
    Winfield S. Spink, Appellant, v. Co-operative Fire Insurance Company of Wyoming and Genesee Counties, Respondent.
    
      Gov/nty co-operative jb'e insurance — a by-law that the amount of the loss shall be finally determined by certain committees of the company is not against public policy — the interest of a member of the committee as policyholder or director does not invalidate its decision.
    
    A stipulation contained in the by-laws of a county co-operative fire insurance company, incorporated under the Insurance Law (Laxvs of 1892, chap. 690, art. 9), and made a part of the .policy, providing that losses shall be adjusted by a committee of three directors, and that in case a loser is dissatisfied with the action of the adjustment committee, he may appeal to the executive committee, composed of the president, the secretary and three members of the com- . pany elected by the directors, whose decision shall be final, does not improperly oust the courts of jurisdiction, and, being authorized by the statute, is valid.
    Nor, it seems, irrespective of the statute, in the absence of any proof of fraud, mistake or misconduct, is it void as against public policy by reason of the fact that the adjusters are officers in, and members of, the corporation, arid thus liable to assessment for losses.
    The pecuniary interest of a director or member in such a corporation which, by its constitution, requires that applications to the amount of §200,000 shall be made to it before any policy shall be issued, is too slight to disqualify him from serving as a member of either committee.
    Appeal by the plaintiff, Winfield S. Spink, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of. the county of Genesee on the 10th. day of June, 1897, upon the dismissal of the complaint by direction of the court after a trial at the Genesee Trial Term, and also from an.order entered in said clerk’s office on the 8th. day of June, 189.7, upon which.said judgment was entered.
    . The defendant respondent herein is a mutual.association composed of farmers residing in Wyoming and Genesee counties, in the State of New York, incorporated as a co-operative fire insurance company under article 9 of the Insurance Law (Laws of 1892, chap. 690), relative to town and county co-operative insurance companies. It adopted a constitution and by-laws providing for- the regulation of its affairs .and the conduct of its business. AH' persons insured by the cothpany became members thereof. Eác'h member' miist individually" carry one-third of his risk. The ; risks , are limited upon a single building to $5,000. Losses are to be adjusted by three directors, one of whom, shall be the director of the town within whose jurisdiction the loss occurred. Upon the com-, pletion of the adjustment, the adjusting committee report to the secretary of the corporation the result they have reached, giving an itemized account of the property lost or damaged and the adjusted valuation of each item, together with such other information as in their judgment the circumstances of the case may require. Provisions are made for the payment of this loss out of the treasury of the corporation, if sufficient funds exist there; if not, assessment is made upon all the members of the corporation, including the claimant. “ In case of dissatisfaction on the part of the losers with the action of the adjusting committee in adjusting any loss, an appeal may be taken to the executive committee, who shall proceed to make such an examination of the case as in their judgment the circumstances may require, and their decision shall be final. Any appeal shall be made within five days from the date of the adjustment.” This executive committee consists of the president, secretary and three members of the company elected by the board of directors. On the 2d day of July, 1895, the defendant issued its policy, No. 508, to the plaintiff. The policy, as required by section 266 of the Insurance Law, liad attached to it a printed copy of its by-laws and regulations, and also the constitution of the company, and was made and accepted by the plaintiff subject to and with reference to the constitution, by-laws and regulations, and the plaintiff in his application for the insurance agreed to be bound thereby. The by-laws contained the provisions as to adjustment and the payment of losses and the appeals above referred to. The policy insured the plaintiff’s dwelling house and barns, and farm produce, clothing and furniture, in the sum of $5,450. On the 16th of August, 1896, one of the barns, with the produce therein, and farming utensils, was destroyed by fire, and the dwelling house and other property damaged thereby. The complaint in the action set forth the fact of the insurance, the loss, a. copy of the policy, which included the constitution and by-laws of the company; and the Jth subdivision of the complaint is as follows: “ The plaintiff duly fulfilled all of the conditions of said insurance on his part as in said contract or certificate of insurance required to be fulfilled and performed by him, and that immediately after said fire, and on the 17th day of August, 1896, this plaintiff duly notified the president of the defendant of such fire and loss, .and did soon thereafter prepare and deliver to the board of adjusters of the defendant a' written statement of the personal property lost and destroyed by such fire, giving the amount and value of each article, and also of such other matters as was necessary to enable the adjusting committee-or board of adjusters aforesaid to make a proper adjustment of such loss,- which said statement, so prepared and delivered as aforesaid, was duly verified by this plaintiff and presented to such adjusting committee or board of adjusters in the manner as required by said certificate of insurance.
    “ Plaintiff' further alleges that thereafter,' and on or about the 24th day of August, 1896, said- board of adjusters made an adjustment of such loss as aforesaid, which was unsatisfactory to this plaintiff, and' he, being dissatisfied therewith, duly took an appeal therefrom to the executive committee of said defendant, as permitted and provided by said certificate of insurance, which said executive committee on or about the middle of September, 1896, proceeded to make an examination of the case, as provided by section 39 of the constitution and by-laws of said defendant, endorsed upon the back of said certificate, and that on or about the date last aforesaid the said executive committee rendered a decision upon said appeal which is and was entirely unsatisfactory to this plaintiff.”
    The plaintiff further alleges that the actual value of the property destroyed and damaged was $5,000; that the time had elapsed required by the policy for the payment thereof after due notice and demand of payment of the loss by the plaintiff in conformity with the by-laws and conditions annexed to his certificate of insurance, that such payment had been refused; and judgment is demanded for $3,333.33 with interest:
    The defendant answered, denying the value of the property lost and damages as claimed by the plaintiff, admitting the issuing of the policy and the loss by fire and the facts- set up in subdivision 7th of the complaint; but alleged that the plaintiff had made false statements in his application as to the cost and value of the property insured. Neither the complaint nor the answer alleges the amount that the adjusting committee awarded to the plaintiff for his loss.
    Upon the trial the defendant’s. counsel moved to dismiss the plaintiff’s complaint upon the pleadings upon various grounds, among which was that, upon the facts alleged in the complaint, it failed to state a cause of-action, and that the plaintiff was bound by the determination of the adjusters, as affirmed by the executive committee upon appeal, which was final and ■ conclusive upon the. plaintiff. The motion was granted. The complaint did not allege any fraud or mistake or undervaluation of the property or any misconduct on the part of the adjusting committee or the executive committee, nor did the complaint demand that the award of the adjusters be vacated.
    
