Summary
In Handleman v. U.S. Fidelity Guar. Co., 223 Mo.App. 758, 18 S.W.2d 532, 534-35 (1929), the Missouri Court of Appeals held that exhaustion did not require an insurer to pay the full dollar value of a policy.
Summary of this case from Reliance Ins. Co. in Liquidation v. ChitwoodOpinion
Opinion filed June 21, 1929.
1. — Insurance — Burglary Insurance — Policy Provisions — Excess and Not Contributing — Applying After Other Insurance Was Exhausted in Payment of Claims — Enforceable. A provision in a policy of burglary insurance providing that the policy is accepted "as excess and not contributing insurance and shall apply and cover only after all other insurance herein referred to shall have been exhausted in the payment of claims to the full amount of the expressed limits of such other insurance," held unambiguous and enforceable as written.
2. — Same — Same — Same — Same — Same — Condition Precedent to Liability — Burden of Proof. In an action based upon a policy of burglary insurance containing the provision that the policy should apply only after prior insurance was exhausted in the payment of claims to the full amount of the expressed limits thereof, insured had the burden of proof to show that such prior insurance taken in another company had been exhausted in the payment of claims to the full amount thereof as a condition precedent to liability on the part of defendant company on the policy sued on.
3. — Contracts — Construction. While it is the duty of courts in proper cases to construe the contracts of the parties, yet they have no power to construct a new contract for them, nor is the reason which moved the parties to write the contract as they did material.
4. — Insurance — Burglary Insurance — Excess as Distinguished from Contributing Insurance — Condition Precedent — Compromise Settlement Exhausting Primary Insurance as Fulfillment of Condition Precedent. Where a policy of burglary insurance contains a provision that the policy is accepted "as excess and not contributing insurance and shall apply and cover only after all other insurance" therein referred to shall have been exhausted in the payment of claims to the full amount of the expressed limits of such other insurance, held not necessary that insured, in order fully to meet such condition precedent, must prove that he has actually collected in cash the full face of such primary insurance, but it is sufficient if the insured proves that he has compromised his claim for an alleged loss in an amount equal to the full expressed limit of such primary insurance and that such compromise was a settlement in full of any and all liability under said primary insurance and left no further insurance therein in effect.
Appeal from the Circuit Court of the City of St. Louis — Hon. Claude O. Pearcy, Judge.
REVERSED AND REMANDED.
Casper S. Yost, Jr., and Hensley, Allen Marsalek for appellant.
(1) The court should have sustained defendant's demurrers to the evidence. 1. The policy sued on was issued and accepted subject to the express provision that it should cover and apply only after the prior $3000 policy was exhausted in the payment of claims to the full amount of the expressed limits thereof. These provisions are plain and unambiguous, and must be enforced as written. State ex rel. v. Trimble, 297 Mo. 659; State ex rel. v. Ellison, 269 Mo. 410; Mitchell v. Accident Co., 179 Mo. App. 7. 2. The statutes (R.S. Mo. 1919, secs. 6142, 6233-4) governing representations and warranties, have no application to policies of burglary insurance. Park v. Fidelity Casualty Co., 279 S.W. 246; State ex rel. Park v. Daues, 316 Mo. 346. 3. In the absence of a statute affecting the question, the character and effect of the above provision must be determined by the common-law rule, which requires exact and literal compliance with such provision by the assured as a condition of defendant's liability under the policy. Mers v. Insurance Co., 68 Mo. 127; Hutchinson v. Insurance Co., 21 Mo. 97; Loehner v. Insurance Co., 17 Mo. 255; Hoover v. Insurance Co., 93 Mo. App. 111; Marcus v. Insurance Co., 187 Mo. App. 134; Brooks v. Insurance Co., 11 Mo. App. 351; Campbell v. Ins. Co., 98 Mass. 381; Kyte v. Assurance Co., 149 Mass. 116; Imperial Fire Insurance Co. v. Coos County, 151 U.S. 463. 