Burge Bros. v. Greenwich Insurance

80 S.W. 342, 106 Mo. App. 244, 1904 Mo. App. LEXIS 348

• Court: Missouri Court of Appeals
• Decided: April 12, 1904
• Status: Published

Opinion

GOODE, J.

The defendant, issued a policy of insurance for $1,000, dated June 2, 1901, insuring plaintiffs’ stock of general merchandise contained in a building in the town of Purdy, for one year from that date. The merchandise was consumed by fire February 28, 1902, and as the loss was not settled, this action was instituted to compel payment.

Plaintiffs, Henry and Pearl F. Burge, composed a partnership. Proofs of loss were prepared by B. F. Collins, the company’s regular adjuster, and were sworn to by W. D. Burge, father of the plaintiffs, hut not a member of the firm. He had been employed in the store, however, and was well acquainted with the value of the stock. The evidence goes to show that Collins, as well as John P. Hubble, the general manager of the western department of the company to whom the proofs were sent, supposed that W. D. Burge was one of the insured and had no information to the contrary until long after the proofs had been received and after the sixty days subsequent to the-fire, during which, according to the policy, proofs were to he furnished. The policy required the proofs to be signed and sworn to by the insured-, and on that provision the defense is founded that the plaintiffs had no standing in court and the jury should have been directed to return a verdict for the company.

- The facts connected with the signing and verification of the proofs by W. D. Burge, relieve the plaintiffs from the forfeiture which otherwise would have been produced by non-compliance with the requirement to furnish proofs of loss signed and sworn to by them or one of them. The policy in suit was written by C.- D. Manley, the defendant’s agent in the town óf Cassville. Manley was acquainted with the plaintiffs and with their father, W. D. Burge, had frequently met the latter at the store and knew he was not a member of the firm. One day in March, after the fire, Manley called Pearl Burge by telephone and said the proofs were ready to sign and for him to come to Cassville and sign them. Pearl Burge.replied that he was going to Peirce City that day and could not go to Cassville, but that he would send his father if he would do just as well. Manley answered that the father would do as well, and the outcome of the conversation was that the father, W. D. Burge, went to Cassville and verified the proofs. That the affair happened in this way was not denied, and obviously it estops the company from asserting a defense based on the failure of one of the insured to make the proofs. Manley was the company’s local agent at Cassville, with authority to represent it in making contracts of insurance, collecting premiums and signing policies, which agency carried with it authority to waive proofs of loss, either in writing or orally, or by acts sufficient to constitute an estoppel; there being no proviso in the policy to the contrary so far as the record shows. Nickell v. Ins. Co., 144 Mo. 420. That the terms of a policy providing for the verification óf proofs by the insured may be, under some circumstances, sufficiently complied with by an agent’s verification, was decided in Sims v. Ins. Co., 47 Mo. 54.

It is insisted the plaintiffs should have been denied a recovery because Pearl Burge was guilty of fraud and false swearing concerning the amount of merchandise on hand at the time of the fire and the amount of loss sustained by plaintiffs. Said Burge was examined under oath by a representative of the company after the fire, at Bedford, Iowa, where he resided at the time of the examination. Then, and on the witness stand during the trial, he stated the value of the stock was $8,500 when the fire occurred and that it had been maintained at a valuation running from $7,000 to that amount; and so the proofs of loss declared. On January 28, 1902, plaintiffs notified the company they had taken other insurance in different companies amounting to $5,000 and running the total insurance up to $6,000. In that notice the stock was valued at $8,534. The supposed conclusive proof of fraud is the fact that on June 3,1901, prior to the writing of the policy in suit, Pearl Burge made an affidavit to a statement on which the merchant’s tax of the firm would be based, that the greatest amount of merchandise on hand between the first Monday in March and the first Monday in June preceding, was $2,000. No court could hold the discrepancy between the affidavit for merchant’s license and the representation to the insurance company as to the value of the merchandise, cut plaintiffs off from a recovery on the policy. Pearl Burge explained that he made the .statement to obtain a license knowing the goods on hand were worth more than $2,000, because it was customary to value personal property for taxation at much less than its real worth, and that he stated the value of the firm’s stock at the proper proportion of its true value according to the scale at which property was assessed. The circumstance went to the credibility of the witness and the whole matter was one to be considered and weighed by the jury in determining whether plaintiffs had been guilty of fraud that would avoid the contract of insurance.

