Scottish Union & National Ins. Co. v. Bejcy

• Decision Date: 23 January 1953
• Docket Number: No. 11576.,11576.
• Citation: 201 F.2d 163
• Parties: SCOTTISH UNION & NATIONAL INS. CO. v. BEJCY et al.
• Court: U.S. Court of Appeals — Sixth Circuit

201 F.2d 163 (1953)

SCOTTISH UNION & NATIONAL INS. CO. v. BEJCY et al.

No. 11576.

United States Court of Appeals Sixth Circuit.

January 23, 1953.

Edward P. Frohlich, Detroit, Mich., Howard J. Ellis, Detroit, Mich., on brief, for appellant.

Robert A. Sullivan, Detroit, Mich., Wilber M. Brucker, Detroit, Mich., on brief; Clark, Klein, Brucker & Waples, Detroit, Mich., of counsel, for appellees.

Before SIMONS, Chief Judge, and ALLEN and McALLISTER, Circuit Judges.

SIMONS, Chief Judge.

The appellant assails a judgment against it for a fire loss covered by its insurance policy and particularly the special and exemplary damages included in it because of its failure to pay.

The policy was issued on November 9, 1946 through the insurer's local agent, Schumann, covering household furniture at the home of the appellees, in the sum of $3,000.00. Subsequently, the furniture was moved to a storage warehouse and the agent notified of its removal. The appellees left for California by automobile on August 24, 1948 arriving there October 6, and on October 13 received word from the storage company that their furniture had been destroyed by fire on August 28th. They notified Schumann by letter on October 15th of the loss but were advised by the insurer, on October 25, 1948, that Schumann no longer represented the insurance company and that it did not know of the loss until receipt of the October 15th letter. The appellees notified the insurer directly of the loss, on November 30th. The insurer referred the matter to its representative in Detroit who instituted an investigation and by letter of December 10th denied liability and returned the unearned premium to the appellees. Schumann had been advised by the company in 1947 that it would not accept any risks in the location of the storage company.

The appellees instituted suit in July, 1949, seeking recovery of the face amount of the policy and in addition special damages for mental anguish, medical expenses, rent of a furnished apartment, financing charges on money borrowed to purchase new furniture, loss of wages, illness, including ulcers, and loss of a down payment on the purchase of a new house. Overruling motions to dismiss and to strike the ad damnum clause from the complaint, the court submitted to the jury the issue as to special damages in excess of the limits of the contract. A verdict for $7,500 and judgment thereon followed.

A number of issues may be summarily disposed of. The first relates to jurisdiction. The coverage of the policy being in the sum of $3,000, the appellants contend that the court was without jurisdiction by virtue of Title 28 U.S.C.A. § 1332, which limits federal jurisdiction to cases where the amount in controversy exceeds $3,000, exclusive of interest and costs. The rule, however, is that the sum claimed by the plaintiff controls, if the claim is made in good faith, and it must appear to a legal certainty that the claim is for less than the jurisdictional amount to justify dismissal, St. Paul Mercury Indemnity Company v. Red Cab Company, 303 U.S. 283, 288, 58 S.Ct. 586, 82 L.Ed. 845. The appellees had, in good faith, reasonable expectation for recovery of special damages under Michigan law and the validity of such expectation could not be determined from the pleadings nor until after trial and review. The court was not in error in taking jurisdiction of their claim.

Another issue raised by the appellants is that the provisions of the policy, requiring the insured to render sworn proof of loss within sixty days after it occurred, were not complied with and the appellees were, therefore, barred from recovery. The law in Michigan is settled that when an insurance company denies liability for reasons other than imperfect compliance with the proof of loss provision it is estopped from objecting to its sufficiency. Lum v. United States Fire Insurance Company, 104 Mich. 397, 62 N.W. 562; Crystal Ice Company v. United Surety Company, 159 Mich. 102, 123 N.W. 619. The insured submitted to the insurer all of the information it had of the loss and payment was denied on the ground that Schumann's agency had been terminated and the furniture removed to the storage warehouse. Proof of loss was furnished within the sixty day period because under Michigan law that period does not begin to run until the insured has knowledge of the loss, Rogers v. Great Northern Life Insurance Company, 284 Mich. 660, 667, 279 N.W. 906. When an insured notified the company of a loss, the company makes an investigation and then denies liability on the grounds other than failure to file written proofs of loss, the proof of loss provision is waived and is no longer a condition precedent to the beginning of suit, Rood v. National Casualty Co., 296 Mich. 530, 537, 296 N.W. 672; Rogers v. Great Northern Life Insurance Company, supra; First State Savings Bank of Croswell v. National Fire Insurance Company, 244 Mich. 668, 671, 222 N.W. 116.

The remaining and principal issue is whether special damages were recoverable because arising naturally from the breach or within the contemplation of the parties at the time they entered into the contract. Michigan has no statute such as that in Tennessee which we considered in Niagara Fire Insurance Company v. Bryan & Hewgley, 6 Cir., 195 F.2d 154. There are similar statutes in Texas, Northwestern Life Insurance Company v. Sturdivant, 24 Tex.Civ.App. 331, 59 S.W. 61, in Iowa,...