Beck v. Hibernia Insurance

44 Md. 95, 1876 Md. LEXIS 26

• Court: Court of Appeals of Maryland
• Decided: March 2, 1876
• Status: Published

Opinion

Miller, J.,

delivered the opinion of the Court.

By the policy sued on in this case, dated November 8th, Í872, and continued by renewal until Nov. 8th, 1874, the appellee - insured the appellants, Beck and Bolte, to the amount of $2506, say “$2000 on their five story brick building,” the structure and situation of which is stated, “ and occupied as a steam furniture factory,” and $500 on the adjoining two and a half story brick building, which is also particularly described. In August, 1873, this endorsement was made on the instrument: “It is understood that the buildings above described belong to George Beck, but loss, if any, payable to Beck and Bolte, to be used in re-erecting said property — buildings stand upon leased ground.” The policy also provides that it “is made and accepted in reference to the application oí the insured, and to the conditions hereunto annexed, as forming part of this policy, and which are to he used and resorted to for a moro particular description of the property insured, and in order to explain the rights and obligations of the parties hereto.” Among the conditions to be particularly noticed are the first and fifteenth, as follows :

“1st. All policies must be made and issued upon a survey and description of the property insured, which survey and description shall constitute the application of the assured. Such application must specify the construction and materials of the buildings to be insured, or containing the property to he insured, by whom occupied, whether as a private dwelling or how otherwise; its situation with respect to contiguous buildings aud their construction, use and materials; whether any manufactory is.i carried on within or about it, and shall also contain a just, true and full exposition of all the facts and circumstances in regard to the condition and value of the property insured, so far as the same are known to the assured, and are material to the risk. And such application shall be taken and deemed to he a part of the policy issued in pursuance thereof, and shall he deemed a warranty on the part of the assured that the facts therein stated constitute the true condition in all respects of the subject-matter of such insurance. And if any person insuring any building or goods in this office shall malte any misrepresentation or concealment, such insurance shall be void.”

“ 15th. In oil cases of applications for insurance in this company the applicant shall state the true value of the property, and also the amount of encumbrance, if any exist thereon. ’ ’

At the time of the insurance and of the loss the insured buildings belonged to Beck, hut were in possession of the firm of Beck & Bolte under articles of co-partnership appearing in the record, and which they had entered into for the purpose of carrying on the furniture manufacturing business. The insurance was effected through one Selby, an insurance agent and broker, who testified in. reference thereto, that he made a personal examination of the premises with a view of issuing policies thereon, by the companies for whom he was agent, that he approved the risk and issued policies in all the companies of which he was agent, and then as broker effected additional insurances outside of his own agency, and among them procured this insurance from the defendant; that he made no written application theretor at all, and was not required by the defendant’s agent to make any written application ; that he merely presented the written form of the policies which he had adopted for his own companies, and stated to the defendant’s agent that he approved the risk and had issued policies in his own companies, and thereupon, the defendant’s agent issued this policy adopting the written form above referred to.

The company rests its defence upon the conceded facts that prior to and at the time this policy was issued, there were two mortgages on the insured buildings, executed by Beck to one May, amounting to $5000, and that the existence of these mortgages was never communicated to the company or its agent. The question therefore is, does the non-disclosure of these encumbrances avoid the policy and defeat the action ? That it does we have no doubt.