      O. P. Stockwell, for the appellant.
    
      Clarence H. Beane and Safford E. North, for the respondent.
   "Ward, J.:

The position of the appellant upon this review, is that the agreement to submit the adjustment of the loss by fire under the insurance policy to the adjusting committee of the insurance company and to exercise the right of appeal from the adjustment to the executive committee, did not oust the court of jurisdiction to determine the amount of the loss in • an action; that the agreement was void as against-public policy and relies upon Hurst v. Litchfield (39 N. Y. 377); Prest., etc., D. & H. Canal Company v. Pa. Coal Company (50 id. 250); Sanford v. Commercial Travelers' Association (86 Hun, 380; S. C., 147 N. Y. 326); Seward v. The City of Rochester (109 id. 164) and kindred cases to support this position.-

In the Hurst case there was a stipulation in a building contract that in case any question arose under it in relation to the value of the work the same should be adjusted by an architect, whose decision should be binding upon both parties. This provision was held to be void as having a tendency to exclude the jurisdiction of the court. There were other questions in the case.

In the D. & H. Canal Co. case there was an agreement to" submit to two persons (in case of a disagreement of the parties) the cost of transportation of coal, and if these persons could not agree they shoiild select an umpire. It was held that no cause of action existed until this submission was made, but the principle'was asserted that a general covenant to submit any differences that might arise in the performance of the contract would: be a nullity ; and in commenting upon the Hurst case the court says that the statement in that .case that the agreement to abide by the decision of the architect was void, was obiter.

■ The Hurst case has not been followed in this' State* but, on the. contrary, it has been settled by a long line of authorities that an agreement is valid and will be enforced, which provides that a special matter arising in the performance of a contract, such as the value of services, the loss under an insurance policy, whether work under a building contract is in conformity with the same, may be submitted to the decision of arbitrators, architects or other persons for determination; and no cause of action arises on the contract until this is done or until an effort is fairly made by the complaining party to have it done. (Austin v. Searing, 16 N. Y. 112; Warner v. Schoharie & Schenectady Counties Farmers' Mutual Fire Insurance Co., 15 N. Y. Supp. 632; Sweet v. Morrison, 116 N. Y. 19, 34; Perkins v. Giles, 50 id. 228 ; .O'Brien v. The Mayor, 139 id. 543.)

It follows that, when the reference or arbitration is complete, and a result reached' or an award made by .the arbitrators or other persons, it is binding'upon all of the parties to the contract and will be. enforced unless it is set aside for fraud, mistake. or misconduct on' the part of the arbitrators,, or for sucli other reason .as equity recognizes as sufficient for that 'purpose. (Sweet v. Morrison, 116 N. Y. 27, and cases cited.) .

