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CHAPTER XIII.

OF REPRESENTATION.

WE have considered the subject of warranties as expressed by the parties, and then of warranties as they are implied by the written contracts. We have now to consider representations by either party which are not contained in the contract, but which relate to its subject-matter, and affect the rights and obligations of the parties under the contract. The law in relation to these representations when connected with a policy of insurance is somewhat peculiar, and perhaps somewhat difficult. To constitute a representation in the law of insurance, Chief Justice Marshall has said that "there should be an affirmation or denial of some fact, or an allegation which would plainly lead the mind to the same conclusion." These words were all that the case required; but to complete them as a definition of a representation, we must add that the fact must be material. The representation may be made orally or in writing, or by the exhibition of any written or printed paper.2 If the representation be false, or, as it is usually called in the books and cases, a misrepresentation, this falsehood avoids the policy. We consider that this is now an established rule of law,

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also Livingston v. Delafield, 1 Johns. 523, S. C. 3 Caines, 49.

This point is fully discussed in Clark v. New England Mutual Fire Ins. Co., 6 Cush. 342. Mr. Justice Story, in Carpenter v. American Ins. Co., 1 Story C. C. 57, says: "We are clearly of opinion that the policy in this case, having been obtained upon a misrepresentation of material facts, is utterly void.

A false representation of a material fact is, according to well-settled principles, sufficient to avoid a policy of insurance underwritten on the faith thereof, whether the false representation be by mistake or design." But see Carpenter v. Prov. Wash. Ins. Co., 16

but the ground upon which the rule rests is by no means as certain. On the one hand, fraud vitiates every contract; on the other hand, if there be conversation and negotiation between parties, and this be followed and concluded by a written contract, it is a rule of law that nothing which is not written can be introduced by evidence to vary or avoid the written contract, unless such evidence discloses fraud. Nevertheless, this written contract - a policy of insurance is avoided by any false representation

or concealment of material facts. Thus, in a case before the Court of Exchequer, on a policy of insurance, the counsel says: "A misrepresentation not embodied in the contract cannot vitiate it, except it be fraudulently made." To this Parke, B., replied: "I have not the least doubt about it,

Pet. 495, in which the same judge says: "It is not true that, because a policy is procured by misrepresentation of material facts, it is therefore to be treated in the sense of the law as utterly void ab initio. It is merely voidable, and may be avoided by the underwriters upon due proof of the acts; but until so avoided, it must be treated for all practical purposes as an existing policy." The doctrine of Carpneter v. American Ins. Co. is substantiated by the case in the 6th of Cushing, above cited, in which Mr. Justice Fletcher is very clear as to the policy being rendered nugatory by misrepresentation. In this case the court said: "A policy obtained by misrepresentation is in legal intendment no insurance at all; it has no legal effect." And in Stacey v. Franklin Fire Ins. Co., 2 W. & S. 506, 544, 545, the court say: "The defendants' defence rests on this; that the plaintiffs are doubly insured, but if the plaintiffs could at no time have recourse to the North American Company, it cannot with any propriety be said that they are doubly insured. If the plaintiffs have failed to perfect their contract with the subsequent underwriters, by omitting to

except in the case of insurance,

have the prior insurance allowed and specified on the policy as is required, it is difficult to imagine in what way the prior insurance can be invalidated or effected. It is a vain, nugatory, void act." In Jackson v. Farmers' Mutual Fire Ins. Co., 5 Gray, 52, there was a provision in a policy that an increase of risk should render it void; and the court held that a subsequent policy, which provided that the existence of other insurance should discharge the underwriter, remained in force, the former policy being avoided by a change of risk. See the old case of Carter v. Boehm, 3 Burr. 1905-1909, in which Lord Mansfield said: "Although the suppression should happen through mistake, without any fraudulent intention, yet still the underwriter is deceived, and the policy is void, because the risk run is vastly different from the risk understood and intended to be run at the time of the agreement." See also Catron v. Tennessee Ins. Co., 6 Humph. 176; Columbian Ins. Co. v. Lawrence, 2 Pet. 25; Williams v. Smith, 2 Caines, 13.

