Case Name: DAVENPORT Respondent, v. FIREMEN'S INSURANCE CO. OF NEWARK, N. J., Appellant
Court: South Dakota Supreme Court
Jurisdiction: South Dakota
Decision Date: 1924-05-28
Citations: 47 S.D. 426
Docket Number: File No. 5178
Parties: DAVENPORT Respondent, v. FIREMEN’S INSURANCE CO. OF NEWARK, N. J., Appellant.
Judges: 
Reporter: South Dakota Reports
Volume: 47
Pages: 426–438

Head Matter:
DAVENPORT Respondent, v. FIREMEN’S INSURANCE CO. OF NEWARK, N. J., Appellant.
(199 N. W. 203.)
(File No. 5178.
Opinion filed May 28, 1924.)
1. Appeal and Error — New Trial — Order Granting New Trial Not Generally Disturbed Except for Abuse of Discretion.
An order granting a new trial will not in general be disturbed except for abuse of discretion in granting it.
2. Appeal and Error — New Trial — Gi’ant of New Trial for Improper Exclusion or Admission of Evidence, Not Discretionary.
A motion for new trial on the ground that evidence was improperly excluded or admitted, being a question of law, is not addressed to the discretion of the trial court, and its ruling is. reviewable.
3. Insurance — Contracts—Dance Pavilion Attached to' Insured Building Held Covered by Building Policy.
A $3,000, well-built, lean-to, dancing' pavilion, of a permanent character, attached as securely as possible to an insured building, constituted a part of the building, and was covered by the insurance policy on the building.
4. Evidence — Contracts—Claimed Carbon Copy of Better to Insurer Held Inadmissible to Show Agreement Not Contained in Policy.
In an action on a fire policy, plaintiff’s carbon copy of letter, claimed to have been written on request of insured’s agent, but not attached 'to nor indorsed on policy, was not admissible to show any agreement not contained in policy.
5. Insurance — Principal and Agent — Agent or Officer Cannot Bind Insurance Company by Agreement Outside of Policy.
The law, though liberal as to what provisions may be contained in fire policies, requires the entire agreement to be contained or indorsed on the policy, and no officer or agent can bind his company or estop it by any contract or agreement not so included or indorsed.
,6. Evidence — Fire Insurance — Insurance Policy Only Evidence of Contract.
The insurance policy is the only competent evidence of the contract between insurer and insured.
7.' Insurance — Jury—Evidence—Whether Removal of Part of Insured Property Increased Physical Hazard Hold for Jury.
In action on a fire policy, whether insured’s removal of a lean-to dancing pavilion, of a permanent character,' attached to his building, and heating and plumbing material from his building, increased insurer’s physical hazard, held for the jury, since question depended largely on manner of performance of the removal.
S. Insurance — Moral Hazard — What Constitutes “Moral Hazard” Is Question of Law.
In action on a fire policy, “moral hazard,” being risk, or danger, or probability that insured will destroy or permit to be destroyed the insured property to collect the insurance, what constitutes such hazard is a question of law for the court.
9. Insurance — Fir© Insurance — Tearing Down Material Part of Insured Building and Bemoving Plumbing Increased Moral Hazard, Rendering Policy Void.
Where insured took out a “valued” fire policy for $2,500 and subsequently tore down and sold a material part of insured building and some plumbing and heating material, he increased insurer’s moral hazard by increasing his own temptation to burn the building, and thereby rendered policy void.
10' Now Trial — Appeal and Error — Granting New Trial Where Conceded Facts Showed Recovery Impossible Held Reversible Error.
An order granting new trial for the exclusion of evidence which was properly excluded held reversible error, where, on the conceded facts, plaintiff could not recover.
Dillon, J., dissenting.
Appeal from Circuit Court, Minnehaha County; Hon. L. L. FlEEGER, Judge.
Action by Holton Davenport, as trustee in bankruptcy of 'George W. Egan, against the Firemen’s Insurance Company, of Newark, N. J. From an order granting a new trial, defendant appeals.
Reversed.
Cherry & Marker, of S'ioux Falls, for Appellant.
Nathan H. Chase, of Minneapolis, Minn., and Boyce, Warren & Fairbanks, of Sioux Falls, for Respondent.
(2) To point two of the opinion, Respondent cited: Ede v. Ward, 32 S. D. 351; State ex rel. Gruenig v Haley, 38 S. D. 568; Western Surety Co. v. Boettcher, (S. D.) 165 N. W. 381: Drew v. Lawrence, 37 S. D. 620; Blewitt v. Hendry, 37 S. D. 106.
