003-NLR-NLR-V-62-VANGUARD-FIRE-AND-GENERRAL-INSURANCE-CO.-Appellant-and-LIYANAGE-Respondent.pdf
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PTJX.L.E, J.—Vanguard Fire and General Insurance Co. v. Diyanage
Present :Pulle, J., and Sansoni, J.
VANGUARD FIRE AND GENERAL INSURANCE CO., Appellant, andJLIYANAGE, Respondent
S.C. 561—D. C. Colombo, 26981jM
Fire insurance—Non-disclosure of material facts—Distinction between a new policyand renewal of an old policy.
Where a fire insurance policy in respect of the stock-in-trade of the insuredperson expired on 28th November 1950 and, after the oxpiry of about thre&months, another policy was issued on 19th March 1951—
Held, that the second policy was not a renewal but a fresh policy and that the-Proposal Form of the earlier policy could not be regarded as its basis.
Appeal from a judgment of the District Court, Colombo.
M.M. K. Subramaniam, with H. D. Tambiah, for the defendant-appe?lant.
W. Jayewardene, Q.C., with V. Arulambalam, for the plaintiff-respondent.
Cur. adv. vuU..
July 14, 1958. PuiibE, J.—
The plaintiff in this action sought to recover a sum of Rs. 100,000 on a-fire insurance policy dated the 19th March, 1951, a copy of which marked* A * is attached to the plaint. A fire <broke out on the 27th December,1951, on the premises in which the stock-in-trade of the plaintiff consist-ing of motor spares and electrical goods was stored. A large part of thegoods was either damaged or destroyed and the decree from which thedefendants, an insurance company, appeals has awarded the plaintiffRs. 73,054/00.
PCT/LE, J.— Vanguard Fire and General Insurance Co. v. Liyanage
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Apart from the quantum of loss and damage which was disputed, theclaim was resisted on several grounds of which it is necessary for thedecision of this appeal to refer to only those set out in paragraph 7 of theanswer. It reads,
“7. The defendant pleads that the plaintiff made the followingmaterial misrepresentations and non-disclosures prior to the formationof the contract in the aforesaid Policy of Insurance, marked ‘ A * andannexed to the plaint.
“ (a) that the plaintiff represented to the defendant that the businesspremises in which the insured stock-in-trade was to be stored hadexternal walls of brick and chunam, whereas in fact the -external wallsof the said business premises are constructed on three sides with brickand chunam, and on the fourth side, by a wooden partition and a wire*mesh.
“ (6) that the plaintiff represented to the defendant that he wouldremove his stock book and account books from the said premises everynight since there was no fire-proof safe on the said premises, whereas inifact on the night of 27th December, 1951, the plaintiff failed to do so-.
“ (c) that the plaintiff represented to the defendant that the buildingin which the insured stock-in-trade was to be stored was only twoyears old and in good state of repair, whereas in fact these represen-tations were untrue.*>
“ (d) that the plaintiff in his sketch of the said premises on the pro-posal form attached hereto marked ‘X’ failed to disclose to the defen-dant that there is a cafe and kitchen attached to it, adjoining the saidpremises and separated from the said premises only by a wooden parti-tion and a wire mesh. The defendants would not have entered into thesaid Policy of Insurance marked c A ’ and annexed to the plaint, if anyone or more of the aforesaid material misrepresentations and non-dis-closures in paragraphs 5 (a) to (d) (apparently a mistake for 7 (a) to (d) )hereof had not been made and that the said Policy of Insurance is ren-dered null and void/or the defendant is entitled to have the said Policydeclared null and void. ”
At the hearing of the appeal no submissions based on the allegations inparagraphs (a) and (c) or regarding the caf<§ and kitchen in paragraph (tZ>above were addressed to us by learned counsel for the appellant. For thepurpose of avoiding the Policy he relied only on one submission, namely,,that at^he time the contract was entered into, namely 19th March, 1951,.there had been a failure to disclose facts appertaining to the custody ofthe account books of the plaintiff which materially affected the risk under-taken by the defendant company who are referred to hereinafter as “the-insurers **. To this argument the reply was that the point was not opento the insurers, as it was neither pleaded nor embodied in an issue, or,if the point was open, there was no obligation on the part of the plaintiffto make any disclosure regarding the books of account. It is for thepurpose of dealing with this aspect of the case that the contents of para-graph 7 of the answer have already been quoted in extenso.
