Home Ins. Co. v. Hartshorn

• Decision Date: 20 March 1922
• Docket Number: 22472
• Citation: 91 So. 1,128 Miss. 282
• Court: Mississippi Supreme Court
• Parties: HOME INS CO. v. HARTSHORN

91 So. 1

128 Miss. 282

HOME INS CO. v. HARTSHORN

No. 22472

Supreme Court of Mississippi

March 20, 1922

1 INSURANCE. Insurer's right of subrogation against third party who caused loss measured by terms of clause providing therefor.

Where an insurance policy contains a clause providing that, on the payment by the insurer for the loss or destruction of the property insured, the insurer shall be subrogated to the insured's right to recover against any person whose act or neglect caused the loss or destruction of the property the insurer's right of subrogation must be measured by the terms of the clause of the policy providing for it.

2 INSURANCE. Insurer, to be subrogated to insured's right against third party who caused loss, required to make claim to insured that loss was so caused before payment of loss to insured.

In order for an insurance company to be subrogated to the rights of the insured upon the payment by it of the loss covered by a policy issued by the company to the insured, containing a provision that "if the company shall claim that the fire was caused by the act or neglect of any person or corporation, private or municipal, this company shall on payment of the loss be subrogated to the extent of such payment to all right of recovery by the insured for the loss resulting therefrom and such right shall be assigned to this company by the insured on receiving such payment," the claim of the insurer that the fire was caused by the act or neglect of any person or corporation must be made to the insured at or before the payment to him of the loss by the insurer.

3 INSURANCE. Word "salvage" defined.

The word "salvage" in the law of insurance includes damages paid by third persons for the loss of property covered by an insurance policy.

4 INSURANCE. Insurer by making settlement entitling insured to salvage waived right of subrogation.

Where an insurance company in a settlement with the insured in a policy issued by it for the loss of the property insured by fire, agrees that the insured shall have all salvage, the company thereby waives its right of subrogation to the right of the insured to recover damages against any person by whose act or neglect the property was destroyed.

5. INSURANCE. Extent to which insurer who has settled with insured may participate in amount recovered by insured against third party who caused fire.

Where an insurance company settles with an insured, to whom it has issued a policy of insurance, for less than the value of the insured property destroyed and for less than it was insured by the policy issued, and the, insured thereafter recovers judgment against a third person whose act or neglect caused the destruction of the property for the value thereof, the insurer is not entitled to any part of the money so recovered by the insured unless the amount paid by the insurer to the insured, together with that to be received by the insured under the judgment, less the amount expended by him in the recovery thereof, exceeds the value of the insured property destroyed, and then the insurer is entitled to participate only to the extent of such excess.

HON. G. ED WILLIAMS, Chancellor.

APPEAL from chancery court of Leflore county, HON. G. ED WILLIAMS, Chancellor.

Action by the Tallahatchie Compress & Storage Company against the Home insurance Company, in which the defendant filed a cross-bill against Mrs. J. B. Hartshorn. From decree sustaining demurrer to cross-bill, defendant appeals. Affirmed and remanded.

Affirmed and remanded.

R. L. McLaurin, T. C. Catchings, and T. G. Birchett, for appellants.

The fourth ground of demurrer was the principal one relied on by the appellee, and inasmuch as the main argument in the instant case will revolve around this ground, we will repeat same: "Because the cross-bill shows that any claim that cross-complainant (appellant) may have had to the money in controversy is concluded by compromise."

On record page 16 will be found this clause, which is a clause in the policy: "If this company shall claim that the fire was caused by the act or neglect of any person or corporation, private or municipal, this company shall on payment of the loss be subrogated to the extent of such payment to all right of recovery by the insured for the loss resulting therefrom and such right shall be assigned to this company by the insured on receiving such payment."

There was no written assignment taken and appellee contended that the failure to procure a written assignment, connected with the last clause in the receipt, and in consideration of said payment, the policy is hereby cancelled and surrendered, and the last clause in the check or draft for the settlement money and said policy is hereby cancelled and surrendered, taken in connection with the statement on the proof of loss, shown on record page 25, compromise settlement six thousand six hundred dollars assured to have all salvage, eliminates and extinguishes all subrogation claims.

