Hanover Ins. Co. of New York v. Hagler

• Decision Date: 31 December 1975
• Docket Number: No. 18712,18712
• Parties: The HANOVER INSURANCE COMPANY OF NEW YORK, Appellant, v. Horace B. HAGLER, d/b/a Texas Electronics Supply Company, Appellee .
• Court: Texas Court of Appeals

Page 136

532 S.W.2d 136

The HANOVER INSURANCE COMPANY OF NEW YORK, Appellant, v. Horace B. HAGLER, d/b/a Texas Electronics Supply Company, Appellee .

No. 18712.

Court of Civil Appeals of Texas,

Dallas.

Dec. 31, 1975.

Rehearing Denied Jan. 29, 1976.

Robert Lee Guthrie, William F. Billings, Johnson, Guthrie, Billings & Nash, Dallas, for appellant.

John Emmett, Dallas, for appellee.

CLAUDE WILLIAMS, Chief Justice.

Horace B. Hagler, d/b/a Texas Electronics Supply Company, sued Hanover Insurance Company of New York to recover on a policy issued by Hanover which insured against the hazard of 'vandalism and malicious mischief.' The case was tried to a jury which found that Hagler had sustained damages to his merchandise in the sum of $82,911.58 as a direct result of vandalism and malicious mischief. Based upon his verdict, the court rendered judgment against Hanover in the sum of $30,000, the policy limit. Hanover appeals. We reverse and remand.

Our primary question is whether Hagler has avoided the consequences of his failure to file a proof of loss by proving substantial compliance with or waiver of that requirement as a matter of law. The record is without dispute that the loss occurred on July 19, 1970, and that Hagler did not file a formal verified proof of loss, as required by the policy, within ninety-one days following July 19, 1970. Hagler alleged (1) that Hanover, by its action and conduct, waived the filing of a formal proof of loss and (2) that he had substantially complied with the terms of the policy. No issue was submitted to the jury dealing with either waiver or substantial compliance. The record does not reveal that Hagler requested the submission of either issue.

Hanover contends that the trial court erred in rendering judgment against it because Hagler failed to file a proof of loss, a condition precedent to recovery on the policy, and did not prove or secure a finding that the filing of the proof of loss had been waived. We agree.

It is a settled principle of law in Texas that a stipulation in an insurance contract requiring notice and proof of loss within a reasonable time and on reasonable terms is valid and must be complied with to recover under the policy. Commercial Union Assurance Co. v. Preston, 115 Tex. 351, 282 S.W. 563, 566 (1926); Scottish Union & National Insurance Co. v. Clancey,83 Tex. 113, 18 S.W. 439 (1892); Delaware Underwriters v. Brock, 109 Tex. 425, 211 S.W. 779 (1919); Great Central Insurance Co. v. Cook, 422 S.W.2d 801, 806 (Tex.Civ.App.--Dallas 1967, no writ). The purpose of requiring written notice and proof of loss within ninety-one days is to enable the insurer to properly investigate the circumstances of the loss while the occurrence is fresh in the minds of witnesses, to prevent fraud, and to enable it to form an intelligent estimate of its rights and liabilities so that it may adequately prepare to defend any claim that may arise. Employers Casualty Co. v. Glens Falls Insurance Co., 484 S.W.2d 570, 575 (Tex.1972); 14 Couch on Insurance 2d § 49:373 (2d ed. 1965). Waiver of the proof of loss requirement or a showing of substantial compliance with the provision is all that is ordinarily required of an insured to avoid the consequences of failure to strictly comply with the policy provision. United States Fidelity and Guaranty Co. v. Bimco Iron and Metal Corp., 464 S.W.2d 353, 356 (Tex.1971); Home Insurance Co. v. Greene, 443 S.W.2d 326 (Tex.Civ.App.--Texarkana 1969), Affirmed, 453 S.W.2d 470 (Tex.1970); Great Central Insurance Co. v. Cook,422 S.W.2d 801, 806 (Tex.Civ.App.--Dallas 1967, no writ); Federal Union Insurance Co. v. Hardin, 115 S.W.2d 1144 (Tex.Civ.App.--Amarillo 1938, no writ).

Hagler, while conceding that he had the burden of establishing either waiver or substantial compliance with the proof of loss provision, argues that he has satisfied that burden as a matter of law and that, therefore, it was not incumbent upon him to secure a jury finding on these issues. We must examine the record to determine the validity of this argument.

Hagler operated a business described as a 'wholesale electronics parts and pawnshop.' The policy of insurance issued by Hanover insured the contents of the shop against 'vandalism and malicious mischief' and expressly excluded 'pilferage, theft, burglary or larceny.' However, the policy did provide coverage for damage to the building from burglary. On July 19, 1970, two men entered the pawnshop by breaking into the adjoining place of business and making a hole in the companion wall. Bins containing thousands of minute electronic parts were turned over and the contents scattered in the aisles; boxes were dumped on the floor; inventory cards were destroyed or lost. The insurance company was promptly notified of the loss, and an investigation was conducted. As a result, Hanover paid Hagler for the damage done to his building by the burglars. When Hagler later demanded payment for damage to his personal property in the building, Hanover refused to pay for that loss.

Hagler argues that the insurance company, having paid for the damage to the building before the time for filing the proof of loss expired, waived the proof of loss requirement for the vandalism and malicious mischief claim. A provision requiring a formal proof of loss may be waived by conduct of the insurer which is inconsistent with an intention to rely on failure to timely file the proof of loss as a defense. Such conduct by the insurer lulls the insured into believing that the filing of the proof of loss will not be required. United States Fidelity and Guaranty Co. v. Bimco Iron & Metal Corp., 464 S.W.2d 353, 357 (T...