Stamler (Joseph H.), J.s.c.
[100 NJSuper Page 29] Plaintiffs sue to recover on a fire insurance policy issued by defendant. The case is before the court on cross-motions for summary judgment. If defendant is successful on its motion that will obviate the need for a trial. If plaintiffs are granted a partial summary judgment on the issues before this court, however, there still
remain certain other issues to be tried. These remaining issues include: (1) failure to file proof of loss (to which plaintiffs respond with waiver and estoppel) -- Cf. Weil v. Pennsylvania Fire Ins. Co., 58 N.J. Super. 145 (App. Div. 1959); (2) increased hazard allegedly caused by long vacancy of the premises and failure to remove combustible debris -- Cf. Asbell v. Pearl Assurance Company, Ltd., 59 N.J. Super. 324 (App. Div. 1960); and (3) generally, plaintiffs' failure to comply with the terms, conditions and requirements of the policy.
There is no dispute as to the relevant facts. On October 8, 1964, a fire occurred damaging or destroying plaintiffs' three-story frame apartment dwelling located at 80-82 Orchard Street in the City of Orange. Defendant had insured the premises for three years beginning on September 9, 1963 against fire with a limit of coverage under the policy of $25,000 (subject to an 80% co-insurance clause not here pertinent). The policy term had not yet expired on the date of the fire.
Prior thereto, on May 11, 1964 the plaintiffs had entered into an agreement with the State of New Jersey to sell the property in question together with another piece of property owned by plaintiffs which was located at 76 Orchard Street in the City of Orange. The successful negotiations, which were with the State Highway Department, were in lieu of condemnation proceedings. The sale price was $27,000 for the properties, without any allocation of this sum among the separate parcels of land or buildings. As of the date of purchase, the insured premises had already been vacated, and the State took possession of the property on July 29, 1964. The State's possession was evidenced by signs posted at the premises.
Following the fire of October 8, 1964 there was no downward revision in the original purchase price of $27,000. Plaintiffs were paid the agreed sum on March 4, 1965 and the State took title. It is alleged that the fire was reported to the defendant one day after its occurrence. Defendant
having refused to pay for damages resulting from the fire, plaintiffs bring this action seeking to recover $25,000, the maximum coverage under the policy.
Defendant first contends that it is not liable for any loss suffered by plaintiffs since the premises in question were unoccupied beyond a period of sixty consecutive days. The insured premises were certified by an investigator for the State Highway Department on July 27, 1964 to have been vacant since the agreement with the State some two and one-half months earlier. The building was still vacant on October 8, 1964 when the fire occurred. Defendant relies on the standard provision found in the policy required by N.J.S.A. 17:36-5.20:
"Conditions suspending or restricting insurance. Unless otherwise provided in writing added hereto this Company shall not be liable for loss occurring * * * (b) while a described building, whether intended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive days; * * *"
Reference is made by defendant to Ekelchik v. American Casualty Co. of Reading, Pa., 56 N.J. Super. 171, 177 (App. Div. 1959), which supports the proposition that a policy of fire insurance is valid but suspended while the premises insured remain vacant and unoccupied beyond the specified period of sixty consecutive days.
As applied to the facts sub judice, this contention of defendant is untenable. In accordance with the above-quoted language of the policy and the statute, it is here "otherwise provided in writing" by a subsequent section of the policy that for protected property other than manufacturing, such as the insured premises, "[p]ermission is granted to be vacant or unoccupied without limit of time." "Protected Property" is defined by the policy as "that which is within five miles air line of a Fire Station and within 600 feet * * * air line of a fire hydrant or suction point * * *; otherwise the property shall be classed as Unprotected." The affidavit of plaintiff William Wolf, which stands uncontroverted,
states that the property in question, at the time of the fire and prior thereto, was "within five miles air line of a fire station, was within 600 feet of a fire hydrant and was never used for purposes other than residential purposes."
