Glens Falls Insurance Co. v. Michael

This action was brought by appellees upon a policy of insurance against loss by fire. The policy contained the following, among other provisions: "This entire policy shall be void if the insured has concealed, or misrepresented in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property be not truly stated herein; or in case of any fraud or false swearing by the insured, touching any matter relating to this insurance, or the subject thereof, whether before or after the loss; this entire policy, unless otherwise provided by agreement, indorsed hereon and added hereto, shall be void * * * if the interest of the insured be other than unconditional and sole ownership; or if the subject of insurance be a building on ground not owned by the insured in fee simple." Appellant answered the complaint in six paragraphs, the first, second and sixth of which were afterwards, by agreement, withdrawn. The third paragraph of answer alleged that "at the time said policy under which plaintiffs' claim was issued, and at the time of said loss and damage by fire, the interest of the plaintiffs in the buildings, additions, and appurtenances mentioned in said policy of insurance, and for loss and damage of which, by fire, the plaintiffs have brought this action, was not that of sole and unconditional ownership, and said building and its additions and appurtenances were not, at the time of the issuance of said policy, and were not at the time of said loss and damage by fire, on ground owned by the plaintiffs or either of them in fee simple; and therefore said policy of *Page 663 insurance, so issued to them, was and is, by the provisions of the contract in the complaint mentioned and set out, void." The fourth paragraph alleged, in substance, that although it was not so provided by agreement indorsed on or added to the policy, yet the subject of insurance was, at the time of issuing the policy and of the fire, a building on ground not owned by assured in fee simple, but that at said times the plaintiffs' interest in said' premises was that of life tenants only, and the fee was in other persons named. The fifth paragraph alleged that, although it was not so provided by agreement indorsed on or added to the policy, nevertheless, at the time of issuing said policy, and at the time of said fire, the interest of plaintiffs in the subject of insurance was not that of unconditional or sole ownership, but was that of life tenants only; the remainder in fee in and to the subject of insurance being at said times vested in other persons named. Appellees replied to the third paragraph of answer herein set out, admitting that at the time of the issuance of the policy, and of the loss and damage by fire sued for, their interest in the buildings mentioned in the policy of insurance was not that of unconditional ownership, and that said buildings were not at the time on grounds owned by them or either of them in fee simple, but they averred "that no change had taken place in the condition of the title to said property, described in the policy sued on, since said policy was issued; that the plaintiffs were then and are now the owners of a life estate in said real estate, with the remainder in fee to Herbert S. Michael, George Michael, and Morris S. Michael, their children; that no written application was made by plaintiffs or either of them for the policy of insurance sued on, and no representations of any character as to the state of said title were made by these plaintiffs or either of them; that at no time before the issuing of said policy or since that time, up until the date of the loss, was anything concerning the state of said title *Page 664 asked of said plaintiffs or either of them by the agent of the defendant who wrote said policy; that the attention of neither of the plaintiffs was called to the conditions in the policy sued on in reference to title, and plaintiffs had no knowledge of said condition in said policy, or that the defendant considered the state or condition of plaintiffs' title to the property insured material to the risk, or that anything in the condition of plaintiffs' title might or could work a forfeiture of said policy; that the defendant, without making any inquiry of plaintiffs concerning the condition of said title, issued said policy, and accepted and retained the premium therefor from the plaintiffs, and that said defendant never thereafter made any objection to the condition of said title until after the loss by fire had occurred; that the plaintiffs accepted said policy and paid the premium therefor in the full belief that the same was a valid and binding contract of insurance, covering the property described therein. Wherefore plaintiffs aver that the defendant has waived any defense to said policy by reason of the condition of said title, and they pray for judgment accordingly." Appellees' reply to the fourth paragraph and also to the fifth paragraph of answer was substantially the same as the reply to the third paragraph of answer, above set out. Appellant demurred to each of the replies for want of sufficient facts. It was thereupon agreed by the parties to this action, and the agreement made a matter of record, that all questions not presented by these pleadings should be waived, and