CIGNA v. Zeitler

• Decision Date: 27 May 1999
• Docket Number: No. 750,750
• Citation: 730 A.2d 248,126 Md. App. 444
• Parties: CIGNA PROPERTY AND CASUALTY COMPANIES et al. v. Klaus ZEITLER.
• Court: Court of Special Appeals of Maryland

730 A.2d 248

126 Md. App. 444

CIGNA PROPERTY AND CASUALTY COMPANIES et al. v. Klaus ZEITLER.

No. 750, Sept. Term, 1998.

Court of Special Appeals of Maryland.

May 27, 1999.

Michael S. DeBaugh (J. Paul Mullen and Lord & Whip, P.A., on the brief), Baltimore, for appellant Cigna.

David J. McManus and Mark A. DiAntonio (Baxter, Baker, Sidle & Conn, P.A., on the brief), Baltimore, for appellant, Jack Martin.

Steven R. Migdal ( Buck, Migdal & Myers, Chartered, on the brief), Annapolis, for appellee.

Argued before HARRELL, HOLLANDER and BYRNES, JJ.

HOLLANDER, Judge.

On September 4, 1995, Hurricane Luis stormed through the Caribbean island of St. Maarten, severely damaging the Serefe, a forty-seven foot Tayana Auxiliary Cutter owned by Dr. Klaus Zeitler, appellee. At the time of the occurrence, appellee believed his yacht was covered by a marine insurance policy issued by CIGNA Property and Casualty Companies ("CIGNA"), appellant, and procured by Jack Martin & Associates, Inc. ("JMA"), appellant, an insurance agency located in Annapolis. On November 8, 1995, CIGNA denied appellant's claim for the loss of the vessel, because the insurance policy did not provide coverage in Caribbean waters after July 1, 1995, when the hurricane season commences.

On April 8, 1996, Zeitler instituted suit in the Circuit Court for Anne Arundel County against CIGNA and JMA, alleging breach of contract and negligence.¹ A jury returned a verdict in favor of Dr. Zeitler, and awarded damages against both appellants in the amount of $200,329.74. After the court denied appellants' motions for judgment notwithstanding the verdict, appellants timely noted their appeals. They present numerous issues for our consideration, some of which overlap. We have condensed, rephrased, and reordered their questions as follows:

I. Did the trial court err in submitting appellee's negligence count against JMA to the jury in the absence of expert testimony regarding the duty of care owed to a client by a professional insurance agent?

II. Did the trial court err in concluding that CIGNA was required to notify appellee of the new terms contained in his 1994-1995 policy, pursuant to COMAR 09.30.32?

III. Were appellants entitled to judgment as a matter of law because of appellee's failure to read the insurance binder and the insurance policy?

For the reasons that follow, we perceive no error. Therefore, we shall affirm.

Factual Background

Dr. Zeitler, a citizen of Canada, purchased the Serefe in May 1991. When the yacht was damaged by the storm, he was employed as chief executive officer of a Canadian mining corporation based in Toronto. Although appellant resided in Toronto, he harbored the vessel in Annapolis with Paradise Bay Yacht Charters, Inc. ("Paradise Bay"). Paradise Bay maintained the boat, offsetting the cost of its services by including the boat in its charter fleet. Although Dr. Zeitler received a portion of the fees generated by charter use, he retained the right to use the vessel at his convenience, with prior notice to Paradise Bay. JMA acted as the insurance broker for the vessels in the Paradise Bay fleet.

At the time of purchase, the vessel was covered under a CIGNA policy held by the previous owner and arranged through JMA. On June 10, 1991, shortly after Dr. Zeitler acquired the vessel, he signed a "Watercraft Application" by which appellee instructed JMA to obtain insurance. The application advised that Dr. Zeitler's coverage would be under a CIGNA policy that was in effect from November 1, 1990 through November 1, 1991. According to appellee's trial testimony, he paid $992 in premiums from June 10, 1991 until the end of the policy period.

Ordinarily, insurance policies for the Paradise Bay fleet ran from November 1 of each year through November 1 of the following year. Sometime prior to November 1, 1991, JMA sent a letter to Dr. Zeitler at his Toronto address, advising him that his current policy was about to expire, and that JMA had "taken the liberty of remarketing the [insurance] policy to provide the most complete coverage at the most competitive rate." For the renewal year beginning on November 1, 1991 and continuing through November 1, 1992, JMA placed appellant's coverage with Maryland Casualty Company, rather than CIGNA. Although JMA informed appellee that his policy would be placed with a different insurer, the letter referred to his November 1991 through November 1992 application as a "renewal" application. JMA's letter stated:

Your coverage has been placed with Maryland Casualty Company. Enclosed you will find your renewal policy, an invoice for your renewal premium as well as a Renewal Application. Please read the policy carefully, make any necessary changes and return the signed application with your payment.

