
    Insurance Company v. Butler.
    A policy of insurance for $800 on 4 certain dwelling house, — which sum does not exceed two-thirds of the value of the house as appears from the application that was made a part of the policy, which also contains a stipulation that the company will pay to the assured “ all loss or damage,” not exceeding the sum assured, within ninety days after due notice and “proofs” of such loss or damage, — is an open and not a valued policy
    Error to the District Court of Holmes County.
    The original action was brought by Joseph R. Butler against the Farmers’ Insurance Company, in the court of common pleas of Holmes county, on a policy of insurance, wherein it was stipulated, among other things, as follows: “ The Farmers’ Insurance Company, by this policy of insurance, and in consideration of a cash premium of $12 received of J. .R. Butler, do hereby insure unto the said J. R. Butler the sum of $1,200, on the following property, situated in Ehllbuck township, Holmes county, Ohio, and more particularly described in application and survey No. 11,974, which is hereby made a part of this policy, to wit: On dwelling house, $800.00; barn, $400.00. And said Farmers’ Insurance Company hereby agrees to make good unto the said assured, his heirs, executors, administrators, or assigns, all such loss or damage, not exceeding in amount the several sums insured, as shall happen by fire or lightning to any of the aforesaid property, from the 28th day of March, 1873, at 12 o’clock at noon, to the 28th day of March 1878, at 12 o’clock at noon, and to be paid ninety days after due notice and proofs of the same shall have been made by the assured and received at this office, with the terms and provisions of this policy.”
    The application thus made a part of the policy, contained, among other things, the following representations:
    “ The above description and diagram contains a full and accurate description of the buildings and property insured and, the insurance on the buildings does not exceed two-thirds their actual cash value. ' J. R. Butler.”
    During the life of the policy, the dwelling house insured was totally destroyed hy fire. The petition prayed for a judgment for $800.00, the full amount of insurance on the dwelling house.
    The answer denied that the dwelling house destroyed was of the ^alue of $800.00.
    During the trial in the court of common pleas, the following bill of exceptions was filed :
    “ Be it remembered that at the trial of the above cause, the defendant, to maintain the issue on her part, offered evidence tending to show that the dwelling house, mentioned in plaintiff’s petition, was not worth, at the time the same burned, more than the sum of four hundred dollars, and that the plaintiff was not damaged by the burning of the same more than the said sum of four hundred dollars ; and that to said evidence the plaintiff, by his attorneys, objected; which objections the court sustained, to which ruling and decision the defendant excepted, and now comes in open court with this, her bill of exceptions, and prays that the same may be allowed, signed and sealed, and ordered to be made a part of the record in this case, which is accordingly done.”
    Trial to the court. Judgment for plaintiff for $800.00 and $34.80 interest, and also for costs.
    On proceedings in error in the district court it was assigned for error that the court of common pleas erred in excluding evidence as set forth in the bill of exceptions ; but the district court affirmed the judgment below.
    This proceeding is now prosecuted to reverse the judgment of the district and common pleas courts.
    
