Hilltop Bowl, Inc. v. United States Fidelity & Guaranty Co.
| Decision Date | 20 October 1966 |
| Docket Number | Civ. A. No. 10340,10341. |
| Citation | 259 F. Supp. 649 |
| Parties | HILLTOP BOWL, INC., et al., v. UNITED STATES FIDELITY & GUARANTY COMPANY et al. (two cases). |
| Court | U.S. District Court — Western District of Louisiana |
James J. Dormer, Brown & Dormer, J. Bennett Johnston, Jr., Johnston & Johnston, Shreveport, La., for plaintiffs.
Charles L. Mayer, Mayer & Smith, Shreveport, La., for defendants.
After timely removal from the state court, we sustained a motion by defendants for entry of judgment. Hilltop Bowl, Inc. v. United States Fid. & Guar. Co., 248 F.Supp. 572 (W.D.La.1966). We concluded there that the bowling lanes installed by the lessee remained its property and were thus covered by the lessee's insurance policy on the "contents" rather than the lessor's policy on the "building." Since the lessee's policy was subject to a co-insurance clause,1 lessee was required to co-insure 28.986 per cent of the damage to the contents because the actual cash value of the contents exceeded the applicable insurance.
Plaintiffs now move for new trial and/or rehearing, alleging (1) that discovery of new evidence shows an intention to treat the bowling lanes as part of the building under the insurance policies, (2) that the court erred in assessing half of the appraisal costs to plaintiffs, and (3) that the controversy should be resolved by reference to the terms of the insurance policies, with due regard to the intention of the parties and to the Louisiana rule that in cases of ambiguity, policies are to be strictly construed against the insurer.2 Although it is our conclusion that plaintiffs' motion must be denied, we deem it advisable to expound upon our original opinion in order to elucidate its resolution of the issues.
Hilltop Realty was the owner and lessor of a building operated as a bowling alley by its lessee, Hilltop Bowl. Although similar in name, these two corporations were separate and distinct legal entities with independent corporate purposes. Both lessor and lessee carried fire insurance policies when the building and its contents were partially destroyed by fire January 19, 1964. The lessor had insured the building for $120,000, and the lessee had insured the contents for $115,000.
Pursuant to the terms of the insurance contracts, each party appointed an appraiser, and the Court selected an umpire. After deliberation, it was agreed that the actual cash value of the building and its contents was $226,880.86, well within the combined coverage of the policies of lessor and lessee. However, since the lessee's policy was subject to a co-insurance provision, a dispute arose as to whether the bowling lanes were insured under lessor's or lessee's policy. If the bowling lanes were considered contents and thus covered under lessee's policy, the actual cash value of the contents would exceed the applicable insurance, requiring the lessee to co-insure 28.986 per cent of the damage to the contents.3
Initially, perhaps we should dispose of the question regarding appraisal costs. Plaintiffs assert that R.S. 22:629,4 as interpreted in Macaluso v. Watson, 171 So.2d 755 (La.App. 4th Cir. 1965), is support for the contention that Louisiana fire insurance policies cannot require the insured to submit to an appraisal procedure. In Macaluso, it was held that a provision in an insurance policy requiring arbitration violated R.S. 22:629 since it deprived Louisiana courts of jurisdiction of an action against an insurer.5 Although we have no quarrel with Macaluso and its applicability to required arbitration in uninsured motorist cases, it has no pertinence here. The appraisal procedure in these insurance policies was lifted verbatim from the appraisal provisions contained in the standard fire insurance policy of Louisiana.6 Unlike the policies under consideration in Macaluso, these policies include no requirement of arbitration which might affect the jurisdiction of Louisiana courts. Thus plaintiffs' contention that they are not bound by the policy's provision requiring a share of the umpire's fee is without merit.
Plaintiffs allege that our original opinion excessively emphasized Louisiana property law and failed to properly appreciate the intention of the parties as reflected by the terms of the insurance policies. Additionally, plaintiffs seek to invoke the Louisiana rule providing for strict construction against insurers in cases where ambiguity exists in the policy. As we shall demonstrate, Louisiana property law, the agreements between the interested parties and the terms of the insurance policies clearly reveal that the intention of the parties was to treat the bowling lanes as contents rather than as part of the building.
