Story Case

Arthur Meeker bought a thousand cords of wood in the Oregon forests on July first, 1915. He was on the ground at the time of purchase, and wired orders to Chicago, Illinois, to protect the wood by insurance. Thereupon, he started his journey to Chicago. On July 4, 1915, Meeker arrived in Chicago, and on the same day, fire destroyed the entire lot of wood. On July 5, 1915, Meeker, in ignorance of the fire, visited the insurance company's office and received his insurance policy. It was then agreed between the parties that the policy should be antedated to July first. On July 7, Meeker learned of his loss. Can he recover on the policy?

Ruling Court Case. Wales Vs. New York Bowery Fire Insurance Company, Volume 37 Minnesota Reports, Page 106

Wales, on the fourteenth or fifteenth of May, applied to Milligan and Ermentraut, insurance agents in Minneapolis, for an insurance policy for $1,000 on wood, stacked "on north and south sides of the Manitoba Railway at Armstrong's station." The policy was finally issued by the New York Bowery Fire Insurance Company, and became effective on the eighteenth. The property was destroyed by fire sometime on the fifteenth, a fact known to Wales, but unknown to the Insurance Company on the eighteenth when the policy became effective. This was an action upon the policy.

The company contended that there could be no recovery, because Wales, knowing of the loss - a fundamentally material fact - failed to disclose it.

Mr. Justice Mitchell said: "If at that time - the eighteenth - both parties had been ignorant of the loss, it would have been competent for them, by antedating the policy, to have made it retroactive. But, in fact, the plaintiff then knew that the property had been destroyed, but did not communicate that fact to the defendant's agent, who, in ignorance of the loss, accepted the risk, and issued the policy. Under these circumstances, the policy is void and does not cover the loss." Judgment was given for the company.

Ruling Law. Story Case Answer

As just stated, the general rule is that the applicant for insurance is under no duty to volunteer information. But if there is some fact, known to him, of such material character, that a reasonable man would know that the company would not insure if the fact were known to it, then failure to disclose that fact by the insured will avoid the policy. Obviously, if the property should have been destroyed, in the interval between the inspection and the writing of the policy, and the applicant knew it, and concealed the fact from the company, such conduct would be highly fraudulent, and the policy should justly be declared void.

In the Story Case, Meeker was ignorant of the fire, and, obviously, could not volunteer the information, when receiving the policy. He can recover.