The Ætna Fire Insurance Company vs. Tyler, 16 Wend. 385

The following opinion was delivered : By the Chancellor. There is no misdescription in this case of the subject of insurance in the policy. Neither was there any misrepresentation or concealment of any fact on the part of the assured, which was all material to the risk, in the application for the insurance ; and the jury have negatived all pretence of fraud on the part of Tyler, in not disclosing the true state of his title.

It is a fact of public notoriety that a great portion of the property in the eighth senate district, and much in every other part of the state, is held by those who are considered the real owners thereof for most purposes, under contracts, without having paid the whole purchase money, and obtained legal conveyances; and this court certainly cannot presume that the officers of this or any other insurance company in the state are igno» rant 0f ^¡g faot) or that they considered the fact as in any way material to the risk.

If they considered it material that the state of the legal title should be disclosed they would, in their notices to the public specifying the information required from country applicants, have inserted this as a necessary part of that information. Yet this is not required in any conditions which I have seen except in the case of mutual insurance companies, where the true state of the title is material to enable the officers of the company to judge of the security which the insured premises will afford for the payment of the premium note, if an assessment should become necessary.

It is also a fact of public notoriety, that in comfkmon parlance the person who is in possession of real proIperty as owner, under a valid and subsisting contract for the purchase thereof, whether he has paid the whole of the purchase money, and.gotten the legal title or not, is called the owner thereof, and the property is usually called his by others. equity it is, in fact, his ; and the vendor has only a lien thereon for the security of his unpaid purchase money; and I am yet to learn that the person who is in the actual possession of property as the real owner thereof in equity, and who must sustain the whole loss thereof primarily in case of its destruction by the perils insured against, cannot insure it as owner, unless there is something in the terms of the policy, or in the conditions referred to therein, requiring the true state of the legal title to be disclosed.

See 10 Pickering’s Reports, 40, 542. The assured in this case had also an insurable interest to the full value of the dwelling-house described in the policy ; and the liability of the underwriters to him was neither diminished nor impaired by the previous policy which the person from whom he purchased had obtained from another company. To constitute a double insurance, both policies must be upon the same insurable interest, either in the name of the owner of that interest, or in the name of some other person for' his benefit.

In this case Tyler could not claim any benefit under the policy of Shafer, as it ha"d not been assigned to him with the assent of the underwriters therein at the time of the loss. It could not, therefore, in any event protect him against any portion of the loss he might sustain, by the destruction of the house insured, or prevent his liability for the payment of the whole of the purchase money due on his contract. Policies against fire are personal contracts with the assured ; and they do not pass to an assignee or purchaser of the property insured without the consent of the underwriters. Lynch v. Dayrell, 3 Bro.

P. C. 497. The Sadlers’ Company v. Badcock, 2 Atk. 554. If the assured, therefore, sells the property and parts with all his interest therein before the loss happens there is an end of the policy unless it is assigned to the purchaser with the assent of the company; or if he retains but a partial interest in the property, it will only protect such insurable interest as he had in the property at the time of the loss.

In the present case all the insurable interest which Shafer had in the property after his sale to Tyler, was the amount of his unpaid purchase money, so far as the land upon which the house stood was insufficient to" protect him from loss; and provided the purchaser was unable to pay the same. Even a recovery by Shafer from the other company, would not protect Tyler from any part of the loss sustained by the destruction of the building, as he would still be liable for the whole amount of the purchase money.

Shafer, indeed, could not recover that money and retain it for his own benefit, after he had been paid by his underwriters; but it could be collected in his name for the benefit of such underwriters, as they are in equity entitled to all his rights and remedies if they pay the amount of his loss.

This principle of equitable subrogation or substitution of the underwriters in the place of the assured, is recognized by every writer on the subject of insurance, and is constantly acted upon in courts of law as well as in equity ; so that where the assured has any claim to indemnity for his loss against a third person who is primarily liable for the same, if the assured discharges such third person from his liability before the payment of the loss by the underwriters, he discharges his claim against them for such loss, pro tanto.

