Pioneer Manufacturing Co. v. Phœnix Assurance Co. of London

Shepheed, J.: The defendant relies upon several defences, but the only one necessary to be considered in order to dispose of this appeal is founded upon the following clause in the policy of insurance, which is the basis of this action: “The amount of sound value, and of the loss or damage, shall be determined by agreement between the company and the assured, but if, at any time, differences shall arise as to the amount of loss ór damage, * * * every such difference shall, at the written request of either party, be submitted, at an equal expense to each of the parties, to two competent and impartial persons — one to be chosen by each party — and the two so chosen shall select an umpire to act with them in case of their disagreement, * * * and the award, in writing, of any two of said persons shall be binding and conclusive as to the amount of such loss or damage, or as to any question, matter or thing so submitted, but shall not decide the liability of the company. * * * It is furthermore hereby expressly provided and mutually agreed that no suit or action against this company for the recovery of any claim by virtue of this policy shall be sustainable in any Court of law or chancery until after an award shall have been obtained, fixing the amount of the claim in the manner above provided. * * * And it is hereby understood and agreed by and between the Phoenix Assurance Company of London and the assured that this policy is made and accepted with reference to the foregoing terms and conditions.” It is, we think, well settled that such a provision in a contract of insurance is not against public policy, and that it will be upheld by the Courts, in so far as it provides for the *47 submission to arbitration of the amount of loss or damage sustained by the assured. A policy of insurance, precisely similar to the one under consideration, was declared to be valid by the Supreme Court of New Jersey, in the case of L. L. & G Insurance Co. v. Wolff, 17 Ins. Law Journal, 714; 14 Atlantic R., 561, and this decision is abundantly sustained by the highest authority. “Agreements for determining only the amount to be recovered by arbitration are valid, and the determination by arbitration of the amount of damages to be recovered, or the time of payment, may lawfully be made a condition precedent.” Scott v. Avery, 5 Ho. of Lords Cases, 811; 2 Addison Contracts, 294; Morse on Arbitration and Awards, 93; May on Insurance, 493; Perkins v. U S. Electric Light Co., 16 Fed. Rep., 513; Gauche v. London & Lancashire Ins. Co., 1 Fed. Rep., 347; Carroll v. G. F. Ins Co., 13 Pac. Rep. (Cal.), 863. In Russell v. Pellegrini, 38 E. L. & E., 101, Lord Campbell said: “ When a cause of action has arisen, the Courts cannot be ousted of their jurisdiction,” but added that “parties may come to an agreement that there shall be no cause of action until their differences have been referred to arbitration.” “ Both sides admit that it is not unlawful for parties to agree to impose a condition precedent, with respect to the mode of settling the amount of damage, or the time of paying it, or any matters of that kind, which do not go to the root of the action. On the other hand, it is conceded that any agreement which is to prevent the suffering party from coming into a Court of law — or, in other words, which ousts the Courts of their jurisdiction — -cannot be supported.” Edwards v. The Aberayron Mutual Ship Ins. Co. (limited), 1 Q. B. Hiv., 593 (1875). “ I take the law as settled by the highest authority — the House of Lords — to be this: There are two cases where such a plea as the present is successful — first, where the action *48 can only be brought for the sum named by the arbitrator; secondly, where it is agreed that no action shall be brought till there has been an arbitration, or that arbitration shall be a condition precedent to the right of action.” Dawson v. Fitzgerald, 1 Exchequer Div., 260 (1876). “Since the case of Scott v. Avery, in the House of Lords, the contention that such a clause is bad, as an attempt to oust the Courts of jurisdiction, may be passed by.” See also Porter’s Laws of Insurance, 210, and Casser v. Sun Fire Office (Supreme Court Minn., 1890), Insurance L. J. The contention of the defendant company is, that a difference arose as to the amount of damage to the engine, boilers, &c., that the defendant made a written request of the plaintiff that the said difference should be submitted to, and determined by, arbitrators, and in accordance with the terms of the policy, and that the plaintiff, without legal excuse, refused to comply with said request. The submission to arbitration upon the written request of the defendant, being clearly a condition precedent to the right of action, we are now to determine whether the defendant company has placed itself in such a position as to defeat the present action by reason of the non-performance of the said condition by the plaintiff. 