David v. Hartford Insurance

13 Iowa 69

• Court: Supreme Court of Iowa
• Decided: April 10, 1862
• Status: Published

Opinion

Baldwin, C. J.

—The policy upon which the plaintiff seeks to recover was issued upon the 12th day of May, 1857, and insured the assignor of plaintiff, for one year, in the sum of $4,000, upon a five-story brick block used as a hotel, and situated in the city of Dubuque. The policy was assigned to plaintiff upon the 20th day of October, 1857, at which time the plaintiff purchased the property insured' — valued at $103,000. The building was destroyed by fire on the 22d day of January, 1858. A condition was inserted in the' policy which reads as follows: “ That if the said assured, or his assigns, shall hereafter make any other insurance on the same property, and shall not, with all reasonable diligence, give notice thereof to this company, and have the same indorsed on this instrument, or otherwise acknowledged by them in writing, this policy shall cease and be of no further effect.” It is claimed by the defendants that they are not liable upon their contract of insurance, as the plaintiff violated this condition of the policy. It appears from the evidence that the plaintiff, upon the 6th day of November, 1857, obtained policies of insurance upon said property, in the Charter Oak Insurance Company in the sum of $5,000 ; in the Phoenix, of Brooklyn, in the sum of $2,500 ; and in the Massasoit, in the sum of $2,500 ; and of which the defendants were not notified. It is claimed by the plaintiff, that these subsequent contracts of insurance were void, for the reason that there was a condition annexed to each of said policies, which required that where the interest of the assured was a leasehold interest it should be so expressed in the policy, otherwise the insurance should be void; that the interest of the plaintiff was a leasehold interest; that it was not so stated in the said policies; that each was therefore void, and being void, the plaintiff was not required to give any notice of their insurance to defendant. Under this issue, upon a trial, there was a judgment for plaintiff, and the defendant appeals.

The errors assigned are based upon instructions given by the court on its own motion, and the refusal to give those asked by defendant.

The first instruction given by the court, is as follows: “If you find that there was no notice to the defendant of the subsequent insurances, you will then come to the question whether the last policies of insurance were void, for if they were, the plaintiff is entitled to recover, and in this it matters not whether notice was given or not.”

In directing the jury in reference to the subsequent policies, the court said: “A stipulation or agreement in the policy is a warranty, and every warranty must be strictly complied with. A warranty is equally effectual if written upon a separate paper but referred to in the policy itself as a warranty, and the direct asseveration of a fact may constitute a warranty.”

The court further instructed the jury: “ that a second policy which is void does not vacate the first, and the fact that the company who issued the second policy paid the amount insured, is of no consequence in the question here involved, if the payments were made upon a policy clearly void.”

' Several instructions were asked by the defendant and refused by the court. Among others the following: “ The said several insurance companies had a right to waive the failure of David to state his interest in the property insured; and if they did waive it, the said contracts of insurance were valid.

“ The plaintiff having received the amount of said policies, cannot, in this action, deny their validity.

“ If the jury believe from the evidence that the plaintiff has attempted to procure and has procured subsequent insurances on said property, and received payment for his loss by virtue thereof as appears from said policies in evidence, then he has forfeited his contract with defendant, and the jury must so find for the defendant.

“ These were voidable, and not void, and the said Insurance Companies could affirm them and waive all objection, and having paid the insurance in full, and the same having been accepted by the plaintiff, he cannot now avoid it, unless he alleges and proves fraud or mistake in the transaction, to his injury or prejudice.”

The subsequent policies, or copies thereof, do not appear in the record. The agent of the several companies who issued the same testified that each policy contained the following, as one of the conditions of the insurance: “ If the interest in the property to be insured be a leasehold interest or other interest not absolute, it must be so represented to the company, and expressed in the policy, otherwise the insurance shall be void.”

The record shows that “ it was not proved nor was it claimed that the interest of the assured was expressed in either of said policies of insurance.” The testimony of the agent shows, however, that the assured represented himself as the owner of said property. The plaintiff, upon the trial, introduced evidence tending to prove the interest of the insured but a leasehold interest, and not absolute, as represented in the subsequent policies. It appears from this evidence that the plaintiff had a lease upon the lot upon which the building insured was located; that the lease was to continue for twenty years, and at the expiration thereof, 'in addition to the annual rent reserved, the lessee was to leave a two-story brick building remaining on said premises. The building insured was built and owned by the plaintiff, at the time of the issuance of the policy by the defendant.

