Eden Corporation v. Utica Mutual Insurance Company

Decision Date27 October 1972
Docket NumberCiv. A. No. 71-C-61-R.
Citation350 F. Supp. 637
CourtU.S. District Court — Western District of Virginia
PartiesEDEN CORPORATION, Plaintiff, v. UTICA MUTUAL INSURANCE COMPANY et al., Defendants and Third Party Plaintiffs, v. GENERAL ELECTRIC COMPANY and Old Dominion Electric, Inc., Third Party Defendants.

B. K. Cruey, Bates, Cruey & Lee, Roanoke, Va., and Thomas Keister Greer, Rocky Mount, Va., for plaintiff.

Jack B. Coulter, Dodson, Pence, Coulter, Viar & Young, Roanoke, Va., for Utica Mutual Ins. Co.

William B. Poff, Woods, Rogers, Muse, Walker & Thornton, Roanoke, Va., for Northwestern Mutual Ins. Co.

Carroll D. Rea, Hazlegrove, Carr, Dickinson, Smith & Rea, Roanoke, Va., for General Electric Co.

Richard C. Rakes, Gentry, Locke, Rakes & Moore, Roanoke, Va., and Harvey E. White, Jr., White, Reynolds, Smith & Winters, Norfolk, Va., for Old Dominion Electric, Inc.

OPINION and JUDGMENT

DALTON, District Judge.

This action involves a claim for damages on a fire loss suffered by plaintiff on April 28, 1970, and was originally filed in the Circuit Court of Roanoke County on April 26, 1971. The motion for judgment sought damages of $206,294.50.

The defendants in the action were Utica Mutual, Northwestern Mutual, Merrimack Mutual, Grain Dealers Mutual and Holyoke Mutual Insurance Companies.

On May 18, 1971, defendants petitioned for removal to this court and said petition was granted under 28 U.S.C.A. § 1441, as the requisite diversity of citizenship exists and the amount in controversy exceeds $10,000, pursuant to the jurisdictional requirements of 28 U.S.C. A. § 1332. Also filed by defendants on May 18, 1971, was a motion to dismiss, which is the concern of this court at this stage of the proceedings. Defendants were given leave to file a third-party complaint against General Electric Company (GE) and Old Dominion Services in an order dated October 12, 1971, pursuant to Rule 14 of the Fed. Rules of Civ. Procedure. Subsequent interrogatories and answers were filed by the parties and on August 28, 1972 plaintiff was granted leave by the court to file an amended complaint, joining third-party defendant General Electric Company as a defendant, pursuant to the provisions of Rules 14 and 15 of the Fed. Rules of Civil Procedure.

The facts of the case, as best can be determined by the court at this stage, are as follows:

Plaintiff was the owner of the Feedbox Restaurant, located in Roanoke County, Virginia, when a fire occurred on April 28, 1970, at approximately 4:00 a.m., which resulted in extensive damage to the structure and its contents. The alleged cause of the fire was the malfunction, during the early morning hours of April 28, of one or both of two Hotpoint electric fry kettles located in the restaurant, thereby causing a fire in the immediate area which spread throughout the remainder of the restaurant before it was detected and extinguished. The two fry kettles, bearing serial Nos. C-03551-4 and C-06906-9, were purchased by plaintiff from William P. Swartz and Company, Inc. in April 1961 and were used in plaintiff's restaurant business until the fire occurred. They were manufactured by the defendant General Electric Company, Hotpoint, Inc. having merged with GE in June 1952.

On or about April 24, 1970 Old Dominion Electric, Inc., t/a Old Dominion Services, with general offices in Norfolk, Virginia and branch offices in Roanoke, undertook to check the operation of the said kettles and replaced the thermostat in one of them. A bill for $49.72 for labor and materials was sent to the Feedbox Restaurant, which was paid on May 27, 1970, after the fire occurred.

Plaintiff alleges that the five defendant insurance companies had issued and delivered to the plaintiff policies of fire insurance covering the building and its contents, which policies were in full force and effect at the time of the fire.

The policies of fire insurance issued by the defendants were as follows:

a. Utica . . . Policy No. 33476 FMP, 25% of total of limits of liability
b. Northwestern . . . Policy No. MPOO-0211, 10% of total of limits of liability
c. Merrimack . . . Policy No. 1X34-63-16, 15% of total of limits of liability
d. Grain Dealers . . . Policy No. SMP 15 667, 25% of total of limits of liability
e. Holyoke . . . Policy No. SMP XX-XXXXXX, 25% of total of limits of liability.

