Faugier v. Hallett

2 Johns. Cas. 233

Opinion

Radcliff, J.

On the trial, the plaintiff produced the policy and the adjustment, and relied on them alone for a recovery. The defendant offered to prove, that the adjustment was made on a false, or mistaken representation of the loss on the part of the plaintiff] and that instead of a total, it was, in fact, a partial loss, amounting to 1262 dollars, besides a dozen or fifteen sword blades, the residue of the property being saved. Strong evidence to this effect was offered, and overruled in consequence of which the plaintiff recovered for a total loss.

The first question is, whether the defendant was concluded by the adjustment. I think he was not. The insurer, in the event of a loss, as in subscribing a policy, acts wholly on the representation of the insured. He cannot be supposed to know the situation of the subject insured, or the accidents which may have attended it. The insured is therefore bound in good faith to represent the truth. If he misrepresents, it can only be done through fraud or mistake, and in either case, he ought not to be benefitted by it. I think the rule is obvious and universal, and where one party is obliged to act on the representation of another, he cannot be Concluded, if that representation after-wards appear to be untrue. In relation to adjustments, it has, in several cases, in the English courts, been so decided. The adjustment is prima facie evidence only, and may be rebutted. (Peake’s Ev. 108, 109. Beawes, 308.)

-On this ground alone, the verdict ought to be set aside. It is unnecessary, therefore, on the present motion, to decide the other questions, whether a policy on goods generally, will extend to goods which are not regularly a part of the cargo, or for which no bill of lading was given, or to pronounce the effect of the warranty as stated.

Kent, J.

Upon the facts in this case, Í am of opinion that the testimony offered ought to have been received. The plaintiff, at the time of the adjustment, did not know the whole case as it then stood. The adjustment was, consequently, founded upon mistake, or at least, the testimony offered was so material to the point, that it ought to have been submitted to the jury. An adjustment is not conclusive, if the party can show that it was made on the misrepresentation of the insured, and whether the misrepresentation proceeded from mistake or design, is immaterial. It is a just and sound rule, that if one person proceeds upon the information of another, to do an act in his favor, the person in whose favor the act is done, is bound at his peril, to see that the information be correct.

I am of opinion, therefore, that a new trial be granted, with costs to abide the event.

Lansing, Ch. J. was of the same opinion.

Lewis, J. absent.

New trial granted.(a)(b)

Footnotes

a

(а) [Old note.] Park on Ins. 6th ed. 163, 167. Marshall on Ins. 2d ed. 632, 636.

b

(b) An adjustment of a loss is an admission between the assured and underwriter, by which the loss is settled or adjusted at a certain amount. It is usually made by endorsing on the policy, “ adjusted this loss at- per cent.” (Park, 192. 2 Phillips on Insurance, 521.) The form, however, is not material. Lord Ellenborough, in Herbert v. Champion, (1 Campb. 134,) observed, “ perhaps if properly stamped it might be declared on as a promissory instrumentbut no cases have been found to sanction this view of the subject. Undoubtedly an adjustment, like any other settlement, might be placed in such a form that the assured could bring an action upon it without setting forth the policy particularly; (Rogers v. Mayler, Park, 194; Christian v. Combe, 2 Esp. 489 ; 2 Phillips, ut sup.;) and in such a case it would be subject to the same general rules that control other instruments of the class to which it might belong. But practically it is used as evidence to support the claim of the assured. In effect it is an admission of all the facts necessary to be proved by the assured to enable him to recover in an action on the policy, (2 Greenl. Ev. 319, § 393,) to the amount stated in the adjustment; and like any other admission, may be shown to have been made under ignorance or mistake of facts, or under the fraudulent influence of the assured or his agent. (See Haigh v. De la Cour, 3 Campbell, 319. Steel v. Lacy, infra.)

In Dow v. Smith, (1 Caines, 32,) the court said, “ an adjustment cannot be opened except on the ground either of fraud, or' mistake of facts not known,” and this remark is adopted by Chancellor Kent, in his Lecture on Marine Insurance, (Comm. vol. 3, p. 339. See Steel v. Lacy, 3 Taunt. 285.) Mr. Phillips, in discussing this rule, considers if an adjustment be made from a mistake of a fact, into which mistake one party is led by the concealment or misrepresentation of the other, or without any neglect on his own part, it will not be binding upon the party who assented to it, in consequence of such mistake. An adjustment is set aside on this ground, very much upon the principles on which a policy is made void by a concealment or misrepresentation. It is a general rule, that money paid in consequence of a mistake of facts, may be recovered back; and that a promise to pay money is not binding, if made in consequence of such a mistake, where the party promising has not fallen into the mistake by his own negligence, or is not understood, from the circumstances, or his agreement, to take the risk of the facts. (2 Phillips on Insurance, ed. 1840, p. 524, 525.) Thus, insurance being made “ free from capture in port,” an adjustment was made and the premium returned, on the supposition that the loss had been by capture in port. It afterwards appeared that the loss had been by capture not in port. The underwriter was held to be liable notwithstanding the adjustment. (Reyners v. Hall, 4 Taunt. 725.) It has been made a question, whether a mistake of law will avoid an adjustment ; but although Lord Kenyon seems to have supposed it would, (Rogers v. Mayler, 2 Esp. 489,) his opinion has been rejected in the subsequent cases. (Belbey v. Lumley, 2 East, 469. Elting v. Scott, 2 Johns. 157. Stevens v. Lynch, 12 East, 38. See 2 Phill. ut sup.) As to conditional adjustment, see 2 Phill. 523.