The record indicates that these two separate and distinct legal entities entered into a lease in which Hilltop Bowl, as lessee, was to pay substantial rental to operate a bowling alley in the building owned by Hilltop Realty. The lessee, at its own expense, installed the bowling lanes in the building, along with automatic pinsetters and miscellaneous bowling equipment. Quite naturally, lessee was unable to transform lessor's building into a modern bowling alley without the procurement of extensive credit. Thus after installing twelve bowling lanes and equipment in the building, Buckelew's Hardware Co. and Brunswick Automatic Pinsetters, Inc. were by no stretch of the imagination insubstantial creditors.
Brunswick, certainly not without experience, was interested in protecting its investment. In addition to its recorded chattel mortgage, this influential creditor persuaded other potentially priming creditors to waive any priority they may have been able to assert with reference to the bowling lanes and equipment. Thus in an agreement styled a "Real Estate Consent," the bowling lanes and equipment were stipulated to "at all times be considered personal property and not attached to the real estate." In this agreement, Hilltop Bowl, Inc., Hilltop Realty, Inc., Commercial National Bank and the First National Bank in Mansfield waived any "lien, claim or interest" which they may have or ever acquire as to the bowling lanes and equipment. To show the extent of Brunswick's influence over both the lessor and lessee, it was not only named loss payee in lessee's insurance policy on the contents, but also in lessor's policy covering the building.
In our original opinion, we concluded that the bowling lanes would not be considered immovables by nature or destination under Louisiana property law.7 Under the law, there seems to be little doubt that the lessee remained owner of the bowling lanes and could remove them subject to the limitation that the building be left in the same condition in which it was received.8 Once we had determined that ownership of the bowling lanes had been retained by lessee, it was then necessary to examine the coverage clauses of each insurance policy.
Lessor's policy on the building contained the following clause:
(Emphasis added.)
Since the coverage clause specifically exempted from coverage property described in Section B and that section is applicable only when "contents" are the subject of insurance, it is important to note that Section B provided:
(Emphasis added.)
After an examination of these clauses, it seems clear that the bowling lanes could only be covered under the "contents" policy since they were owned by the lessee and in use pertaining to his occupancy of lessor's building.
To the contention that we relied too heavily on Louisiana property law and the "Real Estate Consent" agreement, we can only reiterate a fundamental rule of insurance law. Insurance on property is not a wagering contract but a contract of indemnity, and if one has no insurable interest in property, he sustains no loss by its destruction.9 Answering the question of ownership of the bowling lanes by reference to Louisiana property law and the "Real Estate Consent" agreement was necessary to establish intention of the parties. Lessee, as owner of the bowling lanes, unquestionably had the requisite insurable interest required by R.S. 22:614.10 On the other hand, the lessor had very little insurable interest in the bowling lanes. Not only were the bowling lanes to remain the property of the lessee, but by execution of the "Real Estate Consent," lessor had waived any priority his lessor's privilege may have had over the chattel mortgage held by Brunswick.11
Admittedly, lessor has some insurable interest in the property of its lessee despite relinquishment of a portion of his priority rights.12 However, since the valued policy law of Louisiana is inapplicable to this case because the bowling lanes were neither immovable by nature or destination,13 there is no question that the insurer could have questioned the extent of the lessor's insurable interest.14 Since lessor would have been limited in its recovery to its insurable interest, which would certainly have been small, we fail to see any basis for the belief that the parties intended for the bowling lanes to be covered by lessor's...
To continue reading
Request your trial
-
Technical Land, Inc. v. Firemen's Ins. Co.
...one without an insurable interest in property incurs no redeemable loss by its destruction. See Hilltop Bowl Inc. v. United States Fidelity & Guar. Co., 259 F.Supp. 649, 652 (W.D.La.1966). A policy reason for defining with concreteness the basis for an insurable interest is that the insurab......
-
Barham v. United Statesa Cas. Ins. Co.
...of requiring an insurable interest is to prevent wagering contracts on insurance risks.”); see also Hilltop Bowl, Inc. v. U.S. Fidelity & Guaranty Co., 259 F.Supp. 649, 652 (W.D.La.1966). An insurable interest must exist not only at the time the policy is written but also at the time of the......