
    Milton M. Northrup and Seymour D. Latcher, Appellant, v. Joshua Piza, Respondent.
    
      False statement in an insurance policy — who is not an agent of the insurer — change in the poliey omitting the false statement is not a waiver of the defect.
    
    Insurance brokers doing a brokerage business with the attorneys of an insurance company, and presenting risks which the latter accept if considered desirable, and on which- they pay the brokers a commission, are not to be considered the-agents of the insurance company; and where a risk upon several buildings used as a single apartment house is accepted by the attorneys upon the. state-' ment of the brokers that the buildings arc distinct and separated by-partitions, and a three-year policy is issued thereon containing a statement 'that the buildings are separated by entire division walls, whereas in fact such is not the case, the brokers’ knowledge of the falsity of the statement does not operate a» a waiver by the insurance company of such defense to the policy.
    An indorsement annexed to such policy, thirteen months after its issue, by the attorneys, without any new consideration, in which the statement concerning the division walls is bmitted," and by which the policy is extended- to cover the completed buildings and the additions mentioned in the indorsement, cannot be considered as a release of the warranty attending such statement.
    Spring, J., dissented.
    
      Appeal by the plaintiffs, Milton M. Northup and another, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Oneida on the 7th day of January, 1899, upon the decision of the court, rendered after a trial at the Oneida Trial Term, dismissing the complaint upon the merits.
    
      Thomas S. Jones, for the appellants..
    
      Robert Weil, for the respondent.
   Nash, J.:

This action is upon a policy of insurance issued by the defendant and his associates who were underwriters engaged in the business of insuring property against loss by fire under the name of “ The South & North American Lloyds,” transacted for them by Whipple & Co. of New York, their attorneys.

■ The policy was issued and delivered to the plaintiffs on the 4th. of April, 1894, by which it in terms insured the plaintiffs to the amount of $20,000 for the term of three "years, from thé 4th day of. April, 1894, at noon, to the 4th day of April, 1897, at noon, against loss by fire to the following described property, to wit:

“ $2,000 : On the brick building situate on tlie east side of Genesee street and 100 feet northerly from Clinton place,, located on lot No. 871 Genesee street.
“ $2,000: On the brick building adjoining above-described building, and located on lot No. 371 Genesee street. . . "
$2,000 : On the brick building adjoining last-mentioned building, and located on No. 369 and 371 Genesee street.
$2,000: On the 'brick building adjoining last-mentioned building, and located on lot No. 369 Genesee street.
“ $2,000 : On the brick building adjoining last-mentioned building, and located on lot No. 369 Genesee street,, all in Utica, N. Y.
“ Privilege for dwelling occupation only; for alterations and repairs ; for all mechanics’ work to complete said bujldings and to effect other insurance hereon. It is understood that entire division walls extend to roofs between each of the above-described buildings.”

Ten thousand dollars on personal property particularly described in the policy.

The policy provided that, “In any matter relating to this insurance no person, unless duly authorized in writing, shall be deemed the agent of the underwriters.”

The policy was procured for the plaintiffs by Porter & Armstrong, insurance agents and brokers of Few York city, to whom the policy was delivered by Whipple & Co., defendant’s attorneys, and by Porter & Armstrong delivered to plaintiffs, who paid the premium to Porter & Armstrong, who paid the same, less-their commission, to Whipple & Co.

On or about the 15th day of May, 1895, upon application of the -plaintiffs, the insurers put upon said policy an indorsement by annexing thereto, without any new or other consideration, a writing as follows:

“ On and after this date this policy to cover as below and not as heretofore.
“THE GENESEE.
Northrup & Latcher.
“ $2,000 : On the brick building situate on the easterly side of Genesee street, near Clinton place, and located oh lot Fo. 371 Genesee .street, Utica, N. Y.
$2,000 : On the brick building adjoining -above-described building and located on lot Fo. 371 Genesee street, Utica, F. Y.
“ $2,000 : On the brick building adjoining lást-mentibned building and located on lots Fos. 369 and 371 Genesee street, Utica, F. Y.
■ “ $2,000 : On the brick building adjoining last-mentioned building, and located on lot Fo. 369 Genesée street, Uticá, F. Y.
“ $2,000 : On the brick building adjoining last-mentioned building and located on lot Fo. 369 Genesee street, Utica, F. Y., all known - as The Genesee. ’ ,
It is understood that this insurance on the buildings shall cover and apply to their foundations, and all fixtures of the nature of elevators, platforms and all permanent fixtures for heating and lighting and for the general use and occupation of the buildings.”

