Philadelphia Underwriters' Agency of Fire Insurance Ass'n of Philadelphia v. Driggers

This cause is here on certified questions from the Court of Civil Appeals of the Seventh District.

The certificate, with the questions submitted, is as follows:

"Appellees, W.F. Driggers and T.J. Taylor, sued the appellants, Philadelphia Underwriters' Agency of the Fire Insurance Association of Philadelphia, and North British Mercantile Insurance Company of London and Edinburgh, on two policies of fire insurance, issued by the said Insurance Companies respectively, one for the sum of $500 on merchandise and $200 on furniture and fixtures, and the other for the sum of $500 on merchandise and $100 on furniture and fixtures, by which said policies of insurance the appellees were insured against loss by fire of a stock of merchandise and the furniture and fixtures used in connection with the establishment.

"Appellants, in their answers, alleged that each of said policies contained the following provision:

"``Record Warranty Clause.

The covenant is hereby made a part of this policy and a warranty upon the part of the assured: Section 1. The assured will take a complete itemized inventory of stock on hand at least once in each calendar year, and within twelve months of the last preceding inventory if such has been taken. Unless such an inventory has been taken within twelve calendar months prior to the date of this policy, and together with a set of books showing a complete record of business transacted since the taking of such inventory, is on hand at the date of this policy, one shall be taken within thirty days after the date of this policy, or in each and either case, this entire policy shall be null and void.

"``Sec. 2. The assured will make and prepare, in the regular course of business, from and after the date of this policy, a set of books, which shall clearly and plainly present a complete record of business transacted, including all purchases, sales and shipments, both for cash and on credit, or this entire policy shall be null and void. The term ``complete record of business transacted,' as used above, is meant to include in said set of books a complete record of all the property which shall go into the premises and be added to the stock, and of all property taken from the stock, whether by the assured or by others, even though not technically purchases or technically sales.

"``If the business of the assured under this policy be that of manufacturing, this complete record of business transacted must, in addition, show all the raw material received and all products manufactured therefrom, including the cost of manufacture, and must show waste in process of manufacture and must show all the raw material and manufactured property which is taken from the building described.

"``Sec. 3. The assured will keep and preserve all inventories of stock taken during the current year, and also all those taken during the preceding calendar year, which are on hand when this policy is issued, and will keep and preserve all books which are then on hand, showing a record of business transacted during the current calendar year and the preceding calendar year.

"``The assured will also keep and preserve all inventories taken after the issuance of this policy, and all books made and prepared after the issuance hereof, showing a record of business transacted.

"``The books and inventories, and each of same, as called for above, shall be by the assured kept securely locked in a fireproof safe at night, and at all times when the building mentioned in the policy is not actually open for business, or, failing this, the assured shall keep such books and inventories and each of them, in some secure place not exposed to a fire which would destroy said building, and, in event of a loss or damage insured against to the personal property mentioned herein, said books and inventories, and each of the same must be by the assured delivered to this Company for examinations, or this entire policy shall be null and void, and no suit or action shall be maintained hereon for any such loss.

"``It is understood and agreed that this clause and the requirements thereof is one of the inducing causes to the acceptance of the risk herein assumed and the issuance of this policy, and that the terms and requirements hereof are material to the risk, and to this insurance, and to any loss or damage happening to the property described in this policy.

"``It is further agreed that the receipt of such books and inventories, or the request for them or either of them, and the examination of the same, shall not be an admission of any liability under this policy, nor a waiver of any provision or condition of this policy, or of any defense to the same.'" "And in connection with this allegation the appellants alleged that the appellees wholly failed and refused to comply with each and all of the requirements and conditions enumerated in said record warranty clause, and that in consequence said policy was null and void, and the plaintiffs were not entitled to recover any sum whatever. The court below sustained a special exception to these allegations in the answer of each of the defendants, because the failure to comply with the provisions therein set out could not in any way contribute to the loss and therefore, under the provisions of the Act of 1913, page 194, Vernon's Sayles' Civil Statutes, Art. 4874a, constituted no defense.

