Court Opinion

ID: 9774820
Source: CourtListenerOpinion
Date Created: 2023-08-29 18:34:50.122531+00
Date Added: 2024-06-11T07:32:16.548879
License: Public Domain

George Rose Smith, Justice. This multi-party lawsuit arose as a result of there having been two concurrent fire insurance policies upon a house in Little Rock that was partially damaged by fire on December 2, 1972. The record owner, Hallie B. Nicholas, died some months later. The appellee, as the administrator of Mrs. Nicholas’s estate, brought this suit against the two insurance companies (joining as defendants the other beneficiaries ,of the policies). The chancellor’s decree held each insurer liable in the amount sued for, with penalty and attorney’s fees. For reversal each insurer contends that it is not liable to the extent found by the chancellor. The facts are not in dispute. Mrs. Nicholas originally owned the house, subject to a mortgage not in controversy. She sold the property, by an installment contract, to Edward D. Briscoe, Jr. At that time one of the insurers, Fireman’s Fund, insured the property for $10,000, naming Mrs. Nicholas and Briscoe as the insureds. That policy contained a “pro rata” other insurance clause (a term explained in Ark. Grain Corp. v. Lloyd’s, 240 Ark. 750, 402 S.W. 2d 118 [1966]). Briscoe later contracted to sell the property to Oleaster Coates. The other insurer, INA, then insured the property for $11,000, naming Briscoe and Coates as the insureds. That policy contained an “escape” other insurance clause (also explained in Lloyd’s). The fire damage amounted to $13,153.47. The two insurers took different courses. INA, without invoking its escape clause, simply paid the full amount of its policy, $11,-000, to its insureds, Briscoe and Coates, who presumably divided the money as they saw fit. Briscoe, before this suit was filed, fell behind in his payments to Mrs. Nicholas and reconveyed his interest to her. While the suit was pending Briscoe was adjudicated a bankrupt and was dismissed from the case. The other insurer, Fireman’s Fund, invoked the benefit of its pro rata clause by tendering to its insureds, Nicholas, and Briscoe, its proportionate part (10/21st) of the loss. Nicholas rejected the tender and brought this suit, successfully contending in the trial court that Fireman’s Fund is liable to him for its full $10,000 and that INA is liable to him for the remaining $3,153.47 of the loss. We first consider INA’s appeal. Here the issue is comparatively simple. An insurance policy is ordinarily a personal contract, upon which the insured alone is entitled to recover. Langford v. Searcy College, 73 Ark. 211, 83 S.W. 944 (1904). INA was therefore justified in admitting liability, waiving its escape clause, and paying the full amount of its coverage to its named insureds, Briscoe and Coates. It makes no difference that INA knew of Mrs. Nicholas’s interest in the property when it paid the loss. Whatever claim Mrs. Nicholas might have asserted against INA was necessarily derived from Briscoe and was extinguished when INA paid Briscoe in full. Mrs. Nicholas could not claim the benefits of Briscoe’s INA policy without also being subject to its burdens. Nicholas also asserts an equitable lien against the proceeds of the INA policy, but that also was a matter between Mrs. Nicholas and Briscoe. It is argued that this lien theory is supported by the presence of a standard mortgage clause in the INA policy. That clause, however, was never activated, because no mortgagee was named in the policy (as the clause required). We conclude that the chancellor erred in holding INA liable to Nicholas. As to Fireman’s Fund, the pivotal question is whether the INA policy constituted other insurance within the meaning of Fireman’s Fund’s pro rata clause. Such double insurance exists when the two policies cover the same interests in the same property, against the same risks, and for the benefit of the same person. Couch on Insurance 2d, § 37:1394 (1962). Here the questions are whether the two policies covered the same interests for the benefit of the same person. Briscoe’s insured interest under the two policies was evidently the same. What he purchased from Mrs. Nicholas is what he sold to Coates — nothing more, nothing less. That he was paying Mrs. Nicholas and being paid by Coates did not divide his estate into two ownerships. It must be remembered that the purpose of the pro rata clause is to protect the insurer against the hazards of overinsurance. Such a hazard would have existed if Briscoe had insured the full value of his estate with two different insurers. By the same reasoning the two policies were for the benefit of the same person — Briscoe. This particular point seems to have arisen very infrequently, but the cases are uniform in holding that there is double insurance where the same person is an insured in each policy. Horridge v. Dwelling-House, Ins. Co., 75 Iowa 375, 39 N.W. 648 (1888); Pitney v. Glen’s Falls Ins. Co., 65 N.Y. 6 (1875); Mussey v. Atlas Mut. Ins. Co., 14 N.Y. 79 (1856). Again the hazard of overinsurance would exist if Briscoe could recover in full under each policy. As a matter of fact, owing to INA’s waiver of its escape clause, the two insurers will pay $11,000 plus $6,263.56, a total that exceeds the physical damage of $13,153.47. If the Nicholas estate sustains a loss it will be attributable .o Mrs. Nicholas’s not having taken out a policy by herself, instead of with Briscoe, and to the latter’s insolvency after he was paid by INA. Needless to say, principles of law that reach a sound result with respect to solvent litigants cannot be abrogated simply because the fortuitous intervention of insolvency may cause a hardship. Reversed and remanded for the entry of a decree in harmony with this opinion. Byrd, J., dissents. Fogleman, J., not participating.