Choy Look See v. Royal Insurance

OPINION OP THE COURT BY FREAR, C.J. (Galbraith, J., dissenting.) This is one of many insurance cases arising out of the burning of “Chinatown” in the city of Honolulu on January 20, 1900. The policy.is for $1000 upon two- buildings, one on the East corner of Beretania and River streets, the other on the same side of River street 60 feet from the same corner. The fire spread to these buildings from other buildings which had been set on fire by order of the Board of Health because of infection by bubonic plague. See Wong Chow v. Trans. Fire Ins. Co., 13 Haw. 160 and Saw. Land Co. v. Lion Fire Ins. Co., Id. 164. The jury found for the plaintiff in the full amount of the policy. The case comes here on numerous exceptions, including exceptions to the rejection of evidence', to the refusal to order a non-suit, to the giving and refusing to give to the jury various instructions, and to the denial of a motion for a new trial. The principal questions raised are: (1) Whether the defendant is estopped from setting up a forfeiture based' on the facts that the buildings were on ground not owned by the insured in fee simple and (2) that one of the buildings was unoccupied at the time of the insurance and so remained for ten days and more; and (3) whether the wind or the order of the Board of Health was the proximate cause of the fire. It will be sufficient to pass upon the second only of these questions. One of the buildings was unoccupied at the time the insurance was effected and remained so until the fire occurred seventeen days afterwards. The policy provided, among other tilings, that, “This entire policy, unless otherwise' provided by agreement indorsed hereon, or added hereto;, shall be void * * * if — 7 — a building herein described, whether intended for occupancy by owner or tenant, be or become vacant or unoccupied and so remain for ten days.” It provided also that, “No officer, agent or other representative of this company shall hare power to waive any provision or condition of this policy except such a® by the terms of this policy may be the subject of agreement indorsed hereon or added hereto, and as to-such provisions and conditions no- officer, agent, or representative shall have such power or be deemed or held to have- waived, such provisions or conditions unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured 'unless so written or attached.” • There is no agreement indorsed on or added to- the policy, as required by its terms, to the effect that one of the buildings might remain unoccupied indefinitely. Indeed, the only reference to the matter of occupancy of the building in question, outside of the printed terms of the policy above quoted, is that contained in the words “to be occupied,” found in the typewritten description of the building. But these words, it goes without saying, rather require the building to be occupied than permit it to- remain unoccupied. And so counsel do not contend that there has been a, waiver in accordance with the terms of the policy. They contend that the defendant is estopped! from setting up the fact that the terms of the policy have not been complied with. The only fact relied on to show estoppel is that the insurer knew, through its agent, at the time the policy was issued, that the building was unoccupied. This no doubt would work an estoppel if the provision of the policy were that it should be void if the building should be or become unoccupied at all. There-is a distinction between a waiver of a breach which occurred, or knowledge of which was acquired after the inception of the contract, and an estoppel by reason of knowledge at the outset of facts which by the terms of the policy would otherwise render it void. In the former case a valid contract would have been — 8 — entered into-, by tbe terms of which the parties would be bound afterwards, while in the latter case the insurer would have accepted a premium for a policy which it knew at the time was void and so would perpetrate a fraud, unless it were held estopped. Accordingly it is held that the insurer cannot rely on a failure to indorse on the policy as required by its terms a noncompliance with its provisions, when! it had knowledge of such non-compliance at the time it accepted the premium and delivered the policy. There is, it is true, much to be said in support •of the opposite view, but the view we adopt seems to be more in accord with justice and to have the better support in authority. Perhaps as clear and forcible statements of the two views as can be found are those of the majority and dissenting opinions in the recent case of Northern Assur. Co. v. Grand View Bldg. Ass’n, 101 Fed. R. 77, decided by the United States Circuit Court of Appeals for the Eighth Circuit, in accordance with the view we have taken, under a policy which contained the identical strict provisions of the policy now in question. See Lewis v. N. Y. Life Ins. Co., 4 Haw. 305, 370. But the foregoing reásoning has no application to a case like the present in which nonoccupancy is not forbidden altogether but on the contrary is permitted for a limited period. The