Kozlowski v. Pavonia Fire Ins. Co.

• Decision Date: 31 January 1936
• Docket Number: No. 17.,17.
• Citation: 183 A. 154
• Parties: KOZLOWSKI et al. v. PAVONIA FIRE INS. CO.
• Court: New Jersey Supreme Court

183 A. 154

KOZLOWSKI et al.

v. PAVONIA FIRE INS. CO.

No. 17.

Court of Errors and Appeals of New Jersey.

Jan. 31, 1936.

Appeal from Supreme Court.

Action by Joseph Kozlowski and another against the Pavonia Fire Insurance Company.

From a judgment for the plaintiffs, the defendant appeals.

Affirmed.

Samuel D. Lenox, of Trenton, for appellant.

William Reich, Erwin E. Marshall, and Linton S. Marshall, all of Trenton, for respondents.

HEHER, Justice.

The defendant corporation undertook, by its policy of insurance, to indemnify plaintiffs against damage by fire to a certain dwelling house and personal property therein contained. Title to the real estate was in Mary, but there was evidence tending to show that she held an undivided one-half interest therein in trust for her coplaintiff. They were not lawfully married. Of this more hereafter.

On October 21, 1930, there was a total destruction of the insured property by fire; and this action is predicated upon a breach of the indemnity undertaking. The challenged judgment was entered on a jury verdict in favor of plaintiffs.

Defendant was allowed a rule to show cause with a reservation of exceptions, including those taken to the denial of its motions for a nonsuit and the direction of a verdict in its favor. One of the reasons urged in support of the motion for a new trial was that the verdict was contrary to the weight of the evidence, but this was abandoned before argument of the rule, and was specifically excised by the trial judge from the reasons considered by him. The rule was discharged.

Error is now predicated of the trial judge's denial of the motions to nonsuit and direct a verdict. The insistence is that it conclusively appeared that respondents were guilty of fraud and false swearing in the following particulars, viz.: (1) Misrepresentation of the quantum of fire insurance coverage; (2) a deliberate and willful misrepresentation made to officers of the state constabulary, while they were engaged in an inquiry to determine the origin and cause of the fire, respecting the sum paid to a contractor for labor and material provided in the construction of the insured dwelling, and the amount of such insurance coverag_e; (3) "concealment or misrepresentation" of the facts that respondents were not lawfully married, and were living in a state of adultery; (4) an untrue statement of the interest of plaintiffs in the insured property; and (5) "fraud and false swearing" after the loss as to the source and cost of certain items of construction and personal property, and the relationship between plaintiffs.

The condition of the policy asserted to have been thus breached is in the following language: "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 a loss."

"Misrepresentation" or "concealment" of a fact material to the risk made the subject of insurance, within the intendment of this condition of the policy, must be fraudulent in character. While there is authority for the view that an intent to deceive is not requisite where the representation is made with knowledge of its falsity, it seems to be the settled rule in this jurisdiction that the misrepresentation, to avoid the policy, must be tainted with the fraudulent purpose to deceive. The accepted definition of misrepresentation is "the statement of something as a fact, which is untrue in fact, and which the assured states, knowing it to be not true, with an intent to deceive the underwriter, or which he states positively as true, without knowing it to be true, and which has a tendency to mislead, such fact in either case being material to the risk." Daniels v. Hudson River Fire Ins. Co, 12 Cush. (Mass.) 416; Kerpchak v. John Hancock Mutual Life Insurance Co, 97 N.J.Law, 196, 117 A. 836, 837; Prahm v. Prudential Insurance Co, 97 N.J.Law, 206, 116 A. 798; Guarraia v. Metropolitan Life Insurance Co, 90 N.J.Law, 682, 101 A. 298; Daniels v. Hudson River Fire Insurance Co, 12 Cush.(Mass.) 416, 59 Am.Dec. 192; 26 C.J. 154; 14 R.C.L. 1021. The positive statement of something as a fact without knowledge that it has a factual basis seems to be the equivalent of willful deception, and connotes moral or conscious fraud within the intendment of this definition. This court has held that a fraudulent purpose is implicit therein. Kerpchak v. John Hancock Mutual Life Insurance Co, supra; Prahm v. Prudential Insurance Co, supra. And such seems to be the holding also of Chief Justice Shaw in Daniels v. Hudson River Fire Insurance Co, supra, one of the earlier cases in which this definition was laid down. This would seem to be a doctrine grounded in reason and logic. If an intention to deceive is essential where the representation is made with knowledge of its falsity, it is equally so when a positive statement as a fact of a matter or thing susceptible of actual knowledge is made without knowledge of its truth. Fraud may be inferred from the representation as a fact of something which its maker does not know to be true. The fraud consists in professing to have knowledge of that of which he in fact is consciously ignorant. Hexter v. Bast, 125 Pa. 52, 17 A. 252, 11 Am.St.Rep. 874; Chatham Furnace Co. v. Moffatt, 147 Mass. 403, 18 N.E. 168, 9 Am.St.Rep. 727.

"Concealment" is the designed and intentional withholding of a fact material to the risk, which the assured, in honesty and good faith, ought to communicate to the underwriter. While there is authority for the view that the intention is immaterial where the concealment relates to a matter made the subject of a specific inquiry, it seems to be the settled rule that, where no inquiry is made, the concealment must be tainted with a fraudulent intent. Brighton v. North River Insurance Co, 106 N.J.Law, 10, 147 A. 481; 14 R.C.L. 1025; 26 C.J. 156, 157. "Mere silence on the part of the assured, especially as to some matter of fact which he does not consider it important for the underwriter to know, is not to be considered as such concealment. Aliudest celare, aliud ta-cere." Daniels v. Hudson River Fire Insurance Co, supra.

And the fact misrepresented or concealed is to be regarded as material, if the knowledge or ignorance of it would naturally and reasonably influence the judgment of the insurer, in determining whether to undertake the risk, or in estimating its degree or character, or in fixing the rate of the premium. Kerpchak v. John Hancock Mutual Life Insurance Co, supra; Daniels v. Hudson River Fire Insurance Co, supra.

And it goes without saying that, to work a forfeiture of the policy upon the...