Opinion
Submitted October 25, 1935 —
Decided May 14, 1936.
1. Under the instant policies and under our standard form of policy the permissible change of occupancy is applicable to personalty as well as to realty.
2. Under the wording of the standard form of policies of insurance, forfeitures, on the ground of increased hazard, can only follow when it is shown that the situation was within the control or knowledge of the insured, or upon circumstances which, by the exercise of ordinary care and diligence, would result in such knowledge. Where it is a conceded fact that the insured was not charged with knowledge of the increased hazard, it is clear that there can be no forfeiture on that ground by reason of that provision.
3. Plaintiff held two policies of fire insurance issued by defendant insurance companies covering personal property, such as household furniture, c., located in her dwelling house in Maywood, New Jersey. She subsequently leased the property, including the furniture, and before she again assumed possession thereof a fire occurred, and for the resulting loss plaintiff brought suit under the policies. Under the standard form of policy required by statute, there is contained a forfeiture clause if any change, other than death by the insured, takes place in the interest, title or possession of the subject of insurance, except change of occupants without increase of hazard, it will void the policy. Held, that the leasing of the property, including the furniture, did not constitute a change of possession prohibited under the alienation clause of the policies; it was a permissible change of occupancy within the terms of the policies.
On appeal from the Supreme Court, Bergen county.
For the appellant, Edward Gaulkin.
For the respondents, Lum, Tamblyn Fairlie.
Case No. 115 involves the policy of the Phoenix Insurance Company of Hartford, Connecticut. It is dated December 24th, 1928, term three years, and is for $2,000 and covers the personal property therein described "while located and contained as described herein and not elsewhere * * *." "It is understood and agreed that this insurance covers as above the property of the assured, while contained in the frame dwelling occupied by not more than two families situate No. 125 Spring Valley Road, Maywood, New Jersey." It is endorsed "Household Furniture Form." Among the privileges under this policy is the following: "Privilege to remain vacant not exceeding six consecutive months at any one time in any one year."
Case No. 116 involves the policy of the Automobile Insurance Company of Hartford, Connecticut. It is dated April 8th, 1929, term three years, and is for $3,000, and is rather peculiarly worded. It reads that the $3,000 is "to the following described property while located and contained as described herein, but not elsewhere * * *." Then follows the caption Private Dwelling Barn and Furniture (Unprotected). In the space reserved for the amount of the insurance to the left of the captioned phrase is typed the word "Nil." Then follows the chattels enumerated and to the left of that description — in the space reserved for the amount of the insurance — is typed the sum of $3,000. But under the first captioned phrase in which the amount of insurance is typed "Nil" appears this statement: "While occupied exclusively for dwelling purposes by not exceeding two families situated at 125 Spring Valley Road, Maywood, N.J." Among the privileges under this policy are the following: "to remain unoccupied for not exceeding eight consecutive months at any one time in any one year; to remain vacant during any change of tenants or while awaiting a tenant not exceeding sixty consecutive days at any one time in any one year."
Under our standard form of policy it is provided, inter alia, that the following circumstances shall void the policy: (1) "If the hazard be increased by any means within the control or knowledge of the insured;" (2) "if any change, other than death by the insured, takes place in the interest, title or possession of the subject of insurance (except change of occupants without increase of hazard), whether by legal process or judgment or by voluntary act of the insured, or otherwise;" (3) "or if a building herein described, whether intended for occupancy by owner or tenant, be or become vacant or unoccupied and so remain for ten days."
Plaintiff sued insurers on said policies for a fire loss of the personalty. By consent of counsel for the respective parties, the record in case No. 115 only is printed. Both cases were consolidated and submitted, on stipulation, to the trial judge for his decision. This is the stipulation:
"On December 24th, 1928, Phoenix Insurance Company of Hartford issued a policy of insurance to plaintiff in the sum of $2,000 to cover certain personal property belonging to her. The policy is in the New Jersey standard form. On this policy was an endorsement or schedule captioned "Household Furniture Form." There is no special form provided by the commissioner of banking and insurance for such schedules or endorsements; they are provided for by subsection II of paragraph 77 of the Insurance laws of New Jersey. 2 Comp. Stat. p. 2862, amended laws 1929, chapter 283.
