
    PHILIP D. ARMOUR and others, Appellants, v. THE TRANSATLANTIC FIRE INSURANCE COMPANY, Respondent.
    I. Insubance.
    1. MATERIAL REPRESENTATIONS.
    
      (a) What constitute.
    1. Existing insurance. A representation that the existing insurance is less than it really is, is a material one.
    2. Board, rate of premium. A representation that the rate charged by the board of underwriters of the city where the property to be insured is situate—such city being at a distance from the place where the insurance is effected.—is less than it really is, the insuring company treating the regular board rate as important, and delivering its policy on the express agreement that it should be null and void in case the rate was higher than represented, is material.
    2. Effect of, on policy. .
    Such representations render the policy of no effect, under the operation of one of its clauses, which provides that any omission to make known any facts material to the risk . . . or any misrepresentation whatever, either in a written application or otherwise, should render the policy void.
    3. Agent for assured for purposes of notification.
    1. One who is employed by a party to place a large line of insurance on his property at a rate much less than that charged by the board of underwriters at the place where the property is situated, and who has placed a portion with a company, is, while he continues to be engaged in the endeavor to place the whole line, the agent of the party employing him for the purposes of notification by the insuring company, although he may have delivered over the policy to the principal.
    1. Notice to such agent; effect of.
    
    A notice to him by the company, upon discovering the falsity of representations made, to return the policy, and his promise to do so (no premium having been paid), is effective to cancel the policy, under a clause in it to the effect that it might be terminated at any time, at the option of the company, on giving notice to that effect.
    Before Sedgwick, Ch. J., and Freedman, J.
    
      Decided May 2, 1881.
    In November, 1878, Armour & Co. employed John Cameron, of Chicago, an insurance agent, to place a large line of insurance on their warehouses and stock in Chicago. Cameron informed Armour & Co. that he would employ John P. Dickinson, an insurance broker of New York, to place $80,000 of insurance on their buildings. Cameron had in December, 1878, placed insurance in non-board companies of Chicago to the amount of $200,000, at 75 cents on the $100, on the stock, but none on the buildings. Cameron employed Dickinson on the usual terms, twelve and a half per cent., promising Dickinson a good business from Armour & Co. if he attended to their interests. Cameron then informed Armour & Co. that he had employed Dickinson. Cameron also inclosed to Dickinson a list of the names of the companies and amount insured by each company, and plans of the risk, adding “$200,-000 have already been placed here in the three sections at three-quarter per cent.” hi either the list nor the letter explained to Dickinson that the $200,000 was not on the “risk,” i. e., the buildings, but on the stock. There was no insurance on the buildings. Dickinson called upon defendant about January 3, 1879, and asked for $8,000 insurance : $2,000 on section A., $3,000 on section B. and $3,000 on section C.
    He represented that there was already $200,000 insurance on the buildings, and that the “board rate” was % per cent.
    The defendant said it had Chicago agents and would telegraph them as to the rate; which it did, and the reply was that the “board rate” was 1M per cent. Dickinson said that that was impossible, that the rate on the stock was 1M per cent., but only % per cent, on the building. The defendant then, on the 6th of January, delivered the policy upon the express condition that if the" “board rate” was notM per cent, as stated, the policy should be void. On January 9 the defendant, having learned by letter from its Chicago agents that the “ board rate” on the building, as fixed by the Chicago Board of Underwriters, was 1M per cent., notified Dickinson to return the policy, which he agreed to do, but did not do. Dickinson was still engaged in placing the $80,000 on the risk for plaintiff. On January 25 the building was injured by fire. Dickinson then notified Cameron to return the policy in suit, which was not done. Plaintiffs then made and presented proofs of loss, which defendant declined to receive, or the premium, on the ground that it was not on the risk.
    Plaintiffs then brought suit.
    The company defended upon the grounds :
    1. That misrepresentation by the plaintiffs as to the1' board rate of insurance being 75 cents on $100 when it was $1.25, vitiated the policy.
    2. That the misrepresentation, that there was $200,-• 000 already on the building, when, in fact, there was none, vitiated the policy.
    3. Also, that the notice to plaintiffs’ agents that defendants desired the policy recalled, or that they recalled the policy, vitiated the policy.
    At the trial the defendant, at the close of the whole case, moved for the direction of a verdict upon each of these grounds, and the court dismissed the plaintiffs’' complaint.
    Judgment having been entered, the plaintiffs appealed.
    
