BL Ivey Construction Co. v. Pilot Fire and Casualty Co.

• Court: U.S. District Court — Northern District of Georgia
• Writing for the Court: EDENFIELD
• Citation: BL Ivey Construction Co. v. Pilot Fire and Casualty Co., 295 F. Supp. 840 (N.D. Ga. 1968)
• Decision Date: 23 December 1968
• Docket Number: Civ. A. No. 10705.
• Parties: B. L. IVEY CONSTRUCTION COMPANY and Marietta Investors, Inc., d/b/a Overbrook Forest Apartments v. PILOT FIRE AND CASUALTY COMPANY.

295 F. Supp. 840

B. L. IVEY CONSTRUCTION COMPANY and Marietta Investors, Inc., d/b/a Overbrook Forest Apartments v. PILOT FIRE AND CASUALTY COMPANY.

Civ. A. No. 10705.

United States District Court N. D. Georgia, Atlanta Division.

December 23, 1968.

Huie & Harland, Atlanta, Ga., for plaintiffs.

Bryan, Carter, Ansley & Smith, Sam Lowe, Jr., Smith, Cohen, Ringel, Kohler, Martin & Lowe, Atlanta, Ga., for defendant.

ORDER

EDENFIELD, District Judge.

In this action on an insurance policy both the plaintiffs and the defendant have asked the court for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons stated herein the court grants plaintiffs' motion and denies that of defendant.

Under the terms of Rule 56, supra, summary judgment can only be granted where there is "no genuine issue as to any material fact" and the decision is one of law. On a motion for summary judgment this court is precluded from trying issues of fact.

The court has found, after a thorough study of the record, that there is "no genuine issue as to any material fact." See Georgia, Sou. & Fla. Ry. Co. v. United States Cas. Co., 177 F.Supp. 751 (M.D.Ga., 1959). In so ruling, the court has given defendants the benefit of all reasonable doubts in determining whether a genuine issue of fact exists. Heyward v. Public Housing Administration, 238 F.2d 689, 696 (5th Cir., 1956). The court has extended no inferences to the plaintiffs in ruling on plaintiffs' motion. See, generally, 6 Moore, Federal Practice (2d ed.), ¶ 56.04.

In arriving at the decision to grant summary judgment, the court has recognized, with the Fifth Circuit, that this procedure

"* * * (I)s not a catch penny contrivance to take unwary litigants into its toils and deprive them of a trial, it is a liberal measure, liberally designed for arriving at the truth. Its purpose is not to cut litigants off from their right of trial by jury if they really have evidence which they will offer on a trial, it is to carefully test this out, in advance of trial by inquiring and determining whether such evidence exists." Whitaker v. Coleman, 115 F.2d 305, 307 (5th Cir., 1940).

Marietta Investors, Inc., one of the plaintiffs in this action, is a corporation which acquires apartment land and develops apartments. Its president is William W. McNeal, who, in addition, is a minority stockholder in the company.

In early October, 1965, Marietta Investors desired insurance coverage on six dwellings under construction through the McNeal-Kennesaw Insurance Agency, d/b/a McNeal Insurance Associates. William W. McNeal is also president of this insurance agency, as well as its sole owner.

McNeal Insurance Associates represented several insurance companies, including Pilot Fire & Casualty Company, the defendant in this action.

At Mr. McNeal's instance, his insurance secretary at McNeal Insurance Associates, Miss Dorothy Cooper (now Mrs. Dorothy Cooper Lindsay), contracted Mr. J. Dow Covey, an agency supervisor with Pilot Fire & Casualty Company, concerning coverage. It is crystal clear from the depositions that Covey was the guiding hand in making the application for coverage. Mr. Covey brought the special multi-risk applications to the McNeal Agency, since Miss Cooper was unfamiliar with the rather new special multi-risk coverage required. Mr. Covey then told Miss Cooper what to fill out. As he put it:

"Well, we had all of the information, and I handed Dorothy Cooper the application and she put it in her typewriter and I stood over her and told her where to put this figure and what to `X' here and so forth and so on." (Deposition of J. Dow Covey, p. 19.)

In filling out the application, the facts show that no one actually worked on it save Mr. Covey and Miss Cooper.

The completed application was then sent to Mr. Clifford Oxford, a stockholder in, and spokesman and attorney for, Marietta Investors. After a wait of some time, Mr. Covey went to Mr. Oxford's office and picked up the signed application.

The application was then sent to the home office of Pilot Life Insurance Company in Greensboro, North Carolina, for rating and approval. After approving the application, it appears that Pilot sent a copy of the policy to the Georgia Inspection & Rating Bureau, an association supported by Georgia's life insurance companies, for an audit. The original policy and copies were mailed to the agent, one copy for the agent, one copy for the insured, and the original to the mortgagee.

