Peterson v. Pacific Fire Ins. Co. of New York

• Decision Date: 22 May 1933
• Docket Number: 14572
• Citation: 148 So. 283
• Court: Court of Appeal of Louisiana — District of US
• Parties: PETERSON v. PACIFIC FIRE INS. CO. OF NEW YORK

148 So. 283

PETERSON v. PACIFIC FIRE INS. CO. OF NEW YORK

No. 14572

Court of Appeal of Louisiana, Orleans.

May 22, 1933

Rehearing denied June 29, 1933.

Deutsch & Kerrigan & Burke, of New Orleans, for appellant.

Dresner & Dresner, of New Orleans, for appellee.

OPINION

WESTERFIELD Judge.

This is a suit on a policy of fire insurance covering household effects. From a judgment in favor of plaintiff, defendant prosecutes this appeal.

Joseph Peterson, plaintiff herein, obtained a policy of fire insurance from the defendant corporation on January 6, 1932. The policy was issued without any formal application blank having been executed or any inquiry made concerning the incumbrance of the household effects, the subject of the insurance. A little more than one month later all of the property insured by the policy was destroyed by fire. An adjuster of the defendant called upon plaintiff and agreed with him that the loss, after deduction of depreciation should be fixed at the sum of $ 947.21, which was about one-half the purchase price of the property. According to plaintiff, an agreement was made to settle the loss within ten days, but this is denied by the adjuster, and the fact is not of importance. A few days later defendant's adjuster called upon plaintiff, and inquired whether there was a chattel mortgage on the insured property, and was informed that there was such a mortgage for the sum of $ 300, bearing upon about one-third of the property. The insurance company defendant, thereupon refused to pay the loss upon the ground that a provision in the policy provided that, if the property insured be or become incumbered, the policy would, ipso facto, be annulled. The provision of the policy referred to reads as follows: "This entire policy, unless otherwise provided by agreement endorsed hereon or added hereto, shall be void (3)5C if the subject of insurance be personal property and be or become encumbered by a chattel mortgage."

The good faith of plaintiff is not questioned; the sole reliance of defendant being upon the quoted forfeiture clause in its policy. Plaintiff calls our attention to the provisions of Act No. 222 of 1928 to the effect that no policy of fire insurance on property in this state shall be declared void for the breach of any representation or warranty in the policy or application, unless such breach exist at the time of the loss, and shall be "such a breach as would increase either the moral or physical hazard under the policy." Counsel for plaintiff contends, in the first place, that defendant has failed to aver that the breach of the mortgage clause of plaintiff's policy increased the moral or physical hazard, and that, therefore, all proof relative to a chattel mortgage is inadmissible; and, secondly, that the failure of the defendant insurance company to make inquiry concerning the existence of the chattel mortgage at the time the policy was issued amounted to a waiver of the mortgage clause, and, finally, that the mere fact that the property has been mortgaged is not sufficient to establish an increase in hazard, the question of whether the hazard has been increased being one of fact dependent upon the special circumstances in each case, and, there being no evidence in this case tending to show that there was any increase in the hazard, this defense must fail. On the first point raised by plaintiff we notice that the defendant evidently, without having the act of 1928 in mind when the answer was prepared, simply sets up a breach of the mortgage clause and claims a forfeiture in accordance with the terms of the policy; there being no reference to the fact that the alleged breach amounted to an increase in hazard. The position of plaintiff is that there must necessarily be an allegation to the effect that the hazard has been increased, because it is only in that event that a breach of warranty under the act of 1928 can be regarded as a forfeiture; the question of whether a breach constituted an increase in hazard being one of fact, which must be specially pleaded. In support of this proposition we are referred to Sigrest v. Federal Ins. Co., 14 La.App. 55, 129 So. 379, which is authority for the proposition advanced, but in that case the alleged breach of warranty claimed to constitute an increase in hazard related to a physical hazard, whereas, in the case before us, the alleged increase was in the moral hazard, a distinction which we regard as of importance. The question of whether there is an increase in the physical hazard may well be considered a question of fact to be alleged and proved like any other fact in a case, but the same is not true of a moral hazard, for a state of mind is not susceptible of evidentiary proof, and, we believe, it is sufficient to allege the fact of the existence of the mortgage and to argue therefrom that the moral hazard has been increased, since there is no other fact that could be alleged or proven which would be of any assistance in reaching a conclusion that the hazard had been increased. So that we conclude, on this point, that the pleadings were sufficient to permit proof of the existence of the chattel mortgage.

