Opinion
No. 8,264.
Submitted June 22, 1942.
Decided September 21, 1942.
State Hail Insurance — Powers and Duties of State Board — Contested Claim for Insurance — Arbitration and Award — Members of Board of Arbitration Must be Disinterested Parties — What Constitutes Exclusive Remedy of Claimant for Failure to Secure Settlement. State Hail Insurance — Right of Damaged Party to Sue State. 1. Quaere: In view of the rule that the state may not be sued without its consent, may one whose insured crops were damaged by a hail storm maintain an action against the State Board of Hail Insurance — an agency of the state — upon failure to obtain redress in the manner provided by section 360, Revised Codes? Same — Insured Dissatisfied with Award of Appraiser — Recourse to Arbitration Exclusive Remedy — Action Against State Board not Available. 2. The provision of section 360, Revised Codes, relating to hail insurance, that where a farmer who has sustained loss of crops by a hail storm is dissatisfied with the adjustment made by an official appraiser of the State Board of Hail Insurance, he may appeal to the board and if then the appraisement made by a second appraiser is still unsatisfactory, a board of arbitrators (erroneously designated "appraisers") shall pass upon the claim and its judgment "shall be binding upon both parties as the final determination of said loss," held to provide the sole and exclusive statutory remedy available to claimant, and therefore where arbitration was not had because claimant objected to the arbitrator chosen on behalf of the board, an action against the board did not lie. Same — Powers of State Board of Hail Insurance Statutory — Board Without Power to Waive Requirements of Statute. 3. Since the powers of the State Board of Hail Insurance are purely statutory, and the power to waive the requirement of the provisions of section 360, supra, that the finding of the board of arbitrators as to loss sustained by a hail storm shall be binding upon both parties, is not one of such powers, contention that the board, by failing to plead such provision in an action against it, waived the right to attack a judgment in favor of plaintiff claimant on appeal has no merit. Same — Board of Arbitration — Members of Board Must be Disinterested Parties. 4. Under the provision of section 360, supra, that where one sustaining loss of crops due to a hail storm, is dissatisfied with appraisals made by two appraisers of the State Board of Hail Insurance at different times he may demand action by a board of arbitrators, one member whereof to be appointed by the Board, through is official appraiser, one by the claimant, and one by the other two, it is contemplated that disinterested persons shall constitute such board, hence the selection of the second official appraiser of the board as a member of the board of arbitration made by the first appraiser in its behalf was improper. Same — Powers of Board of Arbitration — Right to Hear Evidence. 5. Boards of arbitration, in such situation as mentioned above, are more than mere appraisers and are spoken of by text writers as exercising a power judicial in nature; and while section 360, above, apparently contemplates that the board will base its decision largely on an inspection of the crop damaged by a hail storm, it does not limit its decision to the information thus gained but, in the absence of a provision otherwise, may hear evidence, including that of the parties. Same — Case at Bar — Failure of State Board to Select Proper Person as Member of Board of Arbitration — Effect on Appeal in Action Against State Board. 6. Since, under rules 2 and 4, above, the determination of the board of arbitrators in a dispute over the loss of crops by a hail storm is binding upon both parties and an action against the State Board of Hail Insurance does not lie where arbitration was prevented by the naming of an improper person as arbitrator in behalf of the board, judgment in favor of the claimant in such an action reversed with direction to dismiss the cause, the board, however, being ordered to name a proper person as arbitrator.
Construction of hail insurance policy.
Appeal from District Court, Big Horn County; Guy C. Derry, Judge.
Mr. John W. Bonner, Attorney General, and Mr. Clarence Hanley, Assistant Attorney General, for Appellant, submitted a brief; Mr. Hanley argued the cause orally.
Mr. C.C. Guinn, for Respondent, submitted a brief and argued the cause orally.
Plaintiff, whose crop was insured under the provisions of Chapter 39, Revised Codes 1935, by the State Board of Hail Insurance, brought this action against the Board to recover the sum of $2,200, that sum being the amount of loss he claimed to have sustained by reason of a hail storm on the 21st day of June, 1940. Trial was had before a jury and verdict rendered in favor of the plaintiff in the sum of $1,100, and judgment was entered in accordance with the verdict. From the record these facts appear:
Within the time provided in the statute after the hail storm in question, plaintiff notified the Board of his loss. Subsequently, as provided in section 359, Revised Codes, one of the Board's regularly appointed appraisers inspected the damaged crop and appraised the loss at less than 5%. Plaintiff, being dissatisfied, appealed to the Board pursuant to section 360; a second adjuster inspected the damaged crop, and he too found the loss to be less than 5%. Plaintiff then proceeded, under a provision of the latter section, to make demand for an arbitration.