It is true the interest of the plaintiff in the lot was but a leasehold right, but we are not prepared to say that the building insured was not absolutely the property of plaintiff. The lessee was not required by the terms of the lease to leave such a building as the one insured upon the lot at the expiration of the lease. Was it not, therefore, until the expiration of the twenty years, fully and unconditionally the property of the insured ? If the plaintiff, thereA fore, did not misrepresent his true interest in the property \ insured when he stated it was absolute, there was no viola- 1 tion of the conditions of the policies, and they were not void«-J

We do not, however, place our conclusions as to the rights of the parties upon this position alone. The jury, however, must have determined that the true interest of the plaintiff was but a leasehold interest, and that the plaintiff, having failed to have this interest truly stated in the policies, could not recover, and placed their verdict upon the ground that each of said policies was absolutely void.

Upon the supposition that the interest of the assured was but a leasehold interest, were these policies void? It must bé conceded that upon their face they were each valid subsisting contracts. They were applied for by the plaintiff, and issued by the underwriters in good faitb, and with the full understanding that if there should be a loss by fire, the insured was entitled to recover. How, then, could these policies be declared void ? We can conceive of no manner in which they could be so held, except by thg introduction of extrinsic factSj_such as would render it evident that .the plaintiff had wilfully, and. fraudulgntly concealed his true interest in the building insured, and had done this in’violation of the terms of the several policies. This could be done only at the instance of the underwriters, in a suit upon the policies, as the conditions inserted are for their benefit, and not that of the assured. Suppose that the underwriters had refused, after the fire, to pay, and the plaintiff had brought his action to compel them to do so; and suppose, further, that the defendants had set up as a defense the fact that plaintiff had failed to have it stated in the policies that his interest was a leasehold interest, and it should be made to appear that his interest was not absolute, as represented in the policy,— would this defense, if established, bar the plaintiff from a recovery ? The plaintiff could have suggested many considerations in reply to this defense. Suppose, for instance, that it could be shown that it was the fault of the underwriters, and not that of the plaintiff, that this interest was not truly stated ? Suppose that the insurance had been effected without asking the plaintiff to state what his true interest was ? Or, suppose that the underwriters had waived this misrepresentation of the true interest of the assured, and after the policies had issued, agreed to pay in case of a fire ? If either of these facts'had been established, the plaintiff could have recovered. If so, the policies were not void. We also think that'the fact that these several policies were regarded as binding by the insurers, and the losses of plaintiff paid, is a strong presumption, at' least, that the policies: were not void.

We, therefore, conclude that these policies were not void. It is true, they might have been avoided by insurers, but so far as the plaintiff was concerned, they were valid, and were so treated. J)y both_ parties. The plaintiff effected an insurance, therefore, that proved to be an available one, and in doing so, without notice to defendants, he violated his contract with them to such an extent as to forfeit his right to recover.

The condition is inserted in defendant’s policy, to protect the company from an over-insurance, without their knowledge. Where property is insured to such an extent that it would be to the interest of the insured that a fire should occur, the hazard is increased and the underwriters should know it. And even if the policies could have been avoided by the underwriters, it was the duty of the plaintiff to notify the defendants of his having effected what he supposed at the time, to be a valid insurance.

We readily conclude that the authorities are somewhat conflicting upon this question, but we believe the cases referred to as favoring the position we have assumed, are placed upon the better reasoning and the true principles of law.

The case of Clark v. New England Mutual Fire Insurance Company, 6 Cush., 342, cited by counsel for appellee, is entitled to great consideration, as being the one most similar in its character to the one now before us, made by an able bench, and in which the leading case in support of the opposite position, Carpenter v. Providence Washington Insurance Company, 16 Peters, 495, is reviewed, and the reasoning of Justice Story is endeavored to be refuted. The defendants in this case (Clark v. The New England Company,) had a condition in their policy similar to that of defendants. The plaintiff, Clark, subsequent to the date of his policy, effected an insurance in the Bowditch Company upon the same premises, and without notice to defendants. After making the policy declared on, Clark mortgaged the premises to secure the payment of $400; and while the estate was thus incumbered, in the plaintiff’s application to the Bowditch Company for an insurance, in answer to this interrogatory, “state whether or not incumbered, and to what amount,” replied, in writing, “ none.” Upon this application, containing this inquiry and answer, the policy of the Bowditch Company was issued.

