Carpenter v. American Ins.

STORT, Circuit Justice, delivered the opinion of the court as follows. We are clearly of opinion, that the policy in this case having been obtained upon a misrepresentation of the material facts, is utterly void. The original proposal for the insurance, by the letter of the 14th of November, 1830, referred the defendants to the description of the property at Providence Washington Insurance Company’s office, at which it was insured for $15,000, the property being therein valued at $19,000. The defendants, after examining that policy and description, declined, by the letter of the 17th of November, to take the additional sum proposed, upon the very ground, that the sum already insured thereon was as much as was proper to be taken on such a valuation. In order to induce the defendants to take the risk, the letter of the 0th of December, 1S30, represented, that since the original insurance was made, additions had been made to the factory, &c. fully equal to $10,000. Upon the faith of this statement the present policy was underwritten. It now turns out that this representation is utterly untrue, (whether by design or by mistake is not material,) and no such additions have been made since the former policy. No one can doubt the materiality of this representation; for it was the very point (the increased value) upon which the policy was underwritten. It seems to us. therefore, that this makes an end of the case; for a false representation of a material fact is, according to well settled principles, sufficient to avoid a policy of insurance underwritten on the faith thereof, whether the false representation be by mistake or by design. It is suggested, that the misrepresentation was in fact unintentional and without any fraudulent design, and that Epenetus Reed (the mortgagee) for whose benefit the insurance was made, was entirely ignorant of the misrepresentation; and that, under such circumstances, his rights under the policy ought not to be prejudiced thereby. But this suggestion cannot avail for the plaintiff, or for Reed. The misrepresentation, made by an agent in procuring a policy, is equally fatal, whether made with the knowledge or consent of the principal, or not. The ground in each case is the same. The underwriters are deceived. They execute the policy upon the faith of statements, material to the risk, which turn out to be untrue. The mistake is, therefore, fatal to the policy, as it goes to-the very essence of the contract. The plaintiff discontinued his suit, and costs were awarded to the defendants.