      D. M. Porter, attorney, and of counsel for appellants., urged :
    Plaintiffs had no notice of the request to return the policy until after the fire. By the terms off the policy the insurance could x ‘ only be terminated at any time at the option of the company on giving notice' to that effect.” The language here is not as strong as in the case of Osgood v. Glover, 7 Daly, 367, which can be found at page 375, and in that case it was held insufficient, the court saying: “The policy was never ' canceled, which can be done only by the mutual consent of the insurer and the assured.”
    II. The case of Grace v. American Central Ins. Co (Insur. Jour, for October, 1875, p. 71; S. C., 16 Blatchf,. 433),is distinguishable from the case at bar. 1st. Because a notice was given to the agent, and he had agreed to return the policy. 2d. There was. no proof that the agent was the insurance company’s agent. In the case at bar there was no notice given that the policy would be revoked, but simply a request to the broker to get it back ; in other words, to act as the agent of the defendant. And there is proof that he was the agent of the defendant because the defendant paid him by allowing him to deduct his commission, and on the question of usage the supreme court of the United States has over and over again held the other way. See authorities hereinafter cited.
    III. There was a mutual account between the broker, Dickenson, and the defendant; it delivered the policy to him, with a receipt for the premium paid, and the defendant trusted him for the premium. That constituted him the defendant’s agent. 3d. The defendant’s request to Dickenson to get the policy back, which request was not made, as we have shown, until after the policy had been received by the plaintiffs, was simply asking Dickenson to act as the defendant’s agent in procuring its return (Partridge v. Commercial Fire Ins. Co., 17 Hun, 95 ; Sprague v. Holland Purchase Ins. Co., 69 N. Y. 128 ; Van Schaick v. Niagara Fire Ins. Co., 68 Id. 434; Train v. Holland Purchase Co., 62 Id. 598 ; Richmond v. Niagara Fire Ins. Co., 79 N. Y. 230). The latter part of the eighth clause of the policy did not extend the agency of the broker beyond the delivery of the policy to the plaintiffs. Such clause must “be construed most strongly against those using the language and issuing the policy” (Reynolds v. Commerce Fire Ins. Co., 47 N. Y. 597, 604; McMasters v. Insurance Co. of North America, 55 Id. 222). The defendant could only terminate the policy by giving an unequivocal notice that the policy was revoked (Quick v. Wheeler, 78 N. Y. 300; Osgood v. Glover, supra). The request was not communicated to the plaintiffs until after the loss and after the defendant’s liability had become fixed. By delivering the policy to the insured a credit was given for the premium (Washoe Tool Man’f’g Co. v. Hibernia Fire Ins. Co., 66 N. Y. 613; Boehen v. Williamsburgh City Ins. Co., 35 Id. 131).
    IV. The allegation of the defendant that requesting Dickinson to get the policy back because defendant could write it, at the time defendant so made the request, at a better rate, to wit: $1.25 in place of 75c., canceled the policy, is erroneous for the following reasons: Because Dickinson was the agent of the defendant, as he was paid by the defendant, by a course of usage allowing him to receive the entire premiums and deduct his commissions therefrom, paying the residue over to the insurance company. The insurance company fixed a certain price or premium at which insurance would be effected ; the plaintiff paid that price on the amount to which they wished to insure their property, to wit: $8,000, and out of the price of premium for such insurance the defendant allowed the broker to deduct the amount of his commissions ; or in other words, the plaintiffs having paid, or agreed to pay, the full amount demanded by the defendant for such insurance, the defendant paid to, or allowed the broker to deduct from the face of such premiums, whatever sum was agreed upon between such broker and the insurance company, as his commissions.
