Glens Falls Insurance Company v. Michael

• Decision Date: 08 June 1905
• Docket Number: 20,432
• Citation: 74 N.E. 964,167 Ind. 659
• Parties: Glens Falls Insurance Company v. Michael et al
• Court: Indiana Supreme Court

74 N.E. 964

167 Ind. 659

Glens Falls Insurance Company v. Michael et al

No. 20,432

Supreme Court of Indiana

June 8, 1905

Dissenting Opinion Filed June 28, 1905. Rehearing Denied January 17, 1907, Reported: at 167 Ind. 659 at 699.

From Cass Circuit Court; John S. Lairy, Judge.

Action by George W. Michael and another against the Glens Falls Insurance Company. From a judgment for plaintiffs, defendant appeals. Transferred from Appellate Court under § 1337u Burns 1901, Acts 1901, p. 590.

Affirmed.

Royal J. Whitlock, Charles E. Yarlott and Chambers, Pickens, Moores & Davidson, for appellant.

Lairy & Mahoney and McConnell, Jenkines, Jenkines & Stuart for appellees.

Montgomery J. Gillett, J., dissents.

OPINION

Montgomery, J.

This action was brought by appellees upon a policy of insurance against loss by fire. The policy contained the following, among other provisions:

"This entire policy shall be void if the insured has concealed, or misrepresented in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property be not truly stated herein; or in case of any fraud or false swearing by the insured, touching any matter relating to this insurance, or the subject thereof, whether before or after the loss; this entire policy, unless otherwise provided by agreement, indorsed hereon and added hereto, shall be void * * * if the interest of the insured be other than unconditional and sole ownership; or if the subject of insurance be a building on ground not owned by the insured in fee simple."

Appellant answered the complaint in six paragraphs, the first, second and sixth of which were afterwards, by agreement, withdrawn. The third paragraph of answer alleged that "at the time said policy under which plaintiffs' claim was issued, and at the time of said loss and damage by fire, the interest of the plaintiffs in the buildings, additions, and appurtenances mentioned in said policy of insurance, and for loss and damage of which, by fire, the plaintiffs have brought this action, was not that of sole and unconditional ownership, and said building and its additions and appurtenances were not, at the time of the issuance of said policy, and were not at the time of said loss and damage by fire, on ground owned by the plaintiffs or either of them in fee simple; and therefore said policy of insurance, so issued to them, was and is, by the provisions of the contract in the complaint mentioned and set out, void." The fourth paragraph alleged, in substance, that although it was not so provided by agreement indorsed on or added to the policy, yet the subject of insurance was, at the time of issuing the policy and of the fire, a building on ground not owned by assured in fee simple, but that at said times the plaintiffs' interest in said premises was that of life tenants only, and the fee was in other persons named. The fifth paragraph alleged that, although it was not so provided by agreement indorsed on or added to the policy, nevertheless, at the time of issuing said policy, and at the time of said fire, the interest of plaintiffs in the subject of insurance was not that of unconditional or sole ownership, but was that of life tenants only; the remainder in fee in and to the subject of insurance being at said times vested in other persons named.

Appellees replied to the third paragraph of answer herein set out, admitting that at the time of the issuance of the policy, and of the loss and damage by fire sued for, their interest in the buildings mentioned in the policy of insurance was not that of unconditional ownership, and that said buildings were not at the time on grounds owned by them or either of them in fee simple, but they averred "that no change had taken place in the condition of the title to said property, described in the policy sued on, since said policy was issued; that the plaintiffs were then and are now the owners of a life estate in said real estate, with the remainder in fee to Herbert S. Michael, George Michael, and Morris S. Michael, their children; that no written application was made by plaintiffs or either of them for the policy of insurance sued on, and no representations of any character as to the state of said title were made by these plaintiffs or either of them; that at no time before the issuing of said policy or since that time, up until the date of the loss, was anything concerning the state of said title asked of said plaintiffs or either of them by the agent of the defendant who wrote said policy; that the attention of neither of the plaintiffs was called to the conditions in the policy sued on in reference to title, and plaintiffs had no knowledge of said condition in said policy, or that the defendant considered the state or condition of plaintiffs' title to the property insured material to the risk, or that anything in the condition of plaintiffs' title might or could work a forfeiture of said policy; that the defendant, without making any inquiry of plaintiffs concerning the condition of said title, issued said policy, and accepted and retained the premium therefor from the plaintiffs, and that said defendant never thereafter made any objection to the condition of said title until after the loss by fire had occurred; that the plaintiffs accepted said policy and paid the premium therefor in the full belief that the same was a valid and binding contract of insurance, covering the property described therein. Wherefore plaintiffs aver that the defendant has waived any defense to said policy by reason of the condition of said title, and they pray for judgment accordingly." Appellees' reply to the fourth paragraph and also to the fifth paragraph of answer was substantially the same as the reply to the third paragraph of answer, above set out.

