(36 R. I. 240)

owner or by any proceeding relating to the

CO. OF NEW YORK. (Supreme Court of Rhode Island. March 13, 1914.)

1. ESTOPPEL (§ 52*)-ESTOPPEL BY CONDUCT. An estoppel in pais usually arises from the misrepresentation or concealment of material facts and is based upon the idea that it would be a fraud to permit the party estopped to assert what his conduct had denied after his denial had been acted upon in good faith.

[Ed. Note.-For other cases, see Estoppel, Cent. Dig. §§ 121-125, 127; Dec. Dig. § 52.*] 2. INSURANCE (§ 574*)—ARBITRATION OF Loss -AWARD.

The award of appraisers, selected under a fire policy to determine the amount of loss, must conform in substance and form to the agreement for submission to appraisers.

[Ed. Note.-For other cases, see Insurance, Cent. Dig. §§ 1430-1432, 1434; Dec. Dig. 574.*]

3. INSURANCE (§ 567*)-AMOUNT OF Loss "AWARD.

An agreement in a fire policy to submit the amount of loss to appraisers contemplates the making of an appraisement and also of an "award," which is the finding or judgment based upon the appraisement.

[Ed. Note. For other cases, see Insurance, Cent. Dig. §§ 1420, 1421; Dec. Dig. § 567.* For other definitions, see Words and Phrases, vol. 1, pp. 656, 657.]

4. INSURANCE (§ 665*)-FIRE INSURANCE-ACTIONS-SUFFICIENCY OF EVIDENCE.

In an action on a fire policy, which provided for the submission of the amount of loss to appraisers upon disagreement, evidence held not to sustain a finding that the presentation by defendant of the form of award to be used was intended or calculated to mislead insured or the appraisers to believe that an itemized award was not required so as to estop defendant from insisting on such award.

[Ed. Note. For other cases, see Insurance, Cent. Dig. §§ 1555, 1707-1728; Dec. Dig. § 665.*]

5. INSURANCE (§ 575*)-FIRE INSURANCE-APPRAISEMENT AND AWard.

Where the award of appraisers as to the amount of loss is invalid, it is the duty of insured, and not of the insurer, to take further steps to procure a new award, especially where the policy required the amount of loss to be determined by appraisement and award in case of disagreement before an action could be maintained on the policy.

[Ed. Note. For other cases, see Insurance, Cent. Dig. § 1435; Dec. Dig. § 575.*] 6. APPEAL AND ERROR (§ 1056*) - HARMLESS ERROR.

Since the insurance company was not required to take steps to procure a new award as to the amount of damage, upon failure of the first award and appraisement for not giving an itemized list of the property damaged, etc., the exclusion of evidence as to its failure to ask for a new appraisement was harmless in an action on the policy.

[Ed. Note.-For other cases, see Appeal and

pay any premium, mortgagee shall pay the same. The policy required "the insured" to make proofs of loss. Held, that where mortgagee had no knowledge of the failure to procure a valid arbitration of the amount of loss, as required by the policy, or of mortgagor's failure to procure a new appraisal and award upon failure of the first award, because it did not contain an itemized list of the property damaged, the neglect of mortgagor to procure such award would not prevent mortgagee from maintaining an action on the policy; the words "the insured" referring to the mortgagor.

[Ed. Note.-For other cases, see Insurance, Cent. Dig. §§ 1520-1528; Dec. Dig. § 612.* vol. 4, p. 3681.] For other definitions, see Words and Phrases,

8. INSURANCE (§ 662*)-FIRE INSURANCE-ACTION-ADMISSION OF EVIDENCE.

An award of appraisers which was invalid was properly excluded from evidence in an action on a fire policy, whether offered to show performance of the condition requiring an award or to establish the amount of loss, or for both purposes.

Cent. Dig. §§ 1697, 1698, 1700-1706; Dec. Dig. [Ed. Note. For other cases, see Insurance, § 662.*]

Exceptions from Superior Court, Providence and Bristol Counties; John Doran, Judge.