reason why nonoccupancy cannot be relied upon as a defense, notwithstanding the terms of the policy, when the insurer has knowledge of that fact at the time and the policy does not permit any vacancy at all unless so agreed by indorsement, is that the insurer would otherwise peipetrate a fraud by accepting the premium for a policy known to be void at the time. But this reason obviously has no application where nonoccupancy for a time is permitted by the teams of the policy itself, for in such case the policy is valid at its inception and continues so until a breach of one of its conditions, and it is immaterial that the condition, the subsequent breach of which is relied on, is that relating to occupancy. In this case, the policy was to> be void if a building described therein should “be or become vacant ■or unoccupied and so remain for ten days.” The policy itself — 9 — contemplated vacancy either at the time or afterwards and permitted this to continue for any period less than ten days. It was immaterial whether the insurer knew of the vacancy at the time or not. The policy was valid at its inception and would so continue, so far as this condition was concerned, if the insured did not commit a breach by permitting the vacancy to continue for a period longer than that permitted by the policy. The case might perhaps be different if the circumstances- were such that the insurer knew not only that the building was unoccupied at the time but also- that it could not be occupied within the time limited by the policy, as, for instance, that it was in course of erection and could not be completed so> as to be fit for occupancy within that time. The evidence, however, shows a different state of facts. The testimony of the plaintiff’s husband who- acted for her in the matter, was that the clerk who acted for tide defendant, first asked, when soliciting the insurance, if he (the witness) had completed the building, saying that he (the clerk) wished to insure the place, and that he (the witness) replied “Very well.” He testified also that the building was then completed except that some carpenter work about the windows and some painting remained to be done and that, “if a party had rented it, it was ready for occupancy,” on the day the policy was issued. The policy itself also shows, as stated above, that there was no' intention to waive the requirement of occupancy altogether or indefinitely, for it describes the building in question as “to be occupied.” There are, it is true, eases that have not distinguished in regard to this point between policies which forbid nonoccupancy altogether and those which permit it for a limited time, but they are cases in which, if there: were not other facts to distinguish them from the present case, the courts did not notice the distinction or give any valid reasons for failing to observe it. The latest case: that has come to our attention on this point is Moore v. Niagara Fire Ins. Co., 199 Pa. St. 49 (48 Atl. 869). In that case, the court after careful consideration of the whole question and a review of the authorities, came to the conclusion that there was no estoppel from a knowl — 10 — edge of no-noccupancy at the time, under a policy like that now-under consideration. See also England v. Westchester Fire Ins. Co., 81 Wis. 583; Thomas v. Hartford Fire Ins. Co., 21 Ky. L. Rep. 1139 (56 S. W. 264); Conn. Fire Ins. Co. v. Tilley, 88 Va. 1024 (14 S. E. 851). It follows, therefore, that the policy was void as to- the unoccupied building at least. The policy being void as to the unoccupied building was-void as to the other building also-. This too- is a proposition in regal’d to which there is an irreconcilable conflict of authority. The language of the policy would seem at first glance to be-clear enough. “This entire policy * * * shall be void' " * * if a- building herein described * * * be or become vacant or unoccupied and so- remain for ten days.” There are several classes of cases upon this point. Some courts hold that although, as in this case, the consideration is entire, that is, the premium is a gross sum and the amount of insurance is also a gross sum and the provision is that “this policy” or “this entire policy,” <fcc., shall be void, the mere fact that the amount of insurance is distributed by the terms of the- policy among the various, items insured, is sufficient to show that the- contract is severable- or divisible and that its being void as to- one item does not affect its validity as to the- other items-. They hold this even though the items are so- related that the burning of one would in all probability result in a destruction of the- other, ns where the items are a building and the goods in the building. In some cases an attempt is made to justify such ruling by the-statement that the insurance might have been effected by separate policies on tire respective items, in which case the vo-idance of one policy would not affect the other, and, that the- insured ought not to suffer because for convenience all the items have been included in one policy. This of course assumes that the insurance could have been effected on the respective- items