Kirkland v. Ohio Cas. Ins. Co.

• Decision Date: 03 October 1977
• Docket Number: No. 3996-I,3996-I
• Citation: 18 Wn.App. 538,569 P.2d 1218
• Parties: Eleanor V. KIRKLAND and Reliance Insurance Company, Respondents, v. OHIO CASUALTY INSURANCE COMPANY, a Foreign Corporation, Appellant.
• Court: Washington Court of Appeals

Page 538

18 Wn.App. 538

569 P.2d 1218

Eleanor V. KIRKLAND and Reliance Insurance Company, Respondents, v. OHIO CASUALTY INSURANCE COMPANY, a Foreign Corporation, Appellant.

No. 3996-I.

Court of Appeals of Washington, Division 1.

Oct. 3, 1977.

Clarke, Clarke, Albertson & Bovingdon, Fred G. Clarke, Jr., Seattle, for appellant.

Foulds, Felker & Gelfand, P. S., Tom H. Foulds, Seattle, for respondents.

CALLOW, Judge.

This case involves a dispute between two insurance companies as to whether liability for a fire loss should be paid entirely by the joint plaintiff, Reliance Insurance Company, as sole insurer of Conduff, the purchaser in possession who had the legal burden of loss, or whether it should be apportioned between Reliance and the defendant, Ohio Casualty Insurance Company, because the policy of each company insured the interest of the seller to Conduff.

On July 1, 1971, Eleanor V. Kirkland and her now deceased husband sold the property which is the subject of this action to David A. Schwab under a real estate contract dated July 1, 1971. A policy of insurance was obtained by Schwab from the defendant, Ohio Casualty Insurance Company, covering the subject property with a contract of sale clause in favor of the plaintiff, Eleanor V. Kirkland, as vendor under said contract. This policy was renewed by the defendant's policy, providing coverage in the amount of $22,000 on the dwelling. This policy was in effect at the time of the loss.

On December 1, 1972, Schwab executed a quitclaim deed in favor of Harvey L. Conduff and wife, subject to the Kirkland-Schwab contract. Conduff obtained insurance covering the property in the amount of.$19,000 on the dwelling with the Reliance Insurance Company, effective December 1, 1972. This contract contained the same contract of sale clause showing Kirkland as vendor.

On January 3, 1973, the dwelling was destroyed totally by fire. At the time of this loss, neither policy had been cancelled, and the unpaid balance owed to Kirkland on the Kirkland-Schwab real estate contract was $22,752.55. The Reliance Insurance Company paid Kirkland and Conduff a total of $18,566 ($17,966 to Kirkland and $600 to Conduff).

On May 14, 1973, suit was brought in the name of Kirkland against Ohio Casualty seeking recovery for fire damage in the amount of $22,000, the face of its policy. Ohio Casualty answered, and by affirmative defense asserted that the burden of the loss was on Conduff, who was not named in its policy but was insured by Reliance, which had made payment to Conduff and Kirkland. The affirmative defense claimed that Conduff and Kirkland had been compensated for the fire loss and the suit was an attempt by Reliance to accomplish a recoupment to which it was not entitled.

It was stipulated at trial that Reliance be joined as a party plaintiff, and the trial was conducted as a contest between the two insurance companies as to whether the loss should be borne by Reliance or apportioned between Reliance and Ohio Casualty.

The court found the loss to be $19,950 and held that it should be apportioned between the two companies in the ratio of their respective coverages, i. e., $10,704.88 to be paid by Ohio Casualty, and $9,245.12 to be paid by Reliance. Judgment was entered accordingly. The defendant Ohio Casualty appeals.

The Kirkland-Schwab real estate contract, which Conduff assumed, contained the following standard provisions:

(2) The purchaser agrees, until the purchase price is fully paid, to keep the buildings now and hereafter placed on said real estate insured to the actual cash value thereof against loss or damage by both fire and windstorm in a company acceptable to the seller and for the seller's benefit, as his interest may appear, and to pay all premiums therefor and to deliver all policies and renewals thereof to the seller.

(4) The purchaser assumes all hazards of damage to or destruction of any improvements now on said real estate . . .

The quitclaim deed from Schwab to Conduff contained the following clause:

SUBJECT TO Contract of record with Wayne F. Kirkland and Eleanor V. Kirkland, his wife, as sellers, and the Grantor herein as purchasers, recorded July 15, 1971, under Auditor's file No. 2206146. Said contract has an unpaid principal balance of $22,752.55, which the Grantee herein agrees to assume and pay according to its terms and conditions.

Among the findings of fact are:

The Contract of Sale clause in the Ohio policy designating the plaintiff, Eleanor V. Kirkland, as Vendor included the following language:

"It is understood that DAVID A. SCHWAB (hereinafter termed Vendee) has an interest in the property described under Item(s) A of this policy, by virtue of contract of sale from ELEANOR V. KIRKLAND (hereinafter termed Vendor), whose mailing address is 128 North 77th, Street, Seattle, Washington 98103.

