Scharles v. N. Hubbard Jr. & Co.

Seabury, J. The complaint having been dismissed at the close 'of the plaintiffs’ case, it follows that upon this appeal the plaintiffs are entitled to the benefit of the most favorable inferences which are deducible from the evidence. The defendant is a domestic corporation engaged in the business of an insurance broker. The present action is predicated upon the claim that the defendant negligently procured for the plaintiffs a policy of fire insurance which was void, and that by reason of this fact the plaintiffs are unable to recover upon it, although they have suffered the loss against which the policy was designed to insure them. The duty which the defendant as an insurance broker owed the plaintiffs under their contract is well defined in the case of Burges v. Jackson, 18 App. Div. 296, 298; affd., 162 N. Y. 632 In that case Bradley, J., said: “ The defendants, by holding themselves out as persons constituting such firm, engaged in the business of effecting insurance, assumed to have the requisite knowledge, information, ability and skill to accomplish such purpose in behalf of those who should become their patrons. They were not insurers of the adequacy in financial condition of the companies from which policies were obtained through their advice and agency, but in what [74] ever they did in that respect for others, they undertook to use reasonable care, skill and judgment, with a view to the security or indemnity for which insurance was sought.” Pursuant to the plaintiffs’ request, the defendant furnished them with several policies of fire insurance. We are concerned upon this appeal with but two, viz.the policy issued by the National Fire Insurance Company and that issued hy the Standard Fire Insurance Company. The policy in the National Company was procured March 15, 1907, and ran for one year from that time and covered the plaintiffs’ property in the sum of $2,000 on merchandise alone. The premium rate prescribed by it was 1.815. The policy in the Standard Company was procured some months . later and by its terms ran for one year from its date and purported to cover the plaintiffs’ property in the sum of $750 on merchandise and $250 on fixtures. The premium rate prescribed in it was 1.731. The policy in the Standard Company had attached tq it. a rider which, in part, provided as follows: “ This policy is issued upon the understanding and warranty by the assured that 'the National Insurance Company of Hartford has now a policy or policies in force insuring the identical property described in this policy for the sum of $2,000 in form concurrent herewith, in identically the same proportions on each part thereof, and at no higher rate of premium, and that said policy or policies as ' now written will be continued in force during the entire currency of this policy, otherwise this policy is void.” A comparison of the terms of the policy issued by the' National Company and those of the Standard Company shows that the policy of the National Company was at a different and higher rate of premium than the rate prescribed in the policy of thé Standard Company. Nor were the proportions of the two policies or the property covered by them identical. If the clause quoted above as contained in the rider attached to the policy was valid, there can be no doubt that it constituted a warranty and that the falsity of the statements therein contained rendered the policy void. No question seems to be raised as to the'duty of the defendant to procure valid policies of insurance for the plaintiffs, nor [75] is any claim made that the plaintiffs were in any way responsible for the policies which were actually procured. To avoid the consequences inevitable from the conclusion that the clause referred to • constituted a warranty, the respondent attempts to separate the clause contained in the rider from the policy itself and argues that the clause contained in the rider, not being within the terms of the standard form prescribed by law, is invalid under section 121 of the Insurance Law. The rider is a part of the contract and must be considered as such in this action against the insurance brokers. It is now well settled that a rider attached to the face of the policy is a part of the contract. Handy v. Insurance Co., 166 Mass. 210; Quinn v. Fire Association, 180 id. 560; Benedict v. Ocean Insurance Co., 31 N. Y. 389. This • being' so, it is evident that the defendant is confronted by the horns of a dilemma. If the rider itself does not render the contract illegal on the ground that it is contrary to the standard form, then the falsity of the warranty therein contained avoids the policy. If the rider does render the contract illegal, then' the defendant is liable for having procured" for the plaintiffs a void policy. Either view is fatal to the contention of the defendant. The contract between the Standard Company and the plaintiffs was clearly made in Hew York.- It was, therefore, requisite that the policy should be in the standard form prescribed by law. Section 121 of the Insurance Law prescribes that the standard form of policy shall be used and specifies in the exceptions therein contained the nature of .the clauses which, may be added without being deemed a departure from the statutory form. Section 121 of the Insurance Law itself specifies certain exceptions to the general rule therein declared. It is only necessary for the purpose .of this case to consider the second exception specified in that section. The second exception includes: “ Printed or written forms of description and specifications or schedules of the property covered by any particular policy, and any other matter necessary to clearly express all the facts and conditions of insurance on any [76] particular risk not inconsistent with or a waiver of any of the conditions or provisions of the. standard policy herein provided for.” The rider attached to the policy 'of the Standard Company related to obtaining other insurance from other companies outside of this State, and that this purpose may be accomplished consistently with section 121 of the Insurance Law, which prescribes the use of the" standard form of policy, appears from section 137 of the Insurance Law which distinctly recognizes such insurance as valid upon compliance with the conditions therein prescribed. Upon the trial the plaintiffs endeavored to show that the defendant had complied with the conditions prescribed by section 137 of the Insurance Law. This evidence the learned court below incorrectly excluded, although without this evidence it could not have been shown that the defendant-procured the policy in the manner prescribed by -law. The rider attached to the policy was within the second exception contained in section 121. of the Insurance Law and did not serve to make the policy contrary to the standard form prescribed by law. The provision contained in the rider relates to the facts and conditions of the particular risk insured against and was not inconsistent with or a waiver of any of the conditions or provisions of the 'standard policy prescribed by law. Treating the policy in question as a contract made in this State, it is evident that the rider attached to it was a part of the contract and that the policy as a whole was not con-tray to the standard form prescribed by law.' The rider which was a part of the contract contained certain warranties which were false in fact, as alleged in the complaint, and the policy itself was void on this account. The plaintiffs were not obliged to show that they had brought an action against the Standard Company. It was sufficient to establish a prima facie case to show that the policy was void and that the insurance company had refused, to pay the amount specified in the policy after receipt of due proofs of loss. Landusky v. Beirne, 80 App. Div. 272; affd., 178 N. Y. 551. It follows that the learned court below erred, in dismissing the complaint.' [77] Judgment reversed and new trial ordered, with costs to the appellants to abide the event.