
    Edward R. C. Clarkson and Others, Respondents, v. The Western Assurance Company, Appellant.
    
      Insurance of a vessel against fire — when concealment of the fact that oil had been •poured over the side of the vessel vitiates the policy.
    
    An owner of a vessel who procures an insurance against fire thereon, while it is moored at a dock many hundred miles distant from the place where the insurance is effected, and does not inform the insurer of the fact that such vessel, shortly before reaching the dock, was stranded and obliged to jettison a large number of barrels of oil, a portion of which was poured over the side of the • vessel, saturating it with oil and materially increasing the risk from tiré, is guilty of a concealment of a material fact which vitiates the contract of insurance.
    Ward, J., dissented.
    Appeal by the defendant, The Western Assurance Company, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Erie on the 21st day of October, 1897, upon the decision of the court rendered after a trial at the Erie Equity Term, and also from an order entered in said clerk’s office on the 14th day of October, 1897, denying the defendant’s motion for a new trial of the issues directed to be tried by a, jiiry and its motion to set aside the verdict rendered by the jury.
    In December, 1890, Charles H. Blakeslee and Melville F. Brown of Rochester, N. Y., who were doing business under the firm name of “ The Rochester Transportation Company,” purchased of the plaintiffs and one Thomas Maytham, since deceased, the steamer Northerner for the sum of $50,000. They paid $1,000 in cash and gave back a mortgage upon the steamer for the balance of the purchase price, upon which mortgage there was due at the time of the trial of this action the sum of $26,595.82.
    In March, 1892, Blakeslee and Brown chartered the Nm'therner to one Eber Ward of ,Detroit, Mich., for purposes of navigation upon the great lakes during that season. The “ season ” as ordinarily understood ends on the thirtieth of November, and policies of marine insurance generally expire at that time, but extensions are frequently granted in individual cases after that period at special rates.
    The Northerner left Buffalo on the 2d of December, 1892, in charge of one Captain McKinnon, who represented the charterer, and stopped at Cleveland where she took on her cargo, consisting of about 4,000 barrels of kerosene oil and a number of barrels of lubricating oil; leaving Cleveland on the fifth of December, the vessel stopped at St. Clair, where 100 tons of hay were added to the cargo; and again at Detroit, where more hay was taken on board, a portion of which was delivered to the consignee at Marquette. On the seventh of December the vessel was stranded at Keweenaw Point on Lake Superior, and remained in that position from five o’clock in the morning until about half past two o’clock in the afternoon. During this time about one-half of the kerosene oil and a considerable portion of the, lubricating oil was jettisoned, and by this means-the vessel was enabled to get afloat, but it was found that she was badly disabled and was leaking at the rate of ten inches an hour, and in this condition she made for the harbor of L’Anse, some thirty or forty miles distant from Keweenaw Point, which place she reached during the forenoon of December eighth.
    The original destination of the Northerner was Duluth, but owing to the accident which had occurred and the injury to the vessel which resulted therefrom, the trip was abandoned, the consignees of the cargo were notified of the fact, and arrangements were made, to lay the vessel up for the winter at L’Anse. In the meantime. the. marine insurance, by special arrangement, had been extended until such time as the vessel should reach its destination. Upon reaching L’Anse the owners and the charterer were informed by telegram of' the accident to the steamer and of the condition she was in, and in accordance with instructions received from them the captain and crew took steps to strip and dismantle the vessel, preparatory to mooring it for the winter; but, before the process of stripping had been completed, the captain was notified. that the underwriters desired the vessel to proceed to Duluth under charge of one Captain Rounds, who came on to L’Anse for that purpose. Upon ' receipt of these later instructions, the crew of the steamer proceeded . to put it in condition to proceed cm its way, but before the preparations were completed an altercation took pflace between Captain Rounds and Captain McKinnon which'resulted in the former abandoning the steamer, in consequence of which it remained moored at the dock at L’Anse.
    
      Upon receipt of the telegram announcing the arrival of the steamer at L’Anse, and on the morning of December ninth, Mr. Blabeslee, one of the owners, telegraphed Mr. Edwin T. Hitchcock, an insurance broker, residing in the city of Buffalo, to obtain fire insurance upon the vessel, and in accordance with such instructions Hitchcock went to the office of Smith, Davis & Co., insurance agents, and applied for $50,000 fire insurance. The application for this amount of insurance was declined, but the agents finally consented to insure for the sum of $45,000, distributing the risk among a number of the Companies which they represented, including the defendant, in which company it was agreed a policy of $6,000 should be issued. No policy, however, was issued at the time, and no premium was paid thereon ; but it was the custom of Smith, Davis & Co. to receive applications for insurance made by Mr. Hitchcock and to charge him with the premiums thereon, the policies being delivered at their convenience; and that was the understanding and agreement in this particular instance.
    On the twelfth of December, early in the forenoon, while moored at the dock at L’Anse, the Northerner was burned and totally destroyed. Thereafter Smith, Davis & Co. were tendered the proper premium for the defendant’s insurance, but they refused to receive the same or to deliver the policy which was demanded.
    Thereafter the interest of Blalceslee and Brown in the cause of action was assigned to the plaintiffs, and this action was commenced to compel the delivery by the defendant to the plaintiffs of a policy of insurance for $6,000, or the payment of the amount thereof. Issue was joined in the action and certain questions of fact were framed therein, all of which involved the inquiry as to whether or not the steamer Northerner was, on the ninth day of December, when the contract of insurance was made, and on the twelfth of the sainé month, when the fire occurred, laid up at the port of L’Anse.
    The issues thus framed were tried,, and the questions submitted to the jury were all answered by them in the affirmative. Subsequently the case came on for trial at an Equity Term, -at which time a motion was made for a new trial upon all the issues, which was denied, and the trial was continued before the court, which found in favor of the plaintiffs and against the defendant, and from the judgment entered thereon, as well as from the order denying.the defendant’s motion for a new trial, this appeal is brought.
    