A statement at the bottom of the page provided:

It is important that we have the Renewal Application completed and returned to our office. Up to date information allows me to select appropriate coverage for your yacht at the lowest premium cost.

In November 1992, JMA chose not to "renew" coverage through Maryland Casualty. Instead, it returned to CIGNA. The Serefe was insured through CIGNA until the boat was damaged in 1995.

In renewal year 1991-1992, the "Navigation Zone" specified on appellee's renewal application was the "Chesapeake Bay and tributaries." At trial, Dr. Zeitler testified that, prior to renewal year 1992, he informed JMA that he wished to sail in the Caribbean. Accordingly, the "Navigation Zone" on appellee's application for November 1992 through November 1993 was changed to the "Atlantic including Bahamas, Bermuda, Virgin Islands." In an October 22, 1992 cover letter to appellee accompanying the 1992-1993 "renewal", JMA agent Peggy Brookman added the following note at the bottom of the page: "Have a Safe Trip to the Islands!"²

The following year, appellee's "Navigation Zone" was again expanded. A "Certificate of Insurance" dated October 19, 1993 contained the following "Navigational Warranty": "Atlantic Coast from Eastport, ME to Cedar Key, FL including the Caribbean Box; 9-19 degrees North to 58-73 degrees West and all transits in between." Significantly, the 1993-1994 policy contained no limitation as to the dates of travel in the Caribbean.

In October 1994, a representative of Paradise Bay informed Morgan Wells, a marine insurance agent with JMA, that JMA should not include the Serefe among the Paradise Bay vessels insured under the fleet policy for 1994-1995. Thereafter, JMA negotiated with CIGNA to obtain a private pleasure policy to cover the Serefe. On October 21, 1994, Wells sent the following facsimile to CIGNA:

Following account is under Paradise Bay Yacht Charters. As in past years, vessel is departing to the Carib with Carib 1500 Rally. Return Ches Bay May 1995.

Vessel is pleasure only during this time. As a result we request separate Binding and coverage EFF 01 Nov, apart from the PBAY fleet.

Offshore App follows. Client would like Binder ASAP

What transpired next is a matter of dispute. According to JMA, it mailed a binder reflecting the terms of the "pleasure craft" policy to appellee on October 26, 1994. The insurance binder stated: "This binder is a temporary insurance contract subject to the conditions shown on the bottom of this page and serves as proof of insurance until you receive the actual policy." The "Navigation Limits" listed on the binder provided:

Atlantic & Gulf Coastwise & island tributary waters of the U.S. and Canada between St. John New Brunswick & Carabelle FL. both [sic] Inclusive and including the waters of Bahamas. Navigation is further extended to include the waters of the Caribbean Sea to 11 Degrees North Latitude from 11/01/94 to 07/01, but excluding Haiti, Cuba, and the Dominican Republic. A two (2%) deductible applies while in Bahamas and Caribbean Waters.

(Emphasis added). JMA also contends that it subsequently mailed a copy of the policy to appellee. Appellee, however, disputes that he received a copy of the policy and binder before the loss that spawned this litigation.

Regardless of when JMA sent the binder to appellee, and despite the terms of the pleasure-craft policy Wells had negotiated with CIGNA, it is clear that in the fall of 1994, JMA sent Dr. Zeitler a "renewal application", as it had done in previous years. An undated cover letter from JMA agent Teresa Kellum again instructed appellee to review his "current coverages" and sign the "renewal application." The letter said, in part:

Your policy is due to renew shortly and we would like you to take a few moments to review your current coverages. Enclosed you will find a Renewal Application reflecting your current coverages. Please review the application carefully and verify that the information we have is complete and correct by making the changes directly on the application, signing it and returning it to our office. Up to date information allows me to select the most appropriate coverage for your yacht at the most competitive rate. The application can be returned with your check for the renewal premium in the enclosed envelope.

The "renewal application", which appellee signed on November 8, 1994, did not reflect the changes in coverage contained in the insurance binder that JMA claimed it mailed to Dr. Zeitler on October 26, 1994. The application indicated that appellee's premium for the upcoming year would be $2,668.00, which was $99.00 more than appellant had paid the previous year. The "Navigation Zone" on the renewal application for November 1, 1994 through November 1, 1995, was identical to the one for the period covered by the policy in effect for the period of November 1, 1993 through November 1, 1994. It said: "Atlantic Coast from Eastport, ME to Cedar Key, FL including the Caribbean Box; 9-19 degrees North to 58-73 degrees West and all transits in between."

Appellee made several changes to the 1994 application. He added "radar" and "SSB Radio" to the list of...