South Carolina Elec. & Gas Co. v. Aetna Ins. Co.

• Decision Date: 27 April 1961
• Docket Number: No. 17770,17770
• Court: South Carolina Supreme Court
• Parties: SOUTH CAROLINA ELECTRIC & GAS COMPANY et al., Respondents, v. AETNA INSURANCE COMPANY et al., Appellants.

Page 111

120 S.E.2d 111

238 S.C. 248

SOUTH CAROLINA ELECTRIC & GAS COMPANY et al., Respondents, v. AETNA INSURANCE COMPANY et al., Appellants.

No. 17770.

Supreme Court of South Carolina.

April 27, 1961.

Joseph L. Nettles, Belser & Belser, Robinson, McFadden & Moore, Columbia, for appellants.

Arthur M. Williams, Jr., Cooper & Gary, McLain & Sherrill, Columbia, for respondents.

LEGGE, Justice.

Respondent South Carolina Electric & Gas Co. brought this action in May, 1953, against thirty-eight defendant insurance companies, which by separate policies had covered its properties against loss or damage by fire, alleging that as the result of a fire on June 27, 1950, in one of its generators, it had sustained loss within the coverage of said policies in the amount of $132,181.95, for which amount and interest it prayed judgment, to be apportioned against them in accordance with the coverage of the respective policies. The present appeal, the fourth in this case, is from a judgment of the court of common pleas for Lexington County in favor of respondents, in the amount of $67,200 with interest from September 1, 1952. The numerous exceptions involve, substantially, four questions:

1. Was there evidence to support the jury's conclusion that there was an 'ensuing fire' within appellants' coverage?

2. Did the trial judge err in refusing to grant a new trial absolute because of the excessiveness of the verdict?

3. Was there error in the charge as to the measure of damages?

4. Was it error on the part of the trial judge to exclude from evidence certain correspondence relative to dealings between respondent and Lloyd's of London, and to refuse appellants' requests to charge concerning coverage under Lloyd's policy?

In addition to the coverage of appellants' policies, respondent was insured, under a policy issued by The Underwriters at Lloyd's (also referred to in the course of this litigation as Lloyd's of London, and as Lloyd's), against loss or damage directly caused by accident to certain insured objects, including the generator before mentioned, described in an attached schedule. This policy limited the insurer's liability to the amount of the insured's ultimate net loss in excess of $10,000, limited total liability for loss from any one accident to $150,000, and excluded from coverage loss from fire outside the insured object and loss from accident caused by fire. It defined 'accident' as 'a sudden and accidental breaking, deforming, burning-out or rupturing of the object or any part thereof which manifests itself at the time of its occurrence by immediately preventing continued operation or by immediately impairing the functions of the object, and which necessitates repair or replacement before its operation can be resumed and its functions restored.'

The defendants alleged in their answer:

1. That the damage to the generator was not within the coverage of their policies, but was caused by mechanical breakdown or electrical injury;

2. That prior to the electrical or mechanical failure of June 27, 1950, the generator had been operated in a defective condition, of which plaintiff had knowledge; and that such operation increased the hazard of damage and consequently relieved the defendants from liability because of the 'increased hazard' provision in their respective policies; and

3. That Lloyd's, having paid the plaintiff on account of the loss complained of, was the real party in interest.

Plaintiff, replying: denied that it had by any act or omission increased the hazard within the meaning of the policies; denied that it had operated the generator at any time in a defective condition or in an improper manner; denied that Lloyd's had paid it on account of the loss as alleged in the answer; but admitted that in connection with the said loss it had borrowed a sum of money from Lloyd's under a Loan Receipt Agreement, of which a copy had been furnished to the defendants. The Loan Receipt Agreement acknowledged receipt from Lloyd's of $122,281.95 as a loan, repayable only from any net recovery which South Carolina Electric & Gas Co. should make from any person or corporation on account of the loss in question, the proceeds of such recovery to be applied first to expenses of suit, including attorneys' fees, and then to repayment of the loan.

