Continental Insurance v. Vallandingham & Gentry

76 S.W. 22, 116 Ky. 287, 1903 Ky. LEXIS 187

• Court: Court of Appeals of Kentucky
• Decided: September 25, 1903
• Status: Published

Opinion

OriNIOK 03? .the coukt ey

JUDGE O’REAR

Aeeikming.

Appellees effected an insurance for $6,000 with appellants, six fire insurance companies, upon a stock of general merchandise at Wheatley, Ky. By .the reason of the burning of an adjacent building, threatening the one containing the insured goods, appellees removed the goods into the street and to a nearby lot. In the excitement, hurry, and reckless manner of handling by the crowd the goods were badly damaged by being soiled and otherwise abused. These suits are to recover the amount of the damage, laid at $4,000. The principal defense is that the insured failed and refused to submit the amount of their loss or damage to arbitration or appraisement, as required by the policies. All the policies are alike in this particular. Their form is what is known as the “New York Standard Policy.” The clause in question is as follows: “This company shall not be liable beyond the actual cash value of the property at the time any loss or damage occurs, and the'loss or damage shall be ascertained or estimated according to such actual cash value, with proper deduction for depreciation, however caused, and shall in no event exceed what it would then cost the insured to repair or replace^ the same with material of like kind and quality; said ascertainment or estimate shall be made by the insured and this company, or if they differ, then by appraisers as hereinafter provided, and the amount of loss or damage having' been thus determined, the sum for which this company is liable pursuant to this policy shall be payable sixty days after due notice, ascertainment, estimate and .satisfactory proof of the loss have been received by this company in accordance with the terms of this policy. ... In the# event of disagreement as to the amount of the loss the same shall, as above provided,'be ascertained by two competent and disinterested appraisers, the insured and this company each selecting one, and the two so chosen shall first select a competent and disinterested umpire; the appraisers together shall then estimate and appraise the loss, stating separately sound' value and damage, and, failing to agree, shall submit their differences to the umpire; and the award in writing of any two shall determine the amount of such loss; the parties thereto shall pay the appraiser selected by them and shall bear equally the expenses of the appraisal and umpire. . . . And the loss' shall not become payable until sixty days after the notice, ascertainment, estimate and satisfactory proof of the loss herein required have been received by this 'company, including an award by appraisers when appraisal has been required. ... No suit or action on this policy for the recovery of any claim shall be sustained in any court of law or equity until after full compliance by the insured with all the foregoing requirements'. . . . This policy is made and accepted subject to the foregoing stipulations and conditions.” The fire occurred on the night of November 1st. The insurance companies were promptly-notified of the loss, and sent adjusters. Failing to agree upon the amount of the loss, on December 7th following the insurers and the insured entered into an “agreement for submission to appraisers,” the material part of which, so far as affects the question now in hand, is as follows: “This agreement made and entered into by and between Vallandingham & Gentry, of Wheatley, Kentucky, of the first part, and the insurance company or companies whose name or names are signed hereto, of the second part, each for itself and not jointly, witnesseth, that C. G. Boerner and T. J. Boyd shall appraise and ascertain the sound value of and the loss upon the property damaged and destroyed by the fire of November 1, 1900, as specified below. Provided, that the said appraisers shall first select a competent and disinterested umpire, who shall act with them in mattérs of difference only. The award of any two of them, made" in writing, in- accordance with this agreement, shall be binding upon both parties to this agreement as to the amount of such loss. It is expressly understood that this agreement and appraisement is for the purpose of ascertaining and fixing the amount of sound value and loss and damage only to the property hereinafter described, and taken into consideration every article on schedule attached hereto, whether totally or partially destroyed, and is to be in settlement of the entire loss, and shall not determine, waive or invalidate any other right or rights of either party to this agreement.” Boerner was selected by the insured, and Boyd by the insurers. Boerner was a merchant living in a village some few miles from Wheatley. Boyd was a merchant living at Columbus, Ohio. The arbitrators spent most of tire day of December 7th in trying to agree upon an umpire, but failed. All names then proposed by each were rejected by the other. About 2 or 3 o’clock in the afternoon Boerner announced that they were unable to agree on an umpire, and signed an indorsement to that effect on the appraisal agreement. Boyd did not sign it, but did not then offer to make further effort toward an agreement. Boyd and the adjuster for the insurance companies left together. That evening, after they had arrived at the railroad station some miles from Wheatley, Boyd wrote to Boerner, offering to reopen the matter. Boerner responded some days later that he had nothing more to do with it, and that the insured had opened their store (which had been kept closed since the fire), and begun selling the goods, and that it was, therefore, impossible to make an appraisal. Later Boyd offered to Boerner ,to accept as umpire one, of the persons whom Boerner had offered at the first meeting. Boerner peremptorily declined to act further. The insurers wrote, in answer to letters from the insured inclosing the proof of the loss and itemized statements thereof, insisting that Boyd and Boerner should continue to act as arbitrators, and should complete the appraisal as provided in the agreement of December 7th. This was refused by the. insured. No other specific objection was made or intimated as to the amount of damage claimed, or touching any item of it. The companies refused to pay, because of the failure to have the appraisal made, and these suits followed.