1. As a first step in the establishment of this defence, it was incumbent on the defendant to show that a difference, in respect to the particulars mentioned, had arisen, and, in order to determine this question, the eighth issue was submitted to the jury. The defendant requested his Honor to charge the jury that, according to the plaintiff’s own testimony, through its president, Hawkins, such a difference had arisen between the parties. The Court declined to give this instruction, and the jury found the said issue in the negative. *49 Hawkins testified that L. R. Warren, the adjuster of the defendant company, offered him nine hundred dollars in settlement of the damages to the above mentioned property, and that he, Hawkins, declined to accept the said offer. This surely constituted a “ difference,” within the meaning of the word as used in the policy, and the subsequent negotiations as to arbitration must have been based entirely upon the assumption that such a difference existed. We are, therefore, of the opinion that his Honor erred in declining to give the instruction prayed for, and we presume that he only permitted the finding of the jury to stand, upon the ground that it became immaterial in view of the verdict upon the succeeding issue. 2. This, the ninth issue, involves the second branch of the inquiry, and is in the following words: “ If so (that is, if there was a difference), did the defendant request the plaintiff, in writing, in accordance with the requirement of the policy sued on, that the amount of damage to said articles should be assessed by appraisers, and did •the plaintiff refuse such request”? The' defendant tendered two issues, which divided the proposition contained in that which was submitted by the Court. These issues were refused, and the defendant excepted to such refusal, and also to the issue actually submitted. This exception finds direct support in Emry v. Railroad, 102 N. C., 209, where it is said that “ it is misleading to embody in one issue two propositions, as to which the jury might give different responses, and, on exception taken in apt time, a new trial will, in such cases, be granted.” We prefer, however, to base our decision upon grounds which more closely affect the merits of the defence, and we will, therefore, inquire whether there was error in the instruction of the Court upon the said issue. Hawkins testified that he received the letter (exhibit “E”) from Warren, the adjuster of the defendant company, on *50 the 3d of November, and that before he had written his letter (exhibit “D”), which was dated on the same day, Mr. Warren had handed him exhibit “F,” which, he admits, was a proposition .tendered to him by the said Warren. Mr. Hawkins further says: “ I think that the exhibit ‘ F’ and a pencil memorandum contained all the propositions submitted to me. * * * .My objection to the proposition ‘F’ was that the company was not bound, while I was bound.” Now, proposition “F” wasapaperdrawnin strict conformity to the provisions of the policy, and it provided that the award should be “ binding and conclusive as to the amount of such loss or damage, but shall not decide the liability of said insurance company.” Not only was u executed by the defendant company, but it contained the name of the arbitrator selected by it, and was complete in every respect, save its execution by the plaintiff company and the insertion of the name of the arbitrator to be selected by it. The policy does not require any particular form of written request, and we can conceive of no stronger one than this paper which the plaintiff admitted was submitted to him. Again, the plaintiff admitted that he received letter “E.” This was a formal request for an arbitration or appraisement, and it referred to “a paper indicating an agreement for that purpose,” and executed by the defendant, which the plaintiff was requested to sign. Hawkins does not deny that he received the enclosure; but if he did not receive it, the letter was none the less a written request to arbitrate according to “terms and conditions” of the policy. If the paper enclosed was not drawn in accordance with such terms and conditions, it was the duty of the plaintiff to have made it known, so that a proper agreement could have been prepared. Besides, it was not the duty of the defendant to tender the agreement until after the proposition had been acceded to, and it will be further observed that the letter did not request a submission to arbitration according to the *51 terms of the policy as interpreted by the enclosed -paper, but that the submission to arbitration was to be in accordance with the terms of the policy, and the paper was submitted only as “ indicating an agreement” to effectuate that purpose. The Court charged the jury upon the said issue as follows: “9. If, after such difference had arisen, the defendant’s