## Facts

- Standard Supply Co. owned a dwelling insured under a Reliance fire policy containing a clause excluding coverage for loss occurring while the house was vacant or unoccupied for more than 60 days.
- Before renewing the policy, Reliance hired Tar Heel Reporting Company; its president, John Jennings, inspected the dwelling and reported to Reliance.
- At the time of inspection, the dwelling had been unoccupied for more than a year and lacked electricity and heat, had sparse furnishings, and had several broken windows.
- Although a neighbor told Jennings that people were living there, Jennings’s written report described the property’s condition and stated the house was not vacant.
- Reliance renewed the policy after receiving the report.
- The dwelling later burned, and Reliance denied coverage based on the vacancy/unoccupancy exclusion.
- Standard sued, contending Reliance waived the vacancy condition or was estopped from asserting it because Reliance renewed the policy after obtaining information suggesting vacancy.
- The trial court instructed the jury that Jennings was not Reliance’s agent and that his knowledge could not be imputed to Reliance; the jury found no estoppel and returned a verdict for Reliance.

## Issues

1. Whether the trial court erred by failing to properly instruct the jury on waiver of a condition precedent where an insurer renews coverage after obtaining information inconsistent with strict enforcement of a vacancy clause.
2. Whether the trial court erred by categorically instructing that the insurer’s inspector was not an agent and that the inspector’s knowledge could not be imputed to the insurer for purposes of waiver or estoppel.

## Decision

- The court reversed the judgment for Reliance and remanded for a new trial.
- The court held there was sufficient evidence from which a jury could find that Reliance waived the vacancy condition by renewing the policy after commissioning and receiving an inspection report revealing facts strongly indicating vacancy.
- The court held the agency/imputation instruction improperly removed from the jury the factual question whether the inspector acted as Reliance’s agent for the limited purpose of investigating occupancy and reporting material underwriting facts.
- The court concluded the jury should have been instructed to consider waiver, not solely estoppel, under correct legal standards.

## Legal Principles

- An insurer may waive a policy condition precedent, including a vacancy/unoccupancy condition.
- Waiver may be found when, with knowledge (actual or imputable) of facts permitting avoidance of coverage, the insurer engages in conduct inconsistent with insisting on strict compliance with the condition, such as renewing coverage on the same risk.
- Whether conduct constitutes waiver commonly presents a jury question when it depends on disputed inferences about what the insurer knew and how it acted.
- Knowledge acquired by a person engaged by the insurer to investigate and report material risk facts may be imputed to the insurer when the factfinder determines the person acted within the scope of an agency relationship for that undertaking.
- Waiver may arise from the insurer’s conduct and does not necessarily require the reliance and detrimental change-of-position elements associated with estoppel.

## Conclusion

The court ordered a new trial because the jury was not properly instructed on waiver and was improperly told the insurer’s inspector could not be an agent whose knowledge might be imputed to the insurer; on the evidence, a jury could find the insurer waived the vacancy clause by renewing the policy after an inspection showing facts indicating the house was unoccupied.


Standard Supply Co. v. Reliance Ins. Co., 272 S.E.2d 394 (N.C. Ct. App. 1980)