Sebring v. Fid.-Phenix Fire Ins. Co. of New York

• Decision Date: 10 February 1931
• Citation: 174 N.E. 761,255 N.Y. 382
• Parties: SEBRING v. FIDELITY-PHENIX FIRE INS. CO. OF NEW YORK.
• Court: New York Court of Appeals Court of Appeals

255 N.Y. 382

174 N.E. 761

SEBRING

v.FIDELITY-PHENIX FIRE INS. CO. OF NEW YORK.

Court of Appeals of New York.

Feb. 10, 1931.

Action by James O. Sebring against the Fidelity-Phenix Fire Insurance Company of New Youk. From a judgment of the Appellate Division (229 App. Div. 830, 242 N. Y. S. 850), unanimously affirming a judgment entered upon the verdict of a jury in favor of plaintiff, defendant by permission appeals.

Judgments of Appellate Division and Trial Term reversed, and new trial granted.

Appeal from Supreme Court, Appellate Division, Fourth Department.

W. Earl Costello, of Corning, for appellant.

James O. Sebring, of Corning, for respondent.

O'BRIEN, J.

Plaintiff owns a farm in Tioga county situated a few miles from the village of Owego. He testified that during the year 1921 or 1922 he purchased it for the sum of $11,500 and within a year or two improved it by the erection of a large barn costing $10,000. In the year 1926 the land with all improvements was assessed at $4,800, and defendant's real estate experts estimated its market value in that year at $8,000. Since its purchase by plaintiff, the farm has never earned a profit. Not since the barn was built has any stock been kept on the farm. The principal produce was hay. Until July, 1926, the buildings were insured for only $1,600. Some time during that year William H. Hubbard came to occupy the farm as a tenant. He had been a farmer in Ontario county and had kept a restaurant. Plaintiff, who is an attorney at law, testified that he had known Hubbard for years and had represented him in litigation. In July the insurance was increased by $2,050, in August by the same amount, and in January, 1927, $12,400 more was added. A small proportion of this new insurance covered household property, farm produce, and machines. Plaintiff testified that in March, 1927, he entered into a written contractof sale to Hubbard. On April 4, 1927, defendant, at plaintiff's request, made the following indorsement on its policy: ‘Title to property insured under the policy is now vested in James O. Sebring, owner and William H. Hubbard, purchaser under land contract as interest may appear.’ On the night of May 23, 1927, fire destroyed the farm house, the large barn, the toolhouse, and the woodhouse. In the proof of loss prepared by plaintiff and Hubbard the origin of the fire is stated to be lightning. There is no competent evidence in behalf of plaintiff that lightning had occurred in the vicinity of the farm on the night of the fire, but for defendant two witnesses testified that there was no lightning. One year later, Hubbard assigned to plaintiff all his right in and to the loss under the policy. He was present at the trial but did not testify. The jury rendered a verdict in plaintiff's favor for $3,950. The judgment has been unanimously affirmed and leave to appeal to his court granted by the Appellate Division.

The standard form policy includes this provision: ‘Fraud, misrepresentation, etc. This entire policy shall be void if the insured has concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof.’ In its pleading, as well as at the trial by exceptions, and in this court, defendant raised the point that plaintiff's failure to disclose the facts known to him in respect to Hubbard's record, when he caused the indorsement to be made on the policy in April, 1927, constitutes a concealment of material facts and voided the policy. It offered to prove that plaintiff, as attorney, had represented Hubbard in various actions against insurance companies involving insurance losses, that Hubbard had been convicted in Pennsylvania of conspiracy to defraud insurance companies, and that plaintiff had defended him on his trial for that crime. Objections to the questions were sustained and the exemplified copy of the record of conviction was excluded. We think reversible error was thereby committed. Defendant was entitled to prove, if it could, that the facts relating to Hubbard were material, that they were concealed, and that the concealment was fraudulent.

The question of the materiality of a representation or concealment is ordinarily for the jury. Penn Mut. Life Ins. Co. v. Mechanics' Savings Bank & Trust Co. (C. C. A.) 72 F. 413, 38 L. R. A. 33. The usual test relates to the effect which knowledge of the fact would have on the making of the contract. That test is complete if such knowledge would influence the parties in making it. If the underwriter, with full information, would have refused to accept the risk, then the concealment is material. The undisclosed fact need not be of such a nature as to have increased the risk or contributed to any loss or damage. Vance on Insurance (2d Ed.) p. 347; Jefferson Ins. Co. v. Gotheal, 7 Wend. 72, 22 Am. Dec. 567. The fact that an owner had placed upon premises, about to become the subject of an insurance contract, a pyromaniac or even a sane person whose chief activity consisted in the commission of arson for the purpose of collecting insurance, would present such a perfect illustration of materiality that no jury could fail to recognize it. In a lessor degree, the occupation of the premises by one who had been convicted of such an offense only on a single occasion would constitute sufficient evidence for the consideration of a jury and might form a solid basis for a verdict holding that concealment of that fact is material. As far as materiality is concerned, no different principle exists in marine, fire, and life insurance.

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