Gechijian v. Richmond Ins. Co.

• Decision Date: 01 February 1940
• Citation: 305 Mass. 132,25 N.E.2d 191
• Parties: GECHIJIAN v. RICHMOND INS. CO., and nine other cases.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

305 Mass. 132

25 N.E.2d 191

GECHIJIAN

v.RICHMOND INS. CO., and nine other cases.

Supreme Judicial Court of Massachusetts, Suffolk.

Feb. 1, 1940.

Exceptions from Superior Court, Suffolk County; Gray and Walsh, Judges.

Actions of contract by George Gechijian, against the Richmond Insurance Company, against the Fulton Fire Insurance, against the Firemen's Insurance Company, against the Northwestern National Insurance Company, against the Chicago Fire & Marine Insurance Company, against the Rhode Island Insurance Company, against the Pennsylvania Fire Insurance Company, against the Southern Fire Insurance Company, against the Ohio Farmers Insurance Company, and against the New England Fire Insurance Company. Verdict for plaintiff in each case, and the defendants bring exceptions.

Exceptions overruled.W. J. Killion, F. J. Good, and K. P. Hern, all of Boston, for plaintiff.

G. B. Rowell and A. R. Berge, both of Boston, for defendants.

RONAN, Justice.

These ten actions of contract are brought against the defendants, who issued fourteen policies insuring the plaintiff against loss by fire to furniture, fixtures, photographic supplies and negatives, which were located in a studio owned and maintained by him in Boston and were damaged by fire on the evening of December 23, 1930. The jury returned a verdict for the plaintiff in each case and the cases are here upon the exceptions of the defendants. There is a second bill of exceptions to the action of a judge other than the trial judge in granting the plaintiff a jury claim under the circumstances hereinafter stated.

There was evidence that the plaintiff had occupied this studio, which was located upon the top floor of a four-story building, for ten years prior to the fire. A tenant on the second floor had moved out, and another tenant, the plaintiff's lessor, which occupied the first and third floors, intended to vacate in January, 1931, and had requested the plaintiff to remove from its premises a considerable quantity of photographic mounts or folders contained in wooden boxes which this tenant had permitted the plaintiff to store in the cellar of its premises. This material was placed in the plaintiff's studio within a week before the fire. The plaintiff had received a one-year lease of the top floor about ten days before the fire, but the lease had not been executed at the time of the fire. On account of the fact that he might be the only tenant in the building, the plaintiff deemed it advisable to secure fire insurance and sent for one A. D. Harry, an insurance broker, and told him that he wanted $12,000 insurance on the furnishings and equipment and $3,000 upon the negatives. Harry told the plaintiff to give him ‘something’ that Harry could show to his companies. The plaintiff picked up a piece of paper from the waste basket and wrote a list showing certain furnishings, equipment, materials and negatives, amounting to $14,500. Later Harry told him that he could not insure the negatives but could give him $12,000 on the merchandise. Policies in this amount were delivered to the plaintiff. When informed by Harry that he was unable to procure insurance on the negatives, the plaintiff called in another broker and requested him to place insurance upon the negatives. He informed this broker of the insurance that he had secured from Harry. This broker requested the plaintiff to give him some more insurance on his merchandise. The plaintiff agreed to take additional insurance and policies for $6,000 on the furnishings, equipment and materials and $3,000 on the negatives were issued. Soon after the fire the plaintiff hired one Cuthbert, an experienced adjuster, to assist him in settling and collecting the amount of the loss. Cuthbert gave him a blank form and told him to make out a list of the articles that he had in the studio at the time of the fire and to put down the estimated values in the column marked ‘value’-‘what he would have to take and pay to replace them.’ Cuthbert said the column headed ‘Loss' could be left vacant and that, when he and the adjusters inspected the various articles, they ‘would determine whether there was a total loss on that or only a partial or none at all.’ The plaintiff put down figures in the value column for each article. Cuthbert added a few items as partitions, doors and wiring. The total of the figures appearing in the value column of this list was not given but the sum amounted to $27,081. The list contained the statement that ‘As considerable of the stock, etc. has been burned out of sight, this list is presented as being to the best of the owner's memory.’ At the trial the plaintiff testified that the fair value of the goods contained in the list was $20,000 to $21,000; that he did not put down any figures as to the loss; that he did not expect the insurance company to pay the amount set forth in the value column; that he did not understand that he was making any claim against the companies for that amount but he understood that the adjusters would meet, decide what his merchandise was worth and determine his loss. This list was given to a representative of the insurance companies on January 7, 1931. Various conferences between the adjusters were held and, on March 7, 1931, a value and loss memorandum setting forth the sound value of stock, fixtures and negatives as $15,000 and the total loss as $13,000 was executed by the adjusters of the plaintiff and the defendants. An adjuster for one of the companies requested the plaintiff's signature. The plaintiff demurred to signing the memorandum until he was informed by his adjuster that the adjuster for this company had said in substance that the statement of the sound value would make no difference so long as the plaintiff was paid $13,000. Later, the plaintiff executed and delivered to the defendants proof of loss with figures corresponding to those in the memorandum. The plaintiff recovered on a count in his declaration seeking recovery from each defendant of its pro rata of this total settlement of $13,000.