Ten thousand dollars on personal property as in the policy.

The property was totally destroyed by fire on the 3d of March, 1896; notice of the fire was given, and due proofs of loss were served.

It appeared from the evidence adduced that there were not five distinct buildings, separated by entire division walls.

This fact was brought out by way of defense, and in reply thereto and for the purpose of showing a waiver of the warranty that the buildings were distinct and separated by entire division walls, the-plaintiffs gave evidence to the effect that Porter, of the firm of Porter & Armstrong, the insurance agents through whom the plaintiffs effected the insurance, had, before the original policy was issued, been through and examined the buildings, and at the time the policy was issued had knowledge'that the division walls were not entire and that the buildings were not separate and distinct.

The plaintiffs claimed that Porter was the agent of the insurers, and that his knowledge was their knowledge, and hence this defense was waived.

The court held, granting the defendant’s motion for a nonsuit, that there was a breach of the warranty and that it had not been waived.

We held (17 App. Div. 80) in an action arising upon another policy on the same property containing a similar clause descriptive of the buildings, that the misdescription was material to the risk, and that the plaintiffs were not entitled to recover, unless the jury found that the defendant became an underwriter on the policy, with knowledge of the manner in which the building was constructed.

The question here is whether there was a waiver of the warranty that the division walls Were without openings.

Porter; & Armstrong, as insurance agents, had prior to April 4, 1894, the date of the issuing of the policy in suit, insured the buildings of the plaintiffs in large amounts, in companies of which they, Porter & Armstrong, were agents. A short time prior to April 4, 1894, one of the plaintiffs, Latcher, was in Sew York and applied to Porter, at the office of Porter & Armstrong, and said to him, “We wanted to get $40,000 or $50,000 worth of insurance; he (Porter) said, ‘The old line companies won’t cut your rate in Utica any more, but we are agents for two of the best Lloyds, insurance companies that there are; ’ he says, All of our leading merchants are insuring in those,’ and he took and showed me a list, and the size of the policies of these various ones that had insured in thosethere was perhaps seventy-five names on that list, and among the number was Macy’s, I remember, and he says, ‘I will guarantee that if yon have a loss under this Lloyds insurance, that you will be' paid just as promptly as you would in the old line companies; ’ I said I didn’t know anything about the Lloyds insurance, it was new to me, that ail we had was old line companies,; ‘Well,’ said he, ‘We are agents for them,’ he said they were agents for two of the best, and I think he mentioned the South and North American and the Columbia; he says ‘They can do business a great deal cheaper than the old line companies, because we are limited to :25% * * * to do business, and we will make the rate what we .agreed on ;’ 'think it was 50c. a hundred ; I said he could write $40,000, and I went back home that day or the next, and within two' or three days we got two or three policies from them.”

It appears from the testimony of David E. Casey, of the firm of Whipple & Co., called as a' witness by the plaintiffs, that Armstrong, of the firm of Porter & Armstrong, brought- the application for the policy in suit to the office of Whipple & Co., and reported it as an- Al apartment or dwelling risk, informing Whipple & Co. that there were five separate and distinct dwellings, each one separated by a partition, and that relying , upon that statement Whipple & Co. accepted the risk and issued the policy.

Casey testified in regard to the dealings of his firm with-.Porter &- Armstrong as follows: “Porter & Armstrong, at the time they brought this risk to us, were a leading fire insurance-firm in New York city; they Were fire insurance brokers; they had had dealings with us when this organization started ; they transacted a brokerage business with us; they came-into our office and presented their risks .over the counter,.and if we liked the risk and'were satisfied'with it we wrote the policy, day in and day out,; they were in the the same block with us, and in the same line of business ; if we didn’t.like the risk we rejected it; very often they brought us risks that we didn’t accept. Re-direct examination by Mr. Jones: Prior to-the issuance of this policy in 1894, I have often taken through Porter & Armstrong and issued policies, as many as ten a day, and then a week might elapse that we did not take a risk from them ; ordinarily every month, prior to the issuing of this policy in April,. 1894, we might have taken as high as fifty risks a month from them ; I think the number of policies that we issued per month through Porter & Armstrong increased, because we got better known and were doing a better business,; on all the business that we did with Porter & Armstrong, and the policies issued both before and after the issuance of this policy, a commission of 15% was allowed in the adjustment of our accounts monthly upon all the premiums paid for the respective policies; that was the method of compensation and the fixed amount between us. Re-cross-examination by Hr, Weil: We allowed that same compensation to every other broker who brought us business.”