the cause submitted to the court upon the issue of law presented by appellant's demurrer to each of the replies, and that, in case the court should hold the replies sufficient to avoid the several paragraphs of answer to which they were addressed, judgment was to be rendered in favor of appellees for $917.86, together with interest after March 1, 1903, and, in case the court should hold the replies insufficient, *Page 665 judgment should be rendered in favor of appellant for costs. But nothing in the agreement was intended to preclude either party from appealing or otherwise obtaining a review of the decision of the circuit court in like manner as they might do without having entered into such stipulation. The court subsequently overruled appellant's demurrer to each of said paragraphs of reply, to which rulings the appellant duly excepted, and thereupon judgment was rendered in accordance with said agreement in favor of appellees for $932.40, together with costs. The assignment of errors calls in question the decision of the court on appellant's demurrer to each of said paragraphs of reply. The contention of appellant is that appellees are bound by the strict terms of the policy with regard to title, and that it was their duty to make known, voluntarily, the exact state of the title to the grounds upon which the insured building stood, and to see that the same was correctly described, and that a failure to do so rendered the policy absolutely void. This contention is primarily founded upon a principle which prevails in marine insurance. The subject of marine insurance is often in distant ports or upon the high seas, and generally not open to the examination of the underwriter. The perils to which such property may be exposed are peculiarly numerous, hazardous, and difficult to anticipate by any reasonable inquiry, but are always known to the owner of the property. The underwriter is compelled, from necessity, to rely upon the assured, for a full disclosure of all facts known to him which may in any way affect the risk to be assumed. It is both reasonable and just, under such circumstances, that the assured should not only act with unquestioned good faith, but also make known every fact and circumstance within his knowledge which might increase the hazard of insurance, and, in case of failure so to do, liability upon the policy should be avoided. *Page 666 It is apparent that there is a marked difference in this respect between the subjects of marine and fire insurance. The subjects of fire insurance may almost always be seen and inspected, and, if the underwriter assumes the risk without taking the trouble either to examine or inquire about facts which may affect the hazard of insurance, he ought not to complain, in the absence of fraud, if the risk proves to be greater than he anticipated. A pertinent general rule of law applicable to the construction of these contracts is, "that if policies of insurance contain inconsistent provisions, or are so framed as to be fairly open to construction, that view should be adopted, if possible, which will sustain rather than forfeit the contract." McMaster v.New York Life Ins. Co. (1901),183 U. S. 25, 22 Sup. Ct. 10, 46 L. Ed. 64. See, also,Thompson v. Phenix Ins. Co. (1890),136 U. S. 287, 10 Sup. Ct. 1019, 34 L. Ed. 408; First Nat.Bank v. Hartford Fire Ins. Co. (1878),95 U. S. 673, 24 L. Ed. 563. The courts of many states have construed policies having provisions identical with or similar to those of the policy in suit. The importance of the principle involved, and a desire that the reasoning and authority upon which our conclusion rests may more fully appear, have prompted us to quote extensively from these cases. In the case of Morotock Ins. Co. v. RodeferBros. (1896), 92 Va. 747, 24 S. E. 393, 53 Am. St. 848, the court pertinently said: "Applicants for insurance are not generally aware of the necessity of disclosures which long experience in the business of insurance has shown to underwriters to be necessary, or what disclosures it is important to make; while insurance companies cannot only protect themselves by making inquiries in regard to such things as they may regard to be material, but, as is well known, are in the habit of doing so. * * * If an insurance company elects to issue its policy without an application or any representation *Page 667 in regard to the title to the property upon which the insurance is effected, the company cannot complain, after a loss has ensued, that the interest of the insured was not correctly stated in the policy, or that an existing encumbrance was not disclosed." The same court in the case of Manhattan Fire Ins. Co. v.Weill Ullman (1877), 28 Gratt. (Va.) 389, 26 Am. Rep. 364, held that although it was provided in the policy that in case of any omission to make known every fact material to the risk, or if the interest of the assured in the property be not truly stated in the policy it should be void; yet, an omission to disclose, in the absence of any inquiry, an encumbrance in the form of a deed of trust subsisting on the property at the time the insurance was effected, did not vitiate the policy. In the case of Philadelphia Tool Co. v. British,etc., Assur. Co. (1890),132 Pa. St. 236, 19 Atl. 77, 19 Am. St. 596, the court said, that the defense rested