Action by Hugo Riddell against the Rochester. German Insurance Company. Verdict for defendant, and plaintiff excepts. Exception sustained, and case remitted for new trial.

See, also, 35 R. I. 45, 85 Atl. 273.

Arthur Cushing. William F. Carroll, and James F. McCartin, all of Providence, for plaintiff. C. M. Van Slyck and Frederick A. Jones, both of Providence, for defendant.

BAKER, J. This is an action of the case in assumpsit on an insurance policy for $1,500 bearing date July 25, 1907, covering certain buildings and their contents and issued to one Shmay Kotler as owner. The policy is of the Rhode Island standard form. A clause attached and forming a part of the policy is in part as follows: "Loss or damage, if any, under this policy, shall be payable to Hugo Riddell as the mortgagee (or trustee), as interest may appear, and this insurance, as to the interest of the mortgagee (or trustee) only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property, nor by any foreclosure or other proceedings or notice of sale relating to the property, nor by any change in the title or ownership of the property, nor by the occupation of the premis

7. INSURANCE ($ 612*) - FIRE INSURANCE RIGHTS OF MORTGAGEE-THE INSURED.'

case. The interest of the mortgagee, the plaintiff, rests on a mortgage deed of personal property, bearing date April 9, 1906, and duly recorded, given by Shmay Kotler to Hugo Riddell to secure the payment of a promissory note for $1,000 and covering a very considerable portion of the personal property described in said policy. At the trial the plaintiff offered evidence showing the giving of the mortgage by Kotler to Riddell; the issuing of the policy of insurance with the mortgage clause attached; the occurrence of the fire while the policy was in force; the damaging thereby of said insured and mortgaged property; the giving of notice of loss to the defendant by the insured; the furnishing, within 60 days, by the insured of proofs of loss; the disagreement of the insured and the insurer as to the amount of loss or damage; the agreement for submission to appraisers, their appointment, their declaration; and qualification and their choice of an umpire and his qualification. He then offered as the award of the two appraisers and the umpire the following, namely: "Award. To the Parties in Interest: We have carefully examined the premises and remains of the property hereinbefore specified, in accordance with the foregoing appointment, and have determined the sound value to be thirteen hundred and three and 62/100 dollars divided as follows: Property of Kotler $224. Property of Riddell $1,079.62, and the loss and damage to be seven hundred and two and 55/100 dollars divided as follows: On property of Kotler sixty-eight dollars, on property of Riddell $634.55. Witness our hands this 19th day of December, 1907." The italicized portion of the award in the original is in writing, and the rest of it is in print. The admission of this award was objected to and the objection was sustained, to which ruling the plaintiff excepted. Plaintiff made certain other offers of testimony to which the defendant objected, which objections were sustained, and to these rulings plaintiff excepted. Such of these exceptions as require consideration will appear hereafter. At the conclusion of the plaintiff's testimony the defendant moved for a nonsuit, and the motion was granted. To this ruling the plaintiff excepted. The plaintiff thereafter filed his bill of exceptions containing seven exceptions, which, aside from the first exception, were allowed by the justice presiding at the trial.

The exclusion of the award was based upon the opinion of this court in Sauthof v. American Central Insurance Co., 34 R. I. 324, 83 Atl. 441, in which in an action on a policy of fire insurance, of the Rhode Island standard form, an award giving the sound value of the damaged property and the loss therein in the aggregate, without giving "an itemized list of the several articles damaged, together with the sound value and loss upon each article," was held to be invalid and a

valid award is a condition precedent to the insured's right to maintain an action on the policy. If the question in the case at bar were identical with that in the Sauthof Case, the decision in that case would require the same decision in this case. But certain questions are raised on the record here which apparently did not arise in the former case. It is urged, first, that defendant by its conduct is barred from raising the question of the insufficiency of the award; and, if not so estopped, second, that it has waived its defects; and, third, if these claims are invalid, that the plaintiff, as mortgagee, is still entitled to recover because the invalidity of the award resulted from the act or neglect of the owner or mortgagor.

