Quality Foods, Inc. v. U.S. Fire Ins. Co.
| Decision Date | 19 September 1983 |
| Docket Number | No. 81-8036,81-8036 |
| Citation | 715 F.2d 539 |
| Parties | QUALITY FOODS, INC., Plaintiff-Appellee, v. U.S. FIRE INSURANCE COMPANY, et al., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
G. Hamp Uzzelle, III, Mobile, Ala., for defendants-appellants.
James D. Brooks, Carl Robert Gottlieb, Jr., Mobile, Ala., for plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Alabama.
Before TJOFLAT, HILL, and JOHNSON, Circuit Judges.
PRIOR PROCEEDINGS
Plaintiff, Appellee, Quality Foods, Inc. [hereinafter Quality] filed suit against U.S. Fire Insurance Company [hereinafter U.S. Fire] in the circuit court of Mobile County, Alabama. Appellee sought recovery, under an insurance policy issued by U.S. Fire to Quality, in the amount of three million dollars compensatory and property damages and two million dollars in punitive damages. Appellant removed the action to federal district court pursuant to 28 U.S.C.A. §§ 1332 and 1441. The jury found for Quality in the amount of $50,000.00 building damages and $250,000.00 contents damages. U.S. Fire subsequently filed this appeal assigning error to the judgment of $250,000 contents damages.
Quality is primarily engaged in the food business and has been incorporated since 1962. Soon after its incorporation, Quality engaged the services of King Pickett as their insurance agent. Mr. Pickett is an independent insurance agent who places insurance with numerous insurers based upon the "best deal" he can acquire for his clients. Mr. Pickett arranged for U.S. Fire to insure Quality.
The type of insurance policy Quality acquired to cover its loss or damage to its contents was known as reporting form insurance. This type of insurance allows the insured to pay premiums based on its monthly reports of the present amount of inventory. The monthly premium fluctuates depending on the amount of inventory for the current month. Thus, reporting form insurance allows an insured who has a fluctuating inventory to obtain full coverage for the fluctuating inventory (up to a stated limit not here involved) and yet pay premiums on only the average of the inventory values. However, this type of policy requires accurate submissions by the insured of the current inventory values to the insurer. The insured must file its inventory reports within 30 days after the end of each month. The policy also contains a Full Reporting Clause which protects the insurer, limiting recovery by adjusting coverage according to the accuracy of the last inventory report filed prior to loss or damage by the insured. The policy's Full Reporting Clause reads:
C. Full Reporting Clause. As respects [contents], liability under this policy shall not in any case exceed that proportion of any loss hereunder which the last value reported prior to the loss ... bears to the total actual cash value ... on the date for which such report was made ....
During the month of September 1979, Hurricane Frederick struck the coast of Alabama and caused severe damage to the buildings and contents of Quality. The last inventory report filed by Quality, prior to the losses it sustained due to the hurricane was submitted on July 31, 1979. The inventory value reported by Quality was $990,000.00. Yet, the total value of Quality's contents as of July 31, 1979, was actually $2,299,592.57. Based on the full reporting clause, U.S. Fire divided the $1,000,000.00 1 reported value by the actual value of $2,299,592.57 to arrive at a proportionate coverage of 43.4% of the damages sustained by Quality.
U.S. Fire, acting through Mr. George Kerr, an adjuster from the General Adjustment Bureau, agreed with Quality, that the contents damage to Quality by windstorm was in the amount of $247,164.69. U.S. Fire, based on the Full Reporting Clause offered to pay Quality 43.4% of the $247,164.69, or $107,269.48. Mr. Dominic Ficarino, president of Quality refused to accept anything below $247,164.69.
Quality refused to accept the 43.4% calculation of recovery, asserting that U.S. Fire had waived its Full Reporting Clause. Quality had submitted an inventory report for the month of August, 1979, although this report was not filed with U.S. Fire until October, 1979, due to the damages caused by the hurricane. Quality asserts that throughout its years of coverage, it had frequently filed its monthly reports late and U.S. Fire never protested or repudiated coverage because of the untimely filings. The August report, filed in October reflected a total inventory value of $2,529,554.00, a noticeable jump from the $990,000.00 total inventory reported in July. The reason for the jump in the post-loss report was it covered all contents and not just value of frozen seafood inventory theretofore used.
Quality had claimed approximately $400,000.00 worth of contents damage. Although Mr. Ficarino had tentatively agreed to the total loss appraisal of $247,164.69, he did so believing he would be paid this full amount. Because Quality would not accept the 43.4% of the $247,164.69 and U.S. Fire refused to compensate Quality beyond the calculated percentage rate, this suit commenced.
Quality asserts that U.S. Fire waived the terms in the Full Reporting Clause which limited recovery to 43.4% of the claimed damages. This assertion is based on U.S. Fire's failure to protest or complain about Quality's history of untimely reporting. Additionally, Quality asserts that any underreporting of the inventory was due to Mr. Pickett.
The controlling case in this circuit on full reporting clauses, such as the one in dispute in the present case, is Camilla Feed Mills, Inc. v. St. Paul Fire & Marine Ins. Co., 177 F.2d 746 (5th Cir.1949). In Camilla, the insured sued the insurance company for a fire loss based on the same type of clause that exists in the present case. A judgment was entered for the insurance company and the fifth circuit affirmed. The insured had estimated the value of its inventory at $3,000.00 when in fact, the inventory was $9,000.00. After the fire took place, the insured amended its last report to reflect actual inventory rather than estimated inventory. The insured also filed its next monthly report showing actual inventory. This report was filed within the 30 day grace period given for each month, yet after the fire had destroyed the property. The insured argued that because it had filed within the grace period, the last inventory report showing a $9,000.00 value should have been accepted rather than the previous report reflecting a $3,000.00 value.
The court stated that what the insured was really asking was for the court to reform the contract and the evidence, thereby relieving the insured of its own...
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