upon "one of the almost innumerable conditions, stipulations, and provisos which appear on the policy, and which asserts that if the assured is not the sole and unconditional owner of the property, or if the building stands on ground not owned in fee simple by the assured, or if the interest of the assured is not truly stated in the policy, then the policy shall be void." In discussing the defense thus asserted the court said: "Is this condition applicable to the case presented on this policy? A policy of insurance, like any other contract, is to be read in the light of the circumstances that surround it. This policy was issued without any application or written request describing the interest of the assured in the buildings. No actual representation of any sort upon the subject, oral or written, is alleged to have been made by or on behalf of the assured. We ought to assume that a policy written under such circumstances was written upon the knowledge of the representative of the insurer, and intended to cover in good faith the interest which the insured had in the buildings. Fraud is never to be presumed, and in this case no fraudulent representation *Page 668 is shown or alleged, unless it can be deduced from the statements of the insurer, made, as we must presume, on the knowledge of its representative, and for which the insured is in no manner responsible. We must also remember that this policy is to be interpreted most strongly against the company whose contract it is. Applying these principles to the question now raised, we conclude that the policy, written on the knowledge of the insurer, was made in view of the facts of the case, and was intended to cover such interest in the buildings as the insured had. This was a leasehold only, but it was an insurable interest. Presumably it is the interest which an application, if one had been made, would have shown, for it is the only interest which the tool company ever had or claimed to have. To such an interest, the proviso whose protection is invoked is not applicable." From the case of Western, etc., Pipe-Lines v. Home Ins.Co. (1891), 145 Pa. St. 346, 22 Atl. 665, 27 Am. St. 703, we quote the following pertinent declarations: "It is not even pretended that there was any fraudulent concealment of ownership of the property, or that any untruthful representation was made, upon the faith of which the policy was issued; nor is it claimed that the defendant company was not fully aware of the exact situation and ownership of the oil when it accepted the risk. * * * The policy in suit was issued without any application or written request describing the interest of the insured in the oil, and it does not appear that any actual representation of any kind was made by the insured. * * * The defendant having insured the oil contained in tank No. 1, without any representation as to the quantum of plaintiff's interest therein, must be considered as having insured it as against any loss which the plaintiff would suffer by fire." In the case of Short v. Home Ins. Co. (1882),90 N. Y. 16, 43 Am. Rep. 138, a somewhat similar question was involved, and upon that point the court said: "It is held that a *Page 669 neglect on the part of the insured to make known the fact that a building is unoccupied is not a breach of a condition in the policy avoiding it in case of any omission to make known every fact material to the risk; that the applicant has a right to suppose that the insurer will make proper inquiries, and that in making inquiries as to material facts he considers all others as immaterial, or assumes to know or waives information in regard to them; that when he fails to inquire as to occupation, unless there is proof of concealment, it is not evidence of bad faith which will vitiate the policy, and that where no statement is made in the policy as to the occupation, it must be assumed that the insurance is made without regard to occupation." The case of Hoose v.Prescott Ins. Co. (1890),84 Mich. 309, 47 N. W. 587, 11 L. R. A. 340, is aptly in point upon the subject under consideration. In that case the court said: "But the defendant relies upon the further provision contained under this head, to the effect that `this entire policy, and every part thereof, shall become void unless consent in writing is indorsed by the company hereon in each of the following instances,' namely: (1) If the assured is not the sole and unconditional owner of the property. (2) If any building intended to be insured stands on ground not owned in fee simple by the assured. (3) If the interest of the assured in the property, whether as owner or otherwise, is not truly stated in the policy. (4) If any change take place in the title, interest, location, or possession of the property, by sale, transfer or conveyance, in whole or in part. In construing this portion of the policy, the whole must be taken together. Now, the object sought to be accomplished by the person applying for insurance was to obtain indemnity against loss by fire of her interest in the building. If the insurance company which made out this policy upon the verbal application to its agent had desired to know what interest it was insuring, it should have stated it in that part of the policy pertaining *Page 670 to the risk. It was the intention of