[1, 2] First, as to the estoppel: The third exception is based on the ruling of the trial judge in excluding evidence showing that the form of the award used by the arbitrators was furnished by the defendant. The plaintiff's claim is that by furnishing a form not adapted to or calling for an itemized award the defendant is estopped from questioning the validity of the award made in accordance with such form. The evidence was excluded on the ground of its immateriality. The plaintiff's claim in effect is that the furnishing by the defendant of the printed form of award with its lack of space for an itemized account creates an estoppel in pais as to the right of the defendant to an itemized award which it would otherwise be entitled to under a policy of the form herein sued upon as decided in Sauthof v. American Central Ins. Co., supra. The application of the doctrine of estoppel in pais usually arises from the misrepresentation or concealment of material facts on the part of the person to be estopped. "The primary ground is that it would be fraud in a party to assert what his previous conduct has denied when others have acted on the faith of that denial.” Am. & Eng. Ency. Law, vol. 12, 422. The agreement for submission to appraisers is at the same time the source and limitation of their authority, and the award to be binding must in substance and in form conform to this submission. 3 Cyc. 374: Continental Ins. Co. v. Garrett, 125 Fed. 589, 60 C. C. A. 395. 396.

The agreement for submission does not in terms make the policy a part thereof, so that it did not inform the appraisers of the condition in the policy on which the Sauthof decision was based. Does the agreement itself expressly or impliedly require an itemized appraisal? The clause attached to the policy containing a description of the property insured is also attached to the agree ment. The agreement provides that the persons named therein, Cooley and Sprague, "shall appraise and ascertain the sound value of and the loss upon the property damaged and destroyed by the fire of October 18, 1907. as specified below." Provision is also made

with them in matters of difference only," and that "the award of any two of them shall be binding upon both parties to this agreement as to the amount of such loss." The description of the property insured and referred to in the words "as specified below" is set out in six compact typewritten lines, and contains, among other things, the words "horses, in case of loss no horse to be valued at more than $100." Near the end of the attached clause appears the following: "Provided, however, that if the aggregate claim for any loss shall not exceed five (5) per cent. of such actual value, no special inventory or appraisement of the undamaged property shall be required. If this policy be divided into two or more items the foregoing conditions shall apply to each item separate ly; and if two or more buildings or their contents are included in a single item the application of the provision as to special inventory or appraisement shall be limited to each building and its contents." By the printed "declaration of appraisers" on the back of the agreement they swear that they "will act with strict impartiality in making an appraisement and estimate of the sound value and the loss and damage upon the property hereinbefore mentioned," and that they "will make a true, just and conscientious award of the same." By the printed "qualification of umpire" on the back of the agreement, he swears that he "will act with strict impartiality in all matters of difference only that shall be submitted to" him and that he "will make a true, just and conscientious award." As the forms for the agreement for submission to appraisers, the declaration of appraisers, the selection of umpire, the qualification of umpire, and the award are printed forms on the same paper, it may fairly be inferred that they are in common use in determining losses by fire.

[3] From these citations it is clearly apparent that the agreement is made to secure two things: First, an appraisement; and, second, an award, which is the finding or judgment based upon the appraisement. Where there are numerous articles of different kinds and quality to be appraised, it is obvious that an appraisement to be of value must be founded upon an individual appraisal of the various articles. There is no provision in the agreement expressly requiring an itemized appraisal; but its implications, as indicated by the citations above therefrom, in our judgment show that an itemized or individual appraisement was contemplated thereby. The number of articles to be appraised after different fires may be expected to vary greatly, particularly when the articles are personal property. The itemized list in such cases must also vary greatly in length. Perhaps for this reason no space for the appraisement is provided for on the form of agreement. The appraisers are apparently left to make that up themselves. In

word, "dollars," is a space with a dotted line upon which to write whatever may be necessary in addition. There is ample room allowed to make the itemized appraisement a part of the award by reference. It may here be properly noted that the endeavor by the appraisers in their award to apportion the loss between the mortgagor and mortgagee, which was no part of their duty, cannot be attributed to their being misled by the forms submitted by the defendant. It rather seems to indicate a lack of care on their part in examining the papers to ascertain their duties.

