Court Opinion

ID: 6911988
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:26:07.520767+00
Date Added: 2024-06-11T16:06:32.207336
License: Public Domain

O’CONNELL, C. J.,
dissenting.
Mr. Martin, plaintiff’s agent, testified that when he called the Van Doren Agency, which was the agent for defendant Oregon Automobile Insurance Company, he “explained that Eoss and Millsap wanted the equipment immediately and that he wanted a *303verbal binder on it, and also TEE to be named as additional insured.” When plaintiff received a copy of tbe binder it immediately replied by letter, stating that “We need a 10-day cancellation clause and also an additional insured clause naming Transportation Equipment Rentals, Inc. as additional insured to attach to this binder.” This letter was mailed before the occurrence of the accident which resulted in the destruction of the vehicle. The letter would tend to confirm Martin’s assertion that TER was to be covered by the binder as an additional insured.
Defendant’s agent testified that he understood that plaintiff was selling the equipment to Ross and Millsap and that TER was to be named as mortgagee-payee. However, the trial court could have rejected this version of the transaction and accepted plaintiff’s testimony as a true statement of the transaction.
But even if we accept defendant’s contention and treat plaintiff as a mortgagee-payee, the binder reveals an intent on the part of the insurer to include plaintiff as a loss payee under the policy. As a loss payee plaintiff would have a derivative right to collect under the policy to the extent that Ross and Mill-sap would be entitled to recover from defendant insurer.
The majority opinion takes the position, however, that plaintiff could have no derivative right because when there is a bailment, the bailee cannot recover an amount exceeding his actual interest in the property (relying upon 3 Richards on Insurance § 503, 1613 (5th ed 1952)).
Leaving aside the question of the bailor’s right to recover from the bailee a portion of the proceeds representing the bailor’s interest, there is ample an*304tliority for the proposition that the bailee may recover the full value of the property insured in spite of his limited interest.① Since the insurer has received a premium predicated upon the obligation to pay the full amount of the loss, the insurer should have no cause to complain. However, if the bailee were permitted to recover the entire proceeds, there would be the danger that he might destroy the property in order to reap the proceeds exceeding his interest. The simple solution to this danger is to permit the bailee to retain only that part of the proceeds representing his interest, and to require him to hold the balance as trustee for the bailor. That solution has found acceptance in some jurisdictions.② I think that we should adopt it.

 In 5A Appleman, Insurance Law and Practice § 3333, 132-133 (rev. 1970), the rule is stated:
“* * * [A] bailee, insuring the property bailed to its full value, may recover on behalf of the bailor for the actual loss sustained. In such event, there is held to be a direct interest in the bailor in such insurance, subject to any rights which the bailee may have under the policy. Therefore, the surplus insurance money over and above the bailee’s own loss constitutes money held in trust for the bailor, [footnotes omitted] ”
To the same effect see 5 Couch on Insurance § 29:56, 336-338 (2d ed 1960) and 1 Richards on Insurance § 162, 601-602 (5th ed 1952).
Some courts have permitted direct recovery by the bailor even in the absence of special policy language indicating an intent to insure bailed property; see, e.g., Babcock & Wilcox Co. v. Parsons Corporation, 298 F Supp 898 (D Neb 1969); Richelieu, Etc. Nav. Co. v. Thames & Mersey Ins. Co., 58 Mich 132, 24 NW 547 (1885). For a similar result under special circumstances see Coburn v. Fireman’s Fund Insurance Co., 86 Idaho 415, 387 P2d 598 (1963).

 See, e.g., Goldstein v. Harris, 24 Ala App 3, 130 So 313 (1930), cert. denied 221 Ala 612, 130 So 315; Allcorn v. Commonwealth Mut. Fire Ins. Co. of Pa., 174 Pa Super 489, 102 A2d 179 (1954); 5 Couch on Insurance § 29:57, 339 (2d ed 1960); 68 ALR 1344, 1348.