Washington Mutual Insurance v. Merchants & Manufacturers' Mutual Insurance

| Ohio | Dec 15, 1856

Bartley, C. J.

The main question on the merits of this case, in the court below, was, whether a kiln-drying corn meal mill was an ordinary incident to, or a known or usual appendage of, a mill coming under the denomination of a “ steam flouring mill; ” and this was a question of fact for the determination of the jury, under proper instructions from the court. The policy upon which the plaintiff below declared, was a reinsurance for six months, against loss or damage by fire, to the amount of $4,000, on $8,000, as insured by plaintiff below to D. White & Co., on “ stock of flour, grain, and cooperage, contained in'their stone and brick steam flowring mill, with cement roof, and detached from other buildings, situate in the city of Madison, Indiana, and known as the Gity Mills.'’ ” The policy contained an express condition, in the words following:

“ And it is agreed and declared to be the true intent and meaning of the parties hereto, that in case the above mentioned buildings, or any part thereof, shall hereafter be appropriated, applied, or used to or for the purpose of carrying on or exercising therein any trade, business, or vocation denominated hazardous in the conditions annexed to this policy, or for the purpose of storing therein any of the articles, goods, or merchandise, in the conditions aforesaid denominated hazardous, unless herein otherwise especially provided for, or hereafter agreed to by said company, and indorsed upon this policy, then and from thenceforth, so long as the same shall be so appropriated, applied, or used, these presents shall cease, and be of no force or effect.”

The conditions of insurance, and classes of hazards referred to in the body of the policy, contain the following:

“The following trades, goods, wares, and merchandise, are denominated hazardous: Apothecaries and druggists, book-sellers’ stock, book binders, bakers, brewers, boarding houses, brass, iron, and type founders, confectioners, chair makers, manufacturers or sellers of camphene, or spirit gas, cabinet makers, chemists, colleges, china, glass, and earthen ware, carpenters in their shops, or in buildings erecting or altering, distilleries, gunpowder, hatters, painters’ shops, and paint grinding, paint stores, rectifiers of liquor, school houses, spirits of turpentine, soap makers, Spanish moss stables, sulphuric acid, smoke houses, ship chandlers, tallow and lard Tenderers, theatres, hay, straw, fodder, and corn husks, hemp and flax, lime unslaked, printers, tallow chandlers, taverns, coffee houses, and restaurants, varnish, upholsterers, grist mills, fulling mills, saw mills, paper mills, and other mills, manufactories or mechanical operations requiring fire heat, or in which wood, chips, or shavings are made.”

The policy took effect on the 26th day of October, 1847 ; and on the 28th day of March, 1848, the property insured, together with the said flouring mill, was destroyed by fire. And it appears, that, at the time of the insurance, the said flouring mill contained a corn meal mill, and a kiln-drying corn meal apparatus, requiring fire heat, and that the' same were used in said flouring mill until, or near, the time when the establishment was burned down.

It was claimed, on the' part of the defendant in the court below, that the kiln-drying corn meal mill, which necessarily increased the risk, did not constitute an ordinary incident to, or usual and appropriate appendage of, a flouring mill, and that, therefore, not being included’ by the descriptive expression, “flouring mill” contained in the policy, the use of such mechanical apparatus in the mill, was in violation of the conditions of the policy, and wholly avoided it, or, at least, suspended its operation. On the other hand, it was claimed by the plaintiff below, that the kiln-drying corn meal mill was an incident to, and an appropriate part of the flouring mill, or, at least, that its use, not being an independent and distinct trade or business, was not a violation of the conditions of the policy. And this constituted the naked issue between the parties on the merits of the case. And, in order to present this simple issue of fact in legal form for determination, the parties have gone into much abstruse refinement in pleading through a multiplicity of special pleas and special demurrers, and have been followed by the court below into such learned and critical philological niceties of discrimination, that the record in the case constitutes truly an interesting legal curiosity to those who have a taste for the most sublimated abstractions of special pleading. We have not deemed it necessary for the purposes of this case, nor profitable in the appropriation of our time, to decide all the various questions of special pleading presented by the record.

