81 N.Y.S. 933 | N.Y. Sup. Ct. | 1903
The case was disposed of at the trial on a question •of pleading. There is no defence of fraud pleaded, but only a ■defence that certain misrepresentations of facts material to the risk were made by the insured to obtain the policy, and relied upon by the insurer.
It is claimed by the learned counsel for the defendant that such misrepresentations make the policy voidable, even though
These rules are of familiar use in the trial of causes (Fitch v. American Ins. Co. 59 N. Y. 557; Graham v. Fireman’s Ins. Co. 87 id. 69). But the present case does not fit either of them. Here there are no warranties in the policy, nor does it provide that it shall be voidable for misrepresentations. We have to do with representations dehors the written contract; and they are oral. Unless, therefore, their truthfulness is an implied condition of the contract, they are not' of the contract, and their falsity cannot be a breach thereof, and proved under a defence to that effect; and this brings us to the precise point of the case.
If it be an implied condition of all contracts of insurance that they are free from material misrepresentations by the insured which induced the making of them, then they are different in that respect from contracts in general. The general rule of contracts is that such misrepresentations avoid a contract only on the ground of fraud, or of mutual mistake of fact, and such a defence has to be pleaded. This rule is ample for every case of misrepresentation inducing a contract, and it is not apparent why insurance contracts, any more than any other, should need an additional rule of an implied condition that the contract is free from inducing misrepresentation. ■ As Lord Mansfield said on the subject in the early insurance-case of Carter v. Boehm (3 Burr. 1905): “ The governing principle is applicable to all contracts and dealings”; and he considered the question as one of fraud, either actual or constructive. In no case have I found the matter of mutual mistake of fact mentioned as a defence to an action to-recover for a loss on an insurance policy; nor could it arise except in recent years, and only in- those jurisdictions having a new system of pleading and practice under which such a defence
The question of pleading which is before us is not discussed in any judicial opinion or text book which has been cited to me, nor have I found any mention of it. If, however, it be an implied condition of contracts of insurance that all material representations of fact by the insured dehors the written contract are true, then it follows that every action to recover on an insurance policy for a loss allows of a defence of breach of such condition, the very same as though such condition were expressed in the policy; and therefore the defence of fraud or of mutual mistake of fact, based on such misrepresentations, is' not necessary, but only optional.
An early and leading case in this country, always cited for the proposition that a misrepresentation of a material fact by the insured avoids the policy, is Carpenter v. American Ins. Co. (1 Story, 57). The headnote of that case is as follows: “A misrepresentation of a material fact, whether it be made through mistake or design, avoids a policy of insurance underwritten on the faith thereof ”; and it is fully supported by Judge Story’s opinion. But when you read the statement of facts which precedes the opinion, you learn that the representations there were, contained in two letters which are in terms referred to in the policy, and expressly made part of the contract. The case is therefore manifestly of no weight or relevancy on the question whether representations dehors the policy are impliedly of the contract. The language of the headnote and of the opinion is large, but its scope must nevertheless be restricted to the facts of the case. Judicial opinions in this country have ever since continued to use the same language, but when the facts are looked to the representations are invariably found to be made warranties by the policy, or else the policy contains the less stringent general provision already mentioned that the falsity of any representation shall avoid the contract. The recent case of Armour v. Transatlantic Fire Ins. Co. (90 N. Y. 450) may be referred to as typical. The headnote is as follows: “A material misrepresentation made in applying for a policy of insurance will, although honestly made, avoid the policy.” Rotwithstanding this broad generalization, the report of the case discloses that the applica
For a long time after the case of Carter v. Boehm (supra), the rule as it seems to have been considered by the English courts was, as is pointed out in the scientific and discriminating text book' on- insurance by,Mr. Arnould (§ 525, 7th ed.), that “although (in a given case of misrepresentation) no pretence existed for alleging actual fraud, yet the policy was to be considered void on the ground of constructive or legal fraud, i. e., such conduct on the part of the assured as, though it does not imply any moral turpitude in himself, yet, from the effect it has in fact of misleading the underwriter, is in legal language said to be fraudulent.” The contract of insurance being one peculiarly dependent on the representations of the insured, the law correspondingly requires of him uberrimina fides in the making of it; and on that principle of the strictest good faith on his part, fraud could the more easily be based in all cases on misrepresentations made through mistake, ignorance or accident. This enabled such fraud to be found in insurance cases when it might not be found in cases of other contracts.
Mr. Arnould does not manifest complete satisfaction with this rule, though he accepts it apparently for the sake of consistency, it being at one with the general rule applicable to contracts. Mr. Phillips in his equally scientific and able work on insurance refuses to adhere to it, and rests the avoidance of insurance contracts for misrepresentations dehors the written contract also on the ground of an implied condition of the contract that there were no material misrepresentations. He says: “ The effect of a misrepresentation or concealment in discharging the underwriters-does-not‘seem to be merely on the ground of fraud, as has usually been laid down by writers on insurance, but also on the ground of a condition implied by the fact of entering into
The view of Phillips is set forth and adopted by Lord Esher in his luminous opinion in the case of Blackburn v. Vigors in the Court of Appeal (17 Q. B. D. p. 561), and apparently accepted by,the other judges in the ease. It is also adopted in a dictum of Judge Bapallo in the Armour ease (supra); and its general acceptance would do away with all confusion in text books and judicial opinions between cases where the policies provide for the avoidance of the contract by false representation or warranties, and those where the policies contain no such provision, and the representations are dehors. The case of Campbell v. New England Life Ins. Co. (98 Mass. 381) is also instructive on the subject.
I therefore conclude that as there is in every contract of insurance, in the absence of an express provision on that head, an implied condition of the truth of all material representations of the insured on the faith of which the contract is made, a pleaded defence of the breach of such condition suffices; that it is optional with the defendant to plead it instead of a defence of fraud or of mutual mistake of fact.
The foregoing rule is subject to the rule applicable to insurance contracts, the same as to all other contracts, that oral evidence cannot be received to add to, vary or contradict the terms of a written contract, and may be affected and is limited by it (Walton v. Agricultural Ins. Co., 116 N. Y. 322; Mayor v. Brooklyn Fire Ins. Co., 4 Keyes, 465; New York Ins. Co. v. Thomas, 3 Johns. Cas. 1; Alston v. Mechanics’ Mutual Ins. Co., 4 Hill, p. 342).
Oral evidence of the defence pleaded in this case will not violate
The motion for a new trial is granted.