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Volker v. Connecticut Fire Insurance Co.

Decided: October 28, 1952.


William A. Smith, Freund and Goldmann. The opinion of the court was delivered by Goldmann, J.A.D.


The single question involved on this appeal is whether the Superior Court, Law Division, erred in granting reformation of an insurance policy issued by defendant and in permitting plaintiff to recover thereon.

On February 2, 1949 plaintiff, who had purchased a gasoline yacht located at Forked River, N.J., consulted Fred W. Kemp, the Chatham, N.J. general agent of the defendant insurance company, for the purpose of obtaining insurance on the yacht. Kemp had never written a marine insurance policy, and so phoned defendant's Newark branch office. Upon being referred to the New York office he phoned there in plaintiff's presence and "got all the details, the terms and the limits" of defendant's policy. Plaintiff provided Kemp with the information he transmitted over the phone regarding the amount of insurance, the kind of boat, its length, value and contents, and the "lay-up and out-of-commission" period.

This period was a six-month period during which the boat had to be laid up and kept out of commission. The period specifically requested by plaintiff and discussed by Kemp with the New York office was from October 1 to April 1. Based upon the answers given to questions put in the course of the telephone conversation, the New York office agreed to insure the yacht as of February 2 for a stated premium, calculated upon the 6% rate it had quoted Kemp. Further, it gave plaintiff the permission he had requested to move the boat from Forked River to Manasquan during the lay-up period. The New York office told Kemp that an application form would be forwarded. At the conclusion of the phone call, Kemp informed plaintiff that the insurance was in effect and that he could move the boat.

The application form arrived February 4, 1949. On the same day, and in plaintiff's presence, Kemp typed out the information called for by the application and which was given him by plaintiff. Kemp dated the application February 2, the day the binder was put on the boat, pursuant to instructions he had received during the New York phone call. The following printed questions and typed answers appear on the application form:

"During what months is it laid up? Oct. to April. Where? Manasquan, N.J. "

Kemp then sent the application to defendant and was paid the agreed premium by plaintiff.

On February 8, 1949 defendant forwarded the application to Carpinter & Baker, defendant's New York "marine managers," with the request that they issue the necessary policy and forward it to Kemp. Carpinter & Baker then prepared and issued a policy in defendant's name insuring plaintiff's yacht, in which policy the following warranty appeared:

"Lay-up Warranty -- Warranted by the Assured that the within named yacht shall be laid up and out of commission from Nov. 1st, at noon, until May 1st, at noon."

Walter Lehr, an officer of Carpinter & Baker who handled the matter, testified that he personally directed that the policy be issued with this lay-up period although he knew and understood that the application called for a lay-up from October 1 to April 1. The reason for the change was that the marine underwriters preferred to have policies on small boats carry a November 1-May 1 lay-up period because such craft could not withstand heavy storms. Lehr admitted that no effort was made to notify plaintiff of the change in the lay-up period. In all other respects the policy issued conformed with what had been agreed upon over the telephone between plaintiff and defendant, Kemp's principal, and with what was called for in the application -- in particular, the risk insured against, the amount of insurance ($2,000), the rate (6%), the premium ($120) and the period of coverage. Although issued on February 9, 1949, the policy was for the period from noon February 2, 1949 to noon February 2, 1950, consistent with the binder agreement.

Carpinter & Baker forwarded the policy to Kemp who received it on February 10 or 11, 1949 and placed it in his files. On April 9, 1949 the yacht exploded while being refueled, caught fire and was totally destroyed. Plaintiff filed his proof of loss but defendant refused to pay because the fire had occurred during the lay-up period of the policy, i.e. , between November 1 and May 1.

Suit was instituted in the Superior Court, Law Division, for $2,000 damages, interest and costs. Defendant answered denying liability and set up as a separate defense that plaintiff, by using the yacht on April 9, 1949, had breached the lay-up warranty contained in the policy. Plaintiff's amended reply alleged that the only warranties made by him were those contained in the application for insurance dated February 2, 1949, and demanded reformation of the policy. The pretrial order gave plaintiff leave to further amend his reply to ...

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