Donley v. Glens Falls Insurance

The judgment and order, so far as appealed from, should be affirmed, with costs.

The action was upon a standard policy of insurance covering $450 on a barn, and $1,400 on personal property therein. The policy was issued September 8, 1903, and the property was destroyed by fire October 13, 1903, while the policy was in force.

The principal defense was that there was a breach of warranty as. to the title-of real property upon which the barn was located which avoided the policy and prevented a recovery. The. facts relating to this issue were not in dispute. Jn his application for the *70insurance the plaintiff stated that he had fee simple title to the real property; that the title or possession thereof was not in litigation or dispute; that there was no mortgage' or other lien on the same; that he was the sole owner of the property and had owned it about one year, and these statements- were expressly provided to be- warranties, and not merely representations as a basis for the insurance requested. As matter of fact the farm was formerly owned by one William P. Bassett. He died in 1895, leaving, a will by -which he devised the farm and other property in equal shares to five brothers and sisters, and the five children of a deceased brother. His indebtedness largely exceeded the Valúe of the personal estate left. In February or March, 1908, the plaintiff obtained a quitclaim deed from one of the’sons of the testator of his one-sixth interest in the farm, subject to all the debts and claims against it. He went into possession of the farm under this deed and remained there until the issue of this policy and the destruction of the barn and personal property therein by fire. November 8,1902, an action was commenced against the devisees' under the Bassett will to charge the farm with a debt against the testator, and a.lis pendens was then filed in the Yates county clerk’s office. Judgment was duly entered in that action November 19,1903, for $454.88 damages and $227 costs, The plaintiff had no other title to the farm, than the deed above referred to. There was, therefore, a breach of the warranty as to the real, property. At the close of . the evidence the trial court held there could be no recovery for loss of the barn, $450, but there could" be a recovery for loss of the personal property therein.He submitted to the jury the question as to, the value thereof, and directed them to render á verdict therefor. The amount of the verdict, including interest, we assume, was $1,428. The defendant insists that the whole policy was avoided by the breach of Warranty and no recovery could be had- thereon for the loss of any of the property insured. ■ This leads us to consider' the law relating to severing the liability under insurance policies, and allowing a recovery for the loss of a portion of the property insured; where there can be no recovery for the other part. ;

The following cases decided by the Court of Appeals relate directly to this question. In Wilson v. Herkimer Co. M. I. Co. (6 N. Y. 53) the insurance was úpon a stock of -goods in a building. • *71There was the concealment of a material fact as to the surroundings of the building. The policy provided that such concealment should render the same void and of no effect. It was held that concealment as to the surroundings of the building rendered the' policy void as to the contents of the building insured. The policy seems not to have covered or insured the building. In Chaffee v. Cattaraugus Co. M. I. Co. (18 N. Y. 376) the insurance was npon a building, $600, and the stock of goods therein, $1,400. The policy was the same as in the case last cited, and there was a misrepresentation as to the surroundings of the building in the same respect as in such last-cited case. It was held that there was a warranty and a breach thereof, and that the policy was void. No question seems to have been raised as to the right, nevertheless, to recover for the stock of goods.

In Merrill v. Agricultural Ins. Co. (73 N. Y. 452);the insurance was upon farm buildings, $2,300, and various kinds of personal property therein, $3,700. The policy provided that if the property insured should become incumbered by mortgage,- judgment or otherwise, the policy should be void until the written consent of the company was obtained. Two mortgages were given upon the real property after the policy was issued, and no consent of the company was obtained. A part of the buildings and personal property therein was destroyed by fire. The court held the policy void as to the buildings by reason of the subsequent mortgages, but valid as to the personal property. It considered the Wilson and Chaffee cases, above cited, and also an unreported case (Heacock v. Saratoga Mut. F. Ins. Co.), decided in 1856. In that case there-was an insurance upon a factory and machinery therein, valued separately, at $750. There was a condition in the policy which rendered .it void by reason of the conceded fact that the assured had no legal title to the real estate. The Court of Appeals upheld- a recovery for the machinery upon the theory that the contract was severable as to the separate properties covered by the policy. More or less of the reasoning of the court in the Seacock case was referred, to, and then the court at some length considered the question itself and arrived at the same conclusion arrived at in the Seacock case, that the contract was severable,, and, therefore, a- recovery could be had for the machinery, though the policy -was void as to the buildings. ■

