Summary
In Glassner, the Wisconsin Supreme Court never squarely addressed whether the discovery of a pre-existing defect in a property which was unknown to the parties at the time the insurance policy was issued constituted a fortuitous loss (i.e., resulted from a risk as opposed to being an ordinary and almost certain consequence of the condition of the property).
Summary of this case from Atlantic Mutual Insurance Companies v. LotzOpinion
March 30, 1964 —
April 28, 1964.
APPEAL from a judgment of the circuit court for Milwaukee county: WILLIAM I. O'NEILL, Circuit Judge. Reversed.
For the appellants there was a brief by Arnold, Murray O'Neill, attorneys, and Glassner, Clancy Glassner of counsel, and oral argument by Robert N. Gordon, all of Milwaukee.
For the respondent there was a brief by Wickham, Borgelt, Skogstad Powell, and oral argument by Clayton R. Hahn, all of Milwaukee.
Action on a "comprehensive dwelling" insurance policy to recover loss by reason of damage to a submersible pump, used to supply water to plaintiffs' dwelling.
Plaintiffs alleged that the pump was damaged "by accident and misfortune, and without fault or negligence on the part of the plaintiffs," but also referred to loss and damage "suffered by said fire." The policy was incorporated in the complaint.
Defendant denied that injury to the pump was the result of fire and denied that injury to the pump was within the coverage of the policy. Defendant did not allege facts to support a claim that any particular policy exclusion was applicable.
Before trial the parties stipulated that the pump was damaged "by accident and misfortune, and without fault or negligence on the part of the plaintiffs."
The policy contained a description of coverage for the building different from the description of coverage for its contents. As to the building the company agreed "to insure against all risks of physical loss, except as hereinafter excluded, . . ." As to the contents, the company agreed to pay for direct loss caused by certain listed and defined perils. Loss by fire was defined to "include any sudden and accidental injury to electrical appliances, . . . resulting from electrical currents artificially generated." Although the trial appears largely to have dealt with the question whether the pump was an item of contents and whether the damage resulted from fire as specially defined under contents coverage, plaintiffs made known to the court their position that if the pump were deemed to be part of the building, they were entitled to recover under the "all risk" coverage applicable to the building.
The circuit court found that plaintiffs were seeking recovery for alleged damage by fire; that the pump was a part of the building and the special definition of fire which was applicable to contents was inapplicable to the pump; that the usually accepted meaning of fire includes the idea of visible heat or light; that although there was evidence of charring about the control box, there was no evidence of any visible heat or light; that the evidence was inconclusive as to whether the damage was the result of fire. The court concluded that the complaint must be dismissed for failure of proof of damage by fire. Judgment was entered accordingly September 27, 1963. Plaintiffs appealed.
Additional facts will be referred to in the opinion.
1. Liability for the loss. Plaintiffs appear to have been uncertain whether the damaged pump was an item of contents or a part of the dwelling building. The coverage provisions applicable to contents are different from those applicable to the building. If the pump were an item of contents, plaintiff needed to establish that the loss was caused by one of several listed perils, one of which was fire. They attempted to prove loss by fire by the charring which indicated short circuiting, and relied on the policy definition of loss by fire so as to include sudden and accidental injury to electrical appliances resulting from electrical currents artificially generated. If, on the other hand, the pump were part of the dwelling, it was insured against all risks of physical loss, except those excluded by the terms of the policy. Defendant did not plead that the cause of the loss fell within any exclusion.
Upon the trial plaintiffs seem to have preferred the theory that the pump was an item of contents and damaged by fire. They did, however, make known their alternative theory. On appeal they accept the finding of the circuit court that the pump was part of the building, and rely upon the alternative theory. They contend that it was unnecessary to prove that the pump (as part of the building) was damaged by fire, that they were required only to establish that the loss was occasioned by accident, and that defendant had the burden of pleading and proving any exclusion.
Defendant contends that even though the pump is part of the building, plaintiffs pleaded and tried their case on the theory of a fire loss and cannot seek relief on a different theory on appeal. This argument, we conclude, must fail The language of the complaint, though referring at times to loss by fire, was broad enough to state a cause of action for fortuitous loss of a portion of the dwelling as well as for loss by fire of an item of contents, and the record shows that plaintiffs' counsel brought the alternative theory to the attention of the court and defendant's counsel at the trial.
