Story Case

The Hartford Fire Insurance Company issued a policy to Mr. John Hopkins upon ten thousand barrels of turpentine in his warehouse in Memphis, Tennessee. The application and the policy each stated that "the stock of turpentine is to be closely guarded by a watchman who dares not smoke." The turpentine was destroyed by fire originating from a cigarette stub thrown away by the night watchman. The company refused payment, assigning as a reason that the statements made in the application and the policy, calling for a watchman who did not smoke, was a warranty. Is this a defense that will prevent recovery on the policy?

Ruling Court Case No. 1. Stout Vs. Fire Insurance Company Of New Haven, Volume 12, Iowa Reports, Page 371

William Longhurst was the owner of a building in Dubuque, Iowa, insured by the company herein, against damages by fire. This policy contained the following statement: "In consideration of one hundred dollars, the company insures William Longhurst against loss or damage by fire, to the amount of $5,000 on the five-story brick building and the three-story addition, known as the Lawrence Block, occupied for stores below, the upper portion to remain unoccupied during the continuance of the policy." The building was destroyed by fire, and Stout, to whom Longhurst had previously assigned the policy with the consent of the company, brings this action.

The company showed that the upper story had frequently been used as a dance hall during the continuance of the policy and that this constituted a breach of the warranty that the upper stories would be unoccupied. Stout contended that these were only words of description and were not words constituting a warranty.

Decision: The court was of the opinion that the words in the policy were more than words merely descriptive; that they constituted an affirmative warranty that the upper stories were not occupied and would not be occupied during the continuance of the policy of the building.

Held that the language used was a warranty, and no recovery could be had on the policy.

Ruling Court Case No. 2. Frisbie Vs. Fayette Mutual Insurance Company, Volume 27, Pennsylvania Reports, Page 325

The insurance company issued a policy of insurance to Frisbie, in the sum of $1500, upon a stock of dry goods and groceries, against loss by fire. In the application, the following statements were made: "Application of Orton Frisbie, of Dunbar Township, in the County of Fayette, for insurance, etc., against fire, by the Fayette County Mutual Fire Insurance Company for the sum of $1500, to-wit: on his stock of merchandise, to-wit: $1200 on dry goods kept in a frame plastered storehouse 24x24 feet, one and one-half stories high; merchandise kept on the first floor, and groceries in the storeroom and cellar; said store attended by applicant and clerk; clerk sleeps in the store," etc. The building was destroyed by fire, and this was an action to recover for the same. It was contended by the company that the words, "clerk sleeps in the store," were a warranty, and that, as no clerk was sleeping in the store on the night the fire occurred, the policy was forfeited.

Mr. Justice Lawrie said: "These words have not the form of a warranty; they speak of present time, and not for the future, and are placed in no connection that leads to a belief that they were intended for a future state of affairs. They stand in the midst of a description of the merchandise insured, and of the house in which they were, and when we notice, in addition, that one question in such cases always is, 'How is the house occupied?' we cannot avoid the inclination to believe that these words were inserted as description and not as warranty." Judgment was given for Frisbie.

Ruling Law. Story Case Answer

Frequently, a policy will contain many matters which are merely descriptive, and are not intended to be warranties. In respect to such statements, it is not required that they be strictly accurate as in the case where such statements are warranties. If the property insured has been reasonably described otherwise, and if the information might reasonably influence the company in accepting the risk, it is generally held that such statements are warranties and not mere descriptive statements. It is difficult to tell in all cases whether it is a matter of description or whether the statements really constitute a warranty. Each case must be determined on its own facts. The criterion is whether or not the court or jury is of the opinion that the statement made had influenced the company in originally accepting the risk.

Observe that, in the Story Case, it was important for the insurance company that a watchman be placed in charge of the inflammable property who did not carry fire. It is obvious that the company was taking a much greater risk than it had agreed upon. The policy is void, because of the breach of a promissory warranty.