This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In England insurance contracts are held to be avoided if the insured does not make a full disclosure to the insurer of all material facts known to the insured. This principle applies in England to marine insurance,1 life insurance,2 and indemnity insurance.3 In the United States it applies to marine insurance without much question.4 So where marine insurance is v. Ins. Co., 164 Mass. 341, 49 Am. St. Rep. 462, 41 N. E. 649; Howell v. Ins. Co., 7 Ohio (Pt. 1) 276.
1 Sun Mutual Ins. Co. v. Ins. Co., 107 U. S. 485, 27 L. ed. 337.
1 Ionides v. Pender, L. R.9 Q. B. 531; Elton v. Larkins, 8 Bing. 198; Rick-ards v. Murdock, 10 B. & C. 527.
2 London Assurance Co. v. Mansel, 11 Ch. D. 363.
3Seaton v. Heath , 1 Q. B. 782.
4MTanahan v. Tns. Co, 28 U. S. (1 Pot.) 170, 7 L. ed. 98; Northwestern S. S. Co. v. Maritime Tns. Co., 161 Fed. 166; Allegre v. Tns. Co., 8 Gill & J. (Md.) 190, 29 Am. Dec. 536; Scammell obtained upon a disclosure of facts then obtainable, it being understood that he is to furnish additional facts in a reasonable time, his failure so to do avoids the policy.5 Authorities are in conflict as to whether it applies to life insurance and fire insurance.6 Where the kind of insurance involved is held to be uberrima fidei, non-disclosure of a material fact, as of a fire in the neighborhood, possibly incendiary,7 or an attempt to burn the property insured,8 omission to disclose incumbrances,9 or that the insured has not the title to the property,10 or that concurrent insurance is in force upon the property,11 avoids the policy. If the insurance company learns that one to whom it has issued a policy of fire insurance has a bad reputation and has lost property by fire on two other occasions, and thereupon it reinsures such risk without disclosing such facts, it can not recover upon its contract of reinsurance.12 Failure to disclose the true value of the boat which is insured,13 or to disclose the owner of such boat,14 avoids the policy of insurance.
Disclosure is necessary only if the facts are material.15 Disclosure of a fact material to the transaction but not to the risk is not necessary.16 Misspelling the name of the insured, due to his lack of education,17 or the failure of the insured to disclose the fact that he believed that a former fire was of incendiary origin, if such former fire was not in fact of incendiary origin,18 do not avoid the policy.
5Scammell v. Ins. Co., 164 Mass. 341, 49 Am. St. Rep. 462, 41 N. E. 649.
6 That fire insurance is uberrimae fidei and that full disclosure is necessary. Orient Ins. Co. v. Peiser, 91 111. App. 278.
That disclosure is not necessary in life insurance. Phoenix Life Ins. Co. v. Raddin, 120 U. S. 183, 30 L. ed. 644.
In fire insurance. Vankirk v. Ins. Co., 79 Wis. 627, 48 N. W. 798; Wythe-ville Ins. Co. v. Stultz, 87 Va. 629, 13 S. E. 77.
7Orient Ins. Co. v. Peiser, 91 111. App. 278; Walden v. Ins. Co., 12 La. 134, 32 Am. Dec. 116.
8 Beebe v. Ins. Co., 25 Conn. 51, 65 Am. Dec. 553.
Contra. German-American Ins. Co.
9Roper v. National Fire Ins. Co., 161 N. Car. 151, 76 S. E. 860.
10 Roper v. National Fire Ins. Co., 161 N. Car. 151, 76 S. E. 869.
11 Roper v. National Fire Ins. Co., 161 N. Car. 151, 76 S. E. 869.
12 New York Bowery Fire Ins. Co. v. New York Fire Ins. Co., 17 Wend. (N.Y.) 359.
13lonides v. Pender, L. R. 9 Q. B. 531; Howell v. Cincinnati Ins. Co., 7 Ohio (1 pt.) 276.
14 Howell v. Cincinnati Ins. Co., 7 Ohio (1 pt.) 276.
15Northwestern S. S. Co. v. Maritime Ins. Co., 161 Fed. 166.
16Hartford Fire Ins. Co. v. McClain (Ky.), 85 S. W. 699.
17Coplin v. Woodmen, 105 Miss. 115, 62 So. 7.
