DeLancey v. Insurance Co., 52 N.H. 581

DeLancey v. Insurance Co.

52 N.H. 581 | N.H. | 1873

Lead Opinion

Doe, J.

In the application for insurance, signed by the plaintiff, he is made to say, among many of the things, and in the kind of print extremely difficult to be read, usually found in such documents, that he covenants and agrees that the description of the property in the application is correct, so far as regards its condition, situation, value, and risk ; that the misrepresentation or suppression of material facts, in the application, shall destroy his claim for a damage or loss,; and that he holds himself bound by the charter and by-laws of the company. The policy, after reciting, in diminutive type, in long and compact lines, that he has entered into the numerous stipulations of the'application, “ which is made a part of this policy,” goes on to declare, in type of *586good size, well spaced, and set in a legible manner, that the company, in consideration of the premises, promises to insure, subject to the provisions and conditions of the charter and by-laws “ hereto annexed.” Annexed to the policy, in the typographic style commonly used for the suppression of information, are copies of the defendants’ act of incorpox’ation, passed in 1833, an act in addition to that act, passed in 1862, and the by laws.

The third section of the amendatory act of 1862 (ch. 2685), provides that “ any policy of insurance issued by said company, signed by the president, and countersigned by the secretary, shall be deemed valid and binding on said company in all cases where the assured has a title in fee simple, unincumbered, to the building, buildings, or property insured, and to the land covered by said buildings; but if the assured have a less estate therein, or if The property or premises are incumbered, policies shall be void, unless the true title of the assured, and the incumbrances on the same, be expressed therein.” In the application, the plaintiff was represented as stating that the house upon which lie desired insurance was his property, and was not incumbered, when he had an absolute legal title, not to the whole of the house and land covered by the house, but only to part thereof as tenant in comnion. The sixth section of the act of 1855 (ch. 1662), entitled “An act in relation to insurance companies,” provides that no such policy as the plaintiff’s “ shall be void by reason of any error, mistake, or misrepresentation, unless it shall appear to have been intentionally and fraudulently made; but said company may, in any action brought against them on said policy, file in offset any claim for damages which they shall have actually suffered thereby; and the jury may deduct, from the claims of the plaintiff, the amount of said damage, as they shall find it.” The plaintiff’s misrepresentation of title was not “ intentionally aixd fraudulently made;”,and he claims that his policy is valid by force of the sixth section of the general act of 1855 ; while the defexxdants claim that the policy is void oxx the ground that, in cases where the assured has a less estate in the buildings insured and the land covered by the buildings than a fee simple, unincumbered, and the true title of the assured and the encumbrances are not expi’essed in the policy, this particular insurance company is relieved from the obligatioxx of the sixth section of the general act of 1855, by the third section of the pi'ivate act of 1862, amending its charter.

The situation of the title was such, that, if the plaintiff was not a lawyer, or a man specially versed in the legal technicalities of real estate titles, he might well have called the real as well as the personal property his, as he did when he signed the paper called an application. His “ error, mistake, or misrepresentation ” does not “ appear to have beexi intentionally and fraudulently made.” The case is clearly one of the class which the general act of 1855 was intended to reach; and the plaintiff’s policy is valid by force of that act, unless these defexxdants were singled out, among all the insuraxxce companies of the State, as worthy of being" invested with the exclusive privilege of exemption *587from the operation of the general act, by the special act of 18G2. Does the true construction of the latter act entitle the defendants to such an exemption ?

The nature of the mischief intended to be remedied by the act of 1855 has a bearing upon the question whether, hy a fair and reasonable construction, it appears that the legislature, having, in 1855, forbidden all insurance companies to commit such mischief, did actually intend, in 1862, to confer on this company the exceptional legal right to commit the same mischief. The object of the act of 1855 obviously was, to remedy an evil with which the people of this State had long believed themselves to be grievously afflicted. Whether their belief had an ample or substantial foundation, or any foundation at all; whether it was justified by the conduct of a considerable number of insurance companies ; or whether the course of a very few brought an undeserved reproach upon the whole system of insurance, it is not now necessary to inquire. It is the state of things believed to exist, and not its real existence, that explains the legislation. The public belief, manifested in the annals of litigation and elsewhere, is too notorious and historic to require any specific .attestation. The state of things believed to exist was this :

