Merchants Fire Assurance Corporation v. Lattimore, 15692.

• Decision Date: 05 January 1959
• Docket Number: No. 15692.,15692.
• Citation: 263 F.2d 232
• Parties: MERCHANTS FIRE ASSURANCE CORPORATION, Appellant, v. Ann E. LATTIMORE, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

263 F.2d 232 (1959)

MERCHANTS FIRE ASSURANCE CORPORATION, Appellant, v. Ann E. LATTIMORE, Appellee.

No. 15692.

United States Court of Appeals Ninth Circuit.

January 5, 1959.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Derby, Cook, Quinby & Tweedt, Stanley J. Cook, San Francisco, Cal., for appellant.

Reginald G. Hearn, San Francisco, Cal., for appellee.

Before HEALY, POPE, and HAMLEY, Circuit Judges.

HAMLEY, Circuit Judge.

In this action, Miss Ann E. Lattimore, the insured under a policy of personal property insurance, recovered judgment against the insurer in the sum of $17,034. Of this sum $7,084 was for loss in connection with the disappearance of, or damage to, scheduled fine arts. The remaining $9,950 was for loss due to the disappearance of, or damage to, unscheduled personal property covered by a personal property floater provision of the policy.¹

Appealing to this court, defendant, Merchants Fire Assurance Corporation, contends that with regard to the scheduled fine arts the trial court should have found the loss to be $4,339.45 instead of $7,084. Concerning the $9,950 loss relating to unscheduled personal property, the company contends that it should have been relieved from all liability on its defense of concealment and misrepresentation of a material fact.

We will first consider the issues pertaining to that part of the award having to do with scheduled fine arts.

Under the policy, scheduled fine arts were insured by an endorsement which listed and described 131 objects of art. Each such item was separately valued at a specific figure and insured for that amount. The company concedes that items of scheduled fine arts with a total value of $2,269 were completely lost. It also concedes that other items of scheduled fine arts having a total value of $4,815 were damaged.

It is the company's position that the loss on these damaged items was only partial and did not exceed $2,070.45. The court, however, found and concluded that as to these damaged items Miss Lattimore had sustained a total loss of $4,815. The amount in dispute on this branch of the case is therefore $2,744.55.

Appellant argues in effect that the finding of fact upon which the trial court predicated its conclusion that a total loss was sustained as to these damaged fine arts is clearly erroneous. This finding of fact reads as follows:

"XI. An object of art, unless a masterpiece and unique, loses its full insurable value when it is damaged and ceases to be an object of art. Consequently, plaintiff has sustained a loss in the amount of $4,815 relative to the damaged articles of personal property."²

This finding is based upon the testimony of Benjamin W. Langman, a witness called by Miss Lattimore. He qualified as an expert on fine arts, as appellant concedes, and was the only such expert to testify at the trial.

Langman testified that where an art object is an original, or unique, it does not necessarily lose its entire value when damaged. If properly restored, it may even resume its original value and in the course of time have a still greater value. This is not true, Langman stated, in the case of art objects which are not originals or unique. Art objects of the latter kind, he indicated, lose their identity as such when damaged even to a minor extent.

As an example, Langman referred to porcelains produced in limited numbers from the same mold, with the mold still in existence. If one such porcelain art object were damaged and then repaired, however skillfully, it would no longer be an object of art, according to Langman. It would be only a "restored piece of porcelain." As such, the article would have "no value," "a relatively small value," or "some sub-value," as the witness expressed it during the course of his examination.

Most of Miss Lattimore's scheduled art objects which were damaged were porcelains, although there were also items of furniture, cloth, candelabra, goblets, and decanters. None of these scheduled items, according to Langman, was an original or unique. He testified that for the most part the damage was "rather severe," and that some objects were smashed into small pieces. The damage to some objects was relatively minor and could not be detected six feet or more away. Some of the damaged articles were capable of physical repair. With a few exceptions, however, no attempt had been made to repair any of them.

