Cleveland Builders Supply Co. v. Farmers Ins. Group of Cos.

• Decision Date: 08 May 1995
• Docket Number: No. 67090,67090
• Citation: 657 N.E.2d 851,102 Ohio App.3d 708
• Parties: CLEVELAND BUILDERS SUPPLY COMPANY, Appellant, v. FARMERS INSURANCE GROUP OF COMPANIES et al., Appellees.
• Court: Ohio Court of Appeals

Page 708

102 Ohio App.3d 708

657 N.E.2d 851

CLEVELAND BUILDERS SUPPLY COMPANY, Appellant, v. FARMERS INSURANCE GROUP OF COMPANIES et al., Appellees.

No. 67090.

Court of Appeals of Ohio,

Eighth District, Cuyahoga County.

Decided May 8, 1995.

John D. Wheeler, Cleveland, for appellant.

Crabbe, Brown, Jones, Potts & Schmidt, Gilbert J. Gradisar and John C. Albert, Columbus, Porter, Wright, Morris & Arthur, Margaret M. Koesel and Hugh E. McKay, Cleveland, for appellees.

PATTON, Chief Judge.

The Cleveland Builders Supply Company ("CBS") brought this action against Farmers Insurance Group of Companies ("Farmers") and insurance agent Glen Silverhart. CBS claimed Farmers had wrongfully denied coverage under an umbrella policy the agent had issued. It sought a declaration of its rights under the policy and damages for various tort claims and breach of contract. Both defendants denied the existence of a contract for insurance. The trial court granted summary judgment to each defendant and this appeal followed.

CBS is engaged in the manufacture and sale of ready-mix concrete. Prior to 1987, it purchased from another insurance company primary insurance coverage containing a $1,000,000 limit, and an umbrella policy containing a $5,000,000 limit. As that coverage came due to expire in late 1986, CBS sought to renew coverage.

In the fall of 1986, CBS met with Silverhart and, after preliminary discussions, asked him to prepare bids for primary and umbrella insurance coverage similar to its then-current coverage. Silverhart is a "captive" agent for Farmers, meaning he cannot submit insurance applications to other brokers or carriers unless permitted to do so by Farmers. After preparing an initial proposal for primary coverage in late December 1986, Silverhart, by letter dated January 2, 1987, submitted a proposal for primary coverage of $500,000 and umbrella coverage of $5,000,000. The proposal quoted umbrella coverage at a price of $23,400 and contained language stating umbrella coverage "cannot be bound until underlying coverage is approved."

On January 14, 1987, CBS forwarded to Silverhart information relating to its exposure to asbestos lawsuits. On January 29, 1987, Farmers authorized Silverhart to bind the primary policy. Farmers did not authorize a binder on the umbrella policy, although Silverhart did tell CBS it had been his experience that Farmers always approved the umbrella policy once the primary policy had been approved.

CBS signed the application for the primary policy on January 29, 1987, and requested a commercial umbrella policy. Farmers approved the primary policy in late March or early April 1987 and began to review CBS's application for the umbrella policy. Farmers' reinsurer said it would not provide umbrella coverage because of CBS's exposure to asbestos litigation. As a result, Farmers refused to quote a price for the umbrella policy and on April 14, 1987, authorized Silverhart to pursue other sources for umbrella coverage. Silverhart contacted thirty other insurers who all refused to provide coverage because of CBS's asbestos risk. Silverhart did manage to present a proposal for insurance, but CBS rejected it due to cost. In January 1988, CBS informed Silverhart it had accepted an insurance binder from another insurance company and asked Silverhart to cancel its primary policy with Farmers.

CBS brought this action against Farmers and Silverhart alleging breach of contract, bad faith, negligence, fraudulent misrepresentation, fraudulent inducement and breach of fiduciary duty. It also sought a declaration of its rights under the contract and requested specific performance as a remedy for the alleged breach. In their separate motions for summary judgment, defendants maintained (1) there was no contract, (2) even if there was a contract, CBS failed to suffer damages resulting from a breach, and (3) CBS's buyout deprived it of standing to bring its claims. The court granted the defendants' motions for summary judgment without opinion.

I

In its first assignment of error, CBS maintains it presented sufficient evidence to establish a genuine issue of material fact as to the existence of a contract between the parties. CBS claims a contract was formed based upon material representations by Silverhart. In the absence of such representations, it urges us to find a contract implied in fact.

