Case Name: Munn v. National Fire Insurance Co. of Hartford, et al.
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1959-10-26
Citations: 237 Miss. 641
Docket Number: No. 41206
Parties: Munn v. National Fire Insurance Co. of Hartford, et al.
Judges: McGehee, G. J., and Hall, Lee, Kyle, Holmes and Arrington, JJ., concur.
Reporter: Mississippi Reports
Volume: 237
Pages: 641–660

Head Matter:
Munn v. National Fire Insurance Co. of Hartford, et al.
No. 41206
October 26, 1959
115 So. 2d 54
Bobby J. Garraway, Purvis, Blass & Parsons, Wiggins, for appellant.
Watkins & Eager, Jackson, for appellees.
APPELLANT IN REPLY.

Opinion:
Roberds, P. J.
The main question to be determined on this appeal is the extent of the powers of appraisers under a windstorm insurance policy. Is that power limited to an ascertainment of the damage to the property or does it include the power on behalf of the appraisers to determine the cause of the damage to the property? We have concluded that the appraisers have no power to determine the cause of the damage. Their power is limited to the function of determining the money value of the property which may be damaged by the storm.
The question arises under the following circumstances: On April 4, 1957, the two appellee insurance companies had issued two fire and storm policies upon the residence of appellant Munn in the total sum of $4,000, and on his barn in the sum of $1,500 and on his chicken houses in the sum of $200. On the morning of said date of April 4, a violent storm occurred which did much damage to the property covered by the policies. Munn and the insurance companies could not agree upon the amount of the damage. Appraisers were duly appointed to estimate the damage under the standard provision contained in fire and storm policies. The appraisers made a report fixing the damage at $783.10 to the residence, $65 to the barn and $200 to the chicken houses. Munn called the attention of the appraisers to the fact that the walls of his residence were leaning and twisted and he requested that a money value he placed by the appraisers upon that loss. The appraisers refused to do that. The report they made did not include any damage to said walls. They refused to estimate that damage, not because the damage did not exist, but because in their opinion the damage to the walls was not caused by the windstorm.
Munn filed two hills in the chancery Court attacking the appraisal. He said the appraisers had no right to determine the cause of the damage; that the province of the appraisers was simply to ascertain and fix damages and not to determine what caused the damage. The two cases were combined and tried as one in the chancery court. On the trial testimony was introduced by both parties bearing upon whether or not the leaning and twisting of the walls of the dwelling resulted from the windstorm or from some other cause. The chancery court did not decide that question. He said he was bound by the report of the appraisers. His opinion contains this statement:
"The court also specifically finds that the report of the appraisers and umpire of an estimate to repair the premises, did not include an estimate to repair the leaning of the buildings.
"The court further specifically finds that the question of the building leaning was considered by the appraisers, but their conclusions, as a whole, was that the leaning was not the result of windstorm damage on April 3d or 4th, 1957."
He further found that the parties and the court were bound by the report of the appraisers and he did not determine or undertake to determine whether the damage to the walls of the dwelling was caused by the windstorm or some other force. This presents the main question involved on this appeal and that is whether or not it is the function of appraisers to determine what caused the damage.
The provision in the policy for the appointment of appraisers is as follows: "Appraisers shall then appraise the loss, stating separately actual cash value and loss to each item." It further provides that the award of the appraisers ' ' shall determine the amount of actual cash value and loss. " It is also provided that the appraisers shall take an oath that they will appraise the value of the damage to the property and in their report they shall state that they have done that. It is noted that nowhere in the standard form for submission to appraisal is any power vested in or conferred upon the appraisers to determine the cause of the loss, the value of which they shall appraise.
The appraisers are not arbiters. They have no power to arbitrate disputes between the property owner and the insurance company other than to value the property damage.
In Harrington v. Agricultural Ins. Co., 179 Minn. 510, 229 N. W. 792, the Court said: " the right of the insurer to have a judicial determination of liability includes the right of a judicial determination of the coverage of the policy. Itasca Paper Co. v. Niagara Fire Ins. Co., 175 Minn. 73, 220 N. W. 425."
In another Minnesota case, where the appraisers undertook to determine the cause of the loss, the Court said: "They also found, apparently, that the loss was not covered by the policy. The latter finding was not within their province and mere surplusage. The finding of appraisers on question of coverage, which would be a decision on a question of law, would not be final." The reporter deduced the following principle from the facts, issues and opinion in that case: "The coverage of an insurance policy against damage by fire or explosion is a question of law not within the province of a board of arbitrators, selected as provided by statute and the contract of insurance, and a finding by the board as to the amount of loss and its coverage by the policy will, as to the coverage, be regarded as surplusage." Mork v. Eureka-Security Fire & M. Ins. Co., 230 Minn. 382, 42 N. W. 2d 33, 28 A. L. R. 2d 987.
In 45 C. S. J., Insurance, Sec. 1110, this statement appears: ' ' stipulations for submissions to ascertain the 'amount of loss or damage' are to be construed to signify a proceedings to appraise and estimate the damage to the property described, but not to embrace the question of ownership or any other matter which goes to the root of the cause of action."