*72In Herrman v. Adriatic Fire Ins. Co. (85 N. Y. 162) there was insurance upon several farm buildings and personal property therein, the amount of the insurance upon each of the properties being separately stated. Some of the buildings and the personal property therein were destroyed by fire. The policy provided: “ If the above-mentioned premises shall ■ * * become vacant or unoccu-piedr and so remain for more than thirty days, without notice to and consent of this company in writing, * * * this policy shall be void.” It was held that the contract was severable, and though the policy was void as to some of the buildings it was valid as to the other, buildings and the personal property in all of them, following the Merrill case, above cited.

In Schuster v. Dutchess County Ins. Co. (102 N. Y. 260) there was an insurance upon a dwelling house, $800, and personal property therein, $700. The policy provided that -any misrepresentation in the application should render the policy void and of no effect, and that .any misrepresentation or false swearing in the proofs of loss should be a full bar to all remedies upon the policy. The assured represented themselves in the policy and proofs of loss as owners- of the' real property. This was untrue, their interest therein having been sold on foreclosure. No recovery was allowed, for the dwelling house, but there was a recovery had for the personal property therein. ' The,court held the contract severable, following the Hea-. cock and Merrill cases. Also that the recovery for the personal was properly allowed inasmuch as the jury found that the representations, as to .the ownership of the real estate were made in good faith-without intent to defraud under a.mistake as to the fact.

In Smith v. Agricultural Ins. Co. (118 N. Y. 518) the insurance was upon a barn, $600, and its contents $500. The policy provided • that “ 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 tlie company in the application, otherwise this entire policyand every part thereof \ shall be void. * * * All statements contained therein are warranties on the part of the assured.” . , .

. The application represented the property as-incumbered in the' sum of, $1,000. As matter of fact the incumbrance was more .than . $5,000. The court held- that the policy in this case was quite differ*73ent from those in the Merrill, Herrma/n and Sehuster cases, where the contracts were held severable, and that the breach of contract in this case was such as to defeat plaintiffs right to recover for any of the property. This case was decided in the Second Division and only four of the seven judges of the court concurred therein. One judge dissented and two others did not sit.

In Pratt v. D. H. M. F. Ins. Co. (130 N. Y. 206) the insurance was upon a wine house, $500, and personal property therein, $1,500. A verdict was directed for defendant, which was affirmed at General Term. There was a reversal in the Court of Appeals. The question most discussed related to the making of the contract of insurance. The form of the policy and the alleged breach thereof do not clearly appear in the report. The court did, however, state that “ the condition in regard to’ incumbrances affected nothing except the real estate, which was but part of the subject of insurance, and a breach thereof did not affect the remainder of the contract, as it related only to the personal property which was not mortgaged. Whatever the rule may be elsewhere, it is settled in this State that where insurance is made on different kinds of property, each separately valued, the contract is severable, even if but one premium is paid and the amount insured is the sum total of the valuations.” (Citing the • Merrill and Sehuster cases, but not referring to the Smith case.)

