Supreme Court of Canada
Gore District Mutual Fire Ins. Co. v. Samo, 2 S.C.R.
411
Date: 1878-06-03
The Gore District
Mutual Fire Insurance Company (Plaintiffs) Appellants;
and
James H. Samo and
Thomas Johnston (Defendants)
Respondents.
1878: February 1; 1878: June 3.
Present: Sir William Buell Richards, Knt.,
C.J., and Ritchie, Strong, Taschereau, Fournier and Henry, J.J.
The Chief Justice was absent when judgment
was delivered.
ON APPEAL FROM THE COURT OF APPEAL FOR
ONTARIO.
Insurance—Misstatement as to incumbrances—Indivisibility
of policy—36 sec., c. 44, 36 Vict., Ont.
The Appellants issued to the Respondents, in
consideration of $195, a policy of insurance to the amount of $3,000 as
follows, viz.: $1,000 on their building, and $2,000 on the stock. In the Respondent’s
application, which had been signed in blank and delivered to the person through
whose instrumentality the policy was effected, it was stated that there were no
incumbrances on the property, although there were several mortgages. It was
also proved that after the issuing of the policy the Respondents effected a
further incumbrance on the land, but did not notify Defendants. The policy was
made subject to 36 Vic., c. 44, O., The proviso (since repealed by 39 Vic.,
c. 7,) to sec. 36, declared, “That the concealment of any incumbrances on the
insured property, or on the land on which it may be situate * * shall render
the policy void, and no claim for loss shall be recoverable thereunder, unless
the Board of Directors shall see fit in their discretion to waive the defect.”
One of the conditions of the policy provided
that the policy should be made void by the omission to make known any fact
material to the risk.
On an action upon the policy, the Court of
Common Pleas refused
to set aside the verdict in favor of the Appellants, but on appeal to the Court
of Error and Appeal for Ontario, it was
held that the policy was divisible and that Respondents were entitled to
recover the insurance on the stock.
[Page 412]
Held—On
Appeal, that the contract of insurance on the building and on the stock was
entire and indivisible, and that the misrepresentations as to incumbrances, by
the conditions of the policy as well as by the 36 sec. of 36 Vic., c.
44, O., rendered the policy wholly void.
THIS was an appeal from a judgment of the
Court of Appeal for Ontario, making absolute a rule nisi to enter
a verdict for the Respondents for two thousand dollars, being insurance on
goods.
The action was commenced on the 3rd day of
November, 1875, upon a policy of insurance issued by the Appellants to the
Respondents, bearing date the 16th of December, 1874, on their property to the
amount of three thousand dollars, as follows, viz.: $1,000 on the building only
of their wooden furniture manufactory; $2,000 on their stock of lumber and
materials, and furniture manufactured and in process of manufacture contained
in said building.
The declaration contained four counts on the
policy and the common counts. The pleas were:—
1st. One denying the making of the policy.
2nd. That the real estate was encumbered, and
that in the application it was alleged to be unencumbered.
3rd. Concealment of the fact of encumbrances.
4th. As to so much of the counts as relate to
the insurance on the building; that after the making of the policy, the Respondents
transferred the said building, by mortgage, to Robert Davies, and gave
no notice of such transfer to the Appellants.
5th. Sets up the same defence in a different
way; and the
6th. Never indebted to the common counts.
The Respondents replied, taking issue on the
first plea, and, to the second plea, 1st. That they did not, in their
application, state there were no encumbrances on the property, as in that plea
alleged.
[Page 413]
2nd. That the policy was not issued on the
application in that plea mentioned.
3rd. That the section of 36 Vic., Chapter
44, of the Statutes of Ontario, referred to in the pleadings, does not
affect the policy as to the goods insured and the risk thereon.
4th. That the application was made through an
agent of the Appellants, and that before the application the Respondent
informed him of the encumbrances, and that the misrepresentations were by him.
Issue was taken on the replication, and the
Defendants rejoined that provision in the policy that if an agent of the
company should fill up an application, he, in doing so, should be considered as
acting for the applicant, and not for the Respondents. The cause was tried
before Chief Justice Hagarty, in March, 1876, and a verdict given for
the Appellants. Leave was, however, given to move for a rule to enter a
judgment for the Respondents for $3,000 and interest, and shortly after a rule nisi
was granted in pursuance of such leave, on the following grounds:—
1st. That there was no evidence that the
Appellants had ever elected to avoid the policy for any cause.