The second contention to the effect that the policy provision relied upon had been waived is supported by numerous authorities mentioned in plaintiff's brief: Corpus Juris vol. 26, p. 318; Ruling Case Law, vol. 14, p. 1186, note 2, and many therein cited. But, when we come to examine the jurisprudence in Louisiana, we find that a different view obtains. In the case of Gitz Sash Factory v. Union Ins. Co., 160 La. 381, 107 So. 232, 233, a case relied upon by plaintiff, we find the following: "The decisions of the Supreme Court of this state are in line with the jurisprudence of a majority of the states of the Union, as to the application of the doctrine of waiver by the conduct and declarations of insurance companies, and as to the proof of estoppel by parol, notwithstanding the provisions contained in the policy requiring written evidence as to waiver. Corporation of Roman Catholic Church v. Royal Ins. Co., 158 La. 601, 602, 104 So. 383; Brodie v. Atlas Assurance Co., 158 La. 695, 104 So. 620; Gaudet v. North River Ins. Co., 156 La. 719, 101 So. 118; Investors' Mortgage Co. v. Marine & Motor Ins. Co., 155 La. 627, 99 So. 486 (on rehearing); Bank v. Manhattan Ins. Co., 52 La.Ann. 36, 48, 26 So. 800." That case is authority for the proposition that the written provisions of the policy may be waived by parol, and it held the insurance company responsible for knowledge of its agent concerning the existence of a chattel mortgage, but the case does not hold in line with the common-law authorities that, "if an insurance company elects to issue its policy of insurance against a loss by fire without a written application, and without any representation or inquiry in regard to title or encumbrances, it cannot complain, after a loss has occurred, that an existing encumbrance was not disclosed. (3)5C In other words, the insurer is deemed by its action to have consented to assume the risk of such liens and encumbrances as may have been upon the property, and to that extent to have modified or suspended the printed terms of the policy which was prepared for general use, without reference to the particular case." 26 Corpus Juris, p. 318, §391. In St. Landry Wholesale Mer. Co. v. New Hampshire Fire Ins. Co., 114 La. 146, 38 So. 87, 89, 3 Ann. Cas. 821, the court held that, since the adoption of Act No. 105 of 1898, prohibiting the issuance of policies on property in this state in any other form than that of the New York standard form of fire insurance policies, copied in the statute, there was no reason why a court, in interpreting insurance contracts, should lean one way or the other, and that, adopting the language of the court in Dumas v. Northwestern Nat. Ins. Co., 12 App. D.C. 245, 40 L.R.A. 358, "an express condition that a policy shall be void if the insured is not the sole and unconditional owner of the property, or if it is mortgaged, will render it void if the conditions are broken, even if the insured made no representations as to the property or any fraudulent concealment of the facts." See, also, Shuff v. Life & Casualty Co., 164 La. 741, 742, 114 So. 637. Our conclusion on the question of waiver, therefore, is that under the jurisprudence of this state the failure to make inquiry concerning the existence of the mortgage does not operate as a waiver of the printed stipulations in the policy. The final contention of plaintiff is that the mortgage in this case did not increase the moral hazard, and therefore, in view of the provisions of the act of 1928, the breach of the conditions of the policy cannot work a forfeiture. There are many cases which hold that the existence of a mortgage upon insured property ipso facto increases the moral hazard. Heliotos v. Great American Ins. Co. of N. Y., 103 N.J.L. 529, 138 A. 97; McGowan v. People's Mutual Fire Ins. Co., 54 Vt. 211, 41 Am. Rep. 843; Brooks v. Liverpool & L. & G. Ins. Co. (La.App.) 144 So. 788. In Lee v. Agricultural Ins. Co., 79 Iowa 379, 44 N.W. 683, 684, the court said: "The giving of the chattel mortgage is, beyond question, an increase of the risk, and a decrease of the defendant's security, because thereby the assured lessened his interest in the insured property." In the opinion of the writer, at...