Supreme Court of Canada
Liverpool and London and Globe Ins. Co. v. Agricultural Savings and Loan Co., (1903) 33 S.C.R. 94
Date: 1903-02-17
The Liverpool and London and Globe Insurance Company (Defendants) Appellants;
and
The Agricultural Savings and Loan Company (Plaintiffs) Respondents.
1902: November 27, 28; 1903: February 17.
Present: Sir Elzéar Taschereau C.J. and Sedgewick, Girouard, Davies and Mills JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.
Fire insurance—Void policy—Renewal—Mortgage clause.
By sec. 167 of The Ontario Insurance Act a mercantile risk can only be insured for one year and may be renewed by a renewal receipt instead of a new policy.
Held, reversing the judgment of the Court of Appeal (3 Ont. L.R. 127), and restoring that at the trial (32 O.R. 369), Girouard J. contra, that the renewal is not a new contract of insurance. Therefore, where the original policy was void for non-disclosure of prior insurance the renewal was likewise a nullity though the prior insurance had ceased to exist in the interval.
Held, per Girouard J. that the renewal was a new contract which was avoided by non-disclosure of the concealment in the application for the original policy.
The mortgage clause attached to a policy of insurance against fire, which provided that “the insurance as to the interest only of the mortgagees therein shall not be invalidated by any act or neglect of the mortgagor or owner of the property insured, &c,” applies only to acts of the mortgagor after the policy comes into operation and cannot be invoked as against the concealment of material facts by the mortgagor in his application for the policy.
Quœre. Would the mortgage clause entitle the mortgagee to bring an action in his own name alone on the policy?
APPEAL from the decision of the Court of Appeal for Ontario reversing the judgment at the trial in favour of defendant company.
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The facts of the case are stated by Armour C.J.O. in the Court of Appeal as follows:
“By a policy of the defendant company, under the hand and seal of one of its directors, it was witnessed that one Calvin Randolph Annott, Esq., of the Village of Watford, having paid to the defendant company the sum of $26.25 for the insurance against loss or damage by fire (subject to the conditions and stipulations indorsed thereon which constituted the basis of the insurance) of the property thereinafter described to the amount thereinafter mentioned, not exceeding upon any one article the sum specified on such article, namely:—‘$300 on the building only of his brick galvanized iron roofed building, 24 x 45, occupied by the assured as a cold storage building, situate and being on a part of lot No. 27, west side of Main street, Village of Watford, Ont., marked No. 1 on diagram, indorsed on assured’s application No. 140312, which form part hereof and are his warranty;’ ‘$1,200 on his machinery and fixtures therein attached and affixed thereto;’ ‘$1,500. Fifteen hundred dollars. Loss, if any, under this policy payable to Agricultural Savings and Loan Company, London, Ont.’ ‘Other concurrent insurance $600 on first item and $700 on second item on Alliance,’ ‘Subject to mortgage clause hereto attached.’ And the defendant company did thereby agree that from the 9th day of May, 1898, until 12 o’clock noon on the 9th day of May, A.D. 1899, and for so long afterwards as the said insured, his or her or their heirs, executors or administrators, should from time to time pay or cause to be paid the sum of $26.25 to the defendant company or to the known agents thereof, on or before the commencement of each and every succeeding twelve months, and the board of directors should agree thereto by accepting the same, the funds and property of the
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defendant company should (subject to the conditions and stipulations indorsed thereon which constituted the basis of that insurance) be subject and liable to pay, reinstate or make good to the said insured, his or her or their heirs, executors or administrators, such loss or damage as should be occasioned by fire to the property therein above mentioned and thereby insured, not exceeding in each case respectively the sum or sums thereinbefore severally specified and stated against each property.
“The ‘conditions and stipulations’ indorsed on the policy were not the conditions prescribed by the statute, and this policy must be held to be subject not to the conditions and stipulations indorsed thereon, but to the statutory conditions.
