Clary Ins. Agency v. Doyle

• Decision Date: 21 November 1980
• Docket Number: No. 4386,4386
• Parties: CLARY INSURANCE AGENCY and Gail Brewer, Appellants, v. James H. DOYLE and Doyle's Fuel Service, Inc., Appellees.
• Court: Alaska Supreme Court

Page 194

620 P.2d 194

CLARY INSURANCE AGENCY and Gail Brewer, Appellants, v. James H. DOYLE and Doyle's Fuel Service, Inc., Appellees.

No. 4386.

Supreme Court of Alaska.

Nov. 21, 1980.

H. Russell Holland, George Trefry, Holland & Trefry, Anchorage, and Claire D. Johnson, Severson, Werson, Berke & Melchior, Los Angeles, Cal., for appellants.

Arden E. Page, Burr, Pease & Kurtz, Inc., Anchorage, for appellees.

Before RABINOWITZ, C. J., and CONNOR, BOOCHEVER, BURKE and MATTHEWS, JJ. ^*

OPINION

BOOCHEVER, Justice.

This case involves an insurance agency's failure to obtain workers' compensation insurance, and a later failure to notify the prospective insured of its error. In addition to ordering the insurance agency to assume the position of insurer for a loss suffered by the proposed insured during a time when it was not covered, the trial court, based on the jury's verdict, entered a punitive damage award of $190,000. The appellants raise objections concerning the applicable standard of care, the need for expert testimony, an instruction on negligent misrepresentation, and the punitive damage award. Our conclusion is that whatever error may have been committed was harmless, and the judgment of the trial court is affirmed.

About 1972 or 1973, Doyle's Fuel Service, Inc., an Alaska corporation engaged in distributing fuel products, and James Doyle, the owner of the corporation and a separate sole proprietorship engaged in related work, bought all their insurance through the Kenai branch office of the Clary Insurance Agency. Doyle paid his insurance premiums directly to Clary, who, in turn, placed Doyle's policies with various insurance companies. Because of a poor loss year in Alaska in 1975, the Home Insurance Company, which had been underwriting the bulk of Doyle's insurance, notified Clary in 1976 that it would not renew or extend any of Doyle's policies beyond October 15, 1976. Gail Brewer, the manager of Clary's Kenai office, began contacting other companies to replace the policies issued by Home. The cost of obtaining insurance greatly increased. At one point Clary sent Doyle a bill of $143,000 to renew all his policies for the coming year, which compared to Doyle's total renewal premium in previous years of about $20,000.

In the fall of 1976, Doyle met with Brewer in an attempt to lower his insurance costs. The result was a renewal package that cost Doyle $78,000, which the parties agreed would be paid in three equal installments of $26,000.00. Among other items, the renewal package included $16,489 for workers' compensation insurance, and $13,250 for automobile liability. Invoices were sent to Doyle showing these amounts and their purpose. Doyle made the first two installment payments of $26,000 on November 17 and December 21.

Because Brewer was unable to find any carrier willing to underwrite Doyle's workers' compensation or automobile liability insurance, it was necessary to obtain a carrier through Alaska's assigned risk pool. On October 13, 1976, two days before Doyle's workers' compensation insurance was due to expire, Peggy Murphy, a secretary in Clary's Kenai office, prepared a risk pool application for Doyle's workers' compensation insurance. There is no indication that Doyle or any of his employees knew at the time that Clary had applied to the risk pool. Doyle testified that at the time he had never heard of the assigned risk pool.

The risk pool assigned the Fireman's Fund Insurance Company as Doyle's workers' compensation carrier, and notified both Doyle and Clary of this fact by letter dated October 18, 1976. The letter states that the insurance would not be effective until a deposit premium of $3,731 was paid.

Doyle gave the letter to his secretary, Barbara Morton, to ask Brewer about it. Morton testified, "Brewer told me he was going to take care of it and I trusted him." Morton was especially concerned about the effective date of the policy because of the expiration of the prior coverage.

Despite Brewer's assurances, Clary never mailed the premium, and Doyle's workers' compensation insurance lapsed.

Doyle testified that, in the following months when Brewer picked up the installment payments on the renewal package, Brewer mentioned the letter, telling Doyle that it had been a mistake and "we (Doyle) should have never got it." On January 10, 1977, the risk pool notified Fireman's Fund, Doyle and Clary that Fireman's Fund was no longer required to accept the risk because no premium had been paid.

