Gillis v. Sun Insurance Office, Ltd.

Defendant insurer has appealed from a judgment, following trial by the court, which awarded plaintiff, as assignee of the alleged insured under its policy, the sum of $3,365.03, together with interest from April 18, 1963, on account of a loss which the trial court found came within the provisions of the policy.

Appellant contends that the owner of the property, which is one of plaintiff’s assignors, was not a party to the contract of insurance; that the loss was one which is excluded by the terms of the policy; and that the damages are erroneously computed. The foregoing contentions are accompanied by specific assignments of alleged errors of the lower court in making its findings of fact and conclusions of law, and in failing to find as requested by appellant.

The pertinent facts, as set forth in the findings and where disputed, as reflected by the evidence, are as follows:

During the period from May 3, 1961, to and including May 7, 1962, Trident, Inc., was a corporation duly organized and existing under the laws of this state. On May 7, 1962, Kingston Trio, Inc., a similar corporation, became the successor in interest to Trident, Inc., by means of a merger carried out pursuant to section 4124 of the Corporations Code of the State of California. First, Trident, Inc., and then Kingston Trio, Inc., as its successor, owned and operated the Trident Restaurant in Sausalito.

In July 1962 docking facilities were constructed on the water side of the restaurant. These facilities, about 96 feet long, consisted of three fibre glass float sections. They were each reinforced with two by ten and two by six timbers and bolted together with the use of steel plates. The whole thing was designed so that if there was a failure the failure would be complete. A gangway was attached to the existing dock by a hinge which was fabricated out of a 1%-inch pipe inside sections of 1%-inch pipe that were respectively attached to the fixed deck off the restaurant and the gangway. The pipes were held together by pipe caps on the ends of the inner pipe. The other end of the gangway had steel wheels with rubber tires which rested on the float. Subject to the terms of a conditional sales contract, Kingston Trio, Inc. was the owner of these facilities at all times from their construction to their loss.

On July 12, 1962, defendant issued its policy of fire insurance “On Docks and Piers Situate: Bridgeway, Sausalito, California” covering the foregoing docking facilities for a term of three years from July 12, 1962. The policy named “Trident, Inc.” as the insured and contained a loss payable clause to “United States Leasing Corporation” as mortgagee. The court’s findings and conclusions and the express terms of the policy may be set forth more appropriately under the points to which they relate.

On or about January 30, 1963, a violent windstorm arose and caused the gangway to be lifted up and to fall violently upon the docking facility, and as a result thereof the facility

The court found cost of repairs in the sum of $3,365.03. The parties stipulated at oral argument that $50 of this sum should be remitted. Appellant further urges that all, or, in any event, an appreciable portion of the remaining cost is not attributable to the risks covered by the policy, and that the court erred in fixing the date from which interest would run.

Kingston Trio, Inc. filed claim and proof of loss with defendant on April 18, 1963. Defendant refused to pay. Kingston Trio, Inc. and United States Leasing Corporation thereafter assigned their claims to plaintiff, who was granted judgment as such assignee.

Respondent was entitled to site on the claim, as assignee of Kingston Trio, Inc.

The complaint alleged that the policy upon which the action is predicated was issued to and insured Trident, Inc. against direct loss to the insured property by windstorm. The answer admitted the foregoing, and in denying liability contains a recital that “it is admitted that said policy insured docks and piers at Bridgeway, Sausalito, California. ” As a separate defense the defendant alleged: That in and by said policy of insurance it was and is provided that said policy cannot be assigned without consent to [sic] this defendant and that it would be void if the insured concealed material facts; that defendant never consented to assignment of said insurance to the existing corporation of Kingston Trio, Inc. or to plaintiff Gil-lis and that said changes of name, merger and legal assignment were never disclosed to defendant by its insured, Trident, Inc.”