“The mortgage clause to which this policy was made subject was as follows:—‘It is hereby provided and agreed that this insurance as to the interest of the mortgagees only therein shall not be invalidated by any act or neglect of the mortgagor or owner of the property insured, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy. It is further provided and agreed that the mortgagees shall at once notify said company of non-occupation or vacancy for over thirty days, or of any change of ownership or increased hazard that shall come to their knowledge, and that every increase of hazard not permitted by the policy to the mortgagor or owner shall be paid for by the mortgagees on reasonable demand from the date such hazard existed, according to the established scale of rates for the use of such increased hazard during the continuance of this insurance. It is also further provided and agreed that whenever the company shall pay the mortgagees any sum for loss under this policy and shall claim that as to the mortgagor or owner no liability therefor existed,
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it shall at once be legally subrogated to all rights of the mortgagees under all the securities held as collateral to the mortgage debt, to the extent of such payment, or at its option the company may pay to the mortgagees the whole principal due or to grow due on the mortgage with interest, and shall thereupon receive a full assignment and transfer of the mortgage and all other securities held as collateral to the mortgage debt, but no such subrogation shall impair the rights of the mortgagees to recover the full amount of their claim. It is also further provided and agreed that in the event of this property being further insured with this or any other office on behalf of the owner or mortgagee, the company, except such other insurance when made by the mortgagor or owner shall prove invalid, shall only be liable for a ratable proportion of any loss or damage sustained. At the request of the assured the loss, if any, under this policy is hereby made payable to the Agricultural Saving and Loan Company as their interest may appear, subject to the conditions of the above mortgage clause.’
“The plaintiffs were the mortgagees of the insured property by virtue of a mortgage bearing date the 7th day of May, 1898, made by Calvin Randolph Annott and one James Annott, who executed the same as surety for the payment of the mortgage money in pursuance of the Act respecting short forms of mortgages, securing payment to them of the sum of $3,000 and interest as therein set forth, which said mortgage contained the following covenant: ‘And that the said mortgagors will insure the buildings on the said lands to the amount of not less than three thousand dollars currency.’
“C.R. Annott in his application for this policy in answer to the question, ‘What other insurance and where? Name companies and amounts?’ said ‘$1,500
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on above property just being taken to-day in the Alliance Assurance Company.’ And by this application the applicant agreed with the defendant 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 risk of the property to be insured so far as the same are known to the applicant and are material to the risk, 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,’ and on the margin of the application appeared these words: ‘Loss, if any, payable to the Agricultural Savings & Loan Co., London, Ont., as their interest may appear.’
“Prior to the date of this policy and on the 25th day of April, 1898, C.R. Annott had insured the property covered by this policy in the Perth Mutual Fire Insurance Company for three years from that date in the sum of $4,000, which insurance was on the 14th April, 1899, cancelled by that company.
“The insurance effected by this policy was renewed by the following renewal receipt:
‘THE LIVERPOOL AND LONDON AND GLOBE INSURANCE COMPANY.
‘Receipt No. 160389. Renewing Policy, No. 3732312
Sum insured, $1,500. Premium, $26.25.
Received the 9th day of May, 1899, from C.R. Annott, Esq., the sum of twenty-six 25‑100 dollars, being the premium for the renewal of policy above named to the ninth day of May, nineteen hundred.
Not valid until countersigned by the company’s authorized agent. at Watford.
Countersigned at Watford, this
8th day of May, 1899. G.F.C. SMITH,
W.E. FITZGERALD, Resident Secretary,
Agent. Canada Branch.”
On February 20th, 1900, the insured premises were destroyed by fire. The insurance company refused to
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pay the policy on several grounds which they pleaded in the action, namely, that the mortgagees could not sue in their own names; that the non-disclosure of the insurance in the Perth Mutual avoided the policy; that the policy had been cancelled before the fire; and that there had been a material increase of the risk by a change in the use of the premises. The mortgagees met these objections by contending that the policy being a deed poll in which they were named as having an interest entitled them to sue; that the policy in the Perth Mutual was cancelled before the renewal sued on which was a new contract and not affected by the non-disclosure; that the alleged cancellation of the policy in suit was made without authority; and that there was no increase of risk. They also contended that the mortgage clause protected them against the concealment of the original action.
The Court of Appeal held against this last contention but decided in favour or the plaintiffs on the other grounds reversing the judgment of Mr. Justice Rose at the trial by which the action was dismissed. The insurance company appealed.
Riddell K.C. and Hoskin for the appellants. The policy was void for non-disclosure under the statutory conditions.
