Case Name: Amasa Stetson versus The Massachusetts Mutual Fire Insurance Company
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1808-03
Citations: 3 Tyng 330
Docket Number: 
Parties: Amasa Stetson versus The Massachusetts Mutual Fire Insurance Company.
Judges: 
Reporter: Massachusetts Reports
Volume: 4
Pages: 292–300

Head Matter:
Amasa Stetson versus The Massachusetts Mutual Fire Insurance Company.
Where a moiety of a building insured by the Massachusetts Mutual Fire Insurance Company was conveyed in fee, the grantor reserving a term of seven years therein; and' the grantee immediately reconveyed the same to the grantor in mortgage; and the mortgagee demised them to the mortgagor and another for seven years, reserving rent; it was held that the company was liable in case of a loss, notwithstanding such conveyances.
Where a building insured by the same company was represented, at the time of effecting the insurance, as connected with another building on one side only, and before the loss happened it became connected on two sides, the policy is not avoided, unless the risk thereby became greater.
Covenant broken apon a policy of insurance upon the plaintiff’s dwelling-house, alleging that it was consumed by fire in December, 1801.
[*331] *The defendants pleaded three several pleas in bar, upon the replication of the first of which issue was joined, and a verdict found for the plaintiff.
In their second plea, the defendants acknowledge the making the policy, as declared on, and the destruction of the house by fire without design in the insured, in the manner alleged by the plaintiff; but they further say, that after making the policy, and before the fire took place, viz., on the 11th of December, 1800, the plaintiff conveyed one half in value of the said house to one Thomas Harris, to hold the same in fee simple, saving the term of seven years, which the plaintiff reserved therein, which said term, he, on the 12th of the same December, assigned to the said Harris and one Lewis Gorham, so that the plaintiff, at the time the said house was consumed, was not the owner thereof according to the form and effect of the policy, and of the roles of said company. And afterwards, viz., on the 12th of January, 1802, certain trustees of said company, according to the roles thereof, taking the premises into consideration, and being well advised thereof, declared the said policy to be null and void, and the said policy thereby, according to the roles of the company, became void, the said declaration of said trustees having been duly made and accepted.
To this plea the plaintiff replies, and confessing the making of the deed to Harris, alleges that, at the time of making the same, the said Harris conveyed the same estate to the plaintiff by mortgage, conditioned for the payment of a certain sum of money, which, the plaintiff avers, was not paid pursuant to the said condition, nor at any other time. The plaintiff then sets forth a lease from him tc Harris and Gorham, of the estate described in the plaintiff’s con veyance to Harris, for the term of seven years from the 12th of December, 1800, reserving a rent to be paid quarterly, with a right of reentry in case of non-payment of the rent.
To this replication the defendants demur generally, and the plaintiff joins in demurrer.
In their third plea, the defendants allege that, before the making of the policy declared on, the plaintiff, in his proposal for insuring his house, described it, in its relative situation * as to other buildings, as connected on one side only, [ * 332 ] and declared that it was in fact so situated, and in consequence thereof the premium was agreed upon, and the policy was made ; but afterwards, on the 20th of the same December, a certain framed building was erected on ground adjoining the said house belonging to the plaintiff, and was joined to the said house, so that the same house thereby became connected in relation to other buildings on two of its sides, and the risk of fire to the same was thereby rendered greater ; and that at the time of the fire aforesaid, the said framed building was burnt with the house. The plea then sets forth the declaration of the trustees that the policy was void, in the same terms as in the second plea.
To this plea the plaintiff replies that, after the policy was made, and before the premises were destroyed by fire, they were not repaired, or enlarged, or altered, in such a manner as to render the risk of their being consumed by fire greater.
The defendants demurred to this replication, and the plaintiff joined in demurrer.
[The following articles of the company are referred to by the counsel or the Court, viz.: —■
Art. 6. The trustees shall have power—to declare any policy • null and void, in all cases where the insured shall have repaired or enlarged a building, or have appropriated the same to other purposes than those mentioned in the policy, thereby rendering the risk greater; unless the assured will add to his premium, and deposi. such a sum as shall be deemed by them to be an equivalent.
