CHAPTER VII.

OF MISREPRESENTATION AND CONCEALMENT.

I. Of Misrepresentation.

When a warranty is inserted in a policy, it forms an express condition, and must be expressly complied with. A representation, on the other hand, not embodied in the policy, will not vitiate it, although erroneous, if it be fairly and substantially true, and does not prejudice the insurers. Farmer's Ins. & Loan Co. v. Snyder, 16 Wend. 481.

Where there is a condition precedent on a warranty in a policy of insurance, it is of no consequence whether the thing waranted, or to be perform ed, is material to the risk or not, if not performed. The defendant has a right to say non in haec in fœdere veni. Sutherland, J. in 12 Wend. 460; Fowler v. Etna F. Ins. Co. 6 Cow, 673; Duncan v. The Sun F. Ins. Co. 6 Wend. 488; 7 Cowen, 649; Cornell v. Le Roy, 9 Wend. 163 and cases cited; 19 J. R. 72; 6 Cowen, 624.

The legal and commercial meaning of the term misrepresentation as used in the condition of a fire policy, which declares that if any person insuring a building or goods shall make any misrepresentation or concealment &c., the insurance shall be void, is, that it must be a misrepresentation of a matter material to the risk, either designed or otherwise. Per chancellor in Farmer's

Ins. & Loan Co. v. Snyder, 16 Wend. 480, 488.

In New York, fire insurance companies make a general classification of hazards in reference to the materials and construction of the buildings insured, or in which the subject matter of the insurance is deposited or kept, and in reference to their location and the manner in which they are occupied, and their rates of premium are usually regulated accordingly. A false or mistaken representation, therefore, from which the underwriters might be induced to suppose that the risk belonged to a lower instead of a higher class of hazards, would, if caused by the fraud or even mistake of the assured or his agents, be sufficient to avoid the policy, ib. But in reference to all matters of minor importance, such as whether the building is a few feet more or less from an adjacent building, or whether the rooms, partitions, stair cases, &c. are precisely as stated by the party insured, it must always be a mere question of fact to be determined by the jury whether the misrepresentation be fraudulent or materially varied the nature of the risk, to the prejudice of the insurer; unless the underwriter thinks proper to put it in the shape of a warranty, and thus make it a part of the contract that the assured shall not be paid his loss if there be any, even an unessential variance from the description of the property or its location as to the buildings, &c. ib.

In Macmoran & Co. v. Newcastle F. Ins. Co. 3 Dow. 255, the policy was in these terms :- "Whereas Mr. Hugh M'Moran & Co., &c., have paid the sum of 21l. 5s. 8d. to the society of the Newcastle-upon-Tyne Fire Office; and do agree to pay, or cause to be paid, to the said society, at their office in Newcastle-upon-Tyne, the sum of 171. 17s. on the 24th day of June, 1806, and the like sum of 177. 17s. yearly, on the 24th day of June, during the continuance of this policy, as a premium for the insurance from loss or damage by fire, of £50 on mill-wright's work, including all the standing and going gear in their mill, which is used as a cotton and woolen mill, situated at Garschew, being in their own occupation only, and stone built and slated; £550 on cloth-maker's work, carding and breaking machines, and all moveable utensils in the first floor, occupied as a woolen mill; and £350 on stock of wool in the same:" then followed this very material passage, "warranted that the above mill is conformable to the first class of cotton and woolen rates delivered herewith."

"But that case observes Ch. J. Jones (2 Hall 614, 615,) which so fully carries out the principle of a literal and strict compliance with a warranty, in no respect relaxes, but in effect confirms the rule, that a representation or assurance, to impress it with the character of a warranty, must be incorporated in the contract, and compose part of the agreement between the parties.

"The warranty upon which the decision of the court turned, was embodied in the policy, and constituted part of the contract. No recurrence was had to extrinsic evidence, or to any collateral document or writing to establish it. The printed proposals to which the policy refers, as delivered with it, was not resorted to or used as proof of the warranty, but as an item of evidence, to show the mere compliance of the warrantor with his engagement, by showing that the mill was not of the class to which it was warranted, by the policy, to belong. It was because the assured had permitted the mill to be represented in the policy, as being conformable to the first class of cotton and woolen rates, and had accepted the contract with that condition in it, that he was held bound to establish the fact without regard to its materiality, and disabled by his own compliance with the condition, notwithstanding the extenuating matters shown in excuse of his failure from enforcing his contract against the company."

