Hanley v. Aetna Ins. Co.

• Decision Date: 12 September 1913
• Parties: HANLEY et al. v. AETNA INS. CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

215 Mass. 425

102 N.E. 641

HANLEY et al. v. AETNA INS. CO.

Supreme Judicial Court of Massachusetts, Suffolk.

September 12, 1913

COUNSEL

Jas. R. Murphy and David H. Fulton, both of Boston, for plaintiffs.

F. W Brown and W. L. Came, both of Boston, for defendant.

OPINION

LORING J.

This is an action on a policy of fire insurance in the form prescribed by St. 1907, c. 576, § 60, brought to recover the amount found by referees appointed in accordance with the terms of the policy to have been the amount of injury done to the plaintiffs' building by a fire against which the plaintiff was insured. The building in question was injured but not destroyed. At the trial defendant insurance company proved by the testimony of the third referee that the referees had refused to admit evidence offered by it bearing on the amount of the loss. The third referee testified that the award was made on what he saw aided by thirty years' experience in the lumber business and by his experience in having buildings erected for him, and that he did not think that the evidence offered was worthy of consideration. It was agreed by counsel that this evidence was to be taken to be true. It is a fair inference from the report that it covered the action of the other referee who signed the award. On recross-examination by the defendant's attorney the third referee, in answer to the question, 'And it was your duty, in making that examination, to rely solely on what you could see yourself,' testified that he did. We do not construe this to modify his preceding testimony that the evidence offered was excluded because the referees in their discretion decided not to admit it. It is expressly stated in the report that the defendant did not question the good faith of the two referees who signed the award.

Upon this testimony the presiding judge ruled that as matter of law the award was invalid because the referees refused to hear the evidence offered by the defendant and directed a verdict for the defendant. The case is here on report.

It did not appear at the trial in the superior court what the evidence was which the defendant offered to introduce before the referees. If the defendant had a right to put in any pertinent evidence before the referees, the burden was on the defendant to show that the evidence excluded in the case at bar was material and that it was harmed by the exclusion. That burden was not sustained here by the defendant, and this case might be disposed of on that ground. But the conduct of hearings by referees appointed under the Massachusetts standard form of fire insurance policy is a practical matter of almost daily occurrence which should not be left in uncertainty. For that reason we prefer to decide the case on the broader ground that it is within the discretion of the referees, in cases like the case at bar, to admit evidence or to find the amount of the loss by inspection, or by inspection and information obtained by them in such way as they in their discretion think fit.

It was decided in Christianson v. Norwich Union Fire Ins. Soc'y, 84 Minn. 526, 88 N.W. 16, 87 Am. St. Rep. 379, that referees appointed under a standard form of policy like our own (see Minn. Sts. 1895, c. 175, § 53) should sit as a quasi court and decide the case on evidence offered by the respective parties. There had been a previous decision to the same effect (Mosness v. German-American Fire Ins. Co., 50 Minn. 341, 52 N.W. 932), when there was no standard form of policy in that state (see Minn. Sts. 1889, c. 217), and the policy there in question contained the provision which is found in the New York standard form. For subsequent cases confirming the decision in Christianson v. Norwich Union Fire Ins. Soc'y, ubi supra, see Redner v. New York Fire Ins. Co., 92 Minn. 306, 99 N.W. 886; Schoenich v. American Ins. Co., 109 Minn. 388, 124 N.W. 5. There is a similar decision in South Dakota ( Mason v. Fire Association of Philadelphia, 23 S.D. 431, 122 N.W. 423), under a standard form of policy like that prescribed in New York. See Laws of South Dakota 1893, c. 105. And in Canfield v. Watertown Fire Ins. Co., 55 Wis. 419, 13 N.W. 252, a similar decision was made in case of a policy which was not prescribed by statute but which contained the provision found in the New York standard form of fire insurance policy stated later on.

