Hartford Fire Ins. Co. v. Shlenker

• Decision Date: 09 June 1902
• Citation: 32 So. 155,80 Miss. 667
• Court: Mississippi Supreme Court
• Parties: HARTFORD FIRE INSURANCE COMPANY v. DAVID J. SHLENKER

32 So. 155

80 Miss. 667

HARTFORD FIRE INSURANCE COMPANY v. DAVID J. SHLENKER

Supreme Court of Mississippi

June 9, 1902

FROM the circuit court of Warren county. HON. GEORGE ANDERSON Judge.

Shlenker appellee, was plaintiff in the court below; the insurance company, appellant, was defendant there. The suit was upon a fire insurance policy covering cotton in bales contained in certain cotton yards in Vicksburg, Miss. The policy sued on contained the following stipulations: "In consideration of the mutually agreed reduction of one per centum per annum at which this policy is issued, the assured agree to waive any and all benefit that may be claimed under an act of the legislature of Mississippi known as 'House Bill No 702,' approved March 20, 1896; and it is understood agreed, and warranted by the assured that the basis for adjustment of any claim for loss or damage to the property covered by this insurance shall not exceed the actual cash market value of such property at the time of the loss, and at the place of the fire, which cash market value shall in no event be greater than it would then and there cost to replace the property damaged or destroyed with property of the same kind and quality. And it is further understood, agreed, and warranted by the assured to maintain insurance to an amount not less than the cash value of the whole property hereby insured, and that in case of loss under this policy this company shall be liable only for such proportion of the whole loss which shall not exceed the actual market value as above provided as the amount of this insurance bears to the cash market value of the whole property hereby insured at the time of the fire. Now, therefore, in consideration of said reduction in rates, the assured do hereby covenant and agree with the Hartford Fire Insurance Company that in case this warranty and agreement shall at any time be violated, they do hereby declare themselves liable to the Hartford Fire Insurance Company for any loss or damage which may result to said Hartford Fire Insurance Company by reason of breach of this warranty; it being clearly understood that this policy of insurance is based on this agreement, and its validity depends upon the performance of this obligation."

The suit was for $ 2,000, the amount of the policy, and the declaration alleged that there was $ 15,000 worth of cotton in the yards at the time of the fire, which destroyed over $ 4,000 worth of it. Defendant filed several separate pleas raising the following questions: (1) By the terms of the policy the insurance company was not responsible for the whole amount named in the policy, but only to the extent of the proportion which the amount named in the policy might bear to the whole amount of the value of the property insured; (2) that the stipulation that the insured would maintain insurance upon the property to its full value was a vital condition upon which the policy was issued, and that by failure to maintain such full insurance the policy became void; (3) that the insured became bound to make good any loss or damage which might result to the company by reason of his failure to maintain full insurance; (4) the property insured was constantly changing in specifics, quantity, and value in the usual course of trade, and that for this reason the policy was not subject to the valued policy provisions of the law of 1896. Plaintiff demurred to these several pleas. The demurrer was sustained, to which defendant excepted, and declined to plead further, whereupon a judgment was rendered for plaintiff for the amount sued for and interest. From that judgment defendant appealed to the supreme court.

Affirmed.

E. J. Bowers and Catchings & Catchings, for appellant.

The amount named in the policy is the maximum liability of the insurer. The contract being one of indemnity, the amount named in the policy does not furnish the measure of damages for which the insured shall recover, but merely fixes the limit beyond which he cannot recover.

In case of damage or destruction, the amount of damages or the value of the property destroyed must be ascertained, and this being done, the insurer becomes liable for the amount so ascertained, not to exceed the limit fixed in the policy. This is because the contract being merely one of indemnity, the only recovery allowable is for the actual value of the property destroyed. What we have said, of course, relates to an ordinary contract of insurance, when not qualified by special stipulations, or controlled by statutory limitations or conditions. What we have said, also does not apply to that class of insurance contracts known to the law as valued policies. "Valued policies" are as ancient as the law of insurance itself, and rest upon principles entirely different from those which govern ordinary, or what the law designates as "open policies."