      Critchfield <& Graham, for plaintiff in error:
    It is claimed for the defendant, that he is entitled to receive the full amount of his insurance, notwithstanding his actual loss may not have exceeded half that sum ; or, in other words, the sum insured, and not the value of the property destroyed, should be his measure of damages.
    The contract is in writing, and unless by its terms the company manifestly intended to value the risk and the loss, the policy is an open and not a valued one, and the measure of damages is the value of the property at the time destroyed. Wood on Ins. 92, 93, § 41; Planders on Ins. 77; Laurent v. Chatham Ins. Co., 1 Hall (N. Y.) 41; Sedgw. on Dam. 6 ed. 306 ; 2 Parsons on Cont. 6 ed. 453; 2 Greenl. on Ev. 13 ed. 367, § 407; Noble v. North Am. Ins. Co., 1 Sandf. 551; 1 Duer on Ins. 94, §§ 4, 8, 9, 10; Wallace v. Insurance Co., 4 La. 268; Cox v. Ætna Ins. Co., 29 Ind. 568; Phillips on Ins. 1213; Lycoming Ins. Co. v. Mitchell, 48 Penn. St. 367; 3 Rich. 331.
    Neither the rate of premium nor the sum insured determines the measure of damages. In the absence of an express agreement it is the. actual loss sustained; when the value of the property is fixed by the parties the insured is entitled to recover such a portion of the valuation as the insurer has agreed to pay. Cox v. Charleston Ins. Co., Wallace v. Insurance Co., 4 La. 289; Wood on Ins. 97, § 42.
    "Valuation is seldom made in fire policies. Parsons on Cont. 6 ed. 453; Phillips on Ins. 1211; Hughes on Ins. 310 ; Sedgw. Dam. 6 ed. 306 ; 4 Louis. 289 ; Brinley v. Insurance Co., 11 Met. 195; 9 Met. 205.
    When it is intended to make the estimation conclusive it is usually accomplished by writing in the policy and after the description of the property, the words “ valued at.” Phillips on Ins. 1178, 1179; Wallace v. Insurance Co., 4 La. 289; Wood on Ins. 93, §41; Hughes on Ins. 310; Wellandon v. West. Ins. Co., 9 La. 23.
    If the policy contained a reference to the value stated by defendant in his application in such a way as to show that the company adopted the valuation as true, the policy, in the absence of any stipulations to the contrary, would be a valued one. Nichols v. Fayette Mut. T. Ins. Co., 1 Allen 63; Fuller v. Boston Ins. Co., 4 Met. 206.
    But the mere reference to the application as a part of the policy, cannot be construed as the agreement of the company to be bound by the defendant’s statement as to the value. Wood on Ins. 102, § 43, says, that “if the application is made a part of the policy, a valuation therein is as effectual to make the policy a valued one as though stated in the policy itself,” and in support of this cites the case of Nichols v. Fayette Mut. Ins. Co., 1 Allen, 63; and Phoenix Ins. Co. v. McClean, 100 Mass. 415. But if the author intends to be understood as saying that the mere statement by an applicant of the value of the property to be insured, without an agreement of the insurer contained in the application that the valuation is true, then clearly lie is unsupported by authority. In the case of Nichols v. Fayette Mut. Ins. Co., the policy recited that “ the amount insured is not more than three-fourths of the value of the property as appears by the proposal of the insured.” And in the case of Phœnix Ins. Co. v. Moses, it does not appear that any valuation was made in the application at all, and besides, in that case the policies were in marine insurance, where the valuation is usually adopted by the insurer. See Sedgw. on Dam. 6 ed. 306 ; Parsons on Cont. 6 ed. 453. Where the charters and bylaws of mutual companies become part of the policies, and the companies are forbidden to insure for more than a certain proportion of the value of the buildings, valuations will be held binding on both parties. 2 Parsons on Cont. 6 ed. 455 ; Phillips v. Merrimac Mut. Ins. Co., 10 Cush. 350; Bordan v. Hingham Mut. Ins. Co., 523; Haywood v. N. E. Mut. Ins. Co., 10 Cush. 444; Fuller v. Boston Ins. Co., 4 Met. 206; Holmes v. Charleston Ins. Co., 10 Met. 211. In all other cases it must appear clearly in the policy that the insurer intends to value both the risk and the loss. See authorities first cited
    The policy expressly provides the amount the company should pay in the event of loss, viz : “ All such loss or damage, not exceeding in amount” the sum insured as should “happen by fire or lightning” to the property at risk. It is also provided in the event “ any difference should arise touching any loss,” etc., the same “ shall at the written request of either party, be submitted by them to impartial and disinterested arbitrators.” These provisions clearly indicate, we think, that the company should be held for no more than the loss sustained.
    
      StUwell & Hoogla/nd, for defendant in error:
    The only question made in this case is, whether this is a valued or an open policy. When the application is referred to as forming a part of the contract, the statements therein contained are held to have the force and effect of warranties. May on Insurance, 164, § 159; Nichols v. Fairfield Mut. Ins. Co., 1 Allen, 63, and other authorities cited in Wood on Ins. 102, § 43, note 1.
    Where the language of reference is ambiguous, and does not clearly intend to make the application a part of the policy, the doubt will be construed against the company. May on Insurance, 165, par. 160.
    In this case the application is made a part of the policy, by the following language: “ And more particularly described in application and survey No. 11,974, which is hereby made a part of this policy, to wit: One dwelling house, $800.” The building insured has been totally destroyed by fire. The amount insured on the dwelling house is $800. The application states that does not exceed two-thirds its actual cash value. The valuation thus agreed upon by the parties is conclusive, in the absence of frand. Luce v. Dorchester Mutual Fire Ins. Co., 105 Mass. 297, 396; 7 Ohio, pt. 1, 284; Portsmouth Ins. Co. v. Brazee, 16 Ohio, 81; Wood on Ins. 93, § 41, V. N. 4; Fuller v. Burton Ins. Co., 4 Metc. 206, and authorities cited; also, Wood on Ins. p. 103, note 1, and text same p., Shaw, J.
    
