151 F. 681 | U.S. Circuit Court for the District of South Carolina | 1907
The opinion overruling the demurrer, 126 Fed. 998, states the case which now comes up on the report of the testimony taken by the special master.
Frederick Schmidt, an aged and unlettered German, was in 1902 the owner of the eastern half of the square bounded by Main, Green, Sumter, and Divine streets in the city of Columbia, on which were several stores and other buildings, including his residence and a laundry. The lot adjoining the laundry and his residence, containing about a half acre, belonged to his wife who had died intestate several years before leaving him and his five daughters her heirs at law. The ice plant was erected on this lot, and four policies of insurance against fire, all of like tenor, were issued by the companies named to Frederick Schmidt May 14, 1902, covering pro rata the items stated in each policy, to wit:
On a brick building............................................. $1,350 00
On machinery and implements.................................... 5,850 00
On boilers and engines........................................... 750 00
On stock of ammonia............................................ 75 00
On stock of salt................................................. 75 00
The fire occurred December 30, 1902. The policies of insurance were assigned March 12, 1903, to Nora Martin Schmidt, a young woman whom Schmidt had married in the previous September. Suits having been commenced on these policies, the plaintiff filed this bill alleging that the policies were void on several grounds: (1) That Schmidt represented himself as sole owner of the property, when in fact he was owner only of an undivided óne-third interest therein; (2) that he represented the property insured to be worth $8,100, whereas in fact it was not worth more than one-half that amount; (3) that the property insured was a manufacturing establishment which had ceased to be operated for 10 consecutive days; (4) that Schmidt filed his proofs of loss which were informal, inaccurate, and false; (5) false swearing, in stating that the origin of the fire was unknown to him and did not originate by any act, design, or procurement on his part, and concealment and misrepresentation of material facts in regard thereto. These will be considered in the order stated.
“This entire policy shall he 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 if the interest of the insured be not truly stated herein. This entire policy shall be void if the interest of the assured be other than unconditional and sole ownership, or if the subject of insurance be a building on ground not owned by the assured in fee simple.”
It is not disputed that the title to the lot was,in the name of his late wife, and under the law of South Carolina he was entitled to one-third interest therein, the remaining two-thirds belonging to his children. He testified that he had originally bought and paid for it, and always paid the taxes on it, and built houses thereon, and collected the rents and controlled them; and it is not disputed that he built and paid for the erection of the ice plant building and machinery, and that none of his children during his lifetime claimed any interest or ownership therein. The proposition of law relied oil by the insurance companies is this:
“A contract of insurance is one of indemnity, requiring insurable interest on the part of the insured, and therefore the extent and nature of such interest are very, material to the contract and the risk,; since an absolute, unconditional owner lias a far stronger motive to care for and protect the property than one who Is not the absolute,, unconditional owner.”
As a general proposition this is sound law, and the reason for it is stated by Chief Justice Marshall in Columbian Insurance Company v. Lawrence, 2 Pet. 48 (7 L. Ed. 335):
“Insurances against tire are made in the confidence that the assured will use all the. precautions to avoid the calamity insured against: which would be suggested by his interest. The extent of this interest must always influence the underwriter in taking or rejecting Hie risk and in estima ting the premium. So far as it may influence him in this respect it ought to be communicated to him.”
There is not the slightest ground for suspicion that Schmidt had any interest or intention to misrepresent the nature of his interest in this property. lie had always used the land as his own, had put up oilier buildings on it and collected the rents, had paid the taxes, arid the building and machinery insured was erected and paid for exclusively by him; and any loss by fire or otherwise would have fallen entirely upon him. There was no written application for the insurance, and no representation as to the nature or extent of his interest in the property insured. He simply asked the agents to insure the ice plant for him, and that they get up a form covering the machinery and buildings. I fe evidently considered them to be his property, and no question was asked as to the title to the land on which the buildings stood.
By the law' of South Carolina a co-tenant who makes improvements under the belief that he is sole owner is entitled to have allotted to him the improved part, not taking into consideration the value of the improvements, or in case of sale by allotting to him the increased purchase price. McGee v. Hall, 28 S. C. 564, 6 S. E. 566; Johnson v. Pelot, 24 S. C. 255, 58 Am. Rep. 253; Hall v. Boatwright, 58 S. C. 548, 36 S. E. 1001, 79 Am. St. Rep. 864. Undoubtedly Schmidt had an insurable interest. He was entitled to the ownership in fee of one-
“One of the tests, and certainly a decisive test, whether a misrepresentation or concealment is material to the risk is to ascertain whether if the true , state of the property or title had been known it would have enhanced the premium.”
