Gipps Brewing Corp. v. CENTRAL MFRS'MUT. INS. CO., 8512.

• Decision Date: 19 February 1945
• Docket Number: No. 8512.,8512.
• Citation: 147 F.2d 6
• Parties: GIPPS BREWING CORPORATION v. CENTRAL MANUFACTURERS' MUT. INS. CO. et al.
• Court: U.S. Court of Appeals — Seventh Circuit

147 F.2d 6 (1945)

GIPPS BREWING CORPORATION v. CENTRAL MANUFACTURERS' MUT. INS. CO. et al.

No. 8512.

Circuit Court of Appeals, Seventh Circuit.

January 8, 1945.

Rehearing Denied February 19, 1945.

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COPYRIGHT MATERIAL OMITTED

Hayes McKinney, George H. Grear, Hendrik Folonie, and C. Oscar Carlson, all of Chicago, Ill., and J. M. Elliott, of Peoria, Ill. (McKinney, Folonie & Grear, of Chicago, Ill., of counsel), for appellants.

Richard J. Kavanagh and J. Lewis Bond, both of Peoria, Ill. (Hunter, Kavanagh & McLaughlin, of Peoria, Ill., of counsel), for appellee.

Before EVANS, SPARKS and MAJOR, Circuit Judges.

MAJOR, Circuit Judge.

This is an action by plaintiff to recover for fire loss upon a policy of insurance issued by the fifteen defendants. The case was tried before the court without a jury, and resulted in separate judgments against the defendants for their respective portions of the loss, in the aggregate amount of $76,092.79. From these judgments defendants appeal.

The complaint set out the policy in full; alleged plaintiff's ownership of the property covered; that a fire occurred July 17, 1941, causing loss or damage; compliance on plaintiff's part of all of the conditions of the policy required of it; defendants' refusal to pay; and alleged a loss of $94,061.18. The complaint further alleged that on December 11, 1941, defendants advised plaintiff that the policy was void, and that by reason thereof plaintiff was entitled to recover unearned premiums in the sum of $5,000, from that date to the expiration of the policy.

Defendants alleged in their answer that the policy was invalidated and became void by reason of concealment and misrepresentation by plaintiff of material facts and circumstances concerning plaintiff's property and the fire loss, and because of fraud and false swearing by plaintiff, in violation of the conditions of the policy; the refusal of plaintiff's officers and representatives to answer questions put to them concerning material facts and circumstances relating to plaintiff's property and to its claim, during the course of an examination under oath under the terms of the policy; that plaintiff after the fire failed to forthwith separate the damaged and undamaged personal property and put it in the best possible condition, or to furnish to defendants a complete inventory of the destroyed, damaged and undamaged property, or to exhibit after the fire all that remained of the property covered under the policy.

The insurance in blanket form covered buildings and contents thereof, constituting plaintiff's brewery plant in Peoria, Illinois, consisting of nine or more buildings designated as buildings Nos. 1 to 9, together with some smaller buildings. The amount of the insurance at the time of the fire was $298,000. The insurance was against the peril of fire and other perils. There was also an endorsement covering in the sum of $4,887.20, for a special premium, the amount of premium for the unexpired term earned by reason of payment for the loss. The policy contained a 90% coinsurance clause. The policy also contained numerous provisions, the breach of which is relied upon as a defense to plaintiff's cause of action. These provisions will be subsequently referred to in connection with the discussion in which they are involved.

The fire occurred, as alleged, July 17, 1941. It originated in building No. 9 and the loss was largely, although not entirely, confined to that building and its contents.

On July 22, 1941, plaintiff employed William A. Glancy, a public adjuster of long experience, for the purpose of adjusting and collecting its loss from the defendants. Glancy, with the assistance and under the direction of Vincent M. Quinn, plaintiff's president, and Harley J. Green, its treasurer, proceeded to prepare a statement which was submitted to defendants' adjusters on August 4, 1941. This statement was introduced in evidence as defendants' exhibit 15. The importance of this exhibit is fully recognized by all of the parties, as it is relied upon as the main support for the defense of fraud. In this connection, it is pertinent to note that on August 30, 1941, plaintiff submitted to defendants a proof of loss, signed and sworn to by plaintiff's president. This was introduced in evidence as plaintiff's exhibit 18.