This was also a decision in the Second Division made nearly two years after the Smith case, and all the judges concurred therein. In Knowles v. Am. Ins. Co. of Boston (66 Hun, 220; affd. on opinion at General Term, 142 N. Y. 641) the insurance was by two policies, one in December, 1890, upon a hop house, $700, and the other in March, 1891, upon hops in the hop house, crop of 1889, $1,200, and crop of 1890, $800. The whole property was destroyed by tire soon after the second policy was issued. There' was a chattel mortgage upon the crop of hops of 1889, but none on the hop house or crop of 1890. A recovery was had for the hop house and crop of 1890 which was upheld in the General Term and Court of Appeals. The policy provided: “This entire policy * * shall be void * * * if the subject of the insurance be personal property, and be or become incumbered by a chattel mortgage.” No defense was made as to the hop house. The only question really litigated was the right to recover for the crop of 1890 insured in *74the same policy as the crop of. 1889. Concededly the policy was void as to the-crop of 1889. The court held the contract was sever-able, Under the Merrill, Schuster and Pratt cases-; that the policy should be construed to' mean that the entire policy should be void, tis to the.personal property which was mortgaged, but not as-to such . property as was free from mortgage. , . •

The Smith case was distinguished in that the policy , was á peculiar one, providing that the entire policy should be void if the property insured or cmy part of it became incumbered. . . -

. These are the only cases in the Court of Appeals which have been called to our attention' or have been discovered by. us relating to the question under consideration. The law seems to be well settled in this State that when a policy of insurance covers separate and distinct classes or species _of property, each of which is separately valued, the contract is severable, and the avoidance of the policy as to one of the subjects of insurance will not affect the validity of the contract as to the others. There is nothing peculiar in the policy in this case, as there seems to have been in the Smith Case (supra), taking it out of this general rule. It is stated that “ this entire policy shall be void if,” etc., but that was the language used in the'policy in the Knowles Case (supra), which was held to be within the rule as to severability of the contract. We have not regarded it as important to consider the cas.es decided by the courts of other States or the' Supreme Court of this State, as the ■ law seems to he well settled by the Court of Appeals. Indeed, counsel for the appellant, in his brief, does not dispute the law generally as to severability as applied to insurance contracts, but claims that the rule does not apply to cases of warranty like this. He claims that, 'in such cases the warranty of a fact as to. one subject of the insurance applies equally to all other subjects and that it does not matter whether it is material to such other subjects or not.

We do not find that any such distinction is made in the cases we have examined.. The Smith case was clearly one of warranty, .but the decision was not placed upon the ground that- the severability of insurance contracts was not applicable to cases of warranty.. It is not so clear whether the other cases cited were cases of warranty or representations merely. . In some of -them the policies: were rendered invalid by reason of misstatement of facts" existing at the *75time of the issue of -the policies, and in others by reason of things occurring after the issue of the policies and before the fires. This distinction is not referred to in any of the cases so far as we are able to discover. While there is reason in the claims made by counsel, we think, in this case, it is better to adhere to what seems to be the well-settled law of this State, and allow this new distinction to be made by the Court of Appeals if it is to be made at all. We do not think reversible error was committed by the trial court in excluding evidence as to fires upon the farm of the wife of the plaintiff and his declaration with reference thereto.

The views herein expressed lead us to affirm the judgment and order appealed from, with costs.

All concurred, except McLennan, P. J., who dissented in an opinion in which Stover, J., co'hcurred.

(dissenting): I do not think it is the law of this State that a person may procure a .building and the personal property therein to be insured against loss by fire upon an application in which he warrants that he is the owner of the building, free and clear, of all incumbrance, as well as of the personal property, and in case all is destroyed by fire, even although the amount of insurance upon each kind of property is specified, may admit he did not own the building, that his statement in that regard was false, and still recover the. value of the personal property, the only part of the subject of insurance in which he had any interest; and so, notwithstanding it was expressly agreed in the contract that such statement, if false, whether material or not, would render the policy of insurance absolutely void. That, however, is, in effect, the holding of the court by the decision which is about to be made in this case.