The court in their opinion, say: “ But the question is, was any other insurance obtained, within the just and true import of the section of the act before recited ? The policy was issued by the Bowditch Company upon an application by the plaintiff, in which it was distinctly and expressly stated that there was no incumbrance upon the premises insured, when, in fact, there, was a mortgage thereon for about $400. The existence of this mortgage was certainly a material and important fact, not only in regard to the lien of the insurers upon the- property, but also as to the ability and responsibility of the insured as to .his interest and estate in the premises, and in other respects. But when the insurers desire a fact material, and make an express and direct inquiry as to that fact, it is material that' the insured should answer that fact correctly. It is perfectly clear, therefore, that the Bowditch policy was issued upon a material misrepresentation of the insured in his application, and that the plaintiff could maintain no action upon it against that company. It is an invalid and useless policy. The defendants now say that their policy is void, because the plaintiff obtained other insurance without giving them notice. But it does not appear, in point of fact, that the plaintiff did obtain other insurance. The plaintiff, it is true, had obtained a policy, .but it was not binding in law, and could not be enforced. ít was not an insurance, as manifestly understood by the defendants themselves, when they made their policy.”

Let us see bow far tbis case is analogous to tbe one before us. Tbe Bowditcb Company was a Mutual Insurance Company, we suppose, as tbe court speaks of tbe existence of tbe mortgage as a material fact, not only in regard to tbe lien of tbe insurers upon the property, but of tbe responsibility of tbe assured. It was more important to tbe validity and to tbe interest of tbe company tbat tbe true interest of plaintiff assured should be disclosed. Tbe assured was directly asked to state tbe incumbrances, and be replied tbat there were none. Tbis statement is made a part of tbe policy. A fraud was, therefore, perpetrated in obtaining tbe policy. Tbe Bowditcb Company never waived tbis objection to tbe assured’s right of recovery, and did not pay any loss to tbe plaintiff in tbat case. There was no double insurance obtained in tbat case, and tbe defendants could not claim tbat they were liable to pay only ratably.

Was tbe plaintiff in tbis case asked to disclose tbe interest be bad in tbe property insured ? Did be obtain tbe insurances upon any false representations? Was it not an available insurance to him ? Did it prove to be really and in fact no insurance? Were not bis subsequent policies binding, and could they not be enforced ? Tbe answers to these inquiries are disclosed by tbe record, and show tbe distinction between tbe two cases. Tbe ease of Jackson v. The Massachusetts Mutual Fire Insurance Company, 23 Pick., 418; and Stacy v. Franklin Insurance Company, 2 W. & S., 506, are cited by tbe court in their opinion in tbe above case as authority for its conclusions, and each is relied upon by tbe counsel for tbe appellee in their argument. None of tbe eases referred to tbat we have been ablé to examine, support tbe ruling of tbe court more strongly than tbe case from 6 Cushing.

The case of Carpenter v. Providence and Washington Insurance Company, 16 Peters, 496, and Bigler v. New York Central Insurance Company, New York Court of Appeals, are eacb cited by counsel for defendants in this case.

In the case of Carpenter, supra, Story, J., in delivering the opinion of the court says, “ The second instruction asked, proceeds upon the ground that although the policy of the ‘ American Insurance Company ’ was good upon its face, yet if in point of fact it was procured by material misrepresentation by the owners, of the cost and value of the premises insured, it was to be deemed utterly null and void, and therefore as a null and void policy, notice thereof need not have been given to the Washington Insurance Company at the time of the underwriting the policy declared on. The court refused to give the instruction, and, on the contrary, instructed the jury, that if the policy of the American Insurance Company was at the time when that at the Washington Insurance Office was made, treated by all the parties thereto as a subsisting and valid policy, and had never in fact been avoided, but was still held by the assured as valid, then that notice thereof ought to have been given to the Washington Insurance Company, and if it was not, the policy declared on was void. We are of the opinion that the instruction as asked was properly refused, and that given was correct. It is not true that because a policy is procured by misrepresentation of material facts, it is therefore to be treated in the sense of the law as utterly void ad initio. It is merely voidable, and may be avoided by the underwriters upon the proof of the facts ; but until so avoided, it must be treated for all- practical purposes, as a subsisting policy. ***** But the question is not how the policy may now be treated by the parties, but how was it treated by them at the time when the policy declared on was made. It was then a subsisting policy, treated by all the parties as valid, and supposed by the underwriters to be so. ****** And it may be well doubted whether a party to a policy can be allowed to set up bis owa misrepresentations to avoid the obligations deducible from his own contract. Be this as it may, it is in our judgment free from all reasonable doubt, that notice of a voidable policy must be given to the underwriters, for such a case falls within the meaning of the stipulations in the policy. It is a prior policy, and has a legal existence until avoided. Indeed, we are not prepared to say that the court might not have gone further, and have held that a policy existing and in the hands of the insured, and not utterly void upon its face, without any reference whatever to extrinsic facts, should have been notified to the underwriters, even though by proofs afforded by such extrinsic facts it might be held in its very origin and concoction a nullity.”