Some companies, chartered by the legislature as insurance companies, were organized for the purpose of providing one or two of their officers, at head-quarters, with lucrative employment, — large compensation for light work, — not for the purpose of insuring property; for the payment of expenses, not of losses. Whether a so-called insurance company was originally started for the purpose of insuring an easily earned income to one or two individuals, or whether it came to that end after a time, the ultimate evil was the same. Names of men of high standing were necessary to represent directors. The directorship, like the rest of the institution and its operations, except the collection of premiums and the division of the same among the collectors, was nominal. Men of eminent respectability were induced to lend their names for the official benefit of a concern of which they knew and were expected to know nothing, but which was represented to them as highly advantageous to the public. There was no stock, no investment of capital, no individual liability, no official responsibility, — nothing but a formal organization for the collection of premiums, and their appropriation as compensation for the services of its operators.

The principal act of precaution was, to guard the company against liability for losses. Forms of applications and policies (like those used in this case), of a most complicated and elaborate structure, were prepared, and filled with Covenants, exceptions, stipulations, provisos, rules, regulations, and conditions, rendering the policy void in a great number of contingencies. These provisions were of such bulk and character that they would not be understood by men in general, oven if subjected to a careful and laborious study: by men in general, they were sure not to be studied at all. The study of them was rendered particularly unattractive, by a profuse intermixture of discourses on *588subjects in which a premium payer would have no interest. The compound, if read by him, would, unless he were an extraordinary man, be an inexplicable riddle, a mere flood of darkness and confusion. Some of the most material stipulations were concealed in a mass of rubbish, on the back side of the policy and the following page, where few would expect to find anything more than a dull appendix, and where scarcely any one would think of looking for information so important as that the company claimed a special exemption from the operation of the general law of the land relating to the only business in which the company professed to be engaged. As if it were feared that, notwithstanding these discouraging circumstances, some extremely eccentric person might attempt to examine and understand the meaning of the involved and intricate net in -which he was to be entangled, it was printed in such small type, and in lines so long and so crowded, that the perusal of it was made physically difficult, painful, and injurious. Seldom has the art of typography been so successfully diverted from the diffusion of knowledge to the suppression of it. There was ground for the premium payer to argue that the print alone was evidence, competent to be .submitted to a jury, of a fraudulent plot. It was nota little remarkable that a method of doing business not designed to impose upon, mislead, and deceive him by hiding the truth, practically concealing and misrepresenting the facts, and depriving him of all knowledge of what he was concerned to know, should happen to be so admirably adapted to that purpose. As a contrivance for keeping out of sight the dangers created by the agents of the nominal corporation, the system displayed a degree of cultivated ingenuity, which, if it had been exercised in any useful calling, would have mer.ited the strongest commendation.

Travelling agents were necessary to apprise people of their opportunities, and induce them to act as policy holders and premium payers, under the name of “ the insured.” Such emissaries were sent out. “ The soliciting agents of insurance companies swarm through the country, plying the inexperienced and unwary, who are ignorant of the principles of insurance law, and unlearned in the distinctions that are drawn between legal and equitable estates.” Combs v. Hannibal Savings and Ins. Co., 43 Mo. 148, 152—6 Western Insurance Review 467, 529. The agents made personal and ardent application to people to accept policies, and prevailed upon large numbers to sign papers (represented to be mere matters of form) falsifying an important fact by declaring that they made application for policies, reversing the first material step in the negotiation. An insurance company, by its agent, making assiduous application to an individual to make application to the company for a policy, was a sample of the crookedness characteristic of the whole business.