Art. 7. The president and directors shall appoint one or more agents, in such towns within the commonwealth, as to them may seem proper. They shall have power, and it shall be their duty, to value any building, to describe the materials of which it may be built, the use to which it is applied, and its situation, as it respects other buildings. They shall estimate its rate of hazard, and certify the same in writing, &c.
Art. 8. No alteration in terms of insurance shall be made, on account of a building’s being made more or less hazardous, by means not under the control of the insured
[ * 333 ] * Art. 18. When a building insured shall be alienated by death, sale, or any other means, the insured, his, her, or their representatives, may surrender his, her, or their policy or policies, and receive a sum not exceeding their deposit money.
Art 23. No transfer of a policy shall operate to discharge the person insured from his obligation to fulfil the conditions of said policy, until said transfer be entered in the books of said company.]
The cause was argued at the last March term in this county by G. Blake for the plaintiff, and Amory for the defendants.
Amory, in support of the demurrers,
observed that the pleadings exhibited the whole of the case, and he should therefore consider it upon its merits, as if it was before the Court upon an agreed statement of the facts.
Two points arise in the defence of the action, both going, in the apprehension of the defendants, to render the contract no longer binding, and in effect a mere nullity, viz.: 1. The alienation of the property by the insured. 2. An alteration in its relative situation respecting other buildings, and that by means under the control of the assured.
As to the alienation of the property, it is to be observed that, by the act of incorporation, and, indeed, by the very nature of a mutual insurance, the members of the company must be owners of buildings. It is in virtue only of those buildings being insured, that the owners are or can be members of the company. The plaintiff, when he effected this insurance, had the requisite qualification. He was owner of the house insured. But he afterwards alienated a moiety of it. The estate then became less his. He had less control of it, and less interest in preserving it. From an estate in fee, he converted it into a mere chattel interest, over which he retained no power, except in a case not to be presumed, viz., that the mortgagor would not fulfil his contract. Indeed, for a time, his estate in that part of the property was wholly out of him. This, we contend, annulled the policy. His after interest in the property was not the interest contemplated by the parties when the insurance was effected. It was no more than a right to demand the stipulated rent.
[ * 334 ] * But if this alienation did not vacate the contract, we contend that the alteration made in the property must have that effect. In marine risks, when a deviation is shown, it is never made a question whether the hazard was increased by it. The policy is avoided because the risk is not the same. By analogy to this rule, it is not material, in the present case, whether the risk was increased by the alteration or not.
But we contend that the alteration here did materially vary the degree of risk; as to this contract, which was bottomed upon the description, part of which was, that the building was connected with another on one side only, it was a material alteration. When the loss happened, the property insured was in a different situation from that in which it was when the insurance was made. ■
If it be said that this alteration was effected by means out of the control of the insured, we answer that from the whole case the contrary appears. The words are not technical; we must therefore seek for their import in the common sense of mankind. It appears, by the first plea, that the new building was erected by the plaintiff’s lessees. But they derived all their authority and power from the lease made to them by the plaintiff. That lease was in effect a license to Harris and Gorham, to erect the new building contiguous to that insured. It will certainly be agreed that, without some act of the plaintiff, these persons could never have erected it but as trespassers. The law will give a strict construction to contracts like this, which furnish so strong a temptation to fraud and imposition.
Blake, for the plaintiff,
said he had no oojection to consider the subject at large upon the merits, although he thought the defendants had committed the first essential fault in the pleadings. And as to the first point made on the other side, relative to the alienation, he agreed that to entitle the plaintiff" to recover, he must show an insurable interest at the time of making the insurance, and also at the time of the loss.
As he had at the time of effecting the policy an undoubted interest, if he has since conveyed part of the property, he would still be entitled to recover pro rata. But we contend * that he has been constantly owner of the whole prop- [ * 335 ] erty. He did convey a part of it to Harris, but immediately took it back by a mortgage in fee, by which the whole legal estate was in him ; defeasible, indeed, by an after contingency, but never defeated, as the pleadings show.
If the same construction is to be applied to this policy as to a policy on a marine risk, the plaintiff is well entitled to recover. Suppose a ship worth 4000 dollars, and the owner effects 2000 dollars’ insurance. The ship is lost. In an action to recover for the loss, the underwriter shows that, since the insurance was made, the assured had sold a moiety of the ship. Still he had property enough remaining in the subject of the insurance to cover the whole policy, and on that ground he would recover.
