurance issued by defendant in October, 1936, and May and October, 1937, and, after paying premiums for a time and upon receiving notice of assessment liability as a member of a Mutual insurance company, filed the bill herein to have the policies canceled and *Page 580 the premiums paid returned on the ground that the insurance was induced by the false and fraudulent representations that the policies were adequate protection and nonassessable because of the company affiliation with Lloyds Insurance Company of London. Defendant is an Illinois corporation and, at the time the policies were issued, was authorized to do business in the State of Michigan.
At the time this suit was commenced, liquidation proceedings involving defendant were pending in an Illinois court in which there had been entered an order restraining creditors and others from bringing actions or obtaining judgments. Upon application the circuit court authorized the director of insurance for the State of Illinois, as liquidator of defendant company, to appear in this suit in behalf of defendant. The answer of the liquidator admitted there was no affiliation of defendant with the Lloyds Company, but joined issue upon the other facts. Upon hearing in open court the circuit judge found the fraudulent representations were made as alleged and, by decree, canceled the policies and freed plaintiff from all liability but, on account of the restraining order of the Illinois court, did not decree recovery of premiums paid. Appeal is by defendant.
The amendment to the bill, granted at the hearing, relative to alleged failure of defendant to pay losses, did not bring a new cause of action but only amplified previous allegations and was permissible.
Defendant rested at the close of plaintiff's proofs and contends that the court was in error in admitting, over objection, incompetent testimony. This being an appeal in equity we hear the case de novo and, if the competent proofs establish plaintiff's right to the relief granted in the circuit court, the error, if any, in admitting incompetent testimony is of *Page 581 no decisive moment. The competent evidence established the alleged representations. However, counsel for defendant contends they did not constitute fraud and the representation relative to nonassessability was to the contrary in the policies and, therefore, merged therein.
This is not a suit to reform the policies but to cancel for fraud operating in making the contract at all and the law of torts applies.
Death of defendant's local agent, who made the representations, has not closed the mouth of plaintiff's witness, J.J. Richards, an independent insurance broker, who had the president of plaintiff corporation in tow for insurance in some company and piloted him to the office of defendant's local agent to have him assured of the inducements offered by that company and heard the agent make the false representations.*
The defendant was not affiliated with Lloyds and the statement that it was was intended to induce favorable action, and the subsequent liquidation proceeding was not wholly without bearing upon the question of the falsity, in fact, of the representation made that the policies would afford adequate protection, although somewhat weakened by lapse of time.
The fact that in the interim other policyholders suffering losses had not been paid involves too many steps necessary to show nonpayment by reason of financial inability of the company to make such testimony of any importance.
The decree is affirmed, with costs to plaintiff.
BUTZEL, C.J., and BUSHNELL, SHARPE, POTTER, CHANDLER, NORTH, and McALLISTER, JJ., concurred.
* See 3 Comp. Laws 1929, § 14219 (Stat. Ann. § 27.914). — REPORTER. *Page 582