A contract is a promise or a set of promises, the breach of which the law provides a remedy, or the performance of which the law in some way recognizes a duty. Ford v. Tandy Transp. Inc. (1993), 86 Ohio App.3d 364, 380, 620 N.E.2d 996, 1006. In order for a party to be bound to a contract, the party must consent to its terms, the contract must be certain and definite and there must be a meeting of the minds of both parties. Episcopal Retirement Homes, Inc. v. Ohio Dept. of Indus. Relations (1991), 61 Ohio St.3d 366, 369, 575 N.E.2d 134, 137.

Having reviewed the facts in a light most favorable to CBS, we conclude that there is no genuine issue of material fact as to the existence of a contract for umbrella coverage. Documents submitted in conjunction with Farmers' motion for summary judgment clearly demonstrate Farmers' intent not to be bound to provide umbrella coverage until certain prerequisites had been satisfied. The application form for CBS's request for a commercial liability quotation contained the following statement: "Completion of this form does not bind coverage. Applicant's acceptance of Company's quotation is required before applicant may be bound and policy issued." Farmers did not approve umbrella coverage, nor for that matter did it forward to CBS any offer for such coverage. By its own terms, Farmers would not agree to provide any umbrella coverage until it issued a quotation. The undisputed facts show that Farmers made no such quotation. Consequently, CBS and Farmers did not have a meeting of the minds.

CBS argues that Farmers could be bound to issue the umbrella coverage based upon representations made by Silverhart. CBS maintains that Silverhart had apparent authority to represent Farmers; therefore, his statements concerning coverage may be imputed to Farmers.

The parties agree that Silverhart is a captive agent for Farmers and is not authorized to submit insurance applications to other brokers or carriers unless the applicant does not meet Farmers' requirements or Farmers rejects the applicant. See, also, R.C. 3929.27. In Miller v. Wick Bldg. Co. (1950), 154 Ohio St. 93, 42 O.O. 169, 93 N.E.2d 467, paragraph two of the syllabus, states:

"Even where one assuming to act as agent for a party in the making of a contract has no actual authority to so act, such party will be bound by the contract if such party has by his words or conduct, reasonably interpreted, caused the other party to the contract to believe that the one assuming to act as agent had the necessary authority to make the contract."

A finding of apparent authority is predicated on the existence of a contract. Cascioli v. Cent. Mut. Ins. Co. (1983), 4 Ohio St.3d 179, 181, 4 OBR 457, 459, 448 N.E.2d 126, 128. Silverhart told CBS that Farmers did not write the policy (the reinsurer did) and he had no authority to bind umbrella coverage. In fact, his proposal to CBS stated, "[T]his is merely a propsal [sic] and is not a policy of insurance * * *. [T]he company reserves the right to accept, reject or modify this proposal after investigation, review of the application, and review of all other underwiting [sic] information."

CBS's argument that Silverhart's statement that umbrella coverage existed is taken out of context. Although Silverhart did tell CBS it was his experience that once Farmers approved primary coverage umbrella coverage would generally follow, he also told CBS he had no authority to bind a contract. The language of the application for umbrella coverage reinforced Silverhart's inability to bind Farmers since it clearly stated that completion of the application form did not bind coverage. As stated in Cascioli, "[s]ince there was no attempt to create a binder, a contract was never created, and the issue of apparent authority to make the contract and thus the enforceability of such contract never became ripe." Id., 4 Ohio St.3d at 182, 4 OBR at 460, 448 N.E.2d at 129. The facts unambiguously show Silverhart did not attempt to create a binder because he did not have the authority to do so.

CBS argues in the alternative that principles of promissory estoppel ¹ apply because it relied to its detriment on Silverhart's representations that the umbrella policy would be issued as soon as Farmers approved the primary policy.

In order to establish a claim of promissory estoppel, the plaintiff must show a promise, clear and unambiguous in its terms, reliance by the party to whom the promise is made, the reliance must be reasonable and foreseeable, and the party claiming estoppel must be injured by the reliance. Stull v. Combustion Engineering, Inc. (1991), 72 Ohio App.3d 553, 557, 595 N.E.2d 504, 507.

CBS maintains Silverhart promised umbrella coverage would follow as soon as Farmers approved the primary coverage. The undisputed facts also show that Silverhart emphasized that he...