Connecticut Fire Ins. Co. v. Manning

• Decision Date: 26 March 1908
• Docket Number: 2,688.
• Citation: 160 F. 382
• Parties: CONNECTICUT FIRE INS. CO. v. MANNING et al. [1]
• Court: U.S. Court of Appeals — Eighth Circuit

160 F. 382

CONNECTICUT FIRE INS. CO. v. MANNING et al. ^[1]

No. 2,688.

United States Court of Appeals, Eighth Circuit.

March 26, 1908

Thomas T. Fauntleroy (Shepard Barclay, R. B. Oliver, and R. B Oliver, Jr., on the brief), for plaintiff in error.

Edward Robb, for defendants in error.

Before SANBORN and ADAMS, Circuit Judges, and PHILIPS, District Judge.

SANBORN Circuit Judge.

The defense to an action upon a policy of insurance against fire upon property in the state of Missouri was that the policy contained a condition that 'if the interest of the assured be or become other than the entire unconditional unincumbered and sole ownership of the property, * * * this policy shall be void, unless otherwise provided by agreement indorsed hereon,' that the interest of the assured was incumbered by a trust deed made to secure the payment of a promissory note of $500, upon which more than $400 was owing and there was no provision indorsed upon the policy regarding the incumbrance. The property insured by the terms of the policy was the interest of the assured in a dwelling house. The amount of the insurance was $3,000. The land on which the house stood and the other buildings thereon were worth $500. Certain statutes of the state of Missouri read in this way:

'Sec. 7973. That the warranty of any fact or condition hereafter made by any person in his or her application for insurance against loss by fire, tornado or cyclone, which application, or any part thereof, shall thereafter be made a part of a policy of insurance, by being attached thereto, or by being referred to therein, or by being incorporated in such policy, shall, if not material to the risk insured against, be deemed, held and construed as representations only, in any suit brought at law or in equity in any of the courts of this state, upon such policy to enforce payment thereof, on account of loss of or damage to any property insured by such policy.

'Sec. 7974. That the warranty of any fact or condition hereafter incorporated in or made a part of any fire, tornado or cyclone policy of insurance, purporting to be made or assented to by the assured which shall not materially affect the risk insured against, shall be deemed, taken and construed as representations only in all suits at law or in equity brought upon such policy in any of the courts of this state.

'Sec. 7975. No insurance company, corporation or association of persons doing a fire, cyclone or tornado insurance business in this state, shall have the right, power or authority, by contract or otherwise, to contract against or in any manner whatever evade the provisions of sections 7973 and 7974 of this article. ' Revised Statutes of Missouri 1899 (Ann. St. 1906, pp. 3791, 3792).

Upon this state of facts and statutes the court below refused to instruct the jury to return a verdict for the defendant below, and charged them that, if they believed from the evidence that the incumbrance was material to the risk, they should return a verdict for the defendant, and if they found from the evidence that the mortgage effected by the trust deed was not material to the risk they should return a verdict for the plaintiff. They found for the plaintiff, and the ruling of the court is assigned as error.

For the purpose of the determination of this case it will be conceded, but it is not decided, that the contention of counsel for the plaintiff below that the stipulation quoted from the policy constituted a warranty is sound, although it seems that it was a mere description by exclusion of the property insured, and not a warranty of any fact or condition relating thereto. Syndicate Ins. Co. v. Bohn, 12 C.C.A. 531, 537, 65 F. 165, 171, 27 L.R.A. 614, and cases there cited. The plaintiff's counsel argue that the ruling challenged is not open to consideration in this court because there was no pleading that the mortgage was material to the risk, but no objection of this nature was made in the court below, and the issue of its materiality was tried and decided by the jury at the request of counsel for the plaintiff.

It is too late to object for the first time in an appellate court to the sufficiency of a pleading to raise an issue which was tried and submitted to the jury below with the consent of the objector. Dolan v. Mo. Town Mutual Ins. Co., 88 Mo.App. 666, 673, 675.