these parties to issue a valid and binding contract of insurance, valid and binding from the time of acceptance of the same by the assured, not that after it had been accepted by the assured then the assured should apply to the company and obtain its consent in writing indorsed on the policy, stating that the assured was not the sole and unconditional owner of the property, or stating that the building intended to be insured stood on ground not owned in fee simple by the assured, or stating by indorsement on the policy the interest which the assured had in the property covered by the insurance; and yet the language of this part of the policy is that the entire policy, and every part thereof, shall become void, that is, void in the future, unless such consent in writing is indorsed by the company in writing thereon. To give any reasonable force and effect to this clause of the policy, it can only be held to apply to such changes as arise after the policy has been delivered and accepted, in the ownership of the property, or, if a building stood upon leased ground, the ownership of the building, and it does not apply to an existing state or condition of the property at the time the policy was issued. It looks to the future for protection of the insurer, and not to the present, only in so far as the preceding portion of the policy is violated by a misstatement or concealment of any fact material to the risk. Construing this portion of the policy with the testimony in the case, and with the fact that the company issued the policy to Mrs. Hoose, without stating in the policy what her interest was, but insuring the building against loss by fire to an amount not exceeding the interest of the assured in the property, we think that it must be held that the defendant understood the condition of the title, and intended to insure whatever interest Mrs. Hoose had which was insurable, not exceeding the amount named in the policy. We do not think that it would carry out the intention of the parties, or be a fair and just construction of this instrument, *Page 671 to hold that when it was issued and accepted by the assured, and the premium paid, it was void from that moment because it did not contain the indorsements required above." See, also, to the same effect, Hall v. Niagara Fire Ins. Co. (1892),93 Mich. 184, 189, 53 N. W. 727, 18 L. R. A. 135, 32 Am. St. 497. In Miotke v. Milwaukee, etc., Ins. Co. (1897),113 Mich. 166, 71 N. W. 463, the court said: "The day has gone by in Michigan for successfully contending that the mere acceptance of a policy containing a condition like this makes it conclusive against the holder who accepts it in ignorance of the clause, and whose title does not conform to the strict letter of the condition." In the case of Lycoming Fire Ins. Co. v. Jackson (1876),83 Ill. 302, 25 Am. Rep. 386, it is said in the syllabus: "The principal thing in an insurance is, that the assured has an insurable interest, and has acted in good faith. Under a statement that he is the owner, he is only bound to prove an insurable interest, which is such a title as, if there should be a loss, without insurance, it would fall upon him." In Manchester FireAssur. Co. v. Abrams (1898), 89 Fed. 932, 32 C. C. A. 426, Gilbert, circuit judge, speaking for the court, said of the contention that the assured, by accepting a policy of insurance containing the stipulation that the same shall be void if the ownership of the assured is not unconditional and sole, has falsely represented to the insurance company that his ownership is sole and unconditional: "But sound reason as well as the weight of authority inclines us to the view that where the assured has an insurable interest in the property, and in good faith applies for insurance upon the same, and makes no actual misrepresentation or concealment of his interest therein, and the insurance company refrains from making inquiry concerning his interest, and issues a policy to him, and accepts and retains his premium, the company must be presumed to have knowledge of the condition of his title, and to *Page 672 assure the property with such knowledge." The same doctrine is declared in the case of Morrison v. Tennessee, etc., Ins.Co. (1853), 18 Mo. 262, 59 Am. Dec. 299, in the following words: "The rights of the insurer are sufficiently guarded, by having it in his power to exact, by inquiry, a description of the interest of the applicant, and by the recovery being limited in case of loss to the value of the interest proved on the trial. * * * These views commend themselves to our judgment by their justness, and we are satisfied will effect more solid justice between the assured and the insurer than the contrary doctrine. * * * The man without guile, who asks for insurance on his property, is not aware of the necessity of disclosures, which long experience in insurance offices has shown to the underwriter to be necessary, and to hold his policy void for not making disclosures of the importance of which he is not aware, would be gross injustice." The holding of the supreme court of Nebraska is to the same effect. We quote the following from the case ofHanover Fire Ins. Co. v. Bohn (1896),48 Neb. 743, 67 N. W. 774, 58 Am., St. 719: "Where an application for fire insurance is oral, and no inquiries are made