Or if he obtains payment from such third person afterwards, it is in the nature of sa]vage) which he holds as trustee for the underwriters who had paid his loss. Thus, in the case of Grade v. The New-York Insurance Company, 8 Johns.

R. 246, where the assured recovered to the full amount of the policy upon a condemnation of the vessel and cargo under the Berlin and Milan decrees, although there was no abandonment of the spes recuperandi against the French government, Chief Justice Kent says that if France should at any time hereafter make compensation for the capture and condemnation, the United States upon the receipt of the money, would hold it as trustee for the party having the equitable interest therein; and that would clearly be the underwriter. So, in the case of Godsall v.

Bolders, 9 East R. 72, which was the case of an insurance by a creditor upon the life of 1 Mr. Pitt, the British minister, who died insolvent, and the government afterwards granted a sum of money to the executors to pay the debts, the court of King’s bench held that the underwriters were entitled to the benefit of the payment made to the creditor by the executors, although there was an actual total loss before the grant by the government to pay the late premier’s debts. So, in the case of Mason v.

Sainshury, referred to as a manuscript case by Marshall in his treatise on Insurance, 2 Condy’s Marsh. 794, and which is recognized as good law in the recent case of Clark v. The Inhabitants of Blything, in the court of King’s bench, the assured, who had received his whole demand from the underwriters for the loss sustained by a fire, was permitted to recover the same from the inhabitants of the hundred who were also liable to him upon the statute.; or rather the underwriters were permitted to recover the same in his name, the suit being prosecuted for their benefit.

The same principle as to the equitable right of the insurer to be subrogated to all the rights and remedies of the assured to obtain compensation for his loss from other persons, was acted upon by the vice-chancellor of the first circuit in the recent case of The Atlantic Insurance Company v.

Storrow and others, where an attempt was made, by the master and owners of the vessel who were primarily liable for a loss of goods by thieves, to throw the loss upon the underwriters, and to deprive them of their remedy over against those who were liable to the assured to make good his loss ; and the decision of the vice-chancellor in that case was affirmed upon appeal. See 5 Paige’s R. 285.

The rule on this subject is thus correctly laid down by Phillipps in his valuable treatise on the law of insurance, which has become a text book in the American courts: “ Where the insurable interest consists of a debt due to the assured, as in the case of advances made by a consignee, or a policy on the life of the debtor, the assured is bound, no doubt, to assign to the underwriters his debt or his insurable interest,- whatever it may be, in case of his being paid a total loss.” 2 Phil, on Ins. 282.

It is evident, therefore, in the case under consideration, that the two insurances, after the sale and when the last insurance was made, were upon two distinct and separate interests. The subject matters thereof were different : the one being upon Tyler’s debt to Shafer, which might be lost by the destruction of the house if the vendee was unable to pay, and the other upon the actual loss of the house.

The loss of the house must fall upon the holder of the last policy, in any event, as the underwriters in the first policy will be entitled to an assignment of Tyler’s contract to pay the purchase money, and may collect the full amount thereof from him if they shall pay to Shafer the full amount of his debt. I am satisfied from this view of the rights of the different parties that there was no prior insurance, within the meaning of the policy, of which the assured was bound to give notice, or which could be resorted to by him to obtain satisfaction for part of his loss.

The clauses in the policy and in the conditions annexed to the same on the same subject, unquestionably were intended to mean the same thing; and if they differ in any respect, the policy itself must be resorted to to explain the meaning; as it would then be a case which would be specially provided for in the policy, otherwise than in the conditions annexed.

The language of the policy is sufficiently broad to cover any previous insurance on the property in which Tyler had an interest, or which could protect him as the purchaser of the property, provided the previ0ug policy had been assigned to him at the time of his purchase, with the assent of the other company.

The terms 0f the condition are, “if the assured shall have already any other insurance against loss by fire on the property hereby insured,” &c. evidently intending to cover not only insurances made by the assured and in his own name, but any others which he had, either in the name of another or by assignment for his benefit.

