Kelly v. Liverpool & London & Globe Insurance

94 Minn. 141 | Minn. | 1905

BROWN, J.

Action to reform and recover upon a policy of fire insurance. Defendant interposed a general demurrer to the complaint, which was overruled by the trial court, and this appeal was taken.

The complaint sets out that on April 9, 1903, the defendant issued to one C. H. Grafenstadt a certain policy of fire insurance, for the sum of $1,500, upon his stock of goods and merchandise, consisting of dry-goods, groceries, boots and shoes, etc.; that on October 11, 1903, the property, which is alleged to have been worth the sum of $14,000, ivas totally destroyed by fire; that thereafter, on October 13, Grafenstadt assigned the policy of insurance to the plaintiffs in this action, who are now the owners thereof. It further alleges that, by the contract entered into at the time the policy was issued, it was understood and agreed between the parties that Grafenstadt might place other insurance upon the same property, and that, by the mutual mistake of the parties, this understanding was not incorporated in the written policy. The relief demanded is that the policy be reformed and corrected, and made to conform to the agreement made at the time the contract was entered into, and that plaintiffs recover thereon the sum of $1,500, with interest — the amount of loss suffered.

It is urged by defendant that the complaint fails to state a cause of action, for two reasons: (1) That it does not allege that an arbitration between the parties has ever been had respecting the amount of the loss, as provided by the policy, or-that an arbitration was waived by defendant; and (2) that it states no facts showing a necessity for a reformation of the policy.

1. The complaint states but one cause of action, and that to recover upon the policy, but, to entitle them to so recover, they seek to have the policy corrected and made to conform to the contract actually entered into between the parties. While it is true that the complaint' discloses no particular necessity for correcting the policy, it might become necessary that it be reformed, depending upon the defense interposed by defendant. The policy, as written, provides that it shall be void if the insured had at the time it was issued, or should at any time .thereafter procure, any other contract of insurance upon the same property without the consent of the company. The property covered by the policy is alleged to' have been of the value of $14,000, and it is fair to assume that the owner did procure other insurance thereon. If the policy should not be corrected and made to conform to the contract actually entered into, the defense that other insurance was subsequently placed on the same property would be fatal to plaintiffs’ right of recovery. No objection occurs to us why they may not anticipate that defense. Of course, if it is not made, there would be no occasion for the reformation or correction of the policy, and the court would not permit a waste of its time by a trial of the question.

2. The policy provides that:

In case of loss, except of total loss on buildings, under the policy and a failure of the parties to agree as to the amount of loss, it is mutually agreed that the amount of such loss shall be referred to three disinterested men, the company and the insured each choosing one out of three persons, to be named by the other, and the third being selected by the two so chosen.

It is insisted by appellant that an arbitration of the amount of the loss is a condition precedent to the right of action on the policy, and that the complaint is defective, in that it contains no allegations showing that an arbitration was had, or that it was waived by defendant.

We do not concur in this contention. The question whether this condition of the policy renders an arbitration in case of loss a condition precedent to the right of recovery has been before the court in several actions, and by the later decisions it has been held that the provision for arbitration is not a condition precedent unless a controversy in fact exists between the parties as to the amount of the loss. In the case of Gasser v. Sun Fire Office, 42 Minn. 315, 44 N. W. 252, and also in Mosness v. German-American Ins. Co., 50 Minn. 341, 52 N. W. 932, it was, in substance, said that the provision of the policy referred to was a condition precedent to the right of action thereon. But in both those cases it affirmatively appeared that a controversy in fact existed between the parties as to the amount of the loss. In the case of Fletcher v. German-American Ins. Co., 79 Minn. 337, 82 N. W. 647, it was held that the arbitration provided for by the terms of the policy is not a condition precedent to the right of action upon the policy unless the parties actually disagree as to the amount of the loss. Until there is some controversy between them on that subject, there is no occasion for arbitration — there is nothing to arbitrate. The same was, in effect, also held in Ohage v. Union Ins. Co., 82 Minn. 426, 85 N. W. 212.

The question in the case at bar is one of pleading, and our attention has not been called to any case in this court directly bearing upon it. We think it should be answered adversely to defendant’s contention. The right of arbitration provided for by the terms of the policy was.» intended for the benefit of both parties, and either may insist upon it if a dispute exists between them as to the amount of the loss. If there is in fact a controversy on that subject, and an arbitration is not had or waived by the insurance company, no recovery upon the policy can be had by the insured. Prima facie, however, the insured is entitled to recover the face value of his policy, and he may frame his complaint accordingly. If a controversy in fact exists as to the amount of the loss, the company may plead in its answer the failure to arbitrate the question, and thus defeat the action. The question whether a pleading should cover this particular feature in a case of this kind was presented in Davis v. Atlas, 16 Wash. 232, 47 Pac. 436, where it was held that it was unnecessary that the plaintiff expressly allege that an arbitration was or was not had, or was waived. See also Kahnweiler v. Phenix Ins. Co., 67 Fed. 483, 14 C. C. A. 485.

Order affirmed.