The defendants thereupon moved: (1) for an order requiring Lloyd's, as the real party in interest, to be substituted as plaintiff in the place of South Carolina Electric & Gas Co.; and (2) for an order requiring production and permitting inspection of all agreements as to attorneys' fees to be paid out of any recovery that might be obtained in the action. The first of these motions was disposed of by an order directing that Lloyd's be made a party co-plaintiff with South Carolina Electric & Gas Co., and that if it should decline, or fail within ten days to indicate its intention, to so join, South Carolina Electric & Gas Co. should implead it as a party defendant. The second motion was refused. Upon appeal by the defendants we affirmed both orders, 230 S.C. 340, 95 S.E.2d 596, and expressly held: that the right of action was vested in South Carolina Electric & Gas Co.; that the issues under the pleadings required for their determination no additional parties; that Lloyd's was not a necessary party at all, but its joinder, as a proper party, was within the discretionary power of the court; and that disposition by South Carolina Electric & Gas Co. of any recovery that it might obtain in the cause was a matter with which the defendants would have no concern.

Following that decision Lloyd's became a party co-plaintiff and the case came on to be tried, resulting in a verdict for $138,000. The trial Judge, having overruled defendants' motions for nonsuit, direction of verdict, and judgment n. o. v., concluded that the verdict was excessive and ordered a new trial upon the issue of damages only. The defendants appealed, presenting four questions, which we disposed of as follows, 233 S.C. 557, 106 S.E.2d 276:

1. Was there evidence from which the jury could reasonably have found that the loss was within the coverage of appellants' policies? We answered that question in the affirmative, refraining from review of the evidence because of our disposition of question 4.

2. Had the respondents proven recoverable damages? That question we also answered in the affirmative, saying: 'The evidence relating to loss included the original cost of the damaged generator, estimated length of useful life, age, and cost of replacement of the parts, of which some were damaged by electrical injury or ensuing fire, from which the jury may have determined the actual cash value of the latter at the time of loss, which is the measure of damages under the terms of the policies.'

3. Should South Carolina Electric & Gas Co. have been dismissed as not a proper party to the action, because of the payment to it by Lloyd's and the terms of the loan receipt in that transaction? We held that this question had been disposed of by the decision upon the first appeal, which had plainly held the right of action to be vested in South Carolina Electric & Gas Co. alone; and that such holding was the law of the case.

4. Was it proper to grant a new trial as to damages only? We held that such practice was not countenanced in the modern decisions of this court, and that in the absence of a statute or rule authorizing it we would not approve so important an innovation in our procedure; and accordingly we remanded the case for a new trial of all issues.

On the next appeal, 235 S.C. 147, 110 S.E.2d 165, we affirmed a circuit court order denying the defendants' motion to change the venue from Lexington to Richland County.

Thereafter, on September 21, 1959, the case came on for trial before the Honorable Thomas P. Bussey, Presiding Judge, and a jury. He denied the defendants' motion for directed verdict and submitted the case to the jury, which found for the plaintiffs $87,000. The parties had theretofore stipulated that interest should be computed from September 1, 1952, on any amount that might be found to be due. Defendants then moved for judgment n. o. v. or, in the alternative, for a new trial; and by his order of July 11, 1960, Judge Bussey denied these motions but ordered a new trial unless the plaintiffs should remit so much of the verdict as exceeded $67,200 (with interest from September 1, 1952, as stipulated). Plaintiffs remitted accordingly, and the defendants have appealed.

The defendants' policies each contained an 'Electrical Apparatus Clause' to the effect that there should be no liability 'for any electrical injury or disturbance to the said electrical appliances or devices from artificial causes, unless fire ensues * * *'. The coverage under these policies, to be apportioned among the several companies, was 'to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss * * *'.

Lloyd's policy, as we have before mentioned, covered the generator in question against 'sudden and accidental breaking, deforming, burning-out or rupturing * * * which manifests itself at the time of its occurrence by immediately preventing continued operation or by immediately impairing the functions * * * and which necessitates repair or replacement before its operation can be resumed and its functions restored.' Subject to the deductible amount of $10,000 and the maximum liability of $150,000, Lloyd's liability was for 'ultimate net loss' defined in the policy as 'the amount actually expended * * * to repair or replace the property damaged or destroyed in a condition equal to but not superior to or more extensive than its condition when new.'

It is undisputed that on the afternoon of June 27, 1950, an electrical fault, accompanied by...