Farmers' Insurance & Loan Co. v. Snyder

The following opinion was delivered :

By the Chancellor.

The principle is well settled that every warranty on the part of the assured, whether express or implied, is in the nature of a condition precedent to the payment of the loss, and must be strictly complied with, or the policy is void. In this respect there is a material difference between a warranty and a representation ; which latter is a matter of collateral information or intelligence relative to the subject and nature of the risk to be assumed, which in itself must have been calculated to increase the responsibility of the underwriter, or to have induced him to assume the risk for a smaller premium than he would otherwise have required. In other words, it must be a misrepresentation of a matter material to the risk, either designed or otherwise. This is the legal and commercial meaning of the term misrepresentation, as used in the second condition annexed to the policy in this case; which declares that if any person insuring a building or goods in the office of the company shall make any misrepresentation or concealment, or if after the expiration of the policy and before the renewal thereof the risk shall be increased by any means within the control of the assured, or if such buildings or premises shall be occupied in any way so as to render the risk more hazardous than at the time of insuring, the insurance shall be void. The question was therefore properly submitted to the jury to decide, as a matter of fact, whether there was a fraudulent misrepresentation or concealment in the survey, or an increase of the risk or hazard by the facts and circumstances in which the building varied from the description in the survey. I do not understand the survey on its face as calculated to convey to the underwriters the impression that the stone partition extended up through the garret to the highest point of the roof, so as to divide the garret, as well as the other part of the building, into two distinct and separate apartments—as that would be not only a very unusual way of building, but would be inconsistent with another specification in the survey, to wit, that there was a garret extending over the whole building. This part of the description certainly could not have been intended to convey to the underwriters the information that a one story building with a roof of shingles had a vacant space between the ceiling of the rooms below and the roof, as that was a fact that must be known to every body who ever saw a building with a shingled roof; but this description was intended to convey to the insurers the information that there was a room usually called a garret, and capable of being occupied as such, over the whole of the one story building of 56 feet by 35. The only error in the description, therefore, was in inducing the underwriters to suppose that the wall which ran lengthwise through the building and as high up as the garret floor, was also as high as the roof or eaves of the building ; that is, that the top of the walls, or the plates upon which the lower part of the roof rested, were on a level with the garret floor, and with the top of the stone partition on which it also rested. In this there was undoubt edly a misrepresentation, or rather a mistaken description; as the walls or plates upon which the lower part of the roof rested were several feet above the garret floor and partition walk But I cannot see how that mistake of the surveyor, which is accounted for by him from the circumstance that he did not go above the garret floor to look, there being some temporary difficulty which prevented him from doing so, could have altered the risk assumed by these underwriters, to their prejudice. Neither do I believe, in point of fact, that the circumstance of the partition wall, and the garret floor which rested upon it, being a few feet lower than the roof, would ever,have induced any underwriter to decline the risk or to have increased the premium upon the policy. It is a well known fact, and which also appears from the proposals annexed to this policy, that fire insurance companies in this state make a general classification of hazards in reference to the materials and construction of the buildings insured, or in which the subject matter of the insurance is deposited or kept, and in reference to their location and the manner in which they are occupied, and that their rates of premium are usually regulated accordingly. A false or mistaken representation, therefore, from which the underwriters might be induced to suppose the risk belonged to a lower instead of a higher class of hazard, would, if caused by the fraud or even mistake of the assured or his agent, be sufficient to avoid the policy; but in reference to all matters of minor importance, such as whether the building is a few feet more or less from an adjacent building, or whether the rooms, partitions, stair cases, &c. are precisely as stated by the party insured, it must always be a mere question of fact to be determined by the jury whether the misrepresentation was fraudulent or materially varied the nature of the risk, to the prejudice of the insurer; unless the underwriter thinks proper to put it in the shape of a warranty, and thus make it a part of the contract that the assured shall not be paid his loss if there is any, even an unessential variance from the description of the property or its location as to other contiguous buildings, &c. In the present case the verdict of the jury upon the questions submitted to them by the judge was warranted by the evidence, and established the fact that there was no fraud, misrepresentation or concealment which ought to avoid the policy either upon the general principles of law relative to misrepresentation or concealment, or by the terms of the second condition of the proposals referred to in the body of the contract; which second condition, in this respect, is only an embodying of the settled principle of law on the subject of misrepresentation and concealment in the conditions upon which the insurances of the company are to be made. Where the representation is material, it must be substantially correct, although it need not be literally and mathematically accurate in every particular. If there is a misrepresentation in relation to an immaterial matter, it does not affect the validity of the contract, especially where, as in this case, it was made by mistake and without any intention to deceive or defraud the underwriters. Such being the. construction which this company undoubtedly intended should be put upon this clause in the conditions annexed to the policy, this part of the conditions of their proposals for insurance was perfectly right and proper on the part of the company, (although the law itself would have protected their rights to the same extent,) as this condition was calculated to put the person applying for insurance upon his guard in relation to any representations which he might make, so that he might be careful to have them substantially correct. But if the company had expected and intended that a construction would be put upon this clause of the condition which should render the policy void if the assured, who resided out of the city, happened to make a mistaken representation in reference to the situation of the property intended to be insured in any unimportant particular, although it did not materially vary the risk, the clause would operate as a fraud upon the assured ; as the officers of the corporation must have known that not one survey in ten from the country would have been literally and mathematically accurate in every respect.

