Vlastos v. Sumitomo Marine & Fire Insurance Company
Vlastos had a building that had a restaurant on the first floor, massage parlor on the second and third, and her office on the fourth. A janitor also lived on the third.
She insured it with the defendants. Part of the policy stated that she "Warranted that the 3rd floor is occupied as Janitor's residence."
The building later burned down, killing three people, and Vlastos filed a claim. Defendants refused to pay because the janitor was not living there at the time of the fire.
District court said that the materiality of the provision was irrelevant, denied plaintiff's motion for a directed verdict, and sent it to the jury. The jury said that plaintiff did breach the policy by the janitor not living there at the time of the fire.
Was the janitor's absence a breach of policy?
A representation must be material to a risk to be relevant, but a warranty does not. Any violation of a warranty allows the insurer to deny recovery.
Note:This has largely changed in states' laws.
An ambiguous insurance policy must be construed against the insurer.
It is undisputed that the policy only required the janitor to live on the third floor when the contract was signed. The fact that he was not there are the time of the fire is irrelevant.
It was ambiguous whether the warranty required the janitor to occupy the entire third floor or not. However, such ambiguities must be resolved against the insurer.
There was not a breach of the policy. Judgment for Vlastos.