by the agent of the insurer as to the condition of the title to the property, and the insured says nothing about the existence of a mortgage thereon, but does not keep silent from any sinister motive or with the intention on his part to deceive or mislead the insurer, then the fact that when the policy was issued there existed a mortgage upon the insured property will not invalidate the policy, notwithstanding the fact that the policy provides that it should be void if there existed an incumbrance, by mortgage or otherwise, against the insured property. Insurance Co., etc., v.Bachler [1895], 44 Neb. 549, 62 N. W. 911. But it is insisted that the policy sued upon was never in force because the Bohns at the date of its issuance were not the unconditional and sole owners of the insured property, and that the insured building was not *Page 673 situated on ground to which the Bohns had a fee-simple title. This contention involves the assumption that the Bohns at the date of the issuance of the policy in suit had no insurable interest in the insured property. * * * It has already been stated * * * that no questions as to the title of the Bohns were ever propounded to them by the fire insurance companies or their agents; that neither of the Bohns ever made any representations to the fire insurance companies as to what title they had or held; that the Bohns were not actuated by any sinister motives whatever in not disclosing the nature of the interest they had in the insured property; that no fraud was attempted by any one, and that the failure of the Bohns in September, 1890, to disclose the exact nature of their interest in the insured property resulted either from their not thinking about it, or from the failure of the fire insurance companies to inquire about that interest. Under these facts we think the policy, notwithstanding its provisions, was in force even in favor of the Bohns at the time the loss sued for occurred." See, also, PhenixIns. Co. v. Fuller (1898),53 Neb. 811, 74 N. W. 269, 68 Am. St. 637, 40 L. R. A. 408. In the case of German Ins., etc., Inst. v.Kline (1895), 44 Neb. 395, 62 N. W. 857, the court, upon this point, said: "The real contract of insurance is made before the policy is written, and the insured, by accepting the policy with such a condition as the one relied upon, cannot be deemed to have represented his title to be in fee simple, or not by leasehold. How can it be said that, under such circumstances, there has been either fraud, misrepresentation, or concealment on the part of the insured? He has represented nothing. He has not been asked to represent anything." In Quarrier v. Peabody Ins. Co. (1877),10 W. Va. 507, 27 Am. Rep. 582, which was an action upon a policy providing that if the interest of the insured is not truly stated, or is other than the entire, unconditional, and *Page 674 sole ownership, it must be so expressed in the policy, under penalty of forfeiture, it was held, that the policy was not rendered void by the failure to disclose that at the time the policy was issued there was a deed of trust on the property insured, no inquiry having been made about the state of the title. To the same effect is QueenIns. Co. v. Kline (1895), (Ky.), 32 S. W. 214. The supreme court of Montana, in the case of Wright v.Fire Ins. Co. (1892), 12 Mont. 474, 31 Pac. 87,19 L. R. A. 211, in a well-reasoned opinion, held that where an insurance company issued a policy on mortgaged property, without making inquiry as to whether the property was mortgaged, which fact was a matter of public record, and no representations touching the matter were made by the insured, who paid the premium and accepted the policy in ignorance of the fact that it contained a provision rendering it void if the property be or become mortgaged, unless consent in writing was indorsed by the company thereon, the company should be held by its action to have consented to take the risk on the mortgaged property, as effectually as if consent had been indorsed on the policy. In the case of Georgia Home Ins. Co. v.Holmes (1897), 75 Miss. 390, 23 South. 183, 65 Am. St. 611, it is said: "This is a case, then, in which no application — no formal application — was made, because the agent held it unnecessary, inasmuch as he knew about the condition of the property, and a case in which appellee did not know there was any anti-mortgage clause contained in the policy until after loss, and the question is whether the company shall now be permitted to repudiate its contract made, not upon any misrepresentations, or even representations, of the insured, but upon its own knowledge of the property. If this policy was issued upon the knowledge of the company as to the condition of the property, and after refusal to furnish the usual blank application, whereby the insured would have apprised the insurer of the true condition of the property, and not upon any representations of the insured, then the *Page 675 anti-mortgage clause must be held to have been waived. Any other view would involve the holding by us of this proposition: That the insurance company, waiving any application by the person desiring insurance, and issuing a policy upon its own knowledge of the condition of the property, may receive the premiums paid for the indemnity, and defeat a recovery for