Palace Cafe v. Hartford Fire Ins. Co.

• Decision Date: 07 July 1938
• Docket Number: 6451.,No. 6450,6450
• Citation: 97 F.2d 766
• Parties: PALACE CAFE v. HARTFORD FIRE INS. CO. SAME v. NATIONAL SECURITY FIRE INS. CO.
• Court: U.S. Court of Appeals — Seventh Circuit

97 F.2d 766 (1938)

PALACE CAFE v. HARTFORD FIRE INS. CO.

SAME v. NATIONAL SECURITY FIRE INS. CO.

Nos. 6450, 6451.

Circuit Court of Appeals, Seventh Circuit.

May 11, 1938.

Rehearing Denied July 7, 1938.

COPYRIGHT MATERIAL OMITTED

C. G. Myers and C. F. Snerly, both of Chicago, Ill., and G. A. Farabaugh, of South Bend, Ind. (Myers & Snerly, of Chicago, Ill., and Farabaugh, Pettengill & Chapleau, of South Bend, Ind., of counsel), for appellants.

Floyd O. Jellison, of South Bend, Ind. (George A. Crane, of South Bend, Ind., of counsel), for appellee.

Before SPARKS and MAJOR, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

Defendants appeal from judgments entered against them upon two insurance policies. The policy of the Hartford Fire Insurance Company covered loss of property by riot, civil commotion, or explosion; that of the National Security Fire Insurance Company, loss of use and occupancy occasioned by riot, civil commotion, and explosion. The losses for which claim was made under each policy were caused by an explosion, which destroyed plaintiff's property located on leased premises.

Defendants assert as error that there was no substantial evidence to support the verdicts; that the court should have granted each of defendants' several motions for a directed verdict; that the court admitted improper evidence offered by plaintiff and excluded proper evidence offered by defendants, unduly limited cross-examination of plaintiff's witnesses and wrongfully overruled defendants' several motions for new trial.

Each policy contained a provision requiring the assured to submit to an examination. Plaintiff employed Blondell & Company, insurance adjusters, to prepare its proof of loss and to adjust the claims, if possible. For these services this firm was to be paid a certain sum irrespective of results and, in case of successful adjustment, an additional compensation. The firm designated its employee Wallace H. Lancton as its representative to attend to the details in making the claim and attempting adjustment. Defendants contend that Lancton was the authorized agent of plaintiff and that, therefore, the failure of plaintiff to comply with their demand to produce him for examination was a violation of the provisions of the policies. Under the facts stated, the insurance adjustment firm was an independent contractor and Lancton an employee thereof. He was not an officer or employee of the plaintiff. Ipswich Mills v. William Dillon et al., 260 Mass. 453, 157 N.E. 604, 53 A.L.R. 792; Pearl v. West End St. R. Co., 176 Mass. 177, 57 N.E. 339, 49 L.R.A. 826, 79 Am.St.Rep. 302; Leverone v. Arancio, 179 Mass. 439, 61 N.E. 45; Wright v. Fissell, 92 N.J.Eq. 508, 113 A. 699. There is no evidence that the plaintiff reserved any right to control the activity of Blondell & Company or any detail of performance of any of its contractual duties. The policies provide for examination of the assured. This includes only its corporate agents, not an independent contractor or attorney. Fidelity & Casualty Co. v. Carroll, 186 Ind. 633, 117 N.E. 858.

Defendants assert that plaintiff refused and failed to produce its bank statements or copies thereof or to permit defendants to inspect the bank records pertaining thereto and failed to preserve and produce an inventory of merchandise. This alleged failure of the plaintiff, it is asserted, was a violation of the terms and conditions of the policies, which provided that the assured might be required to produce all books of accounts, bills, invoices and vouchers, or copies thereof, if the originals should be lost. The evidence disclosed that the books of plaintiff included a general ledger, accounts payable ledger, daily journal or cashbook, corporation minute book and corporation stock book, all of which were kept on a desk in the office, being too large to put into the safe. The entire office was blown to pieces, and the testimony of plaintiff's witnesses was that all books were lost or destroyed except the accounts payable ledger, which was found some two or three blocks from the place of explosion. This book was delivered to defendants at the time of the examination requested. They took it to Chicago and had photostatic copies made of its pages, which were received in evidence. Thereafter, in some manner not beyond dispute, the book disappeared, but, in view of the sworn inability to produce it and the presence of the photostatic copies, no breach of the covenants of the policies occurred because of the book's absence. It should be observed that the record is silent as to notice for production of the books at any certain time or place and before any certain named officer. Such definite character of notice is essential.

Plaintiff testified that it produced all records it had regarding the bank account. There is no evidence that it objected to defendants examining the books of the bank with reference to its deposit account.

The inventory taken prior to the time of the explosion was on separate slips of paper. It was not complete, but such portions as had been finished were delivered to the adjuster, who kept them in his room. He copied them in a loose leaf book, which was produced, but did not know what finally became of them. He testified that he seached for them but was unable to find them. As to whether the disputed evidence as to non-production of any records was sufficient to constitute a breach of the policies, the question was one of fact for determination by the jury.

Defendants assert that the evidence disclosed fraudulent accounts, fraudulent concealment and false swearing by plaintiff, its officers, agents and representatives, knowingly and willfully committed, in violation of the policies' provisions forbidding such. Plaintiff contends there was no breach of the policies in this respect. The respective parties offered evidence bearing upon this issue and the jury was instructed by the court; its findings must be accepted. True, a misstatement in the proofs of loss willfully made will avoid a policy, but an innocent mistake will not amount to fraud or false swearing. Franklin Insurance Co. v. Culver, 6 Ind. 137. The adjuster explained the discrepancies between the items in the proofs of loss and the figures produced at the trial. Whether his explanation was to be believed, and whether he willfully made a false misstatement was a question of fact for the jury. The discrepancy between the amount fixed in a claim for loss and the amount of a settlement or of a...