The second objection to the plaintiff’s recovery arises from the alterations made in the situation of the building insured. If it even appeared that the hazard of fire was increased by this alteration, wa contend that the policy is not thereby avoided, because the altera tian was effected by means not -under - the plaintiff’s control. He was not in possession, nor had he any right of entry, except for condition broken. Harris and Gorham, had the possession, and the right of possession, and the alteration was made by them, and is precisely within the letter and spirit of the 8th article.
What is there in the contract which prohibits an alteration in the building insured, unless the identity of the subject described is taken away, or the degree of hazard increased ? Neither of those effects, it is contended, appear in this case. But if it is otherwise, still the policy does not become ipso facto void. It remains with the trustees, in the exercise of a sound discretion, to declare it void. But this declaration must be made while the risk continues, and the subject of the insurance remains. The absurdity of a party’s retaining a power to annul a contract, after the case for which it provided has happened, and the claim of the other party has become fixed and absolute, is too apparent to require a serious discussion.

Opinion:
The action stood continued for advisement until this term, when the following opinion was delivered by
* Sewall, J.
The first objection made for the defenddants is, that the plaintiff, at the time of the loss, had no interest in the building originally insured to him by the policy in the case.
The facts admitted by the pleadings are, that, after the issuing of the policy, the plaintiff sold and conveyed to Thomas Harris a part of the building insured, reserving a term of seven years in the premises ; and that Harris at the same time reconveyed them to the plaintiff, in mortgage, to secure the purchase money. And it appears that the occupants, at the time the building was burnt, held under a lease from the plaintiff, upon a rent payable to him quarterly.
The sale and contracts between the plaintiff and Harris affecting a part only of the premises insured, it is a question for the jury to determine, what interest the plaintiff retained, and the value of it. It may be further observed that a sale and reconveyance by mortgage to secure the purchase money, executed at one time, are, for many purposes, to be regarded as one instrument. And taking all the writings together, the actual sale of the property insured, as to the moiety affected by these contracts, was, substantially, and, in answering a question of the interest of the plaintiff, to be considered as, a conditional sale after the expiration of seven years. This objection does not arise upon the terms of the contract. The 18th article, especially if we connect with it the 2d article, imports a continuance of the contract, notwithstanding an alienation of the premises insured. It seems to have been the intent of the parties that, in this mutual insurance, although the insured is at liberty, upon an alienation, to surrender his policy, or to transfer it, yet that his deposit and personal responsibility are retained by the company until a surrender, or an acceptance of the assignee by an entry in the transfer books of the company.
But, however this maybe, the objection, if the facts had warranted it, must upon general principles prevail. It is a maxim of public policy, important to good morals, and for the prevention of frauds in contracts of this nature, that gaming insurances, insurances without interest, are unlawful and of no validity. It is incumbent, therefore, upon the party * claiming a loss [ * 337 ] upon a policy of insurance, to show an interest in the subject of it, and in the event insured against; and his demand must appear to be for an indemnity, and not for a wager, become successful, as in this instance, by a public calamity. An objection of this kind is not supported by showing contracts affecting the formal title of the plaintiff, in a part only of the subject of the insurance. His interest in a part remains the same; and perhaps substantially, and for the purpose of repelling this objection, is to be considered as unaltered in the whole of the premises insured.
Upon the whole, it is the opinion of a majority of the Court, that the replication to the second plea in bar is sufficient in law.
The second objection is, that certain alterations, in reference to the representation of the state of the building insured when the policy was effected, had been made by the party insured, whereby his policy was vacated, and the defendants were discharged from this insurance before the loss happened.
This objection may be examined upon general principles, and upon the terms of the contract.
The estimate of the risk undertaken by an insurer must generally depend upon the description of it made by the insured or his agent. A mistake or omission, in his representation of the risk, whether wilful or accidental, if material to the risk insured, avoids the contract. And where the estimate of the risk depends upon the continuance of the material circumstances represented to the insurer, these are not to be altered to his detriment, by any act of the insured, with out a like effect upon the contract.
