Imperial Fire Insurance Company of London v. Coos County/Opinion of the Court
In the view we take of the case, it will be necessary to notice only the exceptions based upon the refusal of the court to instruct the jury, as requested by the defendant, 'that if the work done by the mechanics, as disclosed by the evidence, increased the hazard while such work was being done, then the plaintiff is not entitled to recovery;' and the exception to the instruction given, to the effect that the question was whether the work and repairs done upon the building increased the risk at the time of the fire.

It is contended on behalf of the plaintiff in error that these exceptions present the following legal propositions:

(1) The court should have instructed the jury that if the work done by the mechanics increased the hazard while the work was in progress, then the assured would not be entitled to recover, because, when the hazard was increased, and the risk changed, by the acts of the assured, and without the knowledge or consent of the insurer, in that event the contract came to an end by virtue of its own expressed, unambiguous terms.

(2) The assured, the county of Coos, having made extensive repairs upon the insured premises, and having neither notified the plaintiff in error, the insurer thereof, nor obtained its consent in writing therefor, the conditions of the policy were violated, and, by its terms, the contract terminated.

(3) It was error to instruct the jury that it was immaterial what had occurred to increase the hazard during the repairs, unless such increased hazard existed at the time of the fire.

On behalf of the defendant in error it is claimed that under a proper construction of the policy the question on which the case turns is, did the repairs and alterations made by the defendant in error upon its courthouse, and completed when the fire occurred, result in an increase of risk at that time, or were they in any way the cause of the fire? The proposition is that, unless such repairs and alterations had the effect of either causing the fire, or of increasing the risk, at the time it occurred, then there was no breach of the condition contained in the contract that 'this policy shall be void and of no effect if, without notice to the company, and permission therefor indorsed hereon, * * * mechanics are employed in building, altering, or repairing the premises named herein.'

Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy or policies embodying the agreement of the parties. For a comparatively small consideration the insurer undertakes to guaranty the insured against loss or damage, upon the terms and conditions agreed upon, and upon no other, and, when called upon to pay in case of loss, the incurer, therefore, may justly insist upon the fulfillment of these terms. If the insured cannot bring himself within the conditions of the policy, he is not entitled to recover for the loss. The terms of the policy constitute the measure of the insurer's liability, and, in order to recover, the assured must show himself within those terms; and, if it appears that the contract has been terminated by the violation on the part of the assured of its conditions, then there can be no right of recovery. The compliance of the assured with the terms of the contract is a condition precedent to the right of recovery. If the assured has violated or failed to perform the conditions of the contract, and such violation or want of performance has not been waived by the insurer, then the assured cannot recover. It is immaterial to consider the reasons for the conditions or provisions on which the contract is made to terminate, or any other provision of the policy which has been accepted and agreed upon. It is enough that the parties have made certain terms conditions on which their contract shall continue or terminate. The courts may not make a contract for the parties. Their function and duty consist simply in enforcing and carrying out the one actually made.

It is settled, as laid down by this court in Thompson v. Insurance Co., 136 U.S. 287, 10 Sup. Ct. 1019, that, when an insurance contract is so drawn as to be ambiguous, or to require interpretation, or to be fairly susceptible of two different constructions, so that reasonably intelligent men, on reading the contract, would honestly differ as to the meaning thereof, that construction will be adopted which is most favorable to the insured.

But the rule is equally well settled that contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties have used, and, if they are clear and unambiguous, their terms are to be taken and understood in their plain, ordinary, and popular sense.

It is entirely competent for the parties to stipulate, as they did in this case, 'that this policy should be void and of no effect, if, without notice to the company, and permission therefor indorsed hereon, * * * the premises shall be used or occupied so as to increase the risk, or cease to be used or occupied for the purposes stated herein; * * * or the risk be increased by any means within the knowledge or control of the assured; * * * or, if mechanics are employed in building, altering, or repairing premises named herein, except in dwelling houses, where not exceeding five days in one year are allowed for repairs.'

These provisions are not unreasonable. The insurer may have been willing to carry the risk at the rate charged and paid, so long as the premises continued in the condition in which they were at the date of the contract; but the company may have been unwilling to continue the contract under other and different conditions, and so it had a right to make the above stipulations and conditions on which the policy or the contract should terminate. These terms and conditions of the policy present no ambiguity whatever. The several conditions are separate and distinct, and wholly independent of each other. The first three of the above conditions depend upon an actual increase of risk by some act or conduct on the part of the insured, but the last condition is disconnected entirely from the former, whether the risk be increased or not. This last condition may properly be construed as if it stood alone, and a material alteration and repair of the building beyond what was incidental to the ordinary repairing necessary for its preservation, without the consent of the insurer, would be a violation of the condition of the policy, even though the risk might not have been in fact, increased thereby. The condition that the policy should be void and of no effect if 'mechanics are employed in building, altering, or repairing the premises named herein,' without notice to or permission of the insurance company, being a separate and valid stipulation of the parties, its violation by the assured terminated the contract of the insurer, and it could not be thereafter made liable on the contract, without having waived that condition, merely because, in the opinion of the court and the jury, the alterations and repairs of the building did not, in fact, increase the risk. The specific thing described in the last condition as avoiding the policy, if done without consent, was one which the insurer had a right, in its own judgment, to make a material element of the contract; and, being assented to by the assured, it did not rest in the opinion of other parties, court or jury, to say that it was immaterial, unless it actually increased the risk.