(3) To point three, Appellant cited: Violette v. Queen Ins. Co. (Wash.) 165 Pac. 65; Gross v. Milwaukee Mechanics’ Ins. Co., (Minn.) 87 N. W. 932; Still v. Conn. Fire Ins. Co., 185 Mo. App. 550, 172 S. W. 625; Pettit v. State Ins. Co., (Minn.) 43 N. W. 378; Horae Mut. Ins. Co. v. Roe, 71 Wis. 33, 36 N. W. 594.
(4) To point four Appellant cited: Hronish v. Ins. Co., 33 S. D. 428, 146 N. W. 588; Langbehn v. Am. Ins. Co., 41 S. D. 581, 171 N. W. 820; Bourgeois v. N. W. Nat’l. Ins. Co., (Wis.) 57 N. W. 347; House v. Bankers’ Reserve Life Co., 43 S. D. 440, 180 N.-W. 69; Straker v. Phoenix Ins. Co., 77 N. W. 752; Northern Assur. Co., v. Grand View Building etc. 183 U. S. 389, 46 L; ed. 213;- Modern Woodman v. Tevis, 117 Fed. 369; Penman v. St. Paul Fj. & M'. Ins. Co., 216 U. S. 311, 54 L. ed. 493; Baumgartel v. Prov. Wash. Ins. Co., (N. Y.) 32 N,. E. 901; Yusco v. Middle West Fire Ins. Co., (N. D1.) 166 N. W. 539; Code 1919, Secs. 860, 9198, 91199; Cleaver v. Traders Ins. Co:, 65 Mich. 527, 3,2 N! W. 660.
(5) and (6) To points five and six, Appellant cited: Anderson v. Interstate Business Men’s Acc. Assn., 38 S. D. 105, 160 N. W. 522; Gray v. Germania Fire Ins. Co., (N. Y.) 49 N. E. 6754 Moore v. Iianover Fire Ins. Co., 141 N. Y. 2191, 36 N. E. 191; Cooley’s Briefs, Vol. II, p, 1841; Eagle Fire Co. v. Globe Loan & Trust Co., 44 Neb. 380, 62 N. W. 895; McCarthy v. Mut. Ins. Co., 81 S. C. 152, 62 S. E. 1; Kimball v. Ploward Fire Ins. Co., (Mass.) 8 Gray 33; Dewees v. Ins. Co., 3.5 N. J. L. 356; Wensel v. Property Mut. Ins. Co:, 129 la. 295; Carlton v. Patrons’ Androscoggin Mut. Ins. Co., 109 Me, 79, 82 Atl. 649 ; Havens v. Home Ins. Co., 111 Inch 90, 12 N. E. 137: Sowers v.Mutual Fire Ins. Co., 113 la. 441, 85 N. W. 7634 Rundell & Hough v. Anchor Fire Ins. Co. 101 N. W. 517; W'orachek v. New Denmark Mut. ITome Ins. Co., 102 Wis. 81, 78 N. W. 165; Athens Mutl. Ins. Co. v. Evans, 132 Ga. 703; Orient Ins. Co. v. Prather, 25 Tex. Civ. App. 446, 62 S. E. 89; Union Mutl. Life Ins. Co., v. Mo wry, 96 U. S. 547, 24 L. ed. 674, Noem v. Equitable Life Ins. 'Co., 35 S. D¡. 593, 153 N. W. 652; Langbehn v. Ins. Co., 41 S, D. 58.1, 171 N. W. 820, House v. Bankers Reserve Life Co., 43 S. D. 441, 180 N. W. 69.
Respondent cited: Robins v .Springfield Fire & Marine Ins. Co., (N. Y.) 44 N. E. 159; Glover v. National Fire Ins. Co., 30 C. C. A. 95, 85, Fed. 125; Havens v.. The Insurance Co., 111 Inch 92, 12 N. E. 138, 60 Am. Rep. 689; Foster v. Scottish Union Ins. Co., 127 N. E. 65; Yusko v. Middlewest Fire Ins. Co., 166 N. W. 539; Western Nat. Ins. Co. v. Marsh, 125 Pac. 1094, 42 L. R. A'. (N, S.) 991; Twin City Fire Ins. Co. v. Stock-men’s Nat. Bank, 261 .Fed. 470; Schultz v. Des Moines Mutual Hail Ins. Co., (S. D.) 1.53 N. W. 884; Farmers State Bank of Parker v. Tri-State Mutual Grain Dealers Fire Ins. Co.,-170 N. W. 638. -
(8) To point eight, Appellant cited: Dustin v. Interstate Business Men’s Accident Ass’n., 3,7 S'. D. 625, 159 N. W. 395 ; Smith v. Security Mut. Fire Ins. Co., 37 S. D. 418, 158 N. W. 991; Syndicate Ins. C'o. v. Gohn, 65 Fed. 165; McKernan v. North River Ins. Co., 206 Fed. 984, 26 C. J. 199; Pottsville Mut. Fire Ins. Co. v. Horan, 89 Pa. 438; Ampersand Hotel Co. v. Home Ins. Co., 115 N. Y. S. 4801.

