Stecker v. American Home Fire Assur. Co.

• Decision Date: 03 March 1949
• Parties: STECKER v. AMERICAN HOME FIRE ASSUR. CO.
• Court: New York Court of Appeals Court of Appeals

299 N.Y. 1

84 N.E.2d 797

STECKER

v.AMERICAN HOME FIRE ASSUR. CO.

Court of Appeals of New York.

March 3, 1949.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Bernard H. Stecker, doing business as B. H. Stecker Company, against the American Home Fire Assurance Company, on a salesmen's floater policy insuring plaintiff against loss of or damage to furs being transported around the country for sale to plaintiff's customers, in which defendant filed a counterclaim for cancellation of the policy on the ground of plaintiff's concealment of a material fact. From a judgment for defendant on an order of the Appellate Division, 274 App.Div. 91, 80 N.Y.S.2d 145, reversing on questions of fact and law a judgment of the Supreme Court for plaintiff on an order at Trial Term, Dickstein, J., 72 N.Y.S.2d 908, dismissing the counterclaim on the merits after separate trial of issues raised by defendant's fourth affirmative defense and counterclaim in an amended answer and plaintiff's reply thereto, and reversing stated fact findings and conclusions of law in the Trial Term's opinion and making new findings and conclusions, plaintiff appeals.

Reversed, and Trial Term's order affirmed. Abraham Streifer, of Kingston, and Benjamin L. Tell and Solomon M. Cheser, both of New York City, for appellant.

Joseph Bleich and Henry H. Abrams, both of New York City, for General Brokers Association of Metropolitan District, Inc., and others, amici curiae, in support of appellant's position.

Alfred B. Nathan, of New York City, for respondent.

DESMOND, Judge.

Plaintiff, a fur merchant, procured from defendant a so-called ‘salesmen's floater policy’ insuring plaintiff against loss or damage to his furs while being transported around the country, for sale to plaintiff's customers. During the term of the policy, some furs were reported by insured to have been stolen from him, and he then brought this suit on the policy, for the amount of his loss. As one of several defenses and counterclaims, defendant pleaded that plaintiff had concealed from it the fact, claimed by defendant to be material to the risk, that plaintiff, six years before purchasing this policy, had been convicted, in a Federal court, of the crime of concealing assets from his trustee in bankruptcy. That counterclaim, which prayed for the cancellation of the policy as void from its inception, was the subject of a separate trial before a Supreme Court Justice without a jury. The trial court, on conflicting evidence, found as fact that the insured had disclosed his criminal record to defendant, and, accordingly, made an order dismissing that counterclaim on the merits.

When defendant appealed to the Appellate Division, that court, reversing the order below on the facts and the law, took a different view of the fact principally in controversy. Its finding was that there had been no disclosure at all to defendant by plaintiff, of the 1938 criminal judgment. We, stating the result and not the details of our own review of that fact question, conclude that the weight of evidence favors the factual determination of the Appellate Division, that is, that no disclosure was made. That brings us to the question of law in the case.

Plaintiff, taking out this insurance, was asked no questions, signed no application, and furnished no information on this subject. If the so-called ‘ordinary rule’ as to concealments by applicants for insurance, be the one here to be applied, then plaintiff's failure voluntarily to come forward with the story of his past would not void the policy. So held both courts below, citing the leading case of Sebring v. Fidelity-Phenix Fire Ins. Co. of New York, 255 N.Y, 382, at page 386, 174 N.E. 761, at page 762, where Judge O'Brien wrote for this court; ‘Concealment is the designed and intentional withholding of any fact material to the risk which the assured in honesty and good faith ought to communicate to the underwriter. * * * If fraud be absent, the assured may remain silent in respect to many matters concerning which the underwriter fails to question him.’ As we understand the opinions below, both courts decided that plaintiff, even if he failed to bring the matter to defendant's attention, had been guilty of no actual or active concealment and no fraud indeed, in procuring a previous similar policy from defendant, plaintiff had mentioned to his own broker the conviction, which was, of course, a matter of public record and mentioned in reports readily available to defendant's broker; also the conviction was, as aforesaid, of public record in New York City, where the policies were issued; also some credit agency reports, subscribed to by defendant, showed it. Such being the facts, nondisclosure would not void this policy if, as the trial court held, the ‘ordinary rule’ was the right one for this type of insurance, Browning v. Home Ins. Co., 71 N.Y. 508 512,27 Am.Rep. 86.Merchants' & Shippers' Ins. Co. v. St. Paul Fire & Marine Ins. Co., 219 App.Div. 636, 220 N.Y.S. 514, affirmed 246 N.Y. 616,156 N.E. 674, and Hanover Fire Ins. Co. v. Morse Dry Dock & Repair Co., 152 Misc. 111, 272 N.Y.S. 792, affirmed 244 App.Div. 780, 280 N.Y.S. 795, affirmed 270 N.Y. 86, 200 N.E. 589, were fraud cases and dealt with as such.

Besides the ‘ordinary rule’, however, there is, as this court pointed out in the Sebring case, supra, and had similarly pointed out many years earlier in Gates v. Madison County Mut. Ins. Co., 5 N.Y. 469, 55 Am.Dec. 360, a ‘marine rule.’ ‘In marine insurance, the insured is bound, although no inquiry be made, to disclose every fact material to the risk, within his knowledge.’ Gates v. Madison County Mut. Ins. Co., supra, 5 N.Y. at page 474. In other words, an applicant for marine insurance must state all material facts which are known to him and unknown to the insurer. Alexander, Ramsey & Kerr v. National Union Fire Ins. Co., 2 Cir., 104 F.2d 1006, 1008. In the Sebring case, 255 N.Y. 382, 386, 174 N.E. 761, 762, supra, this court said that such was the rule, in New York as elsewhere, as...