229 N.W. 792 | Minn. | 1930
Taking as true the admitted allegations of the complaint and the averments of the answers, the facts are these: January 17, 1920, plaintiff leased a store property in Minneapolis for a term beginning March 15, 1920, and ending August 31, 1929. The terms of the lease were such that anything the lessee might add to the real estate by way of "improvements and betterments" would become the property of the lessor, the lessee's interest therein being nothing more than the right of user for the purposes and duration of the lease. As permitted by the lease and in order to fit the premises for his own use, plaintiff made improvements at a cost of over $12,000.
September 7, 1927, when the lease had but two more years to run, the building was damaged by fire. Plaintiff's loss was covered by the policies, in the Minnesota standard form, upon which suit is brought. They insured plaintiff against loss or damage by fire to the "improvements and betterments" which he himself had made.
Plaintiff claimed that the loss was total and its amount the full, intrinsic or "sound value" of the improvements. Defendants failed to agree. An appraisal was had as provided for by the policies. The resulting award allowed plaintiff's claim in full — fixing his loss at $11,304.52, the whole "sound value" of the property. The value of plaintiff's right of user of the insured improvements during the remaining two years of the lease does not appear save for an allegation of the answers that plaintiff's "insurable interest" did not exceed $3,500 at the time of the fire. The answers further allege, and so we must assume, that the award was made on the theory that the policies covered "the full and intrinsic value of said improvements and betterments * * * instead of covering solely the value of plaintiff's insurable interest therein."
1. There is no claim of fraud inducing the award or contributing to it. But where such an award is so grossly inadequate or excessive as to be in effect a fraud it may be vacated *512
(Kaufman Jewelry Co. v. Insurance Co. of Pa.
2. The appraisers went upon the theory that plaintiff should have the damage to the "improvements and betterments" as such instead merely of the damage to his interest therein, the loss of his right to use them as lessee for the remaining two years of his lease. Upon that theory alone could there be an award for full sound value. Counsel for plaintiff frankly meets that situation with the proposition that "in the absence of fraud or mistake, and where not otherwise limited by the policy, if the insured has an insurable interest at the time the policy is obtained and also at the time of the loss he is entitled to recover the whole amount of the loss not exceeding the amount of the insurance, regardless of the nature or extent of his peculiar interest." 26 C.J. 358. Kludt v. German M. F. Ins. Co.
To rule that an insured may recover regardless of the value of his interest would require, in our judgment, an erroneous construction and application of the insurance contract. It would remove it from the class of contracts for indemnity against loss, to which agreements to insure must be confined to prevent their being gambling contracts and so against public policy. It would change the contract from one of pure indemnity into one for gain. This case illustrates the idea. We must assume that the value of plaintiff's interest in the property insured did not exceed $3,500. Yet the award was for $11,304.52. It is not a permissible purpose of insurance contracts to provide for any such gain in addition to indemnity for actual loss.
"A contract of insurance is a contract of indemnity. When there are no limitations as to the amount of the loss, and no stipulated value of the property, the insured is to be reimbursed for the actual amount of his loss." Northwestern M. L. Ins. Co. v. Rochester German Ins. Co.
"A fire insurance policy is a mere personal contract of indemnity against a loss by the person insured." Imperial Elev. Co. v. Bennett,
"The general principle that insurance is to be regarded as a contract of indemnity is limited by the rule that the parties to the *514
contract may agree upon a valuation in advance." Unton v. Liverpool, L. G. Ins. Co.
But we are not now dealing with valued policies. The open ones in suit indemnify only against "loss or damage." They should not by construction be converted into agreements to pay not only actual loss but also a substantial profit or premium. They would have to be so construed in order to sustain plaintiff's theory, which therefore we consider unsound.
What we consider the correct theory of decision was applied in Doyle v. American F. Ins. Co.
The results of the rule contended for by plaintiff, were it adopted, would be astounding, at least from the viewpoint that the only permissible *515 object of insurance is indemnity rather than profit. It would permit the ordinary lessee of real estate, even for a short term and without title to or any obligation to replace the buildings, to insure them in his own name and in case of their destruction recover the entire value. It would allow a mortgagee or other lienholder to insure the property and recover the full amount of the insurance however much it might exceed the debt secured. It cannot be the law that, given an insurable interest, the insured may always recover the full amount of the insurance regardless of the value of his interest and the actual loss to him. Such a rule finds its only proper application in cases of total loss under valued policies.
It is plausible but not convincing to argue that the "loss or damage," which is the only thing insured against is, according to the policies, "to be estimated according to the actual value of the insured property at the time when such loss or damage happens." That means nothing more, in a case of this kind, than that the actual value of the property is a factor in determining loss. It is not controlling simply because the contract is not for profit but for indemnity only. It is to compensate only for loss sustained. Every implication must be against any undertaking to pay a premium or profit in addition.
Order reversed. *516