The defense in the court below, was first presented under the various aspect of five several special pleas, to wit: 1st, plea of concealment; 2d, of misdescription ; 3d, of breach of implied warranty; and 4th, of breach of express conditions in the policy. To these several special pleas, the plaintiff demurred generally and specially. In the demurrer to the plea of concealment, besides sundry grounds of duplicity, no less than four several grounds of uncertaj^y are assigned on special demurrer, the most material of which is, that the plea does not expressly aver knowledge in the plaintiff at the time. Now, a late elementary writer of high character, on “ Fire and Life Insurance,” touching this subject of the defense of concealment, says :

“ All the authorities concerning matters of insurance, concur in the position that, if the concealment is material, it will avoid the policy, notwithstanding the assured did not intend to commit any fraud. The supp-essio veri may hap-x pen by mistake, and be entirely without fraudulent intention ; still the underwriter is deceived, and the policy is thus void, for the reason that the risk run is really different from the risk understood and intended to be run, at the time of the agreement. A concealment, which is only the effect of accident, inadvertence or mistake, is equally fatal to the contract as if it were designed. By a material fact is meant one which, if communicated to the underwriter, would induce him either to decline an insurance altogether, or not to accept it unless at a higher premium. If a party, for instance, with knowledge that his agent is in treaty for insurance, receives information of a material fact, he is bound promptly to use the means of communicating it, and his neglect thus to do will avoid the policy, independently of any proof of bad motives for the delay. The question of materiality in regard to concealment, as in the case of representation, is ordinarily considered proper to be left to the jury. ‘ The question,’ says a very learned writer, ‘ whether the facts concealed were or were not material to the risk, is mainly a question for the jury.’ ”

In the making of a contract for insurance, the parties are held to the utmost good faith; the. assured is presumed to know the condition of the property, and the dangers attending it; and is not at liberty to withhold information on an important and material matter known to increase the risk. And a concealment set up as a defense to an action on a policy of insurance, imports within itself the knowledge essential to this ground of defense.

The counsel for the defendant in error is clearly mistaken in supposing that the doctrine of concealment is confined to cases of marine insurance, and no part of the law applicable to insurances against fire. It is very true, that on account of the difference in the circumstances attending these two classes of insurances, a strictness and nicety has been required in questions arising on policies of marine insurance, not deemed applicable to policies of fire insurance; but so far as the principle is concerned, as between marine and fire policies of insurances, in regard to concealment, there is no difference; the question in each instance being that of good faith, which forbids an improper-and unjustifiable want of disclosure.

I do not propose, however, to enter into an examination of the technical sufficiency of this, or either of the other special pleas to which demurrers have been sustained; but will pass them with the single remark, that it is not easy to perceive, at least, how some of the rulings of the court below as to the demurrers to these pjpas, can be sustained. But we have not deemed it necessary, for the purposes of this case, to determine these questions of pleading, inasmuch as the true issue of fact has been presented by the subsequent pleadings in the ease, as it arises on the express conditions in the policy of insurance.

It is expressly provided in the policy, that the buildings mentioned as containing the property insured, should not be used in any way, for the purposes of carrying on or exercising therein any trade, business, or vocation, denominated hazardous in the conditions annexed to the policy; among which, are “ grist mills and other mills, manufactories, or mechanical operations requiring fire heat” Now, the kiln-drying corn meal mill would, most manifestly, fall within the terms of this condition of the policy, if not covered by the policy, as an incidental part of the flouring mill therein mentioned; and whether this was the case or not, was the issue of fact for determination. The term grist mill is a general term, comprehending all kinds of mills for grinding grain for food. A corn meal mill belongs to a particular class of grist mills, the use of which may be a distinct business of itself; and if the kiln-drying corn meal apparatus be not an invariable and essential part of a corn meal mill, the latter may, or may not, have that appendage. Now, if the kiln-drying corn meal mill did not constitute a- known or usual and appropriate part of, and incident to a steam flouring mill, the use of it in the buildings of the steam flouring mill in question, being a hazardous business, carried on by a mechanical operation requiring fire heat, was in violation of the conditions of the policy. The issue, therefore, presented two facts, which it became necessary for the court to submit to the jury: first, whether the grinding of corn meal was a usual and appropriate part of, or incident to, the business of a steam flouring mill; and if so, secondly, whether the kiln-drying corn meal operation was also a usual and appropriate incident to the business of such a steam flouring mill. And these two questions should have been properly and fairly submitted to the jury, and left for their determination. In the opinion of the majority of this court, that was not done by the court below. The business of manufacturing kiln-dried corn meal consisted of two distinct operations : one being the grinding the corn into meal, and the other being the kiln-drying, either the corn before the grinding, or the meal after the grinding, (and which it was in this instance, is not shown by the record.) And it was the kiln-drying operation, rather than the simple grinding the corn, which most materially increased the risk, and, therefore, constituted the chief ground of complaint on the part of the defendant in the court below. Now, although the court did, in a manner, leave to the jury the question whether the business of grinding corn was included in the appropriate business of the flouring mill, yet the main question, whether the kiln-drying operation was included also, the court did not submit to the jury at all, but decided that question itself. The language of the charge on this subject, is as follows:

“It will be observed that the subject of the insurance is a ‘ stock of flour, grain, and cooperage, etc., contained in a steam flouring mill.’ The word grain, comprehends wheat, corn, rye; buckwheat, barley, and other farinaceous grains. When stored in a mill, it is presumed to be there for .the purpose of being ground, unless the contrary appears. If corn and rye, as well as wheat, were stored in this mill át the time of the loss, would they fall within the protection of the word grain ? If they would, then for what purpose were they expected to be placed in the mill ? If for the purpose of being ground into flour or meal, the use of the mill for such purpose was contemplated by the parties. These, however, are matters for your own determination. Should you be satisfied, upon examination, that the words. ‘ flour mill,’ were used to signify a mill for the grinding of grain generally, and that the parties contemplated the building in question would be used during the continuance of the insurance for the grinding of corn and other grains, as well as wheat, then the putting up or using of any apparatus or machinery in connection therewith for the purpose of facilitating the operation merely, and not as an independent trade, within the class of hazardous trades, etc., set forth in the conditions of the policy, even though fire heat was used therefor, and the hazard actually increased thereby, it would not suspend the operation of the policy, according to the clause above referred to, (i. e., under the pleadings in the case.)”

This charge is not qualified or changed in any other part of the instructions to the jury. 'Now, the question whether the use of a fire kiln in a mill for the purpose of drying the corn or the meal, was a usual and appropriate part, or ordinary incident to a flouring mill, was the main question, and that was not left to the determination of the jury at all. The question which the jury were instructed to find, was, whether the words “ flouring mill ” were used to signify a mill for the grinding of grain generally, and therefore included the business of grinding corn. And it is not going too far to say, that even this was not fairly and properly left to the jury, for the reason that the court first stated circumstances argumentatively, and after plainly and distinctly indicating to the jury the conclusion of the court as to the fact, said: “ These, however, are matters for your own determination.” A court, in charging a jury, may very properly call the attention of the jury to the evidence, in order to show the application of the law governing the case, or the legal purpose and effect of the testimony; but the statement of the evidence by the court argumentatively, so as to give the jury the manifest conclusion of the court as to the fact submitted to their determination, is uniformly condemned as improper.

Again, it is insisted that the court erred in refusing to give to the jury the second and fifth instructions, asked by the counsel for the defendant, which were as follows :

“ 2. Under the issues made, if the jury find that a kiln-drying corn meal apparatus was not a part of a steam flouring mill in the ordinary acceptation of the words, or as these words are used by underwriters, or an incident to the business of manufacturing flour, the verdict must be for the defendant.

“ 5. If the jury find that the kiln-drying corn meal apparatus was either a mill, manufactory, or mechanical operation requiring fire heat, and not there by the express permission of the defendant, or with defendant’s express authority, they must find for the defendant.”

The questions presented by these instructions, properly arose under the issue in the case. The fifth instruction follows almost the language of the policy. And in our opinion, this ruling of the court below, cannot be sustained upon any principle of law applicable to this case.

It is also alleged, that the court erred in giving to the jury the instructions asked for by the counsel for the plaintiff below, which were as follows:

“ 1. That if the jury should find that the mill referred to in the policy was a flouring mill, and used for grinding grain for food, the policy in question authorized D. White & Co. to manufacture corn meal, in the building described in the policy, and the fact that the mill was used for that purpose, at the time of the loss, will not bar the plaintiff from recovering.

“ 2. That an incident to a trade like the business of manufacturing flour or meal for food, is that which does not necessarily belong to it, but which may happen to it; and if the jury should find as above charged, and that the drying of corn by a kiln was deemed an improvement in the manufacture of meal for a foreign or domestic market, and it was a part of the process of manufacturing corn meal for a foreign or domestic market, then D. White & Co. had a right to use a kiln for that purpose, and the fact that they had such a kiln with fire heat, in use at the time of the loss, is no bar to the plaintiff’s right to recover.”