Both upon principle and authority we think it must be.held that, in obtaining and issuing this policy, Porter & Armstrong were not the agents of the insurers, or authorized to -represent them in matters pertaining to the acceptance of the risk. Their statement that they were agents did not, of course, make them such, and it does not appear from what occurred between Batcher and Porter, at the office of Porter & Armstrong, that they did anything there as agents of these underwriters. It seems that Porter took the application from Batcher, who left it with him to procure the policy and send it to the plaintiffs. His firm did nothing more than to apply to the attorneys of the insurers, making the representations which, it appears, were made, and get an acceptance of the risk — a mere act of. brokerage on their part. They had no authority whatever, so far as the evidence shows, to do or perform any act for the insurers, except to transmit the policy and.receive and pay over the premium to Whipple & Co. The decisive test as to whether they were authorized to waive any provision of the policy, or whether, any act of theirs would conclude the insurers as to any defense they might have, would seem to be, did they have any authority to effect insurance or to accept risks for them ? The evidence does not suggest that they did.

The distinction between broker and agent is stated in Arff v. S. F. Ins. Co., by Peckham, J. (125 N. Y. 63), as follows: “ What is understood under the designation of. an insurance broker is one who acts as a middleman between the insured and the company, and who solicits insurance from the public under no employment from any special company, but, having secured an order, he either places the insurance with the company selected by the insurer, or, in absence of any selection by him, then with the company selected by such broker.”

The fact that insurance brokers receive commissions from the companies for such risks as they procure does not constitute them agents of the companies. (Andrews, J., Devens v. Mechanics & Traders' Ins. Co., 83 N. Y. 171.)

The case here cannot be distinguished from that of Allen v. German Am. Ins. Co. (123 N. Y. 6), where it was held that a mere insurance broker cannot be held to be an agent of an insurance company, without evidence of some action on its part, or of facts from which a general' authority' to represent it may be fairly inferred. There, one Noble was a fire insurance broker, resident, during the summer months, at' Lake Placid, where was also the hotel property of the plaintiff. Noble applied to the plaintiff Allen to insure his hotel and personal property,, and he agreed that Noble might procure such insurance, and the amount of $4,630 was placed with the defendant. This figure was the aggregate of sums apportioned upon various items of property. Noble wrote out upon a piece of paper the apportionment of the insurance, and added a clause giving to the insured certain privileges as to the use of oil, repairs, and for other insurance. This paper writing was then transmitted to the defendant’s office in New York city. The defendant afterwards sent to Noble a policy for the amount mentioned. Upon the face of the instrument was attached the paper forwarded by Noble, but with a change in that part of the writing which privileged' the assured to make other insurance limiting the amount.

The office which Noble performed was to solicit the insurance, apply .for the policy, deliver it, and receive the premium. Held, that the fact that Noble, at the time he delivered the policy, knew of other insurance by plaintiffs exceeding the sum limited, did not constitute a. waiver of the condition of the policy, or estop the defendant from claiming a forfeiture.

The point is urged upon us that the indorsement made ujjon the policy on the 15th of May, 1895, has the effect of doing away with the warranty as to division walls. We cannot so regard it.

The indorsement is to be read into the policy, so' that the policy as originally written, and the indorsement, may be read together as one instrument. The provisions of the two instruments, read separately or together as one, are .not conflicting. The policy .contains a warranty that the division walls are entire. The indorsement simply describes the five buildings as the property covered by the policy and that it shall also cover and apply to their foundations, all fixtures of the nature of elevators, platforms, and all permanent fixtures for heating and lighting.

