Dumas v. Northwestern National Insurance

Mr. Justice Morris delivered the opinion of the Court: It will be noticed that among the reasons assigned for the motion to direct a verdict in favor of the defendant, the enforced release executed by the plaintiff is not mentioned. And certainly it was very proper to omit this proceeding from the further consideration of the court. We do not need to give it any consideration here; although it is insisted on in the brief of counsel for the appellee. If the case turned upon that release, our conclusion might be very different from that which we have reached. There are six assignments of error by the appellant. Four of these raise the same substantial question, that there was no breach of the conditions of the policy of insurance — 254 — by the plaintiff, either in executing the affidavit before mentioned, or in the fact that part of the property was covered by a chattel mortgage, or that the title to part of the property was not in her. The fifth has reference to the release executed by the plaintiff, while under duress, as is claimed. And the sixth is based upon the theory that the plaintiff had made a case wherein she .was entitled in any event to go to the jury. In view of what we have said, the fifth assignment need not be further considered here; and the sixth will be disposed of by what we have to say of the others. In connection with this last assignment, however, the point is made, that in any event the plaintiff should have been allowed to recover pro tanto for the property actually owned by her, even if as to the remainder of the property insured the objections of the defendant should be regarded as well taken. Of this in its. order. 1. The burden of the argument on behalf of the appellant is that there was no fraudulent concealment of anything by her; and that, if there was any omission of proper information, it was the duty of the defendant company and its agents to inform themselves of the true condition of things by proper inquiry before the policy of insurance was issued. And the claim is, that, in the absence of fraudulent concealment by the plaintiff, and in the absence of proper inquiry by the agents of the defendant company, the plaintiff is not chargeable with any breach of the conditions of the policy of insurance. That there was apparent breach of the conditions of the policy is beyond all question. One of those conditions was that the policy should be void if the interest of the insured in the property should be other than that of unconditional and sole ownership. To one-fifth of the property, or thereabouts — the piano valued at $275, and the property purchased from the Lansburgh Company, about $600 — she had no title whatever. Even if it be conceded that she had an — 255 — insurable interest, both in the piano, which she had only-rented, and in the other property, of which the title had been expressly retained by the vendor, it is very clear that the interest was not that of unconditional and sole ownership. Another of the conditions was that the policy should be void in the event that the property insured should be covered by a chattel mortgage. Nearly one-quarter of the property — that purchased from Craig and Harding, and valued at $950 — was incumbered by a chattel mortgage to secure the greater part of the purchase money yet due upon the property to that firm. Yet another condition was that the policy should be void in case of false swearing by the insured touching any matter relating to the insurance or the subject thereof, whether before or after a loss. After the loss in the case, the plaintiff, in an affidavit presented to the company and constituting part of her proof of loss, swore that she was the sole and absolute owner of all the articles enumerated in her schedule of her loss, and which comprised both the piano and the furniture contracted for with the Lansburgh Company; and in view7 of what has already been said, that statement was undoubtedly untrue, and therefore necessarily a violation of the condition of the policy. But it is argued, that there was no fraud in all this on the part of the plaintiff, and that, therefore, she ought not to be precluded from recovering. And cases are cited in which it is claimed that recovery has been allowed under somewhat similar circumstances. We do not so understand the law. It is unnecessary, and it would be a hopeless task to enter upon the dreary wilderness of judicial decision upon the subject of insurance, with the view7 of deducing a rule from it for our government in the present instance. Courts have sometimes been too astute in their search for reasons to maintain the liability of insurance companies in the face of conditions limiting such — 256 — liability. And yet a contract of insurance in this regard is no different from other contracts; and the function of courts is to construe them, not to make them. In the absence of statutory provisions to the contrary, insurance companies have the same rights as individuals to limit their liability, and to impose whatever conditions they please upon their obligations not inconsistent with public policy; and the courts have no right to add anything to their contracts, or to take anything from them. If those contracts contain harsh and onerous conditions, which perhaps a court of equity might not enforce, if called on so to do, yet there is no compulsion, either legal or moral, on parties to deal with them upon the basis of such conditions. And certainly it would be a novel contention for parties to seek to enforce liability under such contracts in a court of common law, and at the same time to repudiat the express conditions upon which such liability is made to depend. We must take it for granted, therefore, that our duty in the premises is to construe the contract of insurance before us according to its true legal intent and meaning, and not in any manner to vary or modify the instrument itself by disregard of any of its provisions. It is true, however, that this construction must be with reference to the