BOARD OF COM'RS, ETC. v. Norwich Union Fire Ins. Soc.

• Decision Date: 14 August 1943
• Docket Number: Civil Action No. 69.
• Citation: 51 F. Supp. 245
• Parties: BOARD OF COM'RS OF PORT OF NEW ORLEANS v. NORWICH UNION FIRE INS. SOC., Limited.
• Court: U.S. District Court — Eastern District of Louisiana

51 F. Supp. 245

BOARD OF COM'RS OF PORT OF NEW ORLEANS v.NORWICH UNION FIRE INS. SOC., Limited.

Civil Action No. 69.

District Court, E. D. Louisiana, New Orleans Division.

August 14, 1943.

Lewis L. Morgan and Eldon S. Lazarus, both of New Orleans, La., for plaintiff.

St. Clair Adams & Son, of New Orleans, La., for defendant.

CAILLOUET, District Judge.

This suit of the plaintiff to recover judgment against the defendant in the principal sum of $20,547.60, "with 12% additional thereon as damages and with interest and attorney's fees", was first filed in the proper State court, from which defendant there-upon effected removal.

On July 1, 1937, said defendant, Norwich Union Fire Insurance Society, Ltd., a foreign corporation, issued under the counter-signature of its duly authorized New Orleans agents to the plaintiffBoard of Commissioners of the Port of New Orleans, an agency of the State of Louisiana, two certain one-year policies of insurance (expiring July 1, 1938), carrying stated limits of liability, respectively far in excess of the amount herein sued for; which original amount, in each policy, was greatly increased by four consecutively-added policy riders, while all other policy terms and conditions were specifically confirmed, upon the making of each one of the said four amendments.

One of the said two policies insured the plaintiff against "all direct loss or damage by explosion" and the other, against "all direct loss or damage by fire"; there were listed, in each, special exceptions and exclusions, of no moment here, except as may be hereinafter specially noted.

The insured property, in each policy, was referred to, in typewritten inserted matter, as being: "On grain and seeds of all kinds, their own, or held by them in trust or on storage, or on commission or consignment, or for which they may be legally liable, or sold but not delivered, including all earned and unpaid freight, storage and elevator charges, while contained in any of the buildings and conveyors thereto, known as the PUBLIC GRAIN ELEVATOR, and in cars on tracks within THREE HUNDRED (300) FEET of any of the buildings or structures comprising the GRAIN ELEVATOR PLANT, situated on East Bank of the Mississippi River between Soniat and Leontine Streets, in New Orleans, La."

In the "explosion policy" it was expressly provided that the insurer, however, should not be liable for loss or damage covered under "any fire or other kind of insurance contract" nor "for loss by interruption of business, manufacturing processes, or otherwise.", and that the policy should "in no event be construed to cover loss or damage by fire whether resultant from explosion or not".

By still another amending rider the words "storage and elevator charges" which appeared, as aforesaid, in the description of the insured property, were deleted for the specific purpose of excluding coverage of such storage and elevator charges; but, again, express declaration was made that all other policy terms and conditions remained unchanged.

In the "fire policy" it was expressly provided that the insurer would not be liable for loss caused directly or indirectly by explosion of any kind unless fire ensued and, in that event, for the damage by fire only; but it was also provided therein that, "in the interest of the insured", the policy condition excluding loss or damage from explosion was modified so that, in consideration of the rate at which the policy was written, the company would be liable for "any direct loss or damage" to all of the property insured, (but only while said property was covered by the policy) caused by an explosion resulting from "the hazards inherent in the business as conducted", except that said insurer would not be liable for "loss or damage occasioned by or incident to the explosion, collapse or rupture of steam or hot water boilers," etc., "unless fire ensued and then, for loss or damage by fire only."

As was the case with reference to the "explosion policy", the insurer under the terms of the "fire policy" was not to be held liable for any loss occasioned "by interruption of business, manufacturing process, or otherwise", and the words "storage and elevator charges" were deleted by rider from the insured property description but all other policy terms were, at the same time, expressly confirmed.

