Penn. Mut. Fire Ins. v. Schmidt

Opinion, Mr. Justice Paxson: The policy of insurance upon which this suit was brought in the court below contained a covenant against incumbrances. It was in the usual form and need not be here repeated. During the life of the policy a judgment of $500 was entered against the insured, which was a lien upon the premises covered by the policy, and remained a lien to the time of the fire. No notice was given to the company of this incumbrance, as was required by the terms of the policy. Upon the trial below the court permitted the plaintiff to prove that he did not know of the entry of the judgment; that the same was given upon the expressed condition that it was not to be entered up in the prothonotary’s office, and that the entering of it was done in bad faith, in breach of that condition, without the knowledge and consent of plaintiff, etc. The admission of this evidence forms the subject of the first specification. The second specification refers to the charge of the court and alleges error in submitting to the jury the question of plaintiff’s knowledge of the entering of the judgment. We think it was error to admit this evidence. The clause in the policy is a covenant against incumbrances. It was therefore immaterial whether the plaintiff had actual knowledge of the judgment or not. He was bound to know it. He had covenanted against it. The judgment was his act; it was entered upon his warrant of attorney, and after the fire he paid it and had it satisfied. That it was given under an agreement of the hook and ladder company not to enter it up, and that the company violated said agreement is not to the purpose. It is possible he may have his remedy against that company for any loss he may sustain by reason of their breach of faith, but this act of a third party can in no way affect this contract of insurance. The covenant against incumbrances is a reasonable covenant, and the principle upon which it is found [461] ed is a sound one. Brown v. Fire Ins. Co., 41 Pa. 187. It goes upon the theory of an increased risk by reason of incumbrances. If a man may incumber his property to its full value and then insure it for its full value, it is easy to see how fires may be turned into a source of profit. That the risk was increased by the entry of this judgment is assumed by the terms of the policy. It is not, therefore, an open question. The company has not received the premium for this increase of the risk, and not being itself in default is not bound to indemnify without receiving the consideration for such indemnity. This position is fully sustained by the authorities. It is sufficient to refer to Brown v. The Ins. Co., supra; Insurance Co. v. Gottsman, 48 Pa. 151; Seybert v. Penn. M. F. Ins. Co., 103 Pa. 282. While this case must be reversed for the errors referred to, it is a serious question how far another trial will help the defendant company, in view of the admitted fact that the $500 judgment did not increase the incumbrances. On the contrary, when that judgment was entered, one of the previous judgments of $1,000 had been paid and the record satisfied. So that in point of fact instead of incumbrances to the amount authorized by the company, $4,000, there was only $8,500 against it. This question was raised by the plaintiff’s second point and denied by the learned judge in his general charge. The ruling being in favor of the company, could not be assigned for error upon their writ and they have not been heard upon it. The learned judge, while ruling this question adversely to the plaintiff in his charge, appears to incline to the other view of it in his opinion refusing .to grant a new trial. As the question is not before us, we will not rule it now. It can be properly raised and squarely decided upon another trial. It is an important question in the case. The judgment is reversed, and a venire facias de novo awarded.