American Ins. Co. v. Iaconi

Decision Date22 May 1952
Docket Number6,Nos. 1,s. 1
Citation47 Del. 167,89 A.2d 141,8 Terry 167,36 A.L.R.2d 604
CourtSupreme Court of Delaware
Parties, 47 Del. 167, 36 A.L.R.2d 604 AMERICAN INS. CO. et al. v. IACONI et al. IACONI et al. v. AMERICAN INS. CO. et al.

William E. Taylor, Jr., and Gerard P. Kavanaugh, both of Wilmington, for appellants, plaintiffs.

Robert C. Barab and Joseph A. L. Errigo, both of Wilmington, for appellees, defendants.

Before SOUTHERLAND, C. J., and WOLCOTT and TUNNELL, JJ.

SOUTHERLAND, Chief Justice.

The essential question in this case is whether the valued policy law of Delaware relating to policies of fire insurance on real estate is applicable to cases of partial loss.

The facts are these:

On or about October 27, 1946, each of the five appellant insurance companies (plaintiffs below, hereinafter called 'the companies'), issued to the appellees (defendants below, hereinafter called 'the insured') a policy of fire insurance upon certain buildings used as mushroom houses, dwelling quarters, manure sheds and packing house, situated in Mill Creek Hundred, New Castle County, Delaware. Each policy was in the amount of $12,000 on a regular Middle Department form (No. 4), and each policy covered pro rata one-fifth of the total risk. As required by the Delaware statutes governing policies of fire insurance on real estate, Vol. 45, Laws of Delaware, Ch. 81, hereinafter called 'the valued policy law', each policy was stamped with the following endorsement:

'It is agreed between Insurer and Insured that the value of the real property insured is the sum of $15,000.00.'

The provisions of this statute are set forth in the margin. 1

Each policy contained the following provision:

'Co-insurance clause: In consideration of the reduced rate and (or) form under which this policy is written, it is expressly stipulated and made a condition of this contract that in the event of loss this company shall be liable for no greater proportion thereof than the amount hereby insured bears to 80% of the actual cash value of the property described herein at the time when such loss shall happen, nor for more than the proportion which this policy bears to the total insurance thereon.'

On or about April 18, 1948, a fire occurred on the insured's premises and the buildings insured by the policies were partially but not totally destroyed. A controversy ensued between the companies and the insured touching the proper method of adjusting the loss in the light of the provisions of the valued policy law and the provisions of the policies. Thereafter the five companies filed in the court below a complaint seeking a declaratory judgment determining the rights of the parties, and praying for certain relief. The insured answered and both sides filed motions for summary judgment in accordance with their respective contentions. It is alleged in an affidavit filed by the insured that the damage to the buildings exceeds $15,000.

From the pleadings and the opinion of the court below it appears that the issues made by the parties are as follows:

First. The companies contend that the provisions of the valued policy law are not applicable to insured's claim because that law deals with total losses only and the insured's loss is a partial one; and hence that the amount of the insured's loss must be determined in accordance with the provisions of the policy and particularly the co-insurance clause thereof.

The insured contends that the valued policy law is in one respect applicable to partial as well as total losses, that is, that the agreed value of the property stated in the policy fixes the value of the property at the time of the loss for the purpose of determining to what extent the insured is a co-insurer, and since in this case the amount of insurance carried ($12,000) equals 80% of the agreed value, he is not a co-insurer to any extent, and is entitled to full recovery of his damage up to the amount of the insurance carried.

Second. The companies further contend that if the agreed value clause be held to apply to partial losses in one respect, viz., the application of the co-insurance clause, it must also apply in other respects, that is, it must supply the basis for determining insured's measure of recovery; and further contend that such measure of recovery is that proportion of the agreed value which is represented by the percentage of actual destruction, which percentage (say the companies) should be held to be that proportion of the agreed value which the current cost of repairing the damage bears to the current replacement cost of all the insured buildings. 2

As to this the insured contends that the 'percentage rule' of recovery is a rule recognized only in the maritime law of insurance and that its application to fire insurance losses would be in derogation of the common law principles of insurance and wholly unjustified.

The court below, feeling bound by a prior decision of the Superior Court construing the valued policy law, entered a judgment denying both motions for summary judgment and declaring the rights of the parties to be as follows:

'1. The provisions of Laws of Delaware, 1945, Vol. 45, Chap. 81, P. 328, are applicable to the defendants' claim herein.