The policy contained these paragraphs:

“Three-fourths value clause: — In consideration of the rate of premium at which this policy is written it is a condition of insurance that in the event of loss or damage by fire to the property insured, this company shall not be liable for an amount greater than three-fourths of the cash market value of each item of the same, not exceeding the amount of said policy at the time immediately preceding such loss or damage; and in the event of other insurance on the property insured, then this company shall be liable only for its proportion of three-fourths of such cash market value at the time.

“This entire policy unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the insured now has or shall hereafter make or procure other contracts of insurance, whether valid or not, on the property covered in whole or in part by this policy, to which is this addition only, viz.: other concurrent insurance permitted but sanie shall at no time exceed three-fourths of the cash value of each item of the property hereby covered. ’ ’

As said above, there were six policies of insurance when the store burned and their total amount was $6,000, of which $150 were on furniture and fixtures, leaving $5,850 on the merchandise. That sum was three-fourths of $7,800, and in view of the above clauses of the policy, the defendant’s counsel requested an instruction that if the jury found the actual value of the stock when the fire occurred was less than $7,800, the verdict should be for the defendant. The court refused to give that instruction, and instead told the jury if they found a verdict for the plaintiff, it should be for such an amount as would' be three-fourths of the value of the goods at the time of the loss, deducting the insurance money received from other companies, and in no case to exceed $889.61, the amount demanded in the proofs of loss.- The evidence as to the value of the stock when burned was somewhat uncertain and permitted the conclusion that it was worth less than $7,800. The company’s position is that if the’value was less than said sum, plaintiffs were carrying excessive insurance, inasmuch as the policy authorized concurrent insurance not to exceed three-fourths of the cash value of each item of property covered, and that carrying insurance beyond that amount nullified the policy.

A prohibition in an insurance contract against concurrent insurance on the property covered beyond a designated limit is enforced. 2 May, Insurance (4 Ed.), sec. 364; Barnard v. Ins. Co., 27 Mo. App. 26; Dolan v. Ins. Co., 88 Id. 666. The reason for such stipulations and for their legal enforcement is to avoid the risk of incendiary and careless losses by preventing over-insurance. If the property is largely overvalued in taking out a policy which provides for other insurance not to exceed a named percentage of its value, it is plain the way is open to obtain insurance beyond the limit which the first policy contemplated, thereby violating the spirit of that contract. If this is intentionally done, or done to a considerable degree whether intentionally or not, generally speaking, in the absence of legislation to the contrary, it avoids the insurance if the property is of a permanent character and expected to remain intact during the life of the policy. 2 May, Insurance, sec. 373, et seq., and citations.

In the present case we have to deal with a contract of insurance on a stock of merchandise, which, according to the usual course of business would be changing and its value fluctuating incessantly, as must have been expected. The question is whether the limitation in this contract against insurance in excess of three-fourths of the value of the stock bound the proprietors never to let their insurance on the stock exceed three-fourths of its value under penalty of forfeiting their right to indemnity if a loss occurred. The extreme inconvenience, not to say impossibility, of observing such a requirement is at once apparent; and courts and text-writers have declared the rule against over-insurance is not applicable to contract covering commodities kept for sale; or, at least, is not so rigidly enforced. May, sec. 374. Instances of insurance on fluctuating stocks of merchandise are akin in principle to those in which renewals of insurance on the same property occur and meanwhile depreciation in value takes place. Neither fraud nor forfeiture is a necessary concomitant of an affair of that sort. May, sec. 375; Ramsey v. Ins. Assn., 71 Mo. App. 380; Gerhauser v. Ins. Co., 7 Nev. 174; Lee v. Ins. Co., 11 Cush. 324; Travis v. Ins. Co., 28 W. Va. 583; Iron Co. v. Ins. Co., 5 R. I. 425; Aurora Ins. Co. v. Johnson, 46 Ind. 315. The question at issue was presented to this court for decision in the Eamsey case just cited, which was an action on a policy of insurance covering merchandise. That policy contained stipulations that the company should be liable in case of loss only for three-fourths of the actual cash value of the property, to be prorated with any other companies carrying insurance on it, and that the total insurance permitted was limited to three-fourths the value of the property. The company requested and the court refused an instruction that if the jury found the plaintiffs’ total insurance was $3,000 and in excess of three-fourths the value of the goods, plaintiffs could not recover. In passing on the assignment of error based on the refusal of that instruction, the court held that while the stipulations might be material in case of a valued policy, they were not so in the particular case, as the amount to be paid if the merchandise burned was limited by the cash value of the property when the fire occurred. The other decisions we have cited are noticed in the opinion, with the statement that they held overvaluation to be immaterial where the value of the goods at the time of their destruction was made the criterion of the indemnity to be paid.