The trial court found that the policy was issued in the name of Trident, Inc. as a result of mistake; and that it insured the docking facility. It concluded as a matter of law that on the date in question a valid contract of insurance was in full force and effect between appellant, as insurer, and Kingston Trio, Inc., as insured, covering the docking facility. Appellant attacks the foregoing findings and conclusions and those related thereto which refer to compliance with terms of the policy by Kingston Trio, Inc., and its assignment to

Neither lack of insurable interest in Trident, Inc., nor lack of consent to assignment is determinative of the rights of respondent and her assignor in this ease. It is true that the contract is void if the insured has no insurable interest; that such interest must exist when the insurance takes effect and when the loss occurs; and that any stipulation to the contrary is void. (Ins. Code, §§ 280, 286 and 287.) Nevertheless the interest of Trident, Inc. cannot be in issue here. The complaint alleged (and thereby created an ambiguity with the allegations, first referred to herein, which state that a policy was “issued to” and “insured” Trident, Inc.) that Trident, Inc. ceased to exist more than two months before the policy was issued. It, therefore, not only had no interest in the property the policy purported to insure, but could not even be a party to that contract. (See J. C. Peacock, Inc. v. Hasko (1960) 184 Cal.App.2d 142 , 149-152 [ 7 Cal.Rptr. 490 ]; and cf. J. C. Peacock, Inc. v. Hasko (1961) 196 Cal.App.2d 363 , 364-370 [ 16 Cal.Rptr. 525 ].)

Similarly it is futile to speculate on whether or not Trident, Inc. could or did assign the policy to Kingston Trio, Inc. (see Ins. Code, §§ 2071, 2078; Bergson v. Builders’ Ins. Co. (1869) 38 Cal. 541 , 542-545; and Greco v. Oregon Mut. Fire Ins. Co. (1961) 191 Cal.App.2d 674 , 682 [ 12 Cal.Rptr. 802 ]); or whether or not the insurance would follow a transfer of the property from the insured to another (Ins. Code, § 305; and see Pacific Indent. Co. v. Industrial Acc. Com. (1934) 136 Cal.App. 158 , 161-162 [ 28 P.2d 397 ]; and cf. Capital Glenn Min. Co. v. Industrial Acc. Com. (1932) 124 Cal.App. 79 , 83 [ 12 P.2d 122 ]). At the time the insurance policy was issued Trident, Inc. was defunct, the property was owned by Kingston Trio, Inc. and there was never any attempt to transfer the insurance or the property after it was issued.

Further inquiry must be directed to a determination of whether or not appellant contracted with anyone, and if so whether or not that party had an insurable interest. Both parties have referred to Strauss v. Dubuque Fire & Marine

Capital Glenn Min. Co. v. Industrial Acc. Com., supra, 124 Cal.App. 79 , which is cited and distinguished in Pacific Indem. Co., supra, (136 Cal.App. at p. 161), is more persuasive. It holds that a compensation insurance carrier which renews a policy originally issued to a partnership, which had been transformed into a corporation, when it had information which should place it upon inquiry regarding the identity of the assured before issuing the new policy, is estopped to deny that it insured the corporation. The record in the instant case is silent on what transpired in connection with the issuance of the policy upon which this action is predicated. There are present, however, several factors noted in Capital Glenn. The named insured was not in existence when the policy was written; the appellant insurer admittedly intended to insure the property in question; there was no fraud or misrepresentation on the part of the insured; there was no increase of hazard on the part of the insurance company on account of the error in the name of the insured or because of the merger; the management remained the same; and the insurer accepted and retained the premium payments. The only missing element is the lack of evidence to show whether or not appellant or its agents had any information which would put them on inquiry as to the true identity of the owner of the property to be covered by the insurance.