"The plaintiff also held another policy in the Automobile Insurance Company covering the same property in the sum of $3,000.
"On November 13th, 1930, the fire occurred which caused $4,000 damage to the insured property.
"The insured personalty property was contained in a two and one-half story frame structure, with a basement and attic. This structure contained eleven rooms and two baths and had a one-story extension in the rear.
"The plaintiff had occupied this building for four years prior to the fire as her dwelling. On or about October 1st, 1930, she rented the premises to one Britto, as a dwelling. No written lease was made.
"On November 12th, 1930, about midnight, the police of Maywood raided the premises and found a high pressure boiler in the cellar which was connected with a two hundred and fifty-gallon still which was on the first floor. A fire was burning under the boiler. The boiler stood in a pit dug in the cellar floor, which pit was lined with concrete which appeared to be fresh. The boiler was about eight feet long and three and one-half feet in diameter. In the adjoining part of the basement there was a rack extending along the whole width of the basement on which were stacked empty quart bottles of dark glass. Adjoining these bottles was a pile of corks, and this pile of corks together with the stacked bottles extended across the whole length of the rack. The rack was approximately fifteen feet in length and about three feet wide and stood about two and one-half feet from the floor. On the floor were two large wooden barrels approximately three feet long and two and one-half feet high.
"On the second floor, in the front bedrooms, was a large metal tank about ten feet long and three feet high and about two and one-half feet wide.
"A hole had been cut in the first floor about eighteen inches square, and a similar hole had been cut in the floor about it. Eighteen inch columns protruding through these holes supporting the still and terminating in a six-inch vent pipe which went through the roof.
"The plaintiff had no knowledge that the tenant was or had been using the premises for other than dwelling purposes.
"The police dismantled the still and removed it from the premises. This dismantling and removal began about nine A.M. and was completed about four forty-five P.M. on November 13th, 1930.
"At about nine-thirty P.M., November 13th, 1930, the fire happened."
The trial judge held that since tenant's user of the premises was without knowledge of the assured, the policy was not violated under the first above recited provision thereof. He, however, held, "there is no dispute that the plaintiff when she rented the premises to Britto on October 1st transferred her interest and possession in the furniture and violated the second above provision thereof, thereby rendering it void." In support thereof he cites section 243, Richards on the Law of Insurance (4 th ed.).
Judgment was entered in favor of defendants and plaintiff appeals.
Appellant's contention is that the trial judge erred in concluding that there was a change of interest, title or possession forbidden by the policy; that the renting of the furniture was merely "a change of occupancy permitted by the policy."
Respondents contend, in substance, that the detailed statement in each policy of the use and occupation is a warranty and that a compliance thereof by the assured is a condition precedent to the right of recovery. Sonnenborn v. Manufacturers' Insurance Co. ( Court of Errors and Appeals, 1882), 44 N.J.L. 220; Dougherty v. Greenwich Insurance Co. ( Court of Errors and Appeals), 64 Id. 716; that, if under the endorsements of the description aforesaid, the premises were not used or occupied as a private dwelling house, lack of control or knowledge on the part of the assured, or occupancy of the premises without increase of hazard, are immaterial for they (endorsements) are not merely descriptive but they are essential, present and future warranties. Marone v. Hartford Fire Insurance Co. ( Court of Errors and Appeals, 1935), 114 Id. 295; 176 Atl. Rep. 320; compare, Grady v. Concordia Fire Insurance Co. ( N.Y., 1935), 196 N.E. Rep. 16. In short, as we understand it, respondents' position is that, under the proofs here exhibited, their policies did not and do not cover the risk assumed or undertaken thereunder.
