Mcnally v. Phenix Ins. Co. of Brooklyn

• Decision Date: 28 February 1893
• Citation: 33 N.E. 475,137 N.Y. 389
• Parties: McNALLY et al. v. PHENIX INS. CO. OF BROOKLYN.
• Court: New York Court of Appeals Court of Appeals

137 N.Y. 389

33 N.E. 475

McNALLY et al.

v.PHENIX INS. CO. OF BROOKLYN.

Court of Appeals of New York.

Feb 28, 1893.

Appeal from supreme court, general term, second department.

Action by Frank McNally, Charles McNally, Owen McNally, and Patrick McNaughton against the Phenix Insurance Company of Brooklyn. From a judgment of the general term (16 N. Y. Supp. 696) refusing plaintiffs' motion for a new trial on exceptions ordered to be heard in the first instance at the general term, and sustaining a judgment of the special term dismissing the complaint, plaintiffs appeal. Reversed.

Earl, Peckham, and Gray, JJ., dissenting.

Matthew Hale, for appellants.

James & Thomas H. Troy, for respondent.

O'BRIEN, J.

The plaintiffs sought to recover upon a policy of insurance for $2,500, issued May 2, 1885, upon a building situated on the shores of Gravesend bay, which was destroyed by fire June 2, 1885, or a little more than a month after the insurance was effected. At the close of the plaintiffs' testimony, on the trial, the court, upon the motion of counsel for the defendant, granted a nonsuit, to which the counsel for the plaintiffs excepted, after having requested that the case be submitted to the jury. The motion for a nonsuit was made and granted upon three grounds: (1) That there was a breach of the warranty in the policy that the building was occupied at the time of the insurance. (2) That the final proofs of the loss were not furnished until June 7, 1886, a year from the time of the loss. (3) That this suit was commenced on the same day that the final proofs of loss were served; and as the claims were not due, by the terms of the policy, until 60 days after compliance with all the requirements thereof, the action was premature.

In reviewing a judgment upon a nonsuit, the plaintiff is entitled to the benefit of every fact that the jury could have found from the evidence given, and to every legitimate inference that is warranted by the proofs. This disposition of a cause by the trial court is never warranted unless it appears that the plaintiff is not entitled to recover, after giving him the benefit of the most favorable view that a jury would be warranted in taking of the evidence. The plaintiffs' theory with respect to the facts, so far as they are supported by evidence, must be deemed to be established; and, where inferences are to be drawn from facts and circumstances not in themselves certain or incontrovertible, it is generally for the jury, and not the court. It appears from the evidence that one of the plaintiffs applied for the insurance directly at the principal office of the company in Brooklyn, and it was not procured through any local agent, as it generally is. He was introduced to a person in charge of the office, and who, it seems, was the defendant's cashier. He stated to him the amount of the insurance required; that the building was in process of construction, not quite complete, and not yet occupied or used; that, when complete, it was to be used as a storage ice house. The policy was not then procured, but the cashier made a memorandum of something, told him he would not do anything in the matter until the secretary arrived, and to call in a few days after. It seems that the party who introduced him to the officers of the company had an office in the same building, and had some claim upon the property which was the subject of insurance, by way of mortgage. This mortgage, however, was paid off by the owners before this suit was commenced, and no question was made in regard to it upon the trial, as an obstacle to the right of the plaintiffs to recover. The circumstance is important now only as it tends to show that the party thus introducing the owners, or one of them, to the defendant, and to whom the policy was afterwards delivered, was perhaps as much interested in procuring the insurance as the plaintiffs themselves. It does not appear that any of the plaintiffs had any further negotiations with the company prior to issuing the policy, but they left the matter with Nostrand, who had, or was about to take, the mortgage, and who had opened the transaction by introducing one of the owners, and had himself one or more interviews with some of the defendant's officers in regard to the matter, representing, as he says, himself and his interest as well as the owners. The policy was delivered to him on the day of its date; and on the same day Nostrand. describing himself as agent, signed a written application, in which the building is described as ‘used as a storage ice house.’ The building was entirely new, and at the date of the policy, and at the time of the fire, was unoccupied. The evidence tended to show that the building was constructed and intended for use in the business of receiving and storing ice to be transferred by boat down the Hudson river, but was destroyed before the owners commenced to use it for that purpose. Notwithstanding the statement in the application as to the use and occupancy of the building, the jury might have found, from the testimony, that the officers of the defendant had been fully informed, prior to the execution or delivery of the application or the policy, of the condition of the subject of the insurance, with respect to its use and occupancy, and of all the facts bearing upon the nature of the risk; and if the company had knowledge, before the contract was made, that the building was not quite completed, and was neither used nor occupied, that would be evidence upon which to base a waiver on its part of the condition that the policy should become forfeited in case of nonoccupation. When a policy is issued with full knowledge on the part of the underwriter of facts in direct conflict with the statement on the same subject in the application, it is reasonable to assume that there was no intention to insist upon the condition, or claim a forfeiture under it. Van Schoick v. Insurance Co., 68 N. Y. 434;Richmond v. Insurance Co., 79 N. Y. 230;Woodruff v. Insurance Co., 83 N. Y. 133;Short v. Insurance Co., 90 N. Y. 16;Haight v. Insurance Co., 92 N. Y. 51;Bennett v. Insurance Co., 81 N. Y. 273;McCall v. Insurance Co., 66 N. Y. 517.

