Hutchinson v. Western Insurance

Leonard, Judge, delivered the opinion of the court. The sixth condition annexed to the present policy is : “ Persons insuring property at this office must give notice of any other insurance (either previous or subsequent) made on their behalf on the same, and cause such other insurance to be endorsed on their policies; in which cases, such office shall be liable to the payment only of a rateable proportion of any loss [101] or damage which may be sustained; and, unless such notice is given, the insured will not be entitled to recover in case of loss and the principal question upon the trial was, whether there had been a compliance with it, and if not, what was the effect of the non- compliance. A warranty, in the law of insurance, is a written stipulation in the policy, applicable either to matters present or future, and, in the former case, is called an affirmative, and in the latter, a promissory warranty; and the policy being signed by the underwriters only, these warranties are made effectual by treating them as conditions precedent, upon the truth or fulfillment of which the entire contract depends. (Angel on Insurance, secs. 140,142,145 and 147. Arnold on Insurance, 58. Ellis on Insurance, 28. Borradaille v. Hunter, 5 M. & Granger, 639. Newcastle Fire Insurance Co. v. McMorran, 3 Dow, 262.) The present stipulation, it seems, is now a new invention, but is taken from the conditions annexed to the fire policies issued by the London companies, (Ang. on Ins., Appendix, 7,) and the object of it is very obvious, and the provision itself reasonable enough. Underwriters rely more upon the interest than the morals of the insured for protection against the carelessness of owners in the preservation of the insured property, and therefore always leave a sufficient amount uncovered by the policy to make it the interest of the insured to take proper care of it. To enable them to do this, it is necessary, of course, that they should be informed whether the property, upon which they are about to take the risk, is covered by any existing policy, and if so, to what extent; and that their risk may not afterwards be increased without their knowledge or consent, by the subsequent act of the insured, in covering his remaining interest, either wholly or partially, with additional policies, from other underwriters, this stipulation, looking not only to the present, but to the future condition of the property, in reference to other insurance upon it, and the consequent increased risk on the part of the underwriters, is inserted as a condition in the policy. [102] We may remark, too, an additional reason for this provision. The contract of fire insurance being a mere contract of indemnity against actual damage, the insured can only recover to the extent of his loss, no matter what amount maybe covered, or by how many different policies. But, then, he has his election upon which policy he will exact this indemnity, leaving it to the parties themselves afterwards to Gompel contribution from those who ought to bear with them the common loss, and to compel the insured to go to the other underwriters for the residue. Keeping these things in view, there is not much difficulty in settling the material questions discussed in this case. It is true, the main purpose of the provision, might be effected by a mere verbal notice of other insurance, without any endorsement of it upon the policy ; but the parties have seen fit to agree that all other insurance upon the property shall be so ^endorsed, in order manifestly to have certain and authentic evidence of this material fact, instead of leaving the matter to the uncertainty of mere verbal testimony. The endorsement changes the effect of the contract, as it stands on the face of the instrument, in reference to the amount the insured may claim of the underwriters, and perhaps it is also intended to furnish evidence against the underwriters of their consent to a continuance of their liability, notwithstanding the increased risk thrown upon them by the subsequent insurance. An intimation to this effect is given in the opinion of the court, in the case of Carpenters. The Prov. Ins. Co., 4 How. 222, which was a suit in equity, to compel the underwriters to make an endorsement upon a policy of a subsequent insurance, of which they had received verbal notice. The case went oft' upon a defect of proof as to the fact of notice ; but it is intimated by the judge who delivered the opinion, that, perhaps, it would have been a good defence to the bill, that the parties had declined continuing their liability, as underwriters, under the increased risk, and, in the exercise of their right to do so, had refused to make the necessary endorsement upon the policy, required as the evidence of the fact. [103] If other insurance exists at the time, and is not endorsed, although communicated or known to the underwriters, it is not enough. The condition is not complied with, and no contract exists. (Carpenter v. The Prov. Ins. Co., 16 Pet. 512. Barrett et al., v. Union Mutual Fire Ins. Co., 7 Cush. 178. 1 Phillips on Ins. 477.) There can be no distinction in this particular between a present and a subsequent insurance, and the present condition extends to both existing and future policies, and if there is a failure to endorse either, the stipulation is not complied with. But it seems to have been thought upon this trial, that the endorsement was not a condition precedent to the plaintiff’s right of recovery, and that a failure in this matter did not defeat a recovery, upon the ground, we suppose, that the express provision to that effect was confined to tho want of notice. It seems, however, that any stipulation inserted in the policy is, according to the law of insurance, to be considered as a warranty, and so is a condition precedent, without any express contract for that purpose ; and, indeed, in this case, we think the last clause of this condition ought to be construed as referring to a notice perfected by an endorsement, rather than as limiting the effect of the provision in annulling the contract to the mere failure to give notice. The endorsement must, of course, be made by authority of the party who is to be bound by it, and if it is to affect the rights and liabilities of both parties, it must be made with the consent of both. No question, however, of this kind arises here, as it is not pretended that any endorsement was ever made, or proposed to be made. It is not necessary to go into a particular examination of the instructions given and refused. It is enough for the reversal of the judgment that the ease was tried and determined upon the assumption that a verbal notice, without an endorsement, was sufficient to enable the plaintiff to recover, while we think otherwise. The judgment must therefore be reversed, and the cause remanded ; which is ordered accordingly, the other judges concurring.