Daniels v. Hudson River Fire Insurance

Shaw, C. J. This is an action of contract, to recover on a policy of insurance, made by the defendant company, for a loss by fire. The insurance was upon the plaintiffs’ factory building in Medway, and the machinery and stock. The defendant company have their office and principal place of business at Waterford, N. Y. The policy, for one year, purports to be dated there, and signed by the president and secretary ; but the negotiation was bad by an agent of the company in Massachusetts, and by the terms of the policy, it was not to be valid unless countersigned by their agent at Worcester, and it was so countersigned and delivered by him. There can be no doubt that this is a contract made in Massachusetts, and to be governed and construed by the laws of this state; for — 423 — though it was dated in New York and signed by the president and secretary there, yet it took effect, as a contract, from the counter-signature and delivery of the policy in Massachusetts, It is to be interpreted according to the laws, and with reference to the usages and the practice of this state, in the same manner with any other Massachusetts policy of insurance against fire. It came to trial before one of the justices of this court; several exceptions were taken by the defendants to the directions and decisions of the judge. These are now brought before the whole court by bill of exceptions. 1. The defendants, relying upon a violation of the statements in the application, contended that these statements were warranties or conditions, and if they were not strictly and literally true at the time of the application, that the policy was void; and that if they were then true, and the plaintiffs afterwards ceased to comply with them, the policy thereupon became void, whether the same were or were not material to the risk. But the presiding judge instructed the jury, that the statements of the application were not warranties, requiring an exact and literal compliance, but that they were representations ; and as such, must have been substantially true and correct as to things done, or existing, at the time the policy was issued, and that so far as they related to the future — to things to be done, and rules and precautions to be observed— they were stipulations, to be fairly and substantially complied with. The court are of opinion, that looking at the policy and the application, this instruction was correct. There is undoubtedly some difficulty in determining by any simple and certain test what propositions in a contract of insurance constitute warranties, and what representations. One general rule is, that a warranty must be embraced in the policy itself. If by any words of reference, the stipulation in another instrument, such as the proposal or application, can be construed a warranty, it must be such as make it in legal effect a part of the policy. In a recent case, it was said that “ the proposal or declaration for insurance, when forming a part of — 424 — the policy, has been held to amount to a condition or warranty, which must be strictly true or complied with, and upon the truth of which, whether a misstatement be intentional or not, the whole instrument depends.” Vose v. The Eagle Life & Health Ins. Co. 6 Cush. 47. But no rule is laid down in that case, for determining how or in what mode such statements contained in the application, or in answer to interrogatories, shall be embraced or incorporated into 1he policy, so as to form part thereof. The difference is most essential, as indicated in the definition of a warranty in the case last cited, and as stated by the counsel for the defendants in the prayer for instruction. If any statement of fact, however unimportant it may have been regarded by both parties to the contract, is a warranty, and it happens to be untrue, it avoids the policy; if it be construed a representation, and is untrue, it does not avoid the contract if not wilful, or if not material. To illustrate this; the ap plication, in answer to an interrogatory, is this: “ Ashes are taken up and removed in iron hods ; ” whereas it should turn out in evidence, that ashes were taken up and removed in copper hods; perhaps a set recently obtained, and unknown to the owner. If this was a warranty, the policy is gone; but if a representation, it would not, we presume, affect the policy, because not wilful or designed to deceive ; but more especially, because it would be utterly immaterial, and would not have influenced the mind of either party in making the contract, or in fixing its terms. Hence it is, we suppose, that the leaning of all courts is, to hold such a stipulation to be a representation, rather than a warranty, in all cases, where there is any room for construction; because such construction will, in general, best carry into effect the real intent and purpose which the parties have in view, in making their contract. In the present case, the only clause in the policy having any bearing upon this question, is this: “ And this policy is made and accepted in reference to the terms and conditions hereto annexed, 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 ” Here — 425 — is no reference whatever to the application or the answers accompanying it; the only reference is to the conditions annexed to the policy. In looking at these conditions, 2d clause of art. 1, the provision is, that “ if any person, insuring any building or goods in this office, shall make any misrepresentation or concealment, or, &c., — mentioning several other cases, all of which would tend to increase the risk, — such insurance shall be void and of -no effect.” The terms “ misrepresentation ” and “ concealment ” have a known and definite meaning in the law of insurance; and it is that meaning and sense, in which we are to presume the parties intended to use them in their contract of insurance, unless there is something to indicate a different intent. “ Misrepresentation ” is the statement of something as fact, which is untrue in fact, and which the assured states, knowing it to be not