Michael v. St. Paul Fire and Marine Ins. Co.

308 S.E.2d 727 (1983)

Edward G. MICHAEL, d/b/a Michael's Gold Fashions
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY and McPhail, Bray, Murphy & Allen, Inc.

No. 8226SC734.

Court of Appeals of North Carolina.

November 15, 1983.

Tucker, Hicks, Sentelle, Moon & Hodge by John E. Hodge, Jr., Charlotte, for plaintiff-appellant/appellee.

Young, Moore, Henderson & Alvis by Dan J. McLamb and Barbara B. Weyher, Raleigh, for defendant-appellant/appellee St. Paul Fire and Marine Ins. Co.

Golding, Crews, Meekins, Gordon & Gray by John G. Golding, Charlotte, for defendant-appellee McPhail, Gray, Murphy & Allen, Inc.

PHILLIPS, Judge.

Plaintiff and defendant insurance company both challenge the directed verdict by which the company was required to pay for the property damage and 2% of the jewelry lost in the theft—the plaintiff claiming by his appeal that all the stolen jewelry should be paid for, the defendant by its that none of it should be. In our opinion, the trial court's ruling was correct.

An insurance policy, of course, is but a special kind of contract, and in suing on the policy involved the plaintiff is bound by its terms no less than the insurance company. One term of the policy required plaintiff to maintain in the store during the policy period a Class F safe or vault, and another required him to lock 98% of the insured jewelry in the safe when the store was closed. Plaintiff's deliberate failure, for no excusable reason, to lock any jewelry at all in the safe the night of the theft was a breach of his contract obligation and bars his right to recover for the 98% of the jewelry that he promised would be safeguarded against thievery.

Though plaintiff's statement in applying for the insurance that he would lock the jewelry—all of it at first, 98% of it later—in the safe when the store was closed was dubbed a warranty by the policy, it was not a warranty, as plaintiff correctly points out. This is because G.S. 58-30 provides that statements in applications for insurance or in the policy itself "shall be deemed representations and not warranties, and a representation, unless material or fraudulent, will not prevent a recovery on the policy." But this does not eliminate plaintiff's problems in the case as he contends, since the materiality of his promise or representation under the circumstances that existed is obvious, and his inexcusable failure to comply with it diminishes his rights under the contract accordingly.

A representation in an application for insurance that influences the insurance company to accept the risk and enter into the contract is a material representation. Carroll v. Carolina Casualty Insurance Co., 227 N.C. 456, 42 S.E.2d 607 (1947). Whether such representations are material depends upon the circumstances in each case and is usually, though not always, a question of fact for the jury. But in this instance we are of the opinion that the materiality of plaintiff's promise to lock the jewelry in the safe when the store was closed is too plain for debate. It is universally known that a fortune in jewelry can be carried in one's pocket, and loose jewelry protected only by a glass window or door and a glass showcase is a prime target for thieves, who can fill their pockets and be on their way long before the police or anybody else can respond to a burglar alarm; but opening and rifling a locked safe is neither that easy nor quick. Had the safe and its use been a matter of no consequence, it is inconceivable that the company would have required or plaintiff would have bought an expensive safe, which has no protective utility at all when empty and unlocked. Against this factual backdrop, in applying for theft insurance on his jewelry, plaintiff stated that the jewelry would be locked in a safe approved by the company when the store was closed; and in response thereto he received a policy stating in language that could neither be missed nor misunderstood that a failure to comply with his representation could void his coverage. In a different setting, a similar statement might well be regarded as immaterial and of no effect; but under the circumstances here, plaintiff chose not to abide by it at his peril, rather than the company's. See 7 Couch on Insurance § 35:100 et seq. (2d ed. 1961).

We are unaware of any previous North Carolina decision involving a Jeweler's Block policy and the failure of the insured to comply with the security and protective representations made in obtaining it. Such cases have been decided elsewhere, however, and our decision is in accord with them. See Great American Insurance Co. v. Lang, 416 S.W.2d 541 (Tex.Civ.App.1967); Phoenix Insurance Co. v. Ross Jewelers, Inc., 362 F.2d 985 (5th Cir.1966). But, more importantly, we think, our decision is in accord not only with the parties' written contract, but with their demonstrated understanding of it, as well. The company would not insure plaintiff's jewelry against theft until plaintiff obtained a suitable safe and represented that the jewelry would be locked in it when the store was closed. Though plaintiff now contends that he did not understand the policy to require him to use the safe, his earlier actions indicate otherwise. He was unable to obtain theft insurance for his jewelry at first, and in order to obtain it, he bought the Class F safe required by the insurance company, at some expense certainly, and promised to use it when the store was closed; and, thereafter, when it became troublesome to lock up all of the jewelry each night, he took steps which led to the policy being amended to accommodate that change. These actions indicate as much as the words put in the contract that safeguarding the insured jewelry when the store was closed was material to the contract and was so understood by both parties.

But plaintiff's promise to lock 98% of the jewelry in the safe was not material to the policy coverages for property damage and the other 2% of the jewelry. Thus, the directed verdict in plaintiff's favor as to those losses, but no more, was proper.

As to his negligence claim against defendant McPhail, Bray, plaintiff contends the trial court made several prejudicial errors in charging the jury. We disagree. Our reading of the charge as a whole leaves us with the impression that the trial court carefully and correctly instructed the jury on all elements of the claim, and that a discussion of the several instructions complained of would not be beneficial. Among other things, the jury was specifically instructed that the defendant broker had a legal duty to explain plaintiff's policy to him, "including those conditions the violations of which would result in the policy being voided", and to not misstate the conditions or coverage of the policy. But even if some parts of the charge had been technically incorrect, it is unlikely that plaintiff would have been prejudiced thereby. This is because the dispute between plaintiff and McPhail, Bray was almost entirely factual. That defendant broker had a legal duty to correctly advise plaintiff insurance purchaser about the coverages obtained really was not contested; what was contested and what the outcome of the case depended upon was the advice that the broker gave. Plaintiff testified that the broker told him that locking the jewelry in the safe at night was not necessary, just preferred; defendant broker's testimony was directly to the contrary. In arriving at their verdict the jury did not accept plaintiff's version of that crucial occurrence and we have no reason to believe they would have done so if the judge had instructed them in the form and manner the plaintiff preferred or requested.

No error.

HILL and JOHNSON, JJ., concur.