Vernon Fire & Cas. Ins. Co. v. Sharp

Decision Date10 June 1976
Docket NumberNo. 676S181,676S181
Citation264 Ind. 599,349 N.E.2d 173
CourtIndiana Supreme Court
PartiesVERNON FIRE & CASUALTY INSURANCE COMPANY and Great American Insurance Company, Appellants (Defendants below), v. A. W. SHARP, d/b/a Columbus Wood Preserving Company, Appellee (Plaintiff below).

Mark W. Gray, John T. Lorenz, Kightlinger, Young, Gray & De Trude, Indianapolis, William A. Conner, Walker & Conner, Columbus, for appellants.

Charles E. Brown, Crabbe, Brown, Jones, Potts & Schmidt, Columbus, Ohio, Charles R. Wells, Columbus, for appellee.

OPINION ON PETITION TO TRANSFER

HUNTER, Justice. *

Petitioners, Vernon Fire & Casualty Company and Great American Insurance Company, seek transfer from the decision of the Court of Appeals, 316 N.E.2d 381, affirming the judgment of the trial court in favor of their insured A. W. Sharp, d/b/a Columbus Wood Preserving Company. The judgment awarded compensatory damages based upon petitioners' contracts to indemnify the insured for loss sustained by a fire which gutted his creosoting plant. The judgment also awarded punitive damages based upon the second and third paragraph of Sharp's complaint, infra Part II, generally alleging tortious conduct on behalf of petitioners in dealing with their insured and in refusing to pay over the proceeds of the insurance contracts.

After hearing oral argument, the Court voted to grant transfer and my brother Justice Prentice agreed to prepare the Court's opinion. Upon circulation of the proposed opinion, a majority of the Court concurred with that portion of the opinion which treated the issue of compensatory damages, but disagreed with the disposition of the punitive damages award, requiring another opinion to be written upon that issue. As set forth in Part I, but without quotation marks, the Court now adopts the opinion of Justice Prentice on the issue of compensatory damages.

I

PRENTICE, J.

Plaintiff (Appellee) was the owner of properly destroyed in part and damaged in part by fire. Defendants (Appellants) are two insurance companies, each of which had written a policy (contract) of fire insurance upon the property. The evidence is not in dispute and consisted of stipulation and testimony from the plaintiff and his attorney.

The contracts of insurance had been issued by the same agency, and at the same time. Insofar as is pertinent to this litigation, the contracts were in identical form. The property insured was scheduled in the contracts and of the total value of $125,000.00, but the liability of the insurer under each policy was limited to $31,250.00 or twenty-five percent of the scheduled values.

The insuring agreement of each policy was as follows:

'IN CONSIDERATION OF THE PROVISIONS AND STIPULATIONS HEREIN OR ADDED HERETO AND OF the premium above specified, this Company, for the term of years specified above from inception date shown above at Noon (Standard Time) to expiration date shown above At Noon (Standard Time) at location of property involved, to an amount not exceeding the amount(s) above specified, does insure the insured named above and legal representatives, 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 * * *.' (Emphasis ours.)

The amount of insurance provided and the property insured was designated in each policy as follows:

'This policy being for $31,250. covers its pro-rata proportion of and on the following amounts: (Emphasis ours.)

                 1.     $3,000.        On the one story, iron clad and frame Retort
                                       Room
                 2.     65,000.   80%  On contents of the one story, iron clad and
                                       frame Retort Room
                 3.      4,000         On the concrete block, Creosote Oil Storage
                                       Tanks (Limits of Liability) ($1,000
                                       per tank)
                 4.     15,000         On the one story, iron clad and frame Boiler
                                       Room and Storage (including boiler and
                                       appurtenances)
                 5.      1,000.        On the steel Metal Stack.
                 6.     35,000.        On contents of Material, principally lumber and
                                       ties in yard.
                 7.      1,000.   80%  On contents of One story, frame Office building
                 8.        500.        On the one stroy, frame Laboratory Building.
                 9.        500.        On contents of the one story, frame
                                       Laboratory Building.
                      ----------
                      $125,000."
                

The plaintiff's business was under the management of one John Easter, who also had property of his own destroyed in the fire which occurred on June 7, 1971. Mr. Easter's property was not scheduled in the contract, but he filed a claim with the defendants and their agent who had issued the contracts in question.

