Appleton Chinese Food Service, Inc. v. Murken Ins., Inc., 93-1948
| Decision Date | 07 June 1994 |
| Docket Number | No. 93-1948,93-1948 |
| Citation | 185 Wis.2d 791,519 N.W.2d 674 |
| Parties | APPLETON CHINESE FOOD SERVICE, INC., d/b/a Dragon Gate Restaurant, Shyh Fann Tyan and Bin Ti Tyan, Plaintiffs-Respondents, (2 d) v. MURKEN INSURANCE, INC. and Utica Mutual Insurance Company, Defendants-Appellants, d United Fire & Casualty Company, Defendant. |
| Court | Wisconsin Court of Appeals |
Before CANE, P.J., and LaROCQUE and MYSE, JJ.
Murken Insurance, Inc., and its errors and omissions carrier, Utica Mutual Insurance Company, appeal a judgment awarding damages to Appleton Chinese Food Service, Inc. (ACFS) and Shyh Fann Tyan and Bin Ti Tyan, for their damages arising from Murken's negligent failure to procure requested insurance coverage. ACFS, owned by the Tyans, ran the Dragon Gate Restaurant in a building also owned by the Tyans. When a fire destroyed the building, the Tyans discovered that their United Fire & Casualty Company insurance policy provided only actual cash value coverage; it did not provide either the requested replacement cost or lost business income coverage. 1 They sued Murken for failing to procure the proper coverage and, following a bench trial, were awarded damages.
We address these issues: (1) The sufficiency of the evidence to show the Tyans requested replacement cost coverage; (2) the application of Nelson v. Davidson, 155 Wis.2d 674, 456 N.W.2d 343 (1990), which insulates insurance agents from liability for failing to advise an insured of available coverages; (3) whether plaintiffs' release of United Fire released Murken from liability; and (4) whether the court erred in its damage award. For the reasons explained hereafter, we affirm the judgment, with the exception of the court's award of lost business income damages. We therefore affirm in part and reverse in part.
A fire destroyed the Tyans' building and shut down the Dragon Gate Restaurant on December 5, 1990. The building was insured by United Fire under a policy procured by Murken, an independent insurance agency. The policy provided $140,000 in actual cash value coverage, and it did not provide any type of business interruption coverage. Following the fire, United Fire appraised the building at an actual cash value of $52,200 and paid that sum, less deductible, to the Tyans.
The Tyans and ACFS filed suit against Murken and United Fire. The complaint alleged that the Tyans had requested a policy with replacement cost coverage and lost business income coverage. It alleged that Murken was liable in contract and tort for failing to procure the requested coverage. It further alleged that United Fire was jointly liable with Murken for the failure to procure. It also alleged grounds for reformation of the insurance policy. Prior to trial, the Tyans and ACFS settled with United Fire for $2,000 and stipulated to a Pierringer release, 2 releasing United Fire from liability for all of plaintiffs' or remaining defendants' claims.
After a six-day bench trial, the court issued extensive findings of fact and conclusions of law. It found that Tyan had met with a Murken insurance agent, Sue Priewe, and sufficiently communicated his request for $140,000 replacement cost coverage on the property. He also requested lost business income coverage for ACFS. Consistent with this request, Priewe prepared seven applications to various insurers seeking quotes or price estimates for $140,000 replacement cost coverage on Dragon Gate.
Due to Murken's clerical error, the applications did not request lost business income coverage and, consequently, none of the quotes Priewe received contemplated such coverage. This fact was never discovered because the quotes were never thoroughly reviewed. On Priewe's recommendation, the Tyans eventually selected United Fire. The court concluded that coverage was initially bound at replacement cost coverage. However, before the policy was issued, United Fire informed Priewe it could not issue replacement cost coverage and instead proposed writing the policy at actual cash value. Priewe agreed to this proposal without consulting the Tyans. The policy was ultimately issued at actual cash value and, due to the earlier error, did not include lost business income coverage.
The court concluded that Priewe had breached her duty to the Tyans to exercise reasonable skill, care and diligence in obtaining the requested coverage. It concluded that she was negligent in preparing the United Fire application for coverage and by failing to adequately review the quote and the policy to determine that they included the coverage for which she intended to apply. The court also concluded that Priewe negligently failed to notify the Tyans that the United Fire policy was issued at actual cash value coverage. The court found United Fire and the Tyans were negligent to a lesser extent. It awarded the Tyans damages of $140,000 minus the deductible and actual cash value settlement they had already received. It awarded ACFS lost business income in the amount of $21,364. These damages were reduced by the Tyans' and United Fire's share of negligence. Other facts will be discussed as needed.
