Chevrolet v. Rjf Agencies Inc.

• Decision Date: 07 December 2010
• Docket Number: No. SD 30329.,SD 30329.
• Citation: 332 S.W.3d 184
• Parties: AUTRY MORLAN CHEVROLET, CADILLAC, INC., Appellant,v.RJF AGENCIES, INC., U.S. Bancorp, Inc., and Frank Reahr, Respondents.
• Court: Missouri Court of Appeals

332 S.W.3d 184

AUTRY MORLAN CHEVROLET, CADILLAC, INC., Appellant,

v.RJF AGENCIES, INC., U.S. Bancorp, Inc., and Frank Reahr, Respondents.

No. SD 30329.

Missouri Court of Appeals, Southern District, Division Two.

Dec. 7, 2010.Motion for Rehearing or Rehearing En Banc or Transfer to Supreme Court Denied Dec. 29, 2010.Application for Transfer Denied

March 29, 2011.

Bradley D. Jarrell, Dexter, MO, for Appellant.Sanford Goffstein and Lori R. Koch of St. Louis, MO, for Respondent RJF Agencies, Inc.Bruce C. Oetter and Elizabeth C. Carver, St. Louis, MO, and James E. Spain, Poplar, Bluff, MO, for Respondents Bancorp and Reahr.

WILLIAM W. FRANCIS, JR., Judge.

This is an appeal by Autry Morlan Chevrolet, Cadillac, Inc. (“Morlan”), from the trial court's entry of summary judgment against Morlan in favor of Respondents RJF Agencies, Inc. (“RJF”), U.S. Bancorp, Inc. (“Bancorp”), ¹ and Frank Reahr (“Reahr”). We reverse and remand this matter to the trial court for further proceedings.

Factual and Procedural History

Morlan filed a two-count petition alleging “damages for negligence” against RJF, Bancorp and Reahr, and “tortious interference with a business relationship” against Bancorp only.² A brief history of the relationship among the parties is required.

Morlan operated a Chevrolet and Cadillac automobile dealership in Dexter, Missouri. Bancorp had a branch in Dexter and provided floor-plan financing to automobile dealers. By this financing, Bancorp received a security interest in Morlan's property, including the automobiles on its lot. Bancorp's financing agreements required dealers to maintain insurance on their inventory on terms satisfactory to Bancorp. Implicit in this requirement is Bancorp's ability to accept or reject insurance coverage on the inventory. Reahr is a Bancorp employee and the relationship manager who handled negotiations and communications between Morlan and Bancorp.

Bancorp learned that RJF, an insurance broker, had an insurance program tailored to meet the insurance needs of automobile dealerships. RJF's program offered an aggregate weather deductible, which would limit a dealer's financial exposure in the event of a catastrophic, weather-related claim. This aggregate weather deductible program, limited to automobile dealerships, was not available on the open market. Bancorp had entered into an arrangement with RJF to make the insurance program available to dealers to whom Bancorp provided financing in order to avoid assembling and selling the complex plans itself. Bancorp agreed with RJF to acquire a master insurance policy with Lloyd's of London through which dealers obtaining floor-plan financing from Bancorp could elect to obtain insurance as additional insureds. That coverage, available exclusively through RJF as broker, was handled under the master insurance policy covering a number of dealers rather than individual policies in order to offer dealerships a volume rate at a lower premium.

In August 2005, Bancorp presented Morlan with a “Financial Services Proposal,” proposing a “financial partnership with [Bancorp]” and setting forth terms by which it would provide financing with respect to their new and used vehicles. It further described Bancorp's “comprehensive proposal for financial services” which, in part, specifically recognized Morlan's need for insurance with deductible exposure limits in the event of catastrophic weather conditions, and refers to RJF's exclusive program as a proposed solution.

On November 7, 2005, Bancorp and Morlan entered into a “Dealer Loan and Security Agreement” under which Bancorp agreed to provide a flooring line of credit up to a maximum of $7,000,000, to finance vehicles owned and offered for sale on Morlan's lot. As a part of this agreement, Morlan agreed to maintain certain insurance, including casualty policies insuring Bancorp's collateral, and to designate Bancorp as a loss payee on the casualty policies. An additional part of the agreement immediately appointed any officer of Bancorp as Morlan's attorney-in-fact effective in the event of Morlan's default on payment. RJF subsequently provided Morlan with details relating to the insurance program, as well as an “Application/Schedule of Insured Automobiles,” which Morlan completed on November 16, 2005.

