National Fire Insurance Company v. Banister

Court of Appeals of Georgia, Case No. 38899, decided June 22, 1961. Townsend, Presiding Judge, wrote for the Court; Frankum and Jordan, JJ., concurred. Our text comes from the Caselaw Access Project (case.law), Harvard Law School’s open archive of published U.S. case law. The archive lists two different cases beginning at page 13 of volume 104; this is the one docketed 38899. Removed: the reporter’s head matter — the docket line and the caption “NATIONAL FIRE INSURANCE COMPANY v. BANISTER.” — the archive’s bracketed label naming the opinion’s author, and the decision-date line and counsel-of-record lines (Bagwell & Hames, James A. Bagwell, for plaintiff in error; Walter O. Allanson, contra), which the scan drops into the middle of the opinion between the third and fourth divisions; all of that information is stated in this line instead. Every repair made to the remaining text, in full: (1) “totally destroyed by ñre” restored to “fire”; (2) “the amount wthich it would cost” restored to “which”; (3) “damage by fire to tfhe property insured” restored to “the”; (4) the fourth division, which the scan numbers “3.” a second time, is printed here as “4.” — the opinion’s own closing sentence refers to “divisions 2 and 4,” and when this same lawsuit came back to the Court of Appeals the panel cited this decision as “National Fire Ins. Co. v. Banister, 104 Ga. App. 13 (4), (121 SE2d 46)” for exactly that ruling, Banister v. National Fire Ins. Co. of Hartford, 106 Ga. App. 507 (1962); (5) the judge’s name line is set in bold. On the citation: the archive’s record for this case carries only the Georgia Appeals cite; the parallel cite 121 S.E.2d 46 is taken from the Court’s own later opinion in the same litigation, quoted above. No word of the Court’s has been changed, condensed, reordered, or paraphrased.

The full opinion

Townsend, Presiding Judge.

1. Pleadings are to be given a reasonable intendment, and a strained and unnatural construction will not be given them in order to raise an inference against the pleader. Where, as here, it appears that the plaintiff carried a policy of fire insurance on a described house and contents, an allegation as follows: “… defendant insured plaintiff for the period stated in said policy of insurance against loss by fire of the building and contents belonging to plaintiff; said building and contents owned by plaintiff and described in said policy being a brick veneer building with approved roof occupied as a grocery and filling station … ,” it appears obvious that the plaintiff intends to allege ownership of the building as well as the contents. A general demurrer on the ground that the petition fails to set forth a cause of action would not in any event reach such a defect even if it existed, for as the defendant recognized, the petition would still state a cause of action for the personal property.

2. Where in a fire insurance policy containing the New York standard mortgage clause the proceeds in the event of loss are payable to the named insured and mortgagee as interest may appear, an allegation that the lien of the bank has been paid and that no person other than the insured has any interest in the property is not sufficient to excuse the plaintiff from joining such mortgagee as a party plaintiff, the action being in its nature a joint action. Georgia Cas. &c. Co. v. Pincus, 89 Ga. App. 836 (3) (81 SE2d 527); Firemen’s Ins. Co. v. White, 181 Ga. 759 (184 SE 316). The defendant insurance company is entitled to the protection of having all parties named in the insurance policy joined as parties plaintiff in order that they may be bound by the judgment rendered. This may be done by amendment. Wallace v. Brannen, 56 Ga. App. 856 (193 SE 901).

3. A special demurrer, being itself a critic, must be perfect in form. To an allegation “that plaintiff immediately made known to the defendant the fact of loss and destruction of said building and contents by fire, furnishing proof of said loss and the facts surrounding same” the defendant demurred on the grounds that the allegation was vague, indefinite and a conclusion “there being no allegation … in the petition setting forth the contents of said proof of loss and the facts surrounding the same.” The demurrer does not raise the issue that the plaintiff did not file the proof of loss within the time limited in the policy. A statement that plaintiff furnished defendant a proof of loss is not a conclusion, and it necessarily follows that the defendant is apprised of the contents thereof. The proof of loss is not itself the foundation of the action, which is based on the contract of insurance; accordingly it need not be attached as an exhibit to the petition. These special demurrers are without merit.