1 Elkinson v. Janson, 13 M. & W. 658.

which is a contract uberrimæ fidei, vitiated not only by the slightest fraud, but by any misrepresentation or concealment of material facts, which are deemed equivalent to fraud." The assertion of

1 In the late case of Lewis v. Eagle Ins. Co., 10 Gray, 508, the action was on a policy of insurance on the schooner Emeline, valued therein at $6,000. The vessel while on a voyage under the policy put in to the port of Nassau, N. P., in a leaky condition, was surveyed, condemned, and sold, and the plaintiffs claimed a constructive total loss. The defendants, in their answer, alleged that the valuation by the plaintiffs, made when insurance was asked for, "was a gross and fraudulent overvaluation," and that they were induced to write the policy "by the fraudulent representations of the plaintiffs," and offered evidence tending to prove the truth of the allegations. The presiding judge instructed the jury, in substance, that the law requires good faith in contracts of insurance; that a misrepresentation is a false representation of a material fact, by one of the parties, tending to induce the other to enter into the contract; that this principle, applicable to all contracts, has peculiar bearing on contracts of insurance; that the answer of the defendants required proof that the representation was false as well as fraudulent, and in point of fact induced the defendants to make the contract. On exception, the judgment of the court was delivered by Merrick, J., in which he said: "Whether the representation was designedly and intentionally erroneous, and made with the corrupt purpose of gaining an undue advantage or not, is immaterial to the question at issue between the parties; for if it was false, it clearly exonerated the defendants from the performance of the contract on their part, and wholly

1

avoided the policy.”

In Cornfoot v. Fowke, 6 M. & W. 358, the action was for non-performance of an agreement to take a house. Plea, that the plaintiff caused and procured the defendant to enter into the agreement by fraud, covin, and misrepresentation of the plaintiff, and others in collusion with him, on which issue was joined. It appeared at the trial that the plaintiff had employed one C. to let the house in question, and the defendant, being in treaty with C. for taking it, asked him "if there were any objection to the house," to which he answered that there was not; and the defendant entered into and signed the agreement, but afterwards discovered that the adjoining house was a brothel, and on that ground declined to fulfil the contract. It appeared that the plaintiff knew of the existence of the brothel before, but C., the agent, did not. Held (Lord Abinger, C. B., dissenting), that it was sufficient to support the plea that the representation turned out to be untrue, but that for that purpose it ought to have been proved to have been fraudulently made; and that as the representation was not embodied in the contract, the contract could not be effected by it, unless it were a fraudulent representation; and that the knowledge of the plaintiff of the existence of the nuisance, and the representations of the agent that it did not exist, were not enough to constitute fraud so as to support the plea. The dissenting opinion of Lord Abinger, pp. 378, 379, says: "In the case of Hodsdon v. Richardson, 1 W. Bl. 463, Mr. Justice Yates lays down as a general principle, that the conceal

counsel was founded upon the decision of a majority of the same court in an earlier case, which was not upon a policy, and in

ment of material circumstances vitiates all contracts, upon the principles of natural law.' If this be true, can it be doubted that the false representation of a material circumstance also vitiates a contract? These principles are familiar to every person conversant with the law of insurance. But a policy of insurance is a contract, and is to be governed by the same principles that govern other contracts. When it is said to be a contract uberrimæ fidei, this only means that the good faith, which is the basis of all contracts, is more especially required in that species of contract in which one of the parties is necessarily less acquainted with the details of the subject of the contract than the other. Now nothing is more certain than that the concealment or misrepresentation, whether by principal or agent, by design or by mistake, of a material fact, however innocently made, avoids the contract, on the ground of a legal fraud." In the case of Pawson v. Watson, Cowp. 785, Lord Mansfield lays it down, generally, that, in a representation to induce a party to make a contract, it is equally false for a man to affirm that of which he knows nothing, as it is to affirm that to be true which he knows to be false. And Mr. Justice Story, in his Commentaries on Equity Jurisprudence, I. 166, §193, says: "Whether the party misrepresenting a fact knew it to be false, or made the assertion without knowing whether it were true or false, is wholly immaterial; for the affirmation of what one does not know, or believe to be true, is equally in morals and law as unjustifiable as the affirmation of what is known to be positively false. And even if a party innocently misrepresents