Appellant demurred to each of the replies for want of sufficient facts.

It was thereupon agreed by the parties to this action, and the agreement made a matter of record, that all questions not presented by these pleadings should be waived, and the cause submitted to the court upon the issue of law presented by appellant's demurrer to each of the replies, and that, in case the court should hold the replies sufficient to avoid the several paragraphs of answer to which they were addressed, judgment was to be rendered in favor of appellees for $ 917.86, together with interest after March 1, 1903, and, in case the court should hold the replies insufficient, judgment should be rendered in favor of appellant for costs. But nothing in the agreement was intended to preclude either party from appealing or otherwise obtaining a review of the decision of the circuit court in like manner as they might do without having entered into such stipulation. The court subsequently overruled appellant's demurrer to each of said paragraphs of reply, to which rulings the appellant duly excepted, and thereupon judgment was rendered in accordance with said agreement in favor of appellees for $ 932.40, together with costs. The assignment of errors calls in question the decision of the court on appellant's demurrer to each of said paragraphs of reply.

The contention of appellant is that appellees are bound by the strict terms of the policy with regard to title, and that it was their duty to make known, voluntarily, the exact state of the title to the grounds upon which the insured building stood, and to see that the same was correctly described, and that a failure to do so rendered the policy absolutely void. This contention is primarily founded upon a principle which prevails in marine insurance. The subject of marine insurance is often in distant ports or upon the high seas, and generally not open to the examination of the underwriter. The perils to which such property may be exposed are peculiarly numerous, hazardous, and difficult to anticipate by any reasonable inquiry, but are always known to the owner of the property. The underwriter is compelled, from necessity, to rely upon the assured, for a full disclosure of all facts known to him which may in any way affect the risk to be assumed. It is both reasonable and just, under such circumstances, that the assured should not only act with unquestioned good faith, but also make known every fact and circumstance within his knowledge which might increase the hazard of insurance, and, in case of failure so to do, liability upon the policy should be avoided.

It is apparent that there is a marked difference in this respect between the subjects of marine and fire insurance. The subjects of fire insurance may almost always be seen and inspected, and, if the underwriter assumes the risk without taking the trouble either to examine or inquire about facts which may affect the hazard of insurance, he ought not to complain, in the absence of fraud, if the risk proves to be greater than he anticipated.

A pertinent general rule of law applicable to the construction of these contracts is, "that if policies of insurance contain inconsistent provisions, or are so framed as to be fairly open to construction, that view should be adopted, if possible, which will sustain rather than forfeit the contract." McMaster v. New York Life Ins. Co. (1901), 183 U.S. 25, 22 S.Ct. 10, 46 L.Ed. 64. See, also, Thompson v. Phenix Ins. Co. (1890), 136 U.S. 287, 10 S.Ct. 1019, 34 L.Ed. 408; First Nat. Bank v. Hartford Fire Ins. Co. (1878), 95 U.S. 673, 24 L.Ed. 563.

The courts of many states have construed policies having provisions identical with or similar to those of the policy in suit. The importance of the principle involved, and a desire that the reasoning and authority upon which our conclusion rests may more fully appear, have prompted us to quote extensively from ...