American Eagle Fire Insurance Co. of New York, a Corporation v. McKinnon

• Decision Date: 31 March 1930
• Docket Number: Civil 2874
• Citation: 36 Ariz. 409,286 P. 183
• Parties: AMERICAN EAGLE FIRE INSURANCE COMPANY OF NEW YORK, a Corporation, Appellant, v. J. M. McKINNON, Doing Business in Yuma County, Arizona, Under the Firm Name and Style of McKINNON GIN COMPANY, Appellee
• Court: Arizona Supreme Court

286 P. 183

36 Ariz. 409

AMERICAN EAGLE FIRE INSURANCE COMPANY OF NEW YORK, a Corporation, Appellant, v. J. M. McKINNON, Doing Business in Yuma County, Arizona, Under the Firm Name and Style of McKINNON GIN COMPANY, Appellee

Civil No. 2874

Supreme Court of Arizona

March 31, 1930

APPEAL from a judgment of the Superior Court of the County of Yuma. Fred L. Ingraham, Judge. Affirmed.

Mr Glenn Copple and Messrs. Miller & Thornton, for Appellant.

Mr William H. Westover, for Appellee.

OPINION

ROSS, J.

Plaintiff McKinnon sues for the value of eight bales of platform cotton destroyed by fire on January 9th, 1929, claiming it was covered by an insurance policy issued to him by defendant insurance company on September 1st, 1927, covering only yard cotton, but which was, it is alleged, by agreement amended on October 14th, 1928, to cover platform cotton also. The yard cotton was all baled cotton in what was known as the cotton yard, 100 feet from plaintiff's gin, and the platform cotton was the baled cotton on platform within 100 feet of the gin. It is alleged in the complaint that plaintiff had platform insurance with the Firemen's Fund Insurance Company on and prior to October 14th, 1928, which he canceled on that day at the request of defendant, and that on that day the policy of defendant covering yard cotton "was amended to include all baled cotton ginned by the plaintiff on the platform or elsewhere within one hundred (100) feet of said gin"; that after said amendment plaintiff reported to defendant all cotton ginned by him, including platform cotton, and paid defendant its premiums thereon until the fire on January 9th, 1929 that immediately after the fire defendant was notified and investigated the loss and agreed to pay plaintiff for the destroyed cotton eighteen and one-half cents per pound, or the sum of $660.78. Plaintiff asked judgment for said sum, also statutory damages of fifteen per cent, and reasonable attorneys' fees placed at $250.

The defendant filed a general demurrer to the complaint; also answered admitting plaintiff had its policy insuring baled cotton in the yard 100 feet from gin; also the destruction by fire of cotton sued for, and put in issue by denial all the other averments of the complaint, except that it admitted the fire was reported to it and that it investigated it. The answer also set out in defense of the action certain provisions of the policy, to wit: One describing the cotton insured as being baled cotton in the cotton yard 100 feet from gin; another, the "clear space clause," which provided that there should be kept clear 100 feet intervening between the gin and the cotton yard; and another which provided that the conditions, provisions and agreements written upon or attached to the policy could not be waived unless the waiver was written upon or attached thereto. The answer contained a denial that any demand for payment of loss was ever made before bringing suit.

The demurrer was overruled. The court, sitting without a jury, made written findings of fact and conclusions of law. It was found as a fact that the policy as originally issued covered only yard cotton; that subsequently defendant's agent applied to plaintiff for all his cotton insurance and particularly platform insurance; that plaintiff canceled the platform insurance he then had with another company and requested defendant's agent to cover the same, who told plaintiff such cotton would be covered, and that the policy was on or about October 14th, 1928, modified to cover platform cotton; that defendant's agents investigated the fire and loss and thereafter agreed to settle therefor on the basis of replacement or at eighteen and one-half cents per pound, which plaintiff agreed to accept; and that all the allegations of the complaint were true, which would include a finding that premiums were paid. As conclusions of law it was held defendant was liable for the loss, also damages of fifteen per cent and attorneys' fees in the sum of $250, and judgment was entered accordingly. The appeal is from the judgment and the order overruling the motion for a new trial.

Whether error was committed in overruling the demurrer is the first question presented. The cotton destroyed, and for the value of which this suit is brought, was not covered by the policy as originally written. One condition of the policy was that it would cover no cotton closer than 100 feet to the gin and that the space between the insured cotton and gin should be kept clear. Therein it is provided that these and other conditions cannot be waived or changed except by a writing indorsed on policy or attached thereto. The complaint fails to show any such writing. If this requirement is one that cannot be ignored or waived by a later agreement between the contracting parties, or except in the manner stated, then the complaint was vulnerable and the demurrer should have been sustained. The rule with reference to written contracts generally is that the parties by subsequent oral agreement may modify, alter or change their terms. Westchester Fire Ins. Co. v. Earle, 33 Mich. 143. In the annotation to Massachusetts Bonding & Insurance Co. v. Vance, 15 A.L.R. 981, loc. cit. 996 (74 Okl. 261, 180 P. 693), it is said:

" So far as the law is concerned, however, an insurance contract does not differ from other contracts; and if the minds of the parties have met in regard to the essential parts of the agreement, it does not matter whether the form of the contract is written or oral; and the power to make completed oral contracts of insurance, as well as agreements to insure, is now sustained by practically all of the cases, in the absence of charter or statutory regulations forbidding them."

The rule as affecting insurance contracts is stated in 32 Corpus Juris, 1113, section 209, as follows:

"In the absence of a statute or other positive regulation to the contrary, a contract of insurance can be made by parol. The fact that contracts of insurance are not usually made in this way is not evidence that they cannot be so made. There is nothing in the nature of insurance which requires written evidence of the contract. The contract may be verbal or in writing, or partly in writing and partly verbal. It is, of course, essential to the existence of an oral, as well as a written, contract of insurance that the minds of the parties shall have met on all the essential terms of the contract; but, where the minds of the parties for a valuable consideration have met on all the terms of the contract, it is complete and enforceable, although it was intended by the parties to be evidenced by a policy which, because of some fortuity, was not delivered before the death of insured."

No reason is apparent why the above rule should not be given full force in this state. If an oral contract of insurance is valid, an oral change or alteration of a written insurance contract when founded on a sufficient consideration is also valid. The following are authority that a policy of insurance may be modified by oral agreement: 2 Cooley's Briefs on Insurance, 2d ed., p. 1491; Norris v. China Traders' Ins. Co., 52 Wash. 554, 100 P. 1025; Ludwig v. Jersey City Ins. Co., 48 N.Y. 379, 8 Am. Rep. 556; Canfield v. Newman, (Tex. Civ. App.) 265 S.W. 1052; Offutt v. National Fire Ins. Co. of Hartford, Conn., (Mo. App.) 273 S.W. 161; Hartford Fire Ins. co. v. J. R. Buckwalter Lumber Co., 116 Miss. 822, 77 So. 798.

But it is said because the...