4. A provision in a policy, requiring that other insurance must be exhausted before liability accrues, is legal and enforceable and defeats an action on such policy until the condition is fulfilled. Wilson Co. v. Hartford Fire Ins. Co., 300 Mo. 54; Wolf v. Hartford Fire Ins. Co., 219 Mo. App. 307. (2) The court erred in giving plaintiff's instruction No. 1. The instruction ignores the provisions of the policy, in authorizing a verdict for plaintiff upon the mere finding that the value of the goods stolen exceeded three thousand dollars. Authorities, point 1, supra. The court erred in giving plaintiff's instruction No. 4. The instruction ignores the provisions of the policy, in telling the jury that plaintiff was entitled to recover if he suffered a loss in excess of three thousand dollars, notwithstanding the fact that he settled with the other company for less than that sum. Authorities, point 1, supra. (4) The court erred in excluding from the evidence the plaintiff's release of his claim against the Fidelity and Deposit Company. The release was proper and competent evidence to show, with the other facts in evidence, that plaintiff had not exhausted the prior policy. Authorities, point 1, supra. (5) The court erroneously instructed the jury to allow plaintiff interest from the date the suit was filed. Even if the settlement with the Fidelity and Deposit Company satisfied the condition of the defendant's policy (which we by no means concede), the plaintiff was not entitled to interest from the date the suit was filed, but only from the date of such settlement. Conqueror, etc., Co. v. Insurance Co., 152 Mo. App. 332; Century Realty Co. v. Insurance Co., 179 Mo. App. 123. (6) The award of damages and attorneys' fees is without support in the evidence. 1. It is admitted that the insured demanded and sued for more than he was entitled to, and under such circumstances, he cannot recover damages and attorneys' fees because the defendant rejected his demand. Glover v. Insurance Co., 193 Mo. App. 491-2; Kahn v. Insurance Co., 187 Mo. App. 219, 220: Fager v. Insurance Co., 189 Mo. App. 464. 2. It is also conceded that, at the time when the demand was made and the suit was filed, the provision requiring that the Fidelity and Deposit Company's policy be exhausted in the payment of claims was wholly unperformed. Even if the settlement thereafter occurring constituted a substantial compliance with this provision (which we by no means concede) the defendant cannot be penalized for refusing to pay the claim before that time. Authorities, point 5, supra. 3. The record gives rise to questions of the most serious character, both as to defendant's liability under the policy and the time when (if ever) it accrued. No penalty can be assessed against defendant for contesting the suit, under such circumstances. Non-Royalty Shoe Co. v. Assurance Co., 277 Mo. 399; Patterson v. Insurance Co., 174 Mo. App. 44; Keller v. Insurance Co., 198 Mo. 440; Mound City, etc., Co. v. Insurance Co. (Mo. App.), 277 S.W. 349.
L.B. Sher and Abbott, Fauntleroy, Cullen Edwards for respondent.
(1) The holder of a primary policy of insurance containing a clause similar to the one in the case at bar may compromise his claim and accept less than the face value of the policy without affecting its right to recover for the excess over and above the amount of the policy owed by the other company. Zeig v. Massachusetts Bonding Ins. Co., 23 F.2d 665. (2) Liability of each company must be determined from the provisions of the policy without reference to compromise payments of other companies. Goodwin v. Merchants, etc., Ins. Co., 92 N.W. 894; Buse v. Nat'l Ben Franklin Ins. Co., 160 N.Y.S. 566; Georgia Co-op. Fire Ass'n v. Harris, 52 S.E. 88; Kansas City Paper Box Co. v. Am. Fire Ins. Co., 100 Mo. App. 691; Austin v. Dixie Fire Ins. Co., 112 N.E. 382.