a fact by mistake, it is equally conclusive; for it operates as a surprise and imposition upon the other party." It is held in Anderson v. Thornton, 20 Eng. L. & Eq. 339, that where to an action on a policy of insurance a plea that the insurer was induced to enter into the policy by a false misrepresentation of a material fact, made by the assured and their agent, such misrepresentation being, at the time it was made, false, to the knowledge of the insured and their agent, it is supported by proof either of concealment or misrepresentation not fraudulent. See also Southall v. Rigg, S. C. 11 C. B. 481. It appeared in Humphreys v. Pratt, 5 Bligh, 154, that a sheriff, at the representation of the plaintiff in a suit, had seized goods under a fieri facias, as belonging to the defendant, and damages were recovered against the sheriff for the seizure, by a third person claiming the ownership. It was held that an action on the case lies at the suit of the sheriff, upon the false representation; and on a motion in arrest of judgment, a declaration stating such a case was held good, without averment of fraud in the representation or knowledge of its falsehood. See also Railton v. Mathews, 10 C. & F. 934, in which a party became surety in a bond for the fidelity of a commission agent to his employers. After some time the employers discovered irregularities in the agent's accounts, and put the bond in suit. The surety then instituted a suit to avoid the bond, on the ground of concealment by the employers of material circumstances affecting the agent's credit prior to the date of the bond, and which, if communicated to the surety,

which Parke, B., one of the majority, laid down the law as stated by the counsel. It is not quite clear what Baron Parke means by

would have prevented him from undertaking the obligation. On the trial of an issue, whether the surety was induced to sign the bond by undue concealment or deception on the part of the employers, the presiding Judge directed the jury that the concealment to be undue must be wilful and intentional, with a view to the advantages the employers were thereby to gain. Held by the Lords (reversing the judgment of the Court of Sessions), that the direction was wrong in point of law. Mere non-communication of circumstances affecting the situation of the parties, material for the surety to be acquainted with, and within the knowledge of a person obtaining a surety bond, is undue concealment, though not wilful or intentional, or with a view to any advantage to himself. See also Commonwealth v. Squire, 1 Met. 258, and Commonwealth v. Baker, 10 Cush. 405, for effect of the word 'felonious.' In Anderson v. Thornton, supra, which was an action on a policy of insurance, it does not clearly appear from the pleas, as they are stated in the report of the case, that fraud was alleged, but the language of the court shows that this must have been the case, Parke, B., said: "Much reliance was placed on the form of the sixth and seventh pleas, and it was contended that, inasmuch as those pleas alleged a fraudulent misrepresentation on the part of the plaintiff, in order to sustain the pleas, it was necessary to prove the fact as fully as alleged; and it was very strongly urged that the plaintiff had been subjected to a great hardship in being compelled to combat such pleas by having to procure evidence to disprove the matters of

fraud, it turning out afterwards, on the trial, that there was no such imputation of fraud on the plaintiff. But the pleas were supported by proof of material communications by the agents; for, in cases of insurance, material misstatement or concealment vitiates the contract, and whether it be fraudulently made or not is a matter which is wholly immaterial, except with reference to a return of premiums." See also Smout v. Ilberry, 10 M. & W. 1. Per contra, see Pasley v. Freeman, 3 T. R. 51, the principles of which have been embodied in succeeding cases. In Collins . Evans, 5 Ad. & E. N. S. 820, Tindale, C. J., said: "The current of authorities, from Pasley v. Freeman downwards, has laid down the general rule of law to be that fraud must concur with the false statement, in order to give a ground for action." In that case the defendant knew the statement which he made was false, and it was held that action would lie. In Haycraft v. Creary, 2 East, 92, the defendant made a false representation, but did not know it to be false; on the contrary, he believed it to be true; and it was held no action would lie. But these cases are similar in their nature to Humphreys v. Pratt, supra; and it is worthy of note that Lord Mansfield, in Bree v. Holbech, Dougl. 656, says: "There may be many cases where the operation of a false fact, though unknown to be false to the party making the assertion, will be fraudulent." And he cites the case of one C., who insured a life and affirmed it to be as good a life as any in England, without knowing whether it was or was not.' It is worthy of remark, that, while in one case, Smout v.

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