Sbisa v. American Equitable Assur. Co.

On Rehearing. A rehearing was granted in this case for the sole purpose of reconsidering the liability of the defendant for the penalties and attorney's fees provided for by Act 59 of 1921, Ex.Sess.

In its plea to this Court on rehearing, defendant insists that we were in error in approving the assessment by the lower court of penalties and attorney's fees for the following reasons:

1. That the plaintiff did not, as a condition precedent to recovery of statutory damages and attorney's fees, make a demand for payment of the amount due under the policy as required by section 3 of Act 59 of 1921, Ex.Sess., and

2. That plaintiff did not satisfy the burden of proof, required by the policy contract and by Act 59 of 1921, Ex.Sess., by submitting to the defendant a true and sufficient proof of loss together with all books of account, bills, invoices and other vouchers, or by informing the company that he had such papers, but only submitted such evidence for the first time in court, after filing suit, which evidence had never previously been shown or produced to it.

The plaintiff has opposed further consideration of the case, and has filed a motion to recall the order granting the rehearing, setting forth that the reasons now advanced by the defendant for a reconsideration of the question of its liability for penalties are raised for the first time in the application for rehearing and that, under the well-established jurisprudence of this court, these points will not be noticed. We do not find it necessary to pass upon the question raised by counsel for plaintiff for the reason that a careful consideration of the case has satisfied us that the allowance to the plaintiff of the penalties and attorney's fees is conformable with the provisions of Act No. 59 of 1921, Ex.Sess.

In order that the contentions of the defendant may be intelligently discussed, it is apt to briefly restate some of the salient facts of the case. Plaintiff is the owner of two sound trucks which were built for him by one de Otter — a red truck and a blue one. The red truck was insured by the defendant against fire in the sum of $2,000. On December 22, 1936 this truck was totally destroyed by fire while it was returning from a trip in St. Tammany Parish on a public highway leading to New Orleans. After receiving notice of the fire defendant furnished plaintiff with a blank form for proof of loss. This form was filled out and sworn to by the plaintiff. Shortly after this proof of loss was filed, the defendant required the plaintiff to furnish a supplemental proof of loss because it was not satisfied with the statements contained in the original. Thereafter, the defendant, being still dissatisfied with the correctness of the vouchers submitted by plaintiff and the statements made by him in the first and second proofs of loss, requested that he be examined under oath with respect to the correctness of the items included in the affidavit attached to the proof of loss which showed that the sound truck was worth $3,253.05. This examination was held on February 4, 1937, at which time it was discovered that the plaintiff had made a number of erroneous statements and that items aggregating the sum of $1,585 were incorrect.

Subsequently, on March 24, 1937, the defendant, taking the position that plaintiff had been guilty of false swearing with respect to the statements made by him in the proofs of loss and his examination under oath, denied any and all liability to plaintiff for the loss maintaining that all of his rights and claims against it under the policy contract had been forfeited.

Plaintiff thereafter brought suit in the District Court, in which he proved that, as a consequence of the fire, he had sustained a loss exceeding the face amount of the policy of insurance, and was awarded judgment for $2,000, plus the penalties and attorney's fees provided by Act No. 59 of 1921, Ex.Sess.

The first contention of the defendant on this rehearing is that the penalties and attorney's fees were erroneously awarded to plaintiff because he did not, as a condition precedent to recovery, make a demand for payment as required by section 3 of Act No. 59 of 1921, Ex.Sess.

This section of the statute, which has been quoted in full in our original opinion, provides in substance that, whenever loss or damage shall be suffered by the assured as a result of fire to property insured under a policy of fire insurance, it shall be the duty of such fire insurance company, upon receipt of proofs of loss from the assured, to pay the amount due under its policy within sixty days thereafter "or if the said proofs of loss are not satisfactory to the company, it shall be the duty of the company to proceed under the terms of the policy or policies to ascertain and adjust theamount of the loss and its liability under the terms of the policy or policies and to make payment of the amount due under policy or policies to the insured within sixty days from date upon which it received the proofs of loss offered by the assured,and should the company fail to pay, within said time the amountdue the insured under the policy after demand made therefor, such company shall be liable to pay the holder or holders of such policy in addition to the amount of the loss" 25% damages on the total amount of the loss together with reasonable attorney's fees. (Italics ours.)

It is pointed out by counsel for the defendant that the foregoing statute, being a penal one, should be strictly construed and that, since it clearly appears from the pleadings and proof submitted in the case that the plaintiff failed, prior to filing suit, to make demand for the payment of the amount due under the policy, recovery of the penalties and attorney's fees should be denied.

While we readily agree with counsel that the statute (in so far as the penalties are concerned) is to be given a strict interpretation, this does not mean that literal compliance by the assured is to be regarded as essential where the action of the insurer can be considered as relieving the insured of such compliance. On the contrary, we are convinced that the penalties were rightly imposed in the instant case because the defendant, by reason of its absolute denial of liability to plaintiff for the amount due under the policy after the proofs of loss had been submitted, must be held to have waived the requirement of the statute respecting the necessity of a demand.