Opinion:
POLLBY, J.
This action was brought to recover on a fire insurance policy issued to George W. Egan. At the close of the evidence the court directed a verdict for the defendant. Judgment was entered accordingly, and plaintiff moved for a new trial. This motion was granted, and from the order granting a new trial defendant appeals.
The first question to be considered is. whether this court should review or disturb the order of the trial court granting a new trial. The general rule is that an order granting a new trial will not be disturbed by this court except where there has been an abuse of discretion by the trial court in granting the new trial. This rule is tersely stated by this court as follows:
"It is a well-established rule in- this state that the order of a trial court granting a new trial will not be reversed unless -it clearly appears that the trial court abused its discretion in granting such motion. In this case we are clearly of the view that the trial court did not abuse such discretion. It is conceded by appellant that there was a substantial conflict in the testimony upon the issue as to whether or not Mo was the agent of respondent in procuring the signatures to said indemnity bond; that the evidence in this particular was of such a nature that different conclusions might reasonably have been drawn therefrom.Under the unanimous view of the members of this court, as expressed in Drew v. Lawrence, 37 S. D. 620, 159 N. W. 274, when the trial court grants a new trial where'there is a conflict in the testimony, the appellate court will not disturb such ruling on the ground of abuse of discretion." Western Surety Co. v. Boettcher, 39 S. D. 541, 165 N. W. 381.
In this case it is not a question of the conflict of evi dence. The question involved is whether the trial ' court ruled correctly on the admission and exclusion of certain evidence at the trial. This presents purely a question of law and is not governed by the above rule, viz.: That the trial court is vested with judicial discretion which will not be overruled except for manifest abuse of such discretion:
"A motion for a new trial on the grounds of 'errors in law' is not addressed to the discretion of the court." Hayne, New Trial and Appeal (Rev. Ed.) §100, and note 4.
The building insured is described as a frame building 40x60 feet of the ground, but along one side of the building and extending beyond the end thereof was attached a lean-to or addition 30x80 feet that had been built for a dancing pavilion. There is some controversy in the record as to whether this addition was a part of the insured building and was covered by the insurance policy, or was only a temporary affair that did not constitute a part of the building, and was not covered by the insurance policy. The evidence showed that this pavilion was well built; that it was made of good material; was permanent in character; that it cost something more than $3,000; and was fastened to the main building as securely as possible. Under. the evidence in the record, we have no hesitancy in holding that this pavilion constituted a part of the building; that it was covered by the insurance policy; and that, had such pavilion alone been damaged or destroyed by fire while the policy was in fofce, the appellant would have been liable for the loss under the terms of the policy.
Shortly after the issuance of the policy, the insured caused this pavilion ho be torn down. A part, at least, of the material was sold and a .considerable sum of money realized therefrom by the insured. A part of the heating plant and plumbing material in the main building was removed and sold or used elsewhere bjr the insured. In the trial the insured offered to prove that before the policy -was written the insurance agent stated that he could not insure the pavilion and that the company would not write insurance upon it; that as a consideration for the issuance of the policjr the insured should at once remove the pavilion and discontinue the dances and the restaurant on the premises; that this was assented to by the insured and that it was agreed that the insured should write a letter addressed to the insurer and leave it with the agent who was to sign the policy; and that such letter to the company together with the agent's report on issuing the policy, was then sent to the company. Such letter was not attached to the policy, nor was any memorandum thereof made on the policy. At the trial plaintiff made a written demand on defendant to produce this letter, to which demand defendant replied that it had no such document and never had received such document. Plaintiff then offered in evidence what purported to- be a carbon copy of such letter. This was excluded by the court, and if we understand the record, it was because of the alleged error in excluding' the evidence -of this letter that a new trial was granted. We believe that this evidence, was properly excluded and that the exclusion thereof did not constitute a ground for granting a new trial. The effect of such evidence would have been to change and materially vary the terms of the policy. Under the law and under the interpretation of the law by this court in the Hronish Case, 33 S. D. 428, 146 N. W. 588, approved in Smith v. Insurance Co., 37 S. D. 418, 158 N. W. 991, and again in Dustin v. Insurance Co., 37 S. D. 635, 159 N. W. 395, L. R. A. 1917B, 319, this evidence was not competent to show any agreement not contained in or indorsed upon the policy.