Plaintiff's action is based upon a policy of burglary insurance issued by defendant company. The trial resulted in a verdict and judgment in plaintiff's favor for $1224.91, the full amount set up in plaintiff's petition as plaintiff's loss under the policy, $557.31 interest, one dollar damages for vexations delay, and $300 as attorneys' fees, making a total of $2083.22. After unavailing motion for new trial defendant appeals.
Plaintiff conducted a business of sponging and measuring cloth for manufacturers. The character of the business was such that at all times he had on hand bolts of goods belonging to various customers and he carried insurance against the theft thereof, being insured in the sum of $3000 under policy issued by the Fidelity Deposit Company of Maryland, and a policy of the defendant for "excess and not contributing insurance" in the sum of $7000 for loss by burglary, which said policy is the one herein sued on and carries the following endorsements which are the subject of consideration of this appeal.
"In consideration of the reduced premium charged for the policy to which this endorsement is attached, such policy is issued and accepted:
"1. As excess and not contributing insurance and shall apply and cover only after all other insurance herein referred to shall have been exhausted in the payment of claims to the full amount of the expressed limits of such other insurance.
"2. Upon the further condition, that, if the assured shall fail to carry other insurance against loss or damage of the kind covered hereby in the amount of at least three thousand dollars ($3000) at all times, while the policy to which this endorsement is attached is in force, then the insurance hereunder shall be null and void: . . ."
On June 5, 1920, when both mentioned policies were in effect. plaintiff suffered a loss by burglary in the alleged sum of $4224.91. It is admitted that plaintiff notified defendant in this case of his alleged loss in the sum of $4269.89, and demanded of defendant $1269.89, and that the defendant refused to pay. As to the policy issued by the Fidelity Deposit Company of Maryland, all that appears from the record in this case is that plaintiff, on cross-examination, admitted that a photastatic copy of an alleged original receipt produced at the trial by the defendant was a correct copy of the receipt executed by plaintiff at the time plaintiff settled his suit against the Fidelity Deposit Company of Maryland, and that the date on which plaintiff settled his said suit was June 10, 1927. However when defendant later on offered the receipt in evidence, the objection of counsel for defendant to its introduction was sustained, so that the basis of the suit on the terms of the settlement made by plaintiff with the Fidelity Deposit Company of Maryland nowhere appears. In other words, this record is barren of any evidence as to whether or not the insurance held by plaintiff in the Fidelity Deposit Company of Maryland had "been exhausted in the payment of claims to the full amount of the expressed limits thereof."
In this state of the record it is here argued that the action of the trial court in overruling defendant's demurrer offered at the close of the case is error prejudicial to the rights of the defendant. In support of this contention appellant argues that since plaintiff failed to prove that the said policy issued by the Fidelity Deposit Company of Maryland had been "exhausted in the payment of claims to the full amount of the expressed limits" thereof, plaintiff failed to make out a case showing any liability under the terms of the policy of defendant herein sued on. After due consideration we have concluded the point is well taken.
It is our view, and we so rule, that under the terms of the policy, the burden of proof was on plaintiff to show that insurance in the Fidelity Deposit Company of Maryland had been "exhausted in the payment of claims to the full amount" $3000 "the expressed limits" thereof, as a condition precedent to liability on the part of the defendant company on the policy herein sued on. In this connection we note that plaintiff, in his second amended petition upon which the case went to trial, among other things specifically alleges that plaintiff was insured in the sum of $3000 under a policy issued by the Fidelity Deposit Company of Maryland; that said policy was in full force and effect when his said loss occurred; that his total loss is $4224.91; that the said Fidelity Deposit Company of Maryland is liable to him for the sum of $3000 and interest, and the defendant is liable to him for the excess of his loss, to-wit, $1224.91, and that said Fidelity Deposit Company of Maryland has not paid the sum of $3000 and interest, and plaintiff was compelled to sue said company, and he has sued it and said suit is now pending against said company; and that plaintiff was compelled to and has sued both companies in order to recover what is justly due him for each of them; that immediately after the burglary "he gave notice of said loss to defendant and delivered to said defendant a particular account of said loss together with certain proofs of the same as required by the terms of said policy, and thereafter made claim of defendant for $1224.91, his loss under said policy, and demanded of defendant payment thereof, and defendant then and there disclaimed all liability under said policy and vexatiously refused to pay same; and that the plaintiff has performed all the conditions on his part to be done and performed by the terms of said policy."