2nd. That the evidence established that the only
application made by the Respondents was in blank; that there was no concealment
therein of encumbrances; that the policy was issued without the Respondents
knowing that any one had represented the absence of encumbrances, and that the
agency of Rosenblatt had terminated before he signed the application,
and that he was then the agent of the Appellant and of Griffith, and not
of the Plaintiff.
3rd. That no representations were made by the
Respondents, but by Griffith—not their agent, but the agent of the
Appellants.
[Page 414]
4th. That Griffith signed the application
without any authority from Samo.
5th. That the replication proved there were no
misrepresentations made by Respondents, and that they were not answerable for
acts of Griffith.
6th. That the condition that the agent of the
Appellants shall be deemed the agent of the Respondents is unreasonable and
unjust.
7th. That the policy was divisible; and
therefore only void as to the insurance on the factory, and not on the goods
therein contained.
The Court of Common Pleas refused to set the
verdict aside. The Plaintiffs then appealed from the decision of the Court of
Common Pleas to the Court of Appeal of Ontario, which held that the
policy was divisible, and that Plaintiffs were entitled to receive the amount
of the risk, taken in and by the policy on the stock of lumber and furniture.
The material portions of the evidence are set
forth in the judgments. The question to be determined on this appeal was,
whether or not the policy in question is a divisible policy; whether it is void
in the whole, or only in part, viz.:—Void as to the insurance on the wooden
manufactory, and good as to the stock of lumber and materials, and furniture manufactured
and in process of manufacture?
Mr. Bethune, Q.C., and Mr. C.A. Durand,
for Appellants.
One of the covenants of the policy is that, “if
the title of the property be transferred or changed without written permission,
the policy shall thenceforth be void.” Under Sec. 36 of the Statute, 36 Vic.,
c. 44, O., it is the policy, that is, the whole policy, which is made void in
the event of there being any false statement in the application respecting the
title or ownership, or his
[Page 415]
circumstances, or the concealment of any
encumbrances on the insured property or the land on which it may be situate. It
is admitted that there was a misrepresentation as to encumbrances on the land,
the application stating that there were none, the land at the time being
mortgaged to over $4,000. The insurance in this case was an entire insurance
for $3,000, for which one rate was fixed and paid. The conditions of the policy
apply equally to real and personal property: it cannot be argued that such a
policy is divisible.
By the terms of the contract, “the policy,” that
is, the whole policy (not a part of it, as held by the majority of the Judges
in the Court of Appeal) became void if the assured made any erroneous
representations in the application, or if the assured was not the sole and
unconditional owner of the property, unless the true title were therein
expressed:—Gottsman v. Pennsylvania Ins. Co.; Barnes v. The Union Mutual; Gould v. The York County Mutual Fire
Ins. Co.; Lovejoy
v. The Augusta Mutual Ins. Co.; Wilson
v. The Herkimer County Ins. Co.; Bowman
v. The Franklin Ass. Co.; Hinman
v. The Hartford Fire Ins. Co.; Lee
v. The Howard Ins. Co.; Friesmuth
v. Agawam M.F. Ins. Co.
The only American case opposed to this view is
that of Phœnix Ins Co. v. Lawrence et al.
The case of Date v. The Gore District Mutual
Ins. Co. was
under a different section of the Act. It is opposed to Ramsay Cloth Co. v.
Mutual Ins. Co. of Johnstown; and
to Russ v. The Clinton Mutual Ins. Co.;
Kerby
[Page 416]
v. Niagara; and to Bleakely
v. The Niagara District.
Moreover it is proved that subsequent to the policy being effected, the insured
effected a further encumbrance on the property, and never notified the company.
The learned counsel referred also to Cashman v. London & Liverpool Ins.
Co.; Flanders
on the law of fire insurance; Bunyon,
law of life insurance; Angell,
law of fire and life insurance; and Phillipp’s
law of insurance.
Mr. Read, Q.C., for Respondents.
The application was for two insurances in one
policy: 1st, for the building for which a special rate of 5 p. cent. was fixed;
and 2nd, for the stock for which a special rate of 5 p. cent. was also fixed.
It makes no difference that the rate should be the same. This rate was
subsequently changed to 6½ p. c., and it applies equally to the personal and
real property.
The Appellants by their replications have made
this case dependant upon the construction of 36 Vic., c. 44, O.