The standard policy adopted by the Legislature of this state goes into great detail as to what provisions it may contain. The law is very liberal in this respect and leaves the parties to a fire insurance policy great latitude, if indeed they are not without any restrictions whatever, as to the provisions that may be contained in the policy. On the other hand', the law requires that the entire agreement, whatever it may be, shall be contained in, or indorsed upon, the policj'-. In this respect the law is absolutely inflexible. No officer or agent of an insurance company can bind the company, or estop it by any contract or agreement not included in or indorsed upon the policy itself. The effect of this provision of the law is to make the policy the only competent evidence of the contract between the insurer-and the insured.
Had the evidence in question been received by the court, it would then have been in order for the party who issued the policy to have gone upon the stand and sworn that no such agreement was ever made. This would have imposed upon the jury the duty of determining the veracity of the respective parties. True, plaintiff had what he claimed to be a carbon copy of the alleged letter; but this in no manner strengthened his testimony. The existence of such letter still depended upon his uncorroborated word. To all intents and purposes it was purely a self-serving declaration. One of the principal reasons for requiring the entire contract to be embraced in the policy is to prevent 'just such situations as this in the courtroom.
It is contended by respondent that the question of the admissibility of this evidence was settled favorably to him in the case of State v. Egan, 44 S. D. 273, 183 N. W. 652. It is true we held this evidence should have been admitted in the criminal case, and reversed the judgment because of its exclusion; but it was admissible upon the question of criminal intent only, and the rule applied in that case has no applicability to' a civil action. This is clearly pointed out in the opinion in that case where it is said:
"The question at issue was the criminality of defendant's act in making his report of loss and omitting to advise the insurance company that he had removed a material part of the property insured. For the purpose of this decision, we must assume that-, if allowed so to do appellant could and would have proven to the satisfaction of the jury all of these facts concerning which he offered proof."
But in that case it was the truthfulness of' ihe proof of loss that had been furnished by the insured that was at issue, and not the right to vary the terms of the policy by an 'extraneous agreement. With this evidence excluded, the decisive question in the case is: Did the removal of a portion of the insured building vitiate the policy?
It is contended by appellant that by the removal of a portion of the building the insured increased both the moral and physical hazard of the insurer, and thereby rendered the policy void. The policy contains the following provision relative to the increase of the hazard after the issuance of the policy:
"This entire policy, unless otherwise provided by agreement hereon, or added hereto, shall be void if the hazard be increased by any means within the control or knowledge of the insured."
We do not feel that we can hold as a matter of law that the acts complained of increased the physical hazard. This we believe presents a matter of fact for the jury upon the evidence. Whether the removal of the pavilion or the heating and plumbing material increased the physical hazard would depend to so great a degree upon the manner in which the work of removal was performed, that the question could be determined only by a jury or trial court upon the evidence.
On the other' hand, what constitutes "moral hazard" is a question of law and may be determined by the court. Moral hazard is the risk, the danger, or probability that the insured will destroy or permit to be destroyed the insured property for the purpose of collecting the insurance, and any change in the condition of the insured or the insured property that will increase the probability that the insured will destroy the property for the purpose of collecting the insurance will increase the moral hazard. Any act or change in the conditions that will increase the temptation to destroy the insured property for the purpose of collecting the insurance will increase the moral hazapd. So, too, will any act that reduces the value of the insured property in proportion to the amount of insurance or the procuring of instirance materially in excess of the reasonable cash value of the insured property. Quoting from Syndicate Ins. Co. v. Bohn, 65 Fed. 165, 12 C. C. A. 531, 27 L. R. A. 614:
" 'Moral hazard,' in insurance, is' but another name for a peculiar interest in the insured to permit the: property to burn. Statistics, experience, and observation all teach that the moral hazard is least when the pecuniary interest of the insured in the protection of the property against fire is greatest, and that the moral hazard is greatest when the insured may gain most by the burning of the property."
If the insured could take out a "valued" policy for $2,500 on this building, then tear down and sell a material part of the building, and then collect the full amount of the policy because of the burning of the remaining portion of the building, would he not have a greater pecuniary interest in the destruction of what remained oí the building than if no part of it had been removed? The question admits of but one answer, and when applied to the facts in this case, the answer is that the insured had a pecuniary interest in permitting the building to burn. Necessarily the moral hazard was increased, and from this it necessarily follows that the policy was vitiated by the removal of a portion of the building and that the plaintiff is not entitled to a recovery on the policy in any event.
If the case were tried again, the court would be obliged', as a matter of law, to direct a verdict for the defendant because the policy is void. Where the conceded facts show, as they show in this case, that the plaintiff cannot recover, then there is nothing left upon which the trial court can exercise its judicial discretion. Only one conclusion is possible, and there is no question as to the sufficiency or insufficiency of the evidence. The court was right in directing the verdict for the defendant, and the order granting a new trial constituted reversible error.