Case Name: Lorillard Fire Insurance Company v. Lucius S. McCulloch
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1871-12
Citations: 21 Ohio St. 176
Docket Number: 
Parties: Lorillard Fire Insurance Company v. Lucius S. McCulloch.
Judges: Scott, C. J., and White, Day and McIlvaine, JJ., concurred.
Reporter: Ohio State Reports, New Service
Volume: 21
Pages: 176–180

Head Matter:
Lorillard Fire Insurance Company v. Lucius S. McCulloch.
1. Where a policy of insurance is issued upon a written application containing questions which are left unanswered by the applicant, the underwriter thereby waives the answers to such questions.
2. A party in possession of real estate under a contract of purchase, having' paid only part of the purchase money therefor, has an insurable interest in. the property.
3. A party having such interest and possession, in his written application for insurance on the property, answered questions propounded in the application, as follows : Question — “ Is the property owned and operated by the-applicant ? ” Answer — " Xes.” Question — " Is any other person interested in the property ? If so, state the interest.” Answer — "No.” Question— "Incumbrance — Isthere any on the property?” Answer — “Feld by contract.” JKetil, that the answers were substantially true, and that there was no breach of warranty in that respect which would avoid the policy.
Error to the district court of Cuyahoga county.
The original action was brought by the defendant in. error against the plaintiff in error, upon a policy of insurance executed by the latter to the former. The defence set up was that McCulloch, the party assured, had, in his written application for the policy, made false representations, or a false warranty, as to his interest in the property insured. ,
The property was a building, with machinery therein, situate upon a lot in Berea, which McCulloch had lately purchased of the owner, but for which he had received no conveyance. He had purchased the property at $2,000, and had paid but $500, the remaining $1,500 not being due. He was in possession, and held the vendor’s written contract, for a deed, to be executed when the purchase money should be paid.
By the terms of the policy the written application of the assured was made a part of the policy. The form of application contained various questions to be answered, by the applicant, and, among others, the following : (1.) “Is the pro perty owned and operated by the applicant ? ” (2.) “ Is any other person interested in the property ? If so, state the interest.” (3.) “ Incumbrance — Is there any on the property ? If mortgaged, state to whom ; is there any insurance by the mortgagee ? ” To the first of these questions the applicant answered “ Yes ; ” to the second he answered “No;” and to the third his answer was, “Held by contract.” Immediately following the questions and answers is this provision:
“ 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 and value of the property to be insured, as far as the same are known to the applicant, and material to the risk; and the same is hereby made a condition of the insurance and warranty on the part of the-insured.”
Upon these facts the court of common pleas held that the policy was avoided by the false representations, or false warranty, contained in the application, and gave judgment for the company. The district court, upon a petition in error filed by McCulloch, reversed this judgment; and now, to reverse the judgment of the district court, a petition in error is filed here.
E. Somers for plaintiff in error :
1. The insured did not make a full and true exposition of the facts and circumstances in regard to the condition of the property to be insured, in reply to the specific inquiries of the insurer. Phil. Ins. secs. 542-546 ; Wilson v. Conway Ins. Co. 4 R. I. 141, 142 ; 11 Ohio St. 477 and authorities there cited ; Ripley v. Ætna Ins. Co. 30 N. Y. 136.
2. The insured misrepresented his interest in the risk to be assumed, by representing himself to be the owner of the property to be insured, and that no other person was interested in it, thus violating the covenant in the application, as well as the conditions of the policy. Phil. Ins. sec. 592 ; Reynolds v. State Mut. Ins. Co. 2 Grant, 326 ; Brown v. Williams and Thomaston Ins. Co. 28 Maine, 254 ; 2 Pet. 25 ; Chase v. Hamilton Mut. Ins. Co. 22 Barb. 527 ; 1 Phil. Ins. secs. 754, 755, 762 ; Aug. on Ins. p. 184, § 140, p. 187, § 142 : Wood v. Hartford Ins. Co. 13 Conn. 533; Wall v. East River &c. Mut. Ins. Co. 3 Seld. 370 ; Mead v. Northwest Ins. Co. 3 Seld. 553 ; Protection Ins. Co. v. Harmer, 2 Ohio St. 463 ; Flanders on Ins. p. 204.