In the case of Delonguemare v. The Tradesman's Ins. Co. 2 Hall, 589, a description of the room in question, as a store room for painted ware, was contained in the application for insurance, or in the report or survey made upon the buildings insured; but it did not appear in the policy itself, nor was the report or survey, or the application containing it annexed to the policy. It was, therefore, held not to be a warranty; but that it might on the general principles of insurance, taken to be a representation; and, considered in that light, if material and falsified, it would vitiate the insurance. Jones, C. J. observes (p. 611):-"This brings us to the next branch of the defense, which is, that if the description of the building was not a warranty, it was a representation, and the room in question being represented as a room for the storage or deposite of finished painted ware, and not being so occupied at the time

of effecting the insurance, but then being used as a carpenter's shop, and that fact not being communicated to the insurers, there was a material misrepresentation or concealment, and the policy, for that reason, did not attach, and the Judge should, for that cause, have nonsuited the plaintiff.

"It is conceded that a representation, if it be not fraudulent, and does not tend to increase the risk of the insurer, will not avoid the policy, but that it will be sufficient to comply with it in substance, or to show that it has not been departed from, to the material injury of the insurers. I assume that the plaintiff did represent the room, on the smaller plan or survey, which I take to be his application for insurance, as intended for a store room for the reception of the painted ware when finished, and I assume, that this representation, whether the plan in which it appeared was the application for insurance, or a survey of the building, was before the insurers when they took the risk, and may have entered into their estimate of the rate of premium. And the question on these assumptions will be, whether the occupancy of that room by the carpenter, with his materials and tools, as disclosed by the evidence, did materially falsify the representation and increase the risk of the insurers? The proof of its materiality was upon the underwriters, who make the defense. I discover no evidence in the case of the point; and the failure of proof is decisive against the objection. The risk incurred, by the occupancy of that part of the building by the carpenter, if it in reality did enhance the risk, was susceptible of proof, and it was indispensably necessary to show it, in order to render the defense available. Unless, therefore, the necessity of extrinsic and oral proof of this fact was superseded, or the absence of such proof was supplied by the internal evidence deducible from the policy, or its accompanying conditions of insurance, this ground of defense cannot prevail.

And Mr. J. Oakley in the same case observes: "The general question arising on this bill of exceptions, is whether a description filed in the office of an insurance company, and referred to in the policy, in general terms, as a report of the situation of the premises insured, is to be considered as incorporated in the policy, and as constituting a strict warranty. If so, it follows, from the established doctrine on the subject of warranties, that any variation, in the actual situation of the premises, from the description, renders the policy void, though it be immaterial, or the mere result of accident or mistake.

"Assuming that the same rules of construction are to be applied to fire, as to marine policies, in determining what shall constitute a warranty, and what shall be a representation merely, the general principle seems to be well settled, that an express warranty must appear on the face of the policy, and that any instructions for insurance, unless inserted in the instrument itself, do not amount to a warranty. (1 Con. Marsh. 349. 451. Pawson v. Watson, Cowp. 785. 2 Caines, 142. 3 Kent's Com. 235.) Thus it has been held, that a paper wrapped up in the policy, when presented to the underwriters, or annexed to it by a wafer, does not constitute a warranty; (Doug. 11, notis ;) and Phillips, in his Treatise on Insurance, (p. 125,) qualifies the general rule, by saying that a warranty may be contained in documents, expressly referred to in the policy, and so made a part of it

"This qualification, or rather extension of the rule, rests upon the cases of Routledge v. Burrell, (1 H. B. 254,) and Worsley v. Wood, (6 T. R. 210.) On referring to these cases, it will be found, that the policies, on their face, contained an express stipulation that the insurers were to be liable, according to the exact terms of their printed proposals. It was necessary, therefore, to resort to those proposals, to ascertain the terms of the contract, and, without such reference, the contract itself would be unintelligible. In such a case, no doubt the proposals, thus referred to, may be considered as incorporated in the policy, and as making part of it.