There was much of ingenious reasoning by the able counsel for the appellants as to the construction and legal effect ol the several provisions and conditions of this policy Their main argument was that compliance with the fifteenth condition was not a condition precedent to the attaching of every policy issued by the company, but was simply directory, and'applied only to cases where there was a formal application in accordance with the first condition, and inasmuch as no such application had been made in this case, non-conrplianco with the provision in the former condition requiring a statement of encumbrances does not necessarily involve a forfeiture of the policy. But according to our construction of this instrument it matters not whether there was here an application in strict and technical conformity with the first condition or not. There certainly was a presentation by the broker, who acted in this behalf as the agent of the assured, of a written statement embodied in other policies, which sufficiently specified the construction and materials of the insured buildings, their location and for what purpose they were used. This, though not containing all that the first condition required to be embodied in a formal application under it, was nevertheless cm application by the insured for the insurance, and the fifteenth condition which seems to have been framed and put in for that special purpose, provides that in all cases of applications the amount of encumbrance on the property to be insured shall be stated. Looking to the whole instrument and reading, as we must, all its provisions to ascertain the intention of the parties, we cannot escape the conclusion that disclosure of encumbrances was made a material element of the contract, without which it was to bo inoperative and void in its inception. .It provides that the annexed conditions shall form part of the instrument, and are to be resorted to in order to explain the rights and obligations of the parties to it. Then by one condition, it requires every applicant to state any encumbrances that may exist on the property to be insured, and in another declares that if any person insuring any buildings or goods, shall make any misrepresentation or concealment, such insurance shall be void.- This seems to us to make the validity of the contract to depend upon the disclosure of encumbrances, as effectually as if so' stated connectedly in terms in a separate clause, as was done in Bowman’s Case, 40 Md., 620. Where encumbrances are thus in express terms required to be disclosed, where suck disclosure is thus made a substantial element of .the contract, no good reason exists why the Courts should seek to place upon the instrument any rigid or restricted construction of its terms, in order to enable the assured to escape the consequences of the neglect of a plain obligation thus imposed on him by the contract, which he accepted, and knowledge of which on his part is presumed from such acceptance. Balt. Fire Ins. Co. vs. Loney, 20 Md., 20. Apptying the rule adopted by repeated decisions of this Court, that in construing a contract of insurance, as in all other cases, the intention of the contracting parties is to be regarded, and when ascertained, must govern and control their rights under it; we are satisfied it was the intention here, that this policy should' be void, if, at the time it was issued, there were encumbrances on the buildings sought to be insured, which the assured did not disclose to the insurer. In this view of the case, it is wholly immaterial, whether the existence of the encumbrances was material to the risk or not, or whether the fact that none were disclosed, induced the insurer to issue the policy or not. The parties themselves by their contract, have made it material, and have stipulated; that if encumbrances were not disclosed the policy should be void.

This construction of the policy answers also the argument, that the company is estopped from setting up this defence. We have had occasion very recently in the case of Maryland Fire Ins. Co. vs. Gusdorf, 43 Md., 506, to examine this question of equitable estoppel, and have adopted it as a just and sound doctrine, to be applied in all cases to which it is properly applicable, as well at law as in equity. But if we are right in the construction of the policy now before us, there is in this case no room .for the application of this doctrine. If the assured had in fact disclosed these encumbrances, and the policy had been issued with knowledge thus communicated, the case would have been entirely different. So also had the policy required the endorsement of the company’s assent to the encumbrances, and with knowledge of their existence, they had issued the policy without making the endorsement, the estoppel would apply. In either case, the fact of disclosure could he established by parol testimony. But there is here no proof whatever of any such disclosure ; on the contrary, it is conceded that none was made. The case is then simply this : The assured applies for insurance on certain buildings, which he represents as belonging to himself; he fails to state they were encumbered by mortgages, and accepts a policy which requires him to make such statement if the facts were so, and that the insurance should he void if he did not. The obligation rested on him, and no omission of duty is imputable to the insurer. If in such case the insurer cannot avail himself of the express stipulations of the contract, there is no conceivable case in which such conditions can he availed of, and it might as well he said at once that parties have no power to make such contracts.

(Decided 2nd March, 1876.)

That the insurance was on the buildings belonging to Beck, and not on any interest which Beck and Bolte might have had in them under their co-partnership contract, (even supposing that would make any difference in the case,) we consider too clear on the face of the policy and the endorsement thereon to admit of question.

Eor these reasons, we are of opinion the defence of the company which was sustained by the rulings of the Superior Court, is valid and effectual against any suit on this policy, aud the judgment must therefore he affirmed.

Judgment affirmed.