Fratto v. Northern Insurance Company of New York

• Decision Date: 07 June 1965
• Docket Number: 63-311,Civ. A. No. 63-310,63-507.
• Parties: Dominick and Rosina FRATTO, individually and trading and doing business as Silver Fox Inn, Plaintiffs, v. NORTHERN INSURANCE COMPANY OF NEW YORK, a New York Corporation, Defendant, Crawford Lieberum, Alvin G. Barr, Paul Lieberum and Helen Lieberum, his wife, Intervenors. Dominick and Rosina FRATTO, individually and trading and doing business as Silver Fox Inn, Plaintiffs, v. The HOME INSURANCE COMPANY OF NEW YORK, a New York Corporation, Defendant, Crawford Lieberum, Alvin G. Barr, Paul Lieberum and Helen Lieberum, his wife, Intervenors. Dominick and Rosina FRATTO, individually and t/d/b as Silver Fox Inn, Plaintiffs, v. NEW AMSTERDAM FIRE INSURANCE COMPANY, a foreign corporation, et al., Defendants, Crawford Lieberum, Alvin G. Barr, Paul Lieberum and Helen Lieberum, his wife, Intervenors.
• Court: U.S. District Court — Eastern District of Pennsylvania

242 F. Supp. 262

Dominick and Rosina FRATTO, individually and trading and doing business as Silver Fox Inn, Plaintiffs, v. NORTHERN INSURANCE COMPANY OF NEW YORK, a New York Corporation, Defendant, Crawford Lieberum, Alvin G. Barr, Paul Lieberum and Helen Lieberum, his wife, Intervenors.

Dominick and Rosina FRATTO, individually and trading and doing business as Silver Fox Inn, Plaintiffs, v. The HOME INSURANCE COMPANY OF NEW YORK, a New York Corporation, Defendant, Crawford Lieberum, Alvin G. Barr, Paul Lieberum and Helen Lieberum, his wife, Intervenors.

Dominick and Rosina FRATTO, individually and t/d/b as Silver Fox Inn, Plaintiffs, v. NEW AMSTERDAM FIRE INSURANCE COMPANY, a foreign corporation, et al., Defendants, Crawford Lieberum, Alvin G. Barr, Paul Lieberum and Helen Lieberum, his wife, Intervenors.

Civ. A. Nos. 63-310, 63-311, 63-507.

United States District Court W. D. Pennsylvania.

June 7, 1965.

James E. McLaughlin, of McArdle, Harrington, Feeney & McLaughlin, Pittsburgh, Pa., for plaintiffs.

Thomas Lewis Jones, of White, Jones & Gregg, Pittsburgh, Pa., for defendants.

Samuel J. Margiotti, of Margiotti & Casey, Pittsburgh, Pa., for intervenors.

MARSH, District Judge.

This is a non-jury trial of consolidated diversity suits wherein the plaintiffs are Dominick and Rosina Fratto. In their complaints, they seek to recover from each of the defendant insurance companies the total amount of insurance covering the Silver Fox Inn as shown in each fire insurance policy, together with interest from January 2, 1962. The Inn, which was purchased by the Frattos in May, 1961, was destroyed by a fire which occurred on January 2, 1962. In addition to technical reasons, the defendants refused payment of the fire damage on the ground that the plaintiffs were responsible for the fire.

In my opinion, the plaintiffs are entitled to recover in the suits over which the court has jurisdiction. From the evidence, I make the following:

FINDINGS OF FACT

1. Plaintiffs, Dominick and Rosina Fratto, husband and wife, are citizens of Pennsylvania. The defendants are insurance corporations. All are incorporated and have their principal places of business in states other than Pennsylvania.

2. On May 10, 1961, Rosina Fratto purchased for herself and her husband the Silver Fox Inn, located in Foxburg, Clarion County, Pennsylvania, from Crawford Lieberum, Alvin G. Barr, Paul Lieberum and Helen Lieberum, the intervenors. The price was $30,000 — $25,000 for the real estate and $5,000 for the contents and a liquor license. Mrs. Fratto paid $12,000 in cash and for the balance assumed the payment of two mortgages, which were liens against the premises, — the first, to the Farmers National Bank of Emlenton, and, the second, to Francis J. McGuiness.

3. The intervenors, Crawford Lieberum, Alvin G. Barr, and Paul Lieberum and Helen Lieberum, his wife, are citizens of Pennsylvania, who by deed dated May 10, 1961, granted and conveyed to the plaintiffs the premises known as the Silver Fox Inn, together with the contents thereof and a liquor license. At the time of the conveyance, the unpaid debt of the second mortgage due to Mr. McGuiness was $13,792.36. The terms of the second mortgage required the plaintiffs to insure the premises for at least the real debt of $15,000. The plaintiffs later defaulted in payment of the second mortgage. Legal proceedings were instituted against the intervenors, as a result of which they were required to pay $14,716.01 in satisfaction of the ensuing judgment and costs. This judgment, the second mortgage and accompanying bond were assigned to the intervenors. In this action they assert all the rights, title and interest of the equitable lien of the second mortgage to the extent of $14,716.01 on the proceeds of the insurance policies covering the premises. Plaintiffs do not contest the intervenors' rights as against them. However, since Mr. McGuiness was not named in the insurance policies as a mortgagee, the intervenors' rights to the proceeds of the policies issued by the defendant companies rise no higher than the rights of the plaintiffs.

