Aetna Insurance Company v. Eisenberg, LR 3626.
| Decision Date | 01 November 1960 |
| Docket Number | No. LR 3626.,LR 3626. |
| Citation | 188 F. Supp. 415 |
| Parties | AETNA INSURANCE COMPANY, Plaintiff v. Saul EISENBERG, Defendant, Bleidt-Banks Cleaners, Inc., et al., Intervenors. |
| Court | U.S. District Court — Eastern District of Arkansas |
James I. Teague, McMillen, Teague & Coates, Little Rock, Ark., for plaintiff.
Henry E. Spitzberg, Spitzberg, Bonner, Mitchell & Hays, Little Rock, Ark., for defendant.
Abner McGehee, Cockrill, Laser & McGehee, and John Thurman, Jr., Barber, Henry, Thurman & McCaskill, Little Rock, Ark., for interveners.
This is an action for declaratory judgment (28 U.S.C.A. § 2201 (1958)) upon a policy of inland marine fire insurance. Plaintiff, Aetna Insurance Company, seeks to have the policy, a Furriers' Customers Basic Policy issued to defendant, Saul Eisenberg, doing business as Saul Eisenberg, Exclusive Furrier, in Little Rock, Arkansas, declared void because of defendant's alleged fraud and violation of a policy promissory warranty in making false monthly reports of storage values. Customers of Eisenberg's having claims under this policy have been allowed to intervene to prevent a multiplicity of actions upon the same facts, Fed.R.Civ.P. 23(a) (3), 28 U.S.C.A.
A bailee's customer policy has been in effect between Aetna and Eisenberg since January of 1934, with the policy form here in question having been executed in March of 1946; various endorsements as to premium rates or limits of coverage had increased the coverage to $200,000 when, on July 22, 1958, fire badly damaged garments stored with defendant that were within the coverage of the policy. The evidence did not disclose the number of garments stored at the time of the fire, but according to the audit subsequently made there were "approximately 2,000 cards", or storage receipts, outstanding, a number of which included more than one garment. In adjusting this loss plaintiff discovered that the value of garments stored with Eisenberg had been substantially understated in his reports to plaintiff from January 1958 through June of that year. These reports were the basis for premium calculation.
Eisenberg defends upon the grounds of estoppel and waiver, and counterclaims for policy limit coverage. The intervenor-customers maintain that their rights under the policy are not affected at all by any rights or defenses that plaintiff may have against Eisenberg; they allege that Eisenberg was the agent of Aetna for the issuance of the insurance on their garments, that he so held himself out, and that this holding out was known to Aetna. Further, the customers allege that it was the duty of Aetna to audit the records of Eisenberg to see that correct reports were being made, and that it is now estopped to void the policy for improper value reports by Eisenberg. Upon these grounds they seek to invoke the principle that where one of two innocent persons must suffer, the loss should fall upon the one who made it possible for the loss to occur. It is the position of Aetna that the customers' rights are subject to the same limitations as are the rights of Eisenberg.
The bailee's customer policy herein question insured only furs and garments trimmed with fur owned by third parties which were accepted by Eisenberg for storage, alteration, repairing, cleaning, or remodeling, and for which he issued a receipt which included an agreement that he would effect insurance for the customer. The garments so covered were insured against all risks of loss or damage, including Eisenberg's legal liability therefor, subject to the policy exclusions, one of which specifically excluded property belonging to Eisenberg from policy coverage.
