Hall v. Niagara Fire Ins. Co.

• Decision Date: 04 October 1892
• Court: Michigan Supreme Court
• Parties: HALL v. NIAGARA FIRE INS. CO. [1]

53 N.W. 727

93 Mich. 184

HALL v. NIAGARA FIRE INS. CO. ^[1]

Supreme Court of Michigan

October 4, 1892

Error to circuit court, Wayne county; GEORGE S. HOSMER, Judge.

Action by Harry C. Hall against the Niagara Fire Insurance Company on a policy of insurance. The court directed a verdict for defendant. Plaintiff brings error. Reversed.

Keena & Lightner, for appellant.

Hanchett, Stark & Hanchett, for appellee.

MCGRATH, C.J.

This is an action upon a policy of insurance dated October 13, 1888 and running for three years, issued to J. C. Hough "on his two-story frame dwelling, * * * against all such immediate loss or damage sustained by the assured as may occur by fire to the property above specified, but not exceeding the interest of the assured in the property." By the terms of the policy, the assured by its acceptance "warrants that any application, survey, plan, statement or description, connected with procuring this insurance, or contained in or referred to in this policy, is true, and shall be a part of this policy; that the assured has not overvalued the property herein described, nor omitted to state to this company any information material to the risk." The policy also provided that "this policy shall become void, unless consent in writing is indorsed by the company hereon, in each of the following instances, viz If the insured is not the sole and unconditional owner of the property; or if any building intended to be insured stand on ground not owned in fee simple by the assured; or if the interest of the assured in the property, whether as owner trustee, consignee, factor, agent, mortgagee, lessee, or otherwise, is not truly stated in this policy; or if any change take place in the title, interest, location, or possession of the property, (except in case of succession by reason of the death of the assured,) whether by sale, transfer, or conveyance, in the whole or in part, or by legal process or judicial decree; or the title or possession be now or hereafter become involved in litigation; or if this policy be assigned or transferred before a loss." No written application for the policy was requested or made. The insurance was solicited by the company's agent, "who saw the building permit in the paper, and came to the office, [Hough's,] and wanted to write a policy on the house." No statement as to the condition of the title or as to the nature of Hough's ownership was asked for or given. Hough, in November, 1887, had bought 10 acres of land for $18,000, a large portion of which had been paid, and had subdivided the land; the house in question being, at the time the insurance was effected, in process of construction on one of the lots known as "Lot 7." He held the whole under a contract of purchase. October 13, 1888, the policy was issued. May 14, 1889, Hough contracted, in writing, to sell to one Stevens this lot 7 for $3,500, which was to be paid as follows: $25 on July 1, 1889, and the further sum of $25 in monthly payments thereafter, until the entire sum, with interest, should be paid. Stevens contracted to pay all taxes and assessments upon the property, and to pay the expenses of keeping the buildings insured against loss or damage by fire. Hough agreed, on performance of all of the covenants upon Stevens' part, to execute a good and sufficient deed to Stevens. It was further agreed that "the said party of the second part shall have possession of said premises on and after the date hereof, while he shall not be in default on his part in carrying out the terms hereof; and if said party of the second part shall fail to perform his agreements on this contract, or any part of the same, the said party of the first part shall, immediately after such failure, have a right to declare the same void, and may retain whatever may have been paid hereon, and all improvements that may have been made on said premises, to the extent of his just interest therein, and treat the party of the second part as his tenant holding over without permission." Stevens went into possession at once, and occupied the premises at the date of the fire, although he only made three monthly payments. On July 1, 1890, he was given notice to quit the premises, and that the contract had been declared void. In March, 1889, Hough assigned all his interest in the original contract held by him to plaintiff. At the time of that assignment, Hough assigned the policy to Hall, and Hough and Hall went together to the office of defendant's agent. Hall told the agent that Hough had "assigned his interest in the property" to him, (Hall,) and that he "wanted the policy to read payable to him in case it should burn," and thereupon the consent of the company was indorsed upon the policy. Upon these facts the court directed a verdict for defendant, and plaintiff appeals.

