Lumber Underwriters of New York v. Rife/Opinion of the Court

This is a suit upon a policy insuring lumber for one year from May 22, 1909. The policy contained a warranty by the assured that a continuous clear space of 100 feet should be maintained between the lumber and the mill of the assured, and also a provision requiring any waivers to be written upon or attached to the instrument. The lumber was burned during the year, but it appeared by the undisputed evidence that the warranty had been broken, and the judge directed a verdict for the defendants. It appeared, however, that the policy was indorsed, 'No. 27,868, renewing #27,566,' and the plaintiffs offered to prove that pending the earlier policy the defendants had the report of an inspection that informed them of the actual conditions, showing permanent structures between where some of the lumber was piled and the mill, that made the clear space in this direction less than 100 feet, and that with that knowledge they issued the present policy and accepted the premium. This evidence was excluded, subject to exception. But it was held by the circuit court of appeals that the jury should have been allowed to find whether the defendants had knowledge of the conditions and reasonable expectation that they would continue, and so had waived the warranty. For this reason the judgment was reversed. 122 C. C. A. 346, 204 Fed. 32.

When a policy of insurance is issued, the import of the transaction, as everyone understands, is that the document embodies the contract. It is the dominant, as it purports to be the only and entire, expression of the parties' intent. In the present case this fact was put in words by the proviso for the indorsement of any change of terms. Therefore when, by its written stipulation, the document gave notice that a certain term was insisted upon, it would be contrary to the fundamental theory of the legal relations established to allow parol proof that at the very moment when the policy was delivered that term was waived. It is the established doctrine of this court that such proof cannot be received. Northern Assur. Co. v. Grand View Bldg. Asso. 183 U.S. 308, 46 L. ed. 213, 22 Sup. Ct. Rep. 133; Northern Assur. Co. v. Grand View Bldg. Asso. 203 U.S. 106, 107, 51 L. ed. 109, 111, 27 Sup. Ct. Rep. 27; Connecticut F. Ins. Co. v. Buchanan, 4 L.R.A.(N.S.) 758, 73 C. C. A. 111, 141 Fed. 877, 883. See Penman v. St. Paul F. & M. Ins. Co. 216 U.S. 311, 54 L. ed. 493, 30 Sup. Ct. Rep. 312; AEtna L. Ins. Co. v. Moore, 231 U.S. 543, 559, 58 L. ed. 356, 366, 34 Sup. Ct. Rep. 186. There is no hardship in this rule. No rational theory of contract can be made that does not hold the assured to know the contents of the instrument to which he seeks to hold the other party. The assured also knows better than the insurers the condition of his premises, even if the insurers have been notified of the facts. If he brings to the making of his contract the modest intelligence of the prudent man, he will perceive the incompatibility between the requirement of 100 feet clear space and the possibilities of his yard, in a case like this, and will make a different contract, either by striking out the clause or shortening the distance or otherwise, as may be agreed. The distance of 100 feet that was written into this policy was not a fixed, conventional formula that there would be trouble in changing, if the insured would pay what more, if anything, it mirht cost. Of course, if the insured can prove that he made a different contract from that expressed in the writing, he may have it reformed in equity. What he cannot do is to take a policy without reading it, and then, when he comes to sue at law upon the instrument, ask to have it enforced otherwise than according to its terms. The court is not at liberty to introduce a short cut to reformation by letting the jury strike out a clause.

The plaintiffs try to meet these recognized rules by the suggestion that after a contract is made, a breach of conditions may be waived, 'void' only meaning voidable at the option of the insurers (Grigsby v. Russell, 222 U.S. 149, 155, 56 L. ed. 133, 136, 36 L.R.A.(N.S.) 642, 32 Sup. Ct. Rep. 58, Ann. Cas. 1913B, 863); that this policy was a renewal of a former one, and that the case stands as if, after the breach of warranty had been brought to the notice of the insurers, a premium had been paid and accepted without a new instrument. But what would be the law in the case supposed we need not consider, as in our opinion it is not the one before us. The policy in suit is a document complete in itself. The indorsement that we have quoted is probably only for history and convenient reference. We see no ground for attributing to it any effect upon the contract made. The fact that the policy has a provision for renewal has no bearing, and we do not perceive how it would matter if the previous one had the same. No use was made of the clause. Therefore, in our opinion, the principles that we have laid down apply to the present case (Kentucky Vermillion Min. & Concentrating Co. v. Norwich Union F. Ins. Soc. 77 C. C. A. 121, 146 Fed. 695, 700), and the action of the District Court was right.

Judgment reversed.

The CHIEF JUSTICE, Mr. Justice McKenna, and Mr. Justice Day are of opinion that the Circuit Court of Appeals properly disposed of the case, and dissent.