In the case of Patapsco Ins. Co. v. Biscoe, 7 Gill. & Johnson, 293, S. C., 28 Am. Dec., 219, the supreme court of Maryland, in discussing the law governing valued policies, uses the following language: "That the valuation, unless a fraudulent one, is always binding and conclusive upon the parties, and that unless it be a case of fraud the valuation agreed upon estops the parties from looking behind it for the purpose of changing the legal operation of the contract. In case of claim for a total loss upon such a policy, the only legitimate inquiry is: Has such a loss occurred, and has it been occasioned by one of the perils insured against, while the policy was operating upon the subject matter insured by it? Upon any other principle of construction, it would be divested of all the attributes of a valued policy, and the door would be open to inquiries unwarranted by the solemn agreement of the parties, and which is only admissible in the case of an open one. It would be subjecting the insured to all the delay, expense, and inconvenience which the valuation of the policy was intended to prevent, and would be at war with the best established principles of the law of insurance."

In other words, a valued policy is simply a contract of insurance by which the parties agree in advance that the amount to be paid in case of total loss shall be the amount named in the policy. Under such a contract, in case of total loss, no inquiries can be made for the purpose of ascertaining the value of the property destroyed, but the insurer becomes liable without regard to its value for the amount designated in the policy. Even, however, where a valued policy has been issued, the amount fixed in the policy is only intended to be, so far as the parties to the contract are concerned, the value of the whole property. It is, therefore, only where a whole property is destroyed that the insurer is bound to pay the whole sum named in the policy. Where the property is only partially destroyed, valued policies are treated precisely as though they were open policies, and before the insurer can be called upon to pay, the loss or damage incurred must first be ascertained. When it has been ascertained, he must pay, provided that in no event can he be required to pay a sum greater than that fixed in the policy. In other words, where the loss is not total, a valued policy becomes in law and in fact simply an open policy. Clark v. United Ins. Co., 7 Mass. 365, s. c., 5 Am. Dec., 50.

By the terms of that law all insurance contracts, except those relating to stocks of goods and merchandise, and other species of personal property where the same after the issuance of the policy is constantly changing in specifics and quantity, in the usual course of trade, are made and constituted valued policies, which are to be governed by the law pertaining to valued policies created by voluntary agreement as we have heretofore stated it to be.

If the legislature had simply declared that all policies of insurance, except those relating to losses on stocks of goods and merchandise, and other species of personal property where the same after the issuance of the policies is constantly changing in specifics and quantity in the usual course of trade, should be held and construed to be valued policies, it would have accomplished the same purpose precisely which it designated to accomplish, and which it did accomplish, by the law of 1896 as it is written.

The legislature simply made policies, other than those of the excepted class, where the loss was total, valued policies, subject to the law as laid down by the supreme court of Maryland in the case of Patapsco Ins. Co. v. Biscoe, 7 Gill. & Johnson, 283, and where the loss was partial "open policies" according to the law as laid down by the supreme court of Massachusetts in Clark v. United Insurance Co., 7 Mass. 365, s. c., 5 Am. Dec., 50, 219. Except as to certain policies on personal property constantly changing in specifics and quantity in the usual course of trade, all stipulations, no matter what, which seek to relieve the insurer in case of total loss from liability for the whole amount named in the policy, and which seeks to relieve the insurer in case of partial loss from liability for the full amount of damages, not to exceed the amount written in the policy as properly held by this court in Assurance Co. v. Phelps, 77 Miss. 657, are nugatory and void. We do not complain of that decision, but, on the contrary, accept it as correct and sound. That decision does no more than to declare, as the statute itself did no more than to declare, that all stipulations in policies of insurance (except such as are issued upon changeable property), which have for their object to reduce the liability of the insurer below the amount named, in case of total loss, or below the actual damages, in case of partial loss, are nugatory and void.

Neither the statute nor...