Appellant argues that the court should not have accepted this testimony as a basis for a finding that the damaged articles had lost all value. The company complains that in expressing the opinion that a damaged object of art (other than one which is an original or unique) is no longer an object of art, however skillfully it is repaired, Langman adopted a subjective approach. This is unacceptable in fixing insurance liability, it is argued, and only an objective appraisal is worthy of consideration. On an objective basis, appellant urges, there can be no "total loss" where the piece is not physically destroyed in specie, and still retains monetary value.

Langman's opinion that an object of art which is damaged is no longer an object of art doubtless reflects a subjective approach. But the taste for and enjoyment of art — and hence the value to be attached to objects of art — call for an appreciation of aesthetic and other subjective values. It must therefore be expected that the loss occasioned by such damage as was here sustained would be measured by the same considerations which gave the art object initial value. The testimony was not as to the value of these objects to Miss Lattimore, but that which they would have for anyone trained to appreciate such art. Moreover, having determined that the damaged articles were no longer objects of art, Langman was objective in his estimate of the monetary value of what remained. In the absence of any more objective or persuasive evidence of value or loss, his testimony was sufficient.

Appellant argues further that in view of other evidence in the record Langman's opinion as to the value of repaired pieces should not have been accepted. As before noted, there was no other expert testimony on the subject. Appellant calls to our attention, however, the evidence pertaining to a formula which, in the initial stages of this controversy, was utilized in assessing Miss Lattimore's loss.

Immediately after the loss was discovered, Miss Lattimore engaged Langman to act for her in ascertaining and adjusting the amount of loss. In order to arrive at an over-all figure covering this loss, Langman and the company's adjuster employed a formula under which a flat ten per cent of insured value was allowed for repairs, and an additional 33 1/3; per cent for depreciation remaining after repairs. This formula was selected as a means of avoiding a separate appraisal of each damaged item. Such a formula is frequently used in arriving at a loss figure in cases of this kind.

The formula referred to above was thereafter used by Miss Lattimore's brokers in presenting this part of the claim under the policy. At that time the company had not denied liability on the loss relating to unscheduled items. After such liability was denied, the formula basis for calculating the claim was abandoned by Miss Lattimore, and she adopted her present position that such damaged items were a total loss.

The trial court in its memorandum opinion indicated that the evidence relative to the formula arrangement was disregarded because it was considered to be in the nature of an offer of compromise settlement.³

Appellant correctly points out that at the time this formula was developed the company had not denied liability as to any part of the loss and no overall dispute had yet developed. Miss Lattimore and her advisers, however, were people with wide business experience. They should be credited with judgment enough to realize that a controversy might well develop with regard to other features of the claim. In this setting, tentative acquiescence in the loss figure derived by use of the formula did not necessarily manifest appellee's detached view of her true and full loss. It more than likely represented only a willingness to go part way with the company on that portion of the claim, in the hope that this would promote an amicable settlement of the remainder.

The filing of a partial claim based on the formula did not preclude adoption of a firmer position when the hope of avoiding litigation was disappointed. As fact finder, the trial court under these circumstances was not required to reject the opinion evidence of Langman in favor of the formula-determined claim of loss.

No evidence as to market value, unless it be that of the scheduled appraisal set out in the policy, was submitted in evidence. The only art expert who testified placed a minimal or salvage value on the damaged items, not expressed in dollars and cents. The company submitted no evidence other than the formula, which the court was entitled to discount. Under the circumstances, the court did not err in crediting the testimony of the expert and awarding the company the damaged articles as salvage.

If the damaged items do prove to have substantial value, the company should come out whole. But, on this record, it was proper for the trial court to put this risk on the company and not the insured.

The remaining questions relate to that part of the judgment which awards $9,950 for loss of, or damage to, unscheduled items of personal property.

The claim of loss in the sum of $9,950 was made under a personal property floater provision of the policy. This provision gave Miss Lattimore all-risk insurance coverage in that amount on unscheduled personal property. It was conceded at the trial that loss and damage to unscheduled property equaled or exceeded the insurance limit of $9,950. Hence, it is agreed, if appellee is entitled to recover at all on this part of the claim, she is entitled to recover the...