Harter v. American Eagle Fire Ins. Co.

• Decision Date: 27 June 1932
• Docket Number: No. 5967.,5967.
• Citation: 60 F.2d 245
• Parties: HARTER v. AMERICAN EAGLE FIRE INS. CO.
• Court: U.S. Court of Appeals — Sixth Circuit

60 F.2d 245 (1932)

HARTER v. AMERICAN EAGLE FIRE INS. CO.

No. 5967.

Circuit Court of Appeals, Sixth Circuit.

June 27, 1932.

John H. McNeal, of Cleveland, Ohio, for appellant.

R. M. Edmonds, of Columbus, Ohio (Mooney, Bibbee & Edmonds, of Columbus, Ohio, on the brief), for appellee.

Before MOORMAN, HICKENLOOPER, and SIMONS, Circuit Judges.

SIMONS, Circuit Judge.

The plaintiff below looked for escaping gas with a lighted match. The inevitable explosion and resulting fire which followed completely destroyed his house and his household goods, injured him, and caused him substantial loss of earnings. At the time of the explosion and fire, the plaintiff's house was insured against fire in the sum of $5,000 by a policy issued by the defendant insurance company, appellee. The plaintiff notified Mr. Hook, a local agent of the company, of the fire, and claims to have been told by Hook that there was nothing for him to do or sign; that his claim would be paid in the sum of $5,000, but that he should first settle with the East Ohio Gas Company, that company being responsible for the escaping gas which caused the explosion; that, by first doing so, he would obtain a better settlement from the gas company; that he could then come back and his money would be paid to him. The plaintiff subsequently presented to the gas company a claim for all of the damages suffered, including damages to his house and household goods, his personal injuries, and loss of salary, and the gas company paid him the sum of $32,000, taking a full release of all liability, which release is set forth in the margin.¹ After the settlement the plaintiff commenced suit on his fire insurance policy against the defendant in the state court, and, after removal to and trial in the federal court, where judgment on directed verdict was entered against him, brought this appeal.

The policy sued upon contained the usual subrogation clause, providing that, in case fire is caused by the act or neglect of any person or corporation, the company should, upon payment of the loss, be subrogated to the extent of any payment made by it to all right of recovery by the insured for the resulting loss. It also contained the further provision that no officer, agent, or other representative of the company, should have the power to waive any provision or condition of the policy except such as by the terms of the policy might be the subject of agreement indorsed thereon or added thereto, and as to such provisions or conditions no agent should have the power, or be deemed or held to have waived such provisions or conditions unless the waiver be written upon or attached to the policy.

Defense to the suit was based upon payment of the loss suffered by the party primarily liable, and upon destruction of defendant's right to subrogation by the plaintiff's execution of the release to the gas company for all damages growing out of the explosion. In answer the plaintiff contends that there was no settlement of the fire loss with the gas company, that defendant's agent waived the subrogation clause, and that in any event the defendant is estopped by the representations of its agent from denying liability on the policy.

The defendant possessed the right to subrogation to the extent of its liability on the policy not only under its contract, but upon equitable principles. Phœnix Insurance Company v. Erie & W. Transportation Company, 117 U. S. 312, 6 S. Ct. 750, 29 L. Ed. 873; Farmers' Bank v. Hayes, 58 F. (2d) 34, decided by this court April 15, 1932. It is also settled that a release given by the insured to a tort-feasor who is primarily liable for the injury destroys the insurance company's right of subrogation, and is a bar to recovery on the policy. Phœnix Insurance Company v. Erie & W. Transportation Company, supra; Chicago, etc., Railroad Company v. Pullman Car Company, 139 U. S. 79, 11 S. Ct. 490, 35 L. Ed. 97; Packham v. German Fire Insurance Company, 91 Md. 515, 46 A. 1066, 50 L. R. A. 828, 80 Am. St. Rep. 461; Sims v. Mutual Fire Insurance Company, 101 Wis. 586, 77 N. W. 908; Maryland Motor Car Insurance Company v. Haggard (Tex. Civ. App.) 168 S. W. 1011; Auto Owners' Protective Exchange v. Edwards, 82 Ind. App. 558, 136 N. E. 577; Smith & Son v. Phœnix Insurance Company, 181 Mo. App. 455, 168 S. W. 831; Highlands v. Cumberland V. F. M. Insurance Company, 203 Pa. 134, 52 A. 130; Ætna Casualty & Surety Co. v. Phœnix National Bank, 285 U. S. 209, 52 S. Ct. 329, 76 L. Ed. 709. This seems to rest upon the principle that the insured is not entitled to double compensation for the same loss. Auto Owners' Protective Exchange v. Edwards, supra; Phœnix Insurance Company v. Transportation Co., supra; Sims v. Mutual Fire Insurance Company, supra. Even if the insurance company had first paid, and if the amount collected from the gas company had exceeded the net loss, the excess amount representing such loss would be held by the insured in trust for the insurance company. Phœnix Insurance Company v. Erie & W. Transportation Company, supra.

Some of the cases go so far as to hold that, even where some item of damage is especially excepted or reserved in the release, the right to recovery is nevertheless extinguished, because release from liability for a tort extinguishes all claims of damages growing out of it. Packham v. German Fire Insurance Company, supra; Sims v. Mutual Fire Insurance Company, supra; Maryland Motor Car Insurance Co. v. Haggard, supra. It is unnecessary for us to decide the question ruled upon in the last-cited case, because it is clear from the terms of the release and upon the whole record that no item of damage was excepted by the plaintiff in his release to the gas company.

There remain the questions of waiver and...