Fireman's Fund Ins. Co. of San Francisco v. Hanley

• Decision Date: 25 February 1958
• Docket Number: No. 13201.,13201.
• Parties: FIREMAN'S FUND INSURANCE COMPANY OF SAN FRANCISCO, California, a California Corporation, Appellant, v. Joseph A. HANLEY and Ruth C. Hanley, Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

252 F.2d 780 (1958)

FIREMAN'S FUND INSURANCE COMPANY OF SAN FRANCISCO, California, a California Corporation, Appellant, v. Joseph A. HANLEY and Ruth C. Hanley, Appellees.

No. 13201.

United States Court of Appeals Sixth Circuit.

February 25, 1958.

J. T. Hammond, Benton Harbor, Mich., and Herbert R. Stoffels, Chicago, Ill., for appellant.

Harold S. Sawyer, Grand Rapids, Mich. (Harold S. Sawyer, Warner, Norcross & Judd, Grand Rapids, Mich., John T. Ryan, St. Joseph, Mich., on the brief), for appellees.

Before ALLEN and MILLER, Circuit Judges, and BOYD, District Judge.

ALLEN, Circuit Judge.

This appeal arises out of an action on an insurance policy for the destruction by landslide of a residence and real property located in St. Joseph, Michigan. The residence occupied the top of a bluff some 80 feet high overlooking the lake. The jury returned a verdict for plaintiffs¹ upon which judgment was rendered.

The case arises out of the following facts which, in general, are not in controversy:

On March 13, 1954, plaintiffs, husband and wife, purchased an insurance policy from defendant insuring the property against "All Physical Loss" except that covered by certain exclusions contained in Section III, the pertinent portions of which are as follows:

"Exclusions: This Policy Does Not Insure Against: * * *

"B. Loss by termites or other insects; deterioration; smoke from industrial operations; rust, wet or dry rot; mould; mechanical breakdown; normal settling, shrinkage, or expansion in walls, floors or ceilings; this Exclusion, however, shall not apply to loss by Fire, Smoke (except as specifically excluded above), Explosion, Landslide, Total or Partial Collapse, Water Damage, and Glass Breakage, caused by perils excluded in this paragraph;

"C. Loss by surface waters, flood waters, waves, tide or tidal wave, high water, or overflow of streams or bodies of water, all whether driven by wind or not; this Exclusion, however, shall not apply to loss by Fire or Explosion caused by perils excluded in this paragraph;"

For many years prior to 1954 there were severe storms on Lake Michigan. For several years the level of the lake had been unusually high. Waves and high water were driven by winds against the bluff on which plaintiffs had built their house. Especially heavy storms occurred during 1951, 1952 and 1953. The action of the waves, combined with the high water, created extensive erosion along the shore line in the vicinity of St. Joseph, Michigan. Before he secured the insurance in 1948 plaintiff, Joseph Hanley, had partially constructed a seawall and jetty to protect the property and restore the beach. He completed these about the same time that he secured the insurance from defendants in 1948. During 1951, 1952, and 1953 land on the bluff sloughed off into the lake from time to time and five houses in the area were either destroyed or moved for safety. By the spring of 1954, due presumably to the protective structures in the lake built by land owners, a 30 to 40 foot sand beach had been established at the foot of the bluff below plaintiffs' property. The toe of the bluff during that period was not washed by the waves. In fact, a bulldozer, a crane and other equipment used in building the seawall at the foot of the bluff were stored upon the beach. The bluff was precipitous and about 20 to 30 feet from the top there was a horizontal stratum of clay-sand which regularly carried and at times emitted ground water. At the end of September, 1954, 16 days of exceptional rainfall occurred during which 8.67 inches of rain fell in the area. During this period the rain percolated into the ground or drained off from plaintiffs' premises, which were higher than and sloped down to the adjoining real property.

On October 13, 1954, a landslide in the upper portion of the bluff cut off some 5 feet of the lawn facing the lake. On October 17, 1954, a large landslide occurred at the rear of plaintiffs' property covering an area of about 30 feet from east to west and an even greater distance north and south roughly following the shore of the lake. The landslide took off about 40 feet at the top of the 80-foot bluff. The entire rear portion of plaintiffs' house was undermined. Large cracks appeared, the floors tilted, and eventually the structure was a total loss. Plaintiffs made diligent efforts to secure the removal or salvage of the house but no one would attempt to move it from the top of the bluff. Some ten months later the roof of the house blew off. It was subsequently sold for salvage for a net sum of $1,020. On October 26, 1954, after the entire loss had accrued, defendant cancelled the policy in accordance with its provisions.