The contract- which is the subject of this litigation is evidenced by a single policy of insurance, based upon one application, signed by the insured. By its terms it purported to insure the plaintiff against loss by fire for three years from the 8th of September, 1903, in the sum of not to exceed $2,500, as follows: “ $700 on two-story .* * ■* frame' building * * * occupied as a private family residence; $450 on barn; * -* * $1,000 on farm produce and feed while therein; * - * $100 on farming tools * * "x" *76while in said barns; $200 on pine shingles and lumber in said barn; all situated on the farm owned by assured while occupied by tenant, in the township of Italy, County of Yates, and State of ..New York. For a more particular description reference .is had to the application and survey of the assured, No. 1213 on file with this company, which is a warranty and is made a part of this contract.”- ■ Concededly, the plaintiff made several statements in his appfi-.cation for insurance respecting his title to or ownership of the premises upon which the buildings were situate, and in which the. personal-property was, which'were false and untrue ;• bnt, notwitli-. standing such false-statements, the application, contained the following : “ And the said applicant hereby warrants, covenants and agrees to and with said company, that the foregoing is a full, j.ust and true exposition of all the facts and circumstances, conditions, situation , and values' of and title to the. property to be insured, and is offered as a basis of insurance requested, and.is made a- special warranty,, the same as if written on the face of the ■ policy, and the statement is offered and received, and to be taken and to have'the effect of a Warranty-and not a representation.”

I cannot agree, with the majority of the court that such - false statements, which werer expressly made- warranties, only rendered the insurance upon-the buildings void, and did not affect the insurance upon the personal property which; was kept or stored in such buildings. -It is elementary that a warranty.is in.the nature of a. condition precedent, and, therefore, must be performed- by. the; insured before he can demand performance. of the contract on the part of the-insurer, and it is quite immaterial for what purpose such warranty was made, or whether or hot it was material to the risk or whether the hazard was enhanced by reason of its falsity. (Rohrbach v. Germania Fire Ins. Co., 62 N. Y. 47; Chaffee v. Cattaraugus Co. M. l. Co., 18 id. 376; Bryce v. Lorillard Fire Ins. Co., 55 id. 240; Alexander v. Germania Fire Ins. Co., 66 id. 464; Graham v. Fireman's Ins. Co., 87 id. 69.)

As was. said by Hr. Justice Adams, writing for this court in the case of Clements v. Connecticut Indemnity Co. (29 App. Div. 131): “ It is now a,well-established principle of the law of insurance that the effect of a warranty is to make void the policy if all the representations of the assured, upon which the policy is issued, *77are not substantially true, and this without regard to their actual materiality.” ,

In the case at bar it is apparent that the statements of the assured were material to the risk, and the defendant may well claim that it would not have insured either the buildings, which were a part of the realty, or the personal property in such buildings, if the plaintiff had truthfully stated the nature of liis title and the interest which he had in the farm upon which the buildings were situated. As matter of fact, the plaintiff had no title to, and really no valuable interest in, the farm. The insurance upon the buildings aggre-. gated only $1,150, whereas there was $1,400 of insurance upon the personal property, all stored in a barn, which was insured for only $450. The defendant might very well have refused to insure the contents of such barn if it had known-the plaintiff had no interest in protecting it against destruction by fire. The representations made by the plaintiff that he was the owner in fee of the farm and that it was unincumbered, were material to the risk which the defendant assumed in insuring the personal property upon the premises. But under the authorities it is entirely immaterial whether the risk was thus enhanced or not. As was said in Graham v. Fireman's Ins. Co. (supra): “ The cases cited establish the principle that where the provisions of the contract explicitly declare that it shall be void in case of misrepresentation and certain conditions which are enumerated are not performed, the truth and not the .materiality of the misrepresentations is the real question.” And at page 77 the court further said : “ The insurer has a right to know to what extent the insured has the ability to protect, or an interest in protecting against the perils insured against. (Savage v. Howard Ins. Co., 52 N. Y. 502, 504.) And .in a case like this, when a specific inquiry is made, the question of the materiality of the statement in respect to the risk is settled by the parties as a matter of contract. A broad distinction exists whether the statement is made in answer to inquiries or otherwise. In the one case the answers are made material by the act of the assured, whether they are in fact or not, while in. the other case, even though the statements are made a part of the policy, they are not efficacious as warranties, although material in fact.”