      George Clinton and Haney D. Goulder, for the appellant.
    
      Norris Morey, for the respondents.
   Adams, J.:

This case appears to have been twice tried. Upon the first trial a verdict was directed in favor of the defendant, which was set aside by the General Term and a new trial ordered.

Several of the questions which are involved in the present appeal were litigated upon the former trial and adjudicated by the General Term when the case was in that court for review. It was there contended by the defendant, as it is now, that the plaintiffs were not 'entitled.. to recover, for the reason that, in the application for insurance by the assured, it was .represented that the vessel was laid up ” at ■ L’Anse, whereas, in fact, it was at the time the contract of insurance was entered into and at the time the fire occurred, preparing to continue its voyage to Duluth. •

Upon the first trial this was treated as a question of law, and, as already stated, it was decided' by the trial court in favor of the defendant; but it w^as held by the General Term (92 Hun, 527) that the evidence upon this subject, which was not materially different from that contained in the present record, presented an issue of fact which ought to have been submitted to the jury,. The procedure, therefore, which was adopted, and the result which was reached upon the second trial, ought not, so far as this particular question is concerned, to be disregarded by. this court, unless it be made to appear either that the former decision was clearly erroneous or that the Verdict was unsupported by evidence.

There certainly was a very sharp conflict in the evidence which '' bore upon this feature of the case. Upon the one hand it was made to appear that after the vessel had reached L’Anse and the process-of dismantling had commenced, instructions were received from the charterer to resume the trip to Duluth, the original point of destination, in consequence of which the work of stripping the vessel preparatory to its being ‘.‘laid up” for the season was suspended, audit was to some extent- at least -put in condition to complete its trip. Upon the other hand, evidence was given which tended very strongly to show' that, notwithstanding these instructions and the steps, taken by reason thereof, the idea of proceeding any further was abandoned prior to the fire in consequence of the refusal of the party authorized by the underwriters to take charge of the vessel, to have anything further to do with it, after his quarrel with the captain.

There was, likewise, considerable expert evidence given to prove that the vessel was, and that it was not, “ laid up,” within the definition of that term as it is understood by navigators and persons engaged in the business of fire and marine insurance. But without entering further into the details, it is sufficient to say that if the question of whether or not the steamer was actually laid up, was one of fact, the verdict of the jury is not without evidence to support it, and it is, therefore, conclusive upon this court.

Several other propositions are pressed upon our attention by the learned counsel for the defendant, which were disposed of upon the former appeal, and, as already intimated', as to those we are inclined to regard the decision of the late General Term as the established law of the case for the purposes of .this review. There is, however, one question presented, upon this appeal which, to our mind, is of vital importance, and yet, for some unexplained reason, it has not, up to the present time, been regarded as a very potent factor in the case. We refer to the omission of the owners of the vessel to disclose the condition it was in at the time application was made for its insurance.

It is an undisputed fact that the disaster which overtook the Norther'ner when it ran aground at Keweenaw Point, was a very serious one; that in order to get the steamer off the ground a large portion of its cargo was jettisoned ; that when righted it was discovered that the vessel was leaking at the rate of ten inches an hour, in consequence of which it became necessary to seek a haven of safety, and to keep the steam up and the pumps working in order to prevent the vessel sinking. It also appears that some 2,500 barrels of the kerosene oil were jettisoned, and that a large number of barrels containing lubricating oil were broken open, and their contents poured over the side of the vessel. This operation must of necessity have saturated the vessel with oil, and very materially increased the risk from fire. ' Indeed, several witnesses called on . behalf of .the plaintiffs testified that by reason of the condition the vessél was in when it reached L ’Ansé, the- risk would have been regarded as an extraordinary one, and one which it'would be difficult, if not impossible, to get any insurance company to accept if . the facts were known.