The true construction of the 36. Sec. of 36 Vic.,
Cap. 44, O., which enacts that in case a fraudulent representation, or
any false statement respecting the title or ownership of the applicant or his
circumstances, or the concealment of any incumbrances on the insured property,
or on the land on which it may be situate, or the failure to notify the company
of any change in the title or ownership of the insured property, and to obtain
the written assent of the company thereto, shall render the policy void, is
that where a policy, as in this case, is for a cash premium, and in the
application, a distinct premium is charged for the risk on the building and
[Page 417]
on the goods, that the policy is void as to the
buildings only, where any of the defects referred to exist as to the buildings,
and not as to the goods or personal property; and void only as to the goods and
personal property insured where the defects exist only in reference thereto,
and not to the buildings insured.
The 36th Sec. of 36 Vic., Cap. 44, says
that the policy shall be void, in case any of the defects therein referred to
exist as to the “insured property,” and not as to the “insured property or any
part thereof,” to make the policy void the defects, or some of them, must exist
as to all the insured property mentioned in the policy, and not to a part
thereof only.
The policy in question, however, was a divisible
policy, and only void as to the factory, and not as to the furniture, goods, or
other personal property: Phænix Insurance Co. v. Lawrence et al; Clark v. New England M.F. Insurance
Co.; French
v. Chemango Co. Mutual Insurance Co.;
Barnes v. Union Mutual Fire Insurance Co.; Gould v. York County Mutual Fire
Insurance Co.; Burrill
v. Chemango Mutual Insurance Co.; Kuntz
v. Niagara District Insurance Co.; Date
v. Gore District M.F. Insurance Co.
Most of the American cases holding a policy is
indivisible are cases in which there has been a premium note for which the
company had a lien on the property, and do not apply.
The policy in this case, and the construction
thereof, is not to be governed by the law as applied to whole or entire and
divisible contracts without reference to legislative enactments, but must be
governed by the legislative enactments referred to therein, and the ap-
[Page 418]
plication therefor, and the construction to be
placed thereon.
Even under the Law of Contracts, there is
nothing to prevent this contract being a divisible contract, but on the
contrary, the application for the contract and the contract itself show that it
was intended to be divisible, and the words thereof do not necessarily make it
indivisible. Doran v. Reed: Held,
that notwithstanding the Consolidated Statutes of U.C. Cap. 85, Sec. 7, of
which provides:—“If any such deed (one-third of married woman) be not executed,
acknowledged, and certified as aforesaid, the same shall not be valid or have
any effect,” the deed is good as to husband’s interest—in other words, partly
good and partly bad. Rose v. Scott;
chattel mortgage, held good in part and bad in part.
As to the defence set up by the Appellants in
their second plea, viz.:—That the existence of the undisclosed mortgages was a
circumstance material to the risk, and to be known to the Appellants, and
setting up the failure to disclose them, as a breach of the agreement in the
application for insurance, the Respondents submit, that the existence of an
encumbrance on the building was not a material fact or circumstance, in regard
to the condition, situation, value or risk of the property, nor was there any
evidence at the trial that the failure to disclose such encumbrances was material
to the risk, Lindenan v. Desborough;
Jones v. Provincial Ins. Co.
Mr. Bethune, Q.C, in reply:—
The Appellants did not only plead the Statute.
By the evidence it will be seen that the answers given by the applicant relate
to the risk, and not to two risks,
[Page 419]
and moreover, when the rate was increased, it
was agreed to lump the risk at 6½ cent.
RITCHIE, J.:—
Defendants insured Plaintiffs “in consideration
of the receipt of $195, to the amount of $3,000 for the term of one year,
ending at noon on 18th Nov., 1875, as follows, viz: $1,000 on the building only
of their wooden furniture manufactory, situate on Yonge Street, in Yorkville,
$2,000 on their stock of lumber and materials and furniture manufactured and in
process of manufacture contained in said building.” It is admitted there was a
misrepresentation as to encumbrances which would invalidate the policy as to
the building, but it is contended on Plaintiff’s behalf that the contract of
insurance is not entire, but divisible, the insurance on the building being, it
is alleged, separate and distinct from that on the furniture contained in the
building, and that consequently any encumbrance on the building could affect
and render void only that portion of the contract applicable to the building,
and had no reference to the insurance on the furniture, which, notwithstanding
the encumbrance on the building, was valid. But, I am not able so to construe
this instrument. The words of the Statute of 36 sec. 36 Vic., Cap. 44,
endorsed on the policy, enact that any false statement respecting the title or
ownership of the applicant or his circumstances, or the concealment of any
encumbrance on the insured property, or on the land on which it may be situate,
or the failure to notify the company of any change in the title or ownership of
the insured property, and to obtain the written consent of the company, shall
render the policy void, and that the concealment of any circumstances on the
insured property or the land on which it may be situate, renders the policy
void.
