Story Case

When Mr .Walter Tyler, a reserve officer in the English army, living in St. Louis, was called to his country's colors in August, 1914, he delivered his Packard motor car to James Stillwell, his friend, for safe keeping. The friend did not use the car as was his privilege, but rented a private garage, storing the machine therein, and at the same time, having it insured for the full amount with the Missouri Indemnity Exchange. In June, 1915, when Stillwell owed $100 for the use of the garage, it was burned and the automobile was destroyed. When Stillwell attempted to collect the insurance, the company refused to pay, insisting that he had not an insurable interest, since he was not a bailee for hire, and, therefore, not liable for the loss of the automobile. The company offered to pay him $100, however, since he had a lien on the automobile for this amount to cover the payment of rent. Should Stillwell accept this settlement?

Ruling Court Case. The Peoria And Pekin Union Railway Company Vs. The Home Insurance Company Of New York, Volume 178, Illinois Reports, Page 64

The railway company was the owner of certain railroad yards in and near the city of Peoria; it was engaged in a switching and terminal business in Peoria, as well as doing a general railroad business. It procured a policy of insurance from the insurance company, covering "freight cars of every description, the property of other roads, firms, individuals or corporations." Certain cars, not belonging to the railway company were destroyed by fire while in the control of this company. The railway company sues on the policy for indemnity. It was urged, among other things, that the policy was void, in so far as it purported to cover property not belonging to the railway company, because the company had no insurable interest therein.

The court decided that a railroad company, owing such a duty to cars of other owners while in its custody as may result in legal liability, has an insurable interest in such cars. The railway company was bailee of these cars, and as such had an insurable interest in them.

Mr. Justice Boggs said: "That relation established, it is well settled, an insurable interest vested in the railway company, so that it might lawfully insure the cars in its own name and sue for and recover the value thereof if destroyed by fire, holding the excess over its own interest in the property for the benefit of those who had intrusted the cars to it." Judgment was given for the railway company.

Ruling Law. Story Case Answer

A bailee is one who holds possession of the goods or property of another for a definite purpose, in accordance with the directions of the owner, who is the bailor. A bailee who receives pay for his work is called a bailee for hire, and is liable for the loss of the goods if his negligence has caused the destruction. A gratuitous bailee is liable for the loss if it occurs because of his wilfull or gross negligence. Either class of bailee has an interest in the property to the extent of his lien on the property for moneys owing to him or for which he is liable. The law of insurance, however, goes in advance of the general rule, and gives all classes of bailees an insurable interest in the goods instrusted to them as if they were the owners. They may insure in their own names, and for full value, with or without the consent of the bailor. If the goods are destroyed by fire, for which the bailee is not responsible, he may collect the full amount. He is looked upon, however, as trustee for the bailor, and must account to him for the sum recovered, after deducting his own losses covering charges, premiums, and cost of collection.

Except in the case of bailees who are themselves insurers of goods, like the common carrier and the public service companies, the ordinary bailee is not required to insure goods, unless, of course, the contract of bailment stipulates for insurance. An exception to the rule probably exists in the case of guardians of infants and insane persons, when the risk of loss by fire is apparent and great.

In the Story Case, Stillwell can recover for the loss of the automobile. He must hold the amount of money received for his friend Tyler, after deducting his own money losses.