Phoenix Assurance Company, Ltd. v. Loetscher

• Decision Date: 04 April 1949
• Docket Number: 4-8779
• Citation: 219 S.W.2d 629,215 Ark. 23
• Parties: Phoenix Assurance Company, Ltd. v. Loetscher
• Court: Arkansas Supreme Court

219 S.W.2d 629

215 Ark. 23

Phoenix Assurance Company, Ltd. v. Loetscher

No. 4-8779

Supreme Court of Arkansas

April 4, 1949

Rehearing Denied May 9, 1949.

Appeal from Pulaski Circuit Court, Second Division; Jackson A. Weas Judge.

Affirmed.

John M. Lofton, Jr., and Owens, Ehrman & McHaney, for appellant.

T J. Gentry and D. D. Panich, for appellee.

Minor W. Millwee, Justice. Holt, J., dissenting.

OPINION

Minor W. Millwee, Justice.

In June, 1946, appellees, Raymond P. Loetscher and Charles H. Loetscher started construction of a building on the Base Line Road in a rural community west of the City of Little Rock. They planned to use the building in the operation of a garage for the repair of motor vehicles. In order to secure a loan from the Reconstruction Finance Corporation to complete construction of the building, appellees were required to procure insurance against the perils of fire, tornado and lightning. On January 22, 1947, appellant, Phoenix Assurance Company, Ltd., issued its policy to appellees against these perils in the principal sum of $ 12,000. The building was nearing completion when it collapsed or was destroyed during a rain and thunder storm about 4:30 or 5:00 a. m., October 18, 1947.

Appellees' claim for loss of the building by lightning was denied and they filed this suit on December 5, 1947, alleging issuance of the policy, payment of the premium of $ 118.20 and total destruction of the building by lightning on October 18, 1947. It was further alleged that the building was of the value of approximately $ 20,000 at the time of its destruction and judgment was prayed for $ 12,000, plus the statutory penalty of 12% and attorney's fee.

On December 24, 1947, appellant answered admitting the issuance of the policy and that it was in force as alleged in the complaint, but denied all other allegations therein. On February 18, 1948, appellant filed an amendment to its answer pleading that the policy contained a "Full Completed Value Contribution Clause" which provided that the company was liable for no greater proportion of the loss than the amount of insurance bore to 100% of the actual value of the building when fully completed and ready for occupancy.

A second amendment to the answer was filed April 12, 1948, specifically denying that the building had been totally destroyed and alleging that if appellee should recover any amount, it should be limited to 12/20 of the amount of damage to the building as it existed on the date of its destruction. On April 19, 1948, appellant withdrew its first amendment to the answer.

The issues were tried before a jury resulting in a verdict for appellees for $ 12,000 for which judgment was rendered together with 12% penalty and attorney's fee of $ 1,800.

The building in question was 125 feet long and 60 feet wide with walls of concrete blocks and brick and a metal roof supported by steel trusses 60 feet in length and extending crosswise from wall to wall. Construction of the building was under the supervision of Henry Buddenburg, appellees' uncle, who was an experienced builder, but not an architect or engineer.

Appellees presented one witness who testified that he saw lightning strike and demolish the building during the storm on the morning in question. Other witnesses who lived nearby heard a violent clap of thunder and the noise of the falling building. Much of the testimony offered by appellant was directed to the type of materials and construction used and several experts gave it as their opinion that the building collapsed because of faulty materials and improper construction. Thus a disputed question of fact was presented to the jury as to the cause of the destruction of the building and the issue was resolved in favor of appellees.

Appellant first contends that the evidence is insufficient to support a finding by the jury that the building was totally destroyed and that the trial court, therefore, erred in submitting this issue to the jury. Appellant says: "It is our contention here that the uncontradicted and only testimony clearly proved that certain portions of the building remained which could be used for the reconstruction of the building, and that there was, therefore, not a total loss. Under these conditions the court should have instructed the jury that appellees could not recover the full amount of their policy of insurance and should have instructed them to determine the value of those portions of the building remaining and make the appropriate calculation under the provisions of the policy or permit the court to make the calculations after determining the extent of the loss."

