Guin v. Commercial Cas. Ins. Co.

• Decision Date: 09 November 1953
• Docket Number: 41153,Nos. 41152,s. 41152
• Citation: 224 La. 44,68 So.2d 752
• Parties: GUIN v. COMMERCIAL CAS. INS. CO. et al. GUIN v. CALVERT FIRE INS. CO. et al.
• Court: Louisiana Supreme Court

Page 752

68 So.2d 752

224 La. 44

GUIN v. COMMERCIAL CAS. INS. CO. et al.

GUIN v. CALVERT FIRE INS. CO. et al.

Nos. 41152, 41153.

Supreme Court of Louisiana.

Nov. 9, 1953.

J. Vance Thompson, Alexandria, for plaintiff-appellant.

Polk & Culpepper, Alexandria, for intervenor and appellee.

MOISE, Justice.

The plaintiff, A. D. Guin, prosecutes this action (No. 41,153) against the Calvert Fire Insurance Company for $3,850, alleging that $2,480 is the value of the truck coupled with the crossties destroyed by fire, that $750 is the value of the attorney's fees to be paid, and $620 is for penalties incurred because of an alleged failure of the company to settle timely the loss sustained. The Commercial Credit Corporation intervened and prayed for a judgment in the sum of $1,121.40, the amount of the balance due on its note, and $341.80 carrying charges.

On October 29, 1952, the plaintiff filed suit (No. 41,152) against the Commercial Casualty Insurance Company of Newark, N. J., and Milwaukee Mechanics' Insurance Company, praying for $3,850, itemized in the same manner as in suit No. 41,153.

The Milwaukee Mechanics' Insurance Company pleaded fraud on the part of the assured, in that he had stated that he owed nothing on the truck, that it was not encumbered, and that the truck was new.

For the purpose of a decision, our court directed that the two cases be consolidated.

On an examination of the jurisprudence and the record evidence, we propounded the following syllogisms:

1. Has the insurance company the right to limit liability under the policy clause of the insurance contract?

2. Are the incorrect answers given to the representatives of Commercial Casualty Insurance Company and Milwaukee Mechanics' Insurance Company by plaintiff such as would void the policy?

3. Under the present jurisprudence and the pleadings and facts of record, is the assured entitled to collect penalties and reasonable attorney's fees from the insurance company?

4. Is the value of the truck as fixed by the judge at $1,500 proper?

The 1950 Studebaker truck was bought for $1,700, less $600 trade-in value, on November 28, 1950. The purchase was financed through the Commercial Credit Corporation, which company, at the time of the sale, exacted a mortgage to protect itself against fire and theft, which mortgage was in an amount equal to the value of the truck.

The plaintiff, on his own initiative, took out another policy of insurance on his truck with Commercial Casualty Insurance Company and Milwaukee Mechanics' Insurance Company for the cash value of the truck.

A reading of the policy of the Calvert Fire Insurance Company reveals a condition specified in the policy contract stating:

'6. If the insured has other insurance against a loss covered by this policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss.'

In the second suit No. 41,152, the Commercial Casualty Insurance Company and the Milwaukee Mechanics' Insurance Company insured, on March 27, 1951, the identical truck for its cash value, subject to Condition No. 18 of the policy contract, which reads:

'18. If the insured has other insurance against loss covered by this policy the company shall not be liable under the policy for a greater proportion of such loss than the applicable limit of liability of all valid and collectible insurance against such loss; provided, however, * * *.'

There being no statutory provision to control, the company has a right to limit liability as proposed by the policy contract.

In the case of Millaudon v. Western Marine & Fire Ins. Co., 9 La. 27, the Court held:

'It appears to be a settled principle, that if the subsequent policy contain no provision in respect to prior insurances, the amount of insurable interest for such policy will be the same as for the first, for the assured may insure again and again the same property, against the same risks, if he will pay the premium; but he can recover but one indemnity, and this he may recover of the first or subsequent underwriters, and those who pay the loss, may demand a proportionable contribution from the other insurers. The different underwriters are, by this means, sureties for each other.'

