Newark Fire Ins. Co. v. Turk

• Citation: 43 ALR 496,6 F.2d 533
• Decision Date: 05 September 1925
• Docket Number: No. 3301.,3301.
• Parties: NEWARK FIRE INS. CO. v. TURK et al.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

43 ALR 496, 6 F.2d 533 (1925)

NEWARK FIRE INS. CO. v. TURK et al.

No. 3301.

Circuit Court of Appeals, Third Circuit.

June 8, 1925.

Rehearing Denied September 5, 1925.

Horace Michener Schell, of Philadelphia, Pa., for plaintiff in error.

Mervyn R. Turk, of Chester, Pa., and Arthur S. Arnold, of Philadelphia, Pa., for defendants in error.

Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.

WOOLLEY, Circuit Judge.

This is a suit on a policy of fire insurance issued to the plaintiffs by the defendant company. Broadly stated, the question is whether another policy, issued by another company to predecessors of the plaintiffs in the title of the damaged property, covered the property, and whether, within the pro rata liability clauses of the two policies, there was double or contributing insurance. Arising on the plaintiffs' motion for judgment because of an insufficient affidavit of defense, in which, under the Pennsylvania practice, the facts are accepted as pleaded, the court decided the question against the defendant, and directed judgment for the plaintiffs. 4 F.(2d) 142. The case is here on the defendant's appeal.

Somewhat compressed, the facts are as follows: Bristol R. Lord, Jr., and William K. Lord (hereinafter called Lord Bros.) owned properties known as 316 and 318 Market street in the city of Chester, Pa. They mortgaged them to George K. Crozer, Jr., treasurer of the board of trustees, Crozer Theological Seminary, and delivered to him, as additional security, a policy of fire insurance for $5,000, obtained from the Springfield Fire & Marine Insurance Company, covering both properties, and containing a clause for his protection as mortgagee. Lord Bros. then sold one of the properties, 316 Market street, to Simon Turk and Phillip Saft, cum onere of the mortgage. The policy of the Springfield company did not figure in the transaction. It was not assigned to the purchasers, nor did they then have any knowledge of its existence. On taking title, Turk and Saft (now the plaintiffs) procured insurance from three companies, of which the Newark Fire Insurance Company (the defendant) was one, covering specifically 316 Market street, and aggregating $16,000. The policy issued to them by the defendant was for $6,000.

A fire occurred. Adjusters and agents, representing the plaintiffs and the defendant, fixed the damage at $14,276. The two other policies which the plaintiffs had obtained on acquiring the property contained clauses for the benefit of the mortgagee and had been delivered to him. After the fire, the plaintiffs requested him to loan them these policies to assist them in making their claims against the insurance companies. Responding, the mortgagee handed them the two policies they had asked for and, in addition, the policy of the Springfield company issued to Lord Bros. This was the first intimation to the plaintiffs of the existence of this policy. Having in hand four policies, three issued to themselves and one to Lord Bros., the plaintiffs, on the advice of insurance brokers, made claims against all four companies. Being later advised that they had mistaken their rights under the law, and that they could claim insurance only from the companies which had issued policies to them, the plaintiffs abandoned their claim against the Springfield company, and confined their claims to the three companies which had issued to them the three policies aggregating $16,000. Thereupon the defendant (and the other two companies) pointed out that their policies (as well as the policy of the Springfield company) contained liability clauses in the following language: "This company shall not be liable for a greater proportion of any loss or damage than the amount hereby insured shall bear to the whole insurance covering the property, whether valid or not, and whether collectible or not" — and took the position that the insurance of $16,000 issued to the plaintiffs, and the insurance of $5,000 issued to Lord Bros. made a total insurance of $21,000, and that, according to a proper reading of the quoted clause, the defendant in this case is liable for only so much of the agreed loss of $14,276 as the face of its policy for $6,000 bears to the total insurance of $21,000; or, in other words, that it is liable for six twenty-firsts and not six-sixteenths thereof. When sued, the defendant reiterated its position as a defense. The soundness of this contention depends, of course, upon whether the Springfield insurance, in the circumstances, covered the property, and is accordingly contributing insurance.

In order to decide this question, we must pause for a moment and inquire how the law regards a policy of insurance. Defined broadly, it is "a contract whereby, for an agreed premium, one party undertakes to compensate the other for loss on a specified subject by specified perils." Bouvier's Law Dictionary, 1613; Dover Glass Works Co. v. Ins. Co., 1 Marvel (Del.) 32, 29 A. 1039, 65 Am. St. Rep. 264. Indemnity against loss is the essence of a contract of insurance. The undertaking is personal to the insured. "The policy is not an insurance of the specific thing without regard to the ownership, but is a special agreement of indemnity with the person insuring against such loss or damage as he may sustain." King v. Lancaster County Mutual Ins. Co., 45 Pa. Super. Ct. 464. But a sale of insured property does not carry with it the policy of insurance. Olyphant Lumber Co. v. People's Mutual Live Stock Ins. Co., 4 Pa. Super. Ct. 100. Therefore, when the insured parts with his "property, and has no further interest in it, he can sustain no loss or damage by its destruction, but the loss, if any, is that of his grantee. In the absence of an assignment, the grantee cannot recover on the...