Irrespective of these conditions the policy was void at its inception. See Clarkson v. Macmaster & Co.; McCrea v. Waterloo Co. Mut. Ins. Co.; Venner v. Sun Life Ins. Co.; Thomson v. Weems.
The policy being void the renewal had no effect. Howard v. Lancashire Ins. Co.; London West v. London Guarantee & Acc. Ins. Co.; New England Ins. Co., v. Wetmore.
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The contract of insurance was not with the mortgagees, and they have no right to sue. May on Insurance (4 ed.) vol. 2 sec. 424; Tweddle v. Atkinson; Ex parte Richardson; In re Rotherham A. & C. Co.; Livingstone v. Western Assurance Co.
The mortgage clause does not protect the mortgagee against defects in the application but only applies to acts of the mortgagor after the policy is issued. Omnium Securities Co. v. Canada Fire Ins. Co.; Davis v. German-American Ins. Co.
The risk was materially increased by the premises being left vacant. McKay v. Norwich Union Ins. Co.; Hervey v. Mutual Fire Ins. Co.; Kuntz v. Niagara District Fire Ins. Co.; Sovereign Fire Ins. Co. v. Moir; Guerin v. Manchester Fire Assurance Co.
The respondents surrendered the policy so far as their interest was concerned, and it is immaterial in this action whether the rights of the mortgagor remain or not. Marrin v. Stadacona Ins. Co.; Schwarzchild v. Phænix Ins. Co.
It is claimed that the 19th statutory condition was not complied with. But that only provides for one mode of cancelling a policy and does not prevent the parties from adopting another. Schwarzchild v. Phœnix Ins. Co.23
Bayley K.C. and Aylesworth K.C. for the respondents. The mortgagees had a right to sue, the policy being a deed poll and mentioning them as parties
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entitled to payment. Green v. Home; Mitchell v. City of London Fire Ins. Co.; Bower v. Hodges; Gandy v. Gandy.
As to concealment of a prior insurance we contend that the renewal is a new contract the risk being a “mercantile” risk which the statute only allows to continue for one year. See May on Insurance (4 ed.) sec. 70a; Holt on Insurance, sec. 95.
A fire policy differs from a life policy which is a continuing insurance so long as the premiums are paid. New York Life Ins. Co. v. Statham; Long v. Ancient Order United Workmen.
The plaintiffs had no power to cancel the policy. See Caldwell v. Stadacona Fire & Life Ins. Co.; Morrow v. Lancashire Ins. Co.
There was no material increase of risk. The use of the premises was changed from cold storage to ordinary storage, the insurance rate being the same for both. See Ardill v. Citizens Ins. Co.; Johnston v. Dominion Grange Mut. Fire Ins. Co.
The CHIEF JUSTICE.—I would allow this appeal and restore the original judgment which dismissed the respondents’ action.
There never was in law a contract by the appellants to insure this property, and the policy dated the 9th of May, 1898, was vitiated by fraud ab initio. The essential allegations of the respondents’ statement of claim are not proved. The expressions “continued insurance” and “renewed insurance,” as I view the case, are therefore inaccurate, to use an euphemism. It seems to me
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inconsistent and illogical, after determining that the first policy was invalid, to assume that it could be in law continued or renewed, without waiver or estoppel which are not, in the least, contended for here.
There was by the respondents, in their argument at bar, a misapplication of the Ontario Insurance Act. The insurance of a mercantile risk, it is true, sec. 167, cannot be for more than one year, and may be renewed by renewal receipt instead of a policy. But clearly what can be renewed is a valid contract, a prior valid policy. There is no insurance of a mercantile risk if there is no insurance at all.. And the statute does not say and cannot be construed as intending to say that a contract that never existed can be renewed; it has no application whatever when there has been no prior insurance.
Then the so-called renewal receipt is not a new contract, since there had been no prior one. It is the only contract, if any, that had existed between the appellants and the insured. Now the insured obtained the appellants’ assent to this contract by his concealing from them that he had previously deceived them. By applying for a renewal, instead of a new policy, he impliedly represented to them that he had previously a valid contract with them, which he knew was a false representation. He induced them by his conduct to believe in a state of facts which, to his knowledge, was not true. By the very form and terms of the receipt, he knew that they contracted with him on the assumption that he had been insured with them previously, and he, knowing the contrary, suppressed the truth from them, and that, under the circumstances, was in law equivalent to a fraudulent misrepresentation.
