Chavis v. State Farm Fire and Cas. Co.

• Decision Date: 04 February 1986
• Docket Number: No. 8513SC809,8513SC809
• Citation: 79 N.C.App. 213,338 S.E.2d 787
• Parties: Cecil K. CHAVIS, and wife Vicky L. Chavis v. STATE FARM FIRE AND CASUALTY COMPANY.
• Court: North Carolina Court of Appeals

Page 787

338 S.E.2d 787

79 N.C.App. 213

Cecil K. CHAVIS, and wife Vicky L. Chavis v. STATE FARM FIRE AND CASUALTY COMPANY.

No. 8513SC809.

Court of Appeals of North Carolina.

Feb. 4, 1986.

T. Craig Wright and Burns, Pope, Sessoms and Williamson by William J. Williamson, Whiteville, for plaintiffs, appellants.

Anderson, Broadfoot, Anderson, Johnson & Anderson by Henry L. Anderson, Jr., Fayetteville, for defendant, appellee.

HEDRICK, Chief Judge.

The sole question presented on appeal is whether the trial court erred in allowing defendant's motion for directed verdict at the close of the evidence. Plaintiffs contend that the issues as to whether they complied with the provision of the policy requiring the insured to produce books of account and other documents would be subject to a test of reasonableness, which would necessarily have to be determined by the jury. We disagree.

Plaintiffs' fire insurance policy is the "Standard Fire Insurance Policy for North Carolina" as provided by G.S. 58-176. The provisions of this policy, including the provisions that compliance with its terms is a condition precedent before the insured can establish a claim for relief, have been held by the Supreme Court to be valid and just to the insured and the insurer. Zibelin v. Insurance Co., 229 N.C. 567, 50 S.E.2d 290 (1948). Both the insured and the insurer are presumed to know the terms, provisions, and conditions of the policy, and are bound by them. Midkiff v. Insurance Company, 197 N.C. 139, 147 S.E. 812 (1929).

Neither plaintiffs nor defendant cite any authority from this jurisdiction dealing specifically with the provision requiring the insured to produce books of account and other records at the request of the insurance company. However, courts of other jurisdictions have held that similar provisions are valid and that the unexcused refusal to produce the required documents precludes recovery on the policy. Pogo Holding Corp. v. New York Property Ins., 73 A.D.2d 605, 422 N.Y.S.2d 123 (1979); Southern Guaranty Ins. Co. v. Dean, 252 Miss. 69, 172 So.2d 553 (1965); Beasley v. Pacific Indemnity Co., 200 Cal.App.2d 207, 19 Cal.Rptr. 299 (1962); Georgian House of Interiors v. Glens Falls Ins. Co., 21 Wash.2d 470, 151 P.2d 598 (1944). The object of provisions requiring the insured to submit to an examination under oath is to enable the insurance company to obtain information to determine the extent of its obligation and to protect itself from false claims, Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884), and the provision requiring the production of documents is designed to serve the same purpose. See Southern Guaranty Ins. Co. v. Dean, 252 Miss. 69, 172 So.2d 553 (1965).

While these provisions do not give the insurer license to harass plaintiff with aimless questions and demands for documents, questions asked and documents sought which relate to the validity of the insured's claim are material and relevant. Happy Hank Co. v. Insurance Co., 286 A.D. 505, 145 N.Y.S.2d 206 (1955), modified, 1 N.Y.2d 534, 136 N.E.2d 842, 154 N.Y.S.2d 870 (1956). The financial condition of the insured is relevant to the arson defense in a suit upon a fire insurance policy. Payne v. Nationwide Mutual Ins. Co., 456 So.2d 34 (Ala.1984); Kisting v. Westchester Fire Insurance Company, 416 F.2d 967 (7th Cir.1969).

Compliance with provisions of an insurance policy requiring the insured to produce documents "as often as may be reasonably required" at a "reasonable time and place" is a condition precedent to bringing suit where the insurer notifies the insured of the time and place for production. Taubman v. Allied Fire Ins. Co. of Utica, 160 F.2d 157 (4th Cir.1947). The "reasonable time and place" clause ordinarily means that a demand must be made within a reasonable period of time and that the location must be in the locality of the insured property. Butler Candy Co. v. Springfield Fire and Marine Ins. Co., 296 Pa. 552, 146 A. 135 (1929).

In Tire Co. v. Morefield, 35 N.C.App. 385, 241 S.E.2d 353 (1978), this Court said that "[a] condition precedent is a fact or event, occurring subsequently to the making of a valid contract, that must exist or occur before there is a right to immediate performance, before there is a breach of contract duty, before the usual judicial remedies are available." Id. at 387, 241 S.E.2d at 355, citing Cargill, Inc. v. Credit Assoc., Inc., 26 N.C.App. 720, 722-23, 217 S.E.2d 105, 107 (1975). The burden is on plaintiff to offer evidence in support of all essential elements to establish his claim. Tire Co. v. Morefield, 35 N.C.App. 385, 241 S.E.2d 353 (1978). The occurrence of a condition precedent is an essential element of plaintiff's case, and it is therefore incumbent upon plaintiff to offer proof of compliance with the terms of the contract. Id.

Plaintiffs, in the present case, have offered no evidence tending to show that they have complied with the terms of the insurance contract by producing the information requested. In fact, the evidence discloses that plaintiffs had steadfastly refused to comply with defendant's requests to produce copies of their bank and loan accounts. Pursuant to a letter written to plaintiffs' attorney on 25 November 1981, plaintiffs appeared at the courthouse in Elizabethtown, North Carolina for an examination under oath. Mr. Chavis testified at trial that although he had been specifically requested to produce copies of his bank accounts and F.H.A. loan accounts, he did not produce these documents at the examination. When the attorney for defendant, upon learning of their failure to supply the information requested, asked plaintiffs to execute an authorization permitting a representative of defendant to examine their records at banks and other lending institutions, they refused. Mr. Chavis testified that he refused to sign the release on the advice of his attorney and because he felt that his business and financial records were "none of their business."

Plaintiffs do not contend that the time or place for the production of these documents was unreasonable. Rather, they argue that there was an issue for the jury as to whether defendant could reasonably require them to produce these documents. Under the principles discussed above, information about plaintiffs' financial condition was clearly relevant to defendant's arson defense and defendant therefore had the right to inspect the requested records.

Thus, all the evidence at trial discloses plaintiffs' failure to comply with the terms of the contract and particularly with the condition precedent by failing to provide the requested financial information. The evidence discloses an insurmountable bar to plaintiffs' claim, and the trial court properly allowed defendant's motion for a directed verdict.

Affirmed.

JOHNSON, J., concurs.

PHILLIPS, J., dissents.

PHILLIPS, Judge, dissenting.

An insurance policy being but a special kind of contract, it is fundamental, of course, that an insured must comply with the terms of the policy before he can recover under it, and the validity of this rule is not questioned by plaintiffs' appeal. What is questioned is whether, as a matter of law, plaintiffs' policy required them to permit defendant to examine the records of every banking and loan transaction that either of them had ever had. This question is not really addressed by the majority opinion, which is based on the tacit...