The defendant's answer admits the issuance of the policy and notice given by plaintiff of an alleged loss of $4262.89, and a demand for $1269.89, and that payment has not been made to plaintiff of the amount so demanded, but denies an indebtedness to plaintiff in the sum of $1269.89, or any other sum, or that it has vexatiously refused to pay, or has wrongfully disclaimed liability, and denies that "under the terms of said policy, and the application therefor, all of which constituted the contract between plaintiff and this defendant, it ever becomes obligated in any manner whatever upon said policy or contract," and denies "liability of any kind or character ever accrued against the defendant upon said policy," and then as a further defense sets up that there was attached to and a part of the policy herein sued on the "conditions" which we have enumerated supra; and avers the fact to be that at the time of the alleged loss plaintiff held a policy of insurance in full force and effect in the sum of $3000 in the Fidelity Deposit Company of Maryland covering the first $3000 of any alleged loss sustained by the plaintiff, and states that the expressed limits of said policy, to-wit, $3000 and no part thereof has been exhausted in the payment of this alleged loss, but to the contrary it has been adjudicated that the plaintiff herein could not recover anything from the said Fidelity Deposit Company of Maryland on account of this alleged loss.
To this second amended answer of the defendant, plaintiff filed a reply denying each and every allegation therein contained. The pleadings thus made an issue upon the question of whether the said policy issued by the Fidelity Deposit Company of Maryland "had been exhausted in the payment of claims to the full amount of the expressed limits thereof."
An examination of the record discloses that plaintiff, despite the pleadings as set out above, insisted upon trying his case below upon the theory that even though defendant's policy is for excess non-contributing insurance, it is not subject to the limitations pleaded. The court adopted this theory of the case over objection of defendant, as appears from a reading of plaintiff's instruction numbered one which covers the entire case and directs a verdict. The said instruction is based upon a predicate for liability that if the jury find the value of the goods taken from plaintiff's store by burglary exceeds $3000 they will return a verdict for plaintiff and assess the amount of his recovery on the policy at such sum as they believe equals the fair cash value of the property in excess of $3000, if any, taken from plaintiff's store at the time of the burglary, if they find there was a burglary, not exceeding, however, the amount claimed in the petition, to-wit, $1224.91.
This theory of the case in our view is not in accordance with the law. The policy sued on was issued and accepted subject to the express provision that it should recover and apply only after the prior $3000 policy was exhausted in the payment of claims to the full amount of the expressed limits thereof, and in our view this provision is a condition precedent. Its terms are plain and unambiguous and must be enforced as written. And this is true though quite often the courts have gone far in the scope of judicial interpretation in aid of an insured. While it is the duty of courts in proper cases to construe the contracts of the parties, yet they have no power to construct a new contract for them, nor is the reason which moved the parties to write the contract as they did material. [State ex rel. v. Trimble, 297 Mo. 659, 249 S.W. 902, loc. cit. 905; State ex rel. v. Ellison, 269 Mo. 410, 190 S.W. 879; Bothman v. Met. Life Ins. Co. (Mo. App.), 231 S.W. 1007, loc. cit. 1011; Ransford v. Nat'l. Prot. Ins. Assn., 16 S.W. 663.]
We have not been cited any cases in this State which deal directly on the point in question, nor has our own investigation disclosed any, yet there is a case which by analogy tends to support our ruling that the provision in question in this policy, which requires that the primary insurance must be exhausted before liability attaches to the excess policy, is legal and enforceable and defeats an action on the excess policy until such condition is fulfilled. [Wilson Co. v. Hartford Fire Ins. Co., 300 Mo. 1, loc. cit. 54, 254 S.W. 266.]
