Plaintiff sues to rescind an automobile truck liability policy issued by it to defendants, Angell Georgiana and Francis Georgiana, on the ground of their fraud in obtaining its issuance. The policy covered a truck for the period May 5, 1949, to November 5, 1949. On October 5, 1949, the truck was involved in an accident in New Jersey. The remaining defendants are plaintiffs and defendants in a law action arising out of the accident and were added as parties defendants in this case because of their interest in the controversy.
This case involves two broad issues: (1) whether plaintiff is entitled to rescind for fraud and (2) whether the Financial Responsibility Law of New Jersey precludes such relief as to the defendants who claim to have sustained injuries by reason of the accident.
The policy was issued in Maryland. The Georgianas then resided and the truck was principally garaged in Franklin Township, Somerset County, New Jersey, and that factual situation still continues. The testimony shows that while in Maryland, the Georgianas heard that the authorities of Maryland were carrying on a drive against the operators of uninsured trucks and seeing a card of R. Russell Hitch, an
insurance salesman, they called him. Hitch was plaintiff's agent for the soliciting of insurance and I find that Hitch was plaintiff's agent with respect to the transmitting to plaintiff the representations about to be described.
Hitch, knowing that the Georgianas lived in New Jersey and that the truck was registered and principally garaged in New Jersey advised the Georgianas that unless they furnished a Maryland address plaintiff might not issue the policy. The Georgianas furnished the address of a friend, James Hines, Hagerstown, Maryland. The application for insurance prepared by Hitch and signed by the Georgianas falsely represented that the applicants lived in Hagerstown. The policy declarations stated their residence in conformity with the application and further that "The automobile will be principally garaged" in Hagerstown. Paragraph 23 of the "Conditions" provides that "By acceptance of this policy the named insured agrees that the statements in the declarations are his agreements and representations, that this policy is issued in reliance upon the truth of such representations * * *."
The falsity of the representations is not questioned but defendants assert that there is no evidence that the misrepresentations were material and further that under the law of Maryland rescission for fraud will be denied where the carrier's agent knew of the falsity of the representations.
With respect to the issue of materiality plaintiff claims materiality in the fact that it is not authorized to issue policies in New Jersey and would not issue a policy to a resident of this State with respect to a vehicle registered and principally garaged in this State. Defendants urge a deficiency in the want of evidence that the premium charges with respect to Hagerstown vary from the premium charges with respect to Franklin Township, and further assert that no law prohibits the writing of an insurance contract executed outside this State by a company not authorized to act within this State. Defendants' claims, apart from any question of legal soundness, are far from the mark. The overriding fact is that plaintiff was not authorized to act in this State and did
not want to write a policy for a New Jersey vehicle. I think the materiality of the representations is manifest. There is more to automobile insurance business than the mere issuance of a policy and collection of premiums. An insurance contract provides for the performance of many obligations by a carrier. A carrier which writes insurance in a given locality must arrange for local handling of potential claims. Wholly apart from possible involvement with New Jersey authorities, the practical considerations, arising from the issuance of an isolated policy in an area in which a carrier does not wish to operate, make the materiality of the representations indisputable.
As stated, Hitch was plaintiff's agent and knew that the representations were false. Hitch was disloyal to his principal. The Georgianas knew that he was acting in fraud of plaintiff on their behalf, and are guilty of connivance with him. Their own testimony demonstrates that they knew that plaintiff would not accept the risk if the truth were revealed and their subsequent relations with plaintiff evidenced a careful continuation of the misrepresentations. In these circumstances there is no room for speculation as to whether the Georgianas may have supposed that the place of residence and garaging was of no concern to plaintiff.
In these circumstances plaintiff is accordingly entitled under the law of Maryland to rescind for fraud as against the named insured. Globe Reserve Mutual Life Ins. Co. of Baltimore City v. Duffy , 76 Md. 293, 25 A. 227 (Ct. of Apps. 1892); Commercial Cas. Ins. Co. v. Schmidt , 166 Md. 562, 171 A. 725 (Ct. of Apps. 1934); Commonwealth Cas. Co. v. Arrigo , 160 Md. 595, 154 A. 136 (Ct. of Apps. 1931). The additional insureds, who assert an interest under the "omnibus" clause, are precluded by the fraud of the named insureds. So also are the injured claimants unless the Financial Responsibility Law requires a contrary conclusion.
There is no evidence that plaintiff discovered the fraud and waived its right to rescind. A reporting agency engaged by plaintiff for a routine ...