Moss v. Union Mutual Insurance

J. H. G-illis, J. On May 13,1964, defendant Union Mutual Insurance Company of Providence issued a 3-year “scheduled property floater” to plaintiffs Sol and Ida Moss covering specific property listed in the personal articles schedule endorsement. On August 26, 1964 this endorsement was amended to include 1 lady’s diamond ring which had been purchased by Sol Moss, who gave it to his son. The younger Moss then gave it to Linda Epstein, whom he subsequently married. In May, 1966, on Mother’s Day, Linda discovered a large chip in the diamond and on the following day Sol Moss filed a claim which was denied by defendant. Suit was instituted in the common pleas court for the city of Detroit, which resulted in a nonjury verdict for plaintiffs on October 13, 1966. Defendant’s motion for judgment notwithstanding the verdict or for a new trial was denied November 14, 1966. The questions raised on appeal will be discussed seriatim. Scope of Review. Plaintiffs first contend that “defendant-appellant cannot for the first time on appeal argue that plaintiff-appellees failed to sustain pecuniary loss and thus have no insurable interest, when defendant-appellant failed to bring this issue to the attention — 337 — of the trial court.” Specifically, plaintiffs object to introduction at this juncture of the element of lack of “pecuniary loss”; they claim that this represents a new issue. Plaintiffs further state that it would be “manifestly unfair for this Court to discuss and determine questions raised here for the first time.” We agree that as a general rule issues not presented to the trial court are not proper subject matter for appellate consideration. The rule urged by plaintiffs is not applicable in this case, since lack of insurable interest was set up as an affirmative defense in defendant’s answer and was again advanced by defendant in its motion for judgment notwithstanding the verdict or for a new trial. The phrase “pecuniary loss” does not signify a concept separate and distinct from insurable interest. Rather, the risk of direct pecuniary loss by damage to or destruction of the described property is the very definition of insurable interest. Crossman v. American Insurance Company of Newark, N. J. (1917), 198 Mich 304. Thus we hold that defendant does not by the use of this phrase inject a novel issue into this case. Waiver. A provision of this insurance policy stated: “This endorsement covers only with respect to such and so many of the following classes of property as are indicated by a specific amount of insurance applicable thereto, and a premium charged therefor, which property is owned by or in the custody or control of the insured and members of the insured’s family of the same household.” It is conceded that Linda and her husband were not members of the “insured’s family of the same household.” — 338 — When the ring was listed in the endorsement on the policy in August of 1964, a written statement of appraisal was sent by a jeweler to plaintiffs who contend that the statement, which indicated the wearer of the ring to be Linda Epstein, became part of the policy. Additionally it was contended that defendant had knowledge that Linda Epstein was not “of the same household” with plaintiffs through oral communications with defendant’s soliciting agent. The thrust of plaintiffs’ argument is that the defendant could and did waive the restriction set out above. The question of waiver of lack of insurable interest in property was settled early in Michigan by Agricultural Insurance Company of Watertown, New York v. Montague (1878), 38 Mich 548, in which Mr. Justice Cooley wrote at p 551: “The argument was that, as the company, through its agent, had knowledge of all the facts, and still granted the policy, the issuing of the policy was a waiver of all objection on that score. This view was accepted by the court, and the jury was instructed accordingly. If the instruction was correct, it is manifest that any person may obtain insurance upon property without any right in it whatsoever; he has but to disclose the facts, and the policy, though only a wager policy, will be as legal as any other. But such a doctrine is at war with the fundamental principles of insurance, which require that a person shall have an insurable interest before he can insure: a policy issued when there is no such interest is void, and it is immaterial that it is taken in good faith and will full knowledge. The policy of the law does not admit of such insurance, however willing the parties may be to enter into it. The doctrine of waiver has obviously nothing to do with such a case.” — 339 — This ruling of the Montague Case was followed with respect to life insurance in Sun Life Assurance Company of Canada v. Allen (1935), 270 Mich 272. See, also, 4 Appleman, Insurance Law and Practice, § 2122, p 19; Patterson v. Durand Farmers Mutual Fire Ins. Co. (1940), 303 Ill App 128, 138 (24 NE 2d 740, 744). Existence of Insurable Interest. We are finally brought to the question of whether or not plaintiffs had an insurable interest at the time of the loss. Defendant contends that they did not. The leading Michigan case on what constitutes an insurable interest in property is Crossman, supra, called by Appleman “one of the finest discussions and analyses of leading cases.”* The opinion concludes in this manner, stating the test to determine the existence of an insurable interest: “The unrippled current of authority is to the effect that title to, or lien upon, property, is not essential to an insurable interest. Measured by the standard fixed in the cases quoted from, and cited, Did Craig have an insurable interest in this property? He had an option upon this property, a right to buy it, an enforceable right, for which he paid over $2,500. Was that right of more value with the building standing than with the building destroyed? Would he suffer direct pecuniary loss in the value of his right by its destruction? Would he be damaged pecuniarily by the loss of the building?” Crossman v. American Insurance Company of Newark, N. J., supra, at p 311. — 340 — We thus must determine whether plaintiffs bore a risk of “direct pecuniary loss” with respect to the ring. In Macarty v. Commercial Insurance Co. (1841), 17 La 365 (08) (9 La 223 [NS] [1854 reprint]), plaintiff insured certain real property against fire and later gave the land to another, the only qualification on the gift being that the donee could only dispose of the land by last will and testament. Thereafter a fire occurred and plaintiff sought recovery on the policy. Recovery was denied on the basis of lack of insurable interest at the time of the loss, the court stating at p 369 (p 226 NS): “A policy of insurance against fire is a personal contract of indemnity with the insured; if the latter parts with all his interest in the property before the loss happens, the policy becomes void unless it has been assigned to the new proprietor with the consent of the underwriters.” Facts even more closely resembling those involved in this appeal are found in Ludeau v. Phoenix Insurance Co. (1947, Tex Civ App), 204 SW2d 1008. A donor of an engagement ring sought recovery under an “all risks” policy when, after the gift, the ring was stolen from the donee, his fiancee. The claim was resisted by the insurer for lack of insurable interest. The court sustained the insurer, holding that even though the gift was “conditional,” the donor at the time of the loss had no present insurable interest in the engagement ring. In this case, plaintiffs have no title to the ring; nor do they show any reversionary, security, or other interest in it which might subject them to “'direct pecuniary loss”, by its damage or destruction. Logic, policy, and precedent militate against — 341 — the judgment of the common pleas court; it must therefore be reversed and the action dismissed. Costs to appellant. Quinn, J., concurred with J. H. Gtllis, J. Footnotes [*] 4 Appleman, Insurance Law and Practice, § 2123, p 22, footnote 30.