Court Opinion

ID: 9661271
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:34:07.926693+00
Date Added: 2024-06-11T18:14:26.931218
License: Public Domain

VOGEL, Justice,
dissenting.
I dissent. The judgment below is correct, and should be affirmed.
The dispute in this case is over the interpretation of Section 26-18-08, N.D.C.C. It provides that the stated amount of the insurance written in a fire-insurance policy shall be taken conclusively to be the true value of the property insured when the insured property “shall be destroyed by fire without fraud on the part of the insured or his assigns, . . .”
As I read this statute and the relevant case law, only fraud subsequent to the issuance of the policy can be a defense.
I do not read the North Dakota cases, Horswill v. North Dakota Mutual Fire Insurance Co., 45 N.D. 600, 178 N.W. 798 (1920), and Jakober v. Commercial Union Assurance Co., 49 N.D. 270, 191 N.W. 480 (1922), as having decided that fraud in the obtaining of the policy is a defense. While there is language in both cases to support the majority view, I believe it is dictum under the facts of both cases. In Jakober, 191 N.W. at 481, Judge Christianson, in a concurring opinion, points this out. He says:
*310“Whether section 6624, supra [now § 26-18-08, N.D.C.C.], precludes the insurer from asserting as a defense that he was induced to overvalue the property in the policy as a result of fraudulent representations on the part of the insured need not be determined in this case.”
In the Jakober case the jury was given the issue of whether the plaintiff signed the application with the intent to misrepresent the facts or deceive the defendant," and the jury found that he did not, but since the jury also found that the value of the property at the time of the loss was equal to the amount of insurance, the question of whether the application was false or not was really immaterial. The decision is puzzling, but I think the holding is really found in syllabus by the court ¶ 2, 191 N.W. at 480, which reads:
“There was no fraud in the destruction of the property. The loss was total. In these circumstances, under the provisions of section 6624, Comp.Laws 1913, plaintiff was entitled to recover the amount of insurance written in the policy, or $800.”
If this is the true basis of the holding, then the case really supports my dissent and not the majority opinion.
In the Horswill ease the court said [178 N.W. at 800] that the value of the property is determined
“. . .by the amount written in the policy, and, except for fraud, that amount is conclusive. The defendant could have ascertained the value before issuing its policy. If it did not do so, it should have. As it has failed to do so, and there is no fraud, it is bound by the amount for which the buildings are insured. It is not claimed in this case there is any fraud, and the record discloses none. The plaintiff did introduce competent testimony showing the value of the dwelling to be $3,800, but this was entirely unnecessary, and, in this case, entirely superfluous.”
I take this language to mean that the insurer is bound to ascertain the value of the property before issuing the insurance policy and, if it fails to do so, it is bound by the face amount stated in the policy. The reference to fraud, I believe, must refer to fraud in causing the loss or, perhaps, fraudulent acts after the issuance of the insurance policy which increased the risk. This seems to be the holding of Nathan v. Saint Paul Mutual Insurance Co., 243 Minn. 430, 68 N.W.2d 385, 390 (1955), in which the Minnesota Supreme Court concluded:
“. . . that the nature, use, and condition of a structure which reasonably are discoverable by an inspection at the time the fire insurance policy is issued or renewed cannot be shown by the insurer as proof that, relative to those matters, the insured committed intentional fraud or misrepresentations increasing the risk of loss. And failure to inspect shall not put the insurer in any better position than if an inspection had been made. To adopt the views of defendant would be to nullify the statutory duty of inspection and render the statute wholly ineffective.”
Minnesota, as the Nathan case points out, has a statute requiring that the insurance company cause the structure to be previously examined and its insurable value to be fixed and the amount thereof stated in the policy. North Dakota’s provision as to inspection is somewhat different. The North Dakota statutes, Sections 26-18-09 to 26-18-11, inclusive, apply to rating bureaus engaged in making rates or estimates for rates in this State and provide for review and hearings on complaints about ratings. They do not in specific terms require each risk to be rated. However, I believe that the language of Section 26-18-08, supra, read together with Horswill, supra, requires the insurance company to either make an inspection and determine the value of the property insured or else take the risk that it is overvalued.
If we were to reach the facts in this case, the insured would still be entitled to recover. The insurance company knew the actual value of the insured property at the time the policy was issued. It knew it because its agent knew it. Its agent who took the application was also the real estate agent who sold the property to the plaintiff. His knowledge is the company’s knowledge. *311He is an agent for the company. Sec. 26-07-02, N.D.C.C.; National Farmers Union Property & Casualty Co. v. Michaelson, 110 N.W.2d 431 (N.D.1961). Under Section 26-02-16, N.D.C.C., neither party to a contract of insurance is bound to communicate information which the other knows or ought to know. The insured could hardly commit fraud by failing to tell the company what the company, through its agent, already knew.
The authorities cited in Justice Sand’s opinion are unpersuasive. The quotation from 15 Couch on Insurance is supported by only two cases, with one cited contra. In Naiman v. Niagara Fire Insurance Co., 285 App.Div. 706, 140 N.Y.S.2d 494 (1955), the court specifically found that the policy in question was not a valued policy. Lumbermens Mutual Insurance Co. v. Edmister, 412 F.2d 351 (8th Cir. 1969), was decided on the basis that the sale of property by the insured after the policy was issued deprived him of an insurable interest. Thus this was a case where subsequent events deprived the insured of a right to collect on the policy. Day v. Hustisford Farmers’ Mutual Insurance Co., 192 Wis. 160, 212 N.W. 301 (1927), supports the statement made in Justice Sand’s opinion, but it cites no authority, and the statement is only dictum.
I would prefer to follow the rule of the Nathan case, discussed above, and Gamel v. Continental Insurance Co., 463 S.W.2d 590 (Mo.App.1971). That rule is that the insurance company is bound by the valuation stated in a valued policy, and the only fraud which will excuse it from paying the amount stated in the policy is fraud subsequent to the issuance of the policy or relating to the destruction of the property. I believe this is the rule in North Dakota [see syllabus by the court in Jakober v. Commercial Union Assurance Co., supra ]. It is also the rule which accomplishes the dual purpose of statutes such as Section 26-18-08, N.D.C.C. As stated in the majority opinion, that dual purpose is (1) to relieve the insured from the burden of proving the value of his property after its total destruction, and (2) to prevent overinsurance by discouraging insurance companies from collecting premiums on overvalued property, but then contesting value, and hence liability, when it becomes to their advantage to do so.
The majority seems to feel that it is wrong for the insured here to get a windfall by collecting more than the destroyed property may have been worth. I feel it is wrong to permit insurance companies to collect thousands of smaller windfalls each year in the form of inflated premiums based on over-valuations of property, so long as there is no loss, and then assert fraud on the part of the insured, in the hope of paying less than the agreed value, when a loss occurs. Both kinds of windfall .could be avoided by requiring insurance companies to inspect and appraise properties when they insure them. The majority opinion lets the companies have the best of both worlds, and lets the insured get the worst of it either way — too much premium, too little settlement in case of loss.
I would affirm the judgment of the trial court. It was correct. Summary judgment was properly granted where the only fraud alleged was prior to the issuance of the policy, since the only fraud which can properly be asserted as a defense is fraud occurring after the issuance of the policy.