A. E. Graham, d/b/a Graham’s Grill v. Aetna Insurance Company, Globe & Republic Insurance Company of America, The Eagle Fire Company of New York, and Pearl Assurance Company, Ltd.

Supreme Court of South Carolina, No. 18106, decided August 8, 1963 (Taylor, Chief Justice, for the Court; Moss, Lewis, Bussey and Brailsford, JJ., concurring). The complete opinion appears below. Our text comes from the Caselaw Access Project (case.law), Harvard Law School’s open archive of published U.S. case law, which supplies the opinion as printed in the official reporter at 243 S.C. 108. The reporter’s head matter — the docket number, the caption, the parallel-cite line “(132 S. E. (2d) 273)”, the counsel listing (Messrs. Burroughs & Green, of Conway, for Appellants; H. T. Abbott, Esq., of Conway, for Respondent), and the filing date — is summarized in this paragraph rather than printed as opinion text; a caption and a court-and-date line are reprinted above the opinion. Here is the complete list of repairs to the opinion text: the judge’s name line was set in bold; “$8,176-.00” was rejoined to “$8,176.00”, the hyphen being a line break inside the figure; “policyestops insurer” was separated into “policy estops insurer”; and one closing quotation mark the scan dropped at the end of the second quotation from Corpus Juris Secundum — after “is desired from him, * *” — was restored. One thing was deliberately left as printed: in the first quotation from Corpus Juris Secundum, the archive reads “the modern practice of requiring applicant to answer questions prepared by insured,” where the sense calls for “insurer.” Because that may be the reporter’s own slip rather than a scanning error, it stands untouched. Nothing else was changed. No word of the Court’s has been changed, condensed, reordered, or paraphrased.

The full opinion

A. E. GRAHAM, d/b/a Graham’s Grill, Respondent, v. AETNA INSURANCE COMPANY, Globe & Republic Insurance Company of America, The Eagle Fire Company of New York, and Pearl Assurance Company, Ltd., Appellants.

Supreme Court of South Carolina. No. 18106. August 8, 1963.

Taylor, Chief Justice.

This appeal arises out of an action to recover upon four fire insurance policies issued to plaintiff by the four defendant insurance companies. The four policies were procured simultaneously through one insurance agency and covered a building and the contents thereof in which plaintiff operated a restaurant. Upon trial in the Court of Common Pleas for Horry County, the jury returned a verdict in the amount of $17,701.28 and defendants appeal.

On or about October 28, 1960, a fire totally destroyed the insured building and its contents and plaintiff in his complaint alleges that he filed the required proof of loss, cooperated completely and complied with every request of defendants; but that defendants had failed to comply with the provisions of the policy with respect to payment.

Defendants answered admitting the issuance of the policies but contending that plaintiff willfully concealed a previous fire loss in violation of the following provision appearing in each policy:

“This entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto.”

The answers further allege that had the fact of the previous loss been disclosed, the agent would not have issued the policies to plaintiff.

Upon trial it developed that plaintiff had received $8,176.00 as payment for a fire loss that he had sustained in 1955 on a dwelling and its contents located on property belonging to plaintiff approximately 3 or 4 miles from the site of plaintiff’s restaurant.

“A concealment in the law of insurance is the designed and intentional withholding of any fact, material to the risk, which insured in honesty and good faith ought to communicate. As a general rule a failure by insured to disclose conditions affecting the risk, of which he is aware, makes the contract voidable at insurer’s option. However, the modern practice of requiring applicant to answer questions prepared by insured has relaxed this rule to some extent, since information not asked for is presumably deemed immaterial.” 45 C. J. S. Insurance § 473(3), p. 153.

Answers to oral questions asked of the insured by insurer’s agent when applying for insurance are only representations and such answers even if false are not sufficient to avoid the policy unless they are material to the risk, known to the applicant to be false, made with intent to mislead and defraud the insurer and are relied upon by the insurer as a basis for the issuance of the policy. Atlantic Life Insurance Co. v. Beckham, 240 S. C. 450, 126 S. E. (2d) 342.