Respondent has pointed out: “To constitute a valid contract of insurance the minds of the parties must have met on the identity of the person with whom they are dealing.” (K. C. Working Chemical Co. v. Eureka-Security F.&M. Ins. Co. (1947) 82 Cal.App.2d 120 , 131 [ 185 P.2d 832 ].) It is also axiomatic that the court cannot reform and remake a contract for alleged mistake where there was never any such common intent. (Milwaukee etc. Co. v. Palatine Ins. Co. (1900) 128 Cal. 71 , 74-75 [ 60 P. 518 ]; National Auto. Ins. Co. v. Industrial Acc. Com. (1938) 27 Cal.App.2d 225 , 227 [ 80 P.2d 1024 ].) In each of the cases last cited the court was faced with two alternative contracts, and refused to disturb that which was written and agreed to. In this case there is either a reformed contract with those entitled to the property which the appellant intended to insure and charged a premium for, or no contract at all. Under these circumstances, and in the absence of any show of prejudice to the insurer, the trial court properly granted reformation for mistake and recognized the rights of Kingston Trio, Inc. under the contract. (See National Auto. & Cas. Co. v. Industrial Acc. Com. (1949) 34 Cal.2d 20 , 24-25 [ 206 P.2d 841 ]; Gillanders v. DaSilva (1931) 212 Cal. 626 , 630-632 [ 299 P. 722 ]; Maier Brewing Co. v. Pacific Nat. Fire Ins. Co. (1963) 218 Cal.App.2d 869 , 874 [ 33 Cal.Rptr. 67 ]; Beach v. United States Fid. & Guar. Co. (1962) 205 Cal.App.2d 409 , 416 [ 23 Cal.Rptr. 73 ]; American Surety Co. v. Heise (1955) 136 Cal.App.2d 689 , 695-696 [ 289 P.2d 103 ]; Eagle Indem. Co. v. Industrial Acc. Com. (1949) 92 Cal.App.2d 222 , 224-225 [ 206 P.2d 877 ]; Cantlay v. Olds & Stoller Inter-Exchange (1932) 119 Cal.App. 605 , 614 [ 7 P.2d 395 ].)

Appellant finally asserts that to permit respondent to obtain relief by way of reformation of the policy for mistake is not warranted by the pleadings. As noted above the complaint is ambiguous. It contains allegations, which appellant originally denied for lack of information and belief, and sub

It being established that Kingston Trio, Inc. was entitled to the benefits of the policy as the intended insured, no issue is or can be raised concerning the established assignment of the claim to plaintiff. (See Ins. Code, § 520 ; Greco v. Oregon Mut. Fire Ins. Co., supra, 191 Cal.App.2d 674 , 682-683.)

The loss was not excluded by the terms of the policy.

The trial court found that “ [T]he policy of fire insurance issued by defendant insured the said docking facility against loss or damage caused by wind,” and that it “excluded coverage for loss occurring to the docking facility caused by water or damage from, contributed to or aggrevated [sic] by surface water or waves.’’

The foregoing substantially sets forth the pertinent provisions of the policy. On its face the policy is a “California Standard Form Fire Insurance Policy” insuring against loss from fire and lightning. For an extra premium there was issued and attached to the policy an “Extended Coverage Endorsement (Perils of Windstorm and . . . [naming other perils]) ’ ’ which, insofar as is material herein recites:

“In consideration of the premiums for this coverage, and subject to the provisions herein and in the policy to which this endorsement is attached including endorsements thereon, this policy is extended to insure against direct loss by windstorm [naming other perils], except as hereinafter provided.

“Provisions applicable only to windstorm and hail: [none asserted as material herein].

The owner of the dinghy went down that evening and dragged his boat up on top of the dock. When he left the north end of the float was slightly lowered and the rest of it was all right. The next morning the storm still persisted, the waves were very high and the water was going over the top of the dock. The dock was sunk further and it had broken in two pieces. One part, which had broken—“exploded”—right through the center of the pontoon about one foot on one side of the connection, was submerged, and two parts were still floating and securely fastened together. By 11:30 a.m. the other two sections had submerged. A diver descended to make observations, but it was too dangerous to work on the dock then.