'2. Plaintiffs' liability to defendants under defendants' policies of insurance is for an amount representing the difference between $15,000, the agreed valuation, and the value of the salvage, said amount not to exceed the sum of $12,000.'

From this judgment both the companies and the insured have appealed.

The basic issue between the parties, viz., whether the valued policy law is applicable to partial losses, turns primarily upon the intent of the statute, as disclosed by its language. The statute now in force has its origin in the Act of the General Assembly of March 29, 1889, Vol. 18 Laws of Del.Ch. 695, which reads as follows:

'Section 1. Whenever any policy of insurance shall be issued to insure any real property in this State against loss by fire, tornado or lightning, and the property insured shall be wholly destroyed without criminal fault on the part of the insured, or his assigns, the amount of the insurance stated in such policy shall be taken conclusively to be the true value of the property insured and the true amount of loss and measure of damages; and every such policy, whether hereafter issued or renewed, shall have endorsed across the face of it the following: 'It is agreed between insurer and insured that the value of the insured property is of the sum of $_____;' and this estimate shall be binding on both parties as to value, and in case any owner shall effect any subsequent insurance upon any larger value than so agreed, all insurance as well as that then existing as that subsequently obtained shall become void.

'Section 2. This act shall apply to all policies of insurance hereafter made or issued upon real property in this State, and also to the renewal which shall hereafter be made, of all policies heretofore issued in this State, and the contracts made by such policies and renewals shall be construed to be contracts made under the laws of this State.

'Section 3. The court upon rendering judgment against any insurance company upon any such policy of insurance, shall allow the plaintiff a reasonable sum as an attorney's fee to be taxed as part of the costs.

'Section 4. This bill shall not take effect until on and after January 1st, (1890), eighteen hundred and ninety.'

It is first to be observed that the introductory clauses of the law appear to limit its application to the case of total losses only. In case of a total loss the true amount thereof and the measure of damages are conclusively taken to be the amount of insurance. The statute says nothing about partial losses, nor does it attempt to fix the measure of damages therefor. Valued policy laws governing fire policies on real estate are in force in a number of states. Some of them have specifically dealt with the subject of partial losses in various ways, e.g., by providing that in case of loss the full amount thereof shall be paid, or an amount sufficient to repair the damage, or a proportionate amount of the value of the property insured. See Oppenheim v. Fireman's Fund Ins. Co., 119 Minn. 417, 138 N.W. 777; Simon v. Queen Ins. Co., 120 La. 477, 45 So. 396; Columbia Real Estate & Trust Co. v. Royal Exch. Assurance, 132 S.C. 427, 128 S.E. 865; Insurance Laws of Florida, F.S.A. Ch. 631, §§ 631.04 and 631.05; Missouri Rev., Stat.1939, Sec. 5930, V.A.M.S. § 379.140; Marr's Rev. Statutes of Louisiana 1915, Sec. 3757, LSA-R.S. 22:695; New Hampshire Laws of 1885, Ch. 93, Sec. 2. In other states the statute, like ours, is silent upon the matter, e.g., Wisconsin Statutes, Sec. 203.21; Ohio Insurance Laws, Throckmorton's Code 1940, Sec. 9583; Insurance Laws of Nebraska, R.S. 1943, Sec. 44-380. For a recent resume of the statutes see the discussion of partial losses under value policy laws in 49 Columbia Law Review, pp. 827-828. In states with statutes providing no rule of recovery in case of partial losses, it has been held either expressly or impliedly that the valued policy law has no application. Lancashire Ins. Co. v. Bush, 60 Neb. 116, 82 N.W. 313; Voges v. Mechanics' Ins. Co. of Phila., 119 Neb. 533, 230 N.W. 105; Third Nat'l Bank v. American Equit. Ins. Co., 27 Tenn.App. 249, 178 S.W.2d 915; Automobile Ins. Co. of Hartford v. Buie, Tex.Civ.App., 252 S.W. 295; Eureka Fire & Marine Ins. Co. v. Gray, 14 Ohio Cir.Dec. 269, 2 Ohio Cir.Ct. R., N.S., 265; affirmed 69 Ohio St. 542, 70 N.E. 1119.

That the statute was not designed to deal with the matter of partial losses is indicated by the amendment of 1893, Vol. 19 Laws of Del. Ch. 696, which reads as follows:

'That Section I of Chapter 695, Volume 18, of the Laws of Delaware, be and the same is hereby amended by inserting between the word 'damages' and the word 'and,' in the eighth line thereof, the words 'subject to the proviso herein'; and that the said section be and...

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