Defendants rely principally upon the testimony of its agents, Mr. and Mrs. Ed Taylor, to establish its contention that plaintiff had willfully concealed the facts and circumstances of a previous fire.

Mr. Ed Taylor testified that plaintiff told him that the only previous fire he had was a tenant house on which he had no insurance; that while he inspected the property and talked to plaintiff for approximately an hour, the only property with which he was concerned at the time was the property which plaintiff wished insured.

Mrs. Clydie Taylor testified that the first time she saw plaintiff was when he came to the office to return an insurance binder that had been issued to him after he had applied for the insurance. The following is her only testimony relative to plaintiff’s previous fire loss:

“Q. Did you have any conversation with him about any previous fire losses?

“A. Yes, I did.

“Q. Will you tell us what he told you?

“A. He said he had never had but one fire loss and that was a tenant house without insurance.”

Plaintiff testified that he had suffered a previous loss when a tenant house on this same farm burned, but there was no insurance coverage. He did not admit or deny that he had told the agent that this was the only previous loss but explained the unreported loss by saying that “* * * I was talking about that farm out there where I lived.”

An applicant has a duty to fully answer questions propounded without evasion, misrepresentation or concealment. In order for this Court to determine whether plaintiff’s alleged statement was a full and truthful answer to a particular question, such question should be set forth. The record before us does not contain the alleged interrogatories asked of plaintiff by the Taylors, only his purported answers. Without some evidence of the actual questions propounded, it is impossible to determine precisely whether plaintiff’s answers were false or were mistakenly made in good faith. As Mr. Taylor testified that he was only concerned with the property he was preparing to insure the record is not conclusive whether the question propounded by him regarding previous fire losses was directed to losses occurring on that particular property as contended by plaintiff or any or all losses as contended by defendants.

“* * * Ordinarily, in the absence of fraud, a failure of insured to disclose a fact with reference to which no questions are asked is not such a concealment as will avoid a policy, and, as has been stated, where the company asked no information and insured makes no representations, insured being asked nothing may presume that nothing as to the risk is desired from him, * *” 45 C. J. S. Insurance § 473(3), p. 155.

In the absence of inquiry, insured need not disclose that he had had previous fire losses for which he had collected insurance, 45 C. J. S. Insurance § 534, p. 275; and insurer’s failure to inquire into facts it considers material to the risk prior to issuance of the policy estops insurer to object to applicant’s concealment unless the concealment is tainted with a fraudulent intent. See Dixon v. Standard Mutual Life Ins. Co., 206 S. C. 241, 33 S. E. (2d) 516. Mere silence on the part of the assured as to a matter not inquired of is not to be considered such a concealment as to avoid the policy. Aliud est celare, aliud tacere.

For the foregoing reasons, under the evidence here, the trial Court could not have properly held, as a matter of law, that the plaintiff willfully concealed or misrepresented any material fact or circumstance within the meaning of the policy provision and it follows that he was correct in overruling defendants’ motion for a directed verdict and submitting the cause to the jury.

Defendants’ second exception relates to a written statement made and signed by plaintiff, under oath, prior to trial and refused admittance as evidence upon trial. Plaintiff was extensively cross-examined concerning the contents of this statement. The statement is not printed in the Transcript of Record, and it is impossible for this Court to say whether the testimony is contradictory to this statement or merely cumulative. Some of the questions propounded elicited admissions, some with explanations, to the effect that plaintiff had made such statements; others were not denied. Ordinarily, where contradictory statements of a witness, contained in a writing, are admitted by the witness to have been made, there is no need to introduce the instrument as proof thereof, and such is inadmissible on this ground, granting that it is admissible otherwise. Squires v. Henderson, 208 S. C. 58, 36 S. E. (2d) 738; McMillan v. Ridges, et al., 229 S. C. 76, 91 S. E. (2d) 883. There is nothing in the record to suggest that the statement signed by plaintiff contained anything in the nature of an admission against interest so as to make the statement admissible on that ground.