Plaintiff contends that it complied with the terms and conditions of said insurance policies and that defendants expressly waived the filing of any proof of loss by plaintiff. Plaintiff also alleges that there has been no appraisal to determine the amount of plaintiff's loss and that the provision for such appraisal in section 38.1-366 of the Code of Virginia1 was for the benefit of defendants and since the defendants have at no time demanded such appraisal, their right to the same has been waived. Plaintiff also contends that defendants' conduct in leading plaintiff to believe that the defendants desired to negotiate a settlement until shortly before the statute of limitations was to expire, has estopped the defendants from claiming that any appraisal was required.

Plaintiff further alleges that if the court holds that appraisals were required under Section 38.1-366 of the Code of Virginia, this deprives plaintiff of a jury to determine damages and denies it the equal protection of the laws guaranteed under the Fourteenth Amendment. It denies a jury trial guaranteed by the Seventh Amendment and Article I, Section 11 of the Constitution of Virginia.

Plaintiff alleges that under the policies, defendants agreed to pay the replacement costs of the insured property, which amounted to $206,294.50, and that the defendants have refused to pay plaintiff the money.

Defendants' motion to dismiss, filed on May 18, 1971 and restated on September 14, 1972, asks for dismissal because plaintiff has not complied with the conditions precedent for institution of this action which are outlined in the policies. The conditions, included in both § 38.1-366 of the Code of Virginia and the insurance policies cited in Footnote 1, are: (1) plaintiff's alleged loss has not been determined or subjected to the "appraisal" provision of the insurance policies; (2) plaintiff first submitted his proof of loss to defendants on April 9, 1971, seventeen days prior to the institution of this action, which loss was not payable by defendants until 60 days after receipt of proof of loss; and (3) plaintiff has failed to comply with the policy provisions which state that no suit or action on the policy shall be brought until all the conditions and requirements of the policy have been complied with. Plaintiff allegedly has not submitted his loss to an appraisal as required by policy and has not allowed 60 days from the filing of a proof of loss before instituting suit.

The court will consider the following questions:

(1) Whether failure to submit the loss to an "appraisal" is grounds for dismissal?

(2) Whether instituting suit less than 60 days after filing proof of loss is grounds for dismissal?

(3) Whether the applicable Virginia statute of limitations effectively bars suit against the defendant, General Electric Corporation?

Ruling On Motion To Dismiss

The court will first consider whether failure to submit the loss to an appraisal is grounds for dismissal. Section 38.1-366 of the Code of Virginia provides that if the insured and insurer "fail to agree as to the actual cash value or the amount of loss, then, on the written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within twenty days of such demand." Furthermore, the statute provides for an umpire to resolve disputes between the appraisers, and the itemized award of any two when filed with the insurer shall determine the amount of actual cash value and loss.

Previous cases have held that the award is a necessary element of the plaintiff's cause of action, if demanded at a time when the company has a right to demand it, and when it can be made. Hanover Fire Ins. Co. v. Drake, 170 Va. 257, 196 S.E. 664, 667 (1938); North British & Mercantile Ins. Co. v. Robinett & Green, 112 Va. 754, 72 S.E. 668 (1911).

However, the filing of an award may be waived by an insurance company. As said in Couch Cyclopedia of Insurance Law, vol. 7, pp. 5641, 5642, § 1613, cited by the court in Hanover Fire Ins. Co. v. Drake, supra, 196 S.E. at 667:

A clause in an insurance policy, providing for an arbitration or appraisement of loss or damage as a condition precedent to suit by the policy-holder to recover insurance, is inserted wholly for the protection of the insurer, and, consequently, may, as a general rule, be waived by it. * * * Nor need such waivers be expressed in terms; they may be implied from the acts, omissions, or conduct of the insurer or its authorized agents. * * *

See, also 14 R.C.L. p. 1357, § 528; 47 L.R.A.,N.S., p. 425, note, citing numerous cases.

Also, in an annotation in 94 A.L.R. 499, 506, the author states that "it is well settled that the failure of arbitration through the fault of the insurer, or its arbitrator or appraiser, abrogates the provision for arbitration, and the insured, if free from fault in the matter, is absolved from compliance with such provision, and may bring suit on the policy without an award." Hanover Fire Ins. Co. v. Drake, supra 196 S.E. at 667.

Therefore, the court holds that if the failure to submit the loss to an appraisal was through some fault of the insurer, and the insured was free from fault, then the insured would be absolved from compliance with the appraisal provision of § 38.1-366. This is a matter for jury determination when all of the evidence is presented. The court cannot presently determine whether defendants waived the appraisal clause by the conduct and acts of its authorized agents. Therefore, until all the evidence is taken, the court must deny the motion to dismiss on the ground that ...

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