The argument is advanced that section 7979 of the Revised Statutes made the policy in suit a valued one and that, therefore, the rule, against overvaluation should be enforced the same as if the property was realty or personalty of a permanent nature. The last clause of that section provides as follows: “No company shall take a risk on any property in this State at a rate greater than three-fourths of the value of the property insured and when taken its value shall not be questioned in any proceeding. ’ ’

In Gibson v. Ins. Co., 82 Mo. App. 515, that provis-ion was interpreted to embrace insurance on chattels and personal property. Bnt if a portion of insured personal property is disposed of between the date of the policy and the loss, or if there is depreciation from any cause, the resultant difference in value can be taken into account in fixing the amount of the loss. We followed that authority in Howerton v. Ins. Co., 105 Mo. App. 575. As construed, the statute precludes a company from denying that insured chattels were of the estimated value when the insurance was written, and to that extent makes the policy a valued one; but when a stock of merchandise, or other personalty of a changing character, is involved, the insurer may show a reduction of value had occurred prior to the fire. In the present case the dispute is not regarding the amount of the stock when the policy was issued, but the contention is that when the fire occurred the worth of the goods on hand did not exceed the insurance carried by one-fourth. The defendant was at liberty to prove what the stock amounted to then and its proportion of the loss could not be more than three-fourths of the loss computed on the worth of the property when burned and prorated with the other insurance. The statute quoted created no cause for changing the rule announced in the Ramsey case, or holding, in opposition to it, that this policy was avoided, ipso facto, if the merchandise in stock at the time of the fire had been depleted until the insurance exceeded three-fourths of its value.

Section 7979 of the statutes does not weaken the authority of Ramsey v. Assn., but section 7974 greatly strengthens the reasons for the like result in the present case; for as the law now stands, the stipulation of the policy in suit as to concurrent insurance, is not a promissory warranty as the one in the Ramsey case was declared to be, but is a representation. The latter section (7974) was enacted in 1897, the year the Ramsey case was decided, but took effect after the decision. It reads as follows:

“That the warranty of any fact or condition hereafter incorporated in or made a part of any fire, tornado or cyclone policy of insurance, purporting to be made or assented to by the assured, which shall not materially affect the risk insured against, shall be deemed, taken and construed as representations only in all suits at law or in equity brought upon such policy in any of the courts of.this State.”

We find no statute prescribing the test of the materiality of a representation in fire insurance such as there is for life insurance, viz.: that a misrepresentation to be material must contribute to the loss. R. S. 1899, sec. 7890. But Ramsey v. Assn., Lee v. Ins. Co., 11 Cush. 324, and other cases cited above, hold a stipulation against over-insurance of merchandise is immaterial to the risk for the reason that the indemnity to be paid is limited by the cash value of the stock when the loss occurs; an .argument not perfectly convincing, but accepted by the courts and the law declared accordingly. Now, if the stipulation regarding other insurance with which we are dealing is immaterial, as the authorities, say, the statute last quoted makes it a representation instead of a warranty. The respective effects of those two features of insurance contracts are these: A warranty must be literally complied with and an unimportant breach defeats the contract: if a representation partly fails, but is true, or is complied with, so far as is essential to the risk insured against, the policy remains in force'. Plaintiffs’ stock of merchandise might have been reduced by sales until its value was so much less than the insurance carried as to increase the risk and thereby infringe the stipulation in defendant’s policy regarding concurrent insurance, were it but a representation. On the other hand, the stock might have run somewhat below the required amount without increasing the risk. No more than substantial compliance with the provision was requisite for the validity of the policy. An issue of fact could have been raised on that phase ef the case. 4 Joyce, Insurance, sec. 3780; Loy v. Ins. Co., 52 Maine 60; March v. Ins. Co., 186 Pa. St. 629. Bnt the refused instruction required a verdict against the plaintiffs from the bare fact that the insurance exceeded three-fourths of the value of the stock on hand at the time of the fire, without reference to whether the limitation regarding concurrent insurance was substantially complied with in good faith, or the risk increased by non-compliance.

The defense was made that plaintiffs set the fire; but the evidence to support it, like that relating to other defenses, was far from conclusive and raised an issue for the jury to decide.

We have commented on those assignments of error which are thought to call for argument; minor ones, though not discussed, have received’ attention.

The judgment is affirmed.

Bland, P. J., and Reyburn, J., concur. .