Hamilton v. Home Insurance Company/Opinion of the Court

This case resembles in some aspects that of Hamilton v. Insurance Co., 136 U.S. 242, 10 Sup. Ct. Rep. 945, (decided at the last term,) but it is essentially different in important and controlling elements.

In that case, the effect of the provisions of the policy by reason of which it was held that the assured, having refused to submit to the appraisal and award provided for, could not maintain his action, was thus stated by the court: 'The conditions of the policy in suit clearly and unequivocally manifest the intention and agreement of the parties to the contract of insurance that any difference arising between them as to the amount of loss or damage of the property insured shall be submitted, at the request in writing of either party, to the appraisal of competent and impartial persons, to be chosen as therein provided, whose award shall be conclusive as to the amount of such loss or damage only, and shall not determine the question of the liability of the company; that the company shall have the right to take the whole or any part of the property at its appraised value so ascertained; and that until such an appraisal shall have been permitted, and such an award obtained, the loss shall not be payable, and no action shall lie against the company. The appraisal, when requested in writing by either party, is distinctly made a condition precedent to the payment of any loss, and to the maintenance of any action.' 136 U.S. 254, 255, 10 Sup. Ct. Rep. 949. That policy looked to a single appraisal and award, to be made as one thing, and by one board of appraisers or arbitrators, whenever any difference should arise between the parties, and to be binding and conclusive as to the amount of the loss, although not to determine the question of the liability of the company; and the policy contained, not only a provision that until such an appraisal the loss should not be payable, but an express condition that no action upon the policy should be sustainable in any court until after such an award.

In the case now before us, on the other hand, the appraisal and the award are distinct things, and to take place at separate times, and the effect assigned to each is quite different from that given to the appraisal and award in the other policy. The 'appraisal,' without which the loss is not payable, is required to be made not merely when differences arise as to its amount, but in all cases, and results in a mere 'report in writing,' which is not declared to be binding upon the parties in any respect, and is in truth but a part of the proofs of loss. It is only by a separate and independent provision, and when differences arise touching any loss 'after proof thereof has been received in due form,' that the matter is required, at the request of either party, to be submitted to 'arbitrators, whose award in writing shall be binding on the parties as to the amount of such loss, but shall not decide the liability of this company under the policy;' and there is no provision whatever postponing the right to sue until after an award. The special defenses set up, with some tautology and surplusage, in the answer, reduce themselves, when scrutinized, to a singel one, the plaintiff's refusal to submit to an award of arbitrators, as provided in the policy. This appears by the general frame of the answer, and by its speaking of the award as 'an arbitration and the ascertainment of the said loss thereby,' and as 'an appraisement by arbitrators,' as well as by the distinct averments that the defendant requested and the plaintiff declined a submission to arbitration, and by the omission of any specific allegation that the plaintiff neglected to procure a report of appraisers. The evidence introduced at the trial was to the same effect. Proofs of loss § ent by the plaintiff to the defendant, with a request that any defects in substance or form might be pointed out so that he might perfect the proofs to the defendant's satisfaction, were received by the defendant, without then or after wards objecting to their form or sufficiency. The subsequent correspondence between the parties was evidently influenced in form by embracing insurances in different companies under policies with various provisions; but, as applied to the policy in suit, it manifestly related, and was understood by both parties to relate, not to a mere report of appraisers, but to an award of arbitrators which should bind both parties as to the amount of the loss. The instruction to the jury, therefore, that on the issues joined on the special defenses in the answer, and upon the evidence in the case, the plaintiff could not recover, was, in effect, a ruling that the plaintiff could not maintain his action because he had refused to submit the amount of his loss to arbitration.

A provision in a contract for the payment of money upon a contingency that the amount to be paid shall be submitted to arbitrators, whose award shall be final as to that amount, but shall not determine the general question of liability, is undoubtedly valid. If the contract further provides that no action upon it shall be maintained until after such an award, then, as was adjudged in Hamilton v. Insurance Co., above cited, and in many cases therein referred to, the award is a condition precedent to the right of action. But when no such condition is expressed in the contract, or necessarily to be implied from its terms, it is equally well settled that the agreement for submitting the amount to arbitration is collateral and independent; and that a breach of this agreement, while it will support a separate action, cannot be pleaded in bar to an action on the principal contract. Roper v. Lendon, 1 El. & El. 825; Collins v. Locke, L. R. 4 App. Cas. 674; Dawson v. Fitzgerald, 1 Exch. Div. 257; Reed v. Insurance Co., 138 Mass. 572; Seward v. City of Rochester, 109 N. Y. 164, 16 N. E. Rep. 348; Insurance Co. v. Pulver, 126 Ill. 329, 338, 18 N. E. Rep. 804; Crossley v. Insurance Co., 27 Fed. Rep. 30. The rule of law upon the subject was well stated in Dawson v. Fitzgerald, by Sir GEORGE JESSEL, M. R., who said: 'There are two cases where such a plea as the present is successful: First, where the action can only be brought for the sum named by the arbitrator; secondly, where it is agreed that no action shall be brought till there has been an arbitration, or that arbitration shall be a condition precedent to the right of action. In all other cases where there is, first, a covenant to pay, and, secondly, a covenant to refer, the covenants are distinct and collateral, and the plaintiff may sue on the first, leaving the defendant' 'to bring an action for not referring,' or (under a modern English statute) 'to stay the action till there has been an arbitration.' 1 Exch. Div. 260. Applying this test, it quite clear that the separate and independent provision, in the policy now before us, for submitting to arbitration the amount of the loss, is a distinct and collateral agreement, and was wrongly held by the circuit court to bar this action. Judgment reversed, and case remanded, with directions to set aside the verdict, and to take such further proceedings as may be consistent with this opinion.