Springfield Fire & Marine Ins. Co. v. Boswell, F-87

• Decision Date: 06 October 1964
• Docket Number: No. F-87,F-87
• Citation: 167 So.2d 780
• Parties: SPRINGFIELD FIRE AND MARINE INSURANCE COMPANY, Appellant, v. Brady B. BOSWELL and Dora Lee Boswell, Appellees.
• Court: Florida District Court of Appeals

Page 780

167 So.2d 780

SPRINGFIELD FIRE AND MARINE INSURANCE COMPANY, Appellant, v. Brady B. BOSWELL and Dora Lee Boswell, Appellees.

No. F-87.

District Court of Appeal of Florida, First District.

Oct. 6, 1964.

Beggs, Lane, Daniel, Gaines & Davis, Pensacola, for appellant.

Robinson & Roark, Pensacola, for appellees.

WILLIS, BEN C., Associate Judge.

The appellant-defendant sustained an adverse summary final judgment rendered in the trial court in behalf of the appellee-plaintiffs who were the insureds in a fire insurance policy issued by the appellant company. The trial judge was confronted with pure questions of law. On this appeal it is asserted that he failed to apply the proper legal principles, which, if they had been recognized, would have resulted in a judgment favorable to the appellant-defendant.

The parties will be referred to as they appeared in the trial court. The plaintiffs Boswell were the owners of real estate which included a frame, one-story dwelling house. On November 16, 1959, defendant issued its standard fire insurance policy for $6,000 on the dwelling for a one-year period. The insureds named in the policy were the plaintiffs as owners and a Mr. and Mrs. Alford who were shown as purchasers under a contract of sale. The plaintiffs paid the required premium. The Alfords soon defaulted in their obligations on the contract and their rights in the property were extinguished by a quit claim deed to the plaintiffs. On May 25, 1960 an endorsement to the insurance policy was issued showing the Alfords no longer had an insurable interest in the property.

On July 1, 1960 the plaintiffs Boswell entered into a written contract of sale and purchase of this property with Mr. and Mrs. James W. Brown, who went into possession of the premises. The purchase price was $12,500 of which $500 was paid in cash with the balance to be paid in monthly installments with interest on the unpaid balance. The contract required the purchasers to procure fire insurance of at least $7,500 for the benefit of both the sellers and purchasers. The Browns procured insurance in the sum of $15,000 with a company not a party to this suit.

On August 7, 1960, well within the policy period, the insured premises were totally destroyed by fire. The following day the plaintiffs reported the loss to defendant's agent.

On November 10, 1961, fifteen months after the fire plaintiffs Boswell executed and delivered to the Browns a warranty deed conveying the subject property, but specifically reserved to themselves their claim under the policy issued by defendant. In return for the deed, the plaintiffs were paid $12,000.00 from the proceeds of the policy which had been procured by the Browns and in which the Boswells were also shown as being insureds.

It was more than a year after the fire that any settlement of any kind was made by either company which had insured the risk. It was only a few days before the delivery of the deed from the Boswells to the Browns that the Browns' insurer settled with the Browns and Boswells the claim against it. It paid the full $15,000 face amount of the policy. The defendant insurer has of course made no settlement, hence this lawsuit.

The plaintiffs instituted this action against the defendant insurer in January, 1962 in which they sought to recover the full face amount of the policy, interest and attorneys' fees. The defendant answered denying the alleged indebtedness, and in substance asserted that under the circumstances of the contract of sale of the property by plaintiffs, the payment of the proceeds of the policy issued to the Browns, and the conveyance of the title to the property in question the plaintiffs Boswell had no loss the defendant is obligated to indemnify.

After certain discovery procedures, including the taking of the deposition of Mr. Boswell, each party moved for a summary judgment. Ultimately the Court granted the motion in behalf of the plaintiffs and in the judgment made the following findings: '* * * the insured improvements were a total loss; * * * the plaintiffs were at the time of the loss the vendors holding title subject to the contract of sale, the policy in question was in full force and effect and there is no indication of any fraud or provision in the policy itself prohibiting additional insurance; that had there been no contract of sale in existence at the time of the loss and both policies were in full force and effect at said time, plaintiffs, being the insureds, would be entitled to right of recovery; that the policy in question was issued in accordance with the valued policy statute * * *'.