When a premium payer met with a loss, and called for the payment promised in the policy which he had accepted upon the most zealous solicitation, he was surprised to find that the voluminous, unread, and unexplained papers had been so printed at head-quai’ters, and so filled *589out by the agents of the company, as to show that he had applied for the policy. This, however, was the least of his surprises. He was informed that he had not only obtained ,the policy on his own application, but had obtained it by a series of representations (of which he had not the slightest conception), and had solemnly bound himself by a general assortment of covenants and warranties (of which he was unconscious), the number of which was equalled only by their variety, and the variety of which was equalled only by their supposed capacity to defeat every claim that could be made upon the company for the performance of its part of the contract. He was further informed that he had succeeded in his application by the falsehood and fraud of his representations, — the omission and misstatement of facts which he had expressly covenanted truthfully to disclose. Knowing well that the application was made to him, and that he had been cajoled by the skilful arts of an importunate agent into the acceptance of the policy and the signing of some paper or other, with as little understanding of their effect as if they had been printed in an unknown and untranslated tongue, he might well be astonished at the inverted application, and the strange multitude of fatal representations and ruinous covenants. But when he had time to realize his situation, — had heard the evidence of his having beset the invisible company, and obtained the policy by just such means as those by which he knew he had been induced to accept it, and listened to the proof of his obtaining it by treachery and guile, in pursuance of a premeditated scheme of fraud, with intent to swindle the company in regard to a lien for assessments, or some other matter of theoretical materiality, he was measurably prepared for the next regular charge of having burned his own property.

With increased experience came a constant expansion of precautionary measures on the part of the companies. When the" court held (Marshall v. C. M. F. I. Co., 27 N. H. 157, Campbell v. M. & F. M. F. I. Co., 37 N. H. 35, Clark v. U. M. F. I. Co., 40 N. H. 333) that the agent’s knowledge of facts not stated in the application was the company’s knowledge, and that an unintentional omission or misrepresentation of facts known to the company would not invalidate the policy, the companies, by their agents, issued new editions of applications and policies, containing additional stipulations, to the effect that their agents were not their agents, but were the agents of the premium payers ; that the latter were alone responsible for the correctness of the applications; and that the companies were not bound by any knowledge, statements, or acts of aiiy agent, not contained in the application. As the companies’ agents filled the blanks to suit themselves, and were in that matter necessarily trusted by themselves and by the premium payers, the confidence which they reposed in themselves was not likely to be abused by the insertion in the applications of any unnecessary evidence of their own knowledge of anything, or their own representations, or their dictation and management of the entire contract on both sides. Before that era, it had been understood that a corporation, — an artificial being, invisible, intangible, and exist*590ing only in contemplation of law, — was capable of acting only by agents. But corporations, pretending to act without agents, exhibited the novel phenomena of anomalous and nondescript as well as imaginary beings, with no visible principal or authorized representative; no attribute of personality subject to any law, or bound by any obligation ; and no other evidence of a practical, legal, physical, or psychological existence than the collection of premiums and assessments. The increasing number of stipulations and covenants, secreted in the usual manner, not being understood by the premium payer until his property was burned, people were as easily beguiled into one edition as another, until at last they were made to formally contract with a phantom that carried on business to the limited extent of absorbing cash received by certain persons who were not its agents.

When it was believed that things had come to this pass, the legislature thought it time to regulate the business in such a manner that it should have some title to the name of insurance, and some appearance of fair dealing; and the act of 1855 was passed for that purpose.

The loss of the time occupied by the solicitations of insurance agents, the loss of premiums and assessments paid, the loss of insurance security, the vexation and costs of lawsuits lost upon the astute and technical character of applications and policies not understood by the premium payers, the manner in which innocent and deluded persons were overwhelmed by an array of their theoretical misrepresentations and constructive frauds, and other misfortunes incident to the system, were believed to constitute a crying evil, and a mischief of great magnitude. (Whether any remedy was available at common law or in equity, upon higher grounds and broader views than were taken—U. M. L. Ins. Co. v. Wilkinson, and note on that case in 11 Am. Law Reg. (N. S.) 485—we need not, in this construction of statutes, stop to consider.) When the premium payer complained that he had been defrauded, it was not, in the opinion of the legislature, a sufficient answer to say that, if he had been wise enough, taken time enough, had good eyes enough, and been reckless enough in the use of them to read the mass of fine print, and had been scholar, business man, and lawyer enough to understand its full force and effect, he would have been alarmed, and would not have been decoyed into the trap that was set for him. Men have a right to be dealt with with some regard for the state of mind and body, of knowledge and business, in which they are known actually to exist. Whether they ought to be what they are, or not, the fact is, that, in the present condition of society, men in general cannot read and understand these insurance documents. Whether it bo reliance upon the representations of the companies’ agents, or want of taste for literary pursuits and critical exegesis, or defect of legal attainments, or press of business, or fatigue of daily labor, or dislike of insurance typography, — whatever the cause may be, the fact is, that, under the ordinary circumstances of the present order of things, these documents are illegible and unintelligible to the generality of mankind. And it seemed to the legislature that the companies who *591sent out tbeir agents, knowing they would be confided in by the premium payers to transact the business properly, and who issued applications and policies which they knew would not be understood, should not take an unfair advantage of mistakes into which the companies themselves, by their agents and their fine print, caused the premium payers to innocently and unconsciously fall: The action of the legislature was certainly in harmony with, if, indeed, it was anything more than an affirmance of, the common law (in relation to fraud, estoppel, and trust), which will not hear a man complain that he has led his neighbor into a pit. .It was also thought that insurance companies, in danger of being defrauded by the premium payer’s burning his own property, were required, by their private interest and their public duty, to see to it that they did not insure his property to such an amount as to lead him into temptation; and that their devices were not a prevention of, nor an appropriate protection against, the fraudulent incendiarism propagated throughout the country by excessive amounts of pretended insurance.