true, with an intent to deceive the underwriter, or which he states positively as true, without knowing it to be true, and which has a tendency to mislead, such fact in either case being material to the risk. “ Concealment ” is the designed and intentional withholding of any fact material to the risk, which the assured, in honesty and good faith, ought to communicate to the underwriter; mere silence on the part of the assured, especially as to some matter of fact which he does not consider it important for the underwriter to know, is not to be considered as such concealment. Aliud est celare, aliud lacere. And every such fact, untruly asserted or wrongfully suppressed, must be regarded as material, the knowledge or ignorance of which would naturally influence the judgment of the underwriter in making the contract at all, or in estimating the degree and character of the risk, or in fixing the rate of the premium. If the fact so untruly stated or purposely suppressed is not of this character, it is not a “ misrepresentation” or “concealment” within this clause of the conditions annexed to the policy. But further; the clause in this policy has none of the characteristics of a warranty, because it is not, in its own terms, or by reference to the terms and conditions annexed, an absolute stipulation for the truth of any existing fact, or for the — 426 — adoption of any precise course of conduct for the future, making the truth of such fact, or a compliance with such stipulation, a condition precedent to the validity of the contract, or the right of the assured to recover on it. The policy is made in reference to the terms and conditions annexed; but these are referred to, not as conditions precedent, but “ to be used and resorted to, in order to explain the rights and obligations of the parties hereto, in cases not herein otherwise specially provided for.” They are not to control or alter any express provision in the contract, or become parts of the policy; but they are statements in a collateral document, which both parties agree to, as an authoritative exposition of what they both understand as to the facts, on the assumption and truth of which they contract, and the relations in which they stand to each other. The court are of opinion, therefore, that the statements in this application were not warranties, and could have no greater effect than that of representations, and that the judge was right in giving such instruction to the jury. 2. Another exception was taken to the direction of the judge in regard to the force-pump, which is, that the judge erroneously ruled that the burden of proof was on the defendants, to prove its materiality to the risk, and also, whether it had been complied with or not. This was correct. Whether the answer was responsive to the question or not, it could have only the character of a representation ; and, therefore, if the defendants rely either upon the falsity of the representation, or the failure to comply with an executory stipulation, it is upon them to prove it; and it is a question of fact for the jury, in either aspect. 3. With respect to the representation and stipulation that a water-cask should be kept in each room, the presiding judge instructed the jury, that if the plaintiffs established a rule that such water-casks should be kept full, and employed servants to execute such rule, and if, through their negligence at any time, they were not full, such negligence of servants would not avoid the policy. We understand it to be a well-settled principle in the law — 427 — of fire insurance, and, indeed, the strong tendency of modern judicial decisions in cases of marine insurance is in the same direction, that the negligence of subordinates, many of whom must often be employed, without much knowledge of them by employers, is one of the perils insured against. In Chandler v. Worcester Mutual Fire Ins. Co. 3 Cush. 328, the rule is laid down thus: “ The general rule unquestionably is, in case of insurance against fire, that the carelessness and negligence of the agents and servants of the assured constitutes no defence.” The question there was, whether gross negligence on the part of the assured himself, gross carelessness, equivalent in legal estimation to a wilful intent to burn the building, would be a good defence. It seems difficult to see how an incorporated company, who must act by agents and servants, could otherwise comply with their representations. If, indeed, such servants and agents are habitually or frequently careless in performing their duties, it may become negligence on the part of the employers, whose duty it is to have a reasonable vigilance over them, and employ faithful servants. 4. The next exception turns on the representation that a water-cask was kept in each room, and the admission of evidence tending to show in what sense the parties understood the word “ room.” This is a point which seemed most doubtful, and which has had the particular attention of the court. The question arises upon the representation made in answer to the twenty-fourth interrogatory. It may be remarked in passing, that there is some discrepancy between the question and answer. Whether designed or not, does not appear. The question is, “ Are there casks in each loft constantly supplied with water ? ” The answer is, “ There is in each room, casks of forty-two gallons each kept constantly full.” If the plaintiffs intended to conform their answer to the question proposed, then it is manifest, that in their view the word “ loft ” in the question, and “ room ” in the answer, would mean the same thing, and the effect of the answer would be, that a cask was kept in each loft. This would raise another question, whether the term “ loft ” would include the basement story, or only the chambers over the basement the “ rooms aloft 1 ” — 428 — Or, did it mean each story ? These considerations are, perhaps, not material, except that they have some tendency to show that the word “ room ” was used without any very precise or definite meaning. The evidence offered for the purpose of