The plaintiff was awarded the $6,000 face amount of the policy, interest on same, costs and attorneys' fees.

The questions presented may be condensed and summarized into the following query:

May a vendor in a sale-purchase contract of real property who has been paid the full purchase price from proceeds of a fire insurance policy required by his contract, also recover on a fire insurance policy, insuring only the vendor, to the extent of the face amount of the policy, when the unpaid purchase price at the time of a total loss of the insured premises by fire exceeded such face amount?

This Court has already approved, in the Rutherford case, ¹ the so-called New York Rule to the effect that, barring any agreement to the contrary, a fire insurance policy is a contract to insure against fire loss, and its premiums are assumed to represent the fair equivalent of the obligation contracted for by the insurer without the knowledge of collateral remedies. The New York rule is said to be preferred to the minority or Wisconsin Rule which regards a contract of fire insurance as a contract of indemnity and where no pecuniary loss has been sustained there can be no recovery. Both of these rules are fully discussed with supporting citations in Rutherford, and such will not be repeated here.

In Rutherford we held that the allegation made by plaintiff in her complaint against the defendant fire insurer that she held a vendor's lien to secure the unpaid portion of the purchase price was sufficient as an allegation of her insurable interest in the premises destroyed by fire and that she was not required to allege and prove actual loss where she sought only to recover the amount of the unpaid portion of the purchase price at time of the loss, which was less than the face amount of the policy. In arriving at that conclusion we applied the above mentioned New York Rule, and also held that a vendor's lien gives the vendor an 'insurable interest' in the property being sold so as to come within the class of persons who may procure an enforceable contract of insurance against loss of such property, as defined in Section 627.01041, Florida Statutes, F.S.A. ² We were also impressed with the pertinency of our Valued Policy Law, Section 627.0801, Florida Statutes, F.S.A., which provides, inter alia, that in the event of a total loss by fire of a structure, the liability of the insurer of such peril shall be the amount of money for which the property was insured as specified in the policy and for which premium has been charged and paid. ³

The Rutherford case has committed us to the doctrine that one who holds an insurable interest in property insured against fire at the time of the total loss may recover to the extent of the value of such interest as of the time of loss provided it does not exceed the full face of the policy, and that it is not necessary to allege or prove an ultimate actual loss or impairment of security.

We also recognized that under the New York Rule there are two schools of thought on the collateral issue of the measure of the insured's recovery against the fire insurer. One school, which we will call the 'face value rule' or 'Minnesota Rule' is expressed in Board of Trustees of First Congregational Church of Austin v. Cream City Mutual Ins. Co., 255 Minn. 347, 96 N.W.2d 690 (1959), in which it was declared that, in case of a valued policy, 'the insured may recover the full value of his policy, even though the value of his actual interest is less than the amount of the insurance'. In brief, this holds that where the insured has an insurable interest at the time of loss and there is a total loss, recovery may be made of the full face amount of the insurance contract even though the clear, demonstrable actual value of the insurable interest is less than such amount.

The other school, which we will call the 'insurable interest value rule' or 'North Dakota Rule' is set forth fairly in Koppinger v. Implement Dealers Mutual Ins. Co., 122 N.W.2d 134 (N.D., 1963), which held that the measure of recovery of an insured holder of a vendor's lien in the destroyed premises 'is the value of his interest at the time of loss not exceeding the amount of coverage provided by the policy.'

In Rutherford we were not compelled to choose between these two rules of measure of recovery because the plaintiff vendor only sought to recover the unpaid portion of the purchase price which was substantially less than the face value of the policy. It was stated, however:

'Nevertheless, by way of pure obiter dictum, we comment that we are impressed with the justice of the North Dakota view and are inclined to favor it, although we realize that a...