We reject Murken's argument that the finding that the Tyans requested replacement cost coverage is unsupported by the evidence. 3 A trial court's findings of fact shall not be set aside on appeal unless they are clearly erroneous. Section 805.17(2), STATS. The trial court, not the appellate court, judges the credibility of witnesses and the weight of their testimony. State v. Wyss, 124 Wis.2d 681, 694, 370 N.W.2d 745, 751 (1985). If the evidence permits more than one reasonable inference, appellate courts must accept the one drawn by the trial court. C.R. v. American Std. Ins. Co., 113 Wis.2d 12, 15, 334 N.W.2d 121, 123 (Ct.App.1983).
The trial court found that Mr. Tyan sufficiently expressed his desire for replacement cost coverage to Murken. It found that while Tyan did not understand the difference between the formal terms "replacement cost" coverage and "actual cash value" coverage, he clearly, consistently and unambiguously communicated to Murken a desire for $140,000 coverage so that he could replace the building and get back into business in the event of a total loss. It found that the insurance applications were prepared in part based on this communication. It noted this finding was consistent with the property's coverage history, and with Priewe's preparing seven applications for $140,000 replacement cost coverage.
Mr. Tyan testified in broken English that after Priewe introduced herself as a Murken agent, she asked him why he was insuring his property for $140,000. He testified that he told her he wanted $140,000 in coverage to "cover in case fire because that old structure."
He also told her that he purchased the building for $65,000 and had spent $20,000 improving the building. Priewe sought replacement cost coverage on the property. While she testified that this was her normal practice and not a response to the Tyans' specific request, the court could doubt the credibility of this testimony.
At the time Priewe met with Tyan, the property was insured through a different company for $140,000 under an actual cash value policy, though Tyan believed he was covered at replacement cost. The court could reasonably infer Priewe was motivated to ask Tyan why he wanted $140,000 coverage because she knew the building was currently insured at $140,000 actual cash value and believed such coverage far exceeded the property's value. The property's actual cash value turned out to be $52,200, and its replacement cost exceeded $140,000. This disparity, coupled with Priewe's knowledge that only $85,000 had been invested in the property, reinforces the inference that Priewe would have been aware that $140,000 in actual cash value coverage was excessive.
The court could also infer that when Tyan explained to Priewe that he needed $140,000 in coverage because it was an old structure, he was expressing his belief that the building's actual cash value was well below its replacement cost, and therefore he needed replacement cost coverage. The court could further reasonably infer that Priewe understood this expression, as is evidenced by her request for replacement cost coverage. The court's finding that Tyan sufficiently expressed his request for replacement cost coverage is not clearly erroneous. See § 805.17(2), STATS.
We also reject Murken's assertion that concluding that imposition of liability violates the holding of Nelson. The extent of an insurance agent's duty to the agent's clients, and liability for actions, involves issues of law and public policy that we review de novo. Id., 155 Wis.2d at 679, 456 N.W.2d at 345.
In Nelson, the injured plaintiffs sued their insurance agents for failing to advise them of their need for underinsured motorist coverage. Id. at 678, 456 N.W.2d at 344-45. The Nelson court concluded that an insurance agent has no affirmative duty, absent special circumstances, to inform an insured concerning the availability or the advisability of insurance coverage. Id. at 685, 456 N.W.2d at 347.
Nelson is readily distinguishable. Murken's liability is premised upon its failure to procure coverage that the Tyans actually requested. As our supreme court has noted, " '[a]n insurance broker is bound to exercise reasonable skill and diligence in the transaction of the business entrusted to him and he will be responsible to his principal for any loss from his failure to do so....' " Master Plumbers Ltd. Mut. Liab. Co. v. Cormany & Bird, Inc., 79 Wis.2d 308, 313, 255 N.W.2d 533, 535 (1977) (quoting Kane Ford Sales, Inc. v. Cruz, 119 Ill.App.2d 102, 255 N.E.2d 90, 91 (1970)); see also WIS.J. I.- CIVIL 1023.6. 4 Holding Murken liable for its negligence does not violate the policy and precedent of Nelson. 5
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