      A policy having this clause, the amount insured being not more than two-thirds the value of said property, as appears by the application of the said insured, is a valued policy. May on Insurance, 29, par. 31; Phœnix Ins. Co. v. McLoon, 100 Mass. 475. This policy does not limit the value of the property at the time of loss. If it did, no doubt such a provision would be controlling. May on Insurance, 29, 30, par. 31.
    In this case a total loss, and no occasion for “ any difference” to arise “touching any loss or damage” to be submitted to arbitrators, and if the loss were partial as a damage to dwelling house of $800 or less, then a difference might arise as provided in the policy; but even though the loss were $800 or less, then a difference might arise as provided in the policy; but even though the loss were $900, no more than $800 could be collected, as the policy recites “ all such loss or damage, not exceeding in amount the several sums insured.”
    In Wallace v. Insurance Co., 4 La. 239, cited by plaintiff in error, the policy contained these words: “ The said loss or damage to be estimated according to the true and actual value of the said property at the time the same shall happen.”
    In reply to first citations of plaintiff’s brief, Wood on Insurance, 93, § 41, 3ays: “ So, where the policy recites that the amount insured is not more than one-half, two-thirds, three-fourths, etc., of the value of the property insured, and indeed in all cases, where, from the language used, it is evident that the policy was intended as a valued policy.” It is to be so treated without reference to the words or form of expression employed.
   McIlvaine, J.

Whether the policy of insurance in this suit is valued or open, is the sole question in this case.

A policy of insurance is essentially a contract for indemnity in case of loss. Wager policies are contrary to public policy. The insured must have an interest in the subject of the insurance — an interest in its preservation. In case of loss, his contract rightfully entitles him to compensation — nothing more. The reason upon which this principle rests, is the prevention of fraud and crime, by removing all inducement and temptation to commit them, which would naturally arise from the great disparity between the consideration paid and the indemnity received by the insured. This disparity, however, does not amount to inadequacy or even a suspicion of fraud; because of the supposed remoteness of the contingency of loss; nevertheless its existence requires the utmost good faith on the part of the insured. While these considerations do not, in the least, exempt the insurer from liability on his contract, they do show that in the absence of a contract to the contrary, the amount of recovery on a policy of insurance should be limited to the actual loss sustained by the assured on account of the risk against which the policy was taken. In other words, a policy of insurance must be regarded as an open one, unless it appears to have been the intention of the parties to the policy, upon a fair and reasonable construction of its terms, to value the loss, aud thereby fix, by contract, the amount of recovery.

Mr. Wood, in his treatise on fire insurance, section 41, says: “ Valued policies are those in which both the property insured and the loss are valued, and which bind the insurer to pay the whole sum insured, in case of total loss. They may be said to be policies in which the insurer himself, at the time of making the policy, assesses the damages in case of total loss, unless fraud, inducing an over-valuation on the part of assured, is established.” And further along in the same section, he says : “ If there is anything in the policy that clearly indicates an intention on the part of the insurer to value the risk and the loss, in whatever words expressed, the policy is valued, otherwise it is open.” Again, “ No particular form of expression is necessary; the intention of the parties, gathered from the whole instrument, must determine the matter.” Fuller v. Boston, &c. Ins. Co., 18 Pick. 523.

It has been decided that a policy of a company whose charter limited its liability to a certain proportion of the actual value of the property insured, which refers to the value of the property as stated in the application of the insured, is a valued policy. 10 Cushing, 551. Other cases go so far as to hold generally, that a policy which refers to the valuation of the property as it appears in the application which is made a part of the policy, is a valued one. 1 Allen 68; 100 Mass. 475.

Without expressing an opionion as to the soundness of such construction when nothing further appears in the policy, we are satisfied that the policy before us, which contains the further stipulation, that “said Farmers’ Insurance Company hereby agrees to make good unto the said assured, his heirs, executors, administrators or assigns, all such loss or damage, not exceeding in amount the several sums insured, as shall happen by fire or lightning to any of the aforesaid property, from the 28th day of March, 1873, at 12 o’clock at noon, to the 28th day of March 1878, at 12 o’clock at noon, and to be paid ninety days after due notice a/nd proofs of the same shall have been made by the assured and received at this office, with the terms and provisions of this policy,” shows, that it was not intended by the insurer to make the sum assured the measure or value of the damages, although the loss might be total. Proofs of loss or damage here required as a condition precedent to the payment, refer to cases of total as well as partial losses. The amount of liability on the policy was thus left open to inquiry, limited, however, by the amount of insurance named in the policy.

The court of common pleas, therefore, erred in rejecting testimony offered by the defendant below as to the amount of actual loss. And the district court erred in affirming the judgment of the common pleas.

Judgments reversed and cause remmded.  