It is conceded in this matter that the assured suffered a loss which was covered by the policy. Proofs of loss were duly submitted by the plaintiff. If the insurance company was not satisfied with these proofs of loss, it was incumbent upon it, by the provisions of section 3 of Act No. 59 of 1921, Ex.Sess., to undertake to adjust the loss and pay to the assured the amount which it considered to be due. Instead of following this course, the defendant took the affirmative stand that there was no liability whatever under the policy because the plaintiff had sworn falsely in his proofs of loss. In view of this, it would have been futile for the plaintiff to have made demand on the company for payment of the loss. Obviously, the denial by the company was tantamount to a concession by it that the filing of the proof of loss constituted in adequate demand. One does not deny prior to the receipt of a claim. While the statute plainly contemplates a demand, other than the mere filing of a proof of loss and the filing of a suit in order for the penalties to attach, the requirement applies only in cases where the proof of loss has been filed and the company has passively denied liability by failing to make payment within sixty days from the date upon which it received the proofs or where it has failed to adjust the loss and tender to the assured the amount which is due under the policy. But to say that in a case like this, where the proof of loss has been submitted and the company has notified the assured that it will not pay, that the assured is required to go through the useless ceremony of making another demand on the company, in order to be entitled to the penalties, would be to resolve that the plaintiff should treat the denial of the company as meaningless. The strict interpretation which is to be accorded to the statute does not require that we reach such an absurd consequence and, particularly so, in view of the well-established jurisprudence that, in cases where a putting in mora is exacted, it is unnecessary to do so where the debtor denies the obligation. See Louisiana Farms Co. v. Yazoo M.V.R. Co., 179 La. 539,154 So. 445 and authorities there cited, also Wadkins v. Wilson Oil Corp., 199 La. 656, 6 So. 2d 720.

Counsel for defendant, relying heavily upon the rule of stricti juris as applied to the infliction of penalties, maintains that the affirmative action on the part of the defendant company does not operate as a waiver of the demand prescribed by the statute. In support of this contention, a number of cases are cited from this and other jurisdictions wherein it is held that the filing of a suit is not tantamount to the demand required by such penal statutes.

We quite agree with counsel that a demand of some sort is essential, in case the insurance company fails to pay within sixty days after the submission of the proofs of loss, and that the filing of the suit is not the type of demand contemplated by the statute. However, counsel have been unable to cite any authorities (except from the State of Texas) holding that a demand is a prerequisite to the recovery of penalties where it appears the insurance company has denied liability under the policy after the filing of the proofs of loss.

In some of the decisions from Texas a different view has been expressed. In Mutual Life Ins. Co. v. Ford, 103 Tex. 522,131 S.W. 406, it was declared that, under a statute similar in its terms to Act No. 59 of 1921, Ex.Sess., the fact that the defendant insurance company denied liability under the policy did not relieve the plaintiff of the requirement to make a demand upon it for payment prior to the filing of the suit and that, in the absence of such demand, the penalties and attorney's fees would not be awarded. Later, in National Casualty Co. v. Mahoney, Tex.Civ.App., 296 S.W. 335, the Court of Civil Appeals of that State under a similar state of facts refused to allow penalties provided for under the statute. However, in a recent case, National Mutual Ben. Ass'n v. Aaron, Tex.Civ.App., 45 S.W.2d 371, the Court of Civil Appeals held that, since the company had denied liability of the claim, the demand prescribed by the statute would be inferred from such denial on the part of the company. In reaching this conclusion, the court relied upon the decision of the United States Circuit Court of Appeals for the Fifth Circuit in Standard Accident Insurance Co. v. Bittle,36 F.2d 152.

But aside from the apparent conflicting jurisprudence in Texas on this subject, we are of the opinion that the strict interpretation to be given to Act No. 59 of 1921, Ex.Sess., does not require that the insured do a vain and useless thing by making a demand in cases where the insurance company has asserted that it will not pay the amount claimed under the policy. Plaintiff is therefore entitled to recover the penalties and attorney's fees provided by the statute, the assessment of which, as we have already found in our original opinion, is mandatory.

Disposal of the foregoing point of the defendant leaves little to be said with respect to its other contention — which is that the plaintiff did not satisfy the burden of proof required by the statute in that he failed to submit a true and sufficient proof of loss and all books of account, bills, invoices, etc., or by informing the insurance company that he had such papers, but only submitted such evidence for the first time in court after he filed the instant suit. In stressing this proposition, counsel for the defendant argue that the company did everything required of it under the statute and under the policy of insurance; that, when the assured submitted his proof of loss containing numerous erroneous items, it could only require him to be examined under oath; that it was unable to arbitrate and that, under the provisions of the law, it was not in a position to adjust the loss.

The contention is not well founded because the argument of counsel fails to give consideration to the provisions of section 3 of Act No. 59 of 1921, Ex.Sess. That section imposes upon the insurance company, in case the proofs of loss submitted by the assured are not satisfactory, the duty of ascertaining and adjusting the amount of the loss and its liability under the policy and to make payment of the amount due to the insured within sixty days from the date upon which it received the proofs of loss. In the instant case, the insurer failed to comply with this provision of the law notwithstanding the fact that it knew that the loss had occurred; that ordinarily it would be liable therefor and that there were numerous items contained in the proof of loss which were admittedly correct. Therefore, under the circumstances, the company could have adjusted and ascertained the loss or, in any event, that part of the loss over which there was no dispute. But, in spite of the fact that the statute required this to be done, the company denied any and all liability on the ground that the policy had been forfeited because the assured swore falsely with respect to certain items contained in the proof of loss. In the circumstances, it took its chance upon the judgment of the court on the question of its liability and, having been unsuccessful, the assessment of the penalties and attorney's fees followed as a matter of course.

For the reasons assigned, our original opinion and decree herein are reinstated as the final judgment of this Court.

ODOM, J., dissents.