Redman v. Hartford Fire Insurance

LyoN, J. When the case of Blumer v. The Phoenix Ins. Co. (45 Wis., 622) was decided, a majority of the members of the court were of the opinion that positive and unqualified statements of the insured, contained in the application for the insurance, in respect to the precautions used against fire, although, in the present tense, are, in general, continuing or promissory undertakings, in the nature of express warranties, if made so by the contract; and that a failure by the insured to continue such precautions during the term of the policy is fatal to the contract. A reargument of that case has been ordered, and will probably be had at the next term. We do not wish to decide the question there involved before the case is reargued, and we do not find it necessary to do so on this appeal. Eor the purposes of this case, it will be assumed that Blumer v. The Ins. Co. was correctly decided in the first instance, and the case will be considered from that standpoint. The nonsuit was ordered on the ground that the uncontra-dicted evidence proved that the contract of insurance had been forfeited, and the insurer released therefrom, for the following reasons and those only. Two of the interrogatories in the application for insurance, and the answers of the plaintiffs thereto, are as follows: “ What material is used for lubricating or oiling the bearings or machinery?” Ans. “Lard and sperm oil.” “ Is the machinery regularly oiled? If so, by whom and how often,” Ans. “ Yes, by engineer and miller, as often as necessary.” The evidence seems to show conclusively that during the whole life of the policy an oil known as “ Fine Engine Oil ” was constantly used in the mill for lubricating purposes, and that the machinery was not usually oiled — 98 — by the engineer or miller, but by another person specially employed by tbe plaintiffs for that purpose. The learned circuit judge held that the answers to the above questions were absolute and continuing undertakings in the nature of express warranties, and that the failure by the plaintiffs to use lard and sperm oil, and to have the machinery oiled by the engineer or miller, invalidated the contract of insurance and released the defendant from any and all obligations under it. Hence the nonsuit. This ruling ignored the questions whether the plaintiffs knew that there had been a departure from the requirements of the contract in respect to the oil used for lubricating purposes, or the person who used it, and whether the risk or hazard of fire was thereby increased. J3y the terms of the policy the application is made a part of it. The two instruments are therefore parts of the same contract, and must be construed together, as though all of the statements and stipulations contained in each were written in one instrument. Hence the stipulation at the close of the application must be treated as if written in the policy. It is manifest that such stipulation is not qualified or changed by anything in the policy. • The condition therein that the application shall be considered a warranty by the assured, means just such a warranty as is stipulated in the application — no more and no less. Were this doubtful, the fact that the application came under the immediate scrutiny of the assui’ed while negotiations for the insurance were pending, and the policy did not, would resolve the doubt by making the stipulation in the . application' controlling. Hence, the case turns entirely upon the construction of the stipulation in the application. , Counsel for defendant maintain that the first clause of the stipulation, to wit, that “ the foregoing is a just, full and true exposition of all the facts and circumstances in regard to the condition, situation, value and risk of the property to be insured,” is not qualified or affected by the next sentence — “ so — 99 — far as the same are known to the applicant, and are material to the risk,” — but that snch sentence is an additional stipulation that the insured have stated in the application all facts known to them w'hich are material to the risk, although the information is not called for in the interrogatories. If this is the correct construction, the plaintiffs covenanted against both the suggestio falsi and the suppressio veri, and it would seem to follow that a breach of the covenant in either respect would be fatal to the contract under the last clause of the stipulation, which reads, “ and the same is hereby made a condition of the insurance, and a warranty on the part of the assured.” But the defense does not rest upon any alleged concealment of facts material to the risk and known to the plaintiffs, but upon their false affirmations, or their failure to comply with continuing or promissory undertakings, in respect to the precautions used, or to be used, against loss by fire of the insured property. Hence, the construction contended for would render the words “ so far as the same are known to the applicant and are material to the risk” entirely immaterial and inapplicable in the present case. Omitting these words from the stipulation, there remains a positive unqualified covenant that the statements contained in the application are true. .This would make the case substantially like the JBlumer case, and would sustain the nonsuit on the hypothesis assumed at the outset. On the other hand, counsel for the plaintiffs maintain that the words “ so far as the same are known to the applicant and are material to the risk,” contained in the stipulation, qualify and limit the preceding clause, and restrict the condition and warranty thereinafter mentioned to such statements in the application as were material to the risk and known'to the plaintiffs to have been false. Under this construction, the contract cannot be declared void unless it is made to appear, not. only that the application contains some false statement of fact, but