"If loss under this policy be payable to a mortgagee, trustee or beneficiary under deed of trust, the proceeds of this policy shall be first applied to the payment of such payee's interest, and the balance, if any, subject to all the terms and conditions of the policy, shall be payable to said vendor and/or said vendee in the manner hereinafter provided in paragraphs designated "First" and "Second" hereof. If this policy be not payable to a mortgagee, trustee or beneficiary under deed of trust, the proceeds of this policy, subject to all its terms and conditions, shall be payable to said vendor and/or said vendee as follows:

"FIRST: To said Vendor, to an amount not exceeding the balance unpaid, at the time of loss, upon the contract of sale above referred to; and

"SECOND: The balance, if any, to said Vendee.

"PROVIDED ALWAYS, HOWEVER, THAT IN NO EVENT SHALL ANY OF THE ABOVE PAYMENTS OR THE AGGREGATE THEREOF, EXCEED THE AMOUNT FOR WHICH THIS POLICY IS WRITTEN, OR THE AMOUNT FOR WHICH THIS COMPANY MAY BE LIABLE ON ANY

LOSS THEREUNDER; AND PROVIDED FURTHER, THAT IF AT THE TIME OF ANY LOSS HEREUNDER THERE BE OTHER INSURANCE, WHETHER VALID OR NOT, UPON THE PROPERTY DESCRIBED UNDER THE ITEM(S) SPECIFIED IN THIS CONTRACT OF SALE CLAUSE, THIS COMPANY SHALL NOT BE LIABLE UNDER THIS POLICY FOR A GREATER PROPORTION OF ANY LOSS ON SAID PROPERTY THAN THE AMOUNT INSURED BY THIS POLICY UNDER SUCH ITEM(S) BEARS TO THE ENTIRE INSURANCE COVERING SUCH PROPERTY ISSUED TO OR HELD BY ANY PARTY OR PARTIES HAVING AN INSURABLE INTEREST THEREIN AS VENDOR, VENDEE, MORTGAGEE, TRUSTEE OR BENEFICIARY UNDER DEED OF TRUST."

Finding of fact No. 3.

Schwab and his wife were the only persons signing the Quit Claim Deed from Schwab to Conduff. There was no agreement between Schwab and plaintiff Kirkland to substitute Conduff for Schwab in the Kirkland-Schwab Contract of Sale. Schwab continued liable to Kirkland for the performance of said contract, and continued to have an insurable interest in subject property.

Finding of fact No. 5.

Conduff obtained insurance covering said property in the amount of $19,000.00 on the dwelling with the plaintiff, Reliance Insurance Company, effective December 1, 1972. The Reliance policy had the identical Contract of Sale clause as in the policy of defendant, Ohio Casualty Insurance Company, and which Reliance clause also designated Mrs. Eleanor Kirkland as the Vendor.

Finding of fact No. 6.

On January 3, 1973, the subject dwelling was destroyed by fire and at the time of this loss, neither the Ohio policy nor the Reliance policy had been canceled, and both the Ohio policy and the Reliance policy were in effect.

Finding of fact No. 7.

The issue presented is whether the two insurance policies, both containing an "other insurance" clause and acquired to cover the same risk and loss payee, should each contribute proportionately to the loss?

WHO SHOULD BEAR THE RISK OF LOSS?

Ohio Casualty first asserts that upon receiving the quitclaim deed from Schwab, Conduff assumed all his assignor's rights and obligations under the real estate contract, including the total risk of loss and the duty to keep the premises insured for the contract vendor's benefit. Ohio Casualty states that if there had been no insurance whatsoever, the loss would fall upon Conduff, and, therefore, the ultimate legal risk of loss is upon Reliance.

The findings of fact were uncontroverted that Schwab had executed a quitclaim deed in favor of Conduff, subject to the Kirkland-Schwab contract of sale, that there was no agreement between Schwab and Kirkland to substitute Conduff for Schwab in the Kirkland-Schwab contract of sale, and that Schwab continued to be liable to Kirkland for the performance of the contract and continued to have an insurable interest in the property. Ohio Casualty acknowledges that Kirkland, Schwab and Conduff all had insurable interests, and agrees that Kirkland should receive the full amount of the $19,950 loss sustained. Ohio Casualty insists that Reliance should contribute the full amount of its policy,.$19,000, and that Ohio Casualty should pay only the $950 balance.

It is true that had the loss occurred with no insurance having been secured whatsoever, the ultimate loss would have fallen on the last purchaser in line. However, there was no direct obligation on the part of the assignee-grantee Conduff to perform in accordance with the terms of the Kirkland-Schwab real estate sale contract. See generally 8A G. Thompson, Commentaries on the Modern Law of Real Property § 4459 (1963 repl.); 77 Am.Jur.2d Vendor and Purchaser § 394 (1975). In addition, the original vendor, Kirkland, had not released the vendee Schwab from responsibility for performance under the initial contract. Schwab retained an insurable interest and liabilities following the assignment to Conduff, and, had not Conduff secured insurance, Ohio Casualty would have been liable for the full extent of its policy. Vogel v. Northern Assurance Co., 219 F.2d 409 (3d Cir. 1955); Johnson v. Fidelity & Guar. Co., 245 S.C. 205, 140 S.E.2d 153 (1965). The argument of Ohio Casualty proposes many...