Fireman's Fund Insurance v. Pekor

Fish, J. were consolidated and argued together before this court, as the controlling question presented for decision is common to both. Aside from this question, we find it necessary to deal specially with one only of the various points raised by the plaintiffs in error, none of the others being of sufficient merit or importance, to require notice. Before undertaking to discuss the main issue-involved, we shall direct our attention to the minor question last referred to, which is made in but one of the cases now before us. By agreement between counsel, these two cases 1. It was strenuously insisted by counsel for the insurance company, that, under the circumstances detailed in the plaintiff’s petition, no valid and binding policy had been issued to him by the Fireman’s Fund Insurance Company, for the reason that its agent had no authority to extend credit to the plaintiff, and up to the time the loss- by fire occurred he had paid no portion of the premium, which was the sole consideration moving to the company under the contract sought to be enforced. — 8 — In this connection, exception is taken to the overruling of a general demurrer to the plaintiff’s petition, and error is assigned upon various portions of the charge of the court bearing upon this issue. In point of fact, the plaintiff’s petition alleged, certainly with sufficient clearness to withstand a general demurrer, an arrangement with a general agent of the company, the effect of which was to create a contract in all essential respects alike to that indicated in the first headnote. No new question is therefore presented for determination; for the contention above outlined is effectually disposed of by the decision of this court in the case of Mechanics & Traders Insurance Co. v. Mutual Real Estate & Building Ass’n, 98 Ga. 262, the facts of which were similar to those appearing in the case at bar. We need only add, therefore, that the law as there laid down was correctly announced in the instructions given by the court of which complaint is now made. 2. It appears that each of the instruments upon which suit was brought contained the following recital and stipulation: “It is a part of the consideration of this policy, and the basis upon which the rate of premium is fixed, that the assured shall at all times maintain a total insurance upon the property insured by this policy of not less than 75 per cent, of the total cash value thereof, as covered under the several items of this policy, and that failing to do so, the assured shall become a coinsurer to the extent of the deficiency, and in that event shall bear his or her or their proportion of any loss occurring under this policy.” The question presented for decision is, whether or not this stipulation is properly to be regarded as repugnant to the act of November 23, 1895, now embodied in section 2110 of the Civil Code, the material provisions of which are quoted in the second headnote. In the argument here, counsel for the plaintiffs in error undertook to explain that the purpose of this act was to declare invalid a stipulation which had previously been inserted in fire-insurance policies, to the effect that, irrespective of the amount named in the policy as the extent to which the holder was ostensibly insured, no recovery should be had thereunder for a sum greater than three fourths of the sound value' of the property destroyed. We can not, — 9 — however, take judicial cognizance of what stipulations it was customary to incorporate in such policies prior to the passage of the act of 1895, in order that we may thus be able to arrive at. the real or supposed evil at which the statute was aimed. Disregarding, therefore, the contention above stated, we conclude, from an examination of the terms of the act itself, read in the-light of the law then obtaining, that its purpose was to declare void every stipulation whatsoever the practical operation of which would be to defeat a recovery for the full loss sustained, provided the same was not in excess of the amount named in the face of the policy, and provided, further, that the insurer-had undertaken to assume alone the entire -risk incident to an insurance against fire of the -property destroyed. We add the latter proviso, although it is not to be found in the act under-discussion, for the following reasons: Section 2109 of the Civil Code provides: “The assured may recover the full amount of his loss, provided, the same is within the amount insured. If he has several policies on the same property, the recovery from each company will be pro rata as to the amount insured.” The- - provisions of this section were of force when the act of. 1895-was passed. (Code of 1882, § 2814.) Not having been thereby repealed, expressly or by necessary implication, they occupy their present position in our new code, and are therefore to be-considered in connection'with section 2110, which sets forth in substance the terms- of that act. ' Construing this latter section-together with the one which preeedes it, the conclusion is irresistible that there was no intention on the part of the legislature-to declare that notwithstanding there were several policies covering the same property, the assured could nevertheless, in the event of its total or partial destruction, recover from each company the face value of the policy issued by it, if the damage by fire suffered was equal thereto, regardless of the question whether the aggregate amount recovered from all the companies-was or was not out of all proportion to the amount which would indemnify the assured against the loss sustained by him. It has long been the settled policy of this State that wagering contracts are not to be tolerated. Section 3668 of the Civil Code, the provisions of which have been of force for over a quar — 10 — ter of a century, declares unequivocally that all such contracts shall be void. As was held by a majority of this court in Exchange Bank of Macon v. Loll, 104 Ga. 446, the object of all legitimate insurance is to secure indemnity only, and a policy of life-insurance which contemplates anything beyond indemnity is a mere wager. Beyond all doubt, “to indemnify the assured against loss,” not to arbitrarily pay him the face value of the policy in the event of damage by fire to the property insured, is essentially the only office a policy of fire-insurance can legally perform. Civil Code, § 2089. Accordingly, it is . apparent that we are not at liberty to assume that the General Assembly intended that the act of 1895 should be given a con.struction which would result, in'the case of coinsurance on the property insured, in a recovery against each company of the full amount of its policy, where the damage by fire suffered was in excess thereof, but far below the aggregate amount of the face value of all the policies held by the assured. On the contrary, we are constrained to hold that the act in question was intended to be read in connection with the provisions of section '2109, as we have accordingly done. That this section does not stand repealed is evidenced by the fact that the legislature, in adopting our present code, allowed it to take a place therein • and to be immediately followed by the provisions of the act of 1895, under one general head devoted to a