The record presents two questions: (a) Was this contract valid at its inception? (b) Conceding that the policy was vitiated by the Stevens contract as to Hough, what was the effect of the company's consent to the assignment to plaintiff? It must be conceded that Hough, at the inception of the policy, had an insurable interest in the property. It is well settled in this state, at least, that an applicant for insurance is not required to show the exact condition of his title, unless requested so to do, ( Castner v. Insurance Co., 46 Mich. 15, 8 N.W. 554; Guest v. Insurance Co., 66 Mich. 98, 33 N.W. 31;) that the failure to mention incumbrances, if not inquired about, the application being oral, and no deceit being practiced, is immaterial, (O'Brien v. Insurance Co., 52 Mich. 131, 17 N.W. 726; Tiefenthal v. Insurance Co., 53 Mich. 306, 19 N.W. 9;) and that an equitable ownership will support a recital of ownership, ( Insurance Co. v. Fogelman, 35 Mich. 481; Guest v. Insurance Co., supra.) See 1 May, Ins. 285-287, and 7 Amer. & Eng. Enc. Law, 1020.

In the present case, neither Hough nor Hall were asked to state the nature of their interest in the property or the condition of the title; neither made any misrepresentation or was guilty of any fraud or concealment; and Hough, at the inception of the policy, and plaintiff, at the time of the consent of the company to the assignment to him, had such an interest in the property insured as would support the recitation in the policy that it covered "his two-story frame dwelling." Hough's contract with Stevens was not executed until after the policy had been issued, and when Hall took Stevens was in default, but, in any event, Hall had at that time an equitable interest. The provisions of the policy in the present case, respecting the sole and unconditional ownership of the property, the truthfulness of the statement as to the interest of the assured in the property, and as to any change in the title, interest, location, or possession of the property by sale or transfer, are precisely the same as were passed upon in Hoose v. Insurance Co., 84 Mich. 309, 47 N.W. 587, and the court there held that all the provisions of the contract must be taken together; that, if the insurer desired to know the interest it was insuring, it should have defined that interest in the policy; that it was the intention of the parties to make a binding contract of insurance when accepted by the insured; that the claim as to sole and unconditional ownership could only be held to relate to changes arising after the execution and acceptance of the policy, and did not apply to an existing state or condition of the property at the time that the policy was issued. That case, therefore, disposes of the first question.

The other question is the more serious one, and one upon which the authorities are by no means uniform. In Insurance Co v. Munns, 120 Ind. 30, 22 N.E. 78, the insured had mortgaged the property, and afterwards sold it to Munns, and assigned the policy, to which assignment the company, without knowledge or notice of the mortgage, consented. The court held that a contract of insurance is a purely personal engagement, and does not run with the property insured, citing Nordyke & Marmon Co. v. Gery, 112 Ind. 535, 13 N.E. 683, and Cummings v. Insurance Co., 55 N.H. 457. "That the policy expires with the transfer of the estate, so far as it relates to the original holder, but the assignment and assent of the company constitute an independent contract with the assignee, the same, in effect, as if the policy had been reissued to him upon terms and conditions therein expressed. * * * The contract of insurance, thus consummated, arises directly between the purchaser and the insurance company, to all intents and purposes the same as if a new policy had been issued embracing the terms of the old. In such a case, no defense predicated on supposed violations of the conditions of the policy by the assignor will be available against the assignee. Until the latter himself does some act or permits a condition of things to exist in violation of the terms of the policy, he is not in default." That, being a new and independent contract, both parties are subject to the same rules which govern the making of the original contract. A large number of authorities are cited in support of the conclusions reached. In Steen v. Insurance Co., 89 N.Y. 315, the court held that the consent to the assignment created a new contract between the company and the assignee, unaffected by the forfeiture, if, in any event, it could have been insisted upon. In Shearman v. Insurance Co., 46 N.Y. 526, the property was conveyed to plaintiff March 14th. The policy was renewed in the name of the grantor, March 21st, and was assigned to plaintiff, April 15th, and on the same day...