In Bryce v. Lorillard Fire Ins. Co. (supra), in discussing the *78effect of such, a false statement, the court. said (p. 244): “And it was * * * a‘ condition precedent not to be avoided by the fact that the truth.of the description was not-essential to the risk nor an inducement to the defendant to enter into the contract. This rule is so well established in the law of insurance as that it must be adhered to, though it may work hardship in a particular case.”

Upon principle the .warranties contained in the application,for the policy of insurance in. question should be regarded as applicable to the personal as well as to the real property., . By the contract the parties stipulated that they should so apply. ’ The contract is“This entire policy shall be void if the insured has concealed or misrepresented * * . * concerning this insurance or the subject thereofP

We think the authorities to which attention has been, called in the prevailing opinion i dó not in any manner overrule the broad principle adverted to, that a false statement contained in an application for a policy of insurance, which by- the term's of the instrument is made a warranty, vitiaies and renders void the entire contract. The precise proposition, was last decided by.the Court of Appeals in Smith v. Agricultural Ins. Co. (118 N. Y. 518), and it was there held that 'the false warranty vitiated the entire policy. In that case it is said that it was expressly stipulated in the, policy that if either.the real or personal property or any part of it be incumbered,, it must be so represented to.the company in the applb cation,. otherwise the en tire policy and every .part of it shall be void. Practically the same stipulation is contained in the policy involved in this case. It provides1: “ This entire policy shall, be void if the insured has concealed or misrepresented, in writing or otherwise, any material- fact or circumstance concerning this insurance or the subject thereof \ ■ * . *,. * or in cáse of any. fraud or false swearing by the insured, touching any matter relating to this insurance- or the subject .thereof.” “This insurance or. the subject thereof” covers and: relates to. real and personal property alike. Those words are quite as comprehensive as those employed in the policy in the Smith Case (supra) and their effect is the same.

In Wilson v. Herkimer Co. M. I. Co. (6 N. Y. 53) and Chaffee v. Cattaraugus Co. M. I. Co. (supra), which were cases exactly like the one at bar, it was expressly.held that no recovery could be had, either for loss to the personal property or realty. Merrill v. *79Agricultural Ins Co. (73 N. Y. 452) was a case where the policy provided that if the property insured became incumbered by mortgage, judgment or otherwise, the policy should be void, until the written consent of the company was obtained.

In Herrman v. Adriatic Fire Ins. Co. (85 N. Y. 162) the policy provided that if the premises should become vacant or unoccupied and so remain for more than thirty days without the consent of the company, the policy should be void.

In those and similar cases the court held that where the breach of a condition subsequent did not affect the entire property insured, and did not enhance the risk, recovery could be had for the loss of the property not affected by such breach. Frank v. Mutual Life Insurance Company of New York (102 N. Y. 266) was a case where the alleged false statements were not warranties. In that case the jury were permitted to determine whether such representations were material to the risk; enhanced the hazard. That is always the issue in case of false representations,, but never in the ease of breach of warranty. So in the case of Knowles v. Am. Ins. Co. of Boston (66 Hun, 220; affd., 142 N. Y. 641, on opinion below). The statements contained in the application in that case were not made warranties by the express language of the contract, but they were regarded as representations, and, therefore, it having been found that the fact of their falsity was not material to a certain specific part of the risk and that they did not induce the making of the contract, it was held that a recovery could be had for the loss of such specific property. We have been unable to find any case decided or approved by the Court of Appeals which held that a false statement contained in an application for insurance, which by the express language of the policy was made a warranty and declared to be material, did not render void the entire contract. On the contrary, as we interpret the decisions it has been uniformly held that under such circumstances no recovery can be had.

We, therefore, conclude that the judgment and prder appealed • from should be reversed and judgment directed in favor of the defendant dismissing the complaint upon the merits, with costs.

Stover, J., concurred.

Judgment, in so far as appealed from, and order affirmed, with costs.