National Union Fire Ins. Co. v. Hendrix

• Decision Date: 20 May 1960
• Parties: NATIONAL UNION FIRE INSURANCE COMPANY et al., Appellant, v. Dan HENDRIX, Appellee.
• Court: United States State Supreme Court — District of Kentucky

Page 875

337 S.W.2d 875

NATIONAL UNION FIRE INSURANCE COMPANY et al., Appellant, v. Dan HENDRIX, Appellee.

Court of Appeals of Kentucky.

May 20, 1960.

Rehearing Denied Sept. 30, 1960.

Stoll, Keenon & Park, John L. Davis, Lexington, Pat Rankin, Stanford, for appellant.

John Y. Brown, Lexington, for appellee.

MOREMEN, Judge.

The appellee, Dan Hendrix, operated a general store in Lincoln County. The appellants are fire insurance companies who issued various policies of fire insurance covering the merchandise and fixtures. There is no controversy concerning that part of the policies which covered the fixtures and we will concern ourselves only with insurance coverage for the stock of merchandise.

On December 18, 1956, appellee obtained fire insurance policies through the Pence-Gilliland Agency of Stanford which insured against loss of his merchandise by fire in the total amount of $11,000. To these policies was annexed an endorsement limiting the total insurance to $11,000.

On January 2, 1957, appellee purchased a policy of insurance through the Foster & Foster Agency of Stanford covering merchandise in the amount of $7,500. The policy had an endorsement limiting the total insurance on merchandise to $7,500.

On February 15, 1957, the general store, the stock of merchandise and the fixtures were destroyed by fire.

Appellants took the position that appellee had violated a material provision of the insurance policy when he obtained insurance beyond the limitation for total insurance, and refused payment.

Appellee brought suit on the policies and after a trial before the court and jury it was adjudged that each of the defendant insurance companies was liable to appellee in that proportionate amount of its policy which the specified limit fixed in the policy bore to the aggregate amount of insurance. The jury fixed the amount of loss at $12,500.

In each of the policies is this provision:

'Other insurance may be prohibited or the amount of the insurance may be limited by endorsement attached hereto.'

To each policy was annexed this endorsement:

'Permission for other insurance given by this policy is hereby limited so that the total amount of insurance permitted, including this policy, shall in no case be in excess of the following stipulated amounts, which are permitted whether or not permission for other insurance is given elsewhere in this policy.'

As stated above, the endorsement on the Pence-Gilliland policies limited the total insurance on merchandise to $11,000, and that on the Foster & Foster policy to $7,500.

We learn from the opinion of the trial court that all the policies were written on the form of the New York Standard Fire Insurance Policy which was enacted in 1942 and became effective in 1943, and that the clause with which we are concerned has been subject to several changes.

In the first enactment in the year 1886, the clause was in this form:

'This entire policy, unless otherwise provided by an agreement endorsed hereon or added hereto shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy.' in 1918 the form was changed to read:

'Unless otherwise provided by agreement in writing added hereto this Company shall not be liable for loss or damage occurring while the insured shall have any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy.'

The trial court stated that under the older forms of the New York Standard Fire Policy this court had held that a violation of the clause, by obtaining other insurance, would forfeit the policy. Northwestern Nat. Ins. Co. of Milwaukee v. Avant, 132 Ky. 106, 116 S.W. 274; Hurst Home Ins. Co. v. Deatley, 175 Ky. 728, 194 S.W. 910, L.R.A.1917E, 750; and Continental Ins. Co. v. Riggs, 277 Ky. 361, 126 S.W.2d 853, 121 A.L.R. 1421. He remarked, however, that while the 1918 revision changed the wording somewhat, the wording as changed--just as unequivocally as that in the 1886 form--provided that unauthorized additional insurance would forfeit the insurance. He pointed out that in the 1943 form there was a definite change in the wording, and concluded that the words prohibited and limited, as used in the provision, were not of equivalent meaning, saying:

'Going back to the 1943 policy provision, it seems to me that its phraseology is strongly persausive that it gives to the company the option, through the endorsement, of providing for the effect of other insurance, so as to make it either a bar to any recovery or simply a limitation on the amount recoverable. The contrasting nature of the two phrases of this provision, one that other insurance may be prohibited, the other that the amount of the insurance may be limited, is shown, as I see it, not only by the difference in the meaning of the two key words, prohibited and limited, but also by the connective used, the disjunctive or, thus manifesting that the two phrases are in the alternative, with the choice to the company of whether by its endorsement to prohibit or limit. As previously shown, words of an insurance policy are to be taken as meaning what persons of usual and ordinary understanding would take them to mean in the context in which used. While it hardly requires recourse to the dictionary to know their meaning, Webster's New International Dictionary defines the verb prohibit as meaning to hinder, debar, forbid; to interdict, prevent; it defines the verb limit as having the meaning of to assign to or within certain limits; to fix, constitue, or appoint definitely; to allot; to apply a limit to or bounds for; to terminate or restrict by a limit or limits. Obviously, then, the words prohibit and limit are not equivalent in meaning, and this provision should be construed not as if they were synonymous, but in such manner as to give effect to the meaning of each.

'In the context, and bearing in mind that the right to prohibit connotes authority to bar absolutely, I think the fair and reasonable interpretation of this provision is that it gives to the company the choice of so endorsing the policy as to bar any recovery, in event of other insurance, or of simply limiting the amount of recovery, in such event.'

He concluded, that in view of the fact the company, by endorsement, had not provided that other insurance was prohibited, but that 'permission for other insurance is hereby limited,' the company chose only to limit the recovery and not to bar it completely. As stated above, the judgment apportioned the...