Zweygardt v. Farmers Mut. Ins. Co. of Nebraska

• Decision Date: 21 April 1976
• Docket Number: No. 40257,40257
• Citation: 241 N.W.2d 323,195 Neb. 811
• Parties: Delmer ZWEYGARDT, Appellee, v. FARMERS MUTUAL INSURANCE COMPANY OF NEBRASKA, a corporation, Appellant.
• Court: Nebraska Supreme Court

Page 323

241 N.W.2d 323

195 Neb. 811

Delmer ZWEYGARDT, Appellee, v. FARMERS MUTUAL INSURANCE COMPANY OF NEBRASKA, a corporation, Appellant.

No. 40257.

Supreme Court of Nebraska.

April 21, 1976.

Syllabus by the Court

1. If an insurance company has knowledge through its agent, when a contract of insurance is effected, that the premises are vacant or unoccupied, the issuance of the policy waives any provision as to vacancy or unoccupancy, at least so far as the existing vacancy is concerned.

2. An award of damages must be based on evidence and not on speculation and conjecture.

3. The findings of a court in a law action in which a jury is waived have the effect of the verdict of a jury and will not be disturbed on appeal unless clearly wrong.

Van Steenberg, Brower, Chaloupka & Mullin, Scottsbluff, for appellant.

Holtorf, Hansen, Kovarik & Nuttleman, P.C., Gering, for appellee.

Heard before WHITE, C.J., and SPENCER, BOSLAUGH, McCOWN, NEWTON, CLINTON, and BRODKEY, JJ.

BRODKEY, Justice.

Farmers Mutual Insurance Company of Nebraska, hereinafter referred to as 'Farmers Mutual' or as 'Insurance Company,' appeals from a judgment rendered against it in the District Court for Scotts Bluff County in an action brought by the plaintiff, Delmer Zweygardt, on a fire insurance policy issued by Farmers Mutual, to recover the fair and reasonable value of an insured dwelling house completely destroyed by fire. A trial by jury having been waived, the matter was tried to the court, which entered a judgment against the defendant Insurance Company for $5,000 and also awarded the plaintiff an attorney's fee of $500 to be taxed as costs. Motion for a new trial was overruled, and Farmers Mutual perfected its appeal. We affirm.

The issues in this appeal are the effect of a prior vacancy of the premises upon the liability of Farmers Mutual under its policy, and the sufficiency of the evidence adduced at the trial to sustain the damages awarded by the court.

It appears that sometime prior to the fire in question, the plaintiff, Delmer Zweygardt, a resident of Colorado, purchased 240 acres of land near Mitchell, Nebraska, upon which were located two houses. One of these houses, known as Labor House #2, was the house involved in this action which was destroyed by fire. The 240 acres were 'custom farmed' for Zweygardt by one Chuck Meyer, who acted as Zweygardt's agent to obtain insurance on the house, and also to attempt to rent it. Meyer went to the City & Country Insurance Agency in Scottsbluff, with whom he had previously done business, to arrange for the insurance. Robert Hall was the owner of the insurance agency and was an agent of Farmers Mutual. He testified at the trial that Chuck Meyer had come to his office and advised him that his father had sold the farm to Zweygardt and that he was to get insurance on it immediately. Robert Hall was familiar with the farm and improvements, having insured them for Chuck Meyer's father, the previous owner. Hall testified that Meyer at that time told him that the tenant house was vacant. Hall told Meyer that he didn't think the house was in very good shape and that there were a lot of problems in insuring a building. Meyer then told him that that was no problem, and that: 'We are in the process of remodeling and we got a tenant lined up.' Hall replied: 'Fine, when you get it done come in and we will revalue it.' Hall put a valuation of $3,000 on the house at that time. The insurance policy in question was issued on April 2, 1971, and insured Labor House #2 for $3,000.

Both Zweygardt and Meyer testified that sometime in March a young couple planning to be married had agreed to do repair work upon the house in return for a reduction in rent. However, the tentative arrangement fell through after the house was severely vandalized by unknown persons about May 1971, a month or two before the house was destroyed by fire.

