Lane v. Travelers Indem. Co.

• Decision Date: 02 June 1965
• Docket Number: No. A-10529,A-10529
• Citation: 391 S.W.2d 399
• Parties: H. E. LANE, Petitioner, v. The TRAVELERS INDEMNITY COMPANY, Respondent
• Court: Texas Supreme Court

Page 399

391 S.W.2d 399

H. E. LANE, Petitioner, v. The TRAVELERS INDEMNITY COMPANY, Respondent.

No. A-10529.

Supreme Court of Texas,

June 2, 1965.

Sidney Lee, Texarkana, for petitioner.

Atchley, Russell, Hutchinson & Waldrop, Cahill Hitt, with above firm, Texarkana, for respondent.

CALVERT, Chief Justice.

Petitioner Lane sued The Travelers Indemnity Company, respondent, on a fire insurance policy and to recover part of the premium which had been paid. The case was submitted to a jury on a number of special issues. Following return of the jury's verdict the trial court rendered judgment that the plaintiff take nothing. The Court of Civil Appeals modified the judgment to the extent of decreeing recovery by the plaintiff of the total premium paid for the policy, and affirmed the judgment as thus modified. 383 S.W.2d 955. We reverse the judgments of the courts below and remand the case to the trial court with directions to render judgment for plaintiff Lane.

The only question for decision is whether statements in a Texas Standard Fire Insurance Policy descriptive of the property are warranties. We hold they are not. There were other issues between the parties in the trial court but they have gone out of the case.

Lane purchased the contract of fire insurance on a house situated nine miles southwest of Linden, Texas. Lane was not the owner of the property, but he had an insurable interest in it as a lienholder. A printed Texas standard fire insurance policy form was used in preparing the contract. In the section of the form titled 'DESCRIPTION OF PROPERTY' are blank lines for showing number of stories, type of roof, construction, location and occupancy. The words 'Dwelling-Tenant' were written on the line over 'occupancy.' The house was a dwelling and it was occupied as such at all relevant times, but it was not occupied by a tenant; it was occupied by its owners, Mr. and Mrs. Floyd McGowen. It was destroyed by fire some five and one-half months after the contract was purchased. Lane sued for the amount of his debt which was less than the amount of insurance.

In answer to a special issue the jury found that 'Plaintiff warranted in the insurance contract that the property insured was to be occupied as a dwelling-tenant.' The question submitted by the issue is one of law and not of fact, and the Court of Civil Appeals properly so treated it. However, we disagree with the Court of Civil Appeals' conclusion that the statement of occupancy was a contractual warranty and that the falsity of the statement relieves the respondent insurer of liability.

The basis on which the Court of Civil Appeals affirmed the trial court's judgment denying recovery on the policy is difficult to determine from its opinion. That court held that the statement in the policy that the dwelling was occupied by a tenant was a 'contractual warranty,' and yet it did not hold that a breach of the warranty voided the policy. Instead, the court seems to have used another policy provision as a basis for denying recovery. The policy provision used by the court is one of several appearing under the heading 'BASIC CONDITIONS,' and is titled 'Conditions Suspending or Restricting Insurance.' It reads:

'Unless otherwise provided in writing added hereto, this Company shall not be liable for loss occurring (a, b, and c applicable only to Coverage F-Fire):

(a) while the hazard is increased by any means within the knowledge and control of the insured, provided such increase in hazard in not usual and incidental to the occupancy as hereon described; or

(b) while a described building, whether intended for occupany by owner or tenant, is vacant beyond a period of thirty consecutive days; or

(c) as a result of explosion or riot, unless fire ensue, and in that event for loss by fire only; or

(d) following a change in ownership of the insured property; or

(e) while any other stipulation or condition of this policy is being violated.' ¹

But if the basis of the Court of Civil Appeals' judgment is somewhat unclear, the position of respondent Travelers is not. Travelers' position is that the statement was a warranty; that the truth of the matter warranted was a condition precedent to validity of the contract; and that the policy never became effective.

If the quoted provision of the policy is intended to relieve an insurer of liability because of mere misrepresentations, without proof and findings of materiality, it runs afoul of Art, 21.16, Vernon's Texas Insurance Code, which provides:

'Any provision in any contract or policy of insurance issued or contracted for in this State which provides that the answers or statements made in the application for such contract or in the contract of insurance, if nutrue or false, shall render the contract or policy void or voidable, shall be of no effect, and shall not constitute any defense to any suit brought upon such contract, unless it be shown upon the trial thereof that the matter or thing misrepresented was matterial to the risk or actually contributed to the contingency or event on which said policy became due and payable, and whether it was material and so contributed in any case shall be a question of fact to be determined by the court or jury trying such case.'

The stricture of the statute is applicable whether the exonerating policy provision be that the contract 'shall be void' or only that the insurer 'shall not be liable.' It follows that Travelers was not entitled to be relieved of liability in this case unless the statement that the dwelling was occupied by a tenant was a warranty.

Travelers argues that the statement cannot be a representation and it must, therefore, be a warranty. A semblance of support for the argument is found in Doyle v. Great Southern Life Ins. Co., Tex.Civ.App., 126 S.W.2d 735, 737 (1939), affirmed 136 Tex. 377, 151 S.W.2d 197 (1941), in which Couch on Insurance, 1st Edition, is quoted as defining a representation as 'an oral or written statement which precedes the contract of insurance and is no part thereof, unless it be otherwise stipulated, * * * and relates to the facts necessary to enable the underwriter to form his judgment whether he will accept the risk, and at what premium.' For similar statements, see 7 Couch on Insurance, 2d Ed., §§ 35:2, 35:3, 35:4. But Couch qualifies the quoted statement in § 35:9, 2d Ed., as follows:

'By the basic definition, the representation is not a part of the contract of insurance and therefore is not a term of the contract. This, however, does not preclude the inclusion or repetition within the policy itself of the representations. Such statements will be given effect only as representations and not as warranties when it is expressly stipulated that they are merely representations, or if it appears from the contract read as a whole that they were so intended.'

Moreover, Art. 21.16, quoted above, contains a clear recognition that a statement 'in the contract of insurance' may be nothing more than a representation the falsity of which must be shown to have been material to the risk or to have contributed to the event on which the policy became payable before an insurer is relieved of liability.

The word 'warrant...