The evidence as to the cause of the failure of the pump and motor is inconclusive. It suggests, at least, that water may have leaked into the electric motor which was in a capsule underneath the pump (and also submerged) and this may have caused the electrical short circuits and damage to pump, motor, and controls. It may be that the leakage resulted from normal deterioration or wear of parts of the mechanism. From the evidence alone, one might conclude that plaintiffs failed to prove that the damage was fortuitous, as contrasted with an ordinary and almost certain consequence of the inherent qualities and intended use of the equipment.
Defendant, however, is in the position of having stipulated that the pump was damaged "by accident and misfortune, and without fault or negligence on the part of plaintiffs" and of having failed to plead or prove that the cause of the loss was excluded from coverage.
An "all risk" policy is a promise to pay for loss caused by a fortuitous and extraneous happening, but it is not a promise to pay for loss or damage which is almost certain to happen because of the nature and inherent qualities of the property insured.
2 Richards, Insurance (5th ed. 1952), pp. 721, 722, sec. 212; Anno. Coverage under "all risks" insurance, 88 A.L.R.2d 1122, 1125-1127, secs. 2, 3 (a), and 4; Gorman, All Risks of Loss v. All Loss: An Examination of Broad Form Insurance Coverages, 34 Notre Dame Lawyer (1959), 346, 348; Gorman, supra, part III, pp. 351-354; Landis, All Risks Insurance, 1951 Insurance Law Journal, 709-716; Finkelstein v. Central Mut. Ins. Co. (1957), 8 Misc.2d 261, 166 N.Y. Supp. 2d 989; Gillespie Co. v. Continental Ins. Co. (1958), 14 Misc.2d 110, 176 N.Y. Supp. 2d 146.
The insured under an "all risk" policy has the burden of proving the loss, at least, and, in addition, according to some authorities, that the loss was fortuitous. Once these are established, the burden is upon the insurer to prove that the loss arose from a cause which is excepted.
Anno. Coverage under "all risks" insurance, 88 A.L.R.2d 1122, 1129-1131, sec. 6; Gorman, supra, part IV, pp. 355, 356, footnote 1; Betty v. Liverpool London Globe Ins. Co. (4th Cir. 1962), 310 F.2d 308; Fireman's Fund Ins. Co. v. Hanley (6th Cir. 1958), 252 F.2d 780.
We consider that plaintiffs had the burden of establishing not only that damage occurred, but that it was fortuitous, i.e., that it resulted from a "risk," as contrasted with being an ordinary and almost certain consequence of the inherent qualities and intended use of the property. With these facts established, plaintiffs would be entitled to recovery unless the defendant pleads and proves that the particular risk from which the loss arose was excluded from coverage by the terms of the policy.
The policy before us does exclude from coverage losses arising from various risks, e.g., loss by earthquake. It also expressly excludes losses from cause which might be considered not to be "risks" at all, but almost certain consequences, e.g., loss by wear and tear, deterioration, mechanical breakdown. Here it might be argued whether the burden is on the insured to prove that the loss did not result from wear and tear, deterioration, and mechanical breakdown because he has the burden of proving that he has suffered a fortuitous loss, or whether the burden is on the insurer to prove that the loss did so result because it has treated these causes in its policies as if they were excluded risks.
We find it unnecessary, in this case, to decide that question because of the stipulation of the parties that the loss was the result of accident and misfortune.
2. Amount of recovery. Because the circuit court concluded plaintiffs could not recover, no finding was made as to the amount of the loss. We consider that plaintiffs clearly proved the following items: $96, cost of pump of same capacity and age; $65, cost of removing pump; $43.25, cost of new cable; $4.35, cost of starting capacitor; and $7.50, starting relay. Plaintiffs also paid $145 for labor installing the new unit, but at least $27.50 of this amount was made necessary by the fact that a pump of larger capacity was installed. The sum of the items sufficiently established is $216.10. The net installation labor charge, after deducting $27.50, was $117.50, but it was not made clear that the entire $117.50 was necessary to install a pump of the same type and capacity as that which had been damaged. We will grant plaintiffs the option within ten days after the return of the record to the circuit court to file a written election to take judgment for $216.10 plus costs. If plaintiffs do not do so, defendant may, within twenty days after such return, file a written consent to judgment against it for $333.60 plus costs. If no option is exercised it will be necessary to have a further hearing to determine what part of the $117.50 amount is due plaintiffs.
By the Court. — Judgment reversed, cause remanded for further proceedings consistent with the opinion on file.