But no one can suppose for a moment that these underwriters intended to bé so unreasonable as to require a person insuring with them, under the penalty of a forefeiture of his policy, to give notice of every insurance which any former owner of the property might have made thereon, although he had no interest in that insurance, and the rights of the company could not in any way be affected thereby ; that if there was any such insurance, even in those cases where the fact was notified to the underwriters, the person insured with them should only recover a part of his loss from them, although he had no interest in and could not be benefitted by the other insurance.

To suppose the underwriters intended that such a construction should be given to this part of the policy, would be to suppose that they intended to entrap those who insured with them.

The plain and obvious meaning of the whole clause is, that if the assured has any other policy or insurance upon the property, by assignment or otherwise, by which the interest intended to be insured is already either wholly or partially protected, he shall disclose that fact and have it endorsed on the policy, or the insurance shall be void ; and the same where he shall make any subsequent insurance; also, that in case of any such prior or subsequent insurance, although it is notified to the company and endorsed on the policy, the underwriters in the two policies shall contribute rateably to his loss, so that in no event he can recover more than the amount of his actual loss.

I am satisfied, therefore, that the policy was valid; that the assured had an insurable interest to the value of the house which was burned ; and as the jury have found that value to be the whole amount underwritten in the policy, he was entitled to recover that amount, with the interest thereon after the sixty days, if the condition as to the proof of loss, &c. has been complied with by him according to the terms of the policy, or has been waived by the underwriters.

The certificate of the magistrate was a part of the preliminary proofs as to the nature, circumstances and extent of the loss which, by the express terms of the policy, the underwriters had a right to insist upon before any action could be sustained for such loss; but the production of this document, as well as any other part of the preliminary proofs of loss and interest, might be waived by the company.

The law is well settled in this state, that if there is a formal defect in the preliminary proofs, required by the policy or the custom of the place, and which could probably have been supplied, had any objection been made by the underwriters to the payment of the loss on that ground, if the insurers do not call for the document, or make an objection on the ground of its absence or imperfection, but put their refusal to pay distinctly on some other ground, the production of such further preliminary proof will be considered as waived. Vos v. Robinson, 9 Johns. R. 192. Ocean Insurance Company v.

Francis, 1 Wendell, 64. Curry v. Commercial Insurance Co., 10 Pick. 536. I am aware that the supreme court of the United States thought differently on this question, when the case of The Columbian Ins. Co. v. Lawrence, 2 Peters, 25, was first before that court, and that it was held that the court below had improperly submitted the question of waiver to the jury upon the facts proved.

The subsequent history of that case, however, shows the good sense of the rule as established in our own courts ; for it appears that as soon as this decision of the supreme court was known, the assured procured a new certificate from the justice, in which the formal defects in the first were obviated, and which the same court afterwards held to have been procured intime, and to be a compliance with the terms of the contract requiring the certificate, &c. to be produced before the loss should be payable; and that it was procured within a reasonable time, under the circumstances of that case, although more than five years-had elapsed after the destruction of. the property before such new certificate was procured.

See 10 Peters, 507. on®y e®3Ct the original decision, therefore, was ter turn the assured around to a new action, after such a lapse 0f time, upon an objection which was not probably thought of by either party at the time when the claim was originally made, and the preliminary proofs- exhibited ; and which objection might have been immediately obviated, if it had been suggested by the officers or agents of the company, or if they had thought proper to- - pul their refusal to pay, either upon that ground alone, or. upon that in connection with others which went to the merits of the claim.

Good faith on the part of the underwriters, in such a case, requires that, if they mean to insist upon a mere formal defect of this kind in the preliminary proofs, they should apprise the* assured that they consider the same defective in that particular, or to put their refusal to pay upon that ground as well as others, so as to give him an opportunity to supply the defect before it should be too late; and if t-hey neglect to do so, their silence should be held a waiver of such defect in the preliminary proofs, so that the same shall be considered as having been duly made according to the conditions of the policy. .The difficulty in the present case on this subject, however, is, that the question of waiver was not raised at the circuit, so as to give the underwriters an opportunity of showing that they had in fact insisted upon the want of a proper certificate as a necessary part o-f the preliminary proofs; the court having decided that the certificate produced was such a one as the condition of the policy, required, which of course precluded all consideration of the question of waiver.

