Bankers' Indem. Ins. Co. v. Henry Henkel & Sons, Inc.

• Decision Date: 11 May 1935
• Citation: 178 A. 565
• Parties: BANKERS' INDEMNITY INS. CO. v. HENRY HENKEL & SONS, Inc.
• Court: New Jersey Court of Chancery

178 A. 565

BANKERS' INDEMNITY INS. CO.

v. HENRY HENKEL & SONS, Inc.

Court of Chancery of New Jersey.

May 11, 1935.

Syllabus by the Court.

1. Fraud applies to a representation in effecting a contract; it does not apply to a warranty which is part of the contract.

2. To void a contract by fraud, it must be established that the fraud induced the making of the contract.

Suit by the Bankers' Indemnity Insurance Company against Henry Henkel & Sons, Inc.

Bill dismissed.

Robert H. Doherty, of Jersey City, for complainant.

William Huck, Jr., of New York City, for defendant.

EGAN, Vice Chancellor.

The defendant obtained from the complainant an automobile public liability policy numbered AP-80330, dated April 16, 1929, covering six of its autotrucks. It was to remain in force for one year. There was an endorsement on it as follows:

"Endorsement

"(More Automobiles than Operators)

"In consideration of the reduced premium rates at which this policy is written and of the statement made by the Assured that he does not own more automobiles than those described in the policy, and that there will not be a greater number of persons who operate such automobiles than those named in this endorsement without previous notice to the Company and payment of proper additional premium therefor, it is agreed that without such previous notice to the Company and payment of additional premium this policy covers the operations of the automobiles described only while such automobiles are being personally driven by James Hunter, William Avensky & Henry Henkel, Jr. or by any person when accompanied by such named driver. If any of the named drivers is a hired chauffeur, it is agreed that the policy is extended to cover while such automobiles are being driven by any employed as his substitute by reason of such chauffeur's illness or leave of absence, and by any one employed as his successor. Notice of such successor or substitute shall be furnished the Company within ten (10) days from the date of employment of such successor or substitute. This policy also covers the named assured while the automobiles described are being operated by person connected with a repair shop or garage by reason of repairs to, calling for, or delivery of any such automobile.

"Nothing herein contained shall be held to alter, vary or waive any of the agreements, conditions, or statements of this policy, except as herein stated, nor shall this endorsement bind the Company until countersigned by a duly authorized representative of the Company.

"This endorsement becomes effective on the 16th day of April, 1929 noon, standard time.

"Attached to and forming part of Policy No. AP-80330 dated April 16th, 1929 issued by the Bankers Indemnity Insurance Company, to Henry Henkel and Sons, Incorporated.

——————

"H. P. Jackson

"Countersigned: ————

"Authorized Agent

"President"

On February 1, 1930, one of the trucks, while being operated by William Henkel, son of Henry Henkel mentioned in the said endorsement, injured Frieda Biebel. She instituted an action against the defendant in the New York courts. The defendant communicated the fact to the complainant, which disclaimed liability, alleging that the driver operating the truck at the time of the accident was not one of those mentioned in the said endorsement, nor a substitute for any of them. The action resulted in a judgment for $5,176.05, damages and costs. The defendant called upon the complainant to pay it. It refused. The defendant then, on March 29, 1933, instituted an action on the judgment against the complainant in the New Jersey Supreme Court, Hudson circuit. The complainant filed an answer to this action, and issue was joined. The action remained on the Supreme Court calendar until some time in the April term, 1934, when it reached the daily call, or calendar. On July 2, 1934, on the application of the complainant, this court issued a preliminary restraint of the law action. The suit was heard on final hearing.

The bill seeks a cancellation or reformation of the policy upon the ground of fraud. Complainant contends that the substitution of William Henkel as a driver in the place of one of the three persons mentioned in the endorsement on the policy is a breach of warranty which voids the policy. It directs attention to that part of the endorsement which says: "This policy covers the operation of the automobiles described only while such automobiles are being personally driven by James Hunter, William Avinsky and Henry Henkel, Jr., or by any person when accompanied by such named driver." The defendant argues that the endorsement on the policy is not binding, since it contains the following provision: "Nothing herein contained shall be allowed to alter, vary or waive any of the agreements, conditions, or statements of this policy, except as herein stated, nor shall this endorsement bind the Company until countersigned by a duly authorized representative of the Company." Attention is directed to the fact that the endorsement is not countersigned. That being so, it lacks mutuality, and therefore is ineffective.

The counsel for the defendant further observes that all that can reasonably be inferred from the endorsement is: (1) "The assured was not permitted to own more than six automobiles." There is no allegation of violation of such limitation. (2) "That no more than three persons could operate such automobiles unless notice was given to the insurer and an additional premium paid." It is to be observed that the endorsement carried the heading "More Automobiles than Operators." The limitation appears to be on the number of persons driving at one time rather than on the specific persons named. (3) "If the assured did use more than three operators at any one time, without giving notice and paying an additional premium, it did not avoid the policy but limited its coverage to the operation of the automobiles by the named drivers, or their substitutes, or successors." The defendant could have had six drivers and operated six automobiles at one time without notice to the insurer or the payment of any additional premiums; the penalty which would or could follow would be that the assured was not covered, unless an accident occurred through the operation of the truck then being driven by one of the three named drivers, or one who was a substitute for, or successor to, one of them, in which latter event the insurance company would be liable. That being so, where is there support for the allegations of fraud; I can find none. There is no allegation indicating that the assured represented that it did not have William Henkel in its employ or that he had not operated the cars. If he were driving regularly when the three named drivers or their successors were also driving, or he was a substitute without notice, and had an accident, then the policy certainly would not apply; but to say that his act in driving was a fraud upon the complainant is supplying an atmosphere that did not exist at the time of the happening of the accident. Fraud can apply only to a representation in effecting a contract; it does not apply to a warranty which is part of the contract. I make that...