Home Ins v. Hartshorn

Smith, C. J., delivered, the opinion of the court. This is an appeal to settle the principles of the case from a decree sustaining a demurrer to a cross-bill. The Tallahatchie Compress & Storage Company filed an original bill, in which it alleges in substance that the appellee has recovered a judgment against it for thirteen thousand, one hundred and ninety-one dollars and fifty-four cents for the destruction of certain cotton by fire while stored in the complainant’s compress and owned by the appellee; that the appellant, the Home Insurance Company, claims to be entitled to a portion of the amount due the appellee by the compress company on this judgment, and that the company is ready and willing to pay the money to the one entitled thereto, and prayed that both the appellant and the appellee be summoned to contest with each other for the right to the money due by the compress company on the judgment. Summons was issued accordingly. The Home Insurance Company filed an answer admitting the allegations of the original bill, and a cross-bill against the appellee, from which the following facts appear: In October, 1917, the appellant issued an insurance policy and a cotton certificate of insurance to the appellee in the sum of twelve thousand dollars on cotton in bales owned by the appellee and stored with the compress company. The cotton covered by this policy was destroyed by fire while stored with the compress company, and thereafter the ap-pellee executed and filed with the appellant a proof of loss as required by the policy and certificate, in which proof of loss the actual cash value of the cotton insured was not set forth in the space provided therefor, but in lieu thereof was written the words: “Compromise settlement six thousand six hundred dollars. Assured to have all salvage.” The appellant’s agent at Greenwood, Miss., then executed and delivered to her a draft on the appellant for the sum of six thousand, six hundred dollars, for which the appellee executed a receipt setting forth: [293] That it “when paid, will be in full satisfaction of all claims and demands for loss and damages by fire which occurred on the 13th day of March, 1918, to the property described in policy No; Ctf. No. 290 issued at the Greenwood, Miss., agency of said company, and in consideration of said payment the policy is hereby canceled and surrendered.” This draft was indorsed and collected by the appellee, and ¿Iso set forth that it would, when paid — “constitute full satisfaction of all claims and demands for loss and damage by fire which occurred March 13, 1918, to property described in policy No. Gtf. No. 290 issued at the Greenwood, Miss., agency and said policy is hereby canceled and surrendered.” After this settlement between the appellant and the ap-pellee had been consummated, the appellee sued the compress company for the value of the cotton burned and recovered against it the judgment hereinbefore referred to. See Tallahatchie Compress & Storage Co. v. Hartshorn, 125 Miss. 662, 88 So. 278. One of the provisions of the insurance policy is: “If this company shall claim that the fire was caused by the act or neglect of any person or corporation private or municipal this company, shall on payment of the loss'be sub-rogated to the extent of such payment to all right of recovery by the insured for the loss resulting therefrom and such right shall be assigned to this company by the insured on receiving such payment.” The appellee’s right of recovery against the compress and storage company for the burning of the cotton was not assigned to the appellant, but we do not understand counsel for the appellee to contend that, by reason thereof alone, the appellant will be barred of the right to participate in the money due by the compress and storage company on the judgment recovered by appellee against it. A demurrer interposed by the appellee to the appellant’s cross-bill was sustained, and this appeal was granted to settle the principles of the case. The several grounds of [294] the demurrer will not be herein specifically get forth, but they raise, among other questions; those hereinafter discussed. The ground upon which the appellant relies for a recovery is that, on the payment to the appellee of the six thousand six hundred dollars under the insurance policy, it became subrogated by reason thereof to the right of the appellee to recover against the compress and storage company for the loss of the cotton to the extent of the six thousand six hundred dollars so paid by it. The right of the- appellant to 'be subrogated to the ap-pellee’s claim for damages for the destruction of the cotton covered by the insurance policy being expressly provided for in the policy, its right thereto must be measured by and depends solely on the terms of' the clause of the policy dealing therewith and hereinbefore set forth. One .of the requirements of this clause of the policy is that: “If this company shall claim that the fire was caused by the act or neglect of any person . . . this company shall on payment of the loss be subrogated,” etc., — the meaning of which necessarily is .that the claim must be made to the insured at or before the time of the payment to the insured of the loss under the policy, and the reason for the requirement probably is that the insured may have an opportunity of taking into consideration when settling with the insurer the fact that the damages to be recovered from the person by whose fault the property was destroyed will go to him or to the insurer as the case may be. If such a claim can be made at any time, then any provision therefor in the policy would be useless, for the mere filing of a suit by the insurer against the person whose act or neglect caused the fire would be a sufficient claim that the fire was so caused. In the language of the court in Fire Association of Philadelphia v. Schellenger, 84 N. J. Eq. 464, 94 Atl. 615: “It is plain from a reading of this part of the contract that the parties to it intended that the right of the insurer, in case it paid the loss should not be an absolute, but a [295] conditional one; the condition being that the insurer should ‘claim that the fire was caused by the act or neglect’ of some third person. We think it equally clear that the agreement contemplates that such claim should be made by the insurer to the insured at or before the time when it paid the loss. This appears from the fact that by its terms the right to subrogation, if it comes into existence at all, becomes complete when the payment is made. The language used is ‘This company shall on payment of the loss be subro-gated,’ etc., ‘and such right shall be assigned-to this company by the, insured on receiving such payment.’ ” The cross-bill should, but does not, allege that such-a claim was made to the insured at or before the time when the loss was paid. The amount paid by the insurance company under- its policy and certificate was about one-half of the loss sustained by the insured, and it is clear from the recitals of the proof of loss, the dráft by which the payment was made, and the receipt therefor that the payment was the result of a compromise settlement in which it was expressly agreed that the insured was “to have all salvage,” and the word “salvage” in the law of fire insurance, whatever it may mean in other connections, includes damages paid’ by third person for the loss of the property covered by an insurance policy. 5 Joyce on Insurance (2 Ed.), 5880; Freed v. Am. Fire Ins. Co., 99 Miss. 72, 43 So. 947, 11 L. R. A. (N. S.) 368, 122 Am. St. Rep. 307 ; Phoenix Ins. Co. v. Erie & Western Trans. Co., 117 U. S. 312, 6 Sup. Ct. 750, 29 L. Ed. 873. The appellée, therefore, by express agreement of the appellant became entitled to the whole amount that the compress and storage company might be called on to pay for the loss of the cotton, and consequently it Avill be unnecessary for us to decide what effect this compromise agreement, in event it had omitted all reference to. the salvage, would have had upon the right of the appellant to subrogation under the terms of the policy. There is one other question presented which may become important in event the appellant should amend its [296] cross-bill so as to eliminate tbe questions hereinbefore discussed, and that is that the appellant in no event will be entitled to participate in the money to be paid by the compress and storage company under the judgment here in question, unless the sis thousand six hundred dollars paid by it to the appellee and the amount of the judgment, less the expense necessarily incurred by the appellee in obtaining it, exceeds the value of the cotton burned, in which event the appellee will have the right to participate in the fund to the extent of such excess. And since, in order for a complainant to recover, his right so to do must affirmatively appear from the bill of complaint, the appellant’s cross-bill should, but does not, contain an allegation to the effect that the amount due by the compress and storage company on the judgment after deducting therefrom the expense incurred by the appellee in obtaining it, when added to the six thousand six hundred dollars paid the appellee by the appellant, will be in excess of the value of the cotton burned. Affirmed and remanded.