Case Name: Bowditch Mutual Fire Insurance Company vs. Isaac Winslow & others
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1857-03
Citations: 8 Gray 38
Docket Number: 
Parties: Bowditch Mutual Fire Insurance Company vs. Isaac Winslow & others.
Judges: 
Reporter: Massachusetts Reports
Volume: 74
Pages: 38–52

Head Matter:
Bowditch Mutual Fire Insurance Company vs. Isaac Winslow & others.
An application to a mutual fire insurance company for insurance on buildings contained the following question and answer: “ State whether or not incumbered, to whom, and to what amount: ” “ Mortgaged for $2,000 on the buildings, land, &e.—value $7,000; ” and concluded with an agreement of the applicant “ that the foregoing is a just, full and true exposition of all the facts and circumstances in regard to the condition, situation, value and risk of the property to be insured, so far as the same are known to the applicant, and are material to the risk; and in case of insurance he holds himself bound by the act of incorporation and by-laws of the company.” The policy was also made subject to the provisions and conditions of the by-laws; and one of the by-laws provided that the policy should be void, unless the true title of the assured should be expressed in the application. The policy also expressed the intention of the company to rely on their lien on the interest of the insured in the buildings and the land under the same. At the time of the application, the land on which these buildings stood, and a larger piece of land, owned by the same person, but separated by a court laid out between them by the owner, were both subject to a mortgage for $2,000 to J. S., and to another mortgage for $800 to another party; and the value of the first piece of land and buildings was $7,000. The assured afterwards indorsed upon the policy an assignment reciting his “having mortgaged the property within mentioned to J. S.” and assigning the policy to him as collateral security; and the company assented in writing to this assignment. Held, that the failure to disclose the mortgage for $800, in the original application, avoided the policy in the hands of the assignee.
Writ of review. The original action was assumpsit upon a policy of insurance, dated June 16th 1847, by which the plaintiffs in review insured Joseph Morrill $1,600 upon his soap and candle shop, fixtures, stock and tools, in Roxbury, “ subject to the provisions and conditions of the charter and by-laws of said corporation, and the lien on the interest of the person insured in any building covered by this policy, and the land under the same,” which lien the company expressed in the policy their intention to rely on, to secure the payment of assessments.
Indorsed upon the policy was the following assignment: “ Having mortgaged the property, real and personal, within mentioned, to Isaac Winslow & Sons, merchants of Boston, I hereby assign to them or their assigns the within policy, to hold as collatera. security for the performance of the condition of said mortgage Dated at Boston, July 16th 1847. Joseph Morrill.
“ The directors consent. John T. Burnham, Secretary.”
Among the by-laws were the following : “ Art. 9. If the insured shall neglect for the space of ten days, when personally called on, or after notice in writing left at his last and usua. place of abode or business, to pay any assessment, the risk of the company on the policy shall be suspended till the same is paid.”
“ Art. 11. When any property insured shall be alienated by sale or otherwise, the policy shall thereupon be void, and be surrendered to the directors to be cancelled; but if the grantee oi alienee have the policy assigned to him, he may, upon application to the directors, within thirty days next after such alienation, on giving proper security, have the same ratified and continued in force for his benefit, with all the rights, and subject to all the liabilities, to which the original party insured was entitled and subjected: Provided, that such alienation shall not affect the rights of any person to whom the policy shall be payable, or be assigned as collateral security, if such person shall have assigned a premium note with the assured, or shall give such security as the directors require.”
“ Art. 17. Any policy issued by this company shall be void, unless the true title of the assured be expressed in the proposal or application for insurance.”
“ Art. 19. The applicant for insurance shall make a true representation of the property on which he requests insurance, so far as concerns the risk and value thereof, and of his title and interest therein.”
The application (which was made part of the policy) contained, among others, the following question and answer: “ State whether or not incumbered, to whom, and to what amount.” Answer. “ Mortgaged for $2,000 on the buildings, land, See.— value $7,000.” And the application concluded with the following clause: “ The said applicant hereby covenants and agrees to and with said company, that the foregoing is a just, full and true exposition of all the facts and circumstances in regard to the condition, situation, value and risk of the property to be insured, so far as the same are known to the applicant, and are materia] to the risk; and in case of insurance he holds himself bound by the act of incorporation and by-laws of said company.”
The parties submitted the case to the court upon a statement of facts, of which the policy, assignment, charter and by-laws, and application were made parts, and the material part of the residue of which was as follows :
“ At the time of the application for insurance, the premises ■ were owned by Joseph Morrill, and were subject to a mortgage to the plaintiffs for $2,000, and also to an earlier mortgage to the Traders’ Bank for $800. But both these mortgages covered four lots of land, two on the northwesterly side of High Street Court, containing 3,291| feet, and two on the opposite side of said court, containing 4,2601 feet, entirely separated by said court from the two lots first mentioned. The buildings insured stood on the first two lots only, and were built after the making of the mortgage to the Traders’ Bank, and before the making of the other mortgage; and the value of said two lots and buildings thereon was $7,000. The four lots have never been conveyed separately, but have always been owned together, and originally constituted one lot, through which High Street Courl was laid out by the owner before either of said mortgages was made. The mortgage to the Traders’ Bank remained in force till the time of the fire, and under it- the bank took possession for the purpose of foreclosure after the making of the policy.”