The defendants argue, in effect, that the statement was admissible to prove the substantive fact that plaintiff swore falsely about a material fact or circumstance after the loss and thereby voided the policy. This contention is without merit for more than one reason. The contention was not made to the Court below. The statement not being in the record, there is nothing before us to show that there was anything therein tending to prove any substantive fact and, moreover, counsel, in the course of cross-examination, apparently read from the said statement all of the questions and answers which he considered had any probative effect as to whether or not there was any false swearing on the part of the plaintiff, as to any material fact or circumstance. As far as the record shows, plaintiff admitted that such questions and answers, dealing with any material fact or circumstance, were asked and given. Under these circumstances, there is no showing of any prejudice in the exclusion of this statement, even if the same were admissible.

For the foregoing reasons, we are of opinion that all exceptions should be overruled, and the judgment appealed from affirmed; and it is so ordered.

Affirmed.

Moss, Lewis, Bussey and Brailsford, JJ., concur.

What it decided

A. E. Graham ran Graham’s Grill in Horry County. Four fire policies, bought at the same time through one agency, covered the building and its contents. On October 28, 1960, a fire “totally destroyed the insured building and its contents.” A jury awarded $17,701.28, and the four insurers appealed.

Their defense was the fraud-and-concealment clause every fire policy carries: “This entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning this insurance … or in case of any fraud or false swearing by the insured relating thereto.” The concealment they alleged was a 1955 fire, on a dwelling three or four miles away, for which Graham had collected $8,176.00. They said that had they known, the agent “would not have issued the policies.”

The Supreme Court affirmed the verdict, and it laid down four propositions on the way.

Concealment requires intent. Adopting the Corpus Juris Secundum formulation, the Court defined it as “the designed and intentional withholding of any fact, material to the risk, which insured in honesty and good faith ought to communicate.” Not an omission. Not a mistake. A design.

Oral answers to an agent are representations, and representations void nothing unless four things are proved. They must be “material to the risk, known to the applicant to be false, made with intent to mislead and defraud the insurer and … relied upon by the insurer as a basis for the issuance of the policy.”

You cannot judge an answer without the question — and the questions were not in the record. This is the hinge of the case. Graham’s answer, as the agents recalled it, was that his only previous fire was an uninsured tenant house. Graham said he had been “talking about that farm out there where I lived.” The Court refused to call that false: “The record before us does not contain the alleged interrogatories asked of plaintiff by the Taylors, only his purported answers. Without some evidence of the actual questions propounded, it is impossible to determine precisely whether plaintiff’s answers were false or were mistakenly made in good faith.” And the agent’s own testimony cut against the carriers — Mr. Taylor said “the only property with which he was concerned at the time was the property which plaintiff wished insured,” which left it open whether the question was about that property or about every loss anywhere.

Silence about what was never asked is not concealment, and the failure to ask has a price. “In the absence of inquiry, insured need not disclose that he had had previous fire losses for which he had collected insurance … and insurer’s failure to inquire into facts it considers material to the risk prior to issuance of the policy estops insurer to object to applicant’s concealment unless the concealment is tainted with a fraudulent intent.” Then the Court put it in one line and one Latin maxim: “Mere silence on the part of the assured as to a matter not inquired of is not to be considered such a concealment as to avoid the policy. Aliud est celare, aliud tacere.” — it is one thing to conceal, another to be silent.

On that evidence the trial court “could not have properly held, as a matter of law, that the plaintiff willfully concealed or misrepresented any material fact,” so a directed verdict was properly refused and the case properly went to the jury.

A second exception failed too. The insurers wanted a sworn pre-trial statement of Graham’s admitted into evidence, arguing it proved he “swore falsely about a material fact or circumstance after the loss and thereby voided the policy.” The Court rejected it on three independent grounds: the contention “was not made to the Court below”; the statement itself “is not printed in the Transcript of Record,” so the Court could not tell whether the testimony contradicted it; and counsel had already read to the jury every question and answer he thought had probative value, so there was “no showing of any prejudice in the exclusion.”

