Lebanon Mutual Insurance v. Losch

Mr. Justice Paxson delivered the opinion of the Court, Upon the argument at bar the defendant company set up two distinct grounds of defence, viz.: 1st. A breach of warranty as to incumbrances; and 2d. The erection by the plaintiff below of an additional building near the one insured, by which the risk was increased so as to increase the rate of insurance, of which erection no notice had been given to the company. It appeared on the trial below that in the plaintiff’s application for insurance he answered “no” to the 11th interrogatory, which was : “ If incumbered, how and to what amount? ” In point of fact, at the time the policy was issued there was a mortgage upon a part of the insured premises. This mortgage was subsequently removed, and a new mortgage, covering the entire premises, placed thereon, with the consent of the defendant company, and for the approval of which they were paid. This condition of things continued for several years. [106] and until the fire occurred by which the insured premises were destroyed. There is nothing to commend this branch of the defence to our favorable consideration. An examination of the record shows that it was little relied upon in the trial below, if relied upon at all. No point was put to the court as to the effect of the original mortgagé upon the contract of insurance. The alleged warranty was contained in the application; the policy did not in terms make the application a part of the policy. The only clause in the policy which could possibly bear this interpretation is the following: “And this policy is made and accepted in reference to the conditions hereto annexed, as well as the application and survey, which are to be used and resorted to, in order to explain the rights and obligations of the parties hereto, in all cases not herein otherwise specially provided for.” No point was put to the court as to the effect of this clause. The court was not asked to say that it made the application a part of the policy, and thereby incorporated the warranty against incumbrances into the contract of insurance. The court did say in its general charge: “I have already said to you where the defendant undertakes to say that the answer to a certain question in this paper amounts to a warrant}',, and that warranty does not appear in the body of the policy itself, you are to treat the answers in the application simply as representations, and there can only be a defeat in case the jury find that those representations were falsely made.” This was assigned for error, and it is the only assignment which has any possible relation to the matter of the mortgage, or the alleged warranty. All of the other assignments, and all of the points put to the court below by the defendant company, relate to the question of the increase of risk, which was the ground upon which the company refused to pay, and upon which they attempted to defeat a recovery in the court below. Under the circumstances we are not prepared to reverse the case upon the above extract from the charge. It is not inaccurate as an abstract proposition; if the defendant company desired a more specific instruction they should have asked for it. Moreover, I am unable to see its importance or relevancy to this case. Conceding that the mortgage existed when the application was made and the policy issued, and that the warranty against incumbrances was made a part of the policy, the company are estopped from setting it up to defeat a recovery, for the reason that they subsequently gave their assent to the incumbrance, and were paid for it. And this occurred years before the fire. The palpable iniquity of such a defence may be the reason why it is so dimly shadowed forth upon this record. [107] It remains to consider the second branch of the defence. In one of the printed “conditions of insurance ” I find the following: “If, during the insurance, any alterations be made on the premises, buildings erected, or change made in the use or occupation of the same or neighboring premises, or otherwise, whereby the risk or hazard is increased, so as to increase the rate of insurance, it shall be the duty of the insured to give notice thereof to the secretary, pay the additional premium and obtain the consent of the company thereto in writing, otherwise the insured shall not be entitled to recover for any loss or damage by fire originating in consequence of such change.” No change occurred on the premises insured. There was a change in the surroundings, made after the date of the policy. The insured erected a shop within about twenty feet of the insured premises, for which he obtained the consent of the company and paid an additional premium. He also demised a lot of ground adjoining the premises to a tenant, who erected thereon a frame building which he used as a carriage factory. Tliis building was about fifty foot from the premises insured. No notice of its erection was given to the company, nor was any additional premium paid. Had the condition of insurance required tbe insured to give notice to the company of any change in tbe surroundings, it would have been liis duty to give notice of tbe erection of the carriage factory. Such, however, was not the condition. The notice was only required in case the change was such as to increase the risk or hazard “so as to increase the rate of insurance.” Under this clause it is manifest that the insured must be shown to have knowledge that the building would not only increase tbe risk, but that it would also enhance tbe rate of insurance. The condition of the policy must be construed most strongly against the company. We are not to assume, when the plaintiff below seeks to recover on bis policies for what at least appears to be an honest loss, that be knew the factory building would increase the risk to such an extent as to increase the rate of insurance. There was nothing upon the face of his policy, or in the conditions attached, had he read carefully every word of both, which could have given him this information. It was a fact, the solution of which Avould be found outside tbe policy. There is not a word of evidence to show that the insured knew that the carriage factory would increase the risk to tbe extent specified iu the policy, nor indeed to any extent. There was evidence that the risk was increased, but none that the rates of insurance would be increased thereby. It must be remembered that the factory was about fifty feet away [108] from the insured premises, and the plaintiff may well have thought there was no material increase of the risk. And it is not clear from the defendant’s own testimony that the risk was materially increased. Lewis P. Hecker, a witness on behalf of the company, says in answer to the inquiry whether there was an increase of risk: “ Not yery much, I should think; the risk was increased a little ; it was an additional exposure in the hazardous business carried on; the exposure was great, the risk and hazard, so far as fire was concerned, was increased.” Israel Reber, another witness, says: “In my opinion it would be rather more risky.” And John H. Helzich, agent of the defendant company, in response to a similar inquiry, answers in this cautious manner: “I would rather think it would (increase the risk) ; because two hazardous buildings make it more dangerous than one; that is natural.” The building insured was a livery stable, a hazardous risk, for which a high premium was paid. It was to this circum- ■ stance the last witness referred to when he spoke of two hazardous buildings. What has been said practically disposes of the assignments of error. I will say, however, in addition, that the defendant’s first, second and third points assume all the facts, as to some of which there was no evidence, and the court below committed no error in rejecting them. The defendant’s fourth and eighth points were also properly refused. Conceding that the fire originated in the carriage factory, that fact would not necessarily defeat the plaintiff’s right to recover. Such right depended upon other matters not involved in these points. The defendant’s fifth point was not pressed below, nor here, and need not be discussed. There is nothing in it. The remaining assignments relate to the exclusion of evidence offered on the part of the defendant company to show that the erection of the carriage factory would increase the rate of insurance. Most, if not all, of these offers were rejected upon the ground that the witness by whom the proof was proposed to be made, had not the information necessary for that purpose. The ruling was unquestionably right as to most of the cases, and we need not discuss the others for the reason that there was no attempt to show that the insured knew, or even that the circumstances were such that he ought to have known, that the erection of the carriage factory would so materially enhance the risk as to increase the rate of insurance. Judgment affirmed.