Protection Insurance v. Hall , 54 Ky. 411 ( 1854 )

Chief Justice Marshall

delivered the opinion of the Court—

This action was brought by Hall & Gideon, carpenters or house-joiners, on a policy of insurance issued by the defendants, on the 3d of August, 1852, insuring the plaintiffs for three months against loss or da^tiiage by fire, “to the amount of three thousand five hundred dollars, on their work done on the two story brick house now being finished, belonging to the estate of John W. Tibbatts,” the loss to be paid in sixty days after its occurrence.' On the 27th of August,' 1852, the house was destroyed by fire; and in November of the same year, the plaintiffs, having previously complied, with the requisitions of the policy in case of loss, and not having been paid within sixty days nor afterwards, commenced this action b-y a petition, which refers to the policy as filed and made a part thereof. A demurrer to the petition having been overruled, the defendants filed their answer, in which they deny that the plaintiffs had, at the time of procuring the policy, any lien or other insurable interest in their work done upon the house mentioned. As the ground of this denial, and also as a specific ground for avoiding the policy, they alleged that the plaintiffs had agreed to do the work on the house at thirty-three and one-third per cent, on the bill of prices, and to take, in payment, lots in Newport; that they had selected and taken possession of the lots, for which they gave their note, or notes, to Tibbatts for $1,600, with an indorsement thereon that the same might be discharged in work on his house, at the rate above mentioned, which facts they say were unknown to the defendants, and were fraudulently and designedly concealed from them in order to procure insurance to the amount of $3,500, which they say could not have been done if they had known said facts, and they aver that this was known to the plaintiffs. They also allege that by the concealment of these facts their risk was increased; and further, that the plaintiffs procured the policy by falsely and fraudulently representing that the value of their work done on said building on the 3d of August, 1852, was $4,500, when it was, in fact, worth not more than $3,000, of which plaintiffs had received a large amount in said lots, which was fraudulently concealed. They say the plaintiffs had not an interest of $4,500 in said work, as fraudulently represented by them; and they insist that the facts aforesaid, and the concealment and misrepresentation thereof, rendered void the policy, which, in one of the conditions thereto annexed, and made part of it, declares that in a valued policy, an overvaluation shall render absolutely void a policy insuring on such overvaluation. Up on the issue made by this answer there were two trials , in each of which a verdict was found for the plain - tiffs. This record contains only the evidence and opinions of the court delivered on the last trial, in which the jury, under instructions from the court, found for the plaintiff $3,832, being the amount insured,- with interest thereon from the end of sixty days after the loss. The contract for the work, as alleged in the answer, was proved ; also, the selection of the lots by the plaintiffs and the conveyance of at least three of them, they still claiming the fourth. But it was also proved that after they had done considerable work on the house in question, and inclosed- it, there being some delay in furnishing ma-rials by Tibbatts, the plaintiffs, under his employment, went to Ohio, and worked on a house which he was having built near Urbana, for which they were be paid one-half in cash, and one-half in lots; and that after their return, and before the insurance was obtained, there was evidence that three of the lots were conveyed to them in payment for the work done in Ohio, and that the amount due on their note or notes aforesaid was credited to .Tibbatts on that job, and fully settled. It does not appear, however, that the defendants were informed of any part of these transactions until after the loss had occurred. It was also proved on the part of the plaintiffs, by the agent of the defendants by whom the insurance was made and the policy delivered, that being struck with the amount of work for which insurance was asked, he went to look at the house, but took the statement of the plaintiffs as to the value of the work, and made them indorse the survey, and that said indorsement is in their own hand writing. On his subsequent examination by the defendants, he made substantially the same statement, and produced the survey, signed by the plaintiffs, in which the eleventh interrogatory is : What is the present cash value of the property ? And the answer is: “$4,500 at least.” And one of the plaintiffs, being called on by the defendants to testify, stated, that “when he placed the value in the survey offered by defendants, and applied for insurance, he included in said estimated value not only the work then done, but that which he- expected to do in completing the house.” That at the time, “he thought the work then done was worth fully $3,600, and he included the work intended to be performed, which he thought would amount to $4,500, and that was the reason why he informed the agent that the value of the work was worth $4,500.” But he does not say that he informed the agent that he included in his estimate $900 worth of work not then done. And to the special interrogatory as to present value, he answered, “$4,500 at least” — although that sum exceeded his own real estimate of the actual present value by $900. Other witnesses estimate the value of the work done at the date of the insurance, some higher and some lower than $3,600, it being stated in the bill of exceptions that it was proved to have been worth from $3,000 to $3,600. The fourth condition of the policy, which contains the provision before referred to, with respect to the consequences of overvaluation states also, “that the office (that is, the company,) will be responsible for the accuracy of surveys and valuations made by its agents.”