separately a.t the- same rate-, which is- no- doubt true in some cases and not true in other cases. A larger number of courts hold that under terms like those in this jrolicy and especially in view of the fact that the consideration is entire-, the- contract is not — 11 — divisible. They say that even if the insurance could have been effected in different policies at the same rate, yet this was not done; that the parties have made their contract; that it should be construed by the same rules that are applicable to other eon-, tracts; that the court cannot make a different contract for the-parties; and that the object of distributing the amount among the different items is to- limit the amount to be recovered in respect of each item and not to make the contract severable. A third class of courts, in an effort to effect justice, take a middle course and hold the contract to be entire where the items insured are so related that the burning of one would endanger the others, and divisible where they are not so related. No doubt policies of insurance should be construed strictly against the insurer and liberally in favor of tire insured, but this rule applies in cases of doubt. It does not mean that policies should be given meanings which their language cannot reasonably bear or that insurers have no rights or that the; terms of valid contracts should not be enforced though they may appear to be harsh. It would in our opinion be in violation of established principles of law and recognized principles of justice, to adopt the first of the above views and hold that the contract was severable under tire circumstances of this case irrespective of the question whether the burning of the one building would endanger the other. Even if, in an effort to- hold the insurance company liable, assuming that such an effort should be made, we should adopt the middle ground above referred to' and hold that as matter of law the contract would be divisible in case the burning of one building would not endanger the other, the facts would not support us. The buildings were both shingled-roof frame buildings, built for stores on the ground floor and dwellings on the other floors. The occupied one (upon which there was insurance for $250 under this policy and for $500 under another policy) was a two story building. The unoccupied one (upon which there was insurance for $750 under this policy), was a three story building. The latter building was next to the former. And as already stated the two were owned by the — 12 — same person who had insurance on both buildings. Under these circumstances it could hardly be claimed that the burning of the three story building would not endanger the other or that a fact — nonoccupancy—which would increase the risk as to one would not increase it as to the other. Numerous cases upon this subject are cited in 28 Century Digest, 954 et seq. One of the strongest of the recent cases supporting the view that the contract is divisible is Trabue v. Dwelling House Ins. Co., 121 Mo. 75. Oases taking the middle ground, that the contract is entire or not, according as the items insured are so related as to constitute in fact one risk or not, are collected in the note to Wright v. Fire Ins. Ass’n, 19 L. R. A. (Mont.) 211. A recent decision by a court of high authority holding that the contract is entire from1 the fact that there was but one premium is found in Thomas v. Commercial Un. Ass. Co., 162 Mass. 29. One of the latest and most carefully considered decisions to the same effect that has come to our notice is that in the case of So. Ins. Co. v. Knight, 111 Ga. 622 (52 L. R. A. 70) from which we quote the following: “The policy sued on in the present case insured both the stock of goods and the building in which it was contained. The premium due upon the policy was a 'gross sum. The question arises therefore, whether the breach of a warranty relating solely to the goods, and which precluded a recovery for their loss, would also bar a recovery for the loss of the building. The stipulation prescribing that the insured must take an inventory of his stock provides that in case of failure so to do ‘this policy shall be null and void.’ What was the intention of the parties with respect to the question just above stated? If this intention is to be derived from the language used, — and it must be,— it would seem to be clear that the contract was entire and indivisible, and that the breach of a condition which would work a forfeiture would avoid the entire policy, and not simply a portion thereof. The parties contracted that ‘the policy’ should be void in case of failure to comply with the iron-safe clause. The policy embraces insurance upon both the building and its contents, and the premium is payable in a gross sum. ‘If the consideration to be paid is single and entire, the contract must beheld to be entire, although the subject of the contract may con — 13 — sist of several distinct and wholly independent items.’ 2 Parsons, Contr. 