Pierce v. Empire Insurance

By the Court, Mullin, J. A warranty, in the law of insurance, differs from a representation, in this, to wit: The former is a stipulation inserted in writing on the face of the policy, or in another writing referred to in the policy and made a part of it, on the literal truth or fulfillment of which' the validity of the entire contract depends. A representation is a verbal or written statement made by the insured to the underwriter before the subscription of the policy, as to the existence of some fact or state of facts, tending to induce the underwriter, more readily to assume the risk by diminishing the estimate he would otherwise have formed of it. (Angell on Ins. § 147.) In this case, as will be shown hereafter, the application is made a part of the policy. The statements contained in it are thus made warranties, and the compliance with them conditions precedent to a right to recover. (Angell on Ins. § 142.) The insurer has an interest in knowing the interest which the insured has in the property ; and whatever is said in the application on that subject is material and important, but it does not affect the risk. The nature, situation and condition of the property, its exposure to fire from within, as well as from without, are matters affecting the risk. Representations relate exclusively to the. risk; to-the matters which would have a tendency to induce the insurer to enter or to refuse to enter into the contract, or to lessen the premium which he would charge for insuring. Ownership is not, in this view of the case, the subject of representation. It is true that if the insurer knew that the applicant for insurance [645] had no interest in the property, he would not insure; not because the risk was greater or less, but because the contract, .if entered into, would be a mere gambling contract, and against public policy. What is said in the policy must be by way of warranty, as from its nature it cannot be a representation. When the referee assumed to treat the statement in the application as a representation and not a warranty, he overlooked the distinction between them, and the error thus made has entered into the judgment. The first condition annexed to the policy, and which is made a part of it, by express agreement of the parties, is, that the application shall specify, among other things, “the nature of the applicant’s title, if less than fee simple, the nature and amount of insurance,” &c. And it is declared that “ any misstatement or concealment in relation to any of the foregoing requirements, or withholding any information affecting the hazard, shall render the insurance void, the validity of the policy being based thereon.” In the application signed by the plaintiff, she declared that she was the owner of the premises, and that there was no incumbrance On them. It was not true that she was owner in fee. She had an equitable interest merely. It is impossible to read the application, in view of the condition above referred to, and not see that the object of the company was to ascertain truly the actual interest which the applicant had in the premises, and it must be fully disclosed when it was less than a fee. How the interest of the plaintiff' was less than a fee; she has "not stated it. From" the language used the defendant had the right to assume that the plaintiff was the owner in fee. When she said she was owner, and disclosed no inferior interest, although expressly required to do so unless she had a fee, the defendant could not avoid the inference that she was owner in fee. The statement of the interest of the insured is undoubtedly a warranty, and being un [646] true, avoids the policy. To escape this result, it is said that the statement as to the interest of the assured was put in by the defendant’s agent, was not read over to her, and she did not know, when she signed it, that any such statement of interest was made. The referee finds this state of facts to be true. The plaintiff cannot, after insuring in the defendant’s company, and bringing an action upon a policy issued to her, containing conditions binding both parties, be permitted to hold the defendant to performance of its promises and repudiate altogether her own. Her interest in the premises was an important fact for the defendant to' know, we are to presume, and I think she cannot be heard, in this action, to rebut the presumption, that she knew that she was bound to know what the conditions of the policy were. She also knew that her interest in the property must be truly disclosed. ■Again ; if she knew the conditions, she was aware that unless she disclosed an inferior interest, the company had the right to assume that she was owner in fee. If she was ignorant of all knowledge on these points, then she entered into the contract in ignorance of facts which it was important for her to know, and it was her duty to repudiate it altogether, or to apply to the court for relief against it. She cannot hold the defendant to its part of the agreement into which it has been led through statements concededly false, while she repudiates all liability on her part except the payment of the premium. The agent was the agent of the company for some purposes— of the plaintiff for others. So far as notice of a fact to the company was necessary to be proved, notice to the agent has been held sufficient. (Masters v. Madison Co. Mutual Ins. Co., 11 Barb. 624.) But the question here is not one of notice. The policy required the fact to be stated in the application, and no amount of information aside from that could help the plaintiff. But if knowledge to the agent of the facts affecting the plaintiff’s title, was sufficient, [647] there is no fact found or proved tending to show that the agent had any information that the plaintiff was not owner in fee. [Jefferson General Term, October 7, 1862. Mullin, Morgan and Bacon, Justices.] It seems to me quite clear, 1st. That knowledge of the interest of the insured in the property or premises is important to the insurer, and that when, as in this case, the insured is called on to state such interest truly, and it is stated untruly, the representation is a warranty, and if stated untruly the policj' is void. 2d. That the statement in this case was, that the plaintiff was the owner in fee, and such statement is in writing, and the policy is therefore void. 3d. That the misconduct of the agent does not relieve the plaintiff" from her part of the contract; and that the defendant is not responsible for such misconduct. The policy being void for the reasons aforesaid, it is legally impossible to hold the defendant responsible on the ground that the representation as to interest was not material, and she, having an insurable interest, can recover on the policy. By the contract the policy is absolutely void, and no action can be maintained upon it. We have no right to enter into the question as to how far knowledge of the plaintiff’s interest was material to the defendant. That inquiry can be entered upon when the representation is as to a matter collateral to the risk. (Wall v. Howard Ins. Co., 14 Barb. 383.) But when the representation amounts, as in this case, to a warranty, there is no escape from it; it avoids the contract, and the insured cannot recover. (Wilson v. Herkimer Mutual Ins. Co., 2 Seld. 53.) I will not enter into the question whether the plaintiff had an insurable interest, as that question is wholly immaterial if I am right upon the other branch of the case. The judgment of" the referee must be reversed, and a new trial ordered, costs to abide the event.