Defendants' exhibit 15 consisted of five typewritten pages and one double sheet of figures in pencil on paper ruled in columnar form. The length of this exhibit precludes its reproduction here, and we find it difficult to describe it in a way which will fairly disclose the respective contentions which are made concerning it. Defendants term it an inventory, or at least an attempted inventory, while plaintiff tenaciously insists that it is not an inventory and was never intended as such, although it is certain that if it be not so considered, then there was no pretense on the part of plaintiff in complying with the policy provision in this respect. To illustrate plaintiff's attitude toward this exhibit, we quote from its brief thus: "This statement was prepared and submitted, as they well know, only as a preliminary estimate to form a basis upon which to start negotiations for adjustment." It appears to be plaintiff's position that this exhibit must be carefully limited to a mere preliminary statement so as to escape responsibility for the representations contained therein. We are of the view that plaintiff's protestations in this respect are of little avail. Further, it is our view that in so far as the charge of fraud is concerned, it is immaterial what label be placed upon this exhibit. The question in any event is whether plaintiff made representations for the purpose and with the intent of defrauding the defendants.

Exhibit 15 contained plaintiff's name and location at the top of the first sheet, was furnished to defendants by plaintiff's authorized agents, and, notwithstanding the fact it was unsigned, we think plaintiff is bound by the information therein contained. The first page of the exhibit, under the title of "Summary," listed various buildings and items of merchandise, with the value of each, and also the amount of loss as to building No. 9 and as to each item of merchandise contained therein. The total value of the buildings and merchandise disclosed was $379,601.74, and the total amount of loss shown was $119,790.79. The double sheet of figures contained numerous columns, and under a column headed "Claim" there was listed the damage to building No. 9, together with numerous items of merchandise contained therein, and also minor items of damage to other buildings and other merchandise. The total amount of the items shown under this "Claim" column was $119,790.79, which was the same amount shown under the "Loss" column appearing on page 1 of the exhibit. As we view the situation, this was a plain representation by plaintiff that it had sustained a loss in that amount. The loss as found by the court was $71,000, or nearly $49,000 less than that shown by exhibit 15. Defendants urge that such an excessive claim as to the amount of loss is a potent indication of the purpose and intent to defraud.

Defendants under the terms of the policy were entitled not only to an inventory of lost and damaged property but also of all the property covered by the insurance. This was important in order to give application to the 90% coinsurance clause. A certain number of cases of undamaged bottled beer had been salvaged during the course of the fire and immediately afterward, which plaintiff conceded at the trial as being 5,796 cases, with a value of almost $11,000. There was also $12,000 worth of machinery and equipment covered by the insurance, which were not damaged in the fire. While neither of these two items of almost $23,000 was claimed as a loss by plaintiff, they were omitted from exhibit 15. We are not advised as to the extent, if any, which the omission of these items would have affected plaintiff's claim against defendants, but conceivably their inclusion might have increased the portion of the loss to be borne by plaintiff.

The most glaring defect in this exhibit was the inclusion of 43,194 cases of bottles, of a value afterward stipulated at $29,717.47, shown in the exhibit to have been lost, when as a matter of fact they were not in the building at the time of the fire and were not even covered by the insurance. In addition, the value of these cases was increased in the amount of $6,646.20, for the purpose of adjusting their book value to the market value. It was afterward shown that there had been no increase in value in this respect, and this item was waived by plaintiff. It will be noted that these two items amounting to over $36,000 make up a large portion of the difference between the loss claimed and that found by the court.

On August 30, 1941, a proof of loss signed and sworn to by plaintiff's president was furnished the defendants. (This is referred to as plaintiff's exhibit 18.) On this exhibit, aggregate values were stated at $366,118.34 (instead of the original $379,601.74), loss was stated as $87,477.17 (instead of the original $119,790.79), and under the application of the coinsurance clause there was claimed $78,870.05. (The amount of loss found by the court was $71,000.) As it subsequently developed, this exhibit contained some discrepancies which we think are of minor importance. We think it can also be stated that the misrepresentations contained in exhibit 15 were to a large extent eliminated in exhibit 18.

Defendants rely not only upon exhibits 15 and 18 in support of their defense of fraud but also upon statements and conduct of plaintiff's officials, and especially its adjuster Glancy. On the other hand, plaintiff relies upon certain facts and circumstances which it claims dispel any idea of fraud. In our view of the situation, an analysis of this testimony would unduly prolong this opinion and in the end...