The plaintiff by his attorney, filed a formal proof of loss with the defendants' adjusting representative upon each contract on August 16, 1971. Such action followed some informal negotiations between the adjuster and the plaintiff personally, the details of which are not disclosed, and from which the plaintiff had concluded that the defendants would refuse to pay his claim until the claim of Mr. Easter was settled. The proofs of loss were on forms provided by the adjuster to the plaintiff's attorney on July 15, 1971. Completed and filed by the plaintiff, each such proof of loss was as follows:

                "Total     THE TOTAL AMOUNT OF INSURANCE upon the
                Insurance  property described by this policy was, at the time of
                           the loss, $31,250.00, as more particularly specified in
                           the apportionment attached, besides which there was
                           no policy or other contract of insurance, written or
                           oral, valid or invalid.
                Value      THE ACTUAL CASH VALUE of said property at
                           the time of the loss was ..........$93,000.00
                Loss       THE WHOLE LOSS AND DAMAGE was $93,000.00
                Amount     THE AMOUNT CLAIMED under the above numbered
                Claimed    policy is .................$31,250.00"
                

The amount of the plaintiff's loss by reason of the fire was $94,108.09 which was itemized as follows:

                Retort Room                   $   3,000.00
                Retort Room contents 80%         65,000.00
                Creosote Tank                     4,000.00
                Boiler                           15,000.00
                Materials, Lumber Ties, etc.      6,108.09
                Laboratory Building                 500.00
                Laboratory Building contents        500.00
                                              ------------
                                              $  94,108.09
                

From the foregoing, it is readily determined that the plaintiff's loss as to some items was equal to the scheduled value. However, two items insured (a metal stack and office contents) of the total scheduled value of $2,000.00 were not damaged, and only $6,108.09 of the scheduled materials were destroyed or damaged. The plaintiff's losses exceeded the amount of the insurance provided under the two contracts, and under 'blanket' policies he would have been entitled to reimbursement for the stated policy limits of $31,250.00 upon each contract. However, these were not 'blanket' policies but were 'scheduled' policies, i.e. the property insured was separately scheduled and valued in the contracts. The liability of the insurers under such policies is limited as to each scheduled item, and a portion applying to one item but unused may not be transferred to another item which was under-valued and thus underinsured.

'A distinction must be made between a policy which speaks in terms of a lumpsum obligation or value of the property and one which separately schedules different items of property. In the latter case, each separately treated item of property is in effect covered by a separate contract of insurance and the amount recoverable with respect to a loss affecting such property is determined independently of the other items of property.' Couch on Insurance, 2d Ed., § 54:83.

To the same effect, also see 45 C.J.S. Insurance § 918 and cases there cited.

This distinction was recognized in Indiana in Continental Insurance Company v. Chew (1894), 11 Ind.App. 330, 38 N.E. 417.

In that case, the appellee had been awarded a judgment upon a contract which insured both a house and its contents. The judgment was for less than the total amount of the policy, but the court reversed saying:

'The policy provides for $450 insurance on the house, and $150 on the contents. Thus, there was not a general or blanket policy of $600 on both house and contents, but separable contracts for insurance to the amount of $450 on the house, and $150 on the personalty. Nappanee Furniture Co. v. Vernon Ins. Co. (10) (Ind.App.) (319) 37 N.E. 1064.

'There is also in the policy a provision that the company shall not be liable for an amount beyond the value of the interest of the assured in the property insured.

'It is conceded by counsel for the appellee that she owned but a one-third interest in the realty, and that consequently she was entitled to recover on account of the building, the value of which was $400, only the one-third thereof, or $133.33.

'The amount of the recovery was $433.34. Counsel seek to justify this amount upon the theory that appellee is entitled to the full value of the personal property destroyed, which was shown to be $300.

'This position, however, cannot be maintained, because she could not in any event recover on account of the loss of the personalty more than the amount of insurance distributed to it in the policy.' 11 Ind.App. 330. 333--34, 38 N.E. 417, 419.

Where an aggregate amount of insurance is on separately valued items pro rata, the risk as to each item is to be determined by prorating the insurance according to the value of the different items. E. H. Stanton Co. v. Rochester German Underwriters' Agency, D.C.Wash., 206 F. 978; Springfield Fire and Marine Insurance Co. v. Simmons, 184 Okl. 323, 87 P.2d 941.

The total declared or 'scheduled' value of the insured property was $125,000.00 and the amount of...

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