Butler v. Scott, 97-68
| Citation | 417 F.2d 471 |
| Decision Date | 09 October 1969 |
| Docket Number | 98-68.,No. 97-68,97-68 |
| Parties | H. Wayne BUTLER, d/b/a Wayne Butler Agency, Appellant, v. J. K. SCOTT and Lloyd Scott, d/b/a Scott Brothers Drilling Company, Appellees, v. MARYLAND CASUALTY COMPANY, Cross-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
William B. Keleher of Keleher & McLeod, Albuquerque, N. M., for appellant.
Paul A. Phillips, Albuquerque, N. M., for appellees.
James A. Ritchie, Albuquerque, N. M., (Rodey, Dickason, Sloan, Akin & Robb, Albuquerque, N. M., on the brief) for cross-appellee.
Before TUTTLE, Senior Circuit Judge,* and HILL and HOLLOWAY, Circuit Judges.
Appellees, J. K. Scott and Lloyd Scott, d/b/a Scott Brothers Drilling Company, filed suit in the District Court of Bernalillo County, New Mexico, to recover damages for a fire loss to personal property on June 3, 1963. On the basis of diversity of citizenship, appellants, Maryland Casualty Company and H. Wayne Butler, d/b/a Wayne Butler Agency, removed the case to the United States District Court for the District of New Mexico. The suit was tried without a jury and resulted in a judgment in favor of defendant Maryland Casualty Company and against H. Wayne Butler, individually, for $37,750 plus interest from September 1, 1963, sixty days from the filing of the proof of loss. Defendant Butler prosecutes this appeal, with appellees cross-claiming alternatively against Maryland Casualty Company.
This appeal tests whether Butler, as an independent insurance agent, is liable for his failure to procure insurance when requested to do so by appellees. We affirm the District Court in holding that Butler breached a duty owed to the clients of his agency, and is thereby liable in an amount as if the requested insurance had in fact been procured.
The facts as found by the trial court show that Scott Brothers were drilling contractors and that in 1954 or 1955 they began to place all their insurance with Maryland Casualty Company through their general agent Whyburn and Company, with Butler's predecessor James E. Colbert, responsible for its direct solicitation. In early 1961, Colbert, d/b/a Colbert and Company, procured for Scott Brothers a floater policy which covered the specified drilling equipment. Included in this Maryland Company policy was the following restrictive endorsement.
"In consideration of the reduced rate for this insurance, it is understood and agreed that this policy does not insure against loss or damage while the insured property is being used in any oil and gas well drilling or servicing operations."
At the time the policy was issued Scott Brothers were apparently engaged in oil and gas drilling on a very limited basis. To cover the contingency excluded from the floater policy, i.e., equipment coverage while drilling for oil and gas, plaintiffs were to notify Colbert each time they drilled, and he would then procure the required coverage. On increasingly numerous occasions Scott Brothers notified Colbert of their intent to drill for oil and gas and Certificates of Insurance were requested to be sent to the oil companies with whom Scott Brothers had contracted. Colbert complied with such requests on every occasion, at least insofar as issuing the Certificates was concerned. Subsequent disclosures proved in fact that the requested insurance coverage was never actually procured.
In February, 1962, appellant Butler bought Colbert and Company and continued to handle the insurance business of Scott Brothers. Notwithstanding the fact that Butler knew nothing of the restrictive endorsement, as often as Scott Brothers notified him that oil and gas wells were to be commenced, he issued Certificates of Insurance to certify the existence of coverage. In this regard the trial court found that Butler assumed the obligation of servicing the appellees and that they, as his clients, relied upon Butler for their insurance advice. The court additionally found that the Certificates of Insurance which issued out of the Butler Agency led Scott Brothers to believe that the equipment was insured while used in the drilling of oil and gas wells and that appellees relied upon the representations of Butler and resultingly did not secure other insurance.
Conforming with prior custom, when Scott Brothers secured contracts to drill oil and gas wells for Murphy Corporation, notification was given to Butler of such intention and he subsequently issued a Certificate of Insurance to Murphy indicating insurance coverage on the well designated Navajo AA 1, but not as to Navajo AA 2 where the fire occurred destroying appellees' equipment. The evidence and parties conflict as to whether Butler was notified of the drilling on Navajo AA 2.
After the fire, the loss was reported to Butler who in turn reported it to the Maryland Casualty Company general agent. Thereafter, Maryland wrote to inform Scott Brothers that they disclaimed all liability under the floater policy by virtue of the restrictive endorsement.
The judgement against Butler is founded on Finding 25 of the trial court: "Defendant Butler failed to use reasonable diligence and the skill and knowledge requisite to the calling in the handling of plaintiffs' insurance business."
Appellant first contends that the trial court erred in extending Butler's duty beyond those policies which he undertook to issue pursuant to Scott's requests; that no duty evolved upon him regarding those policies issued prior to February, 1962. The argument ignores the fundamental principle that this case rests not upon the prior contract issued out of the Colbert Agency, rather upon the duty which springs out of the relationship between the principal and insurance agent when the latter is requested to procure insurance for the former, fails to do so and fails to inform of that failure. Fiduciary relationships are created in multifarious circumstances and "frequently arise out of trust and confidence consensually placed in the superior knowledge, skill, or judgment of another." Steinbrugge v. Haddock, 281 F.2d 871, 874 (10th Cir. 1960). We believe this to be a case where the trust and confidence of appellees were properly reposed in Butler, an independent insurance agent represented as possessing special skills and knowledge of the needs of the insurance client. Between the insurance client and local agent arises a duty of the highest order, inuring to the benefit of the patron. An agent employed to effect insurance must exercise the skill and diligence fairly to be expected from one in his profession. It is the independent insurance agent to whom an insured looks and relies upon to acquire the requested coverage with a reliable company who can and will properly and promptly pay claims when due. Thereafter, to assure that the client is safely insured at all times, the agent is duty bound to keep him fully informed.1
Appellant contends that while such a duty does exist, he is exempted in this case because he was never specifically requested to procure the insurance. The trial court found that there was sufficient request and authorization to procure the disputed coverage. Suffice it to say that this finding was made on conflicting evidence and absent "clear error" pursuant to F.R.Civ.P. rule 52(a), 28 U.S.C.A., we will not set it aside on appeal.2
The first evidence supportive of the trial court's findings was a letter from Scott Brothers to Colbert, posted six weeks after Butler purchased the agency. The substance of the letter was to inform the agent that Scott Brothers was under contract to drill an oil and gas well and had rented certain machinery, the description of which was unknown but would be forwarded forthwith. The aforementioned drilling contract had been sent to Colbert's (Butler's) office and forwarded by that office to Maryland Casualty for their information and coverage.
The record is conflicting as to who actually dealt with the letter since neither Colbert nor Butler specifically recall. It is of no real consequence inasmuch as Colbert was Butler's employee at the time...
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