Westchester Fire Insurance v. Weaver

Stone, J., delivered the opinion of the Court. This is an action brought on a policy of insurance, against loss by fire. The loss was duly proved, but the company, among others, set up the defence, that the property, which was exclusively personal, was covered by a mortgage. The policy contained a covenant that the policy should become void, unless consent in writing, should be endorsed on the policy by the company, in the following instance: “If the assured is not the sole and unconditional owner of the property, * * * or if the interest Of the assured in the property, whether as owner, trustee, consignee, factor, agent, mortgagee, lessee, or otherwise is not truly stated in this policy.” The .'company contends that, as no disclosure was made to the company that the property was encumbered ⁵³⁹ by a mortgage, and no written consent endorsed on the policy that it was insured although mortgaged, that by the terms of the policy the company is not liable.

There is no doubt that, if the only condition in the policy was that the assured was the “sole and unconditional owner of the property,” the policy would not be held void, if it turned out that it was encumbered by a mortgage. This point is clearly covered by the decisions in Washington Fire Ins. Co. and Atlantic Fire and Marine Ins. Co. vs. Kelly, 32 Md., 421 , and the case of Clay Fire & Marine Stock Ins.

Co. vs. Beck & Bolte, 43 Md., 358 ; and the question that we have to decide is, whether the additional words used in this policy, to wit “if the interest of the assured in the property, whether as owner, trustee, consignee, factor, agent, mortgagee, lessee, or otherwise, is not truly stated in this policy,” will apply to the case of a mortgagor. In the warranty of the assured he stated that he has not “omitted to state to this company any information material to the risk.” Contracts of insurance, as this Court said in Kelly’s Case, are to he construed as other contracts. The law presumes that the parties'understand the contract they make, and every intelligible condition was inserted by design, and was intended to accomplish some purpose. The Court also repudiates the principle of interpretation adopted in some cases, that such contracts are to be construed most strongly against the underwriter, but adopts the sounder rule that the intention of the parties, as gathered from the whole instrument, must prevail.

The terms of this policy are more comprehensive than the terms used in either Kelly’s Case, or.the case in 43 Md. After reciting that if the assured is not the sole and unconditional owner of the property, or if the interest of the assured, whether as owner, agent, &c., or ⁵⁴⁰ otherwise, is not truly stated, the policy shall he void. All these qualified interests in property are insurable. But it is important to the company that a full and true disclosure of the condition of the property should he made, as upon it, the amount of the risk and the premium maj’' depend. In Bowman vs. Franklin Fire Ins.

Co., 40 Md., 620 , the Court uses this language: “If the property to he insured is encumbered by judgments, mortgages, or liens for unpaid purchase money, it is always of importance for the insurance company to he informed of the fact, as upon the existence, or non-existence of real interest and motive on the part of the insured to protect and preserve the property, the premium for insurance may justly he regulated;” and so in Columbian Ins. Co. vs. Lawrence, 2 Peters, 49 , Judge Marshall said: “The extent of this interest (the assured's) must always influence the underwriter in taking or rejecting the risk, and in estimating the premium. * * * * Underwriters do not rely so much upon the principles as on the interest of the assured ; and it Avould seem, therefore, to be always material that they should know how far this interest is engaged in guarding the property from loss.” It is evident that incumbrances upon the property may influence the underwriter in taking the risk, and fixing the premium, and may justlj form an important covenant in the policy, aird is material to the risk. Now the assured expressly covenanted that he had not omitted to state to the company, any information material to the risk. If such statement is material, then the assured has not complied with his express covenant.

In Kelly’s Case the Court said that the nature of the interest of the assured, in cases of ordinary- contracts of insurance, is immaterial to the risk, and an omission to state the nature and extent of his interest, where no ⁵⁴¹ inquiry has been made on the subject, and it is not exacted by conditions, will not avoid the policy, unless the failure so to state would operate as an actual fraud. But the Court also said, that in that case “there were no written proposals, and no specific inquiry as to title or interest.” But in this case there is an express statement that the assured has omitted no statement, material to the risk. If the property insured had been