On April 27, 1971, approximately 3 weeks after the issuance of the policy, plaintiff Zweygardt personally came to Hall's insurance agency to discuss the revaluation for insurance purposes of some buildings, including Labor House #2. Hall was reluctant to increase the coverage on that house when he learned that it was still vacant. According to Hall, Zweygardt then told him: 'No problem. We got it remodeled, we got a tenant lined up. We are in the process.' Hall further testified that, relying on the foregoing assurances, he did not execute any forms or permits normally required when Farmers Mutual insures vacant buildings. Zweygardt, however, contradicted Hall's version of what had transpired at that time. According to Zweygardt, there was no discussion about the nature or duration of the vacancy, although he testified that Hall had asked him whether there was anybody living in the house; and that Zweygardt had said, 'No, not at this time.' He stated there was no further discussion about renting the house then and that Hall stated that he would increase the coverage on the house to $5,000. Hall further testified that the first time they discovered the buildings had never been remodeled and were still vacant was when they received the report of the vandalism, but that he did not go out and check it. He also stated that he had no discussion with either Chuck Meyer or Zweygardt regarding the occupancy of the house after the day in April when they changed the values on the property. He testified: '* * * I just assumed that it was going along according to our original conversation.' On July 18, 1971, the house was totally destroyed by fire.

The policy in question has three separate provisions relative to the issue of vacancy and unoccupancy. The first is the standard provision contained in all New York Standard Fire Insurance Policies, reading as follows: 'Conditions suspending or restricting insurance. Unless otherwise provided in writing added hereto this Company shall not be liable for loss occurring * * * (b) while a described building, whether intended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive days; * * *.' The second appears as one of the general provisions of the reverse side of the broad form endorsement, being section VI C, which reads: 'Vacancy and Unoccupancy. Permission is granted to remain vacant for not more than 60 days at any one time or unoccupied for not more than 120 days at any one time, except as respects Perils 5, 6, 7, 15, 16, 17 and 18 as provided in paragraphs C and E of Section II, and except as provided in any endorsement attached to this policy.' The third appears on the reverse side of the extended coverage endorsement which is made a part of the policy. It provides: 'Construction, Alterations and Repairs: Permission is granted to complete any new building insured under this policy, and to make alterations, additions and repairs to any building insured under this policy, and for such building to be vacant or unoccupied during construction or repairs for not exceeding 90 consecutive days, and the insurance on such building is extended to cover all materials on the premises to be used in the construction or repairs.'

There is no dispute in the evidence and both parties agree that the house was vacant when the policy was issued, that it was not subsequently rented, and that it remained vacant until its destruction on July 18, 1971, a period of 107 days.

There is no question that provisions in fire insurance policies, such as those set out above, which void the policy in case the property is vacant and unoccupied are reasonable and valid. However, it is also well settled that such provisions are for the benefit of the insurer and may be waived by it, or its authorized agent, or the insurer may be estopped to rely upon the condition as a defense to an action upon the policy.

The first issue for our determination is whether under the facts of this case such a waiver by, or estoppel of, the Insurance Company occurred. The weight of authority and prevailing view is that if an insurance company has knowledge through its agent, when a contract of insurance is effected, that the premises are vacant or unoccupied, the issuance of the policy waives any provision as to vacancy or unoccupancy, at least so far as the existing vacancy is concerned. See, for example, McKinney v. Providence Washington Ins. Co., 144 W.Va. 559, 109 S.E.2d 480 (1959), and cases cited therein at pages 564 and 565. See, also, 43 Am.Jur.2d Insurance, § 957, p. 906. Nebraska adheres to this rule. Rochester Loan & Banking Co. v. Liberty Ins. Co., 44 Neb. 537, 62 N.W. 877 (1895); German Ins. Co. of Freeport v. Frederick, 57 Neb. 538, 77 N.W. 1106 (1899). In Rochester, the policy provided that it would be void if the policy should 'be or become vacant or unoccupied, and so remain for 10 days.' The court noted that the policy was not void but voidable at the election of the insurer. The court found that there was a waiver by the company because the agent knew at the time of the issuance of the policy that the premises were vacant, but issued the policy anyway. Later, in German, the court dealt with the situation in which the insured had told the agent that the premises were vacant, but assured him that a tenant was moving in the next day. The agent, in reliance on this assurance, indicated on the application that a tenant was residing in the premises. The tenant did not move in, and 9 days later the house burned down. The policy denied coverage in the event of any vacancy, without granting any grace period. In that case the court found a waiver, stating that the vacancy provision is for the benefit of the insurer which can waive it, and that the provision is waived if the company issues the policy with knowledge of an existing vacancy, citing Rochester Loan & Banking Co. v. Liberty Ins. Co., supra. The court then stated: 'It can hardly be claimed that there...