German-American Ins. Co. of New York v. Yeagley
| Decision Date | 06 August 1904 |
| Docket Number | No. 20,331.,20,331. |
| Parties | GERMAN-AMERICAN INS. CO. OF NEW YORK v. YEAGLEY. |
| Court | Indiana Supreme Court |
OPINION TEXT STARTS HERE
Appeal from Circuit Court, Miami County; J. N. Tillett, Judge.
Action by Daniel W. Yeagley against the German-American Insurance Company of New York. From a judgment for plaintiff, defendant appealed to the Appellate Court, from whence the cause was transferred to this court under Burns' Ann. St. § 1337u. Affirmed.Chambers, Pickens & Moores and J. F. Statesman, for appellant Cox, Reasoner & O'Hara, for appellee.
This is a suit by the appellee against the appellant on a policy of fire insurance upon a stock of goods owned by the appellee, destroyed by fire. Issues were formed, and a trial by the court resulted in a finding for the appellee in the sum of $1,000. A motion for a new trial was overruled, and judgment was rendered on the finding.
Errors are assigned (1) upon the refusal of the court to strike out parts of the second paragraph of the reply to the second paragraph of the answer; (2) the overruling of a demurrer to the second paragraph of the reply to the second paragraph of the answer; (3) the overruling of a demurrer to the third paragraph of the reply to the second paragraph of the answer; and (4) the overruling of a motion for a new trial.
The complaint alleged the ownership of the merchandise by the appellee, the issuing of the policy by the appellant (a copy of which was made an exhibit), the payment of the premium, the loss, the performance of all the conditions of the policy by the appellee, and the failure of the appellant to indemnify the appellee for his loss. The answer was (1) a denial; (2) a plea that, at the time the policy was issued, the goods insured were incumbered by a mortgage, which fact, by the terms of the contract, rendered the insurance void; and (3) a partial answer founded upon a clause in the policy requiring the loss, if any, to be borne pro rata by all companies issuing policies on the property, alleging other insurance, and a consequent diminution of the amount for which the appellant was liable. Reply, (1) a denial; (2) that the agent of the appellant wrote the policy without a written application therefor, and accepted the premium with full knowledge of the existence of the incumbrance on the goods insured, without notice to the appellee that the incumbrance would avoid the policy; that the provision for such forfeiture was in fine print, and was not read by the appellee, who had no knowledge thereof until after the fire and loss, and the delivery of the proofs of loss; (3) a third paragraph of reply, similar to the second, averred that the policy was issued and the premium accepted by the appellant with full knowledge of the mortgage, and without notice to the appellee until after the fire that the forfeiture clause was not waived.
The motion to strike out a part of the second paragraph of the reply to the second paragraph of the answer, and the demurrers to the second and third paragraphs of the reply, present substantially the same question, and may be considered together.
The policy of insurance issued by the appellant contained these provisions:
“This entire policy, unless otherwise provided by agreement endorsed hereon or added hereto, shall be void *** if the subject of insurance be personal property, and be, or become, incumbered by a chattel mortgage. ***
“This entire policy shall be void if the insured has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning the insurance, or the subject thereof, or, if the interest of the insured in the property be not truly stated therein. ***
“This policy is made and accepted subject to the foregoing stipulations and conditions, *** and no officer, agent, or other representative of this company shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of agreement indorsed hereon, or added hereto, and as to such provisions and conditions no officer, agent or representative shall have such power, or be deemed or held to have waived such provisions or conditions, unless such waiver, if any, shall be written upon or attached thereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached.”
The second paragraph of appellee's reply to the second paragraph of appellant's answer admits that, at the time the policy was executed, the goods insured were incumbered by a mortgage, but it seeks to avoid the effect of this circumstance by the averment that the agent of the appellant accepted the premium with full knowledge of the existence of the incumbrance. It is not claimed by the appellee that the condition concerning incumbrances was one which, by the terms of the policy, was a proper subject of agreement to be indorsed on that instrument, nor that the agreement to waive this condition was indorsed on the policy or attached to it. It is contended by counsel for the appellant that the legal effect of the supposed waiver of the condition in regard to incumbrances on the goods insured is to enable the insured to add to and contradict the written instrument by a parol agreement or by matter in pais. It is also insisted that, even if such waiver may be shown, it does not appear from the reply that the agent who issued the policy had authority to consent to the waiver.
