Court Opinion

ID: 8301014
Source: CourtListenerOpinion
Date Created: 2022-10-17 11:12:47.489151+00
Date Added: 2024-06-11T16:44:19.639675
License: Public Domain

OK PETITION POR A REHEARING.
The petition makes tbe point that tbe opinion upon tbe subject of tbe penalty is in conflict with tbe case of Thompson v. Interstate Life & Accident Insurance Co dcided by this court at its recent Knoxville term, and reported in 128 Tenn., 526, 162 S. W., 39. A comparison of tbe two cases will so readily show tbe absence of conflict that we deem it unnecessary to make any comment on tbe point further than to say tbe opinion in that case shows there was a demand and a refusal of that demand within sixty days. In tbe case before us, it does not appear that any demand was made after tbe obligation of tbe company to pay bad accrued. There was a demand, whether formal or not in tbe sense of the statute does not appear, to pay the amount fixed by tbe arbitrators, but tbe companies’ failure to comply with that demand was justified by tbe subse*72quent decree of the chancery court setting aside the award on the grounds stated supra, as to which there was no appeal. So it is not shown that the insurers remained in default for the period of sixty days after formal demand made to pay a loss duly fixed on them pursuant to the terms of their contracts; nor that they refused to pay within such sixty days.
It is urged by the complainant that the construction we have given the statute affords litigants against insurance companies no relief. This suggestion is based, as we think, on a misconception of the purpose of the statute. It is a penalty statute, and must be strictly construed. The demand provided for in the statute is intended to operate as a fair warning to the insurer that the penalty will be claimed, on failure to pay within sixty days. It is not improper or unjust that such warning should be required. This requirement does not have any bearing upon the right of the insured to enforce the contract itself. Immediately upon the maturing of the policy under its terms, the arising of the duty to pay, the insured may bring suit to enforce the contract. The penalty statute gives an additional right. Its purpose was to supersede the necessity of suit, or, in case suit should finally have to be brought as a result of the delinquency of the insurer, then to indemnify the insured against delay interposed and defense made in bad faith; the underlying thought being that the insurers on formal demand so made would, noting the warning, thereby be induced to pay the loss without suit, in the absence of some real and bona fide *73defense. Is it not better that the insured should in this simple manner hasten the payment of the loss within two months than that suit should be brought immediately on the maturity of the policy, and then, that the insured should be compelled by the necessary delays of litigation to wait many months, or a year, or longer? Is the insured not fully protected by the right to recover the penalty, at the expiration of such sixty days, if the failure or delay of the insurers has not been in good faith? True it is that the mere failure of the insurers to pay, for the sixty days referred to, would not of itself, as suggested supra, conclusively fix the penalty, because there might be circumstances which would show that the delay or failure or refusal to pay was not in bad faith, even though the insurer should ultimately be cast in the suit; but certainly the burden would be on the insurer to make this appear.
It is insisted that the insurance companies in the case before us refused to pay before the obligation to pay matured, and that such refusal was a waiver of the right to have a formal demand made upon them as a preliminary to a claim for the penalty. The facts elready stated sufficiently show that this contention is not well based. There was a fire. The companies did not deny liability. There was no controversy except as to the amount of the loss. The insurers and the complainant endeavored to ascertain the amount by inspection and by inventories. They could not ag’ree. Arbitration was then demanded and agreed to. An award was filed. Complainant demanded payment of *74the award. The companies answered by a bill to set aside the award because not in compliance with the arbitration agreement between the parties, and succeeded in obtaining that relief, and complainant acquiesced in this. In the meantime complainant filed a cross-bill to recover on the award, and, in the alternative, on the policies. She failed on the first and succeeded in the second; but no formal demand was ever made for the payment of the policies, irrespective of the award, prior to the filing of the cross-bill. If it was the contention of complainant that the' companies were liable irrespective of the arbitration proceedings, formal demand on that basis should have been made before action brought and the pleadings framed accordingly.
Petition overruled.