“ The directors of the company did not, either at or since the time of assenting to the assignment of the policy to the defendants in review, claim of them any premium note or Other security, and the said defendants have never given any such note or security.
“ More than ten days before the fire, an assessment was laid, and notice thereof given to Morrill, and he agreed to pay it, if the agent of the company would call upon him on a certain day, which happened to be the day on the night of which the fire occurred. He called accordingly, and did not find Morrill. That night the fire happened. The next morning Morrill paid the assessment. The defendants in review did not know of the assessment, arid were never asked to pay it.
“ If, on the foregoing facts, a jury would be warranted in finding a verdict for the defendants in review, in this action, brought in their names, judgment is to be rendered for them and the case referred to an assessor to settle the amount of damages; otherwise, judgment to be entered for the plaintiffs in review, and the former judgment reversed.” like this; and that, unless it is satisfactorily proved that such precautions were ordinarily used under like circumstances at that time, the plaintiff is not entitled to recover.”
O. P. Lord, for the plaintiffs in review.
H. Gray, Jr. for the defendants in review.
I. The assignment of the policy, with the assent of the insurance company, to the Winslows, who had an insurable interest in the property, created a new contract between the insurers and the Winslows, upon their interest in the property. Fogg v. Middlesex Mutual Fire Ins. Co. 10 Cush. 345, 346. Foster v. Equitable Mutual Fire Ins. Co. 2 Gray, 219. Clark v. Citizens' Mutual Ins. Co. Middlesex, 1853. The Winslows may therefore maintain this action in their own names. Kingsley v. New England Mutual Fire Ins. Co. 8 Cush. 393. Phillips v. Merrimack Mutual Fire Ins. Co. 10 Cush. 353. After such new contract, the Winslows were the insured, within the meaning of the 9th by-law; and their rights could not be affected by the subsequent failure of Morrill to pay an assessment, no demand for which had been made on them; nor by the fact that they never gave a deposit note, inasmuch as no such note was ever required of them by the company. Clark v. Citizens' Mutual Ins. Co. Middlesex, 1853. Wilson v. Hill, 3 Met. 69. Tillou v. Kingston Mutual Ins. Co. 7 Barb. 573, and 1 Seld. 408. Flanagan v. Camden Mutual Ins. Co. 1 Butcher, 513. Durar v. Hudson County Mutual Ins. Co. 4 Zab. 194—199, 203. New England Mutual Fire Ins. Co. v. Butler, 34 Maine, 454.
II. The failure to disclose the mortgage to the Traders’ Bank for $800 was not such a misrepresentation as makes void the contract of insurance with the Winslows; and this on three independent grounds:
(1.) The failure to state the name of the mortgagee, in the answer respecting incumbrances, in the application, cannot now be objected to, after the insurers have accepted that answer, and issued a policy thereon. Buffum v. Bowditch Mutual Fire Ins. Co. 10 Cush. 543. Strong v. Manufacturers’ Ins. Co. 10 Pick. 45. Gates v. Madison County Mutual Ins. Co. 2 Comst. 47, 48. This was therefore a policy on the interest of the assured, subject to a mortgage of not more than $2,000 to some person other than the assured; for if it was less, the assured cannot complain. Liscom v. Boston Mutual Fire Ins. Co. 9 Met. 205. The new contract with the Winslows was therefore valid, whatever may have been the validity of the original contract with Morrill.
(2.) It is sufficient if the representations as to incumbrances, in the application, are substantially correct. Houghton v. Manufacturers’ Mutual Fire Ins. Co. 8 Met. 114. Underhill v. Agawam Mutual Fire Ins. Co. 6 Cush. 440. Liscom v. Boston Mutual Fire Ins. Co. 9 Met. 205. Buffum v. Bowditch Mutual Fire Ins. Co. 10 Cush. 540. Allen v. Charlestown Mutual Fire Ins. Co. 5 Gray, 384. Clapp v. Union Mutual Fire Ins. Co. 7 Foster, 143. Dunstable Baptist Society v. Hillsborough Mutual Fire Ins. Co. 19 N. H. 580. And as much of the $2,800 of incumbrances was disclosed as belonged to those two, (out of the four lots mortgaged,) on which the property insured stood. Brown v. Worcester Bank, 8 Met. 51. Rev. Sts. c. 37, § 37. Stevens v. Cooper, 1 Johns. Ch. 430.
