Opinion
June Term, 1897.
A.H. Sawyer, for the appellant.
P.W. Cullinan, for the respondent.
There is practically no dispute upon the facts.
The plaintiff's claim is that, although the policy contains a clause providing that the same, unless otherwise provided by agreement indorsed thereon or added thereto, should be void if the subject of insurance be personal property and be or become incumbered by a chattel mortgage, and notwithstanding the fact that the property so insured was personal property and was incumbered by a chattel mortgage at the time the same was insured, and that that fact was not indorsed upon or added to the policy, the defendant is estopped from setting up a breach of that condition, for the reason that it was incumbent upon the defendant to make inquiries and to ascertain whether or not the property to be insured was incumbered; and that, not having made those inquiries, it is chargeable with such knowledge as investigation respecting the condition of the property would have disclosed, and that, therefore, the defendant assumed the risk as it actually existed when the policy was issued, subject to the incumbrance upon the property insured. In other words, that, under the circumstances under which this policy was issued, the insurance company, having neglected to make such inquiry, consented to any existing incumbrance on the property which it could have ascertained by reasonable investigation, notwithstanding the provision in the policy rendering it void if there were then such incumbrance thereon, unless the fact of the existence of the same was noted upon the policy; and that, therefore, the defendant is estopped from setting up as a defense the breach of this condition in the policy.
To support the contention of the plaintiff, that the defendant is estopped from setting up a breach of the condition of the policy in question, he relies upon Robbins v. Springfield Fire Insurance Co. ( 149 N.Y. 477); Wood v. Am. Fire Ins. Co. (Id. 382), and McGuire v. Hartford Fire Ins. Co. ( 7 App. Div. 575).
It appears from an examination of those cases that they were decided upon a state of facts widely differing from the facts in this case. In the cases cited it appears that the insurance company, in each case, issued the policy with full knowledge by its agents, at the time it was issued, of the existence of facts contrary to the conditions of the policy. In such a case it is presumed that the consent of the company to the existence of such a state of facts was omitted, by mistake, to be stated in the policy, and the company is estopped from setting up as a defense the breach of such conditions. But such is not the case here. There is nothing to show that this defendant, or its agent, was informed of the existence of this incumbrance upon the property, or that either had information that such was the fact until after the loss occurred. So that the material element of knowledge of all the facts and circumstances of the condition of this property at the time the policy was issued, which was present in the cases cited, is wholly wanting in the case at bar, and, therefore, the decisions relied upon by plaintiff are inapplicable to this case. The premise upon which the argument of plaintiff is based is an erroneous one. The statement of the plaintiff, by his duly authorized agent, to the agent of defendant, at the time of making the application for insurance was, that there was no incumbrance on the property that he knew of. It is true that he told defendant's agent that, if there was any incumbrance, he could find out at the custom house or of Mr. Skinner. Upon this latter statement plaintiff relies as a notification to defendant that there was an incumbrance on the property, or that it was sufficient to put defendant on inquiry; and that if it neglected to make such inquiry, or to make a search against the property, then it was estopped from setting up, as a defense, the breach relied upon by defendant. And this was the view taken by the learned trial justice. No authority for such a rule has been called to the attention of the court, and diligent research fails to disclose any.
The statement by plaintiff, through his agent, to the effect that defendant's agent might make inquiry or search the records of the custom house, conferred no greater rights or privileges than the latter possessed before such statement, nor did it absolve plaintiff from the obligation which rested upon him of disclosing all the material facts and circumstances relating to the condition of this property. Neither did it cast upon defendant the burden of making inquiry, or searching to discover such condition. A day or two after this interview plaintiff was informed by his agent that he had effected the insurance, and, at about the same time, the policy was delivered to plaintiff. It was received and retained by plaintiff without objection. At the time plaintiff constituted Mr. Andrews his agent to effect this insurance, it was incumbent upon plaintiff to instruct him in his duties as such agent. If he did not so instruct him, or if the agent neglected to follow those instructions, the plaintiff, and not the defendant, must suffer the consequences.
An examination of his contract, the contents of which he is presumed to have known, would have disclosed to plaintiff that it was not binding upon the company; that in case of loss by fire, he would have no redress against the company, for he does not claim that he knew that the company's agent, or his own agent, knew anything about the incumbrance on the vessel, or that that had been mentioned by either of them at the time of making the application. So far as appears, therefore, he then relied upon the terms of the policy and not upon any oral agreement or waiver on the part of the company's agent. He knew of the incumbrance; the insurance company did not. It was not obligatory upon the insurer to ascertain the condition of the property. In Ellis v. State Ins. Co. ( 68 Iowa 578) there was an incumbrance upon the property of which the insurer had no knowledge. The policy was assigned with the consent of the company. It was claimed that, before consenting to such assignment, the company should have ascertained whether there was an incumbrance upon the property; but it was held that there was no warrant for any such rule, and that it would work great mischief to so hold; that there was no duty upon the insurer to ascertain incumbrances upon property insured. It was the duty of the plaintiff to disclose to the company the existence of the incumbrance.