The original policy contained a privilege for dwelling occupation only. By the indorsement the insurance covers the general use. and occupancy of the building. The original provided for alterations and repairs and for all mechanics’ work to complete the building. The addition gives permission to make alterations, improvements and repairs without notice, and this policy to cover the same ; also to keep and use such articles and materials as is necessary for the use and occupancy of the buildingsalso the policy was made to cover “ all other personal property of every description belonging to the insured, whether specified or not, belonging to and for the use and occupancy of the buildings, all contained in the above-described buildings.”

The only evidence relating to the making of the indorsement other than that shown by its terms, is the testimony of Mr. Batcher to the effect simply that he sent the policy to Porter & Armstrong by mail, and it was returned with the indorsement attached.

In the absence of evidence of any negotiations looking to a release of the warranty as to the division walls or of an express agreement in regard thereto, it must be presumed that the indorsement upon the policy was for the purpose of making its. provisions applicable to the completed buildings, and to cover the additions thereto mentioned in the indorsement.

We, therefore, regard the indorsement as defining merely the additional insurance which the policy should cover or include, and that all of the conditions and warranties contained in the policy as originally issued remained unimpaired and in full force and effect, after the indorsement as before.

The judgment should be affirmed, with costs.

Adams and McLennan, JJ., concurred; Spring, J., dissented; Hardin, P. J., not voting.

Spring, J. (dissenting):

The original policy was issued April 4, 1894. It described five buildings which were covered by it, each in the sum of $2,000. The policy restricted occupancy to dwellings only, permitted alterations and repairs, and the completion of the buildings; as they were, unfinished at the time of the issuance of the policy, and then contained this clause: “It is understood that entire division walls extend to roofs "between each of the above-described buildings.”

This was a material provision and was untrue in fact for a - hallway- led across the entire rear portion of the building and open . courts were left into which windows opened from each adjacent apartment..

In May, 1895, at the instance of the plaintiffs, the authorized agents of the defendant made and executed a Written modification of this'policy which was attached to it. This was designed as a substitute for the original policy. The statement preceding the description of the property is as follows: “New York, May 15, 1895: On and after this date this policy to cover as below and not as heretofore.” '

■ The modified statement contained - not only ¡a complete descrip- . fion of the property covered by the policy, but the provision as to manner-and-use and occujDancy is included.in it. It included specifically foundations, elevators, platforms, permanent fixtures for" heating and lighting, most of which would.come within the compass of the policy without specific mention'. ' Permission to make alterations, and repairs was given in the original policy and in the amended one ás well, only in the latter It was provided that such repairs .could be made “ without notice,”-which in -effect made no change as notice was not prescribed in the original policy. In the amended policy, a general occupancy was permitted although-the building was designed and used for an apartment house, only. -.The modification "in precise term's -included all personal property contained in the building, but the -original policy, aside from a very elaborate enumeration of personal effects, included also “ the cafe and the furnished apartments all contained in the above-described buildings,” so that in. this respect the modification only altered the verbiage, but it -applied to the same property as the original policy. The clause pertaining to the completion of the building was eliminated as it was then finished. The ■ provision as to division walls was omitted: ' "

One or two things are apparent in this modification: (1) The agents, Whipple & Co., must have possessed- information as to the condition of the buildings when they prepared and gave life to this modified policy. They knew the building was completed. Otherwise they would not have stricken out that clause permitting its completion. They knew the elevators were in. operation and the heating and lighting fixtures in use or there would have- been no definite inclusion of them. And they must have known the-' walls were not entire to'the roof or they would not have eradicated of their own motion that significant and important provision in the original policy. (2) It is equally obvious that the modification was designed as a substitute for the original policy except as to those printed portions engrafted in the policies of this Lloyds company.

The provision relating to division walls in the original policy is in the paragraph restricting occupancy to dwelling only, allowing, alterations and repairs, and authorizing the completion of the building. This entire paragraph was rewritten and substantially changed. The attention of the underwriters was, therefore, called to this paragraph carefully, and it is not to be presumed they inadvertently omitted this important statement as to division walls. Its omission is significant and indicates an intent, on their part to relieve the insured from a representation confessedly untrue and which if retained destroyed the validity of the policy.