(3.) The application, being expressly made part of the policy, is to be construed as if the two were moulded into one instrument. Burritt v. Saratoga County Mutual Fire Ins. Co. 5 Hill, 191. Morrill’s covenant in the application, as to the truth of the representations, was limited to those “ material to the risk.” This limits the more general stipulation in the 17th and 19th by-laws annexed to the policy. Line v. Stephenson, 5 Bing. N. C. 183, and 4 Bing. N. C. 678. The additional mortgage was clearly not material to the risk.
The further covenant that, “in case of insurance, he holds himself bound by the act of incorporation and by-laws of said company,” must be construed to mean “ in case of valid insurance.” Jackson v. Massachusetts Mutual Fire Ins. Co. 23 Pick. 423. Clark v. New England Mutual Fire Ins. Co. 6 Cush. 347-353. Clauses introduced for the benefit of the insurers are to be continued most strongly against them. Palmer v. Warren Ins. Co. 1 Story R. 364. Wall v. Howard Ins. Co. 14 Barb. 385, 386.

Opinion:
Dewey, J.
Assuming that by force of the assignment to the Winslows by Morrill, with the assent thereto of the plaintiffs in review, the action was properly brought in the name of the Winslows, the further inquiry is as to the sufficiency of the defence to the original action. This is placed upon two grounds, first, the false representation of Morrill, in his application for a policy, as to the extent of the incumbrances upon the property ; secondly, a failure on the part of Morrill to pay an assessment upon his policy, within the time specified in the by-law, whereby the policy was forfeited, and the company discharged from further liability. As to the second ground of defence, it arises upon facts happening after the assignment of the policy to the Winslows, and it is contended on their behalf, that the Wins-lows are not properly chargeable therefor, the neglect being that of Morrill only, and there not having been any demand upon them for the payment of the assessment. Whether this position can be maintained, we have not found it necessary particularly to consider; for, whatever may be the rule of law as to the effect of a violation of the by-laws or stipulations in the policy, after the assignment by Morrill, we suppose no doubt can exist as to the right of the insurance company to show that this policy was defeated by reason of misrepresentations of the assured made in his original application for the policy. This assignment transferred the policy of Morrill only. It did not profess to create a new policy. The Winslows assumed no responsibility to the insurance company, gave no new deposit note to the company, nor any guaranty of Morrill's note; in fact, did nothing more than to succeed to Morrill's right and interest in the policy, whatever those might be. The question is, virtually, whether as a policy to Morrill there exists a valid defence to it.
It now appears that there was in the original application of Morrill a material misrepresentation as to the extent of the incumbrances upon the property. In answer to the direct inquiries as to whom and to what amount it was mortgaged, it was stated to be mortgaged for two thousand dollars. It was in fact mortgaged not only for the two thousand dollars, but in a distinct mortgage for the further sum of eight hundred dollars. This false statement as to the incumbrances, in answer to a direct question, under the repeated decisions of this court, and as it seems also to have been held in reference to this particular case, upon the hearing of the petition for review, renders the policy invalid. Bowditch Mutual Fire Ins. Co. v. Winslow, 3 Gray, 431, and cases cited. It was invalid originally in the hands of Morrill, and equally so in the hands of the party claiming under him.
In answer to this, it is now urged that after the assignment to the Winslows this objection was obviated, as the assignment recites that " having mortgaged the property within mentioned to Isaac Winslow & Sons, I hereby assign to them or their assigns the within policy, to hold as collateral security for the performance of the condition of said mortgage." It is true that after this transfer to the Winslows, the policy was held by the persons who were the mortgagees in the two thousand dollar mortgage. Except as to those authorized to receive the avails of this policy in case of loss, there was no other outstanding mortgage than th:3 eight hundred dollar mortgage to the Traders' Bank. But we do not see how this changes the aspect of the case, or removes the objection. The recital as to the mortgage to the Wins- lows was only a restatement of what had been stated in the original application, and the assignment of the policy did not discharge that incumbrance or lessen the whole amount of incumbrances on the property insured. As already remarked, the Winslows did not by this indorsement take a new policy as mortgagees, but a transfer of Morrill's interest in the policy he had obtained.
It is further urged that the falsity of the representations of Morrill ought not to affect the policy, unless material to the risk, and that the value of the property insured was so large, that the omission of the eight hundred dollar mortgage was not material to the risk. But this is no sufficient answer, as the party applying for the policy was bound, in answering the interrogatories, to answer truly; and having made a false statement in this respect, he has thereby rendered the policy of no effect. This seems to us to have been distinctly ruled in the former decision of the court in this case. 3 Gray, 432. We see nothing in the present aspect of this case to lead us to change the opinion there expressed; and the result is therefore that the original action against the company cannot be maintained, and there must be
Judgment for the plaintiffs in review.