Treit v. Oregon Auto. Ins. Co.
| Decision Date | 13 July 1972 |
| Citation | 262 Or. 549,499 P.2d 335 |
| Parties | Marlowe C. TREIT, Appellant, v. OREGON AUTOMOBILE INSURANCE CO., Respondent. |
| Court | Oregon Supreme Court |
Raul Soto-Seelig, Portland, argued the cause for appellant. With him on the briefs was Paul J. Rask, Portland.
James P. Wall, Portland, argued the cause for respondent. With him on the brief were Thomas H. Tongue, and Morrison, Bailey, Dunn, Cohen & Miller, Portland.
Before O'CONNELL, C.J., and McALLISTER, DENECKE, HOLMAN, and HOWELL, JJ.
Plaintiff brought this action to recover the value of a trailer, which he had insured with defendant against theft. The trial judge, who tried the case without a jury, found for defendant. The judge ruled that, on the basis of plaintiff's failure to satisfy the court that he was an innocent purchaser of the vehicle, plaintiff failed to prove by a preponderance of the evidence that he possessed an insurable interest in the trailer. The major issue in the case is whether, under the circumstances here, there is a necessity that plaintiff be an innocent purchaser in order to establish that he had an insurable interest.
We note that neither the trial court nor the authorities cited by counsel define 'innocent purchaser.' But the record indicates that the judge assumed, and, we conclude, properly so, that an 'innocent purchaser' is one who has no reasonable grounds to suspect that the person from whom he buys an article did not have good title.
Plaintiff testified that, being in the market for a trailer, he had noticed the vehicle in question parked on a service station lot. On an occasion when he made a closer inspection, he discovered a man he had never seen before within the trailer who purported to be the owner. In fact, the trailer belonged to someone else. Plaintiff arranged to purchase it from the person in the vehicle. Plaintiff claims he made a $500 down payment, and agreed to pay an additional $1,000 at a later date. He indicated that the seller was to have delivered to him the certificate of title, which plaintiff never saw, when the second payment was made. However, the seller disappeared long before that date arrived. Plaintiff testified that he spent considerable time and money refurbishing the trailer since its purchase. However, he did not call any witnesses nor produce any records to verify his testimony except a purported bill of sale which set forth the above terms. He claimed to have paid the $500 down payment in cash though he had a checking account.
The trial judge found that there was a 'slight stench' surrounding the alleged transaction and indicated that he had little faith in the veracity of the plaintiff. Certainly, because of the paucity of plaintiff's proof of the circumstances under which he secured the trailer and of the lack of plausibility of his story, there was a basis for the trial judge's finding that plaintiff failed to prove satisfactorily that he was an innocent purchaser. If the circumstances here require plaintiff to be an 'innocent purchaser' in order to have an insurable interest, the trial judge's determination of the case will have to stand.
After plaintiff took possession of the trailer, the true owner filed a conversion action against plaintiff in February of 1969, charging that he had delivered the trailer for safekeeping to the proprietor of the service station from whence plaintiff said he secured the trailer and that the proprietor wrongfully delivered the trailer to plaintiff. In April of 1969 plaintiff insured the trailer with defendant. In May the trailer was stolen. The conversion case was subsequently tried and resulted in a judgment for $2,100 against plaintiff.
Many authorities do hold that in order to have an insurable interest, the purchaser must be 'innocent.' 1 Some courts even say that an innocent purchaser does not have an insurable interest if the article is purchased from a thief. 2
In Fenter v. Gen. Acc. Fire & Life Assur., 92 Or.Adv.Sh. 757, 484 P.2d 310 (1971), this court pointed out that an insurable interest is a prerequisite to recovery because such a requirement prevents wagering on insurance contracts and eliminates the temptation to the insured to destory the property. An insurable interest is described in Fenter in the following manner:
'* * * We have never held that an interest in property, to be insurable, must be legally enforceable. We seem to have inquired only whether the insured had a direct pecuniary interest in the preservation of the insured property. In Bird v. Central Mfg. Ins. Co., 168 Or. 1, 6, 120 P.2d 753, 755 (1942), we said
* * *" 92 Or.Adv.Sh. at 761--762, 484 P.2d at 312.
It follows that an insurable interest should be defined in the terms of the insured's economic interest in the article covered, rather than depend on whether the insured is an 'innocent purchaser.' It is the insured's economic interest in the article which prevents the insurance contract from becoming a wager or an arrangement which encourages fraud. Such a rule provides adequate protection so long as contracts of insurance are treated as ones of indemnity, and recovery is allowed solely on the basis of the extent of the insured's economic interest in the insured article. If a sufficient economic interest is present to prevent the insurance policy from becoming a wagering contract and to prevent the goods from being intentionally destroyed by the insured, there is no necessity that the purchaser be 'innocent.'
The rule is further stated as follows in Harnett and Thornton, 'Insurable Interest in Property: A Socio-Economic Reevaluation of a Legal Concept,' 48 Colum.L.Rev. 1162, 1185 (1948):
At the time plaintiff insured the trailer and at the time of the loss there was no temptation on plaintiff's part to destroy the trailer (other than the temptation to which every insured is subject to convert an insured article into cash). His possession of the vehicle had already been discovered by the true owner and the action of conversion had been brought against him. At that time plaintiff could not possibly have been benefited by the destruction or disapperance of the trailer. If he lost the conversion case (he did), he owed the value of the trailer to the owner; if he won the case, his right to the trailer would be confirmed. In either event, his interest in the trailer was such that he would suffer the loss of its value by its destruction or disappearance.
In the present case, plaintiff's economic interest in the insured article is not the amount he paid for it plus his cost of renovation, but it is the actual value of the trailer at the time of its loss. At that time, the risk of such loss was his and there was no monetary advantage or risk of discovery which could conceivably induce fraud on his part. Consequently, the 'innocent purchaser's rule has no proper application in this case.
Finally, the trial court ruled that the defendant met its burden of proof on its affirmative defense that plaintiff and his wife knowingly concealed a material fact- --the pendency of the conversion action--when the wife made the application for the insurance. Representatives of the defendant testified that they would not issue a policy on an article when the applicant was a defendant in a conversion action concerning the item. However, there is no reasonable ground for refusing insurance in such a case because, as the agent who actually issued the policy indicated, a dispute over ownership of the vehicle would not increase the hazard of loss because the 'exposure would be there no matter who owned it.'
Nevertheless, there is a dispute in the...
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