Court Opinion

ID: 4004329
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:05:33.669562+00
Date Added: 2024-06-11T07:44:35.416742
License: Public Domain

I am unable to give concurrence to the foregoing decision. *Page 343 
The policy provides that "if the property insured under this policy become encumbered without the written consent of the company, then this policy shall be null and void." The plaintiff did place an encumbrance (deed of trust) on the property without the written consent of the company, and, in fact, without its knowledge.
The majority of the court holds that this encumbrance did not avoid the policy under the above contractual provision because it was created subsequent to the application and prior to the issuance of the policy; that the insurer assumed all risk of change of status of the property between the date of the application and the date of the policy.
The conclusion, I submit, is not consonant with fair dealing, nor within the spirit and purpose of the contractual provision quoted. It is obvious that insurance companies should be reluctant to insure encumbered buildings against fire. If an insured, after truthfully stating that his property is unencumbered, may with legal propriety, hastily encumber it without the knowledge of the insurer, before the policy is issued, opportunity for fraud is thereby greatly fostered.
The interim here between date of application and date of policy was thirty-five days. The principle applied by the majority would be just the same if the interim were two hours. At 10 A.M. an applicant for a fire insurance policy might truthfully represent to the insurance company that the property was wholly unencumbered; yet between that hour and the issuance of the policy at noon the applicant might secretly encumber the property. Under the majority opinion, such fraudulent conduct of the insured would not void the policy because, forsooth, it was the duty of the insurer to discover the iniquity.
A contract of insurance is a contract uberrima fides (utmost good faith). 65 Corpus Juris, p. 1187. The good faith essential to such a situation must be manifested by the insured as well as the insurer. The requirement is reciprocal.
In my opinion the authorities relied on do not sustain the decision.
For these reasons I think the judgment should be reversed.
Judge Hatcher authorizes me to say he concurs in this dissent. *Page 344