Orenstein v. Star Ins. Co.

• Decision Date: 12 January 1926
• Docket Number: No. 2396,2397.,2396
• Citation: 10 F.2d 754
• Parties: ORENSTEIN et al. v. STAR INS. CO. OF AMERICA. SAME v. UNION FIRE INS. CO. OF PARIS, FRANCE.
• Court: U.S. Court of Appeals — Fourth Circuit

10 F.2d 754 (1926)

ORENSTEIN et al. v. STAR INS. CO. OF AMERICA.

SAME v. UNION FIRE INS. CO. OF PARIS, FRANCE.

Nos. 2396, 2397.

Circuit Court of Appeals, Fourth Circuit.

January 12, 1926.

COPYRIGHT MATERIAL OMITTED

D. W. Robinson, of Columbia, S. C. (Robert Moorman, of Columbia, S. C., on the brief), for plaintiffs in error.

Augustine T. Smythe, of Charleston, S. C. and Christie Benet, of Columbia, S. C., (Benet, Shand & McGowan, of Columbia, S. C., on the brief), for defendants in error.

Before WADDILL, ROSE, and PARKER, Circuit Judges.

PARKER, Circuit Judge (after stating the facts as above).

There are twenty-four assignments of error to the action of the court below, many of which it is unnecessary to discuss. A careful analysis of the case shows that three major questions are presented for our determination: (1) Was there sufficient evidence of a breach of the condition against increased hazard? (2) Was there sufficient evidence of the breach of condition against false swearing? and (3), if there was a breach of such conditions, were the rights of plaintiff bank under the policies of insurance forfeited thereby?

As to the first question, we think that there was ample evidence to sustain a finding that there was a breach of the condition against increase of hazard. The fact that insured was in the warehouse practically alone all of the day prior to the fire; that he left with the key of the warehouse in his pocket at 6 o'clock in the evening; that the building was so constructed and closed that it was impracticable for it to be soaked with kerosene or gasoline from without; that the goods and the interior of the building were found soaked with one or the other of these inflammable liquids; that all of the property of insured was mortgaged; and that the goods in the warehouse were overinsured — all of these facts and circumstances together made a case where it was proper that the jury pass on the question whether there was not an increase of hazard within the knowledge and control of the insured. Orenstein v. New Jersey Ins. Co., 127 S. E. 570, 131 S. C. 498, a decision by the Supreme Court of South Carolina in a case growing out of the same fire and involving the same facts. Contention is made by plaintiffs, however, that defendants waived this defense of increase of hazard by not denying liability on this ground, when they rejected the proofs of loss tendered by insured. Without questioning for a moment the rule laid down in the case cited by plaintiffs (Ohio & Miss. Ry. Co. v. McCarthy, 96 U. S. 267, 24 L. Ed. 693), to the effect that, where a party has given a reason for his conduct and decision touching anything involved in a controversy, he cannot, after litigation has begun, change his ground and put his decision upon another and a different consideration, we think that that rule has no application here. Defendants did not deny liability on the policy when rejecting the proofs of loss upon a different ground from that set up in the answer. They did not deny liability at all. They simply rejected the proofs submitted, on the ground that they did not correctly state the loss. This could not amount to a waiver, because the rejection of the proofs of loss was an "action taken" under the terms of the nonwaiver agreement quoted above, which expressly preserved defendants' rights and defenses. We think, therefore, that the learned trial judge correctly submitted to the jury the defense growing out of the increase of hazard alleged, and, from an examination of the entire charge, we are of opinion that he correctly stated the law applicable thereto.

Plaintiffs contend that there was error in submitting the defense of false swearing to the jury, (1) because the false statements contained in the proofs of loss were mere matters of opinion, (2) because denial of liability under the policies waived proofs of loss, and (3) because the intention to contest the policy for increased hazard at the time of taking the nonwaiver agreement estops the defendants from setting up causes of forfeiture growing out of proofs of loss submitted under the agreement. None of these propositions can be maintained. As to the first, the oath as to values in the proofs of loss was not a mere matter of opinion. It was a sworn estimate of value by one having special knowledge of the property made, with the intent that the other party, ignorant on the subject, and with unequal means of information, should rely upon it to his injury. Ruberg v. Brown, 27 S. E. 873, 50 S. C. 397. It appeared that this estimate of value was grossly excessive, and the circumstances surrounding the fire were such as to warrant the conclusion that it was willfully false and fraudulent. The rule applicable is well stated in Ruling Case Law as follows:

"An estimate of the value of insured property by the insured in his proofs of loss will not constitute fraud, if he places the amount too high through inadvertence or mistake, but a willfully false and fraudulent valuation of the property destroyed will of course avoid the policy." 14 R. C. L. 1344; Hiller v. Ins. Co. of North America, 52 So. 104, 125 La. 938, 32 L. R. A. (N. S.) 453, and note; Orenstein v. N. J. Ins. Co., 127 S. E. 570, 131 S. C. 498.

As to the second proposition, it is unquestionably true that denial of liability waives proofs of loss, but it does not waive the breach of condition involved in false swearing, if proofs of loss are in fact offered, and that is the proposition with which we are dealing here. Furthermore, in this case there had been no denial of liability at the time insured made the alleged false oath and filed the proofs of loss. No authority has been cited which supports the third proposition, and it is obviously unsound. The execution of the nonwaiver agreement was in itself notice that the defendants might assert defenses against the policies. The fact that the defendants did intend to assert such defenses...