18Hartford Protection Ins. Co. v. Harmer, 2 O. S. 452.
The tendency in modern American law to hold that mere nondisclosure of material facts does not avoid the contract of insurance is due largely to the method of effecting insurance now generally prevailing. Specific interrogatories, usually in writing, are submitted to the insured, and upon his answers thereto the policy is usually based, in part at least. As a result of such business methods the view is often expressed that "the insured has a right to suppose that the insurer will make proper inquiries concerning all facts except such as are supposed to be known or are regarded as immaterial."19 Mere non-disclosure of a fact about which no question is asked in the interrogatories does not avoid a contract of insurance where such view obtains,20 as long as such non-disclosure is not intentional and fraudulent.21 Thus omission to disclose encumbrances,22 as a real estate mortgage,23 a mechanic's lien,24 a vendor's lien,25 or a chattel mortgage,26 or the nature of the in-
19Continental Ins. Co. v. Munns, 120 Ind. 30, 5 L. R. A. 430, 22 N. E. 78.
"If no representations are asked or given, the insurer must be supposed to assume (all risks)." Clark v. Ins. Co.; 49 U. S. (8 How.) 235, 250, 12 L. ed. 1061.
"Mere silence will not avoid." Seal v. Ins. Co., 59 Neb. 253, 80 N. W. 807.
"Assured has the right to assume that the assurer will make proper inquiry with reference to such matters as it may deem material to the risk." Arthur v. Ins. Co., 35 Or. 27, 76 Am. St. Rep. 450, 57 Pac. 62.
20United States. Clark v. Ins. Co., 49 U. S. (8 How.) 235, 12 L. ed. 1061.
Indiana. Continental Ins. Co. v. Munns, 120 Ind. 30, 5 L. R. A. 430, 22 N. E. 78.
Massachusetts. Washington, etc., Mfg. Co. v. Ins. Co., 135 Mass. 503.
Michigan. O'Brien v. Ins. Co., 52 Mich. 131, 17 N. W. 726; Guest v. Ins. Co., 66 Mich. 98, 33 N. W. 31.
Nebraska. Insurance Co. v. Bachler, 44 Neb. 549; Hanover Fire Ins. Co. v. Bohn, 48 Neb. 743, 58 Am. St. Rep. 719, 67 N. W. 774; Seal v. Ins. Co., 59 Neb. 253, 80 N. W. 807.
Oregon. Koshland v. Ins. Co., 31 Or. 402, 49 Pac. 866; Arthur v. Ins. Co.,
35 Or. 27, 76 Am. St. Rep. 450, 57 Pac. 62.
Pennsylvania. Hey v. Indemnity Co., 181 Pa. St. 220, 59 Am. St. Rep. 644, 37 Atl. 402.
Washington. Sanford v. Ins. Co., 11 Wash. 653, 40 Pac. 609; Dooly v. Ins. Co., 16 Wash. 155, 58 Am. St. Rep. 26, 47 Pac. 507.
Wisconsin. Alkan v. Ins. Co., 53 Wis. 136, 10 N. W. 91; Vankirk v. Ins. Co., 79 Wis. 627, 48 N. W. 798.
21 Dooly v. Ins. Co., 16 Wash. 155, 58 Am. St. Rep. 26, 47 Pac. 507; Campbell v. Ins. Co., 73 Wis. 100, 40 N. W. 661.
22 Humble v. German Alliance Ins. Co., 85 Kan. 140, 116 Ac. 472; Continental Insurance Co. v. Ford, 140 Ky. 406, 131 S. W. 189; Hall v. Ins. Co., 93 Mich. 184, 32 Am. St. Rep. 497, 18 L. R. A. 135, 53 N. W. 727; Dooly v. Ins. Co., 16 Wash. 155, 58 Am. St. Rep. 26, 47 Pac. 507.
