National Union Fire Insurance Co. v. Hall , 233 Ky. 337 ( 1930 )

An insurance policy, though denominated a contract, differs materially from an ordinary contract. In the making of the latter each of the contracting parties has a voice. Whether issued by one company or another, insurance policies are substantially alike, and are prepared in advance. In the making of the policy the insured has no voice, but is placed in a situation where he must either reject the policy and do without insurance, or accept it as written. Because of this, and of the further fact that insurance is affected with a public interest, the right of an insurance company to incorporate in its policies such provisions as it may desire is subject to the limitation that conditions avoiding the policy shall not be unreasonable, or such as to operate as a fraud on the insured. Metropolitan Life Ins. Co. v. Walters, 215 Ky. 379,285 S.W. 252, 60 A.L.R. 194. Sometimes courts uphold policy provisions without foreseeing the serious consequences that will follow. Then when a hardship is presented they try to meet the situation by trimming the provision down, or holding it inapplicable to the particular facts presented. In my opinion the only proper course for the courts to pursue is to project themselves into the future and consider the validity of a provision in the light of the consequences that will follow, and if it appears that the enforcement of the provision will work oppressively, or operate as a fraud on the policyholder, they should meet the situation squarely and declare the provision invalid. The provision of which I desire to treat is that the policy shall be void "if the subject of insurance be a building on ground not owned by the insured in fee simple." Fire insurance companies insure property and not titles. They are concerned with the ownership of the property only to the extent that there shall be no motive on the part of the insured to destroy the property or neglect its proper care, and clearly this situation may be met by a provision less drastic. The maxim, "Ignorantia legis neminem excusat," has many exceptions. It is going far to say that every lawyer is presumed to know the intricacies of real estate law. It is going too far to say that every layman in dealing with an insurance company is charged with such knowledge. For reasons that appellee did not and could not understand the deed under which she held was invalid. Notwithstanding this fact she had bought, paid for, and was in possession of, the property under a deed apparently valid and purporting to convey the fee-simple title. She believed in good faith, and had reasonable grounds to believe, that she was the owner of the property. Neither her grantor nor any one else was asserting any claim to the property. On the contrary, her grantor recognized her as the owner of the property, promptly confirmed her title, and the situation was such that the loss would fall upon her if the property were destroyed by fire. In the circumstances the temptation to destroy or neglect the proper care of the property was wholly lacking, and yet the provision in question deprived her of the insurance. The resulting hardship is apparent, and nothing more is needed to show the unreasonableness of the provision. Notwithstanding this fact there might be some reason for upholding the provision if the case were exceptional. As a matter of fact, however, the case is not uncommon. On the contrary, fee-simple titles are the exception in many sections of our commonwealth, and if the provision be upheld it will be an easy matter for insurance companies to defend successfully in nearly every case on the ground that the insured had no fee simple title. Not only will investigations made for the purpose of defense result in numerous lawsuits against property owners resting secure in the belief that they are the real owners of the property, but a large percentage of the insurance now or hereafter carried will be invalidated. Not being able to uphold the validity of the provision without shutting my eyes to the oppressive hardships and serious injustice that will necessarily follow, I am constrained to the view that the provision is unreasonable, and therefore invalid.

I am authorized to say that Judges WILLIS and LOGAN concur in this dissent.