Home Insurance v. Adler

Murphy, C. J., delivered the opinion of the Court. On August 14, 1966, a fire partially destroyed the house located at 3010 Manhattan Avenue in Baltimore City. The property was insured against direct loss by fire for $17,500 under a Homeowner’s policy issued by the appellant, Home Insurance Company (the insurer), to Gertrude Becker (Becker), the sole insured named in the policy. Becker died in the fire, approximately nineteen minutes after it had begun.

The insurer paid Abraham Adler (Adler), Becker’s Executor and the appellee herein, for personal property lost in the fire; it refused, however, to pay Adler’s claim for fire damage to the house, maintaining that Becker had only a life estate therein, that her insurable interest terminated by operation of law at the moment of her death, and that ⁷¹⁷ consequently neither Becker nor Adler suffered any pecuniary loss from the damage to the building caused by the fire. Adler sued the insurer, claiming $7,691.06 as the amount of Becker’s loss caused by fire damage to the building; he maintained that Becker survived the fire and damage to the property (by nineteen minutes) and thus did sustain loss as a result of the fire. From a judgment of the Superior Court of Baltimore City (Carter, J.) in favor of Adler, the insurer appealed. The facts are not in dispute.

The property was conveyed sometime prior to January 2, 1963 to Lillian Clark for life, remainder to Becker; on January 2,1963, Clark died, thereby vesting title to the property in fee in Becker. Subsequently, on December 18, 1963, Becker caused the property to be conveyed to herself, as life tenant, with full life powers, 1 remainder in fee simple to Alfred Lee Scheinberg and Diana Sue Scheinberg (the remaindermen). Thereafter, Becker insured the property with the insurer against direct loss by fire for a three year period beginning October 6, 1964. By the terms of the policy, the insurer: “. . . insure[d] the Insured named in the declarations above [Gertrude Becker] and legal representatives, to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss . . . nor in any event for more than the interest of the insured, against all Direct Loss by Fire. . . .” ⁷¹⁸ Neither the Executor nor the remaindermen made any repairs to the house after the fire.

No demand was made upon the Executor by the remaindermen to repair the property and he was under no legal obligation to do so. The property was eventually sold on an “as is basis” for $8,825. The remaindermen were not made parties to the present litigation. The lower court held, on authority of Rogge v. Menard County Mutual Fire Insurance Co., 184 F. Supp. 289 (S.D. Ill. 1960), that since Becker died after, and not before, the fire began, the insurer was liable under the policy.

The court found that the insurer was not aware of Becker’s limited interest in the property prior to the fire; that since all premiums paid by Becker were based on the value of the property being insured, and not on the value of her interest in the property, Adler, as Becker’s Executor, was entitled to reimbursement in the full amount of the loss under the insurance contract. The court concluded: “Admittedly, a contract of insurance is a personal contract and recovery is based on the actual loss to the insured. Miss Becker was alive after the fire and her actual loss at that time was the damage to both real and personal property caused by the fire, no matter how long she lived thereafter. ‘A life tenant has an insurable interest in property to the full value thereof.’ 44 C.J.S. Insurance, Sec. 190, p. 891. Under the facts of this case, the limitation in the insurance policy to coverage of only insured’s interest, is only applicable if Miss Becker had died prior to the fire, as there would no longer be an interest to be insured.” Relying upon Glens Falls Insurance Co. v. Sterling, 219 Md. 217 , 148 A. 2d 453 (1959), the insurer contends on appeal that a fire insurance policy is a contract of personal indemnity requiring proof of actual pecuniary loss as a prerequisite to the right to recover the policy proceeds.

The insurer agrees that $7,691.06 fire damage was done to the ⁷¹⁹ property, but maintains that the loss fell upon the remaindermen who are not parties to the suit. The insurer concedes that the fact that Becker lived for approximately nineteen minutes after the fire began “would technically give her and her Personal Representative, Abraham L. Adler, a possible right to recover provided the Appellee could show or prove that Gertrude Becker, or her estate, had suffered a pecuniary loss,” but maintains that the pecuniary loss, if any, is de minimis. Appellee contends that liability under the policy attached the moment the fire started, citing Rogge v. Menard County Mutual Fire Insurance Co., supra and Western Coal and Dock Co. v. Traders Insurance Co., 122 Ill. App. 138, 140 (1905); consequently, he maintains that Becker did sustain a loss in her lifetime constituting a debt now payable to her estate by the insurer.

He urges that the recovery cannot be limited to Becker’s life interest as: (1) the premiums were paid on the fee value of the property; (2) but for Becker’s death during the fire, the insurer would not so limit the recovery; and (3) events subsequent to