Plaintiff's petition or complaint alleged that while both of said mentioned policies were in full force and effect, i. e., on April 4, 1938, an explosion with ensuing fire took place in plaintiff's public grain elevator, resulting from the hazards inherent in its business as the same was by it conducted therein; that besides the death of six and the injury of sixteen persons on the premises as the explosion's unfortunate toll, the grain elevator was damaged "and the machinery that performed the work of turning and drying the undried corn stored therein was totally ruptured"; that there was then stored in said public grain elevator for various owners, preparatory to shipment, a particular lot of 684,920 bushels of undried corn which, when said machinery for the proper handling and drying of said corn was so wrecked and disabled, rapidly deteriorated during the resultant interruption, which plaintiff diligently sought to terminate as soon as physically possible; that the damages suffered by such owners, by reason of such unavoidable deterioration, aggregated $20,547.60, which plaintiff was obliged to pay, and did pay, unto them; that the aforementioned insurance policies having been taken out and issued for the purpose of insuring plaintiff against any loss or damage whatever to grain held on storage, such as said lot of corn in question, plaintiff made demand upon the insurer to be paid said outlay, but without avail; and, finally, that the insurer having failed to settle the claimed loss suffered within the time prescribed by law, plaintiff should be adjudged entitled to recover from defendant not only said $20,547.60, but 12% damages on the total amount of loss as may be determined by the Court, with reasonable attorneys' fees for the prosecution and collection of such loss.

There was first filed, and denied in due course, defendant's motion to dismiss the plaintiff's action because, so movant asserted, the complaint fails to state a claim against defendant upon which relief can be granted; and defendant then answered substantially alleging that it was under no obligation to the assured, because—

1.The claimed loss was not one that "was caused proximately or directly by fire",—was not "a direct loss or damage by fire, within the intendment of the policy contracts";

2.Plaintiff's alleged loss or damage "did not occur at the time of said fire, but resulted from causes other than the fire after the fire had been extinguished and after the passing of many days and consequently said alleged loss and damage is not a proximate or direct loss or damage by fire"; and

3.The policy contracts "expressly except from liability for loss and damage by fire, all loss and damage that was occasioned by `interruption of business, manufacturing processes, or otherwise'" and the alleged loss and damage, if it did occur, resulted from the "interruption of business or manufacturing process or otherwise" and not"proximately or directly from the fire".

By reason of a pre-trial conference stipulation and admissions made at the trial, it was established that plaintiff did have in custody, on April 4, 1938, 684,820 bushels of corn; that an explosion and fire occurred in plaintiff's grain elevator on that day; that, as a result thereof, "the building was damaged and the machinery that performed the work of turning and drying the undried corn was injured and made inoperative for six days * * * and possibly partially inoperative for a further twenty-four hour period"; that the plaintiff"did everything it possibly could in order to bring about a complete repair and restoration of that equipment" so that operations might be resumed, as they were, without more delay than necessary; that plaintiff did pay to owners of damaged corn, with respect to said explosion and fire, the aggregate amount of $20,547.60; that, if it be found that liability rests upon defendant for the damages sued for, then the insurer admits the claimed sum of $20,547.60, alleged to represent the damages done to the corn during six days total and twenty-four hours partial non-operation of the grain elevator's machinery, to be reasonable; and that, if plaintiff be entitled to recover the claimed attorney's fees, then the rate for calculating the same upon the aggregate recovery shall be 15%, which defendant also admits to be reasonable.

The proof was that none of the corn for which the $20,547.60 was paid as damages, was actually burned, or affected by something from the fire, or by water used in fighting said fire, and that the damage done to the corn resulted from enforced cessation of the drying process, while the elevator's machinery for that purpose, which the explosion and ensuing fire threw out of commission, could not be used.

On the day following the explosion and fire of April 4, 1938, John W. Whitty, member of the firm who served as defendant's general agents in the issuing of the two policies of insurance to plaintiff, wrote to it saying that it was by way of confirmation of his firm's prior advices to plaintiff to the effect that the insurance companies in interest authorized the insured to proceed with the repairing of the damage done by such fire and explosion so that the grain elevator might be restored to operative status as soon as possible; and said letter contained the following two paragraphs towards the close thereof, viz:

"With reference to the grain, it will be in order for you to handle this with whatever grain dealer here with whom you can make the best arrangements, submitting to the insurance company the actual amount of loss, and payment will be made accordingly.

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