Insurance Co. of North America v. Bachler

Ragan, C.

To reverse a judgment pronounced against it by the district court of Otoe county in favor of Henry Bachler in a suit based on an ordinary fire insurance policy the Insurance Company of North America (hereainfter called the “Insurance Company ”) has prosecuted to this court proceedings in error.

1. The first assignment of error is that the district court erred in giving instructions numbered 1 to 10, both inclusive, upon its own motion; and the second assignment is that the court erred in refusing to give the instructions 1 to 11, both inclusive, requested by the plaintiff in error. The court did not err in giving all these instructions, nor err in refusing to give all the instructions asked for, and for that reason these assignments must be overruled.

2. No specific ruling of the district court in the admission or rejection of evidence is assigned as error in the petition in error filed here. Our examination of the record then is confined to the determination of whether the verdict pronounced by the jury is suppоrted by sufficient competent evidence, and whether the judgment pronounced by the court is contrary to the law of the case.

3. The policy sued on was issued on the 1st day of October, 1889, and insured the property of Bachler from loss or damage by fire for one year. October 1, 1890, a renewal certificate was issued by the Insurance Company continuing the policy in force for another year, and on October 1, 1891, another renewal certificate was issued continuing the policy in force until October 1, 1892. On the 22d day of February, 1892, the insured property was destroyed by fire. At the time the policy was originally issued and at the time the policy was renewed on the 1st of October, 1891, there existed an unrecorded mortgage against the insured property. This mortgage was recorded in June, 1891, and was in existence and a lien upon the insured property at thе time the policy was renewed October 1, 1891. The policy, among other provisions, contained the following: “The acquiring by a third party of an insurable interest in the property or any part thereof by virtue of a mortgage or a deed of trust executed by the assured subsequent to the date hereof * * * shall cause an immediate termination of this policy,” etc. The argument here is that because of the existence of this mortgage on the insured property October 1, 1889, that the policy sued upon never took effect and never was in force, and as the mortgage still existed upon the property on the 1st of October, 1890, that the renewal certificate issued on that date continuing the policy in force for one year was without effect for that purpose. This is a violent construction of the contract. Its language is in effect that if thе insured shall subsequent to the date of the issuance of the insurance policy mortgage the insured property, etc., that the execution of such mortgage shall terminate the policy. The insured did not incumber this property by mortgage subsequent to the date of the renewal of the policy made the subject of this suit, namely, October 1, 1890, nor did he incumber this property subsequent to the time that the original contract of insurance wаs issued, to-wit, October 1, 1889. The fact that there existed a mortgage upon the property insured at the date of the issuance of the insurance contract did not itself prevent the policy from taking effect. The evidence shows, without conflict, that neither the original issuance of this policy nor either of its renewals were ba-ed on any written application made by the insured to the Insurance Company for the insurance; that the agent of the company at neither of said times made inquiries of the insured as to whether the property proposed to be insured was incumbered by a mortgage; that the agent of the Insurance Company at neither of said times knew of the existence of the mortgage upon the insured property; and that the insured at neither of said times informed the agent of the Insurance Company that the property was incumbered by a mortgage. But the evidence also warrants the conclusion that the insured was not actuated by any sinister motive in not disclosing to the agent of the Insurance Company the existence of this mortgage; that as he was not interrogated upon the subject he remained silent because he was ignorant of the fact that he was under any obligation to disclose the existence of the mortgage. • The policy contained a provision that if the insured should “ fail to make known every fact material to the risk, including the amount of incumbrance, if any, on said property, whether interrogated with reference thereto or not, this policy shall be void.” It is now argued that the judgment under consideration here is contrary to the law of the case, because of the failure of the insured to inform the Insurance Company of the existence of this mоrtgage upon the insured property at the time the policy was originally issued, October 1, 1889, or at least at the date when the renewal certificate was issued, October 1, 1891. ‍​​‌​‌​‌‌​​​‌​​​​‌‌​​​​​​‌‌​​​‌‌​​​‌‌‌​​‌‌‌​​‌​‌​‍In support of this contention counsel cite us to Waller v. Northern Assurance Company, 10 Fed. Rep., 232. The provision in the policy made the subject of that action was practically the same as the provision in the policy here, and it appeared from the evidence that the only interest the assured had in the property was that of a mortgagee. It also appeared that at the time the insured applied for the insurance no inquiries were made by the insurance company’s agent as to the title the insured had in the property, and the insured made no representations as to the character of his estate in the property which he desired insured, and the court held, McCrary, C. J., delivering the opinion, that it was the duty of the insured, when he. applied for the insurance, to disclose the nature of his interest in the insured property, whether or not any inquiry was made of him on the subject. The case cited then appears to sustain the contention of counsel.

