New York Underwriters Ins. Co. v. Coffman

Citation540 S.W.2d 445
Decision Date16 July 1976
Docket NumberNo. 17718,17718
PartiesNEW YORK UNDERWRITERS INSURANCE COMPANY, Appellant, v. Harold W. COFFMAN et ux., Appellee.
CourtCourt of Appeals of Texas. Court of Civil Appeals of Texas

Thompson, Coe, Cousins & Irons, and Larry L. Gollaher, Dallas, for appellant.

C. Coit Mock, Fort Worth, for appellee.


SPURLOCK, Justice.

Harold W. Coffman and wife, Ollie Coffman, appellees, initiated this action by suing New York Underwriters Insurance Company, appellant, on a policy of insurance which included what is generally known as 'Boiler and Machinery' coverage. This policy insured an apartment complex owned and operated by the plaintiffs. The policy in general insured plaintiffs from losses occasioned by accidental damage to the air conditioning system, loss because of interruption of business caused thereby, the cost of temporary repair and expediting expenses of the air conditioning machinery, and the cost of repair or replacement of the damaged machinery. The insurance company contends that it is not liable because the plaintiffs did not give it notice of the accident in the time and manner required by the policy; plaintiffs violated a policy provision which required them to give the insurance company an opportunity to examine the damaged parts before their removal from the premises; plaintiffs did not properly prove the amount of damage to the machinery and loss of rental because of the breakdown; the verdict was too large; and interest was improperly computed. The Coffmans assigned a cross-point of error claiming that the trial court awarded them less damages than required by the findings of the jury.

Judgment modified and, as modified, affirmed.

Plaintiffs are the owners of Randol Mill Terrace Apartments consisting of 80 units of 1 to 3 bedrooms each. These apartments were generally rented by written leases for periods of time ranging from 6 months to a year. No apartment was ever rented on a daily basis.

On June 24, 1972, the air conditioning system in the entire apartment complex failed due to a breakdown of a seventy-five (75) ton Bell & Gossett compressor. The air conditioning system was serviced regularly by Air Service Company. Immediately after the accidental breakdown plaintiff and this company tried to locate parts in this and other states in order to get the compressor operating again. Air Service Company, after much difficulty, obtained a seal and bearing which was put on the compressor; however, the compressor ran for only about five hours before breaking down again. The compressor failed and an inspection revealed that the new seal was damaged.

The company that had manufactured the compressor was no longer in business. Frantic attempts to obtain parts to make the compressor operable were unsuccessful. The temperature was unseasonably hot at the time of the breakdown, and for a week or more thereafter, reaching temperatures of 106, 110, and 112 degrees.

After the second breakdown plaintiffs employed another company, Texas Distributors, Inc., to install replacement machinery since repair parts were not available and many of the tenants were vacating their apartments. The new installation took place during the weekend of the fourth of July holiday. Immediately after the June 24 breakdown Mr. Coffman caused a telephone call to be made to the residence of the local agent who had issued this policy and gave notice of the accident to a member of his family and requested the agent to call the plaintiffs. The Coffmans also gave additional notice on July 10, 1972, which insurer stipulated complied with the written notice provisions of the policy.

The jury found: (1) the compressor failed due to accidental damage; (2) the insureds gave notice to the insurer as soon as practicable; (3) it was impractical to repair the damaged compressor; (4) the reasonable cost of repairs necessitated by the accident was $6,500; (5) the reasonable replacement cost of the damaged equipment was $8,500; (6) the insureds incurred additional costs for temporary repair in expediting the repair of the damaged property in the amount of $777.80; (7) the insured average daily rental income before the accident was $700.00 and the daily loss after the accident was $233.33; and (8) the insurance company did not waive the notice requirements of the policy.

This cause of action instituted by the Coffmans against the insurance company was consolidated and tried with the cause of action brought by Texas Distributors, Inc., against the Coffmans. This latter suit was brought for the purpose of collecting the balance due it by the Coffmans as a result of having replaced the air conditioning equipment, the breakdown of which gave rise to both lawsuits. Texas Distributors, Inc., recovered judgment against the Coffmans but no appeal was perfected concerning that portion of the controversy. Therefore, we will consider the issues between Texas Distributors, Inc., and the plaintiffs only to the extent it may affect the claims against the insurance company.

