North River Ins. Co. v. Corsicana Warehouse Co.

• Decision Date: 03 February 1926
• Docket Number: (No. 6919.)<SMALL><SUP>*</SUP></SMALL&gt
• Citation: 281 S.W. 217
• Parties: NORTH RIVER INS. CO. v. CORSICANA WAREHOUSE CO.
• Court: Texas Court of Appeals

281 S.W. 217

NORTH RIVER INS. CO. v. CORSICANA WAREHOUSE CO.

(No. 6919.)^*

Court of Civil Appeals of Texas. Austin.

February 3, 1926.

Rehearing Denied February 24, 1926.

Error from District Court, Navarro County; Hawkins Scarborough, Judge.

Action by the Corsicana Warehouse Company against the North River Insurance Company. Judgment for plaintiff, and defendant brings error. Reformed and affirmed.

Prince & Taylor, of Corsicana, and Thompson, Knight, Baker & Harris and Pinkney Grissom, all of Dallas, for plaintiff in error.

Richard Mays, of Corsicana, for defendant in error.

McCLENDON, C. J.

Appellee sued appellant upon a policy of fire insurance for $4,000 covering a cotton warehouse in Corsicana. The case was tried to the court, and judgment was rendered for appellant for the full amount of the policy. The writ of error is to review this judgment. The parties will be designated appellant and appellee.

The contentions in the case are substantially as follows:

Appellant contends (1) that the evidence conclusively shows that it is entitled to have the policy corrected on the ground of mutual mistake and to have attached thereto a rider known as "Distribution Average Clause," which would make the liability under the policy and the loss sustained amount to $1,135.98; and (2) that no recovery can be had because there was no proof of loss as required by the policy.

Appellee contends that there was a settlement and adjustment of the loss for the full amount of the policy, subsequently to the fire.

The facts pertinent to the issues thus raised are in substance the following: The warehouse in question was a one-story brick building about 250 feet square, divided into five compartments each 50 feet in width and separated by fireproof partition walls. There was no difference in the value of the separate compartments, except that each of the end compartments was charged with the entire outer wall and one-half of a partition wall; whereas, the interior compartments were each charged with one-half of the partition wall on either side, amounting, of course, to one partition wall chargeable to each interior compartment as against a wall and a half charged to the end compartments.

Under the rules of the state fire insurance commission, the building came within a classification which required that blanket policies written thereon should contain what is denominated the "Distribution Average Clause," the effect of which was that the total amount insured by the policy should be distributed among the several divisions of the building in the proportion that the value of each subdivision thereof should bear to the aggregate value of the entire subject insured. At the time of the fire, appellee held altogether $12,000 insurance on the property, which was distributed between four companies, including appellant; the other policies being one for $4,000 and two for $2,000 each. Each of the other policies had attached to it a rider containing the distribution average clause, but no such rider was attached to the policy in suit. The evidence in this regard is without contradiction and is embraced in the following finding of the trial court:

"The court finds that the Corsicana Warehouse Company constructed its plant some time in the fall of 1914, and that it is engaged in the business of a cotton warehouse, and has been since it was organized. That the same year it was constructed said company, hereinafter called the plaintiff, took out an insurance policy in the defendant company, and that this occurred before the present manager took charge of said company, or any of its present officers were in control of same, except G. M. Gibson, President. That thereafter each year previous to the expiration of the original policy and of the ones succeeding it, all of said policies being for a term of one year, the defendant insurance company would make out a new policy for the same amount of insurance and mail the same to the plaintiff. That the plaintiff never at any time requested a renewal of any of said policies. That in 1920 a policy was mailed to the plaintiff by the defendant, which contained an equal distribution clause, and was similar in amount of insurance to the ones preceding it. That the plaintiff's agents never read any of said policies, but merely accepted the same and put them in their safe, and paid the premiums on all of them. That the law or ruling of the insurance board authorizing the incorporation of an equal distribution clause in insurance policies on property of this nature was passed in 1917. As to whether any of the policies previous to the one issued in 1920 contained an equal distribution clause, the evidence does not disclose. At the expiration of the policy issued in 1920, which expired in the fall of 1921, the defendant insurance company, without any request from the plaintiff made out a new policy for the same amount of insurance and mailed the same to the plaintiff, whose agent accepted same without reading it, and placed it in its safe, and paid the premium thereon. The plaintiff did not know that the insurance policy issued in 1920 contained an equal distribution clause, and in fact it never heard of such a clause until after its loss in the fall of 1922.

