DeWitt v. American Family Mut. Ins. Co.

• Citation: 667 S.W.2d 700
• Decision Date: 20 March 1984
• Docket Number: No. 65140,65140
• Parties: Betty M. DeWITT, Respondent, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellant.
• Court: United States State Supreme Court of Missouri

Page 700

667 S.W.2d 700

Betty M. DeWITT, Respondent, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellant.

No. 65140.

Supreme Court of Missouri,

En Banc.

March 20, 1984.

William J. Gotfredson, Patrick M. Reidy, Theresa Shean Hall, Kansas City, for appellant.

Steven K. Wickersham, William R. Merryman, Kansas City, for respondent.

BILLINGS, Judge.

Suit on a fire insurance policy. The jury awarded plaintiff Betty DeWitt $31,082.00 on the policy, $2,443.54 interest and $5,600.00 attorney fees. The court of appeals affirmed in part, reversed in part and remanded for further proceedings. We ordered the case transferred because of general interest and importance. The defendant-insurer alleges numerous points of error relating to three general issues at trial (1) plaintiff's insurable interest in the house destroyed; (2) the amount of personal property destroyed by the explosion and fire; and (3) plaintiff's claim for vexatious refusal to pay under the policy. We review the case as an original appeal [Mo. Const. art. V, § 10] and affirm.

The sequence of events giving rise to plaintiff's judgment are summarized as follows: (1) In 1972 plaintiff and her husband Joseph C. DeWitt bought a house and lot at 1301 Eastwood Road in Harrisonville, Missouri, taking title in the plaintiff's name alone. (2) In September of 1977 the defendant insurer issued a fire insurance policy on the property naming plaintiff as the insured. (3) On March 5, 1979 plaintiff and her husband were divorced. The marriage dissolution was uncontested and the division of marital assets was in accordance with a property settlement agreement. Under the agreement and dissolution decree, the house and lot were set over to Joseph DeWitt as his sole and separate property. The agreement provided that Betty DeWitt would execute a quitclaim deed to Joseph DeWitt subject to the existing mortgages which he would assume. Custody of the only child, Joseph C. DeWitt, Jr., was awarded to the father. (4) In April of 1979 plaintiff moved out of the house and her former spouse continued to occupy the property with his son. (5) Joseph C. DeWitt died on January 29, 1980. (6) The plaintiff reoccupied the Harrisonville property and lived there with her son. The plaintiff invested considerable money and labor making improvements on the property. (7) On May 1, 1980 the defendant insurance company issued a new policy to plaintiff insuring the dwelling for $38,500.00, personal property in the amount of $19,300.00 and living expense coverage at $3,900.00. Plaintiff subsequently paid the full premium. (8) On August 10, 1980 the insured premises were totally destroyed by an explosion and fire. (9) Plaintiff gave notice of the casualty and filed a proof of claim with the insurer who advanced her $1,000.00 on the contents coverage of her policy. (10) At defendant's request, on October 30, 1980, plaintiff submitted to an examination under oath to supplement the proof of loss she had filed. During this examination, defendant first learned of the insured's divorce and the facts relative to her ownership of the property pursuant to her property settlement agreement and divorce decree. (11) At the time of the loss, plaintiff was a co-maker with her former husband on three mortgage notes. The first and second mortgage holders, United Missouri Bank and Home Savings & Loan were named as loss payees under the policy. As of the date of loss, the balance and accrued interest were respectively, $5,081.55 and $18,736.04. A third mortgage was held by a party named Hollenbeck for the amount of $2,069.76. (12) Defendant formally denied plaintiff's claim on December 22, 1980. (13) Betty DeWitt filed this action in February, 1981, alleging recovery under the policy for the full insured amounts and damages under § 375.420, RSMo 1978, for vexatious refusal to pay. (14) On March 3, 1981, the defendant made payment to United Missouri Bank as mortgagee in the amount of $5,081.55. (15) On April 30, 1981, the insurer made payment to Home Savings & Loan as mortgagee in the amount of $18,736.04.

As a prerequisite to the enforcement of an insurance contract, public policy demands that the insured have an insurable interest in property both at the time of making the contract and at the time of loss. Prewitt v. Continental Insurance Co., 538 S.W.2d 902, 905 (Mo.App.1976); Galati v. New Amsterdam Casualty Co., 381 S.W.2d 5, 9 (Mo.App.1964); Estes v. Great American Insurance Co., 112 S.W.2d 153, 156 (Mo.App.1938). The requirement of insurable interest is necessary to prevent wagering under the guise of insurance and temptation to destroy the insured property. See B. Harnett & J. Thornton, Insurable Interest In Property: A Socio-Economic Reevaluation of a Legal Concept, 48 Colum.L.Rev. 1162, 1178-83 (1942).

