Paterson-Leitch Co. v. Insurance Co. of No. America

• Decision Date: 29 October 1973
• Docket Number: No. C 72-827.,C 72-827.
• Citation: 366 F. Supp. 749
• Parties: The PATERSON-LEITCH COMPANY, Plaintiff, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant.
• Court: U.S. District Court — Northern District of Ohio

366 F. Supp. 749

The PATERSON-LEITCH COMPANY, Plaintiff, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant.

No. C 72-827.

United States District Court, N. D. Ohio, E. D.

October 10, 1973.

As Amended October 29, 1973.

Phillip J. Campanella, Spieth, Bell, McCurdy & Newell, Cleveland, Ohio, for plaintiff.

Murray K. Lenson, Cleveland, Ohio, for defendant.

MEMORANDUM OPINION AND ORDER

BATTISTI, Chief Judge.

Plaintiff, The Paterson-Leitch Company, owner of three adjoining dwellings damaged by fire, brings this action upon an insurance policy (Standard Fire Insurance Policy No. SFB 20 26 01) issued by defendant, Insurance Company of North America, covering the loss of these dwellings by fire. Federal jurisdiction is predicated on diversity of citizenship, 28 U.S.C. § 1332.

Plaintiff has filed a motion for summary judgment pursuant to Rule 56, F. R.Civ.P. The parties have filed briefs, admissions depositions and interrogatories in support of their respective positions.

The following facts relevant to this case appear to be substantially undisputed. On February 28, 1972, the dwellings here in question,¹ fully owned by plaintiff, and covered by a genuine and effective fire insurance policy issued by defendant, were damaged by fire. The origin of the fire was unknown, but it did not occur from any of the causes excepted in the insurance policy here in question. (Defendant's Answers to Plaintiff's Supplemental Request for Admissions, No. 17.) Immediately subsequent to the fire, plaintiff duly notified defendant of the loss and damage to the insured dwellings. (See Defendant's Answers to Plaintiff's Request for Admissions, No. 20.) Thereafter, on March 2, 1972, in the early morning, defendant sent one of its authorized claims adjusters, Mr. Boyd Gunnison, to inspect the insured dwellings, and make estimates of the extent of damages. (See Deposition of Mr. Boyd Gunnison, p. 32; Defendant's Answers to Plaintiff's Request for Admissions, No. 33.)

There is much dispute between the parties as to what Mr. Gunnison accomplished as a result of his inspection of the damaged dwellings. Defendant contends that Mr. Gunnison only conducted a cursory examination of the damaged premises and never made any final or conclusive estimates as to the actual cash value of plaintiff's alleged loss. Plaintiff, on the other hand, argues that Mr. Gunnison's estimates amounting to a total of $11,500.00² must be deemed final, particularly in view of the fact that when Mr. Gunnison was informed of plaintiff's plans to raze what remained of the dwellings, he specifically informed plaintiff's agents that he had no objection to their carrying out these plans, thereby precluding any further physical inspection of the dwellings by him. (Deposition of Mr. Boyd Gunnison, p. 75.) It seems undisputed, however, that as a result of the fire one of the insured dwellings was at least twenty percent destroyed; another thirty-three percent destroyed; and the last eighty percent destroyed. (See Defendant's Answers to Plaintiff's Supplemental Request for Admissions, Nos. 6, 7; Defendant's Answers to Plaintiff's Interrogatories No. 9 F.)

The parties are likewise in accord that prior to the fire and sometime between February 10 and February 16, 1972, plaintiff entered into a contract with the Harris Wrecking Company to have the three insured dwellings demolished. (See Plaintiff's Answers to Defendant's First Set of Interrogatories, Nos. 2, 3); that prior to February 28, 1972, the Harris Wrecking Company had obtained all or nearly all the permits necessary to undertake the demolition work; and that again prior to February 28, 1972, all the utilities in the insured dwellings had been disconnected. (See Deposition of Jerome Harris and exhibits attached thereto.) No specific date, however, had been set for the commencement of the demolition. (See Deposition of Jerome Harris, p. 29.) Nor had plaintiff agreed to convey or sell to the Harris Wrecking Company any of the materials that the dwellings were composed of.

There is no dispute, in addition, that prior to February 28, 1972, the insured dwellings had been vacated by their tenants. With respect to 931 East 67 Street, the last tenant moved out sometime in January, 1972. With respect to 927 East 67 Street and Rear 927 East 67 Street, the actual date the buildings were vacated is not completely clear. Plaintiff formally submits that the last tenants moved out over the weekend of February 27, 1972. (See Plaintiff's Answers to Defendant's Set of Interrogatories, No. 10.) Information supplied to Mr. Gunnison on March 2, 1972, however, seems to indicate that the dwellings were vacated a few days earlier than that. (See Deposition of Boyd Gunnison, p. 35.)

