The plaintiff in error insured the defendants in error against
loss by fire by two policies, one dated in June, 1894, the other in
February, 1895, each of which contained the following
provision:
"The assured under this policy hereby covenants and agrees to
keep a set of books showing a complete record of business
transacted, including all purchases and sales, both for cash and
credit, together with the last inventory of said business, and
further covenants and agrees to keep such books and inventory
securely locked in a fireproof safe at night, and at all times when
the store mentioned in the within policy is not actually open for
business, or in some secure place not exposed to a fire which would
destroy the house where such business is carried on, and, in case
of loss, the assured agrees and covenants to produce such books and
inventory, and in the event of
Page 180 U. S. 133
the failure to produce the same, this policy shall be deemed
null and void, and no suit or action at law shall be maintained
thereon for any such loss."
On the night of April 18, 1893, between the hours of one and
three A.M., fire accidentally broke out in a livery stable in the
Town of Ardmore, which was about three hundred yards distant from
the plaintiffs' place of business. Efforts to arrest the progress
of the conflagration failed, and when it had approached so near to
the plaintiffs' place of business that the windows of their store
were cracking from the heat and the building was about to take
fire, one of the plaintiffs entered the building for the purpose of
removing the books of the firm to a safer place, thinking that it
would be better to remove them than to take the chances of their
being destroyed by fire. He opened an iron safe in the store in
which they had been deposited for the night, which was called a
fireproof safe, and took them therefrom and to his residence some
distance away. The books consisted of a ledger, a cash book, a day
book or blotter, and a small paper-covered book containing an
inventory that the firm had taken of their stock on or about
January 1, 1895. In the hurry and confusion incident to the removal
of the books, the inventory was either left in the safe and was
destroyed or was otherwise lost, and could not be produced after
the fire. The other books, however, were saved, and were exhibited
to the insurer after the fire and were subsequently produced as
exhibits on the trial. There was neither plea nor proof that the
loss of the inventory was due to fraud or bad faith on the part of
the plaintiffs or either of them. An action for the amount of the
loss was brought by the insured against the insurance company, on
the trial of which the jury gave a verdict in the plaintiffs'
favor, on which judgment was entered, which judgment was sustained
by the circuit court of appeals.
Held:
(1) That it was not intended by the parties that the policy
should become void unless the fireproof safe was one that was
absolutely sufficient against every fire that might occur, but that
it was sufficient if the safe was such as was commonly used, and
such as, in the judgment of prudent men in the locality of the
property insured, was sufficient.
(2) That if the plaintiffs had the right, under the terms of the
policy, as undoubtedly they had, to remove their books and
inventory from the safe to some secure place not exposed to a fire
which might destroy the building in which they carried on business,
it was never contemplated that they should lose the benefit of the
policies if, in so removing their books and inventory, the same
were lost or destroyed, they using such care on the occasion as a
prudent man, acting in good faith would exercise.
The case is stated in the opinion of the Court.
Page 180 U. S. 134
MR. JUSTICE HARLAN delivered the opinion of the Court.
This action was brought to recover the amount alleged to be due
on two policies of fire insurance issued by the Liverpool and
London and Globe Insurance Company -- one dated June 15, 1894, for
$2,500, and the other dated February 11, 1895, for $1,000 -- each
policy covering such losses as might be sustained by the insured,
Kearney & Wyse, in consequence of the destruction by fire of
their stock of hardware in the Town of Ardmore, Indian
Territory.
Each policy contained the following clause, called the iron-safe
clause:
"The assured under this policy hereby covenants and agrees to
keep a set of books showing a complete record of business
transacted, including all purchases and sales, both for cash and
credit, together with the last inventory of said business, and
further covenants and agrees to keep such books and inventory
securely locked in a fireproof safe at night, and at all times when
the store mentioned in the within policy is not actually open for
business, or in some secure place not exposed to a fire which would
destroy the house where such business is carried on, and, in case
of loss, the assured agrees and covenants to produce such books and
inventory, and in the event of the failure to produce the same this
policy shall be deemed null and void, and no suit or action at law
shall be maintained thereon for any such loss."
The insurance company insisted in its defense that the terms and
conditions contained in this clause of the policies had not been
kept and performed by the insured.
There was a verdict and judgment in favor of the plaintiffs in
the United States Court for the Southern District of the Indian
Territory, and that judgment was affirmed in the United States
court of appeals for that territory.
The insurance company sued out a writ of error to the United
States Circuit Court of Appeals for the Eighth Circuit, and that
court affirmed the judgment. 94 F. 314.
The controlling facts are thus (and we think correctly) stated
in the opinion of Judge Thayer, speaking for the court below:
"On the night of April 18, 1895, between the hours of one
and
Page 180 U. S. 135
three A.M., a fire accidentally broke out in a livery stable in
the Town of Ardmore, which was about three hundred yards distant
from the plaintiffs' place of business. Efforts to arrest the
progress of the conflagration failed, and when it had approached so
near to the plaintiffs' place of business that the windows of their
store were cracking from the heat and the building was about to
take fire, one of the plaintiffs entered the building for the
purpose of removing the books of the firm to a safer place,
thinking that it would be better to remove them than to take the
chances of their being destroyed by fire. He opened an iron safe in
the store, in which they had been deposited for the night, which
was called a fireproof safe, and took them therefrom, and to his
residence some distance away. The books consisted of a ledger, a
cash book, a day book or blotter, and a small paper-covered book
containing an inventory that the firm had taken of their stock on
or about January 1, 1895. In the hurry and confusion incident to
the removal of the books, the inventory was either left in the safe
and was destroyed or was otherwise lost, and could not be produced
after the fire. The other books, however, were saved, and were
exhibited to the insurer after the fire, and were subsequently
produced as exhibits on the trial. There was neither plea nor proof
that the loss of the inventory was due to fraud or bad faith on the
part of plaintiffs, or either of them. The trial judge charged the
jury that the set of books which had been kept and which were
produced on the trial 'were substantially in compliance with the
terms of the policy upon that subject,' and no exception was taken
by the defendant to this part of the charge."