The right of subrogation exists independent of any assignment to the person paying the loss or damage against the one whose act caused same. It is immaterial whether an express instrument of subrogation is obtained or not.

This court in the case of Freed v. American Fire Insurance Company, 90 Miss. 72, has fully discussed the law of subrogation applicable to such cases in this state. Phoenix Ins. Co. v. Erie & Western Transportation Co., 117 U.S. 312, at page 321, 6 S.Ct. 750, at page 753, 29 L.Ed. 873.

Thus it will be seen that this court has distinctly held that an assignment is not necessary to support the right and that the right of subrogation does not depend on a special clause in the policy, but grows out of and is incident to the payment itself.

Appellee argued on the hearing for demurrer, and will so contend here, that subrogation not being reserved in the proof of loss, amounted to a waiver of this equity. Waiver in insurance is construed to be a voluntary relinquishment of a known right, and would this court construe the word supra, to be such a waiver.

Under the law, as laid down in the Freed case, supra, we find the insurer is entitled to be reimbursed from the remnants of the goods or from the damages paid by third persons for the loss. The assured, appellee, was permitted to retain the remnants of the goods, which must have had a very substantial value to be accepted by her as a material matter of settlement, but we do not find anywhere in the record that there was any relinquishment of the subrogation right conferred by law. The argument of appellee based upon the receipt and draft clauses quoted supra to the effect that the policy was cancelled and surrendered upon the payment of the sixty-six hundred dollars and the retention of the salvage, that the subrogation right was lost and that these two instruments eliminated the subrogation clause in the policy, we contend that this is not sound.

The subrogation grows out of the payment and is not a part of the settlement. It is incident to the payment of the loss and an equity of reimbursement conferred upon the party paying against anything recovered from the party causing the loss. The effect of these words is simply this, that the right to recover for the lost cotton on the policy between the insured, appellee, and the insurer, appellant, is ended, and she is paid so far as the policy insures her against fire on her cotton. 5 Joyce on Insurance, page 5880.

From a consideration of the above authority it will be seen that in applying the doctrine of subrogation, technicalities which are not of an insuperable nature should be disregarded and the broad equities should be admissible between the parties. We stated as a proposition of law that the law abhors double payments and speculation at the expense of one who has done his share and complied with his agreements.

The relation between the appellee and the appellant in regard to the suit against the Compress Company and the collection of the damages for the damaged cotton is that of trustee, in this that the appellee is trustee for the insurer. The suit had to be brought in the name of the appellee.

In Kansas City, etc., R. R. v. Blaker & Co. Vol. 1, American & English Annotated Cases, page 883, we find the rule proceeds on the theory that the assured sustains towards the insurer the relation of trustee, and is well supported by the authorities, citing a large number of authorities. The payment of the sum supra amounted to an equitable assignment of the sum paid. New York C. & S. L. R. R. Co. v. Roper, 36 L. R. A. (N. S.) 954, bottom left hand corner.

In Cooley's Briefs on the Law of Insurance, Vol. 3908, we find the general rule stated: "The general rule is that the right of the insurer to be subrogated to the rights of the insured against the person responsible for the loss extends no further than the amount the company was compelled to pay." Same authority, page 3913.

The failure to procure the assignment in writing does not affect the right to subrogation. Cooley's Briefs on the Law of Insurance, Vol. 7, supplement, page 1645, section 3898.

Alfred Stoner and Gardner, McBee & Gardner, for appellee.

The cross-bill did not allege that the sum of money recovered from the compress company, after paying the expenses of its recovery, plus the amount of insurance paid by appellant, was in excess of the value of the cotton destroyed.

All the authorities that we have found hold that, even though the insurance company pays the full amount of insurance stipulated for by the policy (which was not the case here) the assured must be fully indemnified before the assurer is entitled to subrogation. It is held and we shall cite numerous authorities under this paragraph showing, that the assured is...