Niagara Fire Ins. Co. of New York v. Adams

• Citation: 198 F. 822
• Decision Date: 10 September 1912
• Docket Number: 958.
• Parties: NIAGARA FIRE INS. CO. OF NEW YORK et al. v. ADAMS et al.
• Court: U.S. Court of Appeals — First Circuit

198 F. 822

NIAGARA FIRE INS. CO. OF NEW YORK et al. v. ADAMS et al.

No. 958.

United States Court of Appeals, First Circuit.

September 10, 1912

The following are the opinions of Dodge, District Judge, in the lower court.

On Demurrer to Bill.

According to this bill the complainant Niagara Fire Insurance Company issued two policies of fire insurance to the defendant Adams covering the personal property in the building 47 Juniper street, Boston, and the complainant Glens Falls Fire Insurance Company issued to her one policy covering the same property. The Niagara Company's policies, Nos. 92,407 for $2,000, and 100,779, for $4,000, were issued November 21 1908, and November 22, 1910, respectively; the first-mentioned policy being made payable to the defendant McGinnis, mortgagee, as interest may appear. The Glens Falls Company's policy No. 60,476, for $1,000, was issued April 23, 1910. Proofs of an alleged loss under the policies have been presented, whereof the defendants are claiming payment from the complainant companies. The complainants ask the court to declare these policies void for fraud and to enjoin the defendants from suing or enforcing them.

The allegations of fraud are that the two defendants, having been closely associated for years, and being without financial resources, fraudulently agreed and conspired to obtain the policies described, upon articles of little or no value, for the purpose of causing the property to be destroyed by fire and of fraudulently obtaining from the plaintiffs payment of the policies above mentioned; that in pursuance of this plan the defendant McGinnis falsely represented to the Niagara Company, on or about November 20, 1908, that she held a mortgage on Adams' personal property to the amount of $3,000, and requested the issuance of its policy No. 92,407 for $2,000, in Adams' name, payable to her as mortgagee as interest may appear, then well knowing that she had no mortgage upon any property of Adams, and that the Niagara Company, believing this statement, issued the policy, upon property worth not more than $1,000; that also in pursuance of the same plan the same defendant falsely and knowingly represented to the same company, on or about November 20, 1910, that she had sold $4,000 worth of personal property to Adams, and requested the issuance of its policy No. 100,779 to Adams in order to obtain said insurance on property of little value, and that the Niagara Company, believing said statement, issued said policy accordingly; that the defendant Adams represented to the Glens Falls Company, at some time not specified, that she owned a large amount of valuable property on which there was no other insurance, knowing at the time that she held the policy No. 92,407 above mentioned, and that neither defendant at any time disclosed to either company that the other company had issued policies on the property; and that the defendant Adams in pursuance of said plan set a fire, or caused it to be set, at 47 Juniper street, on December 15, 1910, for the purpose of destroying all the insured property and obtaining payment of a total loss under the policies, but that only part of the property was destroyed by fire, and part of the remainder was damaged by fire, smoke, and water. It is further alleged that Adams never executed any mortgage to McGinnis, but had bound herself by written agreement to pay McGinnis $7,000, with interest at 6 per cent., in weekly payments of $10 each, for a large number of perishable articles specified in the proofs of loss afterward value, in order to show that the value of the insured property intended to be value, in order to show that the value of the insured property intended to be destroyed by fire would equal or exceed the total amount insured under all the policies.

