Appeals from judgments of Court of Common Pleas, Trial Division, of Philadelphia, Dec. T., 1962, No. 4085, in case of Rittenhouse Foundation, Inc. v. Lloyd's, London et al.
Bernard Chanin, with him Donald K. Joseph, Bernard M. Borish, and Wolf, Block, Schorr & Solis-Cohen, for defendants.
Richardson Dilworth, with him, Jacob Kalish, and Dilworth, Paxson, Kalish, Kohn and Levy, for plaintiff.
Bell, C. J., Jones, Cohen, Eagen, O'Brien, Roberts and Pomeroy, JJ. Opinion by Mr. Justice Pomeroy. Mr. Justice Cohen took no part in the decision of this case.
These appeals present the question of the extent, if any, of the liability of Lloyd's of London ("Lloyd's"), as insurers against loss by fire, to Rittenhouse Foundation, Inc. ("Rittenhouse"), whose building in Philadelphia was almost completely destroyed by fire in 1962. Two contracts of insurance had been issued, one in the face amount of $230,000, and the other in the amount of $68,500. After a non-jury trial, the court below held (1) that the larger policy was in force and effect on the date of the loss, and that the defendant insurers were liable thereon, and (2) that the smaller policy was not in force or effect on the date of the loss, and that the insurers were not liable thereon. A verdict was entered accordingly. Exceptions to findings and conclusions were filed by both parties, and in all material respects were dismissed by the court en banc, one judge dissenting. Both parties have appealed.
The facts, while involved, are not in dispute. In essential respects they are as follows: Rittenhouse was required under the terms of a purchase money mortgage covering the premises in question to maintain fire insurance in the aggregate face amount of $350,000. In partial discharge of this undertaking it purchased, effective June 27, 1961, $60,000 of insurance from Insurance Company of North America ("I.N.A."), $30,000 from Fidelity Phenix Insurance Company ("Fidelity-Phenix") and $30,000 from Newark Insurance Company
("Newark").*fn1 The balance of $230,000 was sought and obtained from underwriters at Lloyd's, the underwriting being evidenced by two "cover notes" issued by Stewart, Smith (Pennsylvania) Inc. ("Stewart, Smith"), brokers for Lloyd's.*fn2 Of paramount importance in the matter before us is the following language contained in both cover notes issued to Rittenhouse by Lloyd's: "Warranted same terms and conditions as and to follow the settlements of Insurance Company of North America,*fn3 and that said company has, at the time
of any loss, and at the same gross rate, at least $60,000 (subject only to reduction by amount of any loss not reinstated) on the identical subject matter and risk, and in identically the same proportion on each separate part thereof. This policy is subject without notice to the same conditions, endorsements, assignments and alterations of rates as are, or may be assumed in the above-mentioned Company's Insurance upon which this policy is based and shall be deemed to include such risks of Lightning and/or Explosion as are included in that Insurance." For ease of reference these two paragraphs will be referred to as the "warranty clause".
Early in April, 1962, Rittenhouse's agent was advised that INA proposed to cancel its $60,000 policy. Since INA was Lloyd's "warranty company", the Rittenhouse agent promptly requested the broker, Stewart, Smith, to have Fidelity Phenix or Newark substituted as the warranty insurance company. At this time it was recognized in conversation between the broker and Rittenhouse's representative that INA's cancellation would immediately result in Lloyd's being off the risk if no substitute warranty company were secured. Lloyd's notified Stewart, Smith by cable that they wished to follow INA and therefore considered themselves off the risk as of April 5, 1962.*fn4 By formal written notice received by Rittenhouse on May 22, 1962, INA cancelled its policy, effective June 2, 1962. Lloyd's ...