[4] The evidence in this case does not warrant the presumption or inference that the form of the award, if presented by the de fendant, was by it intended or calculated to deceive or mislead the appraisers or the insured as to the character of appraisement and award required. The evidence therefore would not establish an estoppel in pais and was rightfully excluded. The third exception is overruled.

Second, as to waiver: The fifth exception is to the exclusion of evidence showing that after the reception by the defendant of said award it never requested any new appraisal. Courts do not agree as to the duties of the parties after the appraisers and umpire have failed to reach a proper or final award, when such failure is without fault on the part of the insurer and insured. It has been held in some jurisdictions that, in case the appraisers fail to reach an award, the insured need do nothing further. Western Assurance Co. v. Decker, 98 Fed. 381, 39 C. C. A. 383; Conn. Fire Ins. Co. v. Cohen, 97 Md. 294, 55 Atl. 675, 99 Am. St. Rep. 445; Pretzfelder v. Merchants' Ins. Co., 116 N. C. 491, 21 S. E. 302, and s. c., 123 N. C. 164, 31 S. E. 470, 44 L. R. A. 424.

[5] It is held, however, on the other hand, that in case the award is invalid and a new one has not been waived it is incumbent on the insured and not the insurer to take further steps towards securing such new award. This is usually based on the provision of the policy requiring the determination of the loss in case of disagreement to be by appraisement and award and making this procedure a condition precedent to a right of action on the policy. See Fisher v. Merchants' Ins. Co., 95 Me. 486, 50 Atl. 282, 85 Am. St. Rep. 428; Vernon Ins. & Trust Co. v. Maitlen, 158 Ind. 393, 63 N. E. 755; Westenhaver Bros. v. German American Ins. Co., 113 Iowa, 726, 84 N. W. 717; Davenport v. Long Island Ins. Co., 10 Daly (N. Y.) 535; Graham v. German Ins. Co., 75 Ohio St. 374, 79 N. E. 930, 15 L. R. A. (N. S.) 1055, 9 Ann. Cas. 79; Baumgarth et al. v. Firemen's Fund Ins. Co., 152 Mich. 479, 116 N. W. 449.

The opinion of this court in Early v. Prov. & Wash. Ins. Co., 31 R. I. 225, on page 232, 76 Atl. 753, on page 756 (140 Am. St. Rep. 750), is in harmony with the doctrine set

*

Case the plaintiff, who was the insured, alleged misconduct of the umpire and an appraiser and that the award was invalid. The court says: "If the plaintiff could show that the award is invalid, that would not benefit him. * ** The plaintiff does not aver * that he ever made any request for a second appraisal." And later, on the same page, it clearly states that the plaintiff was not excused from requesting a second appraisal when the first arbitration failed without fault on the part of either plaintiff or defendant; and on page 234 of 31 R. I., page 756 of 76 Atl. (140 Am. St. Rep. 750), it further says: "Assuming that the first arbitration failed because of reasons alleged in the plaintiff's declaration, nevertheless he cannot maintain this action on the policy because he has not performed all of the conditions precedent to a right of action on the policy."

[6] The testimony excluded relative to the defendant's failure to ask for a new appraisal was therefore not material. The fifth exception is overruled.

The second exception is not pressed, and the fourth and sixth exceptions are not separately urged or discussed in plaintiff's brief on the ground, as there stated, that they are covered by the foregoing exceptions. They will therefore not be separately or further considered.

The seventh exception is taken to the granting of a motion for nonsuit, and under this exception may appropriately be considered the right of the plaintiff as mortgagee to maintain this action under the conditions disclosed by the evidence.