■ In the case, before us the only question submitted to tlie.board of adjusters or to the executive committee oil appeal was the extent, of the loss-of the plaintiff against which he was insured. The plaintiff submitted to the jurisdiction of the adjusters and to the executive committee on appeal this question of the loss. This appears in his complaint. No reason is. given in the complaint why the plaintiff should not abide- by -the. -decision, of these bodies to which he had Stipulated to submit the question except -that he is. dissatisfied with the amount, of the award that has been made for his loss. No fraud or misconduct on the part of these committees or boards of the associa^ tion is alleged in the complaint, and the theory of .the plaintiff’s case, seems to have been that he could, subject the association to the. expense and trouble of this arbitration and the appealand that, if he was not satisfied with the result, he could go to the courts for redress or for another determination of the amount of his loss, repudiating his contract in this regard and all that had been done under it. This position cannot be sustained.

The true rule and distinction appears in Prest., etc., D. & H. Canal Co. v. The Pa. Coal Co. (supra), scná. that case has been approved and the distinction- recognized in Seward v. The City of Rochester (supra); Sanford v. Accident Association (147 N. Y. 328) and i-nany other cases.

But the appellant contends also that- the stipulation as to the loss, which we have been considering in this case, is void as against public policy, because the adjusters are officers in and members of the defendant corporation, and are liable to assessment for any loss that may be sustained under the plaintiff’s' insurance policy, and have a pecuniary interest in adjusting the loss as low as possible.

Article 15 of the constitution of the corporation provides that no policy shall be issued by the company until application for insurance has been made to the amount of $100,000 in .each of the counties of Wyoming and Genesee.

The members of the adjusting or executive committee under the conditions of its association could have but slight pecuniary interest in acting unfairly or in violation of their duty in adjusting the loss.

The plaintiff made his contract in this regard, with full knowledge of the pecuniary interest of the members of the tribunals who were to pass upon his loss. ' ■

Judge Vann says in Sweet v. Morrison, supra (at p. 27): “ While neither natural nor legal disabilities hinder a person from being an arbitrator, provided the fact is known to the parties at the time of the submission, still, as. he is the agent of both parties alike and impartiality is the fundamental requisite, the courts closely scrutinize the action of an arbitrator whose relation to one of the parties was such as to naturally influence the judgment even of an honest man-.” (Citing Morse Arb. & Award, 99; Russ. Arb, 105.).

As we have said, the integrity and fairness of these committees have in no manner been impeached or attacked in. the complaint.

A conclusive answer to this contention is that this method of adjusting the loss is authorized by statute. Section 267 of the Insurance Law provides that “ every policyholder sustaining a loss or damage from any cause specified in the policy, shall immediately notify the president or secretary of the corporation of such loss or damage, and the officers of the corporation shall at once proceed to ascertain and adjust such loss or damage in the manner provided by the charter' and by-laws and the provisions of this article.” The statute recognizes the power of a corporation to .create by-laws to govern its business affairs, and directs in section 266 that a printed copy of the by-laws shall be attached to each policy issued.

The logic of the appellant’s position in this regard would lead to the exclusion of a taxpayer from a jury u]3on the trial of a case which would involve taxation upon him -to pay the verdict that he might render, f of it can be said that he has a pecuniary interest in the case before him.

The cases cited by the learned counsel to sustain this position we have consulted, but they fail to do so.

It was suggested upon the argument of this appeal that, under the complaint as "it- stands, the plaintiff upon a new trial could be pez'znitted to recover the amount of his loss as fixed by the adjusters, and, therefoz’e,. that we. should not affirm this jzidgment, but. should grant a new trial.

.The difficulty with this view lies in the fact that the coznplaint does not ask for this relief, but repudiates the award of the adjusting board and bzings this action in hostility to it. • The pleadings do not inforzn izs' even of the amount fixed by the , adjustez’s -as the plaintiff’s loss; nor was this claim pz-esented to the trial court. Had the plaintiff done so, that court might have permitted a recovez^y for the amount of the loss as adjusted, with intei^est, and the, amendment of the pleadings, if necessary, to show the amount of the adjustment! '

We think the plaintiff should stand or fall by his own theoz*y of the action azid that the judgmezit and order appealed, from should be affirmed, with costs.

All concurred.

Judgment and order affirmed, with costs.  