Finch v. Great American Insurance , 101 Conn. 332 ( 1924 )

The only question before us is whether, under the standard form of fire insurance policy, "a debt is due" from the underwriter to the insured, within the meaning of our foreign attachment statute, § 5915 of the General Statutes, after a loss by fire covered by the policy, and before proofs of loss are filed. It is not surprising that there should be a conflict of authority among the several States as to the validity of a garnishment made under such circumstances, because of the wide differences of statutory policy respecting attachments in general. See 28 Corpus Juris, p. 165, § 207.

Our own liberal policy with regard to the use of attachments, has naturally led this court to construe the word "due," in our foreign attachment statute, in the sense of "owing," rather than in the more restricted sense of "payable"; and of the many decisions to this effect we are of opinion that Knox v. ProtectionIns. Co., 9 Conn. 430, virtually controls the case at bar. In that action of scire facias, the declaration alleged that, at the time of the service of the garnishment process, the garnishee was indebted to the defendant in the original suit, "by a policy of fire insurance, a loss having accrued by fire, claimed to exceed the amount of the policy, before the leaving of said copy with said company; but said claim was not agreed to by said company and remains unadjusted." The cause was reserved for the advice of this court upon a demurrer to the declaration; and one of the questions arising on the demurrer was whether an unadjusted claim for a loss covered by the policy was a debt subject to garnishment. On that point, CHIEF JUSTICE DAGGETT said: "Is the indebtedness of the defendants such as to authorize this proceeding by way of foreign attachment? That they owed, when the copy was left with them, to the absent debtor, in a certain sense, or that they were liable to pay him for a loss which they had insured against, is not denied; but it is insisted, that this liability does not render them responsible in this suit. . . . Our statute declares, ``that whenever the goods or effects of an absent or absconding debtor are concealed in the hands of his attorney, agent, factor or trustee, so that they cannot be found or come at, to be attached; or where debts are due from any person to an absent or absconding debtor, it shall be lawful,' etc. It would be an extremely narrow construction of these words to limit them toliquidated debts. The object of the statute is to secure for the benefit of the creditor, all the property of the debtor — all his goods, effects and credits. The defendants owe the absent debtor for a loss; they do not adjust it; but say they will not be responsible for it to his creditors. They are liable to pay him money; and they will pay only when the damages are liquidated. It can be recovered in the same form of action, viz:assumpsit. Had the damages been ascertained, there could have been no difficulty; but in that case, there would have been only indebtedness. Had the absent debtor sent them goods to sell, or debts to collect, and had they converted them into money, still the account might have remained unsettled, and they have been liable in an action of assumpsit or account. This objection, therefore, cannot prevail."

The Knox case has been often cited in support of the rule, now firmly established, that a debt is "due" when it is owed, though not yet payable because not yet liquidated in amount. New Haven Steam Saw MillCo. v. Fowler, 28 Conn. 103, 108; Woodruff v. Bacon,35 Conn. 97, 105; Ransom v. Bidwell, 89 Conn. 137, 140,93 A. 134. See also Goodman v. Meriden BritanniaCo., 50 Conn. 139; Seymour v. Over-River School District,53 Conn. 502, 3 A. 552. Although it does not clearly appear from the report of the Knox case why the loss had not been liquidated when the garnishee was served with process, the opinion assumes that the insured had done all that the policy required him to do, and that the loss was capable of liquidation. So in the case at bar, it is expressly found that the insured has done all that the policy required her to do, and that the loss has been liquidated and is now payable. The Knox case establishes the crucial proposition that the obligation to pay such a loss dates from the loss, and not from the subsequent liquidation which determines the amount payable. We have no doubt that the Knox case was rightly decided. A policy of fire insurance is an agreement to indemnify the insured against loss by fire to the property insured. Before any loss, and while the policy remains in force, the liability of the underwriter is contingent. When, as here, the policy is in force at the time of a loss by fire, which is covered by the policy, the contingent liability of the underwriter is thereby converted into a present contract obligation to pay whatever sum, not exceeding the amount of the policy, will in fact indemnify the insured, payment being necessarily deferred until the amount of the loss is ascertained.

