Foster v. Illinois Travelers' Home Fire Ins. Co.

Decision Date17 December 1927
Citation300 S.W. 7
CourtTennessee Supreme Court
PartiesFOSTER v. ILLINOIS TRAVELERS' HOME FIRE INS. CO. OF CHICAGO.<SMALL><SUP>*</SUP></SMALL>

Appeal from Chancery Court, Shelby County; D. W. De Haven, Chancellor.

Bill by T. J. Foster against the Illinois Travelers' Home Fire Insurance Company of Chicago. Decree for defendant, and complainant appeals. Affirmed.

R. O. Valley, of Memphis, for appellant.

Robt. Lee Bartels, of Memphis, for appellee.

McKINNEY, J.

On May 11, 1926, complainant, Foster, made a loan of $6,500 to Oliveri, which was secured by a deed of trust on a frame store building located on the corner of Lyceum and Grand Opera streets, near the city of Memphis.

About July 2, 1926, Foster applied to Cleveland & Hughes, insurance agents and brokers, in the city of Memphis, for insurance on said building, and on said day Hughes, accompanied by Foster, made a personal inspection of said property. Foster disclosed to Hughes the true state of title to said property. Hughes advised Foster "that he was insured."

On July 5, 1926, Foster left for California.

Later the company in which Hughes had insured said property ordered the policy canceled. Thereupon Hughes called up Smith, local agent for the defendant company, and asked if he could place insurance upon said building. He was told that he could, Smith agreeing to accept Hughes' inspection of the property, and requested that Hughes furnish him a description of the property. An erroneous description was furnished by some employee in Hughes' office, upon which the policy was issued to Foster covering a similar building owned by Oliveri in the middle of the block, and which was already covered by a policy issued by defendant. None of the agents or employees of defendant undertook to locate or inspect said building, but relied upon the inspection made by Hughes. The policy in question was for $3,000, was issued on July 24, 1926, and the premium of $90 was paid by Foster, who deposited the policy in his lock box without having read it. The building was destroyed by fire on October 28, 1926.

No written application for the insurance was made by Foster, and the policy was payable to him without disclosing the fact that he was only a mortgagee and not the owner. The purpose of the bill was to reform the policy with respect to the description of the property and to recover a decree for the face value thereof.

The bill was demurred to and the demurrer sustained and the bill dismissed.

The third ground of the demurrer is as follows:

"It appears upon the face of the bill that the complainant was not the owner of the property which was destroyed and for which he seeks a recovery upon the contract of insurance, but merely held a mortgage upon said property to secure an indebtedness owing to him."

The policy contains this provision:

"This entire policy shall be void unless otherwise provided by agreement in writing added hereto, (a) if the interest of the insured be other than unconditional and sole ownership; or (b) if the subject of insurance be a building on ground not owned by the insured in fee simple."

It is generally held that stipulations of this character are reasonable and valid, and a breach thereof will avoid the policy. 26 C. J. 170, and cases cited in notes.

On page 171 of the same book, it is said:

"Where such conditions are contained in the policy, and there is no statement of the title or specific interest, an acceptance of the policy amounts to a representation by insured that his title or interest is that stated in the condition, and if his title or interest is substantially different the insurance is avoided. It has been held, however, by some authorities that, where there is no written application and no inquiries are made, the mere acceptance of a policy providing that it shall be void if the interest of insured is other than that specified in the policy does not constitute a representation or warranty as to the nature of insured's title."

By referring to the cases in the notes it will be seen that the decided weight of authority supports the rule, while the exception is sustained by the courts of Illinois, Indiana, Nebraska, and Washington. It seems that Illinois adopted the majority rule in Crikelair v. Citizens' Insurance Co., 168 Ill. 309, 48 N. E. 167, 61 Am. St. Rep. 119.

The purpose of the condition is thus stated in Phenix Ins. Co. v. Hilliard, 59 Fla. 590, 52 So. 799, 138 Am. St. Rep. 171:

"The just and reasonable purpose of insurance policies in requiring the insured to have the `unconditional and sole ownership' of the property insured is to give protection to only those upon whom the loss insured against would inevitably fall...

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