adjuster, L. R. Warren, sent to C. M. Hawkins the letter marked exhibit ‘ E,’ and sent also accompanying said letter a paper marked exhibitF,’ or a copy of said paper signed by said Warren, as it purported to be, then the plaintiff did request in writing, according to the requirement of the policy, that the damage should be assessed by appraisers. If such request was made and refused, the jury would respond to the 9th issue Yes. But if said request in writing, marked ‘ F,’ was not delivered to C. M. Hawkins, and no request was handed to Hawkins other than that marked exhibit 1,’ which is not signed by Warren as an adjuster of the defendant, then no request in writing was made, and the jury would respond to the 9th issue No.” This instruction is to the effect that neither exhibit ‘E’ nor ‘F,’ taken separately, would constitute such a written request as is required by the policy, whereas we have seen that either paper would be sufficient. This error is not cured in the latter part of the instruction, which speaks .of the delivery to plaintiff of the “request in writing, marked ‘ F.’” If such paper was, in the opinion of bis Honor, a request in writing, he should have instructed the jury, as substantially requested, that the plaintiff’s president, Mr. Hawkins, expressly admitted that the said paper was submitted to him, and that he had failed to agree to it. Again, if his Honor considered the paper ‘F’ a written request, he should have so stated, and put it affirmatively, as well as negatively, to the jury; but we very much doubt that, even had he done so, the prejudicial effect of the first part of the. instruction would have been removed. *52 3. We will now consider the exception relating to the tenth issue, which is as follows: “Did the defendant company, at the time of making any request or demand for arbitration as to the damage to said articles of property not destroyed by fire, deny its liability to plaintiff under the said policy of insurance”? Hawkins testified that at an interview in his office (Messrs. Churchill, Dewey and Cowper being present), Warren handed him a paper to read; that he told Warren that he was willing to sign it if it bound the insurance companies as it did the plaintiff company, and that he pointed out an objectionable clause; that Warren struck out that clause and substituted another paper and handed it to him; that he, Hawkins, said that it was “ the same old gray mare colored differently; ” that AVarren said that if he, Plawkins, did not sign that paper they would pay him nothing. “Pie was speaking (says Hawkins) for all the companies. I think Mr. Churchill said to Mr. Warren, ‘You act as spokesman for all the companies.’ I think that all of the agents were present; I am not sure about young Mr. Walter Play and Mr. Dewey. Pulaski Cowper was present. Mr. John AYhite-head was present at that time. Mr. AVarren walked across the floor and said, ‘ We don’t owe you one dollar’ (or one cent, perhaps, he said). I turned around and asked if he meant that they did not owe us anything. Mr. AVarren said, ‘Yes,’ and we all then left the office.” The plaintiff also introduced upon this point John J. Whitehead, who testified as follows: “I am employed by the Gas Light Company, of which Mr. Hawkins is president. I was in Mr. Hawkins’.office about November 1, 1886, and saw Mr. Warren and Mr. Churchill, and, I think, Mr. Dewey was there. They submitted a paper to Mr. Hawkins to sign. Pie said that it bound him, but did not bind the companies. Then Mr. Warren sat down and wrote with a pencil and handed what he wrote to Mr. Plawkins. Mr. *53 Hawkins said, in substance, that it amounted to the same thing as the other. Mr. Warren got up off the stool and said to Mx\ Hawkins, ‘Then, Mr. Hawkins, I don’t owe you one cent.’ Mr. Hawkins turned to him and said, ‘Do I take that as a denial of liability?’ Mr. Warren said, ‘Mr. Hawkins, I wish you to understand that we do not admit one cent of liability.’ I don’t recollect anything more, except that in a very short time they left.” The foregoing testimony was relied upon to establish the-alleged denial of liability by the defendant, and it is plain that the latter was entitled to show all of the circumstances under which the alleged denial was made. Hawkins admits that two propositions to arbitrate were made at the said interview. Now, if these propositions were in accordance with the terms of the policy, and the plaintiff refused to accede to them, the very terms of the contract forbade a recovery, and Warren would have been justified in making the imputed denial It was in evidence that Warren presented a printed form of an agreement to submit to arbitration, executed by the defendant and the other companies (which, according to Hawkins’ testimony, may have been exhibit “F,” or a similar paper), and the defendant proposed to show its contents by oral testimony, having given notice to the plaintiff to produce it. Passing