Cincinnati Ins. Co. v. Palmer

• Decision Date: 24 May 1974
• Docket Number: No. 72--980,72--980
• Citation: 297 So.2d 96
• Parties: The CINCINNATI INSURANCE COMPANY, an Ohio corporation, Appellant, v. Cecil R. PALMER, Appellee.
• Court: Florida District Court of Appeals

Page 96

297 So.2d 96

The CINCINNATI INSURANCE COMPANY, an Ohio corporation, Appellant, v. Cecil R. PALMER, Appellee.

No. 72--980.

District Court of Appeal of Florida, Fourth District.

May 24, 1974.

Rehearings Denied July 24, 1974.

Monroe E. McDonald of Sanders, McEwan, Mims & McDonald, Orlando, for appellant.

Edward M. Stein, Melbourne, for appellee.

OWEN, Chief Judge.

The named insured under a fire insurance policy brought suit against the insurer on the policy seeking recovery in favor of the mortgagee, Small Business Administration (a non-party). Shortly after suit was filed, the insurer paid the face amount of the police to the mortgagee, rendering moot all issues in the suit other than the question of attorney's fees. Ultimately, the plaintiff recovered judgment for attorney's fees and costs, and on this appeal the issues relate to the correctness of such award.

In 1965, a corporation known as Buyer's Mart, Inc. negotiated a loan from the Small Business Administration in the amount of $85,000 to purchase certain improved real property. As security for the loan, the SBA took a mortgage on the property, together with the personal guarantee of appellee-Palmer who wass president and principal stockholder in the corporation. In 1969, Palmer sold all of his stock in the corporation. In February, 1971, when Palmer learned that the building was empty and that there was no fire insurance on it, he purchased a $30,000 fire insurance policy from appellant, naming himself and the corporation as insureds, with the customary loss payable endorsement which provided that any loss under the policy would be payable to the corporation, Palmer and SBA 'as their interest may appear'.

On June 27, 1971, the building on the property was totally destroyed by fire. Appellant was immediately notified and an independent insurance adjuster retained by it made a prompt investigation. By the middle of August, the adjuster was apparently satisfied that the loss was one which was covered under the policy, that there was no other applicable insurance coverage available, and that the balance due the SBA on the loan and mortgage was $56,000. It was also discovered that the corporation, Buyer's Mart, Inc., had been dissolved several years before, leaving uncertain the question as to title to the property and also the question of who, on behalf of the corporation, would be authorized to endorse the appellant's draft which it wanted to issue payable jointly to Palmer, the corporation, and the SBA. As a result of these problems, another three and one-half months passed without payment being made to anyone despite requests by both Palmer and the SBA that appellant make payment solely to SBA since it was evident that the latter's interest was substantially in excess of the $30,000 amount of the policy.

In the early part of December, 1971, the instant suit was filed by Mr. Palmer for the benefit of SBA (which was not made a party). Some three months thereafter, appellant paid to SBA the full amount of the policy, but declined to pay to Mr. Palmer or his attorney any attorney's fee in excess of the $500.00 fee which Mr. Palmer had paid his attorney as a retainer. In due course, the cause was tried by the court on the issue of appellee's entitlement to attorney's fees, and on the basis of expert witness testimony the court entered judgment for appellee-Palmer in the sum of $7,125,00 as his attorney's fee for the prosecution of this action.

Appellant first contends that this action was champertous, because Palmer did not have an insurable interest. Subsection (2) of F.S. Section 627.405, F.S.A. defines 'insurable interest' to mean any actual, lawful and substantial economic interest in the safety or preservation of the subject of the property free from loss, destruction, or pecuniary damage or impairment; subsection (3) provides that the measure of an insurable interest in property is the extent to which the insured might be damnified by loss, injury, or impairment thereof. It is clear that appellee-Palmer, being liable on his personal guarantee of the corporate obligation to SBA, had a direct pecuniary interest in seeing that the primary security for the obligation remained free from loss, destruction, or damage. Since the risk of his having to make good on his personal guarantee would be increased in direct proportion to the extent that the primary security might sustain loss, he had an insurable interest to the full extent of the policy proceeds. See, Schlehuber v. Norfolk & Dedham Mutual Fire Insurance Company, Fla.App.1973, 281 So.2d 373; Aetna Insurance Company v. King, Fla.App.1972, 265 So.2d 716; Rutherford v. Pearl Assurance Company, Fla.App.1964, 164 So.2d 213; Springfield Fire and Marine Insurance Company v. Boswell, Fla.App.1964, 167 So.2d 780; American Central Ins. Co. of St. Louis, Mo., v. Whitlock, 1936, 122 Fla. 363, 165 So. 380.

Appellant next contends that there was no basis for rendering any kind of judgment against it because it had never wrongfully refused to pay the policy proceeds. The policy required payment sixty days after proof of loss; nonetheless, the evidence clearly established that by the middle of August, 1971, the insurer had admitted its liability for the loss, at least as to the interest of the mortgagee. As such, this constituted a waiver of the requirement of a formal proof of loss. American Bankers Insurance Company of Florida v. Terry, Fla.App.1973, 277 So.2d 563; English and American Insurance Company v. Swain Groves, Inc., Fla.App.1969, 218 So.2d 453; Bear v. New Jersey Ins. Co., 1939, 138 Fla. 298, 189 So. 252. The fact that the insurer's refusal to pay the amount owed by it under the terms of the policy was in good faith and on reasonable grounds does not relieve the insurer from liability for payment of attorney's fees where it is subsequently found liable on the policy. Salter v. National Indemnity Co., Fla.App.1964, 160 So.2d 147; Pacific Mut. Life Ins. Co. of California v. McCaskill, 1936, 126 Fla. 82, 170 So. 579.

Appellant next...