The familiar doctrine is urged that a waiver of forfeiture will not be inferred, but must be established by preponderating evidence. In this case the' modification was the product of the agents of the defendant. They prepared it and its composition shows that their attention must have been specifically directed to the representation. pertaining to division walls.

Either these agents purposely omitted the clause to deceive the. insured and pass upon them an invalid policy or else the omission' was designed to waive the representation. They possessed as much knowledge of this clause as of any. other in the policy which they left out or altered. The modification consequently is either valid as an entirety or else of no force whatever.

It accordingly seems clear that Whipple & Co. knew the representation that entire division walls extended to the roof was a misstatement, and with that knowledge consented to eliminate it from the modification.

The best evidence of their intention is found in the act itself of so vital import to these plaintiffs. This intention need not .be expressed in words. As was said in Kiernan v. Dutchess Co. Mutual Ins. Co. (150 N. Y. 194): “ There may be a waiver by express agreement or through estoppel, but neither is required to effect that result, as words or acts from which an intention to waive may reasonably be inferred are sufficient at least when acted upon,”

It is a principle well settled in the construction of policies of insurance that if the policy is forfeited or rendered invalid the recognition of it as a binding instrument, after knowledge of its nullity, precludes the insurance company from asserting the forfeiture: The act of recognition 'is deemed to be a waiver and a new agreement is unnecessary to support it. (Titus v. Glens Falls Ins. Co., 811 N. Y. 410; Walker et al. v. The Phoenix Ins. Co., 156 id. 628.)

If at the time of the issuance of the policy the authorized agents of the defendant knew, that the buildings, were not separated by continuous division walls, and understood how they were constructed, the defendant could not assert the misstatement as a defense. (McNally et al. v. P. Ins. Co., 137 N. Y. 389, 396.)

If later on he learns of the misstatement and consents to its erasure, he is precisely in the same situation. A waiver after forfeiture is certainly of no greater importance, and requires no greater circumstances to establish it than a consent to strike out a provision in a policy which, at the election of the insurer, may ripen into a forfeiture. In the latter case the insured keeps alive a policy which he might terminate on the assumption that his property is indemnified against loss. In the former case the loss has occurred and he is at the mercy of the insurer, and yet courts in seeking to preserve the insurance for the man who has paid for it are alert to give effect to any -conduct on the part of the insurer which, fairly considered, indicates a purpose to waive a defense otherwise valid:

Whipple & Co. were not bound to accede to the request of the plaintiff to modify the policy. They could have declined to change the agreement of their principal. Had -they taken that position the plaintiffs would have known that the warranty in their policy would be asserted as a defense. They would have understood they were carrying $20,000 of insurance which was no indemnity to them whatever. They could have procured the cancellation of the policy and obtained another. They would be entitled in this event to the repayment of the unearned premium. But the agents of the defendant did'not take that position. They prepared and signed a modification satisfactory to the insured, and the vitiating provision was stricken out. They stated to the plaintiffs, in effect, that they waived their right to assail the policy by reason of this misstatement. This conduct of these agents gave life to the policy. The defendant is in the same position as if he had signed and delivered to the plaintiffs an instrument reciting that he would not avail himself of this defense. The plaintiffs received the paper, acted upon it, and let the policy continue undisturbed. The original policy containing this untruthful material statement as to the existence of the division walls was an invalid, unenforcible instrument. The parties consented to expunge the condition which made it invalid. They agreed that it should be made a vital, enforcible contract. The insured forebore terminating the policy and taking out another. That constituted a sufficient consideration for the new agreement. But it is not necessary to show a new consideration to give force to the changed instrument, for the parties to it made the altered instrument. It was the act of the defendant. If a policy contain the statement, inadvertently made, that the property is unincumbered, and, in fact, it is subject to a mortgage lien, and the insured, upon ascertaining that fact, so informs the insurer, and another policy is issued, omitting the untruthful statement, the insurer ought not to evade payment when a loss occurs, because, forsooth, the second policy is unsupported by any new consideration.

The assent to the alteration of any instrument, however vital, precludes either party from impugning the legality of the altered instrument. (Camden Bank v. Hall, 14 N. J. L. 583; Collins v. Collins, 51 Miss. 311, 321; Hill v. Barnes, 11 N. H. 395.)

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

Judgment affirmed, with costs.  