Puget Sound Lumber Co. v. Mechanics' & Traders' Ins. Co.

• Decision Date: 26 April 1932
• Docket Number: 23495.
• Citation: Puget Sound Lumber Co. v. Mechanics' & Traders' Ins. Co., 168 Wash. 46, 10 P.2d 568 (Wash. 1932)
• Court: Washington Supreme Court
• Parties: PUGET SOUND LUMBER CO. v. MECHANICS' & TRADERS' INS. CO.

10 P.2d 568

168 Wash. 46

PUGET SOUND LUMBER CO. v. MECHANICS' & TRADERS' INS. CO.

No. 23495.

Supreme Court of Washington

April 26, 1932

Department 2.

Appeal from Superior Court, Pierce County; E. D. Hodge, Judge.

Actions by the Puget Sound Lumber Company against the Mechanics' & Traders' Insurance Company, and against the Caledonian Insurance Company of Edinburgh, Scotland, and against the Carolina Insurance Company of Wilmington, N. C., and against the Victory Insurance Company of Philadelphia, Pa., and against the Svea Fire & Life Insurance Company, Limited which were consolidated for trial. Judgments for plaintiff and defendants appeal.

Reversed with directions.

Fred G. Clarke, of Seattle, and Neal & Bonneville, of Tacoma, for appellants.

Williamson, Freeman & Broenkow, of Tacoma, for respondent.

BEALS, J.

Puget Sound Lumber Company, a corporation, the plaintiff in this action, has for several years owned and operated a sawmill in the city of Tacoma. Some time prior to May 7, 1930, on which date the mill plant was destroyed by fire, plaintiff had taken out policies of use and occupancy insurance in the aggregate sum of $88,300. Of this gross amount, the five defendant insurance companies had written policies aggregating $11,000, and, the matter of defendants' liability upon these policies being disputed, plaintiff instituted actions against these defendants based upon their policies. The five actions were consolidated for trial in the superior court, and, being tried to a jury, resulted in verdicts in plaintiff's favor as follows:

            Mechanics' & Traders' Insurance Company 
                          
                            $ 732.63
                          
                            The Svea Fire & Life Insurance Company ....
                          
                            1,465.25
                          
                            The Carolina Insurance Company of Wilmington, N. C
                            ......
                          
                            1,172.20
                          
                            Caledonian Insurance Company of Edinburgh, Scotland
                            ........
                          
                            1,318.73
                          
                            Victory Insurance Company of Philiadelphia,
                            Pennsylvania ......
                          
                            1,758.30
                          
                            ---------
                          
                            $6,447.11
                          
                

From judgment on these verdicts the defendants appeal, and the consolidation of the actions has been maintained in this court.

Appellants admit that their respective policies were in force at the date of the fire, and that the fire was of sufficient magnitude to totally suspend the operations of respondent's plant for a considerable period. Respondent claimed against the aggregate amount of its use and occupancy insurance a total loss of $81,470.63, the claim being for loss under subdivision II, hereinafter quoted, for fixed charged and expenses which must necessarily continue during a total or partial suspension of business, to the extent only that such fixed charges and expenses would have been earned had no fire occurred. Respondent advanced no claim under the policies for net profits lost because of the fire, the sole issue to be tried being whether or not respondent, during the period of suspension of business because of the fire, would have earned any part of its fixed charges and expenses had the fire not occurred and business continued as usual, and, if so, how much.

The provisions of the insurance policies, in so far as they are material, read as follows:

'(1) The conditions of this contract are that if the building(s) and equipment only, situate on premises owned, leased, and/or occupied by the assured at Tacoma, Pierce County, Washington, Sanborn Map Sheet 26, Block 482, and occupied as Saw Mill Plant and/or machinery and/or equipment * * * (Insert here 'and/or raw stock' if liability due to damage to or destruction of raw stock is to be included) contained therein, be destroyed or damaged by fire occurring during the term of this policy so as to necessitate a total or partial suspension of business, this Company shall be liable under this policy for the actual loss sustained consisting of:

'I. Net profits on the business which is thereby prevented;

