Opinion
April 21, 1911.
Horace L. Cheyney, for the appellant.
Max L. Schallek, for the respondents.
This is an action upon a policy of fire insurance. The plaintiffs pleaded the policy, performance of conditions upon their part, except as waived by the defendant, and the adjustment of the loss pursuant to the terms of the policy by adjusters appointed by the respective parties. In its answer the appellant alleged as a separate defense that its adjuster was induced to agree upon the adjustment by the plaintiffs falsely representing that the lowest bid received by them for repairing the damage was in excess of the sum of $12,000. Upon the trial the plaintiffs relied upon the adjustment for proof of the loss. The appellant undertook to prove the alleged fraudulent representations by an examination of one of the plaintiffs, but the evidence was excluded on the ground that the action was upon the policy, not upon the agreement of adjustment, and that the answer had raised no issue as to the actual loss sustained. As a matter of fact, the plaintiffs had alleged that their loss was $12,000, and the answer denied it.
While counsel apparently think that the case turns on whether the action is deemed to be on the policy or the agreement of adjustment, we entertain no doubt that the action is on the policy. Cases like Smith v. Glens Falls Insurance Company ( 62 N.Y. 85) and Brown v. Hartford Fire Insurance Company ( 117 Mass. 479), in which agreements in compromise or settlement were made, have no application. The policy in this case provided for an adjustment of loss by appraisers. The loss was adjusted in that way, but the policy still remained in full force and effect. The plaintiffs recovered upon it by proving the adjustment without being put to proof of the actual loss, the adjustment in the absence of proof of fraud being conclusive evidence of the loss. It is possible that it was unnecessary for the plaintiffs to plead the adjustment. If so, it was unnecessary for the appellant to plead fraud in avoidance of it. In such case, upon proof of it being made, the appellant could avoid it by proof that it was procured by fraud. However, the plaintiffs did plead it, and the appellant sufficiently pleaded that it was procured by fraud. We think that there can be no question but that, under such circumstances, the appellant was entitled to give evidence in support of its claim of fraud. If such claim were established, it would destroy the evidence upon which the plaintiffs relied to prove damage.
It was not necessary for the appellant first to have the adjustment set aside. Where one is induced by fraud to enter into an agreement, he may be entitled to the aid of equity to have it canceled, but when it is made the basis of an attack against him, he may without resorting to equity defend on the ground of fraud. ( Bosley v. National Machine Co., 123 N.Y. 550; Mead v. Bunn, 32 id. 275.)
We think, therefore, that when the plaintiffs sought to establish their loss by proof of the adjustment, the appellant was entitled to overcome its effect by proving, if it could, that it was procured by fraud. It follows that the judgment and order should be reversed and a new trial ordered, with costs to the appellant to abide the event.
INGRAHAM, P.J., McLAUGHLIN, SCOTT and DOWLING, JJ., concurred.
Judgment and order reversed and new trial ordered, with costs to appellant to abide event.