153 Iowa 168 | Iowa | 1911
The plaintiff, being the owner of five separate buildings situated on a parcel of ground in Sioux City, the buildings being of the aggregate value of $85,000, secured various policies of fire insurance covering all five buildings in the aggregate sum of $10,000. All the policies were of the standard Iowa form, and to each of them, with' one exception, was attached, by way of rider, what is called the average clause. One of these policies being for $1,500, to which such rider was attached, was a policy issued 'by the defendant. Within the terms of insurance covered by all these policies, plaintiff suffered a loss by fire in respect to one of the buildings, which was adjusted by the agents of all the companies in the sum of $1,448.19. In this adjustment it was insisted for the defendant and the other companies whose policies contained the average clause that the liability of such companies was by reason of such clause limited to that proportion of the insurance which the value of the building destroyed bore to the aggregate value of all the five buildings insured, and that the liability of the defendant as one of the coinsurers was $25.56; whereas the plaintiff contended that the average clause was invalid, that each of the companies was liable for its pro rata portion of the loss, and that the liability of the defendant was therefore $217.23. By an amicable arrangement between plaintiff and defendant, this action is brought to recover' the difference between these two sums, that is, $191.66; the object of the suit being to determine the validity of the average clause, and secure a basis on which all the claims under the policies containing the average clause may be settled.
The sole ground for insisting upon the invalidity of the average clause is that it is contrary to the provisions of our fire insurance statute, as found in the Code and Code Supplement, as follows:
Sec. 1758-a. It shall be unlawful for any insurance company to issue any policy of fire insurance upon any property in this state other or different from the standard form fire insurance policy herein set forth, except . . .
2. It may use in or upon its policy forms or slips of description, location and specifications of the property insured, together with permits upon such conditions not in conflict with the provisions of law, as may be agreed upon, for the use or storage of electricity, gasoline, explosives, or other extra-hazardous products or materials; for repairs or improvements; for the operation or ceasing to operate, and for the vacancy of the premises, and permits for hazards other than those specifically mentioned above, also a mortgagee’s or loss payable clause, and other permits or riders not in conflict with law.
The average clause attached as a rider to defendant’s policy is in the following language: “It is hereby agreed that in case of loss this policy shall attach in each building in such proportion as the value of each building bears to the aggregate value of the entire property insured.”
The statutory provisions above quoted prohibit (1) any stipulation “that the insured shall maintain insurance on any property covered by such policy to any extent, or shall to any extent be an insurer of the property insured in such policy, or shall bear any portion of the loss on the property insured;” and (2) any modification of the standard form of policy prescribed by statute (which form- does not include an average clause), save that it may attach thereto “forms or slips of description, location and specifications of the property insured” and permits for certain
The question submitted to us for determination is whether the average clause is prohibited under Code, section 1746, or permitted under Code Supplement, section 1758-a, as above quoted. The statutory provisions as to prorating are not here considered, for the reason that there is no controversy in regard -to the prorating between the companies, and no question as to the right of each to limit its liability to the pro rata share of the total insurance covering the loss. This matter was determined in the adjustment, which is not questioned, save in so far as it was based on the average clause.
The average clause is used for a wholly different purpose. It is primarily intended to apply to manufactories or storehouses, the contents of which are covered by a blanket policy; the contents being insured in whichever one or more of the various factories or storehouses described it may be located at the time of the loss; the particular amount of such contents in any particular 'building not being determinable at the time the policy is issued, but only ascertainable after the loss. 1 Biddle, Insurance, section 2; Richards, Insurance Law (3d ed.'), 727; Clement, Fire Ins. 511. But, even as applied to several buildings covered 'by a blanket policy, it does not operate as a stipulation for co-insurance.
. We think that an illustration will make plain the distinction above made, and an illustration of the effect of a single policy on several buildings with an average clause attached will be entirely applicable to the present case, for all the policies were treated in this adjustment as constituting an aggregate amount of insurance. Suppose, therefore, that the plaintiff, desiring to secure insurance on his five buildings of different values and of the aggregate value of $85,000, has taken one policy in the defendant company for $10,000. Without an average clause attached, he would be entitled to indemnity to the extent of $10,000 for a partial loss on any one of such five buildings; that is to say, under such a policy, without an increase of premium, the company would have incurred five times the risk of loss which it would have incurred under specific
The argument for plaintiff seems to be that by the general nature and terms of the policy it was misled into thinking that it was securing indemnity for loss as to any one of its five buildings to the extent of $10,000 as effectually as though it had taken a policy for $10,000 on that building alone. But, in the absence of any allegation of fraud, concealment, or misrepresentation, we would not be justified in assuming that it could reasonably have so understood the contract. This is not a case where, as counsel contend (quoting language found in Matthes v. Imperial Acc. Ass’n, 110 Iowa, 222), “the return offered bears such an insignificant ratio to what was paid for that the suggestion of such a settlement (as was proposed) seems a grim jest.” The plaintiff got just what it paid for. It could not have supposed that the company was willing to give it insurance' on five separate risks at the same rate that it would pay for a like amount of insurance on one risk. Suppose, for instance, that the owner of five farmhouses on as many different farms, and therefore not exposed in any way to the peril of destruction by the same fire, each of the farmhouses being worth $2,500, should desire to insure each of them against loss to the extent of $2,000, would he be justified in assuming that he could get a blanket policy of insurance on all five houses, which would afford him the same protection against partial or total loss, on the usual terms on which a policy for that amount would be issued covering one house ? And if he found in his blanket policy an average clause, would not he be fairly required to understand that he had in fact insurance on each house only to the extent of $400 ?
The average clause is not a new device resorted to by insurance companies to avoid the provisions of our statutes. While there are meager references to it in the text-books, and, so far as we can find, no cases specifically relating to its application, it was fully described prior to the enactment of our statute in Biddle on Insurance, a standard text-book to which we have already referred. See, also, Bunyon, Fire Ins. 3, 102, 119; Ellis, Insurance (2d ed.), 55. So far as we can discover, it is as old as the co-insurance clause; and if the Legislature had intended to prohibit its use in the section of the Code first above cited (embodying a statute passed in 1894) some unambiguous reference to it would surely have been made.
The trial court erred in holding the average clause to 'be void as prohibited by statute, and should have rendered judgment in defendant’s favor. The cause is remanded for' judgment in accordance with the views expressed in this opinion, — Reversed.