by the ruling of the Court that the contents could not be thus proven for any purpose, which ruling is, to say the least, doubtful, it is very plain to us that the defendant had a right to show by the witness Warren that Hawkins “refused to sign the printed form of submission, stating to witness as a reason that it contained a provision that the appraisers should not decide the liability of the company,” His Honor excluded this testimony, which expressly stated the ground of refusal, and in this we think there was serious error, although there was other testimony from which the same facts might probably have been *54 inferred. It will be noted that Hawkins admits that the paper was a proposition in the form of an agreement to arbitrate, and it was unnecessary to have shown its contents, so far as- the question of denial of liability was concerned, if the refusal to accept was based upon the reason alleged to have been assigned by him. The whole conversation, therefore, should have been submitted to the jury for the purpose of showing why the alleged denial was made. Apart from this, however, the material contents of the papers were proved, without objection, in another way. Mr. Hawkins speaks of a substituted paper (“the same old gray mare,” &c.) being submitted to him. Warren testified that the paper marked “ Q” was the one so described by Hawkins. This paper was in evidence, and its terms are in perfect conformity to the provisions of the policy. If, then, as Mr. Hawkins says, these terms were the same as those in the other paper, which Warren states was executed by him and the agents of the other companies, we have in evidence the very clause which Hawkins objected to. There was, therefore, testimony tending to prove that a proper agreement to arbitrate, executed by the defendant, was proposed to the plaintiff, and that this request in writing was not acceded to. It was also in evidence that Hawkins said he would not sign any agreement that contained the alleged objectionable provision. Now, if this testimony be true, Warren, as we have remarked, was justified in making the alleged denial, and the defendant had the right to have this view particularly presented to the jury. To this end, it very properly asked the following instruction: “That if the adjuster of the defendant company did not deny liability until after the plaintiff had refused to sign a submission to arbitration unless the clause providing that the appraisers should not decide the liability of the company should be stricken out, this was no excuse for the plaintiff’s refusal to submit to appraisers, and such denial of liability was no waiver of the *55 plaintiff’s obligation to submit, upon a written request, to appraisal.” His Honor instructed the jury as follows: “If L. R. Warren, the adjuster of the defendant company, declared to C. M. Hawkins, president of the plaintiff company, in the office of the latter, without qualification, that he would not for his company, or his company would not, pay one dollar or one cent for loss by reason of the fire, and walked immediately out of the said office, then such declaration was a denial of liability on the part of the defendant, and the jury would respond to the tenth issue Yes. If the said Warren did not make said unqualified declaration, or if said Warren, said only that he neither admitted nor denied liability, then there was no denial, and the jury would respond No to the tenth issue.” The denial mentioned in the issue, in view of the pleadings and evidence, must necessarily mean a wrongful denial. If it was not wrongful, it was no denial, in the legal meaning of the word, as thus used. The instruction prayed for involved, therefore, a delicate question of waiver, which it was very material to the defendant to have clearly and specifically presented to the jury. The instruction given entirely ignores this theory of the defence, and seems predicated upon the idea that the testimony of Hawkins and Whitehead, the only witnesses to the denial, was either that there was an unqualified denial, or a refusal either to deny or admit liability. These are the two views presented by the charge, whereas it might very reasonably have been inferred from the testimony of the said witnesses, and especially that of Whitehead, that the alleged denial was in consequence of the refusal of the tendered propositions. In other words, the finding of the issue was made to turn rather upon the nature of the denial than the right of the defendant, under the circumstances, to make any denial whatever. *56 We conclude, therefore, that there was error in declining to give the special instruction prayed for by the defendant, and that for this, and other errors which we have indicated, there should- be a new trial. Entertaining these views, we deem it unnecessary to pursue the discussion through the labyrinth of exceptions which fill this very voluminous record. Venire de novo.