As to the respondents’ contention that they are protected by the mortgage clause we disposed of that at
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the hearing. That clause, as held in The Omnium Securities Co. v. The Canada Fire and Mutual Insurance Co., applies only to the subsequent acts of the insured.
The United States decisions to the contrary cannot be followed.
It is moreover doubtful, in this case, if this mortgage clause can be read into the contract between the appellants and the insured.
The first contract being invalid the mortgage clause should share its fate. However, this is immaterial in the view I take that the clause, assuming it to form part of the contract, affords no protection to the respondents in this case.
SEDGEWICK J.—I concur in the judgment of Mr. Justice Davies.
GIROUARD J.—The action arose out of a policy of fire insurance issued in the City of Montreal by the appellants in favour of one Calvin Randolph Annott on the ninth of May, 1898, for $1,500, for one year, and renewed at the end of that year, on property situated in the Village of Watford, in Ontario. The respondents held a mortgage on that property made on the seventh of May, 1898, and the loss, if any, under the policy was made payable to the respondents.
The appellants contend, among other things:
1. Prior insurance with the Perth Mutual not disclosed, and even misrepresentations in this respect in the written application for the policy;
2. The respondents are not the proper parties to sue upon the said policy; and
3. Material facts and circumstances in the risk omitted at the time of the contract of insurance set forth in the statement of defence.
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The trial judge, (Rose J.,) dismissed the action upon the first ground. But, on appeal, this judgment was reversed upon both the first and the second grounds. Without expressing any opinion upon these two points, which present serious difficulties, I think the appellants are entitled to judgment upon the third ground, namely that, at the time of the renewal, the insured had not disclosed material facts and circumstances in the risk, whether requested to do so or not.
The conditions under which the policy was issued are the “statutory conditions” contained in chapter 203 of the Revised Statutes of Ontario, 1897.
Section 167, paragraph (1) provides that contracts of fire insurance of “mercantile and manufacturing risks shall, if on the cash system,” as this risk certainly was, “be for terms not exceeding one year.” At the time of the renewal, therefore, a new contract of insurance was entered into, the renewal receipt being evidence of it instead of a policy. Section 167, paragraph (2), provides for renewal “by renewal receipt instead of a policy,” and section 168 adds that this renewed contract shall be subject to the same statutory conditions.
Section 168, paragraph 1, under the heading “statutory conditions,” declares that
if any person or persons insures his or their buildings or goods, and * * * * misrepresents or omits to communicate any circumstance which is material to be made known to the company in order to enable it to judge of the risk it undertakes, such insurance shall be of no force in respect to the property in regard to which the misrepresentation or omission is made.
The present case comes within this section of the Ontario statute. The insured obtained his policy, notwithstanding the misrepresentation in his written application that there was only one prior insurance with the Alliance for $1500, whereas there was another one for $4,000 with the Perth Mutual, which was
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“unknown to the appellants. True, he allowed this prior policy to drop during the currency of the first year, not being able to pay the premium for the same, and at the time of the second contract this objection did not exist. Probably the company cannot plead prior insurance, but can they not allege misrepresentation and omission of material facts at the time of the renewal? I think that, at that time, the insured was bound to disclose his false representation with regard to the prior insurance and also the circumstances of its surrender. These facts and circumstances, in my humble opinion, were material and should have been made known to the company at the time of the renewal in order to enable it to judge of the risk it undertook especially, as the renewal, under the statute of Ontario, is equivalent to a new and separate contract, as held by the Court of Appeal, and correctly held it seems to me. Applying, therefore, par. 1 of section 168 of the Ontario Insurance Act, I have come to the conclusion that the contract of insurance sued upon is of no force, null and void.
The appeal should, therefore, be allowed and the action dismissed with costs.
DAVIES J.—This was an action brought by the mortgagees, the above named respondents, against the insurance company (appellants), to recover the amount of a policy issued by the latter for $1,500 on a building and machinery and fixtures therein, used as a cold storage building. The insurance had been effected on the application of the owner and mortgagor, one C.R. Annott, and pursuant to a general covenant to insure contained in his mortgage. In his application, Annott had answered in reply to the questions,
What other insurance and where? Name companies and amounts? $1,500 on above property just being taken to-day in the Alliance Assurance Co.