If it be that when the contract was made the defendant had knowledge that the building was in fact unoccupied, it is necessary to presume that the statement in the application and in the policy to the contrary was inserted by mistake, in order to relieve it from the imputation of a fraudulent intent to deliver, and receive pay for, an invalid instrument, or that it intended to hold itself estopped from setting up a breach of the condition or warranty as a defense. If an action to reform the contract was necessary, as to which we now express no opinion, it is sufficient to say upon this appeal that no such point was made at the trial.

It appeared that, after the defendant had received the proofs of loss from the plaintiffs, it returned the same, for the reason, among others, that a magistrate's certificate, required by the policy, as to certain facts which will be hereafter noticed, was not attached, and which was subsequently supplied by the plaintiffs. If the defendant at the time intended to avail itself of the breach of the warranty above referred to, this requirement was, of course, wholly unnecessary; and when an insurance company, with knowledge of all the facts constituting a breach of a condition or a warranty, requires the assured, by virtue of the contract, to do some act, or incur some trouble or expense, the forfeiture is deemed to have been waived, as such requirement is inconsistent with the position that the contract has ceased to exist, and consistent only with the theory that the obligations of the contract are still binding upon both parties. Titus v. Insurance Co., 81 N. Y. 410, 419;Benninghoff v. Insurance Co., 93 N. Y. 495;Roby v. Insurance Co., 120 N. Y. 510, 24 N. E. Rep. 808. The written application was made, as we have seen, by a person who assumed to act as agent of the plaintiffs, and in their absence the policy was written and delivered to him; and the testimony tended to show that he had no authority from the plaintiffs to insert such a statement in the application or the policy. It was not shown that the plaintiffs in any way, with knowledge of the facts, ratified this act; and, in the absence of any evidence on the part of the defendant, it would be reasonable to assume that the statement in the application and in the policy as to the occupancy of the premises was the result of some mistake, either on the part of the agent or the company. Benninghoff v. Insurance Co., supra. In this condition of the case, it could not be held, as matter of law, that the policy was forfeited for breach of the conditions, or that it was rendered void by a breach of the warranty.

The two other grounds specified in the motion for a nonsuit may be considered together. Both are based upon the proofs of loss, and matters occurring after the fire; and here it may be proper to note a manifest distinction to be observed in giving construction to the two classes of conditions to be found in a policy of insurance. Those conditions which operate upon the parties and the contract prior to the loss, such as the condition and situation of the property, and the relations of the insured to it, and all statements and representations preceding the contract, are matters of substance, upon which the liability of the insured depends. Such stipulations are important, as their general object is to...