a loss sustained by inserting in the policy a provision invalidating the contract from the moment it was signed and delivered, thus inducing the insured to rest upon a contract which the company never intended to carry out. This cannot be sound law." In Sharp v. Scottish Union, etc., Ins.Co. (1902), 136 Cal. 542, 69 Pac. 253, 615, it is held that where there was no fraud, false swearing, concealment, or misrepresentation by the applicant for a policy of fire insurance which made the loss payable to a mortgagee, and where the assured person had an insurable interest in the property, though his wife was the owner of an undivided half interest therein, the policy may be enforced by the mortgagee, notwithstanding a clause that if the interest of the insured be other than unconditional and sole ownership the policy shall be void, and that in such case the company must be presumed to have issued the policy with knowledge of the condition of the title, which was not inquired into, and to have assured the property with such knowledge, and to have waived all inconsistent provisions. In the case of Dooly v. Hanover FireIns. Co. (1896), 16 Wash. 155, 47 Pac. 507, 58 Am. St. 26, the provisions of the policy were the same as those now under consideration, and were pleaded in defense of the action. In disposing of them the court said: "There having been no written application in which questions were asked and answered concerning the status of the property, we think, under the authorities and as a question of right, that this condition which is injected into the policy, among numerous other conditions more or less technical and hard to understand by the ordinary mind, *Page 676 ought not to prevent a recovery, in the absence of any misrepresentation on the part of the insured. The insured, as a matter of fact, ordinarily knows nothing about the policy until it is made out and returned to him after the payments for the same have been made to the agent at the time the contract was made, and the insurer, having failed to obtain this information, must be held to have done so at his peril." In Lancaster Ins. Co. v.Monroe (1897), 19 Ky. Law 204, 39 S. W. 434, it is said: "The case here, therefore, is one where, without inquiry as to any mortgage, the company accepts the money of the insured, prepares its own policy and issues it. It seems to us that the insured has the right to assume that the company has made inquiries of him, touching every material fact affecting the risk, and if he does not scrutinize the multitude of conditions and stipulations with which he finds his policy shingled over he only risks the avoidance of his policy if it turns out that he has failed to disclose what is in fact material and what he ought to have known to be material to the risk assumed by the company. We think this is the effect of the later decisions of this court, as is certainly the trend of the authorities generally." Hartford Fire Ins. Co. v.McClain (1905), (Ky.), 85 S. W. 699. See, also, 1 Wood, Insurance (2d ed.), § 212, p. 517; 1 May, Insurance (4th ed.), § 207; Vankirk v. Citizens Ins. Co. (1891),79 Wis. 627, 48 N. W. 798. In German Mut. Ins. Co. v.Niewedde (1895), 11 Ind. App. 624, the court said: "The weight of authority and the strong equities of the case lead us to hold that where there is no written application, no questions asked, no statements made and no knowledge by the assured that the existence of the mortgage was fatal to his insurance, the company must be deemed to have waived the provisions for forfeiture by reason of the existing incumbrance." These quotations express the doctrine which meets our approval, and indicate the correct construction of the policy *Page 677 in suit. We cannot with any regard for justice, strictly apply to this class of written instruments the rule for the interpretation of written contracts generally. The making of contracts is generally preceded by some negotiations, culminating in a meeting of the minds upon terms, mutually agreeable and understood, which are then reduced to writing, and the agreement formally executed. Insurance policies are prepared in advance by insurance and legal experts, having in view primarily the safeguarding of the interests of the insurer against every possible contingency. The insurer not only fully knows the contents of the writing, but also adequately comprehends its legal effect. The insured has no voice in fixing or framing the terms of his policy, but must accept it as prepared and tendered, usually without any knowledge of its contents, and often without ability to comprehend the legal significance of its provisions. The meeting of the minds ordinarily deemed essential to a valid contract, as to many of its terms and conditions, is wanting in fact, and a mere fiction of law. In this case appellees were not the owners of a feesimple title to the real estate on which the insured buildings stood, but owned only a life estate therein. They had an insurable interest in the property at the time the policy was issued and at the time of the loss by fire. They desired, in good faith, to obtain insurance upon their interest in the property, and were guilty of no misrepresentation, concealment, or fraud. They were ignorant of the invalidating provisions of the policy, and of the materiality