Gould v. York County Mutual Fire Insurance , 47 Me. 403 ( 1859 )

The opinion of the Court was drawn up by

Tenney, C. J.

The goods covered by the policy were owned by Benjamin Gould, the father of the plaintiff, prior to April, 1856, when they were purchased by the latter, and were entirely his property. While they were owned by the father, according to the evidence, the business was done in the name of B. & W. Gould, the son consenting that his name should be so used. After the purchase, goods were bought and business carried on by the son in the name of B. & W. Gould, the father consenting thereto. The case contains no evidence that any part of the goods was purchased on credit. The Judge was requested to instruct the jury, that, if the goods were bought in the name of B. &'W. Gould, and partly on 'credit, it would constitute such a fraud, or breach of warranty, as would avoid the policy; that purchasing the goods in the name of the firm constitutes them partnership goods. These instructions were not given; but the jury were instructed, if the father authorized the plaintiff to use his name, as he did use it, in the purchase of goods, and the goods were in fact the sole property of the plaintiff, the use of the father’s name would not affect the legal rights of the parties. The evidence touching the ownership of the goods is not in the least in conflict with the representations in the application or the terms of the policy; and there is nothing in that evidence which tends to show that the risk of. the company was in any degree increased. The instructions requested were properly withheld, and those given upon this point free from error.

The policy refers to the application as part thereof, and it is made subject to the provisions and conditions of the charter and by-laws, and the lien on the interest of the person insured, in any personal property or building covered by the policy, and the land under said building. It is provided, in the application, that any concealment of the condition or character of the property will make the policy void. The 14th interrogatory in the application is, — “If incumbered, state for how much and to whom. State the true title and interest.” The answer to this interrogatory is, “None.”

It is in evidence that, at the'time of the application and the issuing of the policy, there was upon the real estate insured a mortgage, on which there was due the sum of two hundred dollars. This answer was manifestly material and became a warranty by the terms of the contract. Battles v. York Co. Mut. Ins. Co., 41 Maine, 208. This was a misrepresentation, and a breach of the contract, and, by the instructions of the Judge, the policy was absolutely void, so far as it referred to and covered the real estate insured. This part of the instructions was correct.

But the jury were further instructed that, if the misrepresentation was made fraudulently, the whole policy was void, and the- plaintiff could recover nothing; but, if the representation that the store was free from incumbrance was made inadvertently, in good faith, he believing it to be true, and he had no knowlédge to the contrary till the day before the commencement of the trial, then said erroneous representation would not avoid the policy of insurance upon the goods insured, and that he would be entitled to recover for the goods insured, according to the terms of the agreement, as stated in the policy. Exceptions taken to the latter portion of these last instructions are relied upon.

The company had a lien on the land and the store which contained the goods, and upon the goods themselves, not only for the payment of the note given for the premium, but for the payment of assessments made on account of losses. In the policy and the application, no distinction is made between an incumbrance for a small sum compared with the value of the real estate insured, and a sum which is nearly or quite equal to the whole value, in relation to the question whether the policy is avoided by such misrepresentation. In the latter case, supposed, the company would hold a position far less favorable than in the former, as to the goods insured, as well as to the real estate. In a policy like the one in question, the real estate insured is security for the goods covered by the same policy; and, if the real estate, as owned by the assured, is of little or no value, it can be security for the intended purposes only in proportion to the insurable interest of the applicant.

Is there ground for the distinction made by the Judge, as to the intent with which the misrepresentation was made, in its effect upon the insurance of the goods ?

It is immaterial, in regard to misrepresentation in obtaining insurance, whether it is made fraudulently or by mistake or accident, the effect is the same. A policy obtained by misrepresentation is, in legal intendment, no insurance at all; it has no legal effect. Clark v. N. E. Mut. Ins. Co., 6 Cush., 342.

In Carpenter v. American Ins. Co., 1 Story, 57, Story, J., says, — “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 design.” ■“ The representation, 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 on 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 same principle was laid down by Lord Mansfield, which has not been denied to be correct. He says, — “Although the suppression should happen through mistake, without any fraudulent intention, yet still, the underwriter is deceived and the policy is void, because the risk run is vastly different from the risk understood and intended to be run at the time of the agreement.” Carter v. Boehm, 3 Burr., 1905, 1909.

The policy was void by reason of the misrepresentation in regard to the incumbrance, irrespective of the question whether it was fraudulent or made through an honest misapprehension of the facts; and, by the terms of the policy, including the application, charter and by-laws, which make a part thereof, it became void. The contract being entire, and one premium note given, the lien for the security of the same was affected by the erroneous answer. Richardson v. Maine Ins. Co., decided by this Court in 1859, not yet reported; Brown v. People’s Mut. Ins. Co., 11 Cush., 280.

The plaintiff testified that, at the time of the fire, some 1500 pounds of paper rags were in the store, which were destroyed ; these he had taken in from time to time. The defendants requested the Judge to instruct the jury that, if rags were kept in the store insured, and which contained the other property insured, during the time said property was insured by the defendants, the policy would be thereby avoided. 2. If rags were so kept during any portion of the time the same were insured, it avoids the policy. These instructions were not given.

The 8th question put to the plaintiff, in the application, is, “ Is cotton or woollen waste, or rags kept in or near the property to be insure.d ?” The answer is, “None.” It does not appear, affirmatively, that this answer was untrue at the time it was made. And no provision is found in the policy, or the charter and by-laws, that, if such articles shall thereaffcerwards be kept, the policy shall be avoided.

Exceptions sustained,—

Verdict set aside, and

New trial granted.

Rice, Appleton, G-oodenow, and Davis, JJ., concurred.