In re Strickel
| Decision Date | 11 March 1982 |
| Docket Number | Adv. No. 581-0003.,Bankruptcy No. 580-00087 |
| Citation | 19 BR 740 |
| Parties | In re Charles W. STRICKEL and Linda Strickel, Debtors. Thomas J. GRIFFITH, Trustee, Plaintiff, v. TEXAS FARM BUREAU MUTUAL INSURANCE COMPANY, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
Larry McEachern, Plainview, Tex., for debtors.
Walter J. Taylor, Joe H. Nagy, Lubbock, Tex., for Texas Farm Bureau Mutual Ins Thomas J. Griffith, Lubbock, Tex., trustee.
Thomas J. Griffith, Trustee for the estate of Charles W. Strickel and Linda Strickel, debtors, filed a complaint against Texas Farm Bureau Mutual Insurance Company by which he seeks to recover damages and attorney's fees under two fire insurance policies. Nonjury trial was conducted on October 30, 1981. The following summary constitutes the findings of fact required by Rule 752.
Charles W. Strickel, in connection with the acquisition of a business in Plainview, Texas, which he conducted under the common name and style of "The House of Carpets," insured the contents of his business for $50,000.00 and insured a Yale 4000 Forklift for an additional sum of $6,500.00. The policies of insurance were issued on June 26, 1980, by Texas Farm Bureau Mutual Insurance Company on Texas Standard forms with loss-payee clause in favor of First National Bank of Plainview, a lienholder against the insured properties. The contents of the store were destroyed, and the Yale Forklift was damaged, by a fire which was discovered at approximately 1:00 o'clock A.M. in the early morning hours on August 20, 1980.
On August 19, 1980, the day preceding the fire, a carpet installer who was operating out of the debtor's business spilled some pad cement on the floor of the building and on some tack strips which were stacked against a wall of the building. Strickel was unsuccessful in his efforts to scrape the cement from the tack strips. During his lunch hour he went to his home and brought back to the store a one gallon can of gasoline which he had used to operate his lawnmower at the home. He used the gasoline in an unsuccessful attempt to dissolve the pad cement or to loosen it from the tack strips. At closing time he left the one gallon can of gasoline in the storeroom and left the air conditioner running in an effort to exhaust the fumes from the gasoline and from the cement from the store. At approximately 1:30 A.M. on the following morning he was awakened by the police who advised him that his store was on fire.
The parties agree that the policies of insurance were in effect, that all premiums had been paid, and that proper notice of loss was given. The major thrust of the defense advanced by the insurance company is twofold—the insurance company pleaded a limitation on liability in each of the policies and, in addition, contends that the fire was intentionally set. In the alternative the insurance company challenges the amount of damages and entitlement to attorney's fees claimed by the trustee.
Each of the subject fire insurance policies contained a limitation on liability which stated:
The insurance company contends that the hazard was increased by means within the knowledge and control of Strickel, its insured, when he brought the gallon of gasoline on the premises and when he poured it on the tack strips. The insurance company contends further that the use of gasoline in that manner is not usual and incidental to the occupancy of the premises for the purpose of conducting a carpet sales and installation business.
A threshold issue is concerned with the burden of proof.
Rule 94, T.R.C.P. reads in pertinent part, as follows:
".... Where the suit is on an insurance contract which insures against general hazards, but contains other provisions limiting such general liability, the party suing on such contract shall never be required to allege that the loss was not due to a risk or cause coming within any of the exceptions specified in the contract, nor shall the insurer be allowed to raise such issue unless it shall specifically allege that the loss was due to a risk or cause coming within a particular exception to the general liability; provided that nothing herein shall be construed to change the burden of proof on such issue as it now exists." (emphasis added)
Prior to the adoption of Rule 94 a plaintiff suing upon an insurance contract was required to allege and prove that the facts the plaintiff relied on for recovery did not come within any of the contract exceptions exempting the issuing company from liability. Rule 94 changed the burden of pleading. There are presently no such burdens of allegation and proof on the part of the plaintiff, except where the insurer alleges that the loss was due to a risk or cause coming within a particular exception to the general liability. Shaver v. National Title and Abstract Company, 361 S.W.2d 867 (Tex.1962). Therefore, while the rule was changed as to the burden of pleading, a plaintiff still has the burden of proving that his case does not come within the exceptions from liability in the insurance policy sued on when the insurer alleges the loss was due to a risk within such exceptions. Commercial Travelers Life and Accident Company v. Bruce, 405 S.W.2d 634 (Tex.Civ. App.—Corpus Christi, 1966) writ ref. n.r.e.; Sublett v. American National Insurance Company, 230 S.W.2d 601 (Tex.Civ.App.— Eastland 1950) writ ref. n.r.e.
However, the real issue in this case is whether the limitation on liability in the subject policies is an exception or exclusion (upon which the insured has the burden of proof when it is raised by the insurance company) or whether it is a condition subsequent (upon which the insurance company retains the burden).
In Knoff v. United States Fidelity and Guaranty Company, 447 S.W.2d 497 (Tex. Civ.App.—Houston 1969), no writ, the heirs of an insured brought suit under a fire policy issued on the insured's residence. The fire insurance policy contained the following clause:
The Court concluded that the subject provision was not an exclusion, but rather was a condition subsequent which would avoid liability on the part of the insurance company. Therefore it placed the burden on the insurer to plead and prove the occurrence of the condition.
Similarly, in Dixie Fire Insurance Company v. Henson, 277 S.W. 756 (Tex.Civ.App.— Amarillo, 1925), aff'd 285 S.W. 265 (Tex. Com.App., 1926), it was stated that the burden rests on the insurer to plead and prove a breach of a condition and that such breach increased the hazard insured against.
In R.B. Company, Inc. v. Aetna Insurance Company, 5th Cir. 1962, 299 F.2d 753, the Fifth Circuit had occasion to deal with a fire insurance policy which contained the following provision:
The insurance company sought to show an increase in hazard by showing that the activities for which the building was used far exceeded the hazards contemplated by the insurer, as evidenced by the "building use" description on the face of the policy. The evidence regarding the increase in hazard was established by expert testimony and by evidence of the high rates commanded by the Insurance Commission manual for coverage of the uses which the insureds were making of the buildings covered by the policy. In this regard the court, citing Dixie Fire Insurance Company v. Henson, supra, noted: "The insurer, in asserting these defenses did not shirk from the burden imposed by Texas law of sustaining them."
The clause that is the subject of controversy in the instant case is substantially similar to the clauses in the Fifth Circuit case, R.B. Company v. Aetna Insurance Company, and the Knoff case discussed above. Accordingly, the burden is on the insurance company to prove the condition subsequent—that the hazard insured against was within the knowledge and control of the insured, and that the increase in hazard was not usual and incidental to the occupancy which was described on the face of the policies.
The insurance company in this case has established that the gasoline which was brought on the premises was within the knowledge and control of the insured. The evidence is undisputed that Strickel brought the gasoline on the premises. Although there were flammables on the premises at the time the policies of insurance originally issued, and at all relevant times thereafter, the bringing of gasoline on the premises and using it in the manner in which it was used in this case does increase the hazard. However, the testimony from the insured's expert witness that the use of gasoline and similar solvents are customarily used in the industry to clean spills was substantially unchallenged. The case of Hartford Fire Insurance Company v. Dorroh, 63 Tex.Civ.App. 560, 133 S.W. 465 (1911) states some rules of law which may be helpful in resolving the issue. In that case the policy contained a clause which stated: "This entire policy shall be null and void if the hazard be increased by any means within the...
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