Schreiber v. Pacific Coast Fire Insurance

Markell, J., delivered the opinion of the Court. These are appeals by plaintiffs from judgments for plaintiffs on verdicts in two suits, tried together, against different insurers on fire insurance policies. The verdicts are based on an appraisal of “the actual cash value” of the property insured. Plaintiffs contend, for a number of reasons, that the appraisal was not binding on them and should not have determined the amounts of the verdicts.

The only relevance of the value of the property is in the application of the 80% coinsurance clause. The amount of loss is not in dispute here. As the loss was a partial loss, the effect of the coinsurance clause is that the greater the value of the property the less the liability under the policies. Plaintiffs contend that the value of the property was substantially less than the amount of the appraisal.

The policies in suit provided that, “In case the insured and this Company shall fail to agree as to the actual cash value or the amount of loss, then, on the written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected * * *”. Defendants, through their adjusters, Insurance Adjusters, Inc., selected Harold M. Cummins. Mr. Cummins had been in the building business for thirty-three years, first with the Consolidated Engineering Company in building, construction and incidentally appraisals, then with a corporation formed by his uncle, his cousins and himself. Since 1945 he has been in the appraisal business, appraising fires and buildings.

In the instant case he was designated on May 29, 1947, the appraisal agreement was signed on June 18, 1947 and the award was made on April 21, 1948. During the pendency of this appraisal he took fifteen other appraisal jobs for Insurance Adjusters, Inc.; from May 6, 1946 until the beginning of this appraisal, twelve jobs. Meanwhile he had many appraisal jobs for other insurance ⁶⁴³ companies or their adjusters and for owners and insured. He says about sixty per cent of his appraisal work is done for owners.

Before he was selected by defendants’ adjusters as their appraiser, he was asked by plaintiffs’ adjuster, Milton Kind, to appraise this loss, but when he went to the premises he found some one else had been employed. Mr. Kind selected not only plaintiffs’ appraisers but also their lawyers, who were changed several times. It is not contended that defendants were guilty of any misrepresentation or concealment regarding Mr. Cummins or that Mr. Kind was ignorant of the nature of Mr. Cummins’ business or of the fact that Mr. Cummins accepted employment in a particular case from either insurer or insured, whichever chose to employ him. It seems quite impossible that Mr. Kind could have been uninformed in this respect.

It is generally held, and plaintiffs apparently concede, that the mere fact of other employment by insurance companies does not, as a matter of law, disqualify one from selection as “a disinterested appraiser.” Firemen’s Fund Ins. Co. v. Flint Hosiery Mills, 4 Cir., 74 F. 2d 533 , 104 A. L. R. 556; see cases collected in note, 104 A. L. R. 563. Plaintiffs, however, contend that though Cummins’ other employments did not disqualify him as a matter of law, the jury should have been permitted to find, as a matter of fact, that he was not “a disinterested appraiser”. In connection with misrepresentations, (Bradshaw v. Agricultural Insurance Co., 137 N. Y. 137, 141-144 , 32 N. E. 1055 ), or concealment, (“deceptive silence”, Coon v. National Fire Insurance Co., 126 Misc. 75, 78 , 213 N. Y. S. 407), such other employment may be considered by the jury on the question of disqualification.

But in the instant case there is no evidence of misrepresentation, concealment or other misconduct on the part of either defendants or Mr. Cummins. The court properly refused to submit to the jury the question of disqualification on the evidence of other employment, which as a matter of law is insufficient to show disqualification. Furthermore, there is no evidence or other ⁶⁴⁴ ground for belief that Kind, plaintiffs’ adjuster, was not fully informed as to Cummins’ business, including work for insurers as well as insúred. Plaintiffs complain that their examination of Cummins was restricted to other employment by Insurance Adjusters, Inc., to the exclusion of employment by other adjusters for insurance companies.

The extent of such examination is largely within the discretion of the trial judge. We see no abuse of discretion. Legally insufficient evidence of other employment by the same adjusters would not have been made sufficient by evidence of employment by other adjusters, especially in view of Cummins’ testimony that the greater part of his business was work for owners. Cummins testified that after the appraisers had disagreed as to the cash value and had called in the umpire, the two appraisers and the umpire set down their own figures, added them, divided by three and then agreed upon that figure as the combined judgment of the three.

Plaintiffs contend that an appraisal thus arrived at is not valid. It has been held that a quotient verdict is no more lawful for arbitrators than for jurors. Pearce v. Rickard, 18 R. I. 142, 26 A. 38 , 19 L. R. A. 472, 49 Am. St. Rep. 755 .

If, however, two arbitrators or appraisers strike a mean between the opposing claims of the parties and then adopt it as their appraisal, this is not unlawful, though it might be if they had agreed in advance to accept the mean. Brown v. Bellows, 4 Pick. 178, 191-192, 21 Mass. 179 . In the instant case we think the appraisal is not invalid. We do not sanction “quotient verdicts” by arbitrators or appraisers.

But without some conscious or subconscious, exact- or approximate, splitting of differences, no agreement would be reached by jurors, arbitrators, appraisers or bargainers.' There is no evidence that these appraisers agreed to be bound by the result of their computations or otherwise subordinated their judgment to the fall of the dice. ⁶⁴⁵ Plaintiffs also contend that this evidence shows that the umpire was improperly called in before the appraisers had disagreed. The uncontradicted evidence is to the contrary. The fact that all three eventually concurred in the result does not alter the fact that the two appraisers first disagreed and found it necessary to call in the umpire. Plaintiffs say the award was invalid because of delay in arriving at it.

The loss occurred on March 16, 1947; suit was instituted on March 15, 1948, one day before expiration of the one year policy period of limitation. We intimate no opinion whether the limitation provision would have been applicable in the circumstances. The award was made on April 21, 1948. As late as February 2, 1948 a hearing was had before the appraisers and the umpire.

Plaintiffs did not, when they instituted suit, or at any time before the award was made, attempt to repudiate the appraisal agreement or the submission to appraisal. There were a number of reasons, good or bad, for the long delay. The court submitted to the jury the question whether the delay in making the award was unreasonable. The court could not have ruled, as a matter of law, that it was unreasonable.

Plaintiffs contend that the award should be set aside for error of law in that the appraisers and the umpire erroneously held “actual cash value” to be equivalent to cost of reproduction less depreciation. Some courts have held that “actual cash value” is equivalent to cost of reproduction less depreciation, but we think the best considered cases hold that cost of reproduction is not the measure of “actual cash value”, but is very important evidence of value. McAnarney v. Newark Fire Insurance Company, 247 N. Y. 176 , 159 N. E. 902 , 56 A. L. R. 1149; Kingsley v. Spofford, 298 Mass. 469, 476 , 11 N. E. 2d 487 ; Bonbright on Valuation of Property, pp. 369-370, 384-394; 6 Appleman on Insurance Law and Practice, § 3823. If we were to take over the appraisers’ functions we might doubt whether cost of reproduction, less depreciation, is a reliable guide to the value of this kind of ⁶⁴⁶ property — an old dwelling house property in the 1400 block on Eutaw Place.

On the other hand, some special effort seems to have been made to allow for obsolescence of high ceilings and elaborate stairways. Again, if the question were properly before us, it is not clear that the appraisers and umpire committed error of law in determining “actual cash value”. Cummins’ testimony indicates