When Doyle and Morton contacted Brewer about this second letter, Brewer failed to advise Doyle of the oversight. Instead, Brewer indicated that for some reason which Morton did not understand, it was not in Doyle's best interest to insure with Fireman's Fund. He said that he had decided to use another carrier and again assured Doyle that he was covered.

On January 21, 1977, Brewer prepared and signed a second application to the risk pool without Doyle's knowledge. The risk pool responded on January 24, assigning the Alaska Pacific Assurance Company (Alpac) as carrier. Like the letter of October 18, 1976, this letter also required the applicant to submit a premium before the policy would be effective.

On February 1, 1977, Doyle gave Brewer a check for $5,000 as a final settlement on his account. ¹ Brewer called Clary's Anchorage office on the same day and instructed it to send a check to Alpac. Although Brewer assured Doyle that the check was hand carried to Alpac's Anchorage office, the undisputed evidence is that Alpac did not receive the check until February 7, and Doyle's insurance did not go into effect until the next day, February 8. Doyle had no workers' compensation insurance between October 15 and February 7.

On or about February 4, Ralph Kline, in the course of his employment with Doyle, was seriously injured in a Jet Alaska air crash. Doyle called Brewer about the accident and was advised to fill out a workers' compensation insurance form. On the form, Doyle left the name of the insurance carrier blank, and the form was taken to Clary's office. Clary never mailed the form to the Workmen's Compensation Board; in fact, it was still in Clary's files when Doyle's lawyer took Brewer's deposition.

On February 7, Brewer traveled to Anchorage with Doyle's file. According to his testimony, he assumed that Alpac had received the check from Clary, and that Doyle was covered. Alpac informed Brewer that they had not received the check until February 7, and would not cover the accident. Doyle claimed he first knew he was uninsured on March 18 when an attorney for Kline called to ask Doyle when he planned to start paying Kline's medical bills and back wages.

During their testimony at trial, Brewer, Peggy Murphy, the Clary agency's secretary, and Lois Clary, vice president of the Clary agency, all stated that it was the firm's policy not to advance funds directly to insurance carriers selected by the risk pool. The defendants' position at trial was that Doyle had received copies of the correspondence from the risk pool, and it was his responsibility to see that these funds were paid to the carrier. Brewer stated that once a carrier had been assigned by the risk pool, it did not require any further action on his part because "the assigned risk pool is a cash transaction between the buyer and the company." Nevertheless, the undisputed facts are that in the course of their three- or four-year business relationship, Doyle had never submitted money directly to an insurance carrier. The Clary agency paid all funds necessary to obtain Doyle's automobile liability policy, which was also assigned by the risk pool. The $78,000 renewal package agreed upon by Brewer and Doyle included $16,000 for renewal of his workers' compensation insurance, and Clary continued to collect the amounts due on the contract even though it failed to remit the money to the insurance carrier. ² Finally, it was undisputed that Clary in fact ultimately made the payment to Alpac for Doyle's workers' compensation insurance.

I. INSTRUCTIONS ON THE STANDARD OF CARE AND THE NEED FOR EXPERT TESTIMONY

The appellants' first assignment of error is that the trial court improperly instructed the jury on the appropriate standard of care. In their view, Doyle's action was essentially one for malpractice on the part of an insurance agent or broker, ³ and, as such, the appropriate standard of care was that of a professional in that field, ⁴ not that of a reasonably prudent person. ⁵ Clary argues that it was reversible error not to grant their proposed instruction.

Clary and Brewer cite numerous cases to the effect that procuring insurance is a complex business that is beyond the cognizance of most laymen. ⁶ According to the appellants, this case "involves the very essence of an insurance agent's professional responsibilities: the procurement of suitable insurance for his client."

Their argument is meritless. It is plain from the facts that Brewer did not need to exercise any degree of professional judgment in selecting or procuring appropriate workers' compensation insurance. This is not a case where there was a need to have a great deal of knowledge about various insurance carriers, the types of policies available, or the insured's needs. Workers' compensation insurance is required by statute. The risk pool automatically selected a carrier to take the risk. Neither Brewer nor the carrier had any choice as to which insurance company was selected. Procuring insurance from the risk pool involved completing a relatively simple application form that was done in this case by Brewer's secretary.

The issue in this case is whether Brewer was negligent in failing to submit the premium to the carrier and in failing to warn Doyle that he was uninsured. Both of these issues fall within the realm of ordinary negligence.

Not every act of a professional requires an instruction on the professional standard of care. Meier v. Ross General...