In the Sauthof Case, supra, the plaintiff was the owner of the property; in the present case the plaintiff is the mortgagee. The important question now raised therefore is as to what extent the rights of the mortgagee under the policy differ from those of owner or mortgagor by virtue of the condition in the mortgage clause attached to the policy: "This insurance, as to the interest of the mortgagee (or trustee) only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property." It is generally held that a mortgage clause like the one quoted "operates as a distinct, separate and independent insurance contract as between the mortgagor and the company in protection of the mortgagee's interest." Clement on Fire Insurance, vol. 1, 33, and cases cited. Such construction of a clause identical with the mortgage clause in this case is adopted in Smith v. Union Ins. Co., 25 R. I. 260, 55 Atl. 715, 105 Am. St. Rep. 882. In that case the court held that, while the contract with the owner under the policy may never attach or may fail, the contract with the mortgagee begins and proceeds subject to its own conditions and limitations. As in a way the contract of the company with the mortgagee is ingrafted on the agreement

insurance policy-it is generally held that the mortgage clause in itself does not contain all of the contract of the insurer and mortgagee, but that the policy itself is part of such contract except so far as it is modified by said mortgage clause. But the courts have not always found it easy to determine just how far the stipulation that the insurance as to the mortgagee "shall not be invalidated by any act or neglect of the mortgagor or owner" goes. For example, in Southern Loan Association v. Home Ins. Co., 94 Ga. 167, 170, 21 S. E. 375, 376 (27 L. R. A. 844, 47 Am. St. Rep. 147), the court expresses the opinion that this provision "refers to acts or neglect in connection with the property, while the risk is subsisting, and not the omission, after a fire has occurred, to comply with provisions designated to secure evidence as to the nature and extent of the loss." The court also says, in substance, that "the policy required the mortgagee" to furnish proofs of loss if the mortgagor should not do so.

*

*

On the other hand, in Union Institution for Savings v. Phoenix Ins. Co., 196 Mass. 230, 234, 81 N. E. 994, 995 (14 L. R. A. [N. S.] 459, 13 Ann. Cas. 433), referring to the provision in question, the court says: "The stipulation is not limited to acts or defaults occurring before the fire, but it includes all acts or defaults of the mortgagor which otherwise might affect the mortgagee's right to recover." See, also, Queen Ins. Co. v. Dearborn Savings, Loan & Building Association, 175 Ill. 115, 51 N. E. 717; Glens Falls Ins. Co. v. Porter, 44 Fla. 568, 33 South. 473; Dwelling House Ins. Co. v. Kansas Loan & Trust Co., 5 Kan. App. 137, 48 Pac. 891; Reed v. Firemen's Insurance Co., 76 N. J. Law, 11, 15, 69 Atl. 724, and the same case in 81 N. J. Law. 523, 80 Atl. 462, 35 L. R. A. (N. S.) 343. This latter view is not only supported by the greater weight of authority but in our judgment is the more reasonable.

[7] Having found that the defendant is not estopped to object to the award made as invalid and that it has not waived its right to object to it, under the exceptions already considered, and it appearing that the failure to obtain the valid award through the action of the appraisers appointed was through no fault of either of the parties to the appraisal, what is the duty of the parties in the premises? As already indicated above, the weight of authority is that it is the duty of the insured to seek a new determination of the amount of loss in accordance with the terms of the policy. Clement on Fire Insurance, vol. 1, pp. 158, 159; Early v. Prov. & Wash. Ins. Co., supra, and cases there cited. The failure therefore to obtain a valid award as between the insurer and the owner, as appears by the evidence in the present case, rests upon the neglect of Kotler, the insured, to proceed with the steps incumbent upon him to take as necessary to secure a valid appraisement and award of the loss. But

We are of the opinion that the construction given to the words "the insured" in Union Institution for Savings v. Phoenix Ins. Co., supra, is the correct one as applied to the policy now in suit, and that there is no

tained therein to furnish proofs of loss.