It was also said in the same opinion:
"The books, though used at the trial as exhibits, do not form a
part of the record. For these reasons, no question arises as to the
sufficiency of the set of books that was kept which we are called
upon to consider. It must be taken for granted that it was a proper
set of books, as the trial court held. The only substantial ground
for complaint seems to be that the inventory was not produced."
The argument in behalf of the defendant assumes that the
insurance company is entitled to a literal interpretation of the
words of the policies. But the rules established for the
construction
Page 180 U. S. 136
of written instruments apply to contracts of insurance equally
with other contracts. It was well said by Nelson, C.J., in
Turley v. North American Fire Insurance Co., 25 Wend. 373,
377, referring to a condition of the policy of insurance requiring
the insured, if damage by fire was sustained, to produce a
certificate under the hand and seal of the magistrate or notary
public most contiguous to the place of the fire setting forth
certain facts in regard to the fire and the insured, that
"this clause of the contract of insurance is to receive a
reasonable interpretation; its intent and substance, as derived
from the language used, should be regarded. There is no more reason
for claiming a strict literal compliance with its terms than in
ordinary contracts. Full legal effect should always be given to it
for the purpose of guarding the company against fraud or
imposition. Beyond this, we would be sacrificing substance to form
-- following words, rather than ideas."
To the general rule there is an apparent exception in the case
of contracts of insurance -- namely that where a policy of
insurance is so framed as to leave room for two constructions, the
words used should be interpreted most strongly against the insurer.
This exception rests upon the ground that the company's attorneys,
officers, or agents prepared the policy, and it is its language
that must be interpreted.
National Bank v. Insurance Co.,
95 U. S. 673,
95 U. S.
678-679;
Moulor v. American Life Ins. Co.,
111 U. S. 335,
111 U. S.
341.
Turning now to the words of the policies in suit, what is the
better and more reasonable interpretation of those provisions so
far as they relate to the issues in this case? The covenant and
agreement
"to keep a set of books showing a complete record of business
transacted, including all purchases and sales, both for cash and
credit, together with the last inventory of said business,"
should not be interpreted to mean such books as would be kept by
an expert bookkeeper or accountant in a large business house in a
great city. That provision is satisfied if the books kept were such
as would fairly show to a man of ordinary intelligence "all
purchases and sales, both for cash and credit." There is no reason
to suppose that the books of the plaintiff did not meet such a
requirement.
Page 180 U. S. 137
That of which the company most complains is that the insured did
not produce the last inventory of their business, and removed the
books and inventory from the fireproof safe in which they had been
placed the night of the fire. It will be observed that the insured
had the right to keep the books and inventory either in a fireproof
safe or in some secure place not exposed to a fire that would
destroy the house in which their business was conducted. But was it
intended by the parties that the policy should become void unless
the fireproof safe was one that was absolutely sufficient against
every fire that might occur? We think not. If the safe was such as
was commonly used, and such as, in the judgment of prudent men in
the locality of the property insured, was sufficient, that was
enough within the fair meaning of the words of the policy. It
cannot be supposed that more was intended. If the company
contemplated the use of a safe perfect in all respects and capable
of withstanding any fire, however extensive and fierce, it should
have used words expressing that thought.
Nor do the words, "or in some secure place not exposed to a fire
which would destroy the house where such business is carried on"
necessarily mean that the place must be absolutely secure against
any fire that would destroy such house. If, in selecting a place in
which to keep their books and last inventory, the insured acted in
good faith and with such care as prudent men ought to exercise
under like circumstances, it could not be reasonably said that the
terms of the policy relating to that matter were violated. Indeed,
upon the facts stated, the plaintiffs were under a duty to the
insurance company to remove their books and inventory from the iron
safe, and thereby avoid the possibility of their being destroyed in
the fire that was sweeping towards their store, provided the
circumstances reasonably indicated that such a course on their part
would more certainly protect the books and inventory from
destruction than to allow them to remain in the safe. If they
believed from the circumstances that the books and inventory would
be destroyed by the fire if left in the safe, and if under such
circumstances they had not removed them to some other place, and
the books or inventory had been burned
Page 180 U. S. 138
while in the safe, the company might well have claimed that the
inability of the insured to produce the books and inventory was the
result of design or negligence, and precluded any recovery upon the
policies. We are of opinion that the failure to produce the books
and inventory referred to in the policy means a failure to produce
them if they are in existence when called for, or if they have been
lost or destroyed by the fault, negligence, or design of the
insured. Under any other interpretation of the policies, the
insured could not recover if the books and inventory had been
stolen, or if they had been destroyed in some other manner than by
fire, although they had been placed "in some secure place not
exposed to a fire" that would reach the store. If the plaintiffs
had the right, under the terms of the policy, as undoubtedly they
had, to remove their books and inventory from the safe to some
secure place not exposed to a fire which might destroy the building
in which they carried on business, surely it was never contemplated
that they should lose the benefit of the policies if, in so
removing their books and inventory, they were lost or destroyed,
they using such care on the occasion as a prudent man acting in
good faith would exercise. A literal interpretation of the
contracts of insurance might sustain a contrary view, but the law
does not require such an interpretation. In so holding, the Court
does not make for the parties a contract which they did not make
for themselves. It only interprets the contract so as to do no
violence to the words used, and yet to meet the ends of
justice.
We perceive no error in the view taken by the court below; and,
having noticed the only questions that need to be examined, its
judgment is
Affirmed.