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In answer to the further question:
State fully the applicant’s interest in the property, whether owner, mortgagee or lessee?
he had answered that he was “the owner in fee simple,” and that
the property insured was mortgaged to the Agricultural Savings and Loan Co. of London (the respondents), for $3,000.
He also stated the cash value of the property to be $7,000. At the foot of the questions answered by the applicant and forming part of his application was the following covenant or agreement which was signed by him.
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 risk of the property to be insured, so far as the same are known to the applicant and are material to the risk, and agrees and consents that the same shall be held to form the basis of the liability of the said company, and shall form part and be a condition of this insurance contract. It is further agreed between the contracting parties that if the agent of the company fill up the application he will, in that case, be the agent of the applicant and not the agent of the company.
The application also provided that loss, if any, should be made payable to the Agricultural Savings and Loan Co., of London, as their interest might appear.
The policy issued pursuant to this application was what was known as a “mercantile risk” on the cash system and by the terms of the Ontario statute governing such contracts, section 167, c. 203, was obliged to be for a term not exceeding one year.
Sub-sec. 2 of the above section provides that;
Any contract that may be made for one year or any shorter period on the premium note system, or for three years or any shorter period on the cash system may be renewed at the discretion of the board of directors by renewal receipt instead of policy on the insured paying the required premium, etc.
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The policy issued to Annott pursuant to his application made the loss, if any, under it payable to the mortgagees the respondents, and declared, following the application, that other concurrent insurance was $1,500 in the Alliance Insurance Co. The policy was, on its face, made subject to “mortgage clause thereto attached” which clause amongst other things provided that
the insurance as to the interest only of the mortgagees therein should not be invalidated by any act or neglect of the mortgagor or owner of the property insured nor by the occupation of the premises for purposes more hazardous than are permitted by this policy.
At the time this insurance was effected there was not only the concurrent insurance of $1,500 in the Alliance Insurance Company, as stated in the application of Annott, but there was also another policy of insurance on the same property outstanding in the Perth Mutual Fire Insurance Company for the sum of $4,000, and of which the applicant said nothing, which made a total of $7,000 existing insurance, if all the policies attached, or the full value of the properly, as given by Annott in his application.
This policy of the Perth Mutual, although in force at the time of the application for insurance to the appellant company, had ceased to exist, either by cancellation or by failure to pay the renewal premiums, some time before the 9th of May, 1899, on which date the receipt was issued by the appellant company to Annott in renewal of the contract and policy made and issued by them to him on the 9th of May, 1898. That receipt was as follows:
RENEWAL RECEIPT.
The Liverpool and London and Globe Insurance Company.
Receipt No. 160,389. Renewing Policy, No. 3732312.
Sum insured, $1,500. Premium, $26.25.
Received the 9th day of May, 1899, from Calvin Randolph Annott, Esq., the sum of twenty-six 25/100 dollars, being the premium for the renewal of policy above named, to the 9th day of May, nineteen
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hundred. Not valid until countersigned by the company’s authorized agent at Watford.
Countersigned at Watford, this 8th day of May, 1899.
W.E. FITZGERALD, G.F.C. SMITH,
Agent. Resident Secretary, Canada Branch.
Annott, on whose application the policy issued, left the country after the renewal receipt was issued, and in February, 1899, the property insured was destroyed by fire, and this action was brought by the respondents, the mortgagees, to whom the policy, in case of loss, was made payable in their own name alone.
The late Mr. Justice Rose, before whom the action was tried, dismissed it on the ground of the non-disclosure by the applicant, Annott, at the time he made his application, of the existence of the $4,000 insurance in the Perth Mutual Fire Insurance Company, and held that the subsequent payment of the renewal premium could not operate to validate an invalid policy.