The statutes of Missouri which have been quoted provide that warranties in applications for and in policies of insurance of facts or conditions that are not material to the risks taken thereunder, shall be deemed representations. As the expression of one is the exclusion of the other, warranties of facts or conditions which are material to the risks cannot be deemed representations, they remain what they in fact are-- warranties by the terms of these sections. But how shall the question whether a given warranty is material or immaterial be determined? Evidently by the course of the common law, for there is no statute which modifies it, by the court when the nature of the warranty is such, or the entire evidence regarding the materiality is so conclusive that a decision but one way may be lawfully sustained, by the jury where all the competent evidence is so inconclusive that a decision either way may be lawfully sustained. Aloe v. Ins. Co., 147 Mo. 561, 579, 49 S.W. 553; March v. Ins. Co., 186 Pa. 629, 40 A. 1100, 1101, 65 Am.St.Rep. 887; Brown v. Greenfield Life Ass'n, 172 Mass. 498, 503, 53 N.E. 129; Dolan v. Mo. Town Mutual Fire Ins. Co., 88 Mo.App. 666, 673; White v. Merchants' Ins. Co., 93 Mo.App. 282, 288; Hanna & Co. v. Orient Ins. Co., 109 Mo.App. 152, 156, 82 S.W. 1115.

Thus in Aloe v. Ins. Co., 147 Mo. 561, 579, 49 S.W. 553, the Supreme Court of that state held under these statutes that false warranties by the assured that he had applied and been rejected by 2 insurance companies when he had been rejected by 6, and that he had not consulted or been treated by a physician for 30 years, were material to the risk of his life insurance as a matter of law, and it reversed a judgment for the plaintiff which had been rendered on the ground that these were representations, and entered a judgment for the defendant. In Dolan v. Mo. Town Mutual Ins. Co., 88 Mo.App. 666, 672, the Court of Appeals held that a false warranty of the amount of insurance was material to the risk as a matter of law, and reversed a judgment because the trial court submitted that question to the jury. On the other hand, in Hanna & Co. v. Orient Ins. Co., 109 Mo.App. 152, 82 S.W. 1115, there is a decision that the question whether or not the iron-safe clause is material to the risk taken under a policy which contained it is for the jury, and the court said that the consensus of judicial opinion in Missouri was that the question of what is material to the risk is for the jury, except in such clear cases as can be determined by the court as a matter of law, and it cited several decisions to that effect.

The question in this case, then, is whether the materiality to the insurance risk of a false warranty of no incumbrance upon the property insured is a question of law for the court or a question of fact for the jury. It is not, however, in reality whether or not the amount of the incumbrance actually existing is material, but whether or not a knowledge by the underwriter of the condition of the title regarding incumbrances is material to the risk as a matter of law, for this contract is that the company insures the interest of the assured unincumbered, save as specified in writing in the policy, and no incumbrance was specified.

The property insured against fire in this policy, and in like policies of insurance ordinarily, is not the real or personal property described therein, but it is the interest of the assured in that property. The extent of his interest is therefore necessarily material to the risk which the underwriter assumes. The moral hazard is one of the main elements, if not the chief element, of an insurance risk, and it is never negligible. It is always material to the risk. Moral hazard is but another name for a pecuniary interest in the assured to permit the property to burn. Statistics experience, and observation all teach alike that the moral hazard is least when the pecuniary interest of the assured in the protection of the property against fire is greatest, and the moral hazard is greatest when the assured may gain the most by the burning of the property. The extent of the interest of the assured in the property insured measures the moral hazard, and hence is always material to the risk of the insurance. But any incumbrance upon the interest of the assured diminishes that interest by the amount of the incumbrance and thus becomes itself material to the risk. The responsibility of the assured, his ability to pay the premiums upon his policy, is another important consideration to the underwriter, and the extent of his interest in the insured property, the incumbrance upon it, and his indebtedness on account of that incumbrance tend clearly to show his responsibility, and in that way are material to the risk. The parties to a contract are as important as its terms, and the parties interested in property insured are little less material than the parties to the policy itself. Equitable Life Assur. Society v. McElroy, 83 F. 631, 641, 28 C.C.A. 365, 375. An insurance company might willingly insure unincumbered property of a citizen of high character when it would hesitate or refuse to insure it when it was incumbered, unless it knew that the mortgagee was also of good reputation and neither a fire bug nor a rascal. Moreover, courts cannot be, and ought not to be, blind to the common knowledge and judgment of men engaged in a long-established and familiar...