Tedford v. Security State Fire Ins. Co.

• Decision Date: 25 April 1955
• Docket Number: No. 5-656,5-656
• Citation: 224 Ark. 1047,278 S.W.2d 89
• Parties: W. A. TEDFORD, Appellant, v. SECURITY STATE FIRE INSURANCE COMPANY, Appellee.
• Court: Arkansas Supreme Court

Page 89

278 S.W.2d 89

224 Ark. 1047

W. A. TEDFORD, Appellant, v. SECURITY STATE FIRE INSURANCE COMPANY, Appellee.

No. 5-656.

Supreme Court of Arkansas.

April 25, 1955.

Shaver, Tackett & Jones, Texarkana, for appellant.

Martin, Dodds & Kidd, Little Rock, for appellee.

MILLWEE, Justice.

This is an action by appellant, W. A. Tedford, against appellee, Security State Fire Insurance Company, to recover $2,000 plus statutory penalty and attorney fees allegedly due on a fire insurance policy covering a barn which was totally destroyed by fire on April 7, 1954. Appellee denied liability on the ground that appellant procured issuance of the policy by falsely and fraudulently misrepresenting and concealing the value of the insured property and his interest therein. This issue was submitted to the jury and a special verdict rendered in appellant's favor. Pursuant to this verdict the trial court found as a matter of law that appellant was entitled to recover $181.80, or one-eleventh of the face amount of the policy, and judgment was rendered for that amount.

It is appellant's contention that the trial court erred in refusing to award judgment for $2,000, the face value of the policy, and the statutory penalty and attorney fees. Appellee has not cross-appealed.

There is little dispute in the evidence. Appellant owned an undivided one-eleventh interest in the estate of his deceased father which consisted of the lands upon which appellant resided and built the barn in question at his sole expense in February and March, 1953. On October 21, 1953, appellee issued to appellant a standard 5-year fire insurance policy in the face amounts of $2,000 on the barn and $2,500 on the dwelling for a premium of $71.50 for the first year and $55.77 each for the next four years. Prior to issuance of the policy, appellee's agent inspected the property. Both appellant and the agent testified that the former fully advised the latter at that time of his interest in the property as an heir of his deceased father. The agent listed appellant as sole owner in the application with full knowledge of the true nature of his interest.

The barn had a cash value of $2,500 to $4,000 at the time of the firm. After the fire appellee attempted to return the premium of $71.50 which appellant had paid for the first year.

In fixing the judgment at $181.80 the trial court apparently gave effect to a provision of the policy which purports to limit the amount of recovery in any event to the insured's interest in the property. It is appellant's contention that this attempted limitation is rendered nugatory and void under our valued policy statute. Ark.Stats. § 66-515, which provides: 'A fire insurance policy, in case of a total loss by fire of the property insured, shall be held and considered [to be] a liquidated demand against the company taking such risk, for the full amount stated in such policy, or the full amount upon which the company charges, collects or receives a premium; provided, the provisions of this article shall not apply to personal property.'

Since the enactment of the statute in 1889 this court has consistently held that it cannot be evaded by contrary policy stipulations. In E. O. Barnett Bros. v. Western Assurance Co., 143 Ark. 358, 220 S.W. 465, 467, the court said the valued policy statute 'becomes a part of every policy of insurance on real property in this state the same as if it were actually written in the policy.' Thus a policy stipulation limiting the insurance to two-thirds of the actual value of the property was held void as conflicting with the statute in Farmers' Home Mutual Fire Ass'n v. McAlister, 171 Ark. 574, 285 S.W. 5, the court saying: 'The contention of the insurance company in this case is that this statute does not apply, because the policy contains a provision that no property, either real or personal, shall be insured by the association for more than two-thirds of its actual value, and that the proof shows that this was done in the present case.

'Counsel for the insurance company in making this contention have not taken into consideration the Payton Case [Liverpool & London & Globe Ins. Co. v. Payton, 128 Ark. 528, 194 S.W. 503] above cited, in which it was expressly held that a stipulation of the policy in conflict with the terms of the statute is void. Statutes of this sort are passed for the purpose of avoiding the uncertainty of determining the value after the fire. The manifest policy of the statute is to guard against overinsurance of the property. The agents of the company have the opportunity to inspect the property fully before taking the insurance and fixing the amount of the premium. It is the valuation fixed in advance by the parties by way of liquidated damages in case of a total loss by fire of the property insured without the fault of the insurer.' A similar attempt to limit the amount of the loss to actual cash value or some other amount less than the full amount stated in the policy in case of total loss was held void in Firemen's Ins. Co. v. Little, 189 Ark. 640, 74 S.W.2d 777.

The rule applicable in the present situation is stated in 29 Am.Jur., Insurance, Sec. 1196, as follows: 'It is recognized by all the cases decided upon the question that under a valued policy or the provisions of a valued policy statute, the insured insuring the property at a given valuation accepted by the insurer at the time of the issuance of the policy as the value of the insured's interest may recover the full value insured, even though he in fact has a limited or qualified interest worth less than the amount of the insurance. The insurer may not go behind the policy and show that the insured's interest is worth less than the amount of the policy.' Cases from other jurisdictions which support this rule are collected in 68 A.L.R. 1352.

We think the Washington court properly interpreted the purpose and effect of the valued policy statute in Bright v. Hanover F. Ins. Co., 48 Wash. 60, 92 P. 779, 780, where it said: 'The appellant contends that this section does not apply where the interest of the insured is a limited or qualified one, such as that of a tenant, a party in possession, etc.; but with this contention we are unable to agree. The valued policy law is founded on what the Legislature regarded as sound public policy, and was, no doubt, intended to relieve the insured from the burden of proving the value of his property after its total destruction, and to prevent insurance companies from receiving premiums on overvaluations, and thereafter...