Finally it is undisputed that prior to the fire and after the last tenant left the insured premises, no watchman or other security personnel was employed to watch the buildings for the purpose of preventing access thereto by vagrants. (See Plaintiff's Answers to Defendant's First Set of Interrogatories, No. 15.)

Defendant's opposition to plaintiff's motion for summary judgment is essentially bottomed on three arguments. First, defendant contends that plaintiff had effectively extinguished its insurable interest in the dwellings by the time of the fire on February 28, 1972. Second, it submits that even if plaintiff had retained its insurable interest in the properties at the time of the fire there are genuine issues of fact in dispute as to whether the coverage under the insurance policy had been suspended by reason of an increase of the fire hazard caused by means within the control or knowledge of plaintiff. Finally, defendant argues that there are genuine issues of fact in dispute as to what damages, if any, defendant sustained as a result of the fire.

Upon consideration of the evidence, and for the reasons set forth below, plaintiff is granted partial summary adjudication pursuant to Rule 56(d), F.R. Civ.P., insofar as the Court holds that plaintiff did have an insurable interest in the dwellings at the time of the fire. In all other respects, however, plaintiff's Motion for Summary Judgment is denied.

INSURABLE INTEREST

The insurance policy issued by defendant to plaintiff provides in pertinent part:

"In consideration of the provisions and stipulations herein or added hereto and of the premium specified, this company . . . does insure the named insured . . . to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss . . . nor in any event for more than the interest of the insured, against all DIRECT LOSS BY FIRE." (Emphasis added.)

As defendant points out in its briefs, it is well established that to recover under an insurance policy for fire loss to property, an insured must have an insurable interest in the property at the time of the loss. See 30 Ohio Jur.2d §§ 301, 302, 306; Stauder v. Associated General Fire Co., 105 Ohio App. 105, 151 N.E.2d 583 (1957). "Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction." 30 Ohio Jur.2d § 305.

Defendant argues that by entering into a contract to have its insured dwellings demolished, by allowing the wrecking company to secure, or at least begin to secure, the necessary permits for demolition, by vacating the dwellings prior to the prospective demolition, and by allowing all utilities in the dwellings to be disconnected, plaintiff had effectively extinguished its insurable interest in the dwellings. Defendant's point, it would seem, is that because the insured dwellings were apparently about to be demolished, they were no longer of any value to plaintiff at the time of the fire and, in consequence, plaintiff lacked any insurable interest thereon.

Defendant cites no Ohio authority supporting this position. Instead it places reliance on a number of cases from other jurisdictions dealing with situations similar to the one at bar. See Aetna State Bank v. Maryland Casualty Co., 345 F.Supp. 903 (N.D.Ill.1972); Garcy Corp. v. The Home Ins. Co. et al., 353 F.Supp. 329 (N.D.Ill.1973); Lieberman v. Hartford Fire Ins. Co., 6 Ill. App.3d 948, 287 N.E.2d 38 (1972); Royal Ins. Co. Ltd. v. The Sisters of Presentation, 430 F.2d 759 (9th Cir. 1970); Leggio v. Millers National Ins. Co., 398 S.W.2d 607 (Tex.Civ.App.1965); Board of Education of Hancock Co. v. Hartford Fire Ins. Co., 124 W.Va. 163, 19 S.E.2d 448 (1942). The circumstances of these cases, however, upon careful examination, are clearly distinguishable from those of the instant case; moreover, the spirit of their holdings may not be viewed as controlling or dictating the result herein.

Aetna, Garcy, and Lieberman appear to stand for the proposition, inter alia, that where an owner is bound by contract for the destruction of his insured properties, and demolition has already commenced, his insurable interest in the properties is extinguished. Here, however, although plaintiff had entered into a contract for demolition, the actual physical work had not yet begun. Indeed, no date had been specified for the demolition prior to the fire. At the time of the fire, therefore, plaintiff's insured dwellings were completely intact and fully at the disposition, and in the control, of plaintiff.

Defendant argues, however, that Aetna, Garcy and Lieberman should be broadly read. It maintains that the spirit of these holdings, if not their language, is that whenever it appears certain that a property owner is going to demolish his insured properties, the Court need not wait for the ball to actually hit the building in order to rule that the property owner's insurable interest has been extinguished.

It must be remembered, however, that the contract plaintiff had with the Harris Wrecking Company was not specifically enforceable. The...