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PXJIjLE, J.—Vanguard. Fire and General Insurance Go. v. Inyanage
Before dealing with the merits of the arguments adduced on either sideit is necessary to refer to answers given by the plaintiff to questions in aProposal Form (D1) dated 28th November, 1945, when the stock-in-tradeof the plaintiff was first insured by the insurers for Rs. 50,000 (vide covernote D2 for the year ending 28th November, 1946, and Policy No. 000224marked D3). The questions and answers were as follows :
“13. Do you or your representative
(а)Take stock at least once a year “? Yes.
(б)Keep a set of Account Books ? Yes.
(c) Keep such Account Books in a fire-proof safe ? No iron safe.
It is always taken home with the Proprietor. ”
It is common ground that at the time the proposal was signed the plaintiffhad no fire-proof safe for lodging his account books and that he used totake them home. However from the year 1947 the books were keptin the premises and they were in fact destroyed by lire on the 27th Decem-ber, 1951. The contention for the insurers is
(а)that although the proposal D1 was signed in 1945 on the occasionof the issue of the first policy it was on the basis of the statements containedtherein that the policy sued on was issued ;
(б)that at the date of the policy the statement in DI that the accountbooks were taken home was not true in fact and that in any event it wasthe duty of the plaintiff to have disclosed when he took out the policysued on that the account books were kept at the place of business since1947 and that the failure so to disclose materially affected the risk and thepolicy sued on was thereby avoided.
The plaintiff’s answer is that as the policy sued on was not a renewabut a fresh policy the proposal of 1945 cannot be regarded as the basis ofthe policy. It was further contended by the plaintiff
(а)that the allegations in paragraph 7 of the answer and the issuebased thereon, namely,
“ 3. Did the plaintiff make any, and/or all the misrepresentationsand/or non-disclosures, prior to the formation of the contract sued upon, ■set out in paragraph 7 (a) and/or 7 (6) and/or 7 (c) and/or 7 (d) of theanswer % ”
precluded the defendant from taking the point in appeal that the non-disclosure, if any, regarding the account books avoided the policy
(б)that the only allegation in the answer, namely, in paragraph 7 (b)touching the account books was a representation that “ lie would removehis stock book and account books from the said premises every night”,and that, therefore, the representation, if any, was in the nature ofpromise to do an act in futuro the failure to do which did not of itselfmake the representation fraudulent.
The learned trial Judge found that the policy on which the action wasbrought was a new contract in the sense that it, was not a renewal of thepolicy which expired on 28th November, 1950.
PULLE, J.— Vanguard Fire and General- Insurance Go. v. Liya nag e
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On the assumption, that the policy sued on was in reality a contractthe basis of which was the proposal signed in 1945 the learned Judgewent on to hold that the answer to question 13 (c) was “ true as it relatesto the time the proposal was made He further held that the answerwas not of a promissory nature carrying the implication that the bookswould be taken home by the insured till the end of the period for whichthe policy was issued. In other words he held that the answer did notconstitute a warranty or condition a breach of which would save theinsurers from liability.