As the distress of those who met with losses was not allevdated by the eminent respectability of the men whoso names figured as officers of the companies, so it was the nature of a system so liable to abuse, and not the character of the nominal or real managers of the companies, that was supposed to call for the interference of the legislature. With no fault in many, and probably with substantial fault in but a few, the system came to be excessively odious: it was believed there had seldom been so flagrant an abuse of corporate power.

The act of 1855 cut up a considerable part of the supposed evil by the roots. Upon a full trial of the remedy, from 1855 to 1862, it seemed to answer the high expectations that had been formed of it, and was perfectly satisfactory to the people of the State. In this state of things the defendants claim that, by the special act of 1862, in addition to the defendants’ charter, the legislature abolished the remedy, not generally, in favor of all insurance companies, but by an exception in favor of this company alone, leaving the public securely guarded against all other companies, and giving to this company alone the legal right to take advantage of an innocent mistake, which right (if it ever existed) the legislature had taken away from this company and all other companies seven years before. It is not to be presumed that the legislature, of their own motion, passed the act of 1862 in ignorance of its tenor and practical effect, or that this company fraudulently procured its passage. No reason is suggested to show why the legislature should revive the evil which they had explicitly abolished — abolish the remedy which was thought to be perfectly indispensable, and, after a thorough trial of seven years’ duration, had been found perfectly successful — and give this company a monopoly of insurance fraud. What great and conspicuous benefits these defendants had conferred upon the State; what enormous and exceptional service" this particular company was to render the public, over and above all other companies engaged in the same business; in what respect it was so peculiar an institution *592as to be selected for distinguishing marks of public favor, and loaded with the bounty and perpetual pension and franchise of defrauding the whole community, — on this subject, history, as well as the act of 1862, is silent-, and conjecture fails. Until some explanation is given, the presumption must be almost irresistible that the legislature did not do what the defendants claim they did.

It is not for the court to legislate by construing an act to be what they think it ought to be ; but, in ascertaining the meaning of the act of 1862, by the settled rules of construction, it is our duty to give due weight to the history of all the legislation on the subject-matter of the act, and the reason and policy of the general law of the land, in connection with which the special act of 1862 is to operate. The presumption which we have found, arising upon considerations of this kind, is not absolutely irresistible and conclusive, because it would be possible for the legislature to use language sufficiently explicit to leave no room for doubt of their intent to do what the defendants claim they did. If the legislature had passed a general act, saying, in so many words, “ The act of 1855, chapter 1662, is hereby repealed,” there would have been no question what that meant. If, instead of a general act of that kind, there had been a special act, explicitly declaring that policies issued by this company should be void by reason of innocent mistakes- of the premium payers, and that this company should be exempted from the operation of the sixth section of the act of 1855, we might be compelled to admit that the legislature intended not only to expose the community to an unnecessary danger of fraud, but also to violate those principles of free government which require laws, as far as practicable, to be general, equal, and uniform, and prohibit unjust discriminations and monopolies.

