Headley v. Aetna Ins. Co.

• Decision Date: 28 November 1918
• Docket Number: 7 Div. 957
• Citation: 202 Ala. 384,80 So. 466
• Parties: HEADLEY v. AETNA INS. CO.
• Court: Alabama Supreme Court

80 So. 466

202 Ala. 384

HEADLEY v. AETNA INS. CO.

7 Div. 957

Supreme Court of Alabama

November 28, 1918

Appeal from Circuit Court, Talladega County; Hugh D. Merrill, Judge.

Action by Annie Carrie Headley against the AEtna Insurance Company. Judgment for defendant, and plaintiff appeals. Reversed and remanded.

Appellant sued appellee on a policy of insurance known as tornado or cyclone insurance. The policy contained a clause by which the parties undertook to agree that, in the event of a disagreement between them as to the amount of damages or loss suffered by the insured, then on the request or demand of either party each should select or name one appraiser, and these two appraisers should select an umpire, and that the award of any two of the three should determine the amount of the loss. It further provided that no suit should be brought on the policy until there had been a full compliance with those provisions by the insured. The reporter will set out this clause, it being the last clause in the policy.

The complaint set out the policy in full, and claimed a breach thereof by the defendant, in the failure to pay the amount as agreed in the policy.

To the complaint the defendant filed several special pleas in abatement, because the action was prematurely brought, in that there was a disagreement as to the amount of loss or damages, and the amount had not been ascertained or determined in the mode or manner provided for in the policy setting out the provision of the policy above mentioned.

The plaintiff moved to strike the special pleas in abatement, and demurred thereto; and, the motion and the demurrer both being overruled she filed a general and a number of special replications thereto. The demurrer was sustained as to replications 2, 4, 5, and 7, and overruled as to replications 1, 3, and 6. No ruling appears to have been made as to replications 8 and 9.

Special replications 3 and 6, in substance, alleged that the failure to appoint an umpire was not the fault of plaintiff, but that of defendant, and hence that plaintiff ought not to be allowed to prosecute this suit.

After the evidence was concluded, the trial court, at the request of the defendant, gave the affirmative charge in favor of defendant.

The trial was had on these issues as thus made, and resulted in a verdict and judgment for defendant. Plaintiff appeals assigning many errors.

The clause of the policy referred to is as follows:

In the event of disagreement as to the amount of any loss or damage, the same shall, at the written request of either party, be ascertained by two competent and disinterested appraisers, whose appointment shall, if requested, be agreed on in writing, 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 each subject of difference to the umpire; and the award in writing, under oath, of any two of them shall determine the amount of such loss, but such appraisal shall affect no other question under this policy; and until such appraisal, if requested, shall be had, the loss shall not be payable. The parties thereto shall pay the appraisers respectively selected by them, and shall bear equally the expenses of the appraisal and umpire. And claim for any loss or damage shall be forfeited by failure to furnish proofs of such loss or damage within the time and in the manner above provided including examinations under oath and the award of appraisers, if the same or either of them have been requested. No suit or action on this policy, for the recovery of any claim, shall be sustainable in any court of law or equity until after full compliance by the insured with all the foregoing requirements, nor unless commenced within twelve months after the date of the tornado, windstorm or cyclone.

Riddle & Riddle, of Talladega, for appellant.

Coleman & Coleman, of Birmingham, and W.B. Harrison, of Talladega for appellee.

MAYFIELD J.

A covenant in a contract, whether of insurance or of other matters, to submit every matter of dispute between the parties, growing out of such contract, to arbitration or to a board of appraisers, to the end of defeating the jurisdiction of courts as to the subject-matter, are universally held to be void, as against public policy. There need be no such express intent to so defeat the jurisdiction; if the necessary effect of the covenant will inevitably so operate, it is held to be void because against public policy. Agreements, however, which merely provide a mode or manner for ascertaining the value of property, or the amount of damages, losses, or profits, are valid, and may be made conditions precedent to the right of action to recover damages based on such values, damages, losses, or profits. Western Assur. Co. v. Hall, 112 Ala. 318, 20 So. 447; Niagara Ins. Co. v. Bishop, 154 Ill. 9, 39 N.E. 1102, 45 Am.St.Rep. 105. The clause of the insurance policy in question falls within the latter class, and is valid and enforceable. The policy of this state favors arbitration and amicable settlement of differences between parties; but it does not favor or allow agreements in advance to oust or defeat the jurisdiction of all courts, as to all differences between parties. Const. § 84; Code, §§ 2908-2923.

A general provision in a contract for the arbitration of any dispute which may arise thereunder does not oust the courts, nor bar a suit either at law or equity. Stone v. Dennis, 3 Port. 231; Kinney v. Baltimore & Ohio Employés' Ass'n, 35 W.Va. 385, 14 S.E. 8, 15 L.R.A. 142.

Where the contract explicitly makes the determination by arbitration of amounts, values, qualities, etc., a condition precedent to the maintenance of an action, it is binding, as in insurance and building contracts; but if the condition is not clearly and explicitly precedent, and is merely collateral, an action is not barred. A provision in a contract that certain matters of estimate involving no dispute shall be determined and certified by a certain person, as an engineer or architect, is binding. Campbell v. American Popular Life Ins. Co., 1 McArthur, 246, 29 Am.Rep. 591; Commercial Union Assur. Co. v. Hocking, 115 Pa. 407, 8 A. 589, 2 Am.St.Rep. 562; Cole Mfg. Co. v. Collier, 91 Tenn. 525, 19 S.W. 672, 30 Am.St.Rep. 898; Faunce v. Burke & Gonder, 16 Pa. 469, 55 Am.Dec. 519.

An arbitration clause, induced by fraud, folly, or undue pressure, might well be refused a specific performance, or disregarded, when set up as a defense; but when parties stand upon equal footing, and provide such a mode for the adjustment of their differences, it is not easy to assign a reason why such contracts should not stand.

Some contracts of this kind impose a condition precedent to a right of action accruing; others endeavor to prevent any right of action accruing at all. Lawson on Contracts, § 318; President, etc., of Delaware & H. Canal Co. v. Pennsylvania Coal Co., 50 N.Y. 250; May on Insurance, § 492; 2 Parsons on Contracts, 707.

By the common law an agreement to refer matters of difference to arbitration did not oust the jurisdiction of courts. A person could not, by his mere voluntary agreement, preclude himself from seeking relief in the court. T.R. 139; 36 L.J.Ch. 480.

If parties to contracts of insurance covenant that in case of disagreement as to the amount of the loss or damages, or the value of the property destroyed or damaged, they will submit such difference to disinterested parties as appraisers, arbitrators, or umpires, and provide a mode for selecting such parties, and make an award of such parties a prerequisite to the bringing of a suit on such insurance policy, such covenant or agreement is valid, and will be enforced by the courts, in the absence of surprise, mistake, fraud, etc. If, however, one party prevents the award from being made as provided in the covenant, he will not be heard in a court of law or equity to say that an award is a prerequisite to a suit on the insurance contract. No one is allowed thus to profit by his own wrong or fault, which the other could not prevent and did not occasion.

So also, if the award, without fault of either party, becomes impossible of performance, it will not be given effect, to destroy all rights of a party. If the appraisers nominated by the parties should willfully refuse to name an umpire or to appraise the property, without fault of the insured, this ought not to bar his right of recovery. Such was evidently not the...