Phœnix Insurance v. Zlotky

Oldham, C. The firm of Zlotky & Kurnick were engaged in merchandise at Fremont, Nebraska, and had insurance on their stock of goods for the aggregate amount of -¶12'000, in policies for different amounts, in the different insurance companies named in this cause of action as plaintiffs in error. The stock of goods was subsequently wholly or partially destroyed by fire. After the fire these various policies were assigned in writing by the firm to the First-National Bank of Fremont, to secure an indebtedness owing to that institution. A dispute arose as to the amount of loss, which, on demand 'of the companies, the holders of the policies refused to arbitrate. Suit was subsequently instituted on these various policies of insurance, and plaintiffs in the court below had judgment against each of the insurance companies, and these jndg585 ments, in the aggregate, amounted to the sum of $7,200; and the companies bring error to .this court. Complaint is made in the brief of the insurance companies as to the form of the assignment of the various policies to the First National Bank of Fremont. The assignment was in writing, signed bj the members of the firm, and was made for the alleged purpose of securing an indebtedness of the firm to the bank, and for all that might be incurred in the future, before the insurance was actually collected. We see nothing wrong with the assignment, nor do we understand how the rights of the insurance companies were in any manner affected by it. This assignment is not argued at any length in the brief, and is probably not relied upon seriously by plaintiffs in error. The only question arising in the case that we are seriously urged to examine is that the refusal of the assured to comply with what is termed the “appraisal clause” in the different policies of insurance, should abate this suit. The different policies involved in this controversy are written upon what is known as the “New York Standard Form,” and each contains, among other things, the following provisions:' “This company shall not be liable beyond the actual cash value of the property at the time any loss or damage occurs. * * * In the event of disagreement as to the amount of the loss the same shall, as above provided, be ascertained by two competent and disinterested appraisers, the insured and this company each selecting one, and the two so chosen shall first select a competent and disinterested umpire; the appraisers together shall then estimate and appraise the loss, stating separately sound value and damage, and failing to agree, shall submit their differences to the umpire; and the award in writing of any two shall determine the amount of such loss. * * * No suit or action on this policy, for the recovery of any claim, shall be sustainable in any court of law or equity until after full compliance by the insured with all the foregoing requirements.” [586] It is conceded at the outset by counsel for the insurance companies that if the agreement had been for the arbitration of the whole question of liability, it would be against public policy and void; hut it is contended that a different rule applies when the agreement is for the arbitration of hut one question, i. e., the amount of damage. Numerous cases are cited from both the state and federal courts tending to support this contention; the reasoning of all the cases being founded on the leading case of Scott v. Avery, 5 H. L. Cas. [Eng.], 811, — a decision rendered in 1856. The keynote of this decision was sounded by Lord Chancellor Oran worth in one of the majority opinions, when he said, referring to the agreement to arbitrate the amount of the loss, that it was the intention that no right of action should accrue until the amount of loss had been ascertained according to the mode pointed out in the policy, and, — using his exact language, — “that the right of action should be, not for what a jury should say v/as the amount of the loss, but for what the persons designated in that particular form of agreement should so say.” Long after the announcement of the opinion in Scott v. Avery, supra, the people of the state of Nebraska adopted a constitution containing a Bill of Rights, enumerated among which were that “the right of trial by jury shall remain inviolate,”* and that “all courts shall be open, and every person, for any injury done him in his lands, goods, person, or reputation, shall have a remedy by due course of law,”† etc. After the adoption of our constitution a question similar to the one in the case at bar- was presented to this court in the case of German-American Ins. Co. v. Etherton, 25 Nebr., 505; and the rule was announced that “a provision 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 rule has been followed with [587] approval in Union Ins. Co. v. Barwick, 36 Nebr., 223; Home Fire Ins. Co. v. Bean, 42 Nebr., 537; National Masonic Accident Ass’n v. Burr, 44 Nebr., 256, 258; Insurance Co. of North America v. Bachler, 44 Nebr., 549; Home Fire Ins. Co. v. Kennedy, 47 Nebr., 138. And in the late case of Schrandt v. Young, 62 Nebr., 254, 266, it was said by Pound, 0.: “Whatever distinction may be made elsewhere between arbitration generally and arbitration as to damages only, it is well settled in this state that a provision in a contract requiring arbitration, whether of all disputes arising under the contract, or only of the amount of loss or damage sustained by the parties thereto, will not be enforced, and that refusal to arbitrate is not available to the parties in an action growing out of the contract.” We can not agree with counsel for the insurance companies that this long line of decisions rests on a mere dictum of the court in the case of German-American Ins. Co. v. Etherton, supra, and that the question now at issue was not properly before the court in that case. It appears from the statement contained in the opinion in the last-named case that the suit was brought on a policy of insurance covering a house and contents, which contained a condition similar to the so-called appraisal clauses in the policies now before us. That decision was rendered before the valued-policy law was adopted in this state, so that there would be the same reason for arbitrating the value of the house at that time that would now exist for the arbitration of the value of the stock of goods destroyed by fire. The right of appraisal as a condition precedent to the right of action in a court of law, was an issue as well defined in German-American Ins. Co. v. Etherton, supra, as it is in the case now pending; and the rule in that case, instead of announcing a mere dictum, is a solemn adjudication of a question then in issue before the court. We have no disposition to change a rule of this court which is in harmony with the genius and spirit of our constitution, and which has entered into every contract of insurance made in this state since its [588] announcement, sixteen years ago, merely for the purpose of putting ourselves in closer touch with the House of Lords. There is no better reason for upholding a contract that in advance ousts the jurisdiction of a court of law from finding the amount of damage in a dispute between assured and insurer, than there would be for upholding contracts ousting the jurisdiction of courts on any other question that might arise between them; and whenever we say that the jurisdiction of courts may be contracted away in advance on any question, we open a leak in the dyke of constitutional guarantees which might some day carry all away. It is therefore recommended that the judgment of the district court be affirmed. Pound, C., concurs in separate opinion. By the Court: For the reasons stated in the foregoing-opinion, the judgment of the district court is AFFIRMED. Footnotes [*] Constitution, art. 1, sec. 6. [†] Constitution, art. 1, sec. 13.