In the case of Muse v. Metropolitan Life Ins. Co., 193 La. 605, 192 So. 72, 125 A.L.R. 1075, it was held that where there is no statutory provision, insurance companies may limit their liability. See, also, 14 R.C.L., Sec. 103, p. 930; 45 C.J.S., Insurance, § 922(c), p. 1031; Powell v. Liberty Industrial Life Ins. Co., 197 La. 894, 2 So.2d 638.

It, therefore, does appear that the contention of the insurance company is backed up by both precedent and authority, and we answer Syllogism No. 1 in the affirmative.

Syllogism No. 2.

The assured gave incorrect information.

Under the facts shown and authorities submitted, is the policy here voided?

Milwaukee Mechanics' Insurance Company pleaded fraud and denied any right for recovery, and it also averred that the taking out of additional insurance increased its hazard. This contention is a mere brutum fulmen, because, as shown here, the additional insurance minimizes the loss sustained, because of a limited liability which can be invoked in each policy contract to one-half of the amount of the loss sustained. The statement of this fact should be conclusive on the subject. But, the defendant insurance company contends further that the representations made by the insured vitiated the policy contract.

The case of Lee v. Traveler's Fire Ins. Co., 219 La. 587, 53 So.2d 692, was a well-considered opinion, and the dicta of that case, and the authorities cited, should be conclusive of this question. So says the Lee case, quoting Knowles v. Dixie Fire Insurance Co. of Greensboro, 177 La. 941, 149 So. 528:

'Under Act No. 222 of 1928, p. 291, the question whether the existence of the chattel mortgage on the property subject to the insurance at the time of the loss increases the moral hazard is one of fact which must be determined by the circumstances surrounding each case.

'In order that an insurer may avoid liability under a fire policy on the ground that the moral hazard was increased by a breach of the warranty contained in the chattel mortgage clause, it carries the burden of showing that the changed conditions brought about by the imposition of the mortgage were of such real and substantial character as might influence the insured in his conduct and attitude toward the property. The term 'moral hazard' as used in the act and in the decisions relates to the pecuniary interest which the insured or some other person has either in protecting the property from loss by fire or destroying it. The moral hazard is least when the pecuniary interest of the insured in protecting it is greatest. It is greatest when his pecuniary interest is such that he might gain most by burning it. * * *' [219 La. 587, 53 So.2d 694.] See, also, 12 L.L.R. 129.

Plaintiff did not gain anything by the fire. In fact, he sustained a severe loss, because his truck was the instrumentality by which he made a living for himself and his family. The mortgage due the finance company will take all of the proceeds of the insurance. Like a two-edged sword, the plaintiff has lost his truck as well as the means of making a living. To put him in the same position to earn his living as before the fire means the cost and expense of another truck.

Syllogism No. 3.

Under the jurisprudence as now exists and the pleadings of record, is the assured entitled to collect reasonable attorney's fees?

The Calvert Fire Insurance Company argues that an insurer is not liable for penalties or attorney's fees unless its failure to pay the claim of an insured within sixty days after receipt of proof of loss is found to be arbitrary, capricious, or without probable cause. LSA-R.S. 22:658, amended by Act 417 of 1952, reads:

'All insurers issuing any type of contract other than those specified in R.S. 22:656 and 22:657 shall pay the amount of any claim due any insured including any employee under Chapter 10 of Title 23 of the Revised Statutes of 1950 within sixty days after receipt of satisfactory proofs of loss from the insured, employee or any party in interest. Failure to make such payment within sixty days after receipt of such proofs and demand therefor when such failure is found to be arbitrary, capricious, or without probable cause, shall subject the insurer to a penalty, in addition to the amount of the loss, of 12% damages on the total amount of the loss, payable to the insured, or to any of said employees, together with all reasonable attorney's fees for the prosecution and collection of such loss, or in the event a partial payment or tender has been made 12% of the difference between the amount paid or tendered and the amount found to be due and all...