Another case cited by counsel is Becker v. Hibernian Ins. Co., 44 Ind., 95. We have been unable to find this case. Certainly there is no such case in the 44th Indiana.

Another case cited in support of this contention is Hinman v. Hartford Fire Ins. Co., 36 Wis., 159. In that case the insured made and signed an application in writing to the insurance company for the insurance, in which application were the following questions and answers: “Q,. Is the property mortgaged? A. No. Q. Are you the sole and undisputed owner of the property to be insured? A. Yes. Q. Do you own the ground on which the building stands? A. By contract.” The policy contained a provision that if the assured in his application had made any erroneous representation, or had omitted to make known any fact material to the- risk, or if the insured was not the sole and unconditional owner of the property insured, or of the land orTwhich the building stood, that the policy should be void. The undisputed evidence at the trial showed that at the time the policy was issued that the insured had no title whatever to the real estate, but was in possession thereof under a contract of purchase. The court held that the answers of the insured, tаken together, were equivalent to a statement that although he held the land and building under a contract of purchase, yet no person other than himself had any substantial interest in them; that he had fully paid for the land and was the equitable owner, with the right to enforce a conveyance to himself of the legal title; that such representation was material and false, and rendered the policy void. It will thus be seen that the deсision in the case last cited is not applicable to the facts of the ease under consideration. Counsel also cite us to Pennsylvania Ins. Co. v. Gottsman, 48 Pa. St., 151, and Brown v. Commonwealth Ins. Co., 41 Pa. St., 187. We have not examined these authorities, but assumed for the purposes of this case that they support the contention of counsel.

The rule laid down in the case in 10 Fed. Rep., swpra, is iar away from the weight of authority on the question under consideration. The true rule, we think, and the one supported by the decided weight of authority, was announced by the supreme court of Wisconsin in Vankirk v. Citizens Ins. Co. of Pittsburgh, 48 N. W. Rep. [Wis.], 798, in the following language: “Where the assured was not questioned as“to incumbrances on his property, and did ‍​​‌​‌​‌‌​​​‌​​​​‌‌​​​​​​‌‌​​​‌‌​​​‌‌‌​​‌‌‌​​‌​‌​‍not intentionally conceal the facts, the existence of a mortgage thereon does not invalidate the policy.” To the same effect see Alkan v. New Hampshire Ins. Co., 10 N. W. Rep. [Wis ], 91. This is also the rule in Michigan. (See Castner v. Farmers Mutual Ins. Co., 8 N. W. Rep. [Mich.], 554.) O’Brien v. Ohio Ins. Co., 17 N. W. Rep. [Mich.], 726, where it was held: “Where insurance is applied for orally, and the applicant is unaware of any provision in the policy regarding incumbrances, and is not guilty of any misleading conduct, his bare silence cannot be deemed a misrepresentation; and if (he agent in such a case did not read the policy to the applicant or call his attention to the clause relating to incumbrances, the existence of a mortgage would be no impediment to a recovery from the insurance company.” See, also, Guest v. New Hampshire Fire Ins. Co., 33 N.W. Rep. [Mich.], 31, where it was held: “A mere failure of the assured to mention incumbrances on the insured property, if not inquired about, where the application for insurance is oral, and no deceit is practiced, will not vitiate the policy.” It is also the rule in Massachusetts. (See Washington Mills Emery Mfg. Co. v. Weymouth & Braintree Mutual Fire Ins. Co., 135 Mass., 503.) It is also the rule in New Jersey. (See Trade Ins. Co. v. Barracliffe, 45 N. J. Law, 543.) In Wood, Insurance, it is stated that when no inquiries are made the intention of the assured becomes material, and to avoid the policy it must be found not only that the matter was material, but also that it was intentionally and fraudulently concealed.

We conclude, therefore, that Bachler's failure to inform the agent of the Insurance Company of the existence of the mortgage upon the insured property either at the date that the policy was issued or renewed did not vitiate the policy or prevent its going into effect. It is not doubted that the existence of the mortgage on the property was a fact material to the risk. But the application for this insurance was oral. No inquiries were made by the agent»of the Insurance Company as to the condition of the title to the property; and Bachler said nothing about the existence of the mortgage for the reason that he did not know that it was his duty to disclose the existence of the mortgage. It is not pretended that Bachler kept silent from any sinister motive or with any intention on his part to deceive or mislead the Insurance Company. In other words, Bachler’s acceptance of the policy was not under the circumstances a representation that the insured property was free from the mortgage; nor was his silence under the circumstances a misrepresentation as to the condition of his title.