4. At the time of trial Rosina Fratto was 79 years of age and Dominick Fratto was 90 years of age and afflicted with the disabilities of old age. At the time of the purchase of the Inn, Rosina was a quite dominant character. The Frattos had six children.

5. Plaintiffs' son, Philip Fratto, managed an inn on Route 8, south of Butler, which was also owned by the plaintiffs. This inn was named Dino's but was usually referred to as Nick's Inn.

6. On June 28, 1961, Mrs. Fratto procured insurance on the Silver Fox Inn in the amount of $50,000. In early December, 1961, her sons, Philip and Samuel Fratto, acting pursuant to her authority, procured additional insurance on the Inn in the amount of $87,000.

Prior to obtaining the additional insurance, an appraisal of the premises and contents was made by Industrial Appraisal Company. This appraisal was procured by Philip and Samuel Fratto on behalf and with the approval of their mother.

Industrial Appraisal Company made an on-the-scene visual inspection of the exterior and interior of the Silver Fox Inn. On September 5, 1961, it certified that the actual cash value (net sound insurable value) of the Inn, including contents, was $153,025. The actual cash value (net sound insurable value) of the building was certified at $137,623, and that of the contents at $15,402.

Mrs. Fratto paid for the appraisal and the premiums for the additional insurance.

7. The defendants herein named issued the following policies of fire insurance insuring plaintiffs, trading as Silver Fox Inn:

                                                         Policy
                           Company                         No.                 Amount
                Northern Insurance Company of
                  New York                               F 340 378             $ 15,000
                The Home Insurance Company of
                  New York                               532 12 51               20,000
                United States Fire Insurance Company     21 47 90                10,000
                Centennial Insurance Company             19672                   10,000
                Ohio Farmers Insurance Company           5727                    10,000
                Scottish Union and National Insurance
                  Company                                53-05-16                10,000
                Aetna Insurance Company                  81 81 50                10,000
                Bankers and Shippers Insurance
                  Company of New York                    132B1559                10,000
                Sun Insurance Company                    K8559344                10,000
                                                                               ________
                                                         Total                 $105,000
                

The latter seven policies are the subjects of Civil Action No. 63-507. The $15,000 policy issued by Northern Insurance Company is the subject of Civil Action No. 63-310, and the $20,000 policy issued by The Home Insurance Company is the subject of Civil Action No. 63-311.

The total face amount of other policies issued on the building, but not sued upon in this court, is $32,000.

8. In addition to insuring the building, plaintiffs insured the contents thereof with New Amsterdam Fire Insurance Company, $10,000; Royal Indemnity Company, $10,000; and, later, Fireman's Insurance Company of Newark, New Jersey, $5,500.

The plaintiffs' claims at Civil 63-507 against New Amsterdam and Royal Indemnity for loss of the contents were withdrawn at trial and dismissed. (T., pp. 60-61, 276.)

9. The total amount of insurance covering the building was $137,000, and the total amount of insurance covering the contents was $25,500.

10. In the early morning of January 2, 1962, while all policies in suit were in full force and effect, the Silver Fox Inn was totally destroyed by fire which immediately followed a dynamite explosion. At the time, some of the windows and a door were open; some electric lights were on. The explosion was caused by a person or persons unknown. The defendants had immediate knowledge of the fire.

11. Some time after the fire, Dominic Fratto, the grandson of the plaintiffs and an attorney, consulted with Attorney James P. McArdle in connection with the preparation of proofs of loss. Attorney McArdle is a lawyer of some 34 years experience and the senior member of a large and prominent law firm in the City of Pittsburgh. Subsequently, Attorney Fratto turned the entire matter over to Attorney McArdle for settlement or prosecution of the claim of the plaintiffs.

12. Shortly after the fire, all the insurers, except Aetna Insurance Company and Fireman's Insurance Company, engaged the Keystone Adjustment Corporation of Pittsburgh, Pennsylvania, to investigate, negotiate, and adjust the loss.¹ This company was an independent adjustment corporation, the common stock of which was then owned by Joseph Hubbard, its president, and his family. Joseph Hubbard died on March 17, 1962, and Donald Hubbard, a brother, who had previously been in charge of certain of its fire claims, became its president.

13. On March 12, 1962, proofs of loss were sworn to by the plaintiffs and sent to the respective insurance companies by Attorney Fratto.

14. Prior to the death of Joseph Hubbard, he and Attorney McArdle began negotiating for settlement of the Fratto claim. Attorney McArdle made demands upon Joseph Hubbard and later upon Donald Hubbard for settlement in amounts ranging from $150,000 to a low figure of $110,000. Joseph Hubbard made an offer of settlement to Attorney McArdle in the sum of $50,000, which offer was subsequently repeated by Donald Hubbard and was never withdrawn. At the time these demands and offers were made, Attorney McArdle thought that Keystone Adjustment Corporation represented all the defendants.

Both Joseph and Donald Hubbard had asked for and received from Attorney McArdle some details concerning the valuations placed on the Inn by the Industrial Appraisal Company.

15. On April 6, 1962, representatives of all the...