"The case is then simply this: The assured applies for insurance on certain buildings, which he represents as belonging to himself; he fails to state they were encumbered by mortgages and accepts a policy which requires him to make such statement, if the facts were so, and that the insurance should be void if he did not. The obligation rested on him, and no omission of duty is imputable to the insurer." ( Beck v. Hibernia Ins. Co., 44 Md. 107.)
This rule is a beneficent one, founded in reason and highly commendable as necessitating a fair and full disclosure of the condition of property concerning which the parties purpose contracting; that rule must be applied to this case.
All the special facts upon which the risk was to be computed and the condition of the property were known to plaintiff when the application for insurance was made. It was obligatory upon him to make known to the company all facts and circumstances material to the risk. The company had a right to rely upon this obligation resting upon the applicant, and that he would not suppress any facts and circumstances which would mislead the company and induce it to execute a risk which it would not assume if any existing material facts and circumstances were not so suppressed. The insurer was presumed to undertake only the risks communicated to it and understood and intended to be taken at the time of making the agreement. It should have had full opportunity to judge of the condition of the property before executing the contract, so that it may have rejected or accepted with full knowledge of its true condition. If the applicant suppresses that which, by the very terms of the policy, voids the instrument, it is a deception upon the company sufficient to avoid its contract.
The plaintiff knew of this incumbrance when his duly authorized agent made the application. He is presumed to know the law, and that the terms and conditions of the policy to be issued are fixed and determined by statute. The policy which was issued and delivered to him contained the terms and conditions so fixed and determined. He received the policy more than six weeks before the fire and retained the same without objection. He is presumed to have contracted with reference to the terms of that contract and subject to its conditions and requirements. Upon its receipt by him the contract of insurance was complete in all its terms and binding upon both parties. He accepted it with all its terms and limitations. In the absence of fraud or mistake he was, on general principles and authority, presumed to know its contents. ( Wilcox v. Continental Ins. Co. of N.Y., [Wis. 1893] 55 N.W. Rep. 188.) The policy itself was notice to him that the company would not be bound to pay any loss if this property was incumbered, unless an agreement to that effect was indorsed upon or added to the contract; and it expressly provided in its contract that the same should be void if the property therein described was, at the time of the execution of the policy, or should thereafter, be incumbered, unless the insured notified it that such was the fact and caused the same to be indorsed or added to the policy.
"The use of the standard policy was compelled by legislative enactment to remedy existing evils, and, among others, to protect insurance companies from the perils of alleged parol waivers by their local agents. Every person who now enters into a contract of insurance is required to agree that no officer or agent or other representative of the company shall have power to waive any provision or condition of the policy, except such as by the terms thereof may be subject of agreement indorsed thereon, and as to such provisions and conditions the waiver must be written upon or attached to the policy; and he specially covenants that he will not claim any privilege or permission unless it be in writing." ( Moore et al. v. Hanover Fire Ins. Co., 141 N.Y. 223.)
The silent acceptance of the policy by plaintiff closed the contract and bound him to the agreement tendered by its policy, that it would be void if the property was then, or should thereafter become, incumbered, unless an agreement thereto was indorsed on or added to the policy. ( Lasher v. St. Joseph F. M. Ins. Co., 86 N.Y. 423.) The plaintiff, however, seeks to avoid the force and effect of the limitations and conditions of the contract, on the plea that he never read the policy and did not know of the condition in question. He had the policy in his possession more than six weeks before the fire, and, if he did not read it, it was his own fault, and he must bear the consequences of his negligence. He was a man of affairs, actually engaged in business, and, so far as appears, fully able to comprehend and protect his own interests. There was nothing to preclude his reading it; there is no fact alleged or shown, and no act on the part of the company which could tend to mislead or induce him to neglect to inform himself of its contents or prevent him from reading the policy as soon as he obtained it. He is presumed to know its contents. ( N.Y. Life Ins. Co. v. Fletcher, 117 U.S. 519; Ryan v. World Life Ins. Co., 41 Conn. 172.)
"In determining the question of liability in this case, it is immaterial whether the plaintiff read the policy or not, or that he had no actual knowledge of the conditions. * * * The conditions and limitations were a part of the contract, and he was bound to take notice of them, and is not excused upon the plea that he omitted to acquaint himself with the provisions of the policy." ( Quinlan v. Prov. Wash. Ins. Co., 133 N.Y. 364, 365.)
"When there is no application, the insured is bound by the conditions of the policy, which he accepts and holds without objection: That he never read it is not the fault of the insurer." (1 May on Ins. § 167.)
The judgment and order should be reversed and a new trial ordered, with costs to abide the event.
All concurred.
Judgment and order reversed and a new trial ordered, with costs to abide the event.