4. It is contended by special demurrers 12, 13, 14 and 15 that the plaintiff has failed to allege facts sufficient to support the conclusion that he is entitled to recover the sum of $10,000, the total insurance on the premises. The plaintiff alleged merely that the policy in question granted him fire insurance in amount of $6,000 on the building and $4,000 on the contents; that the building and contents were totally destroyed by fire, and that the company is liable to him in the sum of $10,000. The contract was to insure the property “to an amount not exceeding the amounts above specified … to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality.” The legal liability of insurance companies under the former Code § 56-701 was to pay “the full amount of loss sustained upon the property insured by them: Provided, said amount of loss does not exceed the amount of insurance expressed in the policy.” The measure of the loss is the fair market value of the property at the time of loss. Atlanta Title &c. Co. v. Allied Mortg. Co., 64 Ga. App. 38, 40 (12 SE2d 147). “Beyond all doubt, ‘to indemnify the assured against loss,’ not to arbitrarily pay him the face value of the policy in the event of damage by fire to the property insured, is essentially the only office a policy of fire-insurance can legally perform.” Fireman’s Fund Ins. Co. v. Pekor, 106 Ga. 1, 10 (31 SE 779).

Paragraph 4 of the petition is subject to the demurrers interposed because neither there nor elsewhere in the petition does the plaintiff allege the amount of his loss.

For the reasons set out in divisions 2 and 4 of the opinion the trial court erred in overruling certain special demurrers to the petition and thereafter erred in overruling the general demurrer.

Judgment reversed.

Frankum and Jordan, JJ., concur.

What it decided

A fire destroyed a brick veneer building “occupied as a grocery and filling station” and everything in it. The policy carried $6,000 on the building and $4,000 on the contents. The owner sued for the full $10,000 and pleaded, in substance, that the property was insured for those amounts, that it burned, and that the company therefore owed him $10,000. The insurer attacked the complaint by demurrer. The trial court overruled the attacks; the Court of Appeals reversed in part.

Four rulings, in the Court’s order:

1. Ownership was adequately alleged. “Pleadings are to be given a reasonable intendment, and a strained and unnatural construction will not be given them in order to raise an inference against the pleader.” And a general demurrer would not have reached the point in any event, because the complaint still stated a case on the personal property.
2. The mortgagee has to be in the suit. Where the policy carries the New York standard mortgage clause and proceeds are payable to the insured and the mortgagee “as interest may appear,” saying the bank’s lien has been paid does not excuse leaving the mortgagee out. The action “being in its nature a joint action,” the insurer “is entitled to the protection of having all parties named in the insurance policy joined as parties plaintiff in order that they may be bound by the judgment rendered.” Fixable by amendment.
3. The proof-of-loss attack failed. “A special demurrer, being itself a critic, must be perfect in form.” Saying you furnished a proof of loss is a fact, not a conclusion, and the proof of loss “is not itself the foundation of the action, which is based on the contract of insurance,” so it need not be attached.
4. The valuation ruling — the reason this case is on the shelf. The policy insured “to an amount not exceeding the amounts above specified … to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality.” The insurance code of the day made the company liable for “the full amount of loss sustained upon the property insured by them: Provided, said amount of loss does not exceed the amount of insurance expressed in the policy.” Then the sentence that carries the case: “The measure of the loss is the fair market value of the property at the time of loss.” And, quoting an older Supreme Court of Georgia decision, “Beyond all doubt, ‘to indemnify the assured against loss,’ not to arbitrarily pay him the face value of the policy in the event of damage by fire to the property insured, is essentially the only office a policy of fire-insurance can legally perform.”

