Cat 'N Fiddle, Inc. v. Century Ins. Co.

• Decision Date: 18 July 1968
• Docket Number: No. 36598,36598
• Citation: 213 So.2d 701
• Parties: CAT 'N FIDDLE, INC., a Florida corporation operating and doing business as Cat 'N Fiddle Restaurant & Lounge, Petitioner, v. The CENTURY INSURANCE COMPANY, Limited, a corporation organized and existing under the laws of New York, Respondent.
• Court: Florida Supreme Court

Page 701

213 So.2d 701

CAT 'N FIDDLE, INC., a Florida corporation operating and doing business as Cat 'N Fiddle Restaurant & Lounge, Petitioner, v. The CENTURY INSURANCE COMPANY, Limited, a corporation organized and existing under the laws of New York, Respondent.

No. 36598.

Supreme Court of Florida.

July 18, 1968.

Rehearing Denied Sept. 23, 1968.

Lurie, Lesperance & Goethel, Miami, for petitioner.

Fred C. Davant of Wicker, Smith, Pyszka, Blomqvist & Davant, Miami, for respondent.

ERVIN, Justice.

We have for review by conflict certiorari a decision of the District Court of Appeal, Third District, reported at 200 So.2d 208. Petition for writ of certiorari to the District Court was granted by order dated October 2, 1967.

Cat 'n Fiddle, Inc., petitioner herein and plaintiff in the trial court, was formed by one Raymond McGee, and in November, 1960 acquired the Cat 'n Fiddle Restaurant & Lounge. Shortly thereafter, Petitioner, through McGee, engaged Hurst Insurance Agency, Inc., herein referred to as Hurst, to obtain fire insurance covering the premises. The parties considered the premises to be of a value that could justify fire insurance in the amount of $100,000 and Hurst recommended the insurance be obtained. On September 15, 1961, Century Insurance Company, Limited, respondent herein, issued a fire insurance policy to Petitioner in the amount of $35,000. Two other fire insurance policies were written on this same date--$20,000 with Farmers' Alliance Insurance Company and $20,000 with Guaranty Security Insurance Company--making a total insurance in force of $75,000. The policies were not delivered to Petitioner but to Hurst, and with Petitioner's approval were retained by Hurst.

On November 10, 1961 Farmers' Alliance and Guaranty Security cancelled their insurance by notice to Hurst. There is some indication in the record that Hurst advised Petitioner of such cancellation. On November 15, 1961, Respondent, Century Insurance Company, Limited, issued an endorsement increasing its coverage by $35,000 on the policy that was previously issued to the Petitioner. The original policy issued by Respondent contained a provision that the policy could be cancelled by the insurer at any time by giving five days' written notice of cancellation to the insured. The endorsement to the policy provided, 'signature is required when endorsement reduces or restricts policy.'

On March 5, 1962 Respondent, by endorsement, eliminated $35,000 of its coverage, thereby reducing its policy to the original $35,000. Notice of this elimination by endorsement was directed to Hurst and Petitioner never received written notice from Respondent or from Hurst of the elimination of $35,000 of insurance coverage. On March 26, 1962 Respondent requested that the policy issued to the Petitioner be cancelled altogether. This request was directed to Hurst and Respondent never directed such a request to Petitioner in accordance with the policy provision, nor did Hurst advise the Petitioner of the cancellation of the policy issued by Respondent. Also on March 26, 1962, Hurst, through another agency, wrote policies of insurance in two other insurance companies, each for a coverage of $15,000.

On April 10, 1962 a fire occurred which totally destroyed the 'insured' property. After the fire, Petitioner learned of the cancellation of the fire insurance policy issued by Respondent and the acquisition of the two policies for $30,000 coverage. Notice of loss and proof of claim were submitted by Petitioner to Respondent, which denied liability based on its prior cancellation. Subsequently Petitioner filed an action against the two companies which issued coverage in the total amount of $30,000 and received payment of $25,000 thereon in settlement.

The present controversy arises from an action brought by Petitioner against Respondent and Hurst. One count sought recovery from Respondent on the theory that Respondent's policies were in effect at the time of the fire. Two counts were filed against Hurst, one alleging negligence in failing to notify Petitioner of the cancellation of the $70,000 coverage by Respondent when it occurred, and the other charging Hurst with negligence in failing to keep the property insured.