The builder of the dock opined that the whole thing was so designed that if it had a failure the failure would be complete ; that if one section was submerged the wave action could cause sufficient force to break the pontoons in the manner in which he found them; and that it was possible that the force of the gangway on top of the first pontoon could have cracked it.

From the foregoing it is clear that the concessions made by respondent and the trial court are justified if not compelled by the evidence. How can it be said that the loss was not contributed to or aggravated by water or waves? Respondent does not attempt to answer this question, but is content to rest on the decision in Sabella v. Wisler (1963) 59 Cal.2d 21 [ 27 Cal.Rptr. 689 , 377 P.2d 889 ], in which it was held that an insurer, which insured a house ‘ against all risks of physical loss except as hereinafter excluded,” was liable where the negligence of a third party, rather than the aeknowl

“It would appear therefore that the specially excepted peril alluded to in section 532 as that ‘but for’ which the loss would not have occurred, is the peril proximately causing the loss (see Herron v. Smith Bros., Inc., 116 Cal.App. 518 , 521 [1] [ 2 P.2d 1012 ]), and the peril there referred to as the ‘immediate cause of the loss’ is that which is immediate in time to the occurrence of the damage. (See Black’s Law Dictionary (4th ed. 1951) ‘Immediate Cause,’ p. 884; 6 Couch, Insurance (1930) § 1463, pp. 5298-5299; 28 Cal.Jur.2d, Insurance, § 446, pp. 160-161.) ” (59 Cal.2d at pp. 33-34.)

Appellant insists that the foregoing decision is not controlling because the use of the words “direct loss by windstorm” in reference to the peril, and “caused by, resulting from, contributed to or aggravated by” (italics added) in connection with the exclusions voids the application of the usual rule of proximate cause, and clearly and unequivocally expresses the intent that regardless of the initiating or proximate cause of damage, no recovery can be had if an excluded cause has any part, no matter how small, in causing the damage. The eases on which it relies establish that where the damage results from the combined joint, but independent, action of a peril insured against, and an excluded peril, the foregoing and similar language will suffice to relieve the insured from liability. (See Newman v. Great American Ins. Co. (1965) 86 N.J. Super. 391 [ 207 A.2d 167 ]; Great American Ins. Co. v. Carr (1964) (Tenn. App.) [11 Fire & Casualty Cases 1414]; Cox v. Queens Ins. Co. of America (Tex. Civ.App. 1963) 370 S.W.2d 206 ; Palatine Ins. Co. v. Coyle (Tex. Civ.App. 1917) 196 S.W. 560 , affd. (Tex. Com. App.) 222 S.W. 973 ; and Wooton Hotel Corp. v. Northern Assur. Co., Ltd., (E.D., Pa. 1944) 57 F.Supp. 112 , affd. (3d Cir. 1946) 155 F.2d 988 , cert. den. (1946) 329 U.S. 758 [ 67 S.Ct. 111 , 91 L.Ed. 654 ].)

None of the foregoing eases specifically meets the situation in Sabella where the action of the peril insured against operates through an excluded peril to cause the damage. Here the facts justify a finding that the injury to the docking facility caused by the fall of the gangway—a direct loss by the windstorm which broke off and permitted the gangway to fall on the dock—was the start of a chain of events which permitted the waves to cause damage to the float, first through penetrating the cracked pontoons and submerging it in part, and then through the unnatural strain on the partially submerged facility which resulted in further breaking up and the sink

Factual basis for this conclusion of the lower court is found in evidence which reflects that the docking facility had passed through two prior storms, where it was only subjected to the actions of the water and waves, with but minor damage.