The court gave Instructions 1 and 2 requested by appellees as follows: "Instruction No. 1 -- You are instructed that the burden of proving that said building being constructed by the plaintiffs and insured by the defendant was struck by lightning and as a result thereof was totally demolished is upon the plaintiffs, and if you find from a preponderance of the evidence in this case that the building was struck by lightning, and it was so far destroyed that no substantial portion remains in place capable of being utilized to advantage in restoring the building in the condition in which it was before being struck by lightning, then the building is a total loss. Whether or not the remnant of the building, if any remains, is adapted to use to restore the building to its condition before being struck by lightning depends on whether a reasonably prudent owner, uninsured, desiring to construct such a building as the building was before being struck by lightning, in proceeding to restore the building to its original condition, would utilize the remnant.

"Instruction No. 2 -- You are instructed that the terms of the insurance policy issued to plaintiffs by the defendant covers the construction of the building described in said policy of insurance, and until fully completed or occupied in whole or in part, said policy of insurance was in full force and effect. If you find from a preponderance of the evidence in this case that said building was demolished as a direct result of being struck by lightning prior to its completion or occupancy in whole or in part, your verdict will be for the plaintiffs."

Appellant objected generally to the giving of Instruction No. 1 and specifically to Instruction No. 2 on the ground that it afforded no basis upon which to fix the amount of a verdict for partial destruction of the building. While appellant did not request an instruction confining the jury's consideration to partial destruction of the building, the court gave appellant's requested Instruction A, as follows: "If you should find that the plaintiff is entitled to recover in this cause and in addition you should further find that the building was not a total loss, but that there was some value remaining, you will answer the following interrogatories: 1. What is the actual completed value of the building? 2. What is the value of the salvage, if any, that you find remains after the destruction of the building?

The three instructions, when considered together, correctly stated the applicable law as declared by this court in St. Paul Fire & Marine Ins. Co. v. Green, 181 Ark. 1096, 29 S.W.2d 304, and The Home Insurance Co. of N. Y. v. Cole, 195 Ark. 1002, 115 S.W. 267. However, appellant urges that the uncontradicted proof showed a remnant of the structure remaining which was reasonably adaptable to use in restoring the building to its former condition.

The policy did not cover the cost of concrete foundations or supports which are below the surface of the ground in a building constructed without a basement. There was no basement in the building erected by appellees. Testimony on behalf of appellees was that portions of the walls standing after collapse of the building were cracked and would have to be removed and rebuilt; that it would cost more to remove and clean the concrete blocks and brick than it would to purchase new materials; and that there was nothing in the remnants of the wrecked building from the foundation up that a prudent builder would use in restoring the structure.

There was a concrete floor or fill four inches thick laid over gravel estimated by a witness for appellant to have cost $ 1,750. Appellant earnestly contends that this was a finished floor which was covered by the policy and adaptable for use in restoring the building. Witnesses for appellees referred to this part of the structure as a concrete fill, or foundation for the floor. Henry Buddenberg, the contractor, testified that this fill lacked four inches reaching the level of the highway or lot surface and that it was their plan to add four inches of concrete to the fill and put a thinner on top to bring it up to the level of the highway. Appellees gave similar testimony. The cost of this part of the structure was not included in the itemized statement introduced by appellees showing a total of $ 16,942.46 in the costs of labor and materials used in the construction of the building at the time of its collapse. We think this evidence, considered in the light most favorable to appellees, was sufficient to support a finding that this part of the structure constituted a part of the foundation for a floor which was below the surface of the lot. Hence, it was not covered by the terms of the policy and any ambiguity in the exclusion clause is to be construed strictly against the insurer and liberally in favor of the insured under our well established rule of interpretation of insurance contracts. While the evidence on the whole was conflicting as to whether or not the remnants covered by the policy were capable of being utilized to advantage in restoring the building to its former condition, it was...