What it did NOT decide

• It did not hold that Graham told the truth. It held that on this record no court could decide willful concealment as a matter of law. The question of fact went to a jury, and the jury’s verdict was left alone. That is a sufficiency-of-the-evidence holding, not a finding of honesty.
• It did not weaken the fraud-and-concealment clause. The clause is quoted in full and treated as a valid policy term throughout. What the insurers lacked was proof, not a clause.
• It did not decide whether false swearing after a loss voids a South Carolina policy. The insurers raised exactly that argument on the excluded statement, and the Court declined to reach it — the point “was not made to the Court below,” the document was missing from the record, and no prejudice was shown. That question is still open on this page.
• It did not decide whether the 1955 loss was material. The Court never had to say whether a five-year-old fire on a different property miles away would have mattered to the risk.
• It did not excuse applicants from answering. The opinion says the opposite in plain words: “An applicant has a duty to fully answer questions propounded without evasion, misrepresentation or concealment.” Graham won because the questions were not in the record, not because there is no duty.
• The estoppel it announces has a stated exception. Failure to inquire estops the insurer “unless the concealment is tainted with a fraudulent intent.” An insured who actively hides something does not get the benefit of this rule.
• It is an appellate-record case as much as an insurance case. Twice — on the interrogatories, then on the sworn statement — the carriers lost because a document was not in the Transcript of Record. That is a lesson about proof, and it runs in both directions.
• It says nothing about valuation, the amount of the loss, or the total-loss rules. The building was totally destroyed, but the appeal was about the concealment defense only. On today’s South Carolina rules for a total fire loss, see S.C. Code § 38-75-20 — a statute this 1963 opinion never addresses.

Why it matters to policyholders

“You didn’t tell us about X” is a live denial, and it is one of the most frightening a family can get. It is not a dispute about the extent of the damage. It is an accusation, it says the whole policy is void, and it usually arrives after the carrier has been through the applicant’s history looking for something. Graham is the South Carolina answer to the weakest version of that accusation: the version where nobody ever asked.

Two questions decide most of these fights, and both are documentary. First: what was the question? Graham was saved because the interrogatories were not in the record and the agent conceded he was focused on the property being insured. Get the written application, the agent’s notes, and the underwriting file — the exact wording of the question is the evidence. Second: did the insurer rely on it? Reliance is one of the four elements this Court listed for a false representation to void a policy.

Answer completely what is actually asked. Nothing in this opinion protects an evasive answer. The duty to answer “without evasion, misrepresentation or concealment” is stated as law in the same paragraph that saves Graham. The safe practice is boring and effective: answer the question in front of you, in full, and if you realize afterward that an answer was incomplete, correct it in writing and keep the copy.

The clause covers after the loss too — and that half of it was never decided here. “Whether before or after a loss” includes recorded statements, sworn proofs of loss, inventories, and examinations under oath. Graham left open what post-loss false swearing does to a South Carolina policy, which is precisely why post-loss accuracy is not optional. When a carrier’s questions turn accusatory, that is normally the point at which counsel belongs in the file.

Where this sits in the South Carolina shelf. An insurer still has to prove its defense with evidence, the same way it has to have a reason for a denial — the lesson of Cock-N-Bull Steak House v. Generali, where the carrier “did not present evidence as to why the claim was denied” and lost a directed verdict and a punitive award. A denial that has no reasonable basis is itself an improper claim practice under § 38-59-20, and the fee remedy for a refusal to pay is § 38-59-40. If the fight instead becomes one about the amount, the appraisal machinery is described in Harwell v. Home Mutual.

What the work looks like, and where it stops. A public adjuster’s contribution to a concealment fight is the record: assembling the application and underwriting file, documenting exactly what was asked and answered and when, keeping the post-loss submissions accurate and dated, and pricing and proving the loss itself so that the claim is ready the moment the accusation fails. Litigating a policy-voiding defense, or suing for bad faith, is attorney work — we build the file and refer it out. More South Carolina claim law, in full text, is on the South Carolina claim-law page.

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