Many other important questions were afterwards raised in the Appeal Court of Ontario, and amongst them was one challenging the right of the plaintiffs, as mortgagees, to sue in their own name on the insurance contract. The plaintiffs contended that their mortgage contained a general covenant by the mortgagor to insure for $3,000; that the policy sued on was one of those taken out by the mortgagor in compliance with his covenant and contained not only a provision making the loss, if any, under it payable to them as mortgagees, but was also issued expressly subject to what was known as the “mortgage clause” and which was attached to the policy. It was contended by them that under such a policy and mortgage clause they had a beneficial right and a beneficial interest, and that, without their consent, the insurance company and Annott could not have cancelled the policy before a loss or made accord and satis-
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faction with respect to it after a loss, and that the mortgage clause constituted a specific and independent agreement with them, apart from Annott, which entitled them to sue on the policy. On the other hand, the company submitted that the policy was under seal and the covenants and agreements to pay in it were with Annott, the applicant, and with him alone, and that, as there was no assignment of the policy, no action would lie against them on it unless Annott was, at any rate, one of the plaintiffs.
The question is one of some doubt and there are some observations made in cases already decided in this court which seem to support the appellant company’s contention, but it is not necessary for us to decide the point on this appeal. The decisions upon the point in the courts in the United States do not seem to agree as to the reason of the rule permitting mortgagees to sue in their own names nor as to the precise extent of the rule, while in England there does not appear to be any decision upon this special point. It is difficult to understand why mortgagees desirous of securing themselves collaterally by insurance upon the mortgaged property should not either have the policy assigned to them or so framed as to exclude doubts of their right to sue in their own name and without joining the mortgagor. One of the learned judges who delivered the judgment appealed from, Mr. Justice Osler, and whose reasons are stated in a similar case heard at the same time and brought by the mortgagees (appellants) against the Alliance Assurance Company, stated that in the case at bar,
The policy contained what was known as the subrogation or mortgage clause which is a contract by the company directly with the mortgagees, and in terms expressly renounces the right of the com-
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pany to set up as a defence against the mortgagees any act or neglect of the mortgagor. There was, therefore, no difficulty in holding, in that case, that neither the omission of the insured to communicate to the insurance company the existence of the policy in the Perth Mutual Insurance Company, nor the alleged change of occupation, was any answer to the action on the policy at the suit of the mortgagees whose right to sue did not rest solely upon the “loss if any” clause.
I have already stated that it is not necessary on this appeal for us to determine, and we do not determine, whether such a mortgage clause as was inserted in this policy gave the mortgagees such a beneficial right and interest or constituted such a direct contract between the mortgagees and the insurance company as would enable the former to sue in their own name alone and irrespective of Annott. But we are all of the opinion that whether there was or was not such a direct contract, it did not cover or relate to the statements or omissions made by the applicant, Annott, in his application for insurance and which were expressly made
the basis of the liability of the company, and a part and a condition of this insurance contract.
In our opinion the provision in the mortgage clause already quoted in words by me to the effect that
the insurance should not be invalidated by any act or neglect of the mortgagor or owner of the property insured, etc.
had reference to the subsequent acts or neglects of the mortgagor only and did not apply to his application for insurance or his statements or omissions therein.
The question which was argued at great length and with great ability before us, and on the true solution of which this appeal depends, was whether there was any valid contract of insurance at all existing, at the time the fire took place, with the London and Liverpool and Globe Insurance Company, and we are of the opinion that there was not.
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The application on which the contract was first entered into contained the express covenant of the applicant which I have already set out, and which was declared to form the basis of the liability of the company and a part and to be a condition of the insurance contract.
That covenant was that the answers of the applicant immediately foregoing to the questions put to him were a just, full and true exposition of all the facts and circumstances in regard to the condition, situation, value and risk of the property to be insured so far as they were known to the applicant and material to the risk. It was admitted that Annott knew of the insurance policy for $4,000 in the Perth Mutual, that he concealed the fact of its existence from the Liverpool and London and Globe Insurance Company to whom his application was being made, that the fact was a material one to be known to the insurance company to which he was applying, that its concealment sufficed to have avoided the policy issued on his application. In my judgment the truth of the representation made of these material facts was a condition precedent to the risk attaching at all. I am clearly of the opinion that there was not any binding insurance contract existing when the renewal premium was paid and the renewal receipt issued on the 9th of May, 1899. If the premises insured had been burnt during the term of the year for which the policy in this case was issued and whether before or after the Perth Mutual insurance policy was cancelled or expired, no action would have lain against the present appellants, the Liverpool and London and Globe Insurance Company, either in the name of the mortgagor, Annott, or the mortgagees, the Repondents, or in their joint names. The condition precedent to the existence of any contract on which an action could be brought had not been performed.
