Oppenheim v. Fireman's Fund Insurance Co.

Decision Date29 November 1912
Docket Number17,699 - (37)
Citation138 N.W. 777,119 Minn. 417
PartiesJOSIE OPPENHEIM and Others v. FIREMAN'S FUND INSURANCE COMPANY
CourtMinnesota Supreme Court

Action in the district court for Ramsey county to recover $5,000 upon a policy of fire insurance. The case was tried before Dickson, J., who, at the close of the testimony, denied defendant's motion for a directed verdict and directed a verdict in favor of plaintiffs for $5,142.50. From an order denying its motion for judgment notwithstanding the verdict or for a new trial, defendant appealed. Reversed and new trial granted.

SYLLABUS

Fire insurance -- coinsurance clause.

Where the coinsurance clause permitted by R.L. 1905, § 1642 as amended by Laws 1907, c. 446, is attached to a policy of fire insurance, and the insured maintains insurance on the building to the amount which he is by such clause required to carry, in case of a total loss the insurable value as stated in the policy, and not the actual value at the time of the fire, is the basis of determining the amount of recovery on the policy.

Total or partial loss.

In this case the question of whether the loss was total or partial was, under the evidence, one of fact for the jury.

Total or partial loss -- amount of recovery.

It is only where a loss on buildings is total that the insurable value as stated in the policy forms the basis of determining the amount of a recovery. Where the loss is partial the insured is entitled to recover the actual amount of his loss and this cannot be based on the insurable value.

Reference to arbitrators.

If the actual loss is proved to be greater than the amount of the insurance, a reference to arbitrators is not a condition precedent to recovery, but if the actual loss is less than the amount of the insurance such reference is a condition precedent to recovery.

Morphy, Ewing & Bradford, for appellant.

M. D. Munn, for respondents.

OPINION

PHILIP E. BROWN, J.

This is an action on a policy of fire insurance. At the close of the testimony the trial court directed a verdict for the plaintiffs. The defendant moved for judgment notwithstanding the verdict or for a new trial, and from an order denying this motion appealed to this court.

The policy sued on was issued upon a building in St. Paul owned by the plaintiffs, was for $5,000, and was one of six policies identical in form, making a total insurance of $20,000. While these policies were in force a fire occurred which damaged, or practically destroyed, the building. The plaintiffs furnished proofs of loss, claiming a total loss. The defendant insisted that the loss was not total, and demanded that the question of the amount of the loss and damages be referred to referees, as provided in the policy in case of a disagreement upon such question. The plaintiffs refused to comply with this demand and, the defendant refusing to pay, brought this action as for a total loss, and in their complaint alleged that the loss was total and prayed judgment for the total amount of the policy sued on, to wit: $5,000. The defendant, in its answer, admitted the issuance of the policy, that the insurable value of the property, as stated in the policy, was $25,000, and that the total insurance on the property was $20,000, but alleged that the entire risk covered by the policy amounted to more than $20,000, that the other companies carrying insurance on the said property were "coinsurers" with the defendant by reason of the fact that the policy contained the following so-called "coinsurance" clause:

"In consideration of the acceptance by the assured of a reduction from the established rate of 105 per cent to 89 per cent, it is hereby agreed that the assured shall maintain insurance during the life of this policy upon the property hereby insured to the extent of at least 80 per cent of the actual cash value thereof at the time of fire; and that failing so to do, the insured shall be a coinsurer to the extent of such deficit, and to that extent shall bear his, her or their proportion of any loss, and it is expressly agreed that in case there shall be more than one item or division in the form of this policy this clause shall apply to each and every item.

"This clause, at the request of the assured, is attached to and forms part of Policy No. C-118,167 of the Fireman's Fund Insurance Company of California, and shall in no case apply to dwellings or farm property nor to any risk wherein the total insurance shall be less than twenty thousand dollars, except grain elevators and warehouses and the contents of same."

As a further defense it was alleged that the loss was not total, but partial only, and that for this reason the reference demanded by it and refused by the plaintiffs was a condition precedent to the right to sue on the policy, and that the actual loss from the fire did not exceed $11,000.

1. The first proposition of the defendant is that by reason of the "coinsurance" clause of the policy and under R.L. 1905, § 1642, as amended by Laws 1907, p. 639, c. 446, the actual value of the insured property at the time of the fire is the basis for determining the amount of the loss, notwithstanding the agreed valuation of the property as evidenced by the "insurable value" stated in the policy. But the trial court ruled that the "coinsurance" clause, under the law referred to, had no effect; it being admitted that there was concurrent insurance which brought the total insurance up to eighty per cent of the insurable value stated in the policy; and in this we agree with the trial court. We hold that the mere attaching of the "coinsurance" clause to the policy, though with the consent of both parties to the contract, did not wipe out the "insurable value" stated in the policy and render the policy an open one, and that under such a clause the insurer becomes a coinsurer within the purview of Laws 1907, c. 446, only where he fails to take out concurrent insurance to the amount specified and required by such clause. The statute under consideration provides:

"Any policy where the entire risks covered by the same amounts to more than $20,000 may contain a coinsurance clause, if the insured requests the same in writing, of which fact such writing shall be the only evidence, and if, in consideration thereof, a reduction in the rate of premium is made by the company. When so demanded and attached to the policy, said agreement shall be binding upon both the insured and the company, and in case of loss the actual cash value of the property so insured at the time of the loss, including buildings, shall be the basis for determining the proper amount of such coinsurance and the amount of loss, notwithstanding any previous valuation of such building."

It appears that the insured in this case requested a coinsurance clause, and that pursuant to such request the clause above quoted was included in the policy. Looking, then, to this clause, it is quite clear that it was simply an agreement by the insured to maintain insurance on the property to the extent of at least eighty per cent of the "actual cash value thereof at the time of fire," in default of which the insured would themselves become coinsurers to the extent of the deficit. Since, therefore, it is admitted that the insured maintained insurance covering eighty per cent of the "insurable value," which amount, according to the defendant's own contention hereinafter referred to, even exceeded the amount which the plaintiffs were required to carry under a literal interpretation of that provision of the coinsurance clause specifying that eighty per cent of the "actual cash value" of the property "at the time of fire" should be covered by insurance, it would also seem very clear that the plaintiffs did not become coinsurers, and that, so far at least as the coinsurance clause is concerned, the policy was not an open one under which the loss was determinable with reference to the cash value of the property at the time of the loss, as distinguished from the "insurable value" stated in the policy.

There is a wide distinction between "coinsurance" and "concurrent insurance." The latter term has been used from time immemorial to designate insurance placed in other companies covering the same risk. The standard policy permits concurrent insurance, and it was permitted in the policy in this case. We venture to say that it is rare indeed that there is not concurrent insurance whenever the risk is a large one. Coinsurance, on the other hand, is a creature of modern invention, at least in this state. When the standard policy law was enacted, and for a long time thereafter, it was expressly provided that there should be no coinsurance or other clause in the policy which would reduce the amount payable to the insured in the event of loss to less than the amount of the...

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