Richards v. Protection Ins.

The opinion of the Court, (Wells, J. dissenting,) was delivered by

Shepley, C. J.

— The suit is upon a policy of insurance of goods against loss or damage by fire. The goods were to constitute the stock in trade of the plaintiffs, and were to be kept in a frame store occupied by themselves. The store and goods were subsequently consumed by fire.

It appeared, from testimony introduced by the plaintiffs, that there were in the store three cans of oil, which might hold about a barrel each, and from which they were accustomed to draw for sale. That there was a barrel of oil in the back part of the store. That there were boxes of glass. These articles composed a part of the stock of goods consumed. There had been tallow candles kept as part of the stock for trade; whether they had been all sold before the goods were consumed, it was uncertain.

To prevent any misapprehension respecting the ground, upon which the decision is placed, it may be proper to notice two clauses of the policy.

The first in effect declares, that if the premises shall be used for the exercise of any trade or business denominated hazardous, extra-hazardous, or specified in the memorandum of special rates, or for the purpose of storing any goods thus denominated or specified, the contract during that time shall be of no effect. This clause suspending the contract under such circumstances is applicable only to the building; and it can have no effect upon the rights of the parties, for there is no proof that the building was used for any such business or for the purpose of storing any such articles.

The second is, “ if after insurance is effected upon any building or goods in this office, either by the original policy or by the renewal thereof, the risk shall be increased by any means whatsoever within the control of the assured ; or if such buildings or premises shall with the assent of the assured, be occupied in any way so as to render the risk more hazardous than at the time of insuring, such insurance shall be void and of no effect.” Whether there had been a violation of this provision was a question of fact for the jury to determine. They have found no violation of it, and the plaintiff’s right to recover cannot be affected by it.

Their right to recover must depend upon the effect of the language used by them in describing the property insured. They procured insurance “ on their stock in trade, consisting of not hazardous merchandize.”

Four classes of hazards are named in the conditions annexed to the policy, denominated not hazardous, hazardous, extra-hazardous, and memorandum of special risks. The goods insured were by the plaintiffs declared to be of the first class. The goods before named were not of that class, but were of the second class denominated hazardous.

Insurance is proposed to be made upon goods contained in these different classes, at different rates of premium. The classes of hazard, and the conditions of insurance annexed to the policy, form a part of the contract between the parties. That contract requires mutual good faith and fair dealing. The law presumes, that the parties acted with intelligence. The defendants did not propose to insure goods of the class denominated hazardous, at the premium affixed for the class denominated not hazardous. Nor did they propose to insure goods composed partly of one class and partly of the other, at the rate of premium affixed to the least hazardous. This appears from the language used; for “ groceries with any hazardous articles” are enumerated in the class of hazardous. If the plaintiffs having procured insurance on their stock in trade, consisting of not hazardous articles, could have kept a stock of goods for sale composed entirely of hazardous articles, and could have recovered for a loss of them by fire, they could do so only by compelling the defendants to become insurers and to bear the loss for a compensation less than the one affixed to such a class of goods, and less than the one agreed upon by the parties as appropriate to such a risk. So if they could have kept goods for sale composed partly of the first, and partly of the second class of risks and could after a loss of them by fire have recovered for them, the defendants would have been compelled to bear the loss for a premium less, than that for which they would have knowingly assumed the risk. The injustice in the latter case would not be so great as in the former, but a recovery would be equally unauthorized according to the terms of the contract.

The description of the property insured in the body of the policy, when the rate of premium is thereby affected, operates as a warranty, that the property is of the character and class described. And that the property is all, and not partly of that character and class. Such a warranty is in the nature of a condition precedent, and performance of it must be shown by the person insured, before he can recover upon the policy.

In the case of Fowler v. The Ætna Fire Ins. Co. 6 Cow. 673, it was decided, that the description of the property in the policy, was a warranty, and that it., as “a condition precedent, must be.fulfilled by the insured, before performance can be enforced against the insurer.”

In Duncan v. The Sun Fire Ins. Co. 6 Wend. 488. the opinion says, “ the stipulations in policies are considered as express warranties ; an express warranty is an agreement expressed in the policy, whereby the assured stipulates, that certain facts relating to the risk, are or shall be true, or certain acts relating to the same subject have been, or shall be done.”

