Allstate Ins. Co. v. Reliance Ins. Co.
| Decision Date | 03 December 2001 |
| Docket Number | No. 2815,2815 |
| Citation | 786 A.2d 27,141 Md. App. 506 |
| Parties | ALLSTATE INSURANCE COMPANY, v. RELIANCE INSURANCE COMPANY et al. |
| Court | Court of Special Appeals of Maryland |
Robert S. Reverski, Jr., (Craig D. Roswell and Niles, Barton & Wilmer, LLP, on the brief,) Baltimore, for appellant.
Michael S. DeBaugh (Lord & Whip, on the brief, for appellees, Reliance Ins. Co. and The Ryland Group, Inc.,) Baltimore, for appellees. (Thomas M. Hennessy of Annapolis, on the brief, for appellees, Alex and Janet Yeung.)
Argued before DAVIS, JAMES R. EYLER, and BISHOP, JOHN J. (Ret., specially assigned), JJ.
The Ryland Group, Inc. (Ryland) and Reliance Insurance Company (Reliance), appellees, filed suit in the Circuit Court for Anne Arundel County against Allstate Insurance Company, appellant. Alex and Janet Yeung filed a separate suit against appellant in the same circuit court. Appellees, as assignees of the Yeungs, and the Yeungs in their own right sought to recover for fire damage to the Yeungs' home under a fire insurance policy issued by appellant to the Yeungs. The circuit court entered judgment in favor of appellant with respect to the claim by the Yeungs but entered judgment against appellant with respect to the claims by Reliance and Ryland.
Appellant relied on a provision in the policy that excluded coverage if the insured property was not occupied by the insured. Appellant issued the policy with knowledge that the property would not be occupied by the insured for six months. We shall affirm the judgment on the ground that, on the facts of this case, appellant, based on principles of waiver and estoppel, was barred from asserting the exclusion.
On May 30, 1997, the Yeungs entered into a contract to purchase a house from Ryland. On May 31, 1997, the Yeungs leased the house to Ryland until December 31, 1997, for use as a sales office and a mobile home. Pursuant to the terms of the lease, Ryland agreed to maintain the property and to procure fire insurance on the property.
On June 26, 1997, Ms. Yeung telephoned appellant's agent in order to purchase a homeowner's insurance policy. The parties disagreed as to what was said in that conversation. Ms. Yeung took the position that she advised the agent that the Yeungs were going to lease the house to Ryland, and appellant took the position that Ms. Yeung told the agent that the Yeungs intended to occupy the property within thirty days.
On June 27, 1997, appellant's agent, who had authority to bind coverage, delivered a completed application/binder to the Yeungs. The application recited that the house would be occupied by the Yeungs and that there would be no business or professional activity in the house. The binder bound appellant to the terms of its standard homeowner's policy. The Yeungs did not read the application/binder.
On June 30, 1997, the Yeungs obtained title to the property. On July 10, 1997, the Yeungs' house was damaged by fire. The Yeungs did not reside in the house prior to the fire; Ryland used it as a sales office and model home.
The Yeungs made a claim pursuant to the fire insurance policy issued by appellant, but appellant denied the claim. Appellant, as reasons for the denial, asserted that (1) coverage was excluded under the policy because the house was leased to Ryland for use as a model home, (2) the Yeungs misrepresented their intent to live in the house, (3) Ryland assumed the risk of loss as lessee, and (4) Ryland's use as a model home increased the hazard. The policy, in pertinent part, provided coverage for a "dwelling," defined as the building in which the insured resided and which was principally used as a private residence. Reliance, Ryland's insurance carrier, and Ryland paid for damage to the house and related losses. The Yeungs assigned their rights under appellant's policy to Ryland and Reliance. Ryland and Reliance filed suit against appellant in the Circuit Court for Anne Arundel County to recover the amounts paid. The Yeungs filed a separate suit against appellant in the Circuit Court for Anne Arundel County, seeking lost rental payments. The cases were consolidated in that court.
At trial on October 5, 2000, the parties agreed that there was only one question of fact, and they submitted that question to the jury. The jury, on special verdict, resolved that factual dispute and determined that, "Mr. or Mrs. Yeung notified, informed or advised Allstate's [appellant's] agent prior to the issuance of the policy that their home was to be leased back to Ryland immediately after the purchase and that the Yeungs would not occupy the property during that lease term." Appellant made an oral motion for judgment and, subsequently, filed a written memorandum in support of that motion. Ryland, Reliance, and the Yeungs filed motions for judgment and memoranda in support thereof.