'II. Such fixed charges and expenses as must necessarily continue during a total or partial suspension of business to the extent only that such fixed charges and expenses would have been earned had no fire occurred;

'III. Such expenses as are necessarily incurred for the purpose of reducing the loss under this policy; for not exceeding such length of time, commencing with the date of the fire and not limited by the date of expiration of this policy, as shall be required with the exercise of due diligence and dispatch to rebuild, repair or replace such part of said building(s) and machinery and equipment * * * (Insert here 'and raw stock' if liability due to damage to or destruction of raw stock is included) as may be destroyed or damaged, subject to the following conditions and limits, to-wit:

'(2) Total Suspension Clause: The per diem liability under this policy during the time of total suspension of business of all the properties described herein shall be limited to the actual loss sustained, not exceeding 1/300 of the amount of this policy for each business day of such suspension, except that in the case of business being operated on Sundays and/or holidays, in which event the said per diem liability shall not exceed 1/365 of the amount of this policy for each business day of such suspension, due consideration in either case being given to the experience of the business Before the fire and the probable experience thereafter.'

Appellants contend that the trial court erred in overruling their motion for judgment notwithstanding the verdict and in denying their motion for a new trial; in submitting to the jury certain items to be considered in computing the amount of recovery in case of a finding in respondent's favor; in admitting in evidence certain exhibits offered by respondent; and in giving to the jury an instruction to which appellants excepted.

In support of their first assignment of error, appellants contend that it should be held as matter of law that the evidence is insufficient to support a finding that during the period of reconstruction respondent would have earned any part of its fixed charges and expenses within the provisions of the policies sued upon, and that the trial court should have granted appellants' motion for judgment in their favor notwithstanding the verdict and dismissed the actions. It must be remembered that this is not an action upon the usual policy of fire insurance. It is true that the loss for which recovery is sought was occasioned by a fire, but the policies of insurance cover only earnings which might have accrued to the insured had the operation of its plant been uninterrupted by such a calamity; no tangible property being covered. Such policies as are here in question constitute a new branch of insurance, and we find few authorities either in the textbooks or the decided cases which are of assistance in deciding the questions presented in this action. We agree with appellants in their contention that, in determining whether or not any recovery shall be had upon the policies, 'due consideration' must be given 'to the experience of the business Before the fire and the probable experience thereafter,' as provided in paragraph (2) above quoted. Hutchings v. Caledonian Ins. Co. (D. C.) 52 F. (2d) 744, 748.

Appellants contend that the policies here in question were based upon the customary methods of accounting established and followed by the insured over a considerable period of time preceding the fire, and that these methods of accounting became a part of the contract of insurance, and, in so far as applicable, are controlling in determining the liability of appellants. It is undoubtedly true that, in an action upon such a policy, the trier of the facts is entitled to consider the methods of accounting maintained by the insured prior to the loss, but we cannot agree with appellants thay any particular system of accounting is controlling in determining questions of liability under the policies. Appellants wrote the policies in suit for a valuable consideration. The policies do not themselves refer to any particular system of bookkeeping or accounting, nor do they purport to refer to any particular classification to which certain accounts in connection with the business shall be allocated. In such an action as this, the question is, not in what account did the insured place certain items of receipt or disbursement, of depreciation, or of profit or loss, for the purpose of computing any income tax which might be due or for the purpose of making a statement for its banker, but rather to what account should the respective items be allocated for the purpose of determining liability, if any, upon the policies sued upon. For the purposes of making an annual statement to its stockholders, it might be entirely immaterial in which account a certain item was placed, while for the purpose of establishing liability in this action the same matter might become of considerable importance. We find in connection with the matter now under discussion no elements either of contract or estoppel, and we are satisfied that, in determining the rights of the parties in this proceeding, the question to be decided is where do the different items of account, as the same affect the issues of this case, properly belong, not where were they placed by respondent pursuant to the system of accounting which it followed prior to the fire.

Respondent does not claim that during the time covered by the reconstruction period, if its business had been maintained without any interruption, it would have earned any net profits. Examination of the record satisfies us, however,...