U.S. Fire Ins. Co. v. Stricklin

• Decision Date: 09 September 1977
• Docket Number: No. 19165,19165
• Citation: 556 S.W.2d 575
• Parties: UNITED STATES FIRE INSURANCE COMPANY, Appellant, v. T. C. STRICKLIN, Appellee.
• Court: Texas Court of Appeals

Page 575

556 S.W.2d 575

UNITED STATES FIRE INSURANCE COMPANY, Appellant, v. T. C. STRICKLIN, Appellee.

No. 19165.

Court of Civil Appeals of Texas, Dallas.

Sept. 9, 1977.

Rehearing Denied Oct. 6, 1977.

Larry L. Gollaher, Thompson, Coe, Cousins & Irons, Dallas, for appellant.

Corbet F. Bryant, Jr., Robert H. Mow, Jr., Carrington, Coleman, Sloman, Johnson & Blumenthal, Dallas, for appellee.

AKIN, Justice.

This is a suit on a fire insurance policy by T. C. Stricklin, a third-lien mortgagee, against U.S. Fire Insurance Company. The property damaged was covered on the date of loss by two separate policies similar in terms, and Stricklin has sued each insurance company for the loss in separate actions. Prior to suit, Stricklin foreclosed upon the property and repaired it. The principal question on this appeal is whether the trial court erred in refusing to admit evidence of the second fire insurance policy covering the property and in failing to give effect to the "other insurance" clause contained in the U.S. Fire policy. U.S. Fire also contends that the trial court erred: (1) in overruling its plea in abatement asserting that a necessary party, the first-lien mortgagee, was not a party; (2) in refusing to consolidate this case with Stricklin's action against the other insurer, Houston General Fire Insurance Co.; (3) in admitting into evidence a summary of the damages; and (4) in submitting, over objection, improper damage issue instructions.

We reverse and remand because the trial court erred (1) in refusing to give effect to the "other insurance" proration clause, (2) in submitting jury issues with instructions that failed to restrict the jury to values before and after the fire, and (3) in admitting the summary without a showing that the underlying documents were admissible. Finally, we hold that the trial court did not abuse its discretion in refusing to consolidate the two cases.

"Other Insurance" Clause

U.S. Fire argues that the trial court erred in refusing to admit into evidence the Houston General policy and to give effect to the pro rata "other insurance" clause of the U.S. Fire policy by prorating the loss between U.S. Fire and Houston General. In this respect, U.S. Fire asserts that the trial court erred in failing to admit testimony that plaintiff Stricklin had knowledge of the Houston General policy before the fire loss and had sued Houston General for the same loss. Essentially, U.S. Fire is contending that the Houston General policy falls within the "other insurance" provision of the U.S. Fire policy and, therefore, the loss should be prorated between the two companies.

Stricklin, on the other hand, asserts that the Houston General policy is not "other insurance" with respect to him and, consequently, insists upon recovering against U.S. Fire the total amount of his loss and then assigning his rights on the Houston General policy to U.S. Fire. In support of this contention. Stricklin urges that he is named in the U.S. Fire policy as a third-lien mortgagee-payee, but is not named in the Houston General policy. His claim on the Houston General policy is based on his equitable right to the proceeds. In response, U.S. Fire points out that Stricklin's position is the same under both policies because of an assignment to him of the second-lien mortgagee's rights under both policies, and, thus, the distinction urged by Stricklin is nonexistent.

We agree with U.S. Fire and hold that the trial court erred in failing to give effect to the "other insurance" clause and in refusing to prorate the loss between the insurers. The policy provides:

This company shall not be liable for a greater proportion of any loss than the amount hereby insured shall bear to the whole insurance covering the property against the peril involved whether collectible or not.

In addition to the above-quoted pro rata liability clause, the policy sued upon also contains an "other insurance" provision which states:

1. Loss by fire or other perils not provided for in 2. below: If at the time of the loss, there is other insurance available to the insured or any other interested party covering such loss or which would have covered such loss except for the existence of this insurance, then the Company shall be liable as follows:

a. If such insurance is Contributing Insurance, defined as any insurance written in the name of the insured, upon the same plan, terms, conditions and provisions as contained in this policy whether collectible or not, the Company shall be liable for no greater proportion of any loss than the limit of liability under this policy bears to the whole amount of insurance covering such property.