Although the underwriters, if they make the objection ib time, have a right to insist upon- the production of such a certificate as is specified in the conditions of the policy and from the proper person, before they shall be liable for the payment of the loss, I do not understand the rule to be so strict as to render it necessary that such-certificate should be in the precise words mentioned in the policy, provided it is so drawn as evidently to mean the same thing.

Even in the case of a warranty in ' a policy although the language of -the judges in many cases has been that it must be literally complied with, it has been held that a warranty to sail on a particular day was complied with, although the wind blew so that a sail could not be raised, and the master knew it was impossible to get the vessel to sea on that day, by his merely warping the vessel a little further down the river for the bona fide purpose of starting on the voyage insured, and putting the vessel in a •better situation to .proceed on her voyage to the port of destination as soon as the wind would permit her to go to sea.

Cockrane v. Fisher, 2 Cromp. & Mees. R. 581. This -decision was afterwards affirmed upon a writ of error to the exchequer chamber; the court, holding that a literal compliance with the warranty to sail on that day, was not necessary if the vessel was, bona fide and in fact, started upon her voyage by warping her down the river upon the day specified in the warranty.. 5 Tyrwhitt’s R. 496.

If 1 could be satisfied, therefore, in -this ease, that the justice meant to certify that he verily believed the assured had sustained damage or .loss by the destruction of the dwelling-house insured, to the amount of twenty- five hundred dollars, or any -other specific sum, as stated in Tyler’s affidavit or certificate, I should have no difficulty in concurring in opinion with the court below that the preliminary proofs were sufficient, and that the judgment should be affirmed.

But when I look at the peculiar terms in which the justice’s certificate is framed, and then advert to the fact that the whole of the buildings insured, and not insured, together with the land itself, were sold but a few months before for a much less sum, I cannot bring my mind to the conclusion that Groves meant to certify that he believed Tyler’s loss upon the dwelling-house alone, which was the only property included in the policy, was worth about $2500 as stated in the affidavit of the latter.

The condition of the policy is not that the magistrate shall state that he believes the assured has sustained damage or loss to the amount mentioned in the affidavit of the latter. The meaning unquestionably is that the certificate shall specify the sum which the magistrate believes the assured has sustained by the destruction or partial destruction of the subject insured.

If he believed, therefore, that the loss by the burning of the house, exclussive of tlie furniture, was less than the sum at which the assured had estimated it in his affidavit, it would have been a compliance with -the terms of the policy if he had stated what he believed the real amount of that loss to be, although it was not, in his .opinion, so great as that at which Tyler himself had stated it.

Although the amount therein mentioned, in the conditions annexed to the policy, evidently means the amount mentioned in the certificate of the magistrate, I have no doubt the certificate would be sufficient if the fair construction of it was that he believed he had sustained damage or loss by the destruction of the subject of insurance to the amount specified by the assured in his affidavit annexed, as that in effect would be a specification of the amount in .the certificate of the magistrate by reference to the affidavit to which it was annexed.

But as I am unable to give such a construction to the language of the certificate in this case, I am compelled, upon this point alone, to vote for a reversal of the judgment of the court below. If other members of the court,, however, are capable of giving to the Certificate the meaning which the counsel for the defendant in error insist it ought to bear, there is very little danger that injustice will be done to the underwriters; as the jury have decided that the loss actually sustained by Tyler upon the property insured was equal to the whole amount of the risk assured by these underwriters.

On the question being put. Shall this judgment he reversed? The members of the court voted as follows : In the affirmative—The Chancellor and Senators Edwards, Hubbard and Tracy—4. In the negative—The President of the Senate, and Senators Armstrong, J. Beardsley, L. Beardsley, Beck-with, Griffin, Downing, Fox, Gansevoort. Huntington, H. F. Jones, J. P. Jones, Lacey. Lawyer. Loomis, Lounsberry, Mack, Maisqn, Powers, Wager, Willes—21. Whereupon the judgment of the supreme court was affirmed.