Atwood v. Union Mutual Fire Insurance

The only question presented by this case is, whether the plaintiff shall recover $1,400, the whole amount of the insurance, or $840, the one half of the goods ■on hand at the time of the loss, the insurance being upon merchandize only.

It is contended by the plaintiff that, inasmuch as a valuation was placed upon the property, at the time of the insurance, the defendants are not at liberty to show that the stock in-trade has since been reduced, and that at the time ■of the fire it was actually of the value of $1,680, and no more.

*241There are cases which, to some extent, go to sustain the plaintiff’s position, and they proceed upon the principle that the company, having once fixed a valuation upon the property, must be held, in the absence of fraud, to be governed thereby. Fuller v. The Boston Mut. Fire Ins. Co. 4 Met. 206, is a ease of the kind. In that case, which was an insurance upon buildings, one of the regulations of the company was, that the president should examine the premises before the insurance and fix the value, and it appeared that he made an examination, and that the amount proposed by the assured was agreed upon and fixed. It was held that, after such an agreement, the compauy could not, in the absence of fraud, be heard to say that there was an over-valuation. Shaw, C. J., wrho delivered the opinion of the court, says that such a valuation is, in the highest sense, a valuation by mutual agreement. And he remarks that the question is, whether a valuation thus deliberately and carefully made by mutual agreement, as a part of the original negotiation, when each party is independent of the other, and at liberty to contract or not, as they are or not respectively satisfied with the terms, shall, in the absence of all fraud, collusion and misrepresentation, be taken as the best evidence of the actual value of the premises insured. And the learned chief justice, after discussing the question, arrives at the conclusion that it is not only the best evidence of the value, but that such a valuation is, under the circumstances, conclusive upon the parties.

To the same effect are Borden & Wife v. Hingham, Mut. Fire Ins. Co. 18 Pick. 523, Holmes v. Charlestown Mut. Fire Ins. Co. 10 Met. 211.

But in Post v. Hampshire Mut. Fire Ins. Co. 12 Met. 555, where a regulation of the company provided that a re-valuation might be had, it was held that the assured could recover only the proportion of the value at the time of the fire.

The doctrine of the Massachusetts cases appears to be this: that where the valuation, at the time of the issuing *242of the policy, is made under such circumstances as to assume the character of a deliberate and mutual agreement fixing the value, such valuation will, in the absence of fraud and of any provision in the charter or by-laws for a re-valuation, be the best evidence of the value, and conclusive upon the parties.

In the case before us, the defendants promised to pay the sum insured, according to the provisions of the charter and the by-laws of the corporation. The charter and by-laws formed a part of the policy, and the contract was made having them for its basis. In the charter and by-laws there is no express provision for a re-valuation; but by the fifth section of the charter, it is provided that the directors shall determine the sum to be insured not exceeding three-fourths the value of any building and one half the value of personal property. By the fourteenth article of the by-laws, it is provided that, in case of loss, the insured shall deliver to the secretary of the company, within thirty days, a particular account, on oath, of the property lost or damaged, and the value thereof at the time of the loss; and by the fifteenth article the directors are required to proceed as soon as may be, after notice of the loss, and determine the amount thereof.

Under these provisions, we think that the representation made by the applicant, at the time of the insurance, that the property was worth $3,000, and the issuing a policy upon that representation, cannot have that binding and conclusive force upon the company, that shall prohibit them from showing the actual amount of goods the plaintiff had on hand at the time of the fire. The charter expressly provides that not more than one half the value of personal property shall be insured. Can the directors make a contract that shall bind the company, which is in violation of an express provision of the charter? And can a member, who has made the charter the basis of the contract, set up an agreement between him and the directors that shall override the *243charter? The stock in a business store is constantly changing, and of this the parties are well aware. There are, probably, not two days in a year when the insured has the same amount of goods on hand. There can, necessarily, from the very nature of the business, be nothing fixed and certain about it; and a contract of insurance upon merchandize of this kind must be understood to have been made with reference to this well-known fact. And taking this charter and by-laws together, we think that the true construction of the contract between these parties should be, that the loss should be estimated according to the amount of goods on hand at the time of the fire.

We think, also, that even upon the principles of Fuller v. Boston Mut. Fire Ins. Co. and Borden & Wife v. Hingham Mut. Fire Ins. Co. before cited, the plaintiff could not recover. The policies, in those cases, were issued upon buildings, which, for the short time of an ordinary policy of insurance, may be considered as having a somewhat fixed character and value. This policy was issued upon a stock of goods, which, from the very nature of the articles, must be constantly changing, both in character and amount. Those authorities, also, taken in connection with Post v. Hampshire Mut. Fire Ins. Co., recognize the doctrine of a revaluation at the time of the fire, provided the charter and by-laws sanction it. And, we think, that the charter and by-laws, in this case, are sufficient to authorize such a course to be taken.

It appears to us, also, that, to sustain the position of the plaintiff, would be contrary to one of the fundamental principles of mutual insurance, which is that the insured shall assume a large part of the risk himself, as a guarantee against fraud and negligence. If the doctrine contended for be correct, then may the assured reduce his stock, even down to the amount insured, and still recover for the whole; and thereby would not only the protection against fraud be *244destroyed, but the charter, as we conceive it, be directly violated.

We have no doubt that the true construction of this policy, taken in connection with the charter and by-laws, is, that the company should never have at risk more than one half of the stock of goods on hand. If the whole stock should be consumed, the plaintiff would recover one half the amount, not exceeding his insurance. If only half should be consumed, he would recover for that half, provided it did not exceed the whole,insurance, and the half saved would belong to him also. Such, we think, to be the true rule, and that, consequently, the defendants are liable for only the $840.

Judgment should, therefore, be entered for the plaintiff for $840, with costs up to the time of the confession ; and the defendants should recover costs after the confession.