On November 21, 2005, RJF forwarded to Morlan an insurance proposal—“Dealers Open Lot Insurance and Aggregate Weather Deductible Indication” (the “RJF Proposal”). The RJF Proposal highlighted the advantages of its strategically designed service team, “a team of skilled individuals to service each account,” where “[e]ach team member brings particular skills and specialties” to the account. RJF's Proposal also referenced the “RJF-[Bancorp] program” and noted in relevant part that: “This insurance program is a master policy issued to [Bancorp]. Insured must have financing through [Bancorp] in order to participate in this insurance program.” The parties agree it is only by its special relationship with Bancorp that Morlan was able to participate in this program.

The base policy offered in the RJF Proposal had a deductible of $1,000 per vehicle, with no aggregate, for the perils of catastrophic weather conditions. The RJF Proposal also outlined the “Aggregate Weather Deductible Option” noting: “The Aggregate Deductible is based on the number of total vehicles on the lot location at the time of the loss; not the number of damaged vehicles. The Minimum Aggregate Deductible is $35,000.” (Emphasis in original.)

On November 22, 2005, Autry Morlan signed the last page of the RJF Proposal—the “Client Authorization to Bind Coverage.” RJF provided Morlan with an “Evidence of Insurance” certificate dated November 23, 2005, stating: “Coverage is effected under [Bancorp] Deductible Buyback Risk Reference NO365660U with Underwriters at Lloyd's[ ][of] London 100%.” The certificate stated the coverage was “[e]ffective from: November 23, 2005 to February 1, 2006 both days at 12:01 a.m. E.S.T.”

On January 10, 2006, RJF advised Morlan by facsimile that: “[Bancorp] is in the process of negotiating their Buy Back/weather retention with [Lloyd's] of London. It renews on February 1, 2006. There is a possibility [Bancorp] may not renew the policy.”

In mid-January 2006, RJF notified Bancorp that the cost of the aggregate weather deductible was going to increase significantly, that the minimum deductible amount would be substantially increased, and asked Bancorp to decide whether it would renew the coverage when the master insurance policy expired on February 1, 2006. Due to the increase in both the premium and the minimum deductible amount, Bancorp notified RJF on January 27, 2006, it would not renew the aggregate weather deductible. The base coverage issued by Lloyd's of London remained in full force and effect. RJF arranged for the aggregate weather deductible to be extended until March 1, 2006.

On February 17, 2006, RJF notified Morlan, by letter and facsimile, of Bancorp's decision not to renew the aggregate weather deductible effective March 1, 2006. RJF's letter advised Morlan:

Your primary policy with [Bancorp] is still in force and will stay in force unless you give us a 60 day notice to cancel.

The weather aggregate provided a cap in the event of a storm. The primary policy provides coverage for weather perils with a deductible per unit and no aggregate.

Morlan's representatives denied receipt of the facsimile, but RJF submitted proof to the contrary.

Paul Novotny, the “National Account and Product Manager RV and Marine in the Dealer Commercial Services Division of [Bancorp],” stated in an affidavit in support of Bancorp's motion for summary judgment that RJF advised him they had obtained and proposed to Morlan an alternative insurance arrangement with an aggregate weather deductible to be in place when the Lloyd's of London deductible expired.

On March 9, 2006 and April 1, 2006, hail storms struck and a number of vehicles on Morlan's lot sustained damage in an estimated amount of $607,591.29. Autry Morlan testified the vehicles were not repaired as required to collect insurance for the loss: “I couldn't repair five hundred vehicles.... I elected to spend a hundred thousand dollars and advertise the cars as storm damaged vehicles and create as much sales volume as possible....” The vehicles were sold “as is.” Morlan rejected an offer of $151,000 from the insurance company for the storm damage. Morlan's petition sought damages for all of the expenses sustained and incurred by not having an aggregate weather deductible in place, including attorney's fees and punitive damages. In his deposition, Autry Morlan was unable to quantify “the difference between the price [the vehicles] were sold for and the price they would have sold for undamaged.” Mr. Morlan also explained the vice president of Bancorp told him he would have an aggregate weather deductible, they were taking care of it, and he should not worry.

Pertinent portions of the allegations in Morlan's petition are:

1. Bancorp owed a fiduciary duty to protect Morlan's interests;

2. As a co-policy holder of the insurance that was in place, Bancorp had a duty to keep property insurance in place;

3. RJF, as an insurance broker/agent, owed a duty to Morlan to use diligence, skill and reasonable care to acquire proper coverage;

4. RJF breached its duties as an insurance broker/agent;

5. Reahr, as the relationship manager who conducted business with Morlan, had a fiduciary duty and an obligation to notify Morlan of any problems with the insurance coverage;

6. That a policy with an aggregate weather deductible that would cap the total amount of deductible at $35,000, for vehicles damaged by hail and storms was put into effect;

7. That Morlan had an expectation the insurance policy would remain in effect and the aggregate weather deductible would remain in place; and

8. That Bancorp decided unilaterally to discontinue or not renew the aggregate weather...