The opposite conclusion, however has been reached in every other state in which the question has arisen. See Bangor Savings Bank v. Niagara Fire Ins. Co., 85 Me. 68, 26 A. 991, 20 L. R. A. 650, 35 Am. St. Rep. 341; Hall v. Norwalk Fire Ins. Co., 57 Conn. 105, 17 A. 356; Townsend v. Greenwich Ins. Co., 86 App. Div. 323, 83 N.Y.S. 909, affirmed in 178 N.Y. 634, 71 N.E. 1140; Royal Ins. Co. v. Ries, 80 Ohio St. 272, 88 N.E. 638; Vincent v. Germania Ins. Co., 120 Iowa, 272, 94 N.W. 458; Liverpool Ins. Co. v. Goehring, 99 Pa. 13; Stout v. Phoenix Assur. Co., 65 N. J. Eq. 566, 56 A. 691; American Central Ins. Co. v. Landau, 62 N. J. Eq. 73, 93, 49 A. 738; Carlston v. St. Paul Fire Ins. Co., 37 Mont. 118, 94 P. 756, 127 Am. St. Rep. 715; American Steel Co. v. German-American Fire Ins. Co., 187 F. 730, 109 C. C. A. 478. See, also, Continental Ins. Co. v. Vallandingham, 116 Ky. 287, 300, 76 S.W. 22, 105 Am. St. Rep. 218. These cases have arisen under the New York standard from of policy or under a policy not prescribed by statute which contained a clause like that in the New York standard form. The New York standard form provides that: 'In the event of disagreement as to the amount of loss, the same shall, as above provided, be ascertained by two competent and disinterested appraisers, the insured and this company each selecting one, and the two so chosen shall first select a competent and disinterested umpire; the appraisers together shall then estimate and appraise the loss, stating separately sound value and damage, and failing to agree shall submit their differences to the umpire; and the award in writing of any two shall determine the amount of such loss.' For the New York standard form see 1 Clements, Fire Ins. (1905 Ed.) 474, and Fleming v. Phoenix Assur. Co., 75 Hun, 530, 27 N.Y.S. 488. It is not of consequence whether the persons who are to fix the amount of the loss as between the insured and the insurer are called appraisers or referees, nor whether their decision is called an award or an appraisal. We do not overlook the fact that in the New York standard form it is called an award. If the rights of the parties are fixed by persons called appraisers and their conclusion is called an appraisal, they are in effect referees and their conclusion is in effect an award.

The history and purpose of the statutes which resulted in St. 1907, c. 576, § 60, establishing the Massachusetts standard form of fire insurance policy containing the clause here in question shows that the referees appointed under it were intended to be referees of the character previously described in Palmer v. Clark, 106 Mass. 373, theretofore well known in the jurisprudence of this commonwealth. See Flint v. Gibson, 106 Mass. 391; Robbins v. Clark, 129 Mass. 145; Haley v. Bellamy, 137 Mass. 357. In Palmer v. Clark, Colt, J., 106 Mass. at page 389, said: 'A reference to a third person to fix by his judgment the price, quantity or quality of material, to make an appraisement of property and the like, especially when such reference is one of the stipulations of a contract founded on other and good considerations, differs in many respects from and ordinary submission to arbitration. It is not revocable. The decision may be made without notice to or hearing of the parties, unless such notice and hearing be required by express provision or reasonable implication; and it may be made upon such principles as the person agreed on may see fit honestly to adopt, or upon such evidence as he may choose to receive.'

Before any statute on the subject had been enacted, a contest under a policy of fire insurance almost always was begun by putting the insured to a proof of the amount of his loss. That generally meant a reference to an auditor whose conclusion often reached after many hearings extending over a long period of time, was subject to revision at the trial of the cause in court. Such a method of determining the amount of loss under a fire insurance policy was an unsatisfactory one, and it was manifestly the purpose of the statutes which ended in St. 1887, c. 214, § 60 (now ...