On the trial of the cause at the close of Petitioner's case, the court granted motions of Respondent and Hurst for directed verdict and entered judgment thereon. On appeal, the District Court of Appeal, Third District sustained the directed verdict in favor of Respondent but reversed the directed verdict in favor of Hurst. In affirming the judgment in favor of Respondent, the District Court, citing Graves v. Iowa Mutual Insurance Company (Fla.1961), 132 So.2d 393, 96 A.L.R.2d 282, reasoned that under the circumstances presented the general rule that notice to an agent is notice to the principal controlled.

Before disposing of the present controversy on the merits, we feel compelled to comment briefly on this Court's jurisdiction pursuant to Florida Appellate Rule 2.1(5)(b), 32 F.S.A. In support of conflict jurisdiction, Petitioner relies on Taylor v. Glens Falls Ins. Co. (Fla.1902), 44 Fla. 273, 32 So. 887, and Handley v. Home Ins. Co. of New York (Fla.1933), 112 Fla. 225, 150 So. 902. In each of these cases, notice of cancellation as required by the policies was not given, although the agent who had writen the policies was requested by the insurer to cancel the same. In each case, the attempted cancellation was held to be ineffective. In the Taylor case, the Court noted that the policy was unauthorizedly cancelled without the knowledge or consent of the real beneficiaries. The gravamen of these decisions is that if, contrary to the provisions of the policy, cancellation notice is given to a person other than the insured, it must appear that the person accepting such notice had the authority to waive the policy provisions and assent to the cancellation in the form or manner given. In this respect, it follows that a determination that the person receiving notice of cancellation is the agent of the insured does not per se authorize the agent to bind the insured by accepting cancellation notice.

In the instant case, the District Court concluded that under the circumstances the maxim that notice to the agent is notice to the principal controlled. To the extent that this decision neglects to consider precisely the authority of the person or agent accepting notice of cancellation, we think it fails to measure up to the import of the above cited authorities, thereby giving rise to the conflict necessary to establish our jurisdiction.

After reviewing the briefs and arguments on the merits, we are of the opinion that the judgment affirming a directed verdict in favor of Respondent should be reversed.

The purpose of a provision in an insurance policy providing that the insurer can cancel the policy after giving notice to the insured for a prescribed period is to enable the insured to obtain insurance elsewhere before he is subjected to risk without protection. See Graves v. Iowa Mutual Insurance Company, supra. See also, 29 Am.Jur. Insurance § 834. Notice of cancellation being a provision designed to secure and protect the insured's interest, the burden of proving cancellation in accordance with the policy provisions is in the party asserting it, in this case the Respondent. See 45 C.J.S. Insurance § 461a. Furthermore, when an insurer has failed to give personal notice to the insured, but seeks nevertheless to establish cancellation on the theory that it effected notice to the insured's agent, it is incumbent on the insurer to demonstrate that the scope of the agent's authority encompassed the authority to perform the act sought to be charged to the agent's principal. See Foye Tie & Timber Co. v. Jackson (Fla.1923), 86 Fla. 97, 97 So. 517.

In the present case we do not understand Respondent to contend that Hurst was expressly authorized by Petitioner to accept notice of cancellation. Nor do we understand Respondent to contend that Hurst had apparent authority to accept cancellation notice. The record in this respect contains no facts suggesting that Petitioner through acts or representations held Hurst out as possessing the authority to accept notice of cancellation on its behalf. In addition, there is no evidence in the record which would support a good faith belief on the part of Respondent that Hurst was acting as anything but an insurance broker for Petitioner. Therefore our inquiry is reduced to ascertaining whether Hurst was impliedly authorized to accept Respondent's notice of cancellation because of the authority actually conferred upon Hurst in handling Petitioner's insurance matters.

Having precisely framed the determinative issue presented in the instant case, we now pass to consideration and application of the controlling principles of law. The general principles applicable to controversies concerning the scope of an insurance broker's authority to accept cancellation notice on behalf of an insured can fairly be stated as follows:

'(1--3) It is a well-settled rule that a broker or agent employed by an owner to procure a policy of insurance on property is not authorized to accept notice of the cancellation of such policy. His employment is at an end when he procures the insurance, and the subsequent notice to him by the insurance company of the cancellation of its policy is no notice to the insured. * * * It is equally well settled that when a broker or agent is instructed by an owner with the duty of keeping the owner's property insured, taking out policies thereon, and authorized to obtain other insurance in lieu of expired or canceled policies, the broker or agent is the general agent of the owner in these respects as to the latter's insurance, and notice to him of cancellation of a policy, Provided he substitutes therefor another policy for a like amount, is notice to the insured.' (Emphasis supplied.) Stuyvesant Ins. Co. v....