4. Another аrgument under this head is this: The Insurance Company, in its answer, set up as a defense to the suit the existence of this mortgage on the insured property' at the date that the policy was originally issued and at the dates of its renewal. The reply to this defense Avas a gen-era 1 denial. The undisputed evidence is, as already seen, that the mortgage was on the property when the policy was' originally issued and at each of the timеs when it was renewed, and the contention is that, therefore, the judgment pronounced is contrary to the law and evidence of the ‍​​‌​‌​‌‌​​​‌​​​​‌‌​​​​​​‌‌​​​‌‌​​​‌‌‌​​‌‌‌​​‌​‌​‍case; but this is in effect saying that the district court erred in permitting the insured to prove the circumstances under which the policy was issued and renewed, that the application for the insurance was oral, that the Insurance Company had no knowledge of the existence of the mortgage, made no inquiries respecting it, and the insured ón his part did not know that it was his duty to communicate the existence of the mortgage to the insurance agent and made no disclosure of the existence of the mortgage for that reason. This precise question arose and was decided in Omaha Fire Ins. Co. v. Dierks, 43 Neb., 475, and it was there held that if •such-evidence was irrelevant under the pleadings, counsel for insurance company should have objected to the ruling of the district court on that ground, and then specifically assigned the ruling of the district court in admitting such •evidence in his petition in error.

5. The next argument is that the verdict that the insured property was wholly destroyed by fire is not supported by sufficient evidence. This was purely a question of fact for -the jury, and while there is some conflict in the evidence, we cannot say that the verdict lacks sufficient evidence to support it. The insured building was a frame structure, the rear wall of which was veneered with brick. The evidence does not show that the material of which the building was composed was transformed by the fire into cinders, smoke, and ashes; nor is it necessary that the evidence should so show, in order to support the jury’s finding, that the loss was total. We conclude from the evidence in the record, included in which evidence is a photograph of the premises immediаtely after the fire, that the insured premises was reduced to a wreck by the fire; that what remained of the building was practically valueless. There were some boards and some bricks and some pieces of material and parts of the floors and walls that were not consumed, but after the fire the building insured did not exist as a building. An insurance upon a building is an insurance upon a building as such, and not upon the materials of which it is composеd. (Williams v. Hartford Ins. Co., 54 Cal., 442; German Ins. Co. v. Eddy, 36 Neb., 461.)

6. The policy in suit contained this provision: “If differences shall arise between the parties hereto as to the amount of any loss or damage, * * * the matter shall, at the written request of either parly, be submitted to three-impartial arbitrators, each party to choose one, and the two so chosen to choose the third, whose award, in writing, signed by a majority of the arbitrators, shall be binding on the parties as to the amount of such loss or damage, but shall not decide the legal liability of the company under this policy. And in such case of disagreement, the determination of the amount of the loss or damage sustained by arbitrators as aforesaid shall be a condition precedent to the right of the assured, or either party, to institute proceedings at law for the recovery of the claim hereunder.” One of the defenses interposed by the Insurance Company to this action was that a disagreement arose between it and Bachler as to the amount of the loss or damage he had sustained by reason of the fire; that the Insurance Company, in pursuance of the provision of the policy just quoted, requested, in writing, of Bachler that the amount of such loss or damage might be arbitrated, and that Bachler had refused to submit the amount of loss or damage he had sustained by the fire to arbitration. Assuming that the evideuce in the record sustains without conflict the contention' of the Insurance Company that it demanded that the-amount of the loss or damage sustained by Bachler on account of the fire should be submitted to arbitration and. that he had refused to arbitrate it, the defense must {ail. This precise question was decided adversely to the contention of the plaintiff in error in German-American Ins. Co. v. Etherton, 25 Neb., 505, and again decided in German Ins. Co. v. Eddy, 36 Neb., 461. The question was again considered in Home Fire Ins. Co. v. Bean, 42 Neb., 537. The court, speaking through Hаrrison, J., said: “Aprovision in a policy that no suit or action against the insurer ‘shall be sustained in any court of law or chancery until/ after an award shall have ‍​​‌​‌​‌‌​​​‌​​​​‌‌​​​​​​‌‌​​​‌‌​​​‌‌‌​​‌‌‌​​‌​‌​‍been obtained’ by arbitration, fixing the amount due after loss, is void, the effect of such provision being to oust the courts of their legitimate jurisdiction.” This question was again considered in National Masonic Accident Association v. Burr, 44 Neb., 256, and! the foregoing cases were again examined and the court, held: “Whatever be the rule elsеwhere, it is the firmly-established doctrine here that if parties to the contract-agree that if a dispute arise between them that such dispute shall be submitted to arbitration, refusal to arbitrate or no arbitration is not a defense to an action brought on such contract by one of the parties thereto, as the effect of' such agreement is to oust the courts of their legitimate jurisdiction and is contrary to public poliсy and therefore-void.”

