North British Mercantile Ins. Co. of London & Edinburg v. Union Stockyards Co.

• Decision Date: 05 May 1905
• Citation: 120 Ky. 465,87 S.W. 285
• Parties: NORTH BRITISH MERCANTILE INS. CO. OF LONDON & EDINBURGH v. UNION STOCKYARDS CO.
• Court: Kentucky Court of Appeals

87 S.W. 285

120 Ky. 465

NORTH BRITISH MERCANTILE INS. CO. OF LONDON & EDINBURGH v. UNION STOCKYARDS CO.

Court of Appeals of Kentucky.

May 5, 1905

Appeal from Circuit Court, Jefferson County, Common Pleas Division.

"To be officially reported."

Action by the Union Stockyards Company against the North British Mercantile Insurance Company of London & Edinburgh. Judgment for plaintiff, Defendant appeals. Affirmed.

Henry Burnett and Dallam, Farnsley & Means, for appellant.

Gibson Marshall & Gibson, for appellee.

O'REAR J.

Appellee Union Stockyards Company, owned a lot of land in the eastern part of Louisville, about 200 feet square, on which were situated their stock pens and a 2 1/2 story brick house. An insurance against loss by fire was effected by policies written by several different companies, including one by appellant company, which is in suit. The stock pens constituted a frame building or shed, two stories high. On the ground floor were stalls for cattle or horses; on the second floor were pens for sheep. Some time after the policy was issued, appellee rented the brick building to one O'Brien for storing rags. The original rate of insurance on the buildings was $1.50 on the $100, but when used for storing baled rags it was $2.50 per $100. A "rider" was put on the policy, as follows: "Privilege to make additions, alterations or repairs, and to store baled rags in brick buildings insured under this contract." The stockyards company contends that it rented to O'Brien only the brick building. O'Brien testified that he rented the whole of the property, subject to the right of his landlord to rent it to others, whereupon he was to surrender the portions so let to others. O'Brien was to quit whenever notified, upon five days' notice. The following February the stockyards company leased the whole of the property to Hudson Bros. as a horse and mule market, and notified O'Brien to give immediate possession. Carpenters and other workmen began work remodeling and repairing the buildings for occupancy by Hudson Bros., who in fact moved in on April 1st. April 4th the stockyards company notified the insurer that O'Brien had quit the buildings rented to him, and that his rags were removed. Whereupon an additional rider was added to the policy, as follows: "In consideration of $16.50 returned assured, the privilege to store rags in buildings assured under this policy is hereby rescinded, the rate now being $1.50." On April 26th the buildings were totally destroyed by fire. It then developed that O'Brien had used not only the brick building for storing baled rags, as permitted by the policy, but had stored baled and loose rags in considerable quantifies in the brick building and the frame buildings indiscriminately. In fact, there was quite a quantity of loose rags in the sheep pens of the frame building when the fire occurred. The insurer denied liability, and resisted payment under the policy on the grounds (1) that the policy had become void by reason of material and false misstatements made by the assured concerning the removal of the rags, and (2) that the hazard had been increased without its consent by the assured having, through its tenant, suffered the premises to be used in an occupation more hazardous than that contracted. These two defenses arise under the following conditions in the policy: "This entire policy shall be void if the insured shall conceal or misrepresent, in writing or otherwise, any material fact or circumstance concerning the insurance or the subject thereof, or in case of false swearing or fraud by the insured, touching any matters relating to this insurance or the subject thereof, whether before or after the loss. This entire policy, unless otherwise provided for by agreement, endorsed thereon or attached thereto, shall be void if the hazard be increased by any means within the control or knowledge of the insured." The verdict of the jury and the judgment of the court having been adverse to appellant, this appeal is taken to correct what it is urged are prejudicial errors committed against appellant on the trial.

The defenses outlined above were put at issue, and were submitted under an instruction which will be noticed particularly further along. An analysis of the defenses will better enable us to apply the trial court's instruction. It may be conceded that the fact that rags, when stored in the buildings in considerable quantities, became a material circumstance concerning the insurance. The parties by their conduct have so treated it. And it would seem, from the very nature of the thing, to be so. Consequently, a concealment or misrepresentation of that fact by the assured, if it was a fact, came within the provision just quoted. Baled rags to be stored in the brick building was consented to, and the privilege and risk paid for. When the assured applied for a rebate of the unearned portion of the premium for that additional risk (some months yet which were covered by the policy not having expired), its secretary, Wood, was inquired of by the agents of the insurer whether the rags had been removed. He answered that he would ask the superintendent Birch, to see in person and report. Birch was called by telephone, and told to examine and report whether O'Brien had removed the rags. In about 30 minutes he reported that O'Brien had vacated the leased premises, and that the rags were gone. Wood repeated this statement to the insurer, whereupon the unearned extra premium was paid back, and the second rider above quoted was pasted upon the policy. Now, as a matter of fact, Birch did go and examine the brick building, and O'Brien had vacated it, and had then removed from it all his rags. Birch, who had made the contract of renting with O'Brien, understood that O'Brien had rented the brick building only, and had occupied it alone for storing his rags; consequently he did not examine the cattle and sheep pens in the frame buildings, and testified that he had no thought that O'Brien had any rags stored there, as he had no right to do so. Still, the truth was that O'Brien at that time did have loose rags stored in the frame buildings in considerable quantities. The question is, was this a misrepresentation or concealment of the fact by the assured? It was not a concealment, unless it was actually known at the time. But it was not known. At least, such is the result of the jury's verdict, which seems to us to be sufficiently supported by the evidence. But a misrepresentation may be made without knowledge of its falsity. If the representation was made, was material, and was untrue, the...