Connecticut Fire Ins. Co. v. Union Mercantile Co.

• Decision Date: 18 December 1914
• Citation: 161 Ky. 718,171 S.W. 407
• Parties: CONNECTICUT FIRE INS. CO. v. UNION MERCANTILE CO. [d1] INSURANCE CO. OF NORTH AMERICA v. UNION MERCANTILE CO.
• Court: Kentucky Court of Appeals

171 S.W. 407

161 Ky. 718

CONNECTICUT FIRE INS. CO. v. UNION MERCANTILE CO. ^[d1]

INSURANCE CO. OF NORTH AMERICA v. UNION MERCANTILE CO. ^[d1]

Court of Appeals of Kentucky.

December 18, 1914

Appeal from Circuit Court, Marshall County.

Actions by the Union Mercantile Company against the Connecticut Fire Insurance Company and the Insurance Company of North America. From a judgment for plaintiff, defendants appeal. Reversed and remanded.

Flexner & Gordon and Frank M. Drake, all of Louisville, and Oliver &amp Oliver, of Paducah, for appellants.

John G Lovett, of Benton, and Wheeler & Hughes, of Paducah, for appellee.

TURNER J.

These were originally two common-law actions instituted by appellee on separate policies against the two appellants.

In August, 1911, while the policies were each in force, nearly all the property covered by them was destroyed by fire. The policy of the Connecticut Fire Insurance Company was dated the 7th of February, 1911, and insured appellee's storehouse for $1,000, and its stock of goods carried therein for $4,000 against loss by fire. The policy of the Insurance Company of North America was dated the 1st of June, 1911, and insured appellee's storehouse for $800, the fixtures therein for $200, and the stock of merchandise for $4,000 against such loss. The first-named policy had the three-quarter clause in it as to the personal property, and the second named policy did not.

The cases were transferred to the equity docket in the lower court, consolidated, and referred to a commissioner for the purpose of ascertaining the value of the property destroyed at the time of the fire.

The business of appellee was inaugurated and it begun operations in August, 1907, at Gilbertsville in Marshall county; for several months it was conducted as a partnership, but was in a short time incorporated under the corporate name now shown.

The commissioner in his final or supplemental report found the value of the storehouse to be $1,600 at the time of the fire and the value of the goods destroyed to be $8,002.53. All exceptions to the report, as amended, were overruled and judgment entered against the two defendants under the terms of the policies.

The first question we are confronted with is one of pleading. The plaintiff in his petition set up the policy sued on, set forth the property embraced therein, and alleged same was destroyed by fire, but did not allege in terms that the property so destroyed was of any value whatsoever. Each of the defendants, however, in its answer alleged that at the time of the fire the value of the storehouse did not exceed $1,000 and the value of the stock did not exceed $2,409.95, which allegations were duly denied by reply, with an affirmative allegation therein of the value as claimed by the plaintiff.

It is urged for appellant that under this state of the pleading there should have been no judgment for the plaintiff in excess of $2,409.95, for the merchandise destroyed, the value admitted in the answer. Undoubtedly the petition was fatally defective in failing to allege that the goods destroyed, as well as the house, had some value, and what that value was, because if they had no value it suffered no loss, and there could consequently have been no recovery. But the issues as to the value of the goods destroyed and the value of the house were fully contested by the parties in the lower court and thoroughly tried out by that court and its commissioner, voluminous evidence was taken on these precise issues, the books of the corporation were thoroughly overhauled and considered by the commissioner with the purpose of ascertaining the values, and exceptions to the commissioner's report were filed and tried out before the court. In other words the question was determined by the lower court as to the value of the goods and the building destroyed just as fully as if the question had been accurately made in the pleadings. Under these circumstances it would be more than useless to send this cause back to have issues perfected which had already been so fully considered and tried out. It is, in fact, an ideal case for the application of the doctrine of intendment after the verdict.

The rule laid down in Connecticut Fire Insurance Co. v. Moore, 154 Ky. 18, 156 S.W. 857, Ann.Cas. 1914B, 1106, in no sense conflicts with what we have said, on the contrary the rule stated therein harmonizes with our view. The rule stated therein was this:

"While we have been very liberal in applying the rule that a verdict will cure a defect in the pleadings, we have never gone to the extent of holding that where the petition fails to state a cause of action or some fact essential to the cause of action, and there is neither an admission nor proof of this fact, nor a submission of the question to the jury, such defect in the petition will be cured by the verdict."

In that case there was no evidence of value heard or permitted to be heard by the jury, there was no submission of the question of value to the jury, and consequently the jury could not have passed upon that value; while in this case voluminous evidence was taken and heard, and both the commissioner and the court passed upon that evidence and fixed the value.

But it is asserted for appellants that the evidence as to the value taken by them was not for the purpose of fixing the values, but was taken only for the purpose of showing fraud upon the part of the officers of the corporation in its alleged exorbitant and fraudulent claims against the companies. But, whatever may have been the purpose in submitting this evidence, the record discloses beyond question that both the commissioner and the lower court considered it in fixing the value of the property destroyed.

There is a provision in each of the policies that:

"This entire policy shall be void if the insured has concealed or misrepresented in writing or otherwise any material fact or circumstance concerning this insurance or the subject thereof; * * * or in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject-matter thereof, whether before or after the loss."

It is insisted for appellant that the officers, directors, and owners of the assured corporation have been guilty of such fraud and false swearing in the proofs of loss submitted by them, and on their examination under oath, as will avoid the policies under the terms of the provision quoted. It is apparent from the proofs of loss and their examination under oath that these officers and directors gave exaggerated statements, especially as to the value of the house destroyed, and did make some mistakes as to merchandise alleged to have been bought and placed in stock, but throughout all of these statements they consistently adhered to the statement, in a general way, that the value of the merchandise destroyed was approximately $10,000. It appears that their statements of the value of the house was based upon an estimate of what it would cost to replace it, which might very well have been a mistaken basis; and it further appears, that while they made some mistakes in the details as to the amount of merchandise on hand at the time of the fire, that the report of the commissioner in this case, which was approved by the lower court, was not far below the general estimate placed by them on its value, not taking into account the ten per cent. deduction for depreciation in value. We do not believe that the record shows such deliberate misstatements of facts and values as would justify an avoidance of the policies within the meaning of the provision quoted. The general rule on this subject is thus stated by this court in the case of Western Assur. Co. v. Ray, 105 Ky. 523, 49 S.W. 326, 20 Ky. Law Rep. 1360, in a quotation from Richards on Insurance:

"As a general rule, false swearing in a proof of loss, to vitiate the policy, must be intentionally false, whether by fraudulent overvaluation of the goods destroyed or a statement of items which really have no existence. An innocent mistake, or a mistaken, though exaggerated, estimate of value, is not sufficient to void the policy. An overvaluation, in order to work a forfeiture must be so plain that it cannot be accounted for upon the principle that every man is naturally prone to put a favorable estimate on the value of his property."

The commissioner found, in substance, that, while there was some exaggeration in the valuations, that there was no fraudulent purpose, and this finding was approved by the lower court, and we see no reason to disturb it.

It was provided in the written application for insurance, signed by the appellee, that no other insurance would be permitted on the property covered by the policy of the Connecticut Company...