If the last stipulation had been so framed as to require the element of an increased risk to be incorporated into the condition that if 'mechanics are employed in building, altering, or repairing the premises named herein,' without notice to the company, and its permission in writing indorsed on the policy, then there would have been presented a question of fact for the jury whether such alterations and repairs constituted an increase of the risk. But this condition, being wholly independent of any increase of risk, its violation without the consent of the insurer, or waiver of the breach, annulled the policy.

This being the proper construction, as we think, of the terms and conditions of the policy, and it being shown that the insured, in August, 1886, without the knowledge or written consent of the insurer, employed carpenters and brick masons, and reconstructed and enlarged the vaults and offices of the courthouse, reconstructing the foundations corresponding to the enlargement of the vaults, which necessitated the cutting of the floors and ceilings of the different offices, and that this work occupied five or six weeks, and in connection therewith necessitated painting, and a new method of heating the offices of the register of probate and the clerk of the court, (this change in the method of heating being completed about midnight of November 3, 1886, and the fire which destroyed the building occurring some two hours thereafter,) clearly entitled the plaintiff in error to the instruction requested, that 'if the work done by the mechanics, as disclosed by the evidence, increased the hazard while such work was being done, then the plaintiff is not entitled to recover.' This instruction, which the court declined to give, presented the question of fact whether there had been any violation of the condition that the premises should not be so used or occupied as to increase the risk, or that the risk should not be increased by any means within the knowledge or control of the assured.

The court not only refused this instruction, but in its charge to the jury so construed the condition that if 'mechanics are employed in building, altering, or repairing the premises named herein,' without the consent of the insurer, as to make it mean that such alterations and repairs must be shown to have increased the risk in point of fact, and that such increase of risk must have existed at the time of the fire.

If the mechanics were employed in altering and repairing the building in a manner beyond what was required for its ordinary repair and preservation, and in such a material way as constituted a breach of the condition of the contract, it is difficult to understand upon what principle the charge of the court can be sustained. The condition which was violated did not, in any way, depend upon the fact that it increased the risk, but by the express terms of the contract was made to avoid the policy if the condition was not observed. The instruction of the court gave no validity or effect to the condition and its breach, but made it depend upon the question whether the acts done in violation of it in fact increased the risk, and whether such increased risk was operative at the date of the fire.

The court below proceeded upon the theory that the fire having occurred after the employment of the mechanics had ceased, such employment, and the making of the alterations and repairs described, did not constitute a breach at the time of the fire; that the increased risk, which was necessary to render the policy void, must be found to have existed at the time of the fire, and not at any preceding date.

But, aside from the error of the court in refusing to give the specific charges requested, and in the general charge, as given, it appears, by the bill of exceptions, that upon the conclusion of the testimony establishing the foregoing facts, and about which there is no controversy, the defendant made the following motion: 'That a verdict be directed for it on the ground that there is no evidence competent to be submitted to the jury that the building, altering, and repairing shown by the evidence was not such altering and repairing as avoided the policy.' This motion was denied by the court, and the defendant excepted. Under the construction we have placed upon the last condition, above quoted, we are of opinion that the defendant was entitled, on the conceded facts, to have a verdict directed in its favor on the ground that the employment of mechanics to make such material alterations and repairs as were made, without the knowledge or consent of the plaintiff in error, was, in and of itself, such a violation of the terms of the policy as rendered it void, without reference to the question whether such alternations and repairs had increased the risk or not. The principles of law applicable to this question are stated and illustrated in the following authorities:

In Ferree v. Insurance, etc., Co., 67 Pa. St. 373, the policy of insurance contained the provision that it should not 'be assignable without the consent of the company expressed thereon. In case of assignment without such consent, whether of the whole policy or of any interest in it, the liability of the company in virtue of said policy shall thenceforth cease.' The assured assigned the policy, and the court held that the condition was a perfect legal one, and that the company was not liable, although the plaintiff had redeemed the policy previously assigned, and was the holder thereof at the time of the suit.

In Fabyan v. Insurance Co., 33 N. H. 203, the policy provided that procuring other insurance without the consent of the company would avoid the policy. Other insurance was procured, and the court held 'that by the terms of the policy this discharged the defendant from liability, its promise contained in the policy to pay the plaintiff in case of loss being upon the condition that, in case of double insurance, its assent thereto should be indorsed on the policy.'

In Moore v. Insurance Co., 62 N. H. 240, the policy contained, among other provisions, the following conditions: 'If the above-mentioned premises shall become vacant and unoccupied for a period of more than ten days * * * without the assent of the company indorsed hereon, * * * then, and in every such case, this policy shall be void.' At the time the premises were destroyed they were occupied, but for a period of at least three months prior to that time they were unoccupied, although without the knowledge of either the assured or the insurer. The court held that the conditions of the policy had been broken by the unoccupancy of the premises, and that 'the contract, being once terminated, could not be revived without the consent of both of the contracting parties. It is immaterial, then, whether the loss of the buildings is due to unoccupancy or to some other cause.'