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Whether fraudulently or not makes no difference, the existence of the $4,000 of insurance had been suppressed. Mr. Aylesworth did not argue that any valid and binding contract existed before the renewal receipt, but simply that the contract was a voidable one and not a void one. Then, as already stated, I am of the opinion that the applicant’s covenant, already set out, making the truth of his answers to the questions put to him on matters within his knowledge and material to the risk the basis of the liability of the company and a condition of the contract, settles the question. The truthfulness of the answers is a condition precedent to the liability of the company attaching.
If any doubt remained upon the point, it would seem to me to be removed by the first statutory condition which was admittedly binding on this contract and which expressly provides that the misrepresentation or suppression of circumstances material to the risk by the applicant renders the insurance of “no force” in respect of the property in regard to which the misrepresentation or omission is made.
Then, did the acceptance of the renewal premium and the issuance by the insurance company of the renewal receipt, in ignorance of the truth of the facts which Annott had suppressed or misrepresented constitute a renewal or a new contract? The statute already quoted only pretends to give to the renewal receipt efficacy so far as there was a prior valid contract existing. It does not give and was never intended to give to the renewal receipt the effect of reviving a void contract or one which was of “no force.” The Act assumes the existence of a valid policy and points out a simple mode by which it may be renewed. But, if there was not originally a valid policy of insurance there cannot be a renewal of it.
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Nor, apart from the statute, do I think that there was any new contract, and that for the reasons already-given. The original contract or policy was of “no force” and the condition necessary to liability attaching on the part of the company never existed.
The appellants’ policy was subject to the statutory conditions.
Condition36 already referred to, provides;
If any person or persons insures his or their buildings or goods, and causes the same to be described otherwise than as they really are, to the prejudice of the company, or misrepresents or omits to communicate any circumstance which is material to be made known to the company, in order to enable it to judge of the risk it undertakes, such insurance shall be of no force in respect to the property in regard to which the misrepresentation or omission is made.
There can be no question that the knowledge of the amount of insurance already on the properly was very material to the risk and necessary to be known to the appellants “in order to enable it to judge of the risk” it was undertaking, and being withheld and misrepresented in the answers made by the applicant to the questions put to him and which answers he agreed should form the basis of the liability of the company and be a condition of the insurance contract, the risk never attached. If the risk never attached before the issuance of the renewal receipt, what was there to renew? If the original contract had been voidable merely and not void, there might have been colour for the argument that the renewal receipt issued after the Perth Mutual policy had expired operated in some way as a renewed contract. But without passing upon that, I am of opinion that once it is established that the original contract either by virtue of statutory condition36 or of the express agreement of the applicant, or of both combined, was of “no force,” and that the
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risk never attached, the mere receipt of another and subsequent premium by the company in ignorance of the material facts could not operate to instil life into that which was lifeless or give virtue to that which was, otherwise, without it. It cannot be successfully argued that the renewal receipt created a new contract not dependent upon the policy, or of which the latter did not form part. Such an agreement would, of course, be fatal to the plaintiffs’ right to sue, which, if it exists at all, must only do so by virtue of the covenant to insure in their mortgage coupled with the mortgage clause in the policy. But on its face it is apparent that no new contract was intended to be made, but that the old contract as contained in the policy and application referred to in the receipt was intended to be renewed.
The money was paid and received and the receipt given on the assumption by both parties that there was a valid existing contract which could be renewed and continued in this way. The facts when proved established that no such contract did exist. It could not, therefore, be continued, nor can it be said to be renewed either under or outside of the statute, for the plain and simple reasons that the misrepresentation or non-representation of facts material to the risk which prevented the original policy from ever attaching, would operate to prevent the law creating out of the payment of the premium a new contract based upon the old one which in law did not exist.
I think the appeal should be allowed with costs.
MILLS J.—I concur in the above judgment of Mr. Justice Davies.
Appeal allowed with costs.
Solicitors for the appellants: Hoskin, Ogden & Hoskin.
Solicitors for the respondents: Bayly & Bayly.
R.S.O. [1897] ch. 203, secs. 168, 170.
43 U.C.Q.B. 556; 4 Ont App. R. 330.
29 O.R. 377; 26 Ont. App. R. 173.
22 O.R. 529; 20 Ont. App. R. 605.
R.S.O. [1897] ch. 203, s. 168.
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