Camilla Feed Mills v. St. Paul Fire & Marine Ins. Co.

• Decision Date: 18 November 1949
• Docket Number: No. 12903.,12903.
• Citation: 177 F.2d 746,13 ALR 2d 705
• Parties: CAMILLA FEED MILLS, Inc. v. ST. PAUL FIRE & MARINE INS. CO. OF ST. PAUL, MINN.
• Court: U.S. Court of Appeals — Fifth Circuit

13 ALR 2d 705, 177 F.2d 746 (1949)

CAMILLA FEED MILLS, Inc. v. ST. PAUL FIRE & MARINE INS. CO. OF ST. PAUL, MINN.

No. 12903.

United States Court of Appeals Fifth Circuit.

November 18, 1949.

Leonard Farkas, Walter H. Burt, Albany, Ga., for appellant.

H. H. Perry, Jr., Menard B. Peacock, Asa D. Kelley, Jr., Albany, Ga., for appellee.

Before HOLMES, WALLER, and SIBLEY, Circuit Judges.

HOLMES, Circuit Judges.

This action was brought by appellant against the appellee to recover for a fire loss upon a provisional policy of insurance issued by the appellee. By agreement of the parties, the case was submitted to the district judge, without a jury, on an agreed statement of facts. He rendered a judgment in favor of the Insurance Company, and it is from this judgment that the Camilla Feed Mills, Inc., appeals to this court.

The judge based his findings of fact upon the admissions contained in the stipulations and pleadings, since there were no contested issues of fact. The following facts are those that were agreed upon by the parties: On February 5, 1948, the appellee issued a fire insurance policy, known as a reporting-form policy, which in the present case covered a fluctuating inventory of grain and other like commodities dealt in by the appellant in the operation of his feed-mill business. One of the conditions of the policy was that the insured should report within thirty days after the end of each month the amount of his inventory for the preceding month. If no such inventory was reported, then the last reported inventory of the prior month was to be accepted as that of the month not reported. The purpose of having these inventories reported each month was to have monthly reports on which to base the premium for this policy. An average of all the monthly reported inventories was taken at the end of the year, and the premium for the past year's insurance was based on this average. On March 27, 1948, the appellant reported that the total actual value of its inventory on hand as of February 28, 1948, was $3000. On May 7, 1948, the appellant reported the value of its inventory as of March 31, 1948, was $3000. On the same day, May 7, 1948, appellant likewise reported that the value of its inventory as of April 30, 1948, was $3000. On June 10, 1948, without any additional reports having been made, the property was destroyed by fire. After the fire, an inventory of the books revealed that the appellant's inventory as of April 30, 1948, amounted to $9529.50 instead of $3000 as reported. At the time of the fire, the property destroyed was found to be worth $10,091.49. On June 24, 1948, which was after the fire, the appellant reported to the appellee that its inventory at the time of the fire was $10,099.23. There was no other insurance on appellant's property. The appellant had complied with all the terms of the policy in question, and had paid the premium of $462.04.

The dispute between the parties revolves around an interpretation of this type of policy. The primary question presented to this court is whether the appellant could, after the fire, amend, change, or reform its last report filed prior to the fire when such report did not correctly reflect its inventory as of that date, and substitute for the figures reported the correct amount of the inventory. The court below concluded that no sufficient cause was shown to authorize the reformation sought by appellant, and that the report dated May 7, 1948, showing the inventory value as of April 30, 1948, was conclusive and final. It further concluded that, under the provisions of the policy, the apellee was liable to the appellant for only the proportion of the loss sustained that the amount of inventory shown in the last report filed prior to the fire bore to the actual inventory on hand at that time.

The policy involved in this case was intended to offer to the owners of fluctuating businesses the opportunity of full insurance coverage while at the same time exacting from the insured only the amount of premiums figured on the average monthly amount of reported inventory. Thus the owner of a stock of goods that would fluctuate from $1000 one month to $9000 the next month could insure his property under this policy and pay a premium on the monthly average of his reported inventory, and be protected. He would not have to take out specific insurance on the stated amount of $9000 to protect his maximum or $1000 to protect his minimum. The one big obligation placed on the insured under such a policy was that he report to the company, not later than thirty days after the last day of each month, the exact value of such property covered under the policy, its exact location, and all other specific insurance in force on the same.

The premium collected on the policy at the time it was issued represented three-fourths of the total premium of the policy, figured on the limit of its liability, which limit in this case was $9000. After the final premium was calculated from the average of the monthly reported values of inventory provided for in the policy, the insured was either given a refund if it had paid too much, or asked to pay more if it had paid too little, on the original payment of three-fourths of the premium of the limit of the liability. From such a method of computing the premium, it can easily be recognized that the insured, in order to save premiums, might not correctly report the true value of his inventory. During the term of a policy, an insured could mistakenly underestimate the amount of his inventory and, if there were no loss, pay a premium based on such under-estimated amounts; and if, during the term of the policy, a loss occurred, he could simply ask the court to correct the erroneous estimate that had been made. In this way, according to appellant's contentions, an insured could easily escape the payment of the correct amount of premiums where there was no loss; and, in the event of a loss, he could collect the full amount of his policy by offering to pay an additional amount of premiums. In order to offset this advantage to the insured, the policy contains a provision to the effect that the liability of the insurer shall not exceed that portion of any loss sustained which the last reported value, filed prior to loss, bears to the actual value of the inventory on the date for which the report was made. The following material parts of the policy clearly indicate that the appellant must be bound by his last inventory report of $3000, which was filed prior to the fire:

"8. Value Reporting Clause. It is a condition of this policy that the Insured shall report to this Company not later than thirty (30) days after the last day of each month, the exact location of all property covered hereunder, the total value of such property at each location and all specific insurance in force at each of such locations on the last day of each month. At the time of any loss, if the Insured has failed to file with this Company reports of values as above required, this policy, subject otherwise to all its terms and conditions, shall cover only at the locations and for not more than the amounts included in the last report of values, filed prior to the loss.

"9. Full Reporting Clause. Liability under this policy shall not in any case exceed that proportion of any loss hereunder, which the last reported value filed prior to the loss, less the amount of specific insurance reported, if any, at the location where any loss occurs bears to the actual value...