519. It was competent for the parties to make two separate and distinct contracts,, one covering the goods, and the other the building, but they did not see proper to do this. They combined the two, and made the consideration moving towards the insurer a gross sum. They further provided that the contract — not a part of it — should be void under certain conditions. It may perhaps seem to be unreasonable that, simply for a failure to take an inventory of the stock of goods, the plaintiffs should be precluded from recovering the value of the building. But this does not affect the question. The question is, What have they agreed upon? If there was any room to doubt as to the intention of the parties, that construction which is most reasonable and most consonant with justice would be applied. But there is none. The parties have deliberately chosen to enter into an agreement whereby the policy shall be forfeited if the insured fails to do certain things, and he has failed to comply with his agreement. In such a case there is but one thing for the courts to do, and that is to, enforce the agreement as made. The question as to whether a policy of insurance such as is involved in the present case constitutes a separable or an entire contract is no new question. It has been the subject of numerous decisions by the courts in this country, and they are ip hopeless and irreconcilable conflict. The weight of authority is to the effect that the contract is entire, and that the breach of a warranty which relates solely to one class of property will avoid the entire policy, if the contract so provides. Text writers of great learning and ability have, after reviewing the decisions on both sides of this question, reached the conclusion that the contract is indivisible. We quote the following from 1 Wood, Eire Ins. p. 384: ‘It is difficult to understand how it can.be held that these contracts are several, when a gross premium is paid for the entire insurance. The court cannot say, as a matter of law, neither can the fact be shown, that the insurer would have been satisfied to take the risk separately at the same premium. By consenting to pay a gross premium for the insurance, the assured has signified his willingness to let the policy stand as an entire contract, subject in all its parts to, the, conditions imposed by .the insurer; and there is neither reason nor equity in permitting the assured, after he has violatéd one of «the conditions of the policy as to, a part of the risk, to turn around and say that the condition only affected that portion of the risk — 14 — .to which "fhe breach related.’ Mr. •Ostrander, after an elaborate review of the decisions, reaches the conclusion that those, which hojld the.contract to be entire announce the sounder and better rule. Ostrander, Fire Ins. §23 fit seq. See also 2 Joyce, Ins. §1931 • 1 May, Ins. §277. In support of the views herein announced, we find the courts of last resort of Maine, Wisconsin, Maryland, Minnesota, Virginia, New Hampshire, Massachusetts, Vermont, Pennsylvania, New Jersey, Michigan, Indiana, Arkansas, Iowa, Alabama, and Connecticut. .* * *■ Opposed to this view are decisions -of the courts of .last resort of Nebraska, Colorado-, Kansas and Missouri. * * * The courts of New York and Indiana seem to- have been at different times on both sides of the question now under consideration. * * * Our conclusion is .that where .an insurance policy is issued in. consideration -of a gross premium, and provides that the policy shall be void in the event of a breach of a certain ■condition therein, named and this condition is broken, no recovery can be had on the policy, though separate classes of property are therein insured, and though the stipulation violated-■relates solely to a matter which could have connection .with but one of these classes.” It may seem hard to- hold that the breach of fhe condition as to occupancy avoids the policy although it in fact had nothing to do with the burning of the property. But such was the contract made by the parties themselves. It was competent for them to make, such a contract and the court must give it effect. The insurer might have extended the period of nonoccupancy if the insured had applied for an extension,'but whether'it shall now waive or rely on the breach is not' for the court to say. That the breach may be relied on under the terms of the policy ■¡although it did not contribute to the.loss is well settled. Imperial Fire Ins. Co. v. Coos County, 151 U. S. 452. Under the practice established in this jurisdiction judgment non obstante veredicto may be ordered for the defendant as .well as for the plaintiff and on -the evidence- as-well as on the •■pleadings when the facts- are undisputed. See Estate of Kamalca, 9 Haw. 245. This was done in an insurance case in Lewis v. N. T. Life Ins. Co., 4 Haw. 305. The facts are undisputed 'in the present case so far as the question of. occupancy — 15 — is concerned. The trial judge should have directed a verdict for ■the defendant. Magoon & Thompson and Hatch & 8Miman for plaintiff. Robertson & Wilder and L. A. Thurston for defendant. • The exceptions are sustained, the verdict.set aside, and the ■case remanded to the! Circuit Court with directions to order judgment for the defendant non obstante 'veredicto.