Upon this evidence, the court instructed the jury, on motion of the plaintiffs, that if the defendants insured the work of plaintiffs on the house for $3,500, on the 3d of August, and the house was consumed on the 27th of the same month, without any neglect, cause, or agency of the plaintiffs, the jury should find that sum for the plaintiffs, with interest from sixty days after the house was burnt. And two instructions moved for by the defendants having been refused, the court, in lieu thereof, instructed the jury that if the defendants relied upon the valuation fixed by the plaintiffs, or either of them, upon the work in question, and the plaintiffs knowingly overvalued it, and by that means obtained the policy sued on, the policy is void, and they must find for the defendants. But if they believed that the agent of defendants made a survey of said work, and that on examination and valuation thereof by said agent, the plaintiffs, or either of them, expressed an opinion of the value thereof, in which said agent acquiesced, and thereupon issued said policy to plaintiffs, they must find for the plaintiffs, although they may believe that the valuation so made by them was erroneous.

The instruction given for the plaintiffs could only be justified upon the ground that upon the evidence the court had a right to assume-, 1st. That the plaintiffs had an insurable interest in the work which was the subject of the insurance. 2di That that interest was worth, at the date of the policy, at least the sum of $3,500 insured upon it; and 3d. That the plaintiffs had neither done nor omitted anything, by reason of which the policy was void, or by which their recovery should be reduced. And in each of these assumptions, and especially in the two last, there were involved questions of fact depending on inconclusive evidence, and which, therefore, should have been submitted to the jury. The facts submitted by the instruction were uncontested in the pleadings and evidence, and the instruction was, in effect, peremptory, and was, upon the evidence, erroneous and prejudicial. This error would scarcely have been cured by the subsequent instructions given in lieu of those asked for by the defendants, if they had been entirely correct, and had covered the whole case. For the jury would still have had before them the instruction requiring them to find for the plaintiffs if they believed that the policy was executed by the defendants, aiid that the house was afterwards, in the same month, and without the fault of the plaintiffs, consumed by fire.

But the subsequent instructions are themselves erroneous and misleading. There is no proof that the agent of the defendants made any survey or valuation of the work, or attempted or pretended to do so, and the jury were not authorized by any evidence in the record to find that he did. He says he relied on the plaintiff’s valuation; and although he saw the building, and may have looked at the work, there is no evidence that he was capable of valuing it by merely looking at it, or even by measurement, or that he had any such knowledge of the contract under which it was done as would have enabled him, even if he had the requisite skill, to estimate its value under the contract; which alone constituted the interest of the plaintiffs in it as far as the work was done. Moreover the survey containing the valuation was signed, not by the agent, but by the plaintiffs, which makes it their act and not his. And one of them not only states that he placed the value in the survey, but admits that he placed it there considerably higher, (25 per cent, higher,) than his own estimate of the value of the work actually done, his reason for which he states in his testimony. But he does not say that he informed the agent of the fact, that he was including in his estimate work which he expected to do, but which had not been done. And assuming, as in reason must be done, that his estimate of his own work was sufficiently high, the fact that the agent acted upon or acquiesced in his valuation made not only upon work done but also on a large quantity of work anticipated or expected to be done, and not then to be seen or valued, tends most strongly to prove that the agent did rely upon the presumed knowledge and fairness of the plaintiff, and did not exercise or trust to his own judgment; or, if he had no judgment on the subject, it is but the more certain that he was imposed upon and deceived by the valuation which one of the plaintiffs professed to place upon his own work actually done, but in which he included work not done, and as to which, if it was the proper subject of insurance at all, the insurer should at least have had the opportunity, by full information on the subject, of determining whether he would insure it or not. In the absence of such information, the agent had a right to rely upon the valuation made^by the plaintiff as fairly estimated upon the work done. His taking it as a part of the survey signed by the plaintiffs, shows that he did rely upon it and make it the basis of the insurance, which if the true value had been stated would hardly have been made for a sum but one hundred dollars less than that value. The overvaluation then was a means of getting insurance for a larger sum than would otherwise have been insured upon the work. A small overvaluation, or such as might be reasonably accounted for on the ground of difference of opinion, might not, even under the fourth condition which has been referred to, have vitiated the policy. But if the overvaluation be serious and knowingly made, or made upon work not done, or a subject not in existence, and that fact not disclosed, whatever may have been the particular motive, and it could scarcely have been anything else than to get a greater sum insured, it must under the general principles of the law of insurance, as well as on the ground of the condition which has been noticed, be deemed a sufficient cause for avoiding the policy. Insurers against fire or other casualties would often have but a slight guaranty against loss, if they insure to an amount equal to or nearly approximating the total value of the subject insured: hence the usage, almost universal, of risking but a portion of the loss to which the subject is liable, and thus leaving to the insured, in the remaining hazard of loss to himself, a motive in his own self interest for care and precaution.