of their exact title to the risk assumed. No change was subsequently made in the title held, nor was any act done increasing the risk of insurance. It is not suggested that the value of their title was not equal to the amount of insurance carried, nor that the fire would not have occurred just as it did, had their title been an unconditional fee simple. They *Page 678 paid the premium charges, which appellant accepted and retains, and honestly rested in the belief that they had valid insurance. We must assume that both parties in good faith intended to effect a valid contract, and, if reasonably possible, so construe the policy as to make it effective. The appellant did not require of appel. lees a written application for insurance, or ask of them any questions concerning the property to be insured, or concerning their title to the same. We must therefore presume that appellant or its agent had satisfactory knowledge of the condition and surroundings of the property, and of the title to the same as then existing. Knowledge of the true state of the title on the part of the insurer being, under the circumstances shown, presumed by law, the provisions of the policy with respect to title pleaded in the answers were waived. It follows that the policy was valid, at least to the extent of the interest of the insured, and that the facts set out in each paragraph of reply were sufficient to avoid the paragraph of answer to which the same was addressed. The same result is obtained, and the replies upheld by another course of reasoning. In our opinion the word "void" is used in the policy in the sense of voidable. Hunt v. State Ins.Co. (1902), 66 Neb. 121, 92 N. W. 921, and cases cited. If a title to the property insured, other than a sole and unconditional fee simple in the insured, ipso facto, rendered the policy void, then it was void as to both parties. It will scarcely be insisted by any one that the insured, at their option, might have treated the policy as void, and recovered the premium paid, prior to the fire; but the evident meaning of the policy was that, for a breach of its terms, the insurer, acting with reasonable diligence, at its option might avoid the contract. If appellant could elect to avoid the policy for any reason, it is equally clear that in a case like *Page 679 this, where the insured had an insurable interest, it could elect not to do so, and treat the policy as valid. If the stipulations with regard to title made the contract voidable only, then, upon discovery of the true condition of the title, whether before or after the loss, the insurer was required to make its election either to regard the contract as valid or void. A court cannot by its fiat alone render a voidable contract void, but it can only adjudge that the party entitled to avoid it has done so, and that it thereby and for that reason became invalid. If appellant desired to avoid this policy for the reasons pleaded, it was required to act with reasonable promptness after acquiring knowledge of the facts, and thereupon it was its duty to notify appellee of its decision to avoid the policy and of the reasons therefor, and to return, or tender, or in some appropriate way manifest its willingness and readiness to restore, the unearned premium received. The answers filed do not disclose the time when appellant learned the true state of appellees' title, nor deny knowledge of the same at the time of issuing the policy, but proceed upon the theory that the policy was void ab initio, and without any action on the part of the insurer. This theory was wrong, and the averment of facts insufficient. The answers should have pleaded the covenants or conditions relied upon, a breach, and the acts done by appellant in pursuance of its election to avoid the contract. Appellant's contention is that, under the terms of the policy, no risk attached and no liability was assumed by it at any time. It must therefore follow that there was no consideration for the premium received, and good faith and common fairness required its prompt return; and the insurer, by retaining such premium with full knowledge of the facts, elected not to insist upon a forfeiture of the policy. Hanover Fire Ins. Co. v. Bohn (1896),48 Neb. 743, 67 N. W. 774, 58 Am. St. 719; *Page 680 Queen Ins. Co. v. Young (1888),86 Ala. 424, 5 South. 116, 11 Am. St. 51; German Ins. Co. v.Shader (1903), 68 Neb. 1, 93 N. W. 972, 60 L. R. A. 918;Fraser v. Aetna Life Ins. Co. (1902),114 Wis. 510, 524, 90 N. W. 476; Sharp v. Scottish Union, etc.,Ins. Co. (1902), 136 Cal. 542, 69 Pac. 253, 254;Pearlstine v. Westchester Fire Ins. Co. (1904),70 S. C. 75, 49 S. E. 4; Harris v. Equitable Life Assur.Soc. (1876), 64 N. Y. 196; Slobodisky v. Phenix Ins.Co. (1898), 53 Neb. 816, 74 N. W. 270; McQuillan v.Mutual, etc., Life Assn. (1902),112 Wis. 665, 87 N. W. 1069, 56 L. R. A. 233, 88 Am. St. 986;Schreiber v. German-American, etc., Ins. Co. (1890),43 Minn. 367, 45 N. W. 708; Union Cent. Life Ins. Co. v.Jones (1897), 17 Ind. App. 592. We are of the opinion, for the reasons indicated, that the answers were insufficient, and that appellant's demurrers to the several paragraphs of reply should have been carried back and sustained to the answers. No reversible error being shown, the judgment is affirmed. Gillett, J., dissents.