To this contention appellant replies (paraphrasing the language in Corlies v. Westchester Fire Insurance Co. ( Supreme Court, 1918), 92 N.J.L. 108; 108 Atl. Rep. 152:
"* * * if the endorsements be construed as continuing warranties that no one will increase the risk with or without the knowledge of the assured, then it is plain that they are inconsistent with the forfeiture clause of the standard policy which requires that the increase of the hazard shall be within the control or knowledge of the assured, and hence those conditions in the endorsements are void."
The questions requiring decision are, therefore, whether the renting of the house and furniture by the assured to Britto, constituted a change of possession prohibited by the alienation clause in the policies, or whether it was merely a permissible change of occupancy?
We have, what we believe to be, a well charted and defined course by which we are guided in the process of interpreting insurance contracts. It is based on certain established principles of law. The following are but a few of the many of these applicable principles:
1. The law will not make a better contract for the parties than they themselves have seen fit to enter into, or alter it for the benefit of one party and to the detriment of the other. Kupfersmith v. Delaware Insurance Co., 84 N.J.L. 271, 275; 86 Atl. Rep. 399; Marone v. Hartford Fire Insurance Co., supra.
2. We enforce the contract in accordance with its plain provisions; as it is written. Precipio v. Insurance Company of Pennsylvania, 103 N.J.L. 589 ; 137 Atl. Rep. 549; Vozne v. Springfield Fire, c., Insurance Co., 115 N.J.L. 449 , 451; 180 Atl. Rep. 852.
3. We liberally construe policies of insurance to uphold the contract, and conditions contained in them which create forfeitures are construed most strongly against the insurer and will never be extended beyond the strict words of the policy. Baylor v. The State, c., Assurance Co., 113 N.J.L. 389 , 395; 174 Atl. Rep. 526.
4. We never seek for a construction of a forfeiture clause in a policy which will sustain it, if one which will defeat it is reasonably deducible from the terms and words used to express it. Rockmiss v. New Jersey Manufacturers, c., Co., 112 N.J.L. 136, 140; 169 Atl. Rep. 663.
5. We consider the entire policy in all its parts to the end that each clause shall have the same effect. Smith v. Fidelity and Deposit Co., 98 N.J.L. 534, 536; 120 Atl. Rep. 322.
6. We hold even in contracts of insurance written on our standard form of policy, that the maxim, Verba Chartarum accipiuntur contra proferentum, has no special application. Precipio v. Insurance Company of Pennsylvania, supra.
7. We consider facts or conditions imposed in a policy inconsistent with, or a waiver of, any of the provisions or conditions of the standard form of policy as a nullity; and where the conditions of the issued policy and the provisions of the standard form of policy, relating to forfeitures, create an ambiguity, we adopt a construction which will avoid a forfeiture. Corlies v. Westchester Fire Insurance Co., supra. First: Do not the tenancy privileges, both under the instant policies and under our standard form of policy, clearly indicate that occupancy by a tenant is permissible? Respondents answer the question by saying that, assuming that the answer is in the affirmative, the permissible occupancy of the tenant is limited solely to realty. Appellant denies the accuracy of this answer. What is the applicable law? There is no concord of authority on this point. It has been held that the permissible change of occupancy is not so limited. Herman Bros. v. Katz (1897), 101 Tenn. 118; 41 L.R.A. 700; 47 S.W. Rep. 86. And it has also been held that it is so limited. Compare cases cited and analyzed in Western Assurance Co. v. Stone ( Va., 1926), 134 S.E. Rep. 710; 48 A.L.R. 1009, 1020.
We cannot be unmindful of the fact that, under our ever changing and increasing conveniences in living conditions, there are many furnished homes and apartments leased by owners to tenants. Some are leased for seasonal periods during the year and others are leased for longer periods. If an assured is given privilege, within the terms of his policy of insurance, of permitting a tenant to occupy a building which is not furnished why deny him the same right simply because the rented building is furnished? If it is permissible, and it is conceded to be so, under the one circumstance, it is likewise permissible under the other circumstance. There is nothing based on right, reason or law for a distinction in either event. We hold that the change of occupancy, under the proofs here exhibited, is applicable to personalty as well as to realty.