In other New Hampshire decisions it is held that a departure from the conditions without the written consent of the insurer avoided the policy and terminated the contract. Shepherd v. Insurance Co., 38 N. H. 232; Gee v. Insurance Co., 55 N. H. 65; Sleeper v. Insurance Co., 56 N. H. 401; Hill v. Insurance Co., 58 N. H. 82; Baldwin v. Insurance Co., 60 N. H. 164; Crafts v. Insurance Co., 36 N. H. 44; Dube v. Insurance Co., 64 N. H. 527, 15 Atl. 141.

It is competent for the parties to agree that this or that alteration or change shall work a forfeiture, in which case the only inquiry will be whether the one in question comes within the category of changes which by agreement shall work a forfeiture. May, Ins. (1st Ed.) § 223, citing Lee v. Insurance Co., 3 Gray, 583; Glen v. Lewis, 8 Exch. 607.

In Frost's Detroit Lumber, etc., Works v. Millers' & Manuf'rs Mut. Ins. Co., 37 Minn. 300, 302, 34 N. W. 35, the court was called upon to construe a contract of insurance which contained the following provision: 'Such ordinary repairs as may be necessary to keep the premises in good condition are permitted by this policy; but if the buildings hereby insured be altered, added to, or enlarged, due notice must be given, and consent indorsed hereon.' The building insured was subsequently materially enlarged, and the court held, inasmuch as notice was not given to the company, that under the construction given to the clause the policy was avoided, although the risk was not increased by the alterations which had been made to the building.

In Mack v. Insurance Co., 106 N. Y. 560, 13 N. E. 343, the policy contained a condition similar to the one in the policy in this case, providing that the working of mechanics in building, altering, or repairing any building covered by the policy, without the written consent of the company indorsed thereon, would cause a forfeiture of all claim under the policy. Mechanics were at work making changes in the building at the time of the fire, without the consent of the insurer, and the court held that this effected an avoidance of the policy. The court said that 'certain conditions are very generally regarded by underwriters as largely increasing the hazards of insurance, and they, unless corresponding premiums are paid for extra risks, are usually intended to be excluded from the obligation of the policy. Such are the conditions in reference to unoccupied houses, changes in the occupation from one kind of business to another more hazardous, the use of inflammable substances in buildings, and their occupation by carpenters, roofers, etc., for the purpose of making changes and alterations. These conditions, when plainly expressed in a policy, are binding upon the parties, and should be enforced by the courts, if the evidence brings the case clearly within their meaning and intent. It tends to bring the law itself into disrepute, when, by astute and subtile distinctions, a plain case is attempted to be taken without the operation of a clear, reasonable, and material obligation of the contract.'

The principle announced in the last-cited case was also enunciated in Lyman v. Insurance Co., 14 Allen, 329.

In Kyte v. Assurance Co., 149 Mass. 116, 21 N. E. 361, a policy was sued upon containing the provision that it should become void if the circumstances affecting the risk should be altered so as to increase the risk, or if articles subject to legal restriction should be kept in quantities or manner different from those allowed or prescribed by law. When the premises were insured they were used as a common victualing place, and subsequently intoxicating liquors were sold illegally. The judge before whom the case was tried instructed the jury, in substance, that if that illegal use was temporary, not contemplated at the time when the policy was taken by the plaintiff, and ceased before the fire, then the fact that he had made an illegal use of the premises during the time covered by the policy would not deprive the plaintiff of the right to maintain the action; and that his right, under the policy, if suspended while the illegal use of the building continued, would revive when he ceased to use it illegally. The supreme judicial court of Massachusetts, in considering this instruction, said: 'The question is thus presented whether the provision of the policy that it shall be void in case of an increase of risk means that it shall be void only during the time while the increase of risk may last, and may revive again upon the termination of the increase of risk.' 'The contract of insurance depends essentially upon an adjustment of the premium to the risk assumed. If the assured, by his voluntary act, increases the risk, and the fact is not known, the result is that he gets an insurance for which he has not paid.' And again: 'An increase of risk which is substantial, and which is continued for a considerable period of time, changes the basis upon which the contract of insurance rests; and, since there is a provision that in case of an increase of risk which is consented to, or known by the assured and not disclosed, and the assent of the insurer obtained, the policy shall be void, we do not feel at liberty to qualify the meaning of these words by holding that the policy is only suspended during the continuance of such increase.' The decision of the supreme court reversed the lower court, which had proceeded exactly upon the same theory adopted by the circuit court in the case under consideration. The principle laid down in this and the other cases cited clearly establishes that the general instruction to the jury complained of in the present case was erroneous.

Judgment reversed, and case remanded, with instructions to set aside the verdict and to order a new trial.

Mr. Justice BREWER dissents. 

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