In the Wilson Company case, supra, our Supreme Court construed a policy containing a somewhat similar provision as that under discussion here. It appears in that case that the Hartford Fire Insurance Company had issued a policy to the Kansas City Live Stock Exchange protecting members of the exchange and others against loss by fire to live stock that might be located on the premises of the exchange. The provision in that policy provided that "it is specifically understood and agreed that if there be any specific insurance on the live stock as above described, then this policy shall apply only after such specific insurance is exhausted." Wilson Company, plaintiff, brought suit against the Hartford Company to recover for the loss by fire of certain live stock included within the terms of this policy. One of the defenses set up by the insurance company, defendant, was that Wilson Company, at the time of the fire, held a policy issued by the Globe Rutgers Fire Insurance Company covering the live stock destroyed in the fire for a sufficient amount to pay the loss. One of the terms of the Globe Rutgers policy was as follows: "It is also specifically understood and agreed that this insurance shall be considered surplus insurance where any specific insurance exists on any of the property hereby insured, and this insurance shall not apply or contribute until the amount collectible from all such specific insurance shall have been exhausted." Our Supreme Court held that the Globe Rutgers policy was a blanket or floating policy and that the policy of the defendant was specific in its description of the property insured, and held that since there could be no recovery upon the Globe Rutgers blanket policy until the insurance of the Hartford Company had been exhausted, the existence of the blanket policy was no defense to the suit, the court using the following language: "Appellant's policy constitutes specific insurance. The Globe Rutgers policy does not. Therefore until the insurance contracted to be paid in the former is exhausted, the latter can have no application in so far as it may affect the binding force or manner of payment of the appellant's obligation."
It may be well to state, however, that though we rule that the provision in the policy requiring that the specific insurance be exhausted in the payment of claims to the full amount of the expressed limits thereof is a valid provision in the nature of a condition precedent to any liability thereunder, yet we cannot agree with the contention of the appellant that under said clause plaintiff, as one of the predicates for liability on the part of the defendant, must prove that he has actually collected $3000 in cash, the full face of the primary policy of insurance. Such suggested construction is harsh and unreasonable and particularly so in light of the fact that so to hold would be of no rational advantage to the insurer. Such condition is complied with when the insured proves that claims aggregating the full amount of the specific policy have been settled thereunder and full liability of the insurer discharged. As was ruled in the case of Zeig v. Mass. Bonding Ins. Co., 23 F.2d 665, in construing an identical provision in an insurance policy, "there is no need of interpreting the word `payment' as one relating to payment in cash. It often is used as meaning the satisfaction of a claim by compromise, or any other way. To render the policy in suit applicable, claims had to be and were satisfied and paid to the full limit of the primary policies. Only such portion of the loss as exceeded, not the cash settlement, but the limits of these policies, is covered by the excess policy."
If, therefore, plaintiff (as may well be the case as is made to appear from the photostatic copy of a receipt given by plaintiff in the settlement of his claim against the Fidelity Deposit Company of Maryland, which receipt, however, though offered on the part of the defendant was not permitted in evidence) can show that he compromised his claims for an alleged loss in an amount equal to the full expressed limit, under said primary policy against the Fidelity Deposit Company of Maryland, and that such compromise was a settlement in full of any and all liability on the part of said company under said policy and left no further insurance therein in effect, then plaintiff must be held to have fully met such said condition precedent.
In light of the construction of the provision in the policy as above set out, it follows that the plaintiff failed to make out a case under the policy and that the demurrer offered at the close of the case should have been sustained. The judgment is accordingly reversed and the cause remanded. Haid, P.J., and Nipper, J., concur.
REPORTER'S NOTE: — Writ of certiorari in the foregoing case was denied by the Supreme Court October 7, 1929.