Coburn v. Fireman's Fund Ins. Co.

• Decision Date: 19 December 1963
• Docket Number: No. 9376,9376
• Citation: 86 Idaho 415,387 P.2d 598
• Parties: Ralph J. COBURN and Bertha Lee Coburn, husband and wife, plaintiffs-Respondents, v. FIREMAN'S FUND INSURANCE COMPANY, a foreign corporation, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 598

387 P.2d 598

86 Idaho 415

Ralph J. COBURN and Bertha Lee Coburn, husband and wife, plaintiffs-Respondents, v.FIREMAN'S FUND INSURANCE COMPANY, a foreign corporation, Defendant-Appellant.

No. 9376.

Supreme Court of Idaho.

Dec. 19, 1963.

Holden, Holden & Kidwell, Idaho Falls, for appellant.

Black & Black, Pocatello, for respondents.

SMITH, Justice.

Appellant(defendant) has appealed from a judgment of $10,908 rendered in favor of respondents(plaintiffs) by the district court of Butte County.The judgment was the result of an action brought by respondents for recovery of the value of their three-fourths interest in a stored crop of potatoes destroyed by fire, allegedly insured by a fire insurance policy issued by appellant.The potatoes were grown by respondents as tenants of O. T. and Ruby I. Jones, who retained the remaining one-fourth interest in the crop.

Appellant, by answer and related instruments, admitted its issuance of the fire insurance policy, but resisted respondents' claim on grounds that they were not named as insureds in the policy, and could not claim benefits arising thereunder.We shall briefly relate the facts.

The harvested crop consisted of approximately 7,000 sacks of potatoes valued at $15,000 which were stored in lessor O. T. Jones's potato cellar near Arco.November 2, 1960, Jones applied to H. Michael Porter, in his capacity as appellant's insurance agent in Arco (and who also was executive vice-president of Butte County Bank), for a $15,000 policy of fire insurance covering the stored potatoes.Mr. Porter, in his agency capacity, thereupon issued appellant's fire insurance policy in the name of O. T. Jones for $15,000 insuring the entire stock of stored potatoes against loss by fire.Jones paid the policy premium, respondents agreeing to reimburse Jones three-fourths of such amount.

Loss of the stored potatoes by fire occurred December 31, 1960.On that date Jones submitted a statement of loss showing $14,544.00 as the inventory value of the potatoes.Jones showed 'insured's interest'(one-fourth) to be the value of $3,636.00 which appellant paid and obtained his written release.

Thereafter, respondents submitted a sworn written statement of proof of loss, dated March 1, 1961, to appellant.Therein respondents recited that Jones owned an undivided one-fourth interest in the destroyed potatoes; and that they, respondents, owned the remaining undivided three-fourths interest of the value of $10,908, less approximately $1,000 which respondents owed to Jones, which he had advanced for expenses attendant to growing and harvesting the crop.Respondents, in their claim, alleged that they were bailors and beneficiaries of such three-fourths interest in the stock of potatoes, and which had been stored in the cellar of O. T. Jones, as bailee and trustee thereof.They referred to and submitted a copy of the written lease under which Jones leased to respondents the land upon which the potatoes were grown, and alleged that appellant's agent, H. Michael Porter, was fully informed of respondents' interest as owners of their portion of the potatoes covered by the insurance policy; that Jones, as bailee, had exclusive possession of the cellar and the stock of potatoes stored therein, including the three-fourths interest owned by respondents, and that the debt which respondents owed to Jones was to be paid out of respondents' interest in the potatoes when sold.

Appellant rejected respondents' claim, whereupon respondents commenced this action.

Respondents in their complaint alleged (1) that on November 2, 1960, Jones made application to H. Michael Porter, appellant's authorized insurance agent, for a policy of insurance on behalf of himself and respondents, insuring the stored crop of potatoes against fire loss; (2) that appellant issued the policy (in the name of O. T. Jones) covering the stock of potatoes in the amount of $15,000; (3) that appellant's agent well knew of the respective interests of respondents, on the one hand, and of O. T. and Ruby I. Jones, on the other hand, and well knew that the Jones's interest was but one-fourth of the total stored crop insured at $15,000; that appellant accepted premiums on the basis of insurance covering the combined interests of respondents and Jones, but that the agent 'carelessly and negligently, or wilfully and fraudulently' failed or neglected to include respondents as insureds under the policy.Additionally respondents alleged (4) that the Joneses were bailees in sole control of the stored potato crop, and that because of that existent bailor-bailee relationship and because of the debt which respondent owed them, that the Joneses had 'a substantial insurable interest in the entire stock of potatoes' which would enable them to insure the entire interests,--both their own and that of respondents.

