Issue: After the loss of a Guadagnini violin, the company learned that a previous policy had been canceled. Would it be liable under its policy for the value of the violin?

Judgment: The application for the policy covering the violin stated that no previous policy had been canceled. After the proof of loss was filed on the violin, the company’s investigation revealed that it had canceled a policy issued to the insured, covering musical instruments.

The insured contended that the company knew, or should have known, that it had theretofore canceled a policy issued to him, and, therefore, it could not rely upon the alleged misrepresentation in the application for the policy in question.

It is generally conceded that a company is not bound where it is induced to issue a policy as a result of the applicant’s fraudulent misrepresentation. However, in this case, the court ruled that the application was not made a part of the policy, and the application stated on its face that the signing thereof would not bind the applicant or the company, but would merely form the basis of the contract. It did state that false answers would void the policy.

The court stated that, as a matter of law, the company was chargeable with knowledge of the misrepresentations since full information concerning its former transaction with the applicant was in its files.

It noted that, after the loss, the company had no difficulty in discovering the misrepresentation, and said that the diligence exercised after the loss should have been exercised when the application was received.

Since the company had waived its right to reply upon the misrepresentation, the insured was entitled to recover for the loss of the violin.

One judge dissented, on the ground that the loss had occurred only two months after the policy was issued, and that an insured should be held to the strictest standards in dealing with an insurance company.

Violin et al vs. Fireman’s Fund Insurance Co. – Nevada Supreme Court – Sept. 30, 1965 – Insurance law Journal, Vol. 515, Page 751 (Rough Notes Magazine, March, 1966)