Defendant first contends plaintiff did not have an insurable interest in the insured property as of the date of loss. Central to this position is its claim that plaintiff's interest in the property materially changed or ceased to exist between the date the contract was first entered and the date of loss.

We find substantial evidence in the record to support a finding that the contract underlying the present lawsuit was entered into between the parties on May 1, 1980. While it is evident that the parties to the instant action first entered into an insurance contract in 1977, we find that the loss in question did not occur under this original policy. The renewal of an insurance policy is a separate and distinct contract for the period of time covered by the renewal unless it is apparent that the parties merely intended the renewal to constitute a continuation of the old policy. See 44 C.J.S. Insurance § 283-288 (1945); Krey Packing Co. v. Employers' Liability Assur. Corp., 127 S.W.2d 780, 782 (Mo.App.1939) (renewal of fidelity policy or bond). The policy issued on May 1, 1980, substantially extended the plaintiff's coverage beyond that of the 1977 policy. The face of the renewal policy stated that it was effective "from 5-1-80". From the foregoing we conclude that the parties entered into the contract on May 1, 1980 and the plaintiff's interest in the property was not materially changed between the date of inception of the contract to insure and the date of loss. We next consider whether this interest is sufficient to enforce the contract.

A person has an insurable interest in property if she will derive pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the event insured against. 44 C.J.S. Insurance § 175 (1945). In American Central Insurance Co. v. Kirby, 294 S.W.2d 556 (Mo.App.1956), the court recognized that an insurable interest "may be a special interest entirely disconnected from any title, lien, or possession." Id. at 561. The issue is not what is the insured's title to the property, but rather, would she suffer pecuniary damage by its loss. Thus, an insurable interest "may be derived from possession, enjoyment, or profits of the property, security or lien resting upon it, or it may be other certain benefits growing out of or dependent upon it." Id.

Plaintiff claims an insurable interest based upon her status as sole owner of record title, her personal liability as mortgagor on three notes secured by the property, her expenditure of materials and labor to make improvements on the property and her possession and occupancy of the house as a dwelling place. ¹

Defendant maintains that the decree of dissolution of marriage of March 5, 1979 worked a complete divestiture of any interests the plaintiff had in the insured dwelling without any affirmative act to be undertaken by the plaintiff with respect to the conveyance of her interest therein.

The court approved decree of dissolution of marriage found that plaintiff and her husband, Joseph C. DeWitt, had entered into a written property settlement agreement, providing, inter alia:

3. Wife agrees to execute a Quit-Claim to real property described as:

[legal description]

and the Husband agrees to assume all liability on the following notes and deeds of trust that encumber the property:

Home Savings Association in the original amount of $20,125.00 with a present balance of approximately $19,300.00 with payments of $228.00 per month;

Cass County Bank in the original amount of $13,632.00;

Mildred and Herschell Hollenbeck, a judgment entered by the Cass County Magistrate Court in the approximate amount of $1,700.00;

and to hold Wife harmless therefrom:

The divorce decree ordered in pertinent part:

The parties shall perform the terms of their Property Settlement Agreement as follows:

II. Respondent [Joseph C. DeWitt] shall have as his sole and separate property all of the following:

b. House located at 1301 East Wood Road, Harrisonville, Missouri, subject to existing liens and encumbrances.

It is clear that if the proceedings are properly conducted, and the language of the decree is sufficient, the court in a marriage dissolution may convey title to real property without further action by the parties. ² However, the court also has the power to order spouses to execute deeds of conveyance. If a party does not comply the court may enforce its decree by issuing a supplemental order decreeing the transfer of title or proceed by contempt. Section 452.325, RSMo 1978. See R. Fowler & J. Krauskopf, Property Provisions, 29 J.Mo.Bar 508, 513-15 (1973).

We find merit in the plaintiff's claim that the decree of divorce was insufficient in its language to effectuate a conveyance without an affirmative act by her to convey her interest therein. The decree merely orders the parties to do certain acts and does not automatically convey the property by its plain language. A supplemental order would be a prerequisite to effect an exchange of title. However, the foregoing does not imply that the plaintiff's interest in the property remained unchanged. The...