It is not claimed that the general act of 1855 was repealed, but it is claimed that this company was exempted from the operation of the sixth section of that act. The general drift of the constitution is distinctly hostile to the creation of discriminating and unreasonable privileges and immunities; the declaration of Article X of the Bill of Rights, that government is instituted for the common benefit, protection, and security of the whole community, and not for the private interest or emolument of any one man, family, or class of men, is plain and explicit; and the declaration of Article XXXVI, that a pension should be granted with great caution, and only in consideration of actual services, and never for more than one year at a time, is very significant. And it is difficult to overestimate the weight of the natural presumption that the legislature did not intend either to pass an act that would be void, because evidently a breach of constitutional obligations, or to pass one that would so far indirectly defy the general spirit of the paramount law, — though not in direct, open, and violent conflict with any of its specific provisions, — as to be of doubtful validity. It is always to be presumed — and the presumption is to stand until the contrary is shown by an immense preponderance of evidence —that the legislature have not' intended to disregard the doctrine of *593equal rights, upon which our institutions were founded. Whether every possible application of that doctrine is guaranteed in express terms in the constitution, or whether some applications of it are necessarily to be inferred from the general tone and temper of that instrument, and its comprehensive declarations of the doctrine, it is extremely improbable that a legislature, presumed to be well affected to free institutions in theory and practice, have intended, by an application, of the doctrine of unequal rights, to build on some other foundation than that laid by competent authority.

It would be a serious misfortune if, by construing the constitution strictly in its general direction, and liberally in other directions, or by adopting any arbitrary rule or eccentric habit of construction, it were rendered necessary to constantly amend the constitution by inserting such specific guaranties as would be, in fact, mere applications of the general principles of the original instrument to changed circumstances and new conditions of society. Such a custom of amendment would propagate erroneous ideas of the original, break the uniformity and shake the permanency of its principles, and materially impair its efficacy. If the court should hold that the legislature intended to make unreasonable discriminations and to establish unreasonable franchises, not for the common benefit, protection, and security of the whole community, but for the private interest or emolument of some one man, family, or class of men, and should further hold that the legislature had the power to do this, in any case not within the condemnation of some constitutional provision more explicit than Article X of the Bill of Rights, the government would be turned into a course not designed by its founders. Standing on the presumption of a legislative intent to support the spirit as well as the letter of the constitution, the court is not justified in holding, upon any light grounds, that the legislature have carelessly, unintelligently, or in bad faith, discharged the duty forcibly called to their attention by their official oath ; and when a statute is fairly and reasonably capable of a construction consistent with the doctrines of the constitution, it must ordinarily, if not always, be the duty of the court to give it that construction.

Upon a just consideration of the province of'construction as the discovery of the legislative intent, the history of legislation on the subject-matter of the third section of the private act of 1862, the reason and policy of the general act of 1855, the mischief which the act of 1855 was designed to remedy, and the presumption that the legislature passed the act of 1862 with a becoming regard for constitutional principles, the defendants’ construction of that act is extremely unreasonable. A different construction must be very unreasonable indeed to prevent its being adopted in preference to the defendants’.

The title of the act of 1862 is, “An act in addition to an act to incorporate the Rockingham Farmers’ Mutual Fire Insurance Company,”— not a word indicating a purpose to amend the act of 1855, entitled “An act in relation to insurance companies,” but every word' indicating a purpose to amend the charter of this company, passed in 1833. A *594material modification of or exception to the general law would naturally be put in a general act, and not in a private one, which would not be likely to be published in revisions of the statutes. An important amendment of a general act inserted in a private one, with nothing in the title of the latter suggesting the amendment, is not according to the usual course of legislation in this State. Not only is there nothing in the title of the act of 1862 suggesting an amendment of the act of 1855, but in the body of the former act there is no allusion to the latter ; and, from a perusal of the private act alone, no one would suspect that it modified, or introduced an exception to, any general act whatever. If the legislature had intended, by the private act, to make so serious a change in the general law of insurance as to exempt one insurance company from its operation, there is some reason to expect they would have explicitly referred to the general law, or used, in the title or body of the private act, some express words of exemption or exception. But, while the seventh section of the amendatory act is, “ The fifth and seventh sections of the act to which this is in addition are hereby repealed,” the general clause repealing all acts and parts of acts inconsistent with this act, which clause was inserted in the act of 1855, and is usually inserted in all acts supposed to be repugnant to existing statutes not particularly repealed, was omitted in the act of 1862.