It is not clear that appellants were entitled to an arbitration under their contracts in this case. The policies provide that the amount of loss or damage was to be fixed by the agreement of the parties, and only in event of a difference was there a right to demand an appraisal. The insured promptly furnished complete itemized statements, showing in detail the values claimed by them, and the amount of loss or damage asserted. Whether the articles were fairly valued in their sound condition was a matter easily enough to he ascertained by those familiar with the markets of such goods. It does not appear that appellants’ adjuster ever expressed an opinion or made such an examination as would warrant it, before his testimony in this suit, that could be made the basis of intelligent action by the insured. A general proposition to pay so much in the aggregate smacks more of a proposition to compromise than one to compensate. Arbitrarily rejecting the insured’s estimate without an earnest intention and effort to make a settlement upon the basis first fixed in the policies, in order that vexatious delays and questionable diplomatic advantages might be gained in the matter of arbitrators, to lessen the sum that should be paid for the actual loss, is contrary to both the letter and the spirit of the contract. That the insurers merely declined to pay the sum fixed in the schedule and itemized accounts of the insured is not a disagreement, or differing, as contemplated by the contract, so as to authorize a demand of appraisal. It should have been a real difference, based upon the facts, which should have been candidly and fully submitted for acceptance by the other side. However, in the preparation of this case the parties have treated it as one where the difference between the insured and the insurers had occurred.

Appellees insist that the agreement to submit to arbitration is void. An agreement to submit a possible controversy to arbitration, made before the controversy has arisen, if it involves the determination of the right of recovery, both as to law and facts, is void, because it tends to oust the courts of their jurisdiction, and substitutes a contract tribunal in the stead of the one provided by law for the trial of lawsuits. But the courts have held with marked unanimity that an agreement to submit the determination of some fact involved in a controversy to arbitrators, or to some third person as a referee, is not an invalid provision; and, where the agreement makes the award or finding a condition precedent to a right of action, it is enforceable, in that the failure, without good excuse, to submit the question as provided, is a,good defense to a suit upon the contract. Joyce on Insurance, section 3232 et seq.; May on Insurance (3d Ed.), section 493; Hamilton v. L. & L. & G. Ins. Co., 136 U. S. 242, 10 Sup. Ct. 945, 34 L. Ed., 419; U. S. v. Robeson, 9 Pet., 319, 9 L. Ed., 142. The arbitration clause in insurance policies issued upon personal property, if lived up to in the spirit that justifies their encouragement by law, is a serviceable method of settling the question of loss or damage. While the facts are yet fresh, and the damaged articles are to be seen, it is reasonable to suppose that impartial men, familiar with the character and value of such goods in that community, can, by personal inspection, and by the use of their judgments and experience, more nearly come to a true valuation than any number of men not on the Scene, inexperienced, in every probability in the business of valuing such articles, trying to get at the values upon the testimony often of-biased or incompetent or careless witnesses. This clause of the policy was inserted wholly for the protection of the insurer. The courts have allowed and encouraged it as an inexpensive and not unjust check upon the danger of overvaluation and fraud by dishonest insured property holders who have sustained loss by fire. But the insurer will not be permitted to misuse this clause oppressively, or in bad faith. To prevent such, when the insurer so misuses it, it ought to be held a waiver by it of that provision.

From the record we find that the person selected by appellants as their appraiser had served many times in that capacity before, and as many as three times before for one of the appellants. This fact alone need not be inconsistent with his impartiality. But his conduct throughout this transaction was more like that of an employe than of a disinterested person. That he was brought from such a remote point, at great expense, undoubtedly, to the insurers; that he was willing, and even anxiously persistent, in serving their interests, as a partisan would; that his examination of the injured goods affected his judgment exactly as it did the paid adjuster of the companies, fixing the amount of the damage at $600, when all the other witnesses, many of them apparently ■ disinterested and equally qualified, placed it at $4,000; that he was directed and counseled with by appellants’ adjuster, and submitted to him the correspondence and other information gained bearing on the attempt to arbitrate the loss — all convince us that this person did not have the qualification implied in the contract; that is, a discreet, disinterested, impartial man. This fact was evidently known to the insurers or to their adjuster having this settlement in charge. That an improper advantage was sought by them in making this selection is equally evident, if we can accept the judgment and opinion of every other witness in the record, except these two representatives of appellants, concerning the amount of the damage. The evidence of the extent of damage is convincing. An adjuster may be, and ought to be, more competent than the ordinary merchant, and equally as honest, in fixing such valuations. But the great preponderance of the evidence in this case seems to be against the valuation fixed by appellants’ adjuster.

We may say in passing that the arbitrator selected by appellees seems to have been equally as partisan as the other. But, if a person for whose benefit a clause in a contract is inserted would have the advantage of it, he must bring himself within its terms, and will not be excused because the other party has likewise failed. Unless the insurer asks for the arbitration or appraisal before suit brought, the failure to appraise is not a defense. Sun Mutual Ins. Co. v. Crist, 19 R., 305, 39 S. W., 837; Bergman & Co. v. Commercial Union Ins. Co., 12 Ky. Law Rep., 942; Chenowith v. Phoenix Ins. Co., Id., 232; Scottish Union and National Ins. Co. v. Strain, 24 R,, 958, 70 S. W., 274. And when the insurer demands the appraisal, it must in good faith nominate a competent, disinterested person as appraiser, before it can defend upon the ground that the insured has failed to keep that part of his contract. Chapman v. Rockford Ins. Co., 89 Wis., 572, 62 N. W., 422, 28 L. R. A., 405; Brock v. Dwelling House Ins. Co., 102 Mich., 583, 61 N. W., 67, 26 L. R. A., 623, 47 Am. St. Rep., 562. Having once waived the appraisal by its conduct, the insurer can not require that the matter in dispute be again submitted to arbitrators. It was, therefore, within the legal right of appellees to decline to renew the arbitration at the hands of Boyd and another, or any other appraisers. McCullough v. Phoenix Ins. Co., 113 Mo., 606, 21 S. W., 207; Chapman v. Rockford Ins. Co., supra; Uhrig v. Wiliiamsburgh Fire Ins. Co., 101 N. Y., 362; 4 N. E., 745.

The judgment of the circuit court was in conformity to these views, and is, consequently, affirmed.

Petition for rehearing by appellant overruled.