It is certainly difficult to perceive how these instructions can be sustained. A flouring mill, in its most restricted sense, is, to say the least, a mill used for grinding one hind of grain for food, to wit, wheat. The first instruction here given, does not make any qualification by specifying the grinding of grain of different kinds, or grain generally, for food, but simply that of grinding grain for -food. Now, a flouring mill, if it grind nothing but wheat, is still a mill used for grinding grain for food. So that the jury were instructed, that, if they found that the mill referred to in the policy, was a flouring mill used for grinding grain for food, the policy authorized the manufacture of corn meal in it; and, therefore, could not defeat the plaintiff’s recovery. This is the plain and natural meaning of the language of the charge.

In the second instruction asked by the plaintiff below, and given to the jury, “ an incident to a trade, like the business of manufacturing flour or meal for food,” is defined as synonymous with accident. And the jury were instructed, that if the introduction of a fire kiln into a flouring mill for the drying of corn, -was deemed (it is not said by whom, whether by the mill own ers, the public generally, or by the jury,) an improvement in the manufacture of meal for a foreign or domestic market, and was a part of the process of such manufacture, that then the owners of this flouring mill had a right, under the policy, to use such kiln in the mill, with fire heat. This complicates a very simple matter of fact with a- proposition compounded of distinct considerations, not conducing by any necessary dependency upon each other, to the conclusion sought. One consideration is the finding that the use of this fire kiln for drying corn is a part of the process, (not any particular process, but of course the ordinary process,) of manufacturing corn meal for a foreign or domestic market ; and another is the finding that this operation was an improvement in such manufacture. Then these two distinct matters being both found, inasmuch as an incident of any-particular trade is that which does not necessarily belong to such trade, but that which may happen to it, the conclusion was, according to the instructions, that the use of this corn drying apparatus with fire heat was authorized by this policy. Such instructions were calculated both to confuse and to mislead the jury.

But it is urged, that no injury could have accrued to the plaintiff in error, by the charge of the court below, for the reason, as it is said, that under the state of the pleading in the case, the defense was unavailable, inasmuch as the term “ trades,” used in the conditions annexed to the policy, is intended to signify those occupations or branches of business which are wholly separate, distinct and independent of each other, and not such as are mere parts of, or adjuncts to, some other business. The term “ trades ” is manifestly used, in the second specification in the conditions annexed to the policy, in a very enlarged sense. And there is nothing in the specifications requiring that the various branches of business and mechanical operations enumerated, be such only as are wholly separate, distinct from, and independent of, the business authorized in the buildings mentioned in the policy. Numerous distinct trades or branches of business may be often carried on in the same building, and in connection with, and even auxiliary to, each other. Because one kind, of manufacturing business has been authorized in buildings covered by a policy of insurance, can any other kind of manufacturing or mechanical operation be introduced into the same building, greatly increasing the risk, without the consent of the underwriter, providing it can be carried on in some kind of connection with the former ? Suppose that, inasmuch as the flouring mill in question required for its business a large supply of flour barrels, an extensive cooper shop, with all its mechanical operations requiring fire heat, and making chips and shavings, had been introduced into the building, making two or three hundred barrels per day for the purposes of the mill, could the change in the risk have been thus made, without vitiating the policy, because of its connection with the business of the mill ? If this were so, underwriters could make but little calculation on the risks they run. The business of kiln-drying corn, and manufacturing corn meal therefrom, if carried on in the same building with a wheat flouring mill, could not be connected as an auxiliary with the manufacture of wheat flour. And mere connection with the same propelling power would certainly not be sufficient. It would hardly be claimed by any one, that a manufactory of fire-works — a business extra hazardous, and for which the highest scale of premium would be requisite — could have been carried on in this flouring mill, because connected with the same propelling power, and thus used in conjunction with the flour mill, without affecting the policy.

The general principles which govern ordinary contracts, cannot be inapplicable to contracts of insurance. “ The construction and use of the premises insured, as described in the policy, constitute the basis of the insurance on the conditions expressed, and determine the amount of the premium. But this, calculation can only be made upon the supposition, that the description in the policy is substantially true, and shall remain so while the risk is running, and that no alteration be subsequently made to enhance the liability of the insurer.” 26 Eng. L. and Eq. Rep. 244.

This is in accordance with the most recent adjudicated cases. In Wall et al. v. The East River Mutual Insurance Company, 3 Seld. Rep. 370, where a policy covering a rope maker’s stock, described it as “ contained in a brick building, with tin roof, occupied as a store house, and about forty-two feet from the rope-walk,” etc., it appearing that a pari of the building was used for hackling hemp and spinning it into rope yarns, it was held, that the description contained in the policy was a warranty, and that such occupation was a breach which avoided the policy.