well-established rule that, if a policy of insurance is so drawn as to require interpretation and to be fairly susceptible of two different constructions, the one will be adopted that is most favorable to the insured. Imp. Fire Ins. Co. v. Coos County, 151 U. S. 452. In the sense of absolute ownership, clear and unincumbered, as commonly understood, the plaintiff had title only to about one-half of the property which she sought to insure. With reference, however, to the portion of the property purchased from Craig and Harding, and which was covered by a chattel mortgage, she may, in view of the authorities on the point, be also regarded as the sole and unconditional owner. Insurance Co. v. Kelly, 32 Md. 421; Howard Fire Ins. — 257 — Co. v. Chase, 5 Wall. 509. But it is.not apparent how, in any sense of the words, she can be regarded as the sole and unconditional owner of the residue of the property. The ownership of that residue was purely and simply conditional; and it would be difficult to conceive an ownership more distinctly of the character against which the defendant company sought to guard its liability. If, therefore, we are to give any force whatever to the condition in the policy of insurance that the person insured must be the sole and unconditional owner, we can not hold that the condition was observed in regard to a considerable part of the property sought to be protected by this instrument. It may well be that the plaintiff had an insurable interest in all of it, possibly even in the piano, which she had only rented, and that the defendant company might have insured that interest, if only that had been presented to them for insurance. But certainly it was not the interest that was actually presented for insurance ; it was not sole and unconditional ownership. And it does not follow that, even if the defendant would have insured, it would have done so on the same terms and conditions. On the contrary, in such cases, the terms and conditions are usually different from the case of either absolute or unconditional ownership. We must conclude that, at least as to part of the property, about one-fifth of it in value, the policy of insurance wholly failed, for the reason that the condition of insurance, requiring unconditional ownership in the plaintiff was never performed by her. 2. It may be that it was in consequence of such decisions of the courts as those to which we have referred, wherein it was held that there was sole and unconditional ownership, in the legal sense of the policy of insurance, notwithstanding the existence of an outstanding mortgage, that insurance companies sought further to limit their liability by imposing conditions against such mortgages. But whatever may have been the suggestion for these conditions, it is very certain ' — 258 — that they add limitations to the policy beyond that of sole and unconditional ownership, which we can not disregard. It was the right of the company in this case to refuse to insure mortgaged property, and to provide that its policy of insurance, however otherwise conditioned, should not cover personal property encumbered by a chattel mortgage. As nearly one-quarter of the property in question here was covered by a chattel mortgage, we find it impossible to understand how the policy can reasonably be construed so as to protect it. 3. But it is said that all this is of no consequence, inasmuch as the defendant company made no inquiry as to the true-condition of things, and there was no fraudulent concealment on the part of the plaintiff. And there is excellent authority for the doctrine, that “as to the ordinary risks connected with the property insured, if no representations whatever are asked or given, the insurer must be supposed to assume them; and if he acts without inquiry anywhere concerning them, he seems quite as negligent as the insured, who is silent when not requested to speak.” Clark v. Manufacturers’ Ins. Co., 8 How. 235. The agents of insurance companies are usually experienced men, well informed as to the information which they should have in anticipation of the risk which they assume; and the rule is not unreasonable which would require them to make all due inquiry for the procurement of such information. Nor is it unreasonable that the insured should be held harmless from the mere failure to give information, when he is not interrogated, and when perhaps he is not aware of the importance or immateriality of the matter to which the information should extend. But this is not a case of representation or misrepresentation,’ of failure to give information or failure to elicit it by proper inquiry. The parties have deliberately put it into their contract, and have made it an essential condition of that contract that the contract itself should not be binding, — 259 — if there was any mortgage on the property or the title was not that of unconditional ownership. There was no inhibition by law against the insertion of such a condition in the contract; and it may well be that its insertion was a matter of precaution, to guard as well against the negligence or failure of agents to elicit proper information, as against the negligence or failure, not fraudulent, of persons seeking insurance to give such information. The condition is not illegal and does not contravene any rule of public policy; and even if its practical effect should be held to be to throw upon the insured party the burden of giving voluntarily the information which otherwise the insurer would have been required to elicit by proper inquiry, we know of no rule of law that would preclude parties from contracting to that effect, if they so desire. In the case of Clark v. Manufacturers’ Ins. Co., 8 How., 235, to which we have referred for the rule imposing the burden of inquiry upon the insurer rather than that of voluntary information upon the insured, the matters there referred to as proper knowledge for the insurer were the circumstances of the use of property, to which the minds of insurers would naturally be directed, and those of parties insured might