Sachs v. American Central Ins. Co.

• Decision Date: 15 June 1962
• Citation: 34 Misc.2d 687,230 N.Y.S.2d 126
• Parties: Charles SACHS, Marvin Sachs, David Sachs and Peter Pluck, Plaintiffs, v. AMERICAN CENTRAL INSURANCE COMPANY, Commercial Union Assurance Co., Ltd., American Equitable Assurance Company and Marcato Elevator Company, Inc., Defendants.
• Court: New York Supreme Court

Page 126

230 N.Y.S.2d 126

34 Misc.2d 687

Charles SACHS, Marvin Sachs, David Sachs and Peter Pluck, Plaintiffs, v. AMERICAN CENTRAL INSURANCE COMPANY, Commercial Union Assurance Co., Ltd., American Equitable Assurance Company and Marcato Elevator Company Inc., Defendants.

Supreme Court, Trial Term, Kings County, Part XXIII.

June 15, 1962.

Raphael H. Weissman, Brooklyn, for plaintiffs.

Max J. Gwertzman, New York City, for defendants (Insurance Companies).

O'Hara & Gronell, New York City, for defendant Marcato, by William O'Hara, New York City.

J. IRWIN SHAPIRO, Justice.

Defendants insurance companies move to vacate the decision in plaintiffs' favor herein (Sachs v. Am. Central Ins. Co., 33 Misc.2d 816, 227 N.Y.S.2d 873) and for dismissal of the complaint against them on the grounds that (1) the court's determination was against the clear weight of the credible testimony and (2) the court erred in ruling that defendants had the burden of proving the electrical breakdown in the premises was not caused by a fire.

Plaintiffs sued on policies which insured them against 'all direct loss by fire' to the premises. Defendants insurance companies, for an affirmative defense, alleged that the damage was due entirely to an electrical disturbance, to wit, a short circuit of elevator equipment wiring. They disclaimed liability based upon a clause in each policy under 'EXCLUSIONS' which reads as follows:

'Electrical Apparatus Clause: This Company shall not be liable for any loss resulting from any electrical injury or disturbance to electrical appliances, devices or wiring from artificial causes unless fire ensues and, if fire does ensue, this Company shall be liable only for its proportion of loss caused by such ensuing fire.'

At the trial plaintiffs proved to the court's satisfaction, and accordingly the court factually found, that there had been a fire and that the fire caused damage to the elevator equipment.

As to the origin of the fire, plaintiffs' expert testified that it probably arose outside the wiring and caused the short circuit. Defendants insurance companies' expert denied that there had been a fire, either before or after the short circuit. The court rejected the contention that there had not been any fire. Upon the entire record, however, the court was of the opinion that any decision that the fire preceded the short circuit or that the short circuit preceded and caused the fire, would rest upon pure conjecture. Accordingly, the court concluded that neither proposition had been established by a fair preponderance of the credible and acceptable evidence. The bases for the foregoing findings were sufficiently set forth in the original opinion and need not be repeated here.

The first ground urged by the defendants insurance companies in support of this motion, is that the proof requires a finding in accord with the testimony of their expert, that there was no fire damage of any kind to the premises. The court's contrary finding, they claim, was against the clear weight of the evidence. This contention is not accepted by the court. In making its findings the court gave due consideration to the credibility of the witnesses and the quality of the evidence adduced at the trial. Accordingly, the court adheres to its factual findings for the reasons stated in its original opinion.

The second ground urged in support of the motion is that plaintiffs had the burden of proving that the fire preceded and caused the electrical breakdown. At the trial neither side argued or briefed the issue as to burden of proof upon the assumption that a determination would be made in its favor as to whether the fire or electrical disturbance came first. Defendants insurance companies have now submitted a brief in support of this motion. Accordingly, the court takes this opportunity to amplify its original opinion.

The court adheres to its original decision that plaintiffs, by proving that there had been a fire and damage resulting from a fire (as distinguished from damage resulting solely from an electrical disturbance) established a prima facie case, bringing themselves within the coverage of the policies, and that defendants insurance companies had the burden of proving their affirmative defense based upon the exclusionary clause that the electrical disturbance was not preceded and caused by a fire.