Under plaintiffs' insurance contract replacement cost was the measure of damages. This was figured in the policy at $30,000. The policy also provided for reimbursement of amounts actually expended in securing other living quarters and additional living expenses. Testimony was given to the effect that the replacement value of the house at the time of the loss was $29,000 and additional living and other recoverable expenses were shown to be $562.61. A mortgage existed on the property upon which $8,000 was still due when the loss occurred. Following the removal of plaintiffs and sale of the house the mortgage was foreclosed. Under the instruction of the court the jury deducted the net salvage payment and returned a verdict for plaintiff in the sum of $26,792.61.

Defendants claim (1) that the charge of the court constituted reversible error; (2) that, in view of the fact that the destroyed property was subject to a mortgage under which a balance of $8,000 was unpaid at the time of the loss, $8,000 should have been deducted from the amount of the verdict; and (3) that plaintiffs are not entitled to recover damages on the basis of replacement value because they attempted in 1954 to sell the property for $20,000.

The principal question is whether the District Court committed reversible error in instructing the jury as follows with reference to the existence of liability:

"Testimony has been presented in this case from which the jury could find that the damage to the plaintiffs\' property resulted from causes within the coverage of the policy, and testimony has been presented from which the jury could find that the damage resulted from causes excluded from the coverage of the policy; and testimony has further been presented from which the jury could find that the damage may have resulted from a combination, concurrence, and working together of causes within the coverage and causes excluded from the coverage of the policy.

"Therefore, the court instructs the jury that if you find as a fact that the damage to the plaintiffs\' property resulted from a combination, concurrence, and working together of causes within the coverage of the policy and causes excluded from the coverage of the policy, the court instructs you that the plaintiffs are entitled to recover in this action."

Defendant contends that the dominant cause of the loss was not the landslide, but the long-continued erosion of the shore line due to high water and the action of the wind and waves. It argues that, due to the long existence of this condition, it was inevitable that plaintiffs' house would be destroyed and therefore the general term "All Physical Loss" did not insure against the risk of landslide because it was not fortuitous. Appleman on Insurance Law and Practice, Vol. 5, section 3272; Richards on Insurance, 5th Edition, Vol. 2, Sections 206, 212. Defendant urges in effect that under the decision in Aetna Insurance Company v. Boon, 95 U.S. 117, 24 L.Ed. 395, an admittedly excluded risk such as damage caused by waves, high water or surface water, combining with a covered factor such as landslide, does not establish liability against the insurer.

In the Boon case, supra, a fire insurance policy had been issued upon plaintiff's merchandise located in a store at Glasgow, Missouri. The policy provided that the company should not be liable for damage by fire which might "happen or take place by means of any invasion, insurrection, riot or civil commotion, or of any military or usurped power * * *." The city of Glasgow at the time of the fire was occupied by the United States military forces. It was attacked by Confederate armed forces. In the ensuing battle United States troops set fire to the city hall to prevent the capture of important military stores. The fire spread and eventually destroyed the building in which plaintiff's insured goods were located. The United States Circuit Court allowed recovery, but the Supreme Court of the United States reversed the judgment and ordered that judgment be entered for the defendant. It held that the Confederate invasion was the "predominating and operative cause" of the fire which occurred while the attack was in progress. It pointed out that the attack never ceased to operate as a cause until the loss was complete, that it created the military necessity for the destruction of the military stores, that the fire which destroyed the property was caused by an invasion by military or usurped power and was specifically excepted from the risk undertaken by the insurer.

We recognize that the Boon decision is an authority followed in numerous lower court decisions presenting identical or closely similar policy provisions and closely similar facts. However, we think that case is not controlling here. The insurance policy construed in the Boon case contained an exclusive provision which was clear and unambiguous. Moreover, the facts are not closely similar to those herein presented. In the Boon case the court emphasized the fact that when the fire destroyed plaintiff's goods the attack of the Confederates was in progress and declared that the invasion and the attack compelled and caused the fire. Also, the court held that the loss fell within the precise terms of the policy above quoted.

Defendant...