Because the complaint nowhere stated the amount of the loss — only the limits and the fact of destruction — that paragraph was subject to attack, and the trial court should have sustained the demurrers.

What it did NOT decide

• It did not value anything. This is a pleading decision. No evidence was heard, no appraisal was reviewed, and the Court said nothing about what this building or its contents were worth.
• It does not contain the sentence it is most often quoted for. The formulation that circulates in insurance commentary — that the measure of loss “is not original cost or replacement value … but is actual value which has been defined as fair market value of the property at the time of loss” — does not appear in this opinion. What this opinion says is “The measure of the loss is the fair market value of the property at the time of loss,” alongside the policy’s own words tying payment to actual cash value at the time of loss and capping it at like-kind-and-quality repair or replacement cost. That is narrower, and it is the version worth quoting, because it is the one the Court actually wrote.
• It did not address depreciation. Nothing here says how to compute it, whether labor may be depreciated, or what evidence a carrier may use. For Georgia’s treatment of actual cash value as a fair market value question, see American Casualty v. Parks-Chambers.
• It did not involve a home. The insured property was a grocery and filling station. Georgia’s valued policy statute, O.C.G.A. § 33-32-5, applies to a one- or two-family residential building wholly destroyed by fire and makes the policy amount conclusive of value in that situation. The Court of Appeals charged that statute in Allstate v. Baugh and quoted it in full in Georgia Farm Bureau v. Franks. If your total fire loss is a house, start there, not here.
• It is not current statutory law. The Court was already calling § 56-701 “the former Code” in 1961, and Georgia’s insurance code has been rewritten and renumbered into Title 33 since. Read the case for the valuation principle, not for the section number.
• It did not end the case. The same lawsuit came back to the Court of Appeals twice more. In 1962 the owner won a reversal on the pleadings, Banister v. National Fire Ins. Co. of Hartford, 106 Ga. App. 507. In 1963 he lost on the merits, the court holding the loss had been settled by mutual agreement and the funds fully disbursed, 108 Ga. App. 202. Banister the doctrine is not the same thing as Banister the outcome.

Why it matters to policyholders

Every property claim has two separate questions inside it, and this 1961 opinion draws the line between them cleanly. Whether you are covered is one question. How much you lost is a different question, and the policy limit is not the answer to it. A fire policy is a contract of indemnity. It pays what you lost, up to the limit — not the limit because you had one.

That cuts both ways, and you should know both edges.

The edge that helps you: the measure is fair market value at the time of the loss. Not what you paid for it. Not what a carrier’s software says a twelve-year-old roof or a nine-year-old sofa “should” be worth on a schedule. When an adjuster anchors a settlement to a purchase price from a decade ago, this is the frame that says the purchase price is not the measure.

The edge that costs you: you carry the burden of stating and supporting the amount. The owner in this case pleaded a $10,000 policy and a total loss and stopped there, and that was not enough. Modern claim practice does the same thing to homeowners in a quieter way. “It’s a total loss, my limit is $340,000, pay me” is not a loss statement. A room-by-room inventory with ages, conditions and replacement figures, a measured repair estimate, photographs from before the loss if you have them, and a written basis for every value is what turns your number into evidence. If you cannot show the amount, the amount is the carrier’s to guess.

Two practical notes from the other divisions. If there is a mortgagee named on your policy, the company can insist that the mortgagee be part of any suit — worth knowing before anyone drafts a complaint. And a flat attack on your proof of loss for “not being specific enough” is not automatically good; the Court treated the statement that a proof of loss was furnished as a fact, and the policy contract, not the proof of loss, as the foundation of the claim. Nationwide v. Wiley is the case that goes further, holding that an outright refusal to pay waives the carrier’s right to insist on proof-of-loss technicalities at all.

Documenting the amount is exactly the work a public adjuster does: measuring, inventorying, pricing, and putting a defensible number on paper with the basis attached. Litigation over what the policy means is attorney work, and we refer it out. The rest of the Georgia library is at the Georgia claim library.

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