The total insurance written was for $432,000, covering the six buildings which were some 80% complete at the time. The policy was not a builder's risk policy, but was designed to cover the property and apartment house building when complete. The policy extended is styled an SMP-200 policy. At the time of issuance, however, an SMP-161 endorsement had been added to the policy extending the coverage provided by SMP-200.

Five months later, Marietta Investors wanted a building risk policy to cover 12 new building units, in the same apartment complex as the previous six, to be constructed by B. L. Ivey Construction Company. Marietta also wanted Ivey to be a co-insured along with itself on the new units.

Thus, on March 16, 1966, Marietta again requested McNeal Insurance Associates, through William McNeal, to secure coverage. On instructions from Marietta Investors, McNeal then instructed his insurance secretary, Dorothy Cooper, to get the best coverage available for the new units.

The procedure for application and issuance of the second policy was similar to that used for the initial policy. As before, Miss Cooper called Mr. Covey to help with the application for coverage. Miss Cooper's only directive from McNeal, representing Marietta Investors, was to secure the best possible coverage on the new units. This intention was conveyed by her to Mr. Covey.

As in preparation of the initial application, the depositions show that Covey was the guiding hand. Miss Cooper merely typed the application for builder's risk coverage from a version already drawn up by Covey. Covey did not set the premiums, but left the computation to the Greensboro office.

Covey had Miss Cooper write a note on the back of the application to Mr. William Brauns of the Greensboro office, which, in effect, asked that the new coverage be extended as a separate policy from the initial one issued on the six completed units. However, instead, Mr. Brauns issued an endorsement to the original policy covering the dwellings under construction. This endorsement is styled SMP-230 by the Pilot Fire & Casualty Company.

The application filled out by Covey and Miss Cooper requested SMP-70 coverage. Covey requested SMP-70 builder's risk coverage in order to give Marietta Investors the best coverage available, as they had desired.

According to Mr. Brauns, he wrote the SMP-230 endorsement with the intention that SMP-70 coverage be attached to the original and memorandum copy. There is no evidence or assertion this SMP-70 form ever reached the insured. Brauns states that he does not know whether or not an SMP-70 was in fact attached to the SMP-230. He does not have a copy of his original working copy, did not inspect the policy which was sent to see if an SMP-70 was attached, and the Greensboro office copy of the SMP-230 endorsement does not indicate, as it ordinarily would, that an SMP-70 was attached. However, premium payments were computed as if an SMP-70 had been attached to the SMP-230 endorsement. The SMP-230 coverage in and of itself included coverage for the dwellings under construction and also added the interest of the B. L. Ivey Construction Company to the policy.

On May 13, 1966, after heavy rains, building No. 11, one of the buildings covered by the new builder's risk policy, collapsed. There is no contention that the policy in question was not fully in effect at the date of collapse. After a timely proof of loss statement was filed and payment refused by defendant, this suit was entered.

In brief, defendant contends that no payment is required because of the exclusions in SMP-70. They contend that SMP-70 must be considered as part of the coverage because plaintiffs paid premiums on the basis of an SMP-70 attachment to the SMP-230 endorsement and because the insurance contract should be reformed to include SMP-70 coverage, due to a mutual mistake by plaintiffs and defendant. In the alternative, defendant contends that plaintiffs were not entitled to payment because SMP-200, the initial policy, excluded damage by water pressure, the supposed cause of damage.

On the other hand, plaintiffs contend that there was no mutual mistake to permit reformation, only a unilateral error by defendant; that defendant was negligent in not attaching SMP-70 to the SMP-230 endorsement, and thus cannot reform the contract; and that plaintiffs had no reason to know that premiums were computed according to SMP-70 coverage. In addition, plaintiffs contend that SMP-161, the optional perils endorsement to SMP-200, supersedes the exclusions in SMP-200, thus requiring payment for damages.

The court will first consider the argument concerning the SMP-70 attachment. The court concludes that the contract should not be reformed to include the SMP-70 attachment.

Georgia Code § 37-202 makes it clear that while equity will relieve mistakes in certain situations, "this power shall be exercised with caution, and to justify it the evidence shall be clear, unequivocal, and decisive as to the mistake." Because of this stricture, the courts in this state do not lightly reform contracts. It is a jurisdiction cautiously exercised. Cook v. Barfield, 224 Ga. 355. 162 S.E.2d 417 (1968); Prince v. Friedman, et al., 202 Ga. 136, 42 S.E.2d 434 (1947); Delong v. Cobb, 215 Ga. 500, 111 S.E.2d 89 (1959); see, especially, Hood v. Connell, 204 Ga. 782, 783, 51 S.E.2d 853 (1949), and Minor, et al. v. Fincher, et al., 206 Ga. 721, 58 S.E.2d 389 (1950), which demonstrate the...