    V. The testimony as to the conversation at the time the policy was delivered by the defendant to the broker, that if the board rate was more than' 75c. the policy should be returned, is inoperative, because “delivery of a deed or agreement as an escrow, can only be made to a stranger. If made to the party, or his agent, the delivery is absolute, and the instrument takes effect presently, as the deed or agreement of the party making the delivery” (Worrell v. Munn, 11 N. Y. 229). If intended as parol evidence of conditions qualifying the delivery, being contrary to the terms of the instrument, it does not constitute a defense (Ashton v. Mechanics’ Mutual Ins. Co. of Troy, 4. Hill, 329, 330 ; Worrell v. Munn, supra; White v. Ashton, 51 N. Y. 280 ; Riley v. City of Brooklyn, 46 Id. 444; Wilson v. Dean, 74 Id. 531). Again, the fact was true that the rate was 75 cents, and the broker testified that the rate on the stock in the building, and on the building, is the same. If the defendant claims there is any evidence to the contrary it created a disputed question of fact, which ought to have been submitted to the jury (Train v. Holland Purchase Ins. Co., supra ; Stone v. Flower, 47 N. Y. 566). It was an immaterial statement, being a mere expression of opinion of price (Chandler v. Lopus, 1 Smith L. Cas. 299, 238 ; Ellis v. Andrews, 56 N. Y. 83; Chester v. Comstock, 6 Robt. 1 ; affirmed, 40 N. Y 575, note ; Furman v. Titus, 40 Super. Ct. 284). Again, the defendant did not rely upon the broker Dickinson’s alleged statement, but inquired of its own .agent in Chicago, prior to delivering the policy to plaintiffs.
    VI. There is no proof of any fraud applicable to either of the alleged defenses. Fraud, by the terms of the policy, could only vitiate it; but even if the statement of Dickenson had been false in such case it would have been a mistake on his part and not fraud. “ Fraud eannot be predicated without intent to deceive” (Chester v. Comstock, 6 Robt. 1; Ormrod v. Huth, 14 Mees. & W. 651; Marsh v. Falker, 40 N. Y. 562, 565, and cases there cited ; Sprague v. Holland Purchase Ins. Co., supra). Again, if the defendant desired to rescind upon the ground of fraud it should have acted promptly and not wait until the contract was completed and its liability fixed after the loss on its policy. In any event, the plaintiffs were entitled to a direction of a verdict in their favor; otherwise the question was a question of fact for the jury. It was error to take it away from the j ury.
    VII. Proving that it was a general custom to notify the agent that the company elected to terminate the policy was erroneous. Usage cannot be shown to unmake a contract nor to prevent the effect of the well settled rules of law, and especially as the plaintiffs were citizens of Chicago, Illinois, and were not shown to have been informed of any usage. A local usage cannot affect the plaintiffs, "without proof that they had knowledge of it (Higgins v. Moore, 34 N. Y. 425 ; Bradley v. Wheeler, 44 Id. 500 ; Barnard v. Kellogg, supra). Not only the existence of such usage, but whether knowledge of it exists in any particular case, is a question of fact for the jury (Hill v. Hibernia Ins. Co., 10 Hun, 26 ; Fisher v. Sargent, 10 Cush. 250; Winsor v. Deloway, 4 Metc. 221). “Usage cannot make a contract where there is none, nor prevent the effect of the settled rules of law ” (National Bank v. Burkhardt, 10 Otto, 686, 692 ; Partridge v. Insurance Company, 15 Wall. 573; Barnard v. Kellogg, 10 Id. 390 ; Blivin v. New England Screw Co., 23 How. U. S. 433 ; Collender v. Dinsmore, 55 N. Y. 200 ; Adams v. Goddard, 48 Me. 212; Thompson v. Riggs, 5 Wall. 674; Dykers v. Allen, 7 Hill, 497).
    