Second: Under the plain wording of the standard form of policy, forfeitures, on the ground of increased hazard, can only follow when it is shown that the situation was within the control or knowledge of the assured, or upon circumstances which, by the exercise of ordinary care and diligence, would result in such knowledge. It is conceded that the assured was not charged with such knowledge. We, therefore, concur in the view adopted by the trial judge that the policies were not forfeited by reason of the increased hazard provisions thereof. Section 253, Richards on the Law of Insurance (4 th ed.) 403; 26 C.J. 221, § 268; compare, Patriotic Insurance Co. v. Franciscus, 55 Fed. Rep. (2 d) 844, 847, and cases therein cited; see Knight v. Boston Insurance Co., 113 N.J.L. 132 ; 172 Atl. Rep. 905.
Third: Having determined that a change of occupancy was permissible, we next approach the consideration and determination of the question, whether that change (leasing of furnished house to Britto), constituted a change of possession prohibited under the alienation clause of the policies? Here we again strike divergent opinion. There is respectable authority supporting each side of the question. "* * * The occupancy of insured premises by a lessee under a lease made subsequent to the issuance of the policy is not such a change of possession as is contemplated by the condition * * *." 26 C.J. 242, § 306. "A lease of the insured property is not a violation of a stipulation avoiding the policy in case of alienation or change of title or interest * * *." 26 C.J. 235, § 288. Compare 14 R.C.L. 1129, § 307; see exhaustive review of the cases ( pro and con) on the subject in Western Assurance Co. v. Stone, supra.
It may well be conceded that the object of the clause is to guard against indifference on the part of the assured in the care of his property. Commercial Union Assurance Co. v. Scammon, 126 Ill. 355; 9 Am. St. Rep. 607; 18 N.E. Rep. 526. It is to avoid possible carelessness. Bowling v. Continental Insurance Co., 86 W. Va. 164; 17 A.L.R. 376; 103 S.E. Rep. 285. But not every change of possession is prohibited. The instant policies specifically exempt a change which occurs as the result of death of the assured, and also a "change of occupants without increase of hazard."
A construction avoiding a forfeiture is deducible from the words used to express it. It has been so construed. The word "possession" as used with "* * * the words `interest' and `title' seem to mean legal possession or possessory right * * *." Except for the physical occupancy of the premises, which is not forbidden under the policies, there was no change of possession. Marcello v. Concordia Fire Insurance Co. (1912), 234 Pa. 31; 81 Atl. Rep. 1090; 39 L.R.A. ( N.S.) 366, 368; Western Assurance Co. v. Stone, supra.
We do not share the view adopted by the court below that the letting of the dwelling and furniture constituted a change of possession prohibited by the alienation clause under the policies. We hold to the contrary. The result of what has been written leads, obviously, to a reversal.
Fourth: We do not desire to prolong this opinion with a discussion of the legal efficacy of the description in the rider to the policies as to use and occupation. We express no opinion thereon. Since this case may be retried, it is perhaps not out of place to observe that the stipulation discloses, inter alia, "that the police dismantled the still and removed it from the premises." The process "of dismantling and removing began about nine A.M. and was completed four forty-five P.M. on November 13th, 1930." The fire, however, did not happen until "about nine-thirty P.M." of the same day. Under those circumstances it may well be that the fire occurred when the non-dwelling house user of the premises and furniture had ceased, or when the premises were permitted to become, or had, in fact, become vacant or unoccupied. Compare Ring v. Phoenix Assurance Co., 145 Mass. 426; 14 N.E. Rep. 525.
We deem it unnecessary to now make any further comment on any of the other points argued.
Judgment is reversed. For affirmance — THE CHIEF JUSTICE, CASE, HETFIELD, JJ. 3.
For reversal — THE CHANCELLOR, LLOYD, BODINE, DONGES, HEHER, PERSKIE, DEAR, WOLFSKEIL, RAFFERTY, JJ. 9.