But to what degree is the insured restrained in this respect ? If every, the least, alteration or enlargement of a building insured against fire, is necessarily and of course material to the risk, and, whenever it is made by the act or consent of the insured, is to va cote the policy, unless it should be renewed by the insurer,—-so [ * 338 ] close a restraint upon ¡the party would place * contracts of this kind in a state of complete uncertainty ; and would render them so inconvenient as wholly to prevent them.
This degree of restraint will not be contended for. But in the argument for the defendants, it has been contended that the enlargement of a building, represented to be contiguous to other buildings on one side only, to the effect of making it contiguous on two sides, is, under all possible circumstances, a material alteration, which ought to discharge the policy ; and that it is to be considered in the light of a departure from the voyage described, in a marine insurance, and must have a similar effect upon a policy to insure against fire.
The true reason why, in a case of marine insurance, a deviation discharges the insurer, is not the increase of the risk ; but that the party contracting has voluntarily substituted another voyage for that which was insured. This change of the voyage determines the contract from the time it happens. The same strictness is not requisite in an insurance against fire, where the building, although enlarged or repaired, remains the same; and it is only necessary to guard the insurer from an increase of his risk, by an alteration of the building insured. And if an alteration of the kind alleged in this case may be made, under any circumstances, without increasing the risk of the insurer, there can be no reason, upon general principles, that it should determine the policy. Suppose, for instance, the subject of the insurance to be a wooden building, separated at the distance of a few feet from a brick wall in another building, and to be enlarged and made contiguous to the brick wall; it is obvious that such an alteration may diminish, and not increase, the risk. And if this may be reasonably supposed in any case, then, whether the enlargement of a building insured has increased the risk of the insurer, is a question of fact, to be determined by the jury.
The parties to this contract appear to have been aware of the inconvenience which a minute restraint in this respect would produce to the insured, and the effect upon the policy from alterations in the building insured, has not been left as a question of con- [ *339 1 struction upon general principles ; but * has been regulated by express stipulations in the contract, which must determine the law between the parties.
The value, materials, and uses, of any building proposed to be insured, and its situation relative to other buildings, and the consequent estimation of the rate of hazard, are understood to be represented by agents appointed for the purpose, who are to state and certify these circumstances to the trustees of the company, by whom, and at whose discretion, the policy is to be issued. [Article 7.J By the preceding article, the trustees are authorized to annul a policy, whenever the insured shall repair or enlarge his building, or appropriate it to other purposes than those mentioned in the policy, " thereby rendering the risk greater," unless the insured will add to his premium an equivalent in the estimation of the trustees. By a subsequent article, this power of the trustees is not to extend to any case where a building " becomes more or less hazardous," by means not under the control of the insured.
By these stipulations, we discover what, in the intentions of the parties to this contract, was to be estimated a material alteration from the representation given of the building insured. Whether the alteration is by repairs, by enlargement, or by a new appropriation of the building, it must in fact render the risk greater, the building must become thereby more hazardous, or it is not material, and is not allowed to affect the contract,
The averment, therefore, in the plea of the defendants, in the case at bar, that, by the enlargement of the building insured, the risk had been increased, is material, and must be maintained, or their plea is insufficient. The traverse of that averment is confessed by the demurrer, and the replication must be adjudged sufficient.
And it is the opinion of a majority of the Court, that the replication to the third plea in bar is good and sufficient in law.
Parker, J., concurred.
Parsons, C. J., had been of counsel in the cause, and gave no opinion.
Sewall, J., then observed that the judges Sedgwick and Thatcher, who were not at this time present in Court, did not perfectly concur in the opinion which had been delivered, * but [ * 340 ] had finally consented that judgment should be rendered by the two justices who had concurred, in their absence, and this the rather as the judgment is open to a writ of error.
Marshall, 335
Ibid. 339
Marshall, 394, 186, Lavabre vs. Wilson.
[Curry vs. The Commonwealth Ins. Co., 10 Pick. 535. — Ed.]