The Niagara Company may have believed the alleged false statements to be true when it issued its policies 92,407 and 100,779, but there is no distinct allegation that it was induced to issue them by its belief in the truth of those false statements. Whether the defendant McGinnis held a mortgage on the property or not, or to what amount, would not appear to have been material when the policies were issued. In case of loss under the policies, she would in any event have had to prove her interest in order to recover. Nor would the value of the property appear to have been material when the policies were issued. To recover after a loss, the insured would have to prove the value of what was lost. As to the policy issued by the Glens Falls Company, the bill does not even allege that the statements claimed to have been false were believed to be true by the insurer when it issued the policy, and the statement that there was no other insurance on the property does not appear to have been material, in view of the usual provisions regarding other insurance which all the policies contain. But, assuming it to be shown that the insured took out all the policies in pursuance of a previous plan to cheat the insurers by causing a fraudulent loss, there can be no question that this would show all the policies to have been void when issued, like any contract into which one party enters for the purpose of cheating the other by means of it. Dow v. Sanborn, 3 Allen (Mass.) 181; Haigh v. Delacour, 3 Camp. 319.

Proof of such a fraud, however, would be a complete defense to an action at law on either policy, and although a federal court of equity may in a proper case order the surrender and cancellation of a policy of insurance void for fraud in obtaining it, yet it will not generally do so, after a loss is claimed, when the fraud can be perfectly well established as a defense at law in a suit on the policy. Special circumstances must be shown, threatening irreparable injury to the insurer, if he is denied a preventive remedy. That he has no choice of the time of the commencement of the action at law, or less control of its conduct than the insured, are not circumstances sufficient for the purpose. All this appears to be now settled by the decision of the Supreme Court in Cable v. Insurance Co., 191 U.S. 288, 24 Sup.Ct. 74, 48 L.Ed. 188 (1903). See, also, Riggs v. Insurance Co., 129 F. 207, 63 C.C.A. 365; Insurance Co. v. Griesa (C.C.) 156 F. 398; Griesa v. Insurance Co., 169 F. 509, 513, 94 C.C.A. 635, in the Court of Appeals for the Eighth Circuit, following Cable v. Insurance Co.

The bill alleges that the defendant McGinnis may sue the Niagara Company at law on its policy 92,407, that the defendant Adams may also sue it at law on its policy 100,779, that Adams may also make it defendant with McGinnis in an equity suit to establish the respective interests of the two defendants under its policy 92,407, and that Adams may also sue the Glens Falls Company on its policy 60,476. This prospect of a multiplicity of suits is relied on to establish the complainants' right to equitable relief.

It is obvious that part of the apprehended multiplicity is because of the fact that two separate insurers have joined in this bill as complainants; but no connection between them, and no dependence of either on the other, in the issuing of their respective policies, is alleged, and the dates of the policies, as stated, are widely separated. Nor is it alleged that the amount for which either insurer may be held depends on the amount of liability of the other, as in Virginia-Carolina, etc., Co. v. Home, etc., Co., 113 F. 1, 51 C.C.A. 21. Except that the policies cover the same property, the frauds alleged upon the respective insurers were distinct and independent. The Glens Falls Company which has issued one policy only on the property can hardly claim rights in equity, which it would not have if it stood alone, because the Niagara Company issued two policies on the same property, one some 18 months earlier and one some 6 months later than its own policy. The two insurers in combination have no more of a cause of action in equity than either would have independently. Insurance Co. v. Mohlman Co. (C.C.) 73 F. 66; Insurance Co. v. Hoover, etc., Co., 173 F. 888, 891, 97 C.C.A. 400, 32 L.R.A. (N.S.) 940.

If the Niagara Company issued two policies on the property, one two years later than the other, the first payable to the alleged mortgagee, as interest may appear, it may be subject to more than one suit; but it can hardly be said to be subject to more than one on the same contract. Litigation between the two insured under one of the contracts can hardly be said to increase the number of possible suits which the insurer may have to defend. That it may have to defend suits on each of the two policies referred to I am unable to regard as establishing a sufficient probability of irreparable injury to it. Insurance Co. v. Pearson (C.C.) 114 F. 395 decided in this court in 1902, is the authority most relied on by the complainants; but the apprehended multiplicity of suits there treated by the court as a circumstance sufficient, with other circumstances, to establish jurisdiction in equity, consisted in a possibility of many successive suits arising out of...