Franklin v. Insurance Co.

The agreement of the parties to submit their differences to arbitration was revoked by the refusal of one of the arbitrators to act, and the notice given the insurers by the insured. It is the well-settled law of this state that either the refusal of the arbitrator to perform the duties necessary to carry out the purpose of the agreement, or the withdrawal from the compact of either party before the award is published, renders the agreement of no effect. Wright v. Cobleigh, 21 N.H. 339, 342; Kimball v. Gilman, 60 N.H. 54.

The contract of insurance contained the following provision: "In case difference of opinion shall arise as to the amount of any loss under this policy, other than on buildings totally destroyed, unless the company and the insured shall, within fifteen days after notice of the loss, mutually agree upon referees to adjust the same, either party may, upon giving written notice to the other, apply to a justice of the supreme court, who shall appoint three referees, one of whom shall be thoroughly acquainted with the kind of property to be considered, and their award in writing, after proper notice and hearing, shall be final and binding on the parties." The policy being in the form approved by the legislature, it is argued that this provision is a condition precedent to the right to sue; that the parties must first arbitrate, and then, if the insured chooses, he may sue; but upon the question of damages the only evidence admissible will be the award of the arbitrators. Being the only admissible evidence, it would be conclusive on the question. Like a formal judgment, it would import absolute verity. He might sue for his loss, but he could not litigate one of the principal questions involved. The contract, it is said, is not to pay the loss, but only to pay what three men shall say the loss is. That is, since the adoption of this form of policy in 1885, every case in which the amount of loss has been litigated has been erroneously conducted, and in each case the only inquiry on this branch should have been, "What is the sum fixed by arbitrators?"

The contention is that the referee clause is of the very essence of the contract, but beyond the policy is the statute, which the policy is not allowed to contradict (P.S., c. 170, s. 18), and which shows that the legislature did not understand that the question of the amount of loss had been taken from the court. Section 13, chapter 170, of the Public Statutes, provides that "if upon trial the insured recovers more than the amount determined by the insurers," etc. If the only contract made by the insurer was to pay the amount determined by arbitrators, this provision of the statute is meaningless; but if the statute means, as it must, that the amount of loss may be litigated, the referee clause cannot mean that an award of arbitrators is the only foundation for a suit.

It is further argued that, after an adjustment by the company, it is the right of either party to compel a reference by a seasonable application therefor; that this is the contract which the legislature has provided for the parties, that by entering into it the insured waives any rights conflicting with its provisions, and that for various reasons such a law is wise and equitable, and should be upheld. This contention is answered by the provision that if the insured is dissatisfied with the adjustment made by the insurer he may bring his action. P.S., c. 170, s. 10. The adjustment here referred to is the amount which the insurer is willing to pay, or the sum it fixes as the amount of the loss. Even if the parties are agreed as to all other questions, dissatisfaction with the insurer's estimate of the loss entitles the insured to sue. If he may bring suit, he is not bound to abandon the action because of a stipulation in the policy which conflicts with the statutory provision under which the suit was brought. The statute must prevail over the policy contract, for such was the legislative intent. "This chapter shall be a part of every contract of insurance. . . . No waiver of any part of it shall be set up by the insurer, and every stipulation in the contract in conflict with it shall be void." P.S., c. 170, s. 18, Perry v. Insurance Co., 67 N.H. 291. This section was enacted in 1879 (Laws 1879, c. 13), immediately after the decision that a provision in the policy which conflicted with the statute was a waiver of the latter. Tasker v. Insurance Co, 58 N.H. 469 (decided in August, 1878). Since 1879, the law which is now chapter 170 of the Public Statutes has been a part of every contract of fire insurance made in this state.

In 1885 it was enacted that the insurance commissioner should provide a standard form of policy, and that all companies should conform to the regulations prescribed by him. Laws 1885, c. 93, s. 3. Acting under this authority, the commissioner prescribed the form since known as the "New Hampshire standard form of policy." Ins. Com. Rep., 1885, pp. 5, 73. Grave doubts arose as to the binding effect of the commissioner's action. A similar statute, passed by the same legislature, was held to be invalid as an attempted delegation of legislative power. In re School Law Manual,63 N.H. 574. In the revision of 1891, all doubts were removed by the enactment that "the form of policy and insurance contract now in force in this state is continued until the insurance commissioner shall change it." P.S., c. 170, s. 1. At the same time all the earlier statutory provisions, including the law of 1879 as to waiver, were re-enacted. There is no evidence of an intent to remove or modify the protection given to the insured, or to make the policy the controlling factor. On the contrary, the legislature expressly provided that, as between the policy and the provisions of chapter 170 of the Public Statutes, the latter should govern. The form of policy there referred to must be the one then and now in use, for any other form was forbidden. No evidence being found of a legislative intent to deprive the parties jury trial upon this question, the language of the statute is to be given its ordinary meaning. The history of insurance legislation in this state is one of constant effort to provide for the speedy adjustment and payment of losses, to take away technical and inequitable defences, and at the same time to protect insurers from fraudulent claims and vexatious suits. The statutes are to be so construed as to give effect to this purpose. It should not be defeated by a strained construction of the language of the contract, especially when, as in this case, the result would be to nullify the express provisions of the statute. The parties insured are entitled to a jury trial upon the question of the amount of their loss.

The further defence is suggested that the actions are premature, because they were brought within sixty days after formal proof of loss. The only ground for this objection is the stipulation in the policy that the insurers shall pay within sixty days. From this it is argued that until that time has elapsed there is no default, and so no action can be maintained. Like the other defences set up, this is answered by the statute. "If the company neglects to adjust the loss within fifteen days after receiving notice of it, . . . the insured may commence an action upon the policy." P.S., c. 170, s. 9. If the notice of the amount awarded by two of the three arbitrators was an adjustment, suit might be brought at any time within six months after it was received. P.S., c. 170, s. 10. If the notice was not an adjustment, the suits were properly brought because of a failure to adjust within fifteen days after proof of loss. In neither view are the actions premature. As a decision of the question whether the notice was or was not an adjustment will be of no practical importance unless the insured fail to recover a larger sum (P.S., c. 170, s. 13), it has not been considered.

Case discharged.

All concurred.