In the case of Wood v. The Hartford Fire Ins. Co. 13 Conn. 533, the opinion says, “ any statement or description, or any undertaking on the part of the insured, on the face of the policy, which relates to the risk, is a warranty.”

The insurance in that, case, was made on “ the one undivided half of the paper-mill, which they own at Westville.” The opinion states, “ if this relates to the risk, it is a warranty. That it does is evident from the memorandum in the conditions of the policy, where paper-mills are enumerated among those articles, which will be insured at special rates of premium ; that is, a paper-mill is the subject of peculiar risks, and is to be insured upon special stipulations.”

This-is no novel doctrine. Bean v. Stupart, Doug. 14; Pawson v. Watson, Cowp. 787.

And it is admitted to be the law, in the later cases decided in this country. Delonguemare v. Trad. Ins. Co. 2 Hall, 589; Burritt v. Saratoga County Mutual Fire Ins. Co. 5 Hill, 188; Clark v. Manuf. Ins. Co. 2 M. & W. 472.

In the present case, the warranty that their stock in trade consisted of not hazardous merchandize, has not been complied with, but violated by keeping goods for sale, of a different class denominated hazardous, for the insurance of which, a greater premium was required.

One description of goods of the class not hazardous, “ are such as are usually kept in dry goods stores.” The classification determines to a certain extent, what goods may be thus designated, for it determines, that certain goods must belong to other classes, by their being enumerated as appertaining to them. Such goods as the parties by their enumeration of them, as composing one class, have agreed should be of that class, cannot compose any portion of another class.

The parties have agreed, that oil, tallow and glass belong to the class denominated hazardous. The plaintiff cannot therefore, be permitted to prove, that those articles are usually kept in' dry goods stores, and thereby have them transferred to a different class denominated not hazardous.

All the cases decided upon the effect of a stipulation contained in the body of the policy, and operating as a warranty, determine that there must be a compliance with the warranty to entitle the assured to recover. Not because any of the conditions of the policy declare, that it shall be void, if articles of a different class or description are kept for sale, but because one who has violated his own contract of warranty, cannot enforce it against the other party to it.

The position that the insurance in this case attached only to goods of the denomination not hazardous, and that its validity was not affected by the presence of goods of a different class, cannot be admitted. If it were, the assured might, contrary to his own stipulation to have goods only of one class, keep goods of different classes, thereby greatly enhancing the risk, and yet recover for the loss of the goods composed of the class insured. Nor can the warranty be considered as attaching to part of the goods only. It relates to their stock in trade, and not to a portion of it. Nor can the warranty upon any known principles of law or justice be considered as attaching only to the goods in the store, at the time it was made, and as not operative to prevent the introduction and sale, of a class of goods of a much more hazardous character. Such a warranty would be of little or no value. The premium is predicated upon the same description of risk during its continuance.

The case of Curry v. Com. Ins. Co., 10 Pick. 535, is not at variance with the positions before stated. The case was not decided upon the effect of any stipulation, or warranty respecting the property in the body of the policy, but upon the effect of a condition, providing, that the policy should be null and void, if an alteration of the building, affecting the risk, should be made with the assent of the assured. Whether such an alteration had been made, was of course a question to be determined by a jury.

The case of Merriam v. Middlesex Mutual Fire Ins. Co. 21 Pick, 162, was of a similar character.

In this case, the plaintiffs by their own testimony have proved that their warranty, that their stock in trade consisted of not hazardous merchandise, had not been complied with. There is therefore no occasion to send the case to a jury to have that fact determined.

That warranty attached to the goods insured, at all times during the continuance of the risk.

In tire case of Stetson v. The Mass. Mutual Fire Ins. Co. 4 Mass. 337, the opinion states, “ and where the estimate of the risk depends upon the continuance of the material circumstances represented to the insurer, these are not to be altered to his detriment, by any act of the insured, without a like effect upon the contract.” That is, without avoiding it.

According to the agreement of the parties, the verdict is set aside and a nonsuit entered.