[Page 420]
But entirely independent of the Statute, the
application set forth:—
Application of J.H. Samo & Co.,
of Toronto, County of York, for insurance against loss or damage
by fire, by the Gore District Mutual Fire Insurance Company, in the sum
of $3,000 for the term of one year, commencing the eighteenth day of November,
1874, at noon, on the property, as follows:—On a furniture manufactory two
stories high, 50 x 25, built of wood, covered with shingles; present cash
value, exclusive of land, amount to be insured ⅔ value, $1,000. Rate, 5 per cent.
On stock of lumber and materials, and
furniture manufactured and in process of manufacture, contained in above
building, covered with shingles, marked No. on
diagram, said building owned by assured, present cash value, exclusive of land,
$8,000; amount to be insured, $2,000. Rate, 5 per cent.
The said applicant makes the following
statement and gives the following answers to interrogations here put, relating
to the risk:—
1. Where is the property to be insured
situate? On Yonge street, Village of Yorkville.
2. Name of owner of property to be insured?
J.H. Samo and company.
3. By whom and for what purpose is the
building occupied? By us as a furniture manufactory.
29. What other insurance is there at
present on the property? $2,000.
30. In what companies? Guardian.
31. What is your interest in the property
to be insured? Owners.
33. Is property encumbered, and, if so, to
what amount? None.
* *
*
And the said applicant hereby covenants and
agrees to and with the said company that the foregoing is a just, full and true
exposition of all the facts and circumstances in regard to the condition,
situation, value and risks of the property to be insured, so far as the same
are known to the applicant, and are material to the risk, and material to be
known by the company, and agrees and consents that the same be held to form the
basis of the liability of the said company, and shall form a part and be a
condition of this insurance contract.
Signature
of applicant,
J.H.
SAMO & Co.,
per
T.B.G.
Dated 18th November, 1874.
By the policy, it was covenanted:—
[Page 421]
It is covenanted and agreed that the
interest of the assured herein is not assignable without the consent of said
company in writing; and if the title of the property be transferred or changed
other than by succession, by reason of death, or the policy be assigned without
written permission hereon, this policy shall thenceforth be void; and that the
application of the assured upon which this insurance is granted, the survey and
diagram of the premises and all things therein contained shall be taken and
considered a part and portion of this policy; and that no insurance shall be
binding until payment of the premium by cash or note. * * * * That if the assured
in the application referred to herein make any erroneous representation or omit
to make known any fact material to the risk, or if the assured shall have
effected or shall hereafter effect any other insurance on the property hereby
insured, or if the risk be increased by any means within the knowledge of the
assured without the consent of this company endorsed thereon, or if the assured
is not the sole and unconditional owner of the property insured unless the true
title be expressed herein, * * * * then, and in every such case this policy
shall be void. * * * * That if any agent of this company fill up an application
for insurance therein, such agent shall be considered as acting for the
applicant and not for this company, and no verbal or written statement of the
said agent to the contrary shall be received in evidence, but this company will
be responsible for all surveys made by their agents personally.
Having a due regard to the terms of this policy
and the subject matter of the contract, I think it was an entire agreement to
insure the house and its contents in consideration of the gross sum of $195,
made up, no doubt, as proposed in the application for the insurance. The
consideration is stated in the policy as entire on the one side for all Defendants
undertook to do, on the other, the distribution of the risk being simply to
limit the extent of the risk assumed by Defendants on each kind of property; in
all other respects the contract was entire.
A remark of Bramwell, B., in Harris v.
Venables; where
one question was whether the consideration applied to both promises, and it was
held it did, seems very apposite to this case. He says:—
[Page 422]
All that is to be done on one side is the
consideration, for all that is to be done on the other; all the promises are
referred to all the considerations.
So here, in consideration of an entire sum on
one side, the Defendants assumed all the risks on the other.