In Hartford Fire Insurance Co. v. Jones, 235 Miss. 37, 108 So. 2d 571, appears a splendid discussion of the effect of an appraisal in Mississippi. We quote the following from that opinion:
"Both sides have briefed this case on the theory that the report of the appraisers constituted an award under an arbitration agreement. It seems that all of the lawyers and the court completely overlooked the fact that the report of the appraisers is not an arbitration award. In 3 Am. Jur., Arbitration and Award, Sec. 3, at pp. 830-831, the distinction between the two is made quite clear. The report of appraisers fixing the amount of a fire loss is not an arbitration and award. We quote from the text cited: 'Arbitration is sometimes confused with other forms of procedure which have some points of similarity. For example, agreements in, or separate from, contracts, leaving to the decision of third persons questions of price, value, amounts, quantities, or qualities, are not, strictly speaking, submissions to arbitration, nor are suck third persons properly called arbitrators. Some of these so-called arbitrations are mere appraisements; others have some, many, or nearly all of the characteristics of arbitrations. All of them, in one or more particulars, differ from arbitrations. Appraisement, in particular, is perhaps most often confused with arbitration. While some of the rules of law that apply to arbitration apply in the same manner to appraisement, and the terms have at times been used interchangeably, there is a plain distinction between them. In the proper sense of the term, arbitration presupposes the existence of a dispute or controversy to be tried and determined in a quasi judicial manner, whereas appraisement is an agreed method of ascertaining value or amount of damage, stipulated in advance, generally as a mere auxiliary or incident feature of a contract, with the object of preventing further disputes, rather than of settling present ones. Liability is not fixed by means of an appraisal; there is only a finding of value, price, or amount of loss or damage. The investigation of arbitrators is in the nature of a judicial inquiry and involves, ordinarily, a hearing and all that is thereby implied. Appraisers, on the other hand, where it is not otherwise provided by the agreement, are generally expected td act upon their own knowledge and investigation, without notice of hearings, are not required to hear evidence or to receive the statements of the parties, and are allowed a wide discretion as to the mode of procedure and sources of information.' We covered this point in the case of Home Insurance Company v. Watts, 91 So. 2d 722, 726, not yet reported in the State Reports.
"The agreement which was signed for an appraisal is called ' Memorandum of Appraisal ' and a careful reading of the entire agreement shows that in no place is the agreement, or the action of the appraisers thereunder, referred to as an arbitration and award, and in fact it is not an arbitration and award agreement but is purely an agreement for determining the value of the property destroyed."
The able chancellor did not find, or undertake to find what caused the walls of the dwelling to twist and lean, he said he was hound by the conclusion of the appraisers that the damage to the walls was not caused by the storm. That involved the fundamental question of liability of the insurance companies. If the storm caused the damage, the insurance companies are liable. If some force or agency other than those mentioned in the policy caused the damage then the insurance companies are not liable. If appraisers have the power to look at the property and determine the cause of the damage, in addition to the extent thereof, they possess a power to arbitrarily say whether the insurance company is liable. That is just what was done in the case at bar. The appraisers, upon a mere cursory inspection of the premises, allowed nothing for damage to the walls, not because they were not damaged but because they thought the storm did not cause the damage. This was done without any kind of hearing. There was no taking of testimony or adjudication by the appraisers in a legal manner of the question at issue. That would simply deprive an owner of the property of his constitutional rights to have determined in a court, of justice the liability of an insurer.
Under Section 24 of the Constitution of Mississippi such a procedure would be unheard of here.
The undisputed proof in this record is that it would take at least $6,000 to repair the injury to the walls of this dwelling. The great weight of the testimony is that the damage to the walls was caused by the storm. Munn introduced six witnesses on that question. He himself testified that the storm did cause the walls to lean. Whorley, an engineer for the Farmers Home Administration, examined the walls before and after the storm. They were not leaning before but were leaning after the storm occurred.
Sumrall, a neighbor, testified he was familiar with the house, that he visited it a few days prior to the windstorm and the walls were not then leaning. After the storm they were leaning.
Hatten, county tax assessor, testified he had been in the house many times, before the storm and after the storm, and that the walls were not leaning before but were leaning after the storm occurred.
Robbins, a carpenter and contractor, testified it would cost at least $6,000 to repair the walls. He was the only witness who undertook to fix a dollar and cent cost of repair.
Sullivan, a carpenter, noticed the leaning condition of the walls two or three days after the storm, but he did not undertake to fix a price.
The insurance companies introduced three witnesses. Nelson H.,Webb was an insurance adjuster and Munn's claim was referred to him. He had never seen the house before the storm. He said he examined it the day after the storm. The walls were leaning but he did not think the storm caused them to lean. He said he observed the doors were scraping the floors and had indented the floors about one-eighth of an inch, from which he concluded the damage was not done by the storm. He said he was on the premises only a short time.
Reeves was the appraiser selected by the insurance company. He examined the dwelling after the storm. He said some of the doors were scraping the floors and that the paint in the cracks of the walls looked like old paint. From that he concluded the storm did not cause the damage.
White, the other witness for the insurance companies, was the umpire who had been selected by the appraisers. He concluded the storm did not produce the damage to the walls because the walls appeared to be "pulled loose." He also said there was old paint in the cracks of the walls.
It is not our duty to pass upon the weight of the testimony under the proceeding herein, but we have briefly outlined the evidence as bearing upon the action of the chancellor in concluding he was bound by the appraisal.
Of course, it is elementary law that an appraisal is presumptively correct, but it is also the law that the court may set aside the appraisal where the award is so grossly inadequate or excessive as to amount to a fraud in effect, although fraud is not charged, or where the appraisers were without authority, or where there is a mistake of fact or to prevent injustice. 29 Am. Jur., Insurance, Sec. 1251, page 934; Harrington v. Agricultural Ins. Co., supra; Mork v. Eureka-Security Fire & M. Ins. Co., supra.
The chancellor should have judicially determined what force caused the walls to lean and twist. That was not a question for the appraisers to decide. If that damage was the result of the storm, then the appraisers should have been directed to estimate the value of the loss occasioned by the walls being damaged.
Reversed and remanded.
McGehee, G. J., and Hall, Lee, Kyle, Holmes and Arrington, JJ., concur.