The third section of the act of 1862 is a substitute for the repealed seventh section of the charter, which provided “ that the said company may make insurance for any term not exceeding seven years; and any policy of insurance issued by said company, signed by the president, and countersigned by the secretary, shall be deemed binding on said company in all cases.”

The third section of the act of 1862 provides “ that said company may make insurance for any term not exceeding seven years; and any policy of insurance issued by said company, signed by the president, and countersigned by the secretary, shall be deemed valid and binding on said company in all cases where the assured has a title, in fee simple, unincumbered, to the building, buildings, or property insured, and to the land covered by said buildings; but if the assured have a less estate therein, or if the [property or premises are incumbered, policies shall be void, unless the true title of the assured, and the incumbrances on the same, be expressed therein.”

A literal construction of the repealed section would have made every policy “ binding on said company,” that had been “ issued by said company, signed by the president, and countersigned by the secretary.” A literal construction of the substituted section would make every such policy “ valid and binding -on said company,” where the title of the assured is “ in fee simple, unincumbered.” No construction could be more unreasonable or more unacceptable to the defendants than that. There were many cases where policies “ issued by said company, signed by the president, and countersigned by the secretary,” would have been void under the repealed section; and there are many cases where *595such policies would now be void under the substituted section, even if the title of the assured' were “ in fee simple, unincumbered.” The literal construction of either section is wholly inadmissible. The repealed section would be held to operate in harmony with and in subjection to the general law applicable to duly executed policies of insurance. Such a qualification was necessarily implied and understood. And, to a great extent, the defendants would of course cláim that the substituted section should be taken with the same qualification. But the defendants claim that no such qualification can be attached to the express . provision that policies shall be void when the assured has a less estate than a fee simple, unincumbered, unless his true title is expressed in the policy ; and it is argued that such a qualification would render that provision nearly a nullity, and would conflict with the purpose of the lien (given by the preceding section) on the property insured, for assessments. Forcibly as the defendants’ argument is presented, it seems to us to be overcome by the reasons for the contrary conclusion, which we have considered. Due weight being given to all the reasons on both sides of the question, the qualification, necessarily implied in the repealed section, making policies valid, not in all cases, according to the literal terms.of that section, but in all cases where duly executed policies would be valid by the general law, — which qualification is also necessarily implied in the substituted section £c in all cases where the assured has a title in fee simple, unincumbered,”— must, we think, also be implied in the latter section, in cases where the assured has not such a title. The implied qualification is in the repealed section and in the substituted section ; and, on the grounds already stated, we think it must be held to apply to all cases under the latter section, as it applied to all cases under the former.

This construction undoubtedly leaves the substituted section open to the criticism of not being a very felicitous composition, or a very, important amendment; but the opposite construction would expose it to objections far more serious than infelicity of style and immateriality of substance. A literal construction makes the act of 1862 repugnant to the act of 1855 ; but the repugnancy is removed by applying to all cases the qualification which must be applied to many cases ; and it is much easier thus to remove the repugnancy than to remove the objections to the construction which raises it.

The defendants further claim, that the act of 1862 being made a part of the contract, the plaintiff is bound by it as by a waiver of the act of 1855. But, if it is binding upon him as a part of the contract, it is binding in accordance with its legal construction, which, as we hold, makes it operate in harmony with, and subject to the general law under which the plaintiff’s policy is not “ void by reason of any error, mistake, or misrepresentation, unless it shall appear to have been intentionally and fraudulently made.” The third section of the act of 1862 did not exempt the defendants, in any case, from the operation of the sixth section of the act of 1855.

Judgment for the plaintiff.,

Concurrence Opinion

Hibbard, J.

I concur in the result which is reached in the foregoing opinion, but do not think it can be sustained upon the ground stated. It seems to me that, upon a true construction of the plaintiff’s application, the insurance was not on the whole house, but on the undivided half winch the plaintiff owned in fee simple, the value of which was found by the jury oto be more than sufficient to justify the sum insured upon it. If this view is correct, the question, so ably discussed in the opinion, does not arise. The provisions of the application which tend to favor this construction are not contained in the statement of facts preceding the opinion ; and it would not be useful to occupy space in reciting or considering them, nor in assigning reasons for disagreeing with the doctrine of the opinion.