Ger.-Am. Ins. Co. v. Etherton

• Decision Date: 16 January 1889
• Parties: GERMAN-AMERICAN INS. CO. v. ETHERTON.
• Court: Nebraska Supreme Court

25 Neb. 505

41 N.W. 406

GERMAN-AMERICAN INS. CO.

v.ETHERTON.

Supreme Court of Nebraska.

Jan. 16, 1889.

Syllabus by the Court.

1. In an action upon an insurance policy for loss sustained by fire, where it was stipulated in the policy that upon the written request of either party the loss shall be appraised and determined by disinterested and competent persons, one to be selected by the insurance company and one by the insured, and, in case of their failure to agree, by some third party called by the appraisers, the award of any two of the three as to the damage to be conclusive as to the amount of loss, it was held that it was not necessary that the petition should allege that an arbitration had been had on an award made, in order to the maintenance of the action.

2. In such case an action can be maintained without reference to the agreement to arbitrate, unless such arbitration had been actually had, and that would constitute matter to be pleaded by way of defense.

3. A provision in a policy that no suit or action against the insurer “shall be sustained in any court of law or chancery until after an award shall have been obtained” by arbitration, “fixing the amount” due after loss, is void; the effect of such provision being to oust the courts of their legitimate jurisdiction.

Error to district court, Webster county; GASLIN, Judge.

Action by Sarah Etherton against the German-American Insurance Company to recover for loss by fire. From a judgment for plaintiff defendant brings error.J. S. Gilham, for plaintiff in error.

Case & McNeny, for defendant in error.

REESE, C. J.

This action was instituted for the purpose of recovering the insurance upon a building and contents destroyed by fire. The insurance policy was issued December 21, 1886. The building was destroyed on the 17th day of January, 1887. The cause was tried to a jury, who returned a verdict in favor of defendant in error. A motion for a new trial was filed and overruled, and judgment entered upon the verdict. The cause is brought into this court by proceedings in error, by the insurance company, as plaintiff in error. When the jury was impaneled, and the introduction of testimony was about to be entered upon, plaintiff in error objected to the introduction of any evidence, for the reason that the petition did not state facts sufficient to constitute a cause of action. This objection was overruled, to which plaintiff in error excepted, and now assigns the same for error. The objection is based upon the following clause of the policy: “It is expressly stipulated by the parties hereto that no suit or action against this company shall be sustained in any court of law or chancery until after an award shall have been obtained, fixing the amount of such claims in the manner above provided.” The manner provided and referred to by this clause is that “loss or damage to property partially or totally destroyed, unless the amount of said loss or damage is agreed upon between the insured and this company, shall, at the request of either party, be appraised and determined by disinterested and competent persons,” etc. There is no allegation in the petition that the action is founded upon an award of arbitrators. In fact it appears by the record that no such award was ever made. While it is competent for parties between whom a dispute has arisen or may arise to agree upon a settlement of such dispute by arbitration, and while it is true that where such an arbitration is had that a cause of action should be based upon the award, or result of such arbitration, yet such provision can have no effect upon the right of an assured to maintain an action upon a loss, where no such arbitration is demanded by the defendant.

As to the first of the above-quoted clauses, we apprehend that there is practically no dispute, but that the whole provision is void. Where a policy provides that the whole matter in controversy between the parties, including the right to recover at all, shall be submitted to arbitration, the condition is void. The effect of such a provision is to oust the courts of their legitimate jurisdiction, which the parties cannot do. Gray v. Wilson, 4 Watts, 39;Insurance Co. v. Morse, 20 Wall. 445;Rowe v. Williams, 97 Mass. 163;Trott v. Insurance Co., 1 Cliff. 439; Roper v Lendon, 102 E. C. L. 825. The most that could be claimed by the second of the above-quoted provisions would be that, where the sole question between the parties to the policy was as to the amount of indebtedness, such question might be ascertainedby a reference to arbitrators upon the written request of either party, but even then plaintiff in error could...