Norwich Union Indemnity Co. v. H. Kobacker & Sons Co.

• Decision Date: 15 March 1929
• Docket Number: No. 5103.,5103.
• Citation: 31 F.2d 411
• Parties: NORWICH UNION INDEMNITY CO. v. H. KOBACKER & SONS CO.
• Court: U.S. Court of Appeals — Sixth Circuit

31 F.2d 411 (1929)

NORWICH UNION INDEMNITY CO. v. H. KOBACKER & SONS CO.

No. 5103.

Circuit Court of Appeals, Sixth Circuit.

March 15, 1929.

Frank X. Cull, of Cleveland, Ohio (Bulkley, Hauxhurst, Jamison & Sharp and Raymond

G. Hengst, all of Cleveland, Ohio, on the brief), for plaintiff in error.

James I. Boulger, of Columbus, Ohio (E. J. Schanfarber, of Columbus, Ohio, on the brief), for defendant in error.

Before MOORMAN, HICKS, and HICKENLOOPER, Circuit Judges.

HICKENLOOPER, Circuit Judge.

This was an action at law, brought by the defendant in error to recover upon a policy of burglary insurance. No formal application was made by the insured, but answers to certain questions in the schedule were supplied by the soliciting agent upon his then mistaken understanding of the facts. Such schedule contained inter alia the following:

"Schedule.

"The following statements, No. 1 to 8, inclusive, are hereby made a part of this policy and are warranted by the assured to be true.

* * * * * *

"5 (b) A private watchman employed exclusively by the assured will be on duty within the premises at all times when the premises are not regularly open for business, while this policy is in force (yes or no).

"Yes — two.

"(c) The watchman described in paragraph (b) will make hourly rounds and record same on a watchman's clock, or will signal an outside central station at least hourly (state which).

"Hourly rounds record on watchman's clock."

At the time of the burglary occasioning the loss only one watchman was on duty, but he signaled hourly to an outside agency. On behalf of the insurer it is claimed that the quoted provisions of the policy were warranties, specifically made so by the contract, and that literal compliance therewith was a condition precedent to recovery. On behalf of the insured it is contended that the answers to the questions were supplied by the insurer's agent under the belief that they represented the true practice of the insured; that the policy was not read after delivery nor its terms specifically called to the attention of the insured; that under such circumstances the insurer must be charged with responsibility for any error therein; and that such answers were at best representations and not warranties, and one watchman signalling to an outside agency was the recognized full equivalent and substantial performance of a representation that two watchmen would be employed recording hourly rounds upon a watchman's clock, a lower premium being charged in the former case than in the latter. The court below directed a verdict for plaintiff for the amount of the loss upon the contentions just stated.

Under the decision of the Supreme Court in Lumber Underwriters v. Rife, 237 U. S. 605, 35 S. Ct. 717, 59 L. Ed. 1140, the insured must be charged with knowledge of the provisions of the policy without regard to whether it was read or by whom the answers were supplied. Nor does any question of estoppel arise. Since the portions of the schedule here involved are wholly prospective in their nature and prescribe the conduct of the insured in control of the premises after the policy becomes effective, past practices, even though the insurer's agent were charged with knowledge of them by assuming to supply the above answers, would not be controlling as to the future and the agent's mistake as to the intended future practice could not, in an action at law, effect an alteration of the terms of the policy because of the provisions of section 14 that no such alteration shall be valid "unless the same be signed by an executive officer of the company." Cf. Hartford Fire Ins. Co. v. Jones, 15 F.(2d) 1 (C. C. A. 6). The precise question is, therefore, whether the answers to the questions, above quoted, constitute promissory warranties, and, if not, whether they are technical representations or other form of contractual obligation and then whether they have been substantially performed.

In so far as the answers are responsive to the questions propounded, manifestly asked as a part of the application and as the basis for acceptance or rejection of the risk, they clearly constitute promissory warranties with which literal compliance is required as a condition to liability attaching. Shamrock Towing Co. v. American Ins. Co., 9 F.(2d) 57 (C. C. A. 2); Whealton Packing Co. v. Ætna Ins. Co., 185 F. 108, 34 L. R. A. (N. S.) 563 (C. C. A. 4); Penn-National Hdw. Mut., etc., Co. v. General Finance Corp., 16 F.(2d) 36 (C. C. A. 5); Hartford Fire Ins. Co. v. Nance, 12 F. (2d) 575 (C. C. A. 6); Maryland Casualty Co. v. Bank of England, 2 F.(2d) 793 (C. C. A. 8); Boston Ins. Co. v. Hudson, 11 F. (2d) 961 (C. C. A. 9); Lumber Underwriters v. Rife, supra. No difference in principle exists between those cases in which the warranty is prospective and promissory in its nature and those cases in which a false answer is given to a specific question asked by the insurer as to fact, except that in the latter case the contract is voidable ab initio, while in the case of the promissory warranty liability only is avoided in the event of breach, the policy remaining in force.

The rule regarding false answer to a specific inquiry is tersely stated in Bella S. S. Co. v. Ins. Co. of N. A., 5 F.(2d) 570, 572 (C. C. A. 4), as follows: "When a specific inquiry concerning the risk is made and an untrue answer given, the policy is avoided whether inquiry and answer were in the view of the court and jury material or not, because the insurer has the right to decide for himself what is material to his risk, and his inquiry is notice to the applicant for insurance that he regards the answer material." Compare, also, N. Y. Life Ins. Co. v. Goerlich, 11 F.(2d) 838 (C. C. A. 6), and Hartford Fire Ins. Co. v. Jones, 15 F.(2d) 1, 2 (C. C. A. 6).

In the early case of Buell v. Connecticut Mut. Life Ins. Co., 4 Fed. Cas. 590, No. 2,104, the Circuit Court for the Northern District of Ohio defined the distinction between a warranty and a representation as: "Where the answers are responsive to direct questions asked by the insurance company, they are to be regarded as warranties, and where they are not so responsive, but volunteered without being called for, they should be construed to be mere representations." The court was there referring to an unresponsive answer untruthfully stating a past fact. But in here determining whether...