In Investment Co. v. Insurance Co., 62 Mo. App. 315, on page 323, no proofs of loss were made by either owner or mortgagee. The plaintiff was the mortgagee. The court declined to hold the words "the insured" as meaning the owner only, and said that: "It was the duty of plaintiff to see that proofs of loss were made. If made by the owner, they probably would necessarily have covered the condition as applicable to the plaintiff, but, not having been made by the owner, no recovery can be had." In that case, in reaching the conclusion, great importance was attached by the court to the words in the mortgage clause (not in the present policy) "the foregoing provisions and agreement shall take precedence over any provisions or conditions conflicting therewith contained in said policy," and it held that the condition requiring proofs of loss was not in conflict with the mortgage clause.

In Graham v. Firemen's Ins. Co., 8 Daly (N. Y.) 421, it is held that the mortgagee might furnish proofs of loss. In that case the mortgagee furnished proofs of loss, but the company would not receive them. The provision of the policy was "persons sustaining loss or damage shall forthwith give notice of such loss to the company." But in Hastings et al. v. Washington Fire Ins. Co., 73 N. Y. 141, 148, it is held that the meaning of the word "assured” in the policy was not changed by the addition of the mortgage clause. In the case of Union Institution for Savings v. Phoenix Ins. Co., supra, 196 Mass. on page 233, 81 N. E. on page 995, 14 L. R. A. (N. S.) 459, 13 Ann. Cas. 433, the court in discussing this point says: "It is quite certain that the party referred to as 'the insured' in these provisions is the mortgagor. The contract calls for but one such statement, and, if the duty of furnishing it is upon the mortgagee when the loss is payable to him, then there is no such duty upon the mortgagor. The paper must be 'signed and sworn to by the insured'; it must set forth the interest of the insured therein,' and various other stipulated facts which are

Queen Ins. Co. v. Dearborn Savings, Loan & Building Ass'n, supra; Glens Falls Ins. Co. v. Porter, supra; Dwelling House Ins. Co. v. Kansas Loan & Trust Co., supra; Reed v. Firemen's Ins. Co., supra; and Adams v. Firemen's Mutual Ins. Co., 115 Mo. App. 21, 25, 90 S. W. 747-all either expressly or impliedly hold that, by virtue of the mortgage clause attached to the policy, the mortgagee is relieved from any necessity to furnish proofs of loss and to enter into arbitration as a condition precedent to a right to sue on the policy. From these decisions the author in Clement on Fire Insurance, vol. 1, p. 208, formulates a rule as follows: "Unless the mortgagee clause attached makes it obligatory on the mortgagee to furnish proofs of loss, he is not required to furnish such proofs as a condition precedent to his right of action on the policy. Failure of the mortgagor and owner to furnish such proofs either wholly or within the stipulated time constitutes one of the neglects from the invalidating consequences of which the mortgagee is exempted." But, as may be expected, the courts are not in agreement on this point. In addition to Southern Loan Ass'n v. Home Ins. Co., supra, Investment Co. v. Ins. Co., supra, and Graham v. Firemen's Ins. Co., supra, there are a few others which say in case the mortgagor neglects or refuses to make proofs of loss the mortgagee may or must do so. See Insurance Co. v. Ketcham, 9 Kan. App. 552, 555, 58 Pac. 229, and Nickerson v. Nickerson, 80 Me. 100, 12 Atl. 880.

In Union Institution for Savings v. Phonix Ins. Co., supra, the court holds that by implication without express provision the mortgagee, in case the mortgagor fails to make a statement, or to ask for arbitration, any make a statement of loss and ask for arbitration resting such implication on the intention of the company expressed in the policy not to pay anything until it has reasonable information of the loss and the amount of loss has been determined. page 235 of 196 Mass., page 996 of 81 N. E. (14 L. R. A. [N. S.] 459, 13 Ann. Cas. 433) it says: "We think the implication goes no further than to require him (the mortgagee) to furnish the company in writing, within a reasonable time, proper information in regard to the loss, as to such matters as the mortgagee reasonably may be expected to know."

On

All of the cases asserting either that the mortgagee may or must furnish proofs of