There is not the slightest ground for believing that such would have been the case. The ground for avoiding a policy where the ownership is only partial is that the insured will be more watchful of its preservation if he is the absolute owner of the whole than if he has only a partial interest. In this case there is not the slightest ground to doubt that Schmidt would feel the same solicitude in protecting and preserving the property insured as he would have felt if he had had the legal fee in the land; for any loss would have fallen entirely upon him, and would not have been shared by those who shared with him in the legal title. The extent of the ownership of the buildings and machinery insured is the important element of inquiry, and there is no doubt that Schmidt was the owner of this property who would have suffered by its destruction. There is not a particle of proof of any intentional misrepresentation or concealment; no ground to believe that the insurance company would have refused to insure had they known the true state of the title, or that the premium or risk was enhanced.
Chief Justice McIver, in Pelzer Company v. Sun Fire Insurance Company, 36 S. C. 269, 15 S. E. 583, says:
“Insurance companies or tbeir agents are, of course, assumed to know what facts and circumstances are material to the risk offered, much better than the-persons who are applying for the insurance, and if they choose to accept the risk without inquiry, and when a loss occurs it appears that some fact which the insurance companies may regard as material to the risk was not communicated by the insured, common honesty and fair dealing forbid that this shall operate as a forfeiture of the policy unless it also appears that the insured either knew at the time, or ought to have known, that such fact was material. Inasmuch as insurance companies when applied to for insurance have the right to make, and as a matter of fact do make, the fullest and most minute inquiries when the application is in writing, the insured has a right to assume when no such inquiry is made, either that the insurance companies or their agents are fully acquainted with all the facts material to the risk, or that they do not regard such facts as are not stated as material. As was said in Clark v. Manufacturing Company, 8 How. 249 (12 L. Ed. 1061): ‘If the insurer asks for information and the insured makes no representation it must be assumed that the insurer has in person or by agents in such a ease obtained ail the information desired as to the insured premises, or ventures to take the risk without it. He must in point of law be deemed to do it at his peril.’ ”
Citing with approval remarks of Lord Mansfield to the same effect in the leading case of Carter v. Boehm, 3 Burr. 1905.
Where the assured has paid ample consideration for the protection sought, has been guilty of no intentional misrepresentation or concealment, and the circumstances show, as they clearly do here, that the assured honestly believed that the property insured was his own, it would be unconscionable to hold that the policies are for-
2. The second ground is based upon the claim of misrepresentation and fraud by the assured, in overvaluing the property in representing it to be worth $8,100, whereas in fact it was not worth more than one-half that amount. Fred. Schmidt was an old man at the time when he undertook the building of this ice plant. Fie had had no experience in this business, and, as is not infrequently the case, the venture turned out to be an unprofitable one. The proofs clearly show that the building which was insured for $1,350 cost more than that sum. Shand, a witness offered by the insurance companies, an architect and builder, places the value of the building at $1,539.50. Witnesses for the assured place a considerably higher value upon it. The testimony clearly shows that '$1,350 on the building was not an overvaluation. The machinery and implements were insured for $5,850. A great deal of testimony was offered on this point. The machinery was bought from one Behre, the agent of a large manufacturing establishment in Pennsylvania, and was secondhand. It had been used for a temporary purpose in Augusta, Ga., and one of the witnesses connected with the company there which operated it for a little while places a very low valuation upon it. Other witnesses were offered tending to discredit him and to show that his opinion was worth little. The price paid in Augusta was $3,000, to which $1,450 for additional parts, and $400 for other supplies to complete the plant must be added; and besides this, Schmidt paid all the expenses of taking down the plant, removing it to Columbia, and erecting it again. The total cost of the plant, exclusive of the boilers and engines, was considerably over $5,000, and it appears that after it was erected Schmidt expressed great dissatisfaction and Behre offered to take it back at the actual price paid, less $250, and stated that he could have sold the plant to others for a higher price than that paid by Schmidt. It would serve no good purpose to review all the testimony; much of it is of little value, from the character of the witnesses and prejudice and from their lack of knowledge. The plant was erected by Campbell, an engineer employed for the purpose. The insurance agents had the opportunity of examining it before writing the policies and did examine it, and the estimates of value seem to have been made out by Campbell; and as there is no evidence of intentional deception on the part of Schmidt, who had no knowledge of or experience with this kind of machinery, and who relied mainly upon what he knew of the actual moneys paid out by him and the estimates of Campbell, the charge of fraud and overvaluation is not sustained.
3. The third ground for avoiding the policies is that the property insured was a manufacturing establishment which had ceased to be operated for 10 consecutive days. The clause is each of the policies under which this forfeiture is claimed is as follows:
*686 “This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the subject of insurance be a manufacturing - establishment and it be operated in whole or in part at night later than 1Ó o’clock, and cease to be operated for more than 10 consecutive days.”