This policy consists of 21 pages. It contains two insuring sections, a declaration page, a coded schedule of insured property, four endorsements, including a 'Use and Occupancy (Valued)' endorsement, endorsement B(1) 'Coded Blanket Group Descriptions', endorsement B(2), Boiler and Machinery Endorsement A(1), Boiler nd Machinery Endorsement A(2), Boiler and Machinery Endorsement A(3).

The insurance company, by its first point, asserts the trial court erred in failing to render judgment that plaintiffs take nothing because they failed, as a matter of law, to comply with a notice condition of the 'Boiler and Machinery' policy.

The policy contains several references to matters of notice. The first reference requires the insureds to send notice of accident by telegram or letter to the home office of the company or its Houston office and stipulates that recoverable damages for loss of income will not commence until 24 hours before the required notice is received at one of these two places. The second reference to notice provides that written notice shall be given to the company or any of its authorized agents as soon as practicable. Another requirement is that no action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with All the terms of the policy.

Article 5546, V.A.T.S., provides in part as follows: 'No stipulation in a contract requiring notice to be given of a claim for damages as a condition precedent to the right to sue thereon shall ever be valid unless such stipulation is reasonable. Any such stipulation fixing the time within which such notice shall be given at a less period than ninety days shall be void, and when any such notice is required, the same May be given to the nearest or to any other convenient local agent of the company requiring the same.' (Emphasis ours.)

We will first examine the evidence to determine whether the jury's finding that notice of accident was given as soon as practicable is supported by the evidence.

Notice was given within 16 days without dispute and the record is replete with evidence concerning the circumstances under which plaintiffs were laboring during that period of time. These circumstances include, but are not limited to, the fact that the accident occurred on Saturday; the following day a call was placed to the local agent's home and information was conveyed to a member of his household that the air conditioning had blown up, and the request was made for the agent to call the plaintiffs; plaintiffs thus thought they had given immediate notice to defendant; that during the long weekend of the 4th of July frantic attempts were being made to get the unit repaired, replaced, or back in operation; that attempts were being made to minimize the business loss with temporary aid to the tenants by borrowing fans and window units and making them available to the tenants as far as the supply would last, and other efforts made to minimize the business loss such as housing some of the tenants in motels. This was during a record heat wave. Great numbers of tenants were moving out. Plaintiffs' call to the home of the local agent was never returned. On July 10 plaintiffs contacted an inspector who was employed by Hartford Boiler and Steam Company who had made the last annual inspection of the machinery to determine if it complied with state law. It also developed that this same inspector, a Mr. Massey, was also employed by New York Underwriters Insurance Company. That inspector came to the premises and made an inspection on July 10, the day he was notified. The insurance company contends it was pejudiced by the delay of 16 days in the giving of this notice. Mr. Massey testified that if he had been notified immediately he did not know of anything that would have been done differently from what had been done up to that time.

That portion of the notice requirement that notice must be given to the home office or to Houston, Texas, is void and unenforceable because same is in violation of the above quoted statute. American Surety Co. of New York v. Blaine, 115 Tex. 147, 277 S.W. 619 (1925); American Nat. Ins. Co. v. Smith, 97 S.W.2d 963 (Tex.Civ.App., El Paso, 1936, no writ hist.); National Liberty Ins. Co. v. Herring Nat. Bank, 135 S.W.2d 219 (Tex.Civ.App., Amarillo, 1939, writ dism., judgm. cor.); International Brotherhood, etc. v. Rodriguez, 193 S.W.2d 835 (Tex.Civ.App., El Paso, 1945, err. dism.); Bankers' Reserve Life Co. v. Springer, 81 S.W.2d 756 (Tex.Civ.App., El Paso, 1935, writ ref.); Latham v. Mountain States Mutual Casualty Co., 482 S.W.2d 655 (Tex.Civ.App., Houston, 1st Dist., 1972, ref., n.r.e.).

We will next determine whether the giving of the notice within 16 days of the occurrence was a failure to give notice as a matter of law.

In United States Fidelity & Guaranty Co. v. Pressler, 185 S.W. 326 (Tex.Civ.App., Texarkana, 1916, writ...

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