Legal support for respondent’s position is found in Sauer v. General Ins. Co. (1964) 225 Cal.App.2d 275 [ 37 Cal.Rptr. 303 ], wherein the policy used the same qualifying words which have been emphasized above in describing the peril— “ ‘direct loss to the property covered caused by: ... 15. Accidental discharge, leakage or overflow of water. . . .’ ” The ‘Earth Movement Exclusion” excluded, as here, “ ‘loss caused by, resulting from, contributed to, or aggravated by .. . earth sinking. . . .’ ” (Italics added.) The trial court found that leakage within the coverage of the policy caused settlement damage. It denied the insurer’s attempt to exclude the loss under a water exclusion and a settling and cracking exclusion, but found “that while the loss claimed was not caused by or resulting from the settling of the ground, such loss was contributed to and aggravated by the earth sinking following the water leak.” The appellate court applied the principles set forth in Sabella and reversed a judgment for the insurer. It upheld the insured’s contentions that the loss “was not the result of ‘earth movement,’ ‘earth sinking,’ or ‘settling of foundations’ or of ‘water below the surface of the ground’ within the exclusionary terms in their policy”; and that “the uncontroverted evidence clearly shows that defendant is liable within the terms of its policy because the accidental leakage and discharge of water upon and into the ground from within the plumbing system of their house was the efficient proximate cause of their loss rather than settling or sinking of the earth.” (225 Cal.App.2d at pp. 277-278.) The decision is unsatisfactory, in failing to face up to the finding, which was compelled by the evidence, that in fact the loss was contributed to and aggravated by the earth sinking following the water leak. In Sabella it was recognized that the settlement caused the damage, but resort to the exclusionary clause was denied

In the instant case it actually cannot be ascertained whether the final loss was caused exclusively either by the windstorm or by the excluded waves. In either of these events the result is obvious. It does appear that one of the causes of the loss was produced by some other element propelled and driven by the windstorm. There can be no question that the original damages caused by the gangway when it struck the dock was a loss from windstorm. (Firemen’s Ins. Co. of Newark v. Senseney (4th Cir. 1957) 250 F.2d 130 ; Pearl Assur. Co. v. Stacey Bros. Gas Const. Co. (6th Cir. 1940) 114 F.2d 702 ; Phenix Ins. Co. v. Charleston Bridge Co. (4th Cir. 1895) 65 F. 628 [ 13 C.C.A. 58 ]; Sun Ins. Office, Ltd. v. Guest Camera Store, Inc. (1963) 108 Ga.App. 339 [ 132 S.E. 2d 851 ]; Gerhard v. Travelers Fire Ins. Co. (1945) 246 Wis. 625 [ 18 N.W.2d 336 ]; Queen Ins. Co. v. Hudnut Co. (1893) 8 Ind.App. 22 [ 35 N.E. 397 ]; 11 Couch on Insurance 2d, §42:335, p. 146; Grissom, op. cit. p. 632; and cf. Wootton Hotel Corp. v. Northern Assur. Co., Ltd., supra, 57 F.Supp. 112 , where the water which was driven by the wind was, as here, expressly excluded.)

So here common experience and understanding suggest that when personal property of the nature of a floating dock is damaged so that its buoyancy is affected, some water damage will result. The record sustains the implied finding of the lower court that the windstorm alone was the dominant or

In the absence of any other evidence of when the claim was rejected the trial court’s findings and conclusions should be sustained.

Appellant’s principal contention is that only one-third of the floating dock was damaged by windstorm and that the rest was destroyed by subsequent action of the waves. (See Annotation, 93 A.L.R.2d 145 , supra, at pp. 165-166, for cases where separation of damages is proper.) It points to the evidence narrated above concerning the observations of the dinghy owner and the original builder that two sections of the dock remained afloat until around noon the day following the original damage to the other section. The question of whether any or all of the damage and loss was caused by windstorm is one of fact. Since the evidence justifies the finding the windstorm was the dominant, efficient and proximate cause of the loss of the whole float, it likewise justifies the trial court’s rejection of appellant’s contention that two severable losses and not one loss ensued.

The judgment is modified by reducing the principal sum thereof $50 to $3,315.03, and as so modified it is affirmed. Respondent to recover costs.

Sullivan, P. J., and Molinari, J., concurred.