Isabell v. Aetna Ins. Co., Inc.

• Decision Date: 22 September 1971
• Citation: 495 S.W.2d 821
• Parties: Ted ISABELL and wife, Alma Isabell, Complainants-Appellees, v. AETNA INSURANCE COMPANY, INC., Defendant-Appellant.
• Court: Tennessee Court of Appeals

Page 821

495 S.W.2d 821

Ted ISABELL and wife, Alma Isabell, Complainants-Appellees, v. AETNA INSURANCE COMPANY, INC., Defendant-Appellant.

Court of Appeals of Tennessee, Western Section.

Sept. 22, 1971 Certiorari Denied by Supreme Court Feb. 22, 1972.

E. J. Nunn, Schneider & Schneider, Jackson, for defendant-appellant.

James H. Boswell, Jackson, for complainants-appellees.

CARNEY, Presiding Judge.

Honorable William M. Leech of Charlotte, Tennessee, Chancellor of the Sixth Chancery Division, sitting by interchange for Chancellor E. Brooks McLemore, awarded judgment in favor of the complainants Ted Isabell and wife against the defendant, Aetna Insurance Company, for $7,476.35 together with interest and costs of the cause.

Aetna had refused to pay a fire loss sustained by Isabell and wife when their new dwelling being constructed burned on January 13, 1966. A standard fire policy with Builder's Risk Endorsement was issued by local agent Pope, Russell, Overall Agency of Jackson, Tennessee, showing Ted Isabell and wife as insured with loss payable to Farmers Home Administration as mortgagee. Farmers Home Administration financed the home.

The dwelling was 75% Complete and no question is made as to the amount of the fire loss. Aetna Insurance Company refused to pay the loss on the contention that complainant Isabell and wife had sustained no compensable loss because they were not legally obligated to pay the contractor, Lee Lester, for the house until it was completed and accepted. The builder, Lee Lester, was not named as an insured in the policy.

Aetna is the only appellant. Assignments of error I, II, and III all make the one insistence that the Chancellor erred in rendering judgment against Aetna in any amount. By assignment of error No. IV Aetna insists that since the Chancellor dismissed the bill as to agent Pope, Russell, Overall Agency a judgment cannot stand against the principal, Aetna Insurance Company.

The only disputed question of fact upon the trial below was whether the complainant Ted Isabell told Mr. Benford of Pope, Russell, Overall Agency the name of the contractor, Lee Lester. Mr. Overall, one of the officials of the agency along with Mr. Benford, testified that the complainants did not mention the name of the contractor. The complainant Isabell testified that he did. The Chancellor found as a fact that Isabell did mention the name of the contractor but that Mr. Benford and/or Mr. Overall deemed the matter of such little consequence that they did not remember it. We agree with the Chancellor that whether Lester's name was or was not mentioned is not determinative of the case. If the agent deemed the name of the builder important, he should have asked the insured, Isabell, his name.

The salient uncontradicted facts are that sometime in September, 1965, the complainants, Isabell and wife, made application with the Farmers Home Administration for a loan to build a dwelling on their lot in Madison County, Tennessee. On September 21, 1965, upon a printed form entitled 'Construction Contract' apparently furnished by the Farmers Home Administration, Ted Isabell entered into a written contract with Lee Lester d/b/a Home Improvement Company, for the construction of the home to cost $8,850 according to specifications described in the contract and furnished by the Farmers Home Administration. The provision of the contract for the payment to Lester was contained in the following paragraph:

'(C) The Owner will make payments as follows: Payment will be made in ONE-LUMP SUM for the whole contract, upon acceptance by owner and the Farmers Home Administration, of all work required hereunder and compliance by the contractor with all terms and conditions of this contract.'

The written contract contained no mention of insurance. Sometime during the month of November, 1965, the loan application was approved and approximately $9,000 set aside in a special account by Farmers Home Administration to pay for the dwelling when constructed. Mr. Norfleet, the manager of the FHA office, instructed Isabell that he, Isabell, was required to furnish insurance on the property from the time material was delivered to the lot until the construction was completed and he gave Mr. Isabell the names of three insurance agencies in the city of Jackson which were acceptable to FHA. The FHA uniformly required a standard mortgage clause protecting the FHA. This form was furnished by FHA to the several insurance agencies writing policies on dwellings being financed by the FHA. The FHA required the owner to carry full insurance in every case in which the FHA furnished the funds and did not vary the rule even though the contractor may also have carried a Builder's Risk policy.

On November 22, 1965, Isabell and wife went to Pope, Russell, Overall Agency, one of the agents recommended by Farmers Home Administration, and asked for insurance. A standard fire insurance policy in the principal amount of $8,500 was issued by the Aetna Insurance Company. The policy was for one year and bore a 'Dwelling Builder's Risk Endorsement' along with a 'Builder's Risk Completed Value Form.' Also attached was the Insurance Mortgage Clause in favor of the Farmers Home Administration. Ted Isabell and wife were shown on the policy as insureds and the contract did not contain any limitation or restriction as to the type of construction contract.

After construction was 75% Complete the dwelling was destroyed by fire and the complainants made demand upon Aetna for payment of the loss. After Aetna examined the written contract between the complainants Isabell and wife and the builder, Lee Lester, Aetna refused to pay the loss. Aetna contended that the complainants Isabell and wife were not obligated under the contract to pay Lester for the dwelling until it was completed and accepted and Lester was not named in the policy.

Lee Lester then filed suit in the Chancery Court of Madison County against the complainants, Ted Isabell and wife, against Aetna Insurance Company, Inc., against Pope, Russell, Overall Agency, Inc., and against Clarence Norfleet, manager, and the Farmers Home Administration. The...