"About three weeks after the insurance policy was issued in 1921, on which this suit is based, defendant's agent received a letter from defendant company inquiring why the equal distribution clause had not been attached to said policy; thereupon defendant's agent, without any knowledge whatever of the plaintiff, or its agents, prepared an equal distribution clause, in triplicate, one of which was placed in the agent's files, and two of which were sent to the home office of the defendant company, but the agent intended to send one copy to the plaintiff, who was insured under said policy, but did not do so, and the plaintiff never knew or heard of this action of the defendant's agent in making out an equal distribution clause to be attached to the original policy until after the loss which destroyed plaintiff's property, approximately one year later."

The fire occurred on October 13, 1922, and shortly thereafter one Cole, a representative of the Bates Adjustment Company, went to Corsicana for the purpose of adjusting the loss. He represented each of the four companies involved. The fire did considerable damage to one of the end compartments, designated compartment E, and there was a small damage to the adjoining compartment D. Appellee and the adjuster each had a contractor to estimate the damage. That of the former placed the amount at $10,590; whereas, the latter's placed the amount at $7,896. After some negotiation, the amount of the loss was finally adjusted at $6,271.94. This figure was arrived at by the following method: The adjuster's contractor placed the value of the entire building at $42,206.77, that of the two end compartments at $9,158.54 each, and that of the interior compartments at $7,963.23 each. He estimated the damage to the partition wall between compartments D and E at $1,000, whereas appellee's contractor estimated this damage at $776.75, or 25 per cent. of $3,107, his entire valuation on the wall. The damage to compartment D, other than that to the partition, was evidently inconsequential and was placed at $36. The agreed amount of damage to this compartment was $536, which was arrived at by taking one-half of the highest estimate of damage to the wall and adding the $36 damage. Under the proportionate values of the several compartments above the insurance on compartment E applying the distribution average clause was $216.99+ per $1,000 of the face of the policies. The court found the value of the entire building to be $60,000, but this finding would not benefit appellee in any way under the distribution average clause, since the valuation of the partition wall by the adjuster's contractor was higher than that of appellee's; and therefore placing a greater valuation on the entire building would lessen the difference in the proportionate values of the external and internal compartments. It will thus be seen that the total amount recoverable in any event under the three concurrent policies on compartment E was $1,735.94 and on compartment D under all the policies $536. To this was added $4,000, the full face of appellant's policy; thus making in all $6,271.96. There was no theory under which appellee could recover more than this aggregate amount, which all agreed was much less than the actual loss.

There was conflict in the testimony between the adjuster on the one side, and the president and manager of appellee on the other, as to whether the adjuster agreed that appellant would pay the full amount of its policy. The trial court found the agreement was made as appellee contends; but the question becomes unimportant in the light of the other conclusions we have reached. The $2,271.94 was subsequently paid by the other companies. However, in forwarding the proof of loss before payment, the letter of transmittal contained the following clause:

"These proofs are submitted, however, with the distinct understanding that if at a later date final adjustment of the North River policy is based on the application of the distribution average clause, that you will refund the above three companies the sum of $22.33 per thousand dollars insurance. The above companies elected to make this proposition, not feeling that they wanted to withhold any money which you were entitled to, until the final disposition of the North River policy."

These proofs were executed and payment was made accordingly. Mr. Gibson, the president of appellee company, testified that he held up these proofs for a little while, "because I didn't want to make any mistake, and I finally accepted the others as having to do so."

With reference to the proof of loss, it is quite clear that this was waived by appellant. The evidence shows an agreed amount of loss for the...