Houghton v. Manufacturers Mutual Fire Insurance

49 Mass. 114

• Court: Massachusetts Supreme Judicial Court
• Decided: October 15, 1844
• Status: Published

Opinion

Shaw, C. J.

The contract of insurance against fire, as used and practised by the mutual insurance companies in this Commonwealth, depending upon the operation and effect of the act of incorporation and the by-laws, and the policy and written representations in each particular case, is somewhat new and peculiar ; and the rules applicable to it have not been very fully and definitely settled by judicial decisions. For this reason, as -well as on account of its importance to the parties, in point of amount, it is necessary to consider the present case with care. A nonsuit was ordered at the trial, subject to the opinion of the court upon various questions of law, which it was supposed would embrace the whole merits of the case. The court being of opinion, that in one particular the questions, decided as questions of law, should have been left to the jury, on the evidence, as questions of fact, the nonsuit is to be set aside and a new trial ordered.

Upon several questions of law discussed at the argument, the court have come to an opinion, which it may be proper and convenient to the parties to state, in order to regulate the course inquiry on another trial.

1. The court are of opinion that the policy, by the manner in which it refers, in terms, to the application and representations, does legally adopt and embody them as part of the contract, to the same effect as if they were recited and set forth at large in the policy.

2. That the application and the various answers contained in it, being termed “ representations ” in the policy, are rather to be regarded as having the legal effect of representations than of warranties, as understood in the law of marine insurance, though partaking in some measure of the character of both. They are like representations, in requiring that the facts stated shall be substantially true and correct, and, so far as they are executory, that they shall be substantially complied with ; but not like warranties, in requiring an exact and literal compliance. It is enough, therefore, if these statements, relied on as the basis of the contract, are made in good faith and without intent to deceive; that they are substantially true and correct as to exist-, ing circumstances, and substantially complied with, so far as they are executory and regard the future.

3. With the qualification above mentioned, the fact, that the representations made in the application do contain a just, full and true exposition of all the facts and circumstances in regard to the condition, situation, value and risk of the property insured, so far as the same are known to the applicants, and are material to the risk, is a condition precedent to the liability of the defendants; and if, in any particular material to the risk, they do not contain such just, full and true exposition, the company are not bound.

4. The proviso in the policy, that it shall be void, if the application does not contain a just, full and true exposition of all the facts, has this limitation; “ so far as the same are known to the applicants.”

At the trial, it was stated, as a conclusion of law, that if the applicants and assured were owners of the estate, they must be presumed to know certain facts respecting it. The court are of opinion that this was erroneous, and that the question whether the facts, if misrepresented, were known to the applicants, was a question of fact, to be left to the jury upon the evidence. The considerations referred to, as founding a legal conclusion of knowledge, are all fit and proper to be submitted to a jury; such as, that the assured and applicant is himself the owner of the property, and may be presumed to be acquainted with its condition ; that the matter relates to things open and visible, things capable of distinct knowledge and not depending upon estimate, opinion, or mere probability; things in respect to which an owner is bound in honesty and good faith to know, takes upon himself to know, and usually does know ; these, and all other pertinent evidence bearing on the question, are to be left to the jury, with directions that if they are satisfied from all the evidence, and can reasonably infer, that the assured did know the fact as it really existed, in regard to which misrepresentation is imputed, they are to find that he did know it; otherwise, not.

5. There is another clause in the policy, to which the attention of the court was drawn at the argument, which is this: “ If the situation or circumstances, affecting the r5sk upon the property insured, shall be altered or changed, by or with the advice, agency or consent of the assured or their agent, so as to increase the risk thereupon, without the consent of the company, the policy shall be void.” The court are of opinion, that this was a stipulation and condition, without a substantive compli anee with which, the company, from the time of its happening, would cease to be bound by the contract. This provision binds the assured, not only not to make any alteration or change in the structure or use of the property, which will increase the risk, but prohibits them from introducing any practice, custom or mode of conducting their business, which would materially increase the risk, and also from the discontinuance of any precaution, represented in the application to be adopted and practised with a view to diminish the risk. The clause in question, as well as the preceding clause, refers to the application and the representations contained in it. Taking this clause with the representations, we think the legal effect is, that so far as these representations set forth certain usages and practices observed at the factory, as to the mode of conducting their business, and as to precautions taken to guard against fire, it is not only an affirmation that the facts are true at the time, but in effect a stipulation, that as far as the assured, and all those entrusted by them with the care and management of the property, are concerned, such modes of conducting the business shall be substantially observed, and such precautions substan tially continue to be taken, during the continuance of the policy.

By a substantial compliance, we mean the adoption of precautions, if not exactly those stated in the application, precautions intended to accomplish the same purpose, and which may be reasonably considered equally or more efficacious. For instance; when it is stated that ashes are taken up in iron hods, it would be a substantial compliance, if brass or copper were substituted. So, when it is represented that casks of water, with buckets, are kept in each story, if a reservoir were placed above, with pipes to convey water to each story, and found by skilful and experi encéd persons to be equally efficacious, it would be a substan tiai compliance.

6. But in construing these representations, both as to existing facts, and as to future precautions to be taken, a mere literal conformity and compliance would not be sufficient. Good faith, as well as the terms of the contract, requires that it shall be a full and just, as well as true exposition. These answers are to be construed in reference to the requirements of the office, and specified on the back of the application, and referred to in the questions; and they are to be so construed as to meet these requirements, and conform to them, when it can be done consistently with the terms of the answers. For instance ; the answer to No. 13 states that water-casks are placed in each room. This answer would be literally true, if a small vessel, having the shape and bearing the name of a cask, were so kept; but it would not be a full and just statement, nor a substantial compliance with the undertaking of the assured. That undertaking requires a substantial compliance, by keeping a cask of water of a size adapted to the required security, and holding a sufficient quantity to extinguish a sudden fire beginning to kindle in such story.

