Aetna Casualty and Surety Co. v. Walter Ogus, Inc.

• Citation: 396 F.2d 667
• Decision Date: 27 February 1968
• Docket Number: 20859.,No. 20858,20858
• Parties: AETNA CASUALTY AND SURETY CO., Garnishor, Appellant, v. WALTER OGUS, INC., et al., Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

396 F.2d 667 (1967)

AETNA CASUALTY AND SURETY CO., Garnishor, Appellant, v. WALTER OGUS, INC., et al., Appellee.

Nos. 20858, 20859.

United States Court of Appeals District of Columbia Circuit.

Argued November 8, 1967.

Judgment November 22, 1967.

On Petition for Rehearing February 27, 1968.

Messrs. John F. Mahoney, Jr., and Charles E. Pledger, Jr., Washington, D. C., were on the petition for rehearing.

Mr. Frank J. Martell, Washington, D. C., was on the opposition.

Before FAHY, Senior Circuit Judge, and LEVENTHAL and ROBINSON, Circuit Judges.

On Petition for Rehearing by the Division or En Banc February 27, 1968.

JUDGMENT

PER CURIAM.

These causes came on to be heard on the record on appeals from the United States District Court for the District of Columbia, and were argued by counsel.

The question in these cases being primarily determined by the peculiar facts and the judgments being supported by findings of fact that are not clearly erroneous, it is

Ordered and adjudged by this Court that the judgments of the District Court appealed from in these causes, are affirmed.

LEVENTHAL, Circuit Judge:

Our judgment of affirmance dated November 22, 1967, recites that the questions in these cases are "primarily determined by the peculiar facts" and the judgments are supported by findings of fact that are not clearly erroneous. Appellants filed a petition for rehearing by the division or en banc asserting that the evidence does not support the court's findings or conclusions of law, and that the case involves a substantial question of first impression relating to the duty owed by an insurance broker to the insured. We have given the case reconsideration, and conclude that the petition for rehearing should be denied. We state our reasons at some length in Part I of this opinion to underscore general reflections in Part II on petitions for rehearing.

I

The matter may be simply put. Lesmark, Inc., was the general contractor on work done for the Charrons at their Eye Street location, and became liable when its excavations, dug by hand under the party walls of the Charrons' neighbors, failed to provide support for the party walls, — acts that were held in an earlier litigation, between the neighbors and Lesmark, to be in violation of the plans and specifications and applicable District of Columbia building regulations, and to constitute negligence that was the proximate cause of damages sustained by the neighbors.¹

Appellant Aetna Casualty & Surety Co. ("Aetna"), subrogated to moneys due to Lesmark, if any (by virtue of its policy insuring the Charrons, and subsequent garnishment) claims Lesmark was entitled to recover on a third party complaint filed in 1959 against appellee, Harris and Ogus, Inc. ("Ogus"), general agent of appellee Hartford Accident and Indemnity Co. ("Hartford").

Appellees Ogus and Hartford concede that Lesmark had some property damage liability coverage but deny that this included relevant excavation coverage. For some years contractor Michael Abrams, who came to do business under the Lesmark name, was covered by Hartford's Policy 42 MCS 601753. The print of that policy contained certain property damage liability coverage, but Abrams specifically requested that Lesmark not have any coverage whatever as to property. In February 1959, however, to satisfy insurance specifications on a job for Pepco, he requested Ogus to add $100,000 of general property damage coverage; and Ogus, after communication with Hartford, advised Lesmark that this had been done. However, Ogus and Hartford say, and we think rightly, that Hartford's liability did not extend beyond the property damage provision Hartford offered in the outstanding policy, and these plainly excluded liability for damage to abutting walls by reason of excavation.²

Appellant says Ogus became liable to Lesmark for failure to provide excavation coverage. The trial court found:

16. Harris & Ogus, Inc. did not know, nor did any officer, agent or employee of Harris & Ogus, Inc., that Michael Abrams or Lesmark, Inc. was engaged in making excavations, and specifically, they did not know that either Michael Abrams or Lesmark, Inc. contemplated doing excavation work upon the premises at 1919 Eye Street, N. W., Washington, D. C., owned by Walter S. and Marie L. Charron.

Appellant says that the evidence does not support finding 16. This contention is absurd. The Ogus officer flatly testified: "I was not aware of the fact that he did excavation. * * * He never told us that he was doing any excavation." (J.A. 199).

Abrams said that he consulted Ogus on his insurance needs, that either he spoke to them on the phone, or they would read the specifications, and that one or the other had happened on the Eye Street job. On direct, i. e., on questioning by attorney for third-party plaintiff, he testified (J.A. 218):

Q. Now, during these several jobs you mentioned between February 1959 and the I Street job, did you engage in any excavation work?

A. All jobs had some means of excavation, some form.

Although this may have been intended to convey such a flavor, it is plain that nowhere does Abrams testify he told Ogus that he (or Lesmark) was engaged in excavation.

We pause to note that the trial judge remarked in colloquy — after saying he found no evidence that Abrams, either expressly or by implication, had expected Ogus to take out excavation insurance, or to insure him fully — as follows (J.A. 285):

As a matter of fact, Mr. Abrams\' testimony was such that I don\'t think I would believe any of it, and therefore, I think I would find that there was never any such request.

Abrams' general observation that all jobs necessarily involve excavation is also without force because on cross examination the import of this generalization was undercut by Abrams' admission that he ordinarily hired subcontractors to excavate. And he went on to admit that he usually expected and required them to carry appropriate insurance! (J.A. 245-246)

Appellant may attempt to draw support from a passage wherein Abrams remarked: "We did our own footing work. We never gave out footing work to anybody." (J.A. 221). But the issue so far as Ogus is concerned is Abrams' disclosures to Ogus and the knowledge with which Ogus can reasonably be charged.

At oral argument, for the first time in this case, appellant focused on a single line of a six page Hartford audit indicating that part of Lesmark's premiums went to cover liability for damages resulting from excavation. (J.A. 162). From this it is argued that Lesmark was either in fact covered by the policy or Ogus customarily provided such coverage. The fact that an excavation item was picked up on the insurer's audit does not negative lack of knowledge on the part of Ogus.

Assuming its evidentiary relevance, however, the audit item was not brought out meaningfully at the trial. It was buried in an exhibit that was not identified in this way. The point now raised on argument was answered on argument by appellee's counsel with this explanation: Although the exclusion in the policy exempted the carrier where the damages resulted from failure of lateral support due to excavation, the exemption clause did not exculpate from liability in case of other forms of excavation damage (e. g., broken water or gas lines). In view of the explanation and the tardy assertion outlined above, we do not conclude that the finding of the District Court is clearly erroneous.

There can be no doubt that an insurance agent may have affirmative duties to his clients. E. g., Hardt v. Brink, 192 F.Supp. 879 (W.D.Wash.1961). See generally Annot., 29 A.L.R.2d 171 (1953).

We have no occasion to define the doctrine, or to consider to what extent it applies in a commercial context. On the facts of this particular case, it cannot be said as a matter of law that the trial judge erred in failing to find that Ogus failed to render adequate service to Lesmark.

This recital obviously explains why this court did not consider appellant's case to turn on some broad doctrine that a broker has a duty of full explanation to a client that rendered actionable the failure of Ogus to disclose lack of excavation...