3. The vendor, who contracted to convey to the insured, had a lien on or interest in the property equal to the consideration money unpaid ; and so it was not true that no person other than the insured had an interest in the property.
G. M. Barter and 8- J. Andrews for defendants in error:
The insured was the owner of the property. He had bought and paid for it, and was in possession under his purchase. He had paid part in money and the remainder in his agreement to pay, and the vendor held the legal title as security for the payment of the unpaid portion of the purchase money ; and this state of facts is fully disclosed in the answers given.
The questions and answers taken together do not, when properly interpreted, mean that he held the property by a paid up contract. As to incumbrance, the answer that he 11 held ty contract,” is an express statement that the contract .is an incumbrance. 2 Greenl. Ev. 242 ; 4 Mass. 630 ; 2 Greenl. 22 ; 22 Pick. 447. The answer thus given is not very full, it is true, but it discloses the fact that there was •an incumbrance; and if the company saw fit to make the .policy without making any further inquiry, they cannot now ■complain.
“ Is any other person interested in the property ? If so, ■state the interest.” Answer — “ No.” This question and answer are to be taken and construed in connection with all ■the others. Thus taken and construed, the meaning is, that .as to the ownership held by him, it is held by contract, •which is an incumbrance, and no other person is interested. The answer was true.
It was the right of the insurance company to refuse to write the policy until more full and explicit answers were given, but if they saw fit to write it, when any of the questions they had put were unanswered, or the answers to any were incomplete, as long as the insured answered truly, as far as he did answer, and as far as he understood the questions, and made no concealment, it is their own fault, and they cannot take advantage of their own negligence. They thought the application good enough to take the premium on; it ought therefore to be good .enough, now a loss has occurred, to pay on. 1 Allen, 63 ; 6 Gray, 185 ; 5 Gray, 384, 389 ; 7 Gray, 261; 1 Allen, 301; 29 Conn. 10; 18 Pick. 419; 10 Cush. 540 ; 2 Duer on Ins. 662 ; 10 Pick. 535, 40 ; 30 Pa. 282.

Opinion:
Welch, J.
It is, perhaps, not seriously denied, that the interest of the defendant in error in the property was an insurable interest. That it was such, we have no doubt. The ground relied upon for the avoidance of the policy is an alleged breach of warranty, consisting in the fact that the answers given to the questions contained in the written application were not full answers, and also in the fact that they were false.
In regard to the former ground of objection, it seems to us sufficient to say, that 'the receipt of the application, and the issuance of the policy thereupon, was a waiver of the questions in so far as they remained unanswered, and that the policy .cannot, therefore, be avoided by the company on the ground that the answers are not full. The objection should have been made at the time of the receipt of the premium, and the issuance of the policy, or not at all. Had further answers been insisted upon at that time, the applicant would doubtless have given them. To receive his premium, and issue the policy upon the answers as given, and afterward avoid the policy on the ground that the answers were not full, would be to practice a virtual fraud upon the insured.
But are the answers fals.e ? We think not. Taken together, and construed as a whole, they are substantially true. To the question whether he owned the property, the assured answers, " Yesto the question whether any other person has an interest in it, he answers, "No ;" and to the question whether there are any incumbrances upon it, he answers that it is " held by contract."
It is contended that, even admitting the interest of the defendant to be an insurable interest, and that the title of a purchase by mere contract is sufficient to justify a warranty of ownership, yet these answers are false, because they do not disclose the tact that there was a lien for unpaid purchase money, but oil the contrary allege that no other person has an interest in the property. The three answers, it is said, can only be reconciled, and sustained as true, upon the theory that the purchase money had been all paid, and that the equitable title of the defendant was thus made-complete. We do not so understand the answers. The answer which sets forth that the property was "held by contract," is made in response to the question whether there was any " incumbrances " upon the property. We think it was fairly to be inferred from this answer, made in this connection, that there was such an incumbrance as usually exists in such cases, namely, a lien in favor, of the vendor for purchase money. Substantially, the answers amount to this : " The property is held by contract of purchase merely, and is subject to no incumbrance except what that description of ownership implies ; I am the owner of that title ; and I am the sole owner." Understood in this sense, the answers are substantially in accordance with the facts of the case.
Judgment affirmed.
Scott, C. J., and White, Day and McIlvaine, JJ., concurred.