Sullivan v. Fraternal Societies' Co-operative Indemnity Union

Gaynor, J.: 1 — The provision of the certificate that the defendant is to be liable provided embezzlements are committed and discovered during the year covered by the certificate and reported to the defendant within thirty days thereafter, is a condition precedent to the plaintiff’s right of action. Therefore the defendant did not have to plead its non-performance as a defence in order to raise an issue thereon. On the contrary, its performance had to be alleged in the complaint, and proved if denied in the answer; and it was so alleged and denied (McManus v. Western Assurance Co., 22 Misc. Rep. 269; 43 App. Div. 550). The discovery of the embezzlements committed in 1899 was not [580] made until August 14, 1900, and it was reported to the defendant the same day. It follows that there can be no recovery of the sums embezzled in 1899, for such is the contract, i. e., the certificate of 1899. 2 — The certificate of 1900 contains a provision that made it obligatory on the plaintiff Council to “ prosecute the defaulting officer to conviction or judgment ” for the embezzlements if required to do so by the defendant, and makes compliance with such requirement when made a condition precedent to a right of action. The defendant served a written notice on the plaintiff Council requiring it “ to prosecute the said officer and convict him of the embezzlement you claim.” Thereupon the plaintiff brought a civil action against the said collector to recover the amount embezzled and recovered judgment therefor. The defendant claims that the requirement of the policy is that a criminal prosecution and conviction be had. The words of the certificate, “ prosecute ” to “ conviction or judgment,” being uncertain, and susceptible of two interpretations, to say the least, that of the insured is the one to be adopted (Gough v. Davis, 24 Misc. Rep. p. 247). 3 —-In respect of the certificate for 1900, it is also claimed that the statement of the plaintiff Council in its written application therefor that the official to be re-insured as collector had always .kept just and true accounts, and made prompt returns, and was not indebted in any way to the said Council, and in terms warranted in such application to be true, is a part of the contract; and that such warranty being broken there can be no recovery on such certificate, regardless of the materiality of the fact warranted. This is the rule in respect of a warranty in the contract; but. here it is not a part of the contract, for it is not made such by the certificate, which is the contract (Burritt v. Saratoga Mut. Fire Ins. Co., 5 Hill, 188; Cushman v. United States Life Ins. Co., 63 N. Y. 404). But such statement though not a warranty was manifestly material, and its falsity is therefore a defence to the action, and has been pleaded as such. It does not matter that it was innocently made; it is not necessary that it should have been fraudulent (Armour v. Transatlantic Fire Ins. Co., 90 N. Y. 450). . Judgment for the defendant.