Michigan Fire & Marine Ins. Co. v. National Surety Corp.

• Decision Date: 10 July 1946
• Docket Number: No. 13149.,13149.
• Citation: 156 F.2d 329
• Parties: MICHIGAN FIRE & MARINE INS. CO. et al. v. NATIONAL SURETY CORPORATION.
• Court: U.S. Court of Appeals — Eighth Circuit

156 F.2d 329 (1946)

MICHIGAN FIRE & MARINE INS. CO. et al. v. NATIONAL SURETY CORPORATION.

No. 13149.

Circuit Court of Appeals, Eighth Circuit.

July 10, 1946.

LeRoy Bowen, of Minneapolis, Minn. (Bowen & Bowen, of Minneapolis, Minn., on the brief), for appellants.

F. H. Durham, of Minneapolis, Minn. (Durham & Swanson, of Minneapolis, Minn., on the brief), for appellee.

Before SANBORN, WOODROUGH, and RIDDICK, Circuit Judges.

SANBORN, Circuit Judge.

On March 31, 1941, a fire partially destroyed corn owned by the Commodity Credit Corporation and stored in the Harbor Elevator in Minneapolis, which M. B. Lytle then owned and operated as a terminal elevator.

The National Surety Corporation, as assignee of the proceeds of fire insurance policies held by Lytle, brought this action originally in the District Court of Hennepin County, Minnesota, alleging damages to the corn in the amount of $15,963.78. The insurance companies removed the suit to the federal court on the ground of diversity of citizenship.

In a trial to the court without a jury, the court found for the Surety Corporation and entered judgment against the insurance companies for $1,555.14. All the insurance companies have appealed, with the exception of the Westchester Fire Insurance Company, which has paid its portion of the judgment.

The policies in suit are Minnesota Standard fire insurance policies and the law of Minnesota is controlling.

The fire which caused the damage on March 31, 1941, occurred in the basement of the warehouse. On January 7, 1941, a portion of five floors of one section of the warehouse had collapsed, precipitating the corn into the basement, an unsuitable place for its storage. After the collapse, the Surety Corporation, which was on Lytle's bond as a warehouseman and was liable for any loss suffered by the Commodity Credit Corporation on account of his default, undertook to make the building safe for the removal of the corn. Prior to the fire of March 31, 1941, some of the corn had been damaged by the collapse of the building, and some by water running into the basement through open windows, and some had run down a sewer in the basement. All of the parties to this action knew of the fire, which had charred a post in the basement and damaged part of the corn. The fire was not extensive, and fifty gallons of water were sufficient to extinguish it. Immediately after the fire, all of the parties agreed that the corn should be salvaged and either delivered to the Commodity Credit Corporation or sold, and that the question of responsibility for damage to the corn should be deferred.

On April 4, 1941, the Surety Corporation took an assignment from Lytle of his right to the proceeds to be paid by the fire insurance companies on account of the fire loss. All of the corn in the warehouse belonged to the Commodity Credit Corporation, and was stored by it with Lytle under a "Uniform Grain Storage Agreement," which required him to deliver corn of the same kind and quality. Before the salvaging operation was completed, another fire occurred, on May 7, 1941, which destroyed the building and the unsalvaged corn, estimated to be 9,500 bushels. The Surety Corporation then took an assignment of Lytle's claim against the fire insurance companies resulting from the second fire. It was subsequently determined that the fire of May 7 was set by Lytle, and he was convicted of arson. State v. Lytle, 214 Minn. 171, 7 N.W.2d 305.

The Commodity Credit Corporation, as a result of all of the damage to the corn while stored with Lytle, suffered a net loss of $23,062.99, which the Surety Corporation paid in April, 1942. On or about January 8, 1943, it submitted to the fire insurance companies sworn statements of loss on account of each of the fires, and on March 8, 1943, brought this action to recover the fire loss alleged to have resulted from the fire of March 31, 1941. On May 3, 1943, the Surety Corporation brought an action based on the fire of May 7, 1941, which action was removed to the federal District Court and was later dismissed. There were some further complications, but enough has been said to indicate the controlling factual situation.

The defenses asserted by the appellants fire insurance companies were: (1) The loss or damage caused by the fire of March 31, 1941, was not within the coverage of the policies. (2) Sworn statements of loss were not furnished by the insured within the time required by the policies. (3) The policies were voided by various attempts of the Surety Corporation and Lytle to defraud the appellants.

The policies covered grain "on storage if in case of loss the insured is liable therefor."¹ Under the warehouse receipts issued by Lytle to the Commodity Credit Corporation the insured was not liable for fire damage to grain on storage, but, under the Uniform Grain Storage Agreement, Lytle was obligated to deliver to the Commodity Credit Corporation the same quantity and quality of grain as he received and to insure it and to collect the insurance in case of loss. It was expressly provided that the terms of the agreement should prevail over terms of warehouse receipts. Therefore, under the agreement, Lytle was liable to the Commodity Credit Corporation for damage by fire to its grain in storage.

The appellants argue that the words "liable therefor" as used in the policies mean "liable as a warehouseman therefor" and do not cover liability imposed by a special contract such as that with the Commodity Credit Corporation. We agree with the trial court that the word "liable" as used in the policies is to be taken and understood in its plain, ordinary and popular sense. See Bergholm v. Peoria Life Ins. Co., 284 U.S. 489, 492, 52 S.Ct. 230, 76 L. Ed. 416; Millers' Mutual Fire Ins. Ass'n v. Warroad Potato Growers Ass'n, 8 Cir., 94 F.2d 741, 742. In Minneapolis, St. Paul & Sault St. Marie Ry. Co. v. Home Ins. Co., 55 Minn. 236, 56 N.W. 815, 817, 22 L.R.A. 390, upon which the appellants rely, the coverage of the policy was specifically limited to the liability of the insured "as carrier and warehouseman." In the policies in the instant suit there is no such limitation.

Each of the policies in suit provided that, in case of loss or damage, "a statement in writing signed and sworn to by the insured, shall be forthwith rendered to the company, setting forth the value of the property * * *" and that the company shall have sixty days thereafter to pay for or to replace the property.

Under Minnesota law, the statute of limitations applicable to an action under a policy of fire insurance runs from the time of the fire, and not from the time the claim becomes enforceable by suit, which is sixty days after the loss statement is furnished by the insured. Rottier v. German Insurance Co., 84 Minn. 116, 86 N.W. 888. Delay in furnishing proofs of loss does not affect the insured's right of action upon the policy, but merely postpones the time for bringing suit for the loss. In Mason v. St. Paul Fire & Marine Ins. Co., 82 Minn. 336, 338, 339, 85 N.W. 13, 14, 83 Am.St.Rep. 433, the Supreme Court of Minnesota said:

"* * * Where no forfeiture is provided by the terms of the contract, and the service of proofs of loss within the specified time is not made a condition precedent to the liability of the company, the effect of such failure is simply to postpone the day of payment. No liability attaches to the company, however, until such proofs are furnished; but unless otherwise provided, expressly or by fair implication, it is not important that the proofs be not in fact served within the time stated in the policy."

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