The character and situation of the building is a
prominent consideration in every contract of insurance, and is equally
important, whether the policy covers personal property in the building or the
building itself. No distinction is indicated in this policy in respect to the
character and situation of the building between insurance on personal and on real
property, or to indicate in any way that the condition relied on by Defendants
refers exclusively to applications for insurance upon buildings. It is equally
sensible and intelligible when applied to personal property as to real
property, and when applied to personal property in the building as in reference
to the building itself; for no one can doubt that if the building takes fire
the property in the building is jeopardized. It has been argued that it would
necessarily follow that the same rule would be applicable to two descriptions
of insurance having no connection whatever with each other, as for instance, on
personal property in one city and on a house in another, included in one
policy; but this by no means follows. It cannot be doubted, there may be
separate insurances in the same policy as there may be separate causes of
action, totally distinct from each other, arising upon the same instrument for
which an action might be brought on each of them. When questions, such as have
been suggested arise, they will have to be decided on the language of the
policy, having due regard to the subject matter. In Hopkins v. Prescott; at p. 591, Wilde, C.J., says:—
No doubt, you may put two distinct and
independent contracts
[Page 423]
upon one piece of paper, but here the
consideration alleged is an entire one.
And in delivering judgment, he says:—
The declaration sets out an agreement; and
one question is, whether it sets out an agreement, which is single and entire,
made on one entire consideration, or whether is it severable in its nature, and
deals with matters that are unconnected with and independent of each other.
It seems to me that the matter alleged in the declaration amounts to one entire
agreement, which may very well be, although the contract be to perform several
distinct things.
The authorities in Ontario are, so far as
I can judge, in entire accord with the view here put forward, as are those in
the United States. All the cases, both in Ontario and the United
States, have been so fully put forward and discussed in the Courts below
that it is unnecessary to occupy the time of this Court in going through them
again. The Supreme Court of the Province of New Brunswick, in Cashman
v. L. & L. Fire Ins. Co., acted
on the same principle. There the Plaintiffs insured two buildings and the
merchandize in one of them against loss by fire; one of the conditions of the
policy declared that if there should be any fraud or false swearing, the
claimant should forfeit all claim under the policy. One ground of defence to an
action brought on the policy was that the Plaintiff made a false declaration as
to the value of the goods lost by the fire. Held, that the contract was entire,
and if the Plaintiff was guilty of fraud or false statement in reference to the
goods he could not recover any part of the insurance.
Therefore, on principle and authority, to use
the words of Wilde, C.J., in the case before cited, “Looking at this
agreement, it appears to me, that it is one entire and indivisible contract,
founded upon one entire consideration,” and relates to matters that are
connected with and dependant on each other.
[Page 424]
STRONG, TASCHEREAU and FOURNIER, J.J.,
concurred.
HENRY, J.:
The rule nisi for leave to enter judgment
for Respondents was discharged by the unanimous decision of the Court of Common
Pleas, and, on an appeal therefrom to the Court of Appeal of Ontario,
the decision of the Court of Common Pleas was, by a majority of the Court,
reversed; and it is now before us, by a second appeal, and, having been heard,
we have now to give judgment. The defence is substantially as to the
misrepresentations in the application as to the then existing encumbrances, and
the subsequent mortgage to Davies, or, in case they were not the
misrepresentations of the Respondents, that their application omitted to make
known facts material to the risk. I do not consider it necessary to say much in
regard to the question of the agency of Rosenblatt to bind the
Respondents as to his acts in regard to the application, as, in the event of a
decision that he was not such agent, the Respondents will be found to occupy an
equally unfavorable position, for, the section of the Statute incorporated into
and forming part of the agreement provides, amongst other things,
That the concealment of any encumbrance on
the insured property, or on the land on which it may be situated, or the
failure to notify the company of any change in the title or ownership of the
insured property, and to obtain the written consent of the company thereto,
shall render the policy void, and no claim for loss shall be recoverable
thereunder unless the Board of Directors, in their discretion, shall see fit to
waive the defect.
Mr. Samo, in his evidence, admits the
agency of Rosenblatt to procure the insurance. He says:—
I gave Rosenblatt a blank form,
partly filled. The questions in it were not answered or filled up.
Again:—
The question in the paper as to
encumbrances was not answered
[Page 425]
by me. It was to oblige Rosenblatt
that I dealt with him instead of going to the company’s office. I thought Rosenblatt
would fill up the blanks. I intended trusting him with signing the application,
having done the like before. I did not ask Rosenblatt to show me the
application, not thinking it necessary. The mortgage (to Davies) was
dated 28th April, 1875, and was for $525. It was on the factory.