Under this policy customers storing garments with Eisenberg had an option, if they wished insurance, of securing a one year floater insurance policy issued by Aetna and countersigned by their local agent, or of securing coverage under the Customers Basic Policy. They received in either event a storage receipt which contained the following statement: "The furs, garments or property covered by this receipt are insured as stipulated below for $____, under Blanket Policy Number ______, issued by the ______ Insurance Company." The name "Aetna" was written in the last blank except in the few instances disclosed by the testimony where it was inadvertently omitted. This was done with plaintiff's knowledge. The conditions stipulated on the face of the receipt were, in general, those required by the policy of insurance to be included in the receipt given by the furrier to his customers. One of the conditions of the receipt reads: "At the request of the depositor and as part of the consideration for the charge set opposite each item herein listed below, the undersigned hereby agrees to effect for the benefit of the depositor insurance on the articles listed in this receipt which shall, in terms usual to such insurance, cover against loss by fire and theft for the value set opposite each item, which value shall represent respectively the limit of liability for loss of or damage to the same."
The "value set opposite each item" was the value declared by the bailor customer of Eisenberg. The total declared value of all items stored, to be determined by the total of the deposit receipts outstanding, was to be reported by Eisenberg to Aetna at the end of each month. His premium was computed upon the value so reported, though Eisenberg denied knowing this was one of the uses served by his monthly report. The basic policy had also total policy limits upon the insurance liability assumed by Aetna; as to locations used for storage of garments, the limit at the time of the fire was, as previously noted, $200,000 for one casualty. It was of course contemplated that the total limit of liability would be, ordinarily, in excess of the declared value stored with the insured, and the monthly report of Eisenberg also served to inform the company in this respect. Total policy limits had been raised several times over the 24 years that plaintiff and defendant did business to provide complete coverage of the insured items stored with defendant.
The policy contemplated that Eisenberg would report the total of all receipts issued, whether the garment was covered by an individual floater policy or by the basic policy. However, plaintiff's local agent told Eisenberg to report only the total values shown on receipts for garments insured under the basic policy; the agent himself compiled the total of the declared values covered by the individual floater policies from the duplicate copies retained by Eisenberg. On these individual policies Aetna has accepted liability, admitting that the grounds here asserted against liability under the basic policy — the false monthly reports by Eisenberg — would not reach those individual policies. Though the intervenors allege that this admission of liability on the individual policies estops Aetna from voiding the basic policy, I do not regard such admission as having any relevance, and have given it no weight in reaching my decision.
In adjusting the loss caused by the fire in defendant's vault on July 22, 1958, Aetna discovered that the declared value of the garments in storage greatly exceeded the amount shown by Eisenberg's last report, even allowing for normal additional deposits. Thereupon, Aetna ceased adjusting the loss and executed a non-waiver agreement with Eisenberg. An audit of the receipts in Eisenberg's possession at the time of the fire shows a substantial variance between the values declared by customers and the values reported to Aetna, as follows:
Total Values In Values
Storage, Exclusive Reported
Month's End Of Individual Policies To Aetna
January 1958 $ 2,750.00 $ 450.00
February 1958 2,750.00 550.00
March 1958 8,850.00 1,050.00
April 1958 88,055.00 73,550.00
May 1958 176,465.00 110,550.00
June 1958 204,890.00* 115,750.00
- - - - - - - - -
July 1958 (22nd) 209,820.00
Note: The figures used as total values in storage, exclusive of
individual floater policies, are taken from plaintiff's
exhibit number 5, page 5, prepared at my request by
plaintiff's accountant from his worksheet. It thus
varies from his schedule attached to his audit, plaintiff's
exhibit number 5, page 4, which included declared
values covered by the individual policies in the amount
of $5,350.00 as of June 30, 1958
Receipts for the period prior to January 1958 are not available.
The evidence further shows that Aetna's local agent furnished Eisenberg advertising "cuts" of the Aetna trademark, which Eisenberg used extensively in his newspaper, direct mail, radio, and telephone book advertising. Eisenberg also maintained large signs in his shop windows during storage seasons which disclosed Aetna insurance was available upon...
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Aetna Insurance Company v. Eisenberg
...appellee Eisenberg's alleged fraud in under-reporting values of property covered thereby. The District Court's opinion is published at 188 F.Supp. 415. The action was commenced after an investigation of fire losses at Eisenberg's establishment revealed that the latter, a furrier in Little R......