Because the determination of this cause hinges entirely on the provisions for arbitration found in section 360, we quote the relevant portion in full: "In case the party that has sustained the loss is dissatisfied with and refuses to accept the adjustments made by the official appraisers then he shall have the right to appeal to the state board of hail insurance, * * *. In case the adjuster who makes the second appraisal fails to secure an agreement the claimant shall then appoint one disinterested person as appraiser, and the official appraiser shall appoint another person as appraiser, and the two shall select a third disinterested person, and the three shall then proceed to adjust the loss in the same manner as specified in section 359 and the judgment of the majority shall be the judgment of said appraisers and shall be binding upon both parties as the final determination of said loss; * * *"
In carrying out its obligation under this quoted portion of section 360, the board, acting through its adjuster who first appraised the loss appointed as the Board's member of the arbitration board the adjuster who made the second appraisal of the loss. Plaintiff objected to that appointment on the ground that the person so named was not qualified to act upon the arbitration board. Some question appears as to the plaintiff's compliance with the provisions of the Act in making any appointment, but that is here immaterial as will later be seen. No arbitration was had by reason of the facts set out, and this suit was subsequently filed.
Defendant Board first raises the question of the right of the [1] plaintiff to bring suit against it, on the theory that the Board is exercising part of the sovereign power of the state, and thus cannot be sued without its consent. That and other questions raised need not be discussed, for the case must be determined on the basis of the provisions of Chapter 39.
The briefs of both parties are devoted very largely to the [2] question whether or not an arbitration under section 360 is a condition precedent to the filing of suit. An examination of that section reveals that arbitration is more than a mere condition precedent to the institution of an action; it is the sole remedy afforded either party after a failure to agree on the amount of the loss after the second appraisal. It provides that the judgment of the board of arbitration "shall be binding upon both parties as the final determination of said loss." By this language the legislature has made the statutory remedy exclusive. When plaintiff chose to insure his crop under the provisions of this chapter, he necessarily agreed to be bound by all of the provisions of the Act which apply to him, and is therefore limited to the statutory remedy.
Some argument is made by respondent that the Board has waived [3] any right to demand arbitration as a condition precedent to suit or to insist that it is the sole remedy under the statute by appearing and answering, and by its failure to plead the provision of the statute as a bar. The powers of the Board are purely statutory, and even though it be said that it attempted to waive the requirement for arbitration, such waiver would be of no effect since it would be beyond the power of the Board to do so under the statute.
The question then presented resolves itself into the matter of [4-6] who may act on the board of arbitration provided by the statute. Plaintiff urges, as we have said, that the person nominated by the Board was not a proper person to act as a member of the board of arbitration. With this view we agree. The Act provides that after the insured refuses to accept the adjustment "made by the official appraisers," he shall appoint a disinterested person and the "official appraiser shall appoint another person as appraiser, * * *." This language indicates plainly the legislative intent to preclude the appointment of the second adjuster to this board. He has already acted as an official appraiser and is one of the official appraisers within the language of section 360. The use of the words "another person" in designating whom the official appraiser shall appoint unquestionably excludes both of the official appraisers who have inspected the crop in question. The Board, therefore, upon the notice of appeal should, acting through its official appraisers, have nominated a proper person to act upon the board of arbitration, and must do so now.
In the view we take it is necessary to set out briefly the functions of a board of arbitration in a situation such as this, where the crop allegedly damaged has long since been harvested and a view of the premises would be of no avail in determining the loss sustained. While section 360 apparently contemplates that in the ordinary course of things the board of arbitration will base its decision largely on an inspection of the damaged crop, it does not necessarily limit its decision to the information gained solely from a view of the premises. The statute speaks of members of the board as appraisers, but it is clear from a reading of the whole statute that it was intended that the board be one of arbitration rather than of appraisal. In the absence of a provision otherwise, boards of arbitration may hear not only evidence but also the parties themselves as to the matter in controversy. For a general discussion on the subject, see 6 C.J.S., Arbitration and Award, p. 148 et seq.; 3 Am. Jur. 928-937; Vincent v. German Insurance Company of Freeport, 120 Iowa, 272, 94 N.W. 458.
Boards of arbitration are more than mere appraisers, and text writers speak of such boards as exercising a power judicial in nature. ( Produce Refrigerating Co. v. Norwich Union Fire Ins. Society, 91 Minn. 210, 97 N.W. 875, 98 N.W. 100; People ex rel. Bliss v. Board of Supervisors of Cortland County, Sup. Sp. T., 15 N.Y. Supp. 748, 750. See also, 3 Am. Jur. 830 to 835.) Where the board is properly appointed, it may proceed under the provisions of section 360, Revised Codes, to fix the amount of damage based on evidence presented to it.
In accordance with what is said herein the judgment is reversed and the cause ordered dismissed.
MR. CHIEF JUSTICE JOHNSON and ASSOCIATE JUSTICES ANDERSON and MORRIS concur.
MR. JUSTICE ANGSTMAN takes no part in the foregoing decision.