The policy in this case was made and delivered
to the Respondents in December, 1874. The fire did not take place till the
following July. It was for over six months in the hands, for inspection, of the
Respondents, and, after having signed a blank application, their duty was to
read it, and there they would have seen their own covenant and agreement, that
if they were not the sole and unconditional owners of the property insured, unless
the true title be expressed herein, the policy should be void. Their
duty was clearly to have read the policy, and given notice for and send the
necessary amendment made or the policy cancelled before loss. If they did not
accept the policy as it was, they did not accept it at all, and, therefore,
have no action on it. From this evidence, I think the agency of Rosenblatt,
to make an application binding on the Respondents, cannot be questioned, and
that for his misrepresentations the Respondents are answerable. See Richardson
v. Maine Ins. Co., where
the assured applied by mail to the agent for insurance. The agent filled up and
signed an application, which contained a statement that there were no
encumbrances. A policy was issued referring to the application, and accepted,
with the application attached to the policy. Held—1st. That by accepting the
policy the assured covenanted for the truth of the application, and ratified
it. 2nd. That the representation as to the property was material; and lastly,
that the contract was entire, and a misrepresentation as to one of the subjects
insured avoided the policy. If, by the acts of an agent, one or
[Page 426]
other of two innocent parties must suffer, the
law says it must be the one whose agent he was, provided the acts complained
come within the scope of his agency, or was in reference to a matter the agent
had authority to deal with. I think that in this case the Respondents are
responsible for the acts of Rosenblatt, including that of getting Griffith
to put their names to the application. In addition to the defence raised on the
“concealment” referred to it in the Statute, which is virtually a re-enactment
of the common law on the point, I think we must hold the Respondents answerable
for the misrepresentations in the application.
That they are false is admitted; and, therefore,
in respect of the building, there can be no doubt they are fatal to the success
of the Respondents.
The same may be said of the consequences of the
subsequent assigment to Davies. There can be no question, that, under
the terms of the policy and section 36 of the Act before mentioned, “the
failure to notify the company” of the transfer to Davies being a “change
in the title or ownership of the insured property, and to obtain the written consent
of the company thereto,” rendered “the policy void.” That provision of
the statute is incorporated into and became a part of the agreement for the
insurers, the Respondents independently of the other legal principles involved,
having adopted it as a condition precedent to their right to recover on the
policy, are estopped from denying its application, and cannot ask the Court to
pronounce, what they would, for other reasons, be disinclined to do; and which,
by the terms of the section in question, which itself makes the provision for
the notice “and written consent of the company,” it would be prevented from
doing, that the requirement, either of the notice or of the written consent is
unreasonable or unjust.
It is contended, however, that these objections
cannot
[Page 427]
be raised against the claim for loss on the
goods, although a good one, as to the claim for the loss on the building, and
that, therefore, the Respondents are entitled to recover for the loss on the
goods.
To determine that question, we must first
examine the policy and see the nature of the agreement entered into. By it the
Appellants “in consideration of the receipt of one hundred and ninety-five
dollars, do insure J.H. Samo & Co., of the City of Toronto, *
* * to the amount of three thousand dollars for the term of one year * * * as
follows, viz: $1,000 on the building only, of their wooden furniture
manufactory, and * * * $2,000 on their stock of lumber and materials and
furniture manufactured, and in process of manufacture, contained in same
building.” The goods, therefore, and the building are insured for one lump
consideration. It is one agreement; and the Respondents covenant in respect to
the insurance generally, that if the title of the property be transferred or
changed, other than by succession by reason of death, without written
permission thereon, or that if the application referred to therein make any
erroneous representation or omit to make known any fact material to the risk,
or if the assured is not the sole and unconditional owner of the property
insured, unless the true title be expressed therein, that the policy should
be void. The consequence therefore, the policy being legally construed, of
the misrepresentation &c., was settled by it, and, being the agreement of the
parties themselves, is binding on them; and by it the whole policy is void.