The principal contention of the defendants is that the submission of this list with the values thereon by the insured to the insurers constituted, as matter of law, an attempt to defraud the insurers, and that, as the policies were in the standard form, containing the provision that they would be void ‘if the insured shall make any attempt to defraud the Company either before or after the loss,’ the insurers were thereby relieved from any liability and consequently the judge should have granted the motions for directed verdicts.

The law of this Commonwealth is settled that the furnishing to the insurers by the insured of a statement of values that he knows to be false, for the purpose of securing an advantageous position in the settlement of the loss, is a fraudulent design which constitutes an attempt to defraud within the provisions of the standard policies and vitiates such contracts of insurance even though the insured may not have intended to secure more than his actual loss. That was decided when this case was here before. Gechijian v. Richmond Ins. Co., Mass., 11 N.E.2d 478, 479. That decision rested upon the finding of the trial judge that the plaintiff ‘knowingly exaggerated the sound value of the property in order to be in a more advantageous position to be paid for the real loss suffered, but not with the intent to defraud the insurers.’ This established principle of law is decisive if the evidence presented at the second trial is incompatible with any reasonable conclusion other than that the plaintiff made an attempt to defraud the defendants. And this is so, although the burden of proof rested upon the defendants to show the existence of such an attempt. Pigeon v. Massachusetts Northeastern Street Railway, 230 Mass. 392, 119 N.E. 762;Hurd v. Eastern Massachusetts Street Railway, 254 Mass. 204, 150 N.E. 5;Mailhot v. New York, New Haven & Hartford Railroad, 273 Mass. 277, 173 N.E. 422;Daignault v. Berkshire Street Railway, 277 Mass. 227, 178 N.E. 653;Brennan v. Schuster, 288 Mass. 311, 192 N.E. 835. We must take that view of the evidence most favorable to the plaintiff in deciding if there was error in the refusal of the motions of the defendants for directed verdicts. Shea v. American Hide & Leather Co. 221 Mass. 282, 109 N.E. 158;Karjavainen v. Buswell, 289 Mass. 419, 194 N.E. 295.

These policies were contracts of indemnity, but the liability of the companies was limited by the provision contained in each policy that the insurer ‘shall not be liable beyond the actual value of the insured property at the time any loss or damage happens.’ G.L.(Ter.Ed.) c. 175, § 99. The jury might reasonably expect that opinions of the actual value of the plaintiff's property, which is described in considerable detail in the record, would vary to some extent and that persons familiar with the value of such property would honestly differ in appraising its worth. An owner by reason of his close association and use of his property or swayed unduly but unconsciously by his own personal interest might in good faith believe that it was worth more than its actual value. The nature of the property may be such that the ascertainment of its value must to a large extent rest upon opinion and sound judgment. C. W. Hunt Co. v. Boston Elevated Railway, 199 Mass. 220, 85 N.E. 446;Maynard v. Royal Worcester Corset Co., 200 Mass. 1, 85 N.E. 877;Cross v. Sharaffa, 281 Mass. 329, 183 N.E. 838;Picard v. Allan, 285 Mass. 15, 188 N.E. 387;Potier v. A. W. Perry, Inc., 286 Mass. 602, 190 N.E. 822;Piper v. Childs, 290 Mass. 560, 195 N.E. 763. A valuation may be so exaggerated and excessive as to constitute a deliberate and wilful overvaluation; and its use to influence the judgment of another who was under an obligation to pay in accordance with actual value would necessarily imply an intent to deceive as the natural and proximate consequence of such conduct. Commonwealth v. Farmer, ...