Polar Mfg. Co. v. Integrity Mut. Ins. Co.

• Decision Date: 02 June 1959
• Citation: 96 N.W.2d 822,7 Wis.2d 443
• Parties: POLAR MANUFACTURING CO., a Wisconsin corporation, et al., Respondents, v. INTEGRITY MUTUAL INSURANCE CO., Appellant.
• Court: Wisconsin Supreme Court

Page 822

96 N.W.2d 822

7 Wis.2d 443

POLAR MANUFACTURING CO., a Wisconsin corporation, et al., Respondents, v. INTEGRITY MUTUAL INSURANCE CO., Appellant.

Supreme Court of Wisconsin.

June 2, 1959.

Genrich, Terwilliger, Wakeen, Piehler & Conway, Wausau, Paul D. Hilton, Lee Nutt, Wausau, of counsel, for appellant.

Schmitt & Wurster, Merrill, Charles B. Avery, Antigo, for respondent, Polar Manufacturing Company.

David W. Goodnough, Antigo, for respondent, Fidelity Savings Bank.

BROADFOOT, Justice.

Upon this appeal the defendant contends that the special verdict and the court's instructions were erroneous. This involves a construction of sec. 209.06(1), Stats. 1955, which reads as follows:

'No oral or written statement, representation or warranty made by the insured or in his behalf in the negotiation of a contract of insurance shall be deemed material or defeat or avoid the policy, unless such statement, representation or warranty was false and made with intent to deceive, or unless the matter misrepresented or made a warranty increased the risk or contributed to the loss.'

The trial court interpreted the statute to mean that any inaccurate statement in the application must be false and made with intent to deceive in order to avoid the policy. We cannot agree that this is a proper construction of the statute. In Olson v. Herman Farmers Mut. Ins. Co., 187 Wis. 15, 18, 203 N.W. 743, 744, this court made the following statement with reference to the statute:

'* * * It will be observed that the last lines of the statute 'or unless the matter misrepresented or made a warranty, increased the risk or contributed to the loss,' are connected with what precedes by the disjunctive 'or.' In other words, it is probably the true construction of the statute that, if the misrepresentation in an application regularly obtained increases the risk, that is sufficient to defeat recovery even if there is no actual intent to deceive. * * *'

In another portion of the Olson case the word 'erroneous' is used with reference to a statement in the application. Therefore we construe the statute to mean that if there is an inaccurate or erroneous statement in the application for insurance the court should first determine whether it is material. Erroneous or inaccurate statements might be made which had no materiality.

From the record in this case it is clear that the answer to Question No. 47 was an inaccurate or erroneous statement. It follows that there might be three grounds for avoiding the policy: (1) If the statement was false and made with intent to deceive; (2) if the statement increased the risk; or (3) if the statement contributed to the loss. Therefore the special verdict should have inquired as to whether such statement was false and made with intent to deceive. Further inquiry should have been made as to whether or not the inaccurate statement increased the risk to the defendant company. The jury should have been instructed to answer the last question regardless of its answer to the first. The form of the special verdict was erroneous and this will require a new trial. The trial court's instructions were correct when applied to its construction of the statute, but can be adapted to the new verdict.

The defendant further contends that it motion for a directed verdict should have been granted. We cannot agree with that contention. There are issues of fact to be passed upon by a jury. Polar Manufacturing Company was organized in 1943. The corporation purchased certain businesses and property from George Klement. During the trial the defendant made an offer of proof that Klement was the only salaried officer of the corporation; that he and his family held a majority of stock therein; and that Klement as an individual had sustained fire losses between 1936 and 1939. This offer of proof was made in connection with the claim that the answer to Question 50 was inaccurate. The trial court correctly ruled that Question 50 was properly answered. It made inquiry only as to the corporation and no questions were asked Klement as to whether he, as an individual, had ever sustained a fire loss.

The bank contends that the judgment should be affirmed to the extent of its mortgage interest in the insured property regardless of how the other questions are determined. This raises the question of the effect of a standard mortgage clause attached to a standard fire insurance policy. Our attention is called to three opinions by this court touching on the subject. In Prudential...