The cause was tried and submitted to the trial court sitting without a jury.The court found that O. T. Jones was not a bailee, nor in sole control of the stock of potatoes; also, that appellant's agent, Mr. Porter, had no specific knowledge of respondents' interest in the potatoes.It then concluded:

'That O. T. Jones had such an insurable interest in the stock of potatoes in its entirety as to allow Mr. Jones to insure plaintiffs' [respondents'] interest as well as his own.'

In support of such conclusion the court further concluded that appellant intended to insure the entire stock of potatoes; that full disclosure of the insurable quantity of the potatoes was made to appellant, and that appellant accepted an insurance premium based on the entire stock of potatoes with full knowledge as to what it was insuring; that appellant's liability was not enlarged nor altered by a disclosure of respondents' interest in the potatoes, from that liability which appellant contemplated and assumed at the time of its acceptance of the insurance premium; and that appellant did not tender to O. T. Jones the unearned premium, or the amount of his insurable interest in the entire stock of potatoes, or any sum other than one-fourth of the actual cash value of the stock of potatoes destroyed by fire.

Appellant's assignments of error attack the findings of the trial court to the effect that O. T. Jones purchased the insurance for himself and respondents; aldo, to the effect that the insurance policy covered the interests in the potatoes of both Jones and of respondents, rather than only the interest of Jones, appellant contending that the policy protected only Jones as named insured.

Appellant contends that Jones did not have an insurable interest in the entire stock of potatoes, but only to the extent of his one-fourth interest plus the debt of $1,000 owed to him by respondents.In support of such contention appellant refers to I.C. § 41-1806(3) enacted Sess.Laws '61, ch. 330, § 398, p. 645, reading: 'The measure of an insurable interest in property is the extent to which the insured might be directly damnified by loss, injury, or impairment thereof.'Inasmuch as the legislature adopted such enactment in 1961, after the issuance of the insurance policy and occurrence of the loss involved in this cause in 1960, and since the enactment constitutes substantive law, we cannot accord unto it a retroactive effect.Idaho Const., Art. 11, § 12;Rogers v. Hawley, 19 Idaho 751, 115 P. 687.

Appellant nevertheless argues that the 1961enactment, I.C. § 41-1806(3), is but a declaration of the then existing law to the effect as provided in the enactment, citing Miller v. World Insurance Co., 76 Idaho 355, 283 P.2d 581, and 5 Appleman Ins. Law and Practice, § 3361, p. 497.The Miller case ruled in effect that a court cannot by construction create liability not assumed by the insurer, nor make a new contract for the parties or one different from that plainly intended; nor may it add words to the insurance contract either to create or avoid liability; and Appleman recognizes those basic rules.Implicit in both authorities is the principle that the insurance extends to the liability assumed by the insurer and encompasses the interest of the insured.

3 Couch, Insurance, § 24.13 (2d Ed. Anderson 1960), sets forth a widely accepted definition of an insurable interest, at page 86:

'* * * a person has an insurable interest in property whenever he would profit by or gain some advantage by its continued existence and suffer some loss or disadvantage by its destruction.If he would sustain such loss, it is immaterial whether he has, or has not, any title in, or lien upon, or possession of, the property itself.Any right which may be enforced against the property, and which is so connected with it that its injury or destruction will cause loss, is an insurable interest therein.Any interest in property, legal or equitable, qualified, conditional, contingent, or absolute, or merely the right to use the property, with or without the payment of rent, is sufficient.'

As to the extent of an insurable interest, the same author states:

'The law does not seek to evaluate the extent of the insurable interest.It therefore is immaterial that the interest of the insured is overvalued as long as the actual interest is substantial in relation to the amount of the insurance.'Supra, § 24.2at p. 67.

Generally accepted precepts support the proposition that the insurable interest of O. T. Jones in the stock of potatoes was a substantial one in relation to the amount of the insurance coverage; and not so grossly disproportionate to the face amount of the policy as to render it a wagering device which the courts will not allow on grounds of public policy.Nelson v. New Hampshire Fire Insurance Company, 263 F.2d 586(9th Cir.1959);44 C.J.S.Insurance§ 175(1945).

A portion of the annotation cited by appellant in 68 A.L.R., p. 1344, deals with the extent of recovery by an insured who has only a partial or limited interest in the insured property.In the instant case, however, the...