Orient Ins. Co. v. Skellet Co.

• Decision Date: 31 October 1928
• Docket Number: No. 8140.,8140.
• Citation: 28 F.2d 968
• Parties: ORIENT INS. CO. v. SKELLET CO.
• Court: U.S. Court of Appeals — Eighth Circuit

28 F.2d 968 (1928)

ORIENT INS. CO. v. SKELLET CO.

No. 8140.

Circuit Court of Appeals, Eighth Circuit.

October 31, 1928.

Nathan H. Chase, of Minneapolis, Minn., for appellant.

LeRoy Bowen, of Minneapolis, Minn. (Ivan Bowen, of Minneapolis, Minn., on the brief), for appellee.

Before LEWIS, Circuit Judge, and PHILLIPS and SANBORN, District Judges.

LEWIS, Circuit Judge.

Skellet Co. maintained a public storage warehouse. It obtained from Orient Ins. Co. a fire policy insuring it against loss or damage by fire, "On merchandise and property of every description, not owned by the assured, for which they may be legally liable, all while contained in the ten-story, fireproof building, situate and being No. 247-253 Sixth Avenue South, Minneapolis, Minnesota." The policy, aside from the subject-matter insured, was in the terms prescribed by the state statute, and after the fire occurred the insured had its claimed loss or damage assessed by arbitrators, the insurer refusing to participate in the proceeding. It denied liability and objected to arbitration. The State Supreme Court had held that under the Minnesota standard fire policy the insured had the right to have the amount of its loss settled in that way, even though the insurer denied liability and refused to participate in the arbitration. Abramowitz v. Continental Ins. Co., 170 Minn. 215, 212 N. W. 449. We had the statute under consideration in Continental Ins. Co. v. Titcomb (C. C. A.) 7 F.(2d) 833, and held, following McQuaid Market House Co. v. Home Ins. Co., 147 Minn. 254, 180 N. W. 97, that the statute called for a common-law arbitration as distinguished from an appraisement; and we further held that although the statute prescribed the terms of the policy it was contractual when issued, bound the parties as to the mode of procedure in ascertaining the loss, but did not oust the courts of jurisdiction on the question of liability of the insurer. In a late case, Itasca Paper Co. v. Niagara Fire Ins. Co. (Minn.) 220 N. W. 425, the Minnesota court again considered the rights of the insurer and insured to have an award of the loss fixed by arbitrators, whether the liability be admitted or denied. The court, speaking through its Chief Justice, said:

"Defendant contends that a denial of liability solely upon the ground that the policy does not cover the destroyed or damaged property operates as a bar to the right of the assured to demand any appraisal whatsoever. Such contention is contrary to the holding of Abramowitz v. Continental Ins. Co., supra. If so, it would be an effective and simple way to destroy the insured's right of appraisal.

"An award does not preclude the insurer from subsequently having its liability on the policy judicially determined. The findings of the board on the matter of coverage are conclusive, in so far as their determination is necessary and an element or step in arriving at the amount of loss and damage; but, though conclusive for such purposes, it does not have such efficacy upon the question of liability, which, when raised, must be decided by the court.

"Defendant was afforded the opportunity, provided by law, to be present and participate in the proceedings before the board. It elected not to do so. It had the privilege to appear there, deny liability, and litigate before the board the amount of loss and damage. Its appearance or nonappearance alone is of no moment. Having the opportunity to participate, the findings of the board as to amount of loss and damage are just as conclusive as if the defendant had participated in the organization and procedure of the board. * * * Plaintiff was entitled to the appraisal. The award stands and evidences the amount to be paid if defendant's liability on the contract is established."

See also Hamilton v. Ins. Co., 136 U. S. 242, 10 S. Ct. 945, 34 L. Ed. 419.

The purpose of the statute, then, as construed, embodied in the policy, was to ascertain and fix contractually the amount of the loss and damage to the insured and leave only the question of insurer's liability therefor to judicial inquiry if denied. We therefore reject as unsound the contention that no award could be made by arbitration until the question of insurer's liability was first settled by admission or adjudication.

The arbitrators found the loss and damage occasioned by the fire to be $37,012.74, and insured then brought this action to recover the full sum named in the policy, $5,000. It is the contention of Skellet Co. that the goods themselves stored in the warehouse were insured, while the insurance company insists that by the plain terms of the policy it only insured Skellet Co. against its legal liability to the bailors; and it pleaded in its answer that Skellet Co. was in no manner responsible for the fire, that the fire was not due to any negligence of Skellet Co., that Skellet Co. exercised such care in the premises as a reasonably careful person would have exercised under similar circumstances; it pleaded the state statute which holds a public warehouseman to the exercise of reasonable care only and exempts him from liability where loss or injury could not be avoided by the exercise of the same reasonable care that an owner of similar goods would exercise, unless by agreement he binds himself to greater care, alleged that Skellet Co. had no such agreement and that it exercised the reasonable care that an owner of similar goods would have exercised under the circumstances, and that it issued...