23Delahay v. Ins. Co., 27 Tenn. (8 Humph.) 684. surer's interest therein,27 as the retention of title by the vendor as security for the purchase price, the vendee effecting the insurance,28 or that the insured's interest is equitable merely,29 or that the title is in the name of the wife of the insured,30 or that the insured is a married woman,31 or the location of property insured,32 or the existence of void insurance if there is no specific interrogatory upon that question,33 or that the bill of lading is for.a quantity of goods less than the true quantity, the true quantity being stated correctly to the insurance company,34 do not avoid the policy. Statutes which provide that policies shall be void only if the false statement is fraudulent and material, or fraudulent or material,35 prevent mere innocent non-disclosure from avoiding the contract of insurance.36 Omission to disclose facts not known to the insured, as in life insurance, an ailment unknown to him,37 does not, of course, avoid the policy. If an answer to interrogatories in the application on which the policy is issued is on its face incomplete, the insurance company may, of course, refuse to issue the policy; but if it issues the policy the evident omission to make full disclosure is thereby waived.38 Failing to fill out a blank for an answer is, in effect, a refusal to answer such question, and can not be regarded as non-disclosure.39 Non-disclosure of material facts about which questions are asked specifically in the interrogatories attached to the application avoids the policy.40 Ambiguities in the application are to be determined in favor of the insured, since the insurer prepares the application.41 It will-be seen, therefore, that the weight of authority in the United States is that mere innocent non-disclosure does not avoid a contract of insurance other than marine insurance. In practical results the principles governing marine insurance are not as unlike those governing other kinds of insurance in the United States as would be inferred from their abstract form. In many of the cases cited to show that full disclosure is not necessary in contracts of insurance other than marine, the facts are such that a similar result would have been reached in marine insurance on the theory that the facts were not material. Many of the cases cited to show that non-disclosure avoids marine insurance involve facts, the non-disclosure of which would avoid any other insurance policy on the theory that such non-disclosure was fraudulent.
24Arthur v. Ins. Co., 35 Or. 27, 76 Am-St. Rep. 450, 57 Pac. 62.
25Southern Ins. Co. v. Estes, 106 Tenn. 472, 52 L. R. A. 915, 62 S. W. 149.
26 Slobodisky v. Ins. Co., 53 Neb. 816, 74 N. W. 270.
27 Hanover Fire Ins. Co. v. Bohn, 48 Neb. 743, 58 Am. St. Rep. 719, 67 N. W. 774; Morotock Ins. Co. v. Rodefer, 92 Va. 747, 53 Am. St. Rep. 848, 24 S. E. 393.
28Light v. Ins. Co., 105 Tenn. 480, 58 S. W. 851.
29Manhattan Ins. Co. v. Barker, 54 Tenn. (7 Heisk.), 503; Franklin Fire Ins. Co. v. Crockett, 75 Tenn. (7 Lea.) 725.
30K1udt v. German Mutual Fire Ins. Co., 152 Wis. 637, 140 N. W. 321.
31 Queen Ins. Co. v. Young, 86 Ala. 424, 11 Am. St Rep. 51, 5 So. 110.
32 Hey v. Indemnity Co., 181 Pa. St. 220, 59 Am. St. Rep. 644, 37 Atl. 402. (Where located on a river bank, subject to overflow.)
33Nabors v. Dixie Mutual Fire Ins. Co., 84 Ark. 184, 105 S. W. 92.
34Granger v. Providence-Washington Ins. Co., 200 Fed. 730, 119 C. C. A. 174 [reversing decree 192 Fed. 674].
35 See Sec. 222 and 373.
36 Light v. Ins. Co., 105 Tenn. 480, 58 S. W. 851. (Omission to disclose that insured had only an equitable title to personalty, his vendor retaining the legal title for security.)
37Pelican v. Mut. Life Ins. Co., 44 Mont. 277, 119 Pac. 778; March v. Ins. Co., 186 Pa. St. 629, 65 Am. St. Rep. 887, 40 Atl. 1100.
38United States. Connecticut Ins. Co. v. Luchs, 108 U. S. 498, 27 L. ed. 800; Phoenix Life Ins. Co. v. Raddin, 120 U. S. 183, 30 L. ed. 644.
Massachusetts. Hall v. Ins. Co., 72 Mass. (6 Gray.) 185.
Minnesota. Rupert v. Supreme Court, 94 Minn. 293, 102 N. W. 715.
Mississippi. American Ins. Co. v. Mahone, 56 Miss. 180.
Ohio. Lorillard Ins. Co. v. McCul-loch, 21 O. S. 176.
Pennsylvania. Lebanon Ins. Co. v. Kepler, 106 Pa. St. 28.
Wisconsin. Roloff v. Farmers' Home Mut. Ins. Co., 130 Wis. 402, 110 N. W. 261.