. 1. Though a small over valuation of property made by the assured when obtaining insurance, such as might result from difference in opinion, would not vitiate a policy, yet if the over valuation be serious, and knowingly made, and (in case of work in progress,) upon work not in fact done, it will vitiate the policy.

Under the first branch of the instruction under consideration, the jury could scarcely have failed to find, that the defendants relied upon the valuation made by one of the plaintiffs, and that he had knowingly overvalued the work done, and by that means obtained the policy sued on. But when they were informed, as by the latter branch of the instruction they would understand, that they might find that the defendants made a survey of the work, that their agent examined and valued it, and that the positive statement of value placed by them in the survey might be regarded as a mere opinion, and that the talcing of the survey by the agent with the valuation of the plaintiffs in it and signed by themselves, might be regarded as mere acquiescense in their opinion, and not as their valuation and survey, a ground or some ground was furnished for a verdict against the defendants by these assumptions, for which we think there was no sufficient foundation either in the evidence or the law of the case.

2. It is error for the court to give to the jury an instructiohn hypothecated upon a fact which the jury are not authorized to find to be true from the evidence. 3. Builders who undertake to build and receive compensation upon performance of the work, have an insurable interest in the work so far as done at the time insurance is obtained.

The first branch of this instruction was erroneous, because it required that the overvaluation should have been knowingly made by the plaintiffs or one of them. But it may not have been prejudicial, because the jury were bound to find that the overvaluation was knowingly made. The last branch of the instruction is erroneous, because it assumes that the jury might find facts which the evidence did not authorize them to find. The instruction given for the plaintiffs has been shown to be erroneous, and as this required a verdict for the plaintiffs on undisputed facts, the verdict was presumably affected by that instruction, or by the instructions given in lieu of those asked for by the defendants.

Upon the question of an insurable interest which has been much insisted on, we observe that the policy says nothing about a mechanic’s lien which the plaintiffs claimed or might have on the building which they were working on, but merely describes the subject as their work done on an unfinished house, &c. This we suppose may have been a proper subject of insurance irrespective of the lien, if the right to compensation from the employer, Tibbatts, depended on the completion of the house, that is, if by contract or custom they were not to be paid until the house was finished. The facts upon this subject do not clearly appear. But as the house was not finished and the plaintiffs were at work for its completion, when the insurance was obtained, we are inclined to think that if the arrangement by which particular lots were to be taken in payment had been changed by the appropriation of those lots to the payment for other work, there was an inchoate lien on the work in question at the time of the insurance, although by the original and still subsisting agreement the plaintiffs were to take lots in payment for their work done and to be done on the house. That agreement being in parol was unenforceable, and it does not appear that it was in the power of Tibbatts to convey any lots in compliance with it. The conveyances actually made were made by the trustee of Mrs. Tibbatts, and as he understood for the Ohio work. We do not perceive that the mechanic’s lien might not exist as a security for the conveyance of lots in payment of work done on a house, as well as for the payment of money for the same work, and especially if the agreement to pay in lots be unenforceable. But we are of opinion that the existence and nature of such an agreement, whether enforceable or not, should have been communicated to the insurers to enable them to judge of the value of the risk, and to determine whether they would make the insurance desired. But the effect of the failure to communicate such a fact upon the validity of the policy itself, depends upon its materiality to the risk, and we cannot upon the facts now appearing determine that question. We can say, however, that if the plaintiffs have received a conveyance of any of said lots in payment for their work done on the house to which the policy relates, or if they have an enforceable and available contract for such conveyance, the defendants are entitled to have a deduction from their liability by a diminution of the damages, if there be a verdict against them, to the extent of the value of such lot or lots as fixed in the contract.

4. It is the duty of the assured when obtaining insurance to communicate to the insurer every fact calculated to have influence in fixing the value of the subject of insur anee.

The bill of exceptions does not state that the second instruction asked for by the plaintiffs was given. And as the principles of this opinion cover the whole case as now presented, we deem it unnecessary to state either the second instruction asked for by the plaintiffs, or the two which were moved for by the defendants.

But, for the errors which have been noticed, the judgment is reversed, and the cause remanded for a new trial in conformity with this opinion.