Property Insurance: Comprising Fire and Marine Insurance, Corporate Surety ...
By Solomon Stephen Huebner
sive against the insured. If the insured is acting in good faith, and desires to show that the real value of the property destroyed exceeds the amount stated in the proofs, he may recover upon the higher valuation (see Lebanon Mutual Insurance Co. vs. Kepler, 106 Pa., 28).
Certificate of a Notary Public as Part of the Proofs of Loss.—That portion of the clause which provides that the insured shall furnish as part of his proofs of loss, a certificate from a magistrate or notary public that he believes the claim to be honest, has always been regarded as valid and obligatory. As is explained in many legal treatises, this provision has in slightly differing form always constituted a part of the proofs of loss. Originally the policy usually designated that such certificates were to be made by clergymen or church wardens, presumably because they possessed the intelligence, power of judgment, and moral character to qualify them to form reliable opinions. With the ascendency of civil authority, as contrasted with the ecclesiastical, the policy substituted the local magistrate or notary public. The same reasons which led to the introduction of this clause in early policies are present to an even greater extent to-day. Under the widely extended agency system the insurance company is practically unable to know its patrons personally, and consequently in case of loss is dependent upon the information as regards the origin of the fire and the good faith of the insured as furnished by the best citizens in the immediate locality in which the property was situated. As stated by Mr. Ostrander, "the purpose of this requirement has been to protect the insurer against wrong-doing by direct appeal to the candor and fair-mindedness of some reputable person who is acquainted with the claimant, but not interested in the loss, and who can with little trouble inquire into the circumstances of the fire, or if the claim be without merit then the provision will operate to defeat fraud and save the insurer from becoming the victim of the crime.''
Tlie Exhibition of Property and Records and the Examination of the Property Owner.—With reference to this feature the standard fire policy contains 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 examination 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.''
In this connection it only remains to be said that the provision has always been upheld by the courts, and that the examination must be made at the place of the fire, unless the parties by common agreement choose some other place. To give better effect to this clause a so-called "iron-safe clause" is frequently indorsed on the policy with a view to protecting books of account and other records against loss. The clause usually provides that "the assured under this policy hereby covenants and agrees to keep a set of books showing a complete record of business transacted, including all purchases and sales both for credit and cash, together with last inventory of said business, and further covenants and agrees to keep such books and inventory securely locked in a fireproof safe at night, and at all times when the store mentioned in the within policy is not actually open for business, or in some secure place not exposed to a fire which would destroy the house where such business is carried on, and in case of loss, the assured agrees and covenants to produce such books and inventory, and in the event of failure to produce the same, this policy shall be deemed null and void, and no suit or action at law shall be maintained thereon for any such loss."
The Appraisal Clause of the Standard Fire Policy.—In the settlement of losses it frequently occurs that the insurer and insured cannot agree as to the amount that should be paid. The insurance company naturally wishes to reduce its loss as much as possible and the insured, on the other hand, is apt to claim an excessive sum. As middleman between these two parties, the adjuster of losses will strive to effect a fair and mutually satisfactory settlement. Yet, owing to differences of opinion as to the value of buildings or merchandise, or to the absence of inventories, invoices, and other records, cases extremely difficult for settlement often arise'. To make possible the speedy solution of such cases, and to avoid unnecessary litigation, it is desirable that every fire-insurance policy should provide in advance against such contingencies by setting forth a definite line of procedure. In the standard policy this is done by the following agreement: "In the event of disagreement as to the amount of loss the same shall, as above provided, be ascertained by two competent and disinterested appraisers, the insured and this company each selecting one, and the two so chosen shall first select a competent and disinterested umpire; the appraisers together shall then estimate and appraise the loss, stating separately sound value and damage, and, failing to agree, shall submit their differences to the umpire; and the award in writing of any two shall determine the amount of such loss; the parties thereto shall pay the appraiser respectively selected by them, and shall bear equally the expenses of the appraisal and umpire.
"This company shall not be held to have waived any provision or condition of this policy or any forfeiture thereof by any requirement, act, or proceeding on its part relating to the appraisal or to any examination herein provided for; and the loss shall not become payable until sixty days after the notice, ascertainment, estimate, and satisfactory proof of the loss herein required have been received by this company, ineluding an award by appraisers when appraisal has been required."
In interpreting this appraisal clause it should be borne in mind that the award of the appraisers is regarded as final and binding, unless it can be shown that their action involves fraud or misconduct. This is true even though the board of appraisers have not found the actual cash value of the property. The presumption is that the arbitrators must act in good faith, and while doing so errors of judgment will not invalidate the award. It is true, however, that the appraisers should limit their inquiry to the subjects submitted to them, and the award will not be sustained in case matters are considered which were not referred to them. As long as they confine themselves to the subject matter referred to them and act in good faith, they may decide questions of law as well as fact; in fact, they constitute a sort of court which has been created by the parties of the contract to settle their disagreement.
It should here be noted that while this clause is given full force in all the states of the Union, the supreme court of the state of Pennsylvania has thus far considered the appraisal clause as revokable at will by either party. The general rule in this country is that either party to the contract may insist on arbitration. In Pennsylvania, however, this is not the case. As Justice Sharwood states in his opinion given in the case of Mentz vs. The Armenia Fire Insurance Co. (79 Pa., 478): "There can be no doubt that if this case stood upon a general arbitration clause in the policy alone, it would fall within the principle settled by this court, conformably to all the previous English authorities, that it is not in the power of the parties to a contract to oust the courts of their jurisdiction. The cases in which the certificate or approbation of any particular person—as the engineer of a railroad company—to the amount of a claim is made a condition precedent to an action, rest upon entirely different principles. He is not created a judge or arbitrator of law and facts, but simply an appraiser of work done. That is irrevocable. That which is before us, is a mere agreement to refer to arbitrators to be chosen at a future time.
"Such an agreement, like any other agreement of reference, is revocable, though the party may subject himself to an action of damages for the revocation. It is not in the power of the parties thus to oust the courts of their general jurisdiction, any more than they have to add to a personal covenant, that they are not to be responsible for a breach of it."