The case of Jennings v. Chenango County Mutual Insurance Company, 2 Denio 75" court="N.Y. Sup. Ct." date_filed="1846-01-15" href="https://app.midpage.ai/document/jennings-v-chenango-mutual-insurance-5465158?utm_source=webapp" opinion_id="5465158">2 Denio 75, is more strictly analogous to the case before us, where the conditions of a policy required the application to state for what purpose the insured property was occupied, and in the application it was only called a grist mill, and it was proven that carpenter’s work was accustomed to be done in it at times, although in part for the repairs of the mill, with tools and implements permanently kept therein. There it was held by the court, that the policy was vitiated.

This view of the case before us is also strengthened by the cases of Westfall v. The Hudson River Fire Insurance Company, 2 Kernan’s Rep. 290 ; Mead v. The Northwestern Insurance Co., 3 Seld. Rep. 531; Glenn v. Lewis, 8 Exch. Rep. 607; and Sillem v. Thornton, 26 Eng. L. & Eq. Rep. 238; and more especially the analogy of the recent case of Harris v. The Columbiana Insurance Company, 4 Ohio St. Rep. 286.

Some of the difficulty in this case appears to have arisen from confusion as to the distinction between the terms flouring mill and grist mill. At this late day there should be no uncertainty as to the distinctive signification of these words of common use. Flour is the product from grain, both ground and bolted; while meal is the pulverized grain ground but unbolted. The making of flour, therefore, consists in both grinding the grain and bolting the meal; while the making of meal consists in the simple process of grinding. The grinding or grist mill, therefore, is an essential part of all flouring mills, while the bolting apparatus is not an indispensable part of a grist mill. But it will not be controverted that the bolting apparatus is an ordinary appendage or usual incident to grist mills. But whether it is a part of the known or usual business of a mill denominated a flouring mill, to manufacture meal without bolting it, or, in other words, to (|o the business of the grinding of grain without flouring it, is one of the questions of fact presented in this case. And in case it be found that the business of making meal or unbolted flour, is a usual part of the business of a flouring mill, it still remains to be found whether a fire kiln for drying corn in the manufacture of corn meal is an ordinary or usual part of a flouring mill. For if it be so, the underwriter, in taking the contract of insurance, takes the risk; but if it be not, he cannot be burdened with a risk, which could not be fairly presumed to have been in the contemplation of the parties at the time.

But it is said, that this kiln-drying apparatus was a modern improvement in the manufacture of corn meal, and as such, being connected with the process of manufacturing corn meal, was not in violation of the conditions of the policy covering a flouring mill. It may be a matter of public policy falling within the province of the legislative power, to favor improvements in . the mechanical arts; but it is certainly no part of the duty of the judiciary to enter into such considerations, in the enforcement of the 'contract-obligations of parties. If a new improvement in machinery, materially increasing the risk of the insurer, be introduced, which is not a known or ordinary incident of the business of the establishment insured, the fact must be made known to the insurer, and receive his consent, in order to save the policy. The underwriter may be presumed to have in contemplation the incidents and casualties of a business under the usual or ordinary appendages and mechanical operations of a manufacturing establishment, but when new inventions in mechanical operations not in common use, are introduced, greatly increasing the risk, on account of which the underwriter would either not undertake the insurance at all, or do so only on the terms of an increased premium, good faith and common honesty require that he be apprised of the change. And if such new invention be in the establishment at the time of the insurance, but not communicated or made known, the insured will not be authorized by the policy to use it, and his subsequent use of it, will have the same effect on the policy as the subsequent unauthorized introduction of it. This is required by good faith and fair dealing, and in accordance with the ordinary principles governing contracts.

There has been some conflict in the adjudications, and muccontroversy about the principles, both in England and in this country, in relation to changes in the premises, or changes in the business, connected with the property insured, or the occasional uses of the property, or introduction of a business into the same, either not within the contemplation of the policy, or in violation of its express conditions. The principles of these cases, however, do not appear to be involved in the case before us. If the business of manufacturing corn meal, and of kiln-drying corn for that purpose, did not constitute a part of the appropriate or known business of a steam flouring mill, it could not have been used as a business in this mill without affecting the policy; and if kept there for usej whether used constantly, or only occasionally, it either suspended or vitiated the policy.

There are some other questions in this case, arising upon the admissibility of evidence and in other respects, which we do not deem it important to determine.

Judgment of the superior court of Cincinnati reversed, and cause remanded for further proceedings.