Court Opinion

ID: 8046450
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:59:54.376423+00
Date Added: 2024-06-11T09:04:48.029477
License: Public Domain

Sawyer, J.
By the express terms of the policy, the rules and regulations of the company which are annexed, and the application on which it was issued, are made parts of the contract. They are to be regarded as incorporated into the policy ; and, in order to determine what the agreement is, it is necessary to look to the policy, application and rules, as together constituting the contract and expressing its terms, and the conditions and limitations of the defendants’ liability under it.
In the application it is stated, in answer to an inquiry made by the company, that the property is not encumbered by mortgage or otherwise. The application contains a covenant by the insured, in express terms, that the representations therein expressed are a just, full and true exposition of all the facts and circumstances in regard to the condition, situation, value and risk of the property, so far as the same are known to the applicants, and are material to the risk. This representation is false in fact, as the property, at the time of the application and the issuing of the policy, was encumbered by a mortgage for five thousand dollars. This, of course, must be understood to have been known to the applicants, and it was in law a matter material to the risk. The incumbrance was for a substantial amount, and was not merely nominal in its character. It seriously affected the value of the plaintiffs’ title, and the extent of their interest in the property, and gave to other parties a large insurable interest in it. Whether the defendant company might or not have a lien upon the property for the security of the premium note, it was material to them to be correctly informed as to the existence of such an encumbrance, in order to enable them to exercise a proper discretion in determining the rate of insurance, the amount to be insured, and the security to be required for the payment of assessments upon the deposit note. It may readily be conceived that the company might have declined to insure so large an *345amount, if they had understood that there were mortgagees having so large an insurable interest that they might with propriety also obtain insurance to an equal or greater amount, and that they might have insisted upon a higher rate of insurance and better security, if they had understood that the substantial value of the applicant’s interest was in fact $5,000 less than it was represented to be. ¥e think it clear that, when the title of the insured is made the subject of special enquiry by the insurers, in reference to the existence of incumbrances upon it, the matter becomes material, and the representation is material to the risk, not so much because, if false, the property as represented would seem to be less exposed to conflagration than it actually is in its true condition, but because the matter which is the subject of the misrepresentation is material to be fairly and truly disclosed, in order to enable the company to judge correctly in reference to the propriety of assuming the risk, and the terms upon which it is to be taken. The article of the rules and regulations which declares that the policy shall be void if the application does not contain a full, fair and substantially true representation of all the facts and circumstances respecting the property, so far as they are material to the risk, is to be construed in the same sense, as equivalent to saying, so far as it may be material to the company to know them, in order to estimate the risk correctly. The materiality of the facts and circumstances is not to be understood as limited to their direct effect, in exposing the property to more or less danger from fire, but as extending to all other considerations necessarily affecting the nature and character of the risk.
These views are fully sustained by the authorities cited by the defendants’ counsel, and they would seem to be decisive of the case.
There is nothing for the jury upon this point, as the falsity of the representation is admitted, and its materiality appears as matter of law.
*346The undertaking of the defendants was to pay in ease of loss, provided the representations contained in the application, so far as they were material to the risk, were substantially true. The representation, in reference' to the encumbrance, is entirely false, by reason of an encumbrance of a substantial amount. This is material to the risk, within the meaning of the contract, and the defendants are thereby exonerated from liability under it.

Judgment for the defendants.