The policies were taken out on May 14, 1902. The ice plant was not in operation at that time and did not begin operations until some time in June, much more than 10 days after the policies were taken out, so that if its literal construction is given to this clause the policy was void from the beginning. It is not controverted that the ice plant was shut down for considerably more than 10 days before the fire. Ordinarily an ice plant of this character, supplying only a local demand, would not be operated at that season of the year, and the witnesses Crafts and Stebins show that the plant was being overhauled and put in condition to begin operations shortly before the fire. The testimony shows that both Walker and Ravenel, members of the firm of Julius H. Walker & Co., the agents of the insurance companies, had visited the premises before the writing of the insurance, and that one of them at least was fin the neighborhood of the premises after the ice plant had ceased to be operated, going there for the purpose of writing insurance upon some adjoining property; and Schmidt testifies that within a week after the ice factory had shut down he went to Walker’s office and informed him that he had closed down the ice factory. It seems that Walker, in addition to his insurance business, is also engaged in the banking business, and that the office where the insurance business is conducted adjoins that' of the bank, and Evans narrates a conversation between Schmidt and Walker which took place in his presence after the fire, when the former reiterated the statement that he had notified the latter of the shut-down, aiM Walker’s answer was: .
“Mr. Schmidt,. X don’t remember whether you did or not. X eanno-t say; but you should have not come here in my hank, but ought to have gone into the next door there, to the insurance office, where Mr. Xiavenel was.”
To which Schmidt replied:
“Well, I gave you the insurance, and I think you are the proper one to go to.”
I am of opinion that the companies are estopped by the acts, conduct, and knowledge of their agents from insisting on this condition.
4. The fourth ground for avoiding the policies is that the proofs of loss were informal, inaccurate, and false. Inasmuch as the companies deny all liability it is unnecessary to dwell much upon this point. It appears that the proofs of loss were made out by the attorneys of Schmidt, and that they requested the ag'ents of the companies to poinj out any additional information or forms which they might wish them to comply with. The alleged false swearing in connection therewith will be considered under the next head.
5. False swearing in stating that the origin of the fire was unknown to him and did not originate by any act, design, or procurement on his part, and'concealment and misrepresentation of material facts in regard thereto. As already stated, Schmidt, during the autumn of 1902 contracted a second marriage with Nora Martin, a young woman' of less
Upon the whole case I find:
(1) That F. Schmidt was the owner of one undivided third interest in the lot of land on which the ice plant was erected; that during the life of his wife and after her death he had always treated the property as his own, controlled it entirely and absolutely, built houses thereon out of his own means, and rented the same and paid taxes thereon, and considered and treated it as his property; that the building and machinery was paid for by Schmidt entirely out of his own means, and treated as his own individual property, and that his children, some of whom lived with him, and all very near, acquiesced in such treatment and control of said property; that there was no fraudulent or intentional concealment or misrepresentation as to the ownership of said property; and that a true and exact statement of the condition of the legal title to the lot of land would not have materially affected or increased the risk or the insurance rate.
(2) I find that the ice plant machinery had cost over $5,000, that the insured had had no experience with such machinery, and that the estimate of the value of the same was made by the engineer in charge of its erection, after going over it with the agents of the respective insurance companies, and that the insured had no experience in making out applications for, or dealing with insurance of this kind, and that the matter was left largely, almost entirely, with the agents of the respective companies, and with the erecting engineer, and that there was no intentional misrepresentation or concealment as to the value of the ice plant building and machinery; and I find that the value of the machinery was $5,000, of the engine and boilers $750, and of the stock of ammonia and salt $150.
(3) I find that the insurance policies were issued May 14, 1902, and that the agents of the respective insurance companies had been on the premises insured and had personally inspected and examined the same; that ice plants when operated at all are necessarily operated continuously day and night, and that the operation of this plant was first begun some time in June, 1902, and was suspended in the autumn,
(4) I find that the insured offered the proofs of loss shown in the exhibits, and that the attorneys for the insured requested the companies to advise them if the same were not sufficient and instruct them as to what further proofs, if any, were required, and that in the several actions at law brought on the policies each of said companies denied all liability under the same; that at the request of the insurance companies Schmidt presented himself for and submitted to an examination, which examination was had after he had assigned his interest in the policies to Nora Martin Schmidt, and I do not find any competent, satisfactory, or sufficient evidence to warrant the finding that the insured property was burned by Dunn on the procurement of Nora Martin Schmidt, or that she or F\ Schmidt knew of the origin of the fire.
(a) I find that the damage to the building was $500; that the machinery was a total loss, except as to the item of salvage amounting to about $300, and that the total damage to the machinery, pumps, etc., for which the insurance companies are liable was $4,700; that the damage to the boilers, connections, etc., was about $50, and the loss on the ammonia and salt was about $100. The total damage by fire covered by the insurance policies sued on herein amounts to $6,000, and the same should be apportioned among and paid by the respective insurance companies.
A decree in accordance with this opinion will be entered.