not be so called. But it seems to us that a different condition of things arises, when a person solicits insurance on property not his own, and which he knows not to be his own; and when to the proposed insurer the very solicitation of insurance is the equivalent of a representation that the property, for which the policy is sought, is the unconditional and absolute property of the person seeking the insurance. Assuredly it would not be held that, if the person had no title at all of any kind, and the policy, therefore, was simply a wagering policy, yet he should still be entitled to recover, if the company or its agents had made no inquiry in regard to his ownership. Neither ownership nor the character of ownership is usually a subject of inquiry in such cases. — 260 — In support of the contention of the plaintiff, two cases from Kentucky are cited, Lancaster Ins. Co. v. Munroe, 39 S. W. Rep. 434 (Court of Appeals of Kentucky, March, 1897), and Insurance Co. v. Meschendorf, 14 Ky. L. R. 757. But the decisions in those cases are expressly based upon the provisions of the statute law of the State of Kentucky, which are to the effect that “ no misrepresentation, unless material or fraudulent, shall prevent a recovery on a policy of insurance.” Acts of Kentucky of 1874. Were they the result of the application of general principles of law, it is not apparent how they could be supported in reason or with any regard to the inalienable rights of parties to contract with each other as they may deem proper, so long as their contracts are not prohibited by law. We cannot read the word “fraudulent” into the contract before us, when neither the letter nor the spirit requires it for the purpose of reasonable interpretation. The contract deals with facts and conditions, not with the intention of the parties with reference to those conditions. 4. What we have said in regard to the matter of the title to the property and the conditions of the policy in reference thereto, will serve in great measure to dispose of the matter of the affidavit made by the plaintiff for the purpose of procuring payment to her of the amount of the policy of insurance. That this affidavit had been prepared by the agent of the defendant company, and that the plaintiff - did not read it before she executed it, are circumstances that can not for a moment entitle themselves to consideration. The affidavit was short, plain and simple. It was not difficult to be understood; and the failure of the plaintiff to read it before execution only aggravates the falsity of its statements. There is no pretence that she was in any manner prevented from reading it, or that there was any fraud on the part of the agents of the defendant in its procurement. It was precisely the thing against which the defendant company sought to guard itself when it provided — 261 — that the policy of insurance should be void in case of any false swearing about the matter, either before or after the loss. Unless, therefore, we are to hold that this condition in the contract in regard to false swearing was meaningless or void — and we are not aware of any rule of law upon which we can so hold — we can not see how its effect in vitiating the policy of insurance can be avoided. The case of Knop v. National Fire Ins. Co., 101 Mich. 359, is cited, in which there was a suit like the present upon a policy of insurance. There, also, there was a provision in the policy that it should be void if the interest of the insured were other than unconditional and sole ownership. Whether there was any provision in regard to false swearing, as in the policy before us, does not appear from the report of the case, and we are not otherwise advised. But after the loss, the insured party made an affidavit to the effect that he was the sole and unconditional owner. The court,in its opinion,said: “It has been repeatedly held that such a condition will not invalidate the policy in such a case. . . . We do not think that the statement in the affidavit, made after the loss, that he was the sole and unconditional owner, would prevent a recovery.” The reason given for this latter conclusion is that the false affidavit could not have prejudiced the defendant company. Plainly that case has no application to this now before us. In that case there was, as here, a chattel mortgage upon the insured property, which was not disclosed to the insurer at or before the issue of the policy. But the court held, in accordance with what seems to be the preponderance of authority on that point, that, notwithstanding such mortgage, the plaintiff was in law, and according to the true legal intent and meaning of the policy of insurance, the sole and unconditional owner; and therefore the condition of the policy had not been broken. But there was no condition there, as here, against the existence of mort — 262 — gages upon the property; and there was no such absence of ownership, as here, with reference to part of the property. When in that case the court held that the plaintiff was the sole and unconditional owner of the insured property, notwithstanding a mortgage existing against it, it would have been entirely logical, in reference to the affidavit, to hold that this paper was not false. For if the plaintiff was in truth the sole and unconditional owner of the property, it was no falsehood for him to say so, either in an affidavit or otherwise. In the opinion it would seem to be conceded that the affidavit was false; but the falsehood was sought to be excused on the ground that it did no injury to the defendant. This may also have been a correct statement of the law as applicable to that case. But it does not appear in that case, as it appears here, that false swearing on the part of the insured, whether prior to a loss or subsequent thereto, operated to avoid the contract, by being made an integral and essential condition of the contract. We can not say that the insertion of such a condition in the contract was either illegal or improper. Harsh, perhaps, it may have been; but it was competent for the parties to make it, and they made it. We may conjecture even that it was inserted in the policy of insurance, in view of the decision in the case of Knop v. National Fire Ins. Co., or of some similar decision elsewhere. Whatever may have been the motive, it is not illegal; it is part of the contract; and it can not be disregarded by us. As part of the contract, it makes a very different case from that of a false affidavit made in the ordinary course of the proof of loss, and which has not entered into the contract itself as a condition of the validity of the policy. 