falsifying this representation was, that there was in the basement story a partition, setting off a part for a particular purpose, in which no water-cask was kept, — that in the next story above there was a small apartment partitioned off, in which there was no water-cask; and in the two stories above, the water-casks stood in the entry ways by the doors of the main rooms, and not in the main rooms. If the plaintiffs, in answering the interrogatory as put, intended to say that there is a cask of water kept for each loft, or each story, the jury might well find that the representation was true; if they intended to use the word “ room ” in a narrower sense, so as to mean more than one apartment, in each loft or story, then it becomes necessary to inquire what was the extent of the word “ room ” as used in this answer. The word is certainly a familiar one in the English language, and as ordinarily used and construed, as all words must be, by the subject-matter and the context, is not likely to be misunderstood, yet it is not without some considerable varieties of meaning. Apply it to a dwelling-house, and suppose one, in offering a house to be sold or let, should represent that there is a fireplace in every room. Suppose there is a cellar, or an attic, with or without windows, are they rooms ? Or suppose a large apartment into which the front door opens, used for the double purpose of an entry, and for a sitting-room in warm weather, and furnished for that nurpose; is it a room within the representation that there is a fireplace in it ? Or suppose above stairs, one or more small apartments, capable of being used as a closet or clothes-press, or for a bedroom; would the representation be falsified by showing that either of these divisions of the house had no fireplace in it ? The language might be somewhat ambiguous, and require aid to ascertain its meaning. The interpretation of written contracts, indeed, of all writ-ten documents, is a question of law for the court; and it is — 429 — of great importance that the meaning of written evidence should not be altered or varied by parol evidence. But this presupposes that the words are used in their ordinary and normal sense, according to the established rules of the language ; but if they are foreign words, or words used in a peculiar, unusual, or technical sense, evidence may be proper to show their meaning, and then it is the province of the court to declare and apply the law, according to the true meaning of the language as thus ascertained. The rule is laid down, in the case of Eaton v. Smith, 20 Pick. 156, thus: “ When a new and unusual word is used in a contract, or when a word is used in a technical or peculiar sense, as applicable to any trade or branch of business, or to any particular class of people, it is proper to receive evidence of usage, to explain and illustrate it, and that evidence is to be considered by the jury; and the province of the court will be, to instruct the jury what will be the legal effect of the contract or instrument, as they shall find the meaning of the word modified or explained by the usage.” This principle seems to be intelligible enough, but the difficulty in applying it as a practical rule is this: the words severally and as first read seem plain, but like other matters of latent ambiguity, it is when they come to be applied to the subject-matter, that the ambiguity becomes apparent. Then it is, that evidence of usage or other evidence aliumdé, becomes competent and admissible, to show the sense in which the words were used in the particular written paper. It must depend, therefore, much upon the circumstances of each case, and the posture of the evidence already admitted in the trial, whether such evidence aliunde ought to be admitted. In the present case, we are of opinion that there was sufficient uncertainty and ambiguity in the representation in question, to warrant the introduction of evidence of usage, and it was a question of fact for the jury to decide, whether, according to the true meaning of the language used, the representation was substantially true, when made, and substantially complied with afterwards. Une other ground was taken by the defendants in this — 430 — branch of the case, thus: The defendants contended not only that the meaning of the word “ room ” in the application was a question of law for the court to decide, and also whether there was such a general use of language; but also, that if there were such use of language, it was insufficient, unless it was known and general among insurers, as well as manufacturers. Such a direction, we think, would not have been con formable to the rules of law. The general rule on that subject is, that if any person, or any company, foreign or domestic, shall engage in any branch or department of business, they must be presumed to be acquainted with the rules and usages of such business, to be conversant with the language employed in it, whether strictly technical or not. When, therefore, the defendant company undertook to insure a manufactory in Massachusetts, with the machinery and stock therein, they must be presumed to be acquainted with the structure and arrangement of such building, and the distribution of the apartments within it, with a view to its adaptation to the business to be therein carried on, and with the use of the language employed by the owners, superintendents, and persons employed therein. If, therefore, the language of this representation was understood in a particular manner by manufacturers, according to which understanding the representation was true, the legal presumption is that it was so understood by the insurers, in their contract. 5. Exception was taken to the admission of the witness Adams as an expert; but no sufficient ground has been shown that his admission was erroneous; nor does it appear to us that the questions permitted to be put to him, and the answers he gave to them, for the limited purpose to which they were confined by the instructions given thereon to the jury, are open to exception. Exceptions overruled.