7. The district court made an order allowing counsel for.Bachler a certain sum of money as an attorney’s fee, and ordered the amount allowed taxed as part of the costs off the case to the Insurance Company. This order of the-court is assailed on two grounds: (1.) That there was no evidence before the court to show that the amount allowed as an attorney fee was a reasonable fee for services rendered-in the case. The order of the court by which axt attorney-fee was taxed as part of the costs in the action was not made one of the grounds of the motion filed by the Insurance Company for a new trial, nor is this action of the court subsequently assigned as error in the petition in error filed in this court; and the Insurance Company filed no motion in the district court to retax the costs. The ruling of a district court in the taxation of costs has been frequently before this court. One of the later expressions on the subject is found in Real v. Honey, 39 Neb., 516, in which the opinion was prepared by the present chief justice, Norval, and the conclusion reached thus stated in the syllabus: “In order to review the question of taxation of costs, a motion to retax the costs must be made in the trial court, and a ruling obtained thereon by that court.” Whether the district cоurt erred then in allowing counsel for Bachler an attorney’s fee and ordering it to be taxed as part of the costs is not before us for review. (2.) But it is argued that the law under which this attorney fee was allowed is unconstitutional, and that therefore the order of the court was void. It is admitted that this order was made in pursuance of section 45, chapter 43, Compiled Statutes, 1893, which provides, in substance, that the court, upon rendering judgment аgainst an insurance company in a suit upon a policy issued insuring real estate against loss or damage by fire, tornado, or lightning, where such property shall have been wholly destroyed, shall allow the plaintiff in the suit a reasonable sum as an attorney’s fee, to be taxed as part of the costs. This section of the statute was construed by this court in Hanover Fire Ins. Co. v. Gustin, 40 Neb., 828, and it was there held that the courts of the state, by virtue of this provision of the statutе, had the power, upon rendering judgment against an insurance company on any policy of insurance on real property, to allow the plaintiff in the action a reasonable sum as an attorney’s fee to be taxed as part of the costs in the case. The constitutionality of the law, however, was not raised in the argument, nor was the point decided in the case. Here it is argued that the law is unconstitutional, because it is class or special legislation. No authority is cited in support of this proposition, nor do we think any can be found. The subjects of special legislation prohibited by the constitution are all enumerated in section 15, article 3, of that instrument. This section of the constitution does not prohibit the legislature from passing such a law as the one under consideration. That the legislature may legislate upon any subject not prohibited by the constitution is a proposition too well recognized to call for the citation of authorities in its support. We know of nothing in the constitution which prohibits the legislature from enacting that the successful party in litigation may recover a judgment against his adversary for the amount of the costs expended or accrued by him in the prosecution of such suit, nor do we know of anything that prohibits the legislature from inсluding in the term costs a'reasonable attorney’s fee. We conclude, therefore, that the law assailed as unconstitutional is a valid law; that it is not within said section 15 of the constitution which prohibits special legislation. (State v. Berka, 20 Neb., 375; McClay v. City of Lincoln, 32 Neb., 412; Lancaster County v. Trimble, 33 Neb., 121; State v. Robinson, 35 Neb., 401; Koen v. State, 35 Neb., 676; State v. Norris, 37 Neb., 299; Hunzinger v. State, 39 Neb., 653.) It is said that this act is class legislation because it applies only to insurance companies; but where a law is general and uniform throughout ‍​​‌​‌​‌‌​​​‌​​​​‌‌​​​​​​‌‌​​​‌‌​​​‌‌‌​​‌‌‌​​‌​‌​‍the state, and operates alike upon all persons and localities of a class, it is not objectionable as wanting uniformity of operation.

8. The final argument that the judgment is contrary to the law of the case is this, the insurance policy provided: “It is further declared to be a condition precedent to the granting of insurance that the amount claimable hereunder shall not exceed the actual loss ascertained as above, any so called valued policy lаw to the contrary notwithstanding.” The building was insured in the sum of $1,500 •and was totally destroyed by fire. The contention is that the actual value of the building was less than the sum for which it was insured, and that by the provision quoted above from the contract of insurance Bachler agreed, in effect, that the Insurance Company should not be liable to him for any greater sum than the actual value of the building; that this contract was a valid one, and that the courts are bound to enforce it. This precise question was before this court in Home Fire Ins. Co. v. Bean, 42 Neb., 537, and the point was decided adversely to the contention of the plaintiff in error here. Harrison, J., speaking for the court, said: “ Where real property is wholly destroyed by fire, any provision of a policy of insurance covering such property which in any manner attempts to limit the amount of the loss to less than the sum written in the policy is in conflict with the statutory rule, invalid, and will - not be enforced.” This case is decisive of the question under consideration. The judgment of the district court is

Affirmed.

Nor val, C. J., not sitting.

Case Details

Case Name: Insurance Co. of North America v. Bachler

Court Name: Nebraska Supreme Court

Date Published: Apr 4, 1895

Citation: 62 N.W. 911

Docket Number: No. 6124

Court Abbreviation: Neb.