Spink v. Co-operative Fire Insurance

"Ward, J.: The position of the appellant upon this review, is that the agreement to submit the adjustment of the loss by fire under the insurance policy to the adjusting committee of the insurance company and to exercise the right of appeal from the adjustment to the executive committee, did not oust the court of jurisdiction to determine the amount of the loss in • an action; that the agreement was void as against-public policy and relies upon Hurst v. Litchfield (39 N. Y. 377); Prest., etc., D. & H. Canal Company v. Pa. Coal Company (50 id. 250); Sanford v. Commercial Travelers' Association (86 Hun, 380; S. C., 147 N. Y. 326); Seward v. The City of Rochester (109 id. 164) and kindred cases to support this position.- In the Hurst case there was a stipulation in a building contract that in case any question arose under it in relation to the value of the work the same should be adjusted by an architect, whose decision should be binding upon both parties. This provision was held to be void as having a tendency to exclude the jurisdiction of the court. There were other questions in the case. In the D. & H. Canal Co. case there was an agreement to" submit to two persons (in case of a disagreement of the parties) the cost of transportation of coal, and if these persons could not agree they shoiild select an umpire. It was held that no cause of action existed until this submission was made, but the principle'was asserted that a general covenant to submit any differences that might arise [488] in the performance of the contract would: be a nullity ; and in commenting upon the Hurst case the court says that the statement in that .case that the agreement to abide by the decision of the architect was void, was obiter. ■ The Hurst case has not been followed in this' State* but, on the. contrary, it has been settled by a long line of authorities that an agreement is valid and will be enforced, which provides that a special matter arising in the performance of a contract, such as the value of services, the loss under an insurance policy, whether work under a building contract is in conformity with the same, may be submitted to the decision of arbitrators, architects or other persons for determination; and no cause of action arises on the contract until this is done or until an effort is fairly made by the complaining party to have it done. (Austin v. Searing, 16 N. Y. 112; Warner v. Schoharie & Schenectady Counties Farmers' Mutual Fire Insurance Co., 15 N. Y. Supp. 632; Sweet v. Morrison, 116 N. Y. 19, 34; Perkins v. Giles, 50 id. 228 ; .O'Brien v. The Mayor, 139 id. 543.) It follows that, when the reference or arbitration is complete, and a result reached' or an award made by .the arbitrators or other persons, it is binding'upon all of the parties to the contract and will be. enforced unless it is set aside for fraud, mistake. or misconduct on' the part of the arbitrators,, or for sucli other reason .as equity recognizes as sufficient for that 'purpose. (Sweet v. Morrison, 116 N. Y. 27, and cases cited.) . ■ In the case, before us the only question submitted to tlie.board of adjusters or to the executive committee oil appeal was the extent, of the loss-of the plaintiff against which he was insured. The plaintiff submitted to the jurisdiction of the adjusters and to the executive committee on appeal this question of the loss. This appears in his complaint. No reason is. given in the complaint why the plaintiff should not abide- by -the. -decision, of these bodies to which he had Stipulated to submit the question except -that he is. dissatisfied with the amount, of the award that has been made for his loss. No fraud or misconduct on the part of these committees or boards of the associa^ tion is alleged in the complaint, and the theory of .the plaintiff’s case, seems to have been that he could, subject the association to the. expense and trouble of this arbitration and the appealand that, if [489] he was not satisfied with the result, he could go to the courts for redress or for another determination of the amount of his loss, repudiating his contract in this regard and all that had been done under it. This position cannot be sustained. The true rule and distinction appears in Prest., etc., D. & H. Canal Co. v. The Pa. Coal Co. (supra), scná. that case has been approved and the distinction- recognized in Seward v. The City of Rochester (supra); Sanford v. Accident Association (147 N. Y. 328) and i-nany other cases. But the appellant contends also that- the stipulation as to the loss, which we have been considering in this case, is void as against public policy, because the adjusters are officers in and members of the defendant corporation, and are liable to assessment for any loss that may be sustained under the plaintiff’s' insurance policy, and have a pecuniary interest in adjusting the loss as low as possible. Article 15 of the constitution of the corporation provides that no policy shall be issued by the company until application for insurance has been made to the amount of $100,000 in .each of the counties of Wyoming and Genesee. The members of the adjusting or executive committee under the conditions of its association could have but slight pecuniary interest in acting unfairly or in violation of their duty in adjusting the loss. The plaintiff made his contract in this regard, with full knowledge of the pecuniary interest of the members of the tribunals who were to pass upon his loss. ' ■ Judge Vann says in Sweet v. Morrison, supra (at p. 27): “ While neither natural nor legal disabilities hinder a person from being an arbitrator, provided the fact is known to the parties at the time of the submission, still, as. he is the agent of both parties alike and impartiality is the fundamental requisite, the courts closely scrutinize the action of an arbitrator whose relation to one of the parties was such as to naturally influence the judgment even of an honest man-.” (Citing Morse Arb. & Award, 99; Russ. Arb, 105.). As we have said, the integrity and fairness of these committees have in no manner been impeached or attacked in. the complaint. A conclusive answer to this contention is that this method of adjusting the loss is authorized by statute. Section 267 of the [490] Insurance Law provides that “ every policyholder sustaining a loss or damage from any cause specified in the policy, shall immediately notify the president or secretary of the corporation of such loss or damage, and the officers of the corporation shall at once proceed to ascertain and adjust such loss or damage in the manner provided by the charter' and by-laws and the provisions of this article.” The statute recognizes the power of a corporation to .create by-laws to govern its business affairs, and directs in section 266 that a printed copy of the by-laws shall be attached to each policy issued. The logic of the appellant’s position in this regard would lead to the exclusion of a taxpayer from a jury u]3on the trial of a case which would involve taxation upon him -to pay the verdict that he might render, f of it can be said that he has a pecuniary interest in the case before him. The cases cited by the learned counsel to sustain this position we have consulted, but they fail to do so. It was suggested upon the argument of this appeal that, under the complaint as "it- stands, the plaintiff upon a new trial could be pez'znitted to recover the amount of his loss as fixed by the adjusters, and, therefoz’e,. that we. should not affirm this jzidgment, but. should grant a new trial. .The difficulty with this view lies in the fact that the coznplaint does not ask for this relief, but repudiates the award of the adjusting board and bzings this action in hostility to it. • The pleadings do not inforzn izs' even of the amount fixed by the , adjustez’s -as the plaintiff’s loss; nor was this claim pz-esented to the trial court. Had the plaintiff done so, that court might have permitted a recovez^y for the amount of the loss as adjusted, with intei^est, and the, amendment of the pleadings, if necessary, to show the amount of the adjustment! ' We think the plaintiff should stand or fall by his own theoz*y of the action azid that the judgmezit and order appealed, from should be affirmed, with costs. All concurred. Judgment and order affirmed, with costs.