
    Edward Rosenwald et al., Resp’ts, v. Phœnix Insurance Company, App’lt.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed November 24, 1888)
    
    1. Insurance—Interpretation of policy.
    A policy of insurance contained the following provisions. “When personal property is damaged, the assured shall forthwith cause it to be put in order, assorting and arranging the various articles according to their kind, separating the damaged from the undamaged, and shall cause an inventory to be made and furnished to the company of the whole, naming the quantity, quality and cost of each article ” The amouut or sound value covered by this policy, or any part thereof, may be determined by mutual agreement' between the company and the assured, or, failing to agree, the. same shall then, at the written request of either party; be submitted to competent and impartial arbitrators, one to be selected by each party, 1he two so chosen, in case of disagreement, to select a third, the award of any two of whom, in writing, under oath, shall be binding and conclusive as to the amount of such loss or damage, but shall not determine the validity of the contract nor the liability of this company, nor any other question except only the amount of such loss or damage. Held, that except in cases where the sense in which they are used is uncertain, words in a policy of insurance must be taken in their ordinary sense as commonly used and understood.
    9. Same—Construction op provisions op policy.
    
      Held, that the provisions of the policy regarding arbitration had no reference to cases' in which the property insured was destroyed, but to those in which it existed in a damaged condition, and that the effect- of agreements fixing the value of property destroyed by the agencies insured against was not varied by such provisions.
    Appeal from judgment of plaintiffs.
    
      G. A. Black, for app’lt; B. F. Einstein, for resp’ts.
   Brady, J.

This action was brought upon two policies of insurance. The property insured was Wisconsin leaf tobacco of the grade of 1884, and was in two warehouses in Stoughton, Wis. It was, on the 5th of July, 1885, totally destroyed by fire. The policy provided that the loss should be estimated at the full, cash value at the time of its destruction.

It should be noted here that the ownership, the quantity and the value of the tobacco, its destruction by fire, and the service of the proofs of loss were not contested by the defendant. After the fire, the adjusters, on behalf of the defendants and other insurance companies interested, met at Chicago, when the books and papers of the plaintiffs bearing upon the loss were produced. The adjusters made a thorough examination of the books, but claimed that the plaintiffs were not entitled to the market value of the tobacco,, and offered to pay them the actual cost of it.

There does not seem to have been any dispute as to the market value, the attitude of the adjusters being that the plaintiffs were only entitled to the cost price.

The defendants insisted first that under the terms of the policy no action could be maintained until the amount of the loss was ascertained in the manner provided by the policy, that is to say, by arbitration, inasmuch as there was a difference as to the amount to be paid, arising, it seems to be very clear, only on the interpretation put upon the policy, namely, the defendant’s responsibility only for the cost of the property destroyed.

Second. That the defendant had done all that was necessary or incumbent upon it for the purpose of securing the arbitration which the plaintiffs refused to grant as requested

The plaintiffs, in answer to this, contended that the request for the arbitration was not made during the period allowed by the terms of the policy, and that the refusal to arbitrate was not absolute, but that the place in which the defendant desired the arbitration to take place was inappropriate and unreasonable. There are some propositions resulting from this contention as to arbitration which have invoked elaborate examination and citation of authorities on behalf of the defendants, and it may be conceded for the purposes of this decision that the terms of the policy, if applicable to the facts and circumstances of the loss, require that there should be an ascertainment of the amount of the loss by arbitration in the manner therein provided before any action could be maintained.

But it is insisted on the part of the plaintiffs, and it seems rightly that these provisions relate only to instances in which the property insured is partially destroyed, and have no application, therefore, when it is totally destroyed.

The policy in question contains the following provisions: ‘'When personal property is damaged, the assured shall forthwith cause it to be put in order, assorting and arranging the various articles according to their kind, separating the damaged from the undamaged, and shall cause an inventory to be made and furnished to the company of the whole, naming the quantity, quality and cost of each article.

‘'The amount of sound value and of damage to the property, whether real or personal, covered by this policy, or any part thereof, may be determined by mutual agreement between the company and the assured, or tailing to agree, the same shall then, at the written request of either party, be submitted to competent and impartial arbitrators, one to be selected by each party, the two so chosen, in case of disagreement, to select a third; and the award of any two of whom in writing under oath, shall be binding and conclusive as to the amount of such -loss or damage, but shall not determine the validity of the contract, nor the liability of this company, nor any other question except only the amount of such loss or damage.”

It will be observed that what is to be submitted to arbitration under the provisions just quoted,, is the amount of sound value and of damage to the property. And this necessarily contemplates that the sound article is in existence, but has been damaged, and that the arbitrators shall decide as to the extent of the damage.

It is quite clear that this provision can have no possible relation to a thing which has no existence, absolute destruction having distinguished the loss.

If there had been any design to require arbitration where a total loss occurs, it is fair to presume that with the vigilance which marks the contracts made by the insurance companies, it would have been set out in the policy.

The absence of any such clause or agreement makes the principle declared in Hermann v. Merchants’ Ins. Co. (81 N. Y., 184), applicable to this case, viz.: that words in a policy of insurance “must betaken in their ordinary sense, as commonly used and understood; and if the sense in which they were used is uncertain, as they are found in a contract prepared and executed by the insurer, they should be construed most favorably to the insured.” And as was said in Rann v. Home Ins. Co. (59 N. Y., 387):

“In the interpretation of conditions inserted in and making part of the contract by insurers, and in language chosen by them, care should be taken that a strained and unnatural effect should not be given to words and terms to the prejudice of the insured, and in no case should they be extended by implication, so as to embrace cases not clearly or reasonably within the very words of the condition.” And also in Hoffman v. Ætna Ins. Co. 32 N. Y., 405. “ It is also a familiar rule of law that, if it be left in doubt, in view of the general tenor of the instrument, and the relations of the contesting parties, whether given words were used in an enlarged or a restricted sense, other things being equal, that construction should be adopted which is most beneficial to the promisee.”

See also Williamson v. Hand in Hand Mutual Fire Ins. Co. (26 Upper Canada Com. Pl. Rep., 266), in which the policy as to the provision under consideration was similar, and in which the court held that the provisions for ascertaining the amount of damage by examination or appraisal, were not essential where a total loss was claimed; that is where no claim was made for goods partially damaged or destroyed. If this view be correct, there is no force whatever, in the objection that the arbitration was not assented to; and very little doubt is entertained of the correctness of the view expressed, and it is controlling in the proper construction of the provisions of the policy.

There is still another view of this subject, which must enure to the benefit of the respondent, and that is, that the arbitration only follows when there is failure to agree, and that is a condition precedent therefore, of the right to arbitration. It has already been suggested that there was no real dispute as to the value of the property destroyed, the objection being as to the obligation of the company to pay anything more than the cost of the property destroyed.

These conclusions cover the points presented elaborately and ably by the leaaned counsel for the defendant, to which it is not deemed necessary to refer in detail or to take up consecutively.

Assuming that when the facts and circumstances require the observance of the provisions of the policy in reference to arbitration, that formality is necessary in ascertaining the amount of damage, and is a condition precedent, nevertheless, the plaintiffs are entitled to recover for the reason already given, that they did not exist in this case; and of course, all suggestions, propositions, doctrines and principles in reference to that element of the defense are swept away as having no application.

The judgment should be affirmed with costs.

Van Brunt, Ch. J., and Daniels, J., concur.  