This policy of the existence of which the court thus held that notice should have been given to the underwriters, was obtained through false representations, and was held to be utterly void. 1 Story, 57.

In the present case there is nothing to show that the policies were void on their face, and the extrinsic evidence fails to show that they were obtained by any false representations, or that the underwriters had ever taken any steps to avoid them. They were treated by the parties when made as valid subsisting policies, and then and after-wards treated by the underwriters as such.

- The case of Bigler v. The New York Central Insurance Company, supra, is of recent authority, and the facts stated show the case to be very much like the one now before us. The plaintiff in that case having been insured in the New York Central Company, tbe policy containing the same conditions as in that of defendant in this case, subsequently effected an insurance in the Globe Insurance Company upon the same property, in which there was a condition that if the insured had already any other insurance not notified to the said Globe Company, and indorsed upon policy, it was to be void. The court in their opinion Davies, J., say: “ The plaintiffs to enable them to maintain their action against these defendants, now take ground, that in fraud of this agreement with the Globe Company they concealed from them the fact of the prior insurance with defendants,' and that such concealment rendered the Globe policy void. They say, therefore, had no further or other insurance on the same property, and had not violated their agreement in that regard with these defendants. In assuming this position, they overlook the fact that this agreement or stipulation made for the benefit of the Globe Company, and that was competent for that company to waive it. It would appear that in the suit brought by these plaintiffs against that company, its liability on the policy was acknowledged, and a draft given to pay the amount of the loss. Both parties to the policy therefore treated it as a valid, subsisting instrument, and it will not answer for these plaintiffs now to shift their ground, and set up that this policy is void, and was so from the time it was issued, by reason of their fraudulent concealment of the fact of their prior insurance. But the agreement between the parties to this action was, that the policy of defendants was to cease and be of no further effect if the plaintiffs thereafter should make any other insurance upon the same property, &c. It was the act of making another insurance which was to vitiate and render null the defendant’s policy. We think it no answer for plaintiffs to make to allege that the other insurance might legally have been resisted and avoided. This was not what the parties had agreed to. * * * * We are not at liberty to make a new contract for the parties, but to inquire whether the one that was made has been violated.”

The court in case Story, Justice, in the case of Carpenter v. Washington Insuranee Company, and review some of tbe oases cited in support of tbe position of appellee. In referring to tbe case of Philbrook v. The New England Mutual Fire Insurance Company, cited by tbe counsel for appellee. Justice Davies says: “In tbat case tbe underwriters of tbe second policy paid tbe amount of tbe loss, thus directly affirming tbe policy, and admitting tbeir liability on it. Yet tbe court say, tbe. fact tbat tbe company wbo issued tbe second policy paid tbe amount insured is of no consequence in tbe question here involved, if tbe payment was made on a policy clearly void. Whether or not tbe policy was void, depended on the action of tbe underwriters. It was competent for them to waive, at any time, tbe forfeiture incurred by reason of tbe omission to give notice of a prior insurance, or of any fraud or misrepresentation existing at tbe time of tbe issuing of tbe policy. _ This waiver could as well be made after loss as before, and payment of tbe loss is the best evidence tbat tbe underwriters of tbe second policy did in fact make tbe waiver. It was therefore a case where both parties treated the policy as valid and subsisting ; tbe insured by making tbe claim for tbe loss under the policy, and tbe underwriters by admitting tbeir liability, and making payment. Tbat policy was treated by tbe parties as a valid and legal policy, and effectual and binding upon tbe assurers. It came, therefore, directly within tbe class of policies referred to by the Supreme Court of Massachusetts in tbe case in 23 Pick., and was in this view a second insurance. We adopt tbe language of tbe court in tbat case, and agree with them tbat such second insurance would annul tbe previous policy.”

The case of Jacobs v. The Equitable Insurance Company, see 19th Upper Canada Reports, is an analogous case, and strongly supports tbe view we have taken of this question.

It is claimed by counsel for appellee tbat tbe ruling of this court in tbe case of Hygum v. The Ætna Insurance Company, 11 Iowa, 21, is favorable to the ruling of the court below. We do not regard our conclusions in this .case as in conflict with that decision. The Dubuque company, in that case, denied the validity of their policy, and did not waive the violation of its conditions. This alone, if in no other respect, shows that the cases are dissimilar.

The instructions asked by counsel for defendants, so far as they are consistent with this opinion, should have been given. The court erred in its instruction to the jury.

Reversed.