"The appellants further pleaded that each of the policies sued on contained the following provision: ``The insured as often as required, shall exhibit to any person designated by this company all that remains of any property, herein described, and submit to examinations under oath by any person named by this company, and subscribe the same; and as often as required, shall produce for examinations all books, of account, bills, invoices and other vouchers, or certified copies thereof if originals be lost, at such reasonable place as may be designated by this company, or its representative, and shall permit extracts and copies thereof to be made.'

"``No suit or action on this policy, for the recovery of any claim shall be sustainable in any court of law or equity until after full compliance by the insured with all the foregoing requirements.'"

"And in connection therewith each of the appellants further pleaded that after the fire they each demanded that the appellees each appear at a time and place named and submit to such examination, the time and place named being alleged to be in all things reasonable, and that said appellees and each of them refused to submit to such examination. Wherefore, they pleaded that the plaintiffs could not maintain said suit. This pleading followed the general denial and the plea of the record warranty clause. The appellees, by supplemental petition, excepted also to this plea as falling within the provision of the Act of 1913, but in the answer following the exception offered to submit to an examination. The case was not tried until a term of court succeeding the filing of these pleadings, at which time the court sustained the exception to said part of appellants' answers.

"A trial resulted in judgment for the plaintiffs and the case is now pending in this court on two assignments of error, questioning the ruling of the lower court in sustaining the exceptions above referred to.

"As the members of this court are unable to agree as to the disposition of the case and as any holding we may make would be in conflict with one or the other of two lines of decision of other courts of civil appeals, as later shown, we certify to your Honorable Court for decision the following questions:

"First: Did the court err in sustaining the exception to the pleading of the appellants, setting up the record warranty clause, as above stated?

"Second: Did the court err in sustaining the exception to the pleading of the appellants, setting up the provision for examination and its violation, as above stated, and will such action of the court require a reversal of the case?

The trial court held that the pleadings of the appellants to which the exception were sustained constituted no defense, because of the provisions of Chapter 105, General Laws passed by the Thirty-third Legislature. Section 1 of this Act reads:

"That no breach or violation by the insured of any of the warranties, conditions or provisions of any fire insurance policy, contract of insurance, or application therefor, upon personal property, shall render void the policy or contract, or constitute a defense to a suit for loss thereon, unless such breach or violation contributed to bring about the destruction of the property."

This Act has reference only to those warranties and provisions in policies the breach of which might contribute to or bring about a fire loss. McPherson v. Camden Fire Insurance Co.,222 S.W. 211; Providence-Washington Insurance Co. v. Levy Rosen,222 S.W. 216; Aetna Insurance Co. v. Waco Co., 222 S.W. 217; Merchants' Mfrs.' Lloyd's Ins. Exch. v. Southern Trading Co.,229 S.W. 315; Humphrey v. National Fire Insurance Co.,231 S.W. 750.

The clauses in the policies sued on, to the pleading of which by appellants exceptions were sustained, are not within the purview of this Act. A violation of these provisions manifestly could not contribute to or bring about the destruction of property by fire.

In the case of Merchants' Mfrs' Llyod's Ins. Exch. v. Southern Trading Co., cited above, the Commission of Appeals correctly held that the record warranty clause contained in fire policies in the State of Texas is not affected by the Act above quoted.

In the case of Humphrey v. National Fire Insurance Co., supra, the Commission of Appeals held the provision in the policy requiring the insured to submit to examination after loss to be a material one, and that such provision was in no way affected by the Antitechnicality Law.

The Commission of Appeals, in this same case, also properly held that a failure or refusal to submit to examination after loss does not bar recovery, but merely suspends the right of recovery until the examination is complied with; that such failure or refusal, therefore, is to be pleaded in abatement, and not in bar, and that the plea, if sustained, results only in the dismissal of the suit as being prematurely brought.

Answering the specific questions propounded by the Court of Civil Appeals, we hold: that the court erred in sustaining exceptions to the pleadings of appellants setting up the record warranty clause, the provision for examination, and the alleged violation thereof by appellees.

The third inquiry contained in the certificate is, whether or not the action of the trial court will require a reversal of the case. We cannot answer this question without considering the entire record, which we do not believe to be our province under this certificate. We, therefore, leave the determination of that question for the Court of Civil Appeals.