Both parties agree by the incorporation of the statute that in any of the cases
mentioned the policy, not the insurance on the building, shall be
void. There are few, if any, cases that suggest an opposite construction; but
not only in Upper Canada, but in the United States the ruling
authorities are the other way, and properly so,
[Page 428]
as I think. The contract contained no provision
that the risk should continue on that part in reference to which no
misrepresentation was made, but it was entire, and the risk to cease and the
policy to be avoided altogether. It is matter of no small moment that the
insurers, in the case of the application for insurance on goods, should be correctly
informed in regard to the building containing them. If a party says, “I want to
insure on goods in my store, which is a valuable one, totally unencumbered, and
there is no “concealment by me of any encumbrance” on the property sought to be
insured, “or on the lands on which it is situated”; and, upon this
application, the risk is taken, we have to say, whether or not under the
provision of the thirty-sixth section and the written misrepresentations, the
policy would be avoided; if, at the time, the building containing the goods,
and the land on which they both were at the time of the application, either did
not belong at all to the applicant or were heavily encumbered by mortgages. In
the statute and in the policy adopting them, the words are “the insured
property or on the land on which it may be situate.” The word “property”
in the first part of the quotation, includes goods as well as buildings. The
words are general and include goods, unless there is something elsewhere to
induce a different construction. And, I think, we may construe the Statute and
policy, as saying in substance, that if there be any concealment of
encumbrances on the land of any building in which goods are insured, it will be
sufficient to avoid the policy on the latter. There are good reasons why the
insured should be truthfully informed as to the state of the ownership of a
building. If unencumbered, more care is reasonably expected on the part of the
owner. If it be a rented building, or one in which the applicant has little or
no interest, and his
[Page 429]
stock be fairly covered, the personal
inducements to care and caution are absent. In such a case, truly represented,
the insured would have the option of declining the risk or demanding a higher
premium. By a false representation of a different state of things the insured
would be entrapped and a policy obtained that he would not otherwise have
granted at all, or granted only upon different terms. In representations for
insurance, where the knowledge of certain things resides wholly or principally
with the applicant, the law requires the truest and fullest statements; and
when they are not so in respect of important matters, the policy is always
avoided. There is not the slightest suspicion of fraud on the part of the Respondents
in this case; but were we to decide this matter in their favor, the door would
be opened to fraud which might be difficult of proof, and, as I think, legal
principles, founded in justice and equity, violated.
There is no more reasonable or necessary requirement
than that where one party is induced to enter into a contract with another, the
latter is required to give bonâ fide and intelligible information in
regard to material matters of which the other is ignorant, and in no case is
the rule more necessary than in applications for insurance. If in the
administration of justice that rule be neglected or slighted, insurance
companies could not safely do business; and those who would be careful and
truthful applicants, would be made to suffer for the careless and untruthful.
It is necessary, therefore, that rules so salutary should be maintained, not
only in the interest of insurance companies, but in that of the public.
Carelessness and recklessness often mark the conduct of applicants for
insurance, and the aid of Courts are constantly invoked to release them from
the necessary results; and sometimes with undeserved success. In no class of
cases have the legal principles in regard
[Page 430]
to contracts been more strained than in respect
of careless applicants for insurance. Experience has shown insurance companies,
that certain precautions and guards are necessary for the prevention of fraud
and consequent loss. They guard against such by the terms provided in the
application and policy. The law gives them the right to dictate the terms and
conditions upon which they will issue a policy, and the right to say
afterwards, that by the terms of the mutual agreement their liability was at an
end and the policy avoided. The Respondents here, by representing that the
building in question was theirs and unencumbered may have, by that means,
induced the company to accept the risk on the goods contained in it, when they
otherwise would not have done so. And by making an application for the joint
insurance, and warranting that the representations are all true, the insurers
may well say, “we took and accepted the two risks together at a rate less than
we would have taken either separately, or we would otherwise have declined the
risk altogether. The whole position on that point affected, in our view, the
safety of the goods and by your misrepresentations in regard to the building,
we insured the goods which we otherwise would not have done; and you, having in
that respect deceived us, either innocently or otherwise, we disclaim the
contract as a whole.”
We have been asked to say, that the words in
question may be read so as to avoid the insurance on the building only, but, my
reply is, that the parties themselves have agreed that the “policy,” not the
insurance or any part of it, should be avoided; and all the governing
principles and authorities sustaining this view, I am unable to substitute a
new or different agreement from that entered into by the parties themselves.
The authorities cited by my learned brother Ritchie,
I need not repeat.
[Page 431]
I think, therefore, the appeal should be
allowed, the judgment of the Appeal Court of Ontario reversed, and the
rule nisi for a judgment for the Respondents discharged with costs.
Appeal allowed with costs.
Solicitor for Appellants: C.A. Durand.
Solicitors for Respondents: Read &
Keefer.
Email this Content