Fowler v. Phœnix Insurance , 35 Or. 559 ( 1899 )

Mr. Chief Justice Wolverton,

after stating the facts, delivered the opinion of the court.

1. The third defense was not insisted upon at the trial, and there is no question here concerning it. Many objections were interposed to the introduction of evidence and to the propriety and competency of certain instructions given the jury, based on the insufficiency of the facts stated in the answer to support the first two defenses. The special findings of the jury indicate unmistakably that the general verdict for the defendant was based entirely and exclusively upon the second defense. Under this condition or state of the record, if errors were committed by the court in the admission of such testimony, or in rendering its instructions, the case could not be reversed, in so far as they related to the first defense, because it is very apparent that they did the plaintiff no harm. It was held in Kraemer v. Deustermann, 40 Minn. 469 (42 N. W. 297), that, “where it is manifest that a general verdict was rendered upon a particular theory of the facts, rulings and exceptions which could not in any way affect that theory will not be considered.” This we believe to be sound in principle and decisive of the question. See, also, Haight v. Sexton — Cal. - (42 Pac. 687). This, in effect, disposes of all questions raised at the trial touching the insufficiency of the first defense, and it can make no difference now whether it was well stated or not.

2. But the sufficiency of the second further and separate defense is also challenged. We have examined this defense with due care, and, while it may not be as fully stated as it might have been, yet it is sufficient after verdict. No demurrer was interposed thereto, and, the question of its adequacy having been raised for the first time at the trial, at this stage all intendments must be taken in favor of the sufficiency of the pleadings.

3. It is next claimed that fraud or false swearing will not vitiate the policy, and prevent recovery thereon, if the company has not been actually deceived and misled to its detriment; in other words, if it should appear that an actual loss has been sustained, equivalent to the amount covered by the policy, then the false swearing of the policy holder and the attempt to defraud the company will not, within itself, operate to bar a recovery, because it is assumed that the rights of the parties became irrevocably fixed by the fire and the loss attending it. This theory of the law has some support in the cases, and it was so held in Springfield Ins. Co. v. Winn, 27 Neb. 649 (5 L. R. A. 841, 43 N. W. 401). But that case has been so distinguished by a later one in the same court (Home Ins. Co. v. Winn, 42 Neb. 331, 60 N. W. 575) as to render it of little weight as authority in this. The policy requires that the assured shall, in case of loss, and within sixty days after the fire, unless such time is extended in writing by the company, render a statement to tbe company, signed and sworn to by the assured, stating the knowledge and belief of the assured as to the time and origin of the fire, the interest of the assured and of all others in the property, the cash value of each item thereof, and the amount of loss thereon; and it is concerning the false oath of the plaintiff, made in attempting to comply with this condition, that the defendant complains. The parties have subscribed to the condition, and thus it has become a material incident to the contract itself.' Contracts of insurance, like other contracts, should be construed so as to. carry into effect the intention of the parties in making and entering into them. It was said by Mr. Justice Matthews, in Claflin v. Commonwealth Ins. Co., 110 U. S. 81 (3 Sup. Ct. 507), that: “A false answer to any matter of fact material to the inquiry, knowingly and willfully made, with intent to deceive the insurer, would be fraudulent. If it accomplished its result, it would be a fraud effective; if it fail, it would be a fraud attempted. And if the matter were material, and the statement false, to the knowledge of the party making it, and willfully made, the intention to deceive the insurer would be necessarily implied, for the law presumes every man to intend the natural consequences of his act.” In Dolloff v. Insurance Co., 82 Me. 266 (17 Am. St. Rep. 485, 19 Atl. 396), it was held, notwithstanding it appeared the assured had suffered loss to the full amount of the policy, yet that, by reason of his attempt to deceive, mislead, and defraud the company, the policy, by virtue of its terms, was rendered void, and the assured could not recover. The purpose, no doubt, of such a stipulation in the contract, is to enable the insurer to ascertain the extent and amount of the loss. By the very nature of things, the company is obliged in a marked degree to look to the assured, and to depend very largely upon his statements and repre-' sentations for the ascertainment of the actual loss sustained ; and hence it is required of him, and he has accordingly agreed, under the penalty of a forfeiture of his right to the enforcement of the contract, that he will answer faithfully and truly touching the amount of such loss. It has therefore become a material part of the contract that the policy holder shall answer truly touching the loss, so as to enable the insurer to decide upon its obligations and liabilities, and thereby to protect itself against false claims. There is but little conflict in the authorities upon the question, and it seems .to be well settled that any false swearing touching a material fact or matter of legitimate inquiry under the policy, for the purpose of deceiving and defrauding the company, knowing the same to be false, will render the policy void, and no recovery can be had under it: 2 May, Ins. § 477; Virginia Fire Ins. Co. v. Vaughan, 88 Va. 832 (14 S. E. 754); Insurance Co. v. Weides, 81 U. S. (14 Wall.) 375; Geib v. International Ins. Co., 1 Dill. 443 (Fed. Cas. No. 5,298) ; Sternfield v. Park Fire Ins. Co., 50 Hun, 262 (2 N. Y. Supp. 766).