Learned counsel for the appellant argued that while the answer givenby the plaintiff might have been true at the time it was given in 1945,the plaintiff knew that it was not true at the time the policy sued on wasissued. It was his duty then to disclose that fact and that the non-disclosure which materially affected the risk was a conclusive answer tothe claim. Reliance was placed strongly on the case of In re Wilsonand Scottish Insurance Corporation, Limited 1 in which it was Held thatthe renewal of a fire policy is impliedly made on the basis that the state-ments in the original proposal are still accurate. While a fresh proposalmay not be necessary it may be very material to the insurers to know ofany change in the extent of the risk to enable them to determine whetheror not they will continue the insurance. I do not think the principle laiddown in this case can be applied to the policy sued on. The last of thepolicies came to an end on 28th November, 1950. About three monthselapsed before the present policy was issued and any rights accruing to theinsurers on the proposal of 1945 also came to an end by the latest on thesame date. The fact that the agent of the insurers Mr. Krishnasamybelieved that there was a renewal of the old policy at the time he issuedthe cover note cannot conclude the question in their favour. A sub-mission was made by the insurers both in the trial court and in appealthat the basis of the policy was the proposal signed in 1945 becausethe plaintiff by his letter L>13 of 3rd January,! 952, requested the insurersto send him a copy of the policy and “ the connected proposal form ”.The learned trial Judge was not prepared to read this letter as anadmission by the plaintiff that the proposal was the basis of the jjolicy.He has expressed his opinion of the plaintiff as follows :—
“ The plaintiff is illiterate in English. He may have picked up afew words of English in the course of his business. He certainly docsnot understand the nice distinction between a new policy evidencinga new contract and a renewal of an old policy. Wliat he wanted wasthat his goods should be covered by insurance. ”
I am unable to give to the letter H13 the effect contended for on behalfof the insurers. It certainly falls short of an admission that the plaintiffregarded the proposal Do as the basis of the policy. In the result I holdthat the policy is not avoided on the ground that the plaintiff did notdisclose to the insurers that he had ceased to take his account books homeand that they were left after the day’s business in the premises.
It was submitted to tis, as stated before, that this point of non-disclosurewas not open to the insurers as it was neither pleaded in the answer norraised as an issue at the trial. A close examination of the pleadingson this point and the issue which have already been quoted in full shows
(1920) 2 Ch. 28.
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PUl-iLE, J.— Vanguard Fire and General Insurance Go. v. IAyanage
that the insurers relied on only one specific act of non-disclosure mentionedin paragraph 7 {d) of the answer and three specified acts of misrepresenta-tion mentioned in paragraphs 7 (a) to (c). I am not prepared to readparagraph (6) to mean that the insurers sought to avoid the contract onthe basis that while the representations as to the account books was trueas at the date of the proposal the plaintiff failed in bis duty to disclose,at the time the policy sued on was issued, that it was no longer true. Theplaintiff’s objection is entitled to prevail unless the insurers can satisfythe court that it has all the facts before it to decide the point raised on-their behalf. On this aspect of the matter it was extended for theplaintiff that if the insurers had raised the point in the trial court as aspecific issue, namely, a failure in 1951 to disclose a change in circums-tances affecting the risk undertaken by the insurers, he might have ledevidence that they were aware in 1951 that the books were no longer takenhome by him at the end of each day’s business. In my opinion the ob-jection to the insurers raising the point of non-disclosure in appeal for thefirst time ought to be upheld.
However, on the basis of the finding that the policy sued on was not arenewal of a subsisting policy governed by the proposal D5, it follows inmy opinion that the contention that the policy was avoided fails andthere is left to consider only the submission that there was no legalproof of the monetary value of the loss sustained by the plaintiff.
The assessment of the damage suffered, by the plaintiff was made by the-Chairman of the Ceylon Fire Insurance Association, Mi-. B. G. Thomley,at the request of the insurers. The trial Judge accepted his figuresand after making a deduction of 10% as being the margin of profits fixedthe loss at Its. 73,051/00. The only objection taken to the evidence ofMr. Thomley is that a representative of the insured and a representativeof a well known firm of motor car dealers who were associated with himwere not called as witnesses at the trial. For the insurers no evidence-was called to show that the values placed against each of the d.amagedarticles specified in the list P23 prepared by Mr. Thomley was excessive.In a communication P10 dated 21st January, 1952, the plaintiff wroteto the insurers asking them to confirm that the goods damaged werevalued by Mr. Thomley at Rs. 84,613/97. No reply was sent either tothis letter or to those calling attention to it. While it is true thatMr. Thomley did not personally know the market value of each andevery one of the numerous articles set out in P23, he was entitled togather information from a reliable source and ultimately he took theresponsibility for the assessment which he made at the instance of theinsurers themselves who must be deemed to have been satisfied as to his.competence. The learned trial Judge says of the assessment that it hadbeen made with commendable precision and c-are and I do not thinkthat the absence of the evidence of the two representatives associatedwith Mr. Thomley renders his estimate of the loss unreliable.
In my opinion the appeal fails and should be dismissed with costs.Sansokt, J.— I agree.
Ajjpeal dismissed.