[Strong vs. The Manufacturers Ins. Co., 10 Pick. 40. — Gordon vs. Mass. Fire and Marine Ins. Co., 2 Pick. 249. — Lazarus vs. The Commonwealth Ins. Co., 5 Pick 76. — Lock vs. The North Am. Ins. Co., 13 Mass. Rep. 61. — Higgins vs. Dall, 13 Mass. Rep 96. — Bartlett & Al vs. Walter, 13 Mass. Rep. 267. — Carl & Al. vs. The Boston M. Ins. Co., 8 Mass. Rep. 515. — Curry vs. The Commonwealth Ins. Co., 10 Pick. 535. — The Columbian Ins. Co. vs. Lawrence, 2 Peters, 46. — Merriam vs. The Middlesex Mutual Fire Ins. Co., 21 Pick. 162. — But see Carpenter vs. The Providence Washington Ins. Co., 16 Peters, 495. — Ed.]
The reporter has been favored, by his honor, Judge Sedgwick, with the following note of the grounds of his opinion: —
When the plaintiff applied to the defendants to insure the property, far the destruction of which this action is brought, the representation which he made, and which was required by the rules of the company, was, doubtless, intended to enable them to con tract understanding^, and on equal terms, with the plaintiff. By that representation it appears — and so was the fact — that the insured premises were, at that time, connected with other buildings on one side only. Had they been so connected in other parts, no reasoning is necessary to show that danger from fire would have been thereby increased, and that, therefore, a higher premium would have been demanded for the insurance. Independent, then, of any express stipulation, if, by any future event, authorized or permitted by the insured, there was a material alteration in the state of the insured property, whereby the danger of destruction by fire was increased, — it is dictated by reason and justice that the defendants should thereby be discharged.
But in this case, it is not necessary to rest on the reason of the thing. The mealing is rendered very apparent by what is explicitly declared. For it being stipulated n the 8th article of the rules and articles of the company, that " no alterations in "erms of insurance shall be made on account of a building's being made more or less hazardous by means not under the control of the insured," it is rendered certain, without referring to other articles, by which the same is implied, that the terms of insurance shall be altered, whenever a building is rendered more hazardous by means tinder the control of the insured ; or, in other words, that the contract shall not, without such alteration, be binding on the insurers.
There can, then, be but two questions, that 1 can perceive, to decide this cause 1. Was this building, by an alteration, rendered more hazardous after the contract ? And if so, 2. Was that alteration made by means under the control of the insured ?
1. As to the first question, at the time of the insurance the property insured was connected on one side only with other buildings; and it is agreed, that afterwards, and before the fire, alterations were made, " by means of which the insured building became connected on two sides with other buildings, whereas, at the time the policy was effected, the said building was connected with others on one side only." Did this increase the hazard ? To my mind, no reasoning can render more clear the proposition, that in a populous town, a building connected with others on two sides is more exposed to fire than if connected on one side only. It is, then, as 1 conceive, most certain, that, after the policy was made, the hazard of destruction by fire was increased.
2. Was this increase of hazard by means under the control of the insured? By the state of facts existing at the time of the contract, this must be determined, unless an alteration takes place, by means which the insured could not have controlled. In this case, tile land, on which the building connecting the insured building after the contract with other buildings, was, at the time of effecting the policy, the property of the plaintiff He could, therefore, prevent that building from being erected. If it was erected by another, in consequence of an alienation of the land on which it was erected, then the means of erecting it was the alienation, which might have been omitted; and of consequence the erection itself might have been controlled by the plaintiff It does, on the whole, appear most clear to me, that after the policy was made, the hazard of destruction by fire was increased by means which might have been controlled by the plaintiff, and that thereby the contract of the defendants is discharged.
Nor do I think that the plaintiff is aided by the verdict. The verdict has found, it is true, that the premises were not repaired or enlarged, whereby the risk by fire was rendered greater. The jury, it seems to me, by the verdict have found only the legal inference. From the nature of the contract, in relation to the subject matter, the question was, whether the hazard had been increased by means under the control of the plaintiff Now, there has been erected, by means under his control, a building connecting the insured premises with buildings with which it was not connected at the time of the contract; and the inference is, in my opinion, irresistible, that thereby «the risk by fire was rendered greater." The issue, therefore, on which the verdict was rendered, was, I think, immaterial, and so the finding of the jury ought not to conclude tí e parties against the truth of the facts.