codification of the ■various existing laws relating to “fire-insurance contracts.” ; Surely, where several companies together carry a common risk, each in a proportion established by the face of its policy as compared with the total amount of the insurance effected, no greater sum than its pro rata share of the loss sustained can be recovered by the assured from any one of such companies. Indeed, no recovery at all can be had from a given company, unless necessary to indemnify the assured; so, if he has effected insurance with seven companies, for instance, and six of them •discharge in full his just claim, the liability of the seventh com;pany will be to its coinsurers, not to the assured himself. Williamsburg City Fire-Insurance Company v. Gunn, 88 Ga. 65. Coinsurance being, then, expressly recognized by our code as -entirely legitimate and proper, it is pertinent to inquire into — 11 — the nature of the contract by which the same may be effected. The doctrine as to contribution between coinsurers is based upon the ground that “ where several policies in different offices insure the same party upon the same subject-matter against the .same risk, as there can be but one loss and one indemnity, the several offices, as between themselves, must contribute proportionably to the loss, though each is liable to the insured for the ■entire loss, unless there is a special agreement that each shall be liable only for its proportional part. The several insurers .are regarded as if they were one, each standing as a cosurety with the other, according to the amount which he undertakes, just as if all had underwritten the same policy. To avoid circuity of action, the pro rata limitation was introduced.” 2 May on Insurance, § 484. In this State, it is unnecessary for a coinsurer to stipulate with the assured against liability for the entire loss; for it is expressly provided by law that in the event the latter “has several policies on the same property, the recovery from each company will be pro rata as to the amount insured.” Civil Code, § 2109. Reduced to its legitimate analysis, the contract between the assured and the coinsurers appears to be as follows: No one of the latter assumes the entire risk, and consequently he can in no event be called upon to pay the entire loss. They combine to carry the whole risk and to assume responsibility for any indemnity which may justly be demanded. Each bears only such a proportion of the risk as he contracts to undertake, and his pro rata of the indemnity to which the assured is entitled in case of loss should be measured accordingly. ' For instance, suppose the owner of property worth $20,000 desired to place thereon insurance to the amount ■of $15,000; and while no one of three companies' was willing to assume the whole risk, each readily agreed to share an equal proportion thereof, and thus become responsible for one third of any loss which might occur not in excess of the total amount of the insurance issued in accordance with such an arrangement. Clearly, in such a case, it could not be said that the ■contract was in its essence vicious, or violative of the policy of the law as declared by the act of 1895, which apparently seeks to bold an insurer liable to the extent of the face of the policy, — 12 — where the loss incurred is equal to or exceeds the amount therein stated, whenever he undertakes to assume alone the entire risk and exacts premiums upon that basis. Again, suppose a company, declining to assume the entire risk, agreed to undertake the liability of a coinsurer to the extent of one third of the risk, with the .express understanding that if the assured failed to comply with an undertaking on his part to procure other companies willing to assume the remaining two thirds of the risk, he himself should be considered as carrying that proportion of the same, and in no event should the company’s liability exceed its just pro rata of the losses, to wit: one third thereof, a proportion exactly corresponding with the measure of risk the company was paid to assume. Such a contract would seem to be far from iniquitous. If a perfected arrangement for coinsurance is beyond reproach, why may not parties legitimately contract with a view to bringing about an arrangement of this kind, and stipulate that the insurance issued shall be upon that basis instead of upon the plan upon which single policies are ordinarily issued? We understand the stipulation contained in-the policies now under consideration to have no other object than to evidence an agreement between insurer and assured that the former should occupy the position of a coinsurer, undertaking to assume only a fractional part of the risk, and therefore liable for no greater proportion of any loss which might occur. It is urged by counsel for the defendant in error that this stipulation is intended to operate as an evasion of the law, and is a mere subterfuge to which insurance companies have resorted. If the requirement imposed upon the assured of keeping up additional insurance to a given amount were one with which it would be impossible or extremely difficult for him to comply, there would be a great deal of force in the suggestion of counsel. But we do not understand that it is at all impracticable or difficult for the owner of property which is a fair risk to obtain insurance “of not less than 75 per cent, of the total cash value thereof.” At any rate, we are not judicially informed that such a requirement may not readily be met, and are not, therefore, in a position to say it is obviously so unrea — 13 — sonable as to indicate a purpose on the part of the insurer to place the assured in a situation where he can not comply with his obligations, in order that non-fulfilment thereof may be urged as a reason why the amount of recovery under the policy should be reduced below the sum therein specified as the limit of liability. Had the assured in the present case complied with his covenant to carry a total insurance of 75 per cent, of the value of the property insured, clearly he could claim of the insurance companies who issued policies on this express understanding and condition only their pro rata of the loss sustained. He offers no excuse whatever for his failure to comply with his solemn agreement. To allow him to profit by his breach of covenant would be to permit him to take advantage of his own wrong. He appears in this court, not as one who can lay any claim to having conscientiously tried to comply with his legal and moral obligations under a contract to which he voluntarily assented, but in the attitude of one who seeks to evade and override his agreement upon the ground that the policy of the law prohibited his entering into the same, and accordingly he is not in strict law bound thereby. This inclines us without reluctance to administer the law, as we find it, in its strict, technical sense. The act of 1895, being in restraint of the common-law right of freedom to contract, is not be extended by implication beyond its precise terms. After careful consideration, we are not prepared to hold that it com.prehends and prohibits such a stipulation as that with which we have in the present litigation been called upon to deal. Judgment reversed. All the Justices concurring, except Lu/mphin, P. J, and, Little, J., absent.