The general rule as to burden of proof where an exclusionary clause is interposed as a defense is as follows:

'Sec. 1854. Exceptions From and Limitations of Liability.--If a risk is excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk constitutes a defense which the insurer may urge, since it has not assumed that risk, and from this it follows, at least as a general rule, that an insurer seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the loss, or a part thereof, comes within the purview of the exception or limitation set up. In other words, the principle generally applied by the courts is that if proof is made of a loss apparently within a contract of insurance, the burden is upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability.' (29A Am.Jur. § 1854)

More specifically, the burden of proving an excluded risk in a fire insurance policy is generally upon the insurer, 46 C.J.S. Insurance § 1318, p. 421:

'Excepted risk or cause. In some jurisdictions the burden is on the plaintiff to show that the fire or loss was not due to a cause which is excepted by the terms of the policy. In most jurisdictions, however, where the loss appears to have been caused by fire, it is incumbent on defendant to show that it falls within one of the excepted risks or causes, but if defendant sustains this burden, it then becomes incumbent on plaintiff to disprove defendant's case or present additional facts taking the case out of the exceptions.'

In my opinion, New York follows the general rule which places on the insurance company the burden of proving any fact falling within an exclusionary clause which will bar recovery on the policy.

In Green v. Travelers Ins. Co., 286 N.Y. 358, 36 N.E.2d 620, cited in the original opinion herein, the insured paid a judgment against him for personal injuries and then brought an action for indemnification against the defendant insurance company. The insurer disclaimed liability on the ground that the injured person was plaintiff's employee at the time of the accident. The case was submitted to the trial court on stipulated facts that the injured person was a passenger in a truck operated by plaintiff and that he was being transported to pick currants on plaintiff's farm at the time of the accident. Plaintiff relied on a provision of the policy whereby the insurer undertook

'to pay on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed upon him * * * because of bodily injury * * * sustained by any person or persons, caused by an accident or arising out of the ownership, maintenance or use of the automobile.' (id. p. 361, 36 N.E.2d p. 621.)

The insurer relied on a clause contained in that portion of the policy entitled 'EXCLUSIONS' which excluded from coverage liability for injuries occurring to 'any employee of the insured while engaged in the business of the insured.'

The Court of Appeals found in the insured's favor on the ground that the insurance company failed to sustain the burden of showing that the injured person was in the employ of the insured at the time of the accident. The court said (p. 361, 36 N.E.2d p. 621):

'Since this clause [the exclusionary clause] was pleaded as a separate and affirmative defense, the burden of proof thereon was upon the defendant. Murray v. New York Life Ins. Co., 85 N.Y. 236. The defendant has failed to sustain the burden of proof.'

In Prashker v. U. S. Guar. Co., 1 N.Y.2d 584, 592, 154 N.Y.S.2d 910, 916, 136 N.E.2d 871, 875, the Court of Appeals reaffirmed its prior holdings that the insurance company has the burden of proving facts falling within an exclusionary clause upon which it relies to escape liability when it said

'The rule [is] that an insurance company has the burden of proving such facts as will come within exclusionary clauses in an insurance policy. Wagman v. American Fidelity & Cas. Co., 304 N.Y. 490, 109 N.E.2d 592, * * *.'

Where there is proof of a fire, which is credited by the trier of the fact, as in the case at bar, the burden is on the insurance company to establish its affirmative defense that the fire originated in a manner excluded from coverage under the terms of the policy (Slocovich v. Orient Mut. Ins. Co., 108 N.Y. 56, 14 N.E. 802). In that case the action was on a policy to recover for destruction of a ship by fire. The defense was that the ship was set on fire by the captain. The insurance company contended that the insured had the burden of proving that the fire loss occurred (p . 66, 14 N.E.2d p. 806) 'without any agency or instrumentality of the plaintiffs, direct or indirect.' The Court of Appeals held that the quoted clause constituted an exception or exclusion, and, in determining that the burden of proof to establish its exemption from liability was on the insurance company, said (108 N.Y. 56, 66, 14 N.E. 802, 806):

'Where there is an insurance against a loss by fire, and it is proved or admitted that the property insured has been destroyed by fire, the loss is brought literally and exactly within the terms of the policy. If, in such a case, the insurance company claims to be exempt from paying the sum insured, because there has been a breach of some condition contained in the policy, or the violation of some obligation or duty imposed upon the insured by the law on contract, the burden rests upon it to establish the facts which it thus...