5. From what we have said, it necessarily follows, in our opinion, that as to about one-half of the property supposed to have been covered by the policy of insurance, that policy was or became void by its own express limitations, the condition of the plaintiff’s interest in the property, and the — 263 — affidavit executed by the plaintiff. But it is argued on behalf of the appellant that this should not preclude a recovery, pro tanto, in respect of so much of the property as actually belonged to the plaintiff and to which she had full right and title. Again, the answer to this is found in the contract itself. It is one single and entire contract; and the conditions which operate to invalidate it expressly provide that it shall be avoided in its entirety. Even in the absence of such express provision this would be the result in the present case in any event by operation of law. The contract is plainly indivisible — certainly not divisible upon any such lines as those indicated in this contention. The defendant insured a certain amount of furniture as a whole upoii certain terms and conditions. We cannot assume that it would have insured a part only on the same terms and conditions, inasmuch as the risk might be wholly different. So to assume would be to assume to make a contract for the parties; and such assumption we have repudiated as being beyond the province of the courts, and indeed beyond the province of any other authority than the parties themselves. The patient ingenuity and evidently conscientious and laborious research of counsel for the appellant have failed to find more than two adjudicated cases in apparent support of their contention in this regard; and we are unable to see that those cases have that effect. In one of them from the Supremo Court of the State of Tennessee, the case of Hobbs and Henly v. Memphis Ins. Co., 1 Sneed, 444, action was brought on a policy of fire insurance, covering groceries owned by a partnership. One of the conditions of the policy was that it should be void if assigned in whole or in part. One of the partners, Hobbs, sold his interest in the property and assigned his interest in the policy to his copartner. The property was destroyed by fire, and the insurance company claimed a total forfeiture of the policy on the ground that it had been invalidated by the assign — 264 — ment. It was held by the court, however, that Henly, the copartner, was entitled to recover for his pro rata. But if there was error in this decision — and we are disposed to think there was, and that the decision cannot be sustained either on reason or on authority — it was that the remaining partner, Henly, was not allowed to recover for the whole property. For, in our opinion, the assignment by one partner to another was not such an assignment as was contemplated by the policy of insurance. The other case cited is from West Virginia. It is the •'case of Quarrier v. Insurance Co., 10 W. Va. 507, in which suit was brought upon a policy' of insurance effected on four buildings and the fixtures therein. The policy provided that it should become void upon a sale or transfer of the property; and the contract of insurance was one entire contract. One of the buildings was sold; and subsequently all four of them were damaged by fire. A recovery was allowed for ' the three buildings retained by the person insured. But we fail to see wherein that is pertinent to the question before us. The claim of forfeiture in that case was wholly unwarranted. By the express terms of the policy itself there could have been no forfeiture except by the alienation of all the property. ’ There was no provision in reference to a partial alienation. At the same time as the recovery by the insured could properly have been only in proportion to his loss and the total amount of the insurance, the decision was only just to permit such proportionate recovery. This was only the application of the principle which makes the amount of the policy the limit of recovery, and authorizes recovery only to the actual extent of the damage within that limit. In the case before us, if there were no question of the plaintiff’s ownership of the property insured, and subsequently to the issue of the policy of insurance she had sold or disposed of some of the property, there might be room for the application of the doctrine of the case of Quarrier v. Insurance Co; but as the — 265 — case actually stands it presents a very different aspect, and the rule of that case can not apply. The proposition that a policy of insurance, such as that shown in the present case, is an entire and indivisible contract, the consideration being entire, is amply supported by authority. Boarman v. Franklin Fire Ins. Co., 40 Md. 620; Agricultural Ins. Co. v. Hamilton, 82 Md. 88; Gottman v. Penn. Ins. Co., 56 Pa. 210; Lee v. Howard Ins. Co., 3 Gray, 583; Geiss v. Insurance Co., 123 Ind. 172; Garver v. Insurance Co., 69 Iowa, 202; Stevens v. Insurance Co., 81 Wis. 335; McGowan v. Insurance Co., 54 Vt. 211. The forfeiture necessarily operates to invalidate the vahóle policy. From what we have said it follows that the plaintiff having shown by her own testimony that the policy of insurance upon which she sued had become void by its own express terms, had no case upon which to go to the jury; and the trial court was fully justified in peremptorily directing a verdict in favor of the defendant. . The judgment appealed from must, therefore, be affirmed, with costs. And it is so ordered.