Defendant's principal contention is that plaintiffs did not sustain any loss which is covered under the policy of insurance. Plaintiffs insist with equal vigor that they have suffered a loss under this set of facts. The insuring provisions in the case at bar conform precisely with the language found in the first sentence of N.J.S.A. 17:36-5.19:
"Every such fire insurance policy shall insure, limited to the amounts of insurance specified therein, the named insured and legal representatives, 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 within a reasonable time after such loss, without allowance for any increased cost of repair or reconstruction by reason of any ordinance or law regulating construction or repair and without compensation for loss resulting from interruption of business or manufacture, nor in any event for more than the interest of the insured, against all direct loss by fire, lightning, and by removal from premises endangered by the perils insured against in such policy, except as thereinafter provided, to the property described therein while located or contained as described in such policy, or pro rata for 5 days at each proper place to which any of the property shall necessarily be removed for preservation from the perils insured against in such policy, but not elsewhere." (Emphasis added).
There can be no dispute that an insured must sustain a loss before he can recover on a standard form fire insurance policy. The question before this court is: precisely when does one measure or ascertain whether a fire loss has occurred? What is the "time of loss" referred to in N.J.S.A. 17:36-5.19? Does the "loss" become fixed as of the date of the fire so that, as long as the insured has an insurable interest at that time, the insurer becomes obligated to pay under its policy; or can subsequent collateral events, such as the fact that the sale between insureds and the State of New Jersey was ultimately consummated nearly five months after the fire, with insureds receiving the full previously agreed
upon contract price, be taken into account in determining the existence of an insurable "loss"?
This is a controversy which "has been raging in Anglo-American law since 1801." Cribbet, "Insurance and the Executory Contract for the Sale of Real Estate," 51 Ill. Bar J. 124 (1962). As noted in First National Bank of Highland Park v. Boston Ins. Co., 17 Ill. 2 d 147, 150, 160 N.E. 2 d 802, 804 (Sup. Ct. 1959):
"The problem that the case presents is not an easy one. When insured property is in a single ownership, it is not hard to hold to the orthodox concept of an insurance contract as a personal contract of indemnity. But there are inherent difficulties when there are multiple interests in the property. Those inherent difficulties are augmented because the effect given to an executory contract to sell realty, and to the doctrine of equitable conversion, differs significantly from one jurisdiction to another. The result is that neither courts nor commentators are agreed upon proper solutions for the many variations on the vendor-vendee-insurer theme."
In an excellent note by William F. Young entitled "Some 'Windfall Coverages' in Property and Liability Insurance," 60 Colum. L. Rev. 1063, 1071 (1960), the author feels that the Illinois court "understates the case" to say that neither the courts nor the commentators are agreed upon the proper solutions in this area.
It would appear that there are two broad lines of authority upon this question. What may be referred to as the "New York Rule" is derived from Foley v. Manufacturers' & Builders' Fire Ins. Co., 152 N.Y. 131, 46 N.E. 318, 43 L.R.A. 664 (Ct. of App. 1897) and a subsequent series of New York cases, especially Alexandra Restaurant, Inc. v. New Hampshire Ins. Co., 272 App. Div. 346, 71 N.Y.S. 2 d 515 (App. Div. 1947), affirmed 297 N.Y. 858, 79 N.E. 2 d 268 (Ct. of App. 1948). This rule is to the effect that in the absence of any contractual agreement to the contrary, a fire insurance policy is a contract of indemnification, the premiums for which are computed according to the value of the property and the risk involved without the knowledge [100 NJSuper Page 34] of collateral remedies, so that recovery on the policy will not be denied as long as the insured has a