4. As the special findings of the jury indicate,.there was evidence introduced tending to show that in making his proofs of loss, the plaintiff swore falsely touching the burning of his wearing apparel, presuming to give an itemized statement of the loss sustained, when, as a matter of fact, such wearing apparel had been removed from the building prior to the fire. It is now urged that, as the false swearing did not extend to the house itself, or to the household furniture, the plaintiff was entitled to recover for the loss incurred on those two items, notwitln standing he may have sworn falsely concerning the loss upon his wearing apparel. This argument proceeds upon the theory that the contract of insurance is divisible ; that it contains, substantially, three contracts, for the purposes of this controversy ; and while false swearing or an attempt to defraud might have rendered the policy void as it pertained to the wearing apparel, yet that, notwithstanding, plaintiff is entitled to recover as to the house and furniture. This question must be determined by a construction of the policy. The stipulation is : “This entire policy shall be void * * * in case of any fraud or false swearing by the insured touching any matter relating to this insurance, or the subject thereof, whether before or after a loss. ’ ’ This language seems to be general in its scope and application, and would appear to cover all fraud or false swearing which could have relation or be material to the proof of loss necessary to establish the plaintiff’s right to recover under the conditions of the policy. It is well understood that fraud practiced by either party in the inception or during the formulation and execution of a contract, if of any vital or material consequence whatever, will vitiate such contract in its entirety. In so far as this element is concerned, it was unnecessary for the parties to have stipulated regarding it in the policy, because its operation would have been the same whether the stipulation was there or not, and the policy would have been rendered void by reason of auy fraud practiced by the insurer in procuring its issuance. Now, the parties to the policy have not only stipulated that fraud in the inception of the contract shall have the effect to destroy the policy and the right of recovery thereon, but have extended its purview to the making up of the proofs of loss, so as to afford the company protection from misrepresentation touching the actual damage sustained by reason of fire. As we have before intimated, the insurer must depend largely upon the oath of the insured, and the account he may render of the amount of damages incurred by him for which he claims indemnity under the policy, and it was for this reason mainly — perhaps entirely — that the parties stipulated that any fraud or false swearing which might be indulged in touching the proofs of loss should have the same effect as if it had been practiced in the inception of the contract; and this is a matter with regard to which the parties had the right to contract if they saw fit.

In McGowan v. Insurance Co., 54 Vt. 211 (41 Am. Rep. 843), the court, speaking through Taet, J., announced the following doctrine: “The general rule, ‘Void in part, void in toto,’ should apply to all cases where the contract is affected by some all-pervading vice, such as fraud, or some unlawful act condemned by public policy or the common law; cases where the contract is entire, and not divisible ; and all those cases where the matter that renders the policy void in part, and the result of its being so rendered void affects the risk of the insurer upon the other items in the contract.” To the same effect, see 1 May, Ins. § 277, note 5. We-are impressed that this rule is especially applicable in arriving at the rightful construction of the policy under consideration. It was"thought by the learned judge that it was sufficient to reconcile the apparently conflicting decisions touching the question of the divisibility of the contract of insurance. In Moore v. Virginia Fire Ins. Co., 28 Gratt. 508 (26 Am. Rep. 373), it was held, upon the construction of a policy similarly worded to the one at bar, that false swearing as to one of the items covered would render the policy void, and that recovery could not be had for any other item therein, although not involved in the false proof. A similar construction has been given to policies of insurance where fraud was not involved. In Smith v. Insurance Co., 118 N. Y. 518 (23 N. E. 883), the wording of the policy was : “If the property, either real or personal, or any part thereof, shall be incumbered by mortgage, judgment, or otherwise, it must be so represented to the company in the application ; otherwise, this entire policy, and every part thereof, shall be void.” It was held, under the particular stipulation, that an incumbrance upon the real estate extended to the personal property contained in the building insured, and opei'ated to render the entire policy void. All these decisions, as we understand them, are based upon a proper construction and interpretation of the contract of insurance, and we have to look to the intention of the parties in making the contract to ascertain what the relief should be and what defenses might be interposed in case of the attempted enforcement thereof.

There are many cases holding that the contract is several, but its severability depends upon the intention of the parties, as gathered from all its terms, stipulations, and conditions. We may instance a case in which the policy declares that it shall be void for any subsequent alienation by the insured. If only a part of the entire subject of insurance be alienated, and this without increasing the risk to the rest, the policy would not be thereby wholly avoided : Trabue v. Dwelling House Ins. Co., 121 Mo. 75 (42 Am. St. Rep. 523, 23 L. R. A. 719, 25 S. W. 848). And where an insurance is effected upon several houses in a gross sum, and the policy thereafter designated a definite sum upon each, if a part of the houses only are permitted to become vacant, contrary to the stipulations, it will not avoid the policy upon those that remain occupied : Connecticut Fire Ins. Co. v. Tilley, 88 Va. 1024 (29 Am. St. Rep. 770, 14 S. E. 851). These and other cases of similar import well illustrate the principle we desire to announce. We have found no case where fraud or false swearing is introduced as an element in the consideration wherein the contract is construed to be divisible, except in Texas, and the statute of that state is held to be the controlling factor in the construction. These considerations sustain the action of the court below.

5. There is another question in the case requiring notice. The wife of the plaintiff was permitted to testify touching the removal of the wearing apparel from the dwelling prior to the fire, and it was objected that it was incompetent for her to testify without his consent. But the plaintiff had previously testified that such wearing apparel had been destroyed, and, he being a party to the action, this was tantamount to his consent to her examination upon the same subject: Hill’s Ann. Laws, §§ 712, 713. Aketrmed .