Satz v. Massachusetts Bonding & Ins. Co.

• Decision Date: 19 October 1926
• Citation: 243 N.Y. 385,153 N.E. 844
• Court: New York Court of Appeals Court of Appeals
• Parties: SATZ v. MASSACHUSETTS BONDING & INS. CO.

243 N.Y. 385

153 N.E. 844

SATZ

v.MASSACHUSETTS BONDING & INS. CO.

Court of Appeals of New York.

Oct. 19, 1926.

Action by Lew A. Satz against the Massachusetts Bonding & Insurance Company. From an order of the Appellate Division (217 App. Div. 734,216 N. Y. S. 909), affirming a determination of the Appellate Term (126 Misc. Rep. 199, 213 N. Y. S. 215), which reversed a judgment of the City Court (125 Misc. Rep. 798, 211 N. Y. S. 718), dismissing the complaint, the defendant appeals by permission on certified questions.

Reversed, and judgment of City Court affirmed.

Appeal from Supreme Court, Appellate Division, First Department.

I. Maurice Wormser, Alfred J. Rifkind and Thomas T. Reilley, all of New York City, for appellant.

Alfred B. Nathan, of New York City, for respondent.

POUND, J.

The action is on a policy of burglary insurance. The policy provides:

‘The Massachusetts Bonding & Insurance Company, hereinafter called the Company, in consideration of the payment of the premium and of the statements contained in the schedule hereof, which statements the assured makes on the acceptance of this policy and warrants to be true, hereby agrees to indemnify, in the amounts as defined in item twelve (12) of said schedule, the person or persons designated in statement one (1) thereof.’

In the schedule which is attached to and forms part of the policy it is also expressly provided that:

The ‘statements herein contained are made the basis of this insurance, and the assured, by the acceptance of this policy, hereby warrants them to be true.’

The plaintiff's ninth warranty, which is found in the schedule, reads:

‘No burglary, theft, or robbery insurance applied for or carried by the assured, at the premises covered hereby or elsewhere has ever been declined or canceled, except as herein stated-no exceptions.’

Printed in bold type, on the front of the policy at the bottom thereof, are the words ‘ Please Read Your Policy.’

The complaint alleges a loss under the terms of the policy and a denial of liability thereunder. The answer sets up as defenses: (1) A breach of warranty in that an application by the assured for a policy of burglary insurance had been declined by one insurance company; and (2) a further breach of warranty in that a burglary insurance policy issued to assured had been canceled by another insurance company.

Plaintiff's reply does not deny the making of the warranties and admits that the application had been denied and the policy canceled as alleged in the answer, but alleges that the policy in suit was issued with full knowledge of the facts, and that defendant is estopped from alleging such breach of warranty. Motion was made by defendant for judgment on the pleadings in the City Court of the city of New York and granted. The Appellate Term reversed the judgment and denied the motion. The Appellate Division affirmed by a divided court, two of the justices dissenting. An appeal to this court was allowed on the following certified questions:

‘(1) Is parol evidence, as to the prior alleged negotiations set forth in the reply, admissible to overcome the breach of the warranties which form the basis of the defenses to the plaintiff's action on said policy in the City Court of the city of New York, where there is physically attached and incorporated into said policy a schedule of the aforesaid warranties which, by the terms of the policy, the assured on the acceptance thereof warrants to be true?

‘(2) Is the plaintiff, in an action on a policy of burglary insurance instituted in the City Court of the city of New York, estopped from offering parol evidence to overcome the warranties contained in the schedule incorporated in the policy, which warranties, by the terms of the policy, the assured warrants are true upon acceptance and are made the basis of the insurance, where the reply of the plaintiff to the affirmative defenses of breach of said warranties contained in the schedule fails to allege that the defendant did anything to prevent him from examining the policy?

‘(3) Is the plaintiff in his action in the City Court of the city of New York, on a policy of burglary insurance, estopped from adducing parol evidence; to overcome the breach of warranties affirmatively pleaded in the answer; of representations alleged, in his reply, to have preceded delivery of the policy (which alleged representations are inconsistent with the warranties upon the breach of which said affirmative defenses are predicated), where the warranties alleged to have been breached are contained in a schedule physically attached to and incorporated in the policy, where the policy, accepted and retained by the assured, by its terms provides that the warranties are the basis of the insurance and the assured by the acceptance of the policy warrants that they are true, and where the reply does not allege that the defendant did anything to prevent the plaintiff from reading the policy, upon the front of which, when folded for delivery and accepted, appeared in bold type the words, ‘ Please Read Your Policy’?

‘(4) Is the reply to the third and fourth defenses contained in the answer insufficient, as a matter of law, entitling the defendant to judgment on the pleadings?’

[1] It has been broadly stated:

‘The law is well settled in this state that if the insurance company or its general agent is at the time of the issue of the policy notified of facts which, under the terms of the policy, would render it void if not noted on the policy, the company cannot avail itself of such a defense.’ Lewis v. Guardian Fire & Life Assur. Co., 181 N. Y. 392, 395,74 N. E. 224 (106 Am. St. Rep. 557), citing Van Schoick v. Niagara Fire Ins. Co., 68 N. Y. 434;Wood v. American Fire Ins. Co., 149 N. Y. 382, 44 N. E. 80,52 Am. St. Rep. 733.

This rule was repudiated by the Supreme Court of the United States in the case of Northern Assur. Co. v. Grand View Building Association, 183 U. S. 308, 22 S. Ct. 133, 46 L. Ed. 213;Id., 203 U. S. 106, S. Ct. 27,51 L. Ed. 109, as fallacious and as overlooking the general principle that a written contract cannot be varied or defeated by parol evidence, but it remains, with proper limitations, the law of the state. McClelland v. Mut. Life Ins. Co. of New York, 217 N. Y. 336, 345,111 N. E. 1062. It has been applied to conditions on the face of the policy to the effect that the policy shall be void if the insured is not in good health when the policy is delivered (McClelland v. Mut. Life Ins. Co. of New York, supra); if the building insured is on leased land, is incumbered, unoccupied, or if the title of the insured is other than of unconditional ownership (Van Schoick v. Niagara Fire Ins. Co., supra); to representations or warranties not physically a part of the policy of insurance (Sternaman v. Metropolitan Life Ins. Co., 170 N. Y. 13, 62 N. E. 763, 57 L. R. A. 318, 88 Am. St. Rep. 625); or to cases where the company has been guilty of some fraud or unfair conduct whereby the assured is led to believe that the...