We are in accord with the views expressed in the majority opinion in paragraph numbered 1, in regard to the proper construction of 1 Mason Minn. St. 1927, § 3370, but cannot agree with the conclusion that there was a question for the jury as to materiality of the failure to disclose the Cedar Lake contract, nor as to the intent with which the information was withheld. As we see it, reasonable *Page 8 men could not differ as to the conclusion that must necessarily be arrived at as to either proposition.
The best definition of a moral hazard which we find in the books is that contained in the opinion of Judge Sanborn in Connecticut F. Ins. Co. v. Manning (C.C.A.) 160 F. 382, 385, 15 Ann. Cas. 338, where that learned jurist said:
"Moral hazard is but another name for a pecuniary interest in the assured to permit the property to burn."
It appears from the evidence that just before the insurance policies were assigned to him, Romain had purchased the ice-house for $1,000 and that this was the best offer that the then owner could obtain. There was an outstanding contract with the Cedar Lake Ice Fuel Company which required the building to be wrecked when the land upon which it was erected was sold, or in any event not later than 1940. Romain had agreed to carry out the terms of this agreement; in fact, he was one of the partnership of Romain Lagergren which, as owners of the property, had originally made such agreement. They had sold to the Ice Service Company, Inc., with the consent of the Cedar Lake company, but no such consent appears to the sale to Romain, the deed evidencing which had not been recorded.
That the Cedar Lake contract materially affected the sale or the market value of the ice-house is quite obvious. Reasonable men could hardly differ upon that question. Romain certainly knew this from the fact that he was able to purchase for $1,000 an ice-house which, without the Cedar Lake contract, had an insurable value of $12,000 and which was actually insured for $10,000. His was the best offer its owner could obtain. It was therefore definitely in his pecuniary interest for the property to burn, and that fact constituted a material moral hazard, a much greater one than the mere existence of an encumbrance. As wisely said by Judge Sanborn in the case referred to [160 F. 385]:
"Statistics, experience, and observation all teach alike that the moral hazard is the least when the pecuniary interest of the assured in the protection of the property against fire is greatest, and *Page 9 the moral hazard is greatest when the assured may gain the most by the burning of the property."
Judge Sanborn said further [160 F. 385]:
"The moral hazard is one of the main elements, if not the chief element, of an insurance risk, and it is never negligible. It is always material to the risk."
Nor do we think that reasonable minds functioning judicially could give credence to the plaintiff's statement that he did not think the Cedar Lake contract affected the value of the ice-house when he took an assignment of $10,000 of insurance on property which could not be sold for more than the $1,000 for which he had been able to buy it and that for that reason he refrained from mentioning the contract. Such a statement strains credulity past the breaking point. Reasonable minds versed in the ways of human nature could not differ as to the real reason for withholding this information. Obviously it was intentional and for the purpose of obtaining the transfer without reduction or cancellation of the insurance. His explanation of why he did not think the contract affected the value is wholly unsatisfactory and incredible. At any rate, the existence of the contract was material to the risk. The insured knew of it, and the insurer was entitled to know of it and then determine whether it affected the value or the risk. As said in Mutual L. Ins. Co. v. Hilton-Green, 241 U.S. 613, 622,36 S. Ct. 676, 680, 60 L. ed. 1203, 1210:
"Considered in the most favorable light possible, the above quoted incorrect statements in the application are material representations; and, nothing else appearing, if known to be untrue by assured when made, invalidate the policy without further proof of actual conscious design to defraud."
The insured's mere statement that to him it did not affect the value does not relieve him of the consequences of intentionally concealing it.
"Beyond doubt an applicant for insurance should exercise toward the company the same good faith which may be rightly demanded *Page 10 of it. The relationship demands fair dealing by both parties." Mutual L. Ins. Co. v. Hilton-Green, 241 U.S. 613, 624,36 S. Ct. 676, 680, 60 L. ed. 1203, 1211.
On either ground we think the defendants should have judgment notwithstanding the verdict.