that the insured knew it to be false, and that the same was — 100 — material to the risk. And as to a promissory or continuing statement or undertaking, true when made, but afterwards departed from, it must appear that the change increased the risk or hazard of loss, or it-is immaterial. It seems obvious that one of the constructions contended for must be adopted; and the question is, Which of the two is the more reasonable and just? In determining this question, we shall enter into no minute analysis of the stipulation, nor indulge in any extended discussion. There are a few general considerations which control our judgment, and these will be very briefly noticed. In the first place, we think there is no authorized rule of construction which will permit us to hold that the stipulation may be extended to facts and circumstances concerning which no interrogatory is propounded in the application. More than one hundred questions are propounded therein to the plaintiffs, calling for most minute information upon every matter which would seem to be of any interest to the insurer, and there is no general interrogatory calling for information in respect to matters not specially inquired after. Under these circumstances, the plaintiffs might well have believed that every fact which the insurer deemed material to the risk was specially called for, and that the stipulation was only intended to bind them to good faith in their answers to the interrogatories propounded to them. We think any intelligent and prudent business man would have so understood it. The stipulation was framed by the insurer, and had it been intended to require the insured to go beyond the interrogatories and disclose facts not called for therein (if any existed) material to the risk, a general interrogatory calling for such facts would have been inserted; or, at least, the stipulation would have been framed to express that intention more clearly. We cannot assume that the insurer would leave its intention in that behalf to rest in uncertain and doubtful inference, when it was so easy to express it clearly and unmistakably. If these views are correct, — 101 — they are fatal to the construction claimed on behalf of the defendant. Moreover, that construction would work a forfeiture of the contract, and it is a maxim that, in a doubtful case, the construction should be preferred which will save the contract, rather than one which will destroy it. The use of the word warranty in the stipulation is not very significant; certainly it does pot control the construction. There may be a warranty without the use of the word, and its use may not in every case create one. The vendor of a horse who represents to the purchaser that the animal is sound, the purchaser relying upon such representation, warrants the soundness of the horse, although he does not use the word warrant. But, unless the representation is material, it is no warranty. On the other hand, if the vendor warrants the horse sound so far as he knows, that is no warranty in the legal sense of the term, and he can only be held liable for an unsoundness on proof that he knew the fact. That is, he is not liable as a war-rantor, but only for his fraudulent and false representation. And here too the representation must be material, that is to say, it must have been an inducement to the contract, or there is no liability. So the stipulation under consideration, notwithstanding the use of the word warranty, may, without doing violence to the language employed, be construed as merely an agreement against false and fraudulent material statements in the application. Regarding the statements upon which this case turns as continuing or promissory representations, the same elements of knowledge by the plaintiffs that they were false or have been departed from, and of materiality, must be proved to exist, or the contract cannot be held void. For the reasons above suggested, and because we believe that to be the more natural and reasonable construction of the language employed in the stipulation, we adopt the construction claimed on behalf of the plaintiffs. This is substantially — 102 — the construction given to a similar clause in a policy in Houghton v. Ins. Co., 8 Met., 114. We hold, therefore, that, to escape liability on the policy, the defendant must show that the use of “Eine Engine Oil,” instead of lard and sperm oil, was known to the plaintiffs, and increased the risk; or that the risk was increased by the fact that some person other than the engineer and miller usually oiled the machinery. • The judgment of nonsuit cannot be sustained unless such conditions of knowledge and materiality were conclusively proved. That they were not, will scarcely be denied. Besides, testimony offered by the plaintiffs to negative the existence of one of these conditions, was rejected. The judgment must be reversed for the following reasons: I. The testimony tended to prove that the plaintiffs believed that the oil used in their mill for lubricating purposes, although denominated “Eine Engine Oil,” was a compound composed mainly of lard and sperm oil. We think the testimony was sufficient to send that question of knowledge to the jury. II. The court rejected testimony which, had it been received, might have tended to show that the oil used in the mill during the life of the policy was as good and safe as lard and sperm oil. The evidence should have been received on the question of the materiality of the statement on that subject in the application. III. There does not appear to be any evidence that the machinery was not properly oiled by the person employed for that purpose. If it was properly oiled, the representation in that behalf, although false, is immaterial. The burden was upon the defendant to show the materiality of the statement, and it failed to do so. By the Court. — Judgment reversed, and cause remanded for a new trial.