It appears, that immediately upon reaching the harbor of L’Anse . both the charterer and owners were notified by telegram of the accident which had befallen the Vessel, andof the condition it was in. ■■

Mr. Ward,- the charterer, testified: “I heard of. the disaster to the Northerner in. December, 1892. I think it was the 7th or 8th of December. I became acquainted with the fact from a telegram received from- Capt. McKinnon, of the .boat, from L’Anse.. . I answered that telegram to the; effect that he had better lay up there-. As soon as I had done that I telegraphed to Mr. Blakeslee, the managing owner, of Rochester, that the boat was.at L’Anse and would . remain there, and to place his fire insurance.”

Mr. Blakeslee also testified that he was advised of the arrival of the vessel at L’Anse, and of the disaster at Keweenaw Point; and it appears-that he thereupon - telegraphed Mr. Hitchcock -to - obtain the necessary insurance, which,, as we have seen,, was accomplished the following day, the underwriters, as well as Hitchcock, being in entire ignorance of the actual condition of the vessel at the time the" contract of insurance was entered into, In view of- these conceded-facts,, the inquiry which at’ once suggests-itself is, what, if any, duty of disclosure, rested ■ upon the assiired when making application for insurance upon this property ?

A contract of insurance is- one which requires perfect good faith upon- the part of the insured, Upon whom the obligation rests not to suppress any facts and circumstances material to the: risk which would mislead the company, and thereby induce it -to' assume a risk which it would not assume if such facts and circumstances were disclosed. (Skinner v. Norman, 18 App. Div. 609.) It has long been the well-settled -law. of marine insurance that the concealment of a material fact avoided the contract (Watson v. Delafield, 2 Johns. 526 ; Gates v. Madison Co. Mutual Ins. Co., 5 N. Y. 469 ; M' Lanaham, v. Universal Ins. Co., 1 Pet. 170); and in the case last cited it was. held that if the -owner possesses secret information respecting -a-fact material-fb the risk,' and with such knowledge permits his agent to procure insurance in ignorance of the existence of the fact, for the purpose of misleading the underwriter, it is no less a fraud than it would be if he made the application himself. And although the same general principles are said to apply to the contract of fire-insurance, it has been held that in the absence of fraud, “ if the applicant for such insurance make a full and true answer to the questions put to him by the insurer, it is enough; he is not answerable for an omission to mention the existence of other facts about which no inquiry is made of him, though they may turn out to be material for the insurer to know in taking the risk.” (Gates v. Madison Co. Mutual Ins. Co., supra.)

This difference between marine and fire insurance is said by a recognized authority upon ' the subject to- be not so much one of doctrine as of the subject-matter, and of the degree of confidence necessarily placed in the assured by the underwriter.” (1 Philips Ins. 1 635.)

Property insured against loss or damage by fire is, says this same author, “ usually stationary and the risk local, and within the limits of actual inspection by the insurers or their agents. * * * And besides, the inquiries put to the assured, his answers to which are usually referred to in the policy, are intended by the insured to cover and usually do cover, all the circumstances affecting the risk material to be disclosed.”

And he then states the rule to be that, “ amy circumstance - evidently amd materially enhancing the risk of fire, known to the applica/nt at the tine of insuring• cmd not so, or presumed to be so, to the insurer, and of which he is not bou/nd to inform himself or to take the risk of it, must be disclosed, though no inquiry is made respecting itP (1 Philips Ins. 635.) ■

The application in this case does not disclose that any questions were asked or any information imparted by the assured, save that the vessel was “ laid up at L’Anse, Mich.,” and that the risk was of such a character as to entitle it to be classified by the company as A2; ” and it is not disputed that it would not have been thus classified if the actual condition of the vessel had been known to the underwriters. But even had there been other inquiries and answers, we do not think that there would exist in this case any reason for applying a different rule of obligation to the assured than would. have been the case if they had applied for marine instead of fire insurance.

The subject of insurance was a vessel which was laid up in a harbor many hundreds of miles distant from the place where the insurance was effected. It was consequently not “ within the.limits •of actual inspection by the insurers or their agents.” In accepting •an application for insurance under these circumstances the,underwriters had a right to assume that the owners or-their agent would ■■act in perfect good -faith and disclose any and all facts material to the risk of which they had any knowledge; and it seems to us that they were under precisely, the same obligation to do so as they would have been had they been seeking to'obtain an insurance of their vessel against the perils of water. It was stated upon the trial, and ■ not disputed, that if this obligation had been fulfilled, and the underwriters informed of the condition the Northerner was in, they would probably have refused the risk. Consequently, to have concealed from them its true condition was, in our opinion, almost if not quite equivalent to an actual fraud.

This question is one which the defendant is entitled to have adjudicated, but it is one which, as has already been suggested, does not appear to have been considered by the trial court, and for this reason we feel constrained to order a new trial, when possibly other and different facts may be made to appear.

■ The judgment and -order should be reversed - and a new trial ordered, with costs to the appellant to abide the event.

All concurred, except Ward, J. dissenting.

Judgment and order reversed and a new trial ordered, with costs to the appellant to abide the event.  