A policy of insurance is a somewhat unique species of contract. Its principal, or at least its most conspicuous, elements are the payment of a premium by the insured, and the agreement of the insurer to indemnify the insured against loss on a certain subject against certain perils. The numerous conditions often inserted, which are intended to defeat the risk and create a forfeiture of the right to demand the indemnity in the event of loss, are to some extent collateral to the principal undertaking, and are not essential to it. These conditions are usually inserted exclusively for the benefit of the insurer, and, as a matter of fact, are seldom read or seen by the insured until a loss occurs. The policy is generally a printed paper, of considerable length, gotten up by the insurer with infinite skill, and designed to protect its interests, without particular regard for those of the insured. These, with other peculiarities of the contract of insurance, have caused the courts to deal with it, when practicable, in such manner as to secure the insured against harsh and unreasonable conditions and forfeitures. For this purpose, very slight circumstances are often seized upon as evidence of an intention on the part of the insurer to waive the benefit of certain conditions providing for forfeitures. National Masonic Accident Association v. McBride, 162 Ind. 379, 70 N. E. 483. It is true that most of the numerous conditions contained in the ordinary policy of fire insurance are intended to protect the insurer against fraud, and they may be necessary to accomplish that object. Such are the conditions relative to other insurance, full disclosures concerning the title to the subject of the risk, and the existence or creation of incumbrances and liens thereon. These circumstances affect the moral hazard assumed by the insurer. That moral hazard is nothing more nor less than the probability or improbability that the insured will designedly destroy his property, or negligently suffer it to be destroyed, to obtain the insurance. If he did so destroy it, that fact, if shown, independent of any condition to that effect in the policy, would constitute a complete defense to an action on the contract. But the burden of proving the fact would rest on the insurer, and in most cases it would be difficult or impossible to establish it. By inserting in the contract conditions rendering the policy void and the insurance forfeited if all facts affecting the title of the property insured are not fully disclosed by the policy holder, or if other insurance is taken out without notice to the insurer, or if the property is, or shall become, incumbered by mortgage or other lien, the insurer not only escapes all danger from the moral hazard in such cases, but is enabled to defeat the recovery of the sum at risk where the insured has acted in perfect good faith, and the fire has resulted from causes over which he had no control.
Considerations of this character have induced the courts to hold that even where the contract contains a condition that “the policy shall be void if the subject of insurance be personal property, and be or become incumbered by a chattel mortgage,” the company will not be permitted to defeat a recovery by proving the existence of such an incumbrance as would render the policy void, where it had full knowledge of the incumbrance when the policy was issued by it. And such has been held to be the rule, also, where there are other provisions in the policy declaring that notice of the existence of all incumbrances must be indorsed on the policy, and that no agent shall be deemed to have waived any condition unless the waiver is so indorsed. So, too, it is generally held that if an insurer accepts payment of a premium with knowledge that a fact exists which, by the terms of the policy, will render the contract of insurance void, the acceptance of the premium is a waiver of the right to avoid the policy for that breach. 16 A. & E. Ency. of Law (2d Ed.) 940; Phœnix Insurance Co. v. Raddin, 120 U. S. 183, 7 Sup. Ct. 500, 30 L. Ed. 644;Mutual Reserve Fund Ass'n v. Cleveland Woolen Mills, 54 U. S. App. 290, 82 Fed. 508, 27 C. C. A. 212;Home Ins. Co. v. Duke, 84 Ind. 253;Indiana, etc., Ins. Co. v. Capehart, 108 Ind. 270, 8 N. E. 285;Moffitt v. Phœnix Ins. Co., 11 Ind. App. 233, 38 N. E. 835;Masonic Mutual Benefit Ass'n v. Beck, 77 Ind. 203, 40 Am. Rep. 295;Phenix Ins. Co. v. Boyer, 1 Ind. App. 329, 27 N. E. 628;Union Central Ins....
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