In the standard form of fire insurance policy, the required process of liquidating the loss is minutely specified with reference to protecting the company against excessive or fraudulent claims; and the filing of proofs of loss by the insured is one step in that process. A failure to do so within the time limited may bar the enforcement of the underwriter's obligation, because it is so agreed in the policy; but the obligation itself is manifestly created by the promise to pay in case of a loss by fire, and by the happening of that contingency. The steps which the insured is required by the policy to take before he can collect or sue for the loss, relate to matters the performance of which is exclusively within the volition of the insured. In effect, he is required to furnish a bill of particulars in support of his claim. This is not with a view to creating a debt; on the contrary, the filing of proof of loss necessarily involves the assertion by the insured of the existence of an antecedent debt. So the provisions of the policy requiring the filing of proofs of loss, tacitly assume the existence of an obligation to indemnify. The whole procedure after the loss, is for the purpose of finding out whether the claimed obligation to indemnify has arisen, and, if so, to ascertain its amount.

The agreement that the loss shall not become payable until sixty days after the insured has performed his part in the process of investigation and liquidation, is in form and in substance entirely consistent with the existence of an obligation to pay the loss so in process of investigation and liquidation. By virtue of that agreement, a default by the insured will prevent the loss from becoming payable, and so it may be said that compliance with the requirements referred to is a condition precedent to the right to payment and, therefore, to an enforceable liability to pay. Harris v. Phoenix Ins. Co., 35 Conn. 310. In that case, it appears that the loss never became payable, because of the failure of the insured to comply with one of the requirements exacted by the underwriter and assented to by the insured, within the allotted time; and for that reason, a garnishment made after the loss was held invalid, on the ground that the factorizing creditor could not put himself in any better position by the garnishment than that occupied by the debtor himself. That is not this case. Here it is found that the insured has complied with all the requirements of the policies, and the result of the investigation, in the course of which she was required to file proofs of loss, is that a loss of $6,000, covered by the policy, did in fact occur on June 5th, 1921, several days before the garnishment, which loss became payable in accordance with the terms of the policy, before this action in the nature of scire facias was commenced. Thus the plaintiff stands squarely in the shoes of the insured, and the liability to pay being admitted, the only question before us is whether the obligation to indemnify, which is now sought to be enforced, came into existence at the date of the loss. This is the question which was decided in the affirmative in theKnox case, and on principle and authority, we hold that the debt now adjusted and payable was "due" at and from the date of the loss. The following cases hold directly that an unadjusted and unliquidated claim for a loss under a policy of insurance against fire is subject to garnishment in the hands of the insurance company: Girard Fire Marine Ins. Co. v.Field, Merritt Co., 45 Pa. 129; Sexton v. PhoenixIns. Co., 132 N.C. 1, 43 S.E. 479; Crescent Ins. Co. v. Moore Co., 63 Miss. 419; Glens Falls Ins. Co. v.Hite, 83 Ill. App. 549. See also Waples on Attachment, § 374; Drake on Attachment (5th Ed.) § 549; 28 Corpus Juris, p. 164.

In Northwestern Ins. Co. v. Atkins, 66 Ky. (3 Bush) 328, and Phenix Ins. Co. v. Willis Bro., 70 Tex. 12,6 S.W. 825, the precise point that the filing of proofs of loss was a condition precedent to the creation of the debt, was made and overruled.

It appears from the finding that the interest of the mortgages has been made to appear, and as the apportionment of the loss among the several defendants is a matter of arithmetic, the case is, as the trial court notes in its memorandum, ready for judgment in case the plaintiff should prevail.

There is error, the judgment is set aside and the cause remanded with direction to enter judgment for the plaintiff in accordance with this opinion.

In this opinion the other judges concurred.