valuable insurable interest at the time of the casualty, even though there is an executory contract for the sale of the real property outstanding which is later consummated. A large majority of the courts in this country that have dealt with the question adhere to the New York Rule. Dubin Paper Co. v. Insurance Co. of North America, 361 Pa. 68, 63 A. 2 d 85 (Sup. Ct. 1949); Vogel v. Northern Assurance Co., 219 F.2d 409 (3 Cir. 1955); First National Bank of Highland Park v. Boston Ins. Co., 17 Ill. 2 d 147, 160 N.E. 2 d 802 (Sup. Ct. 1959); Edlin v. Security Insurance Co., 269 F.2d 159 (7 Cir. 1959), certiorari denied 361 U.S. 932, 80 S. Ct. 370, 4 L. Ed. 2 d 354 (1960); Board of Trustees, etc. v. Cream City Mutual Insurance Co., 255 Minn. 347, 96 N.W. 2 d 690 (Sup. Ct. 1959); Milwaukee Mechanics Ins. Co. v. Maples, 37 Ala. App. 74, 66 So. 2 d 159 (Ct. of App. 1953), certiorari denied 259 Ala. 189, 66 So. 2 d 173 (Sup. Ct. 1953); Springfield Fire and Marine Ins. Co. v. Boswell, 167 So. 2 d 780 (Fla. District Ct. of App. 1964); Koppinger v. Implement Dealers Mutual Ins. Co., 122 N.W. 2 d 134 (N. Dak. Sup. Ct. 1963); Pink v. Smith, 281 Mich. 107, 274 N.W. 727 (Sup. Ct. 1937); Foster v. Equitable Mutual Fire Ins. Co., 2 Gray (68 Mass.) 216 (Sup. Jud. Ct. 1854). The contrary view, known as the "Wisconsin Rule" is an out-growth of Ramsdell v. Insurance Co. of North America, 197 Wis. 136, 221 N.W. 654 (Sup. Ct. 1928). This rule also regards a contract of fire insurance as a contract of indemnity but it denies recovery to the vendor-insured where the existence of a collateral executory contract for the sale of the real property eventually results in shielding the vendor from sustaining any actual pecuniary loss from the casualty. The Wisconsin Rule finds support in the following cases from other jurisdictions: Paramount Fire Ins. Co. v. Aetna Casualty & Surety Co., 163 Tex. 250, 353 S.W. 2 d 841 (Sup. Ct. 1962); Glens Falls Insurance Company v. Sterling, 219 Md. 217,
148 A. 2 d 453 (Ct. of App. 1959); Smith v. Jim Dandy Markets, 172 F.2d 616 (9 Cir. 1949). Several of the cases cited herein as authority for each of the abovementioned rules are discussed later in this opinion.
The topic has received judicial attention in one reported New Jersey case. Tauriello v. Aetna Insurance Co., 14 N.J. Super. 530 (Law Div. 1951) dealt squarely with the same factual situation now before this court. There is no relevant distinction. In holding for the defendant insurer on the theory that the plaintiffs had not been able to show any loss, the court in Tauriello in effect followed that line of cases referred to as the Wisconsin Rule, when it said:
"The general rule is that a contract for insurance against fire is ordinarily one of indemnity under which the insured is entitled to receive indemnity or to be reimbursed for any loss that he may have sustained and cannot recover if he has sustained no loss. See 45 C.J.S. Insurance § 915, page 1009, section 915. In Draper v. Delaware State Grange Mutual Fire Insurance Co., 5 Boyce 143, 28 Del. 143, 91 A. 206 [ Super. Ct. 1914], it was pointed out that a fire insurance policy is a contract not to insure the property against fire but to insure the owner against loss by fire, and that the insurance company can be called upon when, and only when, the insured has sustained a loss which under the terms of the policy calls for indemnification. The same rule finds support in Patterson v. Durand Farmers Mutual Insurance Co., 303 Ill. App. 128, 24 N.E. 2 d 740 (1940)." (at p. 532)
The court goes on to state that the rationale of United Bond & Mortgage Co. of Hackensack v. Concordia Fire Ins. Co., 113 N.J.L. 28 (E. & A. 1934) and Power Building & Loan Association v. Ajax Fire Ins. Co., 110 N.J.L. 256 (E. & A. 1933), lends support to its decision.
Plaintiffs submit that in light of the persuasive appellate authority from other states before and after Tauriello, that holding is erroneous. Our system of jurisprudence envisions that while the opinions of courts of coordinate jurisdiction be taken into consideration, they are nevertheless not binding on a court of equivalent rank. State v. Patfol, Inc., 71 N.J. Super. 404, 408 (Cty. Ct. 1961), reversed on other grounds 76 N.J. Super. 287 (App. Div. 1962), reargument