In support of its motion, appellant argued (1) Ryland assumed the risk of fire loss pursuant to the terms of the lease, (2) there was no coverage because of misrepresentation of facts in the application for insurance, (3) the house was not a dwelling as defined in the policy because the policy required that it be occupied by the Yeungs, (4) leasing the house increased the hazard, (5) there was no coverage because the property was being taken care of for a fee in violation of certain provisions in the policy, and (6) there was no coverage with respect to the Yeungs' claim for lost rental. Ryland and Reliance argued that (1) notwithstanding the terms of the written binder and insurance policy, there was an oral agreement to provide coverage based on the conversation between Ms. Yeung and appellant's agent, (2) appellant waived the exclusion in the policy, and (3) appellant was estopped from asserting the exclusion. The Yeungs are not parties on appeal, and their contentions with respect to their claim for lost rental are not relevant to the issues before us.
On November 21, 2000, the circuit court entered judgment in favor of appellant with respect to the Yeungs' claim, but denied appellant's motion with respect to the claims by Ryland and Reliance. On the same date, the court granted Ryland and Reliance's motion and entered judgment in their favor against appellant in the amount of $253,922.81. In ruling on the motions, the circuit court found that there was an oral agreement between the Yeungs and appellant whereby appellant agreed to cover the property even though it was to be rented for the following six months. The court held that the oral agreement superseded the terms of the written agreement. The court also ruled that Ryland's agreement to provide insurance under the terms of the lease did not relieve appellant of its coverage obligation. The court did not rule on the waiver and estoppel claims.
Appellant contends (1) the circuit court erred by finding a parol contract when a clear written contract existed, (2) reformation of the contract is not available to appellees, and (3) the lease agreement provided that Ryland would bear the risk of fire loss. In support of the first contention, appellant argues that a parol contract that contradicts a written contract is void, and the written contract did not provide coverage for a leased building used as a model home. Appellees contend that (1) the circuit court's finding of a parol contract to provide coverage should be affirmed, (2) appellant waived the occupancy provision, and (3) appellant is estopped from asserting the occupancy provision.
Appellant contends that the oral agreement found to exist by the circuit court contradicted the written binder issued by appellant's agent; thus, by application of the parol evidence rule, it was void. Appellant points out that the settled rule is that, "[a] parol agreement made at the time of issuing the policy, contradicting the terms of the policy itself, like any other parol agreement inconsistent with a written agreement made contemporaneously therewith, is void and cannot be set up to contradict the writing." McFarland v. Farm Bureau Mutual Automobile Insurance Co., 201 Md. 241, 249, 93 A.2d 551 (1953) (citations omitted). Appellees contend that the oral agreement was binding, regardless of the terms of the written binder or policy, relying on National Fire Insurance Company of Hartford v. Tongue, Brooks & Co., 61 Md.App. 217, 486 A.2d 212 (1985), and John Alan Appleman, Holmes' Appleman on Insurance, 2d vol. 4, § 17.2 (Eric Mills Holmes ed., LEXIS L. Publg.1998) [hereinafter Appleman 2d].
The jury's finding of fact is not challenged on appeal. It is not clear whether the circuit court found an oral contract as a matter of law or of fact but the parties, and the court as well, appear to have assumed that the jury's verdict established an oral promise by appellant's agent to provide coverage for the Yeungs' home during the time it was leased to Ryland. The jury was not asked to resolve that issue, however. Moreover, our review of the record reveals no evidence of an oral promise to provide insurance. There is no evidence of any oral representation whatsoever by appellant's agent. The first promise by appellant or appellant's agent to provide any coverage was contained in the written application/binder. The knowledge of facts on the part of appellant's agent, standing alone, was insufficient to support a finding of fact, and necessarily a ruling of law, that there was an oral agreement to provide coverage for the Yeungs' home leased to Ryland. Consequently, the circuit court erred in finding such an oral agreement.
National Fire is not on point. In that case, the question was whether National Fire Insurance Company had agreed to insure a restaurant. National Fire paid the claim and then sued its agent, Tongue, Brooks & Co., alleging that the agent issued the binder without authority. This Court indicated that regardless of whether the agent had authority to issue the...
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