7. One other point was taken, respecting which an opinion was asked for and given at the trial. It related to the representation and the practice in respect to the examination of the factory. The representation was contained in the answer to the 14th question, as follows: “ Is a watch kept constantly m the building ? If no watch is constantly kept, state what is the arrangement respecting it.” Ans. “ No watch is kept in or about the buildings; but the mill is examined thirty minutes after worlc.” This question referred to the requirements of the office, on the last page of the representation, amongst which is this, viz: “ that an examination will be had, say thirty minutes after work.”

Question 21st was this : “ During what hours is the factory worked r ” The answer was, “ from 5 o’clock A. M. to 8-J o’clock P. M. Sometimes extra work will be done in the night.”

Two questions were made at the trial. First; whether this representation of the usual practice amounted to any condition or stipulation that it should be continued. It was ruled at the trial, and the whole court are now of opinion, that as this examination was manifestly intended as a substitute for a constant watch ; as it was one which the assured had it in their power to make or cause to be made; as it was one of the precautions tending to secure the property against danger of fire, and tending to its safety ; it was one which, as a general practice, the assured were bound to follow; although an occasional omission owing to accident, or to the negligence of subordinate persons, servants or workmen, not sanctioned nor permitted by .the assured, or by their superintendent, manager or agent, might not be a breach or non-compliance.

The second question under this clause regarded the time at which the examination was to be made. The question as understood at the trial, was this; whether, if the factory work was continued during extra hours in the night, that is, after half past 8 P. M., the examination should be made at half an hour after the cessation of actual work, or half an hour after the time fixed in the 21st answer, as the usual hour of the cessation of work. On this question, considering the purpose of the examination, and considering that the object of the examiner would be, by the sense of sight or smell, to detect any latent fire or fire beginning to kindle, arising from sparks from the extinguished lamps, spontaneous combustion, friction of machinery, or otherwise; as this could be best accomplished after the mills were stopped, and the operation of the factory for the night had ceased, and the persons employed in it had left, I was of opinion that the examination must be made at thirty minutes after the cessation of the actual work of the factory, and that an examination thirty minutes after the time fixed by the 21st answer, as the usual time for closing work, if the factory did continue in operation, was not a substantial compliance with this stipulation. And the court are of opinion, that this direction, in the case supposed, was right, and that such is the correct construction of the contract. The assured had represented that the usual hour for the cessation of work was half past eight; yet, laving represented that the factory would sometimes be worked during extra hours in the night, they had a right so to work, without impairing the contract. But if they thought fit, for any cause, to change the hours of work, so that it should continue to a later hour in the night, they must see that the examination be made at thirty minutes after the actual cessation of work..

8. But another question is now presented, which was not distinctly raised at the trial, and in regard to which, the evidence was not fully reported; and it is this: What is the cessation or termination of work; or, in other words, what is the meaning of thirty minutes after work, within the meaning of the answer to the 14th question ? As there is to be a new trial on other grounds, we think it proper to state the opinion of the court upon this point; although, through misapprehension of the counsel, or of the court, or otherwise, it was not raised at the trial, or presented on the report.

The question as to what is a termination of work, within the meaning of this contract, is partly a question of law and partly a question of fact. The intentions of the parties, if they can be ascertained, are to govern ; and these are to be learned from the language used, construed in connection with every part and clause in the contract, the subject matter respecting which they are used, and the obvious purposes of each stipulation.

That the assured were bound to make an examination, at thirty minutes after work, is the construction of law on the contract; what is the cessation of work, is a question of fact for the jury, depending upon the circumstances, and having in view the object and purpose of the stipulation, which was, to have an examination at such time as will conduce to the safety of the building. As some of the sources of danger are the continuance of fires and lights, and the friction of machinery, so long as the general work of the factory and operation of the machinery continues, a jury must find that the work had not then ceased, and could not be warranted in finding otherwise. If, on the contrary, the gate were shut, the machinery all stopped, the fires and lights extinguished, and the operatives generally retired, it could hardly be said that the work had not ceased, although one or two persons should remain to do something which should create no danger of fire. The fact to be looked to is not that the persons employed have all left, or that the lights are all extinguished, or that the machinery has wholly stopped, but the termination of the time during which the factory is worked ; and this is an inference of fact, which may be influenced, more or less, by all these considerations.

Now, between the full operation of the factory, and the entire cessation of work, extremes may be supposed on either hand, respecting which there could be no doubt. There may be various intermediate stages, in which it would be the duty of the jury to determine, upon the particular combination of cir cumstances, whether they constituted a cessation of the working of the factory, or not. If the general work of the factory has ceased, although a single machine may remain in operation for a special purpose, we think a jury should be instructed, that if such machine should cause no danger of fire, the examination should be made at thirty minutes after the cessation of the general work, and not after the stopping of the particular machine ; and this the rather, because the contract stipulates but for one examination; and an examination after the cessation of the general work, being apparently most for the interest of both parties, may be presumed to be most conformable to their intentions. And so in the various cases, it will be for the jury to say, under the direction of the court, taking into View the purposes of the examination, and the nature of the work done, and the risk attending it, whether, within the meaning of this contract, the work of the factory, in the particular case, had terminated.

New trial ordered