      Kaufman & Sanders, attorneys, and Lewis Sanders, of counsel, for respondent, argued :
    I. Misrepresentation as to amount of insurance on the risk, represented at $200,000, while it was only $28,000. By the terms of the policy, “any omission to make known every fact mateijal to the risk, or any misrepresentation whatever, avoids the policy.” Untrue representations which affect the mind of the insurer in issuing the policy, avoid the policy (Valton v. National Loan Fund Life Assur. Soc., 4 Abb. App. Dec. 437; Gates v. Mad. Co. Mut. Ins. Co., 2 N. Y. 49 ; Bunett v. Sarat. Co. Mut. Fire Ins. Co., 5 Hill, 188).
    II. The misrepresentation as to the Chicago rate—• that it was 75 cents on the $100 instead of $1.25. This' misrepresentation avoided the policy (authorities cited, supra).
    
    III. By the terms of the policy: “ The insurance may also be terminated at any time, at the option of the company, on giving notice to that effect.” [As no premium had been paid, none could be refunded.] “It is a part of this contract, that any person other than the assured, who may have procured this insurance to be taken by this company, shall be deemed to be the agent of the assured named in this policy, and not of this company, under any circumstances whatever, or in any transaction relating to this insurance.” In the case at bar, Mr. Dickinson was not only the agent of plaintiffs in procuring this policy, but he continued to act as such agent until the fire, in the vain attempt to place $80,000 of insurance on- the buildings of plaintiffs at a rate two-fifths less than that established by the board of underwriters of Chicago, and was, subsequent to the fire, engaged in furnishing the plaintiffs’ proofs of loss. Independent of the terms of the policy, this notice to Dickinson of the election of the defendant to terminate the policy was valid, in accordance with a uniform usage and custom existing in New York for the last twenty-five years. “That custom is to notify a broker if you recall a policy. The broker who places the risk. You give notice to the broker that you want the policy returned.” In Standard Oil Co. v. Triumph Ins. Co. (64 N. Y. 85), a case on all fours with the case at bar, notice was given by the defendant’s agents in New York to the brokers, who had procured the policy for the assured, and who were, like Dickinson here, engaged in keeping upon the plaintiff’s property a large line of insurance, that they had received instructions from the defendant to» raise the rate of insurance from five to six per cent. Evidence of a usage among insurance brokers in New York and Brooklyn was then offered by the defendant, showing that where the broker procuring the risk was notified that the rate would be raised, and the broker failed to produce the policy for indorsement of the increased rate, that the risk was off and the policy canceled. The plaintiffs’ objection to this evidence was overruled, and the ruling of the court below sustained by the court of appeals. It is the notification by the defendant to the plaintiffs’ agent, Dickinson, of its election to cancel the policy, that terminates the risks, and not the return of the policy (Grace v. Insurance Co., Insur. Jour.).
    
   By the Court.—Freedman, J.

The plaintiffs, on three blocks covering twelve acres of ground in Chicago, 111., owned quite an extensive establishment, which was known as Armour & Co.’s property. Ora-the first block stood the ice-house, on the second the packing-house, and on the third the waréhouseThere were fire-walls between the several buildings, but they were all connected by tramways, and on the procurement of the policy in suit they were spoken of as one risk. The warehouse was divided into sections called A, B, and C.

The policy in suit, dated January 6; 1879, purported to insure Armour & Co. against loss or damage by fire for one year to the amount of $8,000 on the three sections into which the warehouse was divided, including certain fixtures and utensils, but covering no-stock or merchandise.

At the trial there was no conflict as to the circumstances under which the policy was obtained, and the evidence clearly established the following facts : ■

The policjr was procured for the plaintiffs by a -broker, John P. Dickinson, who had been employed by the plaintiffs to effect a large line of insurance upon their property, and who throughout acted in the matter as the agent of the plaintiffs. Moreover, the policy in question expressly provided, as part of the contract, that any person other than the assured, who might procure the insurance to be taken by the company, should be deemed the agent of the assured, and not of the company, under any circumstances whatever, or in any transaction relating to the insurance. The policy was issued by the defendant in reliance upon Dickinson’ s representations that the rate of insurance charged by the board of underwriters of Chicago was 75 cents on $100 on the buildings, and $1.25 on the stock contained therein, and that there was already an insurance of $200,000 on the risk, viz. : the buildings known as Armour & Co.’s property. Both representations were material, to the risk to be assumed by the defendant. The representation as tó the amount of insurance already on the buildings was material, because, if true, the defendant, in case of loss, could be held for only its proportionate share ; and the representation as to the regular board-rate was in fact treated by the defendant as so important that the policy was delivered to Dickinson upon the express agreement that it should be null and void in case the said rate was higher. Both representations turned out to be false. Instead of $200,000 prior insurance, there was but $28,000 existing on all the buildings at the time of the issuing of the policy, and the board-rate was $1.25 on the buildings. By its terms, therefore, which, among other things, provided, that any omission to make known every fact material to the risk, or any misrepresentation whatever, either in a written application or otherwise, should render the policy void, the policy ceased to exist. But the defendant did not stop here. As soon as it was ascertained that the board-rate was in fact $1.25, Dickinson was notified to return the policy. ■ The testimony bearing upon this point, as a whole, leaves no doubt that it was a distinct notice to return, and that Dickinson promised to comply with it, though he did not do so. No premium had been paid, and consequently none was to be refunded. Under these circumstances, I am inclined to think that the notice was effective to cancel the policy, even independent of the custom which was shown to exist in New York, that where the broker who procured the risk is notified that the rate will be raised, and he fails to produce the policy for indorsement of the increased rate, the risk is off and the policy canceled. The policy in question expressly provided that the insurance might be terminated at any time, at the option of the company, on giving notice to that effect. Dickinson had not only been the agent of the plaintiffs in procuring the policy, but, at the time the notice was given to him and for some time thereafter, he continued to act as agent for the plaintiffs in the attempt to place $80,000 of insurance on the buildings of the plaintiffs, at a rate two-fifths less than that established by the board of underwriters of Chicago. To show the fact of the continuation of this agency, the letter of Dickinson, of January 28, 1879, was properly received in evidence.'

I can see no merit in any of the exceptions taken, and am of the opinion that the judgment should be affirmed, with costs.

Sedgwick, Ch. J., concurred.  