Having disposed of this part of the case, it remains for me to consider the question whether the reference to the survey in the body of this policy, and which, I believe, is usually referred to in fire policies in the same way, is to have the same effect as a warranty contained in a marine insurance, so as to render the policy void if the description ¡n survey js not perfectly accurate in every particular ; or whether the survey thus referred to ought to be considered as a representation or description of the property insured, or of the building in which it is deposited or kept, and binding upon the assured as a representation if furnished by him or his agent, and not by the agent of the company. A marine policy is anomalous in form, though in other respects it is to receive the same construction as other contracts. Hence it has been correctly held that a stipulation, or clause or memorandum, as it is sometimes called, although written in the margin, on the bach, or on any other part of the same paper, if made before or at the time of the underwriting of the policy, and intended as- a part thereof, is considered as a part of the contract itself in the same manner as if it had been inserted in its proper place, in the form of a stipulation or agreement, in the body of the policy. This accounts for the different decisions of Lord Mansfield in the cases of Bean v. Stupart, 1 Dougl. Rep. 11, and Kenyon v. Berthon, referred to in a note to the last case, in both of which he held stipulations written upon the policy itself as strict warranties, and in the cases of Pawson v. Barnevelt, and Bize v. Fletcher, referred to in the same note; in the first of which he held that a written memorandum inclosed in the policy, and shown to the underwriter at the time of his signature, was not a strict warranty, but a representation merely ; and in the last he held the same as to a memorandum, upon a separate piece of paper, but which was actually attached to the policy by a wafer at the time the policy was underwritten. I have no doubt that it is perfectly competent for the underwriter, by the insertion of a stipulation to that effect in the policy itself, to give to a statement of facts contained in a separate paper or instrument, sufficiently referred to and identified, all the effect of an express warranty inserted in the body of the policy. But in the anomalous and informal instrument called a marine policy, many things have been con strued into express warranties, which, if found in other contracts, would be perfectly unintelligible, or would be considered as immaterial matters ; and the cases above referred to show that the principle of converting every thing contained in a policy into an express warranty, although there is nothing in the form of the memorandum itself to show that such was the intention of the parties to the contract, is not to be extended to any memorandum or paper writing not contained in the policy itself, or written upon the same paper with the policy so as to be considered as contained therein. This I take to be the settled law at this time in relation to marine insurances; but I confess I have doubts whether the principle of construing every matter of mere description contained in the body of the policy, although not material to the risk, into an express warranty which is to be literally complied with, should be applied with the same strictness to fire policies, where the misdescription is most generally the mistake of the underwriter’s own surveyor. In the present case, however, even if we test the construction of this policy by these settled principles of marine insurance law, it wilt be found that there is no misdescription of the building in the policy itself, or in any stipulation, clause, or memorandum written or printed on the same paper therewith. Neither is the survey, furnished by the assured, referred to in this" policy in such a manner as to show clearly that the assured was to be considered as warranting that every thing contained in that survey was literally and mathematically correct; and as there was neither a warranty, or a misrepresentation material to the risk assumed by the underwriters, they were properly chargeable with the loss. The judgment should, therefore, be affirmed.

On the question being put, Shall this judgment he reversed? All the members of the court present, twenty-three in number, voted in the negative.

Whereupon the judgment of the supreme court was affirmed.