Similar language is contained in the Houston General policy. It is settled that pro rata liability insurance clauses are valid. In Traders & General Ins. Co. v. Hicks Rubber Co., 140 Tex. 586, 169 S.W.2d 142, 147 (1943), the court held such a provision to be enforceable, absent a statute to the contrary. The supreme court concluded that an insured was not permitted to recover more than a pro rata amount from each insurer. Employers Casualty Co. v. Transport Co., 444 S.W.2d 606, 609 (Tex.1969); see Liverpool & London & Glove Ins. Co. v. Delta County Farmers' Ass'n, 56 Tex.Civ.App. 588, 121 S.W. 599 (1909, writ ref'd). The rule is that if two or more insurers contract to pay a portion of a loss, each is liable only to the extent that the amount insured by such insurer bears to the total loss and that none of the insurers has any right of contribution from the other insurers because the contracts are several, rather than joint. Traders & General, 169 S.W.2d at 148. Thus, U.S. Fire would be entitled to contribution from Houston General. Neither do we think U.S. Fire should be required to accept an assignment from Stricklin, as he urges, and bear the expense of litigation against Houston General when U.S. Fire is only liable for a part of the loss.

Stricklin asserts, however, that this case is controlled by the doctrine enunciated in St. Paul Fire & Marine Ins. Co. v. Crutchfield, 162 Tex. 586, 350 S.W.2d 534, 538 (1961). We cannot agree. In Crutchfield, two policies existed covering the same property. The court held that a mortgagee was not bound by the apportionment clause in the policy and could recover its entire loss, subject to the policy limits, from one insurer. The court did, however, recognize that the second policy would constitute "other insurance" if the mortgagee ratified the second policy. Here, Stricklin has, as a matter of law, ratified the Houston General policy by asserting a claim under that policy and filing suit to recover on that claim. American Surety Co. v. Martinez, 73 S.W.2d 109 (Tex.Civ.App. El Paso 1934, writ ref'd). Crutchfield is, therefore, not controlling.

Stricklin also contends that the Houston General policy is not "other insurance" with respect to him because article 6.15 of the Texas Insurance Code (Vernon 1963) provides that the interest of a mortgagee under a fire insurance policy shall not be invalidated by any act of the mortgagor and that any provision in the insurance contract to the contrary shall be void. The simple answer is that even if the act of the owner in obtaining the Houston General policy could not make Stricklin subject to the apportionment clause, Stricklin's own act of ratifying the Houston General policy would make the apportionment clause applicable. Consequently, there is no violation of article 6.15. Accordingly, we hold that Stricklin is bound by the "other insurance" clause and may recover only a pro rata share of his loss from U.S. Fire.

Stricklin argues, however, that it would be prejudicial to him on the damage issues to admit evidence of the second policy before the jury. This may be true; however, upon retrial, the trial court, acting on a proper motion in limine, need not admit before the jury evidence of the second policy since it only pertains to a question of law for the court. U.S. Fire is entitled to have this evidence admitted so that the court can prorate the loss found by the jury. Of course, where the question of ratification is one for the jury, of necessity, evidence of the second policy must be admitted. In any event, the insured can protect himself from any possible jury prejudice by requesting proper instructions from the trial court.

Consolidation

U.S. Fire next argues that the trial court abused its discretion in refusing to consolidate this suit with Stricklin's suit against Houston General. ¹ In this respect, it asserts that because the liability of the two insurers is several, not joint, U.S. Fire could not have, on its own initiative, brought Houston General into this litigation as a third-party defendant. We cannot agree that the trial court's refusal to consolidate was an abuse of its discretion. Texas Rules of Civil Procedure 174(a), which sets forth the standard for consolidation, provides that: "When actions involving a common question of law or fact are pending before the court, it may order a joint hearing or trial of any or all matters in issue in the actions; . . . "(emphasis added). Thus, rule 174 has been held to be discretionary with the trial court, and only where there is an abuse of that discretion by the trial court will the order be reversed. Kemp v. Harrison, 431 S.W.2d 900, 904 (Tex.Civ.App. Houston (14th Dist.) 1968, writ ref'd n. r. e.); see Womack v. Berry, 156 Tex. 44, 291 S.W.2d 677 (1956). The question of whether the trial court erred in refusing to consolidate the causes may turn on whether Houston General was a necessary party to the suit between Stricklin and U.S. Fire. See Mid-America Pipeline Co. v. Hadwiger, 471 S.W.2d 157, 160 (Tex.Civ.App. Amarillo 1971, no writ) (ordering consolidation of two eminent domain suits, one against the lessor and the other against the lessee). Since the liability of U.S. Fire and Houston General is several, rather than joint, it follows that Houston General is not a...