"But these cases certainly do not establish the rule, that every paper or document referred to in the policy, is to be considered as incorporated in it When the policy itself contains a full and intelligible description of the subject matter insured, it is not necessary to look out of it, to ascertain the meaning of the contracting parties. The insurers having a description of the property in their possession, are presumed to insert in the policy itself, as much of that description as they deem material, and by omitting any part of it, they show that they are content to take such part as a representation merely, and to look to it only, for the purpose of estimating the risks. (1 Con. Marsh. 451.)

"In reference to the case now before us, it seems to me that we cannot hold the description, as generally referred to in the present policy, to be a warranty, without violating the plain spirit and intent of the contract. The first condition annexed to the policy, provides that applications for insurance on property out of the city of New York, must be in writing, and contain a description of it, and that if any person shall describe the same, otherwise than as it really is, so that it be insured at less than the rate of premium specified in the printed proposals of the company, the insurance shall be void.

"Here is an express declaration of the object and effect of a representation or description of the subject insured. It is to enable the company to judge of the character of the risk, and any mistake or inaccuracy in it, is evidently considered as not affecting the contract, if it be not material. It is clear, that such a representation cannot be converted into a warranty by a mere reference to it, in the body of the policy, without entirely losing sight of the object for which it is required by the company to be made. Every policy contains such a general reference. It is a part of the printed clause of the instrument, and could never have been intended to convert into an express warranty, with all its legal consequences, a document which the company required to be furnished only as a representation.

"As it respects insurances in this city, it is the known practice of the insurance companies, to employ their own surveyors or agents, to examine the situation of the property to be insured, and to make a report of it. That report is always filed, and referred to in general terms in the policy. Where the report or representation is thus the act of the insurers, it would be against all reason and justice to give it the legal effect of a technical warranty. "It could not be considered even as the representation of the insured, for the insurers act upon their own knowledge of the facts, upon which the risk is to be estimated.

"It appears to me, from these considerations, that it will accord-best with the interest of the parties to these fire policies, to consider nothing as a warranty in any sense, unless it is spread in express terms on the face of the instrument. This is a plain and simple rule, and does not conflict with any established principle of law on the subject of insurance. I am of opinion, therefore, that there was no error in the present case, on the part of the Judge, in charging the jury, that the plan or map of the premises insured, referred to in the policy, as a report on file in the office of the Eagle Company, was not a warranty, and that any variation between that plan and the actual situation of the buildings described in it, could not affect the contract of the parties, unless such variance should be deemed material in the estimation of the risk.

"But it is contended by the defendants, that the actual situation of the buildings, at the time of the insurance, was misrepresented by the plaintiff. That they were represented and insured as finished, while the evidence shows that they were unfinished.

"That the buildings insured were represented as finished, I think is very evident. They are stated as" buildings occupied" in a particular manner; a specific estimate of the value of each is made, and there is no where any intimation, that they were otherwise than finished. On looking at the survey of the buildings, as filed in the office of the Eagle Company, (to which the policy refers,) we find nothing to qualify the inference to be drawn from the general terms of the policy. In the survey, the buildings are spoken of as actually in use, and the appropriation of each is specified. The material inquiry then is, were the buildings in question finished on the 9th of January, 1827, the date of the policy?

"The evidence on this point is certainly contradictory and uncertain; yet upon a careful examination of it, I am satisfied that the decided weight of the proof is, that the building insured were substantially finished at the time of the insurance. Cowly, a witness called by the defendants, and Orr, called by the plaintiff, concur in stating that that they were completed at that time, and that all the carpenters' work done to the buildings, afterwards, consisted in hanging some doors, which had been left unhung, at the request of Orr. There was not then, in fact, any misrepresentation as to the state of the buildings, at the time of the insurance.

2. Concealment of material facts.

It has been adopted as a rule, that not only a misrepresentation, but even a concealment of circumstances within the knowledge of the insured, or his agents, which are calculated to enable the insurers to form a due estimate of the risk, will vitiate a policy. But the rule is limited to matters which lie within the private knowledge of the insured, for either party may be innocently silent on facts which the other knows or ought to know, and upon which he may exercise his own judgment. Hughes Amer. ed. 265, 266. The rule on this subject is very broad. "Every fact and circumstance which can